Tidewater Inc. 10-K Summary: Fiscal Year Ended March 31, 2007
Business Context and Reporting Period
Tidewater Inc. operates the world's largest fleet of offshore marine service vessels, providing support for offshore oil and gas exploration, development, and production. The company operates in two primary segments: United States and International. As of March 31, 2007, the fleet consisted of 463 vessels, including 48 stacked vessels and 29 withdrawn from service. International operations accounted for 78% of total revenues.
Key Financial Metrics
| Metric | Fiscal 2007 | Fiscal 2006 |
|---|---|---|
| Total Revenues | $1,125.3 million | $877.6 million |
| Net Earnings | $356.6 million | $235.8 million |
| Diluted EPS | $6.31 | $4.07 |
| Operating Cash Flow | $435.1 million | $297.4 million |
| Cash and Equivalents | $393.8 million | $246.1 million |
| Long-Term Debt | $300.0 million | $300.0 million |
| Working Capital | $584.9 million | $413.3 million |
| Current Ratio | 4.98 | 4.57 |
Material Changes vs. Prior Period
- Revenue Growth: Revenues increased 28% ($247.6 million) driven by strong industry fundamentals, higher vessel utilization, and increased average day rates globally.
- Profitability: Net earnings rose 51% ($120.9 million). International operating profit increased 73% ($134.9 million), while U.S. operating profit increased 49% ($30.2 million).
- Asset Sales: The company sold 14 offshore tugs for a total of $43.7 million, resulting in a $34.0 million pre-tax gain. Additional sales of 52 vessels generated $9.2 million in gains.
- Stock Repurchases: Under a July 2006 authorization, the company repurchased 867,100 shares for $40.4 million. A prior program (July 2005) concluded with $112.1 million spent on 2.4 million shares.
- Impairment: No impairment charges were recorded in 2007, compared to $3.1 million in 2006.
Guidance, Outlook, and Risks
Outlook: Management anticipates continued strong demand in international markets driven by crude oil prices. The U.S. market outlook depends on the active offshore rig count following the completion of hurricane repair work. The company plans to continue fleet replacement with newer, larger vessels and pursue targeted acquisitions.
Capital Commitments: As of March 31, 2007, the company had $520.6 million in vessel construction commitments, with $147.0 million already expended. Subsequent to year-end, an additional $166.6 million was committed for ten new vessels.
Risks and Contingencies:
- FCPA Investigation: In April 2007, the company announced an internal investigation into its Nigerian operations regarding potential violations of the Foreign Corrupt Practices Act (FCPA) involving a customs agent. The company has notified the SEC and DOJ. No liability accrual was recorded as the amount was not probable or estimable.
- SEC Settlement: The company and its CFO submitted a settlement offer regarding a 2004 impairment charge inquiry. If accepted, it would result in a cease and desist order without fines or restatements.
- Tax Disputes: The IRS proposed changes regarding Foreign Sales Corporation (FSC) deductions for fiscal years 2001-2004, potentially resulting in $18.6 million in additional taxes. The company has filed a protest.
- Pension Deficit: The company faces potential contributions to the UK Merchant Navy Officers Pension Fund (MNOPF) due to a fund deficit. Assessments totaling approximately $7.3 million have been recorded or accrued to date.
Investor Verification Checklist
- Verify the status and potential financial impact of the ongoing FCPA investigation in Nigeria.
- Monitor the resolution of the IRS tax dispute regarding FSC deductions for fiscal years 2001-2004.
- Assess the impact of the UK Merchant Navy Officers Pension Fund deficit on future cash flows.
- Review the execution of the $520.6 million vessel construction program and subsequent $166.6 million commitments.
- Track the utilization of the remaining $117.5 million stock repurchase authorization.