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 |
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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, Houston, TX |
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77079
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(Address of Principal Executive Offices) |
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(Zip Code) |
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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 ☐ |
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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 ☒
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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
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, 2020 and December 31, 2019 |
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1 |
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Condensed Consolidated Statements of Loss for the Three Months Ended March 31, 2020 and 2019 |
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2 |
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3 |
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4 |
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Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019 |
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5 |
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6 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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23 |
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Item 3. |
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40 |
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Item 4. |
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40 |
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Part II. |
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43 |
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Item 1. |
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43 |
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Item 1A. |
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43 |
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Item 2. |
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45 |
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Item 3. |
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45 |
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Item 4. |
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45 |
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Item 5. |
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45 |
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Item 6. |
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46 |
i
SEACOR MARINE HOLDINGS INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
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March 31, 2020 |
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December 31, 2019 |
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ASSETS |
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Current Assets: |
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Cash and cash equivalents |
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$ |
69,220 |
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$ |
83,943 |
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Restricted cash |
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|
3,353 |
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3,104 |
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Receivables: |
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Trade, net of allowance for credit loss accounts of $375 and $455 in 2020 and 2019, respectively |
|
|
48,192 |
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49,128 |
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Other |
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27,872 |
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18,531 |
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Inventories |
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1,575 |
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1,228 |
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Prepaid expenses and other |
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2,653 |
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2,612 |
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Total current assets |
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152,865 |
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158,546 |
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Property and Equipment: |
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Historical cost |
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930,264 |
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976,978 |
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Accumulated depreciation |
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(312,911 |
) |
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(358,962 |
) |
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617,353 |
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618,016 |
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Construction in progress |
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55,302 |
|
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74,344 |
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Net property and equipment |
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672,655 |
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692,360 |
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Right-of-Use Asset - Operating Leases |
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8,990 |
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17,313 |
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Investments, at Equity, and Advances to 50% or Less Owned Companies |
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125,010 |
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124,680 |
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Construction Reserve Funds |
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3,745 |
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12,893 |
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Other Assets |
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3,270 |
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3,401 |
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$ |
966,535 |
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$ |
1,009,193 |
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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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13,359 |
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$ |
15,099 |
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Current portion of long-term debt: |
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Recourse |
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36,278 |
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17,802 |
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Non-recourse |
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|
806 |
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— |
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Accounts payable and accrued expenses |
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32,023 |
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25,691 |
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Due to SEACOR Holdings |
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66 |
|
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|
74 |
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Accrued wages and benefits |
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1,274 |
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1,832 |
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Accrued interest |
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1,835 |
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|
731 |
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Accrued income taxes |
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1,143 |
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|
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— |
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Deferred revenue and unearned revenue |
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3,787 |
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5,327 |
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Accrued capital, repair and maintenance expenditures |
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10,577 |
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15,997 |
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Accrued insurance deductibles and premiums |
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2,921 |
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3,564 |
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Accrued professional fees |
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652 |
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871 |
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Derivatives |
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4,893 |
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3,009 |
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Other current liabilities |
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2,867 |
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4,820 |
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Total current liabilities |
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112,481 |
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94,817 |
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Long-Term Operating Lease Liabilities |
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7,859 |
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9,822 |
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Long-Term Debt: |
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Recourse |
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217,733 |
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239,939 |
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Non-recourse |
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138,996 |
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140,312 |
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Conversion Option Liability on Convertible Senior Notes |
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91 |
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5,205 |
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Deferred Income Taxes |
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26,113 |
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33,905 |
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Deferred Gains and Other Liabilities |
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7,951 |
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6,269 |
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Total liabilities |
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511,224 |
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530,269 |
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Equity: |
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SEACOR Marine Holdings Inc. stockholders’ equity: |
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Common stock, $.01 par value, 60,000,000 shares authorized; 23,099,127 and 21,928,674 shares issued in 2020 and 2019, respectively |
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231 |
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219 |
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Additional paid-in capital |
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447,425 |
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429,318 |
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Retained earnings |
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11,131 |
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27,076 |
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Shares held in treasury of 71,902 and 47,185, respectively, at cost |
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(844 |
) |
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(669 |
) |
Accumulated other comprehensive loss, net of tax |
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(2,971 |
) |
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1,548 |
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454,972 |
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457,492 |
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Noncontrolling interests in subsidiaries |
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339 |
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21,432 |
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Total equity |
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455,311 |
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478,924 |
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$ |
966,535 |
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$ |
1,009,193 |
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The accompanying notes are an integral part of these condensed consolidated financial statements and should be read in conjunction herewith.
1
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF LOSS
(in thousands, except share data)
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Three Months Ended March 31, |
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2020 |
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2019 |
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Operating Revenues |
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$ |
41,743 |
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$ |
44,910 |
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Costs and Expenses: |
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Operating |
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24,620 |
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35,166 |
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Administrative and general |
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10,765 |
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10,812 |
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Lease expense |
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3,407 |
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4,137 |
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Depreciation and amortization |
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15,001 |
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16,097 |
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53,793 |
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66,212 |
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Gain (loss) on Asset Dispositions and Impairments, Net |
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(12,572 |
) |
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268 |
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Operating Loss |
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(24,622 |
) |
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(21,034 |
) |
Other Income (Expense): |
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Interest income |
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676 |
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354 |
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Interest expense |
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(7,638 |
) |
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(7,664 |
) |
SEACOR Holdings guarantee fees |
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(16 |
) |
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(29 |
) |
Derivative gains (losses), net |
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5,114 |
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(925 |
) |
Foreign currency gains, net |
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65 |
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|
670 |
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(1,799 |
) |
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(7,594 |
) |
Loss from Continuing Operations Before Income Tax Benefit and Equity in Earnings of 50% or Less Owned Companies |
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(26,421 |
) |
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(28,628 |
) |
Income Tax Benefit |
|
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(6,668 |
) |
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|
(3,831 |
) |
Loss from Continuing Operations Before Equity in Earnings of 50% or Less Owned Companies |
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(19,753 |
) |
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(24,797 |
) |
Equity in Losses of 50% or Less Owned Companies |
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(239 |
) |
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(3,476 |
) |
Loss from Continuing Operations |
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(19,992 |
) |
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(28,273 |
) |
(Loss) Income on Discontinued Operations, Net of Tax (see Note 15) |
|
|
— |
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— |
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Net Loss |
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(19,992 |
) |
|
|
(28,273 |
) |
Net Loss attributable to Noncontrolling Interests in Subsidiaries |
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|
(4,047 |
) |
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|
(2,724 |
) |
Net Loss attributable to SEACOR Marine Holdings Inc. |
|
$ |
(15,945 |
) |
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$ |
(25,549 |
) |
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|
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Basic and Diluted Loss Per Common Share and Warrants of SEACOR Marine Holdings Inc. |
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|
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Continuing operations |
|
$ |
(0.66 |
) |
|
$ |
(1.11 |
) |
Discontinued operations |
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|
— |
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— |
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$ |
(0.66 |
) |
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$ |
(1.11 |
) |
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Weighted Average Common Shares and Warrants Outstanding: |
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|
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Basic and diluted shares |
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23,989,029 |
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|
23,090,137 |
|
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 COMPREHENSIVE LOSS
(in thousands)
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Three Months Ended |
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March 31, |
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2020 |
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2019 |
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Net Loss |
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$ |
(19,992 |
) |
|
$ |
(28,273 |
) |
|
Other Comprehensive Loss: |
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|
|
|
|
|
|
|
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Foreign currency translation gains (losses) |
|
|
(2,528 |
) |
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|
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
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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For the three months ended March 31, 2020 |
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|
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|
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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
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
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