<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 20, 1998
TIDEWATER INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-6311 72-0487776
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
1440 CANAL STREET
NEW ORLEANS, LOUISIANA 70112
(Address of principal executive offices) (Zip Code)
(504) 568-1010
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name or former address, if changed since last report.)
<PAGE> 2
Item 2. Acquisition or Disposition of Assets
On February 20, 1998, Tidewater Inc. ("Tidewater") completed the sale
of all of the shares of Tidewater Compression Service, Inc. ("TCS"), its
wholly-owned subsidiary, to an acquisition corporation formed by Castle Harlan
Partners, III, L.P. ("Castle Harlan"), an unaffiliated purchaser. TCS provides
natural gas and air compression equipment and services, principally to the
energy industry. In consideration of the sale, Tidewater received cash in the
approximate amount of $348 million. Tidewater had entered into a previously
announced definitive agreement to sell TCS to Castle Harlan in December 1997
after conducting a controlled auction and determining that Castle Harlan had
submitted the most favorable bid. Negotiations of the price and other terms of
the transaction were conducted on an arm's-length basis between Tidewater and
Castle Harlan.
In view of the sale of TCS, Tidewater's financial statements as of
March 31, 1997 and 1996 and for each of the years in the three-year period
ended March 31, 1997 have been reclassified to report the compression segment
as a discontinued operation. A copy of the reclassified financial statements
are attached as an exhibit to this report.
Item 7. Financial Statements and Exhibits
(b) Pro Forma Financial Information
1. Pro Forma Balance Sheet at December 31, 1997 - Unaudited
2. Pro Forma Statement of Earnings for Nine Months Ended
December 31, 1997 - Unaudited
(c) Exhibits
23.1 Independent Auditors' Consent
99.1 Press release dated February 20, 1998 announcing
completion of sale
99.2 (a) Index to financial statements
(b) Independent Auditors' Report
(c) Consolidated Balance Sheets, March 31, 1997 and
1996
(d) Consolidated Statements of Earnings, three years
ended March 31, 1997
<PAGE> 3
(e) Consolidated Statements of Stockholders' Equity,
three years ended March 31, 1997
(f) Consolidated Statements of Cash Flows, three
years ended March 31, 1997
(g) Notes to Consolidated Financial Statements
* * * * * * * * * *
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized.
TIDEWATER INC.
/s/ KEN C. TAMBLYN
-------------------------------------
Ken C. Tamblyn
Executive Vice President and Chief
Financial Officer (Chief Accounting
Officer)
Dated: March 6, 1998
<PAGE> 4
Tidewater Inc.
Unaudited Pro Forma Condensed Consolidated Financial Statements
Introduction
The following unaudited pro forma condensed consolidated financial
statements give effect to the February 20, 1998 sale of all of the shares of
Tidewater Compression Service, Inc. (TCS) to an acquisition corporation formed
by Castle Harlan Partners, III, L.P. for cash consideration of approximately
$348 million.
The unaudited pro forma condensed consolidated financial statements should
be read in conjunction with the historical financial statements for Tidewater
Inc. and subsidiaries and notes thereto. This pro forma information is presented
for illustration purposes only and is not necessarily indicative of the results
which actually would have been obtained if the TCS sale had been effected on the
pro forma dates, nor is it necessarily indicative of future results.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of December
31, 1997 assumes that the TCS sale was effected on that date. The Unaudited Pro
Forma Condensed Consolidated Statement of Earnings for the nine months ended
December 31, 1997 assumes that the TCS sale was effected on April 1, 1997. An
Unaudited Pro Forma Condensed Consolidated Statement of Earnings for the year
ended March 31, 1997 is not included herein as there are no pro forma
adjustments that relate to "Earnings from continuing operations".
<PAGE> 5
TIDEWATER INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997 - UNAUDITED
<TABLE>
<CAPTION>
(In thousands of dollars)
Pro Forma
Historical adjustments(a) Pro Forma
----------- -------------- -----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash $ 27,872 2,964 30,836
Trade receivables, net 253,080 253,080
Other current assets 32,480 32,480
----------- ---------- -----------
Total current assets 313,432 2,964 316,396
----------- ---------- -----------
Equity investments 19,963 19,963
Net assets of Compression operations 244,208 (244,208)
Properties and equipment 1,567,370 1,567,370
Less accumulated depreciation 846,204 846,204
----------- ---------- -----------
Net properties and equipment 721,166 721,166
----------- ---------- -----------
Goodwill, net 358,945 358,945
Other assets 61,694 (3,456) 58,238
----------- ---------- -----------
$ 1,719,408 (244,700) 1,474,708
=========== ======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt 59,345 (53,143) 6,202
Accounts payable and accrued expenses 137,246 81,644 218,890
Accrued property and liability losses 8,607 8,607
----------- ---------- -----------
Total current liabilities 205,198 28,501 233,699
----------- ---------- -----------
Deferred income taxes 171,973 (40,000) 131,973
Long-term debt 295,556 (292,252) 3,304
Accrued property and liability losses 44,833 44,833
Other liabilities and deferred credits 56,239 (1,482) 54,757
Stockholders' equity 945,609 60,533 1,006,142
----------- ---------- -----------
$ 1,719,408 (244,700) 1,474,708
=========== ======== =========
</TABLE>
Note to Unaudited Pro Forma Condensed Consolidated Balance Sheet:
(a) To record the sale of the net assets of Compression operations and the use
of most of the proceeds of the sale to reduce Company debt. Pro forma
adjustments also include an accrual for related transactions costs, the
reduction of deferred debt costs as a result of debt repayment, the
reduction of pension related liabilities for Compression personnel, the
resulting gain from the sale of the net assets of Compression operations
and the current income tax effect of the transaction including the
reclassification of related deferred tax liabilities.
<PAGE> 6
TIDEWATER INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
NINE MONTHS ENDED DECEMBER 31, 1997 - UNAUDITED
<TABLE>
<CAPTION>
(In thousands of dollars, except per share data)
Pro Forma
Historical adjustments(a) Pro Forma
------------ -------------- ------------
<S> <C> <C> <C>
Revenues $ 781,550 781,550
Costs and expenses:
Marine operating costs 389,867 389,867
Depreciation and amortization 67,109 67,109
General and administrative 54,021 54,021
------------ -------- ------------
510,997 510,997
------------ -------- ------------
270,553 270,553
Other income (expense):
Gains on sales of assets 16,173 16,173
Interest and miscellaneous income 229 2,175 2,404
Interest and other debt costs (21,095) 16,486 (4,609)
------------ -------- ------------
(4,693) 18,661 13,968
------------ -------- ------------
Earnings before income taxes 265,860 18,661 284,521
Income taxes 85,687 6,345 92,032
------------ -------- ------------
Earnings from continuing operations $ 180,173 12,316 192,489
============ ======== ============
------------ -------- ------------
Earnings per share from continuing operations $ 2.97 N/A 3.18
============ ======== ============
------------ -------- ------------
Diluted earnings per share from continuing operations $ 2.96 N/A 3.16
============ ======== ============
Weighted average shares outstanding 60,566,536 N/A 60,566,536
Incremental shares from stock options 389,162 N/A 389,162
------------ -------- ------------
Weighted average shares and equivalents 60,955,698 N/A 60,955,698
============ ======== ============
</TABLE>
Note to Pro Forma Unaudited Condensed Consolidated Statement of Earnings:
(a) To record interest income on proceeds from the assumed sale of the net
assets of Compression operations from April 1, 1997 to May 15, 1997 and a
reduction in interest expense (and the related income tax effect of these
adjustments) to reflect a lower amount of long-term debt assumed borrowed
on May 15, 1997. Any other pro forma adjustments are not shown above, as
they would be recorded to "Earnings from discontinued operations" which are
not required to be shown above.
<PAGE> 7
INDEX TO EXHIBITS
Pro Forma Financial Information
1. Pro Forma Balance Sheet of December 31, 1997 - Unaudited
2. Pro Forma Statement of Earnings for Nine Months Ended December 31, 1997 -
Unaudited
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
23.1 Independent Auditors' Consent
99.1 Press release dated February 20, 1998 announcing completion of
sale.
99.2 (a) Index to financial statements
(b) Independent Auditors' Report
(c) Consolidated Balance Sheets, March 31, 1997 and 1996
(d) Consolidated Statements of Earnings, three years ended
March 31, 1997
(e) Consolidated Statements of Stockholders' Equity, three
years ended March 31, 1997
(f) Consolidated Statements of Cash Flows, three years ended
March 31, 1997
(g) Notes to Consolidated Financial Statements
</TABLE>
<PAGE> 1
EXHIBIT 23.1
Independent Auditors' Consent
The Board of Directors
Tidewater Inc.:
We consent to the incorporation by reference in the registration statements (No.
33-63094, No. 33-38240, and No. 333-32729) on Form S-8 of Tidewater Inc. of our
report dated April 30, 1997, except as to Note 13, which is as of December 18,
1997, with respect to the consolidated balance sheets of Tidewater Inc. and
subsidiaries as of March 31, 1997 and 1996, and the related consolidated
statements of earnings, stockholders' equity, and cash flows for each of the
years in the three-year period ended March 31, 1997, which report appears in the
Form 8-K of Tidewater Inc. dated February 20, 1998.
KPMG Peat Marwick LLP
New Orleans, Louisiana
March 4, 1998
<PAGE> 1
[TIDEWATER LETTERHEAD]
PRESS RELEASE
FOR RELEASE @ 1:30 P.M. CST, FEB. 20, 1998
TIDEWATER COMPLETES SALE OF ITS NATURAL GAS COMPRESSION BUSINESS
NEW ORLEANS, FEB. 20, 1998 - Tidewater Inc. (NYSE: TDW) announced today it
has completed the previously reported sale of its natural gas compression
business, Tidewater Compression Service, Inc., to Castle Harlan Partners III,
L.P.
William C. O'Malley, chairman, president and chief executive officer of
Tidewater, said: "We are pleased that all terms of the sales agreement have been
satisfied and that the transaction is now complete. It is a positive result for
all the parties involved. For Tidewater, it will allow management to focus its
efforts on our core worldwide marine transportation services business."
New Orleans-based Tidewater owns and operates more than 700 work boats, the
world's largest fleet of vessels serving the international offshore energy
industry.
-30-
Contact: Ken C. Tamblyn (504) 568-1010
<PAGE> 1
EXHIBIT 99.2
TIDEWATER INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS PAGE
----
<S> <C>
1. Independent Auditors' Report F-2
2. Consolidated Balance Sheets, March 31, 1997 and 1996 F-3
3. Consolidated Statements of Earnings, three years ended March 31, 1997 F-4
4. Consolidated Statements of Stockholders' Equity, three years ended March 31, 1997 F-5
5. Consolidated Statements of Cash Flows, three years ended March 31, 1997 F-6
6. Notes to Consolidated Financial Statements F-7
</TABLE>
F-1
<PAGE> 2
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of Tidewater Inc.:
We have audited the accompanying consolidated financial statements of Tidewater
Inc. and subsidiaries as listed in the accompanying index. These consolidated
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Tidewater Inc. and
subsidiaries as of March 31, 1997 and 1996, and the results of their operations
and their cash flows for each of the years in the three-year period ended March
31, 1997, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
New Orleans, Louisiana
April 30, 1997 except as to Note 13, which is as of December 18, 1997
F-2
<PAGE> 3
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
March 31, 1997 and 1996
(in thousands)
<TABLE>
<CAPTION>
ASSETS 1997 1996
---------- -------
<S> <C> <C>
Current assets:
Cash, including temporary cash investments $ 41,166 28,734
Trade and other receivables less allowance for doubtful accounts
of $10,329 in 1997 and $7,866 in 1996 176,513 133,065
Inventories 28,171 23,428
Other current assets 3,803 3,567
---------- -------
Total current assets 249,653 188,794
---------- -------
Investments in, at equity, and advances to unconsolidated companies 20,556 35,861
Net assets of discontinued Compression operations 253,305 271,664
Properties and equipment:
Vessels and related equipment 1,265,633 1,210,876
Other properties and equipment 25,220 25,715
---------- -------
1,290,853 1,236,591
Less accumulated depreciation 827,710 808,027
---------- -------
Net properties and equipment 463,143 428,564
---------- -------
Other assets 47,641 49,527
---------- -------
$1,034,298 974,410
========== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt -- 2,713
Accounts payable and accrued expenses 76,798 68,333
Accrued property and liability losses 13,248 10,844
---------- -------
Total current liabilities 90,046 81,890
---------- -------
Deferred income taxes 95,595 76,579
Accrued property and liability losses 32,146 34,206
Other liabilities and deferred credits 46,847 42,985
Stockholders' equity:
Common stock, par value $.10, issued 60,334,889
shares in 1997 and 61,882,695 shares in 1996 6,033 6,188
Additional paid-in capital 341,415 421,655
Retained earnings 433,347 322,736
---------- -------
780,795 750,579
Less cumulative foreign currency translation adjustment 10,676 10,771
Less deferred compensation - restricted stock 455 1,058
---------- -------
Total stockholders' equity 769,664 738,750
Commitments and other matters
---------- -------
$1,034,298 974,410
========== =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-3
<PAGE> 4
CONSOLIDATED STATEMENTS OF EARNINGS
- --------------------------------------------------------------------------------
Years Ended March 31, 1997, 1996 and 1995
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Marine revenues $ 690,426 532,202 501,118
Costs and expenses:
Marine operations 385,656 328,306 311,949
Depreciation 55,937 55,361 77,393
General and administrative 53,850 48,840 55,031
------------ ------------ ------------
495,443 432,507 444,373
------------ ------------ ------------
194,983 99,695 56,745
Other income (expenses):
Foreign exchange loss (382) (455) (611)
Gain on sales of assets 5,320 6,906 13,098
Equity in net earnings of unconsolidated companies 4,901 5,901 4,555
Minority interests (1,311) (1,385) (1,488)
Interest and miscellaneous income 4,363 4,142 6,837
Other expense (2,800) (12,600) (8,499)
Interest and other debt costs (1,000) (2,176) (2,139)
------------ ------------ ------------
9,091 333 11,753
------------ ------------ ------------
Earnings from continuing operations before income taxes 204,074 100,028 68,498
Income taxes 65,839 30,525 23,630
------------ ------------ ------------
Earnings from continuing operations 138,235 69,503 44,868
Earnings from discontinued operations, net of taxes of
$4,684 in 1997, $4,185 in 1996 and $4,648 in 1995 7,776 6,674 6,319
------------ ------------ ------------
Net earnings $ 146,011 76,177 51,187
============ ============ ============
Earnings per common share:
Earnings from continuing operations $ 2.24 1.13 .73
Earnings from discontinued operations .13 .11 .10
------------ ------------ ------------
Earnings per common share $ 2.37 1.24 .83
============ ============ ============
Diluted earnings per common share:
Earnings from continuing operations 2.23 1.12 .73
Earnings from discontinued operations .12 .11 .10
------------ ------------ ------------
Diluted earnings per common share $ 2.35 1.23 .83
============ ============ ============
Weighted average common shares outstanding 61,606,144 61,675,360 61,586,175
Incremental common shares from stock options 438,188 485,618 272,719
------------ ------------ ------------
Weighted average common shares and equivalents 62,044,332 62,160,978 61,858,894
============ ============ ============
Cash dividends declared per common share $ .575 .475 .40
============ ============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-4
<PAGE> 5
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
Years Ended March 31, 1997, 1996
and 1995 (in thousands)
<TABLE>
<CAPTION>
Cumulative
foreign Deferred
Additional currency compensation-
Common paid-in Retained translation restricted
stock capital earnings adjustment stock Total
-------- ---------- -------- ----------- ------------- -------
<S> <C> <C> <C> <C> <C> <C>
1997
----
Amount at March 31, 1996 $ 6,188 421,655 322,736 (10,771) (1,058) 738,750
Net earnings -- -- 146,011 -- -- 146,011
Exercise of stock options 23 4,368 -- -- -- 4,391
Cash dividends declared -- -- (35,400) -- -- (35,400)
Stock repurchases (178) (84,608) -- -- -- (84,786)
Other -- -- -- 95 603 698
-------- ------- ------- ------- ------ -------
Amount at March 31, 1997 $ 6,033 341,415 433,347 (10,676) (455) 769,664
======== ======= ======= ======= ====== =======
1996
----
Amount at March 31, 1995 $ 6,155 418,941 271,452 (10,745) (1,544) 684,259
Net earnings -- -- 76,177 -- -- 76,177
Exercise of stock options 33 2,950 -- -- -- 2,983
Cash dividends declared -- -- (25,327) -- -- (25,327)
Other -- (236) 434 (26) 486 658
-------- ------- ------- ------- ------ -------
Amount at March 31, 1996 $ 6,188 421,655 322,736 (10,771) (1,058) 738,750
======== ======= ======= ======= ====== =======
1995
----
Amount at March 31, 1994 $ 6,102 416,559 241,520 (11,032) -- 653,149
Net earnings -- -- 51,187 -- -- 51,187
Issuance of restricted stock 7 1,629 -- -- (1,636) --
Exercise of stock options 12 876 -- -- -- 888
Cash dividends declared -- -- (21,255) -- -- (21,255)
Other 34 (123) -- 287 92 290
-------- ------- ------- ------- ------ -------
Amount at March 31, 1995 $ 6,155 418,941 271,452 (10,745) (1,544) 684,259
======== ======= ======= ======= ====== =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-5
<PAGE> 6
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
Years Ended March 31, 1997, 1996 and 1995
(in thousands)
<TABLE>
<CAPTION>
1997 1996 1995
--------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Earnings from continuing operations $ 138,235 69,503 44,868
Adjustments to reconcile earnings from continuing operations
to net cash provided by continuing operating activities:
Depreciation 55,937 55,361 77,393
Provision for deferred income taxes 12,181 3,603 (2,276)
Gain on sales of assets (5,320) (6,906) (13,098)
Equity in net earnings of unconsolidated companies (4,901) (5,901) (4,555)
Minority interests 1,311 1,385 1,488
Compensation expense - restricted stock 603 595 92
Decrease (increase) in trade and other receivables (36,129) 6,046 3,184
Decrease (increase) in inventories (4,471) 1,943 (284)
Decrease (increase) in other current assets (236) 1,178 (1,789)
Increase (decrease) in accounts payable/accrued expenses 2,579 (8,290) 6,046
Increase (decrease) in accrued property/liability losses 2,404 (689) 3,776
Other, net 1,332 6,548 5,001
--------- -------- --------
Net cash provided by continuing operating activities 163,525 124,376 119,846
Net cash provided by discontinued operating activities 42,025 48,239 35,592
--------- -------- --------
Net cash provided by operating activities 205,550 172,615 155,438
--------- -------- --------
Cash flows from investing activities:
Proceeds from sales of assets 22,737 18,044 26,510
Additions to properties and equipment (58,002) (46,116) (354,725)
Sale of marketable securities -- -- 27,310
Acquisition of joint-venture interests, net of cash received (3,435) -- --
Investments in unconsolidated companies, net of dividends received 5,151 9,102 (3,059)
Investment from minority interests, net of dividends paid (755) (1,064) 3,550
Other -- (592) (863)
--------- -------- --------
Net cash used in investing activities (34,304) (20,626) (301,277)
--------- -------- --------
Cash flows from financing activities:
Common stock purchased (84,786) -- --
Principal payments on long-term debt (58,019) (145,395) (96,272)
Credit facility borrowings 15,000 13,400 173,000
Proceeds from issuance of common stock 4,391 4,212 742
Cash dividends (35,400) (25,327) (21,255)
Other -- 40 (947)
--------- -------- --------
Net cash provided by (used in) financing activities (158,814) (153,070) 55,268
--------- -------- --------
Net increase (decrease) in cash, including temporary cash
investments 12,432 (1,081) (90,571)
Net increase in cash for Hornbeck Offshore Services, Inc.
for the quarter ended March 31, 1995 (Note 2) -- 4,980 --
Cash, including temporary cash investments at beginning of year 28,734 24,835 115,406
--------- -------- --------
Cash, including temporary cash investments at end of year $ 41,166 28,734 24,835
========= ======== ========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 702 5,944 5,377
Income taxes $ 56,249 27,721 23,078
========= ======== ========
Supplemental noncash investing activity:
Joint venture interests acquired:
Fair value of assets acquired $ 51,305 -- --
Fair value of liabilities assumed (47,870) -- --
--------- -------- --------
Net cash payment $ 3,435 -- --
========= ======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
F-6
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
March 31, 1997, 1996 and 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
The company provides services and equipment to the offshore energy industry
through the operation of the world's largest fleet of offshore service vessels.
Revenues, net earnings and cash flows from operations are dependent upon the
activity level for the vessel fleet which is ultimately dependent upon oil and
natural gas prices which, in turn, are determined by the supply/demand
relationship for oil and natural gas.
USE OF ESTIMATES
In preparing the company's financial statements, management makes informed
estimates and assumptions that affect the amounts reported in the financial
statements and related disclosures. Actual results may differ from these
estimates.
BASIS OF CONSOLIDATION
The Consolidated Financial Statements include the accounts of Tidewater
Inc. and its subsidiaries. Significant intercompany balances and transactions
are eliminated in consolidation.
INVENTORIES
Inventories are comprised of marine operating supplies and are stated at
average cost.
PROPERTIES AND EQUIPMENT
Properties and equipment are carried at cost. Depreciation for financial
reporting purposes is computed primarily on the straight-line basis beginning
with the first charter/rental, with salvage values of 5%-10% for marine
equipment, using estimated useful lives of:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Marine equipment (from date of construction) 15 - 25
Other properties and equipment 3 - 30
</TABLE>
Used equipment is depreciated in accordance with the above schedule;
however, no life less than six years is used for marine equipment regardless of
the date constructed.
Maintenance and repairs are charged to operations as incurred during the
asset's original estimated useful life. Major repair costs incurred after the
original estimated useful life that also have the effect of extending the useful
life of the asset are capitalized and amortized over three years. Major
modifications to equipment are capitalized and amortized over the remaining life
of the equipment.
In fiscal 1996 the estimated useful lives of the company's marine vessels
were increased from 10-20 years to 15-25 years. The increase in useful lives was
made in order to provide a better matching of revenues and depreciation expense
over a vessel's economic useful life. This change in accounting estimate lowered
fiscal 1996 depreciation expense by approximately $25.2 million. Concurrent with
this change approximately $10.2 million of repair and maintenance costs that
would have been capitalized in fiscal 1996 had the previous estimated useful
lives been used, was expensed. The change increased fiscal 1996 net earnings by
$10.0 million, or $.16 per common share.
On April 1, 1996 the company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." The adoption had
no impact on the company's results of operations or financial position.
F-7
<PAGE> 8
ACCRUED PROPERTY AND LIABILITY LOSSES
The company's insurance subsidiary establishes case based reserves for
estimates of reported losses on direct business written, estimates received from
ceding reinsurers, and reserves based on past experience of unreported losses.
Such losses principally relate to the company's marine operations and are
included as a component of costs of marine operations in the Consolidated
Statements of Earnings. The liability for such losses and the related
reimbursement receivable from reinsurance companies are classified in the
Consolidated Balance Sheet into current and noncurrent amounts based upon
estimates of when the liabilities will be settled and when the receivables will
be collected.
PENSION AND OTHER POSTRETIREMENT BENEFITS
Pension costs are accounted for in accordance with the provisions of
Statement of Financial Accounting Standards No. 87 and are funded as required by
law. Prior service costs are amortized on the straight-line basis over the
average remaining service period of employees expected to receive pension
benefits. Postretirement benefits other than pensions are accounted for in
accordance with Statement of Financial Accounting Standards No. 106. The
estimated cost of postretirement benefits other than pensions are accrued during
the employees' active service period. Postemployment and postretirement benefits
other than pensions are funded as claims are submitted.
INCOME TAXES
Income taxes are accounted for in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
EARNINGS PER SHARE
Earnings per share are computed in accordance with Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings Per Share." SFAS No. 128 requires
the replacement of previously reported primary and fully diluted earnings per
share required by Accounting Principles Board Opinion No. 15 with earnings per
share and diluted earnings per share. The calculation of earnings per share
excludes any dilutive effect of stock options, while diluted earnings per share
includes the dilutive effect of stock options. Per share amounts for all periods
presented have been restated to conform to the requirements of SFAS No. 128. Per
share amounts disclosed in the footnotes are on a diluted basis.
FOREIGN CURRENCY TRANSLATION
The functional currency for certain non-U.S. subsidiaries and
unconsolidated companies is the applicable local currency. The translation of
the applicable local currencies into U.S. dollars is performed for balance sheet
accounts using current exchange rates in effect at the balance sheet date and
for revenue and expense accounts using weighted average exchange rates during
the period. The gains and losses resulting from the balance sheet account
translations, net of deferred income taxes, are included in stockholders'
equity.
Some transactions of the company and its subsidiaries are made in
currencies different from their own. Gains and losses from these transactions
are included in the Consolidated Statements of Earnings as they occur and relate
primarily to the revenue generating and purchasing activities in Brazil,
Venezuela, Mexico, United Kingdom, Singapore, Trinidad and Nigeria.
CASH FLOWS
For purposes of the Consolidated Statements of Cash Flows, all highly
liquid investments purchased with original maturities of approximately three
months or less are considered to be cash equivalents.
F-8
<PAGE> 9
STOCK COMPENSATION
On April 1, 1996 the company elected to continue to use the intrinsic value
method of accounting for stock-based compensation prescribed by Accounting
Principles Board (APB) Opinion No. 25 and, accordingly, adopted the disclosure
provisions of SFAS No. 123 "Accounting for Stock-based Compensation."
NEW ACCOUNTING PRONOUNCEMENT
The Financial Accounting Standards Board issued SFAS No. 129, "Disclosure
of Information about Capital Structure." SFAS No. 129 is effective for fiscal
years ending after December 15, 1997. Management does not believe that SFAS No.
129 will have a material impact on its fiscal 1998 consolidated financial
statements.
(2) BUSINESS COMBINATIONS
On March 20, 1997 the company agreed to purchase, for approximately $535
million, O.I.L. Ltd. O.I.L. Ltd. is a subsidiary of Ocean Group plc, of the
United Kingdom, and owns a fleet of approximately 100 vessels principally
composed of towing-supply and supply vessels operating in most major offshore
oil and gas exploration areas other than the United States. Final determination
of the purchase price is subject to certain conditions to be satisfied at
closing. The acquisition will be accounted for using the purchase method and
will be financed under a $600 million credit facility. The purchase agreement
calls for the closing to be no later than May 30, 1997, unless extended by both
parties.
On May 31, 1996 the company acquired for $12.4 million cash the remaining
50.1% equity interest in 22 of 29 safety/standby vessels previously owned and
operated by joint-venture companies in the North Sea. The acquisition was
accounted for by the purchase method and accordingly, the fair value of the
assets acquired and liabilities assumed and results of operations have been
included in the condensed consolidated financial statements effective June 1,
1996. Unaudited pro forma results of operations assuming the acquisition had
taken place on April 1, 1995 would not be materially different than actual
results.
On March 13, 1996 Tidewater Inc. issued 8,475,214 shares of its common
stock in exchange for all of the outstanding common stock of Hornbeck Offshore
Services, Inc. (Hornbeck). Hornbeck owned and operated a fleet of 61 marine
service vessels operating in the U.S. Gulf of Mexico and had a 49.9% interest in
29 safety/standby vessels operating in the North Sea. This business combination
has been accounted for as a pooling-of-interests and, accordingly, the
consolidated financial statements for periods prior to the combination have been
restated to include the accounts and results of operations of Hornbeck.
Operating results prior to the combination of the separate companies and the
combined amounts presented in the consolidated financial statements are
summarized below:
<TABLE>
<CAPTION>
(in thousands of dollars)
Nine Months
Ended Year Ended
December 31, March 31,
1995 1995
---------- ---------
(unaudited)
<S> <C> <C>
Revenues:
Tidewater $350,330 455,284
Hornbeck 46,341 45,834
---------- ---------
Combined $396,671 501,118
========== =========
Net earnings:
Tidewater $ 59,262 42,628
Hornbeck 4,783 8,559
---------- ---------
Combined $ 64,045 51,187
========== =========
</TABLE>
Adjustments to conform Hornbeck's accounting policies to those of Tidewater
and to apply pooling-of-interests accounting reduced (increased) net earnings of
the combined entity for the above periods by $2,359,000 and ($536,000),
respectively. The adjustments to conform accounting policies relate to
Hornbeck's capitalizing and amortizing the cost of vessel drydockings and major
overhauls rather than expensing such costs as incurred.
F-9
<PAGE> 10
Prior to the combination Hornbeck's fiscal year end was December 31.
Tidewater's fiscal year end is March 31. In applying pooling-of-interests
accounting, the March 31, 1995 Tidewater statement of earnings was combined with
the Hornbeck statement of earnings for the year ended December 31, 1994.
Unaudited amounts for the nine-month period ended December 31, 1995 include
results of each entity for the nine-month period ended December 31, 1995.
Retained earnings of the combined entities were adjusted by $434,000 as of the
beginning of Tidewater's fiscal 1996 year to include the unaudited net earnings
of Hornbeck, including adjustments to conform accounting policies to those of
Tidewater, for the period January 1, 1995 to March 31, 1995. During this period
Hornbeck's revenues were $12,671,000. Additionally, the consolidated statement
of cash flows for the year ended March 31, 1996 was adjusted by $4,980,000 to
reflect the net increase in cash of Hornbeck for the three months ended March
31, 1995.
Merger expenses of $9.6 million include legal, investment banking and
accounting fees related to the business combination. Also included in merger
expenses are payments under severance and employment agreements and a provision
for certain other related costs. Merger expenses are classified as other expense
in the Consolidated Statements of Earnings.
In fiscal 1995 the company purchased for $35 million in cash the assets of
Brazos Gas Compressing Company, a subsidiary of Mitchell Energy & Development
Corporation, and the natural gas compression assets of Halliburton Company using
$55 million of available cash and borrowings of $150 million. The costs of these
acquisitions were allocated under the purchase method of accounting based on the
fair value of the assets acquired. In connection with the purchase of the
natural gas compression assets of Halliburton Company, goodwill of approximately
$25 million was recorded and is included as a component of Net assets of
discontinued Compression operations in the Consolidated Balance Sheet and is
being amortized in equal charges to earnings over a 15-year period.
The results of Brazos' and Halliburton's operations have been consolidated
with the company's effective October 1, 1994, and December 1, 1994,
respectively. Unaudited pro forma combined net earnings of the company and of
Brazos and Halliburton, including appropriate purchase accounting adjustments
for the year ended March 31, 1995 as though the acquisition had taken place on
April 1, 1994, were $44.4 million. Unaudited pro forma combined earnings and
diluted earnings per common share were $.72.
(3) INVENTORIES
A summary of inventories at March 31 follows:
<TABLE>
<CAPTION>
(in thousands)
1997 1996
------- ------
<S> <C> <C>
Marine operating supplies $28,171 23,428
Compression supplies and merchandise held for sale (included as a component
of Net assets of discontinued Compression operations) 7,845 7,918
------- ------
$36,016 31,346
======= ======
</TABLE>
F-10
<PAGE> 11
(4) UNCONSOLIDATED COMPANIES
Investments in, at equity, and advances to unconsolidated marine
joint-venture companies at March 31 were as follows:
<TABLE>
<CAPTION>
Percentage (in thousands)
ownership 1997 1996
---------- --------- -------
<S> <C> <C> <C>
Ravensworth Investments Ltd. (United Kingdom) 50% $ --- 14,505
National Marine Service (Abu Dhabi-UAE) 40% 12,107 11,557
Tidewater Port Jackson (Australia) 50% 3,789 4,682
Provident Marine, Ltd. (Mexico) 50% 1,841 2,126
Lamnalco (UAE) 50% 1,434 1,613
Others 20%-50% 1,385 1,378
------ --------- -------
$ 20,556 35,861
====== ========= =======
</TABLE>
The aggregate amount of undistributed earnings of all unconsolidated
joint-venture companies included in consolidated stockholders' equity at March
31, 1997 is approximately $12,902,000.
(5) INCOME TAXES
Earnings from continuing operations before income taxes derived from United
States and international operations for the years ended March 31 are as follows:
<TABLE>
<CAPTION>
(in thousands)
1997 1996 1995
---------- -------- --------
<S> <C> <C> <C>
United States $ 114,942 32,995 43,771
International 89,132 67,033 24,727
---------- -------- --------
$ 204,074 100,028 68,498
========== ======== ========
</TABLE>
Income tax expense attributable to earnings from continuing operations for
the years ended March 31 consists of the following:
<TABLE>
<CAPTION>
(in thousands)
U.S.
---------
Federal State International Total
-------- ----- ------------- --------
<S> <C> <C> <C> <C>
1997
- ----
Current $ 41,628 562 11,532 53,722
Deferred 12,117 -- -- 12,117
-------- ----- -------- --------
$ 53,745 562 11,532 65,839
======== ===== ======== ========
1996
- ----
Current $ 16,663 (237) 10,076 26,502
Deferred 4,023 -- -- 4,023
-------- ----- -------- --------
$ 20,686 (237) 10,076 30,525
======== ===== ======== ========
1995
- ----
Current $ 18,428 513 6,965 25,906
Deferred (2,276) -- -- (2,276)
-------- ----- -------- --------
$ 16,152 513 6,965 23,630
======== ===== ======== ========
</TABLE>
F-11
<PAGE> 12
The actual income tax expense attributable to earnings from continuing
operations for the years ended March 31, 1997, 1996 and 1995 differs from the
amounts computed by applying the U.S. federal tax rate of 35% to pre-tax
earnings as a result of the following:
<TABLE>
<CAPTION>
(in thousands)
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Computed "expected" tax expense $ 71,426 35,010 23,975
Increase (reduction) resulting from:
Foreign (earnings) losses not includable in U.S. tax return (1,547) 482 (2,803)
Foreign taxes not creditable against U.S. taxes -- -- 1,039
Foreign tax credits not previously recognized (1,303) (7,440) --
Utilization of net operating loss carryforwards (386) (2,181) --
Expenses which are not deductible for tax purposes 45 1,418 78
Other, net (2,396) 3,236 1,341
-------- -------- --------
$ 65,839 30,525 23,630
======== ======== ========
</TABLE>
The significant components of deferred income tax expense for the years
ended March 31 are as follows:
<TABLE>
<CAPTION>
(in thousands)
1997 1996 1995
--------- ------- -------
<S> <C> <C> <C>
Deferred income tax expense (benefit) (exclusive of the effects of
other components listed below) $ 3,628 (4,732) (8,581)
Investment, foreign and minimum tax credits 8,489 8,755 6,305
--------- ------- -------
$ 12,117 4,023 (2,276)
========= ======= =======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at March 31,
1997 and 1996 are as follows:
<TABLE>
<CAPTION>
(in thousands)
1997 1996
--------- --------
<S> <C> <C>
Deferred tax assets:
Financial provisions not deducted for tax purposes $ 19,605 15,755
Unrepatriated foreign earnings 3,267 9,233
Foreign net operating loss carryforwards 1,915 5,079
Foreign tax credit carryforwards 3,851 3,851
Alternative minimum tax credit carryforwards -- 1,968
Other 259 1,068
--------- --------
Gross deferred tax assets 28,897 36,954
Less valuation allowance 1,915 5,079
--------- --------
26,982 31,875
--------- --------
Deferred tax liabilities - depreciation differences on properties and equipment (122,577) (108,454)
--------- --------
Net deferred tax liability $ (95,595) (76,579)
========= ========
</TABLE>
The net changes in the valuation allowance for the years ended March 31,
1997 and 1996 were decreases of $3,164,000 and $2,108,000, respectively. These
changes were made due to the realization of certain international net operating
loss carryforwards. The remaining balance of the deferred tax assets are
expected to be realized through future operating results and the reversal of
taxable temporary differences.
The company has not recognized a deferred tax liability of approximately
$31,500,000 for the undistributed earnings of certain non-U.S. subsidiaries that
arose in prior years because the company currently does not expect those
unremitted earnings to reverse and become taxable to the company in the
foreseeable future. A deferred tax liability will be recognized when the company
expects that it will realize those undistributed earnings in a taxable manner,
such as through receipt of dividends or sale of investments. As of March 31,
1997, the undistributed earnings of these subsidiaries were approximately
$90,000,000.
(6) LONG-TERM DEBT
At March 31, 1997 the company had no long-term debt. Outstanding long-term
debt at March 31, 1996 of $2,934,000, all classified as current, consisted of
outstanding debt assumed in connection with the merger with Hornbeck Offshore
Services, Inc. on March 13, 1996.
F-12
<PAGE> 13
The company's revolving credit and term loan agreement (the "agreement")
consists of a $200 million revolving credit facility and a $400 million
acquisition term loan. The acquisition term loan is for financing the future
acquisition of O.I.L. Ltd. Borrowings will bear interest, at the company's
option, at prime or Federal Funds rates plus .5% or Eurodollar rates plus
margins from .5% to 1% based on the company's debt to capitalization ratio. The
revolving credit commitment of $200 million expires on April 30, 1999, at which
time the then outstanding balance will convert to a term loan repayable in 16
quarterly installments beginning July 31, 1999. Borrowings under the acquisition
term loan are payable in 28 quarterly installments beginning September 30, 1997
and ending June 30, 2004. All of the borrowings under the agreement are
unsecured and the company pays an annual fee of .25% on the unused portion of
the revolving credit facility.
Under the terms of the agreement, the company has agreed to limitations on
future levels of investments and aggregate indebtedness, a minimum level of
tangible net worth and maintenance of certain debt to capitalization ratios. The
agreement also prohibits the company from encumbering its assets, other than
assets already encumbered at March 19, 1997 for the benefit of others.
(7) BENEFIT PLANS
Upon meeting various citizenship, age and service requirements, employees
are eligible to participate in a defined contribution savings plan. The plan
held 510,772 shares and 522,216 shares of the company's common stock at March
31, 1997 and 1996, respectively. Amounts charged to expense for the plan for
1997, 1996 and 1995 were $1,694,000, $1,035,000, and $951,000, respectively.
A defined benefit pension plan covers certain U.S. citizen employees and
employees who are permanent residents of the United States. Benefits are based
on years of service and employee compensation. The company also has a
supplemental retirement plan (Supplemental Plan) that provides pension benefits
to certain employees in excess of those allowed under the company's tax
qualified pension plan. Certain benefits programs are maintained in several
other countries which provide retirement income for covered employees.
Net periodic pension cost for the U.S. defined benefit pension plan and the
Supplemental Plan for 1997, 1996 and 1995 include the following components:
<TABLE>
<CAPTION>
(in thousands)
1997 1996 1995
------- ------ ------
<S> <C> <C> <C>
Service cost-benefit earned during the period $ 844 1,843 1,962
Interest cost on projected benefit obligation 2,258 2,208 1,954
Actual return on assets (3,170) (4,700) 503
Net amortization and deferral 1,591 3,530 (1,463)
------- ------ ------
Net periodic pension cost $ 1,523 2,881 2,956
======= ====== ======
Assumptions used in the accounting are:
Discount rates 7.5% 7.5% 8.5%
Rates of annual increase in compensation levels 5.2% 5.2% 5.0%
Expected long-term rate of return on assets 9.5% 9.5% 9.5%
======= ====== ======
</TABLE>
F-13
<PAGE> 14
The following table sets forth the assets and liabilities of the U.S.
defined benefit pension plan and the Supplemental Retirement Plan and the amount
of the net pension liability in the Consolidated Balance Sheets at March 31:
<TABLE>
<CAPTION>
(in thousands)
U.S. Defined Benefit Supplemental
Pension Plan Retirement Plan
1997 1996 1997 1996
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Actuarial present value of vested benefit obligation $ 28,431 27,606 2,759 2,423
======== ======= ======= =======
Accumulated benefit obligation $ 28,715 27,831 2,932 2,467
======== ======= ======= =======
Projected benefit obligation $ 31,463 30,698 3,982 3,192
Plan assets at fair value, primarily bonds and common stock 29,847 23,935 -- --
-------- ------- ------- -------
Projected benefit obligation in excess of plan assets 1,616 6,763 3,982 3,192
Unrecognized net transitional obligation amortized over 15 years (87) (112) -- --
Unrecognized actuarial gain (loss) 680 (1,856) (1,672) (1,272)
Unrecognized prior service cost (364) (425) (296) (394)
Adjustment required to recognize minimum liability -- -- 918 941
-------- ------- ------- -------
Net accrued pension liability $ 1,845 4,370 2,932 2,467
======== ======= ======= =======
</TABLE>
During the fourth quarter of fiscal 1996 the company recorded as other
expense a $3.0 million charge as a result of the removal of Marine fleet and
Compression field service personnel from the company's U.S. defined benefit
pension plan. Beginning April 1, 1996 these Marine and Compression employees,
along with all new employees of the company who are eligible for pension plan
membership, were enrolled in a new defined contribution retirement plan. Company
contributions in cash to the plan are based on employee compensation, as defined
by the plan, and are subject to certain vesting requirements. The costs of the
plan for fiscal 1997 was $2,309,000.
Qualified retired employees currently are covered by a program which
provides limited health care and life insurance benefits. Costs of the program
are based on actuarially determined amounts and are accrued over the period from
the date of hire to the full eligibility date of employees who are expected to
qualify for these benefits.
Net periodic postretirement health care and life insurance costs for 1997,
1996 and 1995 include the following components:
<TABLE>
<CAPTION>
(in thousands)
1997 1996 1995
------- ----- -----
<S> <C> <C> <C>
Service cost - benefit earned during the period $ 928 743 924
Interest cost on accumulated postretirement benefit obligation 874 798 732
Other amortization and deferral (207) (296) (129)
------- ----- -----
Net periodic postretirement benefit cost $ 1,595 1,245 1,527
======= ===== =====
</TABLE>
The unfunded actuarially-determined liabilities for postretirement benefits
at March 31 are as follows:
<TABLE>
<CAPTION>
(in thousands)
1997 1996
-------- -------
<S> <C> <C>
Actuarial present value of accumulated postretirement benefit obligation:
Current retirees $ 5,110 4,390
Current employees eligible for benefits 1,274 1,039
Current employees not yet eligible for benefits 8,175 6,431
-------- -------
Total accumulated postretirement benefit obligation 14,559 11,860
Unrecognized prior service cost (197) 1,382
Unrecognized net gain 1,798 2,069
-------- -------
Accrued postretirement benefit cost $ 16,160 15,311
======== =======
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation will be 9% in 1998, gradually declining to
5.5% in the year 2005 and thereafter. A 1% change in the assumed health care
cost trend rates for each year would change the accumulated postretirement
benefit obligation by approximately $2,235,000 at March 31, 1997 and change the
cost for the year ended March 31, 1997 by $329,000. The assumed discount rate
used in determining the accumulated postretirement benefit obligation was 7.5%
in 1997 and 1996.
F-14
<PAGE> 15
(8) OTHER ASSETS, OTHER LIABILITIES AND DEFERRED CREDITS
A summary of other assets at March 31 follows:
<TABLE>
<CAPTION>
(in thousands)
1997 1996
---------- --------
<S> <C> <C>
Recoverable insurance losses $ 32,146 34,206
Assets held for sale 5,817 5,658
Other 9,678 9,663
---------- --------
$ 47,641 49,527
========== ========
</TABLE>
A summary of other liabilities and deferred credits at March 31 follows:
<TABLE>
<CAPTION>
(in thousands)
1997 1996
---------- --------
<S> <C> <C>
Postretirement benefit liability $ 16,160 15,311
Pension liability 4,777 3,837
Minority interests in net assets of subsidiaries 7,864 6,991
Noncurrent international and domestic taxes 6,957 6,957
Other 11,089 9,889
---------- --------
$ 46,847 42,985
========== ========
</TABLE>
(9) CAPITAL STOCK
Under the company's stock option and restricted stock plans, the
Compensation Committee of the Board of Directors has authority to grant stock
options and restricted shares of the company's stock to officers and other key
employees. At March 31, 1997, 2,271,040 shares of common stock are reserved for
issuance under the plans of which 332,528 shares are available for future
grants. Stock options are granted with an exercise price equal to the stock's
fair market value at the date of grant. All stock options have ten year terms
and most of the outstanding options vest and become exercisable in ratable
installments over a three-year period from the grant date.
The per share weighted-average fair values of stock options granted during
fiscal years 1997 and 1996 were $15.46 and $13.38, respectively, on the dates of
grant using the Black Scholes option-pricing model with the following
weighted-average assumptions:
<TABLE>
<CAPTION>
1997 1996
------ -------
<S> <C> <C>
Risk-free interest rate 6.4% 6.2%
Expected dividend yield 1.25% 1.25%
Expected stock price volatility 32.57% 31.75%
Expected stock option life 5 years 5 years
======= =======
</TABLE>
The company applies APB Opinion No. 25 in accounting for its plans and,
accordingly, no compensation cost has been recognized for its stock options in
the consolidated financial statements. Had the company determined compensation
cost based on the fair value at the grant date for its stock options under SFAS
No. 123, the company's net earnings would have been reduced to the pro forma
amounts as follows:
<TABLE>
<CAPTION>
1997 1996
----------- --------
<S> <C> <C>
Net earnings (in thousands):
As reported $ 146,011 76,177
Pro forma 145,032 76,115
Earnings per common share:
As reported $ 2.37 1.24
Pro forma 2.35 1.23
Diluted earnings per common share:
As reported $ 2.35 1.23
Pro forma 2.34 1.22
=========== ========
</TABLE>
Pro forma net earnings and diluted earnings per common share reflect only
options granted during fiscal years 1997 and 1996. Therefore, the full impact of
calculating compensation cost for stock options under SFAS No. 123 is not
reflected in the pro forma amounts presented above because compensation cost
F-15
<PAGE> 16
is reflected over the options' vesting period of three years and compensation
cost for options granted prior to April 1, 1995 is not considered.
Stock option activity during 1997, 1996 and 1995 was as follows:
<TABLE>
<CAPTION>
Weighted-average Number
Exercise Price of Shares
-------------- ---------
<S> <C> <C>
Balance at March 31, 1994 $ 13.73 895,736
Granted 21.58 901,875
Exercised 10.12 (131,783)
Expired or cancelled 17.66 (72,530)
Balance at March 31, 1995 18.29 1,593,298
Granted 38.61 284,000
Exercised 12.67 (182,967)
Expired or cancelled 18.12 (27,826)
Balance at March 31, 1996 22.38 1,666,505
Granted 43.49 520,000
Exercised 15.36 (269,177)
Expired or cancelled 19.14 (4,225)
Balance at March 31, 1997 $ 29.11 1,913,103
======== =========
</TABLE>
The 1,913,103 options outstanding at March 31, 1997 fall into three general
exercise-price ranges as follows:
<TABLE>
<CAPTION>
Exercise Price Range
---------------------------------------------------
<S> <C> <C> <C>
$4.75 - $13.25 $15.00 - $25.13 $35.75-$43.63
-------------- --------------- -------------
Options outstanding at March 31, 1997 154,475 962,628 796,000
Weighted average exercise price $12.00 $21.25 $41.93
Weighted average remaining contractual life 3.4 years 7.4 years 9.6 years
Options exercisable at March 31, 1997 154,475 685,114 100,990
Weighted average exercise price of options exercisable
at March 31, 1997 $12.00 $21.12 $38.71
============== =============== =============
</TABLE>
At March 31, 1997, 1996 and 1995, the number of options exercisable under
the stock option plans was 940,579, 771,125 and 531,403, respectively; and the
weighted average exercise price of those options was $21.51, $17.43 and $13.82,
respectively.
The restricted stock plan permits the grant of company shares restricted as
to transferability and subject to a substantial risk of forfeiture. The vesting
restrictions and period during which the transferability restrictions are
applicable are determined on a case-by-case basis. During the restricted period,
the restricted shares may not be transferred or encumbered but the recipient has
the right to vote and receive dividends on the restricted shares. At March 31,
1997, contingent awards totaling 25,409 restricted company shares were
outstanding, to be issued in conjunction with and as a result of the exercise of
certain stock options. All restrictions are removed from the restricted shares
six months after issuance.
In accordance with an employment agreement with the company's chairman of
the board, 70,000 shares of restricted common stock of the company were granted
to him on October 20, 1994. These restricted shares vest at varying intervals
when the average sales price of the common stock reaches certain predetermined
levels. During the years ended March 31, 1997 and 1996, 25,000 shares in each
year vested due to the attainment of the first and second average sales price
levels applicable to those shares. The fair market value of the stock at the
time of the grant was classified in stockholders' equity as deferred
compensation-restricted stock and is being amortized by equal monthly charges to
earnings over approximately seven years, adjusted for vestings during the seven
year period.
During the third quarter of fiscal 1997 the Board of Directors authorized a
share repurchase program whereby the company could purchase in the open market
or through privately negotiated transactions up to $200 million of company
common stock through March 31, 1998. The company expended $84.8 million on the
purchase of 1,788,100 common shares at an average cost, including broker
commissions and fees, of $47.42 per share during 1997. All shares purchased have
been canceled.
F-16
<PAGE> 17
At March 31, 1997 and 1996, 3,000,000 shares of no par value preferred
stock were authorized and unissued.
Under a Shareholder Rights Plan, one preferred stock purchase right has
been distributed as a dividend for each outstanding common share. Each right
entitles the holder to purchase, under certain conditions, one one-hundredth of
a share of Series A Participating Preferred Stock at an exercise price of $160,
subject to adjustment. The rights will not be exercisable unless a person (as
defined in the plan) acquires beneficial ownership of 15% or more of the
outstanding common shares, or a person commences a tender offer or exchange
offer, which upon its consummation such person would beneficially own 15% or
more of the outstanding common shares. The Board of Directors is authorized in
certain circumstances to lower the beneficial ownership percentage to not less
than 10%.
If after the rights become exercisable a person becomes the beneficial
owner of 15% or more of the outstanding common shares (except pursuant to an
offer for all shares approved by the Board of Directors), each holder (other
than the acquirer) will be entitled to receive, upon exercise, common shares
having a market value of twice the exercise price. In addition, if the company
is involved in a merger (other than a merger which follows an offer for all
shares approved by the Board of Directors), major sale of assets or other
business combination after a person becomes the beneficial owner of 15% or more
of the outstanding common shares, each holder of a right (other than the
acquirer) will be entitled to receive, upon exercise, common stock of the
acquiring company having a market value of twice the exercise price.
The rights may be redeemed for $.01 per right at any time prior to ten days
following the acquisition by a person of 15% or more of the outstanding common
shares. The rights expire on November 1, 2006.
(10) COMMITMENTS AND OTHER MATTERS
An employment agreement exists with the company's chairman of the board,
president and chief executive officer whereby he will serve in such capacity
through December 31, 1997. The terms of the employment agreement provide for an
annual base salary and certain other benefits. Compensation continuation
agreements exist with all other officers of Tidewater Inc. whereby each receives
compensation and benefits in the event that their employment is terminated
following certain events relating to a change in control of the company. The
maximum amount of compensation that could be paid under the agreements, based on
present salary levels, is approximately $7.8 million. The amount that could be
paid for certain benefits is not presently determinable.
During the fourth quarter of fiscal 1997 and the third quarter of fiscal
1995, the company recorded as other expense charges of $2.8 million ($1.9
million after tax, or $.03 per common share) and $2.5 million ($1.6 million
after tax, or $.02 per common share), respectively, to establish reserves for
losses resulting from one of the company's insurers filing for liquidation and
for reserves to cover losses due to the potential insolvency of certain of the
company's insurers.
During the fourth quarter of fiscal 1995, the company recorded as other
expense $5.9 million ($3.7 million after tax, or $.06 per common share) for the
cost of a restructuring program of its corporate headquarters and worldwide
marine operations which was designed to reduce costs and improve operating
efficiencies. Substantially all of the costs associated with the restructuring
program were paid before March 31, 1995. The restructuring resulted in the
elimination of approximately 150 positions, realignment of duties and
responsibilities and streamlining of administrative functions. The charge
reflects the costs associated with staff reductions, relocations and related
transition expenses.
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
F-17
<PAGE> 18
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.
Various legal proceedings and claims are outstanding which arose in the
ordinary course of business. In the opinion of management, the amount of
ultimate liability, if any, with respect to these actions will not have a
materially adverse effect on the company's financial position or results of its
ongoing operations.
F-18
<PAGE> 19
(11) DIVISIONS AND GEOGRAPHIC DISTRIBUTION OF OPERATIONS
With the planned sale of the company's Compression business as explained in
Note 13, Tidewater will operate only one business segment, Tidewater Marine,
which provides support services to the offshore energy industry.
The following table provides a comparison of revenues, operating profit,
identifiable assets, and depreciation and amortization and additions to
properties and equipment for the years ended March 31.
<TABLE>
<CAPTION>
1997 1996 1995
---------- --------- ---------
<S> <C> <C> <C>
Marine revenues:
Owned and operated vessel fleet:
United States $ 338,823 241,436 222,784
International(A) 322,401 264,744 246,967
---------- --------- ---------
661,224 506,180 469,751
Brokered vessels, shipyard and other 29,202 26,022 31,367
---------- --------- ---------
690,426 532,202 501,118
========== ========= =========
Marine operating profit (loss):
Owned and operated vessel fleet:
United States $ 120,275 46,839 41,427
International 82,591 60,291 24,947
---------- --------- ---------
202,866 107,130 66,374
Gains from asset sales 5,352 6,930 13,098
Brokered vessels, shipyard and other 4,186 4,849 4,211
---------- --------- ---------
212,404 118,909 83,683
Other income 6,705 5,436 5,589
Other expense (2,800) (12,600) (8,350)
Corporate expenses (11,235) (9,541) (10,285)
Interest and other debt costs (1,000) (2,176) (2,139)
---------- --------- ---------
Earnings from continuing operations before income taxes $ 204,074 100,028 68,498
========== ========= =========
Identifiable assets:
Marine:
United States $ 376,380 349,554 356,593
International (A) 334,005 269,704 314,532
---------- --------- ---------
710,385 619,258 671,125
Investments in and advances to unconsolidated
international Marine companies 20,556 35,861 38,378
---------- --------- ---------
730,941 655,119 709,503
Net assets of discontinued Compression operations 253,305 271,664 188,957
General corporate 50,052 47,627 27,816
---------- --------- ---------
$1,034,298 974,410 926,276
========== ========= =========
Depreciation and amortization:
Marine equipment operations (B) $ 55,569 54,961 77,003
General corporate 368 400 390
---------- --------- ---------
$ 55,937 55,361 77,393
========== ========= =========
Additions to properties and equipment:
Marine equipment operations $ 40,003 40,994 99,893
Discontinued Compression operations 17,949 5,108 254,505
General corporate 50 14 327
---------- --------- ---------
$ 58,002 46,116 354,725
========== ========= =========
</TABLE>
(A) Marine equipment operations are conducted worldwide with assets that are
highly mobile. Revenues and identifiable assets attributable to these
operations in any one country are not "significant" as that term is defined
by Statement of Financial Accounting Standards No. 14. Further, most
identifiable assets in each country are comprised of offshore service
vessels, which regularly and routinely move from one operating area to
another, often to and from offshore operating areas of different
continents. Equity in net assets of non-U.S. subsidiaries is $211,450,000,
$148,045,000 and $164,175,000 at March 31, 1997, 1996 and 1995,
respectively. Other international identifiable assets include accounts
receivable and other balances denominated in currencies other than the U.S.
dollar which aggregate approximately $6,652,000, $8,520,000 and $7,062,000
at March 31, 1997, 1996 and 1995, respectively. These amounts are subject
to the usual risks of fluctuating exchange rates and government-imposed
exchange controls.
(B) See Note 1 of Notes to Consolidated Financial Statements for a discussion
of depreciation policy changes effective in fiscal 1996.
F-19
<PAGE> 20
(12) SUPPLEMENTARY INFORMATION--QUARTERLY FINANCIAL DATA (UNAUDITED)
Years Ended March 31, 1997 and 1996
(in thousands, except per share data)
<TABLE>
<CAPTION>
1997 First Second Third Fourth
- ---- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Marine revenues $146,639 167,691 184,133 191,963
======== ======== ======== ========
Marine operating profit $ 34,045 46,338 62,312 69,709
======== ======== ======== ========
Earnings from continuing operations $ 22,164 31,239 41,132 43,700
Earnings from discontinued Compression operations 2,206 1,713 2,038 1,819
-------- -------- -------- --------
Net earnings $ 24,370 32,952 43,170 45,519
======== ======== ======== ========
Earnings per share:
Continuing operations $ 0.36 0.50 0.66 0.72
======== ======== ======== ========
Discontinued Compression operations $ 0.03 0.03 0.04 0.03
======== ======== ======== ========
Diluted earnings per share:
Continuing operations $ 0.36 0.50 0.66 0.71
======== ======== ======== ========
Discontinued Compression operations $ 0.03 0.03 0.03 0.03
======== ======== ======== ========
1996
- ----
Marine revenues $128,054 132,726 135,891 135,531
======== ======== ======== ========
Marine operating profit $ 25,807 31,483 33,489 28,130
======== ======== ======== ========
Earnings from continuing operations $ 16,045 20,699 21,926 10,833
Earnings from discontinued Compression operations 1,382 1,732 2,261 1,299
-------- -------- -------- --------
Net earnings $ 17,427 22,431 24,187 12,132
======== ======== ======== ========
Earnings per share:
Continuing operations $ 0.26 0.33 0.35 0.19
======== ======== ======== ========
Discontinued Compression operations $ 0.02 0.03 0.04 0.02
======== ======== ======== ========
Diluted earnings per share:
Continuing operations $ 0.26 0.33 0.35 0.18
======== ======== ======== ========
Discontinued Compression operations $ 0.02 0.03 0.04 0.02
======== ======== ======== ========
</TABLE>
Operating profit consists of revenues less operating costs and expenses,
depreciation, general and administrative expenses and other income and expenses
of the Marine division.
See Notes 1, 2, 7 and 10 for detailed information regarding transactions which
affect fiscal 1997 and 1996 quarterly amounts.
(13) SUBSEQUENT EVENT - PLANNED SALE OF COMPRESSION BUSINESS
On December 18, 1997 the company entered into a definitive agreement to
sell its natural gas compression business for $360 million in cash subject to
certain adjustments. Accordingly, the company's consolidated financial
statements and certain related notes for all periods have been reclassified to
report separately financial position, results of operations and operating cash
flows from continuing operations and the discontinued Compression operation. The
agreement is subject to the successful completion of customary due diligence by
the buyer and expiration or early termination of the waiting period under the
Hart-Scott-Rodino Act. The transaction, anticipated to close in February 1998,
is expected to generate an after-tax gain of approximately $61 million, or $.99
per common share, net of legal, accounting and investment banking fees,
severance and other costs associated with the sale.
F-20
