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, 2001
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 72-0487776
--------------- ---------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
601 Poydras Street, Suite 1900, New Orleans, Louisiana 70130
------------------------------------------------------ --------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (504) 568-1010
--------------
---------------------------------------------------
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
56,073,365 shares of Tidewater Inc. common stock $.10 par value per share were
outstanding on July 16, 2001. Excluded from the calculation of shares
outstanding at July 16, 2001 are 4,470,302 shares held by the Registrant's
Grantor Stock Ownership Trust. Registrant has no other class of common stock
outstanding.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
TIDEWATER INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
- -----------------------------------------------------------------------------------------
June 30, March 31,
ASSETS 2001 2001
- -----------------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 14,059 95,153
Trade and other receivables 184,652 160,677
Marine operating supplies 28,833 28,632
Other current assets 4,132 4,125
- -----------------------------------------------------------------------------------------
Total current assets 231,676 288,587
- -----------------------------------------------------------------------------------------
Investments in, at equity, and advances to
unconsolidated companies 15,721 16,544
Properties and equipment:
Vessels and related equipment 1,719,905 1,613,604
Other properties and equipment 42,946 42,837
- -----------------------------------------------------------------------------------------
1,762,851 1,656,441
Less accumulated depreciation 900,907 884,765
- -----------------------------------------------------------------------------------------
Net properties and equipment 861,944 771,676
- -----------------------------------------------------------------------------------------
Goodwill, net 328,836 328,836
Other assets 94,148 99,849
- -----------------------------------------------------------------------------------------
Total assets $1,532,325 1,505,492
=========================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- -----------------------------------------------------------------------------------------
Current liabilities:
Accounts payable and accrued expenses 59,658 68,426
Accrued property and liability losses 7,724 6,825
Income taxes 7,606 8,336
- -----------------------------------------------------------------------------------------
Total current liabilities 74,988 83,587
- -----------------------------------------------------------------------------------------
Deferred income taxes 160,029 155,744
Accrued property and liability losses 36,764 38,682
Other liabilities and deferred credits 50,089 49,139
Stockholders' equity:
Common stock of $.10 par value, 125,000,000 shares
authorized, issued 60,543,667 shares at June and
60,543,181 shares at March 6,054 6,055
Other stockholders' equity 1,204,401 1,172,285
- -----------------------------------------------------------------------------------------
Total stockholders' equity 1,210,455 1,178,340
- -----------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $1,532,325 1,505,492
=========================================================================================
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)
- ----------------------------------------------------------------------------------
Three Months Ended
June 30,
-------------------------
2001 2000
- ----------------------------------------------------------------------------------
Revenues:
Vessel revenues $ 187,814 125,305
Other marine revenues 2,749 11,579
- ----------------------------------------------------------------------------------
190,563 136,884
- ----------------------------------------------------------------------------------
Costs and expenses:
Vessel operating costs 96,826 87,951
Costs of other marine revenues 1,532 9,243
Depreciation and amortization 19,181 19,071
General and administrative 15,752 15,940
- ----------------------------------------------------------------------------------
133,291 132,205
- ----------------------------------------------------------------------------------
57,272 4,679
Other income (expenses):
Foreign exchange gain (loss) (652) 77
Gain on sales of assets 54 964
Equity in net earnings of unconsolidated companies 1,499 2,342
Minority interests 176 (196)
Interest and miscellaneous income 989 4,292
Interest and other debt costs (200) (161)
- ----------------------------------------------------------------------------------
1,866 7,318
- ----------------------------------------------------------------------------------
Earnings before income taxes 59,138 11,997
Income taxes 20,107 3,839
- ----------------------------------------------------------------------------------
Net earnings $ 39,031 8,158
==================================================================================
Earnings per common share $0.70 0.15
==================================================================================
Diluted earnings per common share $0.69 0.15
==================================================================================
Weighted average common shares outstanding 55,998,396 55,614,916
Incremental common shares from stock options 530,510 416,972
- ----------------------------------------------------------------------------------
Adjusted weighted average common shares 56,528,906 56,031,888
==================================================================================
Cash dividends declared per common share $0.15 0.15
==================================================================================
See Notes to Unaudited Condensed Consolidated Financial Statements.
3
TIDEWATER INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
- ---------------------------------------------------------------------------
Three Months Ended
June 30,
-------------------
2001 2000
- ---------------------------------------------------------------------------
Net cash provided by operating activities $ 34,695 33,828
- ---------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sales of assets 1,237 2,754
Additions to properties and equipment (109,625) (6,610)
Other 195 (23)
- ---------------------------------------------------------------------------
Net cash used in investing activities (108,193) (3,879)
===========================================================================
Cash flows from financing activities:
Proceeds from issuance of common stock 815 832
Cash dividends (8,410) (8,356)
Other (1) ---
- ---------------------------------------------------------------------------
Net cash used in financing activities (7,596) (7,524)
- ---------------------------------------------------------------------------
Net change in cash and cash equivalents (81,094) 22,425
Cash and cash equivalents at beginning of period 95,153 226,910
- ---------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 14,059 249,335
===========================================================================
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 111 1
Income taxes $ 12,014 3,771
===========================================================================
See Notes to Unaudited Condensed Consolidated Financial Statements.
4
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) STOCKHOLDERS' EQUITY
At June 30, 2001 and March 31, 2001, 4,472,406 and 4,506,962 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 34% and 32% for the quarters ended June 30, 2001 and 2000,
respectively.
(4) NEW ACCOUNTING PRONOUNCEMENTS
Effective April 1, 2001, the company adopted Statement of Financial Accounting
Standards (SFAS) No. 138, "Accounting for Certain Derivative Instruments and
Hedging Activities," that amends certain provisions of SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities." The pronouncements require
that all derivatives be recognized as either assets or liabilities and measured
at fair value. The adoption of SFAS No. 133, as amended, did not have a
material impact on the company's financial statements.
On July 20, 2001, the Financial Accounting Standards Board issued SFAS No. 142,
"Goodwill and Other Intangible Assets," which establishes a new method of
testing goodwill for impairment using a fair-value-based approach and does not
permit amortization of goodwill as previously required by Accounting Principles
Board Opinion No. 17, "Intangible Assets." An impairment loss would be recorded
if the recorded goodwill exceeds its implied fair value. SFAS No. 142 is
effective for fiscal years beginning after December 15, 2001; however, early
adoption is allowed for companies with fiscal years beginning after March 15,
2001 provided the first quarter financial statements have not been previously
issued. The company elected to adopt SFAS No. 142 effective April 1, 2001 and,
accordingly, no goodwill amortization was recorded during the first quarter of
fiscal 2002. There were no indicators of goodwill impairment as of April 1,
2001, and the company is currently developing a benchmark assessment model to
test for impairment which will be completed within six months as required.
Goodwill amortization for the quarter ended June 30, 2001 would have been $2.3
million (pre-tax), or $.03 per share (after tax) had the company not adopted
SFAS No. 142. For the three months ended June 30, 2000, pre-tax goodwill
amortization amounted to $2.3 million, or $.03 per share (after tax).
5
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
- --------------------------------------
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, 2001, and the related condensed
consolidated statements of earnings and cash flows for the three-month periods
ended June 30, 2001 and 2000. 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, 2001, 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 23, 2001, 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, 2001, 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 20, 2001
6
Item 2. Management's Discussion and Analysis
------------------------------------
The company provides services to the global 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.
FORWARD LOOKING INFORMATION
- ---------------------------
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; level of fleet additions by
competitors; 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 fluctuations; and environmental and labor laws.
Readers should consider all of these risk factors as well as other information
contained in this report.
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 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 customer demands, 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.
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 Ended Quarter
June 30, Ended
------------------ March 31,
(in thousands) 2001 2000 2001
- -------------------------------------------------------------------------
Revenues:
Vessel revenues:
United States $ 69,002 36,503 61,983
International 118,812 88,802 106,235
- ------------------------------------------------------------------------
187,814 125,305 168,218
Other marine revenues 2,749 11,579 6,313
- ------------------------------------------------------------------------
$190,563 136,884 174,531
========================================================================
Operating costs:
Vessel operating costs:
Crew costs $ 50,525 43,365 47,551
Repair and maintenance 24,638 25,888 24,290
Insurance 4,693 4,969 4,884
Fuel, lube and supplies 7,771 6,112 8,315
Other 9,199 7,617 8,687
- ------------------------------------------------------------------------
96,826 87,951 93,727
Costs of other marine revenues 1,532 9,243 4,617
- ------------------------------------------------------------------------
$ 98,358 97,194 98,344
========================================================================
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 a certain customer to make payment of vessel
charter hire, the company has deferred the recognition of approximately $7.4
million of billings as of June 30, 2001 ($7.0 million of billings as of March
31, 2001), 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.
Domestic results of operations for the first quarter of fiscal 2002 benefited
from increased average day rates because of strong natural gas prices.
Throughout the current quarter, demand for natural gas, especially in the United
States, has eased due to the slowdown in the U.S. and global economies resulting
in increased inventory levels. At the end of the current quarter and continuing
into the early part of the second quarter of fiscal 2002, natural gas prices
softened on the news that inventory levels for the resource had surged to
comfortable levels. Although the current price level for natural gas is high
enough to sustain strong demand for working drilling rigs and services in the
U.S. Gulf of Mexico, exploration and production companies have become cautious
over the decrease in the commodity price for natural gas. Leading energy
pundits and forecasters believe this current softening is a result of the normal
ebb and flow of the industry and expect the softness to be short-term. Vessel
demand in the domestic market is primarily driven by natural gas exploration and
production and at present, it is unknown what effect and the extent of the
effect, if
8
any, the current softening in natural gas prices will have on demand for the
company's vessels in the domestic market.
International results of operations for the first quarter of fiscal 2002 also
benefited from increases in average day rates. International vessel demand is
primarily driven by crude oil production, and at the present time crude oil
commodity prices are remaining strong which should result in increased
exploration and production spending. International vessel demand should
strengthen with the increased international exploration and production spending.
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 Ended Quarter
June 30, Ended
----------------- March 31,
(in thousands) 2001 2000 2001
- --------------------------------------------------------------------------------------
Vessel activity:
United States $28,838 (5,475) 21,742
International 30,337 12,216 20,376
- --------------------------------------------------------------------------------------
59,175 6,741 42,118
Gain on sales of assets 54 964 91
Other marine services 1,128 2,230 1,565
- --------------------------------------------------------------------------------------
Operating profit $60,357 9,935 43,774
- --------------------------------------------------------------------------------------
Equity in net earnings of unconsolidated companies 1,499 2,342 1,480
Interest and other debt costs (200) (161) (545)
Corporate general and administrative (3,254) (3,311) (2,619)
Other income 736 3,192 1,070
- --------------------------------------------------------------------------------------
Earnings before income taxes $59,138 11,997 43,160
======================================================================================
U.S.-based vessel revenues for the first quarter of fiscal 2002 increased 89%
and 11% as compared to the first and fourth quarters of fiscal 2001,
respectively, as a result of higher utilization and average day rates. Average
day rates and utilization have strengthened due to strong demand for the
company's vessels in the U.S. Gulf of Mexico. 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 96% and 27%, respectively,
for the current quarter as compared to the first quarter of fiscal 2001 and
increased 7% and 5%, respectively, for the current quarter as compared to the
fourth quarter of fiscal 2001.
Operating profit for the U.S.-based vessels increased significantly in the first
quarter of fiscal 2002 as compared to the first quarter of fiscal 2001 and
increased 33% as compared to the previous quarter. Operating profit increased
in the comparative periods primarily due to higher revenues and lower repair and
maintenance costs. Repair and maintenance costs decreased during the current
quarter as compared to the first quarter of fiscal 2001 as a result of fewer
domestic drydockings being performed. The company incurred high repair and
maintenance cost during the first quarter of fiscal 2001 as a result of an
intense drydocking program the company initiated while vessel demand and average
day rates in the domestic market were not fully recovered in order to ready its
equipment for the expected increase in demand for its vessels when market
conditions in the U.S. Gulf of Mexico improved.
International-based vessel revenues for the first quarter of fiscal 2002
increased 34% and 12% as compared to the first and fourth quarters of fiscal
2001, respectively, as a result of higher average day rates and utilization and
an increase in the number of active vessels in the international-based fleet.
Vessel demand in the international markets has strengthened as international
drilling activity continues to recover from the curtailment in capital spending
in the oil industry as a result of the
9
drop in oil prices that commenced in the fall of 1997. The number of active
vessels in the international-based fleet increased due to an aggressive
deepwater vessel acquisition program that began during the second quarter of
fiscal 2001. Fifteen deepwater vessels have been purchased to date, seven of
which are fulfilling bareboat contractual obligations that existed at the time
the vessels were purchased. The bareboat charter agreements on these seven
vessels will expire at various times over the next two years with the option to
extend certain contracts for another two years. In a bareboat charter agreement,
the bareboat charterer leases a vessel for a pre-arranged fee and is able to
market the vessel and is also responsible for providing the crew and all other
operating costs related to the vessel. For the vessels that Tidewater has under
bareboat contracts, only revenue and depreciation expense is recorded related to
the vessels' activity. As Tidewater incurs no operating costs related to the
vessels, the related bareboat day rates are less than comparable vessels
operating under normal charter hire arrangements. For the current and prior
quarters, the seven bareboat chartered deepwater vessels experienced 100%
utilization and an average day rate of approximately $6,200 per day.
International-based vessel operating profit for the first quarter of fiscal 2002
increased 148% and 49% as compared to the first and fourth quarters of fiscal
2001, respectively, due to an increase in revenues. Revenues increased as a
result of an increase in the number of active vessels in the international fleet
and also as a result of improved average day rates for the towing-supply/supply
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 day based utilization percentages and average day rates tables include a new
vessel class category for the deepwater vessel fleet. Included in this class
are large platform supply vessels and large, high-horsepowered anchor-handling
towing supply vessels that are capable of operating in deepwater markets
globally. The deepwater vessel fleet statistics for prior periods were included
in the towing-supply/supply vessel class statistics. Accordingly, prior period
towing-supply/supply vessel class statistics have been restated to exclude the
effect of the deepwater vessels. 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 Ended Quarter
June 30, Ended
------------------ March 31,
2001 2000 2001
- --------------------------------------------------------------
UTILIZATION:
- ------------
Domestic-based fleet:
- ---------------------
Deepwater vessels 100.0% 98.5 98.9
Towing-supply/supply 71.5 56.1 68.1
Crew/utility 91.4 86.9 87.5
Offshore tugs 38.1 33.5 37.1
Other 22.0 30.7 27.2
Total 66.7% 56.0 63.7
International-based fleet:
- --------------------------
Deepwater vessels 95.6% 70.3 93.8
Towing-supply/supply 74.5 76.9 76.6
Crew/utility 88.7 93.9 88.5
Offshore tugs 70.9 66.8 64.5
Other 46.9 42.4 41.1
Total 75.2% 74.5 74.8
Worldwide fleet:
- ----------------
Deepwater vessels 96.0% 78.8 94.3
Towing-supply/supply 73.4 68.7 73.5
Crew/utility 89.6 91.5 88.2
Offshore tugs 56.9 51.9 52.2
Other 41.5 39.9 37.8
Total 72.3% 67.5 70.8
============================================================
AVERAGE VESSEL DAY RATES:
- -------------------------
Domestic-based fleet:
- ---------------------
Deepwater vessels $11,756 11,622 11,760
Towing-supply/supply 7,181 3,659 6,717
Crew/utility 2,838 2,046 2,724
Offshore tugs 8,160 6,235 6,902
Other 1,427 1,305 2,071
Total $ 6,437 3,735 5,967
International-based fleet:
- --------------------------
Deepwater vessels $ 9,936 7,413 8,270
Towing-supply/supply 5,774 4,985 5,482
Crew/utility 2,385 2,237 2,334
Offshore tugs 4,799 3,814 4,662
Other 953 1,624 974
Total $ 5,163 4,173 4,841
Worldwide fleet:
- ----------------
Deepwater vessels $10,091 8,992 8,619
Towing-supply/supply 6,276 4,558 5,908
Crew/utility 2,537 2,173 2,467
Offshore tugs 5,765 4,516 5,378
Other 1,007 1,572 1,163
Total $ 5,568 4,035 5,202
============================================================
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 Ended Quarter
June 30, Ended
----------------- March 31,
2001 2000 2001
- ---------------------------------------------------------------------------------------------------
Domestic-based fleet:
- ---------------------
Deepwater vessels 2 3 2
Towing-supply/supply 112 122 114
Crew/utility 25 26 25
Offshore tugs 30 32 31
Other 8 9 9
- ---------------------------------------------------------------------------------------------------
Total 177 192 181
- ---------------------------------------------------------------------------------------------------
International-based fleet:
- --------------------------
Deepwater vessels 23 7 19
Towing-supply/supply 194 186 192
Crew/utility 50 48 47
Offshore tugs 40 40 39
Other 29 33 29
- ---------------------------------------------------------------------------------------------------
Total 336 314 326
- ---------------------------------------------------------------------------------------------------
Owned or chartered vessels included in marine revenues 513 506 507
Vessels held for sale 32 52 36
Joint-venture and other 28 51 28
- ---------------------------------------------------------------------------------------------------
Total 573 609 571
===================================================================================================
The above table includes a new vessel class for the deepwater vessel fleet.
Prior period vessel averages for the deepwater vessel fleet were reported with
the towing-supply/supply class and accordingly the average number of vessels for
the towing-supply/supply class have been restated to exclude the effect of the
deepwater vessel fleet.
The company sold or scrapped eight vessels during the current quarter. During
the second quarter of fiscal 2001, the company sold its 40% holding in its
unconsolidated marine joint venture, National Marine Service. As a result of
the sale, the joint venture vessel count decreased by 24 vessels. During the
third quarter of fiscal 2001, the company sold four vessels (two offshore tugs
and two crew boats) to its 40%-owned unconsolidated joint venture, Sonatide
Marine, Ltd. In addition, throughout fiscal 2001, the company sold or scrapped
a total of 37 vessels.
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) 2001 2000 2001
- --------------------------------------------------------
Personnel $ 9,445 10,090 10,083
Office and property 2,728 2,724 2,811
Sales and marketing 1,177 1,119 1,501
Professional services 1,268 850 1,142
Other 1,134 1,157 1,099
- --------------------------------------------------------
$15,752 15,940 16,636
========================================================
General and administrative expenses for the current quarter were comparable to
the same period in fiscal 2001 and to the prior quarter.
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, 2001, 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.
Net cash provided by operating activities for any quarter will fluctuate
according to the level of business activity for the applicable quarter. For the
quarter ended June 30, 2001, net cash from operating activities was slightly
higher than the same period in fiscal 2001. Even though earnings were
significantly higher this quarter versus the first quarter of fiscal 2001,
accounts receivable balances were also significantly higher as a result of the
revenue growth.
Investing activities for the quarter ended June 30, 2001 used $108.2 million of
cash primarily for additions to properties and equipment which was comprised of
approximately $3.8 million in capitalized repairs and maintenance and $105.4
million for the construction of offshore marine vessels and the acquisition of
two deepwater anchor-handling towing supply vessels. Investing activities for
the quarter ended June 2000 had no unusual activity. Financing activities for
the quarters ended June 30, 2001 and 2000 each included $8.4 million of cash for
quarterly cash dividends of $.15 per share.
On January 10, 2001 the company entered into agreements with three shipyards for
the construction of 12 vessels. The new-build program was initiated in order to
better service the needs of the company's customers in the deepwater markets of
the world. Seven of the vessels to be constructed are large platform supply
vessels and five are large anchor-handling towing supply vessels capable of
working in most deepwater markets of the world. Four of the platform supply
vessels are being constructed at the company's shipyard, Quality Shipyards LLC,
while the remaining eight vessels are being constructed at two Far East
shipyards. The four vessels being constructed at Quality Shipyards LLC are
being built to full Jones Act compliance. As of June 30, 2001, $71.1 million
has been expended on these 12 vessels of the total $315 million commitment to
the shipyards. Scheduled delivery of the vessels will commence in December 2001
with final delivery of the last vessel expected in January 2003. The company
expects to finance the new-build program from its current cash balances, its
projected cash flow and its revolving line of credit.
In addition to the new-build program discussed above, the company has committed
to the construction of three additional vessels for a total of approximately $22
million. These vessels consist of one large platform supply vessel under
construction in Norway with an expected delivery date of September 2001 and two
large crewboats being built at U.S. shipyards to be delivered in August 2001 and
January 2002. As of June 30, 2001, $4.6 million has been expended on these
vessels.
On July 17, 2001 the company entered into an agreement with a U.S. shipyard for
the construction of four 175-foot crewboats for approximately $23.6 million.
Scheduled delivery of the vessels is expected to commence in October 2002 with
final delivery of the last vessel in October 2003.
13
CURRENCY FLUCTUATIONS AND INFLATION
- -----------------------------------
Because of its significant international operations, the company is exposed to
currency fluctuations and exchange risk. To minimize the financial impact of
these items the company attempts to contract a majority of its services in
United States dollars. The company is exposed to possible currency fluctuations
related to its commitment to construct three of its new-build platform supply
vessels at a Singapore shipyard. The company is required, per the construction
agreements, to make all payments in Singapore dollars and is currently exposed
to possible currency fluctuations on the remaining commitment which totals a
current U.S. dollar equivalent of approximately $43 million. The company
continually monitors the currency exchange risks associated with all contracts
in foreign currencies.
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 shield 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
that 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. The company is
proactive in establishing policies and operating procedures for safeguarding the
environment against any environmentally hazardous material aboard its vessels
and at shore base locations. Whenever possible, hazardous materials are
maintained or transferred in confined areas to ensure containment if accidents
occur. In addition the company has established operating policies that are
intended to increase awareness of actions that may harm the environment.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
---------------------------------------------------------
No change from 2001 annual report disclosure.
14
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's report on Form 8-K dated April 11, 2001 reported that the
company took delivery of three new vessels - one platform supply vessel and
two anchor-handling towing supply vessels specifically designed and
equipped for deep water work.
C. The company's report on Form 8-K dated April 19, 2001 reported that the
company press released its fiscal 2001 fourth quarter earnings and released
the date and time for its fourth quarter earnings conference call.
15
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 26, 2001 /s/ William C. O'Malley
-------------------------------------
William C. O'Malley
Chairman of the Board, President and
Chief Executive Officer
Date: July 26, 2001 /s/ J. Keith Lousteau
-------------------------------------
J. Keith Lousteau
Senior Vice President and Chief Financial Officer
Date: July 26, 2001 /s/ Joseph M. Bennett
-------------------------------------
Joseph M. Bennett
Vice President and Corporate Controller
(Principal Accounting Officer)
16
EXHIBIT INDEX
Exhibit
Number
- ------
15 Letter re Unaudited Interim Financial Information
17