Tidewater Inc. — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019. Tidewater provides offshore support vessels and related services to the energy industry. It completed its GulfMark Offshore merger on November 15, 2018; Q1 2019 includes GulfMark, while Q1 2018 does not, limiting comparability.
Financial performance
| Metric | Q1 2019 | Q1 2018 |
|---|---|---|
| Total revenue | $122.1 million | $91.5 million |
| Operating loss | $9.6 million | $12.2 million |
| Net loss attributable to Tidewater | $21.7 million | $39.2 million |
| Basic and diluted loss per share | $0.58 | $1.67 |
| Cash used in operating activities | $3.2 million | $6.0 million |
| Capital expenditures | $3.1 million | $1.7 million |
- Revenue rose 33%, including $25.5 million attributed to GulfMark. Vessel revenue was $119.7 million; other operating revenue was $2.5 million.
- Operating margin improved to approximately negative 7.9% from negative 13.3%; net loss narrowed, partly reflecting the prior-year $15.4 million equity-method loss and $6.2 million asset impairment.
- Vessel operating costs were $82.2 million, or 68.7% of vessel revenue, compared with $61.4 million, or 70.1%. Depreciation and amortization increased to $22.9 million from $12.0 million, principally due to GulfMark and higher drydocking amortization.
- General and administrative expense was $27.1 million versus $23.6 million; Q1 2019 included $3.7 million of merger/integration costs. Management also changed its allocation of certain marine-management costs to corporate G&A, affecting segment comparisons.
- At March 31, cash and cash equivalents were $391.1 million and restricted cash was $7.0 million. Total current assets were $674.1 million and current liabilities $156.1 million. Working capital was approximately $518.0 million.
- Total debt, including current maturities, was approximately $437.4 million, versus $439.0 million at year-end 2018. The principal secured notes bear 8% interest and mature in August 2022. Tidewater reported no revolving credit facility.
- Cash provided by investing activities was $6.5 million, mainly from $9.7 million of asset-sale proceeds; financing used $3.1 million, primarily for scheduled debt payments and share-award taxes. Cash, cash equivalents and restricted cash increased by $0.3 million in the quarter.
Operating trends, outlook and risks
- Worldwide utilization increased to 53.6% from 44.4%; average day rates edged down to $9,806 from $10,093. The fleet averaged 168 active vessels and 85 stacked vessels; 71 vessels were stacked at quarter-end.
- Europe/Mediterranean revenue increased substantially, with management citing stronger North Sea and Mediterranean demand and higher day rates. West Africa returned to segment operating profit. Americas utilization improved, but average day rates fell 21% and the segment reported an operating loss.
- Management said offshore activity remained affected by the industry downturn and oil-price volatility. It provided no specific financial guidance. Results remain sensitive to energy-company spending, vessel utilization and day rates, fleet overcapacity, and costs of integration.
- Sonatide, Tidewater’s Angolan joint venture, remained a significant collection and currency risk. Gross amounts due from Sonatide were $92.2 million; after offsetting amounts due to it, the net receivable was approximately $63 million. Management continued evaluating potential impairment, considering Sonatide’s available liquidity and unresolved discussions over kwanza devaluation losses.
- Tidewater disclosed a $58.7 million final arbitral award against Venezuela, accruing interest of about $0.6 million per quarter. The award is recorded as a gain contingency, not recognized as an asset or income; management warned collection presents significant practical challenges. In April 2019, a U.S. judgment was entered in Delaware.
- Q1 2019 had no vessel impairment charges, compared with $6.2 million for 13 vessels in Q1 2018. Restructuring liabilities for office closures and severance totaled $6.3 million at March 31, 2019. The company adopted the new lease standard, recording $5.1 million of lease liabilities, with no earnings or cash-flow impact.
Key facts for investors to verify
- How much of revenue growth and improving utilization reflects sustainable market recovery versus GulfMark’s inclusion, and whether day rates strengthen.
- Collection progress and impairment exposure for the Sonatide receivable, including foreign-currency and partner-dispute developments.
- Cash generation, debt-service capacity and compliance with debt covenants, particularly if offshore market conditions remain weak.
- Progress in realizing GulfMark integration savings and the effect of restructuring and corporate-cost allocation changes.
- Any developments affecting enforceability or collection of the Venezuela award; no proceeds are recognized until the contingency is resolved.