TRMA Trico Marine Services (MM)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2010

or

o		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: 1-33402

Trico Marine Services, Inc.

(Exact name of registrant as specified in its charter)

Delaware		72-1252405
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
10001 Woodloch Forest Drive, Suite 610
The Woodlands, Texas		77380
(Address of principal executive offices)		(Zip code)

Registrant’s telephone number, including area code: (281) 203-5700

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 for 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. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer o		Accelerated Filer þ		Non-accelerated filer o		Smaller Reporting Company o
				(Do not Check if a Smaller Reporting Company)

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

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes þ No o

The number of shares of the registrant’s common stock, $0.01 par value per share, issued and outstanding at May 5, 2010 was 19,538,017.

 

 

TRICO MARINE SERVICES, INC.
REPORT FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2010

TABLE OF CONTENTS

		Page
Part I. Financial Information
Item 1. Financial Statements (Unaudited)			3
Condensed Consolidated Balance Sheets — March 31, 2010 and December 31, 2009			3
Condensed Consolidated Statements of Operations — Three Months Ended March 31, 2010 and 2009			4
Condensed Consolidated Statements of Cash Flows — Three Months Ended March 31, 2010 and 2009			5
Notes to the Condensed Consolidated Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			34
Item 3. Quantitative and Qualitative Disclosures About Market Risk			51
Item 4. Controls and Procedures			51
Part II. Other Information
Item 1. Legal Proceedings			53
Item 1A. Risk Factors			53
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			57
Item 3. Defaults upon Senior Securities			57
Item 4. (Removed and Reserved)			57
Item 5. Other Information			57
Item 6. Exhibits			57
Signature			60
EX-31.1
EX-31.2
EX-32.1

PART I — FINANCIAL INFORMATION

Item 1.		Financial Statements

TRICO MARINE SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share amounts)

		March 31,				December 31,
		2010				2009
ASSETS
Current assets:
Cash and cash equivalents		$	31,965			$	52,981
Restricted cash			2,589				3,630
Accounts receivable, net			87,573				98,600
Prepaid expenses and other current assets			18,910				18,761
Assets held for sale			13,917				15,223
Total current assets			154,954				189,195
Property and equipment:
Marine vessels			476,355				522,169
Subsea equipment			176,242				182,576
Construction-in-progress			178,012				168,879
Transportation and other			8,585				6,649
			839,194				880,273
Less accumulated depreciation and amortization			(141,453	)			(152,116	)
Net property and equipment, net			697,741				728,157
Restricted cash, noncurrent			3,820				3,926
Intangible assets			110,868				116,471
Other assets			46,245				38,510
Total assets		$	1,013,628			$	1,076,259
LIABILITIES AND EQUITY
Current liabilities:
Short-term and current maturities of long-term debt		$	61,543			$	52,585
Accounts payable			41,360				45,961
Accrued expenses			77,844				88,990
Accrued interest			27,429				12,738
Foreign taxes payable			—				4,594
Income taxes payable			10,394				9,182
Other current liabilities			49				104
Total current liabilities			218,619				214,154
Long-term debt			675,393				681,312
Long-term derivative			722				6,003
Foreign taxes payable			—				31,886
Deferred income taxes			80,681				19,219
Other liabilities			10,525				11,357
Total liabilities			985,940				963,931
Commitments and contingencies (See Note 14)			—				—
Total equity:
Common stock, $.01 par value, 50,000,000 shares authorized and 20,108,224 shares issued at March 31, 2010 and December 31, 2009, respectively			201				201
Warrants			—				1,640
Additional paid-in capital			342,947				340,803
Retained earnings (accumulated deficit)			(198,618	)			(120,069	)
Accumulated other comprehensive loss, net of tax			(146,881	)			(153,301	)
Phantom stock			47,643				47,643
Treasury stock, at cost, 570,207 shares			(17,604	)			(17,604	)
Total Trico Marine Services, Inc. equity			27,688				99,313
Noncontrolling interest			—				13,015
Total equity			27,688				112,328
Total liabilities and equity		$	1,013,628			$	1,076,259

The accompanying notes are an integral part of these condensed consolidated financial statements.

TRICO MARINE SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts )

		Three Months Ended March 31,
		2010				2009
Revenues		$	95,714			$	121,819
Operating expenses:
Direct operating expenses			79,154				98,488
General and administrative			18,057				21,439
Depreciation and amortization			17,813				18,072
Gain on sales of assets			(864	)			(9	)
Total operating expenses			114,160				137,990
Operating loss			(18,446	)			(16,171	)
Equity in net loss of investee			(1,824	)			—
Interest expense, net of amounts capitalized			(22,354	)			(10,914	)
Interest income			929				1,072
Unrealized gain on mark-to-market of embedded derivative			5,281				939
Gain on conversions of debt			—				10,779
Foreign exchange loss			(19,455	)			(393	)
Other income (expense), net			180				(337	)
Loss before income taxes			(55,689	)			(15,025	)
Income tax (benefit) expense			22,860				(15,028	)
Net income (loss)			(78,549	)			3
Less: Net income attributable to the noncontrolling interest			—				(750	)
Net loss attributable to Trico Marine Services, Inc.		$	(78,549	)		$	(747	)
Earnings (loss) per common share:
Basic		$	(3.80	)		$	(0.04	)
Diluted		$	(3.80	)		$	(0.04	)
Weighted average shares outstanding:
Basic			20,691				16,711
Diluted			20,691				16,711

The accompanying notes are an integral part of these condensed consolidated financial statements.

TRICO MARINE SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
( Unaudited)
(In thousands)

		Three Months Ended March 31,
		2010				2009
Cash flows from operating activities:
Net income (loss)		$	(78,549	)		$	3
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization			17,813				18,072
Amortization of non-cash deferred revenues			(82	)			(140	)
Amortization of deferred financing costs			2,142				580
Noncash benefit related to change in Norwegian tax law			21,242				(18,568	)
Accretion of debt discount			3,265				3,404
Deferred income taxes			5,131				2,470
Change in fair value of derivatives			(5,281	)			(939	)
Gain on conversions of 6.5% Debentures			—				(10,779	)
Cash paid for make-whole premium related to conversions of 6.5% Debentures			—				(6,574	)
Foreign currency (gains)/losses, net			11,522				—
Gain on sales of assets			(864	)			(9	)
Provision on doubtful accounts			—				493
Stock based compensation			411				724
Change in operating assets and liabilities			19,225				(4,155	)
Net cash used in operating activities			(4,025	)			(15,418	)
Cash flows from investing activities:
Purchases of property and equipment			(14,852	)			(19,557	)
Proceeds from sales of assets			2,800				155
Dividend from unconsolidated affiliate			980				—
Investment in unconsolidated affiliates			(5,839	)			—
Decrease in restricted cash			998				659
Net cash used in investing activities			(15,913	)			(18,743	)
Cash flows from financing activities:
Proceeds and (repayments) of revolving credit facilities, net			(206	)			2,529
Contribution from noncontrolling interest			—				2,284
Dividend to noncontrolling partner			—				(6,120	)
Net cash used in financing activities			(206	)			(1,307	)
Effect of exchange rate changes on cash and cash equivalents			(872	)			1,359
Net decrease in cash and cash equivalents			(21,016	)			(34,109	)
Cash and cash equivalents at beginning of period			52,981				94,613
Cash and cash equivalents at end of period		$	31,965			$	60,504

The accompanying notes are an integral part of these condensed consolidated financial statements.

TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Organization and Basis of Presentation

     The condensed consolidated financial statements include the accounts of Trico Marine Services, Inc. and its consolidated subsidiaries (the “Company”). The consolidated financial statements of the Company include the accounts of those subsidiaries where the Company directly or indirectly has more than 50% of the ownership rights and for which the right to participate in significant management decisions is not shared with other shareholders. Beginning January 1, 2010, in accordance with new guidelines for consolidation of variable interest entities, the Company deconsolidated Eastern Marine Services Limited (“EMSL”). See Note 13. All intercompany balances and transactions have been eliminated in consolidation. For comparative purposes, certain amounts in 2009 have been adjusted to conform to the current period’s presentation.

     The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information required for complete financial statements under accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments, which consist of normal recurring items considered necessary for a fair presentation, have been included. The results of operations for the interim periods are not necessarily indicative of results of operations to be expected for the full year.

     The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires estimates and assumptions that affect the reported amounts as well as certain disclosures. The Company’s financial statements include amounts that are based on management’s best estimates and judgments. Actual results could differ from those estimates.

     The consolidated balance sheet as of December 31, 2009 has been derived from the audited consolidated financial statements at that date, but does not include all disclosures required by accounting principles generally accepted in the United States of America, since certain information and disclosures normally included in the notes to the financial statements have been condensed or omitted for interim periods as permitted by the rules and regulations of the Securities and Exchange Commission. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

2. Risks, Uncertainties and Going Concern

     As discussed below, the Company’s forecasted cash and available credit capacity are not expected to be sufficient to meet its commitments as they come due over the next twelve months and the Company does not expect that it will be able to remain in compliance with its debt covenants. At March 31, 2010, we had available cash of $32 million. There can be no assurance that we will have sufficient funds to permit us to make the 8.125% Payment of approximately $8 million on or before May 15, 2010. Further, we have no availability under either our U.S. $50 million revolving credit facility (the “U.S. Credit Facility”) or Trico Shipping’s $33 million working capital facility (the “Trico Shipping Working Capital Facility”). We will be unable to satisfy our obligations under the 8.125% Debentures, the 3% Debentures, the Senior Secured Notes, the U.S. Credit Facility and the Trico Shipping Working Capital Facility if such indebtedness is accelerated.

     The uncertainties associated with the Company’s ability to meet its commitments as they come due, comply with its debt covenants or repay its outstanding debt raises substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments related to the recoverability and classification of recorded assets or the amounts and classification of liabilities that might result from the uncertainty associated with the Company’s ability to meet its obligations as they come due.

     The Company’s forecasted cash and available credit capacity are not expected to be sufficient to meet its commitments as they come due over the next twelve months and the Company does not expect that it will be able to remain in compliance with its debt covenants. In particular, the Company may need to, or may choose to, avail itself of the 30-day grace period with respect to the approximately $8 million interest payment due on May 15, 2010 (the “8.125% Payment”) on its 8.125% secured convertible debentures due 2013 (the “8.125% Debentures”), and there is no assurance that the Company will be able to make the 8.125% Payment before the end of that grace period, in which case an event of default will occur with respect to the 8.125% Debentures, which in turn would constitute an event of default under all of its outstanding debt agreements, and all of the Company’s outstanding debt could become callable by its creditors and would be reclassified as a current liability on its balance sheet. The Company’s use of the grace period would not constitute an event of default under the indenture governing the 8.125% Debentures.

     The Company has engaged a financial advisor and is pursuing measures to improve liquidity and its capital structure and is in active discussions with various parties regarding potential transactions, including replacing its current U.S. Credit Facility and modifying the existing 8.125% Debentures to, among other things, defer amortization payments. Under the indenture governing the 8.125% Debentures, if we do not make the 8.125% Payment by June 15, 2010, the trustee under such indenture, or the holders of at least 25% in principal amount of the outstanding 8.125% Debentures, by notice to us, may declare the outstanding principal of and accrued but unpaid interest on all the 8.125% Debentures to be due and payable immediately. In addition, if the 8.125% Payment is not made on June 15, 2010 (irrespective of whether the amounts owing under the 8.125% Debentures are accelerated), then the administrative agents under the U.S. Credit Facility and the Trico Shipping Working Capital Facility may, upon written request by all the non-defaulting lenders thereto, declare the outstanding principal of and accrued but unpaid interest on the outstanding loans under such agreements to be due and payable. Following acceleration under the 8.125% Debentures, (i) the trustee under the indenture governing the Senior Secured Notes, or holders of at least 25% in principal amount of the outstanding Senior Secured Notes, may, by notice to Trico Shipping, declare the principal of and accrued but unpaid interest on the Senior Secured Notes to be due and payable immediately and (ii) the trustee under the indenture governing our 3% senior convertible debentures due 2027 (the “3% Debentures”), or holders of at least 25% in principal amount of the outstanding 3% Debentures, may provide us with a notice of default under the 3% Debentures and, if we fail to make the 8.125% Payment within 30 calendar days of such notice, such trustee or such holders of the 3% Debentures may, by notice to us, declare the principal of and accrued but unpaid interest on the 3% Debentures to be due and payable immediately. See Note 5.

     In the Company’s 10-K for the year ended December 31, 2009, the Company indicated that the forecasted cash and available credit capacity were not expected to be sufficient to meet its commitments as they came due over the subsequent twelve months and that it would not be able to remain in compliance with its debt covenants without completing certain actions to increase its level of liquidity. These actions included (i) selling additional assets, (ii) accessing cash in certain of its subsidiaries, (iii) minimizing capital

expenditures, (iv) obtaining waivers or amendments from its lenders, (v) managing working capital and (vi) improving cash flows from operations. Since December 31, 2009, the Company has made progress toward completing certain of these actions. These actions include receiving approximately $2.8 million in net proceeds from asset sales, with an additional $15.6 million received after March 31, 2010, receiving a dividend of $1.0 million from its EMSL subsidiary, receiving a $9.3 million tax refund at its subsidiary, Trico Shipping AS (“Trico Shipping”), and obtaining a waiver from its lender for the debt to consolidated leverage ratio for the period ending March 31, 2010. However, additional liquidity will need to be generated from some or all of the previously mentioned actions in order for the Company to have sufficient liquidity to meet its commitments as they come due. There can be no assurance that sufficient liquidity can be raised from one or more of these transactions and / or that these transactions can be consummated within the period needed to meet certain obligations. Additionally, the Company expects that it will need additional amendments or waivers from its lenders for at least each of the next four quarters. The Company’s interest payment obligations are concentrated in the months of May and November with approximately $24 million of interest due on Trico Shipping’s 11 7/8% senior secured notes due 2014 (the “Senior Secured Notes”) on each of May 1 and November 1, in addition to the 8.125% Payments due on each of May 15 and November 15. The May 1, 2010 interest payment on the Senior Secured Notes was paid as scheduled. Additionally, the terms of the Company’s credit agreements require that some or all of the proceeds from certain asset sales be used to permanently reduce outstanding debt which could substantially reduce the amount of proceeds it retains. The Company is currently restricted by the terms of each of the 8.125% Debentures and the Senior Secured Notes from incurring additional indebtedness due to its leverage ratio exceeding the limit at which additional indebtedness could be incurred. In conjunction with the waiver of the requirement that the Company receive an unqualified opinion in relation to going concern for the period ending December 31, 2009, additional draws under the U.S. Credit Facility and Trico Shipping Working Capital Facility were prohibited and no additional amounts are currently available under those facilities. Additionally, the Company’s ability to refinance any of its existing indebtedness on commercially reasonable terms may be materially and adversely impacted by the Company’s financial condition and the current credit market conditions. If the Company is unable to complete the above mentioned actions, it will be in default under its credit agreements, which in turn, could potentially constitute an event of default under all of its outstanding debt agreements. If this were to occur, all of its outstanding debt could become callable by its creditors and would be reclassified as a current liability on its balance sheet.

     Due to the Company’s expected liquidity position and limitations in the U.S. Credit Facility, it expects to make the amortization payments of approximately $10 million due on the 8.125% Debentures on each of August 1, 2010, November 1, 2010 and February 1, 2011 in common stock. The number of shares issued will be determined by the stock price at the time of each of the amortization payments and may lead to significantly more shares being issued than if the debentures were converted at the stated conversion rate which is equivalent to $14 per share; however, the number of shares that the Company can issue in compliance with Nasdaq rules is limited to approximately 9.3 million as of March 31, 2010. At the March 31, 2010 closing market price of $2.32 per share, the Company has enough shares to fund the $10 million amortization payments due August 1 and November 1, 2010 but not enough shares to fully fund the interest due February 1, 2011 which would be an event of default. There can be no assurance that the number of shares required to make these amortization payments will not exceed this limit, in which case the Company will require an amendment to the U.S. Credit Facility to permit the amortization payments to be made in cash, and will require the cash to make such payments, or will require a shareholder vote to permit the issuance of additional shares. There can be no assurance that all or any of these events will occur, in which case the Company may default on either the 8.125% Debentures or the U.S. Credit Facility, which would provide the lenders the opportunity to accelerate the remaining amounts outstanding under these facilities. In addition, the Company will need to obtain a waiver or amendment to its consolidated leverage ratio debt covenant in the U.S. Credit Facility that it does not expect to be in compliance with beginning with the quarter ending June 30, 2010 and for at least the three subsequent quarters. There can be no assurance that the lenders will agree to these amendments / waivers and / or additional amendments/ waivers on acceptable terms, or at all, and a failure to do so would provide the lenders the opportunity to accelerate the remaining amounts outstanding under these facilities.

     At March 31, 2010, the Company had available cash of $32 million. (This amount and other amounts in this section reflecting U.S. Dollar equivalents for foreign denominated debt amounts are translated at currency rates in effect at March 31, 2010.) As of March 31, 2010, payments due on the Company’s contractual obligations during the next twelve months were approximately $284 million. This includes $62 million of principal payments of debt as of March 31, 2010, $29 million of which can be paid in cash or stock at the Company’s option, $119 million of time charter obligations, $31 million of vessel construction obligations, $69 million of estimated interest expense, and approximately $3 million of other operating expenses such as operating leases and pension obligations. The Company expects it will need to complete additional actions to have sufficient liquidity to satisfy these obligations. The Company holds the option to cancel construction by Tebma of the four new build MPSVs after July 15, 2010, which would reduce its committed future capital expenditures to approximately $33 million on the three remaining MPSVs, of which it expects to take delivery of by the second and fourth quarters of 2010 and the first quarter of 2011.

     The Company is highly leveraged and its debt imposes significant restrictions on it and increases its vulnerability to adverse economic and industry conditions. Under the terms of the Senior Secured Notes, the Company’s business has been effectively split into two groups: (i) Trico Supply, where substantially all of its subsea services business and all of its subsea protection business resides along with its North Sea towing and supply business and (ii) Trico Other, whose business is comprised primarily of its non North Sea towing and supply businesses. Trico Other has the obligation, among other things, to pay the debt service related to the 8.125% Debentures, the Company’s 3% senior convertible debentures due 2027 (the “3% Debentures”), the U.S. Credit Facility, and the Company’s 6.11% notes due 2014 (the “6.11%Notes”) and to pay the majority of corporate related expenses while Trico Supply has the obligation to make debt service payments related to the Senior Secured Notes and the Trico Shipping Working Capital Facility. Under the terms of the Senior Secured Notes, the ability of Trico Supply to provide funding on an ongoing basis to Trico Other is limited by restrictions on Trico Supply’s ability to pay dividends and principal and interest on intercompany debt unless certain financial measures are met. Other than an annual reimbursement of up to $5 million related to the reimbursement of corporate expenses, a one-time $5 million restricted payment basket, and certain carve outs related to the sale of one vessel and the proceeds from refund guarantees associated with four construction vessel contracts that are expected to be cancelled, the Company does not expect Trico Supply to be able to transfer additional funds to Trico Other in the foreseeable future. During the first quarter of 2010, a total of $3.5 million was transferred from Trico Supply to Trico Other under the one-time $5 million restricted payment basket and approximately $1.1 million was transferred related to the $5 million annual reimbursement for corporate expenses. The refund guarantees related to the final four construction vessel contracts have expiration dates and need to be periodically renewed. Some or all of the $21 million in refund guarantees for the final four vessels may expire prior to when the Company can make a claim under them. To date, the Company has been able to obtain renewals of these refund guarantees except for one $1.3 million refund guarantee, which has not yet been renewed. The Company has withheld $1.3 million in payments for the recently completed vessel until this refund guarantee is renewed. However, there can be no assurance that the current refund guarantees will be renewed by the existing financial institutions or, if not renewed, replacement refund guarantees can be obtained. Additionally, in lieu of obtaining proceeds from certain of the refund guarantees, the Company may instead realize the proceeds from the sale of equipment previously purchased for the last four vessels. The proceeds from the sale of this equipment may not be equal to the value of the refund guarantees associated with the equipment, the value of which equals the purchase price paid by the Company for the equipment. Should the proceeds of the sale of this equipment not be equal to the value of the refund guarantees associated therewith, the Company would record an impairment charge for the difference in value.

     In addition to the previously mentioned actions being taken to increase its liquidity, the ability of each of Trico Supply, Trico Other, and the Company overall to obtain minimum levels of operating cash flows and liquidity to fund their operations, meet their debt service requirements, and remain in compliance with their debt covenants, is dependent on its ability to accomplish the following: (i) secure profitable contracts through a balance of spot exposure and term contracts, (ii) achieve certain levels of vessel and service spread utilization, (iii) deploy its vessels to the most profitable markets, and (iv) invest in technologically advanced subsea fleet. The forecasted cash flows and liquidity for each of Trico Supply, Trico Other, and the Company are dependent on each meeting certain assumptions regarding fleet utilization, average day rates, operating and general and administrative expenses, and in the case of Trico Supply, new vessel deliveries, which could prove to be inaccurate. Within certain constraints, the Company can conserve capital by reducing or delaying capital expenditures, deferring non-regulatory maintenance expenditures and further reducing operating and administrative costs through various measures.

     The Company’s inability to satisfy any of the obligations under its debt agreements would constitute an event of default. Under cross default provisions in several agreements governing its indebtedness, a default or acceleration of one debt agreement will result in the default and acceleration of its other debt agreements and under its Master Charter lease agreement. A default, whether by the Company or any of its subsidiaries, could result in all or a portion of its outstanding debt becoming immediately due and payable and would provide certain other remedies to the counterparty to the Master Charter which would result in the Company’s debt being reclassified to a current liability. These events could have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and ability to satisfy obligations under its debt agreements (Also see Note 5).

     The Company’s revenues are primarily generated from entities operating in the oil and gas industry in the North Sea, the Asia Pacific Region, West Africa, Brazil and the Mexican Gulf of Mexico (“Mexico”). The Company’s international operations for the three months ended March 31, 2010 account currently for 100% of revenues and are subject to a number of risks inherent to international operations including exchange rate fluctuations, unanticipated assessments from tax or regulatory authorities, and changes in laws or regulations. In addition, because of the Company’s corporate structure, it may not be able to repatriate funds from its Norwegian subsidiaries without adverse tax or debt compliance consequences. These factors could have a material adverse affect on the Company’s financial position, results of operations and cash flows.

     Because the Company’s revenues are generated primarily from customers who have similar economic interests, its operations are also susceptible to market volatility resulting from economic, cyclical, weather or other factors related to the energy industry. Changes

in the level of operating and capital spending in the industry, decreases in oil and gas prices, or industry perceptions about future oil and gas prices could materially decrease the demand for the Company’s services, adversely affecting its financial position, results of operations and cash flows.

     The Company’s operations, particularly in the North Sea, the Asia Pacific Region, West Africa, Mexico, and Brazil, depend on the continuing business of a limited number of key customers and some of its long-term contracts contain early termination options in favor of its customers. If any of these customers terminate their contracts with the Company, fail to renew an existing contract, refuse to award new contracts to it or choose to exercise their termination rights, the Company’s financial position, results of operations and cash flows could be adversely affected.

     The Company’s certificate of incorporation effectively requires that it remain eligible under the Merchant Marine Act of 1920, as amended, or the Jones Act, and together with the Shipping Act, 1916, the Shipping Acts. The Shipping Acts require that vessels engaged in the U.S. coastwise trade and other services generally be owned by U.S. citizens and built in the U.S. For a corporation engaged in the U.S. coastwise trade to be deemed a U.S. citizen: (i) the corporation must be organized under the laws of the U.S. or of a state, territory or possession thereof, (ii) each of the president or other chief executive officer and the chairman of the board of directors of such corporation must be a U.S. citizen, (iii) no more than 25% of the directors of such corporation necessary to the transaction of business can be non-U.S. citizens and (iv) at least 75% of the interest in such corporation must be owned by U.S. “citizens” (as defined in the Shipping Acts). The Jones Act also treats as a prohibited “controlling interest” any (i) contract or understanding by which more than 25% of the voting power in the corporation may be exercised, directly or indirectly, on behalf of a non-U.S. citizen and (ii) the existence of any other means by which control of more than 25% of any interest in the corporation is given to or permitted to be exercised by a non-U.S. citizen. The Company expects decommissioning and deep water projects in the Gulf of Mexico to comprise an important part of its subsea strategy, which may require continued compliance with the Jones Act. Any action that risks its status under the Jones Act could have a material adverse effect on its business, financial position, results of operations and cash flows.

     The holders of the Company’s 3% Debentures and the 8.125% Debentures have the right to require the Company to repurchase the debentures upon the occurrence of a “Fundamental Change” in its business. The holders of the Senior Secured Notes have the ability to require the Company to repurchase the Notes at 101% of par value in the event of a Change of Control. See Note 5 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2009 for more information.

3. Asset Sales

      Asset Sales

     During the first quarter of 2010, the Company sold three offshore supply vessels (“OSVs”) and one subsea platform supply vessel (“SPSV”) for net proceeds of $2.8 million and a gain of $0.9 million. The sale of these vessels did not require a debt prepayment.

      Assets Held for Sale

     Marine vessels held for sale at March 31, 2010 included one anchor handling, towing and supply vessel (“AHTS”) and one OSV. The vessels are included in the Company’s towing and supply segment. The vessels were sold in April 2010 for $15.6 million in net proceeds and did require a partial debt repayment.

4. Intangible Assets

     Intangible assets consist of trade names and customer relationships. The Company did not incur costs to renew or extend the term of acquired intangible assets during the period ending March 31, 2010. The Company classified trade names as indefinite lived intangible assets. Under authoritative guidance for goodwill and other intangibles, indefinite lived assets are not amortized but instead are reviewed for impairment annually and more frequently if events or circumstances indicate that the asset may be impaired. At December 31, 2009, the Company performed an impairment analysis of its trade name assets utilizing a form of the income approach known as the relief-from-royalty method. The Company did not recognize an impairment in 2009.

     The following table provides information relating to the Company’s intangible assets as of March 31, 2010 and December 31, 2009 (in thousands):

		As of March 31, 2010																As of December 31, 2009
										Foreign																Foreign
		Gross Carrying				Accumulated				Currency Translation								Gross Carrying				Accumulated				Currency Translation
		Amount				Amortization				Adjustment				Total				Amount				Amortization				Adjustment				Total
Amortizable intangible assets:
Customer relationships		$	118,057			$	(14,422	)		$	(23,027	)		$	80,608			$	118,057			$	(12,454	)		$	(20,386	)		$	85,217
Total		$	118,057			$	(14,422	)		$	(23,027	)		$	80,608			$	118,057			$	(12,454	)		$	(20,386	)		$	85,217

										Foreign																Foreign
		Gross Carrying								Currency Translation								Gross Carrying								Currency Translation
		Amount				Impairment				Adjustment				Total				Amount				Impairment				Adjustment				Total
Unamortized intangible assets:
Trade name		$	40,881			$	(3,114	)		$	(7,507	)		$	30,260			$	40,881			$	(3,114	)		$	(6,513	)		$	31,254
Total		$	40,881			$	(3,114	)		$	(7,507	)		$	30,260			$	40,881			$	(3,114	)		$	(6,513	)		$	31,254

     Amortization expense was $2.0 million for the three months ended March 31, 2010 and $1.6 million for the three months ended March 31, 2009. The estimated amortization expense for the remainder of 2010 is estimated to be $5.8 million and $7.8 million per year for 2011, 2012, 2013 and 2014.

5. Debt

     Unless otherwise specified, amounts in these footnotes disclosing U.S. Dollar equivalents for foreign denominated debt amounts are translated at currency rates in effect at March 31, 2010. The Company’s debt at March 31, 2010 and December 31, 2009 consisted of the following (in thousands):

		March 31, 2010												December 31, 2009
		Current				Long-Term				Total				Current				Long-Term				Total
$50 million U.S. Revolving Credit Facility Agreement (1) , maturing in December 2011		$	11,298			$	—			$	11,298 (2) ,	(3)		$	11,347			$	—			$	11,347	(2),(3)
$202.8 million face amount, 8.125% Convertible Debentures, net of unamortized discount of $11.2 million and $12.3 million as of March 31, 2010 and December 31, 2009, respectively, interest payable semi-annually in arrears, maturing on February 1, 2013			28,926				162,726				191,652				19,774				170,696				190,470
$150.0 million face amount, 3% Senior Convertible Debentures, net of unamortized discount of $28.5 million and $30.0 million as of March 31, 2010 and December 31, 2009, respectively, interest payable semi-annually in arrears, maturing on January 15, 2027			—				121,535				121,535	(4)			—				119,992				119,992	(4)
$400.0 million face amount, 11.875% Senior Secured Notes, net of unamortized discount of $13.5 million and $14.1 million as of March 31, 2010 and December 31, 2009, respectively, interest payable semi-annually in arrears, maturing on November 1, 2014			—				386,460				386,460	(5)			—				385,925				385,925	(5)
$33 million Working Capital Facility (1) , maturing December 2011			20,000				—				20,000	(5)			20,000				—				20,000	(5)
6.11% Notes, principal and interest due in 30 semi-annual installments, maturing April 2014			1,258				4,399				5,657				1,258				4,399				5,657
Insurance note			—				—				—				119				—				119
Motor vehicle leases			61				35				96				87				47				134
Fresh-start debt premium			—				238				238				—				253				253
Total debt		$	61,543			$	675,393			$	736,936			$	52,585			$	681,312			$	733,897

     Maturities of debt during the next five years and thereafter, based on debt amounts outstanding as of March 31, 2010, are as follows (in thousands):

		Amount
Due in one year		$	61,543
Due in two years			46,960
Due in three years			129,477
Due in four years			1,258
Due in five years			400,625
Due in over five years			150,000	(1)
			789,863
Fresh-start debt premium			238
Unamortized discounts on Senior Secured Notes, 3% Debentures and 8.125% Debentures			(53,165	)
Total debt		$	736,936

      $50 million U.S. Credit Facility. In January 2008, the Company entered into a $50 million three-year credit facility (as amended and restated, the “U.S. Credit Facility”) secured by an equity interest in direct material domestic subsidiaries, first preferred mortgage on vessels owned by Trico Marine Assets, Inc. and a pledge on the intercompany note due from Trico Supply AS to Trico Marine Operators, Inc. A voluntary prepayment of $15 million was made on January 14, 2009 which reduced the commitment to $35 million. In October 2009, $10 million of the proceeds from the sale of the Northern Challenger were used to permanently reduce the commitment under the facility to $25 million. The remaining commitment is reduced by $3.5 million for each quarter beginning September 1, 2010 with the debt having a final maturity on December 31, 2011. Interest is payable on the unpaid principal amount outstanding at the Eurodollar rate designated by the British Bankers Association plus 5.0% and is subject to an additional utilization fee of 3.0% paid quarterly in arrears if the facility is more than 50% drawn.

     In August 2009 the Company received an amendment to the U.S. Credit Facility whereby the maximum consolidated leverage ratio, net debt to EBITDA, was increased from 4.5:1 to 5.0:1 for the fiscal quarter ending September 30, 2009. The consolidated leverage ratios for the remaining periods were subsequently amended in October 2009 to increase the consolidated leverage ratio to 8:50:1:00 for the fiscal quarters ending starting December 31, 2009 and ending September 30, 2010. The ratio decreases to 8.00:1 for the fiscal quarter ending December 31, 2010, and subsequently decreases to 7.00:1 for the fiscal quarter ending March 31, 2011, 6.00:1 for the fiscal quarter ending June 30, 2011, and to 5.00:1 for any fiscal quarters ending thereafter.

     In October 2009, the definition of EBITDA used to calculate the Consolidated Leverage Ratio was amended to exclude any gains or losses related to the embedded derivative associated with the 8.125% Debentures. The change to this definition was made retroactive to September 30, 2009. Additionally in October 2009, the facility was amended to change the definition of Free Liquidity to exclude cash and cash equivalents held by Trico Supply and its subsidiaries, and added a collateral coverage requirement. The amendment also added certain limitations on our ability to pay amortization payments in cash on the 8.125% Debentures, the first payment of which is due August 1, 2010 such that the company cannot pay the amortizations in cash unless the amount of Free Liquidity (which includes any amounts available under this facility) was at least $25 million prior to the amortization payment.

     In December 2009, the Company entered into an amendment that excluded the impact on the minimum net worth covenant of the impairment charge related to four construction vessels. This amendment also increased the consolidated leverage ratio to 11.0:1 for the quarters ending December 31, 2009, March 31, 2010, and June 30, 2010 and to 10.0:1 for the quarter ending September 30, 2010 while leaving the ratio levels for December 31, 2010 and beyond unchanged. In conjunction with this amendment, the current availability under the facility was reduced to $15 million with the reduced availability being restored when the Company is below the consolidated ratio levels that were in effect prior to this amendment.

     On January 15, 2010, the U.S. Credit Facility was amended to change the definition of Free Liquidity such that any amounts that were committed under the facility, whether available to be drawn or not, would be included for the purposes of calculating the free liquidity covenant. In March 2010, the Company received waivers related to the requirement that an unqualified auditors’ opinion without an explanatory paragraph in relation to going concern accompany its annual financial statements. Separate waivers were received for each of the U.S. Credit Facility and the Trico Shipping Working Capital Facility. The Company also amended the Trico Shipping Working Capital Facility to provide that the aggregate amount of loans thereunder shall not exceed $26.0 million.

     In April 2010, the U.S. Credit Facility was amended which (i) enabled the Company to re-borrow certain amounts used to cash collateralize letters of credit, (ii) provided that specified asset sales will not require a reduction in the Total Commitment (as defined in the U.S. Credit Facility), (iii) allowed the Company and its subsidiaries to make cash capital contributions and/or loans to joint ventures and other subsidiaries of the Company with the written consent of Nordea Bank Finland plc, New York Branch, provided that no written consent is necessary if the ultimate recipient of the proceeds is a credit party under and as defined in the Trico Shipping Working Capital Facility and (iv) updated a financial condition representation.

     For the period ending March 31, 2010, the Company was in compliance with all covenants with the exception of the consolidated leverage ratio covenant for which the Company received a waiver. Without this waiver, the Company would not have been in compliance with this covenant. Due to the recent amendments and waivers and the expectation that the Company, absent a waiver or amendment, does not expect to be in compliance with the consolidated leverage ratio at June 30, 2010, the full amount outstanding is classified as current as of March 31, 2010.

     The availability under the facility can also be used for the issuance of up to $5 million in letters of credit. As of March 31, 2010, the Company had outstanding letters of credit under the U.S. Credit Facility totaling $3.5 million with various expiration dates through December 2010 for (1) securing certain payment under vessel operating leases and for (2) payment of certain taxes in Trinidad and Tobago. Due to recent waivers which limited additional draws under the facility, no amounts were available under the facility at March 31, 2010.

     The U.S. Credit Facility subjects the Company’s subsidiaries that are parties to the credit agreement to certain financial and other covenants including, but not limited to, affirmative and negative covenants with respect to indebtedness, minimum liquidity, liens, declaration or payment of dividends, sales of assets, investments, consolidated leverage ratio, consolidated net worth and collateral coverage. Payment under the U.S. Credit Facility may be accelerated following certain events of default including, but not limited to, failure to make payments when due, noncompliance with covenants, breaches of representations and warranties, commencement of insolvency proceedings, entry of judgment in excess of $5 million, defaults by any of the credit parties under the credit agreement or certain other indebtedness in excess of $10 million and occurrence of certain changes of control.

      8.125% Debentures. On May 11, 2009, the Company entered into exchange agreements (the “Exchange Agreements”) with existing holders of its 6.5% senior convertible debentures due 2028 (the “6.5% Debentures”) party thereto as investors (the “Investors”). In accordance with the exchange (the “Exchange”) contemplated by the Exchange Agreements, on May 14, 2009 the Company exchanged $253.5 million in aggregate principal amount of its 6.5% Debentures (representing all of the outstanding 6.5% Debentures) for, in the aggregate, approximately $12.7 million in cash, 3,042,180 shares of the Company’s common stock (or warrants exercisable for $0.01 per share in lieu thereof) and $202.8 million in aggregate principal amount of the 8.125% Debentures.

     This Exchange was accounted for under modification accounting which required the Company to defer and amortize any change in value exchanged. The amount deferred was approximately $10 million and was reflected as a discount to the 8.125% Debentures, which being amortized under the effective interest method over the life of the 8.125% Debentures. This discount represented the fair value of the warrants and common shares of stock that were tendered in the Exchange. The warrants issued in the Exchange were required to be recorded as a liability due to the net-cash settlement terms included in the Exchange document and were revalued each reporting period based upon the Company’s stock price each period they were outstanding. All warrants were exercised by December 2009. Additionally, the debt issue costs previously recorded for the 6.5% Debentures continue to be amortized over the life of the 8.125% Debentures and the new debt issue costs were expensed.

     The Company pays interest on the unpaid principal amount of the 8.125% Debentures at a rate of 8.125 percent per annum. The Company will pay interest semiannually on May 15 and November 15 of each year. Interest on the 8.125% Debentures will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from May 15, 2009.

     The 8.125% Debentures are subject to quarterly principal amortizing payments beginning August 1, 2010 of 5% of the aggregate principal amount per quarter, increasing to 14% of the aggregate principal amount per quarter beginning February 1, 2012 until the final payment on February 1, 2013 (the “Maturity Date”). The Company has the right to elect at each payment date whether to pay principal installments in common stock, subject to certain limitations, or cash. Separate from and prior to the Company’s election, a majority of the holders of the 8.125% Debentures can elect to have the payment of all or any portion of an installment of principal deferred until the Maturity Date. The 8.125% Debentures are also subject to mandatory prepayments, applied on a pro-rata basis, related to net cash proceeds of asset sales. Asset sales of greater than $5 million require a prepayment equal to 50% of net cash proceeds. Net cash proceeds exclude among other items, required repayment of debt. Asset sales between $0.5 million and $5 million do not require a prepayment of the 8.125% Debentures unless total gross proceeds of all asset sales between $0.5 million and $5 million exceed $10 million in any given year based on issuance date of the 8.125% Debentures. If the total gross proceeds of asset sales between $0.5 million and $5 million during any given year exceed $10 million, a prepayment of 50% of net cash proceeds is required for all completed asset sales. After each twelve month period, the cumulative amount of total gross proceeds is reduced by $5 million for calculation purposes. The Company has the option to redeem the 8.125% Debentures at par plus accrued interest on or after May 1, 2011, if the trading price of the common stock exceeds 135% of the conversion price (currently $14.00 per share), subject to adjustment, for 20 consecutive tracking days.

     The holders of the 8.125% Debentures have the option at any time to convert the 8.125% Debentures into the requisite number of shares of common stock at any time. Holders who convert after May 1, 2011 are entitled to receive, in addition to the shares due upon conversion, a cash payment equal to the present value of remaining interest payments until final maturity. Holders of the 8.125% Debentures are entitled to require the Company to repurchase the debentures at par plus accrued interest in the event of certain fundamental change transactions. For more information regarding the conversion, redemption, and repurchase options of the 8.125% Debentures, see Note 5 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

     The conversion feature associated with the 8.125% Debentures is considered an embedded derivative as defined in the derivative instrument and hedging activities authoritative guidance. Under this guidance, the Company is required to bifurcate the conversion option as its fair value is not “clearly and closely” related to the debt host as the make-whole interest is based on the treasury bond rate. This embedded derivative is recorded at fair value on the date of issuance. The estimated fair value of the derivative on the date of issuance was $4.7 million, which was recorded as a non-current derivative liability on the balance sheet with the offset recorded as a discount on the 8.125% Debentures. The derivative liability must be marked-to-market each reporting period with changes to its fair value recorded in the consolidated statement of income as other income (expense) and the discount being accreted through an additional non-cash charge to interest expense over the term of the debt. See Note 6 for further discussion on the derivative liability.

     The 8.125% Debentures and the shares of common stock issuable upon the conversion of the 8.125% Debentures have not been registered because the Company sold the 8.125% Debentures to the investors in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933.

     The 8.125% Debentures are senior secured obligations of the Company, rank senior to all other indebtedness of the Company with respect to the collateral (other than indebtedness secured by permitted liens on the collateral), rank on parity in right of payment with all other senior indebtedness of the Company, and rank senior in right of payment to all subordinated indebtedness of the Company. The 8.125% Debentures shall rank senior to all future indebtedness of the Company to the extent the future indebtedness is expressly subordinated to the 8.125% Debentures. The 8.125% Debentures are secured by a perfected security interest in certain assets of the Company and its subsidiaries. These assets include, as of May 7, 2010, three SPSVs and nine OSVs and, among other assets, one of three intercompany notes between Trico Supply and Trico Other. The note that is pledged as security has an approximate principal amount of $163.1 million as of March 31, 2010 and is between Trico Supply AS (borrower) and Trico Marine Operators (lender). The two notes which are not pledged to the 8.125% Debentures are between Trico Shipping AS (borrower) and Trico Marine Services, Inc. (lender) with a principal amount of approximately $335.5 million as of March 31, 2010 and between Trico Supply AS (borrower) and Trico Marine Cayman LP (lender) with a principal amount of approximately $33.5 million as of March 31, 2010. These three intercompany notes do not include any subordination provisions among themselves but are each subordinated to the Senior Secured Notes.

      3% Debentures. In February 2007, the Company issued $150.0 million of its 3% Debentures. The Company received net proceeds of approximately $145.2 million after deducting commissions and offering costs of approximately $4.8 million. Net proceeds of the offering were for the acquisition of Active Subsea ASA, financing of the Company’s fleet renewal program and for general corporate

purposes. Interest on the 3% Debentures is payable semiannually in arrears on January 15 and July 15 of each year. The 3% Debentures will mature on January 15, 2027, unless earlier converted, redeemed or repurchased. Effective January 1, 2009, the 3% Debentures were subject to new authoritative guidance.

     The 3% Debentures are senior unsecured obligations of the Company and rank equally in right of payment to all of the Company’s other existing and future senior indebtedness. The 3% Debentures are effectively subordinated to all of the Company’s existing and future secured indebtedness to the extent of the value of its assets collateralizing such indebtedness and any liabilities of its subsidiaries. The 3% Debentures and shares of the common stock issuable upon the conversion of the debentures have been registered under the Securities Act of 1933.

     The 3% Debentures are convertible into cash and, if applicable, shares of the Company’s common stock, par value $0.01 per share, based on an initial conversion rate of 23.0216 shares of common stock per $1,000 principal amount of the 3% Debentures (which is equal to an initial conversion price of approximately $43.44 per share), subject to adjustment and certain limitations. Should the holders of such debentures convert, the Company would pay the holders $1,000 in cash for each $1,000 in principal plus the number of shares of stock equal to the value of the conversion option in excess of $43.44 per share. For more information regarding the conversion and redemption options of the 3% Debentures, see Note 5 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

     The amount of interest cost recognized for the three months ending March 31, 2010 relating to both the contractual interest coupon and amortization of the discount on the liability component is $2.7 million compared to $2.5 million for the three months ending March 31, 2009. The coupon and the amortization of the discount on the debt will yield an effective interest rate of approximately 8.9% on these convertible notes.

      Senior Secured Notes . On October 30, 2009, our wholly-owned subsidiary Trico Shipping, issued $400.0 million aggregate principal amount of the Senior Secured Notes. These notes have a final bullet maturity of November 1, 2014 with no scheduled amortization payments. Interest is payable on May 1 and November 1 and accrues at a rate of 11.875%. The Senior Secured Notes are not callable for three years and are subject to a declining prepayment premium until November 2013 after which they can be repaid at par. The Senior Secured Notes are secured by the assets and earnings of Trico Supply AS, and its subsidiaries, including Trico Shipping, DeepOcean AS and CTC Marine Projects, Ltd. (the “Trico Supply Group”) and the proceeds from the sale of these assets. The Senior Secured Notes are guaranteed by the Company’s wholly owned subsidiary, Trico Supply AS, and by Trico Supply’s direct and indirect subsidiaries (other than Trico Shipping) and Trico Marine Services, Inc., Trico Marine Cayman L.P. and Trico Holdco LLC (the “Guarantors”) The Notes are pari passu in right of payment with all existing and future senior debt of Trico Shipping and the Guarantors (excluding Trico Marine Services) and senior to all existing and future subordinated debt of the Issuer and Guarantors (excluding Trico Marine Services), including any Intercompany Debt; except that debt under the U.S. Credit Facility will be senior in right of payment to the Company’s guarantee of the Senior Secured Notes. The Notes are subject to certain prepayment provisions related to sale of assets if the proceeds from these sales are not reinvested within six months. The Notes may be put to the company at 101% of face value in the event of a Change of Control as defined in the Indenture.

     The Senior Secured Notes restrict Trico Supply and its direct and indirect subsidiaries from incurring additional indebtedness or paying dividends to the parent of Trico Supply unless the consolidated leverage ratio, which includes certain intercompany indebtedness, is less than 3.0:1 subsequent to the incurrence of the additional indebtedness. The Notes also limit the ability of Trico Supply and its subsidiaries from paying interest on existing intercompany debt agreements to Trico Marine Services and certain of its subsidiaries unless the Fixed Charge Coverage Ratio is less than 2.5:1. However, payments of up to $5 million by year to Trico Marine Services may be made for payment of general corporate, overhead and other expenses. As of March 31, 2010, payments in the amount of $1.1 million have been made by Trico Supply under this provision. These provisions do not prohibit the payment of any dividend or distribution to Trico Marine Services in an amount equal to any guarantee refunds received by the Company for the last four VS470 vessels currently under construction and the net cash proceeds received from the sale of the Northern Challenger , the Northern Clipper or the Northern Corona . The Northern Challenger and Northern Clipper were sold in the fourth quarter of 2009 and the Northern Corona was sold subsequent to March 31, 2010.

     The indenture provides that each of the following is an Event of Default: default for 30 days in the payment when due of interest; default in the payment when due (at maturity, upon redemption or otherwise) of the principal of, or premium, if any, on, the Senior Secured Notes; failure for 60 days after notice to the borrower by the Trustee or the holders of at least 25% in aggregate principal amount of the Senior Secured Notes then outstanding voting as a single class to comply with any of the other agreements in the indenture governing the Senior Secured Notes or any security document or the occurrence of any event of default under any mortgage, equipment pledge or other security document; default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness, if that default: (i) is caused by a failure to make any payment when

due at the final maturity of such indebtedness; or (ii) results in the acceleration of such indebtedness prior to its express maturity, and, in each case, the principal (or face) amount of any such indebtedness, together with the principal (or face) amount of any other indebtedness with respect to which an event described herein has occurred, aggregates $20.0 million or more; a default under the Trico Shipping Working Capital Facility which is caused by a failure to make any payment when due at maturity or results in the acceleration of such indebtedness prior to its express maturity; if certain significant subsidiaries within the meaning of the bankruptcy law commences a voluntary case, consents in writing to the entry of an order for relief against it in an involuntary case, consents in writing to the appointment of a Custodian of it or for all or substantially all of its property, makes a general assignment for the benefit of its creditors, or admits in writing it generally is not paying its debts as they become due; or any entity that is organized under the laws of Norway will have failed to duly file its audited financial statements for the fiscal year 2008 in accordance with the laws of the Kingdom of Norway prior to January 15, 2010. (All of these reports were filed prior to January 15, 2010.)

     If any Event of Default occurs and is continuing, the Trustee, by notice to the Company, or the Holders of at least 25% in principal amount of the then outstanding Senior Secured Notes, by notice to the Company and the Trustee, may declare all the Senior Secured Notes to be due and payable immediately.

     Within 210 days of the issuance date of the Senior Secured Notes (October 30, 2009), the Company is to file a registration statement with the SEC to effect the exchange of the issued notes for replacement notes covered by the registration statement and not subject to restrictions on transfer. If the registration statement is not effective within 270 days of the original issuance date of the Senior Secured Notes, which may be extended in certain circumstances, the Company will be required to pay additional interest on the Senior Secured Notes of 0.25% per annum initially up to a maximum of 0.50% per annum.

      Trico Shipping Working Capital Facility. In conjunction with the issuance of the Senior Secured Notes, the Company entered into the Trico Shipping Working Capital Facility with Trico Shipping as the borrower. This facility will expire on December 31, 2011. In conjunction with the amendment executed in March 2010, the total commitment was reduced to $26.0 million with quarterly amortizations of $3.3 million beginning July 1, 2010. Interest is payable on the outstanding principal amount at the Eurodollar rate designated by the British Bankers Association plus 5.0% and is subject to an additional utilization fee of 3.0%, payable quarterly in arrears, if the facility is more than 50% drawn. Up to $10 million of the facility may be used for letters of credit and replaced existing letter of credit facilities currently used by CTC and Deep Ocean. This facility shares in the collateral with the Senior Secured Notes and does not have financial covenants. This facility cross-defaults to both the Senior Secured Notes and the U.S. Credit Facility.

     As of March 31, 2010, the Company had outstanding letters of credit under the Trico Shipping Working Capital Facility of $5.7 million with various expiration dates through October 2010 for securing performance under certain subsea services contracts.

     The Trico Shipping Working Capital Facility subjects the Company’s subsidiaries that are parties to the agreement to certain customary non-financial covenants including, but not limited to, affirmative and negative covenants. Payments under the Trico Shipping Working Capital Facility may be accelerated following certain events of default, including, but not limited to, failure to make payments when due, noncompliance with covenants, breaches of representations and warranties, commencement of insolvency proceedings, occurrence of certain changes of control, and defaults under other debt agreements which permit the holders to declare the indebtedness due and payable prior to stated maturity provided the aggregate amount of indebtedness affected is at least $10 million. The Trico Shipping Working Capital Facility also cross defaults to the U.S. Credit Facility. In March 2010, the Company received a waiver of the requirement that its annual financial statements contain an unqualified auditors’ opinion without an explanatory paragraph in regards to going concern. The waiver limited the aggregate amount of loans to the amount then outstanding and there are currently no funds available to be drawn under the facility. The amount of availability under the facility decreases by $3.3 million per quarter beginning July 1, 2010.

      6.11% Notes. In 1999, Trico Marine International issued $18.9 million of notes due 2014 to finance construction of two supply vessels, of which $5.7 million is outstanding at March 31, 2010. The notes are guaranteed by the Company and the U.S. Maritime Administration and secured by first preferred mortgages on two vessels. Failure to maintain the Company’s status as a Jones Act company would constitute an event of default under such notes.

     The Company’s capitalized interest totaled $3.2 million for the three month period ended March 31, 2010 and $4.8 million for the three month period ended March 31, 2009.

6. Derivative Instruments

     As discussed in Note 5, the Company’s 8.125% Debentures provide the holder with a conversion option, which if exercised after May 15, 2011, entitles the holder to a make-whole interest payment that is indexed to the U.S. Treasury Rate. Because the terms of this embedded option are not clearly and closely related to the debt instrument, it represents an embedded derivative that must be accounted for separately. Under authoritative guidance for derivative instruments and hedging activities, the Company is required to bifurcate the embedded derivative from the host debt instrument and record it at fair value on the date of issuance, with subsequent changes in its fair value recorded in the consolidated statement of operations. The conversion option in the Company’s 3% Debentures is settled in cash and potentially stock and therefore is not required to be separately accounted for as a derivative as the value of the consideration is determined solely by the price of the stock. The warrants issued in the Exchange were also derivative instruments and required to be recorded as a liability due to the net-cash settlement terms included in the Exchange document. Changes in fair value were re-measured in each subsequent period based upon the Company’s stock price each quarter the warrants were outstanding. All of the warrants were exercised in 2009 and are no longer outstanding.

     For the debentures, the estimate of fair value was determined through the use of a Monte Carlo simulation lattice option-pricing model that included various assumptions (see Note 7 for further discussion). The 6.5% Debentures were exchanged for the 8.125% Debentures in May 2009. The coupon and the amortization of the discount on the debt will yield an effective interest rate of approximately 11.1% on the 8.125% Debentures and yielded approximately 11.2% on the 6.5% Debentures. The reduction in the Company’s stock price as well as the passage of time are the primary factors influencing the change in value of the derivatives and their impact on the Company’s net income (loss). Any increase in the Company’s stock price will result in non-cash unrealized losses being recognized in future periods for the debentures and such amounts could be material.

     On January 1, 2009, the Company adopted a newly issued accounting standard regarding disclosure of derivative instruments and hedging activities. The new standard requires entities that use derivative instruments to provide qualitative disclosures about their objectives and strategies for using such instruments, as well as any details of credit-risk-related contingent features contained within derivatives. It also requires entities to disclose additional information about the amounts and location of derivatives located within the financial statements, how the provisions of derivative instruments and hedging activities have been applied, and the impact that hedges have on an entity’s financial position, financial performance and cash flows. The tables below reflect (i) Fair Values of Derivative Instruments in the Balance Sheets and (ii) the Effect of Derivative Instruments on the Statements of Operations (in thousands).

Liability Derivative

March 31, 2010

December 31, 2009

Derivatives Not Designated as Hedging

Balance Sheet

Fair

Balance Sheet

Fair

Instruments under Accounting Guidance

Location

Value

Location

Value

Other contract - 8.125% Debentures

Long-term derivative

$

722

Long-term derivative

$

6,003

Total derivatives

$

722

$

6,003

Derivatives Not
Designated as Hedging				Location of Gain (Loss)		Amount of Gain (Loss) Recognized on Derivative
Instruments under				Recognized in Income		Three Months Ended March 31,
Accounting Guidance				on Derivative		2010				2009
Other contract				Unrealized gain on mark-to-market of embedded derivative - 6.5% Debentures		$	—			$	939
Other contract				Unrealized gain on mark-to-market of embedded derivative - 8.125% Debentures			5,281				—
						$	5,281			$	939

7. Fair Value Measurements

     On January 1, 2009, the Company adopted a newly issued accounting standard for fair value measurements of all non-financial assets and liabilities. We had no required fair value measurements for non-financial assets and liabilities in 2010 and no required additional disclosures upon adoption.

     The accounting standard for fair value measurements provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. Fair value is defined as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. The accounting standard established a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required as well as the assets and liabilities that the Company values using those levels of inputs.

	•		Level 1 — Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
	•		Level 2 — Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
	•		Level 3 — Unobservable inputs that reflect the reporting entity’s own assumptions.

     Financial liabilities subject to fair value measurements on a recurring basis are as follows (in thousands):

		Fair Value Measurements
		at March 31, 2010 Using Fair Value
		Hierarchy
		Fair Value as of
		March 31, 2010				Level 1				Level 2				Level 3
Liabilities
Long-term derivative (8.125% Debentures)		$	722			$	—			$	—			$	722
		$	722			$	—			$	—			$	722

		Fair Value Measurements
		at December 31, 2009 Using Fair Value
		Hierarchy
		Fair Value as of
		December 31, 2009				Level 1				Level 2				Level 3
Liabilities
Long-term derivative (8.125% Debentures)		$	6,003			$	—			$	—			$	6,003
		$	6,003			$	—			$	—			$	6,003

     The estimated fair values of financial instruments have been determined by the Company using available market information and valuation methodologies described below. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein may not be indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumptions or valuation methodologies may have a material effect on the estimated fair value amounts.

      Cash, cash equivalents, accounts receivable and accounts payable. The carrying amounts approximate fair value due to the short-term nature of these instruments.

      Debt. The fair value of the Company’s fixed rate debt is based partially on quoted market prices as well as prices for similar debt based on recent market transactions.

     The carrying amounts and fair values of debt were as follows (in thousands):

		March 31,				December 31,
		2010				2009
Carrying amount		$	736,936			$	733,897
Fair value			636,818				687,401

     As discussed in Note 6, the Company’s conversion feature contained in its 8.125% Debentures and the prior 6.5% Debentures is required to be accounted for separately and recorded as a derivative financial instrument measured at fair value. The estimate of fair value was determined through the use of a Monte Carlo simulation lattice option-pricing model. The assumptions used in the valuation model for the 8.125% Debentures as of March 31, 2010 include the Company’s stock closing price of $2.32 on such date, expected volatility of 60%, a discount rate of 30.0% and a United States Treasury Bond Rate of 1.40% for the time value of options. Assumptions used in the valuation model for the 6.5% Debentures as of March 31, 2009 included the Company’s stock closing price of $2.10, expected volatility of 60%, a discount rate of 25.0% and a United States Treasury Bond Rate of 1.45% for the time value of options. As of December 31, 2009, there were no assumptions used in the valuation model for the 6.5% Debentures as they were exchanged for the 8.125% Debentures in May 2009. The following table sets forth a reconciliation of changes in the fair value of the Company’s derivative liability as classified as Level 3 in the fair value hierarchy (in thousands).

		8.125%				6.5%
		Debentures				Debentures
Balance on December 31, 2008		$	—			$	1,119
Unrealized (gain) loss for 2009			1,278				(436	)
Final valuation of 6.5% Debentures due to exchange for 8.125% Debentures			—				(683	)
Issuance of long-term derivative (8.125% Debentures)			4,725				—
Balance on December 31, 2009		$	6,003			$	—
Unrealized gain for 2010			(5,281	)			—
Balance on March 31, 2010		$	722			$	—

8. Earnings (Loss) Per Share

     Earnings (loss) per common share was computed based on the following (in thousands, except per share amounts):

		Three Months Ended March 31,
		2010				2009
Basic EPS
Net loss attributable to Trico Marine Services, Inc.		$	(78,549	)		$	(747	)
Weighted-average shares of common stock outstanding:
Basic			20,691				16,711
Earnings per share:
Basic		$	(3.80	)		$	(0.04	)
Diluted EPS
Net loss attributable to Trico Marine Services, Inc.		$	(78,549	)		$	(747	)
Weighted-average shares of common stock outstanding:
Basic			20,691				16,711
Total			20,691				16,711
Earnings per share:
Diluted		$	(3.80	)		$	(0.04	)

     In May 2009, the existing holders of the 6.5% Debentures entered into the Exchange Agreements exchanging their 6.5% Debentures for 8.125% Debentures. See Note 5 for more information.

     Diluted earnings (loss) per share is computed using the if-converted method for the 8.125% Debentures and using the treasury stock method for the 3% Debentures and the 6.5% Debentures. The scheduled principal amortizations for the 8.125% Debentures can be paid either in stock or cash based upon the Company’s election. However, if the 8.125% Debentures are converted at the option of the holders prior to maturity, the bondholders will be paid in stock.

     The Company’s 3% Debentures and 6.5% Debentures (through May 2009 only) were not dilutive as the average price of the Company’s common stock was less than the conversion price for each series of the debentures during the presented periods they were outstanding. As the principal amount for the 3% Debentures can only be settled in cash, they are not considered in the diluted earnings per share. Although the Company had the option of settling the principal amount of 6.5% Debentures in either cash, stock or a combination of both, management’s intention at that time was to settle the amounts when converted with available cash on hand, through borrowings under the Company’s existing lines of credit or other refinancing as necessary.

9. Other Comprehensive Income (Loss)

     The components of total comprehensive income (loss) were as follows (in thousands):

		Three Months Ended March 31,
		2010				2009
						Shareholders of
						Trico Marine				Noncontrolling
		Total				Services, Inc.				Interests				Total
Net income (loss)		$	(78,549	)		$	(747	)		$	750			$	3
Foreign currency translation gain (loss)			6,331				13,090				—				13,090
Amortization of unrecognized actuarial gains			89				97				—				97
Total comprehensive income (loss)		$	(72,129	)		$	12,440			$	750			$	13,190

10. Stock-Based Compensation

     The Company has stock-based compensation plans, which are described in more detail in Note 14 to the Notes to Consolidated Financial Statements in the Company’s 2009 Annual Report on Form 10-K. Net loss for the three months ended March 31, 2010 included $0.4 million, of stock-based compensation costs compared to $0.7 million for the same three month period of 2009. The Company records all of its stock based compensation costs as general and administrative expenses in the accompanying condensed consolidated statements of operations. As of March 31, 2010, there was $1.4 million of total unrecognized compensation costs related to unvested stock-based compensation that is expected to be recognized over a weighted-average period of 0.8 years. The Company expects that its total fixed stock-based compensation expense for the year ended December 31, 2010 will total approximately $1.5 million.

     As SARs provide the participant the right to receive a cash payment only when the SARs are exercised, they will be classified as liabilities and the fair value will be measured in each subsequent reporting period with changes in fair value reflected as a component of stock-based compensation costs in the Statements of Operations. See below for the updated assumptions as of March 31, 2010.

		SARs
		Vested Ratably				Cliff Vested
Fair Value at March 31, 2010		$	1.11			$	1.10
Expected Term			3.5				4.0
Expected Volatility			60	%			55	%
Risk-Free Interest Rate			1.82	%			2.05	%
Expected Dividend Distributions			N/A				N/A

11. Taxes

     The Company’s income tax expense/(benefit) for the three months ended March 31, 2010 was $22.9 million compared to $(15.0) million for the comparable prior year period. The income tax expense/(benefit) for each period is primarily associated with the Company’s U.S. federal, state and foreign taxes. The Company’s tax expense/(benefit) for the three month period ending March 31, 2010 differs from that under the statutory rate primarily due to nondeductible interest expense in the United States as a result of the 6.5% Debenture exchange described in Note 5, the one-time expense related to the Norwegian Supreme Court ruling on February 12, 2010 (described below) and state and foreign taxes. The Company’s effective tax rate is subject to wide variations given its structure and operations. The Company operates in many different taxing jurisdictions with differing rates and tax structures. Therefore, a change in the Company’s overall plan could have a significant impact on the estimated rate. At March 31, 2009, the Company’s tax benefit differed from that under the statutory rate primarily due to tax benefits associated with the Norwegian Tonnage Tax Regime and a change in law enacted on March 31, 2009 (described below), the Company’s permanent reinvestment of foreign earnings and state and foreign taxes.

     Since the Company currently has no U.S. operations, the history of negative earnings from these operations and the emphasis to expand the Company’s presence in growing international markets constitutes significant negative evidence substantiating the need for a full valuation allowance against the U.S. net deferred tax assets, including the current deferred tax assets, as of March 31, 2010. The Company will use cumulative profitability and future income projections as key indicators to substantiate subsequent release of the valuation allowance. This will result in an increase in additional paid-in-capital at the time the valuation allowance is reduced. If the Company’s future U.S. operations are profitable, it is possible the Company will release the valuation allowance at some future date.

     The Company conducts business globally and, as a result, one or more of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities worldwide, including such major jurisdictions as Norway, Mexico, Brazil, Nigeria, Angola, Hong Kong, China, United Kingdom, Australia and the United States. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2003.

     The accounting for income taxes prescribes a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. As of December 31, 2009, the Company recognized $2.4 million in uncertain tax positions and $2.0 million in penalties and interest. During the three months ended March 31, 2010, the Company recognized $0.2 million in uncertain tax positions, penalties and interest. The entire balance of unrecognized tax benefits, if recognized, would affect the Company’s effective tax rate. The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense.

     Norwegian Tonnage Tax legislation was enacted as part of the 2008 Norwegian budgetary process. This new tonnage tax regime was applied retroactively to January 1, 2007 and is similar to other European Union tonnage tax regimes. As a result, all shipping and certain related income, but not financial income, is exempt from ordinary corporate income tax and subjected to a tonnage-based tax. Unlike the previous regime, where the taxation was only due upon a distribution of profits or an outright exit from the regime, the new regime provides for a tax exemption on profits earned after January 1, 2007.

     As part of the legislation, the previous tonnage tax regime covering the period from 1996 through 2006 was repealed. Companies that are in the current regime, and enter into the new regime, will be subject to tax at 28% for all accumulated untaxed shipping profits generated between 1996 through December 31, 2006 in the tonnage tax company. Under the original provisions, two-thirds of the liability (NOK 251 million, $42.0 million at March 31, 2010) was payable in equal installments over 10 years. The remaining one-third of the tax liability (NOK 126 million, $21.1 million at March 31, 2010) can be met through qualified environmental expenditures.

     Under the initial legislation enacted, any remaining portion of the environmental part of the liability not expended at the end of ten years would be payable to the Norwegian tax authorities at that time. In 2008, the ten year limitation was extended to fifteen years. On March 31, 2009, the need to invest in environmental measures within fifteen years was abolished. As a result, the Company recognized a one-time tax benefit in the first quarter of 2009 earnings of $18.6 million related to the change. Although qualifying expenditures are still required, there is no time constraint to make these expenditures before it would become payable to the Norwegian tax authorities.

     On February 12, 2010, the Norwegian Supreme Court ruled that the transitional rules, whereby the untaxed profits under the old regime became taxable upon entrance into the new regime, were unconstitutional. As a result, the Company received $9.3 million in cash refunds related to tax payments made in 2008 and 2009 pursuant to the transitional regime that was ruled unconstitutional. This refund and related interest was received by the Company in March 2010.

     As a result of the unconstitutionality ruling and lack of new tax regulations, the distribution tax regime in place prior to the 2008 Tonnage Tax Legislation is presumed to apply again. Consequently, the Company recorded a deferred tax liability of approximately $64.3 million as of March 31, 2010 related to the calculated gains under the transition rules. These taxes are not due until earnings are distributed from one of our Norwegian tonnage tax entities.

12. Employee Benefit Plans

     The annual costs and liabilities under the Norwegian defined benefit pension plans are determined each year based on actuarial assumptions. The components of net periodic benefit costs related to the Company’s Norwegian defined benefit pension plans were as follows (in thousands):

		Three Months Ended March 31,
		2010				2009
Service cost		$	1,092			$	1,022
Interest cost			236				251
Return on plan assets			(232	)			(286	)
Social security contributions			154				148
Recognized net actuarial loss			89				97
Net periodic benefit cost		$	1,339			$	1,232

     The Company’s contributions to the Norwegian defined benefit plans totaled $0.9 million for the three month period ended March 31, 2010. The Company’s contributions for the three month period ended March 31, 2009 totaled $0.7 million.

     The Company’s United Kingdom employees are covered by a non-contributory multi-employer defined benefit plan. Contributions to this plan were $0.2 million and $0.1 million for each of the three month periods ended March 31, 2010 and 2009, respectively.

13. Investment in Eastern Marine Services Limited

     Beginning January 1, 2010, in accordance with new authoritative guidance for variable interest entities, the Company no longer consolidates its investment in Eastern Marine Services Limited (EMSL). Because the Company holds a 49% ownership interest, EMSL is now accounted for under the equity method. There was no gain or loss recognized in connection with the deconsolidation of EMSL. As of March 31, 2010, EMSL currently has total assets of $24.9 million and equity of $23.9 million. EMSL generated revenues of $2.3 million and a net loss of $3.7 million for the quarter ended March 31, 2010.

14. Commitments and Contingencies

      General. In the ordinary course of business, the Company is involved in certain personal injury, pollution and property damage claims and related threatened or pending legal proceedings. The Company does not believe that any of these proceedings, if adversely determined, would have a material adverse effect on its financial position, results of operations or cash flows. Additionally, the Company’s insurance policies may reimburse all or a portion of certain of these claims. At March 31, 2010 and December 31, 2009, the Company accrued for liabilities in the amount of approximately $3.1 million and $3.3 million, respectively, based upon the gross amount that management believes it may be responsible for paying in connection with these matters. Additionally, from time to time, the Company is involved as both a plaintiff and a defendant in other civil litigation, including contractual disputes. The Company does not believe that any of these proceedings, if adversely determined, would have a material adverse effect on its financial position, results of operations or cash flows. The amounts the Company will ultimately be responsible for paying in connection with these matters could differ materially from amounts accrued.

      Saipem. Prior to their acquisition by the Company, CTC Marine entered into a sub-contract (“the Contract”) dated March 30, 2007 with Saipem S.p.A (“Saipem”), an Italian-registered company. Saipem had previously been contracted by oil and gas operator Terminale GNL Adriatico Srl (“ALNG”) to lay, trench and backfill an offshore pipeline in the northern Adriatic Sea. The Contract between Saipem and CTC Marine related to the trenching and backfilling work. Work on location commenced on February 13, 2008 and was completed on May 5, 2008. The project took longer than originally anticipated and the target depth of cover for the pipeline was not met for the whole of the route due to CTC Marine encountering significantly different soils on the seabed to those which had been identified in the geotechnical survey documentation. In conjunction with the acquisition of CTC in May of 2008, the Company recorded an asset in purchase accounting related to the estimated fair value of this claim as of the acquisition date. In the summer of 2008, CTC Marine submitted a contractual claim to Saipem in relation to the different soils. Saipem in turn made submissions to ALNG. ALNG rejected Saipem’s submission and Saipem has, in turn, refused to pay CTC Marine the additional sums. The Contract is governed by English law and specifies that disputes that are incapable of resolution must be referred to Arbitration before three Arbitrators under the International Chamber of Commerce (“ICC”) rules. Arbitration is a commercial rather than a court remedy. The decision of the Arbitral Tribunal is enforceable in the courts of all major nations.

     CTC Marine submitted a Claim to Arbitration on April 9, 2009 based upon the Contract for payment of 7.7 million Sterling plus interest and costs. Saipem sought an extension to the time for their answer and provided this on June 4, 2009, together with a Counterclaim for Liquidated Damages in terms of the Contract. CTC submitted its reply to the Counterclaim as well as amendments to the request. The Arbitration Tribunal of three, comprising one nomination from each side and an independent chairman has been convened and parties have agreed that the forum for the Arbitration be set in London. The Tribunal issued their schedule of the hearing to follow in August 2009 and both parties agreed. The timetable has been set with arbitration in June or July 2010. The amount due to the Company is reflected in “Prepaid expenses and other current assets” in the accompanying consolidated balance

sheets. While there can be no assurances of full recovery in arbitration, the Company intends to vigorously defend its claim for payment for services rendered and believes its position to be favorable at this time.

      Brazilian Tax Assessments. On March 22, 2002, the Company’s Brazilian subsidiary received a non-income tax assessment from a Brazilian state tax authority for approximately 52.0 million Reais ($29.0 million at March 31, 2010). The tax assessment is based on the premise that certain services provided in Brazilian federal waters are considered taxable by certain Brazilian states as transportation services. The Company filed a timely defense at the time of the assessment. In September 2003, an administrative court upheld the assessment. In response, the Company filed an administrative appeal in the Rio de Janeiro administrative tax court in October 2003. In November 2005, the Company’s appeal was submitted to the Brazilian state attorneys for their response. On December 8, 2008, the final hearing took place and the Higher Administrative Tax Court ruled in favor of the Company. On April 13, 2009, the State Attorney’s Office filed its appeal with the Special Court of the Higher Administrative Tax Court. The Company filed its response on June 9, 2009. The Company is under no obligation to pay the assessment unless and until such time as all appropriate appeals are exhausted. The Company intends to vigorously challenge the imposition of this tax. Many of our competitors in the marine industry have also received similar non-income tax assessments. Broader industry actions have been taken against the tax in the form of a suit filed at the Brazilian Federal Supreme Court seeking a declaration that the state statute attempting to tax the industry’s activities is unconstitutional. This assessment is not income tax based and is therefore not accounted for under authoritative accounting guidance for income taxes that prescribes a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. The Company has not accrued any amounts for the assessment of the liability.

     During the third quarter of 2004, the Company received a separate non-income tax assessment from the same Brazilian state tax authority for approximately 4.8 million Reais ($2.7 million at March 31, 2010). This tax assessment is based on the same premise as noted above. The Company filed a timely defense in October 2004. In January 2005, an administrative court upheld the assessment. In response, the Company filed an administrative appeal in the Rio de Janeiro administrative tax court in February 2006. On January 22, 2009, the Company filed a petition requesting for the connection of the two cases, and asking for the remittance of the case to the other Administrative Section that ruled favorable to the Company in the other case mentioned above. The President of the Higher Administrative Tax Court is analyzing this request. This assessment is not income tax based and is therefore not accounted for under authoritative accounting guidance for income taxes that prescribes a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. The Company has not accrued any amounts for the assessment of the liability.

     If the Company’s challenges to the imposition of these taxes (which may include litigation at the Rio de Janeiro state court) prove unsuccessful, current contract provisions and other factors could potentially mitigate the Company’s tax exposure. Nonetheless, an unfavorable outcome with respect to some or all of the Company’s Brazilian state tax assessments could have a material adverse affect on the Company’s financial position and results of operations if the potentially mitigating factors also prove unsuccessful.

15. Segment Information

     We operate through three business segments: (i) subsea services (ii) subsea trenching and protection and (iii) towing and supply.

						Subsea
						Trenching
		Subsea				and				Towing and
		Services				Protection				Supply				Corporate				Total
										(In thousands)
Three Months Ended:
March 31, 2010
Revenues from Unaffiliated Customers		$	55,630			$	21,795			$	18,289			$	—			$	95,714
Intersegment Revenues			1,034				—				2,260				—				3,294
Operating Loss			(7,843	)			(1,989	)			(1,508	)			(7,106	)			(18,446	)
Loss Before Income Taxes			(11,937	)			(3,322	)			(33,157	)			(7,273	)			(55,689	)
March 31, 2009
Revenues from Unaffiliated Customers		$	58,647			$	26,050			$	37,122			$	—			$	121,819
Intersegment Revenues			685				—				—				—				685
Operating Loss			(5,478	)			(3,236	)			(459	)			(6,998	)			(16,171	)
Income (Loss) Before Income Taxes and Noncontrolling Interests			(7,509	)			(4,021	)			(64	)			(3,431	)			(15,025	)

16. Recent Accounting Standards

     In January 2010, the Financial Accounting Standards Board (“FASB”) issued an amendment to the disclosure requirements for fair value measurements. The update requires entities to disclose the amounts of and reasons for significant transfers between Level 1 and Level 2, the reasons for any transfers into or out of Level 3, and information about recurring Level 3 measurements of purchases, sales, issuances and settlements on a gross basis. The update also clarifies that entities must provide (i) fair value measurement disclosures for each class of assets and liabilities and (ii) information about both the valuation techniques and inputs used in estimating Level 2 and Level 3 fair value measurements. Except for the requirement to disclose information about purchases, sales, issuances, and settlements in the reconciliation of recurring Level 3 measurements on a gross basis, the update is effective for interim and annual periods beginning after December 15, 2009. The requirement to separately disclose purchases, sales, issuances, and settlements of recurring Level 3 measurements is effective for interim and annual periods beginning after December 15, 2010. The Company’s adoption did not have a material effect on the disclosures contained in its notes to the consolidated financial statements.

17. Supplemental Condensed Consolidating Financial Information

     On October 30, 2009, Trico Shipping issued the Senior Secured Notes. The Senior Secured Notes are unconditionally guaranteed on a senior basis by Trico Supply AS and each of the other direct and indirect parent companies of Trico Shipping (other than the Company) and by each direct and indirect subsidiary of Trico Supply AS other than Trico Shipping (collectively, the “Subsidiary Guarantors”). The Senior Secured Notes are also unconditionally guaranteed on a senior subordinated basis by the Company. The guarantees are full and unconditional, joint and several guarantees of the Senior Secured Notes. The Senior Secured Notes and the guarantees rank equally in right of payment with all of Trico Shipping’s and the Subsidiary Guarantors’ existing and future indebtedness and rank senior to all of Trico Shipping’s and the Subsidiary Guarantors’ existing and future subordinated indebtedness. The Company’s guarantee ranks junior in right of payment to up to $50 million principal amount of indebtedness under the Company’s U.S. Credit Facility. All other subsidiaries of the Company, either direct or indirect, have not guaranteed the Senior Secured Notes (collectively, the “Non-Guarantor Subsidiaries”). Trico Shipping and the Subsidiary Guarantors and their consolidated subsidiaries are 100% owned by the Company.

     Under the terms of the indenture governing the Senior Secured Notes and the Trico Shipping’s Working Capital Facility, Trico Supply AS is restricted from paying dividends to its parent, and Trico Supply AS and its restricted subsidiaries (including Trico Shipping) are restricted from making intercompany loans to the Company and its subsidiaries (other than Trico Supply AS and its restricted subsidiaries).

     The following tables present the condensed consolidating balance sheets as of March 31, 2010 and December 31, 2009, and the condensed consolidating statements of operations for the three months ended March 31, 2010 and 2009 and the consolidating statements of cash flows for the periods ended March 31, 2010 and 2009 of (i) the Company (ii) Trico Shipping, (iii) the Subsidiary Guarantors, (iv) the Non-Guarantor Subsidiaries, and (v) consolidating entries and eliminations representing adjustments to (a) eliminate intercompany transactions, (b) eliminate the investments in our subsidiaries and (c) record consolidating entries.

     The additional tables represent consolidating information for the Trico Supply Group as follows: the condensed consolidating balance sheets as of March 31, 2010 and December 31, 2009 and the condensed consolidating statements of operations and of cash flows for the three months ended March 31, 2010 and 2009 of (i) Trico Shipping, (ii) the Subsidiary Guarantors, excluding the parent companies of Trico Supply AS, and (iii) consolidating entries and eliminations representing adjustments to (a) eliminate intercompany transactions, (b) eliminate the investments in our subsidiaries and (c) record consolidating entries. The purpose of these tables is to provide the financial position, results of operations and cash flows of the group of entities which own substantially all of the collateral securing the Senior Secured Notes and are subject to the restrictions of the indenture. For purposes if this presentation, investments in consolidated subsidiaries are accounted for under the equity method.

     Prior periods have been prepared to conform to the Company’s current organizational structure.

      

CONDENSED CONSOLIDATING BALANCE SHEET
AS OF MARCH 31, 2010

																						Consolidated
		Parent Guarantor				Issuer																(Trico Marine
		(Trico Marine				(Trico				Subsidiary				Non-Guarantor								Services, Inc. and
		Services, Inc.)				Shipping AS)				Guarantors (1)				Subsidiaries (2)				Eliminations				Subsidiaries)
										(in thousands, except per share amounts)
ASSETS
Current assets:
Cash and cash equivalents		$	—			$	10,994			$	16,765			$	4,206			$	—			$	31,965
Restricted cash			—				—				1,562				1,027				—				2,589
Accounts receivable, net			—				13,983				46,638				26,952				—				87,573
Prepaid expenses and other current assets			227				426				18,282				(25	)			—				18,910
Assets held for sale			—				13,224				—				693				—				13,917
Total current assets			227				38,627				83,247				32,853				—				154,954
Net property and equipment, net			—				79,829				555,928				61,984				—				697,741
Intercompany receivables (debt and other payables)			338,486				(143,822	)			(307,514	)			112,850				—				—
Intangible assets			—				—				110,868				—				—				110,868
Other assets			4,783				3,614				21,754				6,857				—				37,008
Investments in subsidiaries			17,161				180,785				(333,699	)			13,058				135,752				13,057
Total assets		$	360,657			$	159,033			$	130,584			$	227,602			$	135,752			$	1,013,628
LIABILITIES AND EQUITY
Current liabilities:
Short-term and current maturities of long-term debt		$	40,224			$	20,000			$	61			$	1,258			$	—			$	61,543
Accounts payable			—				247				31,872				9,241				—				41,360
Accrued expenses			373				2,420				55,933				19,118				—				77,844
Accrued interest			7,168				20,108				—				153				—				27,429
Income taxes payable			134				—				8,967				1,293				—				10,394
Other current liabilities			49				—				—				—				—				49
Total current liabilities			47,948				42,775				96,833				31,063				—				218,619
Long-term debt			284,261				386,460				35				4,637				—				675,393
Long-term derivative			722				—				—				—				—				722
Deferred income taxes			—				63,098				17,583				—				—				80,681
Other liabilities			38				396				8,978				1,113				—				10,525
Total liabilities			332,969				492,729				123,429				36,813				—				985,940
Commitments and contingencies
Total equity			27,688				(333,696	)			7,155				190,789				135,752				27,688
Total liabilities and equity		$	360,657			$	159,033			$	130,584			$	227,602			$	135,752			$	1,013,628

CONDENSED CONSOLIDATING BALANCE SHEET
AS OF MARCH 31, 2010 — (Continued)

		Issuer				Subsidiary
		(Trico Shipping AS)				Guarantors				Adjustments (3)				Trico Supply Group
ASSETS
Current assets:
Cash and cash equivalents		$	10,994			$	16,765			$	—			$	27,759
Restricted cash			—				1,562				—				1,562
Accounts receivable, net			13,983				46,638				—				60,621
Prepaid expenses and other current assets			426				18,282				—				18,708
Assets held for sale			13,224				—				—				13,224
Total current assets			38,627				83,247				—				121,874
Net property and equipment, net			79,829				555,928				—				635,757
Intercompany receivables (debt and other payables)			(143,822	)			(307,514	)			(34,133	)			(485,469	)
Intangible assets			—				110,868				—				110,868
Other assets			3,614				21,754				6,884				32,252
Investments in subsidiaries			180,785				(333,699	)			152,914				—
Total assets		$	159,033			$	130,584			$	125,665			$	415,282
LIABILITIES AND EQUITY
Current liabilities:
Short-term and current maturities of long-term debt		$	20,000			$	61			$	—			$	20,061
Accounts payable			247				31,872				—				32,119
Accrued expenses			2,420				55,933				—				58,353
Accrued interest			20,108				—				—				20,108
Income taxes payable			—				8,967				—				8,967
Total current liabilities			42,775				96,833				—				139,608
Long-term debt			386,460				35								386,495
Deferred income taxes			63,098				17,583				—				80,681
Other liabilities			396				8,978				—				9,374
Total liabilities			492,729				123,429				—				616,158
Commitments and contingencies
Total equity			(333,696	)			7,155				125,665				(200,876	)
Total liabilities and equity		$	159,033			$	130,584			$	125,665			$	415,282

CONDENSED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 2009

																						Consolidated
		Parent Guarantor																				(Trico Marine
		(Trico Marine				Issuer				Subsidiary				Non-Guarantor								Services, Inc. and
		Services, Inc.)				(Trico Shipping AS)				Guarantors (1)				Subsidiaries (2)			Eliminations				Subsidiaries)
														(in thousands)
ASSETS
Current assets:
Cash and cash equivalents		$	—			$	2,617			$	37,573			$	12,791			$	—			$	52,981
Restricted cash			—				—				2,853				777				—				3,630
Accounts receivable, net			—				7,184				64,294				27,122				—				98,600
Prepaid expenses and other current assets			503				—				18,006				252				—				18,761
Assets held for sale			—				12,945				—				2,278				—				15,223
Total current assets			503				22,746				122,726				43,220				—				189,195
Net property and equipment, net			—				81,524				567,449				79,184				—				728,157
Intercompany receivables (debt and other payables)			339,476				(138,531	)			(317,794	)			116,849				—				—
Intangible assets			—				—				116,471				—				—				116,471
Other assets			5,504				6,729				20,688				9,515				—				42,436
Investments in subsidiaries			86,748				169,285				(312,485	)			—				56,452				—
Total assets		$	432,231			$	141,753			$	197,055			$	248,768			$	56,452			$	1,076,259
LIABILITIES AND EQUITY
Current liabilities:
Short-term and current maturities of long-term debt		$	31,240			$	20,087			$	—			$	1,258			$	—			$	52,585
Accounts payable			—				2,159				32,834				10,968				—				45,961
Accrued expenses			472				2,816				68,886				16,816				—				88,990
Accrued interest			4,198				8,442				32				66				—				12,738
Foreign taxes payable			—				4,285				309				—				—				4,594
Income taxes payable			134				—				8,124				924				—				9,182
Other current liabilities			104				—				—				—				—				104
Total current liabilities			36,148				37,789				110,185				30,032				—				214,154
Long-term debt			290,688				385,972				—				4,652				—				681,312
Long-term derivative			6,003				—				—				—				—				6,003
Foreign taxes payable			—				30,376				1,510				—				—				31,886
Deferred income taxes			—				(375	)			19,594				—				—				19,219
Other liabilities			79				476				9,314				1,488				—				11,357
Total liabilities			332,918				454,238				140,603				36,172				—				963,931
Commitments and contingencies
Total equity			99,313				(312,485	)			56,452				212,596				56,452				112,328
Total liabilities and equity		$	432,231			$	141,753			$	197,055			$	248,768			$	56,452			$	1,076,259