smhi-10q_20200331.htm

 

 

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, 2020               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.)

 

 

 

12121 Wickchester Suite 500, Houston, TX

 

77079

 

(Address of Principal Executive Offices)

 

(Zip Code)

 

 

 

 

Registrant’s Telephone Number, Including Area Code: (346) 980-1700

 

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, par value $0.01 per share

SMHI

New York Stock Exchange

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  

 

Accelerated filer  

 

Non-accelerated filer 

 

 

Smaller reporting company  

 

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  

 

  

 

The total number of shares of common stock, par value $.01 per share (“Common Stock”), outstanding as of May 4, 2020 was 23,027,225. The Registrant has no other class of common stock outstanding.

i


SEACOR MARINE HOLDINGS INC.

Table of Contents

 

 

 

Part I.

 

Financial Information

 

1

 

 

 

 

 

 

 

 

Item 1.

Financial Statements (Unaudited)

 

1

 

 

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019

 

1

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Loss for the Three Months Ended March 31, 2020 and 2019

 

2

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2020 and 2019

 

3

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Changes in Equity for the Three Months Ended March 31, 2020 and 2019

 

4

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019

 

5

 

 

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

6

 

 

 

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

23

 

 

 

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

40

 

 

 

 

 

 

 

 

Item 4.

Controls and Procedures

 

40

 

 

 

 

 

 

Part II.

 

Other Information

 

43

 

 

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

43

 

 

 

 

 

 

 

 

Item 1A.

Risk Factors

 

43

 

 

 

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

45

 

 

 

 

 

 

 

 

Item 3.

Default Upon Senior Securities

 

45

 

 

 

 

 

 

 

 

Item 4.

Mine Safety Disclosures

 

45

 

 

 

 

 

 

 

 

Item 5.

Other Information

 

45

 

 

 

 

 

 

 

 

Item 6.

Exhibits

 

46

 

 

i


PART I—FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

SEACOR MARINE HOLDINGS INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

 

 

 

March 31, 2020

 

 

December 31, 2019

 

ASSETS

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

69,220

 

 

$

83,943

 

Restricted cash

 

 

3,353

 

 

 

3,104

 

Receivables:

 

 

 

 

 

 

 

 

Trade, net of allowance for credit loss accounts of $375 and $455 in 2020 and 2019, respectively

 

 

48,192

 

 

 

49,128

 

Other

 

 

27,872

 

 

 

18,531

 

Inventories

 

 

1,575

 

 

 

1,228

 

Prepaid expenses and other

 

 

2,653

 

 

 

2,612

 

Total current assets

 

 

152,865

 

 

 

158,546

 

Property and Equipment:

 

 

 

 

 

 

 

 

Historical cost

 

 

930,264

 

 

 

976,978

 

Accumulated depreciation

 

 

(312,911

)

 

 

(358,962

)

 

 

 

617,353

 

 

 

618,016

 

Construction in progress

 

 

55,302

 

 

 

74,344

 

Net property and equipment

 

 

672,655

 

 

 

692,360

 

Right-of-Use Asset - Operating Leases

 

 

8,990

 

 

 

17,313

 

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

 

 

125,010

 

 

 

124,680

 

Construction Reserve Funds

 

 

3,745

 

 

 

12,893

 

Other Assets

 

 

3,270

 

 

 

3,401

 

 

 

$

966,535

 

 

$

1,009,193

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Current portion of operating lease liabilities

 

 

13,359

 

 

$

15,099

 

Current portion of long-term debt:

 

 

 

 

 

 

 

 

Recourse

 

 

36,278

 

 

 

17,802

 

Non-recourse

 

 

806

 

 

 

 

Accounts payable and accrued expenses

 

 

32,023

 

 

 

25,691

 

Due to SEACOR Holdings

 

 

66

 

 

 

74

 

Accrued wages and benefits

 

 

1,274

 

 

 

1,832

 

Accrued interest

 

 

1,835

 

 

 

731

 

Accrued income taxes

 

 

1,143

 

 

 

 

Deferred revenue and unearned revenue

 

 

3,787

 

 

 

5,327

 

Accrued capital, repair and maintenance expenditures

 

 

10,577

 

 

 

15,997

 

Accrued insurance deductibles and premiums

 

 

2,921

 

 

 

3,564

 

Accrued professional fees

 

 

652

 

 

 

871

 

Derivatives

 

 

4,893

 

 

 

3,009

 

Other current liabilities

 

 

2,867

 

 

 

4,820

 

Total current liabilities

 

 

112,481

 

 

 

94,817

 

Long-Term Operating Lease Liabilities

 

 

7,859

 

 

 

9,822

 

Long-Term Debt:

 

 

 

 

 

 

 

 

Recourse

 

 

217,733

 

 

 

239,939

 

Non-recourse

 

 

138,996

 

 

 

140,312

 

Conversion Option Liability on Convertible Senior Notes

 

 

91

 

 

 

5,205

 

Deferred Income Taxes

 

 

26,113

 

 

 

33,905

 

Deferred Gains and Other Liabilities

 

 

7,951

 

 

 

6,269

 

Total liabilities

 

 

511,224

 

 

 

530,269

 

Equity:

 

 

 

 

 

 

 

 

SEACOR Marine Holdings Inc. stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock, $.01 par value, 60,000,000 shares authorized; 23,099,127 and 21,928,674 shares issued in 2020 and 2019, respectively

 

 

231

 

 

 

219

 

Additional paid-in capital

 

 

447,425

 

 

 

429,318

 

Retained earnings

 

 

11,131

 

 

 

27,076

 

Shares held in treasury of 71,902 and 47,185, respectively, at cost

 

 

(844

)

 

 

(669

)

Accumulated other comprehensive loss, net of tax

 

 

(2,971

)

 

 

1,548

 

 

 

 

454,972

 

 

 

457,492

 

Noncontrolling interests in subsidiaries

 

 

339

 

 

 

21,432

 

Total equity

 

 

455,311

 

 

 

478,924

 

 

 

$

966,535

 

 

$

1,009,193

 

 

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.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF LOSS

(in thousands, except share data)

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Operating Revenues

 

$

41,743

 

 

$

44,910

 

Costs and Expenses:

 

 

 

 

 

 

 

 

Operating

 

 

24,620

 

 

 

35,166

 

Administrative and general

 

 

10,765

 

 

 

10,812

 

Lease expense

 

 

3,407

 

 

 

4,137

 

Depreciation and amortization

 

 

15,001

 

 

 

16,097

 

 

 

 

53,793

 

 

 

66,212

 

Gain (loss) on Asset Dispositions and Impairments, Net

 

 

(12,572

)

 

 

268

 

Operating Loss

 

 

(24,622

)

 

 

(21,034

)

Other Income (Expense):

 

 

 

 

 

 

 

 

Interest income

 

 

676

 

 

 

354

 

Interest expense

 

 

(7,638

)

 

 

(7,664

)

SEACOR Holdings guarantee fees

 

 

(16

)

 

 

(29

)

Derivative gains (losses), net

 

 

5,114

 

 

 

(925

)

Foreign currency gains, net

 

 

65

 

 

 

670

 

 

 

 

(1,799

)

 

 

(7,594

)

Loss from Continuing Operations Before Income Tax Benefit and Equity in Earnings of 50% or Less Owned Companies

 

 

(26,421

)

 

 

(28,628

)

Income Tax Benefit

 

 

(6,668

)

 

 

(3,831

)

Loss from Continuing Operations Before Equity in Earnings of 50% or Less Owned Companies

 

 

(19,753

)

 

 

(24,797

)

Equity in Losses of 50% or Less Owned Companies

 

 

(239

)

 

 

(3,476

)

Loss from Continuing Operations

 

 

(19,992

)

 

 

(28,273

)

(Loss) Income on Discontinued Operations, Net of Tax (see Note 15)

 

 

 

 

 

 

Net Loss

 

 

(19,992

)

 

 

(28,273

)

Net Loss attributable to Noncontrolling Interests in Subsidiaries

 

 

(4,047

)

 

 

(2,724

)

Net Loss attributable to SEACOR Marine Holdings Inc.

 

$

(15,945

)

 

$

(25,549

)

 

 

 

 

 

 

 

 

 

Basic and Diluted Loss Per Common Share and Warrants of SEACOR Marine Holdings Inc.

 

 

 

 

 

 

 

 

Continuing operations

 

$

(0.66

)

 

$

(1.11

)

Discontinued operations

 

 

 

 

 

 

 

 

$

(0.66

)

 

$

(1.11

)

 

 

 

 

 

 

 

 

 

Weighted Average Common Shares and Warrants Outstanding:

 

 

 

 

 

 

 

 

Basic and diluted shares

 

 

23,989,029

 

 

 

23,090,137

 

 

 

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.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

 

 

 

Three Months Ended

 

 

 

 

March 31,

 

 

 

 

2020

 

 

2019

 

 

Net Loss

 

$

(19,992

)

 

$

(28,273

)

 

Other Comprehensive Loss:

 

 

 

 

 

 

 

 

 

Foreign currency translation gains (losses)

 

 

(2,528

)

 

 

875

 

 

Derivative losses on cash flow hedges

 

 

(2,038

)

 

 

(710

)

 

Reclassification of derivative gains on cash flow hedges to interest expense

 

 

196

 

 

 

71

 

 

Reclassification of derivative losses on cash flow hedges to equity in earnings

of 50% or less owned companies

 

 

(149

)

 

 

(260

)

 

 

 

 

(4,519

)

 

 

(24

)

 

Income tax benefit (expense)

 

 

 

 

 

 

 

 

 

 

(4,519

)

 

 

(24

)

 

Comprehensive Loss

 

 

(24,511

)

 

 

(28,297

)

 

Comprehensive Loss attributable to Noncontrolling Interests in Subsidiaries

 

 

(4,047

)

 

 

(2,724

)

 

Comprehensive Loss attributable to SEACOR Marine Holdings Inc.

 

$

(20,464

)

 

$

(25,573

)

 

 

 

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.

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(in thousands)

 

 

 

Shares of

Common

Stock

Outstanding

 

 

Common

Stock

 

 

Additional

Paid-In

Capital

 

 

Shares

Held in

Treasury

 

 

Treasury

Stock

 

 

Retained

Earnings

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Non-

Controlling

Interests In

Subsidiaries

 

 

Total

Equity

 

For the three months ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

21,881,487

 

 

$

219

 

 

$

429,318

 

 

 

47,187

 

 

$

(669

)

 

$

27,076

 

 

$

1,548

 

 

$

21,432

 

 

$

478,924

 

Issuance of Common Stock

 

 

900,000

 

 

 

9

 

 

 

3,349

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,358

 

Cancellation of employee share awards

 

 

(1,497

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock grants

 

 

271,950

 

 

 

3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 

Amortization of employee share awards

 

 

 

 

 

 

 

 

1,069

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,069

 

Restricted stock vesting

 

 

(24,715

)

 

 

 

 

 

 

 

 

24,715

 

 

 

(175

)

 

 

 

 

 

 

 

 

 

 

 

(175

)

Acquisition of consolidated joint venture

 

 

 

 

 

 

 

 

13,689

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(17,046

)

 

 

(3,357

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15,945

)

 

 

 

 

 

(4,047

)

 

 

(19,992

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,519

)

 

 

 

 

 

(4,519

)

March 31, 2020

 

 

23,027,225

 

 

$

231

 

 

$

447,425

 

 

 

71,902

 

 

$

(844

)

 

$

11,131

 

 

$

(2,971

)

 

$

339

 

 

$

455,311

 

 

 

 

Shares of

Common

Stock

Outstanding

 

 

Common

Stock

 

 

Additional

Paid-In

Capital

 

 

Shares

Held in

Treasury

 

 

Treasury

Stock

 

 

Retained

Earnings

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Non-

Controlling

Interests In

Subsidiaries

 

 

Total

Equity

 

For the three months ended March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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.

4


SEACOR MARINE HOLDINGS INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Cash Flows from Continuing Operating Activities:

 

 

 

 

 

 

 

 

Net Loss

 

$

(19,992

)

 

$

(28,273

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

15,001

 

 

 

16,097

 

Deferred financing costs amortization

 

 

312

 

 

 

320

 

Restricted stock amortization

 

 

1,069

 

 

 

761

 

Restricted stock vesting

 

 

(175

)

 

 

(282

)

Debt discount amortization

 

 

1,478

 

 

 

1,373

 

Bad debt recoveries

 

 

(80

)

 

 

(404

)

Loss (gain) from equipment sales, retirements or impairments

 

 

12,572

 

 

 

(268

)

Derivative (gains) losses

 

 

(5,114

)

 

 

925

 

Cash settlement on derivative transactions, net

 

 

(214

)

 

 

(75

)

Currency losses

 

 

(65

)

 

 

(670

)

Deferred income taxes

 

 

(7,768

)

 

 

(5,160

)

Equity losses

 

 

239

 

 

 

3,476

 

Dividends received from equity investees

 

 

 

 

 

400

 

Changes in Operating Assets and Liabilities:

 

 

 

 

 

 

 

 

Accounts receivables

 

 

(10,424

)

 

 

(4,275

)

Other assets

 

 

(855

)

 

 

(2,791

)

Accounts payable and accrued liabilities

 

 

5,908

 

 

 

13,991

 

Net cash used in operating activities

 

 

(8,108

)

 

 

(4,855

)

Cash Flows from Continuing Investing Activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(11,244

)

 

 

(20,633

)

Proceeds from disposition of property and equipment

 

 

3,105

 

 

 

378

 

Net change in construction reserve fund

 

 

9,148

 

 

 

(48

)

Investments in and advances to 50% or less owned companies

 

 

(245

)

 

 

(1,951

)

Net cash provided by (used in) investing activities

 

 

764

 

 

 

(22,254

)

Cash Flows from Continuing Financing Activities:

 

 

 

 

 

 

 

 

Payments on long-term debt

 

 

(5,222

)

 

 

(4,361

)

Purchase of subsidiary shares from noncontrolling interests

 

 

 

 

 

(3,392

)

Proceeds from exercise of stock options and Warrants

 

 

 

 

 

108

 

Net cash used in financing activities

 

 

(5,222

)

 

 

(7,645

)

Effects of Exchange Rate Changes on Cash and Cash Equivalents

 

 

(1,908

)

 

 

873

 

Net Decrease in Cash, Restricted Cash and Cash Equivalents

 

 

(14,474

)

 

 

(33,881

)

Cash Flows from Discontinued Operations:

 

 

 

 

 

 

 

 

Operating Activities

 

 

 

 

 

2,888

 

Investing Activities

 

 

 

 

 

(376

)

Effects of Exchange Rate Changes on Cash, Restricted Cash and Cash Equivalents

 

 

 

 

 

612

 

Net Decrease in Cash, Restricted Cash and Cash Equivalents on Discontinued Operations

 

 

 

 

 

3,124

 

Net Decrease in Cash, Restricted Cash and Cash Equivalents

 

 

(14,474

)

 

 

(30,757

)

Cash, Restricted Cash and Cash Equivalents, Beginning of Period

 

 

87,047

 

 

 

96,852

 

Cash, Restricted Cash and Cash Equivalents, End of Period

 

$

72,573

 

 

$

66,095

 

 

 

 

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 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, 2019 (the “2019 Annual Report”).   

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. 

The outbreak of the novel coronavirus (“COVID-19”) and related decreases in commodity prices resulting from oversupply and demand weakness have caused significant disruptions and volatility in the global marketplace during the first quarter of 2020.  These conditions have persisted into the second quarter, and there remains a continuing uncertainty regarding the length and impact of COVID-19 on the energy industry and the outlook for our business. Although the decrease in oil and natural gas prices has not led to a significant decrease in the demand for our products and services, a prolonged period of severely depressed oil and natural gas prices compared to historic averages could have a material adverse effect on our business.

Recently Adopted Accounting Standards.

On June 30, 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326). This ASU represents a significant change in the Accounting for Credit Losses model. This ASU introduced the Current Expected Credit Losses (“CECL”) model, which requires earlier recognition of credit losses and additional disclosures related to credit risk. The CECL model utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses for loans and other receivables at the time the financial asset is originated or acquired. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. This model replaces the multiple existing impairment models in current U.S. generally accepted accounting principles (“GAAP”), which generally require that a loss be incurred before it is recognized. The standard applies to financial assets arising from revenue transactions such as contract assets and accounts receivables and is effective for fiscal years beginning after December 15, 2019. The adoption of the standard by the Company did not have a material impact on its consolidated financial position nor on its results of operations and cash flows.

On August 29, 2018, the FASB issued an amendment to the accounting standards, which requires implementation costs incurred by customers in cloud computing arrangements to be deferred and recognized over the term of the arrangement, if those costs would be capitalized by the customers in a software licensing arrangement. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The adoption of the standard by the Company did not have a material impact on its consolidated financial position nor on its results of operations and cash flows.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820). The ASU eliminates certain disclosures as to the amount of and reasons for transfers between Level 1 and Level 2 of the fair

6


value hierarchy. The ASU adds disclosure requirements for Level 3 measurements. This ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted for any eliminated or modified disclosures. The adoption of the standard by the Company did not have a material impact on the Company's disclosures.

Critical Accounting Policies.

Basis of Consolidation. The consolidated financial statements include the accounts of SEACOR Marine and its controlled subsidiaries. Control is generally deemed to exist if the Company has greater than 50% of the voting rights of a subsidiary. All significant intercompany accounts and transactions are eliminated in the combination and consolidation.

Noncontrolling interests in consolidated subsidiaries are included in the consolidated balance sheets as a separate component of equity. The Company reports consolidated net income (loss) inclusive of both the Company’s and the noncontrolling interests’ share, as well as the amounts of consolidated net income (loss) attributable to each of the Company and the noncontrolling interests. If a subsidiary is deconsolidated upon a change in control, any retained noncontrolled equity investment in the former controlled subsidiary is measured at fair value and a gain or loss is recognized in net income (loss) based on such fair value. If a subsidiary is consolidated upon a change in control, any previous noncontrolled equity investment in the subsidiary is measured at fair value and a gain or loss is recognized in net income (loss) based on such fair value.

The Company employs the equity method of accounting for investments in 50% or less owned companies that it does not control but has the ability to exercise significant influence over the operating and financial policies of the business venture. Significant influence is generally deemed to exist if the Company has between 20% and 50% of the voting rights of a business venture but may exist when the Company’s ownership percentage is less than 20%. In certain circumstances, the Company may have an economic interest in excess of 50% but may not control and consolidate the business venture. Conversely, the Company may have an economic interest less than 50% but may control and consolidate the business venture. The Company reports its investments in and advances to these business ventures in the accompanying consolidated balance sheets as investments, at equity, and advances to 50% or less owned companies. The Company reports its share of earnings from investments in 50% or less owned companies in the accompanying consolidated statements of net income (loss) as equity in earnings (losses) of 50% or less owned companies, net of tax.

The Company employs the cost method of accounting for investments in 50% or less owned companies it does not control or exercise significant influence. These investments in private companies are carried at cost and are adjusted only for capital distributions and other-than-temporary declines in fair value.

Certain reclassifications were made to previously reported amounts in the consolidated financial statements and notes thereto to make them consistent with the current period presentation.

Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates include those related to deferred revenues, allowance for doubtful accounts, useful lives of property and equipment, impairments, income tax provisions and certain accrued liabilities. Actual results could differ from estimates and those differences may be material.

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 custo