CKH-6.30.2012-10Q
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 ________________________________________
FORM 10-Q
________________________________________ 
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2012              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  ý    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  ý     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  ý
The total number of shares of common stock, par value $.01 per share, outstanding as of July 20, 2012 was 20,956,858. The Registrant has no other class of common stock outstanding.
SEACOR HOLDINGS INC.
Table of Contents
 
Part I.
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
 
Item 3.
 
 
 
 
Item 4.
 
 
 
Part II.
 
 
 
 
Item 1.
 
 
 
 
 
Item 2.
 
 
 
 
 
Item 4.
 
 
 
 
 
Item 6.


Table of Contents

PART I—FINANCIAL INFORMATION

ITEM 1.
FINANCIAL STATEMENTS
SEACOR HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data, unaudited)
 
June 30,
2012
 
December 31,
2011
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
301,026

 
$
462,188

Restricted cash
18,347

 
21,281

Marketable securities
32,821

 
66,898

Receivables:
 
 
 
Trade, net of allowance for doubtful accounts of $2,852 and $3,652 in 2012 and 2011, respectively
278,917

 
303,843

Other
66,686

 
51,793

Inventories
72,929

 
69,109

Deferred income taxes
11,123

 
11,123

Prepaid expenses and other
13,968

 
9,323

Discontinued operations
3,551

 
44,989

Total current assets
799,368

 
1,040,547

Property and Equipment
3,304,524

 
3,018,145

Accumulated depreciation
(934,092
)
 
(867,914
)
Net property and equipment
2,370,432

 
2,150,231

Investments, at Equity, and Advances to 50% or Less Owned Companies
323,874

 
249,753

Construction Reserve Funds & Title XI Reserve Funds
192,420

 
259,974

Goodwill
57,054

 
57,054

Intangible Assets, Net
21,116

 
21,528

Other Assets
81,553

 
102,348

Discontinued Operations
—

 
46,699

 
$
3,845,817

 
$
3,928,134

LIABILITIES AND EQUITY
 
 
 
Current Liabilities:
 
 
 
Current portion of long-term debt
$
24,546

 
$
41,091

Current portion of capital lease obligations
4,719

 
2,368

Accounts payable and accrued expenses
131,130

 
185,156

Other current liabilities
160,198

 
150,864

Discontinued operations
(15
)
 
22,047

Total current liabilities
320,578

 
401,526

Long-Term Debt
940,910

 
995,450

Capital Lease Obligations
117

 
3,068

Deferred Income Taxes
582,780

 
566,920

Deferred Gains and Other Liabilities
132,248

 
143,390

Discontinued Operations
—

 
9,717

Total liabilities
1,976,633

 
2,120,071

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; 36,636,706 and 36,444,439 shares issued in 2012 and 2011, respectively
366

 
364

Additional paid-in capital
1,271,617

 
1,256,209

Retained earnings
1,560,416

 
1,512,679

Shares held in treasury of 15,689,148 and 15,511,323 in 2012 and 2011, respectively, at cost
(987,485
)
 
(971,687
)
Accumulated other comprehensive loss, net of tax
(5,831
)
 
(7,958
)
 
1,839,083

 
1,789,607

Noncontrolling interests in subsidiaries
30,101

 
18,456

Total equity
1,869,184

 
1,808,063

 
$
3,845,817

 
$
3,928,134


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

1
Table of Contents

SEACOR HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share data, unaudited)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2012
 
2011
 
2012
 
2011
Operating Revenues
$
494,422

 
$
509,283

 
$
992,307

 
$
947,294

Costs and Expenses:
 
 
 
 
 
 
 
Operating
403,210

 
409,365

 
787,322

 
751,108

Administrative and general
45,120

 
39,170

 
91,298

 
80,824

Depreciation and amortization
43,685

 
39,330

 
83,012

 
77,660

 
492,015

 
487,865

 
961,632

 
909,592

Gains on Asset Dispositions and Impairments, Net
4,419

 
10,301

 
9,961

 
17,556

Operating Income
6,826

 
31,719

 
40,636

 
55,258

Other Income (Expense):
 
 
 
 
 
 
 
Interest income
7,641

 
3,297

 
10,617

 
7,029

Interest expense
(12,413
)
 
(10,465
)
 
(24,437
)
 
(20,505
)
Debt extinguishment losses, net
—

 
—

 
(160
)
 
(48
)
Marketable security gains (losses), net
11,596

 
(4,754
)
 
14,954

 
(3,220
)
Derivative gains (losses), net
3,487

 
(6,601
)
 
(632
)
 
(9,919
)
Foreign currency gains (losses), net
(992
)
 
1,416

 
1,560

 
6,475

Other, net
443

 
(56
)
 
389

 
(234
)
 
9,762

 
(17,163
)
 
2,291

 
(20,422
)
Income from Continuing Operations Before Income Tax
  Expense and Equity in Earnings of 50% or Less Owned
  Companies
16,588

 
14,556

 
42,927

 
34,836

Income Tax Expense
5,975

 
5,877

 
16,583

 
13,550

Income from Continuing Operations Before Equity in
  Earnings of 50% or Less Owned Companies
10,613

 
8,679

 
26,344

 
21,286

Equity in Earnings of 50% or Less Owned Companies,
  Net of Tax
1,051

 
872

 
2,293

 
914

Income from Continuing Operations
11,664

 
9,551

 
28,637

 
22,200

Income (Loss) from Discontinued Operations, Net of Tax
(365
)
 
(184
)
 
19,035

 
(1,364
)
Net Income
11,299

 
9,367

 
47,672

 
20,836

Net Income (Loss) attributable to Noncontrolling Interests
  in Subsidiaries
50

 
336

 
(65
)
 
635

Net Income attributable to SEACOR Holdings Inc.
$
11,249

 
$
9,031

 
$
47,737

 
$
20,201

 
 
 
 
 
 
 
 
Net Income (Loss) attributable to SEACOR Holdings Inc.:
 
 
 
 
 
 
Continuing operations
$
11,614

 
$
9,215

 
$
28,702

 
$
21,565

Discontinued operations
(365
)
 
(184
)
 
19,035

 
(1,364
)
 
$
11,249

 
$
9,031

 
$
47,737

 
$
20,201

 
 
 
 
 
 
 
 
Basic Earnings (Loss) Per Common Share of SEACOR Holdings Inc.:
 
 
 
 
 
 
Continuing operations
$
0.56

 
$
0.44

 
$
1.40

 
$
1.02

Discontinued operations
(0.01
)
 
(0.01
)
 
0.92

 
(0.06
)
 
$
0.55

 
$
0.43

 
$
2.32

 
$
0.96

 
 
 
 
 
 
 
 
Diluted Earnings (Loss) Per Common Share of SEACOR Holdings Inc.:
 
 
 
 
 
 
Continuing operations
$
0.56

 
$
0.43

 
$
1.37

 
$
1.00

Discontinued operations
(0.02
)
 
(0.01
)
 
0.92

 
(0.06
)
 
$
0.54

 
$
0.42

 
$
2.29

 
$
0.94

 
 
 
 
 
 
 
 
Weighted Average Common Shares Outstanding:
 
 
 
 
 
 
 
Basic
20,584,567

 
21,166,037

 
20,552,114

 
21,135,557

Diluted
20,871,380

 
21,517,725

 
20,883,570

 
21,478,759

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

2
Table of Contents

SEACOR HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, unaudited)
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2012
 
2011
 
2012
 
2011
Net Income
 
$
11,299

 
$
9,367

 
$
47,672

 
$
20,836

Other Comprehensive Income (Loss):
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
 
(1,415
)
 
371

 
1,785

 
1,745

Reclassification of net foreign currency translation losses to foreign currency gains (losses), net
 
—

 
—

 
758

 
—

Derivative losses on cash flow hedges
 
(247
)
 
(2,195
)
 
(747
)
 
(2,294
)
Reclassification of net derivative losses on cash flow hedges to interest expense or equity in earnings of 50% or less owned companies
 
857

 
103

 
1,591

 
851

Other
 
—

 
—

 
42

 
—

 
 
(805
)
 
(1,721
)
 
3,429

 
302

Income tax (expense) benefit
 
249

 
602

 
(1,145
)
 
(106
)
 
 
(556
)
 
(1,119
)
 
2,284

 
196

Comprehensive Income
 
10,743

 
8,248

 
49,956

 
21,032

Comprehensive Income (Loss) attributable to Noncontrolling Interests in Subsidiaries
 
(44
)
 
336

 
92

 
635

Comprehensive Income attributable to SEACOR Holdings Inc.
 
$
10,787

 
$
7,912

 
$
49,864

 
$
20,397


















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

3
Table of Contents

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
 
Common
Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Shares
Held In
Treasury
 
Accumulated
Other
Comprehensive
Loss
 
December 31, 2011
$
364

 
$
1,256,209

 
$
1,512,679

 
$
(971,687
)
 
$
(7,958
)
 
$
18,456

 
$
1,808,063

Issuance of common stock:
 
 
 
 
 
 
 
 
 
 
 
 
 
Employee Stock Purchase Plan
—

 
—

 
—

 
1,696

 
—

 
—

 
1,696

Exercise of stock options
1

 
4,561

 
—

 
—

 
—

 
—

 
4,562

Director stock awards
—

 
184

 
—

 
—

 
—

 
—

 
184

Restricted stock and restricted stock units
1

 
399

 
—

 
(32
)
 
—

 
—

 
368

Purchase of treasury shares
—

 
—

 
—

 
(17,431
)
 
—

 
—

 
(17,431
)
Amortization of share awards
—

 
10,233

 
—

 
—

 
—

 
—

 
10,233

Cancellation of restricted stock
—

 
31

 
—

 
(31
)
 
—

 
—

 
—

Acquisition of subsidiary with noncontrolling interests
—

 
—

 
—

 
—

 
—

 
13,268

 
13,268

Issuance of noncontrolling interests
—

 
—

 
—

 
—

 
—

 
83

 
83

Dividends paid to noncontrolling interests
—

 
—

 
—

 
—

 
—

 
(1,798
)
 
(1,798
)
Net income (loss)
—

 
—

 
47,737

 
—

 
—

 
(65
)
 
47,672

Other comprehensive income
—

 
—

 
—

 
—

 
2,127

 
157

 
2,284

Six months ended June 30, 2012
$
366

 
$
1,271,617

 
$
1,560,416

 
$
(987,485
)
 
$
(5,831
)
 
$
30,101

 
$
1,869,184

































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

4
Table of Contents

SEACOR HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
 
Six Months Ended June 30,
 
2012
 
2011
Net Cash Provided by Operating Activities of Continuing Operations
$
84,135

 
$
130,791

Cash Flows from Investing Activities of Continuing Operations:
 
 
 
Purchases of property and equipment
(186,541
)
 
(127,407
)
Proceeds from disposition of property and equipment
11,920

 
25,080

Cash settlements on derivative transactions, net
(202
)
 
4,052

Investments in and advances to 50% or less owned companies
(32,731
)
 
(26,503
)
Return of investments and advances from 50% or less owned companies
26,421

 
5,100

Net advances on revolving credit line to 50% or less owned companies
(300
)
 
(8,916
)
Principal payments (advances) on third party notes receivable, net
19,536

 
(20,323
)
Net decrease (increase) in restricted cash
2,934

 
(325
)
Net decrease in construction reserve funds and Title XI reserve funds
67,554

 
9,206

Net increase in escrow deposits on like-kind exchanges
—

 
(3,396
)
Repayments on leases, net
1,793

 
2,777

Business acquisitions, net of cash acquired
(148,084
)
 
(28,696
)
Net cash used in investing activities of continuing operations
(237,700
)
 
(169,351
)
Cash Flows from Financing Activities of Continuing Operations:
 
 
 
Payments on long-term debt and capital lease obligations
(96,106
)
 
(7,509
)
Net borrowings (repayments) on inventory financing arrangements
(14,798
)
 
5,793

Proceeds from issuance of long-term debt
38,134

 
—

Common stock acquired for treasury
(17,431
)
 
—

Proceeds and tax benefits from share award plans
6,659

 
6,251

Purchase of subsidiary shares from noncontrolling interests
—

 
(1,149
)
Dividends paid to noncontrolling interests, net of cash received
(1,715
)
 
(403
)
Net cash provided by (used in) financing activities of continuing operations
(85,257
)
 
2,983

Effects of Exchange Rate Changes on Cash and Cash Equivalents
1,478

 
5,635

Net Decrease in Cash and Cash Equivalents from Continuing Operations
(237,344
)
 
(29,942
)
Cash Flows from Discontinued Operations:
 
 
 
Operating Activities
(11,749
)
 
31,399

Investing Activities
87,904

 
(3,982
)
Financing activities
—

 
—

Effects of Exchange Rate Changes on Cash and Cash Equivalents
27

 
21

Net Increase in Cash and Cash Equivalents from Discontinued Operations
76,182

 
27,438

Net Decrease in Cash and Cash Equivalents
(161,162
)
 
(2,504
)
Cash and Cash Equivalents, Beginning of Period
462,188

 
365,329

Cash and Cash Equivalents, End of Period
$
301,026

 
$
362,825

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

5
Table of Contents

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 six months ended June 30, 2012 and 2011 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 June 30, 2012, its results of operations for the three and six months ended June 30, 2012 and 2011, its comprehensive income for the three and six months ended June 30, 2012 and 2011, its changes in equity for the six months ended June 30, 2012, and its cash flows for the six months ended June 30, 2012 and 2011. 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, 2011.

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.

Discontinued Operations. The Company's Environmental Services business segment was conducted through SEACOR Environmental Services Inc. ("SES") and O'Brien's Response Management Inc. ("ORM"). SES included National Response Corporation, one of the largest providers of oil spill response services in the United States; NRC Environmental Services Inc., a leading provider of environmental and industrial services on the West Coast of the United States; SEACOR Response Ltd., which provides oil spill response and emergency response services to customers in international markets; and certain other subsidiaries (collectively the "SES Business"). On March 16, 2012, the Company sold the SES Business for a net sales price of $99.9 million and recognized a gain of $20.8 million, net of tax, or $1.00 per diluted share. The transaction did not include ORM, a leading provider of crisis and emergency preparedness and response services. The Company has no continuing involvement in the SES Business, although the sales agreement provides that the Company may receive contingent consideration equal to a portion of the revenue generated by any extraordinary oil spill response that occurs within three years following the date of sale. For all periods presented, the Company has reported the financial position, results of operations and cash flows for the SES Business as discontinued operations in the accompanying condensed consolidated financial statements. The remaining ORM business in the segment was renamed Emergency and Crisis Services.

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 six months ended June 30 were as follows (in thousands): 
 
2012
 
2011
Balance at beginning of period
$
9,968

 
$
21,045

Revenues deferred during the period
13,550

 
3,978

Revenues recognized during the period
(7,697
)
 
(8,334
)
Balance at end of period
$
15,821

 
$
16,689


As of June 30, 2012, deferred revenues included $6.4 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 in 2012. 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.

6
Table of Contents

As of June 30, 2012, deferred revenues included $7.3 million related to contract-lease revenues for certain helicopters leased by Aviation Services to Aeroleo Taxi Aero S/A ("Aeroleo"), its Brazilian joint venture (see Note 6). The deferral resulted from difficulties experienced by Aeroleo following one of its customer's cancellation of certain contracts for a number of AW139 aircraft under contract-lease from Aviation Services. The Company will recognize revenues as cash is received or earlier should future collectability become reasonably assured. All costs and expenses related to these contract-leases were recognized as incurred.

As of June 30, 2012, deferred revenues also included $2.0 million related to contract-lease revenues for certain helicopters leased by Aviation Services to one of its customers. The deferral resulted from the customer having its operating certificate revoked for a period of time and therefore being unable to operate. The certificate has since been reinstated but uncertainty still remains regarding the collectability of the contract-lease revenues. The Company will recognize revenues as cash is received or earlier should future collectability become reasonably assured. All costs and expenses related to these contract-leases were recognized as incurred.

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 June 30, 2012 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)
$
32,759

 
$
62

 
$
—

Derivative instruments (included in other receivables)
1,510

 
5,408

 
—

Construction reserve funds and Title XI reserve funds
192,420

 
—

 
—

LIABILITIES
 
 
 
 
 
Short sale of marketable securities (included in other current liabilities)
13,507

 
138

 
—

Derivative instruments (included in other current liabilities)
8,029

 
8,064

 
—

 ______________________
(1)
Marketable security gains (losses), net include unrealized gains of $0.2 million and losses of $1.8 million for the three months ended June 30, 2012 and 2011, respectively, related to marketable security positions held by the Company as of June 30, 2012. Marketable security gains (losses), net include unrealized gains of $2.6 million and losses of $4.1 million for the six months ended June 30, 2012 and 2011, respectively, related to marketable security positions held by the Company as of June 30, 2012.



7
Table of Contents

The estimated fair values of the Company’s other financial assets and liabilities as of June 30, 2012 were as follows (in thousands): 
 
 
 
Estimated Fair Value
 
Carrying
Amount
 
Level 1
 
Level 2
 
Level 3
ASSETS
 
 
 
 
 
 
 
Cash, cash equivalents and restricted cash
$
319,373

 
$
319,373

 
$
—

 
$
—

Investments, at cost, in 50% or less owned companies (included in other assets)
9,315

 
see below
 
 
 
 
Notes receivable from other business ventures (included in other receivables and other assets)
40,900

 
see below
 
 
 
 
LIABILITIES
 
 
 
 
 
 
 
Long-term debt, including current portion
965,456

 
—

 
992,255

 
—


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 as the overall returns are uncertain due to certain provisions for additional payments contingent upon future events. 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 six months ended June 30, 2012 were as follows (in thousands): 
 
Level 1
 
Level 2
 
Level 3
ASSETS
 
 
 
 
 
Investment in Illinois Corn Processing LLC(1)
$
—

 
$
30,916

 
$
—

 ______________________
(1)
During the six months ended June 30, 2012, the Company marked its equity investment in its Illinois Corn Processing LLC ("ICP") joint venture to fair value following the acquisition of a controlling interest (see Note 6). The investment's fair value was determined based on a fair value analysis of the assets and liabilities of ICP.

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 June 30, 2012 were as follows (in thousands): 
 
Derivative
Asset
 
Derivative
Liability
Derivatives designated as hedging instruments:
 
 
 
Interest rate swap agreements (cash flow hedges)
$
—

 
$
4,135

 
—

 
4,135

Derivatives not designated as hedging instruments:
 
 
 
Options on equities and equity indices
326

 
2,719

Forward currency exchange, option and future contracts
307

 
746

Interest rate swap agreements
—

 
2,866

Commodity swap, option and future contracts:
 
 
 
Exchange traded
1,485

 
5,160

Non-exchange traded
4,800

 
467

 
6,918

 
11,958

 
$
6,918

 
$
16,093



8
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Fair Value Hedges. During the six months ended June 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 June 30, 2012, there were no forward currency exchange contracts designated as fair value hedges.

The Company recognized gains (losses) on derivative instruments designated as fair value hedges for the six months ended June 30 as follows (in thousands):
 
Derivative losses, net
 
2012
 
2011
Forward currency exchange contracts, effective and ineffective portions
$
—

 
$
6,484

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

 
(6,522
)
 
$
—

 
$
(38
)

Cash Flow Hedges. As of June 30, 2012, the Company is a party to various interest rate swap agreements, with maturities ranging from 2013 through 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 the London Interbank Offered Rate (“LIBOR”) on these notional values. As of June 30, 2012, one of the Company’s Offshore Marine Services 50% or less 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 $18.9 million and receive a variable interest rate based on LIBOR on the amortized notional value. In addition, as of June 30, 2012, one of the Company’s Inland River Services 50% or less owned companies had four interest rate swap agreements with maturities ranging from 2013 through 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 $46.6 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 six months ended June 30 as follows (in thousands): 
 
Other comprehensive income (loss)
 
Derivative losses, net
 
2012
 
2011
 
2012
 
2011
Interest rate swap agreements, effective portion
$
(747
)
 
$
(2,294
)
 
$
—

 
$
—

Interest rate swap agreements, ineffective portion
—

 
—

 
(19
)
 
(27
)
Reclassification of derivative losses to interest expense or equity in earnings of 50% or less owned companies
1,591

 
851

 
—

 
—

 
$
844

 
$
(1,443
)
 
$
(19
)
 
$
(27
)

Other Derivative Instruments. The Company recognized gains (losses) on derivative instruments not designated as hedging instruments for the six months ended June 30 as follows (in thousands):
 
Derivative losses, net
 
2012
 
2011
Options on equities and equity indices
$
(910
)
 
$
332

Forward currency exchange, option and future contracts
373

 
1,812

Interest rate swap agreements
(542
)
 
(1,276
)
Commodity swap, option and future contracts:
 
 
 
Exchange traded
(1,456
)
 
(3,547
)
Non-exchange traded
1,922

 
250

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

 
(7,425
)
 
$
(613
)
 
$
(9,854
)


9
Table of Contents

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 enters and settles forward currency exchange, option and future contracts with respect to various foreign currencies. As of June 30, 2012, the outstanding forward currency exchange contracts translated into a net purchase of foreign currencies with an aggregate U.S. dollar equivalent of $18.6 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.

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 $93.1 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 $24.8 million million and receive a variable interest rate based on LIBOR on the amortized 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 enters and settles 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 June 30, 2012, 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 Services and Inland River Services businesses. As of June 30, 2012, these positions were not material.

The Company enters and settles 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 June 30, 2012, there were none of these types of positions outstanding.

4.
BUSINESS ACQUISITIONS

Pantagro Acquisition. On June 25, 2012, the Company acquired a 95% controlling interest in Pantagro-Pantanal Produtos Agropecuarious Ltda. ("Pantagro") for $0.4 million, $0.2 million in cash and a $0.2 million note payable. Pantagro is an Argentine agricultural trading company focusing primarily on salt. The Company performed a preliminary fair value analysis and the purchase price was allocated to the acquired assets and liabilities based on their fair values resulting in no goodwill being recorded. The preliminary fair value analysis is pending completion of a final valuation for the acquired assets and liabilities.

Superior Lift Boats Acquisition. On March 30, 2012, the Company acquired 18 lift boats, real property and working capital from Superior Energy Inc. (“Superior”) for $142.5 million. The Company performed a preliminary fair value analysis and the purchase price was allocated to the acquired assets and liabilities based on their fair values resulting in no goodwill being recorded. The preliminary fair value analysis is pending completion of a final valuation for the acquired assets and liabilities.

ICP Acquisition. On February 1, 2012, the Company obtained a 70% controlling interest in ICP through its acquisition of a portion of its partner's interest for $9.1 million in cash (see Note 6). ICP owns and operates an alcohol manufacturing facility dedicated to the production of alcohol for beverage, industrial and fuel applications. 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 of assets and liabilities acquired was finalized in June 2012.

Lewis & Clark Acquisition. On December 31, 2011, the Company acquired certain assets and liabilities of Lewis & Clark Marine, Inc. and certain related affiliates (“Lewis & Clark”) for $29.6 million. The Company performed a preliminary fair value analysis and the purchase price was allocated to the acquired assets and liabilities based on their fair values resulting in $1.6 million in goodwill being recorded. The preliminary fair value analysis is pending completion of a final valuation for the acquired assets and liabilities.

10
Table of Contents


Windcat Acquisition. On December 22, 2011, the Company acquired 75% of the issued and outstanding shares in Windcat Workboats Holdings Ltd. (“Windcat”) for $21.5 million in cash. Windcat, based in the United Kingdom and the Netherlands, is an operator of 29 wind farm utility vessels operating in the main offshore wind markets of Europe. The Company performed a preliminary fair value analysis and the purchase price was allocated to the acquired assets and liabilities based on their fair values resulting in no goodwill being recorded. The preliminary fair value analysis is pending completion of a final valuation for the acquired assets and liabilities.

Naviera Acquisition. On December 21, 2011, the Company acquired a 70% controlling interest in SEACOR Colombia Fluvial (MI) LLC for $1.9 million in cash. SEACOR Colombia Fluvial (MI) LLC's wholly-owned subsidiary, Naviera Central S.A. (“Naviera”), is a provider of inland river barge and terminal services in Colombia. The Company performed a preliminary fair value analysis and the purchase price was allocated to the acquired assets and liabilities based on their fair values resulting in $1.0 million in goodwill being recorded. The preliminary fair value analysis is pending completion of a final valuation for the acquired assets and liabilities.

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 during the three months ended March 31, 2012.

Purchase Price Allocation. The following table summarizes the allocation of the purchase price for the Company’s business acquisitions during the six months ended June 30, 2012 (in thousands):
Trade and other receivables
$
18,244

Other current assets
16,657

Investments, at Equity, and Advances to 50% or Less Owned Companies
(42,358
)
Property and Equipment
176,202

Intangible Assets
2,438

Other Assets
(332
)
Accounts payable
(4,673
)
Other current liabilities
(3,727
)
Long-Term Debt
(946
)
Other Liabilities
(166
)
Noncontrolling interests in subsidiaries
(13,264
)
Accumulated other comprehensive loss, net of tax
9

Purchase price(1)
$
148,084

(1)
Purchase price is net of cash acquired of $3.7 million.

5.
EQUIPMENT ACQUISITIONS, DISPOSITIONS AND DEPRECIATION AND IMPAIRMENT POLICIES

During the six months ended June 30, 2012, capital expenditures were $186.5 million. Equipment deliveries during the period included one offshore support vessel, one wind farm utility vessel, three inland river dry cargo barges, two liquid tank barges, one inland river towboat and 13 helicopters.

During the six months ended June 30, 2012, the Company sold four offshore support vessels, six helicopters, one inland river towboat, two harbor tugs and other equipment for net proceeds of $65.6 million ($11.7 million in cash, $5.0 million in cash deposits previously received and $48.9 million in seller financing) and gains of $14.8 million, of which $7.5 million were recognized currently and $7.3 million were deferred. In addition, the Company recognized previously deferred gains of $2.5 million and received $0.2 million in deposits related to future expected sales. Two of the offshore support vessels sold were to the Company's Mexican joint venture for $48.5 million (see Note 6).


11
Table of Contents

The Company previously sold certain equipment to 50% or less owned companies prior to adopting new accounting rules effective January 1, 2009 and from time to time enters into vessel sale-leaseback transactions with finance companies and provides seller financing on sales of its equipment to third parties and its 50% or less owned companies. A portion of the gains realized from these transactions were deferred and recorded in deferred gains and other liabilities in the accompanying condensed consolidated balance sheets. Deferred gain activity related to these transactions for the six months ended June 30 was as follows (in thousands):
 
2012
 
2011
Balance at beginning of period
$
119,570

 
$
131,836

Deferred gains arising from asset sales
7,280

 
4,597

Amortization of deferred gains included in operating expenses as a reduction to rental expense
(9,526
)
 
(11,194
)
Amortization of deferred gains included in gains on asset dispositions and impairments, net
(2,455
)
 
(2,461
)
Balance at end of period
$
114,869

 
$
122,778


Equipment, stated at cost, is depreciated using the straight-line method over the estimated useful life of the asset to an estimated salvage value. With respect to each class of asset, the estimated useful life is based upon a newly built asset being placed into service and represents the point at which it is typically not justifiable for the Company to continue to operate the asset in the same or similar manner. From time to time, the Company may acquire older assets that have already exceeded the Company’s useful life policy, in which case the Company depreciates such assets based on its best estimate of remaining useful life, typically the next survey or certification date.

As of June 30, 2012, the estimated useful life (in years) of each of the Company’s major categories of new equipment was as follows:
Offshore support vessels
20

Wind farm utility vessels
10

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
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 months ended June 30, 2012, the change in estimate increased operating income by $4.4 million, net income by $2.9 million, and basic and diluted earnings per share by $0.14. For the six months ended June 30, 2012, the change in estimate increased operating income by $8.4 million, net income by $5.4 million, and basic and diluted earnings per share by $0.26.

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 six months ended June 30, 2012, impairment charges recognized by the Company related to long-lived assets held for use were not material.

6.
INVESTMENTS, AT EQUITY, AND ADVANCES TO 50% OR LESS OWNED COMPANIES

MexMar. As of June 30, 2012, the Company had $31.8 million outstanding in short-term notes, inclusive of unpaid accrued interest, with Mantenimiento Express Maritimo, S.A.P.I. de C.V. ("MexMar"), an Offshore Marine Services Mexican joint venture that operates ten offshore support vessels. During the six months ended June 30, 2012, MexMar purchased two offshore support vessels from the Company and financed a portion of the vessels' mobilization costs with the Company totaling $50.0 million ($5.0 million in cash and two short-term notes totaling $45.0 million). During the six months ended June 30, 2012, MexMar made repayments of $14.1 million on these notes, inclusive of accrued interest.

12
Table of Contents


Trailer Bridge. Trailer Bridge, Inc. (“Trailer Bridge”), an operator of U.S.-flag deck and RORO barges, offers marine transportation services between Jacksonville, Florida, San Juan, Puerto Rico and Puerto Plata, Dominican Republic.  Trailer Bridge filed for bankruptcy under chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Middle District of Florida (the “Bankruptcy Court”) on November 16, 2011.  On April 2, 2012, Trailer Bridge approved and adopted a restructuring plan, which was confirmed by the Bankruptcy Court.  Immediately prior to adopting the restructuring plan, the Company had outstanding marketable security positions in 9.25% Senior Secured Notes due from Trailer Bridge (“Old Notes”) and U.S. Government Guaranteed Ship Financing Bonds due from Trailer Bridge (“MARAD Bonds”).  Upon the adoption and implementation of Trailer Bridge's restructuring plan, the Company exchanged its Old Notes for a new $33.1 million Secured Note due from Trailer Bridge and new common shares in Trailer Bridge, representing a 47.3% ownership interest valued at $9.9 million.  As a result of the adoption and implementation of the restructuring plan, the Company reclassified $48.1 million from marketable securities to investments, at equity, and advances to 50% or less owned companies, representing its investment in the new Trailer Bridge securities valued at $43.0 million and the MARAD Bonds valued at $5.1 million.  In addition, as part of the restructuring plan, the Company provided bridge financing of $15.7 million to Trailer Bridge. During the six months ended June 30, 2012, the Company recognized $9.8 million of marketable security gains, net related to its investments in Trailer Bridge.

Illinois Corn Processing. In January 2012, the Company and its partner each made a capital contribution of $0.5 million. On February 1, 2012, the Company obtained a 70% controlling interest in ICP through its acquisition of a portion of its partner’s interest for $9.1 million in cash (see Note 4). Upon the acquisition, the Company adjusted its investment in ICP to fair value resulting in the recognition of a gain of $6.0 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. During the month ended January 31, 2012, the Company made net advances of $0.3 million under its revolving line of credit.

Aeroleo. On March 1, 2012, the Company recorded an impairment charge of $5.9 million, net of tax, on its investment in and advances to Aeroleo. The impairment charge resulted from difficulties experienced by Aeroleo following one of its customer's cancellation of certain contracts for a number of AW139 aircraft under contract-lease from Aviation Services.

Hawker Pacific. The Company's Hawker Pacific joint venture is an aviation sales and support organization and a distributor of aviation components. During the six months ended June 30, 2012, the Company advanced $3.3 million to Hawker Pacific. The advance bears interest at 10.0% per annum and matures on December 31, 2012, or earlier if a qualified refinancing occurs. As of June 30, 2012, the Company had an outstanding loan totaling $3.3 million inclusive of accrued interest.

Avion Pacific Limited. Avion Pacific Limited (“Avion”) is a joint venture that distributes aircraft and aircraft-related parts in Asia. During the six months ended June 30, 2012, the Company made advances of $9.0 million to Avion and received repayments of $13.7 million. As of June 30, 2012, the Company had outstanding loans to Avion totaling $5.0 million inclusive of accrued interest.

SCFCo Holdings. SCFCo Holdings LLC (“SCFCo”) was established to operate towboats and dry cargo barges on the Parana-Paraguay Rivers and a terminal facility at Port Ibicuy, Argentina. At various times, SCFCo has agreed to expand its operations through additional capital contributions and bank financing. During the six months ended June 30, 2012, the Company and its partner each contributed additional capital of $0.5 million.

Guarantees. The Company has guaranteed the payment of amounts owed by one of its joint ventures under a vessel charter and has guaranteed amounts owed under banking facilities by certain of its joint ventures. As of June 30, 2012, the total amount guaranteed by the Company under these arrangements was $24.6 million. In addition, as of June 30, 2012, the Company had uncalled capital commitments to two of its joint ventures for a total of $2.4 million.

7.
COMMITMENTS AND CONTINGENCIES

As of June 30, 2012, the Company’s unfunded capital commitments totaled $377.6 million and consisted of: eleven offshore support vessels for $148.7 million; an interest in a jack-up drilling rig for $31.2 million; twelve helicopters for $139.3 million; seven inland river liquid tank barges for $16.2 million; an interest in a river grain terminal for $1.3 million; four harbor tugs for $28.5 million and other equipment and improvements for $12.4 million. Of these commitments $110.2 million is payable during the remainder of 2012 with the balance payable through 2016 and $154.2 million may be terminated without further liability other than the payment of liquidated damages of $3.3 million. Subsequent to June 30, 2012, the Company committed to purchase three inland river towboats for $11.4 million and notified the Company's lessors of its intent to purchase three harbor tugs for $3.9 million.


13
Table of Contents

Prior to the sale of the SES Business, the Company had issued performance guarantees on behalf of the SES Business that expire in 2012 through 2014. As of June 30, 2012, the amount of outstanding SES Business performance guarantees was $0.8 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 ORM, the Company's Emergency and Crisis Services business segment. 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.

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 alleged 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 included all direct purchasers of such services and the relief sought included compensatory damages and treble damages.  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 District 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.  On July 27, 2002, the Third Circuit Court of Appeals affirmed the District Court's grant of summary judgment in favor of the defendants. On August 9, 2011, Defendants moved for certain excessive costs, expenses, and attorneys' fees under 28 U.S.C. § 1927. That motion is fully briefed and a decision is pending.

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 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 entered final judgments in favor of the Company in the Robin Case and each of the limitation actions on November 21, 2011.  On December 12, 2011, the claimants appealed each of those judgments to the Unites States Court of Appeals for the Fifth Circuit.  The claimants' opening brief was submitted on May 7, 2012, and the claimants filed a reply brief on June 1, 2012.  The appeal is now fully submitted but no date has been set for oral argument, if any. The Company is unable to estimate the potential exposure, if any, resulting from this matter but believes it is without merit and will continue to vigorously defend the action.

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 ORM. 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 experienced injuries similar to those of Mr. Wunstell. The Company believes this lawsuit has no merit and will continue to vigorously defend the action.  Pursuant to contractual agreements with the responsible party, the responsible party has agreed, subject to certain potential limitations, to indemnify and defend ORM in connection with the Wunstell Action and claims asserted in the MDL.


14
Table of Contents

On December 15, 2010, ORM and then-SEACOR subsidiary 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 ORM 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 ORM and NRC in the master complaint have no merit and on February 28, 2011, ORM 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 ORM 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 ORM and NRC advanced and has directed ORM and NRC to (i) conduct limited discovery to develop evidence to support those arguments and (ii) then re-assert the arguments.  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.  A schedule for limited discovery and motion practice was established by the Court and, in accordance with that schedule, ORM and NRC filed for summary judgment re-asserting their derivative immunity and implied preemption arguments on May 18, 2012.  Those motions were argued on July 13, 2012 and the Court has taken them under advisement.  In addition to the indemnity provided to ORM, pursuant to contractual agreements with the responsible party, the responsible party has agreed, subject to certain potential limitations, to indemnify and defend ORM 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, ORM and/or NRC as defendants and are part of the overall MDL. On April 8, 2011, ORM 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, ORM and NRC were named as defendants in James and Krista Pearson v. BP Exploration & 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, ORM 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 ORM 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.  The Company is unable to estimate the potential exposure, if any, resulting from this matter but believes it is without merit and does not expect this matter will have a material effect on the Company's consolidated financial position or its results of operations.

On February 18, 2011, Triton Asset Leasing GmbH, Transocean Holdings LLC, Transocean Offshore Deepwater Drilling Inc., and Transocean Deepwater Inc. (collectively “Transocean”) named ORM 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 ORM and NRC the claims in the referenced master complaint that have already been asserted against ORM 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 ORM and NRC for contribution and tort indemnity should they be found liable for any damages in Transocean's Limitation of Liability Act action and ORM and NRC have asserted counterclaims against those same parties for identical relief.  As provided above, the Company is unable to estimate the potential exposure, if any, resulting from these actions but believes they are without merit and does not expect this matter will have a material effect on the Company's consolidated financial position or its results of operations.

Separately, on March 2, 2012, the Court announced that BP Exploration & Production Inc. and BP America Production Company (collectively "BP") and the plaintiffs had reached an agreement on the terms of two proposed class action settlements that will resolve, among other things, plaintiffs' economic loss claims and clean-up related claims against BP.  The parties filed their proposed settlement agreements on April 18, 2012 along with motions seeking preliminary approval of the settlements. The Court held a hearing on April 25, 2012 to consider those motions and preliminarily approved both settlements on May 2, 2012.  Although neither the Company, ORM or NRC are parties to the settlement agreements, the Company, ORM and NRC are listed on the releases accompanying both settlement agreements, such that if the settlement agreements are finally approved by the Court as currently drafted, any plaintiffs that settle will be required to release their claims against the Company, ORM and NRC.  The opt-out period for the proposed settlement closes on October 1, 2012 and a final fairness hearing to consider whether the settlements should be finally approved is scheduled for November 8, 2012.

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In the course of the Company's business, it may agree to indemnify a party.  If the indemnified party makes a successful claim for indemnification, the Company would be required to reimburse that party in accordance with the terms of the indemnification agreement.  Indemnification agreements generally are subject to threshold amounts, specified claim periods and other restrictions and limitations. 

In connection with the disposition of the SES Business on March 16, 2012, the Company remains contingently liable for certain obligations of the SES Business, including potential liabilities relating to work performed in connection with the Deepwater Horizon oil spill response.  These potential liabilities may not exceed the purchase consideration received by the Company for the SES Business and the Company currently is indemnified under contractual agreements with BP.

ORM, a subsidiary of the Company, is defending against five collective action lawsuits, each asserting failure to pay overtime with respect to individuals who provided service on the Deepwater Horizon spill response (the “DPH FLSA Actions”) under the Fair Labor Standards Act (“FLSA”).  Four of the cases - Dennis Prejean v. O'Brien's Response Management, Inc. (E.D. La., Case No.: 2:12-cv-01045) (the “Prejean Action”); Baylor Singleton et. al. v. O'Brien's Response Management Inc., et. al. (E.D. La., Case No.: 2:12-cv-01716) (the “Singleton Action”); Himmerite et al. v. O'Brien's Response Management Inc. et al. (E.D. La., Case No.: 2:12-cv-01533) (the “Himmerite Action”); and Chann Chavis v. O'Brien's Response Management Inc. et al. (S.D. Tx., Case No.: 4:12-cv-02045) (the “Chavis Action”) - were each brought on behalf of certain individuals who worked on the Deepwater Horizon oil spill response and who were classified as independent contractors.  The Prejean, Himmerite and Singleton Actions were each filed in the United States District Court for the Eastern District of Louisiana and then subsequently consolidated with the In re: Oil Spill Multidistrict Litigation (N.D. La., Case No. 10-md-02179) (the “Oil Spill MDL”).  The Himmerite and Singleton Actions have since been automatically stayed pending further scheduling by the Court, pursuant to the procedures in the Oil Spill MDL.  In the Prejean Action, ORM has answered the complaint, a scheduling order has been issued and Plaintiffs have, among other things, filed a Motion for Conditional Certification, which has been stayed pending further scheduling by the Court in accordance with the procedures of the Oil Spill MDL.  The Chavis Action was filed on July 7, 2012 in the United States District Court for the Southern District of Texas, and ORM has not yet responded to or answered the complaint in that matter.  The other DPH FLSA Action, Mark Blackman et. al. v. Midwest Environmental Resources, Inc., et. al. (N.D. Fla., Case No.: 3:11-cv-146) (the “Blackman Action”), was filed by five individual Plaintiffs on March 28, 2011, in the United States District Court for the Northern District of Florida, against ORM and several other Defendants.  The complaint in the Blackman Action alleges that the named Plaintiffs and class of workers they are suing on behalf of, identified in the complaint as “Safety Techs,” were not appropriately compensated for all of their work time in violation of the FLSA.  On July 8, 2011, the Court stayed all proceedings in the Blackman Action.  On May 8, 2012, the Court ruled on various motions to dismiss brought by ORM and by the other Defendants, denying them in part, granting them in part, and providing the Plaintiffs with leave to amend the complaint.  On June 6, 2012, Plaintiffs filed an amended complaint and on June 20, 2012, Defendant ORM answered the amended complaint, denying all of the Plaintiffs' claims.  On July 6, 2012, the Court issued a scheduling order setting discovery and dispositive motion deadlines.  The Company is unable to estimate the potential exposure, if any, resulting from any of the five DPH FLSA Actions, but believes they are without merit and will continue to vigorously defend against them.

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 that exposure could occur, but the Company does not expect such changes in estimated costs would have a material effect on the Company's consolidated financial position or its results of operations.

In 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.

8.
MULTI-EMPLOYER PENSION PLANS

There has been no material change in the multi-employer pension plans in which the Company participates, except that the Company received notification from the American Maritime Officers Pension Plan (the "AMOPP”) that, based on an actuarial valuation performed as of September 30, 2011, if the Company chose to withdraw from the AMOPP, its withdrawal liability would have been $39.3 million. That liability may change in future years based on various factors, primarily employee census. As of June 30, 2012, 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

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further funding deficits, requiring the Company to recognize additional payroll related operating expenses in the periods invoices are received or contribution levels are increased.

9.
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

As of June 30, 2012, the Company had $125.0 million of outstanding borrowings under the SEACOR revolving credit facility. The remaining availability under this facility was $279.0 million, net of issued letters of credit of $1.0 million. As of June 30, 2012, Era Group Inc. ("Era") had $260.0 million of outstanding borrowings under its senior secured revolving credit facilities. The remaining availability under this facility was $89.7 million, net of issued letters of credit of $0.3 million. In addition, as of June 30, 2012, the Company had other outstanding letters of credit totaling $47.6 million with various expiration dates through 2016.

During the six months ended June 30, 2012, the Company made scheduled payments on long-term debt and capital lease obligations of $7.2 million, repaid $3.2 million of acquired debt, received proceeds of $0.1 million from other debt, made repayments of $50.0 million of borrowings under the SEACOR revolving credit facility, made net repayments on inventory financing arrangements of $14.8 million and had net borrowings of $8.0 million under the Era senior secured revolving credit facility.

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 six months ended June 30, 2012, the Company purchased $5.5 million, in principal amount, of its 5.875% Senior Notes for $5.7 million, resulting in a loss on debt extinguishment of $0.2 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 six months ended June 30, 2012, the Company acquired for treasury 199,766 shares of Common Stock for an aggregate purchase price of $17.4 million. As of June 30, 2012, the remaining authority under the repurchase plan was $132.6 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 the six months ended June 30, 2012, diluted earnings per common share of SEACOR excluded 593,344 and 531,101 , respectively, of certain share awards as the effect of their inclusion in the computation would have been antidilutive. For the three and six months ended June 30, 2011, diluted earnings per common share of SEACOR excluded 333,819 and 254,230, 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 June 30,
 
Six Months Ended June 30,
 
2012
 
2011
 
2012
 
2011
Basic Weighted Average Common Shares Outstanding
20,584,567

 
21,166,037

 
20,552,114

 
21,135,557

Effect of Dilutive Share Awards:
 
 
 
 
 
 
 
Options and Restricted Stock
286,813

 
351,688

 
331,456

 
343,202

Diluted Weighted Average Common Shares Outstanding
20,871,380

 
21,517,725

 
20,883,570

 
21,478,759


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12.
SHARE BASED COMPENSATION

Transactions in connection with the Company’s share based compensation plans during the six months ended June 30, 2012 were as follows:
Director stock awards granted
2,000

Employee Stock Purchase Plan (“ESPP”) shares issued
22,641

Restricted stock awards granted
116,600

Restricted stock awards canceled
330

Shares released from Deferred Compensation Plan
—

Restricted Stock Unit Activities:
 
Outstanding as of December 31, 2011
1,130

Granted
—

Converted to shares and issued to Deferred Compensation Plan
(370
)
Outstanding as of June 30, 2012
760

Stock Option Activities:
 
Outstanding as of December 31, 2011
1,272,192

Granted
98,975

Exercised
(73,297
)
Forfeited
—

Expired
(13,625
)
Outstanding as of June 30, 2012
1,284,245

Shares available for future grants and ESPP purchases as of June 30, 2012
1,310,026


13.
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. Certain reclassifications of prior year information have been made to conform to the current year's reportable segment presentation as a result of the Company's presentation of discontinued operations (see Note 1). 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, 2011.

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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
 
Emergency and Crisis Services
$’000
 
Commodity
Trading
and Logistics
$’000
 
Other
$’000
 
Corporate
and
Eliminations
$’000
 
Total
$’000
For the three months ended June 30, 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
External customers
123,359

 
62,983

 
49,750

 
25,704

 
8,456

 
206,745

 
17,425

 
—

 
494,422

Intersegment
(83
)
 
2

 
3,552

 
88

 
(17
)
 
—

 
130

 
(3,672
)
 
—

 
123,276

 
62,985

 
53,302

 
25,792

 
8,439

 
206,745

 
17,555

 
(3,672
)
 
494,422

Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating
94,084

 
39,002

 
37,463

 
16,722

 
5,808

 
202,126

 
11,562

 
(3,557
)
 
403,210

Administrative and general
13,146

 
7,195

 
3,773

 
2,934

 
4,211

 
3,411

 
2,996

 
7,454

 
45,120

Depreciation and amortization
15,859

 
10,464

 
7,244

 
5,666

 
491

 
1,591

 
1,904

 
466

 
43,685

 
123,089

 
56,661

 
48,480

 
25,322

 
10,510

 
207,128

 
16,462

 
4,363

 
492,015

Gains on Asset Dispositions, Net
624

 
1,077

 
858

 
—

 
—

 
—

 
1,860

 
—

 
4,419

Operating Income (Loss)
811

 
7,401

 
5,680

 
470

 
(2,071
)
 
(383
)
 
2,953

 
(8,035
)
 
6,826

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative gains (losses), net
—

 
(180
)
 
—

 
—

 
—

 
3,393

 
—

 
274

 
3,487

Foreign currency losses, net
(354
)
 
(12
)
 
(71
)
 
(3
)
 
(20
)
 
(14
)
 
(7
)
 
(511
)
 
(992
)
Other, net
11

 
—

 
—

 
49

 
—

 
—

 
208

 
175

 
443

Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax
1,001

 
756

 
439

 
(774
)
 
147

 
—

 
(518
)
 
—

 
1,051

Segment Profit (Loss)
1,469

 
7,965

 
6,048

 
(258
)
 
(1,944
)
 
2,996

 
2,636

 
 
 
 
Other Income (Expense) not included in Segment Profit
 
6,824

Less Equity Earnings included in Segment Profit
 
(1,051
)
Income Before Taxes, Equity Earnings and Discontinued Operations
 
16,588


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Table of Contents

 
Offshore
Marine
Services
$’000
 
Aviation
Services
$’000
 
Inland
River
Services
$’000
 
Marine
Transportation
Services
$’000
 
Emergency and Crisis
Services
$’000
 
Commodity
Trading and
Logistics
$’000
 
Other
$’000
 
Corporate
and
Eliminations
$’000
 
Total
$’000
For the six months ended June 30, 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
External customers
244,297

 
124,035

 
99,646

 
51,900

 
18,619

 
416,441

 
37,369

 
—

 
992,307

Intersegment
65

 
2

 
7,146

 
175

 
35

 
—

 
130

 
(7,553
)
 
—

 
244,362

 
124,037

 
106,792

 
52,075

 
18,654

 
416,441

 
37,499

 
(7,553
)
 
992,307

Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating
169,424

 
78,678

 
72,646

 
32,480

 
12,681

 
405,359

 
23,376

 
(7,322
)
 
787,322

Administrative and general
25,002

 
16,872

 
7,755

 
5,409

 
7,465

 
6,552

 
5,813

 
16,430

 
91,298

Depreciation and amortization
28,741

 
20,094

 
14,251

 
11,317

 
975

 
2,651

 
4,062

 
921

 
83,012

 
223,167

 
115,644

 
94,652

 
49,206

 
21,121

 
414,562

 
33,251

 
10,029

 
961,632

Gains on Asset Dispositions
2,469

 
2,842

 
2,785

 
—

 
5

 
—

 
1,860

 
—

 
9,961

Operating Income (Loss)
23,664

 
11,235

 
14,925

 
2,869

 
(2,462
)
 
1,879

 
6,108

 
(17,582
)
 
40,636

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative gains (losses), net
—

 
(304
)
 
—

 
—

 
—

 
454

 
—

 
(782
)
 
(632
)
Foreign currency gains (losses), net
769

 
905

 
(93
)
 
6

 
(6
)
 
65

 
(23
)
 
(63
)
 
1,560

Other, net
11

 
30

 
—

 
79

 
—

 
—

 
208

 
61

 
389

Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax
2,830

 
(5,663
)
 
689

 
(991
)
 
214

 
6,154

 
(940
)
 
—

 
2,293

Segment Profit (Loss)
27,274

 
6,203

 
15,521

 
1,963

 
(2,254
)
 
8,552

 
5,353

 
 
 
 
Other Income (Expense) not included in Segment Profit
 
 
 
 
 
 
 
 
 
 
 
974

Less Equity Earnings included in Segment Profit
 
 
 
 
 
 
 
 
 
 
 
(2,293
)
Income Before Taxes, Equity Earnings and Discontinued Operations
 
 
 
 
 
 
 
 
 
42,927

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Capital Expenditures
64,383

 
87,034

 
13,108

 
4,084

 
420

 
—

 
14,731

 
2,781

 
186,541

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of June 30, 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property and Equipment
789,831

 
773,884

 
377,326

 
203,995

 
1,406

 
41,660

 
160,265

 
22,065

 
2,370,432

Investments, at Equity, and Advances to 50% or Less Owned Companies
68,081

 
41,882

 
53,859

 
90,626

 
441

 
—

 
68,985

 
—

 
323,874

Inventories (1)
5,738

 
26,496

 
2,038

 
—

 
752

 
36,617

 
1,288

 
—

 
72,929

Goodwill
13,367

 
352

 
4,345

 
550

 
37,138

 
—

 
1,302

 
—

 
57,054

Intangible Assets
5,029

 
—

 
8,377

 
1,318

 
5,531

 
502

 
359

 
—

 
21,116

Other current and long-term assets, excluding cash and near cash assets(2)
148,525

 
79,699

 
49,890

 
3,691

 
16,629

 
62,889

 
52,950

 
37,974

 
452,247

Segment Assets
1,030,571

 
922,313

 
495,835

 
300,180

 
61,897

 
141,668

 
285,149

 
 
 
 
Cash and near cash assets(2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
544,614

Discontinued operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,551

Total Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,845,817

______________________
(1)
Inventories for Commodity Trading and Logistics includes raw materials of $3.4 million and work in process of $2.4 million resulting from the acquisition of ICP (see Note 4).
(2)
Cash and near cash assets includes cash, cash equivalents, restricted cash, marketable securities, construction reserve funds and Title XI reserve funds.

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Table of Contents

 
Offshore
Marine
Services
$’000
 
Aviation
Services
$’000
 
Inland
River
Services
$’000
 
Marine
Transportation
Services
$’000
 
Emergency and Crisis Services $’000
 
Commodity
Trading and
Logistics
$’000
 
Other
$’000
 
Corporate
and
Eliminations
$’000
 
Total
$’000
For the three months ended June 30, 2011
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
External customers
93,360

 
68,475

 
38,682

 
24,249

 
21,275

 
245,321

 
17,921

 
—

 
509,283

Intersegment
26

 
18

 
2,760

 
87

 
—

 
—

 
—

 
(2,891
)
 
—

 
93,386

 
68,493

 
41,442

 
24,336

 
21,275

 
245,321

 
17,921

 
(2,891
)
 
509,283

Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating
68,242

 
42,457

 
28,717

 
13,584

 
12,328

 
237,644

 
9,158

 
(2,765
)
 
409,365

Administrative and general
11,078

 
6,229

 
3,166

 
2,146

 
3,555

 
2,202

 
3,210

 
7,584

 
39,170

Depreciation and amortization
12,205

 
12,390

 
5,791

 
5,728

 
498

 
12

 
2,237

 
469

 
39,330

 
91,525

 
61,076

 
37,674

 
21,458

 
16,381

 
239,858

 
14,605

 
5,288

 
487,865

Gains (Losses) on Asset Dispositions and Impairments, Net
3,607

 
6,172

 
(22
)
 
—

 
—

 
—

 
544

 
—

 
10,301

Operating Income (Loss)
5,468

 
13,589

 
3,746

 
2,878

 
4,894

 
5,463

 
3,860

 
(8,179
)
 
31,719

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative gains (losses), net
—

 
(811
)
 
—

 
—

 
—

 
828

 
—

 
(6,618
)
 
(6,601
)
Foreign currency gains (losses), net
(408
)
 
338

 
—

 
6

 
(7
)
 
(16
)
 
(24
)
 
1,527

 
1,416

Other, net
—

 
—

 
3

 
56

 
2

 
—

 
—

 
(117
)
 
(56
)
Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax
200

 
1,054

 
666

 
—

 
—

 
(1,051
)
 
3

 
—

 
872

Segment Profit
5,260

 
14,170

 
4,415

 
2,940

 
4,889

 
5,224

 
3,839

 
 
 
 
Other Income (Expense) not included in Segment Profit
 
(11,922
)
Less Equity Earnings included in Segment Profit
 
(872
)
Income Before Taxes, Equity Earnings and Discontinued Operations
 
14,556


21
Table of Contents

 
Offshore
Marine
Services
$’000
 
Aviation
Services
$’000
 
Inland
River
Services
$’000
 
Marine
Transportation
Services
$’000
 
Emergency and Crisis Services
$’000
 
Commodity
Trading
and Logistics
$’000
 
Other
$’000
 
Corporate
and
Eliminations
$’000
 
Total
$’000
For the six months ended June 30, 2011
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
External customers
173,683

 
124,630

 
82,610

 
41,473

 
50,108

 
439,333

 
35,457

 
—

 
947,294

Intersegment
47

 
18

 
5,301

 
175

 
—

 
—

 
—

 
(5,541
)
 
—

 
173,730

 
124,648

 
87,911

 
41,648

 
50,108

 
439,333

 
35,457

 
(5,541
)
 
947,294

Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating
131,262

 
75,922

 
56,601

 
22,563

 
27,104

 
424,662

 
18,300

 
(5,306
)
 
751,108

Administrative and general
22,848

 
13,249

 
5,863

 
3,563

 
6,366

 
4,862

 
5,830

 
18,243

 
80,824

Depreciation and amortization
24,738

 
24,309

 
11,413

 
10,706

 
1,000

 
25

 
4,526

 
943

 
77,660

 
178,848

 
113,480

 
73,877

 
36,832

 
34,470

 
429,549

 
28,656

 
13,880

 
909,592

Gains on Asset Dispositions and Impairments, Net
7,971

 
8,366

 
675

 
—

 


 
—

 
544

 
—

 
17,556

Operating Income (Loss)
2,853

 
19,534

 
14,709

 
4,816

 
15,638

 
9,784

 
7,345

 
(19,421
)
 
55,258

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative losses, net
—

 
(501
)
 
—

 
—

 
—

 
(3,922
)
 
—

 
(5,496
)
 
(9,919
)
Foreign currency gains (losses), net
317

 
691

 
—

 
22

 
(58
)
 
(21
)
 
(23
)
 
5,547

 
6,475

Other, net
—

 
—

 
4

 
56

 
2

 
—

 
(1
)
 
(295
)
 
(234
)
Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax
935

 
955

 
410

 
—

 


 
(1,000
)
 
(386
)
 
—

 
914

Segment Profit (Loss)
4,105

 
20,679

 
15,123

 
4,894

 
15,582

 
4,841

 
6,935

 
 
 
 
Other Income (Expense) not included in Segment Profit
 
 
 
 
 
 
 
 
 
 
 
(16,744
)
Less Equity Earnings included in Segment Profit
 
 
 
 
 
 
 
 
 
 
 
(914
)
Income Before Taxes, Equity Earnings and Discontinued Operations
 
 
 
 
 
 
 
 
 
34,836

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Capital Expenditures
33,025

 
50,233

 
33,137

 
8,315

 
25

 
—

 
1,498

 
1,174

 
127,407

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of June 30, 2011
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
Property and Equipment
620,146

 
629,619

 
338,289

 
249,818

 
855

 
131

 
148,929

 
19,338

 
2,007,125

Investments, at Equity, and Advances to 50% or Less Owned Companies
57,697

 
35,341

 
42,378

 
—

 
—

 
12,929

 
59,676

 
—

 
208,021

Inventories
4,164

 
24,788

 
2,511

 
365

 
404

 
49,255

 
1,633

 
—

 
83,120

Goodwill
13,367

 
352

 
1,743

 
606

 
37,084

 
—

 
1,302

 
—

 
54,454

Intangible Assets
6,992

 
—

 
908

 
1,732

 
7,290

 
—

 
474

 
—

 
17,396

Other current and long-term assets, excluding cash and near cash assets(1)
130,342

 
63,643

 
41,543

 
5,308

 
32,894

 
76,119

 
61,548

 
26,942

 
438,339

Segment Assets
832,708

 
753,743

 
427,372

 
257,829

 
78,527

 
138,434

 
273,562

 
 
 
 
Cash and near cash assets(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
796,088

Discontinued operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
101,219

Total Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,705,762

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

22
Table of Contents

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 which could increase cost of operations, increased competition if the Jones Act is repealed, liability, legal fees and costs in connection with providing emergency response services, including the Company’s involvement in response to the oil spill that resulted from 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 a lack of liquidity 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, dependence of emergency response revenue on the number and size of events and upon continuing government regulation in this area and Emergency and Crisis Services’ ability to comply with such regulation and other governmental regulation, liability in connection with providing emergency response services, the level of grain export volume, the effect of fuel prices on barge towing costs, variability in freight rates for inland river barges, the effect of international economic and political factors in Inland River Services’ operations, adequacy of insurance coverage, the attraction and retention of qualified personnel by the Company and various other matters and factors, many of which are beyond the Company’s control. In addition, these statements constitute the Company’s cautionary statements under the Private Securities Litigation Reform Act of 1995. It is not possible to predict or identify all such factors. Consequently, the following should not be considered a complete discussion of all potential risks or uncertainties. The words “estimate,” “project,” “intend,” “believe,” “plan” and similar expressions are intended to identify forward-looking statements. Forward-looking statements speak only as of the date of the document in which they are made. The Company disclaims any obligation or undertaking to provide any updates or revisions to any forward-looking statement to reflect any change in the Company’s expectations or any change in events, conditions or circumstances on which the forward-looking statement is based. The forward-looking statements in this Form 10-Q should be evaluated together with the many uncertainties that affect the Company’s businesses, particularly those mentioned under “Forward-Looking Statements” in Item 7 on the Company’s Form 10-K and SEACOR’s periodic reporting on Form 8-K (if any), which are incorporated by reference.


23
Table of Contents

Overview

The Company’s operations are divided into six main business segments – Offshore Marine Services, Aviation Services, Inland River Services, Marine Transportation Services, Emergency and Crisis 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.

Discontinued Operations. The Company's Environmental Services business segment was conducted through SEACOR Environmental Services Inc. ("SES") and O'Brien's Response Management Inc. ("ORM"). SES included National Response Corporation, one of the largest providers of oil spill response services in the United States; NRC Environmental Services Inc., a leading provider of environmental and industrial services on the West Coast of the United States; SEACOR Response Ltd., which provides oil spill response and emergency response services to customers in international markets; and certain other subsidiaries (collectively the "SES Business"). On March 16, 2012, the Company sold the SES Business for a net sales price of $99.9 million and recognized a gain of $20.8 million, net of tax, or $1.00 per diluted share. The transaction did not include ORM, a leading provider of crisis and emergency preparedness and response services. The Company has no continuing involvement in the SES Business, although the sales agreement provides that the Company may receive contingent consideration equal to a portion of the revenue generated by any extraordinary oil spill response that occurs within three years following the date of sale. For all periods presented, the Company has reported the financial position, results of operations and cash flows for the SES Business as discontinued operations in the accompanying condensed consolidated financial statements. The remaining ORM business in the segment was renamed Emergency and Crisis Services.

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 six months ("Current Six Months") ended June 30, 2012, as compared with the three months (“Prior Year Quarter”) and six months ("Prior Six Months") ended June 30, 2011. See “Item 1. Financial Statements—Note 13. Segment Information” included in Part I for consolidating segment tables for each period presented.


24
Table of Contents

Offshore Marine Services
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2012
 
2011
 
2012
 
2011
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
United States, primarily U.S. Gulf of Mexico
53,839

 
44

 
32,842

 
35

 
101,156

 
42
 
52,003

 
30
Africa, primarily West Africa
16,186

 
13

 
13,254

 
14

 
33,273

 
14
 
32,721

 
19
Middle East
13,051

 
11

 
10,670

 
11

 
25,070

 
10
 
22,428

 
13
Brazil, Mexico, Central and South America
11,533

 
9

 
14,336

 
16

 
29,820

 
12
 
26,245

 
15
Europe, primarily North Sea
25,613

 
21

 
18,784

 
20

 
49,674

 
20
 
35,530

 
20
Asia
3,054

 
2

 
3,500

 
4

 
5,369

 
2
 
4,803

 
3
 
123,276

 
100

 
93,386

 
100

 
244,362

 
100
 
173,730

 
100
Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Personnel
47,684

 
39

 
34,216

 
37

 
83,668

 
34
 
66,668

 
38
Repairs and maintenance
12,319

 
10

 
10,180

 
11

 
23,135

 
10
 
18,685

 
11
Drydocking
10,810

 
9

 
5,305

 
6

 
16,138

 
7
 
9,968

 
6
Insurance and loss reserves
4,559

 
4

 
3,467

 
4

 
8,197

 
3
 
6,233

 
4
Fuel, lubes and supplies
8,904

 
7

 
5,964

 
6

 
15,770

 
6
 
11,375

 
7
Leased-in equipment
5,145

 
4

 
3,701

 
4

 
10,883

 
4
 
7,158

 
4
Brokered vessel activity
247

 
—

 
273

 
—

 
532

 
—
 
2,743

 
1
Other
4,416

 
3

 
5,136

 
5

 
11,101

 
5
 
8,432

 
5
 
94,084

 
76

 
68,242

 
73

 
169,424

 
69
 
131,262

 
76
Administrative and general
13,146

 
11

 
11,078

 
12

 
25,002

 
10
 
22,848

 
13
Depreciation and amortization
15,859

 
13

 
12,205

 
13

 
28,741

 
12
 
24,738

 
14
 
123,089

 
100

 
91,525

 
98

 
223,167

 
91
 
178,848

 
103
Gains on Asset Dispositions
624

 
—

 
3,607

 
4

 
2,469

 
1
 
7,971

 
4
Operating Income
811

 
—

 
5,468

 
6

 
23,664

 
10
 
2,853

 
1
Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency gains (losses), net
(354
)
 
—

 
(408
)
 
—

 
769

 
—
 
317

 
—
Other, net
11

 
—

 
—

 
—

 
11

 
—
 
—

 
—
Equity in Earnings of 50% or Less Owned Companies, Net of Tax
1,001

 
1

 
200

 
—

 
2,830

 
1
 
935

 
1
Segment Profit
1,469

 
1

 
5,260

 
6

 
27,274

 
11
 
4,105

 
2




25
Table of Contents

Operating Revenues by Type. The table below sets forth, for the periods indicated, the amount of operating revenues earned by type.
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2012
 
2011
 
2012
 
2011
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Time charter:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
United States, primarily U.S. Gulf of Mexico
50,470

 
40
 
30,153

 
32
 
95,123

 
39
 
47,532

 
27
Africa, primarily West Africa
15,576

 
13
 
12,182

 
13
 
32,169

 
13
 
28,496

 
17
Middle East
11,016

 
9
 
8,808

 
10
 
21,357

 
9
 
18,237

 
11
Brazil, Mexico, Central and South America
9,682

 
8
 
12,782

 
14
 
25,631

 
11
 
23,269

 
13
Europe, primarily North Sea
25,718

 
21
 
18,735

 
20
 
49,280

 
20
 
35,431

 
20
Asia
2,920

 
2
 
3,546

 
4
 
5,291

 
2
 
4,866

 
3
Total time charter
115,382

 
93
 
86,206

 
93
 
228,851

 
94
 
157,831

 
91
Bareboat charter
701

 
1
 
209

 
—
 
1,406

 
1
 
416

 
—
Brokered vessel activity
174

 
—
 
301

 
—
 
488

 
—
 
3,669

 
2
Other marine services
7,019

 
6
 
6,670

 
7
 
13,617

 
5
 
11,814

 
7
 
123,276

 
100
 
93,386

 
100
 
244,362

 
100
 
173,730

 
100



26
Table of Contents

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.
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2012
 
2011
 
2012
 
2011
Rates Per Day Worked:
 
 
 
 
 
 
 
Anchor handling towing supply
$
24,541

 
$
32,179

 
$
28,051

 
$
31,215

Crew
7,134

 
6,334

 
7,462

 
6,477

Mini-supply
7,424

 
7,494

 
7,417

 
7,578

Standby safety
9,679

 
9,180

 
9,453

 
9,031

Supply
14,354

 
13,561

 
15,593

 
13,406

Towing supply
9,269

 
8,484

 
9,285

 
9,804

Specialty
14,557

 
9,351

 
13,637

 
8,077

Liftboats
17,454

 
—

 
17,454

 
—

Overall Average Rates Per Day Worked
  (excluding wind farm utility and liftboats)
11,272

 
11,142

 
12,246

 
10,655

Liftboats
17,454

 
—

 
17,454

 
—

Wind farm utility
2,802

 
—

 
2,627

 
—

Overall Average Rates Per Day Worked
10,019

 
11,142

 
10,409

 
10,655

Utilization:
 
 
 
 
 
 
 
Anchor handling towing supply
63
%
 
53
%
 
70
%
 
44
%
Crew
84
%
 
70
%
 
81
%
 
68
%
Mini-supply
98
%
 
77
%
 
98
%
 
69
%
Standby safety
87
%
 
89
%
 
87
%
 
86
%
Supply
75
%
 
74
%
 
80
%
 
69
%
Towing supply
51
%
 
33
%
 
49
%
 
51
%
Specialty
45
%
 
63
%
 
54
%
 
68
%
Overall Fleet Utilization
  (excluding wind farm utility and liftboats)
79
%
 
71
%
 
80
%
 
68
%
Liftboats
70
%
 
—
%
 
70
%
 
—
%
Wind farm utility
93
%
 
—
%
 
90
%
 
—
%
Overall Fleet Utilization
80
%
 
71
%
 
81
%
 
68
%
Available Days:
 
 
 
 
 
 
 
Anchor handling towing supply
1,547

 
1,547

 
3,094

 
3,077

Crew
3,276

 
3,933

 
6,639

 
7,803

Mini-supply
637

 
728

 
1,274

 
1,507

Standby safety
2,195

 
2,291

 
4,470

 
4,541

Supply
1,649

 
1,591

 
3,354

 
3,139

Towing supply
360

 
494

 
724

 
1,034

Specialty
273

 
353

 
546

 
713

Overall Fleet Available Days
  (excluding wind farm utility and liftboats)
9,937

 
10,937

 
20,101

 
21,814

Liftboats
1,656

 
—

 
1,656

 
—

Wind farm utility
2,730

 
—

 
5,377

 
—

Overall Fleet Available Days
14,323

 
10,937

 
27,134

 
21,814



27
Table of Contents

Current Year Quarter compared with Prior Year Quarter

Operating Revenues. Operating revenues were $29.9 million higher in the Current Year Quarter compared with the Prior Year Quarter. Current Year Quarter results included the contributions of the Company's wind farm utility vessels and liftboats that were acquired on December 22, 2011 and March 30, 2012, respectively. The wind farm utility vessels contributed $7.1 million of time charter revenues with an average day rate of $2,802 per day and a utilization rate of 93%. The liftboats contributed $21.9 million of operating revenues of which $20.1 million was time charter revenue with an average day rate of $17,454 per day and a utilization rate of 70%.
Excluding the contributions of the wind farm utility vessels and the liftboats, time charter revenues were $2.0 million higher in the Current Year Quarter compared with the Prior Year Quarter. Overall fleet utilization was 79% compared with 71% in the Prior Year Quarter and average rates were $11,272 per day compared with $11,142 per day in the Prior Year Quarter. The number of days available for charter was 9,937 compared with 10,937 in the Prior Year Quarter, a 1,000 day or 9% reduction.
In the U.S. Gulf of Mexico, time charter revenues were $20.3 million higher primarily due to the liftboat acquisition. Excluding the contribution of the liftboats, time charter revenues were $0.2 million higher in the Current Year Quarter compared with the Prior Year Quarter. The reactivation of previously cold-stacked vessels and other improvements in utilization increased time charter revenues by $0.5 million and $4.5 million, respectively. Net fleet additions increased time charter revenues by $1.8 million. Lower average day rates and the repositioning of vessels between geographic regions reduced time charter revenues by $5.2 million and $1.4 million, respectively. As of June 30, 2012, the Company had no vessels cold-stacked in this region compared with seven as of June 30, 2011.
In Africa, time charter revenues were $3.4 million higher. Time charter revenues were $2.7 million higher due to improved utilization, $0.4 million higher due to improved average day rates and $0.9 million higher due to the repositioning of vessels between geographic regions. These increases were partially offset by a $0.6 million reduction in time charter revenues due to fleet dispositions.
In the Middle East, time charter revenues were $2.2 million higher, of which $0.9 million was due to improved utilization and $0.2 million was due to higher average day rates. Net fleet additions and the repositioning of vessels between geographic regions increased time charter revenues by $1.1 million.
In Brazil, Mexico and Central and South America, time charter revenues were $3.1 million lower. Time charter revenues were $3.8 million lower due to reduced fleet utilization and were $0.1 million lower due to net fleet dispositions and the repositioning of vessels between geographic regions. Higher average day rates increased time charter revenues by $0.8 million.
In Europe, excluding the $7.1 million contribution of the wind farm utility vessels, time charter revenues were $0.1 million lower. Higher average day rates and improved utilization increased time charter revenues by $1.1 million and $0.3 million, respectively. Time charter revenues were $1.0 million lower due to vessel dispositions and $0.5 million lower due to unfavorable changes in currency exchange rates.
Operating Expenses. Operating expenses were $25.8 million higher in the Current Year Quarter compared with the Prior Year Quarter, of which $17.9 million was attributable to fleet additions including the wind farm utility vessels and liftboats. Excluding the impact of fleet additions, operating expenses were higher during the Current Year Quarter compared with the Prior Year Quarter as follows: personnel costs were $4.0 million higher primarily due to the return to service of previously cold-stacked vessels, increased activity levels, and inflationary pressures on rates of pay; drydocking expenses were $2.5 million higher due to increased drydocking activity during the Current Year Quarter in which there were 567 days of downtime attributable to drydocking compared with 287 days in the Prior Year Quarter; and leased-in equipment expense was $1.4 million higher primarily due to the charter-in of several vessels into Africa and Brazil, Mexico, Central and South America.
Gains on Asset Dispositions. During the Current Year Quarter, the Company sold three offshore support vessels and other equipment for net proceeds of $48.7 million and gains of $7.4 million, of which $0.1 million were recognized currently and $7.3 million were deferred. In addition, the Company recognized previously deferred gains of $0.5 million. During the Prior Year Quarter, the Company sold four offshore support vessels and other equipment for net proceeds of $11.9 million and gains of $7.7 million, of which $3.1million were recognized currently and $4.6 million were deferred. In addition, the Company recognized previously deferred gains of $0.5 million.

Operating Income. Excluding the impact of gains on asset dispositions and the impact of brokered vessel activity, operating income as a percentage of operating revenues was 0.2% in the Current Year Quarter compared with 2.0% in the Prior Year Quarter. The reduction was primarily due to increased drydocking activity during the Current Year Quarter as referred to above.


28
Table of Contents

Current Six Months compared with Prior Six Months

Operating Revenues. Operating revenues were $70.6 million higher in the Current Six Months compared with the Prior Six Months. Current Six Months results included the contributions of the Company's wind farm utility vessels and liftboats that were acquired on December 22, 2011 and March 30, 2012, respectively. The wind farm utility vessels contributed $12.7 million of time charter revenues with an average day rate of $2,627 per day and a utilization rate of 90%. The liftboats contributed $21.9 million of operating revenues of which $20.1 million was time charter revenue with an average day rate of $17,454 per day and a utilization rate of 70%.
Excluding the contribution of the wind farm utility vessels and liftboats, time charter revenues were $38.2 million higher in the Current Six Months compared with the Prior Six Months. Overall fleet utilization was 80% compared with 68% and average day rates were $12,246 per day compared with $10,655 per day in the Prior Six Months.The number of days available for charter was 20,101 compared with 21,814 in the Prior Six Months, a 1,713 day or 8% reduction.
In the U.S. Gulf of Mexico, time charter revenues were $47.6 million higher primarily due to firmer market conditions during the first quarter of 2012 and the contribution of the liftboats. Excluding the contribution of the liftboats, time charter revenues were $27.5 million higher in the Current Six Months compared with the Prior Six Months. Net fleet additions increased time charter revenues by $3.6 million. Higher average day rates and improved utilization increased time charter revenues by $9.6 million and $15.0 million, respectively. The repositioning of vessels between geographic regions decreased time charter revenues by $0.7 million. As of June 30, 2012, the Company had no vessels cold-stacked in this region compared with seven as of June 30, 2011.
In Africa, time charter revenues were $3.7 million higher, of which $2.7 million was due to improved utilization and $1.2 million was due to higher average day rates. Fleet dispositions and the repositioning of vessels between geographic regions decreased time charter revenues by $0.2 million.
In the Middle East, time charter revenues were $3.1 million higher, of which $1.4 million was due to improved utilization and $0.2 million was due to higher average day rates. Net fleet additions increased time charter revenues by $2.3 million and the repositioning of vessels between geographic regions decreased time charter revenues by $0.8 million.
In Brazil, Mexico and Central and South America, time charter revenues were $2.4 million higher. Time charter revenues were $2.7 million higher due to the repositioning of vessels between geographic regions and $3.8 million higher due to higher average day rates. Lower utilization and net fleet dispositions decreased time charter revenues by $3.1 million and $1.0 million, respectively.
In Europe, excluding the $12.7 million contribution of the wind farm utility vessels, time charter revenues were $1.1 million higher. Time charter revenues were $1.9 million higher due to improved average day rates and $2.1 million higher due to a vessel that repositioned into the region. Lower utilization, vessel dispositions and unfavorable changes in currency exchange rates decreased time charter revenues by $0.8 million, $1.2 million and $0.9 million, respectively.
Revenues from brokered vessel activity were $3.2 million lower due to reduced activity in West Africa. This was partially offset by a $2.8 million increase in bareboat charter and other marine services revenues.
Operating Expenses. Operating expenses were $38.2 million higher in the Current Six Months compared with the Prior Six Months, of which $21.0 million was attributable to fleet additions including the wind farm utility vessels and liftboats. Excluding the impact of fleet additions, operating expenses were higher during the Current Six Months compared with the Prior Six Months as follows: personnel costs were $6.9 million higher primarily due to the return to service of previously cold-stacked vessels, increased activity levels, and inflationary pressures on rates of pay; repair and maintenance expenses were $1.8 million higher, primarily in the U.S Gulf of Mexico, as activity levels increased during the Current Six Months; drydocking expenses were $3.2 million higher due to increased drydocking activity in international regions; fuel, lubes and supplies expenses were $1.3 million higher primarily due to increased activity levels in the U.S. Gulf of Mexico; leased-in equipment expense was $3.7 million higher primarily due to the charter-in of several vessels into Africa and Brazil, Mexico, Central and South America; brokered vessel activity was $2.2 million lower due to reduced activity in West Africa; other operating expenses were $2.4 million higher primarily due to net fleet additions and increased activity levels.
Gains on Asset Dispositions. During the Current Six Months, the Company sold four offshore support vessels and other equipment for net proceeds of $50.6 million and gains of $9.1 million, of which $1.8 million were recognized currently and $7.3 million were deferred. In addition, the Company recognized previously deferred gains of $0.6 million. During the Prior Six Months, the Company sold five offshore support vessels and other equipment for net proceeds of $20.6 million and gains of $11.8 million, of which $7.2 million were recognized currently and $4.6 million were deferred. In addition, the Company recognized previously deferred gains of $0.8 million.


29
Table of Contents

Operating Income (Loss). Excluding the impact of gains on asset dispositions and the impact of brokered vessel activity, operating income as a percentage of operating revenues was 9% in the Current Six Months compared with an operating loss as a percentage of operating revenues of 4% in the Prior Six Months. The improvement was primarily due to firmer market conditions in the U.S. Gulf of Mexico during the first quarter of 2012.

Equity in Earnings of 50% or Less Owned Companies, Net of Tax. Equity in earnings of 50% or less owned companies, net of tax, increased by $1.9 million in the Current Six Months compared with the Prior Six Months primarily due to the commencement of a long-term charter for a vessel in November 2011.

Fleet Count

The composition of Offshore Marine Services’ fleet as of June 30 was as follows: 
 
Owned
 
Joint
Ventured
 
Leased-in
 
Pooled or
Managed
 
Total
2012
 
 
 
 
 
 
 
 
 
Anchor handling towing supply
14

 
2

 
3

 
—

 
19

Crew
31

 
7

 
7

 
3

 
48

Mini-supply
5

 
2

 
2

 
—

 
9

Standby safety
24

 
1

 
—

 
—

 
25

Supply
9

 
2

 
9

 
8

 
28

Towing supply
2

 
1

 
—

 
—

 
3

Liftboats(1)
18

 
2

 
—

 
—

 
20

Specialty
3

 
3

 
—

 
3

 
9

Wind farm utility
29

 
—

 
1

 
—

 
30

 
135

 
20

 
22

 
14

 
191

2011
 
 
 
 
 
 
 
 
 
Anchor handling towing supply
15

 
2

 
2

 
—

 
19

Crew
39

 
3

 
7

 
3

 
52

Mini-supply
6

 
—

 
2

 
—

 
8

Standby safety
25

 
1

 
—

 
—

 
26

Supply
10

 
—

 
9

 
9

 
28

Towing supply
3

 
1

 
2

 
—

 
6

Liftboats
—

 
2

 
—

 
—

 
2

Specialty
3

 
5

 
—

 
3

 
11

Wind farm utility
—

 
—

 
—

 
—

 
—

 
101

 
14

 
22

 
15

 
152

(1) 
On March 30, 2012, Offshore Marine Services acquired 18 liftboats, real property and working capital from Superior Energy Inc. for $142.5 million.

30
Table of Contents

Aviation Services
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2012
 
2011
 
2012
 
2011
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
United States
53,606

 
85

 
48,632

 
71

 
99,836

 
80

 
87,865

 
70

Foreign
9,379

 
15

 
19,861

 
29

 
24,201

 
20

 
36,783

 
30

 
62,985

 
100

 
68,493

 
100

 
124,037

 
100

 
124,648

 
100

Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Personnel
16,724

 
27

 
15,390

 
22

 
32,423

 
26

 
30,017

 
24

Repairs and maintenance
8,456

 
13

 
12,810

 
19

 
18,754

 
15

 
22,541

 
18

Insurance and loss reserves
2,413

 
4

 
2,536

 
4

 
5,159

 
4

 
4,144

 
3

Fuel
5,382

 
9

 
5,534

 
8

 
10,001

 
8

 
9,717

 
8

Leased-in equipment
296

 
—

 
476

 
1

 
741

 
1

 
965

 
1

Other
5,731

 
9

 
5,711

 
8

 
11,600

 
9

 
8,538

 
7

 
39,002

 
62

 
42,457

 
62

 
78,678

 
63

 
75,922

 
61

Administrative and general
7,195

 
11

 
6,229

 
9

 
16,872

 
14

 
13,249

 
11

Depreciation and amortization
10,464

 
17

 
12,390

 
18

 
20,094

 
16

 
24,309

 
19

 
56,661

 
90

 
61,076

 
89

 
115,644

 
93

 
113,480

 
91

Gains on Asset Dispositions and Impairments, Net
1,077

 
2

 
6,172

 
9

 
2,842

 
2

 
8,366

 
7

Operating Income
7,401

 
12

 
13,589

 
20

 
11,235

 
9

 
19,534

 
16

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative losses, net
(180
)
 
—

 
(811
)
 
(1
)
 
(304
)
 
—

 
(501
)
 
—

Foreign currency gains (losses), net
(12
)
 
—

 
338

 
—

 
905

 
1

 
691

 
—

Other, net
—

 
—

 
—

 
—

 
30

 
—

 
—

 
—

Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax
756

 
1

 
1,054

 
2

 
(5,663
)
 
(5
)
 
955

 
1

Segment Profit
7,965

 
13

 
14,170

 
21

 
6,203

 
5

 
20,679

 
17


Operating Revenues by Service Line. The table below sets forth, for the periods indicated, the amount of operating revenues earned by service line.
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2012
 
2011
 
2012
 
2011
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Gulf of Mexico, primarily from oil and gas services
37,816

 
60

 
31,063

 
45

 
72,014

 
58

 
57,223

 
46

Alaska, primarily from oil and gas services
6,056

 
9

 
6,314

 
9

 
9,382

 
7

 
11,418

 
9

Contract-leasing
9,379

 
15

 
19,861

 
29

 
24,376

 
20

 
36,784

 
30

Air Medical Services
4,831

 
8

 
5,638

 
8

 
11,167

 
9

 
11,494

 
9

Flightseeing
2,617

 
4

 
2,744

 
4

 
2,619

 
2

 
2,747

 
2

FBO
2,413

 
4

 
2,987

 
5

 
4,704

 
4

 
5,201

 
4

Intersegment Eliminations
(127
)
 
—

 
(114
)
 
—

 
(225
)
 
—

 
(219
)
 
—

 
62,985

 
100

 
68,493

 
100

 
124,037

 
100

 
124,648

 
100



31
Table of Contents

Current Year Quarter compared with Prior Year Quarter

Operating Revenues.  Operating revenues were $5.5 million lower in the Current Year Quarter compared with the Prior Year Quarter.  Operating revenues in the U.S. Gulf of Mexico were $6.8 million higher primarily due to newly delivered medium and heavy helicopters being placed on contract, an expansion of government services support and a general increase in charter activity. Operating revenues from contract-leasing activities were $10.5 million lower. Contract-leasing revenues for aircraft chartered to Aviation Services' Brazilian joint venture were $6.2 million lower primarily due to the deferral of $4.4 million as a result of difficulties experienced by Aeroleo following one of its customer's cancellation of certain contracts for a number of AW139 aircraft under contract-lease from Aviation Services. In addition, contract-lease revenues from the joint venture were lower due to decreased flight hours for aircraft undergoing major maintenance.  Aviation Services also deferred contract-leasing revenues of $2.0 million from another customer due to the customer's short-term liquidity issues.  In addition, contract-leasing revenues were $1.4 million lower as a result of the expiration of a short-term contract-lease in Argentina. Operating revenues for air medical services were $0.8 million lower due to the conclusion of a long-term hospital contract. 

Operating Expenses.  Operating expenses were $3.5 million lower in the Current Year Quarter compared with the Prior Year Quarter.  Personnel costs were $1.3 million higher primarily due to the implementation of a pilot pay scale adjustment and the addition of personnel to support increased activity. Repair and maintenance expenses were $4.4 million lower primarily as a result of vendor credits for exiting certain power-by-hour maintenance contracts, partially offset by increased flight hours on helicopters under continuing power-by-hour maintenance contracts and the timing of repairs.   

Depreciation and Amortization.  Depreciation and amortization expenses were $1.9 million lower due to a change in estimate of the useful life and salvage value of helicopters, which reduced depreciation expense by $4.4 million in the Current Year Quarter, partially offset by the addition of new and higher cost equipment.  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.

Gains on Asset Dispositions and Impairments, Net.   During the Current Year Quarter, Aviation Services sold five helicopters and other equipment for proceeds of $1.9 million and gains of $0.9 million.  In addition, Aviation Services recognized previously deferred gains of $0.2 million.  During the Prior Year Quarter, Aviation Services sold two helicopters and other equipment for proceeds of $6.9 million and gains of $6.0 million.  In addition, Aviation Services recognized previously deferred gains of $0.1 million.
   
Operating Income. Excluding the change in depreciation policy noted above, operating income as a percentage of operating revenues was 5% compared with 20% in the Prior Year Quarter. The decrease was primarily due to the deferral of certain operating revenues partially offset by lower operating expenses in the Current Year Quarter as noted above and higher gains on asset dispositions in the Prior Year Quarter.

Current Six Months compared with Prior Six Months

Operating Revenues.  Operating revenues were $0.6 million lower in the Current Six Months compared with the Prior Six Months.  Operating revenues in the U.S. Gulf of Mexico were $14.8 million higher primarily due to newly delivered medium and heavy helicopters being placed on contract, an expansion of government services support and a general increase in charter activity. Operating revenues in Alaska were $2.0 million lower primarily due to the temporary suspension of a contract with a major oil and gas customer whose operations are expected to resume in the fourth quarter of 2012. Operating revenues from contract-leasing activities were $12.4 million lower. Contract-leasing revenues for aircraft chartered to Aviation Services' Brazilian joint venture were $8.7 million lower primarily due to the deferral of $7.3 million as a result of difficulties experienced by Aeroleo following one of its customer's cancellation of certain contracts for a number of AW139 aircraft under contract-lease from Aviation Services. In addition, contract-lease revenues from the joint venture were lower due to decreased flight hours for aircraft undergoing major maintenance.  Aviation Services also deferred contract-leasing revenues of $2.0 million from another customer due to the customer's short-term liquidity issues.  In addition, contract-leasing revenues were $4.6 million lower as a result of the expiration of contract-leases in Argentina, Thailand and Trinidad.  These decreases were partially offset by additional aircraft and new contract-leases in Mexico, the United Kingdom and Denmark.

Operating Expenses.  Operating expenses were $2.8 million higher in the Current Six Months compared with the Prior Six Months.  Personnel costs were $2.4 million higher primarily due to the implementation of a pilot pay scale adjustment and the addition of personnel to support increased activity in the U.S. Gulf of Mexico.  Repair and maintenance expenses were $3.8 million lower primarily as a result of vendor credits recognized in the Current Six Months, offset by additional flight hours on helicopters under power-by-hour agreements and the timing of repairs. Insurance and loss reserves were $1.0 million higher due to an increase in the overall fleet value and the recognition of a good experience credit from Aviation Services' hull and machinery underwriters

32
Table of Contents

in the Prior Six Months. Other operating expenses were $3.1 million higher primarily due to the Prior Six Months receipt of $1.8 million in insurance proceeds related to hurricane damages sustained in 2005. 
 
Administrative and General.  Administrative and general expenses were $3.6 million higher in the Current Six Months primarily due to the recognition of previously deferred legal and professional expenses associated with a contemplated public offering and an increase in administrative support.

Depreciation and Amortization.  Depreciation and amortization expenses were $4.2 million lower primarily due to the change in estimate of the useful life and salvage value of helicopters noted above, which reduced depreciation expense in the Current Six Months by $8.4 million, partially offset by the addition of new and higher cost equipment. 

Gains on Asset Dispositions and Impairments, Net.  During the Current Six Months, Aviation Services sold six helicopters and other equipment for proceeds of $4.8 million and gains of $2.4 million. In addition, Aviation Services recognized previously deferred gains of $0.4 million.  During the Prior Six Months, Aviation Services sold four helicopters and other equipment for proceeds of $9.7 million and gains of $8.1 million. In addition, Aviation Services recognized previously deferred gains of $0.3 million.

Operating Income. Excluding the change in depreciation policy noted above, operating income as a percentage of operating revenues was 2% compared with 16% in the Prior Six Months. The decrease was primarily due to the deferral of certain operating revenues noted above and higher gains on asset dispositions in the Prior Six Months.

Equity in losses of 50% or less owned companies. During the Current Six Months, Aviation Services recognized an impairment charge of $5.9 million, net of tax, on its investment in its Brazilian joint venture. 
 
Fleet Count

The composition of Aviation Services’ fleet as of June 30 was as follows: 
 
Owned(1)
 
Joint
Ventured
 
Leased-in(2)
 
Managed
 
Total
2012
 
 
 
 
 
 
 
 
 
Light helicopters – single engine
52

 
7

 
—

 
—

 
59

Light helicopters – twin engine
28

 
—

 
6

 
10

 
44

Medium helicopters
63

 
1

 
1

 
3

 
68

Heavy helicopters
9

 
—

 
—

 
—

 
9

 
152

 
8

 
7

 
13

 
180

2011
 
 
 
 
 
 
 
 
 
Light helicopters – single engine
52

 
6

 
3

 
—

 
61

Light helicopters – twin engine
29

 
—

 
6

 
9

 
44

Medium helicopters
60

 
—

 
2

 
3

 
65

Heavy helicopters
7

 
—

 
—

 
—

 
7

 
148

 
6

 
11

 
12

 
177

(1) 
Excludes one EC120 helicopter removed from service and sold in July 2011.
(2) 
Excludes three EC120 helicopters removed from service and sold in July 2011.


 

33
Table of Contents

Inland River Services
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2012
 
2011
 
2012
 
2011
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
United States
53,002

 
99

 
41,442

 
100

 
106,378

 
100

 
87,911

 
100
Foreign
300

 
1

 
—

 
—

 
414

 
—

 
—

 
—
 
53,302

 
100

 
41,442

 
100

 
106,792

 
100

 
87,911

 
100
Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Barge logistics
23,540

 
44

 
19,824

 
48

 
43,277

 
41

 
37,578

 
43
Personnel
5,557

 
10

 
3,291

 
8

 
10,935

 
10

 
6,681

 
8
Repairs and maintenance
472

 
1

 
1,108

 
2

 
2,664

 
2

 
2,136

 
2
Insurance and loss reserves
854

 
2

 
487

 
1

 
1,559

 
1

 
1,145

 
1
Fuel, lubes and supplies
2,079

 
4

 
742

 
2

 
3,222

 
3

 
1,650

 
2
Leased-in equipment
2,790

 
5

 
1,725

 
4

 
6,152

 
6

 
4,513

 
5
Other
2,171

 
4

 
1,540

 
4

 
4,837

 
5

 
2,898

 
3
 
37,463

 
70

 
28,717

 
69

 
72,646

 
68

 
56,601

 
64
Administrative and general
3,773

 
7

 
3,166

 
8

 
7,755

 
7

 
5,863

 
7
Depreciation and amortization
7,244

 
14

 
5,791

 
14

 
14,251

 
14

 
11,413

 
13
 
48,480

 
91

 
37,674

 
91

 
94,652

 
89

 
73,877

 
84
Gains (Losses) on Asset Dispositions
858

 
2

 
(22
)
 
—

 
2,785

 
3

 
675

 
1
Operating Income
5,680

 
11

 
3,746

 
9

 
14,925

 
14

 
14,709

 
17
Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency losses, net
(71
)
 
—

 
—

 
—

 
(93
)
 
—

 
—

 
—
Other, net
—

 
—

 
3

 
—

 
—

 
—

 
4

 
—
Equity in Earnings of 50% or Less Owned Companies, Net of Tax
439

 
—

 
666

 
2

 
689

 
1

 
410

 
—
Segment Profit
6,048

 
11

 
4,415

 
11

 
15,521

 
15

 
15,123

 
17

Operating Revenues by Service Line. The table below sets forth, for the periods indicated, operating revenues earned by service line.
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2012
 
2011
 
2012
 
2011
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dry cargo barge pool participation
24,708

 
46
 
23,373

 
56
 
49,316

 
46
 
51,338

 
58
Liquid unit tow operations
7,119

 
13
 
6,321

 
15
 
13,975

 
13
 
12,998

 
15
Charter-out of dry cargo barges
1,897

 
4
 
2,249

 
6
 
4,099

 
4
 
4,282

 
5
10,000 barrel liquid tank barge operations
5,226

 
10
 
3,692

 
9
 
10,341

 
10
 
7,364

 
8
Inland river towboat operations and other activities
14,352

 
27
 
5,807

 
14
 
29,061

 
27
 
11,929

 
14
 
53,302

 
100
 
41,442

 
100
 
106,792

 
100
 
87,911

 
100

 

34
Table of Contents

Dry Cargo Barge Pool Operating Data. The following table presents, for the periods indicated, Inland River Services’ interest in tons moved and its available barge days in the dry cargo barge pools. Available barge days represents the total calendar days during which the Company’s owned and chartered-in barges were in the pool.
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2012
 
2011
 
2012
 
2011
 
Tons
 
%
 
Tons
 
%
 
Tons
 
%
 
Tons
 
%
Tons Moved (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Grain
805

 
56
 
880

 
71
 
1,769

 
63
 
1,843

 
69
Non-Grain
644

 
44
 
365

 
29
 
1,030

 
37
 
827

 
31
 
1,449

 
100
 
1,245

 
100
 
2,799

 
100
 
2,670

 
100
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Days
 
 
 
Days
 
 
 
Days
 
 
 
Days
 
 
Available barge days
51,643

 
 
 
49,686

 
 
 
102,294

 
 
 
97,040

 
 

Operating Revenues. Operating revenues were $11.9 million higher in the Current Year Quarter compared with the Prior Year Quarter and $18.9 million higher in the Current Six Months compared with the Prior Six Months. In the Current Six Months, dry cargo markets suffered from weak demand for freight and a portion of the dry cargo barge fleet was idled. In the Prior Six Months, markets were disrupted by difficult weather-related operating conditions with periodic river closures and restricted tow sizes. Operating revenues from the liquid unit tow and 10,000 barrel liquid tank barge operations were higher in both comparable periods due to increased demand. Operating revenues from inland river towboat operations and other activities were $8.5 million higher in the Current Year Quarter compared with the Prior Year Quarter and $17.1 million higher in the Current Six Months compared with the Prior Six Months primarily due to activity in SCF's Lewis and Clark Fleeting and Terminal operations acquired in December 2011 (“Lewis & Clark").

Operating Expenses. Operating expenses were $9.7 million higher in the Current Year Quarter compared with the Prior Year Quarter and $16.6 million higher in the Current Six Months compared with the Prior Six Months primarily due to Lewis & Clark. Barge logistics expenses were higher in both comparable periods primarily due to higher towing, fleeting and switching expenses and higher fuel costs.

Administrative and General. Administrative and general expenses were $0.6 million higher in the Current Year Quarter compared with the Prior Year Quarter primarily due to Lewis & Clark and were $1.9 million higher in the Current Six Months compared with the Prior Six Months primarily due to Lewis & Clark, the acquisition of a 70% interest in Naviera Central S.A. in December 2011 and higher wage and benefit costs.

Depreciation and Amortization. Depreciation and amortization expenses were $1.5 million higher in the Current Year Quarter compared with the Prior Year Quarter and $2.8 million higher in the Current Six Months compared with the Prior Six Months primarily due to Lewis & Clark and the consolidation of Soylutions LLC beginning in July 2011.

Gains on Asset Dispositions. During the Current Year Quarter, the Company sold other equipment for net proceeds of $0.2 million and recognized gains of $0.2 million. In addition, the Company recognized previously deferred gains of $0.7 million. During the Current Six Months, the Company sold one towboat and other equipment for net proceeds of $5.2 million and gains of $1.4 million. In addition, the Company recognized previously deferred gains of $1.4 million.

During the Prior Year Quarter and Prior Six Months, the Company sold one towboat for proceeds of $0.7 million and recognized a loss of $0.7 million. In addition, the Company recognized previously deferred gains of $0.7 million and $1.4 million in the Prior Year Quarter and Prior Six Months, respectively.

Operating Income. Excluding the impact of gains on asset dispositions, operating income as a percentage of operating revenues was 9% in the Current Year Quarter and the Prior Year Quarter and 11% in the Current Six Months compared with 16% in the Prior Six Months. The reduction in the Current Six Months compared with the Prior Six Months was primarily due to lower revenues for the dry cargo barge pools and higher barge logistics expenses discussed above.



35
Table of Contents

Fleet Count

The composition of Inland River Services’ fleet as of June 30 was as follows: 
 
Owned
 
Joint
Ventured
 
Leased-in
 
Pooled or
Managed
 
Total
2012
 
 
 
 
 
 
 
 
 
Inland river dry cargo barges
692

 
172

 
2

 
587

 
1,453

Inland river liquid tank barges
71

 
—

 
—

 
7

 
78

Inland river deck barges
20

 
—

 
—

 
—

 
20

Inland river towboats:
 
 
 
 
 
 
 
 


4,000 hp - 6,250 hp
3

 
6

 
—

 
—

 
9

3,300 hp - 3,900 hp
1

 
7

 
—

 
—

 
8

Less than 3,200 hp
12

 
2

 
—

 
—

 
14

Dry cargo vessel(1)
—

 
1

 
—

 
—

 
1

 
799

 
188

 
2

 
594

 
1,583

2011
 
 
 
 
 
 
 
 
 
Inland river dry cargo barges
689

 
172

 
2

 
629

 
1,492

Inland river liquid tank barges
70

 
—

 
—

 
10

 
80

Inland river deck barges
26

 
—

 
—

 
—

 
26

Inland river towboats:
 
 
 
 
 
 
 
 


4,000 hp - 6,250 hp
3

 
6

 
—

 
—

 
9

3,300 hp - 3,900 hp
1

 
7

 
—

 
—

 
8

Less than 3,200 hp
12

 
2

 
—

 
—

 
14

Dry cargo vessel(1)
—

 
1

 
—

 
—

 
1

 
801

 
188

 
2

 
639

 
1,630

(1) 
Argentine-flag.


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Table of Contents

Marine Transportation Services
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2012
 
2011
 
2012
 
2011
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
United States
17,481

 
68

 
17,465

 
72
 
35,309

 
68

 
34,777

 
84
Foreign
8,311

 
32

 
6,871

 
28
 
16,766

 
32

 
6,871

 
16
 
25,792

 
100

 
24,336

 
100
 
52,075

 
100

 
41,648

 
100
Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Personnel
4,145

 
16

 
4,175

 
17
 
8,395

 
16

 
8,056

 
19
Repairs and maintenance
2,566

 
10

 
1,078

 
4
 
3,848

 
7

 
1,621

 
4
Drydocking
—

 
—

 
59

 
—
 
300

 
1

 
459

 
1
Insurance and loss reserves
151

 
1

 
66

 
—
 
755

 
1

 
556

 
1
Fuel, lubes and supplies
2,358

 
9

 
2,114

 
9
 
4,606

 
9

 
2,503

 
6
Leased-in equipment
3,230

 
12

 
3,766

 
16
 
6,347

 
12

 
6,666

 
16
Other
4,272

 
17

 
2,326

 
10
 
8,229

 
16

 
2,702

 
6
 
16,722

 
65

 
13,584

 
56
 
32,480

 
62

 
22,563

 
53
Administrative and general
2,934

 
11

 
2,146

 
9
 
5,409

 
10

 
3,563

 
9
Depreciation and amortization
5,666

 
22

 
5,728

 
23
 
11,317

 
22

 
10,706

 
26
 
25,322

 
98

 
21,458

 
88
 
49,206

 
94

 
36,832

 
88
Operating Income
470

 
2

 
2,878

 
12
 
2,869

 
6

 
4,816

 
12
Other Income (Expense):
 
 

 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency gains (losses), net
(3
)
 
—

 
6

 
—
 
6

 
—

 
22

 
—
Other, net
49

 
—

 
56

 
—
 
79

 
—

 
56

 
—
Equity in Losses of 50% or Less Owned Companies, Net of Tax
(774
)
 
(3
)
 
—

 
—
 
(991
)
 
(2
)
 
—

 
—
Segment Profit (Loss)
(258
)
 
(1
)
 
2,940

 
12
 
1,963

 
4

 
4,894

 
12
Operating Revenues by Charter Arrangement. The table below sets forth, for the periods indicated, the amount of operating revenues earned from charter arrangements.
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2012
 
2011
 
2012
 
2011
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Time charter
8,547

 
33
 
8,641

 
35
 
17,625

 
34
 
17,176

 
41
Bareboat charter
8,736

 
34
 
8,736

 
36
 
17,472

 
33
 
17,376

 
42
Technical management services
195

 
1
 
138

 
1
 
378

 
1
 
275

 
1
G&G Shipping
8,314

 
32
 
6,821

 
28
 
16,600

 
32
 
6,821

 
16
 
25,792

 
100
 
24,336

 
100
 
52,075

 
100
 
41,648

 
100

G&G Shipping Acquisition. In April 2011, Marine Transportation Services acquired 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 "G&G Shipping Acquisition"). The operating company leases-in the real property and the RORO vessels from the Company. In the Current Year Quarter and Current Six Months, this operation contributed operating losses of $1.3 million and $2.1 million, respectively. In the Prior Year Quarter and Prior Six Months, it contributed an operating loss of $0.4 million.


37
Table of Contents

Operating Revenues. Operating Revenues were $1.5 million higher in the Current Year Quarter compared with the Prior Year Quarter, and $10.4 million higher in the Current Six Months compared wit the Prior Six Months. Time charter revenues for the Company's U.S.-flag product tankers were flat in both comparable periods. In both cases, higher charter rates for three vessels were offset by 21 days of out-of-service time for one vessel undergoing topside repairs. Operating revenues for the foreign flag RORO vessels were $1.5 million higher in the Current Year Quarter compared with the Prior Year Quarter and $9.8 million higher in the Current Six Months compared with the Prior Six Months reflecting the G&G Shipping Acquisition discussed above.

Operating Expenses. Operating expenses were $3.1 million higher in the Current Year Quarter compared with the Prior Year Quarter primarily due to higher repair and maintenance costs and a complete quarter of activity for the RORO vessels. Operating expenses were $9.9 million higher in the Current Six Months compared with the Prior Six Months primarily due to the G&G Acquisition discussed above and higher repair and maintenance costs.

Administrative and General. Administrative and general expenses were $0.8 million higher in the Current Year Quarter compared with the Prior Year Quarter primarily due to higher salary costs, higher legal fees and higher facility maintenance expenses. Administrative and general expenses were $1.8 million higher in the Current Six Months compared with the Prior Six Months primarily due to the G&G Shipping Acquisition discussed above, and higher legal fees.

Operating Income. Operating income as a percentage of operating revenues was 2% in the Current Year Quarter compared with 12% in the Prior Year Quarter and 6% in the Current Six Months compared with 12% in the Prior Six Months primarily due to out-of-service time and higher repair and maintenance costs for one vessels undergoing topside repairs.

Equity in earnings of 50% or Less Owned Companies. Equity in earnings in the Current Year Quarter and the Current Six Months reflect losses incurred by the Company's Trailer Bridge joint venture, an operator of U.S.-flag deck and RORO barges, partially offset by earnings from the Company's joint venture that began operating its U.S.-flag articulated tug-barge on the Great Lakes in April 2012.

Fleet Count

The composition of Marine Transportation Services’ fleet as of June 30 was as follows: 
 
Owned
 
Joint
Ventured
 
Leased-in
 
Total
2012
 
 
 
 
 
 
 
U.S.-flag product tankers(1)
5

 
—

 
2

 
7

Foreign flag RORO vessels
8

 
—

 
—

 
8

U.S.-flag deck barges
—

 
5

 
—

 
5

U.S.-flag RORO barges
—

 
2

 
—

 
2

U.S.-flag articulated tug-barge
—

 
1

 
—

 
1

 
13

 
8

 
2

 
23

2011
 
 
 
 
 
 
 
U.S.-flag product tankers
5

 
—

 
2

 
7

Foreign flag RORO vessels
8

 
—

 
—

 
8

U.S.-flag deck barges
—

 
—

 
—

 
—

U.S.-flag RORO barges
—

 
—

 
—

 
—

U.S.-flag articulated tug-barge
—

 
—

 
—

 
—

 
13

 
—

 
2

 
15

(1) As of June 30, 2012, four were operating under long-term bareboat charters and three were operating under time charters.


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Table of Contents

Emergency and Crisis Services
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2012
 
2011
 
2012
 
2011
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
United States
6,986

 
83

 
19,367

 
91

 
15,882

 
85

 
46,949

 
94

Foreign
1,453

 
17

 
1,908

 
9

 
2,772

 
15

 
3,159

 
6

 
8,439

 
100

 
21,275

 
100

 
18,654

 
100

 
50,108

 
100

Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Subcontractors
2,157

 
26

 
6,664

 
31

 
6,679

 
36

 
19,670

 
39

Personnel
3,651

 
43

 
5,664

 
27

 
6,002

 
32

 
7,433

 
15

Other
—

 
—

 
—

 
—

 
—

 
—

 
1

 
—

 
5,808

 
69

 
12,328

 
58

 
12,681

 
68

 
27,104

 
54

Administrative and general
4,211

 
50

 
3,555

 
17

 
7,465

 
40

 
6,366

 
13

Depreciation and amortization
491

 
6

 
498

 
2

 
975

 
5

 
1,000

 
2

 
10,510

 
125

 
16,381

 
77

 
21,121

 
113

 
34,470

 
69

Gains on Asset Dispositions
—

 
—

 
—

 
—

 
5

 
—

 


 
—

Operating Income (Loss)
(2,071
)
 
(25
)
 
4,894

 
23

 
(2,462
)
 
(13
)
 
15,638

 
31

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency losses, net
(20
)
 
—

 
(7
)
 
—

 
(6
)
 
—

 
(58
)
 
—

Other, net
—

 
—

 
2

 
—

 
—

 
—

 
2

 
—

Equity in Earnings of 50% or Less Owned Companies, Net of Tax
147

 
2

 
—

 
—

 
214

 
1

 


 
—

Segment Profit (Loss)
(1,944
)
 
(23
)
 
4,889

 
23

 
(2,254
)
 
(12
)
 
15,582

 
31


Operating Revenues by Service Line. The table below sets forth, for the periods indicated, the amount of operating revenues earned by service line.
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2012
 
2011
 
2012
 
2011
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Response Services
1,863

 
22
 
14,289

 
67
 
5,678

 
30
 
36,427

 
73
Retainer Services
2,996

 
35
 
2,640

 
12
 
5,781

 
31
 
5,202

 
10
Professional Services
3,451

 
41
 
4,194

 
20
 
6,907

 
37
 
7,604

 
15
Software Services
129

 
2
 
152

 
1
 
284

 
2
 
374

 
1
Equipment Sales and Leasing
—

 
—
 
—

 
—
 
4

 
—
 
501

 
1
 
8,439

 
100
 
21,275

 
100
 
18,654

 
100
 
50,108

 
100

Operating Results. Operating revenues and operating margins for Emergency and Crisis Services can vary materially between comparable periods depending upon the number and magnitude of emergency responses. Emergency and Crisis Services' operating results in the Prior Year Quarter and Prior Six Months were impacted by oil spill response activities relating to the BP Macondo well incident in the U.S. Gulf of Mexico following the sinking of the semi-submersible drilling rig Deepwater Horizon in April 2010. Emergency and Crisis Services provided professional assistance, consulting services and software systems in support of incident management activities.


39
Table of Contents

Commodity Trading and Logistics
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2012
 
2011
 
2012
 
2011
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
United States
184,447

 
89

 
166,548

 
68

 
366,707

 
88
 
337,863

 
77

Foreign
22,298

 
11

 
78,773

 
32

 
49,734

 
12
 
101,470

 
23

 
206,745

 
100

 
245,321

 
100

 
416,441

 
100
 
439,333

 
100

Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating
202,126

 
97

 
237,644

 
97

 
405,359

 
97
 
424,662

 
97

Administrative and general
3,411

 
2

 
2,202

 
1

 
6,552

 
1
 
4,862

 
1

Depreciation
1,591

 
1

 
12

 
—

 
2,651

 
1
 
25

 
—

 
207,128

 
100

 
239,858

 
98

 
414,562

 
99
 
429,549

 
98

Gains on asset dispositions, net
—

 
—

 
—

 
—

 
—

 
—
 
—

 
—

Operating Income
(383
)
 
—

 
5,463

 
2

 
1,879

 
1
 
9,784

 
2

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative gains (losses), net(1)
3,393

 
2

 
828

 
—

 
454

 
—
 
(3,922
)
 
(1
)
Foreign currency gains (losses), net
(14
)
 
—

 
(16
)
 
—

 
65

 
—
 
(21
)
 
—

Other, net
—

 
—

 
—

 
—

 
—

 
—
 
—

 
—

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

 
—

 
(1,051
)
 
—

 
6,154

 
1
 
(1,000
)
 
—

Segment Profit
2,996

 
2

 
5,224

 
2

 
8,552

 
2
 
4,841

 
1

(1)
In the Company’s energy and sugar trading businesses, fixed price future purchase and sale contracts for ethanol and sugar are included in derivative positions at fair value. The Company routinely enters into exchange traded derivative positions to offset its net commodity market exposure on these purchase and sale contracts as well as its inventory balances. As a result, derivative gains (losses), net recognized during any period are predominately offset by fair value adjustments included in operating revenues and expenses on completed transactions, subject to certain timing differences on the delivery of physical inventories. As of June 30, 2012 and 2011, the net market exposure to ethanol and sugar under its contracts and inventory balances was not material.

Operating Revenues and Segment Profit (Loss) by Commodity Group. The table below sets forth, for the periods indicated, the amount of operating revenues earned and segment profit (loss) by commodity group.
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2012
 
2011
 
2012
 
2011
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Energy Trading
184,704

 
89
 
196,055

 
80
 
366,914

 
88
 
364,816

 
83
Agricultural Trading
22,041

 
11
 
49,266

 
20
 
49,527

 
12
 
74,517

 
17
 
206,745

 
100
 
245,321

 
100
 
416,441

 
100
 
439,333

 
100
Segment Profit (Loss):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Energy Trading
1,569

 
52
 
4,589

 
88
 
8,375

 
98
 
4,547

 
94
Agricultural Trading
1,427

 
48
 
635

 
12
 
177

 
2
 
294

 
6
 
2,996

 
100
 
5,224

 
100
 
8,552

 
100
 
4,841

 
100

Energy Trading. Segment Profit was $3.0 million lower in the Current Year Quarter compared with the Prior Year Quarter primarily due to lower backhaul revenues, a change in the ethanol product sales mix which reduced margins and higher losses as a result of consolidating of the Company's alcohol manufacturing joint venture, Illinois Corn Processing LLC (“ICP”) effective February 1, 2012.


40
Table of Contents

Segment profit was $3.8 million higher in the Current Six Months compared with the Prior Six Months primarily due to the recognition of a gain of $6.0 million, net of tax, which is included in equity in earnings in 50% or less owned subsidiaries, following the Company obtaining a controlling interest in ICP and the consequent adjustment of its investment therein to fair value. This gain was partially offset by reductions in segment profit due to reasons noted above.

Other Segment Profit
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2012
 
2011
 
2012
 
2011
 
$’000
 
$’000
 
$’000
 
$’000
Harbor and Offshore Towing Services
3,340

 
4,496

 
6,622

 
7,984

Other Activities
(186
)
 
(660
)
 
(329
)
 
(663
)
Equity in Losses of 50% or Less Owned Companies
(518
)
 
3

 
(940
)
 
(386
)
Segment Profit
2,636

 
3,839

 
5,353

 
6,935


Harbor and Offshore Towing Services. Segment profit was $1.2 million lower for the Current Year Quarter compared with the Prior Year Quarter and $1.4 million lower for the Current Six Months compared with the Prior Six Months primarily due to decreased harbor traffic, higher drydocking and repair and maintenance costs and higher leased-in expenses to cover for vessels undergoing drydockings. These reductions in segment profit were partially offset by higher gains on asset sales.

Corporate and Eliminations
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2012
 
2011
 
2012
 
2011
 
$’000
 
$’000
 
$’000
 
$’000
Corporate Expenses
(8,035
)
 
(8,179
)
 
(17,582
)
 
(19,421
)
Eliminations
—

 
—

 
—

 
—

Operating Loss
(8,035
)
 
(8,179
)
 
(17,582
)
 
(19,421
)
Other Income (Expense):
 
 
 
 
 
 
 
Derivative gains (losses), net
274

 
(6,618
)
 
(782
)
 
(5,496
)
Foreign currency gains (losses), net
(511
)
 
1,527

 
(63
)
 
5,547

Other, net
175

 
(117
)
 
61

 
(295
)

Corporate Expenses. Corporate expenses decreased by $1.8 million in the Current Six Months compared with the Prior Six Months primarily due to lower audit and tax fees and management bonus accruals, partially offset by the receipt in the Prior Six Months of insurance proceeds related to hurricanes Katrina and Rita in 2005.

Derivative gains (losses), net. Derivative losses, net in the Prior Year Quarter and the Prior Six Months were primarily due to losses on U.S. treasury notes, rate-locks and bond future and option contracts resulting from declines in market interest rates, partially offset by gains on forward currency exchange, option and future contracts due to movements in underlying currencies.

Foreign currency gains, net. Foreign currency gains, net in the Prior Year Quarter and the Prior Six Months were primarily due to the strengthening of the euro against the U.S. dollar.


41
Table of Contents

Other Income (Expense) not included in Segment Profit (Loss)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2012
 
2011
 
2012
 
2011
 
$’000
 
$’000
 
$’000
 
$’000
Interest income
7,641

 
3,297

 
10,617

 
7,029

Interest expense
(12,413
)
 
(10,465
)
 
(24,437
)
 
(20,505
)
Debt extinguishment losses, net
—

 
—

 
(160
)
 
(48
)
Marketable security gains (losses), net
11,596

 
(4,754
)
 
14,954

 
(3,220
)
 
6,824

 
(11,922
)
 
974

 
(16,744
)

Interest Income. Interest income was higher in the Current Year Quarter and Current Six Months primarily due to a prepayment penalty received following the early redemption of a note receivable in the Company's lending and leasing portfolio and interest earned on additional notes to certain of the Company's 50% or less owned companies.

Interest Expense. Interest expense was higher in the Current Year Quarter and Current Six Months primarily due to interest expense on borrowings from Era's senior secured revolving credit facility entered into on December 22, 2011.

Marketable Security Gains (Losses), net. Marketable security gains, net in the Current Year Quarter and Prior Year Quarter were primarily attributable to gains on the Company's long and short marketable security positions.

Liquidity and Capital Resources

General

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

As of June 30, 2012, the Company’s unfunded capital commitments totaled $377.6 million and consisted of: eleven offshore support vessels for $148.7 million; an interest in a jack-up drilling rig for $31.2 million; twelve helicopters for $139.3 million; seven inland river liquid tank barges for $16.2 million; an interest in a river grain terminal for $1.3 million; four harbor tugs for $28.5 million and other equipment and improvements for $12.4 million. Of these commitments $110.2 million is payable during the remainder of 2012 with the balance payable through 2016 and $154.2 million may be terminated without further liability other than the payment of liquidated damages of $3.3 million. Subsequent to June 30, 2012, the Company committed to purchase three inland river towboats for $11.4 million and notified the Company's lessors of its intent to purchase three harbor tugs for $3.9 million.

As of June 30, 2012, construction reserve funds of $182.8 million were classified as non-current assets in the accompanying condensed consolidated balance sheets as the Company has the intent and ability to use the funds to acquire equipment.

SEACOR’s Board of Directors previously approved a securities repurchase plan that authorizes the Company to acquire Common Stock, which may be acquired through open market purchases, privately negotiated transactions or otherwise, depending on market conditions. As of June 30, 2012, the remaining authority under the repurchase plan was $132.6 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.


42
Table of Contents

As of June 30, 2012, the Company had $125.0 million of outstanding borrowings under the SEACOR revolving credit facility. The remaining availability under this facility as of June 30, 2012 was $279.0 million, net of issued letters of credit of $1.0 million. On November 3, 2012, the maximum committed amount under the revolving credit facility will be reduced by $40.5 million. As of June 30, 2012, Era had $260.0 million of outstanding borrowings under its senior secured revolving credit facility. The remaining availability under this facility as of June 30, 2012 was $89.7 million, net of issued letters of credit of $0.3 million. In addition, the Company had other outstanding letters of credit totaling $47.6 million with various expiration dates through 2016.

Summary of Cash Flows
 
Six Months Ended June 30,
 
2012
 
2011
 
$’000
 
$’000
Cash flows provided by or (used in):
 
 
 
Operating Activities - Continuing Operations
84,135

 
130,791

Operating Activities - Discontinued Operations
(11,749
)
 
31,399

Investing Activities - Continuing Operations
(237,700
)
 
(169,351
)
Investing Activities - Discontinued Operations
87,904

 
(3,982
)
Financing Activities - Continuing Operations
(85,257
)
 
2,983

Effect of Exchange Rate Changes on Cash and Cash Equivalents
1,505

 
5,656

Net Decrease in Cash and Cash Equivalents
(161,162
)
 
(2,504
)

Operating Activities

Cash flows provided by operating activities decreased by $89.8 million in the Current Six Months compared with the Prior Six Months. The components of cash flows provided by (used in) operating activities during the Current Six Months and Prior Six Months were as follows:
 
Six Months Ended June 30,
 
2012
 
2011
 
$’000
 
$’000
Operating income from continuing operations before depreciation and gains on asset dispositions and impairments, net
113,687

 
115,362

Operating income (loss) from discontinued operations before depreciation and gains on asset dispositions and impairments, net
(434
)
 
1,335

Changes in operating assets and liabilities before interest and income taxes
(2,428
)
 
(8,880
)
Purchases of marketable securities
(25,077
)
 
(54,643
)
Proceeds from sale of marketable securities
17,032

 
134,127

Cash settlements on derivative transactions, net
(2,770
)
 
(9,521
)
Dividends received from 50% or less owned companies
2,050

 
3,058

Interest paid, excluding capitalized interest
(23,530
)
 
(19,833
)
Income taxes paid, net
(18,565
)
 
(4,776
)
Other
12,421

 
5,961

Total cash flows provided by operating activities
72,386

 
162,190


Operating income from continuing operations before depreciation and gains on asset dispositions and impairments, net was $1.7 million lower in the Current Six Months compared with the Prior Six Months primarily due to reduced oil spill response activities in Emergency and Crisis Services and lower results in Commodity Trading and Logistics and Aviation Services partially offset by improvements in Offshore Marine Services. See “Consolidated Results of Operations” included above for a discussion of the results of each of the Company's business segments.


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During the Current Six Months, cash used in operating activities included $14.3 million to purchase marketable security long positions and $10.8 million to cover marketable security short positions. During the Current Six Months, cash provided by operating activities included $14.5 million received from the sale of marketable security long positions and $2.5 million received upon entering into marketable security short positions.

During the Prior Six Months, cash used in operating activities included $21.1 million to purchase marketable security long positions and $33.4 million to cover marketable security short positions. During the Prior Six Months, cash provided by operating activities included $65.5 million received from the sale of marketable security long positions and $68.6 million received upon entering into marketable security short positions.

Investing Activities

During the Current Six Months, net cash used in investing activities of continuing operations was $237.7 million primarily as follows:

•
Capital expenditures were $186.5 million. Equipment deliveries included one offshore support vessel, one wind farm utility vessel, three inland river dry cargo barges, two liquid tank barges, one inland river towboat and 13 helicopters.

•
The Company sold four offshore support vessels, six helicopters, one inland river towboat, two harbor tugs and other equipment for net cash proceeds of $11.7 million and received $0.2 million in deposits related to future expected sales. Total net proceeds of $65.6 million on equipment sold included $5.0 million in cash deposits previously received and $48.9 million in seller financing.

•
The Company made net investments in and advances to its 50% or less owned companies of $32.7 million.

•
Construction reserve fund account transactions included withdrawals of $74.1 million and deposits of $6.5 million.

•
The Company received net repayments of investments in its 50% or less owned companies of $26.1 million.

•
The Company received principal payments, net on third party notes receivable of $19.5 million.

•
The Company acquired 18 lift boats, real property and working capital from Superior for $142.5 million.

•
The Company obtained a 70% controlling interest in ICP through its acquisition of a portion of its partner's interest for $9.1 million in cash.

During the Current Six Months, net cash provided by investing activities of discontinued operations was $87.9 million primarily as follows:

•
The Company sold certain companies and assets that were part of its Environmental Services business segment for a net sales price of $99.9 million. Net cash proceeds received were $88.8 million.

During the Prior Six Months, net cash used in investing activities of continuing operations was $169.4 million primarily as follows:

•
Capital expenditures were $127.4 million. Equipment deliveries included one offshore support vessel, five helicopters, 55 inland river dry cargo barges and two liquid tank barges. In addition, the Company acquired the remaining interest in an offshore support vessel previously joint ventured.

•
Proceeds from the disposition of property and equipment were $25.1 million. The Company sold five offshore support vessels, four helicopters, one inland river towboat, one harbor tug and other equipment.

•
The Company made net investments in its 50% or less owned companies of $26.5 million.

•
The Company made net advances on third party notes receivable of $20.3 million.

•
Construction reserve fund account transactions included withdrawals of $17.2 million and deposits of $8.0 million.

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•
The Company acquired certain real property, eight foreign flag RORO vessels and a 70% interest in an operating company engaged in the shipping trade between the United States, the Bahamas and the Caribbean for $33.5 million, which included cash consideration of $30.3 million and the contribution of a $3.2 million note receivable. The acquired company had $1.6 million in cash at the time of the acquisition.

Financing Activities

During the Current Six Months, net cash used in financing activities of continuing operations was $85.3 million. The Company:

•
had net borrowings of $8.0 million under the Era senior secured revolving credit facility;

•
repaid $50.0 million under the SEACOR revolving credit facility;

•
purchased $5.5 million, in principal amount, of its 5.875% Senior Notes due 2012 for an aggregate purchase price of $5.7 million;

•
made scheduled payments on long-term debt and capital lease obligations of $7.2 million;

•
repaid $3.2 million of acquired debt;

•
received proceeds from other debt of $0.1 million;

•
had net borrowings on inventory financing arrangements of $14.8 million;

•
received $6.7 million for share award plans; and

•
acquired for Treasury 199,766 shares of Common Stock for an aggregate purchase price of $17.4 million.

During the Prior Six Months, net cash provided by financing activities of continuing operations was $3.0 million. The Company:

•
purchased $1.0 million, in principal amount, of its 5.875% Senior Notes due 2012 for an aggregate purchase price of $1.0 million;

•
made scheduled payments on long-term debt and capital lease obligations of $6.5 million;

•
had net borrowings on inventory financing arrangements of $5.8 million; and

•
received $6.3 million from share award plans.

Short and Long-Term Liquidity Requirements

Current economic conditions have continued to disrupt the credit and capital markets. To date, the Company’s liquidity has not been materially impacted by the current credit environment and management does not expect that it will be materially impacted in the near future. The Company anticipates it will continue to generate positive cash flows from operations and that these cash flows will be adequate to meet the Company’s working capital requirements. In support of the Company’s capital expenditure program or other liquidity requirements, the Company may: use its cash balances; sell securities; utilize construction reserve funds; sell assets; enter into sale and leaseback transactions for equipment; borrow under its revolving credit facilities; issue debt, shares of Common Stock, common stock of its subsidiaries or preferred stock; or a combination thereof.

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


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Off-Balance Sheet Arrangements

For a discussion of the Company's off-balance sheet arrangements, refer to Liquidity and Capital Resources contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2011. There has been no material change in the Company's off-balance sheet arrangements during the Current Year Quarter except for the indemnifications of the SES Business as discussed below in Contingencies.

Contractual Obligations and Commercial Commitments

For a discussion of the Company's contractual obligations and commercial commitments, refer to Liquidity and Capital Resources contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2011. There has been no material change in the Company's contractual obligations and commercial commitments during the Current Six Months.

Contingencies

Prior to the sale of the SES Business, the Company had issued performance guarantees on behalf of the SES Business that expire in 2012 through 2014. As of June 30, 2012, the amount of outstanding SES Business performance guarantees was $0.8 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 ORM, the Company's Emergency and Crisis Services business segment. 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.

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 alleged 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 included all direct purchasers of such services and the relief sought included compensatory damages and treble damages.  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 District 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.  On July 27, 2002, the Third Circuit Court of Appeals affirmed the District Court's grant of summary judgment in favor of the defendants. On August 9, 2011, Defendants moved for certain excessive costs, expenses, and attorneys' fees under 28 U.S.C. § 1927. That motion is fully briefed and a decision is pending.

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 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 entered final judgments in favor of the Company in the Robin Case and each of the limitation actions on November 21, 2011.  On December 12, 2011, the claimants appealed each of those judgments to the Unites States Court of Appeals for the Fifth Circuit.  The claimants' opening brief was submitted on May 7, 2012, and the claimants filed a reply brief on June 1, 2012.  The appeal is now fully submitted but no date has been set for oral argument, if any. The

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Company is unable to estimate the potential exposure, if any, resulting from this matter but believes it is without merit and will continue to vigorously defend the action.

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 ORM. 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 experienced injuries similar to those of Mr. Wunstell. The Company believes this lawsuit has no merit and will continue to vigorously defend the action.  Pursuant to contractual agreements with the responsible party, the responsible party has agreed, subject to certain potential limitations, to indemnify and defend ORM in connection with the Wunstell Action and claims asserted in the MDL.

On December 15, 2010, ORM and then-SEACOR subsidiary 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 ORM 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 ORM and NRC in the master complaint have no merit and on February 28, 2011, ORM 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 ORM 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 ORM and NRC advanced and has directed ORM and NRC to (i) conduct limited discovery to develop evidence to support those arguments and (ii) then re-assert the arguments.  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.  A schedule for limited discovery and motion practice was established by the Court and, in accordance with that schedule, ORM and NRC filed for summary judgment re-asserting their derivative immunity and implied preemption arguments on May 18, 2012.  Those motions were argued on July 13, 2012 and the Court has taken them under advisement.  In addition to the indemnity provided to ORM, pursuant to contractual agreements with the responsible party, the responsible party has agreed, subject to certain potential limitations, to indemnify and defend ORM 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, ORM and/or NRC as defendants and are part of the overall MDL. On April 8, 2011, ORM 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, ORM and NRC were named as defendants in James and Krista Pearson v. BP Exploration & 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, ORM 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 ORM 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.  The Company is unable to estimate the potential exposure, if any, resulting from this matter but believes it is without merit and does not expect this matter will have a material effect on the Company's consolidated financial position or its results of operations.

On February 18, 2011, Triton Asset Leasing GmbH, Transocean Holdings LLC, Transocean Offshore Deepwater Drilling Inc., and Transocean Deepwater Inc. (collectively “Transocean”) named ORM 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 ORM and NRC the claims in the referenced master complaint that have already been asserted against ORM 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 ORM and NRC for contribution and tort indemnity should they be found liable for any damages in Transocean's Limitation of Liability Act action and ORM and NRC have asserted counterclaims against those same parties for identical relief.  As provided above, the Company is unable to estimate the potential exposure, if any, resulting from these actions but believes they are without merit and does not expect this matter will have a material effect on the

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Company's consolidated financial position or its results of operations.

Separately, on March 2, 2012, the Court announced that BP Exploration & Production Inc. and BP America Production Company (collectively "BP") and the plaintiffs had reached an agreement on the terms of two proposed class action settlements that will resolve, among other things, plaintiffs' economic loss claims and clean-up related claims against BP.  The parties filed their proposed settlement agreements on April 18, 2012 along with motions seeking preliminary approval of the settlements. The Court held a hearing on April 25, 2012 to consider those motions and preliminarily approved both settlements on May 2, 2012.  Although neither the Company, ORM or NRC are parties to the settlement agreements, the Company, ORM and NRC are listed on the releases accompanying both settlement agreements, such that if the settlement agreements are finally approved by the Court as currently drafted, any plaintiffs that settle will be required to release their claims against the Company, ORM and NRC.  The opt-out period for the proposed settlement closes on October 1, 2012 and a final fairness hearing to consider whether the settlements should be finally approved is scheduled for November 8, 2012.

In the course of the Company's business, it may agree to indemnify a party.  If the indemnified party makes a successful claim for indemnification, the Company would be required to reimburse that party in accordance with the terms of the indemnification agreement.  Indemnification agreements generally are subject to threshold amounts, specified claim periods and other restrictions and limitations. 

In connection with the disposition of the SES Business on March 16, 2012, the Company remains contingently liable for certain obligations of the SES Business, including potential liabilities relating to work performed in connection with the Deepwater Horizon oil spill response.  These potential liabilities may not exceed the purchase consideration received by the Company for the SES Business and the Company currently is indemnified under contractual agreements with BP.

ORM, a subsidiary of the Company, is defending against five collective action lawsuits, each asserting failure to pay overtime with respect to individuals who provided service on the Deepwater Horizon spill response (the “DPH FLSA Actions”) under the Fair Labor Standards Act (“FLSA”).  Four of the cases - Dennis Prejean v. O'Brien's Response Management, Inc. (E.D. La., Case No.: 2:12-cv-01045) (the “Prejean Action”); Baylor Singleton et. al. v. O'Brien's Response Management Inc., et. al. (E.D. La., Case No.: 2:12-cv-01716) (the “Singleton Action”); Himmerite et al. v. O'Brien's Response Management Inc. et al. (E.D. La., Case No.: 2:12-cv-01533) (the “Himmerite Action”); and Chann Chavis v. O'Brien's Response Management Inc. et al. (S.D. Tx., Case No.: 4:12-cv-02045) (the “Chavis Action”) - were each brought on behalf of certain individuals who worked on the Deepwater Horizon oil spill response and who were classified as independent contractors.  The Prejean, Himmerite and Singleton Actions were each filed in the United States District Court for the Eastern District of Louisiana and then subsequently consolidated with the In re: Oil Spill Multidistrict Litigation (N.D. La., Case No. 10-md-02179) (the “Oil Spill MDL”).  The Himmerite and Singleton Actions have since been automatically stayed pending further scheduling by the Court, pursuant to the procedures in the Oil Spill MDL.  In the Prejean Action, ORM has answered the complaint, a scheduling order has been issued and Plaintiffs have, among other things, filed a Motion for Conditional Certification, which has been stayed pending further scheduling by the Court in accordance with the procedures of the Oil Spill MDL.  The Chavis Action was filed on July 7, 2012 in the United States District Court for the Southern District of Texas, and ORM has not yet responded to or answered the complaint in that matter.  The other DPH FLSA Action, Mark Blackman et. al. v. Midwest Environmental Resources, Inc., et. al. (N.D. Fla., Case No.: 3:11-cv-146) (the “Blackman Action”), was filed by five individual Plaintiffs on March 28, 2011, in the United States District Court for the Northern District of Florida, against ORM and several other Defendants.  The complaint in the Blackman Action alleges that the named Plaintiffs and class of workers they are suing on behalf of, identified in the complaint as “Safety Techs,” were not appropriately compensated for all of their work time in violation of the FLSA.  On July 8, 2011, the Court stayed all proceedings in the Blackman Action.  On May 8, 2012, the Court ruled on various motions to dismiss brought by ORM and by the other Defendants, denying them in part, granting them in part, and providing the Plaintiffs with leave to amend the complaint.  On June 6, 2012, Plaintiffs filed an amended complaint and on June 20, 2012, Defendant ORM answered the amended complaint, denying all of the Plaintiffs' claims.  On July 6, 2012, the Court issued a scheduling order setting discovery and dispositive motion deadlines.  The Company is unable to estimate the potential exposure, if any, resulting from any of the five DPH FLSA Actions, but believes they are without merit and will continue to vigorously defend against them.

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 that exposure could occur, but the Company does not expect such changes in estimated costs would have a material effect on the Company's consolidated financial position or its results of operations.

In 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

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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.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For a discussion of the Company’s exposure to market risk, refer to Item 7A, Quantitative and Qualitative Disclosures about Market Risk, contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011. There has been no significant change in the Company’s exposure to market risk during the Current Six Months, except as described below.

As of June 30, 2012, the Company had capital purchase commitments of €110.8 million ($139.3 million). An adverse change of 10% in the underlying foreign currency exchange rate would increase the U.S. dollar equivalent of these non-hedged purchase commitments by $9.0 million, net of tax.

As of June 30, 2012, Era Group Inc., a subsidiary of the Company, had outstanding variable rate borrowings of $260.0 million under the terms of its senior secured revolving credit facility. The average borrowing rate as of June 30, 2012 was 3.4%. An adverse change of 10% in the underlying rate would result in additional annual interest expense of $0.1 million, net of tax.

ITEM 4.
CONTROLS AND PROCEDURES

With the participation of the Company’s principal executive officer and principal financial officer, management evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of June 30, 2012. Based on their evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2012.

There have been no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the Current Year Quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. During the Current Year Quarter, the Company implemented a newer version of its financial information technology system. This implementation was subject to thorough testing and review before and after the final implementation with no significant impact on our underlying internal controls over financial reporting.


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PART II—OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS

For a description of developments with respect to pending legal proceedings described in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2011, see Part I, Item II, "Management's Discussion and Analysis of Financial Condition and Results of Operations-Contingencies".

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

(c)
This table provides information with respect to purchases by the Company of shares of its Common Stock during the Current Year Quarter:
Period
Total Number  Of
Shares
Purchased
 
Average Price  Paid
Per Share(1)
 
Total Number of Shares
Purchased as Part of
Publicly  Announced
Plans or Programs
 
Maximum Value of
Shares that may Yet be
Purchased under  the
Plans or Programs(2)
April 1 – 30, 2012
—

 
$
—

 
—

 
$
150,000,000

May 1 – 31, 2012
199,766

 
$
87.22

 
—

 
$
132,576,597

March 1 – 31, 2012
—

 
$
—

 
—

 
$
132,576,597

 ______________________
(1)
Excludes commissions of $6,143 or $0.03 per share.
(2)
Since February 1997, SEACOR’s Board of Directors authorized the repurchase of Common Stock, certain debt or a combination thereof. From time to time thereafter, and most recently on January 18, 2012, SEACOR's Board of Directors increased the authority to repurchase Common Stock.

ITEM 4.
MINE SAFETY DISCLOSURES

Not applicable.

ITEM 6.
EXHIBITS
 
31.1
 
Certification by the Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
 
 
31.2
 
Certification by the Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
 
 
32.1
 
Certification by the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
32.2
 
Certification by the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
101.INS**
 
XBRL Instance Document
 
 
101.SCH**
 
XBRL Taxonomy Extension Schema
 
 
101.CAL**
 
XBRL Taxonomy Extension Calculation Linkbase
 
 
101.DEF**
 
XBRL Taxonomy Extension Definition Linkbase
 
 
101.LAB**
 
XBRL Taxonomy Extension Label Linkbase
 
 
101.PRE**
 
XBRL Taxonomy Extension Presentation Linkbase
______________________ 
**
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
 
 
SEACOR Holdings Inc. (Registrant)
 
 
 
 
DATE:
July 27, 2012
By:
 
/S/ CHARLES FABRIKANT
 
 
 
 
Charles Fabrikant, Executive Chairman of the Board
(Principal Executive Officer)
 
 
 
 
DATE:
July 27, 2012
By:
 
/S/ RICHARD RYAN
 
 
 
 
Richard Ryan, Senior Vice President
and Chief Financial Officer
(Principal Financial Officer)


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EXHIBIT INDEX

31.1
 
Certification by the Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
 
 
31.2
 
Certification by the Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
 
 
32.1
 
Certification by the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
32.2
 
Certification by the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
101.INS**
 
XBRL Instance Document
 
 
101.SCH**
 
XBRL Taxonomy Extension Schema
 
 
101.CAL**
 
XBRL Taxonomy Extension Calculation Linkbase
 
 
101.DEF**
 
XBRL Taxonomy Extension Definition Linkbase
 
 
101.LAB**
 
XBRL Taxonomy Extension Label Linkbase
 
 
101.PRE**
 
XBRL Taxonomy Extension Presentation Linkbase
______________________ 
**
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.


52