Tidewater Inc. — Form 10-Q Summary
Reporting period: Fiscal first quarter ended June 30, 2017; comparison is with the quarter ended June 30, 2016 unless otherwise stated. The statements are unaudited and reflect Tidewater as a debtor-in-possession. The company emerged from Chapter 11 on July 31, 2017, after the reporting period.
Financial performance and liquidity
| Metric | Quarter ended June 30, 2017 | Prior-year quarter |
|---|---|---|
| Total revenue | $115.1 million | $167.9 million |
| Vessel revenue | $112.3 million | $162.4 million |
| Operating loss | $205.4 million | $66.1 million |
| Net loss attributable to Tidewater | $524.4 million; $11.13 per share | $89.1 million; $1.89 per share |
| Net cash used in operating activities | $23.4 million | $10.9 million |
| Net cash provided by investing activities | $4.3 million | $5.2 million |
| Net cash used in financing activities | $3.5 million | $4.0 million |
- Vessel operating costs were $83.8 million, or 74.6% of vessel revenue, versus $108.9 million, or 67.0%, a year earlier. Vessel revenue less vessel operating costs was $28.5 million, a 25.4% margin versus 33.0%.
- Cash and cash equivalents were $683.8 million at June 30, down from $706.4 million at March 31. Total assets were $3.92 billion and total equity was $1.13 billion.
- At June 30, $2.39 billion of prepetition liabilities were classified as subject to compromise, including $1.95 billion of debt and $323.6 million of sale-leaseback claims. The prepetition revolver was fully utilized.
- Following emergence, the company paid creditors $225 million in cash and issued $350 million of 8% secured notes due 2022. Management reported approximately $440 million of total debt after restructuring; the revolving credit facility was eliminated. Pro forma cash, after the $225 million payment, was approximately $458.8 million.
Changes versus the prior period
- Revenue fell 31.5%, reflecting weak offshore activity, lower utilization and day rates, and reduced fleet activity. Worldwide vessel utilization declined to 44.0% from 48.6%; average day rate fell to $10,842 from $13,727.
- Vessel operating costs declined 23%, but fell less than revenue; accordingly, vessel operating costs rose as a share of vessel revenue.
- Impairment charges increased to $163.4 million from $36.9 million, covering 77 vessels, mainly due to continued stacking and lower vessel values. Depreciation and amortization decreased to $36.3 million from $44.6 million.
- The $524.4 million attributable net loss included $313.2 million of reorganization items and $163.4 million of impairments. Reorganization items included sale-leaseback termination and debt-related costs. Interest expense was lower partly because post-petition interest on the compromised facilities was not accrued; absent that treatment, the company estimated quarterly interest expense would have been about $20 million.
- Operating cash use increased to $23.4 million from $10.9 million. Capital additions were limited to $1.6 million; investing cash flow included a $5.3 million receipt related to a novated vessel construction obligation.
Restructuring, outlook and principal risks
- The confirmed prepackaged plan distributed creditors cash, new secured notes and reorganized equity. Existing shares were cancelled; former shareholders received 5% of pro forma equity and six-year Series A and B warrants. Creditors received equity or warrants representing the remaining 95%, subject to dilution and foreign-ownership limits. The plan also issued creditor warrants to certain non-U.S. creditors to help preserve Jones Act eligibility.
- Claims relating to leases on 16 vessels remain disputed. A portion of plan consideration was withheld pending resolution; the final allowed claims and resulting distribution are not yet determined. Fresh-start accounting and asset valuations were preliminary and could change materially.
- New notes carry 8% interest, are secured by substantially all company and guarantor assets, prohibit cash dividends, and contain minimum liquidity and interest-coverage covenants. Minimum cash tests include $50 million of unrestricted cash at loan obligors and $100 million of consolidated cash. Interest coverage is first measured for the 12 months ending June 30, 2019.
- Management described offshore recovery as uncertain and expected offshore activity to lag the improving North American onshore market; it cited depressed customer spending, industry vessel oversupply, stacking, and potential further pressure on utilization and rates. No specific company revenue or earnings guidance was provided.
- Angola exposure remains material: amounts due from Sonatide were about $253 million, including approximately $84 million of kwanza-denominated cash awaiting conversion and expatriation. Tight U.S.-dollar liquidity in Angola and currency devaluation could impair collections and value.
- Other disclosed uncertainties include the shipyard arbitration over a rejected PSV, a separate delayed Brazilian vessel construction dispute, potential U.S. vessel-repair duties and penalties, and unresolved sale-leaseback claims. The company also disclosed a $54.9 million Venezuelan arbitration award, but records it as a gain contingency because collection is uncertain.
Important facts for investors to verify
- Final allowed sale-leaseback claims, withheld creditor distributions, and the full post-emergence capital structure and covenant headroom.
- Cash accessibility and actual collections from Sonatide, including conversion and repatriation of Angolan balances.
- Subsequent vessel utilization, day rates, fleet stacking, asset impairments, and the market’s supply-demand balance.
- Outcomes and potential cash effects of the vessel-construction arbitrations, customs and vessel-repair matters, and collection efforts on the Venezuelan award.
- Final fresh-start valuations and any material differences from the preliminary pro forma balance sheet.