##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
  o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
  Trico Marine Services, Inc.
  Delaware(State or other jurisdiction ofincorporation or organization)
    
    72-1252405(I.R.S. EmployerIdentification No.)2401 Fountainview Drive, Suite 920
Houston, Texas(Address of principal executive offices)
    
    77057(Zip code)
  þ o
 o þ o
 o þ
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##### 



TRICO MARINE SERVICES, INC.
REPORT FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2006
  
 TABLE OF CONTENTS
 PagePart I.
    
    Financial InformationItem 1. Financial StatementsStatements of Condensed Consolidated Balance Sheet (Unaudited)
    
    
    1Statements of Condensed Consolidated Operations for the Three Months Ended (Unaudited)
    
    
    2Statements of Condensed Consolidated Operations for the Nine Months Ended (Unaudited)
    
    
    3Statements of Condensed Consolidated Cash Flow (Unaudited)
    
    
    4Statements of Condensed Consolidated Stockholders Equity (Unaudited)
    
    
    5Notes to the Condensed Consolidated Financial Statements (Unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    23Item 3. Quantitative and Qualitative Disclosures About Market Risk.
    
    
    36Item 4. Controls and Procedures
    
    
    36Part II.
    
    Other InformationItem 1. Legal Proceedings
    
    
    37Item 1A. Risk FactorsItem 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    38Item 3. Defaults upon Senior Securities
    
    
    38Item 4. Submission of Matters to a Vote of Security Holders
    
    
    38Item 5. Other Information
    
    
    38Item 6. Exhibits
    
    
    39Signature Page
    
    
    40Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Officer's Certifications Pursuant to Section 906
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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Balance Sheets
 as of September 30, 2006 and December 31, 2005  (Dollars in thousands, except share and per share amounts)
 (Unaudited)September 30,
    
    
    December 31,2006
    
    
    2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    100,818
    
    
    $
    51,218Restricted cash
    
    
    441
    
    
    
    570Accounts receivable, net
    
    
    55,766
    
    
    
    42,986Prepaid expenses and other current assets
    
    
    3,992
    
    
    
    3,484Assets held for sale
    
    
    1,500
    
    
    
    5,853Total current assets
    
    
    162,517
    
    
    
    104,111Property and equipment:Land and buildings
    
    
    1,940
    
    
    
    1,844Marine vessels
    
    
    250,542
    
    
    
    241,360Construction-in-progress
    
    
    9,703
    
    
    
    235Transportation and other
    
    
    2,094
    
    
    
    1,566264,279
    
    
    
    245,005Less accumulated depreciation and amortization
    
    
    38,409
    
    
    
    19,359Net property and equipment
    
    
    225,870
    
    
    
    225,646Restricted cash  current
    
    
    11,732
    
    
    
    7,253Other assets
    
    
    8,532
    
    
    
    7,212Total assets
    
    $
    408,651
    
    
    $
    344,222LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Short-term and current maturities of debt
    
    $
    7,407
    
    
    $
    36,610Accounts payable
    
    
    10,963
    
    
    
    6,295Accrued expenses
    
    
    12,829
    
    
    
    10,715Accrued insurance reserve
    
    
    3,029
    
    
    
    3,426Accrued interest
    
    
    273
    
    
    
    288Income taxes payable
    
    
    1,075
    
    
    
    518Total current liabilities
    
    
    35,576
    
    
    
    57,852Long-term debt, including premiums
    
    
    9,249
    
    
    
    9,928Deferred income taxes
    
    
    56,850
    
    
    
    46,055Deferred revenues on unfavorable contracts (see Note 4)
    
    
    1,920
    
    
    
    5,379Other liabilities
    
    
    2,165
    
    
    
    2,576Total liabilities
    
    
    105,760
    
    
    
    121,790Commitments and contingencies
    
    
    
    
    
    
    Non-controlling interest
    
    
    16,490
    
    
    
    Stockholders equity:Common stock, $.01 par value, 25,000,000 shares authorized, 14,782,817 and 14,638,103
shares issued and outstanding at September 30, 2006 and December 31, 2005, respectively
    
    
    148
    
    
    
    146Warrants  Series A
    
    
    1,649
    
    
    
    1,649Warrants  Series B
    
    
    634
    
    
    
    634Additional paid-in capital
    
    
    227,636
    
    
    
    208,143Retained earnings
    
    
    62,438
    
    
    
    20,100Cumulative foreign currency translation adjustment
    
    
    (6,104
    )
    
    
    (8,240
    )Total stockholders equity
    
    
    286,401
    
    
    
    222,432Total liabilities and stockholders equity
    
    $
    408,651
    
    
    $
    344,222
 The accompanying notes are an integral part of these condensed consolidated financial statements.
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##### Table of Contents



TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Operations
(Unaudited)
 (Dollars in thousands, except share and per share amounts)
 Three months
    
    
    Three monthsended
    
    
    endedSeptember 30, 2006
    
    
    September 30, 2005Revenues:Charter hire
    
    $
    67,042
    
    
    $
    43,872Amortization of non-cash deferred revenues (See Note 4)
    
    
    1,127
    
    
    
    3,235Other vessel income
    
    
    368
    
    
    
    19Total revenues
    
    
    68,537
    
    
    
    47,126Operating expenses:Direct vessel operating expenses and other
    
    
    28,131
    
    
    
    19,886General and administrative
    
    
    7,229
    
    
    
    6,205Depreciation and amortization expense
    
    
    6,246
    
    
    
    6,247Impairment on assets held for sale
    
    
    3,185
    
    
    
    Gain on sales of assets
    
    
    (215
    )
    
    
    (429
    )Total operating expenses
    
    
    44,576
    
    
    
    31,909Operating income
    
    
    23,961
    
    
    
    15,217Interest expense
    
    
    (279
    )
    
    
    (2,255
    )Amortization of deferred financing costs
    
    
    (37
    )
    
    
    (97
    )Foreign exchange gain (loss)
    
    
    2,246
    
    
    
    (234
    )Interest income
    
    
    1,227
    
    
    
    87Other gain (loss), net
    
    
    (139
    )
    
    
    (118
    )Income before income taxes and noncontrolling
interest in loss of consolidated subsidiary
    
    
    26,979
    
    
    
    12,600Income tax expense
    
    
    9,963
    
    
    
    4,050Income before noncontrolling interest in loss of
consolidated subsidiary
    
    
    17,016
    
    
    
    8,550Noncontrolling interest in loss of consolidated subsidiary
    
    
    805
    
    
    
    Net income
    
    $
    17,821
    
    
    $
    8,550Basic income per common share:Net income
    
    $
    1.22
    
    
    $
    0.83Average common shares outstanding
    
    
    14,634,937
    
    
    
    10,294,250Diluted income per common share:Net income
    
    $
    1.17
    
    
    $
    0.81Average common shares outstanding
    
    
    15,254,877
    
    
    
    10,577,956
 The accompanying notes are an integral part of these condensed consolidated financial statements.
 2




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##### Table of Contents



TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Operations
(Unaudited)
 (Dollars in thousands, except share and per share amounts)
 PredecessorSuccessor Company
    
    
    
    CompanyPeriod from
    
    
    
    Period fromNine months
    
    
    March 15, 2005
    
    
    
    January 1, 2005ended
    
    
    through
    
    
    
    throughSeptember 30, 2006
    
    
    September 30, 2005
    
    
    
    March 14, 2005Revenues:Charter hire
    
    $
    177,421
    
    
    $
    91,347
    
    
    
    $
    29,869Amortization of non-cash deferred revenues (See Note 4)
    
    
    3,709
    
    
    
    7,072
    
    
    
    
    Other vessel income
    
    
    695
    
    
    
    74
    
    
    
    
    17Total revenues
    
    
    181,825
    
    
    
    98,493
    
    
    
    
    29,886Operating expenses:Direct vessel operating expenses and other
    
    
    78,352
    
    
    
    46,848
    
    
    
    
    16,217General and administrative
    
    
    19,688
    
    
    
    13,226
    
    
    
    
    4,030Amortization of marine inspection costs
    
    
    
    
    
    
    
    
    
    
    
    2,055Depreciation and amortization expense
    
    
    18,774
    
    
    
    13,744
    
    
    
    
    6,703Insurance recovery from a loss on assets held for sale
    
    
    (605
    )
    
    
    
    
    
    
    
    Loss on assets held for sale
    
    
    3,185
    
    
    
    
    
    
    
    
    (Gain) loss on sales of assets
    
    
    (1,332
    )
    
    
    (707
    )
    
    
    
    2Total operating expenses
    
    
    118,062
    
    
    
    73,111
    
    
    
    
    29,007Operating income
    
    
    63,763
    
    
    
    25,382
    
    
    
    
    879Reorganization costs
    
    
    
    
    
    
    
    
    
    
    
    (6,659
    )Gain on debt discharge
    
    
    
    
    
    
    
    
    
    
    
    166,459Fresh-start adjustments
    
    
    
    
    
    
    
    
    
    
    
    (219,008
    )Interest expense
    
    
    (1,163
    )
    
    
    (4,935
    )
    
    
    
    (1,940
    )Amortization of deferred financing costs
    
    
    (133
    )
    
    
    (209
    )
    
    
    
    (50
    )Foreign exchange gain (loss)
    
    
    1,823
    
    
    
    (99
    )
    
    
    
    23Interest income
    
    
    2,653
    
    
    
    192
    
    
    
    
    Other gain (loss), net
    
    
    (483
    )
    
    
    (368
    )
    
    
    
    (18
    )Income before income taxes and noncontrolling
interest in loss of consolidated subsidiary
    
    
    66,460
    
    
    
    19,963
    
    
    
    
    (60,314
    )Income tax expense
    
    
    24,927
    
    
    
    7,742
    
    
    
    
    1,047Income before noncontrolling interest in loss of
consolidated subsidiary
    
    
    41,533
    
    
    
    12,221
    
    
    
    
    (61,361
    )Noncontrolling interest in loss of consolidated subsidiary
    
    
    805
    
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    42,338
    
    
    $
    12,221
    
    
    
    $
    (61,361
    )Basic income (loss) per common share:Net income (loss)
    
    $
    2.90
    
    
    $
    1.19
    
    
    
    $
    (1.66
    )Average common shares outstanding
    
    
    14,614,919
    
    
    
    10,247,469
    
    
    
    
    36,908,505Diluted income (loss) per common share:Net income (loss)
    
    $
    2.79
    
    
    $
    1.17
    
    
    
    $
    (1.66
    )Average common shares outstanding
    
    
    15,174,006
    
    
    
    10,416,505
    
    
    
    
    36,908,505
 The accompanying notes are an integral part of these consolidated financial statements.
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##### Table of Contents



TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Cash Flows
(Unaudited)
 (Dollars in thousands)
 Successor
    
    
    
    PredecessorCompany
    
    
    
    CompanyPeriod from
    
    
    
    Period fromNine months
    
    
    March 15, 2005
    
    
    
    January 1, 2005ended
    
    
    through
    
    
    
    throughSeptember 30, 2006
    
    
    September 30, 2005
    
    
    
    March 14, 2005Net income (loss)
    
    $
    42,338
    
    
    $
    12,221
    
    
    
    $
    (61,361
    )Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Depreciation and amortization
    
    
    18,884
    
    
    
    13,918
    
    
    
    
    8,808Amortization of non-cash deferred revenues (see Note 4)
    
    
    (3,709
    )
    
    
    (7,072
    )
    
    
    
    Deferred marine inspection costs
    
    
    
    
    
    
    
    
    
    
    
    (1,277
    )Deferred income taxes
    
    
    22,961
    
    
    
    6,480
    
    
    
    
    1,397Gain on debt discharge
    
    
    
    
    
    
    
    
    
    
    
    (166,459
    )Fresh start adjustments
    
    
    
    
    
    
    
    
    
    
    
    219,008Loss (gain) on sales of assets
    
    
    (1,332
    )
    
    
    (707
    )
    
    
    
    2Impairment on assets held for sale
    
    
    3,185
    
    
    
    
    
    
    
    
    Provision for doubtful accounts
    
    
    1,204
    
    
    
    100
    
    
    
    
    40Stock based compensation
    
    
    1,558
    
    
    
    1,809
    
    
    
    
    9Noncontrolling interest in loss of consolidated subsidiary
    
    
    (805
    )
    
    
    
    
    
    
    
    Change in operating assets and liabilities:Accounts receivable
    
    
    (13,574
    )
    
    
    (9,410
    )
    
    
    
    2,404Prepaid expenses and other current assets
    
    
    (449
    )
    
    
    (762
    )
    
    
    
    (630
    )Accounts payable and accrued expenses
    
    
    6,564
    
    
    
    (5,815
    )
    
    
    
    7,676Other, net
    
    
    (1,728
    )
    
    
    (1,294
    )
    
    
    
    (449
    )Net cash provided by operating activities
    
    
    75,097
    
    
    
    9,468
    
    
    
    
    9,168Cash flows from investing activities:Purchases of property and equipment
    
    
    (12,179
    )
    
    
    (1,264
    )
    
    
    
    (947
    )Proceeds from sales of assets
    
    
    2,795
    
    
    
    3,324
    
    
    
    
    (Decrease) increase in restricted cash
    
    
    (4,324
    )
    
    
    (685
    )
    
    
    
    508Other, net
    
    
    
    
    
    
    
    
    
    
    
    (211
    )Net cash provided by (used in) investing activities
    
    
    (13,708
    )
    
    
    1,375
    
    
    
    
    (650
    )Cash flows from financing activities:Net proceeds from issuance of common stock
    
    
    608
    
    
    
    1,801
    
    
    
    
    Proceeds from issuance of debt
    
    
    15,878
    
    
    
    60,550
    
    
    
    
    54,550Repayment of debt
    
    
    (47,405
    )
    
    
    (77,339
    )
    
    
    
    (56,771
    )Contribution from non-controlling interest
    
    
    20,910
    
    
    
    
    
    
    
    
    Deferred financing costs and other
    
    
    
    
    
    
    
    
    
    
    
    (375
    )Net cash used in financing activities
    
    
    (10,009
    )
    
    
    (14,988
    )
    
    
    
    (2,596
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (1,780
    )
    
    
    (518
    )
    
    
    
    62Net increase (decrease) in cash and cash equivalents
    
    
    49,600
    
    
    
    (4,663
    )
    
    
    
    5,984Cash and cash equivalents at beginning of period
    
    
    51,218
    
    
    
    19,154
    
    
    
    
    13,170Cash and cash equivalents at end of period
    
    $
    100,818
    
    
    $
    14,491
    
    
    
    $
    19,154Supplemental cash flow information:Income taxes paid
    
    $
    938
    
    
    $
    649
    
    
    
    $
    72Interest paid
    
    $
    1,374
    
    
    $
    5,511
    
    
    
    $
    1,265Operating cash payments from reorganization items
    
    $
    
    
    
    $
    
    
    
    
    $
    1,457
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TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statement of Stockholders Equity
for the nine months ended September 30, 2006
(Unaudited)
 (Dollars in thousands, except share amounts)
 CumulativeForeignAdditional
    
    
    
    
    
    
    Currency
    
    
    TotalCommon Stock
    
    
    Warrants - Series A
    
    
    Warrants - Series B
    
    
    Paid-In
    
    
    Retained
    
    
    Translation
    
    
    StockholdersShares
    
    
    Dollars
    
    
    Shares
    
    
    Dollars
    
    
    Shares
    
    
    Dollars
    
    
    Capital
    
    
    Earnings
    
    
    Adjustment
    
    
    EquityBalance, December 31, 2005
    
    
    14,638,103
    
    
    $
    146
    
    
    
    496,579
    
    
    $
    1,649
    
    
    
    497,438
    
    
    $
    634
    
    
    $
    208,143
    
    
    $
    20,100
    
    
    $
    (8,240
    )
    
    $
    222,432Stock based compensation
    
    
    89,650
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,557
    
    
    
    
    
    
    
    
    
    
    
    1,559Stock options exercised
    
    
    54,835
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    602
    
    
    
    
    
    
    
    
    
    
    
    602Exercise of warrants for common stock
    
    
    229
    
    
    
    
    
    
    
    (74
    )
    
    
    
    
    
    
    (155
    )
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    6Tax benefit from the utilization of
fresh-start NOL
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,713
    
    
    
    
    
    
    
    
    
    
    
    13,713Gain related to the sale of interest in EMSL
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,615
    
    
    
    
    
    
    
    
    
    
    
    3,615Comprehensive income:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gain on foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,136
    
    
    
    2,136Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,338
    
    
    
    
    
    
    
    42,338Comprehensive income:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44,474Balance, September 30, 2006
    
    
    14,782,817
    
    
    $
    148
    
    
    
    496,505
    
    
    $
    1,649
    
    
    
    497,283
    
    
    $
    634
    
    
    $
    227,636
    
    
    $
    62,438
    
    
    $
    (6,104
    )
    
    $
    286,401
 The accompanying notes are an integral part of these condensed consolidated financial statements.
 5




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TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
 
 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER 30, 2006
(Unaudited)
 1. Interim financial statement presentation:
      2. Deferred revenue on unfavorable contracts:
  6




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TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2006
(Unaudited)
   Amortizationof non-cashdeferredPeriod
    
    revenue3 months ending December 31, 2006
    
    $
    603Year ending December 31, 2007
    
    
    817Year ending December 31, 2008
    
    
    300Year ending December 31, 2009
    
    
    138Thereafter
    
    
    62$
    1,920
 3. Partial reimbursement of labor costs by the Norwegian government:
  4. Warrants to purchase common stock:
   7




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##### Table of Contents



TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2006
(Unaudited)
 WarrantsSeries A
    
    
    Series BExpected annual dividends
    
    $
    
    
    
    $
    Risk free interest rate
    
    
    4.12
    %
    
    
    3.96
    %Expected term (in years)
    
    
    5
    
    
    
    3Volatility
    
    
    46.7
    %
    
    
    46.7
    %
  Three months
    
    Three monthsended
    
    endedSeptember 30, 2006
    
    September 30, 2005Series A
    
    
    
    
    
    
    187Series B
    
    
    22
    
    
    
    
  Period fromNine Months
    
    March 15, 2005Ended
    
    throughSeptember 30, 2006
    
    September 30, 2005Series A
    
    
    74
    
    
    
    2,755Series B
    
    
    155
    
    
    
    1,891
 5. Assets held for sale and sales of vessels:
     8




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TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2006
(Unaudited)
 6. Earnings per share:
  Three months
    
    
    Three monthsended
    
    
    endedSeptember 30, 2006
    
    
    September 30, 2005Net income available to common shares (numerator)
    
    $
    17,821
    
    
    $
    8,550Weighted-average common shares outstanding (denominator)
    
    
    14,634,937
    
    
    
    10,294,250Basic EPS
    
    $
    1.22
    
    
    $
    0.83Net income available to common shares (numerator)
    
    $
    17,821
    
    
    $
    8,550Weighted-average common shares outstanding (denominator)
    
    
    14,634,937
    
    
    
    10,294,250Effect of dilutive securities
    
    
    619,940
    
    
    
    283,706Adjusted weighted-average shares
    
    
    15,254,877
    
    
    
    10,577,956Diluted EPS
    
    $
    1.17
    
    
    $
    0.81
  PredecessorSuccessor Company
    
    
    
    CompanyPeriod from
    
    
    
    Period fromNine months
    
    
    March 15, 2005
    
    
    
    January 1, 2005ended
    
    
    through
    
    
    
    throughSeptember 30, 2006
    
    
    September 30, 2005
    
    
    
    March 14, 2005Net income (loss) available to common shares (numerator)
    
    $
    42,338
    
    
    $
    12,221
    
    
    
    $
    (61,361
    )Weighted-average common shares outstanding (denominator)
    
    
    14,614,919
    
    
    
    10,247,469
    
    
    
    
    36,908,505Basic EPS
    
    $
    2.90
    
    
    $
    1.19
    
    
    
    $
    (1.66
    )Net income (loss) available to common shares (numerator)
    
    $
    42,338
    
    
    $
    12,221
    
    
    
    $
    (61,361
    )Weighted-average common shares outstanding (denominator)
    
    
    14,614,919
    
    
    
    10,247,469
    
    
    
    
    36,908,505Effect of dilutive securities
    
    
    559,087
    
    
    
    169,036
    
    
    
    
    Adjusted weighted-average shares
    
    
    15,174,006
    
    
    
    10,416,505
    
    
    
    
    36,908,505Diluted EPS
    
    $
    2.79
    
    
    $
    1.17
    
    
    
    $
    (1.66
    )
  9




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TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2006
(Unaudited)
  7. Equity-based compensation:
   March(1)
    
    April(2)
    
    June(1)
    
    July(1)
    
    TotalOfficers
    
    
    37,100
    
    
    
    
    
    
    
    9,000
    
    
    
    10,000
    
    
    
    56,100Employees
    
    
    22,550
    
    
    
    
    
    
    
    2,000
    
    
    
    
    
    
    
    24,550Non-Executive Chairman of the Board
    
    
    
    
    
    
    4,000
    
    
    
    
    
    
    
    
    
    
    
    4,000Non-Employee Directors
    
    
    
    
    
    
    10,000
    
    
    
    
    
    
    
    
    
    
    
    10,00059,650
    
    
    
    14,000
    
    
    
    11,000
    
    
    
    10,000
    
    
    
    94,650
 
 (1)
    
    The forfeiture restrictions relating to the shares of restricted stock granted expire
three years after date of grant.(2)
    
    The forfeiture restrictions relating to the restricted stock lapsed one month after date
of grant.  Date
    
    Exercise
    
    Sharesof Grant
    
    Price
    
    Issued(1)Officers
    
    March
    
    $
    27.13
    
    
    
    37,100Employees
    
    March
    
    
    27.13
    
    
    
    3,400Officers
    
    June
    
    
    33.75
    
    
    
    9,000
 
 (1)
    
    The forfeiture restrictions relating to the shares of stock options issued vest
ratably over three years beginning at the date of grant. To date 2,000 option grants have been
forfeited.   10




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TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2006
(Unaudited)
    Predecessor CompanyPeriod fromJanuary 1, 2005throughMarch 14, 2005Net loss
    
    $
    (61,361
    )Add: Stock based compensation expense included in
reported loss, net of related tax effects
    
    
    9Deduct: Total stock-based compensation expense
determined under fair value-based method, net of tax
    
    
    (40
    )Pro forma net loss
    
    $
    (61,392
    )Net loss per common share:Basic and Diluted as reported
    
    $
    (1.66
    )Basic and Diluted pro forma
    
    $
    (1.66
    )
  September 30, 2006
    
    September 30, 2005Expected annual dividends
    
    $
    
    
    
    $
    Risk free interest rate
    
    
    4.63
    %
    
    
    4.12
    %Expected term (in years)
    
    
    5
    
    
    
    5Volatility (1)
    
    
    36.54
    %
    
    
    46.70
    %
 
 (1)
    
    The volatility assumption is based on the average volatility of a peer group. 11




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##### Table of Contents



TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2006
(Unaudited)
  Nine Months EndedSeptember 30, 2006Number of
    
    
    WeightedShares
    
    
    AverageUnderlying
    
    
    ExerciseOptions
    
    
    PricesOutstanding at December 31, 2005
    
    
    355,738
    
    
    $
    11.00Granted
    
    
    49,500
    
    
    $
    28.33Exercised
    
    
    (54,835
    )
    
    $
    11.00Expired/Forfeited
    
    
    (10,001
    )
    
    $
    14.23Outstanding at September 30, 2006
    
    
    340,402
    
    
    $
    13.43Exercisable at September 30, 2006
    
    
    76,403
    
    
    $
    11.00
   Options Outstanding
    
    Options ExercisableWeighted
    
    Weighted
    
    Aggregate
    
    
    
    
    
    Weighted
    
    AggregateNumber
    
    Average
    
    Average
    
    Intrinsic
    
    Number
    
    Average
    
    IntrinsicOutstanding
    
    Remaining
    
    Exercise
    
    Value
    
    Exercisable
    
    Exercise
    
    ValueExercise Prices
    
    at 9/30/06
    
    Contract Life
    
    Price
    
    ($000)
    
    at 9/30/06
    
    Price
    
    ($000)$11.00
    
    
    292,902
    
    
    
    5.5
    
    
    $
    11.00
    
    
    $
    6,634
    
    
    
    76,403
    
    
    $
    11.00
    
    
    $
    1,738$27.13
    
    
    38,500
    
    
    
    6.4
    
    
    $
    27.13
    
    
    $
    255
    
    
    
    
    
    
    $
    27.13
    
    
    $
    $33.75
    
    
    9,000
    
    
    
    6.7
    
    
    $
    33.75
    
    
    $
    
    
    
    
    
    
    
    $
    33.75
    
    
    $
    340,402
    
    
    
    5.6
    
    
    $
    13.43
    
    
    $
    6,889
    
    
    
    76,403
    
    
    $
    11.00
    
    
    $
    1,738
  Nine Months EndedSeptember 30, 2006Number of
    
    
    WeightedShares
    
    
    Average
    
    
    WeightedUnderlying
    
    
    Grant
    
    
    AverageShares
    
    
    Price
    
    
    LifeOutstanding at December 31, 2005
    
    
    65,000
    
    
    $
    23.71
    
    
    
    3.4Granted
    
    
    94,650
    
    
    $
    29.70
    
    
    
    2.2Expired/Forfeited
    
    
    (5,000
    )
    
    $
    28.45
    
    
    
    2.5Vested
    
    
    (29,450
    )
    
    $
    28.18
    
    
    
    Outstanding at September 30, 2006
    
    
    125,200
    
    
    $
    27.26
    
    
    
    2.3
 12




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##### Table of Contents



TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2006
(Unaudited)
 8. Taxes:
       13




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TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2006
(Unaudited)
    9. Debt:
  September 30, 2006
    
    
    December 31, 2005NOK Revolver, bearing interest at NIBOR (Norwegian Interbank
Offered Rate) plus a margin (weighted average interest rate of 5.3%
at September 30, 2006) and collateralized by certain marine vessels. This
facilitys current availability reduces in 13 semi-annual installments of NOK
40 million ($6.1 million) beginning March 2003 with balance of the
commitment expiring September 2009.
    
    $
    6,149
    
    
    $
    16,310NOK Term loan, bearing interest at NIBOR (Norwegian Interbank Offered Rate)
plus a margin, collateralized by two marine
vessels, reducing in 5 semi-annual installments beginning June 30, 2004
by NOK 7.5 million ($1.2 million) with the balance of the commitment
expiring June 2006.
    
    
    
    
    
    
    17,7926.11% Notes, bearing interest at 6.11%, principal and interest due in
30 semi-annual installments, maturing April 2014, collateralized by
two marine vessels.
    
    
    10,061
    
    
    
    10,6906.08% Notes, bearing interest at 6.08%, principal and interest due in
16 semi-annual installments, maturing September 2006, collateralized
by a marine vessel.
    
    
    
    
    
    
    1,250Fresh-start debt premium (1)
    
    
    446
    
    
    
    49616,656
    
    
    
    46,538Less current maturities
    
    
    7,407
    
    
    
    36,610Long-term debt
    
    $
    9,249
    
    
    $
    9,928
  Period
    
    Amount3 Months ending December 31, 2006
    
    $
    6,77812 months ending December 31, 2007
    
    
    1,25812 months ending December 31, 2008
    
    
    1,25812 months ending December 31, 2009
    
    
    1,25812 months ending December 31, 2010
    
    
    1,25812 months ending December 31, 2011
    
    
    1,258Thereafter
    
    
    3,142$
    16,210Fresh-start debt premium
    
    
    446$
    16,656
 14




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TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2006
(Unaudited)
 
 (1)
    
    During the application of fresh-start accounting, the Company recorded a fair-value adjustment
to its fixed rate 6.11% Notes and 6.08% Notes of approximately $0.5 million as a result of current
interest rates being lower than the Companys stated interest rates on its fixed-rate debt. Fair
value was determined using discounted future cash flows based on quoted market prices, where
available, on its current incremental borrowing rates for similar types of borrowing arrangements
as of the Exit Date. This premium will be amortized over the remaining life of the debt using the
effective interest rate method, which will lower future interest expense.    10. Employee benefit plans:
   Three months endedSeptember 30, 2006
    
    
    September 30, 2005Norwegian Pension Plan
    
    $
    848
    
    
    $
    676United Kingdom Defined Benefit Plan
    
    
    70
    
    
    
    64Total Contributions
    
    $
    918
    
    
    $
    740
 15




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##### Table of Contents



TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2006
(Unaudited)
  PredecessorSuccessor Company
    
    
    
    CompanyPeriod from
    
    
    
    Period fromNine months
    
    
    March 15, 2005
    
    
    
    January 1, 2005ended
    
    
    through
    
    
    
    throughSeptember 30, 2006
    
    
    September 30, 2005
    
    
    
    March 14, 2005Norwegian Pension Plan
    
    $
    1,271
    
    
    $
    882
    
    
    
    $
    188United Kingdom Defined Benefit Plan
    
    
    173
    
    
    
    191
    
    
    
    
    119Total Contributions
    
    $
    1,444
    
    
    $
    1,073
    
    
    
    $
    307
   Three months
    
    
    Three monthsended
    
    
    endedSeptember 30, 2006
    
    
    September 30, 2005Service cost
    
    $
    264
    
    
    $
    95Interest cost
    
    
    41
    
    
    
    33Return on plan assets
    
    
    (70
    )
    
    
    (55
    )Social security contributions
    
    
    15
    
    
    
    15Recognized net actuarial loss
    
    
    2
    
    
    
    2Net periodic benefit cost
    
    $
    252
    
    
    $
    90
  PredecessorSuccessor Company
    
    
    
    CompanyPeriod from
    
    
    
    Period fromNine months
    
    
    March 15, 2005
    
    
    
    January 1, 2005ended
    
    
    through
    
    
    
    throughSeptember 30, 2006
    
    
    September 30, 2005
    
    
    
    March 14, 2005Service cost
    
    $
    772
    
    
    $
    208
    
    
    
    $
    76Interest cost
    
    
    121
    
    
    
    73
    
    
    
    
    27Return on plan assets
    
    
    (206
    )
    
    
    (121
    )
    
    
    
    (44
    )Social security contributions
    
    
    43
    
    
    
    33
    
    
    
    
    12Recognized net actuarial loss
    
    
    8
    
    
    
    5
    
    
    
    
    2Net periodic benefit cost
    
    $
    738
    
    
    $
    198
    
    
    
    $
    73
 16




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##### Table of Contents



TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2006
(Unaudited)
 11. Contingent litigation:
    12. Segment and geographic information:
     Three months ended September 30, 2006U.S.
    
    North Sea
    
    West Africa
    
    Other
    
    TotalsRevenues from external customers
    
    $
    29,048
    
    
    $
    30,088
    (1)
    
    $
    7,616
    
    
    $
    1,785
    
    
    $
    68,537Intersegment revenues
    
    
    713
    
    
    
    
    
    
    
    
    
    
    
    949
    
    
    
    1,662Operating (loss) income (2)
    
    
    11,337
    
    
    
    15,169
    (1)
    
    
    375
    
    
    
    (2,924
    )
    
    
    23,957Segment total assets (at end of period)
    
    
    251,428
    
    
    
    238,140
    
    
    
    22,609
    
    
    
    23,234
    
    
    
    535,411
 Three months ended September 30, 2005
    
    U.S.
    
    North Sea
    
    West Africa
    
    Other
    
    TotalsRevenues from external customers
    
    $
    15,286
    
    
    $
    24,044
    (1)
    
    $
    3,553
    
    
    $
    4,243
    
    
    $
    47,126Intersegment revenues
    
    
    438
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    438Operating income
    
    
    2,112
    
    
    
    11,884
    (1)
    
    
    443
    
    
    
    778
    
    
    
    15,217Segment total assets (at end of period)
    
    
    171,699
    
    
    
    200,227
    
    
    
    18,457
    
    
    
    14,747
    
    
    
    405,130
 17




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##### Table of Contents



TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2006
(Unaudited)
 
 (1)
    
    Includes amortization of non-cash deferred revenues of $1.1 million and $3.2 million for the
three months ended September 30, 2006 and 2005, respectively.(2)
    
    The Company performed a transfer pricing study, which resulted in a newly adopted allocation of
corporate general and administrative costs to its international subsidiaries. The Company
implemented the allocation in September 2006, and transferred the corporate general and
administrative costs for the year ended December 31, 2005 and for the nine months ended September
30, 2006. The table below reflects the allocated general and administrative costs for the three months ended
September 30, 2006 and 2005, (in thousands). Three months
    
    Three monthsended
    
    endedSeptember 30, 2006
    
    September 30, 2005North Sea
    
    
    50
    
    
    
    50West Africa
    
    
    88
    
    
    
    88Other
    
    
    127
    
    
    
    127US
    
    
    (265
    )
    
    
    (265
    )
  Period
    
    
    Period fromNine months
    
    March 15, 2005
    
    
    January 1, 2005ended
    
    through
    
    
    throughSeptember 30, 2006
    
    December 31, 2005
    
    
    March 14, 2005North Sea
    
    
    150
    
    
    
    161
    
    
    
    
    40West Africa
    
    
    263
    
    
    
    279
    
    
    
    
    71Other
    
    
    381
    
    
    
    405
    
    
    
    
    103US
    
    
    (794
    )
    
    
    (844
    )
    
    
    
    (215
    )
  Nine months ended September 30, 2006U.S.
    
    North Sea
    
    West Africa
    
    Other
    
    TotalsRevenues from external customers
    
    $
    80,053
    
    
    $
    75,087
    (1)
    
    $
    19,565
    
    
    $
    7,120
    
    
    $
    181,825Intersegment revenues
    
    
    1,680
    
    
    
    
    
    
    
    
    
    
    
    949
    
    
    
    2,629Operating (loss) income (2)
    
    
    33,778
    
    
    
    29,485
    (1)
    
    
    3,706
    
    
    
    (3,206
    )
    
    
    63,763
 Period from March 15, 2005 through September 30, 2005U.S.
    
    North Sea
    
    West Africa
    
    Other
    
    TotalsRevenues from external customers
    
    $
    28,610
    
    
    $
    54,075
    (1)
    
    $
    6,663
    
    
    $
    9,145
    
    
    $
    98,493Intersegment revenues
    
    
    935
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    935Operating (loss) income
    
    
    (1,746
    )
    
    
    25,394
    (1)
    
    
    893
    
    
    
    841
    
    
    
    25,382
 
 Predecessor Company
 Period from January 1, 2005 through March 14, 2005
    
    U.S.
    
    North Sea
    
    West Africa
    
    Other
    
    TotalsRevenues from external customers
    
    $
    8,171
    
    
    $
    16,528
    (1)
    
    $
    1,908
    
    
    $
    3,279
    
    
    $
    29,886Intersegment revenues
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating (loss) income
    
    
    (2,996
    )
    
    
    4,220
    (1)
    
    
    278
    
    
    
    (623
    )
    
    
    879
 18




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TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2006
(Unaudited)
 
 (1)
    
    Includes amortization of non-cash deferred revenues of $3.7 million and $7.1 million for the
nine months ended September 30, 2006 and the period from March 15, 2005 through September 30, 2005,
respectively(2)
    
    The Company performed a transfer pricing study, which resulted in a newly adopted allocation of
corporate general and administrative costs to its international subsidiaries. The Company
implemented the allocation in September 2006, and transferred the corporate general and
administrative costs for the year ended December 31, 2005 and for the nine months ended September
30, 2006.  The table below reflects the allocated general and administrative costs for the nine months ended
September 30, 2006 and the period from January 1, 2005 through March 14, 2005 and the period from
March 15, 2005 through September 30, 2005 (in
thousands). Period from
    
    
    Period fromNine months
    
    March 15, 2005
    
    
    January 1, 2005ended
    
    through
    
    
    throughSeptember 30, 2006
    
    December 31, 2005
    
    
    March 14, 2005North Sea
    
    
    150
    
    
    
    161
    
    
    
    
    40West Africa
    
    
    263
    
    
    
    279
    
    
    
    
    71Other
    
    
    381
    
    
    
    405
    
    
    
    
    103US
    
    
    (794
    )
    
    
    (844
    )
    
    
    
    (215
    )
  September 30
    
    
    September 302006
    
    
    2005Total assets for reportable segments
    
    $
    535,411
    
    
    $
    405,130Elimination of intersegment receivables
    
    
    (18,329
    )
    
    
    (11,354
    )Elimination of investment in subsidiaries
    
    
    (108,431
    )
    
    
    (72,115
    )Total consolidated assets
    
    $
    408,651
    
    
    $
    321,661
 13. New accounting standards:
  Employers Accounting for Defined Benefit Pension and Other Postretirement Plans
 19




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TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2006
(Unaudited)
   14. Commitments:
     15. Minority owned consolidated subsidiary:
   20




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TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2006
(Unaudited)
     (in
thousands)
 September 30, 2006Cash
    
    $
    17,442Restricted cash
    
    
    3,468Total assets
    
    $
    20,910Non-controlling interest
    
    $
    16,490Noncontrolling interest in loss of consolidated subsidiary
    
    
    805Additional paid-in-capital
    
    
    3,615Total liabilities and shareholders equity
    
    $
    20,910
 21




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TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2006
(Unaudited)
 (in thousands)
 Eastern Marine Services, Ltd.
Condensed Balance Sheet
as of September 30, 2006
 September 30, 2006ASSETSCurrent Assets:Cash
    
    $
    2,985Note receivable
    
    
    4,386Total current assets
    
    
    7,371Property & Equipment:Vessels
    
    
    32,343Other
    
    
    9432,437Less: accumulated depreciation:
    
    
    6,87525,562Total Assets
    
    $
    32,933LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    599Total current liabilities
    
    
    599Stockholders EquityCommon stock
    
    
    129Additional paid in capital
    
    
    33,783Retained earnings
    
    
    (1,578
    )Total stockholders equity
    
    
    32,334Total liabilities and stockholders equity
    
    $
    32,933
 (in thousands)
 Eastern Marine Services, Ltd.
Condensed Statement of Operations
for the three months ending September 30, 2006
 Revenue
    
    $
    949949Operating Expenses:Direct vessel operating expenses and other
    
    
    1,468Depreciation expense
    
    
    1,030General and Administrative
    
    
    292,527Loss
    
    $
    (1,578
    )
 22




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations.
 Primary Factors Affecting our Results of Operations
  Day Rates and Utilization.
 
    
    demand for our vessels;
    
    customer requirements;
    
    availability of our vessels; and
    
    competition.
    
    
    the ability to attract and retain qualified crewmembers;
    
    price, service and reputation of vessel operators, safety record; and
    
    the age, quality and availability of vessels of the type and size required by the customer.
 Operating Costs.
 Managements Outlook
  
    
    increasing demand from West Africa, Southeast Asia and other emerging markets;
    
    threats to the reliability of supply in major oil producing nations such
as the United States, the Middle East and Nigeria;
    
    increasing demand for vessels due to increased activity in areas ancillary to existing markets;
    
    impact of jackup rigs exiting the Gulf of Mexico and the resulting downward pressure on the Gulf shallow water segment; and
    
    seasonal weather conditions in the North Sea and their impact on offshore development operations.
  23




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##### Table of Contents



Results of Operations
  Three months ended
    
    Nine months endedMonth of
    
    September 30,
    
    September 30,October 2006
    
    2006
    
    2005
    
    2006
    
    2005(4)Average Day Rates:(1)PSV/AHTS (North Sea class)
    
    $
    22,735
    
    
    $
    22,474
    
    
    $
    16,637
    
    
    $
    19,177
    
    
    $
    16,199Supply (Gulf class)
    
    
    11,077
    
    
    
    11,639
    
    
    
    6,367
    
    
    
    11,189
    
    
    
    5,801Crew/line handling
    
    
    5,550
    
    
    
    5,512
    
    
    
    2,499
    
    
    
    4,557
    
    
    
    2,305Utilization:(2)(3)PSV/AHTS (North Sea class)
    
    
    96
    %
    
    
    92
    %
    
    
    92
    %
    
    
    93
    %
    
    
    90
    %Supply (Gulf class)
    
    
    70
    %
    
    
    71
    %
    
    
    62
    %
    
    
    66
    %
    
    
    57
    %Crew/line handling
    
    
    88
    %
    
    
    87
    %
    
    
    90
    %
    
    
    87
    %
    
    
    90
    %Average number of Vessels:PSV/AHTS (North Sea class)
    
    
    16.0
    
    
    
    16.0
    
    
    
    16.1
    
    
    
    16.0
    
    
    
    17.1Supply (Gulf class)
    
    
    44.0
    
    
    
    44.0
    
    
    
    48.0
    
    
    
    44.4
    
    
    
    48.0Crew/line handling
    
    
    8.0
    
    
    
    8.0
    
    
    
    17.0
    
    
    
    9.0
    
    
    
    17.0
 
 (1)
    
    Average vessel day rate is calculated by dividing a vessels total revenues in a period
by the total number of days such vessel was under contract during such period.(2)
    
    Average vessel utilization is calculated by dividing the total number of days for which
a vessel is under contract in a period by the total number of days in such period.(3)
    
    Stacked vessels for the Gulf of Mexico supply vessel class are included in the average
number of vessels and the calculation of utilization. Excluding stacked vessels, our
utilization was 88%, 91%, 94%, 89% and 91% for the month of October 2006, the three month
periods ended September 30, 2006 and 2005 and the nine months ended September 30, 2006 and
2005, respectively.(4)
    
    Includes periods of both the Successor and Predecessor companies, before and after our
reorganization. Comparison of day rates and utilization during the three and nine months ended September 30, 2006
and 2005
   24




---



##### Table of Contents



Comparison of the Results for the Quarter Ended September 30, 2006 to the Quarter Ended September
30, 2005
 (in thousands)
 For the three months endedSeptember 30,2006
    
    
    2005
    
    
    VarianceRevenues:Charter hire
    
    $
    67,042
    
    
    $
    43,872
    
    
    $
    23,170Amortization of non-cash deferred revenues
    
    
    1,127
    
    
    
    3,235
    
    
    
    (2,108
    )Other vessel income
    
    
    368
    
    
    
    19
    
    
    
    349Total revenues
    
    
    68,537
    
    
    
    47,126
    
    
    
    21,411Operating expenses:Direct vessel operating expenses and other
    
    
    28,131
    
    
    
    19,886
    
    
    
    8,245General and administrative
    
    
    7,229
    
    
    
    6,205
    
    
    
    1,024Depreciation and amortization expense
    
    
    6,246
    
    
    
    6,247
    
    
    
    (1
    )Loss on assets held for sale
    
    
    3,185
    
    
    
    
    
    
    
    3,185Gain on sales of assets
    
    
    (215
    )
    
    
    (429
    )
    
    
    214Total operating expenses
    
    
    44,576
    
    
    
    31,909
    
    
    
    12,667Operating income
    
    
    23,961
    
    
    
    15,217
    
    
    
    8,744Interest expense
    
    
    (279
    )
    
    
    (2,255
    )
    
    
    1,976Amortization of deferred financing costs
    
    
    (37
    )
    
    
    (97
    )
    
    
    60Foreign exchange gain (loss)
    
    
    2,246
    
    
    
    (234
    )
    
    
    2,480Interest income
    
    
    1,227
    
    
    
    87
    
    
    
    1,140Other loss (gain), net
    
    
    (139
    )
    
    
    (118
    )
    
    
    (21
    )Income before income taxes and noncontrolling
interest in loss of consolidated subsidiary
    
    
    26,979
    
    
    
    12,600
    
    
    
    14,379Income tax expense
    
    
    9,963
    
    
    
    4,050
    
    
    
    5,913Income before noncontrolling interest in loss of
consolidated subsidiary
    
    
    17,016
    
    
    
    8,550
    
    
    
    8,466Noncontrolling interests loss in subsidiary
    
    
    805
    
    
    
    
    
    
    
    805Net income
    
    $
    17,821
    
    
    $
    8,550
    
    
    $
    9,271
 Charter Hire Revenues
 Amortization of Non-Cash Deferred Revenues
 25




---



##### Table of Contents



Direct Vessel Operating Expenses.
 
    
    increased marine inspection costs of $4.0 million attributable to the process of
destacking nine of our cold stacked vessels and the timing of regulatory dry dockings. Five
of these vessels will operate in Southeast Asia, one of the vessels will be mobilized to
West Africa for operations and the remaining two vessels will operate in our Gulf of Mexico
fleet. As a result of our accounting policy to expense maintenance and classification
costs as incurred, the timing of a vessels regulatory dry docking and the class of vessels
undergoing regulatory dry docking may result in fluctuations in direct vessel operating
expenses when compared to prior periods;
    
    increased labor costs of $1.3 million as a result of higher vessel utilization, crew
shortages resulting in increases in crew labor rates in the Gulf of Mexico, and an
increased pension expense of $1.4 million.
 General and Administrative Expenses
 
    
    increased professional fees of $1.1 million incurred to pursue consummation and
establishment of our EMSL partnership, information systems enhancements; and
    
    increased personnel costs of $0.2 million resulting from the adoption of an annual
incentive awards plan in the fourth quarter of 2005 and increased salary expense related to
new senior management.
 Loss on assets held for sale.
 Interest Expense.
 Foreign exchange gain.
 Interest income.
 Income Tax Expense.
 Noncontrolling interest in loss of consolidated subsidiary.
 Comparison of the Results for the Nine Months Ended September 30, 2006 to the Nine Months Ended
September 30, 2005
  26




---



##### Table of Contents




    
    Amortization of non-cash deferred revenues;
    
    Total revenues;
    
    Direct vessel operating expenses and other;
    
    General and administrative;
    
    Amortization of marine inspection costs;
    
    Depreciation and amortization expense;
    
    Total operating expenses;
    
    Operating income (loss);
    
    Income (loss) before income taxes; and
    
    Net income (loss).
 
 27




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##### Table of Contents



PredecessorSuccessor Company
    
    
    
    CompanyNon-GAAPPeriod from
    
    
    
    Period from
    
    
    CombinedNine months
    
    
    March 15, 2005
    
    
    
    January 1, 2005
    
    
    Results for theended
    
    
    through
    
    
    
    through
    
    
    Nine months endedSeptember 30, 2006
    
    
    September 30, 2005
    
    
    
    March 14, 2005
    
    
    September 30,2005
    
    
    VarianceRevenues:Charter hire
    
    $
    177,421
    
    
    $
    91,347
    
    
    
    $
    29,869
    
    
    $
    121,216
    
    
    $
    56,205Amortization of non-cash deferred revenues
    
    
    3,709
    
    
    
    7,072
    
    
    
    
    
    
    
    
    7,072
    
    
    
    (3,363
    )Other vessel income
    
    
    695
    
    
    
    74
    
    
    
    
    17
    
    
    
    91
    
    
    
    604Total revenues
    
    
    181,825
    
    
    
    98,493
    
    
    
    
    29,886
    
    
    
    128,379
    
    
    
    53,446Operating expenses:Direct vessel operating expenses and other
    
    
    78,352
    
    
    
    46,848
    
    
    
    
    16,217
    
    
    
    63,065
    
    
    
    15,287General and administrative
    
    
    19,688
    
    
    
    13,226
    
    
    
    
    4,030
    
    
    
    17,256
    
    
    
    2,432Amortization of marine inspection costs
    
    
    
    
    
    
    
    
    
    
    
    2,055
    
    
    
    2,055
    
    
    
    (2,055
    )Depreciation and amortization expense
    
    
    18,774
    
    
    
    13,744
    
    
    
    
    6,703
    
    
    
    20,447
    
    
    
    (1,673
    )Insurance recovery from a loss on assets held for sale
    
    
    (605
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (605
    )Loss on assets held for sale
    
    
    3,185
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,185Loss (gain) on sales of assets
    
    
    (1,332
    )
    
    
    (707
    )
    
    
    
    2
    
    
    
    (705
    )
    
    
    (627
    )Total operating expenses
    
    
    118,062
    
    
    
    73,111
    
    
    
    
    29,007
    
    
    
    102,118
    
    
    
    15,944Operating income
    
    
    63,763
    
    
    
    25,382
    
    
    
    
    879
    
    
    
    26,261
    
    
    
    37,502Reorganization costs
    
    
    
    
    
    
    
    
    
    
    
    (6,659
    )
    
    
    (6,659
    )
    
    
    6,659Gain on debt discharge
    
    
    
    
    
    
    
    
    
    
    
    166,459
    
    
    
    166,459
    
    
    
    (166,459
    )Fresh-start adjustments
    
    
    
    
    
    
    
    
    
    
    
    (219,008
    )
    
    
    (219,008
    )
    
    
    219,008Interest expense
    
    
    (1,163
    )
    
    
    (4,935
    )
    
    
    
    (1,940
    )
    
    
    (6,875
    )
    
    
    5,712Amortization of deferred financing costs
    
    
    (133
    )
    
    
    (209
    )
    
    
    
    (50
    )
    
    
    (259
    )
    
    
    126Foreign exchange gain (loss)
    
    
    1,823
    
    
    
    (99
    )
    
    
    
    23
    
    
    
    (76
    )
    
    
    1,899Interest income
    
    
    2,653
    
    
    
    192
    
    
    
    
    
    
    
    
    192
    
    
    
    2,461Other gain (loss), net
    
    
    (483
    )
    
    
    (368
    )
    
    
    
    (18
    )
    
    
    (386
    )
    
    
    (97
    )Income before income taxes and
noncontrolling interest in loss of consolidated
subsidiary
    
    
    66,460
    
    
    
    19,963
    
    
    
    
    (60,314
    )
    
    
    (40,351
    )
    
    
    106,811Income tax expense
    
    
    24,927
    
    
    
    7,742
    
    
    
    
    1,047
    
    
    
    8,789
    
    
    
    16,138Income before noncontrolling interest
in loss of consolidated subsidiary
    
    
    41,533
    
    
    
    12,221
    
    
    
    
    (61,361
    )
    
    
    (49,140
    )
    
    
    90,673Noncontrolling interest in loss of
consolidated subsidiary
    
    
    805
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    805Net income (loss)
    
    $
    42,338
    
    
    $
    12,221
    
    
    
    $
    (61,361
    )
    
    $
    (49,140
    )
    
    $
    91,478
 Charter Hire Revenues
 28




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##### Table of Contents



Amortization of Non-Cash Deferred Revenues.
 Direct Vessel Operating Expenses.
 
    
    increased marine inspection costs of $10.2 million attributable to the destacking of
nine of our cold stacked vessels, some of which are currently in progress, and the timing
and class of vessels undergoing regulatory dry dockings. Five of these vessels will operate
in Southeast Asia, one vessel will be mobilized to West Africa for operations and the
remaining vessels will operate in our Gulf of Mexico fleet. As result of our accounting
policy to expense maintenance and classification costs as incurred, the timing of a
vessels regulatory dry docking and the class of vessels undergoing regulatory dry docking
may result in fluctuations in direct vessel operating expenses when compared to prior
periods;
    
    increased labor costs of $2.1 million as a result of higher vessel utilization and
increases in crew labor rates in the Gulf of Mexico;
    
    increased pension expense of 1.4 million; and
    
    increased mobilization costs of $1.2 million which includes the related labor expenses,
maintenance and repairs expenses and supplies and miscellaneous expenses related to the
mobilization of two vessels into West Africa.
 General and Administrative Expenses
 
    
    increased personnel costs of $0.9 million resulting from the adoption of an annual
incentive awards plan in the fourth quarter, 2005 and increased salary expense related to
new senior management; and
    
    increased professional fees of $1.6 million necessary to consummate and establish the
EMSL partnership, recruit and retain senior management, and information systems upgrades.
 Depreciation and Amortization Expense.
 Insurance recovery from a loss on assets held for sale.
 Loss on assets held for sale.
 Gain on Sale of Assets.
 Reorganization Costs
 Interest Expense.
 Foreign exchange gain.
 Interest Income.
 Income Tax Expense.
 29




---



##### Table of Contents



Noncontrolling interest in loss of consolidated subsidiary.
 Our Liquidity and Capital Resources
 Description of Indebtedness
 NOK Term Loan
  NOK Revolver
   Our Capital Requirements
    30




---



##### Table of Contents




    
    The consent of our Norwegian bank syndicate;
    
    The ability to complete the reduction without the incurrence of tax or other
consequences by state and national regulating and taxing authorities in Norway;
    
    The ability to complete the reduction without the incurrence of tax or other
consequences by state and national regulating and taxing authorities;
    
    The availability of cash at the Norwegian subsidiary, or availability under the NOK
Revolver in order to generate funds for the transfer; and
    
    The ability to comply with the funded debt to operating income plus depreciation and
amortization covenant ratios in the NOK Revolver following completion of the reduction.
   
    
    Net income (loss);
    
    Depreciation and amortization;
    
    Amortization of non-cash deferred revenue;
    
    Deferred marine inspection costs; and
    
    Stock based compensation.
 PredecessorSuccessor Company
    
    
    
    CompanyNon-GAAPPeriod from
    
    
    
    Period from
    
    
    CombinedNine months
    
    
    March 15, 2005
    
    
    
    January 1, 2005
    
    
    Results for theended
    
    
    through
    
    
    
    through
    
    
    Nine monthsSeptember 30, 2006
    
    
    September 30, 2005
    
    
    
    March 14, 2005
    
    
    September 30, 2005
    
    
    VarianceCash and cash equivalents at beginning of period
    
    $
    51,218
    
    
    $
    19,154
    
    
    
    $
    13,170
    
    
    $
    13,170
    
    
    
    38,048Cash flow provided by (used in)Operating activities
    
    
    75,097
    
    
    
    9,468
    
    
    
    
    9,168
    
    
    
    18,636
    
    
    $
    56,461Investing activities
    
    
    (13,708
    )
    
    
    1,375
    
    
    
    
    (650
    )
    
    
    725
    
    
    
    (14,433
    )Financing activities
    
    
    (10,009
    )
    
    
    (14,988
    )
    
    
    
    (2,596
    )
    
    
    (17,584
    )
    
    
    7,575Effect of exchange rate changes on cash and cash
equivalents
    
    
    (1,780
    )
    
    
    (518
    )
    
    
    
    62
    
    
    
    (456
    )
    
    
    (1,324
    )Net increase (decrease in cash and cash equivalents)
    
    
    49,600
    
    
    
    (4,663
    )
    
    
    
    5,984
    
    
    
    1,321
    
    
    
    48,279Cash and cash equivalents at end of period
    
    $
    100,818
    
    
    $
    14,491
    
    
    
    $
    19,154
    
    
    $
    10,838
    
    
    $
    89,980
   31




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##### Table of Contents



Three monthsending
    
    
    Year ended December 30,Description
    
    December 31, 2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    Thereafter
    
    
    TotalDebt (1)
    
    $
    629
    
    
    $
    1,258
    
    
    $
    1,258
    
    
    $
    7,579
    
    
    $
    1,258
    
    
    $
    1,258
    
    
    $
    3,142
    
    
    $
    16,382Interest on fixed
rate debt (2)
    
    
    155
    
    
    
    544
    
    
    
    467
    
    
    
    391
    
    
    
    314
    
    
    
    237
    
    
    
    256
    
    
    
    2,364Interest on
variable rate debt
(3)
    
    
    84
    
    
    
    337
    
    
    
    337
    
    
    
    253
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,011Construction
contracts
    
    
    3,500
    
    
    
    40,351
    
    
    
    8,750
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52,601Operating leases
    
    
    518
    
    
    
    2,011
    
    
    
    1,943
    
    
    
    1,776
    
    
    
    1,643
    
    
    
    1,478
    
    
    
    1,858
    
    
    
    11,227Pension obligations
    
    
    368
    
    
    
    1,500
    
    
    
    702
    
    
    
    737
    
    
    
    774
    
    
    
    812
    
    
    
    852
    
    
    
    5,745Total
    
    $
    5,254
    
    
    $
    46,001
    
    
    $
    13,457
    
    
    $
    10,736
    
    
    $
    3,989
    
    
    $
    3,785
    
    
    $
    6,108
    
    
    $
    89,330
 
 (1)
    
    Excludes fresh-start debt premium. We consider the NOK Revolver to be a long-term source of
funds since advances can be refinanced until the facility reduces over time, concluding in
September 2009; therefore, the above table shows the NOK Revolver being repaid in its final year of
maturity in September of 2009.(2)
    
    Calculated at the rate applicable at September 30, 2006. Although the NOK Revolver is
classified as current in accordance with GAAP requirements, we have projected the interest on the
facility until its full maturity in 2009.      32




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##### Table of Contents



Our Critical Accounting Policies:
   
    
    Financial reporting by entities in reorganization.
 
    
    Revenue recognition.
 
    
    Accounting for long-lived assets.
 
    
    Impairment of long-lived assets other than goodwill.
 
    
    Restricted cash.
 
    
    Losses on insured claims.
 
    
    Deferred tax valuation allowance.
 
    
    Marine inspection costs.
 
    
    Equity-based compensation.
 New Accounting Standards:
  Employers Employers Accounting for Defined Benefit Pension and Other Postretirement Plans
 33




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##### Table of Contents



CAUTIONARY STATEMENTS
  
    
    our objectives, business plans or strategies, and projected or anticipated benefits or
other consequences of such plans or strategies;
    
    the results, timing, outcome or effect of pending or potential litigation and our
intentions or expectations of prevailing with respect thereto and the availability of
insurance coverage in connection therewith ;
    
    our ability to repatriate cash from foreign operations if and when needed;
    
    estimated funding contributions for defined benefit pension plans;
    
    projected or anticipated benefits from future or past acquisitions and partnerships;
    
    projections involving revenues, operating results or cash provided from operations and
available borrowings, or our anticipated capital expenditures or other capital projects;
and
    
    future expectations and outlook and any other statements regarding future growth, cash
needs, operations, business plans and financial results and any other statements which are
not historical facts .
    Risks Relating to our Operations
 
    
    Our fleet includes many older vessels that require increased levels of maintenance and capital expenditures to
maintain them in good operating condition and the fleet may be subject to a higher likelihood of mechanical
failure, inability to economically return to service or requirement to be scrapped.
 34




---



##### Table of Contents




    
    Our inability to upgrade our fleet successfully could adversely affect our financial condition and results of
operations.
 
    
    Increases in size, quality and quantity of the offshore vessel fleet in areas where we operate could increase
competition for charters and lower day rates and/or utilization, which would adversely affect our revenues and
profitability.
 
    
    Operating internationally poses uncertain hazards in regions of political and economic instability.
 
    
    As a U.S. corporation, we are subject to the Foreign Corrupt Practices Act, and any violation of this act may
affect our business and operations adversely.
 
    
    Our marine operations are seasonal and depend, in part, on weather conditions. As a result, our results of
operations will vary throughout the year.
 
    
    Our operations are subject to operating hazards and unforeseen interruptions for which we may not be adequately
insured.
 
    
    Our operations are subject to federal, state, local and other laws and regulations that could require us to
make substantial expenditures.
 
    
    Our U.S. employees are covered by federal laws that may subject us to job-related claims in addition to those
provided by state laws.
 
    
    The loss of a key customer could have an adverse impact on our financial results.
 
    
    We are exposed to the credit risks of our key customers, and nonpayment by our customers could adversely affect
our financial condition or results of operations.
 
    
    The loss of key personnel may reduce operational efficiency and negatively impact our results of operations.
 
    
    The loss of crewmembers without replacements in a timely manner may reduce operational efficiency and
negatively impact our results of operations.
 
    
    Unionization efforts could increase our costs, limit our flexibility or increase the risk of a work stoppage.
 
    
    The removal or reduction of the partial reimbursement of labor costs by the Norwegian government may adversely
affect our costs to operate our vessels in the North Sea.
 
    
    Upon completion of hurricane related repair and construction activity in the Gulf of Mexico, demand for our
vessels and services could decrease.
 
    
    Management decisions needed to successfully operate EMSL, our 49% partnership, are subject to the majority
owners approval If our management team is unable to reach a consensus with the majority owner on material
matters, ESML operators may not be able to successfully operate EMSL and our results of operations may be
negatively affected.
 Risks Relating to our Industry
 
    
    We are dependent on the oil and gas industry. Changes in the level of exploration and production expenditures
and in oil and gas prices and industry perceptions about future oil and gas prices could materially decrease
our cash flows and reduce our ability to service our credit facilities.
 
    
    If our competitors are able to supply services to our customers at a lower price, we may have to reduce our
day rates, which would reduce our revenues.
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Risks Relating to our Capital Structure
 
    
    Our business is highly cyclical in nature due to our dependency on the levels of offshore oil and
gas drilling activity. If we are unable to stabilize our cash flow during depressed markets, we may
not be able to meet our obligations under credit facilities and we may not be able to secure
financing or have sufficient capital to support our operations.
 
    
    We may not be able to repatriate funds from Norway to the U.S., which could negatively impact our
operational flexibility.
 
    
    We may face material tax consequences or assessments in countries in which we operate. If we are
required to pay material tax assessments, our financial condition may be materially adversely
affected.
 
    
    Our ability to utilize certain net operating loss carryforwards or investment tax credits may be
limited by certain events which could have an adverse impact on our financial position.
 
    
    Our business segments have been capitalized and are financed on a stand-alone basis, which may
hinder efficient utilization of available financial resources.
 
    
    Financial statements for periods subsequent to our emergence from bankruptcy will not be comparable
to those of prior periods, which will make it difficult for stockholders to assess our performance
in relation to prior periods.
 
    
    Currency fluctuations could adversely affect our financial condition and results of operations.
 
    
    Our ability to issue primary shares in the equity capital markets for our benefit could be limited
by the terms of our registration rights agreement with certain of our existing common stockholders.
Additionally, these stockholders may sell a large number of shares of common stock in the public
market, which may depress the market price of our stock.
 Risks Relating to the Ownership of our Common Stock
 
    
    Our charter documents include provisions limiting the rights of foreign owners of our capital stock.
 
    
    Some anti-takeover provisions contained in our charter could hinder a takeover attempt.
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 4. Controls and Procedures.
   36




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
     
 Item 1A. Risk Factors.
  
    
    Management decisions needed to successfully operate EMSL, our 49% partnership, are subject
to the majority owners approval. If our management representatives are unable to reach a
consensus with the majority owner on material matters, we may not be able to successfully
operate EMSL and our results of operations may be negatively affected.
    
    
    We may face material tax consequences or assessments in countries in which we operate. If
we are required to pay material tax assessments, our financial condition may be materially
adversely affected.
  37




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##### Table of Contents




    
    Operating internationally poses uncertain hazards in regions of political and economic instability.
  
    
    government instability, which can cause investment in capital projects
by our potential customers to be withdrawn or delayed, reducing or eliminating the
viability of some markets for our services;
    
    potential vessel seizure or confiscation, or the expropriation,
nationalization or detention of assets;
    
    repatriating foreign currency received in excess of local currency
requirements and converting it into dollars or other fungible currency;
    
    exchange rate fluctuations, which can reduce the purchasing power of
local currencies and cause our costs to exceed our budget, reducing our operating
margin in the affected country;
    
    lack of ability to collect amounts owed;
    
    civil uprisings, riots and war, which can make it unsafe to continue
operations, adversely affect both budgets and schedules and expose us to losses;
    
    availability of suitable personnel and equipment, which can be affected
by government policy, or changes in policy, which limit the importation of
qualified crewmembers or specialized equipment in areas where local resources are
insufficient;
    
    decrees, laws, regulations, interpretations and court decisions under
legal systems, which are not always fully developed and which may be retroactively
applied and cause us to incur unanticipated and/or unrecoverable costs as well as
delays which may result in real or opportunity costs; and
    
    terrorist attacks, including kidnappings of our crewmembers or onshore
personnel.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults upon Senior Securities
  
 Item 4. Submission of Matters to a vote of Security Holders
  
 Item 5. Other Information
  38




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##### Table of Contents



Item 6. Exhibits.
  ExhibitNumber10.1
    
    Amended and Restated Employment Agreement, effective as of July 1, 2006, by and between Trico
Marine Services, Inc. and Rishi Varma (incorporated by reference to Exhibit 10.3 to our Current
Report on Form 8-K dated July 6, 2006).10.3
    
    Employment Agreement, effective as of July 5, 2006, by and between Trico Marine Services, Inc.
and Robert V. OConnor (incorporated by reference to Exhibit 10.4 to our Current Report on Form
8-K dated July 6, 2006).10.4
    
    Construction Contract, by and between Trico Marine Assets, Inc. and Bender Shipbuilding &
Repair Co. Inc. (incorporated by reference to Exhibit 1.1 to our Current Report on Form 8-K
dated September 8, 2006).31.1
    
    Chief Executive Officers Certification under Section 302 of the Sarbanes-Oxley Act of 2002. (1)31.2
    
    Chief Financial Officers Certification under Section 302 of the Sarbanes-Oxley Act of 2002. (1)32.1
    
    Officers Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (1)
 
 (1)
    
    Filed herewith 39




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##### Table of Contents



SIGNATURE
  TRICO MARINE SERVICES, INC.By: /s/  Geoff JonesGeoff JonesChief Financial Officer
(Authorized Signatory and Principal Financial Officer)
Date: November 9, 2006 40




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##### Table of Contents



INDEX TO EXHIBITS
  ExhibitNumber10.1
    
    Amended and Restated Employment Agreement, effective as of July 1, 2006, by and between Trico
Marine Services, Inc. and Rishi Varma (incorporated by reference to Exhibit 10.3 to our Current
Report on Form 8-K dated July 6, 2006).10.3
    
    Employment Agreement, effective as of July 5, 2006, by and between Trico Marine Services, Inc.
and Robert V. OConnor (incorporated by reference to Exhibit 10.4 to our Current Report on Form
8-K dated July 6, 2006).10.4
    
    Construction Contract, by and between Trico Marine Assets, Inc. and Bender Shipbuilding &
Repair Co. Inc. (incorporated by reference to Exhibit 1.1 to our Current Report on Form 8-K
dated September 8, 2006).31.1
    
    Chief Executive Officers Certification under Section 302 of the Sarbanes-Oxley Act of 2002. (1)31.2
    
    Chief Financial Officers Certification under Section 302 of the Sarbanes-Oxley Act of 2002. (1)32.1
    
    Officers certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (1)
 
 (1)
    
    Filed herewith