Tidewater Inc. — Q2 2019 Form 10-Q
Reporting period: Three and six months ended June 30, 2019. The unaudited filing covers Tidewater’s global offshore-support-vessel business. Results include GulfMark from its November 15, 2018 acquisition; 2018 comparative results do not, so year-over-year comparisons are not fully like-for-like.
Financial performance and position
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Revenue | $125.9 million | $105.6 million | $248.0 million | $197.1 million |
| Operating loss | $4.4 million | $0.1 million | $14.0 million | $12.3 million |
| Net loss attributable to Tidewater | $16.0 million | $10.9 million | $37.7 million | $50.1 million |
| Basic and diluted loss per share | $0.42 | $0.44 | $1.01 | $2.09 |
| Cash provided by (used in) operating activities | Not presented by quarter | $(20.7) million | $17.0 million |
Margins: Q2 operating margin was approximately -3.5%, versus approximately -0.1% a year earlier. Vessel operating costs were 65% of vessel revenue in Q2, unchanged from Q2 2018; for the first half they were 67%, versus 69%.
Balance sheet at June 30, 2019: Cash and cash equivalents were $369.5 million, plus $13.6 million restricted cash; current assets were $669.9 million and current liabilities $154.3 million. Debt was $434.9 million including current maturities and net debt premiums/discounts, with $10.0 million current and $424.9 million long-term. Total assets were $1.79 billion and equity $1.12 billion. The company reported no revolving credit facility.
Material changes and operating trends
- Revenue increased 19% in Q2 and 26% in the first half. Management attributed most of the increase to GulfMark, contributing $26.2 million in Q2 and $51.7 million in the first half.
- Q2 net loss attributable to Tidewater increased from $10.9 million to $16.0 million. Higher depreciation, including GulfMark vessels and drydocking amortization, and higher corporate expenses offset revenue growth. First-half net loss improved from $50.1 million to $37.7 million, partly reflecting a $15.0 million improvement in equity earnings/losses of unconsolidated companies compared with 2018.
- Worldwide utilization was 57.0% in Q2 versus 55.5%; average day rate was $10,442 versus $10,047. The fleet averaged 163 active and 65 stacked vessels, compared with 141 active and 64 stacked a year earlier.
- Regional results were mixed: Europe/Mediterranean revenue rose sharply and day rates increased, while utilization declined. Americas utilization improved but average day rates fell 23%. Middle East/Asia Pacific had a Q2 operating loss; West Africa operating profit improved.
- Corporate expense presentation changed in 2019: certain marine-management and related costs previously allocated to segments are now reported as corporate general and administrative expense. First-half corporate expenses included $4.2 million of GulfMark integration costs; Q2 included $0.5 million.
Cash flow, debt, and unusual items
- First-half operating cash use was $20.7 million, versus $17.0 million provided in 2018. Management cited the net loss and cash use from working-capital and affiliate-balance changes and drydocking payments; deferred drydocking cash payments were $28.7 million.
- Investing activities provided $11.7 million, mainly from $20.6 million of asset-sale proceeds, offset by $8.9 million of property and equipment additions. Financing activities used $5.6 million, principally for scheduled debt principal payments and share-based-award taxes.
- Debt includes 8.00% senior secured notes due August 2022 and Troms borrowings due 2024–2027. The company repurchased $0.16 million of secured notes in January 2019 and reported a July 2019 repurchase of $747,000 following a tender offer. Restricted cash of $13.6 million related to asset-sale proceeds subject to the notes’ indenture.
- Receivables from affiliates included $94.1 million due from Sonatide at June 30; after offsets, the net amount due was approximately $67.0 million. Tidewater disclosed currency-devaluation exposure and continued evaluating possible impairment based on Sonatide’s liquidity.
- A final $59.3 million ICSID award against Venezuela accrued interest of approximately $0.6 million per quarter. Tidewater is pursuing enforcement but treats collection as a gain contingency and has not recognized the award as income.
- No asset impairment was recorded in the first half of 2019, versus $7.4 million in the first half of 2018. Restructuring liabilities for lease exits and severance totaled $5.4 million at June 30.
Outlook, risks, and controls
The filing provides no specific financial guidance. Management said oil prices in the $55–$65 per barrel range remained insufficient to support significant increases in offshore exploration and production activity; prolonged weak prices could adversely affect revenue, earnings, cash flow, and liquidity. Key risks include offshore-industry overcapacity, customer spending and day-rate pressure, GulfMark integration and synergy execution, limited capital resources, international currency and political risks, Sonatide collections, debt covenant compliance, and the practical challenges of collecting the Venezuelan award. Management stated that disclosure controls were effective at June 30, 2019, and reported no material change in internal control over financial reporting during the quarter.
Investor verification priorities
- Assess whether GulfMark-driven revenue growth translates into improved operating profitability and integration savings.
- Monitor operating cash flow, drydocking requirements, and liquidity given cash use and the absence of a revolver.
- Track Sonatide’s ability to remit the affiliate receivable and any impairment or currency-sharing developments.
- Review vessel utilization, day rates, active versus stacked fleet, and regional operating performance.
- Confirm the status and terms of secured-note tenders, debt obligations, and enforcement or collection of the Venezuelan award.