SEACOR Holdings Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Investments, At Equity, And Advances To 50% Or Less Owned Companies

Investments, At Equity, And Advances To 50% Or Less Owned Companies

12 Months Ended

Dec. 31, 2017

Equity Method Investment, Summarized Financial Information [Abstract]

Investments, At Equity, And Advances To 50% Or Less Owned Companies



4.	INVESTMENTS, AT EQUITY, AND ADVANCES TO 50% OR LESS OWNED COMPANIES

Investments, at equity, and advances to 50% or less owned companies as of December 31 were as follows (in thousands):



	Ownership				2017		2016
Ocean Services:
Trailer Bridge⁽¹⁾	55.3%				47,324		43,050
RF Vessel Holdings	50.0%				2,378		—
Golfo de Mexico	50.0%				2,500		—
KSM	50.0%				(199	)	—
SeaJon	50.0%				—		8,570
					52,003		51,620
Inland Services:
SCFCo	50.0%				42,126		46,028
Bunge-SCF Grain	50.0%				16,166		16,176
SCF Bunge Marine⁽¹⁾	57.0%				5,404		4,233
Other	50.0%				2,783		2,744
					66,479		69,181
Witt O’Brien’s:
O’Brien’s do Brazil	50.0%				777		566
Other:
Hawker Pacific	34.2%				21,681		20,418
VA&E	41.3%				13,596		11,133
Avion	39.1%				11,400		14,783
Cleancor	50.0%				5,134		5,373
Other	34.0%	–	47.5	%	2,371		2,387
					54,182		54,094
					173,441		175,461

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(1)	The Company’s ownership percentage represents its economic interest in the joint venture.

Combined Condensed Financial Information. Summarized financial information for the Company’s investments, at equity, excluding Dorian, SCFCo and Trailer Bridge, as of and for the years ended December 31 was as follows (in thousands):



	2017	2016
Current assets	523,343	573,035
Noncurrent assets	124,733	141,549
Current liabilities	407,812	526,830
Noncurrent liabilities	81,899	27,461



	2017		2016		2015
Operating Revenues	$	1,068,190	1,019,658		869,973
Costs and Expenses:
Operating and administrative	1,035,952		951,019		794,120
Depreciation	11,810		24,936		37,511
	1,047,762		975,955		831,631
Gains (Losses) on Asset Dispositions and Impairments, Net	16,115		(6,339	)	27
Operating Income	$	36,543	37,364		38,369
Net Income	$	23,383	4,961		19,831

As of December 31, 2017 and 2016, cumulative undistributed net losses of 50% or less owned companies accounted for by the equity method and included in the Company’s consolidated retained earnings were $40.1 million and $35.0 million, respectively.

Dorian. On December 21, 2015, Mr. Fabrikant, the Executive Chairman and Chief Executive Officer of SEACOR, resigned from Dorian’s board of directors. As a consequence, the Company determined it no longer exercised significant influence over Dorian and marked its investment, at equity, in Dorian to fair value resulting in a loss of $32.3 million, net of tax, which is included in equity in earnings (losses) of 50% or less owned companies in the accompanying consolidated statements of income (loss). The Company’s investment in Dorian is classified as marketable securities in the accompanying consolidated balance sheet (see Note 1).

Dorian files periodic reports on Form 10-Q and Form 10-K with the Securities and Exchange Commission (“SEC”). Summarized financial information for Dorian for the year ended December 31 was as follows (in thousands):



	2015⁽¹⁾
Operating Revenues	$	239,206
Operating Income	126,820
Net Income	118,356

______________________


(1)	Financial information provided is as of and for the year ended December 31, 2015 as it was not practical to obtain financial information through the period ended December 21, 2015 without undue difficulty or cost.

Trailer Bridge. Trailer Bridge, Inc. (“Trailer Bridge”), an operator of U.S.-flag RORO and deck barges, provides marine transportation services between Jacksonville, Florida, San Juan, Puerto Rico and Puerto Plata, Dominican Republic. In December 2016, the Company and other major investors recapitalized Trailer Bridge by agreeing to exchange outstanding subordinated debt for equity. As a consequence of the recapitalization, the Company’s noncontrolling interest in Trailer Bridge increased to 55.3% resulting in an equity loss of $2.2 million, net of tax. The Company provided secured financing to Trailer Bridge and during the years ended December 31, 2017 and 2016, the Company provided advances of $2.0 million and $1.7 million, respectively, on the secured financing. During the years ended December 31, 2017 and 2015, the Company received repayments of $6.0 million and $18.7 million, respectively, on the secured financing. As of December 31, 2017, there was no outstanding balance on the secured financing. During the years ended December 31, 2017, 2016 and 2015, the Company received $3.1 million, $3.0 million and $0.4 million, respectively, for the time charter of a U.S.-flag harbor tug to Trailer Bridge. Prior to July 1, 2016, the Company also provided Trailer Bridge with technical and commercial management services and during the years ended December 31, 2016 and 2015, received $0.3 million and $0.8 million, respectively, for these services.

RF Vessel Holdings. On July 3, 2017, ISH emerged from bankruptcy pursuant to its chapter 11 plan of reorganization and SEACOR Ocean Transport Inc., a wholly-owned subsidiary of SEACOR, acquired all of the equity of the reorganized ISH (see Note 2). As part of the ISH business acquisition, the Company acquired a 100% interest in Rail-Ferry Vessel Holdings LLC (“RF Vessel Holdings”), which owns two foreign-flag rail ferries. On September 1, 2017, the Company sold a 50% interest in RF Vessel Holdings to G&W Agave Holdings (MI) Inc. for $1.9 million and retained a 50% ownership interest in the newly-formed joint venture.

Golfo de Mexico. On July 3, 2017, ISH emerged from bankruptcy pursuant to its chapter 11 plan of reorganization and SEACOR Ocean Transport Inc., a wholly-owned subsidiary of SEACOR, acquired all of the equity of the reorganized ISH (see Note 2). As part of the ISH business acquisition, the Company acquired a 100% interest in Golfo de Mexico Rail-Ferry Holdings LLC (“Golfo de Mexico”), which operates the two foreign-flag rail ferries owned by RF Vessel Holdings. On September 1, 2017, the Company sold a 50% interest in Golfo de Mexico to G&W Agave Holdings (MI) Inc. for $3.1 million and retained a 50% ownership interest in the newly-formed joint venture. During the year ended December 31, 2017, the Company received dividends of $0.3 million. The Company also provides Golfo de Mexico with administrative management services and received $0.3 million for the year ended December 31, 2017, for these services.

KSM. On April 1, 2017, the Company and Kotug Caribbean Holdings LLC formed Kotug Seabulk Maritime LLC (“KSM”) to operate four foreign-flag harbor tugs and one foreign-flag ocean liquid tank barge in Freeport, Grand Bahama. The Company has a 50% ownership interest in KSM. During the year ended December 31, 2017, the Company and its partner each contributed capital of $0.3 million. The Company also provides KSM with technical, commercial and administrative management services and received $0.3 million for the year ended December 31, 2017, for these services.

SeaJon. SeaJon LLC (“SeaJon”) owned an articulated tug-barge operating in the Great Lakes trade that was sold to a thrid party in June 2017. During the year ended December 31, 2017, the Company received capital distributions of $3.5 million and dividends of $12.5 million from SeaJon. During the years ended December 31, 2016 and 2015, the Company received dividends of $0.6 million and $0.6 million, respectively, from SeaJon.

SEA-Access. On November 7, 2014, the Company and Access Shipping Limited Partnership formed SEA-Access LLC (“SEA-Access”) to acquire and operate the M/V Eagle Ford, a U.S.-flag 124,000 dwt crude oil tanker. In June 2016, the M/V Eagle Ford was scrapped and, as of December 31, 2016, SEA-Access had been liquidated. During the year ended December 31, 2016, the Company received capital distributions of $8.4 million and dividends of $2.0 million from SEA-Access. During the year ended December 31, 2015, the Company received capital distributions of $8.3 million and dividends of $4.4 million from SEA-Access. The Company also provided SEA-Access with technical and commercial management services and received $0.5 million and $1.0 million for the years ended December 31, 2016 and 2015, respectively, for these services.

SeaJon II. SeaJon II LLC (“SeaJon II”) was formed to own a U.S.-flag offshore tug on time charter to Trailer Bridge. During the year ended December 31, 2015, the Company and its partner each contributed capital of $1.0 million in cash. During the year ended December 31, 2015, the Company received capital distributions of $0.3 million from SeaJon II. The Company also provides SeaJon II with technical and commercial management services and received $0.1 million and $0.1 million, during the years ended December 31, 2016 and 2015, respectively, for these services. On December 2, 2016, the Company acquired a controlling interest in SeaJon II through the acquisition of its partner’s 50% equity interest for $3.4 million in cash (see Note 2). Upon the change in control, the Company marked its investment in SeaJon II to fair value resulting in a loss of $1.9 million, net of tax, which is included in equity in earnings (losses) of 50% or less owned companies in the accompanying consolidated statements of income (loss) (see Note 10).

SCFCo. SCFCo Holdings LLC (“SCFCo”) was established to operate dry-cargo barges and towboats on the Parana-Paraguay Rivers and a terminal facility at Port Ibicuy, Argentina. During the years ended December 31, 2017, 2016 and 2015, the Company contributed capital of $0.4 million, $0.8 million and $18.0 million, respectively, to SCFCo. During the years ended December 31, 2017 and 2016, the Company provided SCFCo with working capital advances and loans of $2.5 million and $1.8 million, respectively. During the years ended December 31, 2017 and 2015, the Company received repayments on these working capital advances, loans and financings of $1.7 million and $14.0 million, respectively. As of December 31, 2017, $30.3 million of working capital advances and loans remained outstanding. The Company also provides SCFCo with certain information technology services and received $0.1 million, $0.1 million and $0.2 million, respectively, for these services during the years ended December 31, 2017, 2016 and 2015. During the years ended December 31, 2016 and 2015, the Company identified indicators of impairment in its investment in SCFCo as a result of continuing losses and recognized impairment charges of $7.7 million and $21.5 million, respectively, for an other-than-temporary decline in the fair value of its investment (see Note 10). As of December 31, 2017, the Company’s carrying value of its investment in SCFCo was $26.5 million lower than its proportionate share of the underlying equity in SCFCo.

Summarized financial information for SCFCo as of and for the years ended December 31 was as follows (in thousands):



	2017		2016
Current assets	$	7,924	$	8,549
Property and equipment, net	137,224		154,186
Current liabilities	14,263		14,825
Noncurrent liabilities	54,179		59,601



	2017			2016			2015
Operating Revenues	$	44,177		$	43,711		$	82,835
Costs and Expenses:
Operating and administrative	40,106			38,980			73,587
Depreciation	17,803			17,560			17,751
	57,909			56,540			91,338
Operating Loss	(13,732		)	(12,829		)	(8,503		)
Interest expense	(6,120		)	(6,565		)	(10,514		)
Other expense, net	(961		)	(657		)	(2,141		)
Net Loss	$	(20,813	)	$	(20,051	)	$	(21,158	)

Bunge-SCF Grain. Bunge-SCF Grain LLC (“Bunge-SCF Grain”) operates terminal grain elevators in Illinois. During the year ended December 31, 2015, the Company received $2.0 million of repayments of working capital advances. As of December 31, 2017, the total outstanding balance of working capital advances was $7.0 million. In addition, Bunge-SCF Grain operates and manages the Company’s grain storage and handling facility in McLeansboro, Illinois, and the Company received $1.1 million, $1.0 million and $1.0 million in rental income for the years ended December 31, 2017, 2016 and 2015, respectively. Certain dry-cargo barge pools managed by the Company provide freight transportation to Bunge-SCF Grain and those pools received $7.2 million, $7.2 million and $10.8 million for these services during the years ended December 31, 2017, 2016 and 2015, respectively.

SCF Bunge Marine. SCF Bunge Marine LLC (“SCF Bunge Marine”) provides towing services on the U.S. Inland Waterways, primarily the Mississippi River, Illinois River, Tennessee River and Ohio River. The Company time charters seven inland river towboats to SCF Bunge Marine, of which four are bareboat chartered-in by the Company from a third-party leasing company. The Company and its partner are required to fund SCF Bunge Marine, if necessary, to support the payment of its time charter obligations to the Company. Pursuant to the time charter, the Company received charter fees of $38.7 million, $35.0 million and $41.7 million for the years ended December 31, 2017, 2016 and 2015, respectively. During the years ended December 31, 2017, 2016 and 2015, the Company received dividends of $0.1 million, $2.5 million and $4.0 million, respectively, from SCF Bunge Marine. In addition, during the years ended December 31, 2017, 2016 and 2015, SCF Bunge Marine received $41.4 million, $40.2 million and $47.9 million, respectively, for towing services provided to barge pools managed by the Company.

Other Inland Services. The Company’s other Inland Services 50% or less owned company operates a fabrication facility.

O’Brien’s do Brazil. O’Brien’s do Brazil Consultoria em Emergencias e Meio Ambiente S/A (“O’Brien’s do Brazil”) is an emergency consulting organization providing preparedness, response and recovery services in Brazil. During the years ended December 31, 2017, 2016 and 2015, the Company received dividends of $0.1 million, $0.1 million and $0.1 million, respectively.

Hawker Pacific. Hawker Pacific Airservices, Limited (“Hawker Pacific”) is an aviation sales and support organization and a distributor of aviation components from leading manufacturers. As of December 31, 2017, the Company had a $6.5 million letter of credit outstanding in support of certain Hawker Pacific performance guarantees. During the years ended December 31, 2017, 2016 and 2015, the Company received management fees of $0.3 million, $0.3 million and $0.3 million, respectively, from Hawker Pacific.

VA&E. On June 1, 2015, the Company contributed its 81.1% interest in the assets and liabilities of a previously controlled and consolidated subsidiary that operated its agricultural commodity trading and logistics business (including $3.5 million of cash on hand) in exchange for a 41.3% ownership interest in each of VA&E Trading USA LLC and VA&E Trading LLP (collectively “VA&E”), two newly formed 50% or less owned companies with certain subsidiaries of ECOM Agroindustrial Corp. Ltd. and certain managers of VA&E. VA&E primarily focuses on the global origination, trading and merchandising of sugar, pairing producers and buyers and arranging for the transportation and logistics of the product. Through November 2016, the Company provided VA&E an unsecured revolving credit facility of up to $6.0 million, a term loan of $1.1 million and a subordinated loan of $3.5 million. In December 2016, the Company maintained its subordinated loan of $3.5 million, provided an uncommitted credit facility of up to $3.5 million and terminated the revolving credit facility and term loan. During the year ended December 31, 2017, VA&E borrowed $3.5 million on the credit facility. During the years ended December 31, 2016 and 2015, VA&E borrowed $10.0 million and $15.0 million, respectively, and repaid $12.4 million and $11.5 million, respectively, on the revolving credit facility. During the year ended December 31, 2016, the Company received repayments of $1.1 million on its term loan. During the year ended December 31, 2015, the Company and its partner each funded $1.0 million under the subordinated note executed upon formation of VA&E. As of December 31, 2017, the Company had outstanding advances of $7.6 million to VA&E inclusive of accrued and unpaid interest.

Avion. Avion Pacific Limited (“Avion”) is a distributor of aircraft and aircraft related parts. During the years ended December 31, 2017 and 2016, the Company made advances of $1.0 million and $3.0 million, respectively, to Avion. During the years ended December 31, 2017 and 2015, the Company received repayments on advances of $4.0 million and $3.0 million, respectively, from Avion. As of December 31, 2017, the Company had no outstanding advances to Avion.

Cleancor. CLEANCOR Energy Solutions LLC (“Cleancor”) is a full service solution provider delivering clean fuel to end users. During the year ended December 31, 2015, the Company provided Cleancor financing of $2.0 million for certain equipment, of which $1.9 million was outstanding as of December 31, 2017.

Other. The Company’s other 50% or less owned companies are primarily industrial aviation businesses in Asia. During the years ended December 31, 2016 and 2015, the Company contributed capital and made advances of $0.8 million and $0.2 million, respectively, to these 50% or less owned companies. During the year ended December 31, 2017, the Company received repayments on these advances of $0.4 million. As of December 31, 2017, total advances outstanding were $2.4 million.