Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
________________________________________
FORM 10-Q
________________________________________
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2017              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  ý
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  ý     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 x
(Do not check if a smaller
reporting company)
 
Smaller reporting company  ¨
 
Emerging growth company  x

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. ý
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ¨    No  ý
The total number of shares of common stock, par value $.01 per share, outstanding as of June 21, 2017 was 17,671,356. The Registrant has no other class of common stock outstanding.


Table of Contents

SEACOR MARINE HOLDINGS INC.
Table of Contents

Part I.
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
 
Item 3.
 
 
 
 
Item 4.
 
 
 
Part II.
 
 
 
 
Item 1.
 
 
 
 
 
Item 1A.
 
 
 
 
 
Item 2.
 
 
 
 
 
Item 3.
 
 
 
 
 
Item 4.
 
 
 
 
 
Item 5.
 
 
 
 
 
Item 6.


i

Table of Contents

PART I—FINANCIAL INFORMATION

ITEM 1.
FINANCIAL STATEMENTS
SEACOR MARINE HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data, unaudited)
 
March 31,
2017
 
December 31,
2016
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
184,209

 
$
117,309

Restricted cash
1,811

 
1,462

Marketable securities
785

 
40,139

Receivables:
 
 
 
Trade, net of allowance for doubtful accounts of $6,918 and $5,359 in 2017 and 2016, respectively
48,044

 
44,830

Due from SEACOR Holdings

 
19,102

Other
11,701

 
21,316

Inventories
3,421

 
3,058

Prepaid expenses and other
3,068

 
3,349

Total current assets
253,039

 
250,565

Property and Equipment:
 
 
 
Historical cost
1,089,176

 
958,759

Accumulated depreciation
(534,522
)
 
(540,619
)
 
554,654

 
418,140

Construction in progress
83,710

 
123,801

Net property and equipment
638,364

 
541,941

Investments, at Equity, and Advances to 50% or Less Owned Companies
114,767

 
138,311

Construction Reserve Funds
83,477

 
78,209

Other Assets
6,176

 
6,093

 
$
1,095,823

 
$
1,015,119

LIABILITIES AND EQUITY
 
 
 
Current Liabilities:
 
 
 
Current portion of long-term debt
$
26,600

 
$
20,400

Accounts payable and accrued expenses
26,399

 
25,969

Due to SEACOR Holdings
1,827

 

Other current liabilities
46,055

 
34,647

Total current liabilities
100,881

 
81,016

Long-Term Debt
274,408

 
217,805

Deferred Income Taxes
121,028

 
124,945

Deferred Gains and Other Liabilities
38,820

 
41,198

Total liabilities
535,137

 
464,964

Equity:
 
 
 
SEACOR Marine Holdings Inc. stockholders’ equity:
 
 
 
Preferred stock, $.01 par value, 10,000,000 shares authorized; none issued nor outstanding

 

Common stock, $.01 par value, 60,000,000 shares authorized; 17,671,356 shares issued in 2017 and 2016
177

 
177

Additional paid-in capital
306,359

 
306,359

Retained earnings
242,017

 
249,412

Accumulated other comprehensive loss, net of tax
(10,679
)
 
(11,337
)
 
537,874

 
544,611

Noncontrolling interests in subsidiaries
22,812

 
5,544

Total equity
560,686

 
550,155

 
$
1,095,823

 
$
1,015,119



The accompanying notes are an integral part of these condensed consolidated financial statements
and should be read in conjunction herewith.

1

Table of Contents

SEACOR MARINE HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF LOSS
(in thousands, except share data, unaudited)
 
Three Months Ended March 31,
 
2017
 
2016
Operating Revenues
$
34,304

 
$
59,879

Costs and Expenses:
 
 
 
Operating
33,379

 
48,850

Administrative and general
11,826

 
12,398

Depreciation and amortization
12,503

 
14,838

 
57,708

 
76,086

Gains (Losses) on Asset Dispositions and Impairments, Net
4,819

 
(380
)
Operating Loss
(18,585
)
 
(16,587
)
Other Income (Expense):
 
 
 
Interest income
850

 
1,411

Interest expense
(3,182
)
 
(2,358
)
SEACOR Holdings management fees
(1,925
)
 
(1,925
)
SEACOR Holdings guarantee fees
(76
)
 
(126
)
Marketable security gains (losses), net
11,738

 
(3,585
)
Derivative gains (losses), net
(89
)
 
2,898

Foreign currency losses, net
(189
)
 
(1,560
)
Other, net
(1
)
 
265

 
7,126

 
(4,980
)
Loss Before Income Tax Benefit and Equity in Earnings of 50% or Less Owned Companies
(11,459
)
 
(21,567
)
Income Tax Benefit
(3,422
)
 
(6,826
)
Loss Before Equity in Earnings of 50% or Less Owned Companies
(8,037
)
 
(14,741
)
Equity in Earnings of 50% or Less Owned Companies, Net of Tax
438

 
2,161

Net Loss
(7,599
)
 
(12,580
)
Net Loss attributable to Noncontrolling Interests in Subsidiaries
(204
)
 
(621
)
Net Loss attributable to SEACOR Marine Holdings Inc.
$
(7,395
)
 
$
(11,959
)
 
 
 
 
Basic Loss Per Common Share of SEACOR Marine Holdings Inc.
$
(0.42
)
 
$
(0.68
)
 
 
 
 
Diluted Loss Per Common Share of SEACOR Marine Holdings Inc.
$
(0.42
)
 
$
(0.68
)
 
 
 
 
Weighted Average Common Shares Outstanding:
 
 
 
Basic
17,671,356

 
17,671,356

Diluted
17,671,356

 
17,671,356











The accompanying notes are an integral part of these condensed consolidated financial statements
and should be read in conjunction herewith.

2

Table of Contents

SEACOR MARINE HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands, unaudited)
 
Three Months Ended March 31,
 
2017
 
2016
Net Loss
$
(7,599
)
 
$
(12,580
)
Other Comprehensive Income (Loss):
 
 
 
Foreign currency translation gains (losses)
919

 
(1,356
)
Derivative losses on cash flow hedges
(9
)
 
(1,785
)
Reclassification of derivative losses on cash flow hedges to interest expense
12

 

Reclassification of derivative losses on cash flow hedges to equity in earnings of 50% or less owned companies
188

 
208

 
1,110

 
(2,933
)
Income tax (expense) benefit
(354
)
 
964

 
756

 
(1,969
)
Comprehensive Loss
(6,843
)
 
(14,549
)
Comprehensive Loss attributable to Noncontrolling Interests in Subsidiaries
(106
)
 
(800
)
Comprehensive Loss attributable to SEACOR Marine Holdings Inc.
$
(6,737
)
 
$
(13,749
)



































The accompanying notes are an integral part of these condensed consolidated financial statements
and should be read in conjunction herewith.

3

Table of Contents

SEACOR MARINE HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(in thousands, unaudited)
 
SEACOR Marine Holdings Inc. Stockholders’ Equity
 
Non-
Controlling
Interests In
Subsidiaries
 
Total
Equity
 
Common
Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
December 31, 2016
$
177

 
$
306,359

 
$
249,412

 
$
(11,337
)
 
$
5,544

 
$
550,155

Consolidation of 50% or less owned companies

 

 

 

 
17,374

 
17,374

Net loss

 

 
(7,395
)
 

 
(204
)
 
(7,599
)
Other comprehensive income

 

 

 
658

 
98

 
756

Three Months Ended March 31, 2017
$
177

 
$
306,359

 
$
242,017

 
$
(10,679
)
 
$
22,812

 
$
560,686












































The accompanying notes are an integral part of these condensed consolidated financial statements
and should be read in conjunction herewith.

4

Table of Contents

SEACOR MARINE HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
 
Three Months Ended March 31,
 
2017
 
2016
Net Cash Provided by Operating Activities
$
65,296

 
$
878

Cash Flows from Investing Activities:
 
 
 
Purchases of property and equipment
(10,143
)
 
(20,907
)
Cash settlements on derivative transactions, net
(324
)
 

Proceeds from disposition of property and equipment
8,297

 
238

Investments in and advances to 50% or less owned companies
(2,394
)
 
(4,303
)
Return of investments and advances from 50% or less owned companies
7,350

 

Cash assumed on consolidation of 50% or less owned companies
1,943

 

Payments received on third party notes receivable, net

 
454

Net increase in restricted cash
(349
)
 

Net (increase) decrease in construction reserve funds
(5,268
)
 
27

Net cash used in investing activities
(888
)
 
(24,491
)
Cash Flows from Financing Activities:
 
 
 
Payments on long-term debt
(1,173
)
 
(2,140
)
Proceeds from issuance of long-term debt, net of issue costs
3,396

 

Distributions to noncontrolling interests

 
(205
)
Net cash provided by (used in) financing activities
2,223

 
(2,345
)
Effects of Exchange Rate Changes on Cash and Cash Equivalents
269

 
(286
)
Net Increase (Decrease) in Cash and Cash Equivalents
66,900

 
(26,244
)
Cash and Cash Equivalents, Beginning of Period
117,309

 
150,242

Cash and Cash Equivalents, End of Period
$
184,209

 
$
123,998


























The accompanying notes are an integral part of these condensed consolidated financial statements
and should be read in conjunction herewith.

5

Table of Contents

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 Company’s financial position as of March 31, 2017, its results of operations for the three months ended March 31, 2017 and 2016, its comprehensive loss for the three months ended March 31, 2017 and 2016, its changes in equity for the three months ended March 31, 2017, and its cash flows for the three months ended March 31, 2017 and 2016. The condensed consolidated financial information for the three months ended March 31, 2017 and 2016 has not been audited by the Company’s independent registered certified public accounting firm. 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 for the year ended December 31, 2016 included in the Information Statement filed as Exhibit 99.1 to Amendment No. 3 to the Company’s Registration Statement on Form 10, which was declared effective on May 11, 2017 (the “Registration Statement”).
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 Registration Statement.
SEACOR Marine was previously a subsidiary of SEACOR Holdings Inc. (along with its other majority owned subsidiaries collectively referred to as “SEACOR Holdings”), which had announced its intent to spin-off SEACOR Marine. The spin-off was completed on June 1, 2017 by way of a pro rata dividend of SEACOR Marine’s common stock, all of which was held by SEACOR Holdings, to SEACOR Holdings shareholders of record as of May 22, 2017 (the “Spin-off”). SEACOR Marine entered into a series of agreements with SEACOR Holdings, including a Distribution Agreement, two Transition Services Agreements, an Employee Matters Agreement and a Tax Matters Agreement, which will govern SEACOR Marine’s relationship with SEACOR Holdings following the Spin-off. Upon completion of the Spin-off, SEACOR Marine began to operate as an independent, publicly traded company.
Revenue Recognition. The Company recognizes revenue when it is realized or realizable and earned. Revenue is realized or realizable and earned when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price to the buyer is fixed or determinable, and collectability is reasonably assured. Revenue that does not meet these criteria is deferred until the criteria are met. Deferred revenues, included in other current liabilities in the accompanying condensed consolidated balance sheets, for the three months ended March 31 were as follows (in thousands):
 
2017
 
2016
Balance at beginning of period
$
6,953

 
$
6,953

Revenues deferred during the period
1,536

 

Balance at end of period
$
8,489

 
$
6,953

As of March 31, 2017, deferred revenues 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, 2017, deferred revenues of $1.5 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.
    

6

Table of Contents

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, 2017, 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, 2017, capitalized interest totaled $1.3 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, 2017, the Company recognized no impairment charges related to long-lived assets held for use. During the three months ended March 31, 2016, the Company recognized impairment charges of $0.4 million related to long-lived assets held for use.
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, 2017 and 2016, the Company did not recognize any impairment charges related to its 50% or less owned companies.
Income Taxes. 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. During the three months ended March 31, 2016, the Company’s effective income tax rate of 31.7% was primarily due to non-deductible expenses associated with the Company’s participation in SEACOR Holdings share award plans.

7

Table of Contents

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):
 
2017
 
2016
Balance at beginning of period
$
33,910

 
$
43,298

Amortization of deferred gains included in operating expenses as a reduction to rental expense
(2,050
)
 
(2,050
)
Amortization of deferred gains included in gains (losses) on asset dispositions and impairments, net

 
(18
)
Balance at end of period
$
31,860

 
$
41,230

Accumulated Other Comprehensive 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
Losses on
Cash Flow
Hedges, net
 
Total
 
Foreign
Currency
Translation
Adjustments
 
Derivative
Losses on
Cash Flow
Hedges, net
 
Other
Comprehensive
Income
December 31, 2016
$
(11,413
)
 
$
76

 
$
(11,337
)
 
$
(1,614
)
 
$
(17
)
 
 
Other comprehensive income
837

 
175

 
1,012

 
82

 
16

 
$
1,110

Income tax expense
(293
)
 
(61
)
 
(354
)
 

 

 
(354
)
Three Months Ended March 31, 2017
$
(10,869
)
 
$
190

 
$
(10,679
)
 
$
(1,532
)
 
$
(1
)
 
$
756

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 3.75% Convertible Senior Notes. For each of the three months ended March 31, 2017 and 2016, diluted earnings per common share of SEACOR excluded 4,070,500 common shares issuable pursuant to the Company’s 3.75% Convertible Senior Notes as the conversion feature was contingent upon the Spin-off.
New Accounting Pronouncements. On May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under generally accepted accounting principles in the United States. The core principal of the new standard is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard is effective for annual and interim periods beginning after December 15, 2017 and early adoption is permitted. The Company will adopt the new standard on January 1, 2018 and expects to use the modified retrospective approach upon adoption. The Company is in the advanced stages of determining the impact, if any, the adoption of the new accounting standard will have on its consolidated financial position, results of operations or cash flows. Principal versus agent considerations of the new standard with respect to the Company’s vessel management services and pooling arrangements may result in a gross presentation of operating revenues and expenses compared with its current net presentation for results from managed and pooled third party equipment.
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 new standard is effective for interim and annual periods beginning after December 15, 2018 and requires a modified retrospective approach to adoption. Early adoption is permitted. The Company has not yet determined what impact, if any, the adoption of the new standard will have on its consolidated financial position, results of operations or cash flows.
On August 26, 2016, the FASB issued an amendment to the accounting standard which amends or clarifies guidance on classification of certain transactions in the statement of cash flows, including classification of proceeds from the settlement of insurance claims, debt prepayments, debt extinguishment costs and contingent consideration payments after a business combination. This new standard is effective for the Company as of January 1, 2018 and early adoption is permitted. The Company

8

Table of Contents

has not yet determined what impact, if any, the adoption of the new standard will have on its consolidated financial position, results of operations or cash flows.
On October 24, 2016, the FASB issued a new accounting standard, which requires companies to account for the income tax effects of intercompany sales and transfers of assets other than inventory. The new standard is effective for interim and annual periods beginning after December 31, 2017 and requires a modified retrospective approach to adoption. The Company has not yet determined what impact, if any, the adoption of the new standard will have on its consolidated financial position, results of operations or cash flows.
On November 17, 2016, the FASB issued an amendment to the accounting standard which requires that restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total cash amounts shown on the statement of cash flows. The new standard is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company has not yet determined what impact, if any, the adoption of the new standard will have on its consolidated financial position, results of operations or cash flows.
2.
EQUIPMENT ACQUISITIONS AND DISPOSITIONS
During the three months ended March 31, 2017, capital expenditures and payments on fair value hedges were $10.5 million. Equipment deliveries during the three months ended March 31, 2017 included three fast support vessels.
During the three months ended March 31, 2017, 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 equipment for net proceeds of $8.8 million ($8.3 million in cash and $0.5 million of previously received deposits) and gains of $4.8 million, all of which were recognized currently.
3.
INVESTMENTS, AT EQUITY, AND ADVANCES TO 50% OR LESS OWNED COMPANIES
MexMar. MexMar owns and operates 15 offshore support vessels in Mexico. During the three months ended March 31, 2017, the Company and its partner each received capital distributions of $7.4 million from MexMar.
Falcon Global. Falcon Global was formed to construct and operate two foreign-flag liftboats. During the three months ended March 31, 2017, the Company and its partner each contributed additional capital of $0.4 million in cash and the Company made working capital advances of $2.0 million in cash. In March 2017, the Company’s partner declined to participate in a capital call from Falcon Global and, as a consequence, the Company obtained 100% voting control of Falcon Global in accordance with the terms of the operating agreement. The impact of consolidating Falcon Global’s net assets effective March 31, 2017 to the Company’s financial positions was as follows (in thousands):
 
2017
Cash
$
1,943

Marketable securities
785

Trade and other receivables
(291
)
Investments, at Equity, and Advances to 50% or Less Owned Companies
(19,374
)
Property and Equipment
96,000

Accounts payable
3,201

Other current liabilities
1,153

Long-Term Debt
58,335

Other Liabilities
(1,000
)
Noncontrolling interests in subsidiaries
17,374

Sea-Cat Crewzer II. On April 28, 2017, the Company acquired a 100% controlling interest in Sea-Cat Crewzer II through the acquisition of its partners’ 50% ownership interest for $11.3 million in cash.
Sea-Cat Crewzer. On April 28, 2017, the Company acquired a 100% controlling interest in Sea-Cat Crewzer through the acquisition of its partners’ 50% ownership interest for $4.4 million in cash.

9

Table of Contents

Guarantees. The Company has guaranteed the payment of amounts owed under a vessel charter and banking facilities by certain of its 50% or less owned companies. As of March 31, 2017, the total amount guaranteed by the Company under these arrangements was $22.2 million. In addition, as of March 31, 2017, the Company had uncalled capital commitments to two of its 50% or less owned companies totaling $1.8 million.
4.
LONG-TERM DEBT
3.75% Convertible Senior Notes. Certain features included in the 3.75% Convertible Senior Notes, including the Exchange Option and the 2018 Put Option, terminated upon the completion of the Spin-off.
Falcon Global Term Loan Facility. On August 3, 2015, Falcon Global entered into a term loan facility to finance the construction of two foreign-flag liftboats. The facility consists of two tranches: (i) a $62.5 million facility to fund the construction costs of the liftboats (“Tranche A”) and (ii) a $18.0 million facility for certain project costs (“Tranche B”). Borrowings under the facility bear interest at variable rates based on LIBOR plus a margin ranging from 2.5% to 2.9%, or an average rate of 3.97% as of March 31, 2017. The facility is secured by the liftboats and is repayable over a five year period beginning the earlier of either six months after completion of the construction of the liftboats or June 30, 2017 and matures no later than June 30, 2022. In March 2017, the Company’s partner declined to participate in a capital call from Falcon Global and, as a consequence, the Company obtained 100% voting control of Falcon Global in accordance with the terms of the operating agreement. The Company has consolidated Falcon Global’s debt under this facility of $58.3 million, net of issue costs of $1.0 million, effective March 31, 2017 (See Note 3). Subsequent to March 31, 2017, the Tranche B facility was canceled prior to any funding.
Other. During the three months ended March 31, 2017, the Company borrowed $3.4 million under the Sea-Cat Crewzer III Term Loan Facility to fund capital expenditures and made scheduled payments on other long-term debt of $1.2 million.
As of March 31, 2017, the Company had $7.5 million of borrowing capacity under subsidiary facilities. As of March 31, 2017, the Company had outstanding letters of credit totaling $16.8 million with various expiration dates through 2018 and other labor and performance guarantees of $1.3 million.
5.
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, 2017 were as follows (in thousands):
 
Derivative
Asset(1)
 
Derivative
Liability(2)
Derivatives designated as hedging instruments:
 
 
 
Forward currency exchange contracts (fair value hedges)
$

 
$
143

Interest rate swap agreements (cash flow hedges)

 
4

 
 
 
 
Derivatives not designated as hedging instruments:
 
 
 
Forward currency exchange, option and future contracts
113

 

Interest rate swap agreements

 
327

 
$
113

 
$
474

______________________
(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.
Fair Value Hedges. From time to time, the Company may designate certain of its foreign currency exchange contracts as fair value hedges in respect of capital commitments denominated in foreign currencies. By entering into these foreign currency exchange contracts, the Company may fix a portion of its capital commitments denominated in foreign currencies in U.S. dollars to protect against currency fluctuations. As of March 31, 2017, the Company had euro denominated forward currency exchange contracts designated as fair value hedges with an aggregate U.S. dollar equivalent of $1.9 million. During the three months ended March 31, 2017, the Company recognized immaterial gains on these contracts which was included as a decrease to the corresponding hedged equipment included in construction in progress in the accompanying condensed consolidated balance sheets.

10

Table of Contents

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, 2017. As of March 31, 2017, the interest rate swaps held by the Company and its 50% or less owned companies were as follows:
The Company 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 ($16.0 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 $120.6 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 $22.7 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 $20.1 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):
 
2017
 
2016
Options on equities and equity indices
$

 
$
2,904

Forward currency exchange, option and future contracts
(89
)
 

Interest rate swap agreements

 
(6
)
 
$
(89
)
 
$
2,898

The Company may hold positions in publicly traded equity options that convey the right or obligation to engage in a future transaction on the underlying equity security or index. Historically, the Company’s investment in equity options has primarily included positions in energy related businesses. These contracts are typically entered into to mitigate the risk of changes in market value of marketable security positions that the Company is either about to acquire, has acquired or is about to dispose.
The Company enters and settles forward currency exchange, option and future contracts with respect to various foreign currencies. As of March 31, 2017, the fair market value of the outstanding forward currency option contracts was an unrealized gain of $0.1 million. These contracts enable the Company to buy currencies in the future at fixed exchange rates, which could offset possible consequences of changes in currency exchange rates with respect to the Company’s business conducted outside of the United States. The Company generally does not enter into contracts with forward settlement dates beyond twelve to eighteen months.
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, 2017, the interest rate swaps held by the Company or its 50% or less owned companies were as follows:
The Company 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 $60.9 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 $36.8 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 $71.5 million and receive a variable interest rate based on LIBOR on the amortized notional value.    

11

Table of Contents

6.
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, 2017 that are measured at fair value on a recurring basis were as follows (in thousands):
 
Level 1
 
Level 2
 
Level 3
ASSETS
 
 
 
 
 
Marketable securities
$
785

 
$

 
$

Derivative instruments (included in other receivables)

 
113

 

Construction reserve funds
83,477

 

 

LIABILITIES
 
 
 
 
 
Derivative instruments (included in other current liabilities)
$

 
$
474

 
$

The estimated fair values of the Company’s other financial assets and liabilities as of March 31, 2017 were as follows (in thousands):
 
 
 
Estimated Fair Value
 
Carrying
Amount
 
Level 1
 
Level 2
 
Level 3
ASSETS
 
 
 
 
 
 
 
Cash, cash equivalents and restricted cash
$
186,020

 
$
186,020

 
$

 
$

Investments, at cost, in 50% or less owned companies (included in other assets)
132

 
see below

 
 
 
 
LIABILITIES
 
 
 
 
 
 
 
Long-term debt, including current portion
$
301,008

 
$

 
$
305,407

 
$

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. 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, 2017 were as follows (in thousands):
 
Level 1
 
Level 2
 
Level 3
ASSETS
 
 
 
 
 
Investments, at equity, and advances to 50% or less owned companies
$

 
$

 
$
17,374

Investments, at equity, and advances in 50% or less owned companies. During the three months ended March 31, 2017, the Company’s partner declined to participate in a capital call from Falcon Global and, as a consequence, the Company obtained 100% voting control of Falcon Global in accordance with the terms of the operating agreement (see Note 3). Upon the change in control, the Company marked its investment in Falcon Global to fair value. Falcon Global’s primary assets consist of two newly constructed foreign-flag liftboats. The estimated fair value of the liftboats was the primary input used by the Company in determining the fair value of its investment based on a third-party valuation using significant inputs that are unobservable in the market and therefore are considered a Level 3 fair value measurement. Due to limited market transactions, the primary valuation methodology applied by the appraisers was an estimated cost approach less economic obsolescence based on utilization and rates per day worked trending over the prior year in the Middle East region where the vessels are intended to operate.

12

Table of Contents

7.
NONCONTROLLING INTERESTS IN SUBSIDIARIES
Noncontrolling interests in the Company’s consolidated subsidiaries were as follows (in thousands):
 
Noncontrolling Interests
 
March 31, 2017
 
December 31, 2016
Falcon Global
50%
 
$
17,374

 
$

Windcat Workboats
25%
 
5,158

 
5,266

Other
1.8%
 
280

 
278

 
 
 
 
 
$
22,812

 
$
5,544

Falcon Global. Falcon Global owns and operates two foreign-flag liftboats. In March 2017, the Company’s partner declined to participate in a capital call from Falcon Global and, as a consequence, the Company obtained 100% voting control of Falcon Global in accordance with the terms of the operating agreement. As a consequence, the Company has consolidated Falcon Global’s net assets of $34.7 million as of March 31, 2017 (see Note 3).
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, 2017, the net assets of Windcat Workboats were $20.6 million. During the three months ended March 31, 2017, the net loss of Windcat Workboats was $0.8 million, of which $0.2 million was attributable to noncontrolling interests. During the three months ended March 31, 2016, the net loss of Windcat Workboats was $2.5 million, of which $0.6 million was attributable to noncontrolling interests. Subsequent to March 31, 2017, the Company acquired an additional 12.5% of Windcat Workboats from noncontrolling interests for $3.7 million.
8.
COMMITMENTS AND CONTINGENCIES
As of March 31, 2017, the Company’s unfunded capital commitments were $81.9 million and included six fast support vessels, three supply vessels and one wind farm utility vessel. Of these commitments, $13.8 million is payable during the remainder of 2017; $53.1 million is payable during 2018; $13.2 million is payable during 2019; and $1.8 million is payable during 2020. These commitments included $15.4 million for one supply vessel that may be assumed by a third party at their option. Subsequent to March 31, 2017, the Company committed to acquire additional equipment for $9.7 million.
As of March 31, 2017, SEACOR Holdings has guaranteed $134.4 million on behalf of the Company for various obligations including: debt facility and letter of credit obligations; performance obligations under sale-leaseback arrangements; debt facility obligations for 50% or less owned companies; 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.
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

Table of Contents

9.    SEGMENT INFORMATION
The Company’s segment presentation and basis of measurement of segment profit or loss are as previously described in the Company’s Registration Statement. The following tables summarize the operating results, capital expenditures and assets of the Company’s reportable segments.
 
United States (primarily Gulf of Mexico)
$’000
 
Africa (primarily West Africa)
$’000
 
Middle East and Asia
$’000
 
Brazil, Mexico, Central and South America
$’000
 
Europe (primarily North Sea)
$’000
 
Total
$’000
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


14

Table of Contents

 
United States (primarily Gulf of Mexico)
$’000
 
Africa (primarily West Africa)
$’000
 
Middle East and Asia
$’000
 
Brazil, Mexico, Central and South America
$’000
 
Europe (primarily North Sea)
$’000
 
Total
$’000
For the three months ended March 31, 2016
 
 
 
 
 
 
 
 
 
 
 
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
Time charter
11,042

 
11,139

 
8,153

 
196

 
21,043

 
51,573

Bareboat charter

 

 

 
2,652

 

 
2,652

Other marine services
911

 
(95
)
 
4,088

 
386

 
364

 
5,654

 
11,953

 
11,044

 
12,241

 
3,234

 
21,407

 
59,879

Direct Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
Operating:
 
 
 
 
 
 
 
 
 
 
 
Personnel
7,762

 
3,085

 
4,178

 
1,528

 
11,005

 
27,558

Repairs and maintenance
759

 
971

 
1,834

 
148

 
2,582

 
6,294

Drydocking
42

 
158

 
1,677

 

 
1,826

 
3,703

Insurance and loss reserves
999

 
212

 
263

 
49

 
355

 
1,878

Fuel, lubes and supplies
513

 
376

 
954

 
81

 
1,173

 
3,097

Other
161

 
525

 
779

 
95

 
378

 
1,938

 
10,236

 
5,327

 
9,685

 
1,901

 
17,319

 
44,468

Direct Vessel Profit
1,717

 
5,717

 
2,556

 
1,333

 
4,088

 
15,411

Other Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
Operating:
 
 
 
 
 
 
 
 
 
 
 
Leased-in equipment
1,862

 
977

 
1,176

 
367

 

 
4,382

Administrative and general
 
 
 
 
 
 
 
 
 
 
12,398

Depreciation and amortization
6,877

 
1,578

 
2,918

 
1,199

 
2,266

 
14,838

 
 
 
 
 
 
 
 
 
 
 
31,618

Losses on Asset Dispositions and Impairments, Net
 
 
 
 
 
 
 
 
 
(380
)
Operating Loss
 
 
 
 
 
 
 
 
 
 
(16,587
)
 
 
 
 
 
 
 
 
 
 
 
 
As of March 31, 2016
 
 
 
 
 
 
 
 
 
 
 
Property and Equipment:
 
 
 
 
 
 
 
 
 
 
 
Historical cost
447,750

 
144,880

 
218,708

 
87,632

 
200,093

 
1,099,063

Accumulated depreciation
(205,226
)
 
(73,543
)
 
(91,524
)
 
(49,501
)
 
(138,174
)
 
(557,968
)
 
242,524

 
71,337

 
127,184

 
38,131

 
61,919

 
541,095

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, 2017, 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 $57.6 million and $57.2 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):
 
2017
 
2016
MexMar
$
1,367

 
$
2,585

Other
(929
)
 
(424
)
 
$
438

 
$
2,161



15

Table of Contents

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, an oversupply of newly built offshore support vessels, 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, including as a result of the recent vote in the U.K. to leave 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 to remediate the material weaknesses the Company has identified in its internal controls over financial reporting, 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 “Risk Factors” included in the Information Statement filed as Exhibit 99.1 to Amendment No. 3 to the Company’s Registration Statement on Form 10 and other reports filed by the Company with the 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. 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 Securities and Exchange Commission, 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 136 are owned or leased-in, 34 are joint ventured, 13 are managed on behalf of unaffiliated third parties and three are operated under pooling arrangements. 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 principle 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 the 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.

16

Table of Contents

Offshore oil and gas market conditions deteriorated beginning in 2014 and continued to deteriorate in 2016 when oil prices hit a twelve-year low of less than $27 per barrel (on the New York Mercantile Exchange) in February 2016. This decline in oil and gas prices led to a decrease in offshore drilling and associated activity. The Company continued to experience difficult market conditions through the first quarter of 2017 and expects those conditions to continue in the near term. The Company has experienced a modest improvement from seasonal maintenance and construction activity in the Middle East and U.S. Gulf of Mexico.
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 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) weak oil and gas prices leading to lower customer exploration and drilling activity levels, and (ii) the increasing size of the global offshore support vessel fleet as 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.
The Spin-off. SEACOR Marine was previously a subsidiary of SEACOR Holdings Inc. (along with its other majority owned subsidiaries collectively referred to as “SEACOR Holdings”), which had announced its intent to spin-off SEACOR Marine. The spin-off was completed on June 1, 2017 by way of a pro rata dividend of SEACOR Marine’s common stock, all of which was held by SEACOR Holdings, to SEACOR Holdings shareholders of record as of May 22, 2017 (the “Spin-off”). SEACOR Marine entered into a series of agreements with SEACOR Holdings, including a Distribution Agreement, two Transition Services Agreements, an Employee Matters Agreement and a Tax Matters Agreement, which will govern SEACOR Marine’s relationship with SEACOR Holdings following the Spin-off. Upon completion of the Spin-off, SEACOR Marine began to operate as an independent, publicly traded company.
Results of Operations
The sections below provide an analysis of the Company’s results of operations for the three months (“Current Year Quarter”) ended March 31, 2017 compared with the three months (“Prior Year Quarter”) ended March 31, 2016. For the periods indicated, the Company’s consolidated results of operations were as follows:
 
Three Months Ended March 31,
 
2017
 
2016
 
$’000
 
%
 
$’000
 
%
Operating Revenues:
 
 
 
 
 
 
 
Time charter
30,730

 
90

 
51,573

 
86

Bareboat charter
1,143

 
3

 
2,652

 
5

Other marine services
2,431

 
7

 
5,654

 
9

 
34,304

 
100

 
59,879

 
100

Costs and Expenses:
 
 
 
 
 
 
 
Operating:
 
 
 
 
 
 
 
Personnel
16,791

 
49

 
27,558

 
46

Repairs and maintenance
3,595

 
10

 
6,294

 
11

Drydocking
3,067

 
9

 
3,703

 
6

Insurance and loss reserves
1,559

 
5

 
1,878

 
3

Fuel, lubes and supplies
2,342

 
7

 
3,097

 
5

Other
2,434

 
7

 
1,938

 
3

Leased-in equipment
3,591

 
10

 
4,382

 
7

 
33,379

 
97

 
48,850

 
81

Administrative and general
11,826

 
35

 
12,398

 
21

Depreciation and amortization
12,503

 
36

 
14,838

 
25

 
57,708

 
168

 
76,086

 
127

Gains (Losses) on Asset Dispositions and Impairments, Net
4,819

 
14

 
(380
)
 
(1
)
Operating Loss
(18,585
)
 
(54
)
 
(16,587
)
 
(28
)
Other Income (Expense), Net
7,126

 
21

 
(4,980
)
 
(8
)
Loss Before Income Tax Benefit and Equity in Earnings of 50% or Less Owned Companies
(11,459
)
 
(33
)
 
(21,567
)
 
(36
)
Income Tax Benefit
(3,422
)
 
(10
)
 
(6,826
)
 
(11
)
Loss Before Equity in Earnings of 50% or Less Owned Companies
(8,037
)
 
(23
)
 
(14,741
)
 
(25
)
Equity in Earnings of 50% or Less Owned Companies, Net of Tax
438

 
1

 
2,161

 
4

Net Loss
(7,599
)
 
(22
)
 
(12,580
)
 
(21
)
Net Loss attributable to Noncontrolling Interests in Subsidiaries
(204
)
 

 
(621
)
 
(1
)
Net Loss attributable to SEACOR Marine Holdings Inc.
(7,395
)
 
(22
)
 
(11,959
)
 
(20
)

17

Table of Contents

Time Charter Operating Data. The table below sets forth the average rates per day worked, utilization and available days data for the Company’s owned and leased-in vessels available for time charter in the periods indicated. The rate per day worked is the ratio of total time charter revenues to the aggregate number of days worked. Utilization is the ratio of aggregate number of days worked to total available days for all vessels. Unless vessels have been retired and removed from service, available days represents the total calendar days for which vessels were owned or leased-in by the Company whether marketed, under repair, cold-stacked or otherwise out-of-service.
 
Three Months Ended March 31,
 
2017
 
2016
Rates Per Day Worked:
 
 
 
Anchor handling towing supply
$
13,341

 
$
21,719

Fast support
7,417

 
7,587

Supply
11,707

 
6,484

Standby safety
8,131

 
9,564

Specialty

 
12,403

Liftboats
9,782

 
15,150

Overall Average Rates Per Day Worked (excluding wind farm utility)
8,272

 
10,545

Wind farm utility
2,005

 
2,419

Overall Average Rates Per Day Worked
5,726

 
7,915

Utilization:
 
 
 
Anchor handling towing supply
15
%
 
47
%
Fast support
44
%
 
68
%
Supply
20
%
 
37
%
Standby safety
80
%
 
79
%
Specialty
%
 
45
%
Liftboats
1
%
 
5
%
Overall Fleet Utilization (excluding wind farm utility)
38
%
 
52
%
Wind farm utility
65
%
 
65
%
Overall Fleet Utilization
46
%
 
56
%
Available Days:
 
 
 
Anchor handling towing supply
1,260

 
1,365

Fast support
3,212

 
2,093

Supply
630

 
1,179

Standby safety
1,800

 
2,184

Specialty
270

 
273

Liftboats
1,265

 
1,365

Overall Fleet Available Days (excluding wind farm utility)
8,437

 
8,459

Wind farm utility
3,330

 
3,245

Overall Fleet Available Days
11,767

 
11,704


18

Table of Contents

The composition of the Company’s fleet as of March 31 was as follows:
 
Owned(1)
 
Joint
Ventured
 
Leased-in
 
Pooled or
Managed
 
Total
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

2016
 
 
 
 
 
 
 
 
 
Anchor handling towing supply
13

 
1

 
4

 

 
18

Fast support
23

 
7

 
1

 
3

 
34

Supply
13

 
15

 
1

 
4

 
33

Standby safety
24

 
1

 

 

 
25

Specialty
3

 
5

 

 
1

 
9

Liftboats
13

 

 
2

 

 
15

Wind farm utility
36

 
3

 

 

 
39

 
125

 
32

 
8

 
8

 
173

______________________
(1)
Excludes six offshore support vessels as of March 31, 2017 that had been retired and removed from service.
Operating Loss
Excluding the impact of gains (losses) on asset dispositions and impairments, net, operating loss as a percentage of operating revenues was 68% in the Current Year Quarter compared with 27% in the Prior Year Quarter primarily due to weaker market conditions.
Consolidating segment tables of operating income (loss) for each period presented below is included in “Item 1. Financial Statements—Note 9. Segment Information” included in Part I of this Quarterly Report on Form 10-Q.
United States, primarily Gulf of Mexico. For the periods indicated, the Company’s direct vessel profit in the United States was as follows:
 
Three Months Ended March 31,
 
2017
 
2016
 
$’000’s
 
%
 
$’000’s
 
%
Operating revenues:
 
 
 
 
 
 
 
Time charter
2,995

 
78

 
11,042

 
92
Other marine services
826

 
22

 
911

 
8
 
3,821

 
100

 
11,953

 
100
Direct operating expenses:
 
 
 
 
 
 
 
Personnel
3,130

 
82

 
7,762

 
65
Repairs and maintenance
737

 
19

 
759

 
6
Drydocking
573

 
15

 
42

 
Insurance and loss reserves
805

 
21

 
999

 
9
Fuel, lubes and supplies
310

 
8

 
513

 
5
Other
72

 
2

 
161

 
1
 
5,627

 
147

 
10,236

 
86
Direct Vessel Profit (Loss)
(1,806
)
 
(47
)
 
1,717

 
14

19

Table of Contents

Time Charter Operating Data. For the periods indicated, the Company’s time charter operating data in the United States was as follows:
 
Three Months Ended March 31,
 
2017
 
2016
Rates Per Day Worked:
 
 
 
Anchor handling towing supply
$
35,717

 
$
36,779

Fast support
8,650

 
9,203

Supply

 

Specialty

 

Liftboats
9,782

 
15,150

Overall Average Rates Per Day Worked
10,133

 
21,341

Utilization:
 
 
 
Anchor handling towing supply
2
%
 
26
%
Fast support
16
%
 
44
%
Supply
%
 
%
Specialty
%
 
%
Liftboats
1
%
 
5
%
Overall Fleet Utilization
7
%
 
17
%
Available Days:
 
 
 
Anchor handling towing supply
900

 
819

Fast support
1,653

 
546

Supply
90

 
269

Specialty
90

 

Liftboats
1,265

 
1,365

Overall Fleet Available Days
3,998

 
2,999

Current Year Quarter compared with Prior Year Quarter
Operating Revenues. Time charter revenues were $8.0 million lower in the Current Year Quarter compared with the Prior Year Quarter primarily due to reduced utilization as a consequence of cold-stacking vessels. Time charter revenues were $7.2 million lower for the anchor handling towing supply vessels, $0.9 million lower for the liftboat fleet and $0.1 million higher for the fast support vessels. Available days for fast support vessels charter were higher in the Current Year Quarter primarily due to the acquisition of eleven vessels for $10.0 million at a bankruptcy auction during the third quarter of 2016. These vessels were idle when purchased, are still not working and are therefore contributing to the overall decline in fast support vessel utilization. As of March 31, 2017, the Company had 35 of 44 owned and leased-in vessels (ten anchor handling towing supply, 16 fast support, one supply, one specialty and seven liftboats) cold-stacked in the region compared with 21 of 32 owned and leased-in vessels (five anchor handling towing supply, three fast support, two supply and eleven liftboats) as of March 31, 2016. As of March 31, 2017, the Company had retired and removed from service one anchor handling towing supply vessel in this region.
Direct Operating Expenses. Direct operating expenses were $4.6 million lower in the Current Year Quarter compared with the Prior Year Quarter primarily due to lower personnel costs as a consequence of cold-stacking vessels. During the Current Year Quarter, the Company incurred operating costs of $1.6 million on the reactivation of five liftboats from cold-stack in anticipation of increased activity levels.

20

Table of Contents

Africa, primarily West Africa. For the periods indicated, the Company’s direct vessel profit in Africa was as follows:
 
Three Months Ended March 31,
 
2017
 
2016
 
$’000’s
 
%
 
$’000’s
 
%
Operating revenues:
 
 
 
 
 
 
 
Time charter
5,847

 
97
 
11,139

 
101

Other marine services
192

 
3
 
(95
)
 
(1
)
 
6,039

 
100
 
11,044

 
100

Direct operating expenses:
 
 
 
 
 
 
 
Personnel
2,608

 
43
 
3,085

 
28

Repairs and maintenance
544

 
9
 
971

 
9

Drydocking
1,057

 
18
 
158

 
1

Insurance and loss reserves
182

 
3
 
212

 
2

Fuel, lubes and supplies
559

 
9
 
376

 
3

Other
646

 
11
 
525

 
5

 
5,596

 
93
 
5,327

 
48

Direct Vessel Profit
443

 
7
 
5,717

 
52

Time Charter Operating Data. For the periods indicated, the Company’s time charter operating data in Africa was as follows:
 
Three Months Ended March 31,
 
2017
 
2016
Rates Per Day Worked:
 
 
 
Anchor handling towing supply
$
14,314

 
$
15,427

Fast support
7,499

 
8,824

Supply
14,000

 
5,750

Specialty

 
10,868

Overall Average Rates Per Day Worked
9,388

 
10,553

Utilization:
 
 
 
Anchor handling towing supply
32
%
 
91
%
Fast support
78
%
 
71
%
Supply
100
%
 
67
%
Specialty
%
 
100
%
Overall Fleet Utilization
61
%
 
77
%
Available Days:
 
 
 
Anchor handling towing supply
270

 
364

Fast support
569

 
637

Supply
90

 
273

Specialty
90

 
91

Overall Fleet Available Days
1,019

 
1,365

Current Year Quarter compared with Prior Year Quarter
Operating Revenues. Time charter revenues were $5.3 million lower in the Current Year Quarter compared with the Prior Year Quarter. On an overall basis, time charter revenues were $0.7 million lower due to a decrease in average day rates and $5.0 million lower due to reduced utilization, of which $3.2 million was a consequence of cold-stacking vessels, $1.0 million was attributable to retiring and removing vessels from service and $0.8 million was for vessels in active service. In addition, time charter revenues for anchor handling towing supply vessels were $1.7 million lower in the Current Year Quarter due to the deferral of revenue for one vessel on time charter (excluded from time charter operating data) to a customer as collection was not reasonably assured. Time charter revenues were $2.1 million higher due to fleet additions. As of March 31, 2017, the Company had one of 13 owned and leased-in vessels (specialty) cold-stacked in the region compared with three of 15 owned and leased-in vessels (two

21

Table of Contents

fast support and one supply) as of March 31, 2016. As of March 31, 2017, the Company had retired and removed from service four vessels (two fast support and two supply) in this region.
Direct Operating Expenses. Direct operating expenses were $0.2 million lower in the Current Year Quarter compared with the Prior Year Quarter. Drydocking expense was $0.9 million higher primarily due to increased drydocking activity, including the reactivation of one previously cold-stacked anchor handling towing supply vessel in preparation for a long-term time charter.
Middle East and Asia. For the periods indicated, the Company’s direct vessel profit in the Middle East and Asia was as follows:
 
Three Months Ended March 31,
 
2017
 
2016
 
$’000’s
 
%
 
$’000’s
 
%
Operating revenues:
 
 
 
 
 
 
 
Time charter
5,823

 
87
 
8,153

 
67
Other marine services
877

 
13
 
4,088

 
33
 
6,700

 
100
 
12,241

 
100
Direct operating expenses:
 
 
 
 
 
 
 
Personnel
3,123

 
47
 
4,178

 
34
Repairs and maintenance