Annual report pursuant to Section 13 and 15(d)

Note 16 - Related Party Transactions

v3.19.1
Note 16 - Related Party Transactions
12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Related Party Transactions Disclosure [Text Block]
16.
RELATED PARTY TRANSACTIONS
 
The Company provided services of
$0.1
million to SEACOR Holdings during each of the years ended
December 31, 
2017
and
2016.
 
In connection with the Spin-off, SEACOR Marine entered into certain agreements with SEACOR Holdings that 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.
 
As of
December 31, 2018,
SEACOR Holdings had guaranteed
$40.6
million for various obligations of the Company, including performance obligations under sale-leaseback arrangements (see Note
6
) and invoiced amounts for funding deficits under the MNOPF (see Note
14
). As of
December 31, 2017,
SEACOR Holdings had guaranteed
$69.1
million for various obligations of the Company, including: BNDES Equipment Construction Finance Notes (see Note
8
); letters of credit issued on behalf of the Company; performance obligations under sale-leaseback arrangements (see Note
6
); and invoiced amounts for funding deficits under the MNOPF (see Note
15
). 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 sale-leaseback arrangements of
$0.3
million,
$0.3
million and
$0.4
million during
2018,
2017
and
2016,
respectively, as additional leased-in equipment operating expenses in the accompanying consolidated statements of loss. Guarantee fees paid to SEACOR Holdings for all other obligations are recognized as SEACOR Holdings guarantee fees in the accompanying 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
December 31, 2018
and
2017,
the Company had reimbursed SEACOR Holdings severance and restructuring costs of
$0
and
$0.7
million, respectively, which were recognized as additional administrative and general expenses in the accompanying consolidated statements of loss.
 
Immediately preceding the Spin-off and pursuant to an Investment Agreement dated
November 30, 2015
with the holders of the 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 consolidated statements of loss.
 
Following the completion of the Spin-off, the Company is
no
longer charged for management fees or shared services allocation (see below) for administrative support by SEACOR Holdings; however, the Company continues to be supported by SEACOR Holdings for corporate services pursuant to the Transition Services Agreements with SEACOR Holdings under which it was initially charged
$6.3
million annually for these services. The fees incurred will decline as the services and functions provided by SEACOR Holdings are terminated and replicated within the Company. For the year ended
December 31, 2018
and
2017,
the Company incurred fees of
$4.5
million and
$3.3
million, respectively, for these services that were recognized as additional administrative and general expenses in the accompanying consolidated statements of loss.
 
Prior to the Spin-off, certain costs and expenses of the Company were borne by SEACOR Holdings and charged to the Company. These costs and expenses are included in both operating and administrative and general expenses in the accompanying consolidated statements of loss and are summarized as follows for the years ended
December 31 (
in thousands):
 
   
2018
   
2017
   
2016
 
Participation in SEACOR Holdings employee benefit plans
  $
    $
899
    $
3,702
 
Participation in SEACOR Holdings share award plans
   
     
8,383
     
4,588
 
Shared services allocation for administrative support
   
     
1,932
     
4,365
 
    $
    $
11,214
    $
12,655
 
 
 
SEACOR Holdings maintained self-insured health benefit plans for participating employees, including those of the Company, and charged the Company for its share of total plan costs incurred based on the percentage of its participating employees. Following the Spin-off, the Company
no
longer participates in SEACOR Holdings' self-insured health benefit plans;
     
 
certain officers and employees of the Company received compensation through participation in SEACOR Holdings' share award plans. The Company paid SEACOR Holdings for the fair value of its employees' share awards. 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
120,693
shares of SEACOR Marine restricted stock (see Note
15
), which is being amortized over the participants' remaining original vesting periods, and
$6.7
million on the accelerated vesting of SEACOR Holdings share awards, which was immediately recognized. In addition, the Company recognized and paid share award expense of
$1.7
million through the date of the Spin-off; and
     
 
prior to the Spin-off, SEACOR Holdings provided certain administrative support services to the Company under a shared services arrangement, including but
not
limited to payroll processing, information systems support, benefit plan management, cash disbursement support and treasury management. The Company was charged for its share of actual costs incurred generally based on volume processed or units supported.
 
Prior to the Spin-off, SEACOR Holdings incurred various corporate costs in connection with providing certain corporate services, including, but
not
limited to, executive oversight, risk management, legal, accounting and tax, and charged quarterly management fees to the Company in order to fund its corporate overhead to cover such costs. Total management fees charged by SEACOR Holdings to the Company included actual corporate costs incurred plus a mark-up and were generally allocated within the consolidated group using income-based performance metrics reported by an operating segment in relation to SEACOR Holdings' other operating segments. On
November 30, 2015,
contemporaneously with the issuance of the Convertible Senior Notes, the Company and SEACOR Holdings entered into an agreement for SEACOR Holdings to provide these services at a fixed rate of
$7.7
million per annum beginning
December 1, 2015
until the Spin-off. The Company's incurred management fees from SEACOR Holdings were settled on a monthly basis and reported as SEACOR Holdings management fees in the accompanying consolidated statements of loss.
 
           Charles Fabrikant (Non-Executive Chairman of SEACOR Marine), John Gellert (President, Chief Executive Officer and Director of SEACOR Marine), other members of the Company's management and board of directors and other unaffiliated individuals indirectly invested in OSV Partners by purchasing interests from
three
unaffiliated limited partners of OSV Partners who wished to dispose of their interests. During
2018,
OSV Partners raised
$7.5
million of cash:
$5
million in the form of
second
lien debt and
$2.5
million in the form of class A preferred interests.  As of
December 31, 2018,
limited liability companies controlled by management and directors of the Company had invested
$1.5
million, or
3.9%,
in the limited partner interests;
$0.3
million, or
5.0%,
in preferred interests;
$0.2
million, or
3.9%,
in the form of
second
lien debt; and  
$0.1
million, or
3.9%,
in the class A preferred interests of OSV Partners.  As of
December 31, 2018,
the investments of Messrs. Fabrikant and Gellert in such limited liability companies were
$0.3
million and
$0.4
million, respectively, representing
31.7%
of such limited liability companies' membership interests. The Company owns
30.4%
in the limited partner interests,
38.6%
in the preferred interests,
43.0%
of the
second
lien debt, and
43.0%
in the class A preferred interest of OSV Partners. The general partner of OSV Partners is a joint venture managed by the Company and an unaffiliated
third
-party.
 
On
January 25, 2019,
Seabulk Overseas Transport, Inc. ("Seabulk Overseas"), a wholly-owned subsidiary of SEACOR Marine, acquired a
6.25%
minority interest in Windcat Workboats that it did
not
previously own upon the exercise of a put options by
one
of the
two
minority owners, each of whom is a member (or an affiliate of a member) of management of Windcat Workboats, pursuant to the terms of a certain Subscription and Shareholders Agreement, as amended, for consideration of
£1,552,780
(
$2.0
million).  In addition, the other minority owner has exercised its put option to sell its
6.25%
minority interest in Windcat Workboats to the Company, and the parties have
not
yet closed the sale.  The
two
acquisitions will result in Seabulk Overseas owning
100%
of Windcat Workboats, a consolidated subsidiary which owns and operates the Company's crew transfer vessels that are primarily used to move personnel and supplies in Europe’s offshore wind markets.