SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~March 31,~~June 30, 2005

Commission File Number: 0-28732

SEABULK INTERNATIONAL, INC.


State of Incorporation: Delaware				I.R.S. Employer I.D.: 65-0966399

Address and Telephone Number:
2200 Eller Drive
P.O. Box 13038
Ft. Lauderdale, Florida 33316
(954) 523-2200

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 twelve 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 ninety days. YESþ NOo

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YESo NOþ

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. YESþ NOo

There were ~~23,619,873~~100 shares of Common Stock, par value $0.01 per share, outstanding at ~~May 2,~~August 8, 2005.

The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced disclosure format.

SEABULK INTERNATIONAL, INC.

FORM 10-Q

Table of Contents


Item			Page
Part I. Financial Information

Item 1. Condensed Consolidated Financial Statements (Unaudited)		1

	Condensed Consolidated Balance Sheets ~~at March 31,~~as of June 30, 2005 and December 31, 2004		1

	Condensed Consolidated Statements of Operations for the three and six months ended ~~March 31,~~June 30, 2005 and 2004		2

	Condensed Consolidated Statements of Cash Flows for the ~~three~~six months ended ~~March 31,~~June 30, 2005 and 2004		3

	Notes to Condensed Consolidated Financial Statements		4

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		1921

Item 4. Controls and Procedures		27

Part II. Other Information

Item ~~3. Quantitative and Qualitative Disclosures of Market Risk~~1. Legal Proceedings		28

Item ~~4. Controls~~2. Changes in Securities and ~~Procedures~~Use of Proceeds		2928

~~Part II. Other Information~~Item 3. Defaults upon Senior Securities		28

Item 4. Submission of Matters to a Vote of Security Holders		28

Item ~~1. Legal Proceedings~~5. Other Information		28

Item 6. Exhibits and Reports on Form 8-K		28

Signature		30

~~Item 2. Changes in Securities~~			30

~~Item 3. Defaults upon Senior Securities~~			30

~~Item 4. Submission of Matters to a Vote of Security Holders~~			30

~~Item 5. Other Information~~			30

~~Item 6. Exhibits and Reports on Form 8-K~~			30

~~Signature~~			32

Certifications		3331
~~Rule 302 PEO Certification~~Fourth Supplemental Credit Agreement
~~Rule 302 PFO Certification~~Fourth Supplemental Subsidiary Guarantee Agreement
~~Rule 906 PEO Certification~~Fifth Supplemental Credit Agreement
~~Rule~~Fifth Supplemental Subsidiary Guarantee Agreement
Amend No. 4 to Executive Employment Agreement
Amend No. 5 to Executive Employment Agreement
Amend No. 1 to Executive Defferred Compensation Plan
Amend No.1 to Stock Option Plan for Directors
Specimen of Amend No. 2 - Non-Qualified Stock Option
Amend No1 to Amended & Restated Equity Ownership Plan
Specimen of Amend No.2 to Severance Agreement
Section 302 Certification of Principal Executive Officer
Section 302 Certification of Principal Financial Officer
Section 906 ~~PFO~~ Certification of Principal Executive Officer
Section 906 Certification of Principal Financial Officer

As used in this Report, the term “Parent” means Seabulk International, Inc., and the term “Company” means the Parent and/or one or more of its consolidated subsidiaries.

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Seabulk International, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except par value data)


	March 31,			December 31,			June 30,			December 31,
	2005			2004			2005			2004
Assets
Current assets:
Cash and cash equivalents	$	31,310		$	18,949		$	27,442		$	18,949
Restricted cash		30,350			35,681			32,258			35,681
Trade accounts receivable, net of allowance for doubtful accounts of $5,881 and $5,649 in 2005 and 2004, respectively		51,848			55,209
Trade accounts receivable, net of allowance for doubtful accounts of $6,854 and $5,649 in 2005 and 2004, respectively								51,437			55,209
Other receivables		4,121			3,784			3,774			3,784
Marine operating supplies		8,081			7,868			7,668			7,868
Prepaid expenses and other		4,163			3,627			3,929			3,627

Total current assets		129,873			125,118			126,508			125,118

Vessels and equipment, net		596,626			598,793			590,943			598,793
Deferred costs, net		41,976			45,053			40,493			45,053
Other		21,173			17,824			26,318			17,824

Total assets	$	789,648		$	786,788		$	784,262		$	786,788


Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	10,126		$	14,918		$	9,858		$	14,918
Current maturities of long-term debt		16,429			16,653			15,661			16,653
Current obligations under capital leases		3,531			3,708			3,354			3,708
Accrued interest		6,265			4,875			5,633			4,875
Accrued liabilities and other		35,333			35,321			33,962			35,321

Total current liabilities		71,684			75,475			68,468			75,475

Long-term debt		323,714			325,965			309,353			325,965
Senior notes		148,006			152,906			154,219			152,906
Obligations under capital leases		27,841			28,568			27,097			28,568
Other liabilities		7,663			4,879			6,150			4,879

Total liabilities		578,908			587,793			565,287			587,793

Commitments and contingencies

Stockholders’ equity:
Preferred stock, no par value-authorized 5,000; issued and outstanding, none		—			—			—			—
Common stock–$.01 par value, authorized 40,000 shares; 23,620 and 23,446 shares issued and outstanding in 2005 and 2004, respectively		236			234
Common stock-$.01 par value, authorized 40,000 shares; 23,436 and 23,446 shares issued and outstanding in 2005 and 2004, respectively								234			234
Additional paid-in capital		261,746			259,843			261,799			259,843
Accumulated other comprehensive income		31			55			—			55
Unearned compensation		(2,074	)		(758	)		(1,880	)		(758	)
Accumulated deficit		(49,199	)		(60,379	)		(41,178	)		(60,379	)

Total stockholders’ equity		210,740			198,995			218,975			198,995

Total liabilities and stockholders’ equity	$	789,648		$	786,788		$	784,262		$	786,788

See notes to condensed consolidated financial statements.

Seabulk International, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except per share data)


	Three Months Ended						Three Months Ended						Six Months Ended
	March 31,						June 30,						June 30,
	2005			2004			2005			2004			2005			2004
Revenue	$	95,581		$	82,534		$	96,687		$	87,203		$	192,268		$	169,737
Vessel and voyage expenses:
Crew payroll and benefits		22,600			22,581			23,072			21,697			45,672			44,278
Charter hire		4,892			3,587			4,375			3,944			9,267			7,531
Repairs and maintenance		4,645			6,198			5,760			7,974			10,405			14,172
Insurance		3,181			2,620			3,324			3,704			6,505			6,324
Fuel and consumables		7,283			7,015			7,073			7,795			14,356			14,810
Port charges and other		5,326			4,906			6,222			5,080			11,548			9,986

		47,927			46,907			49,826			50,194			97,753			97,101

General and administrative		9,568			9,425			12,041			9,323			21,609			18,748
Depreciation, amortization and drydocking		16,520			15,790			16,577			17,127			33,097			32,917
Loss on disposal of assets, net		130			12
Gain on disposal of assets, net								(453	)		(1,989	)		(323	)		(1,977	)

Income from operations		21,436			10,400			18,696			12,548			40,132			22,948
Other income (expense):
Interest expense		(9,426	)		(8,069	)		(9,259	)		(8,375	)		(18,685	)		(16,444	)
Interest income		146			66			167			52			313			118
Minority interest in losses of subsidiaries		—			78
Minority interest in (gains) losses of subsidiaries								—			(20	)		—			58
Other, net		(8	)		4,524			41			52			33			4,576

Total income (expense), net		(9,288	)		(3,401	)
Total other expense, net								(9,051	)		(8,291	)		(18,339	)		(11,692	)

Income before provision for income taxes		12,148			6,999			9,645			4,257			21,793			11,256
Provision for income taxes		968			1,349			1,624			1,536			2,592			2,885

Net income	$	11,180		$	5,650		$	8,021		$	2,721		$	19,201		$	8,371


Net income per common share:
Net income per common share — basic	$	0.48		$	0.24		$	0.34		$	0.12		$	0.82		$	0.36

Net income per common share — diluted	$	0.46		$	0.24		$	0.33		$	0.12		$	0.79		$	0.35


Weighted average common shares outstanding — basic		23,327			23,249			23,366			23,261			23,347			23,255

Weighted average common shares outstanding — diluted		24,273			23,795			24,527			23,598			24,400			23,696

See notes to condensed consolidated financial statements.

Seabulk International, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)


	Three Months Ended
	March 31,
	2005			2004			Six Months Ended
				(as restated,			June 30,
				see Note 1)			2005			2004
Operating activities:
Net income	$	11,180		$	5,650		$	19,201		$	8,371
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of vessels and equipment		9,903			9,900
Depreciation of vessels and equipment								19,928			20,222
Expenditures for drydocking		(3,943	)		(4,628	)		(9,457	)		(10,473	)
Amortization of drydocking costs		6,617			5,890			13,169			12,695
Amortization of discount on long-term debt and financing costs		418			412			825			857
Amortization of unearned compensation		194			—			388			—
Provision for bad debts		432			1,643			1,405			1,631
Loss on disposal of assets		130			12
Gain on disposal of assets, net								(323	)		(1,977	)
Minority interest in losses of subsidiaries		—			(78	)		—			(58	)
Other		—			51			—			119
Changes in operating assets and liabilities:
Trade accounts and other receivables		2,592			1,360			2,377			575
Other current and long-term assets		(9,157	)		(5,465	)		(7,546	)		(4,172	)
Accounts payable and other liabilities		(623	)		(3,264	)		(4,387	)		(6,695	)

Net cash provided by operating activities		17,743			11,483			35,580			21,095

Investing activities:
Proceeds from disposals of assets		2,250			601			5,128			3,145
Purchases of vessels and equipment		(9,973	)		(71,040	)		(16,641	)		(83,533	)
Investment in Joint Venture								—			(240	)

Net cash used in investing activities		(7,723	)		(70,439	)		(11,513	)		(80,628	)

Financing activities:
Proceeds from Amended Credit Facility		—			20,000			—			20,000
Payments on Amended Credit Facility		(5,500	)		—			(15,500	)		—
Proceeds from long-term debt		5,799			49,600			8,130			49,600
Payments of long-term debt		(2,324	)		(843	)		(4,654	)		(3,166	)
Payments of Title XI bonds		(450	)		(450	)		(5,580	)		(3,535	)
Payments of obligations under capital leases		(904	)		(865	)		(1,825	)		(1,725	)
Payments of deferred financing costs related to 2003 Senior Notes and Amended Credit Facility		—			(95	)		—			(285	)
Payments of other deferred financing costs		(6	)		(506	)		(14	)		(683	)
Proceeds from exercise of stock options		395			167			446			167
Decrease (increase) in restricted cash		5,331			(3,617	)
Decrease in restricted cash								3,423			2,043

Net cash provided by financing activities		2,341			63,391
Net cash (used in) provided by financing activities								(15,574	)		62,416

Change in cash and cash equivalents		12,361			4,435			8,493			2,883
Cash and cash equivalents at beginning of period		18,949			7,399			18,949			7,399

Cash and cash equivalents at end of period	$	31,310		$	11,834		$	27,442		$	10,282


Supplemental schedule of non-cash investing and financing activities:
Obligation for fair market value of interest rate swap	$	1,994		$	4,891		$	1,313		$	(3,478	)

See notes to condensed consolidated financial statements.

Seabulk International, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements
~~March 31,~~

June 30, 2005 (Unaudited)

1. Organization and Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with Article 10 of Regulation S-X. The consolidated balance sheet at December 31, 2004 has been derived from the audited financial statements at that date. The unaudited condensed consolidated financial statements and the consolidated balance sheet do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. All adjustments which, in the opinion of management, are considered necessary for ~~the~~a fair presentation of the results of operations for the periods shown are of a normal recurring nature and have been reflected in the unaudited condensed consolidated financial statements. The results of operations for the periods presented are not necessarily indicative of the results expected for the full fiscal year or for any future period. The information included in these unaudited condensed consolidated financial statements should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this report and the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K and Form 10-K/A Amendment No. 1 for the fiscal year ended December 31, 2004. For the ~~three~~six months ended ~~March 31,~~June 30, 2005 and 2004, the Company’s components of comprehensive income include net income and a foreign currency forward contract for approximately ~~$24,000. For~~$55,000 and $84,000, respectively. As of June 30, 2005, the ~~three months ended March 31, 2004, except for net income, the Company had no material components of comprehensive income.~~

~~Certain financial statement reclassifications have been made to conform prior period data to the 2005 financial statement presentation.~~

The Company recently reviewed its financial statement presentation and disclosure in response to comments received from the staff of the Securities and Exchange Commission (the “SEC”) in a normal periodic review of the Company’s filings. As a result, the Company is restating the accompanying 2004 condensed consolidated statement of cash flows to classify expenditures for drydocking of $4.6 million as an operating activity rather than an investing activity.

foreign currency forward contract was expired.

2. Merger

On March 16, 2005, SEACOR Holdings Inc., a Delaware corporation (“SEACOR”), entered into a merger agreement (the “Merger Agreement”) with Seabulk International, Inc., a Delaware corporation (“Seabulk” or the “Company”), SBLK Acquisition Corp., a Delaware corporation and a direct, wholly owned subsidiary of SEACOR (“Merger Sub”) and CORBULK LLC, a Delaware limited liability company and a direct, wholly owned subsidiary of SEACOR (“LLC”). The Merger Agreement provides that, upon the terms and subject to the conditions set forth in the Merger Agreement, the Merger Sub will merge with and into Seabulk, with Seabulk continuing as the surviving corporation and a direct, wholly owned subsidiary of SEACOR (the “Merger”). The structure of the Merger could be modified such that Seabulk could merge with and into LLC, with LLC continuing as the surviving entity and a direct, wholly owned subsidiary of SEACOR, depending on the share price of SEACOR stock. As part of the transaction, entities associated with DLJ Merchant Banking Partners III, L.P. and Carlyle/Riverstone Global Energy and Power Fund I, L.P., who collectively ~~own~~owned approximately 75% of Seabulk’s common shares, ~~have~~ entered into an agreement to support the transaction.

At The merger was approved by the stockholders of the Company and SEACOR, and customary conditions, including regulatory approvals, were satisfied. The effective time and ~~as a result~~completion date of the Merger was July 1, 2005. At such time, Seabulk stockholders ~~will be~~were entitled to receive in exchange for each issued and outstanding share of Seabulk common stock (i) $4.00 in cash and (ii) 0.2694 shares of SEACOR common stock. ~~In certain circumstances,~~Based on SEACOR’s closing price of $64.30 on June 30, 2005, the ~~portion~~Company’s stockholders received approximately $21.32 in SEACOR stock and cash for each share of the ~~merger consideration payable in cash may be reduced~~Company’s stock. The Company’s stock ceased trading at the close of business on June 30, 2005 and ~~shares~~the Company began operating as a wholly owned subsidiary of SEACOR common stock, having a value on the closing date equal to the cash reduction, may be substituted therefor. The closing prices of SEACOR and Seabulk shares on Wednesday, March 16, 2005, were $65.28 and $16.73, respectively.beginning July 1, 2005. All outstanding Seabulk stock options ~~will be~~are being assumed by SEACOR. Each such option for Seabulk common stock ~~will then become~~is exercisable for SEACOR common stock under the exchange ratio, plus the cash component.

Seabulk and SEACOR have made customary representations, warranties and covenants in the Merger Agreement. The completion of the Merger is subject to approval by the stockholders of each of Seabulk and SEACOR and the satisfaction of customary conditions, including regulatory approvals. As part of the transaction, entities associated with DLJ Merchant Banking Partners III, L.P. and Carlyle/Riverstone Global Energy and Power Fund I, L.P., who collectively own approximately 75% of Seabulk’s common shares, have entered into an agreement to support the transaction.

The Merger Agreement contains certain termination rights for both SEACOR and Seabulk and further provides that, upon termination of the Merger Agreement under specified circumstances, Seabulk may be required to pay SEACOR a termination fee of up to $21.3 million and SEACOR may be required to pay Seabulk a termination fee of up to $5 million.

On April 22, 2005, the Company announced the early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act, thereby satisfying one of the key conditions to the completion of the merger.

3. Vessel Purchases ~~Sales~~ and Operations

~~In January~~

During the three months ended March 31, 2005, the Company took delivery of and began to operate ~~the~~~~Seabulk Angra~~~~, an~~two offshore ~~supply vessel, under a time charter with Petrobras in Brazil. The vessel brings the total number of vessels operating in the Brazil market to three under charter with Petrobras.~~

~~In January 2005, the Company took delivery of and began to operate the~~~~Seabulk Carmen~~~~, a supply boat, in the U.S. Gulf of Mexico.~~vessels. The transaction to acquire one of the~~Seabulk Carmen~~ offshore vessels was a like-kind exchange of assets of equal value and was a tax-free transaction to the Company, in which the Company delivered ~~three older crew boats and one older geophysical vessel~~four offshore vessels in exchange for one offshore vessel.

Additionally, during the~~Seabulk Carmen~~.

In three months ended March 31, 2005, the Company sold ~~the~~~~Seabulk Veritas~~~~, an~~two offshore ~~support vessel operating in the U.S. Gulf of Mexico. Proceeds from the sale of the vessel were $200,000. The gain on the sale of the vessel was approximately $45,000.~~

~~In March 2005, the Company sold the~~~~Seabulk Neptune~~~~, an anchor handling tug operating in West Africa. Proceeds from the sale of the vessel were approximately $200,000. The loss on the sale of the vessel was approximately $148,000.~~

~~In March 2005, the Company delivered the~~~~Seabulk Winn~~,vessels and exchanged a ~~crew boat operating in the U.S. Gulf of Mexico,~~third and $550,000 ~~in exchange~~ for ~~the~~~~C/Crusader~~~~, a supply boat,~~another offshore vessel and the assignment of a purchase and sale agreement. The Company subsequently sold the~~C/Crusader~~ offshore vessel under the terms of the assigned purchase and sale ~~agreement for proceeds of approximately $1.9 million.~~agreement. The transaction was a like-kind exchange of assets of equal value and was a tax free-transaction to the Company.

Proceeds from the sales of the vessels were approximately $2.3 million and the net loss on the sales of the vessels was approximately $103,000.

During the three months ended June 30, 2005, the Company sold four offshore vessels. Proceeds from the sales of the vessels were approximately $2.9 million and the net gain on the sales of the vessels was approximately 449,000.

Management continues to implement its initiative to sell unprofitable vessels and add newer more efficient vessels to its fleet in an effort to improve profitability and liquidity.

In June 2005, the Company sold theSeabulk Freedom, a special purpose maintenance vessel operating in Southeast Asia to an unrelated third party (the “Buying Entity”) for the purpose of establishing a presence in the Malaysian market. The Company delivered the vessel, with a carrying value of approximately $0.7 million, as of June 30, 2005, in exchange for a $3.5 million note receivable and a ship management agreement from the Buying Entity. The ship management agreement stipulates that the Company is responsible for any operating deficits and capital improvements and calls for the note receivable plus accrued interest to be paid from the vessel revenues in excess of operating costs, management fees and commissions. The Buying Entity subsequently placed the vessel under the

Malaysia flag and began a charter in Malaysia on June 30, 2005. Based on the terms of the sale and the ship management agreement, the Company determined the Buying Entity is a variable interest entity as defined in Financial Accounting Standards Board (“FASB”) Interpretation No. 46(R)Consolidation of Variable Interest Entities (revised December 2003) — an interpretation of ARB No. 51(“FIN No. 46(R)”). Therefore, in accordance with FIN No. 46(R), the Company is required to consolidate the financial position and results of operations of the Buying Entity and is precluded from recording a gain on the sale of the vessel. The accompanying condensed consolidated financial statements include the financial position and results of operations of the Buying Entity in accordance with FIN No. 46(R).

In May 2005, the Company exercised existing options at Labroy Shipbuilding and Engineering Pte. Ltd. for the construction of four additional anchor handling tug supply vessels for its international offshore fleet, bringing the total number of vessels under construction to eight. The total remaining commitment, as of June 30, 2005, for the eight vessel package is approximately $81.9 million. The vessels have various delivery dates beginning in early 2006 through early 2007.

4. Income Taxes

The current provision for income taxes for the three and six-month periods ended June 30, 2005 and 2004 represents expected tax obligations on foreign-source revenue. For the three and six months ended ~~March 31,~~June 30, 2005 and 2004, a domestic tax provision was computed using an estimated annual effective tax rate of 35%. A corresponding reduction in the valuation allowance was ~~recorded.~~recorded resulting in no net domestic provision. Management has recorded a valuation allowance at ~~March 31,~~June 30, 2005 and 2004 to reduce the net deferred tax assets to an amount that is likely to be realized. After application of the valuation allowance, the net deferred tax assets are zero. The current provision for income taxes for the three-month period ended March 31, 2005 represents expected tax obligations on foreign-source revenue and includes a benefit of $0.5 million related to the acceptance by the Internal Revenue Service of the Company’s refund request related to the 1997 tax year. The current provision for income taxes for the three-month period ended March 31, 2004 represents expected tax obligations on foreign-source revenue.

5. Net Income per Common Share

The following table sets forth the computation of basic and diluted net income per share for the periods indicated:


	Three Months Ended
	March 31,				Three Months Ended					Six Months Ended
	2005		2004			June 30,					June 30,
	(in thousands, except					2005		2004			2005		2004
	per share data)					(in thousands, except for per share data)
Numerator for basic and diluted net income per share:
Net income available to common shareholders	$	11,180	$	5,650		$	8,021	$	2,721		$	19,201	$	8,371


Denominator for basic net income per share-weighted average shares		23,327		23,249			23,366		23,261			23,347		23,255

Effects of dilutive securities:
Stock options		691		337			845		139			768		238
Warrants		157		159			155		159			156		159
Restricted shares		98		50			161		39			129		44

Dilutive potential common shares		946		546			1,161		337			1,053		441

Denominator for diluted net income per share-adjusted weighted average shares and assumed conversions		24,273		23,795			24,527		23,598			24,400		23,696


Net income per share – basic	$	0.48	$	0.24
Net income per share — basic						$	0.34	$	0.12		$	0.82	$	0.36


Net income per share – diluted	$	0.46	$	0.24
Net income per share — diluted						$	0.33	$	0.12		$	0.79	$	0.35

The weighted average diluted common shares outstanding for the three and six months ended ~~March 31,~~June 30, 2004 excludes ~~74,000~~344,000 options as these common stock equivalents are antidilutive.

6.6. Segment and Geographic Data

The Company organizes its business principally into three segments. The Company does not have significant intersegment transactions. These segments and their respective operations are as follows:

Offshore Energy Support(Seabulk Offshore) –— Offshore energy support includes vessels operating in U.S. and foreign locations used primarily to transport materials, supplies, equipment and personnel to drilling rigs and to support the construction, positioning and ongoing operations of oil and gas production platforms.

Marine Transportation Services(Seabulk Tankers) –— Marine transportation services includes 10 U.S.-flag product tankers and two foreign-flag product tankers. The U.S.-flag oceangoing vessels are used to transport petroleum, chemicals, and crude products, primarily from chemical manufacturing plants, refineries and storage facilities along the U.S. Gulf Coast to industrial users and distribution facilities in and around the Gulf of Mexico, Atlantic and Pacific Coast ports. Certain of the vessels also transport crude oil within Alaska and among Alaska, the Pacific Coast and Hawaiian ports. One U.S.-flag vessel and the two foreign-flag vessels operate in the foreign trade.

Towing(Seabulk Towing) –— Harbor and offshore towing services are provided by tugs to vessels utilizing the ports in which the tugs operate, and to vessels at sea to the extent required by offshore commercial contract opportunities and by environmental regulations, casualty or other emergencies.

The Company evaluates performance by operating segment. Within the offshore energy support segment, the Company conducts additional performance evaluations of vessels marketed in U.S. and foreign locations. Resources are allocated based on segment profit or loss from operations, before interest and taxes.

Revenue by segment and geographic area consists only of services provided to external customers as reported in the ~~Statements~~condensed consolidated statements of ~~Operations.~~operations. Income from operations by geographic area represents net revenue less applicable costs and expenses related to that revenue.

The following schedule presents segment and geographic information about the Company’s operations (in thousands):


	Three Months Ended						Three Months Ended						Six Months Ended
	March 31,						June 30,						June 30,
	2005			2004			2005			2004			2005			2004
Revenue
Offshore energy support	$	45,347		$	39,583		$	48,843		$	41,173		$	94,190		$	80,756
Marine transportation services		38,659			33,462			37,062			36,408			75,721			69,870
Towing		11,654			9,578			10,894			9,759			22,548			19,337
Eliminations⁽¹⁾		(79	)		(89	)		(112	)		(137	)		(191	)		(226	)

Total	$	95,581		$	82,534		$	96,687		$	87,203		$	192,268		$	169,737


Vessel and voyage expenses
Offshore energy support	$	24,329		$	25,205		$	24,887		$	25,595		$	49,216		$	50,800
Marine transportation services		17,561			16,853			18,720			18,495			36,281			35,348
Towing		6,116			4,938			6,331			6,241			12,447			11,179
Eliminations⁽¹⁾		(79	)		(89	)		(112	)		(137	)		(191	)		(226	)

Total	$	47,927		$	46,907		$	49,826		$	50,194		$	97,753		$	97,101


Depreciation, amortization and drydocking
Offshore energy support	$	8,840		$	9,545		$	8,937		$	9,746		$	17,779		$	19,291
Marine transportation services		6,596			5,294			6,485			6,390			13,080			11,684
Towing		1,013			885			1,083			923			2,095			1,808
General corporate		71			66			72			68			143			134

Total	$	16,520		$	15,790		$	16,577		$	17,127		$	33,097		$	32,917


Income (loss) from operations
Offshore energy support	$	7,916		$	(902	)	$	10,752		$	3,356		$	18,669		$	2,454
Marine transportation services		13,637			10,445			11,000			10,678			24,637			21,123
Towing		3,078			2,494			2,204			1,464			5,281			3,958
General corporate		(3,195	)		(1,637	)		(5,260	)		(2,950	)		(8,455	)		(4,587	)

Total	$	21,436		$	10,400		$	18,696		$	12,548		$	40,132		$	22,948


Net income (loss)
Offshore energy support	$	2,700		$	(5,113	)	$	5,447		$	(964	)	$	8,147		$	(6,077	)
Marine transportation services		8,969			6,167			6,385			5,989			15,354			12,156
Towing		2,185			1,727			1,418			689			3,603			2,416
General corporate		(2,674	)		2,869
Generalcorporate								(5,229	)		(2,993	)		(7,903	)		(124	)

Total	$	11,180		$	5,650		$	8,021		$	2,721		$	19,201		$	8,371


Geographic revenue
Americas⁽²⁾	$	61,189		$	50,682		$	62,403		$	54,489		$	123,592		$	105,170
Foreign West Africa		21,125			22,246
Foreign
West Africa								21,669			21,793			42,794			44,039
Middle East		7,882			5,838			7,438			7,367			15,320			13,206
Southeast Asia		5,385			3,768			5,177			3,554			10,562			7,322

Consolidated geographic revenue	$	95,581		$	82,534		$	96,687		$	87,203		$	192,268		$	169,737


⁽¹⁾		Eliminations of intersegment towing revenue and intersegment marine transportation ~~operating~~vessel and voyage expenses.

⁽²⁾		Americas consist of vessels operating in the United States, the Gulf of Mexico, South America and the Caribbean.

7. Commitments and Contingencies

Under United States law, “United States persons” are prohibited from business activities and contracts in certain countries, including Sudan and Iran. Relating to the prohibitions, the Company has filed three reports with and submitted documents to the Office of Foreign Asset Control (“OFAC”) of the U.S. Department of Treasury. One of the reports was also filed with the Bureau of Export Administration of the U.S. Department of Commerce. The reports and documents related to certain limited charters with third parties involving three of the Company’s vessels which called in ~~the~~ Sudan for several months in 1999 and January 2000, and charters with third parties involving several of the Company’s vessels which called in Iran in 1998. In March 2003, the Company received notification from OFAC that the case has been referred to its Civil Penalties Division. Should OFAC determine that these activities constituted violations of the laws or regulations, civil penalties, including fines, could be assessed against the Company and/or certain individuals who knowingly participated in such activities. The Company cannot predict the extent of such penalties; however, management does not believe the outcome of these matters will have a material impact on its financial position or results of operations.

The Company was sued by Maritime Transport Development Corporation (“MTDC”) in January 2002 in Florida state court in Broward County alleging broker commissions due since 1998 from charters on three of its vessels, theSeabulk Magnachem, Seabulk ChallengerandSeabulk Pride,under an alleged broker commission agreement. MTDC was controlled by the founders of our predecessor company. The claim allegedly continues to accrue. The amount alleged to be due is over $800,000, but is subject to offset claims and defenses by the Company. The Company is vigorously defending such charges, but the Company cannot predict the ultimate outcome.

As of February 20, 2004, the Company switched its mutual protection and indemnity (“P&I”) marine insurance policies from Steamship Mutual (“Steamship”) to West of England Association (“West of England”). Under the Company’s P&I policies, the Company could be liable for additional premiums to cover investment losses and reserve shortfalls experienced by its marine insurance clubs; however, additional premiums can only be assessed for open policy years. Steamship and West of England close a policy year three years after the policy year has ended. Completed policy years 2002 and 2003 are still open for Steamship and policy year 2004 is open for West of England. There have been no additional premiums assessed for these policy years and the Company believes it is unlikely that additional premiums for those policy years will be assessed. The Company will record a liability for any such additional premiums if and when they are assessed and the amount can be reasonably estimated.

In order to cover potential future additional insurance calls made by Steamship for the 2002 and 2003 policy years, the Company was required to post a letter of credit in the amount of approximately $1.9 million to support such potential additional calls as a condition toof its departure from Steamship. The letter of credit will be returned if no additional insurance calls are made. Potential claims liabilities are recorded as insurance expense reserves when they become probable and can be reasonably estimated.

P&I insurance premiums were approximately ~~$2.1~~$1.7 million and ~~$1.5~~$2.6 million for the three months ended ~~March 31,~~June 30, 2005 and 2004, respectively. The Company’s hull and machinery insurance renewed in October ~~2004.~~2004, and was renegotiated again in July 2005 as a consequence of the Merger with SEACOR. The hull and machinery policy years will now run from July 1 to June 30. Additionally, the Company maintains high levels of self-insurance for P&I and hull and machinery risks through the use of substantial deductibles and self-insured retentions. Also as a consequence of the Merger with SEACOR, in July 2005, the P&I coverage was split between three different P&I clubs, one of which will insure the Company’s

international offshore fleet, one will insure the Company’s domestic offshore fleet and one the Company’s tanker fleet.

From time to time, the Company is party to personal injury and property damage claims litigation arising in the ordinary course of ~~our~~ business. Protection and indemnity marine liability insurance covers large claims in excess of the substantial deductibles and self-insured retentions.

8. Stock-Based Compensation

As permitted by Statement of Financial Accounting Standards No. 123,Accounting for Stock-Based Compensation(“SFAS No. 123”), the Company has elected to follow Accounting Principles Board Opinion No. 25,Accounting for Stock Issued to Employees(“APB No. 25”) and related interpretations in accounting for its employee stock-based transactions and has complied with the disclosure requirements of SFAS No. 123. Under APB No. 25, compensation expense is calculated at the time of option grant based upon the difference between the exercise prices of the option and the fair market value of the Company’s common stock at the date of grant recognized over the vesting period.

The Company uses the Black-Scholes option valuation model to determine the fair value of options granted under the Company’s stock option plans. Had compensation expense for the stock option grants been determined based on the fair value at the grant date for awards consistent with the methods of SFAS No. 123, the Company’s net income would have decreased to the pro forma amounts presented below:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2005			2004			2005			2004
Net income, as reported	$	8,021		$	2,721		$	19,201		$	8,371
Stock-based compensation expense determined under the fair value method	$	(468	)	$	(194	)	$	(916	)	$	(570	)

Pro forma net income	$	7,553		$	2,527		$	18,285		$	7,801


Net income per common share:
Basic-as reported	$	0.34		$	0.12		$	0.82		$	0.36

Basic-pro forma	$	0.32		$	0.11		$	0.78		$	0.34


Diluted-as reported	$	0.33		$	0.12		$	0.79		$	0.35

Diluted-pro forma	$	0.31		$	0.11		$	0.75		$	0.33

Three Months Ended
March 31,
2005 2004
Net income, as reported $ 11,180 $ 5,650

Stock-based compensation expense determined under the fair value method (447 ) (376 )

Pro forma net income $ 10,733 $ 5,274

Net income per common share:
Basic-as reported $ 0.48 $ 0.24

Basic-pro forma $ 0.46 $ 0.23

Diluted-as reported $ 0.46 $ 0.24

Diluted-pro forma $ 0.44 $ 0.22

Effective October 14, 2004, the Company amended the stock option agreements for all of the vested and unvested awards, whereby the option exercise period was extended from 12 months to 36 months in the event of termination within two years of a change in control, as defined in the plan. In accordance with FASB Interpretation No. 44Accounting for Certain Transactions involving Stock Compensation, the amendment to the agreements is considered a modification of the award and accordingly the intrinsic value of the option award shall be measured at the date of the modification and any intrinsic value in excess of the amount measured at the original measurement date shall be recognized as compensation cost if the separation event occurs. As of December 31, 2004 the intrinsic value in excess of the amount measured at the original measurement date was $4.1 million and, if a separation event occurred within two years of a change in control, would be recognized as compensation expense in the accompanying condensed consolidated statement of operations.

9. Recent Accounting Pronouncements

In December 2004, the ~~Financial Accounting Standards Board (“FASB”)~~FASB issued Statement of Financial Accounting Standards No. 123 (revised 2004),Share-Based Payment(“SFAS No. 123R”), which requires companies to expense in their consolidated statements of operations the estimated fair value of employee stock options and similar awards. The Company currently uses the intrinsic value method to value stock options, and accordingly, no compensation expense has been recognized for stock options since the Company grants stock options with exercise prices equal to or greater ~~that~~than the Company’s common stock market price on the date of the grant. The Company will adopt the provisions of SFAS No. 123R using the modified prospective application. Under the modified prospective application, SFAS No. 123R will apply to new awards and to awards that are outstanding on the effective date and are subsequently modified or cancelled. Compensation expense for unvested stock-based awards will be recognized over the remaining vesting period. Depending on the model used to calculate stock-based compensation expense in the future, the implementation of certain other requirements of SFAS No. 123R and additional option grants expected to be made in the future, the pro forma disclosure discussed previously may not be indicative of the stock-based compensation expense that will be recognized in the Company’s future consolidated financial statements. In April 2005, the FASB delayed the implementation of SFAS No. 123R from the next reporting period beginning after June 15, 2005 until the beginning of the Company’s next fiscal year. The Company is in the process of determining the impact adopting SFAS No. 123R will have on its consolidated financial position and consolidated results of operations.

In December 2004, the FASB issued Statement of Financial Accounting Standard No. 153,Exchanges of Nonmonetary Assets(“SFAS No. 153”), an amendment of APB Opinion No. 29,Accounting for Nonmonetary Transactions(“APB No. 29”). APB No. 29 is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of assets exchanged, however certain exceptions apply. SFAS No. 153 amends APB No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. SFAS No. 153 is effective for nonmonetary exchanges occurring in fiscal periods beginning after June 15, 2005. The Company’s adoption of SFAS No. 153 is not expected to have a material impact on the Company’s consolidated financial position and consolidated results of operations.

In May 2005, the FASB issued Statement of Financial Accounting Standard No. 154,Accounting Changes and Error Corrections(“SFAS No. 154”), a replacement of APB Opinion No. 20,Accounting Changes(“APB No. 20”) and SFAS No. 3. SFAS No. 154 eliminates the requirement in APB No. 20 to include the cumulative effect of a change in accounting principle in the income statement of the period of change. Instead, SFAS No. 154 requires that a change in accounting principle be retrospectively applied. Under retrospective application, the new accounting principle is applied as of the beginning of the first period presented as if that principle had always been used. The cumulative effect of the change is reflected in the carrying value of assets and liabilities as of the first period presented and the offsetting adjustments are recorded to opening retained earnings. Each period presented is adjusted to reflect the period-specific effects of applying the change. SFAS No. 154 is effective for accounting changes and corrections of an errors made in fiscal years beginning after December 15, 2005. Early adoption is permitted for accounting changes and corrections of errors made in fiscal years beginning after the date SFAS No. 154 was issued. SFAS No. 154 does not change the transition provisions of any existing accounting pronouncements, including those that are in a transition phase as of the effective date of SFAS No. 154. The Company is in the process of determining the impact adopting SFAS No. 154 will have on its consolidated financial position and consolidated results of operations.

10. Subsequent Events

In July 2005, the Company sold an offshore crew boat operating in the U.S. Gulf and a harbor tug operating in Port Canaveral. Proceeds from the sales of the vessels were $800,000. The loss on the sales of the vessels was approximately $60,000.

Effective July 1, 2005, the Company merged with SEACOR and began operations as a wholly-owned subsidiary of SEACOR (see Note 2). As of July 1, 2005, the effective date of the Merger, Gerhard Kurz, Chairman, CEO and President, and Larry D. Francois, Senior Vice President and President - Seabulk Offshore, resigned from the Company and were paid severance under their respective employment agreements. As a consequence of the Merger, certain terminations, certain employment and severance agreements and the Company’s change in control severance policy in place prior to the effective date of the Merger, were triggered. Additionally, the entire slate of directors of the Company resigned as of the effective date of the Merger, pursuant to the Merger Agreement. The Company expects severance payments of approximately $4.4 million will be incurred in the third quarter.

In addition to the severance and employee termination costs described above, the Company also expects to incur additional expenses in the third quarter as a consequence of the Merger with SEACOR including: approximately $1.3 million to expense certain costs which had been capitalized related to a public offering that the Company was considering prior to the Merger; approximately $1.9 million of unearned compensation related to the release of restrictions on previously issued restricted stock; approximately $1.5 million for investment banking fees contingent upon the completion of the Merger; and insurance premiums for director and officer coverage for approximately $1.2 million.

In July 2005, the Company signed agreements to sell theSeabulk Trustand theSeabulk Reliant, the Company’s two foreign-flag tankers, in separate transactions. TheSeabulk Trustis expected to be delivered to its buyer in August. TheSeabulk Reliantis expected to be delivered to its buyer in September. Both vessels are currently operating in an international product tanker pool.

In July 2005, the Company removed its tanker fleet and its international offshore fleet from the West of England P&I club and placed those fleets into two separate P&I insurance clubs (see Note 7).

11. Supplemental Condensed Consolidated Financial Information

The Restricted Subsidiaries as to which financial information is included in the tables below are subsidiaries of the Company that are subject to the terms and conditions of the Indenture governing the 2003 Senior Notes. Only certain of the Restricted Subsidiaries (representing the domestic restricted subsidiaries and referred to in the Indenture as the “Guarantor Subsidiaries”), jointly and severally guarantee the 2003 Senior Notes, on a senior unsecured basis. The Non-guarantor Unrestricted Subsidiaries as to which financial information is included in the tables below are the subsidiary entities that own the five U.S.-flag double-hull product tankers which are financed by the U.S. Maritime Administration backed Title XI debt with recourse to the five tankers and the subsidiaries that own them. These entities are designated as “Non-Recourse” or “Unrestricted” subsidiaries under the Indenture and do not guarantee the 2003 Senior ~~Notes.~~

Notes

Supplemental financial information for the Company and its guarantor restricted subsidiaries, non-guarantor restricted subsidiaries and non-guarantor unrestricted subsidiaries under the 2003 Senior Notes is presented below.

Condensed Consolidating Balance Sheet
(in thousands)
As of March 31, 2005
Wholly
Owned Non- Non-
Guarantor Guarantor Guarantor
Restricted Restricted Unrestricted Consolidated
Parent Subsidiaries Subsidiaries Subsidiaries Eliminations Total
Assets

Current assets:
Cash and cash equivalents $ 22,955 $ 986 $ 7,369 $ — $ — $ 31,310
Restricted cash — — 2,756 27,594 — 30,350
Trade accounts receivable, net 366 18,294 30,046 3,142 — 51,848
Other receivables 1,313 2,257 360 191 — 4,121
Marine operating supplies (698 ) 3,178 3,118 2,483 — 8,081
Prepaid expenses and other 1,806 514 1,321 522 — 4,163

Total current assets 25,742 25,229 44,970 33,932 — 129,873

Vessels and equipment, net 54,371 210,543 125,260 206,452 — 596,626
Deferred costs, net 12,902 8,099 13,211 7,764 — 41,976
Investments in affiliates 525,413 — — — (525,413 ) —
Due from affiliates — 50,282 127,080 3,698 (181,060 ) —
Other 5,807 712 1,549 13,105 — 21,173

Total assets $ 624,235 $ 294,865 $ 312,070 $ 264,951 $ (706,473 ) $ 789,648

Liabilities and Stockholders’ Equity

Current liabilities:
Accounts payable $ 938 $ 3,003 $ 6,185 $ — $ — $ 10,126
Current maturities of long-term debt 3,350 7,067 659 5,353 — 16,429
Current obligations under capital leases 1,108 2,423 — — — 3,531
Accrued interest 1,878 161 6 4,220 — 6,265
Accrued liabilities and other 8,265 4,931 19,775 2,362 — 35,333

Total current liabilities 15,539 17,585 26,625 11,935 71,684

Long-term debt 56,688 51,507 14,853 200,666 — 323,714
Senior Notes 148,006 — — — — 148,006
Obligations under capital leases 10,192 17,649 — — — 27,841
Due to affiliates 177,536 — — — (177,536 ) —
Other liabilities 5,534 238 1,846 45 — 7,663

Total liabilities 413,495 86,979 43,324 212,646 (177,536 ) 578,908

Commitments and contingencies — — — — — —

Total stockholders’ equity 210,740 207,886 268,746 49,027 (528,937 ) 210,740

Total liabilities and stockholders’ equity $ 624,235 $ 294,865 $ 312,070 $ 264,951 $ (706,473 ) $ 789,648


														Condensed Consolidating Balance Sheet
	Condensed Consolidating Balance Sheet													(in thousands)
	(in thousands)													As of June 30, 2005
	As of December 31, 2004
			Wholly														Wholly
			Owned		Non-		Non-										Owned		Non-		Non-
			Guarantor		Guarantor		Guarantor										Guarantor		Guarantor		Guarantor
			Restricted		Restricted		Unrestricted					Consolidated					Restricted		Restricted		Unrestricted					Consolidated
	Parent		Subsidiaries		Subsidiaries		Subsidiaries		Eliminations			Total		Parent^(a)			Subsidiaries^(a)		Subsidiaries		Subsidiaries		Eliminations			Total
Assets
Current assets:
Cash and cash equivalents	$	8,265	$	4,983	$	5,701	$	—	$	—		$	18,949	$	21,253		$	2,336	$	3,853	$	—	$	—		$	27,442
Restricted cash		—		—		2,756		32,925		—			35,681		—			—		2,756		29,502		—			32,258
Trade accounts receivable, net		35		17,797		32,207		5,170		—			55,209		(457	)		18,615		32,251		1,028		—			51,437
Other receivables		1,003		2,430		204		147		—			3,784		214			2,549		701		310		—			3,774
Marine operating supplies		79		2,503		2,700		2,586		—			7,868		(1,026	)		3,416		2,849		2,429		—			7,668
Due from affiliates		—		66,330		119,375		3,372		(189,077	)		—
Prepaid expenses and other		2,005		285		1,239		98		—			3,627		1,856			547		1,145		381		—			3,929

Total current assets		11,387		94,328		164,182		44,298		(189,077	)		125,118		21,840			27,463		43,555		33,650		—			126,508

Vessels and equipment, net		46,072		216,200		127,848		208,673		—			598,793		29,442			235,848		121,422		204,231		—			590,943
Deferred costs, net		14,546		6,625		15,438		8,444		—			45,053		7,435			13,591		12,381		7,086		—			40,493
Investments in affiliates		525,588		14,644		364		82,611		(623,207	)		—		562,222			—		—		—		(562,222	)		—
Due from affiliates															—			44,508		137,482		3,855		(185,845	)		—
Other		7,231		813		1,177		8,603		—			17,824		10,606			999		1,560		13,153		—			26,318

Total assets	$	604,824	$	332,610	$	309,009	$	352,629	$	(812,284	)	$	786,788	$	631,545		$	322,409	$	316,400	$	261,975	$	(748,067	)	$	784,262


Liabilities and Stockholders’ Equity

Current liabilities:
Accounts payable	$	4,802	$	1,159	$	8,957	$	—	$	—		$	14,918	$	154		$	3,542	$	6,162	$	—	$	—		$	9,858
Current maturities of long-term debt		3,799		7,065		436		5,353		—			16,653		2,179			7,070		875		5,537		—			15,661
Current obligations under capital leases		1,093		2,615		—		—		—			3,708		1,129			2,225		—		—		—			3,354
Accrued interest		4,008		159		5		703					4,875		4,825			151		5		652		—			5,633
Due to affiliates		161,144		—		—		—		(161,144	)		—
Accrued liabilities and other		8,854		4,676		17,929		3,862		—			35,321		6,847			5,890		18,646		2,579		—			33,962

Total current liabilities		183,700		15,674		27,327		9,918		(161,144	)		75,475		15,134			18,878		25,688		8,768		—			68,468

Long-term debt		57,544		53,275		14,480		200,666		—			325,965		47,022			49,738		14,742		197,851		—			309,353
Senior Notes		152,906		—		—		—		—			152,906
Senior notes															154,219			—		—		—		—			154,219
Obligations under capital leases		10,476		18,092		—		—		—			28,568		9,899			17,198		—		—		—			27,097
Due to affiliates		—		27,935		—		—		(27,935	)		—		182,671			—		—		—		(182,671	)		—
Other liabilities		2,851		242		1,740		46		—			4,879		3,625			557		1,922		46		—			6,150

Total liabilities		407,477		115,218		43,547		210,630		(189,079	)		587,793		412,570			86,371		42,352		206,665		(182,671	)		565,287


Commitments and contingencies

Total stockholders’ equity		197,347		217,392		265,462		141,999		(623,205	)		198,995		218,975			236,038		274,048		55,310		(565,396	)		218,975

Total liabilities and stockholders’ equity	$	604,824	$	332,610	$	309,009	$	352,629	$	(812,284	)	$	786,788	$	631,545		$	322,409	$	316,400	$	261,975	$	(748,067	)	$	784,262


^(a)		In June 2005, certain vessels owned by Parent were contributed to newly created and existing entities. Subsequent to the contributions by Parent all entities which received vessels are Wholly Owned Guarantor Restricted Subsidiaries.

��
Condensed Consolidating Statement of Operations
(in thousands)
Three Months Ended March 31, 2005
Wholly Non-Wholly
Owned Owned Non- Non-
Guarantor Guarantor Guarantor Guarantor
Restricted Restricted Restricted Unrestricted Consolidated
Parent Subsidiaries Subsidiaries^(a) Subsidiaries Subsidiaries Eliminations Total
Revenue $ 11,827 $ 30,504 $ — $ 35,240 $ 18,089 $ (79 ) $ 95,581

Vessel and voyage expenses 6,589 15,704 — 18,306 7,407 (79 ) 47,927
General and administrative 3,473 2,401 — 3,263 431 — 9,568
Depreciation, amortization and drydocking 2,294 5,082 — 6,365 2,779 — 16,520
(Gain) loss on disposal of assets, net — (18 ) — 148 — — 130

Income (loss) from operations (529 ) 7,335 7,158 7,472 21,436
Other expense (449 ) (2,770 ) — (2,399 ) (3,670 ) — (9,288 )

Income (loss) before income taxes (978 ) 4,565 — 4,759 3,802 — 12,148
Provision for income taxes (507 ) — — 1,475 — — 968

Net income (loss) $ (471 ) $ 4,565 $ — $ 3,284 $ 3,802 $ — $ 11,180


	Condensed Consolidating Balance Sheet
	(in thousands)
	As of December 31, 2004
			Wholly
			Owned		Non-		Non-
			Guarantor		Guarantor		Guarantor
			Restricted		Restricted		Unrestricted					Consolidated
	Parent		Subsidiaries		Subsidiaries		Subsidiaries		Eliminations			Total
Assets
Current assets:
Cash and cash equivalents	$	8,265	$	4,983	$	5,701	$	—	$	—		$	18,949
Restricted cash		—		—		2,756		32,925		—			35,681
Trade accounts receivable, net		35		17,797		32,207		5,170		—			55,209
Other receivables		1,003		2,430		204		147		—			3,784
Marine operating supplies		79		2,503		2,700		2,586		—			7,868
Due from affiliates		—		66,330		119,375		3,372		(189,077	)		—
Prepaid expenses and other		2,005		285		1,239		98		—			3,627

Total current assets		11,387		94,328		164,182		44,298		(189,077	)		125,118

Vessels and equipment, net		46,072		216,200		127,848		208,673		—			598,793
Deferred costs, net		14,546		6,625		15,438		8,444		—			45,053
Investments in affiliates		525,588		14,644		364		82,611		(623,207	)		—
Other		7,231		813		1,177		8,603		—			17,824

Total assets	$	604,824	$	332,610	$	309,009	$	352,629	$	(812,284	)	$	786,788


Liabilities and Stockholders’ Equity

Current liabilities:
Accounts payable	$	4,802	$	1,159	$	8,957	$	—	$	—		$	14,918
Current maturities of long-term debt		3,799		7,065		436		5,353		—			16,653
Current obligations under capital leases		1,093		2,615		—		—		—			3,708
Accrued interest		4,008		159		5		703					4,875
Due to affiliates		161,144		—		—		—		(161,144	)		—
Accrued liabilities and other		8,854		4,676		17,929		3,862		—			35,321

Total current liabilities		183,700		15,674		27,327		9,918		(161,144	)		75,475

Long-term debt		57,544		53,275		14,480		200,666		—			325,965
Senior notes		152,906		—		—		—		—			152,906
Obligations under capital leases		10,476		18,092		—		—		—			28,568
Due to affiliates		—		27,935		—		—		(27,935	)		—
Other liabilities		2,851		242		1,740		46		—			4,879

Total liabilities		407,477		115,218		43,547		210,630		(189,079	)		587,793


Commitments and contingencies

Total stockholders’ equity		197,347		217,392		265,462		141,999		(623,205	)		198,995

Total liabilities and stockholders’ equity	$	604,824	$	332,610	$	309,009	$	352,629	$	(812,284	)	$	786,788


	Condensed Consolidating Statement of Operations
	(in thousands)
	Three Months Ended June 30, 2005

				Wholly			Non-Wholly
				Owned			Owned		Non-			Non-
				Guarantor			Guarantor		Guarantor			Guarantor
				Restricted			Restricted		Restricted			Unrestricted						Consolidated
	Parent^(b)			Subsidiaries^(b)			Subsidiaries^(a)		Subsidiaries			Subsidiaries			Eliminations			Total
Revenue	$	11,452		$	31,298		$	—	$	36,780		$	17,269		$	(112	)	$	96,687

Vessel and voyage expenses		7,102			17,209			—		18,274			7,353			(112	)		49,826
General and administrative		5,503			2,481			—		3,612			445			—			12,041
Depreciation, amortization and drydocking		2,130			5,156			—		6,512			2,779			—			16,577
Loss (gain) on disposal of assets, net		—			603			—		(1,056	)		—			—			(453	)

Income from operations		(3,283	)		5,849			—		9,438			6,692						18,696
Other expense, net		(317	)		(2,538	)		—		(2,511	)		(3,685	)		—			(9,051	)

Income before provision for income taxes		(3,600	)		3,311			—		6,927			3,007			—			9,645
Provision for income taxes		—			—			—		1,624			—			—			1,624

Net income	$	(3,600	)	$	3,311		$	—	$	5,303		$	3,007		$	—		$	8,021


^(a)		In December 2004, the Company purchased the minority interest in a partnership that owns theSeabulk ~~America.~~America. Subsequent to the acquisition, all Guarantor Restricted Subsidiaries are wholly-owned subsidiaries of the Company.

^(b)		In June 2005, certain vessels owned by Parent were contributed to newly created and existing entities. Subsequent to the contributions by Parent all entities which received vessels are Wholly Owned Guarantor Restricted Subsidiaries.



	Condensed Consolidating Statement of Operations																				Condensed Consolidating Statement of Operations
	(in thousands)																				(in thousands)
	Three Months Ended March 31, 2004																				Three Months Ended June 30, 2004
			Wholly			Non-Wholly																		Wholly			Non-Wholly
			Owned			Owned			Non-			Non-												Owned			Owned			Non-			Non-
			Guarantor			Guarantor			Guarantor			Guarantor												Guarantor			Guarantor			Guarantor			Guarantor
			Restricted			Restricted			Restricted			Unrestricted						Consolidated						Restricted			Restricted			Restricted			Unrestricted						Consolidated
	Parent		Subsidiaries			Subsidiaries			Subsidiaries			Subsidiaries			Eliminations			Total			Parent			Subsidiaries			Subsidiaries			Subsidiaries			Subsidiaries			Eliminations			Total
Revenue	$	11,913	$	17,345		$	3,319		$	32,118		$	17,928		$	(89	)	$	82,534		$	10,377		$	21,817		$	3,769		$	32,981		$	18,396		$	(137	)	$	87,203

Vessel and voyage expenses		6,057		11,851			2,190			18,484			8,414			(89	)		46,907			6,693			13,942			2,322			18,670			8,704			(137	)		50,194
General and administrative		1,852		2,564			210			4,455			344			—			9,425			3,150			1,967			205			3,647			354			—			9,323
Depreciation, amortization and drydocking		1,717		3,871			821			6,684			2,697			—			15,790			2,213			4,336			822			7,051			2,705			—			17,127
(Gain) loss on disposal of assets, net		—		(1	)		—			13			—			—			12
Gain on disposal of assets, net																						—			(184	)		—			(1,805	)		—			—			(1,989	)

Income (loss) from operations		2,287		(940	)		98			2,482			6,473			—			10,400
Other income (expense)		4,428		(1,900	)		(337	)		(1,752	)		(3,918	)		78			(3,401	)
Income from operations																						(1,679	)		1,756			420			5,418			6,633			—			12,548
Other expense, net																						(93	)		(2,337	)		(357	)		(1,635	)		(3,849	)		(20	)		(8,291	)

Income (loss) before income taxes		6,715		(2,840	)		(239	)		730			2,555			78			6,999
Income before provision for income taxes																						(1,772	)		(581	)		63			3,783			2,784			(20	)		4,257
Provision for income taxes		—		—			—			1,349			—			—			1,349			—			—			—			1,536			—			—			1,536

Net income (loss)	$	6,715	$	(2,840	)	$	(239	)	$	(619	)	$	2,555		$	78		$	5,650
Net income																					$	(1,772	)	$	(581	)	$	63		$	2,247		$	2,784		$	(20	)	$	2,721

1415

Condensed Consolidating Statement of Cash Flows
(in thousands)
Three Months Ended March 31, 2005
Wholly Owned Non-Wholly
Guarantor Owned Guarantor
Restricted Restricted
Parent Subsidiaries Subsidiaries^(a)
Net cash provided by (used in) operating activities $ 24,330 $ (3,032 ) $ —

Investing activities:

Proceeds from sales of vessels and equipment — 2,050 —
Purchases of vessels and equipment (8,459 ) (610 ) —

Net cash (used in) provided by investing activities (8,459 ) 1,440 —

Financing activities:

Proceeds from Amended Credit Facility — — —
Payments on Amended Credit Facility (5,500 ) — —
Proceeds from long-term debt 5,170 33 —
Payments of long-term debt (525 ) (1,799 ) —
Payments of Title XI bonds (450 ) — —
Payments of obligations under capital leases (269 ) (635 ) —
Payment of other deferred financing costs (2 ) (4 ) —
Proceeds from exercise of stock options 395 — —
Decrease in restricted cash — — —

Net cash (used in) provided by financing activities (1,181 ) (2,405 ) —

Increase (decrease) in cash and cash equivalents 14,690 (3,997 ) —
Cash and cash equivalents at beginning of period 8,265 4,983 —

Cash and cash equivalents at end of period $ 22,955 $ 986 $ —


	Condensed Consolidating Statement of Operations
	(in thousands)
	Six Months Ended June 30, 2005

				Wholly			Non-Wholly
				Owned			Owned		Non-			Non-
				Guarantor			Guarantor		Guarantor			Guarantor
				Restricted			Restricted		Restricted			Unrestricted						Consolidated
	Parent^(b)			Subsidiaries^(b)			Subsidiaries^(a)		Subsidiaries			Subsidiaries			Eliminations			Total
Revenue	$	23,279		$	61,802		$	—	$	72,020		$	35,358		$	(191	)	$	192,268

Vessel and voyage expenses		13,691			32,914			—		36,579			14,760			(191	)		97,753
General and administrative		8,976			4,881			—		6,876			876			—			21,609
Depreciation, amortization and drydocking		4,424			10,238			—		12,877			5,558			—			33,097
Loss (gain) on disposal of assets, net		—			585			—		(908	)		—			—			(323	)

Income from operations		(3,812	)		13,184			—		16,596			14,164			—			40,132
Other expense, net		(766	)		(5,308	)		—		(4,910	)		(7,355	)		—			(18,339	)

Income before provision for income taxes		(4,578	)		7,876			—		11,686			6,809			—			21,793
(Benefit) provision for income taxes		(507	)		—			—		3,099			—			—			2,592

Net income	$	(4,071	)	$	7,876		$	—	$	8,587		$	6,809		$	—		$	19,201


^(a)		In December 2004, the Company purchased the minority interest in a partnership that owns theSeabulk ~~America.~~America. Subsequent to the acquisition, all Guarantor Restricted Subsidiaries are wholly-owned subsidiaries of the Company.

^(b)		In June 2005, certain vessels owned by Parent were contributed to newly created and existing entities. Subsequent to the contributions by Parent all entities which received vessels are Wholly Owned Guarantor Restricted Subsidiaries.

Condensed Consolidating Statement of Cash Flows
(in thousands)
Three Months Ended March 31, 2005
Non- Non-
Guarantor Guarantor
Restricted Unrestricted Consolidated
Subsidiaries Subsidiaries Eliminations Total
Net cash provided by (used in) operating activities $ 1,776 $ (5,331 ) $ — $ 17,743

Investing activities:

Proceeds from sales of vessels and equipment 200 — — 2,250
Purchases of vessels and equipment (904 ) — — (9,973 )

Net cash (used in) provided by investing activities (704 ) — (7,723 )

Financing activities:

Proceeds from Amended Credit Facility — — —
Payments on Amended Credit Facility — — — (5,500 )
Proceeds from long-term debt 596 — — 5,799
Payments of long-term debt — — — (2,324 )
Payments of Title XI bonds — — — (450 )
Payments of obligations under capital leases –– –– –– (904 )
Payment of other deferred financing costs — — — (6 )
Proceeds from exercise of stock options — — — 395
Decrease in restricted cash — 5,331 — 5,331

Net cash (used in) provided by financing activities 596 5,331 — 2,341

Increase (decrease) in cash and cash equivalents 1,668 — — 12,361
Cash and cash equivalents at beginning of period 5,701 — — 18,949

Cash and cash equivalents at end of period $ 7,369 $ — $ — $ 31,310


	Condensed Consolidating Statement of Operations
	(in thousands)
	Six Months Ended June 30, 2004
			Wholly			Non-Wholly
			Owned			Owned			Non-			Non-
			Guarantor			Guarantor			Guarantor			Guarantor
			Restricted			Restricted			Restricted			Unrestricted						Consolidated
	Parent		Subsidiaries			Subsidiaries			Subsidiaries			Subsidiaries			Eliminations			Total
Revenue	$	22,290	$	39,162		$	7,088		$	65,099		$	36,324		$	(226	)	$	169,737

Vessel and voyage expenses		12,750		25,793			4,512			37,154			17,118			(226	)		97,101
General and administrative		5,002		4,531			415			8,102			698			—			18,748
Depreciation, amortization and drydocking		3,930		8,207			1,643			13,735			5,402			—			32,917
Gain on disposal of assets, net		—		(185	)		—			(1,792	)		—			—			(1,977	)

Income from operations		608		816			518			7,900			13,106			—			22,948
Other expense, net		4,335		(4,237	)		(694	)		(3,387	)		(7,767	)		58			(11,692	)

Income before provision for income taxes		4,943		(3,421	)		(176	)		4,513			5,339			58			11,256
Provision for income taxes		—		—			—			2,885			—			—			2,885

Net income	$	4,943	$	(3,421	)	$	(176	)	$	1,628		$	5,339		$	58		$	8,371


	Condensed Consolidating Statement of Cash Flows									Condensed Consolidating Statement of Cash Flows
	(in thousands)									(in thousands)
	Three Months Ended March 31, 2004									Six Months Ended June 30, 2005
				Wholly Owned			Non-Wholly						Wholly Owned			Non-Wholly
				Guarantor			Owned Guarantor						Guarantor			Owned Guarantor
				Restricted			Restricted						Restricted			Restricted
	Parent			Subsidiaries			Subsidiaries			Parent^(b)			Subsidiaries^(b)			Subsidiaries^(a)
Net cash (used in) provided by operating activities	$	(16,904	)	$	13,702		$	(271	)
Net cash provided by (used in) operating activities										$	40,056		$	(155	)	$	—

Investing activities:
Proceeds from sales of vessels and equipment		—			1			—			—			3,443			—
Purchases of vessels and equipment		(21	)		(62,026	)		—			(14,821	)		(1,115	)		—

Net cash (used in) provided by investing activities		(21	)		(62,025	)		—			(14,821	)		2,328			—

Financing activities:
Proceeds from Amended Credit Facility		20,000			—			—
Payments on Amended Credit Facility											(15,500	)		—			—
Proceeds from long-term debt											7,362			67			—
Payments of long-term debt		(525	)		(318	)		—			(1,055	)		(3,599	)		—
Proceeds from long-term debt		—			49,600			—
Payments of Title XI bonds		(450	)		—			—			(2,949	)		—			—
Payments of obligations under capital leases		(254	)		(611	)		—			(541	)		(1,284	)		—
Payments of deferred financing costs related to 2003 Senior Notes and Amended Credit Facility		(95	)		—			—
Payment of other deferred financing costs		—			(506	)		—			(10	)		(4	)		—
Proceeds from the exercise of stock options		167			—			—
Increase in restricted cash		—			—			—
Proceeds from exercise of stock options											446			—			—
Decrease in restricted cash											—			—			—

Net cash provided by (used in) financing activities		18,843			48,165			—
Net cash (used in) provided by financing activities											(12,247	)		(4,820	)		—


Increase (decrease) in cash and cash equivalents		1,918			(158	)		(271	)
Change in cash and cash equivalents											12,988			(2,647	)		—

Cash and cash equivalents at beginning of period		217			452			1,030			8,265			4,983			—

Cash and cash equivalents at end of period	$	2,135		$	294		$	759		$	21,253		$	2,336		$	—


^(a)		In December 2004, the Company purchased the minority interest in a partnership that owns theSeabulk America. Subsequent to the acquisition, all Guarantor Restricted Subsidiaries are wholly-owned subsidiaries of the Company.

^(b)		In June 2005, certain vessels owned by Parent were contributed to newly created and existing entities. Subsequent to the contributions by Parent all entities which received vessels are Wholly Owned Guarantor Restricted Subsidiaries.

Condensed Consolidating Statement of Cash Flows
(in thousands)
Three Months Ended March 31, 2004
Non- Non-
Guarantor Guarantor
Restricted Unrestricted Consolidated
Subsidiaries Subsidiaries Eliminations Total
Net cash (used in) provided by operating activities $ 11,321 $ 3,635 $ — $ 11,483

Investing activities:

Proceeds from sales of vessels and equipment 600 — — 601
Purchases of vessels and equipment (8,975 ) (18 ) — (71,040 )

Net cash (used in) provided by investing activities (8,375 ) (18 ) — (70,439 )

Financing activities:

Proceeds from Amended Credit Facility — — — 20,000
Payments of long-term debt — — — (843 )
Proceeds from long-term debt — — — 49,600
Payments of Title XI bonds — — — (450 )
Payments of obligations under capital leases — — — (865 )
Payments of deferred financing costs related to 2003 Senior Notes and Amended Credit Facility — — — (95 )
Payment of other deferred financing costs — — — (506 )
Proceeds from the exercise of stock options –– –– –– 167
Increase is restricted cash –– (3,617 ) –– (3,617 )

Net cash provided by (used in) financing activities — (3,617 ) — 63,391

Increase (decrease) in cash and cash equivalents 2,946 — — 4,435
Cash and cash equivalents at beginning of period 5,700 — — 7,399

Cash and cash equivalents at end of period $ 8,646 $ — $ — $ 11,834


	Condensed Consolidating Statement of Cash Flows
	(in thousands)
	Six Months Ended June 30, 2005
				Non-
	Non- Guarantor			Guarantor
	Restricted			Unrestricted					Consolidated
	Subsidiaries			Subsidiaries			Eliminations		Total
Net cash provided by (used in) operating activities	$	(3,529	)	$	(792	)	$	—	$	35,580

Investing activities:
Proceeds from sales of vessels and equipment		1,685			—			—		5,128
Purchases of vessels and equipment		(705	)		—			—		(16,641	)

Net cash (used in) provided by investing activities		980			—			—		(11,513	)

Financing activities:
Payments on Amended Credit Facility		—			—			—		(15,500	)
Proceeds from long-term debt		701			—			—		8,130
Payments of long-term debt		—			—			—		(4,654	)
Payments of Title XI bonds		—			(2,631	)		—		(5,580	)
Payments of obligations under capital leases		—			—			—		(1,825	)
Payment of other deferred financing costs		—			—			—		(14	)
Proceeds from exercise of stock options		—			—			—		446
Decrease in restricted cash		—			3,423			—		3,423

Net cash (used in) provided by financing activities		701			792			—		(15,574	)


Change in cash and cash equivalents		(1,848	)		—			—		8,493
Cash and cash equivalents at beginning of period		5,701			—			—		18,949

Cash and cash equivalents at end of period	$	3,853		$	—		$	—	$	27,442


^(a)		In December 2004, the Company purchased the minority interest in a partnership that owns theSeabulk America. Subsequent to the acquisition, all Guarantor Restricted Subsidiaries are wholly-owned subsidiaries of the Company.

^(b)		In June 2005, certain vessels owned by Parent were contributed to newly created and existing entities. Subsequent to the contributions by Parent all entities which received vessels are Wholly Owned Guarantor Restricted Subsidiaries.


	Condensed Consolidating Statement of Cash Flows
	(in thousands)
	Six Months Ended June 30, 2004
				Wholly Owned			Non-Wholly
				Guarantor			Owned Guarantor
				Restricted			Restricted
	Parent			Subsidiaries			Subsidiaries
Net cash (used in) provided by operating activities	$	(7,836	)	$	17,674		$	(991	)

Investing activities:
Proceeds from disposals of assets		—			311			—
Purchases of vessels and equipment		(6,272	)		(62,219	)		—
Investment in Joint Venture		—			—			—

Net cash used in financing activities		(6,272	)		(61,908	)		—

Financing activities:
Proceeds from Amended Credit Facility		20,000			—			—
Proceeds from long-term debt		—			49,600			—
Payments of long-term debt		(1,050	)		(2,116	)		—
Payments of Title XI bonds		(1,075	)		—			—
Payments of obligations under capital leases		(512	)		(1,213	)		—
Payments of deferred financing costs related to 2003 Senior Notes and Amended Credit Facility		(285	)		—			—
Payments of other deferred financing costs		(86	)		(569	)		—
Proceeds from exercise of stock options		167			—			—
Decrease in restricted cash		—			—			—

Net cash provided by (used in) financing activities		17,159			45,702			—


Change in cash and cash equivalents		3,051			1,468			(991	)
Cash and cash equivalents at beginning of period		217			452			1,030

Cash and cash equivalents at end of period	$	3,268		$	1,920		$	39


	Condensed Consolidating Statement of Cash Flows
	(in thousands)
	Six Months Ended June 30, 2004
				Non-
	Non-Guarantor			Guarantor
	Restricted			Unrestricted					Consolidated
	Subsidiaries			Subsidiaries			Eliminations		Total
Net cash (used in) provided by operating activities	$	11,804		$	444		$	—	$	21,095

Investing activities:
Proceeds from disposals of assets		2,834			—			—		3,145
Purchases of vessels and equipment		(15,015	)		(27	)		—		(83,533	)
Investment in Joint Venture		(240	)		—			—		(240	)

Net cash used in financing activities		(12,421	)		(27	)				(80,628	)

Financing activities:
Proceeds from Amended Credit Facility		—			—			—		20,000
Proceeds from long-term debt		—			—			—		49,600
Payments of long-term debt		—			—			—		(3,166	)
Payments of Title XI bonds		—			(2,460	)		—		(3,535	)
Payments of obligations under capital leases		—			—			—		(1,725	)
Payments of deferred financing costs related to 2003 Senior Notes and Amended Credit Facility		—			—			—		(285	)
Payments of other deferred financing costs		(28	)		—			—		(683	)
Proceeds from exercise of stock options		—			—			—		167
Decrease in restricted cash		—			2,043			—		2,043

Net cash provided by (used in) financing activities		(28	)		(417	)		—		62,416


Change in cash and cash equivalents		(645	)		—			—		2,883
Cash and cash equivalents at beginning of period		5,700			—			—		7,399

Cash and cash equivalents at end of period	$	5,055		$	—		$	—	$	10,282

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the condensed consolidated financial statements and the related notes thereto included elsewhere in this Report and the Company’s 2004 Annual Report on Form 10-K and Form 10-K/A Amendment No. 1.

The MD&A contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact included in the MD&A are forward-looking statements. Although the Company believes that the expectations and beliefs reflected in such forward-looking statements are reasonable, it can give no assurance that they will prove correct. For information regarding the risks and uncertainties that could cause such forward-looking statements to prove incorrect, see “Projections and Other Forward-Looking Information” in Item 1 of the Company’s 2004 Annual Report on Form 10-K and Form 10-K/A Amendment No. 1.

~~Critical Accounting Policies and Estimates~~

For general information concerning critical accounting policies as well as estimates, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations, Critical Accounting Policies and Estimates” in the Company’s 2004 Annual Report on Form 10-K and Form 10-K/A Amendment No. 1.

Overview of Revenue

The Company derives its revenue from three main lines of business –— offshore energy support, marine transportation, and marine towing. Seabulk Offshore, the Company’s domestic and international offshore energy support business, accounted for approximately ~~47.4%~~49.0% and ~~47.9%~~47.6% of Company revenue for the ~~three~~six months ended ~~March 31,~~June 30, 2005 and 2004, respectively. Seabulk Tankers, our tanker business, consists of the Company’sJones ActU.S.-flag product tanker business, in which it owns nine petroleum and chemical product tankers and leases one chemical product tanker in the domestic coastwise trade. The tanker business also consists of the Company’s two foreign-flag product tankers which began operations in the international trade in March and April 2004. Seabulk Tankers accounted for approximately ~~40.4%~~39.3% and ~~40.5%~~41.1% of Company revenue for the ~~three~~six months ended ~~March 31,~~June 30, 2005 and 2004, respectively. Seabulk Towing, the Company’s domestic harbor and offshore towing business, accounted for approximately ~~12.2%~~11.7% and ~~11.6%~~11.3% of Company revenue for the ~~three~~six months ended ~~March 31,~~June 30, 2005 and 2004, respectively.

Seabulk Offshore

~~Revenue from~~

During the ~~Company’s offshore energy support operations is primarily a function~~first six months of the size of the Company’s fleet, vessel day rates or charter rates, and fleet utilization. Rates and utilization are primarily a function of offshore exploration, development, and production activities. In certain areas where the Company conducts offshore energy support operations (particularly the U.S. Gulf of Mexico), contracts for the utilization of offshore energy support vessels commonly include termination provisions with three-to-five-day notice requirements and no termination penalty. As a result, companies engaged in offshore energy support operations (including us) are particularly sensitive to changes in market demand.

As the Company’s offshore energy support fleet gets older, the Company’s strategy is to look for opportunities to improve its age profile by acquiring higher-value, larger and newer vessels and selling a number of older and smaller vessels, mainly crewboats and vessels approaching the end of their useful lives.

Periods for collection of receivables in certain foreign areas of operation in the offshore business tend to be longer than is usual for the United States. The Company regularly monitors all such accounts receivable and believes that it has accrued adequate reserves.

~~The Company has a newbuild program for selective offshore fleet replacement and enhancement. In 2004, the Company added one vessel to the Brazilian fleet, the~~~~Seabulk Brasil~~~~; and one vessel to the West African fleet, the~~~~Seabulk Advantage~~~~. In January 2005, the Company added one vessel to the Brazilian fleet, the~~~~Seabulk Angra~~. The Company also executed contracts in 2004 for two offshore newbuilds for delivery in May and August 2005 to cover contracts in Angola. In addition, in 2004 and in May 2005 the Company signed contracts for a total of eight anchor handling tug supply vessels for delivery in 2006 and 2007.

~~In January~~ 2005, the Company took delivery of ~~and began to operate the~~~~Seabulk Carmen~~~~, a supply boat operating in the U.S. Gulf of Mexico. The transaction to acquire the~~~~Seabulk Carmen~~ was a like-kind exchange of assets of equal value and was a tax-free transaction to the Company, in which the Company delivered three older crew boats and one older geophysical vessel in exchange for the~~Seabulk Carmen~~.

~~In March 2005, the Company sold the~~~~Seabulk Veritas~~~~, an~~two offshore support ~~vessel operating in the U.S Gulf of Mexico. Proceeds from the sale of the vessel were $200,000. The gain on the sale of the vessel was approximately $45,000.~~

~~In March 2005, the Company~~vessels, and sold ~~the~~~~Seabulk Neptune~~~~, an anchor handling tug operating in West Africa. Proceeds from the sale of the vessel were approximately $200,000. The loss on the sale of the vessel was approximately $148,000.~~

~~In March 2005, the Company delivered the~~~~Seabulk Winn~~~~, a crew boat operating in the U.S. Gulf of Mexico, and $550,000 in exchange for the~~~~C/Crusader~~~~, a supply boat, and the assignment of a purchase and sale agreement. The Company subsequently sold the~~~~C/Crusader~~under the terms of the assigned purchase and sale agreement for proceeds of approximately $1.9 million. The transaction was a like-kind exchange of assets of equal value and was a tax-free transaction to the Company.

eleven offshore support vessels.

The following tables set forth, by primary area of operation, average day rates achieved by the offshore energy support fleet owned or operated by the Company and average utilization for the periods indicated. Average day rates are calculated by dividing total revenue by the number of days worked. Utilization percentages are based upon the number of working days over a 365/366-day year and the number of vessels in the fleet on the last day of the quarter. Day rates and utilization are not disclosed for categories with a limited number of vessels.

2021

Q1 2005
AHTS/ AHT/ Crew/ Other
Supply Tugs Utility

Americas⁽¹⁾

Vessels⁽²⁾
24 — 14 1

Effective Utilization⁽³⁾
64 % — 77 % —
Day Rate $ 5,518 — $ 3,196 —

West Africa

Vessels⁽²⁾
29 2 3 1

Effective Utilization⁽³⁾
87 % 79 % 92 % —
Day Rate $ 7,564 $ 7,076 $ 3,635 —

Middle East

Vessels⁽²⁾
8 5 7 4

Effective Utilization⁽³⁾
84 % 95 % 72 % 72 %
Day Rate $ 4,298 $ 4,686 $ 1,614 $ 4,095

Southeast Asia

Vessels⁽²⁾
7 — — 1

Effective Utilization⁽³⁾
94 % — — —
Day Rate $ 6,159 — — —


	Q1 2005												Q2 2005
	AHTS/			AHT/			Crew/						AHTS/			AHT/			Crew/
	Supply			Tugs			Utility			Other			Supply			Tugs			Utility			Other
Americas⁽¹⁾
Vessels⁽²⁾		24			—			14			1			22			—			14			1
Effective Utilization		64	%		—			77	%		—			79	%		—			78	%		—
Average Day Rate	$	5,518			—		$	3,196			—		$	6,203			—		$	3,441			—

West Africa
Vessels⁽²⁾		29			2			3			1			29			3			2			—
Effective Utilization		87	%		79	%		92	%		—			95	%		65	%		93	%		—
Average Day Rate	$	7,564		$	7,076		$	3,653			—		$	7,419		$	7,007		$	3,877			—

Middle East
Vessels⁽²⁾		8			5			7			4			8			5			7			3
Effective Utilization		84	%		95	%		72	%		72	%		79	%		83	%		87	%		88	%
Average Day Rate	$	4,298		$	4,686		$	1,614		$	4,095		$	4,385		$	4,740		$	1,733		$	4,642

Southeast Asia
Vessels⁽²⁾		7			—			—			1			7			—			—			1
Effective Utilization		94	%		—			—			—			94	%		—			—			—
Average Day Rate	$	6,159			—			—			—		$	6,136			—			—			—


⁽¹⁾		Americas consists of vessels operating in the United States, the Gulf of Mexico, South America, and the Caribbean.

⁽²⁾		Held-for-sale ~~and bareboat-out~~ vessels are excluded from the vessel count.
⁽³⁾		~~Effective utilization excludes laid-up vessels.~~


	Q1 2004												Q2 2004												Q3 2004												Q4 2004
	AHTS/			AHT/			Crew/						AHTS/			AHT/			Crew/						AHTS/			AHT/			Crew/						AHTS/			AHT/			Crew/
	Supply			Tugs			Utility			Other			Supply			Tugs			Utility			Other			Supply			Tugs			Utility			Other			Supply			Tugs			Utility			Other
Americas⁽¹⁾
Vessels⁽²⁾		21			—			22			2			21			—			21			2			21			—			18			2			22			—			18			2
Laid-Up		—			—			—			1			—			—			—			1			—			—			—			1			—			—			—			1
Effective Utilization		43	%		—			63	%		—			52	%		—			67	%		—			68	%		—			73	%		—			69	%		—			72	%		—
Day Rate	$	5,001			—		$	2,410			—		$	4,879			—		$	2,442			—		$	4,768			—		$	2,705			—		$	5,421			—		$	2,958			—

West Africa
Vessels⁽²⁾		33			4			3			—			33			4			3			—			33			4			3			—			32			2			3			1
Effective Utilization		82	%		86	%		98	%		—			83	%		75	%		94	%		—			78	%		67	%		93	%		—			77	%		70	%		84	%		—
Day Rate	$	7,281		$	6,193		$	3,413			—		$	7,350		$	6,831		$	3,524			—		$	7,300		$	6,196		$	3,620			—		$	7,574		$	6,329		$	3,664			—

Middle East
Vessels⁽²⁾		6			5			7			5			6			5			7			4			6			5			7			4			6			5			7			4
Effective Utilization		89	%		80	%		79	%		43	%		97	%		84	%		92	%		78	%		83	%		75	%		93	%		95	%		86	%		64	%		80	%		99	%
Day Rate	$	3,750		$	4,565		$	1,740		$	3,966		$	3,880		$	4,739		$	1,712		$	5,043		$	3,827		$	4,951		$	1,659		$	4,804		$	3,782		$	5,388		$	1,580		$	4,733

Southeast Asia
Vessels⁽²⁾		8			—			—			1			7			—			—			1			7			—			—			1			7			—			—			1
Effective Utilization		66	%		—			—			—			77	%		—			—			—			88	%		—			—			—			93	%		—			—			—
Day Rate	$	5,422			—			—			—		$	5,388			—			—			—		$	5,400			—			—			—		$	5,327			—			—			—

Q1 2004 Q2 2004 Q3 2004 Q4 2004
AHTS/ AHT/ Crew/ Other AHTS/ AHT/ Crew/ Other AHTS/ AHT/ Crew/ Other AHTS/ AHT/ Crew/ Other
Supply Tugs Utility Supply Tugs Utility Supply Tugs Utility Supply Tugs Utility

Americas⁽¹⁾

Vessels⁽²⁾
21 — 22 2 21 — 21 2 21 — 18 2 22 — 18 2
Laid-Up — — — 1 — — — 1 — — — 1 — — — 1
Effective Utilization⁽³⁾
43 % — 63 % — 52 % — 67 % — 68 % — 73 % — 69 % — 72 % —
Day Rate $ 5,001 — $ 2,410 — $ 4,879 — $ 2,442 — $ 4,768 — $ 2,705 — $ 5,421 — $ 2,958 —

West Africa

Vessels⁽²⁾
33 4 3 — 33 4 3 — 33 4 3 — 32 2 3 1
Effective Utilization⁽³⁾
82 % 86 % 98 % — 83 % 75 % 94 % — 78 % 67 % 93 % — 77 % 70 % 84 % —
Day Rate $ 7,281 $ 6,193 $ 3,413 — $ 7,350 $ 6,831 $ 3,524 — $ 7,300 $ 6,196 $ 3,620 — $ 7,574 $ 6,329 $ 3,664 —

Middle East

Vessels⁽²⁾
6 5 7 5 6 5 7 4 6 5 7 4 6 5 7 4
Effective Utilization⁽³⁾
89 % 80 % 79 % 43 % 97 % 84 % 92 % 78 % 83 % 75 % 93 % 95 % 86 % 64 % 80 % 99 %
Day Rate $ 3,750 $ 4,565 $ 1,740 $ 3,966 $ 3,880 $ 4,739 $ 1,712 $ 5,043 $ 3,827 $ 4,951 $ 1,659 $ 4,804 $ 3,782 $ 5,388 $ 1,580 $ 4,733

Southeast Asia

Vessels⁽²⁾
8 — — 1 7 — — 1 7 — — 1 7 — — 1
Effective Utilization⁽³⁾
66 % — — — 77 % — — — 88 % — — — 93 % — — —
Day Rate $ 5,422 — — — $ 5,388 — — — $ 5,400 — — — $ 5,327 — — —


⁽¹⁾		~~Americas~~Domestic consists of vessels operating in the United States, the Gulf of Mexico, South America, and the Caribbean.

⁽²⁾		Held-for-sale ~~and bareboat-out~~ vessels are excluded from the vessel count.
⁽³⁾		~~Effective utilization excludes laid-up vessels.~~

2123

Offshore energy support revenue in the Americas for the ~~three~~six months ended ~~March 31,~~June 30, 2005 increased by ~~41.7%~~57.6% over the same period in 2004. Gulf of Mexico revenue increased from the prior year due to improvement in natural gas and crude oil drilling activity due to higher commodity prices and strong energy demand, which resulted in higher rates and utilization. ~~However, with a current shortage of additional rigs available for employment, future upside may be limited~~Brazil revenues increased as ~~boat demand is essentially capped in~~ the ~~shallow water Gulf of Mexico where~~two newbuild supply boats commenced their long-term charters during the ~~Company operates. As a result of the cycles in the Gulf of Mexico, the Company continues to explore charter opportunities in Mexico and Brazil, which remain active markets. The~~~~Seabulk Brasil~~, which began operations in Brazil in November 2004, underwent modifications for a part of the first quarter 2005 in preparation for her two year term charter, and now continues to produce high revenues. Revenues are expected to increase in the Americas region as the~~Seabulk Angrabegins full operation in Brazil in the second quarter of 2005 after also undergoing modifications for a similar time charter.~~

six months ended June 30, 2005.

International offshore revenues for the ~~three~~six months ended ~~March 31,~~June 30, 2005 increased by approximately ~~8.0%~~6.4% over the same period in 2004. International vessel demand is primarily driven by crude oil exploration and production. During the first ~~quarter~~and second quarters of 2005, crude oil prices and demand remained high. The West African market continues to benefit from a tight market driven by strong exploration and production activity coupled with larger vessels moving out of the region and repatriating back to the North Sea. Day rates continued to improve with almost all available vessels fully utilized. InRevenues for the Middle East and Southeast Asia ~~the Company experienced higher rates and utilization in comparison to the prior year. The Company’s Middle East~~ region ~~has~~ increased ~~its presence~~as operations in India and Vietnam continued to ~~five vessels, which resulted~~be strong. The West African market had a slight decrease in ~~higher revenues. Revenue increased for the Company’s Southeast Asia operations~~revenue primarily due to ~~a strong Vietnamese market.~~

vessel sales.

Seabulk Tankers

~~Revenue from the Company’s marine transportation services business is derived from the operations of nine U.S.-flag tankers carrying petroleum, crude oil, and chemical products in the U.S.~~~~Jones Act~~~~trade, one in U.S. foreign commerce and two foreign-flag tankers in foreign trade.~~

The Company’s U.S.-flag product tanker fleet operates on long-term time charters, consecutive voyage charters and contracts of affreightment. The Company currently has seven tankers operating under time charters, one under a consecutive voyage charter, and two under contracts of affreightment. The two foreign-flag tankers have been placed in an international product tanker pool.

The following table sets forth the number of vessels and revenue for the Company’s U.S. and foreign-flag product carriers:


	Three Months Ended March 31,				Six Months Ended June 30,
	2005		2004		2005		2004
Number of vessels operated at end of period		12		12		12		12
Revenue (in thousands)	$	38,659	$	33,462	$	75,721	$	69,870

Tanker revenue increased by ~~15.5%~~8.4% in the first ~~quarter~~half of 2005 as a result of adding the two foreign-flag double-hull product tankers to the Company’s fleet at the end of March 2004.

~~U.S.-Flag Tankers.~~~~Demand for the Company’s ten~~~~Jones Act~~product carriers is dependent on several factors, including production and refining levels in the United States, domestic consumer and industrial consumption of petroleum products and chemicals, and competition from foreign imports. The Company owned nine U.S.-flag tankers and operated a tenth under a bareboat charter at March 31, 2005. Five of the petroleum product tankers are double-hull, state-of-the-art vessels, of which two have chemical-carrying capability. The Company’s~~Jones Actfleet is benefiting from higher energy demand and a tightening domestic tanker market, although increased competition from imported products has had a moderating effect on~~~~Jones Act~~tanker rates. One of the Company’s single-hull vessels is scheduled for retirement in 2007, one in 2008, two in 2011, and one in 2015. None of the five U.S.-flag double-hull tankers has an OPA 90 restriction.

~~Foreign-Flag Tankers.~~The international product tanker market is highly cyclical and dependent upon the worldwide demand for refined products. Surging demand from China and an increase in U.S. petroleum product imports have favorably impacted international tanker rates, which are currently high by historical standards. The Company’s two double-hull foreign-flag carriers are benefiting from the current high rates. Neither of them has a regulatory restriction.

Seabulk Towing

Revenue derived from the Company’s tug operations is primarily a function of the rates charged for their services, the volume of vessel traffic requiring docking and other ship-assist services, competition and the number of tugs available to provide services. Vessel traffic is largely a function of the general trade activity in the region served by the port.

The following table summarizes certain operating information for the Company’s tugs:


	Three Months Ended March 31,				Six Months Ended June 30,
	2005		2004		2005		2004
Number of tugs at end of period		26		26		26		26
Revenue (in thousands)	$	11,654	$	9,578	$	22,548	$	19,337

Towing revenue increased by ~~21.7%~~16.6% in the first half of 2005 due to increased vessel traffic in certain of the Company’s ports, higher rates and improved utilization.

Overview of Vessel and Voyage Expenses and Capital Expenditures

The Company’s vessel and voyage expenses are primarily a function of fleet size and utilization. The most significant expense categories are crew payroll and benefits, maintenance and repairs, fuel, insurance and charter hire. For general information concerning these categories of ~~vessel and voyage~~ expenses as well as capital expenditures, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Overview of Operating Expenses and Capital Expenditures” in Item 7 of the ~~Company’s~~ 2004 Annual Report on Form 10-K and Form 10-K/A Amendment No. 1.

2324

Results of Operations

The following table sets forth certain selected financial data and percentages of revenue for the periods indicated:


	Three Months Ended March 31,									Six Months Ended June 30,
	2005					2004				2005						2004
			($’s in millions)										(in millions)
Revenue	$	95.6		100	%	$	82.5	100	%	$	192.3			100	%	$	169.7		100	%
Vessel and voyage expenses		47.9		50	%		46.9	57	%		97.8			51	%		97.1		57	%
General and administrative		9.7		10	%		9.4	11	%		21.6			11	%		18.8		11	%
Depreciation, amortization, drydocking and Other		16.5		17	%		15.8	19	%
Loss on disposal of assets, net		0.1		0	%		—	0	%
Depreciation, amortization, and drydocking											33.1			17	%		32.9		19	%
Gain on disposal of assets, net											(0.3	)		(0	%)		(2.0	)	(1	%)


Income from operations	$	21.4		23	%	$	10.4	13	%	$	40.1			21	%	$	22.9		14	%


Interest expense, net	$	9.3		10	%	$	8.0	10	%	$	18.4			10	%	$	16.3		10	%


Other income (expense), net	$	—		0	%	$	4.6	6	%	$	0.0			0	%	$	4.6		3	%


Income before provision for income taxes	$	12.1		13	%	$	7.0	8	%	$	21.8			11	%	$	11.3		7	%


Net income	$	11.2		12	%	$	5.7	7	%	$	19.2			10	%	$	8.4		5	%

~~Three~~Six months ended ~~March 31,~~June 30, 2005 compared with the ~~three~~six months ended ~~March 31,~~June 30, 2004

Revenue.Revenue during the ~~first quarter of~~six months ended June 30, 2005 increased ~~15.8%~~13.3% from ~~$82.5~~$169.7 million to ~~$95.6~~$192.3 million versus the comparable period in 2004. The increase primarily reflects higher revenue from the Company’s ~~marine transportation and~~ offshore energy support ~~segments~~segment and, to a lesser extent, higher tanker and towing revenue.

Offshore revenue during the ~~first quarter of~~six months ended June 30, 2005 increased ~~14.6%~~16.6% from ~~$39.6~~$80.8 million to ~~$45.3~~$94.2 million versus the comparable period in 2004. The increase primarily reflects increases in rates and utilization for the Americas (including additions to the Brazil fleet), Middle East and Southeast Asia regions.

Marine transportation revenue during the ~~first quarter of~~six months ended June 30, 2005 increased ~~15.5%~~8.4% from ~~$33.5~~$69.9 million to ~~$38.7~~$75.7 million versus the comparable period in 2004. The increase primarily reflects the ~~operation~~full six month operations in 2005 of the Company’s two ~~new~~ foreign-flag double-hull product tankers which ~~entered service~~were added to the fleet at the end of March 2004.

Towing revenue during the ~~first quarter of~~six months ended June 30, 2005 increased ~~21.7%~~16.6% from ~~$9.6~~$19.3 million to ~~$11.6~~$22.5 million versus the comparable period in 2004. The increase primarily reflects additional vessel traffic in certain of the Company’s ports, higher rates and improved utilization of the Company’s tug ~~fleet, and additional offshore towing jobs.~~

fleet.

Vessel and Voyage Expenses. Vessel and voyage expenses during the ~~first quarter of~~six months ended June 30, 2005 remained substantially the same at $97.8 million versus $97.1 in the comparable period in 2004.

General and Administrative Expenses. General and administrative expenses during the six months ended June 30, 2005 increased ~~2.2%~~14.9% from ~~$46.9~~$18.8 million to ~~$47.9~~$21.6 million versus the comparable period in 2004. ~~Higher charter hire expenses~~The increase is primarily due to ~~increased activity in Southeast Asia, the Middle East and outside harbor towing were offset by a decrease in maintenance and repair expenses due~~costs incurred related to the ~~sale of a number of older vessels in the Gulf of Mexico and West Africa.~~

merger with SEACOR, an

2425

~~General and Administrative~~~~. General and administrative expenses during the first quarter of 2005 remained substantially the same at $9.6 million versus $9.4 million~~

increase in the ~~comparable period~~allowance for doubtful accounts and an increase in ~~2004.~~

the Company’s P&I insurance reserve.

Depreciation, Amortization, and Drydocking. Depreciation, amortization, and drydocking during the ~~first quarter~~six months ended June 30, 2005 remained substantially the same at $33.1 million versus $32.9 million in the comparable period in 2004.

Gain on Disposal of Assets, Net.Gain on disposal of assets during the six months ended June 30, 2005 ~~increased 4.6%~~decreased 83.7% from ~~$15.8~~a gain of $2.0 million to ~~$16.5~~a gain of $0.3 million versus the comparable period in 2004. The increase was primarily due to the addition of the two foreign-flag product tankers added in March 2004 offset by a reduction in the total number of vessels as the Company continued selling its older and smaller offshore units.

~~Loss on Disposal of Assets, Net.~~~~Loss on disposal of assets during the first quarter of 2005 increased to a loss of $0.1 million from $12,000 in the comparable period of~~ 2004. The number of vessels sold or exchanged increased to ~~seven~~11 for the ~~three~~six months ended ~~March 31,~~June 30, 2005 compared to ~~one~~three for the same period in 2004.

However, sales in 2004 included theSeabulk Maintainer, which had a gain of approximately $1.5 million.

Net Interest Expense.Net interest expense during the ~~first quarter of~~six months ended June 30, 2005 increased ~~16.0%~~12.5% from ~~$8.0~~$16.3 million to ~~$9.3~~$18.4 million versus the comparable period in 2004. The increase is due to ~~increased~~the debt ~~related to~~incurred for the purchase of the two ~~new~~ foreign-flag tankers, which entered service in late March 2004 and to an overall increase in the Company’s variable borrowing rates.

Other Income (Expense), Net.Other income (expense), net during the ~~first quarter of~~six months ended June 30, 2005 decreased to $0.0 million ~~from~~versus income of $4.6 million in the comparable period in 2004. The decrease is primarily due to the proceeds from the Company’s settlement of litigation, in which it received a total of $4.5 million from two of its suppliers in March 2004.

~~Liquidity and Capital Resources~~

As of March 31, 2005, the Company had cash on hand of $31.3 million and working capital of approximately $58.2 million, which includes $30.4 million in restricted cash. The Company’s main sources of liquidity are cash from operations, borrowings under its amended credit facility, and proceeds from the sale of vessels with marginal operating performance. As of March 31, 2005, cash from operations totaled $17.7 million, which was $6.3 million more than in the same period in 2004. Additionally, the Company received $2.3 million from the sale of vessels during the first quarter of 2005. As of March 31, 2005, availability under our Amended Credit Facility was approximately $2.6 million. While the Company believes cash from operations will continue to be a meaningful source of liquidity, factors that can affect our operating earnings and liquidity are discussed further under “Additional Business and Corporate Risk Factors” in Part 1, Item 1 of the Company’s 2004 Annual Report on Form 10-K and Form 10-K/A Amendment No. 1. The Company relies on external financing to fund a substantial portion of the purchase price of new vessels to its fleet. The Company believes it will obtain commitments from various lenders to fund at least 80% of the cost of vessels it has contracted to purchase.

~~Long-Term Debt.~~~~Long-term debt, including capital leases and current maturities, consisted of the following (in millions):~~

Outstanding Outstanding
Balance Balance
as of as of Interest Rate
March 31, December 31, as of
Facility 2005 2004 Maturity May 1, 2005
2003 Senior Notes $ 148.0 $ 152.9 2013 9.50%^(a)
Amended Credit Facility 43.0 48.5 2008 7.13%
Title XI financing bonds 208.5 209.0 2006 to 2024 5.86% to 8.85%
Other notes payable 88.6 85.1 2006 to 2011 4.00% to 8.50%
Capital leases 31.4 32.3 2005 to 2013 5.57% to 10.00%

Total $ 519.5 $ 527.8

(a) The Company effectively converted the interest rate on its outstanding 2003 Senior Notes to a floating rate based on LIBOR. Pursuant to our interest rate swap agreement, the effective floating interest rate is 7.88% as of May 1, 2005.

In addition to the Amended Credit Facility balance of approximately $43.0 million, there are $22.4 million in outstanding letters of credit as of March 31, 2005. The Company is subject to semi-annual reductions on the Amended Credit Facility each February and August with the final payment due in August 2008.

~~Material Changes in Contractual Obligations.~~On March 4, 2005, the Company made the final principal redemption on the United States Government Guarantee Ship Financing Bonds, Hull 2318 Issue, 10.10% Sinking Fund Bonds, Series C, issued in connection with the Title XI financing on its U.S.-flag product tanker,~~Seabulk Trader~~~~(ex:~~~~HMI Dynachem~~). Accordingly, all of the Shipowner’s issued and outstanding United States Government Guarantee Ship Financing Bonds, Hull 2318 Issue, comprised on Sinking Fund Bond Series A, Series B, and Dynachem Series B (which were previously retired or paid) and Series C, have been retired or paid within the meaning of the indenture between the Shipowner’s predecessor, Ogden Clover Transport, Inc. and Citibank, N.A., as Trustee, effective March 4, 2005; and each and every guarantee, as that term is defined in Schedule A to the Indenture, has been released and is of no further force and effect.

~~Capital Requirements.~~~~The Company’s capital requirements arise primarily from its need to service debt, fund working capital, maintain and improve its vessels, and make vessel acquisitions.~~

During the first quarter of 2005, the Company incurred $13.9 million in capital improvements for drydocking costs, capital expenditures and newbuild vessels. Of this amount, approximately $3.9 million was expended for drydockings, approximately $9.3 million for five offshore newbuild vessels, $0.1 million for capital expenditures and $0.6 million on the exchange for the~~C/Crusader~~.

~~Management expects to continue implementation of the initiative to sell unprofitable vessels in an effort to improve profitability and liquidity.~~

The Company’s expected remaining 2005 capital requirements are $26.1 million for drydocking costs and $17.9 million for newbuild vessels. The Company expects that cash flow from operations will continue to be a significant source of funds for its working capital and capital requirements.

The Company’s Amended Credit Facility contains certain restrictive financial covenants that, among other things, require minimum levels of EBITDA and tangible net worth. The Company was in compliance with all such covenants as of March 31, 2005.

The Company is in compliance with the financial covenants of the 2003 Senior Notes as of March 31, 2005. The 2003 Senior Notes require the Company to make payments of interest only. Based on current financial projections, the Company expects to be in compliance through the balance of 2005.

The possibility exists that unforeseen events or changes in business or regulatory conditions, including deterioration in its markets, could prevent the Company from meeting targeted operating results. If unforeseen events or changes in business or regulatory conditions prevent the Company from meeting targeted operating results, the Company will continue to pursue alternative plans including additional asset sales, additional reductions in operating expenses, and deferral of capital expenditures, which should enable the Company to satisfy essential capital requirements. While the Company believes it could successfully complete alternative plans, if necessary, there can be no assurance that such alternatives would be available or that the Company would be successful in their implementation.

~~Cash Flows.~~Net cash provided by operating activities totaled $17.7 million for the three months ended March 31, 2005 compared to $11.5 million for the same period in 2004. The increase in cash provided by operating activities was primarily a result of increased net income. In addition, the Company deposited $4.5 million in the Title XI reserve fund with the U.S. Maritime Administration in March 2005 for its five double-hull~~Jones Actproduct tankers. The corresponding amount in 2004 of $4.7 million was deposited in March 2004.~~

Net cash used in investing activities was $7.7 million for the three months ended March 31, 2005 compared to $70.4 million for the same period in 2004. The decrease in cash used in investing activities was due primarily to the purchase of the two foreign-flag product tankers in 2004 for approximately $62.0 million.

Net cash provided by financing activities for the three months ended March 31, 2005 was $2.3 million compared to $64.0 million for the same period in 2004. The decrease in cash provided by financing activities in 2005 is mainly attributable to additional financing related to the purchase of the~~Seabulk Reliantand~~~~Seabulk Trust~~~~, the Company’s two foreign-flag product tankers, which occurred in March 2004.~~

~~Effects of Inflation~~

The rate of inflation has not had a material impact on our operations. Moreover, if inflation remains at its recent levels, it is not expected to have a material impact on our operations for the foreseeable future.

~~Recent Accounting Pronouncements~~

In December 2004, the FASB issued SFAS No. 123R, which requires companies to expense in their consolidated statements of operations the estimated fair value of employee stock options and similar awards. The Company currently uses the intrinsic value method to value stock options, and accordingly, no compensation expense has been recognized for stock options since the Company grants stock options with exercise prices equal to or greater that the Company’s common stock market price on the date of the grant. The Company will adopt the provisions of SFAS No. 123R using the modified prospective application. Under the modified prospective application, SFAS No. 123R will apply to new awards and to awards that are outstanding on the effective date and are subsequently modified or cancelled. Compensation expense for unvested stock-based awards will be recognized over the remaining vesting period. Depending on the model used to calculate stock-based compensation expense in the future, the implementation of certain other requirements of SFAS No. 123R and additional option grants expected to be made in the future, the pro forma disclosure discussed previously may not be indicative of the stock-based compensation expense that will be recognized in the Company’s future consolidated financial statements. In April 2005, the FASB delayed the implementation of SFAS No. 123R from the next reporting period beginning after June 15, 2005 until the beginning of the Company’s next fiscal year. The Company is in the process of determining the impact adopting SFAS No. 123R will have on its consolidated financial position and consolidated results of operations.

In December 2004, the FASB issued SFAS No. 153, an amendment of APB No. 29. APB No. 129 is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of assets exchanged; however, certain exceptions apply. SFAS No. 153 amends APB No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. SFAS No. 153 is effective for nonmonetary exchanges occurring in fiscal periods beginning after June 15, 2005. The Company’s adoption of SFAS No. 153 is not expected to have a material impact on the Company’s consolidated financial position and consolidated results of operations.

~~Item 3. Quantitative and Qualitative Disclosures of Market Risk.~~

~~The~~~~Jones Act~~~~restricts U.S. coastwise trade to vessels owned, operated and crewed substantially by U.S. citizens. The~~~~Jones Act~~~~continues to be in effect and supported by Congress and the Administration. However, it is possible that the Company’s advantage as a U.S. citizen operator of~~~~Jones Act~~~~vessels could be somewhat eroded over time as there continue to be periodic efforts and attempts by foreign interests to circumvent certain aspects of the~~~~Jones Act~~.

On March 30, 2005, the U. S. District Court for the Northern District of California found that the Environmental Protection Agency (“EPA”) should not have exempted ballast water discharges in U. S. territorial waters from the rules under the National Pollutant Discharge Elimination System established under the U.S. Clean Water Act. The decision may affect the way product tankers and other vessels in the maritime transportation industry, including Seabulk Tankers, discharge ballast water from ships. This is an industry issue being reviewed by the EPA, the marine industry, environmental groups, and Congress. It is possible that final resolution of this issue will involve higher operating costs for the industry, including Seabulk Tankers.

Interest Rate Risk

The Company is exposed to market risk from changes in interest rates, which may adversely affect its results of operations and financial condition. On October 20, 2003, the Company entered into a ten-year interest rate swap agreement with its Amended Credit Facility lenders and other members of its lending group. The Company entered into this transaction in order to take advantage of a lower available interest rate. Through this derivative instrument, which covers a notional amount of $150.0 million, the Company effectively converted the interest rate on its outstanding 2003 Senior Notes due August 2013 to a floating rate based on LIBOR. The current effective floating interest rate is 7.88%. The floating rate is adjusted semi-annually in February and August of each year. The swap agreement is secured by a second lien on the assets that secure the Company’s Amended Credit Facility.

The interest rate swap was valued as ~~a liability~~an asset of ~~($2.0)~~$4.2 million as of ~~March 31,~~June 30, 2005 ~~a decrease~~an increase of ~~$4.9~~$1.3 million from ~~an asset of $2.9 million~~the value as of December 31, 2004 and is included in other ~~liabilities~~assets with an offsetting ~~decrease~~increase in the 2003 Senior Notes in the accompanying condensed consolidated ~~balance sheets.~~financial statements. The Company expects the fair value of the ~~interest rate~~ swap to change in accordance with the movement in the underlying LIBOR rate.

In connection with the 2003 Senior Notes offering, the Company amended and restated its existing credit facility. The Amended Credit Facility consists of a revolving credit facility with an original amount available of $80.0 million and has a five-year maturity. The interest rate as of ~~March 31,~~June 30, 2005 was ~~6.88%~~5.88%. A hypothetical 2.0% increase in the interest rate on the outstanding borrowings of ~~$65.4~~$55.4 million, including outstanding letters of credit of $22.4 million, as of ~~March 31,~~June 30, 2005, would cause the Company’s interest expense to increase on average approximately ~~$1.3~~$1.1 million per year over the ~~terms~~term of the Amended Credit Facility, with a corresponding decrease in income before taxes.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The Company maintains systems of disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) designed to ensure that the Company is able to record, process, summarize and report, within the applicable time periods, the information required in the Company’s annual and quarterly reports under the Securities Exchange Act of 1934. Management of the Company has evaluated the effectiveness of these disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, the principal executive officer and principal financial officer concluded that these disclosure controls and procedures are effective to accomplish their purpose. No changes were made during the period covered by this report to the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Securities and Exchange Act of 1934) that have materially affected the Company’s internal control over financial reporting or are reasonably likely to materially affect the Company’s internal control over financial reporting.

Attached as Exhibits 31.1 and 31.2 hereto are certifications by the Company’s Chief Executive Officer and Chief Financial Officer, which are required by Section 302 of the Sarbanes-Oxley Act of 2002. The information set forth in this Item 4 should be read in conjunction with these Section 302 certifications. Additionally, our Chief Executive Officer and Chief Financial Officer have provided certain certifications to the Commission pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, which are filed as exhibits to this Report on Form 10-Q.

2927

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

For information concerning certain legal proceedings see Note 7 of the ~~condensed consolidated~~ financial ~~statements included herein.~~statements.

Item 2. Changes in ~~Securities.~~

~~None.~~Securities and Use of Proceeds.

N/A under General Instructions H(1)(a) and (b).

Item 3. Defaults upon Senior Securities.

~~None.~~

N/A under General Instructions H(1)(a) and (b).

Item 4. Submission of Matters to a Vote of Security Holders.

~~None.~~

N/A under General Instructions H(1)(a) and (b).

Item 5. Other Information.

None.

Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits

	10.46		Fourth Supplemental Credit Agreement dated June 10, 2005 among Seabulk International, Inc. and Fortis Capital Corp. (filed herewith).

	10.47		Fourth Supplemental Subsidiary Guarantee Agreement dated June 10, 2005 among Seabulk International Inc. and Fortis Capital Corp. (filed herewith).

	10.48		Fifth Supplemental Credit Agreement dated June 23, 2005 among Seabulk International, Inc., Seabulk Towing, Inc. and each of the four Additional Subsidiary Guarantors and Fortis Capital Corp. (filed herewith).

	10.49		Fifth Supplemental Subsidiary Guarantee Agreement dated June 23, 2005 among Seabulk International Inc., Seabulk Towing, Inc. and each of the four Additional Subsidiary Guarantors and Fortis Capital Corp. (filed herewith).

	10.50		Amendment No. 4 to Executive Employment Agreement by and between Seabulk International Inc. and Gerhard E. Kurz dated April 18, 2005 (filed herewith).

	10.51		Amendment No. 5 to Executive Employment Agreement by and between Seabulk International Inc. and Gerhard E. Kurz dated June 28, 2005 (filed herewith).

	10.52		Amendment No. 1 to Seabulk International Inc. Executive Deferred Compensation Plan dated April 18, 2005 (filed herewith).

	10.53		Amendment No. 1 to Seabulk International Inc. Stock Option Plan for Directors dated April 18, 2005 (filed herewith).

	10.54		Specimen of Amendment No. 2 to Non-Qualified Stock Option Agreement dated April 18, 2005 (filed herewith).

	10.55		Amendment No. 1 to Seabulk International Inc. Amended and Restated Equity Ownership Plan dated April 18, 2005 (filed herewith).

	10.56		Specimen of Amendment No. 2 to Severance Agreement dated April 18, 2005 (filed herewith).

	31.1		Certification of Principal Executive Officer pursuant to Rule 13a-14(a) of the Securities and ~~Exchange Act of 1934.~~

			Exchange Act of 1934 (furnished herewith).

	31.2		Certification of Principal Financial Officer pursuant to Rule 13a-14(a) of the Securities and Exchange Act of ~~1934.~~1934 (furnished herewith).


32.1		Certification of Principal Executive Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the ~~Sarbanes–Oxley~~Sarbanes-Oxley Act of 2002 and Rule 13a-14(b) of the Securities Exchange Act of 1934 (furnished herewith).


32.2		Certification of Principal Financial Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the ~~Sarbanes–Oxley~~Sarbanes-Oxley Act of 2002 and Rule 13a-14(b) of the Securities Exchange Act of 1934 (furnished herewith).

(b) Reports on Form 8-K

The following reports on Form 8-K were filed (other than information reported pursuant to Item 9, which was furnished to the Securities and Exchange Commission rather than filed) during the quarter ended ~~March 31, 2004:~~

June 30, 2005:

	1.		The Company filed a Current Report on Form 8-K dated ~~January 24,~~May 5, 2005. Items 12 and 9 were reported and no financial statements were filed.

	2.		The Company filed a Current Report on Form ~~8-K~~8-K/A dated ~~February 1,~~May 5, 2005. Items 72, 8 and 9 were reported and no financial statements were filed.

	3.		The Company filed a Current Report on Form 8-K dated ~~March 3,~~May 10, 2005. Items 1, 2 7 and 9 were ~~reported and no financial statements were filed.~~

4. ~~The Company filed a Current Report on Form 8-K dated March 7, 2005. Item 1 was~~ reported and no financial statements were filed.

5.4. The Company filed a Current Report on Form 8-K dated ~~March 17,~~June 27, 2005. ~~Items 1 and 9 were~~Item 8 was reported and no financial statements were filed.

3129

Signature

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.


SEABULK INTERNATIONAL, INC.

~~/s/ MICHAEL J. PELLICCI~~
~~Michael J. Pellicci~~
~~Senior Vice President – Finance & Planning,~~
~~Treasurer and Chief Accounting Officer~~
~~(Principal Accounting Officer)~~
~~Date: May 13, 2005~~

/s/ MICHAEL J. PELLICCI

Michael J. Pellicci
Senior Vice President — Finance and Planning,
Treasurer and Chief Accounting Officer
(Chief Accounting and Duly Authorized Officer)
Date: August 9, 2005

3230


	Condensed Consolidating Balance Sheet
	(in thousands)
	As of March 31, 2005
				Wholly
				Owned		Non-		Non-
				Guarantor		Guarantor		Guarantor
				Restricted		Restricted		Unrestricted					Consolidated
	Parent			Subsidiaries		Subsidiaries		Subsidiaries		Eliminations			Total
Assets
Current assets:
Cash and cash equivalents	$	22,955		$	986	$	7,369	$	—	$	—		$	31,310
Restricted cash		—			—		2,756		27,594		—			30,350
Trade accounts receivable, net		366			18,294		30,046		3,142		—			51,848
Other receivables		1,313			2,257		360		191		—			4,121
Marine operating supplies		(698	)		3,178		3,118		2,483		—			8,081
Prepaid expenses and other		1,806			514		1,321		522		—			4,163

Total current assets		25,742			25,229		44,970		33,932		—			129,873

Vessels and equipment, net		54,371			210,543		125,260		206,452		—			596,626
Deferred costs, net		12,902			8,099		13,211		7,764		—			41,976
Investments in affiliates		525,413			—		—		—		(525,413	)		—
Due from affiliates		—			50,282		127,080		3,698		(181,060	)		—
Other		5,807			712		1,549		13,105		—			21,173

Total assets	$	624,235		$	294,865	$	312,070	$	264,951	$	(706,473	)	$	789,648


Liabilities and Stockholders’ Equity

Current liabilities:
Accounts payable	$	938		$	3,003	$	6,185	$	—	$	—		$	10,126
Current maturities of long-term debt		3,350			7,067		659		5,353		—			16,429
Current obligations under capital leases		1,108			2,423		—		—		—			3,531
Accrued interest		1,878			161		6		4,220		—			6,265
Accrued liabilities and other		8,265			4,931		19,775		2,362		—			35,333

Total current liabilities		15,539			17,585		26,625		11,935					71,684

Long-term debt		56,688			51,507		14,853		200,666		—			323,714
Senior Notes		148,006			—		—		—		—			148,006
Obligations under capital leases		10,192			17,649		—		—		—			27,841
Due to affiliates		177,536			—		—		—		(177,536	)		—
Other liabilities		5,534			238		1,846		45		—			7,663

Total liabilities		413,495			86,979		43,324		212,646		(177,536	)		578,908


Commitments and contingencies		—			—		—		—		—			—

Total stockholders’ equity		210,740			207,886		268,746		49,027		(528,937	)		210,740

Total liabilities and stockholders’ equity	$	624,235		$	294,865	$	312,070	$	264,951	$	(706,473	)	$	789,648


									��
	Condensed Consolidating Statement of Operations
	(in thousands)
	Three Months Ended March 31, 2005
				Wholly			Non-Wholly
				Owned			Owned		Non-			Non-
				Guarantor			Guarantor		Guarantor			Guarantor
				Restricted			Restricted		Restricted			Unrestricted						Consolidated
	Parent			Subsidiaries			Subsidiaries^(a)		Subsidiaries			Subsidiaries			Eliminations			Total
Revenue	$	11,827		$	30,504		$	—	$	35,240		$	18,089		$	(79	)	$	95,581

Vessel and voyage expenses		6,589			15,704			—		18,306			7,407			(79	)		47,927
General and administrative		3,473			2,401			—		3,263			431			—			9,568
Depreciation, amortization and drydocking		2,294			5,082			—		6,365			2,779			—			16,520
(Gain) loss on disposal of assets, net		—			(18	)		—		148			—			—			130

Income (loss) from operations		(529	)		7,335					7,158			7,472						21,436
Other expense		(449	)		(2,770	)		—		(2,399	)		(3,670	)		—			(9,288	)

Income (loss) before income taxes		(978	)		4,565			—		4,759			3,802			—			12,148
Provision for income taxes		(507	)		—			—		1,475			—			—			968

Net income (loss)	$	(471	)	$	4,565		$	—	$	3,284		$	3,802		$	—		$	11,180



	Q1 2005
		AHTS/			AHT/			Crew/			Other
		Supply			Tugs			Utility

Americas⁽¹⁾
Vessels⁽²⁾			24			—			14			1
Effective Utilization⁽³⁾			64	%		—			77	%		—
Day Rate		$	5,518			—		$	3,196			—
West Africa
Vessels⁽²⁾			29			2			3			1
Effective Utilization⁽³⁾			87	%		79	%		92	%		—
Day Rate		$	7,564		$	7,076		$	3,635			—

Middle East
Vessels⁽²⁾			8			5			7			4
Effective Utilization⁽³⁾			84	%		95	%		72	%		72	%
Day Rate		$	4,298		$	4,686		$	1,614		$	4,095

Southeast Asia
Vessels⁽²⁾			7			—			—			1
Effective Utilization⁽³⁾			94	%		—			—			—
Day Rate		$	6,159			—			—			—


	Q1 2004												Q2 2004												Q3 2004												Q4 2004
	AHTS/			AHT/			Crew/			Other			AHTS/			AHT/			Crew/			Other			AHTS/			AHT/			Crew/			Other			AHTS/			AHT/			Crew/			Other
	Supply			Tugs			Utility						Supply			Tugs			Utility						Supply			Tugs			Utility						Supply			Tugs			Utility

Americas⁽¹⁾
Vessels⁽²⁾		21			—			22			2			21			—			21			2			21			—			18			2			22			—			18			2
Laid-Up		—			—			—			1			—			—			—			1			—			—			—			1			—			—			—			1
Effective Utilization⁽³⁾		43	%		—			63	%		—			52	%		—			67	%		—			68	%		—			73	%		—			69	%		—			72	%		—
Day Rate	$	5,001			—		$	2,410			—		$	4,879			—		$	2,442			—		$	4,768			—		$	2,705			—		$	5,421			—		$	2,958			—

West Africa
Vessels⁽²⁾		33			4			3			—			33			4			3			—			33			4			3			—			32			2			3			1
Effective Utilization⁽³⁾		82	%		86	%		98	%		—			83	%		75	%		94	%		—			78	%		67	%		93	%		—			77	%		70	%		84	%		—
Day Rate	$	7,281		$	6,193		$	3,413			—		$	7,350		$	6,831		$	3,524			—		$	7,300		$	6,196		$	3,620			—		$	7,574		$	6,329		$	3,664			—

Middle East
Vessels⁽²⁾		6			5			7			5			6			5			7			4			6			5			7			4			6			5			7			4
Effective Utilization⁽³⁾		89	%		80	%		79	%		43	%		97	%		84	%		92	%		78	%		83	%		75	%		93	%		95	%		86	%		64	%		80	%		99	%
Day Rate	$	3,750		$	4,565		$	1,740		$	3,966		$	3,880		$	4,739		$	1,712		$	5,043		$	3,827		$	4,951		$	1,659		$	4,804		$	3,782		$	5,388		$	1,580		$	4,733

Southeast Asia
Vessels⁽²⁾		8			—			—			1			7			—			—			1			7			—			—			1			7			—			—			1
Effective Utilization⁽³⁾		66	%		—			—			—			77	%		—			—			—			88	%		—			—			—			93	%		—			—			—
Day Rate	$	5,422			—			—			—		$	5,388			—			—			—		$	5,400			—			—			—		$	5,327			—			—			—


	Outstanding		Outstanding
	Balance		Balance
	as of		as of			Interest Rate
	March 31,		December 31,			as of
Facility	2005		2004		Maturity	May 1, 2005
2003 Senior Notes	$	148.0	$	152.9	2013	9.50%^(a)
Amended Credit Facility		43.0		48.5	2008	7.13%
Title XI financing bonds		208.5		209.0	2006 to 2024	5.86% to 8.85%
Other notes payable		88.6		85.1	2006 to 2011	4.00% to 8.50%
Capital leases		31.4		32.3	2005 to 2013	5.57% to 10.00%

Total	$	519.5	$	527.8

4.	~~The Company filed a Current Report on Form 8-K dated March 7, 2005. Item 1 was~~ reported and no financial statements were filed.

5.4.		The Company filed a Current Report on Form 8-K dated ~~March 17,~~June 27, 2005. ~~Items 1 and 9 were~~Item 8 was reported and no financial statements were filed.