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 June 30, 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 July 30, 2008 was 20,849,120. 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 June 30, 2008 and December 31, 2007    3
     
      Condensed Consolidated Statements of Income for each of the Three Months and Six Months Ended June 30, 2008 and 2007    4
     
      Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 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    21
     
   Item 3.    Quantitative and Qualitative Disclosures About Market Risk    39
     
   Item 4.    Controls and Procedures    39
     
Part II.    Other Information    40
     
   Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds    40
     
   Item 4.    Submission of Matters to a Vote of Security Holders    40
     
   Item 6.    Exhibits    40

 

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Table of Contents

PART I—FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

SEACOR HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data, unaudited)

 

     June 30,
2008
    December 31,
2007
 
ASSETS     

Current Assets:

    

Cash and cash equivalents

   $ 422,569     $ 537,305  

Restricted cash

     30,072       30,624  

Available-for-sale marketable securities

     97,920       28,792  

Receivables:

    

Trade, net of allowance for doubtful accounts of $4,451 and $4,670 in 2008 and 2007, respectively

     272,291       267,564  

Other

     54,520       62,975  

Inventories

     42,063       30,468  

Deferred income taxes

     9,929       9,929  

Prepaid expenses and other

     12,067       9,756  
                

Total current assets

     941,431       977,413  
                

Property and Equipment

     2,665,956       2,469,735  

Accumulated depreciation

     (578,100 )     (526,583 )
                

Net property and equipment

     2,087,856       1,943,152  
                

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

     115,701       109,288  

Construction Reserve Funds & Title XI Reserve Funds

     270,357       405,000  

Goodwill

     63,101       60,226  

Intangible Assets

     28,079       30,500  

Other Assets, net of allowance for doubtful accounts of $1,093 and $1,502 in 2008 and 2007, respectively

     41,806       43,072  
                
   $ 3,548,331     $ 3,568,651  
                
LIABILITIES AND STOCKHOLDERS’ EQUITY     

Current Liabilities:

    

Current portion of long-term debt

   $ 10,385     $ 9,648  

Current portion of capital lease obligations

     33,682       851  

Accounts payable and accrued expenses

     101,942       119,321  

Other current liabilities

     273,185       258,940  
                

Total current liabilities

     419,194       388,760  
                

Long-Term Debt

     927,701       929,114  

Capital Lease Obligations

     8,192       8,642  

Deferred Income Taxes

     492,131       480,447  

Deferred Gains and Other Liabilities

     127,217       130,311  

Minority Interest in Subsidiaries

     11,981       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; 32,338,985 and 32,154,052 shares issued in 2008 and 2007, respectively

     323       322  

Additional paid-in capital

     913,874       905,702  

Retained earnings

     1,274,289       1,198,024  

Shares held in treasury of 11,221,610 and 9,578,789 in 2008 and 2007, respectively, at cost

     (628,041 )     (486,505 )

Accumulated other comprehensive income (loss):

    

Cumulative translation adjustments

     2,344       1,938  

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

     (874 )     2,338  
                

Total stockholders’ equity

     1,561,915       1,621,819  
                
   $ 3,548,331     $ 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
June 30,
    Six Months Ended
June 30,
 
     2008     2007     2008     2007  

Operating Revenues

   $ 408,967     $ 325,454     $ 763,422     $ 636,217  
                                

Costs and Expenses:

        

Operating

     274,304       198,818       509,344       387,476  

Administrative and general

     45,095       33,937       84,100       68,337  

Depreciation and amortization

     37,728       38,055       75,528       76,930  
                                
     357,127       270,810       668,972       532,743  
                                

Gains on Asset Dispositions and Impairments, Net

     19,274       42,540       31,180       54,697  
                                

Operating Income

     71,114       97,184       125,630       158,171  
                                

Other Income (Expense):

        

Interest income

     5,373       11,456       12,849       23,680  

Interest expense

     (12,674 )     (12,108 )     (24,222 )     (25,376 )

Derivative losses, net

     (7,113 )     (254 )     (646 )     (124 )

Foreign currency gains (losses), net

     604       460       3,214       (130 )

Marketable security gains (losses), net

     383       (9,430 )     (5,301 )     (14,118 )

Other, net

     162       639       326       596  
                                
     (13,265 )     (9,237 )     (13,780 )     (15,472 )
                                

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

     57,849       87,947       111,850       142,699  

Income Tax Expense

     20,616       30,206       41,086       49,048  
                                

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

     37,233       57,741       70,764       93,651  

Minority Interest in Income of Subsidiaries

     (191 )     (304 )     (393 )     (482 )

Equity in Earnings of 50% or Less Owned Companies

     1,315       7,829       5,894       10,249  
                                

Net Income

   $ 38,357     $ 65,266     $ 76,265     $ 103,418  
                                

Basic Earnings Per Common Share

   $ 1.80     $ 2.73     $ 3.49     $ 4.29  

Diluted Earnings Per Common Share

   $ 1.57     $ 2.41     $ 3.06     $ 3.80  

Weighted Average Common Shares Outstanding:

        

Basic

     21,363,065       23,885,550       21,853,360       24,118,540  

Diluted

     25,170,903       27,581,958       25,691,551       27,832,382  

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)

 

     Six Months Ended
June 30,
 
   2008     2007  

Net Cash Provided by Operating Activities

   $ 135,802     $ 165,383  
                

Cash Flows from Investing Activities:

    

Purchases of property and equipment

     (233,093 )     (235,516 )

Proceeds from disposition of property and equipment

     63,843       196,763  

Purchases of marketable securities

     (159,769 )     (40,153 )

Proceeds from sales of marketable securities

     83,833       52,676  

Investments in and advances to 50% or less owned companies

     (4,950 )     (26,646 )

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

     229       5,440  

Principal payments on third party notes receivable, net

     383       783  

Net decrease (increase) in restricted cash

     552       (12,729 )

Net decrease in construction reserve funds and title XI reserve funds

     134,643       3,796  

Net (increase) decrease in escrow deposits on like kind exchanges

     (1,204 )     7,672  

Cash settlements on derivative transactions, net

     6,671       2,434  

Repayments of sales type leases, net

     35       5,508  

Business acquisitions, net of cash acquired

     (4,302 )     (25,364 )
                

Net cash used in investing activities

     (113,129 )     (65,336 )
                

Cash Flows from Financing Activities:

    

Payments on long-term debt and capital lease obligations

     (8,740 )     (15,578 )

Proceeds from issuance of long-term debt, net of offering costs

     6,002        

Common stock acquired for treasury

     (142,705 )     (92,096 )

Proceeds and tax benefits from share award plans

     3,646       3,520  

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

     2,030       (184 )
                

Net cash used in financing activities

     (139,767 )     (104,338 )
                

Effects of Exchange Rate Changes on Cash and Cash Equivalents

     2,358       613  
                

Net Decrease in Cash and Cash Equivalents

     (114,736 )     (3,678 )

Cash and Cash Equivalents, Beginning of Period

     537,305       506,966  
                

Cash and Cash Equivalents, End of Period

   $ 422,569     $ 503,288  
                
    

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

and should be read in conjunction herewith.

 

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Table of Contents

SEACOR HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

1. Basis of Presentation

The condensed consolidated financial information for each of the three and six months ended June 30, 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 June 30, 2008, its results of operations for each of the three and six months ended June 30, 2008 and 2007 and its cash flows for the six months ended June 30, 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 vale of the assets or liabilities.

 

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Table of Contents

The Company’s assets and liabilities as of June 30, 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

   $ 97,920    $    $         —

Forward exchange, options and future contracts

          2,738     

Commodity swap, options and future contracts, net

     142          

Forward delivery contracts, net

          84     

Construction reserve funds and Title XI reserve funds

     270,357          
LIABILITIES         

Short sale of marketable securities

     112,242          

Short sale of equity options, net

     4,281          

Short sale of forward option and future contracts

     328          

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

     994          

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 became effective for SEACOR on January 1, 2008 and the Company did not elect 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 $1.3 million. The Company’s purchase price included cash consideration of $0.8 million and a note payable of $0.5 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 valuations 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 $4.0 million. The Company’s purchase price included cash consideration of $3.4 million (including $0.1 million paid in 2008 relating to working capital adjustments) and accrued obligations of $0.6 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. The selling stockholder of Rivers Edge has the opportunity to receive additional consideration of up to $4.8 million based upon certain performance measures over the period from the date of acquisition through December 31, 2011, which will be recognized by the Company as compensation expense in the period earned by the selling stockholder. No additional consideration has been earned by the selling stockholder through June 30, 2008. 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 $0.9 million. Further changes to the preliminary fair value analysis may be made as the valuations 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 $1.3 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 $0.6 million. Further changes to the preliminary fair value analysis may be made as the valuations 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 measures over the period from the date of acquisition through September 30, 2011, which will be recognized by the Company as additional cost of the acquisition when the contingency is resolved and when any additional consideration is distributable. During the six months ended June 30, 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 valuations 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 measures during the period from the date of acquisition through May 31, 2010, which will be recognized by the Company as additional cost of the acquisition when the contingency is resolved and when any additional consideration is distributable. No additional consideration has been deemed distributable through June 30, 2008. 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 valuations 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.

RMA Acquisition. On October 1, 2006, the Company acquired all of the issued and outstanding shares of Response Management Associates, Inc. (“RMA”), a provider of environmental consulting services, for $12.5 million. The Company’s purchase price included cash consideration of $8.9 million, a note payable of $3.5 million and accrued working capital payments of $0.1 million. The selling stockholder of RMA has the opportunity to receive additional consideration of $8.5 million based upon certain performance measures over the period from the date of the acquisition through September 30, 2012, which will be recognized by the Company as additional cost of the acquisition when the contingency is resolved and when any additional consideration is distributable. During the six months ended June 30, 2008, the Company paid $1.6 million of additional consideration in accordance with the acquisition agreement and allocated the amount to goodwill.

NRCES Acquisition. On October 31, 2003, the Company acquired all of the issued and outstanding shares of NRC Environmental Services, Inc. (“NRCES”) (formerly Foss Environmental Services, Inc.) for $7.8 million. The selling stockholder of NRCES has the opportunity to receive additional consideration of up to $41.0 million based upon certain performance measures over a period from the date of the acquisition through December 31, 2008, which will be recognized by the Company as additional cost of the acquisition when the contingency is resolved and when any additional consideration is distributable. During the six months ended June 30, 2008, accrued additional consideration was reduced by $0.4 million.

 

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Purchase Price Allocation. The following table summarizes the allocation of the purchase prices for the above acquisitions during the six months ended June 30, 2008 (in thousands):

 

Trade and other receivables

   $ 3  

Property and Equipment

     863  

Goodwill

     2,878  

Intangible Assets

     5  

Accounts payable and other current liabilities

     1,057  

Long-Term Debt

     (504 )
        

Purchase price

   $ 4,302  
        

 

4. Equipment Acquisitions, Dispositions and Depreciation Policy

During the six months ended June 30, 2008, capital expenditures were $233.1 million. Equipment deliveries during the period included six offshore marine vessels, 15 inland river dry cargo barges, three inland river towboats, twelve helicopters, two ocean liquid tank barges and three harbor tugs. One offshore marine vessel scheduled for delivery during the three months ended June 30, 2008 has been delayed for an undetermined length of time due to damage sustained in a fire while under construction in a shipyard.

During the six months ended June 30, 2008, the Company sold eight offshore marine vessels, two tankers, one inland river dry cargo barge, five inland river liquid tank barges, six helicopters, one harbor tug, one offshore marine construction contract and other equipment for an aggregate consideration of $63.8 million and recognized net gains of $31.2 million.

Equipment, stated at cost, is depreciated using the straight line method over the estimated useful life of the asset to an estimated salvage value. With respect to each class of asset, the estimated useful life is based upon a newly built asset being placed into service and represents the point at which it is typically not justifiable for the Company to continue to operate the asset in the same or similar manner. From time to time, the Company may acquire older assets 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 June 30, 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(2)

   25

Ocean liquid tank barges

   25

 

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

 

(2) Effective April 1, 2008, the Company changed its estimated useful life for newly built harbor and offshore tugs from 40 to 25 years and reduced the remaining useful life of certain vessels within its harbor and offshore tug fleet due to the more frequent occurrence of technological advancements in vessel design. These changes in estimates did not materially impact the comparability of financial information for the periods presented.

 

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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 June 30, 2008, construction reserve funds of $252.6 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 six months ended June 30, 2008, construction reserve fund account transactions included withdrawals of $171.1 million and deposits of $36.3 million.

 

6. Commitments and Contingencies

The Company’s unfunded capital commitments as of June 30, 2008 consisted primarily of offshore marine vessels, harbor tugs, helicopters and inland river barges and totaled $348.5 million, of which $180.2 million is payable during the remainder of 2008, with the balance payable through 2010. Of the total unfunded capital commitments, approximately $52.3 million may be terminated without further liability other than the payment of liquidated damages of $6.3 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 June 30, 2008, the total amount guaranteed by the Company was $24.9 million. Additionally, as of June 30, 2008, the Company had an uncalled capital commitment to one of its joint ventures for $3.6 million.

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. Management has used estimates in determining the Company’s potential exposure to these matters and has recorded reserves in its financial statements related thereto where appropriate. It is possible that a change in the Company’s estimates of that exposure could occur, but the Company does not expect 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 believes it has provided 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,

 

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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 in a foreign shipyard to enable each of them to continue to transport crude oil and petroleum products beyond their OPA 90 mandated retirement dates in 2011. Both vessels operate in the U.S. coastwise, 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 completed the retrofit work in the 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, setting aside the NVDC’s determination, and remanding the matter to the USCG for further proceedings with instructions to revoke the coastwise endorsement for the Seabulk Trader. The Company believes the Court erroneously set aside the NVDC’s determination and has and will continue to vigorously pursue all appropriate channels of relief. In response to MTS’s motion to stay the implementation of the Court’s Memorandum Opinion, the Court stayed the matter pending MTS’s appeal and, on July 25, 2008 while considering a renewed motion to stay by MTS, the Court declared its intention to revise the Memorandum Opinion by deleting the instruction to the NVDC to revoke the Seabulk Trader’s coastwise endorsement and remanding the matter to the USCG with a direction to complete its proceedings within 90 days. 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 $63.5 million as of June 30, 2008 and the two retrofitted tankers contributed operating revenues of $12.6 million during the six months ended June 30, 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 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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7. Long-Term Debt and Capital Lease Obligations

As of June 30, 2008, the Company had no outstanding borrowings under its revolving credit facility and the remaining availability under this facility was $447.7 million, net of issued letters of credit of $2.3 million. In addition, the Company had other outstanding letters of credit totaling $40.3 million with various expiration dates through 2010.

In April and May 2008, the Company committed to purchase two leased-in offshore marine vessels at the end of their lease terms in September and October 2008, respectively. The leases had previously been considered operating leases but were determined to be capital leases upon commitment to purchase the vessels. As of June 30, 2008, the capital lease obligation related to these two leases was $32.8 million and is included in current portion of capital lease obligations in the accompanying condensed consolidated balance sheets.

 

8. Stock and Debt Repurchases

During the six months ended June 30, 2008, the Company acquired for treasury 1,658,317 shares of SEACOR common stock, par value $0.01 per share (“Common Stock”), for an aggregate purchase price of $142.7 million. From time to time, SEACOR’s Board of Directors grants authorization to repurchase shares of Common Stock and SEACOR’s 2.875% Convertible Debentures due 2024. On April 23 and June 4, 2008, SEACOR’s Board of Directors increased such repurchase authority by $70.9 million and $75.5 million, respectively, to a total authorized expenditure on each occasion of up to $150.0 million. As of June 30, 2008, $128.7 million of the repurchase authority granted by SEACOR’s Board of Directors remained available. 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 through open market purchases, privately negotiated transactions or otherwise, depending on market conditions. Subsequent to June 30, 2008, the Company acquired 328,000 shares of Common Stock for treasury in the amount of $27.5 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. For the three and six months ended June 30, 2008, diluted earnings per common share excluded 571,364 and 506,274, respectively, of certain share awards as the effect of their inclusion in the computation would have been antidilutive. For the three and six months ended June 30, 2007, diluted earnings per common share excluded 235,020 of certain share awards as the effect of their inclusion in the computation would have been antidilutive.

 

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Computations of basic and diluted earnings per common share are as follows (in thousands, except per share data):

 

     For the Three Months
Ended June 30,
   For the Six Months
Ended June 30,
   Net
Income
   Average O/S
Shares
   Per
Share
   Net
Income
   Average O/S
Shares
   Per
Share

2008

                 

Basic Earnings Per Common Share

   $ 38,357    21,363    $ 1.80    $ 76,265    21,853    $ 3.49

Effect of Dilutive Securities, net of tax:

                 

Options and Restricted Stock

        390            421   

Convertible Securities

     1,212    3,418         2,425    3,418   
                                 

Diluted Earnings Per Common Share

   $ 39,569    25,171    $ 1.57    $ 78,690    25,692    $ 3.06
                                 

2007

                 

Basic Earnings Per Common Share

   $ 65,266    23,886    $ 2.73    $ 103,418    24,119    $ 4.29

Effect of Dilutive Securities, net of tax:

                 

Options and Restricted Stock

        278            295   

Convertible Securities

     1,212    3,418         2,425    3,418   
                                 

Diluted Earnings Per Common Share

   $ 66,478    27,582    $ 2.41    $ 105,843    27,832    $ 3.80
                                 

 

10. Comprehensive Income

For the three months ended June 30, 2008 and 2007, total comprehensive income was $38.0 million and $67.1 million, respectively. For the six months ended June 30, 2008 and 2007, total comprehensive income was $73.5 million and $104.8 million, respectively. Other comprehensive income (loss) consisted of gains and losses from foreign currency translation adjustments and unrealized holding gains and losses on available-for-sale 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 six months ended June 30, 2008:

 

Director stock awards granted

   2,500  
      

Employee Stock Purchase Plan (“ESPP”) shares issued

   14,854  
      

Restricted stock awards granted

   136,190  
      

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 June 30, 2008

   1,445  
      

Stock Option Activities:

  

Options outstanding at December 31, 2007

   1,017,031  

Granted

   115,652  

Exercised

   (45,868 )

Cancelled

   —    
      

Options outstanding at June 30, 2008

   1,086,815  
      

Shares available for future grants and ESPP purchases at June 30, 2008

   833,671  
      
  

 

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 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.

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 May 9, 2008, the FASB issued FASB Staff Position, Accounting Principles Board 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (“FSP APB 14-1”). FSP APB 14-1 clarifies the accounting for convertible debt instruments that may be settled in cash (including partial cash settlement) upon conversion. FSP APB 14-1 requires issuers of convertible debt to account separately for the liability and equity components in a manner that will reflect the entity’s nonconvertible debt borrowing rate. The resulting debt discount is amortized over the period the debt is expected to be outstanding as additional non-cash interest expense. The equity component is not revalued as long as it continues to qualify for equity treatment. FSP APB 14-1 is effective for fiscal years beginning after December 15, 2008 on a retrospective basis for all periods presented. The Company has not yet determined what impact the adoption of FSP APB 14-1 will have on its consolidated financial position or its results of operations, but expects such impact will be material.

On May 15, 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements that are presented in conformity with generally accepted accounting principles in the United States. SFAS No. 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. The Company does not expect the adoption of SFAS No. 162 will result in a change in current practice and as such will have no impact on its consolidated financial position or its results of operations.

 

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Table of Contents
13. Subsequent Event

On July 22, 2008, the Company acquired a 49% interest in DART Helicopter Services LLC, an international sales, marketing and manufacturing organization focusing on after market helicopter accessories, for $21.0 million.

 

14. 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. During the six months ended June 30, 2008, the Company’s Commodity Trading segment exceeded certain quantitative thresholds and is presented below as a reportable segment. All prior period information has been restated to conform to the current period’s segment presentation.

 

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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.

 

    Offshore
Marine
Services
  Marine
Transportation
Services
    Inland
River
Services
    Aviation
Services
    Environmental
Services
    Commodity
Trading
    Other     Corporate
And
Eliminations
    Total  
    $’000   $’000     $’000     $’000     $’000     $’000     $’000     $’000     $’000  

For the Three Months Ended June 30, 2008

                 

Operating Revenues:

                 

External customers

  170,418   28,764     32,698     63,795     37,945     55,419     19,928         408,967  

Intersegment

  796       624         39         105     (1,564 )    
                                                   
  171,214   28,764     33,322     63,795     37,984     55,419     20,033     (1,564 )   408,967  
                                                   

Costs and Expenses:

                 

Operating

  104,599   16,762     21,310     46,697     26,571     46,977     12,959     (1,571 )   274,304  

Administrative and general

  15,801   1,607     1,916     4,895     8,423     1,644     2,529     8,280     45,095  

Depreciation and amortization

  13,674   8,039     4,032     8,672     1,414         1,656     241     37,728  
                                                   
  134,074   26,408     27,258     60,264     36,408     48,621     17,144     6,950     357,127  
                                                   

Gains on Asset Dispositions and Impairments, Net

  14,352       1,472     3,208     84         158         19,274  
                                                   

Operating Income (Loss)

  51,492   2,356     7,536     6,739     1,660     6,798     3,047     (8,514 )   71,114  
                                                   

Other Income (Expense):

                 

Derivative gains (losses), net

            1,173         (102 )   10     (8,194 )   (7,113 )

Foreign currency gains (losses), net

  111   (3 )       (478 )   (10 )   2     (4 )   986     604  

Other, net

                    3     3     156     162  

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

  1,592       (462 )   61     214         (90 )       1,315  
                                           

Segment Profit

  53,195   2,353     7,074     7,495     1,864     6,701     2,966      
                                           

Other Income (Expense) not included in Segment Profit

                  (6,918 )
                 

Less Equity Earnings included in Segment Profit

                  (1,315 )
                     

Income Before Taxes, Minority Interest and Equity Earnings

                  57,849  
                     

 

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

For the Six Months Ended June 30, 2008

                 

Operating Revenues:

                 

External customers

  324,678     57,717   62,843   117,587     80,433     84,093     36,071         763,422  

Intersegment

  1,183       624       60         219     (2,086 )    
                                                 
  325,861     57,717   63,467   117,587     80,493     84,093     36,290     (2,086 )   763,422  
                                                 

Costs and Expenses:

                 

Operating

  198,869     32,981   38,036   86,568     57,169     73,734     24,068     (2,081 )   509,344  

Administrative and general

  28,605     3,045   4,039   9,524     14,132     2,371     4,502     17,882     84,100  

Depreciation and amortization

  27,799     16,019   7,996   16,461     2,859         3,923     471     75,528  
                                                 
  255,273     52,045   50,071   112,553     74,160     76,105     32,493     16,272     668,972  
                                                 

Gains (Losses) on Asset Dispositions and Impairments, Net

  21,490     3,629   2,183   3,602     119         158     (1 )   31,180  
                                                 

Operating Income (Loss)

  92,078     9,301   15,579   8,636     6,452     7,988     3,955     (18,359 )   125,630  
                                                 

Other Income (Expense):

                 

Derivative gains (losses), net

          1,352         (592 )   15     (1,421 )   (646 )

Foreign currency gains (losses), net

  (44 )   27     (509 )   (19 )   1     (11 )   3,769     3,214  

Other, net

          39         4     3     280     326  

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

  5,225       449   1     272         (53 )       5,894  
                                         

Segment Profit

  97,259     9,328   16,028   9,519     6,705     7,401     3,909      
                                         

Other Income (Expense) not included in Segment Profit

                  (16,674 )

Less Equity Earnings included in Segment Profit

                  (5,894 )
                     

Income Before Taxes, Minority Interest and Equity Earnings

                  111,850  
                     

As of June 30, 2008

                 

Property and Equipment

  835,270     412,048   252,742   410,957     33,551         139,453     3,835     2,087,856  

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

  23,198       72,532   8,259     1,576         10,136         115,701  

Goodwill

  21,421     177   1,493   352     35,541         4,117         63,101  

Intangible Assets

  13,922     2,905   2,107       8,346         799         28,079  

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

  168,845     12,538   30,593   86,402     54,283     11,540     27,937     40,538     432,676  
                                         

Segment Assets

  1,062,656     427,668   359,467   505,970     133,297     11,540     182,442      
                                         

Cash and near cash assets(1)

                  820,918  
                     

Total Assets

                  3,548,331  
                     

 

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

 

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

For the Three Months Ended June 30, 2007

                 

Operating Revenues:

                 

External customers

  171,230     25,924     28,020   55,861     31,718     204     12,497         325,454  

Intersegment

  212               450         41     (703 )    
                                                   
  171,442     25,924     28,020   55,861     32,168     204     12,538     (703 )   325,454  
                                                   

Costs and Expenses:

                 

Operating

  88,596     22,865     13,056   41,212     23,605     174     10,003     (693 )   198,818  

Administrative and general

  11,893     1,236     2,101   4,439     4,323     200     2,006     7,739     33,937  

Depreciation and amortization

  14,515     9,790     4,332   6,601     1,100         1,264     453     38,055  
                                                   
  115,004     33,891     19,489   52,252     29,028     374     13,273     7,499     270,810  
                                                   

Gains (Losses) on Asset Dispositions and Impairments, Net

  38,546         2,622   1,505     (133 )               42,540  
                                                   

Operating Income (Loss)

  94,984     (7,967 )   11,153   5,114     3,007     (170 )   (735 )   (8,202 )   97,184  
                                                   

Other Income (Expense):

                 

Derivative gains (losses), net

            52         (162 )   12     (156 )   (254 )

Foreign currency gains (losses), net

  (365 )   13       (1 )   80         (1 )   734     460  

Other, net

  19         138   474     (1 )       118     (109 )   639  

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

  5,529         2,311   17     126         (154 )       7,829  
                                           

Segment Profit (Loss)

  100,167     (7,954 )   13,602   5,656     3,212     (332 )   (760 )    
                                           

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

                  (10,082 )

Less Equity Earnings included in Segment Profit (Loss)

                  (7,829 )
                     

Income Before Taxes, Minority Interest and Equity Earnings

                  87,947  
                     

 

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

For the Six Months Ended June 30, 2007

                 

Operating Revenues:

                 

External customers

  342,158     56,480     54,742   101,294     57,282     204     24,057         636,217  

Intersegment

  212               1,378         163     (1,753 )    
                                                   
  342,370     56,480     54,742   101,294     58,660     204     24,220     (1,753 )   636,217  
                                                   

Costs and Expenses:

                 

Operating

  181,595     43,714     25,361   77,437     44,358     183     16,571     (1,743 )   387,476  

Administrative and general

  24,916     2,422     2,978   8,960     9,624     203     4,188     15,046     68,337  

Depreciation and amortization

  31,039     19,948     7,831   12,680     2,009         2,528     895     76,930  
                                                   
  237,550     66,084     36,170   99,077     55,991     386     23,287     14,198     532,743  
                                                   

Gains (Losses) on Asset Dispositions and Impairments, Net

  46,840         6,244   1,732     (149 )       30         54,697  
                                                   

Operating Income (Loss)

  151,660     (9,604 )   24,816   3,949     2,520     (182 )   963     (15,951 )   158,171  
                                                   

Other Income (Expense):

                 

Derivative gains (losses), net

            (634 )       (162 )   (149 )   821     (124 )

Foreign currency gains (losses), net

  (1,072 )   9       (1 )   78         (1 )   857     (130 )

Other, net

  1         136   474     (1 )       118     (132 )   596  

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

  6,881         3,280   33     147         (92 )       10,249  
                                           

Segment Profit (Loss)

  157,470     (9,595 )   28,232   3,821     2,744     (344 )   839      
                                           

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

                  (15,814 )

Less Equity Earnings included in Segment Profit (Loss)

                  (10,249 )
                     

Income Before Taxes, Minority Interest and Equity Earnings

                  142,699  
                     
                 

 

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

This Form 10-Q includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements concerning management’s expectations, strategic objectives, business prospects, anticipated economic performance and financial condition and other similar matters involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of results to differ materially from any future results, performance or achievements discussed or implied by such forward-looking statements. Such risks, uncertainties and other important factors include, among others: 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, loss of U.S. coastwise endorsements for the Seabulk Trader and Seabulk Challenge, the retrofitted double-hull tankers, if the Company is unsuccessful in appealing a district court opinion instructing the U.S. Coast Guard to revoke its coastwise charter, 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 on 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 and consequently, the foregoing should not be considered a complete discussion of all potential risks or uncertainties. The words “estimate,” “project,” “intend,” “believe,” “plan” and similar expressions are intended to identify forward-looking statements. Forward-looking statements speak only as of the date of the document in which they are made. The Company disclaims any obligation or undertaking to provide any updates or revisions to any forward-looking statement to reflect any change in the Company’s expectations or any change in events, conditions or circumstances on which the forward-looking statement is based. The forward-looking statements in this Form 10-Q should be evaluated together with the many uncertainties that affect the Company’s businesses, particularly those mentioned under “Forward-Looking Statements” in Item 7 on the Company’s Form 10-K and SEACOR’s periodic reporting on Form 8-K (if any), which is incorporated by reference.

Results of Operations

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

 

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Table of Contents

The sections below provide an analysis of the Company’s operations by business segment for the three months (“Current Year Quarter”) and six months (“Current Six Months”) ended June 30, 2008, as compared with the three months (“Prior Year Quarter”) and six months (“Prior Six Months”) ended June 30, 2007. See “Item 1. Financial Statements—Note 14. Segment Information” included in Part I for consolidating segment tables for each period presented.

Offshore Marine Services

 

     For the Three Months
Ended June 30,
   For the Six Months
Ended June 30,
   Change
‘08/’07
 
   2008    2007    2008    2007    3 Mos     6 Mos  
     $’000    %    $’000     %    $’000     %    $’000     %    %     %  

Operating Revenues:

                         

United States

   79,439    46    84,363     49    149,469     46    175,254     51     
                                               

Africa, primarily West Africa

   30,479    18    44,720     26    62,799     19    85,289     25     

United Kingdom, primarily North Sea

   19,180    11    17,150     10    38,343     12    33,782     10     

Middle East

   21,917    13    12,032     7    38,411     12    22,691     7     

Asia

   6,534    4    6,742     4    13,001     4    14,250     4     

Mexico, Central and South America

   13,665    8    6,435     4    23,838     7    11,104     3     
                                               

Total Foreign

   91,775    54    87,079     51    176,392     54    167,116     49     
                                               
   171,214    100    171,442     100    325,861     100    342,370     100        (5 )
                                               

Costs and Expenses:

                         

Operating

   104,599    61    88,596     52    198,869     61    181,595     53     

Administrative and general

   15,801    9    11,893     7    28,605     9    24,916     7     

Depreciation and amortization

   13,674    8    14,515     8    27,799     9    31,039     9     
                                               
   134,074    78    115,004     67    255,273     79    237,550     69     
                                               

Gains on Asset Dispositions

   14,352    8    38,546     22    21,490     7    46,840     14     
                                               

Operating Income

   51,492    30    94,984     55    92,078     28    151,660     45    (46 )   (39 )
                                               

Other Income (Expense):

                         

Foreign currency gains (losses), net

   111       (365 )      (44 )      (1,072 )       

Other, net

         19               1         

Equity in Earnings of 50% or Less Owned Companies

   1,592    1    5,529     3    5,225     2    6,881     2     
                                               

Segment Profit

   53,195    31    100,167     58    97,259     30    157,470     47    (47 )   (38 )
                                               
                         

 

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Operating Revenues. Operating revenues decreased by $0.2 million in the Current Year Quarter compared with the Prior Year Quarter and by $16.5 million in the Current Six Months compared with the Prior Six Months. In the Current Year Quarter, an 11% improvement in overall average day rates was offset by a 10% reduction in available days due to net fleet dispositions and a 3% reduction in overall utilization. In the Current Six Months, an 8% improvement in overall average day rates was offset by an 11% reduction in available days due to net fleet dispositions and a 3% reduction in overall utilization. The improvements in average day rates contributed additional operating revenues of $11.0 million in the Current Year Quarter and $13.6 million in the Current Six Months. Net fleet dispositions, the impact of vessels mobilizing between geographic regions and other changes in fleet mix, together with a decline in fleet utilization, reduced operating revenues by $16.6 million in the Current Year Quarter and by $37.3 million in the Current Six Months. In addition, other marine services and the effects of foreign currency translations increased operating revenues by $5.4 million in the Current Year Quarter and by $7.2 million in the Current Six Months.

In the U.S. Gulf of Mexico, operating revenues were lower due to a reduction in overall utilization and the impact of vessels mobilizing to other geographic regions, partially offset by increases in operating revenues as a result of more rig moving activity and new vessels being placed into service. Utilization was impacted by the regulatory drydocking, major repair and upgrade program of the Company’s large AHTS vessels, which resulted in 168 days of out-of-service time in the Current Year Quarter and 255 days of out-of-service time in the Current Six Months. In comparison, the Company’s large AHTS vessels were out-of-service due to regulatory drydocking for 42 days and 60 days in the Prior Year Quarter and Prior Six Months, respectively. In Mexico, Central and South America and the Middle East, operating revenues were higher primarily due to vessels mobilizing from other geographic regions. Operating revenues decreased in West Africa primarily as a result of net fleet dispositions.

Operating Income—Current Year Quarter compared with Prior Year Quarter. Operating income in the Current Year Quarter included $14.4 million of gains on asset dispositions compared with $38.5 million in the Prior Year Quarter. Excluding the impact of these gains, operating income decreased by $19.3 million primarily due to a $16.0 million increase in operating expenses resulting from higher drydocking costs, higher wage and benefit costs and higher insurance costs. In addition, administrative and general expenses increased by $3.9 million primarily due to the recognition of international staff severance payments.

Operating Income—Current Six Months compared with Prior Six Months. Operating income in the Current Six Months included $21.5 million of gains on asset dispositions compared with $46.8 million in the Prior Six Months. Excluding the impact of these gains, operating income decreased by $34.2 million primarily due to an overall decrease in operating revenues as discussed above and a $17.7 million increase in operating expenses resulting from higher drydocking costs and wage and benefit costs. In addition, administrative and general expenses increased by $3.7 million primarily due to the recognition of international staff severance payments.

Equity in Earnings of 50% or Less Owned Companies. Equity earnings decreased by $3.9 million in the Current Year Quarter compared with the Prior Year Quarter and by $1.7 million in the Current Six Months compared with the Prior Six Months. In February 2008, Offshore Marine Services recognized a gain of $1.9 million, net of tax, relating to the sale of a vessel owned by its Norwegian joint venture. During the Prior Six Months, Offshore Marine Services recognized a gain of $4.1 million, net of tax, relating to the sale of its interest in an Egyptian joint venture.

 

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Table of Contents

Fleet Count. The composition of Offshore Marine Services’ fleet as of June 30 was as follows:

 

     Owned    Joint
Ventured
   Leased-in    Pooled or
Managed
   Total

2008

              

Anchor handling towing supply

   17    1    1    1    20

Crew

   51    2    23       76

Mini-supply

   14       5    1    20

Standby safety

   23    1       5    29

Supply

   14       9    5    28

Towing supply

   10    3    2    1    16

Specialty(1)

   10    3          13
                        
   139    10    40    13    202
                        

2007

              

Anchor handling towing supply

   16    2    2    1    21

Crew

   55    2    23       80

Mini-supply

   17       5    1    23

Standby safety

   21    1       5    27

Supply

   12       11       23

Towing supply

   20    7    2    1    30

Specialty(1)

   10    1          11
                        
   151    13    43    8    215
                        
              

 

(1) Previously referred to as Other and includes anchor handling tugs, lift boats, accommodation, line handling and other vessels.

 

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Table of Contents

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

 

     For the Three Months
Ended June 30,
    For the Six Months
Ended June 30,
 
   2008     2007     2008     2007  

Rates Per Day Worked:

        

Anchor handling towing supply

   $ 41,038     $ 29,077     $ 36,330     $ 30,865  

Crew

     6,608       6,508       6,673       6,453  

Mini-supply

     6,838       6,431       6,950       6,599  

Standby safety

     10,278       9,725       10,212       9,620  

Supply

     16,250       13,241       15,898       13,085  

Towing supply

     10,532       11,365       10,389       10,712  

Specialty(1)

     11,962       10,701       11,873       10,394  

Overall Average Rates Per Day Worked

   $ 12,182     $ 10,948     $ 11,987     $ 11,078  

Utilization:

        

Anchor handling towing supply

     69 %     93 %     76 %     91 %

Crew

     77 %     81 %     73 %     78 %

Mini-supply

     67 %     71 %     64 %     66 %

Standby safety

     88 %     91 %     89 %     91 %

Supply

     90 %     89 %     89 %     88 %

Towing supply

     94 %     88 %     87 %     86 %

Specialty(1)

     94 %     82 %     92 %     81 %

Overall Fleet Utilization

     81 %     84 %     79 %     82 %

Available Days:

        

Anchor handling towing supply

     1,618       1,720       3,165       3,520  

Crew

     6,492       7,047       13,044       14,227  

Mini-supply

     1,795       1,995       3,615       3,989  

Standby safety

     2,093       1,911       4,186       3,801  

Supply

     2,123       2,093       4,222       4,253  

Towing supply

     1,253       2,212       2,553       4,843  

Specialty(1)

     831       954       1,767       1,983  
                                

Overall Fleet Available Days

     16,205       17,932       32,552       36,616  
                                
        

 

(1) Previously referred to as Other and includes anchor handling tugs, lift boats, accommodation, line handling and other vessels.

 

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Table of Contents

Marine Transportation Services

 

     For the Three Months
Ended June 30,
    For the Six Months
Ended June 30,
    Change
‘08/’07
   2008    2007     2008    2007     3 Mos    6 Mos
     $’000     %    $’000     %     $’000    %    $’000     %     %    %

Operating Revenues:

                        

United States

   28,764     100    25,924     100     57,717    100    56,480     100     11    2
                                                  

Costs and Expenses:

                        

Operating

   16,762     58    22,865     88     32,981    57    43,714     77       

Administrative and general

   1,607     6    1,236     5     3,045    5    2,422     4       

Depreciation and amortization

   8,039     28    9,790     38     16,019    28    19,948     35       
                                                  
   26,408     92    33,891     131     52,045    90    66,084     116       
                                                  

Gains on Asset Dispositions

                  3,629    6              

Operating Income (Loss)

   2,356     8    (7,967 )   (31 )   9,301    16    (9,604 )   (16 )   130    197
                                                  

Other Income (Expense):

                        

Foreign currency gains (losses), net

   (3 )      13         27       9           
                                                  

Segment Profit (Loss)

   2,353     8    (7,954 )   (31 )   9,328    16    (9,595 )   (16 )   130    197
                                                  

Operating Revenues—Current Year Quarter compared with Prior Year Quarter. Operating revenues increased by $2.9 million in the Current Year Quarter compared with the Prior Year Quarter. The increase was primarily due to the Seabulk Trader and Seabulk Challenge being out-of-service while undergoing retrofit to a double hull configuration during the Prior Year Quarter. In addition, day rates for the Seabulk Energy were higher in the Current Year Quarter compared with the Prior Year Quarter. These increases in operating revenues were partially offset as a result of the sale and subsequent scrapping of the Seabulk Power in January 2008 and increased out-of-service time in the Current Year Quarter for the Seabulk Arctic which began a regulatory drydocking in mid June 2008 and is expected to continue into the third quarter.

Operating Revenues—Current Six Months compared with Prior Six Months. Operating revenues increased by $1.2 million in the Current Six Months compared with the Prior Six Months. The increase was primarily due to the Seabulk Trader and the Seabulk Challenge being out-of-service in the Prior Six Months while undergoing retrofit. In addition, day rates for the Seabulk Energy and Brenton Reef were higher in the Current Six Months compared with the Prior Six Months. These increases in operating revenues were partially offset as a result of the sale and subsequent scrapping of the Seabulk Power and Seabulk Magnachem in January 2008, increased out-of-service time for the Seabulk Arctic while undergoing a regulatory drydocking, lower cargo volumes for the Seabulk America which operates under a contract of affreightment, and the change in contract status of the Seabulk Mariner from time charter to long-term bareboat contract in March 2007.

Operating Income (Loss). Operating income increased by $10.4 million in the Current Year Quarter compared with the Prior Year Quarter and by $18.9 million in the Current Six Months compared with the Prior Six Months primarily due to higher operating revenues as described above, lower regulatory drydocking expenses for the Seabulk Trader, Seabulk Challenge and Seabulk Magnachem and a reduction in depreciation charges as a result of the sale of the Seabulk Power and the extension of the retrofitted tankers useful lives. Operating income in the Current Six Months improved due to the recognition of gains on asset dispositions in January 2008.

 

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Fleet Count. As of June 30, 2008 and 2007, Marine Transportation Services owned eight and ten U.S.-flag product tankers, respectively, operating in the domestic coastwise trade.

Inland River Services

 

     For the Three Months
Ended June 30,
   For the Six Months
Ended June 30,
   Change
‘08/’07
 
   2008     2007    2008    2007    3 Mos     6 Mos  
     $’000     %     $’000    %    $’000    %    $’000    %    %     %  

Operating Revenues:

                          

United States

   33,322     100     28,020    100    63,467    100    54,742    100    19     16  
                                              

Costs and Expenses:

                          

Operating

   21,310     64     13,056    47    38,036    60    25,361    47     

Administrative and general

   1,916     6     2,101    7    4,039    6    2,978    5     

Depreciation and amortization

   4,032     12     4,332    15    7,996    13    7,831    14     
                                              
   27,258     82     19,489    69    50,071    79    36,170    66     
                                              

Gains on Asset Dispositions

   1,472     4     2,622    9    2,183    3    6,244    11     
                                              

Operating Income

   7,536     22     11,153    40    15,579    24    24,816    45    (32 )   (37 )
                                              

Other Income (Expense):

                          

Other, net

           138             136        

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

   (462 )   (1 )   2,311    8    449    1    3,280    6     
                                              

Segment Profit

   7,074     21     13,602    48    16,028    25    28,232    51    (48 )   (43 )
                                              
                          

Operating Revenues. Operating revenues increased by $5.3 million in the Current Year Quarter compared with the Prior Year Quarter and by $8.7 million in the Current Six Months compared with the Prior Six Months. The increases were due to higher rates for the covered dry cargo barge pools and higher demurrage revenues. In addition, operating revenues in the Current Six Months compared with the Prior Six Months increased due to the acquisition of Waxler Transportation Company, Inc. and Waxler Towing Company, Incorporated (collectively referred to as “Waxler”), which were acquired in mid-March 2007, and decreased following the sale of equipment to joint ventures and third parties.

Operating Income. Operating income in the Current Year Quarter and Current Six Months included $1.5 million and $2.2 million, respectively, of gains on asset dispositions compared with $2.6 million and $6.2 million in the Prior Year Quarter and Prior Six Months, respectively. Excluding the impact of these gains, operating income decreased by $2.5 million in the Current Year Quarter compared with the Prior Year Quarter and by $5.2 million in the Current Six Months compared with the Prior Six Months. The improvements in operating revenues described above were offset by higher operating expenses. Towing and switching costs were higher due to increased fuel costs. Maintenance and repair costs were higher for the upgrade of towboats and the regulatory inspection of liquid tank barges acquired from Waxler.

Equity in Earnings (Losses) of 50% or Less Owned Companies. Equity earnings decreased by $2.8 million in the Current Year Quarter and Current Six Months compared with the Prior Year Quarter and Prior Six Months. The decrease was primarily due to losses from securities and futures trading during the Current Year Quarter.

 

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Fleet Count. The composition of Inland River Services’ fleet as of June 30 was as follows:

 

     Owned    Joint
Ventured
   Leased-in    Pooled or
Managed
   Total

2008

              

Inland river dry cargo barges-open

   213    97    5    3    318

Inland river dry cargo barges-covered

   409    131    2    123    665

Inland river liquid tank barges

   44    29    2       75

Inland river deck barges

   26             26

Inland river towboats

   16    4          20
                        
   708    261    9    126    1,104
                        

2007

              

Inland river dry cargo barges-open

   271    25    5    10    311

Inland river dry cargo barges-covered

   461    165    2    152    780

Inland river liquid tank barges

   53    22    2       77

Inland river deck barges

   22             22

Inland river towboats

   15             15
                        
   822    212    9    162    1,205
                        

Aviation Services

 

     For the Three Months
Ended June 30,
   For the Six Months
Ended June 30,
   Change
‘08/’07
   2008     2007    2008    2007    3 Mos    6 Mos
     $’000     %     $’000     %    $’000     %    $’000     %    %    %

Operating Revenues:

                        

United States

   56,630     89     51,976     93    106,142     90    94,372     93      

Foreign

   7,165     11     3,885     7    11,445     10    6,922     7      
                                                  
   63,795     100     55,861     100    117,587     100    101,294     100    14    16
                                                  

Costs and Expenses:

                        

Operating

   46,697     73     41,212     74    86,568     74    77,437     76      

Administrative and general

   4,895     8     4,439     8    9,524     8    8,960     9      

Depreciation and amortization

   8,672     13     6,601     12    16,461     14    12,680     13      
                                                  
   60,264     94     52,252     94    112,553     96    99,077     98      
                                                  

Gains on Asset Dispositions

   3,208     5     1,505     3    3,602     3    1,732     2      
                                                  

Operating Income

   6,739     11     5,114     9    8,636     7    3,949     4    32    119
                                                  

Other Income (Expense):

                        

Derivative gains (losses), net

   1,173     2     52        1,352     1    (634 )        

Foreign currency losses, net

   (478 )   (1 )   (1 )      (509 )      (1 )        

Other, net

           474     1    39        474          

Equity in Earnings of 50% or Less Owned Companies

   61         17        1        33          
                                                  

Segment Profit

   7,495     12     5,656     10    9,519     8    3,821     4    33    149
                                                  
                        

 

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Operating RevenuesCurrent Year Quarter compared with Prior Year Quarter. Operating revenues increased by $7.9 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-based operation customers, higher fuel sales volume and higher rates. International operating revenues increased as additional helicopters were placed on short-term contracts outside of the United States. These increases were offset by a reduction in revenues in the U.S. Gulf of Mexico as helicopters were moved to support activity in other geographic regions.

Operating Revenues—Current Six Months compared with Prior Six Months. Operating revenues increased by $16.3 million in the Current Six Months compared to the Prior Six Months. Operating revenues in Alaska improved for the reasons described above with respect to the Current Year Quarter and, 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 into service. The improvements in the U.S. Gulf of Mexico were partially offset by a reduction in oil and gas support activities as helicopters were moved to other geographic regions. Operating revenues in the air medical services business improved due to additional contracts, rate increases and additional maintenance billings. International revenues increased as helicopters were placed on long-term leases and short-term contracts outside of the United States.

Operating Income. Operating income in the Current Year Quarter and the Current Six Months included $3.2 million and $3.6 million, respectively, of gains on asset dispositions compared with gains of $1.5 million and $1.7 million in the Prior Year Quarter and Prior Six Months, respectively. Excluding the impact of these gains, operating income decreased by $0.1 million in the Current Year Quarter compared with the Prior Year Quarter and increased by $2.8 million in the Current Six Months compared with the Prior Six Months. The improvements in operating revenues were impacted by higher operating expenses resulting from the increased operating activity described above, higher depreciation charges as a result of net aircraft additions, lower insurance costs and lower repair costs due to the timing of component and fleet repair and maintenance.

Fleet Count. The composition of Aviation Services’ fleet as of June 30 was as follows:

 

     Owned(1)    Joint
Ventured
   Leased-in    Managed    Total

2008

              

Light helicopters – single engine

   50    6    6       62

Light helicopters – twin engine

   31       7    17    55

Medium helicopters

   47       3    7    57

Heavy helicopters

   5             5
                        
   133    6    16    24    179
                        

2007

              

Light helicopters – single engine

   46    4    12       62

Light helicopters – twin engine

   28       9    16    53

Medium helicopters

   42       3    6    51

Heavy helicopters

   3             3
                        
   119    4    24    22    169
                        

 

(1) Excludes four helicopters removed from service as of June 30, 2008 and 2007.

 

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Environmental Services

 

     For the Three Months
Ended June 30,
   For the Six Months
Ended June 30,
   Change
‘08/’07
   2008    2007    2008    2007    3 Mos     6 Mos
     $’000     %    $’000     %    $’000     %    $’000     %    %     %

Operating Revenues:

                        

United States

   27,331     72    24,634     77    61,880     77    43,737     75     

Foreign

   10,653     28    7,534     23    18,613     23    14,923     25     
                                                
   37,984     100    32,168     100    80,493     100    58,660     100    18     37
                                                

Costs and Expenses:

                        

Operating

   26,571     70    23,605     73    57,169     71    44,358     76     

Administrative and general

   8,423     22    4,323     13    14,132     18    9,624     16     

Depreciation and amortization

   1,414     4    1,100     4    2,859     3    2,009     3     
                                                
   36,408     96    29,028     90    74,160     92    55,991     95     
                                                

Gains (Losses) on Asset Dispositions

   84        (133 )      119        (149 )       
                                                

Operating Income

   1,660     4    3,007     10    6,452     8    2,520     5    (45 )   156
                                                

Other Income (Expense):

                        

Foreign currency gains (losses), net

   (10 )      80        (19 )      78         

Other, net

          (1 )             (1 )       

Equity in Earnings of 50% or Less Owned Companies

   214     1    126        272        147         
                                                

Segment Profit

   1,864     5    3,212     10    6,705     8    2,744     5    (42 )   144
                                                

Operating Revenues. Operating revenues increased by $5.8 million in the Current Year Quarter compared with the Prior Year Quarter and by $21.8 million in the Current Six Months compared with the Prior Six Months. Operating revenues from response activities, project management, consulting activities and retainer services were all higher while operating revenues from equipment sales were lower. Operating revenues from response activities were higher primarily due to a significant response event in Tulsa, Oklahoma that concluded in May 2008. Project management and consulting revenues increased as a result of recent acquisitions. Retainer services were higher primarily due to two new contracts with major domestic oil companies. Operating revenues from equipment sales decreased due to lower sales volumes.

Operating Income. Operating income decreased by $1.3 million in the Current Year Quarter compared with the Prior Year Quarter and increased by $4.0 million in the Current Six Months compared with the Prior Six Months. Operating income was impacted by higher operating expenses as a result of increased operating activity described above and higher administrative and general expenses, including management bonus awards, bad debt expense, professional fees and additional administrative and general expenses associated with recent acquisitions.

 

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Commodity Trading

 

     For the Three Months
Ended June 30,
    For the Six Months
Ended June 30,
    Change
‘08/’07
   2008    2007     2008    2007     3 Mos    6 Mos
     $’000     %    $’000     %     $’000     %    $’000     %     %    %

Operating Revenues:

                       

U. S.

   30,390     55    204     100     57,774     69    204     100       

Foreign

   25,029     45            26,319     31              
                                                   
   55,419     100    204     100     84,093     100    204     100     27,066    41,122
                                                   

Costs and Expenses:

                       

Operating

   46,977     85    174     85     73,734     88    183     90       

Administrative and general

   1,644     3    200     98     2,371     3    203     99       
                                                   
   48,621     88    374     183     76,105     91    386     189       
                                                   

Operating Income

   6,798     12    (170 )   (83 )   7,988     9    (182 )   (89 )   4,099    4,489
                                                   

Other Income (Expense):

                       

Derivative losses, net

   (102 )      (162 )   (80 )   (592 )      (162 )   (80 )     

Foreign currency gains, net

   2                1                  

Other, net

   3                4                  
                                                   

Segment Profit

   6,701     12    (332 )   (163 )   7,401     9    (344 )   (169 )   2,118    2,251
                                                   

Operating Results. Operating revenues increased by $55.2 million in the Current Year Quarter compared with the Prior Year Quarter and by $83.9 million in the Current Six Months compared with the Prior Six Months. Operating income increased by $7.0 million in the Current Year Quarter compared with the Prior Year Quarter and by $8.2 million in the Current Six Months compared with the Prior Six Months. Operating results increased due to the commencement of ethanol merchandising activities in the Prior Year Quarter and rice merchandising activities in February 2008.

Other Segment Profit (Loss)

 

     For the Three Months
Ended June 30,
    For the Six Months
Ended June 30,
    Change
‘08/’07
 
       2008             2007             2008             2007         3 Mos     6 Mos  
     $’000     $’000     $’000     $’000     %     %  

Harbor and Offshore Towing Services

   3,089     (717 )   4,199     820     531     412  

Other Activities

   (33 )   111     (237 )   111     (130 )   (314 )

Equity in Losses of 50% or Less Owned Companies

   (90 )   (154 )   (53 )   (92 )   42     42  
                            

Segment Profit (Loss)

   2,966     (760 )   3,909     839     490     365  
                            

Harbor and Offshore Towing Services. Segment profit increased in the Current Year Quarter and the Current Six Months compared with the Prior Year Quarter and the Prior Six Months primarily due to tariff increases and the commencement of terminal operations in St. Eustatius. The increases were reduced by higher drydocking and fuel costs and the cost of providing third-party equipment to support the start-up of the St. Eustatius terminal operation.

 

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Table of Contents

Corporate and Eliminations

 

     For the Three Months
Ended June 30,
    For the Six Months
Ended June 30,
    Change
‘08/’07
 
         2008             2007             2008             2007         3 Mos     6 Mos  
     $’000     $’000     $’000     $’000     %     %  

Corporate Expenses

   (8,555 )   (8,208 )   (18,406 )   (15,963 )   (4 )   (15 )

Eliminations

   41     6     47     12     583     292  
                            

Operating Loss

   (8,514 )   (8,202 )   (18,359 )   (15,951 )   (4 )   (15 )
                            

Other Income (Expense):

            

Derivative gains (losses), net

   (8,194 )   (156 )   (1,421 )   821     (5,153 )   (273 )

Foreign currency gains, net

   986     734     3,769     857     34     340  

Other, net

   156     (109 )   280     (132 )   243     312  

Corporate Expenses. Corporate expenses increased by $0.3 million in the Current Year Quarter compared with the Prior Year Quarter and by $2.4 million in the Current Six Months compared with the Prior Six Months, primarily due to higher wage and benefit costs, including management bonus awards, legal and severance costs.

Derivative gains (losses), net. Derivative losses, net increased by $8.0 million in the Current Year Quarter compared with the Prior Year Quarter and increased by $2.2 million in the Current Six Months compared with the Prior Six Months due to losses on equity security and index options, foreign currency forward exchange, option and future contracts, commodity swap, option and future contracts and U.S. treasury and bond future and option contracts.

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

 

     For the Three Months
Ended June 30,
    For the Six Months
Ended June 30,
    Change ‘08/’07  
         2008             2007             2008             2007         3 Mos     6 Mos  
     $’000     $’000     $’000     $’000     %     %  

Interest income

   5,373     11,456     12,849     23,680     (53 )   (46 )

Interest expense

   (12,674 )   (12,108 )   (24,222 )   (25,376 )   (5 )   5  

Marketable security gains (losses), net

   383     (9,430 )   (5,301 )   (14,118 )   104     62  
                            
   (6,918 )   (10,082 )   (16,674 )   (15,814 )   31     (5 )
                            

Interest Income. Interest income decreased in the Current Year Quarter and Current Six Months compared with the Prior Year Quarter and Prior Six Months primarily due to lower average invested balances and lower interest rates.

Interest Expense. Interest expense increased in the Current Year Quarter compared with the Prior Year Quarter and decreased in the Current Six Months compared with the Prior Six Months primarily due to changes in capitalized interest.

Marketable security gains (losses), net. Marketable security gains, net increased in the Current Year Quarter compared with the Prior Year Quarter and marketable security losses, net decreased in the Current Six Months compared with the Prior Six Months primarily resulting from gains on short sales of marketable securities.

 

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Table of Contents

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 per share (“Common Stock”), for treasury or to make 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 Six Months
Ended June 30,
 
     2008     2007  
     $’000     $’000  

Cash flows provided by or (used in):

    

Operating Activities

   135,802     165,383  

Investing Activities

   (113,129 )   (65,336 )

Financing Activities

   (139,767 )   (104,338 )

Effect of Exchange Rate Changes on Cash and Cash Equivalents

   2,358     613  
            

Net Decrease in Cash and Cash Equivalents

   (114,736 )   (3,678 )
            

Operating Activities

Cash flows provided by operating activities decreased in the Current Six Months compared with the Prior Six Months primarily due to unfavorable changes in working capital and reduced operating results before depreciation and gains on asset dispositions in the Company’s business segments.

Investing Activities

Cash flows used in investing activities increased in the Current Six Months compared with the Prior Six Months primarily due to lower proceeds from the sale of property and equipment and increased purchases of marketable securities. These additional uses of cash were partially offset by higher withdrawals from construction reserve funds and increased proceeds from sales of marketable securities.

During the Current Six Months, capital expenditures were $233.1 million. Equipment deliveries during the period included six offshore marine vessels, 15 inland river dry cargo barges, three inland river towboats, twelve helicopters, two ocean liquid tank barges and three harbor tugs. During the Prior Six Months, capital expenditures were $235.5 million. Excluding equipment from business acquisitions, equipment deliveries included six offshore marine vessels, 35 inland river dry cargo barges, 15 inland river deck barges, eleven helicopters and three harbor tugs.

During the Current Six Months, the Company sold eight offshore marine vessels, two tankers, one inland river dry cargo barge, five inland river liquid tank barges, six helicopters, one harbor tug, one offshore marine construction contract and other equipment for an aggregate consideration of $63.8 million and recognized net gains of $31.2 million. During the Prior Six Months, the Company sold 22 offshore marine vessels, 105 inland river dry cargo barges, three inland river liquid tank barges, four helicopters, construction contracts and other equipment for an aggregate consideration of $196.8 million and recognized net gains of $54.7 million.

 

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Table of Contents

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 June 30, 2008, construction reserve funds of $252.6 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 Current Six Months, construction reserve fund account transactions included withdrawals of $171.1 million and deposits of $36.3 million. During the Prior Six Months, construction reserve account transactions included withdrawals of $35.3 million and deposits of $21.5 million.

The Company’s unfunded capital commitments as of June 30, 2008 consisted primarily of offshore marine vessels, harbor tugs, helicopters and inland river barges and totaled $348.5 million, of which $180.2 million is payable during the remainder of 2008, with the balance payable through 2010. Of the total unfunded capital commitments, approximately $52.3 million may be terminated without further liability other than the payment of liquidated damages of $6.3 million in the aggregate.

During the Current Six Months, cash used to purchase marketable security long positions was $126.2 million and cash used to cover marketable security short positions was $33.6 million. During the Prior Six Months, cash used to purchase marketable security long positions was $5.6 million and cash used to cover marketable security short positions was $34.6 million.

During the Current Six Months, cash received from the sale of marketable security long positions was $57.5 million and cash received upon entering into marketable security short positions was $26.3 million. During the Prior Six Months, cash received from the sale of marketable security long positions was $18.9 million and cash received upon entering into marketable security short positions was $33.8 million.

Cash used in investing activities for business acquisitions, net of cash acquired was $4.3 million in the Current Six Months and $25.4 million in the Prior Six Months. Investing activities with the Company’s joint ventures used cash flows of $4.7 million in the Current Six Months and $21.2 million in the Prior Six Months.

Financing Activities

Cash flows used in financing activities increased in the Current Six Months compared with the Prior Six Months primarily due to increased repurchases of Common Stock partially offset by lower payments on long-term debt and capital lease obligations.

During the Current Six Months, the Company acquired for treasury 1,658,317 shares of Common Stock for an aggregate purchase price of $142.7 million. From time to time, SEACOR’s Board of Directors grants authorization to repurchase shares of Common Stock and SEACOR’s 2.875% Convertible Debentures due 2024. On April 23 and June 4, 2008, SEACOR’s Board of Directors increased such repurchase authority by $70.9 million and $75.5 million, respectively, to a total authorized expenditure on each occasion of up to $150.0 million. As of June 30, 2008, $128.7 million of the repurchase authority granted by SEACOR’s Board of Directors remained available. 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 through open market purchases, privately negotiated transactions or otherwise, depending on market conditions. Subsequent to June 30, 2008, the Company acquired 328,000 shares of Common Stock for treasury in the amount of $27.5 million. During the Prior Six Months, the Company acquired 993,080 shares of Common Stock for treasury for an aggregate purchase price of $92.1 million.

 

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Table of Contents

During the Current Six Months, the Company made principal payments on long-term debt and capital lease obligations of $8.7 million. During the Prior Six Months, the Company made principal payments on long-term debt and capital lease obligations of $15.6 million.

As of June 30, 2008, the Company had no outstanding borrowings under its revolving credit facility and the remaining availability under this facility was $447.7 million, net of issued letters of credit of $2.3 million. In addition, the Company had other outstanding letters of credit totaling $40.3 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. Management has used estimates in determining the Company’s potential exposure to these matters and has recorded reserves in its financial statements related thereto where appropriate. It is possible that a change in the Company’s estimates of that exposure could occur, but the Company does not expect 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 believes it has provided 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.

 

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Marine Transportation Services (“MTS”) had two of its tankers retrofitted to a double-hull configuration in a foreign shipyard to enable each of them to continue to transport crude oil and petroleum products beyond their OPA 90 mandated retirement dates in 2011. Both vessels operate in the U.S. coastwise, 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 completed the retrofit work in the 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, setting aside the NVDC’s determination, and remanding the matter to the USCG for further proceedings with instructions to revoke the coastwise endorsement for the Seabulk Trader. The Company believes the Court erroneously set aside the NVDC’s determination and has and will continue to vigorously pursue all appropriate channels of relief. In response to MTS’s motion to stay the implementation of the Court’s Memorandum Opinion, the Court stayed the matter pending MTS’s appeal and, on July 25, 2008 while considering a renewed motion to stay by MTS, the Court declared its intention to revise the Memorandum Opinion by deleting the instruction to the NVDC to revoke the Seabulk Trader’s coastwise endorsement and remanding the matter to the USCG with a direction to complete its proceedings within 90 days. 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 $63.5 million as of June 30, 2008 and the two retrofitted tankers contributed operating revenues of $12.6 million during the six months ended June 30, 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 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 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.

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.

 

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On May 9, 2008, the FASB issued FASB Staff Position, Accounting Principles Board 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (“FSP APB 14-1”). FSP APB 14-1 clarifies the accounting for convertible debt instruments that may be settled in cash (including partial cash settlement) upon conversion. FSP APB 14-1 clarifies the accounting for convertible debt instruments that may be settled in cash (including partial cash settlement) upon conversion. FSP APB 14-1 requires issuers of convertible debt to account separately for the liability and equity components in a manner that will reflect the entity’s nonconvertible debt borrowing rate. The resulting debt discount is amortized over the period the debt is expected to be outstanding as additional non-cash interest expense. The equity component is not revalued as long as it continues to qualify for equity treatment. FSP APB 14-1 is effective for fiscal years beginning after December 15, 2008 on a retrospective basis for all periods presented. The Company has not yet determined what impact the adoption of FSP APB 14-1 will have on its consolidated financial position or its results of operations, but expects such impact will be material.

On May 15, 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements that are presented in conformity with generally accepted accounting principles in the United States. SFAS No. 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. The Company does not expect the adoption of SFAS No. 162 will result in a change in current practice and as such will have no impact on its 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 Six Months, except as described below.

As of June 30, 2008, the Company held available-for-sale marketable securities with a fair value of $97.9 million, including $59.5 million in fixed income investments consisting of corporate debt securities, municipal bonds and foreign government bonds and $38.4 million in equity securities. The fair value of the fixed income securities fluctuates based on market interest rates and the creditworthiness of the issuers. 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. As of June 30, 2008, a 10% decline in the value of available-for-sale marketable securities would reduce other comprehensive income by $6.4 million, net of tax.

As of June 30, 2008, the Company held positions in short sales of marketable securities with a fair value of $112.2 million. The Company’s short sales of marketable securities primarily include positions in energy, marine, transportation and other related businesses. As of June 30, 2008, a 10% increase in the value of the securities underlying the short sale positions of the Company would reduce income by $7.3 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 or sell 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. As of June 30, 2008, the outstanding foreign currency contract positions translate to a net purchase of foreign currencies with an aggregate U.S. dollar equivalent of $156.8 million. An adverse change in the underlying foreign currency exchange rates of 10% would reduce income by $10.2 million, net of tax.

As of June 30, 2008, the Company no longer designates any of its foreign currency forward contracts as fair value hedges for capital commitments. For the Current Year Quarter and Current Six Months, the Company increased its capital commitment obligations by $2.9 million and reduced its capital commitment obligations by $8.3 million, respectively, as a result of the foreign currency forward contracts previously 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 June 30, 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 June 30, 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 its Common Stock during the Current Year Quarter:

 

Period

   Total Number of
Shares
Purchased
   Average Price Paid
Per Share(1)
   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)(3)

April 1 – 30, 2008

   266,000    $ 85.07    266,000    $ 127,372,037

May 1 – 31, 2008

   602,402    $ 86.74    602,402    $ 75,120,487

June 1 – 30, 2008

   244,515    $ 89.44    244,515    $ 128,739,152

 

(1) Excludes commissions of $56,000, or $0.05 per share, paid in the Current Year Quarter.

 

(2) Since February 1997, SEACOR’s Board of Directors authorized, in the aggregate, the repurchase of $866.9 million of Common Stock, certain debt or a combination thereof. Through June 30, 2008, the Company has repurchased $660.0 million and $78.2 million of Common Stock and debt, respectively.

 

(3) On April 23 and June 4, 2008, SEACOR’s Board of Directors approved increases of $70.9 million and $75.5 million, respectively, in the Company’s authority to repurchase Common Stock and its 2.875% convertible senior debentures due 2024 to a total authorized expenditure on each occasion of up to $150 million. This repurchase authority remains in place until fully used or until the Company determines otherwise.

 

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

The annual meeting of stockholders of SEACOR was held on June 4, 2008. The following table gives a brief description of each matter voted upon at that meeting and, as applicable, the number of votes cast for, against or withheld, as well as the number of abstentions and broker non-votes.

 

Description of Matter

   For    Against    Withheld    Abstentions    Broker Non-Votes

1. Election of Directors:

              

Charles Fabrikant

   19,535,915    N/A    190,816    N/A    N/A

Andrew Morse

   10,471,954    N/A    9,254,777    N/A    N/A

Michael E. Gellert

   19,539,542    N/A    187,189    N/A    N/A

Stephen Stamas

   17,940,498    N/A    1,786,233    N/A    N/A

Richard Fairbanks

   19,472,025    N/A    254,706    N/A    N/A

Pierre de Demandolx

   19,541,079    N/A    185,652    N/A    N/A

John C. Hadjipateras

   19,576,987    N/A    149,744    N/A    N/A

Oivind Lorentzen

   19,541,580    N/A    212,151    N/A    N/A

Steven J. Wisch

   19,514,375    N/A    212,356    N/A    N/A

Christopher Regan

   19,585,089    N/A    141,642    N/A    N/A

Steven Webster

   13,574,331    N/A    6,152,400    N/A    N/A

2. The appointment of Ernst & Young LLP as the Company’s independent auditors for the fiscal year ending December 31, 2008

   19,645,375    78,993    N/A    2,363    N/A

 

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: July 31, 2008     By:   /S/ CHARLES FABRIKANT
     

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

(Principal Executive Officer)

     
DATE: July 31, 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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