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 SEPTEMBER 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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1440 Canal Street, Suite 2100, New Orleans, Louisiana 70112
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (504) 568-1010
NOT APPLICABLE
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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
--------- ---------
53,095,815 shares of Tidewater Inc. common stock $.10 par value per share were
outstanding on October 21, 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
(In thousands)
September 30, March 31,
ASSETS 1994 1994
- ----------------------------------------------------------------------------------------------------------------------------
Current assets:
Cash, including temporary cash investments $ 64,955 106,788
Trade and other receivables 140,015 140,627
Inventories 39,952 34,561
Other current assets 9,430 4,440
- ----------------------------------------------------------------------------------------------------------------------------
Total current assets 254,352 286,416
- ----------------------------------------------------------------------------------------------------------------------------
Investments in, at equity, and advances to
unconsolidated companies 21,033 21,843
Properties and equipment 1,325,890 1,286,245
Less accumulated depreciation 866,160 838,067
- ----------------------------------------------------------------------------------------------------------------------------
Net properties and equipment 459,730 448,178
Other assets 48,979 53,449
- ----------------------------------------------------------------------------------------------------------------------------
$ 784,094 809,886
============================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------------------------------------
Current liabilities:
Convertible subordinated debentures redeemed
on April 18, 1994 --- 47,526
Current maturities of other long-term debt 2,391 2,730
Accounts payable and accrued expenses 74,062 69,804
Income taxes 10,288 10,230
- ----------------------------------------------------------------------------------------------------------------------------
Total current liabilities 86,741 130,290
- ----------------------------------------------------------------------------------------------------------------------------
Deferred income taxes 47,358 45,099
Long-term debt 1,053 1,952
Accrued property and liability losses 33,335 36,163
Other liabilities and deferred credits 42,108 39,421
Stockholders' equity:
Common stock of $.10 par value;
issued 53,095,353 shares at
September and 53,022,955 shares
at March 5,310 5,302
Additional paid-in capital 332,751 331,690
Retained earnings 246,153 231,001
- ----------------------------------------------------------------------------------------------------------------------------
584,214 567,993
Less:
Cumulative foreign currency
translation adjustment 10,715 11,032
- ----------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 573,499 556,961
Commitments and other matters (Note 3)
- ----------------------------------------------------------------------------------------------------------------------------
$ 784,094 809,886
============================================================================================================================
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)
Quarter Ended Six Months Ended
September 30, September 30,
1994 1993 1994 1993
- ---------------------------------------------------------------------------------
Revenues:
Marine operations $ 115,648 119,750 234,066 235,975
Compression operations 15,599 14,419 30,512 27,351
- ---------------------------------------------------------------------------------
131,247 134,169 264,578 263,326
- ---------------------------------------------------------------------------------
Costs and expenses:
Marine operations 71,967 74,078 144,376 146,715
Compression operations 8,882 8,094 17,509 15,428
Depreciation 20,210 20,940 40,775 41,690
General and administrative 14,711 15,330 29,982 30,363
- ---------------------------------------------------------------------------------
115,770 118,442 232,642 234,196
- ---------------------------------------------------------------------------------
15,477 15,727 31,936 29,130
Other income (expenses):
Foreign exchange gain (loss) 116 (52) (516) (265)
Gains on sales of assets 2,147 2,283 4,471 2,717
Equity in net earnings of
unconsolidated companies 1,008 478 1,944 1,153
Minority interests (127) (464) (692) (1,270)
Interest and miscellaneous income 1,114 1,573 4,253 3,302
Other expense --- (300) --- (300)
Interest expense (241) (2,483) (648) (5,260)
- ---------------------------------------------------------------------------------
4,017 1,035 8,812 77
- ---------------------------------------------------------------------------------
Earnings before income taxes 19,494 16,762 40,748 29,207
Income taxes 7,167 7,620 14,980 11,851
- ---------------------------------------------------------------------------------
Earnings before extraordinary item 12,327 9,142 25,768 17,356
Extraordinary loss on early
extinguishment of debt
(net of income taxes) --- (4,450) --- (4,450)
- ---------------------------------------------------------------------------------
Net earnings $ 12,327 4,692 25,768 12,906
=================================================================================
Primary and fully-diluted
earnings per common share:
Earnings before extraordinary item $ .23 .17 .48 .32
Extraordinary item -- (.08) -- (.08)
- ---------------------------------------------------------------------------------
Net Earnings $ .23 .09 .48 .24
=================================================================================
Weighted average common
shares and equivalents 53,421,828 53,320,685 53,404,653 53,326,160
=================================================================================
Cash dividends declared
per common share $ .10 .10 .20 .10
=================================================================================
See Notes to Unaudited Condensed Consolidated Financial Statements.
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TIDEWATER INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Quarter Ended Six Months Ended
September 30, September 30,
--------------------- ---------------------
1994 1993 1994 1993
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities $ 30,816 27,842 62,048 55,424
- -------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sales of assets 4,281 5,530 8,518 7,254
Additions to properties and equipment (43,184) (14,871) (55,300) (26,934)
Investments in unconsolidated companies,
net of dividends received 551 132 2,868 (1,814)
Investment from minority interests,
net of dividends paid (26) (1,078) (1,655) (1,540)
- -------------------------------------------------------------------------------------------------------------------
Net cash used in investing
activities (38,378) (10,287) (45,569) (23,034)
- -------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Principal payments on long-term debt (830) (51,565) (47,904) (54,094)
Prepayment penalty on early
extinguishment of debt --- (6,473) --- (6,473)
Cash dividends paid (5,309) (5,294) (10,616) (10,583)
Other 203 268 208 558
- -------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (5,936) (63,064) (58,312) (70,592)
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash,
including temporary cash investments (13,498) (45,509) (41,833) (38,202)
- -------------------------------------------------------------------------------------------------------------------
Cash, including temporary cash investments
at beginning of period 78,453 116,276 106,788 108,969
- -------------------------------------------------------------------------------------------------------------------
Cash, including temporary cash investments
at end of period $ 64,955 70,767 64,955 70,767
===================================================================================================================
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest $ 318 1,917 1,658 5,479
Income taxes $ 11,961 6,686 12,773 8,688
===================================================================================================================
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
Primary and fully diluted earnings per share are computed on the
weighted average number of shares and dilutive equivalent shares of
common stock (stock options and restricted stock grants) outstanding
during each period using the treasury stock method.
(3) Commitments and Other Matters
An employment and consulting agreement exists with the company's
chairman of the board and chief executive officer whereby he will
continue as an employee until the 1994 annual stockholders meeting
(October 20, 1994) and thereafter for a period of three years will
serve as a consultant to the company. The terms of the employment
agreement provide, among other things, for an annual salary/consulting
fee. An employment agreement exists with the company's president and
chief operating officer whereby he will serve in such capacity until
the 1994 annual stockholders meeting, and thereafter serve as chairman
of the board, president and chief executive officer for three years.
The terms of the employment agreement provide for an annual base
salary and certain other benefits, including 70,000 shares of
restricted common stock of the company. These restricted shares vest
at varying intervals when the average sales price of the common stock
reaches certain predetermined levels. 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 $6,100,000. 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% for the quarter and six-month period ended September 30, 1994.
For the quarter ended September 30, 1993 additional income tax expense
of approximately $1.9 million was recorded for the revaluation of
deferred tax assets and liabilities at the higher statutory income tax
rates contained in the Omnibus Budget Reconciliation Act passed by
Congress in August 1993. The effective tax rate for the quarter and
six-month period ended September 30, 1993,
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exclusive of the $1.9 million of additional income tax expense, was
34%.
(5) Segment Information
Revenues and operating profits for the company's business segments are
as follows:
(In thousands)
- -------------------------------------------------------------------------------------------------------------
Quarter Ended Six Months Ended
September 30, September 30,
----------------------------- ---------------------------
1994 1993 1994 1993
- -------------------------------------------------------------------------------------------------------------
Revenues:
Marine $ 115,648 119,750 234,066 235,975
Compression 15,599 14,419 30,512 27,351
- -------------------------------------------------------------------------------------------------------------
$ 131,247 134,169 264,578 263,326
=============================================================================================================
Operating profit:
Marine:
From operations $ 16,544 17,132 33,754 32,065
Gain on sales of
assets 1,517 1,586 3,794 1,987
Unusual item --- --- 1,700 ---
- -------------------------------------------------------------------------------------------------------------
Total Marine
operating profit $ 18,061 18,718 39,248 34,052
=============================================================================================================
Compression:
From operations 2,027 1,669 3,762 2,768
Gain on sales of
assets 630 697 677 730
------------------------------------------------------------------------------------------------------------
Total Compression
operating profit $ 2,657 2,366 4,439 3,498
=============================================================================================================
The $ 1.7 million unusual item is related to refunds received from the
settlement of property tax disputes related to prior years. The
settlement amount is included in interest and miscellaneous income in
the Condensed Consolidated Statement of Earnings for the six-month
period ended September 30, 1994.
(6) Proposed Acquisition
On October 18, 1994, the company entered into an agreement to purchase
the natural gas compression assets of Halliburton Company for $205
million in cash. The proposed acquisition will be accounted for as a
purchase and is subject to certain regulatory approvals. It is
anticipated that the acquisition, if approved, will be consummated by
December 31, 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 September 30, 1994 and the related condensed consolidated
statements of earnings and cash flows for the three-month and six-month periods
ended September 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 LLP
New Orleans, Louisiana
October 18, 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.
Fiscal 1995 second quarter operating performance was consistent with the second
quarter of fiscal 1994. Domestically, market conditions are good, although not
as good as a year ago. Internationally, market conditions overall remain
relatively stable.
LIQUIDITY AND CAPITAL RESOURCES
Fiscal 1995 six-month operating activities generated cash in excess of amounts
generated for the corresponding period of fiscal 1994. The amount of cash
generated from operations is primarily determined by the overall level of
Marine operating margins (defined as Marine revenues less Marine operating
expenses, excluding depreciation). Fiscal 1995 six-month Marine operating
margins were greater than the respective fiscal 1994 six-month amount primarily
because of higher day rates for the domestic-based vessel fleet. 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 maintain this condition.
Investing activities for the three-month and six-month periods ended September
30, 1994 rose significantly above corresponding amounts consumed during the
three-month and six-month periods ended September 30, 1993. The principal
components that determine the amount of cash used in investing activities are
additions to properties and equipment and proceeds from sales of assets.
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The following tables compare these two items, by business segment, for the
quarters and six-month periods ended September 30:
(In thousands)
- -----------------------------------------------------------------------------
Quarter Ended Six Months Ended
September 30, September 30,
------------- ----------------
1994 1993 1994 1993
- -----------------------------------------------------------------------------
Additions to Properties
and Equipment:
- ------------------
Marine:
Additional equipment $ 4,185 -- 9,870 2,359
Modifications to
existing equipment 2,715 1,843 6,678 7,877
Other 424 241 1,106 708
- -----------------------------------------------------------------------------
7,324 2,084 17,654 10,944
- -----------------------------------------------------------------------------
Compression:
- --------------
Additional equipment 32,646 11,510 32,646 13,281
Modifications to
existing equipment 1,938 880 3,307 1,934
Other 1,198 291 1,475 544
- -----------------------------------------------------------------------------
35,782 12,681 37,428 15,759
General Corporate 78 106 218 231
- -----------------------------------------------------------------------------
$ 43,184 14,871 55,300 26,934
=============================================================================
Proceeds from sales of assets:
- --------------------------------
Marine equipment 3,072 4,107 7,212 5,511
Compression equipment 1,209 1,423 1,306 1,743
- -----------------------------------------------------------------------------
$ 4,281 5,530 8,518 7,254
=============================================================================
For the quarter ended September 30, 1994 the Marine segment purchased two
offshore tugs. The Marine segment also acquired a supply vessel and a crewboat
previously leased by the company. Compression's equipment additions for the
quarters ended September 30, 1994 and 1993 are for the purchase of
approximately 375 and 120 gas compressors, respectively. Because current
economic conditions generally do not produce an adequate return on investment
relative to the costs of new construction, expansion of the Marine vessel fleet
and Compression rental fleet, for the most part, will continue to come from
existing excess industry supplies.
Fiscal 1995 second quarter financing activities consumed significantly less
cash than the amount for the corresponding period of the prior fiscal year due
to a significant reduction in principal payments on long-term debt. Fiscal
1994 second quarter financing activities included $57.6 million for the early
extinguishment and associated prepayment penalties of notes due in quarterly
installments through 1999. Principal payments in the current quarter consist
of normal scheduled debt repayments on the remaining capitalized lease
obligations.
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.
On October 18, 1994, the company entered into an agreement to purchase the
natural gas compression assets of Halliburton Company for $205 million in cash.
The proposed acquisition will be accounted for as a purchase and is subject to
certain regulatory approvals. It is anticipated that the acquisition, if
approved, will be consummated by December 31, 1994.
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RESULTS OF OPERATIONS
Revenues and operating profits by business segment and by geographic location
for the quarters and six-month periods ended September 30 and for the quarter
ended June 30, 1994 are:
(In thousands)
- ------------------------------------------------------------------------------
Quarter
Quarter Ended Six Months Ended Ended
September 30, September 30, June
------------- ---------------- -------
1994 1993 1994 1993 1994
- ------------------------------------------------------------------------------
Revenues:
Marine:
United States $ 53,363 49,895 107,033 93,435 53,670
Foreign 62,285 69,855 127,033 142,540 64,748
- ------------------------------------------------------------------------------
115,648 119,750 234,066 235,975 118,418
Compression - United States 15,599 14,419 30,512 27,351 14,913
- ------------------------------------------------------------------------------
$ 131,247 134,169 264,578 263,326 133,331
==============================================================================
Operating profit (loss):
Marine:
United States 9,610 8,464 22,145 15,221 12,535
Foreign 8,451 10,254 17,103 18,831 8,652
- ------------------------------------------------------------------------------
18,061 18,718 39,248 34,052 21,187
- ------------------------------------------------------------------------------
Compression 2,657 2,366 4,439 3,498 1,782
Equity in net earnings of
unconsolidated companies 1,008 478 1,944 1,153 936
Other income 629 518 690 1,333 61
General corporate expenses (2,620) (2,835) (4,925) (5,569) (2,305)
Interest expense (241) (2,483) (648) (5,260) (407)
- ------------------------------------------------------------------------------
Earnings before income taxes 19,494 16,762 40,748 29,207 21,254
Income taxes (7,167) (7,620) (14,980) (11,851) (7,813)
- ------------------------------------------------------------------------------
Earnings before
extraordinary item 12,327 9,142 25,768 17,356 13,441
Extraordinary item --- (4,450) --- (4,450) ---
- ------------------------------------------------------------------------------
Net earnings $ 12,327 4,692 25,768 12,906 13,441
==============================================================================
Compared with the same quarter of fiscal 1994 and the first quarter of fiscal
1995, fiscal 1995 second quarter consolidated revenues declined approximately
2.2% and 1.6%, respectively. Earnings before income taxes for the three-month
period ended September 30, 1994 rose 16.3% above the fiscal 1994 second quarter
amount but dropped 8.3% below the prior quarter amount. The increase in
current quarter pre-tax earnings over the corresponding amount for the same
quarter a year ago is primarily attributable to considerably lower interest
expense and higher Compression operating profits. Lower interest expense is a
direct result of the retirement of long-term debt during fiscal 1994 and the
early redemption of the convertible subordinated debentures in April 1994.
Higher Compression operating profits in the current quarter compared to the
year ago period resulted primarily from higher utilization of gas compressors.
Overall, fiscal 1995 second quarter Marine operating profit did not materially
change from the year ago level because the increase in operating profit for the
domestic-based vessel fleet due to higher vessel day rates, was entirely offset
by lower foreign operating profit as a result of a significant drop in the size
of the foreign-based vessel fleet.
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The decline in fiscal 1995 second quarter pre-tax earnings compared with the
prior quarter's amount is principally due to lower Marine operating profits.
Marine operating profits for the quarter ended June 30, 1994 included
approximately $1.7 million of refunds resulting from the settlement of prior
years' property tax disputes and $.8 million of higher gains on sales of
assets.
Fiscal 1995 six-month consolidated revenues were generally flat compared with
the same period of fiscal 1994. However, fiscal 1995 six-month pre-tax
earnings rose approximately 39.5% above the fiscal 1994 six-month pre-tax
amount. Fiscal 1995 six-month earnings includes approximately $1.7 million of
property tax refunds, $1.8 million of higher gains on sales of assets,
considerably lower interest expense, as explained above, and higher Compression
operating profits. Higher Compression operating profits for the six-month
period ended September 30, 1994 compared with the year ago period is due to
higher utilization of a larger fleet of gas compressors.
Net earnings for the quarter and six-month period ended September 30, 1993
included approximately $1.9 million of additional income tax expense for the
cumulative effect of revaluing deferred tax assets and liabilities at the
higher statutory income tax rates contained in the Omnibus Budget
Reconciliation Act passed in August 1993.
Net earnings for the current quarter and six-month period were also adversely
affected by a higher effective tax rate of 37% as compared with 34% for the
corresponding periods of fiscal 1994, excluding the cumulative effect of the
new tax law passed by Congress in August 1993. The higher effective tax rate
is primarily due to the exhaustion of book-based net operating loss
carryforwards.
The extraordinary item for the quarter ended September 30, 1993 resulted from
the early extinguishment of $51.1 million of long-term debt. The extraordinary
item consists of a $4.2 million after-tax prepayment penalty and the write-off
of associated deferred finance costs of $.3 million.
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General and administrative expenses for the quarters and six-month periods
ended September 30 and for the quarter ended June 30, 1994 consist of the
following:
(In thousands)
- -----------------------------------------------------------------------------
Quarter
Quarter Ended Six Months Ended Ended
September 30, September 30, June
-------------- ---------------- -------
1994 1993 1994 1993 1994
- -----------------------------------------------------------------------------
Type:
Personnel $ 9,446 9,525 18,493 19,163 9,047
Office and property 2,217 2,327 4,579 4,695 2,362
Sales and marketing 885 1,027 1,938 2,030 1,053
Professional services 733 887 1,559 2,210 826
Taxes other than income taxes 198 593 788 1,144 590
Other 1,232 971 2,625 1,121 1,393
- -----------------------------------------------------------------------------
$ 14,711 15,330 29,982 30,363 15,271
=============================================================================
Professional services for the six-month period ended September 30, 1993
includes approximately $350,000 of costs associated with a secondary stock
offering. The increase in current quarter and six-month other general and
administrative expense above the respective prior year levels is primarily due
to higher reserves for uncollectible accounts.
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 vessels and shipyard activity
generally contribute nominally to Marine operating profit.
Revenues for the Marine segment for the quarters and six-month periods ended
September 30 and for the quarter ended June 30, 1994 consist of the following:
(In thousands)
- -----------------------------------------------------------------------------
Quarter
Quarter Ended Six Months Ended Ended
September 30, September 30, June
-------------- ---------------- -------
1994 1993 1994 1993 1994
- -----------------------------------------------------------------------------
Owned or chartered vessels:
Domestic $ 45,205 44,642 90,741 85,048 45,536
Foreign 62,224 69,855 126,514 142,540 64,290
- -----------------------------------------------------------------------------
107,429 114,497 217,255 227,588 109,826
Brokered vessels 3,271 2,772 6,140 5,200 2,869
Shipyard sales 4,948 2,481 10,671 3,187 5,723
- -----------------------------------------------------------------------------
$ 115,648 119,750 234,066 235,975 118,418
=============================================================================
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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 and
six-month periods ended September 30 and for the quarter ended June 30, 1994:
Quarter
Quarter Ended Six Months Ended Ended
September 30, September 30, June
-------------- ---------------- -------
1994 1993 1994 1993 1994
- -----------------------------------------------------------------------------
UTILIZATION:
- ------------
Domestic-based fleet:
- ----------------------
Towing Supply/Supply 86.3% 93.6% 85.5% 92.8% 84.6%
Crew/Utility 92.9% 95.0% 92.0% 92.7% 91.0%
Offshore Tugs 63.9% 66.7% 64.9% 65.8% 66.0%
Other 50.9% 69.0% 51.2% 72.8% 51.6%
Total 80.0% 84.8% 79.9% 84.2% 79.8%
Foreign-based fleet:
- ---------------------
Towing Supply/Supply 81.7% 77.4% 81.9% 79.1% 82.2%
Crew/Utility 74.5% 67.9% 74.0% 72.7% 73.5%
Offshore Tugs 71.3% 79.0% 76.0% 80.3% 80.4%
Other 42.0% 75.1% 49.0% 73.0% 55.7%
Total 72.2% 76.0% 74.0% 77.4% 75.9%
Worldwide fleet:
- ----------------
Towing Supply/Supply 83.3% 82.3% 83.1% 83.1% 83.0%
Crew/Utility 84.8% 81.5% 83.8% 82.7% 82.7%
Offshore Tugs 67.5% 72.9% 70.5% 73.3% 73.5%
Other 43.8% 73.4% 49.4% 72.9% 55.0%
Total 75.2% 79.2% 76.3% 79.8% 77.3%
=============================================================================
The domestic fleet consist of vessels operating in U.S. waters while the
foreign fleet consist of vessels operating outside U.S. waters.
Current quarter and six-month utilization of the domestic-based vessel fleet
fell below the respective year ago levels because of decreased demand for
offshore marine services in the U.S. Gulf of Mexico. Utilization of the
domestic-based vessel fleet for the three-month period ended September 30, 1994
was unchanged from the prior quarter level due to a continued favorable level
of demand for offshore marine services in the U.S. Gulf of Mexico despite lower
U.S. natural gas prices. Demand for offshore marine services was consistent
with the prior quarter because of the long-term outlook for higher U.S. natural
gas prices. Lower utilization of a smaller foreign-based vessel fleet for the
current quarter and six-month period compared with the year ago quarter and
six-month period is primarily attributable to significantly lower activity for
the inland towing fleet in Nigeria. The remainder of the foreign-based vessel
fleet for the current quarter and six-month period has operated at utilization
levels consistent with the levels experienced for the respective year ago
periods.
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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 and six-month
periods ended September 30 and for the quarter ended June 30, 1994:
Quarter
Quarter Ended Six Months Ended Ended
September 30, September 30, June
-------------- ---------------- -------
1994 1993 1994 1993 1994
- -----------------------------------------------------------------------------
AVERAGE VESSEL DAY RATES:
- -------------------------
Domestic-based fleet:
- ----------------------
Towing Supply/Supply $ 3,458 3,430 3,599 3,337 3,738
Crew/Utility 1,250 1,227 1,261 1,205 1,272
Offshore Tugs 4,486 4,146 4,310 4,257 4,126
Other 2,971 1,697 2,946 1,709 2,918
Total $ 3,014 2,839 3,062 2,797 3,111
Foreign-based fleet:
- ---------------------
Towing Supply/Supply $ 3,616 3,714 3,611 3,667 3,606
Crew/Utility 1,752 1,677 1,752 1,739 1,752
Offshore Tugs 2,416 3,122 2,606 3,055 2,766
Other 789 551 738 551 701
Total $ 2,917 2,839 2,879 2,828 2,843
Worldwide fleet:
- -----------------
Towing Supply/Supply $ 3,560 3,616 3,607 3,558 3,653
Crew/Utility 1,445 1,415 1,459 1,440 1,473
Offshore Tugs 3,421 3,585 3,385 3,573 3,353
Other 1,313 843 1,178 859 1,071
Total $ 2,957 2,839 2,953 2,816 2,949
==============================================================================
The domestic fleet consist of vessels operating in U.S. waters while the
foreign fleet consist of vessels operating outside U.S. waters.
Although average vessel day rates for the domestic-based vessel fleet for the
current quarter and six-month period are higher than they were for the
corresponding periods of fiscal 1994, they continued to decline from the fiscal
1995 first quarter level. This is primarily due to the continued over supply
of vessels in the U. S. Gulf of Mexico which began in the fourth quarter of
fiscal 1994 and has continued for most of fiscal 1995. Day rates for the
foreign-based vessel fleet have remained relatively stable over the past twelve
months. Near-term improvement in average vessel day rates for the
domestic-based vessel fleet may occur if demand for offshore marine services
increases in the U. S. Gulf of Mexico. Average day rates for the foreign-based
vessel fleet are not expected to change materially due to present market
conditions. Long-term improvement in average vessel day rates for the
worldwide fleet may result if oil and gas industry analysts' predictions of
higher oil and gas prices materialize.
-14-
15
The following tables compare the average number of vessels by class and by
geographic location during the quarters and six-month periods ended September
30 and for the quarter ended June 30, 1994 and the actual September 30, 1994
vessel count:
Average number of vessels during
Actual --------------------------------
vessel Quarter Six Months Quarter
count at Ended Ended Ended
September 30, September 30, September 30, June
- -----------------------------------------------------------------------------
Domestic-based fleet: 1994 1994 1993 1994 1993 1994
- --------------------- ---- ---- ---- ---- ---- ----
Towing Supply/Supply 91 91 85 94 83 95
Crew/Utility 50 49 46 48 46 48
Offshore Tugs 49 49 47 47 46 46
Other 15 15 23 14 23 13
- -----------------------------------------------------------------------------
Total 205 204 201 203 198 202
- -----------------------------------------------------------------------------
Foreign-based fleet:
- ---------------------
Towing Supply/Supply 178 179 195 176 198 175
Crew/Utility 38 39 46 41 46 42
Offshore Tugs 47 46 49 48 50 49
Other 57 57 62 59 63 61
- -----------------------------------------------------------------------------
Total 320 321 352 324 357 327
- -----------------------------------------------------------------------------
Owned or chartered
vessels included in
marine revenues 525 525 553 527 555 529
Vessels withdrawn
from active service 15 17 13 18 13 18
Joint venture owned
vessels 43 43 43 43 43 43
- -----------------------------------------------------------------------------
Total 583 585 609 588 611 590
=============================================================================
Worldwide fleet:
- -----------------
Towing Supply/Supply 307 309 314 309 315 309
Crew/Utility 93 93 99 94 99 97
Offshore Tugs 98 97 98 99 98 97
Other 85 86 98 86 99 87
- -----------------------------------------------------------------------------
Total 583 585 609 588 611 590
=============================================================================
The drop in the average size of the foreign-based vessel fleet from 352 a year
ago to the current 321 is primarily due to several vessels being withdrawn from
active service due to age and anticipated high repair and maintenance costs,
the transfer of vessels to the domestic-based vessel fleet and the return of
vessels to their owners which could not be operated profitably. As the Marine
vessel fleet ages additional vessels may be withdrawn from active service.
-15-
16
The following table compares major components of Marine operating costs and
compares selected statistics for owned and chartered vessels for the quarters
and six-month periods ended September 30 and for the quarter ended June 30,
1994:
(In thousands)
- ------------------------------------------------------------------------------
Quarter
Quarter Ended Six Months Ended Ended
September 30, September 30, June
------------- ---------------- -------
1994 1993 1994 1993 1994
- ------------------------------------------------------------------------------
Crew costs $ 32,576 34,213 64,557 68,197 31,981
Repair and maintenance 15,200 17,510 30,892 36,386 15,692
Vessel insurance 7,300 6,362 14,954 12,508 7,654
Fuel, lube, and supplies 5,188 5,463 9,966 11,205 4,778
Charter fees,
mobilization/demobilization 1,884 2,045 3,713 3,903 1,829
Other 2,580 3,379 4,964 6,477 2,384
- ------------------------------------------------------------------------------
Total operating costs
of owned and chartered
vessels 64,728 68,972 129,046 138,676 64,318
Brokered vessels costs 3,075 2,610 5,612 4,838 2,537
Shipyard costs 4,164 2,496 9,718 3,201 5,554
- ------------------------------------------------------------------------------
$ 71,967 74,078 144,376 146,715 72,409
==============================================================================
For owned and chartered
vessels:
Overall percentage
increase (decrease) in
operating costs from
same period of prior
fiscal year (6.2%) 13.1% (6.9%) 15.4% (7.7%)
==============================================================================
Operating costs as a
percentage of
related revenues 60.3% 60.2% 59.4% 60.9% 58.6%
==============================================================================
Changes in fleet size and utilization are the principal factors which cause
fluctuations in the amount of crew costs. Lower crew costs for the quarter and
six-month period ended September 30, 1994 compared with the corresponding year
ago periods is primarily the result of a decrease in average fleet size
combined with the lower activity level of the domestic-based vessel fleet. The
absence of significant new vessel construction within the energy services
industry over the past 10 to 12 years has caused the average age of the
Company's Marine vessel fleet to rise. Currently the average age of the
Company's Marine vessel fleet is approximately 16 years. Though primarily
dictated by regulatory agencies, the scheduling of vessel drydockings together
with the age of the vessels affects the amount of repair and maintenance
expense in any period. Vessel drydockings, whenever possible, are scheduled to
minimize any impact on revenues. Higher vessel insurance costs for the current
quarter and six-month period are, in part, the result of a much tougher
insurance market which is unwilling to provide past levels of coverage at the
rates experienced in prior periods.
Gains from sales of assets contributed $1.5 million and $3.8 million for the
quarter and six-month period ended September 30, 1994, respectively. For the
quarter and six-month period ended September 30, 1993, gains from asset sales
contributed $ 1.6 million and $2.0 million, respectively.
-16-
17
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 because gross profits 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 and
six-month periods ended September 30 and for the quarter ended June 30, 1994:
(In thousands)
- -----------------------------------------------------------------------------
Quarter
Quarter Ended Six Months Ended Ended
September 30, September 30, June
-------------- ---------------- -------
1994 1993 1994 1993 1994
- -----------------------------------------------------------------------------
Rentals:
Gas compressors $ 8,150 7,668 16,176 14,652 8,026
Air compressors 1,081 1,114 1,852 1,980 771
- -----------------------------------------------------------------------------
Total rental revenues 9,231 8,782 18,028 16,632 8,797
Equipment and parts sales 5,871 5,126 11,495 9,797 5,624
Repair and service 497 511 989 922 492
- -----------------------------------------------------------------------------
$ 15,599 14,419 30,512 27,351 14,913
=============================================================================
As a percentage of total
Compression revenues:
Rentals 59% 61% 59% 61% 59%
Equipment and parts sales 38% 36% 38% 36% 38%
Repair and service 3% 3% 3% 3% 3%
- -----------------------------------------------------------------------------
100% 100% 100% 100% 100%
=============================================================================
Gas compressor utilization is affected primarily by natural gas storage levels
and by the number and age of producing oil and gas wells which, in turn, are
dependent upon the price levels of oil and natural gas. 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.
-17-
18
The following table compares utilization, average rental rates and average
fleet size for gas and air compressors for the quarters and six-month periods
ended September 30 and for the quarter ended June 30, 1994:
Quarter
Quarter Ended Six Months Ended Ended
September 30, September 30, June
-------------- ---------------- -------
1994 1993 1994 1993 1994
- -----------------------------------------------------------------------------
Gas Compressors
(HP based statistics):
Utilization 87.0% 85.5% 86.4% 82.4% 85.8%
Average monthly rental rate $ 16.70 16.58 16.73 16.71 16.77
Average fleet size 187,105 180,307 186,464 177,352 185,951
==============================================================================
Air Compressors
(CFM based statistics):
Utilization 32.0% 39.6% 28.3% 34.6% 24.7%
Average daily rental rate $ .22 .20 .22 .20 0.20
Average fleet size 166,750 155,350 166,000 153,400 165,250
==============================================================================
Fiscal 1995 second quarter and six-month gas compressor utilization climbed
above the corresponding levels of fiscal 1994 because of higher demand for
natural gas compression services. Despite a decline in the price of U.S.
natural gas, demand for natural gas compression services remained firm during
the current quarter because of the long-term favorable outlook for U.S. natural
gas prices. Six-month gas compressor rental revenues also grew as a result of
a larger gas compressor fleet.
Fiscal 1995 second quarter and six-month air compressor utilization fell below
year ago levels due to continued weak demand for air compression services.
Operating costs of the Compression segment consist of the following for the
quarters and six-month periods ended September 30 and for the quarter ended
June 30, 1994:
(In thousands)
- ---------------------------------------------------------------------------
Quarter
Quarter Ended Six Months Ended Ended
September 30, September 30, June
-------------- ---------------- -------
1994 1993 1994 1993 1994
- ---------------------------------------------------------------------------
Field operating expenses:
Wages and benefits $ 1,641 1,572 3,202 3,112 1,561
Repairs and maintenance 1,422 1,523 3,116 2,940 1,694
Other 964 706 1,790 1,390 826
- ---------------------------------------------------------------------------
4,027 3,801 8,108 7,442 4,081
Cost of sales 4,855 4,293 9,401 7,986 4,546
- ---------------------------------------------------------------------------
$ 8,882 8,094 17,509 15,428 8,627
===========================================================================
Field operating costs as a
percentage of rental, repair
and service revenues 41.4% 40.9% 42.6% 42.4% 43.9%
===========================================================================
Costs of sales as a percentage
of related revenues 82.7% 83.7% 81.8% 81.5% 80.8%
===========================================================================
-18-
19
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 $.6 million and $.7 million for
the quarter and six-month period ended September 30, 1994. For the quarter and
six-month period ended September 30, 1993 gains from sales of assets
contributed $.7 million to segment operating profits.
On September 30, 1994 the Compression segment purchased, for $35 million in
cash, all of the assets of Brazos Gas Compressing Company, a subsidiary of
Mitchell Energy & Development Corporation. The purchase includes 370 gas
compressors aggregating more than 58,000 horsepower and increases the gas
compressor fleet to approximately 1,400 units and 245,000 horsepower. The
purchase had no effect on current quarter segment revenues or operating
profits.
INFLATION AND CURRENCY FLUCTUATIONS
Because of its significant foreign operations, the company is exposed to
currency fluctuations and exchange risks. To minimize the financial impact of
these items the company attempts to contract a majority of its services in
United States dollars.
Day-to-day operating costs are generally affected by inflation. However,
because the energy services industry requires specialized goods and services,
general economic inflationary trends may not affect the company's operating
costs. The major impact on operating costs is the level of offshore
exploration and development spending by energy exploration and production
companies. As this spending increases, prices of goods and services used by
the oil and gas industry and the energy services industry will increase.
Future improvements in vessel day 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.
-19-
20
PART II. OTHER INFORMATION
Item 5. Other Information
A. On October 18, 1994 the Company announced that it had entered into an
agreement to purchase the natural gas compression assets of
Halliburton Company for $205 million in cash. The transaction, which
is subject to regulatory approval, is expected to be closed by
December 31, 1994.
B. On October 20, 1994 the company announced that William C. O'Malley
was elected a director. Mr. O'Malley was also appointed Chairman
and Chief Executive Officer of the company effective with the
retirement of John P. Laborde on October 20, 1994. The Company
previously reported that Mr. O'Malley was appointed President and
Chief Operating Officer on June 13, 1994.
C. On October 20, 1994 Austin M. Seay was elected a Vice President of
the Company. Mr. Cseay is Area Manager, Singapore, for Tidewater
Marine International, Inc. Mr. Seay joined the Company in 1978.
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. No reports on Form 8-K have been filed for the quarter ended
September 30, 1994.
-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: October 21, 1994
/s/ Ken C. Tamblyn
Executive Vice President and Chief
Financial Officer
Date: October 21, 1994
/s/ Victor I. Koock
Senior Vice President, Secretary,
and Co-General Counsel
-21-
22
EXHIBIT INDEX
Exhibit
Number
10 Purchase and Sale Agreement dated October 18, 1994 by and between
Tidewater Inc. and Halliburton Company and Halliburton Canada Inc.
11 Statement - Computation of Per Share Earnings
27 Financial Data Schedule