EDGAR 10-K Filing

Company CIK: 1690334
Filing Year: 2021
Filename: 1690334_10-K_2021_0001564590-21-012639.json

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ITEM 1. BUSINESS
ITEM 1.
BUSINESS
General
Unless the context indicates otherwise, the terms “we,” “our,” “ours,” “us,” “its” and the “Company” refer to SEACOR Marine Holdings Inc. and its consolidated subsidiaries. “SEACOR Marine” refers to SEACOR Marine Holdings Inc., incorporated in 2014 in Delaware, without its subsidiaries. “Common Stock” refers to the common stock, par value $0.01 per share, of SEACOR Marine. The Company’s fiscal year ends on December 31 of each year.
SEACOR Marine’s principal executive office is located at 12121 Wickchester Lane, Suite 500, Houston, Texas 77079, and its telephone number is (346) 980-1700. SEACOR Marine’s website address is www.seacormarine.com. Any reference to SEACOR Marine’s website is not intended to incorporate the information on the website into this Annual Report on Form 10-K.
The Company’s corporate governance documents, including SEACOR Marine’s Board of Directors’ Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee charters as well as the Company’s Corporate Governance Guidelines and Code of Ethics are available, free of charge, on SEACOR Marine’s website or in print for stockholders.
All of the Company’s periodic reports filed with the SEC pursuant to Section 13(a), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), are available, free of charge, on SEACOR Marine’s website, including its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements and any amendments to those reports. These reports and amendments are available on SEACOR Marine’s website as soon as reasonably practicable after the Company electronically files the reports or amendments with the SEC. The SEC maintains a website (www.sec.gov) that contains these reports, proxy and information statements and other information.
Business
The Company provides global marine and support transportation services to offshore energy facilities worldwide. The Company and its joint ventures operate and manage a diverse fleet of offshore support vessels that (i) deliver cargo and personnel to offshore installations including wind farms, (ii) handle anchors and mooring equipment required to tether rigs to the seabed, (iii) tow rigs and assist in placing them on location and moving them between regions, (iv) provide construction, well work-over, maintenance and decommissioning support and (v) carry and launch equipment used underwater in drilling and well installation, maintenance, inspection and repair. Additionally, the Company’s vessels provide accommodations for technicians and specialists, safety support and emergency response services.
As a result of the announced sale of Windcat Workboats Holdings Ltd (“Windcat Workboats”), the Company’s indirect wholly owned subsidiary, and the crew transfer vessel (“CTV”) business of Windcat Workboats (the “Windcat Workboats CTV Business”) on December 18, 2020, the Company classified the CTV assets of the Windcat Workboats CTV Business as held for sale as of the end of the fourth quarter 2020. Unless the context indicates otherwise, all of the results for all periods presented exclude the CTV operations of the Windcat Workboats CTV Business which are classified as Assets held for sale.
For a discussion of risk and economic factors that may impact the Company’s financial position and its results of operations, see “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Equipment and Services
The following tables identify the types of vessels that comprise the Company’s fleet as of December 31 for the indicated years. “Owned” are majority owned and controlled by the Company. “Joint-Ventured” are owned or operated by entities in which the Company does not have a controlling interest. “Leased-in” may either be vessels contracted from leasing companies to which the Company may have sold such vessels or vessels chartered-in from other third-party owners. “Managed” are owned by entities not affiliated with the Company but operated by the Company for a fee. A description of vessel classes follows this table.
Owned Fleet
Owned (1)
Joint-
Ventured
Leased -
in
Managed
Total
Average
Age
U.S.-
Flag
Foreign-
Flag
2020 (2)
Supply
-
FSV
Liftboats
-
-
AHTS
-
-
Specialty
-
-
-
-
-
-
CTV Assets Held for Sale
-
-
-
CTV Continuing Operations
-
-
-
-
Supply
-
-
FSV
Liftboats
-
-
CTV Assets Held for Sale
-
-
-
CTV Continuing Operations
-
-
-
-
AHTS
-
-
Specialty
-
-
Supply
-
FSV
Liftboats
-
-
CTV Assets Held for Sale
-
-
-
CTV Continuing Operations
-
-
-
-
AHTS
Specialty
-
-
Standby safety Discontinued Operations
-
-
-
(1)
CTV Assets Held for Sale excludes one CTV owned and removed from service as of December 31, 2020.
(2)
As of December 31, 2020, 51 of the Company’s owned and leased-in vessels were outfitted with dynamic positioning (“DP”) systems. DP systems enable vessels to maintain a fixed position in close proximity to a rig or platform. The most technologically advanced DP systems have enhanced redundancy in the vessel’s power, electrical, computer and reference systems enabling vessels to maintain accurate position-keeping even in the event of failure of one of those systems (“DP-2”) and, in some cases, in the event of fire and flood (“DP-3”).
Supply vessels (also known as platform supply vessels (“PSVs”)) generally range from 190 to more than 300 feet in length and are primarily used to deliver general cargo, drilling fluids, bulk products, methanol, diesel fuel and water to rigs and platforms where drilling and work-over activity is underway. These vessels are capable of being modified for a wide variety of other uses and missions, including, but not limited to, construction support typically when fitted with a crane, standby, security, firefighting, and accommodation. Relevant differentiating features of supply vessels are total carrying capacity (expressed as deadweight: “dwt”), available area of clear deck space, below-deck capacity for storage of mud and bulk products used in the drilling process, tank storage for water and fuel oil, fuel efficiency and accommodation capacity. Additional factors in the commercial marketability of supply vessels are operating draft because certain markets are limited in the size of vessel that can work safely, local flag preference, cabotage requirements and regulations. To improve station keeping ability, many modern supply vessels have DP systems capabilities. As of December 31, 2020, 14 of the 15 owned supply vessels, 17 of the 27 joint-ventured supply vessels and one managed supply vessel were equipped with DP-2. The remaining joint-ventured supply vessels were equipped with DP-1 and the remaining owned
vessel was not equipped with DP. To improve fuel efficiency, reduce carbon and other emissions, and provide greater redundancy, supply vessels are sometimes equipped with hybrid power systems. As of December 31, 2020, six of the 15 owned supply vessels, and three of the 27 joint-ventured supply vessels were equipped with hybrid power systems.
Fast support vessels (“FSVs”) are aluminum hull vessels used primarily to move cargo and personnel to and from offshore drilling rigs, platforms and other installations at greater speeds than traditional steel hull support vessels. FSVs can be catamaran or mono-hull vessels ranging from 145 to 205 feet in length and capable of speeds between 20 to 45 knots with capacities to carry special cargo, support both drilling operations and production services and transport passengers. The Company’s FSV fleet includes vessels that have a passenger capacity of 36 to 150 and, on certain newer FSVs, include reclining seating, ambient lighting and other features to enhance comfort and marketability for passenger transport. FSVs built within the last ten years are sometimes equipped with DP-2 systems, firefighting equipment, hospitals, walk to work and ride control systems for greater comfort and performance. As of December 31, 2020, 24 of the 27 owned and leased-in FSVs were equipped with DP-2, one was equipped with DP-1, and two were equipped with DP-3. As of December 31, 2020, three of the four joint-ventured FSVs were not equipped with DP and the remaining joint-ventured vessel was equipped with a DP-2 system.
Liftboats provide a self-propelled, stable platform to perform wind farm installation and maintenance, production platform construction, inspection, maintenance and removal, well intervention and work-over, well production enhancement, well plug and abandonment, pipeline installation and maintenance and diving operations. The length of jacking legs (235 feet to 335 feet for the Company’s liftboats) determines the water depth in which these vessels can work. Other differentiating features are crane lifting capacity and reach, clear deck area, helipad and electrical generating power and accommodation capacity. Liftboats are used in all of our operating areas. As of December 31, 2020, three of the 15 owned and leased-in liftboats were equipped with DP-2, one with DP-1 and the remaining liftboats were not equipped with DP.
CTVs are used primarily to move personnel and supplies to offshore wind farms. These are Windcat series vessels that feature a catamaran hull with flush foredeck, providing a stable platform from which personnel can safely transfer to wind turbines, and are capable of speeds between 25 and 31 knots. As a result of the sale of Windcat Workboats CTV Business on January 12, 2021 that was announced in December, 2020, the results of operations of CTV vessels owned by the Windcat Workboats CTV Business are classified in discontinued operations for 2020, 2019 and 2018, and the assets of the Windcat Workboats CTV Business are classified as Assets held-for-sale as of December 31, 2020.
Anchor handling towing supply (“AHTS”) vessels are used primarily to support offshore drilling activities by towing, positioning and mooring drilling rigs and other marine equipment. AHTS vessels are also used to carry and launch equipment such as remote operated vehicles (“ROVs”) used underwater in drilling and well installation, maintenance, and repair and transport supplies and equipment from shore bases to offshore drilling rigs, platforms and other installations, including floating wind farm installations. The defining characteristics of AHTS vessels are: (i) horsepower (“bhp”); (ii) bollard pull, which is the pulling capacity of the AHTS vessel and is important for towing and positioning rigs; (iii) winch size in terms of “line pull” and brake holding capacity; and (iv) wire storage capacity. The Company’s fleet of AHTS vessels has varying capabilities and supports offshore mooring activities in water depths ranging from 300 to 8,000 feet. Most modern AHTS vessels are equipped with DP systems and can also carry drilling fluids and bulk products below-deck. As of December 31, 2020, all six of the Company’s owned and leased-in AHTS vessels were equipped with DP-2.
Specialty vessels include anchor handling tugs, accommodation, line handling and other vessels. These vessels generally have specialized features adapting them to specific applications including offshore maintenance and construction services, freight hauling services and accommodation services. As of December 31, 2020, two of the three joint-ventured specialty vessels were equipped with DP-2 and the remaining specialty vessel was equipped with DP-1.
In addition to its existing fleet, the Company has new construction projects in progress, as of December 31, 2020, for two offshore support vessels, including:
•
one U.S.-flag, DP-2 supply vessel scheduled for delivery in the second quarter of 2021; and
•
one U.S.-flag, DP-2 FSV with an uncertain delivery date as the Company, at its option, may defer its construction for an indefinite period of time.
Markets
The Company operates its fleet in five principal geographic regions: the United States (“U.S.”), primarily in the Gulf of Mexico; Africa, primarily in West Africa; the Middle East and Asia; Latin America, primarily in Mexico, Brazil and Guyana; and Europe, primarily in the North Sea. The Company’s vessels are highly mobile and regularly and routinely move between countries within a geographic region. In addition, the Company’s vessels are redeployed among its geographic regions, subject to flag restrictions, as changes in market conditions dictate.
The table below sets forth vessel types by geographic market as of December 31 for the indicated years. The Company sometimes participates in joint venture arrangements in certain geographical locations in order to enhance marketing capabilities and facilitate operations in certain foreign markets allowing for the expansion of its fleet and operations while diversifying risks and reducing capital outlays associated with such expansion.
United States, primarily U.S. Gulf of Mexico:
Supply
FSV
Liftboats
AHTS
Specialty
-
Africa, primarily West Africa:
Supply
FSV
AHTS
Middle East and Asia:
Supply
FSV
Liftboats
Crew transfer Assets Held for Sale
-
Crew transfer Continuing Operations
AHTS
Specialty
-
Latin America:
Supply
FSV
Liftboats
-
Specialty
Europe, primarily North Sea:
Supply
Liftboat
-
Crew transfer Assets Held for Sale
Standby safety Discontinued Operations
-
-
Total Foreign Fleet
Total Fleet
United States, primarily U.S. Gulf of Mexico. As of December 31, 2020, 23 vessels were located in the U.S. Gulf of Mexico, including 17 owned, three leased-in, two joint-ventured and one managed-in. The Company’s vessels in this market support deepwater anchor handling, fast cargo transport, general cargo transport, well intervention, work-over, decommissioning and diving support operations.
Africa, primarily West Africa. As of December 31, 2020, 15 vessels were located in West Africa, including 13 owned, one leased-in and one joint-ventured. The Company’s vessels in this area generally support projects for major oil companies, primarily in Angola and Nigeria.
Middle East and Asia. As of December 31, 2020, 23 vessels were located in the Middle East and Asia, including 20 owned, two joint-ventured and one managed. The Company’s vessels in this area generally support exploration, personnel transport and seasonal construction activities in Egypt, Israel and Malaysia and countries along the Arabian Gulf and Arabian Sea, such as Saudi Arabia, the United Arab Emirates and Qatar.
Latin America. As of December 31, 2020, 38 vessels were located in this region, including eight owned and 30 joint-ventured. Of these joint-ventured vessels, (i) 16 are owned by Mantenimiento Express Maritimo, S.A.P.I. de C.V. (“MexMar”), a joint venture company that is 49% owned by SEACOR Marine International LLC (“SMI”), a wholly owned subsidiary of SEACOR Marine, and 51% owned by subsidiaries of Proyectos Globales de Energía y Servicios CME, S.A. de C.V. (“CME”), (ii) 13 are owned by MEXMAR Offshore International LLC (“MEXMAR Offshore”), a joint venture company that is 49% owned by SMI and 51% owned by a subsidiary of CME, and (iii) one is owned by Offshore Vessel Holdings, S.A.P.I. DE. C.V. (“OVH”), a joint venture company that is 49% owned by SMI and 51% owned by a subsidiary of CME. These vessels, consisting of a fleet of FSVs, supply, specialty and liftboat vessels, provide support for exploration and production activities in Mexico, Brazil and Guyana. From time to time, the Company’s vessels also work in Trinidad and Tobago, and Colombia.
Europe, primarily North Sea. As of December 31, 2020, the Company had two owned vessels located in this region, primarily supporting the construction and maintenance of offshore wind turbines. On January 12, 2021, the Company completed the sale of its Windcat Workboats CTV Business, comprised of 46 CTVs located in Europe providing crew transfer to offshore wind platforms.
Seasonality
The demand for the Company’s fleet can fluctuate with weather conditions because maintenance, construction and decommissioning activities are planned during times of the year with more favorable weather conditions. Seasonality is most pronounced for the liftboat fleet in the U.S. Gulf of Mexico and Europe, and offshore support vessels in the Middle East and West Africa, with peak demand normally occurring during the summer months. As a consequence of this seasonality, the Company typically schedules drydockings or other repair and maintenance activity during the winter months.
Customers and Contractual Arrangements
The Company’s principal customers are major integrated national and international oil companies, independent oil and natural gas exploration and production companies, as well as wind farm operators, and wind farm installation and maintenance companies. Consolidation of oil and natural gas companies through mergers and acquisitions over the past several years has reduced the Company’s customer base. This, together with the depressed oil and gas price environment that began in 2014 has negatively affected exploration, field development and production activity as consolidated companies continue to focus on increasing efficiency and reducing costs and delay or abandon exploration activity and facilities with less promise.
During the year ended December 31, 2020, two customers, SEACOR Marine Arabia LLC, a joint venture through which vessels are in service to Saudi Aramco, and Exxon Mobil, were each responsible for over 10% of the Company’s consolidated operating revenues from continuing operations. Saudi Aramco and Exxon Mobil were responsible for 21% and 17%, respectively, of the Company’s consolidated revenues from continuing operations. The Company’s ten largest customers accounted for approximately 76% of the consolidated revenues from continuing operations in 2020. The loss of one or more of these customers could have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects.
The Company earns revenues primarily from the time charter and bareboat charter of vessels to customers based upon daily rates of hire. Therefore, vessel revenues are recognized on a daily basis throughout the contract period. Under a time charter, the Company provides a vessel to a customer and is responsible for all operating expenses, typically excluding fuel. Under a bareboat charter, the Company provides a vessel to a customer and the customer assumes responsibility for all operating expenses and all risk of operation. In the U.S. Gulf of Mexico, time charter durations and rates are typically established in the context of master service agreements that govern the terms and conditions of the charter.
Contract or charter durations may range from several days to several years. Longer duration charters are more common where equipment is not as readily available or specific equipment is required. In the Company’s operating areas, charters vary in length from short-term to multi-year periods, many with cancellation clauses and no early termination penalty. As a result of options and frequent renewals, the stated duration of charters may have little correlation with the length of time the vessel is actually contracted to provide services to a particular customer.
Competitive Conditions
The market for offshore marine services is highly fragmented and competitive depending upon the region of operation. The most important competitive factors are pricing, availability and specifications of equipment to fit customer requirements. Other important factors include service, reputation, flag preference, local marine operating and regulatory conditions, the ability to provide and maintain logistical support given the complexity of a project and the cost of moving equipment from one geographic region to another.
The Company has numerous competitors in each of the geographic regions in which it operates, ranging from international companies that operate in many regions to smaller local companies that typically concentrate their activities in one specific country or region.
Risks of Foreign Operations
For the years ended December 31, 2020, 2019, and 2018, 89%, 75% and 71%, respectively, of the Company’s operating revenues was from continuing operations and ($6.6) million, ($13.0) million, and ($1.9) million, respectively, of the Company’s equity in losses from 50% or less owned companies, net of tax, were derived from its foreign operations.
Foreign operations are subject to inherent risks, which, if they materialize, could have a material adverse effect on the Company’s business, financial position, results of operations, cash flows or prospects. See the risk factors regarding international operations in “Item 1A. Risk Factors.”
Government Regulation
The Company’s ownership, operation, construction and staffing of vessels is subject to significant regulation under various international, federal, state and local laws and regulations and pursuant to international conventions, including international conventions and ship registry laws of the nations under which the Company’s vessels are flagged, especially with respect to foreign ownership, health, safety and environmental protection and vessel and port security.
Regulatory Matters
Domestically registered vessels are subject to the jurisdiction of the U.S. Coast Guard (“USCG”), the National Transportation Safety Board (“NTSB”), the U.S. Customs and Border Protection (“CBP”), the U.S. Environmental Protection Agency (“EPA”) and the U.S. Maritime Administration (“MARAD”), as well as in certain instances applicable state and local laws. The Company’s operations may, from time to time, also fall under the jurisdiction of the U.S. Bureau of Safety and Environmental Enforcement (“BSEE”) and its Safety and Environmental Management System regulations, and the Company must also periodically certify that its maritime operations adhere to those regulations. These agencies and organizations establish safety requirements and standards and are authorized to investigate vessels and accidents and to recommend improved maritime safety standards.
The Company is subject to regulation under the Jones Act and related U.S. cabotage laws, which restrict ownership and operation of vessels in the U.S. coastwise trade (defined as trade between points in the U.S.), including the transportation of cargo. Subject to limited exceptions, the Jones Act requires that vessels engaged in U.S. coastwise trade be built in the U.S., registered under the U.S.-flag, manned by predominantly U.S. crews, and be owned and operated by U.S. citizens within the meaning of the Jones Act. Violation of the Jones Act could prohibit operation of vessels in the U.S. coastwise trade during the period of such non-compliance, result in material fines and subject Company vessels to seizure and forfeiture.
To facilitate compliance with the Jones Act, the Company’s Third Amended and Restated Certificate of Incorporation and Third Amended and Restated By-Laws: (i) limit the aggregate percentage ownership by non-U.S. citizens of any class of the Company’s capital stock (including Common Stock) to 22.5% of the outstanding shares of each such class to ensure that ownership by non-U.S. citizens will not exceed the maximum percentage permitted by applicable maritime law (presently 25%) but authorize the Company’s Board of Directors, under certain circumstances, to increase the foregoing percentage to 24%; (ii) permit the institution of a dual stock certification system to help determine such ownership; (iii) provide that any issuance or transfer of shares in excess of such permitted percentage shall be ineffective as against the Company and that neither the Company nor its transfer agent shall register such purported issuance or transfer of shares or be required to recognize the purported transferee or owner as a stockholder of the Company for any purpose whatsoever except to exercise its remedies; (iv) provide that any such excess shares shall not have any voting or dividend rights; (v) permit the Company to redeem any such excess shares; and (vi) permit the Board of Directors to make such reasonable determinations as may be necessary to ascertain such ownership and implement such limitations. In addition, the Company’s Third Amended and Restated By-Laws limit the number of non-U.S. citizens that may serve as directors and restrict any non-U.S. citizen officer from acting in the absence or disability of the Chairman of the Board of Directors, the Chief Executive Officer or the President. For more information, see the Company’s Third Amended and Restated Certificate of Incorporation and Third Amended and Restated By-Laws, which are filed as exhibits to this Annual Report on Form 10-K.
The Company operates vessels that are registered in the U.S. as well as in a number of foreign jurisdictions. Vessels are subject to the laws of the applicable jurisdiction as to ownership, registration, manning, environmental protection and safety. In addition, the Company’s vessels are subject to the requirements of a number of international conventions, as amended, that are applicable to vessels depending on their jurisdiction of registration. Among the more significant of these conventions are: (i) the International Convention for the Prevention of Pollution from Ships, 1973, as modified by the Protocol of 1978 relating thereto (“MARPOL”); (ii) the International Convention for the Safety of Life at Sea, 1974 and 1978 Protocols (“SOLAS”); and (iii) the International Convention on Standards of Training, Certification and Watchkeeping for Seafarers (“STCW”).
The Maritime Labour Convention, 2006 (the “MLC”) establishes comprehensive minimum requirements for working conditions of seafarers including, among other things, conditions of employment, hours of work and rest, grievance and complaints procedures, accommodations, recreational facilities, food and catering, health protection, medical care, welfare, and social security protection. The MLC defines seafarer to include all persons engaged in work on a vessel in addition to the vessel's crew. Under this MLC definition, the Company may be responsible for proving that customer and contractor personnel aboard its vessels have contracts of employment that comply with the MLC requirements. The Company could also be potentially responsible for salaries and/or benefits of third-parties that may board one of its vessels. The MLC requires certain vessels that engage in international trade to maintain a valid Maritime Labour Certificate issued by their flag administration. Although the U.S. is not a party to the MLC, U.S.-flag vessels operating internationally must comply with the MLC when visiting a port in a country that is a party to the MLC. The Company has developed and implemented a fleetwide plan designed to comply with the MLC to the extent applicable to its vessels.
The hull and machinery of most commercial vessels are classed by an international classification society authorized by its country of registry and subject to survey and inspection by shipping regulatory bodies. The international classification society certifies that a vessel is maintained in accordance with the applicable rules and regulations of the country of registry of the vessel and SOLAS. Certain of the Company's vessels are subject to the periodic inspection, survey, drydocking and maintenance requirements of the USCG, the American Bureau of Shipping and other marine classification societies.
Under provisions of the Merchant Marine Act of 1936 and Chapter 563 of Title 46 of the United States Code, the Company’s U.S.-flag vessels are subject to requisition or purchase by the U.S. government under certain terms and conditions during a national emergency as described further in the risk factor under the heading “The Company’s U.S.-flag vessels are subject to requisition for ownership or use by the U.S. in case of national emergency or national defense need” under “Item 1A. Risk Factors” of this Annual Report on Form 10-K. Vessels registered under other flag states may also be subject to requisition or purchase in accordance with local law.
A wide range of domestic governmental agencies, including the USCG, the EPA, the U.S. Department of Transportation’s Office of Pipeline Safety, the BSEE and certain individual states, regulate vessels and other structures in accordance with the requirements of the Oil Pollution Act of 1990 (“OPA 90”) or analogous state law. There is currently little uniformity among the regulations issued by these agencies, which increases the Company’s compliance costs and risk of non-compliance.
Although the Company faces some risk when responding to third-party oil spills, a responder engaged in emergency and crisis activities has qualified immunity from liability under U.S. federal law and all U.S. coastal state laws for any spills arising from its response efforts, except in the event of death or personal injury or as a result of its gross negligence or willful misconduct. The Company may also have derivative immunity when working under the orders of a Federal On Scene Coordinator.
The International Safety Management Code (“ISM Code”), adopted by the International Maritime Organization (the “IMO”) as an amendment to SOLAS, provides international standards for the safe management and operation of ships and for the prevention of marine pollution from ships. The U.S. enforces the ISM Code for all U.S.-flag vessels and those foreign-flag vessels that call at U.S. ports. All of the Company’s vessels that are 500 or more gross tons are required to be certified under the standards set forth in the ISM Code’s safety and pollution protocols. The Company also voluntarily complies with these protocols for some vessels that are under the mandatory 500-gross ton threshold and many of the Company’s customers contractually require compliance with these protocols regardless of the gross tonnage of the vessel. Under the ISM Code, vessel operators are required to develop an extensive safety management system (“SMS”) that includes, among other things, the adoption of a written system of safety and environmental protection policies setting forth instructions and procedures for operating their vessels subject to the ISM Code and describing procedures for responding to emergencies. The Company has developed such a SMS. These SMS policies apply to both the vessel and shore-side personnel and are vessel specific. The ISM Code also requires a Document of Compliance (“DOC”) to be obtained for the vessel manager and a Safety Management Certificate (“SMC”) to be obtained for each vessel subject to the ISM Code that it operates or manages. The Company has obtained DOCs for its shore side offices that have responsibility for vessel management and SMCs for each of the vessels that such offices operate or manage.
Noncompliance with the ISM Code and other IMO regulations may subject the shipowner or charterer to increased liability, may lead to decreases in available insurance coverage for affected vessels, may cause the loss of customers, and may result in the denial of access to, or detention in, some ports. For example, the USCG authorities have indicated that vessels not in compliance with the ISM Code will be prohibited from utilizing U.S. ports.
Environmental Compliance
The Company is subject to extensive federal, state, local and international environmental and safety laws and regulations and to comprehensive international conventions, including laws and regulations related to the discharge of oil and pollutants into waters regulated thereunder. Violations of these laws may result in civil and criminal penalties, fines, injunctions, or other sanctions, any of which could be material.
The Company does not expect that it will be required to make capital expenditures in the near future to comply with environmental laws and regulations that would have a material adverse effect on its financial position, results of operations, cash flows or prospects. However, because such laws and regulations frequently change and may impose increasingly strict requirements, the Company cannot predict the ultimate cost of complying with these laws and regulations.
OPA 90 establishes a regulatory and liability regime for the protection of the environment from oil spills. OPA 90 applies to owners and operators of facilities operating near navigable waters of the U.S. and owners, operators and bareboat charterers of vessels operating in U.S. waters, which include the navigable waters of the U.S. and the 200-mile exclusive economic zone around the U. S. (the “EEZ”). For purposes of its liability limits and financial responsibility and response planning requirements, OPA 90 differentiates between tank vessels (such as chemical and petroleum product vessels and liquid tank barges) and “other vessels” (such as the Company’s offshore support vessels).
Under OPA 90, owners and operators of regulated facilities and owners and operators or bareboat charterers of vessels are “responsible parties” and may be jointly, severally and strictly liable for removal costs and damages arising from facility and vessel oil spills or threatened spills up to certain limits of liability as discussed below. Damages are defined broadly to include: (i) injury to natural resources and the costs of remediation thereof; (ii) injury to, or economic losses resulting from, the destruction of real and personal property; (iii) net loss by various governmental bodies of taxes, royalties, rents, fees or profits; (iv) lost profits or impairment of earning capacity due to property or natural resources damage; (v) net costs of providing increased or additional public services necessitated by a spill response, such as protection from fire or other hazards or taking additional safety precautions; and (vi) loss of subsistence use of available natural resources.
OPA 90 limits liability for responsible parties for non-tank vessels, such as the Company’s, to the greater of $1,100 per gross ton or $939,800. These liability limits do not apply (a) if an incident is caused by the responsible party's violation of federal safety, construction or operating regulations or by the responsible party’s gross negligence or willful misconduct, (b) if the responsible party fails to report the incident or to provide reasonable cooperation and assistance in connection with oil removal activities as required by a responsible official or (c) if the responsible party fails to comply with an order issued under OPA 90.
OPA 90 requires vessel owners and operators to establish and maintain with the USCG evidence of insurance or qualification as a self-insurer or other evidence of financial responsibility sufficient to meet their potential liabilities under OPA 90. In recent years, the Company has satisfied USCG regulations by providing evidence of financial responsibility demonstrated by commercial insurance and self-insurance. OPA 90 regulations also implement the financial responsibility requirements of the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), which imposes liability for any discharge of hazardous substances, similar to OPA 90, and provides compensation for cleanup, removal and natural resource damages. Liability per vessel under CERCLA is limited to the greater of $300 per gross ton or $5 million, unless the incident is caused by gross negligence, willful misconduct, or a violation of certain regulations, in which case liability is unlimited.
Under the Nontank Vessel Response Plan Final Rule issued by the USCG in 2013, owners and operators of nontank vessels are required to prepare Nontank Vessel Response Plans. The Company expects its current pollution liability insurance to cover spill removal costs, subject to coverage deductibles and limitations, including a cap of $1.0 billion. There could be a material adverse effect on the Company’s business, financial position, results of operations, cash flows or prospects if the Company incurs spill liability under circumstances in which the insurance carrier fails or refuses to provide coverage or the loss exceeds the Company’s coverage limitations.
MARPOL is the main international convention covering prevention of pollution of the marine environment by vessels from operational or accidental discharges. It is implemented in the U.S. pursuant to the Act to Prevent Pollution from Ships. Since the 1990s, the Department of Justice (“DOJ”) has been aggressively enforcing U.S. criminal laws against vessel owners, operators, managers, crew members, shore side personnel, and corporate officers related to violations of MARPOL. Violations have related to pollution prevention devices, such as the oily-water separator, and include falsifying records, obstructing justice, and making false statements. In certain cases, responsible shipboard officers and shoreside officials have been sentenced to prison. In addition, the DOJ has required most defendants to implement a comprehensive environmental compliance plan (“ECP”) or risk losing the ability to trade in U.S. waters. If the Company is subjected to a DOJ prosecution, it could suffer material adverse effects, including substantial criminal penalties and defense costs, reputational damages and costs associated with the implementation of an ECP.
The Clean Water Act (“CWA”) prohibits the discharge of “pollutants” into the navigable waters of the U. S. The CWA also prohibits the discharge of oil or hazardous substances into navigable waters of the U. S. and the EEZ around the U. S. and imposes civil and criminal penalties for unauthorized discharges, thereby exposing the Company to potential liability that is in addition to its exposure arising under OPA 90 and CERCLA.
The CWA also established the National Pollutant Discharge Elimination System (“NPDES”) permitting program, which governs discharges of pollutants into navigable waters of the U.S. Pursuant to the NPDES permitting program, the EPA has issued Vessel General Permits covering discharges incidental to normal vessel operations. The EPA issued the 2013 Vessel General Permit (“2013 VGP”) in 2013 with an initial five-year term. In light of the legislation described below, the 2013 VGP continues to apply to the Company’s U.S.-flag and foreign-flag commercial vessels that are at least 79 feet in length and operate within the three-mile territorial sea of the U.S. The 2013 VGP requires vessel owners and operators to adhere to “best management practices” to manage the covered discharges that occur normally in the operation of a vessel, including ballast water, and implements various training, inspection, monitoring, record keeping, and reporting requirements, as well as corrective actions upon identification of deficiencies. The Company has filed a Notice of Intent to be covered by the 2013 VGP for each of its ships that operate in U.S. waters.
On December 4, 2018, the Vessel Incidental Discharge Act (“VIDA”) was enacted, establishing a new framework for the regulation of discharges incidental to the normal operations of vessels. In October of 2020, the EPA published proposed performance standards for vessel incidental discharges and the EPA is expected to publish final standards in 2021. VIDA requires the USCG to develop implementation, compliance, and enforcement regulations within two years of EPA’s promulgation of standards. VIDA extends the 2013 VGP’s provisions, leaving them in effect until new regulations are final and enforceable. Non-military, non-recreational vessels greater than 79 feet in length must continue to comply with the requirements of the 2013 VGP, including submission of annual reports. The Company can provide no assurance as to when the new regulations and performance standards will be issued, nor can it predict what additional costs it may incur to comply with any such new regulations and performance standards.
Many countries have ratified and are thus subject to the liability scheme adopted by the IMO and set out in the International Convention on Civil Liability for Oil Pollution Damage of 1969 (the “1969 Convention”). Some of these countries have also adopted the 1992 Protocol to the 1969 Convention (the “1992 Protocol”). Under both the 1969 Convention and the 1992 Protocol, a vessel’s registered owner is strictly liable for pollution damage caused in the territorial waters of a contracting state by discharge of persistent oil from ships carrying oil in bulk as cargo, subject to certain complete defenses. These conventions also limit the liability of the shipowner under certain circumstances, provided the discharge was not caused by the shipowner’s actual fault or intentional or reckless misconduct.
Vessels trading to countries that are parties to these conventions must provide evidence of insurance covering the liability of the owner. The Company believes that its Protection and Indemnity insurance will cover any liability under these conventions, subject to applicable policy deductibles, exclusions and limitations.
The U.S. is not a party to the 1969 Convention or the 1992 Protocol, and thus OPA 90, CERCLA, CWA and other federal and state laws apply in the U.S. as discussed above. In other jurisdictions where the 1969 Convention has not been adopted, various legislative and regulatory schemes or common law govern, and liability is imposed either on the basis of fault or in a manner similar to that convention.
The International Convention on Civil Liability for Bunker Oil Pollution Damage, 2001, was adopted to ensure that adequate, prompt and effective compensation is available to persons who suffer damage caused by spills of oil when used as fuel by vessels. The convention applies to damage caused to the territory, including the territorial sea, and in the EEZs, of the countries that are party to it. Although the U.S. has not ratified this convention, U.S.-flag vessels operating internationally would be subject to it if they sail within the territorial waters of those countries that have implemented its provisions. The Company believes that its vessels comply with these requirements.
The National Invasive Species Act (“NISA”) was enacted in the U.S. in 1996 in response to growing reports of harmful organisms being released into U.S. waters through ballast water taken on by vessels in foreign ports. The USCG adopted regulations under NISA that impose mandatory ballast water management practices for all vessels equipped with ballast water tanks entering U.S. waters. All new vessels constructed on or after December 1, 2013, regardless of ballast water capacity, must comply with these requirements on delivery from the shipyard absent an extension from the USCG. For non-exempt vessels, ballast water treatment equipment may be required to be used on the vessel. In response to these requirements, the Company’s ships operating in the U.S. waters currently use water from U.S. public systems. Some U.S. states have enacted legislation or regulations to address the introduction of invasive species through ballast water and hull cleaning management, and permitting requirements, which in many cases have also become part of the state’s 2013 VGP certification. Other states may proceed with the enactment of similar requirements that could increase the Company’s costs of operating in state waters.
The IMO ratified the International Convention for the Control and Management of Ships’ Ballast Water and Sediments, otherwise known as the Ballast Water Management Convention (the “BWM Convention”), effective September 8, 2017. Under the BWM Convention, all ships engaged in international voyages are required to manage their ballast water and sediments under a ship-specific ballast water management plan. The U.S. is not a party to the BWM Convention, but U.S. flagged vessels that undertake international voyages may have to install a USCG/EPA approved ballast water treatment system (“BWTS”) or use one of the other management options under the USCG/EPA ballast water management rules and the BWM Convention to achieve compliance. The Company installs BWTS on its vessels as required by the USCG/EPA and BWM Convention.
The Endangered Species Act, related regulations and comparable state laws protect species threatened with possible extinction. Protection may include restrictions on the speed of vessels in certain ocean waters and may require the Company to change the routes of vessels during particular periods.
The Clean Air Act (as amended, the “CAA”) requires the EPA to promulgate standards applicable to emissions of various air contaminants. The CAA also requires states to submit State Implementation Plans (“SIPs”), which are designed to attain national health-based air quality standards throughout the U.S., including major metropolitan and industrial areas. Several SIPs regulate emissions resulting from vessel loading and unloading operations by requiring the installation of vapor control equipment. The EPA and some U.S. states have each proposed more stringent regulations of air emissions from propulsion and auxiliary engines on oceangoing vessels.
MARPOL also addresses air emissions, including emissions of sulfur and nitrous oxide (“NOx”), from vessels, including a requirement to use low sulfur fuels worldwide in both auxiliary and main propulsion diesel engines on vessels. As of January 1, 2020, vessels worldwide are required to use fuel with a sulfur content no greater than 0.5%, which is a reduction from the prior limit of 3.5%. As a result of this reduction, fuel costs for vessel operations could rise dramatically, which could have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects. MARPOL also imposes NOx emissions standards on installed marine diesel engines of over 130 kW output power other than those used solely for emergency purposes irrespective of the tonnage of the vessel into which such an engine is installed. The actual NOx limit is determined by a variety of factors, including the vessel’s construction date, the rated speed of the vessel’s engine, and the area in which the vessel is operating.
More stringent sulfur and NOx requirements apply in certain designated Emission Control Areas (“ECAs”). There are currently four ECAs worldwide: the Baltic Sea ECA, North Sea ECA, North American ECA, and U.S. Caribbean ECA. As of January 1, 2015, vessels operating in an ECA must burn fuel with a sulfur content no greater than 0.1%. Further, marine diesel engines on vessels constructed on or after January 1, 2016 that are operated in an ECA must meet the stringent NOx standards described above.
The Company’s operations occasionally generate and require the transportation, treatment and disposal of both hazardous and non-hazardous solid wastes that are subject in the U.S. to the requirements of the Resource Conservation and Recovery Act (“RCRA”) or comparable state, local or foreign requirements. From time to time the Company arranges for the disposal of hazardous waste or hazardous substances at offsite disposal facilities. As a general matter, with certain exceptions, vessel owners and operators are required to determine if their wastes are hazardous, obtain a generator identification number, comply with certain standards for the proper management of hazardous wastes, and use hazardous waste manifests for shipments to disposal facilities. Moreover, vessel owners and operators may be subject to more stringent state hazardous waste requirements. If such materials are improperly disposed of by third-parties with which the Company contracts, the Company could potentially still be held liable for cleanup costs under applicable laws.
MARPOL also governs the discharge of garbage from ships. MARPOL defines certain sea areas, such as the “wider Caribbean region” as “special areas” requiring a higher level of protection than other areas of the sea. Applicable MARPOL regulations provide for strict garbage management procedures and documentation requirements for all vessels and fixed and floating platforms. These regulations impose a general prohibition on the discharge of all garbage unless the discharge is expressly provided for under the regulations. The regulations have greatly reduced the amount of garbage that vessels are allowed to dispose of at sea and have increased the Company’s costs of disposing garbage remaining on board vessels at their port calls.
Various international conventions and federal, state and local laws and regulations have been considered or implemented to address the environmental effects of emissions of greenhouse gases, such as carbon dioxide and methane. The U.S. Congress has considered, but not adopted, legislation designed to reduce emission of greenhouse gases. At United Nations climate change conferences over the past few decades, various countries have agreed to specific international accords or protocols to establish limitations on greenhouse gas emissions. In December 1997, the Kyoto Protocol was adopted pursuant to which member parties agreed to implement national programs to reduce emissions of greenhouse gases. At the 2015 United Nations climate change conference in Paris, various countries adopted the Paris Agreement, which seeks to reduce emissions in an effort to slow global warming. While the U.S. signed the Paris Agreement in 2016, it formally withdrew from the agreement in 2020. In January 2021, President Biden issued an executive order announcing that the U.S. will be rejoining the Paris Agreement. The Paris Agreement does not specifically mention shipping.
The IMO has announced its intention to develop limits on greenhouse gases from international shipping and is working on proposed mandatory technical and operational measures to achieve these limits. The first step toward this goal occurred in October 2016, when the IMO adopted a system for collecting data on ships’ fuel-oil consumption, which will be mandatory and apply globally. In 2020, the IMO proposed amendments to MARPOL that would require vessels to combine a technical and an operational approach to reduce their carbon intensity. The measures are aimed at reducing carbon intensity of international shipping by 40% by 2030, compared to 2008.
Any future adoption of climate control treaties, legislation or other regulatory measures by the United Nations, IMO, the European Union (the “E.U.”), U.S. or other countries where the Company operates that restrict emissions of greenhouse gases could result in financial and operational impacts on the Company’s business (including potential capital expenditures to reduce such emissions) that the Company cannot predict with certainty at this time. In addition, there may be significant physical effects of climate change from such emissions that have the potential to negatively impact the Company’s customers, personnel, and physical assets, any of which could adversely impact cargo levels, the demand for the Company’s services, or the Company’s ability to recruit personnel.
The Company manages exposure to losses from the above-described laws through its development of appropriate risk management programs, including compliance programs, safety management systems and insurance programs. Although the Company believes these programs mitigate its legal risk, there can be no assurance that these programs will be able to prevent all infractions, nor can the Company provide assurances that future regulations or requirements or any discharge or emission of pollutants by the Company will not have a material adverse effect on its business, financial position, results of operations, cash flows or prospects.
Security
The USCG, the IMO, states and local ports continue to adopt heightened security procedures related to ports and vessels.
To implement certain portions of the U.S. Maritime Transportation Security Act of 2002 (“MTSA”), in July 2003, the USCG issued regulations requiring the implementation of certain security requirements aboard vessels operating in waters subject to the jurisdiction of the U.S. Similarly, in December 2002, the IMO adopted amendments to SOLAS, known as the International Ship and Port Facility Security Code (the “ISPS Code”), creating a new chapter dealing specifically with maritime security. The chapter imposes various detailed security obligations on vessels and port authorities. Included in the various requirements under MTSA and/or the ISPS Code are the following:
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onboard installation of automatic information systems to enhance vessel-to-vessel and vessel-to-shore communications;
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onboard installation of ship security alert systems;
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the development of vessel and facility security plans;
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the implementation of a Transportation Worker Identification Credential program; and
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compliance with flag state security certification requirements.
The USCG regulations, which are intended to align with international maritime security standards, generally deem foreign-flag vessels to be in compliance with MTSA vessel security measures provided such vessels have onboard a valid International Ship Security Certificate that attests to the vessel’s compliance with SOLAS security requirements and the ISPS Code. However, U.S.-flag vessels that are engaged in international trade must comply with all of the security measures required by MTSA, as well as SOLAS and the ISPS Code.
In response to these security programs, the Company has implemented security plans and procedures for each of its U.S.-flag vessels pursuant to rules implementing MTSA that have been issued by the USCG.
Industry Hazards and Insurance
Vessel operations involve inherent risks associated with carrying large volumes of cargo and rendering services in a marine environment. Hazards include adverse weather conditions, collisions, fire and mechanical failures, which may result in death or injury to personnel, damage to equipment, loss of operating revenues, contamination of cargo, pollution and other environmental damages and increased costs. The Company maintains hull, liability and war risk, general liability, workers compensation and other customary insurance subject to various deductions, exclusions and coverage caps. The Company also conducts training and safety programs to promote a safe working environment and minimize hazards.
Employees and Human Capital Management
On September 17, 2020, the Company announced the formation of a sustainability council to oversee the Company’s enhanced environmental, social and governance (“ESG”) program (the “Sustainability Council”). In conjunction with this announcement, the Sustainability Council published an ESG presentation and launched a new section of the Company’s website to highlight both the Company’s track record of sustainable practices, as well as its future plans to further enhance its ESG efforts.
The Sustainability Council is an internal committee that reports to the Board of Directors’ Nominating and Corporate Governance Committee and includes senior executives, operational heads, and safety and health, compliance, and human resources professionals, led by the Company’s Chief Executive Officer. The Sustainability Council collaborates and drives initiatives on all matters related to sustainability, including, but not limited to environmental protection, clean energy technology, social responsibility, employee, contractor and community engagement, health and safety, and community empowerment. Together with the Board of Directors, the Sustainability Council helps establish sustainability goals and integrate them into strategic and tactical business activities across the Company to contribute to risk management and long-term value for all stakeholders.
As part of the Company’s ESG efforts and with the assistance of the Sustainability Council, the Company’s Chief Executive Officer has the primary responsibility for developing, managing, and executing the Company’s human capital strategy. As of December 31, 2020, the Company employed 1,386 individuals directly and indirectly (through crewing or manning agreements), none of whom are members of a union under the terms of an ongoing agreement. Management considers relations with its employees to be
satisfactory. The Company believes that its success is driven by its employees, and its human capital strategy focuses on the following key areas:
Health and Safety: The Company’s health and safety programs, namely its SMS, are implemented to comply with applicable regulations and follow global standards, as well as address the specific hazards of its work environments. The Company regularly conducts management reviews, audits, and inspections onboard its vessels and shore side locations to ensure compliance with applicable regulations, policies, and procedures. The Company is also audited annually by independent classification societies to confirm compliance with applicable regulations and standards. The Company utilizes several metrics to assess the performance of its health and safety policies, procedures, and initiatives, including lost time incidents, medical incidents, and fatalities. In fiscal year 2020, SEACOR Marine achieved the best safety performance in its history while working over 5.4 million man hours across its global businesses. This included zero pollution incidents, zero medical incidents, and a total recordable incident rate of 0.037.
COVID-19 Health Measures: Since the onset of the COVID-19 pandemic, the health and safety of the Company’s employees has been its highest priority, with the Company conducting weekly COVID-19 Response Management Meetings. Management has been mandated to immediately implement several changes to enhance COVID-19 safety and to mitigate related work environment health risks. For the Company’s offshore operations, these changes included providing personal protective equipment such as protective eyewear, medical suits, medical nitrile gloves, boot covers, face masks, anti-bacterial hand soap and alcohol sanitizers, digital infrared thermometers, and Biohazard Spill-Paks. In addition to providing personal protective equipment, the Company implemented COVID-19 vessel response plans across its global fleet which included quarterly fleet-wide shoreside pandemic illness drills and onboard illness drills, as well as developed a health screening questionnaire and related guidelines. For the Company’s other employees, this included enhancing remote working capabilities as well as other arrangements. In addition, the Company provided access to short-term counseling for any employees dealing with the stress of COVID-19 or other issues. SEACOR Marine will continue to enhance its COVID-19 response and is, among other initiatives, evaluating the use of hydroxyl generators in vessel heating, ventilation, and air conditioning systems primarily to destroy pathogens, viruses and bacteria on surfaces and in the air.
Diversity and Inclusion: The Company recognizes the value of diversity and inclusion within its organization and strives to ensure that its workplace reflects the diverse communities in which it operates in order to promote collaboration, innovation, creativity and belonging. The Sustainability Council is mandated to develop strategies to promote diversity and inclusion in the workplace, and oversees the Company’s Diversity and Inclusion Committee which is responsible for developing policies and practices to recruit, support, promote and retain staff with diverse backgrounds, experiences and attributes.
The Company is proud of its diverse workforce and cross-cultural competences and, as of December 31, 2020, employed individuals from over 34 countries. The Company further recognizes that the maritime industry has traditionally been male dominated, and as a result, the Company is seeking to increase the representation of women by developing practical and innovative strategies. As of December 31, 2020, 29% of SEACOR Marine’s onshore workforce was female, while only a small fraction of its at sea workforce was represented by female seafarers. SEACOR Marine is committed to continue to recruit and employ qualified candidates regardless of their gender or cultural background.
Training and Talent Development: The Company is committed to the education of its employees and has committed to provide its employees with a variety of learning opportunities, including, but not limited to, leadership training, technical skill development, soft skills development, workplace conduct guidance, and health, safety and security training. The Sustainability Council is working collaboratively with SEACOR Marine’s Human Resources department to continually enhance and promote its training programs to attract new talent as well as develop and retain talent within the organization.
Employee Benefits: The Company believes in the importance of offering its employees competitive salaries and wages, together with comprehensive insurance options. The Company recognizes the importance of comprehensive healthcare benefits, including medical, prescription drug, vision and dental, and employees and their family members are provided with tools and resources to assist in adopting and maintaining a healthy lifestyle. The Company pays the cost of basic life insurance, accidental death and dismemberment insurance, and short-term disability for its employees. Additionally, employees may purchase supplemental life, dependent life, and long-term disability insurance. Other valuable benefits provided by the Company include life and travel assistance programs, will preparation and a 401(k) plan.

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ITEM 1A. RISK FACTORS
ITEM 1A.
RISK FACTORS
Summary of Risk Factors
The Company’s business, financial position, results of operations, cash flows and prospects may be materially adversely affected by numerous risks. Carefully consider the risks described below, which represent the material risk factors that affect the Company and are known to the Company at this time, as well as the other information that has been provided in this Annual Report on Form 10-K. Additional risks, not presently known to the Company or not perceived as material, may also materially and adversely affect the Company’s business, financial position, results of operations, cash flows and prospects. Material risks that may affect the Company’s business, financial position, results of operations, cash flows and prospects include, but are not necessarily limited to, those relating to:
Risk Factors Related to the Company’s Business and Industry
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fluctuating prices and decreased demand for oil and natural gas;
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decreased demand for offshore oil and natural gas exploration, development and production;
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COVID-19 pandemic and its impact on the price of oil, demand for oil, and demand for services;.
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COVID-19 pandemic, health epidemics and other outbreaks and their impact and disruption to business operations and workforce;
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restrictions and limitations imposed by credit facilities on operating and financial flexibility;
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debt structure;
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downward pricing pressures on the price of crude oil and natural gas resulting from unconventional crude oil and natural gas sources and improved economics of producing natural gas and oil from such sources;
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losses or impairment charges related to sold or idle vessels;
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ability to retain customers due to a failure to maintain an acceptable safety record;
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increase in competition in the offshore marine service industry;
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oversupply of vessels or equipment serving offshore oil and natural gas operations may adversely impact charter rates for vessels and equipment;
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loss of significant customers;
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consolidation of customer base may adversely affect demand for services and reduction in revenue;
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inability to maintain or replace offshore support vessels as they age;
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failure to successfully complete construction or conversion of vessels, repairs, maintenance or routine drydockings on schedule and on budget;
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seasonal factors and their impact on business operations and workforce;
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incurring high levels of fixed costs regardless of business activity levels;
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incurring higher than expected costs to return previously cold-stacked vessels to class as the markets recovers or marketing strategies change;
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inability to renew or replace expiring contracts for vessels;
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early termination of vessel contracts may adversely affect operations;
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increased domestic and international laws and regulations, including additional laws and regulations in the event of high-profile incidents;
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changes in federal government regulation of offshore resources for the production of oil and natural gas;
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changes in laws and regulations, including environmental laws and regulations that can adversely affect the cost, manner or feasibility of doing business;
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changes in climate change and environmental regulations;
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instability of political, military and economic conditions in foreign countries;
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business operation disruptions and exposure to liability caused by hazards customary for the operation of vessels;
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inadequacy of insurance coverage;
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adverse affects and additional risks to business resulting from significant corporate transactions;
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prohibition of operation of offshore support vessels in the U.S. resulting from failure to restrict the amount of ownership of the Company’s Common Stock by non-U.S. citizens;
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repeal, amendment, suspension or non-enforcement of the Jones Act;
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inability to sell off a portion of the business or forfeiture of vessels resulting from restrictions placed on non-U.S. citizen ownership;
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restrictions placed by the Company’s incorporation and formation documents limiting ownership of Common Stock by individuals and entities that are not U.S. citizens may affect liquidity of Common Stock and may result in non-U.S. citizens being required to sell their shares at a loss or relinquish their voting, dividend and distribution rights;
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inability to access funds, redeem any excess shares and suspension of operations in the U.S. coastwise trade due to non-U.S. citizens owning more than 22.5% of the Company’s Common Stock;
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U.S. national emergency or national defense needs;
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inadequate indemnification by customers for damage to their property or the property of their other contractors;
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inability to improve cash flow and liquidity through vessel sales resulting from inability to locate buyers with access to financing or to complete any sales on acceptable terms or within a reasonable time frame;
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inability to collect amounts owed by customers;
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lack of sole decision-making authority and disputes between joint ventures and investments in joint ventures;
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exposure to potential future losses due to participation in industry-wide, multi-employer, defined benefit pension plans;
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inability to improve operations and financial systems, and recruitment of additional staff;
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inability to attract and retain qualified personnel and crew vessels appropriately;
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federal law and state law job-related claims;
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inability to protect against service interruptions, data corruption, cyber-based attacks or network security breaches;
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inability to install ballast water treatment systems and modify vessels;
Risk Factors Related to the Company’s Spin-off
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indemnifications and liabilities arising out of the Company’s Spin-off from SEACOR Holdings;
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U.S. federal income tax liabilities related to the Company’s Spin-off from SEACOR Holdings;
Risk Factors Related to the Company’s Common Stock
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fluctuations in Common Stock price;
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ownership dilution;
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Common Stock price and trading volume decline due to securities or industry analyst reports and recommendations;
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“Emerging Growth Company” requirements;
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costs associated with the development and maintenance of proper and effective internal controls over financial reporting;
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failure to achieve and maintain effective internal controls over financial reporting;
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depression of Common Stock price due to provisions in the Company’s incorporation and formation documents that may discourage, delay or prevent a change of control of the Company or changes in the Company’s management;
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limitations to Common Stockholders ability to obtain favorable judicial forum for disputes due to forum selection clause restrictions placed by the Company’s incorporation and formation documents; and
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intention not to pay dividends on our Common Stock for the foreseeable future.
Risk Factors Related to the Company’s Business and Industry
The Company is exposed to fluctuating prices of oil and natural gas and decreased demand for oil and natural gas.
The market for the Company’s offshore support services is impacted by the comparative price for exploring, developing, and producing oil and natural gas and by the corresponding supply and demand for oil and natural gas, both globally and regionally. Among other factors, the increased supply of oil and natural gas from the development of unconventional oil and natural gas supply sources, particularly shale, and technologies to improve recovery from current sources have caused a reduction in the price of oil and natural gas as well as demand and prices charged for offshore support services globally. The advent of electric cars, development of alternative sources of energy to hydrocarbons, such as solar and wind power and other developing technology, could also diminish the demand for oil and natural gas. Such diminution of demand could place continued or additional pressure on the price of oil and therefore demand for the Company’s services, as developing offshore oil fields, particularly in deep waters, is one of the most expensive sources of hydrocarbons. Other factors that influence the supply and demand and the relative price of oil and natural gas include operational issues, natural disasters, weather, political instability, conflicts, civil unrest, the worldwide economic, political and military environment, acts of terrorism, foreign exchange rates, economic conditions and actions by major hydrocarbon-producing countries. The price of oil and natural gas and the relative cost to extract, proximity to market and political imperatives of countries with offshore deposits affect the willingness to commit investment for contract drilling rigs and offshore support vessels used for offshore exploration, field development and production activities, which in turn affects the Company’s results of operations. Prolonged periods of low oil and natural gas prices or rising costs result in lower demand for the Company’s services and can give rise to impairments of the Company’s assets.
The Company’s operations depend on the level of spending by oil and natural gas companies for exploration, development and production, maintenance and decommissioning activities. Both short-term and long-term trends in oil and natural gas prices affect these activity levels. Oil and natural gas prices, as well as the level of drilling, exploration and production activity, have been highly volatile over the past few years and are expected to continue to be volatile for the foreseeable future. For example, oil prices were as high as $107 per barrel during 2014, followed by a near ten-year low of $26 per barrel in February 2016, and then a high of $76 per barrel in October 2018. The fallout of the novel strain of coronavirus (“COVID-19”) pandemic has pushed oil prices to a new low. The West Texas Intermediate (“WTI”) front month oil prices experienced unprecedented volatility during 2020, including going negative for a short period of time. While oil prices increased to a high of around $65 per barrel in early March 2021, no assurances can be given that the increases will continue or be sustained. Declines in oil prices are primarily caused by, among other things, an excess of supply of crude oil in relation to demand. Since developing offshore oil fields, particularly in deep waters, is one of the most expensive sources of hydrocarbons and providing transportation and logistics services to these markets is the largest component of the Company’s business, the Company is particularly exposed to depressed oil and natural gas prices that last for some period of time. When the Company’s customers experience low commodity prices or come to believe that they will be low in the future, they generally reduce their capital spending for offshore drilling, exploration and field development. The significant decrease in oil and natural gas prices that began in the second half of 2014 caused a reduction in many of the Company’s customers’ exploratory, drilling, completion and other production activities and, as a result, related spending on the Company’s services. As such, the Company’s overall fleet utilization for the years ended December 31, 2020, 2019 and 2018, was 55%, 60% and 52%, respectively. The prolonged reduction in the overall level of exploration and development activities, whether resulting from changes in oil and natural gas prices or otherwise, has materially and adversely affected the Company by negatively impacting its fleet utilization, which in turn has negatively affected its revenues, cash flows, profitability and the fair market value of the Company’s vessels. It could also affect the collectability of the Company’s receivables and its ability to retain skilled personnel. Periods of low activity intensify price competition in the industry, which erodes operating margin, and can lead to the Company’s vessels being idle for long periods of time.
If difficult market conditions persist and an anticipated recovery is delayed beyond the Company’s expectation, further deterioration in the fair value of vessels already impaired or revisions to its forecasts may result in the Company recording additional impairment charges related to its fleet in future periods.
Demand for many of the Company’s services is impacted by the level of activity in the offshore oil and natural gas exploration, development and production industry.
The level of offshore oil and natural gas exploration, development and production activity has historically been volatile. This volatility is likely to continue. The level of activity is subject to large fluctuations in response to relatively minor changes in a variety of factors that are beyond the Company’s control, including:
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the worldwide economic environment, trends in international trade or other economic trends, including recessions and the level of activity in energy-consuming markets;
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prevailing oil and natural gas prices and expectations about future prices and price volatility;
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assessments of offshore drilling prospects compared with land-based opportunities;
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the cost of exploring for, producing and delivering oil and natural gas offshore and the relative cost of, and success in, doing so on land, including fracking and other technologies that make it more economical to produce oil from non-traditional sources;
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consolidation of oil and natural gas and oil service companies operating offshore;
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worldwide supply and demand for energy, petroleum products and chemical products;
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availability and rate of discovery of new oil and natural gas reserves in offshore areas;
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federal, state, local and international political and economic conditions, and policies including cabotage and local content laws;
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technological advancements affecting exploration, development, energy production and consumption;
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the ability or willingness of the Organization of Petroleum Exporting Countries ("OPEC") to set and maintain production levels and pricing;
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the level of oil and natural gas production by non-OPEC countries and the acceptance of oil produced by Iran by other countries throughout the world;
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international sanctions on oil producing countries including certain sanctions against Iran;
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civil unrest and the worldwide political and military environment, including uncertainty or instability resulting from an escalation or additional outbreak of armed hostilities involving the Middle East, Russia, Venezuela, other oil-producing regions or other geographic areas or acts of terrorism in the U.S. or elsewhere;
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weather conditions and catastrophic events;
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environmental regulation;
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regulation of drilling activities and the availability of drilling permits and concessions;
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the ability of oil and natural gas companies to generate or otherwise obtain funds for capital projects; and
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increase in the use and exploitation of renewable energy and the development of alternative fuel or energy sources.
The prolonged material downturn in oil and natural gas prices has caused a substantial decline in expenditures for exploration, development and production activity, which has resulted in a decline in demand and lower rates for the Company’s offshore energy support services and, in turn, lower utilization levels over the last five years. The continuation or worsening of such decrease in activity is likely to further reduce the Company’s day rates and its utilization, which may in turn have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects. In addition, an increase in commodity demand and prices will not necessarily result in an immediate increase in offshore drilling activity since project development lead and planning times, reserve replacement needs, expectations of future commodity demand, prices and supply of available competing vessels all combine to affect demand for the Company’s vessels.
Moreover, for the years ended December 31, 2020, 2019, and 2018, approximately 11%, 25%, and 30%, respectively, of the Company’s operating revenues were earned in the U.S. Gulf of Mexico. Historically, the Company has been and continues to be dependent on levels of activity in that region, which may differ from levels of activity in other regions of the world due to more localized factors. The Company has some ability to shift the location of its assets between regions depending upon local regulation and cost of doing business, among many other factors, and, while it has repositioned some assets from the U.S. Gulf of Mexico to other regions and may continue to do so in the future, such efforts may not be sufficient to counter the localized downturn in the region.
The COVID-19 pandemic has resulted in a decrease in the price of and demand for oil, which has caused, and may continue to cause, a decrease in the demand for the Company’s services.
During 2020, oil prices have experienced record declines in response to a significant amount of oversupply in oil and natural gas caused by (i) the COVID-19 pandemic that began in late 2019 and has led to a substantial decrease in global economic activity and (ii) supply decisions made principally by Russia and Saudi Arabia resulting in the failure to agree on terms to maintain production limits and the ensuing influx of additional oil to an already oversupplied market. These declines in oil and natural gas prices come on top of prices that have, for the last few years, been below historic averages. On January 2, 2020, WTI crude oil prices closed at a price of $61.18 per barrel. On April 20, 2020, the NYMEX WTI oil futures price for May 2020 went “negative” to -$37.63 per barrel. By December 31, 2020, WTI front month crude oil prices closed at a price of $48.52 per barrel, still below historic average. While the Organization of the Petroleum Exporting Countries Plus (“OPEC+”) members have implemented a production cut, the cuts failed to return oil and natural gas prices to pre-COVID-19 pandemic during 2020. To the extent that the COVID-19 pandemic continues to negatively impact the demand for oil and natural gas, the Company expects there to be an excess supply of oil and natural gas. This excess supply could, in turn, result in transportation and storage capacity constraints in the United States, or even the elimination of available storage. The decrease in prices caused by the COVID-19 pandemic could cause the Company’s customers’ to further reduce exploratory, drilling, completion and other production activities, which could have a material adverse effect on the Company’s business and liquidity.
The Company’s operation and workforce faces risks related to the COVID-19 pandemic, health epidemics and other outbreaks, which could significantly disrupt the Company’s operations.
The Company’s operations and financial results were adversely affected by the COVID-19 pandemic as a result of decreased demand and the increase in costs due to operational changes enacted to enhance crew and on-share employee safety. However, the Company believes that it has sufficient liquidity to meet its obligations for the foreseeable future, especially after receipt of the proceeds from the sale of Windcat Workboats and the anticipated tax refund under the CARES Act.
In addition, the pandemic may affect the health of the Company’s workforce, and international, national and local government interventions enacted to reduce the spread of COVID-19 may render the Company’s employees unable to commute to work and/or travel. Although the Company’s workforce is largely considered to be “essential” under guidance issued by the U.S. Cybersecurity and Infrastructure Security Agency, work, travel and other restrictions may vary in other regions of the world in which the Company has significant operations, such as Africa, Middle East and Asia, Latin America and Europe. Therefore, the Company may experience reduced productivity and an inability to fully support its offshore operations if the Company’s onshore personnel work remotely due to restrictions related to COVID-19. In addition, while many governments relaxed COVID-19 related restrictions during the northern hemisphere’s summer months, subsequent increases in infection rates have caused many restrictions to be reinstituted and, in some cases, such restrictions have been more severe than they were initially.
Additionally, an outbreak of COVID-19 on any of the Company’s vessels may result in the vessel, or some or all of the vessel crew, being quarantined, which would hinder the vessel’s ability to generate revenue and the crew’s ability to man any substitute vessel. The Company may also experience challenges in connection with the Company’s offshore crew changes due to health and travel restrictions related to COVID-19. The duration and severity of the business disruption and related financial impact from the COVID-19 pandemic cannot be reasonably estimated at this time and will depend on, among other things, sustained decreases of infections rates as well as the pace of production and deployment of vaccines. If the impact of the COVID-19 pandemic continues for an extended period of time, not only could it materially adversely affect the demand for the Company’s services but also the ability of the Company to provide such services, either of which could have a material adverse effect on the Company’s business. Adverse affects of the COVID-19 pandemic could exacerbate many of the other risks set forth in this “Risk Factors” section and the Company’s other SEC filings, such as those relating to the Company’s financial performance and debt obligations.
Any further outbreak of contagious diseases and other adverse public health developments, or the fear of such events, may cause similar issues or require the implementation of additional restrictions and precautionary measures. Any such restrictions or precautionary measures may curtail travel or impact the delivery or mobilization of vessels to and from certain countries, or geographic regions, or the ability to crew vessels appropriately. Any prolonged disruption of our delivery or mobilization schedule would likely impact our sales and operating results. A health epidemic or other outbreak may impact certain of our crews, which may materially and adversely affect our business, financial condition and results of operations. In addition, to the extent an outbreak of any such diseases cause a deterioration of the global economy it could impact oil and gas prices, which in turn could impact our business.
Restrictions imposed by the terms of the Company’s existing credit facilities may limit the Company’s operating and financial flexibility. In addition, there can be no assurance that the Company will meet the requirements of its financial covenants on an ongoing basis or that if it should fail to meet such covenants in the future, the lender under the relevant credit agreement will agree to waivers or amendments with respect thereto.
Many of the Company’s existing credit facilities impose, and its future credit facility may impose, restrictions, such as negative covenants and maintenance of financial ratio covenants, which may limit its operating and financial flexibility. Negative covenants such as limitations on additional indebtedness or liens may affect the Company’s ability to incur additional debt if needed,
while asset sale covenants could affect its ability to sell assets to generate liquidity. Requirements to maintain a minimum level of liquidity could also affect cash available for working capital, capital expenditures and general corporate purposes The Company’s ability to maintain financial ratio covenants may be affected by general economic conditions or other events beyond the Company’s control and no assurance can be given that such ratios will be met in the future. If the Company is unable to meet such ratios, it may be unable to reach agreements with the lenders under such agreements for waivers and/or amendments to the applicable covenants. Failure to comply with these restrictions could result in the lenders accelerating all amounts due under the debt facility and potentially trigger a default or acceleration of the Company’s other debt facilities.
There are risks associated with the Company’s debt structure.
As of December 31, 2020, the Company has $521.9 million of outstanding indebtedness, including the Convertible Senior Notes and obligations under secured notes and credit facilities secured by mortgages on various vessels. This includes the $130.0 million loan facility that was entered into by SEACOR Marine Foreign Holdings Inc. (“SMFH”), a wholly owned subsidiary of the Company, on September 26, 2018.
The Company’s ability to meet its debt service obligations and refinance its current indebtedness, as well as any future debt that it may incur, will depend upon its ability to generate cash in the future from operations, financings or asset sales, which are subject to general economic conditions, the Company’s results of operations, industry cycles, seasonality and financial, business, the general state of the capital markets at the time it seeks to refinance its debt and other factors, some of which may be beyond the Company’s control. If the Company cannot repay or refinance its debt as it becomes due, the Company may be forced to sell assets or take other disadvantageous actions, including undertaking alternative financing plans, which may have onerous terms or may be unavailable, dedicating an unsustainable level of the Company’s cash flow from operations to the payment of principal and interest on its indebtedness and/or reducing the amount of liquidity available for working capital, capital expenditures and general corporate purposes. The Company’s failure to pay or refinance its current or future debt under a credit facility when it becomes due could lead to the acceleration of all amounts due under such facility and potentially trigger a default or acceleration of the Company’s other debt facilities. The Company’s obligations to repay indebtedness and comply with restrictive and/or financial maintenance covenants could also impair its ability to rapidly respond to changes in its business or industry and withstand competitive pressures. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources” for additional information. The Company’s overall debt level and/or market conditions could limit its ability to issue additional debt in amounts and/or on terms that it considers reasonable.
Unconventional crude oil and natural gas sources and improved economics of producing natural gas and oil from such sources has and will likely continue to exert downward pricing pressures on the price of crude oil and natural gas.
The rise in production of crude oil and natural gas from shale in North America and the increased use of large Liquefied Natural Gas export facilities around the world are, at least to date, significant contributors to an over-supplied natural gas market and a similar environment for the crude oil market. Production of crude oil and natural gas from unconventional sources has also benefited from improved drilling efficiencies that have lowered the costs of extraction from these sources. The rise in production of natural gas and oil from these sources not only affects the price of oil but can also result in a reduction of capital invested in offshore oil and natural gas exploration. Because the Company provides vessels servicing offshore oil and natural gas exploration, a significant reduction in investments in offshore exploration and development in favor of investments in these unconventional resources could have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects.
The Company may record additional losses or impairment charges related to sold or idle vessels
During 2020, 2019, and 2018, the Company recognized impairment charges of $18.8 million, $12.0 million, and $14.6 million, respectively, related to tangible assets. Prolonged periods of low utilization or low day or charter rates, the sale of assets below their then carrying value or the decline in market value of the Company’s assets may cause the Company to experience further losses. If there are indications that the carrying value of any of the Company’s vessels may not be recoverable or if the Company sells assets for less than their then carrying value, the Company may recognize additional impairment charges on its fleet.
Failure to maintain an acceptable safety record may have an adverse impact on the Company’s ability to retain customers.
The Company’s customers consider safety and reliability a primary concern in selecting a service provider. The Company must maintain a record of safety and reliability that is acceptable to its customers. Should this not be achieved, the ability to retain current customers and attract new customers may be adversely affected, which in turn could have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects.
There is a high level of competition in the offshore marine service industry.
The Company operates in a highly fragmented and competitive industry, and the competitive nature of its industry and excess supply of equipment is currently depressing charter and utilization rates. If the period of depressed rates experienced over the last few years continues, it could adversely affect the Company’s financial performance. The Company competes for business on the basis of price, reputation for excellent service, quality, suitability and technical capabilities of its vessels, availability of vessels, safety and
efficiency, cost of mobilizing vessels from one market to a different market, and national flag preference. Further, competition has intensified as lower activity in the offshore oil and natural gas market has led to lower utilization and additional capacity. In addition, the Company’s ability to compete in international markets may be adversely affected by regulations requiring, among other things, local construction, flagging, ownership or control of vessels, the awarding of contracts to local contractors, the employment of local citizens and/or the purchase of supplies from local vendors. Furthermore, the Company competes with companies that have undergone significant restructuring which has substantially reduced their debt levels thereby vastly improving their balance sheets.
The process of obtaining new charter agreements is highly competitive and generally involves an intensive screening and a competitive bidding process, which, in certain cases, may extend for several months. The Company’s existing and potential competitors may have significantly greater financial resources than the Company. In addition, competitors with greater resources may have larger fleets, or could operate larger fleets through consolidations, acquisitions, new buildings or pooling of their vessels with other companies, and, therefore, may be able to offer a more competitive service than the Company, including better charter rates. The Company expects competition from a number of experienced companies providing contracts to potential customers, including state-sponsored entities and major energy companies affiliated with the projects requiring offshore vessel services. As a result, the Company may be unable to expand its relationships with existing customers or to obtain new customers on a profitable basis, if at all. If the Company is unable to successfully compete, it could have a materially adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects.
An oversupply of vessels or equipment that serve offshore oil and natural gas operations could have an adverse impact on the charter rates earned by the Company’s vessels and equipment.
The Company’s industry is highly competitive, with oversupply of vessel capacity and intense price competition. Expansion of the supply of vessels and equipment that serve offshore oil and natural gas operations has increased competition in the markets in which the Company operates and affected prices charged by operators. Further, the refurbishment of disused or "mothballed" vessels, conversion of vessels from uses other than oil and natural gas exploration and production support and related activities or construction of new vessels and equipment could add vessel and equipment capacity to current worldwide levels. The current oversupply of vessels and equipment capacity in the offshore marine market could lower charter rates and result in lower operating revenues, which in turn could have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects.
The Company relies on several customers for a significant share of its revenues, the loss of any of which could adversely affect the Company’s business and operating results.
The Company derives a significant portion of its revenues from a limited number of oil and natural gas exploration, development and production companies. During the years ended December 31, 2020, 2019, and 2018, the Company’s ten largest customers accounted for approximately 76%, 61%, and 57%, respectively, of its operating revenues. During the year ended December 31, 2020, two customers, Seacor Marine Arabia LLC, a joint venture through which vessels are chartered to Saudi Aramco, and Exxon Mobil, were each responsible for 10% or more of the Company’s operating revenues from continuing operations. In addition, one or more of the Company’s joint ventures rely primarily on a single customer for their revenues. The portion of the Company’s revenues or any of its joint ventures’ revenues attributable to any single customer may change over time, depending on the level of activity by any such customer, the Company’s ability to meet the customer's needs and other factors, many of which are beyond the Company’s control. In addition, most of the Company’s contracts with its oil and natural gas customers can be canceled on relatively short notice and do not commit its customers to acquire specific amounts of services or require the payment of significant liquidated damages upon cancellation. The loss of business from any of the Company’s significant customers could have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects. Further, to the extent any of the Company’s customers experience an extended period of operating difficulty, it may have a material adverse effect on the Company’s business, financial position, results of operation, cash flows and prospects.
Consolidation of the Company’s customer base could adversely affect demand for its services and reduce its revenues.
In recent years, oil and natural gas companies, energy companies, drilling contractors and other offshore service providers have undergone substantial consolidation and additional consolidation is possible, especially as the depressed oil price environment has caused many of these companies to restructure their operations and capital structure, including substantially reducing their debt levels. Consolidation results in fewer companies to charter or contract for the Company’s services. Also, merger activity among both major and independent oil and natural gas companies affects exploration, development and production activity as the consolidated companies integrate operations to increase efficiency and reduce costs. Less promising exploration and development projects of a combined company may be dropped or delayed. Such activity may result in an exploration and development budget for a combined company that is lower than the total budget of both companies before consolidation, which could adversely affect demand for the Company’s vessels thereby reducing its revenues.
The Company may be unable to maintain or replace its offshore support vessels as they age.
As of December 31, 2020, the average age of the Company’s owned vessels was approximately 7 years. The Company believes that after a vessel has been in service for approximately 20 years, the expense (which typically increases with age) necessary to satisfy required marine certification standards may not be economically justifiable. In addition, the Company must maintain its vessels to remain attractive to its customers and comply with regulations, including updating or replacing systems and equipment, however, the Company may be unable to carry out drydockings of its vessels, may be limited by insufficient shipyard capacity or its systems and equipment may become obsolete and unsupported by the manufacturer or other service providers, which could adversely affect its ability to maintain its vessels. In addition, market conditions may not justify these expenditures or enable the Company to operate its older vessels profitably during the remainder of their economic lives. There can be no assurance that the Company will be able to maintain its fleet by extending the economic life of existing vessels, or that its financial resources will be sufficient to enable it to make expenditures necessary for these purposes or to acquire or build replacement vessels, all of which could have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects.
The failure to successfully complete construction or conversion of the Company’s vessels, repairs, maintenance or routine drydockings on schedule and on budget could have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects.
From time to time, the Company may have a number of vessels under conversion and may plan to construct or convert other vessels in response to current and future market conditions. The Company also routinely engages shipyards to drydock vessels for regulatory compliance and to provide repair and maintenance. Construction and conversion projects and drydockings are subject to risks of delay and cost overruns, resulting from shortages of equipment, lack of shipyard availability, unforeseen engineering problems, work stoppages, weather interference, unanticipated cost increases, inability to obtain necessary certifications and approvals and shortages of materials or skilled labor. A significant delay in either construction or drydockings could have a material adverse effect on contract commitments and revenues with respect to vessels under construction, conversion or undergoing drydockings. Significant cost overruns or delays for vessels under construction, conversion or retrofit could have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects.
The operations of the Company’s fleet may be subject to seasonal factors.
Demand for the Company’s offshore support services is directly affected by the levels of offshore drilling and production activity of its oil and gas customers, and construction and maintenance activity for its wind farm customers. Budgets of many of the Company’s customers are based upon a calendar year, and demand for the Company’s services has historically been stronger in the second and third calendar quarters when allocated budgets are expended by its customers and weather conditions are more favorable for offshore activities. In particular, the demand for the Company’s liftboat fleet in the U.S. Gulf of Mexico and Europe and offshore support vessels in the Middle East and West Africa, are seasonal with peak demand normally occurring during the summer months. Adverse events relating to the Company’s vessels or business operations during peak demand periods could have a significant adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects. In addition, seasonal volatility can create unpredictability in activity and utilization rates, which could have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects.
The Company has high levels of fixed costs that will be incurred regardless of its level of business activity.
The Company’s business has high fixed costs. Maintenance downtime or low productivity due to reduced demand can have a significant negative effect on the Company’s operating results and financial condition. Some of the Company’s fixed costs will not decline during periods of reduced revenue or activity. During times of reduced utilization, the Company may not be able to reduce its costs immediately as it may incur additional costs associated with preparing vessels for cold stacking. Moreover, the Company may not be able to fully reduce the cost of its support operations in a particular geographic region due to the need to support the remaining vessels in that region. A decline in revenue due to lower day rates and/or utilization may not be offset by a corresponding decrease in the Company’s fixed costs and could have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects.
As the markets recover or the Company changes its marketing strategies or for other reasons, the Company may be required to incur higher than expected costs to return previously cold-stacked vessels to class.
In response to the decrease in demand stemming from lower oil and natural gas prices, the Company has cold-stacked a number of offshore support vessels. As of December 31, 2020, 22 of 64 owned and leased-in offshore support vessels were cold-stacked worldwide. No assurance can be given that the Company will be able to quickly bring these cold-stacked offshore support vessels back into service or that the cost of doing so would not be significant. Cold-stacked vessels do not receive the same level of maintenance as active vessels. As a result and depending on the length of time the vessels are cold-stacked, the Company could incur deferred drydocking costs for regulatory recertification to return these vessels to active service and may incur costs to hire and train mariners to operate such vessels. These costs are difficult to estimate and could be substantial. Delay in reactivating cold stacked offshore support vessels and the costs and other expenses related to the reactivation of cold-stacked offshore support vessels could have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects.
The Company may not be able to renew or replace expiring contracts for its vessels.
The Company’s ability to renew or replace expiring contracts or obtain new contracts, and the terms of any such contracts, will depend on various factors, including market conditions and the specific needs of its customers. Given the highly competitive and historically cyclical nature of the industry, the Company may not be able to renew or replace expiring contracts or it may be required to renew or replace expiring contracts or obtain new contracts at rates that are below, and potentially substantially below, existing day rates, or that have terms that are less favorable to the Company than its existing contracts, or it may be unable to secure contracts for these vessels. This could have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects.
The early termination of contracts on the Company’s vessels could have a material adverse effect on its operations.
Most of the long-term contracts for the Company’s vessels contain early termination options in favor of the customer. Although some of such contracts have early termination remedies or other provisions designed to discourage the customer from exercising such options, the Company cannot assure investors that its customers would not choose to exercise their termination rights in spite of such remedies or the threat of litigation with the Company. Until replacement of such business with other customers, any termination could temporarily disrupt the Company’s business or otherwise adversely affect its financial condition and results of operations. The Company might not be able to replace such business on economically equivalent terms. In addition, during the current and prior downturns, the Company has experienced customers requesting contractual concessions even though such concessions were contrary to existing contractual terms. While the Company may not be legally required to give concessions, commercial considerations may dictate that it do so. If the Company is unable to collect amounts owed to it or long-term contracts for its vessels are terminated and its vessels are not sufficiently utilized, this could have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects.
Increased domestic and international laws and regulations may materially adversely impact the Company, and the Company may become subject to additional international laws and regulations in the event of high-profile incidents.
Regulation of the offshore marine industry has intensified over the past several decades, and the Company expects this trend to continue. Changes in laws or regulations regarding offshore oil and natural gas exploration and development activities and technical and operational measures, whether or not in connection with specific incidents, may increase the Company’s costs and the costs of its customers’ operations. For instance, in response to fatalities and environmental damages caused by a 2010 explosion on the Deepwater Horizon, a drilling rig operating in the Gulf of Mexico, various regulatory agencies imposed temporary moratoria on drilling operations and enacted several permanent regulations designed to enhance the safety of operations in the Gulf of Mexico. Compliance with these new regulations and new interpretations of existing regulations have materially increased the cost of drilling operations in the U.S. Gulf of Mexico. New or additional government regulations or laws concerning drilling operations in the U.S. Gulf of Mexico and other regions have in the past and could in the future materially increase the cost of drilling operations in the U.S. Gulf of Mexico and/or cause additional moratoria on drilling activities. These changes may influence decisions by customers or other industry participants that could reduce the demand for the Company’s services. Moreover, continuing changes in regulation make it more difficult for the Company to implement long-term plans. For these reasons, further changes in regulation could have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects.
The Outer Continental Shelf Lands Act, as amended, provides the federal government with broad discretion in regulating the leasing of offshore resources for the production of oil and natural gas.
The Outer Continental Shelf Lands Act provides the federal government with broad discretion in regulating the release or continued use of offshore resources for oil and natural gas production. The current extent of permitted offshore leasing is uncertain. A moratorium on new offshore oil and gas drilling had been in place for a number of years. Although officials in the Trump Administration took steps to lift the moratorium to allow new offshore oil and gas drilling in nearly all U.S. coastal waters, these efforts were not successful. Because the Company’s operations rely on offshore oil and gas exploration and production, the government’s exercise of authority under the provisions of the Outer Continental Shelf Lands Act to restrict the availability of offshore oil and natural gas leases (for example, due to a serious incident of pollution) could have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects.
The Company is subject to complex laws and regulations, including environmental laws and regulations that can adversely affect the cost, manner or feasibility of doing business.
Increasingly stringent federal, state, local and international laws and regulations governing worker safety and health and the staffing, construction and operation of vessels significantly affect the Company’s operations. Many aspects of the marine industry are subject to extensive governmental regulation and oversight, including by the USCG, Occupational Safety and Health Administration ("OSHA"), the NTSB, the EPA, the IMO, the U.S. Department of Homeland Security, MARAD, CBP, BSEE, and state environmental protection agencies for those jurisdictions in which the Company operates, and to regulation by states and classification societies (such as the American Bureau of Shipping). The Company is also subject to regulation under international treaties, such as (i) MARPOL, (ii) SOLAS, (iii) MLC, (iv) BWM Convention, (v) STCW and (vi) other port regulations. These agencies, organizations, regulations and treaties establish safety requirements and standards and are authorized to investigate vessels and accidents and to recommend improved safety standards. CBP and USCG are authorized to inspect vessels at will. The Company has and will continue to spend significant funds to comply with these regulations and treaties. Failure to comply with these regulations and treaties may cause the Company to incur significant liabilities or restrictions on its operations, any of which could have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects.
The Company’s business and operations are also subject to federal, state, local and international laws and regulations relating to environmental protection and occupational safety and health, including laws and regulations that govern the discharge of oil and pollutants into waters regulated thereunder. Violations of these laws may result in civil and criminal penalties, fines, injunctions, or other sanctions, or the suspension or termination of the Company’s operations. Compliance with such laws and regulations frequently require installation of costly equipment, increased staffing, increased fuel costs, specific training, or operational changes. Some environmental laws impose strict and, under certain circumstances, joint and several liability for remediation of spills and releases of oil and hazardous materials and damage to natural resources, which could subject the Company to liability without regard to whether it is negligent or at fault. Under OPA 90, owners, operators and bareboat charterers are jointly and severally strictly liable for the removal costs and damages resulting from the discharge of oil within the navigable waters of the U.S. and the EEZ. In addition, an oil spill could result in significant liability, including fines, penalties, criminal liability and costs for natural resource and other damages under other federal and state laws and civil actions. Liability for a catastrophic spill could exceed the Company’s available insurance coverage and result in it having to liquidate assets to pay claims. These laws and regulations may expose the Company to liability for the conduct of or conditions caused by others, including charterers. Because such laws and regulations frequently change and may impose increasingly strict requirements, the Company cannot predict the ongoing cost of complying with these laws and regulations. Additionally, reduced enforcement of existing safety and other laws or regulations may result in a decline in the demand for the Company’s offshore support services that are provided in connection with compliance with such laws or regulations. The Company cannot be certain that existing laws, regulations or standards (and the enforcement thereof), as currently interpreted or reinterpreted in the future, or future laws and regulations and standards will not have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects. Regulation of the offshore marine services industry will likely continue to become more stringent and more expensive for the Company. In addition, a serious marine incident that results in significant pollution or injury could result in additional regulation and lead to strict governmental enforcement or other legal challenges. The variability and uncertainty of current and future shipping regulations could hamper the ability of the Company and its customers to plan for the future or establish long-term strategies. Additional environmental and other requirements, as well as more stringent enforcement policies, may be adopted that could limit the Company’s ability to operate, require the Company to incur substantial additional costs or otherwise have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects. For more information, see “Item 1. Business-Governmental Regulations and -Environmental Compliance.”
The Company is required by various governmental and quasi-governmental agencies to obtain, maintain and periodically renew certain permits, licenses and certificates with respect to its operations or vessels. In certain instances, the failure to obtain, maintain or renew these authorizations could have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects.
There are risks associated with climate change and environmental regulations.
Governments, supranational groups and various other parties around the world have, in recent years, proposed or adopted new laws or regulations pertaining to climate change, carbon emissions or energy use that in turn could result in a reduction in demand for hydrocarbon-based fuel. In fact, a number of countries and organizations have adopted, or are considering the adoption of, regulatory frameworks to reduce greenhouse gas emissions. These regulatory measures or international treaties may include, among others, adoption of cap and trade regimes, carbon taxes, increased efficiency standards, and incentives or mandates for renewable energy and could include specific restrictions on shipping emissions. Additionally, some institutional investors and other groups have indicated a focus on matters affecting the environment, which may result in reduced investment in, or financing available to, the hydrocarbon-based industry. Many of these groups have developed environmental, social and governance standards as benchmarks. Although the Company formed a new Sustainability Council in 2020 to oversee the Company’s enhanced environmental, social and governance program, the Company may not meet these evolving standards or benchmarks; and our failure to do so could adversely impact our business, stock price or access to capital.
Governments could also pass laws or regulations encouraging or mandating the use of alternative energy sources such as wind power and solar energy. These requirements could reduce demand for oil and natural gas and therefore the services provided by the Company. Alternatively, changes in U.S. law permitting additional drilling on federal lands could divert capital from offshore exploration. In addition, new environmental or emissions control laws or regulations may require an increase in the Company’s operating costs and/or in its capital spending for additional equipment or personnel to comply with such requirements and could also result in a reduction in revenues due to downtime required for the installation of such equipment. Moreover, various international conventions and federal, state or international laws have significantly increased their regulation of vessel fuel and emissions in recent years, and this trend is likely to continue. Any of these developments, requirements or initiatives could have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects.
The Company has significant international operations, which subjects it to risks. Unstable political, military and economic conditions in foreign countries where a significant proportion of the Company’s operations is conducted could materially adversely impact its business.
The Company operates vessels and transacts other business worldwide. For the years ended December 31, 2020, 2019 and 2018, 89%, 75% and 71%, respectively, of the Company’s operating revenues and ($6.6) million, ($13.0) million and ($1.9) million respectively, of its equity in losses from 50% or less owned companies, net of tax, were derived from its foreign operations. These operations are subject to risks, including potential vessel seizure, terrorist acts, piracy, kidnapping, nationalization of assets, currency restrictions, import or export quotas, tariffs and other forms of public and government regulation, all of which are beyond the Company’s control. Economic sanctions or an oil embargo, for example, could have significant impact on activity in the oil and natural gas industry and, correspondingly, on the Company should it operate vessels in a country subject to any sanctions or embargo, or in the surrounding region to the extent any sanctions or embargo disrupts its operations.
In addition, the Company’s ability to compete in international markets may be adversely affected by foreign government regulations that favor or require the awarding of contracts to local competitors, or that require foreign persons to employ citizens of, or purchase supplies from, a particular jurisdiction. Further, the Company’s foreign subsidiaries may face governmentally imposed restrictions on their ability to transfer funds to their parent company.
Activity outside the U.S. involves additional risks, including the possibility of:
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U.S. embargoes or restrictive actions and regulations by U.S. and foreign governments that could limit the Company’s ability to provide services in foreign countries or cause retaliatory actions by such governments;
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a change in, or the imposition of, withholding or other taxes on foreign income, tariffs or restrictions on foreign trade and investment;
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limitations on the repatriation of earnings or currency exchange controls and import/export quotas;
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unwaivable, burdensome local cabotage and local ownership laws and requirements;
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nationalization, expropriation, asset seizure, blockades and blacklisting;
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limitations in the availability, amount or terms of insurance coverage;
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loss of contract rights and inability to enforce contracts;
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political instability, war and civil disturbances or other risks that may limit or disrupt markets, such as terrorist acts, piracy and kidnapping;
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fluctuations in currency exchange rates, hard currency shortages and controls on currency exchange that affect demand for the Company’s services and its profitability;
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potential noncompliance with a wide variety of laws and regulations, such as the FCPA, and similar non-U.S. laws and regulations, including the U.K. Bribery Act 2010;
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labor strikes;
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import or export quotas and other forms of public and government regulation;
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changes in general economic and political conditions;
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difficulty in staffing and managing widespread operations, including the ability to transfer qualified labor to local operations; and
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inadequate or delayed response to natural disasters on other major incidents or events in less developed countries.
On January 31, 2020, the U.K. formally left the E.U.(“Brexit”) and on December 24, 2020 the U.K. and E.U. agreed to a trade deal (the “Trade and Cooperation Agreement”) which was ratified by the U.K. on December 30, 2020. The Trade and Cooperation Agreement is subject to formal approval by the European Parliament and the Council of the European Union before it comes into effect and has been applied provisionally since January 1, 2021. The Trade and Cooperation Agreement allows the U.K and E.U. to continue trading without tariffs or quotas, however, the movement of goods between the U.K. and the remaining member states of the E.U. may be subject to additional inspections and documentation checks, leading to possible delays at ports of entry and departure. In addition, there are still a number of areas of uncertainty in connection with the future of the U.K. and its relationship with the E.U. and the application and interpretation of the Trade and Cooperation Agreement, and Brexit-related matters may take several years to be clarified and resolved. In particular, the Trade and Cooperation Agreement only covers the trade of goods and, therefore, uncertainly remains over the U.K.’s long-term trading of services relationship with the E.U. At this time, we cannot predict the potential impact of Brexit on our business, if any. Brexit also may create global economic uncertainty, which may cause the Company’s customers and potential customers to monitor their costs and reduce their budgets for the Company’s services. Any of these effects, and others the Company cannot anticipate, could materially adversely affect its business, financial position, results of operations, cash flows and prospects.
The Company is subject to hazards customary for the operation of vessels that could disrupt operations and expose it to liability.
The operation of offshore support and related vessels is subject to various risks, including catastrophic disaster, adverse weather, mechanical failure and collision. For instance, the Company’s operations in the U.S. Gulf of Mexico may be adversely affected by weather. The Atlantic hurricane season typically runs from June through November. Tropical storms and hurricanes may limit the Company’s ability to operate vessels in the proximity of storms, reduce oil and natural gas exploration, development and production activity, and could result in the Company incurring additional expenses to secure equipment and facilities. They may also require the Company to evacuate its vessels, personnel and equipment out of the path of a storm. Additional risks to vessels include adverse sea conditions, capsizing, grounding, oil and hazardous substance spills and navigation errors. These risks could endanger the safety of the Company’s personnel, equipment, cargo and other property, as well as the environment. If any of these events were to occur, the Company could be held liable for resulting damages, including loss of revenues from or termination of charter contracts, higher insurance rates, increased operating costs, increased governmental regulation and reporting and damage to the Company’s reputation and customer relationships. Any such events would likely result in negative publicity for the Company and adversely affect its safety record, which would affect demand for its services in a competitive industry. In addition, the affected vessels could be removed from service and would then not be available to generate revenues.
The Company’s insurance coverage may be inadequate to protect it from the liabilities that could arise in its business.
Although the Company maintains insurance coverage against the risks related to its business, risks may arise for which it may not be insured. Claims covered by insurance are subject to deductibles, the aggregate amount of which could be material, and certain policies impose caps on coverage. Insurance policies are also subject to compliance with certain conditions, the failure of which could lead to a denial of coverage as to a particular claim or the voiding of a particular insurance policy. There also can be no assurance that existing insurance coverage can be renewed at commercially reasonable rates or that available coverage will be adequate to cover future claims. If a loss occurs that is partially or completely uninsured, or the carrier is unable or unwilling to cover the claim, the Company could be exposed to substantial liability. Further, to the extent the proceeds from insurance are not sufficient to repair or replace a damaged asset, the Company would be required to expend funds to supplement the insurance and in certain circumstances may decide that such expenditures are not justified, which, in either case, could adversely affect the Company’s business, financial position, results of operations, cash flows and prospects.
The Company may undertake one or more significant corporate transactions that may not achieve their intended results, may adversely affect its financial condition and its results of operations, and may result in additional risks to its business.
The Company continuously evaluates the acquisition and disposition of assets relevant to participants in the offshore energy industry and may in the future undertake significant transactions. Any such transaction could be material to the Company’s business and could take any number of forms, including mergers, joint ventures, investments in new lines of business and the purchase of equity interests or other assets. The form of consideration associated with such transactions may include, among other things, cash, Common Stock, securities convertible into Common Stock or other securities (privately or through a public offering), equity interests in the Company’s subsidiaries, or other assets of the Company. The Company also evaluates the disposition of its assets, in whole or in part, which could take the form of asset sales, mergers or sales of equity interests in its subsidiaries (privately or through a public offering).
These types of significant transactions may present material risks and uncertainties, including distraction of management from current operations, insufficient revenue to offset liabilities assumed, potential loss of significant revenue and income streams, unexpected expenses, inadequate return of capital, potential acceleration of taxes currently deferred, regulatory or compliance issues, the triggering of certain covenants in the Company’s debt instruments (including accelerated repayment) and other unidentified issues not discovered in due diligence. If the Company was to complete such an acquisition, disposition, investment or other strategic transaction, it may require additional debt or equity financing that could result in a significant increase in the amount of debt the Company has or the number of outstanding shares of its Common Stock. As a result of the risks inherent in such transactions, the Company cannot guarantee that any such transaction will ultimately result in the realization of the anticipated benefits of the transaction or that significant transactions will not have a material adverse impact on the Company’s business, financial positions, results of operations, cash flows and prospects.
If the Company does not restrict the amount of ownership of its Common Stock by non-U.S. citizens, it could be prohibited from operating offshore support vessels in the United States, which would adversely impact the Company’s business and operating results.
The Company is subject to the Jones Act, which governs, among other things, the ownership and operation of vessels used to carry passengers and cargo between points in the U.S. Subject to limited exceptions, the Jones Act requires that vessels engaged in the U.S. coastwise trade be built in the U.S., registered under the U.S. flag, manned by predominantly U.S. crews and be owned and operated by "U.S. citizens" within the meaning of the Jones Act. Compliance with the Jones Act requires that non-U.S. citizens own no more than 25% in the entities that directly or indirectly own or operate the vessels that the Company operates in U.S. coastwise trade. Although the Company’s Third Amended and Restated Certificate of Incorporation and Third Amended and Restated By-Laws contain provisions intended to assure compliance with these provisions of the Jones Act, a failure to maintain compliance could have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects and could temporarily or permanently prohibit the Company from operating vessels in the U.S. coastwise trade. In addition, the Company could be subject to fines and its vessels could be subject to seizure and forfeiture for violations of the Jones Act and the related U. S. vessel documentation laws.
Repeal, amendment, suspension or non-enforcement of the Jones Act would result in additional competition for the Company and could have a material adverse effect on the Company’s business.
Substantial portions of the Company’s operations are conducted in the U.S. coastwise trade and thus subject to the provisions of the Jones Act (discussed above). For years, there have been attempts to repeal or amend such provisions, and such attempts are expected to continue in the future.
Repeal, substantial amendment, waiver or substantial reinterpretation of provisions of the Jones Act could significantly adversely affect the Company by, among other things, resulting in additional competition from competitors with lower operating costs, because of their ability to use vessels built in lower-cost foreign shipyards, owned and manned by foreign nationals with promotional foreign tax incentives and with lower wages and benefits than U.S. citizens. In addition, the Company’s advantage as a U.S.-citizen operator of Jones Act vessels could be eroded by periodic efforts and attempts by foreign interests to circumvent certain aspects of the Jones Act. If maritime cabotage services were included in the General Agreement on Trade in Services or other international trade agreements, or if the restrictions contained in the Jones Act were otherwise altered, the shipping of maritime cargo between covered U.S. points could be opened to foreign-flag or foreign-built vessels. Because foreign vessels may have lower construction costs and operate at significantly lower costs than companies operating in the U.S. coastwise trade, such a change could significantly increase competition in the U.S. coastwise trade, which could have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects.
Restrictions on non-U.S. citizen ownership of the Company’s vessels could limit its ability to sell off any portion of its business or result in the forfeiture of its vessels.
As noted above, compliance with the Jones Act requires that non-U.S. citizens own no more than 25% in the entities that directly or indirectly own or operate the vessels that the Company operates in the U.S. coastwise trade. If the Company were to seek to sell any portion of its business that owns any of these vessels, it may have fewer potential purchasers, since some potential purchasers might be unable or unwilling to satisfy the U.S. citizenship restrictions described above. As a result, the sales price for that portion of the Company’s business may not attain the amount that could be obtained through unconstrained bidding. Furthermore, if at any point the Company or any of the entities that directly or indirectly own its vessels cease to satisfy the requirements to be a U.S. citizen within the meaning of the Jones Act, the Company would become ineligible to operate in the U.S. coastwise trade and may become subject to penalties and risk forfeiture of its vessels.
The Company’s Third Amended and Restated Certificate of Incorporation and its Third Amended and Restated By-laws limit the ownership of Common Stock by individuals and entities that are not U.S. citizens within the meaning of the Jones Act. These restrictions may affect the liquidity of the Company’s Common Stock and may result in non-U.S. citizens being required to sell their shares at a loss or relinquish their voting, dividend and distribution rights.
Under the Jones Act, at least 75% of the outstanding shares of each class or series of the Company’s capital stock must be owned and controlled by U.S. citizens within the meaning of the Jones Act. Certain provisions of the Company’s Third Amended and Restated Certificate of Incorporation and its Third Amended and Restated By-Laws are intended to facilitate compliance with this requirement and may have an adverse effect on holders of shares of the Company’s Common Stock. These restrictions may affect the liquidity of the Company’s Common Stock.
Under the provisions of the Company’s Third Amended and Restated Certificate of Incorporation, the aggregate percentage of ownership by non-U.S. citizens of any class or series of the Company’s capital stock is limited to 22.5% of the outstanding shares of each such class or series to ensure that such ownership by non-U.S. citizens will not exceed the maximum percentage permitted by the Jones Act, which is presently 25%. The Company’s Third Amended and Restated Certificate of Incorporation also restricts ownership of shares of any class or series of its capital stock by a single non-U.S. citizen (and any other non-U.S. citizen whose ownership position would be aggregated with such non-U.S. citizen for purposes of the Jones Act) to not more than 4.9% of the outstanding shares of each such class or series. The Company refers to such percentage limitations on ownership by persons who are not U.S. citizens within the meaning of the Jones Act as the “applicable permitted percentage.”
The Company’s Third Amended and Restated Certificate of Incorporation provides that any transfer or purported transfer of any shares of any class or series of its capital stock that would otherwise result in ownership (of record or beneficially) by non-U.S. citizens of shares of such class or series in excess of the applicable permitted percentage will be void and ineffective, and neither the Company nor its transfer agent will register any such transfer or purported transfer in the Company records or recognize any such transferee or purported transferee as a stockholder of the Company for any purpose (including for purposes of voting and dividends) except to the extent necessary to effect the remedies available to the Company under its Third Amended and Restated Certificate of Incorporation.
In the event such transfer restriction would be ineffective for any reason, the Company’s Third Amended and Restated Certificate of Incorporation provides that if any transfer would otherwise result in ownership (of record or beneficially) by non-U.S. citizens of shares of such class or series in excess of the applicable permitted percentage, such transfer will cause such excess shares to be automatically transferred to a trust for the exclusive benefit of one or more charitable beneficiaries that are U.S. citizens within the meaning of the Jones Act. The proposed transferee will have no rights in the shares transferred to the trust, and the trustee, who will be a U.S. citizen chosen by the Company and unaffiliated with the Company or the proposed transferee, will have all voting, dividend and distribution rights associated with the shares held in the trust. The trustee will sell such excess shares to a U.S. citizen within 20 days of receiving notice from the Company (or as soon thereafter as a sale may be effected in compliance with all applicable securities laws) and distribute to the proposed transferee the lesser of the price that the proposed transferee paid for such shares and the amount received from the sale, and any gain from the sale will be paid to the charitable beneficiary of the trust.
These trust transfer provisions also apply to situations where ownership of a class or series of the Company’s capital stock by non-U.S. citizens in excess of the applicable permitted percentage would result from a change in the status of a record or beneficial owner thereof from a U.S. citizen to a non-U.S. citizen or from a repurchase or redemption by the Company of shares of its capital stock, in which case such person will receive the lesser of the market price of the shares on the date of such status change or such share repurchase or redemption and the amount received from the sale. As part of the foregoing trust transfer provisions, the trustee will be deemed to have offered the excess shares in the trust to the Company at a price per share equal to the lesser of (i) the market price on the date the Company accepts the offer and (ii) the price per share in the purported transfer or original issuance of shares, as described in the preceding paragraph, or the market price per share on the date of the status change or share repurchase or redemption, that resulted in the transfer to the trust.
As a result of the above trust transfer provisions, a proposed transferee that is a non-U.S. citizen, or a record or beneficial owner whose citizenship status change results in excess shares, or whose shares become excess shares as a result of a repurchase or redemption by the Company of its capital stock may not receive any return on its investment in shares it purportedly purchases or owns, as the case may be, and it may sustain a loss.
To the extent that the above trust transfer provisions would be ineffective for any reason to prevent ownership (of record or beneficially) by non-U.S. citizens of the shares of any class or series of the Company’s capital stock in excess of the applicable permitted percentage, the Company’s Third Amended and Restated Certificate of Incorporation provides that the Company, in its sole discretion, shall be entitled to redeem all or any portion of such excess shares most recently acquired (as determined by the Company in accordance with guidelines that are set forth in its Third Amended and Restated Certificate of Incorporation), by non-U.S. citizens, or owned (of record or beneficially) by non-U.S. citizens as a result of a change in citizenship status or a repurchase or redemption by the Company of shares of its capital stock, at a redemption price based on a fair market value formula that is set forth in the Company’s Third Amended and Restated Certificate of Incorporation. The per share redemption price may be paid, as determined by the Company’s Board of Directors, by cash, promissory notes, warrants or a combination thereof. Such excess shares shall not be accorded any voting, dividend or distribution rights until they have ceased to be excess shares, provided that they have not been already redeemed by the Company. As a result of the above provisions, a proposed transferee or owner of the Company’s Common Stock that is a non-U.S. citizen may not receive any return on its investment in shares it purportedly purchases or owns, as the case may be, and it may sustain a loss. Further, the Company may have to incur additional indebtedness, or use available cash (if any), to fund all or a portion of such redemption, in which case its financial condition may be materially weakened.
So that the Company may ensure its compliance with the Jones Act, its Third Amended and Restated Certificate of Incorporation permits the Company to require that any record or beneficial owner of any shares of its capital stock provide the Company with certain documentation concerning such owner’s citizenship. These provisions include a requirement that every person acquiring, directly or indirectly, five percent (5%) or more of the shares of any class or series of the Company’s capital stock must provide the Company with specified citizenship documentation. In the event that any person does not submit such requested or required documentation to the Company, the Company’s Third Amended and Restated Certificate of Incorporation provides it with certain remedies, including the suspension of the voting rights of such person's shares of the Company’s capital stock and the payment of dividends and distributions with respect to those shares into an escrow account. As a result of non-compliance with these provisions, a record or beneficial owner of the shares of Common Stock may lose significant rights associated with those shares.
In addition to the risks described above, the foregoing restrictions on ownership by non-U.S. citizens could delay, defer or prevent a transaction or change in control that might involve a premium price for the Company’s Common Stock or otherwise be in the best interest of its stockholders.
If non-U.S. citizens own more than 22.5% of the Company’s Common Stock, the Company may not have the funds or the ability to redeem any excess shares and it could be forced to suspend its operations in the U.S. coastwise trade.
The Company’s Third Amended and Restated Certificate of Incorporation and its Third Amended and Restated By-Laws contain provisions prohibiting ownership of its Common Stock by persons who are not U.S. citizens within the meaning of the Jones Act, in the aggregate, in excess of 22.5% of such shares, in order to ensure that such ownership by non-U.S. citizens will not exceed the maximum percentage permitted by the Jones Act, which is presently 25%. The Company’s Third Amended and Restated Certificate of Incorporation and its Third Amended and Restated By-Laws permit the Company to redeem such excess shares in the event that the transfer of such excess shares to a trust for sale would be ineffective. The per share redemption price may be paid, as determined by the Company’s Board of Directors, by cash, promissory notes or warrants. However, the Company may not be able to redeem such excess shares for cash because its operations may not have generated sufficient excess cash flow to fund such redemption. If, for any reason, the Company is unable to effect such a redemption when such ownership of shares by non-U.S. citizens is in excess of 25% of the Common Stock, or otherwise prevent non-U.S. citizens in the aggregate from owning shares in excess of 25% of any such class or series of its capital stock, or fail to exercise its redemption rights because it is unaware that such ownership exceeds such percentage, the Company will likely be unable to comply with the Jones Act and will likely be required by the applicable governmental authorities to suspend its operations in the U.S. coastwise trade. Any such actions by governmental authorities would likely have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects.
The Company’s U.S.-flag vessels are subject to requisition for ownership or use by the United States in case of national emergency or national defense need.
The Merchant Marine Act of 1936 provides that, during a national emergency declared by presidential proclamation or a period for which the U.S. President has proclaimed that the security of the national defense makes it advisable, the Secretary of Transportation may requisition the ownership or use of any vessel owned by U.S. citizens (which includes the Company) and any
vessel under construction in the U.S. If any of the Company’s vessels were purchased or chartered by the federal government under this law, the Company would be entitled to just compensation, which is generally the fair market value of the vessel in the case of a purchase or, in the case of a charter, the fair market value of charter hire, but the Company would not be entitled to compensation for any consequential damages it may suffer. The purchase or charter for an extended period of time by the federal government of one or more of the Company’s vessels under this law could have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects.
The Company may not be fully indemnified by its customers for damage to their property or the property of their other contractors.
The Company’s contracts are individually negotiated, and the levels of indemnity and allocation of liabilities in them can vary from contract to contract depending on market conditions, particular customer requirements and other factors existing at the time a contract is negotiated. Additionally, the enforceability of indemnification provisions in the Company’s contracts may be limited or prohibited by applicable law or may not be enforced by courts having jurisdiction, and the Company could be held liable for substantial losses or damages and for fines and penalties imposed by regulatory authorities. The indemnification provisions of the Company’s contracts may be subject to differing interpretations, and the laws or courts of certain jurisdictions may enforce such provisions while other laws or courts may find them to be unenforceable, void or limited by public policy considerations, including when the cause of the underlying loss or damage is the Company’s gross negligence or willful misconduct, when punitive damages are attributable to the Company or when fines or penalties are imposed directly against the Company. The law with respect to the enforceability of indemnities varies from jurisdiction to jurisdiction. Current or future litigation in particular jurisdictions, whether or not the Company is a party, may impact the interpretation and enforceability of indemnification provisions in the Company’s contracts. There can be no assurance that the Company’s contracts with its customers, suppliers and subcontractors will fully protect the Company against all hazards and risks inherent in its operations. There can also be no assurance that those parties with contractual obligations to indemnify the Company will be financially able to do so or will otherwise honor their contractual obligations.
The Company may not be able to sell vessels to improve its cash flow and liquidity because it may be unable to locate buyers with access to financing or to complete any sales on acceptable terms or within a reasonable time frame.
The Company may seek to sell some of its vessels to provide liquidity and cash flow. However, given the current downturn in the oil and natural gas industry, there may not be sufficient activity in the market to sell the Company’s vessels and the Company may not be able to identify buyers with access to financing or to complete any such sales. Even if the Company is able to locate appropriate buyers for its vessels, any sales may occur on less favorable terms than the terms that might be available in a more liquid market or at other times in the business cycle. In addition, the terms of the Company’s current and future indebtedness may limit its ability to sell assets, including vessels, or require that it use the proceeds from any such sale in specified manner.
The Company may be unable to collect amounts owed to it by its customers.
The Company typically grants its customers credit on a short-term basis. Related credit risks are inherent as the Company does not typically collateralize receivables due from customers. In addition, many of its international customers are state controlled and, as a result, the Company’s receivables may be subject to local political priorities, which are out of the Company’s control. The Company provides estimates for uncollectible accounts based primarily on its judgment using historical losses, current economic conditions and individual evaluations of each customer as evidence supporting the receivables valuations stated on the Company’s financial statements. However, the Company’s receivables valuation estimates may not be accurate and receivables due from customers reflected in its financial statements may not be collectible. The Company’s inability to perform under its contractual obligations, or its customers’ inability or unwillingness to fulfill their contractual commitments to the Company, may have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects.
The Company participates in joint ventures, and its investments in joint ventures could be adversely affected by its lack of sole decision-making authority and disputes between its partners and itself.
The Company participates in domestic and international joint ventures to further expand its capabilities, share risks and gain access to local markets. Due to the nature of joint venture arrangements, the Company does not unilaterally control the operating, strategic and financial policies of these business ventures. Decisions are often made on a collective basis, including the purchase and sale of assets, charter arrangements with customers and management of cash, including cash distributions to partners. In addition, joint ventures can often require unanimous approval of the parties to the joint venture or their representatives for certain fundamental decisions, which means that each joint venture party may have a veto right with respect to such decisions, which could lead to deadlock in the operations of the joint venture or partnership. Decisions made by the managers or the boards of these entities may not always be the decision that is most beneficial to the Company as one of the equity holders of the entity and may be contrary to the Company’s objectives and may limit the Company’s ability to transfer its interests. Investments in joint ventures involve risks that would not be present were a third-party not involved, including the possibility that the Company’s co-ventures might become bankrupt or fail to fund their share of required capital contributions. Any failure of such other companies to meet their obligations to the Company or to third-parties, or any disputes with respect to the parties’ respective rights and obligations, could have a material adverse effect on the joint ventures or their properties and, in turn, could have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects.
The Company’s participation in industry-wide, multi-employer, defined benefit pension plans expose it to potential future losses.
Certain of the Company’s subsidiaries are participating employers in two industry-wide, multi-employer defined benefit pension plans in the U.K., namely, the U.K. Merchant Navy Officers Pension Fund (“MNOPF”) and the U.K. Merchant Navy Ratings Pension Fund (“MNRPF”). Among other risks associated with multi-employer plans, contributions and unfunded obligations of the multi-employer plan are shared by the plan participants. As a result, the Company may inherit unfunded obligations if other plan participants withdraw from the plan or cease to participate, and in the event that the Company withdraws from participation in one or both of these plans, it may be required to pay the plan an amount based on its allocable share of the underfunded status of the plan. Depending on the results of future actuarial valuations, it is possible that the plans could experience further deficits that will require funding from the Company, which would negatively impact its financial position, results of operations and cash flows.
As part of the Company’s ongoing management of its fleet and personnel, the Company may need to improve its operations and financial systems and recruit additional staff and crew; if the Company cannot improve these systems or recruit suitable employees, the Company’s business and results of operations may be adversely affected.
The Company has and may continue to need to invest in upgrading its operating and financial systems. In addition, the Company may have to recruit additional well-qualified seafarers and shoreside administrative and management personnel. The Company may not be able to hire suitable employees. For example, the Company’s vessels require technically skilled staff with specialized training. If the Company is unable to employ such technically skilled staff, they may not be able to adequately staff the Company’s vessels. If the Company is unable to operate its financial and operations systems effectively or is unable to recruit suitable employees, the Company’s results of operation and its ability to manage and expand its fleet may be adversely affected.
The Company’s inability to attract and retain qualified personnel and crew its vessels could have an adverse effect on its business.
Attracting and retaining skilled personnel is an important factor in the Company’s future success. In addition, the success of the Company is dependent upon its ability to adequately crew its vessels. The market for qualified personnel is highly competitive and the Company cannot be certain that it will be successful in attracting and retaining qualified personnel and crewing its vessels in the future. If the Company fails to retain key personnel and hire, train and retain qualified employees, the Company may not be able to compete effectively and may have increased incident rates as well as regulatory and other compliance failures, which could have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects.
The Company’s employees are covered by federal laws that may subject it to job-related claims in addition to those provided by state laws.
Some of the Company’s employees are covered by provisions of the Jones Act, the Death on the High Seas Act and general maritime law. These laws preempt state workers’ compensation laws and permit these employees and their representatives to pursue actions against employers for job-related incidents in federal courts based on tort theories. Because the Company is not generally protected by the damage limits imposed by state workers’ compensation statutes for these types of claims, it may have greater exposure for any claims made by these employees.
The Company relies on information technology, and if it is unable to protect against service interruptions, data corruption, cyber-based attacks or network security breaches, its operations could be disrupted and its business could be negatively affected.
The Company relies on information technology networks and systems, including the Internet and cloud services, to process, transmit and store electronic and financial information, manage a variety of business processes and activities, and comply with regulatory, legal and tax requirements. The Company also depends on its information technology infrastructure to capture knowledge of its business including its vessel operation systems containing information about vessel positioning and scheduling; to monitor its vessel maintenance and engine systems; to coordinate its business across its bases of operation including cargo delivery and equipment tracking; and to communicate within its organization and with customers, suppliers, partners and other third-parties. The Company’s ability to service customers and operate vessels is dependent on the continued operation of these systems. While the Company takes various precautions and has enhanced controls around its systems, its technology systems are susceptible to damage, disruptions or shutdowns, hardware or software failures, power outages, computer viruses, telecommunication failures, user errors, catastrophic events, or cyber-attacks including malware, other malicious software, phishing email attacks, attempts to gain unauthorized access to its data, the unauthorized release, corruption or loss of its data, loss or damage to its data delivery systems, ransomware, and other electronic security breaches.
The Company’s information technology systems are in some cases integrated, so damage, disruption or shutdown to the system could result in a more widespread impact. If the Company’s information technology systems suffer severe damage, disruption or shutdown, and its business continuity plans do not effectively resolve the issues in a timely manner, the Company’s operations could be disrupted and its business could be negatively affected. In addition, cyber-attacks could lead to potential unauthorized access and disclosure of confidential information, data loss and corruption. There is no assurance that the Company will not experience these service interruptions or cyber-attacks in the future. Recent action by the IMO’s Maritime Safety Committee and U.S. agencies indicate that cybersecurity regulations for the maritime industry are likely to be further developed in the near future in an attempt to combat cybersecurity threats. The Company is unable to predict the impact of such regulations at this time. Further, as the threat of cyber-attacks continues to grow, the Company may be required to expend additional resources to continue to modify or enhance its
protective measures or to investigate and remediate any vulnerabilities to cyber-attacks. The Company has adopted flag-state vessel security plans to comply with the IMO regulations that are going into effect in 2021.
Further, data protection laws apply to the Company in certain countries in which the Company does business. Specifically, the E.U. General Data Protection Regulation (the “GDPR”), increased penalties up to a maximum of 4% of global annual turnover for breach of the regulation. The GDPR requires mandatory breach notification, the standard for which is also followed outside the E.U., particularly in Asia. Non-compliance with data protection laws could expose the Company to regulatory investigations, which could result in fines and penalties. In addition to imposing fines, regulators may also issue orders to stop processing personal data, which could disrupt operations. The Company could also be subject to litigation from persons or corporations allegedly affected by data protection violations. Violation of data protection laws is a criminal offence in some countries, and individuals can be imprisoned or fined. Any violation of these laws or harm to the Company’s reputation could have a material adverse effect on the Company’s business, financial condition, results of operations, cash flows and prospects.
In order to comply with new ballast water treatment requirements, the Company will have to install expensive ballast water treatment systems and modify its vessels to accommodate such systems.
The BWM Convention, adopted by the UN International Maritime Organization in February 2004, calls for the prevention, reduction or elimination of the transfer of harmful aquatic organisms and pathogens through the control and management of ships' ballast water and sediments. The BWM Convention entered into force on September 8, 2017, with all vessels having to comply by 2024. In order to comply with these living organism limits, vessel owners will have to install expensive ballast water treatment systems and modify existing vessels to accommodate those systems or make port facility disposal arrangements, which may have a material impact on the Company’s business, financial condition and results of operations, depending on the cost of available ballast water treatment systems and the extent to which existing vessels or vessels under construction must be modified to accommodate such systems.
Risk Factors Related to the Company’s Spin-off
SEACOR Marine was previously a subsidiary of SEACOR Holdings Inc. (along with its consolidated subsidiaries, other than SEACOR Marine, collectively referred to as “SEACOR Holdings”). On June 1, 2017, SEACOR Holdings completed a spin-off of SEACOR Marine by way of a pro rata dividend of SEACOR Marine’s Common Stock, all of which was then held by SEACOR Holdings, to SEACOR Holdings’ shareholders of record as of May 22, 2017 (the “Spin-off”).
The Company and SEACOR Holdings rely on each other’s performance under various agreements entered into in connection with the Spin-off and may have indemnification and other liabilities related thereto.
The Company has entered into various agreements with SEACOR Holdings in connection with the Spin-off, including two Transition Services Agreements, a Distribution Agreement, a Tax Matters Agreement and an Employee Matters Agreement. These agreements govern the Company’s relationship with SEACOR Holdings subsequent to the Spin-off including administrative and similar services that each company will provide to the other under the Transition Services Agreements. It is possible that if SEACOR Holdings were to fail to fulfill its obligations under these agreements the Company could suffer operational difficulties or significant losses.
If the Company is required to indemnify SEACOR Holdings for certain liabilities and related losses arising in connection with any of these agreements, the Company may be subject to substantial liabilities, which could materially adversely affect its financial position. Specifically, pursuant to the Distribution Agreement, the Company and SEACOR Holdings are required to use their commercially reasonable efforts to cause SEACOR Holdings to be released from any guarantees it has given to third-parties on the Company’s behalf or on behalf of the Company’s 50% or less owned companies. If SEACOR Holdings is not released under any of these guarantees, the Company is required to indemnify SEACOR Holdings for any liabilities incurred as a guarantor. As of December 31, 2020, the aggregate amount of obligations that SEACOR Holdings has guaranteed on the Company’s behalf was $7.0 million. Under the Distribution Agreement, the Company must pay SEACOR Holdings a fee of 0.5% per annum of the aggregate amount of guaranteed by SEACOR Holdings.
If there is a determination that the Spin-off was taxable for U.S. federal income tax purposes because the facts, assumptions, representations or undertakings underlying the tax opinion were incorrect or for any other reason, then SEACOR Holdings, its stockholders that are subject to U.S. federal income tax and SEACOR Marine could incur significant U.S. federal income tax liabilities.
In connection with the Spin-off, SEACOR Holdings received an opinion of its counsel, Milbank LLP (f/k/a Milbank, Tweed, Hadley & McCloy LLP), substantially to the effect that the Spin-off qualifies as a transaction that is described in Section 355 of the Code. The opinion relied on certain facts, assumptions, representations and undertakings from SEACOR Holdings and the Company regarding the past and future conduct of the companies’ respective businesses and other matters. If any of these facts, assumptions, representations or undertakings were incorrect, SEACOR Holdings and its stockholders may not be able to rely on the opinion of counsel and could be subject to significant tax liabilities. Notwithstanding the opinion of counsel, the Internal Revenue Services ("IRS") could determine on audit that the Spin-off was taxable if it determines that any of these facts, assumptions, representations or undertakings were not correct or had been violated or if it disagrees with the conclusions in the opinion, or for other reasons, including
as a result of certain significant changes in the stock ownership of SEACOR Holdings or SEACOR Marine after the Spin-off. If the Spin-off is determined to be taxable, SEACOR Holdings, its stockholders that are subject to U.S. federal income tax and the Company could incur significant U.S. federal income tax liabilities.
Prior to the Spin-off, the Company and SEACOR Holdings entered into the Tax Matters Agreement that governs the parties' respective rights, responsibilities and obligations with respect to taxes, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and assistance and cooperation in respect of tax matters. Taxes relating to or arising out of the failure of the Spin-off to qualify as a tax-free transaction for U.S. federal income tax purposes are the responsibility of SEACOR Holdings, except, in general, if such failure is attributable to the Company’s action or inaction or SEACOR Holdings’ action or inaction.
The Company’s obligations under the Tax Matters Agreement are not limited in amount or subject to any cap. Further, even if the Company is not responsible for tax liabilities of SEACOR Holdings and its subsidiaries under the Tax Matters Agreement, the Company nonetheless could be liable under applicable tax law for such liabilities if SEACOR Holdings were to fail to pay them. If the Company is required to pay any liabilities under the circumstances set forth in the Tax Matters Agreement or pursuant to applicable tax law, the amounts may be significant.
Risk Factors Related to the Company’s Common Stock
The Company’s stock price may fluctuate significantly, and investors may not be able to sell their shares at an attractive price.
The trading price of the Company’s Common Stock may be volatile and subject to wide price fluctuations in response to various factors including:
•
market conditions in the broader stock market;
•
the Company’s capital structure and liquidity;
•
commodity prices and in particular prices of oil and natural gas;
•
actual or anticipated fluctuations in the Company’s quarterly financial condition and results of operations;
•
introduction of new equipment or services by the Company or its competitors;
•
issuance of new or changed securities analysts’ reports or recommendations;
•
purchases and sales of large blocks of the Company’s Common Stock and the frequency and volume with which the Common Stock trades on the New York Stock Exchange;
•
additions or departures of key personnel;
•
the ability or willingness of OPEC to set and maintain production levels for oil;
•
oil and natural gas production levels by non-OPEC countries;
•
regulatory or political developments;
•
litigation and governmental investigations; and
•
changing economic conditions.
These and other factors may cause the market price and demand for the Company’s Common Stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of the Company’s Common Stock and may otherwise negatively affect the liquidity of the Company’s Common Stock. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the company that issued the stock. If any of the Company’s stockholders were to bring a lawsuit against it, the Company could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of the Company’s management from its business.
An investor’s percentage of ownership in the Company may be diluted in the future.
As with any publicly traded company, an investor’s percentage ownership in the Company may be diluted in the future because of equity issuances for acquisitions, capital market transactions or otherwise, including equity awards that the Company has and will continue to grant to its directors, officers and employees. For instance, in April 2018, the Company issued 2,168,586 shares of Common Stock, and warrants to purchase 674,164 shares of Common Stock at a purchase price of $0.01 per share, in a private placement for cash, in January 2019, the Company issued 603,872 shares of Common Stock in a private placement to purchase three FSVs, and in March 2020, the Company issued 900,000 shares of Common Stock in a private placement to purchase the remaining 28% minority equity interests in Falcon Global Holdings LLC (“Falcon Global Holdings”) that the Company did not already own. In addition, an investor’s percentage ownership in the Company will be diluted if any of the holders of the Convertible Senior Notes exercise their right to convert the principal amount of their outstanding notes, in whole or in part, into shares of the Company’s Common Stock. Holders of the Convertible Senior Notes are entitled to convert the principal amount of their outstanding notes into shares of the Company’s Common Stock at an initial conversion rate of 23.26 shares of the Company’s Common Stock per $1,000 principal amount of the Convertible Senior Notes through November 29, 2022. The Company has granted the holders of the Convertible Senior Notes certain registration rights to assist them with the sale of Common Stock issuable upon conversion of such notes. Any substantial issuance of the Company’s Common Stock, including Common Stock issuable upon the conversion of the Convertible Senior Notes, could significantly affect the trading price of the Company’s Common Stock.
If securities or industry analysts do not publish research or reports about the Company’s business, if they adversely change their recommendations regarding the Company’s stock or if the Company’s results of operations do not meet their expectations, the Company’s stock price and trading volume could decline.
The trading market for the Company’s Common Stock is influenced by the research and reports that industry or securities analysts publish about the Company or its business. If one or more of these analysts cease coverage of the Company or fail to publish reports on the Company regularly, the Company could lose visibility in the financial markets, which in turn could cause its stock price or trading volume to decline. Moreover, if one or more of the analysts who cover the Company downgrade recommendations regarding the Company’s stock, or if the Company’s results of operations do not meet their expectations, the Company’s stock price could decline and such decline could be material.
For as long as the Company is an “Emerging Growth Company,” it will be exempt from certain reporting requirements, including those relating to accounting standards and disclosure about its executive compensation, that apply to other public companies.
In April 2012, the Jumpstart Our Business Startups Act (“JOBS Act”) was signed into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for “Emerging Growth Companies,” including certain requirements relating to accounting standards and compensation disclosure. The Company is classified as an “Emerging Growth Company,” which is defined as a company with annual gross revenues of less than $1 billion, that has been a public reporting company for a period of less than five years, and that does not have a public float of $700 million or more in securities held by non-affiliated holders. For as long as the Company is an “Emerging Growth Company,” which may be up to five fiscal years, unlike other public companies, unless the Company elects not to take advantage of applicable JOBS Act provisions, it will not be required to (i) provide an auditor’s attestation report on management’s assessment of the effectiveness of its system of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (ii) comply with any new or revised financial accounting standards applicable to public companies until such standards are also applicable to private companies under Section 102(b)(1) of the JOBS Act, (iii) comply with any new requirements adopted by the Public Company Accounting Oversight Board (the “PCAOB”), such as requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer, (iv) comply with any new audit rules adopted by the PCAOB after April 5, 2012 unless the SEC determines otherwise, (v) provide certain disclosure regarding executive compensation required of larger public companies or (vi) hold stockholder advisory and other votes on executive compensation. The Company cannot predict if investors will find its Common Stock less attractive if it chooses to rely on these exemptions. If some investors find the Company’s Common Stock less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for the Company’s Common Stock and its stock price may be more volatile.
As noted above, under the JOBS Act, “Emerging Growth Companies” can delay adopting new or revised accounting standards that have different effective dates for public and private companies until such time as those standards apply to private companies. The Company elected not to take advantage of such extended transition period, which election is irrevocable pursuant to Section 107 of the JOBS Act.
The Company is obligated to develop and maintain proper and effective internal control over financial reporting and is subject to other requirements that will be burdensome and costly.
The Company has historically operated its business as a segment of a public company. As a separate company, it is required to file with the SEC annual and quarterly information and other reports that are specified in Section 13 of the Exchange Act. The Company is also required to ensure that it has the ability to prepare financial statements that are fully compliant with all SEC reporting requirements on a timely basis. In addition, the Company is subject to other reporting and corporate governance requirements, including the requirements of the New York Stock Exchange (“NYSE”), and certain provisions of the Sarbanes-Oxley Act and the regulations promulgated thereunder, which impose significant compliance obligations upon the Company. As a public company, the Company is required to:
•
prepare and distribute periodic public reports and other stockholder communications in compliance with its obligations under the federal securities laws and NYSE rules;
•
create or expand the roles and duties of its board of directors and committees of the board of directors;
•
institute more comprehensive financial reporting and disclosure compliance functions;
•
supplement its internal accounting and auditing function, including hiring additional staff with expertise in accounting and financial reporting for a public company;
•
enhance and formalize closing procedures at the end of the Company’s accounting periods;
•
enhance the Company’s internal audit function;
•
enhance the Company’s investor relations function;
•
establish new internal policies, including those relating to disclosure controls and procedures; and
•
involve and retain to a greater degree outside counsel and accountants in the activities listed above.
These changes require a significant commitment of additional resources, including increased auditing and legal fees and costs associated with hiring additional accounting and administrative staff. The Company may not be successful in fully and efficiently implementing these requirements and implementing them could materially adversely affect its business, financial position, results of operations, cash flows and prospects.
Failure to achieve and maintain effective internal controls over financial reporting in accordance with Section 404 could have a material adverse effect on the Company.
The Company’s internal controls were initially developed when it was a subsidiary of SEACOR Holdings. However, section 404 of the Sarbanes-Oxley Act (“Section 404”) requires the Company to establish effective internal controls over financial reporting and disclosure controls and procedures pursuant to Section 404 and to assess the effectiveness of such controls beginning with the fiscal year ended December 31, 2022.
If the Company is unable to maintain adequate internal control over financial reporting, it may be unable to report its financial information on a timely basis, may violate applicable stock exchange listing rules or suffer other adverse regulatory consequences and may breach the covenants under its credit facilities. There could also be a negative reaction in the price of the Company’s Common Stock due to a loss of investor confidence in the Company and the reliability of its financial statements. It cannot be assumed that the Company will not have another material weakness in its internal controls over financial reporting in the future.
Moreover, the Company’s internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls or fraud. Even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. The existence of a material weakness could result in errors in the Company’s financial statements that could result in a restatement of financial statements, which could cause the Company to fail to meet its reporting obligations, lead to a loss of investor confidence and have a negative impact on the trading price of the Company’s Common Stock.
Provisions in the Company’s Third Amended and Restated Certificate of Incorporation and Third Amended and Restated By-Laws, and Delaware law may discourage, delay or prevent a change of control of the Company or changes in the Company’s management and, therefore, may depress the trading price of its Common Stock.
The Company’s Third Amended and Restated Certificate of Incorporation and Third Amended and Restated By-Laws include certain provisions that could have the effect of discouraging, delaying or preventing a change of control of the Company or changes in its management, including, among other things:
•
restrictions on the ability of the Company’s stockholders to fill a vacancy on the Board of Directors;
•
restrictions related to the ability of non-U.S. citizens owning the Company’s Common Stock;
•
the Company’s ability to issue preferred stock with terms that the Board of Directors may determine, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;
•
the absence of cumulative voting in the election of directors which may limit the ability of minority stockholders to elect directors; and
•
advance notice requirements for stockholder proposals and nominations, which may discourage or deter a potential acquirer from soliciting proxies to elect a particular slate of directors or otherwise attempting to obtain control of the Company.
These provisions in the Company’s Third Amended and Restated Certificate of Incorporation and Third Amended and Restated By-Laws may discourage, delay or prevent a transaction involving a change in control of the Company that is in the best interest of its stockholders. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of the Company’s Common Stock if they are viewed as discouraging future takeover attempts.
The Company’s Third Amended and Restated By-Laws include a forum selection clause, which could limit the Company’s stockholders’ ability to obtain a favorable judicial forum for disputes with the Company.
The Company’s Third Amended and Restated By-Laws require that, unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Company to the Company or the Company’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, or (iv) any action asserting a claim governed by the internal affairs doctrine.
This exclusive forum provision will not apply to claims under the Exchange Act, but will apply to other state and federal law claims including actions arising under the Securities Act of 1933 (although the Company’s stockholders will not be deemed to have waived the Company’s compliance with the federal securities laws and the rules and regulations thereunder). Section 22 of the Securities Act of 1933, however, creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act of 1933 or the rules and regulations thereunder. Accordingly, there is uncertainty as to whether a court would enforce such a forum selection provision as written in connection with claims arising under the Securities Act of 1933. Any person or entity purchasing or otherwise acquiring any interest in shares of the Company’s capital stock is deemed to have notice of and consented to the foregoing provisions. This forum selection provision in the Company’s Third Amended and Restated By-Laws may limit the Company’s stockholders’ ability to obtain a favorable judicial forum for disputes with the Company. It is also possible that, notwithstanding the forum selection clause included in the Company’s Third Amended and Restated By-Laws, a court could rule that such a provision is inapplicable or unenforceable.
The Company does not expect to pay dividends to holders of its Common Stock.
The Company currently intends to retain its future earnings, if any, for the foreseeable future, to repay indebtedness and to fund the development and growth of its business. The Company does not intend to pay any dividends to holders of its Common Stock. As a result, capital appreciation in the price of the Company’s Common Stock, if any, will be investor's only source of gain or income on an investment in the Company’s Common Stock.
General Risk Factors
Difficult economic conditions and volatility in the capital markets could materially adversely affect the Company.
The success of the Company’s business is both directly and indirectly dependent upon conditions in the global financial markets and economic conditions throughout the world that are outside the Company’s control and are difficult to predict. Factors such as commodity prices and demand for commodities, interest rates, availability of credit, inflation rates, changes in laws (including laws relating to taxation, such as amendments to provisions of the CARES Act that permit us to carryback NOLs not permitted prior to adoption of the act), trade barriers, currency exchange rates and controls, and national and international political circumstances (including wars, terrorist acts, security operations or pandemics) can have a material negative impact on the Company’s business and investments, which could reduce its revenues and profitability. Uncertainty about global economic conditions may cause or require businesses to postpone capital spending in response to tighter credit and reductions in income or asset values and to cancel or renegotiate existing contracts because their access to capital is impeded. This would in turn affect the Company’s profitability or results of operations. These factors may also adversely affect the Company’s liquidity and financial condition and the liquidity and financial conditions of its customers. Volatility in the conditions of the global economic markets can also affect the Company’s ability to raise capital at attractive prices. The Company’s ongoing exposure to credit risks on its accounts receivable balances are heightened during periods when economic conditions worsen. The Company has procedures that are designed to monitor and limit exposure to credit risk on its receivables, however, there can be no assurance that such procedures will effectively limit the Company’s credit risk and avoid losses that could have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects. Unstable economic conditions may also increase the volatility of the Company’s stock price.
The Company’s operations are subject to certain foreign currency, interest rate, fixed-income, equity and commodity price risks.
The Company is exposed to certain foreign currency, interest rate, fixed-income, equity and commodity price risks and, although some of these risks may be hedged, fluctuations could impact its financial position and its results of operations. The Company has, and anticipates that it will continue to have, contracts denominated in foreign currencies. It is often not practicable for the Company to effectively hedge the entire risk of significant changes in currency rates during a contract period. The Company’s financial position, results of operations and cash flows have been negatively impacted for certain periods and positively impacted for other periods, and may continue to be affected to a material extent by the impact of foreign currency exchange rate fluctuations. For example, strengthening of the U.S. dollar could give rise to reduced prices from shipyards and incentivize additional investment in new equipment notwithstanding the current state of such market. The Company’s financial position, results of operations and cash flows may also be affected by the cost of hedging activities that it undertakes. Volatility in the financial markets and overall economic uncertainty also increase the risk that the actual amounts realized in the future on the Company’s debt and equity instruments could differ significantly from the fair values currently assigned to them. In addition, changes in interest rates may have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects. Specifically, rising interest rates, including a potential rapid rise in interest rates, could increase the Company’s cost of capital.
The Company engages in hedging activities which exposes it to risks.
For corporate purposes and also as part of its trading activities, the Company has in the past and may in the future use futures and swaps to hedge risks, such as escalation in fuel costs and movements in foreign exchange rates and interest rates. Such activities can themselves result in losses when a position is purchased in a declining market or a position is sold in a rising market. The Company may also purchase inventory in larger than usual levels to lock in costs when it believes there may be large increases in the price of raw materials or other material used in its business. Such purchases expose the Company to risks of meeting margin calls and drawing on its capital, counter-party risk due to failure of an exchange or institution with which it has entered into a swap, incurring higher costs than competitors or similar businesses that do not engage in such strategies, and losses on its investment portfolio. Such strategies can also cause earnings to be volatile. If the Company fails to offset such volatility, this could have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects.
The Company’s results could be impacted by U.S. social, political, regulatory and economic conditions as well as by changes in tariffs, trade agreements or other trade restrictions imposed by the U.S. government.
Changes in U.S. political, regulatory and economic conditions or in laws and policies governing foreign trade (including the U.S. trade agreements and U.S. tariff policies), travel to and from the U.S., immigration, manufacturing, development and investment in the territories and countries in which the Company operates, and any negative sentiments or retaliatory actions towards the U.S. as a result of such changes, could adversely affect the global marine and support transportation services industry. Recent changes in U.S. foreign policy have created significant uncertainty about the future relationship between the U.S. and China, as well as with other countries, including with respect to the trade policies, treaties, government regulations and tariffs that could apply to trade between the U.S. and other nations. Changes in these policies may have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects.
A violation of the Foreign Corrupt Practices Act of 1977 ("FCPA") or similar worldwide anti-bribery laws may adversely affect the Company’s business and operations.
In order to effectively compete in certain foreign jurisdictions, the Company seeks to establish joint ventures with local operators or strategic partners. As a U.S. corporation, the Company is subject to the regulations imposed by the FCPA, which generally prohibits U.S. companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or maintaining business. The Company has stringent policies and procedures in place to enforce compliance with the FCPA. Nevertheless, the Company does business and may do additional business in the future in countries and regions where strict compliance with anti-bribery laws may not be customary and the Company may be held liable for actions taken by its strategic or local partners even though these partners may not be subject to the FCPA. The Company’s personnel and intermediaries, including its local operators and strategic partners, may face, directly or indirectly, corrupt demands by government officials, political parties and officials, tribal or insurgent organizations, or private entities in the countries in which it operates or may operate in the future. As a result, the Company faces the risk that an unauthorized payment or offer of payment could be made by one of its employees or intermediaries, even if such parties are not always subject to the Company’s control or are not themselves subject to the FCPA or other similar laws to which the Company may be subject. Any allegation or determination that the Company has violated the FCPA (or any other applicable anti-bribery laws in countries in which the Company does business, including the U.K. Bribery Act 2010) could have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects.
Adverse results of legal proceedings could materially adversely affect the Company.
The Company is subject to and may in the future be subject to a variety of legal proceedings and claims that arise out of the ordinary conduct of its business. Results of legal proceedings cannot be predicted with certainty. Irrespective of its merits, litigation may be both lengthy and disruptive to the Company’s operations and may cause significant expenditure and diversion of management attention. The Company may be faced with significant monetary damages or injunctive relief against it that which could have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects should it fail to prevail in certain matters.
Negative publicity may adversely impact the Company.
Media coverage and public statements that insinuate improper actions by the Company, regardless of their factual accuracy or truthfulness, may result in negative publicity, litigation or governmental investigations by regulators. Addressing negative publicity and any resulting litigation or investigations may distract management, increase costs and divert resources. Negative publicity may have an adverse impact on the Company’s reputation and the morale of its employees, which could materially adversely affect its business, financial position, results of operations, cash flows and prospects.
The Company’s success depends on key members of its management, the loss of whom could disrupt its business operations.
The Company depends to a large extent on the efforts and continued employment of its executive officers and key management personnel. It does not maintain key-man insurance. The loss of services of one or more of its executive officers or key management personnel could have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects.

---

ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B.
UNRESOLVED STAFF COMMENTS
None.

---

ITEM 2. PROPERTIES
ITEM 2.
PROPERTIES
Offshore support vessels are the principal physical properties owned by the Company as more fully described in “Item 1. Business.”

---

ITEM 3. LEGAL PROCEEDINGS
ITEM 3.
LEGAL PROCEEDINGS
In the normal course of its business, the Company becomes involved in various litigation matters including, among other things, claims by third-parties for alleged property damages and personal injuries. In the opinion of the Company's management, while the outcome of these matters is uncertain, the likely results of these matters are not expected, either individually or in the aggregate, to have a material adverse effect on the Company's financial position, results of operations or cash flows. However, management has used estimates in determining the Company’s potential exposure to these matters and has recorded reserves in its financial statements related thereto where appropriate. It is possible that a change in the Company’s estimates of that exposure could occur, but the Company does not expect such changes in estimated costs could have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects.

---

ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
Officers of SEACOR Marine serve at the pleasure of the Board of Directors. The name, age and offices held by each of SEACOR Marine’s current executive officers are as follows:
Name
Age
Position
John Gellert
President, Chief Executive Officer and a director of SEACOR Marine since June 1, 2017. Prior to the Spin-off, Mr. Gellert served as the Co-Chief Operating Officer of SEACOR Holdings since February 2015 and President of SEACOR Holdings’ Offshore Marine Services segment since July 2005. Mr. Gellert has also held various financial, analytical, chartering and marketing roles within SEACOR Holdings since joining in June 1992. Mr. Gellert is an officer and director of certain Company subsidiaries. Mr. Gellert serves as a member of the Executive Committee of International Support Vessel Owners Association, a member of the board of directors of Offshore Marine Service Association, an ex-officio member of the Executive Committee of National Ocean Industries Association, and a member of the Executive Council at Cohesive Capital Management, L.P. Mr. Gellert graduated from Harvard College.
Jesús Llorca
Executive Vice President and Chief Financial Officer since April 2, 2018. Prior to his appointment, Mr. Llorca was Executive Vice President of Corporate Development since June 1, 2017. Prior to the Spin-off, Mr. Llorca was a Vice President of SEACOR Holdings since 2007. From 2004 to 2007, Mr. Llorca worked in the corporate group of SEACOR Holdings. From 2000 to 2004, Mr. Llorca worked at Nabors Drilling where he held various operational and management positions internationally. Mr. Llorca graduated from ICADE with degrees in business and law.
Gregory Rossmiller
Senior Vice President and Chief Accounting Officer since April 17, 2018. Prior to his appointment, Mr. Rossmiller was the Chief Financial Officer, North America, for Applus Energy and Industry (a division of Applus Services S.A.) since June 2009. Mr. Rossmiller was Corporate Controller of Pride International from 2005 to 2009, and Controller of Nabors Drilling International Limited (a subsidiary of Nabors Industries, Ltd.) from 2000 to 2005 and Assistant Controller from 1997 to 2000. Prior to 1997, Mr. Rossmiller held audit positions with Cooper Industries and with the accounting firm of Deloitte & Touche. Mr. Rossmiller attended the General Management Program at Harvard Business School and received his B.A from the University of Northern Iowa.
Andrew H. Everett II
Senior Vice President, General Counsel and Secretary since January 22, 2018. Prior to his appointment, Mr. Everett was an associate in the Global Corporate Group of Milbank LLP from 2008 until 2018. Mr. Everett received his J.D. from Boston College Law School and B.S. from Bentley University.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market for the Company’s Common Stock
SEACOR Marine’s Common Stock began trading on the NYSE on June 2, 2017 under the trading symbol “SMHI.” The last reported sales price on the Company’s Common Stock of March 1, 2021 was $4.18.
As of March 1, 2021, there were 154 holders of record of Common Stock.
Dividend Policy
The Company currently does not intend on paying any dividends for the foreseeable future. Any payment of future dividends will be at the discretion of SEACOR Marine’s Board of Directors and will depend upon, among other factors, the Company’s earnings, financial condition, current and anticipated capital requirements, plans for expansion, level of indebtedness and legal and contractual restrictions, including the provisions of the Company’s other then-existing indebtedness. The payment of future cash dividends, if any, would be made only from assets legally available.
Issuer Repurchases of Equity Securities
The following table provides information with respect to purchases by the Company of shares of its Common Stock during the fourth quarter of 2020:
Period
Total number of
shares (or units)
purchased
Average price paid
per share (or unit)
Total number of
shared (or units)
purchased as
part of publicly
announced plans
or programs
Maximum number
(or approximate
dollar value) of
shares (or units)
that may yet be
purchased under the
plans or programs
10/01/20-10/31/20
-
-
-
-
11/01/20-11/30/20
-
-
-
-
12/01/20-12/31/20
-
-
-
-
Total
-
$
-
-
-

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6.
SELECTED FINANCIAL DATA
SELECTED HISTORICAL FINANCIAL INFORMATION.
The following table sets forth for the periods indicated (in thousands, except share data and statistics), selected historical consolidated and combined financial data for the Company. Such financial and operating data should be read in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8. Financial Statements and Supplementary Data” included in Parts II and IV, respectively, of this Annual Report on Form 10- K.
For the years ended December 31,
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 (debt, leases, preferred stock)
$
444,960
$
364,969
$
363,335
$
267,321
$
196,223
Cash Dividends Per Common Share
$
-
$
-
$
-
$
-
$
-

---

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) below presents the Company’s operating results for each of the three years in the period ended December 31, 2020, and its financial condition as of December 31, 2020 and 2019. Certain statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations constitute forward looking statements. See “Forward Looking Statements” included elsewhere in this Annual Report on Form 10-K.
Overview
The Company provides global marine and support transportation services to offshore energy facilities worldwide. As of December 31, 2020, excluding its CTV Assets Held for Sale, the Company and its joint ventures operated a diverse fleet of 101 support and specialty vessels, of which 64 were owned or leased-in, 35 were joint-ventured, and 2 were managed on behalf of unaffiliated third-parties. The primary users of the Company’s services are major integrated oil companies, large independent oil and natural gas exploration and production companies and emerging independent companies, as well as windfarm operations and installation contractors.
The Company and its joint ventures operate and manage a diverse fleet of offshore support vessels that (i) deliver cargo and personnel to offshore installations including wind farms, (ii) handle anchors and mooring equipment required to tether rigs to the seabed, and assist in placing them on location and moving them between regions, (iii) provide construction, well work-over, maintenance and decommissioning support and (iv) carry and launch equipment used underwater in drilling and well installation, maintenance, inspection and repair. Additionally, the Company’s vessels provide accommodations for technicians and specialists.
Recent Developments
Amendment to FGUSA Credit Facility. On February 24, 2021, SEACOR Marine, Falcon Global USA LLC (“FGUSA”), a wholly owned subsidiary of the Company, and certain subsidiaries of FGUSA, entered into a Seventh Consent, Agreement and Omnibus Amendments (the “Seventh FGUSA Credit Facility Amendment”) to that certain (i) $131.1 million term and revolving loan facility, dated as of February 8, 2018, with a syndicate of lenders administered by JP Morgan Chase Bank, N.A. (as amended, the “FGUSA Credit Facility”) and (ii) obligation guaranty issued by SEACOR Marine, dated February 8, 2018, pursuant to which SEACOR Marine provides a guarantee of certain limited obligations of FGUSA under the Credit Facility (as amended, the “FGUSA Guaranty”).
The Seventh FGUSA Credit Facility Amendment provides for, among other things, (i) the extension from March 2021 to June 2021 of the commencement of monthly repayment of the term loan, with such monthly payments being the lesser of (a) $0.8 million and (b) the amount outstanding under the term loan, (ii) the extension of the FGUSA Guaranty for an additional three months from February 8, 2021 to May 8, 2021, (iii) that the audited financial statements of FGUSA and its consolidated subsidiaries for the fiscal year ended December 31, 2020 are not required to be without a “going concern” or like qualification, commentary or exception, and (iv) the extension of the deadline for delivery of certain physical vessel appraisals from April 30, 2021 to December 31, 2021.
Sale of Windcat Workboats. On January 12, 2021, a wholly-owned subsidiary of the Company, completed the sale of the Windcat Workboats CTV Business through the sale of 100% of the equity of Windcat Workboats (together with its subsidiaries, the “Windcat Group”), to CMB N.V. (the “Windcat Buyer”) pursuant to a Sale and Purchase Agreement entered into on December 18, 2020 (the “Windcat Sale”). At closing, the Windcat Buyer paid to the Company an aggregate purchase price of £32.8 million. After deducting transaction costs and expenses and giving effect to foreign exchange rate hedges, the Company received net cash proceeds of approximately US$42.6 million. The Windcat Buyer also assumed all of the approximately £20.4 million of debt outstanding under Windcat Holdings’ existing revolving credit facility. As of December 31, 2020, the Windcat Group owned a total of 41 CTVs and held interests in an additional five CTVs through its joint ventures, all of which were included in the Windcat Sale. These vessels have been classified as and included as Assets held-for sale as of December 31, 2020. The Company recognized a gain on the sale of Windcat Workboats in January 2021 of approximately $22.8 million.
Amendment to SEACOR Marine Foreign Holdings Credit Facility. On December 18, 2020, SEACOR Marine, as parent guarantor, SMFH, and DNB Bank ASA, New York Branch, as facility agent on behalf of the lenders under that certain credit agreement and related parent guaranty, dated September 26, 2018 (as amended), entered into a letter agreement (the “Letter Agreement”) pursuant to which an estimated $31.2 million tax refund receivable from the IRS under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) will be treated as cash or cash equivalents, for the period up to and including January 31, 2021, for purposes of calculating the Company’s cash or cash equivalent balances required under the parent guaranty of the Company.
Trends Affecting the Offshore Marine Business
The market for offshore oil and natural gas drilling has historically been cyclical. Demand for offshore support vessels is highly correlated to the price of oil and natural gas as those prices significantly impact the Company’s customers’ exploration and drilling activity levels. Oil and natural gas prices tend to fluctuate based on many factors, including global economic activity, levels of reserves and production activity. Price levels for oil and natural gas have and will continue to influence demand for offshore marine services. In addition to the price of oil and natural gas, the availability of acreage, local tax incentives or disincentives, drilling moratoriums and other regulatory actions, and requirements for maintaining interests in leases affect activity in the offshore oil and natural gas industry. Factors that influence the level of offshore exploration and drilling activities include:
•
expectations as to future oil and natural gas commodity prices;
•
customer assessments of offshore drilling prospects compared with land-based opportunities, including newer or unconventional opportunities such as shale;
•
customer assessments of cost, geological opportunity and political stability in host countries;
•
worldwide demand for oil and natural gas;
•
the ability or willingness of OPEC to set and maintain production levels and pricing;
•
the level of oil and natural gas production by non-OPEC countries;
•
the relative exchange rates for the U.S. dollar; and
•
various U.S. and international government policies regarding exploration and development of oil and natural gas reserves.
Offshore oil and natural gas market conditions are highly volatile. Prices deteriorated beginning in the second half of 2014 and continued to deteriorate when oil prices hit a thirteen-year low of less than $27 per barrel (on the New York Mercantile Exchange) in February 2016. Oil prices were as high as $76 per barrel in October 2018 and, during the beginning of COVID-19 pandemic in the US and elsewhere throughout the globe, WTI front month oil prices were pushed for a short period of time to a new low of -$37.63 per barrel in April 2020 before recovering to $48 per barrel by year end. The Company has continued to experience difficult market conditions as the overall decline and continued volatility in oil and natural gas prices, have led to a general decrease in exploration and production activities, and a particular decrease in offshore drilling associated activity. The Company’s operating results have been negatively impacted as oil and gas producing companies focused on cost reduction and cut capital spending budgets. Although the underlying commodity prices supporting activity have recovered substantially since year end 2020, with oil hitting a high of approximately $65 per barrel in early March 2021, the risk of continued volatility in the commodity prices remains.
Certain macro drivers somewhat independent of oil and natural gas prices have the ability to continue to support the Company’s business, including: (i) underspending by oil and gas producers during the current industry downturn leading to pent up demand for maintenance and growth capital expenditures; and (ii) improved extraction technologies. While alternative forms of energy may continue to grow and add to the world’s energy mix, for the foreseeable future, the Company believes demand for gasoline and oil will be sustained, as well as demand for electricity from natural gas. These alternative forms of energy include offshore wind facilities which also have the opportunity to support the Company’s business.
Low oil prices and the subsequent decline in offshore exploration have forced many operators in the industry to restructure or liquidate assets. The Company continues to closely monitor the delivery of newly built offshore support vessels to the industry-wide fleet, which is creating situations of oversupply, thereby further lowering the demand for the Company’s existing offshore support vessel fleet. A continuation of (i) low customer exploration and drilling activity levels, and (ii) continued excess supply of offshore support vessels whether from laid up fleets or newly built vessels could, in isolation or together, have a material adverse effect on the Company’s business, financial position, results of operations, cash flows and prospects.
The Company adheres to a strategy of cold-stacking vessels (removing from active service) during periods of weak utilization in order to reduce the daily running costs of operating the fleet, primarily personnel, repairs and maintenance costs, as well as to defer some drydocking costs into future periods. The Company considers various factors in determining which vessels to cold-stack, including upcoming dates for regulatory vessel inspections and related docking requirements. The Company may maintain class certification on certain cold-stacked vessels, thereby incurring some drydocking costs while cold-stacked. Cold-stacked vessels are returned to active service when market conditions improve, or management anticipates improvement, typically leading to increased costs for drydocking, personnel, repair and maintenance in the periods immediately preceding the vessels’ return to active service. Depending on market conditions, vessels with similar characteristics and capabilities may be rotated between active service and cold-stack. On an ongoing basis, the Company reviews its cold-stacked vessels to determine if any should be designated as retired and removed from service based on the vessel's physical condition, the expected costs to reactivate and restore class certification, if any, and its viability to operate within current and projected market conditions. As of December 31, 2020, 22 of the Company’s 64 owned and leased-in in-service vessels were cold-stacked worldwide.
The Company’s operations and financial results were adversely affected by the COVID-19 pandemic as a result of decreased demand and the increase in costs due to operational changes enacted to enhance crew and on-share employee safety. However, the Company believes that it has sufficient liquidity to meet its obligations for the foreseeable future, especially after receipt of the proceeds from the sale of Windcat Workboats and the anticipated tax refund under the CARES Act.
Certain Components of Revenues and Expenses
The Company operates its fleet in five principal geographic regions: the U.S., primarily in the Gulf of Mexico; Africa, primarily in West Africa; the Middle East and Asia; Latin America, primarily in Mexico, Brazil and Guyana; and Europe, primarily in the North Sea. The Company’s vessels are highly mobile and regularly and routinely move between countries within a geographic region. In addition, the Company’s vessels are also redeployed among the geographic regions, subject to flag restrictions, as changes in market conditions dictate. The number and type of vessels operated, their rates per day worked and their utilization levels are the key determinants of the Company’s operating results and cash flows. Unless a vessel is cold-stacked, there is little reduction in daily running costs and, consequently, operating margins are most sensitive to changes in rates per day worked and utilization. The Company manages its fleet by utilizing a global network of shore side support, administrative and finance personnel.
Time charter statistics are the key performance indicators for the Company’s time charter revenues. The rate per day worked is the ratio of total time charter revenues to the aggregate number of days worked. Utilization is the ratio of aggregate number of days worked to total available days for all vessels available for time charter. Unless vessels have been retired and removed from service, available days represents the total calendar days for which vessels available for time charter were owned or leased-in by the Company, whether marketed, under repair, cold-stacked or otherwise out-of-service.
Operating Revenues. The Company generates revenues by providing services to customers primarily pursuant to two different types of contractual arrangements: time charters and bareboat charters. Under a time charter, the Company provides a vessel to a customer and is responsible for all operating expenses, typically excluding fuel. Under a bareboat charter, the Company provides a vessel to a customer and the customer assumes responsibility for all operating expenses and all risks of operation. Vessel charters may range from several days to several years.
Direct Operating Expenses. The aggregate cost of operating the Company’s fleet depends primarily on the size and asset mix of the fleet. The Company’s direct operating costs and expenses, other than leased-in equipment expense, are grouped into the following categories:
•
personnel (primarily wages, benefits, payroll taxes, savings plans and travel for marine personnel);
•
repairs and maintenance (primarily routine repairs and maintenance and main engine overhauls that are performed in accordance with planned maintenance programs);
•
drydocking (primarily the cost of regulatory drydockings performed in accordance with applicable regulations);
•
insurance and loss reserves (primarily the cost of Hull and Machinery and Protection and Indemnity insurance premiums and loss deductibles);
•
fuel, lubes and supplies; and
•
other (communication costs, expenses incurred in mobilizing vessels between geographic regions, third-party ship management fees, freight expenses, customs and importation duties and other).
The Company expenses drydocking, engine overhaul and vessel mobilization costs as incurred. If a disproportionate number of drydockings, overhauls or mobilizations are undertaken in a particular fiscal year or quarter, operating expenses may vary significantly when compared with the prior year or prior quarter.
Direct Vessel Profit. Direct vessel profit (defined as operating revenues less operating expenses excluding leased-in equipment, “DVP”) is the Company’s measure of segment profitability when applied to reportable segments and a non-GAAP measure when applied to individual vessels, fleet categories or the combined fleet. DVP is a critical financial measure used by the Company to analyze and compare the operating performance of its individual vessels, fleet categories, regions and combined fleet, without regard to financing decisions (depreciation for owned vessels vs. leased-in expense for leased-in vessels). DVP is also useful when comparing the Company’s fleet’s performance against those of its competitors who may have differing fleet financing structures. DVP has some limitations in that it does not take into account all expenses related to the operation of the fleet and, more significantly, the Company.
Leased-in Equipment. In addition to the Company’s owned fleet, it operates leased-in vessels from lessors under bareboat charter arrangements that currently expire in 2021. Certain of these vessels were previously owned and subject of sale and leaseback transactions with their lessors.
Impairments. As a result of the difficult conditions experienced in the offshore oil and natural gas markets beginning in the second half of 2014 and the corresponding reductions in utilization and rates per day worked of its fleet, the Company identified indicators of impairment and has over the past few years recognized impairment charges primarily associated with its AHTS fleet, its liftboat fleet, certain specialty vessels and vessels removed from service. When reviewing its fleet for impairment, the Company groups vessels with similar operating and marketing characteristics, including cold-stacked vessels expected to return to active service, into vessel classes. All other vessels, including vessels retired and removed from service, are evaluated for impairment on a vessel by vessel basis.
During 2020, the Company recorded impairment charges of $13.5 million associated with its liftboat fleet (five owned and two leased-in vessels), and one specialty vessel and recognized net losses of $5.3 million as a result of asset disposals ($4.8 million loss due to the disposal of one vessel under construction, and $0.5 million loss due to the redelivery of one leased-in AHTS vessel and one leased-in liftboat). During 2019, the Company recorded impairment charges of $12.0 million primarily associated with its AHTS fleet (four owned and one leased-in vessel), four FSVs and one leased-in specialty vessel. During 2018, the Company recorded impairment charges of $14.6 million primarily associated with its AHTS fleet (four owned and three leased-in vessels) and one specialty vessel. Estimated fair values for the Company’s owned vessels were established by independent appraisers and other market data such as recent sales of similar vessels. For information regarding the Company’s vessel fair value measurement determinations, see “Note 11. Fair Value Measurements” in the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. If market conditions continue to decline from the presently depressed utilization and rates per day worked experienced over the last three years, fair values based on future appraisals could decline significantly.
The Company’s other vessel classes and other individual vessels in active service and cold-stacked status, for which no impairment was deemed necessary, have generally experienced a less severe decline in utilization and rates per day worked based on specific market factors. The market factors include vessels with more general utility to a broader range of customers (e.g., FSVs), vessels required for customers to meet regulatory mandates and operating under multiple year contracts or vessels that service customers outside of the offshore oil and natural gas market (e.g., CTVs).
For vessel classes and individual vessels with indicators of impairment, but which were not impaired as of December 31, 2020, the Company has estimated that their future undiscounted cash flows exceed their current carrying values by more than 40%. The Company’s estimates of future undiscounted cash flows are highly subjective as utilization and rates per day worked are uncertain, including the timing of an estimated market recovery in the offshore oil and natural gas markets and the timing and cost of reactivating cold-stacked vessels. If market conditions decline further, or remain stagnant at current levels, changes in the Company’s expectations on future cash flows may result in recognizing additional impairment charges related to its long-lived assets in future periods.
Consolidated Results of Operations
For the years ended December 31, the Company’s consolidated results of operations were as follows (in thousands, except statistics):
Time Charter Statistics:
Average Rates Per Day Worked
$
10,905
$
10,369
$
9,877
Fleet Utilization
%
%
%
Fleet Available Days
22,250
25,306
29,470
Operating revenues:
Time charter
$
133,454
%
$
157,052
%
$
150,064
%
Bareboat charter
2,855
%
5,131
%
4,635
%
Other marine services
5,528
%
12,270
%
24,462
%
141,837
%
174,453
%
179,161
%
Costs and Expenses:
Operating:
Personnel
48,348
%
55,975
%
58,532
%
Repairs and maintenance
14,661
%
21,401
%
24,385
%
Drydocking
4,269
%
5,848
%
7,792
%
Insurance and loss reserves
5,763
%
5,622
%
5,970
%
Fuel, lubes and supplies
8,128
%
10,622
%
12,904
%
Other
9,976
%
10,055
%
10,004
%
Leased-in equipment
7,525
%
15,840
%
12,964
%
98,670
%
125,363
%
132,551
%
Administrative and general
40,051
%
39,791
%
41,616
%
Depreciation and amortization
57,167
%
57,166
%
61,419
%
195,888
%
222,320
%
235,586
%
Losses on Asset Dispositions and Impairments, Net
(17,588
)
(12
)%
(6,461
)
(4
)%
(11,989
)
(7
)%
Operating Loss
(71,639
)
(51
)%
(54,328
)
(31
)%
(68,414
)
(38
)%
Other Expense, Net
(26,468
)
(19
)%
(30,146
)
(17
)%
(24,019
)
(13
)%
Loss Before Income Tax Benefit and
Equity in Losses of 50% or
Less Owned Companies
(98,107
)
(69
)%
(84,474
)
(48
)%
(92,433
)
(52
)%
Income Tax Benefit
(22,924
)
(16
)%
(7,969
)
(5
)%
(13,463
)
(8
)%
Loss Before Equity in Losses
of 50% or Less Owned Companies
(75,183
)
(53
)%
(76,505
)
(44
)%
(78,970
)
(44
)%
Equity in Losses of 50% or
Less Owned Companies
(8,163
)
(6
)%
(14,459
)
(8
)%
(4,009
)
(2
)%
Loss from Continuing Operations
(83,346
)
(59
)%
(90,964
)
(52
)%
(82,979
)
(46
)%
Income (Loss) from Discontinued Operations, Net of
Tax (including loss on disposal of $9,106)
%
(7,731
)
(4
)%
%
Net Loss
(82,982
)
(59
)%
(98,695
)
(57
)%
(82,052
)
(46
)%
Net Loss attributable to Noncontrolling
Interests in Subsidiaries
(4,067
)
(3
)%
(5,858
)
(3
)%
(4,444
)
(2
)%
Net Loss attributable to SEACOR Marine
Holdings Inc.
$
(78,915
)
(56
)%
$
(92,837
)
(53
)%
$
(77,608
)
(43
)%
The following tables summarize the operating results and property and equipment for the Company’s reportable segments for the periods indicated (in thousands, except statistics):
United States
(primarily Gulf
of Mexico)
Africa
(primarily
West Africa)
Middle East
and Asia
Latin
America
Europe
Continuing
Operations
Total
For the year ended December 31, 2020
Time Charter Statistics:
Average Rates Per Day
$
19,092
$
8,864
$
9,749
$
11,989
$
34,015
$
10,905
Fleet Utilization
%
%
%
%
%
%
Fleet Available Days
7,374
5,226
6,932
2,167
22,250
Operating Revenues:
Time charter
$
9,873
$
35,876
$
52,052
$
23,806
$
11,847
$
133,454
Bareboat charter
2,910
-
-
-
(55
)
2,855
Other
2,422
(465
)
2,157
1,084
5,528
15,205
35,411
54,209
24,890
12,122
141,837
Direct Costs and Expenses:
Operating:
Personnel
10,065
10,552
18,188
6,698
2,845
48,348
Repairs and maintenance
1,655
5,175
5,232
2,131
14,661
Drydocking
1,167
2,014
-
4,269
Insurance and loss reserves
1,774
1,026
1,721
5,763
Fuel, lubes and supplies
1,172
2,940
2,706
8,128
Other
6,891
1,369
9,976
16,206
22,691
35,497
11,979
4,772
91,145
Direct Vessel (Loss) Profit
$
(1,001
)
$
12,720
$
18,712
$
12,911
$
7,350
50,692
Other Costs and Expenses:
Operating:
Leased-in equipment
$
4,272
$
3,029
$
$
$
7,525
Administrative and general
40,051
Depreciation and amortization
21,427
10,833
16,595
5,481
2,831
57,167
104,743
Losses on Asset Dispositions and
Impairments, Net
(17,588
)
Operating Loss
$
(71,639
)
As of December 31, 2020
Property and Equipment:
Historical cost
$
257,592
$
204,079
$
361,514
$
130,769
$
58,919
1,012,873
Accumulated depreciation
(134,391
)
(60,535
)
(75,349
)
(13,312
)
(7,951
)
(291,538
)
$
123,201
$
143,544
$
286,165
$
117,457
$
50,968
$
721,335
Total Assets(1)
$
164,656
$
153,399
$
289,314
$
179,942
$
74,495
$
861,806
(1)
Total assets excludes $105.6 million of corporate assets, and $50.2 million of assets held for sale.
United States
(primarily Gulf
of Mexico)
Africa
(primarily
West Africa)
Middle East
and Asia
Latin
America
Europe
Continuing
Operations
Total
For the year ended December 31, 2019
Time Charter Statistics:
Average Rates Per Day
$
14,701
$
9,392
$
8,556
$
9,449
$
35,001
$
10,369
Fleet Utilization
%
%
%
%
%
%
Fleet Available Days
9,663
5,407
8,008
1,769
25,306
Operating Revenues:
Time charter
$
38,955
$
44,160
$
54,312
$
11,460
$
8,165
$
157,052
Bareboat charter
1,562
-
-
3,569
-
5,131
Other
3,806
1,461
1,669
1,390
3,944
12,270
44,323
45,621
55,981
16,419
12,109
174,453
Direct Costs and Expenses:
Operating:
Personnel
17,491
13,833
16,698
4,459
3,494
55,975
Repairs and maintenance
7,583
4,701
7,182
1,348
21,401
Drydocking
4,594
5,848
Insurance and loss reserves
2,370
1,051
1,449
5,622
Fuel, lubes and supplies
2,936
3,471
2,904
1,056
10,622
Other
4,354
3,095
1,182
1,031
10,055
35,367
27,900
31,928
8,517
5,811
109,523
Direct Vessel Profit
$
8,956
$
17,721
$
24,053
$
7,902
$
6,298
64,930
Other Costs and Expenses:
Operating:
Leased-in equipment
$
10,894
$
3,090
$
$
$
1,673
15,840
Administrative and general
39,791
Depreciation and amortization
$
21,947
$
10,404
$
16,400
$
6,205
$
2,210
57,166
112,797
Losses on Asset Dispositions and
Impairments, Net
(6,461
)
Operating Loss
$
(54,328
)
As of December 31, 2019
Property and Equipment:
Historical cost
$
297,392
$
207,107
$
292,446
$
57,534
$
44,545
$
899,024
Accumulated depreciation
(157,514
)
(57,136
)
(73,039
)
(16,239
)
(4,989
)
(308,917
)
$
139,878
$
149,971
$
219,407
$
41,295
$
39,556
$
590,107
Total Assets(1)
$
224,229
$
161,915
$
250,890
$
116,736
$
64,156
$
817,926
(1)
Total assets excludes $145.5 million of corporate assets, and $45.7 million of assets held-for-sale.
United States
(primarily Gulf
of Mexico)
Africa
(primarily
West Africa)
Middle East
and Asia
Latin
America
Europe
Continuing
Operations
Total
For the year ended December 31, 2018
Time Charter Statistics:
Average Rates Per Day
$
11,292
$
9,421
$
8,320
$
15,991
$
-
$
9,877
Fleet Utilization
%
%
%
%
-
%
%
Fleet Available Days
14,176
5,376
8,170
1,626
29,470
Operating Revenues:
Time charter
$
38,802
$
43,847
$
50,072
$
17,343
$
-
$
150,064
Bareboat charter
-
-
-
4,635
-
4,635
Other
14,762
7,661
(887
)
1,554
1,372
24,462
53,564
51,508
49,185
23,532
1,372
179,161
Direct Costs and Expenses:
Operating:
Personnel
18,708
16,538
16,806
4,399
2,081
58,532
Repairs and maintenance
5,152
6,330
11,172
1,011
24,385
Drydocking
1,957
2,085
1,362
2,260
7,792
Insurance and loss reserves
2,922
1,096
1,371
5,970
Fuel, lubes and supplies
3,568
3,826
4,027
1,225
12,904
Other
4,313
3,980
1,130
10,004
32,700
34,188
38,718
8,388
5,593
119,587
Direct Vessel Profit (Loss)
$
20,864
$
17,320
$
10,467
$
15,144
$
(4,221
)
59,574
Other Costs and Expenses:
Operating:
Leased-in equipment
8,240
$
4,281
$
$
$
12,964
Administrative and general
41,616
Depreciation and amortization
$
23,227
$
10,453
$
18,762
$
7,908
$
1,069
61,419
115,999
Losses on Asset Dispositions and
Impairments, Net
(11,989
)
Operating Loss
$
(68,414
)
As of December 31, 2018
Property and Equipment:
Historical cost
$
432,336
$
184,361
$
306,897
$
124,177
$
$
1,047,797
Accumulated depreciation
(224,737
)
(55,206
)
(81,378
)
(57,002
)
(17
)
(418,340
)
$
207,599
$
129,155
$
225,519
$
67,175
$
$
629,457
Total Assets(1)
$
351,748
$
140,335
$
260,002
$
137,983
$
(28,450
)
$
861,618
(1)
Total assets excludes $153.1 million of corporate assets, and $88.2 million of assets held-for-sale.
The following tables summarize the world-wide operating results and property and equipment for each of the Company’s vessel classes for the periods indicated (in thousands, except statistics):
AHTS
FSV
Supply
Specialty
Liftboats
Crew
transfer
Other
Activity
Total
For the year ended December 31, 2020
Time Charter Statistics:
Average Rates Per Day
$
7,910
$
8,408
$
10,335
$
-
$
26,180
$
2,014
$
-
$
10,905
Fleet Utilization
%
%
%
-
%
%
%
-
%
%
Fleet Available Days
2,661
9,547
3,576
5,816
-
22,250
Operating Revenues:
Time charter
$
9,438
$
54,725
$
26,488
$
-
$
42,065
$
$
-
$
133,454
Bareboat charter
-
2,910
(55
)
-
-
-
-
2,855
Other
(1,266
)
-
1,267
(29
)
4,396
5,528
10,146
56,369
26,885
-
43,332
4,396
141,837
Direct Costs and Expenses:
Operating:
Personnel
3,844
17,414
9,982
15,347
1,488
48,348
Repairs and maintenance
2,061
7,446
2,426
2,205
14,661
Drydocking
1,809
-
1,417
-
-
4,269
Insurance and loss reserves
1,460
3,317
(244
)
5,763
Fuel, lubes and supplies
3,896
1,561
1,552
8,128
Other
1,505
5,777
2,870
2,546
(2,997
)
9,976
9,590
37,802
17,675
26,384
(1,225
)
91,145
Direct Vessel Profit (Loss) (1)
$
$
18,567
$
9,210
$
(359
)
$
16,948
$
$
5,621
50,692
Other Costs and Expenses:
Operating:
Leased-in equipment
$
3,366
$
1,407
$
-
$
-
$
1,591
$
-
$
1,161
7,525
Administrative and general
40,051
Depreciation and amortization
$
2,050
$
20,741
$
7,520
$
$
24,198
$
1,696
$
57,167
104,743
Losses on Asset Dispositions and
Impairments, Net
(17,588
)
Operating Loss
$
(71,639
)
As of December 31, 2020
Property and Equipment:
Historical cost
$
50,189
$
375,746
$
238,624
$
-
$
321,751
$
3,163
$
23,400
$
1,012,873
Accumulated depreciation
(31,778
)
(104,739
)
(15,991
)
-
(117,364
)
(3,138
)
(18,528
)
(291,538
)
$
18,411
$
271,007
$
222,633
$
-
$
204,387
$
$
4,872
$
721,335
(1)
Direct vessel profit by vessel class is a non-GAAP financial measure. See “-Certain Components of Revenues and Expenses - Direct Vessel Profit” for a discussion of the usefulness of this measure. It should be noted that DVP by vessel class has material limitations as an analytical tool in that it does not reflect all of the costs associated with the operation of the Company’s fleet, and it should not be considered in isolation or used as a substitute for the Company’s results as reported under GAAP. A reconciliation of DVP by vessel class to operating loss, its most comparable GAAP measure, is included in the table above.
AHTS
FSV
Supply
Specialty
Liftboats
Crew
transfer
Other
Activity
Total
For the year ended December 31, 2019
Time Charter Statistics:
Average Rates Per Day
$
7,961
$
7,910
$
6,948
$
-
$
22,509
$
1,957
$
-
$
10,369
Fleet Utilization
%
%
%
-
%
%
%
-
%
%
Fleet Available Days
3,251
12,661
1,723
6,576
-
25,306
Operating Revenues:
Time charter
$
12,008
$
73,748
$
8,672
$
-
$
62,014
$
$
-
$
157,052
Bareboat charter
-
1,562
3,569
-
-
-
-
5,131
Other
1,652
(670
)
3,025
-
5,088
(3
)
3,178
12,270
13,660
74,640
15,266
-
67,102
3,178
174,453
Direct Costs and Expenses:
Operating:
Personnel
6,021
21,864
5,930
19,869
1,880
55,975
Repairs and maintenance
2,116
9,096
2,139
7,449
21,401
Drydocking
-
4,465
5,848
Insurance and loss reserves
1,599
3,000
(139
)
5,622
Fuel, lubes and supplies
5,197
1,079
3,530
10,622
Other
1,773
6,482
2,357
1,254
(2,243
)
10,055
11,585
45,054
12,206
39,567
(79
)
109,523
Direct Vessel Profit (Loss) (1)
$
2,075
$
29,586
$
3,060
$
(495
)
$
27,535
$
(88
)
$
3,257
64,930
Other Costs and Expenses:
Operating:
Leased-in equipment
$
5,295
$
1,407
$
1,649
$
-
$
5,990
$
-
$
1,499
15,840
Administrative and general
39,791
Depreciation and amortization
$
2,240
$
22,966
$
4,249
$
$
24,491
$
$
1,915
57,166
112,797
Losses on Asset Dispositions and
Impairments, Net
(6,461
)
Operating Loss
$
(54,328
)
As of December 31, 2019
Property and Equipment:
Historical cost
$
94,078
$
388,460
$
44,958
$
14,805
$
327,028
$
5,032
$
24,663
$
899,024
Accumulated depreciation
(73,095
)
(101,295
)
(8,471
)
(10,466
)
(93,166
)
(4,518
)
(17,906
)
(308,917
)
$
20,983
$
287,165
$
36,487
$
4,339
$
233,862
$
$
6,757
$
590,107
(1)
Direct vessel profit by vessel class is a non-GAAP financial measure. See “-Certain Components of Revenues and Expenses - Direct Vessel Profit” for a discussion of the usefulness of this measure. It should be noted that DVP by vessel class has material limitations as an analytical tool in that it does not reflect all of the costs associated with the operation of the Company’s fleet, and it should not be considered in isolation or used as a substitute for the Company’s results as reported under GAAP. A reconciliation of DVP by vessel class to operating loss, its most comparable GAAP measure, is included in the table above.
AHTS
FSV
Supply
Specialty
Liftboats
Crew
transfer
Other
Activity
Total
For the year ended December 31, 2018
Time Charter Statistics:
Average Rates Per Day
$
10,170
$
7,382
$
7,018
$
-
$
18,482
$
2,025
$
-
$
9,877
Fleet Utilization
%
%
%
-
%
%
%
-
%
%
Fleet Available Days
4,150
14,495
2,295
7,329
-
29,470
Operating Revenues:
Time charter
$
10,339
$
64,046
$
12,224
$
-
$
62,716
$
$
-
$
150,064
Bareboat charter
-
-
4,635
-
-
-
-
4,635
Other
5,017
(2,947
)
1,706
7,173
(11
)
13,187
24,462
15,356
61,099
18,565
69,889
13,187
179,161
Direct Costs and Expenses:
Operating:
Personnel
5,936
21,168
7,418
19,299
3,859
58,532
Repairs and maintenance
3,686
11,186
1,656
6,485
24,385
Drydocking
2,523
3,232
(6
)
1,493
-
7,792
Insurance and loss reserves
1,579
3,042
(151
)
5,970
Fuel, lubes and supplies
1,788
4,194
1,847
4,788
12,904
Other
2,239
5,706
2,783
2,040
(3,357
)
10,004
17,029
44,372
17,447
1,029
37,147
1,648
119,587
Direct Vessel (Loss) Profit (1)
$
(1,673
)
$
16,727
$
1,118
$
(692
)
$
32,742
$
(920
)
$
12,272
59,574
Other Costs and Expenses:
Operating:
Leased-in equipment
$
7,411
$
1,367
$
$
-
$
2,561
$
1,414
$
(1
)
12,964
Administrative and general
41,616
Depreciation and amortization
$
3,390
$
24,475
$
6,276
$
1,129
$
23,644
$
$
1,661
61,419
115,999
Losses on Asset Dispositions and
Impairments, Net
(11,989
)
Operating Loss
$
(68,414
)
As of December 31, 2018
Property and Equipment:
Historical cost
$
197,344
$
404,310
$
64,284
$
25,683
$
329,473
$
5,031
$
21,672
$
1,047,797
Accumulated depreciation
(168,731
)
(98,580
)
(37,202
)
(20,433
)
(71,887
)
(3,724
)
(17,783
)
(418,340
)
$
28,613
$
305,730
$
27,082
$
5,250
$
257,586
$
1,307
$
3,889
$
629,457
(1)
Direct vessel profit by vessel class is a non-GAAP financial measure. See "-Certain Components of Revenues and Expenses - Direct Vessel Profit" for a discussion of the usefulness of this measure. It should be noted that DVP by vessel class has material limitations as an analytical tool in that it does not reflect all of the costs associated with the operation of the Company’s fleet, and it should not be considered in isolation or used as a substitute for the Company’s results as reported under GAAP. A reconciliation of DVP by vessel class to operating loss, its most comparable GAAP measure, is included in the table above.
Operating Income (Loss)
United States, primarily Gulf of Mexico. For the years ended December 31, the Company’s direct vessel profit (loss) in the U.S. as follows (in thousands, except statistics):
Time Charter Statistics:
Rates Per Day Worked:
AHTS
$
-
$
7,155
$
31,648
FSV
7,375
8,768
6,779
Supply
7,380
-
6,953
Liftboats
22,844
19,563
13,869
Specialty
-
-
-
Overall
19,092
14,701
11,292
Utilization:
AHTS
-
%
%
%
FSV
%
%
%
Supply
%
-
%
%
Liftboats
%
%
%
Specialty
-
%
-
%
-
%
Overall
%
%
%
Available Days:
AHTS
1,095
1,457
2,550
FSV
1,486
2,689
5,264
Supply
-
Specialty
Liftboats
4,526
5,152
5,873
Overall
7,374
9,663
14,176
Operating revenues:
Time charter
$
9,873
%
$
38,955
%
$
38,802
%
Bareboat charter
2,910
%
1,562
%
-
-
%
Other marine services
2,422
%
3,806
%
14,762
%
15,205
%
44,323
%
53,564
%
Direct operating expenses:
Personnel
10,065
%
17,491
%
18,708
%
Repairs and maintenance
1,655
%
7,583
%
5,152
%
Drydocking
1,167
%
4,594
%
1,957
%
Insurance and loss reserves
1,774
%
2,370
%
2,922
%
Fuel, lubes and supplies
1,172
%
2,936
%
3,568
%
Other
%
%
%
16,206
%
35,367
%
32,700
%
Direct Vessel (Loss) Profit
$
(1,001
)
%
$
8,956
%
$
20,864
%
2020 compared with 2019
Operating Revenues. Time charter and bareboat charter revenues were $27.7 million lower in 2020 compared with 2019. On an overall basis, charter revenues were $21.5 million lower due to lower utilization of the core fleet and $6.2 million lower due to net fleet dispositions. Other Marine Services were $1.4 million lower primarily due to lower liftboat catering revenues. As of December 31, 2020, the Company had 15 of 20 owned and leased-in vessels cold-stacked in this region (two AHTS, four FSVs, and nine liftboats) compared with 14 of 25 vessels as of December 31, 2019.
Direct Operating Expenses. Direct operating expenses were $19.2 million lower in 2020 compared with 2019. Direct operating expenses were $15.4 million lower for the core fleet, primarily due to reduced personnel, repair and drydocking cost, and $3.8 million lower due to net fleet dispositions.
2019 compared with 2018
Operating Revenues. Time charter revenues were $0.2 million higher in 2019 compared with 2018. On an overall basis, time charter revenues were $2.7 million higher due to net fleet additions and $0.5 million higher due to improved utilization and an increase in average dayrates. Time charter revenues were $3.0 million lower due to the repositioning of vessels between geographic regions. Other Marine Services were $9.4 million lower primarily due to the recognition in 2018 of revenue previously deferred due to collection concerns following the receipt of cash and due to the commencement of a bareboat contract in 2019. As of December 31, 2019, the Company had 14 of 25 owned and leased-in vessels cold-stacked in this region (two AHTS vessels, three FSVs, eight liftboats and one specialty vessel) compared with 18 of 30 vessels as of December 31, 2018. As of December 31, 2018, the Company had two AHTS vessels retired and removed from service in this region.
Direct Operating Expenses. Direct operating expenses were $2.7 million higher in 2019 compared with 2018, primarily due to the repositioning of vessels between geographic regions and higher repair and maintenance costs.
Africa, primarily West Africa. For the years ended December 31, the Company’s direct vessel profit in Africa was as follows (in thousands, except statistics):
Time Charter Statistics:
Rates Per Day Worked:
AHTS
$
8,208
$
8,753
$
11,260
FSV
9,108
9,840
9,926
Supply
8,726
8,429
7,512
Specialty
-
-
-
Overall
8,864
9,392
9,421
Utilization:
AHTS
%
%
%
FSV
%
%
%
Supply
%
%
%
Specialty
-
%
-
%
-
%
Overall
%
%
%
Available Days:
AHTS
1,200
1,095
FSV
3,660
3,518
2,941
Supply
1,521
Specialty
-
-
-
Overall
5,226
5,407
5,376
Operating revenues:
Time charter
$
35,876
%
$
44,160
%
$
43,847
%
Other marine services
(465
)
%
1,461
%
7,661
%
35,411
%
45,621
%
51,508
%
Direct operating expenses:
Personnel
10,552
%
13,833
%
16,538
%
Repairs and maintenance
5,175
%
4,701
%
6,330
%
Drydocking
2,014
%
%
2,085
%
Insurance and loss reserves
1,026
%
1,051
%
1,096
%
Fuel, lubes and supplies
2,940
%
3,471
%
3,826
%
Other
%
4,354
%
4,313
%
22,691
%
27,900
%
34,188
%
Direct Vessel Profit
$
12,720
%
$
17,721
%
$
17,320
%
2020 compared with 2019
Operating Revenues. Time charter revenues were $8.3 million lower in 2020 compared with 2019. On an overall basis, time charter revenues were $3.9 million lower due to the effect of cold-stacking vessels, $3.5 million lower due to net fleet dispositions, $2.5 million lower due to the repositioning of vessels between geographic regions and $1.1 million lower for the core fleet primarily due to reduced utilization. Charter revenues were $2.7 million higher, and Other Marine Services were $1.9 million lower, primarily due to one vessel commencing a time charter after previously having revenues recognized only on receipt of cash (and therefore included in Other Marine Services) due to collection concerns. As of December 31, 2020, the Company had three of 14 owned and leased-in vessels cold stacked in this region (two FSVs and one Supply vessel).
Direct Operating Expenses. Direct operating expenses were $5.2 million lower in 2020 compared with 2019. Direct operating expenses were $4.2 million lower due to net fleet dispositions and $1.4 million lower due to the repositioning of vessels between geographic regions, and $0.4 million higher for the core fleet primarily due to the timing of dry dockings and certain repair expenditures.
2019 compared with 2018
Operating Revenues. Time charter revenues were $0.3 million higher in 2019 compared with 2018. On an overall basis, time charter revenues were $1.7 million higher due to net fleet additions, $1.1 million lower due to the repositioning of vessels between geographic regions and $0.3 million lower for the core fleet. Other Marine Services were $6.2 million lower primarily due to the recognition in 2018 of revenue previously deferred due to collection concerns with regard to one customer following receipt of cash. As of December 31, 2019, the Company had one specialty vessel retired and removed from service in this region.
Direct Operating Expenses. Direct operating expenses were $6.3 million lower in 2019 compared with 2018, primarily due to the repositioning of vessels between geographic regions and the timing of dry dockings and certain repair expenditures.
Middle East and Asia. For the years ended December 31, the Company’s direct vessel profit (loss) in the Middle East and Asia was as follows (in thousands, except statistics):
Time Charter Statistics:
Rates Per Day Worked:
AHTS
$
6,153
$
5,873
$
5,871
FSV
8,014
6,582
6,110
Supply
7,215
5,087
5,181
CTV
2,014
1,957
2,025
Liftboats
26,855
27,177
30,505
Overall
9,749
8,556
8,320
Utilization:
AHTS
%
%
%
FSV
%
%
%
Supply
%
%
%
CTV
%
%
%
Liftboats
%
%
%
Overall
%
%
%
Available Days:
AHTS
FSV
3,533
5,088
5,390
Supply
1,875
CTV
Liftboats
Overall
6,932
8,008
8,170
Operating revenues:
Time charter
$
52,052
%
$
54,312
%
$
50,072
%
Other marine services
2,157
%
1,669
%
(887
)
%
54,209
%
55,981
%
49,185
%
Direct operating expenses:
Personnel
18,188
%
16,698
%
16,806
%
Repairs and maintenance
5,232
%
7,182
%
11,172
%
Drydocking
%
%
1,362
%
Insurance and loss reserves
1,721
%
1,449
%
1,371
%
Fuel, lubes and supplies
2,706
%
2,904
%
4,027
%
Other
6,891
%
3,095
%
3,980
%
35,497
%
31,928
%
38,718
%
Direct Vessel Profit
$
18,712
%
$
24,053
%
$
10,467
%
2020 compared with 2019
Operating Revenues. Time charter revenues were $2.2 million lower in 2020 compared with 2019. Time charter revenues were $3.6 million lower for the core fleet, primarily due to reduced utilization, and $1.4 million higher due to net fleet additions. As of December 31, 2020, the Company had three of 20 owned and leased-in vessels cold-stacked in this region (two Supply vessels and one FSV).
Direct Operating Expenses. Direct operating expenses were $3.6 million higher in 2020 compared with 2019. Direct operating expenses were $2.1 million higher for the core fleet, and $1.5 million higher due to net fleet additions.
2019 compared with 2018
Operating Revenues. Time charter revenues were $4.2 million higher in 2019 compared with 2018, primarily due to improved utilization and the repositioning of vessels between geographic regions. Other operating revenues were $2.6 million higher in 2019 compared 2018 primarily due to the termination of a revenue pooling arrangement. As of December 31, 2019, the Company had no owned and leased-in vessels cold-stacked in this region, compared with one of 22 vessels as of December 31, 2018.
Direct Operating Expenses. Direct operating expenses were $6.8 million lower in 2019 compared with 2018 primarily due to net fleet dispositions and the timing of dry dockings and certain repair expenditures.
Latin America. For the years ended December 31, the Company’s direct vessel profit in Latin America was as follows (in thousands, except statistics):
Time Charter Statistics:
Rates Per Day Worked:
FSV
$
7,435
$
7,059
$
6,800
Supply
14,906
-
-
Liftboats
15,913
16,259
21,852
Overall
11,989
9,449
15,991
Utilization:
FSV
%
%
%
Supply
%
-
%
-
%
Liftboats
%
%
%
Overall
%
%
%
Available Days:
FSV
1,366
Supply
1,108
-
-
Liftboats
Overall
2,167
1,769
1,626
Operating revenues:
Time charter
$
23,806
%
$
11,460
%
$
17,343
%
Bareboat charter
-
-
%
3,569
%
4,635
%
Other marine services
1,084
%
1,390
%
1,554
%
24,890
%
16,419
%
23,532
%
Direct operating expenses:
Personnel
6,698
%
4,459
%
4,399
%
Repairs and maintenance
2,131
%
1,348
%
1,011
%
Drydocking
%
%
%
Insurance and loss reserves
%
%
%
Fuel, lubes and supplies
%
1,056
%
1,225
%
Other
1,369
%
1,182
%
1,130
%
11,979
%
8,517
%
8,388
%
Direct Vessel Profit
$
12,911
%
$
7,902
%
$
15,144
%
2020 compared with 2019
Operating Revenues. Total operating revenues were $8.5 million higher in 2020 compared with 2019. On an overall basis, time charter and bareboat revenues were $14.7 million higher due to fleet additions, $3.6 million lower due to the sale of two vessels on bareboat charter, and $2.6 million lower due to the repositioning of vessels between geographic regions. As of December 31, 2020, the Company had no owned or leased-in vessels cold-stacked in this region.
Direct Operating Expenses. Direct operating expenses were $3.5 million higher in 2020 compared with 2019. On an overall basis, direct operating expenses were $6.9 million higher due to net fleet additions and $3.4 million lower due to the repositioning of vessels between geographic regions.
2019 compared with 2018
Operating Revenues. Time charter and bareboat revenues were $6.9 million lower in 2019 compared with 2018, primarily due to reduced average day rates due to changes in fleet mix, the repositioning of vessels between geographical regions, and the sale of two vessels on bareboat charter. As of December 31, 2019, the Company had no owned or leased-in vessels cold-stacked in this region compared with one of seven vessels as of December 31, 2018.
Direct Operating Expenses. Direct operating expenses were $0.1 million higher in 2019 compared with 2018, primarily due to changes in fleet mix and the repositioning of vessels between geographic regions.
Europe, primarily North Sea. For the years ended December 31, the Company’s direct vessel profit from continuing operations in Europe was as follows (in thousands, except statistics):
Time Charter Statistics:
Rates Per Day Worked:
Liftboat
34,015
35,001
-
Supply
-
-
-
Overall
34,015
35,001
-
Utilization:
Liftboat
%
%
-
%
Supply
-
%
-
%
-
%
Overall
%
%
-
%
Available Days:
Liftboat
-
Supply
Overall
Operating revenues:
Time charter
$
11,847
%
$
8,165
%
$
-
-
%
Bareboat charter
(55
)
-
%
-
-
%
-
-
%
Other marine services
%
3,944
%
1,372
%
12,122
%
12,109
%
1,372
%
Direct operating expenses:
Personnel
2,845
%
3,494
%
2,081
%
Repairs and maintenance
%
%
%
Drydocking
-
-
%
%
2,260
%
Insurance and loss reserves
%
%
%
Fuel, lubes and supplies
%
%
%
Other
%
1,031
%
%
4,772
%
5,811
%
5,593
%
Direct Vessel Profit (Loss)
$
7,350
%
$
6,298
%
$
(4,221
)
%
2020 compared with 2019
Operating Revenues. Time charter revenues were $3.7 million higher in 2020 compared to 2019, due to the repositioning of vessels between geographic regions. Other Marine Services were $3.6 million lower in 2020 compared with 2019, primarily due to the termination of a charter of a PSV from a joint venture. As of December 31, 2020, the Company had one of two owned vessels cold-stacked in this region (one PSV) compared with no cold-stacked vessels as of December 31, 2019.
Direct Operating Expenses. Vessel operating expenses were $1.0 million lower in 2020 compared to 2019, primarily due to the termination of a charter-in of a PSV from a joint venture.
2019 compared with 2018
Operating Revenues. Time charter revenues were $8.2 million higher in 2019 compared to 2018, due to the repositioning of vessels between geographic regions. Other Marine Services were $2.6 million higher in 2019 compared with 2018, primarily due to the charter in of a PSV from a joint venture.
Direct Operating Expenses. Direct operating expenses were $0.3 million higher in 2019 compared to 2018, primarily due to increased costs associated with the repositioning of one liftboat between geographic regions.
Leased-in Equipment. Leased-in expenses were $8.3 million lower for 2020 compared with 2019 primarily due to the impairment of three leased-in vessels and one leased-in vessel having been returned to the lessor in the first quarter of 2020. Leased-in equipment expenses were $2.6 million higher for 2019 compared with 2018 primarily due to the implementation of the new lease accounting standard, which removed the quarterly $2.3 million benefit of amortization of deferred gains on sale-leaseback vessels recognized in 2018 under the old standard. Had this benefit been allowed to be recognized in 2019, this benefit would have been partially reduced by the impairment and removal from service of two leased-in vessels during 2018.
Administrative and general. Administrative and general expenses were $0.3 million higher in 2020 compared with 2019 primarily due to a transaction fee paid to SEACOR Holdings under the Tax Refund and Indemnification Agreement entered into by the Company and SEACOR Holdings on June 26, 2020 (the “Tax Refund Agreement”), offset by decreases in employee and director compensation expenses.
Administrative and general expenses were $1.8 million lower in 2019 compared with 2018, primarily due to lower shared service fees, offset by costs associated with the transformation plan (the “Transformation Plan”). The Transformation Plan contains $3.7 million of Administration and General expenses. Absent the $3.7 million of expense related to the Transformation Plan, Administrative and General expenses would have been $5.5 million lower than 2018.
Depreciation and amortization. Depreciation and amortization expenses were flat when comparing 2020 with 2019.
Depreciation and amortization expenses were $4.3 million lower in 2019 compared with 2018 primarily due to net fleet dispositions.
Losses on Asset Dispositions and Impairments, Net. During 2020, the Company recorded impairment charges of $13.5 million associated with its liftboat fleet (five owned and two leased-in vessels), one specialty vessel and recognized net losses of $5.3 million ($4.8 million loss due to the disposal of one vessel under construction, and $0.5 million loss due to the redelivery of one leased-in AHTS vessel and one leased-in liftboat). The Company sold two AHTS vessels and one specialty vessel previously removed from service, four FSVs, one specialty, one vessel under construction and other equipment for $21.6 million and gains of $1.2 million.
During 2019, the Company recorded impairment charges of $12.0 million associated with its AHTS fleet (four owned and one leased vessel), four FSVs and one leased-in supply vessel. The Company sold one AHTS vessel, seven FSVs, five supply vessels and three liftboats. In addition, the Company sold five AHTS vessels and one specialty vessel previously retired and removed from service and other equipment for aggregate net proceeds of $55.3 million and gains of $5.5 million.
During 2018, the Company recorded impairment charges of $14.6 million associated with its AHTS fleet (four owned and three leased vessels) and one specialty vessel. The Company sold one AHTS vessel, nine FSVs, one supply vessel and two liftboats. In addition, the Company sold one FSV, one tow-supply vessel and one supply vessel previously retired and removed from service and other equipment for net proceeds of $10.7 million and gains of $5.0 million.
Other (Expense) Income, Net
For the years ended December 31, the Company’s other income (expense) was as follows (in thousands):
Other Income (Expense):
Interest income
$
1,273
$
1,389
$
1,171
Interest expense
(30,691
)
(28,956
)
(26,726
)
SEACOR Holdings guarantee fees
(47
)
(108
)
(29
)
Loss on extinguishment debt
-
-
(638
)
Derivative gains, net
4,310
2,854
Foreign currency losses, net
(1,294
)
(2,541
)
(1,328
)
Other, net
(19
)
(1
)
$
(26,468
)
$
(30,146
)
$
(24,019
)
Interest Income. Interest Income in 2020 was lower due to decreases in interest income from the Company’s construction reserve funds deposits which were substantially lower offset by increased income due to interest earned on loans and advances to Joint Ventures. Interest income in 2019 was higher due to loans and advances to Joint Ventures.
Interest expense. Interest expense was higher in 2020 compared to 2019 primarily due to the debt acquired in connection with the Company’s acquisition 100% of SEACOR Offshore Delta (f/k/a SEACOSCO), and partially offset due to lower interest rates on floating rate debt and payments of principal on outstanding debt. Interest expense was higher in 2019 compared to 2018 primarily due to higher interest rates early in the year, and interest for the financing of the vessel SEACOR Alps following its delivery.
SEACOR Holdings guarantee fees. As of December 31, 2020, SEACOR Holdings had issued guarantees in respect of certain of the Company’s obligations with a value of $7.0 million. Pursuant to the Distribution Agreement executed in connection with the Spin-off, SEACOR Holdings charges the Company a guarantee fee of 0.5% per annum on the amount of outstanding guarantees. See “Contractual Obligations and Commercial Commitments.”
Loss on debt extinguishment. On September 26, 2018, the Company entered into a $130.0 million loan facility with a syndicate of lenders administered by DNB Bank ASA. A portion of the proceeds ($99.9 million) was used towards the extinguishment of prior term loans. (See “Note 8. Long-Term Debt” in the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K). As a result of this transaction, the Company recognized a loss of $0.6 million in fees related to the extinguishment of debt.
Derivative gains, net. For all periods, derivative gains were primarily due to reductions in the fair value of the Company’s conversion option liability on its Convertible Senior Notes. The reductions in the conversion option liability were primarily the result of declines in the Company’s share price and estimated credit spread.
Foreign currency losses, net. Foreign currency losses in 2020 were lower primarily due to the strengthening of the pound sterling and the euro in relation to the U.S. Dollar.
Income Tax Benefit
For the year ending December 31, 2020, the Company’s effective income tax rate of 23.4% was primarily due to income tax benefits recognized as a result of the CARES Act signed into law in March 2020, as well as taxes provided on income attributable to noncontrolling interests, foreign sourced income not subject to U.S. income taxes, foreign taxes not creditable against U.S. income taxes, and the adjustment for the acquisition of the remaining minority membership interest in Falcon Global Holdings.
For the year ended December 31, 2019 the Company’s effective income tax rate of 9.4% was lower than the Company’s statutory tax rate of 21% primarily due to foreign subsidiaries with current losses for which there is no current or future federal income tax benefit.
Upon comparison of the 2018 consolidated federal tax return to the 2018 year-end tax provision, the Company recorded a return to provision adjustment related to losses from a consolidated joint venture of $2.4 million in 2019.
For 2018 the Company incurred a current tax liability of $1.4 million related to the non-qualified withdrawal of funds from a Capital Construction Fund by a partnership in which the Company held a 50% interest. The Company had previously recorded a deferred tax liability in connection with this fund.
Equity in (Losses) Earnings of 50% or Less Owned Companies, Net of Tax
For the years ended December 31, the Company’s equity in earnings (losses) from continuing operations of 50% or less owned companies, net of tax, was as follows (in thousands):
MexMar
$
(4,056
)
$
1,054
$
2,736
MEXMAR Offshore
-
(4,901
)
-
Offshore Vessel Holdings
(4,053
)
(848
)
-
OSV Partners
(1,575
)
(1,497
)
(2,133
)
SEACOR Grant DIS
-
(1,058
)
Dynamic Offshore Drilling
-
(2,263
)
(2,695
)
SEACOR Offshore Delta (f/k/a SEACOSCO)
(1,703
)
(7,118
)
(2,359
)
SEACOR Marine Arabia
3,373
1,071
Other
(149
)
(360
)
$
(8,163
)
$
(14,459
)
$
(4,009
)
2020 compared with 2019
MexMar. Equity earnings from MexMar decreased by $5.1 million as compared to 2019 due to an increase in the provision for doubtful accounts due to a default on a loan agreement with UP Offshore (Bahamas) Ltd (“UP Offshore”), a wholly owned subsidiary of MEXMAR Offshore.
MEXMAR Offshore. Equity losses from MEXMAR Offshore increased by $4.9 million due to losses in the value of the investment.
Offshore Vessel Holdings (“OVH”). Equity losses increased by $3.2 million due to higher maintenance and repair costs, depreciation and amortization primarily due to the addition of vessels operated under financial leases and increasing financial and other expenses.
OSV Partners. Equity losses from SEACOR OSV Partners GP LLC and SEACOR OSV Partners I LP LLC (collectively, “OSV Partners”) increased by less than $0.1 million, primarily due to utilization.
SEACOR Grant DIS. Change in equity earnings from SEACOR Grant DIS LLC (“SEACOR Grant DIS”) was due to the joint venture dissolution in 2019.
Dynamic Offshore Drilling. The investment in Dynamic Offshore Drilling Limited (“Dynamic Offshore Drilling”) was fully impaired in 2019.
SEACOR Offshore Delta (f/k/a SEACOSCO). The decrease of $5.4 million in equity losses from SEACOR Offshore Delta LLC (“SEACOR Offshore Delta”) was primarily due to the acquisition of and consolidation of the joint venture in July 2020.
SEACOR Marine Arabia. The increase of $2.3 million in equity gains from SEACOR Marine Arabia was due to increased revenues and recording of a true-up of fees related to the management agreement with our joint venture partner of $0.9 million recognized in 2020.
2019 compared with 2018
MexMar. Equity earnings from MexMar decreased by $1.7 million as compared to 2018 due to lower utilization.
MEXMAR Offshore. Equity losses from MEXMAR Offshore increased by $4.9 million due to losses in the value of the investment.
Offshore Vessel Holdings (“OVH”). On December 28, 2018, the Company invested $4.9 million for a 49% interest in OVH. The remaining 51% is owned by a subsidiary of CME. OVH invests in offshore assets and charters marine equipment. During the year ended December 31, 2019 OVH loaned $10.0 million to Operadora Productura Mexsicana, a drilling company in Mexico which owns and operates two jackup drilling rigs “OPM”, chartered in three PSV’s from UP Offshore and purchased one FSV from the Company for $2.4 million through a seller’s finance agreement.
OSV Partners. Equity losses from OSV Partners were $0.6 million lower than 2018 primarily due to an increased utilization in 2019.
SEACOR Grant DIS. Change in equity earnings from SEACOR Grant DIS LLC was due to $1.1 million loss from operations in 2018 and $0.4 million gain resulting from a release of capital call liability due to the joint venture dissolution in 2019.
Dynamic Offshore Drilling. Equity losses were reduced by $0.4 million due to decreased interest expense. The investment was fully impaired in 2019.
SEACOR Offshore Delta (f/k/a “SEACOSCO”). The increase of $4.8 million in equity losses from SEACOR Offshore Delta was primarily due to operating expenses associated with the additional new vessels entering service in the joint venture.
Liquidity and Capital Resources
General
The Company’s ongoing liquidity requirements arise primarily from working capital needs, capital commitments and its obligations to service outstanding debt and comply with covenants under its debt facilities. The Company may use its liquidity to fund capital expenditures, make acquisitions or to make other investments. Sources of liquidity are cash balances, marketable securities, construction reserve funds and cash flows from operations. From time to time, the Company may secure additional liquidity through asset sales or the issuance of debt, shares of Common Stock or common stock of its subsidiaries, preferred stock or a combination thereof.
As of December 31, 2020, the Company’s unfunded capital commitments from continuing operations were $11.7 million for one PSV and miscellaneous vessel equipment. Of the unfunded capital commitments, $10.7 million is payable during 2021 and $1.0 million is payable during 2022. As of December 31, 2020, the Company had indefinitely deferred an additional $9.6 million of orders with respect to one FSV that the Company had previously reported unfunded capital commitments.
As of December 31, 2020, the Company had outstanding debt of $472.9 million, net of debt discount and issue costs. The Company’s contractual long-term debt maturities as of December 31, 2020 are as follows (in thousands):
Actual
$
32,377
38,484
244,983
134,523
11,365
Years subsequent to 2025
60,145
$
521,877
As of December 31, 2020, the Company held balances of cash, cash equivalents, restricted cash and construction reserve funds totaling $36.0 million, of which $4.2 million was construction reserve funds held as cash. In January 2021, the Company received cash proceeds of $42.6 million for the sale of Windcat Workboats. In addition, as a result of the CARES Act and the entry into the Tax Refund Agreement, the Company expects to receive cash tax refunds of approximately $31.2 million within the next 12 months, subject to the refund schedule of the IRS. The IRS has been recently experiencing delays in processing refund claims due in part to the COVID-19 pandemic. These tax refunds are subject to the terms of the Tax Refund Agreement, which does not restrict the use of approximately $23.1 million of the refund, with the remaining $8.1 million required to be deposited into an account to be used to satisfy certain of the Company’s obligations that remain guaranteed by SEACOR Holdings.
For the years ended December 31, the following is a summary of the Company’s cash flows (in thousands):
Cash flows provided by or (used in):
Operating Activities
$
(29,723
)
$
1,662
$
(63,591
)
Investing Activities
3,823
31,030
(26,796
)
Financing Activities
(22,598
)
(25,942
)
68,252
Effects of Exchange Rate Changes on Cash, Cash Equivalents and
Restricted Cash
(16,619
)
Net increase in Cash, Cash Equivalents and Restricted Cash from
Discontinued Operations
6,137
Decrease in Cash, Cash Equivalents and Restricted Cash
$
(47,509
)
$
(9,805
)
$
(15,699
)
Operating Activities
Cash flows provided by operating activities decreased by $31.4 million in 2020 compared with 2019. For the years ended December 31, the components of cash flows provided by (used in) operating activities were as follows (in thousands):
DVP:
United States, primarily Gulf of Mexico
$
(1,001
)
$
8,956
$
20,864
Africa, primarily West Africa
12,720
17,721
17,320
Middle East and Asia
18,712
24,053
10,467
Latin America
12,911
7,902
15,144
Europe, Continuing Operations
7,350
6,298
(4,221
)
Operating, leased-in equipment (excluding amortization of deferred gains)
(14,785
)
(19,151
)
(21,000
)
Administrative and general (excluding provisions for bad debts and
amortization of share awards)
(35,752
)
(35,149
)
(39,002
)
SEACOR Holdings management and guarantee fees
(47
)
(108
)
(29
)
Other, net (excluding non-cash losses)
(19
)
(1
)
Dividends received from 50% or less owned companies
2,117
2,073
1,724
2,206
12,594
1,512
Changes in operating assets and liabilities before interest and income taxes
(9,377
)
7,324
(48,151
)
Director share awards
Restricted stock vesting
(178
)
(577
)
(88
)
Cash settlements on derivative transactions, net
(1,331
)
(482
)
1,407
Interest paid, excluding capitalized interest (1)
(21,977
)
(21,479
)
(20,014
)
Interest received
1,273
1,389
1,171
Income taxes refunded, net
(1,094
)
1,999
(321
)
Total cash flows (used in) provided by operating activities
$
(29,723
)
$
1,662
$
(63,591
)
(1)
During 2020, 2019 and 2018, capitalized interest paid and included in purchases of property and equipment was $0.9 million, $1.5 million, and $2.4 million, respectively.
For a detailed discussion of the Company’s financial results for the reported periods, see “Consolidated Results of Operations” included above. Changes in operating assets and liabilities before interest and income taxes are the result of the Company’s working capital requirements.
Investing Activities
During 2020, net cash provided by investing activities was $3.8 million primarily comprised of the following:
•
capital expenditures were $20.8 million. Equipment deliveries during the period included a total of four PSVs through construction;
•
the Company sold two AHTS vessels and one specialty vessel previously retired and removed from service, four FSVs, one specialty vessel and one vessel under construction and other equipment for net proceeds of $21.6 million ($20.7 million cash and $0.9 million in previously received deposits);
•
construction reserve funds account transactions included withdrawals of $9.2 million and a reclassification of $3.7 million to short-term cash deposits, which is expected to be utilized in 2021;
•
the Company completed the acquisition of its joint venture SEACOR Offshore Delta (f/k/a SEACOSCO) and as a result, the Company owns 100% of the membership interests in SEACOR Offshore Delta (f/k/a SEACOSCO). The aggregate purchase price for the membership interests was $28.2 million, $8.4 million of which was paid to the sellers at the closing of the transaction and the remainder of which will be paid over the next four years;
•
the Company made investments in, and advances to, its 50% or less owned companies of $2.2 million; and
•
the Company received $1.7 million from investments in, and advances to, its 50% or less owned companies for principal payments on the notes.
During 2019, net cash provided by investing activities was $31.0 million primarily comprised of the following:
•
capital expenditures were $44.8 million. Equipment deliveries during the period included a total of five FSVs (three purchased from managed entities, one from an outside party and one through construction); and two new construction PSVs;
•
the Company sold six vessels removed from service (five AHTS vessels and one specialty), seven FSVs, five PSVs, three liftboats, one AHTS vessel and other equipment, resulting in $55.3 million in proceeds;
•
proceeds from the sale of the emergency response and rescue vessels (“ERRV”) fleet, less cash retained by the purchaser was $22.3 million;
•
loans and advances to investments in 50% or less owned companies of $17.4 million, including $13.6 million to the SEACOSCO joint venture; and
•
net decrease in construction reserve funds of $15.2 million.
During 2018, net cash used in investing activities was $26.8 million primarily comprised of the following:
•
capital expenditures were $35.6 million. Equipment deliveries during the period included two AHTS vessels purchased from a managed entity and six liftboats acquired through a contribution from Montco Offshore LLC (“MOI”) to Falcon Global;
•
the Company sold one AHTS vessel, nine FSVs, one Supply vessel and two liftboats. In addition, the Company sold one FSV, one tow-supply vessel and one Supply vessel previously retired and removed from service and other equipment for cash proceeds of $10.7 million and gains of $5.0 million ($10.6 million cash and $0.1 million of previously received deposits);
•
the Company made investments in 50% or less owned companies of $43.4 million, including $29.6 million to the SEACOSCO joint venture, $3.2 million to OSV Partners, $4.9 million to MEXMAR Offshore and $4.9 million to OVH;
•
construction reserve funds account transactions included withdrawals of $17.3 million;
•
the Company received a return of capital advances of $9.8 million from MexMar and capital distributions of $6.5 million from Nautical Power, LCC (“Nautical Power”); and
•
the Company sold 51% of SEACOR Marlin LLC (“SEACOR Marlin”) to a wholly owned subsidiary of MexMar for $8.0 million.
Financing Activities
During 2020, net cash used by financing activities was $22.6 million. In the period, the Company:
•
made scheduled payments on long-term debt of $22.6 million.
During 2019, net cash used by financing activities was $25.9 million. In the period, the Company:
•
made scheduled payments on long-term debt of $24.0 million;
•
purchased subsidiary shares from holders of noncontrolling interests for $3.4 million; and
•
received $1.4 million from the exercise of stock options.
During 2018, net cash provided by financing activities was $68.3 million. In the period, the Company:
•
made scheduled payments on long-term debt of $26.9 million;
•
borrowed $15.0 million under the FGUSA revolving loan facility (“FGUSA Revolving Loan Facility”);
•
paid $15.0 million in debtor-in-possession obligations assumed from MOI;
•
borrowed $11.0 million for the purchase of the vessels SEACOR 88 and SEACOR 888;
•
refinanced $99.9 million in debt secured by eight vessels under the SMFH Loan Facility and borrowed an additional $30.1 million under the same syndicated loan facility;
•
incurred issuance costs on various debt facilities of $2.6 million;
•
issued Common Stock for proceeds of $1.8 million in a private placement;
•
issued Common Stock for proceeds of $41.2 million and warrants to purchase Common Stock for proceeds of $12.8 million in a private placement; and
•
received $0.8 million from the exercise of stock options.
Short and Long-Term Liquidity Requirements
The Company believes that a combination of cash balances on hand, construction reserve funds, cash generated from operating activities, availability under existing subsidiary financing arrangements and access to the credit and capital markets will provide sufficient liquidity to meet its obligations, including to support its capital expenditures program, working capital and debt service requirements. The Company continually evaluates possible acquisitions and dispositions of certain businesses and assets. The Company’s sources of liquidity may be impacted by the general condition of the markets in which it operates and the broader economy as a whole, which may limit its access to the credit and capital markets on acceptable terms. Management will continue to closely monitor the Company’s liquidity and compliance with covenants in its credit facilities specifically as it relates to the COVID-19 pandemic. As noted above under “Overview”, there are a number of steps the Company has and can take to mitigate any further adverse effects to the Company’s liquidity stemming from the COVID-19 pandemic and the resulting depressed oil and natural gas price environment, including sales of assets, workforce reduction and other cost reduction measures. In addition, the Company expects to receive a meaningful amount of tax refunds over the next 12 months as a result of the changes in the current U.S. tax law included in the CARES Act. While the COVID-19 pandemic has reduced the demand for the Company’s products and services, the COVID-19 pandemic has not had a material impact on the Company’s liquidity or, except as noted in “Note 8. Long-Term Debt” in the notes to consolidated financial statements included elsewhere in this Annual Report on Form 10-K, on the Company’s ability to meet its financial maintenance covenants in its various credit facilities. However, the Company's primary credit facility requires the Company to maintain a minimum of $35.0 million of cash on hand (including restricted cash) at all times. As of December 31, 2020 the Company's cash balances used to test compliance with this covenant was $36.0 million and the Company expects its cash on hand (including proceeds received from the sale of Windcat Workboats described below, together with its cash flow from operations and tax refunds the Company expects to receive (as described under “Recent Developments - Tax Refund Agreement” which would be included in the covenant calculation) will be sufficient to maintain compliance with this covenant for the foreseeable future. However, if the effect of the COVID-19 pandemic on the Company's business becomes more severe, for example by further reducing the demand for the Company’s products and services or causing customers not to make their payments on time, or the
Company does not receive its expected tax refunds in a timely manner, the Company may be required to seek amendments to the covenant to avoid a default under the facility.
The Company completed the sale of Windcat Workboats on January 12, 2021 to Compagnie Maritime Belge (“CMB”), and as consideration for the sale, the Company received £32.8 million in cash and CMB assumed all of the approximately £20.4 million of debt outstanding under Windcat’s existing revolving credit facility. After deducting transaction costs and expenses and giving effect to foreign exchange rate hedges, the Company received net cash proceeds of approximately $42.6 million. The net cash proceeds received in the sale of Windcat adds to the Company’s cash on hand and further supports covenant compliance and the operational and financing needs of the Company.
Off-Balance Sheet Arrangements
As of December 31, 2020, we did not have any obligations on behalf of 50% or less owned companies or financial partnerships, such as structured finance or special-purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements.
Contractual Obligations and Commercial Commitments
Prior to the Spin-Off, in the ordinary course of business, SEACOR Holdings issued guarantees in respect of certain of the Company’s obligations, including obligations under debt instruments and credit facilities, sale-leaseback transactions, letters of credit and certain invoiced amounts for funding deficits of a multi-employer defined benefit pension plan. As of December 31, 2020, the aggregate amount of obligations that SEACOR Holdings had guaranteed on the Company’s behalf was $7.0 million. Pursuant to the Distribution Agreement entered into with SEACOR Holdings in connection with the Spin-off, the Company is required to use commercially reasonable efforts to cause SEACOR Holdings to be released from these guarantees in favor of a guarantee issued by the Company. To the extent the Company is unable to cause SEACOR Holdings to be released from any of these guarantees under reasonable terms, the Company pays SEACOR Holdings a guarantee fee equal to 0.5% per annum of the amount of outstanding guarantees, which declines as the guarantee obligations are settled by the Company. The Company recognized guarantee fees in connection with sale-leaseback arrangements of $0.1 million, $0.2 million, and $0.3 million during 2020, 2019, and 2018, respectively, as additional leased-in equipment operating expenses. Guarantee fees paid to SEACOR Holdings for all other obligations are recognized as SEACOR Holdings guarantee fees. The Company indemnifies SEACOR Holdings in respect of any payments that SEACOR Holdings is required to make under any of these guarantees.
The following table summarizes the Company’s contractual obligations and other commercial commitments and their aggregate maturities as of December 31, 2020 (in thousands):
Payments Due By Period
Total
Less than
1 Year
1-3 Years
3-5 Years
After
5 Years
Contractual Obligations:
Long-term Debt (including principal and interest) (1)
$
594,185
$
53,659
321,975
153,835
64,716
Capital Purchase Obligations (2)
11,666
10,709
-
-
Operating Leases (3)
14,435
7,855
1,267
1,098
4,215
Financing Leases (4)
-
Purchase Obligations (5)
4,428
4,428
-
-
-
624,870
76,693
324,277
154,969
68,931
Other Commercial Commitments:
Letters of Credit
-
-
-
$
625,339
$
77,162
$
324,277
$
154,969
$
68,931
(1)
Estimated interest payments of the Company’s borrowings are based on contractual terms and maturities, using current rates for variable instruments.
(2)
Capital purchase obligations represent commitments for the purchase of property and equipment.
(3)
Operating leases primarily include leases of vessels and other property that have a remaining term in excess of one year.
(4)
Financing leases includes equipment that has a remaining term in excess of one year.
(5)
These commitments are for goods and services to be acquired in the ordinary course of business and are fulfilled by the Company’s vendors within a short period of time.
Debt Securities and Credit Agreements
For a discussion of the Company’s debt securities and credit agreements, see “Note 8. Long-Term Debt” in the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Effects of Inflation
The Company’s operations expose it to the effects of inflation. In the event that inflation becomes a significant factor in the world economy, inflationary pressures could result in increased operating and financing costs.
Contingencies
MNOPF and MNRPF. Certain of the Company’s subsidiaries are participating employers in two industry-wide, multi-employer, defined benefit pension funds in the U.K.: the MNOPF and the MNRPF.
The Company’s participation in the MNOPF began with the acquisition of the Stirling group of companies (the “Stirling Group”) in 2001 and relates to certain officers employed between 1978 and 2002 by the Stirling Group and/or its predecessors. The Company’s participation in the MNRPF also began with the acquisition of the Stirling Group in 2001 and relates to ratings employed by the Stirling Group and/or its predecessors through today. Both of these plans are in deficit positions and, depending upon the results of future actuarial valuations, it is possible that the plans could experience funding deficits that will require the Company to recognize payroll related operating expenses in the periods invoices are received.
Under the direction of a court order, any funding deficit of the MNOPF is to be remedied through funding contributions from all participating current and former employers. Prior to 2015, the Company was invoiced and expensed $19.4 million for its allocated share of the then cumulative funding deficits, including portions deemed uncollectible due to the non-existence or liquidation of certain former employers. As of December 31, 2020, all amounts invoiced have been paid in full.
On November 7, 2018, the Company received notice from MNOPF that a deficit of £9 million existed but noted that the trustee did not propose to collect any additional funds in respect of such deficit. Depending on the results of future valuations, it is possible that the MNOPF will experience further funding deficits requiring the Company to recognize payroll related expenses in the periods the notice is received.
The cumulative funding deficits of the MNRPF were being recovered by additional annual contributions from current employers that were subject to adjustment following the results of future tri-annual actuarial valuations. In 2015, the Company was invoiced and expensed $6.9 million for its share of a funding deficit in the MNRPF. The Company had a repayment plan with the trustees of the MNRPF, for the amount to be repaid in four installments, commencing in 2015, and the amount was repaid in full during 2018. On July 20, 2018, the Company was notified of additional contributions due and recognized in the second quarter of 2018 payroll related expenses of $1.2 million (£0.9 million) for its allocated share of the cumulative funding deficit including portions deemed uncollectible due to the non-existence or liquidation of certain former employers. These additional contributions were invoiced in September 2018 and are payable in four annual installments beginning in October 2018. As of December 31, 2020, all invoices related to the MNRPF have been settled in full. Depending upon the results of future actuarial valuations it is possible that the plan could experience further funding deficits that will require the Company to recognize payroll related operating expenses for those periods.
Other. In the normal course of its business, the Company becomes involved in various litigation matters including, among other things, claims by third-parties for alleged property damages and personal injuries. Management has used estimates in determining its potential exposure to these matters and has recorded reserves in the Company’s financial statements related thereto as appropriate. It is possible that a change in the Company’s estimates related to these exposures could occur, but the Company does not expect such changes in estimated costs would have a material effect on its consolidated financial position, results of operations or cash flows.
Related Party Transactions
For a discussion of the Company’s transactions with related parties, see “Note 17. Related Party Transactions” in the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Critical Accounting Policies
Basis of Consolidation. The consolidated financial statements include the accounts of SEACOR Marine and its controlled subsidiaries. Control is generally deemed to exist if the Company has greater than 50% of the voting rights of a subsidiary. All significant intercompany accounts and transactions are eliminated in consolidation.
Noncontrolling interests in consolidated subsidiaries are included in the consolidated balance sheets as a separate component of equity. The Company reports consolidated net income (loss) inclusive of both the Company’s and the noncontrolling interests' share, as well as the amounts of consolidated net income (loss) attributable to each of the Company and the noncontrolling interests. If a subsidiary is deconsolidated upon a change in control, any retained noncontrolled equity investment in the former controlled subsidiary is measured at fair value and a gain or loss is recognized in net income (loss) based on such fair value. If a subsidiary is consolidated upon a change in control, any previous noncontrolled equity investment in the subsidiary is measured at fair value and a gain or loss is recognized in net income (loss) based on such fair value.
The Company employs the equity method of accounting for investments in 50% or less owned companies that it does not control but has the ability to exercise significant influence over the operating and financial policies of the business venture. Significant influence is generally deemed to exist if the Company has between 20% and 50% of the voting rights of a business venture but may exist when the Company’s ownership percentage is less than 20%. In certain circumstances, the Company may have an economic interest in excess of 50% but may not control and consolidate the business venture. Conversely, the Company may have an economic interest less than 50% but may control and consolidate the business venture. The Company reports its investments in and advances to these business ventures in the accompanying consolidated balance sheets as investments, at equity, and advances to 50% or less owned companies. The Company reports its share of earnings from investments in 50% or less owned companies in the accompanying consolidated statements of loss as equity in earnings (losses) of 50% or less owned companies, net of tax.
Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates include those related to deferred revenues, allowance for credit losses, useful lives of property and equipment, impairments, income tax provisions and certain accrued liabilities. Actual results could differ from estimates and those differences may be material.
Revenue Recognition. Revenue is recognized when (or as) the Company transfers promised goods or services to its customers in amounts that reflect the consideration to which the Company expects to be entitled to in exchange for those goods or services, which occurs when (or as) the Company satisfies its contractual obligations and transfers control of the promised goods or services to its customers. Costs to obtain or fulfill a contract are expensed as incurred.
The Company’s lease revenues are primarily from time charters and bareboat charters that are recognized ratably over the lease term as services are provided, typically on a per day basis. Under a time charter, the Company provides a vessel to a customer for a set term and is responsible for all operating expenses, typically excluding fuel. Under a bareboat charter, the Company provides a vessel to a customer for a set term and the customer assumes responsibility.
The Company contracts with various customers to carry out management services for vessels as agents for and on behalf of ship owners. These services include crew management, technical management, commercial management, insurance arrangements, sale and purchase of vessels, provisions and bunkering. As the manager of the vessels, the Company undertakes to use its best endeavors to provide the agreed management services as agents for and on behalf of the owners in accordance with sound ship management practice and to protect and promote the interest of the owners in all matters relating to the provision of services hereunder. The Company also contracts with various customers to carry out management services regarding engineering for vessel construction and vessel conversions. The vast majority of the ship management agreements span over the length of one to three years and are typically billed on a monthly basis. The Company transfers control of the service to the customer and satisfies its performance obligation over the term of the contract, and therefore recognized revenue over the term of the contract while related costs are expensed as incurred.
Concentrations of Credit Risk. The Company is exposed to concentrations of credit risk associated with its cash and cash equivalents, construction reserve funds and derivative instruments. The Company minimizes its credit risk relating to these positions by monitoring the financial condition of the financial institutions and counterparties involved and by primarily conducting business with large, well-established financial institutions and diversifying its counterparties. The Company does not currently anticipate nonperformance by any of its significant counterparties. The Company is also exposed to concentrations of credit risk relating to its receivables due from customers described above. The Company does not generally require collateral or other security to support its outstanding receivables. The Company minimizes its credit risk relating to receivables by performing ongoing credit evaluations and, to date, credit losses have not been material.
Trade and Other Receivables. Customers are primarily major integrated national and international oil companies and large independent oil and natural gas exploration and production companies. Customers are granted credit on a short-term basis and related credit risks are minimal. Other receivables consist primarily of operating expenses incurred by the Company related to vessels it manages for others and insurance and income tax receivables. The Company routinely reviews its receivables and makes provisions for credit losses; however, those allowances are estimates and actual results could differ from those estimates and those differences may be material. Trade receivables are deemed uncollectible and removed from accounts receivable and the allowance for credit losses when collection efforts have been exhausted.
Property and Equipment. Equipment, stated at cost, is depreciated using the straight-line method over the estimated useful life of the asset to an estimated salvage value. With respect to offshore support vessels, the estimated useful life is typically based upon a newly built vessel being placed into service and represents the point at which it is typically not justifiable for the Company to continue to operate the vessel in the same or similar manner. From time to time, the Company may acquire older vessels that have already exceeded its useful life policy, in which case the Company depreciates such vessels based on its best estimate of remaining useful life, typically the next regulatory survey or certification date.
As of December 31, 2020, the estimated useful life (in years) of each of the Company’s major categories of new offshore support vessels was as follows:
Offshore Support Vessels:
CTVs
All other offshore support vessels (excluding crew transfer utility)
Equipment maintenance and repair costs and the costs of routine overhauls, drydockings and inspections performed on vessels and equipment are charged to operating expense as incurred. Expenditures that extend the useful life or improve the marketing and commercial characteristics of vessels, as well as major renewals and improvements to other properties, are capitalized.
Certain interest costs incurred during the construction of vessels are capitalized as part of the vessels’ carrying values and are amortized over such vessels’ estimated useful lives.
Business Combinations. The Company recognizes 100% of the fair value of assets acquired, liabilities assumed, and noncontrolling interests when the acquisition constitutes a change in control of the acquired entity. Shares issued in consideration for a business combination, contingent consideration arrangements and pre-acquisition loss and gain contingencies are all measured and recorded at their acquisition-date fair value. Subsequent changes to fair value of contingent consideration arrangements are generally reflected in earnings. Acquisition-related transaction costs are expensed as incurred and any changes in an acquirer’s existing income tax valuation allowances and tax uncertainty accruals are recorded as an adjustment to income tax expense. The operating results of entities acquired are included in the accompanying consolidated statements of loss from the date of acquisition.
Income Taxes. Deferred income tax assets and liabilities have been provided in recognition of the income tax effect attributable to the book and tax basis differences of assets and liabilities reported in the accompanying consolidated financial statements. Deferred tax assets or liabilities are provided using the enacted tax rates expected to apply to taxable income in the periods in which they are expected to be settled or realized. Interest and penalties relating to uncertain tax positions are recognized in interest expense and administrative and general, respectively, in the accompanying consolidated statements of loss. The Company records a valuation allowance to reduce its deferred tax assets if it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Prior to 2017, SEACOR Marine was included in the consolidated U.S. federal income tax return of SEACOR Holdings. SEACOR Holdings’ policy for allocation of U.S. federal income taxes required its domestic subsidiaries included in the consolidated U.S. federal income tax return to compute their provision for U.S. federal income taxes on a separate company basis and settle with SEACOR Holdings.
In the normal course of business, the Company or SEACOR Holdings may be subject to challenges from tax authorities regarding the amount of taxes due for the Company. These challenges may alter the timing or amount of taxable income or deductions. As part of the calculation of income tax expense, the Company determines whether the benefits of its tax positions are at least more likely than not of being sustained based on the technical merits of the tax position. For tax positions that are more likely than not of being sustained, the Company accrues the largest amount of the tax benefit that is more likely than not of being sustained. Such accruals require management to make estimates and judgments with respect to the ultimate outcome of its tax benefits and actual results could vary materially from these estimates.
Critical Accounting Estimates
Derivative Instruments. The Company accounts for derivatives through the use of a fair value concept whereby all of the Company’s derivative positions are stated at fair value in the accompanying consolidated balance sheets. Realized and unrealized gains and losses on derivatives not designated as hedges are reported in the accompanying consolidated statements of loss as derivative gains (losses), net. Realized and unrealized gains and losses on derivatives designated as fair value hedges are recognized as corresponding increases or decreases in the fair value of the underlying hedged item to the extent they are effective, with any ineffective portion reported in the accompanying consolidated statements of loss as derivative gains (losses), net. Realized and unrealized gains and losses on derivatives designated as cash flow hedges are reported as a component of other comprehensive loss in the accompanying consolidated statements of comprehensive loss to the extent they are effective and reclassified into earnings on the same line item associated with the hedged transaction and in the same period the hedged transaction affects earnings. Any ineffective portions of cash flow hedges are reported in the accompanying consolidated statements of loss as derivative gains (losses), net. Realized and unrealized gains and losses on derivatives designated as cash flow hedges that are entered into by the Company’s 50% or less owned companies are also reported as a component of the Company’s other comprehensive loss in proportion to the Company’s ownership percentage, with reclassifications and ineffective portions being included in equity in earnings (losses) of 50% or less owned companies, net of tax, in the accompanying consolidated statements of loss.
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 extent or 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 values of the assets are not recoverable, as determined by their estimated future undiscounted cash flows, the estimated fair value of the assets or asset groups are compared to their current carrying values and impairment charges are recorded if the carrying value exceeds fair value. The Company performs its testing on an asset or asset group basis. Generally, fair value is determined using valuation techniques, such as expected discounted cash flows or appraisals, as appropriate.
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. In its evaluation, the Company considers, among other items, recent and expected financial performance and returns, impairments recorded by the investee and the capital structure of the investee. When the Company determines the estimated fair value of an investment is below carrying value and the decline is other-than-temporary, the investment is written down to its estimated fair value. Actual results may vary from estimates due to the uncertainty regarding projected financial performance, the severity and expected duration of declines in value, and the available liquidity in the capital markets to support the continuing operations of the investee, among other factors. Although the Company believes its assumptions and estimates are reasonable, the investee’s actual performance compared with the estimates could produce different results and lead to additional impairment charges in future periods.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A.
Quantitative and Qualitative Disclosures about Market Risk
On occasion, the Company enters and settles forward currency exchange, option and future contracts with respect to various foreign currencies that are not designated as fair value hedges. These contracts enable the Company to buy currencies in the future at fixed exchange rates, which could offset possible consequences of changes in foreign exchange rates with respect to the Company’s business conducted in Europe, Africa, Latin America, the Middle East and Asia. The Company generally does not enter into contracts with forward settlement dates beyond twelve to eighteen months. As of December 31, 2020 the Company had a foreign currency forward contract from which we recorded a loss of $0.9 million related to a £31.5 million swap that settled on January 12, 2021.
The Company’s outstanding debt from continuing operations is primarily in fixed interest rate instruments or variable interest rate instruments that have been fixed through corresponding interest rate swaps. As a result, the Company’s operations are not significantly affected by interest rate fluctuations. As of December 31, 2020 the Company had outstanding variable rate debt instruments (due 2021 through 2029) subject to interest rate fluctuations totaling $288.2 million that call for the Company to pay interest based on LIBOR plus applicable margins. The interest rates reset either monthly or quarterly. As of December 31, 2020 the average interest rate on these variable rate borrowings was 4.1%. For each 1% increase in the applicable LIBOR rate, the Company’s annual interest payments on the non-hedged portion of the facility would increase by approximately $2.8 million. After the sale of the Windcat Workboats on January 12, 2021, the Company no longer had any variable debt denominated in pound sterling.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and related notes are included in Part IV of this Annual Report on Form 10-K and incorporated herein by reference.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
With the participation of the Company’s principal executive officer and principal financial officer, management evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of December 31, 2020. Based on their evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2020.
The Company’s disclosure controls and procedures have been designed to ensure that information required to be disclosed by the Company in the reports it files or furnishes under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, to allow timely decisions regarding required disclosures. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those internal control systems determined to be effective can provide only a level of reasonable assurance with respect to financial statement preparation and presentation.
Management’s Annual Report on Internal Control Over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act). The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in the U.S. and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and Directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
Internal control over financial reporting is designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation of reliable financial statements for external purposes in accordance with generally accepted accounting principles in the U.S. Because of the inherent limitations in any internal control system, no matter how well designed, misstatements may occur and not be prevented or detected. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation.
Management conducted an evaluation of the effectiveness of the Company’s system of internal control over financial reporting as of December 31, 2020 based on the updated framework set forth in “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on its evaluation, management concluded that, as of December 31, 2020, the Company’s internal control over financial reporting was effective.
Changes in Internal Control Over Financial Reporting
There have been no changes in internal control over financial reporting during the quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
ITEM 9B.
OTHER INFORMATION
None.
PART III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required to be disclosed pursuant to this Item 10 is incorporated in its entirety herein by reference to the Company’s definitive proxy statement to be filed with the Commission pursuant to Regulation 14A within 120 days after the end of the Company’s last fiscal year.
NYSE Annual Certification. The Chief Executive Officer of the Company has previously submitted to the NYSE the annual certification required by Section 303A.12(a) of the NYSE Listed Company Manual, and there were no qualifications to such certification. SEACOR Marine has filed the certifications of its Chief Executive Officer and Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002 with the SEC as exhibits to this Form 10-K.

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11.
EXECUTIVE COMPENSATION
The information required to be disclosed pursuant to this Item 11 is incorporated in its entirety herein by reference to the “Compensation Disclosure and Analysis” and “Information Relating to the Board of Directors and Committees Thereof” portions of the Company’s definitive proxy statement to be filed with the Commission pursuant to Regulation 14A within 120 days after the end of the Company’s last fiscal year.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required to be disclosed pursuant to this Item 12 is incorporated in its entirety herein by reference to the “Security Ownership of Certain Beneficial Owners and Management” portion of the Company’s definitive proxy statement to be filed with the Commission pursuant to Regulation 14A within 120 days after the end of the Company’s last fiscal year.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required to be disclosed pursuant to this Item 13 is incorporated in its entirety herein by reference to the “Certain Relationships and Related Transactions” portion of the Company’s definitive proxy statement to be filed with the Commission pursuant to Regulation 14A within 120 days after the end of the Company’s last fiscal year.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required to be disclosed pursuant to this Item 14 is incorporated in its entirety herein by reference to the “Ratification or Appointment of Independent Auditors” portion of the Company’s definitive proxy statement to be filed with the Commission pursuant to Regulation 14A within 120 days after the end of the Company’s last fiscal year.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)
Documents filed as part of this report:
1. Financial Statements and Financial Statement Schedules - See Index to Financial Statements of this Annual Report on Form 10-K.
2. Exhibits
Exhibit
Number
Description
2.1*
Distribution Agreement, dated as of May 10, 2017, by and between SEACOR Holdings Inc. and SEACOR Marine Holdings Inc. (incorporated herein by reference to Exhibit 10.1 of SEACOR Holdings Inc.’s Current Report on Form 8-K filed with the Commission on May 12, 2017 (File No. 001-12289)).
2.2*
Joint Venture Contribution and Formation Agreement, dated August 10, 2017, by and between SEACOR LB Holdings LLC and Montco Offshore, Inc. (incorporated herein by reference to Exhibit 2.1 of SEACOR Marine Holdings Inc.'s Periodic Report on Form 8-K filed with the Commission on August 11, 2017 (File No. 001-37966)).
2.3*
First Amendment to Joint Venture Contribution and Formation Agreement, dated January 8, 2018, by and between SEACOR LB Holdings LLC and Montco Offshore, Inc. (incorporated herein by reference to Exhibit 2.1 of SEACOR Marine Holdings Inc.’s Periodic Report on Form 8-K filed with the Commission on January 9, 2018 (File No. 001-37966)).
3.1*
Third Amended and Restated Articles of Incorporation of SEACOR Marine Holdings Inc. (incorporated herein by reference to Exhibit 10.1 of SEACOR Marine Holdings Inc.’s Quarterly Report on Form 10-Q filed with the Commission on August 7, 2019 (File No. 001-37966)).
3.2*
Third Amended and Restated Bylaws of SEACOR Marine Holdings Inc. (incorporated herein by reference to Exhibit 3.1 of SEACOR Marine Holdings Inc.’s Current Report on Form 8-K filed with the Commission on March 19, 2019 (File No. 001-37966).
4.1*
Note Purchase Agreement dated as of November 30, 2015, by and among SEACOR Marine Holdings Inc. and the Purchasers identified on Schedule A thereto (including therein the form of SEACOR Marine Holdings Inc. 3.75% Convertible Senior Notes due 2022 (the “3.75% Convertible Senior Notes”)) (incorporated herein by reference to Exhibit 4.4 of SEACOR Holdings Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015 filed with the Commission on February 29, 2016 (File No. 001-112289)).
4.2*
Amendment No. 1 dated March 3, 2017 to the Note Purchase Agreement dated as of November 30, 2015, by and among SEACOR Marine Holdings Inc. and the Purchasers of the 3.75% Subsidiary Convertible Senior Notes (incorporated herein by reference to Exhibit 10.1 of SEACOR Holdings Inc.’s Current Report on Form 8-K filed with the Commission on March 3, 2017 (File No. 001-112289)).
4.3*
Investment Agreement dated November 30, 2015, by and among SEACOR Holdings Inc., SEACOR Marine Holdings Inc. and the Investors named therein (the “Investment Agreement”) (incorporated herein by reference to Exhibit 4.5 of SEACOR Holdings Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015 filed with the Commission on February 29, 2016 (File No. 001-112289)).
4.4*
Registration Rights Agreement dated November 30, 2015, by and among SEACOR Marine Holdings Inc. and the holders of the 3.75% Convertible Senior Notes from time-to-time party thereto (incorporated herein by reference to Exhibit 4.7 of SEACOR Holdings Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015 filed with the Commission on February 29, 2016 (File No. 001-112289)).
4.5*
Registration Rights Agreement, dated as of January 9, 2019 by and among SEACOR Marine Holdings, Inc., McCall Properties, LLC and the Members of the Sellers listed therein (incorporated herein by reference to Exhibit 4.1 of SEACOR Marine Holdings Inc.’s Current Report on Form 8-K filed with the Commission on January 11, 2010 (File No. 001-37966)).
4.6*
Warrant, originally issued by SEACOR Marine Holdings Inc., to CEOF II Coinvestment B (DE), L.P., on May 2, 2018, (incorporated herein by reference to Exhibit 4.10 of SEACOR Marine Holdings Inc.’s Shelf Registration on Form S-3 filed with the Commission on June 15, 2018 (File No. 333-225686)).
Exhibit
Number
Description
4.7*
Warrant, originally issued by SEACOR Marine Holdings Inc., to CEOF II DE I AIV, L.P., on May 2, 2018, (incorporated herein by reference to Exhibit 4.8 of SEACOR Marine Holdings Inc.’s Shelf Registration on Form S-3 filed with the Commission on June 15, 2018 (File No. 333-225686)).
4.8*
Warrant, originally issued by SEACOR Marine Holdings Inc., to CEOF II Coinvestment (DE), L.P., on May 2, 2018, (incorporated herein by reference to Exhibit 4.9 of SEACOR Marine Holdings Inc.’s Shelf Registration on Form S-3 filed with the Commission on June 15, 2018 (File No. 333-225686)).
4.9*
Registration Rights Agreement, dated as of April 26, 2018, by and among SEACOR Marine Holdings Inc. and the Purchasers, (incorporated herein by reference to Exhibit 10.6 of SEACOR Marine Holdings Inc.’s Quarterly Report on Form 10-Q filed with the Commission on May 10, 2018 (File No. 1-37966)).
4.10*
Registration Rights Agreement, dated as of March 20, 2020, by and between SEACOR Marine Holdings Inc. and Montco Offshore, LLC (incorporated herein by reference to Exhibit 4.1 of SEACOR Marine Holdings Inc.’s Form 8-K filed with the Commission on March 20, 2020 (File No. 001-37966)).
4.11*
Description of Registrant’s Securities.
10.1*
Transition Services Agreement, dated as of May 10, 2017, by and between SEACOR Holdings Inc. and SEACOR Marine Holdings Inc. (incorporated herein by reference to Exhibit 10.2 of SEACOR Holdings Inc.’s Current Report on Form 8-K filed with the Commission on May 12, 2017 (File No. 001-12289)).
10.2*
Transition Services Agreement, dated as of May 10, 2017, by and between SEACOR Marine Holdings Inc. and SEACOR Holdings Inc. (incorporated herein by reference to Exhibit 10.3 of SEACOR Holdings Inc.’s Current Report on Form 8-K filed with the Commission on May 12, 2017 (File No. 001-12289)).
10.3*
Employee Matters Agreement, dated as of May 10, 2017, by and between SEACOR Holdings Inc. and SEACOR Marine Holdings Inc. (incorporated herein by reference to Exhibit 10.4 of SEACOR Holdings Inc.’s Current Report on Form 8-K filed with the Commission on May 12, 2017 (File No. 001-12289)).
10.4*
Tax Matters Agreement, dated as of May 10, 2017, by and between SEACOR Holdings Inc. and SEACOR Marine Holdings Inc. (incorporated herein by reference to Exhibit 10.5 of SEACOR Holdings Inc.’s Current Report on Form 8-K filed with the Commission on May 12, 2017 (File No. 001-12289)).
10.5*+
SEACOR Marine Holdings Inc. 2017 Equity Incentive Plan. (incorporated herein by reference to Exhibit 10.6 of SEACOR Marine Holdings Inc.’s Periodic Report on Form 8-K filed with the Commission on May 12, 2017 (File No. 001-37966)).
10.6*+
SEACOR Marine Holdings Inc. 2017 Employee Stock Purchase Plan. (incorporated herein by reference to Exhibit 10.7 of SEACOR Marine Holdings Inc.’s Periodic Report on Form 8-K filed with the Commission on May 12, 2017 (File No. 001-37966)).
10.7*+
Form of Indemnification Agreement between SEACOR Marine Holdings Inc. and individual officers and directors. (incorporated herein by reference to Exhibit 10.7 of SEACOR Marine Holdings Inc.’s Amendment No. 1 to its Registration Statement on Form 10 filed with the Commission on February 10, 2017 (File No. 001-37966)).
10.8*
Letter Agreement related to the Investment Agreement dated November 30, 2015 (incorporated herein by reference to Exhibit 10.8 of SEACOR Marine Holdings Inc.’s Amendment No. 3 to its Registration Statement on Form 10 filed with the Commission on May 4, 2017 (File No. 001-37966)).
10.9*+
Form of Stock Option Grant Agreement under the SEACOR Marine Holdings Inc. 2017 Equity Incentive Plan (incorporated herein by reference to Exhibit 99.2 of SEACOR Marine Holdings Inc.’s S-8 filed with the Commission on November 20, 2017 (File No. 001-37966)).
10.10*+
Form of Restricted Stock Grant Agreement under the SEACOR Marine Holdings Inc. 2017 Equity Incentive Plan (incorporated herein by reference to Exhibit 99.3 of SEACOR Marine Holdings Inc.’s S-8 filed with the Commission on November 20, 2017 (File No. 001-37966)).
10.11*+
Form of Performance Restricted Stock Unit Grant Agreement under the SEACOR Marine Holdings Inc. 2017 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.1 of SEACOR Marine Holdings Inc.’s Quarterly Report on Form 10-Q filed with the Commission on May 10, 2019 (File No. 001-37966)).
10.12+
Compensation of Non-Employee Directors
Exhibit
Number
Description
10.13*
Credit Agreement dated as of February 8, 2018 by and among Falcon Global USA LLC, Falcon Global Offshore LLC, Falcon Global Offshore II LLC, Falcon Global Jill LLC, Falcon Global Robert LLC, Falcon Global LLC, the lenders party thereto and JPMorgan Chase Bank, N.A. (incorporated herein by reference to Exhibit 10.2 of SEACOR Marine Holdings Inc.’s Periodic Filing on Form 8-K filed with the Commission on February 9, 2018. (File No. 001-37966)).
10.14*
Pledge and Security Agreement, dated as of February 8, 2018, by and among Falcon Global USA LLC, the additional grantors listed on the signature pages thereto and JPMorgan Chase Bank, N.A. (incorporated herein by reference to Exhibit 10.4 of SEACOR Marine Holdings Inc.’s Periodic Filing on Form 8-K filed with the Commission on February 9, 2018. (File No. 001-37966)).
10.15*
Obligation Guaranty Agreement, dated as of February 8, 2018, by SEACOR Marine Holdings Inc. (incorporated herein by reference to Exhibit 10.3 of SEACOR Marine Holdings Inc.’s Periodic Filing on Form 8-K filed with the Commission on February 9, 2018. (File No. 001-37966)).
10.16*
Amended and Restated Limited Liability Company Agreement of Falcon Global Holdings LLC, dated as of February 8, 2018 (incorporated herein by reference to Exhibit 10.1 of SEACOR Marine Holdings Inc.’s Periodic Filing on Form 8-K filed with the Commission on February 9, 2018. (File No. 001-37966)).
10.17*
Credit Agreement, dated September 26, 2018, by and among SEACOR Marine Foreign Holdings Inc., SEACOR Marine Holdings Inc., the Entities Identified on Schedule 1-A thereto, DNB Bank ASA, New York Branch, the Financial Institutions identified on Schedule 1b, DNB Markets, Inc., Clifford Capital Pte. Ltd. And NIBC Bank N.V. and DNB Markets, Inc., (incorporated herein by reference to Exhibit 10.1 of SEACOR Marine Holdings Inc.’s Quarterly Report on Form 10-Q filed with the Commission on November 13, 2018 (File No. 1-37966)).
10.18*
Guaranty, dated September 26, 2018, by and among SEACOR Marine Holdings Inc. in favor of DNB Bank ASA, New York Branch (incorporated herein by reference to Exhibit 10.2 of SEACOR Marine Holdings Inc.’s Quarterly Report on Form 10-Q filed with the Commission on November 13, 2018 (File No. 1-37966)).
10.19*+
Form of Director Stock Option Grant Agreement Pursuant to the SEACOR Marine Holdings Inc. 2017 Equity Incentive Plan, between SEACOR Marine Holdings Inc., and the non-employee director specified therein, (incorporated herein by reference to Exhibit 10.4 of SEACOR Marine Holdings Inc.’s Quarterly Report on Form 10-Q filed with the Commission on August 9, 2018 (File No. 1-37966)).
10.20*
Subscription Agreement, dated as of April 20, 2018, by and among SEACOR Marine Holdings Inc., the Purchasers named on Schedule A thereto, (incorporated herein by reference to Exhibit 10.5 of SEACOR Marine Holdings Inc.’s Quarterly Report on Form 10-Q filed with the Commission on May 10, 2018 (File No. 1-37966)).
10.21*
Amendment and Exchange Agreement, dated as of May 2, 2018, by and among SEACOR Marine Holdings Inc., CEOF II DE I AIV, L.P., CEOF II COINVESTMENT (DE), L.P. and CEOF II COINVESTMENT B (DE), L.P., (incorporated herein by reference to Exhibit 10.1 of SEACOR Marine Holdings Inc.’s Current Report on Form 8-K filed with the Commission on May 2, 2018 (File No. 001-37966)).
10.22*+
Separation and Consulting Agreement, dated July 12, 2019, by and between Robert Clemons and SEACOR Marine Holdings Inc. (incorporated herein by reference to Exhibit 10.2 of SEACOR Marine Holdings Inc.’s Quarterly Report on Form 10-Q filed with the Commission on August 7, 2019 (File No. 001-37966)).
10.23*+
Employment Agreement, dated November 5, 2019, between SEACOR Marine Holdings Inc. and John Gellert (incorporated herein by reference to Exhibit 10.2 of SEACOR Marine Holdings Inc.’s Quarterly Report on Form 10-Q filed with the Commission on November 12, 2019 (File No. 001-37966)).
10.24*+
Employment Agreement, dated November 5, 2019, between SEACOR Marine Holdings Inc. and Jesús Llorca (incorporated herein by reference to Exhibit 10.3 of SEACOR Marine Holdings Inc.’s Quarterly Report on Form 10-Q filed with the Commission on November 12, 2019 (File No. 001-37966)).
10.25*+
Employment Agreement, dated November 5, 2019, between SEACOR Marine Holdings Inc. and Gregory Rossmiller (incorporated herein by reference to Exhibit 10.4 of SEACOR Marine Holdings Inc.’s Quarterly Report on Form 10-Q filed with the Commission on November 12, 2019 (File No. 001-37966)).
Exhibit
Number
Description
10.26*+
Employment Agreement, dated November 5, 2019, between SEACOR Marine Holdings Inc. and Andrew H. Everett II (incorporated herein by reference to Exhibit 10.5 of SEACOR Marine Holdings Inc.’s Quarterly Report on Form 10-Q filed with the Commission on November 12, 2019 (File No. 001-37966)).
10.27*
Amendment No. 1 to Credit Agreement and Parent Guaranty, dated as of August 6, 2019, by and among SEACOR Marine Foreign Holdings Inc., SEACOR Marine Holdings Inc., DNB Bank ASA, New York Branch, DNB Markets Inc., Clifford Capital Pte. Ltd, NIBC Bank N.V. and entities identified on schedules to the Amendment No. 1. (incorporated herein by reference to Exhibit 10.3 of SEACOR Marine Holdings Inc.’s Quarterly Report on Form 10-Q filed with the Commission on August 7, 2019 (File No. 001-37966)).
10.28*
Agreement for the Sale and Purchase of the Share Capital of Boston Putford Offshore Safety Limited, dated as of November 1, 2019, by and among SEACOR Capital (UK) Limited, SEACOR Marine (Guernsey) Limited, Putford Phoenix Limited, Putford Defender Limited, Stirling Offshore Limited, North Star Holdco Limited and SEACOR Marine Holdings Inc. (incorporated herein by reference to Exhibit 10.1 of SEACOR Marine Holdings Inc.’s Quarterly Report on Form 10-Q filed with the Commission on November 12, 2019 (File No. 001-37966)).
10.29*
Amendment No. 2 to Credit Agreement, dated as of November 26, 2019, by and among SEACOR Marine Foreign Holdings Inc., SEACOR Marine Holdings Inc., DNB Bank ASA, New York Branch, DNB Markets Inc., Clifford Capital Pte, Ltd, NIBC Bank N.V. and entities identified on schedules to the Amendment No. 2. (incorporated herein by reference to Exhibit 10.1 of SEACOR Marine Holdings Inc.’s Current Report on Form 8-K filed with the Commission on December 3, 2019 (File No. 001-37966)).
10.30*
Consent, Agreement and Omnibus Amendments, dated as of February 7, 2020, by and among Falcon Global USA LLC, the other loan parties thereto, SEACOR Marine Holdings Inc., JPMorgan Chase Bank, N.A. and the lenders party thereto (incorporated herein by reference to Exhibit 10.1 of SEACOR Marine Holdings Inc.’s Form 8-K filed with the Commission on February 11, 2020 (File No. 001-37966)).
10.31*
Sixth Consent and Agreement, dated April 29, 2020, by and among Falcon Global USA LLC, the other loan parties thereto, JPMorgan Chase Bank, N.A. and the lenders party thereto (incorporated herein by reference to Exhibit 10.1 of SEACOR Marine Holdings Inc.’s Form 8-K filed with the Commission on May 1, 2020 (File No. 001-37966)).
10.32*
Sale and Purchase Agreement, dated May 31, 2020, by and between China Shipping Fan Tai Limited, China Shipping Industry (Hong Kong) Co. Limited and SEACOR Offshore Asia LLC (incorporated herein by reference to Exhibit 10.1 of SEACOR Marine Holdings Inc.’s Form 8-K filed with the Commission on June 4, 2020 (File No. 001-37966)).
10.33*
Parent Guarantee, dated May 31, 2020, by SEACOR Marine Holdings Inc. in favour of China Shipping Fan Tai Limited and China Shipping Industry (Hong Kong) Co., Limited (incorporated herein by reference to Exhibit 10.2 of SEACOR Marine Holdings Inc.’s Form 8-K filed with the Commission on June 4, 2020 (File No. 001-37966)).
10.34*
Form of Parent Guarantee by SEACOR Marine Holdings Inc. and COSCO Shipping Heavy Industry (Guangdong) Co., Ltd (incorporated herein by reference to Exhibit 10.3 of SEACOR Marine Holdings Inc.’s Form 8-K filed with the Commission on June 4, 2020 (File No. 001-37966).
10.35*
Tax Refund and Indemnification Agreement, dated as of June 26, 2020, by and between SEACOR Marine Holdings Inc. and SEACOR Holdings Inc. (incorporated herein by reference to Exhibit 10.1 of SEACOR Marine Holdings Inc.’s Form 8-K filed with the Commission on June 29, 2020 (File No. 001-37966)).
10.36*
Amendment No. 3 to Credit Agreement and Parent Guaranty, dated as of June 29, 2020, by and among SEACOR Marine Foreign Holdings Inc., SEACOR Marine Holdings Inc., DNB Bank ASA, New York Branch, DNB Capital LLC, Clifford Capital Pte, Ltd, Hancock Whitney Bank, Citicorp North America, Inc., and the entities identified on schedules thereto (incorporated herein by reference to Exhibit 10.1 of SEACOR Marine Holdings Inc.’s Form 8-K filed with the Commission on July 6, 2020 (File No. 001-37966)).
10.37*
Agreement for the Sale and Purchase of the Share Capital of Windcat Workboats Holdings Limited, dated December 18, 2020, by and among Seabulk Overseas Transport, Inc., CMB N.V. and SEACOR Marine Holdings Inc. (incorporated herein by reference to Exhibit 10.1 of SEACOR Marine Holdings Inc.’s Form 8-K filed with the Commission on December 18, 2020 (File No. 001-37966)).
10.38*
Letter Agreement, dated December 18, 2020, by and among SEACOR Marine Foreign Holdings Inc., SEACOR Marine Holdings Inc. and DNB Bank ASA, New York Branch, as facility agent and on behalf of the majority lenders (incorporated herein by reference to Exhibit 10.2 of SEACOR Marine Holdings Inc.’s Form 8-K filed with the Commission on December 18, 2020 (File No. 001-37966)).
Exhibit
Number
Description
10.39*+
SEACOR Marine Holdings Inc. 2020 Equity Incentive Plan (incorporated by reference to Annex A of SEACOR Marine Holding Inc.’s definitive proxy statement on Schedule 14A as filed with the Commission on April 22, 2020 (SEC File No. 001-37966)).
10.40+
Form of Restricted Stock Grant Agreement under the SEACOR Marine Holdings Inc. 2020 Equity Incentive Plan.
10.41+
Form of Stock Option Grant Agreement under the SEACOR Marine Holdings Inc. 2020 Equity Incentive Plan.
10.42+
Form of Performance Restricted Stock Unit Grant Agreement under the SECOR Marine Holdings Inc. 2020 Equity Incentive Plan.
10.43+
Form of Director Stock Option Agreement under the SEACOR Marine Holdings Inc. 2020 Equity Incentive Plan.
10.44*
Seventh Consent, Agreement and Omnibus Amendments, dated February 24, 2021, by and among Falcon Global USA LLC, the other loan parties, SEACOR Marine Holdings Inc., JP Morgan Chase Bank, N.A., as administrative agent for the lenders, and the lenders party thereto.
21.1
List of subsidiaries of SEACOR Marine Holdings Inc.
23.1
Consent of Grant Thornton LLP
31.1
Certification by the Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
31.2
Certification by the Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
Certification by the Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS**
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH**
XBRL Taxonomy Extension Schema
101.CAL**
XBRL Taxonomy Extension Calculation Linkbase
101.DEF**
XBRL Taxonomy Extension Definition Linkbase
101.LAB**
XBRL Taxonomy Extension Label Linkbase
101.PRE**
XBRL Taxonomy Extension Presentation Linkbase
The cover page for the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, has been formatted in Inline XBRL.
*
Incorporated by reference.
+
Management contract or compensatory plan or arrangement.
**
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.