0001437749-21-025937.txt : 20211109 0001437749-21-025937.hdr.sgml : 20211109 20211109162947 ACCESSION NUMBER: 0001437749-21-025937 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 78 CONFORMED PERIOD OF REPORT: 20210930 FILED AS OF DATE: 20211109 DATE AS OF CHANGE: 20211109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TIDEWATER INC CENTRAL INDEX KEY: 0000098222 STANDARD INDUSTRIAL CLASSIFICATION: WATER TRANSPORTATION [4400] IRS NUMBER: 720487776 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06311 FILM NUMBER: 211392675 BUSINESS ADDRESS: STREET 1: 6002 ROGERDALE ROAD STREET 2: SUITE 600 CITY: HOUSTON STATE: TX ZIP: 77072 BUSINESS PHONE: 7134705300 MAIL ADDRESS: STREET 1: 6002 ROGERDALE ROAD STREET 2: SUITE 600 CITY: HOUSTON STATE: TX ZIP: 77072 FORMER COMPANY: FORMER CONFORMED NAME: TIDEWATER MARINE SERVICE INC DATE OF NAME CHANGE: 19780724 10-Q 1 tdw20210930_10q.htm FORM 10-Q tdw20210930_10q.htm
0000098222 TIDEWATER INC false --12-31 Q3 2021 2,134 1,516 70,638 71,800 0.001 0.001 125,000,000 125,000,000 41,277,377 41,277,377 40,704,984 40,704,984 0 200 0 400 0.001 0.001 0.01 0.01 5,923,399 57.06 62.28 100.00 2014 2015 2016 2017 2018 2019 2020 2021 1 0 1.2 22.8 8.00 8.00 August 31, 2022 August 31, 2022 May 31, 2024 May 31, 2024 January 31, 2026 January 31, 2026 January 31, 2027 January 31, 2027 April 30, 2027 April 30, 2027 2 9 2 3 1.9 As of September 30, 2021 and December 31, 2020 the fair value (Level 2) of the Senior Secured Notes was $136.4 million and $141.4 million, respectively. During the nine months ended September 30, 2021, we repurchased $11.8 million of the Senior Secured Notes at a premium of $0.1 million in open market transactions. We pay principal and interest on these notes semi-annually. As of September 30, 2021 and December 31, 2020, the aggregate fair value (Level 2) of the Troms Offshore borrowings was $23.6 million and $51.6 million, respectively. The weighted average interest rate of the Troms Offshore borrowings as of September 30, 2021 was 5.0%. Cash, cash equivalents and restricted cash at September 30, 2021 includes $2.2 million in long-term restricted cash, which is included in other assets in our condensed consolidated balance sheet. 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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q


QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

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)

tdw.jpg

Delaware

72-0487776

(State or other jurisdiction of incorporation)

(I.R.S. Employer Identification No.)

 

6002 Rogerdale Road, Suite 600

Houston, Texas 77072

(Address of principal executive offices) (Zip code)

 

(713) 470-5300

Registrant’s telephone number, including area code

 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, $0.001 par value per share

TDW

New York Stock Exchange

Series A Warrants to purchase shares of common stock

TDW.WS.A

New York Stock Exchange

Series B Warrants to purchase shares of common stock

TDW.WS.B

New York Stock Exchange

Warrants to purchase shares of common stock

TDW.WS

NYSE American

Preferred stock purchase rights

N/A

New York Stock Exchange

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 for 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  ☒    No  ☐ 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,  a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ☐

 

 

Accelerated filer  ☒

Non-accelerated filer  ☐

Emerging Growth Company

 

 

Smaller reporting company 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  ☒

 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes  ☒    No  ☐

 

 41,279,272 shares of Tidewater Inc. common stock $0.001 par value per share were outstanding on October 31, 2021. 

 

 

 

 

PART I.  FINANCIAL INFORMATION

 

ITEM 1.       FINANCIAL STATEMENTS

 

TIDEWATER INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and par value data)

 

 

September 30, 2021

  

December 31, 2020

 

ASSETS

       

Current assets:

       

Cash and cash equivalents

$127,414  $149,933 

Restricted cash

 24,092   2,079 

Trade and other receivables, less allowance for credit losses of $2,134 and $1,516 at September 30, 2021 and December 31, 2020, respectively

 86,015   112,623 

Due from affiliates, less allowance for credit losses of $70,638 and $71,800 at September 30, 2021 and December 31, 2020, respectively

 68,217   62,050 

Marine operating supplies

 13,335   15,876 

Assets held for sale

 17,891   34,396 

Prepaid expenses and other current assets

 13,129   11,692 

Total current assets

 350,093   388,649 

Net properties and equipment

 709,324   780,318 

Deferred drydocking and survey costs

 40,510   56,468 

Other assets

 23,146   25,742 

Total assets

$1,123,073  $1,251,177 
        

LIABILITIES AND EQUITY

       

Current liabilities:

       

Accounts payable

$18,042  $16,981 

Accrued expenses

 52,133   52,422 

Due to affiliates

 59,571   53,194 

Current portion of long-term debt

 140,995   27,797 

Other current liabilities

 29,139   32,785 

Total current liabilities

 299,880   183,179 

Long-term debt

 14,139   164,934 

Other liabilities

 74,442   79,792 
        

Commitments and contingencies

         
        

Equity:

       

Common stock of $0.001 par value, 125,000,000 shares authorized, 41,277,377 and 40,704,984 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

 41   41 

Additional paid-in capital

 1,375,215   1,371,809 

Accumulated deficit

 (639,966)  (548,931)

Accumulated other comprehensive loss

 (1,289)  (804)

Total stockholders’ equity

 734,001   822,115 

Noncontrolling interests

 611   1,157 

Total equity

 734,612   823,272 

Total liabilities and equity

$1,123,073  $1,251,177 

 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

 

 

 

 

TIDEWATER INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)

 

 

Three Months Ended

   

Nine Months Ended

 
 

September 30, 2021

   

September 30, 2020

   

September 30, 2021

   

September 30, 2020

 

Revenues:

                             

Vessel revenues

$ 91,634     $ 85,395     $ 261,141     $ 298,344  

Other operating revenues

  767       1,072       4,717       6,835  
    92,401       86,467       265,858       305,179  

Costs and expenses:

                             

Vessel operating costs

  65,344       61,784       190,627       205,383  

Costs of other operating revenues

  355       219       2,003       3,063  

General and administrative

  18,045       17,438       50,875       56,455  

Depreciation and amortization

  27,980       30,777       86,256       86,028  

Long-lived asset impairments

  2,167       1,945       2,167       67,634  

Affiliate credit loss impairment expense (credit)

              (1,000 )     53,581  

Affiliate guarantee obligation

                    2,000  

(Gain) loss on asset dispositions, net

  74       (520 )     2,954       (7,511 )
    113,965       111,643       333,882       466,633  

Operating loss

  (21,564 )     (25,176 )     (68,024 )     (161,454 )

Other income (expense):

                             

Foreign exchange loss

  (523 )     (1,153 )     (951 )     (2,365 )

Equity in net earnings (losses) of unconsolidated companies

  100             (1,697 )      

Dividend income from unconsolidated company

                    17,150  

Interest income and other, net

  148       272       179       1,084  

Interest and other debt costs, net

  (3,681 )     (6,071 )     (12,166 )     (18,172 )
    (3,956 )     (6,952 )     (14,635 )     (2,303 )

Loss before income taxes

  (25,520 )     (32,128 )     (82,659 )     (163,757 )

Income tax expense

  887       5,953       8,922       3,512  

Net loss

$ (26,407 )   $ (38,081 )   $ (91,581 )   $ (167,269 )

Net loss attributable to noncontrolling interests

  (149 )     (154 )     (546 )     (274 )

Net loss attributable to Tidewater Inc.

$ (26,258 )   $ (37,927 )   $ (91,035 )   $ (166,995 )

Basic loss per common share

$ (0.64 )   $ (0.94 )   $ (2.22 )   $ (4.15 )

Diluted loss per common share

$ (0.64 )   $ (0.94 )   $ (2.22 )   $ (4.15 )

Weighted average common shares outstanding

  41,132       40,405       40,918       40,271  

Adjusted weighted average common shares

  41,132       40,405       40,918       40,271  

 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

 

 

 

TIDEWATER INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

(In thousands)

 

  

Three Months Ended

  

Nine Months Ended

 
  

September 30, 2021

  

September 30, 2020

  

September 30, 2021

  

September 30, 2020

 

Net loss

 $(26,407) $(38,081) $(91,581) $(167,269)

Other comprehensive income (loss):

                

Change in pension plan and supplemental pension plan liability, net of tax of $0, $0.2 million, $0 and $0.4 million, respectively

  (207)  525   (485)  1,342 

Total comprehensive loss

 $(26,614) $(37,556) $(92,066) $(165,927)

 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

 

 

 

TIDEWATER INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

   

Nine Months

   

Nine Months

 
   

Ended

   

Ended

 
   

September 30, 2021

   

September 30, 2020

 

Operating activities:

               

Net loss

  $ (91,581 )   $ (167,269 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

               

Depreciation and amortization

    54,605       53,614  

Amortization of deferred drydocking and survey costs

    31,651       32,414  

Amortization of debt premium and discounts

    2,662       2,418  

Provision for deferred income taxes

    167       107  

(Gain) loss on asset dispositions, net

    2,954       (7,511 )

Loss on debt extinguishment

    59        

Affiliate credit loss impairment expense (credit)

    (1,000 )     53,581  

Affiliate guarantee obligation

          2,000  

Long-lived asset impairments

    2,167       67,634  

Stock-based compensation expense

    4,199       3,959  

Changes in assets and liabilities, net:

               

Trade and other receivables

    26,608       9,434  

Changes in due to/from affiliates, net

    1,210       9,852  

Accounts payable

    1,061       (14,548 )

Accrued expenses

    (473 )     (18,189 )

Deferred drydocking and survey costs

    (17,388 )     (29,499 )

Other, net

    (8,833 )     3,809  

Net cash provided by operating activities

    8,068       1,806  

Cash flows from investing activities:

               

Proceeds from asset dispositions

    33,956       31,498  

Additions to properties and equipment

    (2,583 )     (4,682 )

Net cash provided by investing activities

    31,373       26,816  

Cash flows from financing activities:

               

Principal payments on long-term debt

    (39,259 )     (33,520 )

Debt modification costs

    (855 )      

Debt extinguishment premium

    (59 )      

Tax on share-based awards

    (793 )     (702 )

Net cash used in financing activities

    (40,966 )     (34,222 )

Net change in cash, cash equivalents and restricted cash

    (1,525 )     (5,600 )

Cash, cash equivalents and restricted cash at beginning of period

    155,225       227,608  

Cash, cash equivalents and restricted cash at end of period

  $ 153,700     $ 222,008  

Supplemental disclosure of cash flow information:

               

Cash paid during the period for:

               

Interest, net of amounts capitalized

  $ 10,083     $ 16,169  

Income taxes

  $ 14,735     $ 9,940  

 

Cash, cash equivalents and restricted cash at September 30, 2021 includes $2.2 million in long-term restricted cash, which is included in other assets in our condensed consolidated balance sheet.

 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

 

 

 

TIDEWATER INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands)

 

   

Three Months Ended

 
                           

Accumulated

                 
           

Additional

           

other

   

Non

         
   

Common

   

paid-in

   

Accumulated

   

comprehensive

   

controlling

         
   

stock

   

capital

   

deficit

   

income (loss)

   

interest

   

Total

 

Balance at June 30, 2021

  $ 41     $ 1,373,727     $ (613,708 )   $ (1,082 )   $ 760     $ 759,738  

Total comprehensive loss

                (26,258 )     (207 )     (149 )     (26,614 )

Amortization of share-based awards

          1,488                         1,488  

Balance at September 30, 2021

  $ 41     $ 1,375,215     $ (639,966 )   $ (1,289 )   $ 611     $ 734,612  
                                                 

Balance at June 30, 2020

  $ 40     $ 1,369,645     $ (481,757 )   $ 581     $ 1,491     $ 890,000  

Total comprehensive income (loss)

                (37,927 )     525       (154 )     (37,556 )

Amortization of share-based awards

          1,133                         1,133  

Balance at September 30, 2020

  $ 40     $ 1,370,778     $ (519,684 )   $ 1,106     $ 1,337     $ 853,577  

 

   

Nine Months Ended

 
                           

Accumulated

                 
           

Additional

           

other

   

Non

         
   

Common

   

paid-in

   

Accumulated

   

comprehensive

   

controlling

         
   

stock

   

capital

   

deficit

   

income (loss)

   

interest

   

Total

 

Balance at December 31, 2020

  $ 41     $ 1,371,809     $ (548,931 )   $ (804 )   $ 1,157     $ 823,272  

Total comprehensive loss

                (91,035 )     (485 )     (546 )     (92,066 )

Amortization of share-based awards

          3,406                         3,406  

Balance at September 30, 2021

  $ 41     $ 1,375,215     $ (639,966 )   $ (1,289 )   $ 611     $ 734,612  
                                                 

Balance at December 31, 2019

  $ 40     $ 1,367,521     $ (352,526 )   $ (236 )   $ 1,611     $ 1,016,410  

Total comprehensive income (loss)

                (166,995 )     1,342       (274 )     (165,927 )

Adoption of credit loss accounting standard

                (163 )                 (163 )

Amortization of share-based awards

          3,257                         3,257  

Balance at September 30, 2020

  $ 40     $ 1,370,778     $ (519,684 )   $ 1,106     $ 1,337     $ 853,577  

 

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

 

 

 

(1)

INTERIM FINANCIAL STATEMENTS

 

The unaudited condensed consolidated financial statements for the interim periods presented herein have been prepared in conformity with United States generally accepted accounting principles and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the unaudited condensed consolidated financial statements at the dates and for the periods indicated as required by Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (SEC). Results of operations for interim periods are not necessarily indicative of results of operations for the respective full years. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 4, 2021, as amended on April 30, 2021.

 

The unaudited condensed consolidated financial statements include the accounts of Tidewater Inc. and its subsidiaries. Intercompany balances and transactions are eliminated in consolidation. We use the equity method to account for equity investments over which we exercise significant influence but do not exercise control and are not the primary beneficiary. Unless otherwise specified, all per share information included in this document is on a diluted earnings per share basis.

 

 

 

 

(2)

RECENTLY ISSUED OR ADOPTED ACCOUNTING PRONOUNCEMENTS

 

In July 2021, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2021-05, Lessors – Certain Leases with Variable Lease Payments, which amends Topic 842, Accounting for Leases, to require a lessor to classify a lease with entirely or partially variable payments that do not depend on an index or rate as an operating lease if another classification (i.e. sales-type or direct financing) would trigger a Day 1 loss. The guidance is effective for annual and interim periods beginning after December 15, 2021, with early adoption permitted. Although we are presently evaluating the effect of the standard, we do not expect its adoption to have a material impact on our consolidated financial statements and related disclosures.

 

In May 2021, the FASB issued ASU-2021-04, Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options, which clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification or exchange. The guidance is effective for annual and interim periods beginning after December 15, 2021, with early adoption permitted. Although we are presently evaluating the effect of the standard, we do not expect its adoption to have a material impact on our consolidated financial statements and related disclosures.

 

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifying and amending existing guidance. The guidance is effective for annual and interim periods beginning after December 15, 2020 with early adoption permitted.  We adopted this standard on January 1, 2021 and it did not have a material impact on our consolidated financial statements and related disclosures.

 

In August 2018 the FASB issued ASU 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans – General, which modifies the disclosure requirements for employers that sponsor defined benefit plans or other postretirement plans. This ASU removes certain disclosures that are no longer considered cost beneficial, clarifies the specific requirements of certain other disclosures, and adds disclosure requirements identified as relevant. The guidance is effective for annual and interim periods beginning after December 15, 2020 with early adoption permitted. We adopted this standard on January 1, 2021 and it did not have a material impact on our related disclosures.

 

 

7

 
 

(3)

ALLOWANCE FOR CREDIT LOSSES

 

Expected credit losses are recognized on the initial recognition of our trade accounts receivable and contract assets.  In each subsequent reporting period, even if a loss has not yet been incurred, credit losses are recognized based on the history of credit losses and current conditions, as well as reasonable and supportable forecasts affecting collectability. We developed an expected credit loss model applicable to our trade accounts receivable and contract assets that considers our historical performance and the economic environment, as well as the credit risk and its expected development for each segmented group of customers that share similar risk characteristics. It is our practice to write off receivables when all legal options for collection have been exhausted.

 

Activity in the allowance for credit losses for the nine months ended September 30, 2021 is as follows:

 

   

Trade

   

Due

 
   

and Other

   

from

 

(In thousands)

 

Receivables

   

Affiliates

 

Balance at January 1, 2021

  $ 1,516     $ 71,800  

Current period provision for expected credit losses

    707       (1,000 )

Write offs

    (89 )      

Other

          (162 )

Balance at September 30, 2021

  $ 2,134     $ 70,638  

  

 

(4)

REVENUE RECOGNITION

 

Refer to Note (13) for the amount of revenue by segment and in total for the worldwide fleet.

 

Contract Balances

 

At September 30, 2021, we had $0.9 million and $4.1 million of deferred mobilization costs included within prepaid expenses and other current assets and other assets, respectively.

 

At September 30, 2021, we have $0.7 million of deferred mobilization revenue, included within accrued expenses, related to unsatisfied performance obligations which will be recognized during the remainder of 2021 and 2022.

 

8

 
 

(5)

STOCKHOLDERS' EQUITY AND DILUTIVE EQUITY INSTRUMENTS

 

Accumulated Other Comprehensive Income (Loss)

 

The changes in accumulated other comprehensive income (loss) (OCI) by component, net of tax, for the three and nine months ended September 30, 2021 and 2020 are as follows:

 

  

Three Months Ended

 

(In thousands)

 

September 30, 2021

  

September 30, 2020

 

Balance at June 30, 2021 and 2020

 $(1,082) $581 

Pension benefits recognized in OCI

  (207)  525 

Balance at September 30, 2021 and 2020

 $(1,289) $1,106 

 

  

Nine Months Ended

 

(In thousands)

 

September 30, 2021

  

September 30, 2020

 

Balance at December 31, 2020 and 2019

 $(804) $(236)

Pension benefits recognized in OCI

  (485)  1,342 

Balance at September 30, 2021 and 2020

 $(1,289) $1,106 

 

Dilutive Equity Instruments

 

We had 2,648,775 and 2,488,752 incremental "in-the-money" warrants, restricted stock units and stock options at September 30, 2021 and 2020, respectively, which are as follows:

 

Total shares outstanding including warrants, restricted stock units and stock options

 

September 30, 2021

  

September 30, 2020

 

Common shares outstanding

  41,277,377   40,460,982 

New creditor warrants (strike price $0.001 per common share)

  635,663   761,395 

GulfMark creditor warrants (strike price $0.01 per common share)

  565,155   930,027 

Restricted stock units and stock options

  1,447,957   797,330 

Total

  43,926,152   42,949,734 

 

We also had 5,923,399 shares of “out-of-the-money” warrants outstanding at both September 30, 2021 and 2020. Included in these “out-of-the-money” warrants are Series A Warrants, Series B Warrants and GLF Equity Warrants which have exercise prices of $57.06, $62.28, and $100.00, respectively. No warrants or restricted stock units, whether in the money or out of the money, are included in our loss per share calculations because the effect of such inclusion is antidilutive.

 

 

9

 
 

(6)

INCOME TAXES

 

We use a discrete effective tax rate method to calculate taxes for interim periods instead of applying the annual effective tax rate to an estimate of the full fiscal year due to the level of volatility and unpredictability of earnings in our industry, both overall and by jurisdiction.

 

Income tax expense for the quarter and nine months ended September 30, 2021, reflects tax liabilities in various jurisdictions that are either based on revenue (deemed profit regimes) or pre-tax profits.

 

The tax liabilities for uncertain tax positions are primarily attributable to permanent establishment issues related to a foreign joint venture, subpart F income inclusions and withholding taxes on foreign services. Penalties and interest related to income tax liabilities are included in income tax expense. Income tax payable is included in other current liabilities.

 

As of December 31, 2020, our balance sheet reflected approximately $137.0 million of net deferred tax assets prior to a valuation allowance analysis, with a valuation allowance of $140.4 million. As of September 30, 2021, we had net deferred tax assets of approximately $162.1 million prior to a valuation allowance analysis of $165.7 million.

 

Management assesses all available positive and negative evidence to permit use of existing deferred tax assets.

 

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted on March 27, 2020 in the United States. The CARES Act includes several significant business tax provisions, that are available to us, that, among other things, would allow businesses to carry back net operating losses arising after 2017 to the five prior tax years. Considering the available carryback, in the second quarter of 2020, we recorded an account receivable tax benefit totaling $6.9 million related to the realization of net operating loss deferred tax assets on which a valuation allowance was previously recorded. We collected this receivable in the first quarter of 2021.

 

With limited exceptions, we are no longer subject to tax audits by U.S. federal, state, local or foreign taxing authorities for years prior to 2014. We are subject to ongoing examinations by various foreign tax authorities and do not believe that the results of these examinations will have a material adverse effect on our financial position, results of operations, or cash flows.

 

10

 
 

(7)

AFFILIATES BALANCES

 

We maintained the following balances with our unconsolidated affiliates:

 

(In thousands)

 

September 30, 2021

   

December 31, 2020

 

Due from affiliates:

               

Angolan joint venture (Sonatide)

  $ 47,251     $ 41,623  

Nigeria joint venture (DTDW)

    20,966       20,427  
      68,217       62,050  

Due to affiliates:

               

Sonatide

  $ 38,605     $ 32,767  

DTDW

    20,966       20,427  
      59,571       53,194  

Net due from affiliates

  $ 8,646     $ 8,856  

 

Amounts due from Sonatide

 

Amounts due from Sonatide represent cash received by Sonatide from customers and due to us, amounts due from customers that are expected to be remitted to us by Sonatide and costs incurred by us on behalf of Sonatide. The following table displays the activity in the due from affiliate account related to Sonatide for the period indicated:

 

   

Nine Months

 
   

Ended

 

(In thousands)

 

September 30, 2021

 

Due from Sonatide at December 31, 2020

  $ 41,623  

Revenue earned by the company through Sonatide

    29,096  

Less amounts received from Sonatide

    (19,275 )

Less amounts used to offset due to Sonatide obligations

    (5,177 )

Other

    984  

Total due from Sonatide at September 30, 2021

  $ 47,251  

 

The amounts due from Sonatide are denominated in U.S. dollars; however, the underlying third-party customer payments to Sonatide were satisfied, in part, in Angolan kwanzas. In late 2019, we were informed that, as part of a broad privatization program, Sonangol, our partner in Sonatide, intends to seek to divest itself from the Sonatide joint venture.

 

In the second quarter of 2020, Sonatide declared a $35.0 million dividend. On September 22, 2020, Sonangol received $17.8 million and we received $17.2 million. All of our share of the dividend is reflected as dividend income from unconsolidated company in the consolidated statement of operations because (i) our investment in the Sonatide joint venture had previously been written down to zero, (ii) the distributions are not refundable and (iii) we are not liable for the obligations of or committed to provide financial support to the Sonatide joint venture. In addition, as a result of the aforementioned dividend payment, the cash balances of the joint venture were significantly reduced and we determined that, as a result, a significant portion of our net due from Sonatide balance was compromised. During the nine months ended September 30, 2020, we recorded a $41.5 million credit loss impairment expense.

 

After offsetting the amounts due to Sonatide, the net amount due from Sonatide at September 30, 2021 was approximately $8.6 million. Sonatide had approximately $11.2 million of cash on hand at September 30, 2021 plus approximately $9.5 million of net trade accounts receivable to satisfy the net due from Sonatide. Given prior discussions with our partner regarding how the net losses from the devaluation of certain Angolan kwanza denominated accounts should be shared, we continue to evaluate our net due from Sonatide balance for possible additional changes in future periods based in part on available liquidity held by Sonatide. In the nine months ended September 30, 2021, we recorded a $1.0 million credit to the credit loss impairment account.

 

11

 

Amounts due to Sonatide

 

Amounts due to Sonatide represent commissions payable and other costs paid by Sonatide on our behalf. The following table displays the activity in the due to affiliate account related to Sonatide for the period indicated:

 

   

Nine Months

 
   

Ended

 

(In thousands)

 

September 30, 2021

 

Due to Sonatide at December 31, 2020

  $ 32,767  

Plus additional commissions payable to Sonatide

    2,659  

Plus amounts paid by Sonatide on behalf of the company

    7,811  

Less amounts used to offset due from Sonatide obligations

    (5,177 )

Other

    545  

Total due to Sonatide at September 30, 2021

  $ 38,605  

 

Company operations in Angola

 

Vessel revenues generated by our Angolan operations, percent of consolidated vessel revenues, average number of company owned vessels and average number of stacked company owned vessels of our Angolan operations for the periods indicated were as follows:

 

   

Three Months Ended

   

Nine Months Ended

 
   

September 30, 2021

   

September 30, 2020

   

September 30, 2021

   

September 30, 2020

 

Revenues of Angolan operations (in thousands)

  $ 12,046     $ 10,660     $ 30,413     $ 35,086  

Percent of consolidated vessel revenues

    13 %     12 %     11 %     12 %

Number of company owned vessels in Angola

    24       24       23       26  

Number of stacked company owned vessels in Angola

    4       8       5       9  

 

Amounts due from DTDW

 

We own 40% of DTDW. Our partner, who owns 60%, is a Nigerian national. DTDW owns one offshore service vessel. We also, from time to time, operate company owned vessels in Nigeria for which our partner receives a commission. As of September 30, 2021, we had no company owned vessels operating in Nigeria and the DTDW owned vessel was not employed. As a result, the near-term cash flow projections indicate that DTDW does not have sufficient funds to meet its obligations to us or its vendors. Based on current situations, operations in Nigeria have been severely impacted and we have effectively ceased activity. We have created a fully reserved position in our consolidated balance sheet to account for our expected liabilities related to certain obligations of the joint venture. In the second quarter of 2020, we recorded an affiliate credit loss impairment expense for the entire net due from DTDW balance as of September 30, 2020 totaling $12.1 million.

 

Previously, DTDW had long-term debt of $4.7 million which was secured by the vessel owned by DTDW and guarantees from the DTDW partners (in proportion to their ownership interests). On April 22, 2021, we paid approximately $2.0 million, which was fully reserved during 2020, that represented our portion of the joint venture debt guarantee and our partner assumed the remaining joint venture debt which represented his portion of the guarantee.

 

 

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(8)

EMPLOYEE BENEFIT PLANS

 

U.S. Defined Benefit Pension Plan

 

We have a defined benefit pension plan (pension plan) that covers certain U.S. employees. The pension plan was frozen during 2010. We have not made contributions to the pension plan since 2019. Actuarial valuations are performed annually and an assessment of the future pension obligations and market value of the assets will determine if contributions are made in the future.

 

Supplemental Executive Retirement Plan

 

We also support a non-contributory and non-qualified defined benefit supplemental executive retirement plan (supplemental plan) which was closed to new participants during 2010. We contributed $1.2 million during each of the nine months ended September 30, 2021 and 2020, respectively. We expect to contribute $0.4 million to the supplemental plan during the remainder of 2021. Our obligations under the supplemental plan were $22.8 million for both  September 30, 2021 and  December 31, 2020, respectively, and are included in “accrued expenses” and “other liabilities” in the condensed consolidated balance sheet.

 

Net Periodic Benefit Costs

 

The net periodic benefit cost for our defined benefit pension plans and supplemental plan (referred to collectively as “Pension Benefits”) is comprised of the following components:

 

  

Three Months Ended

  

Nine Months Ended

 

(In thousands)

 

September 30, 2021

  

September 30, 2020

  

September 30, 2021

  

September 30, 2020

 

Pension Benefits:

                

Service cost

 $  $97  $  $111 

Interest cost

  542   239   1,628   2,737 

Expected return on plan assets

  (543)  (114)  (1,630)  (2,208)

Administrative expenses

     52      64 

Settlement loss

     79      910 

Amortization of net actuarial losses

  36   5   109   (4)

Net periodic pension cost

 $35  $358  $107  $1,610 

 

The components of the net periodic pension cost, except for the service cost are included in the caption “Interest income and other, net.” Service cost are included in the caption “Vessel operating costs.”

 

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(9)

DEBT

 

The following is a summary of all debt outstanding:

 

(In thousands)

 

September 30, 2021

  

December 31, 2020

 

Senior Secured Notes:

        

8.00% Senior Secured Notes due August 2022 (A) (B) (C)

 $135,210  $147,049 

Troms Offshore borrowings (D):

        

NOK denominated notes due May 2024

  2,763   5,954 

NOK denominated notes due January 2026

  6,450   14,559 

USD denominated notes due January 2027

  6,887   14,744 

USD denominated notes due April 2027

  7,444   15,669 
  $158,754  $197,975 

Debt premiums and discounts, net

  (3,620)  (5,244)

Less: Current portion of long-term debt

  (140,995)  (27,797)

Total long-term debt

 $14,139  $164,934 

 

 

(A)

As of September 30, 2021 and  December 31, 2020 the fair value (Level 2) of the Senior Secured Notes was $136.4 million and $141.4 million, respectively.  

 

(B)

The $24.1 million restricted cash on the balance sheet at September 30, 2021, represents approximately 65% of net proceeds from asset dispositions since the date of the last tender offer and is restricted by the terms of the Indenture. 

 (C)During the nine months ended September 30, 2021, we repurchased $11.8 million of the Senior Secured Notes at a premium of $0.1 million in open market transactions.

 

(D)

We pay principal and interest on these notes semi-annually. As of September 30, 2021 and  December 31, 2020, the aggregate fair value (Level 2) of the Troms Offshore borrowings was $23.6 million and $51.6 million, respectively. The weighted average interest rate of the Troms Offshore borrowings as of September 30, 2021 was 5.0%. 

 

We may from time to time seek to retire or purchase our outstanding debt through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions, tender offers, exchange offers, redemptions, one or more additional offers, or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

 

An amendment and restatement of the Troms Offshore credit agreement was executed in December 2020 whereby the financial covenants were conformed to match the November 2020 amendments to the covenants governing the Senior Secured Notes, and included an obligation to prepay (1) the amounts deferred in the 2017 amendment and restatement and (2) an additional amount that will not exceed $45 million representing a percentage of Senior Secured Notes prepayments. The prepayment associated with this amendment made during the nine months of 2021 totaled $23.3 million. Additional prepayment obligations of $3.4 million are due in the fourth quarter of 2021, and are reflected in current portion of long-term debt on our condensed consolidated balance sheet. 

 

During the third quarter of 2021, we reclassified the Senior Secured Notes to current portion of long-term debt as the notes mature in August 2022. Our current Senior Secured Notes and Troms Offshore borrowings are expected to be redeemed with proceeds from our new Nordic Bond Offering as described below. The funding of the new notes will not take place until after the filing date of this Quarterly Report on Form 10Q as noted below.

 

Subsequent Event

 

On October 8, 2021, we announced the contemplated private offering of USD $175.0 million in 5-year senior secured bonds in the Nordic bond market, subject to market and other conditions (the Nordic Bond Offering). On October 15, 2021, we announced the completion of pricing and terms of the Nordic Bond Offering. We anticipate that funding of the Nordic Bond Offering will occur on November 16, 2021, subject to customary closing conditions. The bonds will mature in November 2026 and have a coupon rate of 8.5% per annum. The net proceeds from the Nordic Bond Offering will be employed to repay the existing Senior Secured Notes and the Troms Offshore borrowings in full, including contractual make-whole premiums, with any remaining part thereof, applied for general corporate purposes. 

 

 

 

(10)

COMMITMENTS AND CONTINGENCIES

 

Currency Devaluation and Fluctuation Risk

 

Due to our international operations, we are exposed to foreign currency exchange rate fluctuations against the U.S. dollar. For some of our international contracts, a portion of the revenue and local expenses are incurred in local currencies with the result that we are at risk for changes in the exchange rates between the U.S. dollar and foreign currencies. We generally do not hedge against any foreign currency rate fluctuations associated with foreign currency contracts that arise in the normal course of business, which exposes us to the risk of exchange rate losses. To minimize the financial impact of these items, we attempt to contract a significant majority of our services in U.S. dollars. In addition, we attempt to minimize the financial impact of these risks by matching the currency of our operating costs with the currency of our revenue streams when considered appropriate. We continually monitor the currency exchange risks associated with all contracts not denominated in U.S. dollars.  

 

Legal Proceedings

 

Various legal proceedings and claims are outstanding which arose in the ordinary course of business. In the opinion of management, the amount of ultimate liability, if any, with respect to these actions, will not have a material adverse effect on our financial position, results of operations, or cash flows.

 

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(11)

FAIR VALUE MEASUREMENTS

 

Other Financial Instruments

 

Our primary financial instruments consist of cash and cash equivalents, restricted cash, trade receivables and trade payables with book values that are considered to be representative of their respective fair values. The carrying value for cash equivalents is considered to be representative of its fair value due to the short duration and conservative nature of the cash equivalent investment portfolio. In addition, we disclose the fair value of our long-term debt in Note 9 and the fair value of our assets held for sale in Note 15.

  

 

(12)

PROPERTIES AND EQUIPMENT, ACCRUED EXPENSES, OTHER CURRENT LIABILITIES AND OTHER LIABILITIES          

 

As of September 30, 2021, our property and equipment consist primarily of 139 active vessels, which excludes the 14 vessels we have classified as held for sale, located around the world. As of  December 31, 2020, our property and equipment consisted primarily of 149 active vessels, which excluded 23 vessels classified as held for sale.

 

A summary of properties and equipment is as follows:

 

(In thousands)

 

September 30, 2021

   

December 31, 2020

 

Properties and equipment:

               

Vessels and related equipment

  $ 911,242     $ 940,175  

Other properties and equipment

    16,868       16,861  
      928,110       957,036  

Less accumulated depreciation and amortization

    218,786       176,718  

Properties and equipment, net

  $ 709,324     $ 780,318  

 

A summary of accrued expenses is as follows:

 

(In thousands)

 

September 30, 2021

   

December 31, 2020

 

Payroll and related payables

  $ 16,852     $ 17,201  

Accrued vessel expenses

    20,106       17,129  

Accrued interest expense

    2,596       3,240  

Other accrued expenses

    12,579       14,852  
    $ 52,133     $ 52,422  

 

A summary of other current liabilities is as follows:

 

(In thousands)

 

September 30, 2021

   

December 31, 2020

 

Taxes payable

  $ 21,305     $ 23,883  

Other

    7,834       8,902  
    $ 29,139     $ 32,785  

 

A summary of other liabilities is as follows:

 

(In thousands)

 

September 30, 2021

   

December 31, 2020

 

Pension liabilities

  $ 31,139     $ 31,736  

Liability for uncertain tax positions

    31,043       35,304  

Other

    12,260       12,752  
    $ 74,442     $ 79,792  

 

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(13)

SEGMENT AND GEOGRAPHIC DISTRIBUTION OF OPERATIONS

 

The following table provides a comparison of segment revenues, vessel operating profit (loss), depreciation and amortization, and additions to properties and equipment for the three and nine months ended September 30, 2021 and 2020. Vessel revenues relate to vessels owned and operated by us while other operating revenues relate to other miscellaneous marine-related businesses.

 

   

Three Months Ended

   

Nine Months Ended

 

(In thousands)

 

September 30, 2021

   

September 30, 2020

   

September 30, 2021

   

September 30, 2020

 

Revenues:

                               

Vessel revenues:

                               

Americas

  $ 24,564     $ 28,705     $ 74,269     $ 94,608  

Middle East/Asia Pacific

    25,633       23,280       75,675       72,091  

Europe/Mediterranean

    21,197       17,716       58,413       67,827  

West Africa

    20,240       15,694       52,784       63,818  

Other operating revenues

    767       1,072       4,717       6,835  
    $ 92,401     $ 86,467     $ 265,858     $ 305,179  

Vessel operating profit (loss):

                               

Americas

  $ (1,770 )   $ 107     $ (8,361 )   $ 3,448  

Middle East/Asia Pacific

    (713 )     (2,222 )     (2,300 )     (2,479 )

Europe/Mediterranean

    (2,866 )     (3,883 )     (12,873 )     (4,086 )

West Africa

    (3,724 )     (10,168 )     (15,846 )     (19,015 )

Other operating profit

    412       853       2,714       3,772  
      (8,661 )     (15,313 )     (36,666 )     (18,360 )

Corporate expenses

    (10,662 )     (8,438 )     (27,237 )     (27,390 )

Long-lived asset impairments

    (2,167 )     (1,945 )     (2,167 )     (67,634 )

Affiliate credit loss impairment (expense) credit

                1,000       (53,581 )

Affiliate guarantee obligation

                      (2,000 )

Gain (loss) on asset dispositions, net

    (74 )     520       (2,954 )     7,511  

Operating loss

  $ (21,564 )   $ (25,176 )   $ (68,024 )   $ (161,454 )

Depreciation and amortization:

                               

Americas

  $ 7,290     $ 8,076     $ 22,679     $ 23,645  

Middle East/Asia Pacific

    6,370       6,332       19,771       17,504  

Europe/Mediterranean

    6,834       8,248       21,543       21,860  

West Africa

    6,609       7,330       19,759       20,484  

Corporate

    877       791       2,504       2,535  
    $ 27,980     $ 30,777     $ 86,256     $ 86,028  

Additions to properties and equipment:

                               

Americas

  $     $ (10 )   $     $ (10 )

Middle East/Asia Pacific

          5       (42 )     1,188  

Europe/Mediterranean

    146       (13 )     739       913  

West Africa

    99       (11 )     653       667  

Corporate

    477       636       1,233       1,924  
    $ 722     $ 607     $ 2,583     $ 4,682  

 

16

 

The following table provides a comparison of total assets at September 30, 2021 and  December 31, 2020:

 

(In thousands)

 

September 30, 2021

   

December 31, 2020

 

Total assets:

               

Americas

  $ 293,998     $ 338,649  

Middle East/Asia Pacific

    184,580       226,422  

Europe/Mediterranean

    289,123       302,214  

West Africa

    235,249       242,825  

Corporate

    120,123       141,067  
    $ 1,123,073     $ 1,251,177  

  

 

(14)

RESTRUCTURING CHARGES

 

In the fourth quarter of 2018, we abandoned the duplicate office facilities in four locations in the USA and Scotland. Activity for the lease exit and severance liabilities which are included in general and administrative expense for the nine months ended September 30, 2021 was as follows:

 

   

Lease

         

(In thousands)

 

Exit Costs

   

Total

 

Balance at December 31, 2020

  $ 3,335     $ 3,335  

General and administrative charges

    163       163  

Cash payments

    (1,800 )     (1,800 )

Balance at September 30, 2021

  $ 1,698     $ 1,698  

 

Activity for the lease exit and severance liabilities for the nine months ended September 30, 2020 was as follows:

 

   

Lease

                 

(In thousands)

 

Exit Costs

   

Severance

   

Total

 

Balance at December 31, 2019

  $ 4,109     $ 272     $ 4,381  

General and administrative charges

    198       1,076       1,274  

Cash payments

    (720 )     (1,274 )     (1,994 )

Balance at September 30, 2020

  $ 3,587     $ 74     $ 3,661  

 

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(15)

ASSET DISPOSITIONS, ASSETS HELD FOR SALE AND ASSET IMPAIRMENTS

 

In the fourth quarter of 2019, we evaluated our fleet, primarily vessels that had been stacked for an extended period, for vessels to be considered for disposal and identified 46 vessels to be classified as held for sale. Beginning late in the first quarter of 2020, the industry and world economies were affected by a global pandemic and a concurrent reduction in the demand for and the price of crude oil. The pandemic and oil price impact severely affected the oil and gas industry which caused us to re-evaluate the remainder of our stacked vessel fleet and expand our disposal program to include more vessels. In 2020, we added 32 vessels to our assets held for sale, sold 53 of the vessels that were classified as held for sale, and had 23 vessels, valued at $34.4 million, remaining in the held for sale account as of December 31, 2020. During the nine months of 2021, we added two vessels to assets held for sale, sold nine of our vessels held for sale, and re-activated two vessels from assets held for sale back into the active fleet, leaving 14 vessels, valued at $17.9 million, remaining in the held for sale account as of September 30, 2021. In addition, we sold 10 vessels from our active fleet in the nine month period of 2021 and three vessels from our active fleet in the nine month period of 2020. One of the active vessel sales in 2021 was to a third-party operator which has a person in senior management who is an immediate family member of a Director. This vessel was sold for proceeds of $11.4 million, all of which has been collected, and we recognized a gain of $4.3 million on the sale. The total vessel and other sales for the nine months of 2021 contributed approximately $34.0 million in proceeds and we incurred a net $3.0 million loss on the dispositions. The vessel and other sales for the nine months of 2020 contributed $31.5 million in proceeds and we recognized a $7.5 million net gain on the dispositions.

 

During the nine months ended September 30, 2021 and 2020, we recorded $1.9 million and $65.7 million, respectively, in impairment related to assets held for sale. We consider the valuation approach for our assets held for sale to be a Level 3 fair value measurement due to the level of estimation involved in valuing assets to be recycled or sold. We determined the fair value of the vessels held for sale using two methodologies depending on the vessel and on our planned method of disposition. We designated certain vessels to be recycled and valued those vessels using recycling yard pricing schedules based on dollars per ton. We generally value vessels that will be sold rather than recycled at the midpoint of a value range based on sales agreements or using comparative sales in the marketplace. Subsequent to the original valuation, we revalue individual assets held for sale if we determine that the ultimate disposition price will be below the value range used in the original estimate. In addition, in conjunction with the reactivation of a vessel from assets held for sale to the active fleet in the third quarter of 2021 and the concurrent valuation of such vessel at its fair value, we recaptured $1.7 million of impairment charged to expense in the second quarter of 2020. We do not separate our asset impairment expense by segment because of the significant movement of our assets between segments.

 

The following table presents the activity in our asset held for sale account for the periods indicated:

 

  

Three Months Ended

 

(In thousands, except for number of vessels data)

 

Number of Vessels

  

September 30, 2021

  

Number of Vessels

  

September 30, 2020

 

Beginning balance

  14  $17,214   46  $29,064 

Additions

  2   4,089       

Sales

  (1)  (1,250)  (22)  (9,901)

Transfers

  (1)  (250)      

Impairment

     (1,912)      

Ending balance

  14   17,891   24  $19,163 

 

  

Nine Months Ended

 

(In thousands, except for number of vessels data)

 

Number of Vessels

  

September 30, 2021

  

Number of Vessels

  

September 30, 2020

 

Beginning balance

  23  $34,396   46  $39,287 

Additions

  2   4,089   22   65,812 

Sales

  (9)  (15,432)  (44)  (20,247)

Transfers

  (2)  (3,250)      

Impairment

     (1,912)     (65,689)

Ending balance

  14  $17,891   24  $19,163 

 

We evaluated our inventory as of September 30, 2021 and 2020, and charged $1.9 million for each period to impairment expense for obsolete marine service and vessel supplies and parts inventory. We considered this valuation approach to be a Level 3 fair value measurement due to the level of estimation involved in valuing obsolete inventory.

 

In early 2020, it became evident that a novel coronavirus originating in Asia (COVID-19) could become a pandemic with worldwide reach. By mid- March, when the World Health Organization declared the outbreak to be a pandemic (the COVID-19 pandemic), much of the industrialized world had initiated severe measures to lessen its impact. The ongoing COVID-19 pandemic created significant volatility, uncertainty, and economic disruption beginning in the first quarter of 2020. With respect to our particular sector, the COVID-19 pandemic resulted in a much lower demand for oil as national, regional, and local governments imposed travel restrictions, border closings, restrictions on public gatherings, stay at home orders, and limitations on business operations in order to contain its spread. During this same time period, oil-producing countries struggled to reach consensus on worldwide production levels, resulting in both a market oversupply of oil and a precipitous fall in oil prices. Combined, these conditions adversely affected our operations and business beginning in the latter part of the first quarter of 2020 and continuing throughout the remainder of 2020 and through the first nine months of 2021. The reduction in demand for hydrocarbons together with an unprecedented decline in the price of oil has resulted in our primary customers, the oil and gas companies, making material reductions to their planned spending on offshore projects, compounding the effect of COVID-19 on offshore operations. Further, these conditions, separately or together, have continued to impact the demand for our services, the utilization and/or rates we can achieve for our assets and services, and the outlook for our industry in general.

 

In the first and second quarters of 2020, we considered these events to be indicators that the value of our active offshore vessel fleet may be impaired. As a result, as of March 31, 2020 and June 30, 2020, we performed Step 1 evaluations of our active offshore fleet under FASB Accounting Standards Codification 360, which governs the methodology for identifying and recording impairment of long-lived assets to determine if any of our asset groups have net book value in excess of undiscounted future net cash flows. Our evaluations did not indicate impairment of any of our asset groups. Beginning with the third quarter of 2020, conditions related to the COVID-19 pandemic and oil price environment stabilized and in the fourth quarter of 2020 industry conditions marginally improved. Similarly, in the first nine months of 2021 we have not seen indications in the industry that would indicate impairment of any of our asset groups. As a result, we did not identify additional events or conditions that would require us to perform a Step 1 evaluation as of September 30, 2021.&#