UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 2004 or
--------------------
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
-------------- ---------------
Commission file number 1-12289
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SEACOR HOLDINGS INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 13-3542736
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(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
11200 Richmond, Suite 400, Houston, Texas 77082
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(Address of Principal Executive Offices) (Zip Code)
(281) 899-4800
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(Registrant's Telephone Number, Including Area Code)
Not Applicable
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(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
The total number of shares of common stock, par value $.01 per share,
outstanding as of August 3, 2004 was 18,329,476. The Registrant has no other
class of common stock outstanding.
SEACOR HOLDINGS INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Page No.
--------
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of
June 30, 2004 and December 31, 2003..............................................1
Condensed Consolidated Statements of Operations for each of the
Three and Six Months Ended June 30, 2004 and 2003................................2
Condensed Consolidated Statements of Cash Flows for each of the
Three and Six Months Ended June 30, 2004 and 2003................................3
Notes to the Condensed Consolidated Financial Statements..............................4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................................9
Item 3. Quantitative and Qualitative Disclosures About Market Risk...........................16
Item 4. Controls and Procedures..............................................................16
Part II. Other Information
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
Securities......................................................................17
Item 4. Submission of Matters to a Vote of Security Holders..................................17
Item 6. Exhibits and Reports on Form 8-K.....................................................18
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SEACOR HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, UNAUDITED)
June 30, December 31,
2004 2003
----------------- -----------------
ASSETS
Current Assets:
Cash and cash equivalents....................................................... $ 212,857 $ 263,135
Available-for-sale securities................................................... 78,496 48,856
Trade and other receivables, net of allowance for
doubtful accounts of $2,753 and $2,800, respectively......................... 103,013 108,676
Prepaid expenses and other current assets....................................... 26,964 23,551
----------------- -----------------
Total current assets......................................................... 421,330 444,218
----------------- -----------------
Investments, at Equity, and Receivables from
50% or Less Owned Companies.................................................... 52,433 59,848
Property and Equipment............................................................. 1,011,993 1,021,703
Less accumulated depreciation................................................... (280,456) (283,487)
----------------- -----------------
Net property and equipment................................................... 731,537 738,216
----------------- -----------------
Construction Reserve Funds......................................................... 150,452 126,140
Other Assets....................................................................... 39,150 34,189
----------------- -----------------
$ 1,394,902 $ 1,402,611
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt............................................... $ 49 $ 93
Accounts payable and accrued expenses........................................... 27,665 30,333
Other current liabilities....................................................... 49,798 47,089
----------------- -----------------
Total current liabilities.................................................... 77,512 77,515
----------------- -----------------
Long-Term Debt..................................................................... 342,271 332,179
Deferred Income Taxes.............................................................. 187,717 190,704
Deferred Income and Other Liabilities.............................................. 27,333 29,858
Minority Interest in Subsidiaries.................................................. 2,183 1,909
Stockholders' Equity:
Common stock, $.01 par value, 24,508 and 24,466 shares
issued at June 30, 2004 and December 31, 2003................................ 245 245
Additional paid-in capital...................................................... 410,583 408,828
Retained earnings............................................................... 528,593 531,384
Treasury stock, 6,195 and 5,885 shares at
June 30, 2004 and December 31, 2003, at cost................................. (196,045) (183,531)
Unamortized restricted stock compensation....................................... (3,424) (2,998)
Accumulated other comprehensive income -
Cumulative translation adjustments.......................................... 14,193 12,994
Unrealized gain on available-for-sale securities............................ 3,741 3,524
----------------- -----------------
Total stockholders' equity.............................................. 757,886 770,446
----------------- -----------------
$ 1,394,902 $ 1,402,611
================= =================
The accompanying notes are an integral part of these financial statements
and should be read in conjunction herewith.
1
SEACOR HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA, UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------- -------------------------------
2004 2003 2004 2003
------------ ------------- ------------- ------------
Operating Revenues............................................$ 97,403 $ 105,159 $ 193,377 $ 202,019
------------ ------------- ------------- ------------
Costs and Expenses:
Operating expenses......................................... 73,759 69,422 148,789 136,522
Administrative and general................................. 13,857 13,391 28,933 27,470
Depreciation and amortization.............................. 14,156 13,708 28,117 28,344
------------ ------------- ------------- ------------
101,772 96,521 205,839 192,336
------------ ------------- ------------- ------------
Gains on Asset Sales.......................................... 6,117 414 9,755 5,561
------------ ------------- ------------- ------------
Operating Income (Loss)....................................... 1,748 9,052 (2,707) 15,244
------------ ------------- ------------- ------------
Other Income (Expense):
Interest income............................................ 1,663 1,870 3,042 4,426
Interest expense........................................... (5,388) (4,419) (10,766) (9,925)
Debt extinguishment expense................................ - (966) - (2,091)
Derivative income (loss), net.............................. (560) 2,624 (481) 4,373
Foreign currency transaction gains (losses), net........... (689) 1,294 (223) 1,829
Marketable securities sale gains, net...................... 2,753 1,250 5,502 3,441
Other, net................................................. 233 (747) 352 (744)
------------ ------------- ------------- ------------
(1,988) 906 (2,574) 1,309
------------ ------------- ------------- ------------
Income (Loss) Before Income Tax Expense (Benefit), Minority
Interest in Income of Subsidiaries, and Equity in
Earnings of 50% or Less Owned Companies.................... (240) 9,958 (5,281) 16,553
Income Tax Expense (Benefit).................................. 169 3,596 (1,333) 5,995
------------ ------------- ------------- ------------
Income (Loss) Before Minority Interest in Income of
Subsidiaries and Equity in Earnings of 50% or Less
Owned Companies........................................... (409) 6,362 (3,948) 10,558
Minority Interest in Income of Subsidiaries................... (91) (241) (86) (339)
Equity in Earnings of 50% or Less Owned Companies............. 673 322 1,243 568
------------ ------------- ------------- ------------
Net Income (Loss).............................................$ 173 $ 6,443 $ (2,791) $ 10,787
============ ============= ============= ============
Basic Earnings (Loss) Per Common Share........................$ 0.01 $ 0.34 $ (0.15) $ 0.55
============ ============= ============= ============
Diluted Earnings (Loss) Per Common Share......................$ 0.01 $ 0.33 $ (0.15) $ 0.55
============ ============= ============= ============
Weighted Average Common Shares:
Basic...................................................... 18,347 19,155 18,407 19,464
Diluted.................................................... 18,476 19,316 18,407 19,834
The accompanying notes are an integral part of these financial statements
and should be read in conjunction herewith.
2
SEACOR HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, UNAUDITED)
Six Months Ended
---------------------------------
June 30,
---------------------------------
2004 2003
-------------- ---------------
Net Cash Provided by Operating Activities............................................ $ 268 $ 15,375
-------------- ---------------
Cash Flows from Investing Activities:
Purchase of property and equipment................................................ (69,527) (64,986)
Proceeds from asset sales......................................................... 60,859 71,927
Purchase of available-for-sale securities......................................... (69,834) (21,457)
Proceeds from sale of available-for-sale securities............................... 50,891 34,288
Net increase in construction reserve funds........................................ (24,312) (12,665)
Investments in and advances to 50% or less owned companies........................ (359) (6,605)
Principal payments on notes due from 50% or less owned companies.................. 2,830 857
Proceeds on sale of investments in 50% or less owned companies.................... 5,148 -
Dividends received from 50% or less owned companies............................... 991 3,169
Investment in note due from non-affiliate......................................... (5,352) -
Principal payments on note due from non-affiliate................................. 41 -
Cash settlements of derivative transactions....................................... (274) (65)
Other, net........................................................................ - 634
-------------- ---------------
Net cash provided by (used in) investing activities............................ (48,898) 5,097
-------------- ---------------
Cash Flows from Financing Activities:
Payments of long-term debt........................................................ (65) (71,310)
Proceeds from issuance of long-term debt.......................................... 10,000 -
Proceeds from share award plans................................................... 448 394
Common stock acquired for treasury................................................ (12,814) (45,351)
Premium paid with 5-3/8% note extinguishment...................................... - (632)
Other............................................................................. (64) (150)
-------------- ---------------
Net cash used in financing activities.......................................... (2,495) (117,049)
-------------- ---------------
Effect of Exchange Rate Changes on Cash and Cash Equivalents......................... 847 1,394
-------------- ---------------
Net Decrease in Cash and Cash Equivalents............................................ (50,278) (95,183)
Cash and Cash Equivalents, Beginning of Period....................................... 263,135 342,046
-------------- ---------------
Cash and Cash Equivalents, End of Period............................................. $ 212,857 $ 246,863
============== ===============
The accompanying notes are an integral part of these financial statements
and should be read in conjunction herewith.
3
SEACOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The condensed consolidated financial information for the three and six months
ended June 30, 2004 and 2003 has been prepared by the Company and was not
audited by its independent public accountants. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) have been made to
present fairly the financial position, results of operations and cash flows of
the Company as of and for the three and six months ended June 30, 2004 and 2003.
Results of operations for the interim periods presented are not necessarily
indicative of the operating results for the full year or any future periods.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States have been condensed or omitted. These condensed
consolidated financial statements should be read in conjunction with the
financial statements and related notes thereto included in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2003.
Unless the context otherwise indicates, any references in this Quarterly Report
on Form 10-Q to the "Company" refer to SEACOR Holdings Inc. and its consolidated
subsidiaries, and any references in this Quarterly Report on Form 10-Q to
"SEACOR" refer to SEACOR Holdings Inc.
Certain reclassifications of prior period information have been made to conform
to the current period presentation.
2. COMMITMENTS AND CONTINGENCIES
The Company's unfunded capital commitments as of June 30, 2004 for 5 new and 1
used vessel, 183 new dry cargo hopper barges, 39 new chemical tank barges, 7 new
helicopters and other equipment totaled $113.2 million. Deliveries are expected
throughout 2004 and 2005. The Company also holds options to purchase 150 new dry
cargo hopper barges for delivery in 2005.
The Company has guaranteed the payment of amounts owed by certain of its joint
ventures under vessel charter agreements that expire through October 2009. As of
June 30, 2004, the total amount of future charter payments guaranteed by the
Company was $16.2 million.
The Internal Revenue Service ("IRS") previously indicated that it was
considering whether to propose a change in the manner in which vessel assets are
classified for purposes of depreciation. If this change were proposed it would
result in the assertion of a deficiency in the amount of taxes paid in 2001
based on the manner in which the Company's vessel assets were classified for
purposes of depreciation. The Company has been verbally advised that the IRS has
determined that it should not propose a change in the classification of the
vessel assets for depreciation purposes. However, the IRS has recently proposed
potential adjustments relating to the deduction of certain other expenses
included in the Company's income tax returns for fiscal years 2000 and 2001. The
Company believes that any income taxes ultimately assessed will not exceed
amounts already reported in its financial statements.
3. EQUIPMENT ACQUISITIONS AND DISPOSITIONS
Newly constructed equipment delivered to the Company during the six months ended
June 30, 2004 included 147 dry cargo hopper barges, 6 vessels, 1 helicopter and
1 chemical tank barge for aggregate consideration of $86.9 million that was paid
while such equipment was under construction. Equipment dispositions in the first
six months of 2004 included the sale of 42 vessels and other equipment for
aggregate consideration of $60.9 million. Such vessels sold included all 19 of
those remaining in the Company's "retired from service" fleet and 1 that was
leased-back.
4
4. LONG-TERM DEBT
During 2004, the Company borrowed $20.0 million ($10.0 million on June 25, 2004
and $10.0 million on July 22, 2004) under its revolving credit facility.
5. STOCK AND DEBT REPURCHASE PLAN
During the six months ended June 30, 2004, the Company acquired 319,457 shares
of its common stock for treasury at an aggregate cost of $12.8 million pursuant
to the Company's stock and debt repurchase plan. As of June 30, 2004, $45.4
million of authority granted by the Company's Board of Directors remains
available to acquire additional shares of the Company's common stock, its 7.2%
Senior Notes Due 2009 ("7.2% Notes") and its 5-7/8% Senior Notes due 2012
("5-7/8% Notes"). Securities acquired pursuant to the Company's stock and debt
repurchase plan may be conducted from time to time through open market
purchases, privately negotiated transactions or otherwise, depending on market
conditions.
6. FINANCIAL INFORMATION OF 50% OR LESS OWNED COMPANIES
Summarized combined income statement information of business ventures for which
the Company applies the equity method of accounting is as follows:
For the Three Months For the Six Months
Ended June 30, Ended June 30,
------------------------------- -------------------------------
2004 2003 2004 2003
--------------- --------------- --------------- ---------------
Operating Revenues........................ $ 29,435,000 $ 25,328,000 $ 61,288,000 $ 51,582,000
Operating Income.......................... 4,132,000 4,301,000 6,496,000 6,721,000
Net Income................................ 2,934,000 1,346,000 4,789,000 4,721,000
7. COMPREHENSIVE INCOME (LOSS)
For the three months ended June 30, 2004 and 2003, total comprehensive income
(loss) was ($0.5) million and $12.9 million, respectively. For the six months
ended June 30, 2004 and 2003, total comprehensive income (loss) was ($1.4)
million and $11.2 million, respectively. Other comprehensive income (loss) in
2004 and 2003 consisted of gains and losses from foreign currency translation
adjustments and unrealized holding gains and losses on available-for-sale
securities.
8. EARNINGS PER SHARE
Basic earnings per common share were computed based on the weighted average
number of "unrestricted" common shares issued and outstanding (i.e., all issued
and outstanding other than shares subject to forfeiture pursuant to grants of
restricted shares) during the relevant periods. Diluted earnings per common
share were computed based on the weighted average number of unrestricted common
shares issued and outstanding plus all potentially dilutive common shares that
would have been outstanding in the relevant periods assuming the vesting of
restricted stock grants and the issuance of common shares for stock options and
convertible subordinated notes through the application of the treasury stock and
if-converted methods. Diluted earnings per common share exclude certain options
and share awards, totaling 246,645 and 355,015 in the three and six months ended
June 30, 2004, respectively, and 53,600 and 51,600 in the three and six months
ended June 30, 2003, as the effect of their inclusion in the computation would
have been antidilutive.
For the Three Months Ended For the Six Months Ended
June 30, June 30,
--------------------------------------- ---------------------------------------
Average O/S Per Net income Average O/S Per
Net income Shares Share (loss) Shares Share
-------------- --------------- -------- -------------- --------------- --------
2004
- -------------------------------------------------
Basic Earnings Per Common Share................. $ 173,000 18,347,195 $ 0.01 $ (2,791,000) 18,406,783 $(0.15)
======== ========
Effect of Dilutive Securities, net of tax:
Options and restricted stock................. - 129,214 - -
-------------- --------------- -------------- ---------------
Diluted Earnings Per Common Share............... $ 173,000 18,476,409 $ 0.01 $ (2,791,000) 18,406,783 $(0.15)
============== =============== ======== ============== =============== ========
2003
- -------------------------------------------------
Basic Earnings Per Common Share................. $ 6,443,000 19,155,421 $ 0.34 $ 10,787,000 19,463,596 $ 0.55
======== ========
Effect of Dilutive Securities, net of tax:
Options and restricted stock................. - 160,396 - 162,275
Convertible securities....................... - - 167,000 208,436
-------------- --------------- -------------- ---------------
Diluted Earnings Per Common Share............... $ 6,443,000 19,315,817 $ 0.33 $ 10,954,000 19,834,307 $ 0.55
============== =============== ======== ============== =============== ========
5
9. STOCK COMPENSATION
Under Statement of Financial Accounting Standards No. 123 ("SFAS 123"),
companies could either adopt a "fair value method" of accounting for their
stock-based compensation plans or continue to use the "intrinsic value method"
as prescribed by APB Opinion No. 25. The Company has elected to continue
accounting for its stock-based compensation plans using the intrinsic value
method. Had compensation costs for the plans been determined using a fair value
method consistent with SFAS 123, the Company's net income (loss) and earnings
(loss) per common share would have been reduced to the following pro forma
amounts:
For the Three Months Ended For the Six Months Ended
June 30, June 30,
--------------------------------- -----------------------------------
Net income Earnings (Loss) Net income Earnings (Loss)
(loss) Per Common Share (loss) Per Common Share
--------------------------------- -----------------------------------
Basic Diluted Basic Diluted
-------- -------- -------- ---------
2004
- ----------------------------------------------------------
As reported..............................................$ 173,000 $ 0.01 $ 0.01 $ (2,791,000) $ (0.15) $ (0.15)
======== ======== ======== =========
Add: stock-based compensation included in net income 347,000 764,000
(loss)........................................
Less: stock-based compensation using fair value method... (536,000) (1,180,000)
-------------- ---------------
Pro forma................................................$ (16,000) $(0.00) $(0.00) $ (3,207,000) $ (0.17) $ (0.17)
============== ======== ======== =============== ======== =========
2003
- ----------------------------------------------------------
As reported..............................................$ 6,443,000 $ 0.34 $ 0.33 $ 10,787,000 $ 0.55 $ 0.55
======== ======== ======== =========
Add: stock-based compensation included in net income..... 456,000 942,000
Less: stock-based compensation using fair value method... (721,000) (1,472,000)
-------------- ---------------
Pro forma................................................$ 6,178,000 $ 0.32 $ 0.32 $ 10,257,000 $ 0.55 $ 0.53
============== ======== ======== =============== ======== =========
The effects of applying a fair value method consistent with SFAS 123 in this pro
forma disclosure are not indicative of future events and the Company anticipates
that it will award additional stock based compensation in future periods.
During the six months ended June 30, 2004, the Company issued 42,104 shares of
its common stock for restricted stock grants, director stock grants and the
exercise of stock options. In addition, the Company released from treasury
10,355 shares of its common stock for employee stock plan purchases and received
into treasury 1,199 shares of its common stock on the cancellation of previously
issued restricted stock grants.
6
10. SEGMENT INFORMATION
Accounting standards require public business enterprises to report information
about each of their operating business segments that exceed certain quantitative
thresholds or meet certain other reporting requirements. Operating business
segments have been defined as a component of an enterprise about which separate
financial information is available and is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in assessing
performance.
In accordance with Statement of Financial Accounting Standards No 131, the
Company's inland river services segment has been separately reported in the
segment information presented below due to its increased significance resulting
from capital expansion. The Company's basis of measurement of segment profit or
loss has not changed from previous reported periods. Certain reclassifications
of prior period information have been made to conform to the current period's
reportable segment presentation.
Offshore Inland
Marine Environmental River
Services Services Services Other Total
------------ -------------- ------------ ------------ ------------
FOR THE THREE MONTHS ENDED JUNE 30, 2004 (IN THOUSANDS)
- ------------------------------------------------------------
Operating Revenues:
External customers........................................$ 67,008 $ 14,654 $ 10,038 $ 5,703 $ 97,403
Intersegment.............................................. 31 - - 977 1,008
------------ -------------- ------------ ------------ ------------
67,039 14,654 10,038 6,680 98,411
Eliminations.............................................. (1,008)
------------
97,403
Operating expenses.......................................... (49,858) (10,931) (7,282) (6,697) (74,768)
Administrative and general.................................. (8,046) (2,255) (365) (213) (10,879)
Depreciation and amortization............................... (10,822) (722) (1,459) (1,054) (14,057)
Gain (Loss) on asset sales.................................. 6,364 70 - (24) 6,410
Other income (expense), primarily foreign currency
transactions............................................. (687) 23 - - (664)
Equity in earnings (losses) of 50% or less owned companies.. 909 - - (236) 673
------------ -------------- ------------ ------------
Reportable Segment Profit (Loss)............................$ 4,899 $ 839 $ 932 $ (1,544)
============ ============== ============ ============
Corporate................................................... (3,369)
Other income (expense) not included above................... (1,324)
Equity in earnings of 50% or less owned companies........... (673)
Eliminations................................................ 1,008
------------
Loss before Taxes, Minority Interest and Equity Earnings.... $ (240)
============
FOR THE THREE MONTHS ENDED JUNE 30, 2003 (IN THOUSANDS)
- ------------------------------------------------------------
Operating Revenues:
External customers........................................$ 79,547 $ 15,537 $ 4,993 $ 5,082 $ 105,159
Intersegment.............................................. 6 14 51 340 411
------------ -------------- ------------ ------------ ------------
79,553 15,551 5,044 5,422 105,570
Eliminations.............................................. (411)
------------
105,159
Operating expenses.......................................... (54,665) (7,601) (2,798) (4,714) (69,778)
Administrative and general.................................. (7,987) (1,997) (336) (370) (10,690)
Depreciation and amortization............................... (11,615) (822) (754) (494) (13,685)
Gain (Loss) on asset sales.................................. 583 82 (311) 60 414
Other income (expense), primarily foreign currency
transactions and an impairment charge for an investment.. 1,707 - - (1,190) 517
Equity in earnings (losses) of 50% or less owned companies.. 604 5 - (287) 322
------------ -------------- ------------ ------------
Reportable Segment Profit (Loss)............................$ 8,180 $ 5,218 $ 845 $ (1,573)
============ ============== ============ ============
Corporate................................................... (2,779)
Other income (expense) not included above................... 389
Equity in earnings of 50% or less owned companies........... (322)
Eliminations................................................ 411
------------
Income before Taxes, Minority Interest and Equity Earnings.. $ 9,958
============
7
Offshore Inland
Marine Environmental River
Services Services Services Other Total
------------ -------------- ------------ ------------ ------------
FOR THE SIX MONTHS ENDED JUNE 30, 2004 (IN THOUSANDS)
- ------------------------------------------------------------
Operating Revenues:
External customers........................................$ 132,982 $ 31,046 $ 18,614 $ 10,735 $ 193,377
Intersegment.............................................. 73 - - 1,772 1,845
------------ -------------- ------------ ------------ ------------
133,055 31,046 18,614 12,507 195,222
Eliminations.............................................. (1,845)
------------
193,377
Operating expenses.......................................... (101,250) (23,150) (13,272) (12,904) (150,576)
Administrative and general.................................. (16,544) (4,924) (773) (850) (23,091)
Depreciation and amortization............................... (21,893) (1,269) (2,694) (2,080) (27,936)
Gain (Loss) on asset sales.................................. 9,784 67 73 124 10,048
Other income (expense), primarily foreign currency
transactions............................................. (131) 21 - (110)
Equity in earnings (losses) of 50% or less owned companies.. 2,246 - - (1,002) 1,244
------------ -------------- ------------ ------------
Reportable Segment Profit (Loss)............................$ 5,267 $ 1,791 $ 1,948 $ (4,205)
============ ============== ============ ============
Corporate................................................... (6,374)
Other income (expense) not included above................... (2,464)
Equity in earnings of 50% or less owned companies........... (1,244)
Eliminations................................................ 1,845
------------
Loss before Taxes, Minority Interest and Equity Earnings.... $ (5,281)
============
FOR THE SIX MONTHS ENDED JUNE 30, 2003 (IN THOUSANDS)
- ------------------------------------------------------------
Operating Revenues:
External customers........................................$ 160,650 $ 21,661 $ 9,781 $ 9,927 $ 202,019
Intersegment.............................................. 11 27 103 625 766
------------ -------------- ------------ ------------ ------------
160,661 21,688 9,884 10,552 202,785
Eliminations.............................................. (766)
------------
202,019
Operating expenses.......................................... (111,331) (11,287) (5,293) (9,263) (137,174)
Administrative and general.................................. (16,885) (4,004) (670) (686) (22,245)
Depreciation and amortization............................... (23,846) (1,665) (1,882) (906) (28,299)
Gain (Loss) on asset sales.................................. 5,890 82 (311) (100) 5,561
Other income (expense), primarily foreign currency
transactions and an impairment charge for an investment.. 2,245 - - (1,190) 1,055
Equity in earnings (losses) of 50% or less owned companies.. 1,154 3 - (589) 568
------------ -------------- ------------ ------------
Reportable Segment Profit (Loss)............................$ 17,888 $ 4,817 $ 1,728 $ (2,182)
============ ============== ============ ============
Corporate................................................... (5,384)
Other income (expense) not included above................... 254
Equity in earnings of 50% or less owned companies........... (568)
Eliminations................................................ 766
------------
Income before Taxes, Minority Interest and Equity Earnings.. $ 16,553
============
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Certain statements discussed in Item 2 (Management's Discussion and Analysis of
Financial Condition and Results of Operations), Item 3 (Quantitative and
Qualitative Disclosures About Market Risk) and elsewhere in this Form 10-Q
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
concerning management's expectations, strategic objectives, business prospects,
anticipated economic performance and financial condition and other similar
matters involve known and unknown risks, uncertainties and other important
factors that could cause the actual results, performance or achievements of
results to differ materially from any future results, performance or
achievements discussed or implied by such forward-looking statements. Such
risks, uncertainties and other important factors include, among others: the
cyclical nature of the oil and gas industry, adequacy of insurance coverage,
currency exchange fluctuations, changes in foreign political, military and
economic conditions, the ongoing need to replace aging vessels, dependence of
Offshore Marine Services on several customers, dependence of spill response
revenue on the number and size of spills and upon continuing government
regulation in this area and our ability to comply with such regulation and other
governmental regulation, industry fleet capacity, changes in foreign and
domestic oil and gas exploration and production activity, competition,
vessel-related risks, effects of adverse weather conditions and seasonality on
Aviation Services, helicopter related risks, effects of adverse weather and
river conditions and seasonality on Inland River Services, the level of grain
export volume, the effect of fuel prices on barge towing costs, variability in
freight rates for inland river barges, changes in Environmental Services "Oil
Spill Removal Organization" classification with the Coast Guard, liability in
connection with providing spill response services, restrictions imposed by the
Shipping Acts on the amount of foreign ownership of the Company's Common Stock,
the effect of international economic and political factors in Inland River
Services and various other matters, many of which are beyond the Company's
control and other factors as are described at the end of Item 7 (Management's
Discussion and Analysis of Financial Condition and Results of Operations) of the
Company's Form 10-K for the fiscal year ended December 31, 2003. The words
"expect," "anticipate," "estimate," "project," "intend," "believe," "plan" and
similar expressions are intended to identify forward-looking statements.
Forward-looking statements speak only as of the date of the document in which
they are made. We disclaim any obligation or undertaking to provide any updates
or revisions to any forward-looking statement to reflect any change in our
expectations or any change in events, conditions or circumstances on which the
forward-looking statement is based.
CONSOLIDATED RESULTS OF OPERATIONS
For the Three Months Ended June 30, For the Six Months Ended June 30,
--------------------------------------------- --------------------------------------------
2004 2003 2004 2003
-------------------- ----------------------- -------------------- ----------------------
(in thousands) Amount % Amount % Amount % Amount %
- --------------------------------------- ----------- -------- ------------- -------- ----------- -------- ------------- --------
Operating revenues.....................$ 97,403 100 $ 105,159 100 $ 193,377 100 $ 202,019 100
----------- -------- ------------- -------- ----------- -------- ------------- --------
Cost and expenses:
Operating expenses.................. 73,759 (76) 69,422 (66) 148,789 (77) 136,522 (68)
Administrative and general.......... 13,857 (14) 13,391 (13) 28,933 (15) 27,470 (14)
Depreciation and amortization....... 14,156 (14) 13,708 (13) 28,117 (14) 28,344 (14)
----------- -------- ------------- -------- ----------- -------- ------------- --------
101,772 (104) 96,521 (92) 205,839 (106) 192,336 (96)
----------- -------- ------------- -------- ----------- -------- ------------- --------
Gains on asset sales................... 6,117 6 414 - 9,755 5 5,561 3
----------- -------- ------------- -------- ----------- -------- ------------- --------
Operating income (loss)................ 1,748 2 9,052 8 (2,707) (1) 15,244 7
Other income (expense), net............ (1,988) (2) 906 1 (2,574) (1) 1,309 1
----------- -------- ------------- -------- ----------- -------- ------------- --------
Income (loss) before taxes, minority
interest and equity earnings........ (240) - 9,958 9 (5,281) (3) 16,553 8
Income tax expense (benefit)........... 169 - 3,596 3 (1,333) 1 5,995 3
----------- -------- ------------- -------- ----------- -------- ------------- --------
Income (loss) before minority interest
and equity earnings................ (409) - 6,362 6 (3,948) (2) 10,558 5
Minority interest...................... (91) - (241) - (86) - (339) -
Equity earnings........................ 673 - 322 - 1,243 1 568 -
----------- -------- ------------- -------- ----------- -------- ------------- --------
Net income (loss)......................$ 173 - $ 6,443 6 $ (2,791) (1) $ 10,787 5
=========== ======== ============= ======== =========== ======== ============= ========
OVERVIEW
The table above provides an analysis of the Company's consolidated results of
operations for each quarter and six month period indicated. See "Item 1.
Financial Statements - Note 10. Segment Information" included in Part I for
additional financial information about the Company's business segments.
Additional discussions of results of operations by business segment are
presented below. The Company's operations are divided among the following four
business segments: "Offshore Marine Services;" "Environmental Services;" "Inland
River Services" and "Other," which primarily includes its "Aviation Services"
9
business. The Company began separately reporting its Inland River Services
business as a segment in the first quarter of 2004 due to its increased
significance resulting from fleet expansion.
Consolidated operating revenues decreased in the three and six months ended June
30, 2004 ("Current Year Quarter," and "Current Six Months," respectively) as
compared to the three and six months ended June 30, 2004 ("Prior Year Quarter"
and "Prior Six Months," respectively). Declines resulting primarily from fewer
vessels being operated by Offshore Marine Services were partly offset by fleet
expansion in Inland River Services and Aviation Services. Improved results in
Environmental Services due to the acquisition of Foss Environmental Services
Company ("Foss") in the fourth quarter of 2003 was partly offset in the Current
Year Quarter by a reduction in the number and severity of managed spill
responses.
Although a modest net profit was earned in the Current Year Quarter, Current Six
Months' results remained unprofitable. Offshore Marine Services' results remain
depressed due to weak market conditions in the offshore oil and gas industry.
Environmental Services profits declined significantly in the Current Year
Quarter due to reduced spill response earnings. Aviation Services' loss
increased in the Current Year Quarter and Current Six Months as operating
expenses exceeded flight revenues for recently acquired helicopters and repair
costs escalated for existing equipment. An increase in Inland River Services'
operating expenses has substantially offset that business segment's growth in
revenues resulting from fleet expansion.
OPERATING REVENUES BY BUSINESS SEGMENT AND GEOGRAPHIC REGION
For the Three Months Ended June 30, For the Six Months Ended June 30,
------------------------------------------------- -------------------------------------------------
2004 2003 2004 2003
----------------------- ----------------------- ----------------------- -----------------------
(in thousands) Amount % Amount % Amount % Amount %
- ----------------------------- ------------- -------- ------------ -------- ------------- -------- ------------- --------
BUSINESS SEGMENT:
Offshore Marine Services. $ 67,039 69 $ 79,553 75 $ 133,055 69 $ 160,661 79
Environmental Services... 14,654 15 15,551 15 31,046 16 21,688 11
Inland River Services.... 10,038 10 5,044 5 18,614 10 9,884 5
Other.................... 6,680 7 5,422 5 12,507 6 10,552 5
Elimination.............. (1,008) (1) (411) - (1,845) (1) (766) -
------------- -------- ------------ -------- ------------- -------- ------------- --------
$ 97,403 100 $ 105,159 100 $ 193,377 100 $ 202,019 100
============= ======== ============ ======== ============= ======== ============= ========
GEOGRAPHIC REGION:
United States............ $ 58,212 60 $ 51,411 49 $ 115,638 60 $ 104,785 52
------------- -------- ------------ -------- ------------- -------- ------------- --------
United Kingdom........... 16,733 17 18,733 18 33,690 17 36,988 18
West Africa.............. 11,694 12 14,234 14 24,182 13 27,919 14
Latin America & Mexico... 6,492 7 5,109 5 11,940 6 9,939 5
Asia..................... 2,792 3 4,620 4 5,744 3 10,272 5
Other.................... 1,480 1 11,052 10 2,183 1 12,116 6
------------- -------- ------------ -------- ------------- -------- ------------- --------
39,191 40 53,748 51 77,739 40 97,234 48
------------- -------- ------------ -------- ------------- -------- ------------- --------
$ 97,403 100 $ 105,159 100 $ 193,377 100 $ 202,019 100
============= ======== ============ ======== ============= ======== ============= ========
OFFSHORE MARINE SERVICES. Operating revenues decreased 16%, or $12.6 million, to
$67.0 million in the Current Year Quarter from $79.6 million in the Prior Year
Quarter and 17%, or $27.6 million, to $133.1 million in the Current Six Months
from $160.7 million in the Prior Six Months due principally to net vessel
dispositions and a decline in days worked for vessels operating in comparable
periods. A net increase in the number of vessels entering bareboat charter-out
service upon concluding time charter-out arrangements also lowered results.
Since the beginning of 2003 and through the end of the Current Year Quarter, the
number of revenue generating vessels in Offshore Marine Services' fleet declined
by 32% to 166 vessels, resulting from 79 net vessel dispositions. Eighty-six
vessels were sold and the bareboat charter-in of 17 vessels were not renewed
upon termination. The Company completed the divestiture of Offshore Marine
Services' utility fleet and, at June 30, 2004, had no remaining "retired from
service" vessels. Fleet dispositions were offset by Offshore Marine Services'
purchase of 16 vessels and bareboat charter-in of 8 vessels.
Declines in days worked by Offshore Marine Services' vessels in both the Current
Year Quarter and Current Six Months resulted from continued weak worldwide
demand for many vessel types, particularly anchor handling towing supply, supply
and towing. Utilization of this equipment was depressed in each of the three
most recent fiscal quarters, ranging from 60% to 70%. Offshore Marine Services'
overall foreign fleet utilization averaged approximately 80% in the Current Year
Quarter; whereas, Offshore Marine Services' overall U.S. fleet utilization
averaged approximately 86% for the same period.
10
International vessel demand remains depressed in the principal markets served by
Offshore Marine Services, particularly in the North Sea anchor handling towing
supply sector and the West African towing supply sector; and the Company expects
no improvement in these market conditions in the short-term. U.S. demand has
recently improved for Offshore Marine Services' crew and mini-supply fleets
although rates per day worked have generally remained unchanged for these
vessels. Utilization improvements are believed to be partly due to increased
offshore maintenance, and the Company is monitoring changes in offshore activity
closely. There have also been recent modest improvements in demand for the U.S.
supply and anchor handling towing supply vessels although the Company cannot
predict whether, or to what extent, market conditions will continue to improve.
As of June 30, 2004, Offshore Marine Services had 14 vessels bareboat
chartered-out, including 11 to joint venture partners. Operating revenues earned
from bareboat chartered-out vessels are generally lower than for vessels owned
and operated by the Company because vessel expenses, normally recovered through
charter revenue, are the burden of the charterer.
Functional currency (Pounds Sterling) rates per day worked earned by Offshore
Marine Services' North Sea standby safety vessels remained constant between
comparable quarters and six month periods; however, a strengthening in the Pound
Sterling currency relative to the U.S. dollar between both periods increased
reported operating revenues of Offshore Marine Services by approximately $1.9
million and $3.8 million, respectively. Because Offshore Marine Services pays
expenses associated with its North Sea operations in Pounds Sterling, the
strengthening of that currency relative to the U.S. dollar did not have a
material effect on overall operating income and net income of the Company in the
Current Year Quarter or Current Six Months.
The table below sets forth rates per day worked, utilization and available days
with respect to vessels time chartered-out and fleet count data for Offshore
Marine Services during the periods indicated.
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
2004 2003 2004 2003
-------------- ------------- -------------- -------------
RATES PER DAY WORKED ($): (1) (2)
Anchor Handling Towing Supply - Domestic.............. 19,115 16,712 17,417 17,191
Anchor Handling Towing Supply - Foreign............... 9,539 10,593 9,048 10,334
Crew.................................................. 3,314 3,153 3,305 3,156
Geophysical, Freight and Other(3)..................... - - - -
Mini-Supply........................................... 2,932 3,027 2,953 3,063
Standby Safety........................................ 7,719 6,559 7,707 6,549
Supply - Domestic..................................... 5,994 6,141 6,149 6,605
Supply - Foreign...................................... 9,729 9,615 9,397 9,531
Towing- Domestic...................................... 6,040 6,290 6,047 6,362
Towing - Foreign...................................... 6,775 7,050 6,667 7,098
Utility............................................... - 1,767 - 1,780
OVERALL UTILIZATION (%): (1)
Anchor Handling Towing Supply - Domestic.............. 68.3 66.8 68.3 67.4
Anchor Handling Towing Supply - Foreign............... 63.9 81.2 62.7 85.2
Crew.................................................. 89.0 79.9 85.9 79.4
Geophysical, Freight and Other(3)..................... - - - -
Mini-Supply........................................... 86.7 89.4 84.1 88.1
Standby Safety........................................ 85.9 89.5 86.4 85.5
Supply - Domestic..................................... 76.1 58.4 73.8 60.7
Supply - Foreign...................................... 72.8 93.9 73.1 94.8
Towing - Domestic..................................... 91.8 97.1 70.7 95.6
Towing - Foreign...................................... 61.8 88.2 64.9 85.0
Utility............................................... - 56.7 - 55.9
Overall Fleet..................................... 83.2 77.8 80.8 77.0
AVAILABLE DAYS:
Anchor Handling Towing Supply - Domestic.............. 273 455 577 905
Anchor Handling Towing Supply - Foreign............... 741 1,001 1,465 2,059
Crew.................................................. 5,921 6,654 12,109 13,497
Geophysical, Freight and Other(3)..................... - 91 91 181
Mini-Supply........................................... 2,708 2,730 5,438 5,430
Standby Safety........................................ 1,911 1,820 3,822 3,638
Supply - Domestic..................................... 731 1,026 1,521 2,286
Supply - Foreign...................................... 910 995 1,820 1,926
Towing - Domestic..................................... 182 253 455 557
Towing - Foreign...................................... 837 1,140 1,863 2,385
Utility............................................... - 3,417 - 6,845
-------------- ------------- -------------- -------------
Overall Fleet..................................... 14,214 19,582 29,161 39,709
============== ============= ============== =============
11
At June 30,
----------------------------
2004 2003
-------------- -------------
FLEET COUNT AT PERIOD END:
Anchor Handling Towing Supply - Domestic....................... 4 5
Anchor Handling Towing Supply - Foreign........................ 14 20
Crew........................................................... 75 92
Geophysical, Freight and Other................................. 1 2
Mini-Supply.................................................... 31 32
Standby Safety................................................. 27 26
Supply - Domestic.............................................. 8 11
Supply - Foreign............................................... 14 17
Towing - Domestic.............................................. 2 2
Towing - Foreign............................................... 31 36
Utility........................................................ - 40
-------------- -------------
Overall Fleet.............................................. 207(4) 283
============== =============
- --------------------
(1) Rates per day worked and overall utilization figures exclude owned
vessels that are bareboat chartered-out, minority-owned joint venture
vessels and managed vessels and include vessels bareboat and time
chartered-in by the Company.
(2) Revenues for certain of the Company's vessels included in the
calculation of rates per day worked, primarily its North Sea fleet,
are earned in foreign currencies, primarily Pounds Sterling, and have
been converted to U.S. dollars at the weighted average exchange rate
for the periods indicated.
(3) Vessels in this class were out of service during the three and six
months ended June 2003 and three months ended March 31, 2004 and were
retired from service and sold in the three months ended June 30,
2004.
(4) Includes 129 owned, 31 chartered-in, 5 managed and 1 pooled. Joint
ventures in which the Company owned a 50% or less interest owned or
chartered-in 35 vessels and joint ventures in which the Company owned
a majority interest owned 6 vessels.
ENVIRONMENTAL SERVICES. Operating revenues decreased 6%, or $0.9 million, to
$14.7 million in the Current Year Quarter from $15.6 million in the Prior Year
Quarter but increased 43%, or $9.3 million, to 31.0 million in the Current Six
Months from $21.7 million in the Prior Six Months. Results improved with the
acquisition in the fourth quarter of 2003 of West Coast operator Foss. Foss, now
known as NRC Environmental Services Inc. ("NRCES"), provides oil spill emergency
response services, industrial and marine cleaning services, petroleum storage
tank removal and site remediation, transportation and disposal of hazardous
waste and environmental equipment and product sales. The improvement in revenues
resulting from the Foss acquisition was completely offset in the Current Year
Quarter and partly offset in the Current Six Months by a decline in the number
and severity of oil spills handled by Environmental Services.
INLAND RIVER SERVICES. Operating revenues increased 100%, or $5.0 million, to
$10.0 million in the Current Year Quarter from $5.0 million in the Prior Year
Quarter and 88%, or $8.7 million, to $18.6 million in the Current Six Months
from $9.9 million the Prior Six Months due to fleet expansion, the hauling of
greater freight volumes and an increase in cargo stored aboard dry cargo hopper
barges ("hopper barges"). Freight rates remained generally constant between
years.
Inland River Services' barge fleet consists of 912 units as of June 30, 2004,
including 514 owned, 182 chartered-in, 210 managed for third parties and 6 joint
ventured. Net fleet additions since the beginning of 2003 have totaled 377
barges, primarily including newly constructed and chartered-in hopper barges.
Freight volumes hauled by Inland River Services were higher in the Current Year
Quarter for non-grain shipments, exceeding declines in freight volumes hauled of
grain products. Storage revenue increased in the Current Six Months due to
higher levels of fertilizer imports and adverse river conditions during the
winter months.
OTHER. Operating revenues increased 23%, or $1.3 million, to $6.7 million in the
Current Year Quarter from $5.4 million in the Prior Year Quarter and 18%, or
$1.9 million, to $12.5 million in the Current Six Months from $10.6 million in
the Prior Six Months. These changes were principally due to increased flight
hours resulting from helicopter fleet expansion in Aviation Services.
12
OPERATING INCOME (LOSS) BY BUSINESS SEGMENT
For the Three Months Ended June 30, For the Six Months Ended June 30,
----------------------------------- ---------------------------------
(in thousands) 2004 2003 2004 2003
- ---------------------------------------------- --------------- --------------- -------------- ---------------
BUSINESS SEGMENT:
Offshore Marine Services................... $ 4,677 $ 5,869 $ 3,152 $ 14,489
Environmental Services..................... 816 5,213 1,770 4,814
Inland River Services...................... 932 845 1,948 1,728
Other...................................... (1,308) (96) (3,203) (403)
Corporate.................................. (3,369) (2,779) (6,374) (5,384)
--------------- --------------- -------------- ---------------
$ 1,748 $ 9,052 $ (2,707) $ 15,244
=============== =============== ============== ===============
OFFSHORE MARINE SERVICES. Operating income decreased 20%, or $1.2 million, to
$4.7 million in the Current Year Quarter from $5.9 million in the Prior Year
Quarter and 78%, or $11.3 million, to $3.2 million in the Current Six Months
from $14.5 million in the Prior Six Months resulting primarily from those
factors affecting operating revenues outlined above and higher operating
expenses. Decreases in operating income were partly offset by increased gains on
asset sales.
A raise in compensation in the third quarter of 2003 for United Kingdom seamen
increased wage expense. Repairs to a disproportionate number of larger vessels
in the Current Six Months increased drydock expense. Thirty-four vessels were
drydocked in the Current Six Months for an aggregate cost of $5.1 million.
Higher vessel importation fees in certain West African countries increased port
expense. The provisioning for loss contingencies with respect to insurance
contract deductibles increased claims expense.
Operating income in the Current Year Quarter and Current Six Months included
gains from asset sales of $6.4 million and $9.8 million, respectively, an
increase of $5.8 million and $3.9 million as compared to the Prior Year Quarter
and Prior Six Months, respectively. In the Current Six Months, the Company sold
42 vessels that had a carrying value of $48.3 million. Dispositions included
Offshore Marine Services' 19 remaining "retired from service" vessels and 1 that
was leased-back.
ENVIRONMENTAL SERVICES. Operating income decreased 85%, or $4.4 million, to $0.8
million in the Current Year Quarter from $5.2 million in the Prior Year Quarter
and 63%, or $3.0 million, to $1.8 million in the Current Six Months from $4.8
million in the Prior Six Months. A decline in profit margins earned and the
number and severity of oil spills managed by Environmental Services lowered
operating income. These declines were partly offset by reduced depreciation
expense upon certain assets having reached the end of their depreciable lives.
INLAND RIVER SERVICES. Operating income increased 12%, or $0.1 million, to $0.9
million in the Current Year Quarter from $0.8 million in the Prior Year Quarter
and 12%, or $0.2 million, to $1.9 million in the Current Six Months from $1.7
million in the Prior Six Months. Higher fuel and non-grain shipment costs and
the recent charter-in of 182 hopper barges, operating expenses of which exceed
that for hopper barges owned by Inland River Services, significantly offset
increases in operating revenues.
OTHER. Operating loss increased 1,200%, or $1.2 million, to $1.3 million in the
Current Year Quarter from $0.1 million in the Prior Year Quarter and 700%, or
$2.8 million, to $3.2 million in the Current Six Months from $0.4 million in the
Prior Six Months. Other operating loss primarily resulted from the activities of
Aviation Services. An increase in expenses resulting from the commencement of
operation of six new helicopters in the third and fourth quarters of 2003 and
the first quarter of 2004, including costs for mandatory FAA proving flights and
flight and maintenance training related to introducing a new type of
medium-sized twin engine helicopter, and major repairs to restore to service
existing helicopters whose status was non-operational substantially exceeded the
increase between comparable periods of operating revenues. Aviation Services'
operating results are expected to improve in future periods with an increase in
flight hours although it remains dependent on offshore production and drilling
activities of major oil and production management companies operating in the
U.S. Gulf of Mexico.
CORPORATE. Corporate expenses increased 21%, or $0.6 million, to $3.4 million in
the Current Year Quarter from $2.8 million in the Prior Year Quarter and 18%, or
$1.0 million, to $6.4 million in the Current Six Months from $5.4 million in the
Prior Six Months primarily due to increased public reporting costs, losses on
sale of assets and rental expenses partly offset by reduced information
technology costs. Expenses additionally increased in the Current Six Months due
to higher legal and professional costs.
13
OTHER INCOME, NET
For the Three Months Ended June 30, For the Six Months Ended June 30,
----------------------------------- ---------------------------------
(in thousands) 2004 2003 2004 2003
- --------------------------------------------- --------------- ---------------- --------------- --------------
Net interest expense......................... $ (3,725) $ (2,549) $ (7,724) $ (5,499)
Debt extinguishment.......................... - (966) - (2,091)
Derivative income (loss), net................ (560) 2,624 (481) 4,373
Foreign currency transaction gains, net...... (689) 1,294 (223) 1,829
Marketable securities sale gains, net........ 2,753 1,250 5,502 3,441
Other, net................................... 233 (747) 352 (744)
--------------- --------------- --------------- ----------------
$ (1,988) $ 906 $ (2,574) $ 1,309
=============== =============== =============== ================
NET INTEREST EXPENSE. Net interest expense increased 48%, or $1.2 million, to
$3.7 million in the Current Year Quarter from $2.5 million in the Prior Year
Quarter and 40%, or $2.2 million, to $7.7 million in the Current Six Months from
$5.5 million in the Prior Six Months due primarily to lower invested cash
balances and reductions in the associated interest rates. Interest expense
savings resulting from the repayment of loans that financed vessel acquisitions
and the redemption of the Company's 5-3/8% Convertible Subordinated Notes Due
2006 ("5-3/8% Notes") were offset by the 2003 fourth quarter termination of
interest rate swap agreements with respect to the Company's 7.2% Notes and
reduced capitalized interest.
DEBT EXTINGUISHMENT. On February 20, 2003, the Company redeemed the outstanding
principal amount of its 5-3/8% Notes, and on April 7, 2003 accelerated the
repayment of notes due prior shareholders of an acquired company. These debt
repayments resulted in a write-off of related unamortized deferred financing
costs and premium payments totaling $1.0 million and $2.1 million in the Current
Year Quarter and Current Six Months, respectively.
DERIVATIVE INCOME (LOSS), NET. Derivative transactions resulted in a loss of
$0.6 million and $0.5 million in the Current Year Quarter and Current Six Months
as compared to income of $2.6 million and $4.4 million in the Prior Year Quarter
and Prior Six Months. Derivative losses resulted primarily from foreign currency
exchange futures and forward transactions. Whereas, derivative income in the
Prior Year Quarter included a non-recurring $2.6 million gain from interest swap
agreements that terminated in the fourth quarter of 2003 and Prior Six Months
additionally included a $2.2 million gain resulting from the revaluation of
costless collars associated with the Company's common stock investment in ENSCO
International Incorporated. These costless collars were terminated in the second
quarter of 2003.
MARKETABLE SECURITIES SALE GAINS, NET. Marketable securities sale gains
increased 115%, or $1.5 million, to $2.8 million in the Current Year Quarter
from $1.3 million in the Prior Year Quarter and 62%, or $2.1 million, to $5.5
million in the Current Six Months from $3.4 million in the Prior Six Months.
Security sale gains primarily resulted from the sale of equity securities.
INCOME TAXES
The Company's income tax rate decreased to 25.2% in the Current Six Months from
36.2% in the Prior Six Months primarily due to tax provisions for state
jurisdictions with taxable income and the consequence of non-deductible
compensation expenses excluded from the U.S. consolidated tax return. The income
tax rate decline in the Current Year Quarter from the Prior Year Quarter was
primarily due to similar items; however, their impact on the Current Year
Quarter's income tax rate was magnified as a result of the Company's modest loss
before taxes, minority interest and equity earnings.
EQUITY EARNINGS
Equity earnings increased 109%, or $0.4 million, to $0.7 million in the Current
Year Quarter from $0.3 million in the Prior Year Quarter and 119%, or $0.7
million, to $1.2 million in the Current Six Months from $0.6 million in the
Prior Six Months. An improvement in the operating results of the Company's
offshore marine joint ventures was partly offset by a loss recognized on the
sale of an interest in an Asian joint venture. Results for the Current Six
Months additionally included an impairment charge relating to the Company's
investment in an entity that develops and sells software to the ship brokerage
and shipping industry.
14
LIQUIDITY AND CAPITAL RESOURCES
GENERAL
The Company's ongoing liquidity requirements arise primarily from the funding of
working capital needs, acquisition, construction or improvement of equipment,
repayment of debt obligations, repurchase of common stock and purchase of other
investments. The Company's principal sources of liquidity are cash balances,
available-for-sale securities, construction reserve funds, cash flows from
operations and borrowings under its revolving credit facility although, from
time to time, it may issue debt, shares of its common stock, preferred stock, or
a combination thereof, or sell vessels and other assets to finance the
acquisition of equipment and businesses or make improvements to existing
equipment.
As of June 30, 2004, the Company had $188.8 million available for use under a
five year, non-reducing, unsecured revolving credit facility that terminates in
February 2007. On July 22, 2004, the amount available declined $10.0 million as
a result of additional borrowings under the Company`s revolving credit facility.
OPERATING ACTIVITIES
Cash flows provided by operating activities were $0.3 million in the Current Six
Months and $15.4 million in the Prior Six Months. The decline in operating cash
flows resulted primarily from the decline in net earnings between the comparable
periods (see Consolidated Results of Operations discussion above).
INVESTING ACTIVITIES
Cash flows used in investing activities were $48.9 million in Current Six Months
as compared to cash flows provided by investing activities of $5.1 million in
the Prior Six Months. The decline in investing cash flows resulted primarily
from a net increase in available-for-sale security purchases, reduced proceeds
from equipment sales and increased deposits in construction reserve funds for
future purchase of vessels or barges.
The Company's unfunded capital commitments as of June 30, 2004 for 5 new and 1
used vessel, 183 new hopper barges, 39 new chemical tank barges, 7 new
helicopters and other equipment totaled $113.2 million. Deliveries are expected
throughout 2004 and 2005. The Company also holds options to purchase 150 new
hopper barges for delivery in 2005.
FINANCING ACTIVITIES
Cash flows used in financing activities were $2.5 million in the Current Six
Months and $117.0 million in the Prior Six Months. The Company repaid $71.3
million of its outstanding indebtedness in the Prior Six Months with proceeds
from the sale in 2002 of its 5-7/8% Notes. In addition, fewer shares of the
Company's common stock were acquired between comparable periods pursuant to the
Company's Stock and Debt Repurchase Plan. During the Current Year Quarter, the
Company borrowed $10.0 million under its revolving credit facility.
During the Current Six Months, the Company acquired 319,457 shares of its common
stock for treasury at aggregate cost of $12.8 million pursuant to the Company's
stock and debt repurchase plan. As of June 30, 2004, $45.4 million of authority
issued by the Company's Board of Directors remains available to acquire
additional shares of the Company's common stock, its 7.2% Notes and its 5-7/8%
Notes. Securities acquired pursuant to the Company's repurchase plan may be
conducted from time to time through open market purchases, privately negotiated
transactions or otherwise, depending on market conditions.
FINANCIAL POSITION
Total assets of the Company remained constant at $1.4 billion between June 30,
2004 and December 31, 2003. The Company's combined cash, available-for-sale
securities and construction reserve funds increased 1% to $441.8 million and
represented 32% of total assets at quarter end. Net property and equipment
decreased 1% to $731.5 million and represented 52% of total assets at quarter
end. Long-term debt increased 3% to $342.3 million.
15
SHORT AND LONG-TERM LIQUIDITY REQUIREMENTS
The Company anticipates it will generate positive cash flows from operations in
the near term and these cash flows will be adequate to meet the Company's
working capital requirements and contribute toward defraying the costs of its
capital expenditures. As in the past and in further support of the Company's
capital expenditure program, the Company intends to sell vessels, enter into
sale and leaseback transactions for vessels, borrow under its revolving credit
facility or utilize construction reserve funds, or a combination thereof. To the
extent the Company relies on existing cash balances, proceeds from the sale of
available-for-sale securities or construction reserve funds, the Company's
liquidity would be reduced.
The Company's long-term liquidity is dependent upon its ability to generate
operating cash flows sufficient to meet its requirements for working capital,
capital expenditures and a reasonable return on shareholders' investment. The
Company believes that earning such operating profits will permit it to maintain
its access to favorably priced debt, equity and off-balance sheet financing
arrangements. With the cyclical nature of the energy business and the recent
adverse effect it has had on the Company's results of operations and cash flows,
the Company has adopted a strategy of reducing its overall dependency on
Offshore Marine Services and reinvesting certain of its capital resources in
Inland River Services.
CONTINGENCIES
The Company has guaranteed the payment of amounts owed by certain of its joint
ventures under charter agreements that expire through October 2009. As of June
30, 2004, the total amount of future charter payments guaranteed by the Company
was $16.2 million.
The Internal Revenue Service ("IRS") previously indicated that it was
considering whether to propose a change in the manner in which vessel assets are
classified for purposes of depreciation. If this change were proposed it would
result in the assertion of a deficiency in the amount of taxes paid in 2001
based on the manner in which the Company's vessel assets were classified for
purposes of depreciation. The Company has been verbally advised that the IRS has
determined that it should not propose a change in the classification of the
vessel assets for depreciation purposes. However, the IRS has recently proposed
potential adjustments relating to the deduction of certain other expenses
included in the Company's income tax returns for fiscal years 2000 and 2001. The
Company believes that any income taxes ultimately assessed will not exceed
amounts already reported in its financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There has been no material change in the Company's exposure to market risk
during the Current Six Months. For discussion of the Company's exposure to
market risk, refer to Item 7A, Quantitative and Qualitative Disclosures about
Market Risk, contained in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2003.
ITEM 4. CONTROLS AND PROCEDURES
The Company's management, with the participation of the Company's Chief
Executive Officer and Chief Financial Officer, has evaluated the effectiveness
of the Company's disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), as of June 30, 2004. Based on their evaluation, the
Company's Chief Executive Officer and Chief Financial Officer concluded that the
Company's disclosure controls and procedures were effective as of June 30, 2004.
There has been no change in the Company's internal control over financial
reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)
that occurred during the Company's fiscal quarter ended June 30, 2004, that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.
16
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF
EQUITY SECURITIES
This table provides information with respect to purchases by the Company of
shares of its Common Stock during the Current Six Months:
Period Total Number Average Price Paid Total Number of Shares Approximate Dollar Value of
of Shares per Share Purchased as Part of Shares that May Yet Be
Purchased Publicly Announced Plans or Purchased Under the Plans or
Programs Programs
---------------------------- -------------- -------------------- ------------------------------ ------------------------------
April 1 - 30, 2004 7,200 $39.68 7,200 $53,811,000
May 1 - 31, 2004 107,100 $38.59 107,100 $49,671,000
June 1 - 30, 2004 106,100 $40.49 106,100 $45,371,000
-------------- ------------------------------
Total 220,400 $39.59 220,400
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of stockholders of SEACOR was held on May 19, 2004. The
following table gives a brief description of each matter voted upon at that
meeting and, as applicable, the number of votes cast for, against or withheld,
as well as the number of abstentions and broker non-votes.
Description of Matter For Against Withheld Abstentions Broker Non-Votes
--------------------- --- ------- -------- ----------- ----------------
1. Election of Directors:
Charles Fabrikant............... 16,986,768 N/A 171,631 N/A N/A
Andrew Morse.................... 16,986,818 N/A 171,581 N/A N/A
Michael E. Gellert.............. 16,986,818 N/A 171,581 N/A N/A
Stephen Stamas.................. 16,985,620 N/A 172,779 N/A N/A
Richard M. Fairbanks III........ 16,986,818 N/A 171,581 N/A N/A
Pierre de Demandolx............. 16,986,118 N/A 172,281 N/A N/A
John C. Hadjipateras............ 16,986,768 N/A 171,631 N/A N/A
Oivind Lorentzen................ 16,986,120 N/A 172,279 N/A N/A
James A.F. Cowderoy............. 16,985,578 N/A 172,821 N/A N/A
Steven J. Wisch................. 16,986,818 N/A 171,581 N/A N/A
2. Ratification of the appointment of
Ernst & Young LLP as the Company's
independent auditors for the fiscal
year ending December 31, 2004...... 17,049,685 106,553 N/A 2,161 N/A
17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits:
31.1 Certification of Chief Executive Officer pursuant to Rule
13a-14(a) and Rule 15d-14(a) of the Securities Exchange
Act, as amended.
31.2 Certification of Chief Financial Officer pursuant to Rule
13a-14(a) and Rule 15d-14(a) of the Securities Exchange
Act, as amended.
32.1 Certification of Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
B. Reports on Form 8-K:
The Company furnished the following current report related to the
quarter ended June 30, 2004 with the Securities and Exchange
Commission:
(i) Current Report on Form 8-K, dated May 3, 2004, reporting
under Item 12 that, on May 3, 2004, the Company issued a
press release announcing its financial results for the
first quarter ended March 31, 2004.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SEACOR Holdings Inc.
(Registrant)
DATE: AUGUST 9, 2004 By: /s/ Charles Fabrikant
--------------------------------------
Charles Fabrikant, Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
DATE: AUGUST 9, 2004 By: /s/ Randall Blank
--------------------------------------
Randall Blank, Executive Vice President,
Chief Financial Officer and Secretary
(Principal Financial Officer)
18
EXHIBIT INDEX
31.1 Certification by the Chief Executive Officer pursuant to Rule
13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as
amended.
31.2 Certification by the Chief Financial Officer pursuant to Rule
13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as
amended.
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
19