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 September 30, 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 October 23, 2009 was 20,244,165. 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 September 30, 2009 and December 31, 2008    3
     
      Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2009 and 2008    4
     
      Condensed Consolidated Statement of Changes in Equity for the Nine Months Ended September 30, 2009    5
     
      Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2009 and 2008    6
     
      Notes to Condensed Consolidated Financial Statements    7
     
   Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations    25
     
   Item 3.    Quantitative and Qualitative Disclosures About Market Risk    42
     
   Item 4.    Controls and Procedures    42
     
Part II.    Other Information    43
     
   Item 1A.    Risk Factors    43
     
   Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds    43
     
   Item 6.    Exhibits    43

 

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Table of Contents

PART I—FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

SEACOR HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data, unaudited)

 

    September 30,
2009
    December 31,
2008
 
ASSETS    

Current Assets:

   

Cash and cash equivalents

  $ 620,045      $ 275,442   

Restricted cash

    29,353        20,787   

Marketable securities

    52,897        53,817   

Receivables:

   

Trade, net of allowance for doubtful accounts of $3,502 and $5,730 in 2009 and 2008, respectively

    266,537        277,350   

Other

    74,378        40,141   

Inventories

    52,502        66,278   

Deferred income taxes

    5,164        5,164   

Prepaid expenses and other

    21,121        10,499   
               

Total current assets

    1,121,997        749,478   
               

Property and Equipment

    2,794,067        2,741,322   

Accumulated depreciation

    (718,749     (601,806
               

Net property and equipment

    2,075,318        2,139,516   
               

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

    166,878        150,062   

Construction Reserve Funds & Title XI Reserve Funds

    290,871        305,757   

Goodwill

    53,990        51,496   

Intangible Assets

    24,762        28,478   

Other Assets, net of allowance for doubtful accounts of $2,153 and $888 in 2009 and 2008, respectively

    49,920        34,867   
               
  $ 3,783,736      $ 3,459,654   
               
LIABILITIES AND EQUITY    

Current Liabilities:

   

Current portion of long-term debt

  $ 23,765      $ 33,671   

Current portion of capital lease obligations

    951        907   

Accounts payable and accrued expenses

    105,981        102,798   

Other current liabilities

    156,800        139,425   
               

Total current liabilities

    287,497        276,801   
               

Long-Term Debt

    1,027,496        895,689   

Capital Lease Obligations

    6,895        7,685   

Deferred Income Taxes

    565,321        515,455   

Deferred Gains and Other Liabilities

    122,041        121,796   
               

Total liabilities

    2,009,250        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; 32,561,804 and 32,390,838 shares issued in 2009 and 2008, respectively

    326        324   

Additional paid-in capital

    966,895        956,457   

Retained earnings

    1,524,355        1,402,771   

Shares held in treasury of 12,331,332 and 12,373,291 in 2009 and 2008, respectively, at cost

    (722,569     (724,357

Accumulated other comprehensive loss:

   

Cumulative translation adjustments, net of tax

    (2,775     (5,045

Derivative loss on cash flow hedges, net of tax

    (802       
               
    1,765,430        1,630,150   

Noncontrolling interests in subsidiaries

    9,056        12,078   
               

Total equity

    1,774,486        1,642,228   
               
  $ 3,783,736      $ 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
September 30,
    Nine Months Ended
September 30,
 
    2009     2008     2009     2008  

Operating Revenues

  $ 446,079      $ 437,608      $ 1,234,828      $ 1,201,030   
                               

Costs and Expenses:

       

Operating

    327,602        269,874        832,145        779,218   

Administrative and general

    41,926        41,487        120,666        125,587   

Depreciation and amortization

    40,272        39,598        119,364        115,126   
                               
    409,800        350,959        1,072,175        1,019,931   
                               

Gains on Asset Dispositions and Impairments, Net

    5,783        20,074        22,528        51,254   
                               

Operating Income

    42,062        106,723        185,181        232,353   
                               

Other Income (Expense):

       

Interest income

    789        4,329        2,410        17,178   

Interest expense

    (14,267     (16,409     (42,679     (44,525

Debt extinguishment gains (losses), net

    2,787               4,072        (1

Marketable security gains, net

    6,948        35,950        14,796        30,649   

Derivative gains (losses), net

    2,328        (8,430     9,704        (9,076

Foreign currency gains (losses), net

    (939     (6,683     6,566        (3,469

Other, net

    (57     (89     132        237   
                               
    (2,411     8,668        (4,999     (9,007
                               

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

    39,651        115,391        180,182        223,346   

Income Tax Expense

    15,751        42,849        66,866        82,572   
                               

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

    23,900        72,542        113,316        140,774   

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

    2,340        2,160        9,358        8,054   
                               

Net Income

    26,240        74,702        122,674        148,828   

Net Income (Loss) attributable to Noncontrolling Interests in Subsidiaries

    (42     363        1,090        756   
                               

Net Income attributable to SEACOR Holdings Inc.

  $ 26,282      $ 74,339      $ 121,584      $ 148,072   
                               

Basic Earnings Per Common Share of SEACOR Holdings Inc.

  $ 1.32      $ 3.68      $ 6.13      $ 6.95   

Diluted Earnings Per Common Share of SEACOR Holdings Inc.

  $ 1.23      $ 3.20      $ 5.53      $ 6.19   

Weighted Average Common Shares Outstanding:

       

Basic

    19,867,226        20,183,310        19,824,913        21,292,625   

Diluted

    23,458,195        23,999,260        23,374,644        25,121,290   

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
    Common
Stock
  Additional
Paid-In
Capital
    Retained
Earnings
    Shares
Held In
Treasury
    Accumulated
Other
Comprehensive
Loss
    Non-
Controlling
Interests In
Subsidiaries
    Total
Equity
    Comprehensive
Income

December 31, 2008, previously reported

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

Adoption of new accounting rules related to the Company’s convertible debt (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

                      2,361                      2,361     

Exercise of stock options

        1,052                                    1,052     

Director stock awards

        290                                    290     

Restricted stock and restricted stock units

    2     (2            (17                   (17  

Amortization of share awards

        8,824                                    8,824     

Cancellation of restricted stock

        556               (556                       

Conversion option on purchased Convertible Debentures

        (282                                 (282  

Purchase of subsidiary shares from noncontrolling interests

                                    (5,501     (5,501  

Acquisition of a subsidiary with noncontrolling interests

                                    3,043        3,043     

Sale of a subsidiary with noncontrolling interests

                                    (27     (27  

Dividends paid to noncontrolling interests

                                    (1,627     (1,627  

Comprehensive income:

               

Net income

               121,584                      1,090        122,674      $ 122,674

Other comprehensive income

                             1,468               1,468        1,468
                                                           

Nine months ended September 30, 2009

  $ 326   $ 966,895      $ 1,524,355      $ (722,569   $ (3,577   $ 9,056      $ 1,774,486      $ 124,142
                                                           
               

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)

 

     Nine Months Ended
September 30,
 
     2009     2008  

Net Cash Provided by Operating Activities

   $ 276,946      $ 205,781   
                

Cash Flows from Investing Activities:

    

Purchases of property and equipment

     (129,157     (315,588

Proceeds from disposition of property and equipment

     95,033        98,883   

Purchases of marketable securities

            (212,590

Proceeds from sales of marketable securities

            141,886   

Cash settlements on derivative transactions, net

     (771     7,772   

Investments in and advances to 50% or less owned companies

     (10,061     (31,568

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

     1,774        144   

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

     136          

(Advances) principal payments on third party notes receivable, net

     (2,031     59   

Net (increase) decrease in restricted cash

     (8,566     6,965   

Net decrease in construction reserve funds and title XI reserve funds

     14,886        139,414   

Net decrease in escrow deposits on like-kind exchanges

            7,194   

(Investments in) repayments on leases, net

     (1,803     47   

Business acquisitions, net of cash acquired

     (1,955     (6,052

Cash disposed on sale of subsidiary, net of cash proceeds on sale

     (154       
                

Net cash used in investing activities

     (42,669     (163,434
                

Cash Flows from Financing Activities:

    

Payments on long-term debt and capital lease obligations

     (222,691     (26,954

Net payments under inventory financing arrangements

     (16,789     (2,761

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

     349,297        11,250   

Common stock acquired for treasury

            (240,047

Proceeds and tax benefits from share award plans

     2,870        5,183   

Purchase of subsidiary shares from noncontrolling interests

     (1,210       

Cash received from (dividends paid to) noncontrolling interests, net

     (1,627     1,629   
                

Net cash provided by (used in) financing activities

     109,850        (251,700
                

Effects of Exchange Rate Changes on Cash and Cash Equivalents

     476        (1,809

Net Increase (Decrease) in Cash and Cash Equivalents

     344,603        (211,162
                

Cash and Cash Equivalents, Beginning of Period

     275,442        537,305   
                

Cash and Cash Equivalents, End of Period

   $ 620,045      $ 326,143   
                
    

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 and nine months ended September 30, 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 September 30, 2009, its results of operations for the three and nine months ended September 30, 2009 and 2008, its changes in equity for the nine months ended September 30, 2009 and its cash flows for the nine months ended September 30, 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. The Company has performed an evaluation of subsequent events through the date of the filing of this Quarterly Report on Form 10-Q.

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

Effective January 1, 2009, the Company adopted new accounting rules established by the Financial Accounting Standards Board (“FASB”) relating to the presentation of its noncontrolling interests. The new accounting rules establish accounting and reporting standards for noncontrolling interests in a subsidiary and for the deconsolidation of a subsidiary and 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. The new accounting rules require, 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 the new accounting rules were applied retrospectively. Other than the change in presentation of noncontrolling interests and its inclusion in comprehensive income, the adoption of the new accounting rules had no impact on the Company’s consolidated financial position or its results of operations.

Reclassifications. Certain reclassifications of prior year information have been made to conform to the presentation of current year information.

 

2. Financial Instruments

The fair value of an asset or liability 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. The Company utilizes a fair value hierarchy that maximizes the use of observable inputs and minimizes 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

 

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active markets for identical assets or liabilities. Level 2 inputs are observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, quoted prices in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, or inputs derived from observable market data. Level 3 inputs are unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities.

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

   $ 41,287    $ 11,610    $

Derivative instruments (included in other receivables)

     5,623      6,700     

Construction reserve funds and Title XI reserve funds

     290,871          

LIABILITIES

        

Short sale of marketable securities (included in other current liabilities)

     17,140          

Derivative instruments (included in other current liabilities)

     4,004      3,148     

Effective January 1, 2009, the Company adopted new accounting rules established by the FASB related to disclosure requirements of fair value measurements for certain nonfinancial assets and liabilities. The adoption of the new accounting rules had no material impact on the Company’s consolidated financial position or its results of operations.

The estimated fair value of the Company’s other financial assets and liabilities as of September 30, 2009 are as follows (in thousands):

 

     Carrying
Amount
   Estimated
Fair Value

ASSETS

     

Cash, cash equivalents and restricted cash

   $ 649,398    $ 649,398

Investments, at cost, in 50% or less owned companies (included in other assets)

     7,506      see below

Notes receivable from other business ventures (included in other assets)

     15,568      see below

LIABILITIES

     

Long-term debt, including current portion

     1,051,261      1,099,887

The carrying value of cash, cash equivalents and restricted cash approximates fair value. The fair value of the Company’s long-term debt was estimated based upon quoted market prices or by using discounted cash flow analyses based on estimated current rates for similar types of arrangements. It was not practicable to estimate the fair value of the Company’s investments, at cost, in 50% or less owned companies because of the lack of quoted market prices and the inability to estimate fair value without incurring excessive costs. It was not practicable to estimate the fair value of the Company’s notes receivable from other business ventures because the timing of settlement of these notes is not certain. Considerable judgment was required in developing certain of the estimates of fair value and accordingly the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.

Marketable Securities. Marketable security gains, net include gains of $5.6 million and losses of $1.2 million for the three months ended September 30, 2009 and 2008, respectively, related to marketable security positions held by the Company as of September 30, 2009. Marketable security gains, net include gains of $9.4

 

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million and losses of $0.6 million for the nine months ended September 30, 2009 and 2008, respectively, related to marketable security positions held by the Company as of September 30, 2009.

 

3. Derivative Instruments and Hedging Strategies

Effective January 1, 2009, the Company adopted new accounting rules established by the FASB that require enhanced disclosures for derivative instruments and hedging activities. The new accounting rules require disclosure by the Company about how and why it uses derivative instruments and hedges, how derivative instruments and related hedged items are accounted for and how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows.

The Company accounts for derivatives through the use of a fair value concept whereby 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 are reported in the accompanying condensed consolidated statements of income as derivative gains (losses), 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 (losses), net. Realized and unrealized gains and losses on derivatives designated as cash flow hedges are reported as a component of other comprehensive income 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 (losses), net. Realized and unrealized gains and losses on derivatives designated as cash flow hedges that are entered into by the Company’s equity method investees are also reported as a component of the Company’s other comprehensive income in proportion to the Company’s ownership percentage in the investee, with reclassifications and ineffective portions being included in equity in earnings of 50% or less owned companies in the accompanying condensed consolidated statements of income.

Derivative instruments are classified as either assets or liabilities based on their individual fair values. 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 September 30, 2009 were as follows (in thousands):

 

     Derivative
Asset
   Derivative
Liability

Derivatives designated as hedging instruments:

     

Forward currency exchange contracts (fair value hedges)

   $ 2,556    $

Interest rate swap agreements (cash flow hedges)

     312      1,775
             
     2,868      1,775
             

Derivatives not designated as hedging instruments:

     

Options on equities and equity indices

          959

Forward currency exchange, option and future contracts

     514      140

Interest rate swap agreements

          641

Commodity swap, option and future contracts:

     

Exchange traded

     5,560      2,719

Non-exchange traded

     3,377      732

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

     4      186
             
     9,455      5,377
             
   $ 12,323    $ 7,152
             

 

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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 September 30, 2009, the Company has designated certain of its forward currency exchange contracts with notional values of €16.0 million as fair value hedges in respect of capital commitments denominated in euros for assets 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 nine months ended September 30, 2009, the Company designated €15.0 million notional value of its forward currency exchange contracts as fair value hedges, in addition to €20.0 million previously so designated as of December 31, 2008. During the nine months ended September 30, 2009, the Company dedesignated €19.0 million notional value of these contracts as fair value hedges.

For the nine months ended September 30, 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

   $ 587   

Decrease in fair value of hedged items included in property and equipment corresponding to effective portion of derivative gains

     (354
        
   $ 233   
        
  

Cash Flow Hedges. The Company has entered into various interest rate swap agreements with maturities ranging from 2012 to 2014 that have been designated as cash flow hedges. These agreements call for the Company to pay fixed interest rates ranging from 1.79% to 2.85% on aggregate notional values of $143.0 million and receive a variable interest rate based on LIBOR on these notional values. One of the Company’s Offshore Marine Services joint ventures has also entered into an interest rate swap agreement maturing in 2014 that has been designated as a cash flow hedge. This instrument calls for the joint venture to pay a fixed interest rate of 3.05% on the notional value of $29.6 million and receive a variable interest rate based on LIBOR on the notional value. By entering into these interest rate swap agreements, the Company and its joint venture have converted the variable LIBOR component of certain of their outstanding borrowings to a fixed interest rate.

For the nine months ended September 30, 2009, the Company recognized gains (losses) on derivative instruments designated as cash flow hedges as follows (in thousands):

 

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

Interest rate swap agreements, effective portion

   $ (1,490   $   

Interest rate swap agreements, ineffective portion

            (255

Reclassification of derivative losses to interest expense or equity in earnings of 50% or less owned companies

     256          
                
   $ (1,234   $ (255
                

 

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Other Derivative Instruments. For the nine months ended September 30, 2009, the Company recognized gains (losses) on derivative instruments not designated as hedging instruments as follows (in thousands):

 

     Derivative gains
(losses), net
 

Options on equities and equity indices

   $ 2,894   

Forward currency exchange, option and future contracts

     3,847   

Interest rate swap agreements

     (594

Commodity swap, option and future contracts:

  

Exchange traded

     (55

Non-exchange traded

     3,489   

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

     145   
        
   $ 9,726   
        

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 forward currency exchange, option and future contracts with respect to various foreign currencies. As of September 30, 2009, the outstanding forward currency exchange contracts translated into a net purchase of foreign currencies with an aggregate U.S. dollar equivalent of $33.4 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, Mexico, Central and South America, the Middle East and Asia. The Company generally does not enter into contracts with forward settlement dates beyond twelve months. Subsequent to September 30, 2009, the Company entered into additional forward currency exchange contracts with an aggregate U.S. dollar equivalent of $22.0 million.

The Company has entered into various interest rate swap agreements maturing in 2013 that call for the Company to pay fixed interest rates ranging from 2.47% to 2.59% on aggregate notional values of $58.5 million and receive a variable interest rate based on LIBOR on these notional values. The general purpose of these interest rate swap agreements is to provide protection against increases in interest rates, which might lead to higher interest costs for the Company. These instruments are not designated as cash flow hedges.

The Company has entered into and settled positions in various commodity swap, option and future contracts (primarily natural gas, crude oil, gasoline, ethanol, sugar and rice). 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 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 various forward 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 upon settlement. As of September 30, 2009, the Company carried ethanol inventory of $11.9 million relating to such settled transactions.

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 might lead to higher interest costs for the Company.

 

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4. Business Acquisitions

Effective January 1, 2009, the Company adopted new accounting rules established by the FASB related to business combinations. The new accounting rules 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. The new accounting rules establish 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. The new accounting rules also provide 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 the FASB rules related to exit or disposal cost obligations 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.

SES-CHEM Acquisition. On August 3, 2009, the Company acquired its partner’s 51% interest in SES-CHEM Company Limited (“SES-CHEM”), a provider of environmental services in Thailand, for $0.1 million in cash. Subsequent to the transaction, the Company owns all of the issued and outstanding shares of SES-CHEM. The Company performed a preliminary fair value analysis and the purchase price was allocated to the acquired assets and liabilities based on their fair values resulting in no goodwill being recorded.

V & A Acquisition. On May 21, 2009, the Company acquired a controlling interest in V&A Commodity Traders, Inc. (“V&A”), a sugar trading business, for $4.0 million. The Company’s purchase price included cash consideration of $1.3 million and forgiveness of a note due from V&A of $2.7 million. The Company performed a fair value analysis and the purchase price was allocated to the acquired assets and liabilities based on their fair values resulting in no goodwill being recorded. The fair value of assets and liabilities acquired was finalized in June 2009.

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 nine months ended September 30, 2009, the Company paid $1.7 million of additional consideration in accordance with the acquisition agreement and recorded the consideration 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 £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 nine months ended September 30, 2009, the Company paid £61,560 ($0.1 million) of additional consideration in accordance with the acquisition agreement and recorded the consideration 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

 

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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 nine months ended September 30, 2009, the Company paid $0.5 million of additional consideration in accordance with the acquisition agreement and recorded the consideration as goodwill in the accompanying condensed consolidated balance sheets.

Purchase Price Allocation. The following table summarizes the allocation of the purchase price for the Company’s acquisitions for the nine months ended September 30, 2009 (in thousands):

 

Trade and other receivables

   $ 6,045   

Other current assets

     2,341   

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

     (5,187

Property and equipment

     197   

Goodwill

     2,278   

Other Assets

     194   

Accounts payable and other current liabilities

     (802

Other liabilities

     (68

Noncontrolling Interests

     (3,043
        

Purchase price(1)

   $ 1,955   
        

 

(1)

Purchase price is net of cash acquired of $1.7 million.

 

5. Equipment Acquisitions, Dispositions and Depreciation Policy

During the nine months ended September 30, 2009, capital expenditures were $129.2 million. Equipment deliveries during the period included three offshore support vessels, two inland river towboats, six helicopters and three ocean liquid tank barges.

During the nine months ended September 30, 2009, the Company sold 17 offshore support vessels, five inland river dry cargo barges, three inland river towboats, four harbor tugs and other equipment. In addition, two helicopters were scrapped and two helicopters were declared a total loss. The Company received $95.0 million on the disposition of these assets, including the insurance proceeds for the helicopters, and recognized net gains of $22.5 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.

 

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As of September 30, 2009, the estimated useful life (in years) of each of the Company’s major categories of new equipment was as follows:

 

Offshore support vessels

   20

U.S.-flag tankers(1)

   25

Inland river dry cargo and deck barges

   20

Inland river liquid tank barges

   25

Inland river towboats

   25

Helicopters

   12

Harbor and offshore tugs(2)

   25

Ocean liquid tank barges

   25

 

(1) Subject to Oil Pollution Act of 1990 (“OPA 90”) requirements.
(2) Effective April 1, 2008, the Company changed its estimated useful life for newly built harbor and offshore tugs from 40 to 25 years and reduced the remaining useful life of certain vessels within its harbor and offshore tug fleet due to the more frequent occurrence of technological advancements in vessel design. These changes in estimates did not materially impact the comparability of financial information for the periods presented.

 

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

SCF Bunge Marine. On August 1, 2009, the Company and a subsidiary of a large international agricultural and food company formed SCF Bunge Marine LLC, a 50-50 joint venture to time charter and market six inland river towboats on the U.S. Inland River Waterways. Three of the six inland river towboats were previously owned by the Company and sold to a leasing company for $17.7 million immediately prior to the formation of the joint venture. Each partner contributed $1.3 million in cash to the joint venture.

Sea-Cat Crewzer. On July 27, 2009, the Company and another offshore support vessel operator formed Sea-Cat Crewzer LLC, a 50-50 joint venture to own and operate two high speed offshore catamaran crew boats. Each partner contributed to the joint venture a vessel and cash with a combined value of $17.3 million. The Company contributed one high speed offshore catamaran crew boat with a fair value of $14.7 million and $2.6 million in cash. In addition, immediately prior to the formation of the joint venture, the Company sold one high speed offshore catamaran crew boat to its joint venture partner for $16.9 million who then contributed the vessel to the joint venture along with $0.4 million in cash.

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 performed a fair value analysis and the purchase price was allocated to the acquired assets and liabilities based on their fair values resulting in goodwill of $3.2 million. The fair value analysis of assets and liabilities acquired was finalized during the third quarter of 2009.

 

7. Commitments and Contingencies

The Company’s unfunded capital commitments as of September 30, 2009 consisted primarily of offshore support vessels, helicopters, inland river dry cargo barges and an inland river towboat and totaled $98.3 million, of which $28.3 million is payable during the remainder of 2009 with the balance payable through 2011. Of the total unfunded capital commitments, $20.7 million may be terminated without further liability other than the payment of liquidated damages of $3.0 million in the aggregate.

The Company has guaranteed the payment of amounts owed by one of its joint ventures under a vessel charter agreement that expires in 2011. In addition, the Company has guaranteed amounts owed under banking

 

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facilities by certain of its joint ventures and has issued a performance guarantee on behalf of one of its joint ventures. As of September 30, 2009, the total amount guaranteed by the Company under these arrangements was $24.5 million. Additionally, as of September 30, 2009, the Company had an uncalled capital commitment to one of its joint ventures for $3.1 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 that 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 was 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 (the “Undertaking”). 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

 

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in the SB Trader Litigation against MTS’s second retrofitted tanker, the Seabulk Challenge. MTS has intervened in the SB Challenge Litigation that was stayed pending the decision of the Court of Appeals in the SB Trader Litigation. In September 2009, the Court of Appeals reversed the District Court, holding that the USCG’s interpretation was correct and that the District Court erred in requiring MTS to provide the Undertaking. It is expected that the District Court will remand the matter to the USCG for further proceedings concerning matters as to which the District Court had instructed the USCG to provide further explanation that were not addressed by the Court of Appeals. 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 $54.8 million as of September 30, 2009 and such tankers contributed operating revenues of $17.3 million during the nine months ended September 30, 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 latest actuarial valuation, carried out 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 uninvoiced deficit to be approximately $1.5 million.

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 uninvoiced deficit to be approximately $1.0 million.

On June 12, 2009, a purported civil class action was filed against SEACOR, Era Group Inc., Era Aviation, Inc., Era Helicopters LLC and two other defendants (collectively the “Defendants”) in the U.S. District Court for the District of Delaware, Superior Offshore International, Inc. v. Bristow Group Inc., et al., No. 09-CV-438 (D.Del.). SEACOR acquired the Era group of companies in December 2004. The complaint alleges that the Defendants violated federal antitrust laws by conspiring with each other to raise, fix, maintain or stabilize prices for offshore helicopter services in the U.S. Gulf of Mexico during the period January 2001 to December 2005. The purported class of plaintiffs includes all direct purchasers of such services and the relief sought includes compensatory damages and treble damages. The Company is unable to estimate the potential exposure, if any, resulting from these claims but believes they are without merit and intends to vigorously defend the action. On September 4, 2009, the Defendants filed a motion to dismiss the complaint, however the district court has yet to rule on that motion.

 

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8. Long-Term Debt and Capital Lease Obligations

As of September 30, 2009, the Company had $158.5 million of outstanding borrowings under its revolving credit facility. The remaining availability under this facility was $289.4 million, net of issued letters of credit of $2.1 million. In addition, the Company had other outstanding letters of credit totaling $46.7 million with various expiration dates through 2012.

During the nine months ended September 30, 2009, the Company made payments on long term debt and capital lease obligations of $222.7 million, including $79.7 million for the purchase of Convertible Debentures and Senior Notes (see note 9), $84.3 million for the redemption of the remaining outstanding principal of its 9.5% Senior Notes (see note 9) and $32.8 million upon the maturity of its 7.2% Senior Notes. Subsequent to September 30, 2009, the Company repaid $33.5 million on its revolving credit facility.

During the nine months ended September 30, 2009, the Company issued $250.0 million aggregate principal amount of its 7.375% Senior Notes due October 1, 2019 (the “7.375% Senior Notes”) and received net proceeds of $245.9 million. The 7.375% Senior Notes were issued under a supplemental indenture dated as of September 24, 2009 to the base indenture relating to SEACOR’s senior debt securities, dated as of January 10, 2001, between SEACOR and U.S. Bank National Association, as trustee. Interest on the 7.375% Senior Notes is payable semiannually on April 1 and October 1 of each year. The 7.375% Senior Notes may be redeemed at any time, in whole or in part, at a price equal to 100% of the principal amount, plus accrued and unpaid interest to the date of redemption, plus a specified “make-whole” premium.

During the nine months ended September 30, 2009, the Company entered into other secured debt totaling $45.2 million and received proceeds of $44.9 million. The interest rates on the debt are variable based on LIBOR plus a margin of 300 to 400 basis points and are reset quarterly. As of September 30, 2009, the interest rates ranged from 4.4% to 4.5%. The debt will be repaid through periodic payments of principal and accrued interest and matures in 2012.

Effective January 1, 2009, the Company adopted new accounting rules established by the FASB related to its convertible debt that requires the Company to account separately for the liability and equity components in a manner that reflects the Company’s 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 adoption of the new accounting rules, 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 nine months ended September 30, 2009 and 2008, the impact of adopting the new accounting rules on the Company’s condensed consolidated statements of income was an additional $6.0 million and $5.6 million of pre-tax, non-cash interest expense, respectively. For the nine months ended September 30, 2009 and 2008, the impact of the adopting the new accounting rules on basic earnings per share was a reduction of $0.20 and $0.18 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 nine months ended September 30, 2009, the Company repurchased $3.8 million in principal amount of its 2.875% Convertible Debentures due 2024 for $3.7 million. During the nine months ended September 30, 2008, the Company acquired for treasury 2,824,317 shares of Common Stock for an aggregate purchase price of $240.0 million. As of September 30, 2009, the remaining authority under the repurchase plan was $145.5 million.

SEACOR’s Board of Directors previously authorized the Company to 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 nine months ended September 30, 2009, the Company purchased

 

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$37.0 million in principal amount of its 7.2% Senior Notes due 2009, $18.4 million in principal amount of its 5.875% Senior Notes due 2012 and $20.2 million in principal amount of its 9.5% Senior Notes due 2013 for an aggregate purchase price of $76.0 million. In addition, during the nine months ended September 30, 2009, the Company redeemed the remaining $81.7 million in principal amount outstanding of its 9.5% Senior Notes due 2013 for $84.3 million.

 

10. Acquisitions of Noncontrolling Interests

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 interest holder. The aggregate purchase price of $9.6 million included a note payable of $7.0 million, the forgiveness of a $2.3 million note receivable from the noncontrolling interest holder and cash consideration of $0.3 million.

Effective April 1, 2009, the Company purchased the remaining noncontrolled subsidiary shares in an offshore marine services company for $0.9 million.

 

11. Earnings Per Common Share of SEACOR

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 and nine months ended September 30, 2009, diluted earnings per common share of SEACOR excluded 715,985 and 818,364, respectively, of certain share awards as the effect of their inclusion in the computation would have been antidilutive. For the three and nine months ended September 30, 2008, diluted earnings per common share of SEACOR excluded 648,449 and 571,501, respectively, of certain share awards as the effect of their inclusion in the computation would have been antidilutive.

 

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Computations of basic and diluted earnings per common share 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 new accounting rules established by the FASB related to the Company’s convertible debt (see note 8).

 

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

2009

                 

Basic Earnings Per Common Share of SEACOR Holdings Inc.

   $ 26,282    19,867    $ 1.32    $ 121,584    19,825    $ 6.13

Effect of Dilutive Securities, net of tax:

                 

Options and Restricted Stock

        225            165   

Convertible Securities

     2,563    3,366         7,651    3,385   
                             

Diluted Earnings Per Common Share of SEACOR Holdings Inc.

   $ 28,845    23,458    $ 1.23    $ 129,235    23,375    $ 5.53
                             

2008

                 

Basic Earnings Per Common Share of SEACOR Holdings Inc.

   $ 74,339    20,183    $ 3.68    $ 148,072    21,292    $ 6.95

Effect of Dilutive Securities, net of tax:

                 

Options and Restricted Stock

        398            411   

Convertible Securities

     2,516    3,418         7,474    3,418   
                             

Diluted Earnings Per Common Share of SEACOR Holdings Inc.

   $ 76,855    23,999    $ 3.20    $ 155,546    25,121    $ 6.19
                             

 

12. Comprehensive Income

For the three months ended September 30, 2009 and 2008, total comprehensive income was $20.3 million and $69.9 million, respectively. For the nine months ended September 30, 2009 and 2008, total comprehensive income was $124.1 million and $140.8 million, respectively. Total comprehensive income for the three and nine months ended September 30, 2008 has been retrospectively adjusted to reflect the adoption of new accounting rules established by the FASB related to the presentation of the Company’s noncontrolling interests and the accounting for its convertible debt (see notes 1 and 8). For the three and nine months ended September 30, 2009, other comprehensive income consisted of gains and losses from foreign currency translation adjustments, net of tax, and derivative gains and losses on cash flow hedges, net of tax (see note 3). For the three and nine months ended September 30, 2008, other comprehensive income 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.

 

19


Table of Contents
13. Share Based Compensation

The following transactions have occurred in connection with the Company’s share based compensation plans during the nine months ended September 30, 2009:

 

Director stock awards granted

   3,750   
      

Employee Stock Purchase Plan (“ESPP”) shares issued

   49,077   
      

Restricted stock awards granted

   141,750   
      

Restricted stock awards cancelled

   7,350   
      

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

   (975
      

Outstanding as of September 30, 2009

   1,070   
      

Stock Option Activities:

  

Outstanding as of December 31, 2008

   1,129,685   

Granted

   176,900   

Exercised

   (24,491

Cancelled

   (33,960
      

Outstanding as of September 30, 2009

   1,248,134   
      

Shares available for future grants and ESPP purchases as of September 30, 2009

   1,671,062   
      
  

 

20


Table of Contents
14. 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 is as previously described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

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 new accounting rules established by the FASB related to the Company’s convertible debt (see note 8).

 

    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 September 30, 2009

                 

Operating Revenues:

                 

External customers

  128,785      21,737   31,192   64,259      33,827      150,866      15,413           446,079   

Intersegment

  1,054        3,122                  161      (4,337     
                                                 
  129,839      21,737   34,314   64,259      33,827      150,866      15,574      (4,337   446,079   
                                                 

Costs and Expenses:

                 

Operating

  76,982      11,420   20,144   39,659      23,206      150,983      9,544      (4,336   327,602   

Administrative and general

  13,128      953   2,443   5,624      6,090      3,705      2,378      7,605      41,926   

Depreciation and amortization

  13,608      8,003   4,785   9,706      1,846      7      2,049      268      40,272   
                                                 
  103,718      20,376   27,372   54,989      31,142      154,695      13,971      3,537      409,800   
                                                 

Gains (Losses) on Asset Dispositions and Impairments, Net

  3,852        813   1,062      (1        58      (1   5,783   
                                                 

Operating Income (Loss)

  29,973      1,361   7,755   10,332      2,684      (3,829   1,661      (7,875   42,062   
                                                 

Other Income (Expense):

                 

Derivative gains (losses), net

           (80        1,689           719      2,328   

Foreign currency gains (losses), net

  (1,174   7     296           177      10      (255   (939

Other, net

  14                         (1   (70   (57

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

  2,322        140   (186   34           30           2,340   
                                             

Segment Profit (Loss)

  31,135      1,368   7,895   10,362      2,718      (1,963   1,700       
                                         

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

            (3,743

Less Equity Earnings included in Segment Profit (Loss)

              (2,340
                     

Income Before Taxes and Equity Earnings

              39,651   
                     
                 

 

21


Table of Contents
    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 nine months ended September 30, 2009

                 

Operating Revenues:

                 

External customers

  437,705      72,369      93,253   181,336      101,178   301,221   47,766           1,234,828   

Intersegment

  3,383           8,238   8      58     395      (12,082     
                                               
  441,088      72,369      101,491   181,344      101,236   301,221   48,161      (12,082   1,234,828   
                                               

Costs and Expenses:

                 

Operating

  237,430      39,983      57,392   117,288      70,939   292,019   29,462      (12,368   832,145   

Administrative and general

  34,261      3,079      6,627   15,424      19,297   9,012   7,211      25,755      120,666   

Depreciation and amortization

  41,099      24,001      14,601   27,482      5,339   9   5,974      859      119,364   
                                               
  312,790      67,063      78,620   160,194      95,575   301,040   42,647      14,246      1,072,175   
                                               

Gains (Losses) on Asset Dispositions and Impairments, Net

  18,659           3,470   3      11     388      (3   22,528   
                                               

Operating Income (Loss)

  146,957      5,306      26,341   21,153      5,672   181   5,902      (26,331   185,181   
                                               

Other Income (Expense):

                 

Derivative gains (losses), net

  (18          233        3,226        6,263      9,704   

Foreign currency gains (losses), net

  670      (2     1,662      20   449   141      3,626      6,566   

Other, net

  182                    26   (54   (22   132   

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

  8,093           2,014   (190   135   187   (881        9,358   
                                       

Segment Profit

  155,884      5,304      28,355   22,858      5,827   4,069   5,108       
                                       

Other Income (Expense) not included in Segment Profit

  

              (21,401

Less Equity Earnings included in Segment Profit

  

              (9,358
                     

Income Before Taxes and Equity Earnings

  

              180,182   
                     

Capital Expenditures

  21,062      124      7,722   65,521      4,508   3   29,310      907      129,157   
                                               

As of September 30, 2009

                 

Property and Equipment

  728,751      372,653      269,679   511,628      33,514   131   155,246      3,716      2,075,318   

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

  46,805           81,707   26,946      1,966     9,454           166,878   

Goodwill

  13,367           1,493   353      37,475     1,302           53,990   

Intangible Assets

  10,825      2,429      1,516        9,326     666           24,762   

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

  180,555      10,565      32,354   76,476      34,771   61,253   23,992      49,656      469,622   
                                       

Segment Assets

  980,303      385,647      386,749   615,403      117,052   61,384   190,660       
                                       

Cash and near cash assets(1)

                  993,166   
                     

Total Assets

                  3,783,736   
                     

 

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

 

22


Table of Contents
    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 September 30, 2008

                 

Operating Revenues:

                 

External customers

  195,591      27,535      34,869      73,455   42,155      44,290   19,713           437,608   

Intersegment

  1,320           1,648      28   22        86      (3,104     
                                                 
  196,911      27,535      36,517      73,483   42,177      44,290   19,799      (3,104   437,608   
                                                 

Costs and Expenses:

                 

Operating

  97,790      22,391      23,079      49,991   29,904      37,746   11,941      (2,968   269,874   

Administrative and general

  14,473      1,486      1,800      5,174   5,924      1,358   2,688      8,584      41,487   

Depreciation and amortization

  13,689      7,997      4,146      9,571   2,033        1,887      275      39,598   
                                                 
  125,952      31,874      29,025      64,736   37,861      39,104   16,516      5,891      350,959   
                                                 

Gains on Asset Dispositions and Impairments, Net

  13,516           4,073      1,307          1,178           20,074   
                                                 

Operating Income (Loss)

  84,475      (4,339   11,565      10,054   4,316      5,186   4,461      (8,995   106,723   
                                                 

Other Income (Expense):

                 

Derivative gains (losses), net

                        178        (8,608   (8,430

Foreign currency gains (losses), net

  (747   (18        587   (478   8   (143   (5,892   (6,683

Other, net

  1           2             1        (93   (89

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

  2,876           (1,413   312   238      77   70           2,160   
                                         

Segment Profit (Loss)

  86,605      (4,357   10,154      10,953   4,076      5,450   4,388       
                                         

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

  

            23,870   

Less Equity Earnings included in Segment Profit (Loss)

  

            (2,160
                     

Income Before Taxes and Equity Earnings

  

            115,391   
                     
                 

 

23


Table of Contents
    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 nine months ended September 30, 2008

                 

Operating Revenues:

                 

External customers

  520,269      85,252   97,712      191,042   122,588      128,383      55,784           1,201,030   

Intersegment

  2,503        2,272      28   82           305      (5,190     
                                                 
  522,772      85,252   99,984      191,070   122,670      128,383      56,089      (5,190   1,201,030   
                                                 

Costs and Expenses:

                 

Operating

  296,659      55,372   61,115      136,559   87,073      111,480      36,009      (5,049   779,218   

Administrative and general

  43,078      4,531   5,839      14,698   20,056      3,729      7,190      26,466      125,587   

Depreciation and amortization

  41,488      24,016   12,142      26,032   4,892           5,810      746      115,126   
                                                 
  381,225      83,919   79,096      177,289   112,021      115,209      49,009      22,163      1,019,931   
                                                 

Gains (Losses) on Asset Dispositions and Impairments, Net

  35,006      3,629   6,256      4,909   119           1,336      (1   51,254   
                                                 

Operating Income (Loss)

  176,553      4,962   27,144      18,690   10,768      13,174      8,416      (27,354   232,353   
                                                 

Other Income (Expense):

                 

Derivative gains (losses), net

              1,352        (414   15      (10,029   (9,076

Foreign currency gains (losses), net

  (791   9        78   (497   9      (154   (2,123   (3,469

Other, net

  1        2      39        5      3      187      237   

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

  8,101        (964   313   510      77      17           8,054   
                                         

Segment Profit

  183,864      4,971   26,182      20,472   10,781      12,851      8,297       
                                         

Other Income (Expense) not included in Segment Profit

  

            3,301   

Less Equity Earnings included in Segment Profit

              (8,054
                     

Income Before Taxes and Equity Earnings

  

            223,346   
                     

Capital Expenditures

  81,124      6,727   33,203      163,397   7,777           22,642      718      315,588   
                                                 

As of September 30, 2008

                 

Property and Equipment

  820,641      404,144   254,150      451,883   33,561           142,061      4,043      2,110,483   

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

  26,613        72,985      29,308   1,942      2,083      10,259           143,190   

Goodwill

  21,421      178   1,493      352   33,841           4,116           61,401   

Intangible Assets

  13,273      2,811   1,933        10,917           773           29,707   

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

  180,844      11,118   45,752      80,817   50,874      21,713      28,526      32,290      451,934   
                                         

Segment Assets

  1,062,792      418,251   376,313      562,360   131,135      23,796      185,735       
                                         

Cash and near cash assets(1)

                  688,250   
                     

Total Assets

                  3,484,965   
                     
                 

 

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

 

24


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

This Form 10-Q includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements concerning management’s expectations, strategic objectives, business prospects, anticipated economic performance and financial condition and other similar matters involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of results to differ materially from any future results, performance or achievements discussed or implied by such forward-looking statements. Such risks, uncertainties and other important factors include, among others: the 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 products, 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 Corporation’s 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 that primarily includes

 

25


Table of Contents

Harbor and Offshore Towing Services, various other investments in joint ventures and lending and leasing activities.

The sections below provide an analysis of the Company’s operations by business segment for the three months (“Current Year Quarter”) and nine months (“Current Nine Months”) ended September 30, 2009, as compared with the three months (“Prior Year Quarter”) and nine months (“Prior Nine Months”) ended September 30, 2008. See “Item 1. Financial Statements – Note 14. Segment Information” included in Part I for consolidating segment tables for each period presented.

Offshore Marine Services

 

    For the Three Months
Ended September 30,
  For the Nine Months
Ended September 30,
  Change
’09/’08
 
    2009     2008   2009   2008   3 Mos     9 Mos  
    $’000     %     $’000     %   $’000     %   $’000     %   %     %  

Operating Revenues:

                   

United States

  37,705      29      93,892      48   165,927      38   243,361      47    
                                             

Africa, primarily West Africa

  26,889      21      29,091      15   85,167      19   91,889      18    

Middle East

  19,354      15      24,318      12   62,797      14   62,730      12    

Mexico, Central and South America

  19,190      15      19,879      10   53,735      12   43,717      8    

United Kingdom, primarily North Sea

  17,653      13      19,348      10   49,365      11   57,691      11    

Asia

  9,048      7      10,383      5   24,097      6   23,384      4    
                                             

Total Foreign

  92,134      71      103,019      52   275,161      62   279,411      53    
                                             
  129,839      100      196,911      100   441,088      100   522,772      100   (34   (16
                                             

Costs and Expenses:

                   

Operating

  76,982      59      97,790      50   237,430      54   296,659      57    

Administrative and general

  13,128      10      14,473      7   34,261      8   43,078      8    

Depreciation and amortization

  13,608      11      13,689      7   41,099      9   41,488      8    
                                             
  103,718      80      125,952      64   312,790      71   381,225      73    
                                             

Gains on Asset Dispositions and Impairments, net

  3,852      3      13,516      7   18,659      4   35,006      7    
                                             

Operating Income

  29,973      23      84,475      43   146,957      33   176,553      34   (65   (17
                                             

Other Income (Expense):

                   

Derivative losses, net

                (18             

Foreign currency gains (losses), net

  (1,174   (1   (747     670        (791      

Other, net

  14           1        182        1         

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

  2,322      2      2,876      1   8,093      2   8,101      2    
                                             

Segment Profit

  31,135      24      86,605      44   155,884      35   183,864      36   (64   (15
                                             
                   

Operating Revenues – Current Year Quarter compared with Prior Year Quarter. Operating revenues decreased by $67.1 million in the Current Year Quarter compared with the Prior Year Quarter. Time charter revenues decreased by $68.3 million and other operating revenues, including third party brokered vessel activity, bareboat charter revenues and other marine services, increased by $1.2 million.

 

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The number of days available for charter in the Current Year Quarter was 13,753 compared with 15,470 in the Prior Year Quarter, a 1,717 or 11.1% reduction, due to net fleet dispositions. Overall fleet utilization was 67.4% in the Current Year Quarter compared with 87.7% in the Prior Year Quarter. Net fleet dispositions, the impact of vessels mobilizing between geographic regions, changes in utilization and other changes in fleet mix combined to reduce time charter revenues by $48.0 million.

Overall average day rates were $11,880 per day in the Current Year Quarter compared with $13,161 per day in the Prior Year Quarter, a decrease of $1,281 per day or 9.7%. In overall terms, this decrease reduced time charter revenues by $17.7 million and the impact of unfavorable changes in currency exchange rates reduced time charter revenues by a further $2.6 million.

In the U.S. Gulf of Mexico, time charter revenues were $55.8 million lower in the Current Year Quarter compared with the Prior Year Quarter primarily due to a reduction in rig moving activity and a 39.9% reduction in utilization. As of September 30, 2009, 26 of the Company’s vessels were cold-stacked in this region. Average day rates were $12,105 per day in the Current Year Quarter compared with $14,626 per day in the Prior Year Quarter.

Time charter revenues were lower in Mexico, Central and South America primarily due to the cessation of trading in Venezuela in June 2009, were lower in West Africa due to mobilizing vessels to other geographic regions, were lower in the Middle East due to fleet dispositions, and were lower in the North Sea due to unfavorable currency exchange rate movements between the U.S. dollar and the pound sterling.

Operating Revenues – Current Nine Months compared with Prior Nine Months. Operating revenues decreased by $81.7 million in the Current Nine Months compared with the Prior Nine Months. Time charter revenues decreased by $100.5 million. Other operating revenues, including third party brokered vessel activity, bareboat charter revenues and other marine services, increased by $18.8 million primarily in Mexico, Central and South America and West Africa.

The number of days available for charter in the Current Nine Months was 42,104 compared with 48,022 in the Prior Nine Months, a 5,918 or 12.3% reduction, due to net fleet dispositions. Overall fleet utilization was 74.5% in the Current Nine Months compared with 81.5% in the Prior Nine Months. Net fleet dispositions, the impact of vessels mobilizing between geographic regions, changes in utilization and other changes in fleet mix combined to reduce time charter revenues by $77.7 million.

Overall average day rates were $12,261 per day in the Current Nine Months compared with $12,394 per day in the Prior Nine Months, a decrease of $133 per day or 1%. In overall terms, this decrease reduced time charter revenues by $10.4 million and the impact of unfavorable changes in currency exchange rates reduced time charter revenues by a further $12.4 million.

In the U.S. Gulf of Mexico, time charter revenues were $78.6 million lower in the Current Nine Months compared with the Prior Nine Months primarily due to the reduction in rig moving activity and an 18.3% reduction in utilization primarily attributable to the cold-stacking of additional vessels during 2009.

Time charter revenues were lower in West Africa primarily due to net fleet dispositions and vessels mobilizing to other geographic regions and were lower in the North Sea due to unfavorable currency exchange rate movements between the U.S. dollar and the pound sterling.

Operating Income – Current Year Quarter compared with Prior Year Quarter. Operating income in the Current Year Quarter included $3.9 million of gains on asset dispositions compared with $13.5 million of gains in the Prior Year Quarter. Excluding the impact of these gains, operating income decreased by $44.8 million. The decrease in operating revenues noted above was partially offset by a $20.8 million reduction in operating expenses primarily due to net fleet dispositions, a reduction in the number of scheduled drydockings, lower

 

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unscheduled repair costs, and cold-stacking additional vessels in the U.S. Gulf of Mexico. Administrative and general expenses were $1.3 million lower in the Current Year Quarter compared with the Prior Year Quarter primarily due to the impact of restructuring the international group in late 2008.

Operating Income – Current Nine Months compared with Prior Nine Months. Operating income in the Current Nine Months included $18.7 million of gains on asset dispositions compared with $35.0 million of gains in the Prior Nine Months. Excluding the impact of these gains, operating income decreased by $13.2 million. The decrease in operating revenues noted above was partially offset by a $59.2 million reduction in operating expenses primarily due to net fleet dispositions, a reduction in the number of scheduled drydockings and cold-stacking additional vessels in the U.S. Gulf of Mexico. Administrative and general expenses were $8.8 million lower in the Current Nine Months compared with the Prior Nine Months primarily due to the impact of restructuring the international group in late 2008.

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

 

     Owned    Joint
Ventured
   Leased-in    Pooled or
Managed
   Total

2009

              

Anchor handling towing supply

   18    1    1    1    21

Crew

   43    2    22    1    68

Mini-supply

   6       5       11

Standby safety

   24             24

Supply

   11       8    8    27

Towing supply

   7    3    2    1    13

Specialty

   4    5          9
                        
   113    11    38    11    173
                        

2008

              

Anchor handling towing supply

   17    1    1    1    20

Crew

   51    2    23    1    77

Mini-supply

   14       5       19

Standby safety

   23    1       5    29

Supply

   12       9    6    27

Towing supply

   10    3    2       15

Specialty

   7    3          10
                        
   134    10    40    13    197
                        

 

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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 September 30,
    For the Nine Months
Ended September 30,
 
     2009     2008     2009     2008  

Rates Per Day Worked:

        

Anchor handling towing supply

   $ 31,993      $ 45,800      $ 39,091      $ 39,701   

Crew

     7,615        7,080        7,491        6,822   

Mini-supply

     6,822        6,859        6,213        6,916   

Standby safety

     8,795        10,040        8,362        10,153   

Supply

     15,244        17,917        15,449        16,539   

Towing supply

     12,202        11,135        11,908        10,636   

Specialty

     13,038        11,864        14,008        11,871   

Overall Average Rates Per Day Worked

     11,880        13,161        12,261        12,394   

Utilization:

        

Anchor handling towing supply

     57     85     65     79

Crew

     60     87     70     78

Mini-supply

     54     80     63     69

Standby safety

     91     90     90     89

Supply

     66     90     76     89

Towing supply

     84     95     91     90

Specialty

     91     89     91     91

Overall Fleet Utilization

     67     88     75     82

Available Days:

        

Anchor handling towing supply

     1,673        1,547        4,725        4,712   

Crew

     5,796        6,348        17,892        19,392   

Mini-supply

     1,046        1,748        3,743        5,363   

Standby safety

     2,208        2,116        6,552        6,302   

Supply

     1,834        1,942        5,454        6,164   

Towing supply

     828        1,152        2,518        3,705   

Specialty

     368        617        1,220        2,384   
                                

Overall Fleet Available Days

     13,753        15,470        42,104        48,022   
                                
        

 

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Marine Transportation Services

 

    For the Three Months
Ended September 30,
    For the Nine Months
Ended September 30,
  Change
’09/’08
 
    2009   2008     2009   2008   3 Mos     9 Mos  
    $’000   %   $’000     %     $’000     %   $’000   %   %     %  

Operating Revenues:

                   

United States

  21,737   100   27,535      100      72,369      100   85,252   100   (21   (15
                                         

Costs and Expenses:

                   

Operating

  11,420   53   22,391      82      39,983      56   55,372   65    

Administrative and general

  953   4   1,486      5      3,079      4   4,531   5    

Depreciation and amortization

  8,003   37   7,997      29      24,001      33   24,016   28    
                                         
  20,376   94   31,874      116      67,063      93   83,919   98    
                                         

Gains on Asset Dispositions

                       3,629   4    
                                         

Operating Income (Loss)

  1,361   6   (4,339   (16   5,306      7   4,962   6   131      7   
                                         

Other Income (Expense):

                   

Foreign currency gains (losses), net

  7     (18        (2     9      
                                         

Segment Profit (Loss)

  1,368   6   (4,357   (16   5,304      7   4,971   6   131      7   
                                         

Operating Revenues. Operating revenues were $5.8 million lower in the Current Year Quarter compared with the Prior Year Quarter and $12.9 million lower in the Current Nine Months compared with the Prior Nine Months primarily due to changes in the contract status of the California Voyager (from time charter to long-term bareboat charter commencing in September 2008) and the Seabulk Challenge (from spot market to time charter commencing in April 2009), the temporary lay-up of the Seabulk Trader commencing in August 2009, and lower utilization for the Seabulk America that operated in the spot market. Operating revenues were also lower for the Seabulk Energy that completed a long-term time charter in February 2009 and then operated in the spot market before commencing a new time charter at a lower day rate in August 2009. In addition, the Seabulk Energy was off-hire for regulatory drydocking and repairs for 28 days in the Current Nine Months. Operating revenues were higher for the Seabulk Arctic and the Seabulk Pride both of which underwent regulatory drydockings in the Prior Nine Months.

Operating Income (Loss). Operating income was $5.7 million higher in the Current Year Quarter compared with the Prior Year Quarter and $0.3 million higher in the Current Nine Months compared with the Prior Nine Months. Operating income in the Prior Nine Months included gains of $3.6 million on the sale of the Seabulk Magnachem and Seabulk Power. Excluding the impact of these gains, operating income was $4.0 million higher in the Current Nine Months compared with the Prior Nine Months. In both the Current Year Quarter and Current Nine Months the reductions in operating revenues as noted above were offset by lower operating expenses associated with the drydockings of the Seabulk Arctic and Seabulk Pride, the changes in contract status of the Seabulk Challenge and California Voyager and lower voyage expenses for the Seabulk America that operated in the spot market. Operating income was lower for the Seabulk Energy in the Current Year Quarter and Current Nine Months primarily due to the reduction in operating revenues as noted above and in the Current Nine Months due to higher operating expenses, primarily associated with the regulatory drydocking.

Fleet Count. As of September 30, 2009 and 2008, Marine Transportation Services owned eight U.S.-flag product tankers operating in the domestic coastwise trade.

 

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Inland River Services

 

    For the Three Months
Ended September 30,
    For the Nine Months
Ended September 30,
    Change
’09/’08
 
    2009   2008     2009   2008     3 Mos     9 Mos  
    $’000   %   $’000     %     $’000   %   $’000     %     %     %  

Operating Revenues:

                   

United States

  34,314   100   36,517      100      101,491   100   99,984      100      (6   2   
                                           

Costs and Expenses:

                   

Operating

  20,144   59   23,079      63      57,392   56   61,115      61       

Administrative and general

  2,443   7   1,800      5      6,627   7   5,839      6       

Depreciation and amortization

  4,785   14   4,146      11      14,601   14   12,142      12       
                                           
  27,372   80   29,025      79      78,620   77   79,096      79       
                                           

Gains on Asset Dispositions

  813   2   4,073      11      3,470   3   6,256      6       
                                           

Operating Income

  7,755   22   11,565      32      26,341   26   27,144      27      (33   (3
                                           

Other Income (Expense):

                   

Other, Net

      2               2            

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

  140   1   (1,413   (4   2,014   2   (964   (1    
                                           

Segment Profit

  7,895   23   10,154      28      28,355   28   26,182      26      (22   8   
                                           
                   

Operating Revenues. Operating revenues decreased by $2.2 million in the Current Year Quarter compared with the Prior Year Quarter and increased by $1.5 million in the Current Nine Months compared with the Prior Nine Months. In the Current Year Quarter and Current Nine Months operating revenues were higher in the liquid unit tow operation primarily due to the addition of two towboats and eight 30,000-barrel liquid tank barges. In addition, operating revenues were higher due to the commencement of terminal operations in Sauget, Illinois in May 2008. These increases were offset by declines in operating revenues from non-grain freight loadings and idling of a portion of the pooled fleet in the Current Year Quarter. Loadings in the Current Year Quarter were significantly lower than in the Prior Year Quarter due to weaker demand for the movement of non-grain commodities, including construction related materials and domestic coal.

Operating Income. Operating income in the Current Year Quarter included $0.8 million of gains on asset dispositions compared with $4.1 million in the Prior Year Quarter and $3.5 million of gains on asset dispositions in the Current Nine Months compared with $6.3 million in the Prior Year Nine Months. Excluding the impact of these gains, operating income decreased by $0.6 million in the Current Year Quarter compared with the Prior Year Quarter and increased by $2.0 million in the Current Nine Months compared with the Prior Nine Months. The changes in operating income were generally in line with the changes in operating revenues noted above. Operating results in the pooled fleet benefited from favorable operating conditions and lower fuel prices that resulted in lower towing, fleeting and switching costs compared with the Prior Year Quarter and Prior Nine Months.

 

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

 

     Owned    Joint
Ventured
   Leased-in    Pooled or
Managed
   Total

2009

              

Inland river dry cargo barges-open

   179    124          303

Inland river dry cargo barges-covered

   402    138    2    540    1,082

Inland river liquid tank barges

   51    34    2       87

Inland river deck barges

   26             26

Inland river towboats

   16    12          28

Dry-cargo vessel(1)

      1          1
                        
   674    309    4    540    1,527
                        

2008

              

Inland river dry cargo barges-open

   213    117    5    3    338

Inland river dry cargo barges-covered

   389    131    2    121    643

Inland river liquid tank barges

   43    30    2       75

Inland river deck barges

   26             26

Inland river towboats

   17    4          21
                        
   688    282    9    124    1,103
                        
              

 

(1) Argentine-flag.

 

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Aviation Services

 

    For the Three Months
Ended September 30,
  For the Nine Months
Ended September 30,
  Change
’09/’08
 
    2009   2008   2009   2008   3 Mos     9 Mos  
    $’000     %   $’000   %   $’000     %   $’000   %   %     %  

Operating Revenues:

                   

United States

  54,742      85   67,065   91   156,944      87   173,208   91    

Foreign

  9,517      15   6,418   9   24,400      13   17,862   9    
                                       
  64,259      100   73,483   100   181,344      100   191,070   100   (13   (5
                                       

Costs and Expenses:

                   

Operating

  39,659      62   49,991   68   117,288      65   136,559   71    

Administrative and general

  5,624      9   5,174   7   15,424      8   14,698   8    

Depreciation and amortization

  9,706      15   9,571   13   27,482      15   26,032   14    
                                       
  54,989      86   64,736   88   160,194      88   177,289   93    
                                       

Gains on Asset Dispositions and Impairments, Net

  1,062      2   1,307   2   3        4,909   3    
                                       

Operating Income

  10,332      16   10,054   14   21,153      12   18,690   10   3      13   
                                       

Other Income (Expense):

                   

Derivative gains (losses), net

  (80         233        1,352   1    

Foreign currency gains, net

  296        587   1   1,662      1   78      

Other, net

                    39      

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

  (186     312     (190     313      
                                       

Segment Profit

  10,362      16   10,953   15   22,858      13   20,472   11   (5   12   
                                       
                   

Operating Revenues. Operating revenues decreased by $9.2 million in the Current Year Quarter compared with the Prior Year Quarter and by $9.7 million in the Current Nine Months compared with the Prior Nine Months. Operating revenues in the U.S. Gulf of Mexico decreased in the Current Nine Months primarily due to non-recurring hurricane support activity in the Prior Nine Months and a reduction in fuel surcharge revenues as a result of lower fuel prices. In addition, operating revenues were lower in the Current Year Quarter due to the loss of several short-term contracts. Operating revenues in Alaska decreased due to a reduction in fuel sales volume and lower fuel prices at the fixed base operation and fewer aircraft supporting seasonal flightseeing operations, partially offset by additional oil and gas support contracts. Operating revenues for air medical services were lower due to a reduction in the number of medical contracts. International leasing revenues improved as newly delivered aircraft were placed on leases outside the United States.

Operating Income. Operating income in the Current Year Quarter included $1.1 million of gains on asset dispositions and impairments, compared with gains of $1.3 million in the Prior Year Quarter. Operating income in the Prior Nine Months included $4.9 million in gains on asset dispositions and impairments, net. Excluding the impact of these gains, operating income increased by $0.5 million in the Current Year Quarter compared with the Prior Year Quarter and increased by $7.4 million in the Current Nine Months compared with the Prior Nine Months. Operating income was impacted by the decreases in operating activities noted above, offset by lower fuel costs, a reduction in workforce and the receipt of insurance proceeds related to damage incurred from Hurricanes Gustav and Ike. In addition, operating income in the Current Nine Months was positively impacted by the recovery of a previously reserved receivable balance from a major Alaska-based customer.

 

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

 

     Owned(1)    Joint
Ventured
   Leased-in(2)    Managed    Total

2009

              

Light helicopters – single engine

   51    6    3       60

Light helicopters – twin engine

   35       6    9    50

Medium helicopters

   52       3    3    58

Heavy helicopters

   8       1       9
                        
   146    6    13    12    177
                        

2008

              

Light helicopters – single engine

   50    6    6       62

Light helicopters – twin engine

   33       6    14    53

Medium helicopters

   48       3    7    58

Heavy helicopters

   6             6
                        
   137    6    15    21    179
                        

 

(1) Excludes one helicopter removed from service as of September 30, 2009 and 2008.
(2) Excludes three helicopters removed from service as of September 30, 2009.

Environmental Services

 

     For the Three Months
Ended September 30,
    For the Nine Months
Ended September 30,
   Change
’09/’08
 
     2009    2008     2009    2008    3 Mos     9 Mos  
     $’000     %    $’000     %     $’000    %    $’000     %    %     %  

Operating Revenues:

                        

United States

   28,779      85    34,075      81      86,030    85    95,955      78     

Foreign

   5,048      15    8,102      19      15,206    15    26,715      22     
                                                
   33,827      100    42,177      100      101,236    100    122,670      100    (20   (17
                                                

Costs and Expenses:

                        

Operating

   23,206      69    29,904      71      70,939    70    87,073      71     

Administrative and general

   6,090      18    5,924      14      19,297    19    20,056      16     

Depreciation and amortization

   1,846      5    2,033      5      5,339    5    4,892      4     
                                                
   31,142      92    37,861      90      95,575    94    112,021      91     
                                                

Gains (Losses) on Asset Dispositions

   (1                11       119          
                                                

Operating Income

   2,684      8    4,316      10      5,672    6    10,768      9    (38   (47
                                                

Other Income (Expense):

                        

Foreign currency gains (losses), net

           (478   (1   20       (497       

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

   34         238      1      135       510          
                                                

Segment Profit

   2,718      8    4,076      10      5,827    6    10,781      9    (33   (46
                                                
                        

 

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Operating Revenues. Operating revenues decreased by $8.4 million in the Current Year Quarter compared with the Prior Year Quarter and by $21.4 million in the Current Nine Months compared with the Prior Nine Months. The decreases were primarily due to higher activity levels in the Prior Year Quarter and Prior Nine Months for pipeline repair projects in the Republic of Georgia and Turkey and industrial services activity primarily on the U.S. West Coast. In addition, operating revenues were higher in the Prior Year Quarter due to higher debris monitoring activity relating to Hurricane Gustav. Operating revenues from professional services were lower in the Current Year Quarter and Current Nine Months primarily due to a decrease in platform recovery, planning and public assistance recovery activities.

Operating Income. Operating income decreased by $1.6 million in the Current Year Quarter compared with the Prior Year Quarter and by $5.1 million in the Current Nine Months compared with the Prior Nine Months. The decreases were generally in line with the reductions in operating revenues noted above.

Commodity Trading

 

     For the Three Months
Ended September 30,
   For the Nine Months
Ended September 30,
   Change
’09/’08
 
     2009     2008    2009    2008    3 Mos     9 Mos  
     $’000     %     $’000    %    $’000    %    $’000     %    %     %  

Operating Revenues:

                         

United States

   109,045      72      27,549    62    211,035    70    85,323      66     

Foreign

   41,821      28      16,741    38    90,186    30    43,060      34     
                                               
   150,866      100      44,290    100    301,221    100    128,383      100    241      135   
                                               

Costs and Expenses:

                         

Operating

   150,983      100      37,746    85    292,019    97    111,480      87     

Administrative and general

   3,705      2      1,358    3    9,012    3    3,729      3     

Depreciation

   7                 9                
                                               
   154,695      102      39,104    88    301,040    100    115,209      90     
                                               

Operating Income (Loss)

   (3,829   (2   5,186    12    181       13,174      10    (174   (99
                                               

Other Income (Expense):

                         

Derivative gains (losses), net

   1,689      1      178       3,226    1    (414       

Foreign currency gains, net

   177           8       449       9          

Other, net

             1       26       5          

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

             77       187       77          
                                               

Segment Profit (Loss)

   (1,963   (1   5,450    12    4,069    1    12,851      10    (136   (68
                                               

Operating Revenues. Operating revenues in the Current Year Quarter were $150.9 million compared with $44.3 million in the Prior Year Quarter and $301.2 million in the Current Nine Months compared with $128.4 million in the Prior Nine Months. The improvements in operating revenues reflect increased activity in renewable fuel trading, including logistics and transportation, higher hydrocarbon transportation revenues, higher volumes of rice sales and the consolidation of sugar trading activities commencing June 1, 2009.

Segment Profit (Loss). Segment loss in the Current Year Quarter was $2.0 million compared with segment profit of $5.5 million in the Prior Year Quarter. Segment profit in the Current Nine Months was $4.1 million

 

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compared with $12.9 million in the Prior Nine Months. The reductions in segment profit were primarily due to lower margins on rice sales, higher freight costs for liquid products and higher administrative and general expenses due to increased headcount. In addition, Current Year Quarter and Current Nine Months results were negatively impacted by a provision for doubtful accounts.

Other Segment Profit

 

     For the Three Months
Ended September 30,
   For the Nine Months
Ended September 30,
   Change
’09/’08
 
     2009     2008    2009     2008    3 Mos