Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
________________________________________
FORM 10-Q
________________________________________
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2018              or             
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number 1-12289
SEACOR Holdings Inc.
(Exact Name of Registrant as Specified in Its Charter)
________________________________________
Delaware
 
13-3542736
(State or Other Jurisdiction of
Incorporation or Organization)
 
(IRS Employer
Identification No.)
 
 
2200 Eller Drive, P.O. Box 13038,
 
 
Fort Lauderdale, Florida
 
33316
(Address of Principal Executive Offices)
 
(Zip Code)
954-523-2200
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
________________________________________
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  ý     No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer  x
 
Accelerated filer  ¨
 
Non-accelerated filer  ¨
(Do not check if a smaller
reporting company)
 
Smaller reporting company  ¨
 
Emerging growth company  ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ¨    No  ý
The total number of shares of common stock, par value $.01 per share, outstanding as of April 23, 2018 was 18,174,556. The Registrant has no other class of common stock outstanding.


Table of Contents

SEACOR HOLDINGS INC.
Table of Contents

Part I.
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
 
Item 3.
 
 
 
 
Item 4.
 
 
 
Part II.
 
 
 
 
Item 1.
 
 
 
 
 
Item 1A.
 
 
 
 
 
Item 2.
 
 
 
 
 
Item 3.
 
 
 
 
 
Item 4.
 
 
 
 
 
Item 5.
 
 
 
 
 
Item 6.


i

Table of Contents

PART I—FINANCIAL INFORMATION

ITEM 1.
FINANCIAL STATEMENTS
SEACOR HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data, unaudited)
 
March 31,
2018
 
December 31,
2017
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
272,522

 
$
239,246

Restricted cash
2,982

 
2,982

Marketable securities
38,963

 
42,761

Receivables:
 
 
 
Trade, net of allowance for doubtful accounts of $2,752 and $2,390 in 2018 and 2017, respectively
111,083

 
110,465

Other
41,061

 
33,870

Inventories
3,821

 
4,377

Prepaid expenses and other
4,572

 
6,594

Total current assets
475,004

 
440,295

Property and Equipment:
 
 
 
Historical cost
1,354,989

 
1,351,741

Accumulated depreciation
(510,418
)
 
(502,544
)
 
844,571

 
849,197

Construction in progress
15,528

 
28,728

Net property and equipment
860,099

 
877,925

Investments, at Equity, and Advances to 50% or Less Owned Companies
170,305

 
173,441

Construction Reserve Funds
36,790

 
51,339

Goodwill
32,807

 
32,761

Intangible Assets, Net
28,072

 
28,106

Other Assets
9,396

 
9,469

 
$
1,612,473

 
$
1,613,336

LIABILITIES AND EQUITY
 
 
 
Current Liabilities:
 
 
 
Current portion of long-term debt
$
77,634

 
$
77,842

Accounts payable and accrued expenses
40,844

 
44,013

Other current liabilities
59,651

 
57,330

Total current liabilities
178,129

 
179,185

Long-Term Debt
495,863

 
501,505

Deferred Income Taxes
102,084

 
101,422

Deferred Gains and Other Liabilities
74,923

 
77,863

Total liabilities
850,999

 
859,975

Equity:
 
 
 
SEACOR Holdings Inc. stockholders’ equity:
 
 
 
Preferred stock, $.01 par value, 10,000,000 shares authorized; none issued nor outstanding

 

Common stock, $.01 par value, 60,000,000 shares authorized; 38,855,188 and 38,656,505 shares issued in 2018 and 2017, respectively
389

 
387

Additional paid-in capital
1,576,657

 
1,573,013

Retained earnings
417,302

 
419,128

Shares held in treasury of 20,689,761 and 20,716,878 in 2018 and 2017, respectively, at cost
(1,367,433
)
 
(1,368,300
)
Accumulated other comprehensive income (loss), net of tax
96

 
(545
)
 
627,011

 
623,683

Noncontrolling interests in subsidiaries
134,463

 
129,678

Total equity
761,474

 
753,361

 
$
1,612,473

 
$
1,613,336






The accompanying notes are an integral part of these condensed consolidated financial statements
and should be read in conjunction herewith.

1

Table of Contents

SEACOR HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share data, unaudited)
 
Three Months Ended March 31,
 
2018
 
2017
 
 
 
As Adjusted
Operating Revenues
$
184,824

 
$
136,319

Costs and Expenses:
 
 
 
Operating
131,777

 
93,117

Administrative and general
25,795

 
22,878

Depreciation and amortization
19,609

 
16,719

 
177,181

 
132,714

Gains (Losses) on Asset Dispositions and Impairments, Net
7,045

 
(188
)
Operating Income
14,688

 
3,417

Other Income (Expense):
 
 
 
Interest income
1,856

 
2,134

Interest expense
(8,563
)
 
(10,304
)
Debt extinguishment losses, net
(42
)
 

Marketable security gains (losses), net
(3,798
)
 
20,836

Derivative gains, net

 
2,830

Foreign currency gains, net
1,690

 
1,399

Other, net
283

 
(420
)
 
(8,574
)
 
16,475

Income from Continuing Operations Before Income Tax Expense (Benefit) and Equity in Earnings (Losses) of 50% or Less Owned Companies
6,114

 
19,892

Income Tax Expense (Benefit)
(281
)
 
3,896

Income from Continuing Operations Before Equity in Earnings (Losses) of 50% or Less Owned Companies
6,395

 
15,996

Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax
(837
)
 
108

Income from Continuing Operations
5,558

 
16,104

Loss from Discontinued Operations, Net of Tax

 
(5,448
)
Net Income
5,558

 
10,656

Net Income attributable to Noncontrolling Interests in Subsidiaries
4,917

 
6,573

Net Income attributable to SEACOR Holdings Inc.
$
641

 
$
4,083

Basic Earnings (Loss) Per Common Share of SEACOR Holdings Inc.:
 
 
 
Continuing operations
$
0.04

 
$
0.57

Discontinued operations

 
(0.33
)
 
$
0.04

 
$
0.24

Diluted Earnings (Loss) Per Common Share of SEACOR Holdings Inc.:
 
 
 
Continuing operations
$
0.04

 
$
0.56

Discontinued operations

 
(0.32
)
 
$
0.04

 
$
0.24

Weighted Average Common Shares Outstanding:
 
 
 
Basic
17,969,970

 
17,074,043

Diluted
18,178,518

 
17,363,839






The accompanying notes are an integral part of these condensed consolidated financial statements
and should be read in conjunction herewith.

2

Table of Contents

SEACOR HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, unaudited)
 
Three Months Ended March 31,
 
2018
 
2017
Net Income
$
5,558

 
$
10,656

Other Comprehensive Income:
 
 
 
Foreign currency translation gains
644

 
664

Derivative losses on cash flow hedges

 
(9
)
Reclassification of derivative losses on cash flow hedges to interest expense

 
12

Reclassification of derivative losses on cash flow hedges to equity in earnings (losses) of 50% or less owned companies

 
190

Other

 
(7
)
 
644

 
850

Income tax expense
(3
)
 
(264
)
 
641

 
586

Comprehensive Income
6,199

 
11,242

Comprehensive Income attributable to Noncontrolling Interests in Subsidiaries
4,917

 
6,669

Comprehensive Income attributable to SEACOR Holdings Inc.
$
1,282

 
$
4,573



































The accompanying notes are an integral part of these condensed consolidated financial statements
and should be read in conjunction herewith.

3

Table of Contents

SEACOR HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(in thousands, unaudited)
 
SEACOR Holdings Inc. Stockholders’ Equity
 
Non-
Controlling
Interests In
Subsidiaries
 
Total
Equity
 
Common
Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Shares
Held In
Treasury
 
Accumulated
Other
Comprehensive
Income (Loss)
 
December 31, 2017
$
387

 
$
1,573,013

 
$
419,128

 
$
(1,368,300
)
 
$
(545
)
 
$
129,678

 
$
753,361

Impact of adoption of accounting principle

 

 
(2,467
)
 

 

 

 
(2,467
)
December 31, 2017, As Adjusted
387

 
1,573,013

 
416,661

 
(1,368,300
)
 
(545
)
 
129,678

 
750,894

Issuance of common stock:
 
 
 
 
 
 
 
 
 
 
 
 
 
Employee Stock Purchase Plan

 

 

 
867

 

 

 
867

Exercise of stock options
1

 
2,727

 

 

 

 

 
2,728

Director stock awards

 
20

 

 

 

 

 
20

Restricted stock
1

 
(1
)
 

 

 

 

 

Amortization of share awards

 
898

 

 

 

 

 
898

Distributions to noncontrolling interests

 

 

 

 

 
(132
)
 
(132
)
Net income

 

 
641

 

 

 
4,917

 
5,558

Other comprehensive income

 

 

 

 
641

 

 
641

Three Months Ended March 31, 2018
$
389

 
$
1,576,657

 
$
417,302

 
$
(1,367,433
)
 
$
96

 
$
134,463

 
$
761,474



































The accompanying notes are an integral part of these consolidated financial statements
and should be read in conjunction herewith.

4

Table of Contents

SEACOR HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
 
Three Months Ended March 31,
 
2018
 
2017
Net Cash Provided by Operating Activities of Continuing Operations
$
12,907

 
$
34,708

Cash Flows from Investing Activities of Continuing Operations:
 
 
 
Purchases of property and equipment
(9,542
)
 
(66,810
)
Proceeds from disposition of property and equipment
15,852

 
40

Investments in and advances to 50% or less owned companies
(900
)
 
(6,034
)
Return of investments and advances from 50% or less owned companies
4,772

 
2

(Issuances of) payments received on third-party leases and notes receivable, net
150

 
(709
)
Withdrawals from construction reserve funds
14,549

 
11,275

Business acquisitions, net of cash acquired
79

 

Net cash provided by (used in) investing activities of continuing operations
24,960

 
(62,236
)
Cash Flows from Financing Activities of Continuing Operations:
 
 
 
Payments on long-term debt and capital lease obligations
(8,071
)
 
(14,892
)
Proceeds from issuance of long-term debt, net of issue costs

 
14,000

Common stock acquired for treasury

 
(7,569
)
Proceeds from share award plans
3,595

 
6,340

Distributions to noncontrolling interests
(132
)
 

Net cash used in financing activities of continuing operations
(4,608
)
 
(2,121
)
Effects of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash
17

 
401

Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash from Continuing Operations
33,276

 
(29,248
)
Cash Flows from Discontinued Operations:
 
 
 
Operating Activities

 
(20,407
)
Investing Activities

 
(1,552
)
Financing Activities

 
2,217

Effects of Exchange Rate Changes on Cash and Cash Equivalents

 
(98
)
Net Decrease in Cash and Cash Equivalents from Discontinued Operations

 
(19,840
)
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash
33,276

 
(49,088
)
Cash, Cash Equivalents and Restricted Cash, Beginning of Period
242,228

 
258,887

Cash, Cash Equivalents and Restricted Cash, End of Period
275,504

 
209,799

Restricted Cash, End of Period
2,982

 
2,254

Cash and Cash Equivalents, End of Period
$
272,522

 
$
207,545
















The accompanying notes are an integral part of these condensed consolidated financial statements
and should be read in conjunction herewith.

5

Table of Contents

SEACOR HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES
The condensed consolidated financial information for the three months ended March 31, 2018 and 2017 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 March 31, 2018, its results of operations for the three months ended March 31, 2018 and 2017, its comprehensive income for the three months ended March 31, 2018 and 2017, its changes in equity for the three months ended March 31, 2018, and its cash flows for the three months ended March 31, 2018 and 2017. 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, 2017.
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. without its consolidated subsidiaries. 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, 2017.
Adoption of New Accounting Standards. On January 1, 2018, the Company adopted Financial Accounting Standard Board (“FASB”) Topic 606, Revenue from Contracts with Customers (“Topic 606”). As a consequence of adopting Topic 606, the Company now recognizes all of the operating revenues and expenses associated with the dry-cargo barge pools it manages along with additional operating expenses reflective of barge pool earnings attributable to third-party barge owners and not the Company in its capacity as manager. Under Topic 606, the Company determined it was a principal with respect to the third-party barge owners. Previously, the Company recognized operating revenues and expenses only for its proportionate share of the barge pools in which it participated, as it acted as an agent. All prior period results have been adjusted to reflect the retrospective adoption of Topic 606. The adoption of Topic 606 had no impact on previously reported operating income, net income or earnings per share.
On January 1, 2018, the Company adopted ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory, which eliminates the deferral of the tax effects of intercompany asset sales other than inventory until the transferred assets are sold to a third party or recovered through use. As a result of the adoption of the standard, the deferred tax charges previously recognized from those sales resulted in a decrease in deferred tax assets and a cumulative adjustment to retained earnings of $2.5 million in the condensed consolidated balance sheet and statement of changes in equity as of January 1, 2018.
Discontinued Operations. On June 1, 2017, the Company completed the spin-off of SEACOR Marine Holdings Inc. (“SEACOR Marine”), the company that operated SEACOR’s Offshore Marine Services business segment (the “Spin-off”), by means of a dividend of all the issued and outstanding common stock of SEACOR Marine to SEACOR’s shareholders. SEACOR Marine is an independent company whose common stock is listed on the New York Stock Exchange under the symbol “SMHI.” For all periods presented herein, the Company has reported the historical financial position, results of operations and cash flows of SEACOR Marine as discontinued operations (see Note 15).
On July 3, 2017, the Company completed the sale of its 70% interest in Illinois Corn Processing LLC (“ICP”), the company that operated SEACOR’s Illinois Corn Processing business segment. For all periods presented herein, the Company has reported the historical financial position, results of operations and cash flows of ICP as discontinued operations (see Note 15).
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.

6

Table of Contents

Revenue from Contracts with Customers. Ocean Services primarily earns revenues from voyage charters, contracts of affreightment, harbor and ocean towing services, unit freight transportation services and technical ship management agreements with vessel owners (see Note 14). Ocean Services transfers control of the service to the customer and satisfies its performance obligation over the term of the contract, and therefore recognizes revenue over the term of the contract while related costs are expensed as incurred. Voyage charters are contracts to carry cargoes on a single voyage basis for a predetermined price, regardless of time to complete. Contracts of affreightment are contracts for cargoes that are committed on a multi-voyage basis for various periods of time, with minimum and maximum cargo tonnages specified over the period at a fixed or escalating rate per ton. Harbor and ocean towing services typically include operating harbor tugs alongside oceangoing vessels to escort them to their berth, assisting with the docking and undocking of these oceangoing vessels and escorting them back out to sea. They are contracted using prevailing port tariff terms on a per-use basis. In the unit freight trade, transportation services typically include transporting shipping containers, rail cars, project cargoes, automobiles and U.S. military vehicles and are generally contracted on a per unit basis for the specified cargo and destination, typically in accordance with a publicly available tariff rate or based on a negotiated rate when moving larger volume over an extended period. Other operations primarily include technical ship management agreements whereby Ocean Services provides technical ship management services to third-party customers for a predetermined price over a specified period of time, typically a year or more.
Inland Services primarily earns revenues from contracts of affreightment, terminal operations, fleeting operations and repair and maintenance services (see Note 14). Inland Services transfers control of the service to the customer and satisfies its performance obligation over the term of the contract, and therefore recognizes revenue over the term of the contract while related costs are expensed as incurred. Contracts of affreightment are contracts whereby customers are charged an established rate per ton to transport cargo from point-to-point. Terminal operations includes tank farms and dry bulk and container handling facilities that are marketed under contractual rates and terms driven by throughput volume. Fleeting operations includes fleeting services whereby barges are held in fleeting areas for an agreed-upon day rate and shifting services whereby harbor boats are used to pick up and drop off barges to assist in assembling tows and to move barges to and from the dock for loading and unloading at predetermined per-shift fees. Other operations primarily include a machine shop specializing in towboat and barge cleaning, repair and maintenance services that are charged on an hourly or a fixed fee basis depending on the scope and nature of the work.
Witt O’Brien’s earns revenues primarily from time and material and retainer contracts (see Note 14). Witt O’Brien’s transfers control of the service to the customer and satisfies its performance obligation over the term of the contract, and therefore recognizes revenue over the term of the contract while related costs are expensed as incurred. Time and material contracts primarily relate to emergency response, debris management or consulting services that Witt O’Brien’s performs for a predetermined fee. Retainer contracts, which are nearly all with vessel services operators and oil companies, are contracted based on agreed-upon rates.
Contract liabilities from contracts with customers arise when the Company has received consideration prior to performance and are included in other current liabilities in the accompanying condensed consolidated balance sheet. The Company’s contract liability activity for the three months ended March 31 was as follows (in thousands):
 
2018
Balance at beginning of period
$
983

Revenue deferred in the current period

6,483

Previously deferred revenue recognized in the current period
(415
)
Balance at end of period
$
7,051

Lease Revenues. The Company’s lease revenues are primarily from time charters, bareboat charters and non-vessel rental agreements 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 for all operating expenses and risks of operation. Under a non-vessel rental agreement, the Company provides non-vessel property or equipment to a customer for a set term and the customer assumes responsibility for all operating expenses and risks of operation.
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.

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Table of Contents

As of March 31, 2018, the estimated useful life (in years) of each of the Company’s major categories of new equipment was as follows:
Petroleum and chemical carriers - U.S.-flag
25
Harbor and offshore tugs
25
Ocean liquid tank barges
25
Short-sea container/RORO(1) vessels
20
Dry bulk carriers - U.S.-flag
25
Inland river dry-cargo and specialty barges
20
Inland river liquid tank barges
25
Inland river towboats and harbor boats
25
Terminal and fleeting facilities
20
______________________
(1)
Roll On/Roll Off.
Equipment maintenance and repair costs including the costs of routine overhauls, dry-dockings 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 three months ended March 31, 2018, capitalized interest totaled $0.2 million.
Impairment of Long-Lived Assets. The Company performs an impairment analysis of long-lived assets used in operations, including intangible assets, when indicators of impairment are present. These indicators may include a significant decrease in the market price of a long-lived asset or asset group, a significant adverse change in the 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 the estimated undiscounted cash flows, the estimated fair value of the assets or asset groups are compared to their current carrying value and impairment charges are recorded if the carrying value exceeds fair value. The Company performs its testing on an asset or asset group basis. The Company’s estimates of undiscounted cash flows are highly subjective and actual results may vary from the Company’s estimates due to the uncertainty regarding projected financial performance. Generally, fair value is determined using valuation techniques, such as expected discounted cash flows or appraisals, as appropriate. During the three months ended March 31, 2018, the Company did not recognize any impairment charges related to long-lived assets held for use. During the three months ended March 31, 2017, the Company recognized impairment charges of $0.4 million related to long-lived assets held for use.
Income Taxes. During the three months ended March 31, 2018, the Company’s effective income tax rate of (4.6)% was primarily due to taxes not provided on income attributable to noncontrolling interests, foreign sourced income not subject to U.S. income taxes, and income subject to the tonnage tax, partially offset by income taxes on foreign earnings that are not creditable against U.S. income taxes (see Note 6).
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 three months ended March 31 was as follows (in thousands):
 
2018
 
2017
Balance at beginning of period
$
72,453

 
$
82,423

Amortization of deferred gains included in operating expenses as a reduction to rental expense
(2,557
)
 
(3,626
)
Amortization of deferred gains included in gains (losses) on asset dispositions and impairments, net
(518
)
 
(605
)
Balance at end of period
$
69,378

 
$
78,192


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Table of Contents

Accumulated Other Comprehensive Income. The components of accumulated other comprehensive income were as follows (in thousands):
 
SEACOR Holdings Inc. Stockholders’ Equity
 
Noncontrolling Interests
 
 
 
Foreign
Currency
Translation
Adjustments
 
Total
 
Foreign
Currency
Translation
Adjustments
 
Other
Comprehensive
Income
December 31, 2017
$
(545
)
 
$
(545
)
 
$
(1,460
)
 
 
Other comprehensive income
644

 
644

 

 
$
644

Income tax expense
(3
)
 
(3
)
 

 
(3
)
Three Months Ended March 31, 2018
$
96

 
$
96

 
$
(1,460
)
 
$
641

Earnings Per Share. Basic earnings 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 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 per common share of SEACOR were as follows (in thousands, except share data):
 
Three Months Ended March 31,
 
Net Income Attributable to SEACOR
 
Average O/S Shares
 
Per Share
2018
 
 
 
 
 
Basic Weighted Average Common Shares Outstanding
$
641

 
17,969,970

 
$
0.04

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

 
208,548

 
 
Convertible Notes(2)

 

 
 
Diluted Weighted Average Common Shares Outstanding
$
641

 
18,178,518

 
$
0.04

2017
 
 
 
 
 
Basic Weighted Average Common Shares Outstanding
$
4,083

 
17,074,043

 
$
0.24

Effect of Dilutive Share Awards:
 
 
 
 
 
Options and Restricted Stock(3)

 
289,796

 
 
Convertible Notes(4)

 

 
 
Diluted Weighted Average Common Shares Outstanding
$
4,083

 
17,363,839

 
$
0.24

______________________
(1)
For the three months ended March 31, 2018, diluted earnings per common share of SEACOR excluded 503,459 of certain share awards as the effect of their inclusion in the computation would be anti-dilutive. Diluted weighted average shares outstanding are calculated based on continuing operations.
(2)
For the three months ended March 31, 2018, diluted earnings per common share of SEACOR excluded 1,227,101 of common shares issuable pursuant to the Company’s 2.5% Convertible Senior Notes and 2,895,516 of 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.
(3)
For the three months ended March 31, 2017, diluted earnings per common share of SEACOR excluded 903,720 of certain share awards as the effect of their inclusion in the computation would be anti-dilutive. Diluted weighted average shares outstanding are calculated based on continuing operations.
(4)
For the three months ended March 31, 2017, diluted earnings per common share of SEACOR excluded 1,885,772, of common shares issuable pursuant to the Company’s 2.5% Convertible Senior Notes, 1,825,326 of common shares issuable pursuant to the Company’s 3.0% Convertible Senior Notes and 2,243,500 of 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.
New Accounting Pronouncements. On February 25, 2016, the FASB issued a comprehensive new leasing standard, which is meant to improve 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 is in the early stages of implementation and

9

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currently believes that the adoption will have a material impact on its financial statements. Specifically, the Company will be recording material right-of-use assets and lease liabilities for its equipment, office and land leases.
On January 26, 2017, the FASB issued an amendment to the accounting standard which simplified wording and removes step two of the goodwill impairment test. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The FASB also eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform step two of the goodwill test. The new standard is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2020, with early adoption permitted for interim or annual goodwill impairment tests on testing dates after January 1, 2017. 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.
2. BUSINESS ACQUISITIONS
SCA. On March 1, 2018, the Company acquired Strategic Crisis Advisors LLC (“SCA”) for $1.3 million to be paid in two installments. The purchase price includes $0.8 million in contingent consideration that is dependent upon SCA meeting predetermined revenue targets for the twelve months following the acquisition date. The Company performed a preliminary fair value analysis and the purchase price was allocated to the acquired assets and liabilities based on their fair value resulting in no goodwill being recorded.
Purchase Price Allocation. The allocation of the purchase price for the Company’s acquisition for the three months ended March 31, 2018 was as follows (in thousands):
Trade and other receivables
$
453

Intangible Assets
950

Accounts payable and other accrued liabilities(1)
(1,477
)
Other current liabilities
(5
)
Purchase price(2)
$
(79
)
______________________
(1)
Includes $1.3 million of consideration to be paid in two installments.
(2)
Purchase price is net of cash acquired totaling $0.1 million.
3. EQUIPMENT ACQUISITIONS AND DISPOSITIONS
During the three months ended March 31, 2018, capital expenditures were $9.5 million and primarily related to equipment ordered prior to 2018. Equipment deliveries during the three months ended March 31, 2018 included one U.S.-flag harbor tug and two foreign-flag short-sea container/RORO vessels.
During the three months ended March 31, 2018, the Company sold one U.S.-flag petroleum and chemical carrier, one U.S.-flag harbor tug, 32 dry-cargo barges, two inland river specialty barges and other equipment for net proceeds of $15.9 million and gains of $6.5 million, all of which were recognized currently. In addition, the Company recognized previously deferred gains of $0.5 million.
4. INVESTMENTS, AT EQUITY, AND ADVANCES TO 50% OR LESS OWNED COMPANIES
VA&E. VA&E primarily focuses on the global origination, trading and merchandising of sugar, pairing producers and buyers and arranging for the transportation and logistics of the product. The Company provides an uncommitted credit facility of up to $3.5 million and a subordinated loan of $3.5 million to VA&E. During the three months ended March 31, 2018, VA&E made repayments of $4.4 million and borrowed $0.9 million on the credit facility. As of March 31, 2018, the outstanding balance on the credit facility and subordinated loan was $3.6 million, inclusive of accrued and unpaid interest.
Other. The Company’s other 50% or less owned companies are primarily industrial aviation businesses in Asia. During the three months ended March 31, 2018, the Company received repayments on advances of $0.4 million. As of March 31, 2018, total advances outstanding were $2.0 million.
Subsequent to March 31, 2018, the Company disclosed that a subsidiary entered into a contract to sell its interest in Hawker Pacific Airservices Limited. The Company expects to receive approximately $70.0 million in cash at closing after estimated transaction costs.
5. LONG-TERM DEBT
SEACOR’s Board of Directors previously approved a securities repurchase plan that authorizes the Company to acquire SEACOR common stock, par value $0.01 per share (“Common Stock”), 7.375% Senior Notes, 3.0% Convertible Senior Notes, and 2.5% Convertible Senior Notes (collectively the “Securities”) through open market purchases, privately negotiated transactions or otherwise, depending on market conditions. As of March 31, 2018, the Company’s remaining repurchase authority for the Securities was $77.4 million.
As of March 31, 2018, the remaining principal amount outstanding of the Company’s 2.5% Convertible Senior Notes of $64.5 million is included in current liabilities as the holders may require the Company to repurchase these notes on May 31, 2018. In addition, the Company has the right to redeem the Notes at any time after May 31, 2018.
SEA-Vista Credit Facility. During the three months ended March 31, 2018, SEA-Vista made scheduled repayments of $0.8 million on the Term A-1 Loan and $1.4 million on the Term A-2 Loan. As of March 31, 2018, SEA-Vista had $55.0 million of remaining borrowing capacity under the Revolving Loan.
ISH Credit Facility. During the three months ended March 31, 2018, ISH repaid $5.7 million on the ISH Term Loan including $0.7 million of scheduled repayments. As of March 31, 2018, the ISH Credit Facility had $5.0 million of remaining borrowing capacity under the ISH Revolving Loan.
Other. During the three months ended March 31, 2018 the Company made scheduled payments on other long-term debt of $0.2 million.
Letters of Credit. As of March 31, 2018, the Company had outstanding letters of credit totaling $11.1 million with various expiration dates through 2019, including $0.7 million that have been issued on behalf of SEACOR Marine.
Guarantees. The Company has guaranteed the payments of amounts owed under certain sale-leaseback transactions, equipment financing and multi-employer pension obligations on behalf of SEACOR Marine. As of March 31, 2018, these guarantees on behalf of SEACOR Marine totaled $58.2 million and decline as payments are made on the outstanding obligations.
The Company earns a fee of 50 basis points per annum on these guarantees and outstanding letters of credit. For the three months ended March 31, 2018 and 2017, the Company earned fees of $0.1 million and $0.2 million, respectively.
6. INCOME TAXES
The following table reconciles the difference between the statutory federal income tax rate for the Company and the effective income tax rate on continuing operations for the three months ended March 31, 2018:
Statutory rate
21.0
 %
Income subject to tonnage tax
(6.6
)%
Noncontrolling interests
(16.9
)%
Foreign earnings not subject to U.S. income tax
(14.0
)%
Foreign taxes not creditable against U.S. income tax
6.6
 %
Subpart F income
2.1
 %
State taxes
3.1
 %
Other
0.1
 %
 
(4.6
)%
7. DERIVATIVE INSTRUMENTS AND HEDGING STRATEGIES
The Company recognized gains on derivative instruments not designated as hedging instruments for the three months ended March 31 as follows (in thousands):
 
2018
 
2017
Exchange option liability on subsidiary convertible senior notes
$

 
$
2,628

Forward currency exchange, option and future contracts

 
202

 
$

 
$
2,830

The exchange option liability on subsidiary convertible senior notes terminated as a consequence of the Spin-off as the notes became the sole obligation of SEACOR Marine and convertible only into the common stock of SEACOR Marine.

10

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The Company enters and settles forward currency exchange, option and future contracts with respect to various foreign currencies. These contracts enable the Company to buy currencies in the future at fixed exchange rates, which could offset possible consequences of changes in currency exchange rates with respect to the Company’s business conducted outside of the United States. As of March 31, 2018, there were no outstanding forward currency exchange contracts.
8. FAIR VALUE MEASUREMENTS
The fair value of an asset or liability is the price that would be received to sell an asset or transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company utilizes a fair value hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value and defines three levels of inputs that may be used to measure fair value. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, quoted prices in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, or inputs derived from observable market data. Level 3 inputs are unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities.
The Company’s financial assets and liabilities as of March 31, 2018 that are measured at fair value on a recurring basis were as follows (in thousands):
 
Level 1
 
Level 2
 
Level 3
ASSETS
 
 
 
 
 
Marketable securities(1)
$
38,963

 
$

 
$

Construction reserve funds
36,790

 

 

______________________
(1)
Marketable security gains (losses), net include unrealized losses of $3.8 million and gains of $12.1 million for the three months ended March 31, 2018 and 2017, respectively, related to marketable security positions held by the Company as of March 31, 2018.
The estimated fair values of the Company’s other financial assets and liabilities as of March 31, 2018 were as follows (in thousands):
 
 
 
Estimated Fair Value
 
Carrying
Amount
 
Level 1
 
Level 2
 
Level 3
ASSETS
 
 
 
 
 
 
 
Cash, cash equivalents and restricted cash
$
275,504

 
$
275,504

 
$

 
$

Investments, at cost, in 50% or less owned companies (included in other assets)
4,300

 
see below
 
 
 
 
Notes receivable from third parties (included in other receivables and other assets)
2,507

 
922

 
1,542

 

LIABILITIES
 
 
 
 
 
 
 
Long-term debt, including current portion(1)
$
573,497

 
$

 
$
590,968

 
$

______________________
(1)
The estimated fair value includes the embedded conversion options on the Company’s 3.0% Convertible Senior Notes.
The carrying value of cash, cash equivalents and restricted cash approximates fair value. The fair value of the Company’s long-term debt and notes receivable from third parties was estimated based upon quoted market prices or by using discounted cash flow analyses based on estimated current rates for similar types of arrangements. It was not practicable to estimate the fair value of certain of the Company’s investments, at cost, in 50% or less owned companies because of the lack of quoted market prices and the inability to estimate fair value without incurring excessive costs. Considerable judgment was required in developing certain of the estimates of fair value and, accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.
9. STOCK REPURCHASES
SEACOR’s Board of Directors previously approved a securities repurchase plan that authorizes the Company to acquire its Securities through open market purchases, privately negotiated transactions or otherwise, depending on market conditions. As of March 31, 2018, the Company’s repurchase authority for the Securities was $77.4 million.
10. NONCONTROLLING INTERESTS IN SUBSIDIARIES
Noncontrolling interests in the Company’s consolidated subsidiaries were as follows (in thousands):
 
Noncontrolling Interests
 
March 31, 2018
 
December 31, 2017
Ocean Services:
 
 
 
 
 
 
 
SEA-Vista
49%
 
$
133,473

 
$
128,550

Inland Services:
 
 
 
 
 
 
 
Other
3.0
%
51.8%
 
840

 
977

Other
5.0%
 
150

 
151

 
 
 
 
 
$
134,463

 
$
129,678

SEA-Vista. SEA-Vista owns and operates the Company’s fleet of U.S.-flag petroleum and chemical carriers used in the U.S. coastwise trade of crude oil, petroleum and specialty chemical products. As of March 31, 2018, the net assets of SEA-Vista

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were $272.4 million. During the three months ended March 31, 2018, the net income of SEA-Vista was $10.0 million, of which $4.9 million was attributable to noncontrolling interests. During the three months ended March 31, 2017, the net income of SEA-Vista was $13.1 million, of which $6.4 million was attributable to noncontrolling interests.
11. MULTI-EMPLOYER AND DEFINED BENEFIT PENSION PLANS
AMOPP. During the three months ended March 31, 2018, the Company received notification from the AMOPP that the Company’s withdrawal liability as of September 30, 2017 would have been $34.4 million based on an actuarial valuation performed as of that date. That liability may change in future years based on various factors, primarily employee census. As of March 31, 2018, the Company has no intention to withdraw from the AMOPP and no deficit amounts have been invoiced. Depending upon the results of the future actuarial valuations and the ten-year rehabilitation plan, it is possible that the AMOPP will experience further funding deficits, requiring the Company to recognize additional payroll related operating expenses in the periods invoices are received or contribution levels are increased.
12. SHARE BASED COMPENSATION
Transactions in connection with the Company’s share based compensation plans during the three months ended March 31, 2018 were as follows:
Director stock awards granted
500

Employee Stock Purchase Plan (“ESPP”) shares issued
27,117

Restricted stock awards granted
119,100

Stock Option Activities:
 
Outstanding as of December 31, 2017
1,546,014

Granted
31,635

Exercised
(79,083
)
Outstanding as of March 31, 2018
1,498,566

Shares available for future grants and ESPP purchases as of March 31, 2018
717,913

13. COMMITMENTS AND CONTINGENCIES
The Company's capital commitments as of March 31, 2018 by year of expected payment were as follows (in thousands):
 
Remainder of 2018
 
2019
 
Total
Ocean Services
$
148

 
$

 
$
148

Inland Services
2,910

 
757

 
3,667

 
$
3,058

 
$
757

 
$
3,815

Ocean Services’ and Inland Services’ capital commitments included other equipment and various vessel improvements. Subsequent to March 31, 2018, the Company committed to purchase one previously leased-in harbor tug and other equipment for $13.3 million.
During 2012, the Company sold National Response Corporation (“NRC”), NRC Environmental Services Inc., SEACOR Response Ltd., and certain other subsidiaries to J.F. Lehman & Company, a private equity firm (the “SES Business Transaction”).
On December 15, 2010, O’Brien’s Response Management L.L.C. (“ORM”) and NRC were named as defendants in one of the several “master complaints” filed in the overall multi-district litigation relating to the Deepwater Horizon oil spill response and clean-up in the Gulf of Mexico, which is currently pending in the U.S. District Court for the Eastern District of Louisiana (the “MDL”). The “B3” master complaint naming ORM and NRC asserted various claims on behalf of a putative class against multiple defendants concerning the clean-up activities generally and the use of dispersants specifically. Both prior to and following the filing of the aforementioned master complaint, individual civil actions naming the Company, ORM, and/or NRC alleging B3 exposure-based injuries and/or damages were consolidated with the MDL and stayed pursuant to court order. The Company has continually taken the position that all of the B3 claims asserted against it, ORM, and NRC have no merit. On February 16, 2016, all but eleven B3 claims against ORM and NRC were dismissed with prejudice (the “B3 Dismissal Order”). On August 2, 2016, the Court granted an omnibus motion for summary judgment as it concerns ORM and NRC in its entirety, dismissing the remaining

12

Table of Contents

eleven plaintiffs’ against ORM and NRC with prejudice (the “Remaining Eleven Plaintiffs’ Dismissal Order”). The deadline to appeal both of these orders has expired.
Both prior to and since the issuance of the B3 Dismissal Order and the Remaining Eleven Plaintiffs’ Dismissal Order, a number of individual actions in the MDL have been dismissed or otherwise resolved. At present, the only remaining claim is the following:
On April 8, 2013, the Company, ORM, and NRC were named as defendants in William and Dianna Fitzgerald v. BP Exploration et al., No. 2:13-CV-00650 (E.D. La.) (the “Fitzgerald Action”), which is a suit by a husband and wife whose son allegedly participated in the clean-up effort and became ill as a result of his exposure to oil and dispersants. While the decedent in the Fitzgerald Action’s claims against ORM and NRC were dismissed by virtue of the Remaining Eleven Plaintiffs’ Dismissal Order, the claim as against the Company remains stayed.
Following a status conference with the Court on February 17, 2017, the Court issued several new pretrial orders in connection with the remaining claims in the MDL.
On July 18, 2017, the Court issued an order dismissing all remaining “B3” claims in the MDL with prejudice, with the exception of certain claims specifically listed on an exhibit annexed to the order (the “Master MDL B3 Dismissal Order”). Nathan Fitzgerald, the decedent in the Fitzgerald Action, was listed on the exhibit annexed to the Master MDL B3 Dismissal Order. The Court has since issued a list of those plaintiffs compliant with its previous orders and thus whose “B3” claims remain pending; the last version of this compliance list was issued on April 6, 2018 and the claim for the decadent in the Fitzgerald Action remains listed as a pending claim. The Company is unable to estimate the potential exposure, if any, resulting from this matter, to the extent it remains viable, but believes it is without merit and does not expect that it will have a material effect on its consolidated financial position, results of operations or cash flows.
On February 18, 2011, Triton Asset Leasing GmbH, Transocean Holdings LLC, Transocean Offshore Deepwater Drilling Inc., and Transocean Deepwater Inc. (collectively “Transocean”) named ORM and NRC as third-party defendants in a Rule 14(c) Third-Party Complaint in Transocean’s own Limitation of Liability Act action, which is part of the overall MDL, tendering to ORM and NRC the claims in the referenced master complaint that have already been asserted against ORM and NRC. Transocean, Cameron International Corporation (“Cameron”), Halliburton Energy Services, Inc., and M-I L.L.C. (“M-I”) also filed cross-claims against ORM and NRC for contribution and tort indemnity should they be found liable for any damages in Transocean's Limitation of Liability Act action and ORM and NRC asserted counterclaims against those same parties for identical relief. The remainder of the aforementioned cross-claims in Transocean’s limitation action remain pending, although the Company believes that the potential exposure, if any, resulting from these matters has been reduced as a result of the various developments in the MDL, including the B3 Dismissal Order and Remaining Eleven Plaintiffs’ Dismissal Order, and does not expect that these matters will have a material effect on its consolidated financial position, results of operations or cash flows.
On November 16, 2012, 668 individuals who served as beach clean-up workers in Escambia County, Florida during the Deepwater Horizon oil spill response commenced a civil action in the Circuit Court for the First Judicial Circuit of Florida, in and for Escambia County, Abney et al. v. Plant Performance Services, LLC et al., No. 2012-CA-002947, in which they allege, among other things, that ORM and other defendants engaged in the contamination of Florida waters and beaches in violation of Florida Statutes Chapter 376 and injured the Plaintiffs by exposing them to dispersants during the course and scope of their employment. This case was removed to federal court and ultimately consolidated with the MDL on April 2, 2013. On April 22, 2013, a companion case to this matter was filed in the U.S. District Court for the Northern District of Florida, Abood et al. v. Plant Performance Services, LLC et al., No. 3:13-CV-00284 (N.D. Fla.), which alleges identical allegations against the same parties but names an additional 174 Plaintiffs, all of whom served as clean-up workers in various Florida counties during the Deepwater Horizon oil spill response. This case was consolidated with the MDL on May 10, 2013. By court order, both of these matters were then stayed since they were consolidated with the MDL. The names of only a very small percentage of the claimants in these two matters appear to be listed on the exhibit to the Master MDL B3 Dismissal Order and the Court has denied the other plaintiffs’ request for reconsideration, which has since been appealed. The Company believes that the original B3 Dismissal Order should reduce the potential exposure resulting from, if not bar, claims against ORM stemming from these matters and does not expect that these matters will have a material effect on its consolidated financial position, results of operations or cash flows.
Separately, on March 2, 2012, the Court announced that BP Exploration and BP America Production Company (“BP America”) and (collectively “BP”) and the Plaintiffs had reached an agreement on the terms of two proposed class action settlements that will resolve, among other things, Plaintiffs’ economic loss claims and clean-up related claims against BP. Both settlements were granted final approval by the Court, all appeals have concluded, and the deadline for submitting claims with respect to both settlements has passed. Although neither the Company, ORM, nor NRC are parties to the settlement agreements, the Company, ORM, and NRC are listed as released parties on the releases accompanying both settlement agreements. Consequently, class members who did not file timely requests for exclusion are barred from pursuing economic loss, property damage, personal injury, medical monitoring, and/or other released claims against the Company, ORM, and NRC. The Company believes these settlements

13

Table of Contents

have reduced the potential exposure in connection with the various cases relating to the Deepwater Horizon oil spill response and clean-up and continues to evaluate the settlements’ impacts on these cases.
In the ordinary course of the Company’s business, it may agree to indemnify its counterparty to an agreement. If the indemnified party makes a successful claim for indemnification, the Company would be required to reimburse that party in accordance with the terms of the indemnification agreement. Indemnification agreements generally, but not always, are subject to threshold amounts, specified claim periods and other restrictions and limitations.
In connection with the SES Business Transaction, the Company remains contingently liable for work performed in connection with the Deepwater Horizon oil spill response. Pursuant to the agreement governing the sale, the Company’s potential liability to the purchaser may not exceed the consideration received by the Company for the SES Business Transaction. The Company is currently indemnified under contractual agreements with BP for the potential liabilities relating to work performed in connection with the Deepwater Horizon oil spill response.
In the ordinary course of its business, the Company becomes involved in various other litigation matters including, among other things, claims by third parties for alleged property damages and personal injuries. 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 would have a material effect on the Company’s consolidated financial position, results of operations or cash flows.
14. SEGMENT INFORMATION
Accounting standards require public business enterprises to report information about each of their operating business segments that exceed certain quantitative thresholds or meet certain other reporting requirements. Operating business segments have been defined as components of an enterprise about which separate financial information is available and is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Certain reclassifications and adjustments of prior period information have been made to conform the current period’s reportable segment presentation as a result of the Company’s presentation of discontinued operations and the adoption of Topic 606 (see Notes 1 and 15). The Company’s basis of measurement of segment profit or loss is as previously defined in the Company’s Annual report on Form 10-K for the year ended December 31, 2017. Accounting standards also require companies to disaggregate revenues from contracts with customers into categories to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

14

Table of Contents

The following tables summarize the operating results, capital expenditures and assets of the Company’s reportable segments.
 
Ocean
Services
$’000
 
Inland
Services
$’000
 
Witt
O’Brien’s
$’000
 
Other
$’000
 
Corporate
and
Eliminations
$’000
 
Total
$’000
For the three months ended March 31, 2018
 
 
 
 
 
 
 
 
 
 
 
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
External customers
102,384

 
55,921

 
26,403

 
116

 

 
184,824

Intersegment

 

 
29

 

 
(29
)
 

 
102,384

 
55,921

 
26,432

 
116

 
(29
)
 
184,824

Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
Operating
65,333

 
48,181

 
18,306

 

 
(43
)
 
131,777

Administrative and general
10,549

 
3,312

 
5,367

 
186

 
6,381

 
25,795

Depreciation and amortization
12,645

 
6,234

 
301

 

 
429

 
19,609

 
88,527

 
57,727

 
23,974

 
186

 
6,767

 
177,181

Gains on Asset Dispositions, Net
1,883

 
5,162

 

 

 

 
7,045

Operating Income (Loss)
15,740

 
3,356

 
2,458

 
(70
)
 
(6,796
)
 
14,688

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
Foreign currency gains (losses), net
(51
)
 
1,703

 
2

 

 
36

 
1,690

Other, net
283

 

 

 

 

 
283

Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax
315

 
(2,454
)
 
135

 
1,167

 

 
(837
)
Segment Profit
16,287

 
2,605

 
2,595

 
1,097

 
 
 
 
Other Income (Expense) not included in Segment Profit
 
 
 
 
 
 
 
 
 
(10,547
)
Less Equity Losses included in Segment Profit
 
 
 
 
 
 
 
 
 
 
837

Income Before Taxes, Equity Losses and Discontinued Operations
 
 
 
 
 
 
 
 
 
6,114

 
 
 
 
 
 
 
 
 
 
 
 
Capital Expenditures
7,516

 
1,899

 

 

 
127

 
9,542

 
 
 
 
 
 
 
 
 
 
 
 
As of March 31, 2018
 
 
 
 
 
 
 
 
 
 
 
Property and Equipment:
 
 
 
 
 
 
 
 
 
 


Historical cost
890,040

 
433,590

 
1,227

 

 
30,132

 
1,354,989

Accumulated depreciation
(309,371
)
 
(179,152
)
 
(961
)
 

 
(20,934
)
 
(510,418
)
 
580,669

 
254,438

 
266

 

 
9,198

 
844,571

Construction in progress
11,707

 
3,821

 

 

 

 
15,528

Net property and equipment
592,376

 
258,259

 
266

 

 
9,198

 
860,099

Investments, at Equity, and Advances to 50% or Less Owned Companies
53,620

 
64,744

 
734

 
51,207

 

 
170,305

Inventories
1,732

 
2,039

 
50

 

 

 
3,821

Goodwill
1,852

 
2,449

 
28,506

 

 

 
32,807

Intangible Assets
9,961

 
10,112

 
7,999

 

 

 
28,072

Other current and long-term assets, excluding cash and near cash assets(1)
57,593

 
54,531

 
43,563

 
1,770

 
8,655

 
166,112

Segment Assets
717,134

 
392,134

 
81,118

 
52,977

 
 
 
 
Cash and near cash assets(1)
 
 
 
 
 
 
 
 
 
 
351,257

Total Assets
 
 
 
 
 
 
 
 
 
 
1,612,473

______________________
(1)
Cash and near cash assets includes cash, cash equivalents, restricted cash, marketable securities and construction reserve funds.

15

Table of Contents

 
Ocean
Services
$’000
 
Inland
Services
$’000
 
Witt
O’Brien’s
$’000
 
Other
$’000
 
Corporate
and
Eliminations
$’000
 
Total
$’000
For the three months ended March 31, 2018
 
 
 
 
 
 
 
 
 
 
 
Revenues from Contracts with Customers:
 
 
 
 
 
 
 
 
 
 


Voyage charters
16,501

 

 

 

 

 
16,501

Contracts of affreightment
5,006

 
40,710

 

 

 

 
45,716

Harbor & ocean towing
18,001

 

 

 

 

 
18,001

Unit freight
13,384

 

 

 

 

 
13,384

Terminal operations

 
8,561

 

 

 

 
8,561

Fleeting operations

 
4,164

 

 

 

 
4,164

Time and material contracts

 

 
23,625

 

 

 
23,625

Retainer contracts

 

 
2,383

 

 

 
2,383

Other
852

 
588

 
424

 
116

 
(29
)
 
1,951

Lease Revenues:
 
 
 
 
 
 
 
 
 
 


Time charter, bareboat charter and rental income
48,640

 
1,898

 

 

 

 
50,538

 
102,384


55,921

 
26,432

 
116

 
(29
)
 
184,824


16

Table of Contents

 
Ocean
Services
$’000
 
Inland
Services
$’000
 
Witt
O’Brien’s
$’000
 
Other
$’000
 
Corporate
and
Eliminations
$’000
 
Total
$’000
 
 
 
As Adjusted
 
 
 
 
 
 
 
As Adjusted
For the three months ended March 31, 2017
 
 
 
 
 
 
 
 
 
 
 
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
External customers
67,639

 
60,574

 
7,990

 
116

 

 
136,319

Intersegment

 

 
18

 

 
(18
)
 

 
67,639

 
60,574

 
8,008

 
116

 
(18
)
 
136,319

Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
Operating
37,354

 
50,474

 
5,372

 

 
(83
)
 
93,117

Administrative and general
7,088

 
3,792

 
3,219

 
154

 
8,625

 
22,878

Depreciation and amortization
9,161

 
6,592

 
202

 

 
764

 
16,719

 
53,603

 
60,858

 
8,793

 
154

 
9,306

 
132,714

Gains (Losses) on Asset Dispositions and Impairments, Net
(421
)
 
233

 

 

 

 
(188
)
Operating Income (Loss)
13,615

 
(51
)
 
(785
)
 
(38
)
 
(9,324
)
 
3,417

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
Derivative gains, net

 

 

 

 
2,830

 
2,830

Foreign currency gains (losses), net
(5
)
 
1,368

 
10

 

 
26

 
1,399

Other, net
(362
)
 

 

 
(300
)
 
242

 
(420
)
Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax
1,036

 
(2,378
)
 
157

 
1,293

 

 
108

Segment Profit (Loss)
14,284

 
(1,061
)
 
(618
)
 
955

 
 
 
 
Other Income (Expense) not included in Segment Profit (Loss)
 
 
 
 
 
 
 
 
 
12,666

Less Equity Earnings included in Segment Profit (Loss)
 
 
 
 
 
 
 
 
 
 
(108
)
Income Before Taxes, Equity Earnings and Discontinued Operations
 
 
 
 
 
 
 
 
 
19,892

 
 
 
 
 
 
 
 
 
 
 
 
Capital Expenditures
52,619

 
12,819

 
35

 

 
1,337

 
66,810

 
 
 
 
 
 
 
 
 
 
 
 
As of March 31, 2017
 
 
 
 
 
 
 
 
 
 
 
Property and Equipment:
 
 
 
 
 
 
 
 
 
 


Historical cost
872,285

 
433,382

 
1,559

 

 
29,493

 
1,336,719

Accumulated depreciation
(267,163
)
 
(173,249
)
 
(1,262
)
 

 
(18,949
)
 
(460,623
)
 
605,122

 
260,133

 
297

 

 
10,544

 
876,096

Construction in progress
127,734

 
12,014

 
34

 

 

 
139,782

Net property and equipment
732,856

 
272,147


331




10,544

 
1,015,878

Investments, at Equity, and Advances to 50% or Less Owned Companies
54,514

 
68,193

 
758

 
58,930

 

 
182,395

Inventories
1,086

 
1,812

 
153

 

 

 
3,051

Goodwill
1,852

 
2,429

 
28,506

 

 

 
32,787

Intangible Assets

 
11,642

 
7,877

 

 

 
19,519

Other current and long-term assets, excluding cash and near cash assets(1)
23,999

 
57,575

 
17,665

 
11,988

 
43,532

 
154,759

Segment Assets
814,307

 
413,798

 
55,290

 
70,918

 
 
 
 
Cash and near cash assets(1)
 
 
 
 
 
 
 
 
 
 
371,681

Discontinued Operations
 
 
 
 
 
 
 
 
 
 
1,174,908

Total Assets
 
 
 
 
 
 
 
 
 
 
2,954,978

______________________
(1)
Cash and near cash assets includes cash, cash equivalents, restricted cash, marketable securities and construction reserve funds.

17

Table of Contents

 
Ocean
Services
$’000
 
Inland
Services
$’000
 
Witt
O’Brien’s
$’000
 
Other
$’000
 
Corporate
and
Eliminations
$’000
 
Total
$’000
For the three months ended March 31, 2017
 
 
 
 
 
 
 
 
 
 
 
Revenues from Contracts with Customers:
 
 
 
 
 
 
 
 
 
 
 
Voyage charters
267

 

 

 

 

 
267

Contracts of affreightment

 
45,898

 

 

 

 
45,898

Harbor & ocean towing
17,273

 

 

 

 

 
17,273

Unit freight
11,368

 

 

 

 

 
11,368

Terminal operations

 
8,279

 

 

 

 
8,279

Fleeting operations

 
3,663

 

 

 

 
3,663

Time and material contracts

 

 
4,074

 

 

 
4,074

Retainer contracts

 

 
2,470

 

 

 
2,470

Other
171

 
752

 
1,464

 
116

 
(18
)
 
2,485

Lease Revenues:
 
 
 
 
 
 
 
 
 
 


Time charter, bareboat charter and rental income
38,560

 
1,982

 

 

 

 
40,542

 
67,639

 
60,574

 
8,008

 
116

 
(18
)
 
136,319


18

Table of Contents

15. DISCONTINUED OPERATIONS
The Company’s discontinued operations consist of SEACOR Marine and ICP as following the Spin-off and sale, respectively, the Company has no continuing involvement in either of these businesses (see Note 1). Summarized selected operating results of the Company’s discontinued operations were as follows (in thousands):

 
Three Months Ended March 31, 2017
SEACOR Marine
 
Operating Revenues
$
34,304

Costs and Expenses:
 
Operating
33,379

Administrative and general
11,826

Depreciation and amortization
12,503

 
57,708

Gains on Asset Dispositions, Net
4,819

Operating Loss
(18,585
)
Other Income, Net
7,126

Income Tax Benefit
(3,422
)
Equity in Earnings of 50% or Less Owned Companies, Net of Tax
438

Net Loss
$
(7,599
)
Net Loss Attributable to Noncontrolling Interests
$
(204
)
 
 
ICP
 
Operating Revenues
$
38,385

Costs and Expenses:
 
Operating
36,101

Administrative and general
746

Depreciation and amortization
1,175

 
38,022

Operating Income
363

Other Income, Net
1,848

Income Tax Expense
735

Net Income
$
1,476

Net Income Attributable to Noncontrolling Interests
$
376

 
 
Eliminations
 
Operating Revenues
$
(656
)
Costs and Expenses:
 
Operating
(728
)
Administrative and general
(23
)
 
(751
)
Operating Income
95

Other Income, Net
943

Income Tax Expense
363

Net Income
$
675

 
 
Loss from Discontinued Operations, Net of Tax
$
(5,448
)

19

Table of Contents

ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Form 10-Q includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Certain statements discussed in this Form 10-Q as well as in other reports, materials and oral statements that the Company releases from time to time constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Generally, words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “believe,” “plan,” “target,” “forecast” and similar expressions are intended to identify forward-looking statements. Such forward-looking statements concern management’s expectations, strategic objectives, business prospects, anticipated economic performance and financial condition and other similar matters. Forward-looking statements are inherently uncertain and subject to a variety of assumptions, risks and uncertainties that could cause actual results to differ materially from those anticipated or expected by management of the Company. These statements are not guarantees of future performance and actual events or results may differ significantly from these statements. Actual events or results are subject to significant known and unknown risks, uncertainties and other important factors, including risks relating to weakening demand for the Company’s services as a result of unplanned customer suspensions, cancellations, rate reductions or non-renewals of vessel charters or failures to finalize commitments to charter vessels, increased government legislation and regulation of the Company’s businesses that could increase the cost of operations, increased competition if the Jones Act is repealed, liability, legal fees and costs in connection with the provision of emergency response services, decreased demand for the Company’s services as a result of declines in the global economy, declines in valuations in the global financial markets and a lack of liquidity in the credit sectors, including, interest rate fluctuations, availability of credit, inflation rates, change in laws, trade barriers, commodity prices and currency exchange fluctuations, the cyclical nature of the oil and gas industry, activity in foreign countries and changes in foreign political, military and economic conditions, changes in foreign and domestic oil and gas exploration and production activity, safety record requirements related to Ocean Services, decreased demand for Ocean Services due to construction of additional refined petroleum product, natural gas or crude oil pipelines or due to decreased demand for refined petroleum products, crude oil or chemical products or a change in existing methods of delivery, compliance with U.S. and foreign government laws and regulations, including environmental laws and regulations and economic sanctions, the dependence of Ocean Services and Inland Services on several key customers, consolidation of the Company’s customer base, the ongoing need to replace aging vessels, industry fleet capacity, restrictions imposed by the Shipping Acts on the amount of foreign ownership of the Company’s Common Stock, operational risks of Ocean Services and Inland Services, effects of adverse weather conditions and seasonality, the level of grain export volume, the effect of fuel prices on barge towing costs, variability in freight rates for inland river barges, the effect of international economic and political factors on Inland Services’ operations, the ability to realize anticipated benefits from acquisitions and other strategic transactions, adequacy of insurance coverage, the attraction and retention of qualified personnel by the Company, and various other matters and factors, many of which are beyond the Company’s control as well as those discussed in Item 1A (Risk Factors) of the Company’s Annual report on Form 10-K and other reports filed by the Company with the Securities and Exchange Commission (“SEC”). It should be understood that it is not possible to predict or identify all such factors. Consequently, the preceding should not be considered to be a complete discussion of all potential risks or uncertainties. Given these risk factors, investors and analysts should not place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date of the document in which they are made. The Company disclaims any obligation or undertaking to provide any updates or revisions to any forward-looking statement to reflect any change in the Company’s expectations or any change in events, conditions or circumstances on which the forward-looking statement is based, except as required by law. It is advisable, however, to consult any further disclosures the Company makes on related subjects in its filings with the SEC, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K (if any). These statements constitute the Company’s cautionary statements under the Private Securities Litigation Reform Act of 1995.
Overview
The Company’s operations are divided into three main business segments – Ocean Transportation & Logistics Services (“Ocean Services”), Inland Transportation & Logistics Services (“Inland Services”) and Witt O’Brien’s. The Company also has activities, referred to and described under Other, that primarily include lending and leasing activities and noncontrolling investments in various other businesses.
Discontinued Operations. On June 1, 2017, the Company completed the spin-off of SEACOR Marine Holdings Inc. (“SEACOR Marine”), the company that operated SEACOR’s Offshore Marine Services business segment (the “Spin-off”), by means of a dividend of all the issued and outstanding common stock of SEACOR Marine to SEACOR’s shareholders. SEACOR Marine is now an independent company whose common stock is listed on the New York Stock Exchange under the symbol “SMHI.” The Company provides certain transition services to SEACOR Marine, including, among other things, human resource and benefit administration, information technology infrastructure, cash management and general accounting support services.
On July 3, 2017, the Company completed the sale of its 70% interest in Illinois Corn Processing LLC (“ICP”), the company that operated SEACOR’s Illinois Corn Processing business segment.

20

Table of Contents

Historical results for all periods presented herein, present the financial position, results of operations and cash flows of SEACOR Marine and ICP as discontinued operations.
Consolidated Results of Operations
The sections below provide an analysis of the Company’s operations by business segment for the three months (“Current Year Quarter”) ended March 31, 2018 compared with the three months (“Prior Year Quarter”) ended March 31, 2017. See “Item 1. Financial Statements—Note 14. Segment Information” included in Part I of this Quarterly Report on Form 10-Q for consolidating segment tables for each period presented. Capitalized terms used and not specifically defined herein have the meaning given to those terms used in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.
Ocean Transportation & Logistics Services
 
Three Months Ended March 31,
 
2018
 
2017
 
$’000
 
%
 
$’000
 
%
Operating Revenues:
 
 
 
 
 
 
 
United States
82,158

 
80

 
55,207

 
82

Foreign
20,226

 
20

 
12,432

 
18

 
102,384

 
100

 
67,639

 
100

Costs and Expenses:
 
 
 
 
 
 
 
Operating:
 
 
 
 
 
 
 
Personnel
23,300

 
23

 
14,475

 
21

Repairs and maintenance
5,352

 
5

 
3,710

 
6

Dry-docking
2,166

 
2

 
2,951

 
4

Insurance and loss reserves
1,992

 
2

 
1,642

 
2

Fuel, lubes and supplies