United States
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

(Mark One)

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

For the fiscal year ended December 31, 2005

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)

Registrant’s telephone number, including area code (954)-524-4200

Securities registered pursuant to Section 12 (b) of the Act:

Securities registered pursuant to Section 12 (g) of the Act:

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  x Yes  o No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  o Yes  x No

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 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. x Yes  o No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.  (Check one):  x  Large Accelerated Filer  o Accelerated Filer  o Non-Accelerated Filer

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes  x No

The aggregate market value of the voting stock of the registrant held by non-affiliates as of June 30, 2005 was approximately $1,107,842,000 based on the closing price on the New York Stock Exchange on such date. The total number of shares of Common Stock issued and outstanding as of March 8, 2006 was 25,023,759.

DOCUMENTS INCORPORATED BY REFERENCE

The Registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission (the “Commission”) pursuant to Regulation 14A within 120 days after the end of the Registrant’s last fiscal year is incorporated by reference into Part III of this Annual Report on Form 10-K.

SEACOR HOLDINGS INC.
FORM 10-K
TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS

Certain statements discussed in Item 1 (Business), Item 3 (Legal Proceedings), Item 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operations), Item 7A (Quantitative and Qualitative Disclosures About Market Risk) and elsewhere in this Form 10-K as well as in other materials and oral statements that we release from time to time to the public constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements concerning management’s expectations, strategic objectives, business prospects, anticipated economic performance and financial condition and other similar matters involve significant 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 are discussed in Item 1A. Risk Factors. In addition, these statements constitute our cautionary statements under the Private Securities Litigation Reform Act of 1995. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider the following to be a complete discussion of all potential risks or uncertainties. The words “anticipate,” “estimate,” “expect,” “project,” “intend,” “believe,” “plan,” “target,” “forecast” and similar expressions are intended to identify forward-looking statements. Forward-looking statements speak only as of the date of the document in which they are made. We disclaim any obligation or undertaking to provide any updates or revisions to any forward-looking statement to reflect any change in our expectations or any change in events, conditions or circumstances on which the forward-looking statement is based. You are advised, however, to consult any further disclosures we make on related subjects in our 10-Q and 8-K reports to the Securities and Exchange Commission.

PART I

ITEM 1. BUSINESS

General

Unless the context indicates otherwise, the terms “we,” “our,” “ours,” “us” and “the Company” refer to SEACOR Holdings Inc. and its consolidated subsidiaries. “SEACOR” refers to SEACOR Holdings Inc., incorporated in 1989 in Delaware. “Common Stock” refers to the common stock, par value $.01 per share, of SEACOR.

The Company is in the business of owning, operating, investing in, marketing and remarketing equipment, primarily in the offshore oil and gas and marine transportation industries. We operate a diversified fleet of offshore support vessels and helicopters servicing oil and gas exploration, development and production facilities worldwide and we also operate a fleet of U.S.-flag product tankers which transport petroleum, chemicals and crude products primarily in the U.S. domestic or “coastwise” trade. In addition, we operate a fleet of inland river barges transporting grain and other bulk commodities on the U.S. inland waterways. Our environmental services segment provides oil spill response, manages environmental remediation projects and offers related consulting services worldwide to those who store, transport, produce or handle petroleum products and environmentally hazardous materials.

SEACOR’s principal executive offices have been relocated from Houston, Texas to 2200 Eller Drive, P.O. Box 13038, Fort Lauderdale, Florida 33316, and our telephone number is (954) 524-4200. Our Internet address is www.seacorholdings.com.

All of the Company’s periodic report filings with the Securities and Exchange Commission (“SEC”) pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are made available, free of charge, through our website, including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports. These reports and amendments are available through the Company’s website as soon as reasonably practicable after the Company electronically files such reports or amendments with the SEC. They are also available to be read and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549.

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Information as to the operation of the SEC’s Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements and other information.

Segment and Geographic Information

The Company’s operations are divided into five business segments: “Offshore Marine Services,” “Marine Transportation Services,” “Inland River Services,” “Aviation Services,” and “Environmental Services.”  Our additional activities are described under “Other”, which primarily includes “Harbor and Offshore Towing Services” and equity in earnings of 50% or less owned companies unrelated to the five business segments. Marine Transportation Services and Harbor and Offshore Towing Services were acquired as a result of our acquisition on July 1, 2005 of Seabulk International, Inc. (“Seabulk”) through a merger with a wholly-owned subsidiary of SEACOR (the “Seabulk Merger”). Financial data for segment and geographic areas is reported in Item 8. Financial Statements and Supplementary Data—Note 16.—Major Customers and Segment Data included in Part IV of this Annual Report on Form 10-K.

Offshore Marine Services

Business

Offshore Marine Services operates a diversified fleet of offshore support vessels primarily servicing offshore oil and gas exploration, development and production facilities worldwide. Vessels in this service are employed to deliver cargo and personnel to offshore installations, handle anchors for drilling rigs and other marine equipment, support offshore construction and maintenance work and provide standby safety support and oil spill response services. From time to time, Offshore Marine Services supports projects such as well stimulation, seismic data gathering and freight hauling. Offshore Marine Services also offers logistics services in support of offshore oil and gas exploration, development and production operations including shorebase, marine transport and other supply chain management services. This segment contributed 50%, 58% and 78% of consolidated revenues in 2005, 2004 and 2003, respectively.

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Equipment and Services

The following tables identify the types of vessels that comprise the Offshore Marine Services’ fleet as of December 31 in the indicated years. As a result of the Seabulk Merger, 102 vessels were added to Offshore Marine Services’ fleet. “Owned vessels” are those 100% owned by the Company, either constructed and delivered new from shipyards or purchased from competitors. “Joint ventured vessels” are those owned by entities in which the Company is not the sole owner. “Leased-in vessels” are generally those which have been sold to an institutional lessor and then leased back. “Pooled vessels” are owned by entities not affiliated with Offshore Marine Services: the revenues or profits of these vessels are shared with the revenues and profits of certain vessels owned by Offshore Marine Services based upon an agreed formula. “Managed vessels” are owned by entities not affiliated with the Company but are operated by Offshore Marine Services for a fee, no revenues or profits being shared with Offshore Marine Services. At the end of this section we provide a glossary of the types of vessels listed below and an explanation of the services they perform.

Offshore Marine Services Vessels

(a)      Excludes 3 owned vessels removed from service in 2005 and 14 vessels removed from service in 2003.

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The following table sets forth the percent of the Company’s consolidated operating revenues earned by vessel type and certain other business activities of Offshore Marine Services for each year indicated:

(a)      The Company removed its utility fleet from service during 2003.

The following table indicates average age in years of our fleet and shows the changed age profile of the fleet following the Seabulk Merger as of December 31:

Glossary of Vessel Types

Listed below is a description of each of the vessel types referred to above.

Anchor handling towing supply (“AHTS”) vessels are used primarily for towing, positioning and mooring drilling rigs and other marine equipment by lifting and setting anchors on the sea bottom but are also used to transport supplies and equipment from shore bases to offshore drillings rigs, platforms and other installations. The defining characteristics of AHTS vessels are horsepower (“BHP”) and size of winch in terms of “line pull” and wire storage capacity. Our fleet of AHTS vessels has varying capabilities and supports offshore mooring activities in water depths ranging from 300 to 8,000 feet. Most modern AHTS vessels are equipped with dynamic positioning (“DP”) systems that enable them to maintain a fixed position in close proximity to a rig without the use of tie-up lines.

Crew boats move personnel to and from offshore installations. Historically, crew boats transported people and were also used to deliver “light” cargo such as personal effects, small machinery and small quantities of fuel and water. These boats also served as field stand-by vessels, moving personnel between platforms and providing an emergency stand-by service under certain circumstances. Crew boats built prior to 1990 are generally 100 to 130 feet in length and are capable of 20 knots in light condition and calm seas. Vessels built since 1998, also referred to as Fast Support Vessels (“FSVs”), range from 130 to 200 feet in length and develop speeds of between 25 and 35 knots. Modern FSVs have enhanced cargo carrying capacities, including in some instances the capacity to support some phases of drilling operations. Vessels supporting drilling and working in deep water are usually equipped with DP capabilities.

Mini-supply vessels range from 125 to 155 feet in length and typically carry deck cargo, liquid mud, methanol, diesel fuel and water. These vessels are well suited for production support, construction projects, maintenance work and certain drilling support activities.

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Standby safety vessels typically remain on location proximate to offshore rigs and production facilities to respond to emergencies. These vessels carry special equipment to rescue personnel and are equipped to provide first aid and shelter. In some cases, these vessels perform a dual role, functioning also as supply vessels.

Supply vessels and towing supply vessels range in length from 164 to 255 feet and are used to deliver cargo to rigs and platforms where drilling and work-over activity is underway or to support construction work by delivering pipe to vessels performing underwater installations. Supply vessels are distinguished from other vessels by the total carrying capacity (deadweight: “dwt”), available area of clear deck space, below-deck capacity for storage of mud and cement used in the drilling process and tank storage for water and fuel oil. Speed is not generally a factor but the ability to hold station in open water and moderately rough seas is a key factor in differentiating supply vessels. To improve station keeping ability, certain supply vessels have DP capabilities. Towing supply vessels perform similar cargo delivery functions to those handled by supply vessels. They are, however, equipped with more powerful engines (4-8,000 horsepower) and deck mounted winches, giving them the added capability to perform general towing functions, buoy setting and limited anchor handling work.

Other includes geophysical, anchor handling tugs, tugs, freight and other vessels. These vessels generally have specialized features adapting them to their specific function, including large deck space, high electrical generating capacity, high maneuverability and unique thrusters, extra berthing facilities and long-range cruising capabilities. Special project activities include well stimulation, seismic data gathering, freight hauling services and accommodation services.

Markets

The demand for vessels is affected by the level of offshore exploration and drilling activities, which in turn is influenced by a number of factors including:

·       expectations as to future oil and gas commodity prices

·       customer assessments of offshore drilling prospects compared to land-based opportunities

·       customer assessments of cost, geological opportunity and political stability in host countries

·       worldwide demand for oil and natural gas

·       the ability of The Organization of Petroleum Exporting Countries (“OPEC”) to set and maintain production levels and pricing

·       the level of production of non-OPEC countries

·       the relative exchange rates for the U.S. dollar

·       various government policies regarding exploration and development of their oil and gas reserves

See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for discussion of current market conditions.

Each of the markets in which Offshore Marine Services operates is highly competitive. The most important competitive factors are pricing and the availability of equipment to fit customer requirements at such time as the equipment is needed. Other important factors include service and reputation, flag preference, local marine operating conditions, the ability to provide and maintain logistical support given the complexity of a project and the cost of moving equipment from one geographical location to another.

We operate vessels in six principal geographic regions. From time to time, vessels are relocated between these regions to meet customer demand for equipment. The table below sets forth vessel types by geographic market. We sometimes participate in joint venture arrangements in certain geographical locations in order to enhance our marketing capabilities and facilitate operations in certain foreign

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markets. This allows for expansion of both our fleet and operations while diversifying risks and reducing capital outlays associated with such expansion.

(continued)

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(a)      Excludes 3 vessels removed from service in 2005 and 14 vessels removed from service in 2003.

United States.   At December 31, 2005, 135 vessels were operating in the U.S., including 95 owned, 37 leased-in, 2 joint ventured and 1 pooled. Offshore Marine Services’ expertise in this market is deepwater anchor handling with our fleet of AHTS vessels and exploration and production support with our fleet of crew and mini-supply vessels. This is a highly volatile market because the oil company programs we support tend to be of short-term duration and influenced by the near term price of natural gas. In addition, a large number of offshore marine service companies are active in this market and they compete largely on price alone.

Latin America & Mexico.   At December 31, 2005, 35 vessels were operating in Latin America and Mexico, including 14 owned and 21 joint ventured. Offshore Marine Services participated in the Mexican market through a joint venture, Maritima Mexicana, S.A  That market is controlled by the Mexican national oil company, Petroleos Mexicanos (“Pemex”), and vessel services are provided either directly to Pemex or to its subcontractors. The level of activity is largely influenced by Mexican government policies and finances. Subsequent to  December 31, 2005, we sold our interest in Maritima Mexicana, S.A. to our partners in that joint venture but continue to charter some of our vessels to them for operation in the Mexican market. We continue to have joint venture vessels operating in Chile, Argentina, Venezuela and Brazil.

North Sea.   At December 31, 2005, 28 vessels were operating in the North Sea, including 20 owned, 3 joint ventured, and 5 managed-in. The North Sea fleet primarily provides standby safety services. Demand in the North Sea market for standby services developed in 1991 after the United Kingdom promulgated legislation requiring offshore operations to maintain higher specification standby safety vessels. The legislation requires a vessel to “stand by” to provide a means of evacuation and rescue for platform and rig personnel in the event of an emergency at an offshore installation. The North Sea is a highly regulated market.

West Africa.   At December 31, 2005, 53 vessels were operating in West Africa, including 49 owned, and 4 bareboat chartered-in. Our largest market in this area is Nigeria, where we work in cooperation with a Nigerian company, West Africa Offshore. The Nigerian market is dominated primarily by the major oil companies and is characterized by large scale, multi-year projects. There is also a significant political component behind investment decisions as the Nigerian national oil company, NNPC, is a participant in almost all offshore development. The remainder of the Company’s vessels in this region operate from ports in Angola, the Republic of the Congo, Cameroon, Gabon, Equatorial Guinea and South Africa.

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Asia.   At December 31, 2005, 18 vessels were operating in Asia, including 12 owned, 2 leased-in, 3 joint ventured and 1 managed. Offshore Marine Services’ vessels operating in this area generally support exploration programs and therefore follow the rigs to their locations in the region. To date, the largest market in this area has been Indonesia. In the last few years, we have invested in vessels capable of specialty operations such as supporting the operation of remote operated vehicles, telecommunications cable laying/repair and offshore accommodation. We compete against a large number of local and international companies in this market.

Middle East.   At December 31, 2005, 30 vessels were operating in the Middle East region, including 22 owned and 8 joint ventured. Offshore Marine Services’ vessels operating in this area generally support countries along the Arabian Gulf and Arabian Sea, including the United Arab Emirates, Qatar, Pakistan and India. We compete against a large number of local and international companies in this market.

Competitive Conditions

Although there are many suppliers of offshore marine services, management believes only one other company, Tidewater, Inc., operates in all of Offshore Marine Services’ major geographic markets. Tidewater, Inc. has a substantially greater percentage of the offshore marine market compared to that of Offshore Marine Services and its other competitors.

Customers and Contractual Arrangements

Offshore Marine Services’ principal customers are major integrated oil companies, large independent oil and gas exploration and production companies and emerging independent companies. Consolidation of oil and gas companies through mergers and acquisitions over the past several years has further and generally limited Offshore Marine Services’ customer base. In 2005 there was no single customer responsible for 10% or more of consolidated operating revenues. Our ten largest customers accounted for approximately 45% of Offshore Marine Services’ operating revenues. The loss of one or a few of our customers could have a material adverse effect on Offshore Marine Services’ results of operations.

The Offshore Marine Services segment earns and recognizes revenues primarily from the time charter and bareboat charter of vessels to customers based upon daily rates of hire. A time charter is a lease arrangement under which the Company provides a vessel to a customer and is responsible for all operating expenses, normally excluding fuel. Under bareboat charter agreements, the Company provides the vessel to the customer and the customer assumes responsibility for all operating expenses and assumes all risk of operation. Vessel charters may range from several days to several years. Revenues from time charter and bareboat charter are recorded as service is provided. Typically charter durations and rates are established in the context of Master Service Agreements which govern the terms and conditions of hire.

Risks of Foreign Operations

For the years ended December 31, 2005, 2004 and 2003 approximately 50%, 56%, and 54%, respectively, of Offshore Marine Services’ operating revenues were derived from foreign operations. Foreign operations are subject to inherent risks. These risks include, among others, political instability, asset seizures, nationalization of assets, terrorist attacks, fluctuating currency values, hard currency shortages, controls on currency exchange, the repatriation of income or capital, import-export quotas and other forms of public and governmental regulation, all of which are beyond the control of the Company. It is not possible to predict whether any of these conditions or events might develop in the future. The occurrence of any one or more of such conditions or events could have a material adverse effect on the Company’s financial condition and results of operations.

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Marine Transportation Services

Business

The Marine Transportation Services operates a fleet of 10 U.S.-flag tankers, nine of which are owned and one which is bareboat chartered. Two foreign-flag tankers acquired in the Seabulk Merger were sold in August and September 2005. Our tankers provide marine transportation services for petroleum products, petrochemicals and chemicals moving in the U.S. domestic or “coastwise” trade. The Merchant Marine Act of 1920, commonly referred to as the “Jones Act,” requires that vessels engaged in U.S. coastwise trade be owned by U.S. citizens and built in the U.S. Marine Transportation Services accounted for approximately 7% of our total revenue for the six month period in 2005 following the Seabulk Merger.

Equipment and Services

The Oil Pollution Act of 1990 (“OPA 90”) established that vessels that do not have double-hulls will be prohibited from transporting crude oil and petroleum products in U.S. coastwise transportation after a certain date based on the age and size of the vessel unless they are modified with a double-hull. In addition, such vessels will be prohibited from transporting petroleum products in most foreign and international markets under a more accelerated phase-out schedule established by the International Maritime Organization (“IMO”).

The table below sets forth our Marine Transportation Services fleet as at December 31, 2005.

(1)                 Dead weight tons or “dwt”.

(2)                 We operate the Seabulk Magnachem under a bareboat charter expiring in February 2007 at which time we have an option to purchase the vessel.

Markets

Petroleum Product Transportation.   In the domestic energy trade, oceangoing vessels transport fuel and other petroleum products primarily from refineries and storage facilities along the coast of the U.S. Gulf of Mexico to utilities, waterfront industrial facilities and distribution facilities along the U.S. Gulf of Mexico, the Atlantic and Pacific coasts, as well as transport crude and product between Alaska and the West Coast and Hawaii. The number of U.S.-flag oceangoing vessels eligible to participate in the U.S. domestic trade and capable of transporting fuel or petroleum products has steadily decreased since 1980 as vessels have reached the end of their useful lives or are being retired due to OPA 90 requirements. In addition, the cost of new vessel construction in the United States (a requirement to operate in the U.S. domestic coastwise trade) has substantially increased.

Chemical Transportation.   In the U.S. domestic coastwise chemical transportation trade, vessels carry chemicals, primarily from chemical manufacturing plants and storage tank facilities along the coast of the

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U.S. Gulf of Mexico to industrial users in and around U.S. Atlantic and Pacific coast ports. The chemicals transported consist primarily of caustic soda, paraxylene, alkylates, toluene and lubricating oils. Some of the chemicals must be carried in vessels with specially coated or stainless steel cargo tanks and many of them are sensitive to contamination and require special cargo-handling equipment.

Customers and Contractual Arrangements

The primary purchasers of petroleum product transportation services are multi-national oil and gas companies, oil trading companies and large industrial consumers of fuel with waterfront facilities. The primary purchasers of chemical transportation services are chemical and oil companies. Both services are generally contracted for on the basis of short-term or long-term time charters, voyage charters, contracts of affreightment or other transportation agreements tailored to the shipper’s requirements. Even though there was no single customer responsible for 10% or more of consolidated operating revenues in 2005, our ten largest customers accounted for approximately 85% of Marine Transportation Services’ operating revenues. The loss of one or a few of our customers could have a material adverse effect on Marine Transportation Services’ result of operations.

For vessels not operating under time charters or voyage charters, the Company books cargoes either on a spot (movement-by-movement) or contract of affreightment basis. As with other vessels we operate, tankers operated by Marine Transportation Services under time charter are operated for a daily rate of hire where the customer pays for fuel and we are responsible for the actual operation of the vessel and all other vessel operating expenses. When we bareboat charter a tanker to a customer, the customer pays us a daily rate of hire but also assumes all risk of operation and pays all operating expenses. Contracts of affreightment are contracts with a customer for the carriage of cargoes that are committed on a multi-voyage basis over a period of weeks or months, with minimum and maximum cargo tonnages specified over the period at fixed or escalating rates per ton depending on the duration of the contract. Typically, under voyage charters and contracts of affreightment the vessel owner pays for the fuel and any applicable port charges.

Competition

The markets in which our tanker vessels operate are highly competitive. Our primary direct competitors are other operators of U.S. flag ocean-going tank vessels and chemical carriers. The most important competitive factors are pricing and availability to fit customer requirements as well as the requirement in certain areas to operate double hull or double bottom vessels.

Inland River Services

Business

Inland River Services, which trades under the name SCF Marine Inc. (“SCF”), is primarily engaged in the operation of a fleet of dry cargo barges which carry bulk goods on the Mississippi, Illinois, Tennessee and Ohio Rivers and their tributaries and the Gulf Intracoastal Waterways. Principal cargoes include ore, grain, coal, aggregate, steel, scrap and fertilizers. As of December 31, 2005, Inland River Services operated a fleet of 1,139 dry cargo barges, of which 749 are owned, 182 chartered-in, 202 managed on behalf of third parties and six owned through a joint venture. Certain of Inland River Services’ barging activities are supported by four wholly-owned towboats and three towboats in which Inland River Services holds a majority interest. All of our towboats are operated by third parties. Inland River Services also owns 44 chemical and product tank barges that are operated by a third party. These transport liquid bulk cargoes such as lube oils, solvents and glycols. In 2005 we expanded our services through the purchase of a “fleeting operation” which is a staging area for grouping barges in preparation for movements up and down the river and a holding area for barges waiting to load and unload cargo. The fleeting operation is managed by a third party.

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Inland River Services contributed 13%, 14% and 7% of consolidated operating revenues in 2005, 2004 and 2003, respectively.

Equipment and Services

We operate 376 of our dry cargo barges with barges owned by third parties through a pooling arrangement that we manage. Under this arrangement, operating revenues and expenses of the entire pool are shared among the barge owners on the basis of barge days contributed. Each barge owner is responsible for the costs of insurance, maintenance and repair as well as for capital and financing costs of its own equipment in the pool.

SCF’s fleet of dry cargo barges consists of open and covered hopper barges. Open hopper barges are used to transport commodities that are not sensitive to water such as coal, aggregate and scrap. Covered hopper barges are more versatile because they can also carry water sensitive products, such as grain, ores, alloys, cements and fertilizer. Each dry cargo barge in our fleet is capable of transporting approximately 1,500 to 2,000 tons (1,350 to 1,800 metric tons) of cargo. The carrying capacity of a barge at any particular time is determined by water depth in the river channels and hull size of the barge.

Inland barges are unmanned and are moved on the U.S. inland waterways by vessels known in the trade as “towboats.”  The combination of a towboat and dry cargo barges is commonly referred to as a “tow.”  Tows usually range in size from fifteen to forty barges. The number of dry cargo barges included in a tow depends on a variety of factors, including the horsepower of the towboat, river width and navigational conditions, the direction of travel and the mix of loaded and empty barges in the tow.  Inland River Services contracts with third parties to move its dry cargo barges on a spot basis, meaning that the rates it pays for barge movements are market driven. Towing prices fluctuate with demand, rising with higher volumes and higher fuel costs. SCF has ownership interests in seven towboats that are operated by a third party.

Typical dry cargo voyage activity requires shifting a clean, empty barge from a fleeting location to a loading facility. The barge is then moved from the loading location and assembled into a tow before proceeding to its next destination. After unloading it is shifted to a fleeting area for cleaning and repair if needed before being moved again into a load position. Generally, the Company tries to match-up northbound and southbound movements of cargo to minimize the movements of empty barges. Typically, grain cargos move southbound and non-grain cargos move northbound.

The following table sets forth the number of dry cargo barges, chemical tank barges and towboats owned and/or operated by Inland River Services.

(1)                 50% owned by the Company.

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(2)                 Three 6,250 horsepower towboats were acquired in December 2003 and are bareboat chartered-out. The Company and a minority partner jointly own three 6,250 horsepower towboats which were acquired in July 2004. A 3,800 horsepower towboat was acquired in 2005 and is bareboat chartered-out.

Markets

Dry cargo barges provide cost effective transport for many bulk commodity shippers. Primary users of dry cargo barges include major U.S. agricultural and industrial companies. Dry cargo commodities transported on the U.S. inland waterways include coal, petroleum byproducts, grain and grain byproducts, fertilizers, both raw steel commodities and finished steel, nonferrous minerals and construction materials. Grains rank as the primary export, coal and petroleum products are predominately moved domestically, and fertilizer, steel, and construction materials are both imported and moved domestically within the U.S. inland waterways.

The market for our services, prices achieved and utilization are driven by supply/demand economics. The relationship between supply and demand reflects many factors including:

·       the level of domestic and international production of the basic agricultural products to be transported (in particular the yields from grain harvests)

·       the level of domestic and international consumption of agricultural products and the effect of these levels on the volumes of products that are physically moved into the export markets

·       worldwide demand for iron ore, steel, steel by-products, coal, petroleum and other bulk commodities

·       strength or weakness of the U.S. Dollar

·       volatility of foreign economies

·       volume of grain production in different growing regions

·       the cost of ocean freight and the cost of fuel

Within the U.S. other local factors also have an effect on pricing including:

·       the supply of barges available to move the products

·       the ability to position the barges to maximize efficiencies and utility in moving cargoes both northbound and southbound

·       the cost of alternative forms of transportation (primarily rail)

·       general operating logistics on the river network including operating status of locks

·       the effect of river levels on the loading capacities of the barges in terms of draft restrictions

Most of Inland River Services business is booked in the short-term and spot markets, and therefore, its earnings are subject to fluctuations in market rates. We occasionally seek to enter into long-term contracts to provide a level of stable cash flows and moderate the effect of market fluctuations.

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Seasonality

The upper Mississippi River usually closes to barge traffic from mid-December to mid-March. Ice hinders the navigation of barge traffic on the mid-Mississippi River, the Illinois River and the upper Ohio River during the same period. Adverse river conditions due to high water resulting from excessive rainfall, or low water caused by drought, can also impact operations by limiting the speed at which tows travel the U.S. inland waterways, the number of barges included in tows, and the quantity of cargo that is loaded in the barges. The volume of grain transported from the Midwest to the Gulf of Mexico, which is primarily for export, is highest during the harvest season from mid-August through late November. The harvest season is particularly significant because pricing tends to peak during these months in response to higher demand for equipment.

Competitive Conditions

We believe that there are four other major domestic companies that operate over 1,000 barges each, with three of those operating over 2,000 barges each. There are also four mid-sized barge companies that operate more than 500 but less than 1,000 barges. The Company estimates that the ten largest operators control approximately 80% of the dry cargo capacity and the twelve largest operators control 80% of the liquid cargo capacity in the barge industry. Competition is based primarily on price and equipment availability. While our main competitors are other barge lines, railroads also compete for traffic that might otherwise move on the water.

Customers and Contractual Arrangements

The principal customers for Inland River Services are major agricultural and industrial companies. In 2005 there was no single customer responsible for 10% or more of consolidated operating revenues. Our ten largest customers accounted for approximately 60% of Inland River Services’ revenues in 2005. The loss of one or a few of our customers would not have a material adverse effect on Inland River Services’ results of operations.

Most of the barges in the fleet are employed under contracts of affreightment (a contract of affreightment is an agreement to transport cargo from one point to another for a specified rate per ton) with customers. Contracts of affreightment can vary in duration, ranging from one voyage to several years. For longer term contracts base rates may be adjusted in response to changes in fuel prices and operating expenses. Some longer term contracts provide for the transport of a minimum number of tons of cargo or the transportation requirements for a particular customer. Some of the barges are bareboat chartered-out to third parties for a fixed payment of hire per day for the duration of the charter. These contracts tend to be longer, ranging in term from one to five years.

Aviation Services

Business

Aviation Services commenced operations in December 2002 with the acquisition of Houston-based helicopter owner/operator Tex-Air Helicopters, Inc. (“Tex-Air”) an operator of 46 helicopters  primarily servicing the offshore oil and gas markets in Texas and Louisiana. On December 31, 2004, we acquired Era Aviation, Inc. (“the Era Acquisition”), which operated 81 helicopters, an airline with sixteen fixed wing aircraft, which we sold on July 18, 2005, and a Fixed Base Operation (“FBO”) providing fuel and services to third parties at Anchorage International Airport. In April 2005, we integrated the operations of Tex-Air with those of Era Aviation, Inc. and we began operating the combined group as Era Helicopters LLC (“Era”). Era’s primary activities support offshore oil and gas activities in the U.S. Gulf of Mexico and Alaska, flightseeing in Alaska and equipment leasing in various parts of the world. We operate from bases in Alabama, Louisiana, Mississippi, Texas and Alaska.

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Aviation Services contributed 14%, 6% and 5% of consolidated operating revenues in 2005, 2004 and 2003, respectively.

Equipment and Services

At December 31, 2005, Aviation Services owned 94 helicopters and leased 14 others under operating leases. Of these, 100 were located in the United States and 8 were located in foreign jurisdictions. In addition to our operating fleet of 108 helicopters, 16 helicopters have been removed from service and are being marketed for sale.

Aviation Services operates a Federal Aviation Administration (“FAA”) approved maintenance repair station in Lake Charles, Louisiana and is a factory approved service facility for Bell Helicopter, American Eurocopter and Turbomeca. Since 1987, Era has manufactured and marketed, from its Lake Charles facility a composite external auxiliary fuel tank for use on several helicopter types, including the Bell 205, 212/412 and the military “Huey”. The tank system provides enhanced flight range with nominal drag while increasing passenger capacity. Sales to date have been to both civilian and military customers. Other aircraft accessories are also manufactured at the facility.

The composition of Aviation Services’ fleet as of December 31, 2005 was as follows: