<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 - For the Quarterly Period
Ended June 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
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Former name, former address and former fiscal year, if
changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or of such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
--------- ----------
60,390,024 shares of Tidewater Inc. common stock $.10 par value
per share were outstanding on July 22, 1997. Registrant has no
other class of common stock outstanding.
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TIDEWATER INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
June 30, March 31,
ASSETS 1997 1997
---------- ----------
<S> <C> <C>
Current assets:
Cash, including temporary cash investments $ 26,868 41,114
Trade and other receivables 246,805 187,612
Inventories 38,076 36,016
Other current assets 7,173 3,984
---------- ----------
Total current assets 318,922 268,726
---------- ----------
Investments in, at equity, and advances to
unconsolidated companies 14,408 20,556
Properties and equipment:
Marine equipment 1,533,675 1,265,633
Compression equipment 325,399 322,512
Other 44,861 39,826
---------- ----------
1,903,935 1,627,971
Less accumulated depreciation 957,457 946,880
---------- ----------
Net properties and equipment 946,478 681,091
Goodwill, net 387,847 21,357
Other assets 59,423 47,270
---------- ----------
$1,727,078 1,039,000
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt 64,405 --
Accounts payable and accrued expenses 156,191 81,500
Accrued property and liability losses 10,821 13,248
---------- ----------
Total current liabilities 231,417 94,748
---------- ----------
Long-term debt 422,690 --
Deferred income taxes 172,421 95,595
Accrued property and liability losses 40,594 32,146
Other liabilities and deferred credits 47,791 46,847
Stockholders' equity:
Common stock of $.10 par value; issued 60,377,900
shares at June and 60,334,889 shares at March 6,038 6,033
Additional paid-in capital 342,086 341,415
Retained earnings 475,055 433,347
---------- ----------
823,179 780,795
Less:
Cumulative foreign currency translation adjustment 10,582 10,676
Deferred compensation - restricted stock 432 455
---------- ----------
Total stockholders' equity 812,165 769,664
---------- ----------
$1,727,078 1,039,000
========== ==========
</TABLE>
See Notes to Unaudited Condensed Consolidated Financial Statements.
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<PAGE> 3
TIDEWATER INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except
share and per share data)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Revenues:
Marine operations $ 230,440 146,639
Compression operations 26,157 29,255
------------ ------------
256,597 175,894
------------ ------------
Costs and expenses:
Marine operations 123,184 91,216
Compression operations 13,166 16,888
Depreciation and amortization 25,108 20,017
General and administrative 18,869 15,075
------------ ------------
180,327 143,196
------------ ------------
76,270 32,698
Other income (expenses):
Foreign exchange (loss) gain (65) 143
Gain on sales of assets 3,485 1,434
Equity in net earnings of unconsolidated companies 1,024 1,243
Minority interests (295) (178)
Interest and miscellaneous income 996 911
Interest and other debt costs (4,504) (413)
------------ ------------
641 3,140
------------ ------------
Earnings before income taxes 76,911 35,838
Income taxes 26,150 11,468
------------ ------------
Net earnings $ 50,761 24,370
============ ============
Primary and fully-diluted net earnings per common share $ .83 .39
============ ============
Weighted average common shares and equivalents 60,933,347 62,660,947
============ ============
Cash dividends declared per common share $ .15 .125
============ ============
</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>
Three Months Ended
June 30,
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
Net cash provided by operating activities $ 95,069 45,667
----------- -----------
Cash flows from investing activities:
Proceeds from sales of assets 10,557 5,079
Additions to properties and equipment (20,117) (12,826)
Acquisition of O.I.L. Ltd., net of cash acquired (541,944) --
Acquisition of joint-venture interest, net of cash acquired (13,448) (3,435)
Dividends received from unconsolidated companies
net of additional investments 3,162 2,943
Dividends paid to minority interest (462) (658)
Increase in other assets (3,433) --
----------- -----------
Net cash used in investing activities (565,685) (8,897)
----------- -----------
Cash flows from financing activities:
Principal payments on long-term debt (35,253) (25,554)
Credit facility borrowings 500,000 --
Proceeds from issuance of common stock 676 1,730
Dividends paid (9,053) (7,744)
----------- -----------
Net cash provided by (used in) financing activities 456,370 (31,568)
----------- -----------
Net (decrease) increase in cash, including
temporary cash investments (14,246) 5,202
----------- -----------
Cash, including temporary cash investments at beginning of
period 41,114 28,768
----------- -----------
Cash, including temporary cash investments at end of period $ 26,868 33,970
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 640 352
Income taxes $ 5,567 1,411
=========== ===========
</TABLE>
See Notes to Unaudited Condensed Consolidated Financial Statements.
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<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% and 32% for the quarters ended June 30, 1997 and 1996,
respectively.
(4) Marine Acquisitions
On May 16,1997 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 $630 million 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 $356 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 quarters ended June 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 June 30,
1997 1996
----------- -----------
<S> <C> <C>
Revenues $ 277,402 208,415
=========== ===========
Net earnings $ 50,104 20,098
=========== ===========
Primary and fully-diluted earnings per common share $ .82 .32
=========== ===========
</TABLE>
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<PAGE> 6
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. Quarterly repayments of the term loan begin
September 30, 1997 and the indebtedness 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 $13.9 million. The debt has been
discounted to yield interest at 7% and is to be repaid in installments
beginning September 30, 1997. The total estimated cost of the
acquisition of $36 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 $11.6 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. 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. The Company is in
the process of defending against these claims and assessments and, in
management's opinion, the ultimate outcome of these matters will not
have a material adverse effect on the Company's financial position or
the results of its ongoing operations.
-6-
<PAGE> 7
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 June 30, 1997, and the related condensed
consolidated statements of earnings and cash flows for the three-month period
ended June 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 June 30, 1996, and for the three-month period then ended
were reviewed by other accountants whose report dated July 17, 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 June
30, 1997, and for the three-month period 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
July 21, 1997
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<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS
The company provides services and equipment to the 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.
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 revenue and operating profit levels 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 oil 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 and provide a breakdown of Marine operating profit for
the quarters ended June 30 and March 31.
<TABLE>
<CAPTION>
June 30, March 31,
-------------------- --------
(in thousands) 1997 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Revenues:
United States $105,956 68,196 99,798
International 110,040 70,353 88,202
-------- -------- --------
215,996 138,549 188,000
-------- -------- --------
Expenses:
Crew costs 52,748 37,884 47,714
Repair and maintenance 34,003 26,658 24,899
Insurance 8,450 7,931 8,365
Fuel, lube oil and supplies 8,137 7,181 8,886
Other 7,510 4,787 6,676
-------- -------- --------
110,848 84,441 96,540
-------- -------- --------
Operating margins $105,148 54,108 91,460
======== ======== ========
Operating margin percentages 48.7% 39.1% 48.6%
======== ======== ========
</TABLE>
Current quarter operating margins rose above fiscal 1997's first quarter as a
result of higher average day rates for the worldwide vessel fleet and a larger
international-based fleet offset partially by higher operating costs. A much
more favorable supply/demand relationship for offshore marine services in the
U.S. Gulf of Mexico was the cause of the 56% increase in average vessel day
rates for the domestic-based vessel fleet for the current quarter compared with
fiscal 1997's first quarter level. Better international market conditions
contributed to a 33% increase in average vessel day rates for the current
quarter compared with corresponding quarter of fiscal 1997. A larger
international-based vessel fleet resulted from the current quarter's
acquisition of O.I.L. Ltd. Higher current quarter operating costs compared with
fiscal 1997's first quarter resulted from increased costs associated with
attracting,
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<PAGE> 9
training and retaining qualified vessel personnel, a greater number of vessel
drydockings and the expansion of the fleet as a result of the acquisition of
O.I.L. Ltd.
Current quarter operating margins rose above the preceding quarter's amount due
to higher average day rates for the worldwide vessel fleet and the expansion of
the fleet as a result of the O.I.L acquisition. The positive effect of these
factors on current quarter operating margins was partially offset by higher
repair and maintenance costs resulting from a greater number of vessel
drydockings.
Revenues, operating expenses (excluding general and administrative expense and
depreciation expense) and operating margins of brokered vessels, shipyard and
other activities for the quarters ended June 30 and March 31 were:
<TABLE>
<CAPTION>
June 30, March 31,
----------------------- ----------
(in thousands) 1997 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Revenues $ 14,444 8,090 3,963
Expenses 12,336 6,775 3,031
---------- ---------- ----------
Margins $ 2,108 1,315 932
========== ========== ==========
</TABLE>
Marine division operating profit for the quarters ended June 30 and March 31
consist of the following:
<TABLE>
<CAPTION>
June 30, March 31,
----------------------- ----------
(in thousands) 1997 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Owned and operated vessels:
United States $ 47,251 15,862 43,266
International 26,292 16,349 21,958
---------- ---------- ----------
73,543 32,211 65,224
Gains from asset sales 3,308 716 3,793
Brokered vessels, shipyard and other 1,923 1,118 692
---------- ---------- ----------
Operating profit $ 78,774 34,045 69,709
========== ========== ==========
</TABLE>
Marine fleet utilization is determined primarily by market conditions and to a
lesser extent by drydocking requirements. Utilization of the domestic-based
vessel 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 vessel 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 tables compare day-based Marine fleet utilization percentages
and average day rates by vessel class and in total for the quarters ended June
30 and March 31.
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<PAGE> 10
<TABLE>
<CAPTION>
June 30, March 31,
-------------------------- -----------
1997 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
UTILIZATION:
Domestic-based fleet :
Towing-supply/supply 91.0% 91.3 93.3
Crew/utility 90.9 90.9 86.7
Offshore tugs 63.1 62.4 63.9
Other 59.5 48.8 45.1
Total 84.8% 83.6 84.0
International-based fleet :
Towing-supply/supply 89.4% 87.5 92.1
Crew/utility 82.4 90.5 83.6
Offshore tugs 83.1 75.4 85.9
Safety/standby 78.1 84.4 80.1
Other 83.0 76.2 82.0
Total 86.0% 84.0 87.8
Worldwide fleet:
Towing-supply/supply 90.1% 89.2 92.7
Crew/utility 86.1 90.7 85.2
Offshore tugs 74.7 69.7 75.9
Safety/standby 78.1 84.4 80.1
Other 77.7 69.7 72.1
Total 85.5% 83.8 86.2
=========== =========== ===========
AVERAGE VESSEL DAY RATES:
Domestic-based fleet:
Towing-supply/supply $ 6,986 4,278 6,382
Crew/utility 1,976 1,424 1,800
Offshore tugs 6,443 4,994 6,355
Other 2,626 3,158 3,224
Total $ 5,876 3,773 5,470
International-based fleet:
Towing-supply/supply $ 4,806 3,695 4,116
Crew/utility 1,982 1,728 1,958
Offshore tugs 3,413 2,708 3,299
Safety/standby 6,002 5,194 5,906
Other 873 719 812
Total $ 3,909 2,939 3,475
Worldwide fleet:
Towing-supply/supply $ 5,750 3,965 5,177
Crew/utility 1,979 1,562 1,875
Offshore tugs 4,492 3,602 4,468
Safety/standby 6,002 5,194 5,906
Other 1,173 1,123 1,213
Total $ 4,677 3,298 4,310
=========== =========== ===========
</TABLE>
Additional investment in the vessel fleet for the current quarter, excluding
the acquisitions of O.I.L. Ltd and the nine vessels acquired from Australian
joint-venture companies, totaled $13.2 million and included the purchase of a
towing-supply vessel and a utility vessel for $2.8 million. The remainder of
additions in the current quarter were for modifications to the existing vessel
fleet. The following table compares the average number of vessels by class and
geographic distribution for the quarters ended June 30 and March 31.
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<PAGE> 11
<TABLE>
<CAPTION>
June 30, March 31,
------------- ---------
1997 1996 1997
----- ----- -----
<S> <C> <C> <C>
Domestic-based fleet:
Towing-supply/supply 144 139 143
Crew/utility 39 43 41
Offshore tugs 39 41 43
Other 11 15 15
----- ----- -----
Total 233 238 242
----- ----- -----
International-based fleet:
Towing-supply/supply 192 169 164
Crew/utility 49 35 38
Offshore tugs 54 53 51
Safety/standby 26 9 26
Other 38 47 41
----- ----- -----
Total 359 313 320
----- ----- -----
Owned or chartered vessels included in marine revenues 592 551 562
Vessels withdrawn from active service 14 24 16
Joint-venture and other 67 66 47
----- ----- -----
Total 673 641 625
===== ===== =====
Worldwide fleet:
Towing-supply/supply 365 351 346
Crew/utility 98 91 88
Offshore tugs 102 100 98
Safety/standby 26 24 25
Other 82 75 68
----- ----- -----
Total 673 641 625
===== ===== =====
</TABLE>
The information presented above gives effect to the O.I.L acquisition as of May
16, 1997. Because of the timing of the acquisition the averages presented above
distort the effect of O.I.L. on a forward-looking basis. To provide a better
understanding of the effect of this acquisition the table below lists average
utilization, average day rates and number of vessels by class and geographic
distribution as of June 30, 1997.
<TABLE>
<CAPTION>
Average Average Number
Utilization Day Rate of Vessels
----------- ---------- ----------
<S> <C> <C> <C>
Domestic-based fleet :
Towing-supply/supply 90% $ 7,000 145
Crew/utility 89 2,000 39
Offshore tugs 60 6,550 39
Other 56 2,860 11
--------- --------- ---------
Total 84% $ 5,900 234
--------- --------- ---------
International-based fleet :
Towing-supply/supply 89% $ 4,950 231
Crew/utility 82 1,960 57
Offshore tugs 78 3,280 56
Safety/standby 79 6,090 31
Other 81 800 40
--------- --------- ---------
Total 85% $ 4,150 415
--------- --------- ---------
Worldwide fleet:
Towing-supply/supply 89% $ 5,800 376
Crew/utility 85 1,980 96
Offshore tugs 71 4,400 95
Safety/standby 79 6,090 31
Other 75 1,140 51
--------- --------- ---------
Total 84% $ 4,800 649
--------- --------- ---------
</TABLE>
-11-
<PAGE> 12
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 margins and related statistics for gas
compression operations for the quarters ended June 30 and March 31.
<TABLE>
<CAPTION>
June 30, March 31,
---------------------- ---------
(in thousands, except statistics) 1997 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Revenues:
Rentals $ 19,354 17,802 18,717
Repair, service and other 569 1,298 696
--------- --------- ---------
19,923 19,100 19,413
--------- --------- ---------
Expenses:
Wages and benefits 3,024 2,919 2,870
Repairs and maintenance 3,773 3,240 4,033
Other 1,871 2,003 2,090
--------- --------- ---------
8,668 8,162 8,993
--------- --------- ---------
Operating margins $ 11,255 10,938 10,420
========= ========= =========
Operating margins as a percent
of revenues 56.5% 57.3% 53.7%
========= ========= =========
Horsepower based statistics:
Utilization 80.8% 75.5% 79.4%
Average monthly rental rate $ 16.69 16.58 16.62
Average fleet size 476,309 472,108 470,104
========= ========= =========
</TABLE>
Greater demand for natural gas compression services in the current quarter
pushed utilization and rental rates above prior year and prior quarter levels
which positively affected current quarter operating margins. This positive
effect on operating margins in the current quarter compared with the preceding
quarter and compared with fiscal 1997's first quarter was partially offset by
higher repair and maintenance expense as a result of a greater number of
compressor overhauls.
The Compression division also designs, fabricates and installs engineered
compressor systems and sells, primarily to its customers, related parts and
equipment. The following table compares revenues, costs of sales and sales
margins for equipment and parts sales for the quarters ended June 30 and March
31.
<TABLE>
<CAPTION>
June 30, March 31,
------------------ ---------
(in thousands) 1997 1996 1997
------- ------- -------
<S> <C> <C> <C>
Revenues $ 6,234 10,155 9,439
Costs of sales 4,498 8,726 7,608
------- ------- -------
Gross profit margins $ 1,736 1,429 1,831
======= ======= =======
Gross profit margins as a percent of revenues 27.8% 14.1% 19.4%
======= ======= =======
</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
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<PAGE> 13
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.
Additional investment in the natural gas compression rental fleet during the
current quarter totaled $3.6 million and was primarily for additional natural
gas compressors.
CORPORATE
On May 16,1997 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 $630 million 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 $356 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.
Quarterly repayments of the term loan begin September 30, 1997 and the
indebtedness 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 $13.9 million. The debt has been discounted to yield interest at 7%
and is to be repaid in installments beginning September 30, 1997. The total
estimated cost of the acquisition of $36 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 $11.6 million has also been recorded in
the Condensed Consolidated Balance Sheet.
Financing activities for the quarter ended June 30, 1997 provided $456.4
million of cash and included borrowings of $500 million for the acquisition of
O.I.L. Ltd discussed above. Principal payments on long-term debt include $30
million of repayments on the revolving line of credit. 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.
-13-
<PAGE> 14
General and administrative expenses for the quarters ended June 30 and March 31
consist of the following components:
<TABLE>
<CAPTION>
June 30, March
--------------------- ---------
(in thousands) 1997 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Personnel $ 11,427 8,801 10,793
Office and property 3,362 2,641 3,026
Sales and marketing 1,320 933 1,173
Professional services 1,455 1,268 1,377
Other 1,305 1,432 1,275
--------- --------- ---------
$ 18,869 15,075 17,644
========= ========= =========
</TABLE>
The increase in general and administrative costs from the preceding quarter to
the current quarter is principally the result of the O.I.L. acquisition.
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. 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. The Company is in the process of
defending against these claims and assessments and, in management's opinion,
the ultimate outcome of these matters 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
and development spending by energy exploration and production companies. As
this spending increases, prices of goods and services used by the energy
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.
-14-
<PAGE> 15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
A. At page 17 of this report is the index for those exhibits required to be
filed as a part of this report.
B. The Company filed the following two Current Reports on Form 8-K during
the quarter ended June 30, 1997:
1. A Current Report on Form 8-K dated May 16, 1997 disclosed the
Company's acquisition of all of the outstanding shares of O.I.L.
Limited and its related international marine operating companies
from the Ocean Group plc and its affiliates.
2. A Current Report on Form 8-K dated May 30, 1997 disclosed that the
Company had dismissed KPMG Peat Marwick LLP as the Company's
independent accountants and engaged Ernst & Young LLP as the
Company's new independent accountants.
-15-
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
TIDEWATER INC.
--------------------------------
(Registrant)
Date: July 22, 1997 /s/ William C. O'Malley
--------------------------------
William C. O'Malley
Chairman of the Board, President
and Chief Executive Officer
Date: July 22, 1997 /s/ Ken C. Tamblyn
--------------------------------
Ken C. Tamblyn
Executive Vice President and
Chief Financial Officer
-16-
<PAGE> 17
EXHIBIT INDEX
Exhibit
Number
- -------
11 Statement - Computation of Per Share Earnings
27 Financial Data Schedule
<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 ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
Quarter Ended
June 30, 1997
--------------
<S> <C>
Net earnings (in thousands) $ 50,761
==============
Computation of weighted average
number of common shares outstanding :
Issued: 60,377,900 shares
Weighted average common shares outstanding 60,350,547
Plus: Incremental shares applicable to stock options 582,800
--------------
Weighted average common shares & equivalents 60,933,347
==============
Primary and fully diluted earnings per common share $ .83
==============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSENSED 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> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 26,868
<SECURITIES> 0
<RECEIVABLES> 257,745
<ALLOWANCES> 10,940
<INVENTORY> 38,076
<CURRENT-ASSETS> 318,922
<PP&E> 1,903,935
<DEPRECIATION> 957,457
<TOTAL-ASSETS> 1,727,078
<CURRENT-LIABILITIES> 231,417
<BONDS> 422,690
0
0
<COMMON> 6,038
<OTHER-SE> 806,127
<TOTAL-LIABILITY-AND-EQUITY> 1,727,078
<SALES> 256,597
<TOTAL-REVENUES> 256,597
<CGS> 180,327
<TOTAL-COSTS> 180,327
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,504
<INCOME-PRETAX> 76,911
<INCOME-TAX> 26,150
<INCOME-CONTINUING> 50,761
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 50,761
<EPS-PRIMARY> .83
<EPS-DILUTED> .83
</TABLE>
