SEACOR Marine Holdings Inc. — Q3 2021 Form 10-Q
Business context and reporting period. The company provides offshore marine transportation and support services to energy and wind-farm customers. This unaudited report covers the three and nine months ended September 30, 2021; comparisons are with the corresponding 2020 periods. At quarter-end, the company and its joint ventures operated 82 vessels, including 55 owned or leased-in, 25 joint-ventured and two managed for others. Seven of its 55 owned or leased-in in-service vessels were cold-stacked.
Financial performance and position
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $43.7m | $36.2m | $123.0m | $105.8m |
| Operating loss | $14.3m | $13.2m | $22.5m | $54.7m |
| Net income (loss) | ($5.8m) | ($18.1m) | $49.0m | ($44.1m) |
| Operating cash flow | Not separately provided | Not separately provided | $4.9m | ($27.4m) |
- Q3 revenue increased 21% year over year, while operating loss widened to $14.3m; operating margin was approximately -32.7%, compared with -36.4% a year earlier. Nine-month operating margin improved to approximately -18.3% from -51.7%.
- Direct vessel profit, a company-defined non-GAAP measure, was $10.2m for Q3 versus $11.5m and $30.6m year to date versus $40.2m. Fleet utilization improved to 68% for Q3 from 54%; average day rates rose to $12,120 from $11,051. YTD utilization was 63% versus 56%.
- Q3 net loss narrowed year over year. Nine-month net income included substantial unusual gains, including a $62.0m troubled-debt restructuring gain, $22.8m gain on the Windcat Workboats sale, $20.4m net gains on asset dispositions and a $9.4m gain from a joint-venture distribution. The sale gain is reflected in discontinued operations.
- Cash and cash equivalents were $42.2m and restricted cash $4.2m at September 30; combined cash for the primary facility’s covenant was $46.4m. The company reported a $35.0m minimum-cash covenant and compliance at quarter-end. It also reported $1.4m of available borrowing capacity under subsidiary facilities.
- Long-term debt principal was $388.9m, including $28.9m current; debt carrying value, net of discounts and issue costs, was $350.5m. Principal was $521.9m at December 31, 2020. The largest scheduled maturity is $236.2m in 2023. The company reported compliance with all debt covenants.
- Total assets were $902.1m and total liabilities $447.3m. Current assets of $114.9m exceeded current liabilities of $75.1m. Nine-month capital expenditures were $6.6m.
Material changes versus the prior comparable period
- Revenue growth reflected higher fleet utilization and day rates, particularly in the U.S. and Latin America. Higher operating costs—including personnel, repairs and maintenance, drydocking and other costs—offset revenue gains; Q3 operating expenses were $33.4m versus $24.7m.
- Q3 equity-method earnings improved to $4.3m from a $0.6m loss. Nine-month equity earnings were $10.6m versus $1.5m.
- Operating cash flow improved by $32.3m year over year, but included $32.8m of net tax refunds. Excluding those refunds, nine-month operating cash flow was approximately negative $27.8m.
- Investing cash flow was $75.0m, mainly reflecting $38.7m net proceeds from the Windcat sale and vessel-sale proceeds. Financing cash outflow was $72.9m, primarily scheduled debt payments.
Outlook, commentary, risks and unusual items
- Management said available liquidity should meet obligations for the foreseeable future. No specific revenue, earnings or utilization guidance was provided.
- Management cited recovery in oil prices and possible pent-up maintenance and capital-spending demand as potential supports, but cautioned that commodity-price volatility, COVID-19 impacts, weak offshore activity and excess vessel supply could pressure utilization, rates, liquidity and asset values. Reactivating cold-stacked vessels can increase costs.
- The April 13, 2021 SEACOR Power capsizing caused multiple fatalities and the vessel’s constructive total loss. Salvage operations and NTSB/U.S. Coast Guard investigations were ongoing; numerous civil claims were filed and consolidated into the company’s limitation action. Liability, insurance recoveries, potential fines, reputational effects and financial impact remain uncertain and could be material.
- A Brazilian tax-deficiency matter has a stated potential levy of R$18.8m (approximately $3.5m at the stated exchange rate); the company is appealing and says the outcome is uncertain. The U.K. MNRPF also notified the company of two developing issues that could result in additional plan liabilities and employer assessments.
- COVID-19-related market uncertainty remains a risk. The company recorded no vessel impairment in the first nine months of 2021, but stated that weaker market conditions or revised cash-flow expectations could lead to future impairment charges.
- Other notable transactions: Windcat Workboats was sold on January 12, 2021, with approximately $38.7m net proceeds reported in investing cash flow; the $117.3m FGUSA facility was settled for $50.0m in cash and insurance proceeds, generating a $62.0m gain; and the company received a $12.0m MEXMAR Offshore distribution, of which $9.4m exceeded its investment balance.
Important facts for investors to verify
- How much of reported nine-month earnings and operating cash flow reflects one-time gains and the tax refunds, rather than recurring operations.
- The timing and funding plan for the $236.2m scheduled 2023 debt maturity, and continued compliance with the $35.0m minimum-cash covenant.
- Developments in SEACOR Power investigations, litigation, insurance coverage and any potential operating restrictions or liabilities.
- Whether utilization and day rates can improve enough to offset operating-cost increases and excess vessel capacity, especially in weaker regions and vessel classes.
- Potential exposure from the Brazilian tax matter and the U.K. pension fund review, and whether cold-stacked or other vessels may require future impairment charges.