Source: https://ir.stockpr.com/seacorholdings/quarterly-reports/content/0000859598-16-000319/ckh-06302016x10q.htm?TB_iframe=true&amp;height=auto&amp;width=auto&amp;preload=false
Timestamp: 2019-04-19 14:50:45+00:00

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The total number of shares of common stock, par value $.01 per share, outstanding as of July 28, 2016 was 17,320,784. The Registrant has no other class of common stock outstanding.
Basic Earnings (Loss) Per Common Share of SEACOR Holdings Inc.
Diluted Earnings (Loss) Per Common Share of SEACOR Holdings Inc.
The condensed consolidated financial information for the three and six months ended June 30, 2016 and 2015 has been prepared by the Company and has not been audited by its independent registered certified public accounting firm. The condensed consolidated financial statements include the accounts of SEACOR Holdings Inc. and its consolidated subsidiaries. In the opinion of management, all adjustments (consisting of normal recurring adjustments) have been made to fairly present the Company’s financial position as of June 30, 2016, its results of operations for the three and six months ended June 30, 2016 and 2015, its comprehensive income (loss) for the three and six months ended June 30, 2016 and 2015, its changes in equity for the six months ended June 30, 2016, and its cash flows for the six months ended June 30, 2016 and 2015. Results of operations for the interim periods presented are not necessarily indicative of operating results for the full year or any future periods.
As of June 30, 2016, deferred revenues of $6.8 million, included in other current liabilities in the accompanying condensed consolidated balance sheets, related to the time charter of several offshore support vessels scheduled to be paid through the conveyance of an overriding royalty interest (the “Conveyance”) in developmental oil and gas producing properties operated by a customer in the U.S. Gulf of Mexico. Payments under the Conveyance, and the timing of such payments, were contingent upon production and energy sale prices. On August 17, 2012, the customer filed a voluntary petition for Chapter 11 bankruptcy. The Company is vigorously defending its interest in connection with the bankruptcy filing; however, payments received under the Conveyance subsequent to May 19, 2012 are subject to creditors’ claims in bankruptcy court. The Company will recognize revenues when reasonably assured of a judgment in its favor. All costs and expenses related to these charters were recognized as incurred.
Certain interest costs incurred during the construction of equipment are capitalized as part of the assets’ carrying values and are amortized over such assets’ estimated useful lives. During the six months ended June 30, 2016, capitalized interest totaled $9.9 million.
Impairment of Long-Lived Assets. The Company performs an impairment analysis of long-lived assets used in operations, including intangible assets, when indicators of impairment are present. These indicators may include a significant decrease in the market price of a long-lived asset or asset group, a significant adverse change in the manner in which a long-lived asset or asset group is being used or in its physical condition, or a current period operating or cash flow loss combined with a history of operating or cash flow losses or a forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group. If the carrying value of the assets is not recoverable, as determined by the estimated undiscounted cash flows, the carrying value of the assets is reduced to fair value, if lower. Generally, fair value is determined using valuation techniques, such as expected discounted cash flows or appraisals, as appropriate. During the six months ended June 30, 2016 and 2015, the Company recognized impairment charges of $21.3 million and $6.6 million, respectively, related to long-lived assets held for use.
The Company has identified indicators of impairment for certain of its offshore support vessel classes operated by Offshore Marine Services as a result of continued weak market conditions from the decline in oil and gas prices. As a consequence, the Company estimated the undiscounted cash flows and determined that for two vessel classes, its eight owned supply vessels and 13 owned liftboats, there is sufficient uncertainty as to whether or not their carrying value would be recovered through their future operations. During the six months ended June 30, 2016, the Company obtained independent appraisals for each of those vessel classes resulting in a $19.4 million impairment charge related to its 13 liftboats and associated intangible assets. In addition, the Company recognized a $1.9 million impairment charge related to the anticipated sales of one supply vessel and one mini-supply vessel and certain suspended offshore support vessel upgrades.
The preparation of the undiscounted cash flows requires management to make certain estimates and assumptions on expected future rates per day worked and utilization levels of all Offshore Marine Services’ vessel classes based on anticipated future offshore oil and gas exploration and production activity in the geographic regions where the Company operates. If difficult market conditions persist and an anticipated recovery is delayed beyond the Company’s expectation, revisions to management’s forecasts may result in the Company recording additional impairment charges related to its long-lived assets in future periods.
Impairment of 50% or Less Owned Companies. Investments in 50% or less owned companies are reviewed periodically to assess whether there is an other-than-temporary decline in the fair value of the investment. An annual review is performed to consider, among other things, whether the carrying value of the investment is able to be recovered and whether or not the investee’s ability to sustain an earnings capacity would justify the carrying value of the investment. When the Company determines its investment in the 50% or less owned company is not recoverable or the decline in fair value is other-than-temporary, the investment is written down to fair value. Actual results may vary from the Company’s estimates due to the uncertainty regarding the projected financial performance of 50% or less owned companies, the severity and expected duration of declines in value, and the available liquidity in the capital markets to support the continuing operations of the 50% or less owned company. During the six months ended June 30, 2016, the Company recognized a $0.3 million impairment charge, net of tax, related to one of its Offshore Marine Services 50% or less owned companies. During the six months ended June 30, 2015, the Company did not recognize any impairment charges related to its 50% or less owned companies.
For the three months ended June 30, 2016 and 2015, diluted earnings per common share of SEACOR excluded 2,024,421 and 685,645, respectively, of certain share awards as the effect of their inclusion in the computation would be anti-dilutive. For the six months ended June 30, 2016 and 2015, diluted earnings per common share of SEACOR excluded 2,024,421 and 2,017,788, respectively, of certain share awards as the effect of their inclusion in the computation would be anti-dilutive.
For the three months ended June 30, 2016, diluted earnings per common share of SEACOR excluded 2,975,847 common shares issuable pursuant to the Company’s 2.5% Convertible Senior Notes, 1,825,326 common shares issuable pursuant to the Company’s 3.0% Convertible Senior Notes and 2,243,500 common shares issuable pursuant to the Company’s 3.75% Subsidiary Convertible Senior Notes as the effect of their inclusion in the computation would be anti-dilutive. For the six months ended June 30, 2016, diluted earnings per common share of SEACOR excluded 3,177,620 common shares issuable pursuant to the Company’s 2.5% Convertible Senior Notes, 1,825,326 common shares issuable pursuant to the Company’s 3.0% Convertible Senior Notes and 2,243,500 common shares issuable pursuant to the Company’s 3.75% Subsidiary Convertible Senior Notes as the effect of their inclusion in the computation would be anti-dilutive.
For the three and six months ended June 30, 2015, diluted earnings per common share of SEACOR excluded 4,200,525 common shares issuable pursuant to the Company’s 2.5% Convertible Senior Notes and 1,825,326 common shares issuable pursuant to the Company’s 3.0% Convertible Senior Notes as the effect of their inclusion in the computation would be anti-dilutive.
New Accounting Pronouncements. On May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under generally accepted accounting principles in the United States. The core principal of the new standard is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard is effective for annual and interim periods beginning after December 15, 2017 and early adoption is permitted. The Company has not yet selected the method of adoption or determined what impact, if any, the adoption of the new standard will have on its consolidated financial position, results of operations or cash flows.
On March 30, 2016, the FASB issued an amendment to the accounting standards, which simplifies several aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. The amendment is effective for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years and early adoption is permitted. The Company has not yet determined what impact, if any, the adoption of the new standard will have on its consolidated financial position, results of operations or cash flows.
Reclassifications. Certain reclassifications of prior period information have been made to conform with the presentation of the current period information. These reclassifications had no effect on net income (loss) or cash flows as previously reported.
During the six months ended June 30, 2016, capital expenditures were $204.1 million. Equipment deliveries during the six months ended June 30, 2016 included one fast support vessel, one supply vessel, one wind farm utility vessel, one inland river towboat and two U.S.-flag product tankers. In addition, the Company received one U.S.-flag harbor tug as partial consideration for the sale of certain Inland River Services equipment as described below.
During the six months ended June 30, 2016, the Company sold two standby safety vessels, 20 30,000 barrel inland river liquid tank barges, the rights to eight leased-in 30,000 barrel inland river liquid tank barges, 14 inland river towboats, one U.S.-flag product tanker, one U.S.-flag harbor tug and other property and equipment for net proceeds of $153.9 million ($143.9 million in cash, $8.0 million in seller financing and one U.S.-flag harbor tug valued at $2.0 million) and gains of $11.5 million, of which $2.5 million were recognized currently and $9.0 million were deferred (see Note 1). In addition, the Company recognized previously deferred gains of $1.2 million. Equipment dispositions included one 30,000 barrel inland river liquid tank barge and one towboat currently under construction and the sale-leaseback of one U.S.-flag product tanker for $61.0 million with a leaseback term of 76 months. The Company also received $1.2 million of deposits on future equipment sales.
Falcon Global. Falcon Global was formed to construct and operate foreign-flag liftboats. During the six months ended June 30, 2016, the Company and its partner each contributed additional capital of $6.0 million in cash to Falcon Global.
Other Offshore Marine Services. During the six months ended June 30, 2016, the Company made capital contributions of $0.2 million and received dividends of $0.4 million from its other 50% or less owned companies. During the six months ended June 30, 2016, equity in losses of 50% or less owned companies, net of tax, included $3.0 million for the Company’s proportionate share of impairment charges associated with its joint ventured fleet and $0.3 million for an other-than-temporary decline in the fair value of one of its investments in a 50% or less owned company.
SCFCo. SCFCo was established to operate inland river towboats and inland river dry-cargo barges on the Parana-Paraguay Rivers in South America and a terminal facility at Port Ibicuy, Argentina. During the six months ended June 30, 2016, the Company and its partner each contributed additional capital of $0.8 million in cash to SCFCo. As of June 30, 2016, the Company had outstanding loans and working capital advances to SCFCo of $26.9 million.
SEA-Access. SEA-Access owns and operates a U.S.-flag crude oil tanker. During the six months ended June 30, 2016, the Company received dividends of $2.0 million and capital distributions of $7.6 million from SEA-Access.
SeaJon. SeaJon owns an articulated tug-barge operating in the Great Lakes trade. During the six months ended June 30, 2016, the Company received dividends of $0.6 million from SeaJon.
Avion. Avion is a distributor of aircraft and aircraft related parts. During the six months ended June 30, 2016, the Company made advances of $3.0 million to Avion. As of June 30, 2016, the Company had $3.0 million of outstanding loans to Avion.
VA&E. VA&E primarily focuses on the global origination, trading and merchandising of sugar, pairing producers and buyers and arranging for the transportation and logistics of the product. The Company provides an unsecured revolving credit facility to VA&E for up to $6.0 million. During the six months ended June 30, 2016, VA&E borrowed $10.0 million and repaid $8.9 million on the revolving credit facility. As of June 30, 2016, the Company had outstanding advances of $8.2 million to VA&E.
Other. During the six months ended June 30, 2016, the Company made capital contributions and advances of $0.4 million to other 50% or less owned companies.
Guarantees. The Company has guaranteed the payment of amounts owed under a vessel charter, a construction contract and banking facilities by certain of its 50% or less owned companies. As of June 30, 2016, the total amount guaranteed by the Company under these arrangements was $82.6 million. In addition, as of June 30, 2016, the Company had uncalled capital commitments to three of its 50% or less owned companies totaling $3.0 million.
SEACOR’s Board of Directors previously approved a securities repurchase plan that authorizes the Company to acquire SEACOR’s common stock, par value $0.01 per share (“Common Stock”), 7.375% Senior Notes, 3.0% Convertible Senior Notes, and 2.5% Convertible Senior Notes (collectively the “Securities”), which may be acquired through open market purchases, privately negotiated transactions or otherwise, depending on market conditions. As of June 30, 2016, the Company’s repurchase authority for the Securities was $105.9 million.
2.5% Convertible Senior Notes. During the six months ended June 30, 2016, the Company repurchased $76.0 million in principal amount of its 2.5% Convertible Senior Notes for total consideration of $73.8 million. Consideration of $68.8 million was allocated to the settlement of the long-term debt resulting in gains on debt extinguishment of $2.7 million included in the accompanying condensed consolidated statements of income (loss). Consideration of $5.0 million was allocated to the purchase of the conversion option embedded in the 2.5% Convertible Senior Notes as included in the accompanying condensed consolidated statements of changes in equity. The outstanding principal amount of these notes was $208.5 million as of June 30, 2016.
7.375% Senior Notes. During the six months ended June 30, 2016, the Company purchased $22.6 million in principal amount of its 7.375% Senior Notes for $20.3 million resulting in gains on debt extinguishment of $2.1 million included in the accompanying condensed consolidated statements of income (loss). The outstanding principal amount of these notes was $173.4 million as of June 30, 2016.
Windcat Workboats Credit Facility. On May 24, 2016, Windcat Workboats entered into a €25.0 million revolving credit facility secured by the Company’s wind farm utility vessel fleet. Borrowings under the facility bear interest at variable rates based on EURIBOR plus a margin ranging from 3.00% to 3.30% per annum plus mandatory lender costs. A quarterly commitment fee is payable based on the unfunded portion of the commitment amount at rates ranging from 1.20% to 1.32% per annum. During the six months ended June 30, 2016, Windcat Workboats drew $23.5 million (€21.0 million) under the facility to repay all of its then outstanding debt totaling $22.9 million and incurred issuance costs of $0.6 million related to this facility.
Sea-Cat Crewzer III Term Loan Facility. On April 21, 2016, Sea-Cat Crewzer III LLC (“Sea-Cat Crewzer III”) entered into a €27.6 million term loan facility (payable in US dollars) secured by the Company’s vessels currently under construction. Borrowings under the facility bear interest at a Commercial Interest Reference Rate, currently 2.76%. A quarterly commitment fee is payable based on the unfunded portion of the commitment amount at a rate of 0.45%. During the six months ended June 30, 2016, Sea-Cat Crewzer III incurred issuance costs of $0.5 million related to this facility. Subsequent to June 30, 2016, Sea-Cat Crewzer III drew $8.9 million related to this facility.
SEA-Vista Credit Facility. During the six months ended June 30, 2016, SEA-Vista borrowed $47.0 million on the Revolving Loan and made scheduled repayments of $1.9 million on the Term A-1 Loan. As of June 30, 2016, SEA-Vista had $40.0 million of borrowing capacity under the SEA-Vista Credit Facility. Subsequent to June 30, 2016, SEA-Vista borrowed $19.0 million on the Revolving Loan.
ICP Revolving Credit Facility. As of June 30, 2016, ICP had $15.7 million of borrowing capacity under this facility.
Other. During the six months ended June 30, 2016, the Company made scheduled payments on other long-term debt of $1.9 million and received proceeds from the issuance of other long-term debt of $7.5 million, net of issuance costs of $0.1 million. As of June 30, 2016, the Company had outstanding letters of credit totaling $26.2 million with various expiration dates through 2019 and other labor and performance guarantees of $1.8 million.
Included in other current liabilities in the accompanying condensed consolidated balance sheets, except for the exchange option liability on subsidiary convertible notes.
Fair Value Hedges. From time to time, the Company may designate certain of its foreign currency exchange contracts as fair value hedges in respect of capital commitments denominated in foreign currencies. By entering into these foreign currency exchange contracts, the Company may fix a portion of its capital commitments denominated in foreign currencies in U.S. dollars to protect against currency fluctuations. As of June 30, 2016, the Company had euro denominated forward currency exchange contracts with an aggregate U.S. dollar equivalent of $11.6 million related to offshore support vessels scheduled to be delivered in 2017. During the six months ended June 30, 2016, the fair value of these contracts decreased by $0.3 million and was included as an increase to the corresponding hedged equipment included in construction in progress in the accompanying condensed consolidated balance sheets.
The Company had two interest rate swap agreements maturing in 2021 that call for the Company to pay a fixed rate of interest of (0.03)% on the aggregate notional value of €15.0 million ($16.7 million) and receive a variable interest rate based on EURIBOR on the aggregate notional value.
MexMar had four interest rate swap agreements with maturities in 2023 that call for MexMar to pay a fixed rate of interest ranging from 1.71% to 2.05% on the aggregate amortized notional value of $111.6 million and receive a variable interest rate based on LIBOR on the aggregate amortized notional value.
Sea-Cat Crewzer II had an interest rate swap agreement maturing in 2019 that calls for Sea-Cat Crewzer II to pay a fixed rate of interest of 1.52% on the amortized notional value of $24.4 million and receive a variable interest rate based on LIBOR on the amortized notional value.
Sea-Cat Crewzer had an interest rate swap agreement maturing in 2019 that calls for Sea-Cat Crewzer to pay a fixed rate of interest of 1.52% on the amortized notional value of $21.7 million and receive a variable interest rate based on LIBOR on the amortized notional value.
SeaJon had an interest rate swap agreement maturing in 2017 that calls for SeaJon to pay a fixed interest rate of 2.79% on the amortized notional value of $31.5 million and receive a variable interest rate based on LIBOR on the amortized notional value.
The exchange option liability relates to a bifurcated embedded derivative in the Company’s 3.75% Subsidiary Convertible Senior Notes.
The Company enters and settles forward currency exchange, option and future contracts with respect to various foreign currencies. As of June 30, 2016, the outstanding forward currency exchange contracts translated into a net purchase of foreign currencies with an aggregate U.S. dollar equivalent of $2.1 million. These contracts enable the Company to buy currencies in the future at fixed exchange rates, which could offset possible consequences of changes in currency exchange rates with respect to the Company’s business conducted outside of the United States. The Company generally does not enter into contracts with forward settlement dates beyond twelve to eighteen months.
OSV Partners had two interest rate swap agreements with maturities in 2020 that call for OSV Partners to pay a fixed rate of interest ranging from 1.89% to 2.27% on the aggregate amortized notional value of $40.6 million and receive a variable interest rate based on LIBOR on the aggregate amortized notional value.
Dynamic Offshore had an interest rate swap agreement maturing in 2018 that calls for Dynamic Offshore to pay a fixed interest rate of 1.30% on the amortized notional value of $78.8 million and receive a variable interest rate based on LIBOR on the amortized notional value.
The Company and certain of its 50% or less owned companies enter and settle positions in various exchange and non-exchange traded commodity swap, option and future contracts. ICP enters into exchange traded positions (primarily corn, ethanol and natural gas) to protect its raw material and finished goods inventory balances from market changes. VA&E enters into exchange traded positions to protect its fixed price future purchase and sale contracts for sugar as well as its inventory balances from market changes. As of June 30, 2016, the net market exposure to these commodities under these contracts was not material.
Marketable security gains (losses), net include unrealized losses of $24.0 million and gains of $0.6 million for the three months ended June 30, 2016 and 2015, respectively, related to marketable security positions held by the Company as of June 30, 2016. Marketable security gains (losses), net include unrealized losses of $48.5 million and gains of $0.4 million for the six months ended June 30, 2016 and 2015, respectively, related to marketable security positions held by the Company as of June 30, 2016.
as the overall returns are uncertain due to certain provisions for additional payments contingent upon future events. Considerable judgment was required in developing certain of the estimates of fair value and, accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.
During the six months ended June 30, 2016, the Company recognized impairment charges of $19.4 million related to Offshore Marine Services’ liftboat fleet and associated intangible assets and $1.9 million related to the anticipated sale of two offshore support vessels and certain suspended offshore support vessel upgrades. The fair value of the two offshore support vessels was determined based on the contracted sales prices of the vessels. The fair value of the liftboats was determined based on a third-party valuation of the fleet using significant inputs that are unobservable in the market and therefore is considered a Level 3 fair value measurement. The significant unobservable inputs used in the fair value measurement were the construction costs of similar new equipment and estimated economic depreciation for comparably aged assets.
During the six months ended June 30, 2016, the Company identified indicators of impairment in one of its cost investments and, as a consequence, recognized an impairment charge of $1.0 million for an other-than-temporary decline in fair value. The fair value was determined by an appraisal of the vessels in the underlying cost investment using a mix of inputs that are unobservable in the market and therefore is considered a Level 3 fair value measurement.
During the six months ended June 30, 2016, the Company identified indicators of impairment in one of its 50% or less owned companies as a result of continuing weak market conditions and, as a consequence, recognized a $0.3 million impairment charge, net of tax, for an other-than-temporary decline in fair value. The investment was determined to have no value and the Company has suspended equity method accounting.
During the six months ended June 30, 2016, the Company recorded a $6.7 million reserve for one of its notes receivable from third parties following a decline in the underlying collateral value. The collateral was determined to have no value.
SEACOR’s Board of Directors previously approved a securities repurchase plan that authorizes the Company to acquire its Securities, which may be acquired through open market purchases, privately negotiated transactions or otherwise, depending on market conditions. As of June 30, 2016, the Company’s repurchase authority for the Securities was $105.9 million.
During the six months ended June 30, 2016, the Company purchased 47,455 shares of Common Stock for treasury for an aggregate purchase price of $2.4 million from its employees to cover their tax withholding obligations upon the lapsing of restrictions on share awards. These shares were purchased in accordance with the terms of the Company’s Share Incentive Plans and not pursuant to the repurchase authorizations granted by SEACOR’s Board of Directors.
Windcat Workboats. Windcat Workboats owns and operates the Company’s wind farm utility vessels that are primarily used to move personnel and supplies in the major offshore wind markets of Europe. As of June 30, 2016, the net assets of Windcat Workboats were $23.8 million. During the six months ended June 30, 2016, the net loss of Windcat Workboats was $3.3 million, of which $0.8 million was attributable to noncontrolling interests. During the six months ended June 30, 2015, the net income of Windcat Workboats was $3.6 million, of which $0.9 million was attributable to noncontrolling interests.
SEA-Vista. SEA-Vista owns and operates the Company’s fleet of U.S.-flag product tankers used in the U.S. coastwise trade of crude oil, petroleum and specialty chemical products. As of June 30, 2016, the net assets of SEA-Vista were $201.8 million. During the six months ended June 30, 2016, the net income of SEA-Vista was $21.7 million, of which $10.6 million was attributable to noncontrolling interests. During the six months ended June 30, 2015, the net loss of SEA-Vista was $25.9 million, of which $12.7 million was attributable to noncontrolling interests.
Illinois Corn Processing. ICP owns and operates an alcohol manufacturing, storage and distribution facility located in Pekin, IL. As of June 30, 2016, the net assets of ICP were $67.9 million. During the six months ended June 30, 2016, the net income of ICP was $4.7 million, of which $1.4 million was attributable to noncontrolling interests. During the six months ended June 30, 2015, the net income of ICP was $14.6 million, of which $4.4 million was attributable to noncontrolling interests.
AMOPP. During the six months ended June 30, 2016, the Company received notification from the AMOPP that the Company’s withdrawal liability as of September 30, 2015 was $46.7 million based on an actuarial valuation performed as of that date. That liability may change in future years based on various factors, primarily employee census. As of June 30, 2016, the Company has no intention to withdraw from the AMOPP and no deficit amounts have been invoiced. Depending upon the results of the future actuarial valuations and the ten-year rehabilitation plan, it is possible that the AMOPP will experience further funding deficits, requiring the Company to recognize additional payroll related operating expenses in the periods invoices are received or contribution levels are increased.
Offshore Marine Services' capital commitments included nine fast support vessels, four supply vessels and one wind farm utility vessel. These commitments included $14.2 million for one supply vessel that may be assumed by a third party at their option. Shipping Services’ capital commitments included two U.S.-flag product tankers, one U.S.-flag chemical and petroleum articulated tug barge and two U.S.-flag harbor tugs and other equipment and upgrades. Inland River Services’ capital commitments included 50 dry-cargo barges, three inland river towboats and other equipment and upgrades.
On December 15, 2010, both ORM and NRC, a subsidiary of the Company prior to the SES Business Transaction were named as defendants in one of the several “master complaints” filed in the overall multi-district litigation relating to the Deepwater Horizon oil spill response and clean-up in the Gulf of Mexico pending in the U.S. District Court for the Eastern District of Louisiana (the “MDL”). The “B3” master complaint naming ORM and NRC asserts various claims on behalf of a putative class against multiple defendants concerning the clean-up activities generally and the use of dispersants specifically. Both prior to and following the filing of the aforementioned master complaint, individual civil actions naming the Company, ORM, and/or NRC alleging B3 exposure-based injuries and/or damages were consolidated with the MDL and stayed pursuant to court order, discussed in turn below. The Company believes that all of the B3 claims asserted against ORM and NRC have no merit, and on February 28, 2011, ORM and NRC moved to dismiss all claims asserted against them in the master complaint. On September 30, 2011, the Court granted in part and denied in part the motion to dismiss that ORM and NRC had filed although the Court recognized the validity of the derivative immunity and implied preemption arguments that ORM and NRC advanced in their motion and directed ORM and NRC to (i) conduct limited discovery to develop evidence to support those arguments and (ii) then re-assert those arguments. A schedule for limited discovery and motion practice was established by the Court and, in accordance with that schedule, ORM and NRC filed for summary judgment re-asserting their immunity and preemption arguments on May 18, 2012. Those motions were argued on July 13, 2012 and taken under advisement. On July 17, 2014, the Court issued a pretrial order that established a protocol for disclosures clarifying the basis for the B3 claims asserted against the Clean-Up Responder Defendants, including ORM and NRC, in the MDL, whether by joinder in the master complaint, individual complaint or otherwise. Under this protocol, plaintiffs who satisfied certain criteria and believed they had specific evidence in support of their claims, including that any Clean-Up Responder Defendant(s) failed to act pursuant to the authority and direction of the federal government in conducting Deepwater Horizon oil spill remediation and clean-up operations, had to submit a sworn statement or face dismissal. Plaintiffs’ deadline to serve such sworn statements in support of their claims was September 22, 2014, with the exception of several Plaintiffs who were granted an extension until October 10, 2014. On November 14, 2014, the Clean-Up Responder Defendants and the Plaintiffs’ Steering Committee (“PSC”) in the MDL submitted a joint report to the Court regarding claimants’ compliance with the pretrial order. In this joint report, the parties (i) explained how they complied with the notice requirements of the Court’s July 17, 2014 pretrial order, (ii) noted that they had received 102 sworn statements in connection with this pretrial order, and (iii) provided the Court with an assessment of the sworn statements received. An additional sworn statement was received after the joint report was submitted. On January 7, 2016, the Court issued an Order to Show Cause (“OSC”) as to the B3 claims against the Clean-Up Responder Defendants, including ORM and NRC. The OSC ordered any plaintiff(s) opposed to the Court entering the proposed Order & Reasons (“O&R”) attached to the OSC to show cause, in writing, on or before January 28, 2016 why the Court should not dismiss their B3 claim(s) with prejudice for the reasons set forth in the O&R. The O&R addressed the pending summary judgment motions and stated, among other things, why the Clean-Up Responder Defendants are entitled to derivative immunity under the Clean Water Act and discretionary function immunity under the Federal Tort Claims Act, and why Plaintiffs’ claims are preempted by the implied conflict preemption doctrine. The O&R also discussed the results of the protocol delineated in the Court’s July 17, 2014 pretrial order and concluded with the dismissal of all but eleven Plaintiffs’ B3 claims against the Clean-Up Responder Defendants with prejudice. Eight individual Plaintiffs submitted responses to the OSC by the January 28, 2016 deadline, and the Clean-Up Responder Defendants submitted a response thereto on February 4, 2016. On February 16, 2016, the Court issued an order overruling the objections relayed in the eight individual Plaintiffs’ responses to the OSC, and then entered a dismissal order nearly identical to the O&R. Accordingly, the final Order & Reasons entered on February 16, 2016 dismissed all but eleven B3 claims against ORM and NRC with prejudice, whether by joinder in the master complaint, individual complaint, or otherwise (the “B3 Dismissal Order”). The deadline for Plaintiffs to appeal the B3 Dismissal Order has passed and the Company continues to evaluate how this ruling will impact the individual civil actions. Moreover, on April 8, 2016, the Court entered an order establishing a summary judgment briefing schedule as to the remaining eleven B3 claimants (the “Remaining Eleven Plaintiffs”). The Clean-Up Responder Defendants, including ORM and NRC, filed an omnibus motion for summary judgment as to the Remaining Eleven Plaintiffs on May 9, 2016 (the “Omnibus Summary Judgment Motion”) and this motion is now fully briefed. In addition to the indemnity provided to ORM, pursuant to contractual agreements with the responsible party, the responsible party has agreed, subject to certain potential limitations, to indemnify and defend ORM and NRC in connection with the B3 claims in the MDL. Although the Company is unable to estimate the potential exposure, if any, resulting from the remaining B3 claims, the Company does not expect they will have a material effect on the Company’s consolidated financial position, results of operations or cash flows.
for the Parish of Orleans in the State of Louisiana, John Wunstell, Jr. and Kelly Blanchard v. BP, et al., No. 2010-7437 (Division K) (the “Wunstell Action”), in which they assert, among other theories, that Mr. Wunstell suffered injuries as a result of his exposure to certain noxious fumes and chemicals in connection with the provision of remediation, containment, and response services by ORM during the Deepwater Horizon oil spill response and clean-up in the U.S. Gulf of Mexico. Mr. Wunstell is one of the Remaining Eleven Plaintiffs and his claim is subject to the Omnibus Summary Judgment Motion; Ms. Blanchard’s B3 claim against ORM was dismissed by virtue of the B3 Dismissal Order. On April 8, 2011, ORM was named as a defendant in Johnson Bros. Corporation of Louisiana v. BP, PLC, et al., No. 2:11-CV-00781 (E.D. La.), which is a suit by an individual business seeking damages allegedly caused by a delay on a construction project alleged to have resulted from the clean-up operations. On April 15, 2011, the Company, ORM, and NRC were named as defendants in James and Krista Pearson v. BP Exploration & Production, Inc. (“BP Exploration”), et al., No. 2:11-CV-00863 (E.D. La.) (the “Pearson Action”), which is a suit by a husband and wife who allegedly participated in the clean-up effort and are seeking damages for personal injury, property damage to their boat, and amounts allegedly due under contract. The B3 claims against ORM and NRC in the Pearson Action have been dismissed by virtue of the B3 Dismissal Order, and the remainder of the claims alleged by these plaintiffs have been voluntarily dismissed against certain named defendants, including the Company, ORM and NRC. On April 15, 2011, ORM and NRC were named as defendants in Thomas Edward Black v. BP Exploration, et al., No. 2:11-CV-00867 (E.D. La.) (the “Black Action”), which is a suit by an individual who is seeking damages for, among other things, lost income because he allegedly could not find work in the fishing industry after the oil spill and exposure during the spill. The B3 exposure claims against ORM and NRC in the Black Action have been dismissed by virtue of the B3 Dismissal Order. On April 20, 2011, a complaint was filed in Darnell Alexander, et al. v. BP, PLC, et al., No. 2:11-CV-00951 (E.D. La.) (the”Alexander Action”) on behalf of 117 individual plaintiffs that sought to adopt the allegations made in the referenced master complaint against ORM and NRC (and the other defendants). Plaintiffs in this matter were then granted leave to amend their complaint to include 410 additional individual plaintiffs. The claims asserted against ORM and NRC in the Alexander Action have been dismissed by virtue of the B3 Dismissal Order. On October 3, 2012, ORM and NRC were served with a Rule 14(c) Third-Party Complaint by Jambon Supplier II, L.L.C. and Jambon Marine Holdings L.L.C. in their Limitation of Liability action, In the Matter of Jambon Supplier II, L.L.C., et al., No. 2:12-CV-00426 (E.D. La.). This Third-Party Complaint alleges that if claimant David Dinwiddie, who served as a clean-up crewmember aboard the M/V JAMBON SUPPLIER II vessel during the clean-up efforts, was injured as a result of his exposure to dispersants and chemicals during the course and scope of his employment, then said injuries were caused by the third-party defendants. On November 25, 2012, ORM was named as a defendant in Victoria Sanchez v. American Pollution Control Corp. et al., No. 2:12-CV-00164 (E.D. La.), a maritime suit filed by an individual who allegedly participated in the clean-up effort and sustained personal injuries during the course of such employment. Ms. Sanchez’s B3 claim against ORM has been dismissed by virtue of the B3 Dismissal Order. On December 17, 2012, the Court unsealed a False Claims Act lawsuit naming ORM as a defendant, Dillon v. BP, PLC et al., No. 2:12-CV-00987 (E.D. La.), which is a suit by an individual seeking damages and penalties arising from alleged false reports and claims made to the federal government with respect to the amount of oil burned and dispersed during the clean-up. The federal government has declined to intervene in this suit. On April 8, 2013, the Company, ORM, and NRC were named as defendants in William and Dianna Fitzgerald v. BP Exploration et al., No. 2:13-CV-00650 (E.D. La.) (the “Fitzgerald Action”), which is a suit by a husband and wife whose son allegedly participated in the clean-up effort and became ill as a result of his exposure to oil and dispersants. While the decedent in the Fitzgerald Action is one of the Remaining Eleven Plaintiffs subject to the Omnibus Summary Judgment Motion filed by ORM and NRC, the claim as against the Company remains stayed. Finally, on April 17, 2013, ORM was named as a defendant in Danos et al. v. BP America Production Co. et al., No. 2:13-CV-03747 (removed to E.D. La.) (the “Danos Action”), which is a suit by eight individuals seeking damages for dispersant exposure either as a result of their work during clean-up operations or as a result of their residence in the Gulf. Messrs. Jorey Danos and Frank Howell, plaintiffs in the Danos Action, are two of the Remaining Eleven Plaintiffs and their claims are subject of the Omnibus Summary Judgment Motion; the other Danos Action plaintiffs’ B3 claims against ORM have been dismissed by virtue of the B3 Dismissal Order. The Company continues to evaluate the impact of the B3 Dismissal Order and other developments in the MDL, including the settlements discussed below, on these individual actions. The Company is unable to estimate the potential exposure, if any, resulting from these matters, to the extent they remain viable, but believes they are without merit and does not expect that they will have a material effect on its consolidated financial position, results of operations or cash flows.
actions but believes they are without merit and does not expect that these matters will have a material effect on its consolidated financial position, results of operations or cash flows.
On November 16, 2012, 668 individuals who served as beach clean-up workers in Escambia County, Florida during the Deepwater Horizon oil spill response commenced a civil action in the Circuit Court for the First Judicial Circuit of Florida, in and for Escambia County, Abney et al. v. Plant Performance Services, LLC et al., No. 2012-CA-002947, in which they allege, among other things, that ORM and other defendants engaged in the contamination of Florida waters and beaches in violation of Florida Statutes Chapter 376 and injured the Plaintiffs by exposing them to dispersants during the course and scope of their employment. This case was removed to federal court and ultimately consolidated with the MDL on April 2, 2013. On April 22, 2013, a companion case to this matter was filed in the U.S. District Court for the Northern District of Florida, Abood et al. v. Plant Performance Services, LLC et al., No. 3:13-CV-00284 (N.D. Fla.), which alleges identical allegations against the same parties but names an additional 174 Plaintiffs, all of whom served as clean-up workers in various Florida counties during the Deepwater Horizon oil spill response. This case was consolidated with the MDL on May 10, 2013. By court order, both of these matters have been stayed since they were consolidated with the MDL. The Company continues to evaluate the impact of the B3 Dismissal Order and other developments in the MDL, including the settlements discussed below, on these cases. The Company is unable to estimate the potential exposure, if any, resulting from these matters but believes they are without merit, and does not expect that these matters will have a material effect on its consolidated financial position, results of operations or cash flows.
Separately, on March 2, 2012, the Court announced that BP Exploration and BP America Production Company (“BP America”) (collectively “BP”) and the Plaintiffs had reached an agreement on the terms of two proposed class action settlements that will resolve, among other things, Plaintiffs’ economic loss claims and clean-up related claims against BP. Both settlements were granted final approval by the Court, all appeals have concluded, and the deadline for submitting claims with respect to both settlements has passed. Although neither the Company, ORM, nor NRC are parties to the settlement agreements, the Company, ORM, and NRC are listed as released parties on the releases accompanying both settlement agreements. Consequently, class members who did not file timely requests for exclusion will be barred from pursuing economic loss, property damage, personal injury, medical monitoring, and/or other released claims against the Company, ORM, and NRC. The Company believes these settlements have reduced the potential exposure, if any, from some of the pending actions described above, and continues to evaluate the settlements’ impacts on these cases.
The Company’s segment presentation and basis of measurement of segment profit or loss are as previously described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. The following tables summarize the operating results, capital expenditures and assets of the Company’s reportable segments.
Operating revenues includes $84.9 million of tangible product sales and operating expenses includes $77.2 million of costs of goods sold.
Inventories includes raw materials of $1.0 million and work in process of $1.3 million.

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