SEACOR Marine Holdings Inc. — Q3 2019 Form 10-Q
Reporting period: Three and nine months ended September 30, 2019. Financial statements are unaudited. SEACOR Marine provides offshore marine transportation and support services; its operated fleet included 174 vessels at period-end, including joint-venture and managed vessels.
Financial performance and position
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Operating revenue | $54.7 million | $58.2 million | $152.4 million | $144.7 million |
| Operating loss | $(4.4) million | $(13.5) million | $(45.4) million | $(60.7) million |
| Loss from continuing operations | $(11.4) million | $(19.0) million | $(73.5) million | $(79.1) million |
| Net loss attributable to SEACOR Marine | $(18.4) million | $(16.0) million | $(72.4) million | $(69.8) million |
| Basic and diluted loss per share | $(0.78) | $(0.71) | $(3.09) | $(3.42) |
- Operating loss margin was approximately 8.1% in Q3 and 29.8% for the nine months. Nine-month direct vessel profit, a company-defined non-GAAP measure, was $54.7 million, versus $44.8 million a year earlier.
- Continuing-operations cash used in operating activities was $4.2 million for the nine months, compared with $56.9 million used in 2018. Capital expenditures were $49.6 million; continuing-operations investing and financing activities used $30.8 million and $22.4 million, respectively.
- Cash, cash equivalents and restricted cash totaled $44.4 million at September 30, compared with $104.5 million a year earlier. Separately, the company reported $18.2 million in construction reserve funds and $2.3 million available under subsidiary credit facilities.
- Current assets were $125.6 million and current liabilities $111.4 million. Long-term debt obligations totaled $432.7 million gross, including current maturities; balance-sheet debt net of discount and issue costs was $399.2 million. Debt maturities include $25.9 million in 2020 and $50.8 million in 2021. The company reported compliance with debt covenants at September 30.
- Total equity was $494.1 million, down from $554.9 million at December 31, 2018. Operating lease liabilities recognized under the newly adopted lease standard totaled $28.1 million.
Changes versus the prior comparable period
- Q3 revenue declined 6% year over year, while nine-month revenue increased 5%. For the nine months, utilization excluding crew-transfer vessels rose to 60% from 51%; average day rates excluding crew-transfer vessels increased to $10,387 from $9,971. Overall utilization was 67%, versus 58%.
- Q3 operating loss narrowed to $4.4 million from $13.5 million, reflecting lower operating costs and a net asset-disposition gain. Nine-month operating loss also narrowed, while net loss attributable to SEACOR Marine increased, principally alongside worse discontinued-operations results and substantially higher equity-method losses.
- Nine-month equity losses from 50%-or-less-owned companies increased to $11.9 million from $1.7 million, including losses at SEACOSCO and MEXMAR Offshore International.
- Cash used in continuing operating activities improved year over year, partly reflecting a much smaller adverse working-capital movement. Cash and restricted cash nevertheless declined significantly during the period.
Outlook, commentary, risks and unusual items
- Management described offshore market conditions as difficult and volatile, citing low exploration and drilling activity and potential oversupply from vessel reactivations and new deliveries. It warned these conditions could materially adversely affect results, financial position and cash flows.
- A transformation and cost-reduction plan begun in Q3 is expected to run through Q2 2020. Management targets at least $8 million in annualized recurring savings; Q3 restructuring charges were $3.3 million, and the filing estimated a further $2.4 million of restructuring costs.
- During the nine months, the company recorded $11.7 million of impairment charges, primarily on vessels and leased-in vessels. It also sold vessels and equipment, reporting gains on certain dispositions.
- On November 1, 2019, after quarter-end, the company agreed to sell its North Sea emergency response and rescue vessel business for approximately £19.5 million (about $25.1 million at the cited exchange rate), subject to adjustments, with up to £4.0 million of additional contingent consideration. The filing estimated a $7.1 million loss on sale at September 30; the estimate was $5.6 million using the exchange rate at signing.
- The filing’s liquidity discussion states $41.5 million of unfunded capital commitments, with $17.7 million due in the remainder of 2019 and $23.8 million in 2020, plus $30.4 million of indefinitely deferred FSV orders. Note 13 separately reports $71.9 million of unfunded commitments for specified vessels; see verification items below.
- FGUSA was in discussions with lenders regarding potential compliance with certain 2020 financial covenants after expiration of a SEACOR Marine guarantee. The filing also notes a Brazilian tax dispute with a potential exposure of $3.2 million to $4.4 million, and $27.0 million of obligations guaranteed by former parent SEACOR Holdings.
- No formal financial forecast or earnings guidance is provided. Management stated it believed available cash, reserve funds, operating cash flow, subsidiary facilities and access to capital markets would provide sufficient liquidity, while noting market conditions may limit financing access.
Important facts for investors to verify
- Reconcile the filing’s conflicting unfunded capital commitment disclosures: $41.5 million in MD&A versus $71.9 million in Note 13, and confirm what amounts remain payable versus deferred.
- Track cash consumption, available liquidity and upcoming debt maturities, especially the 2020–2021 schedule and FGUSA’s covenant position after the guarantee expires.
- Assess execution of the North Sea business sale, final proceeds and adjustments, contingent earn-out conditions, and realized loss compared with the estimates in the filing.
- Monitor whether the transformation plan achieves its targeted recurring savings and whether additional restructuring or vessel impairment charges arise.
- Review offshore market utilization, day rates, vessel supply and equity-method investee performance, particularly SEACOSCO and MEXMAR Offshore International.