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, 1995
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
--- ----
53,390,009 shares of Tidewater Inc. common stock $.10 par value per share were
outstanding on February 9, 1996. 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 1995 1995
- ------------------------------------------------- ------------ ---------
Current assets:
Cash, including temporary cash investments $ 10,234 14,702
Trade and other receivables 131,146 145,805
Inventories 32,311 36,311
Other current assets 4,738 4,355
- ------------------------------------------------- ---------- ---------
Total current assets 178,429 201,173
- ------------------------------------------------- ---------- ---------
Investments in, at equity, and advances to
unconsolidated companies 20,448 21,527
Properties and equipment 1,453,891 1,464,196
Less accumulated depreciation 882,941 858,297
- ------------------------------------------------- ---------- ---------
Net properties and equipment 570,950 605,899
Other assets 77,707 73,586
- ------------------------------------------------- ---------- ---------
$ 847,534 902,185
================================================= ========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------------------
Current liabilities:
Current maturities of long-term debt --- 12,000
Accounts payable and accrued expenses 72,793 79,909
Income taxes 9,839 9,571
- ------------------------------------------------- ---------- ---------
Total current liabilities 82,632 101,480
- ------------------------------------------------- ---------- ---------
Deferred income taxes 59,226 49,510
Long-term debt 5,000 100,000
Accrued property and liability losses 37,658 28,921
Other liabilities and deferred credits 41,215 42,056
Stockholders' equity:
Common stock of $.10 par value; issued
53,337,457 shares at December and
53,237,839 shares at March 5,334 5,324
Additional paid-in capital 335,625 334,809
Retained earnings 292,982 252,374
- ------------------------------------------------- ---------- ---------
633,941 592,507
Less:
Cumulative foreign currency translation
adjustment 10,759 10,745
Deferred compensation - restricted stock 1,379 1,544
- ------------------------------------------------- ---------- ---------
Total stockholders' equity 621,803 580,218
- ------------------------------------------------- ---------- ---------
$ 847,534 902,185
================================================= ========== =========
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,
------------------------ -----------------------
1995 1994 1995 1994
----------- ---------- ---------- ----------
Revenues:
Marine operations $ 118,210 114,382 350,330 348,448
Compression operations 30,536 21,559 85,609 52,071
----------- ---------- ---------- ----------
148,746 135,941 435,939 400,519
----------- ---------- ---------- ----------
Costs and expenses:
Marine operations 70,918 72,506 213,723 216,882
Compression operations 16,826 11,317 45,603 28,826
Depreciation 17,918 21,830 54,643 62,605
General and administrative 13,751 15,549 40,479 45,531
----------- ---------- ---------- ----------
119,413 121,202 354,448 353,844
----------- ---------- ---------- ----------
29,333 14,739 81,491 46,675
Other income (expenses):
Foreign exchange gain (loss) (346) 383 (503) (133)
Gains on sales of assets 2,057 6,076 6,184 10,547
Equity in net earnings of
unconsolidated companies 1,176 555 4,216 2,499
Minority interests (160) (490) (925) (1,182)
Other expense --- (2,500) --- (2,500)
Interest and miscellaneous income 881 961 2,170 5,214
Interest expense (820) (1,228) (4,183) (1,876)
----------- ---------- ---------- ----------
2,788 3,757 6,959 12,569
----------- ---------- ---------- ----------
Earnings before income taxes 32,121 18,496 88,450 59,244
Income taxes 10,600 6,798 29,188 21,778
----------- ---------- ---------- ----------
Net earnings $ 21,521 11,698 59,262 37,466
=========== ========== ========== ==========
Primary and fully-diluted
earnings per common share $.40 .22 1.10 .70
=========== ========== ========== ==========
Weighted average common
shares and equivalents 53,842,928 53,413,280 53,731,847 53,407,630
=========== ========== ========== ==========
Cash dividends declared
per common share $.125 .10 .35 .30
=========== ========== ========== ==========
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,
------------------ -------------------
1995 1994 1995 1994
-------- -------- -------- --------
Net cash provided by operating
activities $ 50,718 39,069 127,938 105,213
- --------------------------------------- -------- -------- -------- --------
Cash flows from investing activities:
Proceeds from sales of assets 4,122 8,755 14,575 17,273
Additions to properties and equipment (12,130) (12,171) (28,068) (36,567)
Acquisition of Compression assets --- (205,146) --- (240,146)
Dividends from unconsolidated
companies, net of additional
investments 3,437 534 6,636 3,402
Dividends paid to minority interests (99) (197) (998) (1,852)
- --------------------------------------- -------- -------- -------- --------
Net cash used in investing
activities (4,670) (208,225) (7,855) (257,890)
- --------------------------------------- -------- -------- -------- --------
Cash flows from financing activities:
Proceeds from issuance of long-term
debt --- 150,000 --- 150,000
Principal payments on long-term debt (43,000) (20,643) (107,000) (68,547)
Cash dividends paid (6,667) (5,318) (18,654) (15,934)
Other 92 65 1,103 273
- --------------------------------------- -------- -------- -------- --------
Net cash provided by (used in)
financing activities (49,575) 124,104 (124,551) 65,792
- --------------------------------------- -------- -------- -------- --------
Net decrease in cash, including
temporary cash investments (3,527) (45,052) (4,468) (86,885)
- --------------------------------------- -------- -------- -------- --------
Cash, including temporary cash
investments at beginning of period 13,761 64,955 14,702 106,788
- --------------------------------------- -------- -------- -------- --------
Cash, including temporary cash
investments at end of period $ 10,234 19,903 10,234 19,903
======================================= ======== ======== ======== ========
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest $ 424 596 4,160 2,254
Income taxes $ 8,894 2,268 19,725 15,041
======================================= ======== ======== ======== ========
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) 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
33% for the quarter and nine-month period ended December 31, 1995. For the
quarter and nine-month period ended December 31, 1994 the effective tax rate
was 37%.
(4) Increase in Useful Lives of Marine Vessels
Effective April 1, 1995 the estimated useful lives of the company's Marine
vessels were increased from 10-20 years to 15-25 years. For the quarter and
nine-month period ended December 31, 1995, the effect of this change in
accounting estimate lowered depreciation expense by approximately $6.6
million and $19.2 million, respectively. Concurrent with this change $2.2
million for the quarter ended December 31, 1995 and $6.7 million for the
nine months ended December 31, 1995 of repair and maintenance costs, that
would have been capitalized had the previous estimated useful lives been
used, were expensed.
(5) 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.
5
(6) 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,
----------------- -----------------
1995 1994 1995 1994
-------- ------- -------- -------
Revenues:
Marine $118,210 114,382 350,330 348,448
Compression 30,536 21,559 85,609 52,071
- ------------------------------------- -------- ------- ------- -------
$148,746 135,941 435,939 400,519
======== ======= ======= =======
Operating profit:
Marine:
From operations $ 27,747 14,296 77,304 48,050
Gains on sales of assets 2,050 5,833 5,851 9,627
Unusual item --- --- --- 1,700
- ------------------------------------- -------- ------- ------- -------
Marine operating profit $ 29,797 20,129 83,155 59,377
===================================== ======== ======= ======= =======
Compression:
From operations 4,352 3,964 12,093 7,726
Gains on sales of assets 7 243 333 920
- ------------------------------------- -------- ------- ------- -------
Compression operating profit $ 4,359 4,207 12,426 8,646
===================================== ======== ======= ======= =======
The unusual item is related to refunds received from the settlement of prior
years' property tax disputes. 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.
(7) Proposed Merger
On December 22, 1995 the company entered into a definitive merger agreement
with Hornbeck Offshore Services, Inc. The proposed merger is structured as a
tax-free exchange of company common stock for all outstanding Hornbeck
common stock in the ratio of .667 share of company common stock for each
share of Hornbeck common stock. The exchange ratio is subject to certain
adjustments based upon the average market price of the company's common
stock for a period of ten days prior to two days before the effective date
of the merger. The proposed merger will be accounted for as a pooling-of-
interests and is subject to regulatory approvals, approval by no less than
66-2/3% of Hornbeck shareholders, and certain other conditions. On February
1, 1996, the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 expired without any further request for additional
information. In addition the company's registration statement filed to
register shares of Tidewater common stock which may be issued to Hornbeck
shareholders in connection with the merger became effective on February 6,
1996. If approved, the proposed merger is expected to be completed by the
end of fiscal 1996.
6
INDEPENDENT AUDITORS' REVIEW 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, 1995 and the related condensed consolidated
statements of earnings and cash flows for the three-month and nine-month periods
ended December 31, 1995 and 1994. These condensed consolidated 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. and subsidiaries as
of March 31, 1995, 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 1, 1995 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,
1995 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
February 6, 1996
7
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.
Net earnings for the quarter and nine-month period ended December 31, 1995
climbed above fiscal 1995's third quarter and nine-month period due to better
market conditions for offshore marine services. Fiscal 1996 nine-month net
earnings also rose as a result of the expansion of the Compression rental fleet
during fiscal 1995. Current quarter net earnings were consistent with the prior
quarter level reflecting continued strong demand for offshore marine services
through the end of the quarter.
LIQUIDITY AND CAPITAL RESOURCES
Fiscal 1996 third quarter and nine-month operating activities generated
substantially higher cash than fiscal 1995's corresponding periods. The
increase is due to significantly higher utilization of the foreign-based vessel
fleet and higher average day rates for the worldwide vessel fleet. Fiscal 1996
nine-month cash generated by operating activities was also higher as a result of
a significantly larger natural gas compressor rental fleet. Operating
activities continue to generate cash in excess of normal operating requirements.
Anticipated utilization levels for the Marine vessel fleet and Compression
rental fleet for the remainder of fiscal 1996 should maintain this condition.
Cash used in investing activities for the three-month and nine-month periods
ended December 31, 1995 was significantly lower than the amounts for the
corresponding periods of fiscal 1995. Investing activities for fiscal 1995's
third quarter include the purchase of the natural gas compression assets of
Halliburton for $205 million. The nine-month period ended December 31, 1994
also includes the purchase of the assets of Brazos Gas Compressing Company for
$35 million in cash on September 30, 1994. Excluding acquisitions, additions
to properties and equipment and proceeds from asset sales determine the overall
amount of cash used in investing activities. The following tables compare these
two items, by business segment, for the quarters and nine-month periods ended
December 31 and for the quarter ended September 30, 1995:
8
(In thousands)
- -------------------------------------------------------------------------------
Quarter
Quarter Ended Nine Months Ended Ended
December 31, December 31, Sept. 30,
--------------- ----------------- ---------
1995 1994 1995 1994 1995
------- ------ -------- ------- ---------
Additions to Properties
and Equipment:
- -----------------------
Marine $ 9,309 7,682 24,077 25,336 9,453
Compression 2,821 4,401 3,977 10,925 948
General corporate --- 88 14 306 9
- -------------------------------- ------- ------ ------ ------ ------
$12,130 12,171 28,068 36,567 10,410
================================ ======= ====== ====== ====== ======
Proceeds from sales of assets:
- ------------------------------
Marine equipment $ 3,049 7,866 9,694 15,078 2,870
Compression equipment 1,073 889 4,881 2,195 1,656
- -------------------------------- ------- ------ ------ ------ ------
$ 4,122 8,755 14,575 17,273 4,526
================================ ======= ====== ====== ====== ======
Marine additions for the current quarter include the $5.5 million purchase of
three offshore tugs previously operated under long-term lease. Current economic
conditions generally do not favor the construction of Marine vessels; therefore,
future expansion of the Marine fleet will continue to come primarily from
existing industry supplies provided appropriate rates of return can be achieved.
Fiscal 1996's third quarter and nine-month financing activities consumed cash as
compared to the prior year's third quarter and nine-month financing activities
which provided cash. Fiscal 1995's third quarter and nine-month financing
activities include borrowings of $150 million associated with the purchase of
Halliburton's natural gas compression assets. Current nine-month financing
activities include $89 million of prepayments on the Halliburton acquisition
debt. As of December 31, 1995 existing long-term debt of $5 million was
borrowed under an amended and restated revolving credit and term loan agreement
dated December 29, 1995. The amended and restated revolving credit and term
loan agreement eliminates several restrictive covenants contained in the prior
agreement. Principal payments on long-term debt for the nine months ended
December 31, 1994 include the redemption of 7% convertible subordinated
debentures for $46.0 million. Continued dividend payments are subject to
declaration by the Board of Directors.
On December 22, 1995 the company entered into a definitive merger agreement with
Hornbeck Offshore Services, Inc. The proposed merger is structured as a tax-
free exchange of company common stock for all outstanding Hornbeck common stock
in the ratio of .667 share of company common stock for each share of Hornbeck
common stock. The exchange ratio is subject to certain adjustments based upon
the average market price of the company's common stock for a period of ten days
prior to two days before the effective date of the merger. The proposed merger
will be accounted for as a pooling-of-interests and is subject to regulatory
approvals, approval by no less than 66-2/3% of Hornbeck shareholders, and
certain other conditions. On February 1, 1996, the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 expired without any further
request for additional information. In addition the company's registration
statement filed to register shares of Tidewater common stock which may be issued
to Hornbeck shareholders in connection with the merger became effective on
February 6, 1996. If approved, the proposed merger is expected to be completed
by the end of fiscal 1996.
9
RESULTS OF OPERATIONS
Revenues and operating profits, by business segment, for the quarters and nine-
month periods ended December 31 and for the quarter ended September 30, 1995 are
as follows:
(In thousands)
- -----------------------------------------------------------------------------------
Quarter
Quarter Ended Nine Months Ended Ended
December 31, December 31, Sept. 30,
------------------- ------------------- ----------
1995 1994 1995 1994 1995
--------- -------- --------- -------- ----------
Revenues:
Marine $118,210 114,382 350,330 348,448 118,123
Compression 30,536 21,559 85,609 52,071 28,034
- ----------------------------- -------- ------- ------- ------- -------
$148,746 135,941 435,939 400,519 146,157
============================= ======== ======= ======= ======= =======
Operating profit (loss):
Marine $ 29,797 20,129 83,155 59,377 29,694
Compression 4,359 4,207 12,426 8,646 3,990
Other income (expense) 1,058 (1,484) 3,705 1,150 1,602
Corporate expenses (2,273) (3,128) (6,653) (8,053) (2,224)
Interest expense (820) (1,228) (4,183) (1,876) (1,350)
Income tax expense (10,600) (6,798) (29,188) (21,778) (10,464)
- ----------------------------- -------- ------- ------- ------- -------
Net earnings $ 21,521 11,698 59,262 37,466 21,248
============================= ======== ======= ======= ======= =======
Fiscal 1996 third quarter consolidated revenues and pre-tax earnings rose 9% and
74%, respectively, above fiscal 1995's third quarter. The substantial increase
in fiscal 1996 third quarter pre-tax earnings over fiscal 1995's third quarter
is attributable to considerably higher Marine operating profit, lower corporate
expenses and lower interest expense. Higher Marine operating profit is due to
higher utilization and day rates for the vessel fleet, the net positive effect
of lower depreciation expense due to the increase in vessel useful lives
effective April 1, 1995, and lower general and administrative expenses as a
result of the company's restructuring of worldwide Marine operations and
corporate headquarters in fiscal 1995's fourth quarter. The corporate
headquarters' restructuring also resulted in lower corporate expenses during the
current quarter. Lower interest expense is due to the significant amount of
prepayments on long-term debt during the current fiscal year.
For the nine months ended December 31, 1995 consolidated revenues and pre-tax
earnings climbed 9% and 49%, respectively, above the corresponding nine-month
period of fiscal 1995. The increase in pre-tax earnings for the nine-month
period ended December 31, 1995 over fiscal 1995's corresponding nine-month
period is attributable to higher Marine and Compression operating profits
partially offset by higher interest expense. Higher Marine operating profit is
attributable to higher utilization of the foreign-based vessel fleet, higher day
rates for the worldwide vessel fleet and the beneficial effects of lower
depreciation expense and lower general and administrative expenses discussed
above. Fiscal 1995's nine-month Marine operating profit includes $1.7 million
of refunds received from the settlement of prior years' property tax disputes.
Higher Compression operating profit is due to a substantially larger natural gas
compressor rental fleet as a result of the two acquisitions which occurred
during the second half of fiscal 1995. Higher interest expense resulted from
borrowings to finance the fiscal 1995 third quarter purchase of natural gas
compression assets.
10
Other income (expense) for the quarter and nine months ended December 31, 1994
includes a $2.5 million provision to cover losses due to the potential
insolvency of certain of the company's insurers.
General and administrative expenses by type for the quarters and nine-month
periods ended December 31 and for the quarter ended September 30, 1995 are as
follows:
(In thousands)
- -------------------------------------------------------------------------
Quarter
Quarter Ended Nine Months Ended Ended
December 31, December 31, Sept. 30,
--------------- ----------------- ---------
1995 1994 1995 1994 1995
------- ------ -------- ------- ---------
Personnel $ 7,880 9,315 23,423 27,808 7,700
Office and property 2,335 2,277 6,966 6,856 2,363
Sales and marketing 534 1,004 2,049 2,942 682
Professional services 941 906 2,787 2,465 952
Other 2,061 2,047 5,254 5,460 1,653
- -------------------------- ------- ------ ------ ------ ------
$13,751 15,549 40,479 45,531 13,350
========================== ======= ====== ====== ====== ======
MARINE SEGMENT
- --------------
The marine segment provides a diverse range of services and equipment to the
offshore oil and gas 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 with changes in
revenues. Operating costs principally consist of crew costs, repair and
maintenance, insurance, fuel, lube and supplies. Fleet size and utilization are
the major factors which affect crew costs. The timing and amount of repair and
maintenance costs are influenced by vessel age and scheduled drydockings to
satisfy safety and inspection requirements dictated by regulatory agencies.
Whenever possible, vessel drydockings are done during seasonally slow periods to
minimize any impact on vessel operations and are only done when economically
justified given the vessel's age, and physical condition. The following tables
compare revenues, operating expenses (excluding general and administrative
expense and depreciation expense) and operating margins of the Marine segment
and provide a breakdown of Marine operating profit for the quarters and nine-
month periods ended December 31, and for the quarter ended September 30, 1995:
11
(In thousands)
- -----------------------------------------------------------------------------------------------
Quarter
Quarter Ended Nine Months Ended Ended
December 31, December 31, Sept. 30,
-------------------- -------------------- ----------
1995 1994 1995 1994 1995
--------- --------- --------- --------- ----------
Revenues:
Owned and chartered vessels:
United States $ 45,294 46,242 133,152 136,983 45,095
Foreign 65,916 59,407 195,643 185,921 66,550
- --------------------------------------- -------- ------- ------- ------- -------
111,210 105,649 328,795 322,904 111,645
Shipyard and other 2,565 5,351 9,784 16,022 2,468
Brokered vessels 4,435 3,382 11,751 9,522 4,010
- --------------------------------------- -------- ------- ------- ------- -------
118,210 114,382 350,330 348,448 118,123
- --------------------------------------- -------- ------- ------- ------- -------
Expenses:
Owned and chartered vessels:
Crew costs 32,672 31,315 97,308 95,872 33,553
Repair and maintenance 15,415 16,174 49,675 47,066 15,237
Insurance 6,849 7,734 20,424 22,688 6,839
Fuel, lube and supplies 6,122 5,187 17,178 15,153 5,616
Other 4,370 4,543 12,147 13,220 3,812
- --------------------------------------- -------- ------- ------- ------- -------
65,428 64,953 196,732 193,999 65,057
Shipyard and other 1,440 4,347 6,188 14,065 1,179
Brokered vessels 4,050 3,206 10,803 8,818 3,697
- --------------------------------------- -------- ------- ------- ------- -------
70,918 72,506 213,723 216,882 69,933
- --------------------------------------- -------- ------- ------- ------- -------
Operating margins $ 47,292 41,876 136,607 131,566 48,190
======================================= ======== ======= ======= ======= =======
For owned and chartered vessels:
- ---------------------------------------
Operating margins as a percent
of revenues 41.2% 38.5% 40.2% 40.0% 41.7%
Percentage rise (drop) in operating
costs compared to same period of
prior fiscal year .7% (1.7%) 1.4% (5.2%) 0.5%
======================================= ======== ======= ======= ======= =======
Marine operating profit:
Owned and chartered vessels:
United States $ 9,680 8,443 27,556 25,251 11,002
Foreign 16,933 4,765 45,753 21,853 15,995
- --------------------------------------- -------- ------- ------- ------- -------
26,613 13,208 73,309 47,104 26,997
Gains from asset sales 2,050 5,833 5,851 9,627 1,112
Brokered vessels 384 176 948 704 313
Shipyard and other 750 912 3,047 1,942 1,272
- --------------------------------------- -------- ------- ------- ------- -------
$ 29,797 20,129 83,155 59,377 29,694
======================================= ======== ======= ======= ======= =======
Operating margins for the quarter and nine months ended December 31, 1995
climbed 13% and 4%, respectively, above operating margins for the corresponding
periods of fiscal 1995. Fiscal 1996 operating margins for both periods were
higher because of increased activity of the foreign-based vessel fleet and
higher average day rates for the worldwide vessel fleet.
12
Marine fleet utilization is determined primarily by market conditions and to a
lesser extent by drydockings to satisfy safety and inspection requirements. 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, 1995:
Quarter
Quarter Ended Nine Months Ended Ended
December 31, December 31, Sept. 30,
--------------- ------------------- ----------
1995 1994 1995 1994 1995
------- ------ --------- -------- ----------
UTILIZATION:
Domestic-based fleet:
- ----------------------
Towing Supply/Supply 87.4% 88.0% 88.0% 86.3% 87.7%
Crew/Utility 83.2% 88.9% 81.3% 90.9% 79.5%
Offshore Tugs 67.5% 58.5% 59.8% 62.7% 64.8%
Other 51.4% 58.9% 53.6% 53.9% 64.8%
Total 79.8% 79.1% 78.0% 79.6% 79.2%
Foreign-based fleet:
- ---------------------
Towing Supply/Supply 85.7% 78.2% 86.8% 80.7% 88.2%
Crew/Utility 81.5% 81.9% 84.3% 76.5% 85.0%
Offshore Tugs 77.4% 72.7% 73.8% 74.9% 71.2%
Other 56.8% 43.0% 47.5% 47.0% 48.3%
Total 79.1% 71.5% 77.9% 73.2% 78.4%
Worldwide fleet:
- -----------------
Towing Supply/Supply 86.3% 81.5% 87.3% 82.6% 88.0%
Crew/Utility 82.5% 85.9% 82.6% 84.5% 81.7%
Offshore Tugs 73.4% 65.4% 67.6% 68.8% 68.4%
Other 55.7% 46.3% 48.7% 48.4% 51.6%
Total 79.4% 74.5% 77.9% 75.7% 78.7%
========================== ==== ==== ==== ==== ====
The domestic fleet consists of vessels operating in U.S. waters while the
foreign fleet consists of vessels operating outside U.S. waters.
Market trends for offshore marine services are reflected in utilization for the
periods presented. Utilization of the foreign-based vessel fleet in the current
quarter and nine-month period compared favorably with year-ago levels and is
attributable to greater demand for offshore marine services. Utilization of the
domestic-based vessel fleet for the current quarter and nine-month period was
consistent with year-ago levels and reflects stable demand for offshore marine
services in the U.S. Gulf of Mexico. During the past several years vessel
utilization normally weakens towards the end of the third quarter reflecting the
beginning of the seasonal slowdown of activity. However, for the current
quarter no slowdown occurred.
13
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, 1995:
Quarter
Quarter Ended Nine Months Ended Ended
December 31, December 31, Sept. 30,
-------------- ----------------- ---------
1995 1994 1995 1994 1995
------- ----- -------- ------- ---------
AVERAGE VESSEL DAY RATES:
- -------------------------
Domestic-based fleet:
---------------------
Towing Supply/Supply $3,720 3,449 3,619 3,548 3,621
Crew/Utility 1,336 1,295 1,346 1,272 1,352
Offshore Tugs 4,859 5,012 4,859 4,534 4,584
Other 3,356 2,883 3,090 2,922 2,868
Total $3,281 3,097 3,200 3,074 3,164
Foreign-based fleet:
--------------------
Towing Supply/Supply $3,649 3,556 3,655 3,593 3,670
Crew/Utility 1,646 1,716 1,765 1,740 1,766
Offshore Tugs 2,710 2,432 2,686 2,551 2,705
Other 674 896 706 785 906
Total $2,906 2,852 2,970 2,870 3,005
Worldwide fleet:
----------------
Towing Supply/Supply $3,674 3,517 3,642 3,577 3,653
Crew/Utility 1,469 1,466 1,525 1,461 1,529
Offshore Tugs 3,519 3,616 3,538 3,459 3,497
Other 1,176 1,420 1,240 1,254 1,398
Total $3,047 2,954 3,059 2,953 3,067
=========================== ====== ===== ===== ===== =====
The domestic fleet consists of vessels operating in U.S. waters while the
foreign fleet consists of vessels operating outside U.S. waters.
Higher average day rates in the current quarter and nine-month period compared
to the prior year's corresponding quarter and nine-month period is attributable
to a more favorable supply/demand relationship for offshore marine services.
Current quarter average day rates were generally consistent with the preceding
quarter reflecting stable demand for offshore marine services. If oil industry
analyst predictions of increased offshore exploration and production spending
materialize, then average vessel day rates should be positively affected.
However, given the volatile history of demand for offshore marine services, any
future increases in average vessel day rates is not assured.
14
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, 1995 and the actual December 31, 1995
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: 1995 1995 1994 1995 1994 1995
- --------------------- ------------- ---- ------- ----- ----- ---------
Towing Supply/Supply 89 89 91 90 93 91
Crew/Utility 47 47 50 49 49 50
Offshore Tugs 38 40 49 42 48 42
Other 14 13 15 13 14 13
- -------------------------- ---- ---- ---- ---- ---- ----
Total 188 189 205 194 204 196
- -------------------------- ---- ---- ---- ---- ---- ----
Foreign-based fleet:
- --------------------
Towing Supply/Supply 171 171 176 170 176 169
Crew/Utility 38 36 38 35 40 35
Offshore Tugs 56 57 46 53 47 52
Other 48 49 57 50 58 51
- -------------------------- ---- ---- ---- ---- ---- ----
Total 313 313 317 308 321 307
- -------------------------- ---- ---- ---- ---- ---- ----
Owned or chartered
vessels included in
marine revenues 501 502 522 502 525 503
Vessels withdrawn from
active service 16 16 16 16 17 15
Joint venture owned
vessels 47 47 43 47 43 47
- -------------------------- ---- ---- ---- ---- ---- ----
Total 564 565 581 565 585 565
========================== ==== ==== ==== ==== ==== ====
Worldwide fleet:
- ----------------
Towing Supply/Supply 298 298 306 298 308 297
Crew/Utility 93 92 93 93 95 94
Offshore Tugs 98 100 97 98 97 97
Other 75 75 85 76 85 77
- -------------------------- ---- ---- ---- ---- ---- ----
Total 564 565 581 565 585 565
========================== ==== ==== ==== ==== ==== ====
The drop in the average number of owned and chartered vessels from 525 for the
nine-month period ended December 31, 1994 to 502 for the nine-month period ended
December 31, 1995 is due to older vessels being withdrawn from active service
due to age and resultant high repair and maintenance costs. Vessels will
continue to be withdrawn from active service as they become uneconomical to
operate.
COMPRESSION SEGMENT
- -------------------
The Compression segment provides natural gas compression services and equipment
for a variety of applications primarily in the energy industry. Rental revenues
are determined, for the most part, by utilization and fleet size. Utilization is
affected 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. Quality of service, availability and rental rates for equipment
are also major factors which affect utilization. Operating expenses are
generally consistent from period-to-period and usually vary in the short-term
due to fluctuations in the amount of repair and maintenance expense. Long-term
growth in operating expenses will occur primarily as a result of increased
15
fleet size and general inflationary factors. Compression segment operating
profit is primarily determined by operating margins from rental gas compression
operations. The following tables compare revenues, operating expenses
(excluding general and administrative expense and depreciation expense),
operating margins and related statistics for gas compression operations for the
quarters and nine-month periods ended December 31 and for the quarter ended
September 30, 1995.
(In thousands, except statistics )
- ---------------------------------------------------------------------------------------
Quarter
Quarter Ended Nine Months Ended Ended
December 31, December 31, Sept. 30,
-------------------- ------------------- ----------
1995 1994 1995 1994 1995
---------- -------- --------- -------- ----------
Revenues:
Rentals $ 17,756 13,517 54,441 29,693 18,193
Repair, service and other 1,985 1,723 5,190 4,564 1,633
- -------------------------------- -------- ------- ------- ------- -------
19,741 15,240 59,631 34,257 19,826
-------- ------- ------- ------- -------
Expenses:
Wages and benefits 2,567 2,362 8,662 5,564 3,042
Repairs and maintenance 3,196 1,988 9,587 5,104 3,106
Other 1,971 1,227 6,101 3,017 2,082
- -------------------------------- -------- ------- ------- ------- -------
7,734 5,577 24,350 13,685 8,230
-------- ------- ------- ------- -------
Operating margins $ 12,007 9,663 35,281 20,572 11,596
================================ ======== ======= ======= ======= =======
Operating margins as a percent
of revenues 60.8% 63.4% 59.2% 60.1% 58.5%
================================ ======== ======= ======= ======= =======
Horsepower based statistics:
Utilization 74.3% 80.3% 73.5% 84.1% 71.9%
Average monthly rental rate $ 17.30 17.54 17.67 17.00 17.79
Average fleet size 467,152 319,676 470,581 230,868 473,887
================================ ======== ======= ======= ======= =======
Fiscal 1996 third quarter and nine-month operating margins climbed significantly
above fiscal 1995's third quarter and nine-month operating margins because of
the considerable expansion of the natural gas compressor rental fleet which
occurred during the second half of fiscal 1995. Because of weakened demand for
compression services, fiscal 1996 current quarter and nine-month utilization
fell below prior year levels. Utilization was also adversely affected for both
periods because the two natural gas compressor fleets which were purchased
during fiscal 1995 historically experienced lower levels of utilization than the
original Tidewater fleet.
The Compression segment also designs, fabricates and installs engineered
compressor systems and sells, primarily to its customers, related parts and
equipment. The following table compares revenues, costs of sales and sales
margins for equipment and parts sales for the quarters and nine-month periods
ended December 31 and for the quarter ended September 30, 1995:
16
(In thousands)
----------------------------------------------------------
Quarter
Quarter Ended Nine Months Ended Ended
December 31, December 31, Sept. 30,
------------------------- ------------------- ----------
1995 1994 1995 1994 1995
--------- -------------- --------- -------- ----------
Revenues $10,795 6,319 25,978 17,814 8,208
Costs of sales 9,092 5,740 21,253 15,141 6,640
- -------------------------------- ------- ----- ------ ------ -----
Operating margins $ 1,703 579 4,725 2,673 1,568
================================ ======= ===== ====== ====== =====
Operating margins as a percent
of revenues 15.8% 9.2% 18.2% 15.0% 19.1%
================================ ======= ===== ====== ====== =====
Fluctuations in the level of equipment and parts sales for the periods presented
are due to the timing of sales of engineered products. Fluctuations in
operating margin percentages are the result of competitive market forces. Costs
of sales consist primarily of wages and benefits and material costs associated
with the design, fabrication and installation of packaged compressor systems.
Gains from sales of assets have contributed nominally to segment profits for the
quarters and nine-month periods ended December 31, 1995 and 1994 and for the
quarter ended September 30, 1995.
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 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
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.
17
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
A. At page 20 of this report is the index for those exhibits required to be
filed as part of this report.
B. The Company did not file any reports on Form 8-K during the quarter for which
this report is filed.
18
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: February 9, 1996 /s/ William C. O'Malley
----------------------------
William C. O'Malley
Chairman of the Board, President and
Chief Executive Officer
Date: February 9, 1996 /s/ Ken C. Tamblyn
-----------------------
Ken C. Tamblyn
Executive Vice President and
Chief Financial Officer
19
EXHIBIT INDEX
Exhibit
Number
- ------
11 Statement - Computation of Per Share Earnings
27 Financial Data Schedule
20