1
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, 1993.
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
________ ________
52,972,678 shares of Tidewater Inc. common stock $.10 par value per share were
outstanding on January 26, 1994. Registrant has no other class of common stock
outstanding.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TIDEWATER INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands of dollars)
December 31, March 31,
1993 1993
------------ ----------
ASSETS
Current assets:
Cash, including temporary cash investments $ 79,981 108,969
Trade and other receivables 148,150 149,010
Inventories 35,363 34,376
Other current assets 4,820 4,817
----------- ---------
Total current assets 268,314 297,172
----------- ---------
Investments in and advances to unconsolidated companies 21,346 24,424
Properties and equipment 1,293,872 1,287,565
Less accumulated depreciation 830,653 802,744
----------- ---------
Net properties and equipment 463,219 484,821
Other assets 43,936 32,331
----------- ---------
$ 796,815 838,748
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt 2,441 8,755
Accounts payable and accrued expenses 63,101 77,223
Income taxes 12,881 9,795
----------- ---------
Total current liabilities 78,423 95,773
----------- ---------
Deferred income taxes 48,567 44,045
Long-term debt 39,301 95,722
Accrued property and liability losses 29,702 20,594
Other liabilities and deferred credits 37,074 34,940
Stockholders' equity:
Common stock of $.10 par value; issued 53,571,703
shares at December and 53,495,491 shares at March 5,357 5,350
Additional paid-in capital 342,306 341,550
Retained earnings 238,589 222,730
----------- ---------
586,252 569,630
Less:
Cumulative foreign currency translation adjustment 11,361 11,112
Treasury stock, 614,037 common shares at December
and 611,661 common shares at March 11,143 10,844
----------- ---------
Total stockholders' equity 563,748 547,674
Commitments and other matters (Note 4)
----------- ---------
$ 796,815 838,748
=========== =========
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
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TIDEWATER INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Thousands of dollars, except share and per share data)
Quarter Ended Nine Months Ended
December 31, December 31,
---------------------------- ----------------------------
1993 1992 1993 1992
---------- ---------- ---------- ----------
Revenues:
Marine operations $ 118,971 107,149 354,946 309,454
Compression operations 14,002 17,363 41,353 45,962
---------- ---------- ---------- ----------
132,973 124,512 396,299 355,416
---------- ---------- ---------- ----------
Costs and expenses:
Marine operations 69,313 66,986 216,028 185,980
Compression operations 7,095 10,626 22,523 26,746
Depreciation 20,889 20,191 62,579 59,727
General and administrative 15,956 14,293 46,319 42,641
---------- ---------- ---------- ----------
113,253 112,096 347,449 315,094
---------- ---------- ---------- ----------
19,720 12,416 48,850 40,322
Other income (expenses):
Foreign exchange gain (loss) (362) (780) (627) (1,327)
Gain on sales of assets 1,578 361 4,295 2,971
Equity in net earnings of
unconsolidated companies 736 850 1,889 1,966
Minority interests (707) (589) (1,977) (1,497)
Interest and miscellaneous income 1,982 1,484 5,284 4,416
Other expense (953) --- (1,253) ---
Interest expense (1,476) (2,930) (6,736) (9,531)
---------- ---------- ---------- ----------
798 (1,604) 875 (3,002)
---------- ---------- ---------- ----------
Earnings from continuing operations
before income taxes 20,518 10,812 49,725 37,320
Income taxes:
On current earnings 6,976 3,495 16,906 11,966
Effect of 1993 tax law change --- --- 1,921 ---
---------- ---------- ---------- ----------
Earnings from continuing operations 13,542 7,317 30,898 25,354
---------- ---------- ---------- ----------
Income from discontinued Container
Shipping segment (net of income taxes) --- 463 --- 1,286
Extraordinary loss on early extinguishment
of debt (net of income taxes) --- --- (4,450) ---
Cumulative effect of accounting change
(net of income taxes) --- --- --- (6,640)
---------- ---------- ---------- ----------
Net earnings $ 13,542 7,780 26,448 20,000
========== ========== ========== ==========
Primary and fully-diluted earnings per
common share:
Continuing operations $ .25 .14 .58 .48
Income from discontinued Container
Shipping segment (net of incometaxes) --- .01 --- .03
Extraordinary loss on early extinguishment
of debt (net of income taxes) --- --- (.08) ---
Cumulative effect of accounting change
(net of income taxes) --- --- --- (.13)
---------- ---------- ---------- ----------
Net earnings $ .25 .15 .50 .38
========== ========== ========== ==========
Weighted average common shares and
equivalents 53,313,262 53,258,328 53,321,900 53,024,503
========== ========== ========== ==========
Cash dividends declared per share $ .10 .075 .20 .225
========== ========== ========== ==========
See accompanying Notes to Unaudited Condensed Consolidated Financial
Statements.
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TIDEWATER INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of dollars)
Quarter Ended Nine Months Ended
December 31, December 31,
------------------ -------------------
1993 1992 1993 1992
-------- ------- ------- -------
Net cash provided by operating
activities $ 39,636 23,421 95,060 68,836
-------- ------ ------ -------
Cash flows from investing activities:
Proceeds from sales of assets 3,112 567 10,366 6,057
Additions to properties and equipment (17,897) (12,042) (44,831) (31,722)
Investments in unconsolidated companies,
net of dividends received 357 (245) (1,457) 1,981
Investment from minority interests, net
of dividends paid (336) --- (1,876) ---
-------- ------- ------- -------
Net cash used in investing activities (14,764) (11,720) (37,798) (23,684)
-------- ------- ------- -------
Cash flows from financing activities:
Principal payments on long-term debt (10,268) (5,242) (64,362) (44,544)
Prepayment penalty paid on early
extinguishment of debt --- --- (6,473) ---
Cash dividends paid (5,295) (3,956) (15,878) (7,894)
Other (95) 156 463 506
-------- ------- ------- -------
Net cash used in financing activities (15,658) (9,042) (86,250) (51,932)
-------- ------- ------- -------
Net increase (decrease) in cash, including
temporary cash investments 9,214 2,659 (28,988) (6,780)
-------- ------- ------- -------
Cash, including temporary cash investments
at beginning of period 70,767 103,941 108,969 113,380
-------- ------- ------- -------
Cash, including temporary cash investments
at end of period $ 79,981 106,600 79,981 106,600
======== ======= ======= =======
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest $ 2,505 3,865 7,984 10,138
Income taxes $ 2,332 2,326 11,020 7,675
======== ======= ======= =======
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
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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 Data
Primary and fully diluted earnings per share data are computed on the
weighted average number of shares and dilutive equivalent shares of
common stock (stock options, restricted stock grants and shares
issuable on conversion of the convertible subordinated debentures)
outstanding during each period using the treasury stock method.
(3) Other Expense
During the third quarter of fiscal 1994 several employees of the
Compression segment elected early retirement as part of a
reorganization of Compression management. A charge of approximately
$953,000 ($629,000 net of income taxes, or $.01 per common share), was
recognized in the third quarter for severance costs associated with
the reorganization and is shown as Other Expense in the Condensed
Consolidated Statements of Earnings.
(4) Commitments and Other Matters
An employment and consulting agreement exists with the company's
chairman of the board, president and chief executive officer whereby
he will continue as an employee until September 1994, and thereafter
for a period of three years will serve as a consultant to the company.
The terms of the agreement provide, among other things, for an annual
salary/consulting fee. Compensation continuation agreements exist
with all other officers of Tidewater Inc., whereby each receives
compensation and benefits in the event that his or her employment is
terminated following certain events
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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
approximately $6.2 million. The amount that could be paid for certain
benefits is not presently determinable.
(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
on current earnings for the quarter and nine-month period ended
December 31, 1993, was 34%. The effective tax rate for the quarter
and nine-month period ended December 31, 1992 was 32%.
(6) Segment Information
The following table provides a comparison of revenues and operating
profits for the company's business segments. Compression operating
profit for the quarter ended December 31, 1993 includes the $953,000
of reorganization cost described previously.
(thousands of dollars)
Quarter Ended Nine Months Ended
December 31, December 31,
--------------------- -------------------
1993 1992 1993 1992
-------- ------- ------- -------
Revenues:
Marine $118,971 107,149 354,946 309,454
Compression 14,002 17,363 41,353 45,962
-------- ------- ------- -------
$132,973 124,512 396,299 355,416
======== ======= ======= =======
Operating profit:
Marine $ 21,886 13,687 55,938 44,167
Compression $ 1,951 2,895 5,449 8,026
======== ======= ======= =======
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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, 1993 and the related condensed consolidated
statements of earnings and cash flows for the three-month and nine-month
periods ended December 31, 1993 and 1992. 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,
1993, 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, 1993 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, 1993 is
fairly presented, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
KPMG PEAT MARWICK
New Orleans, Louisiana
January 18, 1994
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MANAGEMENT'S DISCUSSION AND ANALYSIS
This discussion and analysis provides information which management considers
helpful for a more complete understanding of financial position and results of
operations. It should be read in conjunction with the condensed consolidated
financial statements and the related disclosures.
Domestic demand for offshore marine services remained strong during the third
quarter of fiscal 1994 because favorable U.S. natural gas prices encouraged
continued natural gas exploration and production activity in the U.S. Gulf of
Mexico. Consequently, earnings from continuing operations for the quarter
ended December 31, 1993 rose above the fiscal 1993 third quarter and fiscal
1994 second quarter amounts. If U.S. natural gas prices remain at or climb
above the current level, they should be able to sustain or improve domestic
demand for offshore marine services which, in turn, should favorably impact
future operating results. Demand for offshore marine services in foreign
markets appears stable, although recent declines in the price of oil and the
future outlook for oil prices may adversely impact demand and, in turn, future
operating results. Third quarter and nine-month fiscal 1994 earnings from
continuing operations include a $629,000 after-tax charge, or $.01 per common
share, for severance costs associated with the reorganization of Compression
management.
LIQUIDITY AND CAPITAL RESOURCES
The following table compares selected financial ratios at December 31 and March
31 and highlights the company's financial condition.
December March
--------------- -----
1993 1992 1993
---- ---- ----
Cash to long-term debt 204% 109% 114%
Long-term debt to total capitalization
(long-term debt plus stockholders' equity) 7% 15% 15%
Stockholders' equity to total assets 71% 68% 65%
Operating activities for the quarter and nine-month period ended December 31,
1993 generated net cash in excess of the amounts produced for the corresponding
periods of fiscal 1993. Operating activities for the current quarter also
generated net cash in excess of the fiscal 1994 second quarter amount. The
dominant factor which determines the amount of net cash provided by operating
activities is the level of Marine operating margins (revenues less operating
expenses, excluding depreciation). Higher fiscal 1994 third quarter Marine
operating margins compared with the preceding quarter and the same quarter of
fiscal 1993 are principally due to higher day rates and utilization for the
domestic-based vessel fleet. On a year-to-date basis Marine operating margins
were above the level for the corresponding period of fiscal 1993 which is also
primarily due to higher day rates and utilization for the domestic-based vessel
fleet. For the remainder of fiscal 1994 anticipated utilization and day/rental
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rates for the Marine vessel fleet and Compression rental equipment should
continue to produce cash in excess of the amount needed to satisfy current
obligations.
Investing activities for the quarter and nine-month period ended December 31,
1993 consumed a larger amount of net cash than the amounts used for the
corresponding periods of fiscal 1993. The following table compares additions
to properties and equipment for the company's business segments for the
quarters and nine-month periods ended December 31 and for the quarter ended
September 30, 1993:
(thousands of dollars)
Quarter
Quarter Ended Nine Months Ended Ended
December 31, December 31, Sept. 30,
--------------- ----------------- ---------
1993 1992 1993 1992 1993
---- ---- ---- ---- ----
Business segment:
Marine $14,618 10,229 25,562 27,362 2,084
Compression 3,210 1,396 18,969 3,279 12,681
General corporate and other 69 417 300 1,081 106
------- ------ ------ ------ ------
$17,897 12,042 44,831 31,722 14,871
======= ====== ====== ====== ======
Marine additions for the current quarter include the purchase of two vessels
for approximately $9.4 million. For the corresponding quarter of fiscal 1993
approximately $4.0 million was used for the purchase of several vessels. The
remainder of Marine additions for both quarters consists of additions and/or
modifications to the existing vessel fleet. Compression additions for the
quarter ended December 31, 1993 include approximately $1.6 million for
additional rental equipment. The remainder of Compression additions for the
current quarter and for the quarter ended December 31, 1992 were for additions
and/or modifications to the existing rental fleet. For the past several years
expansion of the Marine vessel fleet and Compression rental fleet has come
primarily from existing excess industry supplies. During the third quarter of
fiscal 1994 construction of new gas compressors began in order to take
advantage of upcoming opportunities. However, major new construction of
Compression rental equipment or Marine vessels will not begin until the
underlying economic circumstances generate an attainable return on investment
considered appropriate by management.
Proceeds from asset sales for the quarter and nine-month period ended December
31, 1993 were primarily the result of the disposal of Marine equipment whereas
proceeds from asset sales for the quarter and nine-month period ended December
31, 1992 were principally from the sale of Compression rental equipment.
Fiscal 1994 financing activities for the quarter and nine-month period ended
December 31, 1993 used a larger amount of net cash than the amount expended
during the corresponding periods of fiscal 1993. Fiscal 1994 and 1993 nine-
month periods include approximately $60.1 million and $35.0 million,
respectively, of long-term debt retired prior to maturity. For the quarter and
nine-month period ended December 31, 1993 principal payments include
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approximately $9.0 million for termination of capitalized lease obligations on
five marine service vessels. For the quarter and nine-month period ended
December 31, 1992 principal payments include approximately $2.9 million for the
redemption, at par value plus accrued interest, of the 7-3/4% convertible
subordinated debentures due 2005.
Several employees of the Compression segment elected early retirement from the
company in connection with a reorganization of Compression management in the
third quarter of fiscal 1994. A $629,000 after-tax charge, or $.01 per common
share, is included in fiscal 1994 third quarter earnings from continuing
operations for severance costs associated with the management reorganization.
The reorganization was done to reduce future overhead costs and to align
segment management more closely with market conditions.
RESULTS OF OPERATIONS
Fiscal 1994 year-to-date consolidated revenues and earnings from continuing
operations grew 11.5% and 21.9%, respectively, beyond the corresponding fiscal
1993 year-to-date amounts. Third quarter consolidated revenues and earnings
from continuing operations for fiscal 1994 rose 6.8% and 85.1%, respectively,
above the corresponding amounts for the third quarter of fiscal 1993. The
growth for both periods is primarily attributable to higher Marine revenues and
operating profits resulting from the considerable improvement in day rates and
utilization for the domestic-based vessel fleet. Other expense for the current
quarter includes approximately $953,000 of severance cost resulting from the
early retirement of several Compression employees. Fiscal 1994 year-to-date
Other expense also includes the reclassification from general and
administrative expense of approximately $300,000 of severance costs related to
the retirement of one Marine employee in the second quarter. The severance
costs have been included in Compression and Marine operating profits. Fiscal
1994 year-to-date net earnings include approximately $1.9 million of additional
income tax expense resulting from the revaluation of deferred tax assets and
liabilities at the higher statutory income tax rates contained in the August
1993 Omnibus Budget Reconciliation Act. Fiscal 1994 year-to-date net earnings
also include a $4.4 million extraordinary charge for prepayment penalties
resulting from the early extinguishment of $51.1 million of long-term debt.
Business segment and geographic distribution of revenues and operating profit
(loss) for the quarters and nine-month periods ended December 31 and for the
quarter ended September 30, 1993 are:
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(thousands of dollars)
Quarter
Quarter Ended Nine Months Ended Ended
December 31, December 31, Sept. 30,
---------------- ----------------- ---------
1993 1992 1993 1992 1993
---- ---- ---- ---- ----
Revenues:
Marine:
United States $ 52,879 35,732 146,314 96,214 49,895
Foreign 66,092 71,417 208,632 213,240 69,855
-------- ------- ------- ------- -------
118,971 107,149 354,946 309,454 119,750
Compression - United
States 14,002 17,363 41,353 45,962 14,419
-------- ------- ------- ------- -------
$132,973 124,512 396,299 355,416 134,169
======== ======= ======= ======= =======
Operating profit (loss):
Marine:
United States 13,558 314 28,779 (302) 8,464
Foreign 8,328 13,373 27,159 44,469 10,254
-------- ------- ------- ------- -------
21,886 13,687 55,938 44,167 18,718
-------- ------- ------- ------- -------
Compression 1,951 2,895 5,449 8,026 2,366
Equity in net earnings
of unconsolidated
companies 736 850 1,889 1,966 478
Other income (expense) 141 (981) 1,474 (170) 518
General corporate
expenses (2,720) (2,709) (8,289) (7,138) (2,835)
Interest expense (1,476) (2,930) (6,736) (9,531) (2,483)
-------- ------- ------- ------- -------
Earnings from continuing
operations before
income taxes 20,518 10,812 49,725 37,320 16,762
Income taxes:
On current earnings (6,976) (3,495) (16,906) (11,966) (5,699)
Effect of 1993 tax law
changes --- --- (1,921) --- (1,921)
-------- ------- ------- ------- -------
Earnings from
continuing
operations $ 13,542 7,317 30,898 25,354 9,142
======== ======= ======= ======= =======
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General and administrative expenses for the quarters and nine-month periods
ended December 31 and for the quarter ended September 30, 1993 consist of the
following:
(thousands of dollars)
Quarter
Quarter Ended Nine Months Ended Ended
December 31, December 31, Sept. 30,
--------------- ----------------- ---------
1993 1992 1993 1992 1993
---- ---- ---- ---- ----
Personnel costs $ 9,403 9,047 27,988 26,520 9,222
Office and property 2,434 2,502 7,165 7,246 2,494
Sales and marketing 1,069 1,064 3,099 3,162 1,027
Professional services 1,188 890 3,398 2,648 887
Taxes other than income taxes 633 458 1,777 1,355 593
Other 1,229 332 2,892 1,710 1,107
------- ------ ------ ------ ------
$15,956 14,293 46,319 42,641 15,330
======= ====== ====== ====== ======
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. The remainder of the increase from the December 31, 1992 year-to-
date period is primarily due to higher incentive plan expenses. Fiscal 1994
third quarter professional services include approximately $250,000 of costs
associated with a secondary stock offering in the third quarter. On a
year-to-date basis 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 primarily
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 utilization and day
rates for the fleet.
Marine segment revenues for the quarters and nine-month periods ended December
31 and for the quarter ended September 30, 1993 consist of the following:
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(thousands of dollars)
Quarter
Quarter Ended Nine Months Ended Ended
December 31, December 31, Sept. 30,
-------------------- -------------------- ---------
1993 1992 1993 1992 1993
-------- -------- -------- -------- ---------
Owned or chartered vessels:
Domestic $ 49,246 34,960 134,294 96,099 44,642
Foreign 66,020 71,401 208,560 213,043 69,855
-------- ------- ------- ------- -------
115,266 106,361 342,854 309,142 114,497
Brokered vessels 2,909 2,578 8,109 5,914 2,772
Shipyard sales 796 989 3,983 2,517 2,481
Intercompany
eliminations(A) --- (2,779) --- (8,119) ---
-------- ------- ------- ------- -------
$118,971 107,149 354,946 309,454 119,750
======== ======= ======= ======= =======
(A) Revenues earned from the charter of equipment to the discontinued
Container Shipping segment.
Marine fleet utilization is affected primarily by market conditions. It is
also influenced to a lesser degree by drydockings resulting from safety and
inspection requirements. 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 for the quarters and nine-month periods ended
December 31 and for the quarter ended September 30, 1993:
Quarter
Quarter Ended Nine Months Ended Ended
December 31, December 31, Sept. 30,
-------------------- -------------------- ---------
1993 1992 1993 1992 1993
-------- -------- -------- -------- ---------
Utilization:
Domestic fleet 85.1% 83.0% 84.5% 78.4% 84.8%
Foreign fleet 75.3% 85.4% 76.7% 83.3% 76.0%
Total fleet 79.0% 84.5% 79.5% 81.5% 79.2%
==== ==== ==== ==== ====
The domestic fleet is comprised of vessels operating in U.S. waters while the
foreign fleet is comprised of vessels operating outside U.S. waters.
Improved utilization of the domestic-based vessel fleet in the current quarter
and nine-month period compared with the corresponding fiscal 1993 periods,
respectively, and for the current quarter compared with the preceding quarter
reflects the increase in demand for offshore marine services resulting from
higher natural gas exploration and drilling activity in the U.S. Gulf of
Mexico. Declining foreign fleet utilization for the three-month and nine-month
periods ended December 31, 1993 compared with the corresponding periods of
fiscal 1993, respectively, results primarily from softening demand for offshore
marine services in certain foreign markets, principally the West African
market.
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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 for the quarters and nine-month periods ended December
31 and for the quarter ended September 30, 1993:
Quarter
Quarter Ended Nine Months Ended Ended
December 31, December 31, Sept. 30,
-------------------- -------------------- ---------
1993 1992 1993 1992 1993
-------- -------- -------- -------- ---------
Average vessel day rates:
Domestic fleet $3,016 2,367 2,874 2,380 2,839
Foreign fleet 2,768 2,665 2,808 2,721 2,839
Total fleet 2,868 2,559 2,834 2,605 2,839
====== ===== ===== ===== =====
The domestic fleet is comprised of vessels operating in U.S. waters while the
foreign fleet is comprised of vessels operating outside U.S. waters.
Considerable improvements in average vessel day rates for the domestic-based
vessel fleet for the current quarter over the preceding quarter and for the
current quarter and nine-month period over the corresponding periods of fiscal
1993 is reflective of the favorable shift in the supply/demand relationship
brought about by the increase in natural gas offshore exploration and drilling
activity in the U.S. Gulf of Mexico. Increases in average vessel day rates for
the foreign-based vessel fleet for the current quarter and nine-month period
above levels generated for the corresponding periods of fiscal 1993,
respectively, are principally due to the mix of different vessel types working
in foreign locations and greater demand for offshore marine services in certain
foreign operating areas. Lower average day rates for the foreign-based vessel
fleet in the current quarter below the fiscal 1994 second quarter level is
primarily due to an unfavorable shift in the mix of vessels working in certain
foreign locations.
The following table compares the average number of vessels by class and
geographic distribution during the quarters and nine-month periods ended
December 31 and for the quarter ended September 30, 1993 and the actual
December 31, 1993 vessel count:
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Average Number of Vessels During
Actual ---------------------------------------------------
vessel Nine Months Quarter
count at Quarter Ended Ended Ended
Dec. 31, December 31, December 31, Sept. 30,
---------- ---------------- ----------------- ---------
1993 1993 1992 1993 1992 1993
---- ---- ---- ---- ---- ----
Class:
Towing Supply/Supply 312 313 305 314 308 314
Crew/Utility 99 100 96 98 90 99
Offshore Tugs 98 98 86 98 86 98
Other 98 98 103 98 102 98
--- --- --- --- --- ---
Total 607 609 590 608 586 609
=== === === === === ===
Geographic:
Domestic 210 208 193 201 187 201
Foreign 341 345 341 352 342 352
--- --- --- --- --- ---
Owned or chartered
vessels included in
marine revenues 551 553 534 553 529 553
Vessels withdrawn from
active service 13 13 13 12 14 13
Joint venture owned
vessels 43 43 43 43 43 43
--- --- --- --- --- ---
Total 607 609 590 608 586 609
=== === === === === ===
Changes in fleet size and utilization are the principal factors which cause
fluctuations in the amount of crew costs. Higher crew costs for the
three-month and nine-month periods ended December 31, 1993 compared with the
respective fiscal 1993 periods are principally due to a larger average fleet
size and the higher activity level of the domestic-based vessel fleet which
generally has higher crewing costs than the foreign-based vessel fleet.
Fluctuations in the level of repair and maintenance expense are primarily due
to an increase in the average age and size of the company's marine fleet and
normal inflationary effects. Currently, the average age of the company's
vessel fleet is approximately 15 years. Scheduling of vessel drydockings,
though primarily dictated by regulatory agencies, affects the amount of repair
and maintenance expense in any period and is also done to minimize any impact
on vessel revenues. Higher fiscal 1994 third quarter and nine-month insurance
costs compared with the same periods of fiscal 1993 are in part the result of a
much tougher insurance market which is unwilling to provide past levels of
coverage at the same rates enjoyed in prior periods. The following table
compares major components of Marine operating costs, the percentage change in
Marine operating costs of owned or chartered vessels compared to the same
period of the prior fiscal year, and provides a comparison of Marine operating
costs of owned or chartered vessels as a percentage of Marine revenues of owned
or chartered vessels for the quarters and nine-month periods ended December 31
and for the quarter ended September 30, 1993:
- 15 -
16
(thousands of dollars)
Quarter
Quarter Ended Nine Months Ended Ended
December 31, December 31, Sept. 30,
---------------- ----------------- ---------
1993 1992 1993 1992 1993
---- ---- ---- ---- ----
Crew costs $33,294 31,561 101,491 90,034 34,213
Repair and maintenance 16,144 16,945 52,530 48,445 17,510
Vessel insurance 6,413 6,053 18,921 16,305 6,362
Fuel, lube, and supplies 5,236 5,206 16,441 15,200 5,463
Charter fees, mobilization/
demobilization 2,085 2,781 5,988 6,289 2,045
Other 2,881 4,164 9,358 10,577 3,379
------- ------ ------- ------ ------
Total operating costs of
owned or chartered vessels 66,053 66,710 204,729 186,850 68,972
Brokered vessels costs 2,633 1,845 7,471 4,865 2,610
Shipyard costs 627 816 3,828 1,973 2,496
Intercompany eliminations(A) --- (2,385) --- (7,708) ---
------- ------ ------- ------ ------
$69,313 66,986 216,028 185,980 74,078
======= ====== ======= ======= ======
For owned or chartered vessels:
Overall increase (decrease)
in operating costs (1.0%) 14.2% 9.6% 8.5% 13.1%
------- ------ ------- ------ ------
Operating costs as a
percentage of related
revenues 57.3% 62.7% 59.7% 60.4% 60.2%
======= ====== ======= ======= ======
(A) Costs incurred from the charter of equipment to the discontinued Container
Shipping segment.
Gains on asset sales contributed approximately $3.0 million and $1.6 million to
Marine operating profits for the year-to-date periods ended December 31, 1993
and 1992, respectively. For the current quarter gains on asset sales were
approximately $1.0 million. Gains on asset sales for the third quarter of
fiscal 1993 were negligible. Operating margins from brokered vessel and
shipyard activities generally contribute nominally to Marine operating profits.
COMPRESSION SEGMENT
The Compression segment provides natural gas and air compression services and
equipment for a variety of applications primarily in the oil and gas industry
and also designs, fabricates and installs engineered compressor systems.
Compression segment operating profit is significantly affected by the mix of
sales and rental revenues. Gross margins on sales are generally less than
operating margins for rental revenues.
The following table compares Compression revenues on a dollar and percentage
basis for the quarters and nine-month periods ended December 31 and for the
quarter ended September 30, 1993:
- 16 -
17
(thousands of dollars)
Quarter
Quarter Ended Nine Months Ended Ended
December 31, December 31, Sept. 30,
---------------- ----------------- ---------
1993 1992 1993 1992 1993
---- ---- ---- ---- ----
Rentals:
Gas compressors $ 8,067 6,657 22,719 19,825 7,668
Air compressors 1,186 1,281 3,166 3,841 1,114
------- ------ ------ ------ ------
Total rental revenues 9,253 7,938 25,885 23,666 8,782
Equipment and parts sales 4,125 8,952 13,922 20,871 5,126
Repair and service 624 473 1,546 1,425 511
------- ------ ------ ------ ------
$14,002 17,363 41,353 45,962 14,419
======= ====== ====== ====== ======
As a percentage of total
Compression revenues:
Rental revenues 66% 46% 63% 52% 61%
Equipment and parts sales 30% 52% 34% 45% 36%
Repair and service 4% 2% 3% 3% 3%
------- ------ ------ ------ ------
100% 100% 100% 100% 100%
======= ====== ====== ====== ======
Gas compressor utilization is affected primarily by the number and age of
producing oil and gas wells which, in turn, is affected by the price level of
oil and natural gas. Gas compressor rentals are generally for a longer term
than are air compressor rentals. Air compressor utilization is heavily
dependent upon short-term customer needs. Suitability, availability and rental
rates for equipment are the major factors which affect utilization of both gas
and air compression equipment. The following table compares utilization,
average rental rates and average fleet size for gas and air compressors for the
quarters and nine-month periods ended December 31 and for the quarter ended
September 30, 1993:
Quarter
Quarter Ended Nine Months Ended Ended
December 31, December 31, Sept. 30,
----------------- ----------------- ---------
1993 1992 1993 1992 1993
---- ---- ---- ---- ----
Gas Compressors:
(Horsepower based
statistics)
Utilization 89.8% 77.8% 84.9% 76.7% 85.5%
Average rental rate $ 16.53 16.84 16.63 16.79 16.58
Average fleet size 181,159 169,419 178,766 171,052 180,307
======== ======= ======= ======= =======
Air Compressors:
(Cubic feet per minute
based statistics)
Utilization 36.0% 41.3% 35.1% 39.5% 39.6%
Average rental rate $ .23 .21 .21 .22 .20
Average fleet size 158,550 161,500 155,117 159,833 155,350
======== ======= ======= ======= =======
The significant increase in gas compressor utilization for the quarter and
nine-month period of fiscal 1994 above the corresponding levels experienced for
- 17 -
18
the quarter and nine-month period of fiscal 1993, and increased utilization in
the current quarter compared with the preceding quarter is due to higher demand
for natural gas compression services as a result of the continued favorable
level of U.S. natural gas prices. In addition to the benefits provided to gas
compression rental revenues from higher utilization, gas compressor rental
revenues in the current quarter and nine-month period have also grown as a
result of a larger compression fleet. Air compression utilization for the
three-month and nine-month periods of fiscal 1994 was below the prior
three-month and nine-month levels, and current quarter utilization was below
the preceding quarter due to weakened demand for air compression services. The
air compression market during fiscal 1994 has generally suffered from stagnant
demand and any improvement is not anticipated in the foreseeable future.
Average rental rates for gas compressors were fairly consistent for all periods
presented and reflects demand for gas compression services given the recent
history of U.S. natural gas prices. Air compressor rental rates have not
significantly changed over the past 12 months which generally reflects the
stagnant market for air compression services.
Revenues from equipment and parts sales for fiscal 1994 have not contributed as
much as in the prior year or quarter primarily due to reduced sales of
engineered products.
Gains on asset sales for the current quarter and nine-month period have
contributed $.6 million and $1.4 million, respectively, to segment operating
profits. Gains on asset sales for the three-month and nine-month periods ended
December 31, 1992 contributed $.4 million and $1.3 million, respectively.
Compression segment operating costs consist of the following for the quarters
and nine-month periods ended December 31 and September 30, 1993:
(thousands of dollars)
Quarter
Quarter Ended Nine Months Ended Ended
December 31, December 31, Sept. 30,
----------------- ----------------- ---------
1993 1992 1993 1992 1993
---- ---- ---- ---- ----
Field operating expenses:
Wages and benefits $1,527 1,419 4,639 4,173 1,572
Repairs and maintenance 1,475 1,343 4,415 4,359 1,523
Other 781 683 2,171 2,048 706
------ ----- ------ ------ -----
3,783 3,445 11,225 10,580 3,801
Costs of sales 3,312 7,181 11,298 16,166 4,293
------ ----- ------ ------ -----
$7,095 10,626 22,523 26,746 8,094
====== ====== ====== ====== =====
Field operating costs as a
percentage of rental and
repair and service
revenue 38.3% 41.0% 40.9% 42.2% 40.9%
====== ====== ====== ====== =====
Costs of sales as a
percentage of related
revenues 80.3% 80.2% 81.2% 77.5% 83.7%
====== ====== ====== ====== =====
- 18 -
19
Field operating expenses relate to gas and air compressor rental operations.
Field operating expenses are generally consistent on a period-to-period basis
and usually vary in the short-term as a result of fluctuations in the level of
repairs and maintenance of compression equipment. Long-term growth in field
operating expenses will occur primarily as a result of increased fleet size and
general inflationary factors. Cost of sales consist primarily of wages and
benefits and material costs associated with the design, fabrication and
installation of packaged compressor systems. Increased costs of sales as a
percentage of related revenues during the current quarter and nine-month period
compared to the same periods a year ago are due to reduced demand for equipment
and parts sales which resulted from more competitive pricing.
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 oil field
waste from drilling sites it previously operated. Given the company's small
participation in the wells, management believes that the ultimate resolution of
this litigation will not have a material adverse affect on the company's
financial position.
- 19 -
20
PART II. OTHER INFORMATION
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 December 28, 1993 reported that
Ward W. Woods, Jr. resigned from the company's Board of Directors
effective December 28, 1993.
C. The company's report on Form 8-K dated December 2, 1993 reported that
William M. Wiseman, Senior Vice President, Donald S. White, Vice
President, and Robert Ashton, Vice President took early retirement
from the company effective around January 31, 1994.
D. The company's report on Form 8-K dated November 9, 1993 reported that
R. C. Lassiter resigned from the company's Board of Directors
effective November 9, 1993.
- 20 -
21
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: January 26, 1994 /s/ KEN C.TAMBLYN
-----------------------------------
Ken C. Tamblyn
Executive Vice President and
Chief Financial Officer
Date: January 26, 1994 /s/ VICTOR I.KOOCK
-----------------------------------
Victor I. Koock
Senior Vice President, Secretary,
and Co-General Counsel
- 21 -
22
EXHIBIT INDEX
The index below describes each exhibit filed as a part of this report.
Exhibit
Number
- -------
4 - Restated Rights Agreement dated December 17, 1993
between Tidewater Inc. and The First National Bank of Boston.
10 - First Amendment to $60,000,000 Amended and Restated
Revolving Credit and Term Loan Agreement dated
September 14, 1993.
11 - Statement - Computation of Per Share Earnings.
- 22 -
23
TIDEWATER INC.
EXHIBITS FOR THE
QUARTERLY REPORT ON FORM 10-Q
QUARTER ENDED DECEMBER 31, 1993
24
EXHIBIT INDEX
The index below describes each exhibit filed as a part of this report.
Exhibit
Number
- -------
4 - Restated Rights Agreement dated December 17, 1993
between Tidewater Inc. and The First National Bank of Boston.
10 - First Amendment to $60,000,000 Amended and Restated
Revolving Credit and Term Loan Agreement dated
September 14, 1993.
11 - Statement - Computation of Per Share Earnings.