Tidewater Inc. — FY2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019. The filing also reports unaudited fourth-quarter results. Tidewater provides offshore marine support services to the global energy industry. Comparisons with 2018 are affected by the November 2018 GulfMark acquisition; 2019 includes GulfMark for the full year, while 2018 includes it only after the merger date. Comparisons with pre-August 2017 periods are further limited by fresh-start accounting.
Financial performance and position
- FY2019 revenue: $486.5 million, up 19.7% from $406.5 million in 2018. Vessel revenue was $477.0 million. Management attributed about $92.0 million of 2019 revenue to the additional full-year contribution from GulfMark.
- Profitability: Operating loss was $86.6 million, versus $107.5 million in 2018; net loss was $141.2 million, versus $171.8 million. Loss attributable to Tidewater shareholders was $141.7 million, or $3.71 per diluted share, compared with $171.5 million, or $6.45 per share, in 2018. Vessel operating costs were 69% of vessel revenue, compared with 68% in 2018; operating margin on total revenue was approximately negative 17.8%.
- Fourth quarter: Revenue was $118.8 million, operating loss $50.0 million, and net loss attributable to Tidewater $59.9 million, or $1.52 per share. In Q4 2018, revenue was $110.2 million, operating loss $70.1 million, and attributable net loss $90.5 million, or $2.83 per share. Q4 2019 included $32.5 million of impairment and other expense.
- Fleet measures: Worldwide utilization averaged 56.5%, up from 52.2%; average day rate was $10,046, up from $9,809. Results varied by region: Europe/Mediterranean day rates rose 25%, while Americas day rates fell 16%.
- Cash flow: Operating cash flow was negative $31.4 million, compared with positive $3.9 million in 2018. Investing activities provided $10.8 million, primarily from asset sales; financing activities used $149.6 million, including debt repayments. Cash, cash equivalents and restricted cash totaled $227.6 million at year-end, down from $397.7 million.
- Debt and liquidity: Year-end debt principal was approximately $297.7 million: $224.8 million of 8% secured notes due 2022 and $72.9 million of Troms Offshore borrowings. The balance sheet reported $288.9 million of current and long-term debt after debt discounts and premiums. Current assets were $537.3 million and current liabilities $185.7 million. The company had no revolving credit facility.
- Other balance-sheet items: Total assets were $1.58 billion and total equity $1.02 billion. Due from affiliates was $126.0 million; the company reported $89.2 million due from Sonatide in Angola. Contractual obligations totaled $473.3 million, including debt, leases, pension obligations and uncertain tax positions.
Material changes and unusual items
- GulfMark’s full-year inclusion drove much of the revenue and operating-cost increase. Management reported $61.4 million of incremental vessel operating costs associated with GulfMark in 2019.
- Tidewater sold 40 vessels in 2019 and designated 46 additional vessels for sale: 42 stacked and four active. The year-end classification and valuation of the vessels generated a $26.7 million impairment charge; assets held for sale were reported at $39.3 million.
- Other impairment and unusual expenses included $5.2 million for obsolete marine supplies and $5.8 million related to a Brazilian shipyard dispute. Total long-lived asset impairments and other expense were $37.8 million, down from $61.1 million in 2018.
- Corporate severance and termination costs were approximately $12.6 million. General and administrative expense nevertheless declined to $103.7 million from $110.0 million.
- The company repurchased $125.0 million face value of secured notes in a 2019 tender offer, paying a $11.4 million premium and consent fee. Year-end cash and restricted cash fell materially, while operating cash flow was negative.
Outlook, risks and contingencies
- Management said oil prices were generally in the $50–$65 per barrel range, but remained too low to support significant increases in exploration and production activity. The company provided no quantified earnings or revenue guidance in the supplied filing text.
- Results remain sensitive to oil and gas prices, offshore customer spending, vessel supply, charter rates and utilization. Competition and excess industry capacity may pressure pricing; expiring contracts may be renewed at lower rates or not replaced.
- Debt agreements impose minimum liquidity and interest-coverage requirements, alongside other restrictive covenants. A covenant breach could trigger acceleration and potential foreclosure on collateral, including vessels. The filing describes the risks but does not establish here whether future covenant compliance is assured.
- Sonatide presents collection, currency and partner risks. The company reported that Sonangol intended to seek divestiture from the joint venture in 2020. Angolan kwanza devaluation and restrictions on currency conversion or repatriation may affect recoveries; the company continues to assess the Sonatide receivable for impairment.
- The filing identified the emerging coronavirus outbreak as a potential risk to oil demand, economic activity, crew rotations and port access. Other material exposures include international political and regulatory risk, foreign exchange, environmental and marine incidents, insurance limitations, cybersecurity and uncertain tax positions.
- Management and Deloitte reported effective internal control over financial reporting at December 31, 2019; Deloitte issued an unqualified opinion on the financial statements. The auditor identified uncertain tax positions and active-vessel impairment estimates as critical audit matters.
Investor verification priorities
- Review the sustainability of liquidity and covenant compliance, including the cash-flow outlook, debt maturities and absence of a revolving credit facility.
- Assess collectability and currency exposure of affiliate balances, especially the Sonatide receivable, and verify developments in the proposed joint-venture divestiture.
- Verify assumptions behind vessel impairment valuations and the expected timing and proceeds from selling or scrapping the 46 vessels held for sale.
- Separate GulfMark’s acquisition-related contribution from underlying operating trends; check regional utilization, day rates, costs and contract renewals.
- Monitor the Brazilian shipyard litigation, uncertain tax liabilities, and the effects of early-2020 market and public-health developments.