| EMPLOYEE RETIREMENT PLANS | (11) Defined Benefit Pension Plan We have a defined benefit pension plan (pension plan) that covers certain U.S. employees that are citizens or permanent residents of the United States. Benefits are based on years of service and employee compensation. On December 31, 2010, the pension plan was frozen and accrual of benefits was discontinued. We contributed $1.1 million to the plan during the year ended December 31, 2019. We did not contribute to the plan during the year ended December 31, 2018 and during the nine-month period ended December 31, 2017. We anticipate contributing to this plan in 2020, but the amount has not been determined. We also have two defined benefit pension plans that cover approximately 100 Norway citizen employees and other employees who are permanent residents of Norway. Benefits are based on years of service and employee compensation. We contributed $0.7 million, $0.2 million and $0.3 million to these defined benefit plans during the years ended December 31, 2019 and 2018 and the nine month period ended December 31, 2017, respectively. We expect to contribute approximately $0.5 million during 2020. Supplemental Executive Retirement Plan We also offer a non-contributory, defined benefit supplemental executive retirement plan (supplemental plan) that provides pension benefits to certain employees in excess of those allowed under our tax-qualified pension plan. The supplemental plan was closed to new participation in 2010. The supplemental plan was amended to discontinue the accrual of benefits and any other contributions effective January 1, 2018 and all previously accrued pension benefits were frozen for the remaining active participants. This change did not affect the benefits earned by any participants prior to January 1, 2018. Any future accrual of benefits under the supplemental plan or other contributions to the supplemental plan will be determined at our sole discretion. A Rabbi Trust was established to provide us with a vehicle to invest in a variety of marketable securities that were recorded at fair value with unrealized gains or losses, net of income tax expense, included in accumulated other comprehensive income. In April 2018, a lump sum distribution of $8.9 million was paid to our retiring President and Chief Executive Officer in settlement of his supplemental executive retirement plan obligation, resulting in a settlement loss of $0.3 million. This distribution was funded by substantially all of the investments held by the Rabbi Trust which was liquidated in 2019. Postretirement Benefit Plan Qualified retired employees were covered by a program which provided limited health care and life insurance benefits. This plan terminated on January 1, 2019 resulting in a gain of $4.0 million that we recorded in the year ended December 31, 2018. Costs of the program were based on actuarially determined amounts and were accrued over the period from the date of hire to the full eligibility date of employees who were expected to qualify for these benefits. This plan was funded through payments as benefits were required. We eliminated the life insurance portion of our postretirement benefit effective January 1, 2018, resulting in a $1.9 million reduction in benefit obligations. Investment Strategies U.S. Pension Plan The obligations of our pension plan are supported by assets held in a trust for the payment of benefits. We are obligated to adequately fund the trust. For the pension plan assets, we have the following primary investment objectives: (1) closely match the cash flows from the plan’s investments from interest payments and maturities with the payment obligations from the plan’s liabilities; (2) closely match the duration of plan assets with the duration of plan liabilities and (3) enhance the plan’s investment returns without taking on undue risk by industries, maturities or geographies of the underlying investment holdings. If the plan assets are less than the plan liabilities, the pension plan assets will be invested in fixed income debt securities. Any investments in corporate bonds shall be at least investment grade, while mortgage and asset-backed securities must be rated “A” or better. If an investment is placed on credit watch, or is downgraded to a level below the investment grade, the holding will be liquidated, even at a loss, in a reasonable time period. The cash flow requirements of the pension plan will be analyzed at least annually. Portfolio repositioning will be required when material changes to the plan liabilities are identified and when opportunities arise to better match cash flows with the known liabilities. Additionally, trades will occur when opportunities arise to improve the yield-to-maturity or credit quality of the portfolio. The pension plan assets are primarily invested in debt securities. In the event that plan assets exceed the estimated plan liabilities for the pension plan, up to two times the difference between the plan assets and plan liabilities may be invested in equity securities, and so long as equities do not exceed 15% of the market value of the assets. Investments in foreign securities are restricted to American Depository Receipts (ADR) and stocks listed on the U.S. stock exchanges and may not exceed 10% of the equity portfolio Our policy for the pension plan is to contribute no less than the minimum required contribution by law and no more than the maximum deductible amount. The plan does not invest in Tidewater stock. The pension plan assets are periodically evaluated for concentration risks. As of December 31, 2019, we did not have any individual asset investments that comprised 10% or more of each plan’s overall assets. U.S. Pension Plan Asset Allocations The following table provides the target and actual asset allocations for the pension plan:
Actual as of
Actual as of
Target
December 31, 2019
December 31, 2018
U.S. Pension plan:
Equity securities
—
—
2
%
Debt securities
100
%
96
%
91
%
Cash and other
—
4
%
7
%
Total
100
%
100
%
100
% Fair Value of Pension Plans Assets Tidewater’s plan assets are accounted for at fair value and are classified within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement, with the exception of investments for which fair value is measured using the net asset value per share expedient. The following table provides the fair value hierarchy for all domestic and foreign pension plans measured at fair value as of December 31, 2019:
(In thousands)
Fair Value
Quoted prices in active markets (Level 1)
Significant observable inputs (Level 2)
Significant unobservable inputs (Level 3)
Measured at Net Asset Value
Pension plan measured at fair value:
Equity securities:
$
699
699
—
—
—
Debt securities:
Government securities
5,870
5,870
—
—
—
Collateralized mortgage securities
765
—
765
—
—
Corporate debt securities
47,839
—
47,839
—
—
Cash and cash equivalents
2,526
—
2,526
—
—
Other
1,396
—
1,396
—
—
Total
$
59,095
6,569
52,526
—
—
Accrued income
530
530
—
—
—
Total fair value of plan assets
$
59,625
7,099
52,526
—
—
The fair value hierarchy for the pension plans assets measured at fair value as of December 31, 2018, are as follows:
(In thousands)
Fair Value
Quoted prices in active markets (Level 1)
Significant observable inputs (Level 2)
Significant unobservable inputs (Level 3)
Measured at Net Asset Value
Pension plan measured at fair value:
Equity securities:
$
900
900
—
—
—
Debt securities:
Government securities
4,044
4,044
—
—
—
Corporate debt securities
47,667
684
46,983
—
—
Cash and cash equivalents
1,214
717
497
—
—
Other
2,384
—
2,384
—
—
Total
$
56,209
6,345
49,864
—
—
Accrued income
581
581
—
—
—
Total fair value of plan assets
$
56,790
6,926
49,864
—
—
Plan Assets and Obligations Changes in plan assets and obligations and the funded status of the U.S. defined benefit pension plan, Norway’s defined benefit pension plan, and the supplemental plan (referred to collectively as “Pension Benefits”) and the postretirement health care and life insurance plan (referred to as “Other Benefits”), which was discontinued as of January 1, 2019, are as follows:
Pension Benefits
Successor
Predecessor
Period from
Period from
Year
Year
August 1, 2017
April 1, 2017
Ended
Ended
through
through
(In thousands)
December 31, 2019
December 31, 2018
December 31, 2017
July 31, 2017
Change in benefit obligation:
Benefit obligation at beginning of the period
$
90,247
$
103,443
101,490
97,941
Increase in benefit obligation due to business combination
—
5,474
—
—
Service cost
427
294
546
393
Interest cost
3,751
3,605
1,599
1,313
Plan curtailment
—
—
(432
)
—
Benefits paid
(5,967
)
(5,467
)
(2,059
)
(1,610
)
Actuarial (gain) loss (A)
8,198
(8,105
)
2,322
3,322
Settlement
(4,978
)
(8,885
)
—
—
Foreign currency exchange rate changes
(24
)
(112
)
(23
)
131
Benefit obligation at end of the period
$
91,654
90,247
103,443
101,490
Change in plan assets:
Fair value of plan assets at beginning of the period
$
56,790
$
57,536
58,148
57,146
Increase in plan assets due to business combination
—
5,463
—
—
Actual return
7,498
(2,128
)
1,182
2,138
Expected return
—
112
32
16
Actuarial loss
983
(275
)
(217
)
(109
)
Administrative expenses
(68
)
(36
)
(15
)
(7
)
Plan curtailment
—
—
(100
)
—
Employer contributions
5,027
10,546
625
435
Benefits paid
(5,967
)
(5,467
)
(2,059
)
(1,610
)
Settlement
(4,638
)
(8,885
)
—
—
Foreign currency exchange rate changes
—
(76
)
(60
)
139
Fair value of plan assets at end of the period
59,625
56,790
57,536
58,148
Payroll tax unrecognized in benefit obligation at end of the period
—
84
76
91
Unfunded status at end of the period
$
(32,029
)
$
(33,541
)
(45,983
)
(43,433
)
Net amount recognized in the balance sheet consists of:
Current liabilities
$
(1,422
)
$
(1,380
)
(10,731
)
(1,791
)
Noncurrent liabilities
(30,607
)
(32,161
)
(35,252
)
(41,642
)
Net amount recognized
$
(32,029
)
$
(33,541
)
(45,983
)
(43,433
)
(A) The actuarial loss for the year ended December 31, 2019 and the actuarial gain in the year ended December 31, 2018 was primarily attributable to changes in the discount rate.
Other Benefits
Successor
Predecessor
Period from
Period from
Year
August 1, 2017
April 1, 2017
Ended
through
through
(In thousands)
December 31, 2018
December 31, 2017
July 31, 2017
Change in benefit obligation:
Benefit obligation at beginning of the period
$
2,924
4,817
4,811
Service cost
61
29
23
Interest cost
117
75
64
Participant contributions
218
65
58
Plan amendment
(2,954
)
(1,861
)
—
Benefits paid
(595
)
(526
)
(346
)
Actuarial (gain) loss
229
325
207
Benefit obligation at end of the period
$
—
2,924
4,817
Change in plan assets:
Fair value of plan assets at beginning of the period
$
—
—
—
Employer contributions
377
461
288
Participant contributions
218
65
58
Benefits paid
(595
)
(526
)
(346
)
Fair value of plan assets at end of the period
—
—
—
Unfunded status at end of the period
$
—
(2,924
)
(4,817
)
Net amount recognized in the balance sheet consists of:
Current liabilities
$
—
(282
)
(418
)
Noncurrent liabilities
—
(2,642
)
(4,399
)
Net amount recognized
$
—
(2,924
)
(4,817
)
The following table provides information for pension plans with an accumulated benefit obligation in excess of plan assets (includes both the pension plans and supplemental plan):
December 31,
December 31,
(In thousands)
2019
2018
Projected benefit obligation
$
91,654
90,247
Accumulated benefit obligation
91,109
89,024
Fair value of plan assets
59,625
56,790
Net periodic benefit cost for the pension plans and the supplemental plan include the following components:
Successor
Predecessor
Period from
Period from
Year
Year
August 1, 2017
April 1, 2017
Ended
Ended
through
through
(In thousands)
December 31, 2019
December 31, 2018
December 31, 2017
July 31, 2017
Service cost
$
427
294
546
393
Interest cost
3,751
3,605
1,599
1,313
Expected return on plan assets
(2,375
)
(2,042
)
(882
)
(691
)
Administrational expenses
71
36
19
3
Payroll tax of net pension costs
55
42
29
—
Amortization of net actuarial losses
(592
)
30
131
—
Recognized actuarial loss
—
—
—
748
Settlement/Curtailment (gain) loss
(219
)
335
(99
)
—
Net periodic pension cost
$
1,118
2,300
1,343
1,766
Net periodic benefit cost for the postretirement health care and life insurance plan, which was discontinued as of January 1, 2019, includes the following components:
Successor
Predecessor
Period from
Period from
Year
August 1, 2017
April 1, 2017
Ended
through
through
(In thousands)
December 31, 2018
December 31, 2017
July 31, 2017
Service cost
$
61
29
23
Interest cost
117
75
64
Amortization of prior service cost
(299
)
—
(927
)
Recognized actuarial (gain)
42
—
(335
)
Net curtailment gain
(4,005
)
—
—
Net periodic postretirement benefit
$
(4,084
)
104
(1,175
) The components of the net periodic pension cost and the net periodic postretirement benefit, except for the service costs are included in the caption “Interest income and other, net.” Service costs are included in the caption “Vessel operating costs.” Other changes in plan assets and benefit obligations recognized in other comprehensive (income) loss include the following components:
Pension Benefits
Successor
Predecessor
Period from
Period from
Year
Year
August 1, 2017
April 1, 2017
Ended
Ended
through
through
(In thousands)
December 31, 2019
December 31, 2018
December 31, 2017
July 31, 2017
Net (gain) loss
$
2,612
(3,441
)
1,939
1,877
Fresh-start accounting fair value adjustment
—
—
—
(22,333
)
Amortization of net (loss) gain
—
—
—
(748
)
Settlement recognized
(182
)
(335
)
—
—
Total recognized in other comprehensive (income) loss, before tax and net of tax
$
2,430
(3,776
)
1,939
(21,204
)
Other Benefits
Successor
Predecessor
Period from
Period from
Year
August 1, 2017
April 1, 2017
Ended
through
through
(In thousands)
December 31, 2018
December 31, 2017
July 31, 2017
Net (gain) loss
$
229
325
207
Prior service (cost) credit
—
(1,861
)
—
Amortization of prior service (cost) credit
1,861
—
927
Fresh-start accounting fair value adjustment
—
—
19,055
Amortization of net (loss) gain
(554
)
—
335
Total recognized in other comprehensive (income) loss, before tax and net of tax
$
1,536
(1,536
)
20,524
We do not expect to recognize any unrecognized actuarial (loss) gain or unrecognized prior service credit (cost) as a component of net periodic benefit costs during the next year. Discount rates of 3.50% and 4.50% were used to determine net benefit obligations as of December 2019 and 2018, respectively. Assumptions used to determine net periodic benefit costs are as follows:
Pension Benefits
2019
2018
Discount rate
4.50
%
3.80
%
Expected long-term rate of return on assets
4.00
%
3.60
%
Rates of annual increase in compensation levels
2.75
%
2.75
% To develop the expected long-term rate of return on assets assumption, we considered the current level of expected returns on various asset classes. The expected return for each asset class was then weighted based on the target asset allocation to develop the expected return on plan assets assumption for the portfolio. Based upon the assumptions used to measure our qualified pension benefit obligations at December 31, 2019, including pension benefits attributable to estimated future employee service, we expect that benefits to be paid over the next ten years will be as follows:
Year ending December 31, (In thousands)
Pension Benefits
2020
$
6,547
2021
6,444
2022
6,360
2023
6,262
2024
6,235
2025 – 2029
29,592
Total 10-year estimated future benefit payments
$
61,440
Defined Contribution Plans The two defined contribution plans described below were merged in 2013 to provide administrative efficiencies, potential savings on service provider fees and to simplify the participant experience. Following the business combination, the provisions of the two plans remained substantially similar with the exception of cost neutral changes that were approved to simplify the administration of the combined plan. Retirement Contributions All eligible U.S. fleet personnel, along with all new eligible employees hired after December 31, 1995 are eligible to receive retirement contributions. This benefit is noncontributory by the employee, but we contributed, in cash, 3% of an eligible employee’s compensation to a trust on behalf of the employees. Our contributions vest over five years. We ceased contributing to the employee retirement plan effective January 1, 2018. Any future employer contributions to this plan will be determined at our discretion. 401(k) Savings Contribution Upon meeting various citizenship, age and service requirements, employees are eligible to participate in a defined contribution savings plan and can contribute from 2% to 75% of their base salary to an employee benefit trust. Prior to January 1, 2018, we matched, in cash, 50% of the first 8% of eligible compensation deferred by the employee. Company contributions vest over five years. Effective January 1, 2018, we no longer provide a matching of 50% of the first 8% of eligible compensation in an attempt to reduce costs. Any future employer contributions to this plan will be determined at our discretion. The plan held zero, 7,075, 8,074 and 264,504 shares of Tidewater common stock for the years ended December 31, 2019 and 2018 and the periods from August 1, 2017 through December 31, 2017 and April 1, 2017 through July 31, 2017, respectively. The plan also held 9,030 and 9,762 series A warrants and series B warrants, respectively, for the period from August 1, 2017 through December 31, 2017. The amounts charged to expense for the defined contribution plans were immaterial for the years ended December 31, 2019 and 2018. We expensed $0.9 million and $0.9 million for the periods from August 1, 2017 through December 31, 2017 and April 1, 2017 through July 31, 2017, respectively. Other Plans A non-qualified supplemental savings plan is provided to executive officers who have the opportunity to defer up to (i) 50% of their eligible compensation that cannot be deferred under the existing 401(k) plan due to IRS limitations; (ii) 100% of their bonuses; and (iii) any refunds resulting from the failure of the 401(k) non-discrimination test. A company match may be provided on these contributions equal to 50% of the first 8% of eligible compensation deferred by the employee to the extent the employee is not able to receive the full amount of company match to the 401(k) plan due to IRS limitations. In January 2018, our match was discontinued. The non-qualified supplemental savings plan allows us to contribute restoration benefits to eligible employees. Employees who did not accrue a benefit in the supplemental executive retirement plan and who are eligible to participate in the defined contribution retirement plan automatically became eligible for this benefit when the employee’s eligible retirement compensation exceeded the section 401(a)(17) limit. We contributed, in cash, 3% of an eligible employee’s compensation above the 401(a)(17) limit to a trust on behalf of the employees. We ceased contributing restoration compensation effective January 1, 2018. Any future contributions to this plan will be determined at our discretion We also provided retirement benefits to our eligible non-U.S. citizen employees working outside their respective country of origin pursuant to a self-directed multinational defined contribution retirement plan (multinational retirement plan). Non-U.S. citizen shore-based and certain offshore employees working outside their respective country of origin were eligible to participate in the multinational retirement plan provided the employees were not enrolled in any home country pension or retirement program. Participants of the multinational retirement plan could contribute 1% to 50% of their base salary after the first month following hire or transfer to eligible positions. We matched, in cash, 50% of the first 6% of eligible compensation deferred by the employee which vests over five years. We ceased contributing to this retirement plan effective January 1, 2018. Any future contributions to this plan will be determined at our discretion. The amounts charged to expense related to the multinational retirement plan contributions are immaterial. We also provide certain benefits programs which are maintained in several other countries that provide retirement income for covered employees. Multi-employer Pension Obligations Certain of our current and former U.K. subsidiaries are participating in two multi-employer retirement funds known as the Merchant Navy Officers Pension Fund, or MNOPF and the Merchant Navy Ratings Pension Fund or MNRPF. At December 31, 2019 and 2018, we had recorded $1.0 million and $1.4 million, respectively, related to these liabilities. The status of the funds are calculated by an actuarial firm approximately every three years. The last assessment was completed in March 2018 for the MNOPF Plan and March 2017 for the MNRPF Plan. We continue to expense $0.2 million per annum for these plans. |
