-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OlIHrbU1QhT9UxMlP1JjrJovpAQwIDpjLVA1DR1U65RpRr73vKdvFv/x9KcAXkbg w2sfseIze6FB26iiZw31xA== 0000950134-98-000513.txt : 19980128 0000950134-98-000513.hdr.sgml : 19980128 ACCESSION NUMBER: 0000950134-98-000513 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980126 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TIDEWATER INC CENTRAL INDEX KEY: 0000098222 STANDARD INDUSTRIAL CLASSIFICATION: WATER TRANSPORTATION [4400] IRS NUMBER: 720487776 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-06311 FILM NUMBER: 98512575 BUSINESS ADDRESS: STREET 1: 1440 CANAL ST STE 2100 CITY: NEW ORLEANS STATE: LA ZIP: 70112 BUSINESS PHONE: 5045681010 MAIL ADDRESS: STREET 1: 1440 CANAL STREET STREET 2: STE 2100 CITY: NEW ORLEANS STATE: LA ZIP: 70112 FORMER COMPANY: FORMER CONFORMED NAME: TIDEWATER MARINE SERVICE INC DATE OF NAME CHANGE: 19780724 10-Q 1 FORM 10-Q FOR QUARTER ENDED DECEMBER 31, 1997 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 - For the Quarterly Period Ended December 31, 1997 ----------------- 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 1-6311 TIDEWATER INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 072-0487776 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 1440 Canal Street, Suite 2100, New Orleans, Louisiana 70112 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (504) 568-1010 ----------------------------- 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 of 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 X NO ----- ----- 60,894,400 shares of Tidewater Inc. common stock $.10 par value per share were outstanding on January 26, 1998. Registrant has no other class of common stock outstanding. 1 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements TIDEWATER INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
- ------------------------------------------------------------------------------------------------------------------------ December 31, March 31, ASSETS 1997 1997 - ------------------------------------------------------------------------------------------------------------------------ Current assets: Cash, including temporary cash investments $ 27,872 41,166 Trade and other receivables, net 253,080 176,513 Inventories 28,202 28,171 Other current assets 4,278 3,803 - ------------------------------------------------------------------------------------------------------------------------ Total current assets 313,432 249,653 - ------------------------------------------------------------------------------------------------------------------------ Equity investments in and advances to unconsolidated companies 19,963 20,556 Net assets of discontinued Compression operations 244,208 253,305 Properties and equipment: Vessels and related equipment 1,532,278 1,265,633 Other properties and equipment 35,092 25,220 - ------------------------------------------------------------------------------------------------------------------------ 1,567,370 1,290,853 Less accumulated depreciation 846,204 827,710 - ------------------------------------------------------------------------------------------------------------------------ Net properties and equipment 721,166 463,143 - ------------------------------------------------------------------------------------------------------------------------ Goodwill 358,945 406 Other assets 61,694 47,235 - ------------------------------------------------------------------------------------------------------------------------ $1,719,408 1,034,298 ======================================================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt 59,345 -- Accounts payable and accrued expenses 145,853 90,046 - ------------------------------------------------------------------------------------------------------------------------ Total current liabilities 205,198 90,046 - ------------------------------------------------------------------------------------------------------------------------ Long-term debt 295,556 -- Deferred income taxes 171,973 95,595 Accrued property and liability losses 44,833 32,146 Other liabilities and deferred credits 56,239 46,847 Stockholders' equity: Common stock, $.10 par value; issued 60,889,394 shares at December and 60,334,889 shares at March 6,089 6,033 Additional paid-in capital 357,758 341,415 Retained earnings 595,147 433,347 - ------------------------------------------------------------------------------------------------------------------------ 958,994 780,795 Less cumulative foreign currency translation adjustment 10,582 10,676 Less deferred compensation - restricted stock 2,803 455 - ------------------------------------------------------------------------------------------------------------------------ Total stockholders' equity 945,609 769,664 - ------------------------------------------------------------------------------------------------------------------------ $1,719,408 1,034,298 ========================================================================================================================
See Notes to Unaudited Condensed Consolidated Financial Statements. 2 3 TIDEWATER INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except share and per share data)
- ----------------------------------------------------------------------------------------------------------------------- Quarter Ended Nine Months Ended December 31, December 31, - ----------------------------------------------------------------------------------------------------------------------- 1997 1996 1997 1996 - ----------------------------------------------------------------------------------------------------------------------- Marine revenues $ 280,697 184,133 781,550 498,463 Costs and expenses: Operating costs 135,962 98,290 389,867 286,086 Depreciation and amortization 24,481 14,087 67,109 41,514 General and administrative 19,075 13,508 54,021 38,942 - ----------------------------------------------------------------------------------------------------------------------- 179,518 125,885 510,997 366,542 - ----------------------------------------------------------------------------------------------------------------------- 101,179 58,248 270,553 131,921 Other income (expense): Foreign exchange gain (loss) (153) 70 (242) (179) Gains on sales of assets 10,015 682 16,173 1,528 Equity in net earnings of unconsolidated companies 1,226 1,288 4,048 3,706 Minority interests (425) (200) (686) (540) Other income (expense) 1,153 -- (6,847) -- Interest and miscellaneous income 1,093 1,376 3,270 3,544 Interest and other debt costs (7,900) (122) (21,095) (648) - ----------------------------------------------------------------------------------------------------------------------- 5,009 3,094 (5,379) 7,411 - ----------------------------------------------------------------------------------------------------------------------- Earnings before income taxes 106,188 61,342 265,174 139,332 Income taxes 35,890 20,210 85,687 44,797 - ----------------------------------------------------------------------------------------------------------------------- Earnings from continuing operations 70,298 41,132 179,487 94,535 Earnings from discontinued operations 3,661 2,038 9,562 5,957 - ----------------------------------------------------------------------------------------------------------------------- Net earnings $ 73,959 43,170 189,049 100,492 ======================================================================================================================= Earnings per common share: Earnings from continuing operations $ 1.15 0.66 2.96 1.53 Earnings from discontinued operations .06 0.04 .15 0.09 - ----------------------------------------------------------------------------------------------------------------------- Earnings per share $ 1.21 0.70 3.11 1.62 ======================================================================================================================= Diluted earnings per common share: Earnings from continuing operations $ 1.15 .66 2.95 1.52 Earnings from discontinued operations .06 .03 .15 .09 - ----------------------------------------------------------------------------------------------------------------------- Diluted earnings per share $ 1.21 0.69 3.10 1.61 ======================================================================================================================= Weighted average common shares outstanding 60,873,807 61,951,401 60,566,536 61,970,101 Incremental common shares from stock options 388,353 464,514 389,162 435,908 - ----------------------------------------------------------------------------------------------------------------------- Weighted average common shares and equivalents 61,262,160 62,415,915 60,955,698 62,406,009 ======================================================================================================================= Cash dividends declared per common share $ 0.15 0.15 0.45 0.425 =======================================================================================================================
See Notes to Unaudited Condensed Consolidated Financial Statements 3 4 TIDEWATER INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
- ----------------------------------------------------------------------------------------------------------------------- Quarter Ended Nine Months Ended December 31, December 31, 1997 1996 1997 1996 - ----------------------------------------------------------------------------------------------------------------------- Net cash provided by continuing operations $ 84,557 52,360 237,969 126,912 Net cash provided by discontinued operations 12,803 13,604 33,765 30,934 - ----------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 97,360 65,964 271,734 157,846 - ----------------------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Proceeds from sales of assets 18,243 3,890 36,589 11,317 Additions to properties and equipment (17,875) (13,085) (70,544) (45,536) Investment in U.S. Treasury notes -- (35,660) -- (41,720) Acquisitions, net of cash acquired and debt assumption -- -- (552,757) (3,435) Increase in other assets 339 -- (3,876) -- Additional investment in joint venture (1,409) -- (1,409) -- - ----------------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (702) (44,855) (591,997) (79,374) - ----------------------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Common stock purchased -- (28,667) -- (28,667) Principal payments on long-term debt (95,243) -- (178,092) (43,018) Credit facility borrowings -- -- 505,000 -- Proceeds from issuance of common stock 2,511 36 7,310 2,083 Cash dividends (9,133) (9,306) (27,249) (26,352) - ----------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities (101,865) (37,937) 306,969 (95,954) - ----------------------------------------------------------------------------------------------------------------------- Net decrease in cash (5,207) (16,828) (13,294) (17,482) Cash at beginning of period 33,079 28,114 41,166 28,768 - ----------------------------------------------------------------------------------------------------------------------- Cash at end of period $ 27,872 11,286 27,872 11,286 ======================================================================================================================= Supplemental disclosure of cash flow information: Cash paid for: Interest $ 9,765 266 18,924 520 Income taxes 25,871 13,470 67,642 30,060 ======================================================================================================================= Supplemental noncash investing activities: Acquisitions: Fair value of assets acquired $ -- -- 695,701 51,305 Net cash paid for stock -- -- (552,757) (3,435) - ----------------------------------------------------------------------------------------------------------------------- Liabilities assumed $ -- -- 142,944 47,870 =======================================================================================================================
4 5 TIDEWATER INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (1) Interim Financial Statements The consolidated financial information for the interim periods presented herein has not been audited by independent accountants, but in the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the condensed consolidated balance sheets and the condensed consolidated statements of earnings and cash flows at the dates and for the periods indicated have been made. Results of operations for interim periods are not necessarily indicative of results of operations for the respective full years. (2) Earnings per Share Data In 1997 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share." SFAS No. 128 requires the replacement of previously reported primary and fully diluted earnings per share required by Accounting Principles Board Opinion No. 15 with earnings per share and diluted earnings per share. The calculation of earnings per share excludes any dilutive effect of stock options, while diluted earnings per share includes the dilutive effect of stock options. Per share amounts for the quarter and nine-month period ended December 31, 1996 have been restated to conform to the requirements of SFAS No. 128. (3) Income Taxes Income tax expense for interim periods is based on estimates of the effective tax rate for the entire fiscal year. The effective tax rate applicable to pre-tax earnings from continuing operations for the quarter and nine-month period ended December 31, 1997 was 33.8%, excluding a $4 million (or $.07 per share) second quarter reduction in deferred taxes resulting from the lowering of United Kingdom corporate income tax rates which had the effect of reducing the effective tax rate applicable to pre-tax earnings from continuing operations for the nine-month period ended December 31, 1997 to 32.3%. For the quarter and nine-month period ended December 31, 1996 the effective tax rates applicable to pre-tax earnings from continuing operations were 33% and 32.2%, respectively. (4) Planned Sale of Compression Business On December 19, 1997 the company entered into a definitive agreement to sell its natural gas compression business for $360 million in cash. Accordingly, the company's unaudited condensed consolidated financial statements for all periods have been reclassified to report separately financial position, results of operations and operating cash flows from continuing operations and the discontinued Compression operation. 5 6 Compression net assets at December 31, 1997 and March 31, 1997 and Compression operating results for the quarters and nine-month periods ended December 31, 1997 and 1996 are as follows: Compression Net Assets:
(in thousands) At December 31, At March 31, 1997 1997 -------------------------------------------------------------------------------------------------------- Current assets $ 19,266 19,073 Net properties and equipment 210,138 217,983 Goodwill 19,711 20,951 Accounts payable and accrued expenses (4,907) (4,702) -------------------------------------------------------------------------------------------------------- Net assets $244,208 253,305 ========================================================================================================
Compression Operating Results:
(in thousands) Quarter Ended Nine Months Ended December 31, December 31, 1997 1996 1997 1996 -------------------------------------------------------------------------------------------------------------------- Revenues $ 26,664 28,296 80,383 83,732 Operating costs (12,338) (16,039) (39,412) (47,552) Depreciation (6,574) (6,496) (19,657) (19,902) General and administrative (2,330) (2,805) (7,281) (8,268) ---------------------------------------------------------------------------------------------------------------------- 5,422 2,956 14,033 8,010 Other income 449 310 1,170 1,535 --------------------------------------------------------------------------------------------------------------------- Earnings before income taxes 5,871 3,266 15,203 9,545 Income taxes 2,210 1,228 5,641 3,588 --------------------------------------------------------------------------------------------------------------------- Earnings from discontinued operations $ 3,661 2,038 9,562 5,957 =====================================================================================================================
The agreement is subject to the successful completion of customary due diligence by the buyer and expiration or early termination of the waiting period under the Hart-Scott-Rodino Act. The transaction, anticipated to close in March 1998, is expected to generate an after-tax gain in excess of $65 million, or $1.06 per common share, net of legal, accounting and investment banking fees, severance and other costs associated with the sale. (5) Marine Acquisitions During the quarter ended June 30, 1997 the company acquired all of the shares of O.I.L. Ltd. (O.I.L.) from Ocean Group plc in exchange for a cash payment of 328 million pounds sterling or approximately $534 million. In addition a 3 million pound sterling, or approximately $5 million, advance payment was made for the net working capital of O.I.L., with the final purchase price to be adjusted for the final net working capital of O.I.L. as of the closing date. Available cash of $39 million and borrowings of $500 million were used to fund the purchase. Prior to the purchase O.I.L. was principally engaged in the business of operating approximately 100 marine vessels, primarily platform supply and anchor handling towing-supply vessels, in several international offshore oil and gas exploration areas outside of the United States. The total estimated cost of the acquisition of $626 million, which includes $65.6 million of 6 7 deferred income tax liability, was allocated under the purchase method of accounting based on the fair value of the assets acquired and liabilities assumed, including accruals for the estimated balance of O.I.L. working capital and professional fees, severance and other transaction costs and the related deferred tax effect of the acquisition. Goodwill of approximately $354 million has been recorded in the Condensed Consolidated Balance Sheet. The results of O.I.L.'s operations have been consolidated with the company's effective May 16, 1997. Pro forma combined results of continuing operations of the company and of O.I.L. including appropriate purchase accounting adjustments for the quarter ended December 31, 1996 and for the nine-month periods ended December 31, 1997 and 1996 as though the acquisition had taken place on April 1 of the respective years are as follows:
(in thousands, except per share amounts) Quarter Ended Nine Months Ended December 31, December 31, ------------------------------------------------------------------------------------------------ 1996 1997 1996 ------------------------------------------------------------------------------------------------ Revenues $ 219,662 801,995 600,011 Net earnings $ 39,813 178,830 85,890 Earnings per share $ .64 2.95 1.39 Diluted earnings per share $ .64 2.94 1.38
The $500 million of debt incurred to finance the O.I.L. acquisition was borrowed pursuant to a $600 million Revolving Credit and Term Loan agreement with several banks and consists of a $400 million term loan and $100 million borrowed under the $200 million revolving credit facility of the agreement. The term loan is payable in quarterly installments and bears interest at fluctuating rates subject to certain options chosen in advance by the company. On June 30, 1997 the company acquired the remaining 50% equity interest in nine towing-supply and supply vessels previously owned and operated by joint-venture companies in Australia for a cash payment of $13.2 million and issuance of debt totaling $14.0 million. The debt has been discounted to yield interest at 7% and is to be repaid in semi-annual installments. The total estimated cost of the acquisition of $30 million was allocated under the purchase method of accounting based on the fair value of the assets acquired and liabilities assumed, including accruals for professional fees, severance and other transaction costs and the related deferred tax effect of the acquisition. Goodwill of approximately $10.7 million has been recorded in the Condensed Consolidated Balance Sheet. (6) Contingencies The Internal Revenue Service has notified the company of proposed deficiencies aggregating approximately $17.5 million of additional income taxes resulting from audits of the company's income tax returns for the years ended March 31, 1993, 1994 and 1995. Additionally, the company is the defendant to several alleged labor-law pay violations claimed by certain current and former employees in various areas of the world where its marine vessel operations are conducted. While the amount, if any, of such claims for which the company ultimately may be held liable is not presently determinable, if the claimants and all similarly situated employees and former employees who might file claims were successful, the aggregate amount of the company's liability, based on available information, could approximate $15 million. 7 8 In the quarter ended September 30, 1997 the company provided an additional reserve of $8 million for the possible adverse outcome of the above matters. In management's opinion, the amount of the company's liability in excess of established reserves, if any, will not have a material adverse effect on the company's financial position or the results of its ongoing operations. (7) New Accounting Pronouncements In June 1997, the Financial Accounting Standards Board issued SFAS No. 130, "Reporting Comprehensive Income," and SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information." SFAS No. 130 and SFAS No. 131 are effective for fiscal years beginning after December 15, 1997. SFAS No. 130 establishes standards for the reporting and displaying of comprehensive income and its components. SFAS No. 131 establishes standards for the way that public business enterprises report information about operating segments in interim and annual financial statements. These two statements will have no effect on the company's 1998 financial statements, but management is currently evaluating what, if any, additional disclosures may be required when these two statements are adopted in the first quarter of fiscal 1999. 8 9 INDEPENDENT AUDITORS' REVIEW REPORT The Board of Directors and Shareholders Of Tidewater Inc.: We have reviewed the accompanying condensed consolidated balance sheet of Tidewater Inc. and subsidiaries as of December 31, 1997, and the related condensed consolidated statements of earnings and cash flows for the three-month and nine-month periods ended December 31, 1997. These financial statements are the responsibility of the company's management. The condensed consolidated balance sheet and the related condensed consolidated statements of earnings and cash flows of Tidewater Inc. and subsidiaries as of December 31, 1996, and for the three-month and nine-month periods then ended were reviewed by other accountants whose report dated January 20, 1997 stated that they were not aware of any material modifications that should be made to those statements for them to be in conformity with generally accepted accounting principles. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, which will be performed for the full year with the objective of expressing an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed consolidated financial statements at December 31, 1997, and for the three-month and nine-month periods then ended for them to be in conformity with generally accepted accounting principles. The consolidated financial statements for the year ended March 31, 1997, from which the accompanying condensed balance sheet was derived, were audited by other accountants and they expressed an unqualified opinion on those financial statements in their report dated April 30, 1997. Ernst & Young LLP New Orleans, Louisiana January 23, 1998 9 10 MANAGEMENT'S DISCUSSION AND ANALYSIS The company provides services and equipment to the international offshore energy industry through the operation of a diversified fleet of marine service vessels. Revenues, net earnings and cash flows from operations are dependent upon the activity level of the vessel fleet which is ultimately dependent upon oil and natural gas prices which, in turn, are determined by the supply/demand relationship for oil and natural gas. The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and related disclosures. In accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the company notes that certain statements set forth in this Quarterly Report on Form 10-Q which provide other than historical information and which are forward looking, involve risks and uncertainties that may impact the company's actual results of operations. The company faces many risks and uncertainties, many of which are beyond the control of the company, including fluctuations in oil and gas prices; changes in capital spending by customers in the energy industry for exploration, development and production; unsettled political conditions, civil unrest and governmental actions, especially in higher risk countries of operations; foreign currency controls and environmental and labor laws. Readers should consider all of these risk factors as well as other information contained in this report. On December 19, 1997 the company entered into a definitive agreement to sell its natural gas compression business for $360 million in cash. The agreement is subject to the successful completion of customary due diligence by the buyer and expiration or early termination of the waiting period under the Hart-Scott-Rodino Act. The transaction, anticipated to close in March 1998, is expected to generate an after-tax gain in excess of $65 million, or $1.06 per common share, net of legal, accounting and investment banking fees, severance and other costs associated with the sale. MARINE OPERATIONS Offshore service vessels provide a diverse range of services and equipment to the energy industry. Fleet size, utilization and vessel day rates primarily determine the amount of revenues and operating profit because operating costs and depreciation do not change proportionally when revenue changes. Operating costs principally consist of crew costs, repair and maintenance, insurance, fuel, lube and supplies. Fleet size and utilization are the major factors which affect crew costs. The timing and amount of repair and maintenance costs are influenced by vessel age and scheduled drydockings to satisfy safety and inspection requirements mandated by regulatory agencies. Whenever possible, vessel drydockings are done during seasonally slow periods to minimize any impact on vessel operations and are only done if economically justified, given the vessel's age and physical condition. 10 11 The following table compares revenues and operating expenses (excluding general and administrative expense and depreciation expense) for the vessel fleet for the quarters and nine-month periods ended December 31 and for the quarter ended September 30, 1997:
Quarter Quarter Ended Nine Months Ended Ended December 31, December 31, Sept. 30, 1997 1996 1997 1996 1997 - ----------------------------------------------------------------------------------------------------------------------------- Revenues: Owned and operated vessel fleet: United States $122,453 91,602 344,257 239,025 115,848 International 141,681 84,720 391,318 234,199 139,597 - ----------------------------------------------------------------------------------------------------------------------------- 264,134 176,322 735,575 473,224 255,445 Brokered vessels, shipyard and other 16,563 7,811 45,975 25,239 14,968 - ----------------------------------------------------------------------------------------------------------------------------- $280,697 184,133 781,550 498,463 270,413 ============================================================================================================================= Operating costs: Owned and operated vessel fleet: Crew costs $ 63,807 46,755 178,365 128,692 61,810 Repair and maintenance 33,056 22,455 102,249 71,916 35,190 Insurance 8,321 8,138 23,313 24,452 6,542 Fuel, lube and supplies 8,765 8,256 25,336 22,989 8,434 Other 8,909 6,144 24,048 16,906 7,629 - ----------------------------------------------------------------------------------------------------------------------------- 122,858 91,748 353,311 264,955 119,605 Brokered vessels, shipyard and other 13,104 6,542 36,556 21,131 11,116 - ----------------------------------------------------------------------------------------------------------------------------- $135,962 98,290 389,867 286,086 130,721 =============================================================================================================================
Marine operating profit for the quarters and nine-month periods ended December 31 and for the quarter ended September 30, 1997 consist of the following:
Quarter Quarter Ended Nine Months Ended Ended December 31, December 31, Sept. 30, (in thousands) 1997 1996 1997 1996 1997 - ------------------------------------------------------------------------------------------------------------------------- Owned and operated vessels: United States $ 62,249 34,943 166,222 77,009 56,722 International 40,110 25,589 107,537 60,633 41,135 - ------------------------------------------------------------------------------------------------------------------------- 102,359 60,532 273,759 137,642 97,857 Gains from asset sales 10,014 682 16,173 1,559 2,851 Brokered vessels, shipyard and other 3,265 1,098 8,862 3,494 3,674 - ------------------------------------------------------------------------------------------------------------------------- Operating profit $115,638 62,312 298,794 142,695 104,382 =========================================================================================================================
Fiscal 1998 third quarter and nine-month operating profit rose significantly above fiscal 1997's respective amounts. The increase in operating profit was the result of higher average day rates for the worldwide fleet and much higher gains on asset sales partially offset by higher operating costs. Higher average day rates for the worldwide fleet is the result of a more favorable supply/demand relationship in the U.S. Gulf of Mexico and internationally for the company's services. Higher 11 12 operating costs resulted from the expansion of the international-based fleet as a result of the O.I.L. and Australian acquisitions, increased costs associated with attracting, training and retaining qualified vessel personnel and a greater number of drydockings. Current quarter operating profit climbed above the preceding quarter's amount as continued strong demand for the company's services in the U.S. Gulf of Mexico and internationally combined with near-capacity utilization levels pushed average day rates and revenues higher. Because of continuing pressure to retain qualified vessel personnel, crew costs in the current quarter were higher than the preceding quarter and include wage increases for selected fleet personnel. Current quarter repair and maintenance costs were lower than the preceding quarter because of fewer vessel drydockings. Higher gains on asset sales in the quarter and nine-month period ended December 31, 1997 compared to the respective periods of fiscal 1997 and for the current quarter compared with the prior quarter, resulted from the disposal of several vessels, most of which had previously been withdrawn from active service due to obsolescence and prohibitive repair costs. Vessel utilization is determined primarily by market conditions and to a lesser extent by drydocking requirements. Utilization of the domestic-based fleet, which operates in U.S. waters, is primarily influenced by offshore activity related to the exploration, development and production of natural gas in the U.S. Gulf of Mexico; whereas, utilization of the international-based fleet, which operates in waters other than the United States, is primarily influenced by offshore activity related to the exploration, development and production of oil. Vessel day rates are determined by the demand created through the level of offshore exploration, development and production spending by energy exploration and production companies relative to the supply of offshore service vessels. Suitability of equipment and the degree of service provided also influence vessel day rates. 12 13 The following tables compare day-based utilization percentages and average day rates by vessel class and in total for the quarters and nine-month periods ended December 31 and for the quarter ended September 30, 1997:
Quarter Quarter Ended Nine Months Ended Ended December 31, December 31, Sept. 30, 1997 1996 1997 1996 1997 - --------------------------------------------------------------------------------------------------------------------------- UTILIZATION: Domestic-based fleet Towing-supply/supply 91.8% 90.0 91.3 90.5 91.1 Crew/utility 92.1 88.6 90.7 91.2 88.9 Offshore tugs 61.8 62.9 63.1 64.1 64.3 Other 53.3 50.2 57.8 53.4 60.5 Total 85.0% 82.4 84.8 83.7 84.8 International-based fleet Towing-supply/supply 88.9% 90.9 88.7 88.8 88.0 Crew/utility 80.7 80.9 81.3 85.4 80.9 Offshore tugs 79.7 79.3 81.0 75.0 80.3 Safety/standby 65.6 83.9 71.3 81.3 71.3 Other 67.2 84.4 76.4 78.2 78.1 Total 82.9% 86.4 84.2 84.1 83.9 Worldwide fleet Towing-supply/supply 90.1% 90.5 89.8 89.6 89.2 Crew/utility 85.4 85.0 85.2 88.5 84.2 Offshore tugs 71.9 71.8 73.4 70.1 73.6 Safety/standby 65.6 83.9 71.3 81.3 71.3 Other 63.9 75.9 72.0 72.4 73.9 Total 83.7% 84.7 84.4 83.9 84.2 =========================================================================================================================== AVERAGE VESSEL DAY RATES: Domestic-based fleet Towing-supply/supply $ 7,853 5,842 7,463 5,062 7,532 Crew/utility 2,216 1,664 2,112 1,532 2,142 Offshore tugs 6,617 5,651 6,540 5,343 6,558 Other 3,167 3,505 2,833 3,233 2,757 Total $ 6,569 4,948 6,255 4,351 6,308 International-based fleet Towing-supply/supply $ 5,655 3,965 5,328 3,836 5,440 Crew/utility 2,213 1,916 2,134 1,792 2,190 Offshore tugs 3,752 3,290 3,549 2,977 3,494 Safety/standby 6,087 5,290 6,077 5,135 6,138 Other 953 705 916 695 935 Total $ 4,653 3,296 4,345 3,130 4,438 Worldwide fleet Towing-supply/supply $ 6,539 4,833 6,202 4,400 6,267 Crew/utility 2,215 1,776 2,124 1,648 2,169 Offshore tugs 4,832 4,237 4,647 3,943 4,621 Safety/standby 6,087 5,290 6,077 5,135 6,138 Other 1,387 1,168 1,274 1,133 1,291 Total $ 5,380 3,988 5,070 3,647 5,127 ===========================================================================================================================
13 14 The following table compares the average number of vessels by class and geographic distribution for the quarters and nine-month periods ended December 31 and for the quarter ended September 30, 1997:
Quarter Quarter Ended Nine Months Ended Ended December 31, December 31, Sept. 30, 1997 1996 1997 1996 1997 - ------------------------------------------------------------------------------------------------------------------------- Domestic-based fleet: Towing-supply/supply 148 143 146 140 145 Crew/utility 39 42 39 42 39 Offshore tugs 41 44 40 43 40 Other 11 15 11 14 11 - ------------------------------------------------------------------------------------------------------------------------- Total 239 244 236 239 235 - ------------------------------------------------------------------------------------------------------------------------- International-based fleet: Towing-supply/supply 227 164 216 167 230 Crew/utility 55 38 54 36 57 Offshore tugs 53 52 54 53 55 Safety/standby 31 24 29 20 31 Other 33 45 36 47 35 - ------------------------------------------------------------------------------------------------------------------------- Total 399 323 389 323 408 - ------------------------------------------------------------------------------------------------------------------------- Owned or chartered vessels included in marine revenues 638 567 625 562 643 Vessels withdrawn from active service 17 21 14 22 12 Joint-venture and other 55 47 58 53 60 - ------------------------------------------------------------------------------------------------------------------------- Total 710 635 697 637 715 ========================================================================================================================= Worldwide fleet: Towing-supply/supply 393 350 382 351 391 Crew/utility 103 88 102 88 106 Offshore tugs 102 100 102 102 104 Safety/standby 32 25 30 25 32 Other 80 72 81 71 82 - ------------------------------------------------------------------------------------------------------------------------- Total 710 635 697 637 715 =========================================================================================================================
CORPORATE During the quarter ended June 30, 1997 the company acquired all of the shares of O.I.L. Ltd. (O.I.L.) from Ocean Group plc in exchange for a cash payment of 328 million pounds sterling or approximately $534 million. In addition a 3 million pound sterling, or approximately $5 million, advance payment was made for the net working capital of O.I.L., with the final purchase price to be adjusted for the final net working capital of O.I.L. as of the closing date. Available cash of $39 million and borrowings of $500 million were used to fund the purchase. Prior to the purchase O.I.L. was principally engaged in the business of operating approximately 100 marine vessels, primarily platform supply and anchor handling towing-supply vessels, in several international offshore oil and gas exploration areas outside of the United States. The total estimated cost of the acquisition of $626 million, which includes $65.6 million of deferred income tax liability, was allocated under the purchase method of accounting based on the fair value of the assets acquired and liabilities assumed, including accruals for the estimated balance of O.I.L. working capital and 14 15 professional fees, severance and other transaction costs and the related deferred tax effect of the acquisition. Goodwill of approximately $354 million has been recorded in the Condensed Consolidated Balance Sheet. The $500 million of debt incurred to finance the O.I.L. acquisition was borrowed pursuant to a $600 million Revolving Credit and Term Loan agreement with several banks and consists of a $400 million term loan and $100 million borrowed under the $200 million revolving credit facility of the agreement. The term loan is payable in quarterly installments and bears interest at fluctuating rates subject to certain options chosen in advance by the company. On June 30, 1997 the company acquired the remaining 50% equity interest in nine towing-supply and supply vessels previously owned and operated by joint-venture companies in Australia for a cash payment of $13.2 million and issuance of debt totaling $14.0 million. The debt has been discounted to yield interest at 7% and is to be repaid in semi-annual installments. The total estimated cost of the acquisition of $30 million was allocated under the purchase method of accounting based on the fair value of the assets acquired and liabilities assumed, including accruals for professional fees, severance and other transaction costs and the related deferred tax effect of the acquisition. Goodwill of approximately $10.7 million has been recorded in the Condensed Consolidated Balance Sheet. General and administrative expenses for the quarters and nine-month periods ended December 31 and for the quarter ended September 30, 1997 consist of the following:
Quarter Quarter Ended Nine Months Ended Ended December 31, December 31, Sept. 30, (In thousands) 1997 1996 1997 1996 1997 - ------------------------------------------------------------------------------------------------------------------------- Personnel $11,697 7,961 32,773 23,140 11,094 Office and property 3,520 2,575 9,897 7,514 3,308 Sales and marketing 1,277 967 3,819 2,528 1,401 Professional services 1,231 1,155 3,796 3,376 1,347 Other 1,350 850 3,736 2,384 1,471 - ------------------------------------------------------------------------------------------------------------------------- $19,075 13,508 54,021 38,942 18,621 =========================================================================================================================
Higher general and administrative expenses for the nine months ended December 31, 1997 compared with the corresponding period of fiscal 1997 is principally the result of the O.I.L. and Australian acquisitions and higher costs associated with incentive bonus and restricted stock plans. The Internal Revenue Service has notified the company of proposed deficiencies aggregating approximately $17.5 million of additional income taxes resulting from audits of the company's income tax returns for the years ended March 31, 1993, 1994 and 1995. Additionally the company is the defendant to several alleged labor-law pay violations claimed by certain current and former employees in various areas of the world where its marine vessel operations are conducted. While the amount, if any, of such claims for which the company ultimately may be held liable is not presently determinable, if the claimants and all similarly situated employees and former employees who might file claims were successful, the aggregate amount of the company's liability, based on available information, could approximate $15 million. 15 16 In the quarter ended September 30, 1997 the company provided an additional reserve of $8 million for the possible adverse outcome of the above matters. In management's opinion, the amount of the company's liability in excess of established reserves, if any, will not have a material adverse effect on the company's financial position or the results of its ongoing operations. In the fourth quarter of fiscal 1996 the company recorded a $3 million charge for the estimated costs of removing Marine fleet and Compression field service personnel from the company's U.S. defined benefit pension plan. In the current quarter all obligations relating to this change were satisfied and the company recorded a $1.2 million gain as other income in the unaudited condensed consolidated statement of earnings. LIQUIDITY, CAPITAL RESOURCES AND OTHER MATTERS The company's current ratio, level of working capital and amount of cash flows from continuing operations for any period are directly related to fleet activity and vessel day rates. Fleet activity and vessel day rates are determined through the supply/demand relationship for the company's services which is ultimately dependent upon the supply/demand relationship for oil and natural gas. Variations from period to period in these items are generally the result of market conditions. Cash from ongoing operations in combination with available lines of credit provide the company with adequate resources to satisfy financing needs. At December 31, 1997, $255 million of the company's $600 million line of credit was available to satisfy financing requirements. Continued payment of quarterly cash dividends, currently $.15 per common share, are subject to declaration by the board of Directors. Investing activities for the current quarter consumed significantly less cash than for the same period of fiscal 1997 as a result of the sale of several vessels most of which had previously been withdrawn from active service because of obsolescence and prohibitive repair costs. Additional investment in the fleet for the current quarter was primarily for additions and/or modifications to existing vessels to meet customer requirements. Financing activities for the nine-month period ended December 31, 1997 provided $307 million of cash and included borrowings of $500 million to finance the acquisition of O.I.L. In addition to $31.3 million of scheduled payments, principal payments on long-term debt include $132 million of prepayments on the credit facility and repayment of $14.8 million of debt assumed from the O.I.L and Australian acquisitions. INFLATION AND CURRENCY FLUCTUATIONS Because of its significant international operations, the company is exposed to currency fluctuations and exchange risks. To minimize the financial impact of these items the company attempts to contract a majority of its services in United States dollars. Day-to-day operating costs are generally affected by inflation. However, because the energy services industry requires specialized goods and services, general economic inflationary trends may not affect the company's operating costs. The major impact on operating costs is the level of offshore exploration, development and production spending by energy exploration and production companies. As this spending increases, prices of goods and services used by the oil and gas industry and the energy services industry will increase. Future improvements in vessel day rates 16 17 and compressor rental rates may buffer the company from the inflationary effects on operating costs. ENVIRONMENTAL MATTERS During the ordinary course of business the company's operations are subject to a wide variety of environmental laws and regulations. The company attempts to comply with these laws and regulations in order to avoid costly accidents and any related environmental damage. 17 18 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K A. At page 20 of this report is the index for those exhibits required to be filed as a part of this report. B. The company did not file any reports during the quarter for which this report is filed. 18 19 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TIDEWATER INC. -------------------------------------- (Registrant) Date: January 26, 1998 /s/ William C. O'Malley -------------------------------------- William C. O'Malley Chairman of the Board, President and Chief Executive Officer Date: January 26, 1998 /s/ Ken C. Tamblyn -------------------------------------- Ken C. Tamblyn Executive Vice President and Chief Financial Officer (Principal Accounting Officer) 19 20 EXHIBIT INDEX Exhibit Number - ------ 15 Letter re Unaudited Interim Financial Information 27 Financial Data Schedule 20 EX-15 2 LETTER RE: UNAUDITED INTERIM FINANCIAL INFO. 1 EXHIBIT 15 The Board of Directors and Shareholders Tidewater Inc. We are aware of the incorporation by reference in the Registration Statements 33-63094, 33-38240, and 333-32729 on Form S-8 of Tidewater Inc. of our report dated January 23, 1998 relating to the unaudited condensed consolidated interim financial statements of Tidewater Inc. that is included in its Form 10-Q for the quarter ended December 31, 1997. Pursuant to Rule 436(c) of the Securities Act of 1933, our report is not a part of the registration statements prepared or certified by accountants within the meaning of Section 7 or 11 of the Securities Act of 1933. Ernst & Young LLP New Orleans, Louisiana January 23, 1998 21 EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEET AND THE CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS AT THE DATE AND FOR THE PERIOD INDICATED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. ALL AMOUNTS SHOWN ARE IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA. 1,000 9-MOS MAR-31-1998 APR-01-1997 DEC-31-1997 27,872 0 264,053 10,973 28,202 313,432 1,567,370 846,204 1,719,408 205,198 295,556 0 0 6,089 939,520 1,719,408 781,550 781,550 510,997 510,997 0 0 21,095 265,174 85,687 179,487 9,562 0 0 189,049 3.11 3.10
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