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 June 30, 2000
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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.
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(Exact name of registrant as specified in its charter)
DELAWARE 72-0487776
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
601 Poydras Street, Suite 1900, New Orleans, Louisiana 70130
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (504) 568-1010
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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 _________
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55,717,643 shares of Tidewater Inc. common stock $.10 par value per share
were outstanding on July 17, 2000. Excluded from the calculation of shares
outstanding at July 17, 2000 are 4,837,818 shares held by the Registrant's
Grantor Stock Ownership Trust. Registrant has no other class of common
stock outstanding.
-1-
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
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TIDEWATER INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
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June 30, March 31,
ASSETS 2000 2000
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Current assets:
Cash and cash equivalents $ 249,335 226,910
Trade and other receivables 141,459 149,006
Marine operating supplies 27,262 25,405
Other current assets 2,764 2,372
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Total current assets 420,820 403,693
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Investments in, at equity, and advances to
unconsolidated companies 23,563 23,275
Properties and equipment:
Vessels and related equipment 1,360,371 1,356,177
Other properties and equipment 42,369 42,474
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1,402,740 1,398,651
Less accumulated depreciation 856,803 842,620
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Net properties and equipment 545,937 556,031
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Goodwill, net 335,714 338,006
Other assets 123,236 111,331
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Total assets $1,449,270 1,432,336
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities:
Accounts payable and accrued expenses 68,835 66,943
Accrued property and liability losses 5,704 4,322
Income taxes 5,854 3,572
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Total current liabilities 80,393 74,837
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Deferred income taxes 152,940 145,076
Accrued property and liability losses 48,828 49,549
Other liabilities and deferred credits 51,638 48,673
Stockholders' equity:
Common stock of $.10 par value, 125,000,000 shares
authorized, issued 60,555,461 shares at June
and 60,561,892 shares at March 6,056 6,056
Other stockholders' equity 1,109,415 1,108,145
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Total stockholders' equity 1,115,471 1,114,201
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Total liabilities and stockholders' equity $1,449,270 1,432,336
================================================================================
See Notes to Unaudited Condensed Consolidated Financial Statements.
-2-
TIDEWATER INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except share and per share data)
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Three Months Ended
June 30,
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2000 1999
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Revenues:
Vessel revenues $ 125,305 148,277
Other marine revenues 11,579 6,253
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136,884 154,530
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Costs and expenses:
Vessel operating costs 87,951 91,892
Costs of other marine revenues 9,243 4,355
Depreciation and amortization 19,071 22,942
General and administrative 15,940 16,946
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132,205 136,135
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4,679 18,395
Other income (expenses):
Foreign exchange gain (loss) 77 (72)
Gain on sales of assets 964 2,359
Equity in net earnings of unconsolidated companies 2,342 1,986
Minority interests (196) (247)
Interest and miscellaneous income 4,292 1,914
Interest and other debt costs (161) (126)
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7,318 5,814
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Earnings before income taxes 11,997 24,209
Income taxes 3,839 7,747
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Net earnings $ 8,158 16,462
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Earnings per common share $ 0.15 .30
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Diluted earnings per common share $ 0.15 .30
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Weighted average common shares outstanding 55,614,916 55,498,319
Incremental common shares from stock options 416,972 167,498
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Adjusted weighted average common shares 56,031,888 55,665,817
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Cash dividends declared per common share $ 0.15 .15
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See Notes to Unaudited Condensed Consolidated Financial Statements.
-3-
TIDEWATER INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
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Three Months Ended
June 30,
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2000 1999
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Net cash provided by operating activities $ 33,828 80,535
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Cash flows from investing activities:
Proceeds from sales of assets 2,754 3,679
Additions to properties and equipment (6,610) (12,787)
Other (23) 37
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Net cash used in investing activities (3,879) (9,071)
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Cash flows from financing activities:
Proceeds from issuance of common stock 832 150
Cash dividends (8,356) (8,338)
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Net cash used in financing activities (7,524) (8,188)
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Net change in cash and cash equivalents 22,425 63,276
Cash and cash equivalents at beginning of period 226,910 10,422
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Cash and cash equivalents at end of period $249,335 73,698
===============================================================================
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 1 197
Income taxes $ 3,771 6,779
===============================================================================
See Notes to Unaudited Condensed Consolidated Financial Statements.
-4-
TIDEWATER INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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(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) Stockholders' Equity
At June 30, 2000 and March 31, 2000, 4,839,779 and 4,911,445 shares,
respectively, of common stock were held in a grantor stock ownership plan trust
for the benefit of stock-based employee benefits programs. These shares are not
included in common shares outstanding for earnings per share calculations and
transactions between the company and the trust, including dividends paid on the
company's common stock, are eliminated in consolidating the accounts of the
trust and the company.
(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 was 32% for the quarters ended June 30, 2000 and 1999.
-5-
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
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The Board of Directors and Shareholders
Tidewater Inc.
We have reviewed the accompanying condensed consolidated balance sheet of
Tidewater Inc. and subsidiaries as of June 30, 2000 and the related condensed
consolidated statements of earnings and cash flows for the three-month periods
ended June 30, 2000 and 1999. These financial statements are the responsibility
of the Company's management.
We conducted our reviews 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 auditing standards generally accepted in the United States,
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 reviews, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements referred
to above for them to be in conformity with accounting principles generally
accepted in the United States.
We have previously audited, in accordance with auditing standards generally
accepted in the United States, the consolidated balance sheet of Tidewater Inc.
and subsidiaries as of March 31, 2000, and the related consolidated statements
of earnings, stockholders' equity and cash flows for the year then ended, not
presented herein, and in our report dated April 25, 2000, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion
the information set forth in the accompanying condensed consolidated balance
sheet as of March 31, 2000, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
Ernst & Young LLP
New Orleans, Louisiana
July 18, 2000
-6-
Item 2. Management's Discussion and Analysis
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The company provides services 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.
MARINE OPERATIONS
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Offshore service vessels provide a diverse range of services 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 primarily
consist of crew costs, repair and maintenance, insurance, fuel, lube oil 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 the impact on
vessel operations and are only done if economically justified, given the
vessel's age and physical condition.
The company decided to accelerate a number of vessel drydockings into the first
and second quarter of fiscal 2001 in order to have the equipment ready for
service in anticipation of improvements in the market later this fiscal year;
thus, incurring higher repair and maintenance costs and depressing earnings.
Fifty vessel drydockings occurred during the current quarter and approximately
35 are scheduled for the second quarter of fiscal 2001.
-7-
The following table compares revenues and operating expenses (excluding general
and administrative expense and depreciation expense) for the company's vessel
fleet for the quarters ended June 30 and March 31. Vessel revenues and
operating costs relate to vessels owned and operated by the company while other
marine services relate to third-party activities of the company's shipyards,
brokered vessels and other miscellaneous marine-related activities.
Quarter
Quarter Ended Ended
June 30, March 31,
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(in thousands) 2000 1999 2000
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Revenues:
Vessel revenues:
United States $ 36,503 32,758 35,970
International 88,802 115,519 95,880
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125,305 148,277 131,850
Other marine revenues 11,579 6,253 7,719
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$136,884 154,530 139,569
============================================================================================================
Operating costs:
Vessel operating costs:
Crew costs $ 43,365 53,409 46,555
Repair and maintenance 25,888 17,062 19,494
Insurance 4,969 5,297 3,897
Fuel, lube and supplies 6,112 6,984 5,796
Other 7,617 9,140 7,727
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87,951 91,892 83,469
Costs of other marine revenues 9,243 4,355 5,836
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$ 97,194 96,247 89,305
============================================================================================================
Marine support services are conducted worldwide with assets that are highly
mobile. Revenues are principally derived from offshore service vessels, which
regularly and routinely move from one operating area to another, often to and
from offshore operating areas in different continents. Because of this asset
mobility, revenues and long-lived assets attributable to the company's
international marine operations in any one country are not "material" as that
term is defined by SFAS No. 131.
As a result of the uncertainty of certain customers to make payment of vessel
charter hire, the company has deferred the recognition of approximately $10.8
million of billings as of June 30, 2000 ($10.7 million of billings as of March
31, 2000), which would otherwise have been recognized as revenue. The company
will recognize the amounts as revenue as cash is collected or at such time as
the uncertainty has been significantly reduced.
Oil and natural gas prices have appreciated significantly during calendar years
1999 and 2000. The increases in the pricing of oil and natural gas combined with
severe tightening of inventory levels for both crude oil and natural gas
continue to increase the demand for working drilling rigs and services in the
U.S. Gulf of Mexico and on a global basis. Strong demand for natural resources
has prompted the oil and gas exploration and production companies to increase
capital spending in order to take advantage of improving industry conditions.
Despite improved market conditions capital spending levels still remain below
late 1997 levels. U.S.-based vessel demand is expected to increase as market
conditions and drilling rig utilization rates continue to improve and
international-based vessel demand is expected to trend upward as international
drilling activity recovers.
-8-
Marine operating profit and other components of earnings before income taxes for
the quarters ended June 30 and March 31 consists of the following:
Quarter
Quarter Ended Ended
June 30, March 31,
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(in thousands) 2000 1999 2000
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Vessel activity:
United States $(5,475) (397) (5,075)
International 12,216 21,047 20,591
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6,741 20,650 15,516
Gain on sales of assets 964 2,357 8,412
Other marine services 2,230 1,664 1,767
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Operating profit $ 9,935 24,671 25,695
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Equity in net earnings of unconsolidated companies 2,342 1,986 2,525
Interest and other debt costs (161) (126) (265)
Corporate general and administrative (3,311) (2,945) (2,466)
Other income 3,192 623 2,467
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Earnings before income taxes $11,997 24,209 27,956
==============================================================================================================
U.S.-based vessel revenues for the current quarter increased 11% as compared to
the same period in fiscal 2000 as a result of higher utilization and average day
rates. Average day rates and utilization for the towing supply/supply vessels,
the company's major income producing asset in the domestic market, increased by
approximately 7% and 21%, respectively, for the current quarter as compared to
the same period in fiscal 2000.
Current quarter operating profit for the U.S.-based vessels decreased
significantly from the comparative period in fiscal 2000 in spite of increases
in utilization and average day rates. The decrease in operating profit is due
primarily to increases in repair and maintenance costs incurred from an intense
drydocking program the company initiated in order to ready equipment for an
expected improvement in demand for its vessels. Twenty-five domestic-based
vessel drydockings occurred in the current quarter. The company initiated this
drydocking program while vessel demand and average day rates in the domestic
market have not fully recovered; thus, sacrificing short-term profitability in
anticipation of higher average day rates and vessel demand when market
conditions in the U.S. Gulf of Mexico improve.
Current quarter U.S.-based revenues increased slightly as compared to the prior
quarter. Although not indicative in the statistics, improved market conditions
and vessel demand in the U.S. Gulf of Mexico has put upward pressure on average
day rates during the latter part of the current quarter. As of June 30, 2000,
the towing supply/supply vessels operating in the U.S. Gulf of Mexico are
experiencing approximately $4,200 average day rates and 63% utilization. U.S.-
based operating profit decreased during the current quarter as compared to the
previous quarter primarily due to higher repair and maintenance costs.
International-based vessel revenues for the current quarter decreased 23% as
compared to the same period in fiscal 2000 as a result of lower average day
rates and a decrease in the number of active vessels in the international-based
fleet. The company sold its safety/standby vessels in July 1999, as it did not
conform to the company's long-range strategies. Removing the revenue effect of
the safety/standby fleet, current quarter international-based revenues decreased
15% as compared to same period in the prior fiscal year. International vessel
demand continues to feel residual effects of the curtailments in customer
spending due to the oil industry slow down.
Current quarter international-based vessel operating profit decreased
approximately 42% as compared to the same period in fiscal 2000 as a result of
lower average day rates, a decrease in the number of
-9-
active vessels in the international-based fleet and higher repair and
maintenance costs. International vessel utilization rates increased slightly,
but primarily as a result of withdrawing 25 older, little-used vessels from
active service during the latter part of fiscal 2000 at which time they were
removed from the utilization statistics. Vessel utilization rates are a function
of vessel days worked and vessel days available. Repair and maintenance costs
increased primarily due to 25 international-based vessel drydockings.
Current quarter international-based revenues decreased 7% as compared to the
prior quarter as a result of lower average day rates. Current quarter
international-based vessel operating profit decreased 41% as compared to the
previous quarter primarily due to higher repair and maintenance costs for
international-based vessels.
Vessel utilization is determined primarily by market conditions and to a lesser
extent by drydocking requirements. Vessel day rates are determined by the
demand created through the level of offshore exploration, development and
production spending by energy companies relative to the supply of offshore
service vessels. Suitability of equipment and the degree of service provided
also influence vessel day rates. The following tables compare day-based
utilization percentages and average day rates by vessel class and in total for
the quarters ended June 30 and March 31:
-10-
Quarter
Quarter Ended Ended
June 30, March 31,
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2000 1999 2000
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UTILIZATION:
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Domestic-based fleet :
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Towing-supply/supply 57.1% 47.2 56.4
Crew/utility 86.9 77.3 80.0
Offshore tugs 33.5 38.9 35.6
Other 30.7 46.6 35.5
Total 56.0% 49.4 55.1
International-based fleet :
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Towing-supply/supply 76.7% 71.9 76.0
Crew/utility 93.9 89.2 93.7
Offshore tugs 66.8 65.4 76.6
Safety/standby --- 77.5 ---
Other 42.4 52.1 43.7
Total 74.5% 72.0 75.6
Worldwide fleet:
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Towing-supply/supply 69.0% 62.6 68.4
Crew/utility 91.5 85.2 89.0
Offshore tugs 51.9 54.1 59.1
Safety/standby --- 77.5 ---
Other 39.9 50.9 41.9
Total 67.5% 64.1 67.9
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AVERAGE VESSEL DAY RATES:
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Domestic-based fleet:
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Towing-supply/supply $3,990 3,734 4,019
Crew/utility 2,046 1,806 2,014
Offshore tugs 6,235 6,028 5,733
Other 1,305 1,345 1,331
Total $3,735 3,572 3,732
International-based fleet:
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Towing-supply/supply $5,066 5,698 5,273
Crew/utility 2,237 2,250 2,290
Offshore tugs 3,814 4,048 4,009
Safety/standby --- 6,087 ---
Other 1,624 1,265 1,604
Total $4,173 4,676 4,334
Worldwide fleet:
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Towing-supply/supply $4,717 5,143 4,873
Crew/utility 2,173 2,114 2,204
Offshore tugs 4,516 4,652 4,452
Safety/standby --- 6,087 ---
Other 1,572 1,282 1,553
Total $4,035 4,377 4,151
========================================================================================================
-11-
The following table compares the average number of vessels by class and
geographic distribution for the quarters ended June 30 and March 31:
Quarter
Quarter Ended Ended
June 30, March 31,
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2000 1999 2000
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Domestic-based fleet:
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Towing-supply/supply 125 131 125
Crew/utility 26 26 26
Offshore tugs 32 37 32
Other 9 10 9
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Total 192 204 192
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International-based fleet:
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Towing-supply/supply 193 219 199
Crew/utility 48 50 48
Offshore tugs 40 50 43
Safety/standby --- 25 ---
Other 33 33 32
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Total 314 377 322
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Owned or chartered vessels included in marine revenues 506 581 514
Vessels held for sale 52 50 61
Joint-venture and other 51 46 47
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Total 609 677 622
=====================================================================================
The company sold all of its safety/standby vessels for approximately $40 million
in an all cash transaction during the second quarter of fiscal 2000. This
specialized fleet was sold because it did not conform to the company's long-
range strategies. In July 1999 the company acquired six new-build vessels from
an industry competitor for an aggregate price of approximately $22 million. The
package of vessels included one supply vessel, two offshore tugs and three crew
boats. Five of the vessels were delivered to the market in fiscal 2000 while
the sixth vessel was delivered to the market during the current quarter.
During the latter part of fiscal 2000, the company withdrew from active service,
39 older, little-used vessels. Fourteen of the vessels were withdrawn from the
domestic-based fleet and 25 were withdrawn from the international-based fleet.
Vessels withdrawn from active service are intended to be sold.
Consolidated general and administrative expenses for the quarters ended June 30
and March 31 consist of the following components:
Quarter Ended Quarter
June 30, Ended
-------------- March 31,
(in thousands) 2000 1999 2000
- ----------------------------------------------------------------------------
Personnel $10,090 10,133 10,761
Office and property 2,724 2,899 2,829
Sales and marketing 1,119 1,110 1,141
Professional services 850 1,232 1,728
Other 1,157 1,572 707
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$15,940 16,946 17,166
============================================================================
General and administrative expenses for the current quarter decreased
approximately 6% as compared to the same period in fiscal 2000 due primarily to
personnel reductions resulting from the sale of the safety/standby vessel fleet.
-12-
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 year are directly related to fleet activity
and vessel day rates. Fleet activity and vessel day rates are ultimately
determined by the supply/demand relationship for oil and natural gas.
Variations from year-to-year in these items are primarily the result of market
conditions. Cash from ongoing operations in combination with available lines of
credit provide the company, in management's opinion, with adequate resources to
satisfy present financing requirements. At June 30, 2000, all of the company's
$200 million revolving line of credit was available for future financing needs.
Continued payment of dividends, currently $.15 per quarter per common share, is
subject to declaration by the Board of Directors.
Investing activities for the quarters ended June 30, 2000 and 1999 were
comparable with no unusual activity. Financing activities for the quarters ended
June 30, 2000 and 1999 included $8.4 and $8.3 million, respectively, of cash for
quarterly cash dividends of $.15 per share.
In order to better meet and service the needs of its customers, the company
on January 20, 2000 a new-build program estimated to cost in the range
of $200-$300 million. The vessels, which will be designed to cover operational
capabilities the company currently does not possess, will include very large
anchor handling towing supply vessels and large platform supply vessels capable
of working in most of the deepwater markets of the world. The company expects
to finance the new-build program from its current cash balances, its projected
cash flow and its existing revolving credit facility. Deliveries on the new
vessels are expected to commence in about two years. At June 30, 2000 no
commitments to shipyards or other suppliers had been made for construction of
these vessels.
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 energy industry and the energy services industry will increase.
Future increases in vessel day rates may mitigate the effects on 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
related environmental damage. Compliance with existing governmental regulations
which have been enacted or adopted regulating the discharge of materials into
the environment, or otherwise relating to the protection of the environment, has
not had, nor is expected to have, a material effect on the company.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
---------------------------------------------------------
No change from 2000 annual report disclosure.
-13-
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
A. At page 17 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.
-14-
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: July 20, 2000 /s/ William C. O'Malley
------------------------------------------------------
William C. O'Malley
Chairman of the Board, President and
Chief Executive Officer
Date: July 20, 2000 /s/ Ken C. Tamblyn
------------------------------------------------------
Ken C. Tamblyn
Executive Vice President and
Chief Financial Officer (Principal Accounting Officer)
-15-
EXHIBIT INDEX
Exhibit
Number
- ------
15 Letter re Unaudited Interim Financial Information
27 Financial Data Schedule
-16-