| COMMITMENTS AND CONTINGENCIES | (7) COMMITMENTS AND
CONTINGENCIES
Vessel and Other Commitments
The table below summarizes the company’s various vessel
commitments to acquire and construct new vessels, by vessel type,
as of June 30, 2015:
(In thousands, except vessel count)
Number
Total Cost
Invested
Remaining
Vessels under construction:
Deepwater PSVs 13 $ 439,109 227,291 211,818
Towing-supply vessels
3
51,016
39,533
11,483
Total vessel commitments
16
$ 490,125
266,824
223,301 The total cost of the various vessel new-build
commitments includes contract costs and other incidental costs. The
company has vessels under construction at a number of different
shipyards around the world. The deepwater PSVs under construction
range between 4,200 and 6,000 deadweight tons (DWT) of cargo
capacity while the towing-supply vessels under construction are
vessels that have 7,145 brake horsepower (BHP). The new-build
vessels began to deliver in July 2015, with delivery of the final
new-build vessel expected in April 2017. The company has successfully replaced the vast
majority of the older vessels in its fleet with fewer, larger and
more efficient vessels that have a more extensive range of
capabilities. These efforts are expected to continue through the
delivery of the remaining 16 vessels currently under construction,
with the company anticipating that it will use some portion of its
future operating cash flows and existing borrowing capacity as well
as possible new borrowings or lease finance arrangements in order
to fund current and future commitments in connection with the
completion of the fleet renewal and modernization program. In April 2015, the company notified an
international shipyard, which at the time was constructing six
7,145 BHP towing-supply-class vessels, that it was terminating the
first three of the six towing-supply vessels as a result of late
delivery and requested the return of $36.1 million in aggregate
installment payments together with interest on these installments,
or all but approximately $0.8 million of the carrying value of the
accumulated costs through March 31, 2015. There was an
aggregate $12.7 million in estimated remaining costs to be incurred
on these three vessels at the time of the termination. In May 2015,
the company made a demand on the Bank of China refundment
guarantees that secure the return of these installments. In June
2015, the company entered into settlement agreements with the
shipyard that provided for a return of the $36.1 million in
aggregate installment payments, termination of the company’s
obligation to pay any future amounts on these vessels, and the
application of the accrued interest owing on the returned
installments ($3.5 million) to offset future installment
obligations on other vessels at this shipyard. The interest
“credit” is not secured by Bank of China refundment
guarantees. The shipyard returned $24.2 million in June 2015, and
$12 million in July 2015. The company has withdrawn its demands
against the Bank of China refundment guarantees with respect to
these three vessels. The company recorded an impairment charge of
$0.8 million in the first quarter of fiscal 2016 to write off the
amounts not recoverable from the shipyard. In April 2015, the company entered into
negotiations with an international shipyard constructing two
275-foot deepwater PSVs to resolve issues associated with the late
delivery of these vessels. In May 2015, the company settled
these issues with the shipyard. Under the terms of the settlement,
the company can elect to take delivery of one or both completed
vessels at any time prior to June 30, 2016. That date is
subject to two six month extension periods, each extension
requiring the mutual consent of the company and shipyard. If
the company does not elect to take delivery of one or both vessels
prior to June 30, 2016 (as that date may be extended),
(a) the company is entitled to receive the return of $5.4
million in aggregate installment payments per vessel together with
interest on these installments (or all but approximately $1 million
of the company’s carrying value of the accumulated costs per
vessel through March 31, 2015) and (b) the company will
be relieved of the obligation to pay to the shipyard the $21.7
million remaining payment per vessel. The shipyard’s
obligation to return the $5.4 million (plus interest) per vessel if
the company elects not to take delivery of one or both vessels is
secured by Bank of China refundment guarantees. These two vessels
are not included in the preceding table of vessel commitments as of
June 30, 2015. The company is experiencing substantial delay with
one fast supply boat under construction in Brazil that was
originally scheduled to be delivered in September 2009. On
April 5, 2011, pursuant to the vessel construction contract,
the company sent the subject shipyard a letter initiating
arbitration in order to resolve disputes of such matters as the
shipyard’s failure to achieve payment milestones, its failure
to follow the construction schedule, and its failure to timely
deliver the vessel. The company has suspended construction on the
vessel and both parties continue to pursue that arbitration. The
company has third party credit support in the form of insurance
coverage for 90% of the progress payments made on this vessel, or
all but approximately $2.4 million of the carrying value of the
accumulated costs through June 30, 2015. During the first
quarter of fiscal 2016, the company recorded an impairment charge
of $2.4 million (representing amounts not covered by insurance) and
reclassified the remaining $5.6 million from construction in
progress to other non-current assets. This vessel is not included
in the preceding table of vessel commitments as of June 30,
2015. The company generally requires shipyards to provide
third party credit support in the event that vessels are not
completed and delivered timely and in accordance with the terms of
the shipbuilding contracts. That third party credit support
typically guarantees the return of amounts paid by the company and
generally takes the form of refundment guarantees or standby
letters of credit issued by major financial institutions generally
located in the country of the shipyard. While the company seeks to
minimize its shipyard credit risk by requiring these instruments,
the ultimate return of amounts paid by the company in the event of
shipyard default is still subject to the creditworthiness of the
shipyard and the provider of the credit support, as well as the
company’s ability to pursue successfully legal action to
compel payment of these instruments. When third party credit
support that is acceptable to the company is not available or cost
effective, the company endeavors to limit its credit risk by
minimizing pre-delivery payments and through other contract terms
with the shipyard.
Merchant Navy Officers Pension Fund On July 15, 2013, a subsidiary of the company
was placed into administration in the United Kingdom. Joint
administrators were appointed to administer and distribute the
subsidiary’s assets to the subsidiary’s
creditors. The vessels owned by the subsidiary had become aged
and were no longer economical to operate, which has caused the
subsidiary’s main business to decline in recent years. Only
one vessel generated revenue as of the date of the
administration. As part of the administration, the company
agreed to acquire seven vessels from the subsidiary (in exchange
for cash) and to waive certain intercompany claims. The purchase
price valuation for the vessels, all but one of which were stacked,
was based on independent, third party appraisals of the
vessels.
The company previously reported that a subsidiary of the company is
a participating employer in an industry-wide multi-employer
retirement fund in the United Kingdom, known as the Merchant Navy
Officers Pension Fund (MNOPF). The subsidiary that
participates in the MNOPF is the entity that was placed into
administration in the U.K. The MNOPF is that subsidiary’s
largest creditor, and has claimed as an unsecured creditor in the
administration. The company believed that the administration
was in the best interests of the subsidiary and its principal
stakeholders, including the MNOPF. The MNOPF indicated that it
did not object to the insolvency process and that, aside from
asserting its claim in the subsidiary’s administration and
based on the company’s representations of the financial
status and other relevant aspects of the subsidiary, the
MNOPF will not pursue the subsidiary in connection with any
amounts due or which may become due to the MNOPF. In December 2013, the administration was converted
to a liquidation. That conversion allowed for an interim cash
liquidation distribution to be made to the MNOPF. The conversion is
not expected to have any impact on the company and the liquidation
is expected to be completed in calendar 2015. The company
believes that the liquidation will resolve the subsidiary’s
participation in the MNOPF. The company also believes that the
ultimate resolution of this matter will not have a material effect
on the consolidated financial statements.
Sonatide Joint Venture As previously reported, in November 2013, a
subsidiary of the company and its joint venture partner in Angola,
Sonangol Holdings Lda. (“Sonangol”), executed a new
joint venture agreement for their joint venture, Sonatide. The new
joint venture agreement is currently effective and will expire,
unless extended, two years after a new Angolan entity, which is
intended to be one of the Sonatide group of companies, has been
incorporated. The Angolan entity is expected to be incorporated by
late 2015 after certain Angolan regulatory approvals have been
obtained. The challenges for the company to successfully
operate in Angola remain significant. As the company has previously
reported, on July 1, 2013, additional elements of new
legislation (the “forex law”) became effective that
generally require oil companies that engage in exploration and
production activities offshore Angola through governmental
concessions to pay for goods and services provided by foreign
exchange residents in Angolan kwanzas that are initially deposited
into an Angolan bank account. The forex law also imposes
documentation and other requirements on service companies such as
Sonatide in order to effect payments that are denominated in
currencies other than Angolan kwanzas. The forex law has resulted
in substantial customer payments being made to Sonatide in Angolan
kwanzas. A cumbersome payment process has imposed a burden on
Tidewater’s management of its cash and liquidity, because the
conversion of Angolan kwanzas into U.S. dollars and the subsequent
expatriation of the funds has resulted in payment delays,
additional operating costs and, through the company’s 49%
ownership of Sonatide, foreign exchange losses. The payment process
exposes the company to further risk of currency devaluation prior
to Sonatide’s conversion of Angolan kwanza-denominated bank
deposits to U.S. dollars and potentially additional taxes. In response to the new forex law, Tidewater and
Sonangol negotiated and signed an agreement that is set to expire,
unless extended, in November 2015 (the “consortium
agreement”) that is intended to allow the Sonatide joint
venture to enter into contracts with customers that allocate
billings for services provided by Sonatide between
(i) billings for local services that are provided by a foreign
exchange resident (that must be paid in Angolan kwanzas), and
(ii) billings for services provided by offshore residents
(that can be paid in U.S. dollars). Sonatide successfully converted
select customer contracts to this split billing arrangement during
the quarters ended March 31, 2015 and June 30, 2015. The
company is unable to determine the impact that an inability to
extend the consortium agreement would have on the existing split
billing arrangements, and the ability to enter into new split
billing arrangements. In addition, it is not clear if this type of
contracting will be available to Sonatide over the longer term. In November 2014, the National Bank of Angola
issued new regulations controlling the sale of foreign currency.
These regulations generally require oil companies to channel any
U.S. dollar sales they choose to make through the National Bank of
Angola to buy Angolan kwanzas that are required to be used to pay
for goods and services provided by foreign exchange resident
oilfield service companies. These foreign exchange resident
oilfield services companies, in turn, generally have a need to
source U.S. dollars in order to pay for goods and services provided
offshore. The regulations continue to permit tripartite agreements
among oil companies, commercial banks and service companies that
provide for the sale of U.S. dollars by an oil company to a
commercial bank in exchange for Angolan kwanzas. These same U.S.
dollars are then sold onward by the commercial bank to the service
company. The implementing regulations do, however, place
constraints on those tripartite agreements that did not previously
exist, and the period of time that the tripartite agreements will
be allowed remains uncertain. If tripartite agreements or similar
arrangements are not available to service companies in Angola that
have a need for U.S. dollars, then such service companies will be
required to source U.S. dollars exclusively through the National
Bank of Angola. Sonatide has had some success to date in
negotiating tripartite agreements and it continues to work with
customers, commercial banks and the National Bank of Angola in
regards to utilizing these arrangements. For the fiscal year ended March 31, 2015, the
company collected (primarily through Sonatide) approximately $338
million from its Angola operations, which is slightly less than the
approximately $351 million of revenue recognized for the same
period. Of the $338 million collected approximately $159 million
represented U.S. dollars received by Sonatide on behalf of the
company or U.S. dollars directly received by the company from
customers. The balance of $179 million that was collected in fiscal
2015 resulted from Sonatide’s converting Angolan kwanzas into
U.S. dollars and subsequently expatriating the U.S. dollars to
Tidewater. Additionally, the company received an approximate $10
million dividend payment from the Sonatide joint venture during the
third quarter of fiscal 2015. For the three months ended June 30, 2015, the
company collected (primarily through Sonatide) approximately $101
million from its Angolan operations, which is $33 million more than
the approximately $68 million of revenue recognized for the same
period. Of the $101 million collected, approximately $49 million
represented U.S. dollars received by Sonatide on behalf of the
company or U.S. dollars directly received by the company from
customers. The balance of $52 million collected resulted from
Sonatide’s converting Angolan kwanza into U.S. dollars and
subsequently expatriating the dollars to Tidewater. The company believes that the process for
converting Angolan kwanzas continues to function reasonably well,
but the tight U.S. dollar liquidity situation continues in Angola.
Sonatide continues to press its commercial banks with which it has
relationships to increase the amount of U.S. dollars that are made
available to Sonatide. As of June 30, 2015, the company had
approximately $385 million in amounts due from Sonatide, with
approximately half of the balance reflecting invoiced but unpaid
vessel revenue related to services performed by the company through
the Sonatide joint venture. Remaining amounts due to the company
from Sonatide is generally supported by cash (primarily denominated
in Angolan kwanzas) held by Sonatide that is pending conversion
into U.S. dollars and the subsequent expatriation of such
funds. For the three months ended June 30, 2015,
Tidewater’s Angolan operations generated vessel revenues of
approximately $68 million, or 23%, of its consolidated vessel
revenue, from an average of approximately 70 Tidewater-owned
vessels that are marketed through the Sonatide joint venture (seven
of which were stacked on average during the three months ended
June 30, 2015), and, for the three months ended June 30,
2014, generated vessel revenues of approximately $87 million, or
23%, of consolidated vessel revenue, from an average of
approximately 83 Tidewater-owned vessels (four of which were
stacked on average during the three months ended June 30,
2014). Sonatide owns eight vessels (two of which are
currently stacked) and certain other assets, in addition to earning
commission income from Tidewater-owned vessels marketed through the
Sonatide joint venture (owned 49% by Tidewater). In addition, as of
June 30, 2015, Sonatide maintained the equivalent of
approximately $111 million of primarily Angolan kwanza-denominated
deposits in Angolan banks, largely related to customer receipts
that had not yet been converted to U.S. dollars, expatriated and
then remitted to the company, and approximately $30 million of U.S.
dollar-denominated deposits in banks outside of Angola. As of
June 30, 2015 and March 31, 2015, the carrying value of
Tidewater’s investment in the Sonatide joint venture, which
is included in “Investments in, at equity, and advances to
unconsolidated companies,” is approximately $62 million and
$67 million, respectively. Due from affiliate at June 30, 2015 and
March 31, 2015 of approximately $385 million and $420 million,
respectively, represents cash received by Sonatide from customers
and due to the company, amounts due from customers that are
expected to be remitted to the company through Sonatide and,
finally, reimbursable costs paid by Tidewater on behalf of
Sonatide. The collection of the amounts due from customers and the
subsequent conversion and expatriation process are subject to those
risks and considerations set forth above.
Due to affiliate at June 30, 2015 and
March 31, 2015 of approximately $192 million and $186 million,
respectively, represents amounts due to Sonatide for commissions
payable (approximately $41 million and $66 million, respectively)
and other costs paid by Sonatide on behalf of the company. A new presidential decree regulating maritime
transportation activities was enacted in Angola in
2014. Following recent discussions with port state authorities
and local counsel, the company remains uncertain whether the
authorities will interpret the decree to require one hundred
percent Angolan ownership of local vessel operators such as
Sonatide. This interpretation may result in the need to work
with Sonangol to further restructure our Sonatide joint
venture and our operations in Angola. The company has been informed
by the authorities that enforcement of the new decree would
commence in July 2015.The company is seeking further clarification
of the new decree. The company is exploring potential alternative
structures in order to comply. The Angolan government enacted a new statute, which
came into effect on June 30, 2015, for a new levy that could
impose an additional 10% surcharge on certain foreign exchange
transactions. The specific details of the levy have not yet been
disclosed and it is not clear if this new statute will apply to
Sonatide’s scope of operations. The company has undertaken
efforts to mitigate the effects of the levy, in the event the levy
does apply to Sonatide’s operations, including successfully
negotiating rate adjustments and termination rights with some of
its customers. The company will be unlikely to completely mitigate
the effects of the levy, resulting in increased costs and lower
margins, if the levy is interpreted to apply to Sonatide’s
operations. Management continues to explore ways to profitably
participate in the Angolan market while looking for opportunities
to reduce the overall level of exposure to the increased risks that
the company believes currently characterize the Angolan market.
Included among mitigating measures taken by the company to address
these risks is the redeployment of vessels from time to time to
other markets where there is adequate demand for the
company’s vessels. During the year ended March 31, 2015,
the company redeployed vessels from its Angolan operations to other
markets and also transferred vessels into its Angolan operations
from other markets resulting in a net 13 vessels transferred out of
Angola, including four smaller crewboats that were stacked outside
of Angola. Redeployment of vessels to and from Angola during the
quarter ended June 30, 2015 has resulted in a net four vessels
transferred out of Angola. As the company considers the redeployment of
additional vessels from Angola to other markets, there would likely
be temporary negative financial effects associated with such
redeployment, including mobilization costs and costs to redeploy
Tidewater shore-based employees to other areas, in addition to lost
revenues associated with potential downtime between vessel
contracts. These financial impacts could, individually or in the
aggregate, be material to Tidewater’s results of operations
and cash flows for the periods when such costs would be incurred.
The recent decline in crude oil and natural gas prices, the
reduction in spending expectations among E&P companies, the
number of new-build vessels which are expected to deliver within
the next two years and the resulting potential overcapacity in the
worldwide offshore support vessel market may exacerbate such
negative financial effects, particularly if a large re-deployment
were undertaken by the company in the near- to
intermediate-term.
Brazilian Customs In April 2011, two Brazilian subsidiaries of
Tidewater were notified by the Customs Office in Macae, Brazil that
they were jointly and severally being assessed fines of
155 million Brazilian reais (approximately $50 million as of
June 30, 2015). The assessment of these fines is for the
alleged failure of these subsidiaries to obtain import licenses
with respect to 17 Tidewater vessels that provided Brazilian
offshore vessel services to Petrobras, the Brazilian national oil
company, over a three-year period ending December 2009. After
consultation with its Brazilian tax advisors, Tidewater and its
Brazilian subsidiaries believe that vessels that provide services
under contract to the Brazilian offshore oil and gas industry are
deemed, under applicable law and regulations, to be temporarily
imported into Brazil, and thus exempt from the import license
requirement. The Macae Customs Office has, without a change in the
underlying applicable law or regulations, taken the position that
the temporary importation exemption is only available to new, and
not used, goods imported into Brazil and therefore it was improper
for the company to deem its vessels as being temporarily imported.
The fines have been assessed based on this new interpretation of
Brazilian customs law taken by the Macae Customs Office.
After consultation with its Brazilian tax advisors,
the company believes that the assessment is without legal
justification and that the Macae Customs Office has misinterpreted
applicable Brazilian law on duties and customs. The company is
vigorously contesting these fines (which it has neither paid nor
accrued) and, based on the advice of its Brazilian counsel,
believes that it has a high probability of success with respect to
the overturn of the entire amount of the fines, either at the
administrative appeal level or, if necessary, in Brazilian courts.
In December 2011, an administrative board issued a decision that
disallowed 149 million Brazilian reais (approximately
$48 million as of June 30, 2015) of the total fines
sought by the Macae Customs Office. In two separate proceedings in
2013, a secondary administrative appeals board considered fines
totaling 127 million Brazilian reais (approximately
$41 million as of June 30, 2015) and rendered decisions
that disallowed all of those fines. The remaining fines totaling
28 million Brazilian reais (approximately $9 million as
of June 30, 2015) are still subject to a secondary
administrative appeals board hearing, but the company believes that
both decisions will be helpful in that upcoming hearing. The
secondary board decisions disallowing the fines totaling
127 million Brazilian reais are, however, still subject to the
possibility of further administrative appeal by the authorities
that imposed the initial fines. The company believes that the
ultimate resolution of this matter will not have a material effect
on the consolidated financial statements.
Nigeria Marketing Agent Litigation In October 2012, Tidewater had notified the
Nigerian marketing agent that it was discontinuing its relationship
with the Nigerian marketing agent (Phoenix Tide Offshore Nigeria
Limited) and two of its principals (H.H. The Otunba Ayora Dr.Bola
Kuforiji-Olubi, OON and Olutokunbo Afolabi Kuforiji). The company
has entered into a new strategic relationship with a different
Nigerian counterparty that it believes will better serve the
company’s long term interests in Nigeria. This new strategic
relationship is currently functioning as the company intended. On March 1, 2013, Tidewater filed suit in the
London Commercial Court against Tidewater’s Nigerian
marketing agent for breach of the agent’s obligations under
contractual agreements between the parties. The alleged breach
involves actions of the Nigerian marketing agent to discourage
various affiliates of TOTAL S.A. from paying approximately $16
million (including U.S. dollar denominated invoices and Naira
denominated invoices which have been adjusted for the devaluation
of the Naira relative to the U.S. dollar) due to the company for
vessel services performed in Nigeria. Shortly after the London
Commercial Court filing, TOTAL commenced interpleader proceedings
in Nigeria naming the Nigerian agent and the company as respondents
and seeking an order which would allow TOTAL to deposit those
monies with a Nigerian court for the respondents to resolve. On
April 25, 2013, Tidewater filed motions in the Nigerian
Federal High Court to stop the interpleader proceedings in Nigeria
or alternatively stay them until the resolution of the suit filed
in London. The company will continue to actively pursue the
collection of those monies. On April 30, 2013, the Nigerian
marketing agent filed a separate suit in the Nigerian Federal High
Court naming Tidewater and certain TOTAL affiliates as defendants.
The suit seeks various declarations and orders, including a claim
for the monies that are subject to the above interpleader
proceedings, and other relief. The company is seeking dismissal of
this suit and otherwise intends to vigorously defend against the
claims made. On or about December 30, 2014, the company
received notice that the Nigerian marketing agent had filed an
action in the Nigerian Federal High court seeking to prevent the
continuation of the proceedings initiated by Tidewater in the
London Commercial Court. The company intends to vigorously defend
that action. The company has not reserved for this receivable
and believes that the ultimate resolution of this matter will not
have a material effect on the consolidated financial
statements.
Repairs to U.S. Flagged Vessels Operating Abroad The company recently became aware that it may
have had compliance deficiencies in documenting and declaring upon
re-entry to U.S. waters all repairs done on its U.S. flagged
vessels while they were working outside the United States. When a
U.S. flagged vessel operates abroad, any repairs made abroad must
be declared to U.S. Customs. Duties must be paid for
certain of those repairs upon return to U.S. waters. During
our examination of our most recent filings with U.S. Customs, we
determined that it was necessary to file amended forms with U.S.
Customs. We continue to evaluate the return of other
U.S. flagged vessels to the United States to determine
whether it is necessary to adjust our responses in any of
those instances. To the extent that further evaluation
requires us to file amended entries, we do not yet know the
magnitude of any
duties, fines or interest associated with amending
the entries for these vessels. We are committed to bolstering
our processes, procedures and training to ensure that we correctly
identify all repairs made abroad if and when U.S. flagged vessels
return to the United States in the future.
Currency Devaluation and Fluctuation Risk Due to the company’s global operations, the
company is exposed to foreign currency exchange rate fluctuations
and exchange rate risks on all charter hire contracts denominated
in foreign currencies. For some of our non-U.S. contracts, a
portion of the revenue and local expenses are incurred in local
currencies with the result that the company is at risk of changes
in the exchange rates between the U.S. dollar and foreign
currencies. We generally do not hedge against any foreign currency
rate fluctuations associated with foreign currency contracts that
arise in the normal course of business, which exposes us to the
risk of exchange rate losses. To minimize the financial impact of
these items, the company attempts to contract a significant
majority of its services in U.S. dollars. In addition, the company
attempts to minimize its financial impact of these risks, by
matching the currency of the company’s operating costs with
the currency of the revenue streams when considered appropriate.
The company continually monitors the currency exchange risks
associated with all contracts not denominated in U.S. dollars.
Discussions related to the company’s Angolan operations
through the Sonatide joint venture are disclosed in this Note 7
above and in “Foreign Exchange Risk” under Item 3
“Qualitative and Quantitative Disclosure about Market
Risk.”
Legal Proceedings
Arbitral Award for the Taking of the Company’s Venezuelan
Operations On March 13, 2015, the three member tribunal
constituted under the rules of the World Bank’s International
Centre for the Settlement of Investment Disputes
(“ICSID”) awarded subsidiaries of the company
compensation, including accrued interest and costs, for the
Bolivarian Republic of Venezuela’s (“Venezuela”)
expropriation of the investments of those subsidiaries in
Venezuela. The award, issued in accordance with the provisions of
the Venezuela-Barbados Bilateral Investment Treaty
(“BIT”), represented $46.4 million for the fair market
value of the company’s principal Venezuelan operating
subsidiary, plus interest from May 8, 2009 to the date of
payment of that amount accruing at an annual rate of 4.5%
compounded quarterly ($14.7 million as of June 30, 2015) and
$2.5 million for reimbursement of legal and other costs expended by
the company in connection with the arbitration. The aggregate award
is therefore $63.6 million as of June 30, 2015. The nature of
the investments expropriated and the progress of the ICSID
proceeding were previously reported by the company in prior
filings. The company will take appropriate steps to enforce
and collect the award, which is enforceable in any of the 150
member states that are party to the ICSID Convention. As an initial
step, the company was successful in having the award recognized and
entered on March 16, 2015 as a final judgment by the United
States District Court for the Southern District of New York. In
July 2015, Venezuela applied to ICSID to annul the award and
obtained a provisional stay of enforcement. The company has not yet
received a timetable for briefing and hearings associated with the
annulment proceedings. The company is evaluating whether to seek to
lift the provisional stay of enforcement during the pendency of the
annulment proceedings. Even in the absence of a stay of
enforcement, the company recognizes that collection of the award
may present significant practical challenges, particularly in the
short term. Because the award has yet to be satisfied and
post-award relief may be sought by Venezuela, the net impact of
these matters on the company cannot be reasonably estimated at this
time and the company has not recognized a gain related to these
matters as of June 30, 2015. Various legal proceedings and claims are
outstanding which arose in the ordinary course of business. In the
opinion of management, the amount of ultimate liability, if any,
with respect to these actions, will not have a material adverse
effect on the company’s financial position, results of
operations, or cash flows. |
