Tidewater Inc. — FY2015 Form 10-K
Reporting period: Fiscal year ended March 31, 2015. This is an annual filing; quarterly figures below identify the fourth quarter where relevant. Amounts are U.S. dollars.
Business context
Tidewater operates offshore support vessels and marine services for the global oil and gas industry. Its four geographic segments are Americas, Asia/Pacific, Middle East/North Africa, and Sub-Saharan Africa/Europe. At year-end it owned or chartered 289 vessels, including joint-venture vessels; 21 were stacked. Deepwater vessels generated 58.4% of vessel revenue.
Financial results and liquidity
| Metric | FY2015 | FY2014 |
|---|---|---|
| Total revenue | $1.496 billion | $1.435 billion |
| Vessel revenue | $1.468 billion | $1.418 billion |
| Vessel operating costs | $834.4 million | $795.9 million |
| Operating income (loss) | $(37.2) million | $201.5 million |
| Net earnings (loss) attributable to Tidewater | $(65.2) million | $140.3 million |
| Net cash from operating activities | $358.7 million | $104.6 million |
- Operating loss included a $283.7 million non-cash goodwill impairment and a $4.1 million restructuring charge. Excluding goodwill impairment charges in both years, management said net earnings fell about 19%, or $34 million.
- Vessel operating costs were 56.8% of vessel revenue, versus 56.1% in FY2014. Segment vessel operating profit was $294.0 million, or about 20% of vessel revenue, compared with $298.8 million, or 21%.
- Worldwide utilization averaged 77.3%, up from 74.7%; average day rate was $18,792, up from $17,405. In Q4, utilization fell to 71.4% from 80.8% a year earlier, while average day rate was $17,928 versus $17,525.
- Cash and equivalents were $78.6 million; working capital was $386.6 million and the current ratio was 1.80. The company reported $580 million available under its revolving credit facility at year-end.
- Debt was $1.534 billion, including $300 million of term-loan borrowings and $20 million drawn on the revolver. Long-term debt and interest costs increased; interest and other debt costs were $50.0 million versus $43.8 million.
- Operating cash flow increased substantially, but reflected changes in amounts due to/from affiliates, including improved Angola collections and growth in amounts due to the affiliate. Investing cash outflow was $231.4 million; financing cash outflow was $109.1 million.
Changes versus the prior period
- Annual revenue rose 4%, driven by vessel additions and stronger activity in some markets, but management reported falling rates and utilization toward the end of the year as oil prices and customer spending weakened.
- Americas revenue increased 23%; Middle East/North Africa increased 10%. Asia/Pacific declined 3%, and Sub-Saharan Africa/Europe declined 9%, partly reflecting vessel transfers from Angola.
- The third quarter included the $283.7 million goodwill write-off, eliminating all remaining goodwill. FY2014 had a separate $56.3 million goodwill impairment.
- Vessel operating costs rose 5%, mainly due to higher crew costs and vessel repositioning; interest and debt costs rose 14%. The company repurchased 2.84 million shares for $100 million and declared $1.00 per share in dividends.
Outlook, risks and unusual items
- Management expected lower oil prices, reduced E&P budgets, and a large pipeline of new offshore vessels to pressure utilization and day rates, potentially into 2015 and beyond. No formal earnings or revenue guidance was provided in the supplied filing text.
- The company had commitments for 24 vessels totaling about $690.7 million, with $380.1 million remaining to be spent at March 31, 2015. After year-end it terminated three delayed towing-supply vessel contracts and sought return of about $36 million in installments; the shipyard or guarantor could contest recovery. For two PSVs, Tidewater secured an option to take delivery or seek return of installments, subject to conditions.
- Angola is a major exposure: FY2015 Angolan vessel revenue was about $351 million, or 23% of consolidated vessel revenue. Amounts due from Sonatide were about $420 million, including substantial kwanzas awaiting conversion and expatriation; Sonatide held about $150 million equivalent in kwanza deposits. Currency restrictions, payment delays, possible ownership restructuring, and a proposed 10–20% foreign-exchange levy could impair liquidity or margins.
- An ICSID tribunal awarded Tidewater more than $62 million for Venezuela’s expropriation, but the award remained unpaid; Venezuela could seek annulment or a stay, collection may be difficult, and Tidewater recorded no gain.
- Other matters include a Brazilian customs assessment of approximately $48.5 million (not accrued; most of the fines had been disallowed on administrative appeal), a Nigerian dispute over approximately $16 million in receivables, and possible duties, fines, or interest relating to U.S. customs declarations for repairs abroad; the latter amount was not yet known.
- In May 2015 the company extended its $900 million credit facility to June 2019. It also began a global reorganization and recorded $4.1 million of restructuring costs. Management cited liquidity and financing capacity as adequate, while noting the need to preserve liquidity amid the downturn and vessel commitments.
Most important facts for investors to verify
- Whether the $420 million due from Sonatide can be collected, converted, and remitted, and how Angola’s regulatory and currency rules develop.
- Current vessel utilization, day rates, contract coverage, and customer spending trends following the late-year downturn.
- Final delivery, cancellation, refund, and guarantee outcomes for shipyard commitments, and the funding required for remaining construction obligations.
- Liquidity, debt covenant headroom, and refinancing or repayment plans for near-term maturities; the filing states covenant limits but does not clearly quantify headroom.
- Enforceability and collection prospects for the Venezuela award and exposure to unresolved customs and litigation matters.