Tidewater Inc. 10-K Summary: Fiscal Year Ended March 31, 2010
Business Context and Reporting Period
Tidewater Inc. (NYSE: TDW) is a global provider of offshore service vessels and marine support services to the energy industry. The company operates through two reportable segments: International and United States. As of March 31, 2010, the company operated a fleet of 394 vessels, including 83 stacked vessels and 7 withdrawn from service. The reporting period covers the fiscal year ended March 31, 2010.
Key Financial Metrics
| Metric | Fiscal 2010 | Fiscal 2009 |
|---|---|---|
| Total Revenues | $1,168.6 million | $1,390.8 million |
| Net Earnings | $259.5 million | $406.9 million |
| Operating Income | $240.3 million | $465.5 million |
| Operating Margin | 20.6% | 33.5% |
| Cash Flow from Operations | $328.3 million | $526.4 million |
| Cash and Cash Equivalents | $223.1 million | $250.8 million |
| Long-Term Debt | $275.0 million | $300.0 million |
| Working Capital | $380.9 million | $431.1 million |
| Current Ratio | 2.86 | 3.12 |
Material Changes vs. Prior Period
- Revenue Decline: Total revenues decreased 16% ($222.2 million) primarily due to an approximate 8 percentage point reduction in worldwide fleet utilization and the loss of revenue from seized Venezuelan operations.
- Segment Performance: International vessel revenues fell 13% ($160.9 million), while U.S. vessel revenues dropped 39% ($57.3 million) due to weak demand in the Gulf of Mexico.
- Cost Reductions: Vessel operating costs decreased approximately 8% overall, with a 34% reduction in U.S. segment costs and a 5% reduction in International costs.
- Unusual Items: Net earnings were impacted by a $43.7 million provision for Venezuelan operations, an $11.4 million proposed SEC settlement, and a $36.1 million reversal of uncertain tax positions.
Guidance, Outlook, and Risks
Outlook: Management anticipates that vessel demand will not increase significantly until the latter part of fiscal 2011 or fiscal 2012. The U.S. Gulf of Mexico market is expected to remain weak in fiscal 2011 due to oversupply of natural gas and the impact of the Deepwater Horizon rig catastrophe. International markets are expected to remain weak if crude oil prices decrease or capital spending is constrained.
Key Risks and Contingencies:
- Venezuelan Operations: The company recorded a provision for the expropriation of 15 vessels and other assets by the Venezuelan government. An arbitration claim has been filed with the ICSID, but recovery is uncertain.
- Legal Proceedings: The company reached an agreement in principle with the SEC regarding an FCPA investigation involving a $11.4 million settlement. Discussions with the Department of Justice (DOJ) remain ongoing with no agreement reached.
- Joint Venture: The company's joint venture in Angola (Sonatide) faces uncertainty as the partner, Sonangol, declined to renew the existing agreement, potentially impacting future operations in a key market.
- Market Conditions: The industry faces potential overcapacity from new-build vessels and volatility in oil and gas prices.
Investor Verification Checklist
- Verify the status of the arbitration claim against the Republic of Venezuela regarding the expropriation of assets.
- Monitor the finalization of the SEC settlement and the outcome of ongoing DOJ discussions regarding the FCPA investigation.
- Assess the impact of the Sonangol joint venture non-renewal on future revenue from Angola, a significant source of earnings.
- Review the utilization rates and day rates for the U.S. Gulf of Mexico segment in light of the Deepwater Horizon spill and natural gas oversupply.
- Confirm the company's ability to fund remaining vessel construction commitments ($470.5 million) given the current cash flow environment.