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

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

(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,		77380 (Zip code)
The Woodlands, Texas (Address of principal executive offices)

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 Section 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 1, 2009 was 16,227,253.

 

 

TRICO MARINE SERVICES, INC.
REPORT FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2009

TABLE OF CONTENTS

		Page
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets — March 31, 2009 and December 31, 2008			1
Condensed Consolidated Statements of Income — Three Months Ended March 31, 2009 and 2008			2
Condensed Consolidated Statements of Cash Flows — Three Months Ended March 31, 2009 and 2008			3
Notes to the Condensed Consolidated Financial Statements			4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			24
Item 3. Quantitative and Qualitative Disclosures About Market Risk			40
Item 4. Controls and Procedures			41
Part II. Other Information			41
Item 1. Legal Proceedings			41
Item 1A. Risk Factors			41
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			43
Item 3. Defaults upon Senior Securities			43
Item 4. Submission of Matters to a Vote of Security Holders			43
Item 5. Other Information			43
Item 6. Exhibits			43
Signature			46
EX-10.1
EX-31.1
EX-31.2
EX-32.1

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

TRICO MARINE SERVICES, INC. AND SUBSIDIARIES

		March 31,				December 31,
		2009				2008
						As adjusted, see
						Notes 4 and 12
ASSETS
Current assets:
Cash and cash equivalents		$	60,504			$	94,613
Restricted cash			3,035				3,566
Accounts receivable, net			127,320				165,152
Prepaid expenses and other current assets			11,200				3,375
Total current assets			202,059				266,706
Property and equipment:
Marine vessels			513,750				502,417
Subsea equipment			156,431				153,003
Construction-in-progress			282,608				260,069
Transportation and other			5,098				4,902
			957,887				920,391
Less accumulated depreciation and amortization			(133,408	)			(115,981	)
Net property and equipment, net			824,479				804,410
Intangible assets			107,659				106,983
Other assets			23,853				24,637
Total assets		$	1,158,050			$	1,202,736
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term and current maturities of long-term debt		$	210,942			$	82,982
Accounts payable			22,830				53,872
Accrued expenses			84,358				85,656
Accrued interest			12,532				10,383
Foreign taxes payable			2,189				4,000
Income taxes payable			14,295				18,133
Total current liabilities			347,146				255,026
Long-term debt			552,297				687,098
Long-term derivative			180				1,119
Foreign taxes payable			31,415				47,508
Deferred income taxes			3,983				5,104
Other liabilities			6,821				6,001
Total liabilities			941,842				1,001,856
Commitments and contingencies (See Note 13)			—				—
Stockholders’ equity:
Common stock, $.01 par value, 50,000,000 shares authorized and 16,767,772 and 16,199,980 shares issued at March 31, 2009 and December 31, 2008, respectively			166				160
Warrants			1,640				1,640
Additional paid-in capital			322,662				316,694
Retained earnings			24,450				25,197
Accumulated other comprehensive loss, net of tax			(189,494	)			(202,681	)
Phantom stock			55,588				55,588
Treasury stock, at cost, 570,207 shares			(17,604	)			(17,604	)
Total Trico Marine Services, Inc. stockholders’ equity			197,408				178,994
Noncontrolling interest			18,800				21,886
Total equity			216,208				200,880
Total liabilities and stockholders’ equity		$	1,158,050			$	1,202,736

TRICO MARINE SERVICES, INC. AND SUBSIDIARIES

		Three Months Ended March 31,
		2009				2008
						As adjusted, see
						Notes 4 and 12
Revenues		$	121,819			$	59,175
Operating expenses:
Direct operating expenses			98,488				32,994
General and administrative			21,439				10,767
Depreciation and amortization			18,072				6,747
Gain on sales of assets			(9	)			(2,837	)
Total operating expenses			137,990				47,671
Operating income (loss)			(16,171	)			11,504
Interest expense, net of amounts capitalized			(10,914	)			(1,152	)
Interest income			1,072				1,578
Unrealized gain on mark-to-market of embedded derivative			939				—
Gain on conversion of debt			10,779				—
Other expense, net			(730	)			1,167
Income (loss) before income taxes			(15,025	)			13,097
Income tax (benefit) expense			(15,028	)			1,950
Net income			3				11,147
Less: Net (income) attributable to the noncontrolling interest			(750	)			(841	)
Net income (loss) attributable to Trico Marine Services, Inc.		$	(747	)		$	10,306
Earnings (loss) per common share:
Basic		$	(0.04	)		$	0.72
Diluted		$	(0.04	)		$	0.69
Weighted average shares outstanding:
Basic			16,711				14,411
Diluted			16,711				14,919

TRICO MARINE SERVICES, INC. AND SUBSIDIARIES

		Three Months Ended March 31,
		2009				2008
						As adjusted, see
						Notes 4 and 12
Cash flows from operating activities:
Net income		$	3			$	11,147
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization			18,072				6,747
Amortization of non-cash deferred revenues			(140	)			(89	)
Amortization of deferred financing costs			580				—
Noncash benefit related to change in Norwegian tax law			(18,568	)			—
Accretion of debt discount			3,404				1,293
Deferred income taxes			2,470				1,769
Change in fair value of embedded derivative			(939	)			—
Gain on conversion of 6.5% Debentures			(10,779	)			—
Cash paid for make-whole premium related to conversion of 6.5% Debentures			(6,574	)			—
Gain (loss) on sales of assets			(9	)			(2,837	)
Provision on doubtful accounts			493				—
Stock based compensation			724				844
Change in operating assets and liabilities			(4,155	)			(12,955	)
Net cash provided by (used in) operating activities			(15,418	)			5,919
Cash flows from investing activities:
Purchases of property and equipment			(19,557	)			(32,203	)
Proceeds from sales of assets			155				5,123
Decrease in restricted cash			659				3,661
Net cash used in investing activities			(18,743	)			(23,419	)
Cash flows from financing activities:
Net proceeds from exercises of warrants and options			—				11,901
Proceeds from issuance of debt			—				12,000
Proceeds and repayments of revolving credit facilities, net			2,529				—
Contribution from noncontrolling interest			2,284				—
Dividend to noncontrolling partner			(6,120	)			—
Debt issuance costs			—				(273	)
Net cash provided by (used in) financing activities			(1,307	)			23,628
Effect of exchange rate changes on cash and cash equivalents			1,359				5,562
Net increase (decrease) in cash and cash equivalents			(34,109	)			11,690
Cash and cash equivalents at beginning of period			94,613				131,463
Cash and cash equivalents at end of period		$	60,504			$	143,153

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

TRICO MARINE SERVICES, INC. AND SUBSIDIARIES

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. The Company also consolidates the accounts of its noncontrolling owned variable interest subsidiaries for which the Company has been determined to be the primary beneficiary. All significant intercompany balances and transactions have been eliminated in consolidation. For comparative purposes, certain amounts in 2008 have been adjusted to reflect the retrospective application of FAS 160 and APB 14-1 to conform to the current period’s presentation. The presentation and disclosure requirements of FAS 160 had no effect on net income or operating cash flows. See Note 12 Noncontrolling Interests. The APB 14-1 adjustments did have an effect on the financial statements. See Note 4 Debt.

     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, 2008 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, 2008.

2. Risks and Uncertainties

     As an international integrated provider of subsea and marine support vessels and services to the energy and telecommunications industries, the Company’s revenue, profitability, cash flows and future rate of growth are substantially dependent on its ability to (1) secure profitable contracts through a balance of spot exposure and term contracts, (2) increase its vessel utilization and maximize its service spreads, (3) deploy its vessels to the most profitable markets, and (4) invest in a technologically advanced subsea fleet. Consistent with the Company’s strategy, it is in the process of constructing or converting several purpose-specific vessels for customers under long-term contracts. The Company’s inability to execute its plan or the failure to successfully complete construction or conversion of new vessels on schedule could adversely affect its financial position, results of operations and cash flows.

     The Company’s revenues are primarily generated from entities operating in the oil and gas industry in the North Sea, the U.S. Gulf of Mexico, West Africa, Brazil, Mexico and Southeast Asia. The Company’s international operations 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 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 related or other factors related to the energy industry. Changes in the level of operating and capital spending in the industry, decreases in oil or 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, 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 Jones Act eligible, and it must comply with the Jones Act to engage in coastwise trade in the Gulf of Mexico. The Jones Act provides that non-U.S. citizens may neither exercise control over more than 25% of the voting power in the corporation nor occupy seats that constitute more than a minority of a Board quorum. The Company expects decommissioning and deep water projects in the Gulf of Mexico to comprise an important part of its subsea strategy, which will 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 Company is highly leveraged and its debt imposes significant restrictions on it and increases its vulnerability to adverse economic and industry conditions, and could limit its ability to obtain the additional financing required to successfully operate its business. The Company’s inability to satisfy any of the obligations under its debt agreements would constitute an event of default. Under certain of the Company’s debt agreements, an event of default will be deemed to have occurred if there is a change of control of the Company or certain of its subsidiaries or if a material adverse change or a fundamental change occurs in regards to the financial position of the applicable borrowing entity within the Company. Also, certain of the Company’s debt agreements contain a material adverse change/effect provision that is determined in the reasonable opinion of the respective lender, which is outside of the control of the Company. 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. If this were to occur, the Company might not be able to obtain waivers or secure alternative financing to satisfy all of its obligations simultaneously. Given current market conditions, the Company’s ability to access the capital markets or to consummate planned asset sales may be restricted at a time when it would like or need to raise additional capital. In addition, the current economic conditions could also impact its lenders, customers and vendors and may cause them to fail to meet their obligations to it with little or no warning. These events could have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and ability to satisfy the obligations under its debt agreements. (Also see Note 4 Long Term Debt.)

     The holders of the Company’s 6.5% Senior Convertible Debentures (6.5% Debentures) due 2028 have the right to convert their 6.5% Debentures into Company common stock and receive a make whole interest payment from it. In addition, these 6.5% Debentures provide the holders with the right to require the Company to repurchase the 6.5% Debentures on specified dates or upon the occurrence of a “Fundamental Change” in its business, which is defined as the occurrence of any of the following:

	(a)		the consummation of any transaction that is disclosed in a Schedule 13D (or successor form) by any “person” and the result of which is that such “person” has become the “beneficial owner” (as these terms are defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of more than 50% of the Company’s Capital Stock that is at the time entitled to vote by the holder thereof in the election of the Board of Directors (or comparable body); or
	(b)		the first day on which a majority of the members of the Board of Directors are not continuing directors of the Board; or
	(c)		the adoption of a plan relating to the liquidation or dissolution of the Company; or
	(d)		the consolidation or merger of the Company with or into any other Person, or the sale, lease, transfer, conveyance or other disposition, in one or a series of related transactions, of all or substantially all of the Company’s assets and those of

			its subsidiaries taken as a whole to any “person” (as this term is used in Section 13(d)(3) of the Exchange Act), other than:
	(i)		any transaction pursuant to which the holders of 50% or more of the total voting power of all shares of the Company’s capital stock entitled to vote generally in elections of directors of the Company immediately prior to such transaction have the right to exercise, directly or indirectly, 50% or more of the total voting power of all shares of the Company’s capital stock entitled to vote generally in elections of directors of the continuing or surviving Person (or any parent thereof) immediately after giving effect to such transaction; or
	(ii)		any merger primarily for the purpose of changing the Company’s jurisdiction of incorporation and resulting in a reclassification, conversion or exchange of outstanding shares of common stock solely into shares of common stock of the surviving entity.
	(e)		the termination of trading of the common stock, which will be deemed to have occurred if the common stock or other common equity interests into which the 6.5% Debentures are convertible is neither listed for trading on a United States national securities exchange nor approved for listing on any United States system of automated dissemination of quotations of securities prices, and no American Depositary Shares or similar instruments for such common equity interests are so listed or approved for listing in the United States.

     However, a Fundamental Change will be deemed not to have occurred if more than 90% of the consideration in the transaction or transactions (other than cash payments for fractional shares and cash payments made in respect of dissenters’ appraisal rights) which otherwise would constitute a Fundamental Change under clauses (a) or (d) above consists of shares of common stock, depositary receipts or other certificates representing common equity interests traded or to be traded immediately following such transaction on a U.S. national securities exchange or approved for listing on any United States system on automated dissemination of quotations of securities prices, and, as a result of the transaction or transactions, the 6.5% Debentures become convertible into such common stock, depositary receipts or other certificates representing common equity interests. Such conversions could significantly impact liquidity, and it may not have sufficient funds to make the required cash payments should a majority of the holders convert. The Company’s failure to convert or pay the make whole interest payment under the terms of the 6.5% Debentures would constitute an event of default, which in turn, could constitute an event of default under all of its outstanding debt agreements.

     Execution of the Company’s business plan and continued compliance with its debt covenants are dependent upon it obtaining a minimum level of EBITDA and liquidity. The Company’s forecasted EBITDA contains certain estimates and assumptions regarding new vessel deliveries, fleet utilization, average day rates, and operating and general and administrative expenses, which could prove to be inaccurate. A material deviation from one or more of these estimates or assumptions could result in a violation of one or more of the Company’s contractual covenants which could result in all or a portion of its outstanding debt becoming immediately due and payable. 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. While postponing or eliminating capital projects would delay or reduce future cash flows, the Company believes this control will provide it the flexibility to match its capital commitments to its available capital resources.

3. Acquisition

     On May 15, 2008, the Company initiated a series of transactions that resulted in the acquisition of all of the equity ownership of DeepOcean ASA, a Norwegian public limited liability company (“DeepOcean”), including CTC Marine Projects LTD (“CTC Marine”), a wholly-owned subsidiary of DeepOcean. The Company began consolidating DeepOcean’s results on May 16, 2008, the date it obtained constructive control of DeepOcean. The Company’s ownership of DeepOcean ranged from 54% on May 16, 2008 to in excess of 99% by June 30, 2008. At December 31, 2008, the Company had a 100% interest in DeepOcean. The Company, through its subsidiary, Trico Shipping AS (Trico Shipping), acquired all of the outstanding common stock of DeepOcean for approximately $700 million plus the assumption of $281.7 million of debt.

     The acquisition has been accounted for under the purchase method as required by Statement of Financial Accounting Standards (SFAS) No. 141, “Business Combinations.” To fund the acquisition, the Company used a combination of its available cash, borrowings under its existing, new and/or amended revolving credit facilities, the proceeds from the issuance of $300 million of the 6.5% Debentures and the issuance of the Company’s equity instruments in the form of phantom stock units. See Note 4 for further discussion on the debt associated with the acquisition.

     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, 2009. The Company classified trade names as indefinite lived assets. Under SFAS No. 142, 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, 2008, 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. As a result of this assessment, the Company recognized an impairment during 2008 of $3.1 million on trade name assets. As of March 31, 2009 and December 31, 2008, the Company had $27.1 million and $26.4 million, respectively, of trade names on its Consolidated Balance Sheet, which is included in “Intangible assets.”

     The following table provides information relating to the Company’s intangible assets subject to amortization as of December 31, 2008 and the three months ended March 31, 2009 (in thousands):

		Customer
		Relationships
Balance at December 31, 2007		$	—
Intangible assets acquired in connection with DeepOcean acquisition			118,057
Amortization			(5,040	)
Foreign currency translation adjustment			(32,459	)
Balance at December 31, 2008		$	80,558
Amortization			(1,641	)
Foreign currency translation adjustment			1,601
Balance at March 31, 2009		$	80,518

     Amortization expense was $1.6 million for the three months ended March 31, 2009 and none for the three months ended March 31, 2008. The estimated amortization expense for the remainder of 2009 is $5.0 million and $6.6 million per year for 2010, 2011, 2012 and 2013.

     The operations of DeepOcean are reflected in the Company’s Subsea Services segment and the operations of CTC Marine are reflected in the Company’s Subsea Trenching and Protection segment.

     At December 31, 2008, the purchase price and purchase price allocation were finalized.

     All of the Company’s intangible assets are in connection with the acquisition.

     Pro forma Information

     The following unaudited pro forma information assumes that the Company acquired DeepOcean and CTC Marine effective January 1, 2008.

		Three Months Ended
		March 31, 2008
		Historical				Pro Forma
		As adjusted, see
		Notes 4 and 12
Revenues		$	59,175			$	144,834
Operating income a			11,504				11,837
Income before income taxes b			13,097				1,562
Net income (loss) attributable to Trico Marine Services, Inc.		$	10,306			$	(425	)
Diluted net income (loss) per share of common stock		$	0.69			$	(0.03	)
Diluted weighted average shares outstanding			14,919				14,411

4. 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, 2009. The Company’s debt at March 31, 2009 and December 31, 2008 consisted of the following (in thousands):

		March 31,				December 31,
		2009				2008
						As adjusted
NOK 350 million Revolving Credit Facility(1), maturing January 1, 2010		$	61,534			$	61,531
NOK 230 million Revolving Credit Facility(1), maturing January 1, 2010			22,045				21,233
NOK 150 million Additional Term Loan(1), maturing January 1, 2010			10,115				10,398
NOK 200 million Overdraft Facility(1), maturing January 1, 2010			23,826				3,207
23.3 million Euro Revolving Credit Facility(1), maturing March 31, 2010			18,720				19,717
NOK 260 million Short Term Credit Facility interest at 9.9%, maturing on February 1, 2009			—				11,631
$254.7 million and $278.0 million face amount, 6.5% Senior Convertible Debentures(2), net of unamortized discount of $39.4 million and $45.0 million as of March 31, 2009 and December 31, 2008, respectively, interest payable semi-annually in arrears, maturing on May 15, 2028			215,336				232,998
$150.0 million face amount, 3.0% Senior Convertible Debentures(2), net of unamortized discount of $34.4 million and $35.9 million as of March 31, 2009 and December 31, 2008, respectively, interest payable semi-annually in arrears, maturing on January 15, 2027			115,562				114,150
$200 million Revolving Credit Facility(1), maturing in May 2013			166,657				160,563
$100 million Revolving Credit Facility(1), maturing no later than December 2017			25,055				15,000
$50 million U.S. Revolving Credit Facility Agreement (1), maturing in January 2011			31,509				46,460
6.11% Notes, principal and interest due in 30 semi-annual installments, maturing April 2014			6,915				6,915
$18 million Revolving Credit Facility(1), maturing December 5, 2011			15,500				16,000
8 million Sterling Overdraft Facility, maturity 364 days after drawdown			12,112				9,812
24.2 million Sterling Asset Financing Revolving Credit Facility(1), maturing no later than January 31, 2015			16,019				17,286
Finance lease obligations assumed in the acquisition of DeepOcean, maturing from October 2009 to November 2015			14,064				14,172
Other debt assumed in the acquisition of DeepOcean, maturing from July 2009 to August 2014			7,973				8,695
Fresh-start debt premium			297				312
Total debt			763,239				770,080
Less current maturities			(210,942	)			(82,982	)
Long-term debt		$	552,297			$	687,098

Quarter ending March 31,		Amount
Due in one year		$	210,942	a
Due in two years			65,016
Due in three years			43,280
Due in four years			30,822
Due in five years			50,806
Due in over five years			435,893	b
			836,759
Fresh-start debt premium			297
Unamortized discount on 6.5% and 3.0% Debentures			(73,817	)
Total debt		$	763,239

Current Maturities:

     NOK 350 million Revolving Credit Facility. In December 2007, in connection with the financing of the vessel Deep Endeavour, DeepOcean entered into a Norwegian Kroner (NOK) 350 million credit facility (approximately $52.1 million at March 31, 2009). This multi-currency facility allows for borrowings to be made in either U.S. Dollars or NOK. The facility is drawn on U.S. Dollars and at the option of the lenders, they may require a partial repayment if the portion of the loan denominated in U.S. Dollars reaches 105% of the available NOK amount. Based on the exchange rate at March 31, 2009, the amount of this repayment would have been $12.4 million. The loan is guaranteed by DeepOcean and is secured with a mortgage on the Deep Endeavor, a portion of DeepOcean’s inventory and other security documents. The commitment under the facility decreases semi-annually by NOK 10 million (approximately $1.5 million at March 31, 2009) with a balloon payment at its maturity. Interest accrues on the facility at the 3-month NIBOR rate plus 1.75% for NOK borrowings and the LIBOR rate plus 1.75% for U.S. Dollar borrowings and is payable quarterly. The facility is subject to certain customary financial covenants with respect to leverage ratio, working capital ratio and book equity ratio.

     NOK 230 million Revolving Credit Facility. In July 2007, DeepOcean entered into a NOK 230 million revolving credit facility. This facility is part of a larger composite credit facility that has capacity of approximately NOK 1.0 billion ($148.8 million) but has subsequently been reduced to NOK 585 million ($87.0 million). This NOK 230 million credit facility is secured with inventory up to NOK 1.0 billion and other security documents including the pledge of shares in certain DeepOcean subsidiaries. The facility’s commitment is subject to semi-annual reductions of NOK 8 million (approximately $1.2 million at March 31, 2009) with a final NOK 150.7 million ($22.4 million) balloon payment due at the maturity date. Interest on this facility is at the 3-month NIBOR rate plus 1.75% and is payable quarterly in arrears. The facility is subject to customary financial covenants with respect to leverage ratio, working capital ratio and book equity ratio.

     NOK 150 million Additional Term Loan. DeepOcean entered into this agreement in December 2006. Like the NOK 230 million ($34.2 million) facility discussed above, this NOK 150 million ($22.3 million) term loan is part of a larger NOK 585 million ($87.0 million) composite facility. The borrowings under this facility partially funded the acquisition of CTC Marine. This term loan is secured with inventory up to NOK 1.0 billion ($148.8 million) and other security documents, including the pledge of shares in certain DeepOcean subsidiaries. This facility allows for multi-currency borrowing including NOK, U.S. Dollar, Sterling and Euro. The term loan is subject to mandatory NOK 15 million ($2.2 million) semi-annual payments due in June and December every year until the debt matures. Interest on the debt accrues at LIBOR plus 1.75% and is payable quarterly. The facility is subject to customary financial covenants with respect to leverage ratio, working capital ratio and book equity ratio.

     NOK 200 million Overdraft Facility. DeepOcean entered into a multi-currency cash pool system agreement in July 2007. In conjunction with the cash pool system, DeepOcean has a multi-currency cash pool credit of up to NOK 200.0 million. This

facility is part of a larger composite credit facility that once had capacity of approximately NOK 1.0 billion ($148.8 million) but has subsequently been reduced to NOK 585 million ($87.0 million). This NOK 200 million cash pool credit is secured with inventory up to NOK 1.0 billion and other security documents including the pledge of shares in certain DeepOcean subsidiaries. Interest on this facility is at the 3-month NIBOR rate plus 1.75% and is payable quarterly in arrears. The facility is subject to customary financial covenants with respect to leverage ratio, working capital ratio and book equity ratio.

     Regarding the NOK 350 million Revolving Credit Facility, NOK 230 million Revolving Credit Facility, NOK 150 million Additional Term Loan and NOK 200 million Overdraft Facility, the Company and the principal lender have entered into a definitive term sheet, subject to final documentation, to, among other things, shorten the maturity dates for all facilities to January 1, 2010, waive the requirement that DeepOcean AS be listed on the Oslo Stock Exchange, consent to the tonnage tax related corporate reorganization and increase certain fees and margins. In conjunction with the signature of this term sheet and the waiver received regarding the listing requirement on the Oslo Stock Exchange, the Company made a prepayment of NOK 50 million ($7.2 million) and agreed to a retroactive increase in fees and margins to September 1, 2008. The total amount outstanding under these facilities as of March 31, 2009 was $117.5 million which is classified as current as the Company’s intent is to pay the outstanding balances by January 1, 2010. The Company was not in compliance with the Leverage Ratio financial covenant at March 31, 2009 and has received a waiver for this period. In return for the waiver, the Company agreed to, among other things, increase the margin on NOK 350 million Revolving Credit Facility, NOK 230 million Revolving Credit Facility, NOK 150 million Additional Term Loan, and the NOK 200 million Overdraft Facility to 275 bps, to make an additional prepayment of NOK 25 million prior to June 30, 2009, and to pay a waiver fee.

     DeepOcean has $14.1 million of finance leases to finance certain of its equipment including ROVs. These leases have terms of up to seven years. These leases are cross defaulted to the NOK 350 million Revolving Credit Facility, NOK 230 Revolving Credit Facility and NOK 150 million Additional Term Loan, including the NOK 200 Overdraft Facility.

     23.3 million Euro Revolving Credit Facility. In October 2001, a subsidiary of DeepOcean entered into this multi-currency facility, which provides for Euro and U.S. Dollar borrowings. The purpose of this facility was to fund the construction of the vessel Arbol Grande. The facility is secured by a first priority lien on the Arbol Grande. Interest on the loan is payable quarterly at LIBOR plus 3.25%. The facility matures on March 31, 2010. The facility is subject to financial covenants with respect to leverage ratio, net worth and minimum liquidity and affirmative and negative covenants.

     NOK 260 million Short Term Credit Facility. In May 2008, Trico Shipping entered into a credit facility agreement with Carnegie Investment Bank AB Norway Branch, as lender (the Short Term Credit Facility). The Short Term Credit Facility provides for a NOK 260 million short term credit facility that Trico Shipping is using for general corporate purposes. The facility was scheduled to mature on November 1, 2008, but the facility agreement has been amended to extend the term of the facility until February 1, 2009. Interest on the facility accrued at an average 9.05% per annum rate until November 1, 2008, at which time the interest rate increased to 9.9%. This facility was repaid in full at maturity on February 2, 2009.

     In addition to the principal amounts above at March 31, 2009, certain of the following debt instruments have current maturities.

     6.5% Convertible Debentures. On May 14, 2008, the Company issued $300.0 million of the 6.5% Debentures. The Company received net proceeds of approximately $287 million, after deducting offering costs of approximately $13 million, which were capitalized as debt issuance costs and are being amortized over the life of the 6.5% Debentures. Net proceeds of the offering were used to partially fund the acquisition of DeepOcean. Interest on the 6.5% Debentures is payable semiannually in arrears on May 15 and November 15 of each year. The debentures mature on May 15, 2028, unless earlier converted, redeemed or repurchased. The 6.5% 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 unsecured indebtedness. The 6.5% Debentures are effectively subordinated to all of the Company’s existing and future secured indebtedness to the extent of the value of the Company’s assets collateralizing this indebtedness and any liabilities of the Company’s subsidiaries.

     The 6.5% Debentures are convertible, based on an initial conversion rate of 24.74023 shares of common stock per $1,000 principal amount of debentures, subject to adjustment. For more information regarding our 6.5% Debentures conversion and redemption options, see Note 5 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008. None of these conditions related to an adjustment in the conversion rate or a fundamental change have been met at March 31, 2009. The conversion feature associated with the debentures is considered an embedded derivative as defined in SFAS No. 133. The estimated fair value of the derivative on the date of issuance was $53.8 million, which was recorded as a non-current derivative

liability on the balance sheet with the offset recorded as a discount on the 6.5% Debentures. The derivative liability must be marked-to-market each reporting period with changes to its fair value recorded in the consolidated statement of operations as other income (expense) and the discount being accreted through an additional non-cash charge to interest expense over a five year period. See Note 5 for further discussion on the derivative liability.

     During the first quarter of 2009, various holders of the Company’s 6.5% Debentures converted $23.3 million principal amount of the debentures, collectively, for a combination of $6.6 million in cash related to the interest make-whole provision and 576,071 shares of our common stock based on an initial conversion rate of 24.74023 shares of common stock per $1,000 principal amount of debentures. As of March 31, 2009, there is approximately $254.7 million principal amount of the 6.5% Debentures outstanding.

     3% Senior Convertible Debentures. In February 2007, the Company issued $150.0 million of 3% senior convertible debentures due in 2027 (the 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.

     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 our 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 issue approximately 3.5 million shares of our common stock. For more information regarding our 3% Debentures conversion and redemption options see Note 5 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

     Effective January 1, 2009, the 3% Debentures were subject to FASB Staff Position APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)”. ABP 14-1 changes the accounting and requires further disclosures for convertible debt instruments that permit cash settlement upon conversion. ABP 14-1 required the Company to separately account for the liability and equity components of its senior convertible notes in a manner intended to reflect its nonconvertible debt borrowing rate. The discount on the liability component of the 3% Debentures is amortized until the first quarter of 2014. ABP 14-1 requires retrospective application to all periods as defined within Statement of Financial Accounting Standards (SFAS) No. 154, “Accounting Changes and Error Corrections”.

     The information below reflects the impact of adopting APB 14-1 for the three months ended March 31, 2009.

		Three Months Ended
		March 31, 2009
Net incremental non-cash interest expense		$	1,359
Less: tax effect			(489	)
Net incremental non-cash interest expense, net of tax		$	870
Net decrease to earnings per common share:
Basic		$	0.05
Diluted		$	0.05

     The impact of adopting APB 14-1 for the three months ending March 31, 2009 results in an overall $0.2 million increase in assets of which capitalized interest increased $1.2 million and capitalized debt issuance costs decreased $1.0 million, a $34.4 million decrease in long-term debt and an overall increase in stockholders equity of $34.7 million related to a $40.8 million increase in additional paid in capital and a $6.1 million decrease in retained earnings.

     The table below reflects the Company’s retrospective adoption of APB 14-1. These selected financial captions summarize the adjustments for the three months ended March 31, 2008 and twelve months ended December 31, 2008 for the results of operations and December 31, 2008 and 2007 for the consolidated financial position.

		Three Months Ended March 31, 2008												Twelve Months Ended December 31, 2008
		As Reported				APB 14-1				Adjusted				As Reported				APB 14-1				Adjusted
		3/31/2008				Adjustment				3/31/08				12/31/2008				Adjustment				12/31/08
Interest expense, net of amounts capitalized		$	(223	)		$	(929	)		$	(1,152	)		$	(31,943	)		$	(3,893	)		$	(35,836	)
Income tax expense			2,284				(334	)			1,950				14,823				(1,401	)			13,422
Net income (loss) attributable to Trico Marine Services, Inc.			10,901				(595	)			10,306				(111,163	)			(2,492	)			(113,655	)
Earnings (loss) per common share:
Basic		$	0.76			$	(0.04	)		$	0.72			$	(7.45	)		$	(0.17	)		$	(7.62	)
Diluted			0.73				(0.04	)			0.69				(7.45	)			(0.17	)			(7.62	)
Weighted average shares outstanding:
Basic			14,411				14,411				14,411				14,924				14,924				14,924
Diluted			14,919				14,919				14,919				14,924				14,924				14,924
		As Reported				APB 14-1				Adjusted				As Reported				APB 14-1				Adjusted
		12/31/2008				Adjustment				12/31/2008				12/31/2007				Adjustment				12/31/2007
ASSETS
Construction-in-progress		$	258,826			$	1,243			$	260,069			$	255,749			$	—			$	255,749
Other assets			25,720				(1,083	)			24,637				15,858				(1,297	)			14,561
Total assets			1,202,576				160				1,202,736				681,744				(1,297	)			680,447
LIABILITIES AND STOCKHOLDERS’ EQUITY
Long-term debt		$	722,948			$	(35,850	)		$	687,098			$	157,287			$	(41,200	)		$	116,087
Total liabilities			1,037,706				(35,850	)			1,001,856				278,644				(41,200	)			237,444
Additional paid-in capital			275,433				41,261				316,694				245,134				42,662				287,796
Retained earnings			30,448				(5,251	)			25,197				141,611				(2,759	)			138,852
Total Trico Marine Services, Inc. stockholders’ equity			142,984				36,010				178,994				390,222				39,903				430,125
Total liabilities and stockholders’ equity			1,202,576				160				1,202,736				681,744				(1,297	)			680,447

     The amount of interest cost recognized for the three months ending March 31, 2009 and 2008 relating to both the contractual interest coupon and amortization of the discount on the liability component is $2.5 million and $2.4 million, respectively. 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.

     $200 million Revolving Credit Facility. In May 2008, in connection with financing the acquisition of DeepOcean, Trico Shipping AS and certain other subsidiaries of the Company entered into a credit agreement (as amended the $200 Million Credit Agreement) with various lenders. The $200 Million Credit Agreement provides the Company with a $200 million, or equivalent in foreign currency, revolving credit facility, which is guaranteed by certain of the Company’s subsidiaries, and is collateralized by vessel mortgages and other security documents. The final $10 million of availability was contingent on delivery of the Sapphire vessel, which was subsequently cancelled, which limited the maximum availability to $190 million. Additionally, on April 28, 2009, the Company sold a platform supply vessel which required a prepayment on this facility of $14.9 million. The prepayment changed the commitment reductions to $9.1 million each quarter and continues through the quarter ending June 30, 2010, at which time the facility will reduce by $5.4 million per quarter until March 31, 2013. The commitment under the facility is now at $145 million. The facility is drawn in NOK and the amount outstanding is subject to adjustment monthly for changes in the NOK-U.S. Dollar exchange rate. On April 7, 2009, the Company repaid NOK 51.2 million ($7.7 million) of the NOK 1.1 billion outstanding based on an exchange rate of 6.68 NOK per U.S. Dollar. Interest is payable on the unpaid principal amount outstanding at a rate applicable to the currency in which the funds are borrowed (the Eurodollar rate designated by the British Bankers Association for U.S. Dollar denominated loans, or Euro LIBOR, NOK LIBOR or Sterling LIBOR for loans denominated in Euro, NOK or Sterling, respectively) plus 3.25%. The $200 million credit facility matures May 14, 2013.

     The $200 Million Credit Agreement subjects the Company 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 $200 Million Credit Agreement 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.

     $100 million Revolving Credit Facility. In April 2008, Trico Subsea AS entered into an eight-year multi-currency revolving credit facility (as amended, the $100 Million Credit Agreement) in the amount of $100 million or equivalent in foreign currency, secured by first preferred mortgages on Trico Subsea AS vessels, refund guarantees related thereto, certain additional vessel-related collateral, and guarantees from Trico Supply AS, Trico Subsea Holding AS and each subsidiary of Trico Subsea AS that acquires a vessel. The commitment under this multi-currency revolving facility matures on the earlier of the eighth anniversary of the delivery of the final vessel or December 31, 2017. The commitment under this facility reduces in equal quarterly installments of $3.125 million commencing on the earlier of the date three months after the delivery of the eighth and final vessel or June 30, 2010. Interest is payable on the unpaid principal amount outstanding at a rate applicable to the currency in which the funds are borrowed (the Eurodollar rate designated by the British Bankers Association for U.S. Dollar denominated loans, or Euro LIBOR, NOK LIBOR or Sterling LIBOR for loans denominated in Euro, NOK or Sterling, respectively) plus 3.25%.

     The $100 Million Credit Agreement also subjects Trico Supply AS and its subsidiaries 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 collateral, loans, consolidated leverage ratio, consolidated net worth and collateral coverage. Payment under the $100 Million Credit Agreement 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 the occurrence of certain changes in control.

     $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, a 65% interest in Trico Marine Cayman, LP, 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. The commitment under the U.S. Credit Facility reduces to $40 million after one year and $30 million after two years. A voluntary prepayment of $15 million was made on January 14, 2009 which reduced the commitment under this Facility to $35 million. Interest is payable on the unpaid principal amount outstanding at the Eurodollar rate designated by the British Bankers Association plus 3.25% (subject to adjustment based on consolidated leverage ratio). The facility matures on January 31, 2011.

     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.

     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 $6.9 million is outstanding at March 31, 2009. 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.

     $18 million Revolving Credit Facility. In November 2007, DeepOcean entered into this $18 million revolving credit facility to refinance the original loan used to acquire and upgrade the vessel Atlantic Challenger. This facility is secured with a first priority lien on the Atlantic Challenger. This facility is subject to a mandatory $0.5 million per quarter payment. Interest under the facility accrues at LIBOR plus 3.25% and is payable quarterly. The facility is subject to financial covenants with respect to leverage ratio, net worth and minimum liquidity and affirmative and negative covenants.

     8 million Sterling Overdraft Facility. CTC Marine uses this secured short term overdraft facility in its normal business operations. The facility actually has gross capacity of 12 million Sterling ($17.1 million) but it is offset by CTC Marine’s cash accounts. Borrowings under this facility can be made in Sterling, U.S. Dollars, NOK, Australian Dollars and Euros. At March 31, 2009, CTC Marine had cash totaling $9.9 million, which means the net borrowings on the overdraft facility were $2.2 million. Interest on the facility accrues at the lender’s base rate for Sterling borrowings plus 1% and is payable quarterly in arrears. The facility is secured by the property and equipment of CTC Marine.

     24.2 million Sterling Asset Financing Facilities. CTC Marine has two asset facilities totaling 24.2 million Sterling ($34.4 million) to finance new and existing assets. The Asset Finance Loan Facility (Existing Assets Facility) has a commitment of 8.3 million Sterling ($11.8 million), matures on various dates through 2012 and accrues interest at the 3-month Sterling LIBOR rate plus a margin of between 1.65% and 2.55%. As of March 31, 2009, CTC Marine’s outstanding balance on the Existing Assets Facility totaled approximately 4.9 million Sterling ($7.0 million). The Asset Finance Loan Facility (New Assets Facility) has a commitment of 15.9 million Sterling ($22.6 million), matures on various dates that are six years from the delivery of the financed assets and accrues interest at the 3-month Sterling LIBOR rate plus 1.65%. The final asset to be financed under the New Assets Facility was delivered in the fourth quarter of 2008. As of March 31, 2009, CTC Marine’s outstanding balance on the New Assets Facility totaled approximately 6.3 million Sterling ($9.0 million). These asset finance facilities are secured by mortgages on the assets financed and the property and equipment of CTC Marine and are partially guaranteed by DeepOcean. These asset finance loan facilities are subject to certain customary covenants and its outstanding balance cannot exceed 60% of the net book value of the assets collateralizing the facility. These facilities are subject to quarterly reductions of their borrowings.

     Under certain of the Company’s debt agreements, an event of default will be deemed to have occurred if there is a change of control of the Company or certain of its subsidiaries or if a material adverse change occurs to the financial position of the applicable borrowing entity within the Company. Also, certain of the Company’s debt agreements contain a material adverse change/effect provision that is determined in the reasonable opinion of the respective lenders, which is outside the control of the Company. Additionally, certain of the Company’s debt agreements contain cross-default and cross-acceleration provisions that trigger defaults under other of the Company’s debt agreements.

     The Company’s capitalized interest totaled $4.8 million and $1.5 million for the three month period ended March 31, 2009 and 2008, respectively.

5. Derivative Instrument

     The conversion feature associated with the 6.5% Debentures is considered an embedded derivative as defined in SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”). Under SFAS No. 133 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. Additionally, on January 1, 2009, we adopted SFAS No. 161, “Disclosures About Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133” (“SFAS No. 161”). SFAS No. 161 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. SFAS No. 161 also requires entities to disclose additional information about the amounts and location of derivatives located within the financial statements, how the provisions of SFAS No. 133 have been applied, and the impact that hedges have on an entity’s financial position, financial performance and cash flows.

     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 6 for further discussion). The associated discount on the 6.5% Debentures is being accreted through a non-cash charge to interest expense over a five year period given that the debentures include a number of put and call options held by the holders and the Company assumes it is probable that the debt will be redeemed or converted by the first put option date of May 15, 2013. The coupon and the amortization of the discount on the debt will yield an effective interest rate of approximately 11.8% on these convertible notes. The reduction in the Company’s stock price is the primary factor influencing the change in value of this derivative and its impact on the Company’s net income (loss). Any increase in the Company’s stock price will result in unrealized losses being recognized in future periods and such amounts could be material. The tables below reflect (a) Fair Values of Derivative Instruments in the Balance Sheets and (b) the Effect of Derivative Instruments on the Statements of Income.

Liability Derivative

March 31, 2009

December 31, 2008

Derivatives Not Designated as Hedging

Balance Sheet

Fair

Balance Sheet

Fair

Instruments under Statement 133

Location

Value

Location

Value

Other contract

Long-term derivative

$

180

Long-term derivative

$

1,119

Total derivatives

$

180

$

1,119

The Effect of Derivatives Instruments on the Statements of Income
for the Periods Ended March 31, 2009 and 2008

Derivatives Not

Amount of Gain

Designated as Hedging

Location of Gain

Recognized in Income

Instruments under

Recognized in Income

on Derviative

Statement 133

on Derivative

March 31, 2009

March 31, 2008

Other contract

Unrealized gain on mark-to-market of embedded derivative

$

939

$

—

$

939

$

—

6. Fair Value Measurements

     SFAS No. 157, “Fair Value Measurements” defines fair value, provides guidance for measuring fair value and requires certain disclosures. This statement utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

	•		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.

     Our population of financial assets and liabilities subject to fair value measurements on a recurring basis are as follows (in thousands):

		Fair Value Measurements
		at 3/31/09 Using Fair Value
		Hierarchy
		Fair Value as of
		3/31/09				Level 1				Level 2				Level 3
Assets
Cash and cash equivalents		$	60,504			$	60,504			$	—			$	—
Accounts receivable, net			127,320				127,320				—				—
		$	187,824			$	187,824			$	—			$	—
Liabilities
Accounts payable		$	22,830			$	22,830			$	—			$	—
Long-term derivative			180				—				—				180
		$	23,010			$	22,830			$	—			$	180

		Fair Value Measurements
		at 12/31/08 Using Fair Value
		Hierarchy
		Fair Value as of
		12/31/08				Level 1				Level 2				Level 3
Assets
Cash and cash equivalents		$	94,613			$	94,613			$	—			$	—
Accounts receivable, net			165,152				165,152				—				—
		$	259,765			$	259,765			$	—			$	—
Liabilities
Accounts payable		$	53,872			$	53,872			$	—			$	—
Long-term derivative			1,119				—				—				1,119
		$	54,991			$	53,872			$	—			$	1,119

     As discussed in Note 5, the Company’s conversion feature contained in its 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 include the Company’s stock closing price of $2.10, expected volatility of 60%, a discount rate of 25.0% and using a United States Treasury Bond Rate of 1.45% for the time value of options. 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).

Balance on May 14, 2008		$	53,772
Unrealized gain for the period May 14, 2008 through December 31, 2008			(52,653	)
Balance on December 31, 2008		$	1,119
Unrealized gain for the first quarter of 2009			(939	)
Balance on March 31, 2009		$	180

     We also adopted SFAS No. 157 for non-financial assets and liabilities in the first quarter of 2009. We had no required fair value measurements for non-financial assets and liabilities in the first quarter of 2009 and no required additional disclosures upon adoption.

7. Earnings (Loss) per Share

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

		Three Months Ended March 31,
		2009				2008
						As adjusted, see
						Notes 4 and 12
Net income (loss) attributable to Trico Marine Services, Inc.		$	(747	)		$	10,306
Weighted-average shares of common stock outstanding:
Basic			16,711				14,411
Add dilutive effect of:
Stock options and nonvested restricted stock			—				133
Warrants			—				375
Total			16,711				14,919
Earnings (Loss) per Share:
Basic		$	(0.04	)		$	0.72
Diluted		$	(0.04	)		$	0.69

     The Company’s 3% Debentures and 6.5% Debentures 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 (Note 4). Although the Company has the option of settling the principle amount of 6.5% Debentures in either cash, stock or a combination of both, management’s current intention is 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. Therefore, the Company has excluded the potential dilutive effect of the principal amount of these 6.5% Debentures in the calculation of diluted earnings per share.

8. Other Comprehensive Income

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

		Three Months Ended March 31,
		2009												2008
		Shareholders												Shareholders
		of Trico Marine				Noncontrolling								of Trico Marine				Noncontrolling
		Services, Inc.				Interests				Total				Services, Inc.				Interests				Total
														As adjusted, see Notes 4 and 12
Net income (loss)		$	(747	)		$	750			$	3			$	10,306			$	841			$	11,147
Foreign currency translation gain			13,090				—				13,090				26,361				—				26,361
Amortization of unrecognized actuarial gains			97				—				97				85				—				85
Total comprehensive income		$	12,440			$	750			$	13,190			$	36,752			$	841			$	37,593

9. 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 2008 Annual Report on Form 10-K. Net income for the three months ended March 31, 2009 and 2008 included $0.7 million and $0.8 million, respectively, of stock-based compensation costs all of which are included in general and administrative expenses in the accompanying condensed consolidated statements of income. As of March 31, 2009, there was $3.8 million of total unrecognized compensation costs related to unvested stock-based compensation that is expected to be recognized over a weighted-average period of 1.46 years. The Company expects that its total fixed stock-based compensation expense for the year ended December 31, 2009 will total approximately $2.6 million.

     On March 13, 2009, the Company granted stock options and stock appreciation awards (“SARs”) to executives and certain key employees as follows. The exercise price for the stock options and SARs was based on the Company’s closing stock price on the date of grant which was $2.05.

						Number of
Grants		Vesting Period				Shares
SARs		Ratably over three years					170,724
SARs		Vest 100% on third anniversary of grant date					130,144
Stock options		Ratably over three years					170,724

     The grant-date fair value for the stock options and SARs was estimated using a Black-Scholes option valuation model which incorporated the following assumptions. As the 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 Income.

		SARs								Stock
		(Vested Ratably)				(Cliff Vested)				Options
Grant-Date Fair Value		$	1.02			$	1.00			$	1.02
Expected Term			4.5				5.0				4.5
Expected Volatility			60.0	%			55.0	%			60.0	%
Risk-Free Interest Rate			1.74	%			1.87	%			1.74	%
Expected Dividend Distributions			N/A				N/A				N/A

10. Taxes

     The Company’s income tax expense/(benefit) for the three months ended March 31, 2009 was $(15.0) million compared to $2.0 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 benefit for the three month period ending March 31, 2009 differs 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. Absent the $18.6 million benefit recognized in the first quarter related to the Norwegian law change, the Company would expect an annual effective tax rate of (24.0%). 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, 2008, the Company’s tax expense differed from that under the statutory rate primarily due to tax benefits associated with the Norwegian Tonnage Tax Regime, the Company’s permanent reinvestment of foreign earnings and state and foreign taxes. Also impacting the Company’s tax expense was a reduction in Norwegian taxes payable related to a dividend made between related Norwegian entities during the first quarter of 2008.

     Although the Company recorded a profit from operations in recent years from its U.S. operations, the history of negative earnings from these operations constitutes significant negative evidence substantiating the need for a full valuation allowance against the U.S. net deferred tax assets as of March 31, 2009. The Company uses cumulative profitability and future income projections as key indicators to substantiate the release of the valuation allowance. If the Company does not experience an ownership change and its U.S. operations continue to be profitable, it is possible the Company will release the valuation allowance at some future date, which would increase the Company’s additional paid-in capital account.

     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 jurisdictions as Norway, Mexico, United Kingdom, Brazil, Nigeria, Angola, Hong Kong, China, 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.

     Financial Accounting Standards Board (FASB) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes”, clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. As of December 31, 2008, the Company recognized $2.1 million in uncertain tax positions and $1.2 million in penalties and interest. During the three months ended March 31, 2009, 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, $37.4 million at March 31, 2009) was payable in equal installments over 10 years. The remaining one-third of the tax liability (NOK 126 million, $18.6 million at March 31, 2009) 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 first quarter earnings of $18.6 million related to the change. As of March 31, 2009, the Company’s total tonnage tax liability was $33.6 million.

     Subsequent to the acquisition of DeepOcean by Trico Shipping (a Norwegian tonnage tax entity), DeepOcean was delisted from the Oslo Bors exchange in August 2008. Because a Norwegian tonnage tax entity cannot own shares in a non-publicly listed entity, with the exception of other Norwegian tonnage tax entities, Trico Shipping had until January 31, 2009, under a series of waivers provided by the Norwegian Central Tax Office, to transfer its ownership interest in DeepOcean and the non-tonnage tax entities. Failure to comply with this deadline would have resulted in the income of Trico Shipping being subject to a 28% tax rate and an exit tax liability, payable over a ten year period, being due and payable immediately. In a series of steps completed in December of 2008 and January of 2009, the ownership of DeepOcean and its non-tonnage tax related subsidiaries were transferred to Trico Supply and the tonnage tax related entities owned by DeepOcean became subsidiaries of Trico Shipping AS. Following completion of these steps on January 30, 2009, the Company satisfied the tonnage tax requirements.

11. 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,
		2009				2008
Service cost		$	1,022			$	216
Interest cost			251				73
Return on plan assets			(286	)			(90	)
Social security contributions			148				31
Recognized net actuarial loss			97				18
Net periodic benefit cost		$	1,232			$	248

     The Company’s contributions to the Norwegian defined benefit plans totaled $0.7 million and $0.4 million for the three month periods ended March 31, 2009 and 2008, respectively.

     The Company’s United Kingdom employees are covered by a non-contributory multi-employer defined benefit plan. Contributions to this plan were $0.1 million for each of the three month periods ended March 31, 2009 and 2008, respectively.

     Issued in December 2007, SFAS No. 160, “Accounting and Reporting of Minority Interests in Consolidated Financial Statements, an amendment of ARB No. 51”, states that accounting and reporting for a noncontrolling interest, sometimes called a minority interest, will be recharacterized as noncontrolling interests and classified as a component of equity. SFAS No. 160 applies to all entities that prepare consolidated financial statements, except not-for-profit organizations, but will affect only those entities that have an outstanding noncontrolling interest in one or more subsidiaries or that deconsolidate a subsidiary. This statement is effective as of the beginning of an entity’s first fiscal year beginning after December 15, 2008. The Company adopted SFAS No. 160 effective January 1, 2009 which resulted in an adjustment or change in position of its noncontrolling interest in Eastern Marine Services Limited (“EMSL”) as equity. The presentation and disclosure requirements of SFAS No. 160 were applied retrospectively and only change the presentation of noncontrolling interests and its inclusion in comprehensive income. The adoption of SFAS No. 160 did not have a significant impact on the Company’s ability to comply with the financial covenants contained in its debt covenant agreements.

     Below is an equity reconciliation for the year ended December 31, 2008 and the three months ended March 31, 2009 (in thousands):

						Trico Marine				Noncontrolling
		Total				Services, Inc. (1)				Interest
Balance, December 31, 2007		$	443,003			$	430,125			$	12,878
Net income (loss)			(106,864	)			(113,655	)			6,791
Capital contribution			3,519				—				3,519
Distribution to NAMESE Partner			(244	)			—				(244	)
Adjustment to carrying value of NAMESE assets			(824	)			—				(824	)
Foreign currency translation			(222,507	)			(222,273	)			(234	)
Other			84,797				84,797				—
Balance, December 31, 2008			200,880				178,994				21,886
Net income (loss)			3				(747	)			750
Contribution to noncontrolling interest venture			2,284				—				2,284
Distribution to EMSL			(6,120	)			—				(6,120	)
Foreign currency translation			13,187				13,187				—
Other			5,974				5,974				—
Balance, March 31, 2009		$	216,208			$	197,408			$	18,800

13. Commitments and Contingencies

     See also Note 16 for a discussion of litigation commenced following the end of the quarter.

     Plan of Reorganization Proceeding — Steven Salsberg and Gloria Salsberg are pursuing an appeal of a court’s finding that the Company did not provide any inaccurate information in connection with its 2005 reorganization. That finding has already been affirmed by the U.S. District Court and the matter is now pending before the U.S. Court of Appeals. The Salsbergs had agreed to resolve the matter and dismiss their appeal with prejudice, but they later declined to honor that agreement.

     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, 2009 and December 31, 2008, the Company accrued for liabilities in the amount of approximately $2.7 million and $2.3 million, respectively, based upon the gross amount that management believes it may be responsible for paying in connection with these matters. Additionally, 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.

     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 28.6 million Reais ($12.4 million at March 31, 2009). 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 Trico. The Company is currently waiting for the State Attorneys’ Office to file its appeal of the ruling with the Special Court of the Higher Administrative Tax Court. 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 FIN 48. 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 3.0 million Reais ($1.3 million at March 31, 2009). 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 Trico 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 FIN 48. 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.

14. Segment Information

     Following the Company’s acquisition of DeepOcean, consideration was given to how management reviews the results of the new combined organization. Generally, the Company believes its business is now segregated into three operational units or segments: Subsea Services, Subsea Trenching and Protection and Towing and Supply. Therefore, segment data has been retrospectively adjusted to present prior year data in accordance with the new reportable segments.

     The Towing and Supply segment is generally representative of the operations of the Company prior to its acquisition of DeepOcean. The Subsea Services segment is primarily represented by the DeepOcean operations except for the Subsea Trenching and Protection segment operations conducted through its wholly-owned subsidiary, CTC Marine. The Subsea Services segment also includes seven subsea platform supply vessels (SPSVs) that the Company had in service prior to the acquisition of DeepOcean.

						Subsea
						Trenching and				Towing and
		Subsea Services				Protection				Supply				Corporate				Total
		(In thousands)
Three Months Ended:
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	)
March 31, 2008
Revenues from Unaffiliated Customers		$	8,441			$	—			$	50,734			$	—			$	59,175
Intersegment Revenues			—				—				—				—				—
Operating Income (Loss)			2,612				—				10,393				(1,501	)			11,504
Income (Loss) Before Income Taxes and Noncontrolling Interests, as adjusted			2,613				—				13,044				(2,560	)			13,097

15. Recent Accounting Standards

     In April 2009, the FASB issued FASB Staff Position No. (FSP) FAS 157-4 “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly”. This FSP provides additional guidance for estimating fair value in accordance with FASB Statement No. 157, “Fair Value Measurements”, when the volume and level of activity for the asset or liability have significantly decreased. This FSP also includes guidance on identifying circumstances that indicate a transaction is not orderly. The standard is effective for periods ending after June 15, 2009. The Company is evaluating the impact, if any, this standard will have on its financial statements.

     In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments”. FSP FAS 107-1 and APB 28-1 amends FASB Statement No. 107, “Disclosures about Fair Value of Financial Instruments”, to require disclosures about fair value of financial instruments in interim as well as in annual financial statements. This FSP also amends APB Opinion No. 28, “Interim Financial Reporting”, to require those disclosures in all interim financial statements. These standards are effective for periods ending after June 15, 2009. The Company is evaluating the impact, if any, these standards will have on its financial statements.

     On February 12, 2008, the FASB issued FASB Staff Position No. 157-2, “Effective Date of FASB Statement No. 157”, deferring the effective date of SFAS No. 157 to fiscal years beginning after November 15, 2008 for nonfinancial assets and liabilities, except those that are recognized or disclosed in the financial statements at least annually. The Company has adopted the standard for those assets and liabilities as of January 1, 2009 with no material impact on its financial statements.

     In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (SFAS No. 141(R)), which replaces SFAS No. 141, “Business Combinations.” SFAS No. 141(R) retains the underlying concepts of SFAS No. 141 in that all business combinations are still required to be accounted for at fair value under the acquisition method of accounting, but SFAS No. 141(R) changes the method of applying the acquisition method in a number of significant aspects. In addition to expanding the types of transactions that will now qualify as business combinations, SFAS No. 141(R) also provides that acquisition costs will generally be expensed as incurred; minority interests will be valued at fair value at the acquisition date; restructuring costs associated with a business combination will generally be expensed subsequent to the acquisition date; and changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will affect income tax expense. SFAS No. 141(R) is effective on a prospective basis for all business combinations for which the acquisition date is on or after the beginning of the first annual period subsequent to December 15, 2008, with an exception related to the accounting for valuation allowances on deferred taxes and acquired contingencies related to acquisitions completed before the effective date. SFAS No. 141(R) amends SFAS No. 109 to require adjustments, made after the effective date of this statement, to valuation allowances for acquired deferred tax assets and income tax positions to be recognized as income tax expense. SFAS No. 141(R) is required to be adopted concurrently with SFAS No. 160, “Accounting and Reporting of Minority Interests in Consolidated Financial Statements, an amendment of ARB No. 51”, and is effective for business combination transactions for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company adopted the standards as of January 1, 2009.

     Sale of Vessel. On April 28, 2009, the Company sold a platform supply vessel for $26.0 million in net proceeds. The sale of this vessel required a prepayment of approximately $14.9 million for the $200 million Revolving Credit Facility as the vessel served as security for that facility.

     Kistefos Lawsuit. On April 8, 2009, Kistefos AS, a Norwegian investment company wholly owned by Christen Sveaas, filed a complaint in Delaware’s Court of Chancery against Trico and each of Trico’s directors seeking a declaratory judgment as to the legality of one of nine measures Kistefos has proposed for stockholder action at Trico’s upcoming 2009 annual meeting. Kistefos holds about 21.1% of Trico’s outstanding common stock. On April 14, 2009, the court denied Kistefos’s motion to expedite consideration of its claim and noted that the legality of Kistefos’s additional proposal was not ripe for judicial consideration because such proposal has not been and may never be adopted. The court also determined that Trico’s position that Kistefos’s additional proposal was not legal was preserved, and that the proposal would be presented for a stockholder vote at the 2009 annual meeting. Trico will tally a vote of stockholders on this proposal at the 2009 annual meeting for purposes of recording a provisional vote without prejudice to Trico’s position that the proposed bylaw, even were it to receive the requisite vote to amend the bylaws, would not comply with Delaware law or Trico’s charter and would therefore be invalid.

     Withdrawal from Partnership. In July 2007, DeepOcean AS, established a limited partnership under Norwegian law with Volstad Maritime AS, for the sole purpose of creating an entity that would finance the construction of a new vessel. According to the terms of the partnership agreement, neither party to the partnership was obligated to fund more than its committed capital contribution with the remaining portion to be financed through third party financings. Given the global economic turmoil and resulting difficulties in obtaining financing, the purpose of the partnership has been frustrated due to the fact that the partnership has been unable to fulfill its commitment of obtaining financing for the remaining amount necessary to purchase the new vessel. As a result, on April 27, 2009, DeepOcean AS served notice to Volstad of its formal withdrawal from the partnership, effective immediately, thereby eliminating its continuing obligations therein. As a result, the Company’s total commitments and contingencies have been reduced by $41.6 million. Please see “Contractual Obligations” for further information. The Company is currently in negotiations related to the sale of its partnership interest in the Deep Cygnus, which had a carrying value of approximately $11 million at March 31, 2009. Depending on the outcome of those negotiations, the Company could be required to impair some or all of its investments related to its contributions to the partnership in a future period.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2008 (2008 Form 10-K). Unless otherwise indicated, any reference to Notes refers to the Notes to the Condensed Consolidated Financial Statements included herein.

Cautionary Statements

     Certain statements made in this Quarterly Report on Form 10-Q that are not historical facts are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements may include statements that relate to:

	•		our objectives, business plans or strategies, and projected or anticipated benefits or other consequences of such plans or strategies;
	•		our ability to obtain adequate financing on a timely basis and on acceptable terms, including with respect to refinancing debt maturing in the next twelve months;
	•		our ability to continue to service, and to comply with our obligations under, our credit facilities and our other indebtedness, including our obligation to pay make-whole amounts upon any conversion of our convertible debentures due 2028;
	•		projections involving revenues, operating results or cash provided from operations, or our anticipated capital expenditures or other capital projects;
	•		overall demand for and pricing of our vessels;
	•		changes in the level of oil and natural gas exploration and development
	•		our ability to successfully or timely complete our various vessel construction projects;
	•		further reductions in capital spending budgets by customers;
	•		further declines in oil and natural gas prices;
	•		projected or anticipated benefits from acquisitions;
	•		increases in operating costs;
	•		the inability to accurately predict vessel utilization levels and day rates;
	•		variations in global business and economic conditions;
	•		the results, timing, outcome or effect of pending or potential litigation and our intentions or expectations with respect thereto and the availability of insurance coverage in connection therewith; and
	•		our ability to repatriate cash from foreign operations if and when needed.

     You can generally identify forward-looking statements by such terminology as “may,” “will,” “expect,” “believe,” “anticipate,” “project,” “estimate,” “will be,” “will continue” or similar phrases or expressions. We caution you that such statements are only predictions and not guarantees of future performance or events. All phases of our operations are subject to a number of uncertainties, risks and other influences, many of which are beyond our ability to control or predict. Any one of such influences, or a combination, could materially affect the results of our operations and the accuracy of forward-looking statements made by us. Actual results may vary materially from anticipated results for a number of reasons, including those stated under Item 1A. “Risk Factors” included in our 2008 Form 10-K.

     All forward-looking statements attributable to us are expressly qualified in their entirety by the cautionary statements above. We undertake no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this report. We caution investors not to place undue reliance on forward-looking statements.

Overview

     We are an integrated provider of subsea services, including subsea trenching and protection services, and, to a lesser extent, a provider of offshore support vessels. We maintain a global presence with operations primarily in international markets including the North Sea, West Africa, Mexico, China, the Mediterranean, Brazil and, to a lesser extent, the U.S. Gulf of Mexico. Our principal customers are major national and international oil and natural gas exploration, development and production companies, wind energy development companies and telecommunication companies. We provide all of our services through our direct and indirect subsidiaries in each of the markets in which we operate. We have three operating segments: Subsea Services, represented primarily by the operations of DeepOcean; Subsea Trenching and Protection, represented by the operations of CTC Marine; and Towing and Supply, represented primarily by our historical operation of offshore supply vessels.

     The revenues and costs for our Subsea Services segment primarily are determined by the scope of individual projects and in certain cases by multi-year contracts. Subsea Services projects may utilize any combination of vessels, both owned and leased, and components of our non-fleet equipment consisting of remotely-operated vehicles (“ROV“s), installation handling equipment, and survey equipment. The scope of work, complexity, degree of engineering services provided and area of operation for our projects will determine what assets will be deployed to service each respective project. Rates for our subsea services typically include a composite day rate for the utilization of a vessel and/or the appropriate equipment for the project and the crew. These day rates can be fixed or variable and are primarily influenced by the specific technical requirements of the project, level of engineering required, the availability of the required vessels and equipment and the project’s geographic location and competition. Occasionally, projects are based on unit-rate contracts (based on units of work performed, such as miles of pipeline inspected per day) and only occasionally through lump-sum contractual arrangements. In addition, we generate revenues for onshore engineering work, post processing of survey data, and associated reporting. The operating costs for the Subsea Services segment primarily reflect the rental or ownership costs for our leased vessels and equipment, engineering and project management staff, crew compensation costs, supplies and marine insurance. Our customers are typically responsible for mobilization expenses and fuel costs. Variables that may affect our Subsea Services segment include the scope and complexity of each project, weather or environmental downtime, and water depth. Delays or acceleration of projects will result in fluctuations of when revenues are earned and costs are incurred but generally they will not materially affect the total amount of costs.

     The revenues and costs for our Subsea Trenching and Protection segment are also primarily determined by the scope of individual projects. Based on the overall scale of the respective projects, we may utilize any combination of engineering services, assets and personnel, consisting of a vessel that deploys a subsea trenching asset, ROV and survey equipment, and supporting offshore crew and management. Our asset and personnel deployment is also dependent on various other factors such as subsea soil conditions, the type and size of our customer’s product and water depth. Revenues for our Subsea Trenching and Protection segment include a composite daily rate for the utilization of vessels and assets plus fees for engineering services, project management services and equipment mobilization. These daily rates will vary in accordance with the complexity of the project, existing framework agreements with clients, competition and geographic location. The operating costs for this segment predominately reflect the rental of its leased vessels, the hiring of third party equipment (principally ROVs and survey equipment), engineering personnel, crew compensation and depreciation on subsea assets. The delay or acceleration of the commencement of customer offshore projects will result in fluctuations in the timing of recognition of revenues and related costs, but generally will not materially affect total project revenues and costs.

     The revenues for our Towing and Supply segment are impacted primarily by fleet size and capabilities, day rates and vessel utilization. Day rates and vessel utilization are primarily driven by demand for our vessels, supply of new vessels, our vessel availability, customer requirements, competition and weather conditions. The operating costs for the Towing and Supply segment are primarily a function of the active fleet size. The most significant of our normal direct operating costs include crew compensation, maintenance and repairs, marine inspection costs, supplies and marine insurance. We are typically responsible for normal operating expenses, while our contracts provide that customers are typically responsible for mobilization expenses and fuel costs.

Our Outlook

     Our results of operations are highly dependent on the level of, among other things, operating and capital spending for exploration and development by the energy industry. The energy industry’s level of operating and capital spending is substantially related to the demand for natural resources, the prevailing commodity price of crude oil, and to a lesser extent, natural gas, and expectations for such prices. During periods of current or projected low commodity prices, our customers may reduce their capital spending budgets in an amount greater than operating spending for offshore drilling, exploration and development. Other factors that influence the level of capital spending by our customers which are beyond our control include: worldwide demand for crude oil and natural gas and the cost of exploring for and producing crude oil and natural gas which can be affected by environmental regulations, significant weather conditions, maintenance requirements and technological advances that affect energy and its usage.

     For the remainder of 2009, we will continue to focus on the following key areas:

     Reduce our debt level, and carefully manage liquidity and cash flow. Our substantial amount of indebtedness requires us to manage our cash flow to maintain compliance under our debt covenants and to meet our capital expenditure and debt service requirements. We have a centralized and disciplined approach to marketing and contracting our vessels and equipment to achieve less spot market exposure in favor of long-term contracts. The expansion of our subsea services activities is intended to have a stabilizing influence on our cash flow. We are also working towards deleveraging our balance sheet as we manage cash flow and liquidity throughout the year. In the second quarter, we completed a sale of a platform supply vessel. Please see “Liquidity and Capital Resources”.

     Maximize our vessel utilization and our service spreads. We continue to increase our combined subsea services and subsea trenching and protection fleet primarily through chartering of third-party vessels. We offer our customers a variety of subsea installation, construction, trenching and protection services using combinations of our equipment and personnel to maximize the earnings per vessel and to increase the opportunity to offer a differentiated technology service package. As part of this effort, and to reduce the negative effect on vessel utilization and earnings from North Sea seasonality, we have positioned 50% of the assets of the CTC segment in Asia and the Mediterranean.

     Expand our presence in additional subsea services markets. We believe the subsea market is growing, in contrast to our traditional towing and supply business, and will provide a higher rate of return on our vessels currently being constructed. We are marketing more aggressively in Angola, China, Brazil and Mexico.

     Invest in growth of our service offerings on our subsea fleet. We continually aim to improve our fleet’s capabilities in the subsea services area by focusing on more sophisticated next generation subsea vessels that will be attractive to a broad range of customers and can be deployed worldwide. We believe having an up to date and technologically advanced fleet is critical to our being competitive within the subsea services and subsea trenching and protection businesses. The average age of our subsea fleet is 6 years while the average age of the overall fleet is 16 years. During the first and second quarters of 2009, two subsea vessels previously time chartered on a “vessel only” basis began operating with full subsea service “spreads” under term contracts at day rates that are substantially higher than the previous “vessel only” day rates. During 2009 and 2010, we expect between two to four more similar arrangements. This is a key component of the strategy to take advantage of the growth in the subsea sector and the imbalance of supply and demand in the traditional offshore supply vessel sector.

     Focus on growing markets. We continue to capitalize on our experience, technology, personnel and fleet to expand our presence in growing markets. Our goal is to continue to efficiently deploy our vessels and services in profitable markets, with an emphasis on regions that have strong long-term subsea growth fundamentals, favorable contracting terms and lower operating cost structures, through existing operating entities and possibly through the use of joint ventures. Consistent with this strategy, we have reduced the number of our towing and supply vessels in the Gulf of Mexico by more than 70% since 2004. Over a two year period, we have mobilized 10 towing and supply vessels to Southeast Asia and during 2008, we also moved one subsea services vessel to the Mediterranean. Since the beginning of 2009, we have mobilized one subsea services vessel and two subsea protection vessels to Southeast Asia, one towing and supply vessel to Brazil, one towing and supply vessel to Mexico and one towing and supply vessel to West Africa. Throughout 2009, we intend to mobilize additional vessels to Mexico and Southeast Asia and utilize more vessels for subsea services that have historically operated in our traditional towing and supply operations.

Market Outlook — Demand for our Vessels and Services

     Each of our operating segments experiences different impacts from the current overall economic slowdown, the crisis in the credit markets, and the significant decline in oil prices. In all segments, however, we have seen increased exploration and production spending in Brazil, Mexico and China and we continue to focus our efforts on increasing our market presence in those regions. While we expect further declines in overall exploration and production spending, offshore drilling worldwide and construction spending, we believe that spending on subsea services will increase in 2009 and 2010. Additionally, we expect less decline in operational spending by our customers as compared to capital spending. Currently, approximately 50% of our revenues is the result of operational spending by our customers.

     Subsea Services. In 2009, we expect overall subsea spending to increase based on unit growth in new subsea installation and a commensurate increase in the already large base of installed units. Although projects may be postponed as a result of low commodity prices, we have not had any contracts canceled as we do not expect projects will be delayed in the second half of 2009. Given that a majority of our subsea services work includes inspection, maintenance and repair required to maintain existing pipelines, and such services are covered by operating expenditures rather than capital expenditures, we believe that the

outlook for our subsea services will remain consistent with the levels of subsea spending that occurred in 2008 with a seasonal decline in the results related to subsea project work as seen in the first quarter of 2009. We have seen no material decline in pricing for subsea services when compared to contracts awarded in 2008.

     Subsea Protection and Trenching. From January 2009 to the present, we have been awarded over $100 million in new contracts. For the remainder of 2009, we expect demand for our subsea protection and trenching services to be similarly driven by the increase in overall spending on subsea services. However, we believe that certain markets may be softer due to seasonality in this area and therefore are mitigating such seasonality by mobilizing our assets to regions less susceptible to seasonality. We expect generally a weak market in the North Sea but we believe there is an opportunity to develop a meaningful presence in emerging growth areas for this segment including China, Australia, the Mediterranean and Brazil.

     Towing and Supply. In the first quarter of 2009, we experienced significant declines in utilization and rates in the U.S. Gulf of Mexico and North Sea driven by reduced exploration and production spending as a result of low commodity prices in addition to seasonality for our anchor handling, towing and supply (“AHTS”) vessels in the North Sea. Should these markets endure sustained periods of softness, we are prepared to take appropriate measures to reduce our cost structure accordingly combined with mobilizing vessels in these regions to regions with increased activity. Our current view of the worldwide offshore support vehicles (“OSV”) market is that the combination of reduced customer spending on offshore drilling coupled with the likely level of newly built vessels to be delivered in 2009 and 2010, that prices and utilization in most markets, including the North Sea, Gulf of Mexico and West Africa will remain very weak.

Market Outlook — Credit Environment

     During 2009 we have seen lenders be unwilling to lend to companies that are not existing clients and continue to take steps to limit their overall exposure to any one company (which will limit our ability to seek new financing from existing lenders), increase margins and improve their collateral position. Should we desire to refinance existing debt or access capital markets for new financing, we expect terms and conditions of such refinancing or access to capital markets to be challenging during the year.

Acquisition of DeepOcean and CTC Marine

     On May 15, 2008, we initiated a series of events and transactions that resulted in the Company acquiring 100% of DeepOcean and CTC Marine. DeepOcean provides subsea inspection, maintenance and repair (“IMR”), survey and light construction support, subsea intervention and decommissioning services. CTC Marine is a provider of subsea protection services which includes, among other things, trenching, sea floor cable laying and subsea installation services. DeepOcean operates a fleet of 10 vessels equipped with dynamic positioning systems and, together with the owners of the vessel, have driven the development of a new type of dynamic positioning support vessel equipped with heavy weather launch and recovery systems. CTC Marine operates a fleet of five marine subsea trenching and protection vessels and a large number of modern ROVs and trenching equipment and has pioneered the development of deepwater module handling systems used to place and install sophisticated equipment on the ocean seabed. DeepOcean is based in Haugesund, Norway and CTC Marine is based in Darlington in the United Kingdom. DeepOcean and CTC Marine support their overseas operations through facilities in Aberdeen and Norwich in the United Kingdom, Den Helder in the Netherlands, Ciudad de Carmen in Mexico, Cairo, Egypt, Perth, Australia and Singapore. DeepOcean and CTC Marine combine to employ over 826 people worldwide.

     The acquisition price for DeepOcean and CTC Marine was approximately $700 million. To fund the transactions we used available cash, borrowings under new, existing and amended revolving lines of credit, proceeds from the issuance of $300 million of 6.5% Debentures and the issuance of phantom stock units

Proxy Contest

     As discussed in Note 16 to the financial statements, Kistefos has made nine proposals for our upcoming 2009 annual meeting, eight of which Trico opposes.

     Our expenses related to the solicitation (in excess of those normally spent for an annual meeting with an uncontested director election and excluding salaries and wages of our regular employees and officers) are currently expected to be approximately $0.5 million, of which approximately $0.3 million was spent in the first quarter of 2009.

Non-GAAP Financial Measures

     A non-GAAP financial measure is generally defined by the Securities and Exchange Commission (“SEC”) as one that purports to measure historical or future financial performance, financial position or cash flows, but excludes or includes amounts that would not be so adjusted in the most comparable GAAP measures. We measure operating performance based on adjusted EBITDA, a non-GAAP financial measure, which is calculated as earnings (net income or loss) before depreciation and amortization, amortization of non-cash deferred revenue, interest income, interest expense, net of amounts capitalized, unrealized gain on mark-to-market of embedded derivative, gain on conversion of debt, other (income) expense, net, stock-based compensation, gain  on sale of assets, income tax expense (benefit) and noncontrolling interest  of consolidated subsidiary.

     Our measure of adjusted EBITDA may not be comparable to similarly titled measures presented by other companies. Other companies may calculate adjusted EBITDA differently than we do, which may limit its usefulness as a comparative measure.

     We believe that the GAAP financial measure that adjusted EBITDA most directly compares to is operating income. Because adjusted EBITDA is not a measure of financial performance calculated in accordance with GAAP, it should not be considered in isolation or as a substitute for operating income, net income (loss), cash flows provided by operating, investing and financing activities, or other income or cash flows statement data prepared in accordance with GAAP.

     Adjusted EBITDA is widely used by investors and other users of our financial statements as a supplemental financial measure that, when viewed with our GAAP results and the accompanying reconciliation, we believe provides additional information that is useful to gain an understanding of the factors and trends affecting our ability to service debt, pay taxes and fund various capital expenditures. We also believe the disclosure of adjusted EBITDA helps investors meaningfully evaluate and compare our cash flow generating capacity.

     The following table provides the detailed components of adjusted EBITDA, as we define that term (in thousands):

		Three Months Ended March 31,
		2009				2008
						As adjusted, see
						Notes 4 and 12
Net Income (Loss) attributable to Trico Marine Services, Inc.		$	(747	)		$	10,306
Depreciation and Amortization			18,072				6,747
Amortization of Non-Cash Deferred Revenue			(140	)			(87	)
Interest Income			(1,072	)			(1,578	)
Interest Expense, Net of Amounts Capitalized			10,914				1,152
Unrealized Gain on Mark-to-Market of Embedded Derivative			(939	)			—
Gain on Conversion of Debt			(10,779	)			—
Other (Income) Expense, Net			730				(1,167	)
Stock-Based Compensation			724				844
(Gain) Loss on Sale of Assets			(9	)			(2,837	)
Income Tax Expense (Benefit)			(15,028	)			1,950
Noncontrolling Interest of Consolidated Subsidiaries			750				841
Adjusted EBITDA		$	2,476			$	16,171

     The following table reconciles adjusted EBITDA to operating income (in thousands):

		Three Months Ended March 31,
		2009				2008
						As adjusted
Adjusted EBITDA		$	2,476			$	16,171
Depreciation and Amortization			(18,072	)			(6,747	)
Amortization of Non-Cash Deferred Revenue			140				87
Stock-Based Compensation			(724	)			(844	)
(Gain) Loss on Sale of Assets			9				2,837
Operating Income (Loss)		$	(16,171	)		$	11,504

     Results of Operations

     The following is a discussion of the results of operations for each respective segment. Prior year amounts have been reclassified to conform to our new segment presentation.

Three Months Ended March 31, 2009 Compared to the Three Months Ended March 31, 2008

		Three Months Ended March 31,
		2009				2008				$ Change				% Change
						As adjusted, see
						Notes 4 and 12
Revenues:
Subsea Services		$	58,647			$	8,441			$	50,206				595	%
Subsea Trenching and Protection			26,050				—				26,050				100	%
Towing & Supply			37,122				50,734				(13,612	)			(27	)%
Total Revenues			121,819				59,175				62,644				106	%
Operating Income (Loss):
Subsea Services			(5,478	)			2,612				(8,090	)			(310	)%
Subsea Trenching and Protection			(3,236	)			—				(3,236	)			100	%
Towing & Supply			(459	)			10,393				(10,852	)			(104	)%
Corporate			(6,998	)			(1,501	)			(5,497	)			366	%
Total Operating Income (Loss)			(16,171	)			11,504				(27,675	)			(241	)%
Interest Income			1,072				1,578				(506	)			(32	)%
Interest Expense, Net of Amounts Capitalized			(10,914	)			(1,152	)			(9,762	)			847	%
Unrealized Gain on Mark to Market of Embedded Derivative			939				—				939				100	%
Gain on Conversion of Debt			10,779				—				10,779				100	%
Other Income (Expense), Net			(730	)			1,167				(1,897	)			(163	)%
Income (Loss) from Operations			(15,025	)			13,097				(28,122	)			(215	)%
Income Tax (Benefit) Expense			(15,028	)			1,950				(16,978	)			(871	)%
Net Income (Loss)			3				11,147				(11,144	)			(100	)%
Less: Net (Income) Loss Attributable to the Noncontrolling Interest			(750	)			(841	)			91				(11	)%
Net Income (Loss) Attributable to Trico Marine Services, Inc.		$	(747	)		$	10,306			$	(11,053	)			(107	)%