Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 10-Q

 

 

(Mark One)

 

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

For the quarterly period ended March 31, 2008              or             

 

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

For the transition period from              to             

Commission file number 1-12289

SEACOR Holdings Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Delaware   13-3542736

(State or Other Jurisdiction of

Incorporation or Organization)

 

(IRS Employer

Identification No.)

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

954-523-2200

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

 

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x    No  ¨

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

 

Large accelerated filer  x   Accelerated filer  ¨  

Non-accelerated filer  ¨

(Do not check if a smaller

reporting company)

  Smaller reporting company  ¨

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

The total number of shares of common stock, par value $.01 per share, outstanding as of April 30, 2008 was 21,957,989. The Registrant has no other class of common stock outstanding.

 

 

 


Table of Contents

SEACOR HOLDINGS INC.

Table of Contents

 

Part I.

  

Financial Information

   3
     
  

Item 1.

  

Financial Statements (Unaudited)

   3
     
     

Condensed Consolidated Balance Sheets as of March 31, 2008 and

December 31, 2007

   3
     
     

Condensed Consolidated Statements of Income for the Three Months Ended

March 31, 2008 and 2007

   4
     
     

Condensed Consolidated Statements of Cash Flows for the Three Months Ended

March 31, 2008 and 2007

   5
     
     

Notes to the Condensed Consolidated Financial Statements

   6
     
  

Item 2.

  

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

   17
     
  

Item 3.

  

Quantitative and Qualitative Disclosures About Market Risk

   31
     
  

Item 4.

  

Controls and Procedures

   31
     

Part II.

  

Other Information

   32
     
  

Item 2.

  

Unregistered Sales of Equity Securities and Use of Proceeds

   32
     
  

Item 6.

  

Exhibits

   32

 

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PART I—FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

SEACOR HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data, unaudited)

 

     March 31,
2008
    December 31,
2007
 
ASSETS     

Current Assets:

    

Cash and cash equivalents

   $ 444,787     $ 537,305  

Restricted cash

     39,152       30,624  

Available-for-sale marketable securities

     75,669       28,792  

Receivables:

    

Trade, net of allowance for doubtful accounts of $4,584 and $4,670 in 2008 and 2007, respectively

     250,789       267,564  

Other

     72,073       62,975  

Inventories

     35,021       30,468  

Deferred income taxes

     9,929       9,929  

Prepaid expenses and other

     9,196       9,756  
                

Total current assets

     936,616       977,413  
                

Property and Equipment

     2,511,118       2,469,735  

Accumulated depreciation

     (554,838 )     (526,583 )
                

Net property and equipment

     1,956,280       1,943,152  
                

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

     117,409       109,288  

Construction Reserve Funds & Title XI Reserve Funds

     413,681       405,000  

Goodwill

     62,020       60,226  

Intangible Assets

     29,292       30,500  

Other Assets, net of allowance for doubtful accounts of $1,329 and $1,502 in 2008 and 2007, respectively

     36,136       43,072  
                
   $ 3,551,434     $ 3,568,651  
                
LIABILITIES AND STOCKHOLDERS’ EQUITY     

Current Liabilities:

    

Current portion of long-term debt

   $ 11,414     $ 9,648  

Current portion of capital lease obligations

     864       851  

Accounts payable and accrued expenses

     93,079       119,321  

Other current liabilities

     254,522       258,940  
                

Total current liabilities

     359,879       388,760  
                

Long-Term Debt

     928,308       929,114  

Capital Lease Obligations

     8,439       8,642  

Deferred Income Taxes

     493,701       480,447  

Deferred Gains and Other Liabilities

     131,259       130,311  

Minority Interest in Subsidiaries

     12,207       9,558  

Stockholders’ Equity:

    

Preferred stock, $.01 par value, 10,000,000 shares authorized; none issued or outstanding

            

Common stock, $.01 par value, 60,000,000 shares authorized; 32,331,682 and 32,154,052 shares issued in 2008 and 2007, respectively

     323       322  

Additional paid-in capital

     910,843       905,702  

Retained earnings

     1,235,932       1,198,024  

Shares held in treasury of 10,108,693 and 9,578,789 in 2008 and 2007, respectively, at cost

     (531,236 )     (486,505 )

Accumulated other comprehensive income (loss):

    

Cumulative translation adjustments

     2,337       1,938  

Unrealized gain (loss) on available-for-sale marketable securities

     (558 )     2,338  
                

Total stockholders’ equity

     1,617,641       1,621,819  
                
   $ 3,551,434     $ 3,568,651  
                

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

and should be read in conjunction herewith.

 

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SEACOR HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except share data, unaudited)

 

     Three Months Ended
March 31,
     2008     2007

Operating Revenues

   $ 354,455     $ 310,763 
              

Costs and Expenses:

    

Operating

     235,040       188,658 

Administrative and general

     39,005       34,400 

Depreciation and amortization

     37,800       38,875 
              
     311,845       261,933 
              

Gains on Asset Dispositions and Impairments, Net

     11,906       12,157 
              

Operating Income

     54,516       60,987 
              

Other Income (Expense):

    

Interest income

     7,476       12,224 

Interest expense

     (11,548 )     (13,268)

Derivative gains, net

     6,467       130 

Foreign currency gains (losses), net

     2,610       (590)

Marketable security losses, net

     (5,684 )     (4,688)

Other, net

     164       (43)
              
     (515 )     (6,235)
              

Income Before Income Tax Expense, Minority Interest in Income of Subsidiaries and Equity In Earnings of 50% or Less Owned Companies

     54,001       54,752 

Income Tax Expense

     20,470       18,842 
              

Income Before Minority Interest in Income of Subsidiaries and Equity in Earnings of 50% or Less Owned Companies

     33,531       35,910 

Minority Interest in Income of Subsidiaries

     (202 )     (178)

Equity in Earnings of 50% or Less Owned Companies

     4,579       2,420 
              

Net Income

   $ 37,908     $ 38,152 
              

Basic Earnings Per Common Share

   $ 1.70     $ 1.57 

Diluted Earnings Per Common Share

   $ 1.50     $ 1.40 

Weighted Average Common Shares Outstanding:

    

Basic

     22,343,655       24,354,119 

Diluted

     26,011,338       28,076,516 

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

 

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SEACOR HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)

 

     Three Months Ended
March 31,
     2008     2007

Net Cash Provided by Operating Activities

   $ 59,268     $ 76,811
              

Cash Flows from Investing Activities:

    

Purchases of property and equipment

     (81,492 )     (131,651)

Proceeds from disposition of property and equipment

     38,051       48,703 

Purchases of marketable securities

     (82,406 )     (38,196)

Proceeds from sales of marketable securities

     23,072       37,255 

Investments in and advances to 50% or less owned companies

     (3,985 )     (11,582)

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

     60       107 

Principal payments on (investments in) third party notes receivable, net

     218       (188)

Net increase in restricted cash

     (8,528 )     (11,871)

Net increase in construction reserve funds and title XI reserve funds

     (8,681 )     (6,748)

Net decrease in escrow deposits on like kind exchanges

     8,427       1,514 

Cash settlements on derivative transactions, net

     4,647       (1,911)

Repayments of sales type leases, net

     23       5,464 

Business acquisitions, net of cash acquired

     (2,594 )     (25,235)
              

Net cash used in investing activities

     (113,188 )     (134,339)
              

Cash Flows from Financing Activities:

    

Payments on long-term debt and capital lease obligations

     (1,186 )     (1,630)

Common stock acquired for treasury

     (45,900 )     (65,170)

Proceeds and tax benefits from share award plans

     3,599       3,123 

Cash received from (dividends paid to) minority interest holders, net

     2,447       (629)
              

Net cash used in financing activities

     (41,040 )     (64,306)
              

Effects of Exchange Rate Changes on Cash and Cash Equivalents

     2,442       55 
              

Net Decrease in Cash and Cash Equivalents

     (92,518 )     (121,779)

Cash and Cash Equivalents, Beginning of Period

     537,305       506,966 
              

Cash and Cash Equivalents, End of Period

   $ 444,787     $ 385,187 
              
    

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

 

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SEACOR HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

1. Basis of Presentation

The condensed consolidated financial information for the three months ended March 31, 2008 and 2007 has been prepared by the Company and has not been audited by its independent registered public accounting firm. The condensed consolidated financial statements include the accounts of SEACOR Holdings Inc. and its consolidated subsidiaries. In the opinion of management, all adjustments (consisting of normal recurring adjustments) have been made to present fairly the Company’s financial position as of March 31, 2008, its results of operations for the three months ended March 31, 2008 and 2007 and its cash flows for the three months ended March 31, 2008 and 2007. Results of operations for the interim periods presented are not necessarily indicative of operating results for the full year or any future periods.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.

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

 

2. Fair Value Measurements

On September 16, 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements. SFAS No. 157 provides a single definition of fair value, together with a framework for measuring it, and requires additional disclosure about the use of fair value to measure assets and liabilities. The Company adopted SFAS No. 157 effective January 1, 2008 with no material impact on the Company’s consolidated financial position or its results of operations.

The fair value of an asset or liability, as defined by SFAS No. 157, is the price that would be received to sell an asset or transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS No. 157 establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value and defines three levels of inputs that may be used to measure fair value. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, quoted prices in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, or inputs derived from observable market data. Level 3 inputs are unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities.

 

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The Company’s assets and liabilities as of March 31, 2008, that are measured at fair value on a recurring basis, are summarized below (in thousands):

 

     Level 1    Level 2    Level 3

ASSETS

        

Available-for-sale marketable securities

   $ 75,669    $    $  —

Forward exchange, option and future contracts

     61      12,024     

Construction reserve funds and Title XI reserve funds

     413,681          

LIABILITIES

            

Short sale of marketable securities

     106,440          

Short sale of equity options, net

     1,306          

Short sale of commodity swap, option and future contracts, net

     1,271          

Forward delivery contracts, net

          121     

Short sale of U.S. treasury notes and bond future and option contracts, net

     304          

On February 15, 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Liabilities—Including an amendment of FASB Statement No. 155. SFAS No. 159 permits entities to choose to measure many financial assets and financial liabilities, and certain non-financial instruments that are similar to financial instruments, at fair value. SFAS No. 159 was effective for SEACOR beginning January 1, 2008 and the Company has not elected the fair value option under this standard.

 

3. Business Acquisitions

Trident Acquisition. On January 2, 2008, the Company acquired all of the issued and outstanding shares of Trident Port Services, Inc. (“Trident”), providers of environmental services in northern California, for $1.5 million. The Company’s purchase price included cash consideration of $0.8 million, a note payable of $0.5 million and accrued payments of $0.2 million subject to satisfactory delivery of equipment under construction. The Company has performed a preliminary fair value analysis and the purchase price was allocated to the acquired assets and liabilities based on their estimated fair values, with the excess of purchase price over fair value recorded as goodwill in the amount of $0.4 million. Further changes to the preliminary fair value analysis may be made as the valuation of assets and liabilities are finalized and additional information becomes available, primarily related to the fair value of acquired identifiable intangible assets and income tax obligations.

Rivers Edge Acquisition. On November 15, 2007, the Company acquired all of the issued and outstanding shares of Rivers Edge Services, Inc. and Kemp’s Rivers Edge Vactor Services, Inc. (collectively referred to as “Rivers Edge”), providers of remediation, demolition, and environmental services in the pacific northwestern United States, for $4.2 million. The Company’s purchase price included cash consideration of $3.3 million and accrued obligations of $0.9 million due to the selling stockholder. Consideration paid includes the settlement of certain of Rivers Edge’s outstanding debt obligations at the time of acquisition. In addition, the final purchase price is subject to certain working capital adjustments. The selling stockholder of Rivers Edge has the opportunity to receive additional consideration of up to $4.8 million based upon certain performance standards over the period from the date of acquisition through December 31, 2011. The Company has performed a preliminary fair value analysis and the purchase price was allocated to the acquired assets and liabilities based on their estimated fair values, with the excess of purchase price over fair value recorded as goodwill in the amount of $1.1 million. Further changes to the preliminary fair value analysis may be made as the valuation of assets and liabilities are finalized and additional information becomes available, primarily related to the fair value of acquired identifiable intangible assets and income tax obligations.

 

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ACI Acquisition. On September 30, 2007, the Company acquired all of the issued and outstanding shares of AC Industrial Services Corporation (“ACI”), providers of environmental services in northern California, for $1.5 million. The Company’s purchase price included cash consideration of $1.3 million. The Company has performed a preliminary fair value analysis and the purchase price was allocated to the acquired assets and liabilities based on their estimated fair values, with the excess of purchase price over fair value recorded as goodwill in the amount of $0.4 million. Further changes to the preliminary fair value analysis may be made as the valuation of assets and liabilities are finalized and additional information becomes available, primarily related to the fair value of acquired identifiable intangible assets and income tax obligations.

SRI Acquisition. On September 7, 2007, the Company acquired all of the issued and outstanding shares of Solid Resources, Inc. and Solid Resources, LLC (collectively referred to as “SRI”), providers of environmental services in the southeastern United States, for $10.5 million. The final purchase price is subject to certain working capital adjustments. The selling stockholder of SRI has the opportunity to receive additional consideration of up to $39.5 million based upon certain performance standards over the period from the date of acquisition through September 30, 2011. During the three months ended March 31, 2008, the Company paid $1.8 million of additional consideration in accordance with the acquisition agreement. The Company has performed a preliminary fair value analysis and the purchase price was allocated to the acquired assets and liabilities based on their estimated fair values, with the excess of purchase price over fair value recorded as goodwill in the amount of $10.6 million. Further changes to the preliminary fair value analysis may be made as the valuation of assets and liabilities are finalized and additional information becomes available, primarily related to the fair value of acquired identifiable intangible assets and income tax obligations.

Link Acquisition. On September 7, 2007, the Company also acquired all of the issued and outstanding shares of Link Associates International Global Limited (“Link”), a provider of environmental services in the United Kingdom, for £2.2 million ($4.5 million). Consideration paid included the settlement of Link’s outstanding debt obligations at the time of the acquisition. The selling stockholder of Link has the opportunity to receive additional consideration of up to £2.8 million based upon certain performance standards during the period from the date of acquisition through May 31, 2010. The Company has performed a preliminary fair value analysis and the purchase price was allocated to the acquired assets and liabilities based on their estimated fair values, with the excess of purchase price over fair value recorded as goodwill in the amount of £1.6 million ($3.2 million). Further changes to the preliminary fair value analysis may be made as the valuation of assets and liabilities are finalized and additional information becomes available, primarily related to the fair value of acquired identifiable intangible assets and income tax obligations.

Purchase Price Allocation. The following table summarizes the allocation of the purchase prices for the above acquisitions during the three months ended March 31, 2008 (in thousands):

 

Trade and other receivables

   $ (4 )

Property and Equipment

     1,063  

Goodwill

     1,798  

Intangible Assets

     5  

Accounts payable and other current liabilities

     236  

Long-Term Debt

     (504 )
        

Purchase price

   $ 2,594  
        

 

4. Equipment Acquisitions, Dispositions and Depreciation Policy

Capital expenditures were $81.5 million during the three months ended March 31, 2008. Equipment deliveries during the period included two offshore marine vessels, five inland river dry cargo barges, three inland river towboats, four helicopters, one harbor tug and two ocean liquid tank barges.

During the three months ended March 31, 2008, the Company sold two offshore marine vessels, two tankers, one inland river dry cargo barge, three inland river liquid tank barges and other equipment for an aggregate consideration of $38.1 million and recognized net gains of $11.9 million.

 

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Equipment, stated at cost, is depreciated using the straight line method over the estimated useful life of the asset to an estimated salvage value. With respect to each class of asset, the estimated useful life is typically based upon a newly built asset being placed into service and represents the point at which it is typically not justifiable for the Company to continue to operate the asset in the same or similar manner. From time to time, the Company may acquire older assets 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 March 31, 2008, the estimated useful life (in years) of each of the Company’s major categories of new equipment was as follows:

 

Offshore marine vessels

   20

Tankers(1)

   25

Inland river dry cargo and deck barges

   20

Inland river liquid tank barges

   25

Inland river towboats

   25

Helicopters

   12

Harbor and offshore tugs

   40

Ocean liquid tank barges

   25

 

(1)

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

 

5. Construction Reserve Funds

The Company has established, pursuant to Section 511 of the Merchant Marine Act, 1936, as amended, joint depository construction reserve funds with the Maritime Administration. In accordance with this statute, the Company is permitted to deposit proceeds from the sale of certain vessels into the joint depository construction reserve fund accounts for the purpose of acquiring U.S.-flag vessels and qualifying for the temporary deferral of taxable gains realized from the sale of vessels. Withdrawals from the construction reserve fund accounts are only permitted with the consent of the Maritime Administration, and the funds on deposit must be committed for expenditure within three years or be released for the Company’s general use.

As of March 31, 2008, construction reserve funds of $396.0 million are classified as non-current assets in the accompanying condensed consolidated balance sheets as the Company has the intent and ability to use the funds to acquire equipment. During the three months ended March 31, 2008, construction reserve fund account transactions included deposits of $8.6 million. During the three months ended March 31, 2008, interest earned on construction reserve fund balances was $3.0 million.

 

6. Commitments and Contingencies

The Company’s unfunded capital commitments as of March 31, 2008 consisted primarily of offshore marine vessels, harbor tugs, helicopters and inland river barges and totaled $410.5 million, of which $273.5 million is payable during the remainder of 2008 with the balance payable through 2010. Of these commitments, approximately $65.1 million may be terminated without further liability other than the payment of liquidated damages of $5.2 million in the aggregate.

The Company has guaranteed the payment of amounts owed by one of its joint ventures under a vessel charter agreement that expires in 2011. In addition, the Company has guaranteed amounts owed by certain of its joint ventures under banking facilities and has issued a performance guarantee. As of March 31, 2008, the total amount guaranteed by the Company was $28.3 million. Additionally, the Company has an uncalled capital commitment to one of its joint ventures for $3.5 million as of March 31, 2008.

 

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

In June 2005, a subsidiary of SEACOR received a document subpoena from the Antitrust Division of the U.S. Department of Justice. This subpoena relates to a grand jury investigation of potential antitrust violations among providers of helicopter transportation services in the U.S. Gulf of Mexico. The Company believes that this subpoena is part of a broader industry inquiry and that other providers have also received such subpoena. SEACOR intends to provide all information requested in response to this investigation.

Under United States law, “United States persons” are prohibited from business activities and contracts in certain countries, including Sudan and Iran. Relating to these prohibitions, Seabulk International, Inc. (“Seabulk”), a subsidiary of SEACOR acquired in July 2005, filed three reports with and submitted documents to the Office of Foreign Asset Control (“OFAC”) of the U.S. Department of Treasury in December 1999 and January and May 2002. One of the reports was also filed with the Bureau of Export Administration of the U.S. Department of Commerce. The reports and documents related to certain limited charters with third parties involving three Seabulk vessels which called in Sudan for several months in 1999 and January 2000 and charters with third parties involving several of Seabulk’s vessels which called in Iran in 1998. In March 2003, Seabulk received notification from OFAC that the case has been referred to its Civil Penalties Division. Should OFAC determine that these activities constituted violations of the laws or regulations, civil penalties, including fines, could be assessed against Seabulk or certain individuals who knowingly participated in such activity. The Company cannot predict the extent of such penalties; however, management does not believe the outcome of these matters will have a material impact on its consolidated financial position or results of operations.

Marine Transportation Services (“MTS”) had two of its tankers retrofitted to a double-hull configuration to enable each of them to continue to transport crude oil and petroleum products beyond their OPA 90 mandated retirement dates in 2011. Both vessels operate in the U.S. coastwise, or Jones Act, trade which is restricted to vessels built or rebuilt in the United States. In May 2005, MTS received a determination from the National Vessel Documentation Center (“NVDC”) of the U.S. Coast Guard (“USCG”), which administers the U.S.-build requirements of the Jones Act, concluding the retrofit work would not constitute a foreign rebuilding and therefore would not jeopardize the tankers’ eligibility to operate in the U.S. coastwise trade. MTS had the retrofit work completed in a foreign shipyard in reliance upon the NVDC’s determination. MTS believes the NVDC’s determination was correct and in accord with the USCG’s long-standing regulations and interpretations. On July 9, 2007, a U.S. shipbuilders trade association and two operators of tankers in the U.S. coastwise trade (“Shipbuilders”) commenced a civil action in the U.S. District Court for the Eastern District of Virginia (“Court”), Shipbuilders Council of America, Inc., et al. v. U.S. Department of Homeland Security, et al., No. 1:07cv665 (E.D. Va.), in which they sought to have the court set aside the NVDC’s determination and direct the USCG to revoke the coastwise license of one of the two retrofitted tankers, the Seabulk Trader. MTS intervened in the action to assist the USCG in defending the NVDC’s determination. On April 24, 2008, the Court issued a Memorandum Opinion granting a motion for summary judgment filed by the Shipbuilders, holding that the record did not support the NVDC’s coastwise endorsement, and remanding the matter to the USCG with instructions to revoke the coastwise endorsement for the Seabulk Trader. On April 30, 2008, MTS filed a motion to stay the judgment pending appeal. The Company believes the Court’s ruling is erroneous and will vigorously pursue all appropriate channels of relief. If MTS is unsuccessful on its motion for a stay and its appeal, the permanent loss of coastwise eligibility for its two retrofitted tankers could adversely affect the Company’s financial condition and its results of operations. The Company’s carrying value of its two retrofitted

 

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tankers was $65.5 million as of March 31, 2008 and the two retrofitted tankers contributed operating revenues of $5.4 million during the three months ended March 31, 2008.

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

 

7. Long-Term Debt

As of March 31, 2008, the Company had no outstanding borrowings under its revolving credit facility and the remaining availability under this facility was $446.8 million, net of issued letters of credit of $3.2 million. In addition, the Company had other outstanding letters of credit totaling $44.7 million with various expiration dates through 2010.

 

8. Stock and Debt Repurchases

During the three months ended March 31, 2008, the Company acquired 545,400 shares of SEACOR common stock, par value $0.01 per share (“Common Stock”), for treasury for an aggregate purchase price of $45.9 million. As of March 31, 2008, $79.1 million of the repurchase authority granted by SEACOR’s Board of Directors remained available for acquisition of additional shares of Common Stock and its 2.875% Convertible Debentures due 2024. On April 23, 2008, SEACOR’s Board of Directors increased such repurchase authority by $70.9 million to $150.0 million. Additionally, the Company may purchase, separate from such authorization, any or all of its 7.2% Senior Notes due 2009, its 5.875% Senior Notes due 2012 and the 9.5% Senior Notes of Seabulk due 2013. Securities are acquired from time to time through open market purchases, privately negotiated transactions or otherwise, depending on market conditions.

Subsequent to March 31, 2008, the Company acquired 335,100 shares of Common Stock for treasury in the amount of $28.5 million.

 

9. Earnings Per Common Share

In accordance with SFAS No. 128, Earnings Per Share, basic earnings per common share are computed based on the weighted average number of common shares issued and outstanding during the relevant periods. Diluted earnings per common share are computed based on the weighted average number of common shares issued and outstanding plus the effect of potentially dilutive securities. In determining dilutive securities for this purpose the Company assumes, through the application of the treasury stock and if-converted methods, all restricted stock grants have vested, all common shares have been issued pursuant to the exercise of all outstanding stock options and all common shares have been issued pursuant to the conversion of all outstanding convertible notes. Diluted earnings per common share for the three months ended March 31, 2008 and 2007, excluded 565,145 and 3,000, respectively, of certain share awards as the effect of their inclusion in the

 

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computation would have been antidilutive. Computations of basic and diluted earnings per common share are as follows (in thousands, except per share data):

 

     Net
Income
   Average O/S
Shares
   Per
Share

For the Three Months Ended March 31, 2008

        

Basic Earnings Per Common Share

   $ 37,908    22,344    $ 1.70
            

Effect of Dilutive Securities, net of tax:

        

Options and Restricted Stock

        249   

Convertible Securities

     1,212    3,418   
              

Diluted Earnings Per Common Share

   $ 39,120    26,011    $ 1.50
                  
        

For the Three Months Ended March 31, 2007

        

Basic Earnings Per Common Share

   $ 38,152    24,354    $ 1.57
            

Effect of Dilutive Securities, net of tax:

        

Options and Restricted Stock

        305   

Convertible Securities

     1,212    3,418   
              

Diluted Earnings Per Common Share

   $ 39,364    28,077    $ 1.40
                  
        

 

10. Comprehensive Income

For the three months ended March 31, 2008 and 2007, total comprehensive income was $35.4 million and $37.7 million, respectively. Other comprehensive income consisted of gains and losses from foreign currency translation adjustments and unrealized holding gains and losses on available-for-sale marketable securities.

 

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11. Share Based Compensation

The following transactions have occurred in connection with the Company’s share based compensation plans during the three months ended March 31, 2008:

 

Director stock awards granted

   1,250  
      

Employee Stock Purchase Plan (“ESPP”) shares issued

   14,854  
      

Restricted stock awards granted

   135,890  
      

Restricted stock awards cancelled

   190  
      

Shares released from Deferred Compensation Plan

   1,207  
      

Restricted Stock Unit (“RSU”) Activities:

  

RSU’s outstanding at December 31, 2007

   1,820  

Granted

    

Converted to shares and contributed to Deferred Compensation Plan

   (375 )
      

RSU’s outstanding at March 31, 2008

   1,445  
      

Stock Option Activities:

  

Options outstanding at December 31, 2007

   1,017,031  

Granted

   42,826  

Exercised

   (40,115 )

Cancelled

    
      

Options outstanding at March 31, 2008

   1,019,742  
      

Shares available for future grants and ESPP purchases at March 31, 2008

   1,045,187  
      

 

12. New Accounting Pronouncements

On December 4, 2007, the FASB issued SFAS No. 141(R), Business Combinations. SFAS No. 141(R) changes SFAS No. 141 by requiring acquiring companies to recognize, with certain exceptions, 100 percent of the fair value of assets acquired, liabilities assumed, and non-controlling interests in acquisitions of less than a 100 percent controlling interest when the acquisition constitutes a change in control of the acquired entity, by establishing that shares issued in consideration for a business combination be at fair value on the acquisition date, by requiring the recognition of contingent consideration arrangements at their acquisition-date fair values with subsequent changes in fair value generally reflected in earnings, by requiring recognition of pre-acquisition loss and gain contingencies at their acquisition-date fair values, by providing for the capitalization of in-process research and development assets acquired, by requiring acquisition-related transaction costs to be expensed as incurred, by allowing for the capitalization of acquisition-related restructuring costs only if the criteria in SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, are met as of the acquisition date and by requiring as an adjustment to income tax expense any changes in an acquirer’s existing income tax valuation allowances and tax uncertainty accruals. SFAS No. 141(R) is required to be adopted concurrently with SFAS No. 160, Accounting and Reporting of Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51, and is effective for business combination transactions for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Early adoption is prohibited.

 

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On December 4, 2007, the FASB also issued SFAS No. 160 which requires that a non-controlling interest in a consolidated subsidiary be displayed in the consolidated statement of financial position as a separate component of equity because noncontrolling interests meet the definition of equity of the consolidated entity. After control is obtained, a change in ownership interests that does not result in a loss of control will be accounted for as an equity transaction, and a change in ownership of a consolidated subsidiary that results in a loss of control and deconsolidation is a significant event that triggers gain or loss recognition, with the establishment of a new fair value basis in any remaining ownership interests. SFAS No. 160 is required to be adopted concurrently with SFAS No. 141(R) and is effective for the first annual reporting period beginning on or after December 15, 2008. Early adoption is prohibited. The Company has not yet determined what impact, if any, the adoption of SFAS No. 160 will have on its consolidated financial position or its results of operations.

On March 19, 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133. SFAS No. 161 requires enhanced disclosure for derivative instruments and hedging activities about how and why an entity uses derivative instruments and hedges and how derivative instruments and related hedged items are accounted for under SFAS No. 133 and how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early adoption encouraged. The Company has not yet determined what impact, if any, the adoption of SFAS No. 161 will have on its consolidated financial position or its results of operations.

On February 12, 2008, the FASB issued FASB Staff Position No. 157-2, Effective Date of FASB Statement No. 157, which amended SFAS No. 157 to defer the effective date of SFAS 157 for one year for nonfinancial assets and liabilities, except those that are recognized or disclosed in the financial statements at least annually. The Company is evaluating the impact, if any, the adoption would have on the Company’s consolidated financial position or its results of operations.

 

13. Segment Information

Operating business segments have been defined as a component of an enterprise about which separate financial information is available and is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s basis of measurement of segment profit or loss has not changed from those previously described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007. The following tables summarize the operating results and assets of the Company’s reportable segments. Certain reclassifications of prior period information have been made to conform to the current period’s segment presentation.

 

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    Offshore
Marine
Services
    Marine
Transportation
Services
  Inland
River
Services
  Aviation
Services
    Environmental
Services
    Other     Corporate
and
Eliminations
    Total  
    $’000     $’000   $’000   $’000     $’000     $’000     $’000     $’000  

For the Three Months Ended March 31, 2008

               

Operating Revenues:

               

External customers

  154,260     28,953   30,145   53,792     42,488     44,817         354,455  

Intersegment

  387             21     114     (522 )    
                                           
  154,647     28,953   30,145   53,792     42,509     44,931     (522 )   354,455  
                                           

Costs and Expenses:

               

Operating

  94,270     16,219   16,726   39,871     30,598     37,866     (510 )   235,040  

Administrative and general

  12,804     1,438   2,123   4,629     5,709     2,700     9,602     39,005  

Depreciation and amortization

  14,125     7,980   3,964   7,789     1,445     2,267     230     37,800  
                                           
  121,199     25,637   22,813   52,289     37,752     42,833     9,322     311,845  
                                           

Gains (Losses) on Asset Dispositions and Impairments, Net

  7,138     3,629   711   394     35         (1 )   11,906  
                                           

Operating Income (Loss)

  40,586     6,945   8,043   1,897     4,792     2,098     (9,845 )   54,516  
                                           

Other Income (Expense):

               

Derivative gains (losses), net

          179         (485 )   6,773     6,467  

Foreign currency gains (losses), net

  (155 )   30     (31 )   (9 )   (8 )   2,783     2,610  

Other, net

          39         1     124     164  

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

  3,633       911   (60 )   58     37         4,579  
                                   

Segment Profit

  44,064     6,975   8,954   2,024     4,841     1,643      
                                   

Other Income (Expense) not included in Segment Profit

                (9,756 )

Less Equity Earnings included in Segment Profit

                (4,579 )
                   

Income Before Taxes, Minority Interest and Equity Earnings

                54,001  
                   

As of March 31, 2008

               

Property and Equipment

  799,213     420,180   236,095   333,518     32,590     130,820     3,864     1,956,280  

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

  25,726       72,828   6,356     1,248     11,251         117,409  

Goodwill

  21,421     177   1,493   352     34,460     4,117         62,020  

Intangible Assets

  14,572     2,999   2,280       8,616     825         29,292  

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

  149,323     10,459   28,499   78,709     65,953     25,025     55,176     413,144  
                                       

Segment Assets

  1,010,255     433,815   341,195   418,935     142,867     172,038       2,578,145  
                                   

Cash and near cash assets(1)

                973,289  
                   

Total Assets

                3,551,434  
                   

 

(1)

Cash and near cash assets includes cash, cash equivalents, restricted cash, available-for-sale marketable securities, construction reserve funds and Title XI reserve funds.

 

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Table of Contents
    Offshore
Marine
Services
    Marine
Transportation
Services
    Inland
River
Services
    Aviation
Services
    Environmental
Services
    Other
    Corporate
and
Eliminations
    Total  
    $’000     $’000     $’000     $’000     $’000     $’000     $’000     $’000  

For the Three Months Ended March 31, 2007

               

Operating Revenues:

               

External customers

  170,928     30,556     26,722     45,433     25,564     11,560         310,763  

Intersegment

                  928     122     (1,050 )    
                                               
  170,928     30,556     26,722     45,433     26,492     11,682     (1,050 )   310,763  
                                               

Costs and Expenses:

               

Operating

  92,999     20,849     12,305     36,225     20,753     6,577     (1,050 )   188,658  

Administrative and general

  13,023     1,186     877     4,521     5,301     2,185     7,307     34,400  

Depreciation and amortization

  16,524     10,158     3,499     6,079     909     1,264     442     38,875  
                                               
  122,546     32,193     16,681     46,825     26,963     10,026     6,699     261,933  
                                               

Gains (Losses) on Asset Dispositions and Impairments, Net

  8,294         3,622     227     (16 )   30         12,157  
                                               

Operating Income (Loss)

  56,676     (1,637 )   13,663     (1,165 )   (487 )   1,686     (7,749 )   60,987  
                                               

Other Income (Expense):

               

Derivative gains (losses), net

              (686 )       (161 )   977     130  

Foreign currency gains (losses), net

  (707 )   (4 )           (2 )       123     (590 )

Other, net

  (18 )       (2 )               (23 )   (43 )

Equity in Earnings of 50% or Less Owned Companies

  1,352         969     16     21     62         2,420  
                                               

Segment Profit (Loss)

  57,303     (1,641 )   14,630     (1,835 )   (468 )   1,587      
                                       

Other Income (Expense) not included in Segment Profit (Loss)

                (5,732 )

Less Equity Earnings included in Segment Profit (Loss)

                (2,420 )
                   

Income Before Taxes, Minority Interest and Equity Earnings

                54,752  
                   
               

 

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

This Form 10-Q includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements concerning management’s expectations, strategic objectives, business prospects, anticipated economic performance and financial condition and other similar matters involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of results to differ materially from any future results, performance or achievements discussed or implied by such forward-looking statements. Such risks, uncertainties and other important factors include, among others: the conditions in the global financial markets and international economic conditions including, interest rate fluctuations, availability of credit, inflation rates, change in laws, trade barriers, commodity prices and currency exchange fluctuations, the cyclical nature of the oil and gas industry, activity in foreign countries and changes in foreign political, military and economic conditions, changes in foreign and domestic oil and gas exploration and production activity, safety record requirements related to Offshore Marine Services, Marine Transportation Services and Aviation Services, decreased demand for Marine Transportation Services and Harbor and Offshore Towing Services due to construction of additional refined petroleum product, natural gas or crude oil pipelines or due to decreased demand for refined petroleum products, crude oil or chemical products or a change in existing methods of delivery, compliance with U.S. and foreign government laws and regulations, including environmental laws and regulations, the dependence of Offshore Marine Services, Marine Transportation Services and Aviation Services on several customers, consolidation of the Company’s customer base, the ongoing need to replace aging vessels and aircraft, industry fleet capacity, restrictions imposed by the Shipping Acts and Aviation Acts on the amount of foreign ownership of the Company’s Common Stock, increased competition if the Jones Act is repealed, operational risks of Offshore Marine Services, Marine Transportation Services, Harbor and Offshore Towing Services and Aviation Services, effects of adverse weather conditions and seasonality on Aviation Services, future phase-out of Marine Transportation Services’ double-bottom tanker, dependence of spill response revenue on the number and size of spills and upon continuing government regulation in this area and Environmental Services’ ability to comply with such regulation and other governmental regulation, changes in National Response Corporations’ Oil Spill Removal Organization classification, liability in connection with providing spill response services, effects of adverse weather and river conditions and seasonality on Inland River Services, the level of grain export volume, the effect of fuel prices on barge towing costs, variability in freight rates for inland river barges, the effect of international economic and political factors in Inland River Services’ operations, adequacy of insurance coverage, the attraction and retention of qualified personnel by the Company and various other matters and factors, many of which are beyond the Company’s control. In addition, these statements constitute the Company’s cautionary statements under the Private Securities Litigation Reform Act of 1995. It is not possible to predict or identify all such factors. Consequently, the following should not be considered a complete discussion of all potential risks or uncertainties. The words “estimate,” “project,” “intend,” “believe,” “plan” and similar expressions are intended to identify forward-looking statements. Forward-looking statements speak only as of the date of the document in which they are made. The Company disclaims any obligation or undertaking to provide any updates or revisions to any forward-looking statement to reflect any change in the Company’s expectations or any change in events, conditions or circumstances on which the forward-looking statement is based. The forward-looking statements in this release should be evaluated together with the many uncertainties that affect the Company’s businesses, particularly those mentioned under “Forward-Looking Statements” in Item 7 on the Company’s Form 10-K and SEACOR’s periodic reporting on Form 10-Q and Form 8-K (if any), which is incorporated by reference.

Results of Operations

The Company’s operations are divided into five main business segments – Offshore Marine Services, Marine Transportation Services, Inland River Services, Aviation Services and Environmental Services. The Company also has activities that are referred to and described under Other, which primarily includes Harbor and Offshore Towing Services, commodity trading activities, various other investments in joint ventures and asset leasing activities.

 

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The sections below provide an analysis of the Company’s operations by business segment for the three months ended March 31, 2008 (“Current Year Quarter”) as compared with the three months ended March 31, 2007 (“Prior Year Quarter”). See “Item 1. Financial Statements – Note 13, Segment Information” included in Part I for consolidating segment tables for each period presented.

Offshore Marine Services

 

     For the Three Months
Ended March 31
   Change
’08/’07
 
     2008    2007    3 Mos.  
     $ ’000     %    $ ’000     %    %  

Operating Revenues:

            

United States

   70,030     45    90,892     53   
                        

Africa, primarily West Africa

   32,319     21    40,569     24   

United Kingdom, primarily North Sea

   19,163     12    16,631     10   

Middle East

   16,494     11    10,658     6   

Asia

   6,467     4    7,508     4   

Mexico, Central and South America

   10,174     7    4,670     3   
                        

Total Foreign

   84,617     55    80,036     47   
                        
   154,647     100    170,928     100    (10 )
                        

Costs and Expenses:

            

Operating

   94,270     61    92,999     54   

Administrative and general

   12,804     8    13,023     8   

Depreciation and amortization

   14,125     9    16,524     10   
                        
   121,199     78    122,546     72   
                        

Gains on Asset Dispositions and Impairments, Net

   7,138     4    8,294     5   
                        

Operating Income

   40,586     26    56,676     33    (28 )
                        

Other Income (Expense):

            

Foreign currency losses, net

   (155 )      (707 )     

Other, net

          (18 )     

Equity in Earnings of 50% or Less Owned Companies

   3,633     2    1,352     1   
                        

Segment Profit

   44,064     28    57,303     34    (23 )
                            
            

Operating Revenues. Operating revenues decreased by $16.3 million in the Current Year Quarter compared with the Prior Year Quarter primarily due to a 2,337 day, or 13%, reduction in overall days available for charter as a result of net fleet dispositions. On a regional basis, including net fleet dispositions and mobilizations between geographic regions, days available for charter were 12% lower in the U.S. Gulf of Mexico, 39% lower in West Africa and 46% lower in Asia. Days available for charter were 76% higher in Mexico, Central and South America, 14% higher in the Middle East and 11% higher in the North Sea.

Overall average day rates improved in the Current Year Quarter compared with the Prior Year Quarter in all international regions. In the U.S. Gulf of Mexico, average day rates were lower primarily due to the commencement of the regulatory repair and upgrade program of the Company’s large AHTS vessels scheduled for the first half of 2008 resulting in 87 days of out-of-service time during the Current Year Quarter.

 

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In overall terms, the improvements in average day rates contributed additional operating revenues of $2.6 million while net fleet dispositions, the impact of vessels mobilizing between geographic regions and the decline in utilization reduced operating revenues by $20.8 million. In addition, operating revenues increased by $0.2 million due to favorable changes in currency exchange rates and by $1.6 million due to other marine services.

Operating Income. Operating income in the Current Year Quarter included $7.1 million of gains on asset dispositions compared with $8.3 million in the Prior Year Quarter. Excluding the impact of these gains, operating income decreased by $14.9 million in the Current Year Quarter compared with the Prior Year Quarter primarily due to a decrease in operating revenues of $16.3 million. Operating expenses increased by $1.3 million in the Current Year Quarter compared with the Prior Year Quarter primarily due to costs associated with vessel mobilizations between geographic regions incurred in the Current Year Quarter. Depreciation expense was $2.4 million lower in the Current Year Quarter compared with the Prior Year Quarter as a result of net fleet dispositions.

Equity in Earnings of 50% or Less Owned Companies. Equity earnings increased by $2.3 million in the Current Year Quarter compared with the Prior Year Quarter. During the Current Year Quarter, Offshore Marine Services recognized a gain of $1.9 million, net of tax, relating to the sale of a vessel owned by a Norwegian joint venture.

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

 

     Owned    Joint
Ventured
   Leased-in    Pooled or
Managed
   Total

2008

              

Anchor handling towing supply

   15    1    2    2    20

Crew

   52    2    23       77

Mini-supply

   15       5    1    21

Standby safety

   23    1       5    29

Supply

   13       11    2    26

Towing supply

   12    3    2    1    18

Other

   11    3          14
                        
   141    10    43    11    205
                        

2007

              

Anchor handling towing supply

   18    2    2       22

Crew

   59    2    23       84

Mini-supply

   17       5    1    23

Standby safety

   21    1       5    27

Supply

   12       11       23

Towing supply

   28    9          37

Other

   11    2          13
                        
   166    16    41    6    229
                        

 

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Operating Data. The table below sets forth average rates per day worked, utilization and available days data for Offshore Marine Services’ 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.

 

     For the Three Months
Ended March 31,
     2008    2007

Rates Per Day Worked:

     

Anchor handling towing supply

   $ 32,173    $ 32,673

Crew

     6,745      6,395

Mini-supply

     7,072      6,797

Standby safety

     10,146      9,514

Supply

     15,537      12,931

Towing supply

     10,227      10,143

Other

     11,792      10,103

Overall Average Rates Per Day Worked

     11,783      11,209

Utilization:

     

Anchor handling towing supply

     82%      88%

Crew

     69%      75%

Mini-supply

     61%      60%

Standby safety

     89%      92%

Supply

     88%      87%

Towing supply

     80%      84%

Other

     91%      80%

Overall Fleet Utilization

     77%      79%

Available Days:

     

Anchor handling towing supply

     1,547      1,800

Crew

     6,552      7,180

Mini-supply

     1,820      1,994

Standby safety

     2,093      1,890

Supply

     2,099      2,160

Towing supply

     1,300      2,631

Other

     936      1,029
             

Overall Fleet Available Days

     16,347      18,684
             
     

 

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Marine Transportation Services

 

     For the Three Months
Ended March 31
    Change
’08/’07
 
     2008    2007     3 Mos.  
     $ ’000    %    $ ’000     %     %  

Operating Revenues:

            

United States only

   28,953    100    30,556     100     (5 )
                        

Costs and Expenses:

            

Operating

   16,219    56    20,849     68    

Administrative and general

   1,438    5    1,186     4    

Depreciation and amortization

   7,980    28    10,158     33    
                        
   25,637    89    32,193     105    
                        

Gains on Asset Dispositions

   3,629    13           
                        

Operating Income (Loss)

   6,945    24    (1,637 )   (5 )   524  
                        

Other Income (Expense):

            

Foreign currency gains (losses), net

   30       (4 )      
                        

Segment Profit (Loss)

   6,975    24    (1,641 )   (5 )   525  
                        

Operating Revenues. Operating revenues decreased by $1.6 million in the Current Year Quarter compared with the Prior Year Quarter. The decrease was due to the Current Year Quarter off-hire time for the Seabulk Challenge while undergoing repairs, reduced cargo volumes for the Seabulk America operating under a contract of affreightment, sales of the Seabulk Power and Seabulk Magnachem for scrapping, and the change in contract status of the Seabulk Mariner from time charter to long-term bareboat contract commencing in March 2007. These declines were partially offset by the contribution of the Seabulk Trader which had been off-hire for the entire Prior Year Quarter while undergoing a retrofit to double-hull configuration and improved day-rates for the Seabulk Energy and the Brenton Reef.

Operating Income (Loss). Operating income increased by $8.6 million in the Current Year Quarter compared with the Prior Year Quarter. The improvement was primarily due to the contribution of the Seabulk Trader following its retrofit, higher day rates for the Seabulk Energy and the Brenton Reef, gains realized on the sales of the Seabulk Power and Seabulk Magnachem and lower operating and drydock expenses for the Seabulk Mariner that was drydocked prior to commencing its long-term bareboat contract. These improvements were partially offset by the reductions in operating revenues and higher operating expenses for the Seabulk Challenge and lower operating revenues for the Seabulk America as noted above.

Fleet Count. As of March 31, 2008, Marine Transportation Services owned eight Jones Act U.S.-flag product tankers, which were operated in the domestic coastwise trade.

 

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Inland River Services

 

     For the Three Months
Ended March 31
   Change
’08/’07
 
     2008    2007    3 Mos.  
     $ ’000    %    $ ’000     %    %  

Operating Revenues:

             

United States only

   30,145    100    26,722     100    13  
                       

Costs and Expenses:

             

Operating

   16,726    55    12,305     46   

Administrative and general

   2,123    7    877     3   

Depreciation and amortization

   3,964    13    3,499     13   
                       
   22,813    75    16,681     62   
                       

Gains on Asset Dispositions

   711    2    3,622     13   
                       

Operating Income

   8,043    27    13,663     51    (41 )
                       

Other Income (Expense):

             

Other, net

         (2 )     

Equity in Earnings of 50% or Less Owned Companies

   911    3    969     4   
                       

Segment Profit

   8,954    30    14,630     55    (39 )
                       
             

Operating Revenues. Operating revenues increased by $3.4 million in the Current Year Quarter compared with the Prior Year Quarter primarily due to the acquisition of Waxler Transportation Company, Inc. and Waxler Towing Company, Incorporated (collectively referred to as “Waxler”) in March of 2007. Inland river dry cargo barge revenues were lower due to the reduction in fleet size resulting from net fleet dispositions coupled with unfavorable operating conditions.

Operating Income. Operating income for the Current Year Quarter included $0.7 million of gains on asset dispositions compared with $3.6 million of gains on asset disposition in the Prior Year Quarter. Excluding the impact of these gains, operating income decreased by $2.7 million in the Current Year Quarter compared with the Prior Year Quarter. The improvement in operating revenues noted above was partially offset by unfavorable operating conditions caused by ice and high water levels and higher towing costs. Administrative and general costs were higher due to the Waxler acquisition and professional services.

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

 

     Owned(1)    Joint
Ventured(1)
   Leased-in    Pooled or
Managed
   Total

2008

              

Inland river dry cargo barges-open

   213    97    5    3    318

Inland river dry cargo barges-covered

   399    131    2    139    671

Inland river liquid tank barges

   46    22    2       70

Inland river deck barges

   26             26

Inland river towboats

   16    4          20
                        
   700    254    9    142    1,105
                        

2007

              

Inland river dry cargo barges-open

   271    25    5    10    311

Inland river dry cargo barges-covered

   521    106    2    154    783

Inland river liquid tank barges

   53    22    2       77

Inland river deck barges

   14             14

Inland river towboats

   15             15
                        
   874    153    9    164    1,200
                        

 

(1)

Subsequent to March 31, 2007, 43 open and 43 covered inland river dry cargo barges and four inland river towboats were sold or contributed to joint ventures.

 

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Aviation Services

 

     For the Three Months
Ended March 31
    Change
’08/’07
     2008    2007     3 Mos.
     $ ’000     %    $ ’000     %     %

Operating Revenues:

           

United States

   49,513     92    42,396     93    

Foreign

   4,279     8    3,037     7    
                         
   53,792     100    45,433     100     18
                         

Costs and Expenses:

           

Operating

   39,871     74    36,225     80    

Administrative and general

   4,629     9    4,521     10    

Depreciation and amortization

   7,789     14    6,079     13    
                         
   52,289     97    46,825     103    
                         

Gains on Asset Dispositions

   394     1    227        
                         

Operating Income (Loss)

   1,897     4    (1,165 )   (3 )   263
                         

Other Income (Expense):

           

Derivative gains (losses), net

   179        (686 )   (1 )  

Foreign currency losses, net

   (31 )             

Other, net

   39               

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

   (60 )      16        
                         

Segment Profit (Loss)

   2,024     4    (1,835 )   (4 )   210
                         
           

Operating Revenues. Operating revenues increased by $8.4 million in the Current Year Quarter compared with the Prior Year Quarter. Operating revenues in Alaska improved due to a cost-driven increase in fuel uplift fees charged to fixed-base operation customers, increased flight hours in support of oil and gas activity and higher rates. In the U.S. Gulf of Mexico operating revenues increased due to a higher fuel surcharge and generally better rates as newer equipment was placed in service. Operating revenues in the air medical services business improved due to additional contracts, rate increases and additional maintenance billings. International revenues increased as newly delivered aircraft were placed on long-term leases outside of the United States.

Operating Income (Loss). Operating income increased by $3.1 million in the Current Year Quarter compared with the Prior Year Quarter due to the improvement in operating revenues noted above partially offset by higher wage and benefit costs in the U. S. Gulf of Mexico, higher fuel costs and increased depreciation charges. Wage and benefit costs were higher due to a September 2007 wage increase in the U.S. Gulf of Mexico and depreciation charges were higher as a result of net aircraft additions. In addition, operating income was positively impacted by hurricane-related insurance recoveries.

 

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

 

     Owned(1)    Joint
Ventured
   Leased-in    Managed    Total

2008

              

Light helicopters – single engine

   52    4    8       64

Light helicopters – twin engine

   31       7    16    54

Medium helicopters

   45       3    7    55

Heavy helicopters

   3             3
                        
   131    4    18    23    176
                        

2007

              

Light helicopters – single engine

   45       12       57

Light helicopters – twin engine

   27       8    15    50

Medium helicopters

   40       3    6    49

Heavy helicopters

   3             3
                        
   115       23    21    159
                        

 

(1)

Excludes 4 helicopters removed from service as of March 31, 2008 and 2007.

Environmental Services

 

     For the Three Months
Ended March 31
    Change
’08/’07
     2008    2007     3 Mos.
     $ ’000     %    $ ’000     %     %

Operating Revenues:

           

United States

   34,531     81    19,103     72    

Foreign

   7,978     19    7,389     28    
                         
   42,509     100    26,492     100     60
                         

Costs and Expenses:

           

Operating

   30,598     72    20,753     78    

Administrative and general

   5,709     14    5,301     20    

Depreciation and amortization

   1,445     3    909     4    
                         
   37,752     89    26,963     102    
                         

Gains (losses) on Asset Dispositions

   35        (16 )      
                         

Operating Income (Loss)

   4,792     11    (487 )   (2 )   1,084
                         

Other Income (Expense):

           

Foreign currency losses, net

   (9 )      (2 )      

Equity in Earnings of 50% or Less Owned Companies

   58        21        
                         

Segment Profit (Loss)

   4,841     11    (468 )   (2 )   1,134
                         
           

Operating Revenues. Operating revenues increased by $16.0 million in the Current Year Quarter compared with the Prior Year Quarter. Operating revenues from project management and consulting activities were $8.0 million higher as a result of recent acquisitions. In addition, operating revenues from spill response activities increased by $5.8 million due to a significant response project in Tulsa, Oklahoma and retainer services were $1.5 million higher primarily due to two new contracts with major domestic oil companies.

Operating Income (Loss). Operating income increased by $5.3 million in the Current Year Quarter compared with the Prior Year Quarter primarily due to higher operating revenues noted above.

 

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Other Segment Profit (Loss)

 

     For the Three Months
Ended March 31,
    Change
’08/’07
 
     2008     2007     3 Mos.  
     $ ’000     $ ’000     %  

Harbor and Offshore Towing Services

   1,110     1,537     (28 )

Commodity Trading

   700     (12 )   5,933  

Other Activities

   (204 )        

Equity in Earnings of 50% or Less Owned Companies, net

   37     62     (40 )
              

Segment Profit

   1,643     1,587     4  
              
      

Harbor and Offshore Towing Services. Segment profit from Harbor and Offshore Towing Services decreased in the Current Year Quarter compared with the Prior Year Quarter due to higher drydocking and fuel costs and the cost of providing third-party equipment to support the start-up of a new terminal operation in St. Eustatius.

Commodity Trading. Segment profit from SEACOR’s commodity merchandising group, which focuses on renewable fuels and rice, increased by $0.7 million in the Current Year Quarter compared with the Prior Year Quarter. The Current Year Quarter reflects a full quarter of activity as the group began operating in late March 2007.

Corporate and Eliminations

 

     For the Three Months
Ended March 31,
    Change
’08/’07
 
     2008     2007     3 Mos.  
     $ ’000     $ ’000     %  

Corporate Expenses

   (9,851 )   (7,755 )   (27 )

Eliminations

   6     6      
              

Operating Loss

   (9,845 )   (7,749 )   (27 )
              

Other Income (Expense):

      

Derivative gains, net

   6,773     977     593  

Foreign currency gains, net

   2,783     123     2,163  

Other, net

   124     (23 )   639  

Corporate Expenses. Corporate expenses increased by $2.1 million in the Current Year Quarter compared with the Prior Year Quarter primarily due to higher wage and benefit costs and one-time severance accruals.

Derivative gains, net. Derivative gains, net increased by $5.8 million in the Current Year Quarter compared with the Prior Year Quarter primarily due to increased gains on equity options and forward exchange, option and future contracts partially offset by losses on commodity swap, option and future contracts.

Foreign Currency gains, net. Foreign currency gains, net increased by $2.7 million in the Current Year Quarter compared with the Prior Year Quarter primarily due to the translation of certain Euro denominated investments.

 

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Other Income (Expense) not included in Segment Profit (Loss)

 

     For the Three Months
Ended March 31,
    Change
’08/’07
 
     2008     2007     3 Mos.  
     $ ’000     $ ’000     %  

Interest income

   7,476     12,224     (39 )

Interest expense

   (11,548 )   (13,268 )   13  

Marketable security losses, net

   (5,684 )   (4,688 )   (21 )
              
   (9,756 )   (5,732 )   (70 )
              

Interest Income. Interest income decreased in the Current Year Quarter compared with the Prior Year Quarter primarily due to lower rates of return on invested cash balances.

Interest Expense. Interest expense decreased in the Current Year Quarter compared with the Prior Year Quarter primarily due to higher capitalized interest and lower outstanding debt.

Marketable security losses, net. Marketable security losses, net increased in the Current Year Quarter compared with the Prior Year Quarter primarily resulting from losses on short sales of marketable securities.

Liquidity and Capital Resources

General

The Company’s ongoing liquidity requirements arise primarily from working capital needs, meeting its capital commitments and the repayment of debt obligations. In addition, the Company may use its liquidity to fund acquisitions, repurchase shares of SEACOR Common Stock, par value $0.01 par share (“Common Stock”), for treasury or purchase other investments. Sources of liquidity are cash balances, marketable securities, construction reserve funds, Title XI reserve funds, cash flows from operations and borrowings under the Company’s revolving credit facility. From time to time, the Company may secure additional liquidity through the issuance of debt, shares of Common Stock, preferred stock, or a combination thereof.

Summary of Cash Flows

 

     For the Three Months
Ended March 31,
     2008     2007
     $ ’000     $ ’000

Cash flows provided by (used in):

    

Operating Activities

   59,268     76,811 

Investing Activities

   (113,188 )   (134,339)

Financing Activities

   (41,040 )   (64,306)

Effects of Exchange Rate Changes on Cash and Cash Equivalents

   2,442     55 
          

Net Decrease in Cash and Cash Equivalents

   (92,518 )   (121,779)
          

Operating Activities

Cash flows provided by operating activities decreased in the Current Year Quarter primarily due to changes in working capital.

 

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Investing Activities

Cash flows used in investing activities decreased in the Current Year Quarter compared with the Prior Year Quarter primarily from decreased capital expenditures and decreased net investments in business acquisitions and joint ventures. These reduced uses of cash were partially offset by increased purchases of marketable securities and a decrease in proceeds from the sale of equipment and marketable securities.

Capital expenditures were $81.5 million during the Current Year Quarter. Equipment deliveries during the period included two offshore marine vessels, five inland river dry cargo barges, three inland river towboats, four helicopters, one harbor tug and two ocean liquid tank barges.

The Company’s unfunded capital commitments as of March 31, 2008 consisted primarily of offshore marine vessels, harbor tugs, helicopters and inland river barges and totaled $410.5 million, of which $273.5 million is payable during the remainder of 2008 with the balance payable through 2010. Of these commitments, approximately $65.1 million may be terminated without further liability other than the payment of liquidated damages of $5.2 million in the aggregate.

During the Current Year Quarter, the Company sold two offshore marine vessels, two tankers, one inland river dry cargo barge, three inland river liquid tank barges and other equipment for an aggregate consideration of $38.1 million and recognized net gains of $11.9 million.

The Company has established, pursuant to Section 511 of the Merchant Marine Act, 1936, as amended, joint depository construction reserve funds with the Maritime Administration. In accordance with this statute, the Company is permitted to deposit proceeds from the sale of certain vessels into the joint depository construction reserve fund accounts for the purpose of acquiring U.S.-flag vessels and qualifying for the temporary deferral of taxable gains realized from the sale of vessels. Withdrawals from the construction reserve fund accounts are only permitted with the consent of the Maritime Administration, and the funds on deposit must be committed for expenditure within three years or be released for the Company’s general use.

As of March 31, 2008, construction reserve funds of $396.0 million are classified as non-current assets in the accompanying condensed consolidated balance sheets as the Company has the intent and ability to use the funds to acquire equipment. During the three months ended March 31, 2008, construction reserve fund account transactions included deposits of $8.6 million. During the three months ended March 31, 2008, interest earned on construction reserve fund balance was $3.0 million.

Cash used in investing activities for business acquisitions, net of cash acquired, was $2.6 million and $25.2 million in 2008 and 2007, respectively. In the Prior Year Quarter, the Company acquired an air medical services business and Waxler. The net results of marketable security transactions and derivative transactions used cash flows of $54.7 million and $2.9 million in 2008 and 2007, respectively.

Financing Activities

Cash flows used in financing activities decreased in the Current Year Quarter compared with the Prior Year Quarter primarily due to reduced repurchases of Common Stock.

During the Current Year Quarter, the Company acquired 545,400 shares of Common Stock for treasury for an aggregate purchase price of $45.9 million. As of March 31, 2008, $79.1 million of the repurchase authority granted by SEACOR’s Board of Directors remained available for acquisition of additional shares of Common Stock and its 2.875% Convertible Debentures due 2024. On April 23, 2008, SEACOR’s Board of Directors increased such repurchase authority by $70.9 million to $150.0 million. Additionally, the Company may purchase, separate from such authorization, any or all of its 7.2% Senior Notes due 2009, its 5.875% Senior

 

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Table of Contents

Notes due 2012 and the 9.5% Senior Notes of Seabulk due 2013. Securities are acquired from time to time through open market purchases, privately negotiated transactions or otherwise, depending on market conditions.

Subsequent to March 31, 2008, the Company acquired 335,100 shares of Common Stock for treasury in the amount of $28.5 million.

During the Current Year Quarter, the Company made principal payments on long-term debt and capital lease obligations of $1.2 million.

As of March 31, 2008, the Company had no outstanding borrowings under its revolving credit facility and the remaining availability under this facility was $446.8 million, net of issued letters of credit of $3.2 million. In addition, the Company had other outstanding letters of credit totaling $44.7 million with various expiration dates through 2010.

Short and Long-Term Liquidity Requirements

The Company anticipates it will continue to generate positive cash flows from operations and that these cash flows will be adequate to meet the Company’s working capital requirements and contribute toward defraying costs of its capital expenditure program. As in the past and in further support of the Company’s capital expenditure program, the Company may use cash balances, sell securities, utilize construction reserve funds, sell additional vessels or other equipment, enter into sale and leaseback transactions for equipment, borrow under its revolving credit facility, issue debt or a combination thereof.

The Company’s long-term liquidity is dependent upon its ability to generate operating profits sufficient to meet its requirements for working capital, capital expenditures and a reasonable return on shareholders’ investment. The Company believes that earning such operating profits will permit it to maintain its access to favorably priced debt, equity or off-balance sheet financing arrangements.

Contingencies

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

In June 2005, a subsidiary of SEACOR received a document subpoena from the Antitrust Division of the U.S. Department of Justice. This subpoena relates to a grand jury investigation of potential antitrust violations among providers of helicopter transportation services in the U.S. Gulf of Mexico. The Company believes that this subpoena is part of a broader industry inquiry and that other providers have also received such subpoena. SEACOR intends to provide all information requested in response to this investigation.

Under United States law, “United States persons” are prohibited from business activities and contracts in certain countries, including Sudan and Iran. Relating to these prohibitions, Seabulk International, Inc. (“Seabulk”), a subsidiary of SEACOR acquired in July 2005, filed three reports with and submitted documents to the Office of Foreign Asset Control (“OFAC”) of the U.S. Department of Treasury in December 1999 and January and May 2002. One of the reports was also filed with the Bureau of Export Administration of the U.S. Department of Commerce. The reports and documents related to certain limited charters with third parties involving three Seabulk vessels which called in Sudan for several months in 1999 and January 2000 and charters with third parties involving several of Seabulk’s vessels which called in Iran in 1998. In March 2003, Seabulk

 

28


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received notification from OFAC that the case has been referred to its Civil Penalties Division. Should OFAC determine that these activities constituted violations of the laws or regulations, civil penalties, including fines, could be assessed against Seabulk or certain individuals who knowingly participated in such activity. The Company cannot predict the extent of such penalties; however, management does not believe the outcome of these matters will have a material impact on its consolidated financial position or results of operations.

Marine Transportation Services (“MTS”) had two of its tankers retrofitted to a double-hull configuration to enable each of them to continue to transport crude oil and petroleum products beyond their OPA 90 mandated retirement dates in 2011. Both vessels operate in the U.S. coastwise, or Jones Act, trade which is restricted to vessels built or rebuilt in the United States. In May 2005, MTS received a determination from the National Vessel Documentation Center (“NVDC”) of the U.S. Coast Guard (“USCG”), which administers the U.S.-build requirements of the Jones Act, concluding the retrofit work would not constitute a foreign rebuilding and therefore would not jeopardize the tankers’ eligibility to operate in the U.S. coastwise trade. MTS had the retrofit work completed in a foreign shipyard in reliance upon the NVDC’s determination. MTS believes the NVDC’s determination was correct and in accord with the USCG’s long-standing regulations and interpretations. On July 9, 2007, a U.S. shipbuilders trade association and two operators of tankers in the U.S. coastwise trade (“Shipbuilders”) commenced a civil action in the U.S. District Court for the Eastern District of Virginia (“Court”), Shipbuilders Council of America, Inc., et al. v. U.S. Department of Homeland Security, et al., No. 1:07cv665 (E.D. Va.), in which they sought to have the court set aside the NVDC’s determination and direct the USCG to revoke the coastwise license of one of the two retrofitted tankers, the Seabulk Trader. MTS intervened in the action to assist the USCG in defending the NVDC’s determination. On April 24, 2008, the Court issued a Memorandum Opinion granting a motion for summary judgment filed by the Shipbuilders, holding that the record did not support the NVDC’s coastwise endorsement, and remanding the matter to the USCG with instructions to revoke the coastwise endorsement for the Seabulk Trader. On April 30, 2008, MTS filed a motion to stay the judgment pending appeal. The Company believes the Court’s ruling is erroneous and will vigorously pursue all appropriate channels of relief. If MTS is unsuccessful on its motion for a stay and its appeal, the permanent loss of coastwise eligibility for its two retrofitted tankers could adversely affect the Company’s financial condition and its results of operations. The Company’s carrying value of its two retrofitted tankers was $65.5 million as of March 31, 2008 and the two retrofitted tankers contributed operating revenues of $5.4 million during the three months ended March 31, 2008.

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

 

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New Accounting Pronouncements

On December 4, 2007, the FASB issued SFAS No. 141(R), Business Combinations. SFAS No. 141(R) changes SFAS No. 141 by requiring acquiring companies to recognize, with certain exceptions, 100 percent of the fair value of assets acquired, liabilities assumed, and non-controlling interests in acquisitions of less than a 100 percent controlling interest when the acquisition constitutes a change in control of the acquired entity, by establishing that shares issued in consideration for a business combination be at fair value on the acquisition date, by requiring the recognition of contingent consideration arrangements at their acquisition-date fair values with subsequent changes in fair value generally reflected in earnings, by requiring recognition of pre-acquisition loss and gain contingencies at their acquisition-date fair values, by providing for the capitalization of in-process research and development assets acquired, by requiring acquisition-related transaction costs to be expensed as incurred, by allowing for the capitalization of acquisition-related restructuring costs only if the criteria in SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, are met as of the acquisition date and by requiring as an adjustment to income tax expense any changes in an acquirer’s existing income tax valuation allowances and tax uncertainty accruals. SFAS No. 141(R) is required to be adopted concurrently with SFAS No. 160, Accounting and Reporting of Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51, and is effective for business combination transactions for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Early adoption is prohibited.

On December 4, 2007, the FASB also issued SFAS No. 160 which requires that a non-controlling interest in a consolidated subsidiary be displayed in the consolidated statement of financial position as a separate component of equity because noncontrolling interests meet the definition of equity of the consolidated entity. After control is obtained, a change in ownership interests that does not result in a loss of control will be accounted for as an equity transaction, and a change in ownership of a consolidated subsidiary that results in a loss of control and deconsolidation is a significant event that triggers gain or loss recognition, with the establishment of a new fair value basis in any remaining ownership interests. SFAS No. 160 is required to be adopted concurrently with SFAS No. 141(R) and is effective for the first annual reporting period beginning on or after December 15, 2008. Early adoption is prohibited. The Company has not yet determined what impact, if any, the adoption of SFAS No. 160 will have on its consolidated financial position or its results of operations.

On March 19, 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133. SFAS No. 161 requires enhanced disclosure for derivative instruments and hedging activities about how and why an entity uses derivative instruments and hedges and how derivative instruments and related hedged items are accounted for under SFAS No. 133 and how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early adoption encouraged. The Company has not yet determined what impact, if any, the adoption of SFAS No. 161 will have on its consolidated financial position or its results of operations.

On February 12, 2008, the FASB issued FASB Staff Position No. 157-2, Effective Date of FASB Statement No. 157, which amended SFAS No. 157 to defer the effective date of SFAS 157 for one year for nonfinancial assets and liabilities, except those that are recognized or disclosed in the financial statements at least annually. The Company is evaluating the impact, if any, the adoption would have on the Company’s consolidated financial position or its results of operations.

 

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For discussion of the Company’s exposure to market risk, refer to Item 7A, Quantitative and Qualitative Disclosures about Market Risk, contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007. There has been no significant change in the Company’s exposure to market risk during the Current Year Quarter except as described below.

At March 31, 2008, the Company held available-for-sale marketable securities with a fair value of $75.7 million, including $28.9 million in fixed income investments consisting of corporate debt securities, municipal bonds and foreign government bonds and $46.8 million in equity securities. The fair value of the fixed income securities fluctuates based on market interest rates and the creditworthiness of the issuers of the securities. When making substantial investments in fixed income securities, the Company manages its risk associated with these investments by maintaining a ladder of maturities and analyzing the creditworthiness of issuers. The Company’s investments in equity securities primarily include positions in energy, marine, transportation and other related businesses. The Company monitors its investments in available-for-sale marketable securities on a regular basis and disposes of investments when it judges the risk profile to be too high or when it believes that the investments have reached an attractive valuation. A 10% decline in the value of available-for-sale marketable securities as of March 31, 2008 would reduce other comprehensive income by $4.9 million, net of tax.

The Company held positions in short sales of marketable securities with a fair value of $106.4 million as of March 31, 2008. The Company’s short sales of marketable securities primarily include positions in energy, marine, transportation and other related businesses. A 10% increase in the value of the securities underlying the short sale positions of the Company as of March 31, 2008 would reduce income by $6.9 million, net of tax.

The Company has entered into and settled various positions in forward exchange, option and future contracts with respect to the pound sterling, euro, yen, rupee, Singapore dollar, won, Taiwanese dollar, ringgit, dinar, renminbi, dirham and rand. These contracts enable the Company to buy these currencies in the future at fixed exchange rates, which could offset possible consequences of changes in foreign exchange rates with respect to the Company’s business conducted in Europe, Africa, the Middle East and Asia. At March 31, 2007, the Company had foreign currency forward exchange contracts that aggregated $388.7 million. As of March 31, 2008, the Company designated certain of these foreign currency forward contracts, with a notional value of €105.5, as fair value hedges for capital commitments. For the three months ended March 31, 2008, the Company recorded $5.1 million of net gains from these forward exchange, option and future contracts and reduced its capital commitment obligations by $11.2 million as a result of the foreign currency forward contracts designated as fair value hedges.

 

ITEM 4. CONTROLS AND PROCEDURES

With the participation of the Company’s principal executive officer and principal financial officer, management evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of March 31, 2008. Based on their evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2008.

There have been no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the Current Year Quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

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PART II—OTHER INFORMATION

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

(c) This table provides information with respect to purchases by the Company of shares of Common Stock during the Current Year Quarter:

 

Period

   Total Number of
Shares
Purchased
   Average Price Paid
Per Share
   Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs
   Approximate Dollar Value
of Shares that May Yet Be
Purchased Under Plans or
Programs(1)(2)

January 1 – 31, 2008

        N/A       $ 125,020,196

February 1 – 29, 2008

        N/A       $ 125,020,196

March 1 – 31, 2008

   545,400    $ 84.16    545,400    $ 79,120,582

 

(1)

Since February 1997, the Board of Directors authorized, in the aggregate, the repurchase of $720.6 million of Common Stock, certain debt or combination thereof. Through March 31, 2008, the Company has repurchased $563.3 million and $78.2 million of Common Stock and debt, respectively.

 

(2)

On April 23, 2008, the Board of Directors approved an increase in the Company’s authority to repurchase Common Stock and its 2.875% convertible senior debentures due 2024 to a total authorized expenditure of up to $150 million. This repurchase authority remains in place until fully used or until the Company determines otherwise.

 

ITEM 6. EXHIBITS

 

31.1    Certification by the Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
31.2    Certification by the Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
32.1    Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2    Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

    SEACOR HOLDINGS INC. (REGISTRANT)
DATE: May 2, 2008     By:   /S/ CHARLES FABRIKANT
     

Charles Fabrikant, Chairman of the Board, President and Chief Executive Officer

(Principal Executive Officer)

   
DATE: May 2, 2008     By:   /S/ RICHARD RYAN
     

Richard Ryan, Senior Vice President

and Chief Financial Officer

(Principal Financial Officer)

 

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EXHIBIT INDEX

 

31.1    Certification by the Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
31.2    Certification by the Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
32.1    Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2    Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

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