Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 10-Q

 

 

(Mark One)

 

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

For the quarterly period ended March 31, 2009              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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  ¨ No  ¨

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

 

Large accelerated filer  x   Accelerated filer  ¨  

Non-accelerated filer  ¨

(Do not check if a smaller

reporting company)

  Smaller reporting company  ¨

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

The total number of shares of common stock, par value $.01 per share, outstanding as of April 24, 2009 was 20,190,516. The Registrant has no other class of common stock outstanding.

 

 

 


Table of Contents

SEACOR HOLDINGS INC.

Table of Contents

 

Part I.    Financial Information    3
     
   Item 1.    Financial Statements (Unaudited)    3
     
      Condensed Consolidated Balance Sheets as of March 31, 2009 and
December 31, 2008
   3
     
      Condensed Consolidated Statements of Income for the Three Months Ended
March 31, 2009 and 2008
   4
     
      Condensed Consolidated Statement of Changes in Equity for the Three Months Ended March 31, 2009    5
     
      Condensed Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2009 and 2008
   6
     
      Notes to the Condensed Consolidated Financial Statements    7
     
   Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations    20
     
   Item 3.    Quantitative and Qualitative Disclosures About Market Risk    35
     
   Item 4.    Controls and Procedures    36
     
Part II.    Other Information    37
     
   Item 1A.    Risk Factors    37
     
   Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds    37
     
   Item 6.    Exhibits    37

 

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PART I—FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

SEACOR HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data, unaudited)

 

     March 31,
2009
    December 31,
2008
 
ASSETS     

Current Assets:

    

Cash and cash equivalents

   $ 376,720     $ 275,442  

Restricted cash

     23,984       20,787  

Marketable securities

     50,785       53,817  

Receivables:

    

Trade, net of allowance for doubtful accounts of $5,258 and $5,730 in 2009 and 2008, respectively

     262,170       277,350  

Other

     41,515       40,141  

Inventories

     62,065       66,278  

Deferred income taxes

     5,164       5,164  

Prepaid expenses and other

     11,286       10,499  
                

Total current assets

     833,689       749,478  
                

Property and Equipment

     2,761,837       2,741,322  

Accumulated depreciation

     (649,971 )     (601,806 )
                

Net property and equipment

     2,111,866       2,139,516  
                

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

     158,066       150,062  

Construction Reserve Funds & Title XI Reserve Funds

     297,681       305,757  

Goodwill

     52,919       51,496  

Intangible Assets

     27,230       28,478  

Other Assets, net of allowance for doubtful accounts of $888 in 2008

     36,086       34,867  
                
   $ 3,517,537     $ 3,459,654  
                
LIABILITIES AND EQUITY     

Current Liabilities:

    

Current portion of long-term debt

   $ 12,301     $ 33,671  

Current portion of capital lease obligations

     921       907  

Accounts payable and accrued expenses

     104,023       102,798  

Other current liabilities

     145,421       139,425  
                

Total current liabilities

     262,666       276,801  
                

Long-Term Debt

     910,156       895,689  

Capital Lease Obligations

     7,426       7,685  

Deferred Income Taxes

     530,825       515,455  

Deferred Gains and Other liabilities

     111,714       121,796  
                

Total liabilities

     1,822,787       1,817,426  
                

Equity:

    

SEACOR Holdings Inc. stockholders’ equity:

    

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

            

Common stock, $.01 par value, 60,000,000 shares authorized; 32,538,588 and 32,390,838 shares issued in 2009 and 2008, respectively

     325       324  

Additional paid-in capital

     959,092       956,457  

Retained earnings

     1,455,765       1,402,771  

Shares held in treasury of 12,348,072 and 12,373,291 in 2009 and 2008, respectively, at cost

     (723,154 )     (724,357 )

Accumulated other comprehensive loss:

    

Cumulative translation adjustments, net of tax

     (5,578 )     (5,045 )

Derivative loss on cash flow hedge, net of tax

     (36 )      
                
     1,686,414       1,630,150  

Noncontrolling interests in subsidiaries

     8,336       12,078  
                

Total equity

     1,694,750       1,642,228  
                
   $ 3,517,537     $ 3,459,654  
                

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

and should be read in conjunction herewith.

 

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SEACOR HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except share data, unaudited)

 

     Three Months Ended
March 31,
 
     2009     2008  

Operating Revenues

   $ 399,516     $ 354,455  
                

Costs and Expenses:

    

Operating

     248,412       235,040  

Administrative and general

     38,682       39,005  

Depreciation and amortization

     39,264       37,800  
                
     326,358       311,845  
                

Gains on Asset Dispositions and Impairments, Net

     16,760       11,906  
                

Operating Income

     89,918       54,516  
                

Other Income (Expense):

    

Interest income

     1,043       7,476  

Interest expense

     (14,337 )     (13,491 )

Debt extinguishment gains, net

     1,363        

Marketable security losses, net

     (3,981 )     (5,684 )

Derivative gains, net

     3,611       6,467  

Foreign currency gains, net

     658       2,610  

Other, net

     190       164  
                
     (11,453 )     (2,458 )
                

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

     78,465       52,058  

Income Tax Expense

     28,199       19,790  
                

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

     50,266       32,268  

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

     3,527       4,579  
                

Net Income

     53,793       36,847  

Net Income attributable to Noncontrolling Interests in Subsidiaries

     799       202  
                

Net Income attributable to SEACOR Holdings Inc.

   $ 52,994     $ 36,645  
                

Basic Earnings Per Common Share of SEACOR Holdings Inc.

   $ 2.68     $ 1.64  

Diluted Earnings Per Common Share of SEACOR Holdings Inc.

   $ 2.36     $ 1.50  

Weighted Average Common Shares Outstanding:

    

Basic

     19,761,776       22,343,655  

Diluted

     23,507,459       26,011,338  

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

and should be read in conjunction herewith.

 

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SEACOR HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(in thousands, unaudited)

 

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

December 31, 2008, previously reported

  $ 324   $ 922,540     $ 1,421,712     $ (724,357 )   $ (5,045 )   $ 12,078     $ 1,627,252    

Adoption of FSP APB 14-1 (see note 8)

        33,917       (18,941 )                       14,976    
                                                       

December 31, 2008, as adjusted

    324     956,457       1,402,771       (724,357 )     (5,045 )     12,078       1,642,228    

Issuance of common stock:

               

Employee Stock Purchase Plan

                    1,228                   1,228    

Exercise of stock options

        234                               234    

Director stock awards

        97                               97    

Restricted stock and restricted stock units

    1     (703 )           42                   (660 )  

Amortization of share awards

        3,071                               3,071    

Cancellation of restricted stock

        67             (67 )                    

Conversion option on purchased Convertible Debentures

        (131 )                             (131 )  

Purchase of subsidiary shares from noncontrolling interest

                                (4,541 )     (4,541 )  

Comprehensive income:

               

Net income

              52,994                   799       53,793     $ 53,793  

Other comprehensive loss

                          (569 )           (569 )     (569 )
                                                             

Three months ended
March 31, 2009

  $ 325   $ 959,092     $ 1,455,765     $ (723,154 )   $ (5,614 )   $ 8,336     $ 1,694,750     $ 53,224  
                                                             

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

and should be read in conjunction herewith.

 

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SEACOR HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)

 

     Three Months Ended
March 31,
 
     2009     2008  

Net Cash Provided by Operating Activities

   $ 99,168     $ 59,268  
                

Cash Flows from Investing Activities:

    

Purchases of property and equipment

     (25,688 )     (81,492 )

Proceeds from disposition of property and equipment

     43,867       38,051  

Purchases of marketable securities

           (82,406 )

Proceeds from sales of marketable securities

           23,072  

Cash settlements on derivative transactions, net

           4,647  

Investments in and advances to 50% or less owned companies

     (5,473 )     (3,985 )

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

     1,064       60  

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

     136        

Principal payments on third party notes receivable, net

     1,198       218  

Net increase in restricted cash

     (3,197 )     (8,528 )

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

     8,076       (8,681 )

Net decrease in escrow deposits on like-kind exchanges

           8,427  

(Investments in) repayments on leases, net

     (2,074 )     23  

Business acquisitions, net of cash acquired

     (1,563 )     (2,594 )
                

Net cash provided by (used in) investing activities

     16,346       (113,188 )
                

Cash Flows from Financing Activities:

    

Payments on long-term debt and capital lease obligations

     (39,690 )     (1,186 )

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

     25,000        

Common stock acquired for treasury

           (45,900 )

Proceeds and tax benefits from share award plans

     780       3,599  

Purchase of subsidiary shares from noncontrolling interest

     (250 )      

Cash received from noncontrolling interest

           2,447  
                

Net cash used in financing activities

     (14,160 )     (41,040 )
                

Effects of Exchange Rate Changes on Cash and Cash Equivalents

     (76 )     2,442  
                

Net Increase (Decrease) in Cash and Cash Equivalents

     101,278       (92,518 )

Cash and Cash Equivalents, Beginning of Period

     275,442       537,305  
                

Cash and Cash Equivalents, End of Period

   $ 376,720     $ 444,787  
                

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

and should be read in conjunction herewith.

 

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SEACOR HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

1. Basis of Presentation

The condensed consolidated financial information for the three months ended March 31, 2009 and 2008 has been prepared by the Company and has not been audited by its independent registered public accounting firm. The condensed consolidated financial statements include the accounts of SEACOR Holdings Inc. and its consolidated subsidiaries. In the opinion of management, all adjustments (consisting of normal recurring adjustments) have been made to present fairly the Company’s financial position as of March 31, 2009, its results of operations for the three months ended March 31, 2009 and 2008, its changes in equity for the three months ended March 31, 2009 and its cash flows for the three months ended March 31, 2009 and 2008. 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, 2008.

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.

Effective January 1, 2009, the Company adopted Statement of Financial Accounting Standard (“SFAS”) No. 160, Accounting and Reporting of Noncontrolling Interest in Consolidated Financial Statements, an Amendment of ARB No. 51. SFAS No. 160 amends Accounting Research Bulletin (“ARB”) No. 51, Consolidated Financial Statements, to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. This standard defines a noncontrolling interest, previously called a minority interest, as the portion of equity in a subsidiary not attributable, directly or indirectly, to the Company. SFAS No. 160 requires, among other items, that a noncontrolling interest be included in the consolidated statement of financial position within equity separate from the Company’s equity; consolidated net income to be reported at amounts inclusive of both the Company’s and noncontrolling interest’s shares and, separately, the amounts of consolidated net income attributable to the Company and noncontrolling interest all on the consolidated statement of income; and if a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary be measured at fair value and a gain or loss be recognized in net income based on such fair value. The presentation and disclosure requirements of SFAS No. 160 were applied retrospectively. Other than the change in presentation of noncontrolling interests and its inclusion in comprehensive income, the adoption of SFAS No. 160 had no impact on the Company’s consolidated financial position or its results of operations.

 

2. Financial Instruments Measured at Fair Value

The fair value of an asset or liability, as defined by SFAS No. 157, Fair Value Measurements, 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

 

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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.

The Company’s assets and liabilities as of March 31, 2009 that are measured at fair value on a recurring basis are summarized below (in thousands):

 

     Level 1    Level 2    Level 3

ASSETS

        

Marketable securities

   $ 50,245    $ 540    $

Derivative instruments

     295      1,193     

Construction reserve funds and Title XI reserve funds

     297,681          

LIABILITIES

        

Short sale of marketable securities

     4,456          

Derivative instruments

     1,111      1,630     

Effective January 1, 2009, the Company adopted Financial Accounting Standards Board (“FASB”) Staff Position No. 157-2, Effective Date of FASB Statement No. 157 (“FSP SFAS No. 157-2”), with no material impact on its consolidated financial position or its results of operations. FSP SFAS No. 157-2 deferred for one year the effective date of SFAS No. 157 for certain nonfinancial assets and certain nonfinancial liabilities.

 

3. Derivative Instruments and Hedging Strategies

Effective January 1, 2009, the Company adopted 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, Accounting for Derivative Instruments and Hedging Activities, and how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows.

The Company accounts for derivatives in accordance with SFAS No. 133. All of the Company’s derivative positions are stated at fair value in the accompanying condensed consolidated balance sheets. Realized and unrealized gains and losses on derivatives not designated as hedges under SFAS No. 133 are reported in the accompanying condensed consolidated statements of income as derivative gains, net. Realized and unrealized gains and losses on derivatives designated as fair value hedges are recognized as corresponding increases or decreases in the fair value of the underlying hedged item to the extent they are effective, with any ineffective portion reported in the accompanying condensed consolidated statements of income as derivative gains, net. Realized and unrealized gains and losses on derivatives designated as cash flow hedges are reported as a component of other comprehensive loss in the accompanying condensed consolidated statement of changes in equity to the extent they are effective and reclassified into earnings on the same line item associated with the hedged transaction and in the same period the hedged transaction affects earnings. Any ineffective portion of cash flow hedges are reported in the accompanying condensed consolidated statements of income as derivative gains, net.

 

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Derivative instruments are classified as either assets or liabilities based on whether their individual fair value is a gain or loss. Derivative assets and liabilities are included in other receivables and other current liabilities, respectively, in the accompanying condensed consolidated balance sheets. The fair values of the Company’s derivative instruments as of March 31, 2009 are as follows (in thousands):

 

     Derivative
Asset
   Derivative
Liability

Derivatives designated as hedging instruments under SFAS No. 133:

     

Forward currency exchange contracts (fair value hedges)

   $ 500    $

Interest rate swap agreement (cash flow hedge)

          75
             
     500      75
             

Derivatives not designated as hedging instruments under SFAS No. 133:

     

Options on equities and equity indices

     186      540

Forward currency exchange, option and future contracts

     785      1,783

Interest rate swap agreement

          191

Commodity swap, option and future contracts:

     

Exchange traded

         

Non-exchange traded

         

U.S. treasury notes and bond future and option contracts

     17      152
             
     988      2,666
             
   $ 1,488    $ 2,741
             

The Company evaluates the risk of counterparty default by monitoring the financial condition of the financial institutions and counterparties involved and by primarily conducting business with large, well-established financial institutions and diversifying its counterparties. The Company does not currently anticipate nonperformance by any of its significant counterparties.

Fair Value Hedges. As of March 31, 2009, the Company has designated certain of its forward currency exchange contracts with notional values of €16.0 million as fair value hedges under SFAS No. 133 in respect of capital commitments denominated in euros scheduled to be delivered in 2010. By entering into these forward currency exchange contracts, the Company has fixed a portion of its euro capital commitments in U.S. dollars to protect against currency fluctuations. During the three months ended March 31, 2009, the Company designated €15.0 million notional value of its forward currency exchange contracts as fair value hedges under SFAS No. 133, in addition to the €20.0 million previously so designated as of December 31, 2008. During the three months ended March 31, 2009, the Company no longer designated €19.0 million notional value of these contracts as fair value hedges under SFAS No. 133.

For the three months ended March 31, 2009, the Company recognized gains (losses) on derivative instruments designated as fair value hedges as follows (in thousands):

 

     Derivative
gains
(losses), net
 

Forward currency exchange contracts, effective and ineffective portions

   $ (1,468 )

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

     1,860  
        
   $ 392  
        

 

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Cash Flow Hedge. On March 23, 2009, the Company entered into an interest rate swap agreement expiring March 2014 with a notional value of $25.0 million. The Company designated this instrument as a cash flow hedge under the provisions of SFAS No. 133. This instrument calls for the Company to pay a fixed interest rate of 2.25% on the notional value and receive in return a variable interest rate based on LIBOR on the notional value. By entering into this interest rate swap agreement, the Company has converted the variable LIBOR component on $25.0 million of outstanding borrowings under its revolving credit facility maturing in 2013 to a fixed interest rate to protect against interest rate fluctuations.

For the three months ended March 31, 2009, the Company recognized gains (losses) on a derivative instrument designated as a cash flow hedge as follows (in thousands):

 

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

Interest rate swap agreement, effective portion

   $ (62 )   $  

Interest rate swap agreement, ineffective portion

           (18 )

Reclassification of derivative losses to interest expense

     6        
                
   $ (56 )   $ (18 )
                

Other Derivative Instruments. For the three months ended March 31, 2009, the Company recognized gains (losses) on derivative instruments not designated as hedging instruments under SFAS No. 133 as follows (in thousands):

 

     Derivative
gains
(losses), net
 

Options on equities and equity indices

   $ 2,079  

Forward currency exchange, option and future contracts

     540  

Interest rate swap agreement

     (191 )

Commodity swap, option and future contracts:

  

Exchange traded

     (15 )

Non-exchange traded

     1,079  

U.S. treasury notes and bond future and option contracts

     (255 )
        
   $ 3,237  
        

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

The Company has entered into and settled positions in various forward currency exchange, option and future contracts with respect to the pound sterling, euro, yen, rupee, Singapore dollar, won, Taiwanese dollar, Thai baht, ringgit, dinar, renminbi, dirham, Brazilian real and rand. As of March 31, 2009, the outstanding forward currency exchange contracts translate to a net purchase of foreign currencies with an aggregate U.S. dollar equivalent of $4.5 million. These contracts enable the Company to buy currencies in the future at fixed exchange rates, which could offset possible consequences of changes in foreign exchange rates with respect to the Company’s business conducted in Europe, Africa, the Middle East and Asia. The Company generally does not enter into contracts with forward settlement dates beyond twelve months.

 

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On March 24, 2009, the Company entered into an interest rate swap agreement expiring March 2014 with a notional value of $25.0 million. This instrument calls for the Company to pay a fixed interest rate of 2.335% on the notional value and receive in return a variable interest rate based on LIBOR on the notional value. By entering into this interest rate swap agreement, the Company is protecting against interest rate fluctuations on the variable LIBOR component on $25.0 million of outstanding borrowings under its revolving credit facility maturing in 2013. This instrument does not currently qualify as a cash flow hedge under the provisions of SFAS No. 133.

The Company has entered into and settled positions in various commodity swap, option and future contracts (primarily natural gas, crude oil, gasoline and ethanol). The general purpose of these transactions is to provide value to the Company should there be a sustained decline in the price of commodities that over time could lead to a reduction in the market values and cash flows of the Company’s offshore, inland river and commodity trading businesses.

The Company has also entered into and settled various future contracts with unrelated third parties to buy and sell commodities. These contracts are non-exchange traded and typically result in physical delivery of the underlying commodity. As of March 31, 2009, the Company carried ethanol inventory relating to the physical delivery of product from these transactions with a carrying value of $10.9 million.

The Company has entered into and settled various positions in U.S. treasury notes and bonds through futures or options on futures tied to U.S. treasury notes. The general purpose of these transactions is to provide value to the Company should the price of U.S. treasury notes and bonds decline, leading to generally higher interest rates, which if sustained over time, might lead to higher interest costs for the Company.

 

4. Business Acquisitions

Effective January 1, 2009, the Company adopted SFAS No. 141(R), Business Combinations. SFAS No. 141(R) amended the Company’s accounting policy by requiring the Company to recognize on its future acquisitions, with certain exceptions, 100 percent of the fair value of assets acquired, liabilities assumed, and non-controlling interests when the acquisition constitutes a change in control of the acquired entity. It establishes that shares issued in consideration for a business combination be at fair value on the acquisition date, requires the recognition of contingent consideration arrangements at their acquisition-date fair values with subsequent changes in fair value generally reflected in earnings, and requires recognition of pre-acquisition loss and gain contingencies at their acquisition-date fair values. It also provides for the capitalization of in-process research and development assets acquired, requires acquisition-related transaction costs to be expensed as incurred, allows 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 requires as an adjustment to income tax expense any changes in an acquirer’s existing income tax valuation allowances and tax uncertainty accruals.

SRI Acquisition. On September 7, 2007, the Company acquired all of the issued and outstanding shares of Solid Resources, Inc. and Solid Resources, LLC (collectively referred to as “SRI”), providers of environmental services in the southeastern United States. The selling stockholder of SRI has the opportunity to receive additional consideration of up to $39.5 million based upon certain performance measures over the period from the date of acquisition through September 30, 2011, which will be recognized by the Company as additional cost of the acquisition when the contingency is resolved and when any additional consideration is distributable. During the three months ended March 31, 2009, the Company paid $0.9 million of additional consideration in accordance with the acquisition agreement that was recorded as goodwill in the accompanying condensed consolidated balance sheets.

Link Acquisition. On September 7, 2007, the Company acquired all of the issued and outstanding shares of Link Associates International Global Limited (“Link”), a provider of environmental services in the United Kingdom. The selling stockholder of Link has the opportunity to receive additional consideration of up to

 

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£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. During the three months ended March 31, 2009, the Company paid £61,560 ($0.1 million) of additional consideration in accordance with the acquisition agreement that was recorded as goodwill in the accompanying condensed consolidated balance sheets.

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. 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 three months ended March 31, 2009, the Company paid $0.6 million of additional consideration in accordance with the acquisition agreement that was recorded as goodwill in the accompanying condensed consolidated balance sheets.

 

5. Equipment Acquisitions, Dispositions and Depreciation Policy

During the three months ended March 31, 2009, capital expenditures were $25.7 million. Equipment deliveries during the period included one offshore marine vessel, one inland river towboat and two helicopters.

During the three months ended March 31, 2009, the Company sold eight offshore marine vessels and four inland river dry cargo barges. One leased helicopter was a total loss after an accident in the North Sea. The Company received $43.9 million on the disposition of these assets, including the insurance proceeds for the helicopter, and recognized net gains of $16.8 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 that have already exceeded the Company’s useful life policy, in which case the Company depreciates such assets based on its best estimate of remaining useful life, typically the next survey or certification date.

As of March 31, 2009, 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

Dry-cargo vessels

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

Dart. On July 22, 2008, a wholly owned subsidiary of the Company, Era DHS LLC, acquired 49% of the capital stock of Dart Helicopter Services LLC (“Dart”) for cash consideration of $21.0 million. Dart is an international sales, marketing and manufacturing organization focusing on after market helicopter accessories. The Company has performed a preliminary fair value analysis of Dart as of the acquisition date. The excess of the purchase price over the Company’s interest in Dart’s net assets has been initially allocated to intangible assets and goodwill in the amount of $9.8 million each. The preliminary fair value analysis is not yet complete.

 

7. Commitments and Contingencies

The Company’s unfunded capital commitments as of March 31, 2009 consisted primarily of offshore marine vessels, helicopters, ocean liquid tank barges and inland river towboats and totaled $124.6 million, of which $87.0 million is payable during the remainder of 2009 and the balance payable in 2010. Of the total unfunded capital commitments, $22.9 million may be terminated without further liability other than the payment of liquidated damages of $3.1 million in the aggregate. Subsequent to March 31, 2009, the Company committed to purchase additional equipment for $8.0 million and extended the delivery dates and timing of payments totaling $16.8 million for certain equipment from 2009 to 2010.

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 under banking facilities by certain of its joint ventures and has issued a performance guarantee on behalf of one of its joint ventures. As of March 31, 2009, the total amount guaranteed by the Company under these arrangements was $23.0 million. Additionally, as of March 31, 2009, the Company had an uncalled capital commitment to one of its joint ventures for $2.7 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 as appropriate. It is possible that a change in the Company’s estimates related to these exposures 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 its results of operations.

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 that called in Sudan for several months in 1999 and January 2000 and charters with third parties involving several of Seabulk’s vessels that 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 its results of operations.

During 2006 and 2007, Marine Transportation Services (“MTS”) had two of its tankers retrofitted to a double-hull configuration in a foreign shipyard to enable each of them to continue to transport crude oil and petroleum products beyond their OPA 90 mandated retirement dates in 2011. Both vessels operate in the U.S. coastwise, or Jones Act, trade which is restricted to vessels built or rebuilt in the United States. In May 2005,

 

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MTS received a determination from the U.S. Coast Guard (“USCG”), which administers the United States build requirements of the Jones Act, concluding the retro-fit work would not constitute a foreign rebuilding and therefore would not jeopardize the tankers’ eligibility to operate in the U.S. coastwise trade. MTS completed the retrofit work in the foreign shipyard in reliance upon the USCG’s determination, which MTS believes was correct and in accord with the USCG’s long-standing regulations and interpretations. On July 9, 2007, a U.S. shipbuilders trade association and two operators of tankers in the U.S. coastwise trade (“Shipbuilders”) commenced a civil action in the U.S. District Court for the Eastern District of Virginia, Shipbuilders Council of America, Inc., et al. v. U.S. Department of Homeland Security, et al. , No. 1:07cv665 (E.D. Va.) (the “SB Trader Litigation”), in which they sought to have the court set aside the USCG’s determination and direct the USCG to revoke the coastwise license of one of the two retrofitted tankers, the Seabulk Trader. MTS intervened in the action to assist the USCG in defending its determination. On April 24, 2008, the Court issued a Memorandum Opinion granting a motion for summary judgment by Shipbuilders setting aside the USCG’s determination and remanding the matter to the USCG for further proceedings with instructions to revoke the coastwise endorsement of the Seabulk Trader. On April 30, 2008, MTS appealed the decision to the U.S. Court of Appeals for the Fourth Circuit (the “Court of Appeals”), and the lower court’s decision has been stayed pending appeal, subject to certain terms (which MTS has also separately appealed). Those terms require that MTS pay to the plaintiffs 12.5% of the revenue generated by the Seabulk Trader from November 7, 2008 in the event that the Court of Appeals affirms the lower court’s decision to revoke its coastwise endorsement. On July 2, 2008, Shipbuilders commenced a second civil action in the U.S. District Court for the Eastern District of Virginia, entitled Shipbuilders Council of America, Inc., et al. v. U.S. Department of Homeland Security, et al., No. 1:08cv680 (E.D. Va.) (the “SB Challenge Litigation”), alleging essentially identical claims as those asserted in the SB Trader Litigation against MTS’s second retrofitted tanker, the Seabulk Challenge. MTS has intervened in the SB Challenge Litigation, which has been stayed pending the decision of the Court of Appeals in the SB Trader Litigation. The loss of coastwise eligibility for its two retrofitted tankers could adversely affect the Company’s financial condition and its results of operations. The aggregate carrying value of the Company’s two retro-fitted tankers was $58.3 million as of March 31, 2009 and such tankers contributed operating revenues of $7.5 million during the three months ended March 31, 2009.

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. A funding update as of March 2008 indicated that an additional funding deficit of $116.2 million had developed over the two years since the last actuarial valuation in 2006. No invoices in respect of this deficit will be issued to participating employers until the results of the next actuarial valuation, due in March 2009, are available. Should the deficit be maintained at current levels through the March 2009 actuarial valuation the Company estimates its share of the deficit to be approximately $1.5 million. The Company would recognize payroll related operating expenses at such time as it is invoiced for its share of any funding deficit.

A subsidiary of the Company is a participating employer in an industry-wide, multi-employer, defined benefit pension fund, the United Kingdom Merchant Navy Ratings Pension Fund (“MNRPF”). The Company’s participation relates to ratings employed between 1978 and 2001 by SEACOR’s Stirling group of companies

 

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(which had been acquired by SEACOR in 2001) and its predecessors. Based on an actuarial valuation in March 2008, the MNRPF has an accumulated funding deficit of $284.2 million. No decision has yet been reached as to how the deficit will be recovered but the Company expects it is likely that participating employers will be invoiced for their allocated share, at which time the Company would recognize payroll related operating expenses. The Company estimates its allocated share of the deficit to be approximately $1.0 million.

 

8. Long-Term Debt and Capital Lease Obligations

As of March 31, 2009, the Company had $125.0 million outstanding borrowings under its revolving credit facility. The remaining availability under this facility was $322.9 million, net of issued letters of credit of $2.1 million. In addition, the Company had other outstanding letters of credit totaling $40.7 million with various expiration dates through 2012. Subsequent to March 31, 2009, an additional letter of credit was issued apart from the Company’s revolving credit facility in the amount of $6.0 million with an expiration in 2010.

During the three months ended March 31, 2009, the Company made principal repayments of $22.8 million on its long-term debt and capital lease obligations excluding debt repurchases (see note 9).

Effective January 1, 2009, the Company adopted 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 requires issuers of convertible debt to account separately for the liability and equity components in a manner that reflects the issuers’ non-convertible 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. Upon adopting FSP APB 14-1, the Company recorded the impact on a retrospective basis for all periods presented and adjusted previously reported equity as of December 31, 2008 by increasing additional paid-in capital $33.9 million and reducing retained earnings $18.9 million. For the three months ended March 31, 2009 and 2008, the impact of adopting FSP APB 14-1 on the Company’s condensed consolidated statements of income was an additional $2.1 million and $1.9 million of pre-tax, non-cash interest expense, respectively. For the three months ended March 31, 2009 and 2008, the impact of the adoption on basic earnings per share was a reduction of $0.07 and $0.06 per share, respectively.

 

9. Stock and Debt Repurchases

SEACOR’s Board of Directors previously approved a securities repurchase plan that authorizes the Company to acquire shares of SEACOR common stock, par value $0.01 per share (“Common Stock”), and its 2.875% Convertible Debentures due 2024. During the three months ended March 31, 2009, the Company repurchased $2.0 million in principal amount of its 2.875% Convertible Debentures due 2024 for $1.9 million and none of its Common Stock. During the three months ended March 31, 2008, the Company acquired for treasury 545,400 shares of Common Stock for an aggregate purchase price of $45.9 million and none of its 2.875% Convertible Debentures due 2024. As of March 31, 2009, the remaining authority under the repurchase plan was $147.2 million. Subsequent to March 31, 2009, the Company purchased $1.8 million in principal amount of its 2.875% Convertible Debentures due 2024 for $1.8 million.

Additionally, the Company may purchase, separate from such authorization noted above, any or all of its 7.2% Senior Notes due 2009, its 5.875% Senior Notes due 2012 and its 9.5% Senior Notes due 2013. During the three months ended March 31, 2009, the Company repurchased $1.0 million in principal amount of its 5.875% Senior Notes due 2012 and $13.9 million in principal amount of its 9.5% Senior Notes due 2013 for an aggregate purchase price of $15.0 million. During the three months ended March 31, 2008, the Company did not purchase any of its Senior Notes. Subsequent to March 31, 2009, the Company purchased $37.0 million in principal amount of its 7.2% Senior Notes due 2009 for $37.4 million.

 

10. Acquisition of a Noncontrolling Interest

Effective January 1, 2009, the Company purchased the remaining noncontrolled subsidiary shares in a tank farm and handling facility in Sauget, Illinois and certain related leasehold improvements from a noncontrolling

 

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interest holder. The aggregate purchase price of $9.6 million included a note payable of $7.0 million, the forgiveness of a $2.4 million note receivable from the noncontrolling interest holder and cash consideration of $0.3 million.

 

11. Earnings Per Common Share of SEACOR

In accordance with SFAS No. 128, Earnings Per Share, basic earnings per common share of SEACOR are computed based on the weighted average number of common shares issued and outstanding during the relevant periods. Diluted earnings per common share of SEACOR are computed based on the weighted average number of common shares issued and outstanding plus the effect of potentially dilutive securities through the application of the treasury stock and if-converted methods. Dilutive securities for this purpose assumes restricted stock grants have vested, common shares have been issued pursuant to the exercise of outstanding stock options and common shares have been issued pursuant to the conversion of outstanding convertible debentures. For the three months ended March 31, 2009 and 2008, diluted earnings per common share of SEACOR excluded 916,472 and 564,145, respectively, of certain share awards as the effect of their inclusion in the computation would have been antidilutive.

Computations of basic and diluted earnings per common share of SEACOR are included in the table below (in thousands, except per share data). Certain prior period information has been retrospectively adjusted to reflect the adoption of FSP APB 14-1 (see note 8).

 

       For the Three Months Ended March 31,
       Net
Income
     Average O/S
Shares
     Per
Share

2009

              

Basic Earnings Per Common Share of SEACOR Holdings Inc.

     $ 52,994      19,762      $ 2.68

Effect of Dilutive Securities, net of tax:

              

Options and Restricted Stock

            328     

Convertible Securities

       2,558      3,417     
                    

Diluted Earnings Per Common Share of SEACOR Holdings Inc.

     $ 55,552      23,507      $ 2.36
                    

2008

              

Basic Earnings Per Common Share of SEACOR Holdings Inc.

     $ 36,645      22,344      $ 1.64

Effect of Dilutive Securities, net of tax:

              

Options and Restricted Stock

            249     

Convertible Securities

       2,475      3,418     
                    

Diluted Earnings Per Common Share of SEACOR Holdings Inc.

     $ 39,120      26,011      $ 1.50
                    

 

12. Comprehensive Income

For the three months ended March 31, 2009 and 2008, total comprehensive income was $53.2 million and $34.4 million, respectively (total comprehensive income for the three months ended March 31, 2008 has been retrospectively adjusted to reflect the adoption of SFAS No. 160 and FSP APB 14-1 — see notes 1 and 8). For the three months ended March 31, 2009, other comprehensive loss consisted of gains and losses from foreign currency translation adjustments, net of tax, and derivative losses on a cash flow hedge, net of tax (see note 3). For the three months ended March 31, 2008, other comprehensive loss consisted of gains and losses from foreign currency translation adjustments, net of tax, and unrealized holding gains and losses on available-for-sale marketable securities, net of tax.

 

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13. Share Based Compensation

The following transactions have occurred in connection with the Company’s share based compensation plans during the three months ended March 31, 2009:

 

Director stock awards granted

   1,250  
      

Employee Stock Purchase Plan (“ESPP”) shares issued

   25,527  
      

Restricted stock awards granted

   141,250  
      

Restricted stock awards cancelled

   1,140  
      

Shares released from Deferred Compensation Plan

   1,207  
      

Restricted Stock Unit Activities:

  

Outstanding as of December 31, 2008

   1,445  

Granted

   600  

Converted to shares and issued to Deferred Compensation Plan

   (375 )
      

Outstanding as of March 31, 2009

   1,670  
      

Stock Option Activities:

  

Outstanding as of December 31, 2008

   1,129,685  

Granted

   50,710  

Exercised

   (4,875 )

Cancelled

   (3,025 )
      

Outstanding as of March 31, 2009

   1,172,495  
      

Shares available for future grants and ESPP purchases as of March 31, 2009

   503,587  
      

 

14. New Accounting Pronouncement

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 the American Institute of Certified Public Accountants Professional Standards 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 its current accounting policies and as such will have no impact on its consolidated financial position or its results of operations.

 

15. Segment Information

Accounting standards require public business enterprises to report information about each of their operating business segments that exceed certain quantitative thresholds or meet certain other reporting requirements. Operating business segments have been defined as a component of an enterprise about which separate financial information is available and is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s basis of measurement of segment profit or loss has not changed from those previously described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

 

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The following tables summarize the operating results, capital expenditures and assets of the Company’s reportable segments. Certain prior period information has been retrospectively adjusted to reflect the adoption of FSP APB 14-1 (see note 8). Certain reclassifications of prior period information have been made to conform to the current period’s segment presentation.

 

    Offshore
Marine
Services
$ ’000
  Marine
Transportation
Services

$ ’000
    Inland
River
Services
$ ’000
  Aviation
Services
$ ’000
    Environmental
Services

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

For the three months ended March 31, 2009

                 

Operating Revenues:

                 

External customers

  163,484   26,537     35,219   59,378     34,184     64,503     16,211         399,516  

Intersegment

  1,299       1,795   7     50         135     (3,286 )    
                                                 
  164,783   26,537     37,014   59,385     34,234     64,503     16,346     (3,286 )   399,516  
                                                 

Costs and Expenses:

                 

Operating

  78,839   16,771     19,409   40,317     24,077     61,871     10,704     (3,576 )   248,412  

Administrative and general

  10,198   1,184     2,136   4,151     7,241     1,839     2,226     9,707     38,682  

Depreciation and amortization

  13,689   7,999     4,866   8,706     1,754         1,952     298     39,264  
                                                 
  102,726   25,954     26,411   53,174     33,072     63,710     14,882     6,429     326,358  
                                                 

Gains on Asset Dispositions and Impairments, Net

  14,446       2,261   45     8                 16,760  
                                                 

Operating Income (Loss)

  76,503   583     12,864   6,256     1,170     793     1,464     (9,715 )   89,918  
                                                 

Other Income (Expense):

                 

Derivative gains, net

          391         949         2,271     3,611  

Foreign currency gains (losses), net

  1,365   (34 )     429     (33 )   (17 )   3     (1,055 )   658  

Other, net

  172                     (53 )   71     190  

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

  2,391       1,172   (274 )   86     155     (3 )       3,527  
                                         

Segment Profit

  80,431   549     14,036   6,802     1,223     1,880     1,411      
                                         

Other Income (Expense) not included in Segment Profit

 

  (15,912 )

Less Equity Earnings included in Segment Profit

 

  (3,527 )
                     

Income Before Taxes and Equity Earnings

 

  78,465  
                     

Capital Expenditures

  10,436       5,140   8,328     1,055         37     692     25,688  
                                                 

As of March 31, 2009

                 

Property and Equipment

  790,293   388,339     281,434   476,063     33,214         138,456     4,067     2,111,866  

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

  29,159       84,861   26,984     1,969     2,353     12,740         158,066  

Goodwill

  13,367       1,493   353     36,404         1,302         52,919  

Intangible Assets

  12,024   2,621     1,698       10,167         720         27,230  

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

  159,702   11,441     26,064   69,618     60,390     38,648     27,043     25,380     418,286  
                                         

Segment Assets

  1,004,545   402,401     395,550   573,018     142,144     41,001     180,261      
                                         

Cash and near cash assets(1)

                  749,170  
                     

Total Assets

                  3,517,537  
                     

 

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

 

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    Offshore
Marine
Services
$ ’000
    Marine
Transportation
Services

$ ’000
  Inland
River
Services
$ ’000
  Aviation
Services
$ ’000
    Environmental
Services

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

For the three months ended March 31, 2008

                 

Operating Revenues:

                 

External customers

  154,260     28,953   30,145   53,792     42,488     28,674     16,143         354,455  

Intersegment

  387             21         114     (522 )    
                                                 
  154,647     28,953   30,145   53,792     42,509     28,674     16,257     (522 )   354,455  
                                                 

Costs and Expenses:

                 

Operating

  94,270     16,219   16,726   39,871     30,598     26,757     11,109     (510 )   235,040  

Administrative and general

  12,804     1,438   2,123   4,629     5,709     727     1,973     9,602     39,005  

Depreciation and amortization

  14,125     7,980   3,964   7,789     1,445         2,267     230     37,800  
                                                 
  121,199     25,637   22,813   52,289     37,752     27,484     15,349     9,322     311,845  
                                                 

Gains (Losses) on Asset Dispositions and Impairments, Net

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

Operating Income (Loss)

  40,586     6,945   8,043   1,897     4,792     1,190     908     (9,845 )   54,516  
                                                 

Other Income (Expense):

                 

Derivative gains (losses), net

          179         (490 )   5     6,773     6,467  

Foreign currency gains (losses), net

  (155 )   30     (31 )   (9 )   (1 )   (7 )   2,783     2,610  

Other, net

          39         1         124     164  

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

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

Segment Profit

  44,064     6,975   8,954   2,024     4,841     700     943      
                                         

Other Income (Expense) not included in Segment Profit

 

  (11,699 )

Less Equity Earnings included in Segment Profit

 

  (4,579 )
                     

Income Before Taxes and Equity Earnings

 

  52,058  
                     

Capital Expenditures

  30,071     5,645   12,364   20,598     3,479         9,322     13     81,492  
                                                 

As of March 31, 2008

                 

Property and Equipment

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

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

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

Goodwill

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

Intangible Assets

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

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

  149,323     10,459   28,499   78,709     65,953     5,308     19,717     52,885     410,853  
                                         

Segment Assets

  1,010,255     433,815   341,195   418,935     142,867     5,308     166,730      
                                         

Cash and near cash assets(1)

                  973,289  
                     

Total Assets

                  3,549,143  
                     

 

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

 

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

This Form 10-Q includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements concerning management’s expectations, strategic objectives, business prospects, anticipated economic performance and financial condition and other similar matters involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of results to differ materially from any future results, performance or achievements discussed or implied by such forward-looking statements. Such risks, uncertainties and other important factors include, among others: the unprecedented decline in valuations in the global financial markets and illiquidity in the credit sectors, including, interest rate fluctuations, availability of credit, inflation rates, change in laws, trade barriers, commodity prices and currency exchange fluctuations, the cyclical nature of the oil and gas industry, loss of U.S. coastwise endorsement for the retro-fitted double-hull tankers, Seabulk Trader and Seabulk Challenge, if the Company is unsuccessful in defending litigation seeking the revocation of their coastwise charters, activity in foreign countries and changes in foreign political, military and economic conditions, changes in foreign and domestic oil and gas exploration and production activity, safety record requirements related to Offshore Marine Services, Marine Transportation Services and Aviation Services, decreased demand for Marine Transportation Services and Harbor and Offshore Towing Services due to construction of additional refined petroleum 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, 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, the level of grain export volume, the effect of fuel prices on barge towing costs, variability in freight rates for inland river barges, the effect of international economic and political factors in Inland River Services’ operations, adequacy of insurance coverage, the attraction and retention of qualified personnel by the Company and various other matters and factors, many of which are beyond the Company’s control. In addition, these statements constitute the Company’s cautionary statements under the Private Securities Litigation Reform Act of 1995. It is not possible to predict or identify all such factors. Consequently, the following should not be considered a complete discussion of all potential risks or uncertainties. The words “estimate,” “project,” “intend,” “believe,” “plan” and similar expressions are intended to identify forward-looking statements. Forward-looking statements speak only as of the date of the document in which they are made. The Company disclaims any obligation or undertaking to provide any updates or revisions to any forward-looking statement to reflect any change in the Company’s expectations or any change in events, conditions or circumstances on which the forward-looking statement is based. The forward-looking statements in this Form 10-Q should be evaluated together with the many uncertainties that affect the Company’s businesses, particularly those mentioned under “Forward-Looking Statements” in Item 7 on the Company’s Form 10-K and SEACOR’s periodic reporting on Form 8-K (if any), which are incorporated by reference.

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 lending and 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 ended March 31, 2009 (“Current Year Quarter”) compared with the three months ended March 31, 2008 (“Prior Year Quarter”). See “Item 1. Financial Statements - Note 15. Segment Information” included in Part I for consolidating segment tables for each period presented.

Offshore Marine Services

 

     For the Three Months
Ended March 31,
   Change
’09/’08
     2009    2008    3 Mos.
     $ ’000    %    $ ’000     %    %

Operating Revenues:

             

United States

   75,848    46    70,030     45   
                       

Africa, primarily West Africa

   29,063    18    32,319     21   

United Kingdom, primarily North Sea

   15,160    9    19,163     12   

Middle East

   21,346    13    16,494     11   

Asia

   7,041    4    6,467     4   

Mexico, Central and South America

   16,325    10    10,174     7   
                       

Total Foreign

   88,935    54    84,617     55   
                       
   164,783    100    154,647     100    7
                       

Costs and Expenses:

             

Operating

   78,839    48    94,270     61   

Administrative and general

   10,198    6    12,804     8   

Depreciation and amortization

   13,689    8    14,125     9   
                       
   102,726    62    121,199     78   
                       

Gains on Asset Dispositions

   14,446    9    7,138     4   
                       

Operating Income

   76,503    47    40,586     26    88
                       

Other Income (Expense):

             

Foreign currency gains (losses), net

   1,365    1    (155 )     

Other, net

   172             

Equity in Earnings of 50% or Less Owned Companies

   2,391    1    3,633     2   
                       

Segment Profit

   80,431    49    44,064     28    83
                       

Operating Revenues. Operating revenues increased by $10.1 million in the Current Year Quarter compared with the Prior Year Quarter. Time charter revenues decreased by $0.1 million and other operating revenues, including third party vessel brokerage activity, bareboat charter revenues and other marine services, increased by $10.2 million.

In overall terms, the decrease in time charter revenues was due to a 2,059 day, or 13%, reduction in days available for charter due to net fleet dispositions, partially offset by an 8% improvement in average day rates and a 4% increase in utilization. On a regional basis, including net fleet dispositions, mobilizations between geographical regions and other changes in fleet mix, days available for charter were 18% lower in the U.S. Gulf of Mexico, 24% lower in West Africa, 5% lower in Asia and 12% lower in the Middle East. Days available for charter were 16% higher in Mexico, Central and South America, and 3% higher in the North Sea.

 

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In the U.S. Gulf of Mexico, time charter revenues were higher in the Current Year Quarter compared with the Prior Year Quarter primarily due to the commencement in the Prior Year Quarter of the repair and regulatory upgrade program of the Company’s large AHTS vessels, which resulted in 87 days of out-of-service time. Average day rates improved in most other regions except Mexico, Central and South America, where average day rates declined due to lower rates for vessels that had mobilized from other geographical regions. Average rates also declined in the North Sea due to unfavorable currency exchange rate movements between the U.S. dollar and the pound sterling.

The improvements in average day rates contributed additional time charter revenues of $10.8 million before the impact of unfavorable changes in currency exchange rates, which reduced time charter revenues by $5.4 million. Net fleet dispositions, the impact of vessels mobilizing between geographic regions, changes in utilization and other changes in fleet mix reduced time charter revenues by $5.5 million.

Operating Income. Operating income in the Current Year Quarter included $14.4 million of gains on asset dispositions compared with $7.1 million of gains in the Prior Year Quarter. Excluding the impact of these gains, operating income increased by $28.6 million primarily due to the improvements in operating revenues noted above and a reduction in operating expenses of $15.4 million. The reduction in operating expenses was primarily due to net fleet dispositions and a reduction in the number of scheduled drydockings and lower unscheduled repair costs. Administrative and general expenses were $2.6 million lower in the Current Year Quarter compared with the Prior Year Quarter primarily due to a restructuring of the international group.

Equity in Earnings of 50% or Less Owned Companies. Equity earnings decreased by $1.2 million in the Current Year Quarter compared with the Prior Year Quarter. During the Prior Year Quarter, Offshore Marine Services recognized a gain of $1.9 million, net of tax, relating to the sale of a vessel owned by a Norwegian joint venture.

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

 

     Owned    Joint
Ventured
   Leased-in    Pooled or
Managed
   Total

2009

              

Anchor handling towing supply

   18    1    1    1    21

Crew

   45    2    23    1    71

Mini-supply

   10       5       15

Standby safety

   24          4    28

Supply

   12       8    8    28

Towing supply

   7    3    2    1    13

Specialty

   6    3          9
                        
   122    9    39    15    185
                        

2008

              

Anchor handling towing supply

   15    1    2    2    20

Crew

   52    2    23       77

Mini-supply

   15       5    1    21

Standby safety

   23    1       5    29

Supply

   13       11    2    26

Towing supply

   12    3    2    1    18

Specialty

   11    3          14
                        
   141    10    43    11    205
                        

 

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Table of Contents

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

 

     For the Three Months
Ended March 31,
 
     2009     2008  

Rates Per Day Worked:

    

Anchor handling towing supply

   $ 47,719     $ 32,173  

Crew

     7,311       6,745  

Mini-supply

     5,811       7,072  

Standby safety

     7,756       10,146  

Supply

     16,323       15,537  

Towing supply

     11,581       10,227  

Specialty

     13,453       11,792  

Overall Average Rates Per Day Worked

     12,777       11,783  

Utilization:

    

Anchor handling towing supply

     73 %     82 %

Crew

     78 %     69 %

Mini-supply

     73 %     61 %

Standby safety

     90 %     89 %

Supply

     82 %     88 %

Towing supply

     90 %     80 %

Specialty

     99 %     91 %

Overall Fleet Utilization

     81 %     77 %

Available Days:

    

Anchor handling towing supply

     1,506       1,547  

Crew

     6,123       6,552  

Mini-supply

     1,378       1,820  

Standby safety

     2,160       2,093  

Supply

     1,800       2,099  

Towing supply

     871       1,300  

Specialty

     450       936  
                

Overall Fleet Available Days

     14,288       16,347  
                

 

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Table of Contents

Marine Transportation Services

 

     For the Three Months
Ended March 31,
   Change
’09/’08
 
     2009    2008    3 Mos.  
     $ ’000     %    $ ’000    %    %  

Operating Revenues:

             

United States

   26,537     100    28,953    100    (8 )
                       

Costs and Expenses:

             

Operating

   16,771     63    16,219    56   

Administrative and general

   1,184     5    1,438    5   

Depreciation and amortization

   7,999     30    7,980    28   
                       
   25,954     98    25,637    89   
                       

Gains on Asset Dispositions

          3,629    13   
                       

Operating Income

   583     2    6,945    24    (92 )
                       

Other Income (Expense):

             

Foreign currency gains (losses), net

   (34 )      30      
                       

Segment Profit

   549     2    6,975    24    (92 )
                       

Operating Revenues. Operating revenues decreased by $2.4 million in the Current Year Quarter compared with the Prior Year Quarter. Operating revenues were lower in the Current Year Quarter due to out-of-service time in the Current Year Quarter for the Seabulk Energy while undergoing a regulatory docking and the change in contract status of the California Voyager from time charter to long-term bareboat charter commencing in September 2008. These decreases were partially offset by higher operating revenues in the Current Year Quarter for the Seabulk Pride due to out-of-service time in the Prior Year Quarter while undergoing repairs and for the Seabulk Challenge due to a higher average day rate.

Operating Income. Operating income in the Prior Year Quarter included gains of $3.6 million on the sale of the Seabulk Magnachem and Seabulk Power. Excluding the impact of these gains, operating income decreased by $2.7 million in the Current Year Quarter compared with the Prior Year Quarter. In addition to the changes in operating revenues described above, operating expenses were higher in the Current Year Quarter, primarily due to the regulatory drydocking of the Seabulk Energy, partially offset by the change in contract status of the California Voyager from time charter to long-term bareboat charter, lower voyage costs for the Seabulk America and lower repair costs for the Seabulk Challenge

Fleet Count. As of March 31, 2009 and 2008, Marine Transportation Services owned eight U.S.-flag product tankers operating in the domestic coastwise trade.

 

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Table of Contents

Inland River Services

 

     For the Three Months
Ended March 31,
   Change
’09/’08
     2009    2008    3 Mos.
     $ ’000    %    $ ’000    %    %

Operating Revenues:

              

United States

   37,014    100    30,145    100    23
                      

Costs and Expenses:

              

Operating

   19,409    52    16,726    55   

Administrative and general

   2,136    6    2,123    7   

Depreciation and amortization

   4,866    13    3,964    13   
                      
   26,411    71    22,813    75   
                      

Gains on Asset Dispositions

   2,261    6    711    2   
                      

Operating Income

   12,864    35    8,043    27    60
                      

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

   1,172    3    911    3   
                      

Segment Profit

   14,036    38    8,954    30    57
                      

Operating Revenues. Operating revenues increased by $6.9 million in the Current Year Quarter compared with the Prior Year Quarter primarily due to the addition of new equipment in the liquid unit tow operation. In the Current Year Quarter, the liquid unit tow operation included two additional towboats, eight additional 30,000-barrel liquid tank barges, two fewer 10,000-barrel liquid tank barges and one less 25,000-barrel liquid tank barge compared with the Prior Year Quarter. In addition, operating revenues were higher following the return of dry cargo barges to the pooled operating fleet that were previously on a long-term charter to a third party and the commencement of terminal operations in Sauget, Illinois in May 2008.

Operating Income. Operating income for the Current Year Quarter included $2.3 million of gains on asset dispositions compared with $0.7 million of gains on asset dispositions in the Prior Year Quarter. Excluding the impact of these gains, operating income increased by $3.3 million primarily due to the addition of the new equipment in the liquid unit tow operation noted above. The dry cargo barge operation benefited from favorable operating conditions and lower fuel prices that resulted in lower towing, fleeting and switching costs compared with the Prior Year Quarter. The commencement of terminal operations in Sauget, Illinois also contributed to the improvement in operating income.

 

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Table of Contents

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

 

     Owned    Joint
Ventured
   Leased-in    Pooled or
Managed
   Total

2009

              

Inland river dry cargo barges-open

   209    124          333

Inland river dry cargo barges-covered

   373    138    2    116    629

Inland river liquid tank barges

   51    34    2       87

Inland river deck barges

   26             26

Inland river towboats

   18    5          23

Dry-cargo vessels

      1          1
                        
   677    302    4    116    1,099
                        

2008

              

Inland river dry cargo barges-open

   213    97    5    3    318

Inland river dry cargo barges-covered

   399    125    2    139    665

Inland river liquid tank barges

   46    22    2       70

Inland river deck barges

   26             26

Inland river towboats

   16    4          20

Dry-cargo vessels

              
                        
   700    248    9    142    1,099
                        

Aviation Services

 

     For the Three Months
Ended March 31,
   Change
’09/’08
     2009    2008    3 Mos.
     $ ’000     %    $ ’000     %    %

Operating Revenues:

            

United States

   51,513     87    49,513     92   

Foreign

   7,872     13    4,279     8   
                        
   59,385     100    53,792     100    10
                        

Costs and Expenses:

            

Operating

   40,317     68    39,871     74   

Administrative and general

   4,151     7    4,629     9   

Depreciation and amortization

   8,706     14    7,789     14   
                        
   53,174     89    52,289     97   
                        

Gains on Asset Dispositions and Impairments, Net

   45        394     1   
                        

Operating Income

   6,256     11    1,897     4    230
                        

Other Income (Expense):

            

Derivative gains, net

   391        179       

Foreign currency gains (losses), net

   429        (31 )     

Other, net

          39       

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

   (274 )      (60 )     
                        

Segment Profit

   6,802     11    2,024     4    236
                        

 

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Table of Contents

Operating Revenues. Operating revenues increased by $5.6 million in the Current Year Quarter compared with the Prior Year Quarter. Operating revenues in the U.S. Gulf of Mexico increased due to additional contracts and charter flights and generally better rates with new equipment, offset by lower re-billable fuel revenues as a result of a decline in fuel prices. International operating revenues increased as additional helicopters were placed on long-term leases and short-term contracts outside the United States. Operating revenues in Alaska decreased due to a reduction in fuel sales volume at the fixed-base operation and the decline in fuel prices.

Operating Income. Operating income increased by $4.7 million in the Current Year Quarter compared with the Prior Year Quarter before a $0.4 million gain on asset dispositions in the Prior Year Quarter. In addition to the improvements in operating revenues noted above, operating income was positively affected by lower fuel expenses due to the decline in fuel prices, lower wage and benefit costs and lower administrative and general expenses due to the recovery of a previously reserved receivable balance from a major Alaska-based customer. These improvements in operating income were partially offset by increases in insurance expense as a result of net fleet additions and higher repair costs due to the timing of component and fleet repair and maintenance. In addition, operating expenses in the Current Year Quarter were higher due to costs related to hurricane disruption in the U.S. Gulf of Mexico. Depreciation expense was higher in the Current Year Quarter due to the addition of new equipment to the fleet partially offset as a result of assets acquired in a 2004 acquisition reaching the end of their depreciable lives.

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

 

     Owned(1)    Joint
Ventured
   Leased-in    Managed    Total

2009

              

Light helicopters – single engine

   52    6    6       64

Light helicopters – twin engine

   35       6    14    55

Medium helicopters

   52       3    8    63

Heavy helicopters

   6             6
                        
   145    6    15    22    188
                        

2008

              

Light helicopters – single engine

   52    4    8       64

Light helicopters – twin engine

   31       7    16    54

Medium helicopters

   45       3    7    55

Heavy helicopters

   3             3
                        
   131    4    18    23    176
                        

 

(1) Excludes one and four helicopter(s) removed from service as of March 31, 2009 and 2008, respectively.

 

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Table of Contents

Environmental Services

 

     For the Three Months
Ended March 31,
   Change
’09/’08
 
     2009    2008    3 Mos.  
     $ ’000     %    $ ’000     %    %  

Operating Revenues:

            

United States

   28,872     84    34,531     81   

Foreign

   5,362     16    7,978     19   
                        
   34,234     100    42,509     100    (19 )
                        

Costs and Expenses:

            

Operating

   24,077     70    30,598     72   

Administrative and general

   7,241     21    5,709     14   

Depreciation and amortization

   1,754     6    1,445     3   
                        
   33,072     97    37,752     89   
                        

Gains on Asset Dispositions

   8        35       
                        

Operating Income

   1,170     3    4,792     11    (76 )
                        

Other Income (Expense):

            

Foreign currency losses, net

   (33 )      (9 )     

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

   86        58       
                        

Segment Profit

   1,223     3    4,841     11    (75 )
                        

Operating Revenues. Operating revenues decreased by $8.3 million in the Current Year Quarter compared with the Prior Year Quarter primarily due to a reduction in project management and emergency response service activities. The decrease in project management revenues was primarily due to a reduction in pipeline repair services and industrial services in the Current Year Quarter. The decrease in emergency response revenues was primarily due to a significant response project in Tulsa, Oklahoma in the Prior Year Quarter.

Operating Income. Operating income decreased by $3.6 million in the Current Year Quarter compared with the Prior Year Quarter primarily due to the reduction in activities noted above and higher administrative and general expenses, primarily due to higher management bonus awards and an increase in the reserve for doubtful accounts.

 

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Commodity Trading

 

     For the Three Months
Ended March 31,
    Change
’09/’08
 
     2009    2008     3 Mos.  
     $ ’000     %    $ ’000     %     %  

Operating Revenues:

           

United States

   31,331     49    27,384     96    

Foreign

   33,172     51    1,290     4    
                         
   64,503     100    28,674     100     125  
                         

Costs and Expenses:

           

Operating

   61,871     96    26,757     93    

Administrative and general

   1,839     3    727     3    
                         
   63,710     99    27,484     96    
                         

Operating Income

   793     1    1,190     4     (33 )
                         

Other Income (Expense):

           

Derivative gains (losses), net

   949     2    (490 )   (2 )  

Foreign currency losses, net

   (17 )      (1 )      

Other, net

          1        

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

   155               
                         

Segment Profit

   1,880     3    700     2     169  
                         

Segment Profit. Segment profit improved by $1.2 million in the Current Year Quarter compared with the Prior Year Quarter due to increased activity in renewable fuel merchandising, including logistics and transport, and higher rice merchandising activity levels. Rice merchandising activities commenced in February 2008.

Other Segment Profit

 

     For the Three Months
Ended March 31,
    Change
’09/’08
 
         2009             2008         3 Mos.  
     $ ’000     $ ’000     %  

Harbor and Offshore Towing Services

   1,670     1,110     50  

Other Activities

   (256 )   (204 )   (25 )

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

   (3 )   37     (108 )
              

Segment Profit

   1,411     943     50  
              

Harbor and Offshore Towing Services. Segment profit increased $0.6 million in the Current Year Quarter compared with the Prior Year Quarter primarily due to improved results from terminal operations in St. Eustatius and lower fuel costs.

 

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Corporate and Eliminations

 

     For the Three Months
Ended March 31,
    Change
’09/’08
 
         2009             2008         3 Mos.  
     $ ’000     $ ’000     %  

Corporate Expenses

   (10,022 )   (9,851 )   (2 )

Eliminations

   307     6     5017  
              

Operating Loss

   (9,715 )   (9,845 )   3  
              

Other Income (Expense):

      

Derivative gains, net

   2,271     6,773     (66 )

Foreign currency gains (losses), net

   (1,055 )   2,783     (138 )

Other, net

   71     124     (43 )

Derivative gains, net. Derivative gains, net decreased by $4.5 million in the Current Year Quarter compared with the Prior Year Quarter primarily due to lower gains on forward currency exchange contracts and commodity swap, option and future contracts.

Foreign currency gains (losses), net. Foreign currency losses of $1.1 million in the Current Year Quarter were primarily due to a weakening of the U.S. dollar against the euro and the corresponding revaluation of euro cash balances held by the Company. Foreign currency gains of $2.8 million in the Prior Year Quarter were primarily due to a strengthening of the U.S. dollar against the euro and the corresponding revaluation of euro cash balances held by the Company.

Other Income (Expense) not included in Segment Profit

 

     For the Three Months
Ended March 31,
    Change
’09/’08
 
         2009             2008         3 Mos.  
     $ ’000     $ ’000     %  

Interest income

   1,043     7,476     (86 )

Interest expense

   (14,337 )   (13,491 )   (6 )

Debt extinguishment gains, net

   1,363         n/a  

Marketable security losses, net

   (3,981 )   (5,684 )   30  
              
   (15,912 )   (11,699 )   (36 )
              

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

Interest Expense. Interest expense increased in the Current Year Quarter compared with the Prior Year Quarter primarily due to lower capitalized interest partially offset by a lower overall interest rate. The impact of adopting FSP APB 14-1 was an additional $2.1 million and $1.9 million of pre-tax, non-cash interest expense in the Current Year Quarter and Prior Year Quarter, respectively.

 

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Debt extinguishment gains, net. Debt extinguishment gains, net in the Current Year Quarter resulted from the Company’s purchase of $1.0 million in principal amount of its 5.875% Senior Notes due 2012, $13.9 million in principal amount of its 9.5% Senior Notes due 2013 and $2.0 million in principal amount of its 2.875% Convertible Debentures due 2024 for an aggregate purchase price of $16.9 million at average prices below their respective principal amounts and the recognition of unamortized net premiums. There were no debt purchases in the Prior Year Quarter.

Marketable security losses, net. Marketable security losses, net in the Current Year Quarter resulted from losses on long marketable security positions. Marketable security losses, net in the Prior Year Quarter resulted from losses on short sales of marketable securities partially offset by gains on long marketable security positions.

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 Three Months
Ended March 31,
 
     2009     2008  
     $ ’000     $ ’000  

Cash flows provided by or (used in):

    

Operating Activities

   99,168     59,268  

Investing Activities

   16,346     (113,188 )

Financing Activities

   (14,160 )   (41,040 )

Effect of Exchange Rate Changes on Cash and Cash Equivalents

   (76 )   2,442  
            

Net Increase (Decrease) in Cash and Cash Equivalents

   101,278     (92,518 )
            

Operating Activities

Cash flows provided by operating activities increased in the Current Year Quarter compared with the Prior Year Quarter primarily due to improved net income before depreciation and gains on asset dispositions and increased deferrals of income tax obligations and current payables.

Effective October 1, 2008, the Company designated its investments in marketable equity and debt securities as trading securities from their previous available-for-sale designation. As a result, cash flows from trading securities are now reported within operating activities. Prior to this change in designation, cash flows relating to available-for-sale securities were reported within investing activities. During the Current Year Quarter, cash used in operating activities included $4.0 million to purchase marketable security long positions and $0.6 million to cover marketable security short positions. During the Current Year Quarter, cash provided by operating activities included $2.7 million received from the sale of marketable security long positions and $2.2 million received upon entering into marketable security short positions.

 

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Investing Activities

Cash flows provided by investing activities were $16.3 million in the Current Year Quarter compared with cash flows used in investing activities of $113.2 million in the Prior Year Quarter.

During the Prior Year Quarter, cash used in investing activities included $58.9 million to purchase marketable security long positions and $23.5 million to cover marketable security short positions. During the Prior Year Quarter, cash provided by investing activities included $8.9 million received from the sale of marketable security long positions and $14.2 million received upon entering into marketable security short positions.

During the Current Year Quarter, capital expenditures were $25.7 million. Equipment deliveries during the period included one offshore marine vessel, one inland river towboat and two helicopters. During the Prior Year Quarter, capital expenditures were $81.5 million. Equipment deliveries during the Prior Year Quarter included two offshore marine vessels, five inland river dry cargo barges, three inland river towboats, four helicopters, one harbor tug and two ocean liquid tank barges.

During the Current Year Quarter, the Company sold eight offshore marine vessels and four inland river dry cargo barges. One leased helicopter was a total loss after an accident in the North Sea. The Company received $43.9 million on the disposition of these assets, including the insurance proceeds for the helicopter, and recognized net gains of $16.8 million. During the Prior Year Quarter, the Company sold two offshore marine vessels, two tankers, one inland river dry cargo barge, three inland river liquid tank barges and other equipment for an aggregate consideration of $38.1 million and recognized net gains of $11.9 million.

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

As of March 31, 2009, construction reserve funds of $279.8 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 Year Quarter, construction reserve fund account transactions included withdrawals of $21.6 million and deposits of $13.5 million. During the Prior Year Quarter, construction reserve account transactions included deposits of $8.6 million.

The Company’s unfunded capital commitments as of March 31, 2009 consisted primarily of offshore marine vessels, helicopters, ocean liquid tank barges and inland river towboats and totaled $124.6 million, of which $87.0 million is payable during the remainder of 2009 and the balance payable in 2010. Of the total unfunded capital commitments, $22.9 million may be terminated without further liability other than the payment of liquidated damages of $3.1 million in the aggregate. Subsequent to March 31, 2009, the Company committed to purchase additional equipment for $8.0 million and extended the delivery dates and timing of payments totaling $16.8 million for certain equipment from 2009 to 2010.

Financing Activities

Cash flows used in financing activities were $14.2 million in the Current Year Quarter compared with cash flows used in financing activities of $41.0 million in the Prior Year Quarter.

SEACOR’s Board of Directors previously approved a securities repurchase plan that authorizes the Company to acquire shares of Common Stock and its 2.875% Convertible Debentures due 2024. During the

 

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Current Year Quarter, the Company repurchased $2.0 million in principal amount of its 2.875% Convertible Debentures due 2024 for $1.9 million and none of its Common Stock. During the Prior Year Quarter, the Company acquired for treasury 545,400 shares of Common Stock for an aggregate purchase price of $45.9 million and none of its 2.875% Convertible Debentures due 2024. As of March 31, 2009, the remaining authority under the repurchase plan was $147.2 million. Subsequent to March 31, 2009, the Company purchased $1.8 million in principal amount of its 2.875% Convertible Debentures due 2024 for $1.8 million.

Additionally, the Company may purchase, separate from such authorization noted above, any or all of its 7.2% Senior Notes due 2009, its 5.875% Senior Notes due 2012 and its 9.5% Senior Notes due 2013. During the Current Year Quarter, the Company repurchased $1.0 million in principal amount of its 5.875% Senior Notes due 2012 and $13.9 million in principal amount of its 9.5% Senior Notes due 2013 for an aggregate purchase price of $15.0 million. During the Prior Year Quarter, the Company did not purchase any of its Senior Notes. Subsequent to March 31, 2009, the Company purchased $37.0 million in principal amount of its 7.2% Senior Notes due 2009 for $37.4 million.

During the Current Year Quarter, the Company drew $25.0 million under its revolving credit facility. The remaining availability under this facility was $322.9 million, net of issued letters of credit of $2.1 million. In addition, the Company had other outstanding letters of credit totaling $40.7 million with various expiration dates through 2012. During the Prior Year Quarter, there were no draws under the revolving credit facility. Subsequent to March 31, 2009, an additional letter of credit was issued apart from the Company’s revolving credit facility in the amount of $6.0 million with an expiration in 2010.

During the Current Year Quarter, the Company made principal payments on long-term debt and capital lease obligations of $22.8 million excluding debt repurchases. During the Prior Year Quarter, the Company made principal payments on long-term debt and capital lease obligations of $1.2 million.

Short and Long-Term Liquidity Requirements

The current economic conditions have created an unprecedented disruption in the credit and capital markets. To date, the Company’s liquidity has not been materially impacted and management does not expect that it will be materially impacted in the near future. 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. In support of the Company’s capital expenditure program or other liquidity requirements, the Company may use its 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.

As of April 29, 2009, the outstanding principal balance of the Company’s 7.2% Senior Notes due September 2009 was $32.8 million. The Company expects to refinance the remaining principal balance of this debt provided the credit and capital markets are accessible on reasonable terms. If the refinancing is unsuccessful, the Company believes its liquidity will be sufficient to meet its obligations.

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. Management will continue to closely monitor the Company’s liquidity and the credit and capital markets.

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.

 

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Management has used estimates in determining the Company’s potential exposure to these matters and has recorded reserves in its financial statements related thereto as appropriate. It is possible that a change in the Company’s estimates related to these exposures 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 its results of operations.

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 that called in Sudan for several months in 1999 and January 2000 and charters with third parties involving several of Seabulk’s vessels that 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 its results of operations.

During 2006 and 2007, Marine Transportation Services (“MTS”) had two of its tankers retrofitted to a double-hull configuration in a foreign shipyard to enable each of them to continue to transport crude oil and petroleum products beyond their OPA 90 mandated retirement dates in 2011. Both vessels operate in the U.S. coastwise, 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 U.S. Coast Guard (“USCG”), which administers the United States build requirements of the Jones Act, concluding the retro-fit work would not constitute a foreign rebuilding and therefore would not jeopardize the tankers’ eligibility to operate in the U.S. coastwise trade. MTS completed the retrofit work in the foreign shipyard in reliance upon the USCG’s determination, which MTS believes was correct and in accord with the USCG’s long-standing regulations and interpretations. On July 9, 2007, a U.S. shipbuilders trade association and two operators of tankers in the U.S. coastwise trade (“Shipbuilders”) commenced a civil action in the U.S. District Court for the Eastern District of Virginia, Shipbuilders Council of America, Inc., et al. v. U.S. Department of Homeland Security, et al. , No. 1:07cv665 (E.D. Va.) (the “SB Trader Litigation”), in which they sought to have the court set aside the USCG’s determination and direct the USCG to revoke the coastwise license of one of the two retrofitted tankers, the Seabulk Trader. MTS intervened in the action to assist the USCG in defending its determination. On April 24, 2008, the Court issued a Memorandum Opinion granting a motion for summary judgment by Shipbuilders setting aside the USCG’s determination and remanding the matter to the USCG for further proceedings with instructions to revoke the coastwise endorsement of the Seabulk Trader. On April 30, 2008, MTS appealed the decision to the U.S. Court of Appeals for the Fourth Circuit (the “Court of Appeals”), and the lower court’s decision has been stayed pending appeal, subject to certain terms (which MTS has also separately appealed). Those terms require that MTS pay to the plaintiffs 12.5% of the revenue generated by the Seabulk Trader from November 7, 2008 in the event that the Court of Appeals affirms the lower court’s decision to revoke its coastwise endorsement. On July 2, 2008, Shipbuilders commenced a second civil action in the U.S. District Court for the Eastern District of Virginia, entitled Shipbuilders Council of America, Inc., et al. v. U.S. Department of Homeland Security, et al., No. 1:08cv680 (E.D. Va.) (the “SB Challenge Litigation”), alleging essentially identical claims as those asserted in the SB Trader Litigation against MTS’s second retrofitted tanker, the Seabulk Challenge. MTS has intervened in the SB Challenge Litigation, which has been stayed pending the decision of the Court of Appeals in the SB Trader Litigation. The loss of coastwise eligibility for its two retrofitted tankers could adversely affect the Company’s financial condition and its results of operations. The aggregate carrying value of the Company’s two retro-fitted tankers was $58.3 million as of March 31, 2009 and such tankers contributed operating revenues of $7.5 million during the three months ended March 31, 2009.

 

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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. A funding update as of March 2008 indicated that an additional funding deficit of $116.2 million had developed over the two years since the last actuarial valuation in 2006. No invoices in respect of this deficit will be issued to participating employers until the results of the next actuarial valuation, due in March 2009, are available. Should the deficit be maintained at current levels through the March 2009 actuarial valuation the Company estimates its share of the deficit to be approximately $1.5 million. The Company would recognize payroll related operating expenses at such time as it is invoiced for its share of any funding deficit.

A subsidiary of the Company is a participating employer in an industry-wide, multi-employer, defined benefit pension fund, the United Kingdom Merchant Navy Ratings Pension Fund (“MNRPF”). The Company’s participation relates to ratings employed between 1978 and 2001 by SEACOR’s Stirling group of companies (which had been acquired by SEACOR in 2001) and its predecessors. Based on an actuarial valuation in March 2008, the MNRPF has an accumulated funding deficit of $284.2 million. No decision has yet been reached as to how the deficit will be recovered but the Company expects it is likely that participating employers will be invoiced for their allocated share, at which time the Company would recognize payroll related operating expenses. The Company estimates its allocated share of the deficit to be approximately $1.0 million.

New Accounting Pronouncement

On May 15, 2008, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard (“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 the American Institute of Certified Public Accountants Professional Standards 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 its current accounting policies and as such will have no impact on its consolidated financial position or its results of operations.

 

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, 2008. There has been no significant change in the Company’s exposure to market risk during the Current Year Quarter, except as described below.

During the Current Year Quarter, the Company entered into two interest rate swap agreements, each with a notional value of $25.0 million and maturing in March 2014. The first instrument calls for the Company to pay a

 

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fixed interest rate of 2.25% on the notional value and receive in return a variable interest rate based on LIBOR on the notional value. The second instrument calls for the Company to pay a fixed interest rate of 2.335% on the notional value and receive in return a variable interest rate based on LIBOR on the notional value. By entering into these interest rate swap agreements, the Company is protecting against interest rate fluctuations on the variable LIBOR component of $50.0 million of outstanding borrowings under its revolving credit facility maturing in 2013.

 

ITEM 4. CONTROLS AND PROCEDURES

With the participation of the Company’s principal executive officer and principal financial officer, management evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of March 31, 2009. Based on their evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2009.

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 1A. RISK FACTORS

The outbreak of diseases, such as the H1N1 Flu (commonly known as Swine Flu), has curtailed and may in the future curtail travel to and from certain countries. Restrictions on travel to and from these countries and other regions due to additional incidences of diseases, such as the H1N1 Flu, could have a material adverse effect on the Company’s business, results of operations, and financial position.

 

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
   Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs
   Maximum Value of
Shares that may Yet be
Purchased under
the Plans or Programs(1)

January 1 – 31, 2009

            $ 149,170,064

February 1 – 28, 2009

            $ 149,170,064

March 1 – 31, 2009(2)

            $ 147,240,064

 

(1) Since February 1997, SEACOR’s Board of Directors authorized the repurchase of Common Stock, certain debt or a combination thereof. From time to time thereafter, and most recently on September 11, 2008, SEACOR announced that its Board of Directors increased this authority to repurchase Common Stock and SEACOR’s 2.875% Convertible Debentures due 2024 to a total authorized expenditure of up to $150.0 million.

 

(2) On March 30, 2009, the Company repurchased through an open market transaction $2.0 million in principal amount of its 2.875% Convertible Debentures due 2024 for $1.9 million.

 

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: April 30, 2009     By:   /S/ CHARLES FABRIKANT
     

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

(Principal Executive Officer)

   
DATE: April 30, 2009     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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