Quarterly report pursuant to Section 13 or 15(d)

Significant Accounting Policies (Policies)

v3.10.0.1
Significant Accounting Policies (Policies)
9 Months Ended
Sep. 30, 2018
Accounting Policies [Abstract]  
Consolidation, Policy [Policy Text Block]
The condensed consolidated financial statements include the accounts of SEACOR Marine Holdings Inc. and its consolidated subsidiaries (the “Company”). In the opinion of management, all adjustments (consisting of normal recurring adjustments) have been made to fairly present the unaudited condensed consolidated financial statements for the periods indicated.  Results of operations for the interim periods presented are
not
necessarily indicative of operating results for the full year or any future periods.
 
Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the Company’s financial statements and related notes thereto included in the Company's Annual Report on Form 
10
-K for the year ended
December 
31,
2017.
  
 
Unless the context otherwise indicates, any reference in this Quarterly Report on Form
10
-Q to the “Company” refers to SEACOR Marine Holdings Inc. and its consolidated subsidiaries and any reference in this Quarterly Report on Form
10
-Q to “SEACOR Marine” refers to SEACOR Marine Holdings Inc. without its consolidated subsidiaries. Capitalized terms used and
not
specifically defined herein have the same meaning given those terms in the Company's Annual Report on Form
10
-K for the year ended December
31,
2017.
 
SEACOR Marine was previously a subsidiary of SEACOR Holdings Inc. (along with its consolidated subsidiaries, other than SEACOR Marine and its subsidiaries, collectively referred to as “SEACOR Holdings”). On
June 1, 2017,
SEACOR Holdings completed a spin-off of SEACOR Marine by way of a pro rata dividend of SEACOR Marine’s common stock, par value
$0.01
per share (“Common Stock”), all of which was then held by SEACOR Holdings, to SEACOR Holdings’ shareholders of record as of
May 22, 2017 (
the “Spin-off”). SEACOR Marine entered into certain agreements with SEACOR Holdings to govern SEACOR Marine’s relationship with SEACOR Holdings following the Spin-off, including a Distribution Agreement,
two
Transition Services Agreements, an Employee Matters Agreement and a Tax Matters Agreement. Immediately following the Spin-off, SEACOR Marine began to operate as an independent, publicly traded company.
Recently Adopted Accounting Standards [Policy Text Block]
Recently Adopted Accounting Standards.
In
May 2014,
the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
2014
-
09,
Revenue from Contracts with Customers (Topic
606
)
” to clarify the principles for recognizing revenue and to develop a common revenue standard and disclosure requirements. The new standard supersedes current revenue recognition requirements and industry-specific guidance. Under the new standard, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. The Company adopted this new standard on
January 1, 2018
using the modified retrospective approach by recognizing the cumulative effect of initially applying the new standard as an adjustment to the opening balance of accumulated deficit. The Company implemented the necessary changes to its business processes, systems and controls to support recognition and disclosure of this ASU upon adoption. The Company's revenues are primarily based on leases or rental agreements with customers which are
not
addressed in the new standard. As a result, the adoption of the standard did
not
have a material effect on the Company's financial position, results of operations or cash flows, but did result in increased disclosures related to revenue recognition policies.
 
In
November 2016,
the FASB issued ASU
2016
-
18,
Statement of Cash Flows (Topic
230
) – Restricted Cash
,
 which requires that amounts generally described as restricted cash be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period amounts shown on the statement of cash flows. The Company adopted this new standard on
January 1, 2018.
Retrospective presentation was required. The adoption of the standard did
not
have a material effect on the Company's financial position, results of operations or cash flows. In accordance with ASU
2016
-
18,
the Company has included restricted cash as part of the beginning-of-period and end-of-period cash balances on the condensed consolidated statement of cash flows.
Revenue Recognition, Policy [Policy Text Block]
Revenue Recognition.
Revenue is recognized when (or as) the Company transfers promised goods or services to its customers in amounts that reflect the consideration to which the Company expects to be entitled in exchange for those goods or services, which occurs when (or as) the Company satisfies its contractual obligations and transfers over control of the promised goods or services to its customers. Costs to obtain or fulfill a contract are expensed as incurred.
 
Lease Revenues.
The primary source of the Company’s revenues is earned through time charter and bareboat agreements. Time charter and bareboat agreements are rental agreements that are recognized ratably over the lease term as the services are provided, typically on a per day basis. The charterer will take the vessel on hire for a specific period of time and uses the vessel to move cargo, people or equipment and will pay the Company a rate per day. Under a time charter the Company provides a vessel to a customer for a set term and is responsible for all operating expenses, typically excluding fuel. Under a bareboat charter, the Company provides a vessel to a customer for a set term and the customer assumes responsibility for all operating expenses and the risk of operati
on (see Note
15
).
 
Revenues from Customers.
The Company contracts with various customers to carry out management services for vessels as agents for and on behalf of ship owners.  These services include crew management, technical management, commercial management, insurance arrangements, sale and purchase of vessel, provisions and bunkering. As the manager, the Company undertakes to use its best endeavors to provide the agreed management services as agents for and on behalf of the owners in accordance with sound ship management practice and to protect and promote the interest of the owners in all matters relating to the provision of services hereunder. The Company also contracts with various customers to carry out management services regarding engineering for vessel construction and vessel conversions. The vast majority of the ship management agreements span over the length of
one
to
three
years and are typically billed on a monthly basis. The Company transfers control of the service to the customer and satisfies its performance obligation over the term of the contract, and therefore recognizes revenue over the term of the contract while related costs are expensed as incu
rred (see Note
15
).
 
Revenue that does
not
meet these criteria is deferred until the criteria is met and are considered contract liabili
ties. Contract liabilities, i
ncluded in other current liabilities in the accompanying condensed consolidated balance sheets, for the
nine
months ended
September 30
were as follows (in thousands):
 
   
201
8
     
201
7
   
Balance at beginning of period
  $
10,104
      $
6,953
   
Revenues deferred during the period
   
2,756
       
3,147
   
Revenues recognized during the period    
(3,191
)      
— 
   
Balance at end of period
  $
9,669
      $
10,100
   
 
As of
September
30, 2018,
contract liabiliti
es 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
September
30, 2018,
contract liabilities of
$2.5
million re
lated 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.
 
The remaining balance of
$0.4
million as of
September 30, 2018
is comprised of contract liabilities to
two
customers for which collection is
not
reasonably assured.
Property, Plant and Equipment, Policy [Policy Text Block]
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
September
30, 2018,
the estimated useful life (in years) of each of the Company’s major categories of new equipment was as follows:
 
Offshore Support Vessels:
       
Wind farm utility vessels
   
10
 
All other offshore support vessels (excluding wind farm utility)
   
20
 
 
Equipment maintenance and repair costs and the costs of routine overhauls, drydockings and inspections performed on vessels and equipment are charged to operating expense as incurred. Expenditures that extend the useful life or improve the marketing and commercial characteristics of equipment as well as major renewals and improvements to other properties are capitalized.
 
Certain interest costs incurred during the construction of equipment are capitalized as part of the assets’ carrying values and are amortized over such assets’ estimated useful lives. During the
nine
months ended
September 30, 2018,
capitalized interest total
ed
$1.6
million.
Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]
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, 2018,
the Company recognized
$3.0
million of imp
airment charges primarily related to
four
anchor handling towing supply vessels removed from service and adjusted to scrap value.
Equity and Cost Method Investments, Policy [Policy Text Block]
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
nine
months ended
September 30, 2018,
the Company recognized impairment charges of
$1.2
million related to
one
of its
50%
or less owned companies which the Company believes will be unable to meet all of its liabilities.
Income Tax, Policy [Policy Text Block]
Income Taxes.
During the
nine
months ended
September 30, 2018,
the Company's effective income tax rate of
15.5
%
was primarily due to taxes provided on income attributable to noncontrolling interests, foreign sourced income
not
subject to U.S. income taxes, foreign taxes
not
creditable against U.S. income taxes, a return-to-provision adjustment and a reversal of an unrecognized tax benefit. 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.
Deferred Gains [Policy Text Block]
Deferred Gains.
T
he 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):
 
   
2018
   
2017
 
Balance at beginning of period
  $
25,006
    $
33,910
 
Amortization of deferred gains included in operating expenses as a reduction to rental expense    
(6,053
)    
(6,109
)
Other adjustments    
 (416
)    
(364
)
Balance at end of period
  $
18,537
    $
27,437
 
 
Comprehensive Income, Policy [Policy Text Block]
Accumulated Other Comprehensive Income (Loss).
The components of accumulated other comprehensive loss were as follows (in thousands):
 
   
SEACOR Marine Holdings Inc. Stockholders’ Equity
   
Noncontrolling Interests
   
 
 
 
   
Foreign
Currency
Translation
Adjustments
   
Derivative
Income (Losses) on
Cash Flow
Hedges, net
   
Total
   
Foreign
Currency
Translation
Adjustments
   
Derivative
Income (Losses) on
Cash Flow
Hedges, net
   
Other
Comprehensive
Income (Loss)
 
December 31, 2017
  $
(13,195
)
  $
702
    $
(12,493
)
  $
(1,357
)
  $
1
     
 
 
Other comprehensive income (loss)
   
(1,358
)    
(48
)    
(1,406
)    
(48
)    
(4
)   $
(1,458
)
Income tax expense
   
     
(46
)    
(46
)    
     
     
(46
)
Nine months Ended September 30, 2018
  $
(14,553
)
  $
608
    $
(13,945
)
 
$
(1,405
)
  $
(3
)   $
(1,504
)
Earnings Per Share, Policy [Policy Text Block]
Loss Per Share.
B
asic loss per common share of the Company is computed based on the weighted average number of common shares and warrants to purchase common shares at an exercise price of
$0.01
per share (“Warrants”) issued and outstanding during the relevant periods.  The Warrants are included in the basic loss per common share because the shares issuable upon exercise of the Warrants are issuable for de minimis cash consideration and therefore
not
anti-dilutive.  Diluted loss per common share of the Company is computed based on the weighted average number of common shares and Warrants issued and outstanding plus the effect of potentially dilutive securities through the application of the if-converted method that assumes all common shares have been issued and outstanding during the relevant periods pursuant to the conversion of the Convertible Senior Notes. 
For the
nine
months ended
September 30, 2018
and
2017,
diluted earnings per common share of the Company excluded
2,183,708
and
4,070,500
common shares, respectively, issuable pursuant to the Company’s Convertible Senior Notes (see Note
4
) as the effect of their inclusion in the computation would be anti-dilutive.  In addition, for the
nine
months ended
September 30, 2018,
diluted loss per common share of the Company excluded
196,338
shares of restricted stock and
732,191
shares of stock issuable upon exercise of outstanding stock options as the effect of their inclusion in the computation would be anti-dilutive.
 
While calculating the weighted average basic and diluted number of common shares and warrants issued and outstanding for the quarter ending
September 30, 2018,
the Company discovered that it had understated the weighted average basic and diluted common shares and warrants issued and outstanding for both the
three
months and
six
months ended
June 30, 2018. 
As a result of this error, the Company also overstated the basic and diluted loss per common share and warrant for the same
two
periods.  The correct weighted average basic and diluted common shares and warrants for the
three
months ended
June 30, 2018
was
21,035,214,
an increase of
1,056,698
versus the number previously reported.  This increase results in a corrected basic and diluted loss per common share and warrant of
$1.19
versus
$1.25
previously reported.  The correct weighted average basic and diluted common shares and warrants for the
six
months ended
June 30, 2018
was
19,312,923,
an increase of
1,345,681
versus the number previously reported.  This increase results in a corrected basic and diluted loss per common share and warrant of
$2.79
versus
$3.00
previously reported.  The net loss attributable to the Company for the
three
and
six
months ended
June 30, 2018,
as well as all prior year numbers were
not
impacted. 
 
Upon assessing the error from both a quantitative and qualitative perspective, the Company concluded the error was
not
material to the
June 30, 2018
financial statements and has
no
impact on the
September 30, 2018
financial statements presented herein.
New Accounting Pronouncements, Policy [Policy Text Block]
New Accounting Pronouncements.
On
February 25, 2016,
the Financial Accounting Standards Board (“FASB”) issued a comprehensive new leasing standard meant to improve transparency and comparability among companies by requiring lessees to recognize a lease liability and a corresponding right-of-use asset for virtually all lease contracts. It also requires additional disclosures about leasing arrangements. The Company will adopt the new standard on
January 1, 2019
and will apply the transition provisions of the new standard at its adoption date with recognition of a cumulative-effect adjustment to the opening balance of retained earnings. The Company believes the adoption of the new standard will have a material impact on its consolidated financial position, results of operations and cash flows, estimated to be
$40
million to
$75
million in new right-of-use assets and corresponding lease liabilities for certain of its equipment, office and land leases.  The Company's estimates are preliminary and are based on its cu
rrent inventory of leases.  If the Company enters into or exits material lease arrangements prior to adoption or makes material changes to certain of its assumptions, including lease discount rates, the Company's estimates
may
change and those changes
may
be material.
 
In
February 2018,
the FASB issued a new accounting standard which allows a reclassification from accumulated other comprehensive income to retained earnings of stranded tax effects resulting from the Tax Cuts and Jobs Act passed in
December 2017. 
The standard is effective for interim and annual periods beginning after
December 15, 2018. 
The Company does
not
expect the adoption of the new standard to have a material impact on its consolidated financial position or its results of operations and cash flows.
 
In
June 2018, 
the FASB issued a new accounting standard which addresses aspects of the accounting for nonemployee share-based payment transactions.  The standard is effective for interim and annual periods beginning after
December 15, 2018. 
The Company does
not
expect the adoption of the new standard to have a material impact on its consolidated financial position or its results of operations and cash flows.
 
In
August 2018,
the FASB issued a new accounting standard which provided guidance regarding the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement).  The standard is effective for interim and annual periods beginning after
December 15, 2019. 
The Company is evaluating the provisions of the standard, but does
not
expect the adoption of the new standard to have a material impact on its consolidated financial position or its results of operations and cash flows.