<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 - For the Quarterly Period Ended September 30, 1999
------------------
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)
601 Poydras Street, Suite 1900, New Orleans, Louisiana 70130
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (504) 568-1010
----------------------------
- --------------------------------------------------------------------------------
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
-----
55,620,585 shares of Tidewater Inc. common stock $.10 par value per share were
outstanding on October 19, 1999. Excluded from the calculation of shares
outstanding at October 19, 1999 are 4,942,609 shares held by the Registrant's
Grantor Stock Ownership Trust. Registrant has no other class of common stock
outstanding.
-1-
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
TIDEWATER INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
September 30, March 31,
ASSETS 1999 1999
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 136,725 10,422
Trade and other receivables 171,751 238,002
Marine operating supplies 27,795 27,971
Other current assets 3,415 4,483
- ----------------------------------------------------------------------------------------------------------------
Total current assets 339,686 280,878
- ----------------------------------------------------------------------------------------------------------------
Investments in, at equity, and advances to
unconsolidated companies 16,320 17,307
Properties and equipment:
Vessels and related equipment 1,433,247 1,505,441
Other properties and equipment 42,637 42,744
- ----------------------------------------------------------------------------------------------------------------
1,475,884 1,548,185
Less accumulated depreciation 879,665 910,005
- ----------------------------------------------------------------------------------------------------------------
Net properties and equipment 596,219 638,180
- ----------------------------------------------------------------------------------------------------------------
Goodwill, net 342,592 347,176
Other assets 104,100 110,917
- ----------------------------------------------------------------------------------------------------------------
$1,398,917 1,394,458
===============================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------------------------
Current liabilities:
Accounts payable and accrued expenses 64,577 71,256
Accrued property and liability losses 4,364 6,605
Income taxes 1,801 4,485
- ----------------------------------------------------------------------------------------------------------------
Total current liabilities 70,742 82,346
- ----------------------------------------------------------------------------------------------------------------
Deferred income taxes 135,961 128,826
Accrued property and liability losses 53,164 66,052
Other liabilities and deferred credits 51,408 49,527
Stockholders' equity:
Common stock of $.10 par value, 125,000,000 shares
authorized, issued 60,563,194 shares at September
and 60,566,857 shares at March 6,056 6,057
Other stockholders' equity 1,081,586 1,061,650
- ----------------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,087,642 1,067,707
- ----------------------------------------------------------------------------------------------------------------
$1,398,917 1,394,458
===============================================================================================================
</TABLE>
See Notes to Unaudited Condensed Consolidated Financial Statements.
-2-
<PAGE>
TIDEWATER INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Quarter Ended Six Months Ended
September 30, September 30,
----------------------- -------------------------
1999 1998 1999 1998
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Revenues:
Vessel revenues $ 129,735 242,912 278,012 510,545
Other marine revenues 9,211 11,323 15,464 28,567
- ------------------------------------------------------------------------------------------------------------------
138,946 254,235 293,476 539,112
- ------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Vessel operating costs 77,431 123,892 169,323 259,961
Costs of other marine revenues 7,434 8,670 11,789 22,327
Depreciation and amortization 20,335 23,977 43,277 47,799
General and administrative 16,647 18,451 33,593 37,192
- ------------------------------------------------------------------------------------------------------------------
121,847 174,990 257,982 367,279
- ------------------------------------------------------------------------------------------------------------------
17,099 79,245 35,494 171,833
Other income (expenses):
Foreign exchange gain 275 355 203 369
Gain on sales of assets 6,605 987 8,964 2,640
Equity in net earnings of unconsolidated companies 1,900 1,767 3,886 3,529
Minority interests (44) (353) (291) (968)
Interest and miscellaneous income 2,100 1,134 4,014 2,027
Interest and other debt costs (163) (1,015) (289) (1,475)
- ------------------------------------------------------------------------------------------------------------------
10,673 2,875 16,487 6,122
- ------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 27,772 82,120 51,981 177,955
Income taxes 8,887 25,442 16,634 58,505
- ------------------------------------------------------------------------------------------------------------------
Net earnings $ 18,885 56,678 35,347 119,450
==================================================================================================================
Earnings per common share $ .34 .98 .64 2.04
==================================================================================================================
Diluted earnings per common share $ .34 .98 .64 2.03
==================================================================================================================
Weighted average common shares outstanding 55,523,727 57,791,444 55,511,093 58,528,321
Incremental common shares from stock options 304,923 78,799 236,211 117,896
- ------------------------------------------------------------------------------------------------------------------
Adjusted weighted average common shares 55,828,650 57,870,243 55,747,304 58,646,217
==================================================================================================================
Cash dividends declared per common share $ .15 .15 .30 .30
==================================================================================================================
</TABLE>
See Notes to Unaudited Condensed Consolidated Financial Statements.
-3-
<PAGE>
TIDEWATER INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Quarter Ended Six Months Ended
September 30, September 30,
---------------------------- ---------------------
1999 1998 1999 1998
------------ ----------- -------- ---------
<S> <C> <C> <C> <C>
Net cash provided by operating activities $ 51,311 74,986 131,846 179,395
- -------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sales of assets 49,647 3,412 53,326 6,335
Additions to properties and equipment (29,652) (6,827) (42,439) (16,818)
Income tax payments related to sale of
compression operations --- (301) --- (68,111)
Other 25 178 62 60
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 20,020 (3,538) 10,949 (78,534)
===================================================================================================================
Cash flows from financing activities:
Principal payments on long-term debt --- (58,172) --- (83,172)
Credit facility borrowings --- 40,000 --- 80,000
Proceeds from issuance of common stock 38 32 188 437
Common stock purchased --- (56,753) --- (72,948)
Dividends paid (8,342) (8,712) (16,680) (17,623)
- -------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (8,304) (83,605) (16,492) (93,306)
- -------------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents 63,027 (12,157) 126,303 7,555
Cash and cash equivalents at beginning of period 73,698 44,689 10,422 24,977
- -------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 136,725 32,532 136,725 32,532
===================================================================================================================
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 129 1,172 326 1,353
Income taxes $ 10,569 50,411 17,348 126,124
===================================================================================================================
</TABLE>
See Notes to Unaudited Condensed Consolidated Financial Statements.
-4-
<PAGE>
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) Stockholders' Equity
At September 30, 1999 and March 31, 1999, 4,944,997 and 4,985,860 shares,
respectively, of common stock were held in a grantor stock ownership plan trust
for the benefit of stock-based employee benefits programs. These shares are not
included in common shares outstanding for earnings per share calculations and
transactions between the company and the trust, including dividends paid on the
company's common stock, are eliminated in consolidating the accounts of the
trust and the company.
(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 32% for the
quarter and six-month period ended September 30, 1999. The effective tax rate
was 33.4% and 34% for the quarter and six-month period ended September 30, 1998,
respectively, excluding a $2 million (or $.03 per share) reduction in deferred
taxes resulting from the lowering of United Kingdom corporate income tax rates
which had the effect of reducing the effective tax rate for the quarter and six-
month period ended September 30, 1998 to 30.9% and 32.8%, respectively.
(4) Year 2000
Disclosure regarding year 2000 (Y2K) issues facing the company is included as
part of management's discussion and analysis at page 13 of this report.
-5-
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
--------------------------------------
The Board of Directors and Shareholders
Tidewater Inc.
We have reviewed the accompanying condensed consolidated balance sheet of
Tidewater Inc. and subsidiaries as of September 30, 1999, and the related
condensed consolidated statements of earnings and cash flows for the three-month
and six-month periods ended September 30, 1999 and 1998. These financial
statements are the responsibility of the company's management.
We conducted our reviews 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 reviews, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements referred
to above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Tidewater Inc. and subsidiaries as
of March 31, 1999, and the related consolidated statements of earnings,
stockholders' equity and cash flows for the year then ended, not presented
herein, and in our report dated April 27, 1999, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of March 31, 1999, is fairly stated, in all material respects, in relation to
the consolidated balance sheet from which it has been derived.
Ernst & Young LLP
New Orleans, Louisiana
October 18, 1999
-6-
<PAGE>
Item 2. Management's Discussion and Analysis
------------------------------------
The company provides services to the international offshore energy industry
through the operation of a diversified fleet of marine service vessels.
Revenues, net earnings and cash flows from operations are dependent upon the
activity level of 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. The following discussion should be read in
conjunction with the unaudited condensed consolidated financial statements and
related disclosures.
In accordance with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, the company notes that certain statements set
forth in this Quarterly Report on Form 10-Q which provide other than historical
information and which are forward looking, involve risks and uncertainties that
may impact the company's actual results of operations. The company faces many
risks and uncertainties, many of which are beyond the control of the company,
including: fluctuations in oil and gas prices; changes in capital spending by
customers in the energy industry for exploration, development and production;
unsettled political conditions, civil unrest and governmental actions,
especially in higher risk countries of operations; foreign currency controls;
and environmental and labor laws. Readers should consider all of these risk
factors as well as other information contained in this report.
MARINE OPERATIONS
- -----------------
Offshore service vessels provide a diverse range of services to the energy
industry. Fleet size, utilization and vessel day rates primarily determine the
amount of revenues and operating profit because operating costs and depreciation
do not change proportionally when revenue changes. Operating costs primarily
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 the impact on
vessel operations and are only done if economically justified, given the
vessel's age and physical condition.
-7-
<PAGE>
The following table compares revenues and operating costs (excluding general and
administrative expense and depreciation expense) for the quarters and six-month
periods ended September 30 and for the quarter ended June 30, 1999. Vessel
revenues and operating costs relate to vessels owned and operated by the company
while other marine services relate to third-party activities of the company's
shipyards, brokered vessels and other miscellaneous marine-related activities.
Effective June 30, 1999 the company sold its fleet of safety-standby vessels.
Revenues related to that fleet amounted to $10.7 million in the quarter ended
June 30, 1999, $14.3 million in the quarter ended September 30, 1998, and $28.3
million in the six-month period ended September 30, 1998.
<TABLE>
<CAPTION>
Quarter
Quarter Ended Six Months Ended Ended
September 30, September 30, June 30,
----------------- ----------------- -----------
(in thousands) 1999 1998 1999 1998 1999
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Vessel revenues:
United States $ 34,918 81,081 67,676 191,090 32,758
International 94,817 161,831 210,336 319,455 115,519
- --------------------------------------------------------------------------------------
129,735 242,912 278,012 510,545 148,277
Other marine revenues 9,211 11,323 15,464 28,567 6,253
- --------------------------------------------------------------------------------------
$138,946 254,235 293,476 539,112 154,530
======================================================================================
Operating costs:
Vessel operating costs:
Crew costs $ 44,135 66,409 97,544 134,338 53,409
Repair and maintenance 16,334 32,873 33,396 75,999 17,062
Insurance 4,264 6,227 9,561 12,060 5,297
Fuel, lube and supplies 5,508 8,897 12,492 18,894 6,984
Other 7,190 9,486 16,330 18,670 9,140
- ---------------------------------------------------------------------------------------
77,431 123,892 169,323 259,961 91,892
Costs of other marine revenues 7,434 8,670 11,789 22,327 4,355
- --------------------------------------------------------------------------------------
$ 84,865 132,562 181,112 282,288 96,247
======================================================================================
</TABLE>
Marine support services are conducted worldwide with assets that are highly
mobile. Revenues are principally derived from offshore service vessels, which
regularly and routinely move from one operating area to another, often to and
from offshore operating areas in different continents. Because of this asset
mobility, revenues and long-lived assets attributable to the company's
international marine operations in any one country are not "material" as that
term is defined by SFAS No. 131.
As a result of the uncertainty of certain customers to make payment of vessel
charter hire, the company has deferred the recognition of approximately $9.2
million of billings as of September 30, 1999 ($9.7 million of billings as of
March 31, 1999), which would otherwise have been recognized as revenue. The
company will recognize the amounts as revenue when the uncertainty has been
reduced.
-8-
<PAGE>
Marine operating profit and other components of earnings before income taxes for
the quarters and six-month periods ended September 30 and for the quarter ended
June 30, 1999 consist of the following:
<TABLE>
<CAPTION>
Quarter
Quarter Ended Six Months Ended Ended
September 30, September 30, June 30,
----------------- ------------------ ----------
(In thousands) 1999 1998 1999 1998 1999
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating profit - vessel activity:
United States $ 399 28,881 2 82,368 (397)
International 18,633 51,866 39,680 90,918 21,047
- ----------------------------------------------------------------------------------------------
19,032 80,747 39,682 173,286 20,650
Gains on sales of assets 6,598 987 8,955 2,640 2,357
Other marine services 1,661 2,467 3,325 5,859 1,664
- ----------------------------------------------------------------------------------------------
Operating profit 27,291 84,201 51,962 181,785 24,671
- ----------------------------------------------------------------------------------------------
Equity in net earnings of
unconsolidated companies 1,900 1,767 3,886 3,529 1,986
Interest and other debt costs (163) (1,015) (289) (1,475) (126)
Corporate general and administrative (3,120) (3,129) (6,065) (6,507) (2,945)
Other income 1,864 296 2,487 623 623
- ----------------------------------------------------------------------------------------------
Earnings before income taxes $27,772 82,120 51,981 177,955 24,209
==============================================================================================
</TABLE>
Operating profit for the quarter and six-month periods ended September 30, 1999
decreased significantly from the comparative periods in fiscal year 1999 due to
declines in utilization, average day rates and active vessels for the worldwide
fleet offset somewhat by reductions in vessel operating costs for the worldwide
fleet. Declines in utilization and average day rates are directly related to the
current oil industry downturn. This downturn in activity and spending in the oil
industry commenced with the drop in the price of oil in the fall of 1997 due
primarily to worldwide oil surpluses. Cutbacks in customer drilling programs
resulted, negatively affecting the U.S. Gulf of Mexico vessel market first as
the duration of vessel contracts in this region normally range from one to three
months. Despite significant increases in the price of oil over the past six
months, the number of working drilling rigs has not yet rebounded in full from
its sharp decline experienced during fiscal year 1999.
U.S.-based vessel revenues for the quarter and six-month periods ended September
30, 1999 have decreased by approximately 57% and 65%, respectively, as compared
to these same periods in fiscal year 1999 resulting in minimal operating profit
for the current quarter and six-month period. Average day rates for the U.S.-
based towing-supply/supply vessels (the company's major revenue-producing assets
in the U.S.) for the current quarter and six-month period have decreased by
approximately 45% and 49%, respectively, as compared to these same periods in
fiscal year 1999. The number of working drilling rigs in the U.S. Gulf of Mexico
has shown an upward trend during this quarter; however, weak vessel demand is
expected to continue until further improvements in rig utilization occurs. In
addition the expected delivery of several newly-constructed supply vessels to
various industry competitors may create an even further imbalance and/or delay a
recovery in the Gulf of Mexico supply vessel market, thereby putting continued
downward pressure on vessel utilization and day rates.
International-based vessel operating profit for the quarter and six-month
periods ended September 30, 1999 decreased approximately 64% and 56%,
respectively, as compared to these same periods in fiscal year 1999 as
international-based vessel utilization and average day rates continued their
decline which began during the previous quarter. Up until six months ago,
international activity had not been as dramatically affected by the oil industry
downturn as the U.S. Gulf of Mexico due primarily to the longer-term nature of
international vessel contracts. However, depressed oil prices up until the
beginning of this fiscal year has resulted in curtailments of customer projects,
thus lowering international vessel demand which will likely continue for the
remainder of fiscal year 2000.
-9-
<PAGE>
In response to the oil industry downturn the following actions have been taken.
During the last quarter of fiscal year 1999 the company began stacking and
removing from its actively marketed fleet those vessels that cannot find gainful
employment. Drydockings associated with the stacked vessels have been deferred
thus substantially reducing repair and maintenance costs for the current quarter
and six-month period versus these same periods in fiscal year 1999. Reductions
in crew personnel have also been made. These personnel reductions lowered crew
costs for the quarter and six-month periods ended September 30, 1999 versus
these same periods in fiscal year 1999 and the preceding quarter.
Current quarter operating results for the U.S.-based vessels show signs of
stabilization as compared to the previous quarter. A slight increase in U.S.-
based vessel utilization offset somewhat by a modest decline in the average day
rates resulted in a small operating profit for the current quarter versus an
operating loss in the preceding quarter. Increases in domestic oil prices and
working drilling rigs appear to have reversed, for now, the declining vessel
demand in the U.S. Gulf of Mexico vessel market.
Current quarter international-based vessel operating profit decreased
approximately 11% from the preceding quarter as a result of continued declines
in utilization and average day rates offset somewhat by reduced operating costs
for the international fleet. Declines in utilization and average day rates for
international-based vessels were expected as international activity is now being
negatively affected by the depressed oil prices that were experienced throughout
calendar year 1998. International operating costs, mainly crew costs, have been
reduced because of the decreasing demand for international-based vessels. Also
contributing to the reduction in international operating costs was the sale of
the safety/standby vessel fleet in early July 1999 for approximately $40
million.
Gains on sales of assets increased in the current quarter due to an increase in
vessel sales. Interest and other debt costs were negligible as the company had
no outstanding debt during the current six-month period. Other income increased
during the current six-month period as the result of interest earned on an
increased cash balance.
Vessel utilization is determined primarily by market conditions and to a lesser
extent by drydocking requirements. Vessel day rates are determined by the demand
created through the level of offshore exploration, development and production
spending by energy 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 utilization percentages
and average day rates by vessel class and in total for the quarters and six-
month periods ended September 30 and for the quarter ended June 30, 1999:
-10-
<PAGE>
<TABLE>
<CAPTION>
Quarter
Quarter Ended Six Months Ended Ended
September 30, September 30, June 30,
---------------- ----------------- ----------
1999 1998 1999 1998 1999
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
UTILIZATION:
- -----------
Domestic-based fleet:
--------------------
Towing-supply/supply 52.3% 73.2 49.7 79.3 47.2
Crew/utility 74.1 86.5 75.7 87.7 77.3
Offshore tugs 46.8 55.8 42.8 58.6 38.9
Other 76.8 48.2 61.1 47.0 46.6
Total 55.2% 71.0 52.3 75.5 49.4
International-based fleet:
-------------------------
Towing-supply/supply 67.0% 84.0 69.5 85.1 71.9
Crew/utility 90.4 88.0 89.8 84.2 89.2
Offshore tugs 51.2 71.7 58.2 73.8 65.4
Safety/standby ---- 84.6 77.5 82.6 77.5
Other 48.3 69.8 50.2 68.8 52.1
Total 66.3% 81.8 69.2 82.0 72.0
Worldwide fleet:
---------------
Towing-supply/supply 61.6% 80.0 62.1 82.9 62.6
Crew/utility 84.9 87.5 85.0 85.6 85.2
Offshore tugs 49.4 65.2 51.7 67.4 54.1
Safety/standby ---- 84.6 77.5 82.6 77.5
Other 54.4 64.4 52.6 63.5 50.9
Total 62.3% 78.0 63.2 79.7 64.1
- ----------------------------------------------------------------------------------
AVERAGE VESSEL DAY RATES:
- ------------------------
Domestic-based fleet:
--------------------
Towing-supply/supply $3,484 6,331 3,603 7,075 3,734
Crew/utility 1,790 2,121 1,798 2,205 1,806
Offshore tugs 5,922 7,543 5,969 7,600 6,028
Other 1,250 3,053 1,288 3,241 1,345
Total $3,427 5,631 3,496 6,180 3,572
International-based fleet:
-------------------------
Towing-supply/supply $5,522 6,643 5,613 6,583 5,698
Crew/utility 2,172 2,406 2,211 2,425 2,250
Offshore tugs 3,818 4,141 3,944 4,208 4,048
Safety/standby ---- 6,351 6,087 6,444 6,094
Other 1,383 918 1,322 897 1,265
Total $4,401 5,320 4,548 5,325 4,676
Worldwide fleet:
---------------
Towing-supply/supply $4,878 6,536 5,012 6,761 5,143
Crew/utility 2,059 2,303 2,086 2,338 2,114
Offshore tugs 4,638 5,341 4,646 5,453 4,652
Safety/standby ---- 6,351 6,087 6,444 6,094
Other 1,343 1,317 1,313 1,315 1,282
Total $4,088 5,420 4,237 5,616 4,377
================================================================================
</TABLE>
-11-
<PAGE>
The following table compares the average number of vessels by class and
geographic distribution for the quarters and six-month periods ended September
30 and for the quarter ended June 30, 1999:
<TABLE>
<CAPTION>
Quarter
Quarter Ended Six Months Ended Ended
September 30, September 30, June 30,
--------------- -------------------
1999 1998 1999 1998 1999
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Domestic-based fleet:
- --------------------
Towing-supply/supply 129 139 130 141 131
Crew/utility 26 33 26 34 26
Offshore tugs 36 38 37 39 37
Other 9 10 9 10 10
- --------------------------------------------------------------------------------------------
Total 200 220 202 224 204
- --------------------------------------------------------------------------------------------
International-based fleet:
- -------------------------
Towing-supply/supply 219 234 219 231 219
Crew/utility 50 56 50 55 50
Offshore tugs 52 54 51 54 50
Safety/standby --- 29 12 29 25
Other 33 31 33 31 33
- --------------------------------------------------------------------------------------------
Total 354 404 365 400 377
- --------------------------------------------------------------------------------------------
Owned or chartered vessels included in
marine revenues 554 624 567 624 581
Vessels held for sale 43 25 47 26 50
Joint-venture and other 44 49 45 49 46
- --------------------------------------------------------------------------------------------
Total 641 698 659 699 677
============================================================================================
</TABLE>
During the current quarter the company acquired six new-build vessels from an
industry competitor for an aggregate price of approximately $22 million. The
package of vessels included one supply vessel, two offshore tugs and three crew
boats. At September 30, 1999, four of the vessels were still under construction
and were not included in the vessel count. Also during the current quarter the
company sold all of its safety/standby vessels for approximately $40 million in
an all cash transaction. This specialized fleet was sold because it did not
conform with the company's long-range strategies.
General and administrative expenses for the quarters and six-month periods ended
September 30 and for the quarter ended June 30, 1999:
<TABLE>
<CAPTION>
Quarter
Quarter Ended Six Months Ended Ended
September 30, September 30, June 30,
--------------- ----------------
(In thousands) 1999 1998 1999 1998 1999
- --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Personnel $ 9,916 11,110 20,049 22,235 10,133
Office and property 2,752 3,327 5,651 6,636 2,899
Sales and marketing 1,058 1,209 2,168 2,680 1,110
Professional services 1,353 1,083 2,585 2,708 1,232
Other 1,568 1,722 3,140 2,933 1,572
- --------------------------------------------------------------------
$16,647 18,451 33,593 37,192 16,946
====================================================================
</TABLE>
General and administrative expenses for the current quarter and six-month period
decreased as compared to these same periods in fiscal year 1999 due to the
declining business environment and also personnel reductions resulting from the
sale of the safety/standby vessel fleet.
LIQUIDITY, CAPITAL RESOURCES AND OTHER MATTERS
- ----------------------------------------------
The company's current ratio, level of working capital and amount of cash flows
from continuing operations for any year are directly related to fleet activity
and vessel day rates. Fleet activity and
-12-
<PAGE>
vessel day rates are ultimately determined by the supply/demand relationship for
oil and natural gas. Variations from year-to-year in these items are primarily
the result of market conditions. Cash from ongoing operations in combination
with available lines of credit provide the company, in management's opinion,
with adequate resources to satisfy present financing requirements. At September
30, 1999, all of the company's $200 million revolving line of credit was
available for future financing needs. Continued payment of dividends, currently
$.15 per quarter per common share, is subject to declaration by the Board of
Directors.
Investing activities for the six months ended September 30, 1999 provided $10.9
million of cash which included $53.3 million from proceeds from sales of assets,
primarily the safety/standby fleet for approximately $40 million during the
current quarter. Sale proceeds were offset by additions to properties and
equipment totaling $42.4 million comprised of approximately $5.1 million in
capitalized repairs and maintenance and approximately $35.3 million in new
construction. The new construction includes approximately $18.3 million for the
purchase of six new-build vessels from an industry competitor as previously
discussed. Financing activities includes quarterly cash dividends of $.15 per
share.
INFLATION AND CURRENCY FLUCTUATIONS
- -----------------------------------
Because of its significant international operations, the company is exposed to
currency fluctuations and exchange risks. To minimize the financial impact of
these items the company attempts to contract a majority of its services in
United States dollars.
Day-to-day operating costs are generally affected by inflation. However, because
the energy services industry requires specialized goods and services, general
economic inflationary trends may not affect the company's operating costs. The
major impact on operating costs is the level of offshore exploration,
development and production spending by energy exploration and production
companies. As this spending increases, prices of goods and services used by the
energy industry and the energy services industry will increase. Future increases
in vessel day rates may mitigate the effects on the company from the
inflationary effects on operating costs.
ENVIRONMENTAL MATTERS
- ---------------------
During the ordinary course of business the company's operations are subject to a
wide variety of environmental laws and regulations. The company attempts to
comply with these laws and regulations in order to avoid costly accidents and
related environmental damage. Compliance with existing governmental regulations
which have been enacted or adopted regulating the discharge of materials into
the environment, or otherwise relating to the protection of the environment, has
not had, nor is expected to have, a material effect on the company. The company
is proactive in establishing policies and operating procedures for safeguarding
the environment against any environmentally hazardous material aboard its
vessels and at shore base locations. Whenever possible, hazardous materials are
maintained or transferred in confined areas to ensure containment if accidents
occur. In addition the company has established operating policies that are
intended to increase awareness of actions that may harm the environment.
YEAR 2000
- ---------
The Year 2000 (Y2K) issue is the result of computer programs written using two
digits rather than four to define the applicable year. In response to the Y2K
issue, the company began a program in fiscal 1997 designed to identify, assess
and address significant Y2K issues in its information technology (IT) systems
and non-IT systems. As of September 30, 1999, the company believes that it is on
schedule to successfully implement any required systems and equipment
modifications that might be necessary to make the company's critical systems Y2K
compliant before December 31, 1999.
-13-
<PAGE>
The company's critical IT systems are comprised primarily of the company's
mainframe computer and the software programs used on the mainframe, including
general ledger accounting and financial reporting software programs and related
application modules, personnel and payroll systems, and an insurance claims and
accounting system. The assessment of the company's IT systems found that some of
the IT systems were not Y2K compliant. Approximately 95% of the changes
necessary to make these systems Y2K compliant have been completed, with the
remaining changes expected to be completed well in advance of year end. Because
many of the company's computer systems have been upgraded or replaced in recent
years as part of the company's ongoing upgrade program, specific Y2K compliance
costs have been insignificant to date (believed to be less than $100,000).
Remaining compliance costs related to the IT systems are also expected to be
insignificant (probably less than $100,000) because the company will continue to
utilize existing personnel resources to assist in the implementation of its Y2K
compliance initiative.
Non-IT systems are comprised primarily of computer-controlled equipment and
electronic devices, including equipment with embedded microprocessors that are
used to operate equipment on the company's vessels. Telephone systems and other
office-based electronic equipment systems are also being considered in the
assessment of non-IT systems. The company has substantially completed the
process of identifying the components that are likely to have a Y2K problem and
is in the process of communicating with the appropriate vendors to assess what,
if any, changes are necessary to make the component Y2K compliant. The company
believes that this assessment will be completed well in advance of December 31,
1999 and does not expect the costs of any required modifications or upgrades to
be material with respect to the company's results of operations and financial
position.
The company has contacted its key vendors and financial services providers to
assess their progress with their own Y2K issues and to anticipate potential
risks associated with those third parties. Although there is currently no
indication that these parties will not achieve their Y2K compliance plans, there
can be no guarantee that the systems of other companies with whom the company
transacts business will be timely converted. Additionally, there can be no
guarantee that the company will not experience Y2K problems. Despite efforts to
address all significant Y2K issues in advance, the company could potentially
experience disruptions to some aspects of its activities or operations,
including, but not limited to, delays in payments to the company from customers
or payments by the company to suppliers and disruptions in shipments of
equipment and supplies required to operate the company's vessels.
Based upon the company's current assessment of its IT systems and non-IT systems
and based upon communications to date with vendors, the company has not
determined a need to develop a contingency plan for Y2K issues. The company will
continue to monitor its decision on contingency planning and such a plan will be
developed if and when it is considered necessary to do so.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
---------------------------------------------------------
No change from 1999 annual report disclosure.
-14-
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
A. The Annual Meeting of Stockholders of the company was held in New Orleans,
Louisiana on July 27, 1999.
B. Listed below are the nominees who were elected directors at the Annual
Meeting and the name of each other director whose term of office continued
after the Meeting.
Nominee or Director
Name Continuing in Office
---- --------------------
Robert H. Boh Nominee
Donald T. Bollinger Nominee
Arthur R. Carlson Director Continuing in Office
Larry D. Hornbeck Nominee
Hugh J. Kelly Director Continuing in Office
John P. Laborde Director Continuing in Office
Jon C. Madonna Nominee
Paul W. Murrill Director Continuing in Office
William C. O'Malley Director Continuing in Office
Lester Pollack Director Continuing in Office
J. Hugh Roff, Jr. Director Continuing in Office
Donald G. Russell Nominee
C. The company's Stockholders voted as follows with respect to the proposals
presented at the meeting:
1. Robert H. Boh was elected director with 50,541,933 votes cast for and
541,067 votes withheld.
2. Donald T. Bollinger was elected director with 50,544,344 votes cast
for and 538,656 votes withheld.
3. Larry D. Hornbeck was elected director with 50,542,338 votes cast for
and 540,662 votes withheld.
4. Jon C. Madonna was elected director with 50,421,485 votes cast for and
661,515 votes withheld.
5. Donald G. Russell was elected director with 50,541,596 votes cast for
and 541,404 votes withheld.
-15-
<PAGE>
6. The selection of Ernst & Young LLP as the company's independent
accountants for the fiscal year ending March 31, 2000 was ratified
with 50,825,174 votes cast for, 88,354 votes against and 169,472
abstentions.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
A. At page 18 of this report is the index for those exhibits required to be
filed as a part of this report.
B. The company did not file any reports during the quarter for which this
report is filed.
-16-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
TIDEWATER INC.
------------------------------------
(Registrant)
Date: October 19, 1999 /s/ William C. O'Malley
------------------------------------
William C. O'Malley
Chairman of the Board, President and
Chief Executive Officer
Date: October 19, 1999 /s/ Ken C. Tamblyn
------------------------------------
Ken C. Tamblyn
Executive Vice President and
Chief Financial Officer (Principal
Accounting Officer)
-17-
<PAGE>
EXHIBIT INDEX
Exhibit
Number
- ------
15 Letter re Unaudited Interim Financial Information
27 Financial Data Schedule
-18-
<PAGE>
EXHIBIT 15
The Board of Directors and Shareholders
Tidewater Inc.
We are aware of the incorporation by reference in the Registration Statements
(Forms S-8 No. 33-63094, No. 33-38240, No. 333-32729 and No. 333-47687) of
Tidewater Inc. of our report dated October 18, 1999 relating to the unaudited
condensed consolidated interim financial statements of Tidewater Inc. that are
included in its Form 10-Q for the quarter ended September 30, 1999.
Pursuant to Rule 436(c) of the Securities Act of 1933, our report is not a part
of the registration statements prepared or certified by accountants within the
meaning of Section 7 or 11 of the Securities Act of 1933.
Ernst & Young LLP
New Orleans, Louisiana
October 18, 1999
-19-
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<PAGE>
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS 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>
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 136,725
<SECURITIES> 0
<RECEIVABLES> 183,710
<ALLOWANCES> 11,959
<INVENTORY> 27,795
<CURRENT-ASSETS> 339,686
<PP&E> 1,475,884
<DEPRECIATION> 879,665
<TOTAL-ASSETS> 1,398,917
<CURRENT-LIABILITIES> 70,742
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0
0
<COMMON> 6,056
<OTHER-SE> 1,081,586
<TOTAL-LIABILITY-AND-EQUITY> 1,398,917
<SALES> 293,476
<TOTAL-REVENUES> 293,476
<CGS> 257,982
<TOTAL-COSTS> 257,982
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 289
<INCOME-PRETAX> 51,981
<INCOME-TAX> 16,634
<INCOME-CONTINUING> 35,347
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