SEACOR Marine (SMHI) 10-Q 2018 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

________________________________________

FORM 10-Q

________________________________________

(Mark One)

☒ 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 1-37966

SEACOR Marine Holdings Inc.

(Exact Name of Registrant as Specified in Its Charter)

________________________________________

Delaware	47-2564547
(State or Other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification No.)
7910 Main Street, 2nd Floor
Houma, LA	70360
(Address of Principal Executive Offices)	(Zip Code)

985-876-5400

(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  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes  ☒     No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting 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  ☐ Accelerated filer  ☐ Non-accelerated filer ☒   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  ☒

The total number of shares of common stock, par value $.01 per share, outstanding as of November 13, 2018 was 20,437,818. The Registrant has no other class of common stock outstanding.

SEACOR MARINE HOLDINGS INC.

Table of Contents

Part I.	Financial Information		1
	Item 1.	Financial Statements (Unaudited)	1
		Condensed Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017	1
		Condensed Consolidated Statements of Loss for the Three and Nine Months Ended September 30, 2018 and 2017	2
		Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2018 and 2017	3
		Condensed Consolidated Statement of Changes in Equity for the Nine Months Ended September 30, 2018	4
		Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2018 and 2017	5
		Notes to Condensed Consolidated Financial Statements	6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
	Item 4.	Controls and Procedures	38
Part II.	Other Information		39
	Item 1.	Legal Proceedings	39
	Item 1A.	Risk Factors	39
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
	Item 3.	Default Upon Senior Securities	39
	Item 4.	Mine Safety Disclosures	39
	Item 5.	Other Information	39
	Item 6.	Exhibits	40

i

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SEACOR MARINE HOLDINGS INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

	September 30, 2018			December 31, 2017
ASSETS
Current Assets:
Cash and cash equivalents	$	102,864		$	110,234
Restricted cash		1,655			2,317
Receivables:
Trade, net of allowance for doubtful accounts of $4,077 and $4,039 in 2018 and 2017, respectively		75,349			45,616
Other		16,552			12,341
Inventories		3,646			3,756
Prepaid expenses and other		2,692			3,026
Total current assets		202,758			177,290
Property and Equipment:
Historical cost		1,279,000			1,179,836
Accumulated depreciation		(568,752	)		(560,160	)
		710,248			619,676
Construction in progress		82,953			70,157
Net property and equipment		793,201			689,833
Investments, at Equity, and Advances to 50% or Less Owned Companies		120,340			92,169
Construction Reserve Funds		35,596			45,361
Other Assets		3,582			3,851
	$	1,155,477		$	1,008,504
LIABILITIES AND EQUITY
Current Liabilities:
Current portion of long-term debt	$	17,426		$	22,858
Accounts payable and accrued expenses		20,480			24,024
Due to SEACOR Holdings		463			1,358
Accrued wages and benefits		4,497			5,087
Accrued income taxes		4,454			4,290
Accrued capital, repair and maintenance expenditures		27,812			19,618
Deferred revenues		9,754			10,104
Other current liabilities		17,255			11,879
Total current liabilities		102,141			99,218
Long-Term Debt		397,738			292,041
Conversion Option Liability on Convertible Senior Notes		17,928			6,832
Deferred Income Taxes		46,120			55,506
Deferred Gains and Other Liabilities		26,662			31,741
Total liabilities		590,589			485,338
Equity:
SEACOR Marine Holdings Inc. stockholders’ equity:
Common stock, $.01 par value, 60,000,000 shares authorized; 20,441,590 and 17,675,356 shares issued in 2018 and 2017, respectively		204			177
Additional paid-in capital		414,460			303,996
Retained earnings		134,628			216,511
Shares held in treasury		(86	)		—
Accumulated other comprehensive loss, net of tax		(13,945	)		(12,493	)
		535,261			508,191
Noncontrolling interests in subsidiaries		29,627			14,975
Total equity		564,888			523,166
	$	1,155,477		$	1,008,504

The accompanying notes are an integral part of these condensed consolidated financial statements

and should be read in conjunction herewith.

1

SEACOR MARINE HOLDINGS INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF LOSS

(in thousands, except share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Operating Revenues	$	70,255		$	47,813		$	182,677		$	124,440
Costs and Expenses:
Operating		51,423			41,258			141,416			119,119
Administrative and general		12,234			10,318			40,573			43,849
Depreciation and amortization		17,342			15,622			55,260			42,758
		80,999			67,198			237,249			205,726
Gains (Losses) on Asset Dispositions and Impairments, Net		586			(9,744	)		(1,002	)		(11,243	)
Operating Loss		(10,158	)		(29,129	)		(55,574	)		(92,529	)
Other Income (Expense):
Interest income		309			354			877			1,479
Interest expense		(7,761	)		(4,295	)		(20,383	)		(12,023	)
SEACOR Holdings management fees		—			—			—			(3,208	)
SEACOR Holdings guarantee fees		(5	)		(21	)		(24	)		(172	)
Loss on Debt Extinguishment		(638	)		—			(638	)		—
Marketable security (losses) gains, net		—			(698	)		—			10,931
Derivative gains (losses), net		4,387			13,022			(9,797	)		12,720
Foreign currency losses, net		(302	)		(106	)		(981	)		(1,389	)
Other, net		678			—			678			(1	)
		(3,332	)		8,256			(30,268	)		8,337
Loss Before Income Tax Benefit and Equity in Earnings of 50% or Less Owned Companies		(13,490	)		(20,873	)		(85,842	)		(84,192	)
Income Tax Expense (Benefit)		1,249			(5,823	)		(13,299	)		(23,045	)
Loss Before Equity in Earnings of 50% or Less Owned Companies		(14,739	)		(15,050	)		(72,543	)		(61,147	)
Equity in (Losses) Earnings of 50% or Less Owned Companies, Net of Tax		(1,027	)		(7,306	)		(1,540	)		(5,297	)
Net Loss		(15,766	)		(22,356	)		(74,083	)		(66,444	)
Net Income (Loss) attributable to Noncontrolling Interests in Subsidiaries		191			(1,881	)		(4,269	)		(4,582	)
Net Loss attributable to SEACOR Marine Holdings Inc.	$	(15,957	)	$	(20,475	)	$	(69,814	)	$	(61,862	)
Basic Loss Per Common Share and Warrants of SEACOR Marine Holdings Inc.	$	(0.71	)	$	(1.17	)	$	(3.42	)	$	(3.51	)
Diluted Loss Per Common Share and Warrants of SEACOR Marine Holdings Inc.	$	(0.71	)		(1.25	)	$	(3.42	)		(3.51	)
Weighted Average Common Shares and Warrants Outstanding:
Basic		22,512,886			17,550,663			20,391,297			17,617,420
Diluted		22,512,886			21,621,163			20,391,297			17,617,420

The accompanying notes are an integral part of these condensed consolidated financial statements

and should be read in conjunction herewith.

2

SEACOR MARINE HOLDINGS INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Net Loss	$	(15,766	)	$	(22,356	)	$	(74,083	)	$	(66,444	)
Other Comprehensive Loss:
Foreign currency translation (losses) gains		(533	)		1,433			(1,406	)		4,217
Derivative (losses) gains on cash flow hedges		(32	)		91			36			(347	)
Reclassification of derivative (gains) losses on cash flow hedges to interest expense		(305	)		32			(305	)		81
Reclassification of derivative losses on cash flow hedges to equity in earnings of 50% or less owned companies		46			49			217			384
		(824	)		1,605			(1,458	)		4,335
Income tax benefit		(11	)		(541	)		(46	)		(1,428	)
		(835	)		1,064			(1,504	)		2,907
Comprehensive Loss		(16,601	)		(21,292	)		(75,587	)		(63,537	)
Comprehensive Income (Loss) attributable to Noncontrolling Interests in Subsidiaries		172			(1,822	)		(4,321	)		(4,327	)
Comprehensive Loss attributable to SEACOR Marine Holdings Inc.	$	(16,773	)	$	(19,470	)	$	(71,266	)	$	(59,210	)

The accompanying notes are an integral part of these condensed consolidated financial statements

and should be read in conjunction herewith.

3

SEACOR MARINE HOLDINGS INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(in thousands)

	Common Stock		Additional Paid-In Capital		Shares Held in  Treasury			Retained Earnings			Accumulated Other Comprehensive Loss			Non- Controlling Interests In Subsidiaries			Total Equity
December 31, 2017		177		303,996		—			216,511			(12,493	)		14,975			523,166
Impact of adoption of accounting principle		—		—		—			(12,069	)		—			—			(12,069	)
December 31, 2017 as adjusted		177		303,996		—			204,442			(12,493	)		14,975			511,097
Issuance of Common Stock		23		42,973		—			—			—			—			42,996
Issuance of Warrants		—		62,809		—			—			—			—			62,809
Amortization of employee share awards		—		2,602		—			—			—			—			2,602
Exercise of options		1		812		—			—			—			—			813
Exercise of Warrants		3		—		(3	)		—			—			—			—
Restricted stock vesting		—		—		(83	)		—			—			—			(83	)
Director share awards		—		893		—			—			—			—			893
Acquisition of consolidated joint venture		—		—		—			—			—			(12,037	)		(12,037	)
Issuance of noncontrolling interests		—		375		—			—			—			31,010			31,385
Net loss		—		—		—			(69,814	)		—			(4,269	)		(74,083	)
Other comprehensive loss		—		—		—			—			(1,452	)		(52	)		(1,504	)
September 30, 2018		204		414,460		(86	)		134,628			(13,945	)		29,627			564,888

The accompanying notes are an integral part of these condensed consolidated financial statements

and should be read in conjunction herewith.

4

SEACOR MARINE HOLDINGS INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Nine Months Ended September 30,
	2018			2017
Cash Flows from Operating Activities
Net Loss	$	(74,083	)	$	(66,444	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization		55,260			42,758
Deferred financing costs amortization		1,784			2,028
Restricted stock amortization		2,602			363
Restricted stock vesting		(83	)		—
Director share awards		893			—
Debt discount amortization		4,025			3,316
Amortization of deferred gains against charter expense		(6,028	)		(6,109	)
Bad debt expense		86			(516	)
Loss from equipment sales, retirements or impairments		1,002			11,243
Gain from other sales		(428	)		—
Gains from sale of marketable securities, net		—			(10,931	)
Proceeds from sale of securities		—			51,877
Derivative losses (gains)		9,797			(12,720	)
Cash settlement on derivative transactions, net		(48	)		(372	)
Currency loss		980			1,389
Deferred income taxes		(20,980	)		(12,534	)
Equity losses, net		1,540			5,297
Dividends received from equity investees		1,324			2,442
Changes in Operating Assets and Liabilities:
Accounts receivables		(29,246	)		735
Other assets		1,003			3,575
Accounts payable and accrued liabilities		479			19,747
Net cash (used in) provided by operating activities		(50,121	)		35,144
Cash Flows from Investing Activities:
Purchases of property and equipment		(37,763	)		(52,353	)
Cash settlements on derivative transactions, net		—			(369	)
Proceeds from disposition of property and equipment		5,384			9,797
Net change in construction reserve fund		9,765			32,754
Sale of subsidiary joint venture		8,017			—
Investments in and advances to 50% or less owned companies		(30,253	)		(5,302	)
Return of investments and advances from 50% or less owned companies		—			7,350
Capital distributions from equity investees		6,463			—
Proceeds from sale of investment in equity investees		—			89
Payments received on third party notes receivable, net		99			—
Principal payments on notes due from equity investees		—			313
Cash assumed on consolidation of 50% or less owned companies		—			1,943
Business acquisitions, net of cash acquired		—			(9,751	)
Net cash used in investing activities		(38,288	)		(15,529	)
Cash Flows from Financing Activities:
Payments on long-term debt		(38,053	)		(8,572	)
Proceeds from issuance of long-term debt, net of issue costs		62,353			6,845
SMHI Restricted Stock		—			(2,656	)
Purchase of subsidiary shares from noncontrolling interests		—			(3,693	)
Proceeds from exercise of stock options and Warrants		813			—
Issuance of stock		42,996			—
Issuance of Warrants		12,809			—
Net cash provided by (used in) financing activities		80,918			(8,076	)
Effects of Exchange Rate Changes on Cash and Cash Equivalents		(541	)		1,666
Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash		(8,032	)		13,205
Cash, Restricted Cash and Cash Equivalents, Beginning of Period		112,551			118,771
Cash, Restricted Cash and Cash Equivalents, End of Period	$	104,519		$	131,976

The accompanying notes are an integral part of these condensed consolidated financial statements

and should be read in conjunction herewith.

5

SEACOR MARINE HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES

The condensed consolidated financial statements include the accounts of SEACOR Marine Holdings Inc. and its consolidated subsidiaries (the “Company”). In the opinion of management, all adjustments (consisting of normal recurring adjustments) have been made to fairly present the unaudited condensed consolidated financial statements for the periods indicated.  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 Company’s 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 Marine Holdings Inc. and its consolidated subsidiaries and any reference in this Quarterly Report on Form 10-Q to “SEACOR Marine” refers to SEACOR Marine 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.

SEACOR Marine was previously a subsidiary of SEACOR Holdings Inc. (along with its consolidated subsidiaries, other than SEACOR Marine and its subsidiaries, collectively referred to as “SEACOR Holdings”). On June 1, 2017, SEACOR Holdings completed a spin-off of SEACOR Marine by way of a pro rata dividend of SEACOR Marine’s common stock, par value $0.01 per share (“Common Stock”), all of which was then held by SEACOR Holdings, to SEACOR Holdings’ shareholders of record as of May 22, 2017 (the “Spin-off”). SEACOR Marine entered into certain agreements with SEACOR Holdings to govern SEACOR Marine’s relationship with SEACOR Holdings following the Spin-off, including a Distribution Agreement, two Transition Services Agreements, an Employee Matters Agreement and a Tax Matters Agreement. Immediately following the Spin-off, SEACOR Marine began to operate as an independent, publicly traded company.

Recently Adopted Accounting Standards. In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606)” to clarify the principles for recognizing revenue and to develop a common revenue standard and disclosure requirements. The new standard supersedes current revenue recognition requirements and industry-specific guidance. Under the new standard, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. The Company adopted this new standard on January 1, 2018 using the modified retrospective approach by recognizing the cumulative effect of initially applying the new standard as an adjustment to the opening balance of accumulated deficit. The Company implemented the necessary changes to its business processes, systems and controls to support recognition and disclosure of this ASU upon adoption. The Company's revenues are primarily based on leases or rental agreements with customers which are not addressed in the new standard. As a result, the adoption of the standard did not have a material effect on the Company's financial position, results of operations or cash flows, but did result in increased disclosures related to revenue recognition policies.

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230) – Restricted Cash”, which requires that amounts generally described as restricted cash be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period amounts shown on the statement of cash flows. The Company adopted this new standard on January 1, 2018. Retrospective presentation was required. The adoption of the standard did not have a material effect on the Company's financial position, results of operations or cash flows. In accordance with ASU 2016-18, the Company has included restricted cash as part of the beginning-of-period and end-of-period cash balances on the condensed consolidated statement of cash flows.

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 in exchange for those goods or services, which occurs when (or as) the Company satisfies its contractual obligations and transfers over control of the promised goods or services to its customers. Costs to obtain or fulfill a contract are expensed as incurred.

Lease Revenues. The primary source of the Company’s revenues is earned through time charter and bareboat agreements. Time charter and bareboat agreements are rental agreements that are recognized ratably over the lease term as the services are provided, typically on a per day basis. The charterer will take the vessel on hire for a specific period of time and uses the vessel to move cargo, people or equipment and will pay the Company a rate per day. 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 the risk of operation (see Note 15).

6

Revenues from Customers. The Company contracts with various customers to carry out management services for vessels as agents for and on behalf of ship owners.  These services include crew management, technical management, commercial management, insurance arrangements, sale and purchase of vessel, provisions and bunkering. As the manager, the Company undertakes to use its best endeavors to provide the agreed management services as agents for and on behalf of the owners in accordance with sound ship management practice and to protect and promote the interest of the owners in all matters relating to the provision of services hereunder. The Company also contracts with various customers to carry out management services regarding engineering for vessel construction and vessel conversions. The vast majority of the ship management agreements span over the length of one to three years and are typically billed on a monthly basis. The Company transfers control of the service to the customer and satisfies its performance obligation over the term of the contract, and therefore recognizes revenue over the term of the contract while related costs are expensed as incurred (see Note 15).

Revenue that does not meet these criteria is deferred until the criteria is met and are considered contract liabilities. Contract liabilities, included in other current liabilities in the accompanying condensed consolidated balance sheets, for the nine months ended September 30 were as follows (in thousands):

	2018			2017
Balance at beginning of period	$	10,104		$	6,953
Revenues deferred during the period		2,756			3,147
Revenues recognized during the period		(3,191	)		—
Balance at end of period	$	9,669		$	10,100

As of September 30, 2018, contract liabilities of $6.8 million related to the time charter of several offshore support vessels paid through the conveyance of an overriding royalty interest (the “Conveyance”) in developmental oil and gas producing properties operated by a customer in the U.S. Gulf of Mexico. Payments under the Conveyance, and the timing of such payments, were contingent upon production and energy sale prices. On August 17, 2012, the customer filed a voluntary petition for Chapter 11 bankruptcy. The Company is vigorously defending its interest in connection with the bankruptcy filing; however, payments received under the Conveyance subsequent to May 19, 2012 are subject to creditors’ claims in bankruptcy court. The Company will recognize revenues when reasonably assured of a judgment in its favor. All costs and expenses related to these charters were recognized as incurred.

As of September 30, 2018, contract liabilities of $2.5 million related to the time charter of an offshore support vessel to a customer for which collection was not reasonably assured. The Company will recognize revenues when collected or when collection is reasonably assured. All costs and expenses related to this charter were recognized as incurred.

The remaining balance of $0.4 million as of September 30, 2018 is comprised of contract liabilities to two customers for which collection is not reasonably assured.

Property and Equipment. Equipment, stated at cost, is depreciated using the straight-line method over the estimated useful life of the asset to an estimated salvage value. With respect to each class of asset, the estimated useful life is based upon a newly built asset being placed into service and represents the time period beyond which it is typically not justifiable for the Company to continue to operate the asset in the same or similar manner. From time to time, the Company may acquire older assets that have already exceeded the Company’s useful life policy, in which case the Company depreciates such assets based on its best estimate of remaining useful life, typically the next survey or certification date.

As of September 30, 2018, the estimated useful life (in years) of each of the Company’s major categories of new equipment was as follows:

Offshore Support Vessels:
Wind farm utility vessels	10
All other offshore support vessels (excluding wind farm utility)	20

Equipment maintenance and repair costs and the costs of routine overhauls, drydockings and inspections performed on vessels and equipment are charged to operating expense as incurred. Expenditures that extend the useful life or improve the marketing and commercial characteristics of equipment as well as major renewals and improvements to other properties are capitalized.

Certain interest costs incurred during the construction of equipment are capitalized as part of the assets��� carrying values and are amortized over such assets’ estimated useful lives. During the nine months ended September 30, 2018, capitalized interest totaled $1.6 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 values and impairment charges are recorded if the carrying value exceeds fair value. The Company performs its testing on an asset or asset group basis. Generally, fair value is determined using valuation techniques, such as expected discounted cash flows or appraisals, as appropriate. During the nine months ended September 30, 2018, the Company recognized $3.0 million of impairment charges primarily related to four anchor handling towing supply vessels removed from service and adjusted to scrap value.

7

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, the Company recognized impairment charges of $1.2 million related to one of its 50% or less owned companies which the Company believes will be unable to meet all of its liabilities.

Income Taxes. During the nine months ended September 30, 2018, the Company's effective income tax rate of 15.5% was primarily due to taxes provided on income attributable to noncontrolling interests, foreign sourced income not subject to U.S. income taxes, foreign taxes not creditable against U.S. income taxes, a return-to-provision adjustment and a reversal of an unrecognized tax benefit. During the nine months ended September 30, 2017, the Company’s effective income tax rate of 27.4% was primarily due to losses of foreign subsidiaries not benefited, non-deductible expenses associated with the Company's participation in SEACOR Holdings' share award plans and non-deductible Spin-off related expenses reimbursed to SEACOR Holdings.

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	$	25,006		$	33,910
Amortization of deferred gains included in operating expenses as a reduction to rental expense		(6,053	)		(6,109	)
Other adjustments		(416	)		(364	)
Balance at end of period	$	18,537		$	27,437

Accumulated Other Comprehensive Income (Loss). The components of accumulated other comprehensive loss were as follows (in thousands):

	SEACOR Marine Holdings Inc. Stockholders’ Equity									Noncontrolling Interests
	Foreign Currency Translation Adjustments			Derivative Income (Losses) on Cash Flow Hedges, net			Total			Foreign Currency Translation Adjustments			Derivative Income (Losses) on Cash Flow Hedges, net			Other Comprehensive Income (Loss)
December 31, 2017	$	(13,195	)	$	702		$	(12,493	)	$	(1,357	)	$	1
Other comprehensive income (loss)		(1,358	)		(48	)		(1,406	)		(48	)		(4	)	$	(1,458	)
Income tax expense		—			(46	)		(46	)		—			—			(46	)
Nine months Ended September 30, 2018	$	(14,553	)	$	608		$	(13,945	)	$	(1,405	)	$	(3	)	$	(1,504	)

Loss Per Share. Basic loss per common share of the Company is computed based on the weighted average number of common shares and warrants to purchase common shares at an exercise price of $0.01 per share (“Warrants”) issued and outstanding during the relevant periods.  The Warrants are included in the basic loss per common share because the shares issuable upon exercise of the Warrants are issuable for de minimis cash consideration and therefore not anti-dilutive.  Diluted loss per common share of the Company is computed based on the weighted average number of common shares and Warrants issued and outstanding plus the effect of potentially dilutive securities through the application of the if-converted method that assumes all common shares have been issued and outstanding during the relevant periods pursuant to the conversion of the Convertible Senior Notes. For the nine months ended September 30, 2018 and 2017, diluted earnings per common share of the Company excluded 2,183,708 and 4,070,500 common shares, respectively, issuable pursuant to the Company’s Convertible Senior Notes (see Note 4) as the effect of their inclusion in the computation would be anti-dilutive.  In addition, for the nine months ended September 30, 2018, diluted loss per common share of the Company excluded 196,338 shares of restricted stock and 732,191 shares of stock issuable upon exercise of outstanding stock options as the effect of their inclusion in the computation would be anti-dilutive.

While calculating the weighted average basic and diluted number of common shares and warrants issued and outstanding for the quarter ending September 30, 2018, the Company discovered that it had understated the weighted average basic and diluted common shares and warrants issued and outstanding for both the three months and six months ended June 30, 2018.  As a result of this error, the Company also overstated the basic and diluted loss per common share and warrant for the same two periods.  The correct weighted average basic and diluted common shares and warrants for the three months ended June 30, 2018 was 21,035,214, an increase of 1,056,698 versus the number previously reported.  This increase results in a corrected basic and diluted loss per common share and warrant of $1.19 versus $1.25 previously reported.  The correct weighted average basic and diluted common shares and warrants for the six months ended June 30, 2018 was 19,312,923, an increase of 1,345,681 versus the number previously reported.  This increase results in a corrected basic and diluted loss per common share and warrant of $2.79 versus $3.00 previously reported.  The net loss attributable to the Company for the three and six months ended June 30, 2018, as well as all prior year numbers were not impacted. 

Upon assessing the error from both a quantitative and qualitative perspective, the Company concluded the error was not material to the June 30, 2018 financial statements and has no impact on the September 30, 2018 financial statements presented herein.

New Accounting Pronouncements. On February 25, 2016, the Financial Accounting Standards Board (“FASB”) issued a comprehensive new leasing standard meant to improve transparency and comparability among companies by requiring lessees to recognize a lease liability and a corresponding right-of-use asset for virtually all lease contracts. It also requires additional disclosures about leasing arrangements. The Company will adopt the new standard on January 1, 2019 and will apply the transition provisions of the new standard at its adoption date with recognition of a cumulative-effect adjustment to the opening balance of retained earnings. The Company believes the adoption of the new standard will have a material impact on its consolidated financial position, results of operations and cash flows, estimated to be $40 million to $75 million in new right-of-use assets and corresponding lease liabilities 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.

In February 2018, the FASB issued a new accounting standard which allows a reclassification from accumulated other comprehensive income to retained earnings of stranded tax effects resulting from the Tax Cuts and Jobs Act passed in December 2017.  The standard is effective for interim and annual periods beginning after December 15, 2018.  The Company does not expect the adoption of the new standard to have a material impact on its consolidated financial position or its results of operations and cash flows.

In June 2018, the FASB issued a new accounting standard which addresses aspects of the accounting for nonemployee share-based payment transactions.  The standard is effective for interim and annual periods beginning after December 15, 2018.  The Company does not expect the adoption of the new standard to have a material impact on its consolidated financial position or its results of operations and cash flows.

In August 2018, the FASB issued a new accounting standard which provided guidance regarding the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement).  The standard is effective for interim and annual periods beginning after December 15, 2019.  The Company is evaluating the provisions of the standard, but does not expect the adoption of the new standard to have a material impact on its consolidated financial position or its results of operations and cash flows.

8

2. EQUIPMENT ACQUISITIONS AND DISPOSITIONS

During the nine months ended September 30, 2018, capital acquisitions were $44.6 million. Equipment deliveries during the nine months ended September 30, 2018 include two wind farm utility vessels and two platform supply vessels which were constructed through the SEACOSCO joint venture as described in Note 3 below. Equipment acquisitions include six liftboats contributed from Montco Offshore, LLC (“MOI”) to certain wholly-owned subsidiaries of Falcon Global Holdings LLC (“FGH”) as described in Note 4below, and two anchor handling towing supply vessels that were previously managed (but not owned) by the Company. 

 

During the nine months ended September 30, 2018, the Company sold one fast support vessel and two supply vessels previously retired and removed from service, one anchor handling towing supply vessel, two standby safety vessels, three fast support vessels, one wind farm utility vessel, and other property and equipment for net proceeds of $4.0 million ($3.9 million in cash and $0.1 million of previously received deposits) and gains of $2.0 million.  In addition, the Company received $1.4 million in deposits for future asset sales.

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

SEACOSCO. On January 17, 2018, the Company announced the formation of SEACOSCO Offshore LLC (“SEACOSCO”), a Marshall Islands entity jointly owned by the Company and affiliates of COSCO SHIPPING GROUP (“COSCO SHIPPING”).  SEACOSCO entered into contracts for the purchase of eight Rolls-Royce designed, new construction platform supply vessels (“PSVs”) from COSCO SHIPPING HEAVY INDUSTRY (GUANGDONG) CO., LTD (the “Shipyard”), an affiliate of COSCO SHIPPING, for approximately $161.1 million, of which 70% will be financed by the Shipyard and secured by the PSVs on a non-recourse basis to the Company.  SEACOSCO took delivery of two vessels in the quarter ending March 31, 2018, took title to another five of the PSVs in the quarter ending June 30, 2018 and expects to take title to one vessel in 2019.  Thereafter, the Shipyard, at its cost, will store the PSVs at its facility for periods ranging from six to 18 months.  The Company owns an unconsolidated 50% interest in SEACOSCO.  During the nine months ended September 30, 2018, the Company contributed capital of $27.0 million in cash. The expected remaining capital commitment of approximately $5.3 million will be due over the remainder of 2018 and the first half of 2019. The Company is responsible for full commercial, operational, and technical management of the vessels on a worldwide basis.

SEACOR Grant DIS.  As of September 30, 2018, the Company estimates that SEACOR Grant DIS will be unable to meet all its liabilities and has recorded a bad debt reserve of $0.5 million against SEACOR Grant DIS’s liability to the Company and an impairment charge of $1.2 million to reduce its investment carrying value to zero. SEACOR Grant DIS is currently in discussions to sell its one vessel to a third party, which may provide proceeds that are available to its debt holders including the Company.

SEACOR Marlin.The Company created a new subsidiary, SEACOR Marlin LLC (“SMLLC”) and contributed the Seacor Marlin supply vessel into SMLLC. On September 13, 2018, the Company sold 51% of SMLLC to MexMar Offshore (MI) LLC (“MexMar Offshore”), a wholly-owned subsidiary of MexMar, for $8.0 million in cash, which generated a gain of $0.4 million. The Seacor Marlin supply vessel was pledged as collateral under the MexMar credit facility, for which the Company receives an annual collateral fee. SMLLC is a 50% or less owned company and will be accounted for using the equity method of accounting.

OSV Partners. SEACOR OSV Partners I LP (“OSV Partners”), which owns and operates five offshore support vessels, had been in non-compliance with certain financial covenants under its term loan facility. On September 28, 2018, such facility, in the principal amount outstanding of $27.3 million, was restructured to, among other things, extend its maturity to September 28, 2021 and, in connection therewith, the Company participated in a $5.0 million preferred equity offering of OSV Partners and a subordinated loan in the amount of $5.0 million, investing $1.1 million in such preferred equity (and committing to invest an additional $1.1 million in such preferred equity if called by the general partner of OSV Partners prior to September 30, 2020) and providing $2.1 million of such loan.  The lenders to OSV Partners have no recourse to the Company for outstanding amounts under the facility and the Company is not obligated to make any future investment in or loan any money to OSV Partners.

Guarantees.The Company has guaranteed certain of the outstanding charter receivables of one of its managed 50% or less owned companies if a customer defaults in payment and the Company either fails to take enforcement action against the defaulting customer or fails to assign its right of recovery against the defaulting customer. As of September 30, 2018, the total amount guaranteed by the Company under this arrangement is $0.5 million.

 In addition, as of September 30, 2018, two of the Company's 50% or less owned companies have bank debt secured by, among other things, a first preferred mortgage on the Company's vessels.  The banks also have the authority to require the Company and its partners to fund uncalled capital commitments, as defined in the partnership agreements.  In such event, the Company would be required to contribute its allocable share of uncalled capital, which was, as of September 30, 2018, $1.0 million in the aggregate.  This liability is included in other long-term liabilities.

4. LONG-TERM DEBT

Convertible Senior Notes.  On December 1, 2015, the Company issued $175.0 million in aggregate principal amount of its Convertible Senior Notes (the “Convertible Senior Notes”), at an interest rate of 3.75%, due December 1, 2022, to investment funds managed and controlled by the Carlyle Group (collectively “Carlyle”). The Convertible Senior Notes are convertible into shares of Common Stock at a conversion rate of 23.26 shares per $1,000 in principal amount of such notes, subject to certain conditions, or, into Warrants to purchase an equal number of shares of Common Stock at an exercise price of $0.01 per share in order to facilitate the Company's compliance with the provisions of the Jones Act.

On May 2, 2018, the Company and Carlyle entered into an exchange transaction (the “Exchange”) pursuant to which Carlyle exchanged $50 million in principal amount of the Convertible Senior Notes for Warrants to purchase 1,886,792 shares of Common Stock (to facilitate compliance with the provisions of the Jones Act) at an exercise price of $0.01 per share, subject to adjustments (the “Carlyle Warrants”), representing an implied exchange rate of approximately 37.73 shares per $1,000 in principal amount of the Convertible Senior Notes (equivalent to an exchange price of $26.50 per share). The Carlyle Warrants have a 25-year term, which commenced May 2, 2018. The Company and Carlyle also amended the $125.0 million in principal amount of Convertible Senior Notes that remained outstanding following the Exchange to (i) increase the interest rate from 3.75% per annum to 4.25% per annum and (ii) extend the maturity date of the Convertible Senior Notes by 12 months to December 1, 2023.  Interest on the Convertible Senior Notes is payable semi-annually on June 15 and December 15 of each year.  

9

MOI Joint Venture. On February 8, 2018, a wholly-owned subsidiary of SEACOR Marine and MOI formed and capitalized a joint venture named Falcon Global Holdings LLC.  In connection therewith and MOI’s plan of reorganization, which was confirmed on January 18, 2018, MOI emerged from its Chapter 11 bankruptcy case. In accordance with the terms of a Joint Venture Contribution and Formation Agreement, the Company and MOI contributed certain liftboat vessels and other related assets to FGH and its designated subsidiaries and FGH and its designated subsidiaries assumed certain operating liabilities and indebtedness associated with the liftboat vessels and related assets. On February 8, 2018, Falcon Global USA LLC (“FGUSA”), a wholly-owned subsidiary of FGH, paid $15.0 million of MOI’s debtor-in-possession obligations and entered into a $131.1 million credit agreement comprised of a $116.1 million term loan (the “FGUSA Term Loan”) and a $15.0 million revolving loan facility (the “FGUSA Revolving Loan Facility”) bearing interest at a variable rate (currently 6.63%), maturing in 2024 and secured by vessels owned by wholly-owned subsidiaries of FGUSA (collectively, the “FGUSA Credit Facility”). The full amount of the FGUSA Term Loan and other amounts paid by affiliates of MOI satisfied in full the amounts outstanding under MOI’s pre-petition credit facilities. The FGUSA Credit Facility, apart from a guarantee of certain interest payments and participation fees for two years after the closing of the transactions, is non-recourse to SEACOR Marine and its subsidiaries other than FGUSA. The Company performed a fair market valuation of the debt reflecting a debt discount of $10.0 million, which will be amortized over the life of the FGUSA Credit Facility. Scheduled principal payments begin in 2020. During the nine months ending September 30, 2018, the Company borrowed $15.0 million under the FGUSA Revolving Loan Facility for working capital purposes.  The Company consolidates FGH as the Company holds 72% of the equity interest in FGH and is entitled to appoint a majority of the board of managers of FGH.

Windcat. During the nine months ended September 30, 2018, the Company converted €6.0 million denominated debt to pound sterling denominated debt, paying off approximately $7.5 million in euro denominated debt and borrowing approximately $8.5 million in pound sterling denominated debt, resulting in a net increase in USD borrowings of $1.0 million to be used for future capital commitments.

Seacor 88/888. On July 5, 2018, a wholly-owned subsidiary of SEACOR Marine entered into a new term loan of $11.0 million and used the funds to acquire two vessels that were previously managed (but not owned) by the Company.  The term loan matures in 2023, bears interest at a variable rate (currently 5.9%) and is secured by the two vessels. SEACOR Marine provided a limited guaranty of such loan under which claims recoverable from SEACOR Marine shall not exceed the lesser of (x) $5.5 million and (y) 50% of the obligations outstanding at the time a claim is made thereunder. In October 2018, the Company entered into an interest rate swap agreement on the notional value of $5.5 million related to this loan. 

Seacor Marine Foreign Holdings. On September 26, 2018, SEACOR Marine Foreign Holdings Inc. (“SMFH”), a wholly-owned subsidiary of SEACOR Marine, entered into a $130.0 million loan facility with a syndicate of lenders administered by DNB Bank ASA.  SMFH's obligations pursuant to the loan facility are secured by mortgages on 20 vessels owned by the Company's vessel owning subsidiaries as well as an assignment of earnings from those subsidiaries.  The loan matures in 2023 and bears interest at a variable rate (currently 6.1875%).  The obligations of SMFH under the loan facility are guaranteed by SEACOR Marine. The proceeds from the syndicated loan facility were used to pay off other credit facilities of subsidiaries of the Company ($101.3 million, made up of $99.9 million principal and $1.4 million accrued interest), resulting in a net increase in term debt of $30.1 million.  Principal payments of $3.3 million per quarter will begin in December 2018.  In October 2018, the Company entered into an interest rate swap agreement on the notional value of $65.5 million related to this debt.  As a result of this transaction, the Company recognized a loss of $0.6 million upon the extinguishment of debt.

Letters of Credit. As of September 30, 2018, the Company had outstanding letters of credit of $5.8 million securing one long-term debt obligation, $0.3 million securing one lease obligation and $2.5 million for labor and performance guarantees.

5. 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	%
Noncontrolling interests	(1.0	%)
Foreign earnings not subject to U.S. income tax	(3.2	)%
Foreign taxes not creditable against U.S. income tax	(2.9	)%
Unrecognized tax benefit	4.5	%
Return to provision adjustment	(4.0	)%
Other	1.1	%
	15.5	%

As of December 31, 2017, the Company's net operating loss carryforwards excluded potential tax benefits of $3.9 million as a result of uncertainty regarding interpretation of the new U.S. tax legislation signed into law on December 22, 2017. Subsequent guidance has confirmed that the Company should recognize the tax benefits of $3.9 million and therefore, for the nine months ending September 30, 2018, the Company removed the valuation allowance previously established against the net operating loss carryforwards.

During the preparation of the 2017 federal income tax return in the third quarter of 2018, the Company realized management overestimated the available foreign taxes that could be credited against the 2017 transition tax.  This resulted in an additional tax liability of $3.4 million on its 2017 federal income tax return.  This additional liability was recorded as a return-to-provision adjustment to tax expense during the three months ended September 30, 2018.  Upon assessing the out of period adjustment from both a quantitative and qualitative perspective, the Company believes that this out of period adjustment is immaterial to both the year ended December 31, 2017 and the three months ended September 30, 2018 financial statements. 

6. DERIVATIVE INSTRUMENTS AND HEDGING STRATEGIES

Derivative instruments are classified as either assets or liabilities based on their individual fair values. The fair values of the Company’s derivative instruments as of September 30, 2018 were as follows (in thousands):

	Derivative Asset(1)		Derivative Liability
Derivatives designated as hedging instruments:
Interest rate swap agreements (cash flow hedges)	$	—	$	10	(2)
		—		10
Derivatives not designated as hedging instruments:
Conversion option liability on Convertible Senior Notes		—		17,928
Interest rate swap agreements		1,565		25	(2)
	$	1,565	$	17,963

______________________

(1) Included in other receivables in the accompanying condensed consolidated balance sheets.

(2) Included in other current liabilities in the accompanying condensed consolidated balance sheets.

10

Cash Flow Hedges. The Company and certain of its 50% or less owned companies have interest rate swap agreements designated as cash flow hedges. By entering into these interest rate swap agreements, the Company and its 50% or less owned companies have converted the variable LIBOR or EURIBOR component of certain of their outstanding borrowings to a fixed interest rate. The Company recognized immaterial losses on derivative instruments designated as cash flow hedges during the nine months ended September 30, 2018. As of September 30, 2018, the interest rate swaps held by the Company and its 50% or less owned companies were as follows:

• Windcat Workboats had two interest rate swap agreements maturing in 2021 that call for the Company to pay a fixed rate of interest of (0.03)% on the aggregate notional value of €15.0 million (approximately $17.5 million) and receive a variable interest rate based on EURIBOR on the aggregate notional value.

• MexMar had five interest rate swap agreements with maturities in 2023 that call for MexMar to pay a fixed rate of interest ranging from 1.71% to 2.10% on the aggregate amortized notional value of $100.5 million and receive a variable interest rate based on LIBOR on the aggregate amortized notional value.  

Other Derivative Instruments.The Company recognized (losses) gains on derivative instruments not designated as hedging instruments for the nine months ended September 30 as follows (in thousands):

	2018			2017
Conversion option liability on Convertible Senior Notes	$	(11,096	)	$	13,119
Forward currency exchange, option and future contracts		—			(78	)
Interest rate swap agreements		1,299			(321	)
	$	(9,797	)	$	12,720

The conversion option liability relates to the bifurcated embedded conversion option in the Convertible Senior Notes (see Note 4 in this Quarterly Report on Form 10-Q and Note 7 in the Company's Annual Report on Form 10-K for the year ended December 31, 2017).

The Company and certain of its 50% or less owned companies have entered into interest rate swap agreements for the general purpose of providing protection against increases in interest rates, which might lead to higher interest costs. As of September 30, 2018, the interest rate swaps held by the Company or its 50% or less owned companies were as follows:

• OSV Partners had two interest rate swap agreements with maturities in 2020 that call for OSV Partners to pay a fixed rate of interest ranging from 1.89% to 2.27% on the aggregate amortized notional value of $29.2 million and receive a variable interest rate based on LIBOR on the aggregate amortized notional value.

On September 28, 2018, the Company refinanced and extinguished its debts related to the following interest rate swaps:

• Falcon Global International had an interest rate swap agreement maturing in 2022 that called for the Company to pay a fixed interest rate of 2.06% on the amortized notional value of $51.6 million and receive a variable interest rate based on LIBOR on the amortized notional value.  The swap was terminated on September 28, 2018 with de minimis breakage costs, and the $1.2 million fair market value of the swap was received in October 2018.

• Sea-Cat Crewzer II had an interest rate swap agreement maturing in 2019 that called for Sea-Cat Crewzer II to pay a fixed rate of interest of 1.52% on the amortized notional value of $19.1 million and receive a variable interest rate based on LIBOR on the amortized notional value. The swap was terminated on September 28, 2018 with de minimis breakage costs, and the $0.2 million fair market value of the swap was received in October 2018.

• Sea-Cat Crewzer had an interest rate swap agreement maturing in 2019 that called for Sea-Cat Crewzer to pay a fixed rate of interest of 1.52% on the amortized notional value of $16.9 million and receive a variable interest rate based on LIBOR on the amortized notional value. The swap was terminated on September 28, 2018 with de minimis breakage costs, and the $0.2 million fair market value of the swap was received in October 2018.

7. 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
Derivative instruments (included in other receivables)	$	—	$	1,565	$	—
Construction reserve funds		35,596		—		—
LIABILITIES
Derivative instruments		—		35		17,928

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Level 3 Measurement.  The fair value of the conversion option liability on the Convertible Senior Notes is estimated with significant inputs that are both observable and unobservable in the market and therefore is considered a Level 3 fair value measurement. The Company used a binomial lattice model that assumes the holders will maximize their value by finding the optimal decision between redeeming at the redemption price or converting into shares of Common Stock.  This model estimates the fair value of the conversion option as the differential in the fair value of the notes including the conversion option compared with the fair value of the notes excluding the conversion option.  The significant observable inputs used in the fair value measurement include the price of Common Stock and the risk free interest rate.  The significant unobservable inputs are the estimated Company credit spread and Common Stock volatility, which were based on comparable companies in the transportation and energy industries. 

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
Cash, cash equivalents and restricted cash	$	104,519	$	104,519	$	—	$	—
Investments, at cost, in 50% or less owned companies (included in other assets)		132	see below
LIABILITIES
Long-term debt, including current portion		415,164		—		416,888		—

The carrying value of cash, cash equivalents and restricted cash approximates fair value. The fair value of the Company’s long-term debt was estimated based upon quoted market prices or by using discounted cash flow analysis 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
Property and equipment:
Anchor handling towing supply	$	—	$	2,000	$	—
Liftboats		—		—		134,775

Property and equipment. During the nine months ended September 30, 2018, the Company recognized impairment charges of $3.0 million primarily associated with certain vessels (see Note 1).  The Level 2 fair values were determined based on the sales prices of similar property and equipment at scrap value. 

The Level 3 vessels listed above were contributed by MOI to wholly-owned subsidiaries of FGH and recorded at fair value. The Level 3 fair values were determined based on two separate third party valuations using significant inputs that are unobservable in the market. Due to limited market transactions, the primary valuation methodology applied by both appraisers was an estimated cost approach less economic depreciation for comparable aged vessels. The Level 3 fair value of the vessels was based on a simple average between the two appraisals.

The significant unobservable inputs used in the fair value measurement for the liftboats provided by the appraisers were based on i) quotes from local shipyards, ii) economic life ranging from 25 to 40 years and iii) economic obsolescence factor ranging from 45% to 50%. The calculated yearly physical depreciation was multiplied by the remaining useful life of each vessel, based on the date of build and the residual value was added back to arrive at a base cost approach value for each vessel.

8. WARRANTS

On April 26, 2018, the Company closed a private placement of its Common Stock and Warrants to purchase its Common Stock (which were issued to certain investors in place of Common Stock to facilitate compliance with Jones Act restrictions) for aggregate gross proceeds of $56,855,000 (the “PIPE Private Placement”) with certain qualified institutional buyers and other accredited investors. The PIPE Private Placement included the issuance of 2,168,586 shares of Common Stock (the “PIPE Shares”) and Warrants to purchase 674,164 shares of the Common Stock at an exercise price of $0.01 per share (the “PIPE Warrants”). The PIPE Warrants were issued to Proyectos Globales de Energia y Servicios CME, S.A. de C.V. a variable capital corporation (sociedad anónima de capital variable) incorporated and existing under the laws of the United Mexican States (“CME”) and have a 25-year term, which commenced April 26, 2018.

As indicated in Note 4, on May 2, 2018, the Company and Carlyle entered into the Exchange pursuant to which Carlyle exchanged $50.0 million in principal amount of the Convertible Senior Notes for the Carlyle Warrants. The Carlyle Warrants have a 25-year term, which commenced May 2, 2018. 

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On May 31, 2018, Carlyle exercised Carlyle Warrants to purchase a total of 250,585 shares of Common Stock (after giving effect to the withholding of 108 shares of Common Stock as payment for the exercise price of the Warrants - see Note 14) (the “Carlyle Warrant Exercise”). Following the Carlyle Warrant Exercise, Carlyle holds Warrants to purchase 1,636,099 shares of Common Stock at an exercise price of $0.01 per share.

On June 8, 2018, CME exercised PIPE Warrants and paid an aggregate cash exercise price of $0.01 per share to purchase a total of 38,857 shares of Common Stock (the “CME Warrant Exercise”). Following the CME Warrant Exercise, CME holds Warrants to purchase 635,307 shares of Common Stock at an exercise price of $0.01 per share. 

	Weighted Average Exercise Price		Number of Warrants
Balance as of December 31, 2017		—		—
Warrants issued - January 1 - September 30, 2018	$	0.01		2,560,956
Warrants exercised - January 1 - September 30, 2018	$	0.01		(289,550	)
Balance as of September 30, 2018	$	0.01		2,271,406

9. STOCKHOLDERS' EQUITY

On January 1, 2018, the Company adopted a new accounting standard issued by the FASB on October 24, 2016, which requires companies to account for the income tax effects of intercompany sales and transfers of assets other than inventory.  The impact of the adoption of the new standard resulted in a reduction of $12.1 million to the Company’s opening retained earnings.

On February 8, 2018, the Company formed FGH, a joint venture between the Company and MOI.  In accordance with the terms of the Joint Venture Contribution and Formation Agreement, the Company and MOI contributed certain liftboat vessels and other related assets to the joint venture and assumed certain operating liabilities and indebtedness associated with the liftboat vessels and related assets.  The transaction consolidates the fifteen liftboat vessels operated by the Company and six liftboat vessels previously operated by MOI. FGUSA, a wholly-owned subsidiary of FGH, paid $15.0 million of MOI's debtor-in-possession obligations and entered into a $131.1 million credit agreement comprised of the FGUSA Term Loan and the FGUSA Revolving Loan Facility. The Company performed a fair market valuation of the debt reflecting a debt discount of $10.0 million, which will be amortized over the life of the FGUSA Credit Facility.  

On March 26, 2018, the Company issued 103,213 shares of Common Stock to an accredited investor for a total of $1.8 million in gross proceeds pursuant to a private placement in reliance on the exemption from registration set forth in Section 4(a)(2) of the Securities Act.

As indicated in Note 8, on April 26, 2018, the Company closed the PIPE Private Placement for aggregate gross proceeds of $56,855,000 with certain qualified institutional buyers and other accredited investors. The PIPE Private Placement included the issuance of the PIPE Shares and the PIPE Warrants. The PIPE Shares and PIPE Warrants were issued in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act.

As indicated in Notes 4 and 8, on May 2, 2018, the Company and Carlyle entered into the Exchange pursuant to which Carlyle exchanged $50.0 million in principal amount of the Convertible Senior Notes for the Carlyle Warrants. The Carlyle Warrants were issued in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act.

10. 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
Falcon Global Holdings		28.0%	$	27,024	$	12,087
Windcat Workboats		12.5%		2,311		2,608
Other		1.8%		292		280
			$	29,627	$	14,975

Falcon Global Holdings.  The Company formed FGH, a joint venture between the Company and MOI.  The Company and MOI contributed certain liftboat vessels and other related assets to FGH and its designated subsidiaries and assumed certain operating liabilities and indebtedness associated with the liftboat vessels and related assets, including a previous joint venture (“Falcon Global International” or “FGI”) that owned and operated two liftboats.  The transaction consolidates the 15 liftboat vessels operated by the Company and six liftboat vessels previously operated by MOI.   The total capital contributed to FGH was approximately $112.5 million of which, $43.3 million was transferred from FGI and $18.8 million was contributed by MOI and recorded at fair value, with the remaining capital contributed by the Company.  As a result of the transaction, the noncontrolling interest in the joint venture held by MOI is 28.0%.

During the nine months ended September 30, 2018, the net loss of Falcon Global Holdings was $14.2 million, of which $4.0 million was attributable to noncontrolling interests.

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Windcat Workboats. Windcat Workboats owns and operates the Company’s wind farm utility vessels that are primarily used to move personnel and supplies in the major offshore wind markets of Europe. As of September 30, 2018, the net assets of Windcat Workboats were $18.5 million. During the nine months ended September 30, 2018, the net loss of Windcat Workboats was $2.0 million, of which $0.2 million was attributable to noncontrolling interests.

11.    COMMITMENTS AND CONTINGENCIES

As of September 30, 2018, the Company’s unfunded capital commitments were $34.5 million for two fast support vessels, three supply vessels, two wind farm utility vessels and a conversion of one supply vessel to standby safety vessel.  Of the amount of unfunded capital commitments, $2.7 million is payable during the remainder of 2018,$17.3 million is payable during 2019 and $14.5 million is payable during 2020.  The Company has indefinitely deferred an additional $20.8 million of orders with respect to two fast support vessels for which the Company had previously reported unfunded capital commitments. The delivery dates and payment of certain costs (originally scheduled for payment in 2018,2019 and 2020) for such vessels are uncertain as the Company, at its option, may defer their construction for an indefinite period of time.  The Company's remaining commitment related to capital commitments for SEACOSCO is approximately $5.3 million.

As of September 30, 2018, the Company has guaranteed certain performance contracts of one of its subsidiaries by setting aside £0.9 million from its available borrowing under an unsecured line of credit.  If the contract were not fulfilled, the line of credit would be drawn to fund the guarantee.

As of September 30, 2018, SEACOR Holdings has guaranteed $46.1 million on behalf of the Company for various obligations including: letter of credit obligations, performance obligations under sale-leaseback arrangements and invoiced amounts for funding deficits under the MNOPF. Pursuant to a Distribution Agreement with SEACOR Holdings, SEACOR Holdings charges the Company a fee of 0.5% on outstanding guaranteed amounts, which declines as the obligations are settled by the Company.

In the normal 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.

12.    MULTI-EMPLOYER PENSION PLANS

Merchant Navy Ratings Pension Fund (“MNRPF”). The cumulative funding deficits of the MNRPF are being recovered by additional annual contributions from current employers that are subject to adjustment following the results of tri-annual actuarial valuations. Based on an actuarial valuation as of March 2017, the cumulative funding deficit of the MNRPF was $291.9 million (£221.0 million). On July 20, 2018, the Company was notified of additional contributions due and recognized in the second quarter of 2018 payroll related expenses of $1.19 million (£0.9 million) for its allocated share of the cumulative funding deficit including portions deemed uncollectible due to the non-existence or liquidation of certain former employers. These additional contributions are payable in four annual installments, which began in October 2018. Depending upon the results of future actuarial valuations, it is possible that the plan could experience further funding deficits that will require the Company to recognize payroll related operating expenses for those periods.

13.     SHARE BASED COMPENSATION

Transactions in connection with the Company's 2017 Equity Incentive Plan during the nine months ended September 30, 2018 were as follows:

Director stock awards granted	19,285
Restricted stock awards granted	120,600
Stock Options Activities:
Outstanding as of December 31, 2017	613,700
Granted	183,491
Exercised	65,000
Outstanding as of September 30, 2018	732,191
Shares Available for future grants as of September 30, 2018	1,232,924

14.     STOCK REPURCHASES

For the nine months ended September 30, 2018, the Company acquired for treasury 3,664 shares of Common Stock for an aggregate purchase price of $83,922 from its employees to cover their tax withholding obligations upon the lapsing of restrictions on share awards. These shares were purchased in accordance with the terms of the Company's 2017 Equity Incentive Plan and not pursuant to the repurchase authorizations granted by the Company's Board of Directors. On May 24, 2018, in connection with the net settlement of the Carlyle Warrant Exercise, the Company acquired for treasury 108 shares of Common Stock for an aggregate purchase price of $2,562 from Carlyle to cover the $0.01 exercise price of the Carlyle Warrants. (See Note 8).  

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15.   SEGMENT INFORMATION

The Company’s segment presentation and basis of measurement of segment profit or loss are as previously described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. The following tables summarize the operating results, capital expenditures and assets of the Company’s reportable segments (in thousands).

	United States (primarily Gulf of Mexico)			Africa (primarily West Africa)			Middle East and Asia			Brazil, Mexico, Central and South America			Europe (primarily North Sea)			Total
For the Three Months Ended September 30, 2018
Time Charter Statistics:
Average Rates Per Day	$	12,476		$	9,315		$	8,156		$	17,604		$	4,287		$	7,323
Fleet Utilization		30	%		82	%		76	%		80	%		85	%		68	%
Fleet Available Days		3,433			1,475			2,024			531			5,154			12,617
Operating Revenues:
Time charter	$	12,800		$	11,201		$	12,590		$	7,479		$	18,832		$	62,902
Bareboat charter		—			—			—			1,168			—			1,168
Other marine services		2,722			1,777			(83	)		416			1,353			6,185
		15,522			12,978			12,507			9,063			20,185			70,255
Direct Costs and Expenses:
Operating:
Personnel		4,853			4,486			4,361			1,662			9,659			25,021
Repairs and maintenance		1,801			2,438			2,091			312			2,566			9,208
Drydocking		375			1,201			352			103			2,791			4,822
Insurance and loss reserves		612			323			385			163			374			1,857
Fuel, lubes and supplies		1,120			1,081			892			427			1,170			4,690
Other		154			1,103			952			350			441			3,000
		8,915			10,632			9,033			3,017			17,001			48,598
Direct Vessel Profit	$	6,607		$	2,346		$	3,474		$	6,046		$	3,184			21,657
Other Costs and Expenses:
Operating:
Leased-in equipment	$	1,853		$	960		$	—		$	—		$	12			2,825
Administrative and general																	12,234
Depreciation and amortization	$	5,227		$	2,381		$	4,207		$	2,521		$	3,006			17,342
																	32,401
Gains on Asset Dispositions and Impairments																	586
Operating Loss																$	(10,158	)

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	United States (primarily Gulf of Mexico)			Africa (primarily West Africa)			Middle East and Asia			Brazil, Mexico, Central and South America			Europe (primarily North Sea)			Total
For the Nine Months Ended September 30, 2018
Time Charter Statistics:
Average Rates Per Day	$	10,832		$	9,425		$	8,156		$	17,807		$	4,721		$	7,229
Fleet Utilization		23	%		86	%		75	%		65	%		77	%		61	%
Fleet Available Days		11,193			4,066			6,161			1,166			15,159			37,746
Operating Revenues:
Time charter	$	27,834		$	33,117		$	37,555		$	13,409		$	54,955		$	166,870
Bareboat charter		—			—			—			3,467			—			3,467
Other marine services		6,053			3,414			(1,005	)		1,371			2,507			12,340
		33,887			36,531			36,550			18,247			57,462			182,677
Direct Costs and Expenses:
Operating:
Personnel		13,481			12,873			12,452			3,257			29,367			71,430
Repairs and maintenance		4,024			5,457			8,095			649			7,126			25,351
Drydocking		1,810			2,113			413			114			5,741			10,191
Insurance and loss reserves		1,948			789			982			399			863			4,981
Fuel, lubes and supplies		2,513			2,650			2,848			841			3,505			12,357
Other		208			3,541			2,996			898			973			8,616
		23,984			27,423			27,786			6,158			47,575			132,926
Direct Vessel Profit	$	9,903		$	9,108		$	8,764		$	12,089		$	9,887			49,751
Other Costs and Expenses:
Operating:
Leased-in equipment	$	5,571		$	2,885		$	—		$	—		$	34			8,490
Administrative and general																	40,573
Depreciation and amortization	$	17,677		$	8,112		$	14,608		$	6,020		$	8,843			55,260
																	104,323
Losses on Asset Dispositions and Impairment																	(1,002	)
Operating Loss																$	(55,574	)
As of September 30, 2018
Property and Equipment:
Historical cost	$	479,303		$	186,729		$	310,110		$	102,776		$	200,082		$	1,279,000
Accumulated depreciation		(242,364	)		(53,498	)		(81,121	)		(47,374	)		(144,395	)		(568,752	)
	$	236,939		$	133,231		$	228,989		$	55,402		$	55,687		$	710,248

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	United States (primarily Gulf of Mexico)			Africa (primarily West Africa)			Middle East and Asia			Brazil, Mexico, Central and South America			Europe (primarily North Sea)			Total
For the Three Months Ended September 30, 2017
Time Charter Statistics:
Average Rates Per Day	$	7,212		$	10,611		$	7,138		$	16,060		$	4,390		$	6,006
Fleet Utilization		16	%		71	%		61	%		49	%		90	%		60	%
Fleet Available Days		3,859			1,283			2,194			184			5,060			12,580
Operating Revenues:
Time charter	$	4,587		$	9,700		$	9,490		$	1,439		$	20,051		$	45,267
Bareboat charter		—			—			—			1,168			—			1,168
Other marine services		1,116			(310	)		(341	)		159			754			1,378
		5,703			9,390			9,149			2,766			20,805			47,813
Direct Costs and Expenses:
Operating:
Personnel		4,455			3,588			4,731			326			9,079			22,179
Repairs and maintenance		1,289			1,324			2,309			110			2,378			7,410
Drydocking		1,109			311			(102	)		—			961			2,279
Insurance and loss reserves		598			157			363			75			203			1,396
Fuel, lubes and supplies		249			693			1,115			33			790			2,880
Other		123			704			1,192			69			190			2,278
		7,823			6,777			9,608			613			13,601			38,422
Direct Vessel (Loss) Profit	$	(2,120	)	$	2,613		$	(459	)	$	2,153		$	7,204			9,391
Other Costs and Expenses:
Operating:
Leased-in equipment	$	1,870		$	966		$	—		$	—		$	—			2,836
Administrative and general																	10,318
Depreciation and amortization	$	5,224		$	2,456		$	4,320		$	1,025		$	2,597			15,622
																	28,776
Losses on Asset Dispositions and Impairments																	(9,744	)
Operating Loss																$	(29,129	)

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	United States (primarily Gulf of Mexico)			Africa (primarily West Africa)			Middle East and Asia			Brazil, Mexico, Central and South America			Europe (primarily North Sea)			Total
For the Nine Months Ended September 30, 2017
Time Charter Statistics:
Average Rates Per Day	$	8,661		$	10,192		$	6,916		$	16,060		$	4,328		$	5,806
Fleet Utilization		12	%		67	%		55	%		24	%		84	%		54	%
Fleet Available Days		11,920			3,425			5,970			379			15,015			36,709
Operating Revenues:
Time charter	$	12,471			23,333		$	22,728		$	1,439		$	54,829		$	114,800
Bareboat charter		—			—			—			3,467			—			3,467
Other marine services		3,140			97			645			396			1,895			6,173
		15,611			23,430			23,373			5,302			56,724			124,440
Direct Costs and Expenses:
Operating:
Personnel		11,768			9,624			12,001			487			25,667			59,547
Repairs and maintenance		2,963			5,102			6,832			230			6,303			21,430
Drydocking		1,992			2,051			414			—			3,140			7,597
Insurance and loss reserves		2,608			696			1,062			86			629			5,081
Fuel, lubes and supplies		1,104			1,956			2,547			60			2,745			8,412
Other		246			2,221			3,718			73			677			6,935
		20,681			21,650			26,574			936			39,161			109,002
Direct Vessel (Loss) Profit	$	(5,070	)	$	1,780		$	(3,201	)	$	4,366		$	17,563			15,438
Other Costs and Expenses:
Operating:
Leased-in equipment	$	6,286		$	2,905		$	862		$	—		$	64			10,117
Administrative and general																	43,849
Depreciation and amortization	$	16,573		$	6,105		$	10,826		$	2,474		$	6,780			42,758
																	96,724
Losses on Asset Dispositions and Impairment																	(11,243	)
Operating Loss																$	(92,529	)
As of September 30, 2017
Property and Equipment:
Historical cost	$	429,500		$	189,845		$	328,263		$	78,976		$	177,825		$	1,204,409
Accumulated depreciation		(237,210	)		(54,052	)		(93,535	)		(42,590	)		(131,532	)		(558,919	)
	$	192,290		$	135,793		$	234,728		$	36,386		$	46,293		$	645,490

The Company’s investments in 50% or less owned companies, which are accounted for under the equity method, also contribute to its consolidated results of operations. As of September 30, 2018, the Company’s investments, at equity and advances to 50% or less owned companies in MexMar and its other 50% or less owned companies were $63.8 million and $56.5 million, respectively. Equity in (losses) earnings of 50% or less owned companies, net of tax for the nine months ended September 30 were as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
MexMar	$	137		$	793		$	2,644		$	3,382
Other		(1,164	)		(8,099	)		(4,184	)		(8,679	)
	$	(1,027	)	$	(7,306	)	$	(1,540	)	$	(5,297	)

16.    SUBSEQUENT EVENT

In October 2018, the Company entered into interest rate swap agreements for the purpose of providing protection against increases in interest rates, which might lead to higher interest costs on the Company's debt that bear interest at a floating rate.  These agreements hedged 50% of the $11.0 million of debt incurred by Seacor 88 and Seacor 888 and 50% of the $130.0 million syndicated credit facility incurred by SMFH. The Company is currently evaluating the swap agreements for hedge accounting effectiveness.

Subsequent to September 30, 2018, the Company sold three fast support vessels and two liftboats for gross proceeds of $8.2 million and a net gain of $5.1 million. $7.0 million of such gross proceeds were used for the repayment of existing indebtedness. 

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 to the public 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. 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 decreased demand and loss of revenues as a result of a decline in the price of oil and resulting decrease in capital spending by oil and gas companies, an oversupply of newly built offshore support vessels, additional safety and certification requirements for drilling activities in the U.S. Gulf of Mexico and delayed approval of applications for such activities, the possibility of U.S. government implemented moratoriums directing operators to cease certain drilling activities in the U.S. Gulf of Mexico and any extension of such moratoriums, 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 in response to a decline in the price of oil, increased government legislation and regulation of the Company’s businesses could increase cost of operations, increased competition if the Jones Act and related regulations are repealed, liability, legal fees and costs in connection with the provision of emergency response services, such as the response to the oil spill as a result of the sinking of the Deepwater Horizon in April 2010, 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 to the status of applicable trade treaties including as a result of the U.K.'s impending exit from the European Union, changes in foreign and domestic oil and gas exploration and production activity, safety record requirements, compliance with U.S. and foreign government laws and regulations, including environmental laws and regulations and economic sanctions, the dependence 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 Jones Act and related regulations on the amount of foreign ownership of the Company’s Common Stock, operational risks, effects of adverse weather conditions and seasonality, adequacy of insurance coverage, the ability of the Company to maintain effective internal controls over financial reporting, in accordance with Section 404 of the Sarbanes-Oxley Act, 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 and 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 provides global marine and support transportation services to offshore oil and gas exploration, development and production facilities worldwide. The Company currently operates a diverse fleet of 176 support and specialty vessels, of which 137 are owned or leased-in, 32 are joint ventured and seven are managed on behalf of unaffiliated third parties. The primary users of the Company’s services are major integrated oil companies, large independent oil and gas exploration and production companies and emerging independent companies.

The Company operates its fleet in five principal geographic regions: the United States, primarily in the Gulf of Mexico; Africa, primarily in West Africa; the Middle East and Asia; Brazil, Mexico, Central and South America; and Europe, primarily in the North Sea. The Company’s vessels are highly mobile and regularly and routinely move between countries within a geographic region. In addition, the Company’s vessels are redeployed among its geographic regions, subject to flag restrictions, as changes in market conditions dictate. The number and type of vessels operated, their rates per day worked and their utilization levels are the key determinants of the Company’s operating results and cash flows. Unless a vessel is cold-stacked, there is little reduction in daily running costs for the vessels and, consequently, operating margins are most sensitive to changes in rates per day worked and utilization. The Company manages its fleet utilizing a global network of shore side support, administrative and finance personnel.

Offshore oil and gas market conditions deteriorated beginning in 2014 and continued to deteriorate when oil prices hit a thirteen-year low of less than $27 per barrel (on the New York Mercantile Exchange) in February 2016. As of September 30, 2018, oil prices had increased from the February 2016 lows to a price of approximately $76 per barrel. While the Company has experienced what it believes is a beginning of a recovery, it continued to experience difficult market conditions through the third quarter of 2018. 

19

These low oil prices and the subsequent decline in offshore exploration forced many operators in the industry to restructure or liquidate assets. The Company continues to closely monitor the reactivation of existing offshore support vessels as well as the delivery of newly built offshore support vessels to the industry-wide fleet, which is creating situations of oversupply, further lowering the demand for the Company’s existing offshore support vessel fleet. A continuation of (i) low customer exploration and drilling activity levels and (ii) the increasing size of the global offshore support vessel fleet as vessels are reactivated and newly built vessels are placed into service could, in isolation or together, have a material adverse effect on the Company’s results of operations, financial position and cash flows.

As shipyards, finance parties and industry operators have been forced to restructure or liquidate assets, the Company has reviewed discreet opportunities to acquire or takeover the management of certain assets. In this industry context, the Company may from time to time deploy capital in connection with transactions that it determines enhance market coverage and/or represent a substantial discount to replacement value.

Recent Events 

Seacor 88/888. On July 5, 2018, the Company acquired 100% of the membership interests in two Marshall Islands limited liability companies, financed by a term loan of $11.0 million.  Each Marshall Islands company owns one 2013-built AHTS vessel which was previously managed (but not owned) by the Company.  The vessels are currently operating under contract in the Middle East and West Africa regions. The term loan matures in 2023, bears interest at a variable rate (currently 5.9%) and is secured by the two vessels.  SEACOR Marine provided a limited guaranty of such loan under which claims recoverable from SEACOR Marine shall not exceed the lesser of (x) $5.5 million and (y) 50% of the obligations outstanding at the time a claim is made thereunder.  In October 2018, the Company entered into an interest rate swap agreement on the notional value of $5.5 million related to this loan. 

SEACOR Marlin.  The Company created a new subsidiary, SEACOR Marlin LLC (“SMLLC”) and contributed the Seacor Marlin supply vessel into SMLLC.  On September 13, 2018, the Company sold 51% of SMLLC to MexMar Offshore (MI) LLC (“MexMar Offshore”), a wholly-owned subsidiary of MexMar, for $8.0 million in cash and generated a gain of $0.4 million.  The Seacor Marlin supply vessel was pledged as collateral under the MexMar credit facility, for which the Company receives an annual collateral fee. SMLLC is a 50% or less owned company and will be accounted for using the equity method of accounting. 

Seacor Marine Foreign Holdings Debt.  On September 26, 2018, SEACOR Marine Foreign Holdings Inc. (“SMFH”), a wholly-owned subsidiary of SEACOR Marine, entered into a $130.0 million loan facility with a syndicate of lenders administered by DNB Bank ASA.  SMFH's obligations pursuant to the loan facility are secured by mortgages on 20 vessels owned by the Company's vessel owning subsidiaries as well as an assignment of earnings from those subsidiaries.  The loan matures in 2023 and bears interest at a variable rate (currently 6.1875%).  The obligations of SMFH under the loan facility are guaranteed by SEACOR Marine. The proceeds from the syndicated loan facility were used to pay off other credit facilities of subsidiaries of the Company ($101.3 million, made up of $99.9 million principal and $1.4 million accrued interest), resulting in a net increase in term debt of $30.1 million.  Principal payments of $3.2 million per quarter begin in December 2018. In October, 2018, the Company entered into an interest rate swap agreement on the notional value of $65.0 million related to this debt. As a result of this transaction, the Company recognized a loss of $0.6 million upon the early extinguishment of debt. 

20

Consolidated Results of Operations

The sections below provide an analysis of the Company's results of operations for the three months (“Current Year Quarter”) and nine months (“Current Nine Months”) ended September 30, 2018 compared with the three months (“Prior Year Quarter”) and nine months (“Prior Nine Months”) ended September 30, 2017. For the periods indicated, the Company’s consolidated results of operations were as follows (in thousands, except statistics): 

	Three Months Ended September 30,										Nine Months Ended September 30,
	2018					2017					2018					2017
Time Charter Statistics:
Average Rates Per Day Worked (excluding wind farm)	$	10,186				$	8,565				$	9,697				$	8,439
Average Rates Per Day	$	7,323				$	6,006				$	7,229				$	5,806
Fleet Utilization (excluding wind farm)		60	%				49	%				56	%				43	%
Fleet Utilization		68	%				60	%				61	%				54	%
Fleet Available Days (excluding wind farm)		9,119					9,176					27,461					26,608
Fleet Available Days		12,617					12,580					37,746					36,709
Operating Revenues:
Time charter	$	62,902		90	%	$	45,267		95	%	$	166,870		92	%	$	114,800		92	%
Bareboat charter		1,168		1	%		1,168		2	%		3,467		2	%		3,467		3	%
Other marine services		6,185		9	%		1,378		3	%		12,340		6	%		6,173		5	%
		70,255		100	%		47,813		100	%		182,677		100	%		124,440		100	%
Costs and Expenses:
Operating:
Personnel		25,021		35	%		22,178		46	%		71,430		39	%		59,546		48	%
Repairs and maintenance		9,208		13	%		7,411		15	%		25,351		14	%		21,431		17	%
Drydocking		4,822		7	%		2,278		5	%		10,191		5	%		7,597		6	%
Insurance and loss reserves		1,857		3	%		1,396		3	%		4,981		3	%		5,081		4	%
Fuel, lubes and supplies		4,690		7	%		2,880		6	%		12,357		7	%		8,412		7	%
Other		3,000		4	%		2,278		5	%		8,616		5	%		6,935		6	%
Leased-in equipment		2,825		4	%		2,837		6	%		8,490		5	%		10,117		8	%
		51,423		73	%		41,258		86	%		141,416		78	%		119,119		96	%
Administrative and general		12,234		17	%		10,318		22	%		40,573		22	%		43,849		35	%
Depreciation and amortization		17,342		25	%		15,622		33	%		55,260		30	%		42,758		34	%
		80,999		115	%		67,198		141	%		237,249		130	%		205,726		165	%
Gains (Losses) on Asset Dispositions and Impairments, Net		586		1	%		(9,744	)	(20	)%		(1,002	)	—	%		(11,243	)	(9	)%
Operating Loss		(10,158	)	(14	)%		(29,129	)	(61	)%		(55,574	)	(30	)%		(92,529	)	(74	)%
Other (Expense) Income, Net		(3,332	)	(5	)%		8,256		17	%		(30,268	)	(16	)%		8,337		7	%
Loss Before Income Tax Benefit and Equity in Earnings (Losses) of 50% or Less Owned Companies		(13,490	)	(19	)%		(20,873	)	(44	)%		(85,842	)	(46	)%		(84,192	)	(67	)%
Income Tax Benefit		1,249		2	%		(5,823	)	(12	)%		(13,299	)	(7	)%		(23,045	)	(18	)%
Loss Before Equity in Earnings (Losses) of 50% or Less Owned Companies		(14,739	)	(21	)%		(15,050	)	(32	)%		(72,543	)	(39	)%		(61,147	)	(49	)%
Equity in (Losses) Earnings of 50% or Less Owned Companies		(1,027	)	(2	)%		(7,306	)	(15	)%		(1,540	)	(1	)%		(5,297	)	(4	)%
Net Loss		(15,766	)	(23	)%		(22,356	)	(47	)%		(74,083	)	(40	)%		(66,444	)	(53	)%
Net Loss attributable to Noncontrolling Interests in Subsidiaries		191		—	%		(1,881	)	(4	)%		(4,269	)	(2	)%		(4,582	)	(3	)%
Net Loss attributable to SEACOR Marine Holdings Inc.	$	(15,957	)	(23	)%	$	(20,475	)	(43	)%	$	(69,814	)	(38	)%	$	(61,862	)	(50	)%

Direct Vessel Profit.  Direct vessel profit (defined as operating revenues less operating expenses excluding leased-in equipment, “DVP”) is the Company's measure of segment profitability when applied to reportable segments and a non-GAAP measure when applied to individual vessels, fleet categories or the combined fleet.  DVP is a critical financial measure used by the Company to analyze and compare the operating performance of its individual vessels, fleet categories, regions and combined fleet, without regard to financing decisions (depreciation for owned vessel vs. leased-in expense for leased-in vessels).  DVP is also useful when comparing the Company's fleet's performance against those of its competitors who may have differing fleet financing structures.

DVP by region and by vessel class has material limitations as an analytical tool in that it does not reflect all of the costs associated with the operation of the Company’s fleet and it should not be considered in isolation or used as a substitute for the Company’s results as reported under GAAP. A reconciliation of DVP by region and by vessel class to operating loss, its most comparable GAAP measure, is included in the tables below.

21

The following tables summarize the operating results and property and equipment for the Company’s reportable segments for the periods indicated (in thousands, except statistics):

	United States (primarily Gulf of Mexico)			Africa (primarily West Africa)			Middle East and Asia			Brazil, Mexico, Central and South America			Europe (primarily North Sea)			Total
For the Three Months Ended September 30, 2018
Time Charter Statistics:
Average Rates Per Day	$	12,476		$	9,315		$	8,156		$	17,604		$	4,287		$	7,323
Fleet Utilization		30	%		82	%		76	%		80	%		85	%		68	%
Fleet Available Days		3,433			1,475			2,024			531			5,154			12,617
Operating Revenues:
Time charter	$	12,800		$	11,201		$	12,590		$	7,479		$	18,832		$	62,902
Bareboat charter		—			—			—			1,168			—			1,168
Other marine services		2,722			1,777			(83	)		416			1,353			6,185
		15,522			12,978			12,507			9,063			20,185			70,255
Direct Costs and Expenses:
Operating:
Personnel		4,853			4,486			4,361			1,662			9,659			25,021
Repairs and maintenance		1,801			2,438			2,091			312			2,566			9,208
Drydocking		375			1,201			352			103			2,791			4,822
Insurance and loss reserves		612			323			385			163			374			1,857
Fuel, lubes and supplies		1,120			1,081			892			427			1,170			4,690
Other		154			1,103			952			350			441			3,000
		8,915			10,632			9,033			3,017			17,001			48,598
Direct Vessel Profit	$	6,607		$	2,346		$	3,474		$	6,046		$	3,184			21,657
Other Costs and Expenses:
Operating:
Leased-in equipment	$	1,853		$	960		$	—		$	—		$	12			2,825
Administrative and general																	12,234
Depreciation and amortization	$	5,227		$	2,381		$	4,207		$	2,521		$	3,006			17,342
																	32,401
Gains on Asset Dispositions and Impairments												��					586
Operating Loss																$	(10,158	)

	United States (primarily Gulf of Mexico)			Africa (primarily West Africa)			Middle East and Asia			Brazil, Mexico, Central and South America			Europe (primarily North Sea)			Total
For the Nine Months Ended September 30, 2018
Time Charter Statistics:
Average Rates Per Day	$	10,832		$	9,425		$	8,156		$	17,807		$	4,721		$	7,229
Fleet Utilization		23	%		86	%		75	%		65	%		77	%		61	%
Fleet Available Days		11,193			4,066			6,161			1,166			15,159			37,746
Operating Revenues:
Time charter	$	27,834		$	33,117		$	37,555		$	13,409		$	54,955		$	166,870
Bareboat charter		—			—			—			3,467			—			3,467
Other marine services		6,053			3,414			(1,005	)		1,371			2,507			12,340
		33,887			36,531			36,550			18,247			57,462			182,677
Direct Costs and Expenses:
Operating:
Personnel		13,481			12,873			12,452			3,257			29,367			71,430
Repairs and maintenance		4,024			5,457			8,095			649			7,126			25,351
Drydocking		1,810			2,113			413			114			5,741			10,191
Insurance and loss reserves		1,948			789			982			399			863			4,981
Fuel, lubes and supplies		2,513			2,650			2,848			841			3,505			12,357
Other		208			3,541			2,996			898			973			8,616
		23,984			27,423			27,786			6,158			47,575			132,926
Direct Vessel Profit	$	9,903		$	9,108		$	8,764		$	12,089		$	9,887			49,751
Other Costs and Expenses:
Operating:
Leased-in equipment	$	5,571		$	2,885		$	—		$	—		$	34			8,490
Administrative and general																	40,573
Depreciation and amortization	$	17,677		$	8,112		$	14,608		$	6,020		$	8,843			55,260
																	104,323
Losses on Asset Dispositions and Impairments																	(1,002	)
Operating Loss																$	(55,574	)
As of September 30, 2018
Property and Equipment:
Historical cost	$	479,303		$	186,729		$	310,110		$	102,776		$	200,082		$	1,279,000
Accumulated depreciation		(242,364	)		(53,498	)		(81,121	)		(47,374	)		(144,395	)		(568,752	)
	$	236,939		$	133,231		$	228,989		$	55,402		$	55,687		$	710,248

22

	United States (primarily Gulf of Mexico)			Africa (primarily West Africa)			Middle East and Asia			Brazil, Mexico, Central and South America			Europe (primarily North Sea)			Total
For the Three Months Ended September 30, 2017
Time Charter Statistics:
Average Rates Per Day	$	7,212		$	10,611		$	7,138		$	16,060		$	4,390		$	6,006
Fleet Utilization		16	%		71	%		61	%		49	%		90	%		60	%
Fleet Available Days		3,859			1,283			2,194			184			5,060			12,580
Operating Revenues:
Time charter	$	4,587		$	9,700		$	9,490		$	1,439		$	20,051		$	45,267
Bareboat charter		—			—			—			1,168			—			1,168
Other marine services		1,116			(310	)		(341	)		159			754			1,378
		5,703			9,390			9,149			2,766			20,805			47,813
Direct Costs and Expenses:
Operating:
Personnel		4,455			3,588			4,731			326			9,079			22,179
Repairs and maintenance		1,289			1,324			2,309			110			2,378			7,410
Drydocking		1,109			311			(102	)		—			961			2,279
Insurance and loss reserves		598			157			363			75			203			1,396
Fuel, lubes and supplies		249			693			1,115			33			790			2,880
Other		123			704			1,192			69			190			2,278
		7,823			6,777			9,608			613			13,601			38,422
Direct Vessel (Loss) Profit	$	(2,120	)	$	2,613		$	(459	)	$	2,153		$	7,204			9,391
Other Costs and Expenses:
Operating:
Leased-in equipment	$	1,870		$	966		$	—		$	—		$	—			2,836
Administrative and general																	10,318
Depreciation and amortization	$	5,224		$	2,456		$	4,320		$	1,025		$	2,597			15,622
																	28,776
Losses on Asset Dispositions and Impairments																	(9,744	)
Operating Loss																$	(29,129	)

	United States (primarily Gulf of Mexico)			Africa (primarily West Africa)			Middle East and Asia			Brazil, Mexico, Central and South America			Europe (primarily North Sea)			Total
For the Nine Months Ended September 30, 2017
Time Charter Statistics:
Average Rates Per Day	$	8,661		$	10,192		$	6,916		$	16,060		$	4,328		$	5,806
Fleet Utilization		12	%		67	%		55	%		24	%		84	%		54	%
Fleet Available Days		11,920			3,425			5,970			379			15,015			36,709
Operating Revenues:
Time charter	$	12,471		$	23,333		$	22,728		$	1,439		$	54,829		$	114,800
Bareboat charter		—			—			—			3,467			—			3,467
Other marine services		3,140			97			645			396			1,895			6,173
		15,611			23,430			23,373			5,302			56,724			124,440
Direct Costs and Expenses:
Operating:
Personnel		11,768			9,624			12,001			487			25,667			59,547
Repairs and maintenance		2,963			5,102			6,832			230			6,303			21,430
Drydocking		1,992			2,051			414			—			3,140			7,597
Insurance and loss reserves		2,608			696			1,062			86			629			5,081
Fuel, lubes and supplies		1,104			1,956			2,547			60			2,745			8,412
Other		246			2,221			3,718			73			677			6,935
		20,681			21,650			26,574			936			39,161			109,002
Direct Vessel (Loss) Profit	$	(5,070	)	$	1,780		$	(3,201	)	$	4,366		$	17,563			15,438
Other Costs and Expenses:
Operating:
Leased-in equipment	$	6,286		$	2,905		$	862		$	—		$	64			10,117
Administrative and general																	43,849
Depreciation and amortization	$	16,573		$	6,105		$	10,826		$	2,474		$	6,780			42,758
																	96,724
Losses on Asset Dispositions and Impairments																	(11,243	)
Operating Loss																$	(92,529	)
As of September 30, 2017
Property and Equipment:
Historical cost	$	429,500		$	189,845		$	328,263		$	78,976		$	177,825		$	1,204,409
Accumulated depreciation		(237,210	)		(54,052	)		(93,535	)		(42,590	)		(131,532	)		(558,919	)
	$	192,290		$	135,793		$	234,728		$	36,386		$	46,293		$	645,490

23

For additional information, the following tables summarize the world-wide operating results and property and equipment for each of the Company’s vessel classes for the periods indicated (in thousands, except statistics):

	Anchor handling towing supply			Fast support			Supply			Standby safety			Specialty			Liftboats			Wind farm utility			Other activity			Total
For the Three Months Ended September 30, 2018
Time Charter Statistics:
Average Rates Per Day	$	9,269		$	7,148		$	7,410		$	8,692		$	—		$	18,993		$	2,253		$	—		$	7,323
Fleet Utilization		28	%		59	%		82	%		77	%		—	%		60	%		89	%		—	%		68	%
Fleet Available Days		1,012			3,709			565			1,809			92			1,932			3,498			—			12,617
Operating Revenues:
Time charter	$	2,592		$	15,678		$	3,442		$	12,036		$	—		$	22,171		$	6,983		$	—		$	62,902
Bareboat charter		—			—			1,168			—			—			—			—			—			1,168
Other marine services		1,244			(834	)		1,066			50			—			2,922			657			1,080			6,185
		3,836			14,844			5,676			12,086			—			25,093			7,640			1,080			70,255
Direct Costs and Expenses:
Operating:
Personnel		1,667			5,826			1,976			5,855			64			5,621			2,471			1,541			25,021
Repairs and maintenance		1,625			2,641			549			1,627			31			1,827			806			102			9,208
Drydocking		1,168			432			1,624			1,156			—			433			9			—			4,822
Insurance and loss reserves		282			407			145			234			41			630			130			(12	)		1,857
Fuel, lubes and supplies		582			1,016			391			975			65			1,482			163			16			4,690
Other		530			1,718			254			351			67			620			104			(644	)		3,000
		5,854			12,040			4,939			10,198			268			10,613			3,683			1,003			48,598
Direct Vessel (Loss) Profit	$	(2,018	)	$	2,804		$	737		$	1,888		$	(268	)	$	14,480		$	3,957		$	77			21,657
Other Costs and Expenses:
Operating:
Leased-in equipment	$	1,851		$	342		$	34		$	—		$	—		$	641		$	(22	)	$	(21	)		2,825
Administrative and general																										12,234
Depreciation and amortization	$	689		$	5,780		$	1,173		$	945		$	282		$	6,188		$	2,093		$	192			17,342
																										32,401
Gains on Asset Dispositions and Impairments																										586
Operating Loss																									$	(10,158	)

24

	Anchor handling towing supply			Fast support			Supply			Standby safety			Specialty			Liftboats			Wind farm utility			Other activity			Total
For the Nine Months Ended September 30, 2018
Time Charter Statistics:
Average Rates Per Day	$	10,755		$	7,263		$	7,009		$	8,971		$	—		$	18,475		$	2,292		$	—		$	7,229
Fleet Utilization		24	%		58	%		75	%		78	%		—	%		45	%		75	%		—	%		61	%
Fleet Available Days		3,138			11,309			1,835			5,404			273			5,502			10,285			—			37,746
Operating Revenues:
Time charter	$	8,091		$	47,593		$	9,593		$	37,878		$	—		$	46,085		$	17,630		$	—		$	166,870
Bareboat charter		—			—			3,467			—			—			—			—			—			3,467
Other marine services		2,591			(1,995	)		1,087			129			—			5,247			1,649			3,632			12,340
		10,682			45,598			14,147			38,007			—			51,332			19,279			3,632			182,677
Direct Costs and Expenses:
Operating:
Personnel		4,657			15,840			5,931			20,941			307			13,753			6,988			3,013			71,430
Repairs and maintenance		3,300			8,591			1,253			4,645			81			4,514			2,618			349			25,351
Drydocking		2,593			538			2,209			3,521			(6	)		1,326			10			—			10,191
Insurance and loss reserves		638			1,045			381			515			76			2,170			326			(170	)		4,981
Fuel, lubes and supplies		1,321			2,826			1,402			2,809			119			3,303			526			51			12,357
Other		1,671			4,644			2,021			656			264			1,373			373			(2,386	)		8,616
		14,180			33,484			13,197			33,087			841			26,439			10,841			857			132,926
Direct Vessel Profit	$	(3,498	)	$	12,114		$	950		$	4,920		$	(841	)	$	24,893		$	8,438		$	2,775			49,751
Other Costs and Expenses:
Operating:
Leased-in equipment	$	5,564		$	1,026		$	34		$	—		$	—		$	1,923		$	—		$	(57	)		8,490
Administrative and general																										40,573
Depreciation and amortization	$	2,711		$	18,950		$	5,310		$	2,320		$	847		$	17,546		$	6,901		$	675			55,260
																										104,323
Losses on Asset Dispositions and Impairments																										(1,002	)
Operating Loss																									$	(55,574	)
As of September 30, 2018
Property and Equipment:
Historical cost	$	199,672		$	413,584		$	64,284		$	127,811		$	30,529		$	337,057		$	74,685		$	31,378		$	1,279,000
Accumulated depreciation		(169,530	)		(98,076	)		(36,236	)		(100,383	)		(20,151	)		(72,081	)		(45,356	)		(26,939	)	$	(568,752	)
	$	30,142		$	315,508		$	28,048		$	27,428		$	10,378		$	264,976		$	29,329		$	4,439		$	710,248

25

	Anchor handling towing supply			Fast support			Supply			Standby safety			Specialty			Liftboats			Wind farm utility			Other activity			Total
For the Three Months Ended September 30, 2017
Time Charter Statistics:
Average Rates Per Day	$	9,766		$	7,999		$	6,279		$	8,650		$	—		$	11,899		$	2,220		$	—		$	6,006
Fleet Utilization		25	%		49	%		65	%		84	%		—	%		28	%		89	%		—	%		60	%
Fleet Available Days		1,288			3,885		$	507			1,840			276			1,380			3,404			—			12,580
Operating Revenues:
Time charter	$	3,199		$	15,271		$	2,062		$	13,328		$	—		$	4,659		$	6,748		$	—		$	45,267
Bareboat charter		—			—			1,168			—			—			—			—			—			1,168
Other marine services		(88	)		(410	)		(89	)		32			268			447			688			530			1,378
		3,111			14,861			3,141			13,360			268			5,106			7,436			530			47,813
Direct Costs and Expenses:
Operating:
Personnel		2,388			5,405			1,321			6,955			413			3,394			2,265			38			22,179
Repairs and maintenance		565			2,680			321			1,943			40			1,288			575			(2	)		7,410
Drydocking		125			247			—			960			736			211			—			—			2,279
Insurance and loss reserves		176			297			26			116			21			684			89			(13	)		1,396
Fuel, lubes and supplies		158			975			194			723			92			646			93			(1	)		2,880
Other		(170	)		1,610			158			156			84			352			87			1			2,278
		3,242			11,214			2,020			10,853			1,386			6,575			3,109			23			38,422
Direct Vessel (Loss) Profit	$	(131	)	$	3,647		$	1,121		$	2,507		$	(1,118	)	$	(1,469	)	$	4,327		$	507			9,391
Other Costs and Expenses:
Operating:
Leased-in equipment	$	1,866		$	343		$	—		$	—		$	—		$	627		$	—		$	—			2,836
Administrative and general																										10,318
Depreciation and amortization	$	2,419		$	5,000		$	1,226		$	578		$	579		$	3,045		$	2,293		$	482			15,622
																										28,776
Losses on Asset Dispositions and Impairments																										(9,744	)
Operating Loss																									$	(29,129	)

26

	Anchor handling towing supply			Fast support			Supply			Standby safety			Specialty			Liftboats			Wind farm utility			Other activity			Total
For the Nine Months Ended September 30, 2017
Time Charter Statistics:
Average Rates Per Day	$	10,973		$	7,858		$	7,108		$	8,418		$	12,000		$	11,308		$	2,128		$	—		$	5,806
Fleet Utilization		22	%		45	%		43	%		81	%		2	%		15	%		82	%		—	%		54	%
Fleet Available Days		3,822			10,781			1,716			5,460			819			4,010			10,101			—			36,709
Operating Revenues:
Time charter	$	9,068		$	38,525		$	5,198		$	37,302		$	149		$	7,005		$	17,553		$	—		$	114,800
Bareboat charter		—			—			3,467			—			—			—			—			—			3,467
Other marine services		(301	)		595			(242	)		101			546			872			1,633			2,969			6,173
		8,767			39,120			8,423			37,403			695			7,877			19,186			2,969			124,440
Direct Costs and Expenses:
Operating:
Personnel		7,627			14,230			3,574			19,987			994			7,148			5,943			44			59,547
Repairs and maintenance		2,052			9,282			883			4,761			136			2,608			1,710			(2	)		21,430
Drydocking		535			2,236			—			3,140			736			950			—			—			7,597
Insurance and loss reserves		840			1,140			134			389			117			2,226			261			(26	)		5,081
Fuel, lubes and supplies		891			2,577			521			2,392			221			1,435			381			(6	)		8,412
Other		(879	)		4,461			1,364			552			331			854			255			(3	)		6,935
		11,066			33,926			6,476			31,221			2,535			15,221			8,550			7			109,002
Direct Vessel (Loss) Profit	$	(2,299	)	$	5,194		$	1,947		$	6,182		$	(1,840	)	$	(7,344	)	$	10,636		$	2,962			15,438
Other Costs and Expenses:
Operating:
Leased-in equipment	$	5,608		$	1,893		$	663		$	—		$	—		$	1,889		$	64		$	—			10,117
Administrative and general																										43,849
Depreciation and amortization	$	7,256		$	12,821		$	3,799		$	1,703		$	1,739		$	8,013		$	5,890		$	1,537			42,758
																										96,724
Losses on Asset Dispositions and Impairments																										(11,243	)
Operating Loss																									$	(92,529	)
As of September 30, 2017
Property and Equipment:
Historical cost	$	217,537		$	405,956		$	102,827		$	118,819		$	30,486		$	194,667		$	65,507		$	68,610		$	1,204,409
Accumulated depreciation		(179,972	)		(80,960	)		(53,720	)		(97,343	)		(18,978	)		(50,599	)		(37,164	)		(40,183	)		(558,919	)
	$	37,565		$	324,996		$	49,107		$	21,476		$	11,508		$	144,068		$	28,343		$	28,427		$	645,490

Fleet Counts. The Company's fleet count as of September 30 was as follows:

	Owned		Joint Ventured		Leased-in		Managed		Total
2018
Anchor handling towing supply		8		1		4		—		13
Fast support		38		5		1		3		47
Supply		7		20		—		2		29
Standby safety		19		1		—		—		20
Specialty		1		1		—		2		4
Liftboats		19		—		2		—		21
Wind farm utility		38		4		—		—		42
		130		32		7		7		176
2017
Anchor handling towing supply		11		1		4		7		23
Fast support		41		5		1		3		50
Supply		8		17		—		2		27
Standby safety		20		1		—		—		21
Specialty		3		1		—		2		6
Liftboats		13		—		2		—		15
Wind farm utility		37		4		—		—		41
		133		29		7		14		183

27

Operating Income(Loss)

United States, primarily Gulf of Mexico. For the three and nine months ended September 30, the Company’s direct vessel profit (loss) in the United States was as follows (in thousands, except statistics):

	For the Three Months Ended September 30,									For the Nine Months Ended September 30,
	2018				2017					2018				2017
Time Charter Statistics:
Rates Per Day Worked:
Anchor handling towing supply	$	39,982			$	—				$	31,648			$	35,496
Fast support		6,614				7,170					6,813				8,013
Supply		—				7,400					6,953				7,400
Liftboats		14,522				7,257					13,195				8,656
Overall		12,476				7,212					10,832				8,661
Utilization:
Anchor handling towing supply			1	%				—	%			1	%				1	%
Fast support			22	%				21	%			23	%				18	%
Supply			—	%				36	%			11	%				7	%
Liftboats			49	%				24	%			35	%				14	%
Overall			30	%				16	%			23	%				12	%
Available Days:
Anchor handling towing supply		552				920					1,998				2,730
Fast support		1,296				1,696					4,384				5,151
Supply		—				47					124				228
Specialty		92				92					273				273
Liftboats		1,493				1,104					4,414				3,538
Overall		3,433				3,859					11,193				11,920
Operating revenues:
Time charter	$	12,800	82	%	$	4,587		80	%	$	27,834	82	%	$	12,471		80	%
Other marine services		2,722	18	%		1,116		20	%		6,053	18	%		3,140		20	%
		15,522	100	%		5,703		100	%		33,887	100	%		15,611		100	%
Direct operating expenses:
Personnel		4,853	31	%		4,455		78	%		13,481	40	%		11,768		75	%
Repairs and maintenance		1,801	12	%		1,289		23	%		4,024	12	%		2,963		19	%
Drydocking		375	2	%		1,109		19	%		1,810	5	%		1,992		13	%
Insurance and loss reserves		612	4	%		598		11	%		1,948	6	%		2,608		17	%
Fuel, lubes and supplies		1,120	7	%		249		4	%		2,513	7	%		1,104		7	%
Other		154	1	%		123		2	%		208	1	%		246		2	%
		8,915	57	%		7,823		137	%		23,984	71	%		20,681		133	%
Direct Vessel Profit (Loss)	$	6,607	43	%	$	(2,120	)	(37	)%	$	9,903	29	%	$	(5,070	)	(33	)%

Current Year Quarter compared with Prior Year Quarter

Operating Revenues.  Time charter revenues were $8.2 million higher in the Current Year Quarter compared with the Prior Year Quarter primarily due to the addition of six liftboats associated with the FGH joint venture. Time charter revenues were $8.6 million higher for the liftboat fleet, $0.3 million higher for the anchor handling towing supply vessels and $0.7 million lower for the fast support vessels. As of September 30, 2018, the Company had 22 of 38 owned and leased-in vessels (six anchor handling towing supply vessels, nine fast support vessels, six liftboats and one specialty vessel) cold-stacked compared with 31 of 42 vessels as of September 30, 2017. As of September 30, 2018, the Company had retired and removed from service five vessels (four anchor handling towing supply vessels and one supply vessel) in this region.

Direct Operating Expenses.  Direct operating expenses were $1.1 million higher in the Current Year Quarter compared with the Prior Year Quarter. On an overall basis, direct operating expenses were $3.5 million higher due to net fleet acquisitions primarily associated with the FGH joint venture, $0.2 million higher for the core fleet and other marine services and $2.6 million lower due to the effect of cold-stacking vessels.

28

Current Nine Months compared with Prior Nine Months

Operating Revenues.  Time charter revenues were $15.4 million higher in the Current Nine Months compared with the Prior Nine Months primarily due to the addition of six liftboats associated with the FGH joint venture. Time charter revenues were $15.9 million higher for the liftboat fleet, $0.4 million lower for the fast support vessels and $0.1 million lower for the anchor handling towing supply vessels.

Direct Operating Expenses.  Direct operating expenses were $3.3 million higher in the Current Nine Months compared with the Prior Nine Months. On an overall basis, direct operating expenses were $8.8 million higher due to net fleet acquisitions primarily associated with the FGH joint venture, $4.7 million lower due to the effect of cold-stacking vessels, $0.7 million lower due to the repositioning of vessels between geographic regions and $0.1 lower million for the active fleet and other marine services.

Africa, primarily West Africa. For the three and nine months ended September 30, the Company’s direct vessel profit (loss) in Africa was as follows (in thousands, except statistics):

	For the Three Months Ended September 30,									For the Nine Months Ended September 30,
	2018				2017					2018				2017
Time Charter Statistics:
Rates Per Day Worked:
Anchor handling towing supply	$	10,315			$	11,669				$	11,614			$	12,190
Fast support		9,927				10,112					9,894				9,201
Supply		7,762				11,950					7,542				12,832
Overall		9,315				10,611					9,425				10,192
Utilization:
Anchor handling towing supply			65	%				100	%			81	%			71	%
Fast support			86	%				70	%			87	%			71	%
Supply			84	%				100	%			88	%			93	%
Overall			82	%				71	%			86	%			67	%
Available Days:
Anchor handling towing supply		276				184					638				636
Fast support		757				915					2,205				2,243
Supply		442				92					1,223				273
Specialty		—				92					—				273
Overall		1,475				1,283					4,066				3,425
Operating revenues:
Time charter	$	11,201	86	%	$	9,700		103	%	$	33,117	91	%	$	23,333	100	%
Other marine services		1,777	14	%		(310	)	(3	)%		3,414	9	%		97	—	%
		12,978	100	%		9,390		100	%		36,531	100	%		23,430	100	%
Direct operating expenses:
Personnel		4,486	35	%		3,588		38	%		12,873	35	%		9,624	41	%
Repairs and maintenance		2,438	19	%		1,324		14	%		5,457	15	%		5,102	22	%
Drydocking		1,201	9	%		311		3	%		2,113	6	%		2,051	9	%
Insurance and loss reserves		323	2	%		157		2	%		789	2	%		696	3	%
Fuel, lubes and supplies		1,081	8	%		693		7	%		2,650	7	%		1,956	8	%
Other		1,103	9	%		704		8	%		3,541	10	%		2,221	9	%
		10,632	82	%		6,777		72	%		27,423	75	%		21,650	92	%
Direct Vessel Profit (Loss)	$	2,346	18	%	$	2,613		28	%	$	9,108	25	%	$	1,780	8	%

Current Year Quarter compared with Prior Year Quarter

Operating Revenues.  Time charter revenues were $1.5 million higher in the Current Year Quarter compared with the Prior Year Quarter primarily due to fleet additions. Time charter revenues were $3.7 million higher due to fleet additions, $1.5 million lower due to the repositioning of vessels between geographic regions, $0.5 million lower due to a reduction in average day rates and $0.2 million lower due to lower utilization. Other marine services were $2.1 million higher primarily due to the recognition of previously deferred revenue, following receipt of cash, due to collection concerns with regard to one customer. As of September 30, 2018, the Company had 16 owned or leased-in vessels in this region, none of which were cold-stacked, compared with one of 14 vessels as of September 30, 2017. As of September 30, 2018, the Company had one specialty vessel retired and removed from service in this region.

Direct Operating Expenses.  Direct operating expenses were $3.9 million higher in the Current Year Quarter compared with the Prior Year Quarter. On an overall basis, operating costs were $2.9 million higher due to net fleet additions, $0.9 million lower due to the repositioning of vessels between geographic regions and $1.9 million higher for the active fleet and other changes in fleet mix. Personnel costs were $0.9 million higher primarily due to net fleet additions and repairs and maintenance expenses were $1.1 million higher primarily due to main engine repairs that occurred during the Current Year Quarter.

29

Current Nine Months compared with Prior Nine Months

Operating Revenues.  Time charter revenues were $9.8 million higher in the Current Nine Months compared with the Prior Nine Months primarily due to fleet additions. Time charter revenues were $15.1 million higher due to net fleet additions, $0.8 million higher due to the reactivation of vessels from cold-stack, $5.3 million lower due to the repositioning of vessels between geographic regions and $0.8 million lower due to a reduction in average day rates. Other marine services were $3.3 million higher primarily due to the recognition of previously deferred revenue, following receipt of cash, due to collection concerns with regard to one customer. 

Direct Operating Expenses.  Direct operating expenses were $5.8 million higher in the Current Nine Months compared with the Prior Nine Months. On an overall basis, operating costs were $7.8 million higher due to net fleet additions, $0.9 million higher for the active fleet and other changes in fleet mix, $0.7 million lower due to the effect of cold-stacking vessels and other changes in fleet mix and $2.2 million lower due to the repositioning of vessels between geographic regions. Personnel costs were $3.2 million higher primarily due to net fleet additions. Other operating expenses were $1.3 million higher primarily due to mobilization expenses and increased agency expenses associated with the acquired vessels.

Middle East and Asia. For the three and nine months ended September 30, the Company’s direct vessel profit (loss) in the Middle East and Asia was as follows (in thousands, except statistics):

	For the Three Months Ended September 30,										For the Nine Months Ended September 30,
	2018					2017					2018					2017
Time Charter Statistics:
Rates Per Day Worked:
Anchor handling towing supply	$	4,663				$	7,327				$	6,398				$	7,833
Fast support		5,677					6,848					5,947					6,917
Supply		5,982					3,815					4,912					3,951
Specialty		—					—					—					12,000
Liftboats		28,650					36,252					31,401					36,252
Wind farm utility		2,205					2,025					2,025					2,025
Overall		8,156					7,138					8,156					6,916
Utilization:
Anchor handling towing supply				50	%				78	%				42	%				77	%
Fast support				79	%				78	%				83	%				77	%
Supply				100	%				60	%				75	%				38	%
Specialty				—	%				—	%				—	%				5	%
Liftboats				100	%				19	%				82	%				10	%
Wind farm utility				50	%				7	%				42	%				2	%
Overall				76	%				61	%				75	%				55	%
Available Days:
Anchor handling towing supply		184					184					502					456
Fast support		1,380					1,182					4,095					3,114
Supply		92					368					366					1,216
Specialty		—					92					—					273
Liftboats		184					184					546					366
Wind farm utility		184					184					652					546
Overall		2,024					2,194					6,161					5,971
Operating revenues:
Time charter	$	12,590		100	%	$	9,490		104	%	$	37,555		103	%	$	22,728		97	%
Other marine services		(83	)	—	%		(341	)	(4	)%		(1,005	)	(3	)%		645		3	%
		12,507		100	%		9,149		100	%		36,550		100	%		23,373		100	%
Direct operating expenses:
Personnel		4,361		35	%		4,731		52	%		12,452		34	%		12,001		51	%
Repairs and maintenance		2,091		17	%		2,309		25	%		8,095		22	%		6,832		29	%
Drydocking		352		3	%		(102	)	(1	)%		413		1	%		414		2	%
Insurance and loss reserves		385		3	%		363		4	%		982		3	%		1,062		5	%
Fuel, lubes and supplies		892		7	%		1,115		12	%		2,848		8	%		2,547		11	%
Other		952		7	%		1,192		13	%		2,996		8	%		3,718		16	%
		9,033		72	%		9,608		105	%		27,786		76	%		26,574		114	%
Direct Vessel Profit (Loss)	$	3,474		28	%	$	(459	)	(5	)%	$	8,764		24	%	$	(3,201	)	(14	)%

Current Year Quarter compared with Prior Year Quarter

Operating Revenues.  Time charter revenues were $3.1 million higher in the Current Year Quarter compared with the Prior Year Quarter. Time charter revenues were $3.6 million higher due to improved utilization, $1.4 million higher due to the repositioning of vessels between geographic regions, $1.2 million lower due to a reduction in average day rates and $0.7 million lower due to net fleet dispositions. As of September 30, 2018, the Company had one of 22 owned and leased-in vessels cold-stacked in this region (one anchor handling towing supply vessel) compared with one of 25 vessels as of September 30, 2017. As of September 30, 2018, the Company had one specialty vessel retired and removed from service in this region.

30

Direct Operating Expenses.  Direct operating expenses were $0.6 million lower in the Current Year Quarter compared with the Prior Year Quarter. On an overall basis, direct operating expenses were $0.6 million lower due to the effect of cold-stacking vessels, $0.2 million lower due to the repositioning of vessels between geographic regions and $0.2 million higher for the vessels in active service.

Current Nine Months compared with Prior Nine Months

Operating Revenues.  Time charter revenues were $14.8 million higher in the Current Nine Months compared with the Prior Nine Months primarily due to net fleet additions. Time charter revenues were $9.3 million higher due to net fleet additions, $4.7 million higher due to improved utilization of which $0.4 million was due to the reactivation of vessels from cold-stack, $3.1 million higher due to the repositioning of vessels between geographic regions and $2.3 million lower due to a reduction in average day rates. Other marine services were $1.6 million lower primarily due to the completion of a bareboat charter. 

Direct Operating Expenses.  Direct operating expenses were $1.2 million higher in the Current Nine Months compared with the Prior Nine Months. On an overall basis, direct operating expenses were $1.8 million higher due to higher main engine repairs, $0.9 million higher due to net fleet additions and $0.6 million higher due to the repositioning of vessels between geographic regions. Direct operating expenses were $1.4 million lower due to the effect of cold stacking vessels and $0.7 million lower for vessels in active service and other changes in fleet mix.

Brazil, Mexico, Central and South America. For the three and nine months ended September 30, the Company’s direct vessel profit in Brazil, Mexico, Central and South America was as follows (in thousands, except statistics):

	For the Three Months Ended September 30,								For the Nine Months Ended September 30,
	2018				2017				2018				2017
Time Charter Statistics:
Rates Per Day Worked:
Fast support		6,800				—				68,00				—
Liftboats		24,789				16,060				22,902				16,060
Overall		17,604				16,060				17,807				16,060
Utilization:
Fast support			61	%			—	%			38	%			—	%
Liftboats			100	%			97	%			95	%			85	%
Overall			80	%			49	%			65	%			24	%
Available Days:
Fast support		276				92				624				273
Liftboats		255				92				542				106
Overall		531				184				1,166				379
Operating revenues:
Time charter	$	7,479	82	%	$	1,439	52	%	$	13,409	73	%	$	1,439	27	%
Bareboat charter		1,168	13	%		1,168	42	%		3,467	19	%		3,467	65	%
Other marine services		416	5	%		159	6	%		1,371	8	%		396	8	%
		9,063	100	%		2,766	100	%		18,247	100	%		5,302	100	%
Direct operating expenses:
Personnel		1,662	18	%		326	12	%		3,257	18	%		487	9	%
Repairs and maintenance		312	3	%		110	4	%		649	3	%		230	5	%
Drydocking		103	1	%		—	—	%		114	1	%		—	—	%
Insurance and loss reserves		163	2	%		75	3	%		399	2	%		86	2	%
Fuel, lubes and supplies		427	5	%		33	1	%		841	5	%		60	1	%
Other		350	4	%		69	2	%		898	5	%		73	1	%
		3,017	33	%		613	22	%		6,158	34	%		936	18	%
Direct Vessel Profit	$	6,046	67	%	$	2,153	78	%	$	12,089	66	%	$	4,366	82	%

Current Year Quarter compared with Prior Year Quarter

Operating Revenues.  Time charter revenues were $6.0 million higher in the Current Year Quarter compared with the Prior Year Quarter. Time charter revenues were $3.5 million higher due to the repositioning of vessels between geographic regions, $3.2 million higher due to fleet additions and $0.7 million lower due to reduced average day rates for the core fleet. As of September 30, 2018, the Company had one of six owned and leased-in vessels cold-stacked in this region (one fast support vessel) compared with one of four vessels as of September 30, 2017.

Direct Operating Expenses.  Direct operating expenses were $2.4 million higher in the Current Year Quarter compared with the Prior Year Quarter, of which $1.4 million was due to the repositioning of vessels, $0.8 million due to fleet additions and $0.2 million for the active fleet and other marine services.

31

Current Nine Months compared with Prior Nine Months

Operating Revenues. Time charter revenues were $12.0 million higher in the Current Nine Months compared with the Prior Nine Months. Time charter revenues were $7.5 million higher due to the repositioning of vessels between geographic regions, $5.2 million higher due to fleet additions and $0.7 million lower due to reduced average day rates for the core fleet. 

Direct Operating Expenses. Direct operating expenses were $5.2 million higher in the Current Nine Months compared with the Prior Nine Months, of which $3.0 million was due to the repositioning of vessels, $2.0 million due to fleet additions and $0.2 million for the active fleet and other marine services.

Europe, primarily North Sea. For the three and nine months ended September 30, the Company’s direct vessel profit in Europe was as follows (in thousands, except statistics):

	For the Three Months ended September 30,								For the Nine Months Ended September 30,
	2018				2017				2018				2017
Time Charter Statistics:
Rates Per Day Worked:
Standby		8,692				8,650				8,971				8,418
Wind farm utility		2,260				2,221				2,302				2,128
Overall		4,287				4,390				4,721				4,328
Utilization:
Standby			77	%			84	%			78	%			81	%
Wind farm utility			91	%			94	%			77	%			86	%
Overall			85	%			90	%			77	%			84	%
Available Days:
Supply		31				—				122				—
Standby		1,809				1,840				5,404				5,460
Wind farm utility		3,314				3,220				9,633				9,555
Overall		5,154				5,060				15,159				15,015
Operating revenues:
Time charter	$	18,832	93	%	$	20,051	96	%	$	54,955	96	%	$	54,829	97	%
Other marine services		1,353	7	%		754	4	%		2,507	4	%		1,895	3	%
		20,185	100	%		20,805	100	%		57,462	100	%		56,724	100	%
Direct operating expenses:
Personnel		9,659	48	%		9,079	44	%		29,367	51	%		25,667	45	%
Repairs and maintenance		2,566	12	%		2,378	11	%		7,126	12	%		6,303	11	%
Drydocking		2,791	14	%		961	5	%		5,741	10	%		3,140	6	%
Insurance and loss reserves		374	2	%		203	1	%		863	2	%		629	1	%
Fuel, lubes and supplies		1,170	6	%		790	4	%		3,505	6	%		2,745	5	%
Other		441	2	%		190	—	%		973	2	%		677	1	%
		17,001	84	%		13,601	65	%		47,575	83	%		39,161	69	%
Direct Vessel Profit	$	3,184	16	%	$	7,204	35	%	$	9,887	17	%	$	17,563	31	%

Current Year Quarter compared with Prior Year Quarter

Operating Revenues.  For standby safety vessels, time charter revenues were $1.3 million lower in the Current Year Quarter compared with the Prior Year Quarter. Time charter revenues were $ 0.6 million higher due to the repositioning of vessels between geographic regions, $1.0 million lower due to fleet dispositions and $0.9 million lower due to lower utilization.

For wind farm utility vessels, time charter revenues were $0.1 million higher.  Time charter revenues were $0.2 million higher due to fleet additions, $0.1 million higher due to improved average day rates and $0.2 million lower due to the repositioning of vessels between geographic regions.

Other Marine Services were $0.6 million higher due to the charter in of a third party platform supply vessel.

Direct Operating Expenses.  Direct operating expenses were $3.4 million higher in the Current Year Quarter compared to the Prior Year Quarter.  On an overall basis vessel operating expenses were $3.0 million higher due to the cost of converting two supply vessels to standby safety classification, $0.4 million higher for vessels in active service, primarily due to unfavorable changes in currency exchange rates, $0.4 million higher due to the charter in of a third party vessel, $0.3 million higher due to the repositioning of vessels between geographic regions and $0.7 million lower due to net fleet dispositions.  

32

Current Nine Months compared with Prior Nine Months

Operating Revenues.  For standby safety vessels, time charter revenues were $0.6 million higher in the Current Nine Months compared with the Prior Nine Months. Time charter revenues were $2.1 million higher due to favorable changes in currency exchange rates, $0.6 million higher due to the repositioning of vessels between geographic regions, $2.0 lower due to fleet dispositions and $0.1 million lower due to reduced average day rates.

                For wind farm utility vessels, time charter revenues were $0.4 million lower.  Time charter revenues were $0.8 million higher due to favorable changes in currency exchange rates, $0.5 million higher due to net fleet additions, $0.2 million higher due to improved day rates, $1.3 million lower due to reduced utilization and $0.6 million lower due to the repositioning of vessels between geographical regions.

Other Marine Services were $0.6 million higher due to the charter in of a third party platform supply vessel.

Direct Operating Expenses.  Direct operating expenses were $7.2 million higher in the Current Nine Months compared to the Prior Nine Months.  On an overall basis vessel operating expenses were $4.9 million higher due to the cost of converting two supply vessels to standby safety classification, $3.4 million higher for vessels in active service, primarily due to unfavorable changes in currency exchange rates, $0.4 million higher due to the charter in of a third party vessel, $0.2 million higher due to the repositioning of vessels between geographical regions and $1.7 million lower due to net fleet dispositions.

Leased-in Equipment. Leased-in equipment expenses for the Current Nine Months were $1.6 million lower compared with the Prior Nine Months due to the impairment and removal from service of a leased-in vessel during 2017.

Administrative and general. Administrative and general expenses were $1.9 million higher for the Current Year Quarter compared with the Prior Year Quarter primarily due to the recovery of a provision for doubtful accounts. Administrative and General expenses were $3.3 million lower for the Current Nine Months compared with the Prior Nine Months, primarily due to the acceleration of certain stock awards following the Spin-off in 2017 and the reduction in fees in connection with support services provided by SEACOR Holdings.

Depreciation and amortization. Depreciation and amortization expense for the Current Year Quarter and Current Nine Months were $1.7 million and $12.5 million higher compared with the Prior Year Quarter and Prior Nine Months, respectively, primarily due to net fleet additions.

Losses on Asset Dispositions and Impairments, Net. During the Current Year Quarter, the Company sold two fast support vessels, two windfarm utility vessels, one platform supply vessel, one safety standby vessel and other equipment for net proceeds of $20.9 million and a gain of $0.6 million, all of which was recognized currently. During the Prior Year Quarter, the Company sold two offshore support vessels previously retired and removed from service and other equipment for net proceeds of $0.2 million and gains of $0.2 million.  In addition, the Company recognized impairment charges of $9.9 million related to one fast support vessel removed from service and two specialty vessels.

During the Current Nine Months, the Company sold two supply vessels previously retired and removed from service, four fast support vessels, two standby safety vessels, two windfarm utility vessels, one anchor handling towing supply vessel, one platform supply vessel and other equipment for net proceeds of $23.5 million and gains of $2.0 million, all of which was recognized currently. In addition, the Company recorded impairment charges of $3.0 million primarily related to the Company’s anchor handling towing supply vessels. During the Prior Nine Months, the Company sold two liftboats, one supply vessel, six offshore support vessels previously retired and removed from service and other equipment for net proceeds of $10.3 million and gains of $4.4 million, all of which were recognized currently. In addition, the Company recorded impairment charges of $15.7 million related to one leased-in supply vessel removed from service as it was not expected to be marketed prior to the expiration of its lease, one owned fast support vessel removed from service and two owned in-service specialty vessels.

Other Income (Expense), Net

For the periods ended September 30, the Company’s other income (expense) was as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017				2018			2017
Other Income (Expense):
Interest income	$	309		$	354			$	877		$	1,479
Interest expense		(7,761	)		(4,295	)			(20,383	)		(12,023	)
SEACOR Holdings management fees		—			—				—			(3,208	)
SEACOR Holdings guarantee fees		(5	)		(21	)			(24	)		(172	)
Loss on debt extinguishment		(638	)		—				(638	)		—
Marketable security (losses) gains, net		—			(698	)			—			10,931
Derivative gains (losses), net		4,387			13,022				(9,797	)		12,720
Foreign currency losses, net		(302	)		(106	)			(981	)		(1,389	)
Other, net		678			—				678			(1	)
	$	(3,332	)	$	8,256			$	(30,268	)	$	8,337

Interest income. Interest income in the Current Nine Months was lower compared with the Prior Nine Months primarily due to lower interest from marketable security positions.

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Interest expense. Interest expense in the Current Year Quarter and Current Nine Months compared with the Prior Year Quarter and Prior Nine Months, respectively, was higher primarily due to additional interest incurred on the debt facilities of Falcon Global International, Sea-Cat Crewzer, Sea-Crewzer II and Sea-Cat Crewzer III and FGUSA, along with higher interest as a result of the variable nature of interest rates on debt facilities.

SEACOR Holdings management fees. Following the Spin-off, SEACOR Holdings no longer charges management fees to the Company. However, fees under the Transition Service Agreement for various support services that may be provided for a period up to two years following the Spin-off are included in administrative and general expenses.

Loss on debt extinguishment. On September 26, 2018, the Company entered into a $130.0 million loan facility with a syndicate of lenders administered by DNB Bank ASA.  A portion of the proceeds ($99.9 million) was used towards the extinguishment of prior term loans (see Note 4). As a result of this transaction, the Company recognized a loss of $0.6 million in fees related to the extinguishment of debt.

Marketable security (losses) gains, net. Marketable security gains of $10.9 million in the Prior Nine Months were primarily due to a long security position exited by the Company during the Prior Nine Months.

Derivative gains (losses), net. Net derivative losses during the Current Nine Months were primarily due to increases in the fair value of the Company’s conversion option liability on its Convertible Senior Notes. The increases in the conversion option liability were primarily the result of increases in the Company’s share price and estimated credit spread, offset by a reduction in the liability following conversion of $50.0 million of its Convertible Senior Notes to equity as a result of the Exchange.

Foreign currency losses, net. Foreign currency losses for the Current Nine Months were primarily due to the weakening of the pound sterling in relation to the euro underlying certain of the Company’s debt balances.

Income Tax Benefit

During the Current Nine Months, the Company's effective income tax rate of 15.5% was primarily due to taxes provided on income attributable to noncontrolling interests, foreign sourced income not subject to U.S. income taxes, foreign taxes not creditable against U.S income taxes, a return to provision adjustment, and a reversal of an unrecognized benefit. During the Prior Nine Months, the Company's effective income tax rate of 27.4% was primarily due to losses of foreign subsidiaries not benefited.

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

Equity in losses of 50% or less owned companies, net of tax, for the Current Year Quarter and Current Nine Month compared with the Prior Year Quarter and Prior Nine Months were $6.3 million and $3.8 million higher, respectively, due to the following changes in equity earnings (losses) (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017				2018			2017
MexMar	$	136		$	793			$	2,644		$	3,382
OSV Partners		(262	)		(208	)			(1,305	)		(628	)
Sea-Cat Crewzer		—			—				—			234
Sea-Cat Crewzer II		—			—				—			99
SEACOR Grant DIS		(2	)		(484	)			(1,058	)		(519	)
Falcon Global International		—			—				—			(1,559	)
Dynamic Offshore Drilling		(944	)		(7,553	)			(1,650	)		(6,936	)
SEACOSCO		(527	)		—				(2,018	)		—
Other		572			146				1,847			630
	$	(1,027	)	$	(7,306	)		$	(1,540	)	$	(5,297	)

Seacor Grant DIS.During the Current Nine Months equity losses of $1.1 million were primarily due to an impairment charge of $1.1 million, net of taxes, for an other-than-temporary decline in the fair value of the Company’s investment in Seacor Grant DIS.

Falcon Global International.During the Prior Nine Months, the Company’s partner declined to participate in a capital call from FGI and, as a consequence, the Company obtained 100% voting control of FGI in accordance with the terms of the operating agreement and began consolidating FGI’s net assets effective March 31, 2017. In February 2018, the Company and MOI (an affiliate of our partner in FGI during the Prior Nine Months) contributed certain assets, including 100% of the equity interests in each member of FGI, to FGH, a consolidated subsidiary of the Company, in accordance with the terms of a Joint Venture Contribution and Formation Agreement (see Note 10 to the unaudited consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q).

Dynamic Offshore Drilling. During the Prior Nine Months, the Company recognized an impairment charge of $8.3 million, net of tax, for an other-than-temporary decline in the fair value of its equity investments upon Dynamic Offshore Drilling Limited's unsuccessful bid on a charter renewal with a customer. The charter was terminated in February 2018.

      SEACOSCO.During the Current Year Quarter and Current Nine Months equity losses of $0.5 million and $2.0 million, respectively, were primarily due to the mobilization of two newly built vessels following delivery from the shipyard.

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Liquidity and Capital Resources

General

The Company’s ongoing liquidity requirements arise primarily from working capital needs, capital commitments and its obligations to service outstanding debt. The Company may use its liquidity to fund capital expenditures, make acquisitions or to make other investments. Sources of liquidity are cash balances, construction reserve funds and cash flows from operations. From time to time, the Company may secure additional liquidity through asset sales or the issuance of debt, shares of SEACOR Marine Common Stock or common stock of its subsidiaries, preferred stock or a combination thereof.

As of September 30, 2018, the Company had unfunded capital commitments of $34.5 million that included two fast support vessels, three supply vessels and two wind farm utility vessel. The Company’s capital commitments by year of expected payment are as follows (in thousands):

Remainder of 2018	$	2,734
2019		17,243
2020		14,552
	$	34,529

The Company has indefinitely deferred an additional $20.8 million of orders with respect to two fast support vessels for which the Company had previously reported unfunded capital commitments.

As of September 30, 2018, the Company had outstanding debt of $415.2 million, net of debt discount and issue costs. The Company’s contractual long-term debt maturities as of September 30, 2018, are as follows:

	Actual
Remainder of 2018	$	3,738
2019		17,426
2020		25,489
2021		51,753
2022		25,150
Years subsequent to 2022		331,140
	$	454,696

As of September 30, 2018, the Company held balances of cash, cash equivalents, restricted cash and construction reserve funds totaling $140.1 million. As of September 30, 2018, construction reserve funds of $35.6 million were classified as non-current assets in the accompanying condensed consolidated balance sheets as the Company has the intent and ability to use the funds to acquire equipment. Additionally, the Company had $2.5 million available under subsidiary credit facilities.

Summary of Cash Flows

For the nine months ended September 30, the following is a summary of the Company's cash flows (in thousands):

	Nine months Ended September 30,
	2018		2017
Cash flows (used in) provided by:
Operating Activities	$	(50,121)	$	35,144
Investing Activities		(38,288)		(15,529	)
Financing Activities		80,918		(8,076	)
Effects of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash		(541)		1,666
(Decrease) Increase in Cash, Cash Equivalents and Restricted Cash	$	(8,032)	$	13,205

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Operating Activities

Cash flows provided by (used in) operating activities decreased by $85.3 million in the Current Nine Months compared with the Prior Nine Months. The components of cash flows provided by (used in) operating activities during the Current Nine Months and Prior Nine Months were as follows:

	Nine Months Ended September 30,
	2018			2017
DVP:
United States, primarily Gulf of Mexico	$	9,903		$	(5,070	)
Africa, primarily West Africa		9,108			1,780
Middle East and Asia		8,764			(3,201	)
Brazil, Mexico, Central and South America		12,089			4,366
Europe, primarily North Sea		9,887			17,563
Operating, leased-in equipment (excluding amortization of deferred gains)		(14,518	)		(16,226	)
Administrative and general (excluding provisions for bad debts and amortization of share awards)		(37,885	)		(44,002	)
SEACOR Holdings management and guarantee fees		(24	)		(3,380	)
Other, net (excluding non-cash losses)		249			(1	)
Dividends received from 50% or less owned companies		1,324			2,442
		(1,103	)		(45,729	)
Changes in operating assets and liabilities before interest and income taxes		(36,100	)		(2,713	)
Director share awards		893			—
Restricted stock vesting		(83)			—
Proceeds from sale of marketable securities		—			51,877
Cash settlements on derivative transactions, net		(48	)		(372	)
Interest paid, excluding capitalized interest		(14,201	)		(4,745	)
Interest received		877			3,001
Income taxes refunded, net		(356	)		33,825
Total cash flows (used in) provided by operating activities	$	(50,121	)	$	35,144

_____________________

(1) During the Current Nine Months and the Prior Nine Months, capitalized interest paid and included in purchases of property and equipment was $1.6 million and $3.1 million, respectively.

For a detailed discussion of the Company's financial results for the reported periods, see “Consolidated Results of Operations” included above. Changes in operating assets and liabilities before interest and income taxes are the result of the Company's working capital requirements.

Investing Activities

During the Current Nine Months, net cash used in investing activities was $38.2 million, primarily for the following:

• capital expenditures were $37.8 million;

• the Company sold one fast support vessel and two supply vessels previously retired and removed from service, one anchor handling towing supply vessel, three fast support vessels, two standby safety vessels, one wind farm utility vessel and other equipment for net proceeds of $4.0 million ($3.9 million in cash and $0.1 million of previously received deposits) and received  $1.4 million in deposits for the future sale of vessels;

• construction reserve funds account transactions included withdrawals of $9.8 million; 

• the Company made investments in, and advances to, its 50% or less owned companies of $30.2 million, primarily as a result of a $27.0 million capital contribution in the new SEACOSCO joint venture;

• the Company sold 51% of Seacor Marlin LLC to MexMar Offshore for $8.0 million; and

• the Company received $6.5 million as a return of its capital investment in Nautical Power.

During the Prior Nine Months, net cash used in investing activities was $15.7 million, primarily as a result of the following:

• capital expenditures and payments on fair value hedges were $52.7 million. Six fast support vessels and one platform supply vessel were delivered during the period;

• the Company sold two liftboats, one supply vessel, six offshore support vessels previously retired and removed from service and other equipment for net proceeds of $10.3 million ($9.8 million in cash and $0.5 million of previously received deposits);

• construction reserve funds account transactions included deposits of $6.3 million and withdrawals of $39.1 million;

• the Company made investments in and advances to, its 50% or less owned companies of $5.3 million, including $2.4 million to Falcon Global and $2.3 million to OSV Partners;

• the Company received capital distributions of $7.4 million from its 50% or less owned company MexMar; 

• effective March 31, 2017, the Company consolidated Falcon Global International and assumed cash of $1.9 million.  

36

• effective April 28, 2017, the Company acquired a 100% controlling interest in Sea-Cat Crewzer II LLC through the acquisition of its partners' 50% ownership interest for $9.6 million, net of cash acquired; and

• effective April 28, 2017, the Company acquired a 100% controlling interest in Sea-Cat Crewzer LLC through the acquisition of its partners' 50% ownership interest for $0.1 million, net of cash acquired.

Financing Activities

During the Current Nine Months, net cash provided by financing activities was $80.9 million. The Company:

• borrowed $15.0 million under the FGUSA Revolving Loan Facility;  

• paid $15.0 million in debtor-in-possession obligations assumed from MOI;

• converted €6.0 million of denominated debt into pound sterling debt, paying $7.5 million in euro debt and borrowing $8.5 million in pound sterling debt, resulting in a net increase in USD borrowings of $1.0 million;

• made scheduled payments on long-term debt and obligations of $15.6 million;

• borrowed $11.0 million for the purchase of Seacor 88 and Seacor 888;

• refinanced $99.9 million in debt on eight vessels through a syndicated loan facility,

• borrowed $30.1 million through a syndicated loan facility;

• issued Common Stock for proceeds of $43.0 million in a private placement; and

• issued Warrants to purchase Common Stock for proceeds of $12.8 million in a private placement.

During the Prior Nine Months, net cash used in financing activities was $8.1 million. The Company:

• borrowed $7.1 million under the Sea-Cat Crewzer III Term Loan Facility; 

• made scheduled payments on long-term debt and capital lease obligations of $8.6 million;

• incurred issue costs on various facilities of $0.2 million;

• purchased subsidiary shares from noncontrolling interests for $3.7 million; and

• paid SEACOR Holdings $2.7 million for the distribution of SEACOR Marine restricted stock to Company personnel in connection with the Spin-off.

Short and Long-Term Liquidity Requirements

The Company believes that a combination of cash balances on hand, construction reserve funds, cash generated from operating activities, availability under existing subsidiary financing arrangements and access to the credit and capital markets will provide sufficient liquidity to meet its obligations, including to support its capital expenditures program, working capital and debt service requirements. The Company continually evaluates possible acquisitions and dispositions of certain businesses and assets. The Company’s sources of liquidity may be impacted by the general condition of the markets in which it operates and the broader economy as a whole, which may limit its access to the credit and capital markets on acceptable terms. Management will continue to closely monitor the Company’s performance and liquidity, as well as the credit and capital markets.

Off-Balance Sheet Arrangements

For a discussion of the Company’s off-balance sheet arrangements, refer to Liquidity and Capital Resources included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017.  There has been no material change in the Company’s off-balance sheet arrangements during the nine months ended September 30, 2018.

Debt Securities and Credit Agreements

For a discussion of the Company’s debt securities and credit agreements, see “Note 4. Long-Term Debt” in the unaudited consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q and in “Note 7. Long-Term Debt” in the Company's audited consolidated financial statements included in its Annual Report on Form 10-K.

Contractual Obligations and Commercial Commitments

For a discussion of the Company’s contractual obligations and commercial commitments, refer to Liquidity and Capital Resources included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017.  There has been no material change in the Company’s contractual obligations and commercial commitments during the nine months ended September 30, 2018.

37

Contingencies

As of September 30, 2018, SEACOR Holdings has guaranteed $46.1 million on behalf of the Company for various obligations including: letter of credit obligations, performance obligations under sale-leaseback arrangements and invoiced amounts for funding deficits under the MNOPF. Pursuant to a Distribution Agreement with SEACOR Holdings, SEACOR Holdings charges the Company a fee of 0.5% per annum on outstanding guaranteed amounts, which declines as the obligations are settled by the Company.

In the normal 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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For a discussion of the Company’s exposure to market risk, refer to “Quantitative and Qualitative Disclosures About Market Risk” included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017. There has been no material change in the Company’s exposure to market risk during the Current Nine Months.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

With the participation of the Company’s principal executive officer and principal financial officer, management evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of September 30, 2018. Based on their evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2018.

The Company’s disclosure controls and procedures have been designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, to allow timely decisions regarding required disclosures. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those internal control systems determined to be effective can provide only a level of reasonable assurance with respect to financial statement preparation and presentation.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended September 30, 2018 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II—OTHER INFORMATION

ITEM 1.      LEGAL PROCEEDINGS

For a description of developments with respect to pending legal proceedings described in the Company's Annual Report on Form 10-K for the year ended December 31, 2017, see Note 10. “Commitments and Contingencies” included in Part I. Item 1. “Financial Statements” elsewhere in this Quarterly Report on Form 10-Q.

ITEM 1A.   RISK FACTORS

For a discussion of the Company’s risk factors, refer to “Risk Factors” included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017. There have been no material changes in the Company’s risk factors during the Current Nine Months.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULT UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

10.1	Credit Agreement, dated as of September 26, 2018, by and among SEACOR Marine Foreign Holdings Inc., SEACOR Marine Holdings Inc., DNB Bank, ASA, New York Branch, DNB Markets Inc., Clifford Capital PTE, LTD., NIBC Bank N.V. and entities identified on schedules to the Credit Agreement.
10.2	Guaranty, dated as of September 28, 2018, by SEACOR Marine Holdings Inc. in favor of DNB Bank ASA, New York Branch, as security trustee for the creditors under the Credit Agreement
31.1	Certification by the Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
31.2	Certification by the Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
32	Certification by the Principal Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS**	XBRL Instance Document
101.SCH**	XBRL Taxonomy Extension Schema
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase
101.DEF**	XBRL Taxonomy Extension Definition Linkbase
101.LAB**	XBRL Taxonomy Extension Label Linkbase
101.PRE**	XBRL Taxonomy Extension Presentation Linkbase

______________________

** Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			SEACOR Marine Holdings Inc. (Registrant)
DATE:	November 13, 2018	By:	/s/ John Gellert
			John Gellert, President and Chief Executive Officer (Principal Executive Officer)
DATE:	November 13, 2018	By:	/s/ Jesús Llorca
			Jesús Llorca, Executive Vice President and Chief Financial Officer (Principal Financial Officer)

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