SEACOR Marine Holdings Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021; filed August 4, 2021. Amounts below are in U.S. dollars; financial statement figures are in millions unless otherwise noted.
Business context and reporting period
SEACOR Marine provides offshore marine transportation and support services to energy and wind-farm customers. At quarter-end, it and its joint ventures operated 82 vessels. The company completed the sale of its Windcat Workboats crew-transfer business in January 2021; it is reported as discontinued operations. Results remain exposed to offshore energy activity, vessel utilization and day rates, and volatile oil and gas markets.
Financial results and liquidity
| Metric | Q2 2021 | Q2 2020 | H1 2021 | H1 2020 |
|---|---|---|---|---|
| Revenue | $42.8 | $33.9 | $79.3 | $69.6 |
| Operating income (loss) | $8.4 | $(17.8) | $(8.2) | $(41.5) |
| Net income (loss) | $48.8 | $(6.1) | $54.8 | $(26.1) |
| Net income (loss) attributable to SEACOR Marine | $48.8 | $(6.1) | $54.8 | $(22.0) |
| Cash from continuing operating activities | Not provided quarterly | Not provided quarterly | $9.5 | $(24.9) |
Q2 continuing-operations income was $48.8 million; H1 continuing-operations income was $31.9 million. Q2 basic/diluted earnings per share were $1.92/$1.79; H1 basic and diluted earnings per share were $2.16. Earnings were substantially affected by unusual gains, including the approximately $62.0 million debt-extinguishment gain in Q2 and a $22.8 million Windcat sale gain in discontinued operations during H1.
H1 operating revenue increased about 14% year over year. Q2 average time-charter rate was $12,007 per day versus $10,746; fleet utilization was 67% versus 57%. H1 rates were $11,687 versus $10,817, and utilization was 61% versus 57%. Direct vessel profit, a company-defined segment measure, was $10.2 million in Q2 and $20.4 million in H1, compared with $13.8 million and $28.7 million, respectively, in the prior-year periods.
At June 30, cash and cash equivalents were $45.4 million and restricted cash was $5.9 million. Total cash, restricted cash and construction reserve funds were $51.3 million. Current assets were $117.0 million and current liabilities $85.7 million. Debt principal was $389.4 million; reported debt carrying value, net of discounts and issuance costs, was $349.2 million. The company reported $28.4 million of current recourse debt and no current non-recourse debt. It was in compliance with debt covenants; its primary facility requires at least $35 million of cash, including restricted cash. Available subsidiary borrowing capacity was $0.7 million.
H1 investing cash flow was $68.3 million, including $38.7 million net proceeds from the Windcat sale and $30.1 million from vessel dispositions and related proceeds. Financing cash outflow was $65.8 million, principally debt payments. Cash, restricted cash and cash equivalents increased $11.8 million overall.
Material changes versus prior periods
- Revenue rose, alongside improved overall fleet utilization and average charter rates, but higher vessel operating costs offset some improvement. H1 operating costs were $58.9 million versus $40.9 million.
- Q2 and H1 results benefited from a large gain on settlement of the Falcon Global USA facility: $117.3 million of principal was extinguished following $50.0 million of payments and insurance proceeds, producing a reported gain of about $62.0 million.
- Windcat Workboats was sold for net proceeds of approximately $38.7 million reported in the cash flow statement; the sale generated a $22.8 million gain and changed segment presentation.
- H1 cash from operations improved from an outflow to an inflow, but included $31.4 million of net tax refunds. The company said cumulative refunds under its tax agreement totaled $32.3 million, including interest.
- Debt principal declined from $521.9 million at December 31, 2020 to $389.4 million at June 30, 2021, largely reflecting the Falcon facility payoff. Net debt carrying value also reflects discounts and financing costs.
Outlook, risks and unusual items
No quantitative earnings or revenue guidance is provided. Management said it believed liquidity was sufficient for the foreseeable future, supported by cash, operating cash flows, asset-sale proceeds and tax refunds. It cautioned that COVID-19, energy-market volatility, low offshore activity and excess vessel supply could adversely affect demand and results. Reactivating cold-stacked vessels may increase costs; eight of 55 owned or leased-in in-service vessels were cold-stacked at June 30.
The April 13 capsizing of the liftboat SEACOR Power caused multiple crew-member deaths and the vessel’s constructive total loss. Investigations by the NTSB and Coast Guard were ongoing, and civil claims had been filed. The company cited substantial uncertainty around potential liabilities, insurance recovery, salvage costs, reputational effects and possible regulatory restrictions. It expected salvage costs to be covered by insurance, but the ultimate insurance proceeds and total losses could not yet be determined.
Other items include $7.5 million of unfunded capital commitments, of which $6.6 million was payable in the remainder of 2021, and a Brazilian tax-deficiency dispute with a potential levy of R$18.5 million (approximately $3.7 million at the stated exchange rate). The company reported no impairment charges on owned or leased-in vessels in H1 2021, but warned that weaker market conditions or revised cash-flow assumptions could lead to future impairments. Management stated disclosure controls were effective and reported no material change in internal control over financial reporting.
Important facts for investors to verify
- How much of reported earnings reflects recurring vessel operations versus the debt-extinguishment, vessel-disposal and Windcat-sale gains?
- What are the outcome, timing and insurance coverage for the SEACOR Power investigations, salvage, claims and potential penalties?
- Can the company sustain covenant-required liquidity above $35 million after the tax refunds and asset-sale proceeds are used?
- How do utilization, day rates and operating costs develop by region and vessel class, particularly in the U.S. Gulf of Mexico?
- Confirm future debt maturities, including the disclosed $234.0 million due in 2023, and the effect of debt discounts on reported carrying amounts.