Equipment Acquisitions, Dispositions and Depreciation and Impairment Policies

6 Months Ended

Jun. 30, 2012

Equipment Acquisitions, Dispositions And Depreciation And Impairment Policies [Abstract]

Equipment Acquisitions, Dispositions and Depreciation and Impairment Policies

EQUIPMENT ACQUISITIONS, DISPOSITIONS AND DEPRECIATION AND IMPAIRMENT POLICIES

During the six months ended June 30, 2012, capital expenditures were $186.5 million. Equipment deliveries during the period included one offshore support vessel, one wind farm utility vessel, three inland river dry cargo barges, two liquid tank barges, one inland river towboat and 13 helicopters.

During the six months ended June 30, 2012, the Company sold four offshore support vessels, six helicopters, one inland river towboat, two harbor tugs and other equipment for net proceeds of $65.6 million ($11.7 million in cash, $5.0 million in cash deposits previously received and $48.9 million in seller financing) and gains of $14.8 million, of which $7.5 million were recognized currently and $7.3 million were deferred. In addition, the Company recognized previously deferred gains of $2.5 million and received $0.2 million in deposits related to future expected sales. Two of the offshore support vessels sold were to the Company's Mexican joint venture for $48.5 million (see Note 6).

The Company previously sold certain equipment to 50% or less owned companies prior to adopting new accounting rules effective January 1, 2009 and from time to time enters into vessel sale-leaseback transactions with finance companies and provides seller financing on sales of its equipment to third parties and its 50% or less owned companies. A portion of the gains realized from these transactions were deferred and recorded in deferred gains and other liabilities in the accompanying condensed consolidated balance sheets. Deferred gain activity related to these transactions for the six months ended June 30 was as follows (in thousands):



	2012			2011
Balance at beginning of period	$	119,570		$	131,836
Deferred gains arising from asset sales	7,280			4,597
Amortization of deferred gains included in operating expenses as a reduction to rental expense	(9,526		)	(11,194		)
Amortization of deferred gains included in gains on asset dispositions and impairments, net	(2,455		)	(2,461		)
Balance at end of period	$	114,869		$	122,778

Equipment, stated at cost, is depreciated using the straight-line method over the estimated useful life of the asset to an estimated salvage value. With respect to each class of asset, the estimated useful life is based upon a newly built asset being placed into service and represents the point at which it is typically not justifiable for the Company to continue to operate the asset in the same or similar manner. From time to time, the Company may acquire older assets that have already exceeded the Company’s useful life policy, in which case the Company depreciates such assets based on its best estimate of remaining useful life, typically the next survey or certification date.

As of June 30, 2012, the estimated useful life (in years) of each of the Company’s major categories of new equipment was as follows:



Offshore support vessels	20
Wind farm utility vessels	10
Helicopters⁽¹⁾	15
Inland river dry cargo and deck barges	20
Inland river liquid tank barges	25
Inland river towboats	25
U.S.-flag tankers	25
RORO vessels	20
Harbor and offshore tugs	25
Ocean liquid tank barges	25

______________________

(1)

Effective July 1, 2011, the Company changed its estimated useful life and salvage value for helicopters from 12 to 15 years and 30% to 40%, respectively, due to improvements in new aircraft models that continue to increase their long-term value and make them viable for operation over a longer period of time. For the three months ended June 30, 2012, the change in estimate increased operating income by $4.4 million, net income by $2.9 million, and basic and diluted earnings per share by $0.14. For the six months ended June 30, 2012, the change in estimate increased operating income by $8.4 million, net income by $5.4 million, and basic and diluted earnings per share by $0.26.

The Company performs an impairment analysis of long-lived assets used in operations, including intangible assets, when indicators of impairment are present. If the carrying value of the assets is not recoverable, as determined by the estimated undiscounted cash flows, the carrying value of the assets is reduced to fair value. Generally, fair value is determined using valuation techniques, such as expected discounted cash flows or appraisals, as appropriate. During the six months ended June 30, 2012, impairment charges recognized by the Company related to long-lived assets held for use were not material.

- Definition

The entire disclosure for long-lived, physical assets that are used in the normal conduct of business to produce goods and services and not intended for resale. Examples include land, buildings, machinery and equipment, and other types of furniture and equipment including, but not limited to, office equipment, furniture and fixtures, and computer equipment and software. This disclosure may include property plant and equipment accounting policies and methodology, a schedule of property, plant and equipment gross, additions, deletions, transfers and other changes, depreciation, depletion and amortization expense, net, accumulated depreciation, depletion and amortization expense and useful lives, income statement disclosures, assets held for sale and public utility disclosures.

+ References+ Details