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, 2011              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,  
Fort Lauderdale, Florida   33316
(Address of Principal Executive Offices)   (Zip Code)

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  x     No  ¨

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

 

Large accelerated filer  x   Accelerated filer  ¨  

Non-accelerated filer  ¨

(Do not check if a smaller

reporting company)

  Smaller reporting company  ¨

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

The total number of shares of common stock, par value $.01 per share, outstanding as of October 21, 2011 was 21,714,704. The Registrant has no other class of common stock outstanding.

 

 

 


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, 2011

and December 31, 2010

     3   
     
     

Condensed Consolidated Statements of Income for the

Three and Nine Months Ended September 30, 2011 and 2010

     4   
     
     

Condensed Consolidated Statement of Changes in Equity for the

Nine Months Ended September 30, 2011

     5   
     
     

Condensed Consolidated Statements of Cash Flows for the

Nine Months Ended September 30, 2011 and 2010

     6   
     
      Notes to Condensed Consolidated Financial Statements      7   
     
   Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations      27   
     
   Item 3.    Quantitative and Qualitative Disclosures About Market Risk      57   
     
   Item 4.    Controls and Procedures      57   
     
Part II.    Other Information      58   
     
   Item 1A.    Risk Factors      58   
        
   Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds      58   
        
   Item 6.    Exhibits      58   

 

2


PART I—FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

SEACOR HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data, unaudited)

 

    September 30,
2011
    December 31,
2010
 
ASSETS    

Current Assets:

   

Cash and cash equivalents

  $ 306,465      $ 370,028   

Restricted cash

    19,474        12,651   

Marketable securities

    82,978        147,409   

Receivables:

   

Trade, net of allowance for doubtful accounts of $3,343 and $4,212 in 2011 and 2010, respectively

    316,633        450,912   

Other

    52,719        72,448   

Inventories

    75,906        67,498   

Deferred income taxes

    5,442        5,442   

Prepaid expenses and other

    14,637        18,414   
 

 

 

   

 

 

 

Total current assets

    874,254        1,144,802   
 

 

 

   

 

 

 

Property and Equipment

    2,985,583        2,803,754   

Accumulated depreciation

    (918,914     (835,032
 

 

 

   

 

 

 

Net property and equipment

    2,066,669        1,968,722   
 

 

 

   

 

 

 

Investments, at Equity, and Advances to 50% or Less Owned Companies

    245,885        182,387   

Construction Reserve Funds & Title XI Reserve Funds

    298,345        323,885   

Goodwill

    62,424        61,779   

Intangible Assets, net

    16,427        21,169   

Other Assets, net of allowance for doubtful accounts of $1,830 in 2010

    98,314        57,645   
 

 

 

   

 

 

 
  $ 3,662,318      $ 3,760,389   
 

 

 

   

 

 

 
LIABILITIES AND EQUITY    

Current Liabilities:

   

Current portion of long-term debt

  $ 23,138      $ 14,618   

Current portion of capital lease obligations

    1,081        1,030   

Accounts payable and accrued expenses

    208,432        322,785   

Other current liabilities

    208,816        197,080   
 

 

 

   

 

 

 

Total current liabilities

    441,467        535,513   
 

 

 

   

 

 

 

Long-Term Debt

    669,573        697,427   

Capital Lease Obligations

    4,598        5,493   

Deferred Income Taxes

    565,078        567,880   

Deferred Gains and Other Liabilities

    138,969        156,711   
 

 

 

   

 

 

 

Total liabilities

    1,819,685        1,963,024   
 

 

 

   

 

 

 

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; 36,380,547 and 36,110,719 shares issued in 2011 and 2010, respectively

    364        361   

Additional paid-in capital

    1,245,436        1,225,296   

Retained earnings

    1,495,639        1,471,623   

Shares held in treasury of 14,665,843 and 14,711,211 in 2011 and 2010, respectively, at cost

    (900,225     (903,004

Accumulated other comprehensive loss:

   

Cumulative translation adjustments, net of tax

    (5,305     (3,995

Derivative losses on cash flow hedges, net of tax

    (4,228     (2,933

Other, net of tax

    (111     (111
 

 

 

   

 

 

 
    1,831,570        1,787,237   

Noncontrolling interests in subsidiaries

    11,063        10,128   
 

 

 

   

 

 

 

Total equity

    1,842,633        1,797,365   
 

 

 

   

 

 

 
  $ 3,662,318      $ 3,760,389   
 

 

 

   

 

 

 

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

and should be read in conjunction herewith.

 

3


SEACOR HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except share data, unaudited)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2011     2010     2011     2010  

Operating Revenues

   $ 571,424      $ 979,833      $ 1,580,134      $ 2,068,984   
  

 

 

   

 

 

   

 

 

   

 

 

 

Costs and Expenses:

        

Operating

     475,173        683,219        1,274,855        1,480,266   

Administrative and general

     40,117        50,627        132,448        137,626   

Depreciation and amortization

     38,678        41,312        119,807        124,317   
  

 

 

   

 

 

   

 

 

   

 

 

 
     553,968        775,158        1,527,110        1,742,209   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gains on Asset Dispositions and Impairments, Net

     10,982        23,896        28,519        41,953   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating Income

     28,438        228,571        81,543        368,728   
  

 

 

   

 

 

   

 

 

   

 

 

 

Other Income (Expense):

        

Interest income

     5,554        2,562        12,599        5,788   

Interest expense

     (10,712     (10,274     (31,218     (33,862

Debt extinguishment losses, net

     (51            (99     (368

Marketable security gains (losses), net

     130        (54     (3,090     (3,499

Derivative gains (losses), net

     (25,954     1,648        (35,873     (297

Foreign currency gains (losses), net

     (3,218     7,585        3,361        (2,616

Other, net

     (39     10        (273     656   
  

 

 

   

 

 

   

 

 

   

 

 

 
     (34,290     1,477        (54,593     (34,198
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (Loss) Before Income Tax Expense (Benefit) and Equity in Earnings of 50% or Less Owned Companies

     (5,852     230,048        26,950        334,530   

Income Tax Expense (Benefit)

     (352     87,709        12,652        127,424   
  

 

 

   

 

 

   

 

 

   

 

 

 

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

     (5,500     142,339        14,298        207,106   

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

     9,562        7,933        10,600        11,678   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income

     4,062        150,272        24,898        218,784   

Net Income attributable to Noncontrolling Interests in Subsidiaries

     247        334        882        1,163   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income attributable to SEACOR Holdings Inc.

   $ 3,815      $ 149,938      $ 24,016      $ 217,621   
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic Earnings Per Common Share of SEACOR Holdings Inc.

   $ 0.18      $ 7.21      $ 1.14      $ 10.08   

Diluted Earnings Per Common Share of SEACOR Holdings Inc.

   $ 0.18      $ 7.14      $ 1.12      $ 9.99   

Weighted Average Common Shares Outstanding:

        

Basic

     21,202,480        20,786,721        21,158,110        21,590,917   

Diluted

     21,565,149        21,000,565        21,508,457        21,785,292   

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

and should be read in conjunction herewith.

 

4


SEACOR HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(in thousands, unaudited)

 

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

December 31, 2010

  $ 361      $ 1,225,296      $ 1,471,623      $ (903,004   $ (7,039   $ 10,128      $ 1,797,365     

Issuance of common stock:

               

Employee Stock Purchase Plan

                         2,971                      2,971     

Exercise of stock options

    1        5,586                                    5,587     

Director stock awards

           273                                    273     

Restricted stock and restricted stock units

    2        104               1                      107     

Amortization of share awards

           14,398                                    14,398     

Cancellation of restricted stock

           193               (193                  

Dividends paid to noncontrolling interests

                                       (1,957     (1,957  

Cash received from noncontrolling interests

                                       1,705        1,705     

Acquisition of subsidiary with noncontrolling interests

                                       2,322        2,322     

Purchase of subsidiary shares from noncontrolling interests

           (414                          (2,092     (2,506  

Sale of subsidiary shares to noncontrolling interests

                                       124        124     

Other

                                       (49     (49  

Comprehensive income:

               

Net income

                  24,016                      882        24,898      $ 24,898   

Other comprehensive loss

                                (2,605            (2,605     (2,605
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Nine months ended September 30, 2011

  $ 364      $ 1,245,436      $ 1,495,639      $ (900,225   $ (9,644   $ 11,063      $ 1,842,633      $ 22,293   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

and should be read in conjunction herewith.

 

5


SEACOR HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)

 

     Nine Months Ended
September 30,
 
     2011     2010  

Net Cash Provided by Operating Activities

   $ 196,242      $ 416,060   
  

 

 

   

 

 

 

Cash Flows from Investing Activities:

    

Purchases of property and equipment

     (212,428     (173,729

Proceeds from disposition of property and equipment

     50,573        172,993   

Cash settlements on derivative transactions, net

     7,000        (1,585

Investments in and advances to 50% or less owned companies

     (52,309     (28,362

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

     20,184        13,557   

Net advances on revolving credit line to 50% or less owned companies

     (8,233     (4,332

Principal payments (advances) on third party notes receivable, net

     (33,585     1,367   

Net decrease (increase) in restricted cash

     (6,823     19,191   

Net decrease in construction reserve funds and title XI reserve funds

     25,540        17,491   

Net increase in escrow deposits on like-kind exchanges

     (5,046     (738

Repayments on (investments in) leases, net

     7,888        (16,366

Business acquisitions, net of cash acquired

     (40,924     1,203   
  

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     (248,163     690   
  

 

 

   

 

 

 

Cash Flows from Financing Activities:

    

Payments on long-term debt and capital lease obligations

     (33,689     (72,166

Net borrowings (payments) on inventory financing arrangements

     10,196        (19,613

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

     375          

Common stock acquired for treasury

            (125,982

Proceeds and tax benefits from share award plans

     8,684        4,776   

Purchase of subsidiary shares from noncontrolling interests

     (1,149     (39

Dividends paid to noncontrolling interests, net of cash received

     (252     (40
  

 

 

   

 

 

 

Net cash used in financing activities

     (15,835     (213,064
  

 

 

   

 

 

 

Effects of Exchange Rate Changes on Cash and Cash Equivalents

     4,193        (7,312
  

 

 

   

 

 

 

Net Increase (Decrease) in Cash and Cash Equivalents

     (63,563     196,374   

Cash and Cash Equivalents, Beginning of Period

     370,028        465,904   
  

 

 

   

 

 

 

Cash and Cash Equivalents, End of Period

   $ 306,465      $ 662,278   
  

 

 

   

 

 

 

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

and should be read in conjunction herewith.

 

6


SEACOR HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

1. Basis of Presentation and Accounting Policy

The condensed consolidated financial information for the three and nine months ended September 30, 2011 and 2010 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 fairly present the Company’s financial position as of September 30, 2011, its results of operations for the three and nine months ended September 30, 2011 and 2010, its changes in equity for the nine months ended September 30, 2011, and its cash flows for the nine months ended September 30, 2011 and 2010. 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 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, 2010.

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.

Revenue Recognition. The Company recognizes revenue when it is realized or realizable and earned. Revenue is realized or realizable and earned when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price to the buyer is fixed or determinable, and collectability is reasonably assured. Revenue that does not meet these criteria is deferred until the criteria are met. Deferred revenues, included in other current liabilities, for the nine months ended September 30 were as follows (in thousands):

 

     2011     2010  

Balance at beginning of period

   $ 29,322      $ 15,015   

Revenues deferred during the period

     6,191        18,949   

Revenues recognized during the period

     (15,236     (4,587

Write-off of previously deferred revenues

     (16     (278
  

 

 

   

 

 

 

Balance at end of period

   $ 20,261      $ 29,099   
  

 

 

   

 

 

 
    

As of September 30, 2011, deferred revenues included $12.7 million relating to the time charter of several offshore support vessels operating in the U.S. Gulf of Mexico that are scheduled to be paid through the conveyance of a limited net profit interest in developmental oil and gas producing properties owned by a customer. Payments from the conveyance of the limited net profit interest, and the timing of such payments, are contingent upon production and energy sale prices. Based on the current production payout estimate, the deferred revenues are expected to be paid through mid-2012. The Company expects to defer an additional $2.7 million of vessel charter hire under this arrangement through December 2011. The Company will continue to recognize revenues as cash is received or earlier should future payments become determinable. All costs and expenses related to these charters were recognized as incurred.

 

7


As of September 30, 2011, deferred revenues also included $6.1 million related to audit provisions in certain Environmental Services’ response service contracts. The amount of revenues ultimately recognized following the completion of the billing audits or the expiration of the audit period could differ from the amounts billed and those differences may be material.

Reclassifications. Certain reclassifications of prior period information have been made to conform to the presentation of the current period information. These reclassifications had no effect on net income as previously reported.

 

2. Fair Value Measurements

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 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 financial assets and liabilities as of September 30, 2011 that are measured at fair value on a recurring basis were as follows (in thousands):

 

     Level 1      Level 2      Level 3  

ASSETS

        

Marketable securities(1)

   $ 45,471       $ 37,507       $   

Derivative instruments (included in other receivables)

     2,415         4,235           

Construction reserve funds and Title XI reserve funds

     298,345                   

LIABILITIES

        

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

     32,176                   

Derivative instruments (included in other current liabilities)

     11,550         12,617           

 

(1)

Marketable security gains (losses), net include losses of $5.2 million and gains of $1.0 million for the three months ended September 30, 2011 and 2010, respectively, related to marketable security positions held by the Company as of September 30, 2011. Marketable security losses, net include losses of $12.9 million and $0.1 million for the nine months ended September 30, 2011 and 2010, respectively, related to marketable security positions held by the Company as of September 30, 2011.

The estimated fair value of the Company’s other financial assets and liabilities as of September 30, 2011 were as follows (in thousands):

 

     Carrying
Amount
     Estimated
Fair Value
 

ASSETS

     

Cash, cash equivalents and restricted cash

   $ 325,939       $ 325,939   

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

     8,315         see below   

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

     53,159         see below   

LIABILITIES

     

Long-term debt, including current portion

     692,711         717,900   

 

8


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.

The Company’s non-financial assets and liabilities that were measured at fair value during the nine months ended September 30, 2011 were as follows (in thousands):

 

     Level 1      Level 2      Level 3  

ASSETS

        

Investment in Avion Logistics Limited (included in Investments, at Equity, and Advances to 50% or Less Owned Companies)(1)

   $       $ 1,000       $   

Investment in Soylutions LLC (included in Investments, at Equity, and Advances to 50% or Less Owned Companies)(1)

             11,992           

Investment in Mantenimiento Express Maritimo, S.A.P.I. De C.V. (included in Investments, at Equity, and Advances to 50% or Less Owned Companies)(2)

             16,415           

LIABILITIES

        

Lease Obligations for Helicopters (included in other current liabilities)(3)

                     395   

 

(1) During the nine months ended September 30, 2011, the Company marked its investment in its Avion Logistics Limited joint venture and its investment in its Soylutions LLC joint venture to fair value following the acquisition of controlling interests (see Note 6). The investments’ fair values were determined based on the Company’s purchase prices of the acquired interests.

 

(2) During the nine months ended September 30, 2011, the Company marked its investment in its Mantenimiento Express Maritimo S.A.P.I. de C.V. joint venture to fair value following the joint venture’s sale of an additional equity interest to an unrelated third party (see Note 6). The investment’s fair value was determined based on the third party’s purchase price of the acquired interest.

 

(3) During the nine months ended September 30, 2011, the Company recorded a gain of $0.2 million to decrease the carrying value of its exit obligations for three leased-in helicopters.

 

9


3. Derivative Instruments and Hedging Strategies

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, 2011 were as follows (in thousands):

 

     Derivative
Asset
     Derivative
Liability
 

Derivatives designated as hedging instruments:

     

Interest rate swap agreements (cash flow hedges)

   $       $ 5,873   
  

 

 

    

 

 

 
             5,873   
  

 

 

    

 

 

 

Derivatives not designated as hedging instruments:

     

Options on equities and equity indices

     1,127         958   

Forward currency exchange, option and future contracts

     635         1,765   

Interest rate swap agreements

             3,766   

Commodity swap, option and future contracts:

     

Exchange traded

     1,774         2,147   

Non-exchange traded

     3,114         1,403   

U.S. treasury notes, rate-locks and bond future and option contracts

             8,255   
  

 

 

    

 

 

 
     6,650         18,294   
  

 

 

    

 

 

 
   $ 6,650       $ 24,167   
  

 

 

    

 

 

 
     

Fair Value Hedges. During the nine months ended September 30, 2011, the Company utilized forward currency exchange contracts designated as fair value hedges to fix a portion of its euro denominated capital commitments in U.S. dollars to protect against currency fluctuations. As of September 30, 2011, there were no forward currency exchange contracts designated as fair value hedges. During the nine months ended September 30, 2011, the Company designated €55.1 million notional value of its forward currency exchange contracts as fair value hedges, in addition to €56.0 million previously so designated as of December 31, 2010. During the nine months ended September 30, 2011, the Company dedesignated and liquidated €51.5 million notional value of these contracts and €59.6 million notional value matured.

The Company recognized gains (losses) on derivative instruments designated as fair value hedges for the nine months ended September 30 as follows (in thousands):

 

     Derivative gains (losses), net  
           2011                 2010        

Forward currency exchange contracts, effective and ineffective portions

   $ 6,517      $ (1,103

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

     (6,557     1,012   
  

 

 

   

 

 

 
   $ (40   $ (91
  

 

 

   

 

 

 
    

Cash Flow Hedges. As of September 30, 2011, the Company is a party to various interest rate swap agreements, with maturities ranging from 2013 to 2014, which have been designated as cash flow hedges. These agreements call for the Company to pay fixed interest rates ranging from 2.25% to 2.85% on aggregate notional values of $125.0 million and receive a variable interest rate based on London Interbank Offered Rate (“LIBOR”) on these notional values. As of September 30, 2011, one of the Company’s Offshore Marine Services 50% or less

 

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owned companies had an interest rate swap agreement maturing in 2015 that has been designated as a cash flow hedge. This instrument calls for the joint venture to pay a fixed interest rate of 1.48% on the amortized notional value of $19.9 million and receive a variable interest rate based on LIBOR on the amortized notional value. In addition, as of September 30, 2011, one of the Company’s Inland River Services 50% or less owned companies had four interest rate swap agreements with maturities ranging from 2013 to 2015 that have been designated as cash flow hedges. These instruments call for the joint venture to pay fixed rates of interest ranging from 1.53% to 4.16% on the aggregate amortized notional value of $55.0 million and receive a variable interest rate based on LIBOR on the aggregate amortized notional value. By entering into these interest rate swap agreements, the Company and its joint ventures have converted the variable LIBOR component of certain of their outstanding borrowings to a fixed interest rate.

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

 

    

Other comprehensive loss

    Derivative gains (losses), net  
         2011             2010             2011             2010      

Interest rate swap agreements, effective portion

   $ (3,447   $ (8,323   $      $   

Interest rate swap agreements, ineffective portion

                   (108     24   

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

     1,455        2,251                 
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ (1,992   $ (6,072   $ (108   $ 24   
  

 

 

   

 

 

   

 

 

   

 

 

 

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

 

     Derivative gains (losses), net  
           2011                 2010        

Options on equities and equity indices

   $ 2,725      $ 1,434   

Forward currency exchange, option and future contracts

     990        505   

Interest rate swap agreements

     (2,489     (4,035

Commodity swap, option and future contracts:

    

Exchange traded

     (8,818     898   

Non-exchange traded

     1,293        3,048   

U.S. treasury notes, rate-locks and bond future and option contracts

     (29,426     (2,080
  

 

 

   

 

 

 
   $ (35,725   $ (230
  

 

 

   

 

 

 

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 the 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, 2011, the outstanding forward currency exchange contracts translated into a net purchase of foreign currencies with an aggregate U.S. dollar equivalent of $53.0 million. These contracts enable the Company to buy currencies in the future at fixed exchange rates, which could offset possible consequences of changes in currency exchange rates with respect to the Company’s business conducted outside of the United States. The Company generally does not enter into contracts with forward settlement dates beyond twelve to eighteen months.

 

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The Company has entered into various interest rate swap agreements with maturities ranging from 2012 through 2015 that call for the Company to pay fixed interest rates ranging from 1.67% to 2.59% on aggregate amortized notional values of $97.2 million and receive a variable interest rate based on LIBOR on these notional values. In addition, one of the Company’s Offshore Marine Services 50% or less owned companies has entered into an interest rate swap agreement maturing in 2014 that calls for the joint venture to pay a fixed interest rate of 3.05% on the amortized notional value of $26.0 million and receive a variable interest rate based on LIBOR on the notional value. 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 or its joint venture.

The Company has entered into and settled positions in various exchange and non-exchange traded commodity swap, option and future contracts. In the Company’s commodity trading and logistics business, fixed price future purchase and sale contracts for ethanol and sugar are included in the Company’s non-exchange traded derivative positions. The Company enters into exchange traded positions to protect these purchase and sale contracts as well as its inventory balances from market changes. As of September 30, 2011, the net market exposure to ethanol and sugar under these contracts was not material. The Company also enters into exchange traded positions (primarily natural gas, heating oil, crude oil, gasoline, ethanol and sugar) 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 marine, inland river and commodity trading and logistics businesses. As of September 30, 2011, these positions were not material.

The Company has entered into and settled various positions in U.S. treasury notes and bonds through rate locks, 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. As of September 30, 2011, this position consisted of a one-year rate-lock agreement with a notional value of $100.0 million. The treasury rate-lock agreement settled in October 2011 for a net cash payment of $7.1 million based on the then current rate on the ten-year U.S. Treasury Note versus the agreement rate of 2.845%.

 

4. Business Acquisitions

Soylutions Acquisition. On July 29, 2011, the Company obtained a 100% controlling interest in Soylutions LLC (“Soylutions”) through its acquisition of its partner’s interest for $11.9 million in cash (see Note 6). 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 analysis was finalized in July 2011.

G&G Shipping Acquisition. On April 13, 2011, the Company acquired certain real property, eight foreign flag Roll-on/Roll-off (“RORO”) vessels and a 70% interest in an operating company engaged in the shipping trade between the United States, the Bahamas and the Caribbean. The operating company leases-in the real property and the RORO vessels from the Company. The Company’s purchase price of $33.5 million included cash consideration of $30.3 million and the contribution of a $3.2 million note receivable. 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 $0.6 million of goodwill being recorded. The fair value analysis was finalized in April 2011.

SES Kazakhstan Acquisition. On August 31, 2010, the Company obtained a 100% controlling interest in SES-Borkit LLP through its acquisition of its partner’s interest for $1.0 million (cash of $0.6 million and contingent consideration of $0.4 million). Upon acquisition, SES-Borkit LLP was renamed SES Kazakhstan LLP (“SES Kazakhstan”). The selling partner has the opportunity to receive additional consideration of up to $0.4 million based on certain performance measures over the period from the date of acquisition through August 2013. The Company performed a fair value analysis and the purchase price was allocated to the acquired assets

 

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and liabilities based on their fair values resulting in no goodwill being recorded. The fair value analysis was finalized in August 2011. No additional consideration has been earned by the selling partner through September 30, 2011.

PIER Acquisition. On December 1, 2009, the Company acquired all of the issued and outstanding shares of PIER Systems Inc. (“PIER”), a provider of crisis communication consulting services and software in the United States and abroad. The selling stockholders of PIER had the opportunity to receive additional consideration of up to $1.3 million, of which $0.7 million was accrued at acquisition, based upon certain performance measures over the period from the date of acquisition through May 2011. During the nine months ended September 30, 2011, the Company paid $0.5 million of additional consideration and accrued additional contingent consideration of $0.2 million as general and administrative expenses in the accompanying condensed consolidated financial statements. As of September 30, 2011, the Company had paid $0.8 million, in the aggregate, of additional consideration.

Rivers Edge Acquisition. On November 15, 2007, the Company acquired all of the issued and outstanding shares of Rivers Edge Services, Inc. and Kemp’s Rivers Edge Vactor Services, Inc. (collectively referred to as “Rivers Edge”), providers of remediation, demolition, and environmental services in the pacific northwestern United States. The selling stockholder of Rivers Edge has the opportunity to receive additional consideration of up to $4.8 million based upon certain performance measures over the period from the date of acquisition through December 31, 2011, which will be recognized by the Company as compensation expense in the period earned. As of September 30, 2011, no additional consideration had been earned by the selling stockholder.

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 had 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, 2011, no additional consideration was earned by the selling stockholder. As of September 30, 2011, the Company had paid $6.0 million, in the aggregate, of additional consideration, which was recorded as additional goodwill.

Purchase Price Allocation. The following table summarizes the allocation of the purchase price for the Company’s business acquisitions during the nine months ended September 30, 2011 (in thousands):

 

Trade and other receivables

   $ (2,656

Investments, at Equity, and Advances to 50% or Less Owned Companies

     (11,920

Property and Equipment

     59,390   

Goodwill

     621   

Other Assets

     211   

Accounts payable

     (127

Other current liabilities

     (44

Long-Term Debt

     (2,229

Noncontrolling interests in subsidiaries

     (2,322
  

 

 

 

Purchase price(1)

   $ 40,924   
  

 

 

 

 

(1) Purchase price is net of cash acquired of $1.8 million.

 

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5. Equipment Acquisitions, Dispositions and Depreciation and Impairment Policies

During the nine months ended September 30, 2011, capital expenditures were $212.4 million. Equipment deliveries during the period included three offshore support vessels, 55 inland river dry cargo barges, two liquid tank barges, nine helicopters and one harbor tug. In addition, the Company acquired a controlling interest in an offshore support vessel.

During the nine months ended September 30, 2011, the Company sold nine offshore support vessels, eight helicopters, one inland river towboat, six inland river deck barges, two harbor tugs and other equipment for net proceeds of $50.6 million and gains of $31.7 million of which $25.1 million was recognized currently and $6.6 million was deferred.

From time to time, the Company enters into vessel sale-leaseback transactions with finance companies, provides seller financing on sales of its vessels to third parties and sells vessels, helicopters and barges to its 50% or less owned companies. A portion of the gains realized from these transactions was not immediately recognized in income and has been recorded in the accompanying condensed consolidated balance sheets in deferred gains and other liabilities. Deferred gain activity related to these transactions for the nine months ended September 30 was as follows (in thousands):

 

    2011     2010  

Balance at beginning of period

  $ 131,836      $ 93,231   

Deferred gains arising from asset sales

    6,587        8,530   

Amortization of deferred gains included in operating expenses as a reduction to rental expense

    (16,773     (12,440

Amortization of deferred gains included in gains on asset dispositions and impairments, net

    (3,407     (20,626
 

 

 

   

 

 

 

Balance at end of period

  $ 118,243      $ 68,695   
 

 

 

   

 

 

 
   

The Company performs an impairment analysis of long-lived assets used in operations, including intangible assets, when indicators of impairment are present. If the carrying value of the assets is not recoverable, as determined by the estimated undiscounted cash flows, the carrying value of the assets is reduced to fair value. Generally, fair value is determined using valuation techniques, such as expected discounted cash flows or appraisals, as appropriate. During the nine months ended September 30, 2011, impairment charges recognized by the Company related to long-lived assets held for use were not material.

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, 2011, the estimated useful life (in years) of each of the Company’s major categories of new equipment was as follows:

 

Offshore support vessels

     20   

Helicopters(1)

     15   

Inland river dry cargo and deck barges

     20   

Inland river liquid tank barges

     25   

Inland river towboats

     25   

U.S.-flag tankers(2)

     25   

RORO vessels

     20   

Harbor and offshore tugs

     25   

Ocean liquid tank barges

     25   

 

(1) Effective July 1, 2011, the Company changed its estimated useful life and salvage value for helicopters from 12 to 15 years and 30% to 40%, respectively, due to improvements in new aircraft models that continue to increase their long-term value and make them viable for operation over a longer period of time. For the three and nine months ended September 30, 2011, the change in estimate increased operating income by $3.7 million, net income by $2.4 million and basic and diluted earnings per share by $0.11.

 

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

 

6. Investments, at Equity, and Advances to 50% or Less Owned Companies

Soylutions. On July 29, 2011, the Company obtained a 100% controlling interest in Soylutions through its acquisition of its 50% partner’s interest for $11.9 million in cash (see Note 4). Upon the acquisition, the Company adjusted its investment in Soylutions to fair value resulting in the recognition of a gain of $2.3 million, net of tax, which is included in equity in earnings in 50% or less owned companies in the accompanying condensed consolidated statements of income.

MexMar. On July 1, 2011, Mantenimiento Express Maritimo, S.A.P.I. de C.V. (“MexMar”), a Mexican joint venture that operates six offshore support vessels in Mexico, executed a business reorganization plan and issued an additional equity interest to an unrelated third party for $17.1 million in cash. Subsequent to the reorganization and issuance of the additional equity interest, the Company recognized an $8.4 million gain, net of tax, which is included in equity in earnings in 50% or less owned companies in the accompanying condensed consolidated statements of income, and received $14.9 million on the net repayment of outstanding advances from MexMar. The Company has a 49% interest in MexMar after the reorganization.

Aeroleo. On July 1, 2011, the Company acquired a 50% economic interest and a 20% voting interest in Aeroleo Taxi Aereo S/A (“Aeroleo”), a Brazilian entity that provides helicopter transport services to the Brazilian offshore oil and gas industry, for $4.8 million in cash. The Company and its partner also each loaned Aeroleo $6.0 million at an interest rate of 6% per annum. The note requires monthly interest payments and matures in June 2013.

Era do Brazil. On July 1, 2011, the Company and its partner each contributed $4.8 million in cash to Era do Brazil LLC (“Era do Brazil”), a 50-50 joint venture. Era do Brazil immediately acquired a helicopter, subject to a lease to Aeroleo, from the Company for $11.5 million ($9.5 million in cash and a $2.0 million note payable). The note payable bears an interest rate of 7.0% per annum, requires 60 monthly principal and interest payments, and is secured by the helicopter and the Aeroleo lease.

Avion Logistics Limited. On June 1, 2011, the Company acquired a 100% controlling interest in Avion Logistics Limited (“ALL”) through its acquisition of its partner’s 50% interest for $1.0 million in cash. Upon acquisition, the Company adjusted its investment in ALL to fair value resulting in the recognition of a gain of

 

15


$0.3 million, net of tax, which is included in equity in earnings of 50% or less owned companies. Following this change in control, the Company contributed its ownership interest in ALL to Hawker Pacific Airservices Limited (“Hawker Pacific”) for an additional 1.7% interest in Hawker Pacific.

Dynamic Offshore Drilling. On April 4, 2011, the Company acquired a 20% interest in Dynamic Offshore Drilling Ltd. (“Dynamic”), a company established to construct and operate jack-up drilling rigs, for $10.0 million. The first jack-up drilling rig is currently under construction in Singapore and is scheduled for delivery in the first quarter of 2013.

Dart. On February 28, 2011, the Company made an additional investment of $5.0 million in Dart Helicopter Services LLC (“Dart”), a sales, marketing and parts manufacturing organization based in North America that engineers and manufactures after-market parts and equipment for sale to helicopter manufacturers and operators. On July 31, 2011, the Company contributed its ownership in Dart into Dart Holding Company Ltd. in exchange for a 50% interest and a note receivable of $5.1 million. The note receivable bears interest at a rate of 4.0% per annum, requires quarterly principal and interest payments and matures July 31, 2023.

Hawker Pacific. On December 15, 2010, the Company acquired a 32.5% interest in Hawker Pacific, an aviation sales and support organization and a distributor of aviation components, for $25.0 million in cash. In June 2011, the Company contributed its ownership in ALL, valued at $2.0 million, to Hawker Pacific for an additional 1.7% ownership interest bringing its total ownership percentage to 34.2%. The Company has performed a preliminary fair value analysis of Hawker Pacific as of the acquisition date and the date of its additional contribution of ALL. The excess of the purchase price over the Company’s interest in Hawker Pacific’s net assets has been initially allocated to intangible assets in the amount of $7.8 million. Finalization of the preliminary fair value analysis may result in revisions to this allocation.

Bunge-SCF Grain. On September 29, 2010, the Company and a global agribusiness and food company formed Bunge-SCF Gain, LLC (“Bunge-SCF Grain”), a 50-50 joint venture to construct and own a river grain terminal on the Mississippi River in Illinois, which is expected to be completed in 2012. During the nine months ended September 30, 2011, the Company and its partner each made cash contributions of $11.3 million to the joint venture to fund construction costs.

Illinois Corn Processing. Illinois Corn Processing LLC (“ICP”) is a 50-50 joint venture that owns and operates an alcohol manufacturing facility dedicated to the production of alcohol for beverage, industrial and fuel applications. Upon ICP’s formation, the Company provided a $10.0 million term loan with a maturity in November 2014 and a $20.0 million revolving line of credit with a maturity in November 2012 subject to certain borrowing restrictions. During the nine months ended September 30, 2011, the Company made net advances of $8.2 million under the revolving line of credit and received repayments of $0.8 million on the term loan. As of September 30, 2011, the outstanding balances under the term loan and revolving line of credit were $6.8 million and $17.6 million, respectively, inclusive of unpaid and accrued interest.

Avion Pacific Limited. Avion Pacific Limited (“Avion”) is a joint venture that distributes aircraft and aircraft-related parts in the Far East and China. During the nine months ended September 30, 2011, the Company made advances of $6.5 million to Avion and received repayments of $4.6 million. As of September 30, 2011, the Company had outstanding loans to Avion totaling $6.7 million.

Era Training Center. Era Training Center LLC (“ETC”) is a joint venture that operates flight training devices and provides training services to the Company and third party customers. During the nine months ended September 30, 2011, the Company made advances of $1.2 million to ETC. As of September 30, 2011, the Company had outstanding loans to ETC totaling $4.5 million.

 

16


7. Third Party Notes Receivable

From time to time, the Company engages in lending and leasing activities involving various types of equipment. During the nine months ended September, 30, 2011, these activities included advances of $22.2 million for two notes receivable secured by fixed wing aircraft and certain spare parts. Both notes receivable are for five years, one of which requires 59 monthly principal and interest payments and a final balloon payment, and the other requires quarterly payments of principal and interest, subject to certain prepayment provisions based on the sale of spare parts. These activities also included an advance of $14.5 million for a note receivable secured by an offshore support vessel that is managed by the Company. This note receivable requires monthly payments of principal and interest and a final balloon payment.

 

8. Commitments and Contingencies

As of September 30, 2011, the Company’s unfunded capital commitments consisted primarily of offshore support vessels, helicopters, inland river tank barges, an interest in a dry-bulk articulated tug-barge, an interest in a river grain terminal and other property and equipment. These commitments totaled $302.0 million, of which $102.0 million is payable during the remainder of 2011 with the balance payable through 2013. Of the total unfunded capital commitments, $45.7 million may be terminated without further liability other than the payment of liquidated damages of $1.4 million. Subsequent to September 30, 2011, the Company committed to purchase additional equipment for $30.0 million.

The Company has guaranteed the payment of amounts owed by one of its joint ventures under a vessel charter agreement that expires in 2012. In addition, the Company has guaranteed amounts owed under banking facilities by certain of its joint ventures. As of September 30, 2011, the total amount guaranteed by the Company under these arrangements was $24.9 million. In addition, as of September 30, 2011, the Company had uncalled capital commitments to two of its joint ventures for a total of $2.6 million.

On August 19, 2011, the Company granted two fixed price purchase options to an unrelated third party to acquire up to 25% of the outstanding common stock of a certain Environmental Services’ subsidiary of the Company. The first option to acquire a 12.5% interest may be exercised beginning August 19, 2012 through August 19, 2014. If the first option is exercised, the second option to acquire an additional 12.5% may be exercised beginning August 19, 2013 through August 19, 2015.

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 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 2007, representing the Company’s allocated share of an additional funding deficit of $332.6 million. Based on an actuarial valuation of the MNOPF in 2009, the Company was invoiced and expensed $7.8 million in 2010, representing the Company’s allocated share of an additional funding deficit of $636.9 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 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

 

17


(which had been acquired by SEACOR in 2001) and its predecessors. Based on an actuarial valuation in March 2008, the Company was advised that its share of a $281.0 million (£175.0 million) accumulated funding deficit was $1.0 million (£0.6 million). The accumulated funding deficit is being recovered by additional annual contributions from current employers and is subject to adjustment following the results of future tri-annual actuarial valuations. As of September 30, 2011, $0.4 million, in the aggregate, of the Company’s funding deficit had been invoiced and expensed. Depending on the results of the future actuarial valuations, it is possible that the MNRPF will experience further funding deficits, requiring the Company to recognize additional payroll related operating expenses in the periods invoices are received.

Certain subsidiaries of the Company are participating employers in an industry-wide, multi-employer defined benefit pension plan, the American Maritime Officers Pension Plan (“the AMOPP”). Under federal pension law, the AMOPP was deemed in critical status for the 2009 and 2010 plan years as the funded percentage of the AMOPP was less than 65% of the pension liability. The AMOPP was frozen in January 2010 and a ten year rehabilitation plan was adopted by the AMOPP trustees in February 2010 whereby benefit changes and increased contributions by participating employers are expected to improve the funded status of the AMOPP. Based on an actuarial valuation performed as of September 30, 2010, the Company was advised that if it chose to withdraw from the AMOPP, its withdrawal liability would have been $29.5 million. As of September 30, 2011, the Company has no intention to withdraw from the AMOPP and no deficit amounts have been invoiced. Depending upon the results of the future actuarial valuations and the ten year rehabilitation plan, it is possible that the AMOPP will experience further funding deficits, requiring the Company to recognize additional payroll related operating expenses in the periods invoices are received or contribution levels are increased.

On June 12, 2009, a purported civil class action was filed against the Company, Era Group Inc., Era Helicopters LLC and three 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.). The Complaint alleges that the Defendants violated federal antitrust law 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 believes that the claims set forth in the Complaint are without merit and intends to vigorously defend the action. On September 4, 2009, the Defendants filed a motion to dismiss the Complaint. On September 14, 2010, the Court entered an order dismissing the Complaint. On September 28, 2010, the plaintiffs filed a motion for reconsideration and amendment and a motion for re-argument (the “Motions”). On November 30, 2010, the Court granted the Motions, amended the Court’s September 14, 2010 Order to clarify that the dismissal was without prejudice, permitted the filing of an Amended Complaint, and authorized limited discovery with respect to the new allegations in the Amended Complaint. Following the completion of such limited discovery, on February 11, 2011, the Defendants filed a motion for summary judgment to dismiss the Amended Complaint with prejudice. On June 23, 2011, the Court granted summary judgment for the Defendants. On July 22, 2011, the plaintiffs filed a notice of appeal to the U.S. Court of Appeals for the Third Circuit. The Company is unable to estimate the potential exposure, if any, resulting from these claims but believes they are without merit and will continue to vigorously defend the action.

On July 14, 2010, a group of individuals and entities purporting to represent a class commenced a civil action in the U.S. District Court for the Eastern District of Louisiana, Terry G. Robin, et al. v. Seacor Marine, L.L.C., et al., No. 2:10-cv-01986 (E.D. La.) (the “Robin Case”), in which they assert that support vessels, including vessels owned by the Company, responding to the explosion and resulting fire that occurred aboard the semi-submersible drilling rig, the Deepwater Horizon, were negligent in their efforts to save lives and put out the fire and contributed to the sinking of the Deepwater Horizon and subsequent oil spill. The action now is part of the overall multi-district litigation, In re Oil Spill by the Oil Rig “Deepwater Horizon”, MDL No. 2179 (“MDL”). The complaint seeks compensatory, punitive, exemplary, and other damages. In response to this lawsuit, the Company filed petitions seeking exoneration from, or limitation of liability in relation to, any actions that may have been taken by vessels owned by the Company to extinguish the fire. Pursuant to the Limitation of Liability

 

18


Act, those petitions imposed an automatic stay on the Robin Case, and the court set a deadline of April 20, 2011 for individual claimants to assert claims in the limitation cases. Approximately 66 claims were submitted by the deadline in all of the limitation actions. On June 8, 2011, the Company moved to dismiss these claims (with the exception of one claim filed by a Company employee) on various legal grounds. On October 12, 2011, the Court granted the Company’s motion to dismiss in its entirety, dismissing with prejudice all claims that had been filed against the Company in the limitation actions (with the exception of one claim filed by a Company employee that was not subject to the motion to dismiss). The Court has asked the Company to prepare final judgments to be entered in each of the limitation actions and in the Robin Case and the Company expects those judgments to be entered in the coming weeks.

On July 20, 2010, two individuals purporting to represent a class commenced a civil action in the Civil District Court for the Parish of Orleans in the State of Louisiana, John Wunstell, Jr. and Kelly Blanchard v. BP, et al., No. 2010-7437 (Division K) (the “Wunstell Action”), in which they assert, among other theories, that Mr. Wunstell suffered injuries as a result of his exposure to certain noxious fumes and chemicals in connection with the provision of remediation, containment and response services by O’Brien’s Response Management Inc. (“O’Brien’s), a subsidiary of SEACOR. The action now is part of the overall MDL. The complaint also seeks to establish a “class-wide court-supervised medical monitoring program” for all individuals “participating in BP’s Deepwater Horizon Vessels of Opportunity Program and/or Horizon Response Program” who allegedly experience injuries similar to Mr. Wunstell. The Company believes this lawsuit has no merit and will seek its dismissal. Pursuant to contractual agreements with the responsible party, the responsible party has agreed, subject to certain potential limitations, to indemnify and defend O’Brien’s in connection with the Wunstell Action and claims asserted in the MDL.

On December 15, 2010, SEACOR subsidiaries O’Brien’s and National Response Corporation (“NRC”) were named as defendants in one of the several consolidated “master complaints” that have been filed in the overall MDL. The master complaint naming O’Brien’s and NRC asserts various claims on behalf of a putative class against multiple defendants concerning the clean-up activities generally, and the use of dispersants specifically. By court order, the Wunstell Action has been stayed as a result of the filing of the referenced master complaint. The Company believes that the claims asserted against its subsidiaries in the master complaint have no merit and on February 28, 2011, O’Brien’s and NRC moved to dismiss all claims against them in the master complaint on legal grounds. On September 30, 2011, the Court granted in part and denied in part the motion to dismiss that O’Brien’s and NRC had filed (an amended decision was issued on October 4, 2011 that corrected several grammatical errors and non-substantive oversights in the original order). Although the Court refused to dismiss the referenced master complaint in its entirety at that time, the Court did recognize the validity of the “derivative immunity” and “implied preemption” arguments that O’Brien’s and NRC advanced and has directed O’Brien’s and NRC to (i) conduct limited discovery to develop evidence to support those arguments and (ii) then re-assert the arguments. A schedule for such limited discovery and future motion practice is currently being discussed with the Court. The Court did, however, dismiss all state-law claims and certain other claims that had been asserted in the referenced master complaint, and dismissed the claims of all plaintiffs that have failed to allege a legally-sufficient injury. Finally, the Court stated that the plaintiffs could file an amended master complaint and the plaintiffs have indicated that they intend to do so. In addition to the indemnity provided to O’Brien’s, pursuant to contractual agreements with the responsible party, the responsible party has agreed, subject to certain potential limitation, to indemnify and defend O’Brien’s and NRC in connection with these claims in the MDL.

Subsequent to the filing of the referenced master complaint, four additional individual civil actions have been filed in the U.S. District Court for the Eastern District of Louisiana concerning the clean-up activities generally, which name the Company, O’Brien’s and/or NRC as defendants and are part of the overall MDL. On April 8, 2011, O’Brien’s was named as a defendant in Johnson Bros. Corporation of Louisiana v. BP, PLC, et al., No. 2:11-cv-00781 (E.D. La.), which is a suit by an individual business seeking damages allegedly caused by a delay on a construction project alleged to have resulted from the clean-up operations. On April 15, 2011, O’Brien’s and NRC were named as defendants in James and Krista Pearson v. BP Exploration &

 

19


Production, Inc., et al., No. 2:11-cv-00863 (E.D. La.), which is a suit by a husband and wife, who allegedly participated in the clean-up effort and are seeking damages for personal injury, property damage to their boat, and amounts allegedly due under contract. On April 15, 2011, O’Brien’s and NRC were named as defendants in Thomas Edward Black v. BP Exploration & Production, Inc., et al., No. 2:11-cv-00867 (E.D. La.), which is a suit by an individual who is seeking damages for lost income because he allegedly could not find work in the fishing industry after the oil spill. On April 20, 2011, a complaint was filed in Darnell Alexander, et al. v. BP, PLC, et al., No. 2:11-cv-00951 (E.D. La.) on behalf of 117 individual plaintiffs that seek to adopt the allegations made in the referenced master complaint against O’Brien’s and NRC (and the other defendants). By court order, all four of these additional individual cases have been stayed as a result of the filing of the referenced master complaint.

On February 18, 2011, Triton Asset Leasing GmbH, Transocean Holdings LLC, Transocean Offshore Deepwater Drilling Inc., and Transocean Deepwater Inc. (collectively “Transocean”) named O’Brien’s and NRC as third-party defendants in a Rule 14(c) Third-Party Complaint in Transocean’s own Limitation of Liability Act action, which is part of the overall MDL, tendering to O’Brien’s and NRC the claims in the referenced master complaint that have already been asserted against O’Brien’s and NRC. Transocean, Cameron International Corporation, Halliburton Energy Services, Inc., M-I L.L.C., Weatherford U.S., L.P., and Weatherford International, Inc. have also filed cross-claims against O’Brien’s and NRC for contribution and tort indemnity should they be found liable for any damages in Transocean’s Limitation of Liability Act action and O’Brien’s and NRC have asserted counterclaims against those same parties for identical relief.

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

During the year ended December 31, 2010, the Company received notice from the Internal Revenue Service of $12.6 million in proposed penalties regarding Marine Transportation Services’ informational excise tax filings for prior years. The Company intends to vigorously defend its position that the proposed penalties are erroneous and believes the resolution of this matter will not have a material effect on the Company’s consolidated financial position or its results of operations.

During the nine months ended September 30, 2011, the Company received a Notice of Infringement (the “Notice”) from the Brazilian Federal Revenue Office. The Notice alleged the Company had imported a number of vessels into Brazil without properly completing the required importation documents and levied an assessment of $25.7 million. The Company intends to vigorously defend its position that the proposed assessment is erroneous and believes the resolution of this matter will not have a material effect on the Company’s consolidated financial position or its results of operations. Of the levied assessment, $19.3 million relates to managed vessels whose owner would be responsible to reimburse any potential payment.

 

9. Long-Term Debt and Capital Lease Obligations

As of September 30, 2011, the Company had $125.0 million of outstanding borrowings under its revolving credit facility. The remaining availability under this facility was $323.5 million, net of issued letters of credit of $1.5 million. In addition, the Company had other outstanding letters of credit totaling $52.8 million with various expiration dates through 2014.

On July 15, 2011, one of the Company’s Marine Transportation subsidiaries obtained a $1.0 million revolving credit facility. The facility bears interest at prime plus 50 basis points with a floor of 4.5% and is

 

20


secured by all of the assets of the subsidiary. During the nine months ended September 30, 2011, the Company drew $0.4 million on the revolving credit facility and, as of September 30, 2011, had outstanding borrowings of $0.4 million and remaining availability of $0.6 million.

During the nine months ended September 30, 2011, the Company made scheduled payments on long-term debt and capital lease obligations of $8.6 million, repaid $22.8 million for the redemption of a facility financing, and made net borrowings on inventory financing arrangements of $10.2 million.

SEACOR’s Board of Directors has previously authorized the Company to purchase any or all of its 5.875% Senior Notes due 2012 and its 7.375% Senior Notes due 2019, which may be acquired through open market purchases, privately negotiated transactions or otherwise, depending on market conditions. During the nine months ended September 30, 2011, the Company purchased $2.2 million, in principal amount, of its 5.875% Senior Notes due 2012, for an aggregate purchase price of $2.3 million.

 

10. Stock 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”), which may be acquired through open market purchases, privately negotiated transactions or otherwise, depending on market conditions. During the nine months ended September 30, 2011, the Company did not acquire any Common Stock for treasury. As of September 30, 2011, the remaining authority under the repurchase plan was $113.0 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 method. Dilutive securities for this purpose assumes restricted stock grants have vested and common shares have been issued pursuant to the exercise of outstanding stock options. For the three and nine months ended September 30, 2011, diluted earnings per common share of SEACOR excluded 389,536 and 302,521, 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, 2010, diluted earnings per common share of SEACOR excluded 939,071 and 872,748, respectively, of certain share awards as the effect of their inclusion in the computation would have been antidilutive.

A reconciliation of basic and diluted weighted average outstanding common shares of SEACOR was as follows:

 

    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
    2011     2010     2011     2010  

Basic Weighted Average Common Shares Outstanding

    21,202,480        20,786,721        21,158,110        21,590,917   

Effect of Dilutive Share Awards:

       

Options and Restricted Stock

    362,669        213,844        350,347        194,375   
 

 

 

   

 

 

   

 

 

   

 

 

 

Diluted Weighted Average Common Shares Outstanding

    21,565,149        21,000,565        21,508,457        21,785,292   
 

 

 

   

 

 

   

 

 

   

 

 

 

 

21


12. Comprehensive Income

For the three months ended September 30, 2011 and 2010, total comprehensive income was $1.3 million and $150.5 million, respectively. For the nine months ended September 30, 2011 and 2010, total comprehensive income was $22.3 million and $214.5 million, respectively. The components of other comprehensive income (loss) and allocated income tax (expense) benefit for the three and nine months ended September 30 were as follows (in thousands):

 

    Three Months Ended     Nine Months Ended  
    Before-Tax
Amount
    Tax
(Expense)
Benefit
    Net-of-Tax
Amount
    Before-Tax
Amount
    Tax
Benefit
    Net-of-Tax
Amount
 

2011

           

Foreign currency translation adjustments

  $ (3,760     1,316      $ (2,444   $ (2,015   $ 705      $ (1,310

Derivative losses on cash flow hedges (see Note 3)

    (549     192        (357     (1,992     697        (1,295
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive loss

  $ (4,309   $ 1,508      $ (2,801   $ (4,007   $ 1,402      $ (2,605
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

2010

           

Foreign currency translation adjustments

  $ 2,506      $ (877   $ 1,629      $ (556 )   $ 195      $ (361

Derivative losses on cash flow hedges (see Note 3)

    (2,089     731        (1,358     (6,072     2,125        (3,947
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

  $ 417      $ (146   $ 271      $ (6,628 )   $ 2,320      $ (4,308
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

13. Share Based Compensation

Transactions in connection with the Company’s share based compensation plans during the nine months ended September 30, 2011 were as follows:

 

Director stock awards granted

     3,000   
  

 

 

 

Employee Stock Purchase Plan (“ESPP”) shares issued

     47,376   
  

 

 

 

Restricted stock awards granted

     183,500   
  

 

 

 

Restricted stock awards cancelled

     2,020   
  

 

 

 

Shares released from Deferred Compensation Plan

     63   
  

 

 

 

Restricted Stock Unit Activities:

  

Outstanding as of December 31, 2010

     531   

Granted

     650   

Converted to shares and issued to Deferred Compensation Plan

     (51
  

 

 

 

Outstanding as of September 30, 2011

     1,130   
  

 

 

 

Stock Option Activities:

  

Outstanding as of December 31, 2010

     1,130,356   

Granted

     225,590   

Exercised

     (83,277

Forfeited

     (1,120

Expired

       
  

 

 

 

Outstanding as of September 30, 2011

     1,271,549   
  

 

 

 

Shares available for future grants and ESPP purchases as of September 30, 2011

     600,742   
  

 

 

 

 

22


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. An operating business segment has 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, 2010.

The following tables summarize the operating results, capital expenditures and assets of the Company’s reportable segments.

 

    Offshore
Marine
Services

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

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

For the three months ended September 30, 2011

                 

Operating Revenues:

                 

External customers

    93,256        71,804        45,349        24,696        40,415        279,178        16,726               571,424   

Intersegment

    21               2,526        87                      15        (2,649       
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    93,277        71,804        47,875        24,783        40,415        279,178        16,741        (2,649     571,424   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Costs and Expenses:

                 

Operating

    68,457        45,701        31,196        15,194        28,872        279,180        9,117        (2,544     475,173   

Administrative and general

    10,687        6,841        2,206        2,044        7,691        1,944        2,523        6,181        40,117   

Depreciation and amortization

    11,785        9,093        6,464        5,833        2,896        12        2,129        466        38,678   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    90,929        61,635        39,866        23,071        39,459        281,136        13,769        4,103        553,968   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gains (Losses) on Asset Dispositions and Impairments, Net

    5,241        4,894        1,303               3               (315     (144     10,982   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating Income (Loss)

    7,589        15,063        9,312        1,712        959        (1,958     2,657        (6,896     28,438   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other Income (Expense):

                 

Derivative losses, net

           (807                          (3,063            (22,084     (25,954

Foreign currency gains (losses), net

    (2,129     (95            (18     (75     153        (75     (979     (3,218

Other, net

    6                      131                      (1     (175     (39

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

    8,754        106        2,771               (93     (2,267     291               9,562   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment Profit (Loss)

    14,220        14,267        12,083        1,825        791        (7,135     2,872       
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Other Income (Expense) not included in Segment Profit

  

    (5,079

Less Equity Earnings included in Segment Profit

  

    (9,562
                 

 

 

 

Loss Before Taxes and Equity Earnings

  

    (5,852
                 

 

 

 

 

23


    Offshore
Marine
Services

$’000
    Aviation
Services
$’000
    Inland
River
Services
$’000
    Marine
Transportation
Services

$’000
    Environmental
Services

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

For the nine months ended September 30, 2011

                 

Operating Revenues:

                 

External customers

    266,915        196,434        127,959        66,169        151,963        718,511        52,183               1,580,134   

Intersegment

    92        18        7,827        262        4               15        (8,218       
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    267,007        196,452        135,786        66,431        151,967        718,511        52,198        (8,218     1,580,134   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Costs and Expenses:

                 

Operating

    199,719        121,623        87,797        37,757        104,578        703,842        27,417        (7,878     1,274,855   

Administrative and general

    33,535        20,090        8,069        5,607        25,564        6,806        8,353        24,424        132,448   

Depreciation and amortization

    36,523        33,402        17,877        16,539        7,365        37        6,655        1,409        119,807   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    269,777        175,115        113,743        59,903        137,507        710,685        42,425        17,955        1,527,110   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gains (Losses) on Asset Dispositions and Impairments, Net

    13,212        13,260        1,978               (16            229        (144     28,519   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating Income (Loss)

    10,442        34,597        24,021        6,528        14,444        7,826        10,002        (26,317     81,543   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other Income (Expense):

                 

Derivative losses, net

           (1,308                          (6,985            (27,580     (35,873

Foreign currency gains (losses), net

    (1,812     596               4        (29     132        (98     4,568        3,361   

Other, net

    6               4        187        2               (2     (470     (273

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

    9,689        1,061        3,181               31        (3,267     (95            10,600   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Segment Profit (Loss)

    18,325        34,946        27,206        6,719        14,448        (2,294     9,807       
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Other Income (Expense) not included in Segment Profit

  

    (21,808

Less Equity Earnings included in Segment Profit

  

    (10,600
                 

 

 

 

Income Before Taxes and Equity Earnings

  

    26,950   
                 

 

 

 
                 

Capital Expenditures

    50,096        88,894        40,786        10,460        5,853        60        13,253        3,026        212,428   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As of September 30, 2011

                 

Property and Equipment

    610,056        650,750        361,515        233,892        35,617        178        154,081        20,580        2,066,669   

Investments, at Equity, and Advances to 50% or Less Owned Companies

    69,272        51,395        42,870        12,340        2,207        9,441        58,360               245,885   

Goodwill

    13,367        352        1,743        606        45,054               1,302               62,424   

Intangible Assets

    6,482               815        1,630        7,055               445               16,427   

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

    121,486        93,087        56,266        5,528        63,720        127,089        69,124        27,351        563,651   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Segment Assets

    820,663        795,584        463,209        253,996        153,653        136,708        283,312       
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Cash and near cash assets(1)

                    707,262   
                 

 

 

 

Total Assets

                    3,662,318   
                 

 

 

 
                 

 

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

 

24


    Offshore
Marine
Services

$’000
    Aviation
Services

$’000
    Inland
River
Services
$’000
    Marine
Transportation
Services

$’000
    Environmental
Services

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

For the three months ended September 30, 2010

                 

Operating Revenues:

                 

External customers

    150,981        67,117        38,148        18,540        468,226        216,896        19,925               979,833   

Intersegment

    9,935        19        3,233                             106        (13,293       
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    160,916        67,136        41,381        18,540        468,226        216,896        20,031        (13,293     979,833   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Costs and Expenses:

                 

Operating

    79,205        37,492        26,535        8,754        329,497        204,467        10,559        (13,290     683,219   

Administrative and general

    12,378        7,274        2,898        1,087        11,508        3,716        2,803        8,963        50,627   

Depreciation and amortization

    12,758        10,889        5,415        7,320        2,249        13        2,224        444        41,312   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    104,341        55,655        34,848        17,161        343,254        208,196        15,586        (3,883     775,158   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gains (Losses) on Asset Dispositions and Impairments, Net

    12,717        412        29,445        (18,677                          (1     23,896   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating Income (Loss)

    69,292        11,893        35,978        (17,298     124,972        8,700        4,445        (9,411     228,571   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other Income (Expense):

                 

Derivative gains (losses), net

           (29                          (5,307            6,984        1,648   

Foreign currency gains (losses), net

    977        (81            61        3        190        34        6,401        7,585   

Other, net

           50                                           (40     10   

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

    2,300        663        3,522               533        1,042        (127            7,933   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Segment Profit (Loss)

    72,569        12,496        39,500        (17,237     125,508        4,625        4,352       
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Other Income (Expense) not included in Segment Profit

  

    (7,766

Less Equity Earnings included in Segment Profit

  

    (7,933
                 

 

 

 

Income Before Taxes and Equity Earnings

  

    230,048   
                 

 

 

 
                 

 

25


    Offshore
Marine
Services
$’000
    Aviation
Services
$’000
    Inland
River
Services
$’000
    Marine
Transportation
Services

$’000
    Environmental
Services

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

For the nine months ended September 30, 2010

                 

Operating Revenues:

                 

External customers

    400,035        179,873        99,827        59,255        711,013        562,952        56,029               2,068,984   

Intersegment

    15,190        (29     9,586                             411        (25,158       
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    415,225        179,844        109,413        59,255        711,013        562,952        56,440        (25,158     2,068,984   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Costs and Expenses:

                 

Operating

    232,980        110,059        67,636        31,101        476,942        555,213        31,493        (25,158     1,480,266   

Administrative and general

    37,758        18,756        7,577        2,962        24,070        10,251        8,441        27,811        137,626   

Depreciation and amortization

    39,481        32,064        15,249        23,336        6,331        48        6,514        1,294        124,317   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    310,219        160,879        90,462        57,399        507,343        565,512        46,448        3,947        1,742,209   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gains (Losses) on Asset Dispositions and Impairments, Net

    27,332        881        31,231        (18,688     (53            1,203        47        41,953   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating Income (Loss)

    132,338        19,846        50,182        (16,832     203,617        (2,560     11,195        (29,058     368,728   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other Income (Expense):

                 

Derivative gains (losses), net

           (91                          3,612               (3,818     (297

Foreign currency gains (losses), net

    1,776        (1,677            35        10        (557     1        (2,204     (2,616

Other, net

           50        10                      6        34        556        656   

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

    6,264        (54     4,229               625        7        607               11,678   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Segment Profit (Loss)

    140,378        18,074        54,421        (16,797     204,252        508        11,837       
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Other Income (Expense) not included in Segment Profit

  

    (31,941

Less Equity Earnings included in Segment Profit

  

    (11,678
                 

 

 

 

Income Before Taxes and Equity Earnings

  

    334,530   
                 

 

 

 
                 

Capital Expenditures

    31,909        86,079        20,547        4,233        4,176               12,602        14,183        173,729   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As of September 30, 2010

                 

Property and Equipment

    610,088        577,880        317,214        333,462        35,331        168        155,221        19,358        2,048,722   

Investments, at Equity, and Advances to 50% or Less Owned Companies

    40,029        26,367        40,390               2,071        15,577        23,900               148,334   

Goodwill

    13,367        353        1,743               37,999               1,302               54,764   

Intangible Assets

    8,566               1,186        2,036        9,282               557               21,627   

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

    169,112        78,415        47,770        3,152        248,497        80,821        43,439        25,269        696,475   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Segment Assets

    841,162        683,015        408,303        338,650        333,180        96,566        224,419       
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Cash and near cash assets(1)

                    1,052,510   
                 

 

 

 

Total Assets

                    4,022,432   
                 

 

 

 

 

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

 

26


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: decreased demand and loss of revenues as a result of U.S. government implemented moratoriums directing operators to cease certain drilling activities and any extension of such moratoriums (the “Moratoriums”), weakening demand for the Company’s services as a result of unplanned customer suspensions, cancellations, rate reductions or non-renewals of vessel charters and aviation equipment or failures to finalize commitments to charter vessels and aviation equipment in response to Moratoriums, increased government legislation and regulation of the Company’s businesses could increase cost of operations, increased competition if the Jones Act is repealed, liability, legal fees and costs in connection with providing spill and emergency response services, including the Company’s involvement in response to the oil spill as a result of the sinking of the Deepwater Horizon in April 2010, decreased demand for the Company’s services as a result of declines in the global economy, declines 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, 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, safety issues experienced by a particular helicopter model that could result in customers refusing to use that helicopter model or a regulatory body grounding that helicopter model, which could also permanently devalue that helicopter model, 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, 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

 

27


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.

Overview

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

Consolidated Results of Operations

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, 2011, as compared with the three months (“Prior Year Quarter”) and nine months (“Prior Nine Months”) ended September 30, 2010. See “Item 1. Financial Statements—Note 14. Segment Information” included in Part I for consolidating segment tables for each period presented.

 

28


Offshore Marine Services

 

    For the Three Months Ended
September 30,
    For the Nine Months Ended
September 30,
 
    2011     2010     2011     2010  
    $’000     %     $’000     %     $’000     %     $’000     %  

Operating Revenues:

               

United States, primarily U.S. Gulf of Mexico

    26,360        28        90,722        56        78,363        29        209,733        51   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Africa, primarily West Africa

    15,651        17        19,541        12        48,372        18        58,125        14   

Middle East

    11,142        12        13,326        8        33,570        13        39,727        9   

Mexico, Central and South America

    15,107        16        12,396        8        41,353        15        38,110        9   

United Kingdom, primarily North Sea

    19,514        21        17,447        11        55,044        21        48,782        12   

Asia

    5,503        6        7,484        5        10,305        4        20,748        5   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Foreign

    66,917        72        70,194        44        188,644        71        205,492        49   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    93,277        100        160,916        100        267,007        100        415,225        100   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Costs and Expenses:

               

Operating

               

Personnel

    34,978        37        36,959        23        101,645        38        109,918        26   

Repairs and maintenance

    10,118        11        12,539        8        28,803        11        36,243        9   

Drydocking

    2,686        3        4,341        3        12,654        5        18,183        4   

Insurance and loss reserves

    3,285        3        3,761        2        9,518        3        10,742        3   

Fuel, lubes and supplies

    6,308        7        5,824        4        17,683        7        18,659        4   

Leased-in equipment

    5,660        6        4,018        2        12,819        5        11,145        3   

Brokered vessel activity

    243               3,307        2        2,987        1        9,040        2   

Other

    5,179        6        8,456        5        13,610        5        19,050        5   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    68,457        73        79,205        49        199,719        75        232,980        56   

Administrative and general

    10,687        11        12,378        8        33,535        13        37,758        9   

Depreciation and amortization

    11,785        13        12,758        8        36,523        13        39,481        10   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    90,929        97        104,341        65        269,777        101        310,219        75   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gains on Asset Dispositions

    5,241        5        12,717        8        13,212        5        27,332        7   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating Income

    7,589        8        69,292        43        10,442        4        132,338        32   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other Income (Expense):

               

Foreign currency gains (losses), net

    (2,129     (2     977        1        (1,812     (1     1,776          

Other, net

    6                             6                        

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

    8,754        9        2,300        1        9,689        4        6,264        2   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment Profit

    14,220        15        72,569        45        18,325        7        140,378        34   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

29


Operating Revenues by Type. The table below sets forth, for the periods indicated, the amount of operating revenues earned by type.

 

     For the Three Months Ended
September 30,
     For the Nine Months Ended
September 30,
 
     2011      2010      2011      2010  
     $’000      %      $’000      %      $’000      %      $’000      %  

Operating Revenues:

                       

Time charter:

                       

United States, primarily U.S. Gulf of Mexico

     24,111         26         81,004         50         71,643         27         193,050         46   

Africa, primarily West Africa

     15,047         16         14,667         9         43,543         16         47,683         11   

Middle East

     8,557         9         10,755         7         26,794         10         31,611         8   

Mexico, Central and South America

     13,942         15         10,096         6         37,211         14         32,125         8   

United Kingdom, primarily North Sea

     19,518         21         17,445         11         54,949         21         48,712         12   

Asia

     4,674         5         4,235         3         9,541         3         15,890         4   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total time charter

     85,849         92         138,202         86         243,681         91         369,071         89   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Bareboat charter

     212                 3,277         2         628                 4,771         1   

Brokered vessel activity

     256                 4,488         3         3,925         2         11,912         3   

Other marine services

     6,960         8         14,949         9         18,773         7         29,471         7   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     93,277         100         160,916         100         267,007         100         415,225         100   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Time Charter 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,
 
         2011             2010             2011             2010      

Rates Per Day Worked:

        

Anchor handling towing supply

   $ 27,287      $ 41,619      $ 29,729      $ 38,291   

Crew

     6,728        6,522        6,559        6,592   

Mini-supply

     7,535        9,850        7,563        9,051   

Standby safety

     9,302        8,574        9,126        8,250   

Supply

     15,459        16,337        14,143        14,698   

Towing supply

     8,809        10,798        9,575        11,137   

Specialty

     16,172        7,330        9,829        7,258   

Overall Average Rates Per Day Worked

     11,318        13,667        10,880        13,028   

Utilization:

        

Anchor handling towing supply

     52     82     46     78

Crew

     75     80     70     73

Mini-supply

     87     90     75     69

Standby safety

     88     88     87     88

Supply

     70     86     69     81

Towing supply

     43     73     49     77

Specialty

     48     88     62     72

Overall Fleet Utilization

     72     83     69     77

Available Days:

        

Anchor handling towing supply

     1,564        1,675        4,641        5,114   

Crew

     3,487        4,542        11,291        13,569   

Mini-supply

     644        1,012        2,151        3,003   

Standby safety

     2,392        2,300        6,933        6,682   

Supply

     1,748        1,748        4,887        5,187   

Towing supply

     368        560        1,402        2,059   

Specialty

     276        275        988        969   
  

 

 

   

 

 

   

 

 

   

 

 

 

Overall Fleet Available Days

     10,479        12,112        32,293        36,583   
  

 

 

   

 

 

   

 

 

   

 

 

 
        

Current Year Quarter compared with Prior Year Quarter

Operating Revenues. Operating revenues decreased by $67.6 million in the Current Year Quarter compared with the Prior Year Quarter.

Time charter revenues were $52.4 million lower. Overall fleet utilization was 72% compared with 83%. The number of days available for charter was 10,479 compared with 12,112, a 1,633 day or 13% reduction. Overall average day rates were $11,318 per day compared with $13,667 per day, a decrease of $2,349 per day or 17%.

 

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Lower utilization decreased time charter revenues by $23.1 million. Net fleet dispositions, the impact of vessels mobilizing between geographic regions and other changes in fleet mix reduced time charter revenues by $11.8 million. In overall terms, lower average day rates decreased time charter revenues by $18.2 million while the impact of favorable changes in currency exchange rates increased time charter revenues by $0.7 million.

In the U.S. Gulf of Mexico, time charter revenues were $56.9 million lower due to softer market conditions attributable to the ongoing slowdown in the issuance of drilling permits by the Bureau of Ocean Energy Management, Regulation and Enforcement in the aftermath of the Deepwater Horizon oil spill. During the Current Year Quarter, lower utilization and lower average day rates reduced time charter revenues by $11.4 million and $17.0 million, respectively. Vessels that mobilized out of the region, other changes in fleet mix and net fleet dispositions decreased time charter revenues by $18.3 million and more out-of-service time for cold-stacked vessels during the period further decreased time charter revenues by $10.2 million. As of September 30, 2011 and 2010, the Company had seven vessels cold-stacked in this region.

In the Middle East, time charter revenues were $2.2 million lower primarily due to the impact of vessels mobilizing to other geographic regions and fleet dispositions.

In Mexico, Central and South America, time charter revenues were $3.8 million higher, of which $1.9 million was due to incremental time charter revenues from a vessel that mobilized into the region, $2.4 million was due to net fleet additions and $0.9 million was due to higher average day rates. Lower utilization decreased time charter revenues by $1.4 million.

In the United Kingdom, time charter revenues were $2.1 million higher, of which $1.3 million was due to improved average day rates and favorable changes in currency exchange rates and $1.0 million was due to incremental time charter revenues from a vessel that mobilized into the region and was converted from a towing supply to a standby safety vessel configuration.

Bareboat charter revenues were $3.1 million lower due to the change in contract status of one vessel in Asia. Revenues from brokered vessel activity were $4.2 million lower due to reduced activity in West Africa and the Middle East. Other marine services revenues were $7.9 million lower primarily due to $7.7 million of technical services provided in connection with the Deepwater Horizon oil spill response in the Prior Year Quarter.

Operating Expenses. Operating expenses decreased by $10.7 million in the Current Year Quarter compared with the Prior Year Quarter. Operating expenses were $3.5 million lower due to net fleet dispositions, $2.2 million lower due to more out-of-service days for cold-stacked vessels, $3.1 million lower due to reduced brokered vessel activity in West Africa and the Middle East, and $4.8 million lower due to the provision of technical services provided in connection with the Deepwater Horizon oil spill response during the Prior Year Quarter. The charter-in of several vessels into Mexico, Central and South America resulted in additional operating expense of $1.9 million.

Personnel costs were $2.0 million lower primarily due to net fleet dispositions and more out-of-service days for cold-stacked vessels. Repair and maintenance expenses were $2.4 million lower due to net fleet dispositions, more out-of-service days for cold-stacked vessels and the impact of expenditures incurred in the Prior Year Quarter related to technical services provided in support of the Deepwater Horizon oil spill response. Drydocking expenses were $1.7 million lower primarily due to reduced activity in Mexico, Central and South America, and West Africa. Brokered Vessel Activity expense was $3.1 million lower due to reduced activity in West Africa and the Middle East. Other operating expenses were $3.3 million lower primarily due to the impact of expenditures incurred in the Prior Year Quarter related to technical services provided in support of the Deepwater Horizon oil spill response.

Gains on Asset Dispositions. During the Current Year Quarter, the Company sold three offshore support vessels and other equipment for net proceeds of $6.7 million and gains of $5.1 million. In addition, the Company recognized previously deferred gains of $0.1 million. During the Prior Year Quarter, the Company sold four

 

32


offshore support vessels for net proceeds of $84.3 million and gains of $19.2 million of which $11.9 million was recognized currently and $7.3 million was deferred. In addition, the Company recognized previously deferred gains of $0.8 million.

Equity in Earnings of 50% or Less Owned Companies, Net of Tax. During the Current Year Quarter, Offshore Marine Services’ Mexican joint venture executed a business reorganization plan and issued an additional equity interest to an unrelated third party. Subsequent to the reorganization and issuance of the additional equity interest, the Company recognized an $8.4 million gain, net of tax.

Current Nine Months compared with Prior Nine Months

Operating Revenues. Operating revenues decreased by $148.2 million in the Current Nine Months compared with the Prior Nine Months.

Time charter revenues were $125.4 million lower. Overall fleet utilization was 69% compared with 77%. The number of days available for charter was 32,293 compared with 36,583, a 4,290 day or 12% reduction. Overall average day rates were $10,880 per day compared with $13,028 per day, a decrease of $2,148 per day or 16%. Lower utilization decreased time charter revenues by $56.9 million. Net fleet dispositions, the impact of vessels mobilizing between geographic regions and other changes in fleet mix reduced time charter revenues by $39.3 million. In overall terms, lower average day rates decreased time charter revenues by $31.8 million while the impact of favorable changes in currency exchange rates increased time charter revenues by $2.6 million.

In the U.S. Gulf of Mexico, time charter revenues were $121.4 million lower due to softer market conditions attributable to the ongoing slowdown in the issuance of drilling permits by the Bureau of Ocean Energy Management, Regulation and Enforcement in the aftermath of the Deepwater Horizon oil spill. Time charter revenues were lower for all classes of vessels. During the Current Nine Months, lower utilization and lower average day rates reduced time charter revenues by $30.6 million and $26.0 million, respectively. Net fleet dispositions, vessels that mobilized out of the region and other changes in fleet mix decreased time charter revenues by $43.1 million and more out-of-service days for cold-stacked vessels further decreased time charter revenues by $21.7 million.

In West Africa, time charter revenues were $4.2 million lower, of which $5.5 million was due to reduced utilization and $0.8 million was due to lower average day rates. The impact of vessels mobilizing from other geographic regions, net fleet dispositions, and other changes in fleet mix increased time charter revenues by $2.1 million.

In the Middle East, time charter revenues were $4.8 million lower, of which $3.2 million was due to net fleet dispositions and the impact of vessels mobilizing out of the region, $1.5 million was due to reduced utilization and $0.1 million was due to lower average day rates.

In Mexico, Central and South America, time charter revenues were $5.1 million higher. Net fleet additions and the impact of vessels mobilizing out of the region increased time charter revenues by $5.1 million, and higher average day rates further increased time charter revenues by $0.7 million. Lower utilization decreased time charter revenues by $0.7 million.

In the United Kingdom, time charter revenues were $6.2 million higher, of which $4.5 million was due to improved average day rates and favorable changes in currency exchange rates, and $3.0 million was due to the impact of a vessel that mobilized into the region and was converted from a towing supply to standby safety vessel configuration. These increases were partially offset by a $1.3 million decrease due to reduced fleet utilization.

 

33


In Asia, time charter revenues were $6.3 million lower, of which $3.2 million was due to fleet dispositions, the impact of vessels mobilizing out of the region and other changes in fleet mix, $1.8 million was due to reduced utilization and $1.3 million was due to lower average day rates.

Bareboat charter revenues were $4.1 million lower due to the change in contract status of one vessel in Asia. Revenues from brokered vessel activity were $8.0 million lower due to reduced activity in West Africa and the Middle East. Other marine services revenues were $10.7 million lower primarily due to the impact in the Prior Nine Months of technical services provided in connection with the Deepwater Horizon oil spill response, which generated revenues of $11.4 million.

Operating Expenses. Operating expenses decreased by $33.3 million in the Current Nine Months compared with the Prior Nine Months. Operating expenses were $10.5 million lower due to net fleet dispositions and other changes in fleet mix, $3.8 million lower due to the effect of vessels mobilizing between regions, $9.0 million lower due to more out-of-service days for cold-stacked vessels, $6.1 million lower due to reduced brokered vessel activity in West Africa and the Middle East, and $6.8 million lower due to the provision of technical services provided in connection with the Deepwater Horizon oil spill response during the Prior Nine Months. The charter-in of several vessels into Mexico, Central and South America resulted in additional operating expenses of $2.3 million during the Current Nine Months.

Personnel costs were $8.3 million lower primarily due to net fleet dispositions and more out-of-service days for cold-stacked vessels. Repair and maintenance expenses were $7.4 million lower due to net fleet dispositions, more out-of-service days for cold-stacked vessels and expenditures incurred in the Prior Nine Months related to technical services provided in support of the Deepwater Horizon oil spill response. Drydocking expense was $5.5 million lower primarily due to reduced activity in the U.S. Gulf of Mexico, West Africa and Mexico, Central and South America. Insurance expense was $1.2 million lower primarily due to net fleet dispositions. Leased-in equipment expense was $1.7 higher primarily due to the charter-in of several vessels into Mexico, Central and South America during the Current Nine Months. Brokered Vessel Activity expense was $6.1 million lower due to reduced activity in West Africa and the Middle East. Other operating expenses were $5.4 million lower primarily due to the impact of expenditures incurred in the Prior Nine Months related to technical services provided in support of the Deepwater Horizon oil spill response.

Gains on Asset Dispositions. During the Current Nine Months, the Company sold nine offshore support vessels and other equipment for net proceeds of $19.2 million and gains of $16.9 million of which $12.3 million was recognized currently and $4.6 million was deferred. In addition, the Company recognized previously deferred gains of $0.9 million. During the Prior Nine Months, the Company sold six offshore support vessels. In addition, the Company received insurance proceeds related to the nationalization of one of its offshore support vessels and the total constructive loss of another offshore support vessel under construction. The Company received net proceeds of $134.9 million on the disposition of these assets, including the insurance proceeds, and had gains of $30.4 million of which $21.9 million was recognized currently and $8.5 million was deferred. In addition, the Company recognized previously deferred gains of $5.4 million.

Equity in Earnings of 50% or Less Owned Companies, Net of Tax. During the Current Nine Months, Offshore Marine Services’ Mexican joint venture executed a business reorganization plan and issued an additional equity interest to an unrelated third party. Subsequent to the reorganization and issuance of the additional equity interest, the Company recognized an $8.4 million gain, net of tax. The gain was partially offset by lower results from another joint venture due to its vessel being cold-stacked.

 

34


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  

2011

              

Anchor handling towing supply

     15         2         2                 19   

Crew

     33         7         7         3         50   

Mini-supply

     5         1         2                 8   

Standby safety

     26         1                         27   

Supply

     10                 9         10         29   

Towing supply

     2         1