SEACOR Marine Holdings Inc. — Q1 2019 Form 10-Q
Business context and period. The filing covers the three months ended March 31, 2019, compared with Q1 2018, and balance-sheet figures are as of March 31, 2019 versus December 31, 2018. SEACOR Marine provides global vessel and marine-support services to offshore oil and gas and windfarm industries. It and its joint ventures operated 182 vessels at quarter-end.
Financial performance and liquidity
| Metric | Q1 2019 | Q1 2018 / prior date |
|---|---|---|
| Operating revenue | $56.2 million | $51.7 million |
| Operating loss | $21.0 million | $24.4 million |
| Net loss attributable to SEACOR Marine | $25.5 million | $28.8 million |
| Loss per share, basic and diluted | $1.11 | $1.64 |
| Cash from operating activities | Used $2.0 million | Used $11.5 million |
| Cash, cash equivalents and restricted cash | $66.1 million | $96.9 million at Dec. 31, 2018 |
| Debt | $401.8 million carrying amount; $438.4 million contractual principal | $404.7 million carrying amount at Dec. 31, 2018 |
- Revenue increased 8.8% year over year. Operating loss was 37.4% of revenue, improving from 47.2%; the filing reports no positive operating profit. Direct vessel profit, a company-defined non-GAAP measure, was $12.0 million versus $13.4 million.
- Net loss improved despite higher interest expense ($7.7 million versus $6.1 million), mainly because derivative losses fell to $0.9 million from $11.5 million and the prior-year quarter included asset impairment charges. Equity-method investments contributed a $3.4 million loss versus $0.2 million of earnings.
- Operating cash use narrowed year over year. Investing cash use was $22.6 million, including $21.2 million of property and equipment purchases; financing cash use was $7.6 million. Cash, cash equivalents and restricted cash declined $30.8 million during the quarter.
- At March 31, current assets were $151.8 million and current liabilities $110.7 million, implying working capital of $41.1 million and a current ratio of about 1.37. Cash and cash equivalents were $63.9 million; restricted cash was $2.2 million. Including $28.1 million in construction reserve funds, the company reported $94.2 million of cash and reserve balances.
- Debt carrying amount includes current debt and is net of debt discount and issuance costs. The company reported compliance with all debt covenants. Operating lease liabilities totaled $37.8 million after adoption of the new lease standard.
Material changes versus Q1 2018
- Average day rate rose to $7,371 from $7,001 and overall fleet utilization increased to 61% from 53%. Excluding crew transfer vessels, utilization was 62% versus 50%. Available fleet days fell to 11,536 from 12,601.
- Revenue growth reflected higher time-charter activity, including contributions from liftboats and improved utilization in several regions. Direct operating costs increased to $44.3 million from $38.3 million, with higher repairs, maintenance and drydocking costs.
- Capital spending increased to $21.2 million from $8.6 million, while investment in and advances to equity-method companies fell to $2.0 million from $20.0 million.
- SEACOR acquired three fast support vessels for 603,872 shares valued at $7.8 million and acquired the remaining interests in Windcat Workboats, bringing ownership to 100%. Fleet count increased to 182 from 179 at year-end 2018.
Outlook, risks and unusual items
- Management described market conditions as difficult despite a recovery in oil prices from 2016 lows. It warned that subdued offshore exploration and drilling, vessel reactivations and new vessel deliveries could sustain oversupply and materially harm results, financial position and cash flows.
- No numerical earnings or revenue guidance was provided. Management said available cash, construction reserves, operating cash flow, subsidiary credit availability and potential capital-market access were expected to meet obligations, including capital spending and debt service; access to financing may be constrained by market conditions.
- Unfunded capital commitments were $85.7 million: $54.0 million payable during the remainder of 2019 and $31.7 million in 2020. A further $20.2 million of orders for two fast support vessels was indefinitely deferred.
- The company agreed to acquire three PSVs for approximately $46.0 million, with 30% payable in cash and 70% over four years; expected delivery dates run from September 2019 to October 2020.
- ASC 842 lease adoption on January 1, 2019 resulted in recognition of lease assets and liabilities and a net $10.4 million increase to opening retained earnings, including recognition of previously deferred sale-leaseback gains. Prior periods were not recast.
- SEACOR Holdings guaranteed $36.6 million of company obligations. Other disclosed contingencies include $0.3 million of guaranteed charter receivables, $0.8 million of potential capital contributions to joint ventures and ordinary-course litigation; management did not expect litigation changes to have a material effect.
- Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter. It reported no material changes in risk factors.
Important facts for investors to verify
- Whether utilization and day-rate improvements are sustainable amid management’s stated offshore vessel oversupply risk, particularly the 28% U.S. regional utilization.
- How the $85.7 million of near-term capital commitments and planned PSV purchases will be funded, given the quarter’s $30.8 million cash decline and ongoing debt service.
- The timing and certainty of expected PSV deliveries and deferred payments, and the status of the indefinitely deferred $20.2 million vessel orders.
- Performance and funding needs of equity-method ventures, which generated $3.4 million of equity losses in Q1, including SEACOSCO’s construction activity.
- Debt repayment schedule, variable-rate exposure and covenant headroom; the filing states covenant compliance but does not quantify headroom.