United States
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

(Mark One)

x                              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2005

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

 

(I.R.S. Employer Identification No.)

Incorporation or Organization)

 

 

2200 Eller Drive, P.O. Box 13038, Fort Lauderdale, Florida

 

33316

(Address of Principal Executive Offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code (954)-524-4200

Securities registered pursuant to Section 12 (b) of the Act:

Title of Each Class

 

Name of Each Exchange on Which Registered

Common Stock, par value $.01 per share

New York Stock Exchange

 

Securities registered pursuant to Section 12 (g) of the Act:

None

(Title of Class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  x Yes  o No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  o Yes  x No

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 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. x Yes  o No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.  (Check one):  x  Large Accelerated Filer  o Accelerated Filer  o Non-Accelerated Filer

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

The aggregate market value of the voting stock of the registrant held by non-affiliates as of June 30, 2005 was approximately $1,107,842,000 based on the closing price on the New York Stock Exchange on such date. The total number of shares of Common Stock issued and outstanding as of March 8, 2006 was 25,023,759.

DOCUMENTS INCORPORATED BY REFERENCE

The Registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission (the “Commission”) pursuant to Regulation 14A within 120 days after the end of the Registrant’s last fiscal year is incorporated by reference into Part III of this Annual Report on Form 10-K.

 




SEACOR HOLDINGS INC.
FORM 10-K
TABLE OF CONTENTS

PART I

 

Item 1.

 

Business

 

1

 

 

 

General

 

1

 

 

 

Segment and Geographic Information

 

2

 

 

 

Offshore Marine Services

 

2

 

 

 

Marine Transportation Services

 

9

 

 

 

Inland River Services

 

10

 

 

 

Aviation Services

 

13

 

 

 

Environmental Services

 

16

 

 

 

Other

 

18

 

 

 

Government Regulation

 

19

 

 

 

Industry Hazards and Insurance

 

23

 

 

 

Employees

 

24

 

Item 1A.

 

Risk Factors

 

24

 

Item 1B.

 

Unresolved Staff Comments

 

30

 

Item 2.

 

Properties

 

30

 

Item 3.

 

Legal Proceedings

 

30

 

Item 4.

 

Submission of Matters to a Vote of Security Holders

 

30

 

 

 

Executive Officers of the Registrant

 

31

 

PART II

 

Item 5.

 

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

32

 

 

 

Market for the Company’s Common Stock

 

32

 

 

 

Issuer Repurchases of Equity Securities and Debt

 

32

 

Item 6.

 

Selected Financial Data

 

33

 

Item 7.

 

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

 

34

 

 

 

Overview

 

34

 

 

 

Critical Accounting Policies and Estimates

 

36

 

 

 

General

 

38

 

 

 

Results of Operations

 

44

 

 

 

Liquidity and Capital Resources

 

51

 

 

 

Effects of Inflation

 

55

 

 

 

Related Party Transactions

 

55

 

 

 

Contingencies

 

56

 

 

 

New Accounting Pronouncement

 

56

 

Item 7A.

 

Quantitative and Qualitative Disclosures About Market Risk

 

57

 

Item 8.

 

Financial Statements and Supplementary Data

 

58

 

Item 9.

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 

 

58

 

Item 9A.

 

Controls and Procedures

 

58

 

Item 9B.

 

Other Information

 

59

 

 




 

PART III

 

Item 10.

 

Directors and Executive Officers of the Registrant

 

60

 

Item 11.

 

Executive Compensation

 

60

 

Item 12.

 

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

60

 

Item 13.

 

Certain Relationships and Related Transactions

 

60

 

Item 14.

 

Principal Accountant Fees and Services

 

60

 

PART IV

 

Item 15.

 

Exhibits and Financial Statement Schedules

 

61

 

 




FORWARD-LOOKING STATEMENTS

Certain statements discussed in Item 1 (Business), Item 3 (Legal Proceedings), Item 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operations), Item 7A (Quantitative and Qualitative Disclosures About Market Risk) and elsewhere in this Form 10-K as well as in other materials and oral statements that we release from time to time to the public 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 significant 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 are discussed in Item 1A. Risk Factors. In addition, these statements constitute our cautionary statements under the Private Securities Litigation Reform Act of 1995. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider the following to be a complete discussion of all potential risks or uncertainties. The words “anticipate,” “estimate,” “expect,” “project,” “intend,” “believe,” “plan,” “target,” “forecast” 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. You are advised, however, to consult any further disclosures we make on related subjects in our 10-Q and 8-K reports to the Securities and Exchange Commission.

PART I

ITEM 1. BUSINESS

General

Unless the context indicates otherwise, the terms “we,” “our,” “ours,” “us” and “the Company” refer to SEACOR Holdings Inc. and its consolidated subsidiaries. “SEACOR” refers to SEACOR Holdings Inc., incorporated in 1989 in Delaware. “Common Stock” refers to the common stock, par value $.01 per share, of SEACOR.

The Company is in the business of owning, operating, investing in, marketing and remarketing equipment, primarily in the offshore oil and gas and marine transportation industries. We operate a diversified fleet of offshore support vessels and helicopters servicing oil and gas exploration, development and production facilities worldwide and we also operate a fleet of U.S.-flag product tankers which transport petroleum, chemicals and crude products primarily in the U.S. domestic or “coastwise” trade. In addition, we operate a fleet of inland river barges transporting grain and other bulk commodities on the U.S. inland waterways. Our environmental services segment provides oil spill response, manages environmental remediation projects and offers related consulting services worldwide to those who store, transport, produce or handle petroleum products and environmentally hazardous materials.

SEACOR’s principal executive offices have been relocated from Houston, Texas to 2200 Eller Drive, P.O. Box 13038, Fort Lauderdale, Florida 33316, and our telephone number is (954) 524-4200. Our Internet address is www.seacorholdings.com.

All of the Company’s periodic report filings with the Securities and Exchange Commission (“SEC”) pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are made available, free of charge, through our website, including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports. These reports and amendments are available through the Company’s website as soon as reasonably practicable after the Company electronically files such reports or amendments with the SEC. They are also available to be read and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549.

1




Information as to the operation of the SEC’s Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements and other information.

Segment and Geographic Information

The Company’s operations are divided into five business segments: “Offshore Marine Services,” “Marine Transportation Services,” “Inland River Services,” “Aviation Services,” and “Environmental Services.”  Our additional activities are described under “Other”, which primarily includes “Harbor and Offshore Towing Services” and equity in earnings of 50% or less owned companies unrelated to the five business segments. Marine Transportation Services and Harbor and Offshore Towing Services were acquired as a result of our acquisition on July 1, 2005 of Seabulk International, Inc. (“Seabulk”) through a merger with a wholly-owned subsidiary of SEACOR (the “Seabulk Merger”). Financial data for segment and geographic areas is reported in Item 8. Financial Statements and Supplementary Data—Note 16.—Major Customers and Segment Data included in Part IV of this Annual Report on Form 10-K.

Offshore Marine Services

Business

Offshore Marine Services operates a diversified fleet of offshore support vessels primarily servicing offshore oil and gas exploration, development and production facilities worldwide. Vessels in this service are employed to deliver cargo and personnel to offshore installations, handle anchors for drilling rigs and other marine equipment, support offshore construction and maintenance work and provide standby safety support and oil spill response services. From time to time, Offshore Marine Services supports projects such as well stimulation, seismic data gathering and freight hauling. Offshore Marine Services also offers logistics services in support of offshore oil and gas exploration, development and production operations including shorebase, marine transport and other supply chain management services. This segment contributed 50%, 58% and 78% of consolidated revenues in 2005, 2004 and 2003, respectively.

2




Equipment and Services

The following tables identify the types of vessels that comprise the Offshore Marine Services’ fleet as of December 31 in the indicated years. As a result of the Seabulk Merger, 102 vessels were added to Offshore Marine Services’ fleet. “Owned vessels” are those 100% owned by the Company, either constructed and delivered new from shipyards or purchased from competitors. “Joint ventured vessels” are those owned by entities in which the Company is not the sole owner. “Leased-in vessels” are generally those which have been sold to an institutional lessor and then leased back. “Pooled vessels” are owned by entities not affiliated with Offshore Marine Services: the revenues or profits of these vessels are shared with the revenues and profits of certain vessels owned by Offshore Marine Services based upon an agreed formula. “Managed vessels” are owned by entities not affiliated with the Company but are operated by Offshore Marine Services for a fee, no revenues or profits being shared with Offshore Marine Services. At the end of this section we provide a glossary of the types of vessels listed below and an explanation of the services they perform.

Offshore Marine Services Vessels

 

 

Owned(a)

 

Joint
Ventured

 

Leased-in

 

Pooled or
Managed

 

Total

 

2005:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Anchor handling towing supply

 

 

24

 

 

 

3

 

 

 

2

 

 

 

 

 

 

29

 

 

Crew

 

 

72

 

 

 

6

 

 

 

23

 

 

 

 

 

 

101

 

 

Mini-supply

 

 

21

 

 

 

2

 

 

 

7

 

 

 

1

 

 

 

31

 

 

Standby safety

 

 

19

 

 

 

3

 

 

 

 

 

 

5

 

 

 

27

 

 

Supply

 

 

32

 

 

 

4

 

 

 

8

 

 

 

 

 

 

44

 

 

Towing supply

 

 

30

 

 

 

19

 

 

 

3

 

 

 

 

 

 

52

 

 

Other

 

 

14

 

 

 

2

 

 

 

 

 

 

1

 

 

 

17

 

 

 

 

 

212

 

 

 

39

 

 

 

43

 

 

 

7

 

 

 

301

 

 

 

2004:

 

 

 

 

 

 

 

 

 

 

 

Anchor handling towing supply

 

 

14

 

 

 

3

 

 

 

1

 

 

 

 

 

 

18

 

 

Crew

 

 

58

 

 

 

5

 

 

 

19

 

 

 

 

 

 

82

 

 

Mini-supply

 

 

25

 

 

 

1

 

 

 

4

 

 

 

 

 

 

30

 

 

Standby safety

 

 

19

 

 

 

3

 

 

 

 

 

 

5

 

 

 

27

 

 

Supply

 

 

10

 

 

 

6

 

 

 

3

 

 

 

1

 

 

 

20

 

 

Towing supply

 

 

11

 

 

 

20

 

 

 

2

 

 

 

 

 

 

33

 

 

Other

 

 

1

 

 

 

1

 

 

 

 

 

 

 

 

 

2

 

 

 

 

 

138

 

 

 

39

 

 

 

29

 

 

 

6

 

 

 

212

 

 

 

2003:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Anchor handling towing supply

 

 

18

 

 

 

6

 

 

 

2

 

 

 

 

 

 

26

 

 

Crew

 

 

51

 

 

 

13

 

 

 

23

 

 

 

 

 

 

87

 

 

Mini-supply

 

 

26

 

 

 

2

 

 

 

4

 

 

 

 

 

 

32

 

 

Standby safety

 

 

19

 

 

 

3

 

 

 

 

 

 

5

 

 

 

27

 

 

Supply

 

 

12

 

 

 

8

 

 

 

5

 

 

 

1

 

 

 

26

 

 

Towing supply

 

 

11

 

 

 

20

 

 

 

2

 

 

 

 

 

 

33

 

 

Other

 

 

2

 

 

 

2

 

 

 

 

 

 

 

 

 

4

 

 

 

 

 

139

 

 

 

54

 

 

 

36

 

 

 

6

 

 

 

235

 

 


(a)      Excludes 3 owned vessels removed from service in 2005 and 14 vessels removed from service in 2003.

3




The following table sets forth the percent of the Company’s consolidated operating revenues earned by vessel type and certain other business activities of Offshore Marine Services for each year indicated:

Vessel Type

 

 

 

2005

 

2004

 

2003

 

Anchor handling towing supply

 

 

10

%

 

 

9

%

 

 

15

%

 

Crew

 

 

13

%

 

 

16

%

 

 

17

%

 

Mini-supply

 

 

4

%

 

 

6

%

 

 

7

%

 

Standby safety

 

 

6

%

 

 

11

%

 

 

11

%

 

Supply

 

 

7

%

 

 

9

%

 

 

13

%

 

Towing supply

 

 

7

%

 

 

5

%

 

 

9

%

 

Utility(a)

 

 

 

 

 

 

 

 

3

%

 

Other

 

 

2

%

 

 

 

 

 

 

 

Miscellaneous Offshore Marine Services revenues

 

 

1

%

 

 

2

%

 

 

3

%

 

 

 

 

50

%

 

 

58

%

 

 

78

%

 


(a)      The Company removed its utility fleet from service during 2003.

The following table indicates average age in years of our fleet and shows the changed age profile of the fleet following the Seabulk Merger as of December 31:

Vessels

 

 

 

2005

 

2004

 

SEACOR Legacy Fleet including standby safety vessels

 

13.8

 

12.3

 

SEACOR Legacy Fleet excluding standby safety vessels

 

10.7

 

9.6

 

Seabulk Legacy Fleet

 

21.6

 

N/A

 

Combined Fleet including standby safety vessels

 

16.9

 

N/A

 

Combined Fleet excluding standby safety vessels

 

15.5

 

N/A

 

 

Glossary of Vessel Types

Listed below is a description of each of the vessel types referred to above.

Anchor handling towing supply (“AHTS”) vessels are used primarily for towing, positioning and mooring drilling rigs and other marine equipment by lifting and setting anchors on the sea bottom but are also used to transport supplies and equipment from shore bases to offshore drillings rigs, platforms and other installations. The defining characteristics of AHTS vessels are horsepower (“BHP”) and size of winch in terms of “line pull” and wire storage capacity. Our fleet of AHTS vessels has varying capabilities and supports offshore mooring activities in water depths ranging from 300 to 8,000 feet. Most modern AHTS vessels are equipped with dynamic positioning (“DP”) systems that enable them to maintain a fixed position in close proximity to a rig without the use of tie-up lines.

Crew boats move personnel to and from offshore installations. Historically, crew boats transported people and were also used to deliver “light” cargo such as personal effects, small machinery and small quantities of fuel and water. These boats also served as field stand-by vessels, moving personnel between platforms and providing an emergency stand-by service under certain circumstances. Crew boats built prior to 1990 are generally 100 to 130 feet in length and are capable of 20 knots in light condition and calm seas. Vessels built since 1998, also referred to as Fast Support Vessels (“FSVs”), range from 130 to 200 feet in length and develop speeds of between 25 and 35 knots. Modern FSVs have enhanced cargo carrying capacities, including in some instances the capacity to support some phases of drilling operations. Vessels supporting drilling and working in deep water are usually equipped with DP capabilities.

Mini-supply vessels range from 125 to 155 feet in length and typically carry deck cargo, liquid mud, methanol, diesel fuel and water. These vessels are well suited for production support, construction projects, maintenance work and certain drilling support activities.

4




Standby safety vessels typically remain on location proximate to offshore rigs and production facilities to respond to emergencies. These vessels carry special equipment to rescue personnel and are equipped to provide first aid and shelter. In some cases, these vessels perform a dual role, functioning also as supply vessels.

Supply vessels and towing supply vessels range in length from 164 to 255 feet and are used to deliver cargo to rigs and platforms where drilling and work-over activity is underway or to support construction work by delivering pipe to vessels performing underwater installations. Supply vessels are distinguished from other vessels by the total carrying capacity (deadweight: “dwt”), available area of clear deck space, below-deck capacity for storage of mud and cement used in the drilling process and tank storage for water and fuel oil. Speed is not generally a factor but the ability to hold station in open water and moderately rough seas is a key factor in differentiating supply vessels. To improve station keeping ability, certain supply vessels have DP capabilities. Towing supply vessels perform similar cargo delivery functions to those handled by supply vessels. They are, however, equipped with more powerful engines (4-8,000 horsepower) and deck mounted winches, giving them the added capability to perform general towing functions, buoy setting and limited anchor handling work.

Other includes geophysical, anchor handling tugs, tugs, freight and other vessels. These vessels generally have specialized features adapting them to their specific function, including large deck space, high electrical generating capacity, high maneuverability and unique thrusters, extra berthing facilities and long-range cruising capabilities. Special project activities include well stimulation, seismic data gathering, freight hauling services and accommodation services.

Markets

The demand for vessels is affected by the level of offshore exploration and drilling activities, which in turn is influenced by a number of factors including:

·       expectations as to future oil and gas commodity prices

·       customer assessments of offshore drilling prospects compared to land-based opportunities

·       customer assessments of cost, geological opportunity and political stability in host countries

·       worldwide demand for oil and natural gas

·       the ability of The Organization of Petroleum Exporting Countries (“OPEC”) to set and maintain production levels and pricing

·       the level of production of non-OPEC countries

·       the relative exchange rates for the U.S. dollar

·       various government policies regarding exploration and development of their oil and gas reserves

See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for discussion of current market conditions.

Each of the markets in which Offshore Marine Services operates is highly competitive. The most important competitive factors are pricing and the availability of equipment to fit customer requirements at such time as the equipment is needed. Other important factors include service and reputation, flag preference, local marine operating conditions, the ability to provide and maintain logistical support given the complexity of a project and the cost of moving equipment from one geographical location to another.

We operate vessels in six principal geographic regions. From time to time, vessels are relocated between these regions to meet customer demand for equipment. The table below sets forth vessel types by geographic market. We sometimes participate in joint venture arrangements in certain geographical locations in order to enhance our marketing capabilities and facilitate operations in certain foreign

5




markets. This allows for expansion of both our fleet and operations while diversifying risks and reducing capital outlays associated with such expansion.

Vessel Types by Geographic Market(a)

 

 

 

2005

 

2004

 

2003

 

United States:

 

 

 

 

 

 

 

 

 

 

 

 

 

Anchor handling towing supply

 

 

9

 

 

 

4

 

 

 

6

 

 

Crew

 

 

70

 

 

 

58

 

 

 

53

 

 

Mini-supply

 

 

28

 

 

 

26

 

 

 

27

 

 

Supply

 

 

23

 

 

 

8

 

 

 

9

 

 

Towing supply

 

 

5

 

 

 

4

 

 

 

2

 

 

Other

 

 

 

 

 

 

 

 

1

 

 

Total United States Fleet

 

 

135

 

 

 

100

 

 

 

98

 

 

Latin America and Mexico:

 

 

 

 

 

 

 

 

 

 

 

 

 

Anchor handling towing supply

 

 

5

 

 

 

6

 

 

 

9

 

 

Crew

 

 

9

 

 

 

8

 

 

 

11

 

 

Mini-supply

 

 

2

 

 

 

3

 

 

 

4

 

 

Supply

 

 

7

 

 

 

6

 

 

 

8

 

 

Towing supply

 

 

11

 

 

 

11

 

 

 

12

 

 

Other

 

 

1

 

 

 

 

 

 

2

 

 

 

 

 

35

 

 

 

34

 

 

 

46

 

 

North Sea:

 

 

 

 

 

 

 

 

 

 

 

 

 

Anchor handling towing supply

 

 

1

 

 

 

1

 

 

 

1

 

 

Standby safety

 

 

27

 

 

 

27

 

 

 

27

 

 

Supply

 

 

 

 

 

4

 

 

 

7

 

 

 

 

 

28

 

 

 

32

 

 

 

35

 

 

West Africa:

 

 

 

 

 

 

 

 

 

 

 

 

 

Anchor handling towing supply

 

 

6

 

 

 

3

 

 

 

6

 

 

Crew

 

 

13

 

 

 

13

 

 

 

14

 

 

Mini-supply

 

 

 

 

 

1

 

 

 

1

 

 

Supply

 

 

10

 

 

 

2

 

 

 

2

 

 

Towing Supply

 

 

20

 

 

 

8

 

 

 

9

 

 

Other

 

 

4

 

 

 

 

 

 

 

 

 

 

 

53

 

 

 

27

 

 

 

32

 

 

Asia:

 

 

 

 

 

 

 

 

 

 

 

 

 

Anchor handling towing supply

 

 

8

 

 

 

3

 

 

 

3

 

 

Crew

 

 

3

 

 

 

2

 

 

 

9

 

 

Mini-supply

 

 

1

 

 

 

 

 

 

 

 

Supply

 

 

1

 

 

 

 

 

 

 

 

Towing Supply

 

 

3

 

 

 

1

 

 

 

1

 

 

Other

 

 

2

 

 

 

1

 

 

 

 

 

 

 

 

18

 

 

 

7

 

 

 

13

 

 

(continued)

6




 

Vessel Types by Geographic Market(a)

 

 

 

2005

 

2003

 

2003

 

Middle East:

 

 

 

 

 

 

 

 

 

 

 

 

 

Crew

 

 

6

 

 

 

 

 

 

 

 

Supply

 

 

3

 

 

 

 

 

 

 

 

Towing supply

 

 

11

 

 

 

7

 

 

 

7

 

 

Other

 

 

10

 

 

 

1

 

 

 

1

 

 

 

 

 

30

 

 

 

8

 

 

 

8

 

 

Other Foreign:

 

 

 

 

 

 

 

 

 

 

 

 

 

Anchor handling towing supply

 

 

 

 

 

1

 

 

 

1

 

 

Crew

 

 

 

 

 

1

 

 

 

 

 

Towing supply

 

 

2

 

 

 

2

 

 

 

2

 

 

 

 

 

2

 

 

 

4

 

 

 

3

 

 

Total Foreign Fleet

 

 

166

 

 

 

112

 

 

 

137

 

 

Total Fleet

 

 

301

 

 

 

212

 

 

 

235

 

 


(a)      Excludes 3 vessels removed from service in 2005 and 14 vessels removed from service in 2003.

United States.   At December 31, 2005, 135 vessels were operating in the U.S., including 95 owned, 37 leased-in, 2 joint ventured and 1 pooled. Offshore Marine Services’ expertise in this market is deepwater anchor handling with our fleet of AHTS vessels and exploration and production support with our fleet of crew and mini-supply vessels. This is a highly volatile market because the oil company programs we support tend to be of short-term duration and influenced by the near term price of natural gas. In addition, a large number of offshore marine service companies are active in this market and they compete largely on price alone.

Latin America & Mexico.   At December 31, 2005, 35 vessels were operating in Latin America and Mexico, including 14 owned and 21 joint ventured. Offshore Marine Services participated in the Mexican market through a joint venture, Maritima Mexicana, S.A  That market is controlled by the Mexican national oil company, Petroleos Mexicanos (“Pemex”), and vessel services are provided either directly to Pemex or to its subcontractors. The level of activity is largely influenced by Mexican government policies and finances. Subsequent to  December 31, 2005, we sold our interest in Maritima Mexicana, S.A. to our partners in that joint venture but continue to charter some of our vessels to them for operation in the Mexican market. We continue to have joint venture vessels operating in Chile, Argentina, Venezuela and Brazil.

North Sea.   At December 31, 2005, 28 vessels were operating in the North Sea, including 20 owned, 3 joint ventured, and 5 managed-in. The North Sea fleet primarily provides standby safety services. Demand in the North Sea market for standby services developed in 1991 after the United Kingdom promulgated legislation requiring offshore operations to maintain higher specification standby safety vessels. The legislation requires a vessel to “stand by” to provide a means of evacuation and rescue for platform and rig personnel in the event of an emergency at an offshore installation. The North Sea is a highly regulated market.

West Africa.   At December 31, 2005, 53 vessels were operating in West Africa, including 49 owned, and 4 bareboat chartered-in. Our largest market in this area is Nigeria, where we work in cooperation with a Nigerian company, West Africa Offshore. The Nigerian market is dominated primarily by the major oil companies and is characterized by large scale, multi-year projects. There is also a significant political component behind investment decisions as the Nigerian national oil company, NNPC, is a participant in almost all offshore development. The remainder of the Company’s vessels in this region operate from ports in Angola, the Republic of the Congo, Cameroon, Gabon, Equatorial Guinea and South Africa.

7




Asia.   At December 31, 2005, 18 vessels were operating in Asia, including 12 owned, 2 leased-in, 3 joint ventured and 1 managed. Offshore Marine Services’ vessels operating in this area generally support exploration programs and therefore follow the rigs to their locations in the region. To date, the largest market in this area has been Indonesia. In the last few years, we have invested in vessels capable of specialty operations such as supporting the operation of remote operated vehicles, telecommunications cable laying/repair and offshore accommodation. We compete against a large number of local and international companies in this market.

Middle East.   At December 31, 2005, 30 vessels were operating in the Middle East region, including 22 owned and 8 joint ventured. Offshore Marine Services’ vessels operating in this area generally support countries along the Arabian Gulf and Arabian Sea, including the United Arab Emirates, Qatar, Pakistan and India. We compete against a large number of local and international companies in this market.

Competitive Conditions

Although there are many suppliers of offshore marine services, management believes only one other company, Tidewater, Inc., operates in all of Offshore Marine Services’ major geographic markets. Tidewater, Inc. has a substantially greater percentage of the offshore marine market compared to that of Offshore Marine Services and its other competitors.

Customers and Contractual Arrangements

Offshore Marine Services’ principal customers are major integrated oil companies, large independent oil and gas exploration and production companies and emerging independent companies. Consolidation of oil and gas companies through mergers and acquisitions over the past several years has further and generally limited Offshore Marine Services’ customer base. In 2005 there was no single customer responsible for 10% or more of consolidated operating revenues. Our ten largest customers accounted for approximately 45% of Offshore Marine Services’ operating revenues. The loss of one or a few of our customers could have a material adverse effect on Offshore Marine Services’ results of operations.

The Offshore Marine Services segment earns and recognizes revenues primarily from the time charter and bareboat charter of vessels to customers based upon daily rates of hire. A time charter is a lease arrangement under which the Company provides a vessel to a customer and is responsible for all operating expenses, normally excluding fuel. Under bareboat charter agreements, the Company provides the vessel to the customer and the customer assumes responsibility for all operating expenses and assumes all risk of operation. Vessel charters may range from several days to several years. Revenues from time charter and bareboat charter are recorded as service is provided. Typically charter durations and rates are established in the context of Master Service Agreements which govern the terms and conditions of hire.

Risks of Foreign Operations

For the years ended December 31, 2005, 2004 and 2003 approximately 50%, 56%, and 54%, respectively, of Offshore Marine Services’ operating revenues were derived from foreign operations. Foreign operations are subject to inherent risks. These risks include, among others, political instability, asset seizures, nationalization of assets, terrorist attacks, fluctuating currency values, hard currency shortages, controls on currency exchange, the repatriation of income or capital, import-export quotas and other forms of public and governmental regulation, all of which are beyond the control of the Company. It is not possible to predict whether any of these conditions or events might develop in the future. The occurrence of any one or more of such conditions or events could have a material adverse effect on the Company’s financial condition and results of operations.

8




Marine Transportation Services

Business

The Marine Transportation Services operates a fleet of 10 U.S.-flag tankers, nine of which are owned and one which is bareboat chartered. Two foreign-flag tankers acquired in the Seabulk Merger were sold in August and September 2005. Our tankers provide marine transportation services for petroleum products, petrochemicals and chemicals moving in the U.S. domestic or “coastwise” trade. The Merchant Marine Act of 1920, commonly referred to as the Jones Act,” requires that vessels engaged in U.S. coastwise trade be owned by U.S. citizens and built in the U.S. Marine Transportation Services accounted for approximately 7% of our total revenue for the six month period in 2005 following the Seabulk Merger.

Equipment and Services

The Oil Pollution Act of 1990 (“OPA 90”) established that vessels that do not have double-hulls will be prohibited from transporting crude oil and petroleum products in U.S. coastwise transportation after a certain date based on the age and size of the vessel unless they are modified with a double-hull. In addition, such vessels will be prohibited from transporting petroleum products in most foreign and international markets under a more accelerated phase-out schedule established by the International Maritime Organization (“IMO”).

The table below sets forth our Marine Transportation Services fleet as at December 31, 2005.

Name of Vessel

 

 

 

Capacity
in barrels

 

Tonnage
in “dwt”
(1)

 

OPA 90
Retirement date

 

Type

Seabulk Trader

 

360,000

 

49,900

 

2011

 

Double-bottom

Seabulk Challenge

 

360,000

 

49,900

 

2011

 

Double-bottom

HMI Brenton Reef

 

341,000

 

45,000

 

None

 

Double-hull

Seabulk Energy

 

341,000

 

45,000

 

None

 

Double-hull

Seabulk Arctic

 

340,000

 

46,000

 

None

 

Double-hull

Seabulk Mariner

 

340,000

 

46,000

 

None

 

Double-hull

Seabulk Pride

 

340,000

 

46,000

 

None

 

Double-hull

Seabulk Power

 

260,000

 

36,600

 

2008

 

Single-hull

Seabulk Magnachem(2)

 

297,000

 

39,300

 

2007

 

Double-bottom

Seabulk America

 

297,000

 

46,300

 

2015

 

Double-bottom


(1)                 Dead weight tons or “dwt”.

(2)                 We operate the Seabulk Magnachem under a bareboat charter expiring in February 2007 at which time we have an option to purchase the vessel.

Markets

Petroleum Product Transportation.   In the domestic energy trade, oceangoing vessels transport fuel and other petroleum products primarily from refineries and storage facilities along the coast of the U.S. Gulf of Mexico to utilities, waterfront industrial facilities and distribution facilities along the U.S. Gulf of Mexico, the Atlantic and Pacific coasts, as well as transport crude and product between Alaska and the West Coast and Hawaii. The number of U.S.-flag oceangoing vessels eligible to participate in the U.S. domestic trade and capable of transporting fuel or petroleum products has steadily decreased since 1980 as vessels have reached the end of their useful lives or are being retired due to OPA 90 requirements. In addition, the cost of new vessel construction in the United States (a requirement to operate in the U.S. domestic coastwise trade) has substantially increased.

Chemical Transportation.   In the U.S. domestic coastwise chemical transportation trade, vessels carry chemicals, primarily from chemical manufacturing plants and storage tank facilities along the coast of the

9




U.S. Gulf of Mexico to industrial users in and around U.S. Atlantic and Pacific coast ports. The chemicals transported consist primarily of caustic soda, paraxylene, alkylates, toluene and lubricating oils. Some of the chemicals must be carried in vessels with specially coated or stainless steel cargo tanks and many of them are sensitive to contamination and require special cargo-handling equipment.

Customers and Contractual Arrangements

The primary purchasers of petroleum product transportation services are multi-national oil and gas companies, oil trading companies and large industrial consumers of fuel with waterfront facilities. The primary purchasers of chemical transportation services are chemical and oil companies. Both services are generally contracted for on the basis of short-term or long-term time charters, voyage charters, contracts of affreightment or other transportation agreements tailored to the shipper’s requirements. Even though there was no single customer responsible for 10% or more of consolidated operating revenues in 2005, our ten largest customers accounted for approximately 85% of Marine Transportation Services’ operating revenues. The loss of one or a few of our customers could have a material adverse effect on Marine Transportation Services’ result of operations.

For vessels not operating under time charters or voyage charters, the Company books cargoes either on a spot (movement-by-movement) or contract of affreightment basis. As with other vessels we operate, tankers operated by Marine Transportation Services under time charter are operated for a daily rate of hire where the customer pays for fuel and we are responsible for the actual operation of the vessel and all other vessel operating expenses. When we bareboat charter a tanker to a customer, the customer pays us a daily rate of hire but also assumes all risk of operation and pays all operating expenses. Contracts of affreightment are contracts with a customer for the carriage of cargoes that are committed on a multi-voyage basis over a period of weeks or months, with minimum and maximum cargo tonnages specified over the period at fixed or escalating rates per ton depending on the duration of the contract. Typically, under voyage charters and contracts of affreightment the vessel owner pays for the fuel and any applicable port charges.

Competition

The markets in which our tanker vessels operate are highly competitive. Our primary direct competitors are other operators of U.S. flag ocean-going tank vessels and chemical carriers. The most important competitive factors are pricing and availability to fit customer requirements as well as the requirement in certain areas to operate double hull or double bottom vessels.

Inland River Services

Business

Inland River Services, which trades under the name SCF Marine Inc. (“SCF”), is primarily engaged in the operation of a fleet of dry cargo barges which carry bulk goods on the Mississippi, Illinois, Tennessee and Ohio Rivers and their tributaries and the Gulf Intracoastal Waterways. Principal cargoes include ore, grain, coal, aggregate, steel, scrap and fertilizers. As of December 31, 2005, Inland River Services operated a fleet of 1,139 dry cargo barges, of which 749 are owned, 182 chartered-in, 202 managed on behalf of third parties and six owned through a joint venture. Certain of Inland River Services’ barging activities are supported by four wholly-owned towboats and three towboats in which Inland River Services holds a majority interest. All of our towboats are operated by third parties. Inland River Services also owns 44 chemical and product tank barges that are operated by a third party. These transport liquid bulk cargoes such as lube oils, solvents and glycols. In 2005 we expanded our services through the purchase of a “fleeting operation” which is a staging area for grouping barges in preparation for movements up and down the river and a holding area for barges waiting to load and unload cargo. The fleeting operation is managed by a third party.

10




Inland River Services contributed 13%, 14% and 7% of consolidated operating revenues in 2005, 2004 and 2003, respectively.

Equipment and Services

We operate 376 of our dry cargo barges with barges owned by third parties through a pooling arrangement that we manage. Under this arrangement, operating revenues and expenses of the entire pool are shared among the barge owners on the basis of barge days contributed. Each barge owner is responsible for the costs of insurance, maintenance and repair as well as for capital and financing costs of its own equipment in the pool.

SCF’s fleet of dry cargo barges consists of open and covered hopper barges. Open hopper barges are used to transport commodities that are not sensitive to water such as coal, aggregate and scrap. Covered hopper barges are more versatile because they can also carry water sensitive products, such as grain, ores, alloys, cements and fertilizer. Each dry cargo barge in our fleet is capable of transporting approximately 1,500 to 2,000 tons (1,350 to 1,800 metric tons) of cargo. The carrying capacity of a barge at any particular time is determined by water depth in the river channels and hull size of the barge.

Inland barges are unmanned and are moved on the U.S. inland waterways by vessels known in the trade as “towboats.”  The combination of a towboat and dry cargo barges is commonly referred to as a “tow.”  Tows usually range in size from fifteen to forty barges. The number of dry cargo barges included in a tow depends on a variety of factors, including the horsepower of the towboat, river width and navigational conditions, the direction of travel and the mix of loaded and empty barges in the tow.  Inland River Services contracts with third parties to move its dry cargo barges on a spot basis, meaning that the rates it pays for barge movements are market driven. Towing prices fluctuate with demand, rising with higher volumes and higher fuel costs. SCF has ownership interests in seven towboats that are operated by a third party.

Typical dry cargo voyage activity requires shifting a clean, empty barge from a fleeting location to a loading facility. The barge is then moved from the loading location and assembled into a tow before proceeding to its next destination. After unloading it is shifted to a fleeting area for cleaning and repair if needed before being moved again into a load position. Generally, the Company tries to match-up northbound and southbound movements of cargo to minimize the movements of empty barges. Typically, grain cargos move southbound and non-grain cargos move northbound.

The following table sets forth the number of dry cargo barges, chemical tank barges and towboats owned and/or operated by Inland River Services.

 

 

At December 31,

 

Fleet Structure

 

 

 

2005

 

2004

 

2003

 

Dry Cargo Barges:

 

 

 

 

 

 

 

 

 

Owned:

 

 

 

 

 

 

 

 

 

Open

 

279

 

231

 

 

126

 

 

Covered

 

470

 

443

 

 

243

 

 

Total Owned

 

749

 

674

 

 

369

 

 

Managed

 

202

 

210

 

 

235

 

 

Chartered-in

 

182

 

182

 

 

174

 

 

Joint Ventured(1)

 

6

 

6

 

 

6

 

 

Total Fleet

 

1,139

 

1,072

 

 

784

 

 

Chemical Tank Barges

 

44

 

20

 

 

 

 

Towboats(2)

 

7

 

6

 

 

3

 

 

 


(1)                 50% owned by the Company.

11




(2)                 Three 6,250 horsepower towboats were acquired in December 2003 and are bareboat chartered-out. The Company and a minority partner jointly own three 6,250 horsepower towboats which were acquired in July 2004. A 3,800 horsepower towboat was acquired in 2005 and is bareboat chartered-out.

Markets

Dry cargo barges provide cost effective transport for many bulk commodity shippers. Primary users of dry cargo barges include major U.S. agricultural and industrial companies. Dry cargo commodities transported on the U.S. inland waterways include coal, petroleum byproducts, grain and grain byproducts, fertilizers, both raw steel commodities and finished steel, nonferrous minerals and construction materials. Grains rank as the primary export, coal and petroleum products are predominately moved domestically, and fertilizer, steel, and construction materials are both imported and moved domestically within the U.S. inland waterways.

The market for our services, prices achieved and utilization are driven by supply/demand economics. The relationship between supply and demand reflects many factors including:

·       the level of domestic and international production of the basic agricultural products to be transported (in particular the yields from grain harvests)

·       the level of domestic and international consumption of agricultural products and the effect of these levels on the volumes of products that are physically moved into the export markets

·       worldwide demand for iron ore, steel, steel by-products, coal, petroleum and other bulk commodities

·       strength or weakness of the U.S. Dollar

·       volatility of foreign economies

·       volume of grain production in different growing regions

·       the cost of ocean freight and the cost of fuel

Within the U.S. other local factors also have an effect on pricing including:

·       the supply of barges available to move the products

·       the ability to position the barges to maximize efficiencies and utility in moving cargoes both northbound and southbound

·       the cost of alternative forms of transportation (primarily rail)

·       general operating logistics on the river network including operating status of locks

·       the effect of river levels on the loading capacities of the barges in terms of draft restrictions

Most of Inland River Services business is booked in the short-term and spot markets, and therefore, its earnings are subject to fluctuations in market rates. We occasionally seek to enter into long-term contracts to provide a level of stable cash flows and moderate the effect of market fluctuations.

12




Seasonality

The upper Mississippi River usually closes to barge traffic from mid-December to mid-March. Ice hinders the navigation of barge traffic on the mid-Mississippi River, the Illinois River and the upper Ohio River during the same period. Adverse river conditions due to high water resulting from excessive rainfall, or low water caused by drought, can also impact operations by limiting the speed at which tows travel the U.S. inland waterways, the number of barges included in tows, and the quantity of cargo that is loaded in the barges. The volume of grain transported from the Midwest to the Gulf of Mexico, which is primarily for export, is highest during the harvest season from mid-August through late November. The harvest season is particularly significant because pricing tends to peak during these months in response to higher demand for equipment.

Competitive Conditions

We believe that there are four other major domestic companies that operate over 1,000 barges each, with three of those operating over 2,000 barges each. There are also four mid-sized barge companies that operate more than 500 but less than 1,000 barges. The Company estimates that the ten largest operators control approximately 80% of the dry cargo capacity and the twelve largest operators control 80% of the liquid cargo capacity in the barge industry. Competition is based primarily on price and equipment availability. While our main competitors are other barge lines, railroads also compete for traffic that might otherwise move on the water.

Customers and Contractual Arrangements

The principal customers for Inland River Services are major agricultural and industrial companies. In 2005 there was no single customer responsible for 10% or more of consolidated operating revenues. Our ten largest customers accounted for approximately 60% of Inland River Services’ revenues in 2005. The loss of one or a few of our customers would not have a material adverse effect on Inland River Services’ results of operations.

Most of the barges in the fleet are employed under contracts of affreightment (a contract of affreightment is an agreement to transport cargo from one point to another for a specified rate per ton) with customers. Contracts of affreightment can vary in duration, ranging from one voyage to several years. For longer term contracts base rates may be adjusted in response to changes in fuel prices and operating expenses. Some longer term contracts provide for the transport of a minimum number of tons of cargo or the transportation requirements for a particular customer. Some of the barges are bareboat chartered-out to third parties for a fixed payment of hire per day for the duration of the charter. These contracts tend to be longer, ranging in term from one to five years.

Aviation Services

Business

Aviation Services commenced operations in December 2002 with the acquisition of Houston-based helicopter owner/operator Tex-Air Helicopters, Inc. (“Tex-Air”) an operator of 46 helicopters  primarily servicing the offshore oil and gas markets in Texas and Louisiana. On December 31, 2004, we acquired Era Aviation, Inc. (“the Era Acquisition”), which operated 81 helicopters, an airline with sixteen fixed wing aircraft, which we sold on July 18, 2005, and a Fixed Base Operation (“FBO”) providing fuel and services to third parties at Anchorage International Airport. In April 2005, we integrated the operations of Tex-Air with those of Era Aviation, Inc. and we began operating the combined group as Era Helicopters LLC (“Era”). Era’s primary activities support offshore oil and gas activities in the U.S. Gulf of Mexico and Alaska, flightseeing in Alaska and equipment leasing in various parts of the world. We operate from bases in Alabama, Louisiana, Mississippi, Texas and Alaska.

13




Aviation Services contributed 14%, 6% and 5% of consolidated operating revenues in 2005, 2004 and 2003, respectively.

Equipment and Services

At December 31, 2005, Aviation Services owned 94 helicopters and leased 14 others under operating leases. Of these, 100 were located in the United States and 8 were located in foreign jurisdictions. In addition to our operating fleet of 108 helicopters, 16 helicopters have been removed from service and are being marketed for sale.

Aviation Services operates a Federal Aviation Administration (“FAA”) approved maintenance repair station in Lake Charles, Louisiana and is a factory approved service facility for Bell Helicopter, American Eurocopter and Turbomeca. Since 1987, Era has manufactured and marketed, from its Lake Charles facility a composite external auxiliary fuel tank for use on several helicopter types, including the Bell 205, 212/412 and the military “Huey”. The tank system provides enhanced flight range with nominal drag while increasing passenger capacity. Sales to date have been to both civilian and military customers. Other aircraft accessories are also manufactured at the facility.

The composition of Aviation Services’ fleet as of December 31, 2005 was as follows:

Manufacturer

 

 

 

Model

 

Number

 

Engine

 

Passenger
Capacity

 

Light Helicopters:

 

 

 

 

 

 

 

 

 

 

 

 

 

Eurocopter

 

EC120

 

 

8

 

 

Single

 

 

4

 

 

Eurocopter

 

AS 350 Types

 

 

33

 

 

Single

 

 

5-6

 

 

Agusta

 

A119

 

 

10

 

 

Single

 

 

7

 

 

Eurocopter

 

BO-105

 

 

16

 

 

Twin

 

 

4-5

 

 

Agusta

 

A109

 

 

2

 

 

Twin

 

 

7

 

 

 

 

 

 

 

69

 

 

 

 

 

 

 

 

Medium Helicopters:

 

 

 

 

 

 

 

 

 

 

 

 

 

Sikorsky

 

S-76 Types

 

 

9

 

 

Twin

 

 

12

 

 

Eurocopter

 

EC155

 

 

2

 

 

Twin

 

 

12

 

 

Bell

 

Bell 212/412

 

 

22

 

 

Twin

 

 

13

 

 

Agusta

 

AB 139

 

 

3

 

 

Twin

 

 

12

 

 

 

 

 

 

 

36

 

 

 

 

 

 

 

 

Heavy Helicopters:

 

 

 

 

 

 

 

 

 

 

 

 

 

Sikorsky

 

S-61

 

 

3

 

 

Twin

 

 

19

 

 

 

 

 

 

 

3

 

 

 

 

 

 

 

 

 

 

 

 

 

108

 

 

 

 

 

 

 

 

 

The flightseeing tourist services in Alaska are provided through contractual arrangement with cruise lines and through direct bookings with hotels, travel agents and individual passengers. These services are operated out of Juneau and from areas near Denali National Park. Other helicopter services to the oil and mining industries in Alaska are provided on a contract or charter basis from bases in Valdez, Anchorage, the Kenai area and Deadhorse. These services are somewhat seasonal in nature, peaking during the months of May through September when weather conditions are more conducive to operations.

Operations in the U.S. Gulf of Mexico largely support the offshore oil and gas exploration, development and production industry. Services are provided from Aviation Services’ corporate office in Lake Charles, Louisiana and from bases in the Louisiana cities of Morgan City, Cameron, Abbeville, Venice, Fourchon, Houma, Schriever and Johnson’s Bayou, the Texas cities of Galveston and Sabine Pass, from Pascagoula Mississippi and from Theodore, Alabama.

14




Our principal aircraft base in Alaska is our Fixed Base Operation and hangar space at Ted Stevens Anchorage International Airport. We also maintain smaller helicopter facilities in Alaska at Deadhorse and Valdez and we own properties in Juneau and Denali Park, Alaska.

Markets

At this time, Aviation Services’ principal market for its transportation services is the oil and gas industry with offshore operations in the U.S. Gulf of Mexico. The customers and locations are similar to those serviced by Offshore Marine Services and the market and Aviation Services opportunities there are subject to the same cycles and pressures as described above. See “Item 1. Business—Offshore Marine Services—Markets.”  In addition, Aviation Services leases aircraft in the U.S. and internationally, conducts flightseeing operations in Alaska and provides services to the utility and offshore markets in Alaska.

Seasonality

A significant portion of Aviation Services’ operating revenues and profits from serving oil and gas industry customers is dependent on actual flight hours. The fall and winter months have fewer hours of daylight and consequently flight hours are generally lower at these times. In addition, prolonged periods of adverse weather and the effect of fewer hours of daylight can adversely impact our operating results. In general, the winter months of December through February in the U.S. Gulf of Mexico and October through April in Alaska have more days of adverse weather conditions than the other months of the year. In the U.S. Gulf of Mexico, June through November is tropical storm season. During tropical storms, we are unable to operate in the area of the storm although flight activity may increase immediately prior to and after storms due to the evacuation and return of offshore workers. Our flightseeing operation is also seasonal; activity generally occurs from late May until early September.

Competitive Conditions

The helicopter transportation business is highly competitive. There are two major competitors in the U.S.:  PHI, Inc. and Bristow Group Inc. as well as several other smaller companies. In addition, several customers in the U.S. Gulf of Mexico operate their own helicopter fleets. We are the third largest helicopter company operating in the U.S. Gulf of Mexico and one of the largest operators of flightseeing helicopters in Alaska. In most instances, an operator must have an acceptable safety record, demonstrated reliability and suitable equipment to participate in bidding for work. Among bidders meeting these criteria, customers typically make their final choice based on price and aircraft preference.

Customers and Contractual Arrangements

Aviation Services charters its helicopters to utility and oil and gas customers primarily through master service agreements, term contracts and day-to-day charter arrangements. Master service agreements require incremental payments above a fixed fee based upon flight hours flown, have fixed terms ranging from one month to five years and generally are cancelable upon 30 days notice. Term contracts and day-to-day charter arrangements are generally non-cancelable without cause and call for a combination of a monthly or daily fixed rental fee plus a charge based on hours flown. Day-to-day charter arrangements are generally based on either an hourly or daily rate. Our rate structure, as it applies to our utility and oil and gas contracts, contains terms that limit our exposure to increases in fuel costs over a pre-agreed level. Fuel costs in excess of these levels are passed through to our customers. With respect to flightseeing aircraft, we allocate block space to cruise lines and sell seats directly to customers. At December 31, 2005, we had 55 helicopters operating under master service agreements or term contracts with customers. The Company’s principal customers in the U.S. Gulf of Mexico are oil companies of varying sizes and production management companies. In Alaska, the Company’s principal customers are oil companies and cruise line passengers.

15




There are other markets for our helicopter transportation services that include oil and gas industry support activities abroad, medical transportation, agricultural support and general aviation activities. Our activity in these markets is limited. We have nine helicopters operating abroad under leases to third parties.

In 2005 there was no single customer responsible for 10% or more of consolidated operating revenues. Our ten largest customers accounted for approximately 45% of Aviation Services’ operating revenues. The loss of one or a few of our customers could have a material adverse effect on Aviation Services’ results of operations.

Environmental Services

Business

Environmental Services primarily provides emergency preparedness and response services to oil, chemical, industrial and marine transportation clients in the U.S. and abroad. In the United States, these services are generally related to those clients who store, transport, produce or handle petroleum and certain non-petroleum oils as required by OPA 90 and various other federal, state and municipal regulations. Internationally, these services may be required by legislation and regulation of the countries where our clients operate, international maritime conventions and environmental covenants placed on clients by their lending institutions. In general, emergency preparedness services may include development of response plans, training, exercises, equipment selection and sales and other consulting projects. Response services may include mitigation and supervision of actual emergency response and crisis management situations, such as industrial fires, hazardous materials releases and oil spills. We also bid on and perform contractual services for federal, state and local governments from time to time. We conduct our business through the Company’s wholly owned subsidiaries, National Response Corporation (“NRC”), The O’Brien’s Group, Inc., SEACOR Environmental Services International Ltd. (“SESI”) and NRC Environmental Services Inc. (“NRCES”) which was acquired in November 2003.

This segment contributed 14%, 23% and 11% of consolidated revenues in 2005, 2004 and 2003, respectively.

Products and Services

Emergency Response Services.   Environmental Services employs trained personnel and maintains specialized equipment positioned in the U.S. and in certain locations outside the U.S. to respond to oil spills, other emergencies and projects required by our customers. A fleet of specialized vessels and barges outfitted with oil spill equipment is positioned on the East, Gulf, and West Coasts of the U.S. as well as in the Caribbean and Hawaii. Oil spill and other response equipment is also stationed in certain international locations, such as the Caspian Region, Far East, Middle East and South America. The division has also established a network of approximately 175 independent oil spill response contractors that may assist it by providing equipment and personnel. Operating revenues earned from emergency response services approximated 46%, 49% and 41% of Environmental Services’ total operating revenues for the years ended December 31, 2005, 2004, and 2003, respectively.

Retainer Services.   We offer retainer contracts to the maritime community, such as operators of tank and non-tank vessels and chemical carriers and to owners of facilities, such as refineries, pipelines, exploration and production platforms, power plants and storage tank and transportation terminals. Retainer services include access to professional response management and specialized equipment necessary to respond to an oil or chemical spill emergency.

Consulting Services.   Our personnel assist clients in the development and updating of their prevention, emergency response and security plans.  These personnel also develop and conduct customized training programs for clients to educate their employees on the prevention of and response to emergencies,

16




such as oil spills, handling of hazardous materials releases, fire fighting, security incidents and other crisis-related events and associated risks. In addition, our environmental professionals plan, conduct, evaluate and participate in customer and government led emergency response drills and exercises. We also assist customers in the selection, purchase, shipment and commissioning of environmental equipment and products and training of personnel to operate this equipment. Consultants with specialized qualifications also conduct and assist with vessel inspections and security assessments of vessels and facilities. We offer these services throughout the U.S. and internationally, both on a stand-alone basis and as part of retainer services, to our oil, chemical, industrial, marine transportation and government customers.

Industrial and Remediation Services.   We also provide remediation and cleaning services to oil, chemical, industrial and government clients primarily on the U.S. West Coast. These services include hazardous waste management, industrial and marine cleaning services, salvage support, petroleum storage tank removal and site remediation services. Some of these projects are required or governed by federal, state or local regulations. Also, many of these projects are the result of competitive bidding conducted by our customers.

Markets

The market for contractual oil spill response and other related training and consulting services in the U.S. resulted from the enactment of the OPA 90 legislation passed by the U.S. Congress after the Exxon Valdez oil spill in Alaska. OPA 90 requires that all tank vessels operating within the 200-mile Exclusive Economic Zone of the United States and all facilities and pipelines handling oil that could have a spill affecting the navigable waters of the U.S. develop a plan to respond to a “worst case” oil spill and ensure by contract or other approved means the ability to respond to such a spill. Certain states have enacted similar oil spill laws and regulations, most notably California, Washington and Alaska. In 2004, many of these same preparedness and response requirements were expanded to include self-propelled non-tank vessels greater than 400 gross tons by passage of The Coast Guard and Maritime Transportation Act of 2004. The U.S. Coast Guard has in turn issued a Navigation and Vessel Inspection Circular to clarify these requirements and is in the process of promulgating final regulations. The United Nations’ MARPOL 73/78 convention also subjects companies to various requirements governing waste disposal and water and air pollution.

We also provide vessel security assessments, security plans, security training and exercises and other related services. We market these services to clients who are required to comply with the Maritime Transportation Security Act of 2002 which was enacted following the September 11, 2001 terrorist attacks. We also market these services to federal, state, county and local agencies to assist them in their efforts to improve emergency preparedness and response capabilities. The international market is characterized by two distinct operating environments developed and developing nations. In developed nations, the environmental regulations generally are mature and governments usually respond to oil spills with public resources and then recover their costs from the responsible parties. In developing nations where global oil exploration and production exists, there is less oil spill response infrastructure and Environmental Services is seeking to develop opportunities to work with international oil and gas exploration and producing companies in such nations.

Customers and Contractual Arrangements

Environmental Services offers its services primarily to the domestic and international shipping community, major oil companies, independent exploration and production companies, power generating operators, industrial companies and airports. Services are provided pursuant to contracts generally ranging from one month to ten years. In addition to our retainer customers, we provide training, exercise and response services for oil spills, chemical releases, terrorist acts and natural disasters to others, including, under certain circumstances, local, state and federal agencies such as the U.S. Coast Guard. In 2005 there

17




was no single customer responsible for 10% or more of consolidated operating revenues. Our ten largest customers accounted for approximately 50% of Environmental Services’ operating revenues. The loss of one or a few of our customers could have a material adverse effect on Environmental Services’ results of operations.

Environmental Services has more than 2,300 customers, and management does not believe that it is dependent on a single customer or small group of customers.

Competitive Conditions

The principal competitive factors in the environmental service business are price, customer service, reputation, experience and operating capabilities. In the U.S., NRC faces competition primarily from the Marine Spill Response Corporation, a non-profit corporation funded by the major integrated oil companies, other non-profit industry cooperatives and also from those  commercial contractors who target specific market niches in response, consulting and remediation. Internationally, competition for both oil spill response and emergency preparedness and management comes from a few well-known private companies and regional oil industry cooperatives.

Risks of Foreign Operations

Environmental Services operates worldwide. Services include oil spill response, training, exercise support and special projects in assessing risk of spills, response preparedness, strategies and resource requirements to multinational oil companies, governments and industry. For the years ended December 31, 2005, 2004 and 2003 approximately 11%, 8%, and 40%, respectively, of Environmental Services’ operating revenues were derived from its foreign operations. A significant increase in operating revenues earned from foreign operations in 2003 resulted from spill response, spill management, containment and remediation services provided in support of Operation Iraqi Freedom.

Foreign operations are subject to various inherent risks. These risks include, among others, political instability, nationalization of assets, terrorist attacks, the repatriation of income or capital, import-export quotas and other forms of public and governmental regulation, all of which are beyond the control of the Company. It is not possible to predict whether any of these conditions or events might develop in the future.

Other

Harbor and Offshore Towing Services.   The Harbor and Offshore Towing Services operation was acquired on July 1, 2005 as a result of the Seabulk Merger. At December 31, 2005, the Company operated a total of 26 tugs, of which 15 were conventional tugs and eleven were tractor tugs. Of the tractor tugs, four were Ship Docking Module (“SDMs”) which are innovative ship docking vessels, designed and patented by Seabulk. They are maneuverable, efficient and flexible and require fewer crew members than conventional harbor tugs. In 2005 there was no single customer responsible for 10% or more of consolidated operating revenues. Our ten largest customers accounted for approximately 38% of Harbor and Offshore Towing Services’ operating revenues.

18




At December 31, 2005, twelve tugs were operating in Florida; four in Port Everglades, six in Tampa and two in Port Canaveral. There were five tugs operating in Port Arthur, Texas, three in Mobile, Alabama and three in Lake Charles, Louisiana. There were two tugs engaged in offshore towing operations in Mexico and one tug was bareboat chartered-out.

Globe Wireless.   In 1998, the Company acquired an interest in the predecessor of Globe Wireless, L.L.C. (“Globe Wireless”) and beneficially owns approximately 38% of the voting equity of Globe Wireless. Globe Wireless operates a worldwide network of high frequency radio stations. The network of stations is a wireless data network initially targeted at the maritime industry that supports Internet messaging, telex and facsimile communications. Globe Wireless also provides satellite messaging and voice communication services to the maritime industry. The Company records Globe’s results using the equity method of accounting.

Joint Ventures, Leasing and Other Activities.   In 1998, the Company entered into a joint venture with an established private ship-owning and ship-management company in which it owns a 50% interest. The joint venture currently owns and operates a 52,000 dwt handy-max bulk carrier built in 2001. In 2003, the Company made a $6.0 million minority equity investment in a California-based company that designs and manufactures water treatment systems for sale or lease. The Company records the results of these investments using the equity method of accounting. The Company purchases leases or purchases equipment which is then leased to third parties. The company also takes positions in marketable securities.

Government Regulation

Regulatory Matters

Our operations are subject to significant U.S. federal, state and local regulations, as well as international conventions and the laws of foreign jurisdictions where we operate our equipment or where the equipment is registered. Our domestically registered vessels are subject to the jurisdiction of the U.S. Coast Guard, the National Transportation Safety Board, the U.S. Customs Service and the U.S. Maritime Administration, as well as to rules of private industry organizations such as the American Bureau of Shipping. These agencies and organizations establish safety standards and are authorized to investigate vessels and accidents and to recommend improved maritime safety standards. Aviation Services is subject to regulations pursuant to the Federal Aviation Act of 1958, as amended (the “Federal Aviation Act”), and other statutes pursuant to Federal Aviation Regulations Part 135 Air Taxi Certificate granted by the Federal Aviation Administration (the “FAA”). The FAA regulates flight operations and, in this respect, has jurisdiction over Aviation Services personnel, aircraft, ground facilities and certain technical aspects of its operations. In addition to the FAA, the National Transportation Safety Board is authorized to investigate aircraft accidents and to recommend improved safety standards and, because of the use of radio facilities in its operations, we are also subject to the Communications Act of 1934, as amended.

Offshore Marine Services, Marine Transportation Services and Inland River Services are also subject to the Shipping Act, 1916, as amended (the “1916 Act”), and the Merchant Marine Act of 1920, as amended (the “1920 Act,” or the “Jones Act” and, together with the 1916 Act, the “Shipping Acts”), which govern, among other things, the ownership and operation of vessels used to carry cargo between U.S. ports known as “U.S. coastwise trade”. The Shipping Acts require that vessels engaged in the U.S. coastwise trade be owned by U.S. citizens and built in the U.S. For a corporation engaged in the U.S. coastwise trade to be deemed a U.S. citizen: (i) the corporation must be organized under the laws of the U.S. or of a state, territory or possession thereof, (ii) each of the president or other chief executive officer and the chairman of the board of directors of such corporation must be a U.S. citizen, (iii) no more than a minority of the number of directors of such corporation necessary to constitute a quorum for the transaction of business can be non-U.S. citizens and (iv) at least 75% of the interest in such corporation must be owned by U.S. “citizens” (as defined in the Shipping Acts). Should the Company fail to comply with the U.S. citizenship

19




requirements of the Shipping Acts, it would be prohibited from operating its vessels in the U.S. coastwise trade during the period of such non-compliance. Aviation Services’ helicopters operating in the United States are similarly subject to registration and citizenship requirements under the Federal Aviation Act. That Act requires that before an aircraft may be legally operated in the United States, it must be owned by “citizens of the United States,” which, in the case of a corporation, means a corporation (i) organized under the laws of the U.S. or of a state, territory or possession thereof, (ii) of which at least 75% of its voting interests are owned or controlled by persons who are U.S. “citizens” (as defined in the Federal Aviation Act and regulations promulgated thereunder), and (iii) of which the president and at least two-thirds of the board of directors and managing officers are U.S. citizens.

To facilitate compliance with the Shipping Acts, SEACOR’s Restated Certificate of Incorporation: (i) limits the aggregate percentage ownership by non-U.S. citizens of any class of the SEACOR’s capital stock (including the Common Stock) to 22.5% of the outstanding shares of each such class to ensure that such foreign ownership will not exceed the maximum percentage permitted by applicable maritime law (presently 25%) but authorizes SEACOR’s Board of Directors, under certain circumstances, to increase the foregoing percentage to 24%, (ii) requires institution of a dual stock certification system to help determine such ownership and (iii) permits the Board of Directors to make such determinations as reasonably may be necessary to ascertain such ownership and implement such limitations. In addition, SEACOR’s by-laws provide that the number of foreign directors shall not exceed a minority of the number necessary to constitute a quorum for the transaction of business and restrict any officer who is not a U.S. citizen from acting in the absence or disability of the Chairman of the Board of Directors and the Chief Executive Officer and the President, all of whom must be U.S. citizens.

All of Marine Transportation Services’ and Inland River Services’ vessels and the majority of Offshore Marine Services’ vessels are registered in the United States and operate in the U.S. coastwise trade. Offshore Marine Services also operates vessels registered in a number of foreign jurisdictions. Vessels registered in these jurisdictions are subject to the laws of the applicable jurisdiction as to ownership, registration, manning and safety. In addition, the vessels are subject to the requirements of a number of international conventions that are applicable to vessels depending on their jurisdiction of registration. Among the more significant of these conventions are: (i) the 1978 Protocol Relating to the International Convention for the Prevention of Pollution from Ships, (ii) the International Convention on the Safety of Life at Sea, 1974 and 1978 Protocols, and (iii) the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers, 1978. The Company believes that its vessels registered in foreign jurisdictions are in compliance with all applicable material regulations and have all licenses necessary to conduct their business. In addition, vessels operated as standby safety vessels in the North Sea are subject to the requirements of the Department of Transport of the United Kingdom pursuant to the United Kingdom Safety Act.

All of our chemical and petroleum product tankers, harbor and offshore towing vessels, certain of our offshore marine vessels and all of our inland river tank barges that are operated by a third party are subject to periodic inspection and survey by, and drydocking and maintenance requirements of, the U.S. Coast Guard and/or the American Bureau of Shipping and other marine classification societies. Moreover, to insure compliance with applicable safety regulations, the U.S. Coast Guard is authorized to inspect vessels at will.

NRC, one of our environmental services companies, is classified by the U.S. Coast Guard as an Oil Spill Removal Organization (“OSRO”) for every port in the continental U.S., Hawaii and the Caribbean. The OSRO classification process is strictly voluntary. Vessel owners and other customers subject to OPA 90 who utilize classified OSROs are exempt from the requirement to list their response resources in their plans. The classification process permits the U.S. Coast Guard and these customers to evaluate an OSRO’s ability to respond to and recover oil spills of various types and sizes in different operating environments and geographic locations.

20




In addition to the U.S. Coast Guard, the U.S. Environmental Protection Agency (“EPA”), the Office of Pipeline Safety, the Minerals Management Service division of the U.S. Department of Interior and certain individual states regulate vessels, facilities and pipelines in accordance with the requirements of OPA 90 or under analogous state law. There is currently little uniformity among the regulations issued by these agencies.

When responding to third-party oil spills, Environmental Services enjoys immunity from liability under federal law and some state laws for any spills arising from its response efforts, except in the event of deaths or personal injuries as a result of our gross negligence or willful misconduct.

Environmental Compliance

As more fully described below, all of our businesses are, to some degree, subject to federal, state, local and international laws and regulations relating to environmental protection and occupational safety and health, including laws that govern the discharge of oil and pollutants into navigable waters. Violations of these laws may result in civil and criminal penalties and fines, injunctions or other sanctions.

We believe that our operations currently are in compliance with all material environmental laws and regulations. We do not expect that we will be required to make capital expenditures in the near future that are material to our financial condition or operations to comply with environmental laws and regulations; however, because such laws and regulations are frequently changing and may impose increasingly strict requirements, we cannot predict the ultimate cost of complying with these laws and regulations. The recent trend in environmental legislation and regulation is generally toward stricter standards, and it is our view that this trend is likely to continue.

The Oil Pollution Act of 1990 (OPA 90) OPA 90 establishes a regulatory and liability regime for the protection of the environment from oil spills. OPA 90 applies to owners and operators of facilities operating near navigable waters and owners and operators of vessels operating in U.S. waters, which include the navigable waters of the United States and the 200-mile Exclusive Economic Zone of the United States. Although it appears to apply in general to all vessels, for purposes of its liability limits and financial-responsibility and response-planning requirements, OPA 90 differentiates between tank vessels (which include our chemical and petroleum product vessels) and “other vessels” (which include our tugs, offshore marine vessels and dry cargo barges).

Under OPA 90, owners and operators of regulated facilities and owners and operators or certain charterers of vessels are “responsible parties” and are jointly, severally and strictly liable for removal costs and damages arising from facility and vessel oil spills unless the spill results solely from the act or omission of certain third parties under specified circumstances, an act of God or an act of war. Damages are defined broadly to include (i) injury to natural resources and the costs of remediation thereof; (ii) injury to, or economic losses resulting from the destruction of, real and personal property; (iii) net loss by the U.S. government, a state or political subdivision thereof of taxes, royalties, rents, fees and profits; (iv) lost profits or impairment of earning capacity due to property or natural resources damage; (v) net costs of providing increased or additional public services necessitated by a spill response, such as protection from fire, safety or other hazards; and (vi) loss of subsistence use of available natural resources.

The statutory liability of responsible parties for tank vessels is limited to the greater of $1,200 per gross ton or $10 million ($2 million for a vessel of 3,000 gross tons or less) per vessel; for any “other vessel,” such liability is limited to the greater of $600 per gross ton or $500,000 per vessel. These liability limits do not apply (a) if an incident is caused by the responsible party’s violation of federal safety, construction or operating regulations or by the responsible party’s gross negligence or willful misconduct, (b) if the responsible party fails to report the incident or to provide reasonable cooperation and assistance in connection with oil removal activities as required by a responsible official or (c) if the responsible party fails to comply with certain governmental orders.

21




Under OPA 90, with certain limited exceptions, all newly-built or converted oil tankers carrying crude oil and petroleum products in U.S. waters must be built with double-hulls. Existing single-hull, double-side or double-bottom tank vessels, unless retrofitted with double-hulls, must be phased out of service at some point through 2015, depending upon the vessel’s size, age and place of discharge. As a result of this phase-out requirement, as interpreted by the U.S. Coast Guard, unless modified to install double-hulls, our one single-hull and four double-bottom chemical and petroleum product tankers will be required to cease transporting petroleum products between 2007 and 2015.

OPA 90 expanded pre-existing financial responsibility requirements and requires tank vessel owners and operators to establish and maintain with the U.S. Coast Guard evidence of insurance or qualification as a self-insurer or other evidence of financial responsibility sufficient to meet their potential liabilities under OPA 90. We have satisfied U.S. Coast Guard regulations by providing evidence of financial responsibility demonstrated by commercial insurance and self-insurance. The regulations also implement the financial responsibility requirements of the Comprehensive Environmental Response, Compensation and Liability Act, described below, which imposes liability for discharges of hazardous substances such as chemicals, in an amount equal to $300 per gross ton, thus increasing the overall financial responsibility in the case of tank vessels from $1,200 to $1,500 per gross ton.

OPA 90 also amended the Clean Water Act, also described below, to require the owner or operator of certain facilities or of a tank vessel to prepare facility or vessel response plans and to contract with oil spill removal organizations to remove to the maximum extent practicable a worst-case discharge. The Company has complied with these requirements. We expect our pollution liability insurance to cover any cost of spill removal subject to overall coverage limitations of $1.0 billion; however, a failure or refusal of the insurance carrier to provide coverage in the event of a catastrophic spill could result in material liability in excess of available insurance coverage, resulting in a material adverse effect on our business, results of operations or financial condition.

OPA 90 allows states to impose their own liability regimes with respect to oil pollution incidents occurring within their boundaries, and many states have enacted legislation providing for unlimited liability for oil spills. Some states have issued regulations addressing financial responsibility and vessel and facility response planning requirements. We do not anticipate that state legislation or regulations will have any material impact on our operations.

In addition to OPA 90, the following are examples of environmental laws that relate to our business and operations:

The Clean Water Act   (CWA). The federal CWA and comparable state and local laws impose restrictions on the discharge of pollutants into the navigable waters of the United States. These laws also provide for civil and criminal penalties, as well as injunctive relief, for violations. A related statute, the Coastal Zone Management Act, authorizes state development and implementation of programs to manage non-point source pollution to restore and protect coastal waters.

The Resource Conservation and Recovery Act   (RCRA). The federal RCRA and comparable state and local laws regulate the generation, transportation, treatment, storage and disposal of hazardous and certain non-hazardous wastes. These laws also provide for civil and criminal penalties, as well as injunctive relief, for violations. Our operations may generate or, in some cases, result in the transportation of these regulated wastes.

The Comprehensive Environmental Response, Compensation, and Liability Act   (CERCLA).  The federal CERCLA and comparable state laws establish strict and, under certain circumstances, joint and several liabilities for specified parties in connection with liability for the investigation and remediation of releases of hazardous materials into the environment and damages to natural resources.

22




The Clean Air Act   (CAA). The federal CAA and comparable state and local laws impose restrictions on the emission of air pollutants into the atmosphere. These laws also provide for civil and criminal penalties, as well as injunctive relief, for violations. Our chemical and petroleum product carrier vessels are subject to vapor control and recovery requirements when loading, unloading, ballasting, cleaning, and conducting other operations in certain ports and are equipped with vapor control systems that satisfy these requirements in all material respects.

We manage exposure to losses from the above-described laws through our efforts to use only well-maintained, well-managed and equipped facilities and vessels and our development of safety and environmental programs, including a maritime compliance program and our insurance program. We believe we will be able to accommodate reasonably foreseeable environmental regulatory changes. There can be no assurance, however, that any future regulations or requirements or that any discharge or emission of pollutants by us will not have a material adverse effect.

Security

Heightened awareness of security needs brought about by the events of September 11, 2001 has caused the U.S. Coast Guard, the International Maritime Organization and the states and local ports to adopt heightened security procedures relating to ports and vessels. The Company has updated its procedures in light of the new requirements.

In 2002, Congress passed the Maritime Transportation Security Act (the “MTSA”), which together with the International Maritime Organization’s recent security proposals (collectively known as the International Ship and Port Facility Security Code or “ISPS”), requires specific security plans for our vessels and rigorous crew identification requirements. The following vessels are subject to the requirements of the ISPS:

·       U.S.-flag vessels operating in the Jones Act trade that are at least 100 gross registered tons

·       U.S.-flag vessels operating on an international voyage

·       Foreign-flag vessels that are at least 500 gross tons under the ITC (International Tonnage Convention)

The Company has implemented vessel security plans and procedures for each of its U.S.-flag vessels pursuant to rules implementing the MTSA which have been issued by the U.S. Coast Guard. The Company anticipates that the costs of security for our business will continue to increase. In addition, the Company’s U.S.-flag vessels, subject to the requirements of the ISPS, all foreign-flag vessels and U.S.-flag vessels, operating on an international voyage, were in compliance with the ISPS requirements effective July 1, 2004.

Industry Hazards and Insurance

Vessel operations involve inherent risks associated with carrying large volumes of cargo and rendering services in a marine environment. In addition, helicopter operations are potentially hazardous and may result in incidents or accidents. Hazards include adverse weather conditions, collisions, fire and mechanical failures, which may result in injury to personnel, damage to equipment, loss of operating revenues, contamination of cargo, pollution and other environmental damages and increased costs. The Company maintains marine and aviation hull, liability and war risk, general liability, workers compensation and other insurance customary in the industries in which we operate. We also conduct training and safety programs to promote a safe working environment and minimize hazards.

23




Employees

As of December 31, 2005, the Company employed approximately 5,035 individuals directly and indirectly through crewing or manning agreements. Substantially all indirect employees support Offshore Marine Services vessel operations.

At December 31, 2005 Offshore Marine Services employed 699 seafarers in the United Kingdom of whom 242 were members of a union under the terms of an ongoing agreement. In the United States, a total of approximately 540 employees are unionized in Marine Transportation Services and Towing Harbor Services. The union agreements expire at varying times from August 31, 2006 to May 31, 2009. Certain individuals in Environmental Services are also represented by unions. The unionization of domestic seamen and/or aviation employees could arise in the future.

Management considers relations with employees to be satisfactory.

ITEM 1A. RISK FACTORS

Risks, Uncertainties and Other Factors That May Affect Future Results

Demand for many of our services substantially depends on the level of activity in the offshore oil and natural gas exploration, development and production industry.   The level of offshore oil and natural gas exploration, development and production activity has historically been volatile and that volatility is likely to continue. The level of activity is subject to large fluctuations in response to relatively minor changes in a variety of factors that are beyond our control, including:

·       prevailing oil and natural gas prices and expectations about future prices and price volatility

·       the cost of exploring for, producing and delivering oil and natural gas offshore

·       worldwide demand for energy and other petroleum products as well as chemical products

·       availability and rate of discovery of new oil and natural gas reserves in offshore areas

·       local and international political and economic conditions and policies including cabotage and local content laws

·       technological advances affecting energy production and consumption

·       weather conditions

·       environmental regulation

·       the ability of oil and natural gas companies to generate or otherwise obtain funds for capital

A prolonged material downturn in oil and natural gas prices is likely to cause a substantial decline in expenditures for exploration, development and production activity. Lower levels of expenditure and activity would result in a decline in the demand and lower rates for our offshore energy support services and tanker services. Moreover, approximately 50% of our Offshore Marine Services and 73% of our Aviation Services are currently conducted in the U.S. Gulf of Mexico and are therefore dependent on levels of activity in that region, which may differ from levels of activity in other regions of the world.

We conduct international operations, which involve additional risks.   We operate vessels and lease helicopters worldwide. Activity outside the U.S. involves additional risks, including the possibility of:

·       restrictive actions by foreign governments, including asset seizure

·       foreign taxation and changes in foreign tax laws

·       limitations on repatriation of earnings

24




·       changes in currency exchange rates

·       local cabotage and local ownership laws and requirements

·       nationalization and expropriation

·       loss of contract rights

·       political instability, war and civil disturbances or other risks that may limit or disrupt markets

Our ability to compete in the international offshore energy support market may be adversely affected by foreign government regulations that favor or require the awarding of contracts to local competitors, or that require foreign persons to employ citizens of, or purchase supplies from, a particular jurisdiction. Further, our foreign subsidiaries may face governmentally imposed restrictions on their ability to transfer funds to their parent company.

Unstable political, military and economic conditions in foreign countries where a significant proportion of Offshore Marine Services’ operations are conducted could adversely impact our business.   During 2005, approximately 50% of our Offshore Marine Services’ operating revenues principally resulted from Offshore Marine Services’ foreign operations. These operations are subject to risks, including potential vessel seizure, terrorist attacks, nationalization of assets, currency restrictions, import-export quotas and other forms of public and government regulation, all of which are beyond our control. Economic sanctions or an oil embargo, for example could have significant impact on activity in the oil and gas industry and correspondingly on us should Offshore Marine Services operate vessels in a country subject to any sanctions or embargo, or in the surrounding region to the extent any sanctions or embargo disrupt our operations in the region.

Offshore Marine Services, Marine Transportation Services and Aviation Services rely on several customers for a significant share of their revenues, the loss of which could adversely affect Offshore Marine Services’, Marine Transportation Services’  and Aviation Services’ businesses and operating results.   Offshore Marine Services’, Marine Transportation Services’ and Aviation Services’ customers are primarily major oil companies and large independent oil and gas exploration and production companies. The portion of Offshore Marine Services’, Marine Transportation Services’ or Aviation Services’ revenues attributable to any single customer may change over time, depending on the level of relevant activity by such customer, our ability to meet the customer’s needs and other factors, many of which are beyond our control.

Consolidation of our customer base could adversely affect demand for our equipment and reduce our revenues.   Oil and natural gas companies, energy companies and drilling contractors have undergone substantial consolidation in the last few years. Additional consolidation is likely. Consolidation results in fewer companies to charter or contract for our equipment. Also, merger activity among both major and independent oil and natural gas companies affects exploration, development and production activity as the consolidated companies integrate operations to increase efficiency and reduce costs. Less promising exploration and development projects of a combined company may be dropped or delayed. Such activity may result in an exploration and development budget for a combined company that is lower than the total budget of both companies before consolidation, adversely affecting demand for our Offshore Marine Services’ vessels, Marine Transportation Services’ tankers and Aviation Services’ helicopters, thereby reducing our revenues.

We may be unable to maintain or replace our vessels as they age.   As of December 31, 2005, the average age of our Offshore Marine Services vessels, excluding its standby safety vessels, was approximately 15.5 years. The Company believes that after an offshore support vessel has been in service for approximately 20 years, the expense (which typically increases with age) necessary to satisfy required marine certification standards may not be economically justifiable. There can be no assurance that the Company will be able to maintain its fleet by extending the economic life of existing vessels, or that its financial resources will be

25




sufficient to enable it to make expenditures necessary for these purposes or to acquire or build replacement vessels.

An increase in the supply of offshore support vessels or tankers would likely have an adverse impact on the charter rates earned by our offshore support vessels and tankers.   Expansion of the worldwide offshore support vessel fleet would increase competition in the markets where Offshore Marine Services operates. The refurbishment of disused or “mothballed” vessels, conversion of vessels from uses other than oil and gas exploration and production support and related activities or construction of new vessels could all add vessel capacity to current worldwide levels. A significant increase in vessel capacity would lower charter rates. Similarly, should our competitors in the domestic petroleum and chemical product tankers industry construct a significant number of new tankers or large capacity integrated or articulated tug and barges, demand for our tanker assets could be adversely affected.

If we do not restrict the amount of foreign ownership of our Common Stock, we could be prohibited from operating our offshore support vessels, inland river vessels and barges and tankers in parts of the U.S. and could be prohibited from operating our helicopters, which would adversely impact our business and operating results.   We are subject to the Shipping Acts, which govern, among other things, the ownership and operation of offshore support vessels, tankers and barges used to carry cargo between U.S. ports. The Acts require that vessels engaged in the “U.S. coastwise trade” be owned by U.S. citizens and built in the U.S. We are also subject to regulations pursuant to the Federal Aviation Act of 1958, as amended, and other statutes (“Aviation Acts”). Generally, our aircraft operating in the U.S. must be registered in the U.S. In order to register such aircraft under the Aviation Acts, we must be owned or controlled by U.S. citizens. Although our Certificate of Incorporation and by-laws contain provisions intended to assure compliance with these provisions of the Shipping Acts, and also comply with the Aviation Acts, we would be prohibited from operating our vessels in the U.S. coastwise trade and our helicopters in the U.S. during any period in which we did not comply with these regulations.

Marine Transportation Services could lose Jones Act protection, which would result in additional competition.   A substantial portion of Marine Transportation Services’ operations is conducted in the U.S. coastwise trade. Under the Merchant Marine Act of 1920, which is also referred to as the Jones Act, this trade is restricted to vessels built in the United States, owned and manned by U.S. citizens and registered under U.S. law. There have been attempts to repeal or amend the Jones Act, and these attempts are expected to continue in the future. Repeal of the Jones Act could result in additional competition from vessels built in lower-cost foreign shipyards and owned and manned by foreign nationals with promotional foreign tax incentives and with lower wages and benefits than U.S. citizens, which could have a material adverse effect on the business, results of operations and financial condition of the company.

Failure to maintain an acceptable safety record may have an adverse impact on our ability to retain customers.   Our customers consider safety and reliability a primary concern in selecting a service provider. We must maintain a record of safety and reliability that is acceptable to our customers. Should this not be achieved, the ability to retain current customers and attract new customers may be adversely affected.

The Outer Continental Shelf Lands Act, as amended, provides the federal government with broad discretion in regulating the leasing of offshore resources for the production of oil and gas.   Because offshore marine operations rely on offshore oil and gas exploration and production, the government’s exercise of authority under the provisions of the Outer Continental Shelf Lands Act (“OCSLA”), to restrict the availability of offshore oil and gas leases could have a material adverse effect on the Company’s financial condition and results of operations.

Operational risks could disrupt Offshore Marine Services, Marine Transportation Services, Harbor and Offshore Towing Services and Aviation Services and expose us to liability.   The operation of offshore support vessels, tankers, tugs, and helicopters is subject to various risks, including catastrophic disaster, adverse weather, mechanical failure and collision. Additional risks to vessels include sea conditions, capsizing,

26




grounding, oil and hazardous substance spills and navigation errors. These risks could endanger the safety of our personnel, equipment, cargo and other property, as well as the environment. If any of these events were to occur, we could be held liable for resulting damages. In addition, the affected vessels or helicopters could be removed from service and would not be available to generate revenues.

Aviation Services may be subject to adverse weather conditions and seasonality.   A significant portion of the Company’s revenues from Aviation Services is dependent on actual flight hours. Prolonged periods of adverse weather, storms and the effect of fewer hours of daylight adversely impact Aviation Services. Winter months generally have more days of adverse weather conditions than the other months of the year with poor visibility, high winds, heavy precipitation and fewer daylight hours all adversely affecting the operations of helicopters. June through November is tropical storm season in the U.S. Gulf of Mexico; during tropical storms, helicopters are unable to operate in the area of the storm. In addition, many of Aviation Services’ facilities are located along the U.S. Gulf of Mexico coast and tropical storms may cause damage to its property.

Revenue from our tanker segment and towing activities could be adversely affected by a decline in demand for domestic refined petroleum products, crude oil or chemical products, or a change in existing methods of delivery.   A reduction in domestic consumption of refined petroleum products, crude oil or chemical products may adversely affect revenue from our tanker segment and towing activities. Weather conditions also affect demand for our tanker services and towing services. For example, a mild winter may reduce demand for heating oil in our areas of operation. Moreover, alternative methods of delivery of refined petroleum, natural gas or crude oil may be developed and therefore reduce demand for our services. Finally, a reduction in domestic refining capacity would reduce demand for our services.

Construction of additional refined petroleum product, natural gas or crude oil pipelines could have a material adverse effect on our tanker and towing revenues.   Long-haul transportation of refined petroleum products, crude oil and natural gas is generally less costly by pipeline than by tanker. Existing pipeline systems are either insufficient to meet demand in, or do not reach all of, the markets served by our tankers. New pipeline segments are being planned and approved for the Florida market. The construction and operation of these pipelines could have an adverse effect on our tanker and towing businesses.

We may have to phase-out some of our single-hull tankers from petroleum product transportation service in U.S. waters.   OPA 90 establishes a phase-out schedule, depending upon vessel size and age, for non-double-hull vessels carrying crude oil and petroleum products in U.S. coastwise transportation. The phase-out dates for our non-double-hull tankers are as follows: Seabulk Magnachem—2007, Seabulk Power—2008, Seabulk Trader—2011, Seabulk Challenge—2011 and Seabulk America—2015. As a result of this requirement, unless these vessels are modified with double-hulls, which will require substantial capital expenditures, they will be prohibited from transporting crude oil and petroleum products in U.S. coastwise transportation after their phase-out dates. They would also be prohibited from transporting petroleum products in most foreign and international markets under a more accelerated International Maritime Organization international phase-out schedule, were we to attempt to enter those markets.

We are subject to complex laws and regulations, including environmental laws and regulations that can adversely affect the cost, manner or feasibility of doing business.   Increasingly stringent federal, state, local and international laws and regulations governing worker safety and health and the manning, construction and operation of vessels significantly affect our operations. Many aspects of the marine industry are subject to extensive governmental regulation by the U.S. Coast Guard, Occupational Safety and Health Administration, the National Transportation Safety Board and the U.S. Customs Service and to regulation by port states and class society organizations such as the American Bureau of Shipping, as well as to international regulations from international treaties such as the Safety of Life at Sea (“SOLAS”) convention administered by port states and class societies. The U.S. Coast Guard, Occupational Safety and Health Administration, and the National Transportation Safety Board set safety standards and are

27




authorized to investigate vessel accidents and recommend improved safety standards. The U.S. Customs Service is authorized to inspect vessels at will.

Our business and operations are also subject to federal, state, local and international laws and regulations that control the discharge of oil and hazardous materials into the environment or otherwise relate to environmental protection and occupational safety and health. Compliance with such laws and regulations may require installation of costly equipment or operational changes, and the phase-out of certain product tankers. Failure to comply with applicable laws and regulations may result in administrative and civil penalties, criminal sanctions or the suspension or termination of our operations. Some environmental laws impose strict and, under certain circumstances, joint and several liability for remediation of spills and releases of oil and hazardous materials and damage to natural resources, which could subject us to liability without regard to whether we were negligent or at fault. These laws and regulations may expose us to liability for the conduct of or conditions caused by others, including charterers. Moreover, these laws and regulations could change in ways that substantially increase our costs. We cannot be certain that existing laws, regulations or standards, as currently interpreted or reinterpreted in the future, or future laws and regulations will not have a material adverse effect on our business, results of operations and financial condition. For more information, see “Governmental Regulation—Environmental Compliance” in Item 1.

Spill response revenue is subject to significant volatility.   Environmental Services’ response revenues are event driven and can vary greatly from quarter to quarter and year to year based on the number and magnitude of responses. As a result, Environmental Services’ profitability may also vary greatly from year to year.

A relaxation of oil spill regulation or enforcement could reduce demand for Environmental Services’ services.   Environmental Services is dependent upon the enforcement of regulations promulgated under OPA 90, international conventions and, to a lesser extent, upon local regulations. Less stringent oil spill regulations or less aggressive enforcement of these regulations would decrease demand for Environmental Services’ services. There can be no assurance that oil spill regulation will not be relaxed or enforcement of existing or future regulation will not become less stringent. If this happens, the demand for Environmental Services’ oil spill response services could be adversely impacted.

A change in, or revocation of, NRC’s classification as an Oil Spill Removal Organization, or “OSRO” would result in a loss of business.   NRC is classified by the U.S. Coast Guard as an OSRO. The U.S. Coast Guard classifies OSROs based on their overall ability to respond to various types and sizes of oil spills. U.S. Coast Guard classified OSROs have a competitive advantage over non-classified service providers because customers of a classified OSRO are exempt from regulations that would otherwise require them to list their oil spill response resources in filings with the U.S. Coast Guard. A loss of NRC’s classification or changes in the requirements for classification could eliminate or diminish NRC’s ability to provide customers with this exemption. If this happens, Environmental Services could lose customers.

Environmental Services could incur liability in connection with providing spill response services.   Although Environmental Services is generally exempt from liability under the federal Clean Water Act for its own actions and omissions in providing spill response services, this exemption might not apply if it were found to have been grossly negligent or to have engaged in willful misconduct, or if it were to have failed to provide these services consistent with applicable regulations and directives under the Clean Water Act. In addition, the exemption under the federal Clean Water Act would not protect Environmental Services against liability for personal injury or wrongful death, or against prosecution under other federal or state laws. While most of the U.S. states in which Environmental Services provides service have adopted similar exemptions, several states have not. If a court or other applicable authority were to determine that Environmental Services does not benefit from federal or state exemptions from liability in providing spill

28




response services, Environmental Services could be liable together with the local contractor and the responsible party for any resulting damages, including damages caused by others.

Inland River Services could experience variation in freight rates.   Freight transportation rates may fluctuate as the volume of cargo and availability of barges changes. Volume of freight transported on the inland waterways may vary as a result of various factors, such as global economic conditions and business cycles, domestic and international agricultural production and demand and foreign currency exchange rates. Barge participation in the industry will also vary year to year and is dependent on the number of barges built and retired from service. Extended periods of high barge availability and low cargo demand could adversely impact Inland River Services.

Inland River Services’ results of operations can be adversely affected by the decline in U.S. grain exports.   Inland River Services’ business is significantly affected by the volume of grain exports handled through U.S. Gulf of Mexico ports. Grain exports can vary due to a number of factors including the crop harvest yield levels in the U.S. and abroad. The shortage of available grain overseas can increase demand for U.S. grain. Conversely, an abundance of grain overseas can decrease demand for U.S. grain. A decline in exports could result in excess barge capacity, which would likely lower freight rates earned by Inland River Services.

Inland River Services’ results of operations can be adversely affected by international economic and political factors.   The actions of foreign governments could affect the import and export of the dry-bulk commodities typically transported by Inland River Services. Foreign trade agreements and each country’s adherence to the terms of such agreements can raise or lower demand for U.S. imports and exports of the dry-bulk commodities Inland River Services transports. National and international boycotts and embargoes of other countries’ or U.S. imports and/or exports together with the raising or lowering of tariff rates will affect the demand for transportation of the cargoes Inland River Services transports. These actions or developments could have an adverse impact Inland River Services.

Inland River Services’ results of operations are affected by seasonal activity.   Inland River Services’ business is seasonal, and its quarterly revenues and profits have historically been lower during the first and second quarters of the year (January through June) and higher during the third and fourth quarters (July through December) during the grain harvest.

Inland River Services’ results of operations are affected by adverse weather and river conditions.   Weather patterns can affect river levels and cause ice conditions during winter months, both of which can hamper barge navigation. Locks on river systems may be closed for maintenance or other causes, which may delay barge movements. These conditions could adversely impact Inland River Services.

Inland River Services’ results of operations could be materially and adversely affected by fuel price fluctuations.   For the most part, Inland River Services purchases towboat and fleeting services from third party vendors. It is indirectly exposed to increases in fuel prices, as vendors will adjust the price of the services when fuel prices escalate. If this happens, Inland River Services results of operation may be adversely affected.

We may incur significant costs, liabilities and penalties in complying with government regulations.   Government regulation, such as international conventions, federal, state and local laws and regulations in jurisdictions where we operate, have a significant impact on our business. These regulations relate to worker health and safety, the manning, construction and operation of vessels, oil spills and other aspects of our business. Risks of incurring substantial compliance costs and liabilities and penalties for non-compliance, particularly with respect to environmental laws and regulations, are inherent in our business. We cannot predict whether it will incur such costs or penalties in the future.

Our insurance coverage may be inadequate to protect the Company from the liabilities that could arise in our businesses.   We maintain insurance coverage against the risks related to our businesses. There can be no

29




assurance, however, that existing insurance coverage can be renewed at commercially reasonable rates or that available coverage will be adequate to cover future claims. If a loss occurs that is partially or completely uninsured, we could be exposed to substantial liability.

Our global operations are subject to currency exchange risks.   In some of our foreign businesses, we collect revenues and pay expenses in local currency. If the value of foreign currencies (in particular the value of the Pound Sterling, the currency in the United Kingdom, where most of our currency exchange risk arises) decline against the U.S. dollar and we do not or are not able to minimize the effects of such fluctuations through currency hedging arrangements, our operating results may be adversely affected. There can be no assurance that we will not incur losses in the future as a result of currency exchange rate fluctuations.

Our inability to attract and retain qualified personnel could have an adverse effect on us.   Attracting and retaining skilled personnel across all of our business segments is an important factor in our future success. The market for the personnel we employ is very competitive and we cannot be certain that we will be successful in attracting and retaining qualified personnel in the future.

Our continuing compliance with the requirements of the Sarbanes-Oxley Act of 2002 will depend, in part, on our ability  to integrate effectively the internal controls and procedures of Seabulk International, Inc. (“Seabulk”) with our own.   The Seabulk Merger has significantly increased the size of our operations. In connection with our integration of Seabulk’s operations, we will be required in 2006 to assess and make any necessary adjustments to Seabulk’s internal controls and procedures in order to maintain the overall effectiveness of our internal controls and procedures, to ensure that we continue to deliver accurate and timely financial information and to ensure ongoing compliance with Section 404 of the Sarbanes-Oxley Act of 2002. However, we have not yet completed our evaluation of Seabulk’s internal controls. Our failure to accomplish this on a timely basis or at all could compromise our compliance with the Sarbanes-Oxley Act of 2002 and the timeliness and accuracy of our financial reporting, which could reduce investor confidence in our publicly reported consolidated financial statements.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None

ITEM 2. PROPERTIES

Offshore support vessels, tankers, barges and helicopters are the principal physical properties owned by the Company and are more fully described in “Offshore Marine Services,” “Marine Transportation Services,” “Inland River Services” and “Aviation Services.”

ITEM 3. LEGAL PROCEEDINGS

The Company is involved in various legal and other proceedings, which are ordinary routine litigation incidental to the conduct of its business. The Company believes that none of these proceedings, if adversely determined, would have a material adverse effect on its financial condition or results of operations.

On June 15, 2005, one of SEACOR’s subsidiaries received a document subpoena from the Antitrust Division of the U.S. Department of Justice. This subpoena related to a grand jury investigation of potential antitrust violations among providers of helicopter transportation services in the Gulf of Mexico. We believe that this subpoena is part of a broader industry inquiry and that other providers also have received such a subpoena. We intend to provide all information required in response to this investigation.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth quarter of 2005.

30




EXECUTIVE OFFICERS OF THE REGISTRANT

Officers of SEACOR serve at the pleasure of the Board of Directors. The name, age and offices held by each of the executive officers of SEACOR at December 31, 2005 were as follows:

Name

 

 

 

Age

 

Position

Charles Fabrikant

 

61

 

Chairman of the Board of Directors, President and Chief Executive Officer of SEACOR and has served as a director of certain of SEACOR’s subsidiaries since December 1989. For more than the past five years, Mr. Fabrikant has been the President of Fabrikant International Corporation (“FIC”), a privately owned corporation engaged in marine operations and investments that may be deemed an affiliate of the Company. Prior to the merger of SEACOR’s subsidiary Chiles Offshore Inc. (“Chiles”) with Ensco International Incorporated in 2002 (the “Chiles Merger”) Mr. Fabrikant served as Chairman of the Board of Chiles. Mr. Fabrikant is a licensed attorney admitted to practice in the State of New York and in the District of Columbia.

Randall Blank

 

55

 

Senior Vice President of SEACOR since September 2005 and Chief Executive Officer of Environmental Services since October 1997. Formerly, Executive Vice President and Chief Financial Officer of SEACOR from December 1989 to September 2005 and Secretary of SEACOR from October 1992 to September 2005. Mr. Blank is a director of Globe Wireless, and prior to the Chiles Merger, Mr. Blank served as a director of Chiles.

Dick Fagerstal

 

45

 

Senior Vice President, Corporate Development and Treasurer of SEACOR since February 2003 and as Treasurer since May 2000. From August 1997 to February 2003, Mr. Fagerstal served as Vice President of Finance. Mr. Fagerstal has also served as a director of certain of SEACOR’s subsidiaries since August 1997. Prior to the Chiles Merger, Mr. Fagerstal served as a director, Senior Vice President and Chief Financial Officer of Chiles.

Richard Ryan

 

51

 

Mr. Ryan has been Senior Vice President of SEACOR since November 2005 and from September 2005 to November 2005 was Vice President. Mr. Ryan has been Chief Financial Officer since September 2005. Mr. Ryan joined SEACOR in 1996. From December 1996 until June 2002, he was International Controller and from July 2002 until becoming Chief Financial Officer served as Managing Director of SEACOR Marine (International) Ltd.

Alice Gran

 

56

 

Senior Vice President and General Counsel of SEACOR and also Secretary of SEACOR since September 2005. Ms. Gran is a director and officer of certain SEACOR subsidiaries, and is responsible for managing legal, insurance and certain risk management functions. Ms. Gran joined SEACOR in July 1998.

John Gellert

 

35

 

Senior Vice President since June 2004. Mr. Gellert’s primary responsibility since 2002 has been the running of the domestic and international divisions of Offshore Marine Services. Mr. Gellert has been an employee of SEACOR since 1992.

Andrew Strachan

 

58

 

Vice President of SEACOR since April 1997 and a director and officer of certain SEACOR subsidiaries since December 1996.

Matthew Cenac

 

40

 

Vice President and Chief Accounting Officer of SEACOR since September 2005. From June 2003 to August 2005 Mr. Cenac was Corporate Controller of SEACOR. In addition, Mr. Cenac is an officer and director of certain of SEACOR’s subsidiaries. Prior to joining SEACOR, Mr. Cenac was Controller of Pipeworks, Inc. from October 2001 until April 2003 and previously was a Senior Manager for Ernst & Young LLP from August 1987 until September 2001.

 

31




PART II

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market for the Company’s Common Stock

SEACOR’s Common Stock trades on the New York Stock Exchange (the “NYSE”) under the trading symbol “CKH.” Set forth in the table below for the periods presented are the high and low sale prices for SEACOR’s Common Stock.

 

 

HIGH

 

LOW

 

Fiscal Year Ending December 31, 2006:

 

 

 

 

 

First Quarter (through March 8, 2006)

 

$

76.32

 

$

67.60

 

Fiscal Year Ending December 31, 2005:

 

 

 

 

 

First Quarter

 

$

67.09

 

$

52.62

 

Second Quarter

 

$

65.95

 

$

53.92

 

Third Quarter

 

$

73.12

 

$

61.93

 

Fourth Quarter

 

$

74.15

 

$

64.04

 

Fiscal Year Ending December 31, 2004:

 

 

 

 

 

First Quarter

 

$

44.47

 

$

39.22

 

Second Quarter

 

$

44.35

 

$

44.30

 

Third Quarter

 

$

47.04

 

$

40.55

 

Fourth Quarter

 

$

56.37

 

$

44.51

 

 

As of March 8, 2006, there were 234 holders of record of Common Stock.

SEACOR has not paid any cash dividends in respect of its Common Stock since its inception in December 1989 and has no present intention to pay any dividends in the foreseeable future. Instead, we intend to retain earnings for working capital and to finance the expansion of our business. Any payment of future dividends will be at the discretion of SEACOR’s Board of Directors and will depend upon, among other factors, the Company’s earnings, financial condition, current and anticipated capital requirements, plans for expansion, level of indebtedness and contractual restrictions, including the provisions of the Company’s revolving credit facility or other then-existing indebtedness. The payment of future cash dividends, if any, would be made only from assets legally available.

Issuer Repurchases of Equity Securities and Debt

In 2005, 2004 and 2003, the Company acquired 304,676, 370,490, and 1,518,116 shares of Common Stock for treasury, respectively, at an aggregate cost of $20.5 million, $14.9 million, and $56.5 million, respectively. As of December 31, 2005, $35.5 million of repurchase authority granted by SEACOR’s Board of Directors remains available for the acquisition of additional shares of Common Stock and the Company’s the 7.2% Notes  due 2009, the 5 7¤8% Senior Notes Due 2012, the 2.875% convertible senior debentures due 2024 and Seabulk’s 9 ½% senior notes due 2013. On March 8, 2006, SEACOR’s Board of Directors increased the repurchase authority to $50.0 million. Securities are acquired from time to time through open market purchases, privately negotiated transactions or otherwise, depending on market conditions.

Period

 

 

 

Total Number Of
Shares Purchased

 

Average Price
Paid Per Share

 

Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs

 

Maximum Value of
Shares that may Yet
be Purchased
under
the Plans or
Programs (in
thousands)

 

10/01/05-10/31/05

 

 

 

 

 

N/A

 

 

 

 

 

 

$

37,239

 

 

11/01/05-11/30/05

 

 

15,000

 

 

 

$

65.44

 

 

 

15,000

 

 

 

$

49,018

 

 

12/01/05-12/31/05

 

 

197,800

 

 

 

$

68.15

 

 

 

197,800

 

 

 

$

35,527

 

 

 

32




ITEM 6. SELECTED FINANCIAL DATA

SELECTED HISTORICAL FINANCIAL INFORMATION

The following table sets forth, for the periods and at the dates indicated, selected historical and consolidated financial data for the Company, in thousands of dollars, except per share data. Such financial data should be read in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8. Financial Statements and Supplementary Data” included in Parts II and IV, respectively, of this Annual Report on Form 10-K.

 

 

Year Ended December 31,

 

 

 

2005

 

2004

 

2003

 

2002

 

2001

 

Operating Revenues:

 

 

 

 

 

 

 

 

 

 

 

Offshore Marine Services

 

$

480,058

 

$

286,721

 

$

316,116

 

$

367,969

 

$

399,123

 

Marine Transportation Services(1)

 

72,348

 

 

 

 

 

Inland Services

 

123,231

 

66,568

 

27,859

 

12,607

 

9,598

 

Aviation Services(2)

 

137,555

 

27,180

 

20,604

 

 

 

Environmental Services

 

136,577

 

115,014

 

44,045

 

22,087

 

26,847

 

Elimination and Other(3)

 

22,235

 

(3,623

)

(2,415

)

495

 

(778

)

 

 

$

972,004

 

$

491,860

 

$

406,209

 

$

403,158

 

$

434,790

 

Operating Income

 

$

177,452

 

$

28,672

 

$

23,251

 

$

52,392

 

$

100,965

 

Other Income (Expenses):

 

 

 

 

 

 

 

 

 

 

 

Net interest expense

 

$

(28,951

)

$

(14,063

)

$

(11,782

)

$

(8,231

)

$

(8,452

)

Other income(4)

 

45,897

 

9,677

 

9,980

 

21,981

 

11,208

 

 

 

$

16,946

 

$

(4,386

)

$

(1,802

)

$

13,750

 

$

2,756

 

Income from Continuing Operations

 

$

170,345

 

$

19,889

 

$

11,954

 

$

46,587

 

$

70,701

 

Income  from Continuing Operations Per Share:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

7.89

 

$

1.09

 

$

0.63

 

$

2.33

 

$

3.63

 

Diluted

 

6.93

 

1.08

 

0.63

 

2.28

 

3.43

 

Statement of Cash Flows Data:

 

 

 

 

 

 

 

 

 

 

 

Cash provided by operating activities

 

$

237,645

 

$

34,521

 

$

56,565

 

$

68,684

 

$

118,125

 

Cash provided by (used in) investing activities

 

167,243

 

(318,117

)

(13,310

)

4,278

 

(83,343

)

Cash provided by (used in) financing activities

 

(131,936

)

231,725

 

(127,525

)

87,205

 

(77,455

)

Balance Sheet Data (at period end):

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, restricted cash, marketable securities and Title XI and construction reserve funds

 

$

684,521

 

$

495,387

 

$

438,131

 

$

525,931

 

$

258,055

 

Total assets

 

2,885,141

 

1,766,009

 

1,402,611

 

1,487,107

 

1,298,138

 

Long-term debt and capital lease obligations

 

977,635

 

582,367

 

332,179

 

402,118

 

256,675

 

Stockholders’ equity

 

1,361,305

 

793,757

 

770,446

 

804,951

 

743,698

 

Capital Expenditures

 

$

250,459

 

$

200,052

 

$

161,842

 

$

139,706

 

$

107,445

 

Operating Data:

 

 

 

 

 

 

 

 

 

 

 

Offshore Marine Services:

 

 

 

 

 

 

 

 

 

 

 

Fleet Count, at period end(5)

 

301

 

212

 

235

 

301

 

325

 

Overall Fleet Utilization(6)

 

87

%

85

%

77

%

79

%

81

%

Rates Per Day Worked by Vessel Type(7)(8)

 

 

 

 

 

 

 

 

 

 

 

Anchor Handling Towing Supply

 

$

16,744

 

$

12,223

 

$

12,406

 

$

13,067

 

$

13,548

 

Crew

 

4,432

 

3,463

 

3,225

 

3,216

 

3,313

 

Mini-Supply

 

3,651

 

2,974

 

3,029

 

2,854

 

3,071

 

Standby Safety

 

8,117

 

7,850

 

6,697

 

5,935

 

5,448

 

Supply and Towing Supply

 

8,330

 

8,197

 

7,554

 

7,985

 

7,771

 

Utility

 

 

 

1,773

 

1,755

 

1,895

 

Other

 

6,914

 

14,000

 

 

 

 

Tanker Count, at period end

 

10

 

 

 

 

 

Dry Cargo Barge Count, at period end

 

1,139

 

1,072

 

784

 

535

 

338

 

Chemical Barge Count, at period end

 

44

 

20

 

 

 

 

Inland Towboat Count at period end(9),

 

7

 

6

 

3

 

 

 

Helicopter Count, at period end

 

108

 

127

 

41

 

36

 

N/A

 

 


(1)                 Marine Transportation Services commenced operations in July 2005 with the Company’s acquisition of Seabulk.

33




 

(2)                 Aviation Services commenced operations in December 2002 with the Company’s acquisition of Tex-Air. In December 2004, the Company acquired Era Aviation, Inc. significantly increasing the number of helicopters and the size of the segment’s business.

(3)                 Elimination and Other includes the operations of Harbor & Offshore Towing Services, which commenced operations in July 2005 with the Company’s acquisition of Seabulk.

(4)                 Other income principally includes gains and losses from the sale of marketable securities, derivative transactions, the sale of investments in 50% or less owned companies, foreign currency transactions and debt extinguishment. Other income in 2005 included gains on foreign currency transactions as part of the repatriation of foreign earnings under the American Jobs Creation Act of 2004. Other income in 2002 additionally included gains resulting from the Chiles Merger.

(5)                 Offshore Marine Services’ fleet includes vessels owned, chartered-in, managed, pooled and joint ventured.

(6)                 Utilization with respect to any period is the ratio of the aggregate number of days worked for all offshore vessels that are owned and bareboat chartered-in to total calendar days available during such period.

(7)                 Rate per day worked with respect to any period is the ratio of total time charter revenues earned by offshore vessels that are owned and chartered-in to the aggregate number of days worked by offshore vessels during such period.

(8)                 Revenues for certain vessels included in the calculation of rates per day worked are earned in foreign currencies, primarily Pounds Sterling, and have been converted to U.S. dollars at the weighted average exchange rate for the periods indicated.

(9)                 Three 6,250 horsepower towboats were acquired in December 2003 and are bareboat chartered-out. The Company and a minority partner jointly own three 6,250 horsepower towboats which were acquired in July 2004. A 3,800 horsepower towboat was acquired in 2005 and also bareboat chartered out.

FORWARD LOOKING STATEMENTS

Management’s Discussion and Analysis of Financial Condition and Results of Operations below presents our operating results for each of the three years in the period ended December 31, 2005, and our financial condition at December 31, 2005. Except for the historical information contained herein, this Form 10-K and other written and oral statements that we make from time to time contain forward-looking statements, which involve substantial 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 expressed or implied by such forward-looking statements. We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “believe,” “plan,” “target,” “forecast” and similar expressions in connection with any discussion of future operating or financial performance. Among the factors that could cause actual results to differ materially are those discussed in “Risks, Uncertainties and Other Factors That May Affect Future Results” in Item 1A of this Form 10-K. In addition, the following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in connection with the information presented in our consolidated financial statements and the related notes to our consolidated financial statements.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The Company owns, operates, invests in, markets and remarkets equipment. At this time, we have a portfolio of equipment that is primarily comprised of marine assets and helicopters employed in various activities: the majority of our vessels and helicopters are used to support the offshore oil and gas industry, ten U.S. flag tankers are engaged in transporting petroleum products and chemicals, our inland barges carry bulk goods on the U.S. inland waterway system and our tugs assist ships docking in U.S. ports. We also provide emergency environmental response, remediation, training and related services.

All our business lines with the exception of Environmental Services are “asset based” and highly capital-intensive. The offshore energy support business requires many different types of services that in turn utilize different styles and classes of marine and helicopter equipment.

34




The demand for our assets is cyclical in varying degrees, due both to changes in the need for those assets as well as  the general availability and supply in the market of those assets. To manage capital successfully over time, we continually assess our asset portfolio. We pursue opportunities to realize value from our assets by shifting their operation to other markets or trading them when circumstances warrant. We actively buy and sell second-hand equipment in the ordinary course of our business, as well as order, build, upgrade, operate or re-sell newly constructed equipment. We typically pursue a strategy of shedding older assets while adjusting our asset mix. We also lease assets to other operators and sell assets to financial lessors and lease them back for varying periods of time.

In recent years, we have also sought to create balance in our businesses by broadening our asset base from support of offshore oil and gas activity, which is highly cyclical by investing in barges, tankers and tugs. We believe that demand for our barges, tankers and tugs is not linked to the same factors that drive demand for offshore oil and gas exploration and development. In addition, contracts for the employment of barges and tankers that have longer terms than those typically available for offshore marine and helicopter services can often be secured. Our expectation is that over time this strategy of diversification will provide better return on capital than could be achieved by restricting our investment to one specific, highly cyclical business such as marine support for offshore oil and gas. We believe this strategy will afford more opportunities to efficiently allocate and use our capital, create greater stability of earnings and operational synergies which, in turn, should yield a lower cost of capital over the long run, more sustainable cash flow and increased profitability.

In order to optimize returns on capital we manage our assets aggressively, responding quickly to opportunities to deploy or trade those assets. We believe that maintaining significant liquidity is important to enable us to take advantage of opportunities as they arise.

We conduct our activities in five business segments:  Offshore Marine Services is a worldwide provider of offshore energy marine support services with a fleet of 301 vessels in six basic classes of vessels with significant variations within each class. Aviation Services with 108 helicopters also primarily services the offshore energy markets through its operations primarily in the U.S. Gulf of Mexico and a small presence in Alaska. It also leases helicopters to third parties in other countries. Inland River Services operates 1,139 dry cargo and 44 chemical tank barges throughout the U.S. inland waterways. Marine Transportation Services operates ten U.S.-flag tankers carrying petroleum, crude oil and chemical products in the U.S. coastwise trade and U.S. foreign commerce. Environmental Services responds to emergencies resulting from oil spills and other hazardous material discharges, acts as a consultant in emergency preparedness and provides services to ships calling at U.S. ports, oil facilities, and installations. In addition to our five business segments we operate 26 tugs providing harbor assist and ocean towing services and we also have investments in other activities which are noted below.

The market for offshore oil and gas drilling has historically been cyclical. Demand tends to be linked to the price of oil and gas and those prices tend to fluctuate depending on many factors, including global economic activity and levels of inventory. Price levels for oil and gas can in themselves cause additional fluctuations by inducing changes in consumer behavior. The cyclicality of the market is further exacerbated by the tendency of vendors to order capital assets as demand grows, often resulting in new capacity becoming available just as demand for oil and gas is peaking and activity is about to decline.

In 2002, activity in the offshore oil and gas industry markets worldwide began to decline and did not improve significantly until the third quarter of 2004 when offshore drilling activity increased in response to higher oil and gas prices. The improvement continued through 2005 and was further boosted in the aftermath of the 2005 hurricanes, when demand in the U.S. offshore energy sector for both vessel and helicopter support services increased substantially. This was due to the need to make extensive repairs to the offshore energy infrastructure damaged by the hurricanes. The level of offshore drilling activity continued to be brisk in the latter part of 2005. The Company expects continued demand for our offshore marine and aviation support services will likely continue in 2006.

35




In 2001, the Company began expanding Inland River Services’ business and additions to our fleet continued in 2005. We expect that additional equipment will be delivered in 2006 and 2007 although the total size of our fleet will remain approximately the same as in 2005 because we expect to return leased barges to their owner. The Company’s fleet is one of the most modern in the industry. Approximately 42% of the existing dry cargo barge fleet and 62% of the liquid cargo tank barge fleet operating on the U.S. inland waterways are over 20 years old. The Company has added to its investment in towboats and has also invested in a small fleeting operation which provides services to barges on the Mississippi river. Our towboats, chemical tank barges and fleeting operation are operated for us by third parties.

The hurricanes in 2005 also affected our Inland River Services activities. We experienced a substantial increase in spot rates following logistical problems caused by the storms. Although a lot of traffic was diverted from the Mississippi to other destinations, dislocations of barges caused upward pressure in rates.

In connection with the Seabulk Merger, our investment mix was further diversified into U.S. flag tankers and harbor towing vessels. Marine Transportation Services operates five double-hull state of the art product tankers of which two have chemical—carrying capacity. During 2005, other operators placed orders for the construction of fifteen new double-hulled tankers and barges that are expected to be qualified for operation in the U.S. coastwise trade when delivered. We believe that the market will be able to absorb this additional capacity due to expected growth in demand for double-hulled tankers and barges coupled with the mandatory retirement of various vessels under OPA 90. Marine Transportation Services also operates one single-hull and four double-bottom tankers which are subject to mandatory retirement under OPA 90. Double bottom vessels have increased hull integrity in case of grounding and we believe that they may be suitable for retrofit with double hulls.

The Company has continued its expansion of Environmental Services. In addition to oil spill response services, we offer an array of services, including emergency response, planning and preparation, and site remediation. We offer these services both domestically and internationally. We intend to continue the growth of this segment by competing for contracts internationally, pursuing selective acquisitions and developing additional business with existing clients.

Critical Accounting Policies and Estimates

General.   The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of the financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. We continually evaluate our estimates, including those related to bad debts, useful lives of property and equipment, deferred tax assets and those accrued liabilities subject to estimation, based on historical experience, changes in the markets and businesses in which we operate and various other assumptions that are believed to be reasonable under the circumstances. The results of these evaluations form the basis for making judgments about the carrying value of the assets and liabilities that may not be readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions and those differences may be material.

The following critical accounting policies affect the more significant judgments and estimates used in the preparation of the accompanying consolidated financial statements:

Allowance for Doubtful Accounts.   Our reserves for doubtful accounts are based on estimates of losses related to customers’ receivable balances. In establishing reserves, we assess customer credit quality as well as other factors and trends, including the age of receivable balances and individual credit assessments. Once we complete our assessment of receivable balances due from customers, a determination is made as to the probability of default. A reserve is established when we view a loss is likely and the level of reserves can fluctuate depending upon all of the factors mentioned above. Because amounts due to us from individual customers can be significant, future adjustments to our reserves could be material if one or more customers’ receivables are considered uncollectible.

36




Useful Lives and Depreciation of Equipment.   All of the Company’s business segments except Environmental Services are asset-based and highly capital intensive. Our assessments of the useful economic lives of our assets are based on management’s judgment, taking into consideration historical industry data, the Company’s own experience in operating such assets and other relevant factors.

Each of our asset classes is depreciated using the straight line method over the estimated useful life of the asset less any salvage value. With respect to each class of asset, the estimated useful life is typically based upon a newly built asset being placed into service and represents the point at which it is typically not economically justifiable to continue to operate the asset. From time to time the Company may acquire older assets which 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 December 31, 2005, the estimated useful life of each of the Company’s major categories of new equipment is as follows:

 

 

Useful lives
(in years)

 

Offshore Marine Vessels

 

 

20

 

 

Tankers(1)

 

 

25

 

 

Inland River Towboats and Barges

 

 

20

 

 

Helicopters

 

 

12

 

 

Harbor and Offshore Tugs

 

 

20

 

 


(1)      Subject to OPA 90 requirements.

Goodwill.   Goodwill is recorded when the purchase price paid for an acquisition exceeds the estimated fair value of net identified tangible and intangible assets acquired. As a result of various business combinations, our carrying value of goodwill totaled $40.4 million, or 1% of total assets, at December 31, 2005. In accordance with accounting principles generally accepted in the United States, we perform an annual impairment test of goodwill and to the extent indicators of impairment exist between the annual impartment tests, we perform our impairment tests more frequently. Our impairment review process compares the fair value of the reporting unit to its carrying value, including the goodwill related to the reporting unit. To determine the fair value of the reporting unit we use an income method which is based on a discounted future cash flow approach that uses estimates, including: revenue, estimated costs and discount rates. These estimates are reviewed each time we test goodwill for impairment and many are developed as part of our routine business planning and forecasting process. We believe our estimates and assumptions are reasonable; however, variations from those estimates could produce materially different results. We have completed our annual impairment test of goodwill based upon carrying values as of December 31, 2005 and have determined there was an $0.8 million impairment of goodwill related to the impact of hurricanes Katrina and Rita.

Investments in Business Ventures.   We hold less than majority investments in, and have receivables from, strategically aligned companies that totaled $37.0 million at December 31, 2005. We employ the equity method of accounting for investments in business ventures when we have the ability to exercise significant influence over the operating and financial policies of the venture. Significant influence is generally deemed to exist if we have between 20% and 50% of the voting rights of an investee. We perform regular reviews of each investee’s financial condition, the business outlook for its products and services and its present and projected results and cash flows. When an investee has experienced consistent declines in financial performance or difficulties in raising capital to continue operations, the investment is written down to a new cost basis when we expect the decline to be other-than-temporary. Actual results may vary from estimates due to the uncertainties regarding the projected financial performance of investees, the severity and expected duration of declines in value, and the available liquidity in the capital markets to support the continuing operations of the investees in which we have investments, all of which affect the application of this investment valuation policy. During 2005, we recorded an impairment charge of $2.7 million, net of tax, related to the Company’s investment in Globe Wireless.

37




Impairment of Long-Lived Assets.   We assess the impairment of long-lived assets when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Factors that we consider in deciding when to perform an impairment review include significant under-performance of a business segment or an asset grouping contained therein in relation to expectations and significant negative industry or economic trends. Recoverability of assets that will continue to be used in our operations is measured by comparing the carrying amount of the asset grouping to the related total future net cash flows. If an asset grouping’s carrying value is not recoverable through the related cash flows, the asset grouping is considered to be impaired. The impairment is measured by the difference between the asset grouping’s carrying amount and its fair value, based on the best information available, including market prices or discounted cash flow analysis.

Our offshore support vessels, marine transportation vessels and many of its helicopters service oil and gas customers whose demand for services changes with industry cycles. In making assessments of the fair value of such assets we are required to exercise considerable judgment in assessing asset values as changes in circumstances might indicate that the carrying amount of assets may not be recoverable. Where we would be required to perform a recoverability test, considerable judgment is required to project future cash flows and variations in those assumptions could cause a change in the results of the test.

Income Taxes.   We record a valuation allowance to reduce our deferred tax assets if we determine it is more likely than not that some portion or all of the deferred assets will not be realized. While we have made assumptions regarding future taxable income and ongoing prudent and feasible tax strategies in assessing the need for the valuation allowance, if these estimates and assumptions change in the future, we may be required to adjust our valuation allowance. This could increase or decrease income in the period such determination is made. At December 31, 2005, we had deferred tax assets totaling $215.6 million resulting primarily from net operating loss carryforwards expiring in 2020 and 2023 and foreign tax credit carryforwards expiring between 2009 and 2015. We have recorded a $17.4 million valuation allowance to reduce the deferred tax assets relating to the net operating loss carryforwards to an amount that we believe we will be able to utilize through the turnaround of existing temporary differences, future earnings, tax strategies or a combination thereof.

General

Offshore Marine Services

Our fleet services oil and gas exploration and production facilities mainly in the U.S. Gulf of Mexico, the North Sea, Latin America and Mexico, West Africa, the Middle East and Asia. The number and type of vessels we operate and their rates per day worked and utilization levels are the key determinants of Offshore Marine Services’ operating results and cash flows.

38




The table below sets forth average rates per day worked, utilization and available days data for our fleet during the periods indicated. The rate per day worked for any group of vessels with respect to any period is the ratio of total time charter revenue of such vessels to the aggregate number of days worked by such vessels in the period. Utilization for any group of vessels in a stated period is the ratio of aggregate number of days worked by such vessels to total calendar days available for work in such period. Available days for a group of vessels represents the total calendar days during which owned and chartered-in vessels are operated by the Company.

Fleet

 

 

 

2005

 

2004

 

2003

 

Rates Per Day Worked: