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SEACOR Marine Holdings Inc. - Quarter Report: 2018 March (Form 10-Q)

smhi20180331_10q.htm
 

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

________________________________________

FORM 10-Q

________________________________________

(Mark One)

 

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

 

For the quarterly period ended March 31, 2018              or             

 

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

 

For the transition period from              to

 

Commission file number 1-37966

 

SEACOR Marine Holdings Inc.

(Exact Name of Registrant as Specified in Its Charter)

________________________________________

 

Delaware

 

47-2564547

(State or Other Jurisdiction of

Incorporation or Organization)

 

(IRS Employer

Identification No.)

   

7910 Main Street, 2nd Floor

   

Houma, LA

 

70360

(Address of Principal Executive Offices)

 

(Zip Code)

 

985-876-5400

(Registrant’s Telephone Number, Including Area Code)

 

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

________________________________________

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  ☒    No  ☐

 

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  ☒     No  ☐

 

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 definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer  ☐

 

Accelerated filer  ☐

 

Non-accelerated filer ☒

(Do not check if a smaller

reporting company)

 

Smaller reporting company  ☐

 

Emerging growth company  ☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

 

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

 

The total number of shares of common stock, par value $.01 per share, outstanding as of May 9, 2018 was 20,020,155. The Registrant has no other class of common stock outstanding.

 

 

 

SEACOR MARINE HOLDINGS INC.

 

Table of Contents

 

 

Part I.

Financial Information

1
     
 

Item 1.

Financial Statements (Unaudited)

1
     
   

Condensed Consolidated Balance Sheets as of March 31, 2018 and December 31, 2017

1
     
   

Condensed Consolidated Statements of Loss for the Three Months Ended March 31, 2018 and 2017

2
     
   

Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2018 and 2017

3
       
   

Condensed Consolidated Statement of Changes in Equity for the Three Months Ended March 31, 2018

4
     
   

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2018 and 2017

5
     
   

Notes to Condensed Consolidated Financial Statements

6
     
 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

19
     
 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

36
     
 

Item 4.

Controls and Procedures

37
     

Part II.

Other Information

38
     
 

Item 1.

Legal Proceedings

38
       
 

Item 1A.

Risk Factors

38
       
 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

38
       
 

Item 3.

Default Upon Senior Securities

38
       
 

Item 4.

Mine Safety Disclosures

38
       
 

Item 5.

Other Information

38
       
 

Item 6.

Exhibits

38

 

i

 
 
 

PART I—FINANCIAL INFORMATION

 

ITEM 1.

FINANCIAL STATEMENTS

SEACOR MARINE HOLDINGS INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

 

   

March 31,

2018

   

December 31,

2017

 

ASSETS

               

Current Assets:

               

Cash and cash equivalents

  $ 62,738     $ 110,234  

Restricted cash

    2,316       2,317  

Receivables:

               

Trade, net of allowance for doubtful accounts of $3,858 and $4,039 in 2018 and 2017, respectively

    45,664       45,616  

Other

    17,039       12,341  

Inventories

    3,975       3,756  

Prepaid expenses and other

    3,613       3,026  

Total current assets

    135,345       177,290  

Property and Equipment:

               

Historical cost

    1,320,496       1,179,836  

Accumulated depreciation

    (580,461

)

    (560,160

)

      740,035       619,676  

Construction in progress

    80,682       70,157  

Net property and equipment

    820,717       689,833  

Investments, at Equity, and Advances to 50% or Less Owned Companies

    112,219       92,169  

Construction Reserve Funds

    45,361       45,361  

Other Assets

    3,736       3,851  
    $ 1,117,378     $ 1,008,504  

LIABILITIES AND EQUITY

               

Current Liabilities:

               

Current portion of long-term debt

  $ 22,858     $ 22,858  

Accounts payable and accrued expenses

    25,551       24,024  

Due to SEACOR Holdings

    1,583       1,358  

Accrued wages and benefits

    4,958       5,087  

Accrued income taxes

    4,339       4,290  

Accrued capital, repair and maintenance expenditures

    23,818       19,618  

Deferred revenues

    9,430       10,104  

Other current liabilities

    12,820       11,879  

Total current liabilities

    105,357       99,218  

Long-Term Debt

    405,234       292,041  

Conversion Option Liability on Convertible Senior Notes

    18,991       6,832  

Deferred Income Taxes

    56,024       55,506  

Deferred Gains and Other Liabilities

    28,600       31,741  

Total liabilities

    614,206       485,338  

Equity:

               

SEACOR Marine Holdings Inc. stockholders’ equity:

               

Common stock, $.01 par value, 60,000,000 shares authorized; 17,786,569 and 17,675,356 shares issued in 2018 and 2017

    178       177  

Additional paid-in capital

    306,639       303,996  

Retained earnings

    175,609       216,511  

Accumulated other comprehensive loss, net of tax

    (10,424

)

    (12,493

)

      472,002       508,191  

Noncontrolling interests in subsidiaries

    31,170       14,975  

Total equity

    503,172       523,166  
    $ 1,117,378     $ 1,008,504  

 

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

and should be read in conjunction herewith.

 

 

 

SEACOR MARINE HOLDINGS INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF LOSS

(in thousands, except share data)

 

   

Three Months Ended March 31,

 
   

2018

   

2017

 

Operating Revenues

  $ 51,721     $ 34,304  

Costs and Expenses:

               

Operating

    41,173       33,379  

Administrative and general

    12,807       11,826  

Depreciation and amortization

    19,512       12,503  
      73,492       57,708  

Gains (Losses) on Asset Dispositions and Impairments, Net

    (2,643 )     4,819  

Operating Loss

    (24,414 )     (18,585 )

Other Income (Expense):

               

Interest income

    216       850  

Interest expense

    (6,133 )     (3,182 )

SEACOR Holdings management fees

    -       (1,925 )

SEACOR Holdings guarantee fees

    (12 )     (76 )

Marketable security gains (losses), net

    -       11,738  

Derivative gains (losses), net

    (11,516 )     (89 )

Foreign currency losses, net

    139       (189 )

Other, net

    -       (1 )
      (17,306 )     7,126  

Loss Before Income Tax Benefit and Equity in Earnings of 50% or Less Owned Companies

    (41,720 )     (11,459 )

Income Tax Benefit

    (9,824 )     (3,422 )

Loss Before Equity in Earnings of 50% or Less Owned Companies

    (31,896 )     (8,037 )

Equity in Earnings of 50% or Less Owned Companies, Net of Tax

    208       438  

Net Loss

    (31,688 )     (7,599 )

Net Loss attributable to Noncontrolling Interests in Subsidiaries

    (2,855 )     (204 )

Net Loss attributable to SEACOR Marine Holdings Inc.

  $ (28,833 )   $ (7,395 )
                 

Basic and Diluted Loss Per Common Share of SEACOR Marine Holdings Inc.

  $ (1.64)     $ (0.42 )
                 

Basic and Diluted Weighted Average Common Shares Outstanding:

    17,571,490       17,671,356  

 

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

and should be read in conjunction herewith.

 

 

 

SEACOR MARINE HOLDINGS INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

 

 

   

Three Months Ended March 31,

 
   

2018

   

2017

 

Net Loss

  $ (31,688 )   $ (7,599 )

Other Comprehensive Income (Loss):

               

Foreign currency translation gains (losses)

    1,912       919  

Derivative gains (losses) on cash flow hedges

    131       (9 )

Reclassification of derivative losses on cash flow hedges to interest expense

    1       12  

Reclassification of derivative losses on cash flow hedges to equity in earnings of 50% or less owned companies

    129       188  
      2,173       1,110  

Income tax (expense) benefit

    (27 )     (354 )
      2,146       756  

Comprehensive Loss

    (29,542 )     (6,843 )

Comprehensive Loss attributable to Noncontrolling Interests in Subsidiaries

    (2,778 )     (106 )

Comprehensive Loss attributable to SEACOR Marine Holdings Inc.

  $ (26,764 )   $ (6,737 )

 

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

and should be read in conjunction herewith.

 

 

 

SEACOR MARINE HOLDINGS INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(in thousands)

 

 

    Common Stock    

Additional Paid-In Capital

   

Retained Earnings

   

Accumulated Other Comprehensive Income (Loss)

   

Noncontrolling Interests In Subsidiaries

   

Total Equity

 
                                                 

December 31, 2017

  $ 177     $ 303,996     $ 216,511     $ (12,493 )   $ 14,975     $ 523,166  

Impact of adoption of accounting principle

                (12,069 )                 (12,069 )

December 31, 2017 as adjusted

    177       303,996       204,442       (12,493 )     14,975       511,097  

Issuance of common stock

    1       1,792                         1,793  

Amortization of employee share awards

          476                         476  
Acquisition of a consolidated joint venture                             (12,037 )     (12,037 )

Issuance of non-controlling interests

          375                   31,010       31,385  

Net loss

                (28,833 )           (2,855 )     (31,688 )

Other comprehensive income

                      2,069       77       2,146  

March 31, 2018

  $ 178     $ 306,639     $ 175,609     $ (10,424 )   $ 31,170     $ 503,172  

 

 

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

and should be read in conjunction herewith.

 

 

 

SEACOR MARINE HOLDINGS INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

   

Three Months Ended March 31,

 
   

2018

   

2017

 

Cash Flows from Operating Activities

               

Net Loss

  $ (31,688 )   $ (7,599 )
Adjustments to reconcile net loss to net cash (used in)provided by operating activities                

Depreciation and amortization

    19,512       12,503  

Deferred financing costs amortization

    237       897  

Restricted stock amortization

    258        

Option amortization

    218        

Debt discount/(premium) amortization

    1,494       1,109  

Amortization of deferred gains against charter expense

    (2,009 )     (2,050 )

Bad debt expense (income)

    (26 )     1,559  

(Gain)/loss from equipment sales or retirements

    2,643       (4,819 )

(Gains)/losses from sale of marketable securities, net

          (11,738 )

Proceeds from sale of securities

          51,877  

Derivative (income) / losses

    11,516       89  

Cash settlement on derivative transactions, net

    (129 )     (22 )

Currency (gain) / loss

    (139 )     189  

Deferred income taxes

    (11,286 )     (4,503 )

Equity earnings, net

    (208 )     (438 )

Changes in Operating Assets and Liabilities:

               

Accounts receivables

    (3,342 )     4,909  

Other assets

    (346 )     19,025  

Accounts payable and accrued liabilities

    1,786       4,308  
Net cash (used in) provided by operating activities     (11,509 )     65,296  

Cash Flows from Investing Activities:

               

Purchases of property and equipment

    (8,557 )     (10,143 )

Cash settlements on derivative transactions, net

          (324 )

Proceeds from disposition of property and equipment

    282       8,297  

Investments in and advances to 50% or less owned companies

    (19,950 )     (2,394 )
Return of investments and advances from 50% or less owned companies     99       7,350  

Payments received on third party notes receivable, net

          1,943  

Net (increase) decrease in construction reserve funds

          (5,268 )

Net cash used in investing activities

    (28,126 )     (539 )

Cash Flows from Financing Activities:

               

Payments on long-term debt

    (28,807 )     (1,173 )

Proceeds from issuance of long-term debt, net of issue costs

    18,471       3,396  

Proceeds from issuance of Common Stock

    1,793        

Net cash (used in) provided by financing activities

    (8,543 )     2,223  

Effects of Exchange Rate Changes on Cash and Cash Equivalents

    682       269  

Net (Decrease) Increase in Cash, Cash Equivalents, and Restricted Cash

    (47,496 )     67,249  

Cash, Cash Equivalents and Restricted Cash, Beginning of Period

    112,551       118,771  

Cash, Cash Equivalents and Restricted Cash, End of Period

  $ 65,055     $ 186,020  

 

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

and should be read in conjunction herewith.

 

 

SEACOR MARINE HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

 

1.

BASIS OF PRESENTATION AND ACCOUNTING POLICIES

 

The condensed consolidated financial statements include the accounts of SEACOR Marine Holdings Inc. and its consolidated subsidiaries (the “Company”). In the opinion of management, all adjustments (consisting of normal recurring adjustments) have been made to fairly present the unaudited condensed consolidated financial statements for the periods indicated.  Results of operations for the interim periods presented are not necessarily indicative of operating results for the full year or any future periods.

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the Company’s financial statements and related notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017.  

 

Unless the context otherwise indicates, any reference in this Quarterly Report on Form 10-Q to the “Company” refers to SEACOR Marine Holdings Inc. and its consolidated subsidiaries and any reference in this Quarterly Report on Form 10-Q to “SEACOR Marine” refers to SEACOR Marine Holdings Inc. without its consolidated subsidiaries. Capitalized terms used and not specifically defined herein have the same meaning given those terms in the Company's Annual Report on Form 10-K for the year ended December 31, 2017.

 

SEACOR Marine was previously a subsidiary of SEACOR Holdings Inc. (along with its consolidated subsidiaries, other than SEACOR Marine and its subsidiaries, collectively referred to as “SEACOR Holdings”). On June 1, 2017, SEACOR Holdings completed a spin-off of SEACOR Marine by way of a pro rata dividend of SEACOR Marine’s common stock, par value $0.01 per share (“Common Stock”), all of which was then held by SEACOR Holdings, to SEACOR Holdings shareholders of record as of May 22, 2017 (the “Spin-off”). SEACOR Marine entered into certain agreements with SEACOR Holdings to govern SEACOR Marine’s relationship with SEACOR Holdings following the Spin-off, including a Distribution Agreement, two Transition Services Agreements, an Employee Matters Agreement and a Tax Matters Agreement. Immediately following the Spin-off, SEACOR Marine began to operate as an independent, publicly traded company.

 

Recently Adopted Accounting Standards. In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09,Revenue from Contracts with Customers (Topic 606)” to clarify the principles for recognizing revenue and to develop a common revenue standard and disclosure requirements. The new standard supersedes current revenue recognition requirements and industry-specific guidance. Under the new standard, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. The Company adopted this new standard on January 1, 2018 using the modified retrospective approach by recognizing the cumulative effect of initially applying the new standard as an adjustment to the opening balance of accumulated deficit. The Company implemented the necessary changes to its business processes, systems and controls to support recognition and disclosure of this ASU upon adoption. The Company's revenues are primarily based on leases or rental agreements with customers and is not addressed in the new standard. As a result, the adoption of the standard did not have a material effect on the Company's financial position, results of operations or cash flows, but did result in increased disclosures related to revenue recognition policies.

 

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230) – Restricted Cash, which requires that amounts generally described as restricted cash be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period amounts shown on the statement of cash flows. The Company adopted this new standard on January 1, 2018. Retrospective presentation was required. The adoption of the standard did not have a material effect on the Company's financial position, results of operations or cash flows. In accordance with ASU 2016-18, the Company has included restricted cash as part of the beginning-of-period and end-of-period cash balances on the condensed consolidated statement of cash flows.

 

Revenue Recognition. Revenue is recognized when (or as) the Company transfers promised goods or services to its customers in amounts that reflect the consideration to which the Company expects to be entitled to in exchange for those goods or services, which occurs when (or as) the Company satisfies its contractual obligations and transfers over control of the promised goods or services to its customers. Costs to obtain or fulfill a contract are expensed as incurred.

 

Lease Revenues. The primary source of the Company’s revenues is earned through time charter and bareboat agreements. Time charter and bareboat agreements are rental agreements that are recognized ratably over the lease term as the services are provided, typically on a per day basis. The charterer will take the vessel on hire for a specific period of time and uses the vessel to move cargo, people or equipment and will pay the Company a rate per day. Under a time charter, the Company provides a vessel to a customer for a set term and is responsible for all operating expenses, typically excluding fuel. Under a bareboat charter, the Company provides a vessel to a customer for a set term and the customer assumes responsibility for all operating expenses and the risk of operation (see Note 11).

 

6

 

 

Revenues from Customers. The Company contracts with various customers to carry out management services for vessels as agents for and on behalf of ship owners.  These services include crew management, technical management, commercial management, insurance arrangements, sale and purchase of vessel, provisions, and bunkering. As the manager, the Company undertakes to use its best endeavors to provide the agreed management services as agents for and on behalf of the owners in accordance with sound ship management practice and to protect and promote the interest of the owners in all matters relating to the provision of services hereunder. The Company also contracts with various customers to carry out management services regarding engineering for vessel construction and vessel conversions. The vast majority of the ship management agreements span over the length of one to three years and are typically billed on a monthly basis. The Company transfers control of the service to the customer and satisfies its performance obligation over the term of the contract, and therefore recognizes revenue over the term of the contract while related costs are expensed as incurred (see Note 11).

 

Revenue that does not meet these criteria is deferred until the criteria is met and are considered contract liabilities. Contract liabilities, included in other current liabilities in the accompanying condensed consolidated balance sheets, for the three months ended March 31 were as follows (in thousands):

 

    2018       2017    

Balance at beginning of period

  $ 10,104       $ 6,953    

Revenues deferred during the period

    875         1,536    
Revenues recognized during the period     (1,550)         —     

Balance at end of period

  $ 9,429       $ 8,489    

 

As of March 31, 2018, contract liabilities of $6.8 million related to the time charter of several offshore support vessels paid through the conveyance of an overriding royalty interest (the “Conveyance”) in developmental oil and gas producing properties operated by a customer in the U.S. Gulf of Mexico. Payments under the Conveyance, and the timing of such payments, were contingent upon production and energy sale prices. On August 17, 2012, the customer filed a voluntary petition for Chapter 11 bankruptcy. The Company is vigorously defending its interest in connection with the bankruptcy filing; however, payments received under the Conveyance subsequent to May 19, 2012 are subject to creditors’ claims in bankruptcy court. The Company will recognize revenues when reasonably assured of a judgment in its favor. All costs and expenses related to these charters were recognized as incurred.

 

As of March 31, 2018, contract liabilities of $2.4 million related to the time charter of an offshore support vessel to a customer for which collection was not reasonably assured. The Company will recognize revenues when collected or when collection is reasonably assured. All costs and expenses related to this charter were recognized as incurred.

 

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

 

As of March 31, 2018, the estimated useful life (in years) of each of the Company’s major categories of new equipment was as follows:

 

Offshore Support Vessels:

       

Wind farm utility vessels

    10  

All other offshore support vessels (excluding wind farm utility)

    20  

 

Equipment maintenance and repair costs and the costs of routine overhauls, drydockings and inspections performed on vessels and equipment are charged to operating expense as incurred. Expenditures that extend the useful life or improve the marketing and commercial characteristics of equipment as well as major renewals and improvements to other properties are capitalized.

 

Certain interest costs incurred during the construction of equipment are capitalized as part of the assets’ carrying values and are amortized over such assets’ estimated useful lives. During the three months ended March 31, 2018, capitalized interest totaled $0.5 million.

 

Impairment of Long-Lived Assets. The Company performs an impairment analysis of long-lived assets used in operations, including intangible assets, when indicators of impairment are present. These indicators may include a significant decrease in the market price of a long-lived asset or asset group, a significant adverse change in the extent or manner in which a long-lived asset or asset group is being used or in its physical condition, or a current period operating or cash flow loss combined with a history of operating or cash flow losses or a forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group. If the carrying values of the assets are not recoverable, as determined by the estimated undiscounted cash flows, the estimated fair value of the assets or asset groups are compared to their current carrying values and impairment charges are recorded if the carrying value exceeds fair value. The Company performs its testing on an asset or asset group basis. Generally, fair value is determined using valuation techniques, such as expected discounted cash flows or appraisals, as appropriate. During the three months ended March 31, 2018, the Company recognized $2.9 million of impairment charges related to four anchor-handling vessels removed from service and adjusted to scrap value.

 

7

 

 

Impairment of 50% or Less Owned Companies. Investments in 50% or less owned companies are reviewed periodically to assess whether there is an other-than-temporary decline in the carrying value of the investment. In its evaluation, the Company considers, among other items, recent and expected financial performance and returns, impairments recorded by the investee and the capital structure of the investee. When the Company determines the estimated fair value of an investment is below carrying value and the decline is other-than-temporary, the investment is written down to its estimated fair value. Actual results may vary from the Company’s estimates due to the uncertainty regarding projected financial performance, the severity and expected duration of declines in value, and the available liquidity in the capital markets to support the continuing operations of the investee, among other factors. Although the Company believes its assumptions and estimates are reasonable, the investee’s actual performance compared with the estimates could produce different results and lead to additional impairment charges in future periods. During the three months ended March 31, 2018, the Company recognized impairment charges of $1.2 million related to one of its 50% or less owned companies which the Company believes will be unable to meet all of its liabilities.

 

Income Taxes. During the three months ended March 31, 2018, the Company's effective income tax rate of 23.5% was primarily due to taxes not provided on income attributable to noncontrolling interests, foreign sourced income not subject to U.S. income taxes, and a reversal of an unrecognized tax benefit. During the three months ended March 31, 2017, the Company’s effective income tax rate of 29.9% was primarily due to losses of foreign subsidiaries not benefited.

 

Deferred Gains. The Company has sold certain equipment to its 50% or less owned companies, entered into vessel sale-leaseback transactions with finance companies, and provided seller financing on sales of its equipment to third parties and its 50% or less owned companies. A portion of the gains realized from these transactions were deferred and recorded in deferred gains and other liabilities in the accompanying condensed consolidated balance sheets. Deferred gain activity related to these transactions for the three months ended March 31 was as follows (in thousands):

 

    2018       2017  

Balance at beginning of period

  $ 25,006       $ 33,910  
Amortization of deferred gains included in operating expenses as a reduction to rental expense     (2,009)          
Other adjustments      (25)         (2,050

)

Balance at end of period

  $ 22,972       $ 31,860  

 

Accumulated Other Comprehensive Income (Loss). The components of accumulated other comprehensive loss were as follows (in thousands):

 

   

SEACOR Marine Holdings Inc. Stockholders’ Equity

   

Noncontrolling Interests

         
   

Foreign

Currency

Translation

Adjustments

   

Derivative

Income (Losses) on

Cash Flow

Hedges, net

   

Total

   

Foreign

Currency

Translation

Adjustments

   

Derivative

Income (Losses) on

Cash Flow

Hedges, net

   

Other

Comprehensive

Income (Loss)

 

December 31, 2017

  $ (13,195

)

  $ 702     $ (12,493

)

  $ (1,357

)

  $ 1          

Other comprehensive income (loss)

    1,832       264       2,096       80       (3 )   $ 2,173  

Income tax expense

          (27

)

    (27

)

                (27

)

Three Months Ended March 31, 2018

  $ (11,363

)

  $ 939     $ (10,424

)

  $ (1,277

)

  $ (2 )   $ 2,146  

 

Loss Per Share. Basic loss per common share of the Company is computed based on the weighted average number of common shares issued and outstanding during the relevant periods. Diluted loss per common share of the Company is computed based on the weighted average number of common shares issued and outstanding plus the effect of potentially dilutive securities through the application of the if-converted method that assumes all common shares have been issued and outstanding during the relevant periods pursuant to the conversion of the Convertible Senior Notes.  For each of the three months ended March 31, 2018 and 2017, diluted earnings per common share of the Company excluded 4,070,500 common shares issuable pursuant to the Company’s Convertible Senior Notes (see Note 12) as the effect of their inclusion in the computation would be anti-dilutive.  In addition, diluted loss per common share of the Company excluded 94,507 shares of restricted stock and 653,700 outstanding stock options as the effect of their inclusion in the computation would be anti-dilutive.

 

New Accounting Pronouncements. On February 25, 2016, the FASB issued a comprehensive new leasing standard, which improves transparency and comparability among companies by requiring lessees to recognize a lease liability and a corresponding lease asset for virtually all lease contracts. It also requires additional disclosures about leasing arrangements. The Company will adopt the new standard on January 1, 2019 and will use the modified retrospective approach upon adoption. The Company expects the adoption of the new standard will have a material impact on its consolidated financial position, results of operations and cash flows, although it has not yet determined the extent of the impact.

 

8

 

 

 

 

2.

EQUIPMENT ACQUISITIONS AND DISPOSITIONS

 

During the three months ended March 31, 2018, capital expenditures were $8.6 million. Equipment deliveries during the three months ended March 31, 2018 included six liftboats contributed from Montco Offshore, LLC (“MOI”) to certain designated wholly-owned subsidiaries of Falcon Global Holdings LLC (“FGH”) as described in Note 4 below and two platform supply vessels constructed through the SEACOSCO joint venture as described in Note 3 below. 

 

During the three months ended March 31, 2018, the Company sold one fast support vessel previously retired and removed from service, property and other equipment for net proceeds of $0.4 million ($0.3 million in cash and $0.1 million of previously received deposits) and gains of $0.2 million, all of which were recognized currently.

 

 

3.

INVESTMENTS, AT EQUITY, AND ADVANCES TO 50% OR LESS OWNED COMPANIES

 

SEACOSCO. On January 17, 2018, the Company announced the formation of SEACOSCO Offshore LLC (“SEACOSCO”), a Marshall Islands entity jointly owned by the Company and affiliates of COSCO SHIPPING GROUP (“COSCO SHIPPING”).  SEACOSCO entered into contracts for the purchase of eight Rolls-Royce designed, new construction platform supply vessels (“PSVs”) from COSCO SHIPPING HEAVY INDUSTRY (GUANGDONG) CO., LTD (the “Shipyard”), an affiliate of COSCO SHIPPING, for approximately $161.1 million, of which 70% will be financed by the Shipyard, and secured by the PSVs on a non-recourse basis to the Company.  SEACOSCO took delivery of two vessels in the quarter ending March 31, 2018, and will take title to another five of the PSVs in 2018 and one in 2019.  Thereafter, the Shipyard, at its cost, will store the PSVs at its facility for periods ranging from six to 18 months.  The Company's total committed investment for construction and working capital requirements is approximately $27.5 million for an unconsolidated 50% interest in SEACOSCO.  During the three months ended March 31, 2018, the Company and its partner each contributed additional capital of $20.0 million in cash. The remaining committed investment will be due over the next 14 months as the vessel and equipment are delivered.  The Company is responsible for full commercial, operational, and technical management of the vessels on a worldwide basis.

 

SEACOR Grant DIS.   As of March 31, 2018, the Company estimates that SEACOR Grant DIS will be unable to meet all its liabilities, and has recorded a bad debt reserve of $0.3 million against SEACOR Grant DIS's liability to the Company and an impairment charge of $1.2 million to reduce its investment carrying value to zero.

 

Guarantees. The Company has guaranteed certain of the outstanding charter receivables of one of its managed 50% or less owned companies if a customer defaults in payment and the Company either fails to take enforcement action against the defaulting customer or fails to assign its right of recovery against the defaulting customer. As of March 31, 2018, the total amount guaranteed by the Company under this arrangement was $0.4 million.

 

In addition, as of March 31, 2018, two of the Company's 50% or less owned companies have bank debt secured by, among other things, a first preferred mortgage on their vessels.  The banks also have the authority to require the Company and its partners to fund uncalled capital commitments, as defined in the partnership agreements.  In such event, the Company would be required to contribute its allocable share of uncalled capital, which was $1.4 million in the aggregate.

 

 

 

4.

LONG-TERM DEBT

 

Convertible Senior Notes.  As of March 31, 2018, the Company had issued and outstanding $175.0 million aggregate principal amount of its Convertible Senior Notes due December 1, 2022 (the “Convertible Senior Notes”) to affiliates of the Carlyle Group (collectively “Carlyle”).  Interest on the Convertible Senior Notes is payable semi-annually on June 15 and December 15 of each year.  The Convertible Senior Notes are convertible into shares of Common Stock. On May 2, 2018, certain terms of the Convertible Senior Notes were amended and the Company exchanged $50 million in principal amount of the Convertible Senior Notes for warrants to purchase shares of Common Stock (see Note 12).

 

9

 

 

MOI Joint Venture. On February 8, 2018, a wholly-owned subsidiary of the Company and MOI formed and capitalized a joint venture named Falcon Global Holdings LLC.  In connection therewith and MOI’s plan of reorganization, which was confirmed on January 18, 2018, MOI emerged from its Chapter 11 bankruptcy case. In accordance with the terms of a Joint Venture Contribution and Formation Agreement, the Company and MOI contributed certain liftboat vessels and other related assets to FGH and its designated subsidiaries, and FGH and its designated subsidiaries assumed certain operating liabilities and indebtedness associated with the liftboat vessels and related assets. On February 8, 2018, Falcon Global USA LLC (“FGUSA”), a wholly-owned subsidiary of FGH, paid $15.0 million of MOI’s debtor-in-possession obligations and entered into a $131.1 million credit agreement comprised of a $116.1 million term loan (the "FGUSA Term Loan") and a $15.0 million revolving loan facility (the "FGUSA Revolving Loan Facility") bearing interest at a variable rate (currently 6.44%), maturing in 2024, and secured by vessels owned by wholly-owned subsidiaries of FGUSA (the “FGUSA Credit Facility”). The full amount of the FGUSA Term Loan and other amounts paid by affiliates of MOI satisfied in full the amounts outstanding under MOI’s pre-petition credit facilities. The FGUSA Credit Facility, apart from a guarantee of certain interest payments and participation fees for two years after the closing of the transactions, is non-recourse to SEACOR Marine and its subsidiaries other than FGUSA. The Company performed a preliminary fair market valuation of the debt reflecting a debt discount of $10.0 million, which will be amortized over the life of the FGUSA Credit Facility. The preliminary fair market valuation is subject to revision as additional information regarding the fair market value of assets and liabilities acquired becomes available. Scheduled principal payments begin in 2020.   During the quarter ending March 31, 2018, the Company borrowed $10.0 million under the FGUSA Revolving Loan Facility for working capital purposes.  The Company consolidates FGH as the Company holds 72% of the equity interest in FGH and is entitled to appoint a majority of the board of managers of FGH.

 

Windcat. During the three months ended March 31, 2018, the Company converted €6.0 million denominated debt to pound sterling debt, paying off approximately $7.5 million in euro debt and borrowing approximately $8.5 million in pound sterling debt, resulting in a net increase in USD borrowings of $1.0 million to be used for future capital commitments.

 

Letters of Credit. As of March 31, 2018, the Company had outstanding letters of credit for labor and performance guarantees of $1.8 million.

 

 

 

5.

 INCOME TAXES

 

The following table reconciles the difference between the statutory federal income tax rate for the Company and the effective income tax rate on continuing operations for the three months ended March 31, 2018:

 

Statutory rate     21.0 %
Noncontrolling interests     (1.3 )%
Foreign earnings not subject to U.S. income tax     (3.7 )%
Foreign taxes not creditable against U.S. income tax     (2.0 )%
Unrecognized tax benefit     9.3 %

Other

    0.2 %
      23.5 %

 

As of December 31, 2017, the Company's net operating loss carryforwards excluded potential tax benefits of $3.9 million as a result of uncertainty regarding interpretation of the new U.S. tax legislation signed into law on December 22, 2017. Subsequent guidance has confirmed that the Company should recognize the tax benefits of $3.9 million and therefore the Company is removing the valuation allowance previously established against the net operating loss carryforwards.

 

 

6.

DERIVATIVE INSTRUMENTS AND HEDGING STRATEGIES

 

Derivative instruments are classified as either assets or liabilities based on their individual fair values. The fair values of the Company’s derivative instruments as of March 31, 2018 were as follows (in thousands):

 

   

Derivative

Asset(1)

   

Derivative

Liability

 

Derivatives designated as hedging instruments:

               

Interest rate swap agreements (cash flow hedges)

  $ 408     $ 1 (2)
      408       1  

Derivatives not designated as hedging instruments:

               
Conversion option liability on Convertible Senior Notes           18,991  

Interest rate swap agreements

    862       14 (2)
    $ 1,270     $ 19,006  

 

______________________

(1)

Included in other receivables in the accompanying condensed consolidated balance sheets.

(2)

Included in other current liabilities in the accompanying condensed consolidated balance sheets.

   
10

 

Cash Flow Hedges. The Company and certain of its 50% or less owned companies have interest rate swap agreements designated as cash flow hedges. By entering into these interest rate swap agreements, the Company and its 50% or less owned companies have converted the variable LIBOR or EURIBOR component of certain of their outstanding borrowings to a fixed interest rate. The Company recognized immaterial losses on derivative instruments designated as cash flow hedges during the three months ended March 31, 2018. As of March 31, 2018, the interest rate swaps held by the Company and its 50% or less owned companies were as follows:

 

 

Windcat Workboats had two interest rate swap agreements maturing in 2021 that call for the Company to pay a fixed rate of interest of (0.03)% on the aggregate notional value of €15.0 million (approximately $18.5 million) and receive a variable interest rate based on EURIBOR on the aggregate notional value.

 

 

MexMar had five interest rate swap agreements with maturities in 2023 that call for MexMar to pay a fixed rate of interest ranging from 1.71% to 2.10% on the aggregate amortized notional value of $110.8 million and receive a variable interest rate based on LIBOR on the aggregate amortized notional value.

 

 

Sea-Cat Crewzer II had an interest rate swap agreement maturing in 2019 that calls for Sea-Cat Crewzer II to pay a fixed rate of interest of 1.52% on the amortized notional value of $20.3 million and receive a variable interest rate based on LIBOR on the amortized notional value.

 

 

Sea-Cat Crewzer had an interest rate swap agreement maturing in 2019 that calls for Sea-Cat Crewzer to pay a fixed rate of interest of 1.52% on the amortized notional value of $18.0 million and receive a variable interest rate based on LIBOR on the amortized notional value.

 

Other Derivative Instruments. The Company recognized gains (losses) on derivative instruments not designated as hedging instruments for the three months ended March 31 as follows (in thousands):

 

   

2018

   

2017

 

Conversion option liability on Convertible Senior Notes

  $ (12,159 )   $  

Forward currency exchange, option and future contracts

          (89

)

Interest rate swap agreements

    643        
    $ (11,516 )   $ (89

)

 

The conversion option liability relates to the bifurcated embedded conversion option in the Convertible Senior Notes (see Note 7 in the Company's Annual Report on Form 10-K for the year ended December 31, 2017).

 

The Company and certain of its 50% or less owned companies have entered into interest rate swap agreements for the general purpose of providing protection against increases in interest rates, which might lead to higher interest costs. As of March 31, 2018, the interest rate swaps held by the Company or its 50% or less owned companies were as follows:

 

 

Falcon Global International had an interest rate swap agreement maturing in 2022 that calls for the Company to pay a fixed interest rate of 2.06% on the amortized notional value of $54.7 million and receive a variable interest rate based on LIBOR on the amortized notional value.

 

 

OSV Partners had two interest rate swap agreements with maturities in 2020 that call for OSV Partners to pay a fixed rate of interest ranging from 1.89% to 2.27% on the aggregate amortized notional value of $33.0 million and receive a variable interest rate based on LIBOR on the aggregate amortized notional value.

 

•      Dynamic Offshore had an interest rate swap agreement maturing in 2018 that calls for Dynamic Offshore to pay a fixed interest rate of 1.30% on the amortized notional value of $64.2 million and receive a variable interest rate based on LIBOR on the amortized notional value.     

 

 

7.

FAIR VALUE MEASUREMENTS

 

The fair value of an asset or liability is the price that would be received to sell an asset or transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company utilizes a fair value hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value and defines three levels of inputs that may be used to measure fair value. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, quoted prices in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, or inputs derived from observable market data. Level 3 inputs are unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities.

 

The Company’s financial assets and liabilities as of March 31, 2018 that are measured at fair value on a recurring basis were as follows (in thousands):

 

   

Level 1

   

Level 2

   

Level 3

 

ASSETS

                       

Derivative instruments (included in other receivables)

  $     $ 1,270     $  

Construction reserve funds

    45,361              

LIABILITIES

                       

Derivative instruments

          15       18,991  
11

 

Level 3 Measurement.  The fair value of the conversion option liability on the Convertible Senior Notes is estimated with significant inputs that are both observable and unobservable in the market and therefore is considered a Level 3 fair value measurement. The Company used a binomial lattice model that assumes the holders will maximize their value by finding the optimal decision between redeeming at the redemption price or converting into shares of Common Stock.  This model estimates the fair value of the conversion option as the differential in the fair value of the notes including the conversion option compared with the fair value of the notes excluding the conversion option.  The significant observable inputs used in the fair value measurement include the price of Common Stock and the risk free interest rate.  The significant unobservable inputs are the estimated Company credit spread and Common Stock volatility, which were based on comparable companies in the marine transportation and energy industries. 

 

The estimated fair values of the Company’s other financial assets and liabilities as of March 31, 2018 were as follows (in thousands):

 

           

Estimated Fair Value

 
   

Carrying

Amount

   

Level 1

   

Level 2

   

Level 3

 

ASSETS

                               

Cash, cash equivalents and restricted cash

  $ 65,054     $ 65,054     $     $  

Investments, at cost, in 50% or less owned companies (included in other assets)

    132    

see below

                 

LIABILITIES

                               

Long-term debt, including current portion

    428,092             405,769        

 

The carrying value of cash, cash equivalents and restricted cash approximates fair value. The fair value of the Company’s long-term debt was estimated based upon quoted market prices or by using discounted cash flow analysis based on estimated current rates for similar types of arrangements. The long-term debt includes $121.6 million, net, assumed from FGUSA. It was not practicable to estimate the fair value of certain of the Company’s investments, at cost, in 50% or less owned companies because of the lack of quoted market prices and the inability to estimate fair value without incurring excessive costs. Considerable judgment was required in developing certain of the estimates of fair value and, accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.

 

The Company’s other assets and liabilities that were measured at fair value during the three months ended March 31, 2018 were as follows (in thousands):

 

   

Level 1

   

Level 2

   

Level 3

 

ASSETS

                       
Property and equipment:                        

Anchor handling towing supply

  $     $ 2,000     $  

Liftboats

                134,775  

 

Property and equipment. During the three months ended March 31, 2018, the Company recognized impairment charges of $2.9 million associated with certain vessels (see Note 1).  The Level 2 fair values were determined based on the sales prices of similar property and equipment at scrap value. 

 

The Level 3 vessels listed above were contributed by MOI to wholly-owned subsidiaries of FGH and recorded at fair value. The Level 3 fair values were determined based on two separate third-party valuations using significant inputs that are unobservable in the market.  Due to limited market transactions, the primary valuation methodology applied by both appraisers was an estimated cost approach less economic depreciation for comparable aged vessels. The Level 3 fair value of the vessels was based on a simple average between the two appraisals.

 

The significant unobservable inputs used in the fair value measurement for the liftboats provided by the appraisers were based on i) quotes from local shipyards, ii) economic life ranging from 25 to 40 years and iii) economic obsolescence factor ranging from 45% to 50%. The calculated yearly physical depreciation was multiplied by the remaining useful life of each vessel, based on the date of build, and the residual value was added back to arrive at a base cost approach value for each vessel.

 

 

8.

 STOCKHOLDERS' EQUITY

 

On January 1, 2018, the Company adopted a new accounting standard issued by the FASB on October 24, 2016, which requires companies to account for the income tax effects of intercompany sales and transfers of assets other than inventory.  The impact of the adoption of the new standard resulted in a reduction of $12.1 million to the Company’s opening retained earnings.

 

On March 26, 2018, the Company issued 103,213 shares of Common Stock to an accredited investor for a total of $1.8 million in gross proceeds pursuant to a private placement in reliance on the exemption from registration set forth in Section 4(a)(2) of the Securities Act.

 

On February 8, 2018, the Company formed FGH, a joint venture between the Company and MOI.  In accordance with the terms of the Joint Venture Contribution and Formation Agreement, the Company and MOI contributed certain liftboat vessels and other related assets to the joint venture and assumed certain operating liabilities and indebtedness associated with the liftboat vessels and related assets.  The transaction consolidates the fifteen liftboat vessels operated by the Company and six liftboat vessels previously operated by MOI.   FGUSA, a wholly-owned subsidiary of FGH, paid $15.0 million of MOI's debtor-in-possession obligations and entered into a $131.1 million credit agreement comprised of the FGUSA Term Loan and the FGUSA Revolving Loan Facility. The Company performed a preliminary fair market valuation of the debt reflecting a debt discount of $10.0 million, which will be amortized over the life of the FGUSA Credit Facility.  The preliminary fair market valuation is subject to revision as additional information regarding the fair market value of assets and liabilities acquired becomes available. 

 

12

 

 

In April 2018, the Company participated in the Private Placement and in May 2018, the Company participated in the Exchange, each as described in note 12.

 

  

9.

NONCONTROLLING INTERESTS IN SUBSIDIARIES

 

Noncontrolling interests in the Company’s consolidated subsidiaries were as follows (in thousands):

 

   

Noncontrolling

Interests

   

March 31, 2018

   

December 31, 2017

 

Falcon Global Holdings

    28.0%     $

28,450

    $ 12,087  

Windcat Workboats

    12.5%       2,437       2,608  

Other

    1.8%       283       280  
            $ 31,170     $ 14,975  

 

Falcon Global Holdings.  The Company formed FGH, a joint venture between the Company and MOI.  The Company and MOI contributed certain liftboat vessels and other related assets to FGH and its designated subsidiaries and assumed certain operating liabilities and indebtedness associated with the liftboat vessels and related assets, including a previous joint venture (“Falcon Global International” or “FGI”) that owned and operated two liftboats.  The transaction consolidates the 15 liftboat vessels operated by the Company and six liftboat vessels previously operated by MOI.   The total capital contributed to FGH was approximately $112.5 million of which, $43.3 million was transferred from FGI, $18.8 million was contributed by MOI and recorded at fair value, with the remaining capital contributed by the Company.  As a result of the transaction, the noncontrolling interest in the joint venture held by MOI is 28.0%.

 

 Windcat Workboats. Windcat Workboats owns and operates the Company’s wind farm utility vessels that are primarily used to move personnel and supplies in the major offshore wind markets of Europe. As of March 31, 2018, the net assets of Windcat Workboats were $19.5 million. During the three months ended March 31, 2018, the net loss of Windcat Workboats was $1.9 million, of which $0.2 million was attributable to noncontrolling interests.

 

 

10.     COMMITMENTS AND CONTINGENCIES

 

As of March 31, 2018, the Company’s unfunded capital commitments were $48.8 million for two fast support vessels, three supply vessels, four wind farm utility vessels, and conversions of two supply vessels to standby safety vessels.  Of the amount of unfunded capital commitments, $18.8 million is payable during the remainder of 2018, $21.1 million is payable during 2019 and $8.9 million is payable during 2020.  The Company has indefinitely deferred an additional $20.8 million of orders with respect to two fast support vessels for which the Company had previously reported unfunded capital commitments. The delivery dates and payment of certain costs (originally scheduled for payment in 2018, 2019 and 2020) for such vessels are uncertain as the Company, at its option, may defer their construction for an indefinite period of time.  

 

As of March 31, 2018, SEACOR Holdings has guaranteed $56.5 million on behalf of the Company for various obligations including: letter of credit obligations; performance obligations under sale-leaseback arrangements and invoiced amounts for funding deficits under the MNOPF. Pursuant to a Distribution Agreement with SEACOR Holdings, SEACOR Holdings charges the Company a fee of 0.5% on outstanding guaranteed amounts, which declines as the obligations are settled by the Company.

 

In the normal course of its business, the Company becomes involved in various other litigation matters including, among other things, claims by third parties for alleged property damages and personal injuries. Management has used estimates in determining the Company’s potential exposure to these matters and has recorded reserves in its financial statements related thereto where appropriate. It is possible that a change in the Company’s estimates of that exposure could occur, but the Company does not expect such changes in estimated costs would have a material effect on the Company’s consolidated financial position, results of operations or cash flows.

 

13

 
 

 

11.     SEGMENT INFORMATION

 

The Company’s segment presentation and basis of measurement of segment profit or loss are as previously described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. The following tables summarize the operating results, capital expenditures and assets of the Company’s reportable segments (in thousands).

 

   

United States

(primarily

Gulf of

Mexico)

   

Africa

(primarily

West Africa)

   

Middle East

and Asia

   

Brazil,

Mexico,

Central and

South

America

   

Europe

(primarily

North Sea)

   

Total

 

For the three months ended March 31, 2018

                                               

Operating Revenues:

                                               

Time charter

  $ 5,982     $ 10,794     $ 11,374     $ 1,374     $ 17,618     $ 47,142  

Bareboat charter

                      1,143             1,143  

Other marine services

    1,655       1,287       (130)       110       514       3,436  
      7,637       12,081       11,244       2,627       18,132       51,721  

Direct Costs and Expenses:

                                               

Operating:

                                               

Personnel

    3,992       4,073       4,022       376       9,213       21,676  

Repairs and maintenance

    694       1,356       2,428       305       2,290       7,073  

Drydocking

    525       2       (11)             1,741       2,257  

Insurance and loss reserves

    434       218       236       67       235       1,190  

Fuel, lubes and supplies

    493       669       1,034       65       1,284       3,545  

Other

    25       1,036       1,208       60       278       2,607  
      6,163       7,354       8,917       873       15,041       38.348  

Direct Vessel Profit

 

  $ 1,474

 

  $ 4,727     $ 2,327     $ 1,754     $ 3,091       13,373  

Other Costs and Expenses:

                                               

Operating:

                                               

Leased-in equipment

  $ 1,862     $ 963     $     $     $       2,825  

Administrative and general

                                            12,807  

Depreciation and amortization

  $ 6,535     $ 2,807     $ 6,090     $ 1,219     $ 2,861       19,512  
                                              35,144  

Losses on Asset Dispositions, Net

                                            (2,643 )

Operating Loss

                                          $ (24,414

)

                                                 

As of March 31, 2018

                                               

Property and Equipment:

                                               

Historical cost

  $ 526,986     $ 168,317     $ 349,047     $ 93,223     $ 182,923     $ 1,320,496  

Accumulated depreciation

    (236,120

)

    (54,349

)

    (109,601

)

    (39,551

)

    (140,840

)

    (580,461

)

    $ 290,866     $ 113,968     $ 239,446     $ 53,672     $ 42,083     $ 740,035  

 

14

 

 

 

 

 

United States

(primarily

Gulf of

Mexico)

   

Africa

(primarily

West Africa)

   

Middle East

and Asia

   

Brazil,

Mexico,

Central and

South

America

   

Europe

(primarily

North Sea)

   

Total

 

For the three months ended March 31, 2017

                                               

Operating Revenues:

                                               

Time charter

  $ 2,995     $ 5,847     $ 5,823     $     $ 16,065     $ 30,730  

Bareboat charter

                      1,143             1,143  

Other marine services

    826       192       877       75       461       2,431  
      3,821       6,039       6,700       1,218       16,526       34,304  

Direct Costs and Expenses:

                                               

Operating:

                                               

Personnel

    3,130       2,608       3,123       13       7,917       16,791  

Repairs and maintenance

    737       544       576       4       1,734       3,595  

Drydocking

    573       1,057       158             1,279       3,067  

Insurance and loss reserves

    805       182       346       7       219       1,559  

Fuel, lubes and supplies

    310       559       524             949       2,342  

Other

    72       646       1,465       1       250       2,434  
      5,627       5,596       6,192       25       12,348       29,788  

Direct Vessel Profit (Loss)

  $ (1,806

)

  $ 443     $ 508     $ 1,193     $ 4,178       4,516  

Other Costs and Expenses:

                                               

Operating:

                                               

Leased-in equipment

  $ 2,211     $ 970     $ 346     $     $ 64       3,591  

Administrative and general

                                            11,826  

Depreciation and amortization

  $ 5,600     $ 1,590     $ 2,527     $ 665     $ 2,121       12,503  
                                              27,920  

Gains on Asset Dispositions, Net

                                      4,819  

Operating Loss

                                          $ (18,585

)

                                                 

As of March 31, 2017

                                               

Property and Equipment:

                                               

Historical cost

  $ 433,021     $ 157,835     $ 274,885     $ 57,744     $ 165,691     $ 1,089,176  

Accumulated depreciation

    (235,728

)

    (62,359

)

    (82,447

)

    (35,120

)

    (118,868

)

    (534,522

)

    $ 197,293     $ 95,476     $ 192,438     $ 22,624     $ 46,823     $ 554,654  

 

The Company’s investments in 50% or less owned companies, which are accounted for under the equity method, also contribute to its consolidated results of operations. As of March 31, 2018, the Company’s investments, at equity, and advances to 50% or less owned companies in MexMar and its other 50% or less owned companies were $62.5 million and $47.8 million, respectively. Equity in earnings (losses) of 50% or less owned companies, net of tax for the three months ended March 31 were as follows (in thousands):

 

   

2018

   

2017

 

MexMar

  $ 1,432     $ 1,367  

Other

    (1,224)       (929

)

    $ 208     $ 438  

 

 

 

12.  SUBSEQUENT EVENT

 

On April 26, 2018, the Company issued an aggregate of 2,168,586 shares of Common Stock and warrants to purchase 674,164 shares of Common Stock, at an exercise price of $0.01 per share, in a private placement in reliance on the exemption from registration set forth in Section 4(a)(2) of the Securities Act (the “Private Placement”). The Company received $20.00 per share and warrant for a total of $56.9 million in gross proceeds to be used for general corporate purposes.

 

On May 2, 2018, the Company entered into an amendment and exchange agreement with Carlyle pursuant to which:

 

Carlyle exchanged $50 million in aggregate principal amount of the Convertible Senior Notes for warrants to purchase approximately 1.9 million shares of Common Stock, at an exercise price of $0.01 per share representing an exchange rate of 37.73 shares per $1,000 in principal amount of the Convertible Senior Notes (equivalent to an exchange price of $26.50 per share) (the “Exchange”) in in reliance on the exemption from registration set forth in Section 4(a)(2) of the Securities Act; and

 

The Company and Carlyle amended the $125.0 million in principal amount of Convertible Senior Notes that remained outstanding after the Exchange to (i) increase the interest rate from 3.75% per annum to 4.25% per annum and (ii) extend the maturity date of the Convertible Senior Notes by 12 months to December 2023.

 

15

 
 

 

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

This Form 10-Q includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Certain statements discussed in this Form 10-Q as well as in other reports, materials and oral statements that the Company releases from time to time to the public constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Generally, words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “believe,” “plan,” “target,” “forecast” and similar expressions are intended to identify forward-looking statements. Such forward-looking statements concern management’s expectations, strategic objectives, business prospects, anticipated economic performance and financial condition and other similar matters. These statements are not guarantees of future performance and actual events or results may differ significantly from these statements. Actual events or results are subject to significant known and unknown risks, uncertainties and other important factors, including decreased demand and loss of revenues as a result of a decline in the price of oil and resulting decrease in capital spending by oil and gas companies, an oversupply of newly built offshore support vessels, additional safety and certification requirements for drilling activities in the U.S. Gulf of Mexico and delayed approval of applications for such activities, the possibility of U.S. government implemented moratoriums directing operators to cease certain drilling activities in the U.S. Gulf of Mexico and any extension of such moratoriums, weakening demand for the Company’s services as a result of unplanned customer suspensions, cancellations, rate reductions or non-renewals of vessel charters or failures to finalize commitments to charter vessels in response to a decline in the price of oil, increased government legislation and regulation of the Company’s businesses could increase cost of operations, increased competition if the Jones Act and related regulations are repealed, liability, legal fees and costs in connection with the provision of emergency response services, such as the response to the oil spill as a result of the sinking of the Deepwater Horizon in April 2010, decreased demand for the Company’s services as a result of declines in the global economy, declines in valuations in the global financial markets and a lack of liquidity in the credit sectors, including, interest rate fluctuations, availability of credit, inflation rates, change in laws, trade barriers, commodity prices and currency exchange fluctuations, the cyclical nature of the oil and gas industry, activity in foreign countries and changes in foreign political, military and economic conditions, changes to the status of applicable trade treaties including as a result of the U.K.'s impending exit from the European Union, changes in foreign and domestic oil and gas exploration and production activity, safety record requirements, compliance with U.S. and foreign government laws and regulations, including environmental laws and regulations and economic sanctions, the dependence on several key customers, consolidation of the Company’s customer base, the ongoing need to replace aging vessels, industry fleet capacity, restrictions imposed by the Jones Act and related regulations on the amount of foreign ownership of the Company’s Common Stock, operational risks, effects of adverse weather conditions and seasonality, adequacy of insurance coverage, the ability of the Company to maintain effective internal controls over financial reporting, in accordance with Section 404 of the Sarbanes-Oxley Act, the attraction and retention of qualified personnel by the Company, and various other matters and factors, many of which are beyond the Company’s control as well as those discussed in Item 1A (Risk Factors) of the Company's Annual Report on Form 10-K and other reports filed by the Company with the Securities and Exchange Commission ("SEC"). It should be understood that it is not possible to predict or identify all such factors. Consequently, the preceding should not be considered to be a complete discussion of all potential risks or uncertainties and investors and analysts should not place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date of the document in which they are made. The Company disclaims any obligation or undertaking to provide any updates or revisions to any forward-looking statement to reflect any change in the Company’s expectations or any change in events, conditions or circumstances on which the forward-looking statement is based, except as required by law. It is advisable, however, to consult any further disclosures the Company makes on related subjects in its filings with the SEC, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K (if any). These statements constitute the Company’s cautionary statements under the Private Securities Litigation Reform Act of 1995.

 

Overview

 

The Company provides global marine and support transportation services to offshore oil and gas exploration, development and production facilities worldwide. The Company currently operates a diverse fleet of 186 support and specialty vessels, of which 141 are owned or leased-in, 31 are joint ventured, and 14 are managed on behalf of unaffiliated third parties. The primary users of the Company’s services are major integrated oil companies, large independent oil and gas exploration and production companies and emerging independent companies.

 

The Company operates its fleet in five principal geographic regions: the United States, primarily in the Gulf of Mexico; Africa, primarily in West Africa; the Middle East and Asia; Brazil, Mexico, Central and South America; and Europe, primarily in the North Sea. The Company’s vessels are highly mobile and regularly and routinely move between countries within a geographic region. In addition, the Company’s vessels are redeployed among its geographic regions, subject to flag restrictions, as changes in market conditions dictate. The number and type of vessels operated, their rates per day worked and their utilization levels are the key determinants of the Company’s operating results and cash flows. Unless a vessel is cold-stacked, there is little reduction in daily running costs and, consequently, operating margins are most sensitive to changes in rates per day worked and utilization. The Company manages its fleet utilizing a global network of shore side support, administrative and finance personnel.

 

Offshore oil and gas market conditions deteriorated beginning in 2014 and continued to deteriorate when oil prices hit a thirteen-year low of less than $27 per barrel (on the New York Mercantile Exchange) in February 2016. As of March 31, 2018, oil prices had increased from the February 2016 lows to a price of approximately $65 per barrel.  While the Company has experienced what it believes is a beginning of a recovery, it continued to experience difficult market conditions through the first quarter of 2018 as oil producing companies continued to be focused on cost reductions and reductions in capital spending budgets. 

 

16

 

Low oil prices and the subsequent decline in offshore exploration have forced many operators in the industry to restructure or liquidate assets. The Company continues to closely monitor the reactivation of existing offshore support vessels as well as the delivery of newly built offshore support vessels to the industry-wide fleet, which is creating situations of oversupply, thereby further lowering the demand for the Company’s existing offshore support vessel fleet. A continuation of (i) low customer exploration and drilling activity levels, and (ii) the increasing size of the global offshore support vessel fleet as vessels are reactivated and newly built vessels are placed into service could, in isolation or together, have a material adverse effect on the Company’s results of operations, financial position and cash flows.

 

As shipyards, finance parties and industry operators have been forced to restructure or liquidate assets, the Company has reviewed discreet opportunities to acquire or takeover the management of certain assets. In this industry context, the Company may from time to time deploy capital in connection with transactions that it determines enhance market coverage and/or represent a substantial discount to replacement value.

 

Recent Events. On April 26, 2018, the Company issued an aggregate of 2,168,586 shares of Common Stock and warrants to purchase 674,164 shares of Common Stock at an exercise price of $0.01 per share to qualified institutional buyers and other accredited investors in the Private Placement in reliance on the exemption from registration set forth in Section 4(a)(2) of the Securities Act.  The Company received $20.00 per share and warrant for a total of $56.9 million in gross proceeds.

 

On May 2, 2018, the Company entered into an amendment and exchange agreement with Carlyle pursuant to which:

 

The Company and Carlyle exchanged $50 million in aggregate principal amount of the Convertible Senior Notes for warrants to purchase a total of approximately 1.9 million shares of Common Stock in the Exchange in reliance on the exemption from registration set forth in Section 4(a)(2) of the Securities Act; and

 

The Company and Carlyle amended the $125 million in principal amount of Convertible Senior Notes that remained outstanding after the Exchange to (i) increase the interest rate from 3.75% per annum to 4.25% per annum and (ii) extend the maturity date of the Convertible Senior Notes by 12 months to December 2023. 

 

The Spin-off. SEACOR Marine was previously a subsidiary of SEACOR Holdings. On June 1, 2017, SEACOR Holdings completed a spin-off of SEACOR Marine by way of a pro rata dividend of SEACOR Marine’s Common Stock, all of which was then held by SEACOR Holdings, to SEACOR Holdings shareholders of record as of May 22, 2017. SEACOR Marine entered into certain agreements with SEACOR Holdings to govern SEACOR Marine’s relationship with SEACOR Holdings following the Spin-off, including a Distribution Agreement, two Transition Services Agreements, an Employee Matters Agreement and a Tax Matters Agreement. Immediately following the Spin-off, SEACOR Marine began to operate as an independent, publicly traded company.

 

17

 
 

Consolidated Results of Operations

 

For the three months ended March 31, the Company’s consolidated results of operations were as follows (in thousands, except statistics):

 

   

2018

   

2017

 

Time Charter Statistics:

                               

Average Rates Per Day Worked (excluding wind farm)

  $ 9,071             $ 8,272          

Average Rates Per Day

  $ 7,001             $ 5,726          

Fleet Utilization (excluding wind farm)

            50 %             38 %

Fleet Utilization

            53 %             46 %

Fleet Available Days (excluding wind farm)

    9,271               8,437          

Fleet Available Days

    12,601               11,768          

Operating Revenues:

                               

Time charter

  $ 47,142       91 %   $ 30,730       90 %

Bareboat charter

    1,143       2 %     1,143       3 %

Other marine services

    3,436       7 %     2,431       7 %
      51,721       100 %     34,304       100 %

Costs and Expenses:

                               

Operating:

                               

Personnel

    21,676       42 %     16,791       49 %

Repairs and maintenance

    7,073       14 %     3,595       10 %

Drydocking

    2,257       4 %     3,067       9 %

Insurance and loss reserves

    1,190       2 %     1,559       5 %

Fuel, lubes and supplies

    3,545       7 %     2,342       7 %

Other

    2,607       5 %     2,434       7 %

Leased-in equipment

    2,825       5 %     3,591       10 %
      41,173       79 %     33,379       97 %

Administrative and general

    12,807       25 %     11,826       35 %

Depreciation and amortization

    19,512       38 %     12,503       36 %
      73,492       142 %     57,708       168 %

(Losses) Gains on Asset Dispositions and Impairments, Net

    (2,643 )     (5) %     4,819       14 %

Operating Loss

    (24,414 )     (47) %     (18,585 )     (54) %

Other Income (Expense), Net

    (17,306 )     (33) %     7,126       21 %

Loss Before Income Tax Benefit and Equity in Earnings (Losses) of 50% or Less Owned Companies

    (41,720 )     (81) %     (11,459 )     (33) %

Income Tax Benefit

    (9,824 )     (19) %     (3,422 )     (10) %

Loss Before Equity in Earnings (Losses) of 50% or Less Owned Companies

    (31,896 )     (62) %     (8,037 )     (23) %

Equity in Earnings (Losses) of 50% or Less Owned Companies

    208       %     438       1 %

Net Loss

    (31,688 )     (62) %     (7,599 )     (22) %

Net Loss attributable to Noncontrolling Interests in Subsidiaries

    (2,855 )     (6) %     (204 )     %

Net Loss attributable to SEACOR Marine Holdings Inc.

  $ (28,833 )     (56) %   $ (7,395 )     (22) %

 

 

Direct Vessel Profit.  Direct vessel profit (defined as operating revenues less operating expenses excluding leased-in equipment, "DVP") is the Company's measure of segment profitability when applied to reportable segments and a non-GAAP measure when applied to individual vessels, fleet categories or the combined fleet.  DVP is a critical financial measure used by the Company to analyze and compare the operating performance of its individual vessels, fleet categories, regions and combined fleet, without regard to financing decisions (depreciation for owned vessel vs. leased-in expense for leased-in vessels).  DVP is also useful when comparing the Company's fleet's performance against those of its competitors who may have differing fleet financing structures.

 

18

 

The following tables summarize the operating results and property and equipment for the Company’s reportable segments for the periods indicated (in thousands, except statistics):

 

   

United States (primarily Gulf of Mexico)

   

Africa (primarily West Africa)

   

Middle East and Asia

   

Brazil, Mexico, Central and South America

   

Europe (primarily North Sea)

   

Total

 

For the three months ended March 31, 2018

                                               

Time Charter Statistics:

                                               

Average Rates Per Day

  $ 8,775     $ 9,455     $ 8,072     $ 15,272     $ 5,164     $ 7,001  

Fleet Utilization

    17 %     91 %     66 %     41 %     69 %     53 %

Fleet Available Days

    4,050       1,260       2,132       219       4,940       12,601  

 

Operating Revenues:

                                               

Time charter

  $ 5,982     $ 10,794     $ 11,374     $ 1,374     $ 17,618     $ 47,142  

Bareboat charter

                      1,143             1,143  

Other

    1,655       1,287       (130)       110       514       3,436  
      7,637       12,081       11,244       2,627       18,132       51,721  

Direct Costs and Expenses:

                                               

Operating:

                                               

Personnel

    3,992       4,073       4,022       376       9,213       21,676  

Repairs and maintenance

    694       1,356       2,428       305       2,290       7,073  

Drydocking

    525       2       (11)             1,741       2,257  

Insurance and loss reserves

    434       218       236       67       235       1,190  

Fuel, lubes and supplies

    493       669       1,034       65       1,284       3,545  

Other

    25       1,036       1,208       60       278       2,607  
      6,163       7,354       8,917       873       15,041       38,348  

Direct Vessel Profit

  $ 1,474

 

  $ 4,727     $ 2,327

 

  $ 1,754     $ 3,091       13,373  

Other Costs and Expenses:

                                               

Operating:

                                               

Leased-in equipment

  $ 1,862     $ 963     $     $     $       2,825  

Administrative and general

                                            12,807  

Depreciation and amortization

  $ 6,535     $ 2,807     $ 6,090     $ 1,219     $ 2,861       19,512  
                                              35,144  

Losses on Asset Dispositions and Impairments, Net

                                      (2,643

)

Operating Loss

                                          $ (24,414

)

                                                 

As of March 31, 2018

                                               

Property and Equipment:

                                               

Historical cost

  $ 526,986     $ 168,317     $ 349,047     $ 93,223     $ 182,923     $ 1,320,496  

Accumulated depreciation

    (236,120

)

    (54,349

)

    (109,601

)

    (39,551

)

    (140,840

)

    (580,461

)

    $ 290,866     $ 113,968     $ 239,446     $ 53,672     $ 42,083     $ 740,035  

 

19

 

 

   

United States (primarily Gulf of Mexico)

   

Africa (primarily West Africa)

   

Middle East and Asia

   

Brazil, Mexico, Central and South America

   

Europe (primarily North Sea)

   

Total

 

For the three months ended March 31, 2017

                                               

Time Charter Statistics:

                                               

Average Rates Per Day

  $ 10,133     $ 9,388     $ 7,017     $     $ 4,440     $ 5,726  

Fleet Utilization

    7 %     61 %     49 %     %     73 %     46 %

Fleet Available Days

    3,998       1,019       1,710       90       4,950       11,767  

 

Operating Revenues:

                                               

Time charter

  $ 2,995     $ 5,847     $ 5,823     $     $ 16,065     $ 30,730  

Bareboat charter

                      1,143             1,143  

Other

    826       192       877       75       461       2,431  
      3,821       6,039       6,700       1,218       16,526       34,304  

Direct Costs and Expenses:

                                               

Operating:

                                               

Personnel

    3,130       2,608       3,123       13       7,917       16,791  

Repairs and maintenance

    737       544       576       4       1,734       3,595  

Drydocking

    573       1,057       158             1,279       3,067  

Insurance and loss reserves

    805       182       346       7       219       1,559  

Fuel, lubes and supplies

    310       559       524             949       2,342  

Other

    72       646       1,465       1       250       2,434  
      5,627       5,596       6,192       25       12,348       29,788  

Direct Vessel Profit (Loss)

  $ (1,806)     $ 443     $ 508     $ 1,193     $ 4,178       4,516  

Other Costs and Expenses:

                                               

Operating:

                                               

Leased-in equipment

  $ 2,211     $ 970     $ 346     $     $ 64       3,591  

Administrative and general

                                            11,826  

Depreciation and amortization

  $ 5,600     $ 1,590     $ 2,527     $ 665     $ 2,121       12,503  
                                              27,920  

Gains on Asset Dispositions and Impairments, Net

                                      4,819  

Operating Loss

                                          $ (18,585

)

                                                 

As of March 31, 2017

                                               

Property and Equipment:

  $ 433,021     $ 157,835     $ 274,885     $ 57,744     $ 165,691     $ 1,089,176  

Historical cost

    (235,728

)

    (62,359 )     (82,447

)

    (35,120

)

    (118,868

)

    (534,522

)

Accumulated depreciation

  $ 197,293     $ 95,476     $ 192,438     $ 22,624     $ 46,823     $ 554,654  

 

20

 

 

For additional information, the following tables summarize the world-wide operating results and property and equipment for each of the Company’s vessel classes for the periods indicated (in thousands, except statistics):

 

   

Anchor handling towing supply

   

Fast support

   

Supply

   

Standby safety

   

Specialty

   

Liftboats

   

Wind farm utility

   

Other activity

   

Total

 

For the three months ended March 31, 2018

                                                                       

Time Charter Statistics:

                                                                       

Average Rates Per Day

  $ 10,322     $ 7,746     $ 6,454     $ 9,058     $     $ 16,068     $ 2,305     $     $ 7,001  

Fleet Utilization

    21 %     53 %     73 %     78 %     %     30 %     62 %     %     53 %

Fleet Available Days

    1,260       3,780       633       1,849       90       1,659       3,330               12,601  

Operating Revenues:

                                                                       

Time charter

  $ 2,787     $ 15,427     $ 3,002     $ 13,051     $     $ 8,126     $ 4,749     $     $ 47,142  

Bareboat charter

                1,143                                     1,143  

Other

    1,438       (656)       (18

)

    40             756       429       1,447       3,436  
      4,225       14,771       4,127       13,091             8,882       5,178       1,447       51,721  

Direct Costs and Expenses:

                                                                       

Operating:

                                                                       

Personnel

    1,397       4,756       1,956       6,938       164       3,461       2,222       782       21,676  

Repairs and maintenance

    394       2,544       445       1,554       37       1,134       825       140       7,073  

Drydocking

    480       (9)             1,741       (6)       51                   2,257  

Insurance and loss reserves

    91       324       102       138       10       651       103       (229

)

    1,190  

Fuel, lubes and supplies

    153       795       694       991       83       668       144       17

 

    3,545  

Other

    452

 

    1,460       719       161       104       417       96       (802 )     2,607  
      2,967       9,870       3,916       11,523       392       6,382       3,390       (92

)

    38,348  

Direct Vessel Profit (Loss) (1)

  $ 1,258

 

  $ 4,901     $ 211     $ 1,568     $ (392

)

  $ 2,500

 

  $ 1,788     $ 1,539       13,373  

Other Costs and Expenses:

                                                                       

Operating:

                                                                       

Leased-in equipment

  $ 1,858     $ 342     $     $     $     $ 638     $     $ (13)       2,825  

Administrative and general

                                                              12,807  

Depreciation and amortization

  $ 1,490     $ 6,585     $ 2,743     $ 694     $ 282     $ 5,025     $ 2,428     $ 265       19,512  
                                                                      35,144  

Losses on Asset Dispositions and Impairments, Net

                                                                    (2,643

)

Operating Loss

                                                                  $ (24,414

)

                                                                         

As of March 31, 2018

                                                                       

Property and Equipment:

                                                                       

Historical cost

  $ 201,354     $ 421,174     $ 105,360     $ 123,471     $ 30,528     $ 337,142     $ 69,950     $ 31,517     $ 1,320,496  

Accumulated depreciation

    (180,906

)

    (92,519

)

    (54,236

)

    (102,444

)

    (19,586

)

    (59,567

)

    (44,235

)

    (26,968

)

    (580,461

)

    $ 20,448     $ 328,655     $ 51,124     $ 21,027     $ 10,942     $ 277,575     $ 25,715     $ 4,549     $ 740,035  

 

___________________

(1)

Direct vessel profit by vessel class is a non-GAAP financial measure. It should be noted that DVP by vessel class has material limitations as an analytical tool in that it does not reflect all of the costs associated with the operation of the Company’s fleet, and it should not be considered in isolation or used as a substitute for the Company’s results as reported under GAAP. A reconciliation of DVP by vessel class to operating loss, its most comparable GAAP measure, is included in the table above.

 

21

 

 

   

Anchor handling towing supply

   

Fast support

   

Supply

   

Standby safety

   

Specialty

   

Liftboats

   

Wind farm utility

   

Other activity

   

Total

 

For the three months ended March 31, 2017

                                                                       

Time Charter Statistics:

                                                                       

Average Rates Per Day

  $ 13,341     $ 7,417     $ 11,707     $ 8,131     $     $ 9,782     $ 2,005     $     $ 5,726  

Fleet Utilization

    15 %     44 %     20 %     80 %     %     10 %     65 %     %     46 %

Fleet Available Days

    1,260       3,212       630       1,800       270       1,265       3,330             11,767  

Operating Revenues:

                                                                       

Time charter

  $ 2,570     $ 10,542     $ 1,457     $ 11,695     $     $ 95     $ 4,371     $     $ 30,730  

Bareboat charter

                1,143                                     1,143  

Other

    (163)       853       (66)       33             41       362       1,371       2,431  
      2,407       11,395       2,534       11,728             136       4,733       1,371       34,304  

Direct Costs and Expenses:

                                                                       

Operating:

                                                                       

Personnel

    2,494       4,010       1,055       6,334       265       1,006       1,642       (15)       16,791  

Repairs and maintenance

    497       709       200       1,208       40       405       536             3,595  

Drydocking

    348       1,010             1,280             429                   3,067  

Insurance and loss reserves

    357       462       74       136       61       375       89       5

 

    1,559  

Fuel, lubes and supplies

    416       612       171       825       70       122       126             2,342  

Other

    (284

)

    1,324       954       197       149       14       88       (8)       2,434  
      3,828       8,127       2,454       9,980       585       2,351       2,481       (18)       29,788  

Direct Vessel Profit (Loss) (1)

  $ (1,421)     $ 3,268     $ 80     $ 1,748     $ (585)     $ (2,215

)

  $ 2,252     $ 1,389       4,516  

Other Costs and Expenses:

                                                                       

Operating:

                                                                       

Leased-in equipment

  $ 1,873     $ 690     $ 332     $     $     $ 632     $ 64     $       3,591  

Administrative and general

                                                                    11,826  

Depreciation and amortization

  $ 2,419     $ 3,418     $ 1,295     $ 559     $ 581     $ 1,923     $ 1,829     $ 479       12,503  
                                                                      27,920  

Losses on Asset Dispositions and Impairments, Net

                                                                    4,819

 

Operating Loss

                                                                  $ (18,585

)

                                                                         

As of March 31, 2017

                                                                       

Property and Equipment:

                                                                       

Historical cost

  $ 224,526     $ 310,152     $ 99,877     $ 112,005     $ 38,500     $ 195,108     $ 61,582     $ 47,426     $ 1,089,176  

Accumulated depreciation

    (180,928

)

    (76,938

)

    (60,476

)

    (90,779

)

    (17,862

)

    (44,895

)

    (31,249

)

    (31,395

)

    (534,522

)

    $ 43,598     $ 233,214     $ 39,401     $ 21,226     $ 20,638     $ 150,213     $ 30,333     $ 16,031     $ 554,654  

 

___________________

(1)

Direct vessel profit by vessel class is a non-GAAP financial measure. It should be noted that DVP by vessel class has material limitations as an analytical tool in that it does not reflect all of the costs associated with the operation of the Company’s fleet, and it should not be considered in isolation or used as a substitute for the Company’s results as reported under GAAP. A reconciliation of DVP by vessel class to operating loss, its most comparable GAAP measure, is included in the table above.

 

Fleet Counts. The Company's fleet count as of March 31 was as follows:

 

   

Owned

   

Joint Ventured

   

Leased-in

   

Managed

   

Total

 

2018

                                       

Anchor handling towing supply

    7       1       4       7       19  

Fast support

    41       5       1       3       50  

Supply

    8       19             2       29  

Standby safety

    21       1                   22  

Specialty

    1       1             2       4  

Liftboats

    19             2             21  

Wind farm utility

    37       4                   41  
      134       31       7       14       186  

2017

                                       

Anchor handling towing supply

    11       1       4       9       25  

Fast support

    36       11       1       3       51  

Supply

    8       17       1       2       28  

Standby safety

    20       1                   21  

Specialty

    3       1             2       6  

Liftboats

    13             2             15  

Wind farm utility

    37       3                   40  
      128       34       8       16       186

 

 

 

22

 

 

Operating Income (Loss)

 

United States, primarily Gulf of Mexico. For the three months ended March 31, the Company’s direct vessel profit (loss) in the United States was as follows (in thousands, except statistics):

 

   

For the three months ended March 31,

 
   

2018

   

2017

 

Time Charter Statistics:

                               

Rates Per Day Worked:

                               

Anchor handling towing supply

  $             $ 35,717          

Fast support

    7,187               8,650          

Supply

                           

Liftboats

    10,552               9,782          

Overall

    8,775               10,133          

Utilization:

                               

Anchor handling towing supply

            %             2 %

Fast support

            23 %             16 %

Supply

            %             %

Liftboats

            23 %             1 %

Overall

            17 %             7 %

Available Days:

                               

Anchor handling towing supply

    900               900          

Fast support

    1,581               1,653          

Supply

    90               90          

Specialty

    90               90          

Liftboats

    1,389               1,265          

Overall

    4,050               3,998          

Operating revenues:

                               

Time charter

  $ 5,982       78 %   $ 2,995       78 %

Other marine services

    1,655       22 %     826       22 %
      7,637       100 %     3,821       100 %

Direct operating expenses:

                               

Personnel

    3,992       52 %     3,130       82 %

Repairs and maintenance

    694       9 %     737       19 %

Drydocking

    525       7 %     573       15 %

Insurance and loss reserves

    434       6 %     805       21 %

Fuel, lubes and supplies

    493       6 %     310       8 %

Other

    25       %     72       2 %
      6,163       81 %     5,627       147 %

Direct Vessel Profit (Loss)

  $ 1,474       19 %   $ (1,806)       (47) %

 

Current Year Quarter compared with Prior Year Quarter

 

Operating Revenues. Time charter revenues were $3.0 million higher in the Current Year Quarter compared with the Prior Year Quarter primarily due to the addition of six liftboats associated with the FGH joint venture. Time charter revenues were $3.3 million higher for the liftboat fleet, $0.3 million higher for the fast support vessels and $0.6 million lower for the anchor handling towing supply vessels. As of March 31, 2018, the Company had 33 of 43 owned and leased-in vessels (six anchor handling towing supply vessels, 13 fast support vessels, 12 liftboats, one supply vessel and one specialty vessel) cold-stacked compared with 35 of 44 vessels as of March 31, 2017. As of March 31, 2018, the Company had retired and removed from service five vessels (four anchor handling towing supply vessels and one supply vessel) in this region.

 

Direct Operating Expenses. Direct operating expenses were $0.5 million higher in the Current Year Quarter compared with the Prior Year Quarter. On an overall basis, direct operating expenses were $1.6 million higher due to net fleet acquisitions, primarily associated with the FGH joint venture, $0.9 million lower due to the effect of cold-stacking vessels, and $0.2 million lower for the active fleet and other marine services.

 

23

 

 

Africa, primarily West Africa. For the quarters ended March 31, the Company’s direct vessel profit in Africa was as follows (in thousands, except statistics):

 

   

For the three months ended March 31,

 
   

2018

   

2017

 

Time Charter Statistics:

                               

Rates Per Day Worked:

                               

Anchor handling towing supply

  $ 11,669             $ 14,314          

Fast support

    9,913               7,499          

Supply

    7,382               14,000          

Specialty

                           

Overall

    9,455               9,388          

Utilization:

                               

Anchor handling towing supply

            100 %             32 %

Fast support

            88 %             78 %

Supply

            92 %             100 %

Specialty

            %             %

Overall

            91 %             61 %

Available Days:

                               

Anchor handling towing supply

    180               270          

Fast support

    720               569          

Supply

    360               90          

Specialty

                  90          

Overall

    1,260               1,019          

Operating revenues:

                               

Time charter

  $ 10,794       89 %   $ 5,847       97 %

Other marine services

    1,287       11 %     192       3 %
      12,081       100 %     6,039       100 %

Direct operating expenses:

                               

Personnel

    4,073       34 %     2,608       43 %

Repairs and maintenance

    1,356       11 %     544       9 %

Drydocking

    2       %     1,057       18 %

Insurance and loss reserves

    218       2 %     182       3 %

Fuel, lubes and supplies

    669       5 %     559       9 %

Other

    1,036       9 %     646       11 %
      7,354       61 %     5,596       93 %

Direct Vessel Profit

  $ 4,727       39 %   $ 443       7 %

 

Current Year Quarter compared with Prior Year Quarter

 

Operating Revenues. Time charter revenues were $4.9 million higher in the Current Year Quarter compared with the Prior Year Quarter primarily due to net fleet additions. Time charter revenues were $6.1 million higher due to net fleet additions, $1.0 million higher due to improved utilization of which $0.8 million was due to the reactivation of vessels from cold-stacked, $2.1 million lower due to the repositioning of vessels between geographic regions and $0.1 million lower due to a reduction in average day rates. Other marine services were $1.1 million higher primarily due to the recognition of previously deferred revenue, following receipt of cash, due to collection concerns with regard to one customer. As of March 31, 2018, the Company had no owned or leased-in vessels cold-stacked in this region compared with one of 13 vessels as of March 31, 2017. As of March 31, 2018, the Company had one specialty vessel retired and removed from service in this region.

 

Direct Operating Expenses. Direct operating expenses were $1.8 million higher in the Current Year Quarter compared with the Prior Year Quarter. On an overall basis, operating costs were $3.5 million higher due to net fleet additions, $1.2 million lower for the active fleet and other changes in fleet mix and $0.5 million lower due to the repositioning of vessels between geographic regions. Personnel costs were $1.5 million higher primarily due to net fleet additions, and drydocking expenses were $1.1 million lower due to reduced drydocking activity.

 

24

 

 

Middle East and Asia. For the quarters ended March 31, the Company’s direct vessel profit in the Middle East and Asia was as follows (in thousands, except statistics):

 

   

For the three months ended March 31,

 
   

2018

   

2017

 

Time Charter Statistics:

                               

Rates Per Day Worked:

                               

Anchor handling towing supply

  $ 7,629             $ 8,477          

Fast support

    6,584               6,893          

Supply

    4,147               5,725          

Specialty

                           

Liftboats

    35,700                        

Wind farm utility

    2,025                        

Overall

    8,072               7,017          

Utilization:

                               

Anchor handling towing supply

            50 %             100 %

Fast support

            74 %             78 %

Supply

            73 %             8 %

Specialty

            %             %

Liftboats

            52 %             %

Wind farm utility

            38 %             %

Overall

            66 %             49 %

Available Days:

                               

Anchor handling towing supply

    180               90          

Fast support

    1,350               900          

Supply

    183               450          

Specialty

                  90          

Liftboats

    180                        

Wind farm utility

    239               180          

Overall

    2,132               1,710          

Operating revenues:

                               

Time charter

  $ 11,374       101 %   $ 5,823       87 %

Other marine services

    (130 )     (1 % )   877       13 %
      11,244       100 %     6,700       100 %

Direct operating expenses:

                               

Personnel

    4,022       36 %     3,123       46 %

Repairs and maintenance

    2,428       21 %     576       9 %

Drydocking

    (11 )     %     158       2 %

Insurance and loss reserves

    236       2 %     346       5 %

Fuel, lubes and supplies

    1,034       9 %     524       8 %

Other

    1,208       11 %     1,465       22 %
      8,917       79 %     6,192       92 %

Direct Vessel Profit

  $ 2,327       21 %   $ 508       8 %

 

Current Year Quarter compared with Prior Year Quarter

 

Operating Revenues. Time charter revenues were $5.6 million higher in the Current Year Quarter compared with the Prior Year Quarter primarily due to net fleet additions. Time charter revenues were $4.9 million higher due to net fleet additions, $0.8 million higher due to improved utilization of which $0.7 million was due to reactivation of vessels from cold-stack, $0.2 million higher due to the repositioning of vessels between geographic regions, and $0.3 million lower due to a reduction in average day rates. Other marine services were $1.0 million lower due to the completion of a bareboat charter. As of March 31, 2018, the Company had one of 23 owned and leased-in vessels cold-stacked in this region (one anchor handling towing supply vessel) compared with two of 21 vessels as of March 31, 2017. As of March 31, 2018, the Company had one specialty vessel and two towing-supply vessels retired and removed from service in this region.

 

Direct Operating Expenses. Direct operating expenses were $2.7 million higher in the Current Year Quarter compared with the Prior Year Quarter. On an overall basis, direct operating expenses were $3.0 million higher due to net fleet additions, $0.4 million higher due to the repositioning of vessels between geographic regions, $0.4 million lower due to the effect of cold-stacking vessels and $0.3 million lower for vessels in active service and other changes in fleet mix. Repair and maintenance expenses were $1.8 million higher primarily due to the effect of net fleet additions.

 

25

 

 

Brazil, Mexico, Central and South America. For the quarters ended March 31, the Company’s direct vessel profit in Brazil, Mexico, Central and South America was as follows (in thousands, except statistics):

 

   

For the three months ended March 31,

 
   

2018

   

2017

 

Time Charter Statistics:

                               

Rates Per Day Worked:

                               

Anchor handling towing supply

  $             $          

Fast support

                           

Supply

                           

Liftboats

    15,272                        

Overall

    15,272                        

Utilization:

                               

Anchor handling towing supply

            %             %

Fast support

            %             %

Supply

            %             %

Liftboats

            100 %             %

Overall

            41 %             %

Available Days:

                               

Anchor handling towing supply

                           

Fast support

    129               90          

Supply

                           

Liftboats

    90                        

Overall

    219               90          

Operating revenues:

                               

Time charter

  $ 1,374       52 %   $       %

Bareboat charter

    1,143       44 %     1,143       94 %

Other marine services

    110       4 %     75       6 %
      2,627       100 %     1,218       100 %

Direct operating expenses:

                               

Personnel

    376       14 %     13       1 %

Repairs and maintenance

    305       12 %     4       %

Drydocking

          %           %

Insurance and loss reserves

    67       3 %     7       1 %

Fuel, lubes and supplies

    65       2 %           %

Other

    60       2 %     1       %
      873       33 %     25       2 %

Direct Vessel Profit

  $ 1,754       67 %   $ 1,193       98 %

 

Current Year Quarter compared with Prior Year Quarter

 

Operating Revenues. Time charter revenues were $1.4 million higher in the Current Year Quarter compared with the Prior Year Quarter primarily due to the repositioning of one vessel between geographic regions. As of March 31, 2018, the Company had one of five owned and leased-in vessels cold-stacked in this region (one fast support vessel) compared with one of three vessels as of March 31, 2017.

 

Direct Operating Expenses. Direct operating expenses were $0.8 million higher in the Current Year Quarter compared with the Prior Year Quarter, of which $0.3 million was due to fleet additions and $0.5 million was due to the repositioning of one vessel between geographic regions.

 

26

 

 

Europe, primarily North Sea. For the quarters ended March 31, the Company’s direct vessel profit in Europe was as follows (in thousands, except statistics):

 

   

For the three months ended March 31,

 
   

2018

   

2017

 

Time Charter Statistics:

                               

Rates Per Day Worked:

                               

Standby safety

  $ 9,058             $ 8,131          

Wind farm utility

    2,317               2,005          

Overall

    5,164               4,440          

Utilization:

                               

Standby safety

            78 %             80 %

Wind farm utility

            64 %             69 %

Overall

            69 %             73 %

Available Days:

                               

Standby safety

    1,849               1,800          

Wind farm utility

    3,091               3,150          

Overall

    4,940               4,950          

Operating revenues:

                               

Time charter

  $ 17,618       97 %   $ 16,065       97 %

Other marine services

    514       3 %     461       3 %
      18,132       100 %     16,526       100 %

Direct operating expenses:

                               

Personnel

    9,213       51 %     7,917       48 %

Repairs and maintenance

    2,290       13 %     1,734       10 %

Drydocking

    1,741       10 %     1,279       8 %

Insurance and loss reserves

    235       1 %     219       1 %

Fuel, lubes and supplies

    1,284       7 %     949       6 %

Other

    278       1 %     250       2 %
      15,041       83 %     12,348       75 %

Direct Vessel Profit

  $ 3,091       17 %   $ 4,178       25 %

 

Current Year Quarter compared with Prior Year Quarter

 

Operating Revenues. For standby safety vessels, time charter revenues were $1.4 million higher in the Current Year Quarter compared with the Prior Year Quarter. Time charter revenues were $0.3 million higher due to improved utilization, $0.2 million lower due to reduced average day rates, $1.4 million higher due to favorable changes in currency exchange rates and $0.2 million lower due to fleet dispositions.

 

For wind farm utility vessels, time charter revenues were $0.2 million higher. Time charter revenues were $0.5 million higher due to favorable changes in currency exchange rates, $0.2 million lower due to repositioning of vessels between geographic regions and $0.1 million lower due to reduced utilization

 

Direct Operating Expenses. Direct operating expenses were $2.7 million higher in the Current Year Quarter compared with the Prior Year Quarter. On an overall basis vessel operating expenses were $0.5 million higher due to repositioning of vessels between geographic regions, $2.6 million higher for vessels in active service, primarily due to unfavorable changes in currency exchange rates, and $0.4 million lower due to fleet dispositions.  Personnel costs were $1.3 million higher primarily due to unfavorable changes in currency exchange rates.

 

Leased-in Equipment. Leased-in equipment expenses were $0.8 million lower in the Current Year Quarter compared with the Prior Year Quarter primarily due to the impairment and removal from service of a bareboat vessel in July 2017.

 

Administrative and general. Administrative and general expenses were $1.0 million higher in the Current Year Quarter compared with the Prior Year Quarter, primarily due to higher legal and professional fees, and Current Year Quarter expense in connection with support services provided by SEACOR Holdings. These increases were partially offset by lower allowances for doubtful accounts.

 

Depreciation and amortization. Depreciation and amortization expense was $7.0 million higher in the Current Year Quarter compared with the Prior Year Quarter, primarily due to fleet additions.

 

Losses on Asset Dispositions and Impairments, Net. During the Current Year Quarter, the Company recorded impairment charges of $2.9 million primarily related to the Company’s anchor handling towing supply vessels. In addition, the Company sold one fast support vessel and other equipment for net proceeds of $0.4 million and gains of $0.2 million, all of which was recognized currently.

 

27

 

 

Other Income (Expense), Net

 

For the quarters ended March 31, the Company’s other income (expense) was as follows (in thousands):

 

   

2018

   

2017

 

Other Income (Expense):

               

Interest income

  $ 216     $ 850  

Interest expense

    (6,133)

 

    (3,182)

 

SEACOR Holdings management fees

   

 

    (1,925)

 

SEACOR Holdings guarantee fees

    (12 )     (76)

 

Marketable security gains (losses), net

          11,738  

Derivative gains (losses), net

    (11,516)       (89)  

Foreign currency (gains)losses, net

    139

 

    (189)

 

Other, net

   

 

    (1)

 

    $ (17,306 )   $ 7,126

 

 

Interest income. Interest income in the Current Year Quarter was lower compared with the Prior Year Quarter primarily due to lower interest from marketable security positions.

 

Interest expense. Interest expense in the Current Year Quarter compared with the Prior Year Quarter was higher primarily due to additional interest incurred on the debt facilities of Falcon Global International, Sea-Cat Crewzer, Sea-Cat Crewzer II, Sea-Cat Crewzer III and FGUSA.

 

SEACOR Holdings management fees. Following the Spin-off, SEACOR Holdings no longer charges management fees to the Company. However, Transition Service Agreement fees for various support services for a period of up to two years following the Spin-off are included in administrative and general expenses.

 

Marketable security gains, net. Marketable security gains of $11.7 million in the Prior Year Quarter were primarily due to a long security position exited by the Company during the Prior Year Quarter.

 

Derivative gains (losses), net. Net derivative losses during the Current Year Quarter were primarily due to increases in the fair value of the Company’s conversion option liability on its Convertible Senior Notes. The increase in the conversion option liability were primarily the result of increases in the Company’s share price and estimated credit spread.

 

Foreign currency (gains) losses, net. Foreign currency losses for the Current Year Quarter were primarily due to the strengthening of the pound sterling in relation to the euro underlying certain of the Company’s debt balances.

 

Income Tax Benefit

 

During the Current Year Quarter, the Company's effective income tax rate of 23.5% was primarily due to taxes not provided on income attributable to noncontrolling interests, foreign sourced income not subject to U.S. income taxes, and a reversal of an unrecognized benefit. During the Prior Year Quarter, the Company's effective income tax rate of 29.9% was primarily due to losses of foreign subsidiaries not benefited.

 

Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax

 

For the three months ended March 31, the Company’s equity in earnings (losses) of 50% or less owned companies, net of tax, was as follows (in thousands):

 

   

2018

   

2017

 

MexMar

  $ 1,432     $ 1,367  

OSV Partners

    (687)       (192)  

Sea-Cat Crewzer

          (14)  

Sea-Cat Crewzer II

          124  

SEACOR Grant DIS

    (1,056)

 

    7

 

Falcon Global International

   

 

    (1,559)  

Dynamic Offshore Drilling

    208

 

    524  
SEACOSCO     (168)        

Other

    479       181

 

    $ 208     $ 438

 

 

OSV Partners. During the Current Year Quarter equity losses from OSV Partners GP LLC and OSV Partners LP LLC (collectively “OSV Partners”) were $0.5 million higher primarily due to the vessels owned by these entities being out-of-service.

 

SEACOR Grant DIS. During the Current Year Quarter equity losses of $1.1 million were due to an impairment charge of $1.1 million, net of tax, for an other than temporary decline in the fair value for the Company's investment in SEACOR Grant DIS. 

 

28

 

Falcon Global International. During the Prior Year Quarter, the Company’s partner declined to participate in a capital call from FGI and, as a consequence, the Company obtained 100% voting control of FGI in accordance with the terms of the operating agreement and began consolidating FGI’s net assets effective March 31, 2017.  In February 2018, the Company and MOI (an affiliate of our partner in FGI) contributed certain assets, including 100% of the equity interests in each member of FGI, to FGH, a consolidated subsidiary of the Company, in accordance with the terms of a Joint Venture Contribution and Formation Agreement (see Note 9).

 

 

Liquidity and Capital Resources

 

General

 

The Company’s ongoing liquidity requirements arise primarily from working capital needs, capital commitments and its obligations to service outstanding debt. The Company may use its liquidity to fund capital expenditures, make acquisitions or to make other investments. Sources of liquidity are cash balances, marketable securities, construction reserve funds and cash flows from operations. From time to time, the Company may secure additional liquidity through asset sales or the issuance of debt, shares of SEACOR Marine Common Stock or common stock of its subsidiaries, preferred stock or a combination thereof.

 

As of March 31, 2018, the Company had unfunded capital commitments of $48.8 million that included two fast support vessels, three supply vessels and four wind farm utility vessel. The Company’s capital commitments by year of expected payment are as follows (in thousands):

 

Remainder of 2018

  $ 18,852  

2019

    21,069  

2020

    8,951  
    $ 48,872  

 

The Company has indefinitely deferred an additional $20.8 million of orders with respect to two fast support vessels for which the Company had previously reported unfunded capital commitments.

 

As of March 31, 2018, the Company had outstanding debt of $428.1 million, net of debt discount and issue costs. The Company’s contractual long-term debt maturities as of March 31, 2018, on an actual basis and on a proforma basis, including a fully drawn FGUSA Credit Facility and a conversion of Convertible Senior Notes are as follows (in thousands):

 

    Actual     Proforma  
Remainder of 2018   $ 16,525     $ 16,525  
2019     54,533       54,533  
2020     18,421       18,421  
2021     46,352       46,352  
2022     218,293       43,293  
Years subsequent to 2022     115,390       245,390  
    $ 469,514     $ 424,514  

 

As of March 31, 2018, the Company held balances of cash, cash equivalents, restricted cash, marketable securities and construction reserve funds totaling $110.4 million. These amounts do not reflect the $56,855,000 in gross proceeds received by the Company in April 2018 from the Private Placement.  As of March 31, 2018, construction reserve funds of $45.4 million were classified as non-current assets in the accompanying condensed consolidated balance sheets as the Company has the intent and ability to use the funds to acquire equipment. Additionally, the Company had $7.5 million available under subsidiary credit facilities for future capital commitments.

 

29

 

 

Summary of Cash Flows

 

For the three months ending March 31, the following is a summary of the Company's cash flows (in thousands):

 

   

Three Months Ended March 31,

 
   

2018

   

2017

 

Cash flows provided by or (used in):

               

Operating Activities

  $ (11,509)     $ 65,296  

Investing Activities

    (28,126)       (539)

 

Financing Activities

    (8,543)       2,223  

Effects of Exchange Rate Changes on Cash and Cash Equivalents

    682       269  

Increase (Decrease) in Cash and Cash Equivalents

  $ (47,496)     $ 67,249  

 

Operating Activities

 

Cash flows provided by (used in) operating activities decreased by $76.8 million in the Current Year Quarter compared with the Prior Year Quarter. The components of cash flows provided by (used in) operating activities during the Current Three Months and Prior Three Months were as follows:

 

   

Three Months Ended March 31,

 
   

2018

   

2017

 

DVP:

               

United States, primarily Gulf of Mexico

  $ 1,474     $ (1,806)  

Africa, primarily West Africa

    4,727       443  

Middle East and Asia

    2,327       508  

Brazil, Mexico, Central and South America

    1,754       1,193  

Europe, primarily North Sea

    3,091       4,178  

Operating, leased-in equipment (excluding amortization of deferred gains)

    (4,834)       (5,641)  

Administrative and general (excluding provisions for bad debts and amortization of share awards)

    (12,357)       (10,267)  

SEACOR Holdings management and guarantee fees

    (12)       (2,001)  

Other, net (excluding non-cash losses)

          (1)  
      (3,830)       (13,394)  

Changes in operating assets and liabilities before interest and income taxes

    (4,938)       3,415  

Proceeds from sale of marketable securities

          51,877  

Cash settlements on derivative transactions, net

    (129)       (22)  

Interest paid, excluding capitalized interest (1)

    (2,828)        

Interest received

    216       2,372  

Income taxes refunded, net

          21,048  

Total cash flows provided by (used in) operating activities

  $ (11,509)     $ 65,296  

_____________________

(1)

During the Current Year Quarter and the Prior Year Quarter, capitalized interest paid and included in purchases of property and equipment was $0.5 million and $0.6 million, respectively.

 

For a detailed discussion of the Company's financial results for the reported periods, see “Consolidated Results of Operations” included above. Changes in operating assets and liabilities before interest and income taxes are the result of the Company's working capital requirements.

 

Investing Activities

 

During the Current Year Quarter, net cash used in investing activities was $28.1 million, primarily for the following:

 

 

capital expenditures were $8.6 million;

 

 

the Company sold one fast support vessel and other equipment for net proceeds of $0.3 million ($0.4 million in cash and $0.1 million of previously received deposits); and

 

 

the Company made investments in, and advances to, its 50% or less owned companies of $20.0 million for the new SEACOSCO joint venture.

 

During the Prior Year Quarter, net cash used in investing activities was $0.9 million, primarily for the following:

 

 

capital expenditures and payments on fair value hedges were $10.5 million. Three fast support vessels were delivered during the period;

 

 

the Company sold two liftboats, two offshore support vessels previously retired and removed from service (one anchor handling towing supply vessel and one specialty vessel) and other property and equipment for net proceeds of $8.8 million ($8.3 million in cash and $0.5 million of previously received deposits);

 

 

the Company made advances of $2.4 million to its 50% or less owned company Falcon Global International;

 

30

 

 

 

construction reserve funds account transactions included deposits of $6.3 million and withdrawals of $1.0 million;

 

 

the Company received capital distributions of $7.4 million from its 50% or less owned company MexMar; and

     
  effective March 31, 2017, the Company consolidated Falcon Global International and assumed cash of $1.9 million.

 

Financing Activities

 

During the Current Year Quarter, net cash used in financing activities was $8.5 million. The Company:

 

 

borrowed $10.0 million under the FGUSA Revolving Loan Facility;  

 

•     paid $15.0 million in debtor-in-possession obligations assumed from MOI;

 

  converted €6.0 million of denominated debt into pound sterling debt, paying $7.5 million in euro debt and borrowing $8.5 million in pound sterling debt, resulting in a net increase in USD borrowings of $1.0 million;
     
 

made scheduled payments on long-term debt and capital lease obligations of $6.3 million; and

 

 

issued $1.8 million in stock in a private placement.

 

During the Prior Year Quarter, net cash provided by financing activities was $2.2 million. The Company:

 

 

borrowed $3.4 million under the Sea-Cat Crewzer III Term Loan Facility; and

 

 

made other scheduled payments on long-term debt and capital lease obligations of $1.2 million.

 

Short and Long-Term Liquidity Requirements

 

The Company believes that a combination of cash balances on hand, construction reserve funds, cash generated from operating activities, availability under existing subsidiary financing arrangements and access to the credit and capital markets will provide sufficient liquidity to meet its obligations, including to support its capital expenditures program, working capital and debt service requirements. The Company continually evaluates possible acquisitions and dispositions of certain businesses and assets. The Company’s sources of liquidity may be impacted by the general condition of the markets in which it operates and the broader economy as a whole, which may limit its access to the credit and capital markets on acceptable terms. Management will continue to closely monitor the Company’s performance and liquidity, as well as the credit and capital markets.

 

Off-Balance Sheet Arrangements

 

For a discussion of the Company’s off-balance sheet arrangements, refer to Liquidity and Capital Resources included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017.  There has been no material change in the Company’s off-balance sheet arrangements during the three months ended March 31, 2018.

 

Debt Securities and Credit Agreements

 

For a discussion of the Company’s debt securities and credit agreements, see “Note 5. Long-Term Debt” in the unaudited consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q and in “Note 7. Long-Term Debt” in the Company's audited consolidated financial statements included in its Annual Report on Form 10-K.

 

Contractual Obligations and Commercial Commitments

 

For a discussion of the Company’s contractual obligations and commercial commitments, refer to Liquidity and Capital Resources included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017.  There has been no material change in the Company’s off-balance sheet arrangements during the three months ended March 31, 2018.

 

 Contingencies

 

As of March 31, 2018, SEACOR Holdings has guaranteed $56.5 million on behalf of the Company for various obligations including: letter of credit obligations, performance obligations under sale-leaseback arrangements and invoiced amounts for funding deficits under the MNOPF. Pursuant to a Transition Services Agreement with SEACOR Holdings, SEACOR Holdings charges the Company a fee of 0.5% on outstanding guaranteed amounts, which declines as the obligations are settled by the Company.

 

31

 

 

In the normal course of its business, the Company becomes involved in various other litigation matters including, among other things, claims by third parties for alleged property damages and personal injuries. Management has used estimates in determining the Company’s potential exposure to these matters and has recorded reserves in its financial statements related thereto where appropriate. It is possible that a change in the Company’s estimates of that exposure could occur, but the Company does not expect such changes in estimated costs would have a material effect on the Company’s consolidated financial position, results of operations or cash flows.

  

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

For a discussion of the Company’s exposure to market risk, refer to “Quantitative and Qualitative Disclosures About Market Risk” included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017. There has been no material change in the Company’s exposure to market risk during the Current Year Quarter.

 

ITEM 4.

CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

With the participation of the Company’s principal executive officer and principal financial officer, management evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of March 31, 2018. Based on their evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2018.

 

The Company’s disclosure controls and procedures have been designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, to allow timely decisions regarding required disclosures. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those internal control systems determined to be effective can provide only a level of reasonable assurance with respect to financial statement preparation and presentation.

 

Changes in Internal Control Over Financial Reporting

 

There have been no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended March 31, 2018 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

33

 

 

PART II—OTHER INFORMATION

 

ITEM 1.      LEGAL PROCEEDINGS

 

For a description of developments with respect to pending legal proceedings described in the Company's Annual Report on Form 10-K for the year ended December 31, 2017, see Note 10. "Commitments and Contingencies" included in Part I. Item 1. "Financial Statements" elsewhere in this Quarterly Report on Form 10-Q.

 

ITEM 1A.      RISK FACTORS

 

For a discussion of the Company’s risk factors, refer to “Risk Factors” included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017. There have been no material changes in the Company’s risk factors during the Current Year Quarter.

 

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

On March 26, 2018, the Company issued 103,213 shares of Common Stock to an accredited investor for a total of $1.8 million in gross proceeds.  The shares of Common Stock were issued in a private placement exempt from the registration requirements of the Securities Act, in reliance on the exemption set forth in Section 4(a)(2) of the Securities Act.

  

ITEM 3.

DEFAULT UPON SENIOR SECURITIES

 

None.

 

ITEM 4.

MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5.

OTHER INFORMATION

 

None.

 

ITEM 6.

EXHIBITS

 

2.1

 

First Amendment to Joint Venture Contribution and Formation Agreement, dated January 8, 2018, by and between SEACOR LB Holdings LLC and Montco Offshore, Inc. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of SEACOR Marine Holdings Inc. filed with the Securities and Exchange Commission on January 9, 2018).

10.1

 

Amended and Restated Limited Liability Company Agreement of Falcon Global Holdings LLC, dated February 8, 2018, by and among Falcon Global Holdings LLC, SEACOR LB Holdings LLC and Montco Offshore, LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of SEACOR Marine Holdings Inc. filed with the Securities and Exchange Commission on February 9, 2018).

10.2

 

Credit Agreement, dated as of February 8, 2018, by and among Falcon Global USA LLC, as borrower, certain subsidiaries of the borrower as loan guarantors, JPMorgan Chase Bank, N.A., as administrative agent, issuing bank and security trustee, and the lenders party thereto from time to time (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of SEACOR Marine Holdings Inc. filed with the Securities and Exchange Commission on February 9, 2018).

10.3

 

Obligation Guaranty Agreement, dated as of February 8, 2018, by SEACOR Marine Holdings Inc. (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K of SEACOR Marine Holdings Inc. filed with the Securities and Exchange Commission on February 9, 2018).

10.4

 

Pledge and Security Agreement, dated as of February 8, 2018, by and among Falcon Global USA LLC, as borrower, any Grantor (as defined therein), and JPMorgan Chase Bank, N.A., as administrative agent, issuing bank and security trustee (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K of SEACOR Marine Holdings Inc. filed with the Securities and Exchange Commission on February 9, 2018).

10.5

 

Subscription Agreement, dated as of April 20, 2018, by and among SEACOR Marine Holdings Inc. and the purchasers named therein.

10.6

 

Registration Rights Agreement, dated as of April 26, 2018, by and among SEACOR Marine Holdings Inc. and the purchasers named therein.

10.7

 

Amendment and Exchange Agreement, dated as of May 2, 2018, by and among SEACOR Marine Holdings Inc. and the purchasers named therein (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of SEACOR Marine Holdings Inc. filed with the Securities and Exchange Commission on May 2, 2018).

31.1

 

Certification by the Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.

31.2

 

Certification by the Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.

32

 

Certification by the Principal Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS**

 

XBRL Instance Document

101.SCH**

 

XBRL Taxonomy Extension Schema

101.CAL**

 

XBRL Taxonomy Extension Calculation Linkbase

101.DEF**

 

XBRL Taxonomy Extension Definition Linkbase

101.LAB**

 

XBRL Taxonomy Extension Label Linkbase

101.PRE**

 

XBRL Taxonomy Extension Presentation Linkbase

 

______________________

**

Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.

 

34

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

       

SEACOR Marine Holdings Inc. (Registrant)

         

DATE:

 May 10, 2018

By:

 

/s/ John Gellert

       

John Gellert, President and Chief Executive Officer

(Principal Executive Officer)

         

DATE:

 May 10, 2018

By:

 

/s/ Jesus Llorca

       

Jesus Llorca, Executive Vice President

and Chief Financial Officer

(Principal Financial Officer)

 

 

35