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 September 30, 1998 [_] 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 [_] 56,731,256 shares of Tidewater Inc. common stock $.10 par value per share were outstanding on October 22, 1998. 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) - ---------------------------------------------------------------------------------- September 30, March 31, ASSETS 1998 1998 - ---------------------------------------------------------------------------------- Current assets: Cash and cash equivalents $ 32,532 24,977 Trade and other receivables 229,748 258,517 Marine operating supplies 32,916 31,498 Other current assets 4,454 4,122 - ---------------------------------------------------------------------------------- Total current assets 299,650 319,114 - ---------------------------------------------------------------------------------- Investments in, at equity, and advances to unconsolidated companies 15,040 21,825 Properties and equipment: Vessels and related equipment 1,526,173 1,534,948 Other properties and equipment 40,985 33,887 - ---------------------------------------------------------------------------------- 1,567,158 1,568,835 Less accumulated depreciation 891,929 863,209 - ---------------------------------------------------------------------------------- Net properties and equipment 675,229 705,626 - ---------------------------------------------------------------------------------- Goodwill, net 351,760 356,394 Other assets 112,074 89,880 - ---------------------------------------------------------------------------------- $1,453,753 1,492,839 ================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY - ---------------------------------------------------------------------------------- Current liabilities: Current maturities of long-term debt 6,419 6,466 Accounts payable and accrued expenses 97,138 105,914 Accrued property and liability losses 4,907 12,156 Income taxes 10,023 79,671 - ---------------------------------------------------------------------------------- Total current liabilities 118,487 204,207 - ---------------------------------------------------------------------------------- Long-term debt 21,875 25,000 Deferred income taxes 161,361 158,540 Accrued property and liability losses 74,218 57,289 Other liabilities and deferred credits 49,021 49,027 Stockholders' equity: Common stock of $.10 par value, 125,000,000 shares authorized, issued 57,056,256 shares at September and 59,482,769 shares at March 5,706 5,948 Additional paid-in capital 223,097 295,153 Retained earnings 814,290 712,463 - ---------------------------------------------------------------------------------- 1,043,093 1,013,564 Less: Deferred compensation - restricted stock 3,720 4,206 Accumulated other comprehensive income 10,582 10,582 - ---------------------------------------------------------------------------------- Total stockholders' equity 1,028,791 998,776 - ---------------------------------------------------------------------------------- $1,453,753 1,492,839 ================================================================================== 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 Six Months Ended September 30, September 30, ----------------------- ------------------------- 1998 1997 1998 1997 - ---------------------------------------------------------------------------------------------------------------- Revenues: Vessel revenues $ 242,912 255,445 510,545 471,441 Other marine revenues 11,323 14,968 28,567 29,412 - ---------------------------------------------------------------------------------------------------------------- 254,235 270,413 539,112 500,853 - ---------------------------------------------------------------------------------------------------------------- Costs and expenses: Vessel operating costs 123,892 119,605 259,961 230,453 Costs of other marine revenues 8,670 11,116 22,327 23,452 Depreciation and amortization 23,977 24,074 47,799 42,628 General and administrative 18,451 18,586 37,192 34,946 - ---------------------------------------------------------------------------------------------------------------- 174,990 173,381 367,279 331,479 - ---------------------------------------------------------------------------------------------------------------- 79,245 97,032 171,833 169,374 Other income (expenses): Foreign exchange gain (loss) 355 (30) 369 (89) Gain on sales of assets 987 2,850 2,640 6,158 Equity in net earnings of unconsolidated companies 1,767 1,798 3,529 2,822 Minority interests (353) 34 (968) (261) Interest and miscellaneous income 1,134 1,233 2,027 2,177 Other expense --- (8,000) --- (8,000) Interest and other debt costs (1,015) (8,691) (1,475) (13,195) - ---------------------------------------------------------------------------------------------------------------- 2,875 (10,806) 6,122 (10,388) - ---------------------------------------------------------------------------------------------------------------- Earnings from continuing operations before income taxes 82,120 86,226 177,955 158,986 Income taxes 25,442 25,173 58,505 49,797 - ---------------------------------------------------------------------------------------------------------------- Earnings from continuing operations 56,678 61,053 119,450 109,189 Earnings from discontinued operations --- 3,276 --- 5,901 - ---------------------------------------------------------------------------------------------------------------- Net earnings $ 56,678 64,329 119,450 115,090 ================================================================================================================ Earnings per common share: - ------------------------- Earnings from continuing operations $ .98 1.01 2.04 1.81 Earnings from discontinued operations --- .05 --- .09 - ---------------------------------------------------------------------------------------------------------------- Earnings per common share $ .98 1.06 2.04 1.90 ================================================================================================================ Diluted earnings per common share: - --------------------------------- Earnings from continuing operations $ .98 1.01 2.03 1.81 Earnings from discontinued operations --- .05 --- .09 - ---------------------------------------------------------------------------------------------------------------- Diluted earnings per common share $ .98 1.06 2.03 1.90 ================================================================================================================ Weighted average common shares outstanding 57,791,444 60,472,906 58,528,321 60,412,061 Incremental common shares from stock options 78,799 400,315 117,896 389,567 - ---------------------------------------------------------------------------------------------------------------- Adjusted weighted average common shares 57,870,243 60,873,221 58,646,217 60,801,628 ================================================================================================================ Cash dividends declared per common share $ .15 .15 .30 .30 ================================================================================================================ See Notes to Unaudited Condensed Consolidated Financial Statements. -3- TIDEWATER INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) - ---------------------------------------------------------------------------------------------------------------- Quarter Ended Six Months Ended September 30, September 30, ----------------------- ------------------------- 1998 1997 1998 1997 - ---------------------------------------------------------------------------------------------------------------- Net cash provided by continuing operations $ 74,986 67,300 179,395 157,416 Net cash (used in) provided by discontinued operations (301) 9,102 (68,111) 16,958 - ---------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 74,685 76,402 111,284 174,374 - ---------------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Proceeds from sales of assets 3,412 7,789 6,335 18,346 Additions to properties and equipment (6,827) (32,552) (16,818) (52,669) Acquisitions, net of cash acquired --- 1,973 --- (553,419) Change in other assets 178 (120) 60 (3,553) - ---------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (3,237) (22,910) (10,423) (591,295) - ---------------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Principal payments on long-term debt (58,172) (47,596) (83,172) (82,849) Credit facility borrowings 40,000 5,000 80,000 505,000 Proceeds from issuance of common stock 32 4,123 437 4,799 Common stock purchased (56,753) --- (72,948) --- Dividends paid (8,712) (9,063) (17,623) (18,116) - ---------------------------------------------------------------------------------------------------------------- Net cash (used in) provided by financing activities (83,605) (47,536) (93,306) 408,834 - ---------------------------------------------------------------------------------------------------------------- Net change in cash and cash equivalents (12,157) 5,956 7,555 (8,087) Cash and cash equivalents at beginning of period 44,689 27,123 24,977 41,166 - ---------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 32,532 33,079 32,532 33,079 ================================================================================================================ Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 1,172 8,519 1,353 9,159 Income taxes $ 50,411 36,204 126,124 41,771 ================================================================================================================ Supplemental noncash investing activity: Acquisitions: Fair value of assets acquired $ --- (4,169) --- 698,643 Fair value of liabilities assumed --- 2,196 --- (145,224) - ---------------------------------------------------------------------------------------------------------------- Net cash payment $ --- (1,973) --- 553,419 ================================================================================================================ 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) COMPREHENSIVE INCOME Effective April 1, 1998 the company adopted Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income," which established standards for reporting and display of comprehensive income and its components. Comprehensive income includes all changes in equity during a period except those resulting from investment by owners or distribution to owners. A reconciliation of net earnings to comprehensive income for the quarters ended September 30 and for the six-month periods ended September 30, 1998 and 1997 are as follows: Quarter Ended Six Months Ended September 30, September 30, ---------------- ------------------ (In thousands) 1998 1997 1998 1997 - --------------------------------------------------------------------------------------------- Net earnings $56,678 64,329 119,450 115,090 Change in cumulative foreign currency translation adjustment --- --- --- (94) - --------------------------------------------------------------------------------------------- Comprehensive income $56,678 64,329 119,450 114,996 ============================================================================================= (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 33.4% and 34% for the quarter and six-month period ended September 30, 1998, respectively, excluding a $2 million (or $.03 per share) reduction in deferred taxes resulting from the lowering of United Kingdom corporate income tax rates which had the effect of reducing the effective tax rate for the quarter and six-month period ended September 30, 1998 to 30.9% and 32.8%, respectively. For the quarter and six-month period ended September 30, 1997 the effective tax rate was 33.8%, excluding a $4 million (or $.07 per share) reduction in deferred taxes resulting from the lowering of United Kingdom corporate income tax rates which had the effect of reducing the effective tax rate for the quarter and six-month period ended September 30, 1997 to 29.2% and 31.3%, respectively. (4) MARINE ACQUISITIONS On May 16, 1997 the company acquired all of the shares of O.I.L. Ltd. (O.I.L.). The total cost of the acquisition of $626 million, which includes $65.6 million of deferred income tax liability, was allocated under the purchase method of accounting based on the fair value of the assets acquired and liabilities assumed, plus amounts for professional fees, severance and other transaction costs and the related deferred tax effect of the acquisition. The results of O.I.L.'s operations have been consolidated with the company's effective May 16, 1997. Pro forma combined results of continuing operations of the company and of O.I.L. including appropriate purchase accounting adjustments for the six-month period ended September 30, 1997 as though the acquisition had taken place on April 1, 1997 were not significantly different than actual results. -5- (5) BUSINESS DISPOSITION On February 20, 1998 the company completed the all cash sale of its compression division for approximately $348 million. The discontinued compression division's operating results for the three-month and six-month periods ended September 30, 1997 were as follows: Three Months Ended Six Months Ended (In thousands) September 30, 1997 September 30, 1997 - ---------------------------------------------------------------------------------------- Revenues $ 27,562 53,719 Operating costs 13,908 27,074 Depreciation and amortization 6,529 13,083 General and administrative 2,442 4,951 - ---------------------------------------------------------------------------------------- 4,683 8,611 Other income 498 721 - ---------------------------------------------------------------------------------------- Earnings before income taxes 5,181 9,332 Income taxes 1,905 3,431 - ---------------------------------------------------------------------------------------- Earnings from discontinued operations $ 3,276 5,901 ======================================================================================== -6- INDEPENDENT ACCOUNTANTS' REVIEW REPORT The Board of Directors and Shareholders Tidewater Inc. We have reviewed the accompanying condensed consolidated balance sheet of Tidewater Inc. as of September 30, 1998, and the related condensed consolidated statements of earnings and cash flows for the three-month and six-month periods ended September 30, 1998 and 1997. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, which will be performed for the full year with the objective of expressing an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the accompanying condensed consolidated financial statements referred to above for them to be in conformity with 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, 1998, and the related consolidated statements of earnings, stockholders' equity and cash flows for the year then ended not presented herein and, in our report dated April 27, 1998, 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, 1998, is fairly stated in all material respects, in relation to the consolidated balance sheet from which it has been derived. Ernst & Young LLP New Orleans, Louisiana October 16, 1998 -7- MANAGEMENT'S DISCUSSION AND ANALYSIS The company provides services and equipment to the international offshore energy industry through the operation of a diversified fleet of marine service vessels. Revenues, net earnings and cash flows from operations are dependent upon the activity level of the vessel fleet which is ultimately dependent upon oil and natural gas prices which, in turn, are determined by the supply/demand relationship for oil and natural gas. The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and related disclosures. In accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the company notes that certain statements set forth in this Quarterly Report on Form 10-Q which provide other than historical information and which are forward looking, involve risks and uncertainties that may impact the company's actual results of operations. The company faces many risks and uncertainties, many of which are beyond the control of the company, including fluctuations in oil and gas prices; changes in capital spending by customers in the energy industry for exploration, development and production; unsettled political conditions, civil unrest and governmental actions, especially in higher risk countries of operations; foreign currency controls and environmental and labor laws. Readers should consider all of these risk factors as well as other information contained in this report. MARINE OPERATIONS Offshore service vessels provide a diverse range of services and equipment to the energy industry. Fleet size, utilization and vessel day rates primarily determine the amount of revenues and operating profit because operating costs and depreciation do not change proportionally when revenue changes. Operating costs principally consist of crew costs, repair and maintenance, insurance, fuel, lube and supplies. Fleet size is the major factor which affects crew costs. The timing and amount of repair and maintenance costs are influenced by vessel age and scheduled drydockings to satisfy safety and inspection requirements mandated by regulatory agencies. Whenever possible, vessel drydockings are done during seasonally slow periods to minimize any impact on vessel operations and are only done if economically justified, given the vessel's age and physical condition. The company's vessels are subject to various statutes and regulations governing their operation. The laws of the United States provide that once a vessel is registered under a flag other than the United States, it cannot thereafter engage in U.S. coastwise trade. Therefore, the company's non-U.S. flag vessels must continue to be operated abroad, and if the company were not able to secure charters abroad for them, and work would otherwise have been available for them in the United States, its operations would be adversely affected. Of the total 698 vessels owned or operated by the company during the quarter ended September 30, 1998, approximately 377 were registered under flags other than the United States and 321 were registered under the U.S. flag. -8- The following table compares revenues and operating expenses (excluding general and administrative expense and depreciation expense) for the quarters and six- month periods ended September 30 and for the quarter ended June 30, 1998. Vessel revenues and operating costs relate to vessels owned and operated by the company while other marine services relate to the activities of the company's shipyards, brokered vessels and other miscellaneous marine-related businesses. Quarter Quarter Ended Six Months Ended Ended September 30, September 30, June 30, ------------------ ----------------- ------- (In thousands) 1998 1997 1998 1997 1998 - -------------------------------------------------------------------------------------- Revenues: Vessel revenues: United States $ 81,081 115,848 191,090 221,804 110,009 International 161,831 139,597 319,455 249,637 157,624 - -------------------------------------------------------------------------------------- 242,912 255,445 510,545 471,441 267,633 Other marine revenues 11,323 14,968 28,567 29,412 17,244 - -------------------------------------------------------------------------------------- $254,235 270,413 539,112 500,853 284,877 ====================================================================================== Operating costs: Vessel operating costs: Crew costs $ 66,409 61,810 134,338 114,558 67,929 Repair and maintenance 32,873 35,190 75,999 69,193 43,126 Insurance 6,227 6,542 12,060 14,992 5,833 Fuel, lube and supplies 8,897 8,434 18,894 16,571 9,997 Other 9,486 7,629 18,670 15,139 9,184 - -------------------------------------------------------------------------------------- 123,892 119,605 259,961 230,453 136,069 Costs of other marine revenues 8,670 11,116 22,327 23,452 13,657 - -------------------------------------------------------------------------------------- $132,562 130,721 282,288 253,905 149,726 ====================================================================================== Marine support services are conducted worldwide with assets that are highly mobile. Revenues are principally derived from offshore service vessels, which regularly and routinely move from one operating area to another, often to and from offshore operating areas in different continents. Because of this asset mobility, revenues and long-lived assets attributable to the company's international marine operations in any one country are not "material" as that term is defined by SFAS No. 131. -9- Marine operating profit and other components of earnings from continuing operations before income taxes for the quarters and six-month periods ended September 30 and for the quarter ended June 30, 1998 consist of the following: Quarter Quarter Ended Six Months Ended Ended September 30, September 30, June 30, ------------------ ----------------- ------- (In thousands) 1998 1997 1998 1997 1998 - ---------------------------------------------------------------------------------------------- Vessel activity: United States $28,881 56,722 82,368 103,973 53,487 International 51,866 41,059 90,918 67,351 39,052 - ---------------------------------------------------------------------------------------------- 80,747 97,781 173,286 171,324 92,539 Gains from asset sales 987 2,850 2,640 6,158 1,653 Other marine services 2,467 3,674 5,859 5,597 3,392 - ---------------------------------------------------------------------------------------------- Operating profit 84,201 104,305 181,785 183,079 97,584 - ---------------------------------------------------------------------------------------------- Equity in net earnings of unconsolidated companies 1,767 1,798 3,529 2,822 1,762 Interest and other debt costs (1,015) (8,691) (1,475) (13,195) (460) Corporate general and administrative (3,129) (3,526) (6,507) (6,481) (3,378) Other income (expenses) 296 (7,660) 623 (7,239) 327 - ---------------------------------------------------------------------------------------------- Earnings from continuing operations before income taxes $82,120 86,226 177,955 158,986 95,835 ============================================================================================== Current quarter operating profit decreased from the comparative amount in fiscal 1998 due to a decline in utilization and average day rates for U.S.-based vessels and higher operating costs offset by an increase in the average day rate for international-based vessels. The prolonged drop in oil price over the past 12 months has resulted in cutbacks in drilling programs the effects from which have been felt thus far primarily in the U.S. Gulf of Mexico market. As the duration of vessel contracts in the Gulf of Mexico normally range from one to three months, the effects of any change in drilling programs are seen quickly. U.S.-based vessel operating profit for the current quarter decreased approximately 49% from the comparative quarter in fiscal 1998 as these cutbacks have reduced vessel demand resulting in lower vessel utilization and lower average day rates. This softening in domestic activity is likely to continue for some time with the decline in the number of working drilling rigs. In addition the expected delivery of a number of newly-constructed supply vessels to various industry competitors throughout the remainder of this year may create even further imbalance in the Gulf of Mexico supply vessel market thereby putting additional downward pressure on vessel utilization and day rates. Higher operating costs as compared with the year earlier quarter are primarily associated with attracting, training and retaining qualified personnel worldwide. Better market conditions in certain international locations resulted in higher average day rates for international-based vessels for the current quarter as compared to the year earlier quarter. In the quarter ended September 30, 1997 the company provided $8 million for the possible adverse outcome relating to several alleged labor-law pay violations claimed by certain current and former employees in various areas of the world where its marine vessel operations are conducted. During the fourth quarter of fiscal 1998 the company entered into an agreement to settle a majority of these claims. Interest and other debt costs were higher for the quarter and six- months ended September 30, 1997 as compared to these same periods ended September 30, 1998 due to debt incurred related to the O.I.L. acquisition on May 16, 1997. By March 31, 1998 all debt borrowed for the O.I.L. acquisition had been repaid. Operating profit for the current six-months ended remained consistent with the respective period in fiscal 1998 as the result of a combination of higher average day rates for the international-based vessels offset by a decrease in utilization for U.S.-based vessels and an increase in operating costs. The international-based vessel operating profit increased by approximately 35% as the result of stronger vessel demand in certain international locations where average day rates improved. Utilization for U.S.-based vessels declined for the current six-month period as the result of cutbacks in drilling programs discussed -10- previously. Higher operating costs resulted principally from the expansion of the fleet through the O.I.L. acquisition effective May 16, 1997 and high costs associated with recruiting, training and retaining vessel personnel. Current quarter operating profit decreased from the preceding quarter due to the decline in U.S.-based vessel utilization and average day rates offset by reduced operating costs. Operating profit for U.S.-based vessels for the quarter ended September 30, 1998 was approximately 46% less than the preceding quarter as the softening in Gulf of Mexico vessel demand resulted in lower vessel utilization and lower average day rates. Current quarter international-based vessel operating profit increased approximately 33% from the preceding quarter as a result of the continued strength of international markets, a slight increase in the number of vessels operating internationally and reduced drydocking costs. During the current quarter the company began operating five vessels owned by a third party. The decreased level of drydocking costs accounted for most of the reduced marine operating costs in the current quarter versus the preceding quarter. Current quarter average day rates for the international-based vessel fleet were essentially unchanged as compared to the preceding quarter. The duration of vessel contracts in most international markets is considerably longer than in the U.S. market. As such, the decline in oil price has not had the immediate impact on the company's international activity that it has had on the domestic activity. However, if oil prices continue at the low level currently being experienced, future international activity could be adversely affected. Vessel utilization is determined primarily by market conditions and to a lesser extent by drydocking requirements. Vessel day rates are determined by the demand created through the level of offshore exploration, development and production spending by energy exploration and production companies relative to the supply of offshore service vessels. Suitability of equipment and the degree of service provided also influence vessel day rates. The following two tables compare day-based utilization percentages and average day rates by vessel class and in total for the quarters and six-month periods ended September 30 and for the quarter ended June 30, 1998: -11- Quarter Quarter Ended Six Months Ended Ended September 30, September 30, June 30, -------------- ----------------- -------- 1998 1997 1998 1997 1998 - ------------------------------------------------------------------------------ UTILIZATION: - ----------- Domestic-based fleet -------------------- Towing-supply/supply 73.2% 91.1 79.3 91.1 85.4 Crew/utility 86.5 88.9 87.7 89.9 88.8 Offshore tugs 55.8 64.3 58.6 63.7 61.1 Other 48.2 60.5 47.0 60.0 45.7 Total 71.0% 84.8 75.5 84.8 79.9 International-based fleet ------------------------- Towing-supply/supply 84.0% 88.0 85.1 88.7 86.3 Crew/utility 88.0 80.9 84.2 81.6 80.2 Offshore tugs 71.7 80.3 73.8 81.7 76.1 Safety/standby 84.6 71.3 82.6 74.4 80.7 Other 69.8 78.1 68.8 80.7 67.9 Total 81.8% 83.9 82.0 84.9 82.2 Worldwide fleet - ------------------------------ Towing-supply/supply 80.0% 89.2 82.9 89.6 85.9 Crew/utility 87.5 84.2 85.6 85.1 83.6 Offshore tugs 65.2 73.6 67.4 74.1 69.6 Safety/standby 84.6 71.3 82.6 74.4 80.7 Other 64.4 73.9 63.5 75.9 62.7 Total 78.0% 84.2 79.7 84.8 81.4 =============================================================================== AVERAGE VESSEL DAY RATES: - ------------------------------ Domestic-based fleet - ------------------------------ Towing-supply/supply $6,331 7,532 7,075 7,261 7,709 Crew/utility 2,121 2,142 2,205 2,058 2,280 Offshore tugs 7,543 6,558 7,600 6,501 7,649 Other 3,053 2,757 3,241 2,692 3,449 Total $5,631 6,308 6,180 6,094 6,658 International-based fleet - ------------------------------ Towing-supply/supply $6,643 5,440 6,583 5,151 6,523 Crew/utility 2,406 2,190 2,425 2,093 2,447 Offshore tugs 4,141 3,494 4,208 3,453 4,273 Safety/standby 6,351 6,138 6,444 6,073 6,541 Other 918 935 897 901 876 Total $5,320 4,438 5,325 4,188 5,330 Worldwide fleet - ------------------------------ Towing-supply/supply $6,536 6,267 6,761 6,023 6,975 Crew/utility 2,303 2,169 2,338 2,077 2,376 Offshore tugs 5,341 4,621 5,453 4,557 5,558 Safety/standby 6,351 6,138 6,444 6,073 6,541 Other 1,317 1,291 1,315 1,229 1,313 Total $5,420 5,127 5,616 4,911 5,806 ============================== ====== ===== ===== ===== ===== - 12 - The following table compares the average number of vessels by class and geographic distribution for the quarters and six-month periods ended September 30 and for the quarter ended June 30, 1998: Quarter Quarter Ended Six Months Ended Ended September 30, September 30, June 30, -------------- ---------------- -------- 1998 1997 1998 1997 1998 - ------------------------------------------------------------------------------------------ Domestic-based fleet: - -------------------- Towing-supply/supply 139 145 141 145 142 Crew/utility 33 39 34 39 35 Offshore tugs 38 40 39 40 40 Other 10 11 10 11 10 - --------------------------------------------------------------------------------------- Total 220 235 224 235 227 - --------------------------------------------------------------------------------------- International-based fleet: - ------------------------- Towing-supply/supply 234 230 231 211 228 Crew/utility 56 57 55 53 54 Offshore tugs 54 55 54 54 53 Safety/standby 29 31 29 29 29 Other 31 35 31 36 32 - --------------------------------------------------------------------------------------- Total 404 408 400 383 396 - --------------------------------------------------------------------------------------- Owned or chartered vessels included in marine revenues 624 643 624 618 623 Vessels withdrawn from active service 25 12 26 13 26 Joint-venture and other 49 60 49 59 48 - --------------------------------------------------------------------------------------- Total 698 715 699 690 697 ======================================================================================= General and administrative expenses for the quarters and six-month periods ended September 30 and for the quarter ended June 30, 1998: Quarter Quarter Ended Six Months Ended Ended September 30, September 30, June 30, -------------- ---------------- -------- (In thousands) 1998 1997 1998 1997 1998 - -------------------------------------------------------------------------------------------- Personnel $11,110 11,094 22,235 21,076 11,125 Office and property 3,327 3,310 6,636 6,380 3,309 Sales and marketing 1,209 1,401 2,680 2,542 1,471 Professional services 1,083 1,347 2,708 2,564 1,625 Other 1,722 1,434 2,933 2,384 1,211 - -------------------------------------------------------------------------------------------- $18,451 18,586 37,192 34,946 18,741 ============================================================================================ Increase in general and administrative expenses for the current six-month period above the same period in fiscal 1998 is primarily the result of the O.I.L. acquisition effective May 16, 1997. LIQUIDITY, CAPITAL RESOURCES AND OTHER MATTERS - ---------------------------------------------- The company's current ratio, level of working capital and amount of cash flows from continuing operations for any year are directly related to fleet activity and vessel day rates. Fleet activity and vessel day rates are ultimately determined by the supply/demand relationship for oil and natural gas. Variations from year-to-year in these items are primarily the result of market conditions. Cash from ongoing operations in combination with available lines of credit provide the company, in management's opinion, with adequate resources to satisfy financing requirements. At September 30, 1998, $175 million of the company's $200 million revolving line of credit was available to satisfy financing needs. Continued payment of dividends, currently $.15 per quarter per common share, is subject to declaration by the Board of Directors. - 13 - Excluding the O.I.L. acquisition included in the six-months ended September 30, 1997, investing activities for the quarter and six-month period ended September 30, 1998 consumed less cash as compared to these same periods ended September 30, 1997 as a result of smaller cash outlays for vessel modifications and capitalized repairs. Financing activities for the six months ended September 30, 1998 used $93.3 million of cash which included a $80 million prepayment on the credit facility and quarterly cash dividends of $.15 per share. In addition $80 million was borrowed primarily for income tax payments of approximately $68 million relating to the sale of the compression division. The company purchased 2,000,000 shares of common stock during the current quarter at an average cost per share of $28.38. For the six months ended September 30, 1998 2,450,000 shares of common stock have been purchased at an aggregate cost of $72.9 million. INFLATION AND CURRENCY FLUCTUATIONS - ----------------------------------- Because of its significant international operations, the company is exposed to currency fluctuations and exchange risks. To minimize the financial impact of these items the company attempts to contract a majority of its services in United States dollars. Day-to-day operating costs are generally affected by inflation. However, because the energy services industry requires specialized goods and services, general economic inflationary trends may not affect the company's operating costs. The major impact on operating costs is the level of offshore exploration, development and production spending by energy exploration and production companies. As this spending increases, prices of goods and services used by the oil and gas industry and the energy services industry will increase. Future improvements in vessel day rates may shield the company from the inflationary effects on operating costs. ENVIRONMENTAL MATTERS - --------------------- During the ordinary course of business the company's operations are subject to a wide variety of environmental laws and regulations. The company attempts to comply with these laws and regulations in order to avoid costly accidents and any related environmental damage. YEAR 2000 - --------- In fiscal 1997 the company began modifying its existing software applications to be year 2000 compliant. As of September 30, 1998, the company is still reviewing and modifying all affected software applications and the computerized operating systems of company vessels. The company expects this process to be complete in advance of year 2000 with the costs of such modifications being immaterial with respect to the company's results of operations and financial position. - 14 - 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 July 23, 1998. 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 ---- -------------------- Robert H. Boh Director Continuing in Office Donald T. Bollinger Director Continuing in Office Arthur R. Carlson Director Continuing in Office Larry T. Hornbeck Director Continuing in Office Hugh J. Kelly Director Continuing in Office John P. Laborde Director Continuing in Office Paul W. Murrill Nominee William C. O'Malley Director Continuing in Office Lester Pollack Nominee J. Hugh Roff, Jr. Nominee Donald G. Russell Nominee C. The company's Stockholders voted as follows with respect to the proposals presented at the meeting: 1. Paul W. Murrill was elected director with 51,764,307 votes cast for and 478,216 votes withheld. 2. Lester Pollack was elected director with 51,806,911 votes cast for and 435,612 votes withheld. 3. J. Hugh Roff, Jr. was elected director with 51,785,859 votes cast for and 456,664 votes withheld. 4. Donald G. Russell was elected director with 51,739,839 votes cast for and 502,584 votes withheld. 5. The selection of Ernst & Young LLP as the company's independent auditors for the fiscal year ending March 31, 1999 was ratified with 52,087,042 votes cast for, 68,617 votes against and 86,864 abstentions. - 15 - Item 6. Exhibits and Reports on Form 8-K -------------------------------- A. At page 18 of this report is the index for those exhibits required to be filed as a part of this report. B. The company did not file any reports during the quarter for which this report is filed. - 16 - 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: October 22, 1998 /s/ William C. O'Malley ------------------------------------------------- William C. O'Malley Chairman of the Board, President and Chief Executive Officer Date: October 22, 1998 /s/ Ken C. Tamblyn ------------------------------------------------- Ken C. Tamblyn Executive Vice President and Chief Financial Officer (Principal Accounting Officer) - 17 - EXHIBIT INDEX Exhibit Number - ------ 15 Letter re Unaudited Interim Financial Information 27 Financial Data Schedule - 18 -