SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED] - For the Fiscal Year Ended MARCH 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED] - 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 No.)
1440 CANAL STREET, NEW ORLEANS, LOUISIANA 70112
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (504) 568-1010
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
Common Stock, par value $0.10 New York Stock Exchange, Pacific Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange, Pacific Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None
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 for such shorter period that the
registrant was required to file such reports), and (2) has been subject to the
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
As of May 2, 1996, the aggregate market value of the voting stock held by
non-affiliates of the registrant was approximately $2,360,936,025.
61,919,754 shares of Tidewater Inc. common stock $0.10 par value per share
were outstanding on May 2, 1996. Registrant has no other class of common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for Registrant's 1996 Annual Meeting of
Stockholders are incorporated into Part III of this report.
TABLE OF CONTENTS
PART I
PAGE
ITEM NUMBER
- ---- ------
1 & 2. Business and Properties............................................. 3
3. Legal Proceedings................................................... 7
4. Submission of Matters to a Vote of Security Holders................. 7
4A. Executive Officers of the Registrant................................ 8
PART II
5. Market for the Registrant's Common Stock and Related
Stockholder Matters............................................ 9
6. Selected Financial Data.............................................10
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................11
8. Financial Statements and Supplementary Data.........................20
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure............................20
PART III
10. Directors and Executive Officers of the Registrant..................20
11. Executive Compensation..............................................20
12. Security Ownership of Certain Beneficial Owners and Management......20
13. Certain Relationships and Related Transactions......................20
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.....21
-2-
PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
GENERAL
Tidewater Inc. (the "company") was incorporated in Delaware in 1956. The
company's principal executive offices are located at 1440 Canal Street, New
Orleans, Louisiana 70112, and its telephone number is (504) 568-1010. Unless
otherwise required by the context, the term "company" as used herein refers to
Tidewater Inc. and its consolidated subsidiaries.
The company's two principal divisions are Tidewater Marine and Tidewater
Compression. Tidewater Marine provides support services to the international
offshore petroleum industry. Tidewater Compression provides natural gas and air
compression equipment and services, primarily to the energy industry.
Information concerning revenues, operating profits and assets for each of
the company's divisions and the geographic distribution of its operations is set
forth in Item 7 of this report.
TIDEWATER MARINE
Tidewater Marine is the world's largest provider of offshore supply vessels
and marine support services. With a fleet of approximately 650 vessels,
Tidewater Marine operates, and has a leading market share, in most of the
world's significant oil and gas exploration and production markets. Tidewater
Marine provides services supporting all phases of offshore exploration,
development and production, including: towing of and anchor-handling of mobile
drilling rigs and equipment; transporting supplies and personnel necessary to
sustain drilling, workover and production activities; and supporting pipelaying
and other offshore construction activities.
The company's fleet is deployed in the major offshore oil and gas areas of
the world. The principal areas of the company's operations include the U.S. Gulf
of Mexico, areas offshore Australia, Brazil, Egypt, India, Indonesia, Malaysia,
Mexico, Trinidad, Venezuela and West Africa and in the North Sea and the Persian
Gulf. The company conducts its operations through wholly-owned subsidiaries and
joint ventures. For information concerning revenues derived from domestic and
international marine operations, see "Marine Division" in Item 7 of this report.
MARINE SERVICES EQUIPMENT. The company's vessels regularly and routinely
move from one operating area to another, often to and from offshore operating
areas of different continents. Tables comparing the average number of vessels in
the company's marine fleet by class and geographic distribution appear under
"Marine Division" in Item 7 of this report.
The company's largest class of vessels consists of towing-supply and supply
vessels that are chartered to customers for use in transporting supplies and
equipment from shore bases to offshore drilling rigs, platforms and other
installations. In addition, vessels of the towing-supply class are equipped for
and are capable of towing drilling rigs and other marine equipment and setting
anchors for positioning and mooring drilling rigs.
The company's other classes of vessels include crew and utility vessels
that are chartered to customers for use in transporting supplies and personnel
from shore bases to offshore drilling rigs, platforms and other installations,
and offshore tugs that tow floating drilling rigs, dock tankers, tow barges,
assist pipelaying and construction barges and are used in a variety of other
commercial towing operations, including towing barges carrying a variety of bulk
cargoes and containerized cargo.
-3-
The company's vessels also include inshore tugs and both inshore and
offshore barges, production, line-handling and various special purpose vessels.
Inshore tugs, which are operated principally within inland waters, tow drilling
rigs to and from their locations, and tow barges carrying equipment and
materials for use principally in inland water drilling and production
operations. Barges are either used in conjunction with company tugs or are
bareboat chartered to others.
Information concerning the average age of the company's Marine vessel fleet
is set forth in Item 7 of this report.
In March 1996 the company acquired a fleet of 61 vessels owned and operated
by Hornbeck Offshore Services, Inc. ("Hornbeck") and it also acquired Hornbeck's
49.9% interest in 29 safety/standby vessels operating in the North Sea. In
fiscal 1996 the company also acquired 28 used vessels, consisting of eight
towing-supply and supply vessels, eight offshore tugs, 11 crewboats and one
utility vessel. Information concerning the Hornbeck acquisition appears in Note
2 of Notes to Consolidated Financial Statements included in this report.
CONTRIBUTIONS OF MAIN CLASSES OF VESSELS. Of the company's revenues from
marine vessel equipment operations, the following percentages were contributed
by the main classes of vessels:
YEAR ENDED MARCH 31,
--------------------------------
1996 1995 1994
---- ---- ----
Towing-supply/Supply ................. 72.8% 70.9% 70.2%
Offshore Tugs ........................ 16.6% 17.0% 17.8%
Crew/Utility ......................... 7.8% 8.6% 8.2%
Other ................................ 2.8% 3.5% 3.8%
SHIPYARDS. Quality Shipyards, Inc., a wholly-owned subsidiary of the
company, operates two shipyards in Houma, Louisiana, which build, repair, modify
and drydock vessels. Approximately 62% of the shipyards' business for the year
ended March 31, 1996 related to repairs, modifications and drydockings of the
company's vessels.
RISKS OF OPERATION AND INSURANCE. The operation of any marine equipment
involves an inherent risk of catastrophic marine disaster, adverse weather
conditions, mechanical failure, collisions, property losses to the vessel and
business interruption due to political action in countries other than the United
States. Any such event may result in a reduction in revenues or increased costs.
The company's vessels are insured for their estimated market value against
damage or loss, including war and pollution risks. The company also carries
workers compensation, maritime employer's liability, general liability
(including third party pollution) and other insurance customary in the industry.
The company's international marine equipment operations are subject to the
usual risks inherent in doing business in countries other than the United
States. Such risks include political changes, possible vessel seizure, company
nationalization or other governmental actions, currency restrictions and
revaluations, and import/export restrictions, all of which are beyond the
control of the company. Although it is impossible to predict the likelihood of
such occurrences or their effect on the company, the company believes these
risks to be within acceptable limits and, in view of the mobile nature of the
company's principal revenue producing assets, does not consider them to
constitute a factor materially adverse to the conduct of its international
marine equipment operations as a whole.
INDUSTRY CONDITIONS AND COMPETITION. Tidewater Marine's operations are
materially dependent upon the levels of activity in offshore oil and natural gas
exploration, development and production throughout the world. Such activity
levels are affected both by short-term and long-term trends in world oil and
natural gas prices. In recent years, oil and natural gas prices and, therefore,
the level of offshore drilling and
-4-
exploration activity, have been extremely volatile. A discussion of current
market conditions appears under "Marine Division" in Item 7 of this report.
COMPETITION AND CUSTOMERS. The principal competitive factors for the
offshore vessel service industry are suitability and availability of equipment,
price and service. The company has numerous competitors in virtually all areas
in which it operates. Certain customers of the company own and operate vessels
to service certain of their offshore activities.
Tidewater Marine's diverse, mobile asset base and geographic distribution
allow it to respond quickly to market conditions and provide a full range of
vessel services to its customers throughout the world. Management believes that
the company has a significant competitive advantage because of the size,
diversity and geographic distribution of its fleet, the company's financial
strength and economies of scale.
Although one customer accounted for 12% and the five largest customers
accounted for approximately 32% of its marine revenues during the year ended
March 31, 1996, the company does not consider its marine operations dependent on
any single customer.
GOVERNMENT REGULATIONS. The company's vessels are subject to various
statutes and regulations governing their operation and maintenance.
Under the Merchant Marine Act of 1936 and the Shipping Act, 1916, the
company would lose the privilege of engaging in U.S. coastwise trades if more
than 25% of the company's outstanding stock was owned by non-U.S. citizens. The
company has a dual stock certificate system to prevent non-U.S. citizens from
owning more than 25% of its common stock. In addition, the company's charter
permits the company certain remedies with respect to any transfer or purported
transfer of shares of the company's common stock that would result in the
ownership by non-U.S. citizens of more than 24% of its common stock. Based on
information supplied to the company by its transfer agent, approximately 5.6% of
the company's outstanding common stock was owned by non-citizens as of March 31,
1996.
At March 31, 1996, 194 vessels wholly owned by the company were registered
under flags other than the United States. In addition, all of the company's 76
joint venture owned vessels were registered under non-U.S. flags at March 31,
1996. The laws of the United States provide that once a vessel is registered
under a flag other than the United States, it cannot thereafter engage in U.S.
coastwise trade. Therefore, the company's non-U.S. flag vessels must continue to
be operated abroad, and if the company were not able to secure charters abroad
for them, and work would otherwise have been available for them in the United
States, its operations would be adversely affected.
All of the company's offshore vessels are subject to international safety
and classification standards. U.S. flag towing-supply and supply vessels are
required to undergo periodic inspections and to be recertified under drydock
examination at least twice every five years. Non-U.S. flag vessels are also
subject to various similar regulations.
TIDEWATER COMPRESSION
Tidewater Compression provides natural gas and air compression equipment
and services to the energy industry, primarily in the United States.
GAS COMPRESSION RENTALS. The company rents natural gas compressors to oil
and gas producers and processors. With a fleet of approximately 2,800
compressors, Tidewater Compression operates one of the largest rental fleets of
gas compressors in the United States. The compressors are used primarily to
boost the pressure of natural gas from the wellhead into gas gathering systems,
into nearby gas processing plants, or into high pressure pipelines. Gas
compression equipment and services offered by
-5-
the company also are used in the production of coalbed methane and in enhanced
recovery projects such as fire-flooding, gas lift, or gas injection, with the
objective of increasing the amount of oil or condensate that can be recovered
from a reservoir. Customers often rent compressors rather than purchase them
because the required compressor horsepower and stage configuration can change
several times in the lifetime of a project. The primary market served is natural
gas production activities in the United States, although the company has modest
operations in Argentina, Venezuela and Canada. A table setting forth
utilization, rental rates and fleet size of the Tidewater Compression gas rental
fleet appears in "Compression Division" in Item 7 of this report.
EQUIPMENT AND PARTS SALES. Tidewater Compression's Tide Air & Gas division
sells air and natural gas compressor packages and other related equipment to
domestic and international engineering contractors, oil and gas producers and to
manufacturers and other concerns. The equipment consists of skid mounted
compressors designed to meet complex specifications for specialized
applications. The gas compression equipment is used to facilitate the
production, transportation and storage of natural gas as well as boosting fuel
gas pressure for electrical power generation. The air compression equipment is
used to operate machinery, for instrumentation and in manufacturing processes.
The company's compression operations include an engineering and fabrication
facility at which the company designs and constructs air and gas compression
packages.
DISTRIBUTORSHIPS. The company holds distributorships for various
manufacturers of air and gas compressors, related equipment and a wide range of
accessories. These manufacturers are the source for equipment and accessories
sold by the company.
INDUSTRY CONDITIONS. In addition to well age and natural gas consumption, a
structural shift in U.S. oil and gas industry operations is affecting demand for
natural gas compression package rentals. Many of the major oil companies have
directed their focus toward international operations and away from domestic
natural gas reserves. Accordingly, these companies recently have been selling
their domestic natural gas reserves and minimizing staff in domestic operations.
As a result, demand for rental packages of natural gas compressors is expected
to increase as buyers of natural gas reserves or producers with reduced staffs
are less likely to own and operate natural gas compressor packages and more
likely to rent natural gas compressor packages to meet their natural gas
compression needs.
COMPETITION AND CUSTOMERS. The compression equipment market is highly
competitive, with the principal competitive factors being price, service and
availability. The company competes with a large number of companies in each area
in which it operates.
Although one customer accounted for 5% and the five largest customers
accounted for approximately 20% of its compression revenues during the year
ended March 31, 1996, the company does not consider itself dependent on any one
customer.
INTERNATIONAL OPERATIONS. While most of Tidewater Compression's operations
are domestic, the company sells and rents natural gas compressor packages and
parts in Canada and rents natural gas compressors in Argentina and Venezuela.
The Tide Air & Gas division's air and gas compression packages are sold to
customers throughout the world.
SEASONALITY
Tidewater Marine generally has its highest utilization rates in the warmer
temperature months when the weather is more favorable for offshore exploration,
development and construction work. Tidewater Compression generally has its best
results in the winter months when natural gas is in greater demand. However,
business volume for both Tidewater Marine and Tidewater Compression is more
dependent on
-6-
oil and gas prices and the global supply and demand conditions for the company's
services than any seasonal variation.
ENVIRONMENTAL COMPLIANCE
Compliance with existing governmental regulations which have been enacted
or adopted regulating the discharge of materials into the environment, or
otherwise relating to the protection of the environment, does not have, nor is
expected to have, a material effect on the company.
EMPLOYEES
As of March 31, 1996, the company had approximately 7,300 employees. The
company considers relations with employees to be satisfactory. The company is
not a party to any union contract in the United States but through several
subsidiaries is a party to union agreements covering local nationals in several
countries other than the United States.
ITEM 3. LEGAL PROCEEDINGS
The company is not a party to any litigation which, in the opinion of
management, is likely to have a material adverse effect on the company's
financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of fiscal 1996.
-7-
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the company are as follows:
NAME AGE POSITION
---- --- --------
William C. O'Malley .. 59 Chairman, President and Chief Executive Officer since
October, 1994. Chairman of the Board from 1987 to
1994 and Chief Executive Officer from 1990 to 1994 of
Sonat Offshore Drilling, Inc. Employed 1994.
Richard M. Currence .. 57 Executive Vice President since 1992. Senior Vice
President from 1986 to 1992. Employed 1966 with a
break in service from 1973 to 1985.
Ken C. Tamblyn ....... 52 Executive Vice President since 1992. Senior Vice
President from 1986 to 1992. Employed 1986.
Cliffe F. Laborde .... 44 Senior Vice President and General Counsel since 1992.
Employed 1992. Shareholder in Gelpi, Sullivan,
Carroll & Laborde, a professional law corporation,
from 1979 to 1992.
Stephen A. Snider .... 48 Senior Vice President since 1991. Employed 1975 with
a break in service from 1983 to 1991 during which Mr.
Snider owned and operated Learning Associates, Inc.
There are no family relationships between the officers of the company. The
company's officers are elected annually by the Board of Directors and serve for
one-year terms or until their successors are elected.
-8-
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The company's common stock is traded on the New York Stock Exchange and the
Pacific Stock Exchange under the symbol TDW. At March 31, 1996, there were
approximately 2,324 record holders of the company's common stock, based upon the
record holder list maintained by the company's stock transfer agent. The
following table sets forth the high and low closing sales price of the company's
common stock as reported on the New York Stock Exchange Composite Tape and the
amount of cash dividends per share declared on the Tidewater common stock,
excluding common shares issued as a result of the Hornbeck merger for the
periods indicated.
FISCAL YEAR QUARTER HIGH LOW DIVIDEND
- ----------- ------- ------- ------ --------
1996 First $26-1/4 $19-3/4 $0.10
Second 29-1/2 23-1/4 0.125
Third 31-5/8 24-5/8 0.125
Fourth 39-3/8 29-3/8 0.125
1995 First 23-1/4 19-1/4 0.10
Second 24-7/8 21-1/4 0.10
Third 23-3/8 18-1/4 0.10
Fourth 20-3/8 16-3/4 0.10
-9-
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth a summary of selected financial data for
each of the last five fiscal years. This information has been restated as a
result of the merger with Hornbeck Offshore Services, Inc., which has been
accounted for as a pooling-of-interests, and should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements of the company included in
this report.
Years Ended March 31
(in thousands, except ratio and per share amounts)
<TABLE>
<CAPTION>
1996(6) 1995(5) 1994 1993 1992
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Marine operations $532,202 501,118 513,892 431,874 451,100
Compression operations 111,245 83,490 55,471 62,099 54,561
- --------------------------------------------------------------------------------------
$643,447 584,608 569,363 493,973 505,661
======================================================================================
Earnings from continuing
operations $ 76,177 51,187 44,660 27,890 27,821
Discontinued operations (1) -- -- -- 3,099 357
Extraordinary loss on
early debt
retirement (2) -- -- (12,250) -- --
Accounting change (3) -- -- -- (6,640) --
- --------------------------------------------------------------------------------------
Net earnings $ 76,177 51,187 32,410 24,349 28,178
======================================================================================
Per common share:
Earnings from continuing
operations $1.23 .83 .73 .48 .47
Discontinued operations (1) -- -- -- .05 .01
Extraordinary loss on
early debt
retirement (2) -- -- (.20) -- --
Accounting change (3) -- -- -- (.11) --
- --------------------------------------------------------------------------------------
Net earnings $ 1.23 .83 .53 .42 .48
======================================================================================
Total assets $978,200 1,045,658 929,324 910,341 928,765
======================================================================================
Long-term debt $ -- 121,023 7,833 110,381 137,559
======================================================================================
Working capital $123,256 114,440 197,113 208,006 181,366
======================================================================================
Current ratio 2.44 2.05 2.44 3.08 2.46
======================================================================================
Cash dividends declared per
common share (4) $ .475 .40 .30 .325 --
======================================================================================
</TABLE>
(1) In fiscal 1993 the company disposed of its interest in a container shipping
business acquired in fiscal 1992 through the merger with Zapata Gulf Marine
Corporation.
(2) Fiscal 1994 charge results from the early retirement of notes and
debentures totaling $103,800,000.
(3) Fiscal 1993 charge results from the adoption of Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions."
(4) Cash dividends declared per common share reflect Tidewater cash dividends,
excluding the common shares issued as a result of the Hornbeck merger. As a
result of the timing of the fiscal 1994 Board of Directors meetings, only
three quarterly dividends of $.10 per common share each were declared
during fiscal 1994.
(5) See Note 11 of Notes to Consolidated Financial Statements for further
information concerning a $5.9 million pre-tax charge to earnings for the
cost of a restructuring program during fiscal 1995.
(6) See Notes 2 and 8 of Notes to Consolidated Financial Statements for further
information concerning pre-tax merger expenses of $9.6 million and a $3.0
million pre-tax charge for curtailment of the company's pension plan.
-10-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
BUSINESS OVERVIEW
On March 13, 1996 Tidewater Inc. broadened its base of operations and its
ability to serve its customers by merging with Hornbeck Offshore Services, Inc.
(Hornbeck). Prior to the merger Hornbeck's fleet consisted of 61 supply and
towing-supply vessels operating in the U.S. Gulf of Mexico and a 49.9% interest
in 29 safety/standby vessels operating in the North Sea. The merger was
accounted for as a pooling-of-interests and, accordingly, the consolidated
financial statements and the related disclosures and the selected financial data
have been restated for all periods to include the accounts and results of
operations of Hornbeck. After-tax merger costs of $7.8 million, or $.12 per
common share, reduced fiscal 1996 net earnings and consisted of legal,
accounting and investment banking fees, payments under severance and employment
agreements, and a provision for certain other costs related to the business
combination.
Fiscal 1996 operating performance was significantly better than in prior
years due to more favorable market conditions for offshore marine services and a
full years' impact of an expanded natural gas compressor rental fleet. Net
earnings grew 49% above the prior year level after allowing for unusual items in
both fiscal 1996 and fiscal 1995. Fiscal 1996 unusual items consisted of
after-tax merger costs of $7.8 million discussed above, and an after-tax charge
of $2.0 million, or $.03 per common share, for the curtailment of the company's
pension plan. Fiscal 1995 unusual items consisted of an after-tax restructuring
charge of $3.7 million, or $.06 per common share, and an after-tax charge of
$1.6 million, or $.02 per common share, for reserves to cover possible losses
due to the potential insolvency of certain of the company's insurers. Demand for
the services provided by the company's marine division remains strong and recent
improvements in the pricing of natural gas should have a positive impact on the
company's natural gas compression operations.
LIQUIDITY AND CAPITAL RESOURCES
Cash from operations continued to grow as the $174.2 million generated in
fiscal 1996 surpassed the amounts for the two prior fiscal years. The amount of
cash generated from operations is dependent upon utilization and day rate levels
of the company's marine vessel fleet and natural gas compressor rental fleet.
The amount of cash consumed in investing activities for any given period is
principally determined by additions to properties and equipment and proceeds
from the sales of assets. The following tables provide a breakdown by division
of these two items for the years ended March 31:
(in thousands)
1996 1995 1994
- ----------------------------------------------------------------------------
ADDITIONS TO PROPERTIES AND EQUIPMENT:
Marine $40,994 99,893 35,778
Compression 5,108 254,505 20,545
General corporate 14 327 380
- ----------------------------------------------------------------------------
$46,116 354,725 56,703
============================================================================
PROCEEDS FROM SALES OF ASSETS:
Marine $12,435 22,152 9,407
Compression 5,609 4,358 3,376
- ----------------------------------------------------------------------------
$18,044 26,510 12,783
============================================================================
In fiscal 1996 the marine division acquired 28 used vessels for $28.7
million consisting of eight towing-supply and supply vessels, eight offshore
tugs, 11 crewboats and a utility vessel. Fiscal 1995 marine additions include
the purchase of 23 offshore supply vessels, two offshore tugs and a crewboat
-11-
for $64.3 million. Nineteen and ten of the vessels purchased in fiscal 1996 and
fiscal 1995, respectively, were previously operated by the company under various
long-term lease agreements. The remainder of marine additions for these two
fiscal years were for modifications to the existing vessel fleet. Fiscal 1995
compression additions include the acquisition of the natural gas compression
assets of Halliburton Company for $205 million and the assets of Brazos Gas
Compressing Company for $35 million. The remainder of compression additions in
fiscal 1995 and for fiscal 1996 were for modifications to the existing natural
gas compressor rental fleet.
Cash consumed in fiscal 1996 financing activities was primarily for the
repayment of the March 31, 1995 debt balance of $112 million remaining, from the
$150 million borrowed during fiscal 1995, to finance the Halliburton Compression
acquisition. Temporary borrowings of $13.4 million to finance the purchase of
several vessels previously leased to the company was also repaid in fiscal 1996.
Fiscal 1995 principal payments on long-term debt include $38 million of payments
on the Halliburton Compression acquisition debt and $46.0 million to retire
early the 7% convertible subordinated debentures.
During the fourth quarter of fiscal 1996 the company recorded as "other
expense" a $3.0 million pre-tax charge as a result of the removal of Marine
fleet and Compression field service personnel from the company's U.S. defined
benefit pension plan. Beginning April 1, 1996 these Marine and Compression
employees, along with all new employees of the company who are eligible for
pension plan membership, will be enrolled in a new defined contribution
retirement plan.
The Financial Accounting Standards Board (the FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of". This statement
is effective for fiscal years beginning after December 15, 1995. Management does
not believe that this pronouncement will have a material impact on its fiscal
1997 consolidated financial statements.
The FASB also issued SFAS No. 123 "Accounting for Stock-Based Compensation"
effective also for fiscal years beginning after December 15, 1995. SFAS No. 123
encourages, but does not require, companies to measure stock-based compensation
cost using a fair value method, rather than the intrinsic value method
prescribed by Accounting Principles Board (APB) Opinion No. 25. Companies
choosing to continue to measure stock-based compensation using the intrinsic
value method must disclose on a pro forma basis net earnings and net earnings
per share as if the fair value method were used. Management is currently
evaluating the requirements of SFAS No. 123.
-12-
RESULTS OF OPERATIONS
Revenues, operating profits and certain other information by division for
the years ended March 31 are:
(in thousands)
1996 1995 1994
- ------------------------------------------------------------------------------
Revenue (A):
Marine (B) $532,202 501,118 513,892
Compression 111,245 83,490 55,471
- ------------------------------------------------------------------------------
$643,447 584,608 569,363
==============================================================================
Operating profit:
Marine (B) $118,909 83,683 78,048
Compression 14,565 14,436 6,895
Other income 5,436 5,589 4,538
Other expense (12,600) (8,350) ---
General corporate expenses (9.541) (10,285) (10,806)
Interest expense (5,882) (5,608) (9,262)
- -------------------------------------------------------------------------------
Earnings before income taxes $110,887 79,465 69,413
==============================================================================
Identifiable assets:
Marine:
United States $349,554 356,593 375,255
International (B) 269,704 314,532 327,975
- ------------------------------------------------------------------------------
619,258 671,125 703,230
Compression 275,454 308,339 68,285
- ------------------------------------------------------------------------------
Total operating divisions 894,712 979,464 771,515
Investments in and advances to
unconsolidated Marine companies 35,861 38,378 37,066
Corporate 47,627 27,816 120,743
Total $978,200 1,045,658 929,324
==============================================================================
Depreciation (C):
Marine $54,961 77,003 79,627
Compression 27,069 15,472 9,144
- ------------------------------------------------------------------------------
Total operating divisions 82,030 92,475 88,771
Corporate 400 390 165
- ------------------------------------------------------------------------------
Total $82,430 92,865 88,936
==============================================================================
(A) For fiscal 1996 and fiscal 1995 one Marine customer accounted for
approximately 10% of consolidated revenues.
(B) Marine equipment operations are conducted worldwide with assets that are
highly mobile. Revenues and identifiable assets attributable to these
operations in any one country are not "significant" as that term is defined
by SFAS No. 14. Further, most identifiable assets in each country are
comprised of offshore service vessels, which regularly and routinely move
from one operating area to another, often to and from offshore operating
areas of different continents. Equity in net assets of non-U.S.
subsidiaries is $148,045,000, $164,175,000 and $192,038,000 at March 31,
1996, 1995 and 1994, respectively. Other international identifiable assets
include accounts receivable and other balances denominated in currencies
other than the U.S. dollar which aggregate approximately $8,520,000,
7,062,000 and $7,295,000 at March 31, 1996, 1995 and 1994, respectively.
These amounts are subject to the usual risks of fluctuating exchange rates
and government-imposed exchange controls.
(C) See Note 1 of Notes to Consolidated Financial Statements for a discussion
of depreciation policy changes affecting fiscal 1995 and 1996.
Fiscal 1996 pre-tax earnings rose 40% above prior year levels due to higher
Marine operating profits partially offset by higher other expense. Fiscal 1996
other expense of $12.6 million consisted of $9.6 million of costs resulting from
the merger with Hornbeck Offshore Services, Inc. and a $3.0 million charge for
the curtailment of the company's defined benefit pension plan. Fiscal 1995 other
expense of $8.4 million consisted of a $5.9 million restructuring charge and a
$2.5 million charge for possible insurance losses. Please see Notes 2, 8 and 11
of Notes to Consolidated Financial Statements for further discussion of these
items. Increased Marine operating profits are the result of higher utilization
and day rates for the vessel fleet compared to fiscal 1995, the net positive
effect of lower depreciation expense due to the increase in vessel useful lives
effective April 1, 1995 and lower general and administrative expense resulting
from the fiscal 1995 fourth quarter restructuring of worldwide Marine
operations. Please see Note 1 of Notes to Consolidated Financial Statements for
further discussion of the change in vessel useful lives.
-13-
Higher Compression revenues and operating profits resulting from the
substantial expansion of the natural gas compressor rental fleet during the
second half of fiscal 1995 and higher Marine operating profits were the
principal factors which were responsible for the growth in fiscal 1995
consolidated revenues and pre-tax earnings above fiscal 1994 levels. Higher
Marine operating profits in fiscal 1995 were the result of higher gains on sales
of assets and shipyard profits partially offset by lower operating profits for a
smaller international-based vessel fleet. Shipyard profits rose substantially
above fiscal 1994 levels due to the construction of vessels for third-parties.
Fiscal 1995 pre-tax earnings were reduced by $8.4 million of other expense which
consisted of a $5.9 million charge resulting from the restructuring of worldwide
marine operations and the company's headquarters office and a $2.5 million
provision for possible losses due to the potential insolvency of certain of the
company's insurers. During fiscal 1995, the estimated salvage value used to
determine depreciation expense for natural gas compressors was increased. Please
see Note 1 of Notes to Consolidated Financial Statements for further discussion
of this matter.
Fiscal 1994 consolidated revenues and pre-tax earnings rose above prior
year levels because of higher utilization and substantially higher average
vessel day rates for the domestic-based vessel fleet. Fiscal 1994 Marine and
Compression operating profits were negatively affected by $.3 million and $1.0
million, respectively, of severance costs associated with the early retirement
of several employees.
Consolidated general and administrative expenses for the years ended March
31 consist of the following components:
(in thousands)
1996 1995 1994
- ----------------------------------------------------------------------------
Personnel $ 34,463 38,298 39,251
Office and property 9,929 10,149 10,833
Sales and marketing 3,407 4,201 4,396
Professional services 4,545 3,683 4,786
Other 7,004 7,588 6,768
- ----------------------------------------------------------------------------
$ 59,348 63,919 66,034
============================================================================
MARINE DIVISION
The marine division provides a diverse range of services and equipment to
the offshore oil and gas industry. Fleet size, utilization and vessel day rates
primarily determine the amount of revenues and operating profit because
operating costs and depreciation do not change proportionally with changes in
revenues. Operating costs principally consist of crew costs, repair and
maintenance, insurance, fuel, lube and supplies. Fleet size and utilization are
the major factors which affect crew costs. The timing and amount of repair and
maintenance costs are influenced by vessel age and scheduled drydockings to
satisfy safety and inspection requirements dictated by regulatory agencies.
Whenever possible, vessel drydockings are done during seasonally slow periods to
minimize any impact on vessel operations and are only done when economically
justified given the vessel's age and physical condition. The following tables
compare revenues, operating expenses (excluding general and administrative
expense and depreciation expense) and operating margins and provide a breakdown
of operating profit for the years ended March 31:
-14-
(in thousands)
1996 1995 1994
- ----------------------------------------------------------------------------
Revenues:
Owned and operated vessels:
United States $ 241,436 222,784 225,913
International 264,744 246,967 269,169
- ----------------------------------------------------------------------------
506,180 469,751 495,082
Brokered vessels, shipyard sales and other 26,022 31,367 18,810
- ----------------------------------------------------------------------------
532,202 501,118 513,892
- ----------------------------------------------------------------------------
Operating expenses:
Owned and operated vessels:
Crew costs 145,018 139,058 145,988
Repair and maintenance 84,567 69,669 78,355
Insurance 33,999 36,040 28,690
Fuel, lube and supplies 24,422 21,645 23,314
Other 19,909 18,640 21,486
- ----------------------------------------------------------------------------
307,915 285,052 297,833
Brokered vessels, shipyard sales and other 20,391 26,897 17,516
- ----------------------------------------------------------------------------
328,306 311,949 315,349
- ----------------------------------------------------------------------------
Operating margin $203,896 189,169 198,543
============================================================================
FOR OWNED AND OPERATED VESSELS:
Operating margins as a percent of revenues 39.2% 39.3% 39.8%
Percentage rise (drop) in operating costs
compared to prior fiscal year 8.0% (4.3%) 11.3%
============================================================================
Marine operating profit:
Owned and operated vessels:
United States $46,839 41,427 43,145
International 60,291 24,947 30,765
- ----------------------------------------------------------------------------
107,130 66,374 73,910
Gains on sales of assets 6,930 13,098 3,268
Brokered vessels, shipyard sales and other 4,849 4,211 870
- ----------------------------------------------------------------------------
$118,909 83,683 78,048
============================================================================
Fiscal 1996 operating margins rose above the prior year level due to higher
utilization and average day rates for the worldwide vessel fleet. The rise in
fiscal 1996 operating margins was adversely affected by a significant increase
in the amount of repair and maintenance expense which primarily affected the
domestic-based vessel fleet. Approximately 68% of the increase in repair and
maintenance expense in fiscal 1996 is attributable to the changes in estimated
useful lives of the marine vessels whereby costs which would have been
capitalized under the previous life estimates were expensed. Fiscal 1995
operating margins fell below the prior year level as increases in average day
rates for the worldwide vessel fleet did not offset the adverse effect of lower
utilization of the worldwide vessel fleet and a sizeable reduction in the size
of the international-based vessel fleet.
Marine fleet utilization is determined primarily by market conditions and
to a lesser extent by drydockings to satisfy safety and inspection requirements.
Utilization of the domestic-based vessel fleet over the past three years has
been primarily influenced by offshore activity related to the exploration and
production of natural gas in the U.S. Gulf of Mexico, whereas, utilization of
the international-based vessel fleet is primarily influenced by offshore
activity related to the exploration and production of oil.
Marine vessel day rates are determined by the demand created through the
level of offshore exploration, development and production spending by energy
exploration and production companies relative to the supply of offshore vessels.
Suitability of equipment and the degree of service provided also influence
vessel day rates.
The following two sets of tables compare day-based Marine fleet utilization
percentages and average day rates by vessel class and in total for each of the
quarters in the years ended March 31:
-15-
UTILIZATION:
1996 FIRST SECOND THIRD FOURTH YEAR
- ------------------------------------------------------------------------------
DOMESTIC-BASED FLEET:
Towing-supply/Supply 86.8% 85.6 89.9 91.1 88.3
Crew/Utility 81.7 79.5 83.7 80.1 81.2
Offshore Tugs 47.9 64.8 67.5 58.4 59.5
Other 44.9 64.8 51.3 43.3 50.9
Total 77.0% 79.9 83.1 81.0 80.2
INTERNATIONAL-BASED FLEET:
Towing-supply/Supply 86.7% 87.9 85.6 85.3 86.4
Crew/Utility 86.6 85.0 81.5 86.6 84.9
Offshore Tugs 72.2 71.2 77.4 76.1 74.4
Other 37.3 48.3 56.8 77.5 54.7
Total 76.1% 78.2 79.1 82.6 79.0
WORLDWIDE FLEET:
Towing-supply/Supply 86.8% 86.9 87.6 87.9 87.3
Crew/Utility 83.6 81.7 82.8 82.8 82.7
Offshore Tugs 60.6 68.4 73.4 69.0 67.9
Other 38.9 51.6 55.7 69.9 53.9
Total 76.5% 79.0 80.9 81.9 79.6
==============================================================================
1995 FIRST SECOND THIRD FOURTH YEAR
- ------------------------------------------------------------------------------
DOMESTIC-BASED FLEET:
Towing-supply/Supply 81.0% 80.1 85.1 87.2 83.4
Crew/Utility 90.3 92.9 89.0 85.0 89.3
Offshore Tugs 66.0 63.9 58.5 40.5 57.5
Other 51.6 50.9 58.9 26.2 47.2
Total 78.6% 77.8 79.3 75.2 77.7
INTERNATIONAL-BASED FLEET:
Towing-supply/Supply 82.2% 81.7 78.2 81.4 80.8
Crew/Utility 73.5 74.5 81.9 85.1 78.5
Offshore Tugs 80.4 71.3 72.7 80.8 76.4
Other 55.7 42.0 43.0 44.0 46.4
Total 75.9% 72.2 71.5 75.5 73.8
WORLDWIDE FLEET:
Towing-supply/Supply 81.6% 81.0 81.2 84.1 82.0
Crew/Utility 82.6 84.9 86.0 85.1 84.6
Offshore Tugs 73.5 67.5 65.4 61.2 66.9
Other 55.0 43.8 46.3 40.2 46.5
Total 77.0% 74.7 75.0 75.4 75.5
==============================================================================
1994 FIRST SECOND THIRD FOURTH YEAR
- ------------------------------------------------------------------------------
DOMESTIC-BASED FLEET:
Towing-supply/Supply 86.8% 89.5 91.5 85.2 88.2
Crew/Utility 90.3 95.2 92.6 89.9 92.0
Offshore Tugs 64.8 66.7 68.8 57.2 64.4
Other 76.8 69.0 72.5 44.5 67.4
Total 82.5% 84.3 85.7 78.3 82.7
INTERNATIONAL-BASED FLEET:
Towing-supply/Supply 80.7% 77.4 76.2 76.1 77.7
Crew/Utility 77.6 67.9 73.7 71.4 72.6
Offshore Tugs 81.6 79.0 76.4 77.4 78.7
Other 70.9 75.1 72.9 69.9 72.2
Total 78.7% 76.0 75.3 74.6 76.2
WORLDWIDE FLEET:
Towing-supply/Supply 83.1% 82.3 82.6 80.2 82.0
Crew/Utility 84.0 81.8 83.7 81.2 82.7
Offshore Tugs 73.8 72.9 72.6 67.2 71.6
Other 72.5 73.4 72.8 64.3 71.0
Total 80.2% 79.5 79.8 76.2 78.9
==============================================================================
-16-
AVERAGE DAY RATES:
1996 FIRST SECOND THIRD FOURTH YEAR
- -----------------------------------------------------------------------------
DOMESTIC-BASED FLEET:
Towing-supply/Supply $3,351 3,495 3,610 3,880 3,585
Crew/Utility 1,343 1,354 1,344 1,357 1,349
Offshore Tugs 5,220 4,584 4,909 5,162 4,943
Other 3,118 2,868 3,155 2,762 2,970
Total $3,115 3,178 3,309 3,492 3,273
INTERNATIONAL-BASED FLEET:
Towing-supply/Supply $3,644 3,670 3,651 3,713 3,670
Crew/Utility 1,884 1,767 1,646 1,712 1,752
Offshore Tugs 2,635 2,705 2,710 2,906 2,746
Other 726 727 674 631 680
Total $3,025 2,987 2,909 2,895 2,952
WORLDWIDE FLEET:
Towing-supply/Supply $3,507 3,590 3,632 3,791 3,630
Crew/Utility 1,567 1,526 1,470 1,514 1,519
Offshore Tugs 3,609 3,498 3,538 3,674 3,578
Other 1,298 1,265 1,138 923 1,130
Total $3,067 3,075 3,090 3,153 3,097
=============================================================================
1995 FIRST SECOND THIRD FOURTH YEAR
- -----------------------------------------------------------------------------
DOMESTIC-BASED FLEET:
Towing-supply/Supply $3,710 3,364 3,270 3,466 3,451
Crew/Utility 1,270 1,251 1,294 1,288 1,276
Offshore Tugs 4,126 4,487 5,013 4,935 4,601
Other 2,917 2,970 2,884 3,839 3,045
Total $3,190 3,019 3,042 3,116 3,091
INTERNATIONAL-BASED FLEET:
Towing-supply/Supply $3,606 3,616 3,556 3,494 3,569
Crew/Utility 1,752 1,752 1,716 1,675 1,723
Offshore Tugs 2,765 2,416 2,432 2,702 2,591
Other 701 789 896 1,479 932
Total $2,843 2,917 2,852 2,916 2,882
WORLDWIDE FLEET:
Towing-supply/Supply $3,652 3,506 3,424 3,480 3,516
Crew/Utility 1,467 1,441 1,462 1,451 1,455
Offshore Tugs 3,352 3,421 3,617 3,422 3,451
Other 1,071 1,313 1,420 1,808 1,363
Total $2,996 2,964 2,942 3,006 2,977
=============================================================================
1994 FIRST SECOND THIRD FOURTH YEAR
- -----------------------------------------------------------------------------
DOMESTIC-BASED FLEET:
Towing-supply/Supply $3,075 3,288 3,565 3,752 3,430
Crew/Utility 1,189 1,233 1,257 1,269 1,237
Offshore Tugs 4,379 4,146 4,222 4,308 4,259
Other 1,721 1,698 1,867 2,266 1,826
Total $2,742 2,852 3,051 3,232 2,969
INTERNATIONAL-BASED FLEET:
Towing-supply/Supply $3,622 3,714 3,696 3,604 3,660
Crew/Utility 1,794 1,677 1,677 1,753 1,727
Offshore Tugs 2,992 3,123 2,827 2,728 2,923
Other 551 551 540 633 567
Total $2,817 2,839 2,768 2,743 2,793
WORLDWIDE FLEET:
Towing-supply/Supply $3,400 3,527 3,635 3,674 3,558
Crew/Utility 1,462 1,413 1,432 1,470 1,444
Offshore Tugs 3,561 3,585 3,494 3,412 3,516
Other 876 843 903 882 876
Total $2,786 2,845 2,898 2,964 2,871
=============================================================================
-17-
The following table compares the average number of vessels by class and
geographic distribution during the years ended March 31:
- -----------------------------------------------------------------------------
1996 1995 1994
- -----------------------------------------------------------------------------
DOMESTIC-BASED FLEET:
Towing-supply/Supply 147 142 135
Crew/Utility 51 51 49
Offshore Tugs 41 47 47
Other 13 14 21
- -----------------------------------------------------------------------------
TOTAL 252 254 252
- -----------------------------------------------------------------------------
INTERNATIONAL-BASED FLEET:
Towing-supply/Supply 171 175 191
Crew/Utility 35 39 45
Offshore Tugs 54 47 49
Other 50 57 61
- -----------------------------------------------------------------------------
TOTAL 310 318 346
- -----------------------------------------------------------------------------
Owned or chartered vessels included
in marine revenues 562 572 598
Vessels withdrawn from active service 18 18 15
Joint venture owned vessels 74 72 72
- -----------------------------------------------------------------------------
Total 654 662 685
=============================================================================
WORLDWIDE FLEET:
Towing-supply/Supply 384 384 389
Crew/Utility 95 96 101
Offshore Tugs 98 98 98
Other 77 84 97
- -----------------------------------------------------------------------------
Total 654 662 685
=============================================================================
The drop in average size of the international-based vessel fleet from 346
for fiscal 1994 to 318 for fiscal 1995 to 310 for fiscal 1996 is 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 leased vessels to their owners. The average age
of the Marine vessel fleet is approximately 18 years, and in the future as
vessels become uneconomical to operate they may be withdrawn from active
service.
COMPRESSION DIVISION
The Compression division provides natural gas compression services and
equipment for a variety of applications primarily in the energy industry. Rental
revenues are mostly influenced by utilization and fleet size. Utilization is
affected by natural gas storage levels and by the number and age of producing
oil and natural gas wells which, in turn, are dependent upon the price levels of
oil and natural gas. Quality of service, availability and rental rates for
equipment are also major factors which affect utilization. Operating expenses
are generally consistent from year-to-year and usually vary in the short-term
due to fluctuations in the amount of repair and maintenance expense. Long-term
growth in operating expenses will vary due to increased fleet size and general
inflationary factors. Compression operating profit is primarily determined by
operating margins from rental gas compression operations.
-18-
The following tables compare revenues, operating expenses (excluding
general and administrative expense and depreciation expense), operating margins
and related statistics for gas compression operations for the years ended March
31:
(in thousands)
1996 1995 1994
- ---------------------------------------------------------------------------
Revenues:
Rentals $72,765 49,235 30,868
Repair service and other 6,161 6,335 6,218
- ----------------------------------------------------------------------------
78,926 55,570 37,086
- ----------------------------------------------------------------------------
Operating expenses:
Wages and benefits 11,654 8,702 6,209
Repair and maintenance 13,348 8,124 6,043
Other 8,189 5,165 3,109
- ----------------------------------------------------------------------------
33,191 21,991 15,361
- ----------------------------------------------------------------------------
Operating margin $45,735 33,579 21,725
============================================================================
Operating margins as a percent
of revenues 57.9% 60.4% 58.6%
============================================================================
Horsepower based statistics:
Utilization 74% 82% 86%
Average monthly rental rate $17.45 17.41 16.74
Average fleet size 470,444 286,352 179,725
Actual fleet size at March 31
in horsepower 473,282 479,740 185,036
============================================================================
Higher fiscal 1996 revenues and operating margins are primarily the result
of a full year's impact of the expansion of the natural gas compressor rental
fleet which occurred in the third quarter of fiscal 1995. Fiscal 1996
utilization fell below the prior year level due to lower demand for natural gas
compression services.
The Compression division also designs, fabricates and installs engineered
compressor systems and sells related parts and equipment. The following table
compares revenues, costs of sales and operating margins for equipment and parts
sales for the years ended March 31:
(in thousands)
1996 1995 1994
- ---------------------------------------------------------------------------
Revenues $32,319 27,920 18,385
COSTS OF SALES 26,345 23,895 14,977
- ----------------------------------------------------------------------------
$5,974 4,025 3,408
============================================================================
Operating margins as a
percent of revenues 18.5% 14.4% 18.5%
============================================================================
Fluctuations in the level of equipment and parts sales are due to the
timing of sales of engineered products. Fluctuations in operating margin
percentages are the result of competitive market forces. Costs of sales consist
primarily of wages and benefits and material costs associated with the design,
fabrication and installation of packaged compressor systems.
Gains on sales of equipment have contributed $.4 million, $1.1 million and
$1.3 million for the fiscal years ended March 31, 1996, 1995 and 1994,
respectively.
CURRENCY FLUCTUATIONS AND INFLATION
Because of its significant international operations, the company is exposed
to currency fluctuations and exchange risks. To minimize the financial impact of
these items the company attempts to contract a majority of its services in
United States dollars.
Day-to-day operating costs generally are 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
-19-
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. Compliance with existing governmental regulations
which have been enacted or adopted regulating the discharge of materials into
the environment, or otherwise relating to the protection of the environment,
does not have, nor is expected to have, a material effect on the company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is included in Part IV of this
report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning directors of the company is incorporated by
reference from the company's definitive proxy statement to be filed on or before
July 29, 1996. For information regarding executive officers of the company, see
Item 4A of this report.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning executive compensation is incorporated by reference
from the proxy statement described in Item 10 of this report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning security ownership of certain beneficial owners and
management is incorporated by reference from the proxy statement described in
Item 10 of this report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and related transactions is
incorporated by reference from the proxy statement described in Item 10 of this
report.
-20-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
A. Financial Statements and Schedules
The Consolidated Financial Statements and Schedule of the company listed on
the accompanying Index to Financial Statements and Schedule (see page F-1) are
filed as part of this report.
B. Reports on Form 8-K
The company's report on Form 8-K for March 13, 1996 reported that the
company acquired all of the outstanding common stock of Hornbeck Offshore
Services, Inc.
C. Exhibits
The index below describes each exhibit filed as a part of this report.
Exhibits not incorporated by reference to a prior filing are designated by an
asterisk; all exhibits not so designated are incorporated herein by reference to
a prior filing as indicated.
3(a) -Restated Certificate of Incorporation of Tidewater Inc. (filed with the
Commission as Exhibit 3(a) to the company's quarterly report on Form
10-Q for the quarter ended September 30, 1993).
3(b) -Tidewater Inc. Bylaws (filed with the Commission as Exhibit 3(b) to the
company's quarterly report on Form 10-Q for the quarter ended September
30, 1993).
4(a) -Restated Rights Agreement dated as of December 17, 1993 between
Tidewater Inc. and The First National Bank of Boston (filed with the
Commission as Exhibit 4 to the company's quarterly report on Form 10-Q
for the quarter ended December 31, 1993).
10(a) -$130,000,000 Revolving Credit and Term Loan Agreement dated December
29, 1995 (filed with the Commission as Exhibit 10.1 to a Registration
Statement on February 6, 1996, Registration No. 333-00221).
10(b) -Tidewater Inc. 1975 Incentive Program Stock Option Plan, as amended in
1990 (filed with the Commission as Exhibit 10(c) to the company's annual
report on Form 10-K for the fiscal year ended March 31, 1991).
10(c) -Tidewater Inc. 1992 Stock Option and Restricted Stock Plan (filed with
the Commission as Exhibit 10(f) to the company's annual report on Form
10-K for the fiscal year ended March 31, 1993).
10(d) -Tidewater Inc. Amended and Restated Supplemental Executive Retirement
Plan (filed with the Commission as Exhibit 10(g) to the company's annual
report on Form 10-K for the fiscal year ended March 31, 1993).
10(e) -Tidewater Inc. Amended and Restated Employees' Supplemental Savings
Plan (filed with the Commission as Exhibit 10(h) to the company's annual
report on Form 10-K for the fiscal year ended March 31, 1993).
-21-
10(f) -Supplemental Health Plan for Executive Officers of Tidewater Inc.
(filed with the Commission as Exhibit 10(i) to a Registration Statement
on September 12, 1989, Registration No. 33-31016).
10(g) -Tidewater Inc. Deferred Compensation Plan for Directors (filed with the
Commission as Exhibit 10(h) to the company's annual report on Form 10-K
for the fiscal year ended March 31, 1994).
10(h) -Tidewater Inc. Retirement Plan for Directors as adopted on March 22,
1990 (filed with the Commission as Exhibit 10(k) to the company's annual
report on Form 10-K for the fiscal year ended March 31, 1990).
10(i) -Employment and Consulting Agreement dated as of March 31, 1993 between
Tidewater Inc. and John P. Laborde as amended (filed with the Commission
as Exhibit 10(l) to the company's annual report on Form 10-K for the
fiscal year ended March 31, 1993).
*10(j) -Consulting Agreement dated as of March 13, 1996 between Tidewater Inc.
and Larry D. Hornbeck.
10(k) -Form of Severance Agreement entered into as of August 1, 1985 with
eleven executive officers and key employees, as amended (filed with the
Commission as Exhibit 10(j) to the company's annual report on Form 10-K
for the fiscal year ended March 31, 1992).
10(l) -Form of Severance Agreement entered into as of February 18, 1992 with
three executive officers, as amended (filed with the Commission as
Exhibit 10(k) to the company's annual report on Form 10-K for the fiscal
year ended March 31, 1992).
10(m) -Standstill Agreement dated as of November 11, 1992 between Tidewater
Inc. and Zapata Corporation (filed with the Commission as Exhibit 10(o)
to the company's annual report on Form 10-K for the fiscal year ended
March 31, 1993).
10(n) -First Amendment to Standstill Agreement dated January 24, 1994 between
Tidewater Inc. and Zapata Corporation (filed with the Commission as
Exhibit 10(n) to the company's annual report on Form 10-K for the fiscal
year ended March 31, 1994).
10(o) -Agreement, dated August 11, 1989, by and among the company and Irwin L.
Jacobs, Daniel T. Lindsay, Gerald A. Schwalbach, TR Holdings, Inc. and
Minstar, Inc. (filed with the Commission as Exhibit 1 to the company's
report on Form 8-K for August 11, 1989).
10(p) -Tidewater Inc. 1995 Annual Incentive Plan (filed with the Commission as
Exhibit 10(q) to the company's annual report on Form 10-K for the fiscal
year ended March 31, 1995).
10(q) -Employment Agreement dated June 13, 1995 between Tidewater Inc. and
William C. O'Malley (filed with the Commission as Exhibit 10 to the
company's report on Form 8-K for June 13, 1995).
*11 -Earnings per share Computation Information.
*21 -Subsidiaries of the company.
*24 -Consent of Independent Accountants.
*27 - Financial Data Schedule.
-22-
Certain instruments respecting long-term debt of Tidewater have been
omitted pursuant to Regulation S-K, Item 601. Tidewater hereby agrees to furnish
a copy of any such instrument to the Commission upon request.
-23-
SIGNATURES OF REGISTRANT
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on May 9, 1996.
TIDEWATER INC.
(Registrant)
By: /s/ WILLIAM C. O'MALLEY
William C. O'Malley
Chairman of the Board
of Directors, President, and
Chief Executive Officer
By: /s/ KEN C. TAMBLYN
Ken C. Tamblyn
Executive Vice President and
Chief Financial Officer
SIGNATURES OF DIRECTORS
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on May 2, 1996.
/s/ ROBERT H. BOH /s/ LARRY D. HORNBECK
Robert H. Boh Larry D. Hornbeck
/s/ ____________________ /s/ PAUL W. MURRILL
Donald T. Bollinger Paul W. Murrill
/s/ ARTHUR R. CARLSON /s/ WILLIAM C. O'MALLEY
Arthur R. Carlson William C. O'Malley
/s/ HUGH J. KELLY /s/ LESTER POLLACK
Hugh J. Kelly Lester Pollack
/s/ JOHN P. LABORDE /s/ J. HUGH ROFF, JR.
John P. Laborde J. Hugh Roff, Jr.
-24-
TIDEWATER INC.
ANNUAL REPORT ON FORM 10-K
ITEMS 8, 14(A), AND 14(D)
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
FINANCIAL STATEMENTS PAGE
1. Independent Auditors' Report........................................... F-2
2. Consolidated Balance Sheets, March 31, 1996 and 1995................... F-3
3. Consolidated Statements of Earnings, three years
ended March 31, 1996................................................... F-4
4. Consolidated Statements of Stockholders' Equity, three
years ended March 31, 1996............................................. F-5
5. Consolidated Statements of Cash Flows, three years ended
March 31, 1996......................................................... F-6
6. Notes to Consolidated Financial Statements............................. F-7
FINANCIAL STATEMENT SCHEDULE
II. Tidewater Inc. and Subsidiaries Valuation and Qualifying Accounts
All other schedules are omitted as the required information is inapplicable or
the information is presented in the financial statements or the related notes.
F-1
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of Tidewater Inc.:
We have audited the accompanying consolidated financial statements of Tidewater
Inc. and subsidiaries as listed in the accompanying index. In connection with
our audits of the consolidated financial statements, we also have audited the
financial statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Tidewater Inc. and
subsidiaries as of March 31, 1996 and 1995, and the results of their operations
and their cash flows for each of the years in the three-year period ended March
31, 1996, in conformity with generally accepted accounting principles. Also in
our opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
New Orleans, Louisiana
April 29, 1996
F-2
CONSOLIDATED BALANCE SHEETS
March 31, 1996 and 1995
(in thousands)
<TABLE>
<CAPTION>
ASSETS 1996 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash, including temporary cash investments $ 28,768 23,274
Trade and other receivables, less allowance for doubtful accounts
of $8,376 in 1996 and $9,636 in 1995 144,472 157,552
Inventories 31,346 36,311
Other current assets 4,350 6,356
- -----------------------------------------------------------------------------------------------------------------
Total current assets 208,936 223,493
- -----------------------------------------------------------------------------------------------------------------
Investments in, at equity, and advances to unconsolidated companies 35,861 38,378
Properties and equipment:
Marine equipment 1,210,876 1,212,577
Compression equipment 324,069 326,300
Other 41,240 46,646
- -----------------------------------------------------------------------------------------------------------------
1,576,185 1,585,523
Less accumulated depreciation 916,412 878,061
- -----------------------------------------------------------------------------------------------------------------
Net properties and equipment 659,773 707,462
Other assets 73,630 76,325
- -----------------------------------------------------------------------------------------------------------------
$ 978,200 1,045,658
=================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- -----------------------------------------------------------------------------------------------------------------
Current liabilities:
Current maturities of long-term debt 2,934 15,467
Accounts payable and accrued expenses 70,546 72,124
Accrued property and liability losses 10,844 11,533
Income taxes 1,356 9,929
- -----------------------------------------------------------------------------------------------------------------
Total current liabilities 85,680 109,053
- -----------------------------------------------------------------------------------------------------------------
Deferred income taxes 76,579 60,346
Long-term debt --- 121,023
Accrued property and liability losses 34,206 28,921
Other liabilities and deferred credits 42,985 42,056
Stockholders' equity:
Common stock, par value $.10, issued 61,882,695 shares
in 1996 and 61,552,997 shares in 1995 6,188 6,155
Additional paid-in capital 421,655 418,941
Retained earnings 322,736 271,452
- -----------------------------------------------------------------------------------------------------------------
750,579 696,548
Less:
Cumulative foreign currency translation adjustment 10,771 10,745
Deferred compensation - restricted stock 1,058 1,544
- -----------------------------------------------------------------------------------------------------------------
Total stockholders' equity 738,750 684,259
Commitments and other matters
- -----------------------------------------------------------------------------------------------------------------
$ 978,200 1,045,658
=================================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-3
CONSOLIDATED STATEMENTS OF EARNINGS
Years Ended March 31, 1996, 1995 and 1994
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Marine operations $ 532,202 501,118 513,892
Compression operations 111,245 83,490 55,471
- -----------------------------------------------------------------------------------------------------------------
643,447 584,608 569,363
- -----------------------------------------------------------------------------------------------------------------
Costs and expenses:
Marine operations 328,306 311,949 315,349
Compression operations 59,536 45,886 30,338
Depreciation 82,430 92,865 88,936
General and administrative 59,348 63,919 66,034
- -----------------------------------------------------------------------------------------------------------------
529,620 514,619 500,657
- -----------------------------------------------------------------------------------------------------------------
113,827 69,989 68,706
Other income (expenses):
Foreign exchange loss (479) (611) (557)
Gain on sales of assets 7,264 14,207 4,588
Equity in net earnings of unconsolidated companies 5,901 4,555 3,504
Minority interests (1,385) (1,488) (2,022)
Interest and miscellaneous income 4,241 6,920 6,908
Other expense (12,600) (8,499) (2,452)
Interest expense (5,882) (5,608) (9,262)
- ------------------------------------------------------------------------------------------------------------------
(2,940) 9,476 707
- -----------------------------------------------------------------------------------------------------------------
Earnings before income taxes 110,887 79,465 69,413
Income taxes 34,710 28,278 24,753
- -----------------------------------------------------------------------------------------------------------------
Earnings before extraordinary item 76,177 51,187 44,660
Extraordinary loss on early debt retirement --- --- (12,250)
- ------------------------------------------------------------------------------------------------------------------
Net earnings $ 76,177 51,187 32,410
=================================================================================================================
Primary and fully-diluted earnings per common share:
Earnings before extraordinary item $ 1.23 .83 .73
Extraordinary loss on early debt retirement --- --- (.20)
- ------------------------------------------------------------------------------------------------------------------
Net earnings $ 1.23 .83 .53
=================================================================================================================
Weighted average common shares and equivalents 62,160,978 61,858,894 60,791,329
=================================================================================================================
Cash dividends declared per common share $ .475 .40 .30
=================================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-4
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended March 31, 1996, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
Cumulative
foreign Deferred
Additional currency compensation-
Common paid-in Retained translation restricted Treasury
stock capital earnings adjustment stock stock Total
- -----------------------------------------------------------------------------------------------------------------
1996
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Amount at March 31, 1995 $ 6,155 418,941 271,452 (10,745) (1,544) --- 684,259
Net earnings --- --- 76,177 --- --- --- 76,177
Exercise of stock options 33 2,950 --- --- --- --- 2,983
Cash dividends declared --- --- (25,327) --- --- --- (25,327)
Other --- (236) 434 (26) 486 --- 658
- -----------------------------------------------------------------------------------------------------------------
Amount at March 31, 1996 $ 6,188 421,655 322,736 (10,771) (1,058) --- 738,750
=================================================================================================================
1995
- -----------------------------------------------------------------------------------------------------------------
Amount at March 31, 1994 $ 6,102 416,559 241,520 (11,032) --- --- 653,149
Net earnings --- --- 51,187 --- --- --- 51,187
Issuance of restricted stock 7 1,629 --- --- (1,636) --- ---
Exercise of stock options 12 876 --- --- --- --- 888
Cash dividends declared --- --- (21,255) --- --- --- (21,255)
Other 34 (123) --- 287 92 --- 290
- -----------------------------------------------------------------------------------------------------------------
Amount at March 31, 1995 $ 6,155 418,941 271,452 (10,745) (1,544) --- 684,259
=================================================================================================================
1994
- -----------------------------------------------------------------------------------------------------------------
Amount at March 31, 1993 $ 5,978 383,730 224,999 (11,112) --- (10,844) 592,751
Net earnings --- --- 32,410 --- --- --- 32,410
Treasury stock changes (63) (10,781) --- --- --- 10,844 ---
Exercise of stock options 23 1,408 --- --- --- --- 1,431
Issuance of common stock 266 42,245 --- --- --- --- 42,511
Cash dividends declared --- --- (15,889) --- --- --- (15,889)
Other (102) (43) --- 80 --- --- (65)
- -----------------------------------------------------------------------------------------------------------------
Amount at March 31, 1994 $ 6,102 416,559 241,520 (11,032) --- --- 653,149
=================================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended March 31, 1996, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 76,177 51,187 32,410
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Extraordinary loss on early debt retirement --- --- 12,250
Depreciation 82,430 92,865 88,936
Provision for deferred income taxes 16,233 6,523 2,310
Gain on sales of assets (7,264) (14,207) (4,588)
Equity in net earnings of unconsolidated companies (5,901) (4,555) (3,504)
Minority interests 1,385 1,488 2,022
Compensation expense - restricted stock 595 92 ---
Decrease (increase) in trade and other receivables 11,780 (183) 5,233
Decrease (increase) in inventories 4,572 4,977 (238)
Decrease (increase) in other current assets 20 (944) (2,251)
Increase (decrease) in accounts payable and
accrued expenses (3,913) 10,203 (102)
Increase (decrease) in accrued property and
liability losses (689) 3,776 (880)
Increase (decrease) in income taxes (7,763) (741) 7,322
Other, net 6,548 5,001 7,154
- -----------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 174,210 155,482 146,074
- -----------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sales of assets 18,044 26,510 12,783
Additions to properties and equipment (46,116) (354,725) (56,703)
Sale (purchase) of marketable securities --- 27,310 (23,507)
Investments in unconsolidated companies,
net of dividends received 9,102 (3,059) (14,771)
Investment from minority interests, net of dividends paid (1,064) 3,550 (877)
OTHER (592) (863) (767)
- -----------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (20,626) (301,277) (83,842)
- -----------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Principal payments on long-term debt (145,395) (96,272) (71,245)
Prepayment penalties on early debt retirement --- --- (6,473)
Proceeds from the issuance of long-term debt 13,400 173,000 ---
Proceeds from issuance of common stock 4,212 742 40,894
Cash dividends (25,327) (21,255) (21,178)
OTHER 40 (947) ---
- -----------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (153,070) 55,268 (58,002)
- -----------------------------------------------------------------------------------------------------------------
Net increase in cash for Hornbeck Offshore Services, Inc.
for the quarter ended March 31, 1995 (Note 2) 4,980 --- ---
Net increase (decrease) in cash,
Including temporary cash investments 514 (90,527) 4,230
- -----------------------------------------------------------------------------------------------------------------
Cash, including temporary cash investments at beginning of year 23,274 113,801 109,571
- -----------------------------------------------------------------------------------------------------------------
Cash, including temporary cash investments at end of year $ 28,768 23,274 113,801
=================================================================================================================
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 5,944 5,377 9,560
Income taxes $ 27,721 23,078 17,626
=================================================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996, 1995 and 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
The company provides services and equipment to the international energy
industry through its marine and compression divisions. The marine division owns
and operates the world's largest fleet of offshore service vessels and the
compression division owns and operates one of the largest rental fleets of
natural gas compressors in the United States. Activity levels for the marine
vessel fleet and compression rental fleet are ultimately dependent upon oil and
natural gas prices which, in turn, are determined by the supply/demand
relationship for oil and natural gas.
USE OF ESTIMATES
In preparing the company's financial statements management makes informed
estimates and assumptions that affect the amounts reported in the financial
statements and related disclosures. Actual results may differ from these
estimates.
BASIS OF CONSOLIDATION
The Consolidated Financial Statements include the accounts of Tidewater Inc.
and its subsidiaries. Significant intercompany balances and transactions are
eliminated in consolidation.
INVENTORIES
Inventories are stated at average cost for operating supplies and at the
lower of cost (FIFO) or market (net realizable value) for merchandise held for
resale.
PROPERTIES AND EQUIPMENT
Properties and equipment are carried at cost. Depreciation for financial
reporting purposes is computed primarily on the straight-line basis beginning
with the first charter/rental, with salvage values of 5%-10% for marine
equipment and 30% for compression equipment, using estimated useful lives of:
YEARS
Marine equipment (from date of construction) 15 - 25
Compression equipment 8 - 12
Other properties and equipment 3 - 30
Used equipment is depreciated in accordance with the above schedule;
however, no life less than six years is used for marine equipment regardless of
the date constructed.
Maintenance and repairs are charged to operations as incurred during the
asset's original estimated useful life. Major repair costs incurred after the
original estimated useful life that also have the effect of extending the useful
life of the asset are capitalized and amortized over three years. Major
modifications to equipment are capitalized and amortized over the remaining life
of the equipment.
Effective April 1, 1995 the estimated useful lives of the company's marine
vessels were increased from 10-20 years to 15-25 years. The increase in useful
lives was made in order to provide a better matching of revenues and
depreciation expense over a vessel's economic useful life. This change in
accounting estimate lowered fiscal 1996 depreciation expense by approximately
$25.2 million. Concurrent with this change approximately $10.2 million of repair
and maintenance costs that would have been capitalized in fiscal 1996 had the
previous estimated useful lives been used, was expensed. The change increased
fiscal 1996 net earnings by $10.0 million, or $.16 per common share.
In fiscal 1995 the company increased from 12-1/2% to 30% the estimated
salvage value used to calculate depreciation expense for its fleet of natural
gas compressors. The increase in salvage value was made in order to better
reflect the estimated value of this equipment at the end of its service life and
resulted from an internal review following the acquisition of a substantial
number of natural gas
F-7
compressors during the third quarter of fiscal 1995. This change in accounting
estimate reduced depreciation expense by approximately $3 million and increased
net earnings by $1.9 million or $.03 per common share, for fiscal 1995.
ACCRUED PROPERTY AND LIABILITY LOSSES
The company's insurance subsidiary establishes case based reserves for
estimates of reported losses on direct business written, estimates received from
ceding reinsurers, and reserves based on past experience of unreported losses.
Such losses principally relate to the company's marine operations and are
included as a component of costs of marine operations in the Consolidated
Statements of Earnings. The liability for such losses and the related
reimbursement receivable from reinsurance companies are classified in the
Consolidated Balance Sheet into current and noncurrent amounts based upon
estimates of when the liabilities will be settled and when the receivables will
be collected.
PENSION AND OTHER POSTRETIREMENT BENEFITS
Pension costs are accounted for in accordance with the provisions of
Statement of Financial Accounting Standards No. 87 and are funded as required by
law. Prior service costs are amortized on the straight-line basis over the
average remaining service period of employees expected to receive pension
benefits. Postretirement benefits other than pensions are accounted for in
accordance with Statement of Financial Accounting Standards No. 106. The
estimated cost of postretirement benefits other than pensions are accrued during
the employees' active service period. Postemployment and postretirement benefits
other than pensions are funded as claims are submitted.
INCOME TAXES
Income taxes are accounted for in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
EARNINGS PER SHARE
Primary earnings per share are computed based on the weighted average number
of shares and dilutive equivalent shares of common stock (stock options and
restricted stock grants) outstanding during each year using the treasury stock
method.
FOREIGN CURRENCY TRANSLATION
The functional currency for certain non-U.S. subsidiaries and unconsolidated
companies is the applicable local currency. The translation of the applicable
local currencies into U.S. dollars is performed for balance sheet accounts using
current exchange rates in effect at the balance sheet date and for revenue and
expense accounts using weighted average exchange rates during the period. The
gains and losses resulting from the balance sheet account translations, net of
deferred income taxes, are included in stockholders' equity.
Some transactions of the company and its subsidiaries are made in currencies
different from their own. Gains and losses from these transactions are included
in the Consolidated Statements of Earnings as they occur and relate primarily to
the revenue generating and purchasing activities in Brazil, Venezuela, Mexico,
United Kingdom, Singapore, Trinidad and Nigeria.
CASH FLOWS
For purposes of the Consolidated Statements of Cash Flows, all highly liquid
investments purchased with original maturities of approximately three months or
less are considered to be cash equivalents. Some items of compression equipment
are acquired and placed in inventories for subsequent sale or rent to others.
Acquisitions of these assets are considered operating activities in the
Consolidated Statements of Cash Flows, although they later may be transferred to
the compression equipment rental fleet.
F-8
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (the FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This statement
is effective for fiscal years beginning after December 15, 1995. Management does
not believe that this pronouncement will have a material impact on its fiscal
1997 consolidated financial statements.
The FASB also issued SFAS No. 123, "Accounting for Stock Based
Compensation," effective also for fiscal years beginning after December 15,
1995. The new statement encourages, but does not require, companies to measure
stock-based compensation cost using a fair value method, rather than the
intrinsic value method prescribed by Accounting Principles Board (APB) Opinion
No. 25. Companies choosing to continue to measure stock-based compensation using
the intrinsic value method must disclose on a pro forma basis net earnings and
net earnings per share as if the fair value method were used. Management is
currently evaluating the requirements of SFAS No. 123.
(2) BUSINESS COMBINATION
On March 13, 1996 Tidewater Inc. issued 8,475,214 shares of its common stock
in exchange for all of the outstanding common stock of Hornbeck Offshore
Services, Inc. (Hornbeck). Hornbeck owned and operated a fleet of 61 marine
service vessels operating in the U.S. Gulf of Mexico and had a 49.9% interest in
29 safety/standby vessels operating in the North Sea. This business combination
has been accounted for as a pooling-of-interests and, accordingly, the
consolidated financial statements for periods prior to the combination have been
restated to include the accounts and results of operations of Hornbeck.
Operating results prior to the combination of the separate companies and the
combined amounts presented in the consolidated financial statements are
summarized below:
(in thousands of dollars)
Nine Months Year Ended
Ended March 31,
December 31, ---------------------
1995 1995 1994
- --------------------------------------------------------------------------------
(unaudited)
Revenues:
Tidewater $435,939 538,774 522,072
Hornbeck 46,341 45,834 47,291
- --------------------------------------------------------------------------------
Combined $482,280 584,608 569,363
================================================================================
Net earnings:
Tidewater $59,262 42,628 24,160
Hornbeck 4,783 8,559 8,250
- --------------------------------------------------------------------------------
Combined $64,045 51,187 32,410
================================================================================
Adjustments to conform Hornbeck's accounting policies to those of Tidewater
and to apply pooling-of-interests accounting reduced (increased) net earnings of
the combined entity for the above periods by $2,359,000, ($536,000) and
$2,415,000, respectively. The adjustments to conform accounting policies relate
to Hornbeck's capitalizing and amortizing the cost of vessel drydockings and
major overhauls rather than expensing such costs as incurred.
Prior to the combination Hornbeck's fiscal year end was December 31.
Tidewater's fiscal year end is March 31. In applying pooling-of-interests
accounting, the March 31, 1995 and 1994 Tidewater statements of earnings were
combined with the Hornbeck statements of earnings for the years ended December
31, 1994 and 1993, respectively. Unaudited amounts for the nine-month period
ended December 31, 1995 include results of each entity for the nine-month period
ended December 31, 1995. Retained earnings of the combined entities were
adjusted by $434,000 as of the beginning of Tidewater's fiscal 1996 year to
include the unaudited net earnings of Hornbeck, including adjustments to conform
accounting policies to those of Tidewater, for the period January 1, 1995 to
March 31, 1995. During this period Hornbeck's revenues were $12,671,000.
Additionally, the consolidated statement of cash flows for the year ended
F-9
March 31, 1996 was adjusted by $4,980,000 to reflect the net increase in cash of
Hornbeck for the three months ended March 31, 1995.
Merger expenses of $9.6 million include legal, investment banking and
accounting fees related to the business combination. Also included in merger
expenses are payments under severance and employment agreements and a provision
for certain other related costs. Merger expenses are classified as "other
expense" in the Consolidated Statements of Earnings.
(3) ACQUISITION OF COMPRESSION ASSETS
On September 30, 1994, the company purchased for $35 million in cash the
assets of Brazos Gas Compressing Company, a subsidiary of Mitchell Energy &
Development Corporation. On November 30, 1994, the company purchased the natural
gas compression assets of Halliburton Company using $55 million of available
cash and borrowings of $150 million. The costs of these acquisitions were
allocated under the purchase method of accounting based on the fair value of the
assets acquired. In connection with the purchase of the natural gas compression
assets of Halliburton Company, goodwill of approximately $25 million was
recorded as other assets in the Consolidated Balance Sheet and is being
amortized in equal charges to earnings over a 15-year period.
The results of Brazos' and Halliburton's operations have been consolidated
with the company's effective October 1, 1994, and December 1, 1994,
respectively. Unaudited pro forma combined results of operations of the company
and of Brazos and Halliburton, including appropriate purchase accounting
adjustments for the year ended March 31, 1995 as though the acquisition had
taken place on April 1, 1994, are as follows:
(in thousands, except per share data)
1995
- --------------------------------------------------------------------------------
Revenues $579,943
================================================================================
Earnings before extraordinary item 35,947
================================================================================
Net earnings 35,947
================================================================================
Primary and fully diluted earnings per common share .67
================================================================================
(4) INVENTORIES
A summary of inventories at March 31 follows:
(in thousands)
1996 1995
- --------------------------------------------------------------------------------
Marine operating supplies $23,428 25,764
Compression supplies and merchandise held for sale 7,918 10,547
- --------------------------------------------------------------------------------
$31,346 36,311
================================================================================
F-10
(5) UNCONSOLIDATED COMPANIES
Investments in, at equity, and advances to unconsolidated marine
joint-venture companies at March 31 were as follows:
Percentage (in thousands)
ownership 1996 1995
- --------------------------------------------------------------------------------
Ravensworth Investments Ltd. (United Kingdom) 50% $14,505 16,697
National Marine Service (Abu Dhabi-UAE) 40% 11,557 10,886
Tidewater Port Jackson (Australia) 50% 4,682 6,972
Provident Marine, Ltd. (Mexico) 50% 2,126 2,322
Lamnalco (UAE) 50% 1,613 ---
Others 20%-50% 1,378 1,501
- --------------------------------------------------------------------------------
$35,861 38,378
================================================================================
The aggregate amount of undistributed earnings of all unconsolidated
joint-venture companies included in consolidated stockholders' equity at March
31, 1996 is approximately $13,854,000.
(6) INCOME TAXES
Earnings from continuing operations before income taxes derived from United
States and international operations for the years ended March 31 are as follows:
(in thousands)
1996 1995 1994
- ---------------------------------------------------------------------
United States $ 43,854 54,738 37,843
International 67,033 24,727 31,570
- ---------------------------------------------------------------------
$110,887 79,465 69,413
=====================================================================
Total income tax expense for the years ended March 31 was allocated as
follows:
(in thousands)
1996 1995 1994
- --------------------------------------------------------------------------------
Income from continuing operations $ 34,710 28,278 24,753
Extraordinary loss on early debt retirement --- --- (6,615)
- --------------------------------------------------------------------------------
$ 34,710 28,278 18,138
================================================================================
Income tax expense attributable to income from continuing operations for
the years ended March 31 consists of the following:
(in thousands)
U.S.
------------------------
Federal State International Total
- --------------------------------------------------------------------------------
1996
- --------------------------------------------------------------------------------
Current $ 8,877 (629) 10,229 18,477
Deferred 16,233 --- --- 16,233
- --------------------------------------------------------------------------------
$25,110 (629) 10,229 34,710
================================================================================
1995
- --------------------------------------------------------------------------------
Current $13,977 797 6,981 21,755
Deferred 6,523 --- --- 6,523
- --------------------------------------------------------------------------------
$20,500 797 6,981 28,278
================================================================================
1994
- --------------------------------------------------------------------------------
Current $13,907 1,352 7,184 22,443
Deferred 2,310 --- --- 2,310
- --------------------------------------------------------------------------------
$16,217 1,352 7,184 24,753
================================================================================
F-11
The actual income tax expense attributable to earnings from continuing
operations for the years ended March 31, 1996, 1995 and 1994 differs from the
amounts computed by applying the U.S. federal tax rate of 35% to pre-tax
earnings from continuing operations as a result of the following:
<TABLE>
<CAPTION>
(in thousands)
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed "expected" tax expense $ 38,810 27,813 24,295
Increase (reduction) resulting from:
Effect of 1993 tax law change --- --- 1,921
Foreign (earnings) losses not includable in U.S. tax return 482 (2,803) (310)
Foreign taxes not creditable against U.S. taxes --- 1,039 ---
Foreign tax credits not previously recognized (7,440) --- ---
Utilization of net operating loss carryforwards (2,181) --- (183)
Expenses which are not deductible for tax purposes 1,496 177 248
Other, net 3,543 2,052 (1,218)
- ---------------------------------------------------------------------------------------------------------------
$ 34,710 28,278 24,753
===============================================================================================================
</TABLE>
The significant components of deferred income tax expense for the years
ended March 31 are as follows:
<TABLE>
<CAPTION>
(in thousands)
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred income tax expense (benefit) (exclusive of the effects of
other components listed below) $ 7,478 218 (3,208)
Application of net operating loss carryforwards --- --- 2,723
Investment, foreign and minimum tax credits 8,755 6,305 874
Effect of 1993 tax law change --- --- 1,921
- ---------------------------------------------------------------------------------------------------------------
Subtotal 16,233 6,523 2,310
- ---------------------------------------------------------------------------------------------------------------
Extraordinary loss on early debt retirement --- --- (3,747)
- ---------------------------------------------------------------------------------------------------------------
$ 16,233 6,523 (1,437)
===============================================================================================================
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at March 31,
1996 and 1995 are as follows:
(in thousands)
1996 1995
- --------------------------------------------------------------------------------
Deferred tax assets:
Financial provisions not deducted for tax purposes $ 15,755 13,375
Unrepatriated international earnings 9,233 5,220
International net operating loss carryforwards 5,079 7,187
International tax credit carryforwards 3,851 2,996
Investment tax credit carryforwards --- 6,848
Alternative minimum tax credit carryforwards 1,968 4,730
Other 1,068 1,616
- --------------------------------------------------------------------------------
Gross deferred tax assets 36,954 41,972
Less valuation allowance 5,079 7,187
- --------------------------------------------------------------------------------
31,875 34,785
- --------------------------------------------------------------------------------
Deferred tax liabilities:
Depreciation differences on properties and equipment (108,454) (94,570)
Undistributed income of unconsolidated joint-venture companies --- (561)
- --------------------------------------------------------------------------------
Gross deferred tax liabilities (108,454) (95,131)
- --------------------------------------------------------------------------------
Net deferred tax liability $(76,579) (60,346)
================================================================================
The net changes in the valuation allowance for the years ended March 31,
1996 and 1995 were a decrease of $2,108,000 and an increase of $3,016,000,
respectively. These changes were made to provide for uncertainties surrounding
the realization of certain international net operating loss carryforwards. The
remaining balance of the deferred tax assets are expected to be realized through
future operating results and the reversal of taxable temporary differences.
F-12
At March 31, 1996, the company had alternative minimum tax credit
carryforwards of approximately $1,968,000, which are available to reduce future
federal regular income taxes over an indefinite period.
The company has not recognized a deferred tax liability of approximately
$31,500,000 for the undistributed earnings of certain non-U.S. subsidiaries that
arose in prior years because the company currently does not expect those
unremitted earnings to reverse and become taxable to the company in the
foreseeable future. A deferred tax liability will be recognized when the company
expects that it will realize those undistributed earnings in a taxable manner,
such as through receipt of dividends or sale of investments. As of March 31,
1996 the undistributed earnings of these subsidiaries were approximately
$90,000,000.
(7) LONG-TERM DEBT
A summary of long-term debt at March 31 follows:
<TABLE>
<CAPTION>
(in thousands)
1996 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Variable rate revolving credit and term loan agreement with banks $ --- 112,000
Note payable --- 20,000
Other 2,934 4,490
- ---------------------------------------------------------------------------------------------------------------
Total long-term debt 2,934 136,490
Less current maturities of long-term debt 2,934 15,467
- ---------------------------------------------------------------------------------------------------------------
Net long-term debt $ --- 121,023
===============================================================================================================
</TABLE>
The company's revolving credit and term loan agreement (the "agreement")
consists of a $130 million revolving credit facility. At March 31, 1996 there
were no borrowings outstanding under the revolving credit facility. The
agreement bears interest, at the company's option, at prime rates or LIBO rates
plus .625% (6.125% at March 31, 1996) as long as the company maintains an
investment grade senior debt rating from Moody's Investor Services, Inc. and
Standard & Poor's.
The revolving credit commitment of $130 million expires on September 30,
1998, at which time the then outstanding balance may be converted to a term loan
repayable in 16 quarterly installments beginning December 31, 1998. All of the
borrowings under the agreement are unsecured and the company pays an annual fee
of from .250% to .375% on the unused portion of the revolving credit facility.
Under the terms of the agreement, the company has agreed to certain
requirements and limitations, including: limitations on investments and
aggregate indebtedness; a minimum level of tangible net worth of $400 million
plus 50% of cumulative net earnings, as defined, after September 30, 1995 (total
$505,116,000 at March 31, 1996). The agreement also prohibits the company from
encumbering its assets, other than assets already encumbered at December 29,
1995, for the benefit of others.
Based on current interest rates offered to the company for borrowings with
maturities similar to the remainder of its long-term debt, total long-term debt
at March 31, 1996 approximates the fair value of the debt.
(8) BENEFIT PLANS
Upon meeting various citizenship, age and service requirements, employees
are eligible to participate in a defined contribution savings plan. The plan
held 522,216 shares and 536,804 shares of the company's common stock at March
31, 1996 and 1995, respectively. Amounts charged to expense for the plan for
1996, 1995 and 1994 were $1,035,000, $951,000, and $1,282,000, respectively.
A defined benefit pension plan covers certain U.S. citizen employees and
employees who are permanent residents of the United States. Benefits are based
on years of service and employee compensation. The company also has a
supplemental retirement plan (Supplemental Plan) that provides pension benefits
to certain employees in excess of those allowed under the company's tax
qualified
F-13
pension plan. Certain benefits programs are maintained in several other
countries which provide retirement income for covered employees.
During the fourth quarter of fiscal 1996 the company recorded as "other
expense" a $3.0 million charge as a result of the removal of Marine fleet and
Compression field service personnel from the company's U.S. defined benefit
pension plan. Beginning April 1, 1996 these Marine and Compression employees,
along with all new employees of the company who are eligible for pension plan
membership, will be enrolled in a new defined contribution retirement plan.
Net periodic pension cost for the U.S. defined benefit pension plan and the
Supplemental Retirement Plan for 1996, 1995 and 1994 include the following
components:
(in thousands)
1996 1995 1994
- --------------------------------------------------------------------------------
Service cost-benefit earned during the period $ 1,843 1,962 2,118
Interest cost on projected benefit obligation 2,208 1,954 1,715
Actual return on assets (4,700) 503 (1,398)
Net amortization and deferral 3,530 (1,463) 590
- --------------------------------------------------------------------------------
Net periodic pension cost $ 2,881 2,956 3,025
================================================================================
Assumptions used in the accounting are:
Discount rates 7.5% 8.5% 7.25%
Rates of annual increase in compensation levels 5.2% 5.0% 5.0%
Expected long-term rate of return on assets 9.5% 9.5% 9.5%
================================================================================
The following table sets forth the assets and liabilities of the U.S.
defined benefit pension plan and the Supplemental Plan and the amount of the net
pension liability in the Consolidated Balance Sheets at March 31:
<TABLE>
<CAPTION>
(in thousands)
U.S. Defined Benefit Supplemental
Pension Plan Retirement Plan
-------------------- ------------------
1996 1995 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of vested benefit obligation $27,606 14,971 2,423 1,724
================================================================================================================
Accumulated benefit obligation $27,831 16,615 2,467 1,815
================================================================================================================
Projected benefit obligation $30,698 23,635 3,192 2,817
Plan assets at fair value, primarily bonds and common stock 23,935 18,691 --- ---
- ----------------------------------------------------------------------------------------------------------------
Projected benefit obligation in excess of plan assets 6,763 4,944 3,192 2,817
Unrecognized net transitional obligation amortized over 15 years (112) (615) --- ---
Unrecognized actuarial gain (loss) (1,856) (2,089) (1,272) (1,228)
Unrecognized prior service cost (425) (2,165) (394) (1,104)
Adjustment required to recognize minimum liability --- --- 941 1,330
- ----------------------------------------------------------------------------------------------------------------
Net accrued pension liability $ 4,370 75 2,467 1,815
================================================================================================================
</TABLE>
Qualified retired employees currently are covered by a program which
provides limited health care and life insurance benefits. Costs of the program
are based on actuarially determined amounts and are accrued over the period from
the date of hire to the full eligibility date of employees who are expected to
qualify for these benefits.
Net periodic postretirement health care and life insurance costs for 1996,
1995 and 1994 include the following components:
<TABLE>
<CAPTION>
(in thousands)
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefit earned during the period $ 743 924 801
Interest cost on accumulated postretirement benefit obligation 798 732 964
Other amortization and deferral (296) (129) (28)
- ---------------------------------------------------------------------------------------------------------------
Net periodic postretirement benefit cost $1,245 1,527 1,737
===============================================================================================================
</TABLE>
F-14
The unfunded actuarially-determined liabilities for postretirement
benefits at March 31 are as follows:
<TABLE>
<CAPTION>
(in thousands)
1996 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of accumulated postretirement benefit obligation:
Current retirees $ 4,390 2,573
Current employees eligible for benefits 1,039 930
Current employees not yet eligible for benefits 6,431 6,016
- ---------------------------------------------------------------------------------------------------------------
Total accumulated postretirement benefit obligation 11,860 9,519
Unrecognized prior service cost 1,382 1,523
Unrecognized net gain 2,069 3,288
- ---------------------------------------------------------------------------------------------------------------
Accrued postretirement benefit cost $15,311 14,330
===============================================================================================================
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation will be 9.5% in 1997, gradually declining to
7% in the year 2002 and thereafter. A 1% change in the assumed health care cost
trend rates for each year would change the accumulated postretirement benefit
obligation by approximately $1,760,000 at March 31, 1996 and change the cost for
the year ended March 31, 1996 by $290,000. The assumed discount rates used in
determining the accumulated postretirement benefit obligation were 7.5% in 1996
and 8.5% in 1995.
(9) OTHER ASSETS, OTHER LIABILITIES AND DEFERRED CREDITS
A summary of other assets at March 31 follows:
(in thousands)
1996 1995
- --------------------------------------------------------------------------------
Recoverable insurance losses $ 34,206 28,921
Goodwill 23,068 24,958
Assets held for sale 7,155 9,582
Other 9,201 12,864
- --------------------------------------------------------------------------------
$ 73,630 76,325
================================================================================
A summary of other liabilities and deferred credits at March 31 follows:
(in thousands)
1996 1995
- --------------------------------------------------------------------------------
Postretirement benefit liability $ 15,311 14,330
Minority interests in net assets of subsidiaries 6,991 8,628
Noncurrent international and domestic taxes 6,957 6,957
Other 13,726 12,141
- --------------------------------------------------------------------------------
$ 42,985 42,056
================================================================================
(10) CAPITAL STOCK
Under the company's stock option and restricted stock plans, the
Compensation Committee of the Board of Directors has authority to grant stock
options and restricted shares of the company's stock to officers and other key
employees. At March 31, 1996, 2,547,819 shares of common stock are reserved for
issuance under the plans. The stock option price and exercise period are set by
the grant, with the price equal to the market price of the stock on the date of
grant.
F-15
Transactions in the stock option plans during 1996, 1995 and 1994 were as
follows:
Price range
per share Shares
- --------------------------------------------------------------------------------
Outstanding March 31, 1993 $ 4.38 - 21.50 892,989
Options granted 19.63 - 20.13 198,900
Options exercised 4.38 - 15.00 (160,323)
Options expired or cancelled 4.38 - 19.63 (35,830)
- --------------------------------------------------------------------------------
Outstanding March 31, 1994 4.38 - 21.50 895,736
Options granted 19.00 - 23.38 901,875
Options exercised 4.38 - 20.13 (131,783)
Options expired or cancelled 4.38 - 22.25 (72,530)
- --------------------------------------------------------------------------------
Outstanding March 31, 1995 4.38 - 23.38 1,593,298
Options granted 25.13 - 39.00 284,000
Options exercised 4.38 - 23.38 (182,967)
Options expired or cancelled 4.38 - 22.25 (27,826)
- --------------------------------------------------------------------------------
Outstanding March 31, 1996 $ 4.38 - 39.00 1,666,505
================================================================================
At March 31, 1996 and 1995, 771,125 shares and 531,403 shares,
respectively, were exercisable under the stock option plans.
The restricted stock plan permits the grant of company shares restricted
as to transferability and subject to a substantial risk of forfeiture. The
vesting restrictions and period during which the transferability restrictions
are applicable are determined on a case-by-case basis. During the restricted
period, the restricted shares may not be transferred or encumbered but the
recipient has the right to vote and receive dividends on the restricted shares.
At March 31, 1996, contingent awards totalling 33,250 restricted company shares
were outstanding, to be issued in conjunction with and as a result of the
exercise of certain stock options. All restrictions are removed from the
restricted shares six months after issuance.
In accordance with an employment agreement with the company's chairman of
the board, 70,000 shares of restricted common stock of the company were granted
to him on October 20, 1994. These restricted shares vest at varying intervals
when the average sales price of the common stock reaches certain predetermined
levels. During the year ended March 31, 1996, 25,000 shares vested due to the
attainment of the first average sales price level applicable to those shares.
The fair market value of the stock at the time of the grant was classified in
stockholders' equity as deferred compensation-restricted stock and is being
amortized by equal monthly charges to earnings over approximately seven years,
adjusted for vestings during the seven year period.
During fiscal 1994, all then-existing treasury shares were cancelled and,
accordingly, the amount of treasury shares were reclassified to common stock and
additional paid-in capital.
At March 31, 1996 and 1995, 3,000,000 shares of no par value preferred
stock were authorized and unissued.
Under a Shareholder Rights Plan, one preferred stock purchase right has
been distributed as a dividend for each outstanding common share. Each right
entitles the holder to purchase, under certain conditions, one two-hundredth of
a share of Series A Participating Preferred Stock at an exercise price of $50,
subject to adjustment. The rights will not be exercisable unless a person (as
defined in the plan) acquires beneficial ownership of 16% or more of the
outstanding common shares, or a person commences a tender offer or exchange
offer, which upon its consummation such person would beneficially own 16% or
more of the outstanding common shares.
If after the rights become exercisable a person becomes the beneficial
owner of 16% or more of the outstanding common shares (except pursuant to an
offer for all shares approved by the Board of
F-16
Directors), each holder (other than the acquirer) will be entitled to receive,
upon exercise, common shares having a market value of twice the exercise price.
In addition, if the company is involved in a merger (other than a merger which
follows an offer for all shares approved by the Board of Directors), major sale
of assets or other business combination, each holder of a right (other than the
acquirer) will be entitled to receive, upon exercise, common stock of the
acquiring company having a market value of twice the exercise price.
The rights may be redeemed for $.01 per right at any time prior to ten
days following the acquisition by a person of 16% or more of the outstanding
common shares. The rights expire on May 1, 2000.
(11) COMMITMENTS AND OTHER MATTERS
An employment agreement exists with the company's chairman of the board,
president and chief executive officer whereby he will serve in such capacity
through December 31, 1997. The terms of the employment agreement provide for an
annual base salary and certain other benefits. Compensation continuation
agreements exist with all other officers and certain other key employees of
Tidewater Inc. whereby each receives compensation and benefits in the event that
his or her employment is terminated following certain events relating to a
change in control of the company. The maximum amount of compensation that could
be paid under the agreements, based on present salary levels, is approximately
$4,200,000. The amount that could be paid for certain benefits is not presently
determinable.
During the fourth quarter of fiscal 1995, the company recorded as "other
expense" $5.9 million ($3.7 million after tax, or $.06 per common share) for the
cost of a restructuring program of its corporate headquarters and worldwide
marine operations which was designed to reduce costs and improve operating
efficiencies. Substantially all of the costs associated with the restructuring
program were paid before March 31, 1995. The restructuring resulted in the
elimination of approximately 150 positions, realignment of duties and
responsibilities and streamlining of administrative functions. The charge
reflects the costs associated with staff reductions, relocations and related
transition expenses.
During the third quarter of fiscal 1995, the company recorded as "other
expense" a charge of $2.5 million ($1.6 million after tax, or $.02 per common
share) for reserves to cover possible losses due to the potential insolvency of
certain of the company's insurers.
Various legal proceedings and claims are outstanding which arose in the
ordinary course of business. In the opinion of management, the amount of
ultimate liability, if any, with respect to these actions will not have a
materially adverse effect on the company's financial position.
(12) DIVISIONS AND GEOGRAPHIC DISTRIBUTION OF OPERATIONS
The company operates principally in two divisions. Tidewater Marine
provides support services to the offshore oil and gas industry, and Tidewater
Compression provides the energy industry with engineered products and services
used primarily in oil and gas production, enhanced recovery, natural gas
transmission and natural gas processing. Please refer to Management's Discussion
and Analysis of Financial Condition and Results of Operations for disclosures of
additions to properties and equipment, identifiable assets, revenues, operating
profit and depreciation for each division.
F-17
(13) SUPPLEMENTARY INFORMATION--QUARTERLY FINANCIAL DATA (UNAUDITED)
Years Ended March 31, 1996 and 1995
(in thousands, except per share data)
<TABLE>
<CAPTION>
1996 First Second Third Fourth
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Marine operations $ 128,054 132,726 135,891 135,531
Compression operations 27,039 28,034 30,536 25,636
- ----------------------------------------------------------------------------------------------------------------
$ 155,093 160,760 166,427 161,167
================================================================================================================
Operating profit:
Marine operations $ 25,807 31,483 33,489 28,130
Compression operations 4,077 3,990 4,359 2,139
- ----------------------------------------------------------------------------------------------------------------
$ 29,884 35,473 37,848 30,269
================================================================================================================
Net earnings $ 17,427 22,431 24,187 12,132
================================================================================================================
Primary and fully diluted earnings per common share $ .28 .36 .39 .20
================================================================================================================
1995
- ----------------------------------------------------------------------------------------------------------------
Revenues:
Marine operations $ 129,924 125,455 124,800 120,939
Compression operations 14,913 15,599 21,559 31,419
- ----------------------------------------------------------------------------------------------------------------
$ 144,837 141,054 146,359 152,358
================================================================================================================
Operating profit:
Marine operations $ 24,566 19,123 22,537 17,457
Compression operations 1,782 2,657 4,207 5,790
- ----------------------------------------------------------------------------------------------------------------
$ 26,348 21,780 26,744 23,247
================================================================================================================
Net earnings $ 15,772 13,459 13,676 8,280
================================================================================================================
Primary and fully diluted earnings per common share $ .25 .22 .23 .13
================================================================================================================
</TABLE>
Operating profit consists of revenues less operating costs and expenses,
depreciation, general and administrative expenses and other income and expenses
of the Marine and Compression divisions.
See notes 1, 3, 8 and 11 for detailed information regarding transactions which
affect fiscal 1996 and 1995 quarterly amounts.
F-18
TIDEWATER INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED MARCH 31, 1996, 1995, AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- ---------- ---------- ---------- ----------
Balance
Balance at at
Beginning Additions End of
Description of period at cost Deductions Period
----------- ---------- ---------- ---------- ----------
1996
<S> <C> <C> <C> <C>
Deducted in balance sheet from
trade accounts receivables:
Allowance for doubtful accounts $ 9,636 121 1,381 (A) 8,376
========== ========== ========== ==========
Deducted in balance sheet from
other assets:
Amortization of goodwill and
debt issuance costs $ 2,136 2,374 --- 4,510
=========== ========== ========== ==========
1995
Deducted in balance sheet from
trade accounts receivables:
Allowance for doubtful accounts $ 6,842 3,877 1,083 (A) 9,636
============ ========== ========== ==========
Deducted in balance sheet from
other assets:
Amortization of goodwill and
debt issuance costs $ 940 1,196 --- 2,136
=========== ========== ========== ==========
1994
Deducted in balance sheet from
trade accounts receivable:
Allowance for doubtful accounts $ 6,345 1,712 1,215 (A) 6,842
============ ========== ========== ==========
Deducted in balance sheet from
other assets:
Amortization of goodwill and
debt issuance costs $ 1,479 321 860 (B) 940
=========== ========== ========== ==========
</TABLE>
(A) Accounts receivable amounts considered uncollectible and removed from
accounts receivable by reducing allowance for doubtful accounts.
(B) Write-off of patent, deferred debt costs and underwriting commissions.
F-19
The index below describes each exhibit filed as a part of this report.
Exhibits not incorporated by reference to a prior filing are designated by an
asterisk; all exhibits not so designated are incorporated herein by reference to
a prior filing as indicated.
3(a) -Restated Certificate of Incorporation of Tidewater Inc. (filed with the
Commission as Exhibit 3(a) to the company's quarterly report on Form
10-Q for the quarter ended September 30, 1993).
3(b) -Tidewater Inc. Bylaws (filed with the Commission as Exhibit 3(b) to the
company's quarterly report on Form 10-Q for the quarter ended September
30, 1993).
4(a) -Restated Rights Agreement dated as of December 17, 1993 between
Tidewater Inc. and The First National Bank of Boston (filed with the
Commission as Exhibit 4 to the company's quarterly report on Form 10-Q
for the quarter ended December 31, 1993).
10(a) -$130,000,000 Revolving Credit and Term Loan Agreement dated December
29, 1995 (filed with the Commission as Exhibit 10.1 to a Registration
Statement on February 6, 1996, Registration No. 333-00221).
10(b) -Tidewater Inc. 1975 Incentive Program Stock Option Plan, as amended in
1990 (filed with the Commission as Exhibit 10(c) to the company's annual
report on Form 10-K for the fiscal year ended March 31, 1991).
10(c) -Tidewater Inc. 1992 Stock Option and Restricted Stock Plan (filed with
the Commission as Exhibit 10(f) to the company's annual report on Form
10-K for the fiscal year ended March 31, 1993).
10(d) -Tidewater Inc. Amended and Restated Supplemental Executive Retirement
Plan (filed with the Commission as Exhibit 10(g) to the company's annual
report on Form 10-K for the fiscal year ended March 31, 1993).
10(e) -Tidewater Inc. Amended and Restated Employees' Supplemental Savings
Plan (filed with the Commission as Exhibit 10(h) to the company's annual
report on Form 10-K for the fiscal year ended March 31, 1993).
10(f) -Supplemental Health Plan for Executive Officers of Tidewater Inc.
(filed with the Commission as Exhibit 10(i) to a Registration Statement
on September 12, 1989, Registration No. 33-31016).
10(g) -Tidewater Inc. Deferred Compensation Plan for Directors (filed with the
Commission as Exhibit 10(h) to the company's annual report on Form 10-K
for the fiscal year ended March 31, 1994).
10(h) -Tidewater Inc. Retirement Plan for Directors as adopted on March 22,
1990 (filed with the Commission as Exhibit 10(k) to the company's annual
report on Form 10-K for the fiscal year ended March 31, 1990).
10(i) -Employment and Consulting Agreement dated as of March 31, 1993 between
Tidewater Inc. and John P. Laborde as amended (filed with the Commission
as Exhibit 10(l) to the company's annual report on Form 10-K for the
fiscal year ended March 31, 1993).
*10(j) -Consulting Agreement dated as of March 13, 1996 between Tidewater Inc.
and Larry D. Hornbeck.
10(k) -Form of Severance Agreement entered into as of August 1, 1985 with
eleven executive officers and key employees, as amended (filed with the
Commission as Exhibit 10(j) to the company's annual report on Form 10-K
for the fiscal year ended March 31, 1992).
10(l) -Form of Severance Agreement entered into as of February 18, 1992 with
three executive officers, as amended (filed with the Commission as
Exhibit 10(k) to the company's annual report on Form 10-K for the fiscal
year ended March 31, 1992).
10(m) -Standstill Agreement dated as of November 11, 1992 between Tidewater
Inc. and Zapata Corporation (filed with the Commission as Exhibit 10(o)
to the company's annual report on Form 10-K for the fiscal year ended
March 31, 1993).
10(n) -First Amendment to Standstill Agreement dated January 24, 1994 between
Tidewater Inc. and Zapata Corporation (filed with the Commission as
Exhibit 10(n) to the company's annual report on Form 10-K for the fiscal
year ended March 31, 1994).
10(o) -Agreement, dated August 11, 1989, by and among the company and Irwin L.
Jacobs, Daniel T. Lindsay, Gerald A. Schwalbach, TR Holdings, Inc. and
Minstar, Inc. (filed with the Commission as Exhibit 1 to the company's
report on Form 8-K for August 11, 1989).
10(p) -Tidewater Inc. 1995 Annual Incentive Plan (filed with the Commission as
Exhibit 10(q) to the company's annual report on Form 10-K for the fiscal
year ended March 31, 1995).
10(q) -Employment Agreement dated June 13, 1995 between Tidewater Inc. and
William C. O'Malley (filed with the Commission as Exhibit 10 to the
company's report on Form 8-K for June 13, 1995).
*11 -Earnings per share Computation Information.
*21 -Subsidiaries of the company.
*24 -Consent of Independent Accountants.
*27 - Financial Data Schedule.
Certain instruments respecting long-term debt of Tidewater have been
omitted pursuant to Regulation S-K, Item 601. Tidewater hereby agrees to furnish
a copy of any such instrument to the Commission upon request.
EXHIBIT 10(j)
CONSULTING AGREEMENT
This Consulting Agreement (the "Agreement") dated as of March 13, 1996,
is by and between Tidewater Inc., a Delaware corporation (the "Company") and
Larry D. Hornbeck ("Hornbeck").
WITNESSETH:
WHEREAS, Hornbeck is currently a shareholder, director and officer of
Hornbeck Offshore Services, Inc. ("HOSS");
WHEREAS, pursuant to that certain Agreement and Plan of Merger (the
"Merger Agreement"), dated as of December __, 1995, between, among others, the
Company and HOSS, all shares of common stock, $.10 par value per share, of HOSS,
including the shares held by Hornbeck, have been converted into the right to
receive the Merger Consideration (as defined in the Merger Agreement), and HOSS
has been acquired by merger by the Company (the "Merger");
WHEREAS, in order to preserve the goodwill of HOSS being transferred to
the Company in connection with the Merger, Hornbeck has agreed, pursuant to the
Merger Agreement, to execute and deliver this Agreement; and
WHEREAS, in order to induce the Company to consummate the Merger and in
exchange for the payments specified herein, Hornbeck is willing to enter into
this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall
have the meanings set forth below:
(a) "Affiliate" - the meaning specified in Rule 12b-2 under
the Securities Exchange Act of 1934, as amended.
(b) "Associate" - the meaning specified in Rule 12b-2
promulgated under the Securities Exchange Act of 1934, as amended.
(c) "Confidential Information" - information of any nature and
in any form which at the time or times concerned is not generally known to those
persons engaged in business similar to that or contemplated by the Company
(other than by the act or acts of an employee not authorized by the Company to
disclose such information).
(d) "Person" - any natural person, corporation, partnership,
limited liability company, trust or any other entity, organization, or
enterprise of any kind, including governmental or political subdivisions,
agencies or instrumentalities thereof.
2. PERSONAL SERVICES TO BE PERFORMED.
(a) In addition to serving on the Board of Directors of the
Company pursuant to Section 7.3(l) of the Merger Agreement, the Company hereby
engages Hornbeck to serve as its consultant and
2
Hornbeck agrees to so serve for the period specified in Section 6 hereof
commencing as of the date hereof, unless sooner terminated as provided therein.
(b) During the three-month period commencing on the date
hereof, Hornbeck shall devote an average of up to thirty-six hours per week to
the performance of his duties as consultant subject to the instruction and
direction of the President of the Company.
(c) During each of the next six months of this Agreement
following the period in 2(b) above, Hornbeck shall devote an average of up to
eighteen hours per week to the performance of such services as may be necessary
or desirable to render the prompt and effective performance of his duties
hereunder.
(d) During each of the next fifteen months of this Agreement,
following the period in 2(c) above, Hornbeck shall devote an average of up to
nine hours per week to the performance of such services as may be necessary or
desirable to render the prompt and effective performance of his duties
hereunder.
(e) Hornbeck shall not be precluded from pursuing other
employment or occupational or vocational activities, provided that he (i)
complies with the covenants contained in Sections 2 and 4 hereof, (ii) remains
able to devote sufficient time, skill, labor and attention to the performance of
his services hereunder in an effective manner, and (iii) does not engage in any
activity during the term of this Agreement that would be deemed to be a breach
of his duty of loyalty to the Company. Notwithstanding the preceding, Hornbeck
shall be entitled to remain on the board of Coastal Towing, Inc.
(f) For purposes of complying with the requirements of this
Section 2, the following provisions shall apply: Hornbeck's services hereunder
shall be provided Monday through Friday during the Company's normal operating
hours. Any international travel time required of Hornbeck shall be included as
service hereunder; provided, however, that Hornbeck's duties hereunder shall not
require an unreasonable amount of travel which shall average no more than five
days per month.
3. COMPENSATION AND BENEFITS.
(a) In exchange for the services to be provided by Hornbeck
pursuant to Section 2 hereof, the Company will pay Hornbeck monthly Ii)
$33,333.33 per month during the three-month period commencing on the date
hereof, (ii) $16,666.67 per month during each of the next nine months following
the period in 3(a)(i), and (iii) $8,333.33 per month during each of the next 12
months following the period in 3(a)(i). the amounts payable hereunder will be
paid regardless of whether the Company calls upon Hornbeck to consult, and 100%
of the balance owed hereunder will be paid upon Hornbeck's death or disability.
The Company will treat Hornbeck as an independent contractor for withholding and
other employment tax purposes. Furthermore, any additional services provided by
Hornbeck in excess of that required under Section 2 shall entitle Hornbeck to
additional compensation which shall be mutually agreed to by Hornbeck and the
Company. Hornbeck shall be entitled to 100% of the balance owed hereunder if the
Company shall terminate this Agreement for any reason which is not permitted
under Section 6 hereunder. (b) During the term of this Agreement, the Company
will also reimburse Hornbeck for all travel (including business class air travel
and $.40 per mile for auto) and other out-of-pocket expenses reasonably incurred
by him in the performance of his duties hereunder, subject to his observance of
any policies of general application with respect thereto maintained by the
Company. Such reimbursements shall be promptly paid after the Company's receipt
of Hornbeck's written expense voucher (with copies of bills attached) indicating
the amount, nature and purpose of the expenses incurred, all of which shall be
in such form and detail as to enable the Company to substantiate its federal
income tax deductions for such expenses.
3
(c) During the term of Hornbeck's Board membership, Hornbeck
will receive all compensation and benefits paid to the Company's other
non-employee board members for his membership on, attendance at, and
participation in Board meetings and any committees thereof of which eh is a
member. Hornbeck shall be appointed to Board Membership two days after
consummation of the merger pursuant to the Merger Agreement and, in addition,
shall be recommended at the Company's next annual shareholders' meeting for
Board Membership in the class of directors elected for a three-year term.
Notwithstanding another agreements to the contrary, if Hornbeck is not
recommended to the Company's shareholders and elected for Board Membership for a
minimum aggregate period of three years (or placed in a class of directors
serving for such period), then this Agreement will terminate, and Hornbeck will
be entitled to the remaining balance owed hereunder.
4. CONFIDENTIAL INFORMATION; NON-COMPETITION.
(a) Hornbeck acknowledges that the Company has and will
acquire through its business activities various types of Confidential
Information that may be known by or disclosed to Hornbeck and that unauthorized
disclosure of such information by Hornbeck to third parties may be damaging to
the Company. Hornbeck hereby agrees that he will not, and will cause his
Affiliates and Associates not to, at any time during or after the term of this
Agreement, divulge or reveal, directly or indirectly, or use for his own benefit
or the benefit of any person or entity other than the Company, any Confidential
Information relating to the Company, its subsidiaries or affiliates, or any of
the businesses operated by them. Hornbeck will return all tangible evidence of
any such Confidential Information at the termination of his consulting services.
(b) Hornbeck agrees that during the term of this Agreement, he
will not engage, directly or indirectly (including without limitation, through
the ownership of more than a 5% interest in any entity), in any business
activity that competes with the Company in any line of business in which the
Company is engaged during the term of this Agreement.
5. STATUS OF CONSULTANT.
(a) The Company and Hornbeck understand and agree that
Hornbeck is an independent contractor and is not an employee of the Company.
Accordingly, Hornbeck acknowledges and agrees that (i) except as provided in
Section 12(g) of this Agreement, he will not be eligible or entitled to
participate in any employee benefit plans, arrangements, distributions,
insurance or other similar benefits that may be provided by the Company to its
employees, (ii) he will not be treated as an employee for purposes of any
federal or state law regarding income tax withholding or for purposes of
contributions required by any unemployment, insurance or compensatory program,
and (iii) he will be solely responsible for the payment of any taxes or
assessments imposed on account of the payment of compensation to, or the
performance of consulting services by, him pursuant to this Agreement.
(b) Hornbeck will not, and has no authority to, represent to
others that he is an employee of the Company. Except as expressly authorized in
writing by the Company and except with respect to his membership on the
Company's Board of Directors, Hornbeck has no authority to bind or obligate the
Company, to use the name of the Company or any of its affiliates in any manner
whatsoever, or to represent to others that he has any such authority.
6. TERM; TERMINATION.
(a) Unless earlier terminated pursuant to the provisions of
subsection (b) hereof, the terms and provisions of this Agreement shall
terminate on the second anniversary of this Agreement.
(b) This Agreement may be terminated:
4
(i) by either party hereto in the event of a material
breach by the other of them of any covenant or agreement contained in this
Agreement, which cannot be cured within five days after written notice of such
breach is given to the party committing such breach;
(ii)by the Company, upon the death, incapacitation or
gross misconduct involving moral turpitude of Hornbeck; or
(iii) by the mutual written consent of both parties
hereto in whole or in part at any time.
(c) Except as otherwise provided herein, upon termination of
this Agreement under this Section 6, all obligations of the Company and of
Hornbeck hereunder shall cease. Notwithstanding the foregoing, in the event this
Agreement is terminated by Hornbeck pursuant to subsection (b)(i) above, all
amounts owed to him for the unexpired term of this Agreement pursuant to Section
3 hereof shall become immediately due and payable in full to Hornbeck within 30
days of such termination.
(d) If as a result of untenable work conditions Hornbeck
elects to terminate this Agreement prior to its expiration, the Company will be
obligated to pay him the following:
i. 0% of the balance owed hereunder if such
termination within the first months of this Agreement;
ii. 50% of the remaining balance owed hereunder if
such termination occurs between the fourth and twelfth month
of this Agreement;
iii. 85% of the remaining balance owed hereunder if
such termination occurs between the thirteenth and
twenty-fourth month of this Agreement.
7. NOTICES. Any notice, communication, request, reply, consent, advice
or disclosure notice ("Notice") required or permitted to be given or made by any
party to another in connection with this Agreement must be in writing and may be
given or served by (i) depositing such Notice in the United States mail, postage
prepaid and registered or certified with return receipt requested, (ii) by hand
delivering such Notice, (iii) by sending such Notice by an express air mail
courier service for next business day delivery, or (iv) sending such Notice by
telex or telecopy, the receipt of which is confirmed in writing by the named
recipient. Notice deposited in the mail in the manner described above shall be
effective 72 hours after such deposit, and Notice hand delivered in person or
delivered by telex, telecopy or express courier service shall be effective at
the time of delivery. For purposes of delivering any Notice, the addresses of
the parties shall, until changed as hereinafter provided, be as follows:
(a) If to the Company:
Tidewater Inc.
1440 Canal Street
New Orleans, Louisiana 70112
Attention: William C. O'Malley
(b) If to Hornbeck:
Larry D. Hornbeck
P.O. Box 191
Port Bolivar, TX 77650
or such other address as either party shall specify by notice in writing to the
other party.
5
8. COMPLETE AGREEMENT; NO AMENDMENT. This Agreement constitutes the
entire understanding between the Company and Hornbeck with respect to the
matters provided for herein, and all prior discussions, negotiations,
commitments, writings and understandings related hereto are hereby superseded.
This Agreement shall not be amended or modified except by the written agreement
of the parties hereto.
9. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their successors and permitted
assigns. Hornbeck may not assign either his rights or obligations hereunder
without the prior written consent of the Company.
10. GOVERNING LAW. The construction and interpretation of this
Agreement shall be governed by and construed and enforced in accordance with the
laws of the State of [Louisiana].
11. WAIVERS. The Company will not be deemed as a consequence of any
act, delay, failure, omission, forbearance or other indulgence granted by it
from time to time or for any other reason: (a) to have waived, or to be estopped
from exercising, any of its rights or remedies under this Agreement or (b) to
have modified, changed, amended, terminated, rescinded, or superseded any of the
terms of this Agreement, unless such waiver, modification, amendment, change,
termination, rescission, or supersession is express, in writing and signed by a
duly authorized officer of the Company. No single or partial exercise by the
Company of any right or remedy will preclude other or further exercise thereof
or preclude the exercise of any other right or remedy, and a waiver expressly
made in writing on one occasion will be effective only in that specific instance
and only for the precise purpose for which given, and will not be construed as a
consent to or a waiver of any right or remedy on any future occasion. No notice
to or demand on Hornbeck will entitle Hornbeck to any other or future notice or
demand in similar or other circumstances.
12. MISCELLANEOUS.
(a) This Agreement does not in any modify Hornbeck's or HOSS'
rights or obligations pursuant to the Change in Control Agreement between
Hornbeck and HOSS dated June 20, 1995.
(b) HOSS and the Company hereby assign to Hornbeck all rights
to the "Hornbeck" name and any abbreviation thereof, and the Hornbeck
"horsehead" logo.
(c) Hornbeck shall be entitled to the memorabilia and personal
furnishings and effects in the HOSS offices.
(d) Hornbeck's base of operations will be in the
Galveston/Port Bolivar, Texas area. Furthermore, as long as the Company keeps
the Galveston office open, the Company will provide Hornbeck with the right to
remain in his current office there, with appropriate secretarial and support
services and facilities necessary to carry out the services required under this
Agreement or requested by the Company. If and when that office is closed, he
shall operate from his home office or the Company's Houston facility with
appropriate support necessary to carry out the services required under this
Agreement or requested by the Company.
(e) If Hornbeck is remove from the Board for any reason, any
noncompete applicable to Hornbeck will terminate.
(f) The Company will indemnify Hornbeck for any labilities
(including attorney's fees and expenses) in connection with his providing of
consulting services hereunder.
6
(g) Subject to Hornbeck being employed on a full-time basis by
another employer which provides comparable insurance to Hornbeck, Hornbeck and
his spouse shall be entitled for the remainder of his and his spouses's life, at
the Company's expense, to group Retiree health insurance benefits. Hornbeck
shall, if requested by the Company, be required to reimburse the Company for the
cost of providing such benefits after he attains age 68. Furthermore, after age
65, any health insurance benefits provided to Hornbeck hereunder shall be
coordinated with medicare coverage that is available.
IN WITNESS WHEREOF, the parties hereto have duly authorized, executed
and delivered this Agreement as of the date first above written.
TIDEWATER INC.
By: S/WILLIAM C. O'MALLEY
William C. O'Malley
Chairman, President and
Chief Executive Officer
S/LARRY D. HORNBECK
Larry D. Hornbeck
Acknowledged and agreed to:
HORNBECK OFFSHORE SERVICES, INC.
By: S/KEN C. TAMBLYN
Name: KEN C. TAMBLYN
Title: VICE PRESIDENT
EXHIBIT 11
TIDEWATER INC.
EARNINGS PER SHARE COMPUTATION INFORMATION
YEARS ENDED MARCH 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
(in thousands, except share and per share data)
1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Earnings before extraordinary item $ 76,177 51,187 44,660
Extraordinary loss on early debt retirement --- --- (12,250)
- -----------------------------------------------------------------------------------------------------------------
Net earnings $ 76,177 51,187 32,410
=================================================================================================================
Issued shares: 61,882,695
Weighted average common shares outstanding 61,675,360 61,586,175 60,419,859
Incremental shares applicable to stock options 485,618 272,719 371,470
- -----------------------------------------------------------------------------------------------------------------
Weighted average common shares and equivalents 62,160,978 61,858,894 60,791,329
=================================================================================================================
Primary and fully-diluted earnings per common share:
Earnings before extraordinary item $ 1.23 .83 .73
Extraordinary loss on early debt retirement --- --- (.20)
- -----------------------------------------------------------------------------------------------------------------
Net earnings $ 1.23 .83 .53
=================================================================================================================
</TABLE>
The above earnings per share (EPS) calculations are submitted in accordance with
APB Opinion No. 15. An EPS calculation in accordance with Regulation S-K item
601(b)(11) is not shown above because it produces an anti-dilutive result. The
following information is disclosed for purposes of calculating the anti-dilutive
EPS for fiscal year 1994:
<TABLE>
<CAPTION>
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares attributable to assumed conversion
of convertible subordinated debentures --- --- 1,840,880
Interest expense (in thousands) applicable
to convertible subordinated debentures,
net of income taxes $ --- --- 2,377
=================================================================================================================
</TABLE>
<PAGE>
EXHIBIT 21
LIST OF SUBSIDIARIES
PERCENTAGE
STATE OR OF VOTING
JURISDICTION OF SECURITIES
NAME INCORPORATION OWNED
---- ------------- ----------
Al Wasl Marine Limitee . . . . . . . . . . Dubai 49%
Antilles Marine Service Limited . . . . . . Trinidad & Tobago 50%
Asie Zapata Marine Service Sdn. Bhd . . . . Malaysia 49%
Compania Maritima de Magallanes Limitada. . Chile 100%
Equipo Mara, C.A. . . . . . . . . . . . . . Venezuela 19.9%
Equipo Zulia, C.A. . . . . . . . . . . . . Venezuela 100%
Gulf Fleet Abu Dhabi . . . . . . . . . . . Abu Dhabi 49%
Gulf Fleet Middle East, Inc.. . . . . . . . Panama 100%
Gulf Fleet N.V. . . . . . . . . . . . . . . Netherlands Antilles 100%
Gulf Fleet Supply Vessels, Inc. . . . . . . Louisiana 100%
Hilliard Oil & Gas, Inc.. . . . . . . . . . Nevada 100%
Hornbeck Shipping Limited . . . . . . . . . Isle of Man 49%
Hornbeck Support Ships Limited. . . . . . . Isle of Man 49%
Jackson Marine Corporation . . . . . . . . Delaware 100%
Jackson Marine, S.A. . . . . . . . . . . . Panama 100%
Jackson Marine Shipping Limited . . . . . . United Kingdom 100%
Java Boat Corporation . . . . . . . . . . . Louisiana 100%
Lamalco-Tidewater Marine Service Limited . Vanuatu 50%
Marine Transportation Services
Sea-Barge Group, Inc. . . . . . . . . . . Delaware 60%
Maritide Offshore Oil Services
Company S.A.E. . . . . . . . . . . . . . Egypt 49%
Mashhor Marine Sdn. Bhd.. . . . . . . . . . Brunei 70%
Nelson Navigation Limited . . . . . . . . . Isle of Man 49.9%
Nuigini Energy Services (unincorporated). . New Guinea 50%
Offshore Fleet International Incorporated . Panama 100%
Offshore Marine Limited . . . . . . . . . . United Kingdom 100%
Pacific Tidewater Pty. Ltd. . . . . . . . . Australia 100%
Pan-Marine do Brasil Transportes Ltda . . . Brazil 100%
Pan-Marine International, Inc.. . . . . . . Cayman Islands 100%
Pental Insurance Co. Ltd. . . . . . . . . . Bermuda 100%
Point Marine, Inc. . . . . . . . . . . . . Louisiana 100%
Provident Marine Ltd. . . . . . . . . . . . Turks &Caicos Is. 50%
Quality Shipyards, Inc. . . . . . . . . . . Louisiana 100%
Ravensworth Investments Limited . . . . . . Isle of Man 49.9%
Remolcadores y Gabarras Remigasa, S.A. . . Venezuela 19.9%
Seaboard Coral Limited . . . . . . . . . . Scotland 49.9%
Seaboard Holdings Limited . . . . . . . . . Isle of Man 49.9%
Seaboard Offshore Group Limited . . . . . . Scotland 49.9%
Seaboard Offshore Limited . . . . . . . . . Scotland 49.9%
Scott Navigation Limited . . . . . . . . . Isle of Man 49.9%
Seafarer Boat Corporation . . . . . . . . . Louisiana 100%
Servicios de Abastecimientos Mexicanos,
S. de R.L. de C.V. . . . . . . . . . . . Mexico 100%
Servicios Maritimos del Carmen, S.A. de C.V Mexico 100%
Servicios Maritimos Ves, S.A. de R.L. . . . Mexico 100%
Servicios y Representaciones Maritimas
Mexicanas, S.A. de C. V. . . . . . . . . Mexico 100%
Shanghai Zapata Houlder Marine Service Peoples Republic
Corp. Ltd.. . . . . . . . . . . . . . . . of China 50%
Sin-Hai Offshore Co. Pte. Ltd.. . . . . . . Singapore 97.5%
S.O.P., Inc.. . . . . . . . . . . . . . . . Louisiana 100%
Southern Ocean Services Pte. Ltd. . . . . . Singapore 100%
Sunset Personnel Services Limited . . . . . Cyprus 49.9%
Sylcon Personnel Services Limited . . . . . Cyprus 49.9%
T. Benetee Corporation. . . . . . . . . . . Delaware 100%
The National Marine Services Company . . . Abu Dhabi 40%
Tidewater Caribe, C.A. . . . . . . . . . . Venezuela 100%
Tidewater Chartering Pty. Ltd. . . . . . . Australia 50%
Tidewater Compression Service, Inc. . . . . Texas 100%
Tidewater Crewing Limited . . . . . . . . . Cayman Islands 100%
Tidewater Foreign Sales Corporation . . . . Barbados 100%
Tidewater International, Inc. Panama 100%
Tidewater (IOM) Limited . . . . . . . . . . Isle of Man 100%
Tidewater Marine Alaska, Inc. . . . . . . . Alaska 100%
Tidewater Marine Atlantic, Inc. . . . . . . Delaware 100%
Tidewater Marine, Inc.. . . . . . . . . . . Louisiana 100%
Tidewater Marine International Pte. Ltd. . Singapore 100%
Tidewater Marine (Malaysia) Sdn. Bhd. . . . Malaysia 100%
Tidewater Marine Service, C.A. . . . . . . Venezuela 100%
Tidewater Offshore Services, Inc. . . . . . Delaware 100%
Tidewater Offshore (GP-1984), Inc.. . . . . Delaware 100%
Tidewater North Sea Safety, Inc. . . . . . Delaware 100%
Tidewater Marine Service, Inc.. . . . . . . Louisiana 100%
Tidewater Marine (UK) Limited . . . . . . . United Kingdom 100%
Tidewater Marine West Indies Limited. . . . Bahama Islands 100%
Tidewater Marine Western, Inc. . . . . . . Texas 100%
Tidewater Port Jackson Marine Pty. Ltd. . . Australia 50%
Tidewater Nautico, Inc. . . . . . . . . . . Panama 100%
Tidewater Services, Inc.. . . . . . . . . . Louisiana 100%
Tidewater Venezuela, C.A. . . . . . . . . . Venezuela 100%
Tidex (Malaysia) Sdn. Bhd . . . . . . . . . Malaysia 100%
Tidex Nigeria Limited . . . . . . . . . . . Nigeria 60%
Tidex/OTS Nigeria Limited (unincorporated). Nigeria 50%
Torrens Ship Builders Pty. Ltd. . . . . . . Australia 50%
TPJM Nominees Limited . . . . . . . . . . . Vanuatu 50%
TT Boat Corporation . . . . . . . . . . . . Louisiana 100%
Twenty Grand Marine Service, Inc. . . . . . Louisiana 100%
Twenty Grand Offshore, Inc. . . . . . . . . Louisiana 100%
Zapata Gulf Crews, Inc. . . . . . . . . . . Panama 100%
Zapata Gulf Indonesia Limited . . . . . . . Vanuatu 80%
Zapata Gulf Marine Corporation. . . . . . . Delaware 100%
Zapata Gulf Marine International Limited. . Vanuatu 100%
Zapata Gulf Marine Operators, Inc. Delaware 100%
Zapata Gulf Pacific, Inc. . . . . . . . . . Delaware 100%
Zapata Marine Service (Nigeria) Limited . . Nigeria 100%
Zapata Offshore Marine Service Inc. . . . . Liberia 50%
Zapata Services (U.K.) Limited . . . . . . United Kingdom 100%
Zapata Servicos Maritimos Ltda. . . . . . . Brazil 100%*
Zhong Chang Offshore Marine People's Republic
Service Co. Ltd. . . . . . . . . . . . . of China 50%
* Includes Zapata Gulf Marine Corporation's ownership of 15% of the capital
stock and Gulf Fleet Supply Vessels, Inc.'s ownership of 3% of the capital
stock.
EXHIBIT 24
ACCOUNTANT'S CONSENT
The Board of Directors and Stockholders of Tidewater Inc.:
We consent to incorporation by reference in the Registration Statements 2-69356
and 33-38240 on Form S-8 of Tidewater Inc. of our report dated April 29, 1996
relating to the consolidated balance sheets of Tidewater Inc. and subsidiaries
as of March 31, 1996 and 1995 and the related consolidated statements of
earnings, stockholders' equity and cash flows and related schedule for each of
the years in the three-year period ended March 31, 1996, which report appears in
the March 31, 1996 annual report on Form 10-K of Tidewater Inc.
KPMG PEAT MARWICK LLP
New Orleans, Louisiana
April 29, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheets and the Consolidated Statements of Earnings at the
date and for the period indicated and is qualified in its entirety by reference
to such financial statements. All amounts shown are in thousands of dollars,
except per share data.
</LEGEND>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 28,768
<SECURITIES> 0
<RECEIVABLES> 152,848
<ALLOWANCES> 8,376
<INVENTORY> 31,346
<CURRENT-ASSETS> 208,936
<PP&E> 1,576,185
<DEPRECIATION> 916,412
<TOTAL-ASSETS> 978,200
<CURRENT-LIABILITIES> 85,680
<BONDS> 0
0
0
<COMMON> 6,188
<OTHER-SE> 732,562
<TOTAL-LIABILITY-AND-EQUITY> 978,200
<SALES> 643,447
<TOTAL-REVENUES> 643,447
<CGS> 529,620
<TOTAL-COSTS> 529,620
<OTHER-EXPENSES> 2,940
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,882
<INCOME-PRETAX> 110,887
<INCOME-TAX> 34,710
<INCOME-CONTINUING> 76,177
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 76,177
<EPS-PRIMARY> 1.23
<EPS-DILUTED> 1.23
</TABLE>
