UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2019 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 |
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47-2564547 |
(State or Other Jurisdiction of Incorporation or Organization) |
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(IRS Employer Identification No.) |
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12121 Wickchester Suite 500 |
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Houston, TX |
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77079 |
(Address of Principal Executive Offices) |
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(Zip Code) |
Registrant’s Telephone Number, Including Area Code: (346) 980-1700
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth 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 ☐ |
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Accelerated filer ☒ |
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Non-accelerated filer ☐
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Smaller reporting company ☐ |
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Emerging growth company ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Common Stock |
SMHI |
New York Stock Exchange (“NYSE”)
|
The total number of shares of common stock, par value $.01 per share, outstanding as of May 3, 2019 was 21,290,779. The Registrant has no other class of common stock outstanding.
SEACOR MARINE HOLDINGS INC.
Part I. |
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1 |
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Item 1. |
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1 |
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Condensed Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018 |
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2 |
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Condensed Consolidated Statements of Loss for the Three Months Ended March 31 2019 and 2018 |
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3 |
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4 |
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Condensed Consolidated Statement of Changes in Equity for the Three Months Ended March 31, 2019 |
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5 |
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Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2019 and 2018 |
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6 |
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7 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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22 |
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Item 3. |
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39 |
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Item 4. |
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39 |
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Part II. |
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41 |
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Item 1. |
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41 |
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Item 1A. |
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41 |
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Item 2. |
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41 |
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Item 3. |
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42 |
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Item 4. |
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42 |
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Item 5. |
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42 |
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Item 6. |
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43 |
i
1
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
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March 31, 2019 |
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December 31, 2018 |
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Current Assets: |
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Cash and cash equivalents |
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$ |
63,855 |
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$ |
95,195 |
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Restricted cash |
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2,240 |
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1,657 |
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Receivables: |
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Trade, net of allowance for doubtful accounts of $455 and $860 in 2019 and 2018, respectively |
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67,900 |
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64,125 |
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Other |
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9,078 |
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12,082 |
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Inventories |
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4,139 |
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3,443 |
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Prepaid expenses and other |
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4,597 |
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2,530 |
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Total current assets |
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151,809 |
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179,032 |
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Property and Equipment: |
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Historical cost |
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1,294,945 |
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1,242,733 |
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Accumulated depreciation |
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(579,441 |
) |
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(561,272 |
) |
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715,504 |
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681,461 |
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Construction in progress |
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63,301 |
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88,918 |
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Net property and equipment |
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778,805 |
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770,379 |
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Right-of-Use Asset - Operating Leases |
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30,503 |
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— |
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Investments, at Equity, and Advances to 50% or Less Owned Companies |
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119,520 |
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121,773 |
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Construction Reserve Funds |
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28,109 |
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28,061 |
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Other Assets |
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3,603 |
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3,690 |
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$ |
1,112,349 |
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$ |
1,102,935 |
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LIABILITIES AND EQUITY |
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Current Liabilities: |
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Current portion of operating lease liabilities |
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$ |
17,918 |
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$ |
- |
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Current portion of long-term debt |
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17,426 |
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16,812 |
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Accounts payable and accrued expenses |
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27,263 |
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19,370 |
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Due to SEACOR Holdings |
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|
535 |
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452 |
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Accrued wages and benefits |
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4,280 |
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5,025 |
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Accrued income taxes |
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2,650 |
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1,917 |
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Accrued capital, repair and maintenance expenditures |
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20,817 |
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18,886 |
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Deferred revenues |
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3,601 |
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1,327 |
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Other current liabilities |
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16,219 |
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19,828 |
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Total current liabilities |
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110,709 |
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83,617 |
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Long-Term Operating Lease Liabilities |
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19,851 |
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— |
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Long-Term Debt |
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384,344 |
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387,854 |
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Conversion Option Liability on Convertible Senior Notes |
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6,201 |
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5,276 |
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Deferred Income Taxes |
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41,831 |
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44,682 |
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Deferred Gains and Other Liabilities |
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7,290 |
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26,571 |
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Total liabilities |
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570,226 |
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548,000 |
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Equity: |
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SEACOR Marine Holdings Inc. stockholders’ equity: |
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Common stock, $.01 par value, 60,000,000 shares authorized; 21,104,837 and 20,443,215 shares issued in 2019 and 2018, respectively |
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211 |
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204 |
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Additional paid-in capital |
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422,830 |
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415,372 |
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Retained earnings |
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111,701 |
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126,834 |
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Shares held in treasury of 25,558 and 4,007, respectively, at cost |
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(373 |
) |
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(91 |
) |
Accumulated other comprehensive loss, net of tax |
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(16,812 |
) |
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(16,788 |
) |
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517,557 |
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525,531 |
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Noncontrolling interests in subsidiaries |
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24,566 |
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29,404 |
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Total equity |
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542,123 |
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554,935 |
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$ |
1,112,349 |
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$ |
1,102,935 |
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The accompanying notes are an integral part of these condensed consolidated financial statements and should be read in conjunction herewith.
2
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF LOSS
(in thousands, except share data)
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Three Months Ended March 31, |
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2019 |
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2018 |
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Operating Revenues |
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$ |
56,249 |
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$ |
51,721 |
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Costs and Expenses: |
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Operating |
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44,277 |
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38,348 |
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Administrative and general |
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12,000 |
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12,374 |
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Lease expense |
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4,148 |
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3,258 |
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Depreciation and amortization |
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17,193 |
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19,512 |
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77,618 |
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73,492 |
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Gains (Losses) on Asset Dispositions and Impairments, Net |
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359 |
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(2,643 |
) |
Operating Loss |
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(21,010 |
) |
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(24,414 |
) |
Other Income (Expense): |
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Interest income |
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357 |
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216 |
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Interest expense |
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(7,735 |
) |
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(6,133 |
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SEACOR Holdings guarantee fees |
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(29 |
) |
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(12 |
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Derivative losses, net |
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(925 |
) |
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(11,516 |
) |
Foreign currency gains, net |
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635 |
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139 |
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(7,697 |
) |
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(17,306 |
) |
Loss Before Income Tax Benefit and Equity in Earnings of 50% or Less Owned Companies |
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(28,707 |
) |
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(41,720 |
) |
Income Tax Benefit |
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(3,831 |
) |
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(9,824 |
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Loss Before Equity in Earnings of 50% or Less Owned Companies |
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(24,876 |
) |
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(31,896 |
) |
Equity in (Losses) Earnings of 50% or Less Owned Companies |
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(3,397 |
) |
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208 |
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Net Loss |
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(28,273 |
) |
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(31,688 |
) |
Net Loss attributable to Noncontrolling Interests in Subsidiaries |
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(2,724 |
) |
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(2,855 |
) |
Net Loss attributable to SEACOR Marine Holdings Inc. |
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$ |
(25,549 |
) |
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$ |
(28,833 |
) |
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Basic and Diluted Loss Per Common Share and Warrants of SEACOR Marine Holdings Inc. |
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$ |
(1.11 |
) |
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$ |
(1.64 |
) |
Weighted Average Common Shares and Warrants Outstanding: |
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Basic and Diluted |
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23,090,137 |
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17,571,490 |
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The accompanying notes are an integral part of these condensed consolidated financial statements and should be read in conjunction herewith.
3
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
|
Three Months Ended March 31, |
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2019 |
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2018 |
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Net Loss |
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$ |
(28,273 |
) |
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$ |
(31,688 |
) |
Other Comprehensive Loss: |
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Foreign currency translation gains |
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|
875 |
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|
1,912 |
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Derivative (losses) gains on cash flow hedges |
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(710 |
) |
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|
131 |
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Reclassification of derivative gains on cash flow hedges to interest expense |
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71 |
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1 |
|
Reclassification of derivative (losses) gains on cash flow hedges to equity in earnings of 50% or less owned companies |
|
|
(260 |
) |
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|
129 |
|
|
|
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(24 |
) |
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|
2,173 |
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Income tax benefit |
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— |
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(27 |
) |
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(24 |
) |
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|
2,146 |
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Comprehensive Loss |
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(28,297 |
) |
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(29,542 |
) |
Comprehensive Loss attributable to Noncontrolling Interests in Subsidiaries |
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|
(2,724 |
) |
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|
(2,778 |
) |
Comprehensive Loss attributable to SEACOR Marine Holdings Inc. |
|
$ |
(25,573 |
) |
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$ |
(26,764 |
) |
The accompanying notes are an integral part of these condensed consolidated financial statements and should be read in conjunction herewith.
4
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(in thousands)
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Shares of Common Stock Outstanding |
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Common Stock |
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Additional Paid-In Capital |
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Shares Held in Treasury |
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Treasury Stock |
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Retained Earnings |
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Accumulated Other Comprehensive Loss |
|
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Non- Controlling Interests In Subsidiaries |
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Total Equity |
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|||||||||
December 31, 2017 |
|
|
17,675,356 |
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|
$ |
177 |
|
|
$ |
303,996 |
|
|
|
— |
|
|
|
— |
|
|
$ |
216,511 |
|
|
$ |
(12,493 |
) |
|
$ |
14,975 |
|
|
$ |
523,166 |
|
Impact of adoption of new accounting standard for income tax effects |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(12,069 |
) |
|
|
— |
|
|
|
— |
|
|
|
(12,069 |
) |
December 31, 2017 |
|
|
17,675,356 |
|
|
|
177 |
|
|
|
303,996 |
|
|
|
- |
|
|
|
- |
|
|
|
204,442 |
|
|
|
(12,493 |
) |
|
|
14,975 |
|
|
|
511,097 |
|
Issuance of Common Stock |
|
|
138,399 |
|
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|
1 |
|
|
|
1,792 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,793 |
|
Amortization of employee share awards |
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(27,186 |
) |
|
|
— |
|
|
|
476 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
476 |
|
Acquisition of consolidated joint venture |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(12,037 |
) |
|
|
(12,037 |
) |
Issuance of noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
375 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
31,010 |
|
|
|
31,385 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(28,833 |
) |
|
|
— |
|
|
|
(2,855 |
) |
|
|
(31,688 |
) |
Other comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,069 |
|
|
|
77 |
|
|
|
2,146 |
|
March 31, 2018 |
|
|
17,786,569 |
|
|
$ |
178 |
|
|
$ |
306,639 |
|
|
|
— |
|
|
|
— |
|
|
$ |
175,609 |
|
|
$ |
(10,424 |
) |
|
$ |
31,170 |
|
|
$ |
503,172 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018 |
|
|
20,439,208 |
|
|
$ |
204 |
|
|
$ |
415,372 |
|
|
|
4,007 |
|
|
$ |
(91 |
) |
|
$ |
126,834 |
|
|
$ |
(16,788 |
) |
|
$ |
29,404 |
|
|
$ |
554,935 |
|
Impact of adoption of new accounting standard for leases |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
10,416 |
|
|
|
— |
|
|
|
— |
|
|
|
10,416 |
|
December 31, 2018 |
|
|
20,439,208 |
|
|
|
204 |
|
|
|
415,372 |
|
|
|
4,007 |
|
|
|
(91 |
) |
|
|
137,250 |
|
|
|
(16,788 |
) |
|
|
29,404 |
|
|
|
565,351 |
|
Issuance of Common Stock |
|
|
653,872 |
|
|
|
7 |
|
|
|
6,589 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,596 |
|
Amortization of employee share awards |
|
|
— |
|
|
|
— |
|
|
|
776 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
776 |
|
Exercise of options |
|
|
8,750 |
|
|
|
— |
|
|
|
108 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
108 |
|
Restricted stock vesting |
|
|
(21,551 |
) |
|
|
— |
|
|
|
— |
|
|
|
21,551 |
|
|
|
(282 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(282 |
) |
Cancellation of employee share awards |
|
|
(1,000 |
) |
|
|
— |
|
|
|
(15 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(15 |
) |
Acquisition of consolidated joint venture |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,114 |
) |
|
|
(2,114 |
) |
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(25,549 |
) |
|
|
— |
|
|
|
(2,724 |
) |
|
|
(28,273 |
) |
Other comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(24 |
) |
|
|
— |
|
|
|
(24 |
) |
March 31, 2019 |
|
|
21,079,279 |
|
|
$ |
211 |
|
|
$ |
422,830 |
|
|
|
25,558 |
|
|
$ |
(373 |
) |
|
$ |
111,701 |
|
|
$ |
(16,812 |
) |
|
$ |
24,566 |
|
|
$ |
542,123 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements and should be read in conjunction herewith.
5
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
|
Three Months Ended March 31, |
|
|||||
|
|
2019 |
|
|
2018 |
|
||
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
Net Loss |
|
$ |
(28,273 |
) |
|
$ |
(31,688 |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
17,193 |
|
|
|
19,512 |
|
Deferred financing costs amortization |
|
|
320 |
|
|
|
237 |
|
Option amortization |
|
|
— |
|
|
|
218 |
|
Restricted stock amortization |
|
|
761 |
|
|
258 |
|
|
Restricted stock vesting |
|
|
(282 |
) |
|
|
— |
|
Debt discount amortization |
|
|
1,373 |
|
|
|
1,494 |
|
Amortization of deferred gains against charter expense |
|
|
— |
|
|
|
(2,009 |
) |
Bad debt expense |
|
|
(404 |
) |
|
|
(26 |
) |
(Gain) loss from equipment sales, retirements or impairments |
|
|
(359 |
) |
|
|
2,643 |
|
Derivative losses |
|
|
925 |
|
|
|
11,516 |
|
Cash settlement on derivative transactions, net |
|
|
(75 |
) |
|
|
(129 |
) |
Currency gains |
|
|
(635 |
) |
|
|
(139 |
) |
Deferred income taxes |
|
|
(5,160 |
) |
|
|
(11,286 |
) |
Equity (earnings) losses |
|
|
3,397 |
|
|
|
(208 |
) |
Dividends received from equity investees |
|
|
400 |
|
|
|
— |
|
Changes in Operating Assets and Liabilities: |
|
|
|
|
|
|
|
|
Accounts receivables |
|
|
(1,686 |
) |
|
|
(3,342 |
) |
Other assets |
|
|
(2,690 |
) |
|
|
(346 |
) |
Accounts payable and accrued liabilities |
|
|
13,228 |
|
|
|
1,786 |
|
Net cash used in operating activities |
|
|
(1,967 |
) |
|
|
(11,509 |
) |
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
|
(21,183 |
) |
|
|
(8,557 |
) |
Proceeds from disposition of property and equipment |
|
|
552 |
|
|
|
282 |
|
Net change in construction reserve fund |
|
|
(48 |
) |
|
|
— |
|
Investments in and advances to 50% or less owned companies |
|
|
(1,951 |
) |
|
|
(19,950 |
) |
Return of investments and advances from 50% or less owned companies |
|
|
— |
|
|
|
99 |
|
Net cash used in investing activities |
|
|
(22,630 |
) |
|
|
(28,126 |
) |
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
Payments on long-term debt |
|
|
(4,361 |
) |
|
|
(28,807 |
) |
Proceeds from issuance of long-term debt, net of issue costs |
|
|
— |
|
|
|
18,471 |
|
Purchase of subsidiary shares from noncontrolling interests |
|
|
(3,392 |
) |
|
|
— |
|
Proceeds from exercise of stock options and Warrants |
|
|
108 |
|
|
|
— |
|
Issuance of stock |
|
|
— |
|
|
|
1,793 |
|
Net cash used in financing activities |
|
|
(7,645 |
) |
|
|
(8,543 |
) |
Effects of Exchange Rate Changes on Cash and Cash Equivalents |
|
|
1,485 |
|
|
|
682 |
|
Net Decrease in Cash, Cash Equivalents and Restricted Cash |
|
|
(30,757 |
) |
|
|
(47,496 |
) |
Cash, Restricted Cash and Cash Equivalents, Beginning of Period |
|
|
96,852 |
|
|
|
112,551 |
|
Cash, Restricted Cash and Cash Equivalents, End of Period |
|
$ |
66,095 |
|
|
$ |
65,055 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements and should be read in conjunction herewith.
6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. |
BASIS OF PRESENTATION AND ACCOUNTING POLICIES |
The condensed consolidated financial statements include the accounts of SEACOR Marine Holdings Inc. and its consolidated subsidiaries (the “Company”). In the opinion of management, all adjustments (consisting of normal recurring adjustments) have been made to fairly present the unaudited condensed consolidated financial statements for the periods indicated. Results of operations for the interim periods presented are not necessarily indicative of operating results for the full year or any future periods.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the Company’s financial statements and related notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2018.
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.
Recently Adopted Accounting Standards.
On February 25, 2016, the Financial Accounting Standards Board (“FASB”) issued a comprehensive new leasing standard, ASC 842, meant to improve transparency and comparability among companies by requiring lessees to recognize a lease liability and a corresponding lease asset for virtually all lease contracts. It also requires additional disclosures about leasing arrangements. The Company adopted the new standard on January 1, 2019 and applied the transition provisions of the new standard with recognition of a cumulative-effect adjustment to the opening balance of retained earnings and therefore the Company was not required to recast previously issued financial statements. The Company elected the available practical expedients permitted under the guidance including the ability to carry forward the existing lease classification, the option to not separate lease and non-lease components in calculating the right-of-use assets and corresponding lease liabilities and to not apply the recognition requirements of Topic 842 to short-term leases (leases that have a duration of twelve months or less at lease inception). For some leases, it was not possible for the Company to determine the interest rate implicit in each of its operating leases and therefore used the Company’s incremental borrowing rate in calculating operating lease right-of-use assets and lease liabilities. The Company included renewal options that were reasonably certain of being exercised in determining the lease term. Upon adoption, the Company recorded $33.7 million of right-of-use assets, $31.9 million in lease liabilities, and a cumulative-effect adjustment to the opening balance of retained earnings of $1.7 million for certain of the Company’s equipment, office and land leases. In addition, unamortized deferred gains for four vessels previously accounted for under sale-leaseback arrangements of $8.7 million, ($11.0 million deferred gains net of $2.3 million deferred taxes), were fully recognized as an adjustment to the opening balance of retained earnings.
In February 2018, the FASB issued ASU 2018-02, “Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” (“ASU 2018-02”). The amendments in ASU 2018-02 permit a reclassification from Accumulated Other Comprehensive Income (“AOCI”) to retained earnings for stranded tax effects resulting from the Tax Cuts & Jobs Act (“TCJA”). Consequently, the amendments eliminate the stranded tax effects resulting from the Tax Act and will improve the usefulness of information reported to financial statement users. ASU 2018-02 is effective for the Company for annual and interim reporting periods beginning after December 15, 2018. For the period ending March 31, 2019, an election has not been made to reclassify the income tax effects of the TCJA from AOCI to retained earnings.
7
In June 2018, the FASB issued ASU 2018-07, 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 adoption of the new standard by the Company did not have a material impact on its consolidated financial position or its results of operations and cash flows.
Critical Accounting Policies.
Revenue Recognition. Revenue is recognized when (or as) the Company transfers promised goods or services to its customers in amounts that reflect the consideration to which the Company expects to be entitled to in exchange for those goods or services, which occurs when (or as) the Company satisfies its contractual obligations and transfers over control of the promised goods or services to its customers. Costs to obtain or fulfill a contract are expensed as incurred.
Lease Revenues. The Company’s lease revenues are primarily from time charters and bareboat charters that are recognized ratably over the lease term as services are provided, typically on a per day basis. The charterer will take the vessel on hire for a specific period of time, use the vessel to move cargo, people or equipment and will pay the Company the agreed upon rate per day. Under a time charter the Company provides a vessel to a customer for a set term and the Company 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, including fuel, and the risk of operation (see Note 14).
Revenues from Customers of Management Servicers. 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 manager, the Company undertakes to use its best endeavors to provide the agreed management services as agents for, and on behalf of the ship 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 the agreed upon management services. 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 have a duration of one to three years and are typically billed on a monthly basis. The Company satisfies its performance obligation over the term of the contract, and therefore recognizes revenue over the term of the contract while related costs are expensed as incurred (see Note 14).
Revenue that does not meet the aforementioned criteria is deferred until the criteria is met and are considered contract liabilities. Contract liabilities which are included in other current liabilities in the accompanying condensed consolidated balance sheets, for the three months ended March 31 were as follows (in thousands):
|
|
2019 |
|
|
2018 |
|
||
|
$ |
1,327 |
|
|
$ |
10,104 |
|
|
Revenues deferred during the period |
|
|
3,409 |
|
|
|
875 |
|
Revenues recognized during the period |
|
|
(1,135 |
) |
|
|
(1,550 |
) |
Balance at end of period |
|
$ |
3,601 |
|
|
$ |
9,429 |
|
As of March 31, 2019, contract liabilities include $2.0 million related to the time charter of an offshore support vessel to a customer for which collection was not reasonably assured. The Company will recognize revenues when collected or when collection is reasonably assured. All costs and expenses related to this charter were recognized as incurred.
As of March 31, 2019, the Company has deferred $1.4 million received as reimbursement for upgrades of a vessel and deferred reservation fees. The amount will be recognized in revenues over time, commencing with the start of the new time charter agreement for the vessel.
8
The remaining balance of $0.2 million as of March 31, 2019 is comprised of contract liabilities to two customers for which collection is not reasonably assured.
Property and Equipment. Equipment, stated at cost, is depreciated using the straight-line method over the estimated useful life of the asset to an estimated salvage value. With respect to each class of asset, the estimated useful life is based upon a newly built asset being placed into service and represents the time period beyond which it is typically not justifiable for the Company to continue to operate the asset in the same or similar manner. From time to time, the Company may acquire older assets that have already exceeded the Company’s useful life policy, in which case the Company depreciates such assets based on its best estimate of remaining useful life, typically the next survey or certification date.
As of March 31, 2019, the estimated useful life (in years) of each of the Company’s major categories of new equipment was as follows:
Offshore Support Vessels: |
|
|
Crew transfer vessels |
|
10 |
All other offshore support vessels (excluding crew transfer vessels) |
|
20 |
Equipment maintenance and repair costs and the costs of routine overhauls, drydockings and inspections performed on vessels and equipment are charged to operating expense as incurred. Expenditures that extend the useful life or improve the marketing and commercial characteristics of equipment as well as major renewals and improvements to other properties are capitalized.
Certain interest costs incurred during the construction of equipment are capitalized as part of the assets’ carrying values and are amortized over such assets’ estimated useful lives. During the three months ended March 31, 2019, capitalized interest totaled $0.4 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 undiscounted cash flows or appraisals, as appropriate. During the three months ended March 31, 2019, the Company did not recognize any impairment charges related to its long-lived assets. During the three months ended March 31, 2018, the Company recognized $2.9 million of impairment charges related to four anchor-handling vessels removed from service and adjusted to scrap value.
Impairment of 50% or Less Owned Companies. Investments in 50% or less owned companies are reviewed periodically to assess whether there is an other-than-temporary decline in the carrying value of the investment. In its evaluation, the Company considers, among other items, recent and expected financial performance and returns, impairments recorded by the investee and the capital structure of the investee. When the Company determines the estimated fair value of an investment is below carrying value and the decline is other-than-temporary, the investment is written down to its estimated fair value. Actual results may vary from the Company’s estimates due to the uncertainty regarding projected financial performance, the severity and expected duration of declines in value and the available liquidity in the capital markets to support the continuing operations of the investee, among other factors. Although the Company believes its assumptions and estimates are reasonable, the investee’s actual performance compared with the estimates could produce different results and lead to additional impairment charges in future periods. During the three months ended March 31, 2019, the Company did not recognize any impairment charges related to its 50% or less owned companies. During the
9
three months ended March 31, 2018, the Company recognized impairment charges of $1.2 million related to one of its 50% or less owned companies which the Company believed was unable to meet all of its liabilities.
Income Taxes. During the three months ended March 31, 2019, the Company's effective income tax rate of 13.4% was primarily due to taxes provided on income attributable to noncontrolling interests, foreign sourced income not subject to U.S. income taxes, and foreign taxes not creditable against U.S. income taxes. During the three months ended March 31, 2018, the Company’s effective income tax rate of 23.5% was primarily due to taxes not provided on income attributable to noncontrolling interests, foreign sourced income not subject to U.S. income taxes, and a reversal of an unrecognized tax benefit.
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. In 2018, 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 and were amortized in operating expenses as a reduction to rental expense. The new lease accounting pronouncement which was adopted on January 1, 2019 required the recognition of unamortized gains as a cumulative-effect adjustment to the opening balance of retained earnings.
Deferred gain activity related to these transactions for the three months ended March 31 was as follows (in thousands):
|
|
2019 |
|
|
2018 |
|
||
|
$ |
11,819 |
|
|
$ |
25,006 |
|
|
Amortization of deferred gains included in operating expenses as a reduction to rental expense |
|
|
— |
|
|
|
(2,009 |
) |
Impact of adoption of new accounting standard |
|
|
(11,026 |
) |
|
|
— |
|
Other adjustments |
|
|
— |
|
|
|
(25 |
) |
Balance at end of period |
|
$ |
793 |
|
|
$ |
22,972 |
|
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, 2018 |
|
$ |
(15,472 |
) |
|
$ |
(1,316 |
) |
|
$ |
(16,788 |
) |
|
$ |
(1,445 |
) |
|
$ |
(11 |
) |
|
|
|
|
Other comprehensive income (loss) |
|
|
875 |
|
|
|
(899 |
) |
|
|
(24 |
) |
|
|
— |
|
|
|
— |
|
|
$ |
(24 |
) |
Three Months Ended March 31, 2019 |
|
$ |
(14,597 |
) |
|
$ |
(2,215 |
) |
|
$ |
(16,812 |
) |
|
$ |
(1,445 |
) |
|
$ |
(11 |
) |
|