Business Context and Reporting Period
This Form 8-K, filed on November 6, 2015, by W&T Offshore, Inc. (W&T), addresses a material restatement of previously issued unaudited quarterly financial statements for the periods ended March 31, 2015, and June 30, 2015. The filing discloses a material weakness in internal controls related to the preparation of the Condensed Consolidated Statements of Cash Flows.
Key Financial Metrics and Restatement Details
The restatement corrects the classification of non-cash activity related to investing activities, which was previously misclassified. This adjustment significantly increased reported operating cash flow and investing cash outflows but had no impact on net income, balance sheet totals, or ending cash balances.
| Period | Metric | As Previously Reported ($000s) | Adjustment ($000s) | As Restated ($000s) |
|---|---|---|---|---|
| Three Months Ended March 31, 2015 | Net cash provided by operating activities | 742 | 52,176 | 52,918 |
| Net cash used in investing activities | (82,991) | (52,176) | (135,167) | |
| Six Months Ended June 30, 2015 | Net cash provided by operating activities | 30,061 | 50,849 | 80,910 |
| Net cash used in investing activities | (151,703) | (50,849) | (202,552) |
Note: The filing does not provide specific revenue, profit, or debt figures for these periods, as the error was isolated to the Statement of Cash Flows presentation.
Material Changes Versus Prior Periods
- Operating Cash Flow: Restated figures show a substantial increase in operating cash flow for both the first and second quarters of 2015 compared to previously reported numbers.
- Investing Cash Flow: Restated figures show a significant increase in cash used for investing activities, reflecting the reclassification of non-cash investing items.
- Liquidity: There was no change to the reported decrease in cash and cash equivalents or the ending cash balance for either period.
Management Commentary, Risks, and Contingencies
Management and the Audit Committee determined that the error in presentation was material. Consequently, they concluded that a material weakness in internal control over financial reporting existed during the affected interim periods. This weakness specifically related to operating controls for preparing the Condensed Consolidated Statement of Cash Flows.
As a result, disclosure controls and procedures were deemed ineffective for the periods ended March 31, 2015, and June 30, 2015. The company has filed an amended Form 10-Q for the period ended September 30, 2015, which correctly reflects these adjustments. The company has discussed the matter with its independent auditors, Ernst & Young LLP.
Investor Verification Checklist
- Verify the amended Form 10-Q for the period ended September 30, 2015, to confirm the corrected cash flow presentation.
- Review the company's remediation plan for the identified material weakness in internal controls over financial reporting.
- Confirm that the restatement did not impact the Condensed Consolidated Balance Sheet or Statements of Operations.
- Assess the impact of the reclassified cash flows on the company's liquidity ratios and covenant compliance, despite the unchanged ending cash balance.