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| CKH > SEC Filings for CKH > Form 10-Q on 31-Jul-2008 | All Recent SEC Filings |
31-Jul-2008
Quarterly Report
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: the conditions in the global financial markets and international economic conditions 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, loss of U.S. coastwise endorsements for the Seabulk Trader and Seabulk Challenge, the retrofitted double-hull tankers, if the Company is unsuccessful in appealing a district court opinion instructing the U.S. Coast Guard to revoke its coastwise charter, 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 product, 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, 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, increased competition if the Jones Act is repealed, operational risks of Offshore Marine Services, Marine Transportation Services, Harbor and Offshore Towing Services and Aviation Services, effects of adverse weather conditions and seasonality on Aviation Services, future phase-out of Marine Transportation Services' double-bottom tanker, dependence of spill response revenue on the number and size of spills and upon continuing government regulation in this area and Environmental Services' ability to comply with such regulation and other governmental regulation, changes in National Response Corporations' Oil Spill Removal Organization classification, liability in connection with providing spill response services, effects of adverse weather and river conditions and seasonality on Inland River Services, the level of grain export volume, the effect of fuel prices on barge towing costs, variability in freight rates for inland river barges, the effect of international economic and political factors on Inland River Services' operations, adequacy of insurance coverage, the attraction and retention of qualified personnel by the Company and various other matters and factors, many of which are beyond the Company's control. In addition, these statements constitute the Company's cautionary statements under the Private Securities Litigation Reform Act of 1995. It is not possible to predict or identify all such factors and consequently, the foregoing 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 is incorporated by reference.
Results of Operations
The Company's operations are divided into six main business segments-Offshore Marine Services, Marine Transportation Services, Inland River Services, Aviation Services, Environmental Services and Commodity Trading. The Company also has activities that are referred to and described under Other, which primarily includes Harbor and Offshore Towing Services, various other investments in joint ventures and asset leasing activities.
The sections below provide an analysis of the Company's operations by business segment for the three months ("Current Year Quarter") and six months ("Current Six Months") ended June 30, 2008, as compared with the three months ("Prior Year Quarter") and six months ("Prior Six Months") ended June 30, 2007. See "Item 1. Financial Statements-Note 14. Segment Information" included in Part I for consolidating segment tables for each period presented.
Offshore Marine Services
For the Three Months For the Six Months Change
Ended June 30, Ended June 30, '08/'07
2008 2007 2008 2007 3 Mos 6 Mos
$'000 % $'000 % $'000 % $'000 % % %
Operating Revenues:
United States 79,439 46 84,363 49 149,469 46 175,254 51
Africa, primarily West
Africa 30,479 18 44,720 26 62,799 19 85,289 25
United Kingdom, primarily
North Sea 19,180 11 17,150 10 38,343 12 33,782 10
Middle East 21,917 13 12,032 7 38,411 12 22,691 7
Asia 6,534 4 6,742 4 13,001 4 14,250 4
Mexico, Central and South
America 13,665 8 6,435 4 23,838 7 11,104 3
Total Foreign 91,775 54 87,079 51 176,392 54 167,116 49
171,214 100 171,442 100 325,861 100 342,370 100 - (5 )
Costs and Expenses:
Operating 104,599 61 88,596 52 198,869 61 181,595 53
Administrative and general 15,801 9 11,893 7 28,605 9 24,916 7
Depreciation and
amortization 13,674 8 14,515 8 27,799 9 31,039 9
134,074 78 115,004 67 255,273 79 237,550 69
Gains on Asset
Dispositions 14,352 8 38,546 22 21,490 7 46,840 14
Operating Income 51,492 30 94,984 55 92,078 28 151,660 45 (46 ) (39 )
Other Income (Expense):
Foreign currency gains
(losses), net 111 - (365 ) - (44 ) - (1,072 ) -
Other, net - - 19 - - - 1 -
Equity in Earnings of 50%
or Less Owned Companies 1,592 1 5,529 3 5,225 2 6,881 2
Segment Profit 53,195 31 100,167 58 97,259 30 157,470 47 (47 ) (38 )
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Operating Revenues. Operating revenues decreased by $0.2 million in the Current Year Quarter compared with the Prior Year Quarter and by $16.5 million in the Current Six Months compared with the Prior Six Months. In the Current Year Quarter, an 11% improvement in overall average day rates was offset by a 10% reduction in available days due to net fleet dispositions and a 3% reduction in overall utilization. In the Current Six Months, an 8% improvement in overall average day rates was offset by an 11% reduction in available days due to net fleet dispositions and a 3% reduction in overall utilization. The improvements in average day rates contributed additional operating revenues of $11.0 million in the Current Year Quarter and $13.6 million in the Current Six Months. Net fleet dispositions, the impact of vessels mobilizing between geographic regions and other changes in fleet mix, together with a decline in fleet utilization, reduced operating revenues by $16.6 million in the Current Year Quarter and by $37.3 million in the Current Six Months. In addition, other marine services and the effects of foreign currency translations increased operating revenues by $5.4 million in the Current Year Quarter and by $7.2 million in the Current Six Months.
In the U.S. Gulf of Mexico, operating revenues were lower due to a reduction in overall utilization and the impact of vessels mobilizing to other geographic regions, partially offset by increases in operating revenues as a result of more rig moving activity and new vessels being placed into service. Utilization was impacted by the regulatory drydocking, major repair and upgrade program of the Company's large AHTS vessels, which resulted in 168 days of out-of-service time in the Current Year Quarter and 255 days of out-of-service time in the Current Six Months. In comparison, the Company's large AHTS vessels were out-of-service due to regulatory drydocking for 42 days and 60 days in the Prior Year Quarter and Prior Six Months, respectively. In Mexico, Central and South America and the Middle East, operating revenues were higher primarily due to vessels mobilizing from other geographic regions. Operating revenues decreased in West Africa primarily as a result of net fleet dispositions.
Operating Income-Current Year Quarter compared with Prior Year Quarter. Operating income in the Current Year Quarter included $14.4 million of gains on asset dispositions compared with $38.5 million in the Prior Year Quarter. Excluding the impact of these gains, operating income decreased by $19.3 million primarily due to a $16.0 million increase in operating expenses resulting from higher drydocking costs, higher wage and benefit costs and higher insurance costs. In addition, administrative and general expenses increased by $3.9 million primarily due to the recognition of international staff severance payments.
Operating Income-Current Six Months compared with Prior Six Months. Operating income in the Current Six Months included $21.5 million of gains on asset dispositions compared with $46.8 million in the Prior Six Months. Excluding the impact of these gains, operating income decreased by $34.2 million primarily due to an overall decrease in operating revenues as discussed above and a $17.7 million increase in operating expenses resulting from higher drydocking costs and wage and benefit costs. In addition, administrative and general expenses increased by $3.7 million primarily due to the recognition of international staff severance payments.
Equity in Earnings of 50% or Less Owned Companies. Equity earnings decreased by $3.9 million in the Current Year Quarter compared with the Prior Year Quarter and by $1.7 million in the Current Six Months compared with the Prior Six Months. In February 2008, Offshore Marine Services recognized a gain of $1.9 million, net of tax, relating to the sale of a vessel owned by its Norwegian joint venture. During the Prior Six Months, Offshore Marine Services recognized a gain of $4.1 million, net of tax, relating to the sale of its interest in an Egyptian joint venture.
Fleet Count. The composition of Offshore Marine Services' fleet as of June 30 was as follows:
Joint Pooled or
Owned Ventured Leased-in Managed Total
2008
Anchor handling towing supply 17 1 1 1 20
Crew 51 2 23 - 76
Mini-supply 14 - 5 1 20
Standby safety 23 1 - 5 29
Supply 14 - 9 5 28
Towing supply 10 3 2 1 16
Specialty(1) 10 3 - - 13
139 10 40 13 202
2007
Anchor handling towing supply 16 2 2 1 21
Crew 55 2 23 - 80
Mini-supply 17 - 5 1 23
Standby safety 21 1 - 5 27
Supply 12 - 11 - 23
Towing supply 20 7 2 1 30
Specialty(1) 10 1 - - 11
151 13 43 8 215
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(1) Previously referred to as Other and includes anchor handling tugs, lift boats, accommodation, line handling and other vessels.
Operating Data. The table below sets forth average rates per day worked, utilization and available days data for our fleet during the periods indicated. The rate per day worked for any group of vessels with respect to any period is the ratio of total time charter revenue of such vessels to the aggregate number of days worked by such vessels in the period. Utilization for any group of vessels in a stated period is the ratio of aggregate number of days worked by such vessels to total calendar days available for work in such period. Available days for a group of vessels represents the total calendar days during which owned and chartered-in vessels are operated by the Company.
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2008 2007 2008 2007
Rates Per Day Worked:
Anchor handling towing supply $ 41,038 $ 29,077 $ 36,330 $ 30,865
Crew 6,608 6,508 6,673 6,453
Mini-supply 6,838 6,431 6,950 6,599
Standby safety 10,278 9,725 10,212 9,620
Supply 16,250 13,241 15,898 13,085
Towing supply 10,532 11,365 10,389 10,712
Specialty(1) 11,962 10,701 11,873 10,394
Overall Average Rates Per Day Worked $ 12,182 $ 10,948 $ 11,987 $ 11,078
Utilization:
Anchor handling towing supply 69 % 93 % 76 % 91 %
Crew 77 % 81 % 73 % 78 %
Mini-supply 67 % 71 % 64 % 66 %
Standby safety 88 % 91 % 89 % 91 %
Supply 90 % 89 % 89 % 88 %
Towing supply 94 % 88 % 87 % 86 %
Specialty(1) 94 % 82 % 92 % 81 %
Overall Fleet Utilization 81 % 84 % 79 % 82 %
Available Days:
Anchor handling towing supply 1,618 1,720 3,165 3,520
Crew 6,492 7,047 13,044 14,227
Mini-supply 1,795 1,995 3,615 3,989
Standby safety 2,093 1,911 4,186 3,801
Supply 2,123 2,093 4,222 4,253
Towing supply 1,253 2,212 2,553 4,843
Specialty(1) 831 954 1,767 1,983
Overall Fleet Available Days 16,205 17,932 32,552 36,616
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(1) Previously referred to as Other and includes anchor handling tugs, lift boats, accommodation, line handling and other vessels.
Marine Transportation Services
For the Three Months For the Six Months Change
Ended June 30, Ended June 30, '08/'07
2008 2007 2008 2007 3 Mos 6 Mos
$'000 % $'000 % $'000 % $'000 % % %
Operating Revenues:
United States 28,764 100 25,924 100 57,717 100 56,480 100 11 2
Costs and Expenses:
Operating 16,762 58 22,865 88 32,981 57 43,714 77
Administrative and general 1,607 6 1,236 5 3,045 5 2,422 4
Depreciation and
amortization 8,039 28 9,790 38 16,019 28 19,948 35
26,408 92 33,891 131 52,045 90 66,084 116
Gains on Asset Dispositions - - - - 3,629 6 - -
Operating Income (Loss) 2,356 8 (7,967 ) (31 ) 9,301 16 (9,604 ) (16 ) 130 197
Other Income (Expense):
Foreign currency gains
(losses), net (3 ) - 13 - 27 - 9 -
Segment Profit (Loss) 2,353 8 (7,954 ) (31 ) 9,328 16 (9,595 ) (16 ) 130 197
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Operating Revenues-Current Year Quarter compared with Prior Year Quarter. Operating revenues increased by $2.9 million in the Current Year Quarter compared with the Prior Year Quarter. The increase was primarily due to the Seabulk Trader and Seabulk Challenge being out-of-service while undergoing retrofit to a double hull configuration during the Prior Year Quarter. In addition, day rates for the Seabulk Energy were higher in the Current Year Quarter compared with the Prior Year Quarter. These increases in operating revenues were partially offset as a result of the sale and subsequent scrapping of the Seabulk Power in January 2008 and increased out-of-service time in the Current Year Quarter for the Seabulk Arctic which began a regulatory drydocking in mid June 2008 and is expected to continue into the third quarter.
Operating Revenues-Current Six Months compared with Prior Six Months. Operating revenues increased by $1.2 million in the Current Six Months compared with the Prior Six Months. The increase was primarily due to the Seabulk Trader and the Seabulk Challenge being out-of-service in the Prior Six Months while undergoing retrofit. In addition, day rates for the Seabulk Energy and Brenton Reef were higher in the Current Six Months compared with the Prior Six Months. These increases in operating revenues were partially offset as a result of the sale and subsequent scrapping of the Seabulk Power and Seabulk Magnachem in January 2008, increased out-of-service time for the Seabulk Arctic while undergoing a regulatory drydocking, lower cargo volumes for the Seabulk America which operates under a contract of affreightment, and the change in contract status of the Seabulk Mariner from time charter to long-term bareboat contract in March 2007.
Operating Income (Loss). Operating income increased by $10.4 million in the Current Year Quarter compared with the Prior Year Quarter and by $18.9 million in the Current Six Months compared with the Prior Six Months primarily due to higher operating revenues as described above, lower regulatory drydocking expenses for the Seabulk Trader, Seabulk Challenge and Seabulk Magnachem and a reduction in depreciation charges as a result of the sale of the Seabulk Power and the extension of the retrofitted tankers useful lives. Operating income in the Current Six Months improved due to the recognition of gains on asset dispositions in January 2008.
Fleet Count. As of June 30, 2008 and 2007, Marine Transportation Services owned eight and ten U.S.-flag product tankers, respectively, operating in the domestic coastwise trade.
Inland River Services
For the Three Months For the Six Months Change
Ended June 30, Ended June 30, '08/'07
2008 2007 2008 2007 3 Mos 6 Mos
$'000 % $'000 % $'000 % $'000 % % %
Operating Revenues:
United States 33,322 100 28,020 100 63,467 100 54,742 100 19 16
Costs and Expenses:
Operating 21,310 64 13,056 47 38,036 60 25,361 47
Administrative and general 1,916 6 2,101 7 4,039 6 2,978 5
Depreciation and
amortization 4,032 12 4,332 15 7,996 13 7,831 14
27,258 82 19,489 69 50,071 79 36,170 66
Gains on Asset Dispositions 1,472 4 2,622 9 2,183 3 6,244 11
Operating Income 7,536 22 11,153 40 15,579 24 24,816 45 (32 ) (37 )
Other Income (Expense):
Other, net - - 138 - - - 136 -
Equity in Earnings (Losses)
of 50% or Less Owned
Companies (462 ) (1 ) 2,311 8 449 1 3,280 6
Segment Profit 7,074 21 13,602 48 16,028 25 28,232 51 (48 ) (43 )
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Operating Revenues. Operating revenues increased by $5.3 million in the Current Year Quarter compared with the Prior Year Quarter and by $8.7 million in the Current Six Months compared with the Prior Six Months. The increases were due to higher rates for the covered dry cargo barge pools and higher demurrage revenues. In addition, operating revenues in the Current Six Months compared with the Prior Six Months increased due to the acquisition of Waxler Transportation Company, Inc. and Waxler Towing Company, Incorporated (collectively referred to as "Waxler"), which were acquired in mid-March 2007, and decreased following the sale of equipment to joint ventures and third parties.
Operating Income. Operating income in the Current Year Quarter and Current Six Months included $1.5 million and $2.2 million, respectively, of gains on asset dispositions compared with $2.6 million and $6.2 million in the Prior Year Quarter and Prior Six Months, respectively. Excluding the impact of these gains, operating income decreased by $2.5 million in the Current Year Quarter compared with the Prior Year Quarter and by $5.2 million in the Current Six Months compared with the Prior Six Months. The improvements in operating revenues described above were offset by higher operating expenses. Towing and switching costs were higher due to increased fuel costs. Maintenance and repair costs were higher for the upgrade of towboats and the regulatory inspection of liquid tank barges acquired from Waxler.
Equity in Earnings (Losses) of 50% or Less Owned Companies. Equity earnings decreased by $2.8 million in the Current Year Quarter and Current Six Months compared with the Prior Year Quarter and Prior Six Months. The decrease was primarily due to losses from securities and futures trading during the Current Year Quarter.
Fleet Count. The composition of Inland River Services' fleet as of June 30 was as follows:
Joint Pooled or
Owned Ventured Leased-in Managed Total
2008
Inland river dry cargo barges-open 213 97 5 3 318
Inland river dry cargo barges-covered 409 131 2 123 665
Inland river liquid tank barges 44 29 2 - 75
Inland river deck barges 26 - - - 26
Inland river towboats 16 4 - - 20
708 261 9 126 1,104
2007
Inland river dry cargo barges-open 271 25 5 10 311
Inland river dry cargo barges-covered 461 165 2 152 780
Inland river liquid tank barges 53 22 2 - 77
Inland river deck barges 22 - - - 22
Inland river towboats 15 - - - 15
822 212 9 162 1,205
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Aviation Services
For the Three Months For the Six Months Change
Ended June 30, Ended June 30, '08/'07
2008 2007 2008 2007 3 Mos 6 Mos
$'000 % $'000 % $'000 % $'000 % % %
Operating Revenues:
United States 56,630 89 51,976 93 106,142 90 94,372 93
Foreign 7,165 11 3,885 7 11,445 10 6,922 7
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