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 JUNE 30, 1994
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 - For the Transition Period From
___________________________ to ____________________________
Commission file number 1-6311
TIDEWATER INC.
(Exact name of registrant as specified in its charter)
DELAWARE 72-0487776
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1440 Canal Street, Suite 2100, New Orleans, Louisiana 70112
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (504) 568-1010
NOT APPLICABLE
Former name, former address and former fiscal year, if changed since
last report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or of such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
------- -------
53,079,217 shares of Tidewater Inc. common stock $.10 par value per share were
outstanding on July 19, 1994. Registrant has no other class of common stock
outstanding.
(This document contains 22 sequentially
Numbered pages including exhibits, indices,
and financial statements, notes to financial
statements and schedules. The exhibit index
to this document is located at page 21.)
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TIDEWATER INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
- - -----------------------------------------------------------------------------------------------------------------------------
June 30, March 31,
ASSETS 1994 1994
- - -----------------------------------------------------------------------------------------------------------------------------
Current assets:
Cash, including temporary cash investments $ 78,453 106,788
Trade and other receivables 142,236 140,627
Inventories 35,335 34,561
Other current assets 4,670 4,440
- - -----------------------------------------------------------------------------------------------------------------------------
Total current assets 260,694 286,416
- - -----------------------------------------------------------------------------------------------------------------------------
Investments in, at equity, and advances to
unconsolidated companies 20,500 21,843
Properties and equipment 1,290,551 1,286,245
Less accumulated depreciation 851,952 838,067
- - -----------------------------------------------------------------------------------------------------------------------------
Net properties and equipment 438,599 448,178
Other assets 53,662 53,449
- - -----------------------------------------------------------------------------------------------------------------------------
$ 773,455 809,886
=============================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- - -----------------------------------------------------------------------------------------------------------------------------
Current liabilities:
Convertible subordinated debentures redeemed
on April 18, 1994 --- 47,526
Current maturities of other long-term debt 2,679 2,730
Accounts payable and accrued expenses 63,256 69,804
Income taxes 14,475 10,230
- - -----------------------------------------------------------------------------------------------------------------------------
Total current liabilities 80,410 130,290
- - -----------------------------------------------------------------------------------------------------------------------------
Deferred income taxes 47,874 45,099
Long-term debt 1,595 1,952
Accrued property and liability losses 37,522 36,163
Other liabilities and deferred credits 39,859 39,421
Stockholders' equity:
Common stock of $.10 par value; issued 53,074,983
shares at June and 53,022,955 shares at March 5,307 5,302
Additional paid-in capital 332,550 331,690
Retained earnings 239,135 231,001
- - -----------------------------------------------------------------------------------------------------------------------------
576,992 567,993
Less:
Cumulative foreign currency translation adjustment 10,797 11,032
- - -----------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 566,195 556,961
Commitments and other matters (Note 3)
- - -----------------------------------------------------------------------------------------------------------------------------
$ 773,455 809,886
=============================================================================================================================
See Notes to Unaudited Condensed Consolidated Financial Statements.
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TIDEWATER INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except share and per share data)
- - --------------------------------------------------------------------------------------------------------------
Three Months Ended
June 30,
----------------------------
1994 1993
- - --------------------------------------------------------------------------------------------------------------
Revenues:
Marine operations $ 118,418 116,225
Compression operations 14,913 12,932
- - --------------------------------------------------------------------------------------------------------------
133,331 129,157
- - --------------------------------------------------------------------------------------------------------------
Costs and expenses:
Marine operations 72,409 72,637
Compression operations 8,627 7,334
Depreciation 20,565 20,750
General and administrative 15,271 15,033
- - --------------------------------------------------------------------------------------------------------------
116,872 115,754
- - --------------------------------------------------------------------------------------------------------------
16,459 13,403
Other income (expenses):
Foreign exchange loss (632) (213)
Gain on sales of assets 2,324 434
Equity in net earnings of unconsolidated
companies 936 675
Minority interests (565) (806)
Interest and miscellaneous income 3,139 1,729
Interest expense (407) (2,777)
- - --------------------------------------------------------------------------------------------------------------
4,795 (958)
- - --------------------------------------------------------------------------------------------------------------
Earnings before income taxes 21,254 12,445
Income taxes 7,813 4,231
- - --------------------------------------------------------------------------------------------------------------
Net earnings $ 13,441 8,214
==============================================================================================================
Primary and fully-diluted net earnings per
common share $ .25 .15
==============================================================================================================
Weighted average common shares and equivalents 53,387,343 53,331,448
==============================================================================================================
Cash dividends declared per common share $ .10 ---
==============================================================================================================
See Notes to Unaudited Condensed Consolidated Financial Statements.
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TIDEWATER INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
- - ------------------------------------------------------------------------------------------------------------
Three Months Ended
June 30,
------------------------------
1994 1993
- - ------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities $ 31,232 27,582
- - ------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sales of assets 4,237 1,724
Additions to properties and equipment (12,116) (12,063)
Investments in unconsolidated companies, net of
dividends received 2,317 (1,946)
Investment from minority interests, net of
dividends paid (1,629) (462)
- - ------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (7,191) (12,747)
- - ------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Principal payments on long-term debt (47,074) (2,529)
Cash dividends paid (5,307) (5,289)
Other 5 290
- - ------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (52,376) (7,528)
- - ------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash, including
temporary cash investments (28,335) 7,307
- - ------------------------------------------------------------------------------------------------------------
Cash, including temporary cash investments
at beginning of period 106,788 108,969
- - ------------------------------------------------------------------------------------------------------------
Cash, including temporary cash investments
at end of period $ 78,453 116,276
============================================================================================================
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 1,340 3,562
Income taxes $ 812 2,002
============================================================================================================
See 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 and restricted stock grants) outstanding
during each period using the treasury stock method.
(3) 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 the 1994 annual meeting of
stockholders, 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 their
employment is terminated following certain events relating to a change
in control of the company. The maximum compensation amount that could
be paid under the compensation continuation agreements, based on present
salary levels, is approximately $5,642,000. The amount that could be
paid for certain benefits is not presently determinable.
(4) Income Taxes
Income tax expense for interim periods is based on estimates of the
effective tax rate for the entire fiscal year. The effective tax rate
was 37% and 34% for the quarters ended June 30, 1994 and 1993,
respectively.
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(5) Segment Information
Revenues and operating profits for the company's business segments are as
follows:
(In thousands)
Three Months Ended
June 30,
-----------------------------
1994 1993
- - ------------------------------------------------------------------------------------------------------
Revenues:
Marine $ 118,418 116,225
Compression 14,913 12,932
- - ------------------------------------------------------------------------------------------------------
$ 133,331 129,157
======================================================================================================
Operating profit:
Marine:
From operations $ 17,210 14,932
Gain on sales of assets 2,277 402
Other unusual item 1,700 ---
- - ------------------------------------------------------------------------------------------------------
Total Marine operating profit $ 21,187 15,334
======================================================================================================
Compression:
From operations 1,735 1,099
Gain on sales of assets 47 33
- - ------------------------------------------------------------------------------------------------------
Total Compression operating profit $ 1,782 1,132
======================================================================================================
The $1.7 million other unusual item is related to refunds received from the
settlement of property tax disputes related to prior years. The settlement
amount is included in interest and miscellaneous income in the Condensed
Consolidated Statement of Earnings for the period ended June 30, 1994.
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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 June 30, 1994 and the related condensed consolidated
statements of earnings and cash flows for the three month periods ended June
30, 1994 and 1993. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Tidewater Inc. as of March 31,
1994, and the related consolidated statements of earnings, stockholders'
equity, and cash flows for the year then ended (not presented herein); and in
our report dated May 5, 1994 we expressed an unqualified opinion on those
consolidated financial statements. In our opinion the information set forth in
the accompanying condensed consolidated balance sheet as of March 31, 1994 is
fairly presented, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
KPMG PEAT MARWICK
New Orleans, Louisiana
July 19, 1994
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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.
Both operating performance and financial condition improved during the first
quarter of fiscal 1995. Operating performance was much better in the current
quarter principally due to higher profits from both of the company's business
segments. Financial condition improved for the quarter ended June 30, 1994 due
to the early redemption of the Company's 7% convertible subordinated debentures.
Presently, Tidewater is essentially debt-free.
LIQUIDITY AND CAPITAL RESOURCES
Fiscal 1995 first quarter operating activities generated higher cash than the
amounts produced for the quarter ended June 30, 1993. Marine operating
margins, defined as revenues less operating expenses, excluding depreciation,
primarily determine the overall level of cash from operations. Current quarter
Marine operating margins were higher than the corresponding quarter of the
prior fiscal year primarily because of better market conditions and lower
vessel operating costs. Operating activities have generated and continue to
generate cash in excess of amounts required to satisfy current obligations.
Utilization levels and day/rental rates expected for the remainder of fiscal
1995 for the Marine vessel fleet and Compression rental equipment should
preserve this condition.
Investing activities for the quarter ended June 30, 1994 consumed a smaller
amount of cash than was consumed for the first and fourth quarters of fiscal
1994. The principal components that primarily determine the amount of cash
used for investing activities are additions to properties and equipment and
proceeds from sales of assets. The following tables compare these two items by
business segment for the quarters ended June 30, and March 31:
(In thousands)
- - ---------------------------------------------------------------------------------------------------------------
June March
------------------------- ----------
1994 1993 1994
- - ---------------------------------------------------------------------------------------------------------------
Additions to Properties and Equipment:
Marine:
Additional equipment $ 5,685 2,359 ---
Modifications/additions to
existing equipment 3,963 6,034 6,212
Other 682 467 620
- - ---------------------------------------------------------------------------------------------------------------
10,330 8,860 6,832
- - ---------------------------------------------------------------------------------------------------------------
Compression:
Additional equipment --- 1,771 1,068
Modifications/additions to
existing equipment 1,369 1,054 342
Other 277 253 166
- - ---------------------------------------------------------------------------------------------------------------
1,646 3,078 1,576
General Corporate 140 125 80
- - ---------------------------------------------------------------------------------------------------------------
$ 12,116 12,063 8,488
===============================================================================================================
Proceeds from sales of assets:
Marine equipment 4,140 1,404 1,021
Compression equipment 97 320 96
- - ---------------------------------------------------------------------------------------------------------------
$ 4,237 1,724 1,117
===============================================================================================================
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During the quarter ended June 30, 1994 the Marine segment exercised purchase
options on four supply vessels previously operated under long-term lease and
purchased one other vessel. Fiscal 1994 first quarter Marine additions include
one towing supply vessel and one crewboat. Compression additional equipment
for the quarter ended June 30, 1993 was for the purchase of several gas
compressors. Because current economic circumstances generally do not produce
an adequate return on investment relative to the costs of new construction,
expansion of the Marine vessel fleet and Compression rental fleet will continue
to come primarily from existing industry supplies.
Cash used in financing activities for the three-month period ended June 30,
1994 was significantly greater than the amounts consumed for the quarters ended
June 30, 1993 and March 31, 1994 due to increased principal payments on
long-term debt. Fiscal 1995 first quarter principal payments on long-term debt
include approximately $46 million for the April 18, 1994 redemption of the then
outstanding 7% convertible subordinated debentures due 2010. Prior to
redemption, holders converted $1,113,000 of debentures into 44,520 shares of
company common stock. Principal payments on long-term debt for the first and
fourth quarters of fiscal 1994 consist of normal scheduled debt repayments.
Due to the timing of the fiscal 1994 meetings of the Board of Directors a
quarterly dividend was not declared during the quarter ended June 30, 1993.
For the current quarter a dividend of $.10 per common share was declared and
paid. Continued dividend payments are subject to declaration by the Board of
Directors and are subject to limitation by the Company's revolving credit and
term loan agreement.
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RESULTS OF OPERATIONS
Revenues and operating profit by business segment and geographic distribution
for the quarters ended June 30 and March 31 are:
(In thousands)
- - --------------------------------------------------------------------------------------------------------------
June March
------------------------- ---------
1994 1993 1994
- - --------------------------------------------------------------------------------------------------------------
Revenues:
Marine:
United States $ 53,670 43,540 50,948
Foreign 64,748 72,685 60,707
- - --------------------------------------------------------------------------------------------------------------
118,418 116,225 111,655
Compression - United States 14,913 12,932 14,118
- - --------------------------------------------------------------------------------------------------------------
$ 133,331 129,157 125,773
==============================================================================================================
Operating profit (loss):
Marine:
United States 12,535 6,757 6,239
Foreign 8,652 8,577 3,606
- - --------------------------------------------------------------------------------------------------------------
21,187 15,334 9,845
- - --------------------------------------------------------------------------------------------------------------
Compression 1,782 1,132 1,446
Equity in net earnings of unconsolidated
companies 936 675 797
Other income (expense) 61 815 (440)
General corporate expenses (2,305) (2,734) (2,517)
Interest expense (407) (2,777) (1,203)
Income taxes (7,813) (4,231) (2,696)
- - ---------------------------------------------------------------------------------------------------------------
Earnings before extraordinary item 13,441 8,214 5,232
Extraordinary item --- --- (7,520)
- - ---------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ 13,441 8,214 (2,288)
===============================================================================================================
Consolidated revenues and earnings before extraordinary item for the first
quarter of fiscal 1995 rose above the prior year's first and fourth quarter
amounts. Higher Marine and Compression operating profits and considerably
lower interest expense were the primary factors generating the increase in
earnings before extraordinary item. Included in Marine operating profit in the
current quarter is approximately $1.7 million of refunds resulting from the
settlement of prior years property tax disputes and $2.3 million of gain on
sales of assets. Excluding those items, higher fiscal 1995 first quarter
Marine operating profit compared with the same quarter of fiscal 1994 is
primarily due to higher average vessel day rates for vessels operating in the
U.S. Gulf of Mexico combined with lower vessel operating costs. Higher
utilization of the domestic-based vessel fleet and higher utilization and
average day rates for the foreign-based vessel fleet as a result of increased
offshore activity following the normal seasonal slowdown, are the principal
reasons for the increase in current quarter Marine operating profit compared
with the prior quarter amount. Higher fiscal 1995 first quarter Compression
operating profit compared with the same period of fiscal 1994 is primarily due
to higher utilization of a larger fleet of gas compressors and a higher volume
of engineered product sales. Higher sales of engineered products was the
primary reason for the increase in current quarter Compression operating profit
over the prior quarter. Lower interest expense for the three months ended June
30, 1994 is directly attributable to the early retirements of long-term debt in
the
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prior fiscal year and to a lesser extent, the current quarter redemption of the
convertible subordinated debentures. Higher income taxes are principally due
to the exhaustion of book-based net operating loss carryforwards.
The extraordinary item in the fourth quarter of fiscal 1994 is a result of the
April 18, 1994 early redemption of the remaining outstanding 7% convertible
subordinated debentures due 2010. The extraordinary charge consists of a
$644,000 prepayment premium and the write-off of unamortized original issue
discount and deferred finance costs of $10,926,000, less $4,050,000 of income
tax benefits.
General and administrative expenses for the quarters ended June 30 and March 31
consist of the following components:
(In thousands)
- - --------------------------------------------------------------------------------------------------------------
June March
------------------------- ---------
1994 1993 1994
- - --------------------------------------------------------------------------------------------------------------
Type:
Personnel $ 9,047 9,638 9,775
Office and property 2,362 2,369 2,675
Sales and marketing 1,053 1,003 1,092
Professional services 826 1,323 1,182
Taxes other than income taxes 590 551 615
Other 1,393 149 1,438
- - --------------------------------------------------------------------------------------------------------------
$ 15,271 15,033 16,777
==============================================================================================================
Fiscal 1994 first quarter personnel costs include approximately $500,000 of
severance costs related to the termination of several employees in Nigeria.
Professional services for the first quarter of fiscal 1994 include
approximately $350,000 for costs associated with a secondary common stock
offering.
MARINE SEGMENT
The marine segment provides a diverse range of services and equipment to the
offshore oil and gas industry. Because operating costs and depreciation do not
change proportionally with changes in revenues, the amount of operating profit
for the Marine segment is primarily determined by vessel fleet utilization and
day rates. Operating margins from brokered vessel and shipyard activity
generally contribute nominally to Marine operating profit.
Revenues for the Marine segment for the quarters ended June 30 and March 31
consist of the following:
(In thousands)
- - --------------------------------------------------------------------------------------------------------------
June March
------------------------- ---------
1994 1993 1994
- - --------------------------------------------------------------------------------------------------------------
Owned or chartered vessels:
Domestic $ 45,536 40,406 44,432
Foreign 64,290 72,685 60,609
- - --------------------------------------------------------------------------------------------------------------
109,826 113,091 105,041
Brokered vessels 2,869 2,428 1,975
Shipyard sales 5,723 706 4,639
- - --------------------------------------------------------------------------------------------------------------
$ 118,418 116,225 111,655
==============================================================================================================
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Marine fleet utilization is affected primarily by market conditions. It is
also influenced to a lesser degree by drydockings to satisfy safety and
inspection requirements. Marine vessels must undergo periodic inspections to
remain properly classified and certified. These inspections, whenever possible,
are done during seasonally slow periods to minimize the impact on vessel
operations and are only done if the vessel is considered to have continuing
economic viability. The following table compares day-based Marine fleet
utilization percentages by vessel class and in total for the quarters ended
June 30 and March 31:
June March
----------------------- --------
1994 1993 1994
- - --------------------------------------------------------------------------------------------------------------
UTILIZATION:
Domestic-based fleet:
Towing Supply/Supply 84.6% 91.9% 82.9%
Crew/Utility 91.0% 90.5% 89.8%
Offshore Tugs 66.0% 64.8% 57.2%
Other 51.6% 76.8% 44.5%
Total 79.8% 83.5% 75.5%
Foreign-based fleet:
Towing Supply/Supply 82.2% 80.7% 76.1%
Crew/Utility 73.5% 77.6% 71.4%
Offshore Tugs 80.4% 81.6% 77.4%
Other 55.7% 70.9% 69.9%
Total 75.9% 78.7% 74.6%
Worldwide fleet:
Towing Supply/Supply 83.0% 83.9% 78.5%
Crew/Utility 82.7% 84.0% 80.9%
Offshore Tugs 73.5% 73.8% 67.2%
Other 55.0% 72.5% 64.3%
Total 77.3% 80.4% 74.9%
==============================================================================================================
The domestic fleet consist of vessels operating in U.S. waters while the
foreign fleet consist of vessels operating outside U.S. waters.
Utilization of the domestic-based vessel fleet for the current quarter fell
below last year's first quarter level due to a continued oversupply of vessels
in the U.S. Gulf of Mexico which began during the fourth quarter of fiscal
1994. Higher utilization of both the domestic and foreign-based vessel fleets
in the current quarter compared with the prior quarter is primarily
attributable to a combination of higher activity in certain operating locations
and fewer vessel drydockings. Predictions by oil and gas industry analysts of
1994 second-half improvement in the supply/demand relationship for oil, if it
materializes, may have a favorable effect on future Marine fleet utilization
levels.
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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 by class and in total for the quarters ended June 30,
and March 31:
June March
-------------------------- ---------
1994 1993 1994
- - --------------------------------------------------------------------------------------------------------------
AVERAGE VESSEL DAY RATES:
Domestic-based fleet:
Towing Supply/Supply $ 3,738 3,235 3,798
Crew/Utility 1,272 1,182 1,259
Offshore Tugs 4,126 4,379 4,309
Other 2,918 1,721 2,269
Total $ 3,111 2,752 3,134
Foreign-based fleet:
Towing Supply/Supply $ 3,606 3,622 3,604
Crew/Utility 1,752 1,794 1,753
Offshore Tugs 2,766 2,992 2,728
Other 701 551 633
Total $ 2,843 2,817 2,743
Worldwide fleet:
Towing Supply/Supply $ 3,653 3,501 3,676
Crew/Utility 1,473 1,464 1,469
Offshore Tugs 3,353 3,561 3,412
Other 1,071 876 882
Total $ 2,949 2,793 2,896
==============================================================================================================
The domestic fleet consist of vessels operating in U.S. waters while the
foreign fleet consist of vessels operating outside U.S. waters.
While average vessel day rates for the domestic-based vessel fleet in the
current quarter were well above year ago levels, they were down slightly from
fourth quarter fiscal 1994 levels. This is reflective of a domestic market
which experienced rising average day rates for the first three quarters of
fiscal 1994 and falling day rates, primarily due to the oversupply of vessels
beginning in the fourth quarter of fiscal 1994 and continuing through the
current quarter. At the same time, average day rates of the foreign-based
vessel fleet have remained relatively stable. If oil and gas industry
analysts' predictions of higher exploration and development spending during the
second half of calendar 1994 materialize, then, average vessel day rates for
the Marine vessel fleet should be positively affected. However, given the
volatile nature of demand for offshore marine services, any increase in average
vessel day rates is not assured.
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The following tables compare the average number of vessels by class and
geographic distribution during the quarters ended June 30 and March 31 and the
actual June 30, 1994 vessel count:
Actual
vessel Average number of vessels
count at during quarter ended
June 30, June 30, March 31,
- - --------------------------------------------------------------------------------------------------------------
1994 1994 1993 1994
---- ---- ---- ----
Domestic-based fleet:
Towing Supply/Supply 91 95 80 97
Crew/Utility 48 48 46 47
Offshore Tugs 47 46 45 48
Other 15 13 22 16
- - --------------------------------------------------------------------------------------------------------------
Total 201 202 193 208
- - --------------------------------------------------------------------------------------------------------------
Foreign-based fleet:
Towing Supply/Supply 178 175 200 180
Crew/Utility 41 42 46 44
Offshore Tugs 48 49 51 47
Other 61 61 63 58
- - --------------------------------------------------------------------------------------------------------------
Total 328 327 360 329
- - --------------------------------------------------------------------------------------------------------------
Owned or chartered vessels
included in marine revenues 529 529 553 537
Vessels withdrawn from
active service 16 18 14 16
Joint venture owned vessels 43 43 43 43
- - --------------------------------------------------------------------------------------------------------------
Total 588 590 610 596
==============================================================================================================
Worldwide fleet:
Towing Supply/Supply 306 309 315 311
Crew/Utility 96 97 100 98
Offshore Tugs 97 97 99 97
Other 89 87 96 90
- - --------------------------------------------------------------------------------------------------------------
Total 588 590 610 596
==============================================================================================================
During fiscal 1994 several vessels under bareboat charter were returned to
owners. Several additional vessels were withdrawn from active service because
of their age and anticipated high repair and maintenance costs. Vessels in the
Marine fleet may continue to be withdrawn from active service as they become
uneconomical to operate.
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The following table compares major components of Marine operating costs and
compares selected statistics for owned and chartered vessels for the quarters
ended June 30 and March 31:
(In thousands)
- - --------------------------------------------------------------------------------------------------------------
June March
-------------------------- --------
1994 1993 1994
- - --------------------------------------------------------------------------------------------------------------
Crew costs $ 31,981 33,984 33,883
Repair and maintenance 15,692 18,876 16,096
Vessel insurance 7,654 6,146 5,997
Fuel, lube, and supplies 4,778 5,742 5,855
Charter fees, mobilization/demobilization 1,829 1,858 2,125
Other 2,384 3,098 2,736
- - --------------------------------------------------------------------------------------------------------------
Total operating costs of owned and
chartered vessels 64,318 69,704 66,692
Brokered vessels' costs 2,537 2,228 1,803
Shipyard costs 5,554 705 4,413
- - --------------------------------------------------------------------------------------------------------------
$ 72,409 72,637 72,908
==============================================================================================================
For owned and chartered vessels:
Overall percentage increase (decrease)
in operating costs from same quarter
of prior fiscal year (7.7%) 17.9% (2.2%)
==============================================================================================================
Operating costs as a percentage of
related revenues 58.6% 61.6% 63.5%
==============================================================================================================
Changes in fleet size and utilization are the principal factors which cause
fluctuations in the amount of crew costs. The absence of significant new
vessel construction within the energy services industry over the past 10 to 12
years has caused the average age of the Company's Marine vessel fleet to rise.
Currently the average age of the Company's Marine vessel fleet is approximately
15 years. Though primarily dictated by regulatory agencies, the scheduling of
vessel drydockings affects the amount of repair and maintenance expense in any
period. Vessel drydockings, whenever possible, are scheduled to minimize any
impact on vessel revenues. Higher fiscal 1995 first quarter insurance costs
compared with the respective first and fourth quarter amounts of fiscal 1994
are partially 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.
Gains from sales of assets contributed $2.3 million, $.4 million and $.3
million to Marine operating profits for the quarters ended June 30, 1994 and
1993 and March 31, 1994, respectively.
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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, and
petrochemical industries. It also designs, fabricates and installs engineered
compressor systems. Compression operating profit is significantly affected by
the mix of sales and rental revenues. Gross profit on sales are generally less
than operating margins for rental revenues.
Compression segment revenues are compared in the following table on a dollar
basis and as a percentage of total Compression revenues for the quarters ended
June 30 and March 31:
(In thousands)
- - --------------------------------------------------------------------------------------------------------------
June March
-------------------------- --------
1994 1993 1994
- - --------------------------------------------------------------------------------------------------------------
Rentals:
Gas compressors $ 8,026 6,984 8,149
Air compressors 771 866 948
- - --------------------------------------------------------------------------------------------------------------
Total rental revenues 8,797 7,850 9,097
Equipment and parts sales 5,624 4,671 4,463
Repair and service 492 411 558
- - --------------------------------------------------------------------------------------------------------------
$ 14,913 12,932 14,118
==============================================================================================================
As a percentage of total
Compression revenues:
Rental 59.0% 60.7% 64.4%
Equipment and parts sales 37.7% 36.1% 31.6%
Repair and service 3.3% 3.2% 4.0%
- - --------------------------------------------------------------------------------------------------------------
100.0% 100.0% 100.0%
==============================================================================================================
Gas compressor utilization is affected primarily by natural gas storage levels
and by the number and age of producing oil and gas wells which, in turn, are
dependent upon the price level of oil and natural gas. Air compressor
utilization is heavily dependent upon short-term customer needs. Suitability,
availability and rental rates for equipment are also major factors which affect
utilization of both gas and air compression equipment. Gas compressor rentals
are generally for a longer term than are air compressor rentals. The following
table compares utilization, average rental rates and average fleet size for gas
and air compressors for the quarters ended June 30 and March 31:
June March
-------------------------- --------
1994 1993 1994
- - --------------------------------------------------------------------------------------------------------------
Gas Compressors (Horsepower based statistics):
Utilization 85.8% 79.1% 87.7%
Average monthly rental rate $ 16.77 16.84 17.00
Average fleet size 185,951 174,730 182,198
==============================================================================================================
Air Compressors (CFM based statistics):
Utilization 24.7% 29.5% 27.8%
Average daily rental rate $ 0.20 0.21 0.23
Average fleet size 165,250 151,450 164,650
==============================================================================================================
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Fiscal 1995 first quarter gas compressor utilization climbed above the fiscal
1994 first quarter level due to higher demand for natural gas compression
services as a result of higher U. S. natural gas prices. Gas compressor rental
revenues for the current period were also higher than the corresponding year
ago period because of a larger gas compressor fleet. The drop in gas
compressor utilization in the current quarter from the fiscal 1994 fourth
quarter level reflects the normal seasonal slowdown of activity. The slowdown
of activity is normally used to repair and modify gas compressors for new work.
Fiscal 1995 first quarter air compressor utilization and average daily rental
rates fell below the respective levels experienced for the first and fourth
quarters of fiscal 1994 as a result of less demand for air compression
services.
Revenues from equipment and parts sales climbed 20.4% and 26.0% above the
respective first and fourth quarter amounts as a result of increased sales of
engineered products.
Operating costs of the Compression segment consist of the following for the
quarters ended June 30 and March 31:
(In thousands)
- - --------------------------------------------------------------------------------------------------------------
June March
-------------------------- --------
1994 1993 1994
- - --------------------------------------------------------------------------------------------------------------
Field operating expenses:
Wages and benefits $ 1,561 1,540 1,570
Repairs and maintenance 1,694 1,417 1,629
Other 826 684 936
- - --------------------------------------------------------------------------------------------------------------
4,081 3,641 4,135
Cost of sales 4,546 3,693 3,680
- - --------------------------------------------------------------------------------------------------------------
$ 8,627 7,334 7,815
==============================================================================================================
Field operating costs as a percentage
of rental, repair, and service revenues 43.9% 44.1% 42.8%
==============================================================================================================
Costs of sales as a percentage of
related revenues 80.8% 79.1% 82.5%
==============================================================================================================
Field operating expenses relate to gas and air compressor rental operations.
Field operating expenses are generally consistent from period-to-period and
usually vary in the short-term due to fluctuations in the level of repairs and
maintenance expense. Long-term growth in field operating expenses will occur
primarily as a result of increased fleet size and general inflationary factors.
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 ended June 30, 1994 and 1993 and March 31, 1994.
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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.
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PART II. OTHER INFORMATION
Item 5. Other information
Item 6. Exhibits and Reports on Form 8-K.
A. At page 21 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 June 13, 1994 reported that its
Board of Directors had appointed William C. O'Malley as chairman,
president, and chief executive officer to succeed John P. Laborde who is
retiring in the fall of 1994.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
TIDEWATER INC.
(Registrant)
Date: July 21, 1994 /s/ KEN C. TAMBLYN
Ken C. Tamblyn
Executive Vice President and
Chief Financial Officer
Date: July 21, 1994 /s/ VICTOR I. KOOCK
Victor I. Koock
Senior Vice President, Secretary,
and Co-General Counsel
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EXHIBIT INDEX
Exhibit
Number
- - ------
11 Statement - Computation of Per share Earnings
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