CKH-9.30.2012-10Q
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 ________________________________________
FORM 10-Q
________________________________________ 
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2012              or             
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number 1-12289
SEACOR Holdings Inc.
(Exact Name of Registrant as Specified in Its Charter)
________________________________________ 
Delaware
 
13-3542736
(State or Other Jurisdiction of
Incorporation or Organization)
 
(IRS Employer
Identification No.)
 
 
2200 Eller Drive, P.O. Box 13038,
 
 
Fort Lauderdale, Florida
 
33316
(Address of Principal Executive Offices)
 
(Zip Code)
954-523-2200
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
________________________________________ 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  ý     No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer  x
 
Accelerated filer  ¨
 
Non-accelerated filer  ¨
(Do not check if a smaller
reporting company)
 
Smaller reporting company  ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ¨    No  ý
The total number of shares of common stock, par value $.01 per share, outstanding as of October 26, 2012 was 20,852,851. The Registrant has no other class of common stock outstanding.

Table of Contents

SEACOR HOLDINGS INC.
Table of Contents
 
Part I.
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
 
Item 3.
 
 
 
 
Item 4.
 
 
 
Part II.
 
 
 
 
Item 1.
 
 
 
 
 
Item 1A.
 
 
 
 
 
Item 2.
 
 
 
 
 
Item 4.
 
 
 
 
 
Item 6.


1
Table of Contents

PART I—FINANCIAL INFORMATION

ITEM 1.
FINANCIAL STATEMENTS
SEACOR HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data, unaudited)
 
September 30,
2012
 
December 31,
2011
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
207,542

 
$
462,188

Restricted cash
191,782

 
21,281

Marketable securities
22,134

 
66,898

Receivables:
 
 
 
Trade, net of allowance for doubtful accounts of $6,119 and $3,652 in 2012 and 2011, respectively
312,993

 
303,843

Other
69,126

 
51,793

Inventories
77,858

 
69,109

Deferred income taxes
11,123

 
11,123

Prepaid expenses and other
16,203

 
9,323

Discontinued operations
3,025

 
44,989

Total current assets
911,786

 
1,040,547

Property and Equipment
3,379,826

 
3,018,145

Accumulated depreciation
(976,605
)
 
(867,914
)
Net property and equipment
2,403,221

 
2,150,231

Investments, at Equity, and Advances to 50% or Less Owned Companies
266,589

 
249,753

Construction Reserve Funds & Title XI Reserve Funds
179,932

 
259,974

Goodwill
57,054

 
57,054

Intangible Assets, Net
19,931

 
21,528

Other Assets
78,723

 
102,348

Discontinued Operations
—

 
46,699

 
$
3,917,236

 
$
3,928,134

LIABILITIES AND EQUITY
 
 
 
Current Liabilities:
 
 
 
Current portion of long-term debt
$
196,326

 
$
41,091

Current portion of capital lease obligations
4,442

 
2,368

Accounts payable and accrued expenses
152,948

 
185,156

Other current liabilities
143,255

 
150,864

Discontinued operations
(309
)
 
22,047

Total current liabilities
496,662

 
401,526

Long-Term Debt
813,322

 
995,450

Capital Lease Obligations
87

 
3,068

Deferred Income Taxes
602,195

 
566,920

Deferred Gains and Other Liabilities
121,486

 
143,390

Discontinued Operations
—

 
9,717

Total liabilities
2,033,752

 
2,120,071

Equity:
 
 
 
SEACOR Holdings Inc. stockholders’ equity:
 
 
 
Preferred stock, $.01 par value, 10,000,000 shares authorized; none issued nor outstanding
—

 
—

Common stock, $.01 par value, 60,000,000 shares authorized; 36,653,248 and 36,444,439 shares issued in 2012 and 2011, respectively
366

 
364

Additional paid-in capital
1,277,751

 
1,256,209

Retained earnings
1,576,518

 
1,512,679

Shares held in treasury of 15,802,497 and 15,511,323 in 2012 and 2011, respectively, at cost
(997,541
)
 
(971,687
)
Accumulated other comprehensive loss, net of tax
(3,604
)
 
(7,958
)
 
1,853,490

 
1,789,607

Noncontrolling interests in subsidiaries
29,994

 
18,456

Total equity
1,883,484

 
1,808,063

 
$
3,917,236

 
$
3,928,134


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

1
Table of Contents

SEACOR HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share data, unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
Operating Revenues
$
462,058

 
$
545,089

 
$
1,454,365

 
$
1,492,383

Costs and Expenses:
 
 
 
 
 
 
 
Operating
340,947

 
455,442

 
1,128,269

 
1,206,550

Administrative and general
50,460

 
35,387

 
141,758

 
116,211

Depreciation and amortization
45,285

 
36,437

 
128,297

 
114,097

 
436,692

 
527,266

 
1,398,324

 
1,436,858

Gains on Asset Dispositions and Impairments, Net
9,677

 
10,986

 
19,638

 
28,542

Operating Income
35,043

 
28,809

 
75,679

 
84,067

Other Income (Expense):
 
 
 
 
 
 
 
Interest income
4,144

 
5,462

 
14,761

 
12,491

Interest expense
(12,679
)
 
(10,711
)
 
(37,116
)
 
(31,216
)
Debt extinguishment losses, net
—

 
(51
)
 
(160
)
 
(99
)
Marketable security gains (losses), net
(1,730
)
 
130

 
13,224

 
(3,090
)
Derivative losses, net
(4,649
)
 
(25,954
)
 
(5,281
)
 
(35,873
)
Foreign currency gains (losses), net
632

 
(3,126
)
 
2,192

 
3,349

Other, net
7,098

 
(39
)
 
7,487

 
(273
)
 
(7,184
)
 
(34,289
)
 
(4,893
)
 
(54,711
)
Income (Loss) from Continuing Operations Before
  Income Tax Expense (Benefit) and Equity in Earnings
  (Losses) of 50% or Less Owned Companies
27,859

 
(5,480
)
 
70,786

 
29,356

Income Tax Expense (Benefit)
11,277

 
(669
)
 
27,860

 
12,881

Income (Loss) from Continuing Operations Before Equity
  in Earnings (Losses) of 50% or Less Owned Companies
16,582

 
(4,811
)
 
42,926

 
16,475

Equity in Earnings (Losses) of 50% or Less Owned
  Companies, Net of Tax
(1,078
)
 
9,655

 
1,215

 
10,569

Income from Continuing Operations
15,504

 
4,844

 
44,141

 
27,044

Income (Loss) from Discontinued Operations, Net of Tax
—

 
(782
)
 
19,035

 
(2,146
)
Net Income
15,504

 
4,062

 
63,176

 
24,898

Net Income (Loss) attributable to Noncontrolling Interests
  in Subsidiaries
(598
)
 
247

 
(663
)
 
882

Net Income attributable to SEACOR Holdings Inc.
$
16,102

 
$
3,815

 
$
63,839

 
$
24,016

 
 
 
 
 
 
 
 
Net Income (Loss) attributable to SEACOR Holdings Inc.:
 
 
 
 
 
 
Continuing operations
$
16,102

 
$
4,597

 
$
44,804

 
$
26,162

Discontinued operations
—

 
(782
)
 
19,035

 
(2,146
)
 
$
16,102

 
$
3,815

 
$
63,839

 
$
24,016

 
 
 
 
 
 
 
 
Basic Earnings (Loss) Per Common Share of SEACOR Holdings Inc.:
 
 
 
 
 
 
Continuing operations
$
0.79

 
$
0.22

 
$
2.18

 
$
1.24

Discontinued operations
—

 
(0.04
)
 
0.93

 
(0.10
)
 
$
0.79

 
$
0.18

 
$
3.11

 
$
1.14

 
 
 
 
 
 
 
 
Diluted Earnings (Loss) Per Common Share of SEACOR Holdings Inc.:
 
 
 
 
 
 
Continuing operations
$
0.78

 
$
0.21

 
$
2.15

 
$
1.22

Discontinued operations
—

 
(0.03
)
 
0.91

 
(0.10
)
 
$
0.78

 
$
0.18

 
$
3.06

 
$
1.12

 
 
 
 
 
 
 
 
Weighted Average Common Shares Outstanding:
 
 
 
 
 
 
 
Basic
20,432,997

 
21,202,480

 
20,512,118

 
21,158,110

Diluted
20,740,456

 
21,565,149

 
20,838,468

 
21,508,457

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

2
Table of Contents

SEACOR HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, unaudited)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2012
 
2011
 
2012
 
2011
Net Income
 
$
15,504

 
$
4,062

 
$
63,176

 
$
24,898

Other Comprehensive Income (Loss):
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
 
2,123

 
(3,760
)
 
3,908

 
(2,015
)
Reclassification of net foreign currency translation losses to foreign currency gains (losses), net
 
—

 
—

 
758

 
—

Derivative losses on cash flow hedges
 
(491
)
 
(1,154
)
 
(1,238
)
 
(3,448
)
Reclassification of net derivative losses on cash flow hedges to interest expense or equity in earnings of 50% or less owned companies
 
694

 
605

 
2,285

 
1,456

Reclassification of net derivative losses on cash flow hedges to derivative losses, net upon dedesignation
 
1,330

 
—

 
1,330

 
—

Other
 
—

 
—

 
42

 
—

 
 
3,656

 
(4,309
)
 
7,085

 
(4,007
)
Income tax (expense) benefit
 
(1,200
)
 
1,508

 
(2,345
)
 
1,402

 
 
2,456

 
(2,801
)
 
4,740

 
(2,605
)
Comprehensive Income
 
17,960

 
1,261

 
67,916

 
22,293

Comprehensive Income (Loss) attributable to Noncontrolling Interests in Subsidiaries
 
(369
)
 
247

 
(277
)
 
882

Comprehensive Income attributable to SEACOR Holdings Inc.
 
$
18,329

 
$
1,014

 
$
68,193

 
$
21,411
















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

3
Table of Contents

SEACOR HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(in thousands, unaudited)
 
 
SEACOR Holdings Inc. Stockholders’ Equity
 
Non-
Controlling
Interests In
Subsidiaries
 
Total
Equity
 
 
Common
Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Shares
Held In
Treasury
 
Accumulated
Other
Comprehensive
Loss
 
December 31, 2011
 
$
364

 
$
1,256,209

 
$
1,512,679

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

 
$
1,808,063

Issuance of common stock:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Employee Stock Purchase Plan
 
—

 
—

 
—

 
2,963

 
—

 
—

 
2,963

Exercise of stock options
 
1

 
5,050

 
—

 
—

 
—

 
—

 
5,051

Director stock awards
 
—

 
271

 
—

 
—

 
—

 
—

 
271

Restricted stock and restricted stock units
 
1

 
384

 
—

 
(32
)
 
—

 
—

 
353

Windcat Acquisition
 
—

 
585

 
—

 
—

 
—

 
—

 
585

Purchase of treasury shares
 
—

 
—

 
—

 
(28,726
)
 
—

 
—

 
(28,726
)
Amortization of share awards
 
—

 
15,193

 
—

 
—

 
—

 
—

 
15,193

Cancellation of restricted stock
 
—

 
59

 
—

 
(59
)
 
—

 
—

 
—

Acquisition of subsidiary with noncontrolling interests
 
—

 
—

 
—

 
—

 
—

 
13,710

 
13,710

Issuance of noncontrolling interests
 
—

 
—

 
—

 
—

 
—

 
83

 
83

Dividends paid to noncontrolling interests
 
—

 
—

 
—

 
—

 
—

 
(1,978
)
 
(1,978
)
Net income (loss)
 
—

 
—

 
63,839

 
—

 
—

 
(663
)
 
63,176

Other comprehensive income
 
—

 
—

 
—

 
—

 
4,354

 
386

 
4,740

Nine months ended September 30, 2012
 
$
366

 
$
1,277,751

 
$
1,576,518

 
$
(997,541
)
 
$
(3,604
)
 
$
29,994

 
$
1,883,484
































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

4
Table of Contents

SEACOR HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
 
Nine Months Ended September 30,
 
2012
 
2011
Net Cash Provided by Operating Activities of Continuing Operations
$
139,073

 
$
166,295

Cash Flows from Investing Activities of Continuing Operations:
 
 
 
Purchases of property and equipment
(256,973
)
 
(206,611
)
Proceeds from disposition of property and equipment
19,602

 
50,561

Cash settlements on derivative transactions, net
(307
)
 
7,000

Investments in and advances to 50% or less owned companies
(46,364
)
 
(52,309
)
Return of investments and advances from 50% or less owned companies
80,706

 
20,184

Net advances on revolving credit line to 50% or less owned companies
(300
)
 
(8,233
)
Principal payments (advances) on third party notes receivable, net
18,583

 
(33,585
)
Net increase in restricted cash
(170,501
)
 
(6,823
)
Net decrease in construction reserve funds and Title XI reserve funds
80,042

 
25,540

Net increase in escrow deposits on like-kind exchanges
—

 
(5,046
)
Repayments on leases, net
2,586

 
7,888

Business acquisitions, net of cash acquired
(148,088
)
 
(40,924
)
Net cash used in investing activities of continuing operations
(421,014
)
 
(242,358
)
Cash Flows from Financing Activities of Continuing Operations:
 
 
 
Payments on long-term debt and capital lease obligations
(169,268
)
 
(33,689
)
Net borrowings (repayments) on inventory financing arrangements
(13,368
)
 
10,196

Proceeds from issuance of long-term debt
153,134

 
375

Common stock acquired for treasury
(28,726
)
 
—

Proceeds and tax benefits from share award plans
8,400

 
8,684

Purchase of subsidiary shares from noncontrolling interests
—

 
(1,149
)
Dividends paid to noncontrolling interests, net of cash received
(1,895
)
 
(252
)
Net cash used in financing activities of continuing operations
(51,723
)
 
(15,835
)
Effects of Exchange Rate Changes on Cash and Cash Equivalents
2,604

 
4,196

Net Decrease in Cash and Cash Equivalents from Continuing Operations
(331,060
)
 
(87,702
)
Cash Flows from Discontinued Operations:
 
 
 
Operating Activities
(12,043
)
 
29,784

Investing Activities
88,430

 
(5,805
)
Effects of Exchange Rate Changes on Cash and Cash Equivalents
27

 
(3
)
Net Increase in Cash and Cash Equivalents from Discontinued Operations
76,414

 
23,976

Net Decrease in Cash and Cash Equivalents
(254,646
)
 
(63,726
)
Cash and Cash Equivalents, Beginning of Period
462,188

 
365,329

Cash and Cash Equivalents, End of Period
$
207,542

 
$
301,603




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

5
Table of Contents

SEACOR HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
 
1.
BASIS OF PRESENTATION AND ACCOUNTING POLICY

The condensed consolidated financial information for the three and nine months ended September 30, 2012 and 2011 has been prepared by the Company and has not been audited by its independent registered public accounting firm. The condensed consolidated financial statements include the accounts of SEACOR Holdings Inc. and its consolidated subsidiaries. In the opinion of management, all adjustments (consisting of normal recurring adjustments) have been made to fairly present the Company’s financial position as of September 30, 2012, its results of operations for the three and nine months ended September 30, 2012 and 2011, its comprehensive income for the three and nine months ended September 30, 2012 and 2011, its changes in equity for the nine months ended September 30, 2012, and its cash flows for the nine months ended September 30, 2012 and 2011. Results of operations for the interim periods presented are not necessarily indicative of operating results for the full year or any future periods.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.
Unless the context otherwise indicates, any reference in this Quarterly Report on Form 10-Q to the “Company” refers to SEACOR Holdings Inc. and its consolidated subsidiaries and any reference in this Quarterly Report on Form 10-Q to “SEACOR” refers to SEACOR Holdings Inc.
Discontinued Operations. The Company's Environmental Services business segment was conducted through SEACOR Environmental Services Inc. ("SES") and O'Brien's Response Management Inc. ("ORM"). SES included National Response Corporation, one of the largest providers of oil spill response services in the United States; NRC Environmental Services Inc., a leading provider of environmental and industrial services on the West Coast of the United States; SEACOR Response Ltd., which provides oil spill response and emergency response services to customers in international markets; and certain other subsidiaries (collectively the "SES Business"). On March 16, 2012, the Company sold the SES Business for a net sales price of $99.9 million and recognized a gain of $20.8 million, net of tax, or $1.00 per diluted share. The transaction did not include ORM, a leading provider of crisis and emergency preparedness and response services. The Company has no continuing involvement in the SES Business, although the sales agreement provides that the Company may receive contingent consideration equal to a portion of the revenue generated by any extraordinary oil spill response that occurs within three years following the date of sale. For all periods presented, the Company has reported the financial position, results of operations and cash flows for the SES Business as discontinued operations in the accompanying condensed consolidated financial statements. Operating revenues from the SES Business were $22.4 million and $87.8 million for the nine months ended September 30, 2012 and 2011, respectively. The remaining ORM business in the segment was renamed Emergency and Crisis Services.
Revenue Recognition. The Company recognizes revenue when it is realized or realizable and earned. Revenue is realized or realizable and earned when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price to the buyer is fixed or determinable, and collectability is reasonably assured. Revenue that does not meet these criteria is deferred until the criteria are met. Deferred revenues, included in other current liabilities, for the nine months ended September 30 were as follows (in thousands): 
 
2012
 
2011
Balance at beginning of period
$
9,968

 
$
21,045

Revenues deferred during the period
21,794

 
6,518

Revenues recognized during the period
(14,975
)
 
(13,313
)
Write-off of previously deferred revenues
—

 
(16
)
Balance at end of period
$
16,787

 
$
14,234

As of September 30, 2012, deferred revenues included $5.6 million relating to the time charter of several offshore support vessels operating in the U.S. Gulf of Mexico that are scheduled to be paid through the conveyance of an overriding royalty interest (the "Conveyance") in developmental oil and gas producing properties operated by a customer. Payments under the Conveyance, and the timing of such payments, are contingent upon production and energy sale prices. On August 17, 2012, the customer filed a voluntary petition for Chapter 11 bankruptcy. The Company is vigorously defending its interest in connection with the bankruptcy filing, however the resumption of payments due under the Conveyance are uncertain and dependent upon bankruptcy court approval. The Company will continue to recognize revenues as cash is received or earlier should future payments become determinable. All costs and expenses related to these charters were recognized as incurred.

6
Table of Contents

As of September 30, 2012, deferred revenues included $7.7 million related to contract-lease revenues for certain helicopters leased by Aviation Services to Aeroleo Taxi Aero S/A ("Aeroleo"), its Brazilian joint venture (see Note 6). The deferral resulted from difficulties experienced by Aeroleo following one of its customer's cancellation of certain contracts for a number of AW139 helicopters under contract-lease from Aviation Services. The Company will recognize revenues as cash is received or earlier should future collectability become reasonably assured. All costs and expenses related to these contract-leases were recognized as incurred.
As of September 30, 2012, deferred revenues also included $3.4 million related to contract-lease revenues for certain helicopters leased by Aviation Services to one of its customers. The deferral resulted from the customer having its operating certificate revoked for a period of time and therefore being unable to operate. The certificate has since been reinstated but uncertainty still remains regarding the collectability of the contract-lease revenues. The Company will recognize revenues as cash is received or earlier should future collectability become reasonably assured. All costs and expenses related to these contract-leases were recognized as incurred.
For the nine months ended September 30, 2012, the Company revised the presentation of certain buy and sell crude oil contracts entered into by its Commodity Trading and Logistics business segment to net operating revenues rather than gross operating revenues and operating expenses.  This change in presentation had no impact on the Company's financial position, operating income, segment profit, net income attributable to SEACOR Holdings Inc., earnings per share or cash flows for any period reported.  Operating results of the Company's Commodity Trading and Logistics business segment for the three months ended September 30, 2012 included cumulative adjustments that reduced operating revenues and operating expenses each by $27.9 million to affect the revised presentation.  The Company believes the impact of this revised presentation is not material to its overall financial statement presentation and previously reported results for the first and second quarters of 2012 have not been adjusted.
Reclassifications. Certain reclassifications of prior period information have been made to conform to the presentation of the current period information. These reclassifications had no effect on net income as previously reported.
2.
FAIR VALUE MEASUREMENTS

The fair value of an asset or liability is the price that would be received to sell an asset or transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company utilizes a fair value hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value and defines three levels of inputs that may be used to measure fair value. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, quoted prices in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, or inputs derived from observable market data. Level 3 inputs are unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities.
The Company’s financial assets and liabilities as of September 30, 2012 that are measured at fair value on a recurring basis were as follows (in thousands):
 
Level 1
 
Level 2
 
Level 3
ASSETS
 
 
 
 
 
Marketable securities(1)
$
22,068

 
$
66

 
$
—

Derivative instruments (included in other receivables)
4,514

 
5,873

 
—

Construction reserve funds and Title XI reserve funds
179,932

 
—

 
—

LIABILITIES
 
 
 
 
 
Short sale of marketable securities (included in other current liabilities)
8,860

 
—

 
—

Derivative instruments (included in other current liabilities)
3,939

 
7,104

 
—

 ______________________
(1)
Marketable security gains (losses), net include unrealized losses of $2.0 million and $3.7 million for the three months ended September 30, 2012 and 2011, respectively, related to marketable security positions held by the Company as of September 30, 2012. Marketable security gains (losses), net include unrealized losses of $0.6 million and $3.2 million for the nine months ended September 30, 2012 and 2011, respectively, related to marketable security positions held by the Company as of September 30, 2012.

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The estimated fair values of the Company’s other financial assets and liabilities as of September 30, 2012 were as follows (in thousands): 
 
 
 
Estimated Fair Value
 
Carrying
Amount
 
Level 1
 
Level 2
 
Level 3
ASSETS
 
 
 
 
 
 
 
Cash, cash equivalents and restricted cash
$
399,324

 
$
399,324

 
$
—

 
$
—

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

 
see below
 
 
 
 
Notes receivable from other business ventures (included in other
  receivables and other assets)
41,164

 
see below
 
 
 
 
LIABILITIES
 
 
 
 
 
 
 
Long-term debt, including current portion
1,009,648

 
—

 
1,038,680

 
—

The carrying value of cash, cash equivalents and restricted cash approximates fair value. The fair value of the Company’s long-term debt was estimated based upon quoted market prices or by using discounted cash flow analyses based on estimated current rates for similar types of arrangements. It was not practicable to estimate the fair value of the Company’s investments, at cost, in 50% or less owned companies because of the lack of quoted market prices and the inability to estimate fair value without incurring excessive costs. It was not practicable to estimate the fair value of the Company’s notes receivable from other business ventures as the overall returns are uncertain due to certain provisions for additional payments contingent upon future events. Considerable judgment was required in developing certain of the estimates of fair value and, accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.
The Company’s non-financial assets and liabilities that were measured at fair value during the nine months ended September 30, 2012 were as follows (in thousands): 
 
Level 1
 
Level 2
 
Level 3
ASSETS
 
 
 
 
 
Investment in Illinois Corn Processing LLC(1)
$
—

 
$
30,916

 
$
—

 ______________________
(1)
During the nine months ended September 30, 2012, the Company marked its equity investment in its Illinois Corn Processing LLC ("ICP") joint venture to fair value following the acquisition of a controlling interest (see Note 6). The investment's fair value was determined based on a fair value analysis of the assets and liabilities of ICP.
3.
DERIVATIVE INSTRUMENTS AND HEDGING STRATEGIES

Derivative instruments are classified as either assets or liabilities based on their individual fair values. Derivative assets and liabilities are included in other receivables and other current liabilities, respectively, in the accompanying condensed consolidated balance sheets. The fair values of the Company’s derivative instruments as of September 30, 2012 were as follows (in thousands): 
 
Derivative
Asset
 
Derivative
Liability
Derivatives designated as hedging instruments:
 
 
 
Interest rate swap agreements (cash flow hedges)
$
—

 
$
3,788

 
—

 
3,788

Derivatives not designated as hedging instruments:
 
 
 
Options on equities and equity indices
752

 
96

Forward currency exchange, option and future contracts
496

 
238

Interest rate swap agreements
—

 
2,755

Commodity swap, option and future contracts:
 
 
 
Exchange traded
4,149

 
3,636

Non-exchange traded
4,990

 
530

 
10,387

 
7,255

 
$
10,387

 
$
11,043


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Fair Value Hedges. During the nine months ended September 30, 2011, the Company utilized forward currency exchange contracts designated as fair value hedges to fix a portion of its euro-denominated capital commitments in U.S. dollars to protect against currency fluctuations. As of September 30, 2012, there were no forward currency exchange contracts designated as fair value hedges.
The Company recognized gains (losses) on derivative instruments designated as fair value hedges for the nine months ended September 30 as follows (in thousands):
 
Derivative losses, net
 
2012
 
2011
Forward currency exchange contracts, effective and ineffective portions
$
—

 
$
6,517

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

 
(6,557
)
 
$
—

 
$
(40
)
Cash Flow Hedges. As of September 30, 2012, the Company is a party to various interest rate swap agreements, with maturities in 2013, which have been designated as cash flow hedges. These agreements call for the Company to pay fixed interest rates ranging from 2.46% to 2.85% on aggregate notional values of $75.0 million and receive a variable interest rate based on the London Interbank Offered Rate (“LIBOR”) on these notional values. During the nine months ended September 30, 2012, the Company dedesignated $50.0 million notional value of its interest rate swaps previously designated as cash flow hedges. Subsequent to September 30, 2012, the Company dedesignated the remaining $75.0 million notional value of its interest rate swaps previously designated as cash flow hedges. As of September 30, 2012, one of the Company’s Offshore Marine Services 50% or less owned companies had an interest rate swap agreement maturing in 2015 that has been designated as a cash flow hedge. This instrument calls for the joint venture to pay a fixed interest rate of 1.48% on the amortized notional value of $18.5 million and receive a variable interest rate based on LIBOR on the amortized notional value. As of September 30, 2012, one of the Company’s Inland River Services 50% or less owned companies had four interest rate swap agreements with maturities ranging from 2013 through 2015 that have been designated as cash flow hedges. These instruments call for the joint venture to pay fixed rates of interest ranging from 1.53% to 4.16% on the aggregate amortized notional value of $45.4 million and receive a variable interest rate based on LIBOR on the aggregate amortized notional value. Additionally, as of September 30, 2012, one of the Company’s Marine Transportation Services 50% or less owned companies had an interest rate swap agreement maturing in 2017 that has been designated as a cash flow hedge. The instrument calls for the joint venture to pay a fixed interest rate of 2.79% on the amortized notional value of $40.0 million and received a variable interest rate based on LIBOR on the amortized notional value. By entering into these interest rate swap agreements, the Company and its joint ventures have converted the variable LIBOR component of certain of their outstanding borrowings to a fixed interest rate.
The Company recognized gains (losses) on derivative instruments designated as cash flow hedges for the nine months ended September 30 as follows (in thousands): 
 
Other comprehensive income (loss)
 
2012
 
2011
Interest rate swap agreements, effective portion
$
(1,238
)
 
$
(3,448
)
Reclassification of net derivative losses to interest expense or equity in earnings of 50% or less owned companies
2,285

 
1,456

Reclassification of net derivative losses on cash flow hedges to derivative losses, net upon dedesignation
1,330

 
—

 
$
2,377

 
$
(1,992
)
 
 
 
 
 
Derivative losses, net
 
2012
 
2011
Interest rate swap agreements, ineffective portion
$
(55
)
 
$
(108
)
Reclassification of net derivative losses on cash flow hedges to derivative losses, net upon dedesignation
(1,330
)
 
$
—

 
$
(1,385
)
 
$
(108
)

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Other Derivative Instruments. The Company recognized gains (losses) on derivative instruments not designated as hedging instruments for the nine months ended September 30 as follows (in thousands):
 
Derivative losses, net
 
2012
 
2011
Options on equities and equity indices
$
(735
)
 
$
2,725

Forward currency exchange, option and future contracts
884

 
990

Interest rate swap agreements
(803
)
 
(2,489
)
Commodity swap, option and future contracts:
 
 
 
Exchange traded
(4,743
)
 
(8,818
)
Non-exchange traded
1,501

 
1,293

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

 
(29,426
)
 
$
(3,896
)
 
$
(35,725
)
The Company holds positions in publicly traded equity options that convey the right or obligation to engage in a future transaction on the underlying equity security or index. The Company’s investment in equity options primarily includes positions in energy, marine, transportation and other related businesses. These contracts are typically entered into to mitigate the risk of changes in the market value of marketable security positions that the Company is either about to acquire, has acquired or is about to dispose of.
The Company enters and settles forward currency exchange, option and future contracts with respect to various foreign currencies. As of September 30, 2012, the outstanding forward currency exchange contracts translated into a net purchase of foreign currencies with an aggregate U.S. dollar equivalent of $18.2 million. These contracts enable the Company to buy currencies in the future at fixed exchange rates, which could offset possible consequences of changes in currency exchange rates with respect to the Company’s business conducted outside of the United States. The Company generally does not enter into contracts with forward settlement dates beyond twelve to eighteen months.
The Company has entered into various interest rate swap agreements with maturities ranging from 2012 through 2015 that call for the Company to pay fixed interest rates ranging from 1.67% to 2.59% on aggregate amortized notional values of $141.7 million and receive a variable interest rate based on LIBOR on these notional values. In addition, one of the Company’s Offshore Marine Services 50% or less owned companies has entered into an interest rate swap agreement maturing in 2014 that calls for the joint venture to pay a fixed interest rate of 3.05% on the amortized notional value of $24.4 million million and receive a variable interest rate based on LIBOR on the amortized notional value. The general purpose of these interest rate swap agreements is to provide protection against increases in interest rates, which might lead to higher interest costs for the Company or its joint venture.
The Company enters and settles positions in various exchange and non-exchange traded commodity swap, option and future contracts. In the Company’s commodity trading and logistics business, fixed price future purchase and sale contracts for ethanol and sugar are included in the Company’s non-exchange traded derivative positions. The Company enters into exchange traded positions to protect these purchase and sale contracts as well as its inventory balances from market changes. As of September 30, 2012, the net market exposure to ethanol and sugar under these contracts was not material. The Company also enters into exchange traded positions (primarily natural gas, heating oil, crude oil, gasoline, ethanol and sugar) to provide value to the Company should there be a sustained decline in the price of commodities that could lead to a reduction in the market values and cash flows of the Company’s Offshore Marine Services and Inland River Services businesses. As of September 30, 2012, these positions were not material.
The Company enters and settles various positions in U.S. Treasury notes and bonds through rate locks, futures or options on futures tied to U.S. Treasury notes. The general purpose of these transactions is to provide value to the Company should the price of U.S. Treasury notes and bonds decline, leading to generally higher interest rates, which might lead to higher interest costs for the Company. As of September 30, 2012, there were none of these types of positions outstanding.
4.
BUSINESS ACQUISITIONS

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

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Superior Lift Boats Acquisition. On March 30, 2012, the Company acquired 18 lift boats, real property and working capital from Superior Energy Inc. (“Superior”) for $142.5 million. The Company performed a preliminary fair value analysis and the purchase price was allocated to the acquired assets and liabilities based on their fair values resulting in no goodwill being recorded. The preliminary fair value analysis is pending completion of a final valuation for the acquired assets and liabilities.
ICP Acquisition. On February 1, 2012, the Company obtained a 70% controlling interest in ICP through its acquisition of a portion of its partner's interest for $9.1 million in cash (see Note 6). ICP owns and operates an alcohol manufacturing facility dedicated to the production of alcohol for beverage, industrial and fuel applications. The Company performed a fair value analysis and the purchase price was allocated to the acquired assets and liabilities based on their fair values resulting in no goodwill being recorded. The fair value analysis of assets and liabilities acquired was finalized in June 2012.
Lewis & Clark Acquisition. On December 31, 2011, the Company acquired certain terminal and fleeting assets from Lewis & Clark Marine, Inc. and certain related affiliates (“Lewis & Clark”) for $29.6 million. The Company performed a preliminary fair value analysis and the purchase price was allocated to the acquired assets based on their fair values resulting in $1.6 million of goodwill being recorded. The preliminary fair value analysis is pending completion of a final valuation for the acquired assets.
Windcat Acquisition. On December 22, 2011, the Company acquired 75% of the issued and outstanding shares in Windcat Workboats Holdings Ltd. (“Windcat”) for $22.1 million (including $21.5 million in cash during 2011 and 6,374 shares of SEACOR common stock, par value $0.01 per share (“Common Stock”) valued at $0.6 million for final working capital settlement in 2012). Windcat, based in the United Kingdom and the Netherlands, is an operator of 29 wind farm utility vessels operating in the main offshore wind markets of Europe. The Company performed a preliminary fair value analysis and the purchase price was allocated to the acquired assets and liabilities based on their fair values resulting in no goodwill being recorded. The preliminary fair value analysis is pending completion of a final valuation for the acquired assets and liabilities.
Naviera Acquisition. On December 21, 2011, the Company acquired a 70% controlling interest in SEACOR Colombia Fluvial (MI) LLC for $1.9 million in cash. SEACOR Colombia Fluvial (MI) LLC's wholly-owned subsidiary, Naviera Central S.A. (“Naviera”), is a provider of inland river barge and terminal services in Colombia. The Company performed a preliminary fair value analysis and the purchase price was allocated to the acquired assets and liabilities based on their fair values resulting in $1.0 million in goodwill being recorded. The preliminary fair value analysis is pending completion of a final valuation for the acquired assets and liabilities.
Soylutions Acquisition. On July 29, 2011, the Company obtained a 100% controlling interest in Soylutions LLC (“Soylutions”) through its acquisition of its partner’s interest for $11.9 million in cash (see Note 6). The Company performed a fair value analysis and the purchase price was allocated to the acquired assets and liabilities based on their fair values resulting in no goodwill being recorded. The fair value analysis was finalized during the three months ended March 31, 2012.
Purchase Price Allocation. The following table summarizes the allocation of the purchase price for the Company’s business acquisitions during the nine months ended September 30, 2012 (in thousands):
Trade and other receivables
$
18,249

Other current assets
16,282

Investments, at Equity, and Advances to 50% or Less Owned Companies
(42,358
)
Property and Equipment
176,996

Intangible Assets
2,607

Other Assets
(332
)
Accounts payable
(4,701
)
Other current liabilities
(3,508
)
Long-Term Debt
(946
)
Other Liabilities
(166
)
Noncontrolling interests in subsidiaries
(13,459
)
Accumulated other comprehensive loss, net of tax
9

Purchase price(1)
$
148,673

 ______________________
(1)
Purchase price is net of cash acquired of $3.7 million and includes issued Common Stock valued at $0.6 million.

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5.
EQUIPMENT ACQUISITIONS, DISPOSITIONS AND DEPRECIATION AND IMPAIRMENT POLICIES

During the nine months ended September 30, 2012, capital expenditures were $257.0 million. Equipment deliveries during the period included two offshore support vessels, one wind farm utility vessel, three inland river dry cargo barges, four liquid tank barges, two inland river towboats and 17 helicopters.
During the nine months ended September 30, 2012, the Company sold four offshore support vessels, seven helicopters, nine inland river dry cargo barges, two inland river towboats, one RORO vessel, two harbor tugs and other equipment for net proceeds of $73.5 million ($19.6 million in cash, $5.0 million in cash deposits previously received and $48.9 million in seller financing) and gains of $18.4 million, of which $11.1 million were recognized currently and $7.3 million were deferred. In addition, the Company recognized previously deferred gains of $8.5 million. Two of the offshore support vessels sold were to the Company's Mexican joint venture for $48.5 million (see Note 6).
The Company previously sold certain equipment to 50% or less owned companies prior to adopting new accounting rules effective January 1, 2009 and from time to time enters into vessel sale-leaseback transactions with finance companies and provides seller financing on sales of its equipment to third parties and its 50% or less owned companies. A portion of the gains realized from these transactions were deferred and recorded in deferred gains and other liabilities in the accompanying condensed consolidated balance sheets. Deferred gain activity related to these transactions for the nine months ended September 30 was as follows (in thousands):
 
2012
 
2011
Balance at beginning of period
$
119,570

 
$
131,836

Deferred gains arising from asset sales
7,280

 
6,588

Amortization of deferred gains included in operating expenses as a reduction to rental expense
(13,573
)
 
(16,773
)
Amortization of deferred gains included in gains on asset dispositions and impairments, net
(8,541
)
 
(3,408
)
Balance at end of period
$
104,736

 
$
118,243

Equipment, stated at cost, is depreciated using the straight-line method over the estimated useful life of the asset to an estimated salvage value. With respect to each class of asset, the estimated useful life is based upon a newly built asset being placed into service and represents the point at which it is typically not justifiable for the Company to continue to operate the asset in the same or similar manner. From time to time, the Company may acquire older assets that have already exceeded the Company’s useful life policy, in which case the Company depreciates such assets based on its best estimate of remaining useful life, typically the next survey or certification date.
As of September 30, 2012, the estimated useful life (in years) of each of the Company’s major categories of new equipment was as follows:
Offshore support vessels
20
Wind farm utility vessels
10
Helicopters(1)
15
Inland river dry cargo and deck barges
20
Inland river liquid tank barges
25
Inland river towboats
25
U.S.-flag tankers
25
RORO vessels
20
Harbor and offshore tugs
25
Ocean liquid tank barges
25
______________________ 
(1)
Effective July 1, 2011, the Company changed its estimated useful life and salvage value for helicopters from 12 to 15 years and 30% to 40%, respectively, due to improvements in new helicopter models that continue to increase their long-term value and make them viable for operation over a longer period of time. For the nine months ended September 30, 2012, the change in estimate increased operating income by $8.4 million, net income by $5.4 million, and basic and diluted earnings per share by $0.26.

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The Company performs an impairment analysis of long-lived assets used in operations, including intangible assets, when indicators of impairment are present. If the carrying value of the assets is not recoverable, as determined by the estimated undiscounted cash flows, the carrying value of the assets is reduced to fair value. Generally, fair value is determined using valuation techniques, such as expected discounted cash flows or appraisals, as appropriate. During the nine months ended September 30, 2012, the Company recognized $1.2 million of impairment charges related to long-lived assets held for use.
6.
INVESTMENTS, AT EQUITY, AND ADVANCES TO 50% OR LESS OWNED COMPANIES

MexMar. As of September 30, 2012, the Company had $2.3 million outstanding in short-term notes, inclusive of unpaid accrued interest, with Mantenimiento Express Maritimo, S.A.P.I. de C.V. ("MexMar"), an Offshore Marine Services Mexican joint venture that operates ten offshore support vessels. During the nine months ended September 30, 2012, MexMar purchased two offshore support vessels from the Company and financed a portion of the vessels' mobilization costs with the Company totaling $50.0 million ($5.0 million in cash and two short-term notes totaling $45.0 million). During the nine months ended September 30, 2012, MexMar repaid $42.7 million on these notes.
Trailer Bridge. Trailer Bridge, Inc. (“Trailer Bridge”), an operator of U.S.-flag deck and RORO barges, offers marine transportation services between Jacksonville, Florida, San Juan, Puerto Rico and Puerto Plata, Dominican Republic. Trailer Bridge filed for bankruptcy under chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Middle District of Florida (the “Bankruptcy Court”) on November 16, 2011. On April 2, 2012, Trailer Bridge approved and adopted a restructuring plan, which was confirmed by the Bankruptcy Court. Immediately prior to adopting the restructuring plan, the Company had outstanding marketable security positions in 9.25% Senior Secured Notes due from Trailer Bridge (“Old Notes”) and U.S. Government Guaranteed Ship Financing Bonds due from Trailer Bridge (“MARAD Bonds”). Upon the adoption and implementation of Trailer Bridge's restructuring plan, the Company exchanged its Old Notes for a new $33.1 million Secured Note due from Trailer Bridge and new common shares in Trailer Bridge, representing a 47.3% ownership interest valued at $9.9 million. As a result of the adoption and implementation of the restructuring plan, the Company reclassified $48.1 million from marketable securities to investments, at equity, and advances to 50% or less owned companies, representing its investment in the new Trailer Bridge securities valued at $43.0 million and the MARAD Bonds valued at $5.1 million. In addition, as part of the restructuring plan, the Company provided bridge financing of $15.7 million to Trailer Bridge. During the nine months ended September 30, 2012, the Company recognized $9.8 million of marketable security gains, net related to its investments in Trailer Bridge.

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Table of Contents

Illinois Corn Processing. In January 2012, the Company and its partner each made a capital contribution of $0.5 million. On February 1, 2012, the Company obtained a 70% controlling interest in ICP through its acquisition of a portion of its partner’s interest for $9.1 million in cash (see Note 4). Upon the acquisition, the Company adjusted its investment in ICP to fair value resulting in the recognition of a gain of $6.0 million, net of tax, which is included in equity in earnings in 50% or less owned companies in the accompanying condensed consolidated statements of income. During the month ended January 31, 2012, the Company made net advances of $0.3 million under its revolving line of credit.
Era do Brazil. During the nine months ended September 30, 2012, the Company loaned $10.8 million to Era do Brazil LLC ("Era do Brazil") secured by a helicopter purchased from the Company in 2011 and Era do Brazil's ownership interests.  Upon receipt of the proceeds from the loan, Era do Brazil repaid the outstanding principal amount of $1.6 million remaining on the original helicopter acquisition note due to the Company and loaned $9.2 million to Aeroleo Taxi Aereo S/A ("Aeroleo") in the form of two notes, each of an equal amount.  Era do Brazil then distributed the two notes due from Aeroleo to its members.  As a result of these transactions, Era do Brazil is a highly leveraged entity with all its outstanding debt due to the Company.  As the primary beneficiary, the Company has consolidated Era do Brazil in its financial statements effective September 30, 2012.
Aeroleo. On March 1, 2012, the Company recorded an impairment charge of $5.9 million, net of tax, on its investment in and advances to Aeroleo. The impairment charge resulted from difficulties experienced by Aeroleo following one of its customer's cancellation of certain contracts for a number of AW139 helicopters under contract-lease from Aviation Services.
Hawker Pacific. The Company's Hawker Pacific joint venture is an aviation sales and support organization and a distributor of aviation components. During the nine months ended September 30, 2012, the Company advanced $3.3 million to Hawker Pacific. The advance bears interest at 10.0% per annum and matures on December 31, 2012, or earlier if a qualified refinancing occurs. As of September 30, 2012, the Company had an outstanding loan totaling $3.3 million inclusive of accrued interest.
SeaJon. SeaJon LLC ("SeaJon") is a joint venture that that operates an articulated tug-barge in the Great Lakes trade. During the nine months ended September 30, 2012, SeaJon entered into a variable rate $40.0 million term loan, secured by the articulated tug-barge and the assignment of its current charter. The term loan requires monthly principal and interest payments and a balloon payment of $29.7 million due April 2017. In addition, SeaJon entered into an interest rate swap to fix its interest rate at 2.79% per annum in accordance with the terms of the term loan. During the nine months ended September 30, 2012, SeaJon made capital distributions to each of its members of $20.8 million.
Avion. Avion Pacific Limited (“Avion”) is a joint venture that distributes aircraft and aircraft-related parts in Asia. During the nine months ended September 30, 2012, the Company made advances of $9.0 million to Avion and received repayments of $15.7 million. As of September 30, 2012, the Company had outstanding loans to Avion totaling $3.0 million inclusive of accrued interest.
SCFCo Holdings. SCFCo Holdings LLC (“SCFCo”) was established to operate towboats and dry cargo barges on the Parana-Paraguay Rivers and a terminal facility at Port Ibicuy, Argentina. At various times, SCFCo has agreed to expand its operations through additional capital contributions and bank financing. During the nine months ended September 30, 2012, the Company and its partner each contributed additional capital of $0.5 million.
Other. During the nine months ended September 30, 2012, the Company made investments in and advances to other Aviation Services joint ventures of $1.0 million.
Guarantees. The Company has guaranteed the payment of amounts owed by one of its joint ventures under a vessel charter and has guaranteed amounts owed under banking facilities by certain of its joint ventures. As of September 30, 2012, the total amount guaranteed by the Company under these arrangements was $29.1 million. In addition, as of September 30, 2012, the Company had uncalled capital commitments to two of its joint ventures for a total of $2.5 million.
7.
COMMITMENTS AND CONTINGENCIES

As of September 30, 2012, the Company’s unfunded capital commitments totaled $365.0 million and consisted of: twelve offshore support vessels for $131.4 million; an interest in a jack-up drilling rig for $30.3 million; twelve helicopters for $138.3 million; seven inland river liquid tank barges for $15.1 million; three inland river towboats for $9.4 million; four harbor tugs for $23.0 million and other equipment and improvements for $14.9 million. In addition, the Company notified the lessee of its intent to purchase two harbor tugs currently operating under capital leases for $2.6 million. Of these commitments, $58.6 million is payable during the remainder of 2012 with the balance payable through 2016 and $125.0 million may be terminated without further liability other than the payment of liquidated damages of $3.3 million.
Prior to the sale of the SES Business, the Company had issued performance guarantees on behalf of the SES Business that expire in 2012 through 2014. As of September 30, 2012, the amount of outstanding SES Business performance guarantees was $0.2 million.

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Table of Contents

On June 12, 2009, a purported civil class action was filed against the Company, Era Group Inc., Era Helicopters LLC and three other defendants (collectively, the “Defendants”) in the U.S. District Court for the District of Delaware, Superior Offshore International, Inc. v. Bristow Group Inc., et al., No. 09-CV-438 (D. Del.).  The Complaint alleged that the Defendants violated federal antitrust law by conspiring with each other to raise, fix, maintain or stabilize prices for offshore helicopter services in the U.S. Gulf of Mexico during the period January 2001 to December 2005.  The purported class of plaintiffs included all direct purchasers of such services and the relief sought included compensatory damages and treble damages.  On September 4, 2009, the Defendants filed a motion to dismiss the Complaint.  On September 14, 2010, the Court entered an order dismissing the Complaint.  On September 28, 2010, the plaintiffs filed a motion for reconsideration and amendment and a motion for re-argument (the “Motions”).  On November 30, 2010, the Court granted the Motions, amended the Court's September 14, 2010 Order to clarify that the dismissal was without prejudice, permitted the filing of an amended Complaint, and authorized limited discovery with respect to the new allegations in the amended Complaint.  Following the completion of such limited discovery, on February 11, 2011, the Defendants filed a motion for summary judgment to dismiss the amended Complaint with prejudice.  On June 23, 2011, the District Court granted summary judgment for the Defendants.  On July 22, 2011, the plaintiffs filed a notice of appeal to the U.S. Court of Appeals for the Third Circuit.  On July 27, 2002, the Third Circuit Court of Appeals affirmed the District Court's grant of summary judgment in favor of the defendants.  On August 9, 2011, Defendants moved for certain excessive costs, expenses, and attorneys' fees under 28 U.S.C. § 1927 (the “Fee Motion”).  On October 9, 2012, the District Court denied the Fee Motion.
On July 14, 2010, a group of individuals and entities purporting to represent a class commenced a civil action in the U.S. District Court for the Eastern District of Louisiana, Terry G. Robin, et al. v. Seacor Marine, L.L.C., et al., No. 2:10-cv-01986 (E.D. La.) (the “Robin Case”), in which they assert that support vessels, including vessels owned by the Company, responding to the explosion and resulting fire that occurred aboard the semi-submersible drilling rig, the Deepwater Horizon, were negligent in their efforts to save lives and put out the fire and contributed to the sinking of the Deepwater Horizon and subsequent oil spill. The action now is part of the overall multi-district litigation, In re Oil Spill by the Oil Rig “Deepwater Horizon”, MDL No. 2179 (“MDL”). The complaint seeks compensatory, punitive, exemplary, and other damages.  In response to this lawsuit, the Company filed petitions seeking exoneration from, or limitation of liability in relation to, any actions that may have been taken by vessels owned by the Company to extinguish the fire.  Pursuant to the Limitation of Liability Act, those petitions imposed an automatic stay on the Robin Case, and the court set a deadline of April 20, 2011 for individual claimants to assert claims in the limitation cases.  Approximately 66 claims were submitted by the deadline in all of the limitation actions.  On June 8, 2011, the Company moved to dismiss these claims (with the exception of one claim filed by a Company employee) on various legal grounds.  On October 12, 2011, the Court granted the Company's motion to dismiss in its entirety, dismissing with prejudice all claims that had been filed against the Company in the limitation actions (with the exception of one claim filed by a Company employee that was not subject to the motion to dismiss).  The Court entered final judgments in favor of the Company in the Robin Case and each of the limitation actions on November 21, 2011.  On December 12, 2011, the claimants appealed each of those judgments to the Unites States Court of Appeals for the Fifth Circuit.  The claimants' opening brief was submitted on May 7, 2012, and the claimants filed a reply brief on June 1, 2012.  The appeal is now fully submitted but no date has been set for oral argument, if any. The Company is unable to estimate the potential exposure, if any, resulting from this matter but believes it is without merit and will continue to vigorously defend the action.
On July 20, 2010, two individuals purporting to represent a class commenced a civil action in the Civil District Court for the Parish of Orleans in the State of Louisiana, John Wunstell, Jr. and Kelly Blanchard v. BP, et al., No. 2010-7437 (Division K) (the “Wunstell Action”), in which they assert, among other theories, that Mr. Wunstell suffered injuries as a result of his exposure to certain noxious fumes and chemicals in connection with the provision of remediation, containment and response services by ORM. The action now is part of the overall MDL. The complaint also seeks to establish a “class-wide court-supervised medical monitoring program” for all individuals “participating in BP's Deepwater Horizon Vessels of Opportunity Program and/or Horizon Response Program” who allegedly experienced injuries similar to those of Mr. Wunstell. The Company believes this lawsuit has no merit and will continue to vigorously defend the action.  Pursuant to contractual agreements with the responsible party, the responsible party has agreed, subject to certain potential limitations, to indemnify and defend ORM in connection with the Wunstell Action and claims asserted in the MDL.
On December 15, 2010, ORM and then-SEACOR subsidiary National Response Corporation (“NRC”) were named as defendants in one of the several consolidated “master complaints” that have been filed in the overall MDL.  The master complaint naming ORM and NRC asserts various claims on behalf of a putative class against multiple defendants concerning the clean-up activities generally, and the use of dispersants specifically.  By court order, the Wunstell Action has been stayed as a result of the filing of the referenced master complaint.  The Company believes that the claims asserted against ORM and NRC in the master complaint have no merit and on February 28, 2011, ORM and NRC moved to dismiss all claims against them in the master complaint on legal grounds.  On September 30, 2011, the Court granted in part and denied in part the motion to dismiss that ORM and NRC had filed (an amended decision was issued on October 4, 2011 that corrected several grammatical errors and non-substantive oversights in the original order).  Although the Court refused to dismiss the referenced master complaint in its entirety at that time, the Court did recognize the validity of the “derivative immunity” and “implied preemption” arguments that ORM and NRC advanced and has directed ORM and NRC to (i) conduct limited discovery to develop evidence to support those arguments

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and (ii) then re-assert the arguments.  The Court did, however, dismiss all state-law claims and certain other claims that had been asserted in the referenced master complaint, and dismissed the claims of all plaintiffs that have failed to allege a legally-sufficient injury.  A schedule for limited discovery and motion practice was established by the Court and, in accordance with that schedule, ORM and NRC filed for summary judgment re-asserting their derivative immunity and implied preemption arguments on May 18, 2012.  Those motions were argued on July 13, 2012 and are still pending decision.  In addition to the indemnity provided to ORM, pursuant to contractual agreements with the responsible party, the responsible party has agreed, subject to certain potential limitations, to indemnify and defend ORM and NRC in connection with these claims in the MDL. 
Subsequent to the filing of the referenced master complaint, five additional individual civil actions have been filed in the U.S. District Court for the Eastern District of Louisiana concerning the clean-up activities generally, which name the Company, ORM and/or NRC as defendants or third-party defendants and are part of the overall MDL. On April 8, 2011, ORM was named as a defendant in Johnson Bros. Corporation of Louisiana v. BP, PLC, et al., No. 2:11-cv-00781 (E.D. La.), which is a suit by an individual business seeking damages allegedly caused by a delay on a construction project alleged to have resulted from the clean-up operations. On April 15, 2011, ORM and NRC were named as defendants in James and Krista Pearson v. BP Exploration & Production, Inc., et al., No. 2:11-cv-00863 (E.D. La.), which is a suit by a husband and wife, who allegedly participated in the clean-up effort and are seeking damages for personal injury, property damage to their boat, and amounts allegedly due under contract. On April 15, 2011, ORM and NRC were named as defendants in Thomas Edward Black v. BP Exploration & Production, Inc., et al., No. 2:11-cv-00867 (E.D. La.), which is a suit by an individual who is seeking damages for lost income because he allegedly could not find work in the fishing industry after the oil spill. On April 20, 2011, a complaint was filed in Darnell Alexander, et al. v. BP, PLC, et al., No. 2:11-cv-00951 (E.D. La.) on behalf of 117 individual plaintiffs that seek to adopt the allegations made in the referenced master complaint against ORM and NRC (and the other defendants). Finally, on October 3, 2012, ORM and NRC were served with a Rule 14(c) Third-Party Complaint by Jambon Supplier II, L.L.C. and Jambon Marine Holdings L.L.C. in their  Limitation of Liability action, In the Matter of Jambon Supplier II, L.L.C., et al., No. 2:12-CV-00426 (E.D. La.).  This Third-Party Complaint alleges that if claimant David Dinwiddie, who served as a clean-up crewmember aboard the M/V JAMBON SUPPLIER II vessel during the clean-up efforts, was injured as a result of his exposure to dispersants and chemicals during the course and scope of his employment, then said injuries were caused by the third-party defendants. By court order, all five of these additional individual cases have been stayed as a result of the filing of the referenced master complaint.  The Company is unable to estimate the potential exposure, if any, resulting from this matter but believes it is without merit and does not expect this matter will have a material effect on the Company's consolidated financial position or its results of operations.
On February 18, 2011, Triton Asset Leasing GmbH, Transocean Holdings LLC, Transocean Offshore Deepwater Drilling Inc., and Transocean Deepwater Inc. (collectively “Transocean”) named ORM and NRC as third-party defendants in a Rule 14(c) Third-Party Complaint in Transocean's own Limitation of Liability Act action, which is part of the overall MDL, tendering to ORM and NRC the claims in the referenced master complaint that have already been asserted against ORM and NRC. Transocean, Cameron International Corporation, Halliburton Energy Services, Inc., M-I L.L.C., Weatherford U.S., L.P., and Weatherford International, Inc. have also filed cross-claims against ORM and NRC for contribution and tort indemnity should they be found liable for any damages in Transocean's Limitation of Liability Act action and ORM and NRC have asserted counterclaims against those same parties for identical relief.  As provided above, the Company is unable to estimate the potential exposure, if any, resulting from these actions but believes they are without merit and does not expect this matter will have a material effect on the Company's consolidated financial position or its results of operations.
Separately, on March 2, 2012, the Court announced that BP Exploration & Production Inc. and BP America Production Company (collectively "BP") and the plaintiffs had reached an agreement on the terms of two proposed class action settlements that will resolve, among other things, plaintiffs' economic loss claims and clean-up related claims against BP.  The parties filed their proposed settlement agreements on April 18, 2012 along with motions seeking preliminary approval of the settlements. The Court held a hearing on April 25, 2012 to consider those motions and preliminarily approved both settlements on May 2, 2012.  Although neither the Company, ORM or NRC are parties to the settlement agreements, the Company, ORM and NRC are listed on the releases accompanying both settlement agreements, such that if the settlement agreements are finally approved by the Court as currently drafted, any plaintiffs that settle will be required to release their claims against the Company, ORM and NRC.  The opt-out period for the proposed settlements closes on November 1, 2012. A final fairness hearing to consider whether the settlements should be finally approved is scheduled for November 8, 2012.
In the course of the Company's business, it may agree to indemnify a party.  If the indemnified party makes a successful claim for indemnification, the Company would be required to reimburse that party in accordance with the terms of the indemnification agreement.  Indemnification agreements generally are subject to threshold amounts, specified claim periods and other restrictions and limitations. 
In connection with the disposition of the SES Business on March 16, 2012, the Company remains contingently liable for certain obligations of the SES Business, including potential liabilities relating to work performed in connection with the Deepwater Horizon oil spill response.  These potential liabilities may not exceed the purchase consideration received by the Company for the SES Business and the Company currently is indemnified under contractual agreements with BP.

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Table of Contents

ORM, a subsidiary of the Company, is defending against five collective action lawsuits, each asserting failure to pay overtime with respect to individuals who provided service on the Deepwater Horizon spill response (the “DPH FLSA Actions”) under the Fair Labor Standards Act (“FLSA”).  Four of the cases - Dennis Prejean v. O'Brien's Response Management, Inc. (E.D. La., Case No.: 2:12-cv-01045) (the “Prejean Action”); Baylor Singleton et. al. v. O'Brien's Response Management Inc., et. al. (E.D. La., Case No.: 2:12-cv-01716) (the “Singleton Action”); Himmerite et al. v. O'Brien's Response Management Inc. et al. (E.D. La., Case No.: 2:12-cv-01533) (the “Himmerite Action”); and Chann Chavis v. O'Brien's Response Management Inc. et al. (S.D. Tx., Case No.: 4:12-cv-02045) (the “Chavis Action”) - were each brought on behalf of certain individuals who worked on the Deepwater Horizon oil spill response and who were classified as independent contractors.  The Prejean, Himmerite and Singleton Actions were each filed in the United States District Court for the Eastern District of Louisiana and then subsequently consolidated with the In re: Oil Spill Multidistrict Litigation (N.D. La., Case No. 10-md-02179) (the “Oil Spill MDL”).  The Himmerite and Singleton Actions have since been automatically stayed pending further scheduling by the Court, pursuant to the procedures in the Oil Spill MDL.  In the Prejean Action, ORM has answered the complaint, a scheduling order has been issued and Plaintiffs have, among other things, filed a Motion for Conditional Certification, which has been stayed pending further scheduling by the Court in accordance with the procedures of the Oil Spill MDL.  The limitations periods for potential plaintiffs to opt-in to the Prejean, Himmerite and Singleton actions have all been tolled pending further action by the court. ORM has filed a Motion for Reconsideration of the Court's order tolling the limitations periods in these actions. The Chavis Action was filed on July 7, 2012 in the United States District Court for the Southern District of Texas, and ORM answered the complaint in that matter.  The other DPH FLSA Action, Mark Blackman et. al. v. Midwest Environmental Resources, Inc., et. al. (N.D. Fla., Case No.: 3:11-cv-146) (the “Blackman Action”), was filed by five individual Plaintiffs on March 28, 2011, in the United States District Court for the Northern District of Florida, against ORM and several other Defendants.  The complaint in the Blackman Action alleges that the named Plaintiffs and class of workers they are suing on behalf of, identified in the complaint as “Safety Techs,” were not appropriately compensated for all of their work time in violation of the FLSA.  On July 8, 2011, the Court stayed all proceedings in the Blackman Action.  On May 8, 2012, the Court ruled on various motions to dismiss brought by ORM and by the other Defendants, denying them in part, granting them in part, and providing the Plaintiffs with leave to amend the complaint.  On June 6, 2012, Plaintiffs filed an amended complaint and on June 20, 2012, Defendant ORM answered the amended complaint, denying all of the Plaintiffs' claims.  On July 6, 2012, the Court issued a scheduling order setting discovery and dispositive motion deadlines. On August 27, 2012, Plaintiffs filed a Morion for Conditional Certification. Defendants' response to Plaintiffs' motion is due January 31, 2013.  The Company is unable to estimate the potential exposure, if any, resulting from any of the five DPH FLSA Actions, but believes they are without merit and will continue to vigorously defend against them.
In 2011, the Company received a Notice of Infringement (the “Notice”) from the Brazilian Federal Revenue Office. The Notice alleged the Company had imported a number of vessels into Brazil without properly completing the required importation documents and levied an assessment of $25.7 million. The Company intends to vigorously defend its position that the proposed assessment is erroneous and believes the resolution of this matter will not have a material effect on the Company's consolidated financial position or its results of operations. Of the levied assessment, $19.3 million relates to managed vessels. On August 17, 2012, the Company entered into a transfer agreement with the owner of these managed vessels. Under the terms of the agreement, the owner would be responsible to reimburse any potential payment in excess of $1.0 million in assessments and expenses.
In the normal course of its business, the Company becomes involved in various other litigation matters including, among other things, claims by third parties for alleged property damages and personal injuries. Management has used estimates in determining the Company's potential exposure to these matters and has recorded reserves in its financial statements related thereto where appropriate. It is possible that a change in the Company's estimates of that exposure could occur, but the Company does not expect such changes in estimated costs would have a material effect on the Company's consolidated financial position or its results of operations.
8.
MULTI-EMPLOYER PENSION PLANS

There has been no material change in the multi-employer pension plans in which the Company participates, except that the Company received notification from the American Maritime Officers Pension Plan (the "AMOPP”) that, based on an actuarial valuation performed as of September 30, 2011, if the Company chose to withdraw from the AMOPP, its withdrawal liability would have been $39.3 million. That liability may change in future years based on various factors, primarily employee census. As of September 30, 2012, the Company has no intention to withdraw from the AMOPP and no deficit amounts have been invoiced. Depending upon the results of the future actuarial valuations and the ten-year rehabilitation plan, it is possible that the AMOPP will experience further funding deficits, requiring the Company to recognize additional payroll related operating expenses in the periods invoices are received or contribution levels are increased.

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Table of Contents

9.
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

As of September 30, 2012, the Company had $240.0 million of outstanding borrowings under the SEACOR revolving credit facility. The remaining availability under this facility was $164.0 million, net of issued letters of credit of $1.0 million. On November 3, 2012, the maximum committed amount under the revolving credit facility will be reduced by $45.0 million. During the nine months ended September 30, 2012, the Company had borrowings of $115.0 million and made repayments of $50.0 million. In addition, as of September 30, 2012, the Company had other outstanding letters of credit totaling $47.2 million with various expiration dates through 2016.
As of September 30, 2012, Era Group Inc. ("Era") had $190.0 million of outstanding borrowings under its senior secured revolving credit facility. The senior secured revolving credit facility requires Era to maintain a maximum leverage ratio and various other financial ratios, as defined in the senior secured credit facility. Failure to comply with these ratios is an event of default and, as a result, borrowing capacity is based on the ability to comply with these ratios. As of September 30, 2012, the availability under this facility was $44.9 million, net of issued letters of credit of $0.3 million, based on compliance with these financial ratios. During the nine months ended September 30, 2012, Era had borrowings of $38.0 million and made repayments of $100.0 million.
During the nine months ended September 30, 2012, the Company made scheduled payments on other long-term debt and capital lease obligations of $9.7 million and repaid $3.2 million of acquired debt. In addition, the Company had borrowings of $0.1 million and made repayments of $0.7 million on other working capital lines, and made net repayments of $13.4 million on inventory financing arrangements.
On September 28, 2012, the Company made an irrevocable deposit of $171.0 million to its trustee for the extinguishment of the Company's 5.875% Senior Notes at their scheduled maturity on October 1, 2012. As of September 30, 2012, the irrevocable deposit held by the trustee and the outstanding principal of the maturing debt is included in restricted cash and current portion of long-term debt, respectively, in the accompanying condensed consolidated balance sheets.
SEACOR’s Board of Directors has previously authorized the Company to purchase any or all of its 5.875% Senior Notes due 2012 and its 7.375% Senior Notes due 2019, which may be acquired through open market purchases, privately negotiated transactions or otherwise, depending on market conditions. During the nine months ended September 30, 2012, the Company purchased $5.5 million, in principal amount, of its 5.875% Senior Notes for $5.7 million, resulting in a loss on debt extinguishment of $0.2 million.
10.
STOCK REPURCHASES

SEACOR’s Board of Directors previously approved a securities repurchase plan that authorizes the Company to acquire Common Stock, which may be acquired through open market purchases, privately negotiated transactions or otherwise, depending on market conditions. During the nine months ended September 30, 2012, the Company acquired for treasury 330,134 shares of Common Stock for an aggregate purchase price of $28.7 million. As of September 30, 2012, the remaining authority under the repurchase plan was $121.3 million.
11.
EARNINGS PER COMMON SHARE OF SEACOR

Basic earnings per common share of SEACOR are computed based on the weighted average number of common shares issued and outstanding during the relevant periods. Diluted earnings per common share of SEACOR are computed based on the weighted average number of common shares issued and outstanding plus the effect of potentially dilutive securities through the application of the treasury stock method. Dilutive securities for this purpose assumes restricted stock grants have vested and common shares have been issued pursuant to the exercise of outstanding stock options. For the three and the nine months ended September 30, 2012, diluted earnings per common share of SEACOR excluded 655,168 and 555,768, respectively, of certain share awards as the effect of their inclusion in the computation would have been antidilutive. For the three and nine months ended September 30, 2011, diluted earnings per common share of SEACOR excluded 389,536 and 302,521, respectively, of certain share awards as the effect of their inclusion in the computation would have been antidilutive.

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Table of Contents

A reconciliation of basic and diluted weighted average outstanding common shares of SEACOR was as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
Basic Weighted Average Common Shares Outstanding
20,432,997

 
21,202,480

 
20,512,118

 
21,158,110

Effect of Dilutive Share Awards:
 
 
 
 
 
 
 
Options and Restricted Stock
307,459

 
362,669

 
326,350

 
350,347

Diluted Weighted Average Common Shares Outstanding
20,740,456

 
21,565,149

 
20,838,468

 
21,508,457

12.
SHARE BASED COMPENSATION

Transactions in connection with the Company’s share based compensation plans during the nine months ended September 30, 2012 were as follows:
Director stock awards granted
3,000

Employee Stock Purchase Plan (“ESPP”) shares issued
39,980

Restricted stock awards granted
117,600

Restricted stock awards canceled
650

Shares released from Deferred Compensation Plan
—

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

Granted
—

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

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

Granted
136,315

Exercised
(81,465
)
Forfeited
—

Expired
(14,090
)
Outstanding as of September 30, 2012
1,312,952

Shares available for future grants and ESPP purchases as of September 30, 2012
1,254,132


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Table of Contents

13.
SEGMENT INFORMATION
Accounting standards require public business enterprises to report information about each of their operating business segments that exceed certain quantitative thresholds or meet certain other reporting requirements. An operating business segment has been defined as a component of an enterprise about which separate financial information is available and is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Certain reclassifications of prior period information have been made to conform to the current year's reportable segment presentation as a result of the Company's presentation of discontinued operations (see Note 1). The Company’s basis of measurement of segment profit or loss is as previously described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.
The following tables summarize the operating results, capital expenditures and assets of the Company’s reportable segments.
 
Offshore
Marine
Services
$’000
 
Aviation
Services
$’000
 
Inland
River
Services
$’000
 
Marine
Transportation
Services
$’000
 
Emergency and Crisis Services
$’000
 
Commodity
Trading
and Logistics
$’000
 
Other
$’000
 
Corporate
and
Eliminations
$’000
 
Total
$’000
For the three months ended September 30, 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
External customers
134,294

 
77,989

 
49,592

 
27,266

 
9,227

 
145,725

 
17,965

 
—

 
462,058

Intersegment
28

 
—

 
3,701

 
88

 
40

 
—

 
21

 
(3,878
)
 
—

 
134,322

 
77,989

 
53,293

 
27,354

 
9,267

 
145,725

 
17,986

 
(3,878
)
 
462,058

Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating
88,842

 
46,235

 
38,320

 
15,584

 
5,871

 
137,281

 
12,543

 
(3,729
)
 
340,947

Administrative and general
14,795

 
10,338

 
3,480

 
4,301

 
4,256

 
2,236

 
2,655

 
8,399

 
50,460

Depreciation and amortization
16,051

 
10,937

 
7,335

 
5,639

 
483

 
1,641

 
2,345

 
854

 
45,285

 
119,688

 
67,510

 
49,135

 
25,524

 
10,610

 
141,158

 
17,543

 
5,524

 
436,692

Gains on Asset Dispositions and Impairments, Net
6,585

 
613

 
3,503

 
145

 
—

 
—

 
(1,169
)
 
—

 
9,677

Operating Income (Loss)
21,219

 
11,092

 
7,661

 
1,975

 
(1,343
)
 
4,567

 
(726
)
 
(9,402
)
 
35,043

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative losses, net
—

 
(188
)
 
—

 
—

 
—

 
(4,304
)
 
—

 
(157
)
 
(4,649
)
Foreign currency (gains) losses, net
717

 
(272
)
 
33

 
10

 
26

 
(183
)
 
6

 
295

 
632

Other, net
—

 
—

 
—

 
4

 
—

 
—

 
7,141

 
(47
)
 
7,098

Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax
1,238

 
219

 
(2,227
)
 
(551
)
 
72

 
(1
)
 
172

 
—

 
(1,078
)
Segment Profit (Loss)
23,174

 
10,851

 
5,467

 
1,438

 
(1,245
)
 
79

 
6,593

 
 
 
 
Other Income (Expense) not included in Segment Profit
 
(10,265
)
Plus Equity Losses included in Segment Profit
 
1,078

Income Before Taxes, Equity Losses and Discontinued Operations
 
27,859


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Table of Contents

 
Offshore
Marine
Services
$’000
 
Aviation
Services
$’000
 
Inland
River
Services
$’000
 
Marine
Transportation
Services
$’000
 
Emergency and Crisis
Services
$’000
 
Commodity
Trading and
Logistics
$’000
 
Other
$’000
 
Corporate
and
Eliminations
$’000
 
Total
$’000
For the nine months ended September 30, 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
External customers
378,591

 
202,024

 
149,238

 
79,166

 
27,846

 
562,166

 
55,334

 
—

 
1,454,365

Intersegment
93

 
2

 
10,847

 
263

 
75

 
—

 
151

 
(11,431
)
 
—

 
378,684

 
202,026

 
160,085

 
79,429

 
27,921

 
562,166

 
55,485

 
(11,431
)
 
1,454,365

Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating
258,266

 
124,913

 
110,966

 
48,064

 
18,552

 
542,640

 
35,919

 
(11,051
)
 
1,128,269

Administrative and general
39,797

 
27,210

 
11,235

 
9,710

 
11,721

 
8,788

 
8,468

 
24,829

 
141,758

Depreciation and amortization
44,792

 
31,031

 
21,586

 
16,956

 
1,458

 
4,292

 
6,407

 
1,775

 
128,297

 
342,855

 
183,154

 
143,787

 
74,730

 
31,731

 
555,720

 
50,794

 
15,553

 
1,398,324

Gains on Asset Dispositions
  and Impairments, Net
9,054

 
3,455

 
6,288

 
145

 
5

 
—

 
691

 
—

 
19,638

Operating Income (Loss)
44,883

 
22,327

 
22,586

 
4,844

 
(3,805
)
 
6,446

 
5,382

 
(26,984
)
 
75,679

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative losses, net
—

 
(492
)
 
—

 
—

 
—

 
(3,850
)
 
—

 
(939
)
 
(5,281
)
Foreign currency gains (losses), net
1,486

 
633

 
(60
)
 
16

 
20

 
(118
)
 
(17
)
 
232

 
2,192

Other, net
11

 
30

 
—

 
83

 
—

 
—

 
7,349

 
14

 
7,487

Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax
4,068

 
(5,444
)
 
(1,538
)
 
(1,542
)
 
286

 
6,153

 
(768
)
 
—

 
1,215

Segment Profit (Loss)
50,448

 
17,054

 
20,988

 
3,401

 
(3,499
)
 
8,631

 
11,946

 
 
 
 
Other Income (Expense) not included in Segment Profit
 
 
 
 
 
 
 
 
 
 
 
(9,291
)
Less Equity Earnings included in Segment Profit
 
 
 
 
 
 
 
 
 
 
 
(1,215
)
Income Before Taxes, Equity Earnings and Discontinued Operations
 
 
 
 
 
 
 
 
 
70,786

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Capital Expenditures
112,527

 
91,910

 
22,296

 
4,768

 
451

 
32

 
21,385

 
3,604

 
256,973

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of September 30, 2012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property and Equipment
822,454

 
777,706

 
378,193

 
198,040

 
1,350

 
40,046

 
163,454

 
21,978

 
2,403,221

Investments, at Equity, and Advances to 50% or Less Owned Companies
68,003

 
35,755

 
54,250

 
70,413

 
505

 
—

 
37,663

 
—

 
266,589

Inventories (1)
6,249

 
26,590

 
2,435

 
—

 
917

 
40,134

 
1,533

 
—

 
77,858

Goodwill
13,367

 
352

 
4,345

 
550

 
37,138

 
—

 
1,302

 
—

 
57,054

Intangible Assets
4,557

 
—

 
7,996

 
1,213

 
5,153

 
681

 
331

 
—

 
19,931

Other current and long-term assets, excluding cash and near cash assets(2)
155,387

 
90,169

 
50,049

 
4,698

 
14,544

 
76,765

 
50,823

 
45,733

 
488,168

Segment Assets
1,070,017

 
930,572

 
497,268

 
274,914

 
59,607

 
157,626

 
255,106

 
 
 
 
Cash and near cash assets(2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
601,390

Discontinued operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,025

Total Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,917,236

______________________
(1)
Inventories for Commodity Trading and Logistics includes raw materials of $2.9 million and work in process of $0.7 million resulting from the acquisition of ICP (see Note 4).
(2)
Cash and near cash assets includes cash, cash equivalents, restricted cash, marketable securities, construction reserve funds and Title XI reserve funds.

21
Table of Contents

 
Offshore
Marine
Services
$’000
 
Aviation
Services
$’000
 
Inland
River
Services
$’000
 
Marine
Transportation
Services
$’000
 
Emergency and Crisis Services $’000
 
Commodity
Trading and
Logistics
$’000
 
Other
$’000
 
Corporate
and
Eliminations
$’000
 
Total
$’000
For the three months ended September 30, 2011
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
External customers
93,256

 
71,804

 
45,349

 
24,696

 
14,080

 
279,178

 
16,726

 
—

 
545,089

Intersegment
21

 
—

 
2,526

 
87

 
—

 
—

 
15

 
(2,649
)
 
—

 
93,277

 
71,804

 
47,875

 
24,783

 
14,080

 
279,178

 
16,741

 
(2,649
)
 
545,089

Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating
68,457

 
45,701

 
31,196

 
15,194

 
9,141

 
279,180

 
9,117

 
(2,544
)
 
455,442

Administrative and general
10,687

 
6,841

 
2,206

 
2,044

 
2,961

 
1,944

 
2,523

 
6,181

 
35,387

Depreciation and amortization
11,785

 
9,093

 
6,464

 
5,833

 
655

 
12

 
2,129

 
466

 
36,437

 
90,929

 
61,635

 
39,866

 
23,071

 
12,757

 
281,136

 
13,769

 
4,103

 
527,266

Gains (Losses) on Asset Dispositions and Impairments, Net
5,241

 
4,894

 
1,303

 
—

 
7

 
—

 
(315
)
 
(144
)
 
10,986

Operating Income (Loss)
7,589

 
15,063

 
9,312

 
1,712

 
1,330

 
(1,958
)
 
2,657

 
(6,896
)
 
28,809

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative losses, net
—

 
(807
)
 
—

 
—

 
—

 
(3,063
)
 
—

 
(22,084
)
 
(25,954
)
Foreign currency gains (losses), net
(2,129
)
 
(95
)
 
—

 
(18
)
 
17

 
153

 
(75
)
 
(979
)
 
(3,126
)
Other, net
6

 
—

 
—

 
131

 
—

 
—

 
(1
)
 
(175
)
 
(39
)
Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax
8,754

 
106

 
2,771

 
—

 
—

 
(2,267
)
 
291

 
—

 
9,655

Segment Profit (Loss)
14,220

 
14,267

 
12,083

 
1,825

 
1,347

 
(7,135
)
 
2,872

 
 
 
 
Other Income (Expense) not included in Segment Profit
 
(5,170
)
Less Equity Earnings included in Segment Profit
 
(9,655
)
Loss Before Taxes, Equity Earnings and Discontinued Operations
 
(5,480
)

22
Table of Contents

 
Offshore
Marine
Services
$’000
 
Aviation
Services
$’000
 
Inland
River
Services
$’000
 
Marine
Transportation
Services
$’000
 
Emergency and Crisis Services
$’000
 
Commodity
Trading
and Logistics
$’000
 
Other
$’000
 
Corporate
and
Eliminations
$’000
 
Total
$’000
For the nine months ended September 30, 2011
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
External customers
266,939

 
196,434

 
127,959

 
66,169

 
64,188

 
718,511

 
52,183

 
—

 
1,492,383

Intersegment
68

 
18

 
7,827

 
262

 
—

 
—

 
15

 
(8,190
)
 
—

 
267,007

 
196,452

 
135,786

 
66,431

 
64,188

 
718,511

 
52,198

 
(8,190
)
 
1,492,383

Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating
199,719

 
121,623

 
87,797

 
37,757

 
36,245

 
703,842

 
27,417

 
(7,850
)
 
1,206,550

Administrative and general
33,535

 
20,090

 
8,069

 
5,607

 
9,327

 
6,806

 
8,353

 
24,424

 
116,211

Depreciation and amortization
36,523

 
33,402

 
17,877

 
16,539

 
1,655

 
37

 
6,655

 
1,409

 
114,097

 
269,777

 
175,115

 
113,743

 
59,903

 
47,227

 
710,685

 
42,425

 
17,983

 
1,436,858

Gains on Asset Dispositions and Impairments, Net
13,212

 
13,260

 
1,978

 
—

 
7

 
—

 
229

 
(144
)
 
28,542

Operating Income (Loss)
10,442

 
34,597

 
24,021

 
6,528

 
16,968

 
7,826

 
10,002

 
(26,317
)
 
84,067

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative losses, net
—

 
(1,308
)
 
—

 
—

 
—

 
(6,985
)
 
—

 
(27,580
)
 
(35,873
)
Foreign currency gains (losses), net
(1,812
)
 
596

 
—

 
4

 
(41
)
 
132

 
(98
)
 
4,568

 
3,349

Other, net
6

 
—

 
4

 
187

 
2

 
—

 
(2
)
 
(470
)
 
(273
)
Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax
9,689

 
1,061

 
3,181

 
—

 
—

 
(3,267
)
 
(95
)
 
—

 
10,569

Segment Profit (Loss)
18,325

 
34,946

 
27,206

 
6,719

 
16,929

 
(2,294
)
 
9,807

 
 
 
 
Other Income (Expense) not included in Segment Profit
 
 
 
 
 
 
 
 
 
 
 
(21,914
)
Less Equity Earnings included in Segment Profit
 
 
 
 
 
 
 
 
 
 
 
(10,569
)
Income Before Taxes, Equity Earnings and Discontinued Operations
 
 
 
 
 
 
 
 
 
29,356

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Capital Expenditures
50,096

 
88,894

 
40,786

 
10,460

 
36

 
60

 
13,253

 
3,026

 
206,611

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of September 30, 2011
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
Property and Equipment
610,056

 
650,750

 
361,515

 
233,892

 
805

 
178

 
154,081

 
20,580

 
2,031,857

Investments, at Equity, and Advances to 50% or Less Owned Companies
69,272

 
51,395

 
42,870

 
12,340

 
—

 
9,441

 
58,360

 
—

 
243,678

Inventories
4,475

 
24,222

 
2,149

 
365

 
448

 
37,631

 
1,333

 
—

 
70,623

Goodwill
13,367

 
352

 
1,743

 
606

 
37,040

 
—

 
1,302

 
—

 
54,410

Intangible Assets
6,482

 
—

 
815

 
1,630

 
6,683

 
—

 
445

 
—

 
16,055

Other current and long-term assets, excluding cash and near cash assets(1)
117,011

 
68,865

 
54,117

 
5,163

 
18,866

 
89,458

 
67,791

 
27,045

 
448,316

Segment Assets
820,663

 
795,584

 
463,209

 
253,996

 
63,842

 
136,708

 
283,312

 
 
 
 
Cash and near cash assets(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
702,400

Discontinued operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
94,979

Total Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,662,318

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

23
Table of Contents

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

This Form 10-Q includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements concerning management’s expectations, strategic objectives, business prospects, anticipated economic performance and financial condition and other similar matters involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of results to differ materially from any future results, performance or achievements discussed or implied by such forward-looking statements. Such risks, uncertainties and other important factors include, among others: decreased demand and loss of revenues as a result of U.S. government implemented moratoriums directing operators to cease certain drilling activities and any extension of such moratoriums (the “Moratoriums”), weakening demand for the Company’s services as a result of unplanned customer suspensions, cancellations, rate reductions or non-renewals of vessel charters and aviation equipment or failures to finalize commitments to charter vessels and aviation equipment in response to Moratoriums, increased government legislation and regulation of the Company’s businesses which could increase cost of operations, increased competition if the Jones Act is repealed, liability, legal fees and costs in connection with providing emergency response services, including the Company’s involvement in response to the oil spill that resulted from the sinking of the Deepwater Horizon in April 2010, decreased demand for the Company’s services as a result of declines in the global economy, declines in valuations in the global financial markets and a lack of liquidity in the credit sectors, including, interest rate fluctuations, availability of credit, inflation rates, change in laws, trade barriers, commodity prices and currency exchange fluctuations, the cyclical nature of the oil and gas industry, activity in foreign countries and changes in foreign political, military and economic conditions, changes in foreign and domestic oil and gas exploration and production activity, safety record requirements related to Offshore Marine Services, Marine Transportation Services and Aviation Services, decreased demand for Marine Transportation Services and Harbor and Offshore Towing Services due to construction of additional refined petroleum products, natural gas or crude oil pipelines or due to decreased demand for refined petroleum products, crude oil or chemical products or a change in existing methods of delivery, compliance with U.S. and foreign government laws and regulations, including environmental laws and regulations, the dependence of Offshore Marine Services, Marine Transportation Services and Aviation Services on several customers, consolidation of the Company’s customer base, safety issues experienced by a particular helicopter model that could result in customers refusing to use that helicopter model or a regulatory body grounding that helicopter model, which could also permanently devalue that helicopter model, the ongoing need to replace aging vessels and aircraft, industry fleet capacity, restrictions imposed by the Shipping Acts and Aviation Acts on the amount of foreign ownership of the Company’s Common Stock, operational risks of Offshore Marine Services, Marine Transportation Services, Harbor and Offshore Towing Services and Aviation Services, effects of adverse weather conditions and seasonality, dependence of emergency response revenue on the number and size of events and upon continuing government regulation in this area and Emergency and Crisis Services’ ability to comply with such regulation and other governmental regulation, liability in connection with providing emergency response services, the level of grain export volume, the effect of fuel prices on barge towing costs, variability in freight rates for inland river barges, the effect of international economic and political factors in Inland River Services’ operations, adequacy of insurance coverage, the attraction and retention of qualified personnel by the Company, the ability to complete the previously announced intention to spinoff the Aviation Services business, the ability to realize the expected benefits of the intended spinoff of the Aviation Services business and various other matters and factors, many of which are beyond the Company’s control. In addition, these statements constitute the Company’s cautionary statements under the Private Securities Litigation Reform Act of 1995. It is not possible to predict or identify all such factors. Consequently, the following should not be considered a complete discussion of all potential risks or uncertainties. The words “estimate,” “project,” “intend,” “believe,” “plan” and similar expressions are intended to identify forward-looking statements. Forward-looking statements speak only as of the date of the document in which they are made. The Company disclaims any obligation or undertaking to provide any updates or revisions to any forward-looking statement to reflect any change in the Company’s expectations or any change in events, conditions or circumstances on which the forward-looking statement is based. The forward-looking statements in this Form 10-Q should be evaluated together with the many uncertainties that affect the Company’s businesses, particularly those mentioned under “Forward-Looking Statements” in Item 7 on the Company’s Form 10-K and SEACOR’s periodic reporting on Form 8-K (if any), which are incorporated by reference.


24
Table of Contents

Overview

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

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

Consolidated Results of Operations

The sections below provide an analysis of the Company’s operations by business segment for the three months (“Current Year Quarter”) and nine months ("Current Nine Months") ended September 30, 2012, as compared with the three months (“Prior Year Quarter”) and nine months ("Prior Nine Months") ended September 30, 2011. See “Item 1. Financial Statements—Note 13. Segment Information” included in Part I for consolidating segment tables for each period presented.

25
Table of Contents

Offshore Marine Services
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
United States, primarily U.S. Gulf of Mexico
60,408

 
45
 
26,360

 
28

 
161,563

 
43
 
78,363

 
29

Africa, primarily West Africa
16,353

 
12
 
15,651

 
17

 
49,626

 
13
 
48,372

 
18

Middle East
12,489

 
9
 
11,142

 
12

 
37,559

 
10
 
33,570

 
13

Brazil, Mexico, Central and South America
11,236

 
9
 
15,107

 
16

 
41,056

 
11
 
41,353

 
15

Europe, primarily North Sea
26,999

 
20
 
19,514

 
21

 
76,673

 
20
 
55,044

 
21

Asia
6,837

 
5
 
5,503

 
6

 
12,207

 
3
 
10,305

 
4

 
134,322

 
100
 
93,277

 
100

 
378,684

 
100
 
267,007

 
100

Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Personnel
46,798

 
35
 
34,978

 
37

 
130,466

 
34
 
101,645

 
38

Repairs and maintenance
13,069

 
10
 
10,118

 
11

 
36,204

 
10
 
28,803

 
11

Drydocking
4,343

 
3
 
2,686

 
3

 
20,482

 
6
 
12,654

 
5

Insurance and loss reserves
4,505

 
3
 
3,285

 
3

 
12,701

 
3
 
9,518

 
3

Fuel, lubes and supplies
9,386

 
7
 
6,308

 
7

 
25,156

 
7
 
17,683

 
7

Leased-in equipment
5,458

 
4
 
5,660

 
6

 
16,341

 
4
 
12,819

 
5

Brokered vessel activity
53

 
—
 
243

 
—

 
585

 
—
 
2,987

 
1

Other
5,230

 
4
 
5,179

 
6

 
16,331

 
4
 
13,610

 
5

 
88,842

 
66
 
68,457

 
73

 
258,266

 
68
 
199,719

 
75

Administrative and general
14,795

 
11
 
10,687

 
11

 
39,797

 
11
 
33,535

 
13

Depreciation and amortization
16,051

 
12
 
11,785

 
13

 
44,792

 
12
 
36,523

 
13

 
119,688

 
89
 
90,929

 
97

 
342,855

 
91
 
269,777

 
101

Gains on Asset Dispositions
6,585

 
5
 
5,241

 
5

 
9,054

 
2
 
13,212

 
5

Operating Income
21,219

 
16
 
7,589

 
8

 
44,883

 
11
 
10,442

 
4

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency gains (losses), net
717

 
—
 
(2,129
)
 
(2
)
 
1,486

 
—
 
(1,812
)
 
(1
)
Other, net
—

 
—
 
6

 
—

 
11

 
—
 
6

 
—

Equity in Earnings of 50% or Less Owned Companies, Net of Tax
1,238

 
1
 
8,754

 
9

 
4,068

 
1
 
9,689

 
4

Segment Profit
23,174

 
17
 
14,220

 
15

 
50,448

 
12
 
18,325

 
7





26
Table of Contents

Operating Revenues by Type. The table below sets forth, for the periods indicated, the amount of operating revenues earned by type.
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Time charter:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
United States, primarily U.S. Gulf of Mexico
56,535

 
42
 
24,111

 
26
 
151,657

 
40
 
71,643

 
27
Africa, primarily West Africa
16,122

 
12
 
15,047

 
16
 
48,291

 
13
 
43,543

 
16
Middle East
10,796

 
8
 
8,557

 
9
 
32,152

 
9
 
26,794

 
10
Brazil, Mexico, Central and South America
9,625

 
7
 
13,942

 
15
 
35,256

 
9
 
37,211

 
14
Europe, primarily North Sea
26,927

 
20
 
19,518

 
21
 
76,208

 
20
 
54,949

 
21
Asia
6,439

 
5
 
4,674

 
5
 
11,731

 
3
 
9,541

 
3
Total time charter
126,444

 
94
 
85,849

 
92
 
355,295

 
94
 
243,681

 
91
Bareboat charter
867

 
1
 
212

 
—
 
2,273

 
1
 
628

 
—
Brokered vessel activity
55

 
—
 
256

 
—
 
543

 
—
 
3,925

 
2
Other marine services
6,956

 
5
 
6,960

 
8
 
20,573

 
5
 
18,773

 
7
 
134,322

 
100
 
93,277

 
100
 
378,684

 
100
 
267,007

 
100



27
Table of Contents

Time Charter Operating Data. The table below sets forth the average rates per day worked, utilization and available days data for each group of Offshore Marine Services’ vessels operating under time charters for the periods indicated. The rate per day worked is the ratio of total time charter revenues to the aggregate number of days worked. Utilization is the ratio of aggregate number of days worked to total calendar days available for work. Available days represents the total calendar days during which owned and chartered-in vessels are operated by the Company.
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
Rates Per Day Worked:
 
 
 
 
 
 
 
Anchor handling towing supply
$
22,794

 
$
27,287

 
$
26,526

 
$
29,729

Crew
7,267

 
6,728

 
7,392

 
6,559

Mini-supply
7,735

 
7,535

 
7,516

 
7,563

Standby safety
9,806

 
9,302

 
9,572

 
9,126

Supply
16,567

 
15,459

 
15,904

 
14,143

Towing supply
8,265

 
8,809

 
9,062

 
9,575

Specialty
26,195

 
16,172

 
18,146

 
9,829

Overall Average Rates Per Day Worked
  (excluding wind farm utility and liftboats)
11,511

 
11,318

 
12,001

 
10,880

Liftboats
19,830

 
—

 
18,738

 
—

Wind farm utility
2,882

 
—

 
2,717

 
—

Overall Average Rates Per Day Worked
10,552

 
11,318

 
10,460

 
10,880

Utilization:
 
 
 
 
 
 
 
Anchor handling towing supply
57
%
 
52
%
 
66
%
 
46
%
Crew
94
%
 
75
%
 
86
%
 
70
%
Mini-supply
88
%
 
87
%
 
94
%
 
75
%
Standby safety
89
%
 
88
%
 
88
%
 
87
%
Supply
77
%
 
70
%
 
79
%
 
69
%
Towing supply
54
%
 
43
%
 
50
%
 
49
%
Specialty
59
%
 
48
%
 
55
%
 
62
%
Overall Fleet Utilization
  (excluding wind farm utility and liftboats)
82
%
 
72
%
 
80
%
 
69
%
Liftboats
82
%
 
—
%
 
76
%
 
—
%
Wind farm utility
96
%
 
—
%
 
92
%
 
—
%
Overall Fleet Utilization
85
%
 
72
%
 
82
%
 
69
%
Available Days:
 
 
 
 
 
 
 
Anchor handling towing supply
1,564

 
1,564

 
4,658

 
4,641

Crew
3,233

 
3,487

 
9,872

 
11,291

Mini-supply
644

 
644

 
1,918

 
2,151

Standby safety
2,208

 
2,392

 
6,678

 
6,933

Supply
1,631

 
1,748

 
4,985

 
4,887

Towing supply
184

 
368

 
908

 
1,402

Specialty
276

 
276

 
822

 
988

Overall Fleet Available Days
  (excluding wind farm utility and liftboats)
9,740

 
10,479

 
29,841

 
32,293

Liftboats
1,656

 
—

 
3,312

 
—

Wind farm utility
2,760

 
—

 
8,137

 
—

Overall Fleet Available Days
14,156

 
10,479

 
41,290

 
32,293



28
Table of Contents

Current Year Quarter compared with Prior Year Quarter

Operating Revenues. Operating revenues were $41.0 million higher in the Current Year Quarter compared with the Prior Year Quarter. Current Year Quarter results included the contributions of the Company's wind farm utility vessels and liftboats that were acquired on December 22, 2011 and March 30, 2012, respectively. The wind farm utility vessels contributed $7.6 million of time charter revenues with an average day rate of $2,882 per day and a utilization rate of 96%. The liftboats contributed $29.0 million of operating revenues of which $26.9 million was time charter revenues with an average day rate of $19,830 per day and a utilization rate of 82%.
Excluding the contribution of the wind farm utility vessels and liftboats, time charter revenues were $6.0 million higher in the Current Year Quarter compared with the Prior Year Quarter. Overall fleet utilization was 82% compared with 72% in the Prior Year Quarter and average rates were $11,511 per day compared with $11,318 per day in the Prior Year Quarter. The number of days available for charter was 9,740 compared with 10,479 in the Prior Year Quarter, a 739 day or 7% reduction.
In the U.S. Gulf of Mexico, time charter revenues were $32.4 million higher primarily due to the liftboat acquisition. Excluding the contribution of the liftboats, time charter revenues were $5.5 million higher in the Current Year Quarter compared with the Prior Year Quarter of which $3.6 million was due to improved utilization and $2.7 million was due to higher average day rates. Net fleet additions increased time charter revenues by $0.9 million. The repositioning of vessels between geographic regions and other changes in fleet mix combined to increase time charter revenues by $1.0. The net effect of cold-stacking vessels, primarily due to the cold-stacking of three anchor handling towing supply vessels, was a reduction of $2.7 million in time charter revenues. As of September 30, 2012, the Company had three vessels cold-stacked in this region compared with seven as of September 30, 2011.
In Africa, time charter revenues were $1.1 million higher of which $0.7 million was due to improved utilization and $0.4 million was due to improved average day rates.
In the Middle East, time charter revenues were $2.2 million higher. Time charter revenues were $0.4 million higher due to higher average day rates and $2.3 million higher due to the repositioning of vessels between geographic regions. These increases were partially offset by a $0.5 million reduction in time charter revenues due to lower utilization.
In Brazil, Mexico and Central and South America, time charter revenues were $4.3 million lower. Lower utilization, vessel dispositions and the repositioning of vessels between geographic regions, reduced time charter revenues by $0.8 million, $2.3 million and $3.2 million respectively. Higher average day rates increased time charter revenues by $2.0 million.
In Europe, excluding the $7.6 million contribution of the wind farm utility vessels, time charter revenues were $0.2 million lower. Higher average day rates increased time charter revenues by $1.2 million. Lower utilization, vessel dispositions and unfavorable changes in currency exchange rates, reduced time charter revenues by $0.2 million, $0.8 million and $0.4 million respectively.
In Asia, time charter revenues were $1.7 million higher, of which $1.2 million was due to improved utilization and $0.5 million was due to higher average day rates.
Operating Expenses. Operating expenses were $20.4 million higher in the Current Year Quarter compared with the Prior Year Quarter, of which $16.6 million was attributable to fleet additions including the wind farm utility vessels and liftboats. Excluding the impact of fleet additions, operating expenses were $3.8 million higher during the Current Year Quarter compared with the Prior Year Quarter. Personnel costs were $3.6 million higher primarily due to increased activity levels and inflationary pressures on rates of pay. Repair and maintenance expenses were $1.1 million higher, primarily in international regions.
Gains on Asset Dispositions. During the Current Year Quarter, the Company sold equipment for net proceeds of $1.5 million and gains of $1.5 million. In addition, the Company recognized previously deferred gains of $5.1 million. During the Prior Year Quarter, the Company sold three offshore support vessels and other equipment for net proceeds of $6.7 million and gains of $5.2 million.
Operating Income. Excluding the impact of gains on asset dispositions and the impact of brokered vessel activity, operating income as a percentage of operating revenues was 11.0% in the Current Year Quarter compared with 3.0% in the Prior Year Quarter. The increase was primarily due to the contribution of the Company's liftboat fleet.
Equity in Earnings of 50% or Less Owned Companies, Net of Tax. Equity in earnings of 50% or less owned companies, net of tax, decreased by $7.5 million in the Current Year Quarter compared with the Prior Year Quarter. During the Prior Year Quarter, Offshore Marine Services' Mexican joint venture executed a business reorganization plan and issued an additional equity interest to an unrelated third party. Subsequent to the reorganization and issuance of the additional equity interest, the Company recognized an $8.4 million gain, net of tax.

29
Table of Contents

Current Nine Months compared with Prior Nine Months

Operating Revenues. Operating revenues were $111.7 million higher in the Current Nine Months compared with the Prior Nine Months. Current Nine Months results included the contributions of the Company's wind farm utility vessels and liftboats that were acquired on December 22, 2011 and March 30, 2012, respectively. The wind farm utility vessels contributed $20.3 million of time charter revenues with an average day rate of $2,717 per day and a utilization rate of 92%. The liftboats contributed $50.9 million of operating revenues of which $47.0 million was time charter revenue with an average day rate of $18,738 per day and a utilization rate of 76%.
Excluding the contribution of the wind farm utility vessels and liftboats, time charter revenues were $44.3 million higher in the Current Nine Months compared with the Prior Nine Months. Overall fleet utilization was 80% compared with 69% and average day rates were $12,001 per day compared with $10,880 per day in the Prior Nine Months. The number of days available for charter was 29,841 compared with 32,293 in the Prior Nine Months, a 2,452 day or 8% reduction.
In the U.S. Gulf of Mexico, time charter revenues were $80.0 million higher primarily due to firmer market conditions during the first quarter of 2012 and the contribution of the liftboats. Excluding the contribution of the liftboats, time charter revenues were $33.0 million higher in the Current Nine Months compared with the Prior Nine Months. Net fleet additions increased time charter revenues by $4.4 million. Higher average day rates and improved utilization increased time charter revenues by $12.2 million and $19.3 million, respectively. The repositioning of vessels between geographic regions and other changes in fleet mix combined to increase time charter revenues by $0.5 million. The net effect of cold-stacking vessels, primarily due to the cold-stacking of three anchor handling towing supply vessels during the Current Year Quarter, was a reduction of $3.4 million in time charter revenues. As of September 30, 2012, the Company had three vessels cold-stacked in this region compared with seven as of September 30, 2011.
In Africa, time charter revenues were $4.7 million higher. Time charter revenues were $3.4 million higher due to improved utilization and $1.6 million higher due to higher average day rates. These increases were partially offset by a $0.3 million reduction in time charter revenues due to fleet dispositions and the repositioning of vessels between geographic regions.
In the Middle East, time charter revenues were $5.4 million higher, of which $0.9 million was due to improved utilization and $0.6 million was due to higher average day rates. Net fleet additions increased time charter revenues by $2.4 million and the repositioning of vessels between geographic regions increased time charter revenues by $1.5 million.
In Brazil, Mexico and Central and South America, time charter revenues were $2.0 million lower. Time charter revenues were $0.8 million higher due to the repositioning of vessels between geographic regions and $5.8 million higher due to higher average day rates. Lower utilization and net fleet dispositions decreased time charter revenues by $5.3 million and $3.3 million, respectively.
In Europe, excluding the $20.3 million contribution of the wind farm utility vessels, time charter revenues were $1.0 million higher. Time charter revenues were $3.1 million higher due to improved average day rates and $2.1 million higher due to a vessel that repositioned into the region. Lower utilization, vessel dispositions and unfavorable changes in currency exchange rates decreased time charter revenues by $1.0 million, $2.0 million and $1.2 million, respectively.
In Asia, time charter revenues were $2.2 million higher. Time charter revenues were $1.4 million higher due to improved utilization and $1.1 million higher due to higher average day rates. These increases were partially offset by a $0.3 million reduction in time charter revenues due to repositioning of vessels between geographic regions.
Revenues from brokered vessel activity were $3.4 million lower due to reduced activity in West Africa. This was offset by a $3.5 million increase in bareboat charter and other marine services revenues.
Operating Expenses. Operating expenses were $58.5 million higher in the Current Nine Months compared with the Prior Nine Months, of which $44.5 million was attributable to fleet additions including the wind farm utility vessels and liftboats. Excluding the impact of fleet additions, operating expenses were $14.0 million higher during the Current Nine Months compared with the Prior Nine Months. Personnel costs were $10.4 million higher primarily due to the return to service of previously cold-stacked vessels, increased activity levels, and inflationary pressures on rates of pay. Repair and maintenance expenses were $2.9 million higher, primarily in the U.S Gulf of Mexico, as activity levels increased during the Current Nine Months. Drydocking expenses were $3.6 million higher, primarily due to increased drydocking in international regions. Fuel, lubes and supplies expenses were $2.1 million higher primarily due to increased activity levels in the U.S. Gulf of Mexico. Leased-in equipment expense was $3.5 million higher primarily due to the charter-in of several vessels into the U.S. Gulf of Mexico, Africa and Brazil, Mexico, Central and South America. Brokered vessel activity was $2.4 million lower due to reduced activity in West Africa and other operating expenses were $2.2 million higher primarily due to increased activity levels.

30
Table of Contents

Gains on Asset Dispositions. During the Current Nine Months, the Company sold four offshore support vessels and other equipment for net proceeds of $52.1 million and gains of $10.6 million, of which $3.3 million were recognized currently and $7.3 million were deferred. In addition, the Company recognized previously deferred gains of $5.7 million. During the Prior Nine Months, the Company sold eight offshore support vessels and other equipment for net proceeds of $27.3 million and gains of $17.0 million, of which $12.4 million were recognized currently and $4.6 million were deferred. In addition, the Company recognized previously deferred gains of $0.8 million.
Operating Income. Excluding the impact of gains on asset dispositions and the impact of brokered vessel activity, operating income as a percentage of operating revenues was 9% in the Current Nine Months compared with an operating loss as a percentage of operating revenues of 1% in the Prior Nine Months. The improvement was primarily due to firmer market conditions in the U.S. Gulf of Mexico during the first quarter of 2012 and the contribution of the Company's liftboat fleet.
Equity in Earnings of 50% or Less Owned Companies, Net of Tax. Equity in earnings of 50% or less owned companies, net of tax, decreased by $5.6 million in the Current Nine Months compared with the Prior Nine Months. During the Prior Nine Months, Offshore Marine Services' Mexican joint venture executed a business reorganization plan and issued an additional equity interest to an unrelated third party. Subsequent to the reorganization and issuance of the additional equity interest, the Company recognized an $8.4 million gain, net of tax. The decrease was partially offset by a $2.0 million improvement in another Offshore Marine Services' joint venture following the commencement of a long-term charter for a vessel in November 2011.
Fleet Count
The composition of Offshore Marine Services’ fleet as of September 30 was as follows: 
 
Owned
 
Joint
Ventured
 
Leased-in
 
Pooled or
Managed
 
Total
2012
 
 
 
 
 
 
 
 
 
Anchor handling towing supply
14

 
2

 
3

 
—

 
19

Crew
31

 
7

 
7

 
3

 
48

Mini-supply
5

 
2

 
2

 
—

 
9

Standby safety
24

 
1

 
—

 
—

 
25

Supply
10

 
2

 
9

 
4

 
25

Towing supply
2

 
1

 
—

 
—

 
3

Liftboats(1)
18

 
2

 
—

 
—

 
20

Specialty
3

 
3

 
—

 
3

 
9

Wind farm utility
29

 
—

 
1

 
—

 
30

 
136

 
20

 
22

 
10

 
188

2011
 
 
 
 
 
 
 
 
 
Anchor handling towing supply
15

 
2

 
2

 
—

 
19

Crew
33

 
7

 
7

 
3

 
50

Mini-supply
5

 
1

 
2

 
—

 
8

Standby safety
26

 
1

 
—

 
—

 
27

Supply
10

 
—

 
9

 
10

 
29

Towing supply
2

 
1

 
2

 
—

 
5

Liftboats(1)
—

 
2

 
—

 
—

 
2

Specialty
3

 
3

 
—

 
3

 
9

Wind farm utility
—

 
—

 
—

 
—

 
—

 
94

 
17

 
22

 
16

 
149

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

31
Table of Contents

Aviation Services
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
United States
61,785

 
79

 
52,863

 
74

 
161,620

 
80

 
140,728

 
72

Foreign
16,204

 
21

 
18,941

 
26

 
40,406

 
20

 
55,724

 
28

 
77,989

 
100

 
71,804

 
100

 
202,026

 
100

 
196,452

 
100

Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Personnel
16,586

 
21

 
15,774

 
22

 
49,008

 
24

 
45,790

 
23

Repairs and maintenance
13,921

 
18

 
14,550

 
20

 
32,675

 
16

 
37,091

 
19

Insurance and loss reserves
2,968

 
4

 
2,454

 
4

 
8,128

 
4

 
6,598

 
3

Fuel
5,998

 
8

 
5,879

 
8

 
15,998

 
8

 
15,596

 
8

Leased-in equipment
309

 
—

 
505

 
1

 
1,050

 
1

 
1,470

 
1

Other
6,453

 
8

 
6,539

 
9

 
18,054

 
9

 
15,078

 
8

 
46,235

 
59

 
45,701

 
64

 
124,913

 
62

 
121,623

 
62

Administrative and general
10,338

 
13

 
6,841

 
9

 
27,210

 
14

 
20,090

 
10

Depreciation and amortization
10,937

 
14

 
9,093

 
13

 
31,031

 
15

 
33,402

 
17

 
67,510

 
86

 
61,635

 
86

 
183,154

 
91

 
175,115

 
89

Gains on Asset Dispositions and Impairments, Net
613

 
—

 
4,894

 
7

 
3,455

 
2

 
13,260

 
7

Operating Income
11,092

 
14

 
15,063

 
21

 
22,327

 
11

 
34,597

 
18

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative losses, net
(188
)
 
—

 
(807
)
 
(1
)
 
(492
)
 
—

 
(1,308
)
 
(1
)
Foreign currency gains (losses), net
(272
)
 
—

 
(95
)
 
—

 
633

 
—

 
596

 
—

Other, net
—

 
—

 
—

 
—

 
30

 
—

 
—

 
—

Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax
219

 
—

 
106

 
—

 
(5,444
)
 
(3
)
 
1,061

 
1

Segment Profit
10,851

 
14

 
14,267

 
20

 
17,054

 
8

 
34,946

 
18


Operating Revenues by Service Line. The table below sets forth, for the periods indicated, the amount of operating revenues earned by service line.
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Gulf of Mexico, primarily from oil and gas services
40,217

 
51

 
30,891

 
43

 
112,230

 
56

 
88,114

 
45

Alaska, primarily from oil and gas services
10,108

 
13

 
7,730

 
11

 
19,491

 
9

 
19,149

 
10

Contract-leasing
16,229

 
21

 
18,941

 
26

 
40,605

 
20

 
55,724

 
28

Air Medical Services
4,391

 
6

 
7,524

 
10

 
15,558

 
8

 
19,018

 
10

Flightseeing
4,381

 
6

 
4,121

 
6

 
6,999

 
3

 
6,868

 
3

FBO
2,758

 
3

 
2,688

 
4

 
7,463

 
4

 
7,889

 
4

Intersegment Eliminations
(95
)
 
—

 
(91
)
 
—

 
(320
)
 
—

 
(310
)
 
—

 
77,989

 
100

 
71,804

 
100

 
202,026

 
100

 
196,452

 
100



32
Table of Contents

Current Year Quarter compared with Prior Year Quarter

Operating Revenues.  Operating revenues were $6.2 million higher in the Current Year Quarter compared with the Prior Year Quarter.  Operating revenues in the U.S. Gulf of Mexico were $9.3 million higher primarily due to newly delivered medium and heavy helicopters being placed on contract, an expansion of government services support and an increase in charter flights primarily in support of hurricane evacuations and additional drilling activity in the U.S. Gulf of Mexico. Operating revenues in Alaska were $2.4 million higher largely due to additional medium helicopters placed in service with existing customers and a contract recommencing with a major oil and gas customer. Operating revenues from contract-leasing activities were $2.7 million lower. Contract-leasing revenues for helicopters chartered to Aviation Services' Brazilian joint venture, Aeroleo, were $1.5 million lower primarily due to the deferral and reduction of contract-leasing revenues as a result of difficulties experienced by one of its customers following the cancellation of certain contracts for a number of AW139 helicopters under contract-lease from Aviation Services. Contract-leasing revenues were also lower for another customer primarily due to the net deferral of $1.3 million due to the customer's short-term liquidity issues. In addition, contract-leasing revenues were lower following the expiration of contract-leases in Argentina, Thailand and Trinidad. These reductions were offset by a new contract-lease in Denmark. Operating revenues for air medical services were $3.1 million lower due to the conclusion of a long-term hospital contract in the second quarter of the current year. 
Operating Expenses.  Operating expenses were $0.5 million higher in the Current Year Quarter compared with the Prior Year Quarter.  Personnel costs were $0.8 million higher primarily due to the implementation of a pilot pay scale adjustment and the addition of personnel to support increased activity. Insurance and loss reserves were $0.5 million higher due to newly delivered helicopters and an increase in the overall fleet value. These increases were partially offset by a reduction of $0.6 million in repairs and maintenance expense due to vendor credits received for changes in power-by-hour programs and the timing of repairs.
Administrative and General. Administrative and general expenses were $3.5 million higher primarily due to an allowance for doubtful accounts provided in connection with a customer bankruptcy, severance costs associated with a change in executive management and additional wage and benefit costs.
Depreciation.  Depreciation expense was $1.8 million higher due to the addition of new and higher cost equipment.
Gains on Asset Dispositions and Impairments, Net.   During the Current Year Quarter, Aviation Services sold helicopter components and other equipment for proceeds of $0.4 million and gains of $0.4 million.  In addition, Aviation Services recognized previously deferred gains of $0.3 million.  During the Prior Year Quarter, Aviation Services sold four helicopters and other equipment for proceeds of $15.6 million and gains of $6.7 million, of which $4.7 million was recognized currently and $2.0 million was deferred.  In addition, Aviation Services recognized previously deferred gains of $0.2 million.
Operating Income. Operating income as a percentage of operating revenues was 14% compared with 21% in the Prior Year Quarter. The decrease was primarily due to lower gains on asset dispositions and impairments compared with the Prior Year Quarter.
Current Nine Months compared with Prior Nine Months

Operating Revenues.  Operating revenues were $5.6 million higher in the Current Nine Months compared with the Prior Nine Months.  Operating revenues in the U.S. Gulf of Mexico were $24.1 million higher primarily due to newly delivered medium and heavy helicopters being placed on contract, an expansion of government services support and an increase in charter flights primarily in support of hurricane evacuations and additional drilling activity.  Operating revenues from contract-leasing activities were $15.1 million lower. Contract-leasing revenues for helicopters chartered to Aviation Services' Brazilian joint venture, Aeroleo, were $10.1 million lower primarily due to the deferral and reduction of contract-leasing revenues as a result of difficulties experienced by one of its customers following the cancellation of certain contracts for a number of AW139 helicopters under contract-lease from Aviation Services. In addition, contract-lease revenues from the joint venture were lower due to decreased flight hours for helicopters undergoing major maintenance.  Contract-leasing revenues were also lower for another customer primarily due to the net deferral of $3.4 million due to the customer's short-term liquidity issues. In addition, contract-leasing revenues were $6.4 million lower as a result of the expiration of contract-leases in Argentina, Thailand and Trinidad.  These decreases were partially offset by new contract-leases in Denmark and the United Kingdom. Operating revenues for air medical services were $3.5 million lower due to the conclusion of a long-term hospital contract in the second quarter of the current year.
Operating Expenses.  Operating expenses were $3.3 million higher in the Current Nine Months compared with the Prior Nine Months.  Personnel costs were $3.2 million higher primarily due to the implementation of a pilot pay scale adjustment and the addition of personnel to support increased activity in the U.S. Gulf of Mexico.  Repair and maintenance expenses were $4.4 million lower primarily as a result of vendor credits recognized in the Current Nine Months, offset by additional flight hours on helicopters under power-by-hour agreements and the timing of repairs. Insurance and loss reserves were $1.5 million higher due to an increase in the overall fleet value and the recognition of a good experience credit from Aviation Services' hull and liability

33
Table of Contents

underwriters in the Prior Nine Months. Other operating expenses were $3.0 million higher primarily due to the receipt in the Prior Nine Months of $1.8 million in insurance proceeds related to hurricane damages sustained in 2005.
Administrative and General.  Administrative and general expenses were $7.1 million higher in the Current Nine Months primarily due to an allowance for doubtful accounts taken in connection with a customer bankruptcy, severance costs associated with a change in executive management, the recognition of previously deferred legal and professional expenses associated with a contemplated public offering and an increase in administrative support.
Depreciation and Amortization.  Depreciation and amortization expenses were $2.4 million lower primarily due to the change in estimate of the useful life and salvage value of helicopters noted above, which reduced depreciation expense in the Current Nine Months by $8.4 million, partially offset by the addition of new and higher cost equipment.  Effective July 1, 2011, the Company changed its estimated useful life and salvage value for helicopters from 12 to 15 years and 30% to 40% respectively, due to improvements in new helicopter models that continue to increase their long-term value and make them viable for operation over a longer period of time.
Gains on Asset Dispositions and Impairments, Net.  During the Current Nine Months, Aviation Services sold six helicopters, helicopter components and other equipment for proceeds of $5.2 million and gains of $2.8 million. In addition, Aviation Services recognized previously deferred gains of $0.7 million.  During the Prior Nine Months, Aviation Services sold eight helicopters and other equipment for proceeds of $25.3 million and gains of $14.8 million, of which $12.8 million were recognized currently and $2.0 million was deferred. In addition, Aviation Services recognized previously deferred gains of $0.5 million.
Operating Income. Excluding the change in depreciation policy noted above, operating income as a percentage of operating revenues was 7% compared with 18% in the Prior Nine Months. The decrease was primarily due to gains on asset dispositions in the Prior Nine Months.
Equity in losses of 50% or less owned companies. During the Current Nine Months, Aviation Services recognized an impairment charge of $6.5 million, net of tax, on its investment in its Brazilian joint venture. 
Fleet Count
The composition of Aviation Services’ fleet as of September 30 was as follows: 
 
Owned(1)
 
Joint
Ventured
 
Leased-in
 
Managed
 
Total
2012
 
 
 
 
 
 
 
 
 
Light helicopters – single engine
52

 
7

 
—

 
—

 
59

Light helicopters – twin engine
27

 
—

 
6

 
8

 
41

Medium helicopters
64

 
1

 
1

 
3

 
69

Heavy helicopters
10

 
—

 
—

 
—

 
10

 
153

 
8

 
7

 
11

 
179

2011
 
 
 
 
 
 
 
 
 
Light helicopters – single engine
51

 
6

 
3

 
—

 
60

Light helicopters – twin engine
30

 
—

 
6

 
9

 
45

Medium helicopters
59

 
1

 
2

 
3

 
65

Heavy helicopters
7

 
—

 
—

 
—

 
7

 
147

 
7

 
11

 
12

 
177

 ______________________
(1)
Excludes two light-twin engine helicopters removed from service as of September 30, 2012.



 

34
Table of Contents

Inland River Services
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
United States
52,879

 
99

 
47,875

 
100
 
159,256

 
99

 
135,786

 
100
Foreign
414

 
1

 
—

 
—
 
829

 
1

 
—

 
—
 
53,293

 
100

 
47,875

 
100
 
160,085

 
100

 
135,786

 
100
Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Barge logistics
21,514

 
40

 
21,545

 
45
 
64,791

 
40

 
59,122

 
44
Personnel
5,619

 
11

 
2,967

 
6
 
16,554

 
10

 
9,647

 
7
Repairs and maintenance
2,099

 
4

 
1,095

 
2
 
4,763

 
3

 
3,231

 
3
Insurance and loss reserves
1,122

 
2

 
603

 
1
 
2,680

 
2

 
1,748

 
1
Fuel, lubes and supplies
1,525

 
3

 
611

 
1
 
4,747

 
3

 
2,261

 
2
Leased-in equipment
3,057

 
6

 
2,718

 
6
 
9,210

 
6

 
7,232

 
5
Other
3,384

 
6

 
1,657

 
4
 
8,221

 
5

 
4,556

 
3
 
38,320

 
72

 
31,196

 
65
 
110,966

 
69

 
87,797

 
65
Administrative and general
3,480

 
6

 
2,206

 
5
 
11,235

 
7

 
8,069

 
6
Depreciation and amortization
7,335

 
14

 
6,464

 
13
 
21,586

 
14

 
17,877

 
13
 
49,135

 
92

 
39,866

 
83
 
143,787

 
90

 
113,743

 
84
Gains (Losses) on Asset Dispositions
3,503

 
6

 
1,303

 
2
 
6,288

 
4

 
1,978

 
2
Operating Income
7,661

 
14

 
9,312

 
19
 
22,586

 
14

 
24,021

 
18
Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency losses, net
33

 
—

 
—

 
—
 
(60
)
 
—

 
—

 
—
Other, net
—

 
—

 
—

 
—
 
—

 
—

 
4

 
—
Equity in Earnings (Losses) of 50% or Less
  Owned Companies, Net of Tax
(2,227
)
 
(4
)
 
2,771

 
6
 
(1,538
)
 
(1
)
 
3,181

 
2
Segment Profit
5,467

 
10

 
12,083

 
25
 
20,988

 
13

 
27,206

 
20

Operating Revenues by Service Line. The table below sets forth, for the periods indicated, operating revenues earned by service line.
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dry cargo barge pool participation
24,999

 
47
 
27,459

 
57
 
74,316

 
46
 
78,797

 
58
Liquid unit tow operations
7,109

 
13
 
6,873

 
15
 
21,084

 
13
 
19,870

 
15
Charter-out of dry cargo barges
1,789

 
4
 
2,444

 
5
 
5,887

 
4
 
6,727

 
5
10,000 barrel liquid tank barge operations
4,419

 
8
 
4,317

 
9
 
14,760

 
9
 
11,681

 
8
Inland river towboat operations and other activities
14,977

 
28
 
6,782

 
14
 
44,038

 
28
 
18,711

 
14
 
53,293

 
100
 
47,875

 
100
 
160,085

 
100
 
135,786

 
100

 

35
Table of Contents

Dry Cargo Barge Pool Operating Data. The following table presents, for the periods indicated, Inland River Services’ interest in tons moved and its available barge days in the dry cargo barge pools. Available barge days represents the total calendar days during which the Company’s owned and chartered-in barges were in the pool.
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
 
Tons
 
%
 
Tons
 
%
 
Tons
 
%
 
Tons
 
%
Tons Moved (in thousands):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Grain
1,078

 
71
 
1,019

 
80
 
2,843

 
66
 
2,862

 
73
Non-Grain
438

 
29
 
258

 
20
 
1,470

 
34
 
1,084

 
27
 
1,516

 
100
 
1,277

 
100
 
4,313

 
100
 
3,946

 
100
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Days
 
 
 
Days
 
 
 
Days
 
 
 
Days
 
 
Available barge days
53,066

 
 
 
49,914

 
 
 
155,360

 
 
 
146,954

 
 
Operating Revenues. Operating revenues were $5.4 million higher in the Current Year Quarter compared with the Prior Year Quarter and $24.3 million higher in the Current Nine Months compared with the Prior Nine Months. Operating revenues from the dry cargo barge pools were $2.5 million lower in the Current Year Quarter compared with the Prior Year Quarter and $4.5 million lower in the Current Nine Months compared with the Prior Nine Months. Dry Cargo markets continued to be affected by drought conditions that impacted crop yield and caused river closures and restricted tow sizes. Operating revenues from the liquid unit tow and 10,000 barrel liquid tank barge operations were higher in both comparable periods primarily due to increased demand. Operating revenues from inland river towboat operations and other activities were $8.2 million higher in the Current Year Quarter compared with the Prior Year Quarter and $25.3 million higher in the Current Nine Months compared with the Prior Nine Months primarily due to activity in SCF's Lewis and Clark Fleeting and Terminal operations acquired in December 2011(“Lewis & Clark).
Operating Expenses. Operating expenses were $7.1 million higher in the Current Year Quarter compared with the Prior Year Quarter and $23.2 million higher in the Current Nine Months compared with the Prior Nine Months primarily due to the acquisition of Lewis & Clark. Barge logistics expenses were higher in Current Nine Months compared with the Prior Nine Months primarily due to higher towing and switching expenses along with higher fuel costs.
Administrative and General. Administrative and general expenses were $1.3 million higher in the Current Year Quarter compared with the Prior Year Quarter primarily due to the acquisition of Lewis & Clark and were $3.2 million higher in the Current Nine Months compared with the Prior Nine Months primarily due to the acquisition of Lewis & Clark, the acquisition of 70% interest in Naviera Central S.A. and higher wage and benefit costs.
Gains on Asset Dispositions. During the Current Year Quarter, the Company sold nine barges, one towboat and other equipment for net proceeds of $4.3 million and gains of $2.8 million. In addition, the Company recognized previously deferred gains of $0.7 million. During the Current Nine Months, the Company sold nine barges, two towboats and other equipment for net proceeds of $9.5 million and gains of $4.2 million. In addition, the Company recognized previously deferred gains of $2.1 million. During the Prior Year Quarter, the Company sold six barges for net proceeds of $4.1 million and gains of $0.6 million.  In addition, the Company recognized previously deferred gains of $0.7 million.  During the Prior Nine Months, the Company sold six barges and one towboat for net proceeds of $4.8 million and a loss of $0.1 million. In addition, the Company recognized previously deferred gains of $2.1 million.
Operating Income. Excluding the impact of gains on asset dispositions, operating income as a percentage of operating revenues was 8% in the Current Year Quarter compared with 17% in the Prior Year Quarter and 10% in the Current Nine Months compared with 16% in the Prior Nine Months. The reduction in the Current Nine Months compared with the Prior Nine Months was primarily due to lower revenues for the dry cargo barge pools and higher barge logistics expenses discussed above.
Equity in losses of 50% or less owned companies. During the Current Year Quarter and Current Nine Months, the Company recognized $2.2 million and $1.5 million, respectively of equity in losses of 50% or less owned companies, net of tax, primarily from its Argentinian joint venture as a result of difficult operating conditions and provisions for uncertain insurance recoveries related to facility damage sustained in 2011. During the Prior Year Quarter and Prior Nine Months, the Company recognized $2.8 million and $3.2 million, respectively of equity in earnings of 50% or less owned companies, net of tax, primarily due to the recognition of a $2.3 million gain, net of tax, following the acquisition of a 100% controlling interest in Soylutions LLC.



36
Table of Contents

Fleet Count
The composition of Inland River Services’ fleet as of September 30 was as follows: 
 
Owned
 
Joint
Ventured
 
Leased-in
 
Pooled or
Managed
 
Total
2012
 
 
 
 
 
 
 
 
 
Inland river dry cargo barges
683

 
172

 
2

 
587

 
1,444

Inland river liquid tank barges
73

 
—

 
—

 
7

 
80

Inland river deck barges
20

 
—

 
—

 
—

 
20

Inland river towboats:
 
 
 
 
 
 
 
 


4,000 hp - 6,250 hp
3

 
13

 
—

 
—

 
16

3,300 hp - 3,900 hp
1

 
—

 
—

 
—

 
1

Less than 3,200 hp
12

 
2

 
—

 
—

 
14

Dry cargo vessel(1)
—

 
1

 
—

 
—

 
1

 
792

 
188

 
2

 
594

 
1,576

2011
 
 
 
 
 
 
 
 
 
Inland river dry cargo barges
689

 
172

 
2

 
626

 
1,489

Inland river liquid tank barges
70

 
—

 
—

 
9

 
79

Inland river deck barges
20

 
—

 
—

 
—

 
20

Inland river towboats:
 
 
 
 
 
 
 
 


4,000 hp - 6,250 hp
3

 
13

 
—

 
—

 
16

3,300 hp - 3,900 hp
1

 
—

 
—

 
—

 
1

Less than 3,200 hp
12

 
2

 
—

 
—

 
14

Dry cargo vessel(1)
—

 
1

 
—

 
—

 
1

 
795

 
188

 
2

 
635

 
1,620

 ______________________
(1) 
Argentine-flag.


37
Table of Contents

Marine Transportation Services
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
United States
18,747

 
69

 
17,651

 
71

 
54,056

 
68

 
52,302

 
79
Foreign
8,607

 
31

 
7,132

 
29

 
25,373

 
32

 
14,129

 
21
 
27,354

 
100

 
24,783

 
100

 
79,429

 
100

 
66,431

 
100
Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Personnel
4,190

 
15

 
4,287

 
17

 
12,584

 
16

 
12,344

 
19
Repairs and maintenance
1,392

 
5

 
222

 
1

 
5,254

 
7

 
1,843

 
3
Drydocking
87

 
—

 
1,030

 
4

 
373

 
—

 
1,489

 
2
Insurance and loss reserves
100

 
—

 
641

 
3

 
856

 
1

 
1,197

 
2
Fuel, lubes and supplies
2,244

 
8

 
2,007

 
8

 
6,851

 
9

 
4,510

 
7
Leased-in equipment
3,235

 
12

 
2,319

 
9

 
9,581

 
12

 
8,985

 
13
Other
4,336

 
16

 
4,688

 
19

 
12,565

 
16

 
7,389

 
11
 
15,584

 
56

 
15,194

 
61

 
48,064

 
61

 
37,757

 
57
Administrative and general
4,301

 
16

 
2,044

 
8

 
9,710

 
12

 
5,607

 
8
Depreciation and amortization
5,639

 
21

 
5,833

 
23

 
16,956

 
21

 
16,539

 
25
 
25,524

 
93

 
23,071

 
93

 
74,730

 
94

 
59,903

 
90
Gains on Asset Dispositions
145

 
—

 
—

 
—

 
145

 
—

 
—

 
—
Operating Income
1,975

 
7

 
1,712

 
7

 
4,844

 
6

 
6,528

 
10
Other Income (Expense):
 
 

 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency gains (losses), net
10

 
—

 
(18
)
 
—

 
16

 
—

 
4

 
—
Other, net
4

 
—

 
131

 
1

 
83

 
—

 
187

 
—
Equity in Losses of 50% or Less Owned Companies, Net of Tax
(551
)
 
(2
)
 
—

 
—

 
(1,542
)
 
(2
)
 
—

 
—
Segment Profit
1,438

 
5

 
1,825

 
7

 
3,401

 
4

 
6,719

 
10

Operating Revenues by Charter Arrangement. The table below sets forth, for the periods indicated, the amount of operating revenues earned from charter arrangements.
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Time charter
9,883

 
36
 
8,857

 
36
 
27,683

 
35
 
26,207

 
39
Bareboat charter
8,744

 
32
 
8,744

 
35
 
26,041

 
33
 
25,946

 
39
Technical management services
194

 
1
 
137

 
1
 
571

 
1
 
412

 
1
G&G Shipping
8,533

 
31
 
7,045

 
28
 
25,134

 
31
 
13,866

 
21
 
27,354

 
100
 
24,783

 
100
 
79,429

 
100
 
66,431

 
100
G&G Shipping Acquisition. In April 2011, Marine Transportation Services acquired real property, eight foreign flag Roll-on/Roll-off (“RORO”) vessels and a 70% interest in an operating company engaged in the shipping trade between the United States, the Bahamas and the Caribbean (the "G&G Shipping Acquisition"). The operating company leases-in the real property and the RORO vessels from the Company. In the Current Year Quarter and Current Nine Months, this operation contributed an operating loss of $2.1 million and $4.2 million, respectively. In the Prior Year Quarter and Prior Nine Months, this operation contributed an operating loss of $0.9 and $1.3 million, respectively.

38
Table of Contents

Operating Revenues. Operating revenues were $2.6 million higher in the Current Year Quarter compared with the Prior Year Quarter, and $13.0 million higher in the Current Nine Months compared with the Prior Nine Months. Time charter revenues for the Company's U.S. -flag product tankers were $1.0 million higher in the Current Year Quarter and $1.5 million higher in the Current Nine Months primarily due to an increase in time charter rates for three vessels. Operating revenues for the foreign flag RORO vessels were $1.5 million higher in the Current Year Quarter compared with the Prior Year Quarter primarily due to operational issues and the impact of Hurricane Irene in the Prior Year Quarter, and $11.3 million higher in the Current Nine Months compared to the Prior Nine Months reflecting the G&G Acquisition discussed above.
Operating Expenses. Operating expenses were $0.4 million higher in the Current Year Quarter compared with the Prior Year Quarter primarily due to higher repair and maintenance costs. Operating expenses were $10.3 million higher in the Current Nine Months compared with the Prior Nine Months primarily due to the G&G Acquisition discussed above.
Administrative and General. Administrative and general expenses were $2.3 million higher in the Current Year Quarter compared with the Prior Year Quarter primarily due to a G&G related settlement agreement, higher salary costs and higher legal fees. Administrative and general expenses were $4.1 million higher in the Current Nine Months compared with the Prior Nine Months primarily due to the G&G Acquisition discussed above and the G&G related settlement agreement.
Operating Income. Operating income as a percentage of operating revenues was 7% in the Current Year Quarter and the Prior Year Quarter and 6% in the Current Nine Months compared with 10% in the Prior Nine Months. The reduction in the Current Nine Months compared with the Prior Nine Months was primarily due to out-of-service time and higher repair and maintenance costs for one vessel undergoing topside repairs.
Equity in earnings of 50% or Less Owned Companies. Equity in earnings in the Current Year Quarter and the Current Nine Months reflect losses incurred by the Company's Trailer Bridge joint venture, an operator of U.S.-flag deck and RORO barges, partially offset by earnings from the Company's joint venture that began operating its U.S.-flag articulated tug-barge on the Great Lakes in April 2012.
Fleet Count
The composition of Marine Transportation Services’ fleet as of September 30 was as follows: 
 
Owned
 
Joint
Ventured
 
Leased-in
 
Total
2012
 
 
 
 
 
 
 
U.S.-flag product tankers(1)
5

 
—

 
2

 
7

Foreign flag RORO vessels
7

 
—

 
—

 
7

U.S.-flag deck barges
—

 
5

 
—

 
5

U.S.-flag RORO barges
—

 
2

 
—

 
2

U.S.-flag articulated tug-barge
—

 
1

 
—

 
1

 
12

 
8

 
2

 
22

2011
 
 
 
 
 
 
 
U.S.-flag product tankers
5

 
—

 
2

 
7

Foreign flag RORO vessels
8

 
—

 
—

 
8

U.S.-flag deck barges
—

 
—

 
—

 
—

U.S.-flag RORO barges
—

 
—

 
—

 
—

U.S.-flag articulated tug-barge
—

 
—

 
—

 
—

 
13

 
—

 
2

 
15

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


39
Table of Contents

Emergency and Crisis Services
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
United States
7,200

 
78

 
11,914

 
85
 
23,082

 
83

 
58,857

 
92

Foreign
2,067

 
22

 
2,166

 
15
 
4,839

 
17

 
5,331

 
8

 
9,267

 
100

 
14,080

 
100
 
27,921

 
100

 
64,188

 
100

Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Subcontractors
2,669

 
29

 
4,369

 
31
 
9,348

 
33

 
24,039

 
37

Personnel
3,202

 
35

 
4,772

 
34
 
9,204

 
33

 
12,205

 
19

Other
—

 
—

 
—

 
—
 
—

 
—

 
1

 
—

 
5,871

 
64

 
9,141

 
65
 
18,552

 
66

 
36,245

 
56

Administrative and general
4,256

 
46

 
2,961

 
21
 
11,721

 
42

 
9,327

 
15

Depreciation and amortization
483

 
5

 
655

 
5
 
1,458

 
5

 
1,655

 
3

 
10,610

 
115

 
12,757

 
91
 
31,731

 
113

 
47,227

 
74

Gains on Asset Dispositions
—

 
—

 
7

 
—
 
5

 
—

 
7

 
—

Operating Income (Loss)
(1,343
)
 
(15
)
 
1,330

 
9
 
(3,805
)
 
(13
)
 
16,968

 
26

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency gains (losses), net
26

 
—

 
17

 
—
 
20

 
—

 
(41
)
 
—

Other, net
—

 
—

 
—

 
—
 
—

 
—

 
2

 
—

Equity in Earnings of 50% or Less Owned Companies, Net of Tax
72

 
1

 
—

 
—
 
286

 
1

 
—

 
—

Segment Profit (Loss)
(1,245
)
 
(14
)
 
1,347

 
9
 
(3,499
)
 
(12
)
 
16,929

 
26

Operating Revenues by Service Line. The table below sets forth, for the periods indicated, the amount of operating revenues earned by service line.
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Response Services
1,706

 
18
 
6,477

 
46
 
7,076

 
25
 
42,904

 
67
Retainer Services
3,138

 
34
 
2,882

 
20
 
8,939

 
32
 
8,084

 
12
Professional Services
4,171

 
45
 
4,605

 
33
 
11,366

 
41
 
12,209

 
19
Software Services
252

 
3
 
97

 
1
 
536

 
2
 
471

 
1
Equipment Sales and Leasing
—

 
—
 
19

 
—
 
4

 
—
 
520

 
1
 
9,267

 
100
 
14,080

 
100
 
27,921

 
100
 
64,188

 
100
Operating Results. Operating revenues and operating margins for Emergency and Crisis Services can vary materially between comparable periods depending upon the number and magnitude of emergency responses. Emergency and Crisis Services' operating results in the Prior Year Quarter and Prior Nine Months were impacted by oil spill response activities relating to the BP Macondo well incident in the U.S. Gulf of Mexico following the sinking of the semi-submersible drilling rig Deepwater Horizon in April 2010.


40
Table of Contents

Commodity Trading and Logistics
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
United States
96,909

 
67

 
185,615

 
66

 
463,615

 
82

 
537,236

 
75

Foreign
48,816

 
33

 
93,563

 
34

 
98,551

 
18

 
181,275

 
25

 
145,725

 
100

 
279,178

 
100

 
562,166

 
100

 
718,511

 
100

Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating
137,281

 
94

 
279,180

 
100

 
542,640

 
97

 
703,842

 
98

Administrative and general
2,236

 
2

 
1,944

 
1

 
8,788

 
1

 
6,806

 
1

Depreciation
1,641

 
1

 
12

 
—

 
4,292

 
1

 
37

 
—

 
141,158

 
97

 
281,136

 
101

 
555,720

 
99

 
710,685

 
99

Gains on asset dispositions, net
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Operating Income
4,567

 
3

 
(1,958
)
 
(1
)
 
6,446

 
1

 
7,826

 
1

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative losses, net(1)
(4,304
)
 
(3
)
 
(3,063
)
 
(1
)
 
(3,850
)
 
—

 
(6,985
)
 
(1
)
Foreign currency gains (losses), net
(183
)
 
—

 
153

 
—

 
(118
)
 
—

 
132

 
—

Other, net
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

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

 
(2,267
)
 
(1
)
 
6,153

 
1

 
(3,267
)
 
—

Segment Profit (Loss)
79

 
—

 
(7,135
)
 
(3
)
 
8,631

 
2

 
(2,294
)
 
—

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

Operating Revenues and Segment Profit (Loss) by Commodity Group. The table below sets forth, for the periods indicated, the amount of operating revenues earned and segment profit (loss) by commodity group.
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
 
$’000
 
%
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Energy Trading
96,731

 
66

 
189,419

 
68
 
463,644

 
82

 
554,234

 
77
Agricultural Trading
48,994

 
34

 
89,759

 
32
 
98,522

 
18

 
164,277

 
23
 
145,725

 
100

 
279,178

 
100
 
562,166

 
100

 
718,511

 
100
Segment Profit (Loss):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Energy Trading
520

 
658

 
(6,566
)
 
92
 
8,895

 
103

 
(2,020
)
 
88
Agricultural Trading
(441
)
 
(558
)
 
(569
)
 
8
 
(264
)
 
(3
)
 
(274
)
 
12
 
79

 
100

 
(7,135
)
 
100
 
8,631

 
100

 
(2,294
)
 
100
Energy Trading. Segment Profit was $7.1 million higher in the Current Year Quarter compared with the Prior Year Quarter and $10.9 million higher in the Current Nine Months compared with the Prior Nine Months primarily due to volatile commodity prices and equity losses in the Prior Year Quarter. In addition, segment profit in the Current Nine Months included the recognition of a gain of $6.0 million, net of tax, in equity in earnings of 50% or less owned companies following the Company obtaining a controlling interest in Illinois Corn Processing LLC.

41
Table of Contents

Other Segment Profit
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
 
$’000
 
$’000
 
$’000
 
$’000
Harbor and Offshore Towing Services
8,034

 
2,960

 
14,656

 
10,944

Other Activities
(1,613
)
 
(379
)
 
(1,942
)
 
(1,042
)
Equity in Losses of 50% or Less Owned Companies
172

 
291

 
(768
)
 
(95
)
Segment Profit
6,593

 
2,872

 
11,946

 
9,807

Harbor and Offshore Towing Services. Segment profit was $5.1 million higher in the Current Year Quarter compared with the Prior Year Quarter and $3.7 million higher in the Current Nine Months compared with the Prior Nine Months primarily due to a $7.0 million termination payment received from one of Harbor and Offshore Towing Services customers following the cancellation of long-term charter in the Current Year Quarter.
Other Activities. During the Current Year Quarter, the Company recognized a $1.2 million impairment charge related to a long-lived asset held for use in the Company's lending and leasing activities.
Corporate and Eliminations
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
 
$’000
 
$’000
 
$’000
 
$’000
Corporate Expenses
(9,402
)
 
(6,897
)
 
(26,984
)
 
(26,318
)
Eliminations
—

 
1

 
—

 
1

Operating Loss
(9,402
)
 
(6,896
)
 
(26,984
)
 
(26,317
)
Other Income (Expense):
 
 
 
 
 
 
 
Derivative losses, net
(157
)
 
(22,084
)
 
(939
)
 
(27,580
)
Foreign currency gains (losses), net
295

 
(979
)
 
232

 
4,568

Other, net
(47
)
 
(175
)
 
14

 
(470
)
Corporate Expenses. Corporate expenses were $2.5 million higher in the Current Year Quarter compared with the Prior Year Quarter primarily due to increased compensation accruals and higher professional fees associated with the Company's recently announced intention to spinoff of its Aviation Services business segment.
Derivative losses, net. Derivative losses, net in the Prior Year Quarter and the Prior Nine Months were primarily due to losses on U.S. treasury notes, rate-locks and bond future and option contracts resulting from declines in market interest rates, partially offset by gains from options on equities and equity indices as a result of market movements on the underlying securities.
Foreign currency gains (losses), net. Foreign currency gains in the Prior Nine Months were primarily due to the strengthening of the euro against the U.S. dollar.
Other Income (Expense) not included in Segment Profit (Loss)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
 
$’000
 
$’000
 
$’000
 
$’000
Interest income
4,144

 
5,462

 
14,761

 
12,491

Interest expense
(12,679
)
 
(10,711
)
 
(37,116
)
 
(31,216
)
Debt extinguishment losses, net
—

 
(51
)
 
(160
)
 
(99
)
Marketable security gains (losses), net
(1,730
)
 
130

 
13,224

 
(3,090
)
 
(10,265
)
 
(5,170
)
 
(9,291
)
 
(21,914
)
Interest Income. Interest income was higher in the Current Nine Months primarily due to a prepayment penalty received in the second quarter following the early redemption of a note receivable in the Company's lending and leasing portfolio and interest earned on additional notes to certain of the Company's 50% or less owned companies.

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Interest Expense. Interest expense was higher in the Current Year Quarter and Current Nine Months primarily due to interest expense on borrowings from Era's senior secured revolving credit facility entered into on December 22, 2011, partially offset by higher capitalized interest.
Marketable Security Gains (Losses), net. Marketable security gains, net in the Current Nine Months were primarily attributable to gains on the Company's long marketable security positions.
Liquidity and Capital Resources

General

The Company's ongoing liquidity requirements arise primarily from working capital needs, capital commitments and its obligations to repay debt obligations. The Company may use its liquidity to fund acquisitions, repurchase shares of SEACOR common stock, par value $0.01 per share (“Common Stock”), for treasury or to make other investments. Sources of liquidity are cash balances, marketable securities, construction reserve funds, Title XI reserve funds, cash flows from operations and borrowings under the Company's revolving credit facilities. From time to time, the Company may secure additional liquidity through asset sales or the issuance of debt, shares of Common Stock or common stock of its subsidiaries, preferred stock or a combination thereof.
As of September 30, 2012, the Company’s unfunded capital commitments totaled $365.0 million and consisted of: twelve offshore support vessels for $131.4 million; an interest in a jack-up drilling rig for $30.3 million; twelve helicopters for $138.3 million; seven inland river liquid tank barges for $15.1 million; three inland river towboats for $9.4 million; four harbor tugs for $23.0 million and other equipment and improvements for $14.9 million. In addition, the Company notified the lessee of its intent to purchase two harbor tugs currently operating under capital leases for $2.6 million. Of these commitments $58.6 million is payable during the remainder of 2012 with the balance payable through 2016 and $125.0 million may be terminated without further liability other than the payment of liquidated damages of $3.3 million.
As of September 30, 2012, construction reserve funds of $170.3 million were classified as non-current assets in the accompanying condensed consolidated balance sheets as the Company has the intent and ability to use the funds to acquire equipment.
SEACOR’s Board of Directors previously approved a securities repurchase plan that authorizes the Company to acquire Common Stock, which may be acquired through open market purchases, privately negotiated transactions or otherwise, depending on market conditions. As of September 30, 2012, the remaining authority under the repurchase plan was $121.3 million.
SEACOR’s Board of Directors has previously authorized the Company to purchase any or all of its 5.875% Senior Notes due 2012 and its 7.375% Senior Notes due 2019, which may be acquired through open market purchases, privately negotiated transactions or otherwise, depending on market conditions.
As of September 30, 2012, the Company had $240.0 million of outstanding borrowings under the SEACOR revolving credit facility. The remaining availability under this facility as of September 30, 2012 was $164.0 million, net of issued letters of credit of $1.0 million. On November 3, 2012, the maximum committed amount under the revolving credit facility will be reduced by $45.0 million. In addition, the Company had other outstanding letters of credit totaling $47.2 million with various expiration dates through 2016.
As of September 30, 2012, Era had $190.0 million of outstanding borrowings under its senior secured revolving credit facility. The senior secured revolving credit facility requires Era to maintain a maximum leverage ratio and various other financial ratios, as defined in the senior secured credit facility. Failure to comply with these ratios is an event of default and, as a result, borrowing capacity is based on the ability to comply with these ratios. As of September 30, 2012, the availability under this facility was $44.9 million, net of issued letters of credit of $0.3 million, based on compliance with these financial ratios.

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Summary of Cash Flows
 
Nine Months Ended September 30,
 
2012
 
2011
 
$’000
 
$’000
Cash flows provided by or (used in):
 
 
 
Operating Activities - Continuing Operations
139,073

 
166,295

Operating Activities - Discontinued Operations
(12,043
)
 
29,784

Investing Activities - Continuing Operations
(421,014
)
 
(242,358
)
Investing Activities - Discontinued Operations
88,430

 
(5,805
)
Financing Activities - Continuing Operations
(51,723
)
 
(15,835
)
Effect of Exchange Rate Changes on Cash and Cash Equivalents
2,631

 
4,193

Net Decrease in Cash and Cash Equivalents
(254,646
)
 
(63,726
)

Operating Activities

Cash flows provided by operating activities decreased by $69.0 million in the Current Nine Months compared with the Prior Nine Months. The components of cash flows provided by (used in) operating activities during the Current Nine Months and Prior Nine Months were as follows:
 
Nine Months Ended September 30,
 
2012
 
2011
 
$’000
 
$’000
Operating income from continuing operations before depreciation and gains on asset dispositions and impairments, net
184,338

 
169,622

Operating income (loss) from discontinued operations before depreciation and gains on asset dispositions and impairments, net
(434
)
 
3,209

Changes in operating assets and liabilities before interest and income taxes
(7,159
)
 
(3,467
)
Purchases of marketable securities
(35,811
)
 
(96,363
)
Proceeds from sale of marketable securities
32,175

 
155,866

Cash settlements on derivative transactions, net
(14,813
)
 
(22,610
)
Dividends received from 50% or less owned companies
2,325

 
7,663

Interest paid, excluding capitalized interest
(40,975
)
 
(21,543
)
Income taxes paid, net
(20,746
)
 
(5,679
)
Other
28,130

 
9,381

Total cash flows provided by operating activities
127,030

 
196,079

Operating income from continuing operations before depreciation and gains on asset dispositions and impairments, net was $14.7 million higher in the Current Nine Months compared with the Prior Nine Months. See “Consolidated Results of Operations” included above for a discussion of the results of each of the Company's business segments.
During the Current Nine Months, cash used in operating activities included $19.0 million to purchase marketable security long positions and $16.8 million to cover marketable security short positions. During the Current Nine Months, cash provided by operating activities included $29.7 million received from the sale of marketable security long positions and $2.5 million received upon entering into marketable security short positions.
During the Prior Nine Months, cash used in operating activities included $23.8 million to purchase marketable security long positions and $72.6 million to cover marketable security short positions. During the Prior Nine Months, cash provided by operating activities included $77.3 million received from the sale of marketable security long positions and $78.6 million received upon entering into marketable security short positions.


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Investing Activities

During the Current Nine Months, net cash used in investing activities of continuing operations was $421.0 million primarily as follows:
•
Capital expenditures were $257.0 million. Equipment deliveries included two offshore support vessels, one wind farm utility vessel, three inland river dry cargo barges, four liquid tank barges, two inland river towboats and 17 helicopters.
•
The Company sold four offshore support vessels, seven helicopters, nine inland river dry cargo barges, two inland river towboats, one RORO vessel, two harbor tugs and other equipment for net proceeds of $73.5 million ($19.6 million in cash, $5.0 million in cash deposits previously received and $48.9 million in seller financing).
•
On September 28, 2012, the Company made an irrevocable deposit of $171.0 million to its trustee for the extinguishment of the Company's 5.875% Senior Notes at their scheduled maturity on October 1, 2012. As of September 30, 2012, the irrevocable deposit held by the trustee is included in restricted cash.
•
The Company received returns on investments from its 50% or less owned companies of $80.7 million including $42.7 million of repayments on short-term notes from Mexmar, $20.8 million from SeaJon as a capital distribution and $15.7 million from Avion as a repayment of advances.
•
The Company made investments in its 50% or less owned companies of $46.4 million including a $10.8 million loan to Era do Brazil, $15.7 million of bridge financing to Trailer Bridge and $9.0 million in advances to Avion.
•
Construction reserve fund account transactions included withdrawals of $86.5 million and deposits of $6.5 million.
•
The Company received net principal payments on third party notes receivable of $18.6 million.
•
The Company acquired 18 lift boats, real property and working capital from Superior for $142.5 million.
•
The Company obtained a 70% controlling interest in ICP through its acquisition of a portion of its partner's interest for $9.1 million in cash.
During the Current Nine Months, net cash provided by investing activities of discontinued operations was $88.4 million primarily as follows:
•
The Company sold certain companies and assets that were part of its Environmental Services business segment for a net sales price of $99.9 million. Net cash proceeds received were $89.3 million.
During the Prior Nine Months, net cash used in investing activities of continuing operations was $242.4 million primarily as follows:
•
Capital expenditures were $206.6 million. Equipment deliveries included three offshore support vessels, 55 inland river dry cargo barges, two liquid tank barges, nine helicopters, one harbor tug and other equipment. In addition, the Company acquired the remaining interest in an offshore support vessel previously joint ventured.
•
The Company sold nine offshore support vessels, eight helicopters, one inland river towboat, six inland river deck barges, two harbor tugs and other equipment for net proceeds of $50.6 million.
•
The Company made investments in its 50% or less owned companies, net of returns, of $40.4 million.
•
The Company made net advances on third party notes receivable of $33.6 million.
•
Construction reserve fund account transactions included withdrawals of $37.4 million and deposits of $11.8 million.
•
The Company acquired certain real property, eight foreign flag RORO vessels and a 70% interest in an operating company engaged in the shipping trade between the United States, the Bahamas and the Caribbean for $33.5 million, which included cash consideration of $30.3 million and the contribution of a $3.2 million note receivable. The acquired company had $1.6 million in cash at the time of the acquisition.
•
The Company obtained a 100% controlling interest in Soylutions LLC ("Soylutions") through its acquisition of its partner's interest for $11.9 million in cash. The acquired company had $0.2 million in cash at the time of acquisition.

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Financing Activities
During the Current Nine Months, net cash used in financing activities of continuing operations was $51.7 million. The Company:
•
had borrowings of $115.0 million under the SEACOR revolving credit facility and $38.0 million under the Era senior secured revolving credit facility;
•
made repayments of $50.0 million under the SEACOR revolving credit facility and $100.0 million under the Era senior secured revolving credit facility;
•
purchased $5.5 million, in principal amount, of its 5.875% Senior Notes due 2012 for an aggregate purchase price of $5.7 million;
•
made scheduled payments on long-term debt and capital lease obligations of $9.7 million;
•
repaid $3.2 million of acquired debt;
•
received proceeds of $0.1 million and repaid $0.7 million under working capital lines;
•
had net borrowings on inventory financing arrangements of $13.4 million;
•
received $8.4 million for share award plans; and
•
acquired for Treasury 330,134 shares of Common Stock for an aggregate purchase price of $28.7 million.
During the Prior Nine Months, net cash used in financing activities of continuing operations was $15.8 million. The Company:
•
purchased $2.2 million, in principal amount, of its 5.875% Senior Notes due 2012 for an aggregate purchase price of $2.3 million;
•
repaid $22.8 million for the redemption of facility financing;
•
made scheduled payments on long-term debt and capital lease obligations of $8.6 million;
•
had net borrowings on inventory financing arrangements of $10.2 million; and
•
received $8.7 million from share award plans.

Short and Long-Term Liquidity Requirements

Current economic conditions have continued to disrupt the credit and capital markets. To date, the Company’s liquidity has not been materially impacted by the current credit environment and management does not expect that it will be materially impacted in the near future. The Company anticipates it will continue to generate positive cash flows from operations and that these cash flows will be adequate to meet the Company’s working capital requirements. In support of the Company’s capital expenditure program or other liquidity requirements, the Company may: use its cash balances; sell securities; utilize construction reserve funds; sell assets; enter into sale and leaseback transactions for equipment; borrow under its revolving credit facilities; issue debt, shares of Common Stock, common stock of its subsidiaries or preferred stock; or a combination thereof.
The Company’s long-term liquidity is dependent upon its ability to generate operating profits sufficient to meet its requirements for working capital, capital expenditures and a reasonable return on shareholders’ investment. The Company believes that earning such operating profits will permit it to maintain its access to favorably priced debt, equity or off-balance sheet financing arrangements. Management will continue to closely monitor the Company’s liquidity and the credit and capital markets.

Off-Balance Sheet Arrangements

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

Contractual Obligations and Commercial Commitments

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

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Contingencies

Prior to the sale of the SES Business, the Company had issued performance guarantees on behalf of the SES Business that expire in 2012 through 2014. As of September 30, 2012, the amount of outstanding SES Business performance guarantees was $0.2 million.
On June 12, 2009, a purported civil class action was filed against the Company, Era Group Inc., Era Helicopters LLC and three other defendants (collectively, the “Defendants”) in the U.S. District Court for the District of Delaware, Superior Offshore International, Inc. v. Bristow Group Inc., et al., No. 09-CV-438 (D. Del.).  The Complaint alleged that the Defendants violated federal antitrust law by conspiring with each other to raise, fix, maintain or stabilize prices for offshore helicopter services in the U.S. Gulf of Mexico during the period January 2001 to December 2005.  The purported class of plaintiffs included all direct purchasers of such services and the relief sought included compensatory damages and treble damages.  On September 4, 2009, the Defendants filed a motion to dismiss the Complaint.  On September 14, 2010, the Court entered an order dismissing the Complaint.  On September 28, 2010, the plaintiffs filed a motion for reconsideration and amendment and a motion for re-argument (the “Motions”).  On November 30, 2010, the Court granted the Motions, amended the Court's September 14, 2010 Order to clarify that the dismissal was without prejudice, permitted the filing of an amended Complaint, and authorized limited discovery with respect to the new allegations in the amended Complaint.  Following the completion of such limited discovery, on February 11, 2011, the Defendants filed a motion for summary judgment to dismiss the amended Complaint with prejudice.  On June 23, 2011, the District Court granted summary judgment for the Defendants.  On July 22, 2011, the plaintiffs filed a notice of appeal to the U.S. Court of Appeals for the Third Circuit.  On July 27, 2002, the Third Circuit Court of Appeals affirmed the District Court's grant of summary judgment in favor of the defendants.  On August 9, 2011, Defendants moved for certain excessive costs, expenses, and attorneys' fees under 28 U.S.C. § 1927 (the “Fee Motion”).  On October 9, 2012, the District Court denied the Fee Motion.
On July 14, 2010, a group of individuals and entities purporting to represent a class commenced a civil action in the U.S. District Court for the Eastern District of Louisiana, Terry G. Robin, et al. v. Seacor Marine, L.L.C., et al., No. 2:10-cv-01986 (E.D. La.) (the “Robin Case”), in which they assert that support vessels, including vessels owned by the Company, responding to the explosion and resulting fire that occurred aboard the semi-submersible drilling rig, the Deepwater Horizon, were negligent in their efforts to save lives and put out the fire and contributed to the sinking of the Deepwater Horizon and subsequent oil spill. The action now is part of the overall multi-district litigation, In re Oil Spill by the Oil Rig “Deepwater Horizon”, MDL No. 2179 (“MDL”). The complaint seeks compensatory, punitive, exemplary, and other damages.  In response to this lawsuit, the Company filed petitions seeking exoneration from, or limitation of liability in relation to, any actions that may have been taken by vessels owned by the Company to extinguish the fire.  Pursuant to the Limitation of Liability Act, those petitions imposed an automatic stay on the Robin Case, and the court set a deadline of April 20, 2011 for individual claimants to assert claims in the limitation cases.  Approximately 66 claims were submitted by the deadline in all of the limitation actions.  On June 8, 2011, the Company moved to dismiss these claims (with the exception of one claim filed by a Company employee) on various legal grounds.  On October 12, 2011, the Court granted the Company's motion to dismiss in its entirety, dismissing with prejudice all claims that had been filed against the Company in the limitation actions (with the exception of one claim filed by a Company employee that was not subject to the motion to dismiss).  The Court entered final judgments in favor of the Company in the Robin Case and each of the limitation actions on November 21, 2011.  On December 12, 2011, the claimants appealed each of those judgments to the Unites States Court of Appeals for the Fifth Circuit.  The claimants' opening brief was submitted on May 7, 2012, and the claimants filed a reply brief on June 1, 2012.  The appeal is now fully submitted but no date has been set for oral argument, if any. The Company is unable to estimate the potential exposure, if any, resulting from this matter but believes it is without merit and will continue to vigorously defend the action.
On July 20, 2010, two individuals purporting to represent a class commenced a civil action in the Civil District Court for the Parish of Orleans in the State of Louisiana, John Wunstell, Jr. and Kelly Blanchard v. BP, et al., No. 2010-7437 (Division K) (the “Wunstell Action”), in which they assert, among other theories, that Mr. Wunstell suffered injuries as a result of his exposure to certain noxious fumes and chemicals in connection with the provision of remediation, containment and response services by ORM. The action now is part of the overall MDL. The complaint also seeks to establish a “class-wide court-supervised medical monitoring program” for all individuals “participating in BP's Deepwater Horizon Vessels of Opportunity Program and/or Horizon Response Program” who allegedly experienced injuries similar to those of Mr. Wunstell. The Company believes this lawsuit has no merit and will continue to vigorously defend the action.  Pursuant to contractual agreements with the responsible party, the responsible party has agreed, subject to certain potential limitations, to indemnify and defend ORM in connection with the Wunstell Action and claims asserted in the MDL.
On December 15, 2010, ORM and then-SEACOR subsidiary National Response Corporation (“NRC”) were named as defendants in one of the several consolidated “master complaints” that have been filed in the overall MDL.  The master complaint naming ORM and NRC asserts various claims on behalf of a putative class against multiple defendants concerning the clean-up activities generally, and the use of dispersants specifically.  By court order, the Wunstell Action has been stayed as a result of the filing of the referenced master complaint.  The Company believes that the claims asserted against ORM and NRC in the master complaint have no merit and on February 28, 2011, ORM and NRC moved to dismiss all claims against them in the master

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complaint on legal grounds.  On September 30, 2011, the Court granted in part and denied in part the motion to dismiss that ORM and NRC had filed (an amended decision was issued on October 4, 2011 that corrected several grammatical errors and non-substantive oversights in the original order).  Although the Court refused to dismiss the referenced master complaint in its entirety at that time, the Court did recognize the validity of the “derivative immunity” and “implied preemption” arguments that ORM and NRC advanced and has directed ORM and NRC to (i) conduct limited discovery to develop evidence to support those arguments and (ii) then re-assert the arguments.  The Court did, however, dismiss all state-law claims and certain other claims that had been asserted in the referenced master complaint, and dismissed the claims of all plaintiffs that have failed to allege a legally-sufficient injury.  A schedule for limited discovery and motion practice was established by the Court and, in accordance with that schedule, ORM and NRC filed for summary judgment re-asserting their derivative immunity and implied preemption arguments on May 18, 2012.  Those motions were argued on July 13, 2012 and are still pending decision. In addition to the indemnity provided to ORM, pursuant to contractual agreements with the responsible party, the responsible party has agreed, subject to certain potential limitations, to indemnify and defend ORM and NRC in connection with these claims in the MDL.
Subsequent to the filing of the referenced master complaint, five additional individual civil actions have been filed in the U.S. District Court for the Eastern District of Louisiana concerning the clean-up activities generally, which name the Company, ORM and/or NRC as defendants or third-party defendants and are part of the overall MDL. On April 8, 2011, ORM was named as a defendant in Johnson Bros. Corporation of Louisiana v. BP, PLC, et al., No. 2:11-cv-00781 (E.D. La.), which is a suit by an individual business seeking damages allegedly caused by a delay on a construction project alleged to have resulted from the clean-up operations. On April 15, 2011, ORM and NRC were named as defendants in James and Krista Pearson v. BP Exploration & Production, Inc., et al., No. 2:11-cv-00863 (E.D. La.), which is a suit by a husband and wife, who allegedly participated in the clean-up effort and are seeking damages for personal injury, property damage to their boat, and amounts allegedly due under contract. On April 15, 2011, ORM and NRC were named as defendants in Thomas Edward Black v. BP Exploration & Production, Inc., et al., No. 2:11-cv-00867 (E.D. La.), which is a suit by an individual who is seeking damages for lost income because he allegedly could not find work in the fishing industry after the oil spill. On April 20, 2011, a complaint was filed in Darnell Alexander, et al. v. BP, PLC, et al., No. 2:11-cv-00951 (E.D. La.) on behalf of 117 individual plaintiffs that seek to adopt the allegations made in the referenced master complaint against ORM and NRC (and the other defendants). Finally, on October 3, 2012, ORM and NRC were served with a Rule 14(c) Third-Party Complaint by Jambon Supplier II, L.L.C. and Jambon Marine Holdings L.L.C. in their  Limitation of Liability action, In the Matter of Jambon Supplier II, L.L.C., et al., No. 2:12-CV-00426 (E.D. La.).  This Third-Party Complaint alleges that if claimant David Dinwiddie, who served as a clean-up crewmember aboard the M/V JAMBON SUPPLIER II vessel during the clean-up efforts, was injured as a result of his exposure to dispersants and chemicals during the course and scope of his employment, then said injuries were caused by the third-party defendants. By court order, all five of these additional individual cases have been stayed as a result of the filing of the referenced master complaint.  The Company is unable to estimate the potential exposure, if any, resulting from this matter but believes it is without merit and does not expect this matter will have a material effect on the Company's consolidated financial position or its results of operations.
On February 18, 2011, Triton Asset Leasing GmbH, Transocean Holdings LLC, Transocean Offshore Deepwater Drilling Inc., and Transocean Deepwater Inc. (collectively “Transocean”) named ORM and NRC as third-party defendants in a Rule 14(c) Third-Party Complaint in Transocean's own Limitation of Liability Act action, which is part of the overall MDL, tendering to ORM and NRC the claims in the referenced master complaint that have already been asserted against ORM and NRC. Transocean, Cameron International Corporation, Halliburton Energy Services, Inc., M-I L.L.C., Weatherford U.S., L.P., and Weatherford International, Inc. have also filed cross-claims against ORM and NRC for contribution and tort indemnity should they be found liable for any damages in Transocean's Limitation of Liability Act action and ORM and NRC have asserted counterclaims against those same parties for identical relief.  As provided above, the Company is unable to estimate the potential exposure, if any, resulting from these actions but believes they are without merit and does not expect this matter will have a material effect on the Company's consolidated financial position or its results of operations.
Separately, on March 2, 2012, the Court announced that BP Exploration & Production Inc. and BP America Production Company (collectively "BP") and the plaintiffs had reached an agreement on the terms of two proposed class action settlements that will resolve, among other things, plaintiffs' economic loss claims and clean-up related claims against BP.  The parties filed their proposed settlement agreements on April 18, 2012 along with motions seeking preliminary approval of the settlements. The Court held a hearing on April 25, 2012 to consider those motions and preliminarily approved both settlements on May 2, 2012.  Although neither the Company, ORM or NRC are parties to the settlement agreements, the Company, ORM and NRC are listed on the releases accompanying both settlement agreements, such that if the settlement agreements are finally approved by the Court as currently drafted, any plaintiffs that settle will be required to release their claims against the Company, ORM and NRC.  The opt-out period for the proposed settlements closes on November 1, 2012. A final fairness hearing to consider whether the settlements should be finally approved is scheduled for November 8, 2012.
In the course of the Company's business, it may agree to indemnify a party.  If the indemnified party makes a successful claim for indemnification, the Company would be required to reimburse that party in accordance with the terms of the indemnification agreement.  Indemnification agreements generally are subject to threshold amounts, specified claim periods and other restrictions and limitations. 

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In connection with the disposition of the SES Business on March 16, 2012, the Company remains contingently liable for certain obligations of the SES Business, including potential liabilities relating to work performed in connection with the Deepwater Horizon oil spill response.  These potential liabilities may not exceed the purchase consideration received by the Company for the SES Business and the Company currently is indemnified under contractual agreements with BP.
ORM, a subsidiary of the Company, is defending against five collective action lawsuits, each asserting failure to pay overtime with respect to individuals who provided service on the Deepwater Horizon spill response (the “DPH FLSA Actions”) under the Fair Labor Standards Act (“FLSA”).  Four of the cases - Dennis Prejean v. O'Brien's Response Management, Inc. (E.D. La., Case No.: 2:12-cv-01045) (the “Prejean Action”); Baylor Singleton et. al. v. O'Brien's Response Management Inc., et. al. (E.D. La., Case No.: 2:12-cv-01716) (the “Singleton Action”); Himmerite et al. v. O'Brien's Response Management Inc. et al. (E.D. La., Case No.: 2:12-cv-01533) (the “Himmerite Action”); and Chann Chavis v. O'Brien's Response Management Inc. et al. (S.D. Tx., Case No.: 4:12-cv-02045) (the “Chavis Action”) - were each brought on behalf of certain individuals who worked on the Deepwater Horizon oil spill response and who were classified as independent contractors.  The Prejean, Himmerite and Singleton Actions were each filed in the United States District Court for the Eastern District of Louisiana and then subsequently consolidated with the In re: Oil Spill Multidistrict Litigation (N.D. La., Case No. 10-md-02179) (the “Oil Spill MDL”).  The Himmerite and Singleton Actions have since been automatically stayed pending further scheduling by the Court, pursuant to the procedures in the Oil Spill MDL.  In the Prejean Action, ORM has answered the complaint, a scheduling order has been issued and Plaintiffs have, among other things, filed a Motion for Conditional Certification, which has been stayed pending further scheduling by the Court in accordance with the procedures of the Oil Spill MDL. The limitations periods for potential plaintiffs to opt-in to the Prejean, Himmerite and Singleton actions have all been tolled pending further action by the court. ORM has filed a Motion for Reconsideration of the Court's order tolling the limitations periods in these actions. The Chavis Action was filed on July 7, 2012 in the United States District Court for the Southern District of Texas, and ORM has answered the complaint in that matter.  The other DPH FLSA Action, Mark Blackman et. al. v. Midwest Environmental Resources, Inc., et. al. (N.D. Fla., Case No.: 3:11-cv-146) (the “Blackman Action”), was filed by five individual Plaintiffs on March 28, 2011, in the United States District Court for the Northern District of Florida, against ORM and several other Defendants.  The complaint in the Blackman Action alleges that the named Plaintiffs and class of workers they are suing on behalf of, identified in the complaint as “Safety Techs,” were not appropriately compensated for all of their work time in violation of the FLSA.  On July 8, 2011, the Court stayed all proceedings in the Blackman Action.  On May 8, 2012, the Court ruled on various motions to dismiss brought by ORM and by the other Defendants, denying them in part, granting them in part, and providing the Plaintiffs with leave to amend the complaint.  On June 6, 2012, Plaintiffs filed an amended complaint and on June 20, 2012, Defendant ORM answered the amended complaint, denying all of the Plaintiffs' claims.  On July 6, 2012, the Court issued a scheduling order setting discovery and dispositive motion deadlines.  On August 27, 2012, Plaintiffs filed a Motion for Conditional Certification. Defendants' response to Plaintiffs' motion is due January 31, 2013. The Company is unable to estimate the potential exposure, if any, resulting from any of the five DPH FLSA Actions, but believes they are without merit and will continue to vigorously defend against them.
In 2011, the Company received a Notice of Infringement (the “Notice”) from the Brazilian Federal Revenue Office. The Notice alleged the Company had imported a number of vessels into Brazil without properly completing the required importation documents and levied an assessment of $25.7 million. The Company intends to vigorously defend its position that the proposed assessment is erroneous and believes the resolution of this matter will not have a material effect on the Company's consolidated financial position or its results of operations. Of the levied assessment, $19.3 million relates to managed vessels. On August 17, 2012, the Company entered into a transfer agreement with the owner of these managed vessels. Under the terms of the agreement, the owner would be responsible to reimburse any potential payment in excess of $1.0 million in assessments and expenses.
In the normal course of its business, the Company becomes involved in various other litigation matters including, among other things, claims by third parties for alleged property damages and personal injuries. Management has used estimates in determining the Company's potential exposure to these matters and has recorded reserves in its financial statements related thereto where appropriate. It is possible that a change in the Company's estimates of that exposure could occur, but the Company does not expect such changes in estimated costs would have a material effect on the Company's consolidated financial position or its results of operations.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For a discussion of the Company’s exposure to market risk, refer to Item 7A, Quantitative and Qualitative Disclosures about Market Risk, contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011. There has been no significant change in the Company’s exposure to market risk during the Current Nine Months, except as described below.
As of September 30, 2012, the Company had capital purchase commitments of €107.6 million ($138.3 million). An adverse change of 10% in the underlying foreign currency exchange rate would increase the U.S. dollar equivalent of these non-hedged purchase commitments by $9.0 million, net of tax.

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As of September 30, 2012, Era Group Inc., a subsidiary of the Company, had outstanding variable rate borrowings of $190.0 million under the terms of its senior secured revolving credit facility. The average borrowing rate as of September 30, 2012 was 3.2%. An adverse change of 10% in the underlying rate would result in additional annual interest expense of $0.1 million, net of tax.
ITEM 4.
CONTROLS AND PROCEDURES

With the participation of the Company’s principal executive officer and principal financial officer, management evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of September 30, 2012. Based on their evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2012.
There have been no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the Current Year Quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. During the Current Year Quarter, the Company implemented a newer version of its financial information technology system. This implementation was subject to thorough testing and review before and after the final implementation with no significant impact on our underlying internal controls over financial reporting.

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PART II—OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS

For a description of developments with respect to pending legal proceedings described in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2011, see Part I, Item II, "Management's Discussion and Analysis of Financial Condition and Results of Operations-Contingencies".
ITEM 1A.     RISK FACTORS

The planned spinoff of our Aviation Services business segment may not occur as or when planned or at all, or could result in issues the Company does not yet anticipate. Unanticipated developments could delay, prevent the completion of, or otherwise adversely affect the planned spinoff of our Aviation Services business segment, including any problems or delays in obtaining financing, a favorable letter ruling from the Internal Revenue Service (“IRS”), or disruptions either in general market conditions or in the aviation industry. The transaction is also subject to final approval by the Company's board of directors. Completion of the planned spinoff may require significant time, effort, and expense, and may divert management's attention from other aspects of the Company's business operations, which could adversely affect those operations. Any delays in completion of the planned spin-off may increase the amount of time, effort, and expense that the Company devotes to the transaction. In addition, if the Company completes the planned spinoff, the actual results may differ materially from the results the Company anticipates. Specifically, the proposed transaction could adversely affect the Company's relationships with its customers or employees or disrupt its operations. The separated businesses could also face unanticipated problems in operating independently, and thus may not achieve the anticipated benefits of the separation.
The planned spinoff could result in significant tax liability to the Company or its shareholders. The planned spinoff of our Aviation Services business segment is conditioned upon the receipt of a private letter ruling from the IRS and an opinion from the Company's tax counsel that the distribution of Era Group Inc.'s common stock will not result in the recognition, for U.S. federal income tax purposes, of income, gain or loss by the Company or its shareholders. Any private letter ruling and opinion that the Company receives will be subject to the continuing validity of any assumptions and representations reflected therein. In addition, an opinion from the Company's tax counsel is not binding on the IRS or a court. Accordingly, even if the Company receives a private letter ruling and an opinion, the IRS could determine that the distribution of Era Group Inc.'s common stock is a taxable transaction and a court could agree with the IRS. If the distribution of the Era Group Inc.'s common stock is a taxable transaction, the Company and its shareholders could have significant tax liabilities.
The forward-looking statements in this Form 10-Q should be evaluated together with the many uncertainties that affect the Company’s businesses, particularly those mentioned under “Forward-Looking Statements” in Item 7 on the Company’s Form 10-K and SEACOR’s periodic reporting on Form 8-K (if any), which are incorporated by reference.
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(c)
This table provides information with respect to purchases by the Company of shares of its Common Stock during the Current Year Quarter:
Period
Total Number  Of
Shares
Purchased
 
Average Price  Paid
Per Share(1)
 
Total Number of Shares
Purchased as Part of
Publicly  Announced
Plans or Programs
 
Maximum Value of
Shares that may Yet be
Purchased under  the
Plans or Programs(2)
July 1 – 31, 2012
36,342

 
$
86.19

 
—

 
$
129,444,183

August 1 – 31, 2012
89,975

 
$
86.79

 
—

 
$
121,634,835

September 1 – 30, 2012
4,051

 
$
86.17

 
—

 
$
121,285,744

 ______________________
(1)
Excludes commissions of $4,076 or $0.03 per share.
(2)
Since February 1997, SEACOR’s Board of Directors authorized the repurchase of Common Stock, certain debt or a combination thereof. From time to time thereafter, and most recently on January 18, 2012, SEACOR's Board of Directors increased the authority to repurchase Common Stock.
ITEM 4.
MINE SAFETY DISCLOSURES

Not applicable.

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

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
 
 
SEACOR Holdings Inc. (Registrant)
 
 
 
 
 
DATE:
October 30, 2012
By:
 
/S/ CHARLES FABRIKANT
 
 
 
 
Charles Fabrikant, Executive Chairman of the Board
(Principal Executive Officer)
 
 
 
 
 
DATE:
October 30, 2012
By:
 
/S/ RICHARD RYAN
 
 
 
 
Richard Ryan, Senior Vice President
and Chief Financial Officer
(Principal Financial Officer)


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EXHIBIT INDEX

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


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