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| CKH > SEC Filings for CKH > Form 10-Q on 30-Oct-2008 | All Recent SEC Filings |
30-Oct-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 unprecedented decline in valuations in the global financial markets and illiquidity 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, loss of U.S. coastwise endorsement for the Seabulk Trader and Seabulk Challenge, retro-fitted double-hull tankers, if the Company is unsuccessful in defending litigation seeking the revocation of their coastwise charters, 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, 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, the level of grain export volume, the effect of fuel prices on barge towing costs, variability in freight rates for inland river barges, the effect of international economic and political factors in Inland River Services' operations, adequacy of insurance coverage, the attraction and retention of qualified personnel by the Company and various other matters and factors, many of which are beyond the Company's control. In addition, these statements constitute the Company's cautionary statements under the Private Securities Litigation Reform Act of 1995. It is not possible to predict or identify all such factors. Consequently, the following should not be considered a complete discussion of all potential risks or uncertainties. The words "estimate," "project," "intend," "believe," "plan" and similar expressions are intended to identify forward-looking statements. Forward-looking statements speak only as of the date of the document in which they are made. The Company disclaims any obligation or undertaking to provide any updates or revisions to any forward-looking statement to reflect any change in the Company's expectations or any change in events, conditions or circumstances on which the forward-looking statement is based. The forward-looking statements in this Form 10-Q should be evaluated together with the many uncertainties that affect the Company's businesses, particularly those mentioned under "Forward-Looking Statements" in Item 7 on the Company's Form 10-K and SEACOR's periodic reporting on Form 8-K (if any), which 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 nine months ("Current Nine Months") ended September 30, 2008, as compared with the three months ("Prior Year Quarter") and nine months ("Prior Nine Months") ended September 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 Ended For the Nine Months Ended Change
September 30, September 30, '08/'07
2008 2007 2008 2007 3 Mos 9 Mos
$'000 % $'000 % $'000 % $'000 % % %
Operating Revenues:
United States 93,892 48 84,139 47 243,361 47 259,392 50
Africa, primarily West
Africa 29,091 15 42,870 24 91,889 18 128,158 24
United Kingdom, primarily
North Sea 19,348 10 19,487 11 57,691 11 53,269 10
Middle East 24,318 12 13,625 7 62,730 12 36,317 7
Asia 10,383 5 7,035 4 23,384 4 21,286 4
Mexico, Central and South
America 19,879 10 12,462 7 43,717 8 23,566 5
Total Foreign 103,019 52 95,479 53 279,411 53 262,596 50
196,911 100 179,618 100 522,772 100 521,988 100 10 -
Costs and Expenses:
Operating 97,790 50 95,345 53 296,659 57 276,940 53
Administrative and general 14,473 7 13,137 7 43,078 8 38,053 7
Depreciation and
amortization 13,689 7 14,069 8 41,488 8 45,108 9
125,952 64 122,551 68 381,225 73 360,101 69
Gains on Asset
Dispositions 13,516 7 13,222 7 35,006 7 60,062 11
Operating Income 84,475 43 70,289 39 176,553 34 221,949 42 20 (20 )
Other Income (Expense):
Foreign currency losses,
net (747 ) - (5 ) - (791 ) - (1,077 ) -
Other, net 1 - 4 - 1 - 5 -
Equity in Earnings of 50%
or Less Owned Companies 2,876 1 959 1 8,101 2 7,840 2
Segment Profit 86,605 44 71,247 40 183,864 36 228,717 44 22 (20 )
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Operating Revenues. Operating revenues increased by $17.3 million in the Current Year Quarter compared with the Prior Year Quarter and by $0.8 million in the Current Nine Months compared with the Prior Nine Months. In the Current Year Quarter, overall average day rates increased by 12%, overall utilization improved by 4% and days available for charter were 11% lower due to net fleet dispositions. In the Current Nine Months, overall average day rates increased by 10%, overall utilization was flat and days available for charter were 11% lower due to net fleet dispositions. The improvements in average day rates contributed additional operating revenues of $17.7 million in the Current Year Quarter and $31.3 million in the Current Nine Months. Net fleet dispositions, changes in fleet utilization, the impact of vessels mobilizing between geographic regions and other changes in fleet mix reduced operating revenues by $6.2 million in the Current Year Quarter and by $43.5 million in the Current Nine Months. Movements in foreign currency exchange rates reduced operating revenues by $1.1 million in the Current Year Quarter and by $1.0 million in the Current Nine Months. In addition, operating revenues from other marine services, primarily brokered vessel activity and bareboat charters, increased by $6.9 million in the Current Year Quarter and by $14.0 million in the Current Nine Months.
In the U.S. Gulf of Mexico, operating revenues in the Current Year Quarter were higher compared with the Prior Year Quarter primarily due to an increase in overall utilization and higher average day rates as a result of more rig moving activity. Operating revenues were lower in the Current Nine Months compared with the Prior Nine Months primarily as a result of the now concluded regulatory drydocking, major repair and upgrade program of the Company's large U.S.-flag AHTS vessels, which resulted in 281 days of out-of-service time in the Current Nine Months compared with 81 days in the Prior Nine Months. 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 $13.5 million of gains on asset dispositions compared with $13.2 million in the Prior Year Quarter. Excluding the impact of these gains, operating income increased by $13.9 million primarily due to the increase in operating revenues as discussed above. Operating expenses increased by $2.4 million primarily due to higher time charter-in expenses for brokered vessels, higher maintenance and repair costs offset by lower bareboat charter-in expenses and third party management fees. In addition, administrative and general expenses increased by $1.3 million primarily due to the recognition of international staff severance payments and costs related to hurricane disruption in the U.S. Gulf of Mexico.
Operating Income - Current Nine Months compared with Prior Nine Months. Operating income in the Current Nine Months included $35.0 million of gains on asset dispositions compared with $60.1 million in the Prior Nine Months. Excluding the impact of these gains, operating income decreased by $20.3 million. Operating expenses increased by $19.7 million primarily due to higher time charter-in expenses for brokered vessels, higher drydocking costs, higher mobilization costs and higher wage and benefit costs partially offset by lower bareboat charter-in expenses and third party management fees. Administrative and general expenses increased by $5.0 million primarily due to the recognition of international staff severance payments. In addition, depreciation decreased by $3.6 million primarily due to net fleet reductions.
Equity in Earnings of 50% or Less Owned Companies. Equity earnings increased by $1.9 million in the Current Year Quarter compared with the Prior Year Quarter and by $0.3 million in the Current Nine Months compared with the Prior Nine Months. The increase in equity earnings was primarily due to an overall improvement in the operating results for Offshore Marine Services' joint ventures partially offset in the Current Nine Months by a reduction in gains on dispositions. 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. In March 2007, 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 September 30 was as follows:
Joint Pooled or
Owned(1) Ventured Leased-in Managed Total
2008
Anchor handling towing supply 17 1 1 1 20
Crew 51 2 23 1 77
Mini-supply 14 - 5 - 19
Standby safety 23 1 - 5 29
Supply 12 - 9 6 27
Towing supply 10 3 2 - 15
Specialty(2) 7 3 - - 10
134 10 40 13 197
2007
Anchor handling towing supply 16 2 1 2 21
Crew 55 2 23 - 80
Mini-supply 16 - 5 1 22
Standby safety 22 1 - 5 28
Supply 11 - 11 2 24
Towing supply 20 7 2 1 30
Specialty(2) 10 2 - - 12
150 14 42 11 217
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(1) Excludes one supply boat removed from service as of September 30, 2008.
(2) Previously referred to as "Other" and includes anchor handling tugs, lift boats and accommodation, line handling and other vessels.
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.
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2008 2007 2008 2007
Rates Per Day Worked:
Anchor handling towing supply $ 45,800 $ 33,970 $ 39,701 $ 31,840
Crew 7,080 6,699 6,822 6,534
Mini-supply 6,859 6,205 6,916 6,467
Standby safety 10,040 10,440 10,153 9,904
Supply 17,917 13,396 16,539 13,188
Towing supply 11,135 13,010 10,636 11,405
Specialty (1) 11,864 11,378 11,871 10,719
Overall Average Rates Per Day Worked $ 13,161 $ 11,769 $ 12,394 $ 11,304
Utilization:
Anchor handling towing supply 85 % 89 % 79 % 90 %
Crew 87 % 80 % 78 % 79 %
Mini-supply 80 % 68 % 69 % 67 %
Standby safety 90 % 91 % 89 % 91 %
Supply 90 % 92 % 89 % 89 %
Towing supply 95 % 90 % 90 % 87 %
Specialty (1) 89 % 86 % 91 % 82 %
Overall Fleet Utilization 88 % 84 % 82 % 82 %
Available Days:
Anchor handling towing supply 1,547 1,638 4,712 5,158
Crew 6,348 6,817 19,392 21,044
Mini-supply 1,748 1,937 5,363 5,926
Standby safety 2,116 2,021 6,302 5,822
Supply 1,942 2,032 6,164 6,285
Towing supply 1,152 1,996 3,705 6,839
Specialty (1) 617 920 2,384 2,903
Overall Fleet Available Days 15,470 17,361 48,022 53,977
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(1) Previously referred to as "Other" and includes anchor handling tugs, lift boats and accommodation, line handling and other vessels.
Marine Transportation Services
For the Three Months For the Nine Months Change
Ended September 30, Ended September 30, '08/'07
2008 2007 2008 2007 3 Mos 9 Mos
$'000 % $'000 % $'000 % $'000 % % %
Operating Revenues:
United States 27,535 100 27,730 100 85,252 100 84,210 100 (1 ) 1
Costs and Expenses:
Operating 22,391 82 19,207 70 55,372 65 62,921 75
Administrative and general 1,486 5 1,150 4 4,531 5 3,572 4
Depreciation and
amortization 7,997 29 9,536 34 24,016 28 29,484 35
31,874 116 29,893 108 83,919 98 95,977 114
Gains on Asset Dispositions - - - - 3,629 4 - -
Operating Income (Loss) (4,339 ) (16 ) (2,163 ) (8 ) 4,962 6 (11,767 ) (14 ) (100 ) 142
Other Income (Expense):
Foreign currency gains
(losses), net (18 ) - 12 - 9 - 21 -
Segment Profit (Loss) (4,357 ) (16 ) (2,151 ) (8 ) 4,971 6 (11,746 ) (14 ) (103 ) 142
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Operating Revenues - Current Year Quarter compared with Prior Year Quarter. Operating revenues decreased by $0.2 million in the Current Year Quarter compared with the Prior Year Quarter. Operating revenues were higher in the Current Year Quarter for the Seabulk Challenge, which was out-of-service for all of the Prior Year Quarter while undergoing a retro-fit to a double-hull configuration, and for the Brenton Reef, which was out-of-service for 25 days in the Prior Year Quarter while undergoing repairs. In addition, the Seabulk Energy's day rate was higher in the Current Year Quarter compared with the Prior Year Quarter. These increases in operating revenues were partially offset by the sale and subsequent scrapping of the Seabulk Power, out-of-service time in the Current Year Quarter for the Seabulk Arctic and Seabulk Pride while undergoing regulatory dockings and lower cargo volumes in the Current Year Quarter for the Seabulk America, which operates under a contract of affreightment. During September 2008, the Brenton Reef's contract status changed from a time charter to a multi-year bareboat charter.
Operating Revenues - Current Nine Months compared with Prior Nine Months. Operating revenues increased by $1.0 million in the Current Nine Months compared with the Prior Nine Months. The increase was primarily due to out-of-service time in the Prior Nine Months for the Seabulk Trader and Seabulk Challenge while undergoing retro-fit and the Brenton Reef while undergoing repairs. In addition, the Seabulk Energy's day rate was higher in the Current Nine Months compared with the Prior Nine Months. These increases in operating revenues were partially offset by the sale and subsequent scrapping of the Seabulk Power in January 2008 and the Seabulk Magnachem in March 2008, out-of-service time in the Current Nine Months for the Seabulk Arctic and Seabulk Pride while undergoing regulatory drydockings, lower cargo volumes for the Seabulk America and a change in contract status for the Seabulk Mariner from time charter to a multi-year bareboat charter in March 2007.
Operating Income (Loss) - Current Year Quarter compared with Prior Year Quarter. Operating loss increased by $2.2 million in the Current Year Quarter compared with the Prior Year Quarter primarily due to higher costs and expenses. Regulatory drydocking expenses were higher and fuel costs increased due to an
additional vessel operating in the spot market. The increases in operating expenses were partially offset by a reduction in depreciation charges as a result of the sale of the Seabulk Power and the extension of the retro-fitted tankers useful lives.
Operating Income (Loss) - Current Nine Months compared with Prior Nine Months. Operating income increased by $16.7 million in the Current Nine Months compared with the Prior Nine Months due to the improvements in operating revenues noted above and lower costs and expenses. Operating expenses were lower primarily due to the sale and subsequent scrapping of the Seabulk Power and Seabulk Magnachem and the conversion of the Seabulk Mariner from time charter to a multi-year bareboat charter partially offset by higher fuel costs for vessels operating in the spot market. In addition, depreciation charges were lower as a result of the sale of the Seabulk Power and the extension of the retro-fitted tankers useful lives. Operating income in the Current Nine Months included $3.6 million in gains on asset dispositions.
Fleet Count. As of September 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 Ended For the Nine Months Ended Change
September 30, September 30, '08/'07
2008 2007 2008 2007 3 Mos 9 Mos
$'000 % $'000 % $'000 % $'000 % % %
Operating Revenues:
United States 36,517 100 32,656 100 99,984 100 87,398 100 12 14
Costs and Expenses:
Operating 23,079 63 16,234 50 61,115 61 41,595 48
Administrative and general 1,800 5 1,753 5 5,839 6 4,731 5
Depreciation and
amortization 4,146 11 4,256 13 12,142 12 12,087 14
29,025 79 22,243 68 79,096 79 58,413 67
Gains on Asset Dispositions 4,073 11 1,592 5 6,256 6 7,836 9
Operating Income 11,565 32 12,005 37 27,144 27 36,821 42 (4 ) (26 )
Other Income (Expense):
Other, net 2 - - - 2 - 136 -
Equity in Earnings (Losses)
of 50% or Less Owned
Companies (1,413 ) (4 ) 2,022 6 (964 ) (1 ) 5,302 6
Segment Profit 10,154 28 14,027 43 26,182 26 42,259 48 (28 ) (38 )
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Operating Revenues. Operating revenues increased by $3.9 million in the Current Year Quarter compared with the Prior Year Quarter and by $12.6 million in the Current Nine Months compared with the Prior Nine Months. The increases were primarily due to higher rates for all classes of equipment employed, more dry cargo barges operating on voyage affreightment contracts rather than long-term charter arrangements and higher demurrage revenues. These increases were partially offset by lower operating revenues resulting from net fleet reductions following the sale of equipment to joint ventures and third parties. In addition, operating revenues in the Current Nine Months were positively impacted due to the March 2007 acquisition of Waxler Transportation Company, Inc. and Waxler Towing Company, Incorporated (collectively referred to as "Waxler").
Operating Income. Operating income in the Current Year Quarter and Current Nine Months included $4.1 million and $6.3 million, respectively, of gains on asset dispositions compared with $1.6 million and $7.8 million in the Prior Year Quarter and Prior Nine Months, respectively. Excluding the impact of these gains, operating income decreased by $2.9 million in the Current Year Quarter compared with the Prior Year Quarter and by $8.1 million in the Current Nine Months compared with the Prior Nine Months. Operating expenses increased due to higher fuel, towing, fleeting and switching costs, higher operating costs on dry cargo barges moving to voyage affreightment contracts, and higher repair and maintenance costs. These cost increases were partially offset by the improvements in operating revenues noted above.
Equity in Earnings (Losses) of 50% or Less Owned Companies. Equity earnings decreased by $3.4 million in the Current Year Quarter and $6.3 million Current Nine Months compared with the Prior Year Quarter and Prior Nine Months primarily due to losses from securities and futures trading. In addition, the Company recognized a $1.3 million loss, net of tax, in the Current Year Quarter primarily resulting from an impairment charge on prime broker exposure.
Fleet Count.The composition of Inland River Services' fleet as of September 30 was as follows:
. . .
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