BASIS OF PRESENTATION AND ACCOUNTING POLICIES

The condensed consolidated financial information for the three and six months ended June 30, 2017 and 2016 has been prepared by the Company and has not been audited by its independent registered certified public accounting firm. The condensed consolidated financial statements include the accounts of SEACOR Holdings Inc. and its consolidated subsidiaries. In the opinion of management, all adjustments (consisting of normal recurring adjustments) have been made to fairly present the Company’s financial position as of June 30, 2017, its results of operations for the three and six months ended June 30, 2017 and 2016, its comprehensive loss for the three and six months ended June 30, 2017 and 2016, its changes in equity for the six months ended June 30, 2017, and its cash flows for the six months ended June 30, 2017 and 2016. Results of operations for the interim periods presented are not necessarily indicative of operating results for the full year or any future periods.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

Unless the context otherwise indicates, any reference in this Quarterly Report on Form 10-Q to the “Company” refers to SEACOR Holdings Inc. and its consolidated subsidiaries and any reference in this Quarterly Report on Form 10-Q to “SEACOR” refers to SEACOR Holdings Inc without its consolidated subsidiaries. Capitalized terms used and not specifically defined herein have the same meaning given those terms in the Company's Annual report on Form 10-K for the year ended December 31, 2016.

Discontinued Operations. On June 1, 2017, the Company completed the spin-off of SEACOR Marine Holdings Inc. (“SEACOR Marine”), the company that operated SEACOR’s Offshore Marine Services business segment (the “Spin-off”), by means of a dividend of all the issued and outstanding common stock of SEACOR Marine to SEACOR’s shareholders. SEACOR Marine is now an independent company whose common stock is listed on the New York Stock Exchange under the symbol “SMHI.” For all periods presented herein, the Company has reported the historical financial position, results of operations and cash flows of SEACOR Marine as discontinued operations (see Note 13).

On July 3, 2017, the Company effected the sale of its 70% interest in Illinois Corn Processing LLC (“ICP”), the company that operated SEACOR’s Illinois Corn Processing business segment, through a merger transaction whereby the Company received $21.0 million in cash and issued a note to the buyer for $32.7 million, subject to a working capital adjustment, resulting in a third quarter gain of $11.6 million, net of tax. The principal amount of the promissory note accrues interest at a rate per annum equal to the three-month London Interbank Offered Rate (“LIBOR”) plus an applicable margin of 5% for the first three months, 8% for the next three months and 10% thereafter, and matures on January 3, 2019. The obligations of ICP under the promissory note are secured by the equity and substantially all of the assets of ICP. ICP operates a single-site alcohol manufacturing, storage and distribution facility producing alcohol used in the food, beverage, industrial and petrochemical end-markets. For all periods presented herein, the Company has reported the historical financial position, results of operations and cash flows of ICP as discontinued operations (see Note 13).

Subsequent Event. On July 3, 2017, International Shipholding Corporation (“ISH”) emerged from bankruptcy pursuant to its chapter 11 plan of reorganization (the “Plan”) that had been confirmed by the U.S. Bankruptcy Court for the Southern District of New York. Pursuant to the Plan, SEACOR Ocean Transport Inc., a wholly-owned subsidiary of the Company, acquired all of the equity of the reorganized ISH. ISH, through its subsidiaries, operates a diversified fleet of U.S. and foreign-flag vessels that provide worldwide and domestic maritime transportation services to commercial and governmental customers primarily under medium to long-term charters and contracts. Under the terms of the Plan, the Company paid $10.5 million in cash, converted $18.1 million of debtor in possession financing into equity and borrowed $25.0 million under a new credit facility that is secured by the assets and equity of ISH and is non-recourse to SEACOR and its subsidiaries other than ISH (see Note 4).

Revenue Recognition. The Company recognizes revenue when it is realized or realizable and earned. Revenue is realized or realizable and earned when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price to the buyer is fixed or determinable, and collectability is reasonably assured. Revenue that does not meet these criteria is deferred until the criteria are met.

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 June 30, 2017, the estimated useful life (in years) of each of the Company’s major categories of new equipment was as follows:



Inland river dry-cargo and deck barges	20
Inland river liquid tank barges	25
Inland river towboats and harbor boats	25
Product tankers - U.S.-flag	25
Short-sea Container/RORO⁽¹⁾vessels	20
Harbor and offshore tugs	25
Ocean liquid tank barges	25
Terminal facilities	20

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(1)	Roll on/Roll off (“RORO”).

Equipment maintenance and repair costs including 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 six months ended June 30, 2017, capitalized interest totaled $2.1 million.

Impairment of Long-Lived Assets. The Company performs an impairment analysis of long-lived assets used in operations, including intangible assets, when indicators of impairment are present. These indicators may include a significant decrease in the market price of a long-lived asset or asset group, a significant adverse change in the extent or manner in which a long-lived asset or asset group is being used or in its physical condition, or a current period operating or cash flow loss combined with a history of operating or cash flow losses or a forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group. If the carrying values of the assets are not recoverable, as determined by the estimated undiscounted cash flows, the estimated fair value of the assets or asset groups are compared to their current carrying value and impairment charges are recorded if the carrying value exceeds fair value. The Company performs its testing on an asset or asset group basis. The Company’s estimates of undiscounted cash flows are highly subjective and actual results may vary from the Company’s estimates due to the uncertainty regarding projected financial performance. Generally, fair value is determined using valuation techniques, such as expected discounted cash flows or appraisals, as appropriate. During the six months ended June 30, 2017, the Company recognized impairment charges of $0.4 million related to long-lived assets held for use. During the six months ended June 30, 2016, the Company recognized no impairment charges related to long-lived assets held for use.

Impairment of 50% or Less Owned Companies. Investments in 50% or less owned companies are reviewed periodically to assess whether there is an other-than-temporary decline in the carrying value of the investment. In its evaluation, the Company considers, among other items, recent and expected financial performance and returns, impairments recorded by the investee and the capital structure of the investee. When the Company determines the estimated fair value of an investment is below carrying value and the decline is other-than-temporary, the investment is written down to its estimated fair value. Actual results may vary from the Company’s estimates due to the uncertainty regarding projected financial performance, the severity and expected duration of declines in value, and the available liquidity in the capital markets to support the continuing operations of the investee, among other factors. Although the Company believes its assumptions and estimates are reasonable, the investee’s actual performance compared with the estimates could produce different results and lead to additional impairment charges in future periods. During the six months ended June 30, 2017 and 2016, the Company did not recognize any impairment charges related to its 50% or less owned companies.

Income Taxes. During the six months ended June 30, 2017, the Company’s effective income tax rate of 1.7% was primarily due to taxes not provided on income attributable to noncontrolling interests (see Note 8).

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 six months ended June 30 was as follows (in thousands):



	2017			2016
Balance at beginning of period	$	82,423		$	92,610
Adjustments to deferred gains arising from asset sales	7,720			9,003
Amortization of deferred gains included in operating expenses as a reduction to rental expense	(7,242		)	(7,367		)
Amortization of deferred gains included in gains on asset dispositions and impairments, net	(1,210		)	(1,210		)
Other	—			(1,697		)
Balance at end of period	$	81,691		$	91,339

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



	SEACOR Holdings Inc. Stockholders’ Equity												Noncontrolling Interests
	Foreign Currency Translation Adjustments			Derivative Losses on Cash Flow Hedges, net			Other			Total			Foreign Currency Translation Adjustments			Derivative Losses on Cash Flow Hedges, net			Other			Other Comprehensive Income
December 31, 2016	$	(11,593	)	$	75		$	4		$	(11,514	)	$	(1,613	)	$	(17	)	$	3
Distribution of SEACOR Marine stock to shareholders	10,031			94			—			10,125			—			—			—
Other comprehensive income (loss)	1,569			(260		)	(11		)	1,298			153			13			(5		)	$	1,459
Income tax (expense) benefit	(549		)	91			4			(454		)	—			—			—			(454		)
Six Months Ended June 30, 2017	$	(542	)	$	—		$	(3	)	$	(545	)	$	(1,460	)	$	(4	)	$	(2	)	$	1,005

Loss Per Share. Basic loss per common share of SEACOR is computed based on the weighted average number of common shares issued and outstanding during the relevant periods. Diluted loss per common share of SEACOR is computed based on the weighted average number of common shares issued and outstanding plus the effect of potentially dilutive securities through the application of the treasury stock and if-converted methods. Dilutive securities for this purpose assumes restricted stock grants have vested, common shares have been issued pursuant to the exercise of outstanding stock options and common shares have been issued pursuant to the conversion of all outstanding convertible notes.

Computations of basic and diluted loss per common share of SEACOR were as follows (in thousands, except share data):



	Three Months Ended June 30,							Six Months Ended June 30,
	Net Loss attributable to SEACOR			Average O/S Shares	Per Share			Net Loss Attributable to SEACOR			Average O/S Shares	Per Share
2017
Basic Weighted Average Common Shares Outstanding	$	(32,808	)	17,207,831	$	(1.91	)	$	(28,725	)	17,141,306	$	(1.68	)
Effect of Dilutive Share Awards:
Options and Restricted Stock⁽¹⁾	—			—				—			299,055
Convertible Notes⁽²⁾	—			—				—			—
Diluted Weighted Average Common Shares Outstanding	$	(32,808	)	17,207,831	$	(1.91	)	$	(28,725	)	17,440,361	$	(1.65	)
2016
Basic Weighted Average Common Shares Outstanding	$	(55,159	)	16,928,722	$	(3.26	)	$	(82,345	)	16,873,045	$	(4.88	)
Effect of Dilutive Share Awards:
Options and Restricted Stock⁽³⁾	—			—				—			—
Convertible Notes⁽⁴⁾	—			—				—			—
Diluted Weighted Average Common Shares Outstanding	$	(55,159	)	16,928,722	$	(3.26	)	$	(82,345	)	16,873,045	$	(4.88	)

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(1)	For the three and six months ended June 30, 2017, diluted loss per common share of SEACOR excluded 2,644,489 and 1,563,901, respectively, of certain share awards as the effect of their inclusion in the computation would be anti-dilutive. Diluted weighted average shares outstanding are calculated based on continuing operations.

(2)

For the three and six months ended June 30, 2017, diluted loss per common share of SEACOR excluded 2,693,475 and 2,793,144, respectively, of common shares issuable pursuant to the Company’s 2.5% Convertible Senior Notes and 2,801,147 and 2,801,147, respectively, of common shares issuable pursuant to the Company’s 3.0% Convertible Senior Notes as the effect of their inclusion in the computation would be anti-dilutive.


(3)	For the three and six months ended June 30, 2016, diluted loss per common share of SEACOR excluded 2,024,421 and 2,024,421, respectively, of certain share awards as the effect of their inclusion in the computation would be anti-dilutive.

(4)

For the three and six months ended June 30, 2016, diluted loss per common share of SEACOR excluded 2,975,847 and 3,177,620, respectively, of common shares issuable pursuant to the Company’s 2.5% Convertible Senior Notes, 1,825,326 and 1,825,326, respectively, of common shares issuable pursuant to the Company’s 3.0% Convertible Senior Notes and 2,243,500 and 2,243,500, respectively, of common shares issuable pursuant to the Company’s 3.75% Subsidiary Convertible Senior Notes as the effect of their inclusion in the computation would be anti-dilutive.

New Accounting Pronouncements. On May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under generally accepted accounting principles in the United States. The core principal of the new standard is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard is effective for annual and interim periods beginning after December 15, 2017 and early adoption is permitted. The Company will adopt the new standard on January 1, 2018 and expects to use the modified retrospective approach upon adoption. The Company is currently determining the impact, if any, the adoption of the new accounting standard will have on its consolidated financial position, results of operations or cash flows. Principal versus agent considerations of the new standard with respect to the Company’s vessel management services and pooling arrangements may result in a gross presentation of operating revenues and expenses compared with its current net presentation for results from managed and pooled third party equipment.

On February 25, 2016, the FASB issued a comprehensive new leasing standard, which improves transparency and comparability among companies by requiring lessees to recognize a lease liability and a corresponding lease asset for virtually all lease contracts. It also requires additional disclosures about leasing arrangements. The new standard is effective for interim and annual periods beginning after December 15, 2018 and requires a modified retrospective approach to adoption. Early adoption is permitted. The Company has not yet determined what impact, if any, the adoption of the new standard will have on its consolidated financial position, results of operations or cash flows.

On August 26, 2016, the FASB issued an amendment to the accounting standard which amends or clarifies guidance on classification of certain transactions in the statement of cash flows, including classification of proceeds from the settlement of insurance claims, debt prepayments, debt extinguishment costs and contingent consideration payments after a business combination. This new standard is effective for the Company as of January 1, 2018 and early adoption is permitted. The Company has not yet determined what impact, if any, the adoption of the new standard will have on its consolidated financial position, results of operations or cash flows.

On October 24, 2016, the FASB issued a new accounting standard, which requires companies to account for the income tax effects of intercompany sales and transfers of assets other than inventory. The new standard is effective for interim and annual periods beginning after December 31, 2017 and requires a modified retrospective approach to adoption. The Company does not expect the adoption of the new standard will have a material impact on its consolidated financial position, results of operations or cash flows.

On November 17, 2016, the FASB issued an amendment to the accounting standard which requires that restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total cash amounts shown on the statement of cash flows. The new standard is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company has not yet determined what impact, if any, the adoption of the new standard will have on its consolidated financial position, results of operations or cash flows.

On January 26, 2017, the FASB issued an amendment to the accounting standard which simplified wording and removes step two of the goodwill impairment test. A goodwill impairment will now be the amount by which a reporting units carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The FASB also eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform step two of the goodwill test. The new standard is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2020, with early adoption permitted for interim or annual goodwill impairment tests on testing dates after January 1, 2017. The Company has not yet determined what impact, if any, the adoption of the new standard will have on its consolidated financial position, results of operations or cash flows.