SEACOR Marine Holdings Inc. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. The filing reports annual results, not standalone fourth-quarter results. Unless noted, figures are for continuing operations and dollars are in millions.
Business context
SEACOR Marine provides offshore support vessel services to energy and wind customers across the U.S., Africa and Europe, the Middle East and Asia, and Latin America. At year-end, it and its joint ventures operated 81 vessels. The January 2021 sale of Windcat Workboats’ crew-transfer business is presented as discontinued operations.
Key financial metrics
| Metric | 2021 | 2020 | Change / context |
|---|---|---|---|
| Revenue | $170.9 | $141.8 | Up $29.1, or 20.5% |
| Operating loss | $(37.1) | $(71.6) | Improved, but still a loss |
| Direct vessel profit (DVP) | $43.5 | $50.7 | DVP margin was 25.5%, down from 35.7% |
| Income (loss) from continuing operations | $10.2 | $(83.3) | Included a $62.0 gain on debt extinguishment |
| Net income (loss) attributable to SEACOR Marine | $33.1 | $(78.9) | Includes $22.9 income from discontinued operations, principally the Windcat sale gain |
| Operating cash flow | $9.0 | $(29.7) | Included $32.8 of net tax refunds |
| Capital expenditures | $7.0 | $20.8 | Lower year over year |
| Cash, cash equivalents and restricted cash | $41.2 | $36.0 | Included $3.6 restricted cash |
| Total debt principal | $401.0 | $521.9 | Carrying amount, net of discount and issue costs, was $364.4 |
| Total assets / equity | $912.5 / $446.5 | $1,017.7 / $401.8 | At December 31 |
Average daily charter rates rose to $11,712 from $10,905, and fleet utilization improved to 66% from 55%. However, direct operating costs increased to $127.4 from $91.1, and DVP declined. Operating margin was approximately negative 21.7%; reported net income includes significant non-operating and discontinued-operation gains.
Material changes versus prior year
- Revenue and utilization recovered from 2020, while the fleet had fewer available days (20,850 versus 22,250).
- The company completed the Windcat sale for approximately $42.6 cash proceeds and recorded a $22.8 gain. The sold business’s results are excluded from continuing operations.
- A conditional payoff of the Falcon Global facility extinguished $117.3 of principal for $50.0 of total payments, producing a $62.0 accounting gain. The facility was repaid and terminated.
- The December 31 merger with OSV Partners added five PSVs to wholly owned operations. Consideration included 1.57 million newly issued shares, and the company assumed approximately $18.1 of third-party debt.
- The company recorded no fleet impairment in 2021, compared with $18.8 in 2020. Asset dispositions and the SEACOR Power insurance recovery contributed to a $20.4 net gain on asset dispositions and impairments.
Liquidity, outlook and risks
- Management said available liquidity was expected to cover obligations over the short to medium term. A primary credit facility requires at least $35.0 of cash, including restricted cash; year-end qualifying cash was $41.2. The company reported $1.2 of available borrowing capacity and compliance with debt covenants.
- Contractual debt maturities total $252.2 in 2023, including the $125.0 convertible notes due that year. Expected 2022 principal and interest payments were approximately $48.5. Management did not expect capital expenditures in 2022, subject to market conditions and opportunities.
- Management cited higher oil prices, utilization, day rates and customer inquiries as signs of improving market conditions, while cautioning that recovery was uncertain. No specific revenue or earnings guidance was provided.
- The April 2021 SEACOR Power capsizing caused multiple fatalities and the constructive total loss of the vessel. NTSB and Coast Guard investigations and civil claims were ongoing; the company said potential costs and liabilities could not yet be determined. It expected salvage costs to be covered by insurance.
- Other material exposures include customer concentration (Exxon Mobil 21% and SEACOR Marine Arabia 17% of 2021 continuing revenue), volatile offshore energy demand, foreign-operation and currency risks, and a potential share of additional U.K. multi-employer pension liabilities. A Brazilian tax-deficiency claim had a potential levy of approximately $3.3.
- Variable-rate debt totaled $171.8 at an average rate of 4.3%; a 1 percentage-point rate increase was estimated to raise annual interest payments on the unhedged portion by about $1.7. The company did not intend to pay dividends for the foreseeable future.
Important facts for investors to verify
- How much of 2021’s reported profit and cash generation is nonrecurring, including the debt-extinguishment gain, Windcat sale, asset gains, insurance proceeds and tax refunds?
- What refinancing plan and funding sources are available for the substantial 2023 debt maturities?
- What are the eventual financial, insurance and operational consequences of the SEACOR Power investigations and litigation?
- Can improved utilization and charter rates persist while operating costs rise, and how exposed are results to the company’s largest customers?
- What additional funding, if any, will be required for the U.K. pension plans or other disclosed contingencies?