SEACOR Marine Holdings Inc. — Q3 2020 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2020; comparisons are with the corresponding 2019 periods. The company provides offshore marine support and transportation services to energy and windfarm customers. Unless noted otherwise, dollar amounts below are in millions.
Financial performance and position
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Operating revenue | $45.7 | $54.7 | $129.3 | $152.4 |
| Operating loss | $(11.4) | $(3.4) | $(52.7) | $(42.0) |
| Net loss attributable to SEACOR Marine | $(18.1) | $(18.4) | $(40.1) | $(72.4) |
| Loss per share | $(0.72) | $(0.78) | $(1.63) | $(3.09) |
| Direct vessel profit (management measure) | $16.6 | $27.5 | $51.7 | $54.7 |
- At September 30, cash, restricted cash and construction reserve funds totaled $48.5, versus $87.0 at year-end 2019. Current assets were $156.1 and current liabilities $121.5.
- Nine-month operating cash flow was $(21.1), investing cash flow $(0.5), and financing cash flow $(15.9). Cash, restricted cash and cash equivalents decreased $38.5.
- Debt principal totaled $556.5 ($407.1 recourse and $149.3 non-recourse); carrying value, net of discounts and financing costs, was $505.1. Long-term debt maturities include $244.984 due in 2023 and $132.075 in 2024.
Material changes versus the prior comparable period
- Q3 revenue fell 16.5%; nine-month revenue fell 15.2%. Management attributed the declines mainly to weaker utilization and fleet dispositions. Q3 fleet utilization was 70% versus 74%; excluding crew-transfer vessels, it was 54% versus 64%.
- Q3 operating loss widened despite lower revenue, while the attributable net loss was slightly narrower. For the nine months, attributable net loss improved from 2019, helped by a larger income tax benefit, derivative gains and improved equity-investee results; operating loss nevertheless worsened.
- The nine-month 2020 operating result included a net $15.8 gain on asset dispositions and impairments, compared with a $2.7 gain in 2019. The company also recorded $12.5 of impairment charges during 2020, principally on liftboats and a specialty vessel.
- On June 30, the company acquired the remaining 50% of SEACOSCO, now SEACOR Offshore Delta, and owns it wholly. The acquisition brought eight PSVs into the consolidated fleet and added substantial vessel-related debt.
Outlook, risks and unusual items
- Management cited COVID-19, depressed oil and gas prices, reduced offshore activity and industry vessel oversupply as continuing risks. It warned that prolonged weak demand could materially affect operations, cash flows and asset values. Twenty of 105 owned or leased-in in-service vessels were cold-stacked at September 30.
- The company expects approximately $31.2 of CARES Act tax refunds within 12 months, subject to IRS processing delays and the tax refund agreement with former parent SEACOR Holdings. About $19.7 is unrestricted; approximately $11.5 must be reserved for obligations still guaranteed by SEACOR Holdings. A $3.0 transaction fee was paid under the agreement.
- A covenant guarantor test under the Sea-Cat Crewzer III facility required a net financial debt-to-equity ratio of 70%; the company reported 101%. It was negotiating a waiver or modification. The breach did not trigger cross-defaults or immediate acceleration, but the affected debt was classified as current pending relief.
- The company reported $48.5 of cash for a primary credit-facility minimum-cash test of $35. Management said liquidity was expected to be sufficient, relying in part on operations and anticipated tax refunds; delayed refunds or further deterioration could require a covenant amendment.
- Cost-reduction actions completed in Q3, including workforce and facility changes, are expected to generate at least $8.0 in annual recurring savings; $1.2 of restructuring charges were incurred in the first nine months. Unfunded capital commitments were $13.1, with $9.6 of additional FSV orders indefinitely deferred.
- A Brazilian tax-deficiency notice has a potential levy of R$18.05 million (about $3.2 at the stated exchange rate); the administrative appeal remained unresolved. The company also disclosed a continuing material weakness in journal-entry review controls and concluded disclosure controls were ineffective as of September 30. Remediation was in progress, with completion expected before year-end 2020.
- Subsequent event: the BNDES debt and related Oceanpact receivable were paid in full on October 15, 2020, and the related letter of credit was released October 23.
Key facts for investors to verify
- Whether lenders waived or amended the Sea-Cat guarantor covenant and how much debt remained classified as current.
- Timing and receipt of the expected tax refunds, including amounts restricted under the SEACOR Holdings agreement.
- Progress and testing of remediation for the material weakness, and whether controls became effective after quarter-end.
- Subsequent utilization, day rates, cold-stacked vessel plans and impairment assumptions amid continued market uncertainty.
- Debt service capacity, major 2023–2024 maturities, and funding of the $13.1 capital commitments.