SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 - For the Quarterly Period Ended DECEMBER 31, 1994
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)
1440 Canal Street, Suite 2100, New Orleans, Louisiana 70112
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (504) 568-1010
NOT APPLICABLE
Former name, former address and former fiscal year, if changed since
last report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or of such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
------------- -----------
53,210,772 shares of Tidewater Inc. common stock $.10 par value per share were
outstanding on January 24, 1995. Registrant has no other class of common stock
outstanding.
1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TIDEWATER INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
- -------------------------------------------------------------------------------
December 31, March 31,
ASSETS 1994 1994
- ----------------------------------------------------------------------------------
Current assets:
Cash, including temporary cash investments $ 19,903 106,788
Trade and other receivables 145,075 140,627
Inventories 42,220 34,561
Other current assets 4,143 4,440
- --------------------------------------------------------------------------------
Total current assets 211,341 286,416
- --------------------------------------------------------------------------------
Investments in, at equity, and advances to
unconsolidated companies 21,315 21,843
Properties and equipment 1,478,572 1,286,245
Less accumulated depreciation 860,329 838,067
- --------------------------------------------------------------------------------
Net properties and equipment 618,243 448,178
Other assets 75,999 53,449
- --------------------------------------------------------------------------------
$ 926,898 809,886
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
Current liabilities:
Convertible subordinated debentures redeemed
on April 18, 1994 --- 47,526
Current maturities of other long-term debt 14,028 2,730
Accounts payable and accrued expenses 76,283 69,804
Income taxes 9,685 10,230
- --------------------------------------------------------------------------------
Total current liabilities 99,996 130,290
- --------------------------------------------------------------------------------
Deferred income taxes 52,535 45,099
Long-term debt 118,773 1,952
Accrued property and liability losses 32,996 36,163
Other liabilities and deferred credits 42,360 39,421
Stockholders' equity:
Common stock of $.10 par value; issued 53,191,783
shares at December and 53,022,955 shares at March 5,319 5,302
Additional paid-in capital 334,442 331,690
Retained earnings 252,532 231,001
- --------------------------------------------------------------------------------
592,293 567,993
Less:
Cumulative foreign currency translation adjustment 10,456 11,032
Deferred compensation - restricted stock 1,599 ---
- --------------------------------------------------------------------------------
Total stockholders' equity 580,238 556,961
Commitments and other matters (Note 6)
- --------------------------------------------------------------------------------
$ 926,898 809,886
================================================================================
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)
- ---------------------------------------------------------------------------------------------------------
Quarter Ended Nine Months Ended
December 31, December 31,
- ---------------------------------------------------------------------------------------------------------
1994 1993 1994 1993
- ---------------------------------------------------------------------------------------------------------
Revenues:
Marine operations $ 114,382 118,971 348,448 354,946
Compression operations 21,559 14,002 52,071 41,353
- ---------------------------------------------------------------------------------------------------------
135,941 132,973 400,519 396,299
- ---------------------------------------------------------------------------------------------------------
Costs and expenses:
Marine operations 72,506 69,313 216,882 216,028
Compression operations 11,317 7,095 28,826 22,523
Depreciation 21,830 20,889 62,605 62,579
General and administrative 15,549 15,956 45,531 46,319
- ---------------------------------------------------------------------------------------------------------
121,202 113,253 353,844 347,449
- ---------------------------------------------------------------------------------------------------------
14,739 19,720 46,675 48,850
Other income (expenses):
Foreign exchange gain (loss) 383 (362) (133) (627)
Gains on sales of assets 6,076 1,578 10,547 4,295
Equity in net earnings of
unconsolidated companies 555 736 2,499 1,889
Minority interests (490) (707) (1,182) (1,977)
Other expense (2,500) (953) (2,500) (1,253)
Interest and miscellaneous income 961 1,982 5,214 5,284
Interest expense (1,228) (1,476) (1,876) (6,736)
- ---------------------------------------------------------------------------------------------------------
3,757 798 12,569 875
- ---------------------------------------------------------------------------------------------------------
Earnings before income taxes 18,496 20,518 59,244 49,725
Income taxes 6,798 6,976 21,778 18,827
- ---------------------------------------------------------------------------------------------------------
Earnings before extraordinary item 11,698 13,542 37,466 30,898
Extraordinary loss on early
extinguishment of debt
(net of income taxes) --- --- --- (4,450)
- ---------------------------------------------------------------------------------------------------------
Net earnings $ 11,698 13,542 37,466 26,448
=========================================================================================================
Primary and fully-diluted
earnings per common share:
Earnings before extraordinary item $ .22 .25 .70 .58
Extraordinary item --- --- --- (.08)
- ---------------------------------------------------------------------------------------------------------
Net earnings $ .22 .25 .70 .50
=========================================================================================================
Weighted average common
shares and equivalents 53,413,280 53,313,262 53,407,630 53,321,900
=========================================================================================================
Cash dividends declared
per common share $ .10 .10 .30 .20
=========================================================================================================
See Notes to Unaudited Condensed Consolidated Financial Statements.
3
TIDEWATER INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
- -------------------------------------------------------------------------------------------------------------------------
Quarter Ended Nine Months Ended
December 31, December 31,
--------------------- -----------------
1994 1993 1994 1993
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities $ 39,069 39,636 105,213 95,060
- -------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sales of assets 8,755 3,112 17,273 10,366
Additions to properties and equipment (12,171) (17,897) (36,567) (44,831)
Acquisition of Compression assets
(Note 3) (205,146) --- (240,146) ---
Investments in unconsolidated companies,
net of dividends received 534 357 3,402 (1,457)
Investment from minority interests,
net of dividends paid (197) (336) (1,852) (1,876)
- -------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (208,225) (14,764) (257,890) (37,798)
- -------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 150,000 --- 150,000 ---
Principal payments on long-term debt (20,643) (10,268) (68,547) (64,362)
Prepayment penalty on early
extinguishment of debt --- --- --- (6,473)
Cash dividends paid (5,318) (5,295) (15,934) (15,878)
Other 65 (95) 273 463
- -------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities 124,104 (15,658) 65,792 (86,250)
- -------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash,
including temporary cash investments (45,052) 9,214 (86,885) (28,988)
- -------------------------------------------------------------------------------------------------------------------------
Cash, including temporary cash investments
at beginning of period 64,955 70,767 106,788 108,969
- -------------------------------------------------------------------------------------------------------------------------
Cash, including temporary cash investments
at end of period $ 19,903 79,981 19,903 79,981
=========================================================================================================================
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest 596 2,505 2,254 7,984
Income taxes $ 2,268 2,332 15,041 11,020
=========================================================================================================================
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) Earnings Per Share
Primary and fully diluted earnings per share are computed on the weighted
average number of shares and dilutive equivalent shares of common stock
(stock options and restricted stock grants) outstanding during each period
using the treasury stock method.
(3) Acquisition of Compression Assets
On September 30, 1994 the company purchased for $35 million in cash the
assets of Brazos Gas Compressing Company, a subsidiary of Mitchell Energy &
Development Corporation. On November 30, 1994 the company purchased the
natural gas compression assets of Halliburton Company using $55 million of
available cash and borrowings of $150 million. The costs of these
acquisitions were allocated under the purchase method of accounting based on
the fair value of the assets acquired. In connection with the purchase of
the natural gas compression assets of Halliburton Company, goodwill of
approximately $25 million was recorded as other assets in the Condensed
Consolidated Balance Sheet and will be amortized in equal charges to
earnings over a 15-year period.
The results of Brazos' and Halliburton's operations have been consolidated
with the Company's effective October 1, 1994 and December 1, 1994,
respectively. Pro forma combined results of operations of the Company and of
Brazos and Halliburton, including appropriate purchase accounting
adjustments for the quarter and nine-month periods ended December 31, 1994
and 1993, as though the acquisitions had taken place on April 1 of the
respective fiscal years, are as follows:
(In thousands, except per share data)
-----------------------------------------------------
Quarter ended Nine months ended
December 31, December 31,
-------------------- ----------------------
1994 1993 1994 1993
-----------------------------------------------------
Revenues $146,736 147,422 441,688 438,899
====================================================================================
Earnings before
extraordinary item $ 9,728 12,238 30,783 27,023
====================================================================================
Net earnings $ 9,728 12,238 30,783 22,573
====================================================================================
Primary and fully diluted
earnings per common share $ .18 .23 .58 .42
====================================================================================
5
The $150 million of debt incurred to finance the Halliburton acquisition was
borrowed pursuant to a $250 million amended and restated Revolving Credit
and Term Loan Agreement with several banks. It bears interest at fluctuating
rates subject to certain options chosen in advance by the Company. The
effective interest rate on the indebtedness at December 31, 1994 was 7.59%
per annum.
(4) Change in Estimated Salvage Value
During the quarter ended December 31, 1994 the estimated salvage value used
to determine depreciation expense for natural gas compressors was raised
from 12 1/2% to 30% to better reflect the estimated value of this equipment
at the end of its estimated service life. The increase in salvage value
resulted from an internal review following the recent acquisitions of a
substantial number of natural gas compressors. This change in accounting
estimate did not materially affect earnings before extraordinary item, net
earnings or earnings per share for the current quarter.
(5) 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 was
37% for the quarter and nine-month period ended December 31, 1994. For the
nine-month period ended December 31, 1993 additional income tax expense of
approximately $1.9 million was recorded for the revaluation of deferred tax
assets and liabilities at the higher statutory income tax rates contained in
the Omnibus Budget Reconciliation Act passed by Congress in August 1993. The
effective tax rate for the quarter and nine-month period ended December 31,
1993, exclusive of the $1.9 million of additional income tax expense, was
34%.
(6) Commitments and Other Matters
An employment agreement exists with the company's chairman of the board,
president and chief executive officer whereby he will serve in such capacity
for three years. The terms of the employment agreement provide for an annual
base salary and certain other benefits. Subsequent to the 1994 annual
stockholder's meeting on October 20, 1994 and in accordance with the terms
of his employment agreement, 70,000 shares of restricted common stock of the
company were granted to the chairman of the board. These restricted shares
vest at varying intervals when the average sales price of the common stock
reaches certain predetermined levels. The fair market value of the stock at
the time of the grant was classified in stockholders' equity as deferred
compensation-restricted stock and will be amortized by equal monthly charges
to earnings over approximately seven years. A consulting agreement exists
with the company's former chairman of the board and chief executive officer
whereby he will serve as a consultant to the company for a three year
period. The terms of the consulting agreement provide, among other things,
for an annual consulting fee. Compensation continuation agreements exist
with all other officers of Tidewater Inc., whereby each receives
compensation and benefits in the event that their employment is terminated
following certain events relating to a change in control of the company. The
maximum compensation amount that could be paid under the compensation
continuation agreements, based on present salary levels, is
6
approximately $6,230,000. The amount that could be paid for certain benefits
is not presently determinable.
(7) Segment Information
Revenues and operating profits for the company's business segments are as
follows:
(In thousands)
- --------------------------------------------------------------------
Quarter Ended Nine Months Ended
December 31, December 31,
------------------- -----------------
1994 1993 1994 1993
- --------------------------------------------------------------------
Revenues:
Marine $114,382 118,971 348,448 354,946
Compression 21,559 14,002 52,071 41,353
- --------------------------------------------------------------------
$135,941 132,973 400,519 396,299
====================================================================
Operating profit:
Marine:
From operations $ 14,296 20,917 48,050 52,980
Gain on sales of
assets 5,833 969 9,627 2,958
Unusual item --- --- 1,700 ---
- --------------------------------------------------------------------
Total Marine
operating profit $ 20,129 21,886 59,377 55,938
====================================================================
Compression:
From operations 3,964 2,277 7,726 5,045
Gain on sales of
assets 243 627 920 1,357
Unusual item --- (953) --- (953)
- --------------------------------------------------------------------
Total Compression
operating profit $ 4,207 1,951 8,646 5,449
====================================================================
The $ 1.7 million unusual item is related to refunds received from the
settlement of property tax disputes related to prior years. The settlement
amount is included in interest and miscellaneous income in the Condensed
Consolidated Statement of Earnings for the nine-month period ended December
31, 1994. See note (8) Other Expense for explanation of the unusual item
included in Compression operating profit during the quarter ended December
31, 1993.
(8) Other Expense
For the quarter ended December 31, 1994 other expense of $2,500,000 is for
reserves to cover potential losses due to the insolvency of certain of the
company's insurers. For the quarter ended December 31, 1993 other expense of
$953,000 is for severance costs associated with the early retirement of
several employees of the Compression segment following a reorganization of
Compression management.
(9) Corporate Restructuring
In January 1995 the company began a corporate restructuring. The first phase
was implemented on January 5 and resulted in the elimination of several
positions in the headquarters' office. The second phase of the restructuring
involves the streamlining of marine operations at U.S. and
7
foreign locations and is expected to be completed by the end of the fiscal
year. A non-recurring charge relating to the full restructuring will be made
in the fourth quarter ending March 31, 1995. The amount of such charge is
not reasonably estimated at this time.
INDEPENDENT AUDITORS' REPORT
- ----------------------------
The Board of Directors and Shareholders of Tidewater Inc.:
We have reviewed the condensed consolidated balance sheet of Tidewater Inc. and
subsidiaries as of December 31, 1994 and the related condensed consolidated
statements of earnings and cash flows for the three-month and nine-month periods
ended December 31, 1994 and 1993. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Tidewater Inc. as of March 31,
1994, 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 May 5, 1994 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, 1994 is fairly
presented, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
KPMG PEAT MARWICK LLP
New Orleans, Louisiana
January 23, 1995
8
MANAGEMENT'S DISCUSSION AND ANALYSIS
This discussion and analysis of financial position and results of operations
should be read in conjunction with the unaudited condensed consolidated
financial statements and the related disclosures.
Operating performance for the third quarter of fiscal 1995 remained strong.
However, Marine results were adversely impacted by lower daily charter rates
compared with year-ago levels for vessels working in the United States. On
September 30, 1994 the company purchased for $35 million in cash the assets of
Brazos Gas Compressing Company, a subsidiary of Mitchell Energy & Development
Corporation. On November 30, 1994 the company purchased the natural gas
compression assets of Halliburton Company using $55 million of available cash
and borrowings of $150 million. The discussion following includes the results
of these assets as of October 1, 1994 for Brazos and as of December 1, 1994, for
Halliburton.
LIQUIDITY AND CAPITAL RESOURCES
Fiscal 1995 nine-month operating activities generated cash of approximately
$10.2 million in excess of amounts generated for the corresponding period of
fiscal 1994. The increase in cash for the nine-month period ended December 31,
1994 is primarily the result of higher Compression operating margins and higher
collections of accounts receivable.
Investing activities for the three-month and nine-month periods ended December
31, 1994 rose significantly above corresponding amounts invested during the
three-month and nine-month periods ended December 31, 1993. The principal
reason for the increase over prior year levels is the acquisition of the natural
gas compression assets of Halliburton Company in the current quarter for
approximately $205 million and the acquisition of the assets of Brazos Gas
Compressing Company for approximately $35 million on September 30, 1994.
Additions to properties and equipment, excluding the Brazos and Halliburton
acquisitions, and proceeds from sales of assets for the quarters and nine-month
periods ended December 31 by business segment are compared below:
(In thousands)
- -----------------------------------------------------------------------------------
Quarter Ended Nine Months Ended
December 31, December 31,
--------------- -----------------
1994 1993 1994 1993
- -----------------------------------------------------------------------------------
Additions to property and equipment:
Marine $ 7,682 14,618 25,336 25,562
Compression 4,401 3,210 10,925 18,969
General Corporate 88 69 306 300
- -----------------------------------------------------------------------------------
$12,171 17,897 36,567 44,831
===================================================================================
Proceeds from sales of assets:
Marine equipment 7,866 1,575 15,078 7,086
Compression equipment 889 1,537 2,195 3,280
- -----------------------------------------------------------------------------------
$ 8,755 3,112 17,273 10,366
===================================================================================
9
Marine additions for the three-month period ended December 31, 1994 were for
modifying existing equipment to meet operating requirements. Compression
additions for the current quarter are for modifying existing equipment and
include the purchase of six used compressors for approximately $2.1 million.
Third quarter fiscal 1994 Marine additions include the purchase of an offshore
barge and a towing-supply vessel for approximately $9.4 million. Compression
additions for the quarter ended December 31, 1993 include the purchase of
several natural gas compressors for approximately $1.6 million. The remainder of
Marine and Compression additions for the fiscal 1994 third quarter were
primarily for modifying existing equipment. Because current economic conditions
generally do not produce an adequate return on investment relative to the costs
of new construction, expansion of the Marine vessel fleet for the most part,
will continue to come from existing excess industry supplies.
Current quarter financing activities provided net cash of approximately $124.1
million primarily due to borrowing $150 million to finance the Halliburton
acquisition. The borrowing was under a $250 million amended and restated
Revolving Credit and Term Loan Agreement with several banks and bears interest
at fluctuating rates subject to certain options chosen in advance by the
Company. In addition to normal scheduled debt repayments, current quarter
principal payments on long-term debt include approximately $20 million of
prepayments on the debt borrowed to finance the Halliburton acquisition. For
the quarter ended December 31, 1993 principal payments include approximately
$9.0 million for the termination of capitalized leases on five marine service
vessels. Year-to-date fiscal 1995 and 1994 principal payments include
approximately $66 million and $60 million, respectively, of long-term debt
retired prior to maturity.
Continued dividend payments are subject to declaration by the Board of Directors
and are subject to limitation by the Company's revolving credit and term loan
agreement.
During the quarter the estimated salvage value used to determine depreciation
expense for natural gas compressors was raised from 12-1/2% to 30% to better
reflect the estimated value of this equipment at the end of its estimated
service life. The increase in salvage value resulted from an internal review
following the recent acquisitions of a substantial number of natural gas
compressors. This change in accounting estimate did not materially affect
earnings before extraordinary item, net earnings or earnings per share for the
current quarter.
10
RESULTS OF OPERATIONS
Revenues and operating profits by business segment and by geographic location
for the quarters and nine-month periods ended December 31 and for the quarter
ended September 30, 1994 are:
(In thousands)
- -----------------------------------------------------------------------------------------
Quarter
Quarter Ended Nine Months Ended Ended
December 31, December 31, Sept. 30,
------------------- ------------------- ---------
1994 1993 1994 1993 1994
- -----------------------------------------------------------------------------------------
Revenues:
Marine:
Vessel:
Domestic owned or chartered $ 46,242 49,246 136,983 134,294 45,205
Foreign owned or chartered 59,407 66,020 185,921 208,560 62,224
- -----------------------------------------------------------------------------------------
105,649 115,266 322,904 342,854 107,429
Brokered vessels 3,382 2,909 9,522 8,109 3,271
Shipyard sales 5,351 796 16,022 3,983 4,948
- -----------------------------------------------------------------------------------------
Total Marine revenues 114,382 118,971 348,448 354,946 115,648
Compression 21,559 14,002 52,071 41,353 15,599
- -----------------------------------------------------------------------------------------
$135,941 132,973 400,519 396,299 131,247
=========================================================================================
Operating profit (loss):
Marine:
Vessel:
Domestic owned or chartered 8,661 12,514 25,982 25,911 7,164
Foreign owned or chartered 4,723 8,328 21,826 27,159 8,451
- -----------------------------------------------------------------------------------------
13,384 20,842 47,808 53,070 15,615
Shipyard 912 75 1,942 (90) 929
Gains on asset sales 5,833 969 9,627 2,958 1,517
- -----------------------------------------------------------------------------------------
Total Marine operating profit 20,129 21,886 59,377 55,938 18,061
Compression 4,207 1,951 8,646 5,449 2,657
Other income 1,016 877 3,650 3,363 1,637
Other expense (2,500) --- (2,500) --- ---
General corporate expenses (3,128) (2,720) (8,053) (8,289) (2,620)
Interest expense (1,228) (1,476) (1,876) (6,736) (241)
- -----------------------------------------------------------------------------------------
Pre-tax earnings 18,496 20,518 59,244 49,725 19,494
Income taxes (6,798) (6,976) (21,778) (18,827) (7,167)
- -----------------------------------------------------------------------------------------
Earnings before extraordinary
item 11,698 13,542 37,466 30,898 12,327
Extraordinary item --- --- --- (4,450) ---
- -----------------------------------------------------------------------------------------
Net earnings $ 11,698 13,542 37,466 26,448 12,327
=========================================================================================
Consolidated revenues for the current quarter were consistent with consolidated
revenues for the quarter ended December 31, 1993. Pre-tax earnings, however,
fell approximately 10% principally due to lower Marine operating profit and
other expense, partially offset by higher Compression operating profit. Marine
operating profit dropped below the fiscal 1994 third quarter amount primarily
because of lower utilization of the domestic-based vessel fleet coupled with a
significant reduction in the size of the foreign-based vessel fleet. Other
expense is for reserves to cover potential losses due to the insolvency of
certain of the company's insurers. Higher Compression operating profit is
primarily due to a significantly larger natural gas compressor fleet.
Compression operating profit for the quarter ended December 31, 1993 includes a
$953,000 charge for severance
11
costs resulting from the early retirement of several Compression employees
following a reorganization of Compression management.
Nine-month fiscal 1995 consolidated revenues rose modestly while pre-tax
earnings grew 19.1% above the respective amounts for the corresponding periods
of fiscal 1994. In addition to the current quarter items discussed above,
fiscal 1995 year-to-date pre-tax earnings were positively affected by
considerably higher gains on sales of Marine assets and substantially lower
interest expense compared with the fiscal 1994 year-to-date period. Lower
interest expense resulted from the significant amount of debt retired prior to
maturity in prior periods. Fiscal 1995 year-to-date pre-tax earnings also
include a one-time gain of approximately $1.7 million from the settlement of
prior years' property tax disputes. Income taxes for the fiscal 1994 nine-month
period include additional expense of approximately $1.9 million for the
revaluation of deferred tax assets and liabilities at the higher statutory
income tax rates contained in new income tax laws enacted in fiscal 1994. The
extraordinary item for the nine-month period ended December 31, 1993 resulted
from the early extinguishment of $51.1 million of long-term debt. The
extraordinary item consists of a $4.2 million after-tax prepayment penalty and
the write-off of associated deferred finance costs of $.3 million.
Current quarter consolidated revenues rose approximately 4% above the prior
quarter amount in contrast to the approximately 5% drop in pre-tax earnings
compared to the prior quarter amount. Higher Marine and Compression operating
profits offset entirely by higher interest expense and a $2.5 million charge to
cover potential losses from certain of the company's insurers were the primary
reasons for the decrease in current quarter pre-tax earnings. Higher Marine
operating profit is principally the result of significantly higher gains from
asset sales partially reduced by lower operating profit for the foreign-based
vessel fleet. Higher Compression operating profit is primarily due to a much
larger fleet of natural gas compressors. Higher interest expense resulted from
approximately $150 million of new debt borrowed in connection with the
Halliburton acquisition.
The substantial increase in shipyard revenue and operating profit for the
current quarter and nine-month period above the corresponding fiscal 1994
periods is principally due to the construction of vessels for third parties.
General and administrative expenses for the quarters and nine-month periods
ended December 31 and for the quarter ended September 30, 1994 consist of the
following:
(In thousands)
- ----------------------------------------------------------------------------
Quarter
Quarter Ended Quarter Ended Ended
December 31, December 31, Sept. 30,
---------------- ----------------- ---------
1994 1993 1994 1993 1994
- ----------------------------------------------------------------------------
Type:
Personnel $ 9,315 9,439 27,808 28,602 9,446
Office and property 2,277 2,198 6,856 6,893 2,217
Sales and marketing 1,004 1,069 2,942 3,099 885
Professional services 906 1,188 2,465 3,398 733
Other 2,047 2,062 5,460 4,327 1,430
- ----------------------------------------------------------------------------
$15,549 15,956 45,531 46,319 14,711
============================================================================
12
Other general and administrative expense for the current quarter and nine-month
period include a $600,000 contribution to a state university to establish a sea-
grant fund. The remainder of the increase in fiscal 1995 year-to-date other
general and administrative expenses is primarily due to higher reserves for
uncollectible accounts. Personnel costs for the quarter and nine-month period
ended December 31, 1993 include approximately $104,000 to settle former Zapata
Gulf employee union claims in Nigeria. In addition, fiscal 1994 nine-month
personnel costs include approximately $540,000 of severance payments to former
Zapata Gulf employees in Nigeria. Fiscal 1994 third quarter professional
services include approximately $250,000 of costs associated with a secondary
stock offering. Fiscal 1994 year-to-date professional services include
approximately $587,000 of costs associated with two secondary stock offerings.
MARINE SEGMENT
The marine segment provides a diverse range of services and equipment to the
offshore oil and gas industry. Because operating costs and depreciation do not
change proportionally with changes in revenues, the amount of operating profit
for the Marine segment is primarily determined by vessel fleet utilization and
day rates. Operating margins from brokered vessel activity contribute nominally
to Marine operating profit.
Marine fleet utilization is affected primarily by market conditions. It is also
influenced to a lesser degree by drydockings to satisfy safety and inspection
requirements because marine vessels must undergo periodic inspections to remain
properly classified and certified. These inspections, whenever possible, are
done during seasonally slow periods to minimize the impact on vessel operations
and are only done if the vessel is considered to have continuing economic
viability. The following table compares day-based Marine fleet utilization
percentages by vessel class and in total for the quarters and nine-month periods
ended December 31 and for the quarter ended September 30, 1994:
Quarter
Quarter Ended Nine Months Ended Ended
December 31, December 31, Sept. 30,
-------------- ----------------- ---------
1994 1993 1994 1993 1994
- ----------------------------------------------------------------------------
UTILIZATION:
Domestic-based fleet:
Towing Supply/Supply 88.0% 93.1% 86.3% 92.9% 86.3%
Crew/Utility 88.9% 92.8% 90.9% 92.8% 92.9%
Offshore Tugs 58.5% 68.8% 62.7% 66.8% 63.9%
Other 58.9% 72.5% 53.9% 72.7% 50.9%
Total 79.1% 85.1% 79.6% 84.5% 80.0%
Foreign-based fleet:
Towing Supply/Supply 78.2% 76.2% 80.7% 78.1% 81.7%
Crew/Utility 81.9% 73.7% 76.5% 73.0% 74.5%
Offshore Tugs 72.7% 76.4% 74.9% 79.1% 71.3%
Other 43.0% 72.9% 47.0% 73.0% 42.0%
Total 71.5% 75.3% 73.2% 76.7% 72.2%
Worldwide fleet:
Towing Supply/Supply 81.5% 81.6% 82.6% 82.6% 83.3%
Crew/Utility 85.9% 83.6% 84.5% 83.0% 84.8%
Offshore Tugs 65.4% 72.6% 68.8% 73.1% 67.5%
Other 46.3% 72.8% 48.4% 72.9% 43.8%
Total 74.5% 79.0% 75.7% 79.5% 75.2%
============================================================================
13
The domestic fleet consists of vessels operating in U.S. waters while the
foreign fleet consist of vessels operating outside U.S. waters.
Current quarter and nine-month utilization of the domestic-based vessel fleet
dropped below the corresponding year ago levels because of lower demand for
offshore marine services in the U.S. Gulf of Mexico. Fiscal 1995 third quarter
domestic fleet utilization did not materially change from the prior quarter
because of continued demand for offshore marine services despite reduced U.S.
natural gas prices. Demand for offshore marine services in the U.S. Gulf of
Mexico and, in turn, utilization levels for the domestic-based vessel fleet,
could be adversely affected if low U.S. natural gas prices persist. Lower
utilization of a smaller foreign-based vessel fleet for the current quarter and
nine-month period compared with the respective fiscal 1994 periods is primarily
due to significantly lower utilization of the inland towing fleet in Nigeria.
Lower fiscal 1995 third quarter utilization of the foreign-based vessel fleet
compared with the prior quarter is primarily a combination of the normal
seasonal slowdown in offshore activity in certain foreign areas and a greater
number of vessel drydockings.
Marine vessel day rates are primarily determined by the demand created through
the level of offshore exploration, development and production spending by energy
exploration and production companies. Suitability of equipment, the degree of
service provided and the overall supply of marine service vessels also influence
vessel day rates. The following table provides a comparison of average vessel
day rates by class and in total for the quarters and nine-month periods ended
December 31 and for the quarter ended September 30, 1994:
Quarter
Quarter Ended Nine Months Ended Ended
December 31, December 31, Sept. 30,
-------------- ----------------- ----------
1994 1993 1994 1993 1994
- ----------------------------------------------------------------------------
AVERAGE VESSEL DAY RATES:
Domestic-based fleet:
Towing Supply/Supply $ 3,449 3,711 3,548 3,468 3,458
Crew/Utility 1,295 1,250 1,272 1,221 1,250
Offshore Tugs 5,012 4,222 4,534 4,244 4,486
Other 2,883 1,867 2,922 1,763 2,971
Total $ 3,097 3,016 3,074 2,874 3,014
Foreign-based fleet:
Towing Supply/Supply $ 3,556 3,696 3,593 3,676 3,616
Crew/Utility 1,716 1,677 1,740 1,719 1,752
Offshore Tugs 2,432 2,827 2,551 2,983 2,416
Other 896 540 785 547 789
Total $ 2,852 2,768 2,870 2,808 2,917
Worldwide fleet:
Towing Supply/Supply $ 3,517 3,701 3,577 3,605 3,560
Crew/Utility 1,466 1,432 1,461 1,437 1,445
Offshore Tugs 3,616 3,494 3,459 3,547 3,421
Other 1,420 903 1,254 874 1,313
Total $ 2,954 2,868 2,953 2,834 2,957
==========================================================================
The domestic fleet consists of vessels operating in U.S. waters while the
foreign fleet consist of vessels operating outside U.S. waters.
14
Average day rates for the domestic-based vessel fleet for the current quarter
rebounded to a level slightly above the fiscal 1995 second quarter and fiscal
1994 third quarter levels. This modest increase can primarily be attributed to
the different mix of vessels working. Lower fiscal 1995 third quarter average
day rates for the foreign-based vessel fleet compared with the prior quarter are
principally due to lower demand for offshore marine services in certain foreign
locations brought about by the normal calendar year-end slowdown of offshore
activity. Higher average day rates for the foreign-based vessel fleet for the
three-month period ended December 31, 1994 compared to the corresponding period
of fiscal 1994 are primarily due to the mix of vessels working in certain
foreign locations.
The following tables compare the average number of vessels by class and by
geographic location during the quarters and nine-month periods ended December 31
and for the quarter ended September 30, 1994 and the actual December 31, 1994
vessel count:
Average number of vessels during
Actual --------------------------------
vessel Quarter Nine Months Quarter
count at Ended Ended Ended
December 31, December 31, December 31, Sept. 30,
- -----------------------------------------------------------------------------
Domestic-based fleet: 1994 1994 1993 1994 1993 1994
- --------------------- ------ ------ ------ ------ ------ -------
Towing Supply/Supply 92 91 89 93 85 91
Crew/Utility 50 50 48 49 46 49
Offshore Tugs 47 49 48 48 47 49
Other 14 15 23 14 23 15
- -----------------------------------------------------------------------------
Total 203 205 208 204 201 204
- -----------------------------------------------------------------------------
Foreign-based fleet:
- --------------------
Towing Supply/Supply 173 176 190 176 195 179
Crew/Utility 38 38 45 40 45 39
Offshore Tugs 46 46 48 47 49 46
Other 57 57 62 58 63 57
- -----------------------------------------------------------------------------
Total 314 317 345 321 352 321
- -----------------------------------------------------------------------------
Owned or chartered
vessels included in
marine revenues 517 522 553 525 553 525
Vessels withdrawn
from active service 17 16 13 17 12 17
Joint venture owned
vessels 43 43 43 43 43 43
- -----------------------------------------------------------------------------
Total 577 581 609 585 608 585
=============================================================================
Worldwide fleet:
- ----------------
Towing Supply/Supply 305 306 313 308 314 309
Crew/Utility 93 93 100 95 98 93
Offshore Tugs 95 97 98 97 98 97
Other 84 85 98 85 98 86
- -----------------------------------------------------------------------------
Total 577 581 609 585 608 585
=============================================================================
The drop in the average size of the foreign-based vessel fleet from 345 a year
ago to the current 317 is primarily due to several vessels being withdrawn from
active service due to age and anticipated high repair and maintenance costs, the
transfer of vessels to the domestic-based vessel fleet and the return of vessels
to their owners which could not be operated profitably under current market
conditions. As
15
the Marine vessel fleet ages additional vessels may be withdrawn from active
service.
The following table compares major components of Marine operating costs and
compares selected statistics for owned and chartered vessels for the quarters
and nine-month periods ended December 31 and for the quarter ended September 30,
1994:
(In thousands)
- -------------------------------------------------------------------------------
Quarter
Quarter Ended Nine Months Ended Ended
December 31, December 31, Sept. 30,
--------------- ----------------- ----------
1994 1993 1994 1993 1994
- -------------------------------------------------------------------------------
Crew costs $ 31,315 33,294 95,872 101,491 32,576
Repair and maintenance 16,174 16,144 47,066 52,530 15,200
Vessel insurance 7,734 6,413 22,688 18,921 7,300
Fuel, lube, and supplies 5,187 5,236 15,153 16,441 5,188
Other 4,543 4,966 13,220 15,346 4,464
- -------------------------------------------------------------------------------
Total operating costs
of owned or chartered
vessels 64,953 66,053 193,999 204,729 64,728
Brokered vessels costs 3,206 2,633 8,818 7,471 3,075
Shipyard costs 4,347 627 14,065 3,828 4,164
- -------------------------------------------------------------------------------
$ 72,506 69,313 216,882 216,028 71,967
===============================================================================
For owned or chartered
vessels:
Overall percentage
increase (decrease) in
operating costs from
same period of prior
fiscal year (1.7%) (1.0%) (5.2%) 9.6% (6.2%)
===============================================================================
Operating costs as a
percentage of
related revenues 61.5% 57.3% 60.0% 59.7% 60.3%
===============================================================================
Changes in fleet size and utilization are the principal factors which cause
fluctuations in the amount of crew costs. Fiscal 1995 crew costs for the
current quarter and nine-month period fell below year ago levels primarily due
to a reduction in average fleet size and lower vessel activity for the domestic-
based vessel fleet. Lower crew costs in the current quarter compared with the
prior quarter is a result of significantly lower seamen's benefit costs. Lower
seamen's benefit costs resulted from a reduction in reserves for the company's
medical plan due to lower than expected claims costs. The absence of
significant new vessel construction within the energy services industry over the
past 10 to 12 years has caused the average age of the Company's Marine vessel
fleet to rise. Currently the average age of the Company's Marine vessel fleet
is approximately 16 years. Though primarily dictated by regulatory agencies,
the scheduling of vessel drydockings together with the age of the vessels
affects the amount of repair and maintenance expense in any period. Vessel
drydockings, whenever possible, are scheduled to minimize any impact on
revenues. Higher vessel insurance costs for the current quarter and nine-month
period are, in part, the result of a much tougher insurance market which is
unwilling to provide past levels of coverage at the rates experienced in prior
periods.
16
COMPRESSION SEGMENT
The Compression segment provides natural gas compression services and equipment
for a variety of applications primarily in the oil and gas and petrochemical
industries. It also designs, fabricates and installs engineered compressor
systems. Compression operating profit is primarily determined by operating
margins for rental revenues.
Compression segment revenues are compared in the following table on a dollar
basis and as a percentage of total Compression revenues for the quarters and
nine-month periods ended December 31 and for the quarter ended September 30,
1994:
(In thousands)
- ---------------------------------------------------------------------------------
Quarter
Quarter Ended Nine Months Ended Ended
December 31, December 31, Sept. 30,
----------------- ------------------- ---------
1994 1993 1994 1993 1994
- ---------------------------------------------------------------------------------
Gas Compressor rental $13,517 8,067 29,693 22,719 8,150
Equipment and parts sales 6,319 4,125 17,814 13,922 5,871
Repair, service and other 1,723 1,810 4,564 4,712 1,578
- ---------------------------------------------------------------------------------
$21,559 14,002 52,071 41,353 15,599
=================================================================================
As a percentqage of total
Compression revenues:
Gas compressor rental 63% 58% 57% 55% 52%
Equipment and parts sales 29% 29% 34% 34% 38%
Repair, service and other 8% 13% 9% 11% 10%
- ---------------------------------------------------------------------------------
100% 100% 100% 100% 100%
=================================================================================
Gas compressor utilization is affected primarily by natural gas storage levels
and by the number and age of producing oil and gas wells which, in turn, are
dependent upon the price levels of oil and natural gas. Suitability,
availability and rental rates for equipment are also major factors which affect
utilization of gas compression equipment.
The following table compares utilization, average rental rates and average fleet
size for gas compressors for the quarters and nine-month periods ended
December 31 and for the quarter ended September 30, 1994:
Quarter
Quarter Ended Nine Months Ended Ended
December 31, December 31, Sept. 30,
--------------- ---------------- ----------
1994 1993 1994 1993 1994
- ----------------------------------------------------------------------------------------
Gas Compressors
(HP based statistics):
Utilization 80.3% 89.8% 84.1% 84.9% 87.0%
Average monthly rental rate $17.54 16.53 17.00 16.63 16.70
Average fleet size 319,676 181,159 230,868 178,766 187,105
========================================================================================
The decline in current quarter and nine-month utilization of the gas compressor
fleet resulted from a combination of reduced demand for compression services,
due to falling U.S. natural gas prices, and the integration of the Brazos and
Halliburton gas compressor fleets, which historically, experienced lower levels
of utilization. While the long-term outlook for U.S. natural gas prices remains
positive, near-term improvements are not expected. Should U.S. natural gas
prices remain at, or fall below, current levels utilization of natural gas
compressors may be adversely affected.
17
Operating costs of the Compression segment consist of the following for the
quarters and nine-month periods ended December 31 and for the quarter ended
September 30, 1994:
(In thousands)
- ---------------------------------------------------------------------------------------
Quarter
Quarter Ended Nine Months Ended Ended
December 31, December 31, Sept. 30,
---------------- ------------------ ---------
1994 1993 1994 1993 1994
- ---------------------------------------------------------------------------------------
Field operating expenses:
Wages and benefits $ 2,362 1,527 5,564 4,639 1,641
Repairs and maintenance 1,988 1,475 5,104 4,415 1,422
Other 1,227 781 3,017 2,171 964
- ---------------------------------------------------------------------------------------
5,577 3,783 13,685 11,225 4,027
Cost of sales 5,740 3,312 15,141 11,298 4,855
- ---------------------------------------------------------------------------------------
$11,317 7,095 28,826 22,523 8,882
=======================================================================================
Field operating costs as a
percentage of rental, repair
service and other revenues 37% 38% 40% 41% 41%
=======================================================================================
Costs of sales as a percentage
of related revenues 91% 80% 85% 81% 83%
=======================================================================================
Field operating expenses primarily relate to gas compressor rental, repair and
service operations. Field operating expenses are generally consistent from
period-to-period and usually vary in the short-term due to fluctuations in the
level of repairs and maintenance expense. Long-term growth in field operating
expenses will occur primarily as a result of increased fleet size and general
inflationary factors. Current quarter increases in field operating expenses are
primarily attributable to the Brazos and Halliburton acquisitions. Costs of
sales consist primarily of wages and benefits and material costs associated with
the design, fabrication and installation of packaged compressor systems.
Fluctuations in costs of sales as a percentage of related revenues are generally
due to competitive forces and the type of equipment sold.
Gains from sales of assets have contributed $.2 million and $.9 million for the
quarter and nine-month period ended December 31, 1994, respectively. For the
quarter and nine-month period ended December 31, 1993 gains from sales of assets
contributed $.6 million and $1.4 million, respectively, to segment operating
profits.
INFLATION AND CURRENCY FLUCTUATIONS
Because of its significant foreign 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
and development spending by energy exploration and production companies. As
this spending increases, prices of goods and services used by the oil and gas
industry and the energy services industry will increase. Future improvements in
vessel day
18
rates and compressor rental rates may buffer the company from the inflationary
effects on operating costs.
ENVIRONMENTAL MATTERS
During the ordinary course of business the company's operations are subject to a
wide variety of environmental laws and regulations. The company attempts to
comply with these laws and regulations in order to avoid costly accidents and
the related environmental damage. The company is currently involved in
litigation with the Environmental Protection Agency concerning the disposal of
oilfield wastes. In the opinion of management, the ultimate liability with
respect to the litigation will not have a material adverse effect on the
company's financial position.
19
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
A. The Annual Meeting of Stockholders of the Company was held in New Orleans,
Louisiana on October 20, 1994.
B. Listed below are the nominees who were elected directors at the Annual
Meeting and the name of each other director whose term of office continued
after the Meeting.
Nominee or Director
Name Continuing in Office
Arthur R. Carlson Nominee
John P. Laborde Nominee
William C. O'Malley Nominee
Robert H. Boh Director Continuing in Office
Donald T. Bollinger Director Continuing in Office
Hugh J. Kelly Director Continuing in Office
Paul W. Murrill Director Continuing in Office
Lester Pollack Director Continuing in Office
J. Hugh Roff, Jr. Director Continuing in Office
C. The Company's Stockholders voted as follows with respect to the proposals
presented at the meeting:
1. Arthur R. Carlson was elected director with 44,928,858 votes cast for
and 174,286 votes withheld;
2. John P. Laborde was elected director with 44,930,458 votes cast for and
172,681 votes withheld;
3. William C. O'Malley was elected director with 44,894,794 votes cast for
and 208,345 votes withheld; and
4. The selection of KPMG Peat Marwick LLP as the Company's independent
auditors for the fiscal year ending March 31, 1995 was ratified with
44,980,674 votes cast for, 30,488 votes against and 91,977 abstentions.
Item 6. Exhibits and Reports on Form 8-K
A. At page 22 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 November 30, 1994 reported that the
Company had completed its acquisition of the natural gas compression assets
of Halliburton Company and Halliburton Canada Inc.
C. The Company's report on Form 8-K dated January 5, 1995 reported that:
1. The Company had announced a corporate restructuring; and
2. Victor I. Koock, Senior Vice President, Secretary, and Co-General
Counsel, and Gary D. Pope, Vice President, had elected to terminate
their employment from the Company effective March 15, 1995, and March 7,
1995, respectively, in connection with the restructuring.
20
D. The Company's Report on Form 8-K/A-1 dated November 30, 1994 amended the
Company's Report on Form 8-K dated November 30, 1994 to provide the
financial statements and pro forma financial information required to be
filed with respect to the natural gas compression assets of Halliburton
Company and Halliburton Canada Inc.
21
EXHIBIT INDEX
The index below describes each exhibit filed as a part of this report.
Exhibit
Number
11 - Statement - Computation of Per Share Earnings.
27 - Financial Data Schedule.
22
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)
/s/ KEN C. TAMBLYN
Date: January 24, 1995 _________________________________________
Ken C. Tamblyn
Executive Vice President and
Chief Financial Officer
/s/ CLIFFE F. LABORDE
Date: January 24, 1995 _________________________________________
Cliffe F. Laborde
Senior Vice President and General Counsel
23