SEACOR Marine Holdings Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Amounts are in millions of dollars unless stated otherwise. SEACOR Marine provides offshore marine support services and operated 59 vessels, including two managed for third parties.
Financial results and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $75.6 | $59.8 | $202.4 | $159.4 |
| Operating income (loss) | $9.8 | $(10.9) | $12.9 | $(43.5) |
| Net loss attributable to SEACOR Marine | $(0.9) | $(24.4) | $(15.0) | $(58.3) |
| Loss per share | $(0.03) | $(0.91) | $(0.56) | $(2.19) |
- Operating margin was approximately 13.0% in Q3 2023 versus negative 18.2% in Q3 2022; nine-month margin was 6.4% versus negative 27.3%.
- Q3 average time-charter rate rose to $18,046 per day from $13,340, while utilization declined to 73% from 79%. For the nine-month period, the average rate rose to $15,852 from $12,305 and utilization edged up to 76% from 75%.
- Operating expenses fell year over year, including lower drydocking costs, but administrative and general expense increased to $12.3 million in Q3 and $37.6 million for nine months, partly due to higher credit-loss allowances and salaries and benefits.
- Interest expense was $9.5 million in Q3 and $27.1 million for nine months, above the respective prior-year periods. Q3 also included a $2.0 million debt-extinguishment loss. Nine-month income tax expense was $2.4 million; the effective tax rate was 15.32%, primarily reflecting foreign taxes not creditable against U.S. income taxes.
Cash flow, debt, and balance sheet
- Nine-month operating cash flow was $10.4 million, compared with cash use of $11.8 million in 2022. Working-capital movements, including receivables, were a significant offset to operating cash generation.
- Investing activities provided $16.1 million, including $15.0 million of MexMar note principal collected and $8.0 million of vessel and equipment sale proceeds; capital expenditures were $7.0 million. The MexMar note was repaid in full.
- Financing activities used $10.9 million. The company refinanced debt, receiving $148.4 million of net debt proceeds and making $131.6 million of debt-extinguishment payments.
- At September 30, cash and cash equivalents were $55.8 million and restricted cash was $2.8 million. Current assets were $142.0 million and current liabilities $84.0 million. Total equity was $365.6 million.
- Debt principal was $359.2 million, including $28.0 million current; carrying debt, net of discount and financing costs, was $319.8 million. The company reported compliance with all debt covenants and lender requirements at quarter-end.
- The new $122.0 million senior secured facility bears fixed interest of 11.75%, matures in September 2028, and has quarterly amortization of 2.5% of initial principal, with the balance due at maturity. The $28.0 million SEACOR Alpine facility bears fixed interest of 10.25% and also matures in 2028. Both facilities include financial and restrictive covenants, including limits on dividends and distributions.
Changes, outlook, and risks
- Revenue growth and the move to operating profit reflect higher charter rates and vessel activity, with regional results varying. Q3 utilization declined despite higher rates; the U.S. region reported 57% utilization versus 84% in Africa and Europe and 87% in Latin America.
- Management said available liquidity, operating cash flow, note collections, and potential access to credit and capital markets are expected to support obligations and planned needs. No specific earnings or revenue guidance was provided.
- Management identifies vessel rates and utilization as key drivers. It cautions that offshore market conditions remain volatile and that low customer activity or excess vessel supply could materially harm results. Reactivation costs for cold-stacked vessels and uncertain future cash flows could also lead to further impairment charges. Two vessels were cold-stacked and two were held for sale at September 30.
- On November 1, 2023, after quarter-end, the company entered into an at-the-market agreement to sell up to $25.0 million of common stock. Proceeds, if any, are intended for general corporate purposes; the sales agent commission may be up to 3% of gross sales.
- Contingencies include a Brazilian tax-deficiency notice with a potential levy of R$22.6 million (reported as approximately $4.5 million at quarter-end exchange rates), ongoing administrative proceedings, and possible future multi-employer U.K. pension-fund assessments. Nearly all SEACOR Power incident injury and death claims for which the company has financial exposure were resolved; remaining claims are described as subject to contractual indemnity or insurance.
Most important facts for investors to verify
- Whether higher charter rates can be sustained and utilization improves, particularly in weaker-performing areas of the fleet.
- Cash conversion and working-capital trends, including collection of trade receivables and the adequacy of the credit-loss allowance.
- Debt-service capacity and continued covenant compliance under the high-coupon secured facilities, including refinancing and maturity requirements.
- Whether the ATM offering is used, the resulting dilution, and how any proceeds are applied.
- Potential outcomes and financial exposure from the Brazilian tax matter, pension funds, and remaining SEACOR Power-related claims.