UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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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:
(Exact name of registrant as specified in its charter)
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(State of incorporation) |
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(I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip code)
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:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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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.
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).
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.
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Large accelerated filer ☒ |
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Accelerated filer ☐ |
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Non-accelerated filer ☐ Emerging Growth Company |
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Smaller reporting company
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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
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 ☐
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TIDEWATER INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and par value data)
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September 30, |
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December 31, |
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ASSETS |
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2019 |
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2018 |
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Current assets: |
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Cash and cash equivalents |
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$ |
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Restricted cash |
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Trade and other receivables, net |
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Due from affiliates |
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Marine operating supplies |
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Other current assets |
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Total current assets |
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Investments in, at equity, and advances to unconsolidated companies |
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— |
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Properties and equipment, net |
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Deferred drydocking and survey costs |
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Other assets |
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Total assets |
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$ |
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LIABILITIES AND EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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Accrued costs and expenses |
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Due to affiliates |
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Current portion of long-term debt |
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Other current liabilities |
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Total current liabilities |
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Long-term debt |
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Other liabilities |
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Contingencies (Note 10) |
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Equity: |
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Common stock of $ at September 30, 2019 and December 31, 2018, respectively |
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Additional paid-in capital |
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Accumulated deficit |
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Accumulated other comprehensive income |
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Total stockholders’ equity |
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Noncontrolling interests |
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Total equity |
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Total liabilities and equity |
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$ |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
2
TIDEWATER INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2019 |
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2018 |
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2019 |
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2018 |
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Revenues: |
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Vessel revenues |
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$ |
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$ |
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Other operating revenues |
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Total revenues |
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Costs and expenses: |
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Vessel operating costs |
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Costs of other operating revenues |
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General and administrative |
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Depreciation and amortization |
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Loss (gain) on asset dispositions, net |
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( |
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Asset impairments |
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Total operating costs and expenses |
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Operating loss |
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Other income (expense): |
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Foreign exchange gain (loss) |
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( |
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( |
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Equity in net earnings (losses) of unconsolidated companies |
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( |
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( |
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Interest income and other, net |
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Interest and other debt costs, net |
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( |
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Total other expense |
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( |
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Loss before income taxes |
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( |
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( |
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( |
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( |
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Income tax expense |
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Net loss |
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$ |
( |
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$ |
( |
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Less: Net income attributable to noncontrolling interests |
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Net loss attributable to Tidewater Inc. |
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$ |
( |
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$ |
( |
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Basic loss per common share |
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$ |
( |
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$ |
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Diluted loss per common share |
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$ |
( |
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$ |
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Weighted average common shares outstanding |
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Dilutive effect of stock options and restricted stock |
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— |
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— |
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— |
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— |
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Adjusted weighted average common shares |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
3
TIDEWATER INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
(In thousands)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2019 |
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2018 |
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2019 |
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2018 |
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Net loss |
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$ |
( |
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( |
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$ |
( |
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( |
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Other comprehensive income: |
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Unrealized losses on available for sale securities, net of tax of $ |
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— |
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— |
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— |
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( |
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Total comprehensive loss |
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$ |
( |
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( |
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$ |
( |
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( |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
4
TIDEWATER INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
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Nine Months Ended September 30, |
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2019 |
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2018 |
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Operating activities: |
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Net loss |
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$ |
( |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
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Amortization of deferred drydocking and survey costs |
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Amortization of debt premium and discounts |
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( |
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( |
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Provision for deferred income taxes |
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— |
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Gain on asset dispositions, net |
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( |
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( |
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Asset impairments |
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Changes in investments in, at equity, and advances to unconsolidated companies |
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Compensation expense - stock-based |
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Changes in assets and liabilities, net: |
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Trade and other receivables |
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( |
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( |
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Changes in due to/from affiliate, net |
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Accounts payable |
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( |
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Accrued costs and expenses |
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( |
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( |
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Cash paid for deferred drydocking and survey costs |
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( |
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( |
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Other, net |
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Net cash provided by (used in) operating activities |
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Cash flows from investing activities: |
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Proceeds from sales of assets |
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Additions to properties and equipment |
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( |
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Net cash provided by investing activities |
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Cash flows from financing activities: |
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Principal payments on long-term debt |
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( |
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( |
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Payments to General Unsecured Creditors |
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— |
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( |
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Taxes on share based awards |
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( |
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— |
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Other |
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( |
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Net cash used in financing activities |
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( |
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( |
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Net change in cash, cash equivalents and restricted cash |
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( |
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Cash, cash equivalents and restricted cash at beginning of period |
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Cash, cash equivalents and restricted cash at end of period |
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$ |
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Supplemental disclosure of cash flow information: |
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Cash paid during the period for: |
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Interest, net of amounts capitalized |
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$ |
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Income taxes |
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$ |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
5
TIDEWATER INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
(In thousands)
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Three Months Ended |
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Accumulated |
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Additional |
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other |
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Non |
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Common |
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paid-in |
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Accumulated |
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comprehensive |
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controlling |
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stock |
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capital |
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deficit |
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loss |
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interest |
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Total |
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Balance at June 30, 2019 |
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$ |
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( |
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Total comprehensive loss |
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— |
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— |
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( |
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— |
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( |
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Issuance of common stock from exercise of warrants |
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( |
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— |
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— |
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— |
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— |
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Amortization/cancellation of restricted stock units |
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— |
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— |
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— |
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— |
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Balance at September 30, 2019 |
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$ |
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( |
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Balance at June 30, 2018 |
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$ |
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( |
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( |
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Total comprehensive loss |
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— |
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— |
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( |
) |
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— |
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( |
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( |
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Issuance of common stock |
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— |
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— |
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— |
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— |
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Amortization of restricted stock units |
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— |
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( |
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— |
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— |
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— |
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( |
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Balance at September 30, 2018 |
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$ |
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( |
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( |
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Nine Months Ended |
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Accumulated |
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Additional |
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other |
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Non |
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Common |
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paid-in |
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Accumulated |
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comprehensive |
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controlling |
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stock |
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capital |
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deficit |
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loss |
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interest |
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Total |
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Balance at December 31, 2018 |
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$ |
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( |
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Total comprehensive loss |
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— |
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— |
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( |
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— |
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( |
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Issuance of common stock from exercise of warrants |
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— |
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— |
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— |
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|
— |
|
|
|
|
|
|
Amortization/cancellation of restricted stock units |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Balance at September 30, 2019 |
|
$ |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2017 |
|
$ |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Total comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Issuance of common stock |
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Amortization of restricted stock units |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Acquisition of non-controlling interests |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
Balance at September 30, 2018 |
|
$ |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
6
|
(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 presentation 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, 2018, filed with the SEC on February 28, 2019.
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.
On
|
(2) |
ACCOUNTING PRONOUNCEMENTS |
We adopted Accounting Standards Update (ASU) No. 2016-02 - Leases (Topic 842), as amended, as of January 1, 2019. We adopted this guidance retrospectively at the beginning of the period of adoption through a cumulative-effect adjustment. We applied the practical expedient available in this guidance, which allows us not to restate prior year balances. Adoption of the new standard resulted in the recording of right of use assets and lease liabilities as of January 1, 2019 of approximately $
As a lessor, our recognition of vessel and other operating revenues remains consistent with previous guidance under Accounting Standards Update 2014-09, Revenue from Contracts with Customers (ASC 606). In July 2018, the FASB issued guidance codified in Accounting Standards Update 2018-11, Leases – Targeted Improvements (ASU 2018-11). ASU 2018-11 provides a practical expedient, which allows lessors to combine the lease component with the related non-lease component if both the timing and pattern of transfer are the same for the lease and non-lease component and if the lease component would be classified as an operating lease. The single combined component is accounted for under the leasing standard if the lease component is the predominant component and, is accounted for under ASC 606 if the non-lease component is the predominant component. We elected this practical expedient to combine our lease and non-lease components for all classes of underlying assets and have accounted for the combined component under ASC 606 for revenue contracts qualifying for this practical expedient because we have concluded that the non-lease component is the predominant component in our current revenue contracts. The lease component is the vessels leased to our customers. The non-lease components consist of the services provided by the crews manning the vessels.
|
(3) |
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, 2019, we had $
7
|
(4) |
LEASES |
We have operating leases primarily for office space, temporary residences, automobiles and office equipment. Contracts containing assets that we benefit from and control are recognized on our balance sheet. Leases with an initial term of 12 months or less are not recorded on the balance sheet. We recognize lease expense for these leases on a straight-line basis over the lease term. We combine the lease and non-lease components for all of our lease agreements.
Certain leases include one or more options to renew, with renewal terms that can extend the lease term from one to
|
Leases (In thousands) |
|
Classification |
|
September 30, 2019 |
|||
|
Assets: |
|
|
|
|
|
|
|
|
Operating |
|
Other assets |
|
$ |
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
Operating |
|
Other current liabilities |
|
|
|
|
|
|
Noncurrent |
|
|
|
|
|
|
|
|
Operating |
|
Other liabilities |
|
|
|
|
|
|
Total lease liabilities |
|
|
|
$ |
|
|
|
|
Maturity of lease liabilities (In thousands) |
|
Operating leases |
|||
|
2019 |
|
$ |
|
|
|
|
2020 |
|
|
|
|
|
|
2021 |
|
|
|
|
|
|
2022 |
|
|
|
|
|
|
2023 |
|
|
|
|
|
|
After 2023 |
|
|
|
|
|
|
Total lease payments |
|
$ |
|
|
|
|
Less: Interest |
|
|
|
|
|
|
Present value of lease liabilities |
|
$ |
|
|
|
As most of our leases do not provide an implicit interest rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. We used the incremental borrowing rate on January 1, 2019 for operating leases that began prior to that date.
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
||||||
|
Lease costs (In thousands) |
|
Classification |
|
September 30, 2019 |
|
September 30, 2018 |
||||||
|
Operating lease costs |
|
General and administrative |
|
$ |
|
|
|
|
|
|
|
|
|
Short-term leases |
|
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
Variable lease costs |
|
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
Sublease income |
|
General and administrative |
|
|
— |
|
|
|
|
( |
) |
|
|
Net lease cost |
|
|
|
$ |
|
|
|
|
|
|
|
|
Our variable lease payments consist primarily of shared operating costs recognized over the term of the lease.
|
Lease term and discount rate |
|
September 30, 2019 |
|||
|
Weighted average remaining lease term in years |
|
|
4.0 |
|
|
|
|
|
|
|
|
|
|
Weighted average discount rate |
|
|
|
|
% |
8
The cash paid for operating leases included in operating cash flows and in the measurement of lease liabilities for the three and nine months ended September 30, 2019 was $
|
|
|
Minimum |
|||
|
Year ending (In thousands) |
|
rental commitments |
|||
|
2019 |
|
$ |
|
|
|
|
2020 |
|
|
|
|
|
|
2021 |
|
|
|
|
|
|
2022 |
|
|
|
|
|
|
2023 |
|
|
|
|
|
|
After 2023 |
|
|
|
|
|
|
Total lease payments |
|
$ |
|
|
|
|
(5) |
STOCKHOLDERS' EQUITY AND DILUTIVE EQUITY INSTRUMENTS |
Accumulated Other Comprehensive Income (Loss)
The following table summarizes the reclassifications from accumulated other comprehensive income (loss) to the condensed consolidated statement of operations for the three and nine months ended September 30, 2019 and 2018:
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
Affected line item in the condensed |
||||||||||
|
(In thousands) |
|
September 30, 2019 |
|
|
September 30, 2018 |
|
|
September 30, 2019 |
|
|
September 30, 2018 |
|
|
consolidated statements of operations |
||||
|
Balance at beginning of period |
|
$ |
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
Losses recognized in OCI |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
Realized gains on available for sale securities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Interest income and other, net |
|
Net period OCI |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
|
Tax effect |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
Total gains for the period, net of tax |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
Balance at end of period |
|
$ |
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
Dilutive Equity Instruments
We had
9
Common shares and creditor warrants and the sum of common shares and creditor warrants outstanding at September 30, 2019 and 2018 were as follows:
|
Total shares outstanding including warrants |
|
September 30, 2019 |
|
|
September 30, 2018 |
|
||
|
Common shares outstanding |
|
|
|
|
|
|
|
|
|
New Creditor Warrants (strike price $ |
|
|
|
|
|
|
|
|
|
GulfMark Creditor Warrants (strike price $ |
|
|
|
|
|
|
— |
|
|
Total |
|
|
|
|
|
|
|
|
We also had
|
(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 three and nine months ended September 30, 2019, 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, 2018, our balance sheet reflected approximately $
Management assesses all available positive and negative evidence to estimate the company’s ability to generate sufficient future taxable income of the appropriate character, and in the appropriate taxing jurisdictions, to permit use of existing deferred tax assets. A significant piece of objective negative evidence is a cumulative loss incurred over a three-year period in a taxing jurisdiction. Prevailing accounting practice is that such objective evidence would limit the ability to consider other subjective evidence, such as projections for future growth.
On the basis of this evaluation, a valuation allowance of $
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 2013. 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, 2019 |
|
|
December 31, 2018 |
|
||
|
Due from related parties: |
|
|
|
|
|
|
|
|
|
Sonatide (Angola) |
|
$ |
|
|
|
|
|
|
|
DTDW (Nigeria) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due to related parties: |
|
|
|
|
|
|
|
|
|
Sonatide (Angola) |
|
$ |
|
|
|
|
|
|
|
DTDW (Nigeria) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due from related parties, net of due to related parties |
|
$ |
|
|
|
|
|
|
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.
|
|
|
Nine Months |
|
|
|
|
|
Ended |
|
|
|
(In thousands) |
|
September 30, 2019 |
|
|
|
Due from Sonatide at December 31, 2018 |
|
$ |
|
|
|
Revenue earned by the company through Sonatide |
|
|
|
|
|
Less amounts received from Sonatide |
|
|
( |
) |
|
Less amounts used to offset Due to Sonatide obligations (A) |
|
|
( |
) |
|
Other |
|
|
( |
) |
|
Total due from Sonatide at September 30, 2019 |
|
$ |
|
|
|
|
(A) |
|
The amounts due from Sonatide is denominated in U.S. dollars; however, the underlying third-party customer payments to Sonatide were satisfied, in part, in Angolan kwanzas. We and Sonangol, our partner in Sonatide, have had discussions regarding how the net losses from the devaluation of certain Angolan kwanza denominated accounts should be shared.
After offsetting the amounts due to Sonatide, the net amount due from Sonatide at September 30, 2019 was approximately $
11
Amounts due to Sonatide
Amounts due to Sonatide represent commissions payable and other costs paid by Sonatide on behalf of us.
|
|
|
Nine Months |
|
|
|
|
|
Ended |
|
|
|
(In thousands) |
|
September 30, 2019 |
|
|
|
Due to Sonatide at December 31, 2018 |
|
$ |
|
|
|
Plus additional commissions payable to Sonatide |
|
|
|
|
|
Plus amounts paid by Sonatide on behalf of the company |
|
|
|
|
|
Less commissions paid to Sonatide during the period |
|
|
( |
) |
|
Less amounts used to offset Due from Sonatide obligations (A) |
|
|
( |
) |
|
Other |
|
|
|
|
|
Total due to Sonatide at September 30, 2019 |
|
$ |
|
|
|
|
(A) |
|
Sonatide Operations
Sonatide’s principal earnings are from the commissions paid by us to the joint venture for company vessels chartered in Angola. In addition, Sonatide owns
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, 2019 |
|
|
September 30, 2018 |
|
|
September 30, 2019 |
|
|
September 30, 2018 |
|
||||
|
Revenues of Angolan operations (in thousands) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of consolidated vessel revenues |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
Number of company owned vessels in Angola |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of stacked company owned vessels in Angola |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8) |
EMPLOYEE BENEFIT PLANS |
U.S. Defined Benefit Pension Plan
We have a defined benefit pension plan (pension plan) that covers certain U.S. citizen employees and other employees who are permanent residents of the United States. The Board of Directors amended the pension plan to discontinue the accrual of benefits once the plan was frozen on December 31, 2010. We contributed $
Supplemental Executive Retirement Plan
We also support a non-contributory and non-qualified defined benefit supplemental executive retirement plan (supplemental plan) that provided pension benefits to certain employees in excess of those allowed under our tax-qualified pension plan. Effective March 4, 2010, the supplemental plan was closed to new participants. We contributed $
12
Other Defined Benefit Pension Plans
We also have defined benefit pension plans that cover certain Norwegian citizen employees and other employees who are permanent residents of Norway. Benefits are based on years of service and employee compensation. We contributed an immaterial amount to the Norwegian defined benefit pension plans during the three and nine months ended September 30, 2019 and 2018 and contributions during the remainder of calendar year 2019 are expected to be immaterial.
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, 2019 |
|
|
September 30, 2018 |
|
|
September 30, 2019 |
|
|
September 30, 2018 |
|
||||
|
Pension Benefits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected return on plan assets |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement loss recognized |
|
|
( |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost |
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
(9) |
DEBT |
The following is a summary of all debt outstanding:
|
|
|
September 30, |
|
|
December 31, |
|
||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
||
|
Secured notes: |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
Troms Offshore borrowings (C): |
|
|
|
|
|
|
|
|
|
NOK denominated notes due |
|
|
|
|
|
|
|
|
|
NOK denominated notes due |
|
|
|
|
|
|
|
|
|
USD denominated notes due |
|
|
|
|
|
|
|
|
|
USD denominated notes due |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
Debt premiums and discounts, net |
|
|
|
|
|
|
|
|
|
Less: Current portion of long-term debt |
|
|
( |
) |
|
|
( |
) |
|
Total long-term debt |
|
$ |
|
|
|
|
|
|
|
|
(A) |
|
|
|
(B) |
|
|
|
(C) |
|
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,
13
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.
|
(10) |
COMMITMENTS AND CONTINGENCIES |
Currency Devaluation and Fluctuation Risk
Due to our international operations, we are exposed to foreign currency exchange rate fluctuations and exchange rate risks on all charter hire contracts denominated in foreign currencies. 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.
Arbitral Award for the Taking of Our Venezuelan Operations
Committees formed under the rules of the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) have awarded
We are committed to taking appropriate steps to enforce and collect the award, which is enforceable in any of the 150 member states that are party to the ICSID Convention, but we recognize that collection of the award presents significant practical challenges. We will record any gain in future periods if and when the contingency is resolved.
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.
|
(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. We periodically utilize derivative financial instruments to hedge against foreign currency denominated assets and liabilities, currency commitments, or to lock in desired interest rates. These transactions are generally spot or forward currency contracts or interest rate swaps that are entered into with major financial institutions. Derivative financial instruments are intended to reduce our exposure to foreign currency exchange risk and interest rate risk. We enter into derivative instruments only to the extent considered necessary to address our risk management objectives and do not use derivative contracts for speculative purposes. The derivative instruments are recorded at fair value using quoted prices and quotes obtainable from the counterparties to the derivative instruments.
Cash Equivalents. Our cash equivalents, which are securities with maturities less than
Spot Derivatives. Spot derivative financial instruments are short-term in nature and generally settle within two business days. The fair value of spot derivatives approximates the carrying value due to the short-term nature of this instrument, and as a result, no gains or losses are recognized. We had
14
|
(12) |
OTHER CURRENT ASSETS, PROPERTIES AND EQUIPMENT, OTHER ASSETS, ACCRUED EXPENSES, OTHER CURRENT LIABILITIES AND OTHER LIABILITIES |
A summary of other current assets is as follows:
|
|
|
September 30, |
|
|
December 31, |
|
||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
||
|
Deposits |
|
$ |
|
|
|
|
|
|
|
Prepaid expenses and other |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
A summary of properties and equipment is as follows:
|
|
|
September 30, |
|
|
December 31, |
|
||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
||
|
Properties and equipment: |
|
|
|
|
|
|
|
|
|
Vessels and related equipment |
|
$ |
|
|
|
|
|
|
|
Other properties and equipment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less accumulated depreciation and amortization |
|
|
|
|
|
|
|
|
|
Properties and equipment, net |
|
$ |
|
|
|
|
|
|
Our property and equipment consist primarily of our
A summary of other assets is as follows:
|
|
|
September 30, |
|
|
December 31, |
|
||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
||
|
Recoverable insurance losses |
|
$ |
|
|
|
|
|
|
|
Investments held for supplemental savings plan accounts |
|
|
|
|
|
|
|
|
|
Long-term deposits |
|
|
|
|
|
|
|
|
|
Deferred tax asset |
|
|
|
|
|
|
|
|
|
Right of use asset (A) |
|
|
|
|
|
|
— |
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
(A) |
Refer to Note (4). |
A summary of accrued cost and expenses is as follows:
|
|
|
September 30, |
|
|
December 31, |
|
||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
||
|
Payroll and related payables |
|
$ |
|
|
|
|
|
|
|
Commissions payable (B) |
|
|
|
|
|
|
|
|
|
Accrued vessel expenses |
|
|
|
|
|
|
|
|
|
Accrued interest expense |
|
|
|
|
|
|
|
|
|
Other accrued expenses |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
(B) |
|
15
A summary of other current liabilities is as follows:
|
|
|
September 30, |
|
|
December 31, |
|
||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
||
|
Taxes payable |
|
$ |
|
|
|
|
|
|
|
Lease liability - operating (C) |
|
|
|
|
|
|
— |
|
|
Accrued property and liability losses |
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
(C) |
Refer to Note (4). |
A summary of other liabilities is as follows:
|
|
|
September 30, |
|
|
December 31, |
|
||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
||
|
Pension liabilities |
|
$ |
|
|
|
|
|
|
|
Liability for uncertain tax positions |
|
|
|
|
|
|
|
|
|
Deferred tax liability |
|
|
|
|
|
|
|
|
|
Lease liability - operating (D) |
|
|
|
|
|
|
— |
|
|
Accrued property and liability losses |
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
(D) |
Refer to Note (4). |
16
|
(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, 2019 and 2018. Vessel revenues and operating costs relate to vessels owned and operated by us while other operating revenues relate to brokered vessels and other miscellaneous marine-related businesses.
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
(In thousands) |
|
September 30, 2019 |
|
|
September 30, 2018 |
|
|
September 30, 2019 |
|
|
September 30, 2018 |
|
||||
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessel revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Middle East/Asia Pacific |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe/Mediterranean Sea |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
West Africa |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessel operating profit (loss) (A): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Middle East/Asia Pacific |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Europe/Mediterranean Sea |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
West Africa |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other operating profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate expenses (A) (B) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Gain (loss) on asset dispositions, net |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
Asset impairments (C) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Operating loss |
|
$ |
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Depreciation and amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Middle East/Asia Pacific |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe/Mediterranean Sea |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
West Africa |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to properties and equipment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Middle East/Asia Pacific |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe/Mediterranean Sea |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
West Africa |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A) |
|
|
|
(B) |
|
|
|
(C) |
|
17
The following table provides a comparison of total assets at September 30, 2019 and December 31, 2018:
|
|
|
September 30, |
|
|
December 31, |
|
||
|
(In thousands) |
|
2019 |
|
|
2018 |
|
||
|
Total assets: |
|
|
|
|
|
|
|
|
|
Americas |
|
$ |
|
|
|
|
|
|
|
Middle East/Asia Pacific |
|
|
|
|
|
|
|
|
|
Europe/Mediterranean Sea |
|
|
|
|
|
|
|
|
|
West Africa |
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Investments in, at equity, and advances to unconsolidated companies |
|
|
|
|
|
|
|
|
|
Corporate |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
(14) |
ASSET IMPAIRMENTS |
The below table summarizes impairments during the three and nine months ended September 30, 2019 and 2018, along with the amount of impairment.
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
(Dollars in thousands) |
|
September 30, 2019 |
|
|
September 30, 2018 |
|
|
September 30, 2019 |
|
|
September 30, 2018 |
|
||||
|
Number of vessels impaired in the period |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
Amount of impairment incurred |
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
As of September 30, 2019, we performed an evaluation to determine whether conditions existed that would indicate potential impairment in the value of our assets. Our evaluation did not indicate any indicators of impairment that would require us to perform additional analyses and, consequently, we have recorded
|
(15) |
RESTRUCTURING CHARGES |
In the fourth quarter of 2018, we finalized plans to abandon duplicate office facilities with
Activity for the lease exit and severance liabilities for the nine months ended September 30, 2019 was as follows:
|
|
|
Lease Exit Costs |
|
|
Severance |
|
|
|
|
|
||||||||
|
(In thousands) |
|
Europe/ Mediterranean |
|
Corporate |
|
|
Europe/ Mediterranean |
|
Corporate |
|
|
Total |
|
|||||
|
Balance at December 31, 2018 |
|
$ |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
Charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash payments |
|
|
( |
) |
|
( |
) |
|
|
( |
) |
|
( |
) |
|
|
( |
) |
|
Balance at September 30, 2019 |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENT
In accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, this Quarterly Report on Form 10-Q and the information incorporated herein by reference contain certain forward-looking statements which reflect our current view with respect to future events and future financial performance. Forward-looking statements are all statements other than statements of historical fact. All such forward-looking statements are subject to risks and uncertainties, and our future results of operations could differ materially from our historical results or current expectations reflected by such forward-looking statements. Some of these risks include, without limitation, the risk that the cost savings and any other synergies from the business combination with GulfMark Offshore, Inc. (the “business combination”) may not be fully realized or may take longer to realize than expected; disruptions from the business combination making it more difficult to maintain relationships with customers, employees or suppliers; the possibility of litigation related to the business combination; the diversion of management’s time from day-to-day operations due to the business combination; the incurrence of substantial transaction-related costs associated with the business combination; the possibility of unanticipated costs being incurred to effectuate the integration; new accounting policies and our consolidation activities; fluctuations in worldwide energy demand and oil and natural gas prices, and continuing depressed levels of oil and natural gas prices without a clear indication of if, or when, prices will recover to a level to support renewed offshore exploration activities; fleet additions by competitors and industry overcapacity; our limited capital resources available to replenish our asset base, including through acquisitions or vessel construction, and to fund our capital expenditure needs; uncertainty of global financial market conditions and potential constraints in accessing capital or credit if and when needed with favorable terms, if at all; changes in decisions and capital spending by customers in the energy industry and the industry expectations for offshore exploration, field development and production; consolidation of our customer base; loss of a major customer; changing customer demands for vessel specifications, which may make some of our older vessels technologically obsolete for certain customer projects or in certain markets; rapid technological changes; delays and other problems associated with vessel construction and maintenance; the continued availability of qualified personnel and our ability to attract and retain them; the operating risks normally incident to our lines of business, including the potential impact of liquidated counterparties; our ability to comply with covenants in our indentures and other debt instruments; acts of terrorism and piracy; the impact of potential information technology, cybersecurity or data security breaches; integration of acquired businesses and entry into new lines of business; disagreements with our joint venture partners; significant weather conditions; unsettled political conditions, war, civil unrest and governmental actions, such as expropriation or enforcement of customs or other laws that are not well developed or consistently enforced; the risks associated with our international operations, including local content, local currency or similar requirements especially in higher political risk countries where we operate; interest rate and foreign currency fluctuations; labor changes proposed by international conventions; increased regulatory burdens and oversight; changes in laws governing the taxation of foreign source income; retention of skilled workers; enforcement of laws related to the environment, labor and foreign corrupt practices; the potential liability for remedial actions or assessments under existing or future environmental regulations or litigation; the effects of asserted and unasserted claims and the extent of available insurance coverage; and the resolution of pending legal proceedings.
Forward-looking statements, which can generally be identified by the use of such terminology as “may,” “can,” “potential,” “expect,” “project,” “target,” “anticipate,” “estimate,” “forecast,” “believe,” “think,” “could,” “continue,” “intend,” “seek,” “plan,” and similar expressions contained in this Quarterly Report on Form 10-Q, are not guarantees or assurances of future performance or events. Any forward-looking statements are based on our assessment of current industry, financial and economic information, which by its nature is dynamic and subject to rapid and possibly abrupt changes, which we may or may not be able to control. Further, we may make changes to our business plans that could or will affect our results. While management believes that these forward-looking statements are reasonable when made, there can be no assurance that future developments that affect us will be those that we anticipate and have identified. The forward-looking statements should be considered in the context of the risk factors listed above and discussed in Item 1A included in our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the Securities and Exchange Commission (SEC) on February 28, 2019, as updated by subsequent filings with the SEC. Investors and prospective investors are cautioned not to rely unduly on such forward-looking statements, which speak only as of the date hereof. Management disclaims any obligation to update or revise any forward-looking statements contained herein to reflect new information, future events or developments.
In certain places in this Quarterly Report on Form 10-Q, we may refer to reports published by third parties that purport to describe trends or developments in energy production and drilling and exploration activity and we specifically disclaim any responsibility for the accuracy and completeness of such information and have undertaken no steps to update or independently verify such information.
19
The following information contained in this Quarterly Report on Form 10-Q should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included in Part 1, Item 1 of this Quarterly Report on Form 10-Q and related disclosures and our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 28, 2019.
About Tidewater
Our vessels and associated vessel services provide support for all phases of offshore oil and natural gas exploration, field development and production. These services include towing of, and anchor handling for, mobile offshore drilling units; transporting supplies and personnel necessary to sustain drilling, workover and production activities; offshore construction and seismic and subsea support; and a variety of specialized services such as pipe and cable laying. In addition, we have one of the broadest geographic operating footprints in the offshore vessel industry. Our global operating footprint allows us to react quickly to changing local market conditions and to be responsive to the changing requirements of the many customers with which we believe we have strong relationships. We are also one of the most experienced international operators in the offshore energy industry with a history spanning over 60 years.
On July 31, 2017, we successfully emerged from Chapter 11 bankruptcy proceedings and adopted fresh-start accounting. Refer to Notes (4) and (5) of Notes to Consolidated Financial Statements included in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2018 for further details on our Chapter 11 bankruptcy and emergence and the adoption of fresh-start accounting.
On November 15, 2018 (the “Merger Date”), we completed our merger with GulfMark Offshore, Inc. (“GulfMark”) pursuant to the Agreement and Plan of the Merger dated July 15, 2018. GulfMark’s balances and results are included in our consolidated financial statements and disclosures beginning on the Merger Date. Therefore, our balances and results for the three and nine months ended September 30, 2019 include GulfMark’s operations while our balances and results for the three and nine months ended September 30, 2018 do not include GulfMark’s operations.
At September 30, 2019, we owned 220 vessels with an average age of 10.1 years (excluding four joint venture vessels, but including 60 stacked vessels) available to serve the global energy industry. The average age of our 160 active vessels at September 30, 2019 is 9.3 years.
Principal Factors That Drive Our Results
Our revenues, net earnings and cash flows from operations are largely dependent upon the activity level of our offshore marine vessel fleet. As is the case with the numerous other vessel operators in our industry, our business activity is largely dependent on the level of exploration, field development and production activity of our customers. Our customers’ business activity, in turn, is dependent on current and expected crude oil and natural gas prices, which fluctuate depending on expected future levels of supply and demand for crude oil and natural gas, and on estimates of the cost to find, develop and produce crude oil and natural gas reserves.
Our revenues in all segments are driven primarily by our fleet size, vessel utilization and day rates. Because a sizeable portion of our operating and depreciation costs do not change proportionally with changes in revenue, our operating profit is largely dependent on revenue levels.
Operating costs consist primarily of crew costs, repair and maintenance costs, insurance costs and loss reserves, fuel, lube oil and supplies costs and other vessel operating costs. Fleet size, fleet composition, geographic areas of operation, supply and demand for marine personnel, and local labor requirements are the major factors which affect overall crew costs in all segments. In addition, our newer, more technologically sophisticated vessels generally require a greater number of specially trained, more highly compensated fleet personnel than our older, smaller and less sophisticated vessels. Crew costs may increase if competition for skilled personnel intensifies, though a weaker offshore energy market should somewhat mitigate any potential inflation of crew costs.
Costs related to the recertification of vessels are deferred and amortized over 30 months on a straight-line basis. Maintenance costs incurred at the time of the recertification drydocking that are not related to the recertification of the vessel are expensed as incurred. Costs related to vessel improvements that either extend the vessel’s useful life or increase the vessel’s functionality are capitalized and depreciated.
20
Insurance and loss reserves costs are dependent on a variety of factors, including our safety record and pricing in the insurance markets, and can fluctuate over time. Our vessels are generally insured for up to their estimated fair market value in order to cover damage or loss resulting from marine casualties, adverse weather conditions, mechanical failure, collisions, and property losses to the vessel. We also purchase coverage for potential liabilities stemming from third-party losses with limits that we believe are reasonable for our operations, but do not generally purchase business interruption insurance or similar coverage. Insurance limits are reviewed annually, and third-party coverage is purchased based on the expected scope of ongoing operations and the cost of third-party coverage.
Fuel and lube costs can also fluctuate in any given period depending on the number and distance of vessel mobilizations, the number of active vessels off charter, drydockings, and changes in fuel prices. We also incur vessel operating costs that are aggregated as “other” vessel operating costs. These costs consist of brokers’ commissions, including commissions paid to unconsolidated joint venture companies, training costs, satellite communication fees, agent fees, port fees and other miscellaneous costs. Brokers’ commissions are incurred primarily in our non-United States operations where brokers sometimes assist in obtaining work. Brokers generally are paid a percentage of day rates and, accordingly, commissions paid to brokers generally fluctuate in accordance with vessel revenue.
Sonatide Joint Venture
We previously disclosed the significant financial and operational challenges that we confront with respect to operations in Angola, as well as steps that we have taken to address or mitigate those risks. Most of our attention has been focused in three areas: (i) reducing the net receivable balance due from Sonatide, our Angolan joint venture with Sonangol, for vessel services; (ii) reducing the foreign currency risk created by virtue of provisions of Angolan law that require that payment for a portion of the services provided by Sonatide be paid in Angolan kwanza; and (iii) optimizing opportunities, consistent with Angolan law, for services provided by us to be paid for directly in U.S. dollars.
Refer to Note (7) of Notes to Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details on the Sonatide joint venture.
Industry Conditions and Outlook
Our business is directly impacted by the level of activity in worldwide offshore oil and natural gas exploration, development and production, which in turn is influenced by trends in oil and natural gas prices. In addition, oil and natural gas prices are affected by a host of geopolitical and economic forces, including the fundamental principles of supply and demand. In particular, the oil price is significantly influenced by actions of the Organization of Petroleum Exporting Countries, or OPEC. Prices are subject to significant uncertainty and, as a result, are extremely volatile. Beginning in late 2014, the oil and gas industry experienced a significant decline in the price of oil. Beginning in late 2014, oil prices declined significantly from levels of over $100 per barrel and continued to decline throughout 2015 and into 2016 causing an industry-wide downturn. Prices reached a low of less than $30 per barrel in the first quarter of 2016 and then began a partial recovery into the $50 to $60 per barrel range. Currently, prices are ranging between $50 and $65 per barrel. Although prices have been more stable since 2016, they are still at levels that are not expected to sustain significant increases in exploration and production activities, and consequently continue to adversely affect the drilling and support service industry. Commodity prices at these levels have negatively impacted our revenues, earnings and cash flows, and further sustained reduced levels of oil and natural gas prices could have a material adverse effect on our liquidity.
Deepwater activity is a significant segment of the global offshore crude oil and natural gas markets, and a significant component of our business. Development typically involves significant capital investment and multi-year development plans. Such projects are generally underwritten by the participating exploration, field development and production companies using relatively conservative crude oil and natural gas pricing assumptions. Although these projects are generally less susceptible to short-term fluctuations in the price of crude oil and natural gas, deepwater exploration and development projects can be more costly relative to other onshore and offshore exploration and development. As a result, generally depressed crude oil prices have caused, and may continue to cause, many of our customers and potential customers to reevaluate their future capital expenditures in regards to deepwater projects.
Results of Operations – Three Months Ended September 30, 2019 compared to September 30, 2018
Revenues for the quarters ended September 30, 2019 and 2018, were $119.8 million and $99.2 million, respectively. Quarterly revenues have increased as compared to the comparable quarter of the prior year primarily as a result of the business combination with GulfMark. Incremental revenues as a result of this business combination for the quarter ended September 30, 2019 were $25.9 million.
21
Vessel operating costs for the quarters ended September 30, 2019 and 2018, were $80.6 million and $65.2 million, respectively. Incremental vessel operating costs as a result of the GulfMark business combination for the quarter ended September 30, 2019 were $17.9 million.
Depreciation and amortization expense for the quarters ended September 30, 2019 and 2018, was $25.7 million and $13.4 million, respectively. Depreciation and amortization expense were higher in the current quarter because of a $7.8 million increase as a result of the business combination with GulfMark and a $4.7 million increase in amortization of deferred drydocking and survey costs.
General and administrative expenses for the quarters ended September 30, 2019 and 2018, were $30.5 million and $25.5 million, respectively. General and administrative expenses increased during the quarter ended September 30, 2019 as compared to the comparable period of the prior year due to incremental GulfMark general and administrative costs of $2.9 million and termination benefits of $6.1 million with each of three executive officers (the chief executive officer, the chief operating officer and the chief legal officer). Each termination triggered benefits to be paid to the former officer, primarily related to stock compensation. These one-time charges were partially offset by our continuing efforts to further streamline shore based-operations.
Included in loss (gain) on asset dispositions, net for the quarter ended September 30, 2019, are $0.3 million of net gains from the disposal of 3 vessels and other assets. During the quarter ended September 30, 2018, we recognized net losses of $1.6 million related to the disposal of seven vessels and other assets. During the quarter ended September 30, 2019, we impaired certain inventory assets and recognized losses approximating $5.2 million. In the quarter ended September 30, 2018, we impaired 15 vessels and recognized $16.9 million in impairment expense.
During the quarters ended September 30, 2019 and 2018 we recognized de minimis foreign exchange gains.
In addition, our income tax expense increased $13.8 million in the third quarter of 2019 compared to the third quarter of 2018 primarily due to recognition of discrete tax expense associated with uncertain tax positions and writeoffs of certain assets in our international operations.
Results of Operations – Nine Months Ended September 30, 2019 compared to September 30, 2018
Revenues earned for the nine months ended September 30, 2019 and September 30, 2018, were $367.8 million and $296.3 million, respectively. Revenues have increased as compared to the comparable period of the prior year primarily as a result of the business combination with GulfMark. Incremental revenues as a result of this business combination for the nine months ended September 30, 2019 were $76.1 million.
Vessel operating costs for the nine months ended September 30, 2019 and 2018, were $243.3 million and $194.6 million, respectively. Incremental vessel operating costs as a result of the GulfMark business combination for the nine months ended September 30, 2019 were $52.9 million.
Depreciation and amortization expense for the nine months ended September 30, 2019 and 2018, was $73.7 million and $38.2 million, respectively. Depreciation and amortization expense was higher in the current period because of a $23.5 million increase as a result of the business combination with GulfMark and a $11.8 million increase in amortization of deferred drydocking and survey costs.
General and administrative expenses for the nine months ended September 30, 2019 and 2018, were $81.3 million and $73.5 million, respectively. General and administrative expenses increased during the nine months ended September 30, 2019 as compared to the comparable period of the prior year due to: (i) incremental GulfMark general and administrative costs of $10.2 million; (ii) severance and lease costs of $4.3 million related to the integration of the two companies and (iii) termination benefits of $6.1 million with three executive officers discussed previously, which were partially offset by our continuing efforts to further streamline shore based-operations.
Included in gain on asset dispositions, net for the nine months ended September 30, 2019, are $1.0 million of net gains from the sale of 37 vessels and other assets. During the nine months ended September 30, 2018, we recognized net gains of $1.7 million related to the sale of 30 vessels and other assets.
22
During the nine months ended September 30, 2019 and 2018, we recognized foreign exchange losses of $0.3 million and $1.3 million, respectively. These foreign exchange losses were primarily the result of the revaluation of Brazilian-reais denominated balances to our U.S. dollar reporting currency.
In addition, our income tax expense increased $16.0 million in the nine months ended September 30, 2019 compared to nine months ended September 30, 2018 primarily due to recognition of discrete tax expense associated with uncertain tax positions and writeoffs of certain assets in our international operations.
23
The following table compares vessel revenues and vessel operating costs by geographic segment for our owned and operated vessel fleet and the related percentage of vessel revenue for the periods indicated:
|
|
|
Three Months Ended |
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||||
|
|
|
September 30, 2019 |
|
|
September 30, 2018 |
|
|
September 30, 2019 |
|
|
September 30, 2018 |
|
||||||||||||||||||||
|
(In thousands) |
|
|
|
|
|
% |
|
|
|
|
|
|
% |
|
|
|
|
|
|
% |
|
|
|
|
|
|
% |
|
||||
|
Vessel revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
$ |
33,147 |
|
|
|
28 |
% |
|
|
28,039 |
|
|
|
29 |
% |
|
|
103,624 |
|
|
|
29 |
% |
|
|
86,721 |
|
|
|
30 |
% |
|
Middle East/Asia Pacific |
|
|
22,765 |
|
|
|
19 |
% |
|
|
19,927 |
|
|
|
21 |
% |
|
|
63,670 |
|
|
|
18 |
% |
|
|
60,721 |
|
|
|
21 |
% |
|
Europe/Mediterranean Sea |
|
|
30,946 |
|
|
|
26 |
% |
|
|
12,566 |
|
|
|
13 |
% |
|
|
94,531 |
|
|
|
26 |
% |
|
|
35,546 |
|
|
|
12 |
% |
|
West Africa |
|
|
30,315 |
|
|
|
26 |
% |
|
|
36,479 |
|
|
|
38 |
% |
|
|
98,651 |
|
|
|
27 |
% |
|
|
105,691 |
|
|
|
37 |
% |
|
Total vessel revenues |
|
$ |
117,173 |
|
|
|
100 |
% |
|
|
97,011 |
|
|
|
100 |
% |
|
$ |
360,476 |
|
|
|
100 |
% |
|
|
288,679 |
|
|
|
100 |
% |
|
Vessel operating costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crew costs |
|
$ |
15,108 |
|
|
|
46 |
% |
|
|
12,169 |
|
|
|
43 |
% |
|
|
48,215 |
|
|
|
47 |
% |
|
|
32,420 |
|
|
|
37 |
% |
|
Repair and maintenance |
|
|
3,061 |
|
|
|
9 |
% |
|
|
2,571 |
|
|
|
9 |
% |
|
|
9,009 |
|
|
|
9 |
% |
|
|
5,830 |
|
|
|
7 |
% |
|
Insurance and loss reserves |
|
|
305 |
|
|
|
1 |
% |
|
|
(488 |
) |
|
|
(2 |
%) |
|
|
(72 |
) |
|
|
(0 |
%) |
|
|
(7 |
) |
|
|
(<1 |
%) |
|
Fuel, lube and supplies |
|
|
1,919 |
|
|
|
6 |
% |
|
|
2,081 |
|
|
|
7 |
% |
|
|
6,479 |
|
|
|
6 |
% |
|
|
5,491 |
|
|
|
6 |
% |
|
Other |
|
|
2,461 |
|
|
|
7 |
% |
|
|
1,787 |
|
|
|
7 |
% |
|
|
8,003 |
|
|
|
8 |
% |
|
|
4,983 |
|
|
|
6 |
% |
|
|
|
|
22,854 |
|
|
|
69 |
% |
|
|
18,120 |
|
|
|
64 |
% |
|
|
71,634 |
|
|
|
69 |
% |
|
|
48,717 |
|
|
|
56 |
% |
|
Middle East/Asia Pacific: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crew costs |
|
$ |
9,243 |
|
|
|
41 |
% |
|
|
8,412 |
|
|
|
42 |
% |
|
|
26,856 |
|
|
|
42 |
% |
|
|
25,115 |
|
|
|
41 |
% |
|
Repair and maintenance |
|
|
2,317 |
|
|
|
10 |
% |
|
|
1,859 |
|
|
|
9 |
% |
|
|
5,571 |
|
|
|
9 |
% |
|
|
4,916 |
|
|
|
8 |
% |
|
Insurance and loss reserves |
|
|
356 |
|
|
|
2 |
% |
|
|
(458 |
) |
|
|
(2 |
)% |
|
|
1,131 |
|
|
|
2 |
% |
|
|
(225 |
) |
|
|
(<1 |
%) |
|
Fuel, lube and supplies |
|
|
2,431 |
|
|
|
11 |
% |
|
|
1,394 |
|
|
|
7 |
% |
|
|
7,116 |
|
|
|
11 |
% |
|
|
5,955 |
|
|
|
10 |
% |
|
Other |
|
|
1,318 |
|
|
|
6 |
% |
|
|
2,203 |
|
|
|
11 |
% |
|
|
4,896 |
|
|
|
8 |
% |
|
|
7,523 |
|
|
|
12 |
% |
|
|
|
|
15,665 |
|
|
|
69 |
% |
|
|
13,410 |
|
|
|
67 |
% |
|
|
45,570 |
|
|
|
72 |
% |
|
|
43,284 |
|
|
|
71 |
% |
|
Europe/Mediterranean Sea: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crew costs |
|
$ |
12,974 |
|
|
|
42 |
% |
|
|
5,642 |
|
|
|
45 |
% |
|
|
39,034 |
|
|
|
41 |
% |
|
|
16,410 |
|
|
|
46 |
% |
|
Repair and maintenance |
|
|
3,307 |
|
|
|
11 |
% |
|
|
1,837 |
|
|
|
15 |
% |
|
|
9,798 |
|
|
|
10 |
% |
|
|
5,398 |
|
|
|
15 |
% |
|
Insurance and loss reserves |
|
|
503 |
|
|
|
2 |
% |
|
|
116 |
|
|
|
1 |
% |
|
|
1,756 |
|
|
|
2 |
% |
|
|
473 |
|
|
|
1 |
% |
|
Fuel, lube and supplies |
|
|
1,614 |
|
|
|
5 |
% |
|
|
1,195 |
|
|
|
9 |
% |
|
|
4,819 |
|
|
|
5 |
% |
|
|
4,141 |
|
|
|
12 |
% |
|
Other |
|
|
2,658 |
|
|
|
9 |
% |
|
|
1,838 |
|
|
|
15 |
% |
|
|
8,555 |
|
|
|
9 |
% |
|
|
4,903 |
|
|
|
14 |
% |
|
|
|
|
21,056 |
|
|
|
68 |
% |
|
|
10,628 |
|
|
|
85 |
% |
|
|
63,962 |
|
|
|
68 |
% |
|
|
31,325 |
|
|
|
88 |
% |
|
West Africa: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crew costs |
|
$ |
8,868 |
|
|
|
29 |
% |
|
|
11,392 |
|
|
|
31 |
% |
|
|
27,423 |
|
|
|
28 |
% |
|
|
34,262 |
|
|
|
32 |
% |
|
Repair and maintenance |
|
|
3,282 |
|
|
|
11 |
% |
|
|
2,367 |
|
|
|
6 |
% |
|
|
8,201 |
|
|
|
8 |
% |
|
|
8,172 |
|
|
|
8 |
% |
|
Insurance and loss reserves |
|
|
863 |
|
|
|
3 |
% |
|
|
(876 |
) |
|
|
(2 |
)% |
|
|
2,140 |
|
|
|
2 |
% |
|
|
(827 |
) |
|
|
(1 |
)% |
|
Fuel, lube and supplies |
|
|
2,817 |
|
|
|
9 |
% |
|
|
3,310 |
|
|
|
9 |
% |
|
|
8,163 |
|
|
|
8 |
% |
|
|
9,587 |
|
|
|
9 |
% |
|
Other |
|
|
5,214 |
|
|
|
17 |
% |
|
|
6,886 |
|
|
|
19 |
% |
|
|
16,168 |
|
|
|
16 |
% |
|
|
20,093 |
|
|
|
19 |
% |
|
|
|
|
21,044 |
|
|
|
69 |
% |
|
|
23,079 |
|
|
|
63 |
% |
|
|
62,095 |
|
|
|
63 |
% |
|
|
71,287 |
|
|
|
67 |
% |
|
Vessel operating costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crew costs |
|
$ |
46,193 |
|
|
|
39 |
% |
|
|
37,615 |
|
|
|
39 |
% |
|
|
141,528 |
|
|
|
39 |
% |
|
|
108,207 |
|
|
|
37 |
% |
|
Repair and maintenance |
|
|
11,967 |
|
|
|
10 |
% |
|
|
8,634 |
|
|
|
9 |
% |
|
|
32,579 |
|
|
|
9 |
% |
|
|
24,316 |
|
|
|
8 |
% |
|
Insurance and loss reserves |
|
|
2,027 |
|
|
|
2 |
% |
|
|
(1,706 |
) |
|
|
(2 |
)% |
|
|
4,955 |
|
|
|
1 |
% |
|
|
(586 |
) |
|
|
(<1 |
%) |
|
Fuel, lube and supplies |
|
|
8,781 |
|
|
|
7 |
% |
|
|
7,980 |
|
|
|
8 |
% |
|
|
26,577 |
|
|
|
7 |
% |
|
|
25,174 |
|
|
|
9 |
% |
|
Other |
|
|
11,651 |
|
|
|
10 |
% |
|
|
12,714 |
|
|
|
13 |
% |
|
|
37,622 |
|
|
|
10 |
% |
|
|
37,502 |
|
|
|
13 |
% |
|
Total vessel operating costs |
|
$ |
80,619 |
|
|
|
69 |
% |
|
|
65,237 |
|
|
|
67 |
% |
|
|
243,261 |
|
|
|
67 |
% |
|
|
194,613 |
|
|
|
67 |
% |
Prior to January 1, 2019, we allocated the costs of certain marine operations related to general and administrative functions, such as marine management, engineering, supply chain management, risk management, fleet human resources and health and safety to the segment general and administrative expenses. Beginning on January 1, 2019, our management elected to modify that process in order to better analyze costs and better align the policies of the two
24
combined companies such that all costs related to those previously allocated functions would instead be charged to corporate general and administrative expenses. This change is reflected in the tables below for the three and nine months ended September 30, 2019. . As a result, the segment general and administrative expenses for the three and nine months ended September 30, 2019 and 2018 are not comparable.
The following table presents general and administrative expenses in our four geographic segments both individually and in total and the related general and administrative expenses as a percentage of the vessel revenues of each segment and in total for the three and nine months ended September 30, 2019 and 2018:
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||||||||||
|
|
|
September 30, 2019 |
|
|
September 30, 2018 |
|
|
September 30, 2019 |
|
|
September 30, 2018 |
|
||||||||||||||||||||
|
(In thousands) |
|
|
|
|
|
% |
|
|
|
|
|
|
% |
|
|
|
|
|
|
% |
|
|
|
|
|
|
% |
|
||||
|
Segment general and administrative expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
$ |
3,532 |
|
|
|
11 |
% |
|
|
4,849 |
|
|
|
17 |
% |
|
$ |
10,583 |
|
|
|
10 |
% |
|
|
15,500 |
|
|
|
18 |
% |
|
Middle East/Asia Pacific |
|
|
2,224 |
|
|
|
10 |
% |
|
|
4,279 |
|
|
|
21 |
% |
|
|
6,745 |
|
|
|
11 |
% |
|
|
11,214 |
|
|
|
18 |
% |
|
Europe/Mediterranean Sea |
|
|
2,731 |
|
|
|
9 |
% |
|
|
1,681 |
|
|
|
13 |
% |
|
|
8,715 |
|
|
|
9 |
% |
|
|
4,618 |
|
|
|
13 |
% |
|
West Africa |
|
|
3,257 |
|
|
|
11 |
% |
|
|
5,312 |
|
|
|
15 |
% |
|
|
9,787 |
|
|
|
10 |
% |
|
|
18,268 |
|
|
|
17 |
% |
|
Total segment general and administrative expenses |
|
$ |
11,744 |
|
|
|
10 |
% |
|
|
16,121 |
|
|
|
17 |
% |
|
$ |
35,830 |
|
|
|
10 |
% |
|
|
49,600 |
|
|
|
17 |
% |
The following table presents segment depreciation expense by our four geographic segments, the related segment vessel depreciation expense as a percentage of segment vessel revenues, total segment depreciation expense and the related total segment depreciation expense as a percentage of total vessel revenues for the three and nine months ended September 30, 2019 and 2018:
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||||||||||
|
|
|
September 30, 2019 |
|
|
September 30, 2018 |
|
|
September 30, 2019 |
|
|
September 30, 2018 |
|
||||||||||||||||||||
|
(In thousands) |
|
|
|
|
|
% |
|
|
|
|
|
|
% |
|
|
|
|
|
|
% |
|
|
|
|
|
|
% |
|
||||
|
Segment depreciation expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
$ |
6,929 |
|
|
|
21 |
% |
|
$ |
3,858 |
|
|
|
14 |
% |
|
$ |
19,706 |
|
|
|
19 |
% |
|
$ |
10,700 |
|
|
|
12 |
% |
|
Middle East/Asia Pacific |
|
|
5,685 |
|
|
|
25 |
% |
|
|
2,939 |
|
|
|
15 |
% |
|
|
15,454 |
|
|
|
24 |
% |
|
|
8,552 |
|
|
|
14 |
% |
|
Europe/Mediterranean Sea |
|
|
7,436 |
|
|
|
24 |
% |
|
|
2,313 |
|
|
|
18 |
% |
|
|
22,623 |
|
|
|
24 |
% |
|
|
6,356 |
|
|
|
18 |
% |
|
West Africa |
|
|
5,335 |
|
|
|
18 |
% |
|
|
4,176 |
|
|
|
11 |
% |
|
|
14,876 |
|
|
|
15 |
% |
|
|
12,269 |
|
|
|
12 |
% |
|
Total segment depreciation expense |
|
$ |
25,385 |
|
|
|
22 |
% |
|
|
13,286 |
|
|
|
14 |
% |
|
$ |
72,659 |
|
|
|
20 |
% |
|
|
37,877 |
|
|
|
13 |
% |
25
The following table compares operating loss and other components of loss and its related percentage of total revenue for the three and nine months ended September 30, 2019 and 2018:
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||||||||||
|
|
|
September 30, 2019 |
|
|
September 30, 2018 |
|
|
September 30, 2019 |
|
|
September 30, 2018 |
|
||||||||||||||||||||
|
(In thousands) |
|
|
|
|
|
% |
|
|
|
|
|
|
% |
|
|
|
|
|
|
% |
|
|
|
|
|
|
% |
|
||||
|
Vessel operating profit (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
$ |
(168 |
) |
|
|
(<1 |
%) |
|
$ |
1,212 |
|
|
|
1 |
% |
|
$ |
1,702 |
|
|
|
<1 |
% |
|
$ |
11,804 |
|
|
|
4 |
% |
|
Middle East/Asia Pacific |
|
|
(809 |
) |
|
|
(1 |
%) |
|
|
(701 |
) |
|
|
(1 |
%) |
|
|
(4,098 |
) |
|
|
(1 |
%) |
|
|
(2,329 |
) |
|
|
(1 |
%) |
|
Europe/Mediterranean Sea |
|
|
(276 |
) |
|
|
(<1 |
%) |
|
|
(2,056 |
) |
|
|
(2 |
%) |
|
|
(768 |
) |
|
|
(<1 |
%) |
|
|
(6,753 |
) |
|
|
(2 |
%) |
|
West Africa |
|
|
678 |
|
|
|
1 |
% |
|
|
3,912 |
|
|
|
4 |
% |
|
|
11,891 |
|
|
|
3 |
% |
|
|
3,867 |
|
|
|
1 |
% |
|
Other operating profit (loss) |
|
|
2,052 |
|
|
|
2 |
% |
|
|
485 |
|
|
|
1 |
% |
|
|
5,381 |
|
|
|
1 |
% |
|
|
2,767 |
|
|
|
1 |
% |
|
|
|
|
1,477 |
|
|
|
1 |
% |
|
|
2,852 |
|
|
|
3 |
% |
|
|
14,108 |
|
|
|
4 |
% |
|
|
9,356 |
|
|
|
3 |
% |
|
Corporate expenses (A) |
|
|
(19,074 |
) |
|
|
(16 |
%) |
|
|
(9,514 |
) |
|
|
(10 |
%) |
|
|
(46,496 |
) |
|
|
(13 |
%) |
|
|
(24,208 |
) |
|
|
(8 |
%) |
|
Gain (loss) on asset dispositions, net |
|
|
270 |
|
|
|
(<1 |
%) |
|
|
(1,571 |
) |
|
|
(2 |
%) |
|
|
1,047 |
|
|
|
1 |
% |
|
|
1,686 |
|
|
|
1 |
% |
|
Asset impairments |
|
|
(5,224 |
) |
|
|
(4 |
%) |
|
|
(16,853 |
) |
|
|
(17 |
%) |
|
|
(5,224 |
) |
|
|
(1 |
%) |
|
|
(24,254 |
) |
|
|
(8 |
%) |
|
Operating loss |
|
$ |
(22,551 |
) |
|
|
(19 |
%) |
|
|
(25,086 |
) |
|
|
(25 |
%) |
|
$ |
(36,565 |
) |
|
|
(9 |
%) |
|
|
(37,420 |
) |
|
|
(13 |
%) |
|
|
(A) |
Included in corporate expenses for the nine months ended September 30, 2019, was $5.0 million of integration costs related to the business combination with GulfMark. |
Results for three months ended September 30, 2019 compared to September 30, 2018
Americas Segment Operations. Vessel revenues in the Americas segment increased 18%, or $5.1 million, during the quarter ended September 30, 2019, as compared to the quarter ended September 30, 2018. This increase is primarily the result of the ten average active additional vessels added to the fleet resulting from the GulfMark business combination. Overall Americas segment utilization increased from 46.1% during the third quarter of 2018 to 56.9% during the third quarter of 2019; however, average day rates during these same periods decreased 15%, generally due to a greater portion of the segment’s vessels being hired at current prevailing day rates which are lower than those experienced during the third quarter of 2018.
Vessel operating loss for the Americas segment for the quarter ended September 30, 2019 was $0.2 million, which was $1.4 million less than operating profit for the quarter ended September 30, 2018. The decrease is primarily related to the increase in vessel operating costs primarily related to requirements for increased local crewing on vessels operating in Brazil and additional vessels working in the U.S. Gulf, some of which required additional repairs and maintenance.
For the quarter ended September 30, 2019, incremental increases related to the addition of GulfMark vessels to the Americas fleet included vessel operating expenses of $4.8 million, depreciation of $2.3 million and general and administrative expenses of $0.6 million. Offsetting these expense increases is a reduction to general and administrative expenses as a result of our new policy beginning on January 1, 2019 to discontinue the allocation of certain corporate general and administrative expenses.
Middle East/Asia Pacific Segment Operations. Vessel revenues in the Middle East/Asia Pacific segment increased 14%, or $2.8 million, during the quarter ended September 30, 2019, as compared to the quarter ended September 30, 2018. Middle East/Asia Pacific segment utilization for the quarter ended September 30, 2019 was increased from 62.4% to 63.6% and average day rates increased six percent. Vessel operating loss for the Middle East/Asia Pacific segment for the quarter ended September 30, 2019, was $0.8 million as compared to $0.7 million for the quarter ended September 30, 2018. The increase in revenue was offset by the increase in operating costs and depreciation expenses. There was minimal impact from the GulfMark merger on operations in this segment.
For the quarter ended September 30, 2019, incremental increases related to the addition of GulfMark vessels to the Middle East/Asia Pacific vessel fleet included vessel operating expenses of $0.6 million, depreciation of $0.6 million and general and administrative expenses of $0.1 million. Overall reductions to general and administrative expenses were primarily attributable to our new policy beginning on January 1, 2019 to discontinue the allocation of certain corporate general and administrative expenses.
26
Europe/Mediterranean Sea Segment Operations. Vessel revenues in the Europe/Mediterranean Sea segment increased 146%, or $18.4 million, during the quarter ended September 30, 2019, as compared to the quarter ended September 30, 2018. The Europe/Mediterranean Sea vessel fleet increased by 14 active vessels on a net basis, all of which were incrementally added to the area as a result of the business combination with GulfMark. Europe/Mediterranean Sea segment utilization decreased from 67.0% during the quarter ended September 30, 2018 to 61.4% during the quarter ended September 30, 2019. Average day rates during these same periods increased 31% because of increasing demand for vessels in the North Sea and Mediterranean. Vessel operating loss for the Europe/Mediterranean Sea segment was $0.3 million for the quarter ended September 30, 2019 as compared to a vessel operating loss of $2.1 million for the quarter ended September 30, 2018.
For the quarter ended September 30, 2019, incremental increases related to the addition of GulfMark vessels to the Europe/Mediterranean Sea vessel fleet included vessel operating expenses of $12.5 million, depreciation of $4.8 million and general and administrative expenses of $1.5 million. Offsetting these expense increases is a reduction to general and administrative expenses as a result of our new policy beginning on January 1, 2019 to discontinue the allocation of certain corporate general and administrative expenses.
West Africa Segment Operations. Vessel revenues in the West Africa segment decreased 17%, or $6.2 million, during the quarter ended September 30, 2019, as compared to the quarter ended September 30, 2018. The West Africa vessel fleet decreased by seven active vessels during the comparative periods. West Africa segment utilization decreased slightly from 51.4% during the third quarter of 2018 to 50.9% during the third quarter of 2019, and average day rates decreased 1% during these same periods. The decrease in revenue was generally due to the decrease in active vessels in the region.
Vessel operating profit for the West Africa segment decreased from $3.9 million for the quarter ended September 30, 2018 to $0.7 million in the quarter ended September 30, 2019 primarily due to lower revenue.
Results for nine months ended September 30, 2019 compared to September 30, 2018
Americas Segment Operations. Vessel revenues in the Americas segment increased 19%, or $16.9 million, during the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018. This increase is the result of the eleven average active additional vessels added to the fleet resulting primarily from the GulfMark business combination. Overall Americas segment utilization increased from 45.7% during the nine months ended September 30, 2018 to 52.9% during the nine months ended September 30, 2019; however, average day rates during these same periods decreased 20%, which is generally due to a greater portion of the segment’s vessels being hired at current prevailing day rates which are lower than those experienced during 2018.
Operating profit for the Americas segment for the nine months ended September 30, 2019, was $10.1 million less than operating profit for the nine months ended September 30, 2018. The decrease is primarily related to the increase in vessel operating costs primarily related to requirements for increased local crewing on vessels operating in Brazil and additional vessels working in the U.S. Gulf, some of which required additional repairs and maintenance during 2019.
For the nine months ended September 30, 2019, incremental increases related to the addition of GulfMark vessels to the Americas fleet included vessel operating expenses of $17.0 million, depreciation of $7.2 million and general and administrative expenses of $1.2 million. Offsetting these expense increases is a reduction to general and administrative expenses as a result of our new policy beginning on January 1, 2019 to discontinue the allocation of certain corporate general and administrative expenses.
Middle East/Asia Pacific Segment Operations. Vessel revenues in the Middle East/Asia Pacific segment increased $2.9 million during the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018. The Middle East/Asia Pacific vessel fleet count was 2 less for the nine months ended September 30, 2019 than for the nine months ended September 30, 2018; although, four active vessels were incrementally added to the area as a result of the business combination with GulfMark. Middle East/Asia Pacific segment utilization increased from 55.9% to 62.2% and average day rates decreased by 3%. Operating loss for the Middle East/Asia Pacific segment increased $1.8 million largely related to higher depreciation expense primarily related to the additional incremental GulfMark vessels and the amortization of deferred dry docking costs.
27
For the nine months ended September 30, 2019, incremental increases related to the addition of GulfMark vessels to the Middle East/Asia Pacific vessel fleet included vessel operating expenses of $2.7 million, depreciation of $1.7 million and general and administrative expenses of $0.7 million. Overall reductions to general and administrative expenses were primarily attributable to our new policy beginning on January 1, 2019 to discontinue the allocation of certain corporate general and administrative expenses.
Europe/Mediterranean Sea Segment Operations. Vessel revenues in the Europe/Mediterranean Sea segment increased 166%, or $59.0 million, during the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018. The Europe/Mediterranean Sea vessel fleet increased by 16 active vessels on a net basis, 15 of which were incrementally added to the area as a result of the business combination with GulfMark. Europe/Mediterranean Sea segment utilization decreased slightly from 65.0% to 61.4% and average day rates increased by 30%. These increases in utilization and average day rates are due to the increasing demand for vessels in the North Sea and Mediterranean. Operating loss for the Europe/Mediterranean Sea segment decreased 89%, or $6.0 million, for the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018.
For the nine months ended September 30, 2019, incremental increases related to the addition of GulfMark vessels to the Europe/Mediterranean Sea vessel fleet included vessel operating expenses of $33.2 million, depreciation of $14.1 million and general and administrative expenses of $4.8 million. Offsetting these expense increases is a reduction to general and administrative expenses as a result of our new policy beginning on January 1, 2019 to discontinue the allocation of certain corporate general and administrative expenses.
West Africa Segment Operations. Vessel revenues in the West Africa segment decreased 7%, or $7.0 million, during the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018. The West Africa vessel fleet decreased by four active vessels during the comparative periods. West Africa segment utilization increased from 48.3% to 50.8% and average day rates increased by 2%. The decreases in revenue were generally due to the mix of higher specification vessels working in the segment and more spot market activity in the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018.
Operating profit for the West Africa segment was $11.9 million for the nine months ended September 30, 2019, as compared to $3.9 million for the nine months ended September 30, 2018. This increase in profitability is due to decreases in vessel costs, primarily as a result of the devaluation of a currency which was used to pay a portion of crew costs, and general and administrative expenses. The reductions to general and administrative expenses are primarily the result of our new policy beginning on January 1, 2019 to discontinue the allocation of certain corporate general and administrative expenses.
Other Items.
Asset Impairments. The table below summarizes the number of vessels impaired and the amount of the impairment incurred.
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
(Dollars in thousands) |
|
September 30, 2019 |
|
|
September 30, 2018 |
|
|
September 30, 2019 |
|
|
September 30, 2018 |
|
||||
|
Number of vessels impaired in the period |
|
|
— |
|
|
|
15 |
|
|
|
— |
|
|
|
30 |
|
|
Amount of impairment incurred |
|
$ |
5,224 |
|
|
|
16,853 |
|
|
|
5,224 |
|
|
|
24,254 |
|
As of September 30, 2019, we performed an evaluation to determine whether conditions existed that would indicate potential impairment in the value of our assets. Our evaluation did not indicate any indicators of impairment that would require us to perform additional analyses and, consequently, we have recorded no vessel impairment charges in the three and nine months ended September 30, 2019. We did evaluate our inventory as of September 30, 2019 and charged $5.2 million to impairment expense for obsolete inventory.
Vessel Utilization and Average Day Rates by Segment
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 largely through the level of offshore exploration, field development and production spending by energy companies relative to the supply of offshore support vessels. Specifications of available equipment and the scope of service provided may also influence vessel day rates. Vessel utilization rates are calculated by dividing the number of days a vessel works during a reporting period by the number of days the vessel is available to work in the reporting period. As such, stacked vessels depress utilization rates because stacked vessels are considered available to work, and are included in the calculation of utilization rates. Average day rates are calculated by dividing the revenue a vessel earns during a reporting period by the number of days the vessel worked in the reporting period.
28
Vessel utilization and average day rates are calculated on all vessels in service (which includes stacked vessels and vessels in drydock) but do not include vessels owned by joint ventures (four and eight vessels at September 30, 2019 and 2018, respectively).
The following tables compare day-based utilization percentages, average day rates and average total, active and stacked vessels by segment for the three and nine months ended September 30, 2019 and 2018:
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
|
September 30, 2019 |
|
|
September 30, 2018 |
|
|
September 30, 2019 |
|
|
September 30, 2018 |
|
||||
|
SEGMENT STATISTICS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas fleet: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Utilization |
|
|
56.9 |
% |
|
|
46.1 |
% |
|
|
52.9 |
% |
|
|
45.7 |
% |
|
Average vessel day rates |
|
$ |
11,783 |
|
|
$ |
13,924 |
|
|
$ |
11,843 |
|
|
$ |
14,841 |
|
|
Average total vessels |
|
|
54 |
|
|
|
47 |
|
|
|
61 |
|
|
|
47 |
|
|
Average stacked vessels |
|
|
(17 |
) |
|
|
(20 |
) |
|
|
(23 |
) |
|
|
(20 |
) |
|
Average active vessels |
|
|
37 |
|
|
|
27 |
|
|
|
38 |
|
|
|
27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Middle East/Asia Pacific fleet: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Utilization |
|
|
63.6 |
% |
|
|
62.4 |
% |
|
|
62.2 |
% |
|
|
55.9 |
% |
|
Average vessel day rates |
|
$ |
7,520 |
|
|
$ |
7,123 |
|
|
$ |
7,343 |
|
|
$ |
7,545 |
|
|
Average total vessels |
|
|
52 |
|
|
|
49 |
|
|
|
51 |
|
|
|
53 |
|
|
Average stacked vessels |
|
|
(11 |
) |
|
|
(9 |
) |
|
|
(10 |
) |
|
|
(12 |
) |
|
Average active vessels |
|
|
41 |
|
|
|
40 |
|
|
|
41 |
|
|
|
41 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe/Mediterranean Sea fleet: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Utilization |
|
|
61.4 |
% |
|
|
67.0 |
% |
|
|
61.4 |
% |
|
|
65.0 |
% |
|
Average vessel day rates |
|
$ |
12,147 |
|
|
$ |
9,302 |
|
|
$ |
12,050 |
|
|
$ |
9,266 |
|
|
Average total vessels |
|
|
45 |
|
|
|
22 |
|
|
|
47 |
|
|
|
22 |
|
|
Average stacked vessels |
|
|
(13 |
) |
|
|
(4 |
) |
|
|
(13 |
) |
|
|
(4 |
) |
|
Average active vessels |
|
|
32 |
|
|
|
18 |
|
|
|
34 |
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
West Africa fleet: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Utilization |
|
|
50.9 |
% |
|
|
51.4 |
% |
|
|
50.8 |
% |
|
|
48.3 |
% |
|
Average vessel day rates |
|
$ |
9,174 |
|
|
$ |
9,291 |
|
|
$ |
9,421 |
|
|
$ |
9,272 |
|
|
Average total vessels |
|
|
70 |
|
|
|
83 |
|
|
|
75 |
|
|
|
86 |
|
|
Average stacked vessels |
|
|
(22 |
) |
|
|
(28 |
) |
|
|
(25 |
) |
|
|
(32 |
) |
|
Average active vessels |
|
|
48 |
|
|
|
55 |
|
|
|
50 |
|
|
|
54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Worldwide fleet: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Utilization |
|
|
57.5 |
% |
|
|
54.5 |
% |
|
|
55.9 |
% |
|
|
51.4 |
% |
|
Average vessel day rates |
|
$ |
10,021 |
|
|
$ |
9,616 |
|
|
$ |
10,087 |
|
|
$ |
9,911 |
|
|
Average total vessels |
|
|
221 |
|
|
|
201 |
|
|
|
234 |
|
|
|
208 |
|
|
Average stacked vessels |
|
|
(63 |
) |
|
|
(61 |
) |
|
|
(71 |
) |
|
|
(68 |
) |
|
Average active vessels |
|
|
158 |
|
|
|
140 |
|
|
|
163 |
|
|
|
140 |
|
Average active vessels exclude stacked vessels. We consider a vessel to be stacked if the vessel crew is furloughed or substantially reduced and limited maintenance is being performed on the vessel. We reduce operating costs by stacking vessels when management does not foresee opportunities to profitably or strategically operate the vessels in the near future. Vessels are stacked when market conditions warrant and they are no longer considered stacked when they are returned to active service, sold or otherwise disposed. When economically practical marketing opportunities arise, the stacked vessels can be returned to active service by performing any necessary maintenance on the vessel and either rehiring or returning fleet personnel to operate the vessel. Although not currently fulfilling charters, stacked vessels are included in the calculation of utilization statistics.
29
The following is a summary of net properties and equipment at September 30, 2019 and December 31, 2018:
|
|
|
September 30, 2019 |
|
|
December 31, 2018 |
|
||||||||||
|
|
|
Number |
|
|
Carrying |
|
|
Number |
|
|
Carrying |
|
||||
|
|
|
of Vessels |
|
|
Value |
|
|
of Vessels |
|
|
Value |
|
||||
|
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
(In thousands) |
|
||
|
Owned vessels in active service |
|
|
160 |
|
|
$ |
897,583 |
|
|
|
165 |
|
|
$ |
914,044 |
|
|
Stacked vessels |
|
|
60 |
|
|
|
120,010 |
|
|
|
92 |
|
|
|
169,037 |
|
|
Marine equipment and other assets under construction |
|
|
|
|
|
|
246 |
|
|
|
|
|
|
|
795 |
|
|
Other property and equipment |
|
|
|
|
|
|
4,947 |
|
|
|
|
|
|
|
5,981 |
|
|
Totals |
|
|
220 |
|
|
$ |
1,022,786 |
|
|
|
257 |
|
|
$ |
1,089,857 |
|
Vessel Dispositions
We seek opportunities to sell and/or scrap our older vessels when market conditions warrant and opportunities arise. The majority of our vessels are sold to buyers who do not compete with us in the offshore energy industry. The following is a summary of the number of vessels disposed of by segment:
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
|
September 30, 2019 |
|
|
September 30, 2018 |
|
|
September 30, 2019 |
|
|
September 30, 2018 |
|
||||
|
Number of vessels disposed of by segment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
|
2 |
|
|
|
— |
|
|
|
20 |
|
|
|
8 |
|
|
Middle East/Asia Pacific |
|
|
— |
|
|
|
5 |
|
|
|
1 |
|
|
|
7 |
|
|
Europe/Mediterranean Sea |
|
|
1 |
|
|
|
— |
|
|
|
6 |
|
|
|
— |
|
|
West Africa |
|
|
— |
|
|
|
2 |
|
|
|
10 |
|
|
|
15 |
|
|
Total |
|
|
3 |
|
|
|
7 |
|
|
|
37 |
|
|
|
30 |
|
Liquidity, Capital Resources and Other Matters
Availability of Cash
At September 30, 2019, we had $362.6 million in cash and cash equivalents (including $3.3 million of restricted cash), of which $96.4 million was held by foreign subsidiaries, the majority of which is available to us without adverse tax consequences. Included in foreign subsidiary cash are balances held in U.S. dollars and foreign currencies that await repatriation due to various currency conversion and repatriation constraints, partner and tax related matters, prior to the cash being made available for remittance to our domestic accounts. We currently intend that earnings by foreign subsidiaries will be indefinitely reinvested in foreign jurisdictions in order to fund strategic initiatives (such as investment, expansion and acquisitions), fund working capital requirements and repay debt (both third-party and intercompany) of our foreign subsidiaries in the normal course of business. Moreover, we do not currently intend to repatriate earnings of our foreign subsidiaries to the United States because cash on hand, cash generated from our domestic businesses and the repayment of intercompany liabilities from foreign subsidiaries are currently deemed to be sufficient to fund the cash needs of our operations in the United States.
Our objective in financing our business is to maintain adequate financial resources and access to sufficient levels of liquidity. We do not have a revolving credit facility. Cash and cash equivalents and future net cash provided by operating activities provide us, in our opinion, with sufficient liquidity to meet our liquidity requirements.
Debt
Refer to Note (9) of Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details on our indebtedness.
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 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.
30
Operating Activities
Net cash provided by (used in) operating activities for any period will fluctuate according to the level of business activity for the applicable period and for the nine months ended September 30, 2019 and 2018, was $(36.7) million and $22.2 million, respectively.
Net cash used in operations for the nine months ended September 30, 2019, reflects a net loss of $80.6 million, which includes non-cash depreciation and amortization of $73.7 million, asset impairments of $5.2 million, stock-based compensation expense of $16.6 million and approximately $1.0 million of gains on asset sales. Cash paid for drydocking used $43.7 million and combined changes in operating assets and liabilities and in amounts due to/due from affiliate, net, used $6.5 million of cash.
Net cash provided by operations for the nine months ended September 30, 2018 reflects a net loss of $81.4 million, which includes non-cash asset impairments of $24.3 million, non-cash depreciation and amortization of $38.2 million, gain on asset dispositions, net, of $1.7 million and stock-based compensation expense of $10.0 million. Changes in investments in, at equity, and advances to unconsolidated companies decreased by $28.1 million, which primarily reflects foreign exchange losses recognized by the company’s 49% owned Sonatide joint venture. Changes in due from/due to related parties, net during the nine months ended September 30, 2018 of $28.3 million generally reflect collections from Sonatide. Change in operating assets and liabilities used $5.0 million of cash in the nine months ended September 30, 2018.
Investing Activities
Net cash provided by investing activities for the nine months ended September 30, 2019 and 2018, was $11.2 million and $7.4 million, respectively.
Net cash provided by investing activities for the nine months ended September 30, 2019 primarily reflects the receipt of $25.1 million related to the disposal of 37 vessels. Additions to properties and equipment were comprised of approximately $13.9 million in capitalized upgrades to existing vessels and equipment and property and equipment purchases.
Net cash provided by investing activities for the nine months ended September 30, 2018 was $7.4 million, reflecting the receipt of proceeds from the sale of assets of $16.5 million related to the disposal of 30 vessels. Additions to properties and equipment were comprised of approximately $5.0 million in capitalized upgrades to existing vessels and equipment and $4.1 million for the construction of offshore support vessels.
Financing Activities
Net cash used in financing activities for the nine months ended September 30, 2019 and 2018, was $9.6 million and $14.4 million, respectively.
Net cash used in financing activities for the nine months ended September 30, 2019 was a result of $6.3 million of scheduled semiannual principal payments on Troms offshore debt, $3.1 million of taxes paid related to share based compensation and the repurchase of $0.2 million of New Secured Notes resulting from a recent tender offer.
Financing activities for the nine months ended September 30, 2018 used $14.4 million of cash, as a result of payments made to creditors pursuant to the plan of reorganization of $8.4 million, $4.0 million of scheduled semiannual principal payments on Troms offshore debt, a $2.0 million payment to acquire the remaining noncontrolling interest in a consolidated joint venture and the repurchase of $46,023 of New Secured Notes resulting from a tender offer.
Other Liquidity Matters
Contractual Obligations and Other Contingent Commitments
We did not have any material changes in our contractual obligations and commercial commitments since the end of fiscal year 2018. Refer to Part II, Item 7 in our Annual Report on Form 10-K for the year ended December 31, 2018, for information regarding our contractual obligations and other contingent commitments.
31
Application of Critical Accounting Policies and Estimates
Our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the Securities and Exchange Commission on February 28, 2019, describes the accounting policies that are critical to reporting our financial position and operating results and that require management’s most difficult, subjective or complex judgments. This Quarterly Report on Form 10-Q should be read in conjunction with the discussion contained in our Annual Report on Form 10-K for the year ended December 31, 2018, regarding these critical accounting policies.
New Accounting Pronouncements
For information regarding the effect of new accounting pronouncements, refer to Note (2) of Notes to Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There were no material changes in the nine months ended September 30, 2019 to the market risk disclosures contained in Item 7A in our Annual Report on Form 10-K for the year ended December 31, 2018.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed with the objective of ensuring that all information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended (Exchange Act), such as this Quarterly Report on Form 10-Q, is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. However, any control system, no matter how well conceived and followed, can provide only reasonable, and not absolute, assurance that the objectives of the control system are met.
We evaluated, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September30, 2019.
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting that occurred during the quarter ended September 30, 2019, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
32
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Refer to Note (10) of Notes to the Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details on our Arbitral Award for the Taking of our Venezuelan Operations.
Various legal proceedings and claims are outstanding which arose in the ordinary course of business. In the opinion of management, the amount of ultimate liability, if any, with respect to these actions, will not have a material adverse effect on our financial position, results of operations, or cash flows. Information related to various commitments and contingencies, including legal proceedings, is disclosed in Note (10) of Notes to the Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors previously disclosed in Part I, Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the Securities and Exchange Commission on February 28, 2019.
ITEM 6. EXHIBITS
|
Exhibit Number |
|
Description |
|
|
|
|
|
2.1 |
|
|
|
|
|
|
|
2.2 |
|
|
|
|
|
|
|
2.3 |
|
|
|
|
|
|
|
2.4 |
|
|
|
|
|
|
|
3.1 |
|
|
|
|
|
|
|
3.2 |
|
|
|
|
|
|
|
4.1 |
|
|
|
|
|
|
|
10.1 |
|
|
|
|
|
|
|
10.2 |
|
|
|
|
|
|
33
|
Exhibit Number |
|
Description |
|
10.3 |
|
|
|
|
|
|
|
10.4 |
|
|
|
|
|
|
|
10.5 |
|
|
|
|
|
|
|
10.6 |
|
|
|
|
|
|
|
10.7 |
|
|
|
|
|
|
|
10.8 |
|
|
|
|
|
|
|
10.9+* |
|
|
|
|
|
|
|
10.10+ |
|
|
|
|
|
|
|
31.1* |
|
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
|
|
|
32.1** |
|
|
|
|
|
|
|
101.INS* |
|
Inline XBRL Instance Document – The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document. |
|
|
|
|
|
101.SCH* |
|
Inline XBRL Taxonomy Extension Schema. |
|
|
|
|
|
101.CAL* |
|
Inline XBRL Taxonomy Extension Calculation Linkbase. |
|
|
|
|
|
101.DEF* |
|
Inline XBRL Taxonomy Extension Definition Linkbase. |
|
|
|
|
|
101.LAB* |
|
Inline XBRL Taxonomy Extension Label Linkbase. |
|
|
|
|
|
101.PRE* |
|
Inline XBRL Taxonomy Extension Presentation Linkbase. |
|
|
|
|
|
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document). |
|
* |
Filed with this quarterly report on Form 10-Q. |
|
** |
Furnished with the quarterly report on Form 10-Q. |
|
+ |
Indicates a management contract or compensatory plan or arrangement |
34
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized
|
|
TIDEWATER INC. |
|
|
(Registrant) |
|
|
|
|
Date: November 12, 2019 |
/s/ Samuel R. Rubio |
|
|
Samuel R. Rubio |
|
|
Vice President, Chief Accounting Officer and Controller |
|
|
(Principal Accounting Officer and authorized signatory) |
35