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Tidewater Reports Fourth Quarter and Year End Results For Fiscal 2016

05/25/2016

NEW ORLEANS, May 25, 2016 /PRNewswire/ -- Tidewater Inc. (NYSE:TDW) announced today a fourth quarter net loss for the period ended March 31, 2016, of $81.8 million, or $1.74 per common share, on revenues of $184.2 million. For fiscal year ended March 31, 2016, the company's net loss was $160.2 million, or $3.41 per common share, on revenues of $979.1 million. For the prior fiscal year's fourth quarter ended March 31, 2015, the company's net loss was $9.1 million, or $0.19 per common share, on revenues of $324.8 million. For fiscal year ended March 31, 2015, the company's net loss was $65.2 million, or $1.34 per common share, on revenues of $1,495.5 million. During fiscal years ended March 31, 2016 and 2015, the company generated net cash from operating activities of $253.4 million and $358.7 million, respectively, and used net cash in investing activities of $135.0 million and $231.4 million, respectively.

Included in the net loss for the quarter ended March 31, 2016 were the following:

  • $55.5 million ($40.7 million after-tax, or $0.87 per share) in non-cash asset impairment charges that resulted from impairment reviews undertaken during the March 2016 quarter.
  • $8.7 million ($8.7 million after-tax, or $0.18 per share) of foreign exchange losses which is included in Equity in net earnings (losses) of unconsolidated companies and related to our Angola joint venture, Sonatide.

Included in the net loss for the fiscal year ended March 31, 2016 were the following:

  • $117.3 million ($98.6 million after-tax, or $2.10 per share) in non-cash asset impairment charges that resulted from impairment reviews undertaken throughout fiscal 2016.
  • $24.1 million ($24.1 million after-tax, or $0.51 per share) of foreign exchange losses which is included in Equity in net earnings (losses) of unconsolidated companies and related to our Angola joint venture, Sonatide.
  • A $7.6 million ($6.3 million after-tax, or $0.13 per share) restructuring charge related to severance and other termination costs resulting from right-sizing efforts during the September 2015 quarter.

Income tax expense in each of the fiscal 2016 quarters largely reflect tax liabilities in certain jurisdictions that levy taxes on bases other than pre-tax profitability (so called "deemed profit" regimes.)

Included in the net loss for the prior fiscal year's quarter ended March 31, 2015 were the following:

  • $6.4 million ($5.1 million after-tax, or $0.11 per share) in non-cash asset impairment charges that resulted from stacked vessel and other asset impairment reviews undertaken during the March 2015 quarter.
  • A $4.1 million ($3.3 million after-tax, or $0.07 per share) restructuring charge related to severance and other termination costs resulting from right-sizing efforts during the March 2015 quarter.
  • A $23.8 million ($23.8 million after-tax, or $0.51 per share) non-cash adjustment in the March 2015 quarter related to the valuation of deferred tax assets.

Included in the net loss for the prior fiscal year ended March 31, 2015 were the following:

  • A $283.7 million ($214.9 million after-tax, or $4.42 per share) non-cash goodwill impairment charge resulting from the company's annual goodwill impairment assessment undertaken during the December 2014 quarter.
  • $14.5 million ($12.0 million after-tax, or $0.25 per share) in non-cash asset impairment charges that resulted from impairment reviews undertaken throughout fiscal 2015.
  • A $4.1 million ($3.3 million after-tax, or $0.07 per share) restructuring charge related to severance and other termination costs resulting from right-sizing efforts during the March 2015 quarter.
  • A $23.8 million ($23.8 million after-tax, or $0.49 per share) non-cash adjustment in the March 2015 quarter related to the valuation of deferred tax assets.

Status of Discussions with Lenders and Noteholders/Audit Opinion

At March 31, 2016, the company was in compliance with all financial covenants set forth in its debt facilities and note indentures; however, we are forecasting that, as early as the quarter ending June 30, 2016, the company may no longer be in compliance with the 3.0x minimum interest coverage ratio requirement contained in its Revolving Credit and Term Loan Agreement ("Bank Loan Agreement"), the Troms Offshore Debt and the 2013 Senior Note Agreement (the "2013 Note Agreement"). In the event of a covenant violation, which could occur as early as mid-August 2016 (when we are required to certify that the interest coverage ratio has been met for the first fiscal quarter ending June 30, 2016), the lenders and/or the noteholders could declare the company to be in default of the Bank Loan Agreement, the Troms Offshore Debt or the 2013 Note Agreement, as applicable, and accelerate the indebtedness thereunder, the effect of which would be to likewise cause the company's other Senior Notes, which were issued in 2010 and 2011, to be in default.

Given that we expect that during fiscal 2017 we will not meet the 3.0x minimum interest coverage ratio requirement set forth in the Bank Loan Agreement, the Troms Offshore Debt and the 2013 Note Agreement, which could result in the acceleration of the debt under these agreements and the company's other Senior Notes, we expect the report of the company's independent registered public accounting firm that accompanies our audited consolidated financial statements for the fiscal year ended March 31, 2016 (the "audit opinion") will contain an explanatory paragraph regarding our ability to continue as a going concern. Such going concern explanatory paragraph is required only because our internal forecast indicates that, within fiscal 2017, we may no longer be in compliance with the minimum interest coverage ratio requirement.

In addition, the Bank Loan Agreement and the Troms Offshore Debt require that the company receive an unqualified audit opinion from an independent certified public accountant which shall not be subject to a going concern or similar modification. The failure to receive an audit opinion without any modification, in and of itself, is an event of default under these agreements which would allow the lenders to accelerate the indebtedness thereunder, the effect of which would be to likewise cause all of the company's Senior Notes to be in default. Subsequent to March 31, 2016, the company obtained limited waivers from the necessary lenders which waive the audit opinion requirement (i.e., no modifications) until August 14, 2016. 

As a result of the event of default caused by our failure to receive an audit opinion with no modifications from our independent certified public accountants (which has been waived only until August 14, 2016), all of the company's indebtedness (with the stated maturities as summarized in the notes to our consolidated financial statements) has been reclassified as a current liability in the company's consolidated balance sheet at March 31, 2016. The explanatory paragraph in the expected audit opinion discussed above also references the audit opinion-related event of default under various borrowing arrangements as an uncertainty that raises substantial doubt about the company's ability to continue as a going concern.

The company is engaged in discussions with its principal lenders and noteholders to amend and/or waive the company's 3.0x minimum interest coverage ratio covenant in advance of any such potential default occurring, with the goal of finalizing any amendments and/or waivers prior to the possible covenant breach.   Any such amendments and/or waivers would require successful negotiations with our bank group and noteholders, and may  require the company to make certain concessions under the existing agreements, such as providing collateral to secure the Bank Loan Agreement, the Troms Offshore Debt and the Senior Notes, repaying all or a portion of the indebtedness outstanding under the revolving portion of the Bank Loan Agreement, accepting a reduction in total borrowing capacity under the revolving credit facility, paying a higher rate of interest, paying down a portion of the Troms Offshore Debt and/or Senior Notes, or some combination of the above. In addition, such amendments and/or waivers will need to address the audit opinion requirement of the Bank Loan Agreement and the Troms Offshore Debt (which, again, has been waived only until August 14, 2016). Obtaining the covenant relief will require the company to reach an agreement that satisfies potentially divergent interests of our lenders and noteholders.

The company's consolidated financial statements as of and for the year ended March 31, 2016 have been prepared assuming the company will continue as a going concern, which contemplates continuity of operations, realization of assets and the satisfaction of liabilities in the normal course of business for the twelve month period following the date of these consolidated financial statements.  However, for the above described reasons, indebtedness with the stated maturities as summarized in the notes to the consolidated financial statements is classified as a current liability at March 31, 2016.

As previously announced, Tidewater will hold a conference call to discuss March quarterly earnings on Thursday, May 26, 2016, at 10:00 a.m. Central time. Investors and interested parties may listen to the teleconference via telephone by calling 1-888-771-4371 if calling from the U.S. or Canada (1-847-585-4405 if calling from outside the U.S.) and ask for the "Tidewater" call just prior to the scheduled start. A replay of the conference call will be available beginning at 12:00 p.m. Central time on May 26, 2016, and will continue until 11:59 p.m. Central time on May 28, 2016. To hear the replay, call 1-888-843-7419 (1-630-652-3042 if calling from outside the U.S.). The conference call ID number is 42611721.

A simultaneous webcast of the conference call will be available online at the Tidewater Inc. website, (http://www.tdw.com). The online replay will be available until June 23, 2016.

The conference call will contain forward-looking statements in addition to statements of historical fact. The actual achievement of any forecasted results or the unfolding of future economic or business developments in a way anticipated or projected by the Company involve numerous risks and uncertainties that may cause the Company's actual performance to be materially different from that stated or implied in the forward-looking statements. Such risks and uncertainties include, among other things, risks associated with the general nature of the oilfield service industry and other factors discussed within the "Risk Factors" section of Tidewater's recent Forms 10-Q and 10-K.

Tidewater is the leading provider of Offshore Service Vessels (OSVs) to the global energy industry.

Note: all per-share amounts are stated on a diluted basis.

Financial information is displayed on the next page.

 

TIDEWATER INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except share and per share data)




Quarter Ended



Year Ended

March 31,

March 31,



2016



2015



2016



2015

Revenues:
















Vessel revenues


$

180,048




317,770




955,400




1,468,358

Other operating revenues



4,126




6,992




23,662




27,159




184,174




324,762




979,062




1,495,517

Costs and expenses:
















Vessel operating costs



98,146




193,940




561,133




834,368

Costs of other operating revenues



3,187




6,889




18,811




26,505

General and administrative



36,974




45,355




153,811




189,819

Vessel operating leases



8,337




8,075




33,662




28,322

Depreciation and amortization



45,251




45,054




182,309




175,204

Gain on asset dispositions, net



(6,692)




(10,704)




(26,037)




(23,796)

Asset impairments



55,540




6,429




117,311




14,525

Goodwill impairment












283,699

Restructuring charge






4,052




7,586




4,052




240,743




299,090




1,048,586




1,532,698

Operating income (loss)



(56,569)




25,672




(69,524)




(37,181)

Other income (expenses):
















Foreign exchange gain (loss)



(1,645)




225




(5,403)




8,678

Equity in net earnings (losses) of unconsolidated companies



(6,511)




1,075




(13,581)




10,179

Interest income and other, net



949




372




2,703




1,927

Interest and other debt costs, net



(14,011)




(12,102)




(53,752)




(50,029)




(21,218)




(10,430)




(70,033)




(29,245)

Earnings (loss) before income taxes



(77,787)




15,242




(139,557)




(66,426)

Income tax expense (benefit)



3,823




24,134




20,819




(1,077)

Net loss


$

(81,610)




(8,892)




(160,376)




(65,349)

Less: Net income (losses) attributable to
  
noncontrolling interests



177




184




(193)




(159)

Net loss attributable to Tidewater Inc.


$

(81,787)




(9,076)




(160,183)




(65,190)

Basic loss per common share


$

(1.74)




(0.19)




(3.41)




(1.34)

Diluted loss per common share


$

(1.74)




(0.19)




(3.41)




(1.34)

Weighted average common shares outstanding



46,983,430




46,814,976




46,981,102




48,658,840

Dilutive effect of stock options and restricted stock












Adjusted weighted average common shares



46,983,430




46,814,976




46,981,102




48,658,840

TIDEWATER INC.
CONSOLIDATED BALANCE SHEETS


March 31, 2016 and 2015









(In thousands, except share and par value data)









ASSETS


2016



2015


Current assets:









Cash and cash equivalents


$

678,438




78,568


Trade and other receivables, less allowance for doubtful accounts of $11,450
 
in 2016 and $37,634 in 2015



228,113




303,096


Due from affiliate



338,595




420,365


Marine operating supplies



33,413




49,005


Other current assets



44,755




17,781


Total current assets



1,323,314




868,815


Investments in, at equity, and advances to unconsolidated companies



37,502




65,844


Properties and equipment:









Vessels and related equipment



4,666,749




4,717,132


Other properties and equipment



92,065




119,879





4,758,814




4,837,011


Less accumulated depreciation and amortization



1,207,523




1,090,704


Net properties and equipment



3,551,291




3,746,307


Other assets



78,440




75,196


Total assets


$

4,990,547




4,756,162











LIABILITIES AND EQUITY









Current liabilities:









Accounts payable


$

49,130




54,011


Accrued expenses



91,611




146,255


Due to affiliate



187,971




185,657


Accrued property and liability losses



3,321




3,669


Current portion of long-term debt



2,052,270




10,181


Other current liabilities



74,825




82,461


Total current liabilities



2,459,128




482,234


Long-term debt






1,524,295


Deferred income taxes



34,841




23,276


Accrued property and liability losses



9,478




10,534


Other liabilities and deferred credits



181,546




235,108











Commitments and Contingencies


















Equity:









Common stock of $0.10 par value, 125,000,000 shares authorized, issued
 
47,067,715 shares at March 31, 2016 and 47,029,359 shares at
 
March 31, 2015



4,707




4,703


Additional paid-in capital



166,604




159,940


Retained earnings



2,135,075




2,330,223


Accumulated other comprehensive loss



(6,866)




(20,378)


Total stockholders' equity



2,299,520




2,474,488


Noncontrolling interests



6,034




6,227


Total equity



2,305,554




2,480,715


Total liabilities and equity


$

4,990,547




4,756,162


 

TIDEWATER INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands) 




Quarter Ended



Year Ended

March 31,

March 31,



2016



2015



2016



2015

Net loss


$

(81,610)




(8,892)




(160,376)




(65,349)

Other comprehensive income (loss):
















Unrealized gains (losses) on available for sale securities,
  net of tax of ($239), $0, ($239) and $0, respectively



24




64




(443)




143

Amortization of loss on derivative contract, net of tax of
  $77, $0, $77 and $0, respectively



(395)




368




143




717

Change in supplemental executive retirement plan
  
pension liability, net of tax of $1,264, $0,
  
$1,264 and $0, respectively



2,347




(1,845)




2,347




(1,845)

Change in pension plan minimum liability, net of tax of
   $1,093, $0, $1,093 and $0, respectively



2,029




(5,739)




2,029




(5,739)

Change in other benefit plan minimum liability, net of tax
  
of $5,081, ($840), $5,081 and ($769), respectively



9,366




(1,560)




9,436




(1,429)

Total comprehensive loss


$

(68,239)




(17,604)




(146,864)




(73,502)

TIDEWATER INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS


Years Ended March 31, 2016, 2015 and 2014













(In thousands)


2016



2015



2014


Operating activities:













Net (loss) earnings


$

(160,376)




(65,349)




140,255


Adjustments to reconcile net (loss) earnings to net cash provided by
 
operating activities:













Depreciation and amortization



182,309




175,204




167,480


Benefit for deferred income taxes



(6,796)




(72,389)




(34,709)


Gain on asset dispositions, net



(26,037)




(23,796)




(21,063)


Asset impairments



117,311




14,525




9,341


Goodwill impairment






283,699




56,283


Equity in earnings (losses) of unconsolidated companies, net of dividends



28,704




(1,916)




(15,801)


Compensation expense – stock based



13,219




21,374




19,642


Excess tax (benefit) liability on stock options exercised



1,605




1,784




(299)


Changes in assets and liabilities, net:













Trade and other receivables



71,540




(43,537)




13,485


Changes in due to/from affiliate, net



84,084




108,588




(260,675)


Marine operating supplies



13,672




6,148




5,715


Other current assets



5,976




2,794




(7,600)


Accounts payable



(4,881)




(22,989)




(1,395)


Accrued expenses



(53,143)




(11,435)




34,458


Accrued property and liability losses



(348)




38




(429)


Other current liabilities



(15,578)




118




10,373


Other liabilities and deferred credits



231




4,875




(11,842)


Other, net



1,868




(19,023)




1,398


Net cash provided by operating activities



253,360




358,713




104,617


Cash flows from investing activities:













Proceeds from sales of assets



10,690




8,310




51,330


Proceeds from sale/leaseback of assets






123,950




270,575


Additions to properties and equipment



(194,485)




(364,194)




(594,695)


Refunds from cancelled vessel construction contracts



46,119








Payments for acquisition, net of cash acquired









(127,737)


Other



2,680




516




(3,158)


Net cash used in investing activities



(134,996)




(231,418)




(403,685)


Cash flows from financing activities:













Debt issuance costs



(996)




(556)




(5,347)


Principal payment on long-term debt



(136,843)




(97,823)




(1,103,054)


Debt borrowings



656,338




138,488




1,465,362


Proceeds from exercise of stock options






1,023




6,863


Cash dividends



(35,388)




(48,834)




(49,816)


Excess tax benefit (liability) on stock options exercised



(1,605)




(1,784)




299


Cash contributions from noncontrolling interests, net






399




4,551


Repurchases of common stock






(99,999)





Net cash (used in) provided by financing activities



481,506




(109,086)




318,858


Net change in cash and cash equivalents



599,870




18,209




19,790


Cash and cash equivalents at beginning of year



78,568




60,359




40,569


Cash and cash equivalents at end of year


$

678,438




78,568




60,359


Supplemental disclosure of cash flow information:













Cash paid during the year for:













Interest, net of amounts capitalized


$

50,729




49,390




34,190


Income taxes


$

51,585




74,310




59,266


Supplemental disclosure of noncash investing activities:













Additions to properties and equipment


$




2,068




5,751


TIDEWATER INC.
CONSOLIDATED STATEMENTS OF EQUITY


Years Ended March 31, 2016, 2015 and 2014

(In thousands)


Common

stock



Additional

paid-in

capital



Retained

earnings



Accumulated

other

comprehensive

loss



Non

controlling

interest



Total


Balance at March 31, 2013


$

4,949




119,975




2,453,973




(17,141)







2,561,756


Total comprehensive income









140,255




4,916







145,171


Stock option activity



20




9,445













9,465


Cash dividends declared ($1.00 per share)









(49,973)










(49,973)


Amortization of restricted stock units



10




9,923













9,933


Amortization/cancellation of restricted stock



(6)




3,038













3,032


Noncontrolling interests















5,987




5,987


Balance at March 31, 2014


$

4,973




142,381




2,544,255




(12,225)




5,987




2,685,371


Total comprehensive loss









(65,190)




(8,153)




(159)




(73,502)


Stock option activity



3




(691)













(688)


Cash dividends declared ($1.00 per share)









(49,127)










(49,127)


Retirement of common stock



(284)







(99,715)










(99,999)


Amortization of restricted stock units



17




15,270













15,287


Amortization/cancellation of restricted stock



(6)




2,980













2,974


Cash received from noncontrolling interests, net















399




399


Balance at March 31, 2015


$

4,703




159,940




2,330,223




(20,378)




6,227




2,480,715


Total comprehensive loss









(160,183)




13,512




(193)




(146,864)


Stock option activity






(278)













(278)


Cash dividends declared ($.75 per share)









(34,965)










(34,965)


Amortization of restricted stock units



11




6,463













6,474


Amortization/cancellation of restricted stock



(7)




479













472


Balance at March 31, 2016


$

4,707




166,604




2,135,075




(6,866)




6,034




2,305,554


The company's vessel revenues and vessel operating costs and the related percentage of total vessel revenues for the quarters and the years ended March 31, 2016 and 2015 and for the quarter ended December 31, 2015, were as follows:



Quarter Ended



Year Ended



Quarter


Ended

March 31,

March 31,

December 31,

(In thousands)


2016



%



2015



%



2016



%



2015



%



2015



%


Vessel revenues:









































Americas


$

63,650




35%




117,149




37%




342,995




36%




505,699




35%




75,963




36%


Asia/Pacific



9,791




6%




29,536




9%




89,045




9%




150,820




10%




19,144




9%


Middle East/North Africa



35,685




20%




45,486




14%




168,471




18%




205,787




14%




40,184




19%


Sub-Saharan Africa/ Europe



70,922




39%




125,599




40%




354,889




37%




606,052




41%




77,617




36%


Total vessel revenues


$

180,048




100%




317,770




100%




955,400




100%




1,468,358




100%




212,908




100%


Vessel operating costs:









































Crew costs


$

55,549




31%




98,045




31%




303,219




32%




428,131




29%




71,270




33%


Repair and maintenance



14,280




8%




40,307




13%




94,873




10%




173,788




12%




14,811




7%


Insurance and loss reserves



(1,230)




(1%)




7,213




2%




8,585




1%




17,683




1%




1,689




1%


Fuel, lube and supplies



10,366




6%




18,372




6%




61,992




6%




88,272




6%




16,369




8%


Other



19,181




11%




30,003




9%




92,464




10%




126,494




9%




20,955




10%


Total vessel operating costs



98,146




55%




193,940




61%




561,133




59%




834,368




57%




125,094




59%


Vessel operating margin (A)


$

81,902




45%




123,830




39%




394,267




41%




633,990




43%




87,814




41%


Note (A): The following table reconciles vessel operating margin as presented above to operating profit for the quarters and the years ended March 31, 2016 and 2015 and for the quarter ended December 31, 2015:



Quarter Ended



Year Ended



Quarter


Ended

March 31,

March 31,

December 31,

(In thousands)


2016



2015



2016



2015



2015


Vessel operating margin


$

81,902




123,830




394,267




633,990




87,814


General and administrative expenses - vessel operations



(27,045)




(34,190)




(116,039)




(144,495)




(27,686)


Vessel operating leases



(8,337)




(8,075)




(33,662)




(28,322)




(8,441)


Depreciation and amortization - vessel operations



(42,427)




(42,179)




(170,428)




(167,217)




(42,424)


Vessel operating profit


$

4,093




39,386




74,138




293,956




9,263


The company's other operating loss for the quarters and the years ended March 31, 2016 and 2015 and for the quarter ended December 31, 2015, consists of the following:



Quarter Ended



Year Ended



Quarter


Ended

March 31,

March 31,

December 31,

(In thousands)


2016



2015



2016



2015



2015


Other operating revenues


$

4,126




6,992




23,662




27,159




5,283


Costs of other marine revenues



(3,187)




(6,889)




(18,811)




(26,505)




(3,778)


General and administrative expenses - other operating activities



(947)




(1,226)




(3,694)




(4,703)




(762)


Depreciation and amortization - other operating activities



(1,436)




(1,351)




(5,721)




(3,973)




(1,369)


Other operating loss


$

(1,444)




(2,474)




(4,564)




(8,022)




(626)


 

The company's operating earnings (loss) and other components of earnings (loss) before income taxes, and its related percentage of total revenues for the quarters and years ended March 31, 2016 and 2015 and for the quarter ended December 31, 2015, were as follows:

 



Quarter Ended



Year Ended



Quarter


Ended

March 31,

March 31,

December 31,

(In thousands)


2016



%



2015



%



2016



%



2015



%



2015



%


Vessel operating profit (loss):










































Americas (B)


$


11,026




6%




22,218




7%




52,966




5%




122,988




8%




9,289




4%


Asia/Pacific (B)




(5,809)




(3%)




2,477




1%




(1,687)




(<1%)




11,541




1%




(3,796)




(2%)


Middle East/North Africa




5,825




3%




5,690




1%




27,349




3%




37,258




3%




5,849




3%


Sub-Saharan Africa/Europe




(6,949)




(4%)




9,001




3%




(4,490)




(<1%)




122,169




8%




(2,079)




(1%)






4,093




2%




39,386




12%




74,138




8%




293,956




20%




9,263




4%


Other operating loss




(1,444)




(1%)




(2,474)




(1%)




(4,564)




(<1%)




(8,022)




(1%)




(626)




(<1%)






2,649




1%




36,912




11%




69,574




8%




285,934




19%




8,637




4%












































Corporate general and administrative expenses




(8,982)




(5%)




(9,939)




(3%)




(34,078)




(3%)




(40,621)




(3%)




(7,150)




(3%)


Corporate depreciation




(1,388)




(1%)




(1,524)




(<1%)




(6,160)




(1%)




(4,014)




(<1%)




(1,629)




(1%)


Corporate expenses




(10,370)




(6%)




(11,463)




(3%)




(40,238)




(4%)




(44,635)




(3%)




(8,779)




(4%)












































Gain on asset dispositions, net




6,692