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 September 30, 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 November 9, 2017 was 17,671,356. The Registrant has no other class of common stock outstanding.



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


PART I—FINANCIAL INFORMATION

ITEM 1.
FINANCIAL STATEMENTS
SEACOR MARINE HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data, unaudited)
 
September 30,
2017
 
December 31,
2016
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
130,357

 
$
117,309

Restricted cash
1,619

 
1,462

Marketable securities

 
40,139

Receivables:
 
 
 
Trade, net of allowance for doubtful accounts of $4,805 and $5,359 in 2017 and 2016, respectively
54,124

 
44,830

Due from SEACOR Holdings

 
19,102

Other
8,942

 
21,316

Inventories
3,786

 
3,058

Prepaid expenses and other
3,364

 
3,349

Total current assets
202,192

 
250,565

Property and Equipment:
 
 
 
Historical cost
1,204,409

 
958,759

Accumulated depreciation
(558,919
)
 
(540,619
)
 
645,490

 
418,140

Construction in progress
60,597

 
123,801

Net property and equipment
706,087

 
541,941

Investments, at Equity, and Advances to 50% or Less Owned Companies
89,984

 
138,311

Construction Reserve Funds
45,455

 
78,209

Other Assets
6,213

 
6,093

 
$
1,049,931

 
$
1,015,119

LIABILITIES AND EQUITY
 
 
 
Current Liabilities:
 
 
 
Current portion of long-term debt
$
30,858

 
$
20,400

Accounts payable and accrued expenses
23,487

 
25,969

Due to SEACOR Holdings
663

 

Other current liabilities
54,210

 
34,647

Total current liabilities
109,218

 
81,016

Long-Term Debt
285,869

 
217,805

Conversion Option Liability on 3.75% Convertible Senior Notes
14,135

 

Deferred Income Taxes
106,389

 
124,945

Deferred Gains and Other Liabilities
36,314

 
41,198

Total liabilities
551,925

 
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
302,952

 
306,359

Retained earnings
187,550

 
249,412

Accumulated other comprehensive loss, net of tax
(8,685
)
 
(11,337
)
 
481,994

 
544,611

Noncontrolling interests in subsidiaries
16,012

 
5,544

Total equity
498,006

 
550,155

 
$
1,049,931

 
$
1,015,119


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

1


SEACOR MARINE HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF LOSS
(in thousands, except share data, unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Operating Revenues
$
47,813

 
$
54,125

 
$
124,440

 
$
171,275

Costs and Expenses:
 
 
 
 
 
 
 
Operating
41,258

 
41,159

 
119,119

 
134,254

Administrative and general
10,318

 
10,588

 
43,849

 
34,915

Depreciation and amortization
15,622

 
14,213

 
42,758

 
44,305

 
67,198

 
65,960

 
205,726

 
213,474

Losses on Asset Dispositions and Impairments, Net
(9,744
)
 
(29,233
)
 
(11,243
)
 
(49,970
)
Operating Loss
(29,129
)
 
(41,068
)
 
(92,529
)
 
(92,169
)
Other Income (Expense):
 
 
 
 
 
 
 
Interest income
354

 
973

 
1,479

 
3,371

Interest expense
(4,295
)
 
(2,512
)
 
(12,023
)
 
(7,455
)
SEACOR Holdings management fees

 
(1,925
)
 
(3,208
)
 
(5,775
)
SEACOR Holdings guarantee fees
(21
)
 
(80
)
 
(172
)
 
(237
)
Marketable security gains (losses), net
(698
)
 
1,619

 
10,931

 
(4,458
)
Derivative gains, net
13,022

 
16

 
12,720

 
3,077

Foreign currency losses, net
(106
)
 
(1,084
)
 
(1,389
)
 
(3,463
)
Other, net

 
1

 
(1
)
 
266

 
8,256

 
(2,992
)
 
8,337

 
(14,674
)
Loss Before Income Tax Benefit and Equity in Earnings (Losses) of 50% or Less Owned Companies
(20,873
)
 
(44,060
)
 
(84,192
)
 
(106,843
)
Income Tax Benefit
(5,823
)
 
(15,263
)
 
(23,045
)
 
(35,831
)
Loss Before Equity in Earnings (Losses) of 50% or Less Owned Companies
(15,050
)
 
(28,797
)
 
(61,147
)
 
(71,012
)
Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax
(7,306
)
 
790

 
(5,297
)
 
(364
)
Net Loss
(22,356
)
 
(28,007
)
 
(66,444
)
 
(71,376
)
Net Loss attributable to Noncontrolling Interests in Subsidiaries
(1,881
)
 
(74
)
 
(4,582
)
 
(904
)
Net Loss attributable to SEACOR Marine Holdings Inc.
$
(20,475
)
 
$
(27,933
)
 
$
(61,862
)
 
$
(70,472
)
 
 
 
 
 
 
 
 
Basic Loss Per Common Share of SEACOR Marine Holdings Inc.
$
(1.17
)
 
$
(1.58
)
 
$
(3.51
)
 
$
(3.99
)
Diluted Loss Per Common Share of SEACOR Marine Holdings Inc.
$
(1.25
)
 
$
(1.58
)
 
$
(3.51
)
 
$
(3.99
)
 
 
 
 
 
 
 
 
Weighted Average Common Shares Outstanding:
 
 
 
 
 
 
 
Basic
17,550,663

 
17,671,356

 
17,617,420

 
17,671,356

Diluted
21,621,163

 
17,671,356

 
17,617,420

 
17,671,356








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

2


SEACOR MARINE HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands, unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Net Loss
$
(22,356
)
 
$
(28,007
)
 
$
(66,444
)
 
$
(71,376
)
Other Comprehensive Income (Loss):
 
 
 
 
 
 
 
Foreign currency translation gains (losses)
1,433

 
(1,355
)
 
4,217

 
(6,780
)
Reclassification of foreign currency translation losses to foreign currency losses, net

 
74

 

 
74

Derivative gains (losses) on cash flow hedges
91

 
(189
)
 
(347
)
 
(3,803
)
Reclassification of derivative losses on cash flow hedges to interest expense
32

 

 
81

 
9

Reclassification of derivative losses on cash flow hedges to equity in earnings of 50% or less owned companies
49

 
772

 
384

 
2,067

 
1,605

 
(698
)
 
4,335

 
(8,433
)
Income tax (expense) benefit
(541
)
 
192

 
(1,428
)
 
2,654

 
1,064

 
(506
)
 
2,907

 
(5,779
)
Comprehensive Loss
(21,292
)
 
(28,513
)
 
(63,537
)
 
(77,155
)
Comprehensive Loss attributable to Noncontrolling Interests in Subsidiaries
(1,822
)
 
(224
)
 
(4,327
)
 
(1,754
)
Comprehensive Loss attributable to SEACOR Marine Holdings Inc.
$
(19,470
)
 
$
(28,289
)
 
$
(59,210
)
 
$
(75,401
)































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

3


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

Distribution of SEACOR Marine restricted stock to Company personnel by SEACOR Holdings

 
(2,656
)
 

 

 

 
(2,656
)
Amortization of share awards

 
363

 

 

 

 
363

Purchase of subsidiary shares from noncontrolling interests

 
(1,114
)
 

 

 
(2,579
)
 
(3,693
)
Consolidation of 50% or less owned companies

 

 

 

 
17,374

 
17,374

Net loss

 

 
(61,862
)
 

 
(4,582
)
 
(66,444
)
Other comprehensive income

 

 

 
2,652

 
255

 
2,907

Nine Months Ended September 30, 2017
$
177

 
$
302,952

 
$
187,550

 
$
(8,685
)
 
$
16,012

 
$
498,006





































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

4


SEACOR MARINE HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
 
Nine Months Ended September 30,
 
2017
 
2016
Net Cash Provided By (Used In) Operating Activities
$
35,144

 
$
(16,498
)
Cash Flows from Investing Activities:
 
 
 
Purchases of property and equipment
(52,353
)
 
(82,806
)
Cash settlements on derivative transactions, net
(369
)
 
(31
)
Proceeds from disposition of property and equipment
9,797

 
4,119

Investments in and advances to 50% or less owned companies
(5,302
)
 
(8,202
)
Return of investments and advances from 50% or less owned companies
7,752

 

Payments received on third party notes receivable, net

 
504

Net increase in restricted cash
(157
)
 
(1,120
)
Net decrease in construction reserve funds
32,754

 
76,716

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

 

Business acquisitions, net of cash acquired
(9,751
)
 

Net cash used in investing activities
(15,686
)
 
(10,820
)
Cash Flows from Financing Activities:
 
 
 
Payments on long-term debt
(8,572
)
 
(25,125
)
Proceeds from issuance of long-term debt, net of issue costs
6,845

 
36,383

Distribution of SEACOR Marine restricted stock to Company personnel by SEACOR Holdings
(2,656
)
 

Purchase of subsidiary shares from noncontrolling interests
(3,693
)
 

Distributions to noncontrolling interests

 
(205
)
Net cash provided by (used in) financing activities
(8,076
)
 
11,053

Effects of Exchange Rate Changes on Cash and Cash Equivalents
1,666

 
(1,500
)
Net Increase (Decrease) in Cash and Cash Equivalents
13,048

 
(17,765
)
Cash and Cash Equivalents, Beginning of Period
117,309

 
150,242

Cash and Cash Equivalents, End of Period
$
130,357

 
$
132,477





















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

5


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 September 30, 2017, its results of operations for the three and nine months ended September 30, 2017 and 2016, its comprehensive loss for the three and nine months ended September 30, 2017 and 2016, its changes in equity for the nine months ended September 30, 2017, and its cash flows for the nine months ended September 30, 2017 and 2016. The condensed consolidated financial information for the three and nine months ended September 30, 2017 and 2016 have 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 filed on May 4, 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”). 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. Following 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 nine months ended September 30 were as follows (in thousands):
 
2017
 
2016
Balance at beginning of period
$
6,953

 
$
6,953

Revenues deferred during the period
3,147

 

Balance at end of period
$
10,100

 
$
6,953

As of September 30, 2017, deferred revenues of $6.8 million were 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 September 30, 2017, deferred revenues of $3.1 million related to the time charter of an offshore support vessel to a customer from 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

6


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 September 30, 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 nine months ended September 30, 2017, capitalized interest totaled $3.1 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 nine months ended September 30, 2017, the Company recognized impairment charges of $15.7 million primarily associated with one leased-in supply vessel removed from service as it is not expected to be marketed prior to the expiration of its lease, one owned fast support vessel removed from service and two owned in-service specialty vessels.
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 that 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 nine months ended September 30, 2017, the Company recognized impairment charges of $8.8 million, net of tax, related to its 50% or less owned companies.
Income Taxes. During the nine months ended September 30, 2017, the Company’s effective income tax rate of 27.4% was primarily due to losses of foreign subsidiaries not benefited, non-deductible expenses associated with the Company’s participation in SEACOR Holdings’ share award plans and non-deductible Spin-off related expenses reimbursed to SEACOR Holdings. During the nine months ended September 30, 2016, the Company’s effective income tax rate of 33.5% was primarily due to losses of foreign subsidiaries not benefited and non-deductible expenses associated with the Company’s participation in SEACOR Holdings’ share award plans.

7


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 nine months ended September 30 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 leased-in equipment expense
(6,109
)
 
(6,149
)
Amortization of deferred gains included in losses on asset dispositions and impairments, net

 
(36
)
Other
(364
)
 
(1,153
)
Balance at end of period
$
27,437

 
$
35,960

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
Gains on
Cash Flow
Hedges, net
 
Other
Comprehensive
Income
December 31, 2016
$
(11,413
)
 
$
76

 
$
(11,337
)
 
$
(1,614
)
 
$
(17
)
 
 
Other comprehensive income
3,977

 
103

 
4,080

 
240

 
15

 
$
4,335

Income tax expense
(1,392
)
 
(36
)
 
(1,428
)
 

 

 
(1,428
)
Nine Months Ended September 30, 2017
$
(8,828
)
 
$
143

 
$
(8,685
)
 
$
(1,374
)
 
$
(2
)
 
$
2,907

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 treasury stock and if-converted methods. Dilutive securities for this purpose assumes restricted stock grants have vested and common shares have been issued pursuant to the conversion of the 3.75% Convertible Senior Notes.
Computations of basic and diluted loss per common share of SEACOR Marine were as follows (in thousands, except share data):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
Net Loss attributable to SEACOR Marine
 
Average O/S Shares
 
Per Share
 
Net Loss Attributable to SEACOR Marine
 
Average O/S Shares
 
Per Share
2017
 
 
 
 
 
 
 
 
 
 
 
Basic Weighted Average Common Shares Outstanding
$
(20,475
)
 
17,550,663

 
$
(1.17
)
 
$
(61,862
)
 
17,617,420

 
$
(3.51
)
Effect of Dilutive Share Awards:
 
 
 
 
 
 
 
 
 
 
 
Options and Restricted Stock(1)

 

 
 
 

 

 
 
Convertible Notes(2)(3)
(6,610
)
 
4,070,500

 
 
 

 

 
 
Diluted Weighted Average Common Shares Outstanding
$
(27,085
)
 
21,621,163

 
$
(1.25
)
 
$
(61,862
)
 
17,617,420

 
$
(3.51
)
2016
 
 
 
 
 
 
 
 
 
 
 
Basic and Diluted Weighted Average Common Shares Outstanding
$
(27,933
)
 
17,671,356

 
$
(1.58
)
 
$
(70,472
)
 
17,671,356

 
$
(3.99
)
______________________
(1)
For the three and nine months ended September 30, 2017, diluted loss per common share of SEACOR Marine excluded 120,693 of certain share awards as the effect of their inclusion in the computation would be anti-dilutive.
(2)
For the three months ended September 30, 2017, adjusted net loss attributable to SEACOR Marine excluded interest expense on the 3.75% Convertible Senior Notes and derivative gains on the related conversion option liability.
(3)
For the nine months ended September 30, 2017, diluted loss per common share of SEACOR Marine excluded 4,070,500 of common shares issuable pursuant to the 3.75% Convertible Senior Notes as the effect of their inclusion in the computation would be anti-dilutive.

8


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 currently 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 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.
2.
BUSINESS ACQUISITIONS
Sea-Cat Crewzer II. On April 28, 2017, the Company acquired a 100% controlling interest in Sea-Cat Crewzer II, which owns and operates two high-speed offshore catamarans, through the acquisition of its partners’ 50% ownership interest for $11.3 million in cash (see Note 4). The Company performed a fair value analysis and the purchase price was allocated to the acquired assets and liabilities based on their fair values resulting in no goodwill being recorded.
Sea-Cat Crewzer. On April 28, 2017, the Company acquired a 100% controlling interest in Sea-Cat Crewzer, which owns and operates two high-speed offshore catamarans, through the acquisition of its partners’ 50% ownership interest for $4.4 million in cash (see Note 4). The Company performed a fair value analysis and the purchase price was allocated to the acquired assets and liabilities based on their fair values resulting in no goodwill being recorded.

9


Purchase Price Accounting. The allocation of the purchase price for the Company’s acquisitions for the nine months ended September 30, 2017 was as follows (in thousands):
Trade and other receivables
235

Other current assets
4,148

Investments, at Equity, and Advances to 50% or Less Owned Companies
(15,700
)
Property and Equipment
61,626

Accounts payable
747

Other current liabilities
(76
)
Long-Term Debt
(41,186
)
Other
(43
)
Purchase price(1)
$
9,751

______________________
(1)
Purchase price is net of cash acquired totaling $5.9 million.
3.
EQUIPMENT ACQUISITIONS AND DISPOSITIONS
During the nine months ended September 30, 2017, capital expenditures and payments on fair value hedges were $52.7 million. Equipment deliveries during the nine months ended September 30, 2017 included six fast support vessels and one supply vessel.
During the nine months ended September 30, 2017, the Company sold two liftboats, one supply vessel, six offshore support vessels previously retired and removed from service and other equipment for net proceeds of $10.3 million ($9.8 million in cash and $0.5 million of previously received deposits) and gains of $4.4 million.
4.
INVESTMENTS, AT EQUITY, AND ADVANCES TO 50% OR LESS OWNED COMPANIES
MexMar. MexMar owns and operates 15 offshore support vessels in Mexico. During the nine months ended September 30, 2017, the Company and its partner each received cash capital distributions of $7.4 million from MexMar.
Dynamic Offshore Drilling. Dynamic was established to construct and operate a jack-up drilling rig that was delivered in the first quarter of 2013. During the nine months ended September 30, 2017, the Company recognized an impairment charge of $8.3 million, net of tax, for an other than temporary decline in the fair value of its equity investment upon Dynamic’s unsuccessful bid on a charter renewal with a customer. Its existing charter terminates in February 2018.
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, and the Company made working capital advances of $2.0 million to Falcon Global. 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 position was as follows (in thousands):
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. Sea-Cat Crewzer II owns and operates two high-speed offshore catamarans. 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 (see Note 2).

10


Sea-Cat Crewzer. Sea-Cat Crewzer owns and operates two high-speed offshore catamarans. 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 (see Note 2).
OSV Partners. OSV Partners owns and operates five offshore support vessels. OSV Partners is currently in non-compliance with its debt service coverage ratio and its maximum leverage ratio pursuant to its term loan facility and has received waivers from its lenders for these financial covenants through and including September 30, 2017. As of September 30, 2017, the remaining principal amount outstanding under the facility was $30.7 million. During the nine months ended September 30, 2017, the Company participated in a $6.0 million preferred equity offering of OSV Partners and invested $2.3 million in support of the venture. The lenders to OSV Partners have no recourse to the Company for outstanding amounts under the facility, and the Company is not obligated to any future fundings to OSV Partners.
Other. The Company’s other 50% or less owned companies own and operate eight vessels. During the nine months ended September 30, 2017, the Company made working capital advances of $0.6 million to these 50% or less owned companies and received dividends of $2.4 million and advance repayments of $0.4 million from these 50% or less owned companies.
Guarantees. The Company has guaranteed the payment of amounts owed under a vessel charter by one of its 50% or less owned companies. As of September 30, 2017, the total amount guaranteed by the Company under this arrangement was $0.6 million. In addition, as of September 30, 2017, the Company had uncalled capital commitments to two of its 50% or less owned companies totaling $1.7 million.
5.
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.
Upon completion of the Spin-off, the Company bifurcated the embedded conversion option liability of $27.3 million from the 3.75% Convertible Senior Notes and recorded an additional debt discount. The adjusted unamortized debt discount and issuance costs are being amortized as additional non-cash interest expense over the remaining maturity of the debt (December 1, 2022) for an overall effective interest rate of 7.95%.
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 consisted 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 September 30, 2017. The facility is secured by the liftboats and is repayable over a five year period that began after the completion of the construction of the liftboats 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 into its financial statements 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 4). During April 2017, the Tranche B facility was canceled prior to any funding. During the nine months ended September 30, 2017, Falcon Global made scheduled payments of $3.0 million under Tranche A. As of September 30, 2017, the remaining principal amount outstanding under the facility was $56.4 million and is fully guaranteed by SEACOR Marine.
On November 3, 2017, Falcon Global executed an amendment to its term loan facility that requires Falcon Global to maintain a debt service coverage ratio and a minimum cash balance on hand in excess of defined thresholds. In addition, the amendment requires SEACOR Marine, as guarantor, to maintain a debt to capital ratio below a defined threshold and a minimum cash balance on hand in excess of a defined threshold. The amendment provides the Company the ability to retroactively cure any shortfalls in Falcon Global’s debt service coverage ratio. As a result of the amendment and the Company’s ability to meet its financial covenants for the next twelve months, the Company has reclassified outstanding amounts to long-term debt based on the contractual maturity schedule under this term loan facility.
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 (see Notes 2 and 4). Sea-Cat Crewzer II has a term loan facility that matures in 2019 which is secured by a first preferred mortgage on its vessels. The balance of this facility as of September 30, 2017 was $21.5 million. The facility calls for quarterly payments of principal and interest with a balloon payment of $17.3 million due at maturity. The interest rate is fixed at 1.52%, inclusive of an interest rate swap, plus a margin ranging from 2.10% to 2.75% subject to the level of funded debt (overall rate of 4.27% as of September 30, 2017). Since April 28, 2017, the Company made scheduled payments of $0.6 million under this facility.

11


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 (see Notes 2 and 4). Sea-Cat Crewzer has a term loan facility that matures in 2019 which is secured by a first preferred mortgage on its vessels. The balance of this facility as of September 30, 2017 was $19.0 million. The facility calls for quarterly payments of principal and interest with a balloon payment of $15.3 million due at maturity. The interest rate is fixed at 1.52%, inclusive of an interest rate swap, plus a margin ranging from 2.10% to 2.75% subject to the level of funded debt (overall rate of 4.27% as of September 30, 2017). Since April 28, 2017, the Company made scheduled payments of $0.5 million under this facility.
Other. During the nine months ended September 30, 2017, the Company borrowed $7.1 million under the Sea-Cat Crewzer III Term Loan Facility to fund capital expenditures and made scheduled payments on other long-term debt of $4.5 million. As of September 30, 2017, the Company had $4.7 million of borrowing capacity under subsidiary facilities.
Letters of Credit. As of September 30, 2017, the Company had outstanding letters of credit totaling $0.9 million for labor and performance guarantees.
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 September 30, 2017 were as follows (in thousands):
 
Derivative
Asset(1)
 
Derivative
Liability(2)
Derivatives designated as hedging instruments:
 
 
 
Forward currency exchange contracts (fair value hedges)
$

 
$

Interest rate swap agreements (cash flow hedges)
104

 
26

 
 
 
 
Derivatives not designated as hedging instruments:
 
 
 
Conversion option liability on 3.75% Convertible Senior Notes

 
14,135

Forward currency exchange, option and future contracts
136

 

Interest rate swap agreements

 
363

 
$
240

 
$
14,524

______________________
(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, except for the conversion option liability on the 3.75% Convertible Senior Notes.
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. During the nine months ended September 30, 2017, the Company recognized gains of $0.1 million on these contracts which were included as decreases to the corresponding hedged equipment included in construction in progress in the accompanying condensed consolidated balance sheets.
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 losses on derivative instruments designated as cash flow hedges of $0.3 million and $3.8 million during the nine months ended September 30, 2017 and 2016, respectively. As of September 30, 2017, 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 ($17.7 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 $114.3 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 the Company to pay a fixed rate of interest of 1.52% on the amortized notional value of $21.5 million and receive a variable interest rate based on LIBOR on the amortized notional value.

12


Sea-Cat Crewzer had an interest rate swap agreement maturing in 2019 that calls for the Company to pay a fixed rate of interest of 1.52% on the amortized notional value of $19.0 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 nine months ended September 30 as follows (in thousands):
 
2017
 
2016
Conversion option liability on 3.75% Convertible Senior Notes
$
13,119

 
$

Options on equities and equity indices

 
3,095

Forward currency exchange, option and future contracts
(78
)
 

Interest rate swap agreements
(321
)
 
(18
)
 
$
12,720

 
$
3,077

The conversion option liability relates to the bifurcated embedded conversion option in the 3.75% Convertible Senior Notes (see Note 5).
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. 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 September 30, 2017, the interest rate swaps held by the Company or its 50% or less owned companies were as follows:
Falcon Global 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 $57.8 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 $34.2 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 $66.7 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.

13


The Company’s financial assets and liabilities as of September 30, 2017 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)
$

 
$
240

 
$

Construction reserve funds
45,455

 

 

LIABILITIES
 
 
 
 
 
Derivative instruments (included in other current liabilities)

 
389

 

Conversion option liability on 3.75% Convertible Senior Notes

 

 
14,135

The fair value of the conversion option liability on the 3.75% 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 exchanging 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 September 30, 2017 were as follows (in thousands):
 
 
 
Estimated Fair Value
 
Carrying
Amount
 
Level 1
 
Level 2
 
Level 3
ASSETS
 
 
 
 
 
 
 
Cash, cash equivalents and restricted cash
$
131,976

 
$
131,976

 
$

 
$

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

 
see below

 
 
 
 
LIABILITIES
 
 
 
 
 
 
 
Long-term debt, including current portion
$
316,727

 
$

 
$
297,227

 
$

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 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 nine months ended September 30, 2017 were as follows (in thousands):
 
Level 1
 
Level 2
 
Level 3
ASSETS
 
 
 
 
 
Property and equipment:
 
 
 
 
 
Fast support
$

 
$
175

 
$

Specialty

 
750

 

 
 
 
 
 
 
Investments, at equity, and advances to 50% or less owned companies:


 


 


Sea-Cat Crewzer and Sea-Cat Crewzer II

 
15,700

 

Falcon Global

 

 
19,374

Dynamic Offshore

 
5,038

 

Other

 

 
910


14


Property and equipment. During the nine months ended September 30, 2017, the Company recognized impairment charges of $10.3 million associated with certain owned offshore support vessels (see Note 1). The Level 2 fair values were determined based on contracted sales prices, sales prices of similar equipment or scrap value, as applicable.
Investments, at equity, and advances to 50% or less owned companies. During the nine months ended September 30, 2017, the Company marked its investments in Sea-Cat Crewzer and Sea-Cat Crewzer II to fair value upon the acquisition of 100% controlling interests in the companies. The Level 2 fair values were determined based on the purchase price of the acquired interests.    
During the nine months ended September 30, 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 4). 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 is 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.
During the nine months ended September 30, 2017, the Company recognized an other than temporary decline in the fair value of its equity investment in Dynamic Offshore (see Note 4) and marked its investment to fair value. Dynamic’s primary asset consists of a recently constructed foreign-flag jack-up drilling rig. The estimated fair value of the jack-up drilling rig was the primary input used by the Company in determining the fair value of its investment based on a third-party valuation primarily using sales prices of similar equipment and therefore is considered a Level 2 fair value measurement. The fair value analysis is preliminary and is expected to be completed by December 31, 2017.
8.
NONCONTROLLING INTERESTS IN SUBSIDIARIES
Noncontrolling interests in the Company’s consolidated subsidiaries were as follows (in thousands):
 
Noncontrolling Interests
 
September 30, 2017
 
December 31, 2016
Falcon Global
50%
 
$
12,872

 
$

Windcat Workboats
12.5%
 
2,853

 
5,266

Other
1.8%
 
287

 
278

 
 
 
 
 
$
16,012

 
$
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 and began consolidating Falcon Global’s net assets effective March 31, 2017 (see Note 4). As of September 30, 2017, the net assets of Falcon Global were $25.7 million. During the six months ended September 30, 2017 (the period which Falcon Global has been consolidated into the Company’s financial statements), the net loss of Falcon Global was $9.0 million, of which $4.5 million was attributable to noncontrolling interests.
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. During the nine months ended September 30, 2017, the Company acquired an additional 12.5% of Windcat Workboats from noncontrolling interests for $3.7 million. As of September 30, 2017, the net assets of Windcat Workboats were $22.8 million. During the nine months ended September 30, 2017, the net income of Windcat Workboats was $0.1 million with a net loss attributable to noncontrolling interests of $0.1 million. During the nine months ended September 30, 2016, the net loss of Windcat Workboats was $3.6 million, of which $0.9 million was attributable to noncontrolling interests.
9.    RELATED PARTY TRANSACTIONS
In connection with 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.
    

15


Following the completion of the Spin-off, the Company is no longer charged management fees by SEACOR Holdings for their corporate costs. However, the Company continues to be supported by SEACOR Holdings for corporate services provided post Spin-off for a fixed net fee of $6.3 million per annum pursuant to the Transition Services Agreements with SEACOR Holdings. The fees incurred will decline as the services and functions provided by SEACOR Holdings are terminated and replicated within the Company. Fees incurred by the Company pursuant to the Transition Services Agreements are recognized as additional administrative and general expenses in the accompanying condensed consolidated statements of loss.
As of September 30, 2017, SEACOR Holdings has guaranteed $93.2 million for various obligations of the Company, including: debt facility and 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 guaranteed obligations are settled by the Company. The Company recognized guarantee fees in connection with its sale-leaseback arrangements of $0.3 million for the nine months ended September 30, 2017 as additional leased-in equipment operating expenses in the accompanying condensed consolidated statements of loss. Guarantee fees paid to SEACOR Holdings for all other obligations are recognized as SEACOR Holdings guarantee fees in the accompanying condensed consolidated statements of loss.
Certain officers and employees of the Company received compensation through participation in SEACOR Holdings share award plans. Pursuant to the Employee Matters Agreement with SEACOR Holdings, participating Company personnel vested in all outstanding SEACOR Holdings share awards upon the Spin-off and received SEACOR Marine restricted stock from the Spin-off distribution in connection with outstanding SEACOR Holdings restricted stock held. As a consequence, the Company paid SEACOR Holdings $9.4 million upon completion of the Spin-off, including $2.7 million for the distribution of SEACOR Marine restricted stock, which is amortized over the participants’ remaining vesting periods, and $6.7 million on the accelerated vesting of SEACOR Holdings share awards, which was immediately recognized as additional administrative and general expenses in the accompanying condensed consolidated statements of loss.
Pursuant to one of the Transitions Services Agreements with SEACOR Holdings, the Company is obligated to reimburse SEACOR Holdings up to 50% of the severance and restructuring costs actually incurred by SEACOR Holdings as a result of the Spin-off up to, but not in excess of, $6.0 million (such that the Company shall not be obligated to pay more than $3.0 million). As of September 30, 2017, the Company has reimbursed SEACOR Holdings severance and restructuring costs of $0.7 million recognized as additional administrative and general expenses in the accompanying condensed consolidated statements of loss.
Immediately preceding the Spin-off and pursuant to an Investment Agreement dated November 30, 2015 with the holders of the 3.75% Convertible Senior Notes, the Company reimbursed SEACOR Holdings for the final settlement of non-deductible Spin-off related expenses of $3.4 million recognized as additional administrative and general expenses in the accompanying condensed consolidated statements of loss.
10.
COMMITMENTS AND CONTINGENCIES
As of September 30, 2017, the Company had unfunded capital commitments of $68.9 million that included four fast support vessels, three supply vessels and two wind farm utility vessels. The Company’s capital commitments by year of expected payment are as follows (in thousands):
Remainder of 2017
$
5,195

2018
40,932

2019
21,106

2020
1,645

 
$
68,878

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.

16


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 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 September 30, 2017
 
 
 
 
 
 
 
 
 
 
 
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
Time charter
4,587

 
9,700

 
9,490

 
1,439

 
20,051

 
45,267

Bareboat charter

 

 

 
1,168

 

 
1,168

Other marine services
1,116

 
(310
)
 
(341
)
 
159

 
754

 
1,378

 
5,703

 
9,390

 
9,149

 
2,766

 
20,805

 
47,813

Direct Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
Operating:
 
 
 
 
 
 
 
 
 
 
 
Personnel
4,455

 
3,588

 
4,731

 
326

 
9,079

 
22,179

Repairs and maintenance
1,289

 
1,324

 
2,309

 
110

 
2,378

 
7,410

Drydocking
1,109

 
311

 
(102
)
 

 
961

 
2,279

Insurance and loss reserves
598

 
157

 
363

 
75

 
203

 
1,396

Fuel, lubes and supplies
249

 
693

 
1,115

 
33

 
790

 
2,880

Other
123

 
704

 
1,192

 
69

 
190

 
2,278

 
7,823

 
6,777

 
9,608

 
613

 
13,601

 
38,422

Direct Vessel Profit (Loss)
(2,120
)
 
2,613

 
(459
)
 
2,153

 
7,204

 
9,391

Other Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
Operating:
 
 
 
 
 
 
 
 
 
 
 
Leased-in equipment
1,870

 
966

 

 

 

 
2,836

Administrative and general
 
 
 
 
 
 
 
 
 
 
10,318

Depreciation and amortization
5,224

 
2,456

 
4,320

 
1,025

 
2,597

 
15,622

 
 
 
 
 
 
 
 
 
 
 
28,776

Losses on Asset Dispositions and Impairments, Net
 
 
 
 
 
 
 
 
 
(9,744
)
Operating Loss
 
 
 
 
 
 
 
 
 
 
(29,129
)

17


 
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 nine months ended September 30, 2017
 
 
 
 
 
 
 
 
 
 
 
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
Time charter
12,471

 
23,333

 
22,728

 
1,439

 
54,829

 
114,800

Bareboat charter

 

 

 
3,467

 

 
3,467

Other marine services
3,140

 
97

 
645

 
396

 
1,895

 
6,173

 
15,611

 
23,430

 
23,373

 
5,302

 
56,724

 
124,440

Direct Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
Operating:
 
 
 
 
 
 
 
 
 
 
 
Personnel
11,768

 
9,624

 
12,001

 
487

 
25,667

 
59,547

Repairs and maintenance
2,963

 
5,102

 
6,832

 
230

 
6,303

 
21,430

Drydocking
1,992

 
2,051

 
414

 

 
3,140

 
7,597

Insurance and loss reserves
2,608

 
696

 
1,062

 
86

 
629

 
5,081

Fuel, lubes and supplies
1,104

 
1,956

 
2,547

 
60

 
2,745

 
8,412

Other
246

 
2,221

 
3,718

 
73

 
677

 
6,935

 
20,681

 
21,650

 
26,574

 
936

 
39,161

 
109,002

Direct Vessel Profit (Loss)
(5,070
)
 
1,780

 
(3,201
)
 
4,366

 
17,563

 
15,438

Other Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
Operating:
 
 
 
 
 
 
 
 
 
 
 
Leased-in equipment
6,286

 
2,905

 
862

 

 
64

 
10,117

Administrative and general
 
 
 
 
 
 
 
 
 
 
43,849

Depreciation and amortization
16,573

 
6,105

 
10,826

 
2,474

 
6,780

 
42,758

 
 
 
 
 
 
 
 
 
 
 
96,724

Losses on Asset Dispositions and Impairments, Net
 
 
 
 
 
 
 
 
 
(11,243
)
Operating Loss
 
 
 
 
 
 
 
 
 
 
(92,529
)
 
 
 
 
 
 
 
 
 
 
 
 
As of September 30, 2017
 
 
 
 
 
 
 
 
 
 
 
Property and Equipment:
 
 
 
 
 
 
 
 
 
 
 
Historical cost
429,500

 
189,845

 
328,263

 
78,976

 
177,825

 
1,204,409

Accumulated depreciation
(237,210
)
 
(54,052
)
 
(93,535
)
 
(42,590
)
 
(131,532
)
 
(558,919
)
 
192,290

 
135,793

 
234,728

 
36,386

 
46,293

 
645,490


18


 
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 September 30, 2016
 
 
 
 
 
 
 
 
 
 
 
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
Time charter
6,440

 
8,593

 
12,763

 

 
19,677

 
47,473

Bareboat charter

 

 

 
1,967

 

 
1,967

Other marine services
1,083

 
238

 
2,566

 
220

 
578

 
4,685

 
7,523

 
8,831

 
15,329

 
2,187

 
20,255

 
54,125

Direct Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
Operating:
 
 
 
 
 
 
 
 
 
 
 
Personnel
4,865

 
3,195

 
4,778

 
198

 
9,827

 
22,863

Repairs and maintenance
768

 
441

 
1,394

 
20

 
2,194

 
4,817

Drydocking
(8
)
 
617

 
719

 

 
696

 
2,024

Insurance and loss reserves
1,200

 
147

 
199

 

 
163

 
1,709

Fuel, lubes and supplies
533

 
748

 
961

 

 
957

 
3,199

Other
118

 
890

 
790

 
(56
)
 
274

 
2,016

 
7,476

 
6,038

 
8,841

 
162

 
14,111

 
36,628

Direct Vessel Profit
47

 
2,793

 
6,488

 
2,025

 
6,144

 
17,497

Other Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
Operating:
 
 
 
 
 
 
 
 
 
 
 
Leased-in equipment
2,040

 
974

 
1,254

 
180

 
83

 
4,531

Administrative and general
 
 
 
 
 
 
 
 
 
 
10,588

Depreciation and amortization
6,489

 
1,678

 
3,063

 
929

 
2,054

 
14,213

 
 
 
 
 
 
 
 
 
 
 
29,332

Losses on Asset Dispositions and Impairments, Net
 
 
 
 
 
 
 
 
 
(29,233
)
Operating Loss
 
 
 
 
 
 
 
 
 
 
(41,068
)

19


 
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 nine months ended September 30, 2016
 
 
 
 
 
 
 
 
 
 
 
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
Time charter
26,208

 
28,634

 
31,470

 
196

 
61,772

 
148,280

Bareboat charter

 

 

 
7,664

 

 
7,664

Other marine services
3,048

 
274

 
9,295

 
1,104

 
1,610

 
15,331

 
29,256

 
28,908

 
40,765

 
8,964

 
63,382

 
171,275

Direct Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
Operating:
 
 
 
 
 
 
 
 
 
 
 
Personnel
18,995

 
9,604

 
14,014

 
2,093

 
31,556

 
76,262

Repairs and maintenance
2,170

 
1,934

 
4,887

 
227

 
7,320

 
16,538

Drydocking
209

 
1,201

 
2,112

 

 
4,168

 
7,690

Insurance and loss reserves
2,879

 
395

 
613

 
37

 
766

 
4,690

Fuel, lubes and supplies
1,280

 
1,722

 
3,413

 
193

 
3,041

 
9,649

Other
307

 
2,298

 
2,396

 
114

 
945

 
6,060

 
25,840

 
17,154

 
27,435

 
2,664

 
47,796

 
120,889

Direct Vessel Profit
3,416

 
11,754

 
13,330

 
6,300

 
15,586

 
50,386

Other Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
Operating:
 
 
 
 
 
 
 
 
 
 
 
Leased-in equipment
5,760

 
2,926

 
3,553

 
914

 
212

 
13,365

Administrative and general
 
 
 
 
 
 
 
 
 
 
34,915

Depreciation and amortization
20,523

 
4,871

 
9,040

 
3,328

 
6,543

 
44,305

 
 
 
 
 
 
 
 
 
 
 
92,585

Losses on Asset Dispositions and Impairments, Net
 
 
 
 
 
 
 
 
 
(49,970
)
Operating Loss
 
 
 
 
 
 
 
 
 
 
(92,169
)
 
 
 
 
 
 
 
 
 
 
 
 
As of September 30, 2016
 
 
 
 
 
 
 
 
 
 
 
Property and Equipment:
 
 
 
 
 
 
 
 
 
 
 
Historical cost
455,374

 
165,375

 
206,018

 
61,153

 
170,128

 
1,058,048

Accumulated depreciation
(227,333
)
 
(77,259
)
 
(95,195
)
 
(33,700
)
 
(118,531
)
 
(552,018
)
 
228,041

 
88,116

 
110,823

 
27,453

 
51,597

 
506,030

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 September 30, 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 $59.7 million and $30.3 million, respectively. Equity in earnings (losses) of 50% or less owned companies, net of tax, were as follows (in thousands):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
MexMar
$
793

 
$