SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C.D.C. 20549
FORM 10-Q
[X]/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 - For the Quarterly Period Ended September 30,December 31, 2001
------------------
[_]-----------------
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
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TIDEWATER INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 72-0487776
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
601 Poydras Street, Suite 1900, New Orleans, Louisiana 70130
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (504) 568-1010
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-------------------------------------------------------------------------------------------------------
NOT APPLICABLE
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Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or of such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
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56,095,11356,117,116 shares of Tidewater Inc. common stock $.10 par value per share
were outstanding on October 15, 2001.January 11, 2002. Excluded from the calculation of
shares outstanding at October 15, 2001January 11, 2002 are 4,448,5544,426,227 shares held by the
Registrant's Grantor Stock Ownership Trust. Registrant has no other class
of common stock outstanding.
-1-
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
TIDEWATER INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
----------------------------------------------------------------------------------------------
September 30,- --------------------------------------------------------------------------------------------------
December 31, March 31,
ASSETS 2001 2001
----------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 36,27512,042 95,153
Trade and other receivables 183,606180,227 160,677
Marine operating supplies 30,10028,604 28,632
Other current assets 3,1912,971 4,125
----------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------
Total current assets 253,172223,844 288,587
----------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------
Investments in, at equity, and advances to
unconsolidated companies 15,28614,898 16,544
Properties and equipment:
Vessels and related equipment 1,776,0901,808,806 1,613,604
Other properties and equipment 42,69442,520 42,837
----------------------------------------------------------------------------------------------
1,818,784- --------------------------------------------------------------------------------------------------
1,851,326 1,656,441
Less accumulated depreciation 878,423886,664 884,765
----------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------
Net properties and equipment 940,361964,662 771,676
----------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------
Goodwill, net 328,754 328,836
Other assets 104,817106,500 99,849
----------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------
Total assets $ 1,642,3901,638,658 1,505,492
================================================================================================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
----------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------
Current liabilities:
Accounts payable and accrued expenses 70,44368,623 68,426
Accrued property and liability losses 7,9819,946 6,825
Income taxes 16,3255,907 8,336
----------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------
Total current liabilities 94,74984,476 83,587
----------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------
Long-term debt 60,00040,000 ---
Deferred income taxes 164,267167,830 155,744
Accrued property and liability losses 36,32935,171 38,682
Other liabilities and deferred credits 49,08447,119 49,139
Stockholders' equity:
Common stock of $.10 par value, 125,000,000 shares
authorized, issued 60,543,66760,543,343 shares at
SeptemberDecember and 60,543,181 shares at March 6,054 6,055
Other stockholders' equity 1,231,9071,258,008 1,172,285
----------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------
Total stockholders' equity 1,237,9611,264,062 1,178,340
----------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 1,642,3901,638,658 1,505,492
================================================================================================================================================================================================
See Notes to Unaudited Condensed Consolidated Financial Statements.
-2-
TIDEWATER INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except share and per share data)
--------------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------
Quarter Ended SixNine Months Ended
September 30, September 30,
-------------------------December 31, December 31,
------------------------ -----------------------
2001 2000 2001 2000
--------------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------
Revenues:
Vessel revenues $ 184,096 135,642 371,910 260,947178,616 154,766 550,526 415,713
Other marine revenues 3,167 10,495 5,916 22,074
--------------------------------------------------------------------------------------------------------------------------
187,263 146,137 377,826 283,021
--------------------------------------------------------------------------------------------------------------------------3,212 4,361 9,128 26,435
- ----------------------------------------------------------------------------------------------------------------------
181,828 159,127 559,654 442,148
- ----------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Vessel operating costs 96,878 88,304 193,704 176,25596,565 94,202 290,269 270,457
Costs of other marine revenues 2,041 8,066 3,573 17,3092,012 3,170 5,585 20,479
Depreciation and amortization 19,412 19,455 38,593 38,52619,771 19,926 58,364 58,452
General and administrative 16,997 16,337 32,749 32,277
--------------------------------------------------------------------------------------------------------------------------
135,328 132,162 268,619 264,367
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51,935 13,975 109,207 18,65416,600 16,592 49,349 48,869
- ----------------------------------------------------------------------------------------------------------------------
134,948 133,890 403,567 398,257
- ----------------------------------------------------------------------------------------------------------------------
46,880 25,237 156,087 43,891
Other income (expenses):
Foreign exchange loss (473) (139) (1,125) (62)gain (loss) (53) 82 (1,178) 20
Gain on sales of assets 187 19,360 241 20,324780 2,335 1,021 22,659
Equity in net earnings of unconsolidated companies 1,443 1,693 2,942 4,0351,585 1,479 4,527 5,514
Minority interests (269) 24 (93) (172)(49) 112 (142) (60)
Interest and miscellaneous income 866 4,661 1,855 8,953685 3,933 2,540 12,886
Interest and other debt costs (160) (163) (360) (324)
---------------------------------------------------------------------------------------------------------------------------
1,594 25,436 3,460 32,754
--------------------------------------------------------------------------------------------------------------------------(237) (326) (597) (650)
- ----------------------------------------------------------------------------------------------------------------------
2,711 7,615 6,171 40,369
- ----------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 53,529 39,411 112,667 51,40849,591 32,852 162,258 84,260
Income taxes 18,200 13,114 38,307 16,953
--------------------------------------------------------------------------------------------------------------------------16,049 10,513 54,356 27,466
- ----------------------------------------------------------------------------------------------------------------------
Net earnings $ 35,329 26,297 74,360 34,455
==========================================================================================================================33,542 22,339 107,902 56,794
======================================================================================================================
Earnings per common share $ .63 .47 1.33 .62
==========================================================================================================================.60 .40 1.93 1.02
======================================================================================================================
Diluted earnings per common share $ .63 .47 1.32 .61
==========================================================================================================================.60 .40 1.92 1.01
======================================================================================================================
Weighted average common shares outstanding 56,022,155 55,673,269 56,010,341 55,644,55056,043,842 55,770,190 56,021,765 55,686,582
Incremental common shares from stock options 252,822 468,207 391,666 442,589
--------------------------------------------------------------------------------------------------------------------------182,053 591,772 321,795 492,317
- ----------------------------------------------------------------------------------------------------------------------
Adjusted weighted average common shares 56,274,977 56,141,476 56,402,007 56,087,139
==========================================================================================================================56,225,895 56,361,962 56,343,560 56,178,899
======================================================================================================================
Cash dividends declared per common share $ .15 .15 .30 .30
==========================================================================================================================.45 .45
======================================================================================================================
See Notes to Unaudited Condensed Consolidated Financial Statements.
-3-
TIDEWATER INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
- --------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Quarter Ended SixNine Months Ended
September 30, September 30,
---------------------- --------------------December 31, December 31,
------------------------ -----------------------
2001 2000 2001 2000
--------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities $ 72,380 23,752 107,075 57,580
--------------------------------------------------------------------------------------------------------------46,654 33,901 153,729 91,481
- --------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from sales of assets 5,215 39,272 6,452 42,0263,549 3,102 10,001 45,128
Additions to properties and equipment (107,191) (37,197) (216,816) (43,807)(46,101) (209,340) (262,917) (253,147)
Other --- ---(2,657) 195 (23)
--------------------------------------------------------------------------------------------------------------(2,680)
- --------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in)used in investing activities (101,976) 2,075 (210,169) (1,804)
==============================================================================================================(42,552) (208,895) (252,721) (210,699)
- --------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Credit facility borrowings $ --- --- 60,000 ---
60,000Principal payments on debt (20,000) --- (20,000) ---
Proceeds from issuance of common stock 223 1,431 1,038 2,26382 1,018 1,120 3,281
Cash dividends (8,411) (8,359) (16,821) (16,715)(8,417) (8,378) (25,238) (25,093)
Other $ --- --- (1) ---
--------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities 51,812 (6,928) 44,216 (14,452)
--------------------------------------------------------------------------------------------------------------(28,335) (7,360) 15,881 (21,812)
- --------------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents 22,216 18,899 (58,878) 41,324(24,233) (182,354) (83,111) (141,030)
Cash and cash equivalents at beginning of period 14,059 249,33536,275 268,234 95,153 226,910
--------------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 36,275 268,234 36,275 268,234
==============================================================================================================12,042 85,880 12,042 85,880
====================================================================================================================
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 485 128 596 129296 420 892 549
Income taxes $ 7,860 4,615 19,874 8,386
==============================================================================================================27,253 6,696 47,127 15,082
====================================================================================================================
See Notes to Unaudited Condensed Consolidated Financial Statements.
-4-
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,December 31, 2001 and March 31, 2001, 4,451,5604,429,844 and 4,506,962 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 applicable to
pre-tax earnings was 34%32.4% and 33.5% for the quarter and six-monthnine-month period ended
September
30,December 31, 2001. The effective tax rate applicable to pre-tax earnings was 32%
and 32.6% for the quarter and six-monthnine-month period ended September 30,December 31, 2000, was 33.3% and 33.0%,
respectively.
(4) New Accounting Pronouncements
Effective April 1, 2001, the company adopted Statement of Financial Accounting
Standards (SFAS) No. 138, "Accounting for Certain Derivative Instruments and
Hedging Activities," that amends certain provisions of SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities." The pronouncements require
that all derivatives be recognized as either assets or liabilities and measured
at fair value. The adoption of SFAS No. 133, as amended, did not have a material
impact on the company's financial statements.
In July 2001, the Financial Accounting Standards Board issued SFAS No. 142,
"Goodwill and Other Intangible Assets," which establishes a new method of
testing goodwill for impairment using a fair-value-based approach and does not
permit amortization of goodwill as previously required by Accounting Principles
Board (APB) Opinion No. 17, "Intangible Assets." An impairment loss would be
recorded if the recorded goodwill exceeds its implied fair value. SFAS No. 142
is effective for fiscal years beginning after December 15, 2001; however, early
adoption is allowed for companies with fiscal years beginning after March 15,
2001 provided the first quarter financial statements have not been previously
issued. The company elected to adopt SFAS No. 142 effective April 1, 2001 and,
accordingly, no goodwill amortization was recorded during fiscal 2002. The
company completed its transitional goodwill impairment test within six months of
adopting SFAS No. 142 as required and the test determined there is no goodwill
impairment. The transitional impairment test requiresrequired fair value be tested as of
the first day of the company's fiscal year and therefore the fair value of the
reporting unit was determined using carrying amounts as of April 1, 2001. The
company will performperformed its annual impairment test onas of December 31.31, 2001 and the
test determined
-5-
there is no goodwill impairment. Interim testing will be performed when an event
occurs or circumstances indicate that the carrying amount of goodwill may be
-5-
impaired. Goodwill amortization on a pre-tax basis for the quarter and
six-monthnine-month period ended September 30,December 31, 2001 would have been $2.3 million and $4.6$6.9
million, respectively, or $.03 per share and $.05$.08 per share after tax,
respectively, had the company not adopted SFAS No. 142. For the quarter and
six-monthnine-month period ended September 30,December 31, 2000, pre-tax goodwill amortization
amounted to $2.3 million and $4.6$6.9 million, respectively, or $.03 per share and
$.05$.08 per share after tax, respectively.
Also in July 2001, the Financial Accounting Standards Board issued SFAS No. 143,
"Accounting for Asset Retirement Obligations" which requires companies to record
the fair value of a liability for an asset retirement obligation in the period
in which it is incurred and a corresponding increase in the carrying amount of
the related long-lived asset. SFAS No. 143 is effective for fiscal years
beginning after June 15, 2002. The company does not anticipate any financial
statement impact with the adoption of this statement will have no
impact on the company's financial statements.statement.
In August 2001, the Financial Accounting Standards Board issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" which
establishes one accounting model to be used for long-lived assets to be disposed
of by sale and broadens the presentation of discontinued operations to include
more disposal transactions. SFAS No. 144 supercedessupersedes SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets to Be Disposed Of" and the accounting
and reporting provisions of APB Opinion No. 30. SFAS No. 144 is effective for
fiscal years beginning after December 15, 2001. The company does not anticipate
any financial statement impact with the adoption of this statement.
-6-
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,December 31, 2001, and the related
condensed consolidated statements of earnings and cash flows for the three-month
and six-monthnine-month periods ended September 30,December 31, 2001 and 2000. 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 auditing standards generally accepted in the United States,
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 accounting principles generally
accepted in the United States.
We have previously audited, in accordance with auditing standards generally
accepted in the United States, the consolidated balance sheet of Tidewater Inc.
and subsidiaries as of March 31, 2001, 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 23, 2001, 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, 2001, 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 17, 2001January 16, 2002
-7-
Item 2. Management's Discussion and Analysis
------------------------------------
The company provides services to the global 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.
FORWARD LOOKING INFORMATION
- ---------------------------
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; level of fleet additions by
competitors; 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 fluctuations; 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 and equipment 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 customer demands, 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.
-8-
The following table compares revenues and operating costs (excluding general and
administrative expense and depreciation expense) for the quarters and six-monthnine-month
periods ended September 30December 31 and for the quarter ended JuneSeptember 30, 2001. 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.
Quarter
Quarter Ended SixNine Months Ended Ended
SeptemberDecember 31, December 31, Sept 30,
September 30, June 30,
------------------------ --------------------- ---------------------------- ------------------ -------
(In thousands) 2001 2000 2001 2000 2001
---------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------
Revenues:
Vessel revenues:
United States $ 44,328 54,367 172,582 135,677 59,252
44,807 128,254 81,310 69,002
International 134,288 100,399 377,944 280,036 124,844
90,835 243,656 179,637 118,812
---------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------
178,616 154,766 550,526 415,713 184,096 135,642 371,910 260,947 187,814
Other marine revenues 3,212 4,361 9,128 26,435 3,167
10,495 5,916 22,074 2,749
---------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------
$ 181,828 159,127 559,654 442,148 187,263
146,137 377,826 283,021 190,563
===========================================================================================================================================================================================================
Operating costs:
Vessel operating costs:
Crew costs $ 52,205 46,600 155,125 135,951 52,395 45,986 102,920 89,351 50,525
Repair and maintenance 20,386 25,719 65,088 75,797 20,064
24,190 44,702 50,078 24,638
Insurance 5,350 5,464 16,051 15,151 6,008 4,718 10,701 9,687 4,693
Fuel, lube and supplies 7,479 8,002 23,030 20,825 7,780
6,711 15,551 12,823 7,771
Other 11,145 8,417 30,975 22,733 10,631
6,699 19,830 14,316 9,199
---------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------
96,565 94,202 290,269 270,457 96,878 88,304 193,704 176,255 96,826
Costs of other marine revenues 2,012 3,170 5,585 20,479 2,041
8,066 3,573 17,309 1,532
---------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------
$ 98,577 97,372 295,854 290,936 98,919
96,370 197,277 193,564 98,358
===========================================================================================================================================================================================================
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 $8.1$5.2
million of billings as of September 30,December 31, 2001 ($7.0 million of billings as of
March 31, 2001), which would otherwise have been recognized as revenue. The
company will recognize the amounts as revenue as cash is collected or at such
time as the uncertainty has been significantly reduced.
DomesticFor the nine months ended December 31, 2001 domestic results of operations
for the first half of fiscal 2002 benefited from increasedincreases in average day rates; however, current quarter domestic
results of operations feltcontinued to feel the impact of reduced natural gas
drilling activity in the U.S. Gulf of Mexico as a result of lower natural gas
prices. Natural gas prices began softening at the end of the first quarter of
fiscal 2002 on the news that inventory levels for the resource were increasing.
Prices continued to decrease throughout the current quarterfiscal year as moderate summerwarmer than
normal weather and continued economic slowdowns in the U.S. and globally reduced natural
gas demands, consequently applying even more downward pressure on gas prices.
Possibly aggravating the
delicate supply/demand equation is the effect the terrorist attacks on New York
City and Washington D.C. on September 11, 2001 will have on the U.S. economy.
Economic forecasters believe the terrorist attacks may have accelerated the
downturn in the U.S. economy, thus possibly reducing energy demands further and
perhaps delaying or eliminating the potential for a rapid recovery in natural
gas prices. Throughout the current quarter explorationExploration and production companies in the U.S. Gulf of Mexico, cautious over
the decrease in the commodity prices for -9-
natural gas, have eased their capital
investments as evidenced by the significant drop in offshore rig fleet
utilization rates.rates during the last half of calendar year 2001. Although there is
uncertainty in the market, leading energy analysts believe exploration and
production capital spending will increase and expect the natural gas
market to
self-correct by mid-2002.will improve in the latter half of 2002. Vessel demand in the domestic
market is
-9-
is primarily driven by natural gas exploration and production and at present, it
is unknown what effect and the extent of the effect,how much further vessel demand will be affected by the current
softening in natural gas prices and the state of the global economic
environment will have on demand for
the company's vessels in the domestic market.
Internationalenvironment.
Fiscal 2002 international results of operations for the first half of fiscal 2002 also
benefitedcontinue to benefit from
increases in average day rates. International vessel demand is primarily driven
by crude oil production, and at present time crude oil commodity prices are strong and it is unknown what effect, if any, the terrorist
attacks will have on long-term crude oil commodity prices.at
levels high enough to sustain growth. International exploration and production
spending is expected to continue to increase which should strengthen
international vessel demand.
Marine operating profit and other components of earnings before income taxes for
the quarters and six-monthnine-month periods ended September 30December 31 and for the quarter ended
JuneSeptember 30, 2001 consist of the following:
Quarter
Quarter Ended SixNine Months Ended Ended
SeptemberDecember 31, December 31, Sept 30,
September 30, June 30,
-------------------- -------------------------------- -------------------------- ------------------ -------
(In thousands) 2001 2000 2001 2000 2001
-------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------
Vessel activity:
United States $ 6,923 10,125 54,784 5,070 19,023
420 47,861 (5,055) 28,838
International 42,310 18,090 107,476 44,865 34,829
14,559 65,166 26,775 30,337
-------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------
49,233 28,215 162,260 49,935 53,852 14,979 113,027 21,720 59,175
Gain on sales of assets 784 2,335 1,025 22,659 187 19,360 241 20,324 54
Other marine services 1,085 1,036 3,228 5,572 1,015
2,306 2,143 4,536 1,128
-------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------
Operating profit 51,102 31,586 166,513 78,166 55,054
36,645 115,411 46,580 60,357
-------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------
Equity in net earnings of
unconsolidated companies 1,585 1,479 4,527 5,514 1,443 1,693 2,942 4,035 1,499
Interest and other debt costs (237) (326) (597) (650) (160) (163) (360) (324) (200)
Corporate general and administrative (3,276) (3,520) (9,911) (10,407) (3,381) (3,576) (6,635) (6,887) (3,254)
Other income 417 3,633 1,726 11,637 573
4,812 1,309 8,004 736
-------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------
Earnings from continuing operations
before income taxes $ 49,591 32,852 162,258 84,260 53,529
39,411 112,667 51,408 59,138
====================================================================================================================================================================================================================
U.S.-based vessel revenues for the quarter and six-monthended December 31, 2001 decreased
approximately 18.5% from the comparative period in fiscal 2001 primarily due to
a 36.6% decrease in utilization rates for the towing-supply/supply vessels, the
company's major income producing asset in the domestic market, as a result of
the current softness in the domestic market. Average day rates for the
towing-supply/supply vessels increased 12.4% for the comparative periods;
however, the increase in average day rates was insufficient to mitigate the
downward effect that lower vessel utilization had on revenues.
U.S.-based vessel revenues for the nine-month period ended September
30,December 31, 2001
increased 32% and 58%, respectively,27.2% as compared to the same periodsperiod in fiscal 2001 as a result of
higher average day rates. Average day rates increased due to stronger demand for
the company's vessels in the U.S. Gulf of Mexico. Average day rates for the
towing supply/supply vessels the company's major
income producing asset in the domestic market, increased by approximately 66%51.3% for the current
quarter as compared to the same period in fiscal 2001 and
increased approximately 79% for the current six-monthnine-month period as compared to the same period in fiscal 2001. Utilization rates for
the towing-supply/supply vessels decreased 6% for the current quarter as compared tonine-month period ended
December 31, 2001 decreased slightly from the samecomparative period in fiscal 2001
as a result of the current softeningsoftness in the domestic market.
UtilizationU.S.-based operating profit for the towing-supply/supply vesselsquarter ended December 31, 2001 decreased
31.6% from the comparative period in fiscal 2001 primarily due to lower
revenues. U.S.-based operating profit increased significantly for the current six-monthnine-month
period ended September 30,December 31, 2001 increased 10% as compared to the same period in
fiscal 2001.
U.S.-based operating profit for the quarter and six-month period ended September
30, 2001 increased significantly as compared to the same periods in fiscal 2001
primarily due to higher vessel revenues and lower repair and maintenance
-10-
costs. Repair and maintenance costs decreased during the comparative periods as
a result of fewer domestic drydockings being performed. The company incurred
high repair and maintenance cost duringcosts for the first two quarters of fiscal 2001nine-month period ended December 30,
2000 as a result of an intense drydocking program the company initiated while
vessel demand and average day rates in
-10-
the domestic market were not fully
recovered in order to ready its equipment for the expected increase in demand
for its vessels when market conditions in the U.S. Gulf of Mexico improved.
Current quarter U.S.-based vessel revenues decreased 14%25.2% as compared to the
previous quarter as a result of lower utilization and average day rates and utilization
resulting from the current softeningsoftness in the U.S. Gulf of Mexico natural gas
market. As of September 30,December 31, 2001, the towing supply/supply vessels operating in
the U.S. Gulf of Mexico are experiencing approximately $7,000$7,200 average day rates
and 50%30% utilization. U.S.-based operating profit for the current quarter decreased approximately 34% as compared to the prior quarteralso
decrease due to lower revenues.
International-based vessel revenues for the quarter and six-monthnine-month period ended
September 30,December 31, 2001 increased 37%33.8% and 36%35.0%, respectively, fromas compared to the
comparativesame periods in fiscal 2001 as a result of higher average day rates, utilization
and an increase in the number of active vessels in the international-based
fleet. Vessel demand in the international markets continues to remain strong as
international drilling activity continues to recover from the curtailment in oil
industry capital investment as a result of the drop in oil prices that commenced
in the fall of 1997. The number of active vessels in the international-based
fleet increased due to an aggressive deepwater vessel acquisition program that
began during the second quarter of fiscal 2001. Sixteen deepwater vessels have
been purchased to date, seven of which are fulfilling bareboat contractual
obligations that existed at the time the vessels were purchased. The bareboat
charter agreements on thesefour of the seven vessels will expire at various times
over the next two years while the bareboat charter agreements on the remaining
three vessels will expire at various times over the next two years with the
option to extend certain contracts for another two years. In a bareboat charter
agreement, the bareboat charterer leases a vessel for a pre-arranged fee and is
able to market the vessel and is also responsible for providing the crew and all
other operating costs related to the vessel. For the vessels that Tidewater has
under bareboat contracts, only revenue and depreciation expense is recorded
related to the vessels' activity. As Tidewater incurs no operating costs related
to the vessels, the related bareboat day rates are less than comparable vessels
operating under normal charter hire agreements. For the quarter and six-monthnine-month
period ended September 30,December 31, 2001 and for the quarter ended JuneSeptember 30, 2001, the
seven bareboat chartered deepwater vessels experienced 100% utilization for each
respective period and average day rates of approximately $6,100, $6,150$6,200, $6,175 and
$6,200,$6,100, respectively.
International-based vessel operating profit for the quarter and six-monthnine-month
period ended September 30,December 31, 2001 increased approximately 139%134% and 143%140%,
respectively, fromas compared to the comparativesame periods in fiscal 2001 due to an increase
in revenues. Revenues increased as a result of an increase in the number of
active vessels in the international fleet and also as a result of improved
average day rates.rates and utilization.
Current quarter international-based vessel revenues increased 5%8% as compared to
the previous quarter as a result ofdue to higher utilization and average day rates. Current
quarter operating profit increased 15%21.5% as compared to the prior quarter due to
higher revenues.
In September 2001,During the second quarter of fiscal 2002, the company withdrew from active
service 20 older little-used vessels at which time they were removed from the
utilization statistics. Nine vessels were withdrawn from the domestic market and
11 were withdrawn from the international market. Vessels withdrawn from active
service are intended to be sold. Vessel utilization rates are a function of
vessel days worked and vessel days available for active vessels only.
Current quarter gain-11-
Gain on sales of assets for the nine-month period ended December 31, 2001
includes a $1.6 million gain from the sale of the company's interest in its
consolidated marine joint venture, Maritide Offshore Oil Services Company
S.A.E., in August 2001 for approximately $3.5 million. Also included in gain on sales of assets ismillion; a gain of approximately
$1.1$2.7 million from vessel sales. The current quarter gain was
offset bysales; and a $2.5$3.3 million writedown in the carrying
values of certain vessels that were withdrawn from active service and held for
sale. The writedown is a result of reviewing the recoverability of the carrying
values of the vessels that were withdrawn from active service. Gain on sales of
assets for the six-monthnine-month period -11-
ended September 30,December 31, 2000 included a $16.8
million gain resulting from the sale of the company's 40% holding in its marine
joint venture, National Marine Service.
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 day based utilization percentages and average day rates tables include a new
vessel class category for the deepwater vessel fleet. Included in this class are
large platform supply vessels and large, high-horsepowered anchor-handling
towing supply vessels that are capable of operating in deepwater markets
globally. The deepwater vessel fleet statistics for the prior year were included
in the towing-supply/supply vessel class statistics. Accordingly, prior year's
towing-supply/supply vessel class statistics have been restated to exclude the
effect of the deepwater vessels. The following tables compare day-based
utilization percentages and average day rates by vessel class and in total for
the quarters and six-monthnine-month periods ended September 30December 31 and for the quarter ended
JuneSeptember 30, 2001:
-12-
Quarter
Quarter Ended SixNine Months Ended Ended
SeptemberDecember 31, December 31, Sept 30,
September 30, June 30,
---------------------------------- ----------------- ------------------
2001 2000 2001 2000 2001
------------------------------------------------------------------------------------------------ --------------------------------------------------------------------------------------------------------------------
UTILIZATION:
-----------
Domestic-based fleet:
--------------------
Deepwater vessels 100.0% 88.7 100.0 100.0 99.396.1 100.0
Towing-supply/supply 40.2 63.4 57.4 60.9 59.3 63.3 65.4 59.7 71.5
Crew/utility 84.9 93.0 89.3 89.6 93.2 89.2 92.3 88.1 91.4
Offshore tugs 48.8 32.4 43.1 35.5 42.6
40.6 40.3 37.1 38.1
Other 57.2 11.2 42.9 21.9 47.7
23.9 35.4 27.3 22.0
Total 61.1% 61.7 63.9 58.8 66.751.8% 59.9 59.8 59.2 61.1
International-based fleet:
-------------------------
Deepwater vessels 92.5% 81.4 94.1 76.2 95.690.8% 79.0 92.9 77.5 92.5
Towing-supply/supply 82.4 80.6 78.0 77.7 77.3 75.4 75.9 76.2 74.5
Crew/utility 90.2 95.3 87.6 93.6 84.0 91.5 86.3 92.7 88.7
Offshore tugs 75.9 72.8 72.3 68.9 70.1
67.3 70.5Other 67.0 70.9
Other49.7 56.2 46.3 56.0
47.0 51.3 44.7 46.9
Total 76.8% 74.1 76.0 74.3 75.282.3% 78.8 78.1 75.8 76.8
Worldwide fleet:
---------------
Deepwater vessels 93.1% 86.691.5% 80.5 93.5 81.9 93.1
Towing-supply/supply 67.2 74.0 70.5 71.1 70.7
Crew/utility 88.1 94.5 82.9 96.0
Towing-supply/supply 70.7 70.8 72.1 69.7 73.4
Crew/utility88.2 92.2 86.9 90.7 88.3 91.1 89.6
Offshore tugs 64.4 54.2 59.9 53.7 58.4
55.0 57.6 53.4 56.9
Other 64.4 41.1 53.0 41.0 54.0
42.0 47.6 41.0 41.5
Total 71.4% 69.4 71.9 68.4 72.3
-----------------------------------------------------------------------------------------------71.5% 71.8 71.7 69.6 71.4
====================================================================================================================
AVERAGE VESSEL DAY RATES:
------------------------
Domestic-based fleet:
--------------------
Deepwater vessels $ 11,761 11,530 11,765 11,605 11,774 11,643 11,768 11,633 11,756
Towing-supply/supply 6,631 5,897 7,010 4,632 7,042 4,248 7,119 3,969 7,181
Crew/utility 3,089 2,544 2,971 2,265 2,948 2,197 2,893 2,123 2,838
Offshore tugs 6,131 6,298 7,175 6,135 7,467
5,927 7,795 6,062 8,160
Other 1,490 1,434 1,471 1,451 1,467 1,643 1,456 1,455 1,427
Total $ 5,255 5,306 5,974 4,410 6,088 4,169 6,271 3,962 6,437
International-based fleet:
-------------------------
Deepwater vessels $ 11,763 8,633 10,832 8,448 10,778 8,954 10,357 8,278 9,936
Towing-supply/supply 6,140 5,095 5,965 5,022 5,971 4,981 5,874 4,983 5,774
Crew/utility 2,479 2,246 2,4312,622 2,244 2,497 2,242 2,3852,479
Offshore tugs 4,566 4,226 4,680 4,089 4,682
4,224 4,740 4,017 4,799
Other 1,148 1,362 1,064 1,428 1,070 1,318 1,014 1,463 953
Total $ 5,496 4,391 5,338 4,272 5,346 4,245 5,255 4,209 5,163
Worldwide fleet:
---------------
Deepwater vessels $ 11,764 9,148 10,911 9,320 10,864 9,827 10,477 9,445 10,091
Towing-supply/supply 6,245 5,361 6,274 4,892 6,299 4,727 6,287 4,644 6,276
Crew/utility 2,803 2,346 2,666 2,250 2,640 2,229 2,588 2,201 2,537
Offshore tugs 5,073 4,796 5,446 4,708 5,541
4,804 5,651 4,664 5,765
Other 1,227 1,366 1,143 1,430 1,155 1,357 1,090 1,461 1,007
Total $ 5,434 4,674 5,522 4,316 5,565
4,220 5,566 4,129 5,568
=================================================================================================================================================================================================================
-13-
The following table compares the average number of vessels by class and
geographic distribution for the quarters and six-monthnine-month periods ended September
30December
31 and for the quarter ended JuneSeptember 30, 2001:
Quarter
Actual Vessel Quarter Ended SixNine Months Ended Ended
Count At SeptemberDecember 31, December 31, Sept 30,
September 30, June 30,---------------- ----------------- ------------------ ---------
Sept. 30, 2001--------
2001 2000 2001 2000 2001
------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------
Domestic-based fleet:
- --------------------
Deepwater vessels 2 2 3 2 3 2
Towing-supply/supply 103 117 108 119 109 118 111 120 112
Crew/utility 35 2434 25 28 26 24
26 25
Offshore tugs 28 29 33 30 33 3032 29 32 29
Other 9 9 9 8 9 8
----------------------------------------------------------------------------------------------------9
- ------------------------------------------------------------------------------------------
Total 177 186 175 189 173
189 175 191 177
----------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------
International-based fleet:
- -------------------------
Deepwater vessels 24 13 23 8 23 79 23
Towing-supply/supply 183 186 189 187 191 187 194189
Crew/utility 51 52 48 51 48 5052
Offshore tugs 4039 38 40 38 40
39 40
Other 25 31 27 32 26
33 28 33 29
----------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------
Total 323 316 330 314 333 314 336
----------------------------------------------------------------------------------------------------330
- ------------------------------------------------------------------------------------------
Owned or chartered vessels
included in marine revenues 500 502 505 503 503 508 505 513
Vessels held for sale 4543 41 36 47 34 48 33 50 32
Joint-venture and other 28 27 28 3437 28
42 28
------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------
Total 573571 570 569 587 565
585 569 597 573
================================================================================================================================================================================================
The above table includes a new vessel class for the deepwater vessel fleet.
Prior year's vessel averages for the deepwater vessel fleet were reported with
the towing-supply/supply class; and accordingly, the average number of vessels
for the towing-supply/supply class have been restated to exclude the effect of
the deepwater vessel fleet.
In September 2001During the second quarter of fiscal 2002, the company withdrew from active
service 20 older little-used vessels, primarily towing-supply/supply vessels, at
which time they were removed from the utilization statistics. Nine vessels were
withdrawn from the domestic market and 11 were withdrawn from the international
market. The company's sale of its interest in its consolidated marine joint
venture, Maritide Offshore Oil Services Company S.A.E., resulted in a decrease
of five international towing-supply/supply vessels. DuringFor the first half of fiscal 2002,nine months ended
December 31, 2001 the company sold or scrapped 1122 vessels.
On September 30, 2001 the company purchased 10 large crewboat vessels which are
included in the domestic-based fleet.
During the second quarter of fiscal 2001, the company sold its 40% holding in
its unconsolidated marine joint venture, National Marine Service. As a result of
the sale, the joint venture vessel count decreased by 24 vessels. During the
third quarter of fiscal 2001, the company sold four vessels to its 40%-owned
unconsolidated joint venture, Sonatide Marine, Ltd. In addition throughout
fiscal 2001, the company sold or scrapped a total of 37 vessels.
-14-
General and administrative expenses for the quarters and six-monthnine-month periods
ended September 30December 31 and for the quarter ended JuneSeptember 30, 2001 were as follows:2001:
Quarter
Quarter Ended SixNine Months Ended Ended
SeptemberDecember 31, December 31, Sept 30,
September 30, June 30,
----------------- ---------------- ------------------------------ --------------------- --------
(In thousands) 2001 2000 2001 2000 2001
------------------------------------------------------------------------------------ -------------------------------------------------------------------------------------------------------------------
Personnel $ 9,995 9,989 29,370 30,131 9,930 10,052 19,375 20,142 9,445
Office and property 3,011 2,690 8,537 8,172 2,798 2,758 5,526 5,482 2,728
Sales and marketing 1,002 1,094 3,452 3,292 1,273 1,079 2,450 2,198 1,177
Professional services 997 1,126 3,921 3,120 1,656
1,144 2,924 1,994 1,268
Other 1,595 1,693 4,069 4,154 1,340
1,304 2,474 2,461 1,134
------------------------------------------------------------------------------------ -------------------------------------------------------------------------------------------------------------------
$ 16,600 16,592 49,349 48,869 16,997
16,337 32,749 32,277 15,752
======================================================================================================================================================================================================
General and administrative expenses for the quarter and six-monthnine-month period ended
September 30,December 31, 2001 were comparable to the same periods in fiscal 2001 and were
slightly higherlower than the previous period.
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 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,December 31, 2001, $140$160 million 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.
Net cash provided by operating activities for any period will fluctuate
according to the level of business activity for the applicable period. For the
sixnine months ended September 30,December 31, 2001, net cash from operating activities was
$107.1$153.7 million as compared to $57.6$91.2 million for the sixnine months ended SeptemberDecember
2000. Even though earnings were higher for the six months ended September 30,
2001 as compared to the same period in fiscal year 2001, accounts receivable
balances were also higher as a result of revenue growth.
Investing activities for the sixnine months ended September 30,December 31, 2001 used
$210.1$252.7 million of cash which included $6.5$10 million from proceeds from the sale of
assets, primarily the sale of the company's interest in its consolidated marine
joint venture, Maritide Offshore Oil Services Company S.A.E. Sale proceeds were
offset by additions to properties and equipment which was comprised of
approximately $8.1$12 million in capitalized repairs and maintenance and $208.2$249.2
million for the construction of offshore marine vessels and the acquisition of
two deepwater anchor-handling towing supply vessels and 10 large crewboats.
Investing activities for the sixnine months ended September 30,December 31, 2000 used $1.8$210.7
million of cash which included $42$45.1 million of proceeds from the sale of
assets, primarily the sale of the company's 40% holding in National Marine
Service, that were offset by additions to properties and equipment totaling
$43.8$253.1 million which were comprised of approximately $6$11.1 million in
capitalized repairs and maintenance and $36.4$240.4 million for the construction of
offshore marine vessels and the acquisition of oneseven large platform supply
vessel.vessels and four large anchor-handling towing supply vessels. Financing
activities for the sixnine months ended September 30,December 31, 2001 and 2000 included $16.8$25.2
million and $16.7$25.1 million, respectively, of cash for quarterly cash dividends of
$.15 per share.
-15-
On January 10, 2001 the company entered into agreements with three shipyards for
the construction of 12 vessels. The new-build program was initiated in order to
better service the needs of the company's customers in the deepwater markets of
the world. Seven of the vessels to
-15-
be constructed are large platform supply vessels and five are large
anchor-handling towing supply vessels capable of working in most deepwater
markets of the world. Four of the platform supply vessels are being constructed
at the company's shipyard, Quality Shipyards LLC, while the remaining eight
vessels are being constructed at two Far East shipyards. The four vessels being
constructed at Quality Shipyards LLC are being built to full Jones Act
compliance. As of September 30,December 31, 2001, $116.8$150 million has been expended on these 12
vessels of the total $318$323 million commitment to the shipyards. Scheduled
delivery of the vessels will commence in JanuaryFebruary 2002 with final delivery of
the last vessel expected in January 2003. The company is financing the new-build
program from its current cash balances, its projected cash flow and its
revolving line of credit.
During the current quarter the
company borrowed $60 million from its revolving line of credit to help finance
the new-build program. The company is capitalizing interest costs incurred on
the funds used to construct the new-build vessels. Interest and debt costs
incurred net of interest capitalized for the quarter and six-month period ended
September 30, 2001 was approximately $160,000 and $360,000, respectively.
Interest costs capitalized for the current quarter was approximately $285,000.
In addition to the new-build program discussed above, the company has
committed to the construction of three platform supply vessels, one 135-foot
crewboat, four 165-foot crewboats and four 175-foot crewboats for approximately
$65$84 million. SevenEleven of the vessels are being built at U.S. shipyards and one
platform supply vessel is being built in Brazil. Scheduled delivery of the three
platform supply vessels is expected to commence in October 2002 with final
delivery in December 2002. The expected delivery date of the 135-foot crewboat
is JanuaryFebruary 2002. Scheduled delivery of the four 165-foot crewboats is expected
to commence in May 2002 with final delivery of the last vessel in September
2003. Scheduled delivery of the four 175-foot crewboats is expected to commence
in October 2002 with final delivery of the last vessel in October 2003. As of
September 30,December 31, 2001, $5.3$12 million has been expended on these vessels.
On September 30,Subsequent to December 31, 2001 the company also committed to the construction of
four
162-foot crewboats to be delivered from a domestic shipyard in May and August of
2002 and May and September of 2003three platform supply vessels for a total of $18.6$40.6 million. No amounts have
been expended on theseA U.S. shipyard will
build two of the vessels asand a Norwegian shipyard will construct the total purchase price is due uponthird
vessel. Scheduled delivery of the three vessels is expected to commence in July
2002 with final delivery of the last vessel in April 2003.
The company is capitalizing interest costs incurred on borrowed funds used to
construct vessels. Interest and debt costs incurred net of interest capitalized
for the quarter and nine-month period ended December 31, 2001 was approximately
$237,000 and $597,000, respectively. Interest costs capitalized for the quarter
and nine month period ended December 31, 2001 was approximately $423,000 and
$708,000, respectively.
CURRENCY FLUCTUATIONS AND INFLATION
- -----------------------------------
Because of its significant international operations, the company is exposed to
currency fluctuations and exchange risk. To minimize the financial impact of
these items the company attempts to contract a majority of its services in
United States dollars. The company is exposed to possible currency fluctuations
related to its commitment to construct three of its new-build platform supply
vessels at a Singapore shipyard. The company is required, per the construction
agreements, to make all payments in Singapore dollars and is currently exposed
to possible currency fluctuations on the remaining commitment which totals a
current U.S. dollar equivalent of approximately $40 million. The company continually monitors the currency exchange
risks associated with all contracts in foreign currencies.
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 shield the company from the inflationary effects on
operating costs.
-16-
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
that have been enacted or adopted regulating the discharge of materials into the
environment, or otherwise relating to the protection of the environment, has not
-16-
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.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
---------------------------------------------------------
At September 30,December 31, 2001 the company had $60$40 million of debt outstanding. The
outstanding debt represents unsecured borrowings from the company's revolving
credit facility. The fair value of this debt approximates the carrying value
because the borrowings will bear interest at market rates, which currently range
from 3.342.56 to 3.413.35 percent. Monies were borrowed under the revolving credit
facility to finance the company's new-build program previously disclosed.
Interest expense associated with the borrowings is being capitalized.
The company is exposed to foreign currency fluctuations and exchange risks but
attempts to minimize the financial impact of these items by contracting the
majority of its services in United States dollars.
The company periodically enters into spot and forward derivative financial
instruments as a hedge against foreign currency denominated assets and
liabilities and currency commitments. As of September 30,December 31, 2001 the company had
noeight forward currency contracts outstanding.outstanding totaling $22.3 million that qualified as
hedge instruments. The forward contracts were purchased to hedge against any
possible foreign exchange exposure the company may experience with its
commitment to a Singapore shipyard that is currently constructing three platform
supply vessels for delivery between July 2002 and November 2002.
-17-
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
A. The Annual Meeting of Stockholders of the company was held in New Orleans,
Louisiana on July 26, 2001.
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 Director Continuing in Office
Donald T. Bollinger Director Continuing in Office
Arthur R. Carlson Director Continuing in Office
Jon C. Madonna Director Continuing in Office
Paul W. Murrill Nominee
William C. O'Malley Director Continuing in Office
Lester Pollack Nominee
J. Hugh Roff, Jr. Nominee
Donald G. Russell Director Continuing in Office
C. The company's Stockholders voted as follows with respect to the proposals
presented at the meeting:
1. Paul W. Murrill was elected director with 54,032,298 votes cast for
and 777,683 votes withheld.
2. Lester Pollack was elected director with 54,024,940 votes cast for and
785,041 votes withheld.
3. J. Hugh Roff, Jr. was elected director with 54,034,915 votes cast for
and 775,067 votes withheld.
4. The company's 2001 Stock Incentive Plan was approved with 48,048,529
votes cast for, 6,635,478 votes against, and 125,957 abstentions.
5. The selection of Ernst & Young LLP as the company's independent
accountants for the fiscal year ending March 31, 2002 was ratified
with 54,351,079 votes cast for, 407,646 votes against and 51,225
abstentions.
-18-
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
A. At page 2120 of this report is the index for those exhibits required to
be filed as a part of this report.
B. The company's report on Form 8-K dated August 16,October 8, 2001 reported that
Dean E. Taylor has been promoted to President of the company and has
also been appointed to the Tidewater Board of Directors. It is
expected that Mr. Taylor will become Chief Executive Officer in March
2002.
C. The company's report on Form 8-K dated December 6, 2001 reported that
Tidewater elected Jeff Platt, head of its South and Central American
divisions, and Jim Donnelly, head of its European and African
divisions, to the office of Vice President. The company also announced
the promotion of Stephen Dick to Executive Vice President in charge of
all North American operations.
D. The company's report on Form 8-K dated December 19, 2001 reported that
William C. O'Malley, chairman president and chief executive officer, issued a
Quarterly Report to Shareholders.
C. The company's report on Form 8-K dated September 20, 2001 reported that
Tidewater's results for its second quarter ending September 30, 2001 are
expected to be lower than many analyst estimates and will likely fall in
the range of $.58-$.63 per share.
D. The company's report on Form 8-K dated September 25, 2001 reported that
Tidewater has committed up to $100 million to expand its crewboat fleet by
21 vessels by the year 2003.
E. The company's report on Form 8-K dated September 27, 2001 reported that
Tidewater elected Richard A. Pattarozzi to it's Board of Directors.
-19--18-
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 22, 2001January 30, 2002 /s/ William C. O'Malley
--------------------------------------------------------------------------------------------------
William C. O'Malley
Chairman of the Board, and
Chief Executive Officer
Date: October 22, 2001January 30, 2002 /s/ J. Keith Lousteau
--------------------------------------------------------------------------------------------------
J. Keith Lousteau
Senior Vice President and
Chief Financial Officer
Date: October 22, 2001January 30, 2002 /s/ Joseph M. Bennett
--------------------------------------------------------------------------------------------------
Joseph M. Bennett
Vice President and
Corporate Controller (Principal Accounting Officer)
-20--19-
EXHIBIT INDEX
Exhibit
Number
- ------
103(a) Tidewater Inc. Bylaws
10(a) Amended and Restated Non-Qualified PensionTidewater Inc. 1992 Stock Option and Restricted
Stock Plan for Outside Directors
ofdated September 27, 2001
10(b) Amended and Restated Tidewater Inc. 1997 Stock Incentive Plan dated
September 27, 2001
10(c) Tidewater Inc. 2001 Stock Incentive Plan dated July 27, 2001
15 Letter re Unaudited Interim Financial Information
-21--20-