<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 - For the Quarterly Period Ended September 30, 1997
------------------
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 - For the Transition Period From
to
- ------------------------------------- ---------------------------------------
Commission file number 1-6311
TIDEWATER INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 72-0487776
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1440 Canal Street, Suite 2100, New Orleans, Louisiana 70112
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (504) 568-1010
----------------------------
NOT APPLICABLE
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or of such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
----- -----
60,858,281 shares of Tidewater Inc. common stock $.10 par value per share were
outstanding on October 21, 1997. Registrant has no other class of common stock
outstanding.
1
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TIDEWATER INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
September 30, March 31,
ASSETS 1997 1997
- -------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash, including temporary cash investments $ 32,520 41,114
Trade and other receivables 254,964 187,612
Inventories 37,574 36,016
Other current assets 5,734 3,984
- -------------------------------------------------------------------------------
Total current assets 330,792 268,726
- -------------------------------------------------------------------------------
Investments in, at equity, and advances to
unconsolidated companies 17,965 20,556
Properties and equipment:
Marine equipment 1,551,207 1,265,633
Compression equipment 327,053 322,512
Other 46,073 39,826
- -------------------------------------------------------------------------------
1,924,333 1,627,971
Less accumulated depreciation 974,874 946,880
- -------------------------------------------------------------------------------
Net properties and equipment 949,459 681,091
Goodwill, net 381,660 21,357
Other assets 58,934 47,270
- -------------------------------------------------------------------------------
$1,738,810 1,039,000
===============================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------------------------------------------------
Current liabilities:
Current maturities of long-term debt 63,883 --
Accounts payable and accrued expenses 144,073 94,748
- -------------------------------------------------------------------------------
Total current liabilities 207,956 94,748
- -------------------------------------------------------------------------------
Long-term debt 387,083 --
Deferred income taxes 170,041 95,595
Accrued property and liability losses 41,669 32,146
Other liabilities and deferred credits 56,229 46,847
Stockholders' equity:
Common stock of $.10 par value; issued
60,750,014 shares at September and
60,334,889 shares at March 6,075 6,033
Additional paid-in capital 353,377 341,415
Retained earnings 530,321 433,347
- -------------------------------------------------------------------------------
889,773 780,795
Less:
Cumulative foreign currency translation adjustment 10,582 10,676
Deferred compensation - restricted stock 3,359 455
- -------------------------------------------------------------------------------
Total stockholders' equity 875,832 769,664
- -------------------------------------------------------------------------------
$1,738,810 1,039,000
===============================================================================
</TABLE>
See Notes to Unaudited Condensed Consolidated Financial Statements.
2
<PAGE> 3
TIDEWATER INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except share and per share data)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
September 30, September 30,
------------------------------ ----------------------------
1997 1996 1997 1996
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Marine operations $ 270,413 167,691 500,853 314,330
Compression operations 27,562 26,181 53,719 55,436
- -----------------------------------------------------------------------------------------------------------
297,975 193,872 554,572 369,766
- -----------------------------------------------------------------------------------------------------------
Costs and expenses:
Marine operations 130,721 96,579 253,905 187,795
Compression operations 13,908 14,625 27,074 31,513
Depreciation and amortization 30,603 20,816 55,711 40,833
General and administrative 21,028 15,823 39,897 30,898
- -----------------------------------------------------------------------------------------------------------
196,260 147,843 376,587 291,039
- -----------------------------------------------------------------------------------------------------------
101,715 46,029 177,985 78,727
Other income (expenses):
Foreign exchange loss (32) (397) (97) (254)
Gains on sales of assets 3,369 561 6,854 1,995
Equity in net earnings of
unconsolidated companies 1,798 1,176 2,822 2,419
Minority interests 34 (162) (261) (340)
Other expense (8,000) -- (8,000) --
Interest and miscellaneous income 1,214 1,345 2,210 2,256
Interest and other debt costs (8,691) (121) (13,195) (534)
- -----------------------------------------------------------------------------------------------------------
(10,308) 2,402 (9,667) 5,542
- -----------------------------------------------------------------------------------------------------------
Earnings before income taxes 91,407 48,431 168,318 84,269
Income taxes 27,078 15,479 53,228 26,947
- -----------------------------------------------------------------------------------------------------------
Net earnings $ 64,329 32,952 115,090 57,322
===========================================================================================================
Primary and fully-diluted
earnings per common share: $ 1.05 .53 1.88 .92
===========================================================================================================
Weighted average common
shares and equivalents 61,088,777 62,594,928 61,011,397 62,628,126
===========================================================================================================
Cash dividends declared
per common share $ .15 .15 .30 .275
===========================================================================================================
</TABLE>
See Notes to Unaudited Condensed Consolidated Financial Statements.
3
<PAGE> 4
TIDEWATER INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
September 30, September 30,
---------------------- ----------------------
1997 1996 1997 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net cash provided by operating activities $ 76,257 43,930 174,026 91,882
- --------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sales of assets 7,789 2,348 18,346 7,427
Additions to properties and equipment (32,552) (19,625) (52,669) (32,451)
Acquisitions, net of cash acquired 1,973 -- (553,419) (3,435)
Increase in other assets (120) -- (3,553) --
Additional investment in unconsolidated
companies (159) -- (159) --
Purchase of marketable securities -- (6,060) -- (6,060)
- --------------------------------------------------------------------------------------------------
Net cash used in investing activities (23,069) (23,337) (591,454) (34,519)
- --------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Principal payments on long-term debt (47,596) (17,464) (82,849) (43,018)
Credit facility borrowing 5,000 -- 505,000 --
Cash dividends paid (9,063) (9,302) (18,116) (17,046)
Proceeds from issuance of common stock 4,123 317 4,799 2,047
- --------------------------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities (47,536) (26,449) 408,834 (58,017)
- --------------------------------------------------------------------------------------------------
Net increase (decrease) in cash,
including temporary cash investments 5,652 (5,856) (8,594) (654)
Cash, including temporary cash
investments at beginning of period 26,868 33,970 41,114 28,768
- --------------------------------------------------------------------------------------------------
Cash, including temporary cash
investments at end of period $ 32,520 28,114 32,520 28,114
==================================================================================================
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest $ 8,519 434 9,159 786
Income taxes $ 36,204 15,179 41,771 16,590
==================================================================================================
Supplemental noncash investing activity:
Acquisitions:
Fair value of assets acquired $ 1,973 -- 698,643 51,305
Net cash paid for stock -- -- (553,419) (3,435)
- --------------------------------------------------------------------------------------------------
Liabilities assumed $ 1,973 -- 145,224 47,870
==================================================================================================
</TABLE>
See Notes to Unaudited Condensed Consolidated Financial Statements.
4
<PAGE> 5
TIDEWATER INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Interim Financial Statements
The consolidated financial information for the interim periods presented
herein has not been audited by independent accountants, but in the opinion
of management, all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the condensed
consolidated balance sheets and the condensed consolidated statements of
earnings and cash flows at the dates and for the periods indicated have
been made. Results of operations for interim periods are not necessarily
indicative of results of operations for the respective full years.
(2) Earnings per Share Data
Primary and fully diluted earnings per share data are computed on the
weighted average number of shares and dilutive equivalent shares of common
stock (stock options and restricted stock grants) outstanding during each
period using the treasury stock method.
(3) Income Taxes
Income tax expense for interim periods is based on estimates of the
effective tax rate for the entire fiscal year. The effective tax rate was
34% for the quarter and six-month period ended September 30, 1997
excluding a $4 million (or $.07 per share) reduction in deferred taxes
resulting from the lowering of United Kingdom corporate income tax rates
which had the effect of reducing the effective tax rate for the quarter
and six-month period ended September 30, 1997 to 30% and 32%,
respectively. For the quarter and six-month period ended September 30,
1996 the effective tax rate was 32%.
(4) Marine Acquisitions
During the quarter ended June 30, 1997 the company acquired all of the
shares of O.I.L. Ltd. (O.I.L.) from Ocean Group plc in exchange for a cash
payment of 328 million pounds sterling or approximately $534 million. In
addition, a 3 million pound sterling, or approximately $5 million, advance
payment was made for the net working capital of O.I.L., with the final
purchase price to be adjusted for the final net working capital of O.I.L.
as of the closing date. Available cash of $39 million and borrowings of
$500 million were used to fund the purchase. Prior to the purchase O.I.L.
was principally engaged in the business of operating approximately 100
marine vessels, primarily platform supply and anchor handling
towing-supply vessels, in several international offshore oil and gas
exploration areas outside of the United States. The total estimated cost
of the acquisition of $626 million, which includes $65.6 million of
deferred income tax liability, was allocated under the purchase method of
accounting based on the fair value of the assets acquired and liabilities
assumed, including accruals for the estimated balance of O.I.L. working
capital and professional fees, severance and other transaction
5
<PAGE> 6
costs and the related deferred tax effect of the acquisition. Goodwill
of approximately $354 million has been recorded in the Condensed
Consolidated Balance Sheet.
The results of O.I.L.'s operations have been consolidated with the
company's effective May 16, 1997. Pro forma combined results of
operations of the company and of O.I.L. including appropriate purchase
accounting adjustments for the quarter ended September 30, 1996 and for
the six-month periods ended September 30, 1997 and 1996 as though the
acquisition had taken place on April 1 of the respective years are as
follows:
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
September 30, September 30,
------------- --------------------
1996 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $227,370 575,017 435,785
Net earnings $ 29,898 114,433 49,996
Primary and fully diluted earnings
per common share $ .48 1.88 .80
</TABLE>
The $500 million of debt incurred to finance the O.I.L. acquisition was
borrowed pursuant to a $600 million Revolving Credit and Term Loan
agreement with several banks and consists of a $400 million term loan
and $100 million borrowed under the $200 million revolving credit
facility of the agreement. The term loan is payable in quarterly
installments and bears interest at fluctuating rates subject to certain
options chosen in advance by the company.
On June 30, 1997 the company acquired the remaining 50% equity interest
in nine towing-supply and supply vessels previously owned and operated
by joint-venture companies in Australia for a cash payment of $13.2
million and issuance of debt totalling $14.0 million. The debt has
been discounted to yield interest at 7% and is to be repaid in
semi-annual installments. The total estimated cost of the acquisition
of $30 million was allocated under the purchase method of accounting
based on the fair value of the assets acquired and liabilities assumed,
including accruals for professional fees, severance and other
transaction costs and the related deferred tax effect of the
acquisition. Goodwill of approximately $10.7 million has been recorded
in the Condensed Consolidated Balance Sheet.
(5) The Internal Revenue Service has notified the company of proposed
deficiencies aggregating approximately $17.5 million of additional
income taxes resulting from audits of the company's income tax returns
for the years ended March 31, 1993, 1994 and 1995. Additionally, the
company is the defendant to several alleged labor-law pay violations
claimed by certain current and former employees in various areas of the
world where its marine vessel operations are conducted. While the
amount, if any, of such claims for which the company ultimately may be
held liable is not presently determinable, if the claimants and all
similarly situated employees and former employees who might file claims
were successful, the aggregate amount of the company's liability, based
on available information, could approximate $15 million.
6
<PAGE> 7
In the quarter ended September 30, 1997 the company provided an
additional reserve of $8 million for the possible adverse outcome of
the above matters. In management's opinion, the amount of the
company's liability in excess of established reserves, if any, will not
have a material adverse effect on the company's financial position or
the results of its ongoing operations.
7
<PAGE> 8
INDEPENDENT AUDITORS' REVIEW REPORT
The Board of Directors and Shareholders
of Tidewater Inc.:
We have reviewed the accompanying condensed consolidated balance sheet of
Tidewater Inc. and subsidiaries as of September 30, 1997, and the related
condensed consolidated statements of earnings and cash flows for the
three-month and six-month periods ended September 30, 1997. These financial
statements are the responsibility of the company's management. The condensed
consolidated balance sheet and the related condensed consolidated statements of
earnings and cash flows of Tidewater Inc. and subsidiaries as of September 30,
1996, and for the three-month and six-month periods then ended were reviewed by
other accountants whose report dated October 18, 1996 stated that they were not
aware of any material modifications that should be made to those statements for
them to be in conformity with generally accepted accounting principles.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, which will be
performed for the full year with the objective of expressing an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements at
September 30, 1997, and for the three-month and six-month periods then ended
for them to be in conformity with generally accepted accounting principles.
The consolidated financial statements for the year ended March 31, 1997, from
which the accompanying condensed balance sheet was derived, were audited by
other accountants and they expressed an unqualified opinion on those financial
statements in their report dated April 30, 1997.
Ernst & Young LLP
New Orleans, Louisiana
October 20, 1997
8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS
The company provides services and equipment to the international energy
industry through its marine and compression divisions. Revenues, net earnings
and cash flows from operations are dependent upon activity levels of the marine
vessel fleet and the natural gas compression rental fleet. Activity levels for
the marine vessel fleet and the natural gas 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. The
following discussion should be read in conjunction with the unaudited condensed
consolidated financial statements and related disclosures.
In accordance with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, the company notes that certain statements set
forth in this Quarterly Report on Form 10-Q which provide other than historical
information and which are forward looking, involve risks and uncertainties that
may impact the company's actual results of operations. The company faces many
risks and uncertainties, many of which are beyond the control of the company,
including fluctuations in oil and gas prices; changes in capital spending by
customers in the energy industry for exploration, development and production;
unsettled political conditions, civil unrest and governmental actions,
especially in higher risk countries of operations; foreign currency controls
and environmental and labor laws. Readers should consider all of these risk
factors as well as other information contained in this report.
During the current quarter the Board of Directors authorized management to
pursue various alternatives for possibly monetizing the company's investment in
the natural gas compression division. Should a transaction occur, it would
allow management to fully concentrate its efforts on the marine division.
MARINE DIVISION
The Marine division provides a diverse range of services and equipment to the
offshore energy industry. Fleet size, utilization and vessel day rates
primarily determine the amount of revenues and operating profit because
operating costs and depreciation do not change proportionally when revenue
changes. Operating costs principally consist of crew costs, repair and
maintenance, insurance, fuel, lube and supplies. Fleet size 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 mandated by regulatory agencies.
Whenever possible, vessel drydockings are done during seasonally slow periods
to minimize any impact on vessel operations and are only done if economically
justified, given the vessel's age and physical condition. The following tables
compare revenues, operating expenses (excluding general and administrative
expense and depreciation expense) and operating margins of the Marine
division's owned and operated vessel fleet for the quarters and six-month
periods ended September 30 and for the quarter ended June 30, 1997:
9
<PAGE> 10
<TABLE>
<CAPTION>
Quarter
Quarter Ended Six Months Ended Ended
September 30, September 30, June 30,
------------------- ------------------ --------
(in thousands) 1997 1996 1997 1996 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
United States $115,848 79,227 221,804 147,423 105,956
International 139,597 79,126 249,637 149,479 110,040
- -------------------------------------------------------------------------------------------------
255,445 158,353 471,441 296,902 215,996
- -------------------------------------------------------------------------------------------------
Expenses:
Crew costs 61,810 44,053 114,558 81,937 52,748
Repair and maintenance 35,190 22,803 69,193 49,461 34,003
Insurance 6,542 8,383 14,992 16,314 8,450
Fuel, lube and supplies 8,434 7,552 16,571 14,733 8,137
Other 7,629 5,975 15,139 10,762 7,510
- -------------------------------------------------------------------------------------------------
119,605 88,766 230,453 173,207 110,848
- -------------------------------------------------------------------------------------------------
Operating margins $135,840 69,587 240,988 123,695 105,148
=================================================================================================
Operating margin percentages 53.2% 43.9% 51.1% 41.7% 48.7%
=================================================================================================
</TABLE>
Current quarter and six-month operating margins rose considerably above the
respective amounts from fiscal 1997 due to a 41% increase in average day rates
for the worldwide vessel fleet partially offset by higher operating costs. The
rise in average day rates for the worldwide fleet is the result of greater
demand in the U.S. Gulf of Mexico and internationally for the services provided
by the company. Higher current quarter and six-month operating costs when
compared with fiscal 1997's respective amounts are attributable to a larger
international-based vessel fleet due to the O.I.L. and Australian acquisitions,
increased costs associated with attracting, training and retaining qualified
vessel personnel and a greater number of vessel drydockings.
Current quarter operating margins rose above the preceding quarter due to the
combination of higher average day rates for the worldwide vessel fleet being
partially offset by higher operating costs. Continued strong demand in the
U.S. Gulf of Mexico and better market conditions in certain international
locations were the reasons for the increase in average vessel dayrates. Higher
operating costs are principally due to the expansion of the international-based
vessel fleet as a result of the O.I.L. and Australian acquisitions. Amounts
for the quarter ended June 30, 1997 included activity for the O.I.L. fleet for
only half of the quarter as the acquisition was effective May 16, 1997 and did
not include any activity for the vessels acquired from Australian joint-venture
companies as the remaining 50% equity interest was purchased on June 30, 1997.
Revenues, operating expenses (excluding general and administrative expense and
depreciation expense) and operating margins of brokered vessels, shipyard and
other activities for the quarters and six-month periods ended September 30 and
for the quarter ended June 30, 1997 were:
<TABLE>
<CAPTION>
Quarter
Quarter Ended Six Months Ended Ended
September 30, September 30, June 30,
---------------- ---------------- --------
(In thousands) 1997 1996 1997 1996 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $14,968 9,338 29,412 17,428 14,444
Expenses 11,116 7,813 23,452 14,588 12,336
- --------------------------------------------------------------------------------
Margins $ 3,852 1,525 5,960 2,840 2,108
================================================================================
</TABLE>
10
<PAGE> 11
Marine division operating profit for the quarters and six-month periods ended
September 30 and for the quarter ended June 30, 1997 consist of the following:
<TABLE>
<CAPTION>
Quarter
Quarter Ended Six Months Ended Ended
September 30, September 30, June 30,
------------------ ----------------- --------
(In thousands) 1997 1996 1997 1996 1997
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Owned and operated vessels:
United States $ 56,722 26,204 103,973 42,066 47,251
International 41,059 18,695 67,351 35,044 26,292
- -----------------------------------------------------------------------------------------------------
97,781 44,899 171,324 77,110 73,543
Gains from asset sales 2,851 161 6,159 877 3,308
Brokered vessels, shipyard and other 3,674 1,278 5,597 2,396 1,923
- -----------------------------------------------------------------------------------------------------
Operating profit $104,306 46,338 183,080 80,383 78,774
=====================================================================================================
</TABLE>
Marine fleet utilization is determined primarily by market conditions and to a
lesser extent by drydocking requirements. Utilization of the domestic-based
fleet, which operates in U.S. waters, is primarily influenced by offshore
activity related to the exploration, development and production of natural gas
in the U.S. Gulf of Mexico; whereas, utilization of the international-based
fleet, which operates in waters other than the United States, is primarily
influenced by offshore activity related to the exploration, development 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 service vessels. Suitability of equipment and the degree of
service provided also influence vessel day rates. The following two tables
compare day-based Marine fleet utilization percentages and average day rates by
vessel class and in total for the quarters and six-month periods ended
September 30 and for the quarter ended June 30, 1997:
11
<PAGE> 12
<TABLE>
<CAPTION>
Quarter
Quarter Ended Six Months Ended Ended
September 30, September 30, June 30,
------------------ --------------- --------
1997 1996 1997 1996 1997
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
UTILIZATION:
- -----------
Domestic-based fleet
--------------------
Towing-supply/supply 91.1% 90.2 91.1 90.8 91.0
Crew/utility 88.9 94.1 89.9 92.5 90.9
Offshore tugs 64.3 67.0 63.7 64.8 63.1
Other 60.5 61.9 60.0 55.1 59.5
Total 84.8% 85.1 84.8 84.3 84.8
International-based fleet
-------------------------
Towing-supply/supply 88.0% 88.1 88.7 87.8 89.4
Crew/utility 80.9 85.4 81.6 87.9 82.4
Offshore tugs 80.3 70.3 81.7 72.8 83.1
Safety/standby 71.3 78.2 74.4 79.6 78.1
Other 78.1 74.4 80.7 75.3 83.0
Total 83.9% 82.1 84.9 83.0 86.0
Worldwide fleet
---------------
Towing-supply/supply 89.2% 89.1 89.6 89.1 90.1
Crew/utility 84.2 90.1 85.1 90.4 86.1
Offshore tugs 73.6 68.8 74.1 69.3 74.7
Safety/standby 71.3 78.2 74.4 79.6 78.1
Other 73.9 71.7 75.9 70.7 77.7
Total 84.2% 83.3 84.8 83.6 85.5
==========================================================================================
AVERAGE VESSEL DAY RATES:
- ------------------------
Domestic-based fleet
--------------------
Towing-supply/supply $ 7,532 5,049 7,261 4,660 6,986
Crew/utility 2,142 1,512 2,058 1,468 1,976
Offshore tugs 6,558 5,355 6,501 5,185 6,443
Other 2,757 3,050 2,692 3,100 2,626
Total $ 6,308 4,317 6,094 4,047 5,876
International-based fleet
-------------------------
Towing-supply/supply $ 5,440 3,838 5,151 3,768 4,806
Crew/utility 2,190 1,735 2,093 1,731 1,982
Offshore tugs 3,494 2,916 3,453 2,809 3,413
Safety/standby 6,138 4,907 6,073 4,975 6,002
Other 935 662 901 690 873
Total $ 4,438 3,144 4,188 3,044 3,909
Worldwide fleet
---------------
Towing-supply/supply $ 6,267 4,387 6,023 4,178 5,750
Crew/utility 2,169 1,610 2,077 1,586 1,979
Offshore tugs 4,621 3,971 4,557 3,788 4,492
Safety/standby 6,138 4,907 6,073 4,975 6,002
Other 1,291 1,109 1,229 1,116 1,173
Total $ 5,127 3,639 4,911 3,471 4,677
==========================================================================================
</TABLE>
Additional investment in the vessel fleet for the current quarter totaled $29.0
million and included the purchase of six safety/standby vessels and a
towing-supply vessel. The remainder of additions in the current quarter were
for modifications to the existing vessel fleet.
12
<PAGE> 13
The following table compares the average number of vessels by class and
geographic distribution for the quarters and six-month periods ended September
30 and for the quarter ended June 30, 1997:
<TABLE>
<CAPTION>
Quarter Six Months Quarter
Ended Ended Ended
September 30, September 30, June 30,
- --------------------------------------------------------------------------------------------------------------
1997 1996 1997 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Domestic-based fleet:
- --------------------
Towing-supply/supply 145 137 145 138 144
Crew/utility 39 42 39 42 39
Offshore tugs 40 43 40 42 39
Other 11 13 11 14 11
- --------------------------------------------------------------------------------------------------------------
Total 235 235 235 236 233
- --------------------------------------------------------------------------------------------------------------
International-based fleet:
- -------------------------
Towing-supply/supply 230 169 211 168 192
Crew/utility 57 36 53 36 49
Offshore tugs 55 53 54 53 54
Safety/standby 31 26 29 19 26
Other 35 49 36 47 38
- --------------------------------------------------------------------------------------------------------------
Total 408 333 383 323 359
- ---------------------------------------------------------------------------------------------------------------
Owned or chartered vessels
included in marine revenues 643 568 618 559 592
Vessels withdrawn from active service 12 22 13 23 14
Joint-venture and other 60 47 59 57 67
- ---------------------------------------------------------------------------------------------------------------
Total 715 637 690 639 673
===============================================================================================================
Worldwide fleet:
- ---------------
Towing-supply/supply 391 345 372 349 365
Crew/utility 106 89 102 89 98
Offshore tugs 104 102 103 101 102
Safety/standby 32 26 30 26 26
Other 82 75 83 74 82
- ---------------------------------------------------------------------------------------------------------------
Total 715 637 690 639 673
===============================================================================================================
</TABLE>
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 determined, for the most part, 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 period-to-period 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 occur
primarily as a result of increased fleet size and general inflationary factors.
Compression division operating profit is primarily determined by operating
margins from rental gas compression operations. The following tables compare
revenues, operating expenses (excluding general and administrative expense and
depreciation expense), operating
13
<PAGE> 14
margins and related statistics for gas compression operations for the quarters
and six-month periods ended September 30 and for the quarter ended June 30,
1997.
<TABLE>
<CAPTION>
Quarter
Quarter Ended Six Months Ended Ended
September 30, September 30, June 30,
------------------- -------------------- --------
(In thousands, except statistics) 1997 1996 1997 1996 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Rentals $ 20,039 17,995 39,393 35,797 19,354
Repair, service and other 890 677 1,459 1,975 569
- ---------------------------------------------------------------------------------------------------------------
20,929 18,672 40,852 37,772 19,923
- ---------------------------------------------------------------------------------------------------------------
Expenses:
Wages and benefits 3,087 3,054 6,111 5,973 3,024
Repairs and maintenance 3,937 3,243 7,710 6,483 3,773
Other 2,118 1,953 3,989 3,956 1,871
- ---------------------------------------------------------------------------------------------------------------
9,142 8,250 17,810 16,412 8,668
- ---------------------------------------------------------------------------------------------------------------
Operating margins $ 11,787 10,422 23,042 21,360 11,255
===============================================================================================================
Operating margin percentages 56.3% 55.8% 56.4% 56.5% 56.5%
===============================================================================================================
Horsepower based statistics:
Utilization 81.3% 76.3% 81.1% 75.8% 80.8%
Average monthly rental rate $17.07 16.75 16.88 16.67 16.69
Average fleet size 481,970 468,449 477,918 470,278 476,309
===============================================================================================================
</TABLE>
Fiscal 1998 second quarter and six-month operating margins rose above the
respective prior year's amounts due to higher utilization and rental rates for
a larger compressor fleet being partially offset by higher repair and
maintenance costs. The increase in utilization and rental rates resulted from
greater demand for natural gas compression services and the increase in repair
and maintenance costs was due to a greater number of compressor overhauls.
Current quarter operating margins were consistent with preceding quarter
amounts.
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 sales margins for equipment and parts
sales for the quarters and six-month periods ended September 30 and for the
quarter ended June 30, 1997:
<TABLE>
<CAPTION>
Quarter
Quarter Ended Six Months Ended Ended
September 30, September 30, June 30,
------------------- -------------------- --------
(In thousands) 1997 1996 1997 1996 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 6,633 7,509 12,867 17,664 6,234
Costs of sales 4,766 6,375 9,264 15,101 4,498
- ---------------------------------------------------------------------------------------------------------------
Gross profit margins $ 1,867 1,134 3,603 2,563 1,736
===============================================================================================================
Gross profit margin percentages 28.1% 15.1% 28.0% 14.5% 27.8%
===============================================================================================================
</TABLE>
Fluctuations in the level of equipment and parts sales for the periods
presented are due to the timing of sales of engineered products. Fluctuations
in gross profit 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.
14
<PAGE> 15
Additional investment in the natural gas compression rental fleet for the
current year-to-date period totaled $8.2 million for additional natural gas
compressors and modifications of existing equipment to meet customer
requirements.
CORPORATE
During the quarter ended June 30, 1997 the company acquired all of the shares
of O.I.L. Ltd. (O.I.L.) from Ocean Group plc in exchange for a cash payment of
328 million pounds sterling or approximately $534 million. In addition, a 3
million pound sterling, or approximately $5 million, advance payment was made
for the net working capital of O.I.L., with the final purchase price to be
adjusted for the final net working capital of O.I.L. as of the closing date.
Available cash of $39 million and borrowings of $500 million were used to fund
the purchase. Prior to the purchase O.I.L. was principally engaged in the
business of operating approximately 100 marine vessels, primarily platform
supply and anchor handling towing-supply vessels, in several international
offshore oil and gas exploration areas outside of the United States. The total
estimated cost of the acquisition of $626 million, which includes $65.6 million
of deferred income tax liability, was allocated under the purchase method of
accounting based on the fair value of the assets acquired and liabilities
assumed, including accruals for the estimated balance of O.I.L. working capital
and professional fees, severance and other transaction costs and the related
deferred tax effect of the acquisition. Goodwill of approximately $354 million
has been recorded in the Condensed Consolidated Balance Sheet.
The $500 million of debt incurred to finance the O.I.L. acquisition was
borrowed pursuant to a $600 million Revolving Credit and Term Loan agreement
with several banks and consists of a $400 million term loan and $100 million
borrowed under the $200 million revolving credit facility of the agreement.
The term loan is payable in quarterly installments and bears interest at
fluctuating rates subject to certain options chosen in advance by the company.
On June 30, 1997 the company acquired the remaining 50% equity interest in nine
towing-supply and supply vessels previously owned and operated by joint-venture
companies in Australia for a cash payment of $13.2 million and issuance of debt
totalling $14.0 million. The debt has been discounted to yield interest at 7%
and is to be repaid in semi-annual installments. The total estimated cost of
the acquisition of $30 million was allocated under the purchase method of
accounting based on the fair value of the assets acquired and liabilities
assumed, including accruals for professional fees, severance and other
transaction costs and the related deferred tax effect of the acquisition.
Goodwill of approximately $10.7 million has been recorded in the Condensed
Consolidated Balance Sheet.
Financing activities for the six months ended September 30, 1997 provided
$408.8 million of cash and included borrowings of $500 million for the
acquisition of O.I.L. Ltd discussed above. In addition to $18.0 million of
scheduled payments, principal payments on long-term debt include $50 million of
repayments on the revolving line of credit and repayment of $14.8 million of
debt assumed from the O.I.L. and Australian joint-venture acquisitions. Higher
dividend payments are the result of the fiscal 1997 second quarter increase in
the per share dividend from $.125 per share to $.15 per share.
General and administrative expenses for the quarters and six-month periods
ended September 30 and for the quarter ended June 30, 1997 consist of the
following:
15
<PAGE> 16
<TABLE>
<CAPTION>
Quarter
Quarter Ended Six Months Ended Ended
September 30, September 30, June 30,
------------------- -------------------- -------
(In thousands) 1997 1996 1997 1996 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Personnel $ 12,527 9,384 23,954 18,185 11,427
Office and property 3,575 2,867 6,937 5,508 3,362
Sales and marketing 1,568 1,066 2,888 1,999 1,320
Professional services 1,564 1,357 3,019 2,625 1,455
Other 1,794 1,149 3,099 2,581 1,305
- ---------------------------------------------------------------------------------------------------------------
$ 21,028 15,823 39,897 30,898 18,869
===============================================================================================================
</TABLE>
The Internal Revenue Service has notified the company of proposed deficiencies
aggregating approximately $17.5 million of additional income taxes resulting
from audits of the company's income tax returns for the years ended March 31,
1993, 1994 and 1995. Additionally the company is the defendant to several
alleged labor-law pay violations claimed by certain current and former
employees in various areas of the world where its marine vessel operations are
conducted. While the amount, if any, of such claims for which the company
ultimately may be held liable is not presently determinable, if the claimants
and all similarly situated employees and former employees who might file claims
were successful, the aggregate amount of the company's liability, based on
available information, could approximate $15 million.
In the quarter ended September 30, 1997 the company provided an additional
reserve of $8 million for the possible adverse outcome of the above matters.
In management's opinion, the amount of the company's liability in excess of
established reserves, if any, will not have a material adverse effect on the
company's financial position or the results of its ongoing operations.
INFLATION AND CURRENCY FLUCTUATIONS
Because of its significant international operations, the company is exposed to
currency fluctuations and exchange risks. To minimize the financial impact of
these items the company attempts to contract a majority of its services in
United States dollars.
Day-to-day operating costs are generally affected by inflation. However,
because the energy services industry requires specialized goods and services,
general economic inflationary trends may not affect the company's operating
costs. The major impact on operating costs is the level of offshore
exploration, development and production spending by energy exploration and
production companies. As this spending increases, prices of goods and services
used by the oil and gas industry and the energy services industry will
increase. Future improvements in vessel day rates 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
any related environmental damage.
16
<PAGE> 17
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
A. The Annual Meeting of Stockholders of the company was held in New Orleans,
Louisiana on July 24, 1997.
B. Listed below are the nominees who were elected directors at the Annual
Meeting and the name of each other director whose term of office continued
after the Meeting.
<TABLE>
<CAPTION>
Nominee or Director
Name Continuing in Office
---- ------------------------
<S> <C>
Robert H. Boh Director Continuing in Office
Donald T. Bollinger Director Continuing in Office
Arthur R. Carlson Nominee
Larry T. Hornbeck Director Continuing in Office
Hugh J. Kelly Director Continuing in Office
John P. Laborde Nominee
Paul W. Murrill Director Continuing in Office
William C. O'Malley Nominee
Lester Pollack Director Continuing in Office
J. Hugh Roff, Jr. Director Continuing in Office
</TABLE>
C. The company's Stockholders voted as follows with respect to the proposals
presented at the meeting:
1. Arthur R. Carlson was elected director with 46,208,964 votes cast for
and 3,809,764 votes withheld;
2. John P. Laborde was elected director with 45,421,238 votes cast for and
4,597,490 votes withheld;
3. William C. O'Malley was elected director with 46,187,640 votes cast
for and 3,831,088 votes withheld;
4. The 1997 Stock Incentive Plan was approved with 47,394,039 votes cast
for, 2,437,963 votes against and 186,726 abstentions;
5. The Executive Officer Annual Incentive Plan was approved with
47,342,701 votes cast for, 915,087 votes against and 329,397
abstentions; and
6. The selection of Ernst & Young LLP as the company's independent
auditors for the fiscal year ending March 31, 1998 was ratified with
49,707,165 votes cast for, 165,468 votes against and 146,095
abstentions.
17
<PAGE> 18
Item 6. Exhibits and Reports on Form 8-K
A. At page 20 of this report is the index for those exhibits required to be
filed as a part of this report.
B. During the quarter ended September 30, 1997 the company filed a Form
8-K/A-1 dated May 16, 1997 amending and restating the disclosures contained
in a Form 8-K dated May 16, 1997. The Form 8-K/A-1 included financial
statements and pro forma financial information for the company's
acquisition of O.I.L. Limited.
18
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
TIDEWATER INC.
------------------------------------
(Registrant)
Date: October 21, 1997 /s/ William C. O'Malley
------------------------------------
William C. O'Malley
Chairman of the Board, President and
Chief Executive Officer
Date: October 21, 1997 /s/ Ken C. Tamblyn
------------------------------------
Ken C. Tamblyn
Executive Vice President and
Chief Financial Officer
19
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number
- ------
<S> <C>
10 Employment Agreement dated September 25, 1997 between the company and
William C. O'Malley.
11 Statement - Computation of Per Share Earnings
15 Letter re Unaudited Interim Financial Information
27 Financial Data Schedule
</TABLE>
20
<PAGE> 1
EXHIBIT 10
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") between Tidewater Inc., a
Delaware corporation ("Company"), and William C. O'Malley ("Employee") is
effective as of September 19, 1997 (the "Agreement Date") and supersedes the
employment agreement between the Company and the Employee dated June 13, 1994.
The Company and the Employee agree as follows:
1. EMPLOYMENT CAPACITY AND TERM.
(a) CAPACITY AND TERM. The Employee will serve as the
President and Chief Executive Officer of the Company for the period beginning
September 19, 1997 through September 19, 2000. The period from September 19,
1997 through September 19, 2000 is referred to in this Agreement as the
"Employment Term."
(b) DUTIES. As the President and Chief Executive Officer, the
Employee shall perform such duties, consistent with the Employee's job title,
as may be prescribed from time to time by the Board of Directors of the Company
(the "Board") and shall perform such duties as are described in the Company's
Bylaws.
(c) CHAIRMAN. Employee has been elected a director of the
Company and serves as the Chairman of the Board. If the Employee hereafter
ceases for any reason to be the President and Chief Executive Officer of the
Company, the Employee will, if requested by the Company, resign as the Chairman
of the Board and as a director of the Company.
2. TERM OF AGREEMENT. The term of this Agreement shall commence on
the Agreement Date and shall continue through the last day of the Employment
Term, subject to any earlier termination of Employee's status as an employee
pursuant to the terms of this Agreement. Following the term of this Agreement,
each party shall have the right to enforce all rights, and shall be bound by
all obligations, of such party that are continuing rights and obligations under
the terms of this Agreement.
3. DEVOTION TO RESPONSIBILITIES.
During the Employment Term, the Employee will devote all of his time and
attention to the business of the Company, and he will not engage in or be
employed by any other business activity or business, whether or not such
business activity or business is for gain, profit or other pecuniary advantage;
provided, however, that nothing herein contained shall prohibit the Employee
from (i) serving as a member of the Board of Directors, Board of Trustees or
the like of any for profit or non-profit entity, or performing services of any
type for any civic or community entity, whether or not the Employee receives
compensation therefor, (ii) investing his assets in such form or manner as will
require no more than nominal services on the part of the Employee in the
operation of the
-1-
<PAGE> 2
business of the entity in which such investment is made, or (iii) serving in
various capacities with, and attending meetings of, industry or trade groups
and associations, including without limitation the industry or trade groups and
associations with which the Employee is currently involved, as long as the
Employee's engaging in any activities permitted by virtue of clauses (i), (ii)
and (iii) above does not materially and unreasonably interfere with the ability
of the Employee to perform the services and discharge the responsibilities
required of him under this Agreement. Notwithstanding clause (ii) above,
during the Employment Term, the Employee may not beneficially own more than 2%
of the outstanding shares of any class of equity security of a business
organization required to file periodic reports with the Securities and Exchange
Commission under the Securities Exchange Act of 1934 (the "Exchange Act") and
may not beneficially own more than 5% of the outstanding shares of any class of
equity security of a business organization that competes with the Company. For
purposes of this paragraph, "beneficially own" shall have the same meaning
ascribed to that term in Rule 13d-3 under the Exchange Act.
4. COMPENSATION AND BENEFITS. The Company will provide the Employee
with the compensation and benefits described below:
(a) SALARY. An annual salary during the Employment Term of
$700,000 ("Annual Base Compensation"), payable to the Employee in equal semi-
monthly installments.
(b) BONUS. An annual incentive bonus, payable, if at all,
only with respect to services provided by the Employee during the Employment
Term. The annual incentive bonus will be determined, accrued and paid in
accordance with the terms of the Company's Executive Officer Annual Incentive
Plan (the "Incentive Plan") that covers certain executive officers designated
by the Compensation Committee of the Board (the "Committee") or any incentive
or bonus compensation plan that is a successor or substitute therefor. The
parties acknowledge and agree that this Section 4(b) imposes no obligation on
the Company to award a bonus to the Employee. A copy of the Incentive Plan in
effect for fiscal year 1998 is attached as Appendix A.
(c) RESTRICTED STOCK. On the date the Employee executes this
Agreement, and pursuant to the Tidewater 1997 Stock Incentive Plan (the "1997
Plan"), a copy of which is attached as Appendix B, the Employee will be granted
50,000 shares of the Company's common stock. In accordance with the terms of
the 1997 Plan, such shares will be deemed to be "restricted shares", with such
restrictions on transferability, vesting and risks of forfeiture as are
consistent with the terms of the 1997 Plan and are specified in an agreement
(the "Restricted Share Agreement") to be entered into between the Company and
Employee that is substantially in the form of Appendix C hereto. The
Restricted Share Agreement will have the following vesting restrictions: (i)
16,667 shares will vest and become freely transferable on the first day
following the date that the "Average Sales Price" of the Company's common stock
on the New York Stock Exchange exceeds 120% of the "Grant Price;" (ii) an
additional 16,667 shares will vest and become freely transferable on the first
day following the date that the Average Sales Price of the Company's common
stock on the New York Stock Exchange exceeds 140% of the Grant Price, and;
(iii) the remaining 16,666 shares will vest and become freely transferable on
the first day following the date that the Average Sales Price of the Company's
common stock on the New York Stock Exchange exceeds 160% of the Grant
-2-
<PAGE> 3
Price; provided, however, that no shares will vest under this paragraph until
one year following the date Employee executes this Agreement. As used herein,
the term "Average Sales Price" means the average of the high and low sales
prices of the Company's common stock reported on the New York Stock Exchange
over a 20 consecutive trading day period and the term "Grant Price" means the
average of the high and low sales prices of the Company's common stock as
reported on the New York Stock Exchange on the date the Employee executes this
Agreement (or if no shares of the Company's common stock are traded on that
date, on the most recent preceding date on which such shares are traded). The
50,000 "restricted shares" to be granted to Employee by virtue of this Section
are hereinafter referred to as the "Restricted Shares."
The Restricted Share Agreement will also provide that, to the extent
Restricted Shares have not otherwise become vested and freely transferable in
accordance with the terms of the immediately preceding paragraph, the
Restricted Shares will become fully vested and freely transferable by the
Employee at the earliest of (i) the termination of the Employee's employment
during the Employment Term by the Employee for Good Reason or by the Employer
without Cause, (ii) the death of the Employee or a determination by the Board
that the Employee has become disabled pursuant to Section 6(a), (iii) the
attainment by the Employee of age 65 or (iv) in the event of a change of
control of the Company as provided in the Plan (each of (i), (ii), (iii) and
(iv) a "Vesting Event"); provided however that in each case the Restricted
Shares will become fully vested and freely transferable by the Employee only if
the Employee has been continually employed by the Company from the Agreement
Date through the occurrence of the Vesting Event. If the Employee does not
perform the services required under Section 1(a) through the end of the
Employment Term for any reason other than the termination of his employment
without Cause by the Company, his voluntary retirement for Good Reason, or his
death or disability (as determined pursuant to Section 6(a) of this Agreement),
or if the employment of Employee is terminated by the Company for Cause, then
all of the Restricted Shares, which have not otherwise become fully vested and
freely transferable in accordance with the terms of the immediately preceding
paragraph, will be forfeited to the Company.
(d) STOCK OPTIONS. On the date the Employee executes this
Agreement, and pursuant to the 1997 Plan, the Employee will be granted
nonqualified options to purchase 200,000 shares of the Company's common stock.
The per share exercise price of any shares subject to the options will be equal
to the "fair market value," as defined in the 1997 Plan, of one share of the
Company's common stock on the date the option is granted, and on the date the
options are granted, the Company and the Employee shall execute a Stock Option
Agreement substantially in the form of Appendix D hereto.
(e) COMPENSATING RETIREMENT BENEFIT. In addition to any
benefits payable to Employee after his retirement by virtue of his
participation in the Tidewater defined benefit pension plan and Supplemental
Executive Retirement Plan, the Company shall, from and after the date of the
Employee's normal retirement on or after age 65 (the "Retirement Date"), pay to
the Employee, from time to time, such additional amounts as are necessary to
make the Employee's total retirement benefits payable after the Retirement Date
(including retirement benefits provided by Employee's prior employer and
benefits paid prior to the Retirement Date under the Tidewater defined benefit
-3-
<PAGE> 4
plan and Supplemental Executive Retirement Plan) not less in amount than the
retirement benefits to which the Employee would have been entitled under the
terms of any qualified and non-qualified defined benefit pension plans of his
immediate prior employer. In addition to any benefits payable to Employee by
virtue of his participation in the Tidewater defined benefit pension plan and
Supplemental Executive Retirement Plan, in the event his employment with the
Company is terminated for any reason (including his death) prior to age 65, the
Company shall pay to the Employee from time to time, such additional amounts as
are necessary to make the Employee's total retirement benefits payable after
such termination of employment (including retirement benefits provided by
Employee's prior employer and benefits paid prior to the date of termination of
employment under the Tidewater defined benefit plan and Supplemental Executive
Retirement Plan) not less than the amount that the Employee would have been
entitled to receive under the defined benefit pension plans of his immediate
prior employer assuming that Employee's employment by his immediate prior
employer had terminated on the same date his employment with the Company is
terminated. In making any benefit calculation contemplated hereby, it shall be
assumed that the Employee's compensation for purposes of such plans was, for
periods prior to the date his employment with the Company commenced (the
"Commencement Date"), his covered compensation with such prior employer and,
for periods after the Commencement Date, his compensation under this Agreement
or a predecessor agreement between the Company and the Employee. This
compensating retirement benefit will be paid in the same manner as payments are
made under the Company's Supplemental Executive Retirement Plan and will be
based on calculations using the same actuarial assumptions used in the
Company's defined benefit plan. The Employee has provided the Company with
copies of all documents related to retirement compensation available to the
Employee from the prior employer, which documents are attached hereto as
Appendix E.
(f) INDEMNIFICATION. Under its Bylaws, the Company provides,
as of the Agreement Date, certain indemnification rights to its officers and
directors that will be applicable to the Employee with respect to his acts and
omissions in his capacity as an officer and director of the Company. The
Company agrees to provide indemnification rights to the Employee identical to
those provided for in its Bylaws as in existence on the Agreement Date as to
all suits or proceedings to which the Employee is or is threatened to be made a
party that arise out of or are connected to his services during the Employment
Term, without regard to whether such actions, suits or proceedings are made,
asserted or arise during or after the Employment Term.
(g) OTHER BENEFITS. During the Employment Term, the Employee
shall be entitled to all benefits and perquisites provided to senior executive
employees of the Company, including but not limited to the benefits referred to
in Appendix F hereof.
5. EXPENSES. The Employee will be reimbursed for out-of-pocket
expenses incurred from time to time on behalf of the Company or any subsidiary
in the performance of his duties under
-4-
<PAGE> 5
this Agreement, upon the presentation of such supporting invoices, documents
and forms as the Company reasonably requests.
6. TERMINATION OF EMPLOYMENT.
(a) DEATH OR DISABILITY. The Employee's status as an employee
will terminate immediately and automatically upon the Employee's death during
the Employment Term. If (i) the Employee is rendered incapable because of
physical or mental illness of satisfactorily discharging his duties and
responsibilities under this Agreement for a period of 60 consecutive days and
(ii) a duly qualified physician chosen by the Company and acceptable to the
Employee or his legal representatives so certifies in writing, the Board shall
have the power to determine that the Employee has become disabled. If the
Board makes such a determination, the Company shall have the continuing right
and option, during the period that such disability continues, and by notice
given in the manner provided in Section 15, to terminate the status of Employee
as an employee. Any such termination shall become effective thirty days after
such notice of termination is given (the "Disability Effective Date"), unless
within such thirty day period, the Employee becomes capable of rendering
services of the character contemplated hereby (and a physician chosen by the
Company and acceptable to the Employee or his legal representatives so
certifies in writing) and the Employee in fact resumes such services. The
Employee's death or the Employee's incapacity due to physical or mental illness
to discharge the responsibilities assigned by this Agreement shall not
constitute a breach of this Agreement by the Employee.
(b) CAUSE. The Company may terminate the Employee's status as
an employee for Cause. As used herein, termination by the Company of the
Employee's status as an employee for "Cause" shall mean termination as a result
of (i) the willful and continuing failure by the Employee to perform the
services contemplated by this Agreement (other than any such failure resulting
from the Employee's disability of the type specified in Section 6(a)), (ii) the
Employee's breach of or failure to comply with the covenants set forth in
Sections 8, 9 or 11 of this Agreement, or (iii) the willful engaging by the
Employee in gross misconduct injurious to the Company; provided that, no act,
or failure to act, on the Employee's part shall be considered "willful" for
purposes of this Agreement unless done, or omitted to be done, without a
reasonable belief that such action or omission was in, or not opposed to, the
best interests of the Company. Any act, or failure to act, by the Employee
that is based upon authority given pursuant to a resolution duly adopted by the
Board or based upon the advice of counsel for the Company shall be presumed to
be done, or omitted to be done, by the Employee in good faith and in the best
interests of the Company.
(c) GOOD REASON. The Employee may terminate his status as an
employee for Good Reason. The termination by the Employee of his status as an
employee for Good Reason shall be deemed to be a justifiable termination and
shall excuse the Employee from the obligation to render services under or
relating to this Agreement. As used herein, the term "Good Reason" shall mean:
(i) The occurrence of any of the following during the
Employment Term:
-5-
<PAGE> 6
(A) the assignment by the Board to the Employee
of any duties or responsibilities which are inconsistent with the Employee's
status, title and position as President and Chief Executive Officer of the
Company;
(B) any removal of the Employee from, or any
failure to reappoint or reelect the Employee to, the position of President and
Chief Executive Officer of the Company, except in connection with a termination
by the Company of the Employee's employment for Cause or on account of
disability or death of the Employee, or the termination by the Employee of his
employment other than for Good Reason;
(C) the Company's requiring the Employee to be
based anywhere other than in New Orleans, Louisiana, except for required travel
in the ordinary course of the Company's business;
(ii) a reduction in the Employee's annual salary or a
failure by the Company to pay to the Employee any installment of the annual
salary or to pay any other amounts required to be paid under this Agreement,
which failure continues for a period of ten days after written notice thereof
is given by the Employee to the Company;
(iii) the failure by the Company to obtain the assumption
of its obligations under this Agreement by any successor or assign as
contemplated in Paragraph 13 of the Agreement;
(iv) any purported termination by the Company of the
Employee's status as an employee which is not effected pursuant to a Notice of
Termination satisfying the requirements of Paragraph 6(d) hereof, or which is
not justified as a termination based on Cause; or
(v) any breach of this Agreement by the Company.
(d) NOTICE OF TERMINATION. Any purported notice of
termination of the Employee's status as an employee must be communicated in a
writing delivered to the other party as provided in Paragraph 15 hereof (a
notice of termination complying with this sentence is referred to in this
Agreement as a "Notice of Termination"). Any such Notice of Termination that
purports to terminate Employee's employment for Cause or for Good Reason shall
specify the provision or provisions of this Agreement relied upon by the party
giving such notice and shall set forth in reasonable detail the facts and
circumstances claimed by such party to provide a basis for termination of the
Employee's employment under the provision(s) so indicated.
(e) DATE OF TERMINATION. "Date of Termination" means (i) if
Employee's employment is terminated by the Company for Cause, or by Employee
for Good Reason, the date of delivery of the Notice of Termination or any later
date specified therein, as the case may be, (ii) if the Employee's employment
is terminated by the Company other than for Cause or disability, the Date of
Termination shall be the date on which the Company notifies the Employee of
such termination and (iii) if Employee's employment is terminated by reason of
his death or disability,
-6-
<PAGE> 7
the Date of Termination shall be the date of death of Employee or the
Disability Effective Date, as the case may be.
7. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) GOOD REASON, OTHER THAN FOR CAUSE, DEATH OR DISABILITY.
If (i) the Company terminates the Employee's status as an employee other than
for Cause, death or disability, or (ii) the Employee shall terminate his
employment for Good Reason, then the Company shall pay to the Employee in a
lump sum in cash within 30 days after the Date of Termination the aggregate of
the following amounts:
(A) the sum of (1) the amount of the Employee's
Annual Base Compensation earned through the Date of Termination, to the extent
not theretofore paid and (2) any compensation previously deferred by the
Employee (together with any accrued interest on earnings thereon) and any
accrued vacation pay, in each case to the extent not previously paid (the sum
of the amounts described in clauses (1) and (2) being hereinafter referred to
as the "Accrued Obligations").
(B) the aggregate amount of the Employee's
Annual Base Compensation for the period beginning the day of the Date of
Termination and continuing through the last day of the Employment Term (such
amount being referred to herein as the "Non-Accrued Compensation").
(C) to the extent not theretofore paid or
provided, the Company shall timely pay or provide to the Employee any other
amounts required to be paid or provided or which the Employee is eligible to
receive under any plan, program, policy or practice of the Company (such other
amounts being referred to herein as the "Other Benefits").
The rights and obligations of the Employee and the Company following a
change of control of the Company are as provided in the Change of Control
Agreement between the Employee and the Company dated effective September 30,
1996 and any amendments thereto or any subsequent change of control agreement
between Employee and the Company (the "Change of Control Agreement") and in
Section 7(e) hereof.
As used in this Section, the phrase "change in control of the Company"
shall mean a change of control of the Company as defined in the Change of
Control Agreement or a change in control of the type that would be required to
be reported in response to Item 6(e) of Schedule 14A promulgated under the
Exchange Act, whether or not the Company is then subject to such reporting
requirement; provided that, without limitation, such a change of control shall
be deemed to have occurred if (A) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act), other than a trustee or
fiduciary holding securities under an employee benefit plan of the Company, is
or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act) directly or indirectly, of securities of the Company representing 35% or
more of the Company's combined voting power of the Company's then outstanding
securities, (B) during any period of two consecutive years (not including any
period prior to the execution of this Agreement), a majority of the Board is
not
-7-
<PAGE> 8
comprised of (1) individuals who at the beginning of such period were members
of the Board plus (2) any new directors whose nomination for election by the
Board or the Company's stockholders was approved by the vote of two-thirds of
the directors then in office who either were directors at the beginning of the
period or whose nomination was previously so approved.)
(b) DEATH. If the Employee's status as an employee is
terminated by reason of the Employee's death, this Agreement shall terminate
without further obligations to the Employee's legal representatives under this
Agreement, other than for payment of (i) Accrued Obligations, (ii) 50% of the
Non-Accrued Compensation (the "Death Cash Payment") and (iii) the timely
payment or provision of Other Benefits. The sum of the Accrued Obligations and
the Death Cash Payment shall be paid to the Employee's estate or beneficiary,
as applicable, in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other Benefits as
used in this Section 7(b) shall include, without limitation, and the Employee's
estate and/or beneficiaries shall be entitled to receive, benefits at least
equal to the most favorable benefits provided by the Company to the estates and
beneficiaries of its senior executive officers under such plans, programs,
practices and policies relating to death benefits, if any, as in effect on the
date of Employee's death.
(c) DISABILITY. If Employee's status as an employee is
terminated by reason of Employee's disability, this Agreement will terminate
without further obligation to the Employee, other than the payment of (i)
Accrued Obligations, (ii) 50% of the Non-Accrued Compensation (the "Disability
Cash Payment") and (iii) the timely payment or provision of Other Benefits.
The sum of Accrued Obligations and the Disability Cash Payment will be paid to
the Employee in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other Benefits as
used in this Section 7(c) shall include, and the Employee will be entitled
after the Disability Effective Date to receive, disability and other benefits
at least equal to the most favorable of those generally provided by the Company
to disabled executive officers and their families in accordance with such
plans, programs, practices and policies related to disability that are in
effect on the Disability Effective Date.
(d) CAUSE, OTHER THAN FOR GOOD REASON. If the Employee's
status as an employee shall be terminated for Cause by Employer, or voluntarily
terminated by Employee other than for Good Reason, this Agreement shall
terminate without further obligation to the Employee other than for (i) Accrued
Obligations, which shall be paid in a lump sum in cash within 30 days of the
Date of Termination, and (ii) to the extent not theretofore paid or provided,
the Company shall timely pay or provide to the Employee his accrued, vested
benefits under any benefit plan or program of the Company.
(e) CHANGE OF CONTROL BENEFIT. In addition to all benefits to
which Employee is entitled under the Change of Control Agreement, if Employee
is subjected to an excise tax as a result of the golden parachute provisions of
section 4999 of the Internal Revenue Code of 1986, as amended, the Company
shall pay to Employee such amounts as are necessary to place Employee in the
same after-tax position as he would have been had such golden parachute
provisions not been applicable to him. This tax gross-up provision shall take
into account any such applicable excise tax,
-8-
<PAGE> 9
any state or federal interest and penalties and any state or federal income tax
and excise tax payable with respect to the additional payment provided by this
Section 7(e).
8. TRADE SECRETS, ETC. The Employee shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its subsidiaries or
corporate affiliates and their respective businesses and operations, which
shall have been obtained by the Employee during the Employee's employment
(whether prior to or after the Commencement Date) and which shall not have
become public knowledge (other than by acts of the Employee or any of his
representatives in violation of this Agreement). At the end of the Employment
Term, the Employee agrees (i) not, without the prior written consent of the
Company or as may be otherwise required by law or legal process, to communicate
or divulge any such information, knowledge or data to any party other than the
Company and (ii) to deliver promptly to the Company any confidential
information, knowledge or data in his possession, whether produced by the
Company or any of its subsidiaries and corporate affiliates or by the Employee,
that relates to the business of the Company or any of its subsidiaries and
joint ventures or any past, current or prospective activity of the Company or
any of its subsidiaries and joint ventures. The Employee shall be permitted to
retain copies of such data as are necessary in order to enable the Employee to
assert any rights under this Agreement, provided that such data shall be used
solely for such purpose.
9. CUSTOMER LISTS. The Employee recognizes and acknowledges that
any written list or lists of the customers of the Company or any of its
subsidiaries and joint ventures ("customer lists"), as such customer lists may
exist from time to time, are valuable, special and unique assets of the
Company. The Employee agrees that he will not use for his own personal benefit
or disclose such customer lists to any person, firm, corporation, association
or other entity for any reason or purpose whatsoever. Personal and social
contacts with past, present or future customers of the Company shall not be
prohibited hereby.
10. LIMITED COVENANT NOT TO COMPETE. For a period of two years
commencing with the expiration of the term of this Agreement, the Employee will
not, directly or indirectly, own, manage, operate, control, be employed by,
participate in, or be connected in any manner with the ownership, management,
operation or control of any company or other business enterprise engaged in the
business of providing vessel services for the offshore oil and gas industry,
within any parish of the State of Louisiana (as set forth in Appendix G), or
any other jurisdiction (whether within or outside the United States), in which
the Company or any of its subsidiaries or joint ventures carries on the
business of vessel services for the offshore oil and gas industry, so long as
the Company or any of its subsidiaries or joint ventures carries on a like line
of business therein; provided, however, that nothing contained herein shall (a)
prohibit the Employee from making investments in any publicly held company
which do not exceed in the aggregate two percent of the equity interest of such
company or (b) prohibit the Employee from continuing to hold any of the
director or officer positions held by him as of the date of this Agreement that
are disclosed on Appendix H hereto.
11. CERTAIN PROPRIETARY RIGHTS. The Employee agrees to and hereby
does assign to the Company all his right, title and interest in and to all
inventions, business plans, work models or procedures, whether or not
patentable, which are made or conceived solely or jointly by him:
-9-
<PAGE> 10
(a) At any time during the term of his employment by the
Company, or
(b) With the use of time or materials of the Company. The
Employee agrees to communicate to the Company or its representatives all facts
known to him concerning such matters, to sign all necessary instruments, make
all necessary oaths and generally, at the Company's expense, to do everything
reasonably practicable (without expense to the Employee) to aid the Company in
obtaining and enforcing proper legal protection for all such matters in all
countries and in vesting title to such matters in the Company. At the
Company's request (during or after the term of this Agreement) and expense, the
Employee will promptly execute a specific assignment of title to the Company,
and perform any other acts reasonably necessary to implement the foregoing
assignment.
12. INJUNCTIVE RELIEF. In the event of a breach or threatened breach
by the Employee of the provisions of Sections 8, 9, 10 or 11 of this Agreement
during or after the term of this Agreement, the Company shall be entitled to
injunctive relief restraining the Employee from violation of such paragraph.
Nothing herein shall be construed as prohibiting the Company from pursuing any
other remedy at law or in equity it may have in the event of breach or
threatened breach of this Agreement by the Employee.
13. BINDING EFFECT.
(a) This Agreement shall be binding upon and inure to the
benefit of the Company and any of its successors or assigns.
(b) This Agreement is personal to the Employee and shall not
be assignable by the Employee without the consent of the Company (there being
no obligation to give such consent) other than such rights or benefits as are
transferred by will or the laws of descent and distribution.
(c) The Company will require any successor or assign (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the assets or businesses of the Company (i) to assume
unconditionally and expressly this Agreement and (ii) to agree to perform all
of the obligations under this Agreement in the same manner and to the same
extent as would have been required of the Company had no assignment or
succession occurred, such assumption to be set forth in a writing reasonably
satisfactory to the Employee. In the event of any such assignment or
succession, the term "Company" as used in this Agreement shall refer also to
such successor or assign.
14. NOTICES. Any notice or other communication required under this
Agreement shall be in writing, shall be deemed to have been given and received
when delivered in person, or, if mailed, shall be deemed to have been given
when deposited in the United States mail, first class, registered or certified,
return receipt requested, with proper postage prepaid, and shall be deemed to
have been received on the third business day thereafter, and shall be addressed
as follows:
-10-
<PAGE> 11
If to the Company, addressed to:
Tidewater Inc.
1440 Canal Street, Suite 2100
New Orleans, Louisiana 70112
Attn: Cliffe F. Laborde
Senior Vice President and Secretary
If to the Employee, addressed to:
William C. O'Malley
1440 Canal Street, Suite 2100
New Orleans, Louisiana 70112
or such other address as to which any party hereto may have notified the other
in writing.
15. GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Louisiana.
16. ENTIRE AGREEMENT. This Agreement, including Appendices A through
I, inclusive, all of which are herein incorporated by reference and made a part
hereof, and the documents referred to herein, contain or refer to the entire
arrangement or understanding between the Employee and the Company relating to
the employment of the Employee by the Company. No provision of the Agreement,
including the Appendices, may be modified or amended except by an instrument in
writing signed by or for both parties hereto.
17. SEVERABILITY. If any term or provision of this Agreement, or the
application thereof to any person or circumstance, shall at any time or to any
extent be invalid or unenforceable, the remainder of this Agreement, or the
application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected
thereby and each term and provision of this Agreement shall be valid and
enforced to the fullest extent permitted by law.
18. WAIVER OF BREACH. The waiver by either party of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach thereof.
19. REMEDIES NOT EXCLUSIVE. No remedy specified herein shall be
deemed to be such party's exclusive remedy, and accordingly, in addition to all
of the rights and remedies provided for in this Agreement, the parties shall
have all other rights and remedies provided to them by applicable law, rule or
regulation.
20. BENEFICIARIES. Whenever this Agreement provides for any payment
to be made to the Employee or his estate, such payment may be made instead to
such beneficiary or beneficiaries as the Employee may have designated in
writing and filed with the Company. The Employee shall
-11-
<PAGE> 12
have the right to revoke any such designation from time to time and to
redesignate any beneficiary or beneficiaries by written notice to the Company.
21. COMPANY'S RESERVATION OF RIGHTS. Employee acknowledges and
understands that the Employee serves at the pleasure of the Board and that the
Company has the right at any time to terminate Employee's status as an employee
of the Company, or to change or diminish his status as the Chief Executive
Officer during the Employment Term, subject to the rights of the Employee to
claim the benefits conferred by Section 7(a) hereof if such action constitutes
a termination by the Company without Cause or a termination by the Employee for
Good Reason.
22. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
TIDEWATER INC.
Date of Execution: 9/23/97 By: /s/ ROBERT H. BOH
------- ---------------------------------------
Name: Robert H. Boh
Title: Director and Chairman of the
Compensation Committee of the
Board of Directors
EMPLOYEE:
Date of Execution: 9/25/97 /s/ WILLIAM C. O'MALLEY
------- -------------------------------------------
Name: William C. O'Malley
-12-
<PAGE> 1
EXHIBIT 11
TIDEWATER INC.
COMPUTATION OF EARNINGS AND SHARES USED IN ARRIVING AT
PRIMARY AND FULLY-DILUTED EARNINGS PER SHARE FOR THE
QUARTER AND SIX-MONTH PERIOD ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
September 30, 1997 September 30, 1997
------------------ ------------------
<S> <C> <C>
Net earnings (in thousands) $ 64,329 $ 115,090
============= ===============
Computation of weighted
average number of shares
outstanding:
- ------------------------
Issued: 60,750,014 shares
Weighted average shares
outstanding 60,472,906 60,412,061
Plus incremental shares
applicable to stock
options 615,871 599,336
------------- ---------------
Weighted average common
shares and equivalents 61,088,777 61,011,397
============= ===============
Primary and fully diluted
earnings per common share $ 1.05 $ 1.88
============= ===============
</TABLE>
<PAGE> 1
EXHIBIT 15
The Board of Directors and Shareholders
Tidewater Inc.
We are aware of the incorporation by reference in the Registration Statements
33-63094, 33-38240, and 333-32729 on Form S-8 of Tidewater Inc. of our report
dated October 20, 1997 relating to the unaudited condensed consolidated interim
financial statements of Tidewater Inc. that is included in its Form 10-Q for
the quarter ended September 30, 1997.
Pursuant to Rule 436(c) of the Securities Act of 1933, our report is not a part
of the registration statements prepared or certified by accountants within the
meaning of Section 7 or 11 of the Securities Act of 1933.
ERNST & YOUNG LLP
New Orleans, Louisiana
October 20, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated balance sheet and the condensed 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>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 32,520
<SECURITIES> 0
<RECEIVABLES> 267,062
<ALLOWANCES> 12,098
<INVENTORY> 37,574
<CURRENT-ASSETS> 330,792
<PP&E> 1,924,333
<DEPRECIATION> 974,874
<TOTAL-ASSETS> 1,738,810
<CURRENT-LIABILITIES> 207,956
<BONDS> 387,083
0
0
<COMMON> 6,075
<OTHER-SE> 869,757
<TOTAL-LIABILITY-AND-EQUITY> 1,738,810
<SALES> 554,572
<TOTAL-REVENUES> 554,572
<CGS> 376,587
<TOTAL-COSTS> 376,587
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 8,000
<INTEREST-EXPENSE> 13,195
<INCOME-PRETAX> 168,318
<INCOME-TAX> 53,228
<INCOME-CONTINUING> 115,090
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 115,090
<EPS-PRIMARY> 1.88
<EPS-DILUTED> 1.88
</TABLE>
