SEACOR Marine(SMHI) - 2020 Q4 - Annual Report

Part I Item 1. Business SEACOR Marine provides global marine and support transportation services to offshore energy facilities, operating a diverse fleet globally Business Overview The company provides global marine transportation services to offshore energy facilities, operating a diverse fleet of support vessels - The Company provides global marine and support transportation services to offshore energy facilities, including oil & gas installations and wind farms[15] Fleet Composition as of December 31, 2020 | Vessel Type | Owned | Joint Ventured | Leased-in | Managed | Total | Average Age (Years) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Supply | 15 | 27 | — | 1 | 43 | 4 | | FSV | 26 | 5 | 1 | 1 | 33 | 8 | | Liftboats | 14 | — | 1 | — | 15 | 13 | | AHTS | 4 | — | 2 | — | 6 | 12 | | Specialty | — | 3 | — | — | 3 | — | | CTV Assets Held for Sale | 40 | 5 | — | — | 45 | 10 | | CTV Continuing Operations | 1 | — | — | — | 1 | 12 | | Total | 100 | 40 | 4 | 2 | 146 | 7 | - The company operates in five main geographic regions: the United States (Gulf of Mexico), Africa (West Africa), Middle East & Asia, Latin America, and Europe (North Sea)[27] - In 2020, SEACOR Marine Arabia LLC and Exxon Mobil accounted for 21% and 17% of consolidated operating revenues, respectively, with the top ten customers comprising approximately 76%[36] Government Regulation The company's operations are subject to extensive international, federal, and state regulations, including the Jones Act, MARPOL, and OPA 90 - The Company is subject to the Jones Act, limiting non-U.S. citizen ownership to 22.5% of its capital stock to restrict U.S. coastwise trade[44][45] - Operations are governed by international conventions including MARPOL (pollution prevention), SOLAS (safety at sea), and the MLC (maritime labor conditions)[46][47] - The company is subject to the Oil Pollution Act of 1990 (OPA 90), establishing strict liability for oil spills in U.S. waters, with non-tank vessel liability limited to the greater of $1,100 per gross ton or $939,800[56][58] - As of January 1, 2020, MARPOL regulations require vessels to use fuel with a sulfur content no greater than 0.5%, a significant reduction from the previous 3.5% limit[73] Employees and Human Capital Management The company emphasizes its ESG program, focusing on health, safety, diversity, and employee development, achieving its best safety performance in 2020 - A Sustainability Council was formed on September 17, 2020, to oversee the company's enhanced ESG program, reporting to the Board's Nominating and Corporate Governance Committee[86][87] - As of December 31, 2020, the company employed 1,386 individuals from over 34 countries, with 29% of the onshore workforce being female[88][92] - In fiscal year 2020, the company achieved its best safety performance with zero pollution incidents, zero medical incidents, and a total recordable incident rate of 0.037 over 5.4 million man-hours[89] Item 1A. Risk Factors The company faces significant risks from fluctuating oil and gas prices, COVID-19, intense competition, regulatory changes, and financial constraints - The business is highly sensitive to fluctuating oil and natural gas prices, which negatively impacted fleet utilization to 55% in 2020, 60% in 2019, and 52% in 2018[101][102] - The COVID-19 pandemic has decreased demand for oil and services, posing operational risks to the workforce through health issues and travel restrictions[108][109] - The company faces high levels of competition and an oversupply of vessels, which has depressed charter and utilization rates[120][123] - Compliance with the Jones Act requires non-U.S. citizens to own no more than 25% of the company's stock, with the charter restricting this to 22.5%, potentially affecting stock liquidity[148][152][153] Item 2. Properties The company's principal physical properties consist of its fleet of offshore support vessels - The company's main physical properties are its offshore support vessels[209] Item 3. Legal Proceedings The company is involved in various litigation matters in the normal course of business, with management not expecting a material adverse effect on its financial position or results - The company is involved in various litigation matters arising from the normal course of business, but management does not anticipate these to have a material adverse effect on its financial condition[209] Executive Officers of the Registrant This section lists the current executive officers of SEACOR Marine, including their names, ages, and positions held Executive Officers | Name | Age | Position | | :--- | :--- | :--- | | John Gellert | 50 | President, Chief Executive Officer and a director | | Jesús Llorca | 45 | Executive Vice President and Chief Financial Officer | | Gregory Rossmiller | 51 | Senior Vice President and Chief Accounting Officer | | Andrew H. Everett II | 38 | Senior Vice President, General Counsel and Secretary | Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities SEACOR Marine's common stock trades on the NYSE under "SMHI," with no current dividend intention and no repurchases in Q4 2020 - The company's common stock trades on the New York Stock Exchange (NYSE) under the symbol "SMHI"[214] - The company does not intend to pay dividends for the foreseeable future, retaining earnings to repay debt and fund growth[215] - No shares of common stock were repurchased by the company during the fourth quarter of 2020[216] Item 6. Selected Financial Data This section presents selected historical consolidated financial data for the five years ended December 31, 2020, showing declining revenues and persistent net losses Selected Historical Financial Data (in thousands, except per share data) | | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | Net Operating Revenues | $141,141 | $174,453 | $179,161 | $98,499 | $132,589 | | Net Loss from Continuing Operations | $(83,413) | $(90,963) | $(82,980) | $(38,979) | $(130,857) | | Loss from Continuing Operations Per Common Share | $(3.20) | $(3.22) | $(3.75) | $(1.89) | $(7.34) | | Total Assets | $1,017,663 | $1,009,193 | $1,102,938 | $1,008,504 | $1,015,119 | | Long-term Obligations | $444,960 | $364,969 | $363,335 | $267,321 | $196,223 | Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition and operations, highlighting volatile offshore market impacts, recent asset sales, and liquidity management strategies Recent Developments Recent developments include amending the FGUSA Credit Facility, selling the Windcat Workboats CTV business, and an anticipated CARES Act tax refund - On January 12, 2021, the company completed the sale of its Windcat Workboats CTV Business, receiving net cash proceeds of approximately $42.6 million, with the buyer assuming approximately £20.4 million of debt[225] - The company expects to receive an estimated $31.2 million tax refund under the CARES Act, treated as cash for certain debt covenant calculations[226] Trends Affecting the Offshore Marine Business The offshore marine business is highly cyclical, correlated with volatile oil and gas prices, and impacted by COVID-19, leading to cold-stacking vessels - The market for offshore support vessels is highly correlated to volatile oil and natural gas prices, negatively impacting exploration and production activity since 2014[227][228] - The company utilizes cold-stacking vessels to reduce operating costs during weak demand, with 22 of 64 owned and leased-in vessels cold-stacked as of December 31, 2020[231] Consolidated Results of Operations In 2020, operating revenues decreased to $141.8 million from $174.5 million in 2019, driven by lower fleet utilization, resulting in an operating loss Consolidated Results of Operations (in thousands) | | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Operating revenues | $141,837 | $174,453 | $179,161 | | Operating Loss | $(71,639) | $(54,328) | $(68,414) | | Loss from Continuing Operations | $(83,346) | $(90,964) | $(82,979) | | Net Loss attributable to SEACOR Marine | $(78,915) | $(92,837) | $(77,608) | Time Charter Statistics | | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Average Rates Per Day Worked ($) | $10,905 | $10,369 | $9,877 | | Fleet Utilization (%) | 55% | 60% | 52% | - In 2020, the company recorded $13.5 million in impairment charges on its liftboat fleet and one specialty vessel, and recognized net losses of $5.3 million on asset disposals[285] Liquidity and Capital Resources The company's liquidity is sourced from cash balances, operations, asset sales, and financing, with $36.0 million cash as of December 31, 2020 - As of December 31, 2020, the company had cash, cash equivalents, and restricted cash of $36.0 million, supplemented by $42.6 million from the Windcat Workboats sale in January 2021[307] Summary of Cash Flows (in thousands) | | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Cash flows (used in) provided by Operating Activities | $(29,723) | $1,662 | $(63,591) | | Cash flows provided by (used in) Investing Activities | $3,823 | $31,030 | $(26,796) | | Cash flows (used in) provided by Financing Activities | $(22,598) | $(25,942) | $68,252 | - As of December 31, 2020, the company had unfunded capital commitments of $11.7 million, primarily for one PSV and miscellaneous equipment[305] - Total contractual long-term debt maturities as of December 31, 2020, amount to $521.9 million, with significant maturities in 2023 ($245.0 million) and 2024 ($134.5 million)[306][307] Critical Accounting Policies and Estimates Management identifies critical accounting policies requiring significant estimates, including revenue recognition, asset impairment, and income tax provisions - The company's critical accounting policies involve significant management estimates, including useful lives of property and equipment, impairment assessments, income tax provisions, and allowance for credit losses[332] - The company performs impairment analysis of long-lived assets when indicators are present, recording an impairment charge if carrying values are not recoverable based on future undiscounted cash flows[347] - For vessel classes not impaired as of December 31, 2020, estimated future undiscounted cash flows exceed carrying values by more than 40%, though these estimates are highly subjective and depend on market recovery[242] Item 7A. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks from foreign currency exchange rates and interest rate fluctuations, managed through forward contracts and interest rate swaps - The company is exposed to foreign currency risk and uses forward contracts to hedge, recording a $0.9 million loss on a £31.5 million swap related to Windcat sale proceeds[350] - As of December 31, 2020, the company had $288.2 million in unhedged variable rate debt; a 1% increase in LIBOR would increase annual interest payments by approximately $2.8 million[351] Item 9A. Controls and Procedures As of December 31, 2020, management concluded that the company's disclosure controls and internal control over financial reporting were effective - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of December 31, 2020[354] - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2020, based on the COSO 2013 framework[359] Part III Items 10-14 Information for Items 10 through 14 is incorporated by reference from the company's forthcoming definitive proxy statement - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the company's forthcoming definitive proxy statement[363][365][366][367][368] Part IV Item 15. Exhibits, Financial Statement Schedules This section contains the company's audited consolidated financial statements, the independent auditor's report, and a list of all exhibits filed with the Form 10-K - This part includes the company's audited consolidated financial statements, the independent auditor's report, and a list of all exhibits filed with the 10-K[370][371] - The independent registered public accounting firm, Grant Thornton LLP, issued an unqualified opinion on the financial statements, affirming fair presentation in conformity with U.S. GAAP[385]