SEACOR Marine Holdings Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; filed May 3, 2023. Amounts below are in U.S. dollars. The company provides offshore marine support and transportation services across four geographic regions.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Operating revenue | $60.0 million | $45.6 million; up 31.5% |
| Operating income (loss) | $0.2 million | $(17.1) million |
| Net loss | $(9.6) million; $(0.36) per share | $(14.8) million; $(0.56) per share |
| Direct vessel profit (company-defined measure) | $22.7 million, or about 37.8% of revenue | $6.1 million, or about 13.4% of revenue |
| Operating cash flow | $(0.6) million | $1.1 million |
| Cash, cash equivalents and restricted cash | $43.7 million at March 31 | $43.0 million at December 31, 2022 |
| Long-term debt principal | $355.2 million | $363.8 million at December 31, 2022 |
Revenue growth reflected higher charter rates and utilization overall: average time-charter rate rose to $14,314 per day from $11,312, and fleet utilization increased to 76% from 70%. Operating expenses were $63.4 million, including $13.8 million of depreciation and amortization. Interest expense increased to $8.8 million from $6.6 million. The company reported a $1.2 million income tax expense, versus a $2.4 million benefit a year earlier.
Working capital was limited: current assets were $131.6 million and current liabilities $127.6 million. Cash from investing activities was $12.1 million, including $7.6 million of equipment-sale proceeds and a $5.0 million MexMar loan repayment. Financing activities used $11.0 million, principally scheduled debt payments and tax withholding on vested stock. The balance-sheet debt carrying amount, net of unamortized discount and financing costs, was approximately $315.0 million. The filing reports no unused revolving credit availability.
Material changes and management commentary
- Operating results improved substantially, with operating income near break-even compared with a large year-earlier operating loss. Management attributed the improvement to stronger day rates and utilization and lower direct operating costs, partly offset by higher administrative costs and interest expense.
- Regional time-charter revenue increased in Africa and Europe, the Middle East and Asia, and Latin America; U.S. regional revenue declined. The U.S. fleet’s utilization was 35%, compared with 87% in Africa and Europe, 82% in the Middle East and Asia, and 94% in Latin America.
- Equity-method earnings fell to $0.5 million from $5.7 million. Following 2022 framework transactions, the company no longer holds equity interests in MexMar or Offshore Vessel Holdings; management expects future equity-method earnings to be insignificant.
- The company operated 59 vessels at quarter-end, including two managed for unaffiliated parties; two of its 57 owned or leased-in vessels were cold-stacked. It sold three liftboats and other equipment during the quarter.
- Management said available cash, operating cash flows, collections on the MexMar note and access to credit and capital markets are expected to support liquidity needs. It expected two further $5.0 million MexMar repayments in the following quarters. No numeric earnings or revenue guidance was provided.
Debt, risks and contingencies
- Management reported compliance with debt covenants and lender requirements at March 31, 2023. An amendment extended the 1.50:1.00 interest-coverage requirement under the SMFH guaranty through June 30, 2023; a 2.00:1.00 minimum applies at fiscal quarter-ends thereafter. Scheduled debt principal due during the remainder of 2023 was $52.9 million.
- The filing identifies volatile offshore energy demand, oil and gas prices, vessel oversupply, customer spending, vessel utilization and day rates as key business risks. Re-activating cold-stacked vessels may also require significant costs. Management notes estimates of future vessel cash flows are subjective and weaker markets could lead to future impairment charges.
- Following the 2021 SEACOR Power capsizing, the NTSB identified severe thunderstorm winds exceeding vessel operating limits as the probable cause. The company says nearly all death and injury claims for which it has financial exposure have been resolved; remaining claims are expected to be subject to contractual indemnity or insurance. The company expects salvage costs to be covered by insurance, and notes possible reputational effects remain uncertain.
- A Brazilian tax-deficiency matter carries a stated potential levy of R$21.3 million (about $4.2 million at the quarter-end exchange rate); the company is contesting the assessment, and the outcome is uncertain. Potential additional obligations from underfunded U.K. multi-employer pension plans are also described.
- Unfunded vessel-equipment commitments were $1.7 million, with an additional $9.3 million of previously reported orders indefinitely deferred. No impairment was recorded in Q1 2023. The company recorded $2.2 million of insurance receivables offsetting expenses recorded in 2022.
Investor verification points
- Confirm the timing and receipt of the remaining MexMar note repayments and how collections contribute to liquidity.
- Review debt maturities, interest costs and compliance with the SMFH interest-coverage covenant after June 30, 2023.
- Track whether improved charter rates and utilization persist, especially in the low-utilization U.S. region, and whether operating cash flow turns positive.
- Monitor insurance coverage and remaining SEACOR Power claims, the Brazilian tax dispute and possible U.K. pension-plan assessments.
- Assess the effect of equipment sales, deferred vessel orders and cold-stacked fleet reactivation on capacity, capital needs and future impairment risk.