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 September 30, 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 October 22, 2018 was 18,246,825. 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.


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Table of Contents

PART I—FINANCIAL INFORMATION

ITEM 1.
FINANCIAL STATEMENTS
SEACOR HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data, unaudited)
 
September 30,
2018
 
December 31,
2017
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
324,564

 
$
239,246

Restricted cash and restricted cash equivalents
2,990

 
2,982

Marketable securities
41,445

 
42,761

Receivables:
 
 
 
Trade, net of allowance for doubtful accounts of $3,465 and $2,390 in 2018 and 2017, respectively
151,217

 
110,465

Other
45,197

 
33,870

Inventories
5,139

 
4,377

Prepaid expenses and other
6,087

 
6,594

Total current assets
576,639

 
440,295

Property and Equipment:
 
 
 
Historical cost
1,403,886

 
1,380,469

Accumulated depreciation
(545,179
)
 
(502,544
)
Net property and equipment
858,707

 
877,925

Investments, at Equity, and Advances to 50% or Less Owned Companies
149,184

 
173,441

Construction Reserve Funds
5,908

 
51,339

Goodwill
32,767

 
32,761

Intangible Assets, Net
25,724

 
28,106

Other Assets
8,938

 
9,469

 
$
1,657,867

 
$
1,613,336

LIABILITIES AND EQUITY
 
 
 
Current Liabilities:
 
 
 
Current portion of long-term debt
$
155,737

 
$
77,842

Accounts payable and accrued expenses
56,533

 
44,013

Other current liabilities
66,179

 
57,330

Total current liabilities
278,449

 
179,185

Long-Term Debt
372,657

 
501,505

Deferred Income Taxes
99,565

 
101,422

Deferred Gains and Other Liabilities
60,502

 
77,863

Total liabilities
811,173

 
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; 38,914,817 and 38,656,505 shares issued in 2018 and 2017, respectively
389

 
387

Additional paid-in capital
1,593,430

 
1,573,013

Retained earnings
479,495

 
419,128

Shares held in treasury of 20,671,627 and 20,716,878 in 2018 and 2017, respectively, at cost
(1,366,773
)
 
(1,368,300
)
Accumulated other comprehensive loss, net of tax
(444
)
 
(545
)
 
706,097

 
623,683

Noncontrolling interests in subsidiaries
140,597

 
129,678

Total equity
846,694

 
753,361

 
$
1,657,867

 
$
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 (LOSS)
(in thousands, except share data, unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
 
 
As Adjusted
 
 
 
As Adjusted
Operating Revenues
$
220,257

 
$
176,605

 
$
621,912

 
$
441,495

Costs and Expenses:
 
 
 
 
 
 
 
Operating
147,529

 
125,692

 
441,474

 
301,275

Administrative and general
26,083

 
20,531

 
76,189

 
68,949

Depreciation and amortization
18,616

 
20,501

 
57,069

 
54,689

 
192,228

 
166,724

 
574,732

 
424,913

Gains on Asset Dispositions and Impairments, Net
6,018

 
5,209

 
13,569

 
10,918

Operating Income
34,047

 
15,090

 
60,749

 
27,500

Other Income (Expense):
 
 
 
 
 
 
 
Interest income
2,450

 
2,367

 
6,485

 
6,651

Interest expense
(8,335
)
 
(9,121
)
 
(25,502
)
 
(31,101
)
Debt extinguishment gains (losses), net
(160
)
 
3

 
(5,609
)
 
(94
)
Marketable security gains (losses), net
1,713

 
(12,478
)
 
(1,303
)
 
(13,316
)
Derivative gains, net

 

 

 
19,727

Foreign currency gains (losses), net
(328
)
 
969

 
16

 
898

Other, net
357

 
64

 
54,951

 
68

 
(4,303
)
 
(18,196
)
 
29,038

 
(17,167
)
Income (Loss) from Continuing Operations Before Income Tax Expense (Benefit) and Equity in Earnings of 50% or Less Owned Companies
29,744

 
(3,106
)
 
89,787

 
10,333

Income Tax Expense (Benefit)
3,362

 
(12,795
)
 
12,934

 
(12,563
)
Income from Continuing Operations Before Equity in Earnings of 50% or Less Owned Companies
26,382

 
9,689

 
76,853

 
22,896

Equity in Earnings of 50% or Less Owned Companies, Net of Tax
821

 
488

 
1,915

 
2,929

Income from Continuing Operations
27,203

 
10,177

 
78,768

 
25,825

Income (Loss) from Discontinued Operations, Net of Tax

 
10,927

 

 
(23,150
)
Net Income
27,203

 
21,104

 
78,768

 
2,675

Net Income attributable to Noncontrolling Interests in Subsidiaries
10,136

 
3,543

 
15,934

 
13,839

Net Income (Loss) attributable to SEACOR Holdings Inc.
$
17,067

 
$
17,561

 
$
62,834

 
$
(11,164
)
Basic Earnings (Loss) Per Common Share of SEACOR Holdings Inc.:
 
 
 
 
 
 
Continuing operations
$
0.94

 
$
0.38

 
$
3.48

 
$
0.55

Discontinued operations

 
0.62

 

 
(1.20
)
 
$
0.94

 
$
1.00

 
$
3.48

 
$
(0.65
)
Diluted Earnings (Loss) Per Common Share of SEACOR Holdings Inc.:
 
 
 
 
 
 
Continuing operations
$
0.88

 
$
0.38

 
$
3.21

 
$
0.55

Discontinued operations

 
0.62

 

 
(1.19
)
 
$
0.88

 
$
1.00

 
$
3.21

 
$
(0.64
)
Weighted Average Common Shares Outstanding:
 
 
 
 
 
 
 
Basic
18,108,388

 
17,508,770

 
18,052,274

 
17,265,140

Diluted
21,192,554

 
17,637,824

 
22,508,622

 
17,510,560




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 (LOSS)
(in thousands, unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
Net Income
$
27,203

 
$
21,104

 
$
78,768

 
$
2,675

Other Comprehensive Income:
 
 
 
 
 
 
 
Foreign currency translation gains (losses)
(76
)
 
425

 
59

 
2,147

Reclassification of foreign currency translation losses to foreign currency gains (losses), net
15

 

 
15

 

Derivative losses on cash flow hedges

 

 

 
(389
)
Reclassification of derivative losses on cash flow hedges to interest expense

 

 

 
33

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

 

 

 
109

Other

 
5

 

 
(11
)
 
(61
)
 
430

 
74

 
1,889

Income tax benefit (expense)
2

 
(151
)
 
27

 
(605
)
 
(59
)
 
279

 
101

 
1,284

Comprehensive Income
27,144

 
21,383

 
78,869

 
3,959

Comprehensive Income attributable to Noncontrolling Interests in Subsidiaries
10,136

 
3,543

 
15,934

 
14,000

Comprehensive Income (Loss) attributable to SEACOR Holdings Inc.
$
17,008

 
$
17,840

 
$
62,935

 
$
(10,041
)






























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
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

 

 

 
1,527

 

 

 
1,527

Exercise of stock options
1

 
4,752

 

 

 

 

 
4,753

Director stock awards

 
106

 

 

 

 

 
106

Restricted stock
1

 
(1
)
 

 

 

 

 

Net issuance of conversion option on exchange of convertible debt, net of tax

 
12,735

 

 

 

 

 
12,735

Purchase of conversion option in convertible debt, net of tax

 
(5
)
 

 

 

 

 
(5
)
Amortization of share awards

 
2,830

 

 

 

 

 
2,830

Acquisition of a subsidiary with noncontrolling interests

 

 

 

 

 
96

 
96

Distributions to noncontrolling interests

 

 

 

 

 
(5,111
)
 
(5,111
)
Net income

 

 
62,834

 

 

 
15,934

 
78,768

Other comprehensive income

 

 

 

 
101

 

 
101

September 30, 2018
$
389

 
$
1,593,430

 
$
479,495

 
$
(1,366,773
)
 
$
(444
)
 
$
140,597

 
$
846,694





























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)
 
Nine Months Ended September 30,
 
2018
 
2017
Net Cash Provided by Operating Activities of Continuing Operations
$
35,799

 
$
85,088

Cash Flows from Investing Activities of Continuing Operations:
 
 
 
Purchases of property and equipment
(43,736
)
 
(99,306
)
Proceeds from disposition of property and equipment
15,952

 
27,614

Investments in and advances to 50% or less owned companies
(9,836
)
 
(7,636
)
Return of investments and advances from 50% or less owned companies
8,176

 
9,676

Proceeds from the sale of 50% or less owned companies
78,015

 
5,000

Payments received on third-party leases and notes receivable, net
452

 
24,349

Withdrawals from construction reserve funds
45,431

 
37,714

Deposits into construction reserve funds

 
(13,807
)
Business acquisitions, net of cash acquired
310

 
5,250

Net cash provided by (used in) investing activities of continuing operations
94,764

 
(11,146
)
Cash Flows from Financing Activities of Continuing Operations:
 
 
 
Payments on long-term debt and capital lease obligations
(43,967
)
 
(133,151
)
Proceeds from issuance of long-term debt, net of issue costs
(2,495
)
 
38,900

Purchase of conversion option in convertible debt
(5
)
 
(1,354
)
Common stock acquired for treasury

 
(7,569
)
Proceeds from share award plans
6,280

 
16,427

Distributions to noncontrolling interests
(5,111
)
 

Net cash used in financing activities of continuing operations
(45,298
)
 
(86,747
)
Effects of Exchange Rate Changes on Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents
61

 
856

Net Increase (Decrease) in Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents from Continuing Operations
85,326

 
(11,949
)
Cash Flows from Discontinued Operations:
 
 
 
Operating Activities

 
26,875

Investing Activities

 
2,720

Financing Activities

 
(7,149
)
Effects of Exchange Rate Changes on Cash and Cash Equivalents

 
208

Net Increase in Cash and Cash Equivalents from Discontinued Operations

 
22,654

Net Increase in Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents
85,326

 
10,705

Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Beginning of Period
242,228

 
258,887

Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, End of Period
327,554

 
269,592

Restricted Cash and Restricted Cash Equivalents, End of Period
2,990

 
2,436

Cash and Cash Equivalents, End of Period
$
324,564

 
$
267,156











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 and nine months ended September 30, 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 September 30, 2018, its results of operations for the three and nine months ended September 30, 2018 and 2017, its comprehensive income (loss) for the three and nine months ended September 30, 2018 and 2017, its changes in equity for the nine months ended September 30, 2018, and its cash flows for the nine months ended September 30, 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, by means of a dividend of all the issued and outstanding common stock of SEACOR Marine to SEACOR’s shareholders (the “Spin-off”). SEACOR Marine is now 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 14).
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 14).
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.
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 13). 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

6

Table of Contents

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 volumes 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 13). 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 primarily earns revenues from time and material and retainer contracts (see Note 13). 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.
The Company’s Other business segment includes CLEANCOR Energy Solutions LLC (“Cleancor”) (see Note 2). Cleancor primarily earns revenues from the sale of liquefied natural gas (see Note 13). Under these arrangements, control of the goods are transfered to the customer and performance obligations are satisfied at a point in time, and therefore revenue is recognized upon delivery while any related costs are expensed as incurred.
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 sheets. The Company’s contract liability activity for the nine months ended September 30 was as follows (in thousands):
 
2018
Balance at beginning of period
$
983

Contract liabilities arising during the period
4,374

Revenue recognized upon completion of performance obligations during the period
(2,291
)
Balance at end of period
$
3,066

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 their useful life as set forth in 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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As of September 30, 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.
As of September 30, 2018, the Company’s construction in progress totaling $4.6 million primarily consisted of upgrades to inland river towboats and the construction of other Inland Services equipment, and is included in historical cost in the accompanying condensed consolidated balance sheets. Certain interest costs incurred during the construction of equipment are capitalized as part of the assets’ carrying values and are amortized over such assets’ estimated useful lives. During the nine months ended September 30, 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 nine months ended September 30, 2018, the Company did not recognize any impairment charges related to long-lived assets held for use. During the nine months ended September 30, 2017, the Company recognized impairment charges of $0.4 million related to long-lived assets held for use.
Impairment of 50% or Less Owned Companies. Investments in 50% or less owned companies are reviewed periodically to assess whether there is an other-than-temporary decline in the carrying value of the investment. In its evaluation, the Company considers, among other items, recent and expected financial performance and returns, impairments recorded by the investee and the capital structure of the investee. When the Company determines the estimated fair value of an investment is below carrying value and the decline is other-than-temporary, the investment is written down to its estimated fair value. Actual results may vary from the Company’s estimates due to the uncertainty regarding projected financial performance, the severity and expected duration of declines in value and the available liquidity in the capital markets to support the continuing operations of the investee, among other factors. Although the Company believes its assumptions and estimates are reasonable, the investee’s actual performance compared with the estimates could produce different results and lead to additional impairment charges in future periods. During the nine months ended September 30, 2018 and 2017, the Company recognized impairment charges of $0.1 million and $0.9 million, respectively, related to its 50% or less owned companies, which are included in equity in earnings of 50% or less owned companies, net of tax in the accompanying consolidated statements of income (loss).
Income Taxes. During the nine months ended September 30, 2018, the Company’s effective income tax rate of 14.4% was primarily due to foreign sourced income not subject to U.S. tax partially offset by income taxes on Subpart F income (see Note 6).

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Deferred Gains. The Company has sold certain equipment to its 50% or less owned companies, entered into vessel sale-leaseback transactions with finance companies, and provided seller financing on sales of its equipment to third parties and its 50% or less owned companies. A portion of the gains realized from these transactions were deferred and recorded in deferred gains and other liabilities in the accompanying condensed consolidated balance sheets. Deferred gain activity related to these transactions for the nine months ended September 30 was as follows (in thousands):
 
2018
 
2017
Balance at beginning of period
$
72,453

 
$
82,423

Deferred gains arising from asset sales

 
7,720

Amortization of deferred gains included in operating expenses as a reduction to rental expense
(8,991
)
 
(11,126
)
Amortization of deferred gains included in gains on asset dispositions and impairments, net(1)
(6,988
)
 
(1,764
)
Reclassification of deferred gains into historical cost on reacquired property and equipment
(3,052
)
 

Balance at end of period
$
53,422

 
$
77,253

______________________
(1)
For the nine months ended September 30, 2018, the Company recognized previously deferred gains of $5.5 million due to a change in the lease duration for one U.S.-flag petroleum and chemical carrier.
Accumulated Other Comprehensive Loss. The only component of accumulated other comprehensive loss for the nine months ended September 30, 2018 was foreign currency translation adjustments.
 
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.

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Computations of basic and diluted earnings per common share of SEACOR were as follows (in thousands, except share data):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
Net Income attributable to SEACOR
 
Average O/S Shares
 
Per Share
 
Net Income (Loss) Attributable to SEACOR
 
Average O/S Shares
 
Per Share
2018
 
 
 
 
 
 
 
 
 
 
 
Basic Weighted Average Common Shares Outstanding
$
17,067

 
18,108,388

 
$
0.94

 
$
62,834

 
18,052,274

 
$
3.48

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

 
303,285

 
 
 

 
299,405

 
 
Convertible Notes(2)
1,625

 
2,780,881

 
 
 
9,495

 
4,156,943

 
 
Diluted Weighted Average Common Shares Outstanding
$
18,692

 
21,192,554

 
$
0.88

 
$
72,329

 
22,508,622

 
$
3.21

2017
 
 
 
 
 
 
 
 
 
 
 
Basic Weighted Average Common Shares Outstanding
$
17,561

 
17,508,770

 
$
1.00

 
$
(11,164
)
 
17,265,140

 
$
(0.65
)
Effect of Dilutive Share Awards:
 
 
 
 
 
 
 
 
 
 
 
Options and Restricted Stock(3)

 
129,054

 
 
 

 
245,420

 
 
Convertible Notes(4)

 

 
 
 

 

 
 
Diluted Weighted Average Common Shares Outstanding
$
17,561

 
17,637,824

 
$
1.00

 
$
(11,164
)
 
17,510,560

 
$
(0.64
)
______________________
(1)
For the three and nine months ended September 30, 2018, diluted earnings per common share of SEACOR excluded 295,074 and 292,169, respectively, of certain share awards as the effect of their inclusion in the computation would be anti-dilutive.
(2)
For the three months ended September 30, 2018, diluted earnings per common share of SEACOR excluded 1,408,719 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 and nine months ended September 30, 2017, diluted earnings per common share of SEACOR excluded 1,727,132 and 2,638,753, respectively, 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 and nine months ended September 30, 2017, diluted earnings per common share of SEACOR excluded 1,889,027 and 2,488,460, respectively, of common shares issuable pursuant to the Company’s 2.5% Convertible Senior Notes and 2,801,147 and 2,801,147, respectively, 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. Diluted weighted average shares outstanding are calculated based on continuing operations.
New Accounting Pronouncements. On February 25, 2016, the FASB issued a comprehensive new leasing standard that 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 and also requires additional disclosures about leasing arrangements. The new standard is effective for interim and annual periods beginning after December 15, 2018. The Company will adopt this standard using a modified prospective approach to adoption with recognition of a cumulative-effect adjustment to the opening balance of retained earnings at the adoption date. The Company is in the process of preparing for implementation and 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 of approximately $150 - $175 million for certain of its equipment, office and land leases. The Company’s estimates are preliminary and are based on its current inventory of leases. If the Company enters into or exits material lease arrangements prior to adoption or makes material changes to certain of its assumptions, including lease discount rates, the Company’s estimates may change and those changes may be material.
On January 26, 2017, the FASB issued an amendment to the accounting standards, which simplified wording and removed 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.

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2. BUSINESS ACQUISITIONS
Cleancor. On June 1, 2018, the Company acquired a controlling interest in Cleancor, a full service solution provider that delivers clean fuel to end users, through the acquisition of its partners’ 50% equity interest for $3.2 million in cash. In addition, immediately prior to consolidation, the Company contributed as capital $1.9 million of notes receivable due from Cleancor. The Company performed a 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.
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 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 acquisitions for the nine months ended September 30, 2018 was as follows (in thousands):
Trade and other receivables
$
1,264

Other current assets
170

Investments, at Equity, and Advances to 50% or Less Owned Companies
(3,219
)
Property and Equipment
4,382

Intangible Assets
950

Notes receivable contributed as equity
(1,904
)
Other Assets
7

Accounts payable and other accrued liabilities(1)
(1,609
)
Other current liabilities
(269
)
Noncontrolling interests in subsidiaries
(82
)
Purchase price(2)
$
(310
)
______________________
(1)
Includes $1.3 million of consideration to be paid in two installments.
(2)
Purchase price is net of cash acquired totaling $3.6 million.
3. EQUIPMENT ACQUISITIONS AND DISPOSITIONS
During the nine months ended September 30, 2018, capital expenditures were $43.7 million. Equipment deliveries during the nine months ended September 30, 2018 included five U.S.-flag harbor tugs and two foreign-flag short-sea container/RORO vessels.
During the nine months ended September 30, 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 $16.0 million and gains of $6.6 million, all of which were recognized currently. In addition, the Company recognized previously deferred gains of $7.0 million.
4. INVESTMENTS, AT EQUITY, AND ADVANCES TO 50% OR LESS OWNED COMPANIES
RF Vessel Holdings. RF Vessel Holdings owns two foreign-flag rail ferries. During the nine months ended September 30, 2018, the Company and its partner each contributed capital of $0.9 million to RF Vessel Holdings.
Golfo de Mexico. Golfo de Mexico operates the two foreign-flag rail ferries owned by RF Vessel Holdings. During the nine months ended September 30, 2018, the Company and its partner each contributed capital of $2.1 million to Golfo de Mexico.
KSM. KSM operates four foreign-flag harbor tugs and one foreign-flag ocean liquid tank barge in Freeport, Grand Bahama. During the nine months ended September 30, 2018, the Company and its partner each contributed capital of $1.0 million to KSM.

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SCFCo. SCFCo operates dry-cargo barges and towboats on the Parana-Paraguay Rivers and a terminal facility at Port Ibicuy, Argentina. The Company has provided SCFCo with working capital advances, loans and financings. During the nine months ended September 30, 2018, the Company received repayments on these working capital advances, loans and financings of $2.4 million from SCFCo. As of September 30, 2018, $30.0 million of working capital advances, loans and financings remained outstanding.
SCF Bunge Marine. SCF Bunge Marine provides towing services on the U.S. Inland Waterways, primarily the Mississippi River, Illinois River, Tennessee River and Ohio River. During the nine months ended September 30, 2018, the Company contributed capital of $0.5 million to SCF Bunge Marine and received dividends of $2.9 million from SCF Bunge Marine.
O’Brien’s do Brazil. O’Brien’s do Brazil is an emergency consulting organization providing preparedness, response and recovery services in Brazil. During the nine months ended September 30, 2018, the Company received dividends of $0.2 million from O’Brien’s do Brazil.
Hawker Pacific. Hawker Pacific is an aviation sales and support organization and distributor of aviation components from leading manufacturers. On April 30, 2018, the Company sold its 34.2% interest in Hawker Pacific for $78.0 million in cash and recognized a gain of $53.9 million, which is included in other, net in the accompanying condensed consolidated statements of income (loss).
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. During the nine months ended September 30, 2018, the Company received dividends of $0.4 million from VA&E. The Company provides an uncommitted revolving credit facility of up to $3.5 million and a subordinated loan of $3.5 million to VA&E. During the nine months ended September 30, 2018, the Company received repayments of $5.4 million and advanced $5.4 million on the revolving credit facility. As of September 30, 2018, the outstanding balance on the revolving credit facility and subordinated loan was $7.3 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 nine months ended September 30, 2018, the Company received dividends of $0.8 million and repayments on advances of $0.4 million from these 50% or less owned companies. As of September 30, 2018, total advances outstanding were $2.0 million.
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, 3.25% 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 September 30, 2018, the Company’s remaining repurchase authority for the Securities was $71.1 million.
3.0% Convertible Senior Notes. On May 15, 2018, SEACOR exchanged $117.8 million aggregate principal amount of the Company’s outstanding 3.0% Convertible Senior Notes due 2028 for a like principal amount of new 3.25% Convertible Senior Notes due 2030 (see discussion below). In addition, during the nine months ended September 30, 2018, the Company repurchased $0.3 million in principal amount of its 3.0% Convertible Senior Notes for $0.3 million. These transactions resulted in debt extinguishment losses of $5.3 million included in the accompanying condensed consolidated statements of income (loss). The outstanding principal amount of these notes was $111.9 million as of September 30, 2018.
3.25% Convertible Senior Notes. On May 15, 2018, SEACOR issued $117.8 million aggregate principal amount of its 3.25% Convertible Senior Notes due May 15, 2030 (the “3.25% Convertible Senior Notes”). Interest on the 3.25% Convertible Senior Notes is payable semi-annually on May 15 and November 15 of each year. Beginning May 15, 2025, contingent interest is payable during any subsequent semi-annual interest period if the average trading price of the 3.25% Convertible Senior Notes for a defined period is greater than or equal to $1,200 per bond ($1,000 face value). The amount of contingent interest payable for any such period will be equal to 0.45% per annum of such average trading price of the 3.25% Convertible Senior Notes. Prior to February 15, 2030, the 3.25% Convertible Senior Notes are convertible into shares of Common Stock, at a conversion rate (“Conversion Rate”) of 13.1920 shares per bond ($1,000 face value) only if certain conditions are met, as more fully described in the indenture. After February 15, 2030, holders may elect to convert at any time. The Company has reserved the maximum number of shares of Common Stock needed upon conversion, or 1,553,780 shares as of September 30, 2018. On or after May 15, 2022, the 3.25% Convertible Senior Notes may be redeemed, in whole or in part, at a price equal to 100% of the principal amount, plus accrued and unpaid interest to the date of redemption. On May 15, 2025, or if the Company undergoes a fundamental change, as more fully described in the indenture, the holders of the 3.25% Convertible Senior Notes may require SEACOR to purchase for cash all or part of the notes at a price equal to 100% of the principal amount, plus accrued and unpaid interest to the date of purchase.

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The Company accounts separately for the liability and equity components of the 3.25% Convertible Senior Notes and the associated underwriting fees in a manner that reflects the Company’s non-convertible borrowing rate. Of the total issued amount of $117.8 million and offering costs of $2.5 million, the Company allocated $95.1 million and $2.0 million, respectively, to the liability component and $22.7 million and $0.5 million, respectively, to the equity component. The resulting debt discount and offering costs associated with the liability component are amortized as additional non-cash interest expense over the seven year period for which the debt is expected to be outstanding (May 15, 2025) for an overall effective annual interest rate of 7.2%.
7.375% Senior Notes. During the nine months ended September 30, 2018, the Company repurchased $5.7 million in principal amount of its 7.375% Senior Notes for $5.9 million resulting in debt extinguishment losses of $0.2 million included in the accompanying condensed consolidated statements of income (loss). The outstanding principal amount of these notes was $147.4 million as of September 30, 2018. On October 1, 2018, the Company announced it would redeem all of its 7.375% Senior Notes on October 31, 2018 at a redemption price equal to 100% of the principal amount of the notes outstanding plus a make-whole premium to be calculated in accordance with the terms of the indenture governing the 7.375% Senior Notes, plus accrued and unpaid interest, if any, to the redemption date. As a consequence, the Company has included the principal amount of these notes in current portion of long-term debt in the accompanying condensed consolidated balance sheet.
SEA-Vista Credit Facility. During the nine months ended September 30, 2018, SEA-Vista repaid $17.0 million on the Revolving Loan and made scheduled payments of $2.5 million on the Term A-1 Loan and $4.2 million on the Term A-2 Loan. As of September 30, 2018, SEA-Vista had $72.0 million of remaining borrowing capacity under the Revolving Loan.
ISH Credit Facility. During the nine months ended September 30, 2018, ISH repaid the outstanding balance of $12.2 million on the ISH Term Loan and terminated the credit facility resulting in debt extinguishment losses of $0.1 million included in the accompanying condensed consolidated statements of income (loss).
Other. During the nine months ended September 30, 2018, the Company made scheduled payments on other long-term debt of $0.5 million and repaid the remaining outstanding balance of $1.4 million assumed in the ISH acquisition.
Letters of Credit. As of September 30, 2018, the Company had outstanding letters of credit totaling $10.1 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 September 30, 2018, these guarantees on behalf of SEACOR Marine totaled $47.0 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 and nine months ended September 30, 2018, 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 nine months ended September 30, 2018:
Statutory rate
21.0
 %
Income subject to tonnage tax
(2.4
)%
Noncontrolling interests
(3.7
)%
Foreign earnings not subject to U.S. income tax
(17.7
)%
Foreign taxes not creditable against U.S. income tax
4.1
 %
Subpart F income
12.3
 %
State taxes
0.7
 %
Other
0.1
 %
 
14.4
 %

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7. DERIVATIVE INSTRUMENTS AND HEDGING STRATEGIES
The Company recognized gains on derivative instruments not designated as hedging instruments for the nine months ended September 30 as follows (in thousands):
 
2018
 
2017
Exchange option liability on subsidiary convertible senior notes
$

 
$
19,436

Forward currency exchange, option and future contracts

 
291

 
$

 
$
19,727

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.
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 September 30, 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 September 30, 2018 that are measured at fair value on a recurring basis were as follows (in thousands):
 
Level 1
 
Level 2
 
Level 3
ASSETS
 
 
 
 
 
Cash, cash equivalents, restricted cash and restricted cash equivalents
$
327,554

 
$

 
$

Marketable securities(1)
41,445

 

 

Construction reserve funds
5,908

 

 

______________________
(1)
Marketable security gains (losses), net include unrealized gains of $1.7 million and unrealized losses of $7.1 million for the three months ended September 30, 2018 and 2017, respectively, related to marketable security positions held by the Company as of September 30, 2018. Marketable security gains (losses), net include unrealized losses of $1.3 million and $7.2 million for the nine months ended September 30, 2018 and 2017, respectively, related to marketable security positions held by the Company as of September 30, 2018.

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The estimated fair values of the Company’s other financial assets and liabilities as of September 30, 2018 were as follows (in thousands):
 
 
 
Estimated Fair Value
 
Carrying
Amount
 
Level 1
 
Level 2
 
Level 3
ASSETS
 
 
 
 
 
 
 
Notes receivable from third parties (included in other receivables and other assets)
$
2,226

 
$

 
$
2,203

 
$

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

 
see below
 
 
 
 
LIABILITIES
 
 
 
 
 
 
 
Long-term debt, including current portion(1)
$
528,394

 
$

 
$
561,044

 
$

______________________
(1)
The estimated fair value includes the embedded conversion options on the Company’s 3.0% Convertible Senior Notes and 3.25% Convertible Senior Notes.
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.
The Company’s other assets and liabilities that were measured at fair value during the nine months ended September 30, 2018 were as follows (in thousands):
 
 
Level 1
 
Level 2
 
Level 3
ASSETS
 
 
 
 
 
 
Investments, at equity, and advances in 50% or less owned companies
 
$

 
$
3,219

 
$

Investments, at equity, and advances in 50% or less owned companies. During the nine months ended September 30, 2018, the Company marked its investment in Cleancor to fair value as a consequence of the Company acquiring its partners’ 50% interest, resulting in a gain of $0.1 million, net of tax, based on the fair value of the acquired interest (see Note 2). In addition, during the nine months ended September 30, 2018, the Company identified indicators of impairment in one of its 50% or less owned companies and, as a consequence, recognized an impairment charge of $0.1 million for an other-than-temporary decline in fair value. The investment was determined to have an immaterial value.
9. NONCONTROLLING INTERESTS IN SUBSIDIARIES
Noncontrolling interests in the Company’s consolidated subsidiaries were as follows (in thousands):
 
Noncontrolling Interests
 
September 30, 2018
 
December 31, 2017
Ocean Services:
 
 
 
 
 
 
 
SEA-Vista
49%
 
$
139,566

 
$
128,550

Inland Services:
 
 
 
 
 
 
 
Other
3.0
%
51.8%
 
841

 
977

Other
5.0
%
11.8%
 
190

 
151

 
 
 
 
 
$
140,597

 
$
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 September 30, 2018, the net assets of SEA-Vista were $284.8 million. During the nine months ended September 30, 2018, the net income of SEA-Vista was $32.6 million, of which $16.0 million was attributable to noncontrolling interests. During the nine months ended September 30, 2017, the net income of SEA-Vista was $33.2 million, of which $16.3 million was attributable to noncontrolling interests.

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Table of Contents

10. MULTI-EMPLOYER AND DEFINED BENEFIT PENSION PLANS
AMOPP. During the nine months ended September 30, 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 September 30, 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.
11. SHARE BASED COMPENSATION
Transactions in connection with the Company’s share based compensation plans during the nine months ended September 30, 2018 were as follows:
Director stock awards granted
2,250

Employee Stock Purchase Plan (“ESPP”) shares issued
45,251

Restricted stock awards granted
121,850

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

Granted
110,660

Exercised
(134,212
)
Outstanding as of September 30, 2018
1,522,462

Shares available for future grants and ESPP purchases as of September 30, 2018
916,254

Employee Stock Purchase Plans. On June 5, 2018, SEACOR’s stockholders approved an amendment to the 2009 Employee Stock Purchase Plan, whereby the number of shares available under the plan was increased by 300,000.
12. COMMITMENTS AND CONTINGENCIES
The Company's capital commitments as of September 30, 2018 by year of expected payment were as follows (in thousands):
 
Remainder of 2018
 
2019
 
Total
Ocean Services
$
106

 
$

 
$
106

Inland Services
2,478

 
2,690

 
5,168

 
$
2,584

 
$
2,690

 
$
5,274

Ocean Services’ and Inland Services’ capital commitments included one inland river towboat and various other equipment and vessel improvements. Subsequent to September 30, 2018, the Company committed to purchase additional property and equipment for $14.7 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 “B3” 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. 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 eleven plaintiffs’ claims against ORM and NRC with prejudice (the “Remaining Eleven Plaintiffs’ Dismissal Order”). The deadline to appeal both of these orders has expired. At present, the only remaining claim is the following:

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Table of Contents

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. Various submissions followed, and 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 decedent in the Fitzgerald Action remains listed as a pending claim. On April 9, 2018, the Court issued an order requiring remaining “B3” plaintiffs to submit particularized statements of claim, and such a statement was submitted on behalf of the decedent in the Fitzgerald Action on July 9, 2018. On September 20, 2018, the Court issued an order indicating which statements of claim were sufficient and which were not, requiring the latter plaintiffs to show cause; the statement submitted on behalf of the decedent in the Fitzgerald Action was deemed sufficient, requiring nothing further at the time of the order. 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 “B3” master complaint that have already been asserted against ORM and NRC. Various contribution and indemnity cross-claims and counterclaims involving ORM and NRC were subsequently filed. The Company believes that the potential exposure, if any, resulting therefrom 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 (the “Abney Action”), 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. The Abney Action 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.) (the “Abood Action”), 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. The Abood Action 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. In their appellate brief, filed in the U.S. Court of Appeals for the Fifth Circuit on June 15, 2018, these individual claimants noted that ORM “has been effectively dismissed through other actions by the lower court and that dismissal is not the subject of this appeal.” Accordingly, claimants concede that the original B3 Dismissal Order bars their claims against ORM. Finally, both the Abney Action and the Abood Action were directed closed by Court order dated September 9, 2018 (the “Close Out Order”). The Close Out Order similarly listed various individual actions that had been dismissed as against ORM and NRC by virtue of the B3 Dismissal Order and/or the Remaining Eleven Plaintiffs’ Dismissal Order.
    

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Table of Contents

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. The BP settlement pertaining to personal injury claims (the “Medical Settlement”) also established a right for class members to bring a lawsuit against BP (but not ORM or NRC) for later-manifested physical condition(s). These actions, referred to as back-end litigation-option (“BELO”) cases, have specifically-delineated procedures and limitations, as set forth in the Medical Settlement. For example, there are limitations on the claims and defenses that can be asserted, as well as on the issues, elements, and proofs that may be litigated at any trial and the potential recovery for any BELO plaintiff. Notwithstanding that the Company, ORM, and NRC are listed on the Medical Settlement’s release as to claims asserted by Plaintiffs, the Medical Settlement still permits BP to seek indemnity from any party, to the extent BP has a valid indemnity right. BP has purported to tender a number of individual BELO cases to ORM and/or NRC for indemnity pursuant to their service contracts with BP; as of close of business on September 30 2018, 101 BELO claims have been formally filed against BP that have been tendered to ORM and 14 BELO claims have been formally filed against BP that have been tendered to NRC. ORM and NRC have rejected BP’s contention that it is entitled to full defense and indemnity coverage from ORM and/or NRC for all of the BELO claims referenced in BP’s indemnity demands. Moreover, it is the Company’s position that (1) ORM has contractual indemnity coverage for the above-referenced BELO claims through its separate agreements with sub-contractors that worked for ORM during the Deepwater Horizon oil spill response and (2) NRC’s services contract with BP does not provide for broad contractual indemnity as BP contends. Discussions relating to these indemnity demands remain ongoing. Overall, however, the Company believes that both settlements, including the Medical Settlement, have reduced the potential exposure in connection with the various cases relating to the Deepwater Horizon oil spill response and clean-up. The Company is unable to estimate the potential exposure, if any, resulting from these claims but does not expect that they will have a material effect on its consolidated financial position, results of operations or cash flows.
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 B3 liabilities relating to cleanup work performed in connection with the Deepwater Horizon oil spill response; this indemnification is unrelated to, and thus not impacted by, the indemnification BP has demanded for the BELO cases referenced above.
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.
13. 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 14). 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. The following tables summarize the operating results, capital expenditures assets and disaggregated revenues of the Company’s reportable segments.

18

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 September 30, 2018
 
 
 
 
 
 
 
 
 
 
 
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
External customers
109,939

 
78,845

 
30,259

 
1,214

 

 
220,257

Intersegment

 

 
8

 

 
(8
)
 

 
109,939

 
78,845

 
30,267

 
1,214

 
(8
)
 
220,257

Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
Operating
64,683

 
65,667

 
16,240

 
957

 
(18
)
 
147,529

Administrative and general
9,170

 
3,230

 
7,389

 
606

 
5,688

 
26,083

Depreciation and amortization
11,298

 
6,197

 
492

 
202

 
427

 
18,616

 
85,151

 
75,094

 
24,121

 
1,765

 
6,097

 
192,228

Gains on Asset Dispositions, Net
5,505

 
513

 

 

 

 
6,018

Operating Income (Loss)
30,293

 
4,264

 
6,146

 
(551
)
 
(6,105
)
 
34,047

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
Foreign currency losses, net
(24
)
 
(282
)
 
(12
)
 

 
(10
)
 
(328
)
Other, net
(96
)
 

 

 
452

 
1

 
357

Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax
2,073

 
(1,245
)
 
(13
)
 
6

 

 
821

Segment Profit (Loss)
32,246

 
2,737

 
6,121

 
(93
)
 
 
 
 
Other Income (Expense) not included in Segment Profit (Loss)
 
 
 
 
 
 
 
 
 
 
(4,332
)
Less Equity Earnings included in Segment Profit (Loss)
 
 
 
 
 
 
 
 
 
 
(821
)
Income Before Taxes and Equity Earnings
 
 
 
 
 
 
 
 
 
 
29,744


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Table of Contents

    
 
Ocean
Services
$’000
 
Inland
Services
$’000
 
Witt
O’Brien’s
$’000
 
Other
$’000
 
Corporate
and
Eliminations
$’000
 
Total
$’000
For the nine months ended September 30, 2018
 
 
 
 
 
 
 
 
 
 
 
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
External customers
317,478

 
208,175

 
93,960

 
2,299

 

 
621,912

Intersegment

 

 
47

 

 
(47
)
 

 
317,478

 
208,175

 
94,007

 
2,299

 
(47
)
 
621,912

Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
Operating
205,060

 
176,209

 
58,945

 
1,349

 
(89
)
 
441,474

Administrative and general
30,047

 
9,758

 
17,896

 
1,290

 
17,198

 
76,189

Depreciation and amortization
35,563

 
18,674

 
1,284

 
264

 
1,284

 
57,069

 
270,670

 
204,641

 
78,125

 
2,903

 
18,393

 
574,732

Gains on Asset Dispositions, Net
7,391

 
6,178

 

 

 

 
13,569

Operating Income (Loss)
54,199

 
9,712

 
15,882

 
(604
)
 
(18,440
)
 
60,749

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
Foreign currency gains (losses), net
(151
)
 
238

 
(27
)
 
1

 
(45
)
 
16

Other, net
585

 
14

 

 
54,354

 
(2
)
 
54,951

Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax
3,655

 
(3,115
)
 
90

 
1,285

 

 
1,915

Segment Profit
58,288

 
6,849

 
15,945

 
55,036

 
 
 
 
Other Income (Expense) not included in Segment Profit
 
 
 
 
 
 
 
 
 
(25,929
)
Less Equity Earnings included in Segment Profit
 
 
 
 
 
 
 
 
 
 
(1,915
)
Income Before Taxes and Equity Earnings
 
 
 
 
 
 
 
 
 
89,787

 
 
 
 
 
 
 
 
 
 
 
 
Capital Expenditures
38,786

 
4,075

 

 
747

 
128

 
43,736

 
 
 
 
 
 
 
 
 
 
 
 
As of September 30, 2018
 
 
 
 
 
 
 
 
 
 
 
Property and Equipment:
 
 
 
 
 
 
 
 
 
 


Historical cost
929,825

 
437,510

 
1,227

 
5,192

 
30,132

 
1,403,886

Accumulated depreciation
(331,625
)
 
(190,493
)
 
(1,007
)
 
(265
)
 
(21,789
)
 
(545,179
)
Net property and equipment
598,200

 
247,017

 
220

 
4,927

 
8,343

 
858,707

Investments, at Equity, and Advances to 50% or Less Owned Companies
62,999

 
61,304

 
345

 
24,536

 

 
149,184

Inventories
2,509

 
2,258

 
214

 
158

 

 
5,139

Goodwill
1,852

 
2,409

 
28,506

 

 

 
32,767

Intangible Assets
9,297

 
9,365

 
7,062

 

 

 
25,724

Other current and long-term assets, excluding cash and near cash assets(1)
54,416

 
78,461

 
63,578

 
2,177

 
12,807

 
211,439

Segment Assets
729,273

 
400,814

 
99,925

 
31,798

 
 
 
 
Cash and near cash assets(1)
 
 
 
 
 
 
 
 
 
 
374,907

Total Assets
 
 
 
 
 
 
 
 
 
 
1,657,867

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

20

Table of Contents

 
Ocean
Services
$’000
 
Inland
Services
$’000
 
Witt
O’Brien’s
$’000
 
Other
$’000
 
Corporate
and
Eliminations
$’000
 
Total
$’000
For the nine months ended September 30, 2018
 
 
 
 
 
 
 
 
 
 
 
Revenues from Contracts with Customers:
 
 
 
 
 
 
 
 
 
 


Voyage charters
66,496

 

 

 

 

 
66,496

Contracts of affreightment
9,101

 
159,406

 

 

 

 
168,507

Harbor & ocean towing
53,777

 

 

 

 

 
53,777

Unit freight
43,384

 

 

 

 

 
43,384

Terminal operations

 
27,291

 

 

 

 
27,291

Fleeting operations

 
13,325

 

 

 

 
13,325

Time and material contracts

 

 
84,896

 

 

 
84,896

Retainer contracts

 

 
7,456

 

 

 
7,456

Product sales(1)

 

 

 
1,618

 

 
1,618

Other
2,414

 
2,618

 
1,655

 
425

 
(47
)
 
7,065

Lease Revenues:
 
 
 
 
 
 
 
 
 
 


Time charter, bareboat charter and rental income
142,306

 
5,535

 

 
256

 

 
148,097

 
317,478


208,175

 
94,007

 
2,299

 
(47
)
 
621,912

______________________
(1)
Costs of goods sold related to product sales was $1.2 million.
 
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 September 30, 2017
 
 
 
 
 
 
 
 
 
 
 
Operating Revenues:
 
 
 
 
 
 
 
 
 
 
 
External customers
103,780

 
63,042

 
9,667

 
116

 

 
176,605

Intersegment

 

 
14

 

 
(14
)
 

 
103,780

 
63,042

 
9,681

 
116

 
(14
)
 
176,605

Costs and Expenses:
 
 
 
 
 
 
 
 
 
 
 
Operating
65,866

 
53,822

 
6,068

 

 
(64
)
 
125,692

Administrative and general
9,612

 
3,141

 
2,960

 
180

 
4,638

 
20,531

Depreciation and amortization
13,516

 
6,329

 
206

 

 
450

 
20,501

 
88,994

 
63,292

 
9,234

 
180

 
5,024

 
166,724

Gains on Asset Dispositions, Net
73

 
5,136

 

 

 

 
5,209

Operating Income (Loss)
14,859

 
4,886

 
447

 
(64
)
 
(5,038
)
 
15,090

Other Income (Expense):
 
 
 
 
 
 
 
 
 
 
 
Foreign currency gains (losses), net
5

 
992

 
29

 
(12
)
 
(45
)
 
969

Other, net
59

 

 

 

 
5

 
64

Equity in Earnings (Losses) of 50% or Less Owned Companies, N