Tuesday, May 3, 2016

Seacor Holdings Annual Report $CKH

I thought this was interesting - from the Seacor Holdings 2015 Annual Report [pdf]

That there is no impairment charge according to GAAP does not mean that book value represents an achievable price were the asset today offered for sale. I would be happier if GAAP would, like international accounting rules, allow “mark-to-market” accounting for our fleet and permit me to delegate to a broker, or an appraiser, the responsibility for periodically determining a “clearing price” for our assets.

In the past, I have steadfastly refused to provide a SEACOR view of the value of our assets. There are many reasons for not doing so, apart from the army of lawyers who counsel reticence. My preference is to provide SEACOR stockholders information to reach independent conclusions. In this letter you can find the original cost of equipment, current insured values, book carrying costs, and historical information about earnings of different classes of equipment. The ability of our management group to divine the future is not necessarily much better, if indeed at all better, than that of our stockholders, journalists, “sell side” analysts, or palm readers.

In the absence of willing buyers and willing sellers for secondhand equipment, I generally default to replacement cost as the most useful point of departure. Manufacturers (shipyards in our business) are always willing sellers. Of course, the real cost can be elusive. Without a transaction born out of the crucible of negotiation, a shipyard’s list price is an “ask.” From replacement cost it is feasible to extrapolate an approximate value range for secondhand equipment, even if there are no “willing buyers” or “willing seller.”
Sadly, in the 2013 letter [pdf], there was no hint that oil was about to crash.Will be interesting to monitor this one - potential future restructuring candidate.

Also (as he discusses in this year's letter), they'll have to start making tough decisions about maintenance (special surveys, etc) on the idle ships.

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