Quarterly report pursuant to Section 13 or 15(d)

Basis of Presentation and Accounting Policy (Policy)

v3.5.0.2
Basis of Presentation and Accounting Policy (Policy)
9 Months Ended
Sep. 30, 2016
Accounting Policies [Abstract]  
Basis Of Consolidation
The condensed consolidated financial information for the three and nine months ended September 30, 2016 and 2015 has been prepared by the Company and has not been audited by its independent registered certified public accounting firm. The condensed consolidated financial statements include the accounts of SEACOR Holdings Inc. and its consolidated subsidiaries. In the opinion of management, all adjustments (consisting of normal recurring adjustments) have been made to fairly present the Company’s financial position as of September 30, 2016, its results of operations for the three and nine months ended September 30, 2016 and 2015, its comprehensive income (loss) for the three and nine months ended September 30, 2016 and 2015, its changes in equity for the nine months ended September 30, 2016, and its cash flows for the nine months ended September 30, 2016 and 2015. Results of operations for the interim periods presented are not necessarily indicative of operating results for the full year or any future periods.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.
Unless the context otherwise indicates, any reference in this Quarterly Report on Form 10-Q to the "Company" refers to SEACOR Holdings Inc. and its consolidated subsidiaries and any reference in this Quarterly Report on Form 10-Q to "SEACOR" refers to SEACOR Holdings Inc. Capitalized terms used and not specifically defined herein have the same meaning given those terms in the Company's Annual report on Form 10-K for the year ended December 31, 2015.
Revenue Recognition
Revenue Recognition. The Company recognizes revenue when it is realized or realizable and earned. Revenue is realized or realizable and earned when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price to the buyer is fixed or determinable, and collectability is reasonably assured. Revenue that does not meet these criteria is deferred until the criteria are met.
As of September 30, 2016, deferred revenues of $6.8 million, included in other current liabilities in the accompanying condensed consolidated balance sheets, related to the time charter of several offshore support vessels scheduled to be paid through the conveyance of an overriding royalty interest (the “Conveyance”) in developmental oil and gas producing properties operated by a customer in the U.S. Gulf of Mexico. Payments under the Conveyance, and the timing of such payments, were contingent upon production and energy sale prices. On August 17, 2012, the customer filed a voluntary petition for Chapter 11 bankruptcy. The Company is vigorously defending its interest in connection with the bankruptcy filing; however, payments received under the Conveyance subsequent to May 19, 2012 are subject to creditors’ claims in bankruptcy court. The Company will recognize revenues when reasonably assured of a judgment in its favor. All costs and expenses related to these charters were recognized as incurred.
Property, Plant and Equipment, Policy [Policy Text Block]
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 each class of asset, the estimated useful life is based upon a newly built asset being placed into service and represents the time period beyond which it is typically not justifiable for the Company to continue to operate the asset in the same or similar manner. From time to time, the Company may acquire older assets that have already exceeded the Company’s useful life policy, in which case the Company depreciates such assets based on its best estimate of remaining useful life, typically the next survey or certification date.
As of September 30, 2016, the estimated useful life (in years) of each of the Company’s major categories of new equipment was as follows:
Offshore support vessels (excluding wind farm utility)
20
Wind farm utility vessels
10
Inland river dry-cargo barges
20
Inland river liquid tank barges
25
Inland river towboats
25
Product tankers - U.S.-flag
25
Short-sea Container/RORO(1) vessels
20
Harbor and offshore tugs
25
Ocean liquid tank barges
25
Terminal and manufacturing facilities
20
______________________
(1)
Roll on/Roll off (“RORO”).
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 equipment as well as major renewals and improvements to other properties are capitalized.
Certain interest costs incurred during the construction of equipment are capitalized as part of the assets’ carrying values and are amortized over such assets’ estimated useful lives. During the nine months ended September 30, 2016, capitalized interest totaled $14.3 million.
Property, Plant and Equipment [Table Text Block]
As of September 30, 2016, the estimated useful life (in years) of each of the Company’s major categories of new equipment was as follows:
Offshore support vessels (excluding wind farm utility)
20
Wind farm utility vessels
10
Inland river dry-cargo barges
20
Inland river liquid tank barges
25
Inland river towboats
25
Product tankers - U.S.-flag
25
Short-sea Container/RORO(1) vessels
20
Harbor and offshore tugs
25
Ocean liquid tank barges
25
Terminal and manufacturing facilities
20
______________________
(1)
Roll on/Roll off (“RORO”).
Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]
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 value of the assets is not recoverable, as determined by the estimated undiscounted cash flows, the carrying value of the assets is reduced to fair value, if lower. Generally, fair value is determined using valuation techniques, such as expected discounted cash flows or appraisals, as appropriate. During the nine months ended September 30, 2016 and 2015, the Company recognized impairment charges of $51.7 million and $6.9 million, respectively, related to long-lived assets held for use.
When reviewing the Company’s Offshore Marine Services’ fleet for impairment, including stacked vessels expected to return to active service, the Company groups vessels with similar operating and marketing characteristics into vessel classes. As a result of the continued weak market conditions, the Company has identified indicators of impairment for certain of its owned offshore support vessels or vessel classes. As a consequence, the Company estimated their undiscounted future cash flows and determined that for one mini-supply vessel, one specialty vessel, 13 anchor handling towing supply vessels, eight supply vessels and 13 liftboats, there is sufficient uncertainty as to whether or not their carrying values would be recovered. During the nine months ended September 30, 2016, the Company obtained independent appraisals and other market data resulting in impairment charges of $50.6 million related to these identified vessels and associated intangible assets. Due to limited market transactions, the primary valuation methodology applied by the appraisers was an estimated cost approach less estimated economic depreciation for comparably aged assets with a discount applied for economic obsolescence based on current and prior two years’ performance trending.
The preparation of the undiscounted cash flows requires management to make certain estimates and assumptions on expected future rates per day worked and utilization levels for vessels and vessel classes over their expected remaining lives. Those estimates and assumptions are based on the projected magnitude and timing of a market recovery from offshore oil and gas exploration and production activity in the geographic regions where the Company operates and, as such, are highly subjective. 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 management’s forecasts may result in the Company recording additional impairment charges related to its long-lived assets in future periods.
Impairment of 50% or Less Owned Companies. Investments in 50% or less owned companies are reviewed periodically to assess whether there is an other-than-temporary decline in the fair value of the investment. The periodic assessment considers, among other things, whether the carrying value of the investment is able to be recovered and whether or not the investee’s ability to sustain an earnings capacity that would justify the carrying value of the investment. When the Company determines its investment in the 50% or less owned company is not recoverable or the decline in fair value is other-than-temporary, the investment is written down to fair value. Actual results may vary from the Company’s estimates due to the uncertainty regarding the projected financial performance of 50% or less owned companies, the severity and expected duration of declines in value, and the available liquidity in the capital markets to support the continuing operations of the 50% or less owned company. During the nine months ended September 30, 2016, the Company recognized a $0.3 million impairment charge, net of tax, related to one of Offshore Marine Services’ equity method investments in equity in earnings (losses) of 50% or less owned companies in the accompanying condensed consolidated statements of income (loss). In addition, during the nine months ended September 30, 2016, the Company recognized a $6.5 million impairment charge related to a Shipping Services’ cost investment in a foreign container shipping company in other, net in the accompanying condensed consolidated statements of income (loss). During the nine months ended September 30, 2015, the Company did not recognize any impairment charges related to its 50% or less owned companies.
Deferred Gains [Policy Text Block]
Deferred Gains. The Company has sold certain equipment to its 50% or less owned companies, entered into vessel sale-leaseback transactions with finance companies, and provided seller financing on sales of its equipment to third parties and its 50% or less owned companies. A portion of the gains realized from these transactions were deferred and recorded in deferred gains and other liabilities in the accompanying condensed consolidated balance sheets. Deferred gain activity related to these transactions for the nine months ended September 30 was as follows (in thousands):
 
2016
 
2015
Balance at beginning of period
$
135,909

 
$
159,911

Adjustments to deferred gains arising from asset sales
9,003

 
5,971

Amortization of deferred gains included in operating expenses as a reduction to rental expense
(17,369
)
 
(16,897
)
Amortization of deferred gains included in gains (losses) on asset dispositions and impairments, net
(1,852
)
 
(5,437
)
Other
(2,850
)
 
(1,667
)
Balance at end of period
$
122,841

 
$
141,881

Schedule Of Deferred Gain Activity [Table Text Block]
Deferred gain activity related to these transactions for the nine months ended September 30 was as follows (in thousands):
 
2016
 
2015
Balance at beginning of period
$
135,909

 
$
159,911

Adjustments to deferred gains arising from asset sales
9,003

 
5,971

Amortization of deferred gains included in operating expenses as a reduction to rental expense
(17,369
)
 
(16,897
)
Amortization of deferred gains included in gains (losses) on asset dispositions and impairments, net
(1,852
)
 
(5,437
)
Other
(2,850
)
 
(1,667
)
Balance at end of period
$
122,841

 
$
141,881

Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Loss. The components of accumulated other comprehensive loss were as follows (in thousands):
 
SEACOR Holdings Inc. Stockholders’ Equity
 
Noncontrolling Interests
 
 
 
Foreign
Currency
Translation
Adjustments
 
Derivative
Losses on
Cash Flow
Hedges, net
 
Other
 
Total
 
Foreign
Currency
Translation
Adjustments
 
Derivative
Losses on
Cash Flow
Hedges, net
 
Other
 
Other
Comprehensive
Loss
December 31, 2015
$
(5,528
)
 
$
(116
)
 
$
24

 
$
(5,620
)
 
$
(528
)
 
$

 
$
16

 
 
Other comprehensive loss
(5,772
)
 
(1,680
)
 
(11
)
 
(7,463
)
 
(795
)
 
(55
)
 
(5
)
 
$
(8,318
)
Income tax benefit
2,020

 
588

 
4

 
2,612

 

 

 

 
2,612

Nine Months Ended September 30, 2016
$
(9,280
)
 
$
(1,208
)
 
$
17

 
$
(10,471
)
 
$
(1,323
)
 
$
(55
)
 
$
11

 
$
(5,706
)
Earnings Per Common Share of SEACOR
Earnings (Loss) Per Share. Basic earnings (loss) per common share of SEACOR is computed based on the weighted average number of common shares issued and outstanding during the relevant periods. Diluted earnings (loss) per common share of SEACOR is computed based on the weighted average number of common shares issued and outstanding plus the effect of potentially dilutive securities through the application of the treasury stock and if-converted methods. Dilutive securities for this purpose assumes restricted stock grants have vested, common shares have been issued pursuant to the exercise of outstanding stock options and common shares have been issued pursuant to the conversion of all outstanding convertible notes.
Computations of basic and diluted earnings (loss) per common share of SEACOR were as follows (in thousands, except share data):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
Net Income (Loss) attributable to SEACOR
 
Average O/S Shares
 
Per Share
 
Net Loss Attributable to SEACOR
 
Average O/S Shares
 
Per Share
2016
 
 
 
 
 
 
 
 
 
 
 
Basic Weighted Average Common Shares Outstanding
$
(39,803
)
 
16,943,647

 
$
(2.35
)
 
$
(122,148
)
 
16,896,751

 
$
(7.23
)
Effect of Dilutive Share Awards:
 
 
 
 
 
 
 
 
 
 
 
Options and Restricted Stock(1)

 

 
 
 

 

 
 
Convertible Notes(2)

 

 
 
 

 

 
 
Diluted Weighted Average Common Shares Outstanding
$
(39,803
)
 
16,943,647

 
$
(2.35
)
 
$
(122,148
)
 
16,896,751

 
$
(7.23
)
2015
 
 
 
 
 
 
 
 
 
 
 
Basic Weighted Average Common Shares Outstanding
$
6,965

 
17,294,927

 
$
0.40

 
$
(11,917
)
 
17,616,035

 
$
(0.68
)
Effect of Dilutive Share Awards:
 
 
 
 
 
 
 
 
 
 
 
Options and Restricted Stock(1)

 
266,180

 
 
 

 

 
 
Convertible Notes(3)

 

 
 
 

 

 
 
Diluted Weighted Average Common Shares Outstanding
$
6,965

 
17,561,107

 
$
0.40

 
$
(11,917
)
 
17,616,035

 
$
(0.68
)
______________________
(1)
For the three months ended September 30, 2016 and 2015, diluted earnings per common share of SEACOR excluded 2,041,652 and 846,934, respectively, of certain share awards as the effect of their inclusion in the computation would be anti-dilutive. For the nine months ended September 30, 2016 and 2015, diluted earnings per common share of SEACOR excluded 2,041,652 and 2,038,450, respectively, of certain share awards as the effect of their inclusion in the computation would be anti-dilutive.
(2)
For the three months ended September 30, 2016, diluted earnings per common share of SEACOR excluded 2,382,626 common shares issuable pursuant to the Company’s 2.5% Convertible Senior Notes, 1,825,326 common shares issuable pursuant to the Company’s 3.0% Convertible Senior Notes and 2,243,500 common shares issuable pursuant to the Company’s 3.75% Subsidiary Convertible Senior Notes as the effect of their inclusion in the computation would be anti-dilutive. For the nine months ended September 30, 2016, diluted earnings per common share of SEACOR excluded 2,910,688 common shares issuable pursuant to the Company’s 2.5% Convertible Senior Notes, 1,825,326 common shares issuable pursuant to the Company’s 3.0% Convertible Senior Notes and 2,243,500 common shares issuable pursuant to the Company’s 3.75% Subsidiary Convertible Senior Notes as the effect of their inclusion in the computation would be anti-dilutive.
(3)
For the three and nine months ended September 30, 2015, diluted earnings per common share of SEACOR excluded 4,200,525 common shares issuable pursuant to the Company’s 2.5% Convertible Senior Notes and 1,825,326 common shares issuable pursuant to the Company’s 3.0% Convertible Senior Notes as the effect of their inclusion in the computation would be anti-dilutive.
Schedule of Weighted Average Number of Shares [Table Text Block]
Computations of basic and diluted earnings (loss) per common share of SEACOR were as follows (in thousands, except share data):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
Net Income (Loss) attributable to SEACOR
 
Average O/S Shares
 
Per Share
 
Net Loss Attributable to SEACOR
 
Average O/S Shares
 
Per Share
2016
 
 
 
 
 
 
 
 
 
 
 
Basic Weighted Average Common Shares Outstanding
$
(39,803
)
 
16,943,647

 
$
(2.35
)
 
$
(122,148
)
 
16,896,751

 
$
(7.23
)
Effect of Dilutive Share Awards:
 
 
 
 
 
 
 
 
 
 
 
Options and Restricted Stock(1)

 

 
 
 

 

 
 
Convertible Notes(2)

 

 
 
 

 

 
 
Diluted Weighted Average Common Shares Outstanding
$
(39,803
)
 
16,943,647

 
$
(2.35
)
 
$
(122,148
)
 
16,896,751

 
$
(7.23
)
2015
 
 
 
 
 
 
 
 
 
 
 
Basic Weighted Average Common Shares Outstanding
$
6,965

 
17,294,927

 
$
0.40

 
$
(11,917
)
 
17,616,035

 
$
(0.68
)
Effect of Dilutive Share Awards:
 
 
 
 
 
 
 
 
 
 
 
Options and Restricted Stock(1)

 
266,180

 
 
 

 

 
 
Convertible Notes(3)

 

 
 
 

 

 
 
Diluted Weighted Average Common Shares Outstanding
$
6,965

 
17,561,107

 
$
0.40

 
$
(11,917
)
 
17,616,035

 
$
(0.68
)
______________________
(1)
For the three months ended September 30, 2016 and 2015, diluted earnings per common share of SEACOR excluded 2,041,652 and 846,934, respectively, of certain share awards as the effect of their inclusion in the computation would be anti-dilutive. For the nine months ended September 30, 2016 and 2015, diluted earnings per common share of SEACOR excluded 2,041,652 and 2,038,450, respectively, of certain share awards as the effect of their inclusion in the computation would be anti-dilutive.
(2)
For the three months ended September 30, 2016, diluted earnings per common share of SEACOR excluded 2,382,626 common shares issuable pursuant to the Company’s 2.5% Convertible Senior Notes, 1,825,326 common shares issuable pursuant to the Company’s 3.0% Convertible Senior Notes and 2,243,500 common shares issuable pursuant to the Company’s 3.75% Subsidiary Convertible Senior Notes as the effect of their inclusion in the computation would be anti-dilutive. For the nine months ended September 30, 2016, diluted earnings per common share of SEACOR excluded 2,910,688 common shares issuable pursuant to the Company’s 2.5% Convertible Senior Notes, 1,825,326 common shares issuable pursuant to the Company’s 3.0% Convertible Senior Notes and 2,243,500 common shares issuable pursuant to the Company’s 3.75% Subsidiary Convertible Senior Notes as the effect of their inclusion in the computation would be anti-dilutive.
(3)
For the three and nine months ended September 30, 2015, diluted earnings per common share of SEACOR excluded 4,200,525 common shares issuable pursuant to the Company’s 2.5% Convertible Senior Notes and 1,825,326 common shares issuable pursuant to the Company’s 3.0% Convertible Senior Notes as the effect of their inclusion in the computation would be anti-dilutive.
New Accounting Pronouncements
New Accounting Pronouncements. On May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under generally accepted accounting principles in the United States. The core principal of the new standard is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard is effective for annual and interim periods beginning after December 15, 2017 and early adoption is permitted. The Company has not yet selected the method of adoption or determined what impact, if any, the adoption of the new standard will have on its consolidated financial position, results of operations or cash flows.
On February 25, 2016, the FASB issued a comprehensive new leasing standard, which improves transparency and comparability among companies by requiring lessees to recognize a lease liability and a corresponding lease asset for virtually all lease contracts. It also requires additional disclosures about leasing arrangements. The new standard is effective for interim and annual periods beginning after December 15, 2018 and requires a modified retrospective approach to adoption. Early adoption is permitted. The Company has not yet determined what impact, if any, the adoption of the new standard will have on its consolidated financial position, results of operations or cash flows.
On March 30, 2016, the FASB issued an amendment to the accounting standards, which simplifies several aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. The amendment is effective for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years and early adoption is permitted. The Company has not yet determined what impact, if any, the adoption of the new standard will have on its consolidated financial position, results of operations or cash flows.
Reclassification, Policy [Policy Text Block]
Reclassifications. Certain reclassifications of prior period information have been made to conform with the presentation of the current period information. These reclassifications had no effect on net income (loss) or cash flows as previously reported.