2012 Tidewater Annual Report
Catching the
Catching the
Next Wave
Next Wave
Capitalizing on the turning tide, Tidewater will
be navigating a more favorable environment than
we experienced during the past three years. Having
remained disciplined throughout that rough period,
Tidewater is well positioned to grow by adhering
to its long-term strategy and the core values the
company has held for decades. Our strategy and
values include focusing on safe operations, expanding
and diversifying our vessel fleet, upgrading our
capabilities and global reach and maintaining a solid
financial foundation. The successful execution of our
strategy, together with the more favorable industry
trends we see ahead, should allow Tidewater to
continue delivering premier service to our clients;
provide a safe working environment for our employees;
and generate superior returns for our shareholders.
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The Time
is Right
The Time
The Time
isis RightRight
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To Our Shareholders
T he tide is turning for Tidewater. We are on the cusp of a turnaround for our industry and our
business. We anticipated that the offshore vessel industry, and Tidewater’s financial results,
would bottom in the first half of last year and rebound off the bottom during the second half. Mariners
and sailors know that when the tide turns there is first a slack tide before an ebbing tide changes to a
flood tide. We are at slack tide, with the positive turn at hand.
Tidewater faces continuing challenges – among them increased demand by host countries for greater
“local content.” Some are often beyond our control, be they geopolitical, economic, or environmental.
As we demonstrated over the past industry cycle that was marked by many challenges – the Arab
Spring, the Macondo disaster with the resulting Gulf of Mexico moratorium, and the worst economic
crisis since the Great Depression – we were and are prepared to adjust our business plans in order to
deliver superior financial performance for the times at hand.
During the past year, our safety performance was the second best year in company history. Our vessel
revenues exceeded $1 billion for the sixth consecutive year, and importantly, revenue increased over
DEAN E. TAYLOR
Chairman, President and
Chief Executive Officer
the prior year, though marginally. Our fleet utilization rate improved and average fleet day rates also increased. Our cash vessel
operating margin of $422.3 million also exceeded that of the prior year. Among other things, these results reflect improving business
fundamentals. The number of working offshore rigs improved last year by 13 percent. During the year, Tidewater added 24 new
vessels to our industry-leading, newly-constructed fleet, setting the stage for continued earnings growth. These new vessels, plus the
25 in our delivery pipeline, reflect our confidence in the growth prospects for our industry and our commitment to continue to be able
to earn a meaningful share of that future work. Recapping our efforts to promote Tidewater’s future, we have added well over 200
new vessels to our fleet since the year 2000, which contributed 85.9 percent of our total vessel revenue and 91.4 percent of our cash
vessel operating margin in fiscal 2012. We are not done yet. Additional fleet expansion will provide future earnings growth potential.
During the past year, Tidewater directly entered the Saudi Arabian offshore market, a new growth opportunity for the company. We
are performing well there now after some start-up issues and are optimistic that entry into this market provides significant opportunity
for an expanded presence within it. We also continue following our oil and gas company clients into new areas of hydrocarbon
exploration activity, such as East Africa with its significant new discoveries, where we have quickly established an important position.
We maintain our strong presence in most of the more mature markets, which, too, seem poised for increased activity.
Tidewater’s focus is solidly on earnings growth. We are encouraged by our global clients’ planned E&P spending increase this year
and what should be additional increases in the future. That spending has boosted the working offshore rig count to a high level and
has encouraged the drilling industry to accelerate building new offshore rigs, employment of which should boost future global vessel
demand. For the better part of the last decade, Tidewater has been replacing and enhancing the earnings power of its revenue-
generating fleet of vessels. While maintaining our strong financial position with a 20 percent net debt to net capitalization ratio and
over $750 million of liquidity available at fiscal year end, Tidewater now stands prepared to grow earnings significantly by incremental
investment, either in vessels, fleets, our own shares, or other opportunities.
As we transition our executive leadership team, I thank you for the privilege of
playing a part in constructing the future of this entity, and I am optimistic that the
future, built by our employees, their planning, dedication and hard work, will
enable Tidewater to deliver outstanding operational and financial results for our
clients and shareholders. The company’s best days are ahead, as the tide turns.
Dean E. Taylor
Chairman, President and Chief Executive Officer
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Review of Operations
Anchored by
Anchored by
Prudent Planning
Prudent Planning
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W e finished the review of our fiscal 2011 operations
with the statement that “we are ready for the next
545 offshore drilling rigs working. That count increased to
approximately 615 rigs by the end of the fiscal year, a 13
cycle to begin.” We are convinced the next industry cycle has
percent improvement. The increase in offshore drilling reflects
begun and fully expect that the investments we have made over
increased spending by our oil and gas company clients. These
the past few years and our financial and operating strengths
companies have indicated that they plan to increase spending
will produce superior results for our shareholders. As the tide
this coming year by approximately 10 percent to around $600
delineating the shift from the down-side of the industry cycle
billion, in response to the high price for crude oil globally and
to the up-side didn’t change until the second half of fiscal 2012,
high prices for natural gas supplies outside of North America.
there was only a nominal positive impact on our financial
Increased oil industry spending also reflects the belief that
results. As a result, last year marked the third consecutive year
the economic recovery will lead to higher petroleum demand.
of declining earnings. We generated, however, quarterly vessel
That growth remains somewhat unbalanced with developing
revenue and cash vessel operating margins during the second
economies providing almost all the incremental demand.
half of the fiscal year that were better than the results reported
Despite that imbalance, the spread between worldwide oil
for the first half.
and gas supplies and demand should tighten boosting the
For fiscal 2012, Tidewater generated vessel revenue of
need for additional energy supplies.
$1.06 billion, up slightly from the $1.05 billion reported in
The company’s improved financial performance during
the prior year. On a quarterly basis, revenue in the second
the second half of the year also reflects the positive impact from
half averaged about $280 million per quarter versus the $250
our continued investment in new vessels that recently have
million we averaged for the first two quarters of the year.
been added to the fleet. Last year, we added 24 new vessels
Importantly, vessel utilization and average fleet day rates
to the fleet at a cost of $452.2 million. At the end of fiscal 2012,
improved during the final two quarters of the year, which
we had commitments for another 25 vessels at an estimated
reflected the gradually improving industry conditions. Two of
cost of $616.7 million to be added to the fleet over the next
our four major geographic regions produced year over year
three fiscal years. We have already spent by the end of fiscal
revenue gains, but their improvement was muted by the
2012 $257.4 million of that financial commitment for those
declines of the remaining two areas. On a vessel operating
additional vessels. Last year’s new vessel deliveries increased
profit basis, two of our major regions showed year over year
Tidewater’s new vessel fleet to 215, defined as vessels added
improvement while the other two were lower. Overall, our
to the fleet since fiscal 2000. Our new vessel fleet, the largest
operating performance in fiscal 2012 suggests we have reached
in the industry, has an average age of 5.7 years. The impact
a point marking the start of a new industry cycle.
of the new vessel fleet on the company’s overall active fleet’s
What else demonstrates that the tide has turned for
average age has been to reduce it to 9.7 years from 14.9 years
our business? At the start of fiscal 2012, there were about
merely two years ago.
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Review of Operations
Over the past five years, we have been engaged in an
7,500 employees operating in the offshore waters of over 50
aggressive program to replace the earnings power of our
countries around the world, achieving this goal requires
company and to prepare for the industry’s next cycle of
constant focus and attention to detail, something we strive to
growth. Our new vessel fleet utilization averaged 82.9 percent
instill in our workforce. Difficult as it may seem, we believe
in fiscal 2012, and the fleet generated 85.9 percent of our vessel
that we can achieve a workplace that is accident-free, day in
revenue and 91.4 percent of our total vessel cash operating
and day out.
margin. The new vessel fleet has
not only performed well for our
clients and our shareholders, but has
facilitated the company’s entrance
into new geographic markets such
as Saudi Arabia, one of the newest
and fastest growing offshore markets,
and where a Tidewater affiliate had
never contracted directly with the lead
operator, the national oil company of
Saudi Arabia. We are excited about
the growth prospects for this market
and other developing offshore regions,
including those off the eastern coast
of Africa.
2012
A core Tidewater value is a conservative financial foundation.
Our safety performance last year was very good. One
With a net debt to net capitalization ratio of 19.9 percent and a 27.3
lost time accident (LTA) marred our total recordable incident
percent total debt to capitalization ratio at fiscal year end, we
rate (TRIR) of 0.14 that otherwise beat our corporate goal
maintain a solid financial base. We ended fiscal 2012 with $320.7
and marked the second best year of safety performance in
million of cash on the balance sheet and $950 million of debt,
the company’s history. As good as this performance was, it still
which was increased during the year by drawing down a $125
did not meet our goal of zero lost time accidents. With over
million term loan at an attractive interest cost. The company now
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has over $750 million of liquidity available to take advantage
superior operating and financial results, will translate into
of any corporate growth opportunity that might present itself.
an improved share valuation.
This strong financial position has enabled us to continue to return
Just over two years ago, the Deepwater Horizon drilling rig
capital to shareholders in the form of our quarterly dividend,
exploded, burned and sank taking 11 workers’ lives with it. Since
which happens to provide shareholders with the highest return
that day, the Gulf of Mexico offshore petroleum industry has
among our oilfield service company peers. Our liquidity position
struggled to recover from that disaster. It appears the Gulf is now
has also enabled us to take advantage of market opportunities
on track to reach well-permitting and drilling activity levels
to repurchase shares at an attractive valuation. Last year, we
comparable to those that existed before the Macondo well blow-
repurchased $35 million worth of our shares, which should help
out. The return of U.S. offshore activity to historical levels is a
boost future shareholder returns.
welcome development and will augment ongoing international
A significant change last year was made to our financial
offshore activity growth. We believe the next industry cycle has
reporting. We revised our segment disclosure to begin reporting
begun. Tidewater has been consistently investing and preparing
financial results by four geographic regions. This additional data
for this upturn and the company is well positioned, operationally
complements the supplemental information we have been
and financially, to capitalize on it. The depth of management
providing on our results by asset class and vessel vintage. We
and the quality of our workforce has never been better. The
believe this increased transparency will aid investors and
company will continue to work diligently to deliver superior
analysts in better understanding the company’s business and
service to our clients and outstanding financial results for our
prospects. We believe that transparency, when combined with
shareholders. With the next cycle underway, the tide has turned.
Charting Our
Charting Our
wn Course
Own Course
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Financial Highlights
Fiscal Years 2012 2011 2010 2009 2008
Revenues $1,067,007 1,055,388 1,168,634 1,390,835 1,270,171
Net Earnings $87,411 105,616 259,476 406,898 348,763
Diluted Earnings Per
Common Share $1.70 2.05 5.02 7.89 6.39
Net Cash from Operations $222,421 264,206 328,261 523,889 486,842
Capital Expenditures $357,110 615,289 451,973 473,675 354,022
Long-term Debt $950,000 700,000 275,000 300,000 300,000
Stockholders’ Equity $2,526,357 2,513,944 2,464,030 2,244,678 1,930,084
Cash Dividends $1.00 1.00 1.00 1.00 .60
Market Price at Year-end $54.02 59.85 47.27 37.13 55.11
Weighted Average Common
Shares Outstanding 51,165,460 51,221,800 51,447,077 51,364,237 54,259,495
Total Vessel Count
at Year-end 342 378 394 430 460
(000's omitted, except Per Share data and Vessel Count)
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Stockholder Assistance
Information about stockholder accounts may be obtained by contacting the Transfer Agent and Registrar for Tidewater’s common stock,
Computershare Investor Services, P.O. Box 43078, Providence, RI 02940-3078, phone: 781-575-2879 or 1-800-730-4001. General stockholder
information is available on the Computershare website, www.computershare.com/investor.
Duplicate Mailings
If you receive duplicate mailings of shareholder materials, you can help eliminate the added expense by requesting that only one copy be sent.
To eliminate duplicate mailings, contact the Company’s Stock Transfer Agent and Registrar listed above.
Stock Exchange
Tidewater’s common stock is traded on the New York Stock Exchange under the symbol TDW.
Form 10-K Report
Tidewater’s 2012 Annual Report on Form 10-K may be obtained without charge by contacting the Company’s Investor Relations
Department at corporate headquarters. Tidewater’s SEC filings can also be viewed online at the Company’s website, www.tdw.com.
Website and E-mail Alerts
Information concerning the Company, including quarterly financial results and news releases, is available on the
Company’s website at www.tdw.com. E-mail alerts about the Company’s news releases, SEC filings and presentations
are available by registering at the Company’s website.
Investor Relations
Requests for information concerning the Company should be directed to the
Investor Relations Department using the address or phone numbers listed below.
Requests for information can also be submitted at the Company’s website,
www.tdw.com.
Tidewater Inc.
601 Poydras Street, Suite 1900
New Orleans, Louisiana 70130
Toll Free: 1-800-678-8433
Phone: 1-504-568-1010
Email: connect@tdw.com
www.tdw.com
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2012
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXHANGE ACT OF 1934
For the transition period from ______ to _______.
Commission file number: 1-6311
Tidewater Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State of incorporation)
72-048776
(I.R.S. Employer Identification No.)
601 Poydras St., Suite 1900
New Orleans, Louisiana
(Address of principal executive offices)
70130
(Zip Code)
Registrant’s telephone number, including area code: (504) 568-1010
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Common Stock, par value $0.10
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of
the Act. Yes No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web
site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files). Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of
this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
1
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-
accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer”
and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes No
As of September 30, 2011, the aggregate market value of the registrant’s voting common stock held by non-
affiliates of the registrant was $2,162,374,995 based on the closing sales price as reported on the New York
Stock Exchange of $42.50.
As of April 30, 2012, 51,252,071 shares of Tidewater Inc. common stock $0.10 par value per share were
outstanding. Registrant has no other class of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s definitive proxy statement for its 2012 Annual Meeting of Stockholders to be filed
with the Securities and Exchange Commission within 120 days after the end of the Registrant’s last fiscal year
is incorporated by reference into Part III of this Annual Report on Form 10-K.
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TIDEWATER INC.
FORM 10-K
FOR THE FISCAL YEAR ENDED MARCH 31, 2012
TABLE OF CONTENTS
FORWARD-LOOKING STATEMENT
PART I
BUSINESS
ITEM 1.
ITEM 1A. RISK FACTORS
ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 2.
ITEM 3.
ITEM 4. MINE SAFETY DISCLOSURE
PROPERTIES
LEGAL PROCEEDINGS
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
SELECTED FINANCIAL DATA
ITEM 6.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8.
ITEM 9.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9B. OTHER INFORMATION
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
SIGNATURES OF REGISTRANT
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4
4
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24
24
24
25
25
27
28
70
72
72
72
73
74
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FORWARD-LOOKING STATEMENT
In accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, this
Annual Report on Form 10-K and the information incorporated herein by reference contain certain forward-
looking statements which reflect the company’s current view with respect to future events and financial
performance. All such forward-looking statements are subject to risks and uncertainties, and the company’s
future results of operations could differ materially from its historical results or current expectations reflected by
such forward-looking statements. Some of these risks are discussed in this report and in Item 1A. “Risk
Factors” and include, without limitation, volatility in worldwide energy demand and oil and gas prices; fleet
additions by competitors and industry overcapacity; changes in capital spending by customers in the energy
industry for offshore exploration, field development and production; changing customer demands for vessel
specifications, which may make some of our older vessels technologically obsolete for certain customer
projects or in certain markets; uncertainty of global financial market conditions and difficulty in accessing credit
or capital; acts of terrorism and piracy; significant weather conditions; unsettled political conditions, war, civil
unrest and governmental actions, such as expropriation, especially in higher political risk countries where we
operate; foreign currency fluctuations; labor changes proposed by international conventions; increased
regulatory burdens and oversight following the Deepwater Horizon incident; and enforcement of laws related to
the environment, labor and foreign corrupt practices.
Forward-looking statements, which can generally be identified by the use of such terminology as “may,”
“expect,” “anticipate,” “estimate,” “forecast,” “believe,” “think,” “could,” “continue,” “intend,” “seek,” “plan,” and
similar expressions contained in this report, are predictions and not guarantees of future performance or
events. Any forward-looking statements are based on the company’s assessment of current industry, financial
and economic information, which by its nature is dynamic and subject to rapid and possibly abrupt changes.
The company’s actual results may differ materially from those stated or implied by such forward-looking
statements due to risks and uncertainties associated with our business. While management believes that these
forward-looking statements are reasonable when made, there can be no assurance that future developments
that affect us will be those that we anticipate and have identified. The forward-looking statements should be
considered in the context of the risk factors listed above and discussed in greater detail elsewhere in this
Annual Report on Form 10-K. Investors and prospective investors are cautioned not to rely unduly on such
forward-looking statements, which speak only as of the date hereof. Management disclaims any obligation to
update or revise any forward-looking statements contained herein to reflect new information, future events or
developments.
In certain places in this report, we may refer to reports published by third parties that purport to describe trends
or developments in energy production and drilling and exploration activity. The company does so for the
convenience of our investors and potential investors and in an effort to provide information available in the
market that will lead to a better understanding of the market environment in which the company operates. The
company specifically disclaims any responsibility for the accuracy and completeness of such information and
undertakes no obligation to update such information.
ITEM 1. BUSINESS
PART I
Tidewater Inc., a Delaware corporation that is a listed company on the New York Stock Exchange under the
symbol “TDW”, provides offshore service vessels and marine support services to the global offshore energy
industry through the operation of a diversified fleet of marine service vessels. The company was incorporated in
1956 and conducts its operations through wholly-owned United States (U.S.) and international subsidiaries, as
well as through joint ventures in which Tidewater has majority and sometimes minority interests (where
required to satisfy local ownership or content requirements). Unless otherwise required by the context, the term
"company" as used herein refers to Tidewater Inc. and its consolidated subsidiaries.
About Tidewater
The company provides offshore vessel services in support of all phases of offshore exploration, field
development and production, including towing of, and anchor handling for, mobile offshore drilling units;
transporting supplies and personnel necessary to sustain drilling, workover and production activities; offshore
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construction, ROV operations, and seismic support; and a variety of specialized services such as pipe and
cable laying. The size and composition of the company’s offshore service vessel fleet includes vessels that are
operated under joint ventures, as well as vessels that have been stacked or withdrawn from service.
The company has one of the broadest operating global footprints in the offshore energy industry with
operations in most of the world's significant crude oil and natural gas exploration and production offshore
regions so we can be close to our customers. Our wide operating footprint facilitates strong customer
relationships and the ability to react quickly to local market conditions and changing customer needs. The
company is also one of the most experienced international operators in the offshore energy industry with over
five decades of international experience.
At March 31, 2012, the company had 342 vessels (of which 10 were owned by joint ventures, 67 were stacked
and two were withdrawn from service) available to serve the global energy industry. Please refer to Note (1) of
Notes to Consolidated Financial Statements included in Item 8 of this report for additional information regarding
our stacked vessels and vessels withdrawn from service.
The company also operates two shipyards, which construct, modify and repair vessels. The shipyards perform
both repair work and new construction work for outside customers, as well as the construction, repair and
modification of the company’s own vessels.
Our revenues, net earnings and cash flows from operations are largely dependent upon the activity level of our
offshore marine vessel fleet. As is the case with other energy service companies, our business activity is largely
dependent on the level of drilling and exploration activity by our customers. Our customers’ business activity, in
turn, is dependent on crude oil and natural gas prices, which fluctuate depending on expected future levels of
supply and demand for crude oil and natural gas, and on estimates of the cost to find, develop and produce
reserves.
Offices and Facilities
The company's worldwide headquarters and principal executive offices are located at 601 Poydras Street,
Suite 1900, New Orleans, Louisiana 70130, and its telephone number is (504) 568-1010. The company’s U.S.
marine operations are based in Amelia, Louisiana; Oxnard, California; and Houston, Texas. The company’s
shipyards and shipyard operations are located in Houma, Louisiana. We conduct our international operations
through facilities and offices located in over 30 countries. Our principal international offices and/or warehouse
facilities, most of which are leased, are located in Rio de Janeiro and Macae, Brazil; Ciudad Del Carmen,
Mexico; Port of Spain, Trinidad; Aberdeen, Scotland; Cairo, Egypt; Luanda and Cabinda, Angola; Lagos and
Onne Port, Nigeria; Douala, Cameroon; Singapore; Perth, Australia; Shenzhen, China; Port Moresby, Papua
New Guinea; Al Khobar, Kingdom of Saudi Arabia, and Dubai, United Arab Emirates. The company’s
operations generally do not require highly specialized facilities, and suitable facilities are generally available on
a lease basis as required.
Business Segments
During the quarter ended September 30, 2011, our International and United States segments were reorganized
to form four new operating segments. We now manage and measure our business performance in four distinct
operating segments which are based on our geographical organization: Americas, Asia/Pacific, Middle
East/North Africa, and Sub-Saharan Africa/Europe. Management decided to revise its reporting segments,
largely because the company’s Sub-Saharan Africa/Europe and Latin American business regions had gained
greater significance as a percentage of consolidated revenues and operating profit, while our former United
States segment had declined in significance to consolidated revenues and operating profit. Prior period
disclosures have been recast to reflect the change in reportable segments.
Our Americas segment includes the activities of our North American operations, which include the U.S. GOM
and U.S. coastal waters of the Pacific and Atlantic oceans, Mexico, Trinidad and Brazilian operations. The
Asia/Pacific segment includes our Australian and Southeast Asia and Pacific operations. Middle East/North
Africa includes our operations in Egypt, the Arabian Gulf and India. Lastly, our Sub-Saharan Africa/Europe
segment includes operations conducted along the East and West Coasts of Africa as well as operations around
the Caspian Sea and the North Sea.
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The principal customers in each of these business segments are major and independent oil and natural gas
exploration, field development and production companies; foreign government-owned or government-controlled
organizations and other companies that explore and produce oil and natural gas; drilling contractors; and other
companies that provide various services to the offshore energy industry, including but not limited to, offshore
construction companies, diving companies and well stimulation companies.
The company’s vessels are geographically dispersed throughout the major offshore crude oil and natural gas
exploration and development areas of the world. Although the company considers, among other things,
mobilization costs and the availability of suitable vessels in its fleet deployment decisions, and cabotage rules in
certain international countries occasionally restrict the ability of the company to move vessels between markets,
the company’s diverse, mobile asset base and the wide geographic distribution of its vessel assets enable the
company to respond relatively quickly to changing market conditions. As such, significant variations between
various regions tend to be of a short-term duration, as we routinely move vessels between and within
geographic regions.
Revenues in each of our segments are derived primarily from vessel time charter contracts that are generally
three months to three years in duration as determined by customer requirements, and from time charter
contracts on a “spot” basis, which is a short-term agreement (one day to three months) to provide offshore
marine services to a customer for a specific short-term job. The base rate of hire for a term contract is generally
a fixed rate, though some charter arrangements include clauses to recover specific additional costs.
In each of our business segments, and depending on vessel capabilities and availability, our vessels operate in
the shallow, intermediate and deepwater offshore markets of the respective regions. The deepwater offshore
market continues to be a growing sector in the offshore crude oil and natural gas markets due to technological
developments that have made such exploration feasible. It is the one sector that has not experienced
significant negative effects from the 2008-2009 global economic recession, largely because deepwater
exploration and development typically involves significant capital investment and multi-year development plans.
Such projects are generally underwritten by the participating exploration, development and production
companies using relatively conservative assumptions in regards to crude oil and natural gas prices and
therefore are not as susceptible to short-term fluctuations in the price of crude oil and natural gas. However, the
April 2010 Deepwater Horizon incident did negatively affect the level of drilling activity off the continental shelf
of the U.S. Gulf of Mexico (GOM) while the U.S. Department of the Interior, through the Bureau of Ocean
Energy Management Regulation and Enforcement (BOEMRE) evaluated the causes of the incident and
announced plans for enhanced regulatory and safety oversight as a condition to granting additional drilling and
exploration permits. The BOEMRE resumed deepwater exploration and drilling permitting by February 2011,
although the pace of permitting has been slow. Also, in our Americas segment, drilling activity in the shallow
and intermediate waters of the U.S. GOM has been negatively impacted by low natural gas prices.
Please refer to Item 7 "Management's Discussion and Analysis of Financial Condition and Results of
Operations" of this report for a greater discussion of the company’s segments, including the macroeconomic
environment we operated under. In addition, please refer to Note (14) of Notes to Consolidated Financial
Statements included in Item 8 of this report for segment, geographical data and major customer information.
Geographic Areas of Operation
The company's fleet is deployed in the major global offshore oil and gas areas of the world. The principal areas
of the company's operations include the U.S. GOM, the Persian/Arabian Gulf, and areas offshore Australia,
Brazil, China, Egypt, India, Indonesia, Malaysia, Mexico, Thailand, Trinidad, and West and East Africa. The
company regularly evaluates the deployment of its assets and repositions its vessels based on customer
demand, relative market conditions, and other considerations.
6
Revenues and operating profit derived from our marine operations along with total marine assets for our
segments for the fiscal years ended March 31 are summarized below:
(In thousands)
Revenues:
Vessel revenues:
Americas
Asia/Pacific
Middle East/North Africa
Sub-Saharan Africa/Europe
Other operating revenues
Marine operating profit:
Vessel activity:
Americas
Asia/Pacific
Middle East/North Africa
Sub-Saharan Africa/Europe
Corporate expenses
Goodwill impairment
Gain on asset dispositions, net
Other operating expenses
Operating income
Total marine assets:
Americas
Asia/Pacific
Middle East/North Africa
Sub-Saharan Africa/Europe
Total marine assets
2012
2011
2010
$
324,529
153,752
109,489
472,698
6,539
362,825
176,877
92,151
419,360
4,175
393,270
170,358
93,379
481,155
30,472
$
1,067,007
1,055,388
1,168,634
$
$
$
56,003
16,125
805
97,142
170,075
(40,379)
(30,932)
17,657
(2,867)
113,554
1,031,903
654,357
405,625
1,565,260
$
3,657,145
49,341
22,308
18,990
82,993
173,632
(46,361)
---
13,228
(1,163)
139,336
975,210
583,569
369,122
1,325,657
3,253,558
37,533
49,049
29,936
145,032
261,550
(51,432)
---
28,178
2,034
240,330
1,072,215
436,985
192,938
1,174,202
2,876,340
Please refer to Item 7 of this report and Note (14) of Notes to Consolidated Financial Statements included in
Item 8 of this report for further disclosure of segment revenues, operating profits, and total assets by
geographical areas in which the company operates.
Our Global Vessel Fleet
The company continues a disciplined vessel construction, acquisition and replacement program that was
initiated with the intent of assuring the company’s presence in nearly all major oil and gas producing regions of
the world through the replacement of aging vessels in the company’s fleet with fewer, larger, and more
technologically sophisticated vessels. Since calendar 2000, the company has purchased and/or constructed
238 vessels at a total cost of approximately $3.4 billion and at March 31, 2012, has an additional 25 vessels
under construction or committed to be purchased at a total cost of approximately $616.7 million. To date, the
company has generally funded its vessel programs from its operating cash flows, funds provided by three
private debt placements totaling $890 million in senior unsecured notes, a $125 million term bank loan,
borrowings under revolving credit facilities, and various sales-leaseback arrangements.
The company’s strategy contemplates organic growth through the construction of vessels at a variety of
shipyards worldwide and possible acquisitions of recently built vessels and/or other owners and operators
having attractive offshore supply vessels and/ or vessel operations. The company has the largest number of
new offshore supply vessels among its competitors in the industry, but it also has the largest number of older
offshore supply vessels for which management regularly evaluates disposition and other alternatives. The
company intends to pursue its long-term fleet replenishment and modernization strategy on a disciplined basis
and, in each case, will carefully consider whether proposed investments and transactions have the appropriate
risk/reward profile.
The average age of the company's 330 owned or chartered vessel fleet (excluding joint-venture vessels and
vessels withdrawn from service) in its fleet at March 31, 2012 is approximately 14.0 years. The average age of
215 newer vessels in the fleet (defined as those that have been acquired or constructed since calendar year
2000 as part of the company’s new build and acquisition program as discussed below) is approximately
5.7 years. The remaining 115 vessels have an average age of 29.6 years. Of the company’s 330 vessels,
7
72 are deepwater class vessels, 185 are in the non-deepwater towing-supply/supply class vessels, 52 are
crew/utility class vessels and 21 are offshore tugs.
At March 31, 2012, the company had agreements to acquire three vessels and commitments to build
22 vessels at a number of different shipyards around the world (with one of these vessels being constructed in
the United States by the company’s wholly-owned shipyard, Quality Shipyards, L.L.C.) at a total cost, including
contract costs and other incidental costs, of approximately $616.7 million. Of the 22 new-build vessels, two are
anchor handling towing supply (AHTS) vessels and have 8,200 brake horsepower (BHP), 15 are platform
supply vessels (PSVs) ranging between 1,900 and 6,360 deadweight tons of cargo capacity, one is a fast
crew/supply boat and four are crewboats. Scheduled delivery for these newbuild vessels began in April 2012,
with delivery of the final vessel expected in May 2014. The company currently is experiencing substantial delay
with one fast, crew/supply boat under construction in Brazil that was originally scheduled to be delivered in
September of 2009. A discussion of this matter is disclosed in the “Vessel Count, Dispositions, Acquisitions and
Construction Programs” section of Item 7 and Note (11) of Notes to Consolidated Financial Statements
included in Item 8 of this report.
Of the three vessels to be purchased, all three are deepwater PSVs. The aggregate approximate purchase
price for these vessels is $58.4 million. The company took possession of one of the PSVs, which has
3,000 deadweight tons of cargo capacity, in April 2012 for a total cost of $19.8 million and expects to take
possession of the remaining two PSVs, which have 3,500 deadweight tons of cargo capacity, in July 2012 and
in September 2012 for a total aggregate cost of $38.6 million.
At March 31, 2012, the company had invested $244.5 million in progress payments towards the construction of
22 vessels and $12.9 million towards the purchase of the three PSVs. At March 31, 2012, the remaining
expenditures necessary to complete construction of the 22 vessels currently under construction (based on
contract prices) and to fund the acquisition of the three vessels was $359.3 million.
A discussion of the company’s capital commitments, scheduled delivery dates and vessel sales is disclosed in
the “Vessel Count, Dispositions, Acquisitions and Construction Programs” section of Item 7 and Note (11) of
Notes to Consolidated Financial Statements. The “Vessel Count, Dispositions, Acquisitions and Construction
Programs” section of Item 7 also contains a table comparing the actual March 31, 2012 vessel count and the
average number of vessels by class and geographic distribution during the three years ended March 31, 2012,
2011 and 2010.
Between April 1999 and March 2012, the company also sold, primarily to buyers that operate outside of our
industry, 603 vessels. Most of the vessel sales were at prices that exceeded their carrying values. The vessel
sales were accompanied by sales restrictions on competition or else the company determined that the
prospects of the vessel competing with our ongoing business were low. In aggregate, proceeds from, and pre-
tax gains on, vessel dispositions during this period approximated $650 million and $300 million, respectively.
Our Vessel Classifications
Our vessels regularly and routinely move from one operating area to another, often to and from offshore
operating areas of different continents. We disclose our vessel statistical information, such as revenue,
utilization and average day rates, by vessel class. Listed below are our five major vessel classes along with a
description of the type of vessels categorized in each class and the services the respective vessels typically
perform. Tables comparing the average size of the company's marine fleet by class and geographic distribution
for the last three fiscal years are included in Item 7 of this report.
Deepwater Vessels
Included in this vessel class are large (typically greater than 230-feet and/or with at least 2,801 tons in dead
weight cargo carrying capacity) PSVs and large, higher-horsepower (generally greater than 10,000
horsepower) AHTS vessels. This vessel class is generally chartered to customers for use in transporting
supplies and equipment from shore bases to deepwater and intermediate water depth offshore drilling rigs,
platforms and other installations that operate in challenging environments and which typically involve complex
projects. Platform supply vessels, which have large cargo capacities [both below deck (liquid mud tanks and
dry bulk tanks) and above deck cargo capacities], serve drilling and production facilities and support offshore
construction and maintenance work. The deepwater AHTS vessels are equipped to tow drilling rigs and other
8
marine equipment, as well as to set anchors for the positioning and mooring of drilling rigs. Due to the
challenging environment that deepwater offshore rigs, platforms and other installations operate in, our
deepwater AHTS and PSVs are outfitted with dynamic positioning (anchorless station-keeping) capabilities,
which are primarily driven by safety considerations that preclude vessels from physically mooring to the
installations and because our customers demand a high level of safety and technological advancements to
meet the more stringent regulatory standards especially in the wake of the Deepwater Horizon incident.
This class of vessel also includes specialty vessels that can support offshore well stimulation, construction
work, subsea services and/or have fire fighting capabilities and/or accommodation facilities. These vessels are
generally available for routine supply and towing services but are outfitted and primarily intended for specialty
services. For example, these vessels can be equipped with a variety of lifting and deployment systems,
including large capacity cranes, winches or reel systems. Included in the specialty vessel category is the
company’s one multi-purpose platform supply vessel (MPSV), which is designed for subsea service and
construction support activities and which is significantly larger in size, more versatile, and more specialized than
the PSVs discussed above. The MPSV also commands a higher day rate because the vessel has higher
construction cost, operating costs and because of the aforementioned capabilities.
Towing-Supply and Supply Vessels
This is the company’s largest fleet class by number of vessels. Included in this class are non-deepwater
towing/supply vessels with horsepower below 10,000 BHP, and non-deepwater platform supply vessels, or
PSVs that are generally less than 230 feet. The vessels in this class perform the same functions and services
as their deepwater vessel class counterparts except they are generally chartered to customers for use in
intermediate and shallow waters.
Crewboats and Utility Vessels
Crewboats and utility vessels are chartered to customers for use in transporting personnel and supplies from
shore bases to offshore drilling rigs, platforms and other installations. These vessels are also often equipped for
oil field security missions in markets where piracy, kidnapping or other potential violence presents a concern.
Offshore Tugs
Offshore tugs tow floating drilling rigs; assist in the docking of tankers; tow barges; assist pipe laying, cable
laying and construction barges; and are used in a variety of other commercial towing operations, including
towing barges carrying a variety of bulk cargoes and containerized cargo.
Other Vessels
The company's “Other Vessels” included inshore tugs and production, line-handling and various other special
purpose vessels. Inshore tugs, which are operated principally within inland waters, tow drilling rigs to and from
their locations and tow-barges carrying equipment and materials for use principally in inland waters for drilling
and production operations. Barges are either used in conjunction with company tugs or are chartered to others.
The company sold its remaining “other” type vessels during the first quarter of fiscal 2010.
Revenue Contribution of Main Classes of Vessels
Revenues from vessel operations were derived from the following classes of vessels in the following
percentages:
Deepwater vessels ................................................................................................................... 44.2%
Towing-supply/supply ............................................................................................................... 44.9%
Crew/utility .................................................................................................................................. 7.7%
Offshore tugs .............................................................................................................................. 3.2%
2012
Year Ended March 31,
2011
39.6%
49.2%
7.8%
3.4%
2010
31.9%
56.9%
7.9%
3.3%
9
Shipyard Operations
Quality Shipyards, L.L.C., a wholly-owned subsidiary of the company, operates two shipyards in Houma,
Louisiana, that construct, upgrade and repair vessels. The shipyards perform repair work and new construction
work for third-party customers, as well as the construction, repair and modification of the company’s own
vessels. During the last three fiscal years, Quality Shipyards, L.L.C. has constructed and delivered three 266-
foot PSVs, and is currently constructing one 261-foot PSV for the company that is scheduled for delivery in
October 2013. One of the 266-foot platform supply vessels was delivered in November 2011, while the other
two were delivered at various times during fiscal 2010.
Customers and Contracting
The company’s operations are materially dependent upon the levels of activity in offshore crude oil and natural
gas exploration, field development and production throughout the world, which is affected by trends in global
crude oil and natural gas pricing, including expectations of future commodity pricing, which are ultimately
influenced by the supply and demand relationship for these natural resources. The activity levels of our
customers are also influenced by the cost of exploring for and producing crude oil and natural gas, which can
be affected by environmental regulations, technological advances that affect energy production and
consumption, significant weather conditions, the ability of our customers to raise capital, and local and
international economic and political environments, including government mandated moratoriums. A discussion
of current market conditions and trends appears under “Macroeconomic Environment and Outlook” in Item 7 of
this report.
The company’s principal customers are major and independent oil and natural gas exploration, field
development and production companies; foreign government-owned or government-controlled organizations
and companies that explore and produce oil and natural gas; drilling contractors; and companies that provide
other services to the offshore energy industry, including but not limited to, offshore construction companies,
diving companies and well stimulation companies.
In recent years, consolidation of exploration, field development, and production companies has occurred which
reduces the number of customers for the company’s vessels and services, and may negatively affect
exploration, field development and production activity as consolidated companies generally focus initially on
increasing efficiency and reducing costs and delay or abandon exploration activity with less promise. Such
activity could adversely affect demand for our vessels, and reduce the company's revenues. This trend is likely
to continue in the future, although for every merger in the industry, there is frequently a start-up company that
takes the place of the merged company, in numerical terms, if not in levels of activity.
Our primary source of revenue is derived from time charter contracts on our vessels on a rate per day of
service basis; therefore, vessel revenues are recognized on a daily basis throughout the contract period. As
noted above, these time charter contracts are generally either on a term or “spot” basis. There are no material
differences in the cost structure of the company’s contracts based on whether the contracts are spot or term
because the operating costs are generally the same without regard to the length of a contract.
The following table discloses our customers that accounted for 10% or more of total revenues during the years
ended March 31:
Chevron Corporation (including its worldwide subsidiaries and affiliates)
Petroleo Brasileiro SA
2012
17.4%
14.6%
2011
16.2%
15.4%
2010
18.3%
13.1%
While it is normal for our customer base to change over time as our time charter contracts turn over, the
unexpected loss of either or both of these two significant customers could, at least in the short term, have a
material adverse effect on the company’s vessel utilization and its results of operations. The five largest
customers of the company in aggregate accounted for approximately 43% of our fiscal 2012 total revenues,
while the 10 largest customers in aggregate accounted for approximately 59% of the company’s fiscal 2012
total revenues.
10
Competition
The principal competitive factors for the offshore vessel service industry are the suitability and availability of
vessel equipment, price and quality of service. In addition, the ability to demonstrate a strong safety record and
attract and retain qualified and skilled personnel are also important competitive factors. The company has
numerous competitors in all areas in which it operates around the world, and the business environment in all of
these markets is highly competitive.
The company’s diverse, mobile asset base and the wide geographic distribution of its assets generally enable
the company to respond relatively quickly to changes in market conditions and to provide a broad range of
vessel services to its customers around the world. We believe the company has a competitive advantage
because of the size, diversity and geographic distribution of our vessel fleet. Economies of scale and
experience level in the many areas of the world in which we operate are also considered competitive
advantages as is the company’s strong financial position.
According to ODS-Petrodata, the global offshore supply vessel market at the end of April 2012 had
approximately 410 new-build offshore support vessels (PSVs and anchor handlers only), under construction
that are expected to be delivered to the worldwide offshore vessel market primarily over the next three years.
The current worldwide fleet of these classes of vessels is estimated at approximately 2,745 vessels, of which
Tidewater estimates more than 10% are stacked. An increase in worldwide vessel capacity could have the
effect of lowering charter rates, particularly when there are lower levels of exploration, field development and
production activity. The worldwide offshore marine vessel industry, however, also has a large number of aged
vessels, including approximately 725 vessels, or 26%, of the worldwide offshore fleet, that are at least 25 years
old and nearing or exceeding original expectations of their estimated economic lives. These older vessels,
approximately one-third of which Tidewater estimates are already stacked, could potentially be removed from
the market within the next few years if the cost of extending the vessels’ lives is not economically justifiable.
Although the future attrition rate of these aging vessels cannot be determined with absolute certainty, the
company believes that the retirement of a sizeable portion of these aged vessels could mitigate the potential
negative effects of new-build vessels on vessel utilization and vessel pricing. Additional vessel demand could
also be created by the addition of new drilling rigs and floating production units that are expected to be
delivered and become operational over the next few years, which should help minimize the possible negative
effects of the new-build offshore support vessels being added to the offshore support vessel fleet.
Challenges We Confront as an International Offshore Vessel Company
We operate in many challenging operating environments around the world that present varying degrees of
political, social, economic and other uncertainties. We operate in markets where risks of expropriation,
confiscation or nationalization of our vessels or other assets, terrorism, piracy, civil unrest, changing foreign
currency exchange rates and controls, and changing political conditions, may adversely affect our operations.
Although the company takes what it believes to be prudent measures to safeguard its property, personnel and
financial condition against these risks, it cannot eliminate entirely the foregoing risks, though the wide
geographic dispersal of the company's vessels helps reduce the potential impact of these risks. In addition,
immigration, customs, tax and other regulations (and administrative and judicial interpretations thereof) can
have a material impact on our ability to work in certain countries and on our operating costs.
In some international operating environments, local customs or laws may require the company to form joint
ventures with local owners or use local agents. The company is dedicated to carrying out its international
operations in compliance with the rules and regulations of the Office of Foreign Assets Control (OFAC), the
Trading with the Enemy Act, the Foreign Corrupt Practices Act (FCPA), and other applicable laws and
regulations. The company has adopted policies and procedures to mitigate the risks of violating these rules and
regulations.
Sonatide Joint Venture
The company has previously announced that its existing Sonatide joint venture agreement with Sonangol had
been extended to May 31, 2012 to allow ongoing joint venture restructuring negotiations to continue.
The company has from time to time also provided updates regarding the status of its continuing negotiations
with Sonangol to put its Sonatide joint venture on a more permanent footing after a number of temporary
11
extensions of the original joint venture agreement. As previously disclosed, in March 2012, Sonangol informed
Tidewater that it would not permit further vessel contracting activity by Sonatide until the joint venture
negotiations had been resolved to the parties’ mutual satisfaction. As a result, the company has begun
deploying vessels (at prevailing market day rates) to other markets as those vessels become available.
The company has recently exchanged proposals and is continuing discussions with Sonangol. In the most
recent meeting between the two negotiating teams, only modest progress was made in the restructuring
negotiations, and important and fundamental issues regarding the restructured relationship remain outstanding
and unresolved. In that meeting, Sonangol and the company discussed a number of topics, up to and including
the potential issues associated with a wind up of the existing joint venture in the event restructuring discussions
are not ultimately successful. If negotiations relating to putting the Sonatide joint venture on a more permanent
footing are ultimately unsuccessful, the company will work toward an orderly wind up of the joint venture. We
believe, however, that the joint venture would be allowed to honor existing vessel charter agreements through
their contract terms. Even though the global market for offshore supply vessels appears to be well balanced
(and the market for deepwater supply vessels is currently strong), there would be financial impacts associated
with the wind up of the existing joint venture and the possible redeployment of vessels to other markets,
including mobilization costs and costs to redeploy Tidewater shore-based employees to other areas, in addition
to lost revenues associated with potential downtime between vessel contracts. These financial impacts could,
individually or in the aggregate, be material to our results of operations and cash flows. If there is a need to
redeploy vessels which are currently deployed in Angola to other international markets, Tidewater believes that
there is sufficient demand for these vessels at prevailing market day rates.
For the year ended March 31, 2012, Tidewater’s Angolan operations generated vessel revenues of
approximately $254 million, or 24% of its consolidated vessel revenue, from an average of approximately
93 vessels (14 of which were stacked on average in fiscal 2012), and, for the year ended March 31, 2011,
generated vessel revenues of approximately $237 million, or 23% of consolidated vessel revenue, from an
average of approximately 97 vessels (13 of which were stacked on average in fiscal 2011). As of
March 31, 2012, the carrying value of Tidewater's investment in the Sonatide joint venture, which is included in
"Investments in, at equity, and advances to unconsolidated companies," is approximately $46 million.
International Labour Organization’s Maritime Labour Convention
The International Labour Organization's Maritime Labour Convention, 2006 (the "Convention") seeks to
mandate globally, among other things, seafarer working conditions, ship accommodations, wages, conditions of
employment, health and other benefits for all ships (and the seafarers on those ships) that are engaged in
commercial activities. To date, this Convention has been ratified by 25 countries, namely, Antigua and
Barbuda, Australia, the Bahamas, Benin, Bosnia and Herzegovina, Bulgaria, Canada, Croatia, Denmark,
Kiribati, Latvia, Liberia, Luxembourg, Marshall Islands, Netherlands, Norway, Panama, Poland, Saint Kitts and
Nevis, St. Vincent and the Grenadines, Singapore, Spain, Switzerland, Togo and Tuvalu. Instruments of
ratification have been received but registration is pending for Gabon. The aforementioned 26 countries
represent more than 50% of the world's vessel tonnage. If 30 Member States ratify the Convention, then, within
12 months thereof, the Convention will become law. Even though the company believes that the labor changes
proposed by this Convention are unnecessary in light of existing international labor laws that govern many of
these issues, and the company continues to work with industry representatives to oppose ratification of this
Convention, the company continues to assess its seafarer labor relationships, including benefits provided, and
to review its fleet operational practices in light of the Convention requirements. Should this Convention become
law, the company and its customers' operations may be negatively affected by future compliance costs.
Government Regulation
The company is subject to various United States federal, state and local statutes and regulations governing the
operation and maintenance of its vessels. The company’s U.S. flagged vessels are subject to the jurisdiction of
the United States Coast Guard, the United States Customs and Border Protection, and the United States
Maritime Administration. The company is also subject to international laws and conventions and the laws of
international jurisdictions where the company and its offshore vessels operate.
12
Under the citizenship provisions of the Merchant Marine Act of 1920 and the Shipping Act, 1916, as amended,
the company would not be permitted to engage in the U.S. coastwise trade if more than 25% of the company's
outstanding stock were owned by non-U.S. citizens. For a company engaged in the U.S. coastwise trade to be
deemed a U.S. citizen: (i) the company must be organized under the laws of the United States or of a state,
territory or possession thereof, (ii) each of the chief executive officer and the chairman of the board of directors
of such corporation must be a U.S. citizen, (iii) no more than a minority of the number of directors of such
corporation necessary to constitute a quorum for the transaction of business can be non-U.S. citizens and (iv)
at least 75% of the interest in such company must be owned by U.S. citizens. The company has a dual stock
certificate system to protect against non-U.S. citizens owning more than 25% of its common stock. In addition,
the company's charter provides the company with certain remedies with respect to any transfer or purported
transfer of shares of the company's common stock that would result in the ownership by non-U.S. citizens of
more than 24% of its common stock. Based on information supplied to the company by its transfer agent,
approximately 18% of the company's outstanding common stock was owned by non-U.S. citizens as of
March 31, 2012.
The laws of the U.S. require that vessels engaged in the U.S. coastwise trade must be built in the U.S. In
addition, once a U.S.-built vessel is registered under a non-U.S. flag, it cannot thereafter engage in U.S.
coastwise trade. Therefore, the company's non-U.S. flagged vessels must operate outside of the U.S.
coastwise trade. Of the total 342 vessels owned or operated by the company at March 31, 2012, 290 vessels
were registered under flags other than the United States and 52 vessels were registered under the U.S. flag. If
the company is not able to secure adequate numbers of charters abroad for its non-U.S. flag vessels, even if
work would otherwise have been available for such vessels in the United States, these vessels cannot operate
in the U.S. coastwise trade, and the company’s financial performance could be affected.
All of the company's offshore vessels are subject to either United States or international safety and
classification standards or sometimes both. U.S. flag towing-supply, supply vessels and crewboats are required
to undergo periodic inspections twice within every five year period pursuant to U.S. Coast Guard regulations.
Vessels registered under flags other than the United States are subject to similar regulations and are governed
by the laws of the applicable international jurisdictions and the rules and requirements of various classification
societies, such as the American Bureau of Shipping.
The company is in compliance with the International Ship and Port Facility Security Code (ISPS), an
amendment to the Safety of Life at Sea (SOLAS) Convention (1974/1988), and further mandated in the
Maritime Transportation and Security Act of 2002 to align United States regulations with those of SOLAS and
the ISPS Code. Under the ISPS Code, the company performs worldwide security assessments, risk analyses,
and develops vessel and required port facility security plans to enhance safe and secure vessel and facility
operations. Additionally, the company has developed security annexes for those U.S. flag vessels that transit or
work in waters designated as high risk by the United States Coast Guard pursuant to the latest revision of
Marsec Directive 104-6.
Environmental Compliance
During the ordinary course of business, the company’s operations are subject to a wide variety of
environmental laws and regulations that govern the discharge of oil and pollutants into navigable waters.
Violations of these laws may result in civil and criminal penalties, fines, injunction and other sanctions.
Compliance with the existing governmental regulations that have been enacted or adopted regulating the
discharge of materials into the environment, or otherwise relating to the protection of the environment has not
had, nor is expected to have, a material effect on the company. Environmental laws and regulations are subject
to change however, and may impose increasingly strict requirements and, as such, the company cannot
estimate the ultimate cost of complying with such potential changes to environmental laws and regulations.
All vessels over 79 feet in registered length, regardless of flag, that are operating as a means of transportation
within the inland and offshore waters of the U.S. (but not beyond the three nautical mile territorial sea limit)
must comply with the Environmental Protection Agency’s National Pollutant Discharge Elimination System
(NPDES) Vessel General Permit (VGP) for discharges incidental to the normal operation of vessels. For our
vessels, that includes ballast water, bilge water, graywater, cooling water, chain locker effluent, deck wash
down and runoff, cathodic protection, and other such type runoff. The company believes that it is in full
compliance with the VGP.
13
The company is also involved in various legal proceedings that relate to asbestos and other environmental
matters. In the opinion of management, based on current information, the amount of ultimate liability, if any,
with respect to these proceedings is not expected to have a material adverse effect on the company’s financial
position, results of operations, or cash flows. The company is proactive in establishing policies and operating
procedures for safeguarding the environment against any hazardous materials aboard its vessels and at shore-
based locations. Whenever possible, hazardous materials are maintained or transferred in confined areas in an
attempt to ensure containment, if accidents were to occur. In addition, the company has established operating
policies that are intended to increase awareness of actions that may harm the environment.
Safety
We are committed to ensuring the safety of our operations for both our employees and our customers. The
company’s principal operations occur in offshore waters where the workplace environment presents safety
challenges. Because the work environment presents these challenges, the company works diligently to
maintain workplace safety. Management regularly communicates with its personnel to promote safety and instill
safe work habits through company media and safety review sessions. We also regularly conduct safety training
meetings for our seamen and shore based staff personnel. We dedicate personnel and resources to ensure
safe operations and regulatory compliance. Our Director of Health, Safety and Environmental Management is
involved in proactive efforts to prevent accidents and injuries and reviews all incidents that occur throughout the
company. In addition, the company employs safety personnel at every operating location who are responsible
for administering the company’s safety programs and fostering the company’s safety culture. We believe that
every employee is a safety supervisor, and gives each employee the right, the responsibility, and the obligation
to stop any operation that the employee deems to be unsafe, whether it is deemed to be, in retrospect, unsafe
or not.
Risk Management
The operation of any marine vessel involves an inherent risk of marine losses attributable to adverse sea and
weather conditions, mechanical failure, and collisions, as well as, physical damage to the vessel. In addition,
the nature of our operations exposes the company to the potential risks of damage to and loss of drilling rigs
and production facilities, hostile activities attributable to war, sabotage, pirates and terrorism, as well as
business interruption due to political action or inaction, including nationalization of assets by foreign
governments. Any such event may result in a reduction in revenues or increased costs. The company's vessels
are generally insured for their estimated market value against damage or loss, including war, acts of terrorism,
and pollution risks, but the company does not fully insure for business interruption. The company also carries
workers' compensation, maritime employer's liability, director and officer liability, general liability (including third
party pollution) and other insurance customary in the industry.
The company seeks to secure appropriate insurance coverage at competitive rates by maintaining a self-
retention layer up to certain limits on its marine package policy. The company carefully monitors claims and
participates actively in claims estimates and adjustments. Estimated costs of self-insured claims, which include
estimates for incurred but unreported claims, are accrued as liabilities on our balance sheet.
The continued threat of terrorist activity and other acts of war or hostility have significantly increased the risk of
political, economic and social instability in some of the geographic areas in which the company operates. It is
possible that further acts of terrorism may be directed against the United States domestically or abroad, and
such acts of terrorism could be directed against properties and personnel of U.S.-owned companies such as
ours. The resulting economic, political and social uncertainties, including the potential for future terrorist acts
and war, could cause the premiums charged for our insurance coverage to increase. The company currently
maintains war risk coverage on its entire fleet.
Management believes that the company’s insurance coverage is adequate. The company has not experienced
a loss in excess of insurance policy limits; however, there is no assurance that the company’s liability coverage
will be adequate to cover potential claims that may arise. While the company believes that it should be able to
maintain adequate insurance in the future at rates considered commercially acceptable, it cannot guarantee
such with the current level of uncertainty in the markets the company operates.
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Raw Materials
The company’s wholly-owned subsidiary, Quality Shipyards, L.L.C., performs both repair work and new
construction work for outside customers, as well as the construction, repair and modification of the company’s
own vessels. The shipyard operations require raw materials, such as alloy steels in various forms, welding
gases, paint, fuels and lubricants, which are available from multiple sources and subject to price volatility. The
shipyard does not depend on any one supplier or source for any of these materials. Although shortages for
some of these materials and fuels have occurred from time to time, no material shortage currently exists nor
does the shipyard anticipate any shortages. The commodity price for iron ore, the main component of steel, is
typically volatile, and shortages may occur from time to time.
Seasonality
The company’s global vessel fleet generally has its highest utilization rates in the warmer months when the
weather is more favorable for offshore exploration, field development and construction work. Hurricanes,
cyclones, monsoon season, and severe weather can impact operations. The company’s U.S. GOM operations
can be impacted by the Atlantic hurricane season from the months of June through November, when offshore
exploration, field development and construction work tends to slow or halt in an effort to mitigate potential
losses and damage that may occur to the offshore oil and gas infrastructure should a hurricane enter the U.S.
GOM. However, demand for offshore marine vessels typically increases in the U.S. GOM in connection with
repair and remediation work that follows any hurricane damage to offshore crude oil and natural gas
infrastructure. The company’s vessels that operate in Southeast Asia and Pacific are impacted by the monsoon
season, which moves across the region from November to April. The vessels that operate in Australia are
impacted by cyclone season from November to April. Customers in this region, where possible, plan business
activities around the cyclone season; however, Australia generally has high trade winds during the non-cyclone
season and, as such, the impact of cyclone season on our operations is not significant. Although hurricanes,
cyclones, monsoons and other severe weather can impact operations, the company’s business volume is more
dependent on crude oil and natural gas pricing, global supply of crude oil and natural gas, and demand
conditions for the company's offshore marine services than any seasonal variation.
Employees
As of March 31, 2012, the company had approximately 7,650 employees worldwide. The company strives to
maintain excellent relations with its employees. The company is not a party to any union contract in the United
States but through several subsidiaries is a party to union agreements covering local nationals in several
countries other than the United States. In the past, the company has been the subject of a union organizing
campaign for the U.S. GOM employees by maritime labor unions. These union organizing efforts have abated,
although the threat has not been completely eliminated. If the employees in the U.S. GOM were to unionize, the
company’s flexibility in managing industry changes in the domestic market could be adversely affected.
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Executive Officers of the Registrant
The name of each of our executive officers, together with their respective age and all offices held as of
March 31, 2012 is as follows:
Name
Age
Position
Dean E. Taylor ............................... 63
Jeffrey M. Platt ............................... 54
Quinn P. Fanning ........................... 48
Joseph M. Bennett ......................... 56
Bruce D. Lundstrom ....................... 48
Chairman of the Board of Directors since 2003. Chief Executive
Officer since March 2002. President since October 2001. Executive
Vice President from 2000 to 2001. Senior Vice President from 1998 to
2000.
Chief Operating Officer since March 2010. Executive Vice President
since July 2006. Senior Vice President from 2004 to June 2006. Vice
President from 2001 to 2004.
Chief Financial Officer since September 2008. Executive Vice
President since July 2008. Prior to July 2008, Mr. Fanning was a
Managing Director with Citigroup Global Markets Inc. and generally
focused on advisory services for the energy industry.
Executive Vice President since June 2008. Chief Investor Relations
Officer since 2005. Senior Vice President from 2005 to May 2008.
Principal Accounting Officer from 2001 to May 2008. Vice President
from 2001 to 2005. Controller from 1990 to 2005.
Executive Vice President since August 2008. Senior Vice President
to July 2008. General Counsel since
from September 2007
September 24, 2007.
On April 18, 2012, Dean E. Taylor, President, Chief Executive Officer and Chairman of the Board announced
his retirement as President and Chief Executive Officer of Tidewater Inc. effective May 31, 2012. To succeed
Mr. Taylor as President and Chief Executive Officer is Jeffrey M. Platt effective June 1, 2012. Mr. Taylor will
continue as Tidewater’s non-executive Chairman of the Board. Succeeding Mr. Platt as Chief Operating Officer
is Jeffrey A. Gorski. Mr. Gorski joined Tidewater as Senior Vice President in January 2012.
There are no family relationships between the directors or executive officers of the company. The company's
officers are elected annually by the Board of Directors and serve for one-year terms or until their successors
are elected.
Available Information
We make available free of charge, on or through our website (www.tdw.com), our Annual Reports on Form 10-
K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other filings pursuant to Section 13(a)
or 15(d) of the Securities Exchange Act of 1934, and amendments to such filings, as soon as reasonably
practicable after each is electronically filed with, or furnished to, the Securities and Exchange Commission (the
“SEC”). You may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at
100 F Street, N.E., Washington, DC 20549. Information on the operation of the Public Reference Room may be
obtained by calling the Commission at 1-800-SEC-0330. The SEC maintains a website that contains the
company’s reports, proxy and information statements, and the company’s other SEC filings. The address of the
SEC’s website is www.sec.gov. Information appearing on the company’s website is not part of any report that it
files with the SEC.
We also make available its Code of Business Conduct and Ethics (Code), which is posted on our website, for
its directors, chief executive officer, chief financial officer, principal accounting officer, and other officers and
employees on matters of business conduct and ethics, including compliance standards and procedures. We will
make timely disclosure by a Current Report on Form 8-K and on our website of any change to, or waiver from,
the Code of Business Conduct and Ethics for our principal executive and senior financial officers. Any changes
or waivers to the Code will be maintained on the company’s website for at least 12 months. A copy of the Code
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is also available in print to any stockholder upon written request addressed to Tidewater Inc., 601 Poydras
Street, Suite 1900, New Orleans, Louisiana 70130.
ITEM 1A. RISK FACTORS
We operate globally in challenging and highly competitive markets and thus our business is subject to a variety
of risks. Listed below are some of the more critical or unique risk factors identified as affecting or potentially
affecting our company and the offshore marine service industry. In addition, we are also subject to a variety of
risks and uncertainties not known to us or that we currently believe are not as significant as the risks described
below. You should consider these risks when evaluating any of the company’s forward-looking statements. The
effect of any one risk factor or a combination of several risk factors could materially affect the company’s results
of operations, financial condition and cash flows and the accuracy of any forward-looking statements made in
this Annual Report on Form 10-K.
Oil and Gas Prices Are Highly Volatile
Commodity prices for crude oil and natural gas are highly volatile. Prices are extremely sensitive to the
respective supply/demand relationship for crude oil and natural gas. High demand for crude oil and natural gas,
reductions in supplies and/or low inventory levels for these resources as well as any perceptions about future
supply interruptions can cause prices for crude oil and natural gas to rise. Conversely, low demand for crude oil
and natural gas, increases in supplies and/or increases in crude oil and natural gas inventories cause prices for
crude oil and natural gas to decrease. In addition, global military, political, and economic events, including civil
unrest in the Middle East and North Africa oil producing and exporting countries, have contributed to crude oil
and natural gas price volatility.
Factors that affect the supply of crude oil and natural gas include, but are not limited to, the following: global
demand for the hydrocarbons; the Organization of Petroleum Exporting Countries’ (OPEC) ability to control
crude oil production levels and pricing, as well as, the level of production by non-OPEC countries; sanctions
imposed by the U.S., the European Union, or other governments against oil producing countries; political and
economic uncertainties (including wars, terrorist acts or security operations); advances in exploration and field
development technologies; significant weather conditions; and governmental policies/restrictions placed on
exploration and production of natural resources.
Prolonged material downturns in crude oil and natural gas prices and/or perceptions of long-term lower
commodity prices can negatively impact the development plans of exploration and production companies given
the long-term nature of large-scale development projects, which would likely result in a corresponding decline in
demand for offshore support vessel services and a reduction in charter rates and/or utilization rates, which
would have a material adverse effect on our results of operations, cash flows and financial condition. Higher
commodity prices, however, do not necessarily translate into increased demand for offshore support vessel
services as increased commodity supply could come from land-based energy markets.
Crude oil pricing volatility has increased in recent years as crude oil has emerged into a financial asset class
used for speculative purchase. Traditionally, crude oil futures and options were purchased by the commercial
traders for future production in an effort to hedge against price risk. More recently, non-commercial market
participants have traded crude oil derivatives to profit off of the price performance of crude oil instead of
traditional investments. The extent to which speculation causes excessive crude oil pricing volatility is currently
not fully known; however, there is a growing consensus that speculative purchase of crude oil futures and
options helped push crude oil prices to record levels in mid-2008.
Changes in the Level of Capital Spending by Our Customers
Our principal customers are major and independent oil and natural gas exploration, field development and
production companies; foreign government-owned or -controlled organizations and companies that explore and
produce oil and natural gas; drilling contractors; and companies that provide other services to the offshore
energy industry, such as, offshore construction companies, diving companies and well stimulation companies.
Demand for our vessels, and thus our results of operations are highly dependent on the level of capital
spending for exploration and field development by the companies that operate in the energy industry. The
energy industry’s level of capital spending is substantially related to current and expected future demand for
hydrocarbons and the prevailing commodity prices of crude oil and, to a lesser extent, natural gas. When
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commodity prices are low, or when our customers believe that they will be low in the future, our customers
generally reduce their capital spending budgets for onshore and offshore drilling, exploration and field
development. The level of offshore crude oil and natural gas exploration, development and production activity
has historically been volatile, and that volatility is likely to continue.
Other factors that influence the level of capital spending by our customers that are beyond our control include:
worldwide demand for crude oil and natural gas; the cost of offshore exploration and production of crude oil and
natural gas, which can be affected by environmental regulations; significant weather conditions; technological
advances that affect energy production and consumption; local and international economic and political
environment; the availability and cost of financing.
Consolidation of the Company's Customer Base
Oil and natural gas companies, energy companies and drilling contractors have undergone consolidation, and
additional consolidation is possible. Consolidation reduces the number of customers for the company’s
equipment, and may negatively affect exploration, field development and production activity as consolidated
companies focus on increasing efficiency and reducing costs and delay or abandon exploration activity with
less promise. Such activity could adversely affect demand for the company's vessels and reduce the
company's revenues.
The Offshore Marine Service Industry is Highly Competitive
We operate in a highly competitive industry, which could depress vessel charter rates and utilization and
adversely affect our financial performance. We compete for business with our competitors on the basis of price;
reputation for quality service; quality, suitability and technical capabilities of vessels; availability of vessels;
safety and efficiency; cost of mobilizing vessels from one market to a different market; and national flag
preference. In addition, competition in international markets may be adversely affected by regulations requiring,
among other things, local construction, flagging, ownership or control of vessels, the awarding of contracts to
local contractors, the employment of local citizens and/or the purchase of supplies from local vendors that favor
or require local ownership. In general, declines in the level of offshore drilling and development activity by the
energy industry negatively affects the demand for our vessels and results in downward pressure on day rates.
Extended periods of low vessel demand and/or low day rates reduce the company’s revenues.
Risk Associated With the Loss of a Major Customer
We derive a significant amount of revenue from a few customers. For the years ended March 31, 2012, 2011
and 2010, the five largest customers accounted for approximately 43%, 45%, and 47%, respectively, of the
company’s total revenues, while the 10 largest customers accounted for a respective 59%, 63%, and 62% of
our total revenues. While it is normal for our customer base to change over time as our time charter contracts
turn over, our results of operations, financial condition and cash flows could be materially adversely affected if
one or more of these customers decide to interrupt or curtail their activities; terminate their contracts with us; fail
to renew existing contracts; and/or refuse to award new contracts, and we were unable to contract our vessels
with new customers at comparable day rates.
Unconventional Natural Gas Sources are Exerting Downward Pricing Pressures on the Price of
Natural Gas
The rise in production of unconventional gas resources (onshore shale plays resulting from technological
advancements in horizontal drilling and fracturing) in North America and the commissioning of a number of new
large Liquefied Natural Gas (LNG) export facilities around the world are contributing to an over-supplied natural
gas market. While production of natural gas from unconventional sources is still a relatively small portion of the
worldwide natural gas production, it is increasing because improved drilling efficiencies are lowering the costs
of extraction. There is a significant oversupply of natural gas inventories in the United States in part due to the
increase of unconventional gas in the market. Prolonged increases in the worldwide supply of natural gas,
whether from conventional or unconventional sources, will likely continue to weigh on natural gas prices. A
prolonged period of low natural gas prices would likely have a negative impact on development plans of
exploration and production companies (at least in regards to development plans primarily targeting natural gas),
which in turn, may result in a decrease in demand for offshore support vessel services. This effect could be
particularly acute in our Americas segments, specifically our shallow water U.S. GOM operations, which is
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more oriented towards natural gas than crude oil production, and therefore more sensitive to the changes in the
market pricing for natural gas than to changes in the market pricing of crude oil.
Challenging Macroeconomic Conditions
Uncertainty about future global economic market conditions makes it challenging to forecast operating results
and to make decisions about future investments. The success of our business is both directly and indirectly
dependent upon conditions in the global financial and credit markets that are outside of our control and difficult
to predict. Uncertain economic conditions may lead our customers to postpone capital spending in response to
tighter credit and reductions in income or asset values. Similarly, when lenders and institutional investors
reduce, and in some cases, cease to provide funding to corporate and other industrial borrowers, the liquidity
and financial condition of our customers can be adversely impacted. These factors may also adversely affect
our liquidity and financial condition. Factors such as interest rates, availability of credit, inflation rates, economic
uncertainty, changes in laws (including laws relating to taxation), trade barriers, commodity prices, currency
exchange rates and controls, and national and international political circumstances (including wars, terrorist
acts or security operations) can have a material negative effect on our business and operations, which in turn
would reduce our revenues and profitability.
Prolonged material economic downturns in crude oil and natural gas prices can negatively affect the
development plans of exploration and production companies. In addition, a prolonged recession may result in a
decrease in demand for offshore support vessel services and a reduction in charter rates and/or utilization
rates, which would have a material adverse effect on the company’s results of operations, cash flows and
financial condition. Prior to mid-2008, oil and gas companies had increased their respective exploration and
field development activities in response to a very favorable pricing environment for oil and gas that existed at
that time. Worldwide demand for crude oil and natural gas dropped precipitously and energy prices sharply
declined as a result of a 2008-2009 global economic recession. Several years later, there are signs that
economic improvement is underway; however, the pace of recovery and demand for energy and, in turn,
offshore supply vessel services is still recovering. In addition, the recent increases in crude oil prices, resulting
from higher demand for hydrocarbons and civil unrest in the Middle East and North African oil producing and
exporting countries, renewed economists’ concerns that high energy prices could imperil the economic
recovery, although high commodity pricing generally bodes well for the energy industry.
Potential Overcapacity in the Offshore Marine Industry
Over the past decade, as offshore exploration and production activities increasingly focused on deepwater well
exploration, field development and production, offshore service companies, such as ours, constructed
specialized offshore vessels that are capable of supporting complex deepwater and deep well (defined by well
depth rather than water depth) projects that are generally located in challenging environments. During this time,
construction of offshore vessels increased significantly in order to meet customer demands. Excess offshore
supply vessel capacity usually exerts downward pressure on charter day rates. Excess capacity can occur
when newly constructed vessels enter the market and also when vessels migrate between market areas. While
the company is committed to the construction of additional vessels, it has also sold and/or scrapped a
significant number of vessels over the last several years. A discussion about the aging of the company’s fleet,
which has necessitated the company’s new vessel construction programs, appears in the “Vessel Count,
Dispositions, Acquisitions and Construction Programs” section of Item 7 in this report.
The offshore supply vessel market has approximately 410 new-build offshore support vessels (platform supply
vessels and anchor handlers only), under construction that are expected to be delivered to the worldwide
offshore vessel market primarily over the next three years, according to ODS-Petrodata. The current worldwide
fleet of these classes of vessels is estimated at approximately 2,745 vessels, according to the same source. An
increase in vessel capacity could result in increased competition in the company’s industry which may have the
effect of lowering charter rates and utilization rates, which, in turn, would result in lower revenues to the
company.
In addition, the provisions of the Shipping Act restricting engagement of U.S. coastwise trade to vessels
controlled by U.S. citizens may from time to time be circumvented by foreign competitors that seek to engage in
trade reserved for vessels controlled by U.S. citizens and otherwise qualifying for coastwise trade. A repeal,
suspension or significant modification of the Shipping Act, or the administrative erosion of its benefits,
permitting vessels that are either foreign-flagged, foreign-built, foreign-owned, foreign-controlled or foreign-
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operated to engage in the U.S. coastwise trade, could also result in excess vessel capacity and increased
competition especially for our vessels that operate in North America.
Risks Associated with Vessel Construction and Maintenance
The company has a number of vessels currently under construction, and it may construct additional vessels in
response to current and future market conditions. In addition, the company routinely engages shipyards to
drydock vessels for regulatory compliance and to provide repair and maintenance services. Construction
projects and drydockings are subject to risks of delay and cost overruns, resulting from shortages of equipment,
materials and skilled labor; lack of shipyard availability; unforeseen design and engineering problems; work
stoppages; weather interference; unanticipated cost increases; unscheduled delays in the delivery of material
and equipment; financial and other difficulties at shipyards including labor disputes and shipyard insolvency;
and inability to obtain necessary certifications and approvals.
A significant delay in either construction or drydockings of vessels could have a material adverse effect on our
ability to fulfill contract commitments and to realize timely revenues with respect to vessels under construction,
conversion or other drydockings. Significant cost overruns or delays for vessels under construction could also
adversely affect the company's financial condition, results of operations or cash flows. The demand for vessels
currently under construction may diminish from levels originally anticipated. If the company fails to obtain
favorable contracts for newly constructed vessels, such failure could have a material adverse effect on the
company's revenues and profitability.
Also, difficult economic market conditions and/or prolonged distress in credit and capital markets may hamper
the ability of shipyards to meet their scheduled deliveries of new vessels or the ability of the company to renew
its fleet through new vessel construction or acquisitions. In addition, there is always the risk of insolvency of the
shipyards that construct or drydock our vessels, which could adversely affect our new construction or repair
programs, and consequently, adversely affect our financial condition, results of operations or cash flows.
Risks Associated with Operating Internationally
We operate in various regions throughout the world, which exposes us to many risks inherent in doing business
in countries other than the United States, some of which have recently become more pronounced. Our
customary risks of operating internationally include political and economic instability within the host country;
possible vessel seizures or nationalization of assets and other governmental actions by the host country
(please refer to Item 7 in this report and Note (11) of Notes to Consolidated Financial Statements included in
Item 8 of this report for a discussion of our Venezuelan operations regarding vessel seizures); foreign
government regulations that favor or require the awarding of contracts to local competitors; an inability to recruit
and retain management of overseas operations; difficulties in collecting accounts receivable and longer
collection periods, changing taxation policies, fluctuations in currency exchange rates, revaluations,
devaluations and restrictions on repatriation of currency; and import/export quotas and restrictions or other
trade barriers - most of which are beyond the control of the company.
The company is also subject to acts of piracy and kidnappings that put its assets and personnel at risk. The
increase in the level of these criminal or terrorist acts over the last few years has been well-publicized. As a
marine services company that operates in offshore, coastal or tidal waters, the company is particularly
vulnerable to these kinds of unlawful activities. Although the company takes what it considers to be prudent
measures to protect its personnel and assets in markets that present these risks, it has confronted these kinds
of incidents in the past, and there can be no assurance it will not be subjected to them in the future.
The continued threat of terrorist activity and other acts of war or hostility have significantly increased the risk of
political, economic and social instability in some of the geographic areas in which the company operates. It is
possible that further acts of terrorism may be directed against the United States domestically or abroad and
such acts of terrorism could be directed against properties and personnel of U.S.-owned companies such as
ours. To date, the company has not experienced any material adverse effects on its results of operations and
financial condition as a result of terrorism, political instability or war.
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Risks Associated with Doing Business Through Joint Ventures
The company operates in several foreign areas through a joint venture with a local company, in some cases as
a result of local laws requiring local company ownership. While the joint venture partner may provide local
knowledge and experience, entering into joint ventures inevitably requires us to surrender a measure of control
over the assets and operations devoted to the joint venture, and occasions may arise when we do not agree
with the business goals and objectives of our partner or other factors may arise that make the continuation of
the relationship unwise or untenable. Any such disagreements or discontinuation of the relationship could
disrupt our operations and affect the continuity of our business. If we are unable to resolve issues with a joint
venture partner, we may decide to terminate the joint venture and either locate a different partner and continue
to work in the area or seek opportunities for our vessels in another area. The unwinding of an existing
relationship could prove to be difficult or time-consuming, and the loss of revenue related to the termination or
unwinding of a joint venture and costs related to the sourcing of a new partner or the mobilization of vessels to
another area could adversely affect our financial condition, results of operations or cash flows.
International Operations Exposed to Currency Devaluation and Fluctuation Risk
Since we are a global company, our international operations are exposed to foreign currency exchange rate
risks on all charter hire contracts denominated in foreign currencies. For some of our international contracts, a
portion of the revenue and local expenses are incurred in local currencies and the company is at risk of
changes in the exchange rates between the U.S. dollar and foreign currencies. We generally do not hedge
against any foreign currency rate fluctuations associated with foreign currency contracts that arise in the normal
course of business, which exposes us to the risk of exchange rate losses. Gains and losses from the
revaluation of our assets and liabilities denominated in currencies other than our functional currency are
included in our consolidated statements of operations. Foreign currency fluctuations may cause the U.S. dollar
value of our non-U.S. results of operations and net assets to vary with exchange rate fluctuations. This could
have a negative impact on our results of operations and financial position. In addition, fluctuations in currencies
relative to currencies in which the earnings are generated may make it more difficult to perform period-to-period
comparisons of our reported results of operations.
To minimize the financial impact of these items, the company attempts to contract a significant majority of its
services in U.S. dollars. In addition, the company attempts to minimize its financial impact of these risks, by
matching the currency of the company’s operating costs with the currency of revenue streams when considered
appropriate. The company continually monitors the currency exchange risks associated with all contracts not
denominated in U.S. dollars.
Operational Hazards Inherent to the Offshore Marine Vessel Industry
The operation of any marine vessel involves inherent risk that could adversely affect our financial performance
if we are not adequately insured or indemnified. Our operations are also subject to various operating hazards
and risks, including risk of catastrophic marine disaster; adverse sea and weather conditions; mechanical
failure; navigation errors; collisions and property losses to the vessel; damage to and loss of drilling rigs and
production facilities; war, sabotage, pirate and terrorism risks; and business interruption due to political action or
inaction, including nationalization of assets by foreign governments.
These risks present a threat to the safety of personnel and to our vessels, cargo, equipment under tow and
other property, as well as the environment. Any such event may result in a reduction in revenues, increased
costs, property damage, and additionally, third parties may have significant claims against us for damages due
to personal injury, death, property damage, pollution and loss of business. We carry what we consider to be
prudent levels of liability insurance and our vessels are generally insured for their estimated market value
against damage or loss, including war, terrorism acts, and pollution risks, but the company does not fully insure
for business interruption. Our insurance coverages are subject to deductibles and certain exclusions. We can
provide no assurance, however, that our insurance coverages will be available beyond the renewal periods,
that we will be able to obtain insurance for all operational risks and that our insurance policies will be adequate
to cover future claims that may arise.
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Compliance with the Foreign Corrupt Practices Act and Similar Worldwide Anti-Bribery Laws
Our global operations require us to comply with a number of U.S. and international laws and regulations,
including those involving anti-bribery and anti-corruption. In order to effectively compete in certain foreign
jurisdictions, the company seeks to establish joint ventures with local operators or strategic partners. As a U.S.
corporation, we are subject to the regulations imposed by the Foreign Corrupt Practices Act (FCPA), which
generally prohibits U.S. companies and their intermediaries from making improper payments to foreign officials
for the purpose of obtaining or keeping business or obtaining an improper business benefit. We have adopted
proactive procedures to promote compliance with the FCPA, but we may be held liable for actions taken by our
strategic or local partners or agents even though these partners or agents may not themselves be subject to
the FCPA. Any determination that we have violated the FCPA (or any other applicable anti-bribery laws in
countries in which the company does business) could have a material adverse effect on our business, results of
operations, and cash flows. A discussion of the company’s FCPA internal investigation is disclosed in the
“Completion of Internal Investigation and Settlements with United States and Nigerian Agencies” section of
Note (11) of Notes to Consolidated Financial Statements included in Item 8 of this report.
Compliance with Complex and Developing Laws and Regulations
Our operations are subject to many complex and burdensome laws and regulations. Stringent federal, state,
local and foreign laws and regulations governing worker health and safety and the manning, construction and
operation of vessels significantly affect our operations. Many aspects of the marine industry are subject to
extensive governmental regulation by the United States Coast Guard and the United States Customs and
Border Protection and their foreign equivalents, and to regulation by private industry organizations such as the
American Bureau of Shipping, the Oil Companies International Marine Forum, and the International Marine
Contractors Association.
Our operations are also subject to federal, state, local and international laws and regulations that control the
discharge of pollutants into the environment or otherwise relate to environmental protection. Compliance with
such laws and regulations may require installation of costly equipment, increased manning or operational
changes. Some environmental laws impose strict liability for remediation of spills and releases of oil and
hazardous substances, which could subject the company to liability without regard to whether the company was
negligent or at fault.
Further, many of the countries in which the company operates have laws, regulations and enforcement systems
that are largely undeveloped, and the requirements of these systems are not always readily discernable even to
experienced and proactive participants. Further, these laws, regulations and enforcement systems can be
unpredictable and subject to frequent change or reinterpretation, sometimes with retroactive effect, and with
associated taxes, fees, fines or penalties sought from the company based on that reinterpretation or retroactive
effect. While the company endeavors to comply with applicable laws and regulations, the company’s
compliance efforts might not always be wholly successful, and failure to comply may result in administrative and
civil penalties, criminal sanctions, imposition of remedial obligations or the suspension or termination of the
company’s operations. These laws and regulations may expose the company to liability for the conduct of or
conditions caused by others, including charterers or third party agents. Moreover, these laws and regulations
could be changed or be interpreted in new, unexpected ways that substantially increase costs that the company
may not be able to pass along to its customers. Any changes in laws, regulations or standards that would
impose additional requirements or restrictions could adversely affect the company’s financial condition, results
of operations or cash flows.
In order to meet the continuing challenge of complying with applicable laws and regulations in jurisdictions
where it operates, the company revitalized and strengthened its compliance training, makes available and uses
a worldwide compliance reporting system and performs compliance auditing/monitoring. The company
appointed its general counsel as its chief compliance officer in fiscal 2008 to help organize and lead these
compliance efforts. This strengthened compliance program may from time to time identify past practices that
need to be changed or remediated. Such corrective or remedial measures could involve significant
expenditures or lead to changes in operational practices that could adversely affect the company’s financial
condition, results of operations or cash flows.
We are subject to the Merchant Marine Act of 1936, which provides that, upon proclamation by the President of
the United States of a national emergency or a threat to the security of the national defense, the Secretary of
Transportation may requisition or purchase any vessel or other watercraft owned by U.S. citizens (including
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U.S. corporations), including vessels under construction in the United States. If our vessels were purchased or
requisitioned by the U.S. federal government, we would be entitled to be paid the fair market value of the
vessels in the case of a purchase or, in the case of a requisition, the fair market value of charter hire, but we
would not be entitled to be compensated for any consequential damages suffered. Although the purchase or
requisition of one or a few of our vessels for an extended period of time will not cause adverse material
negative financial effects to our company, the purchase or requisition of several or a significant number of our
vessels for an extended period of time may adversely affect our financial condition, results of operations, and
cash flows.
Risk of Changes in Laws Governing U.S. Taxation of Foreign Source Income
We operate globally through various subsidiaries which are subject to changes in applicable tax laws, treaties
or regulations in the jurisdictions in which we conduct our business, including laws or policies directed toward
companies organized in jurisdictions with low tax rates. We determine our income tax expense based on our
interpretation of the applicable tax laws and regulations in effect in each jurisdiction for the period during which
we operate and earn income. A material change in the tax laws, tax treaties, regulations or accounting
principles, or interpretation thereof, in one or more countries in which we conduct business, or in which we are
incorporated or a resident of, could result in a higher effective tax rate on our worldwide earnings, and such
change could be significant to our financial results. In addition, our overall effective tax rate could be adversely
and suddenly affected by lower than anticipated earnings in countries where we have lower statutory rates and
higher than anticipated earnings in countries where we have higher statutory rates, or by changes in the
valuation of our deferred tax assets and liabilities.
Over 90% of the company's revenues and net income are generated by its operations outside of the United
States. The company’s effective tax rate has averaged approximately 18.8% since fiscal 2006, primarily a result
of the passage of The American Jobs Creation Act of 2004, which excluded from the company's current taxable
income in the U.S. income earned offshore through the company’s controlled foreign subsidiaries.
Periodically, tax legislative initiatives are proposed to effectively increase U.S. taxation of income with respect
to foreign operations. Whether any such initiatives will win congressional or executive approval and become
law is presently unknown; however, if any such initiatives were to become law, and were such law to apply to
the company’s international operations, it would result in a materially higher tax expense, which would have a
material impact on the company’s financial condition, results of operations or cash flows, and which could
cause the company to review the utility of continued U.S. domicile.
In addition, our income tax returns are subject to review and examination by the Internal Revenue Service and
other tax authorities where tax returns are filed. The company routinely evaluates the likelihood of adverse
outcomes resulting from these examinations to determine the adequacy of our provision for taxes. We do not
recognize the benefit of income tax positions we believe are more likely than not to be disallowed upon
challenge by a tax authority. If any tax authority successfully challenges our operational structure or
intercompany transfer pricing policies, or if the terms of certain income tax treaties are interpreted in a manner
that is adverse to our structure, or if we lose a material tax dispute in any country, our effective tax rate on our
worldwide earnings could increase, and our financial condition and results of operations could be materially
adversely affected.
Compliance with Environmental Regulations May Adversely Impact Our Operations and Markets
A variety of regulatory developments, proposals and requirements have been introduced in the U.S. and
various other countries that are focused on restricting the emission of carbon dioxide, methane and other
gases. If such legislation is enacted, increased cost of energy as well as environmental and other costs and
capital expenditures could be necessary to comply with the limitations. These developments may curtail
production and demand for hydrocarbons such as crude oil and natural gas in areas of the world where our
customers operate and thus adversely affect future demand for the company’s offshore supply vessels, which
are highly dependent on the level of activity in offshore oil and natural gas exploration, development and
production market. Although it is unlikely that demand for oil and gas will lessen dramatically over the short-
term, in the long-term, demand for oil and gas or increased regulation of environmental regulations may create
greater incentives for use of alternative energy sources. Unless and until legislation is enacted and its terms are
known, we cannot reasonably or reliably estimate its impact on our financial condition, results of operations and
ability to compete. However, any long term material adverse effect on the crude oil and natural gas industry
may adversely affect our financial condition, results of operations and cash flows.
23
The Deepwater Horizon Incident and the Aftereffects of the Drilling Moratorium in the U.S. GOM
Could Have a Material Impact on Exploration and Production Activities in United States Coastal
Waters
The success and profitability of our operations in the United States are dependent on the level of upstream
drilling and exploration activity in the U.S. GOM, and to a lesser extent on the West Coast of the United States
and in Alaska. In particular, many of our new-build vessels were designed to operate in deep water off the
continental shelf to assist in drilling and exploration efforts in that area. The margins we earn on our deepwater
vessels have typically been higher than margins we achieve on other classes of our vessels. Although the
BOEMRE is now issuing new drilling permits, the new regulations and requirements could suppress the level of
drilling activity and demand for our services, which could have a material adverse effect on our U.S. operations
which are part of our Americas segment. In addition, if exploration and production activity migrates from the
U.S. GOM to international markets because of the these additional regulations and resulting increase in
operating costs in the U.S. GOM, it is also possible that other offshore supply vessel owners will redeploy their
respective vessels to international markets where we operate. These mobilizations would increase competition
and thus could negatively affect our vessel utilization and day rates in international markets, depending on the
number of drilling rigs that exit the U.S. GOM and move to international markets.
Also among the uncertainties that confront the industry are whether Congress will repeal the $75.0 million cap
for non-reclamation liabilities under the Oil Pollution Act of 1990 and whether insurance will continue to be
available at a reasonable cost and with reasonable policy limits to support drilling and exploration activity in the
U.S. GOM. Although the eventual outcome of these developments is currently unknown, we believe that, even
in the best case for the industry that we serve, additional regulatory and operational costs will be incurred, and
these additional costs may either reduce the level of exploratory activity in the U.S. GOM, reduce demand for
our services, or both.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Information on Properties is contained in Item 1 of this report.
ITEM 3. LEGAL PROCEEDINGS
Shareholder Derivative Suit
In mid-February 2011, an individual claiming to be a Tidewater shareholder filed a shareholder derivative suit in
the U.S. District Court for the Eastern District of Louisiana. The defendants in the suit are individual directors
and certain officers of Tidewater Inc. Tidewater Inc. is also a nominal defendant in the lawsuit. The suit asserts
various causes of action, including breach of fiduciary duty, against the individual defendants in connection with
the facts and circumstances giving rise to the settlements with the DOJ and SEC and seeks a number of
remedies against the individual defendants and the company as a result. For a discussion of the settlements
with the DOJ and SEC regarding matters arising under the United States Foreign Corrupt Practices Act, refer to
Note (11) of Notes to Consolidated Financial Statements included in Item 8 of this report. While the company
will incur costs in connection with the defense of this law suit, the suit does not seek monetary damages against
the company. The individual defendants and the company have retained legal counsel. The lawsuit is still in an
early stage.
Other Items
Various legal proceedings and claims are outstanding which arose in the ordinary course of business. In the
opinion of management, the amount of ultimate liability, if any, with respect to these actions, will not have a
material adverse effect on the company's financial position, results of operations, or cash flows. Information
related to various commitments and contingencies, including legal proceedings, is disclosed in Note (11) of
Notes to Consolidated Financial Statements.
ITEM 4. MINE SAFETY DISCLOSURE
None
24
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS,
AND ISSUER PURCHASES OF EQUITY SECURITIES
Common Stock Market Prices
The company's common stock is traded on the New York Stock Exchange under the symbol “TDW.” At
March 31, 2012, there were 798 record holders of the company's common stock, based on the record holder
list maintained by the company's stock transfer agent. The closing price on the New York Stock Exchange
Composite Tape on March 30, 2012 (last business day of the month) was $54.02. The following table sets forth
for the periods indicated the high and low sales price of the company's common stock as reported on the New
York Stock Exchange Composite Tape and the amount of cash dividends per share declared on Tidewater
common stock.
Quarter ended
Fiscal 2012 common stock prices:
High
Low
Dividend
Fiscal 2011 common stock prices:
High
Low
Dividend
June 30
September 30
December 31
March 31
$
$
60.59
48.96
.25
57.08
38.65
.25
$
$
56.07
43.10
.25
44.99
38.00
.25
$
$
52.34
38.83
.25
54.15
42.81
.25
$
$
63.26
48.52
.25
63.55
52.44
.25
Issuer Repurchases of Equity Securities
On May 17, 2012, the company’s Board of Directors authorized the company to spend up to $200.0 million to
repurchase shares of its common stock in open-market or privately-negotiated transactions. The effective date
of this new authorization is July 1, 2012 through June 30, 2013. The company will use its available cash and,
when considered advantageous, borrowings under its revolving credit facility or other borrowings, to fund any
share repurchases.
In May 2011, the company’s Board of Directors replaced its then existing July 2009 share repurchase program
with a new $200.0 million repurchase program that is in effect through June 30, 2012. The Board of Directors
authorized the company to repurchase shares of its common stock in open-market or privately-negotiated
transactions. The company uses its available cash and, when considered advantageous, borrowings under its
revolving credit facility, or other borrowings, to fund any share repurchases. The company will evaluate share
repurchase opportunities relative to other investment opportunities and in the context of current conditions in
the credit and capital markets. At March 31, 2012, $165.0 million authorization remains available to repurchase
shares under the May 2011 share repurchase program.
The company’s Board of Directors had previously authorized the company in July 2009 to repurchase up to
$200.0 million in shares of its common stock in open-market or privately-negotiated transactions. The Board of
Directors’ authorization for this repurchase program was replaced in May 2011 when the Board of Directors
extended the program.
The value of common stock repurchased, along with number of shares repurchased, and average price paid
per share for the years ended March 31, are as follows:
(In thousands, except share and per share data)
Value of common stock repurchased
Shares of common stock repurchased
Average price paid per common share
2012
35,015
739,231
47.37
$
$
2011
19,998
486,800
41.06
2010
---
---
---
All shares of common stock repurchased during fiscal 2012 occurred in the third quarter ended
December 31, 2011, while the shares repurchased during fiscal 2011 occurred during the first quarter ended
June 30, 2010.
25
During the period April 1, 2012 through May 15, 2012, pursuant to the company’s stock repurchase plan
discussed in Note (8) of Notes to Consolidated Financial Statements, the company repurchased 435,300
shares of common stock for an aggregated price of $21.4 million, or an average price of $49.28 per share.
Dividend Program
The declaration of dividends is at the discretion of the company’s Board of Directors. The Board of Directors
declared the following dividends for the years ended March 31:
(In thousands, except per share data)
Dividends declared
Dividend per share
Performance Graph
$
2012
51,370
1.00
2011
51,507
1.00
2010
51,735
1.00
The following graph compares the cumulative total stockholder return on the company’s common stock against
the cumulative total return of the Standard & Poor’s 500 Stock Index and the cumulative total return of the
Value Line Oilfield Services Group Index (the “Peer Group”) over the last five fiscal years. The analysis
assumes the investment of $100 on April 1, 2007, at closing prices on March 31, 2007, and the reinvestment of
dividends. The Value Line Oilfield Services Group consists of 25 companies including Tidewater Inc.
Comparison of Cumulative Five Year Total Return
$200
$150
$100
$50
$0
2007
Tidewater Inc.
S&P 500
Peer Group
2008
2009
2010
2011
2012
Indexed returns
Years ended March 31
Company name/Index
Tidewater Inc.
S&P 500
Peer Group
2007
2008
100
100
100
95.03
94.92
130.87
2009
65.43
58.77
59.02
2010
85.11
88.02
97.68
2011
2012
110.03
101.79
140.90
101.21
110.48
112.95
Investors are cautioned against drawing conclusions from the data contained in the graph, as past results are
not necessarily indicative of future performance.
26
The above graph is being furnished pursuant to the Securities and Exchange Commission rules. It will not be
incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of
1934, except to the extent that the company specifically incorporates it by reference.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth a summary of selected financial data for each of the last five fiscal years. This
information should be read in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in Item 7 and the Consolidated Financial Statements of the company included in
Item 8 of this report.
Years Ended March 31
(In thousands, except ratio and per share amounts)
Statement of Earnings Data :
Revenues:
Vessel revenues
Other marine services revenues
Gain on asset dispositions, net
Provision for Venezuelan operations
Goodwill Impairment (C)
Net earnings
Basic earnings per common share
Diluted earnings per common share
Cash dividends declared per
common share (D)
2012
2011 (A)
2010 (B)
2009
2008
$ 1,060,468
6,539
$ 1,067,007
$
$
$
$
$
$
$
17,657
---
30,932
87,411
1.71
1.70
1.00
1,051,213
4,175
1,055,388
13,228
---
---
1,138,162
30,472
1,168,634
28,178
43,720
---
1,356,322
34,513
1,390,835
27,251
---
---
1,215,134
55,037
1,270,171
11,449
---
---
105,616
259,476
406,898
348,763
2.06
2.05
1.00
5.04
5.02
1.00
7.92
7.89
1.00
6.43
6.39
.60
Balance Sheet Data (at end of period):
Cash and cash equivalents
$
320,710
245,720
223,070
250,793
270,205
Total assets
$ 4,061,618
3,748,116
3,293,357
3,073,804
2,751,780
Current maturities of long-term debt
Long-term debt
Capitalized lease obligations
$
$
$
---
---
950,000
700,000
---
Stockholders’ equity
Working capital
Current ratio
$ 2,526,357
455,171
$
2.91
---
2,513,944
395,558
3.15
25,000
275,000
---
2,464,030
380,915
2.86
---
300,000
---
2,244,678
431,101
3.12
---
300,000
10,059
1,930,084
431,691
3.17
Cash Flow Data:
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by (used in)
financing activities
$
$
222,421
264,206
328,261
523,889
486,842
(315,081)
(569,943)
(298,482)
(434,055)
(272,001)
$
167,650
328,387
(57,502)
(109,246)
(338,442)
(B)
(A) Fiscal 2011 net earnings includes a $4.4 million, or $0.08 per common share, final settlement with the DOJ and a $6.3 million, or $0.12
per common share, settlement with the Federal Government of Nigeria related to the internal investigation as disclosed in Note (11) of
Notes to Consolidated Financial Statements included in Item 8 of this report.
In addition to the Provision for Venezuelan operations separately noted above, fiscal 2010 net earnings includes (1) the reversal of
$36.1 million, or $0.70 per common share, of uncertain tax positions related to the resolution of a tax dispute with the U.S. IRS as
disclosed in Note (3) of Notes to Consolidated Financial Statements, (2) an $11.4 million, or $0.22 per common share, proposed
settlement with the SEC related to the internal investigation as disclosed in Note (11) of Notes to Consolidated Financial Statements,
and (3) an $11.0 million, or $0.21 per common share, foreign exchange gain resulting from the devaluation of the Venezuelan bolivar
fuerte relative to the U.S. dollar.
(C) During the quarter ended September 30, 2011, the company recorded a $30.9 million non-cash goodwill impairment charge
(D)
($22.1 million after-tax, or $0.43 per share) as disclosed in Note (13) of Notes to Consolidated Financial Statements.
In May 2008, the company’s Board of Directors authorized the increase of the company’s quarterly dividend from $0.15 per share to
$0.25 per share, a 67% increase. The declaration of dividends is at the discretion of the company’s Board of Directors.
27
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis of financial condition and results of operations should be read in
conjunction with the accompanying consolidated financial statements as of March 31, 2012 and 2011 and for
the years ended March 31, 2012, 2011 and 2010 that we included in Item 8 of this Annual Report on
Form 10-K. The following discussion and analysis contains forward-looking statements that involve risks and
uncertainties. The company’s future results of operations could differ materially from its historical results or
those anticipated in its forward-looking statements as a result of certain factors, including those set forth under
“Risk Factors” in Item 1A and elsewhere in this report. With respect to this section, the cautionary language
applicable to such forward-looking statements described in “Forward-Looking Statements” found before Item 1
of this report is incorporated by reference into this Item 7. The following discussion should also be read in
conjunction with the Selected Financial Data and the Consolidated Financial Statements and related
disclosures of this report.
Fiscal 2012 Business Highlights and Key Focus
During fiscal 2012 the company continued to focus on maintaining its competitive advantages and its market
share in international markets, and continued to modernize its vessel fleet to increase future earnings capacity
while removing from active service certain older, or traditional, vessels that currently have fewer market
opportunities. Key elements of the company’s strategy continue to be the preservation of its strong financial
position and the maintenance of adequate liquidity to fund the expansion of its fleet of newer vessels. Operating
management focused on safe operations, minimizing unscheduled downtime, and maintaining disciplined cost
control.
The company’s strategy contemplates the possible acquisitions of vessels and/or other owners and operators
of offshore supply vessels as well as organic growth through the construction of vessels at a variety of
shipyards worldwide. The company has the largest number of new vessels among its competitors in the
industry, and it also has the largest fleet of older vessels in the industry. Management regularly evaluates
alternatives for its older fleet. The company intends to pursue its long-term fleet replenishment and
modernization strategy on a disciplined basis and, in each case, will carefully consider whether proposed
investments and transactions have the appropriate risk/reward profile.
During the quarter ended September 30, 2011, our International and United States segments were revised to
form four new operating segments. We now manage and measure our business performance in four distinct
operating segments which are based on our geographical organization: Americas, Asia/Pacific, Middle
East/North Africa, and Sub-Saharan Africa/Europe. The new segments are reflective of how the company’s
chief operating decision maker reviews operating results for the purposes of allocating resources and
assessing performance. Management decided to reorganize its reporting segments largely because the
company’s Sub-Saharan Africa/Europe and Latin American business regions had gained greater significance
as a percentage of consolidated revenues and operating profit, while our former United States segment had
decreased in its significance to consolidated revenues and operating profit. Prior period disclosures have been
recast to reflect the change in reportable segments.
Although the company’s revenue during fiscal 2012 increased $11.6 million, or a modest 1%, over the revenues
earned during fiscal 2011, the company’s consolidated net earnings decreased 17%, or $18.2 million, during
fiscal 2012, reflecting a $30.9 million non-cash goodwill impairment charge ($22.1 million after-tax, or $0.43 per
share) recorded during the quarter ended September 30, 2011 on the company’s Middle East/North Africa
segment as disclosed in Note (15) of Notes Consolidated Financial Statements included in Part I, Item 1 of this
report, an $11.1 million, or 8%, increase in general and administrative expenses; and $11.5 million, or 107%,
higher interest and debt costs as disclosed in Note (4) of Notes to Consolidated Financial Statements.
Partially offsetting the increase in these expenses was a $4.4 million, or 33%, increase in gain on asset
dispositions, net, and a 44%, or $18.9 million, reduction in income taxes due to the expiration of statutes of
limitations with respect to tax liabilities that had been established previously for uncertain tax positions as
disclosed in Note (3) of Notes to Consolidated Financial Statements and due to lower earnings before income
taxes. Other operating revenues increased approximately $2.4 million, or 57%, during the same comparative
periods primarily because ship construction at the company’s shipyards increased during the current period.
28
In January 2011, the company amended and extended its then existing $450 million credit facility (the “previous
facility”) and established $575 million in new credit facilities (the “new facilities”) for a five year period maturing
January 2016. The new facilities include a $125 million term loan (“term loan”) and a $450 million revolving line
of credit (“revolver”). The new facilities revolver and term loan borrowings bear interest at the company’s option
at the greater of (i) prime or the federal funds rate plus 0.50 to 1.25%, or (ii) Eurodollar rates, plus margins
between 1.50 to 2.25%, based on the company’s consolidated funded debt to total capitalization ratio. In
January 2012, the company elected to draw on the entire $125 million term loan facility to fund working capital
and for general corporate purposes. Principal repayments of any term loan borrowings are payable in quarterly
installments beginning in the quarter ending September 30, 2013 in amounts equal to 1.25% of the total
outstanding borrowings as of July 26, 2013.
On August 15, 2011, the company issued $165 million of senior unsecured notes to a group of institutional
investors. The multiple series of notes were issued with maturities ranging from approximately eight to 10 years
and have a weighted average life to maturity of approximately nine years. The weighted average coupon rate
on the notes is 4.42%. The notes may be retired before their respective scheduled maturity dates subject only
to a customary make-whole provision. The terms of the notes require that the company maintain a minimum
ratio of debt to consolidated total capitalization that does not exceed 55%.
We continued our vessel construction and acquisition program during fiscal 2012 that had begun in calendar
year 2000. This program facilitated the company’s entrance into deepwater markets around the world in
addition to allowing the company to begin to replace its core towing supply/supply fleet with fewer, larger, and
more technologically sophisticated vessels in order to meet our customers’ needs. The vessel construction and
acquisition program was initiated with the intent of strengthening the company’s presence in all major oil and
gas producing regions of the world through the replacement of aging vessels in the company’s core fleet.
During this time, the company has purchased and/or constructed 238 vessels at a total cost of approximately
$3.4 billion. Between April 1999 and March 2012, the company also sold, primarily to buyers that operate
outside of our industry, 603 vessels. Most of the vessel sales were at prices that exceeded their carrying
values. The vessel sales were accompanied by sales restrictions on competition or else the company
determined that the prospects of the vessel competing with our ongoing business were low. In aggregate,
proceeds from, and pre-tax gains on, vessel dispositions during this period approximated $650 million and
$300 million, respectively.
In recent years, the company has generally funded vessel additions with operating cash flow, and funds
provided by the July 2003 private placement of $300 million, the September 2010 private placement of
$425 million, and the August 15, 2011 private placement of $165 million in senior unsecured notes, borrowings
under its revolving credit facilities and $125 million bank term loan and various leasing arrangements.
At March 31, 2012, the company had agreements to acquire three vessels and commitments to build
22 vessels at a number of different shipyards around the world (with one of these vessels being constructed in
the United States by the company’s wholly-owned shipyard, Quality Shipyards, L.L.C.) at a total cost, including
contract costs and other incidental costs, of approximately $616.7 million. At March 31, 2012, the company had
invested $244.5 million in progress payments towards the construction of 22 vessels and $12.9 million towards
the purchase of three vessels. At March 31, 2012, the remaining expenditures necessary to complete
construction of the 22 vessels currently under construction (based on contract prices) and to fund the
acquisition of the three vessels was $359.3 million. A full discussion of the company’s capital commitments,
scheduled delivery dates and vessel sales is disclosed in the “Vessel Count, Dispositions, Acquisitions and
Construction Programs” section of Item 7 and Note (11) of Notes to Consolidated Financial Statements
included in Item 8 of this report.
Macroeconomic Environment and Outlook
The primary driver of our business, and revenues, is the level of our customers’ capital and operating
expenditures for oil and natural gas exploration, field development and production. These expenditures, in turn,
generally reflect our customers’ expectations for future oil and natural gas prices, economic growth,
hydrocarbon demand and estimates of current and future oil and natural gas production. The prices of crude oil
and natural gas are critical factors in exploration and production (E&P) companies’ decisions to contract drilling
rigs and offshore service vessels in the various international markets or the U.S. GOM, with the various
international markets being largely driven by supply and demand for crude oil, and the U.S. GOM being
29
influenced both by the supply and demand for natural gas (primarily in regards to shallow water activity) and the
supply and demand for crude oil (primarily in regards to deepwater activity).
During fiscal 2012, the price of crude oil increased as positive economic news related to consumer spending,
improvements in employment data, and higher consumer confidence in the U.S. indicated that the tenuous
economic recovery may not be losing its momentum in the U.S. In addition, crude oil prices increased during
fiscal 2012 due to potential supply interruptions resulting from geopolitical tensions in the Middle East as Iran
threatened to shut down the Strait of Hormuz in an effort to disrupt crude oil supplies as tension mounted
between Iran and other nations regarding proposed sanctions related to Iran’s nuclear programs. Prices for
crude oil, however, eased slightly as the Organization of Petroleum Exporting Companies (OPEC) announced
that member nation Saudi Arabia and other OPEC member nations would be ready to provide additional oil
supply in an effort to stabilize crude oil prices should a blockage in the Strait of Hormuz occur. Although signs
of an improved economy in the U.S., the world’s largest consumer of crude oil, are promising, and OPEC, at its
meeting held in December 2011 noted that global crude oil demand is forecast to improve in calendar year
2012, there is still some downside risks to the global economic recovery due to fiscal and financial uncertainty
in certain Euro-zone countries, a prolonged level of relatively high unemployment in the U.S. and other
advanced economies, and inflation risks in emerging economies. Based on these uncertainties, OPEC member
nations agreed in December 2011 to maintain current crude oil production levels to ensure the supply and
demand for crude oil is balanced. In addition, at the Middle East and North Africa 2012 Energy Conference held
in late January 2012, OPEC further expressed that it will strive to meet consumer demand, crude oil market
stability, and other coordinated efforts to ensure balanced global supply of crude oil at a time when, despite the
economic uncertainties, long-term demand for crude oil is expected to grow. Tidewater anticipates that its
longer-term utilization and day rate trends for its vessels will be correlated with demand for and the price of
crude oil, which in late-April 2012, was trading around $105 per barrel for West Texas Intermediate (WTI) crude
and around $120 per barrel for Intercontinental Exchange (ICE) Brent crude. High crude oil prices generally
bode well for increases in drilling and exploration activity, which would support increases in demand for the
company’s vessels, both in the various global markets and the deepwater sectors of the U.S. GOM (assuming
the pace of permits continues to increase).
Throughout fiscal 2012, prices for natural gas were weak due to the rise in production of unconventional gas
resources in North America (in part due to increases in onshore shale production resulting from technological
advancements in horizontal drilling and hydraulic fracturing) and the commissioning of a number of new, large,
Liquefied Natural Gas (LNG) exporting facilities around the world, which have contributed to an over supplied
natural gas market. The price of natural gas trended lower during fiscal 2012 and as of mid-April 2012, natural
gas was trading in the U.S. in the $1.85 to $2.05 per Mcf range down from the $4.13 to $4.32 range at the start
of fiscal 2012. The price for natural gas trended lower as inventories for the resource trended higher because a
considerable amount of natural gas is derived as a byproduct of drilling crude oil and natural gas liquids-
oriented wells in liquid rich basins onshore. In addition, a relatively mild winter in North America and a slow start
to winter in the Euro-Zone depressed weather-related demand for natural gas, thereby adding to supply growth.
Natural gas inventories in the U.S. continue to be well over stocked. This dynamic exerts downward pricing
pressures on natural gas prices in the U.S. Prolonged increases in the supply of natural gas (whether the
supply comes from conventional or unconventional natural gas production or gas produced as a byproduct of
crude oil production) will likely restrain prices for natural gas. Increases in onshore gas production along with a
very slow offshore drilling and exploration permitting process in the U.S. GOM and prolonged downturn in
natural gas prices can negatively impact the offshore exploration and development plans of E&P companies,
which in turn, would result in a decrease in demand for offshore support vessel services, primarily in the
Americas segment (specifically our U.S. operations where natural gas is the more predominant exploitable
hydrocarbon resource).
Certain oil and gas industry analysts are reporting in their 2012 E&P expenditures (both land-based and
offshore) surveys that global capital expenditure budgets for E&P companies are forecast to increase by at
least 10% over calendar year 2011 levels. The surveys forecast that international capital spending budgets will
increase approximately 11% while North American capital spending budgets are forecast to increase
approximately 8%. It is anticipated by these analysts that the North American capital budget increases will
primarily be spent onshore rather than offshore, while international E&P spending is expected to be largely
offshore, with the strongest markets expected to include Latin America, Africa, Europe, Russia, and the Middle
East. Capital expenditure budgets incorporated into the spending surveys were based on an approximate
$87 WTI and $98 Brent average prices per barrel of oil. Although E&P companies are using an approximate
30
$4.08 per mcf average natural gas price for their 2012 capital budgets, natural gas directed drilling is forecast to
decline due to weak natural gas prices.
Deepwater activity continues to be a significant segment of the global offshore crude oil and natural gas
markets, and it is also a source of growth for the company. Deepwater activity in non-U.S. markets did not
experience significant negative effects from the 2008-2009 global economic recession, largely because
deepwater oil and gas development typically involves significant capital investment and multi-year development
plans. Such projects are generally underwritten by the participating exploration, field development and
production companies using relatively conservative assumptions relating to crude oil and natural gas prices.
These projects are, therefore, considered less susceptible to short-term fluctuations in the price of crude oil and
natural gas. During the past few years, worldwide rig construction increased as rig owners capitalized on the
high worldwide demand for drilling and low shipyard and financing costs. Reports published by ODS-Petrodata
in late April 2012 suggest that the worldwide movable drilling rig count (currently estimated at approximately
860 movable offshore rigs worldwide, approximately 44% of which are designed to operate in deeper waters)
will increase as approximately 185 new-build offshore rigs that are currently on order and under construction
are delivered, primarily over the next three years. Of the estimated 860 movable offshore rigs worldwide,
approximately 615 are currently working. It is further estimated that approximately 54% of the new build rigs are
being built to operate in deeper waters, suggesting that the number of rigs designed to operate in deeper
waters could grow in the coming years to nearly 50% of the market. Investment is also being made in the
floating production unit market, with approximately 70 new floating production units currently under construction
and expected to be delivered primarily over the next three years to supplement the current approximately
350 floating production units worldwide.
According to ODS-Petrodata, the global offshore supply vessel market at March 31, 2012 had approximately
410 new-build offshore support vessels (platform supply vessels and anchor handlers only), under construction
that are expected to be delivered to the worldwide offshore vessel market primarily over the next three years.
The current worldwide fleet of these classes of vessels is estimated at approximately 2,745 vessels, of which
Tidewater estimates more than 10% are stacked.
An increase in worldwide vessel capacity would tend to have the effect of lowering charter rates, particularly
when there are lower levels of exploration, field development and production activity. The worldwide offshore
marine vessel industry, however, also has a large number of aged vessels including approximately
725 vessels, or 26%, of the worldwide offshore fleet, that are at least 25 years old and nearing or exceeding
original expectations of their estimated economic lives. These older vessels, approximately one-third of which
Tidewater estimates are already stacked, could potentially be removed from the market within the next few
years if the cost of extending the vessels’ lives is not economically justifiable. Although the future attrition rate of
these aging vessels cannot be determined with certainty, the company believes that the retirement of a
sizeable portion of these aged vessels could mitigate the potential combined negative effects of new-build
vessels on vessel utilization and vessel pricing. Additional vessel demand could also be created by the addition
of new drilling rigs and floating production units that are expected to be delivered and become operational over
the next few years, which should help minimize the possible negative effects of the new-build offshore support
vessels being added to the offshore support vessel fleet.
Principal Factors That Drive Our Revenues
The company’s revenues, net earnings and cash flows from operations are largely dependent upon the activity
level of its offshore marine vessel fleet. As is the case with many other energy service companies, our business
activity is largely dependent on the level of drilling and exploration activity of our customers. Our customers’
business activity, in turn, is dependent on crude oil and natural gas prices, which fluctuate depending on
expected future levels of supply and demand for crude oil and natural gas, and on estimates of the cost to find,
develop and produce reserves. In addition, after the Deepwater Horizon incident in April 2010, the level of
drilling activity off the continental shelf of the United States (U.S.) Gulf Of Mexico (GOM) declined while the
U.S. government evaluated the causes of the incident and announced a plan for enhanced regulatory and
safety oversight as a condition to granting additional drilling and exploration permits.
The company’s revenues in all segments are driven primarily by the company’s fleet size, vessel utilization and
day rates. Because a sizeable portion of the company’s operating costs and its depreciation does not change
proportionally with changes in revenue, the company’s operating profit is largely dependent on revenue levels.
31
Principal Factors That Drive Our Operating Costs
Operating costs consist primarily of crew costs, repair and maintenance, insurance and loss reserves, fuel, lube
oil and supplies and vessel operating lease expense.
Fleet size, fleet composition, geographic areas of operation, supply and demand for marine personnel, and
local labor requirements are the major factors which affect overall crew costs in all segments. In addition, the
company’s newer, more technologically sophisticated anchor handling towing supply vessels and platform
supply vessels generally require a greater number of specially trained, more highly compensated fleet
personnel than the company’s older, smaller and less sophisticated vessels. The company believes that
competition for skilled crew personnel may intensify as new-build support vessels currently under construction
increase the number of offshore vessels operating worldwide. If competition for personnel intensifies, the
company’s crew costs will likely increase.
The timing and amount of repair and maintenance costs are influenced by customer demand, vessel age and
drydockings mandated by regulatory agencies. A certain number of periodic drydockings are required to meet
regulatory requirements. The company will generally incur drydocking costs only if economically justified, taking
into consideration the vessel’s age, physical condition, contractual obligations, current customer requirements
and future marketability. When the company elects to forego a required drydocking, it stacks and occasionally
sells the vessel because it is not permitted to work without valid regulatory certifications. When the company
drydocks a productive vessel, the company not only foregoes vessel revenues and incurs drydocking costs, but
also continues to incur vessel operating and depreciation costs. In any given period, vessel downtime
associated with drydockings and major repairs and maintenance can have a significant effect on the company’s
revenues and operating costs.
At times, vessel drydockings take on an increased significance to the company and its financial performance.
Older vessels may require more frequent and more expensive repairs and drydockings. Newer vessels
(generally those built after 2000), which now account for a majority of the company’s revenues and vessel
margin (vessel revenues less vessel operating costs), can also require expensive drydockings, even in the
early years of a vessel’s useful life, due to the larger relative size and greater relative complexity of these
vessels. Conversely, when the company stacks vessels, the number of drydockings in any period could decline.
The combination of these factors can affect drydock costs, which are primarily included in repair and
maintenance expense, and incrementally increase the volatility of the company’s revenues and operating
income, thus making period-to-period comparisons more difficult.
Although the company attempts to efficiently manage its fleet drydocking schedule, changes in the demand for
(and supply of) shipyard services can result in heavy workloads at shipyards and inflationary pressure on
shipyard pricing. In recent years, increases in drydocking costs and days off hire (due to vessels being
drydocked) have contributed to volatility in repair and maintenance costs and vessel revenue. In addition, some
of the more recently constructed vessels are now experiencing their first or second required regulatory
drydockings.
Insurance and loss reserves costs are dependent on a variety of factors, including the company’s safety record
and pricing in the insurance markets, and can fluctuate over time. The company's vessels are generally insured
for up to their estimated fair market value in order to cover damage or loss resulting from marine casualties,
adverse weather conditions, mechanical failure, collisions, and property losses to the vessel. The company also
purchases coverage for potential liabilities stemming from third-party losses with limits that it believes are
reasonable for its operations. Insurance limits are reviewed annually and third-party coverage is purchased
based on the expected scope of ongoing operations and the cost of third-party coverage.
Fuel and lube costs can also fluctuate in any given period depending on the number and distance of vessel
mobilizations, the number of active vessels off charter, drydockings, and changes in fuel prices.
The company also incurs vessel operating costs that are aggregated as “other” vessel operating costs. These
costs consist of brokers’ commissions, training costs and other miscellaneous costs. Brokers’ commissions are
incurred primarily in the company’s non-United States operations where brokers sometimes assist in obtaining
work for the company’s vessels. Brokers generally are paid a percentage of day rates and, accordingly,
commissions paid to brokers generally fluctuate in accordance with vessel revenue. Other costs include, but
32
are not limited to, satellite communication fees, agent fees, port fees, canal transit fees, vessel certification
fees, temporary vessel importation fees and any fines or penalties.
Results of Operations
During the quarter ended September 30, 2011, our International and United States segments were reorganized
to form four new operating segments. We now manage and measure our business performance in four distinct
operating segments which are based on our geographical organization: Americas, Asia/Pacific, Middle
East/North Africa, and Sub-Saharan Africa/Europe. The following table compares vessel revenues and vessel
operating costs (excluding general and administrative expenses, depreciation expense, provision for
Venezuelan operations, goodwill impairment, and gains on asset dispositions) for the company’s vessel fleet
and the related percentage of vessel revenue for the years ended March 31. Vessel revenues and operating
costs relate to vessels owned and operated by the company.
(In thousands)
Vessel revenues:
Americas
Asia/Pacific
Middle East/North Africa
Sub-Saharan Africa/Europe
Total vessel revenues
Vessel operating costs:
Crew costs
Repair and maintenance
Insurance and loss reserves
Fuel, lube and supplies
Vessel operating leases
Other
Total vessel operating costs
2012
%
2011
%
2010
%
$
324,529
153,752
109,489
472,698
$ 1,060,468
31%
14%
10%
45%
100%
362,825
176,877
92,151
419,360
1,051,213
$
$
327,762
103,257
17,507
76,904
17,967
94,740
638,137
31%
10%
2%
7%
2%
9%
60%
338,126
110,496
19,601
61,784
17,964
90,619
638,590
35%
17%
9%
40%
100%
32%
11%
2%
6%
2%
9%
61%
393,270
170,358
93,379
481,155
1,138,162
35%
15%
8%
42%
100%
320,229
104,413
12,948
56,637
15,054
95,978
605,259
28%
9%
1%
5%
1%
8%
53%
The following table compares other operating revenues and costs related to third-party activities of the
company's shipyards, brokered vessels and other miscellaneous marine-related activities for the years ended
March 31.
(In thousands)
Other operating revenues
Costs of other operating revenues
$
2012
6,539
7,115
2011
4,175
4,660
2010
30,472
27,387
33
The following table presents vessel operating costs by the company’s segments, the related segment vessel
operating costs as a percentage of segment vessel revenues, total vessel operating costs and the related total
vessel operating costs as a percentage of total vessel revenues for each for the fiscal years ended March 31.
(In thousands)
Vessel operating costs:
Americas:
Crew costs
Repair and maintenance
Insurance and loss reserves
Fuel, lube and supplies
Vessel operating leases
Other
Asia/Pacific:
Crew costs
Repair and maintenance
Insurance and loss reserves
Fuel, lube and supplies
Other
Middle East/North Africa:
Crew costs
Repair and maintenance
Insurance and loss reserves
Fuel, lube and supplies
Vessel operating leases
Other
Sub-Saharan Africa/Europe:
Crew costs
Repair and maintenance
Insurance and loss reserves
Fuel, lube and supplies
Vessel operating leases
Other
Total vessel operating costs
2012
%
2011
%
2010
%
$
$
$
$
$
112,138
31,430
5,259
18,092
3,643
19,087
189,649
60,777
13,180
2,257
13,786
9,993
99,993
35,375
16,473
2,995
13,217
1,885
9,268
79,213
119,472
42,174
6,996
31,809
12,439
56,392
269,282
638,137
35%
10%
2%
6%
1%
6%
58%
40%
9%
1%
9%
6%
65%
32%
15%
3%
12%
2%
8%
72%
25%
9%
1%
7%
3%
12%
57%
60%
127,715
49,545
6,855
14,737
4,107
24,808
227,767
70,791
16,620
3,778
15,900
9,336
116,425
25,325
9,172
1,306
8,310
---
6,461
50,574
114,295
35,159
7,662
22,837
13,857
50,014
243,824
638,590
35%
14%
2%
4%
1%
7%
63%
40%
9%
2%
9%
5%
66%
27%
10%
1%
9%
---
7%
55%
27%
8%
2%
5%
3%
12%
58%
61%
134,318
42,237
6,344
17,089
4,193
19,594
223,775
50,890
11,478
2,049
13,562
8,197
86,176
22,401
8,982
663
5,714
---
6,098
43,858
112,620
41,716
3,892
20,272
10,861
62,089
251,450
605,259
34%
11%
2%
4%
1%
5%
57%
30%
7%
1%
8%
5%
51%
24%
10%
1%
6%
---
7%
47%
23%
9%
1%
4%
2%
13%
52%
53%
The following table compares operating income and other components of earnings before income taxes, and its
related percentage of total revenues for the years ended March 31.
(In thousands)
Vessel operating profit:
Americas
Asia/Pacific
Middle East/North Africa
Sub-Saharan Africa/Europe
Corporate expenses
Goodwill impairment
Gain on asset dispositions, net
Other services
Operating income
Foreign exchange gain
Equity in net earnings of unconsolidated companies
Interest income and other, net
Interest and other debt costs
Earnings before income taxes
Fiscal 2012 Compared to Fiscal 2011
2012
%
2011
%
2010
%
$
$
56,003
16,125
805
97,142
170,075
(40,379)
(30,932)
17,657
(2,867)
113,554
3,309
13,041
3,440
(22,308)
111,036
5%
2%
<1%
9%
16%
(4%)
(3%)
2%
<1%
11%
<1%
1%
<1%
(2%)
10%
49,341
22,308
18,990
82,993
173,632
(46,361)
---
13,228
(1,163)
139,336
2,278
12,185
5,065
(10,769)
148,095
5%
2%
2%
8%
17%
(4%)
---
1%
(<1%)
13%
<1%
1%
<1%
(1%)
14%
37,533
49,049
29,936
145,032
261,550
(51,432)
---
28,178
2,034
240,330
4,094
18,107
6,882
(1,679)
267,734
3%
4%
3%
13%
23%
(5%)
---
2%
<1%
21%
<1%
2%
1%
(<1%)
24%
Consolidated Results. Although the company’s revenue during fiscal 2012 increased $11.6 million, or a
modest 1%, over the revenues earned during fiscal 2011, the company’s consolidated net earnings decreased
17%, or $18.2 million, during fiscal 2012, reflecting a $30.9 million non-cash goodwill impairment charge
($22.1 million after-tax, or $0.43 per share) recorded during the quarter ended September 30, 2011 on the
34
company’s Middle East/North Africa segment as disclosed in Note (15) of Notes Consolidated Financial
Statements included in Part I, Item 1 of this report; an $11.5 million, or 107%, increase in interest and debt
costs as disclosed in Note (4) of Notes Consolidated Financial Statements; and an $11.1 million, or 8%,
increase in general and administrative expenses.
Partially offsetting the increase in these expenses was a $4.4 million, or 33%, increase in gain on asset
dispositions, net, and a 44%, or $18.9 million, reduction in income taxes due to the expiration of statutes of
limitations with respect to tax liabilities that had been previously established for uncertain tax positions (as
disclosed in Note (3) of Notes to Consolidated Financial Statements) and lower earnings before income taxes.
Other operating revenues increased approximately $2.4 million, or 57%, during the same comparative periods
primarily because activity at the company’s shipyards increased during the current period.
Vessel operating costs during fiscal 2012 were comparable to those in fiscal 2011. Crew costs decreased
approximately 3%, or $10.4 million, during fiscal 2012 as compared to fiscal 2011, primarily because the prior
fiscal year included a $6.0 million charge associated with the company’s participation in the Merchant Navy
Officers Pension Fund (MNOPF) as disclosed in Note (11) of Notes to Consolidated Financial Statements.
Repair and maintenance costs decreased 7%, or $7.2 million, during fiscal 2012, because a greater number of
drydockings were performed during fiscal year 2011. In particular, during fiscal 2011, we performed four
scheduled drydockings of our largest anchor handling towing supply vessels for an aggregate cost of
$14.5 million. Fuel, lube and supply costs increased 24%, or $15.1 million, during fiscal 2012 as compared to
fiscal 2011, primarily due to the mobilization of newly delivered vessels and because of vessel mobilizations
between operating areas. Costs of other operating revenues increased $2.5 million, or 53%, during the same
comparative periods primarily because ship construction activity at the company’s shipyards increased during
fiscal 2012.
At March 31, 2012, the company had 330 owned or chartered vessels (excluding joint-venture vessels and
vessels withdrawn from service) in its fleet with an average age of 14 years. The average age of 215 newer
vessels in the fleet (defined as those that have been acquired or constructed since calendar year 2000 as part
of the company’s new build and acquisition program) is 5.7 years. The remaining 115 vessels have an average
age of 29.6 years. During fiscal 2012 and 2011, the company's newer vessels generated $911.5 million and
$838.5 million, respectively, of consolidated revenue and accounted for 86%, or $386.1 million, and 80%, or
$363.9 million, respectively, of total vessel margin (vessel revenues less vessel operating costs). Vessel
operating costs exclude depreciation on the company’s new vessels of $111.6 million and $97.9 million,
respectively, during the same comparative periods.
Americas Segment Operations. Americas-based vessel revenues decreased approximately 11%, or
$38.3 million, during fiscal 2012 as compared to fiscal 2011, primarily due to an approximate 6% decrease in
average day rates on the deepwater vessels operating in the Americas and because a fewer number of vessels
are operating in this segment after the transfer of deepwater vessels to other segments. Revenues on the
deepwater vessels declined 19%, or $34.3 million, during the comparative periods. In addition, revenues on
our towing supply/supply class of vessels also declined $5.4 million, or 4%, during the same comparative
periods primarily due to a fewer number of vessels operating after vessel sales. A $1.9 million, or 8%, increase
in revenues generated by offshore tugs, during the same comparative periods, slightly offset revenue declines
on the two aforementioned classes of vessels due to an eight percentage point increase in utilization and a
29% increase in average day rates due to stronger demand for this type of vessel in the Americas segment.
Total utilization rates for the Americas-based vessels increased seven percentage points, during fiscal 2012 as
compared to fiscal 2011; however, this increase is primarily a result of the sale of 50 older, stacked vessels
from the Americas fleet during this two-year period. Vessel utilization rates are calculated by dividing the
number of days a vessel works by the number of days the vessel is available to work. As such, stacked vessels
depressed utilization rates during the comparative periods because stacked vessels are considered available to
work, and as such, are included in the calculation of utilization rates. Within the Americas segment, the
company continued to stack, and in some cases dispose of, vessels that could not find attractive charters. At
the beginning of fiscal 2012, the company had 39 Americas-based stacked vessels. During fiscal 2012, the
company stacked six additional vessels and sold 24 vessels from the previously stacked vessel fleet, resulting
in a total of 21 stacked Americas-based vessels as of March 31, 2012.
35
Vessel operating profit for the Americas-based vessels increased approximately 14%, or $6.7 million, during
fiscal 2012 as compared to fiscal 2011, despite a decrease in revenues during the comparative periods,
because of a 17%, or $38.1 million, decrease in vessel operating costs (primarily crew costs, repair and
maintenance costs, and other vessel costs) and a decrease in depreciation expense, both of which offset the
decline in revenues.
Depreciation expense decreased approximately 16%, or $7.3 million, during fiscal 2012 as compared to fiscal
2011, because of the transfer of vessels to other segments and because of vessel sales. Crew costs decreased
12%, or $15.6 million, during the same comparative periods, due to reductions in crew personnel at our U.S.
GOM operations as a result of fewer vessels operating in the U.S. GOM market due to the continued
aftereffects of the drilling moratorium, and because the prior year’s non-U.S. Americas operations included an
allocated $2.1 million charge associated with the company’s participation in the Merchant Navy Officers
Pension Fund (MNOPF) as disclosed in Note (11) of Notes to Consolidated Financial Statements. Repair and
maintenance costs decreased approximately 37%, or $18.1 million, from the prior fiscal year, due to a fewer
number of drydockings being performed during the current periods and because in the prior fiscal year we
performed three scheduled drydockings of our largest anchor handling towing supply vessels (for an aggregate
cost of $11.1 million).
Asia/Pacific Segment Operations. Asia/Pacific-based vessel revenues decreased approximately 13%, or
$23.1 million, during fiscal 2012 as compared to fiscal 2011, primarily due to a five percentage point decrease
in utilization rates on the towing supply/supply class of vessels as a result of weaker demand, particularly for
older equipment within this class of vessels and because of vessels transferred out of the segment, which
collectively resulted in a $15.7 million decrease in vessel revenues on the Asia/Pacific region’s non-deepwater
towing supply/supply class of vessels. Revenues on the deepwater vessels also declined $7.4 million due to a
two percentage point decrease in utilization rates on the deepwater vessels operating in this segment, largely
due to unanticipated delays on certain customer projects.
Within the Asia/Pacific segment, the company also continued to stack, and in some cases dispose of, vessels
that could not find attractive charters. At the beginning of fiscal 2012, the company had 19 Asia/Pacific-based
stacked vessels. During fiscal 2012, the company stacked three additional vessels and sold six vessels from
the previously stacked vessel fleet, resulting in a total of 16 stacked Asia/Pacific-based vessels as of
March 31, 2012.
Asia/Pacific-based vessel operating profit decreased $6.2 million, or 28%, during fiscal 2012 as compared to
fiscal 2011, primarily due to lower revenues and higher general and administrative expenses. Declines in
revenues were partially offset by an approximate 14%, or $16.4 million, decrease in vessel operating costs
(primarily crew costs, repair and maintenance costs, and fuel, lube and supply costs) and also due to a
decrease in depreciation expense during the same comparative periods.
Crew costs decreased approximately 14%, or $10.0 million, during fiscal 2012 as compared to fiscal 2011, due
to reductions in crew personnel related to the transfer of deepwater vessels to other segments. Crew costs also
decreased because the prior year included an allocated $1.0 million charge associated with the company’s
participation in the Merchant Navy Officers Pension Fund (MNOPF) as disclosed in Note (11) of Notes to
Consolidated Financial Statements. Depreciation expense decreased 18%, or $4.7 million, from the prior fiscal
year, due to the transfer of deepwater vessels to other segments and because of vessel sales.
General and administrative expenses increased 33%, or $4.2 million, during fiscal 2012 as compared to fiscal
2011, due to pay raises for the administrative personnel, an increase in office and property costs, and an
increase in costs associated with foreign assigned administrative employees (specifically foreign income taxes
paid by the company on behalf of expatriate employees). Repair and maintenance costs decreased
approximately 21%, or $3.4 million, from the prior fiscal year, due to a fewer number of drydockings being
performed during the current periods.
Middle East/North Africa Segment Operations. Middle East/North Africa-based vessel revenues increased
approximately 19%, or $17.3 million, during fiscal 2012 as compared to fiscal 2011, primarily due to a five
percentage point increase in utilization rates on the deepwater vessels operating in this segment. This resulted
in an $18.1 million increase in deepwater vessel revenues and reflects three deepwater vessels being
transferred into the region from other segments during the comparative periods.
36
As was the case with other segments, within the Middle East/North Africa segment, the company continued to
stack, and in some cases dispose of vessels that could not find attractive charters. At the beginning of fiscal
2012, the company had six Middle East/North Africa-based stacked vessels. During fiscal 2012, the company
stacked seven additional vessels and sold six vessels from the previously stacked vessel fleet, resulting in a
total of seven stacked Middle East/North Africa-based vessels as of March 31, 2012.
Middle East/North Africa-based vessel operating profit decreased approximately $18.2 million, or 96%, during
fiscal 2012 as compared to fiscal 2011, which primarily reflects the scaling up of operations in the Middle
East/North Africa segment in anticipation of a greater level of business activity. In particular, vessel operating
costs increased 57%, or $28.6 million, (primarily crew costs, repair and maintenance costs, fuel, lube and
supply costs, and vessel operating leases). In addition, depreciation expense increased approximately 23%, or
$3.3 million, during the same comparative periods, and general and administrative expenses increased
approximately $3.6 million, or 44%, during the same comparative periods.
Crew costs increased approximately 40%, or $10.1 million, during fiscal 2012 as compared to fiscal 2011, due
to an increase in crew personnel related to the addition of vessels to the segment. Repair and maintenance
costs increased approximately $7.3 million, or 80%, from the prior fiscal year, largely because the average cost
of the drydockings performed during the current periods was higher. Depreciation expense increased, during
the same comparative periods, primarily because of the additional vessels transferred to the segment related to
the build-up of operations in anticipation of a greater level of business activity. General and administrative
expenses increased, from the prior fiscal year, due to an increase in administrative personnel which resulted in
higher administrative payroll, an increase in office and property costs, and an increase in costs associated with
foreign assigned administrative employees also resulting from the build-up of operations in anticipation of a
greater level of business activity.
Fuel, lube and supply costs increased approximately $4.9 million, or 59%, during fiscal 2012 as compared to
fiscal 2011, due to an increase in the number of vessels operating in the segment resulting from new vessel
deliveries and because of vessels mobilizing into this segment. Vessel operating leases increased
approximately $1.9 million, from the prior fiscal year, because two vessels operating under lease arrangements
were transferred into the segment.
revenues
Sub-Saharan Africa/Europe Segment Operations. Sub-Saharan Africa/Europe-based vessel
increased approximately 13%, or $53.3 million, during fiscal 2012 as compared to fiscal 2011, due to an
increase in the number of deepwater vessels operating in the segment (due to the delivery of new vessels and
vessels mobilizing into this segment), a three percentage point increase in utilization rates, and a 12% increase
in average day rates on the deepwater vessels, all of which resulted in a $76.0 million increase in deepwater
vessel revenues. Revenue increases generated by the deepwater vessels were partially offset by a decline in
revenue experienced by the non-deepwater towing supply/supply class of vessels. Vessel revenue on the
towing supply/supply class of vessels decreased approximately 9%, or $20.1 million, from the prior fiscal year,
due to a five percentage point decrease in utilization rates and because fewer towing supply/supply class of
vessels operated in the segment due to vessel sales and transfers to other segments.
Within the Sub-Saharan Africa/Europe segment, the company continued to stack, and in some cases dispose
of vessels that could not find attractive charters. At the beginning of fiscal 2012, the company had 26 Sub-
Saharan Africa/Europe-based stacked vessels. During fiscal 2012, the company stacked eight additional
vessels and sold 11 vessels from the previously stacked vessel fleet, resulting in a total of 23 stacked Sub-
Saharan Africa/Europe-based vessels as of March 31, 2012.
Sub-Saharan Africa/Europe-based vessel operating profit increased approximately 17%, or $14.1 million,
during fiscal 2012 as compared to fiscal 2011, primarily due to higher revenues, which were partially offset by
an approximate 10%, or $25.5 million, increase in vessel operating costs (primarily crew costs, repair and
maintenance costs, and fuel, lube and supply costs); an increase in depreciation expense; and an increase in
general and administrative expenses.
Crew costs increased approximately 5%, or $5.2 million, during fiscal 2012 as compared to fiscal 2011,
respectively, due to an increase in crew personnel resulting from an increase in the number of deepwater
vessels operating in the segment. Repair and maintenance costs, increased approximately 20%, or
$7.0 million, from the prior fiscal year, due to a higher number of drydockings being performed during current
37
periods. Fuel, lube and supplies were higher by approximately 39%, or $9.0 million, during the same
comparative periods, due to vessel mobilizations.
Depreciation expense increased approximately 10%, or $5.7 million, during fiscal 2012 as compared to
fiscal 2011, primarily because of an increased number of vessels operating in the segment resulting from new
vessel deliveries and vessels mobilizing into the segment during the current fiscal year. General and
administrative expenses increased 21%, or $8.5 million, respectively, from the prior fiscal year, due to pay
raises for the administrative personnel, an increase in office and property costs (primarily office rent and
information technology costs), an increase in travel costs, and an increase in costs associated with foreign
assigned administrative employees.
Other Items. Insurance and loss reserves expense decreased $2.1 million, or 11%, during fiscal 2012 as
compared to fiscal 2011, due to lower premiums and favorable adjustments to loss reserves during fiscal 2012
resulting from good safety results and loss management efforts.
Gain on asset dispositions, net during fiscal 2012 increased $4.4 million, or 33%, as compared to fiscal 2011,
primarily due to lower impairment expense charged during the current fiscal year. Dispositions of vessels can
vary from quarter to quarter; therefore, gains on sales of assets may fluctuate significantly from period to
period.
The company performed a review of all its assets for asset impairment during fiscal 2012. The below table
summarizes the combined fair value of the assets that incurred impairments along with the amount of
impairment during the years ended March 31. The impairment charges were recorded in gain on asset
dispositions, net.
(In thousands)
Amount of impairment incurred
Combined fair value of assets incurring impairment
Fiscal 2011 Compared to Fiscal 2010
$
2012
3,607
8,175
2011
8,958
13,646
Consolidated Results. The company’s consolidated net earnings during fiscal 2011 decreased 59%, or
$153.9 million, as compared to fiscal 2010, due primarily to an approximate 10%, or $113.2 million, decrease in
total revenues, a $33.3 million, or 6%, increase in vessel operating costs, and a $34.2 million, or 414%,
increase in income taxes during the comparative periods as disclosed in Note (3) of Notes to Consolidated
Financial Statements included in Item 8 of this report.
During fiscal 2011 vessel utilization rates decreased approximately four percentage points as compared to
fiscal 2010 due principally to reduced demand for the company’s older vessels by our customers. E&P
customers reduced their capital spending budgets in response to lower hydrocarbon demand and weaker
commodity prices precipitated by the 2008-2009 global economic recession. The 2008-2009 global recession
resulted in a decrease in demand for offshore support vessel services worldwide. This reduced demand has led
to an industry-wide reduction in charter rates and utilization rates on vessels as our customers needed fewer
vessels and demanded pricing concessions.
The company recorded $1.1 billion in revenues during fiscal 2011 as compared to $1.2 billion in fiscal 2010, a
decrease of approximately $113.2 million, primarily due to an approximate four percentage point reduction in
total worldwide utilization and a decrease in the company’s shipyard activity for unaffiliated customers. In part,
the decline in revenues reflected the vessel seizures in Venezuela in mid-2009 with fiscal 2010 including
$11.3 million of revenues that were generated by the company’s Venezuelan operations. Other operating
revenues decreased approximately $26.3 million, or 86%, during the same comparative periods primarily
because ship construction at the company’s shipyards was completed on several projects and the shipyard has
not been able to secure additional backlog.
Vessel operating costs increased 6%, or $33.3 million, during fiscal 2011 as compared to fiscal 2010. Crew
costs increased approximately 6%, or $17.9 million, during fiscal 2011 as compared to fiscal 2010, because of
the addition of 29 new vessels to the worldwide fleet. The newer, more technologically sophisticated vessels
generally require a greater number of specially trained fleet personnel than the older, traditional vessels. In
addition, crew costs increased during the same comparative periods, in part, due to a $6.0 million charge
38
associated with the company’s participation in the Merchant Navy Officers Pension Fund (MNOPF) as
disclosed in Note (11) of Notes to Consolidated Financial Statements. Repair and maintenance costs also
increased approximately 6%, or $6.1 million, during the same comparative periods, because a greater number
of drydockings were performed during fiscal year 2011. In particular, during fiscal 2011, we performed four
scheduled drydockings of our largest anchor handling towing supply vessels (for an aggregate cost of $14.5
million) as compared to one drydocking being performed on the same class of vessel during fiscal 2010 for a
total cost of $3.3 million. Vessel operating lease costs increased approximately $2.9 million, or 19%, during
fiscal 2011 because the company entered into six additional vessel operating leases during fiscal 2010, as
disclosed in Note (10) of Notes to Consolidated Financial Statements and in the “Off-Balance Sheet
Arrangements” section of this report. Fuel, lube and supply costs were higher by approximately 9%, or
$5.1 million, during fiscal 2011 as compared to fiscal 2010, due to vessel mobilizations on the company’s newly
delivered vessels and because of vessel transfers. Insurance and loss reserves increased approximately
$6.6 million due to an increase in the number of vessels operating and due to unfavorable development of
losses during fiscal 2011. Costs of other operating revenues decreased approximately $22.7 million, or 83%,
during the same comparative periods because ship construction at the company’s shipyards was completed on
several projects and the shipyard has not been able to secure additional backlog.
At March 31, 2011, the company had 364 owned or chartered vessels (excluding joint-venture vessels and
vessels withdrawn from service) in its fleet with an average age of 16.5 years. The average age of 193 newer
vessels in the fleet at March 31, 2011 (defined as those that have been acquired or constructed since calendar
year 2000 as part of the company’s new build and acquisition program) was 5.4 years. The remaining 171
vessels had an average age of 29.0 years. During fiscal 2011 and 2010, the company's newer vessels
generated $838.5 million and $770.5 million, respectively, of consolidated revenue and accounted for 88%, or
$363.9 million, and 74%, or $395.3 million, respectively, of total vessel margin (vessel revenues less vessel
operating cost). Vessel operating costs exclude depreciation on the company’s new vessels of $97.9 million
and $76.2 million, respectively, during the same comparative periods.
Americas Segment Operations. Vessel revenues in the Americas segment decreased approximately 8%, or
$30.4 million, during fiscal 2011 as compared to fiscal 2010, primarily due to a six percentage point decrease in
utilization rates on the towing supply/supply class of vessels operating in the Americas (which resulted in a
$20.8 million decline in revenue) mostly due to vessel sales, the transfer of vessels to other segments and
weaker demand for this class of vessel (particularly the older towing supply/supply vessels). In addition,
revenues in the Americas decreased during fiscal 2011 because of the loss of revenue resulting from the
seizure of its Venezuelan operations (including the seizure of 15 vessels) as disclosed in Note (11) of Notes to
Consolidated Financial Statements. Our Venezuelan operations contributed no revenues during fiscal 2011 as
compared to $11.3 million of revenues contributed during fiscal 2010.
Within the Americas segment, the company stacked and disposed of a number of vessels that could not find
attractive charters. At the beginning of fiscal 2011, the company had 48 Americas-based stacked vessels.
During fiscal 2011, the company stacked 22 additional vessels, sold 26 vessels from the previously stacked
vessel fleet, and returned to service five vessels resulting in a total of 39 stacked Americas-based vessels as of
March 31, 2011.
Vessel operating profit for the Americas-based vessels increased approximately 32%, or $11.8 million, because
fiscal 2010 vessel operating profit includes a $43.7 million provision for Venezuelan operations as disclosed in
Note (11) of Notes to Consolidated Financial Statements. Excluding the Venezuelan provision from the
comparatives, vessel operating profit for the Americas-based vessels decreased approximately 39%, or
$31.9 million, primarily due to lower revenues in fiscal 2011 as compared to fiscal 2010 and due to a 2%, or
$4.0 million, increase in vessel operating costs (primarily repair and maintenance costs and other vessel costs
partially offset by lower crew costs and fuel, lube and supply costs) partially offset by a decrease in depreciation
expense.
Repair and maintenance costs increased approximately 17%, or $7.3 million, during fiscal 2011 as compared to
fiscal 2010 due to a greater number of drydockings being performed during the current fiscal year. In particular,
during fiscal 2011, we performed three scheduled drydockings of our largest anchor handling towing supply
vessels (for an aggregate cost of $11.1 million) as compared to one drydocking being performed on the same
class of vessel during fiscal 2010 for a total cost of $3.3 million. Other vessel costs increased 27%, or
$5.2 million, due primarily to the movement of several older vessels out of Brazil after the charters for these
vessels had been completed. A number of these vessels were subsequently disposed of.
39
Depreciation expense decreased approximately 3%, or $1.4 million, during fiscal 2011 as compared to fiscal
2010 because of the transfer of vessels to other segments and because of vessel sales. Crew costs decreased
approximately 5%, or $6.6 million, during the same comparative periods, primarily due to fewer vessels
operating in the Americas because of vessel sales, vessel transfers to other segments, and the seizure of our
Venezuelan fleet of 15 vessels. In addition, crew costs were lower during the comparative periods in the
Americas due to the mobilization of two deepwater vessels from the U.S. GOM to other segments (because
vessel demand related to the Deepwater Horizon oil spill containment effort had declined significantly) and
because of wage reductions for remaining personnel operating in the U.S. GOM. Fuel, lube and supply costs
decreased approximately 14%, or $2.4 million, during the same comparative periods because we had a fewer
number of newly delivered vessels mobilize into the Americas and a fewer number of intersegment
mobilizations.
Asia/Pacific Segment Operations. Asia/Pacific-based vessel revenues increased approximately 4%, or
$6.5 million, during fiscal 2011 as compared to fiscal 2010, primarily due to an approximate 10% increase in
average day rates and a two percentage point increase in utilization rates on our deepwater vessels along with
an increase in the number of deepwater vessels operating in Asia/Pacific segment following the addition of
newly-built and acquired deepwater vessels and the transfer of deepwater class vessels from other segments,
which collectively resulted in a $38.1 million increase in revenue on this class of vessels. Revenue declines on
our non-deepwater towing supply/supply class of vessels partially offset the revenues earned on the deepwater
class vessels. Revenues on the towing supply/supply vessels declined $34.3 million, or 28%, during the same
comparative periods, due to a 23 percentage point decrease in utilization rates as a result of weaker demand
for this class of vessel (specifically the older vessels in this class) despite a 9% increase in average day rates
on this class of vessel.
In fiscal 2011, the company stacked, and in a number of cases disposed of, Asia/Pacific-based vessels that
could not find attractive charters. At the beginning of fiscal 2011, the company had 12 Asia/Pacific-based
stacked vessels. During fiscal 2011, the company stacked 14 additional vessels and sold seven vessels from
the previously stacked vessel fleet, resulting in a total of 19 stacked Asia/Pacific-based vessels as of
March 31, 2011.
Asia/Pacific-based vessel operating profit decreased approximately $26.7 million, or 55%, during fiscal 2011 as
compared to fiscal 2010, primarily due to higher vessel operating costs, depreciation expense and general and
administrative costs (despite an increase in revenues). Vessel operating costs increased 35%, or $30.2 million,
during the same comparative periods (primarily crew costs, repair and maintenance costs, and fuel, lube and
supply costs). Depreciation expense increased 7%, or $1.6 million, during the same comparative periods, due
to an increase in the number of vessels operating in the segment as a result of vessel transfers and the delivery
of newly built vessels. General and administrative expenses increased approximately 13%, or $1.4 million,
during the same comparative periods, due to pay raises for the administrative personnel and temporary
personnel staffing, an increase in office and property costs, and general increases caused by the devaluation of
the U.S. dollar relative to the Australian dollar.
Crew costs increased approximately 39%, or $19.9 million, during fiscal 2011 as compared to fiscal 2010, due
to an increase in crew personnel related to the transfer of vessels into the segments and because of an
allocated $1.0 million charge associated with the company’s participation in the Merchant Navy Officers
Pension Fund (MNOPF) as disclosed in Note (11) of Notes to Consolidated Financial Statements. Repair and
maintenance costs increased 45%, or $5.1 million, during the same comparative periods due to a greater
number of drydockings being performed during fiscal 2011 including a previously scheduled drydocking on one
of our largest anchor handling towing supply vessels for a cost of $3.4 million. Fuel, lube and supply costs were
higher by approximately 2%, or $2.3 million, during fiscal 2011 as compared to fiscal 2010, because of newly-
constructed and acquired vessels that were added to the Asia/Pacific fleet, intersegment vessel mobilizations,
and vessels mobilizing into the segment from other regions.
40
Middle East/North Africa Segment Operations. Middle East/North Africa vessel revenues in fiscal 2011
were comparable to the revenues earned during fiscal 2010. However, revenues on our towing supply/supply
vessels increased 5%, or $22.8 million, due to an increase in the number of towing supply/supply vessels
operating in this segment, while a decrease in revenues generated by our offshore tugs almost offset the
revenue gains achieved by the towing supply/supply class of vessels. In particular, revenues generated by the
offshore tugs declined approximately 28%, or $2.6 million, due to a seven percentage point decrease in
utilization and a 20% decrease in average day rates due to market weakness on this class of vessel.
Within the Middle East/North Africa segment, the company also stacked and disposed of a number of vessels
that could not find attractive charters. At the beginning of fiscal 2011, the company had three Middle East/North
Africa -based stacked vessels. During fiscal 2011, the company stacked six additional vessels, sold two vessels
from the previously stacked vessel fleet, and returned to service one vessel resulting in a total of six stacked
Middle East/North Africa -based vessels as of March 31, 2011.
Middle East/North Africa-based vessel operating profit decreased $10.9 million, or 37%, during fiscal 2011 as
compared to fiscal 2011 due primarily to a 15%, or $6.7 million, increase in vessel operating costs (primarily
crew costs and fuel, lube and supply costs) and a 27%, or $3.0 million, increase in depreciation expense
primarily because of the addition of approximately 10 newly delivered vessels and due to vessels mobilizing
into the segment from other segments. Crew costs increased $2.9 million, or 13%, because of an increase in
crew personnel resulting from an increase in the number of vessels operating in the segment. Fuel, lube and
supply costs increased because newly delivered vessels were mobilized into the segment and due to vessels
mobilizing into the segment from other segments.
Sub-Saharan Africa/Europe Segment Operations. Sub-Saharan Africa/Europe-based vessel
revenues
decreased approximately 13%, or $61.8 million, during fiscal 2011 as compared to fiscal 2010, primarily due to
a 10 percentage point decrease in utilization rates and a 14% decrease in average day rates on the towing
supply/supply class of vessels resulting in a $74.5 million, or 25%, decline in revenue on this class of vessels,
largely due to weak demand for this vessel class (particularly the older vessels). The decline in the towing
supply/supply class of vessel revenues was partially offset by a 12%, or $13.2 million, increase in revenue
earned by the deepwater vessels due to the addition of 16 deepwater vessels throughout fiscal 2010 and into
fiscal 2011 following the addition of newly-built and acquired deepwater vessels to the Sub-Saharan
Africa/Europe-based fleet and the transfer of deepwater class vessels from other segments.
The company continued to stack and dispose of Sub-Saharan Africa/Europe-based vessels that could not find
attractive charters. At the beginning of fiscal 2011, the company had 20 Sub-Saharan Africa/Europe-based
stacked vessels. During fiscal 2011, the company stacked 12 additional vessels and sold six vessels from the
previously stacked vessel fleet, resulting in a total of 26 stacked Sub-Saharan Africa/Europe-based vessels as
of March 31, 2011.
Sub-Saharan Africa/Europe-based vessel operating profit decreased approximately 43%, or $62.0 million,
during fiscal 2011 as compared to fiscal 2010, because of lower revenues, which were partially offset by 3%, or
$7.6 million, lower vessel operating costs (primarily lower repair and maintenance costs and other vessel costs
which were partially offset by higher crew costs, insurance and loss reserves, and vessel operating lease costs)
during the comparative periods. In addition, vessel operating profit decreased because of a 13%, or
$6.0 million, increase in depreciation expense, during the same comparative periods, because of newly-
constructed and acquired vessels that were added to the Sub-Saharan Africa/Europe-based fleet and because
of the mobilization of vessels into this segment from other segments.
Repair and maintenance costs decreased 16%, or $6.6 million, during fiscal 2011 as compared to fiscal 2010,
due to a fewer number of drydockings being performed during the current fiscal year. Other vessel costs
decreased 19%, or $12.1 million, during the same comparative periods, due to a $7.6 million decrease in
brokers’ commission (resulting from weaker demand for the company’s vessels in this segment) and because
the prior fiscal year included a $5.0 million fine assessed by the Angolan government for failure to remit taxes in
a timely manner.
Crew costs increased approximately 1%, or $1.7 million, during fiscal 2011 as compared to fiscal 2010,
primarily due to an increase in the number of deepwater vessels operating in the segment. Insurance and loss
41
reserves increased approximately $3.8 million due to an increase in the number of vessels operating in this
segment and due to unfavorable development of losses on a consolidated level during the current fiscal year
that affected the costs of insurance for all segments. Vessel operating lease costs increased approximately
$3.0 million, or 28%, during the same comparative periods, because the company entered into six additional
vessel operating leases during fiscal 2010, as disclosed in Note (10) of Notes to Consolidated Financial
Statements and in the “Off-Balance Sheet Arrangements” section of this report.
Other Items. Insurance and loss reserves expense increased $6.7 million, or 51%, during fiscal 2011 as
compared to fiscal 2010, because of lower premiums and favorable adjustments to loss reserves during fiscal
2010 and due to unfavorable development of losses during fiscal 2011.
Gain on asset dispositions, net during fiscal 2011 decreased approximately $15.0 million, or 53%, as
compared to fiscal 2010, due to fewer vessel sales, lower gains earned on the mix of vessels sold, and higher
impairment charges taken in fiscal 2011 as discussed below. Dispositions of vessels can fluctuate significantly
from period to period.
The company performed a review of all its assets for asset impairment during fiscal 2011. The below table
summarizes the combined fair value of the assets that incurred impairments along with the amount of
impairment during the years ended March 31. The impairment charges were recorded in gain on asset
dispositions, net.
(In thousands)
Amount of impairment incurred
Combined fair value of assets incurring impairment
Vessel Class Revenue and Statistics by Segment
$
2011
8,958
13,646
2010
3,102
10,580
Vessel utilization is determined primarily by market conditions and to a lesser extent by drydocking
requirements. Vessel day rates are determined by the demand created largely through the level of offshore
exploration, field development and production spending by energy companies relative to the supply of offshore
service vessels. Suitability of equipment and the degree of service provided may also influence vessel day
rates. Vessel utilization rates are calculated by dividing the number of days a vessel works during a reporting
period by the number of days the vessel is available to work in the reporting period. As such, stacked vessels
depressed utilization rates because stacked vessels are considered available to work, and as such, are
included in the calculation of utilization rates. Average day rates are calculated by dividing the revenue a vessel
earns during a reporting period by the number of days the vessel worked in the reporting period.
Vessel utilization and average day rates are calculated on all vessels in service (again which includes stacked
vessels and vessels in drydock) but do not include vessels withdrawn from service (two vessels at
March 31, 2012) or vessels owned by joint ventures (10 vessels at March 31, 2012). The following tables
compare revenues, day-based utilization percentages and average day rates by vessel class and in total for
each of the quarters in the years ended March 31:
42
REVENUE BY VESSEL CLASS:
(In thousands)
Fiscal Year 2012
Americas fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
Asia/Pacific fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
Middle East/North Africa fleet:
Deepwater vessels
Towing-supply/supply
Offshore tugs
Total
Sub-Saharan Africa/Europe fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
Worldwide fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
Fiscal Year 2011
Americas fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
Asia/Pacific fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
Middle East/North Africa fleet:
Deepwater vessels
Towing-supply/supply
Offshore tugs
Total
Sub-Saharan Africa/Europe fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
Worldwide fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
First
Second
Third
Fourth
Year
36,639
36,648
8,044
561
81,892
12,264
15,870
144
849
29,127
11,782
11,616
1,412
24,810
45,605
49,338
12,734
4,906
112,583
106,290
113,472
20,922
7,728
248,412
Second
49,635
37,631
7,166
601
95,033
17,957
23,595
246
867
42,665
6,035
15,165
1,743
22,943
31,238
56,596
12,829
5,566
106,229
104,865
132,987
20,241
8,777
266,870
38,861
35,866
6,905
1,109
82,741
20,445
19,334
246
894
40,919
12,647
13,778
1,414
27,839
51,194
50,159
12,589
5,045
118,987
123,147
119,137
19,740
8,462
270,486
Third
47,046
36,349
7,644
571
91,610
24,757
23,183
245
867
49,052
5,820
15,393
1,724
22,937
31,290
55,225
12,977
6,542
106,034
108,913
130,150
20,866
9,704
269,633
35,045
35,596
6,576
2,002
79,219
26,857
20,197
243
910
48,207
11,331
18,034
1,418
30,783
64,392
48,663
11,674
5,317
130,046
137,625
122,490
18,493
9,647
288,255
Fourth
33,261
40,113
8,138
571
82,083
21,089
20,329
241
874
42,533
9,051
14,408
1,661
25,120
32,508
52,677
12,600
5,193
102,978
95,909
127,527
20,979
8,299
252,714
146,950
143,796
29,535
4,248
324,529
75,495
73,845
876
3,536
153,752
46,511
56,902
6,076
109,489
199,697
201,463
51,010
20,528
472,698
468,653
476,006
81,421
34,388
1,060,468
Year
181,244
149,151
30,104
2,326
362,825
82,919
89,517
975
3,466
176,877
28,460
56,869
6,822
92,151
123,707
221,595
50,549
23,509
419,360
416,330
517,132
81,628
36,123
1,051,213
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
36,405
35,686
8,010
576
80,677
15,929
18,444
243
883
35,499
10,751
13,474
1,832
26,057
38,506
53,303
14,013
5,260
111,082
101,591
120,907
22,266
8,551
253,315
First
51,302
35,058
7,156
583
94,099
19,116
22,410
243
858
42,627
7,554
11,903
1,694
21,151
28,671
57,097
12,143
6,208
104,119
106,643
126,468
19,542
9,343
261,996
43
REVENUE BY VESSEL CLASS - continued:
(In thousands)
Fiscal Year 2010
Americas fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Other
Total
Asia/Pacific fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
Middle East/North Africa fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
Sub-Saharan Africa/Europe fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
Worldwide fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Other
Total
UTILIZATION:
Fiscal Year 2012
Americas fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
Asia/Pacific fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
Middle East/North Africa fleet:
Deepwater vessels
Towing-supply/supply
Offshore tugs
Total
Sub-Saharan Africa/Europe fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
Worldwide fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
First
Second
Third
Fourth
Year
$
$
$
$
$
$
$
$
$
$
42,076
54,769
11,207
3,440
567
112,059
6,051
34,728
290
---
41,069
8,041
16,041
613
2,225
26,920
26,242
84,158
15,096
4,892
130,388
82,410
189,696
27,206
10,557
567
310,436
44,522
46,979
8,557
1,898
---
101,956
8,776
32,011
220
---
41,007
7,351
16,181
631
2,800
26,963
27,760
78,643
13,594
4,640
124,637
88,409
173,814
23,002
9,338
---
294,563
44,715
37,543
7,237
798
---
90,293
13,451
32,995
221
---
46,667
6,783
12,195
---
2,701
21,679
29,275
68,698
12,790
5,105
115,868
94,224
151,431
20,248
8,604
---
274,507
47,310
33,668
6,999
985
---
88,962
16,504
24,116
197
798
41,615
6,391
9,698
---
1,728
17,817
27,240
64,595
12,757
5,670
110,262
97,445
132,077
19,953
9,181
---
258,656
178,623
172,959
34,000
7,121
567
393,270
44,782
123,850
928
798
170,358
28,566
54,115
1,244
9,454
93,379
110,517
296,094
54,237
20,307
481,155
362,488
647,018
90,409
37,680
567
1,138,162
First
Second
Third
Fourth
Year
79.7
54.2
72.6
23.6
61.0
83.5
43.8
100.0
100.0
54.4
98.8
59.2
50.0
65.2
83.8
58.1
82.0
69.0
70.0
84.2
54.4
79.5
54.8
64.6
75.9
53.1
82.3
38.7
61.4
95.3
43.1
100.0
100.0
55.9
100.0
73.3
50.0
74.4
84.0
55.6
76.2
72.6
68.4
84.9
55.2
78.3
60.2
65.4
74.9
49.0
80.0
25.8
58.2
76.8
41.3
89.6
100.0
50.9
91.2
59.9
53.3
64.5
84.4
56.9
83.7
65.9
69.4
81.1
52.1
82.7
55.5
62.9
73.5
46.9
80.2
19.3
56.8
59.6
36.3
58.7
100.0
42.8
91.6
49.7
50.0
57.4
88.1
55.8
85.6
60.8
69.2
79.3
48.6
83.4
51.4
60.2
70.8%
43.3
85.3
20.0
54.3%
71.1%
42.5
100.0
100.0
51.1%
76.3%
57.6
63.2
61.6%
81.6%
57.9
91.1
62.0
70.1%
75.7%
50.7
89.5
55.4
61.5%
44
UTILIZATION - continued:
Fiscal Year 2011
Americas fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
Asia/Pacific fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
Middle East/North Africa fleet:
Deepwater vessels
Towing-supply/supply
Offshore tugs
Total
Sub-Saharan Africa/Europe fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
Worldwide fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
Fiscal Year 2010
Americas fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Other
Total
Asia/Pacific fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
Middle East/North Africa fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
Sub-Saharan Africa/Europe fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
Worldwide fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Other
Total
First
Second
Third
Fourth
Year
80.3%
39.3
48.3
16.8
47.8%
90.1%
49.7
100.0
100.0
59.4%
88.4%
64.8
59.6
67.4%
86.0%
63.2
81.3
74.6
71.7%
84.6%
52.9
68.5
59.4
61.1%
79.2
42.7
53.5
17.0
50.8
61.2
46.5
100.0
100.0
51.6
87.9
71.7
60.0
71.8
87.4
62.6
85.9
66.1
71.9
78.9
54.6
73.9
55.1
61.8
78.5
41.0
57.8
16.4
50.2
84.7
46.8
100.0
100.0
57.5
80.1
72.5
59.7
71.5
79.2
62.5
89.9
73.3
72.3
80.2
54.2
77.9
58.7
62.7
70.1
48.3
70.6
20.0
55.2
78.9
43.5
100.0
100.0
53.6
87.5
66.6
58.8
68.8
76.0
60.0
91.6
60.3
69.8
75.8
54.5
84.3
53.7
62.8
77.3
42.6
56.8
17.5
50.8
78.3
46.6
100.0
100.0
55.5
86.3
69.0
59.5
69.9
81.7
62.1
87.0
68.6
71.4
79.8
54.0
75.9
56.8
62.1
First
Second
Third
Fourth
Year
75.6
43.3
47.0
19.8
---
47.9
80.1
69.8
63.0
---
70.4
68.5
66.6
---
71.8
67.7
86.9
70.9
76.9
70.6
74.4
79.4
60.7
65.0
56.0
---
63.8
79.6
40.8
43.5
25.1
---
47.2
87.8
53.0
100.0
93.3
60.3
64.5
66.5
---
55.6
64.3
82.3
66.9
81.6
68.6
72.8
80.2
55.1
66.4
56.8
---
61.0
77.7
48.6
54.7
34.8
79.2
53.7
76.5
69.1
63.4
56.8
69.9
76.7
72.6
69.3
66.4
72.2
84.4
72.0
76.7
64.1
74.0
79.6
63.3
67.7
56.8
79.2
65.9
74.8
52.1
56.4
45.7
---
56.2
73.2
75.0
49.6
---
73.7
85.3
79.8
82.0
75.3
79.9
82.5
72.7
73.5
60.5
73.1
78.2
66.8
66.4
60.4
---
67.8
80.9%
57.0
70.1
44.9
79.2
62.4%
59.0%
79.3
59.9
---
76.0%
93.3%
76.4
58.6
62.4
75.8%
86.1%
77.0
75.4
56.6
75.6%
80.8%
70.1
72.6
54.2
79.2
70.7%
45
AVERAGE DAY RATES:
Fiscal Year 2012
Americas fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
Asia/Pacific fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
Middle East/North Africa fleet:
Deepwater vessels
Towing-supply/supply
Offshore tugs
Total
Sub-Saharan Africa/Europe fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
Worldwide fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
Fiscal Year 2011
Americas fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
Asia/Pacific fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
Middle East/North Africa fleet:
Deepwater vessels
Towing-supply/supply
Offshore tugs
Total
Sub-Saharan Africa/Europe fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
Worldwide fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
First
Second
Third
Fourth
Year
24,863
14,786
6,414
6,318
15,466
20,619
11,974
2,671
9,236
14,098
17,466
8,513
5,117
10,716
20,375
12,665
4,369
6,751
11,518
21,338
12,519
4,955
6,531
12,771
Second
27,238
13,603
6,183
6,383
16,268
24,933
12,917
2,670
9,426
15,623
16,232
7,522
5,262
8,438
19,044
11,784
4,283
6,541
10,324
23,024
11,653
4,767
6,415
12,366
25,247
13,812
6,186
8,525
15,373
25,357
12,836
2,670
9,709
16,389
17,484
8,604
5,127
10,705
21,719
13,004
4,509
6,620
12,181
22,696
12,460
4,935
6,715
13,359
Third
27,533
13,741
6,294
6,342
16,190
22,697
12,305
2,670
9,426
15,529
17,862
7,595
5,226
8,551
19,302
11,563
4,304
6,930
10,238
22,946
11,485
4,828
6,665
12,337
25,911
13,704
6,234
9,613
15,197
30,982
13,751
2,670
10,000
19,148
17,788
8,992
5,194
10,558
23,254
13,479
4,548
6,705
13,353
24,465
12,651
4,981
7,066
14,140
Fourth
25,041
14,411
6,411
6,341
15,003
23,681
12,688
2,670
9,709
15,913
16,907
7,693
5,235
9,216
19,325
11,848
4,247
6,836
10,450
21,619
11,913
4,850
6,601
12,194
25,573
14,076
6,212
8,199
15,283
25,073
12,790
2,670
9,662
16,221
17,703
8,477
5,192
10,417
21,584
12,978
4,500
6,794
12,080
22,709
12,452
4,960
6,775
13,197
Year
27,103
13,695
6,296
6,353
15,965
23,336
12,498
2,670
9,495
15,454
16,962
7,558
5,232
8,772
19,239
11,873
4,275
6,706
10,374
22,691
11,689
4,810
6,520
12,352
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
26,360
14,031
6,024
6,332
15,094
21,436
12,519
2,670
9,709
14,801
18,147
7,738
5,302
9,726
20,399
12,812
4,577
7,110
11,278
22,065
12,190
4,968
6,748
12,496
First
28,065
13,005
6,284
6,345
16,352
22,446
12,117
2,670
9,426
14,785
16,980
7,401
5,205
8,892
19,290
12,306
4,263
6,528
10,491
23,129
11,718
4,792
6,402
12,511
46
AVERAGE DAY RATES - continued:
Fiscal Year 2010
Americas fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Other
Total
Asia/Pacific fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
Middle East/North Africa fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
Sub-Saharan Africa/Europe fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
Worldwide fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Other
Total
First
Second
Third
Fourth
Year
$
$
$
$
$
$
$
$
$
$
28,569
12,125
5,611
9,752
9,679
13,343
18,517
11,576
2,470
---
11,924
20,657
8,601
11,500
6,530
10,165
24,546
14,046
4,943
7,304
12,090
25,295
12,339
5,210
7,744
9,679
12,282
31,012
12,248
5,664
7,369
---
14,483
18,934
11,117
2,403
---
11,940
18,731
8,287
10,001
6,734
9,548
22,302
14,245
4,542
7,144
11,975
25,000
12,250
4,938
7,059
---
12,426
31,669
12,036
5,908
6,775
---
15,372
22,476
11,782
2,403
---
13,368
18,463
7,752
---
6,818
9,277
20,344
13,185
4,203
6,552
11,065
24,687
11,921
4,644
6,654
---
12,380
28,991
11,742
6,389
7,261
---
15,524
23,196
11,441
2,192
9,497
13,902
18,340
7,046
---
5,751
8,798
20,402
13,472
4,360
6,780
11,146
24,198
11,849
4,853
6,769
---
12,531
30,009
12,062
5,833
8,244
9,679
14,543
21,322
11,481
2,375
9,497
12,749
19,075
7,997
10,687
6,506
9,495
21,721
13,761
4,514
6,920
11,578
24,763
12,114
4,926
7,062
9,679
12,399
47
The following three tables compare vessel day-based utilization percentages, average day rates and the
number of active vessels (excluding stacked vessels) for the company’s new vessels (defined as vessels
acquired or constructed since calendar year 2000 as part of its new build and acquisition program) and its
older, or traditional, vessels for each of the quarters in the years ended March 31. Although the company is
excluding the number of stacked vessels in its number of active vessels below, stacked vessels are considered
to be in service and are included in the calculation of the company’s utilization statistics.
UTILIZATION:
Fiscal Year 2012
Americas fleet:
New vessels
Traditional vessels
Total
Asia/Pacific fleet:
New vessels
Traditional vessels
Total
Middle East/North Africa fleet:
New vessels
Traditional vessels
Total
Sub-Saharan Africa/Europe fleet:
New vessels
Traditional vessels
Total
Worldwide fleet:
New vessels
Traditional vessels
Total
Fiscal Year 2011
Americas fleet:
New vessels
Traditional vessels
Total
Asia/Pacific fleet:
New vessels
Traditional vessels
Total
Middle East/North Africa fleet:
New vessels
Traditional vessels
Total
Sub-Saharan Africa/Europe fleet:
New vessels
Traditional vessels
Total
Worldwide fleet:
New vessels
Traditional vessels
Total
Fiscal Year 2010
Americas fleet:
New vessels
Traditional vessels
Total
Asia/Pacific fleet:
New vessels
Traditional vessels
Total
Middle East/North Africa fleet:
New vessels
Traditional vessels
Total
Sub-Saharan Africa/Europe fleet:
New vessels
Traditional vessels
Total
Worldwide fleet:
New vessels
Traditional vessels
Total
First
Second
Third
Fourth
Year
85.6
36.2
56.8
69.8
8.2
42.8
58.6
55.9
57.4
86.8
33.7
69.2
80.5
33.5
60.2
Second
84.7
31.1
50.8
69.7
34.0
51.6
87.7
63.4
71.8
89.8
41.6
71.9
85.3
39.2
61.8
Second
76.3
47.0
56.2
78.2
71.4
73.7
97.0
76.2
79.9
87.7
55.4
73.1
83.8
57.2
67.8
86.8%
35.1
54.3%
80.8%
16.8
51.1%
69.1%
54.3
61.6%
88.0%
33.8
70.1%
84.4%
34.8
61.5%
First
82.0%
29.2
47.8%
87.8%
37.6
59.4%
70.2%
66.2
67.4%
88.2%
45.2
71.7%
85.3%
40.1
61.1%
First
80.6%
55.0
62.4%
76.1%
75.9
76.0%
87.7%
73.4
75.8%
88.5%
62.6
75.6%
84.7%
62.6
70.7%
48
90.1
37.7
61.0
83.1
10.2
54.4
68.2
59.6
65.2
84.8
36.1
70.0
83.4
35.5
64.6
Third
83.4
30.2
50.2
79.7
31.7
57.5
93.0
59.7
71.5
89.7
41.7
72.3
86.8
38.1
62.7
Third
75.7
34.7
47.9
76.4
66.3
70.4
70.2
67.1
67.7
91.6
51.7
74.4
84.2
49.0
63.8
87.3
41.3
61.4
81.0
10.4
55.9
83.9
55.9
74.4
82.2
32.1
68.4
83.2
35.7
65.4
Fourth
87.4
36.1
55.2
79.3
22.0
53.6
79.7
61.3
68.8
87.8
35.8
69.8
85.6
37.7
62.8
Fourth
76.5
32.2
47.2
82.4
44.4
60.3
77.9
60.9
64.3
87.0
51.2
72.8
83.1
43.3
61.0
87.5
37.4
58.2
78.7
11.6
50.9
70.3
56.1
64.5
85.4
34.0
69.4
82.9
34.8
62.9
Year
84.3
31.5
50.8
78.7
31.8
55.5
83.1
62.7
69.9
88.9
41.2
71.4
85.8
38.8
62.1
Year
77.3
42.8
53.7
78.5
64.8
69.9
82.7
69.7
72.2
88.7
55.6
74.0
83.9
53.5
65.9
AVERAGE DAY RATES:
Fiscal Year 2012
Americas fleet:
New vessels
Traditional vessels
Total
Asia/Pacific fleet:
New vessels
Traditional vessels
Total
Middle East/North Africa fleet:
New vessels
Traditional vessels
Total
Sub-Saharan Africa/Europe fleet:
New vessels
Traditional vessels
Total
Worldwide fleet:
New vessels
Traditional vessels
Total
Fiscal Year 2011
Americas fleet:
New vessels
Traditional vessels
Total
Asia/Pacific fleet:
New vessels
Traditional vessels
Total
Middle East/North Africa fleet:
New vessels
Traditional vessels
Total
Sub-Saharan Africa/Europe fleet:
New vessels
Traditional vessels
Total
Worldwide fleet:
New vessels
Traditional vessels
Total
Fiscal Year 2010
Americas fleet:
New vessels
Traditional vessels
Total
Asia/Pacific fleet:
New vessels
Traditional vessels
Total
Middle East/North Africa fleet:
New vessels
Traditional vessels
Total
Sub-Saharan Africa/Europe fleet:
New vessels
Traditional vessels
Total
Worldwide fleet:
New vessels
Traditional vessels
Total
First
Second
Third
Fourth
Year
19,469
8,650
15,466
15,028
3,953
14,098
13,562
6,759
10,716
12,134
8,313
11,518
14,291
7,970
12,771
Second
20,073
10,246
16,268
20,235
6,361
15,623
10,983
6,591
8,438
11,164
7,268
10,324
14,463
7,964
12,366
Second
21,736
9,064
14,483
19,815
7,332
11,940
17,733
7,291
9,548
13,340
9,380
11,975
16,429
8,518
12,426
18,863
8,655
15,373
17,395
3,749
16,389
12,337
7,174
10,705
12,921
8,226
12,181
14,835
8,021
13,359
Third
20,078
9,757
16,190
18,880
5,769
15,529
11,028
6,442
8,551
11,022
7,274
10,238
14,317
7,712
12,337
Third
22,095
8,442
15,372
21,494
7,176
13,368
17,647
7,043
9,277
12,331
8,096
11,065
16,027
7,815
12,380
19,096
8,851
15,197
20,247
3,642
19,148
11,657
7,377
10,558
14,098
8,353
13,353
15,658
8,226
14,140
Fourth
18,400
10,115
15,003
18,332
5,195
15,913
12,325
6,414
9,216
11,077
7,537
10,450
13,851
8,047
12,194
Fourth
20,928
8,914
15,524
19,313
6,725
13,902
16,636
6,293
8,798
12,467
7,738
11,146
15,705
7,678
12,531
19,069
8,956
15,283
17,494
3,968
16,221
12,398
6,815
10,417
12,774
8,208
12,080
14,741
8,045
13,197
Year
19,727
10,139
15,965
19,176
6,023
15,454
11,812
6,580
8,772
11,186
7,339
10,374
14,381
7,939
12,352
Year
21,233
8,966
14,543
20,276
7,302
12,749
17,808
7,231
9,495
12,952
8,845
11,578
16,165
8,332
12,399
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
18,849
9,587
15,094
16,716
4,232
14,801
12,496
6,259
9,726
11,907
7,970
11,278
14,091
7,987
12,496
First
20,247
10,416
16,352
19,503
6,320
14,785
13,526
6,835
8,892
11,506
7,319
10,491
14,943
8,029
12,511
First
20,243
9,204
13,343
20,624
7,701
11,924
19,173
8,006
10,165
13,797
9,632
12,090
16,554
8,910
12,282
49
First
39
28
67
28
4
32
24
16
40
103
24
127
194
72
266
First
AVERAGE VESSEL COUNT (EXCLUDING STACKED VESSELS):
Fiscal Year 2012
Americas fleet:
New vessels
Traditional vessels
Total
Asia/Pacific fleet:
New vessels
Traditional vessels
Total
Middle East/North Africa fleet:
New vessels
Traditional vessels
Total
Sub-Saharan Africa/Europe fleet:
New vessels
Traditional vessels
Total
Worldwide fleet:
New vessels
Traditional vessels
Total
Fiscal Year 2011
Americas fleet:
New vessels
Traditional vessels
Total
Asia/Pacific fleet:
New vessels
Traditional vessels
Total
Middle East/North Africa fleet:
New vessels
Traditional vessels
Total
Sub-Saharan Africa/Europe fleet:
New vessels
Traditional vessels
Total
Worldwide fleet:
New vessels
Traditional vessels
Total
Fiscal Year 2010
Americas fleet:
New vessels
Traditional vessels
Total
Asia/Pacific fleet:
New vessels
Traditional vessels
Total
Middle East/North Africa fleet:
New vessels
Traditional vessels
Total
Sub-Saharan Africa/Europe fleet:
New vessels
Traditional vessels
Total
Worldwide fleet:
New vessels
Traditional vessels
Total
94
36
130
170
119
289
First
38
72
110
16
30
46
7
31
38
79
55
134
140
188
328
42
42
84
23
18
41
11
23
34
Second
Third
Fourth
Year
41
27
68
29
4
33
25
13
38
103
20
123
198
64
262
Second
43
38
81
28
15
43
14
23
37
98
32
130
183
108
291
Second
37
59
96
18
30
48
6
30
36
85
48
133
146
167
313
42
24
66
30
2
32
27
9
36
106
20
126
205
55
260
Third
43
33
76
32
9
41
15
20
35
99
29
128
189
91
280
Third
37
55
92
21
27
48
8
28
36
87
44
131
153
154
307
41
24
65
32
1
33
27
9
36
113
18
131
213
52
265
Fourth
39
31
70
30
6
36
18
20
38
103
27
130
190
84
274
Fourth
40
50
90
23
21
44
7
25
32
91
41
132
161
137
298
41
25
66
30
3
33
25
12
37
106
21
127
202
61
263
Year
42
36
78
28
12
40
14
22
36
98
31
129
182
101
283
Year
38
59
97
19
28
47
7
28
35
86
47
133
150
162
312
50
Vessel Count, Dispositions, Acquisitions and Construction Programs
The average age of the company's 330 owned or chartered vessels (excluding joint-venture vessels and
vessels withdrawn from service) in its fleet at March 31, 2012 is approximately 14.0 years. The average age of
215 newer vessels in the fleet (defined as those that have been acquired or constructed since calendar year
2000 as part of the company’s new build and acquisition program as discussed below) is 5.7 years. The
remaining 115 vessels have an average age of 29.6 years. The following table compares the average number
of vessels by class and geographic distribution during the fiscal years ended March 31 and the actual
March 31, 2012 vessel count:
Americas fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
Less stacked vessels
Active vessels
Asia/Pacific fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
Less stacked vessels
Active vessels
Middle East/North Africa fleet:
Deepwater vessels
Towing-supply/supply
Offshore tugs
Total
Less stacked vessels
Active vessels
Sub-Saharan Africa/Europe fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
Less stacked vessels
Active vessels
ACTIVE OWNED OR CHARTERED VESSELS
Stacked vessels
TOTAL OWNED OR CHARTERED VESSELS
Vessels withdrawn from service
Joint-venture and other
Total
Actual Vessel
Count at
March 31,
2012
Average Number
of Vessels During
Year Ended March 31,
2011
2012
18
50
14
2
84
21
63
10
37
1
1
49
16
33
7
29
6
42
7
35
37
69
37
12
155
23
132
263
67
330
2
10
342
21
57
16
5
99
33
66
11
38
1
1
51
18
33
8
31
6
45
8
37
30
74
37
13
154
27
127
263
86
349
3
10
362
24
70
23
6
123
45
78
12
42
1
1
56
16
40
5
30
6
41
5
36
22
82
37
14
155
26
129
283
92
375
5
10
390
2010
21
81
29
7
138
41
97
7
43
2
---
52
5
47
5
26
6
37
2
35
17
82
43
13
155
22
133
312
70
382
8
10
400
Owned or chartered vessels include vessels that were stacked by the company. The company considers a
vessel to be stacked if the vessel crew is disembarked and limited maintenance is being performed on the
vessel. The company reduces operating costs by stacking vessels when management does not foresee
opportunities to profitably or strategically operate the vessels in the near future. Vessels are stacked when
market conditions warrant and they are no longer considered stacked when they are returned to active service,
sold or otherwise disposed. When economically practical marketing opportunities arise, the stacked vessels
can be returned to service by performing any necessary maintenance on the vessel and either rehiring or
returning fleet personnel to operate the vessel. Although not currently fulfilling charters, stacked vessels are
considered to be in service and are included in the calculation of the company’s utilization statistics. The
company had 67, 90 and 83 stacked vessels at March 31, 2012, 2011 and 2010, respectively. Most of the
vessels stacked at March 31, 2012 are being marketed for sale and are not expected to return to the active
fleet, primarily due to their age.
51
Vessels withdrawn from service are not included in the company’s utilization statistics.
Vessel Dispositions
The company seeks opportunities to sell and/or scrap its older vessels when market conditions warrant and
opportunities arise. The majority of the company’s vessels are sold to buyers who do not compete with the
company in the offshore energy industry. The number of vessels disposed by vessel type and segment during
the fiscal years ended March 31, are as follows:
Number of vessels disposed by vessel type:
Anchor handling towing supply
Platform supply vessel
Crewboat
Offshore tugs
Utility/ other vessels
Total
Number of vessels disposed by segment:
Americas
Asia/Pacific
Middle East/North Africa
Sub-Saharan Africa/Europe
Vessels withdrawn from service
Total
2012
2011
2010 (A)
40
11
4
5
--
60
27
7
12
12
2
60
25
6
12
1
2
46
26
7
2
7
4
46
25
21
10
7
7
70
30
6
4
26
4
70
(A)
Included in fiscal 2010 vessel dispositions are six platform supply vessels that were sold and leased back by subsidiaries of the
company during fiscal 2010 as disclosed in the Note (10) of Notes to Consolidated Financial Statements included in Item 8 of this
report. Also included in the above table, are 15 vessels that were expropriated by the Venezuelan government in fiscal 2010 as
disclosed in Note (11) of Notes to Consolidated Financial Statements. Of the 15 expropriated vessels, one was an anchor handling
towing supply vessel, three were platform supply vessels, one was a crewboat, five were offshore tugs, three were utility vessels, and
two were other type vessels.
Vessel Deliveries and Acquisitions
The table below summarizes the number of vessels added to the company’s fleet during the fiscal years ended
March 31 by vessel class and vessel type:
Vessel class and type
Deepwater vessels:
Anchor handling towing supply
Platform supply vessels
Towing-supply/supply vessels:
Anchor handling towing supply
Platform supply vessels
Crewboats and offshore tugs:
Crewboats
Offshore tugs
Total number of vessels added to the fleet
2012
Number of vessels added
2011
2010
--
9
14
1
--
--
24
1
6
21
---
1
---
29
4
11
8
--
1
4
28
Fiscal 2012. The company took delivery of 13 newly-built vessels and acquired 11 vessels from third parties.
Six of the newly-built vessels are towing supply/supply class, anchor handling towing supply vessels and the
other seven are deepwater class platform supply vessels. The six anchor handling towing supply vessels were
constructed at two different international shipyards for $94.2 million and have between 5,150 and 8,200 brake
horse power (BHP). One 266-foot deepwater, platform supply vessel was constructed at the company’s own
shipyard, Quality Shipyard, L.L.C., for a cost of $36.1 million. The other six deepwater, platform supply vessels
measure 286-feet and were constructed at the same international shipyard for $172.0 million. The company
also acquired a 246-foot and a 250-foot deepwater, platform supply vessels for a total aggregate cost of $41.6
million, one 197-foot towing supply/supply class, platform supply vessel for a cost of $11.7 million, and eight
5,150 BHP towing supply/supply class, anchor handling towing supply vessels for a total aggregate total cost of
$96.7 million.
Fiscal 2011. The company took delivery of seven newly-built vessels and acquired 22 vessels from third
parties. Of the seven newly-built vessels added to the fleet, three were anchor handling towing supply vessels,
52
three were platform supply vessels and one is a fast, crew/supply boat. The anchor handling towing supply
vessels were constructed at two different international shipyards for a total aggregate cost of $62.1 million and
varied in size from 5,150 to 13,570 brake horsepower (BHP). The three deepwater, platform supply vessels
(one 230-foot and two 240-feet) were constructed for a total aggregate cost of $57.9 million and were built by
two different international shipyards. The crewboat was constructed at an international shipyard for a total cost
of $9.4 million and is a 175-foot fast, crew/supply boat. Of the 22 acquired vessels added to the fleet during
fiscal 2011, 19 were anchor handling towing supply vessels (twelve 5,150 BHP, two 8,000 BHP and five
9,500 BHP) and three were deepwater, platform supply vessels (one 230-foot, one 240-foot and one 250-foot).
The company acquired the 22 vessels for a total aggregate cost of $365.3 million.
Fiscal 2010. The company took delivery of 23 newly-built vessels and acquired five vessels from third parties.
Nine of the 23 newly-built vessels were anchor handing towing supply vessels that were constructed at four
different international shipyards for a total aggregate cost of $182.8 million, and the vessels varied in size from
5,000 to 13,750 BHP. Eleven of the newly-built vessels are deepwater class platform supply vessels, of which
three are 230-foot long, five are 240-foot long, two are 266-foot long and one is 311-foot long in size. Nine of
the 11 platform supply vessels were constructed at four different international shipyards for a total aggregate
cost of $208.5 million. The two 266-foot deepwater, platform supply vessels were constructed at the company’s
own shipyard, Quality Shipyards, L.L.C., for a total aggregate cost of $60.9 million. The newly-built crewboat
was constructed at an international shipyard for a total approximate cost of $1.3 million. The two newly-built
offshore tugs were constructed at an international shipyard for a total aggregate cost of $29.3 million. The
company also acquired three anchor handling towing supply vessels for a total cost of $42.6 million and two
offshore tugs for a total cost of $12.8 million during fiscal 2010.
Vessel Construction and Acquisition Expenditures at March 31, 2012
At March 31, 2012, the company had two 8,200 BHP anchor handling towing supply vessels under construction
at an international shipyard, for a total expected cost of $47.5 million. The first vessel was delivered in early
May 2012 and the second vessel is scheduled to be delivered in June 2012. As of March 31, 2012, the
company had invested $37.8 million in these two vessels.
The company is also committed to the construction of one 261-foot, four 275-foot, six 286-foot and two 300-foot
deepwater platform supply vessels and two 215-foot towing supply/supply class platform supply vessels for a
total estimated cost of $488.4 million. The company’s shipyard, Quality Shipyards, L.L.C., is constructing the
261-foot deepwater class vessel. One international shipyard is constructing the two 215-foot vessels. A different
international shipyard is constructing the four 275-foot deepwater vessels, and a third international shipyard is
constructing the six 286-foot deepwater vessels. One U.S. shipyard is constructing the two 300-foot deepwater
platform supply vessels. The two 215-foot towing supply/supply class platform supply vessels are scheduled for
delivery in August and October of 2013. The 261-foot deepwater platform supply vessel has an expected
delivery in October 2013. The four 275-foot deepwater class vessels are expected to be delivered beginning in
January 2014, with final delivery of the fourth vessel in May 2014. Delivery on the six 286-foot deepwater class
vessels began in April 2012 with final delivery of the last 286-foot vessel scheduled for December 2012. The
two 300-foot deepwater class vessels are scheduled for delivery in June 2013 and December 2013. As of
March 31, 2012, $195.7 million was invested in these 15 vessels.
The company is also committed to the construction of one 175-foot, fast supply boat and four water jet
crewboats for a cost of approximately $22.4 million. Two separate international shipyards are constructing
these vessels. The company is experiencing a substantial delay with the fast supply boat, which is under
construction in Brazil and was originally scheduled to be delivered in September of 2009. On April 5, 2011,
pursuant to the vessel construction contract, the company sent the subject shipyard a letter initiating arbitration
in order to resolve disputes of such matters as the shipyard’s failure to achieve payment milestones, its failure
to follow the construction schedule, and its failure to timely deliver the vessel. The company continues to
pursue arbitration of these issues. The four water jet crewboats are expected to be delivered in February, April
and June of 2013. As of March 31, 2012, the company invested $11.0 million for the construction of these
vessels.
At March 31, 2012, the company had agreed to purchase three platform supply vessels. The aggregate
approximate purchase price for these three vessels is $58.4 million. The company took possession of one of
the platform supply vessels in April 2012. This vessel has 3,000 deadweight tons of cargo capacity and was
53
purchased for a total cost of $19.8 million. The company plans to take possession of the remaining two platform
supply vessels, both of which have 3,500 deadweight tons of cargo capacity, in July 2012 and in September
2012 for a total aggregate cost of $38.6 million. As of March 31, 2012, the company had invested $12.9 million
in these three vessels.
Vessel Commitments Summary at March 31, 2012
The table below summarizes the various vessel commitments, including vessels under construction and vessel
acquisition, by vessel class and type as of March 31, 2012:
Number
of
Vessels
Vessel class and type
In thousands, except number of vessels:
Deepwater vessels:
Platform supply vessels
Towing-supply/supply vessels:
Anchor handling towing supply
Platform supply vessels
Crewboats
Totals
2
2
5
22
13
Non-U.S. Built
U.S. Built
Total
Cost
Invested Remaining
Through
3/31/12
Balance
3/31/12
Number
of
Vessels
Total
Cost
Invested
Through
3/31/12
Remaining
Balance
3/31/12
$ 350,254
146,366
203,888
3
146,811
43,538
103,273
47,584
49,710
22,369
$ 469,917
37,839
18,725
10,969
213,899
9,745
30,985
11,400
256,018
---
---
---
3
---
---
---
146,811
---
---
---
43,538
---
---
---
103,273
The table below summarizes by vessel class and vessel type the number of vessels expected to be delivered
by quarter along with the expected cash outlay (in thousands) of the various vessel commitments as discussed
above:
Quarter Period Ended
Vessel class and type
06/12
09/12
12/12
03/13
06/13
Thereafter
Deepwater vessels:
Anchor handling towing supply
Platform supply vessels
Towing-supply/supply vessels:
Anchor handling towing supply
Platform supply vessels
Crewboats
Totals
(In thousands)
Expected quarterly cash outlay
---
3
2
---
---
5
---
4
---
---
---
4
---
2
---
---
---
2
---
---
---
---
2
2
---
1
---
---
2
3
---
6
---
2
1
9
$
78,900
70,076
54,912
16,344
20,203
118,856 (A)
(A) The $118,856 of ‘Thereafter’ vessel construction obligations is expected to be paid out as follows: $74,997 in the remaining quarters of
fiscal 2014 and $43,859 during fiscal 2015.
The company believes it has sufficient liquidity and financial capacity to support the continued investment in
new vessels, assuming customer demand, acquisition and shipyard economics and other considerations justify
such an investment. The company continues to evaluate its fleet renewal program, whether through new
construction or acquisitions, relative to other investment opportunities and uses of cash, including the current
share repurchase authorization, and in the context of its financial position and conditions in the credit and
capital markets. In recent years, the company has funded vessel additions with available cash, operating cash
flow, revolving credit facility borrowings, a bank term loan, various leasing arrangements, and funds provided by
the sale of senior unsecured notes as disclosed in Note (4) of Notes to Consolidated Financial Statements.
The company has $359.3 million in unfunded capital commitments associated with the 22 vessels currently
under construction and the three vessel purchase commitments at March 31, 2012.
54
General and Administrative Expenses
Consolidated general and administrative expenses and its related percentage of total revenues for the years
ended March 31 consist of the following components:
(In thousands)
Personnel
Office and property
Sales and marketing
Professional services
Other
2012
92,293
23,615
9,407
22,326
8,929
156,570
$
$
9%
2%
1%
2%
1%
15%
2011
80,100
20,757
8,458
17,972
18,167
145,454
%
8%
2%
1%
2%
2%
14%
2010
80,824
19,326
7,553
21,603
20,626
149,932
%
7%
2%
1%
2%
2%
13%
General and administrative expenses were higher by approximately 8%, or $11.1 million, during fiscal 2012 as
compared to fiscal 2011, primarily due to higher personnel costs resulting from pay raises for administrative
personnel; higher accruals for incentive bonuses; an increase in costs associated with foreign assigned
administrative employees (specifically foreign income taxes paid by the company on behalf of expatriate
employees); higher legal fees associated with various legal matters as disclosed in Note (11) of Notes to
Consolidated Financial Statements included in Item 8 of this report and “Other Liquidity Matters” below; and
higher office and property expenses (primarily office rent and information technology costs). In addition, “Other”
general and administrative expenses, during fiscal 2012, were lower than fiscal 2011, because the prior fiscal
year included a $4.4 million settlement with the Department of Justice (DOJ) and a $6.3 million settlement with
the Federal Government of Nigeria (FGN) as discussed below, and as a result of a release of approximately
$1.8 million workers’ compensation reserves because of positive workers’ compensation loss experience.
General and administrative expenses were approximately 3%, or $4.5 million, lower during fiscal 2011 as
compared to fiscal 2010, due to lower personnel costs (resulting from lower bonus expense); lower legal costs
due to the resolution and settlement with the SEC and DOJ regarding the internal investigation matter, and
lower “Other” general and administrative costs, primarily related to the release of approximately $2.6 million of
workers’ compensation reserves because of positive workers’ compensation loss experience. General and
administrative costs during fiscal 2011 also reflect a $4.4 million final settlement with the DOJ regarding the
internal investigation and a $6.3 million settlement with the FGN to resolve the previously disclosed
investigation by the FGN relating to allegations of improper payments to Nigerian government officials (which is
included in “Other” general and administrative costs) as disclosed in Note (11) of Notes to Consolidated
Financial Statements. Included in fiscal 2010 “Other” general and administrative expenses is a $3.6 million
settlement loss related to the July 2009 supplemental retirement plan lump sum distributions as previously
disclosed, and an $11.4 million SEC and DOJ settlement provision regarding the internal investigation matter.
Liquidity, Capital Resources and Other Matters
The company’s current ratio, level of working capital and amount of cash flows from operations for any year are
primarily related to fleet activity, vessel day rates and the timing of collections and disbursements. Vessel
activity levels and vessel day rates are, among other things, dependent upon the supply/demand relationship
for offshore vessels, which tend to follow the level of oil and natural gas exploration and production.
Variations from year-to-year in these items are primarily the result of market conditions.
Availability of Cash
At March 31, 2012, the company had $320.7 million in cash and cash equivalents, of which $72.6 million was
held by foreign subsidiaries. The company currently intends that earnings by foreign subsidiaries will be
indefinitely reinvested in foreign jurisdictions in order to fund strategic initiatives (such as investment, expansion
and acquisitions), fund working capital requirements and repay debt (both third-party and intercompany) of its
foreign subsidiaries in the normal course of business. Moreover, the company does not currently intend to
repatriate earnings of foreign subsidiaries to the United States because cash generated from the company’s
domestic businesses and credit available under its domestic financing facilities, as well as, the repayment of
intercompany liabilities from foreign subsidiaries, are currently sufficient (and are expected to continue to be
sufficient for the foreseeable future) to fund the cash needs of its operations in the United States. However, if, in
the future, cash and cash equivalents held by foreign subsidiaries are needed to fund the company’s operations
in the United States, the repatriation of such amounts to the United States could result in a significant
55
incremental tax liability in the period in which the decision to repatriate occurs. Payment of any incremental tax
liability would reduce the cash available to the company to fund its operations by the amount of taxes paid.
Our objective in financing our business is to maintain adequate financial resources and access to sufficient
levels of liquidity. Cash and cash equivalents, future net cash provided by operating activities and the
company’s revolving credit facilities provide the company, in our opinion, with sufficient liquidity to meet our
liquidity requirements, including required payments on vessel construction currently in progress and payments
required to be made in connection with current vessel purchase commitments.
Indebtedness
Revolving Credit and Term Loan Agreement. Borrowings under the company’s $575 million amended and
restated revolving credit facility (“credit facility”), which includes a $125 million term loan (“term loan”) and a
$450 million revolving line of credit (“revolver”) bear interest at the company’s option at the greater of (i) prime or
the federal funds rate plus 0.50 to 1.25%, or (ii) Eurodollar rates plus margins ranging from 1.50 to 2.25%,
based on the company’s consolidated funded debt to total capitalization ratio. Commitment fees on the unused
portion of the facilities range from 0.15 to 0.35% based on the company’s funded debt to total capitalization
ratio. The facilities provide for a maximum ratio of consolidated debt to consolidated total capitalization of 55%
and a minimum consolidated interest coverage ratio (essentially consolidated earnings before interest, taxes,
depreciation and amortization, or EBITDA, for the four prior fiscal quarters to consolidated interest charges for
such period) of 3.0. All other terms, including the financial and negative covenants, are customary for facilities of
its type and consistent with the prior agreement in all material respects. The company’s credit facility matures in
January 2016.
In July 2011, the credit facility was amended to allow 365 days (originally 180 days) from the closing date
(“delayed draw period”) to make multiple draws under the term loan. In January 2012, the company elected to
borrow the entire $125 million available under the term loan facility and used the proceeds to fund working
capital and for general corporate purposes. Principal repayments on the term loan borrowings are payable in
quarterly installments beginning in the quarter ending September 30, 2013 in amounts equal to 1.25% of the
total outstanding borrowings as of July 26, 2013.
The company has $125 million in term loan borrowings outstanding at March 31, 2012, and the entire
$450 million of the revolver was available, with no outstanding borrowings at March 31, 2012. There were no
outstanding borrowings at March 31, 2011 under any of the credit facilities.
Senior Debt Notes
August 2011 Senior Notes
On August 15, 2011, the company issued $165 million of senior unsecured notes to a group of institutional
investors. A summary of these notes outstanding at March 31, is as follows:
(In thousands, except weighted average data)
Aggregate debt outstanding
Weighted average remaining life in years
Weighted average coupon rate on notes outstanding
Fair value of debt outstanding
$
2012
165,000
8.6
4.42%
166,916
The multiple series of notes were originally issued with maturities ranging from approximately eight to 10 years.
The notes may be retired before their respective scheduled maturity dates subject only to a customary make-
whole provision. The terms of the notes require that the company maintain a minimum ratio of debt to
consolidated total capitalization that does not exceed 55%.
56
September 2010 Senior Notes
On October 15, 2010, the company completed the sale of $310 million of senior unsecured notes, and the sale
of an additional $115 million of the notes was completed on December 30, 2010. A summary of the aggregate
amount of these notes outstanding at March 31, is as follows:
(In thousands, except weighted average data)
Aggregate debt outstanding
Weighted average remaining life in years
Weighted average coupon rate on notes outstanding
Fair value of debt outstanding
$
2012
425,000
7.6
4.25%
430,339
2011
425,000
8.6
4.25%
404,352
The multiple series of these notes were originally issued with maturities ranging from five to 12 years. The
notes may be retired before their respective scheduled maturity dates subject only to a customary make-whole
provision. The terms of the notes require that the company maintain a minimum ratio of debt to consolidated
total capitalization that does not exceed 55%.
Included in accumulated other comprehensive income at March 31, 2012 and 2011, is an after-tax loss of
$3.3 million ($5.1 million pre-tax), and $3.8 million ($5.8 million pre-tax), respectively, relating to the purchase of
interest rate hedges, which are cash flow hedges, in July 2010 in connection with the September 2010 senior
notes offering. The interest rate hedges settled in August 2010 concurrent with the pricing of the senior
unsecured notes. The hedges met the effectiveness criteria and their acquisition costs are being amortized
over the term of the individual notes matching the term of the hedges to interest expense.
July 2003 Senior Notes
In July 2003, the company completed the sale of $300 million of senior unsecured notes. A summary of the
aggregate amount of remaining senior unsecured notes that were issued in July 2003 and outstanding at
March 31, are as follows:
(In thousands, except weighted average data)
Aggregate debt outstanding
Weighted average remaining life in years
Weighted average coupon rate on notes outstanding
Fair value of debt outstanding
$
2012
235,000
1.4
4.43%
240,585
2011
275,000
2.1
4.39%
285,478
The multiple series of notes were originally issued with maturities ranging from seven to 12 years. These notes
can be retired in whole or in part prior to maturity for a redemption price equal to the principal amount of the
notes redeemed plus a customary make-whole premium. The terms of the notes provide for a maximum ratio of
consolidated debt to total capitalization of 55%.
Notes totaling $40 million matured in July 2011 but were not classified as current maturities of long-term debt
because the company had the ability to fund this maturity with its credit facility. Notes totaling $60 million will
mature in July 2012 but are not classified as current maturities of long-term debt because the company has the
ability, if necessary, to fund this maturity with its credit facility.
For additional disclosure regarding the company’s debt, refer to Note (4) of Notes to Consolidated Financial
Statements included in Item 8 of this report.
Interest and Debt Costs
The company capitalizes a portion of its interest costs incurred on borrowed funds used to construct vessels.
Interest and debt costs incurred, net of interest capitalized, for the years ended March 31, are as follows:
(In thousands)
Interest and debt costs incurred, net of interest capitalized
Interest costs capitalized
Total interest and debt costs
2012
22,308
14,743
37,051
$
$
2011
10,769
14,878
25,647
2010
1,679
15,632
17,311
57
Total interest and debt costs incurred during fiscal 2012 were higher than fiscal 2011 due to an increase in
interest expense related to $125 million of term loan borrowing in January 2012, the issuance of $165 million
senior notes during the quarter ended September 30, 2011, and higher commitment fees on the unused portion
of the company’s credit facilities. Total interest and debt costs incurred during fiscal 2011 were higher than
fiscal 2010 due to higher commitment fees on the unused portion of the company’s $575 million new facilities
and higher commitment fees on the unused portion of the company’s previous facility which increased from
$300 million to $450 million in July 2009.
Share Repurchases
On May 17, 2012, the company’s Board of Directors authorized the company to spend up to $200.0 million to
repurchase shares of its common stock in open-market or privately-negotiated transactions. The effective date
of this new authorization is July 1, 2012 through June 30, 2013. The company will use its available cash and,
when considered advantageous, borrowings under its revolving credit facility or other borrowings, to fund any
share repurchases.
In May 2011, the company’s Board of Directors replaced its then existing July 2009 share repurchase program
with a new $200.0 million repurchase program that is in effect through June 30, 2012. The Board of Directors
authorized the company to repurchase shares of its common stock in open-market or privately-negotiated
transactions. The company uses its available cash and, when considered advantageous, borrowings under its
revolving credit facility, or other borrowings, to fund any share repurchases. The company will evaluate share
repurchase opportunities relative to other investment opportunities and in the context of current conditions in
the credit and capital markets. At March 31, 2012, $165.0 million authorization remains available to repurchase
shares under the May 2011 share repurchase program.
The company’s Board of Directors had previously authorized the company in July 2009 to repurchase up to
$200.0 million in shares of its common stock in open-market or privately-negotiated transactions. The Board of
Directors’ authorization for this repurchase program was replaced in May 2011 when the Board of Directors
extended the program.
The value of common stock repurchased, along with number of shares repurchased, and average price paid
per share for the years ended March 31, are as follows:
(In thousands, except share and per share data)
Value of common stock repurchased
Shares of common stock repurchased
Average price paid per common share
2012
35,015
739,231
47.37
$
$
2011
19,998
486,800
41.06
2010
---
---
---
During the period April 1, 2012 through May 15, 2012, pursuant to the company’s stock repurchase plan
discussed in Note (8) of Notes to Consolidated Financial Statements, the company repurchased 435,300
shares of common stock for an aggregated price of $21.4 million, or an average price of $49.28 per share.
Dividends
The declaration of dividends is at the discretion of the company’s Board of Directors. The Board of Directors
declared the following dividends for the years ended March 31:
(In thousands, except per share data)
Dividends declared
Dividend per share
Operating Activities
$
2012
51,370
1.00
2011
51,507
1.00
2010
51,735
1.00
Net cash provided by operating activities for any period will fluctuate according to the level of business activity
for the applicable period.
58
Net cash provided by operating activities for the years ended March 31, is as follows:
(In thousands)
2012
Change
2011
Change
Net earnings
Depreciation and amortization
Provision (benefit) for deferred income taxes
Reversal of liabilities for uncertain tax positions
Gain on asset dispositions, net
Goodwill impairment
Provision for Venezuelan operations, net
Changes in operating assets and liabilities
Other non-cash items
$
87,411
138,356
(23,754)
(6,021)
(17,657)
30,932
---
4,657
8,497
Net cash provided by operating activities
$
222,421
(18,205)
(2,220)
(16,905)
(6,021)
(4,429)
30,932
---
(17,572)
(7,365)
(41,785)
105,616
140,576
(6,849)
---
(13,228)
---
---
22,229
15,862
264,206
(153,860)
10,392
(7,418)
36,110
14,950
---
(43,720)
68,961
10,530
2010
259,476
130,184
569
(36,110)
(28,178)
---
43,720
(46,732)
5,332
(64,055)
328,261
Cash flows from operations decreased $41.8 million, or 16%, to $222.4 million, during fiscal 2012 as compared
to $264.2 million during fiscal 2011, due primarily to a decrease in net earnings, an increase in the benefit for
deferred income taxes due to an increase in net loss carry forward resulting from a decrease in pretax income,
a reduction in uncertain tax positions (all of which were partially offset by a goodwill impairment expense) and
to changes in net operating assets and liabilities; specifically, an increase in trade and other receivable
balances (because of $49.7 million lower cash collections due to the timing of payments from customers and
$19.7 million higher billings to customers due to an increase in business activity), an $18.3 million increase in
trade payable due to the timing of payments which provided cash, and an $11.1 million increase in accrued
expenses due to the timing of accruals. It should be noted that the company is in a cyclical business and
payments from customers frequently slow during periods of declining activity as some customers will seek to
reduce their investment in working capital by delaying payments to service and equipment providers. Payment
delays can also occur during a start-up phase on new projects and with new customers. In addition, changes in
local regulations can also delay customer payments. However, there are no known material adverse trends in
collections of trade receivables and we believe our allowance for doubtful accounts adequately provides for bad
debts.
Cash flows from operations decreased $64.1 million, or 20%, to $264.2 million, during fiscal 2011 as compared
to $328.3 million during fiscal 2010, due primarily to a decrease in net earnings, which was partially offset by
changes in net operating assets and liabilities; specifically, decreases in trade and other receivable balances
primarily due to $68.9 million lower cash collections due to the timing of payments from customers, $12.5
million devaluation in Venezuelan bolivar fuerte receivables (which occurred in fiscal 2010), and by $127.9
million lower billings to customers due to a decrease in business activity; $16.1 million increase in trade
payables due to the timing of payments which provided cash; and increases in other current liabilities (primarily
tax liabilities) because of tax settlements, net of refunds, with the U.S. federal government ($6.1 million) and the
State of Louisiana ($3.2 million).
Investing Activities
Net cash used in investing activities for the years ended March 31, is as follows:
(In thousands)
Proceeds from sales of assets
Proceeds from sales/leaseback vessels
Proceeds from insurance settlements
on Venezuela seized assets
Additions to properties and equipment
Other
$
2012
42,029
---
---
(357,110)
---
Net cash used in investing activities
$
(315,081)
Change
4,833
---
(8,150)
258,179
---
254,862
2011
37,196
---
8,150
(615,289)
---
Change
(14,539)
(101,755)
8,150
(163,316)
(1)
2010
51,735
101,755
---
(451,973)
1
(569,943)
(271,461)
(298,482)
Investing activities in fiscal 2012 used $315.1 million of cash, which is attributed to $357.1 million of additions to
properties and equipment partially offset by $42.0 million in proceeds from the sales of assets. Additions to
properties and equipment were comprised of approximately $16.5 million in capitalized major repair costs,
$336.1 million for the construction and purchase of offshore marine vessels, and $4.5 million in other properties
and equipment purchases.
Investing activities in fiscal 2011 used $569.9 million of cash, which is attributed to $615.3 million of additions to
properties and equipment partially offset by $37.2 million in proceeds from the sales of assets and $8.2 million
59
in proceeds from insurance settlements. Additions to properties and equipment were comprised of
approximately $17.3 million in capitalized major repair costs, $588.6 million for the construction and purchase of
offshore marine vessels and $9.4 million in other properties and equipment purchases.
Investing activities in fiscal 2010 used $298.5 million of cash, which is attributed to $452.0 million of additions to
properties and equipment, offset by approximately $153.5 million in proceeds received from the sales of assets
(of which $101.8 million resulted from the sale and leaseback of six vessels). Additions to properties and
equipment were comprised of approximately $25.6 million in capitalized major repair costs, $423.4 million for
the construction, purchase and/or modification of offshore marine vessels and $3.0 million of other properties
and equipment purchases.
Financing Activities
Net cash provided by (used in) financing activities for the years ended March 31, is as follows:
(In thousands)
2012
Change
Principal payments on debt
Debt borrowings
Debt issuance costs
Proceeds from exercise of stock options
Cash dividends
Excess tax (liability) benefit on stock options exercised
Stock repurchases
$
(40,000)
290,000
(295)
5,411
(51,261)
(1,190)
(35,015)
Net cash provided by (used in) financing activities
$
167,650
150,000
(300,000)
9,737
(3,284)
217
(2,380)
(15,027)
(160,737)
2011
(190,000)
590,000
(10,032)
8,695
(51,478)
1,190
(19,988)
Change
(190,000)
590,000
(2,320)
6,823
256
1,118
(19,988)
328,387
385,889
2010
---
---
(7,712)
1,872
(51,734)
72
---
(57,502)
Fiscal 2012 financing activities provided $167.6 million of cash, which included $165.0 million of privately
placed, unsecured term debt borrowings, $125.0 of bank term loan borrowings, and $5.4 million of proceeds
from the issuance of common stock resulting from stock option exercises. Proceeds were partially offset by
$40.0 million used to repay debt, $51.3 million used for the quarterly payment of common stock dividends of
$0.25 per common share, $35.0 million used to repurchase the company’s common stock, $1.2 million excess
tax liability on stock option exercises, and $0.3 million of debt issuance costs and other items.
Fiscal 2011 financing activities provided $328.4 million of cash, which included $425.0 million of privately
placed unsecured term debt borrowings, $165.0 million of credit facility borrowings, $8.7 million of proceeds
from the issuance of common stock from stock option exercises and $1.2 million tax benefit on stock options
exercised during the period. Proceeds were partially offset by $190.0 million used to repay debt; $51.5 million
used for the quarterly payment of common stock dividends of $0.25 per common share; $20.0 million used to
repurchase the company’s common stock; and $10.0 million of debt issuance costs incurred in connection with
the issuance of the company’s September 2010 senior notes (inclusive of the $6.2 million cost of an interest
rate swap) and the amendment and extension of the company’s revolving credit facility as discussed above.
Fiscal 2010 financing activities used $57.5 million of cash, which is primarily the result of $51.7 million used for
the payment of common stock dividends of $1.00 per common share and $7.7 million of debt issuance costs
related to the company’s new revolving credit agreement. Uses of cash were slightly offset by $1.8 million of
proceeds from the issuance of common stock resulting from stock option exercises and $0.1 million tax benefit
on stock options exercised during the year.
Other Liquidity Matters
Vessel Construction. The company’s vessel construction program has been designed to replace over time
the company’s older fleet of vessels with fewer, larger and more efficient vessels, while also opportunistically
revamping the size and capabilities of the company’s fleet. The company anticipates using its existing cash
balances, future operating cash flows, existing borrowing capacity and new borrowings or lease arrangements
to fund current and future commitments in connection with the fleet renewal and modernization program. The
company continues to evaluate its fleet renewal program, whether through new construction or acquisitions,
relative to other investment opportunities and uses of cash, including the current share repurchase
authorization, and in the context of current conditions in the credit and capital markets.
60
At March 31, 2012, the company had approximately $320.7 million of cash and cash equivalents. In addition,
there was $450.0 million of credit facilities available at March 31, 2012.
Certain of the company's vessels under construction are committed to work under customer contracts that
provide for the payment of stipulated damages by the company or its subsidiaries in certain cases of late
delivery or substantial reductions in rates for the inability to timely deliver a vessel that satisfies the technical
specifications of the contract. Delays in the expected deliveries of any of these vessels could result in these
penalties being imposed by our customers. In the opinion of management, the amount of ultimate liability, if
any, with respect to these penalties will likely not have a material adverse effect on the company's financial
position, results of operations, or cash flows.
The company generally requires shipyards to provide third party credit support in the event that vessels are not
completed and delivered in accordance with the terms of the shipbuilding contracts. That third party credit
support typically guarantees the return of amounts paid by the company, and generally takes the form of
refundment guarantees or standby letters of credit issued by major financial institutions located in the country of
the shipyard. While the company seeks to minimize its shipyard credit risk by requiring these instruments, the
ultimate return of amounts paid by the company in the event of shipyard default is still subject to the
creditworthiness of the shipyard and the provider of the credit support, as well as the company’s ability to
successfully pursue legal action to compel payment of these instruments. When third party credit support is not
available or cost effective, the company endeavors to limit its credit risk through cash deposits and through
other contract terms with the shipyard and other counterparties.
Currently the company is experiencing substantial delay with one fast, crew/supply boat under construction in
Brazil that was originally scheduled to be delivered in September of 2009. On April 5, 2011, pursuant to the
vessel construction contract, the company sent the subject shipyard a letter initiating arbitration in order to
resolve disputes of such matters as the shipyard’s failure to achieve payment milestones, its failure to follow the
construction schedule, and its failure to timely deliver the vessel. The company believes that the shipyard has
suspended construction of the vessel. The company continues to pursue that arbitration. The company has
third party credit support in the form of insurance coverage for 90% of the progress payments made on this
vessel, or all but approximately $2.4 million of the carrying value of the accumulated costs through
March 31, 2012.
In March 2012, the company terminated four PSV construction projects in Indonesia due to unjustified delays
beyond the agreed delivery dates. The vessels were originally scheduled to deliver between May and
November 2012, but had projected delivery dates ranging from August to December 2013 at the time the
projects were terminated. The company had refundment guarantees in place supporting the progress payments
that were made on these vessels and received the full refund including interest. During November and
December of 2011, the company canceled its purchase agreements with the same shipyard for two anchor
handling towing supply vessels under construction in Indonesia. The cancellations, which were due to
unjustified delays beyond the agreed delivery dates, were authorized under the purchase agreements. No
deposits or progress payments were involved in these two cancellations.
Two vessels under construction at a domestic shipyard have fallen substantially behind schedule. The shipyard
recently notified the company that the shipyard should be entitled to a delay in the delivery date for both vessels
and an increase in the contract price for the first vessel because the company was late in completing and
providing the shipyard with the vessel's detailed design drawings. The detailed design drawings were
developed for the company by a third party designer. While the company believes that other factors also
contributed to the delay, negotiations with the shipyard are ongoing in an attempt to reach an amicable
settlement of these issues. These negotiations are at a preliminary stage.
Merchant Navy Officers Pension Fund. A current subsidiary of the company is a participating employer in an
industry-wide multi-employer retirement fund in the United Kingdom, known as the Merchant Navy Officers
Pension Fund (MNOPF). The company has been informed by the Trustee of the MNOPF that the Fund has a
deficit that will require contributions from the participating employers. The amount and timing of the company's
share of the fund's deficit depends on a number of factors, including updated calculations of the total fund
deficit, theories of contribution imposed as determined by and within the scope of the Trustee's authority, the
number of then participating solvent employers, and the final formula adopted to allocate the required
contribution among such participating employers. The amount payable to MNOPF based on assessments was
61
$6.7 million and $9.6 million at March 31, 2012 and 2011, respectively, all of which has been accrued. The
company recorded $0.3 million and $6.0 million of additional liabilities during fiscal 2012 and 2011, respectively.
No additional liabilities were recorded during fiscal 2010. Payments totaling $3.1 million and $0.9 million were
paid to the fund during fiscal 2012 and 2011, respectively. In the future, the fund's Trustee may claim that the
company owes additional amounts for various reasons, including negative fund investment returns or the
inability of other assessed participating employers to contribute their share of respective allocations, failing
which, the company and other solvent participating employers will be asked for additional contributions. In
October 2010, the Trustee advised the company of its intention to accelerate previously agreed installment
payments for the company and other participating employers in the scheme. The company objected to that
decision and has reached an agreement in principle with the Trustee to pay the total remaining assessments
(aggregating $6.7 million as of March 31, 2012) in installments through October 2014. This agreement in
principle is subject to final confirmation by the company and the Trustee.
Brazilian Customs. In April 2011, two Brazilian subsidiaries of Tidewater were notified by the Customs Office
in Macae, Brazil that they were jointly and severally being assessed fines of 155.0 million Brazilian reais
(approximately $90.3 million as of March 31, 2012). The assessment of these fines is for the alleged failure of
these subsidiaries to obtain import licenses with respect to 17 Tidewater vessels that provided Brazilian
offshore vessel services to Petrobras, the Brazilian national oil company, over a three-year period ending
December 2009. After consultation with its Brazilian tax advisors, Tidewater and its Brazilian subsidiaries
believe that vessels that provide services under contract to the Brazilian offshore oil and gas industry are
deemed, under applicable law and regulations, to be temporarily imported into Brazil, and thus exempt from the
import license requirement. The Macae Customs Office has now, without a change in the underlying applicable
law or regulations, taken the position that the temporary importation exemption is only available to new, and not
used, goods imported into Brazil and therefore it was improper for the company to deem its vessels as being
temporarily imported. The fines have been assessed based on this new interpretation of Brazilian customs law
taken by the Macae Customs Office. After consultation with its Brazilian tax advisors, the company believes that
the assessment is without legal justification and that the Macae Customs Office has misinterpreted applicable
Brazilian law on duties and customs. The company is vigorously contesting these fines (which it has neither
paid nor accrued for) and, based on the advice of its Brazilian counsel, believes that it has a high probability of
success with respect to the overturn of the entire amount of the fines, either at the administrative appeal level
or, if necessary, in Brazilian courts. In December 2011, an administrative appeals board issued a decision that
disallowed 149.0 million Brazilian reais (approximately $86.8 million as of March 31, 2012) of the total fines
sought by the Macae Customs Office. The full decision is subject to further administrative appellate review, and
the company understands that this further full review by a secondary appellate board is ongoing. The company
is contesting the decision with respect to the remaining 6.0 million Brazilian reais (approximately $3.5 million as
of March 31, 2012) in fines. The company believes that the ultimate resolution of this matter will not have a
material effect on the consolidated financial statements.
Potential for Future Brazilian State Tax Assessment. The company is aware that a Brazilian state in which
the company has operations has notified two of the company’s competitors that they are liable for unpaid taxes
(and penalties and interest thereon) for failure to pay state import taxes with respect to vessels that such
competitors operate within the coastal waters of such state pursuant to charter agreements. The import tax
being asserted is equal to a percentage (which could be as high as 16% for vessels entering that state’s waters
prior to December 31, 2010 and 3% thereafter) of the affected vessels’ declared values. The company
understands that the two companies involved are contesting the assessment through administrative
proceedings before the taxing authority.
To date, the company’s two Brazilian subsidiaries, as well as vessels for all other competitors (more than a
hundred competitors), have not been similarly notified by the Brazilian state that it has an import tax liability
related to its vessel activities imported through that state. Although the company has been advised by its
Brazilian tax counsel that substantial defenses would be available if a similar tax claim were asserted against
the company, if an import tax claim were to be asserted, it could be for a substantial amount given that the
company has had substantial and continuing operations within the territory of the state (although the amount
could fluctuate significantly depending on the administrative determination of the taxing authority as to the rate
to apply, the vessels subject to the levy and the time periods covered). In addition, under certain circumstances,
the company might be required to post a bond or other adequate security in the amount of the assessment
(plus any interest and penalties) if it became necessary to challenge the assessment in a Brazilian court. The
62
statute of limitations for the Brazilian state to levy an assessment of the import tax is five years from the date of
a vessel’s entry into Brazil. The company has not yet determined the potential tax assessment, and according
to the Brazilian tax counsel, chances of defeating a possible claim/notification from the State authorities in court
are probable. To obtain legal certainty and predictability for future charter agreements and because the
company was importing two vessels to start new charters in Brazil, the company filed two suits on
August 22, 2011 and April 5, 2012, respectively, against the Brazilian state and judicially deposited the
respective state tax for these newly imported vessels. As of March 31, 2012, no accrual has been recorded for
any liability associated with any potential future assessment for previous periods based on management’s
assessment, after consultation with Brazilian counsel, that a liability for such taxes was not probable.
Shareholder Derivative Suit. In mid-February 2011, an individual claiming to be a Tidewater shareholder filed
a shareholder derivative suit in the U.S. District Court for the Eastern District of Louisiana. The defendants in
the suit are individual directors and certain officers of Tidewater Inc. Tidewater Inc. is also a nominal defendant
in the lawsuit. The suit asserts various causes of action, including breach of fiduciary duty, against the
individual defendants in connection with the facts and circumstances giving rise to the settlements with the DOJ
and SEC and seeks a number of remedies against the individual defendants and the company as a result.
While the company will incur costs in connection with the defense of this law suit, the suit does not seek
monetary damages against the company. The individual defendants and the company have retained legal
counsel. The lawsuit is still in an early stage.
Supplemental Retirement Plan. On April 18, 2012, Dean E. Taylor, President, Chief Executive Officer and
Chairman of the Board announced his retirement as President and Chief Executive Officer of Tidewater Inc.
effective May 31, 2012. Mr. Taylor will continue as Tidewater’s non-executive Chairman of the Board. As a
result of our CEO’s retirement, Mr. Taylor is expected to receive in December 2012 a $12.6 million lump sum
distribution in settlement of his supplemental executive retirement plan obligation. A settlement loss, which is
currently estimated to be $4.4 million, will be recorded at the time of distribution.
The supplemental plan was amended in December 2008 to allow participants the option to elect a lump sum
benefit in lieu of other payment options currently provided by the plan. As a result of the amendment, certain
participants received a lump sum distribution in July 2009 in settlement of the supplemental plan obligation. The
aggregate payment to those participants electing the lump sum distribution in July 2009 was $8.7 million. A
settlement loss of $3.6 million was recorded in general and administrative expenses during the second quarter
of fiscal 2010.
Legal Proceedings. Various legal proceedings and claims are outstanding which arose in the ordinary course
of business. In the opinion of management, the amount of ultimate liability, if any, with respect to these actions,
will not have a material adverse effect on the company's financial position, results of operations, or cash flows.
Information related to various commitments and contingencies, including legal proceedings, is disclosed in
Note (11) of Notes to Consolidated Financial Statements included in Item 8 of this report.
Venezuelan Operations
A full discussion on the company’s Venezuelan operations is disclosed in Note (11) of Notes to Consolidated
Financial Statements included in Item 8 of this report.
Completion of Internal Investigation and Settlements with United States and Nigerian Agencies
A full discussion on the company’s internal investigation on its Nigerian operations is disclosed in Note (11) of
Notes to Consolidated Financial Statements included in Item 8 of this report.
63
Contractual Obligations and Contingent Commitments
Contractual Obligations
The following table summarizes the company’s consolidated contractual obligations as of March 31, 2012 and
the effect such obligations, inclusive of interest costs, are expected to have on the company’s liquidity and cash
flows in future periods.
(In thousands)
Term loan
Term loan interest
Total
2013
$
125,000
---
8,600
2,247
August 2011 senior notes
165,000
---
Payments Due by Fiscal Year
2015
2016
2017
More Than
5 Years
6,250
114,062
2,247
1,859
---
---
---
---
---
---
---
165,000
2014
4,688
2,247
---
August 2011 senior notes interest
60,937
7,301
7,301
7,301
7,301
7,301
24,432
September 2010 senior notes
425,000
---
---
---
42,500
---
382,500
September 2010 senior notes interest
140,838
18,041
18,041
18,042
17,693
16,647
52,374
July 2003 senior notes
235,000
60,000
140,000
---
35,000
July 2003 senior notes interest
Uncertain tax positions (A)
Operating leases
14,528
14,281
10,532
8,692
3,192
5,304
3,685
3,392
2,409
1,613
3,590
995
---
---
538
1,900
1,717
820
250
Bareboat charter leases
45,618
17,626
17,609
8,079
2,304
Vessel purchase obligations
45,496
45,496
---
---
Vessel construction obligations
313,795
174,736
95,200
43,859
---
---
---
---
---
---
---
490
754
---
---
---
Pension and post-retirement obligations
85,577
9,315
17,091
6,718
6,927
7,210
38,316
Total obligations
$ 1,690,202
351,950
311,663
98,694
230,904
33,125
663,866
(A) These amounts represent the liability for unrecognized tax benefits under FIN 48. The estimated income tax liabilities for uncertain
tax positions will be settled as a result of expiring statutes, audit activity, competent authority proceedings related to transfer pricing, or
final decisions in matters that are the subject of litigation in various taxing jurisdictions in which we operate. The timing of any particular
settlement will depend on the length of the tax audit and related appeals process, if any, or an expiration of a statute. If a liability is
settled due to a statute expiring or a favorable audit result, the settlement of the tax liability would not result in a cash payment.
Letters of Credit and Surety Bonds
In the ordinary course of business, the company had other commitments that the company is contractually
obligated to fulfill with cash should the obligations be called. These obligations include standby letters of credit,
surety bonds and performance bonds that guarantee our performance as it relates to our vessel contracts,
insurance, customs and other obligations in various jurisdictions. While these obligations are not normally
called, the obligation could be called by the beneficiaries at any time before the expiration date should the
company breach certain contractual and/or performance or payment obligations. As of March 31, 2012, the
company had $72.5 million of outstanding standby letters of credit, surety bonds and performance bonds.
These obligations are geographically concentrated in Nigeria and Mexico.
Off-Balance Sheet Arrangements
Fiscal 2010 Sale/Leaseback
In June 2009, the company sold five vessels to four unrelated third-party companies, and simultaneously
entered into bareboat charter agreements for the vessels with the purchasers. In July 2009, the company sold
an additional vessel to an unrelated third-party company, and simultaneously entered into a bareboat charter
agreement with that purchaser.
The sale/leaseback transactions resulted in proceeds to the company of approximately $101.8 million and a
deferred gain of $39.6 million. The aggregate carrying value of the six vessels was $62.2 million at the dates of
sale. The leases on the five vessels sold in June 2009 will expire June 30, 2014, and the lease on the vessel
64
sold in July 2009 will expire July 30, 2014. The company is accounting for the transactions as sale/leaseback
transactions with operating lease treatment and expenses lease payments over the five year charter hire
operating lease terms.
Under the sale/leaseback agreements, the company has the right to either re-acquire the six vessels at 75% of
the original sales price or cause the owners to sell the vessels to a third-party under an arrangement where the
company guarantees approximately 84% of the original lease value to the third party purchaser. The company
also has the right to re-acquire the vessels prior to the end of the charter term with penalties of up to
5% assessed if purchased in years one and two of the five year lease. The company will recognize the deferred
gain as income if it does not exercise its option to purchase the six vessels at the end of the operating lease
term. If the company exercises its option to purchase these vessels, the deferred gain will reduce the vessels’
stated cost after exercising the purchase option.
Fiscal 2006 Sale/Leaseback
In March 2006, the company entered into agreements to sell five of its vessels that were under construction at
the time to Banc of America Leasing & Capital LLC (BOAL&C), an unrelated third party, for $76.5 million and
simultaneously entered into bareboat charter agreements with BOAL&C upon the vessels’ delivery to the
market. Construction on these five vessels was completed at various times between March 2006 and
March 2008, at which time the company sold the respective vessels and simultaneously entered into bareboat
charter agreements.
The company accounted for all five transactions as sale/leaseback transactions with operating lease treatment.
Accordingly, the company did not record the assets on its books and the company is expensing periodic lease
payments.
The bareboat charter agreements on the first two vessels expire in calendar year 2014 unless extended. The
company has the option to extend the respective bareboat charter agreements three times, each for a period of
12 months, which would provide the company the opportunity to extend the operating leases through calendar
year 2017. The bareboat charter agreements on the third and fourth vessels expire in 2015 and the company
has the option to extend the bareboat charter agreements three times, each for a period of 12 months, which
would provide the company the opportunity to extend the operating leases through calendar year 2018. The
bareboat charter agreement on the fifth vessel expires in 2016. The company has the option to extend the
bareboat charter agreements three times, each for a period of 12 months, which would provide the company
the opportunity to extend the operating leases through calendar year 2019. At the end of the basic term (or
extended option periods), the company has an option to purchase each of the vessels at its then fair market
value or to redeliver the vessel to its owner. The company may also purchase each of the vessels at their fixed
amortized values, as outlined in the bareboat charter agreements, at the end of the fifth year, and again at the
end of the seventh year, from the commencement dates of the respective charter agreements.
Future Minimum Lease Payments
As of March 31, 2012, the future minimum lease payments for the vessels under the operating lease terms are
as follows:
Fiscal year ending (In thousands)
2013
2014
2015
2016
Thereafter
Total future lease payments
Fiscal 2010
Sale/Leaseback
10,702
10,703
2,836
---
---
24,241
$
$
Fiscal 2006
Sale/Leaseback
6,924
6,906
5,243
2,304
---
21,377
Total
17,626
17,609
8,079
2,304
---
45,618
65
The operating lease expense on these bareboat charter arrangements, which are reflected in vessel operating
costs, for the years ended March 31, are as follows:
(In thousands)
Vessel operating leases
2012
17,967
$
2011
17,964
2010
15,054
For more disclosure on the company’s sale-leaseback arrangement refer to Note (10) of Notes to Consolidated
Financial Statements included in Item 8 of this report.
Application of Critical Accounting Policies and Estimates
The preparation of our consolidated financial statements in accordance with accounting principles generally
accepted in the United States of America requires us to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses and related disclosures and disclosures of any
contingent assets and liabilities at the date of the financial statements. We evaluate the reasonableness of
these estimates and assumptions continually based on a combination of historical experience and other
assumptions and information that comes to its attention that may vary its outlook for the future. Estimates and
assumptions about future events and their effects are subject to uncertainty, and accordingly, these estimates
may change as new events occur, as more experience is acquired, as additional information is obtained and as
the business environment in which we operate changes. As a result, actual results may differ from estimates
under different assumptions.
We suggest that the company’s Nature of Operations and Summary of Significant Accounting Policies, as
described in Note (1) of Notes to Consolidated Financial Statements included in Item 8 of this report, be read in
conjunction with this Management’s Discussion and Analysis of Financial Condition and Results of Operations.
We have defined a critical accounting estimate as one that is important to the portrayal of our financial condition
or results of operations and requires us to make difficult, subjective or complex judgments or estimates about
matters that are uncertain. The company believes the following critical accounting policies that affect our more
significant judgments and estimates used in the preparation of the company’s consolidated financial statements
are described below. There are other items within our consolidated financial statements that require estimation
and judgment but they are not deemed critical as defined above.
Revenue Recognition
Our primary source of revenue is derived from time charter contracts of its vessels on a rate per day of service
basis; therefore, vessel revenues are recognized on a daily basis throughout the contract period. These time
charter contracts are generally either on a term basis (average three months to two years) or on a “spot” basis.
The base rate of hire for a term contract is generally a fixed rate; provided, however, that term contracts at
times include escalation clauses to recover increases in specific costs. A spot contract is a short-term
agreement to provide offshore marine services to a customer for a specific short-term job. Spot contract terms
generally range from one day to three months. Vessel revenues are recognized on a daily basis throughout the
contract period. There are no material differences in the costs structure of the company’s contracts based on
whether the contracts are spot or term, for the operating costs are generally the same without regard to the
length of a contract.
Receivables and Allowance for Doubtful Accounts
In the normal course of business, we extend credit to our customers on a short-term basis. Our principal
customers are major oil and natural gas exploration, field development and production companies. We routinely
review and evaluate our accounts receivable balances for collectability. The determination of the collectability of
amounts due from our customers requires us to use estimates and make judgments regarding future events
and trends, including monitoring our customers’ payment history and current credit worthiness to determine that
collectability is reasonably assured, as well as consideration of the overall business climate in which our
customers operate. Provisions for doubtful accounts are recorded when it becomes evident that our customer
will not make the required payments, which results in a reduction in our receivable balance. We believe that our
allowance for doubtful accounts is adequate to cover potential bad debt losses under current conditions;
however, uncertainties regarding changes in the financial condition of our customers, either adverse or positive,
could impact the amount and timing of any additional provisions for doubtful accounts that may be required.
During fiscal 2010, we recorded a $44.8 million provision to fully reserve accounts receivable payable by two of
66
the company’s customers located in Venezuela. Please refer to Note (11) of Notes to Consolidated Financial
Statements included in Item 8 of this report for a detailed discussion regarding the company’s Venezuelan
operations.
Goodwill
Goodwill represents the cost in excess of fair value of the net assets of companies acquired. The company
tests goodwill for impairment annually at the reporting unit level using carrying amounts as of December 31 or
more frequently if events and circumstances indicate that goodwill might be impaired. The company uses the
two-step method for evaluating goodwill for impairment as prescribed by Financial Accounting Standards Board
(FASB) Accounting Standards Codification (ASC) 350, Intangibles-Goodwill and Other. Step one involves
comparing the estimated fair value of the reporting unit to its carrying amount. The estimated fair value of the
reporting unit is determined by discounting the projected future operating cash flows for the remaining average
useful life of the assets within the reporting units by the company’s estimated weighted average cost of capital.
If the fair value of the reporting unit is greater than its carrying amount, there is no impairment. If the reporting
unit’s carrying amount is greater than the fair value, the second step must be completed to measure the
amount of impairment, if any. Step two involves calculating the implied fair value of goodwill by deducting the
fair value of all tangible and intangible assets, excluding goodwill, of the reporting unit from the fair value of the
reporting unit as determined in step one. The implied fair value of goodwill determined in this step is compared
to the carrying value of goodwill. Impairment is deemed to exist if the implied fair value of the reporting unit
goodwill is less than the respective carrying value of the reporting unit goodwill, and in such case, an
impairment loss would be recognized equal to the difference. There are many assumptions and estimates
underlying the determination of the fair value of each reporting unit, such as, future expected utilization and
average day rates for the vessels, vessel additions and attrition, operating expenses and tax rates. Although
the company believes its assumptions and estimates are reasonable, deviations from the assumptions and
estimates could produce a materially different result.
At March 31, 2012, the company’s goodwill balance represented 7% of total assets and 12% of stockholders’
equity. Interim testing is performed if events occur or circumstances indicate that the carrying amount of
goodwill may be impaired. Examples of events or circumstances that might give rise to interim goodwill
impairment testing include prolonged adverse industry or economic changes; significant business interruption
due to political unrest or terrorism; unanticipated competition that has the potential to dramatically reduce the
company’s earning potential; legal issues; or the loss of key personnel.
Impairment of Long-Lived Assets
The company reviews the vessels in its active fleet for impairment whenever events occur or changes in
circumstances indicate that the carrying amount of an asset group may not be recoverable. In such evaluation,
the estimated future undiscounted cash flows generated by an asset group are compared with the carrying
amount of the asset group to determine if a write-down may be required. With respect to vessels that have not
been stacked, we group together for impairment testing purposes vessels with similar operating and marketing
characteristics. We also subdivide our groupings of assets with similar operating and marketing characteristics
between our older vessels and newer vessels.
The company estimates cash flows based upon historical data adjusted for the company’s best estimate of
expected future market performance, which, in turn, is based on industry trends. If an asset group fails the
undiscounted cash flow test, the company uses the discounted cash flow method to determine the estimated
fair value of each asset group and compares such estimated fair value, considered Level 3, as defined by ASC
360, Impairment or Disposal of Long-lived Assets, to the carrying value of each asset group in order to
determine if impairment exists. If impairment exists, the carrying value of the asset group is reduced to its
estimated fair value.
The primary estimates and assumptions used in reviewing active vessel groups for impairment include
utilization rates, average dayrates, and average daily operating expenses. These estimates are made based on
recent actual trends in utilization, dayrates and operating costs and reflect management’s best estimate of
expected market conditions during the period of future cash flows. These assumptions and estimates have
changed considerably as market conditions have changed and they are reasonably likely to continue to change
as market conditions change in the future. Although the company believes its assumptions and estimates are
67
reasonable, deviations from the assumptions and estimates could produce materially different results.
Management estimates may vary considerably from actual outcomes due to future adverse market conditions
or poor operating results that could result in the inability to recover the current carrying value of an asset group,
thereby possibly requiring an impairment charge in the future. As the company’s fleet continues to age,
management closely monitors the estimates and assumptions used in the impairment analysis in order to
properly identify evolving trends and changes in market conditions that could impact the results of the
impairment evaluation.
In addition to the periodic review of its active long-lived assets for impairment when circumstances warrant, the
company also performs a review of its stacked vessels and vessels withdrawn from service every six months or
whenever changes in circumstances indicate that the carrying amount of a vessel may not be recoverable.
Management estimates each stacked vessel’s fair value by considering items such as the vessel’s age, length
of time stacked, likelihood of a return to active service, actual recent sales of similar vessels, among others. In
certain situations we obtain an estimate of the fair value of the stacked vessel from third-party appraisers or
brokers. The company records an impairment charge when the carrying value of a vessel withdrawn from
service or a stacked vessel exceeds its estimated fair value. The estimates of fair value of stacked vessels are
also subject to significant variability, are sensitive to changes in market conditions, and are reasonably likely to
change in the future. The company has consistently recorded modest gains on the sale of stacked vessels.
Income Taxes
The liability method is used for determining the company’s income tax provisions, under which current and
deferred tax liabilities and assets are recorded in accordance with enacted tax laws and rates. Under this
method, the amounts of deferred tax liabilities and assets at the end of each period are determined using the
tax rate expected to be in effect when taxes are actually paid or recovered. In addition, the company
determines its effective tax rate by estimating its permanent differences resulting from differing treatment of
items for tax and accounting purposes.
As a global company, we are subject to the jurisdiction of taxing authorities in the United States and by the
respective tax agencies in the countries in which we operate internationally, as well as to tax agreements and
treaties among these governments. Our operations in these different jurisdictions are taxed on various bases:
actual income before taxes, deemed profits (which are generally determined using a percentage of revenue
rather than profits) and withholding taxes based on revenue. Determination of taxable income in any tax
jurisdiction requires the interpretation of the related tax laws and regulations and the use of estimates and
assumptions regarding significant future events such as the amount, timing and character of deductions,
permissible revenue recognition methods under the tax law and the sources and character of income and tax
credits. Changes in tax laws, regulations, agreements and treaties, foreign currency exchange restrictions or
our level of operations or profitability in each taxing jurisdiction could have an impact on the amount of income
taxes that we provide during any given year. The company is periodically audited by various taxing authorities
in the United States and by the respective tax agencies in the countries in which it operates internationally. The
tax audits generally include questions regarding the calculation of taxable income. Audit adjustments affecting
permanent differences could have an impact on the company’s effective tax rate.
The carrying value of the company’s net deferred tax assets is based on the company’s present belief that it is
more likely than not that it will be able to generate sufficient future taxable income in certain tax jurisdictions to
utilize such deferred tax assets, based on estimates and assumptions. If these estimates and related
assumptions change in the future, the company may be required to record or adjust valuation allowances
against its deferred tax assets resulting in additional income tax expense in the company’s consolidated
statement of operations. Management evaluates the realizability of the deferred tax assets and assesses the
need for changes to valuation allowances on a quarterly basis. While the company has considered future
taxable income and ongoing prudent and feasible tax planning strategies in assessing the present need for a
valuation allowance, in the event the company were to determine that it would be able to realize its deferred tax
assets in the future in excess of its net recorded amount, an adjustment to the valuation allowance would
increase income in the period such determination was made. Should the company determine that it would not
be able to realize all or part of its net deferred tax asset in the future, an adjustment to the deferred tax asset
would be charged to income in the period such determination was made.
68
Drydocking Costs
The company expenses maintenance and repair costs as incurred during the asset’s original estimated useful
life (its original depreciable life). Major repair costs incurred after the original depreciable life that also have the
effect of extending the useful life of the asset are capitalized and amortized over 30 months. Vessel
modifications that are performed for a specific customer contract are capitalized and amortized over the firm
contract term. Major vessel modifications are capitalized and amortized over the remaining life of the
equipment. The majority of the company’s vessels require a drydocking inspection twice in every five year
period, and the company schedules these drydockings when it is anticipated that the work can be performed.
While the actual length of time between drydockings can vary, we use a 30 month amortization period for the
costs of these drydockings as an average time between the required certifications. The company’s net earnings
can fluctuate quarter to quarter due to the timing of scheduled drydockings.
Accrued Property and Liability Losses
The company self-insures a portion of potential hull damage and personal injury claims that may arise in the
normal course of business. We are exposed to insurance risks related to the company’s reinsurance contracts
with various insurance entities. The reinsurance recoverable amount can vary depending on the size of a loss.
The exact amount of the reinsurance recoverable is not known until all losses are settled. The company
estimates the reinsurance recoverable amount we expect to receive and utilizes third party actuaries to
estimate losses for claims that have occurred but have not been reported or not fully developed. Reinsurance
recoverable balances are monitored regularly for possible reinsurance exposure and we record adequate
provisions for doubtful reinsurance receivables. It is the company’s opinion that its accounts and reinsurance
receivables have no impairment other than that for which provisions have been made.
Pension and Other Postretirement Benefits
The company sponsors a defined benefit pension plan and a supplemental executive retirement plan covering
eligible employees of Tidewater Inc. and participating subsidiaries. The accounting for these plans is subject to
guidance regarding employers' accounting for pensions and employers' accounting for postretirement benefits
other than pensions. Net periodic pension costs and accumulated benefit obligations are determined using a
number of assumptions, of which the discount rates used to measure future obligations, expenses and
expected long-term return on plan assets are most critical. Less critical assumptions, such as, the rate of
compensation increases, retirement ages, mortality rates, health care cost trends, and other assumptions, also
have a significant impact on the amounts reported. The company’s pension costs consists of service costs,
interest costs, expected returns on plan assets, amortization of prior service costs or benefits and, in part, on a
market-related valuation of assets. The company considers a number of factors in developing its pension
assumptions, which are evaluated at least annually, including an evaluation of relevant discount rates,
expected long-term returns on plan assets, plan asset allocations, expected changes in wages and retirement
benefits, analyses of current market conditions and input from actuaries and other consultants.
The company also sponsors a post retirement plan that provides limited health care and life insurance benefits
to qualified retired employees. Costs of the program are based on actuarially determined amounts and are
accrued over the period from the date of hire to the full eligibility date of employees who are expected to qualify
for these benefits. This plan is not funded.
New Accounting Pronouncements
For information regarding the effect of new accounting pronouncements, refer to Note (1) of Notes to
Consolidated Financial Statements included in Item 8 of this report.
Effects of Inflation
Day-to-day operating costs are generally affected by inflation. Because the energy services industry requires
specialized goods and services, general economic inflationary trends may not affect the company’s operating
costs. The major impact on operating costs is the level of offshore exploration, field development and
production spending by energy exploration and production companies. As spending increases, prices of goods
and services used by the energy industry and the energy services industry will increase. Future increases in
vessel day rates may shield the company from the inflationary effects on operating costs.
69
The company’s newer technologically sophisticated anchor handling towing supply vessels and platform supply
vessels generally require a greater number of specially trained fleet personnel than the company’s older,
smaller vessels. Competition for skilled crews will likely intensify, particularly in international markets, as new
build vessels currently under construction enter the global fleet. Concerns regarding shortages in skilled labor
become an increasing concern globally, During calendar year 2011, global wages in the energy industry have
risen approximately 6% per analyst reports. Increases in local wages is another developing trend regarding
wage inflation, especially in South America where local wages have trended higher and are now on par or have
exceeded wages earned by the expatriate employee work force. If competition for personnel intensifies, the
market for experienced crews could exert upward pressure on wages, which would likely increase the
company’s crew costs.
Strong fundamentals in the global energy industry experienced in the past few years have also increased the
activity levels at shipyards worldwide and, until the calendar year 2008-2009 global recession, the price of steel
had increased dramatically due to increased worldwide demand for the metal. The price of steel continues to be
high by historical standards. Although prices eased with the reduced global demand for steel in recent years,
availability of iron ore, the main component of steel, is tighter today than in 2005 when prices for iron ore
increased dramatically. Steel consumption increased during calendar year 2010 and into calendar 2011 but is
expected to wane if the economic recovery loses momentum. If the price of steel declines, the cost of new
vessels will result in lower capital expenditures and depreciation expenses, which taken by themselves would
increase our future operating profits.
Environmental Compliance
During the ordinary course of business, the company’s operations are subject to a wide variety of
environmental laws and regulations that govern the discharge of oil and pollutants into navigable waters.
Violations of these laws may result in civil and criminal penalties, fines, injunction and other sanctions.
Compliance with the existing governmental regulations that have been enacted or adopted regulating the
discharge of materials into the environment, or otherwise relating to the protection of the environment has not
had, nor is expected to have, a material effect on the company. Environmental laws and regulations are subject
to change however, and may impose increasingly strict requirements and, as such, the company cannot
estimate the ultimate cost of complying with such potential changes to environmental laws and regulations.
All vessels over 79 feet in registered length, regardless of flag, that are operating as a means of transportation
within the inland and offshore waters of the U.S. (but not beyond the three nautical mile territorial sea limit)
must comply with the Environmental Protection Agency’s National Pollutant Discharge Elimination System
(NPDES) Vessel General Permit (VGP) for discharges incidental to the normal operation of vessels. For our
vessels, that includes ballast water, bilge water, graywater, cooling water, chain locker effluent, deck wash
down and runoff, cathodic protection, and other such type runoff. The company believes that it is in full
compliance with the VGP.
The company is also involved in various legal proceedings that relate to asbestos and other environmental
matters. In the opinion of management, based on current information, the amount of ultimate liability, if any,
with respect to these proceedings is not expected to have a material adverse effect on the company’s financial
position, results of operations, or cash flows. The company is proactive in establishing policies and operating
procedures for safeguarding the environment against any hazardous materials aboard its vessels and at shore-
based locations. Whenever possible, hazardous materials are maintained or transferred in confined areas in an
attempt to ensure containment if accidents occur. In addition, the company has established operating policies
that are intended to increase awareness of actions that may harm the environment.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk refers to the potential losses arising from changes in interest rates, foreign currency fluctuations and
exchange rates, equity prices and commodity prices including the correlation among these factors and their
volatility. The company is primarily exposed to interest rate risk and foreign currency fluctuations and exchange
risk. The company enters into derivative instruments only to the extent considered necessary to meet its risk
management objectives and does not use derivative contracts for speculative purposes.
70
Interest Rate Risk and Indebtedness
Changes in interest rates may result in changes in the fair market value of the company’s financial instruments,
interest income and interest expense. The company’s financial instruments that are exposed to interest rate risk
are its cash equivalents and long-term borrowings. Due to the short duration and conservative nature of the
cash equivalent investment portfolio, the company does not expect any material loss with respect to its
investments. The book value for cash equivalents is considered to be representative of its fair value.
Revolving Credit and Term Loan Agreement
Please refer to “Liquidity, Capital Resources and Other Matters” section of this report for a discussion on the
company’s revolving credit and term loan agreement and required cash payments for our indebtedness.
Because the term loan outstanding at March 31, 2012 bears interest at fixed rates, interest expense would not
be impacted by changes in market interest rates. The following table discloses how the estimated fair value of
our term loans as of March 31, 2012, would change with a 100 basis-point increase or decrease in market
interest rates.
(In thousands)
Term Loan
Senior Notes
Outstanding
Value
125,000
$
Estimated
Fair Value
129,806
100 Basis
Point Increase
127,545
100 Basis
Point Decrease
132,119
Please refer to the “Liquidity, Capital Resources and Other Matters” section of this report for a discussion on
the company’s outstanding senior notes debt.
Because the senior notes outstanding at March 31, 2012 bear interest at fixed rates, interest expense would
not be impacted by changes in market interest rates. The following table discloses how the estimated fair value
of our respective senior notes, as of March 31, 2012, would change with a 100 basis-point increase or
decrease in market interest rates.
(In thousands)
August 2011
September 2010
July 2003
Total
Foreign Exchange Risk
Outstanding
Value
165,000
425,000
235,000
825,000
$
$
Estimated
Fair Value
166,916
430,339
240,585
837,840
100 Basis
Point Increase
155,695
403,931
237,429
797,055
100 Basis
Point Decrease
179,124
458,913
243,817
881,854
The company’s financial instruments that can be affected by foreign currency fluctuations and exchange risks
consist primarily of cash and cash equivalents, trade receivables and trade payables denominated in currencies
other than the U.S. dollar. The company periodically enters into spot and forward derivative financial
instruments as a hedge against foreign currency denominated assets and liabilities, currency commitments, or
to lock in desired interest rates. Spot derivative financial instruments are short-term in nature and settle within
two business days. The fair value of spot derivatives approximates the carrying value due to the short-term
nature of this instrument, and as a result, no gains or losses are recognized. Forward derivative financial
instruments are generally longer-term in nature but generally do not exceed one year. The accounting for gains
or losses on forward contracts is dependent on the nature of the risk being hedged and the effectiveness of the
hedge.
Derivatives
The company had one foreign exchange spot contract outstanding at March 31, 2012, with a notional value of
$1.0 million. The one spot contract settled by April 2, 2012. The company had eight purchase and one sell
foreign exchange spot contracts outstanding at March 31, 2011, which totaled an aggregate notional value of
$3.6 million. All nine spot contracts settled by April 4, 2011.
71
At March 31, 2012, the company had four British pound forward contracts outstanding totaling $7.0 million,
which is generally intended to hedge the company’s foreign exchange exposure relating to its MNOPF liability as
disclosed in Note (11) of Notes to Consolidated Financial Statements included in Item 8 of this report and
elsewhere in this document. The forward contracts expire at various times through September 2013. The
combined change in fair value of the forward contracts was approximately $0.1 million, all of which was recorded
as a foreign exchange gain during the fiscal year ended March 31, 2012, because the forward contracts did not
qualify as hedge instruments. All changes in fair value of the forward contracts were recorded in earnings.
At March 31, 2011, the company had three British pound forward contracts outstanding totaling $8.2 million,
related to the company’s foreign exchange exposure on its MNOPF liability. The forward contracts have
expiration dates between September 2011 and June 2012. The combined change in fair value of these three
forward contracts at March 31, 2011 was approximately $0.3 million, all of which was recorded as a foreign
exchange gain during the fiscal year ended March 31, 2011, because the forward contracts did not qualify as
hedge instruments. All changes in fair value of the forward contracts were recorded in earnings.
Other
Due to the company’s international operations, the company is exposed to foreign currency exchange rate
fluctuations and exchange rate risks on all charter hire contracts denominated in foreign currencies. For some
of our international contracts, a portion of the revenue and local expenses are incurred in local currencies with
the result that the company is at risk of changes in the exchange rates between the U.S. dollar and foreign
currencies. We generally do not hedge against any foreign currency rate fluctuations associated with foreign
currency contracts that arise in the normal course of business, which exposes us to the risk of exchange rate
losses. To minimize the financial impact of these items the company attempts to contract a significant majority
of its services in U.S. dollars. In addition, the company attempts to minimize its financial impact of these risks by
matching the currency of the company’s operating costs with the currency of the revenue streams when
considered appropriate. The company continually monitors the currency exchange risks associated with all
contracts not denominated in U.S. dollars. Discussions related to the company’s Venezuelan operations are
disclosed in the “Liquidity, Capital Resources and Other Matters” section of this report and in Note (11) of Notes
to Consolidated Financial Statements included in Item 8 of this report.
Devaluation of Venezuelan Bolivar Fuerte in January 2010
The company accounted for its operations in Venezuela using the U.S. dollar as its functional currency. In
January 2010, the Venezuelan government announced a devaluation of the Venezuelan bolivar fuerte which
modified the official fixed rate from 2.15 Venezuelan bolivar fuerte per U.S. dollar to 4.3 bolivar fuertes per
U.S. dollar. In connection with the revaluation of its Venezuelan bolivar fuerte denominated net liability position,
the company recorded an $11.0 million foreign exchange gain in its fiscal 2010 fourth quarter.
For additional disclosure on the company’s currency exchange risk, including a discussion on the company’s
Venezuelan operations, refer to Note (11) of Notes to Consolidated Financial Statements included in Item 8 of
this report. For additional disclosure on the company’s derivative financial instruments refer to Note (12) of
Notes to Consolidated Financial Statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is included in Part IV of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed with the objective of ensuring that all information required to
be disclosed in our reports filed under the Securities Exchange Act of 1934 ("Exchange Act'), such as this
72
report, is recorded, processed, summarized and reported within the time periods specified in the Securities and
Exchange Commission rules and forms. Disclosure controls and procedures include, without limitation, controls
and procedures designed to ensure that information required to be disclosed by us in the reports that we file or
submit under the Exchange Act is accumulated and communicated to our management, including our chief
executive and chief financial officers, as appropriate, to allow timely decisions regarding required disclosure.
However, any control system, no matter how well conceived and followed, can provide only reasonable, and
not absolute, assurance that the objectives of the control system are met.
As of the end of the period covered by this annual report, we have evaluated, under the supervision and with
the participation of the company’s management, including the company’s Chairman of the Board, President and
Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of the
company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the
Exchange Act, as amended). Based on that evaluation, the company’s Chairman of the Board, President and
Chief Executive Officer along with our Chief Financial Officer concluded that our disclosure controls and
procedures are effective in timely alerting them to material information relating to the company (including its
consolidated subsidiaries) required to be disclosed in the reports the company files and submits under the
Exchange Act.
Management’s Annual Report on Internal Control Over Financial Reporting
Management’s assessment of the effectiveness of the company’s internal control over financial reporting is
discussed in “Management’s Report on Internal Control Over Financial Reporting” which is included in
Item 15. “Exhibits, Financial Statement Schedules” to this Annual Report on Form 10-K and appears on page
F-2.
Audit Report of Deloitte & Touche LLP
Our independent registered public accounting firm has issued an audit report on the company’s internal control
over financial reporting. This report is also included in Item 15. “Exhibits, Financial Statement Schedules” to this
Annual Report on Form 10-K and appears on page F-3.
Changes in Internal Control Over Financial Reporting
There was no change in the company’s internal control over financial reporting that occurred during the quarter
ended March 31, 2012 that has materially affected, or is reasonably likely to materially affect, the company’s
internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
73
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information required by this item is incorporated herein by reference to the 2012 Proxy Statement, which will be
filed with the SEC not later than 120 days subsequent to March 31, 2012
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item is incorporated herein by reference to the 2012 Proxy Statement, which will be
filed with the SEC not later than 120 days subsequent to March 31, 2012.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Information required by this item is incorporated herein by reference to the 2012 Proxy Statement, which will be
filed with the SEC not later than 120 days subsequent to March 31, 2012.
Securities Authorized for Issuance under Equity Compensation Plans
The following table provides information as of March 31, 2012 about equity compensation plans of the company
under which shares of common stock of the company are authorized for issuance:
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
(A)
Weighted-average
exercise price of
outstanding options,
warrants and rights
(B)
Plan category
Equity compensation plans
approved by shareholders
Equity compensation plans
not approved by shareholders
1,725,424
---
Balance at March 31, 2012
1,725,424
(2)
$44.93
---
$44.93
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (A))
(C)
886,254
(1)
---
886,254
(1) As of March 31, 2012, all such remaining shares are issuable as stock options or restricted stock or other stock-based awards under
(2)
the company’s 2009 Stock Incentive Plan and the 2006 Stock Incentive Plan.
If the exercise of these outstanding options and issuance of additional common shares had occurred as of March 31, 2012, these
shares would represent 3.3% of the then total outstanding common shares of the company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Information required by this item is incorporated herein by reference to the 2012 Proxy Statement, which will be
filed with the SEC not later than 120 days subsequent to March 31, 2012.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Information required by this item is incorporated herein by reference to the 2012 Proxy Statement, which will be
filed with the SEC not later than 120 days subsequent to March 31, 2012.
74
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)
The following documents are filed as part of this report:
(1) Financial Statements
A list of the consolidated financial statements of the company filed as a part of this report is set forth in Part II,
Item 8 beginning on page F-1 of this report and is incorporated herein by reference.
(2) Financial Statement Schedules
The financial statement schedule included in Part II, Item 8 of this document is filed as part of this report which
begins on page F-1. All other schedules are omitted as the required information is inapplicable or the
information is included in the consolidated financial statements or related notes.
(3) Exhibits
The index below describes each exhibit filed as a part of this report. Exhibits not incorporated by reference to a
prior filing are designated by an asterisk; all exhibits not so designated are incorporated herein by reference to
a prior filing as indicated.
3.1
3.2
10.1
10.2+
10.3+
10.4+
10.5+
Restated Certificate of Incorporation of Tidewater Inc. (filed with the Commission as Exhibit 3(a) to
the company's quarterly report on Form 10-Q for the quarter ended September 30, 1993, File No. 1-
6311).
Tidewater Inc. Amended and Restated Bylaws dated January 14, 2010 (filed with the Commission as
Exhibit 3.2 to the company’s current report on Form 8-K on January 20, 2010, File No. 1-6311).
Third Amended and Restated Credit Agreement dated as of January 27, 2011 (filed with the
Commission as Exhibit 10.1 to the company’s current report on Form 8-K on February 2, 2011, File
No. 1-6311).
Amended and Restated Tidewater Inc. 1997 Stock Incentive Plan dated November 21, 2002 (filed
with the Commission as Exhibit 10(a) to the company's quarterly report on Form 10-Q for the quarter
ended December 31, 2002, File No. 1-6311).
Tidewater Inc. 2001 Stock Incentive Plan dated November 21, 2002 (filed with the Commission as
Exhibit 10.5 to the company’s annual report on Form 10-K for the fiscal year ended March 31, 2005,
File No. 1-6311).
Form of Stock Option and Restricted Stock Agreement for the Grant of Incentive Stock Options and
Non-Qualified Stock Options Under the Tidewater Inc. 2001 Stock Incentive Plan, and the Grant of
Restricted Stock Under the Tidewater Inc. 1997 Stock Incentive Plan (filed with the Commission as
Exhibit 10.4 to the company’s quarterly report on Form 10-Q for the quarter ended December 31,
2004, File No. 1-6311).
Form of Stock Option and Restricted Stock Agreement for the Grant of Incentive Stock Options and
Non-Qualified Stock Options Under the Tidewater Inc. 2001 Stock Incentive Plan and the Grant of
Restricted Stock Under the Tidewater Inc. 1997 Stock Incentive Plan (filed with the Commission as
Exhibit 10.10 to the company’s annual report on Form 10-K for the fiscal year ended March 31, 2005,
File No. 1-6311).
10.6+
Form of Stock Option and Restricted Stock Agreement for the Grant of Incentive Stock Options, Non-
Qualified Stock Options and Restricted Stock Under the Tidewater Inc. 2001 Stock Incentive Plan
75
10.7+
10.8+
10.9+
(filed with the Commission as Exhibit 10.11 to the company’s annual report on Form 10-K for the
fiscal year ended March 31, 2005, File No. 1-6311).
Form of Stock Option and Restricted Stock Agreement for the Grant of Incentive Stock Options and
Non-Qualified Stock Options Under the Tidewater Inc. 2001 Stock Incentive Plan and the Grant of
Restricted Stock Under the Tidewater Inc. Employee Restricted Stock Plan (filed with the
Commission as Exhibit 10.12 to the company’s annual report on Form 10-K for the fiscal year ended
March 31, 2005, File No. 1-6311).
Form of Stock Option and Restricted Stock Agreement for the Grant of Incentive Stock Options, Non-
Qualified Stock Options and Restricted Stock Under the Tidewater Inc. 2001 Stock Incentive Plan
(filed with the Commission as Exhibit 10.14 to the company’s annual report on Form 10-K for the
fiscal year ended March 31, 2006, File No. 1-6311).
Form of Stock Option and Restricted Stock Agreement for the Grant of Incentive Stock Options and
Non-Qualified Stock Options Under the Tidewater Inc. 2001 Stock Incentive Plan and the Grant of
Restricted Stock Under the Tidewater Inc. 1997 Stock Incentive Plan (filed with the Commission as
Exhibit 10.15 to the company’s annual report on Form 10-K for the fiscal year ended March 31, 2006,
File No. 1-6311).
10.10+
2006 Stock Incentive Plan effective July 20, 2006, (filed as Exhibit 99.1 to the company’s current
report on Form 8-K on March 27, 2007, File No. 1-6311).
10.11+ Form of Stock Option and Restricted Stock Agreement for the Grant of Incentive Stock Options, Non-
Qualified Stock Options and Restricted Stock Under the Tidewater Inc. 2006 Stock Incentive Plan
(filed with the Commission as Exhibit 10.20 to the company’s annual report on Form 10-K for the
fiscal year ended March 31, 2008, File No. 1-6311).
10.12+ Amended and Restated Directors Deferred Stock Units Plan effective January 30, 2008 (filed with
the Commission as Exhibit 10.21 to the company’s annual report on Form 10-K for the fiscal year
ended March 31, 2008, File No. 1-6311).
10.13+ Stock Option and Restricted Stock Agreement for the Grant of Incentive Stock Options, Non-
Qualified Stock Options and Restricted Stock Under the Tidewater Inc. 2006 Stock Incentive Plan
between Tidewater Inc. and Quinn P. Fanning dated effective as of July 31, 2008 (filed with the
Commission as Exhibit 10.8 to the company’s quarterly report on Form 10-Q for the quarter ended
September 30, 2008, File No. 1-6311).
10.14+ Form of Stock Option and Restricted Stock Agreement for the Grant of Incentive Stock Options, Non-
Qualified Stock Options and Restricted Stock Under the Tidewater Inc. 2006 Stock Incentive Plan
applicable to 2009 grants (filed with the Commission as Exhibit 10.19 to the company’s annual report
on Form 10-K for the year ended March 31, 2009, File No. 1-6311).
10.15+ Amended and Restated Non-Qualified Pension Plan for Outside Directors of Tidewater Inc. effective
March 31, 2005, (filed with the Commission as Exhibit 10.23 to the company’s annual report on Form
10-K for the fiscal year ended March 31, 2006, File No. 1-6311).
10.16+ Amendment to the Amended and Restated Non-Qualified Pension Plan for Outside Directors of
Tidewater Inc. effective December 13, 2006 (filed with the Commission as Exhibit 10.1 to the
company's quarterly report on Form 10-Q for the quarter ended December 31, 2006, File No. 1-
6311).
10.17+ Restated Non-Qualified Deferred Compensation Plan and Trust Agreement as Restated October 1,
1999 between Tidewater Inc. and Merrill Lynch Trust Company of America (filed with the
Commission as Exhibit 10(e) to the company's quarterly report on Form 10-Q for the quarter ended
December 31, 1999, File No. 1-6311).
76
10.18+ Second Restated Executives Supplemental Retirement Trust as Restated October 1, 1999 between
Tidewater Inc. and Hibernia National Bank (filed with the Commission as Exhibit 10(j) to the
company's quarterly report on Form 10-Q for the quarter ended December 31, 1999, File No. 1-
6311).
10.19+ Tidewater Inc. Company Performance Executive Officer Annual Incentive Plan for Fiscal Years 2010,
2011, and 2012 (filed with the Commission as Exhibit 10.2 to the company's quarterly report on Form
10-Q for the quarter ended September 30, 2009, File No. 1-6311).
10.20+ Tidewater Inc. Individual Performance Executive Officer Annual Incentive Plan for Fiscal Years 2010,
2011, and 2012 (filed with the Commission as Exhibit 10.3 to the company's quarterly report on Form
10-Q for the quarter ended September 30, 2009, File No. 1-6311).
10.21+ Tidewater Inc. Management Annual Incentive Plan for Fiscal Years 2010, 2011 and 2012 (filed with
the Commission as Exhibit 10.3 to the company's quarterly report on Form 10-Q for the quarter
ended September 30, 2009, File No. 1-6311).
10.22+ Clarification of Management Annual Incentive Plan dated March 3, 2010 (filed with the Commission
as Exhibit 10.23 to the company’s annual report on Form 10-K for the fiscal year ended March 31,
2010, File No. 1-6311).
10.23+ Amendment to the Amended and Restated Non-Qualified Pension Plan for Outside Directors of
Tidewater Inc. effective January 30, 2008 (filed with the Commission as Exhibit 10.35 to the
company’s annual report on Form 10-K for the fiscal year ended March 31, 2008, File No. 1-6311).
10.24+ Tidewater Inc. Amended and Restated Supplemental Executive Retirement Plan executed on
December 10, 2008 (filed with the Commission as Exhibit 10.1 to the company's quarterly report on
Form 10-Q for the quarter ended December 31, 2008, File No. 1-6311).
10.25+ Tidewater Inc. Amended and Restated Employees’ Supplemental Savings Plan executed on
December 10, 2008 (filed with the Commission as Exhibit 10.3 to the company's quarterly report on
Form 10-Q for the quarter ended December 31, 2008, File No. 1-6311).
10.26+ Amendment to the Tidewater Inc. Amended and Restated Supplemental Executive Retirement Plan
dated December 10, 2008 (filed with the Commission as Exhibit 10.4 to the company's quarterly
report on Form 10-Q for the quarter ended December 31, 2008, File No. 1-6311).
10.27+ Amendment Number One to the Tidewater Employees’ Supplemental Savings Plan, effective
January 22, 2009 (filed with the Commission as Exhibit 10.43 to the company’s annual report on
Form 10-K for the year ended March 31, 2009, File No. 1-6311).
10.28+ Amendment Number Two to the Tidewater Inc. Supplemental Executive Retirement Plan, effective
January 22, 2009 (filed with the Commission as Exhibit 10.44 to the company’s annual report on
Form 10-K for the year ended March 31, 2009, File No. 1-6311).
10.29+ Summary of Compensation Arrangements with Directors (filed with the Commission as Exhibit 10.45
to the company’s annual report on Form 10-K for the year ended March 31, 2009, File No. 1-6311).
10.30+ Amended and Restated Change of Control Agreement between Tidewater Inc. and Dean Taylor
dated effective as of September 26, 2007 (filed with the Commission as Exhibit 10.1 to the
company's quarterly report on Form 10-Q for the quarter ended September 30, 2008, File No. 1-
6311).
10.31+ Amendment Number One to Amended and Restated Change of Control Agreement between
Tidewater Inc. and Dean Taylor dated effective as of June 1, 2008 (filed with the Commission as
Exhibit 10.2
the quarter ended
September 30, 2008, File No. 1-6311).
the company's quarterly report on Form 10-Q
for
to
77
10.32+ Amended and Restated Change of Control Agreement between Tidewater Inc. and Stephen Dick
dated effective as of June 1, 2008 (filed with the Commission as Exhibit 10.3 to the company's
quarterly report on Form 10-Q for the quarter ended September 30, 2008, File No. 1-6311).
10.33+ Amended and Restated Change of Control Agreement between Tidewater Inc. and Jeffrey Platt
dated effective as of June 1, 2008 (filed with the Commission as Exhibit 10.4 to the company's
quarterly report on Form 10-Q for the quarter ended September 30, 2008, File No. 1-6311).
10.34+ Amended and Restated Change of Control Agreement between Tidewater Inc. and Joseph Bennett
dated effective as of June 1, 2008 (filed with the Commission as Exhibit 10.5 to the company's
quarterly report on Form 10-Q for the quarter ended September 30, 2008, File No. 1-6311).
10.35+ Amended and Restated Change of Control Agreement between Tidewater Inc. and Bruce D.
Lundstrom dated effective as of July 31, 2008 (filed with the Commission as Exhibit 10.6 to the
company's quarterly report on Form 10-Q for the quarter ended September 30, 2008, File No. 1-
6311).
10.36+ Change of Control Agreement between Tidewater Inc. and Quinn P. Fanning dated effective as of
July 31, 2008 (filed with the Commission as Exhibit 10.7 to the company's quarterly report on Form
10-Q for the quarter ended September 30, 2008, File No. 1-6311).
10.37+
2009 Stock Incentive Plan (filed as Exhibit 99.1 to the company’s current report on Form 8-K on July
10, 2009, File No. 1-6311).
10.38+ Form of Indemnification Agreement entered into with each member of the Board of Directors, each
executive officer and the principal accounting officer (filed as Exhibit 99.1 to the company’s current
report on Form 8-K on December 15, 2009, File No. 1-6311).
10.39+ Form of Stock Option and Restricted Stock Agreement for the Grant of Incentive Stock Options, Non-
Qualified Stock Options and Restricted Stock Under the Tidewater Inc. 2009 Stock Incentive Plan
(filed with the Commission as Exhibit 10.41 to the company’s annual report on Form 10-K for the
fiscal year ended March 31, 2010, File No. 1-6311).
10.40+ Form of Restricted Stock Agreement for the grant of Restricted Stock under the Tidewater Inc. 2006
Stock Incentive Plan and Tidewater Inc. 2009 Stock Incentive Plan (filed with the Commission as
Exhibit 10.42 to the company’s annual report on Form 10-K for the fiscal year ended March 31, 2011,
File No. 1-6311).
10.41+ Amendment Number Two to the Tidewater Employees’ Supplemental Savings Plan (filed with the
Commission as Exhibit 10.43 to the company’s annual report on Form 10-K for the fiscal year ended
March 31, 2011, File No. 1-6311).
10.42+ Amendment Number Three to the Tidewater Inc. Supplemental Executive Retirement Plan (filed with
the Commission as Exhibit 10.44 to the company’s annual report on Form 10-K for the fiscal year
ended March 31, 2011, File No. 1-6311).
10.43+ Amendment Number Three to the Tidewater Employees’ Supplemental Savings Plan (filed with the
Commission as Exhibit 10.1 to the company’s quarterly report on Form 10-Q for the quarter ended
December 31, 2010, File No. 1-6311).
10.44+ Amendment Number Four to the Tidewater Inc. Supplemental Executive Retirement Plan (filed with
the Commission as Exhibit 10.2 to the company’s quarterly report on Form 10-Q for the quarter
ended December 31, 2010, File No. 1-6311).
10.45+ Retirement and Consulting Agreement between Tidewater Inc. and Stephen W. Dick (filed as Exhibit
99.1 to the company’s current report on Form 8-K on July 7, 2011, File No. 1-6311).
10.46*+ Form of Restricted Stock Units Agreement under the Tidewater Inc. 2009 Stock Incentive Plan.
78
10.47+ Retirement and Non-Executive Chairman Agreement between Tidewater Inc. and Dean E. Taylor
(filed as Exhibit 10.1 to the company’s current report on Form 8-K on April 20, 2012, File No. 1-
6311).
21*
23*
Subsidiaries of the company.
Consent of Independent Registered Accounting Firm – Deloitte & Touche LLP.
31.1*
Certification of Chief Executive Officer pursuant to Rule 13a-14 or 15d-14 of the Securities Exchange
Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of Chief Financial Officer pursuant to Rule 13a-14 or 15d-14 of the Securities Exchange
Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
101*
Interactive Data File.
* Filed herewith.
+ Indicates a management contract or compensatory plan or arrangement.
79
SIGNATURES OF REGISTRANT
Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on May 21, 2012.
TIDEWATER INC.
(Registrant)
By: /s/ Dean E. Taylor
Dean E. Taylor
Chairman of the Board of Directors, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities indicated on May 21, 2012.
/s/ Dean E. Taylor
Dean E. Taylor, Chairman of the Board of
Directors, President and Chief Executive Officer
/s/ Quinn P. Fanning
Quinn P. Fanning, Executive Vice President and
Chief Financial Officer
/s/ Craig J. Demarest
Craig J. Demarest, Vice President, Principal
Accounting Officer and Controller
/s/ Richard T. du Moulin
Richard T. du Moulin, Director
/s/ Jon C. Madonna
Jon C. Madonna, Director
/s/ Richard A. Pattarozzi
Richard A. Pattarozzi, Director
/s/ J. Wayne Leonard
J. Wayne Leonard, Director
/s/ Jack E. Thompson
Jack E. Thompson, Director
/s/ Nicholas J. Sutton
Nicholas J. Sutton, Director
/s/ M. Jay Allison
M. Jay Allison, Director
/s/ James C. Day
James C. Day, Director
/s/ Cindy B. Taylor
Cindy B. Taylor, Director
/s/ Joseph H. Netherland
Joseph H. Netherland, Director
/s/ Morris E. Foster
Morris E. Foster, Director
80
TIDEWATER INC.
Annual Report on Form 10-K
Items 8, 15(a), and 15(c)
Index to Financial Statements and Schedule
Financial Statements
Management’s Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm – Deloitte & Touche LLP
Report of Independent Registered Public Accounting Firm – Deloitte & Touche LLP
Consolidated Balance Sheets, March 31, 2012 and 2011
Consolidated Statements of Earnings, three years ended March 31, 2012
Consolidated Statements of Stockholders' Equity and Other Comprehensive
Income, three years ended March 31, 2012
Consolidated Statements of Cash Flows, three years ended March 31, 2012
Notes to Consolidated Financial Statements
Financial Statement Schedule
II. Tidewater Inc. and Subsidiaries Valuation and Qualifying Accounts
Page
F-2
F-3
F-4
F-5
F-6
F-7
F-8
F-9
F-51
All other schedules are omitted as the required information is inapplicable or the information is presented in the
financial statements or the related notes.
F-1
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The company’s management is responsible for establishing and maintaining adequate internal control over
financial reporting (as defined in Exchange Act Rules 13a-15(f) under the Securities Exchange Act of 1934).
The company’s internal control system was designed to provide reasonable assurance to the company’s
management and Board of Directors regarding the reliability of financial reporting and the preparation and fair
presentation of published financial statements. All internal control systems, no matter how well designed, have
inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable
assurance with respect to financial statement preparation and presentation.
The company’s management assessed the effectiveness of the company’s internal control over financial
reporting as of March 31, 2012. In making this assessment, management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated
Framework. Based on our assessment we believe that, as of March 31, 2012, the company’s internal control
over financial reporting is effective based on those criteria.
Deloitte & Touche LLP, the company’s registered public accounting firm that audited the company’s financial
statements included in this Annual Report on Form 10-K, has issued an audit report on the effectiveness of the
company’s internal control over financial reporting as of March 31, 2012, which appears on page F-3.
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Tidewater Inc.
New Orleans, Louisiana
We have audited the internal control over financial reporting of Tidewater Inc. and subsidiaries (the “Company”)
as of March 31, 2012, based on criteria established in Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is
responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting, included in the accompanying Management’s Report
on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s
internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was maintained in all material respects. Our
audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk, and performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the
company’s principal executive and principal financial officers, or persons performing similar functions, and
effected by the company’s board of directors, management, and other personnel to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of
collusion or improper management override of controls, material misstatements due to error or fraud may not
be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the
internal control over financial reporting to future periods are subject to the risk that the controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of March 31, 2012, based on the criteria established in Internal Control—Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated financial statements and financial statement schedule as of and for the year
ended March 31, 2012 of the Company and our report dated May 21, 2012 expressed an unqualified opinion
on those financial statements and financial statement schedule.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
May 21, 2012
F-3
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Tidewater Inc.
New Orleans, Louisiana
We have audited the accompanying consolidated balance sheets of Tidewater Inc. and subsidiaries (the
“Company”) as of March 31, 2012 and 2011, and the related consolidated statements of earnings, stockholders’
equity and other comprehensive income, and cash flows for each of the three years in the period ended
March 31, 2012. Our audits also included the financial statement schedule listed in the Index at Item 15(a)(2).
These financial statements and financial statement schedule are the responsibility of the Company’s
management. Our responsibility is to express an opinion on the financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial
position of Tidewater Inc. and subsidiaries as of March 31, 2012 and 2011, and the results of their operations
and their cash flows for each of the three years in the period ended March 31, 2012, in conformity with
accounting principles generally accepted in the United States of America. Also, in our opinion, such financial
statement schedule, when considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth therein.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the Company’s internal control over financial reporting as of March 31, 2012, based on the
criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated May 21, 2012 expressed an unqualified
opinion on the Company’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
May 21, 2012
F-4
TIDEWATER INC.
CONSOLIDATED BALANCE SHEETS
March 31, 2012 and 2011
(In thousands, except share and par value data)
ASSETS
Current assets:
Cash and cash equivalents
Trade and other receivables, less allowance for doubtful accounts
of $49,921 in 2012 and $50,677 in 2011
Marine operating supplies
Other current assets
Total current assets
Investments in, at equity, and advances to unconsolidated companies
Properties and equipment:
Vessels and related equipment
Other properties and equipment
Less accumulated depreciation and amortization
Net properties and equipment
Goodwill
Other assets
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
Accrued expenses
Accrued property and liability losses
Other current liabilities
Total current liabilities
Long-term debt
Deferred income taxes
Accrued property and liability losses
Other liabilities and deferred credits
Commitments and Contingencies (Note 11)
2012
2011
$
320,710
245,720
309,468
53,850
10,072
694,100
46,077
3,952,468
93,107
4,045,575
1,139,810
2,905,765
297,822
117,854
4,061,618
272,467
50,748
10,212
579,147
39,044
3,910,430
85,589
3,996,019
1,294,239
2,701,780
328,754
99,391
3,748,116
$
74,115
134,953
3,636
26,225
238,929
950,000
214,627
3,150
128,555
45,177
120,869
3,846
13,697
183,589
700,000
216,735
5,327
128,521
Stockholders’ equity:
Common stock of $0.10 par value, 125,000,000 shares
authorized, issued 51,250,995 shares at March 31, 2012
and 51,876,038 shares at March 31, 2011
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Total stockholders’ equity
Total liabilities and stockholders' equity
$
See accompanying Notes to Consolidated Financial Statements.
5,125
102,726
2,437,836
(19,330)
2,526,357
4,061,618
5,188
90,204
2,436,736
(18,184)
2,513,944
3,748,116
F-5
TIDEWATER INC.
CONSOLIDATED STATEMENTS OF EARNINGS
Years Ended March 31, 2012, 2011, and 2010
(In thousands, except share and per share data)
Revenues:
Vessel revenues
Other operating revenues
Costs and expenses:
Vessel operating costs
Costs of other operating revenues
Depreciation and amortization
Goodwill impairment
General and administrative
Provision for Venezuelan operations, net
Gain on asset dispositions, net
Operating income
Other income (expenses):
Foreign exchange gain
Equity in net earnings of unconsolidated companies
Interest income and other, net
Interest and other debt costs
Earnings before income taxes
Income tax expense
Net earnings
Basic earnings per common share
Diluted earnings per common share
$
$
$
2012
2011
2010
$
1,060,468
6,539
1,067,007
1,051,213
4,175
1,055,388
1,138,162
30,472
1,168,634
638,137
7,115
138,356
30,932
156,570
---
(17,657)
953,453
113,554
3,309
13,041
3,440
(22,308)
(2,518)
111,036
23,625
87,411
1.71
1.70
638,590
4,660
140,576
---
145,454
---
(13,228)
916,052
139,336
2,278
12,185
5,065
(10,769)
8,759
148,095
42,479
105,616
2.06
2.05
605,259
27,387
130,184
---
149,932
43,720
(28,178)
928,304
240,330
4,094
18,107
6,882
(1,679)
27,404
267,734
8,258
259,476
5.04
5.02
Weighted average common shares outstanding
Dilutive effect of stock options and restricted stock
Adjusted weighted average common shares
51,165,460
264,107
51,429,567
51,221,800
265,283
51,487,083
51,447,077
241,953
51,689,030
Cash dividends declared per common share
$
1.00
1.00
1.00
See accompanying Notes to Consolidated Financial Statements.
F-6
TIDEWATER INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND OTHER COMPREHENSIVE INCOME
Years Ended March 31, 2012, 2011 and 2010
(In thousands)
Balance at March 31, 2009
Net earnings
Other Comprehensive Income:
Currency translation adjustment
Unrealized gain/(losses) on available-for-sale securities
Changes in Supplemental Executive Retirement
Plan minimum liability
Changes in Pension Plan minimum liability
Changes in Other Benefit Plan minimum liability
Total Comprehensive income
Issuance of restricted stock
Stock option activity
Cash dividends declared
Amortization/cancellation of restricted stock restricted stock
Balance at March 31, 2010
Net earnings
Other Comprehensive Income:
Currency translation adjustment
Unrealized gain/(losses) on available-for-sale securities
Realized loss on derivative contract
Amortization of loss on derivative contract
Changes in Supplemental Executive Retirement
Plan minimum liability
Changes in Pension Plan minimum liability
Changes in Other Benefit Plan minimum liability
Total Comprehensive income
Issuance of restricted stock
Stock option activity
Cash dividends declared
Retirement of common stock
Amortization/cancellation of restricted stock
Balance at March 31, 2011
Net earnings
Other Comprehensive Income:
Currency translation adjustment
Unrealized gain/(losses) on available-for-sale securities
Amortization of loss on derivative contract
Changes in Supplemental Executive Retirement
Plan minimum liability
Changes in Pension Plan minimum liability
Changes in Other Benefit Plan minimum liability
Total Comprehensive income
Stock option activity
Cash dividends declared
Retirement of common stock
Amortization of restricted stock units
Amortization/cancellation of restricted stock
Balance at March 31, 2012
Common
stock
$ 5,169
---
Additional
paid-in
capital
64,380
---
Retained
earnings
2,194,842
259,476
Accumulated
other
comprehensive
loss
(19,713)
---
---
---
---
---
---
11
7
---
(4)
$ 5,183
---
---
---
---
---
---
---
33
24
---
(49)
(3)
$ 5,188
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
(11)
5,554
---
3,280
73,203
---
---
---
(51,743)
---
2,402,575
105,616
---
---
---
---
---
---
(33)
15,367
---
---
1,667
90,204
---
---
---
---
---
---
---
---
---
---
---
---
---
---
(51,516)
(19,939)
---
2,436,736
87,411
---
---
---
---
---
14
---
(74)
---
(3)
$ 5,125
8,100
---
---
272
4,150
102,726
---
(51,370)
(34,941)
---
---
2,437,836
767
2,622
414
(1,244)
223
---
---
---
---
(16,931)
---
---
1,335
(3,974)
187
183
(133)
1,149
---
---
---
---
---
(18,184)
---
---
(272)
467
(1,288)
894
(947)
---
---
---
---
---
(19,330)
Total
2,244,678
259,476
767
2,622
414
(1,244)
223
262,258
---
5,561
(51,743)
3,276
2,464,030
105,616
---
1,335
(3,974)
187
183
(133)
1,149
104,363
---
15,391
(51,516)
(19,988)
1,664
2,513,944
87,411
---
(272)
467
(1,288)
894
(947)
86,265
8,114
(51,370)
(35,015)
272
4,147
2,526,357
See accompanying Notes to Consolidated Financial Statements.
F-7
TIDEWATER INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended March 31, 2012, 2011 and 2010
(In thousands)
Operating activities:
Net earnings
Adjustments to reconcile net earnings to net cash
2012
2011
2010
$
87,411
105,616
259,476
provided by operating activities:
Depreciation and amortization
Provision (benefit) for deferred income taxes
Reversal of liabilities for uncertain tax positions
Gain on asset dispositions, net
Goodwill impairment
Provision for Venezuelan operations, net
Equity in earnings of unconsolidated companies, net of dividends
Compensation expense – stock based
Excess tax liability (benefit) on stock options exercised
Changes in assets and liabilities, net:
Trade and other receivables
Marine operating supplies
Other current assets
Accounts payable
Accrued expenses
Accrued property and liability losses
Other current liabilities
Other liabilities and deferred credits
Other, net
Net cash provided by operating activities
Cash flows from investing activities:
Proceeds from sales of assets
Proceeds from sales/leaseback of assets
Proceeds from insurance settlements on Venezuela seized vessels
Additions to properties and equipment
Other
138,356
(23,754)
(6,021)
(17,657)
30,932
---
(7,033)
14,340
1,190
(38,015)
(3,102)
140
21,844
4,063
(210)
8,700
7,947
3,290
222,421
140,576
(6,849)
---
(13,228)
---
---
1,570
15,482
(1,190)
15,272
(4,511)
(3,509)
3,504
(7,080)
(963)
12,675
6,219
622
264,206
130,184
569
(36,110)
(28,178)
---
43,720
(3,336)
8,740
(72)
(20,458)
4,490
(338)
(12,657)
6,119
(712)
(21,889)
(3,115)
1,828
328,261
42,029
---
---
(357,110)
---
(315,081)
37,196
---
8,150
(615,289)
---
(569,943)
51,735
101,755
---
(451,973)
1
(298,482)
Net cash used in investing activities
Cash flows from financing activities:
Principal payments on debt
Debt borrowings
Debt issuance costs
Proceeds from exercise of stock options
Cash dividends
Excess tax (liability) benefit on stock options exercised
Stock repurchases
Net cash provided by (used in) financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest
Income taxes
Supplemental disclosure of noncash investing activities:
Additions to properties and equipment
See accompanying Notes to Consolidated Financial Statements.
F-8
(40,000)
290,000
(295)
5,411
(51,261)
(1,190)
(35,015)
167,650
74,990
245,720
$ 320,710
(190,000)
590,000
(10,032)
8,695
(51,478)
1,190
(19,988)
328,387
22,650
223,070
245,720
---
---
(7,712)
1,872
(51,734)
72
---
(57,502)
(27,723)
250,793
223,070
$
$
$
36,839
49,332
10,850
15,957
48,365
14,951
57,571
---
---
(1) NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
The company provides offshore service vessels and marine support services to the global offshore energy
industry through the operation of a diversified fleet of offshore marine service vessels. The company’s
revenues, net earnings and cash flows from operations are dependent upon the activity level of the vessel fleet.
Like other energy service companies, the level of the company’s business activity is driven by the level of
drilling and exploration activity by our customers. Our customers’ activity, in turn, is dependent on crude oil and
natural gas prices, which fluctuate depending on respective levels of supply and demand for crude oil and
natural gas.
Principles of Consolidation
The consolidated financial statements include the accounts of Tidewater Inc. and its subsidiaries. Intercompany
balances and transactions are eliminated in consolidation.
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and expenses during the reporting
period. The accompanying consolidated financial statements include estimates for allowance for doubtful
accounts, useful lives of property and equipment, valuation of goodwill, income tax provisions, impairments,
commitments and contingencies and certain accrued liabilities. We evaluate our estimates and assumptions on
an ongoing basis based on a combination of historical information and various other assumptions that are
considered reasonable under the particular circumstances, the results of which form the basis for making
judgments about carrying values of assets and liabilities that are not readily apparent from other sources.
These accounting policies involve judgment and uncertainties to such an extent that there is reasonable
likelihood that materially different amounts could have been reported under different conditions or if different
assumptions had been used, as such, actual results may differ from these estimates.
Cash Equivalents
The company considers all highly liquid investments with maturities of three months or less when purchased to
be cash equivalents.
Marine Operating Supplies
Marine operating supplies, which consist primarily of operating parts and supplies for the company’s vessels,
are stated at the lower of weighted-average cost or market.
Properties and Equipment
Depreciation and Amortization
Properties and equipment are stated at cost. Depreciation is computed primarily on the straight-line basis
beginning with the date construction is completed, with salvage values of 5%-10% for marine equipment, using
estimated useful lives of 15 - 25 years for marine equipment (from date of construction) and 3 - 30 years for
other properties and equipment. Depreciation is provided for all vessels unless a vessel meets the criteria to be
classified as held for sale. Estimated remaining useful lives are reviewed when there has been a change in
circumstances that indicates the original estimated useful life may no longer be appropriate. Upon retirement or
disposal of a fixed asset, the costs and related accumulated depreciation are removed from the respective
accounts and any gains or losses are included in our consolidated statements of earnings. Used equipment is
depreciated in accordance with this above policy; however, no life less than six years is used for marine
equipment regardless of the date constructed.
F-9
Depreciation and amortization expense for the years ended March 31, are as follows:
(In thousands)
Depreciation expense
Maintenance and Repairs
2012
$
138,356
2011
140,576
2010
130,184
Maintenance and repairs (including major repair costs) are expensed as incurred during the asset's original
estimated useful life (its original depreciable life). Major repair costs incurred after the original estimated
depreciable life that also have the effect of extending the useful life (for example, the complete overhaul of main
engines, the replacement of mechanical components, or the replacement of steel in the vessel’s hull) of the
asset are capitalized and amortized over 30 months. Vessel modifications that are performed for a specific
customer contract are capitalized and amortized over the firm contract term. Major modifications to equipment
that are being performed not only for a specific customer contract are capitalized and amortized over the
remaining life of the equipment. The majority of the company’s vessels require certification inspections twice in
every five year period, and the company schedules these vessel drydockings when it is anticipated that the
work can be performed. While the actual length of time between drydockings can vary, we use a 30 month
amortization period for the costs of these drydockings as an average time between the required certifications
Net Properties and Equipment
The following is a summary of net properties and equipment at March 31:
Number
Of Vessels
2012
Carrying
Value
(In thousands)
Vessels in active service
Stacked vessels
Vessels withdrawn from service
Marine equipment and other assets under construction
Other property and equipment
251
67
2
$ 2,567,321
34,768
633
261,679
41,364
Number
Of Vessels
2011
Carrying
Value
(In thousands)
$
262
90
4
2,265,042
40,224
673
358,294
37,547
Totals
320
$ 2,905,765
356
$
2,701,780
The company considers a vessel to be stacked if the vessel crew is disembarked and limited maintenance is
being performed on the vessel. The company reduces operating costs by stacking vessels when management
does not foresee opportunities to profitably or strategically operate the vessels in the near future. Vessels are
added to this list when market conditions warrant and they are removed from this list when they are returned to
active service, sold or otherwise disposed. When economically practical marketing opportunities arise, the
stacked vessels can be returned to service by performing any necessary maintenance on the vessel and
returning fleet personnel to operate the vessel. Although not currently fulfilling charters, stacked vessels are
considered to be in service and are included in the calculation of the company’s utilization statistics. Stacked
vessels at March 31, 2012 and 2011 have an average age of 30.9 and 30.6 years, respectively. A vast majority
of vessels stacked at March 31, 2012 are currently being marketed for sale and are not expected to return to
the active fleet, primarily due to their age.
Vessels withdrawn from service represent those vessels that are not included in the company’s utilization
statistics. Vessels withdrawn from service at March 31, 2012 and 2011 have an average age of 32.0 and
33.0 years, respectively.
All vessels are classified in the company’s consolidated balance sheets in Properties and Equipment. No
vessels are classified as held for sale because no vessel meets the criteria. Stacked vessels and vessels
withdrawn from service are reviewed for impairment semiannually.
Impairment of Long-Lived Assets
The company reviews the vessels in its active fleet for impairment whenever events occur or changes in
circumstances indicate that the carrying amount of an asset group may not be recoverable. In such evaluation,
the estimated future undiscounted cash flows generated by an asset group are compared with the carrying
F-10
amount of the asset group to determine if a write-down may be required. With respect to vessels that have not
been stacked, we group together for impairment testing purposes vessels with similar operating and marketing
characteristics. We also subdivide our groupings of assets with similar operating and marketing characteristics
between our older vessels and newer vessels.
The company estimates cash flows based upon historical data adjusted for the company’s best estimate of
expected future market performance, which, in turn, is based on industry trends. If an asset group fails the
undiscounted cash flow test, the company uses the discounted cash flow method to determine the estimated
fair value of each asset group and compares such estimated fair value [considered Level 3, as defined by
Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 360] Impairment or
Disposal of Long-lived Assets, to the carrying value of each asset group in order to determine if impairment
exists. If impairment exists, the carrying value of the asset group is reduced to its estimated fair value.
The primary estimates and assumptions used in reviewing active vessel groups for impairment include
utilization rates, average dayrates, and average daily operating expenses. These estimates are made based on
recent actual trends in utilization, dayrates and operating costs and reflect management’s best estimate of
expected market conditions during the period of future cash flows. These assumptions and estimates have
changed considerably as market conditions have changed and they are reasonably likely to continue to change
as market conditions change in the future. Although the company believes its assumptions and estimates are
reasonable, deviations from the assumptions and estimates could produce materially different results.
Management estimates may vary considerably from actual outcomes due to future adverse market conditions
or poor operating results that could result in the inability to recover the current carrying value of an asset group,
thereby possibly requiring an impairment charge in the future. As the company’s fleet continues to age,
management closely monitors the estimates and assumptions used in the impairment analysis in order to
properly identify evolving trends and changes in market conditions that could impact the results of the
impairment evaluation.
In addition to the periodic review of its active long-lived assets for impairment when circumstances warrant, the
company also performs a review of its stacked vessels and vessels withdrawn from service every six months or
whenever changes in circumstances indicate that the carrying amount of a vessel may not be recoverable.
Management estimates each stacked vessel’s fair value by considering items such as the vessel’s age, length
of time stacked, likelihood of a return to active service, actual recent sales of similar vessels, among others. In
certain situations we obtain an estimate of the fair value of the stacked vessel from third-party appraisers or
brokers. The company records an impairment charge when the carrying value of a vessel withdrawn from
service or a stacked vessel exceeds its estimated fair value. The estimates of fair value of stacked vessels are
also subject to significant variability, are sensitive to changes in market conditions, and are reasonably likely to
change in the future. The company has consistently recorded modest gains on the sale of stacked vessels.
Refer to Note (12) for a discussion on asset impairments.
Goodwill
Goodwill represents the cost in excess of fair value of the net assets of companies acquired. Goodwill primarily
relates to the fiscal 1998 acquisition of O.I.L. Ltd., a British company. The company tests goodwill for
impairment annually at the reporting unit level using carrying amounts as of December 31 or more frequently if
events and circumstances indicate that goodwill might be impaired. The company uses the two-step method for
evaluating goodwill for impairment as prescribed in ASC 350, Intangibles-Goodwill and Other (ASC 350). Step
one involves comparing the fair value of the reporting unit to its carrying amount. If the fair value of the reporting
unit is greater than its carrying amount, there is no impairment. If the reporting unit’s carrying amount is greater
than the fair value, the second step must be completed to measure the amount of impairment, if any. Step two
involves calculating the implied fair value of goodwill by deducting the fair value of all tangible and intangible
assets, excluding goodwill, of the reporting unit from the fair value of the reporting unit as determined in step
one. The implied fair value of goodwill determined in this step is compared to the carrying value of goodwill. If
the implied fair value of goodwill is less than the carrying value of goodwill, an impairment loss is recognized
equal to the difference.
As discussed in Note (15), the company changed its reportable segments during the quarter ended
September 30, 2011 from International and United States to Americas, Asia/Pacific, Middle East/North Africa,
and Sub-Saharan Africa/Europe. The company performed an interim goodwill impairment assessment prior to
changing its reportable segments and determined there was no goodwill impairment.
F-11
The company also performed an interim goodwill impairment assessment on the new reporting units using
September 30, 2011 carrying values and determined on the basis of the step one impairment test that the
carrying value of its Middle East/North Africa unit exceeded its fair value thus triggering the second step of the
analysis as prescribed by ASC 350. An estimated goodwill impairment charge of $30.9 million was recorded
during the quarter ended September 30, 2011. Step two of the assessment was completed during the quarter
ended December 31, 2011 and there was no further adjustment to goodwill. The company performed its annual
impairment test as of December 31, 2010 on its then existing International and United States reporting units,
and the test determined there was no goodwill impairment. Refer to Note (15) for a complete discussion on
Goodwill.
The following table summarizes goodwill as a percentage of total assets and stockholders’ equity at March 31:
Goodwill as a percentage of total assets
Goodwill as a percentage of stockholders’ equity
Accrued Property and Liability Losses
2012
7%
12%
2011
9%
13%
The company's insurance subsidiary establishes case-based reserves for estimates of reported losses on direct
business written, estimates received from ceding reinsurers, and reserves based on past experience of
unreported losses. Such losses principally relate to the company's vessel operations and are included as a
component of vessel operating costs in the consolidated statements of earnings. The liability for such losses
and the related reimbursement receivable from reinsurance companies are classified in the consolidated
balance sheets into current and noncurrent amounts based upon estimates of when the liabilities will be settled
and when the receivables will be collected.
The following table discloses the total amount of current and long-term liabilities related to accrued property and
liability losses not subject to reinsurance recoverability, but considered currently payable as of March 31:
(In thousands)
Accrued property and liability losses
Pension and Other Postretirement Benefits
$
2012
6,786
2011
9,173
The company follows the provisions of ASC 715, Compensation – Retirement Benefits, and uses a
March 31 measurement date for determining net periodic benefit costs, benefit obligations and the fair value of
plan assets. Net periodic pension costs and accumulated benefit obligations are determined using a number of
assumptions including the discount rates used to measure future obligations and expenses, the rate of
compensation increases, retirement ages, mortality rates, expected long-term return on plan assets, health
care cost trends, and other assumptions, all of which have a significant impact on the amounts reported.
The company’s pension cost consists of service costs, interest costs, expected returns on plan assets,
amortization of prior service costs or benefits and actuarial gains and losses. The company considers a number
of factors in developing its pension assumptions, including an evaluation of relevant discount rates, expected
long-term returns on plan assets, plan asset allocations, expected changes in wages and retirement benefits,
analyses of current market conditions and input from actuaries and other consultants.
Net periodic benefit costs are based on a market-related valuation of assets equal to the fair value of assets.
For the long-term rate of return, assumptions are developed regarding the expected rate of return on plan
assets based on historical experience and projected long-term investment returns, which consider the plan’s
target asset allocation and long-term asset class return expectations. Assumptions for the discount rate use the
equivalent single discount rate based on discounting expected plan benefit cash flows using the Mercer Bond
Index Curve for the year ended March 31, 2012, and the Citigroup Pension Discount Curve for the years ended
March 31, 2011 and 2010. For the projected compensation trend rate, short-term and long-term compensation
expectations for participants, including salary increases and performance bonus payments are considered. For
the health care cost trend rate for other postretirement benefits, assumptions are established for health care
cost trends, applying an initial trend rate that reflects recent historical experience and broader national statistics
with an ultimate trend rate that assumes that the portion of gross domestic product devoted to health care
F-12
eventually becomes constant. Refer to Note (5) for a complete discussion on compensation – retirement
benefits.
Income Taxes
Income taxes are accounted for in accordance with the provisions of ASC 740, Income Taxes. Deferred tax
assets and liabilities are recognized for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Deferred taxes are not provided on undistributed earnings of certain non-U.S. subsidiaries and business
ventures because the company considers those earnings to be permanently invested abroad. Refer to Note (3)
for a complete discussion on income taxes.
Revenue Recognition
The company’s primary source of revenue is derived from time charter contracts of its vessels on a rate per day
of service basis; therefore, vessel revenues are recognized on a daily basis throughout the contract period.
These vessel time charter contracts are generally either on a term basis (average three months to two years) or
on a “spot” basis. The base rate of hire for a term contract is generally a fixed rate, provided, however, that term
contracts at times include escalation clauses to recover specific additional costs. A spot contract is a short-term
agreement to provide offshore marine services to a customer for a specific short-term job. Spot contract terms
generally range from one day to three months. Vessel revenues are recognized on a daily basis throughout the
contract period. There are no material differences in the cost structure of the company’s contracts based on
whether the contracts are spot or term for the operating costs are generally the same without regard to the
length of a contract.
Operating Costs
Vessel operating costs are incurred on a daily basis and consist primarily of costs such as crew wages; repair
and maintenance; insurance and loss reserves; fuel, lube oil and supplies; vessel operating leases; and other
vessel expenses, which include but are not limited to costs such as brokers’ commissions, training costs, agent
fees, port fees, canal transit fees, temporary importation fees, vessel certification fees, and satellite
communication fees. Repair and maintenance costs include both routine costs and major drydocking repair
costs, which occur during the initial economic useful life of the vessel. Vessel operating costs are recognized as
incurred on a daily basis.
Foreign Currency Translation
The U.S. dollar is the functional currency for all of the company’s existing international operations, as
transactions in these operations are predominately denominated in U.S. dollars. Foreign currency exchange
gains and losses are included in the consolidated statements of earnings.
Earnings Per Share
The company follows ASC 260, Earnings Per Share. and reports both basic earnings per share and diluted
earnings per share. The calculation of basic earnings per share is computed based on the weighted average
number of shares of common stock outstanding. Dilutive earnings per share is computed based on the
weighted average number of shares of common stock plus the effect of dilutive potential common shares
outstanding during the period using the treasury stock method. Diluted earnings per share includes the dilutive
effect of stock options and restricted stock grants (both time and performance based) awarded as part of the
company’s share-based compensation and incentive plans. Per share amounts disclosed in these Notes to
Consolidated Financial Statements, unless otherwise indicated, are on a diluted basis. Refer to Note (9),
Earnings Per Share.
Concentrations of Credit Risk
The company’s financial instruments that are exposed to concentrations of credit risk consist primarily of trade
and other receivables from a variety of domestic, international and national energy companies, including
F-13
reinsurance companies for recoverable insurance losses. The company manages its exposure to risk by
performing ongoing credit evaluations of its customers’ financial condition and generally does not require
collateral. The company maintains an allowance for doubtful accounts for potential losses based on expected
collectability and does not believe it is generally exposed to concentrations of credit risk that are likely to have a
material adverse impact on the company’s financial position, results of operations, or cash flows.
Stock-Based Compensation
The company follows ASC 718, Compensation – Stock Compensation, for the expensing of stock options and
other share-based payments. This topic requires that stock-based compensation transactions be accounted for
using a fair-value-based method. The company uses the Black-Scholes option-pricing model to determine the
fair-value of stock-based awards. Refer to Note (7) for a complete discussion on stock-based compensation.
Comprehensive Income
The company reports total comprehensive income and its components in the financial statements in
accordance with ASC 220, Comprehensive Income. Total comprehensive income represents the net change in
stockholders’ equity during a period from sources other than transactions with stockholders and, as such,
includes net earnings. For the company, accumulated other comprehensive income is comprised of unrealized
gains and losses on available-for-sale securities and derivative financial instruments, currency translation
adjustment and any minimum pension liability for the company’s U.S. Defined Benefits Pension Plan and
Supplemental Executive Retirement Plan. Refer to Note (8) for a complete discussion on comprehensive
income.
Derivative Instruments and Hedging Activities
The company periodically utilizes derivative financial instruments to hedge against foreign currency
denominated assets and liabilities and currency commitments. These transactions generally include forward
currency contracts or interest rate swaps that are entered into with major financial institutions. Derivative
financial instruments are intended to reduce the company’s exposure to foreign currency exchange risk and
interest rate risk.
The company records derivative financial instruments in its consolidated balance sheets at fair value as either
assets or liabilities. The accounting for changes in the fair value of a derivative instrument depends on the
intended use of the derivative and the resulting designation, which is established at the inception of a
derivative. The company formally documents, at the inception of a hedge, the hedging relationship and the
entity’s risk management objective and strategy for undertaking the hedge, including identification of the
hedging instrument, the hedged item or transaction, the nature of the risk being hedged, the method used to
assess effectiveness and the method that will be used to measure hedge ineffectiveness of derivative
instruments that receive hedge accounting treatment.
For derivative instruments designated as foreign currency or interest rate hedges (cash flow hedge), changes in
fair value, to the extent the hedge is effective, are recognized in other comprehensive income until the hedged
item is recognized in earnings. Hedge effectiveness is assessed quarterly based on the total change in the
derivative’s fair value. Amounts representing hedge ineffectiveness are recorded in earnings. Any change in fair
value of derivative financial instruments that are speculative in nature and do not qualify for hedge accounting
treatment is also recognized immediately in earnings. Proceeds received upon termination of derivative
financial instruments qualifying as fair value hedges are deferred and amortized into income over the remaining
life of the hedged item using the effective interest rate method.
F-14
Fair Value Measurements
The company follows the provisions of ASC 820, Fair Value Measurements and Disclosures, for financial
assets and liabilities that are measured and reported at fair value on a recurring basis. ASC 820 establishes a
hierarchy for inputs used in measuring fair value. Fair value is calculated based on assumptions that market
participants would use in pricing assets and liabilities and not on assumptions specific to the entity. The
statement requires that each asset and liability carried at fair value be classified into one of the following
categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities
Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data
Level 3: Unobservable inputs that are not corroborated by market data
Recasted Segment Information
In connection with a change in reportable segments, certain prior period amounts have been recast to conform
to the March 31, 2012 presentation of our segments with no effect on net earnings or retained earnings. Please
refer to Note (14) – Segment and Geographical Distributions of Operations.
Reclassifications
The company made certain reclassifications to prior period amounts to conform to the current year
presentation. These reclassifications did not have a material effect on the consolidated statement of financial
position, results of operations or cash flows.
Subsequent Events
The company evaluates subsequent events through the time of our filing on the date we issue financial
statements.
Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the FASB that are adopted by the company
as of the specified effective date. Unless otherwise discussed, management believes that the impact of recently
issued standards, which are not yet effective, will not have a material impact on the company’s consolidated
financial statements upon adoption.
In September 2011, the FASB issued guidance on ASC 350, Intangibles-Goodwill and Other, for testing
goodwill for impairment. The new guidance provides a company the option to perform a qualitative assessment
to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying
amount. If the company’s assessment determines that this is the case, it is required to perform the currently
prescribed two-step goodwill impairment test to identify potential goodwill impairment and measure the amount
of goodwill impairment to be recognized for that reporting unit, if any. If the company determines it is more likely
than not that the fair value of a reporting unit is greater than its carrying amount, the two-step goodwill
impairment test is not required. The adoption of this guidance is effective for us beginning April 1, 2012.
In June 2011, the FASB issued guidance on ASC 220, Comprehensive Income, regarding the presentation of
comprehensive income. The new guidance eliminates the current option to report other comprehensive income
and its components in the statement of changes in stockholders’ equity. Instead, a company is required to
present either a continuous statement of net income and other comprehensive income or in two separate but
consecutive statements. The new guidance also requires companies to present reclassification adjustments out
of accumulated other comprehensive income by component in both the statement in which net income is
presented and the statement in which other comprehensive income is presented. In December 2011, the FASB
issued guidance which indefinitely defers the guidance related to the presentation of reclassification
adjustments. The new guidance will be effective for us beginning April 1, 2012 and will have financial statement
presentation changes only.
F-15
In May 2011, the FASB issued Accounting Standards Update No. 2011-04 (“ASU 2011-04”), Amendments to
Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International
Financial Reporting Standards (“IFRS”) . This pronouncement was issued to provide a consistent definition of
fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S.
GAAP and IFRS. ASU 2011-04 changes certain fair value measurement principles and enhances the
disclosure requirements particularly for Level 3 fair value measurements. This pronouncement is effective for
fiscal years, and interim periods within those years, beginning after December 15, 2011. The new guidance will
be effective for us beginning April 1, 2012 and will not have a significant impact on our consolidated balance
sheet, results of operations or cash flow.
(2)
INVESTMENT IN UNCONSOLIDATED COMPANIES
Investments in unconsolidated affiliates, generally 50% or less owned partnerships and corporations, are
accounted for by the equity method. Under the equity method, the assets and liabilities of the unconsolidated
joint venture companies are not consolidated in the company’s consolidated balance sheet. The company
does not have a significant unconsolidated subsidiary as defined by SEC Rule 3-09.
Investments in, at equity, and advances to unconsolidated joint-venture companies, which primarily represents
the activities of Sonatide Marine Ltd., a 49%-owned joint venture company located in Luanda, Angola, for the
years ended March 31, are as follows:
(In thousands)
Investments in, at equity, and advances to unconsolidated companies
$
2012
46,077
2011
39,044
(3)
INCOME TAXES
Earnings before income taxes derived from United States and non-U.S. operations for the years ended
March 31, are as follows:
(In thousands)
Non-U.S.
United States
$
$
2012
148,369
(37,333)
111,036
2011
177,938
(29,843)
148,095
2010
280,040
(12,306)
267,734
Income tax expense (benefit) for the years ended March 31, consists of the following:
(In thousands)
Federal
State
International
Total
U.S.
2012
Current
Deferred
2011
Current
Deferred
2010
Current
Deferred
$
$
$
$
$
$
(5,009)
(24,545)
(29,554)
3,827
(6,988)
(3,161)
(38,353)
2,079
(36,274)
(558)
---
(558)
(588)
---
(588)
(71)
---
(71)
54,363
(626)
53,737
48,796
(25,171)
23,625
46,089
139
46,228
44,779
(176)
44,603
49,328
(6,849)
42,479
6,355
1,903
8,258
F-16
The actual income tax expense above differs from the amounts computed by applying the U.S. federal statutory
tax rate of 35% to pre-tax earnings as a result of the following for the years ended March 31:
(In thousands)
Computed "expected" tax expense
Increase (reduction) resulting from:
Resolution of uncertain tax positions
Foreign income taxed at different rates
Foreign tax credits not previously recognized
Expenses which are not deductible for tax purposes
State taxes
Other, net
2012
38,863
$
(4,187)
(13,504)
(626)
2,889
(363)
553
23,625
$
2011
51,833
---
(14,127)
139
2,532
(382)
2,484
42,479
2010
93,707
(38,423)
(54,352)
(176)
4,335
(46)
3,213
8,258
The company is not liable for U.S. taxes on undistributed earnings of most of its non-U.S. subsidiaries and
business ventures that it considers indefinitely reinvested abroad because the company adopted the provisions
of the American Jobs Creation Act of 2004 (the Act) effective April 1, 2005. All previously recorded deferred tax
assets and liabilities related to temporary differences, foreign tax credits, or prior undistributed earnings of these
entities whose future and prior earnings were anticipated to be indefinitely reinvested abroad were reversed in
March 2005.
The effective tax rate applicable to pre-tax earnings for the years ended March 31, is as follows:
Effective tax rate applicable to pre-tax earnings
2012
21.28%
2011
28.68%
2010
3.08%
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and
deferred tax liabilities at March 31, is as follows:
(In thousands)
Deferred tax assets:
Financial provisions not deducted for tax purposes
Net operating loss and tax credit carryforwards
Other
Gross deferred tax assets
Less valuation allowance
Net deferred tax assets
Deferred tax liabilities:
Depreciation and amortization
Other
Gross deferred tax liabilities
Net deferred tax liabilities
2012
2011
$
$
31,960
32,054
76
64,090
---
64,090
(214,627)
---
(214,627)
(150,537)
26,964
15,446
34
42,444
---
42,444
(216,319)
(416)
(216,735)
(174,291)
The company has not recognized a U.S. deferred tax liability associated with temporary differences related to
investments in foreign subsidiaries that are essentially permanent in duration. The differences relate primarily to
undistributed earnings and stock basis differences. Though the company does not anticipate repatriation of
funds, a current U.S. tax liability would be recognized when the company receives those foreign funds in a
taxable manner such as through receipt of dividends or sale of investments. A determination of the
unrecognized deferred tax liability for temporary differences related to investments in foreign subsidiaries is not
practicable due to uncertainty regarding the use of foreign tax credits which would become available as a result
of a transaction.
The amount of foreign income that U.S. deferred taxes has not been recognized upon, as of March 31, is as
follows:
(In thousands)
Foreign income not recognized for U.S. deferred taxes
2012
$
1,874,875
F-17
The company has the following foreign tax credit carry-forwards that begin to expire in 2015 and net operating
loss carry-forwards that begin to expire in 2031 as of March 31:
(In thousands)
Foreign tax credit carry-forwards
Net operating loss carry-forwards
$
2012
13,759
52,270
The company’s balance sheet reflects the following in accordance with ASC 740, Income Taxes at March 31:
(In thousands)
Tax liabilities for uncertain tax positions
Income tax payable
$
2012
14,281
22,217
2011
18,469
11,911
The tax liabilities for uncertain tax positions are attributable to a permanent establishment issue related to a
foreign joint venture. Penalties and interest related to income tax liabilities are included in income tax expense.
Income tax payable is included in other current liabilities.
Unrecognized tax benefits, which would lower the effective tax rate if realized, at March 31, are as follows:
(In thousands)
Unrecognized tax benefit related to state tax issues
Interest receivable on unrecognized tax benefit related to state tax issues
$
2012
8,657
50
In January 2008, the U.S. District Court for the Eastern District of Louisiana issued a ruling in the company’s
favor with respect to a motion for summary judgment concerning the IRS disallowance of the company’s tax
deduction for foreign sales corporation commissions for fiscal years 1999 and 2000. In April 2009, the Fifth
Circuit Court of Appeals affirmed the District Court’s judgment. The IRS did not appeal the Court of Appeals
ruling, resulting in final resolution of the issue in the company’s favor in July 2009. The tax benefit related to the
issue is approximately $36.1 million, or $0.70 per common share, for fiscal year ended March 31, 2010, which
primarily includes a reversal of previously recorded liabilities for uncertain tax positions and interest income on
the judgment.
In March 2010, the company settled a state tax issue for fiscal years 2001 through 2003, which resulted in a tax
benefit of $2.9 million, including interest of $0.8 million.
A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended
March 31, are as follows:
(In thousands)
Balance at April 1,
Additions based on tax positions related to the current year
Reductions for tax positions of prior years
Exchange rate fluctuation
Settlement and lapse of statute of limitations
Balance at March 31,
$
$
2012
15,220
2,813
(1,375)
---
(931)
15,727
2011
14,691
2,130
(1,601)
---
---
15,220
2010
44,875
2,198
(2,774)
(930)
(28,678)
14,691
With limited exceptions, the company is no longer subject to tax audits by United States (U.S.) federal, state,
local or foreign taxing authorities for years prior to 2004. The company has ongoing examinations by various
state and foreign tax authorities and does not believe that the results of these examinations will have a material
adverse effect on the company’s financial position or results of operations.
The company receives a tax benefit that is generated by certain employee stock benefit plan transactions. This
benefit is recorded directly to additional paid-in-capital and does not reduce the company’s effective income tax
rate. The tax benefit for the years ended March 31, are as follows:
(In thousands)
Excess tax benefits on stock options exercised
$
2012
738
2011
1,190
2010
72
F-18
(4)
INDEBTEDNESS
Revolving Credit and Term Loan Agreement
Borrowings under the company’s $575 million amended and restated revolving credit facility (“credit facility”),
which includes a $125.0 million term loan (“term loan”) and a $450 million revolving line of credit (“revolver”)
bear interest at the company’s option at the greater of (i) prime or the federal funds rate plus 0.50 to 1.25%, or
(ii) Eurodollar rates plus margins ranging from 1.50 to 2.25%, based on the company’s consolidated funded
debt to total capitalization ratio. Commitment fees on the unused portion of the facilities range from 0.15 to
0.35% based on the company’s funded debt to total capitalization ratio. The facilities provide for a maximum
ratio of consolidated debt to consolidated total capitalization of 55% and a minimum consolidated interest
coverage ratio (essentially consolidated earnings before interest, taxes, depreciation and amortization, or
EBITDA, for the four prior fiscal quarters to consolidated interest charges for such period) of 3.0. All other terms,
including the financial and negative covenants, are customary for facilities of its type and consistent with the
prior agreement in all material respects. The company’s credit facility matures in January 2016.
In July 2011, the credit facility was amended to allow 365 days (originally 180 days) from the closing date
(“delayed draw period”) to make multiple draws under the term loan. In January 2012, the company elected to
borrow the entire $125 million available under the term loan facility and used the proceeds to fund working
capital and for general corporate purposes. Principal repayments on the term loan borrowings are payable in
quarterly installments beginning in the quarter ending September 30, 2013 in amounts equal to 1.25% of the
total outstanding borrowings as of July 26, 2013.
The company has $125 million in term loan borrowings outstanding at March 31, 2012, and the entire
$450 million of the revolver was available, with no outstanding borrowings at March 31, 2012. There were no
outstanding borrowings at March 31, 2011 under any of the credit facilities.
Senior Debt Notes
The determination of fair value includes an estimated credit spread between our long term debt and treasuries
with similar matching expirations. The credit spread is determined based on comparable publicly traded
companies in the oilfield service segment with similar credit ratings (Level 2 inputs as defined in the accounting
guidance).
August 2011 Senior Notes
On August 15, 2011, the company issued $165 million of senior unsecured notes to a group of institutional
investors. A summary of these notes outstanding at March 31, is as follows:
(In thousands, except weighted average data)
Aggregate debt outstanding
Weighted average remaining life in years
Weighted average coupon rate on notes outstanding
Fair value of debt outstanding
$
2012
165,000
8.6
4.42%
166,916
The multiple series of notes were originally issued with maturities ranging from approximately eight to 10 years.
The notes may be retired before their respective scheduled maturity dates subject only to a customary make-
whole provision. The terms of the notes require that the company maintain a minimum ratio of debt to
consolidated total capitalization that does not exceed 55%.
September 2010 Senior Notes
On October 15, 2010, the company completed the sale of $310 million of senior unsecured notes, and the sale
of an additional $115 million of the notes was completed on December 30, 2010. A summary of the aggregate
amount of these notes outstanding at March 31, is as follows:
(In thousands, except weighted average data)
Aggregate debt outstanding
Weighted average remaining life in years
Weighted average coupon rate on notes outstanding
Fair value of debt outstanding
$
2012
425,000
7.6
4.25%
430,339
2011
425,000
8.6
4.25%
404,352
F-19
The multiple series of these notes were originally issued with maturities ranging from five to 12 years. The
notes may be retired before their respective scheduled maturity dates subject only to a customary make-whole
provision. The terms of the notes require that the company maintain a minimum ratio of debt to consolidated
total capitalization that does not exceed 55%.
Included in accumulated other comprehensive income at March 31, 2012 and 2011, is an after-tax loss of
$3.3 million ($5.1 million pre-tax), and $3.8 million ($5.8 million pre-tax), respectively, relating to the purchase of
interest rate hedges, which are cash flow hedges, in July 2010 in connection with the September 2010 senior
notes offering. The interest rate hedges settled in August 2010 concurrent with the pricing of the senior
unsecured notes. The hedges met the effectiveness criteria and their acquisition costs are being amortized
over the term of the individual notes matching the term of the hedges to interest expense.
July 2003 Senior Notes
In July 2003, the company completed the sale of $300 million of senior unsecured notes. A summary of the
aggregate amount of remaining senior unsecured notes that were issued in July 2003 and outstanding at
March 31, are as follows:
(In thousands, except weighted average data)
Aggregate debt outstanding
Weighted average remaining life in years
Weighted average coupon rate on notes outstanding
Fair value of debt outstanding
$
2012
235,000
1.4
4.43%
240,585
2011
275,000
2.1
4.39%
285,478
The multiple series of notes were originally issued with maturities ranging from seven to 12 years. These notes
can be retired in whole or in part prior to maturity for a redemption price equal to the principal amount of the
notes redeemed plus a customary make-whole premium. The terms of the notes provide for a maximum ratio of
consolidated debt to total capitalization of 55%.
Notes totaling $40 million matured in July 2011 but were not classified as current maturities of long-term debt
because the company had the ability to fund this maturity with its credit facility. Notes totaling $60.0 million will
mature in July 2012 but are not classified as current maturities of long-term debt because the company has the
ability, if necessary, to fund this maturity with its credit facility.
Summary of Long-Term Debt Outstanding
The following table summarizes debt outstanding at March 31:
(In thousands)
4.16% July 2003 senior notes due fiscal 2012
4.31% July 2003 senior notes due fiscal 2013
4.44% July 2003 senior notes due fiscal 2014
4.61% July 2003 senior notes due fiscal 2016
3.28% September 2010 senior notes due fiscal 2016
3.90% September 2010 senior notes due fiscal 2018
3.95% September 2010 senior notes due fiscal 2018
4.12% September 2010 senior notes due fiscal 2019
4.17% September 2010 senior notes due fiscal 2019
4.33% September 2010 senior notes due fiscal 2020
4.51% September 2010 senior notes due fiscal 2021
4.56% September 2010 senior notes due fiscal 2021
4.61% September 2010 senior notes due fiscal 2023
4.06% August 2011 senior notes due fiscal 2019
4.54% August 2011 senior notes due fiscal 2022
4.64% August 2011 senior notes due fiscal 2022
Term Loan
Less: Current maturities of long-term debt
Total
F-20
2012
---
60,000
140,000
35,000
42,500
44,500
25,000
25,000
25,000
50,000
100,000
65,000
48,000
50,000
65,000
50,000
125,000
950,000
---
950,000
$
$
$
2011
40,000
60,000
140,000
35,000
42,500
44,500
25,000
25,000
25,000
50,000
100,000
65,000
48,000
---
---
---
---
700,000
---
700,000
Debt Costs
The company capitalizes a portion of its interest costs incurred on borrowed funds used to construct vessels.
Interest and debt costs incurred, net of interest capitalized, for the years ended March 31, are as follows:
(In thousands)
Interest and debt costs incurred, net of interest capitalized
Interest costs capitalized
Total interest and debt costs
(5) EMPLOYEE RETIREMENT PLANS
U.S. Defined Benefit Pension Plan
2012
22,308
14,743
37,051
$
$
2011
10,769
14,878
25,647
2010
1,679
15,632
17,311
The company has a defined benefit pension plan (pension plan) that covers certain U.S. citizen employees and
employees who are permanent residents of the United States. Benefits are based on years of service and
employee compensation. In December 2009, the Board of Directors amended the pension plan to discontinue
the accrual of benefits once the plan was frozen on December 31, 2010. On that date, previously accrued
pension benefits under the pension plan were frozen for the approximately 60 active employees who
participated in the plan. This change did not affect benefits earned by participants prior to January 1, 2011. The
active employees who participated in the pension plan have become participants in the company’s defined
contribution retirement plan effective January 1, 2011. These changes are providing the company more
predictable retirement plan costs and cash flows. By changing to a defined contribution plan and freezing the
benefits accrued under the predecessor defined benefit plan, the company’s future benefit obligations and
requirements for cash contributions for the frozen pension plan are reduced. Losses associated with the
curtailment of the pension plan were immaterial. No amounts were contributed to the plan during fiscal 2012
and 2011. The company does not expect to contribute to the plan during fiscal 2013.
Supplemental Executive Retirement Plan
The company also offers a supplemental retirement plan (supplemental plan) that provides pension benefits to
certain employees in excess of those allowed under the company’s tax-qualified pension plan. Assets of this
non-contributory defined benefit plan are held in a Rabbi Trust, invested in a variety of marketable securities,
none of which is Tidewater stock. The Rabbi Trust assets are recorded at fair value with unrealized gains or
losses included in other comprehensive income. Effective March 4, 2010, the supplemental plan was closed to
new participation. The company did not contribute to the Rabbi Trust during fiscal 2012 and 2011. No decision
has been made as to any funding to be completed during fiscal 2013. The supplemental plan is a non-qualified
plan and, as such, the company is not required to make contributions to the supplemental plan.
Investments held in a Rabbi Trust for the benefit of participants in the supplemental plan are included in other
assets. The following table summarizes the carrying value of the trust assets, including unrealized gains or
losses at March 31:
(In thousands)
Investments held in Rabbi Trust
Unrealized gains in carrying value of trust assets
Unrealized gains in carrying value of trust assets are net of income tax expense of
Obligations under the supplemental plan
$
2012
17,366
251
135
30,633
2011
18,043
523
281
26,197
The unrealized gains or losses in the carrying value of the trust assets, net of income tax expense, are included
in accumulated other comprehensive income (other stockholders' equity). To the extent that trust assets are
liquidated to fund benefit payments, gains or losses, if any, will be recognized at that time. The company’s
obligations under the supplemental plan are included in ‘accrued expenses’ and ‘other liabilities and deferred
credits’ on the consolidated balance sheet.
The supplemental plan was amended in December 2008 to allow participants the option to elect a lump sum
benefit in lieu of other payment options currently provided by the plan. As a result of the amendment, certain
participants received a lump sum distribution in July 2009 in settlement of the supplemental plan obligation. The
aggregate payment to those participants electing the lump sum distribution in July 2009 was $8.7 million. A
settlement loss of $3.6 million was recorded in general and administrative expenses during fiscal 2010.
F-21
Postretirement Benefit Plan
Qualified retired employees currently are covered by a program which provides limited health care and life
insurance benefits. Costs of the program are based on actuarially determined amounts and are accrued over
the period from the date of hire to the full eligibility date of employees who are expected to qualify for these
benefits. This plan is funded through payments as benefits are required.
Investment Strategies
Pension Plan
The obligations of our pension plan are supported by assets held in a trust for the payment of future benefits.
The company is obligated to adequately fund the trust. For the pension plan assets, the company has the
following primary investment objectives: (1) closely match the cash flows from the plan’s investments from
interest payments and maturities with the payment obligations from the plan’s liabilities; (2) closely match the
duration of plan assets with the duration of plan liabilities and (3) enhance the plan’s investment returns without
taking on undue risk by industries, maturities or geographies of the underlying investment holdings.
If the plan assets are less than the plan liabilities, the pension plan assets will be invested exclusively in fixed
income debt securities. Any investments in corporate bonds shall be at least investment grade, while mortgage
and asset-backed securities must be rated “A” or better. If an investment is placed on credit watch, or is
downgraded to a level below the investment grade, the holding will be liquidated, even at a loss, in a
reasonable time period. The plan will only hold investments in equity securities if the plan assets exceed the
estimated plan liabilities.
The cash flow requirements of the pension plan will be analyzed at least annually. Portfolio repositioning will be
required when material changes to the plan liabilities are identified and when opportunities arise to better match
cash flows with the known liabilities. Additionally, trades will occur when opportunities arise to improve the
yield-to-maturity or credit quality of the portfolio.
The company’s policy for the pension plan is to contribute no less than the minimum required contribution by
law and no more than the maximum deductible amount. The plan does not invest in Tidewater stock.
Supplemental Plan
The investment policy of the supplemental plan is to assess the historical returns and risk associated with
alternative investment strategies to achieve an expected rate of return on plan assets. The objectives of the
plan are designed to maximize total returns within prudent parameters of risk for a retirement plan of this type.
The below table summarizes the supplemental plan’s minimum and maximum rate of return objectives for plan
assets:
Equity securities
Debt securities
Cash and cash equivalents
Minimum
Expected
Rate of Return
on Plan Assets
5%
1%
0%
Maximum
Expected
Rate of Return
on Plan Assets
7%
3%
1%
F-22
Whereas fluctuating rates of return are characteristic of the securities markets, the investment objective of the
supplemental plan is to achieve investment returns sufficient to meet the actuarial assumptions. This is defined
as an investment return greater than the current actuarial discount rate assumption of 4.75%, which is subject
to annual upward or downward revisions. The below table summarizes the supplemental plan’s minimum and
maximum market value objectives for plan assets, which are based upon a five to ten year investment horizon:
Equity securities
Debt securities
Percentage of debt securities allowed in below investment grade bonds
Cash and cash equivalents
Minimum
Market Value
Objective for
Plan Assets
55%
25%
0%
0%
Maximum
Market Value
Objective for
Plan Assets
75%
45%
20%
10%
Equity holdings shall be restricted to issues of corporations that are actively traded on the major U.S.
exchanges and NASDAQ. Debt security investments may include all securities issued by the U.S. Treasury or
other federal agencies and investment grade corporate bonds. When a particular asset class exceeds its
minimum or maximum allocation ranges, rebalancing will be addressed upon review of the quarterly
performance reports and as cash contributions and withdrawals are made.
Pension and Supplemental Plan Asset Allocations
The following table provides the target and actual asset allocations for the pension plan and the supplemental
plan:
Pension plan:
Equity securities
Debt securities
Cash and other
Total
Supplemental plan:
Equity securities
Debt securities
Cash and other
Total
Target
---
100%
---
100%
65%
35%
---
100%
Actual as of
2012
Actual as of
2011
---
97%
3%
100%
63%
32%
5%
100%
---
98%
2%
100%
64%
29%
7%
100%
Significant Concentration Risks
The pension plan and the supplemental plan assets are periodically evaluated for concentration risks. As of
March 31, 2012, the company did not have any individual asset investments that comprised 10% or more of
each plan’s overall assets.
The pension plan assets are primarily invested in debt securities with no more than the greater of 5% of the
fixed income portfolio or $2.5 million being invested in the securities of a single issuer, except investments in
U.S. Treasury and other federal agency obligations. In the event that plan assets exceed the estimated plan
liabilities for the pension plan, up to two times the difference between the plan assets and plan liabilities may be
invested in equity securities, and so long as equities do not exceed 15% of the market value of the assets. The
investment policy sets forth that the maximum single investment of the equity portfolio is 5% of the portfolio
market value. Further, investments in foreign securities are restricted to American Depository Receipts (ADR)
and stocks listed on the U.S. stock exchanges and may not exceed 10% of the equity portfolio.
The current diversification policy for the supplemental plan sets forth that equity securities in any single industry
sector shall not exceed 25% of the equity portfolio market value and shall not exceed 10% market value of the
equity portfolio for equity holdings in any single corporation. Additionally, debt securities should be diversified
between issuers within each sector with no one issuer comprising more than 10% of the aggregate fixed
income portfolio, excluding issues of the U.S. Treasury or other federal agencies.
F-23
Fair Value of Pension Plan and Supplemental Plan Assets
The fair value of the pension plan assets and the supplemental plan assets as of March 31, are as follows:
(In thousands)
Equity securities:
Common stock
Preferred stock
Foreign stock
American depository receipts
Preferred American depository receipts
Real estate investment trusts
Debt securities:
Government securities
Corporate debt securities
Foreign debt securities
Open ended mutual funds
Cash and cash equivalents
Total investments
Accrued income
Other pending transactions
Total fair value of plan assets
Pension Plan
2012
2011
---
---
---
---
---
---
3,021
50,770
1,374
---
845
56,010
907
---
56,917
---
---
---
---
---
---
2,681
48,956
---
---
799
52,436
899
---
53,335
$
$
$
Supplemental Plan
2012
8,248
12
542
2,166
8
139
2,891
---
---
2,690
922
17,618
---
(252)
17,366
2011
8,785
12
355
2,401
---
111
2,571
---
---
2,651
1,448
18,334
---
(291)
18,043
The following table provides the fair value hierarchy for the pension plan and supplemental plan assets
measured at fair value as of March 31, 2012:
(In thousands)
Pension plan measured at fair value:
Debt securities:
Government securities
Corporate debt securities
Foreign debt securities
Cash and cash equivalents
Total
Accrued income
Total fair value of plan assets
Supplemental plan measured at fair value:
Equity securities:
Common stock
Preferred stock
Foreign stock
American depository receipts
Preferred American depository receipts
Real estate investment trusts
Debt securities:
Government debt securities
Open ended mutual funds
Cash and cash equivalents
Total
Other pending transactions
Total fair value of plan assets
Fair
Value
Quoted prices in
active markets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
3,021
---
---
---
3,021
907
3,928
8,248
12
542
2,108
8
139
1,219
2,690
401
15,367
(252)
15,115
---
50,770
1,374
845
52,989
---
52,989
---
---
---
58
---
1,672
---
521
2,251
---
2,251
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
$
$
$
$
$
$
3,021
50,770
1,374
845
56,010
907
56,917
8,248
12
542
2,166
8
139
2,891
2,690
922
17,618
(252)
17,366
F-24
The following table provides the fair value hierarchy for the pension plan and supplemental plan assets
measured at fair value as of March 31, 2011:
(In thousands)
Pension plan measured at fair value:
Debt securities:
Government securities
Corporate debt securities
Cash and cash equivalents
Total
Accrued income
Total fair value of plan assets
Supplemental plan measured at fair value:
Equity securities:
Common stock
Preferred stock
Foreign stock
American depository receipts
Real estate investment trusts
Debt securities:
Government debt securities
Open ended mutual funds
Cash and cash equivalents
Total
Other pending transactions
Total fair value of plan assets
Fair
Value
Quoted prices in
active markets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
$
$
$
$
$
$
2,681
48,956
799
52,436
899
53,335
8,785
12
355
2,401
111
2,571
2,651
1,448
18,334
(291)
18,043
1,407
---
---
1,407
899
2,306
8,785
12
355
2,384
111
1,270
2,651
362
15,930
(291)
15,639
1,274
48,956
799
51,029
---
51,029
---
---
---
17
---
1,301
---
1,086
2,404
---
2,404
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
F-25
Plan Assets and Obligations
Changes in plan assets and obligations during the years ended March 31, 2012 and 2011 and the funded
status of the U.S. defined benefit pension plan and the supplemental plan (referred to collectively as "Pension
Benefits") and the postretirement health care and life insurance plan (referred to as "Other Benefits") at
March 31, are as follows:
(In thousands)
Change in benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Participant contributions
Plan amendments
Benefits paid
Actuarial (gain) loss
Benefit obligation at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return
Employer contributions
Participant contributions
ERRP reimbursement
Benefits paid
Settlement paid
Fair value of plan assets at end of year
Reconciliation of funded status:
Fair value of plan assets
Benefit obligation
Unfunded status
Net amount recognized in the balance sheet consists of:
Current liabilities
Noncurrent liabilities
Net amount recognized
Pension Benefits
2012
2011
Other Benefits
2012
2011
85,570
875
4,412
---
---
(3,743)
6,242
93,356
53,335
6,403
922
---
---
(3,743)
---
56,917
79,557
922
4,461
---
234
(3,266)
3,662
85,570
51,244
4,740
617
---
---
(3,266)
---
53,335
28,439
554
1,379
486
14
(1,031)
(579)
29,262
---
---
531
486
14
(1,031)
---
---
31,214
581
1,458
478
83
(1,472)
(3,903)
28,439
---
---
994
478
---
(1,472)
---
---
56,917
93,356
53,335
85,570
---
29,262
---
28,439
(36,439)
(32,235)
(29,262)
(28,439)
(4,083)
(32,356)
(36,439)
(938)
(31,297)
(32,235)
(1,453)
(27,809)
(29,262)
(1,407)
(27,032)
(28,439)
$
$
$
$
$
$
The following table provides the projected benefit obligation and accumulated benefit obligation for the pension
plans:
(In thousands)
Projected benefit obligation
Accumulated benefit obligation
$
2012
93,356
91,760
2011
85,570
84,619
The following table provides information for pension plans with an accumulated benefit obligation in excess of
plan assets (includes both the pension plan and supplemental plan):
(In thousands)
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
$
2012
93,356
91,760
56,917
2011
85,570
84,619
53,335
Net periodic pension cost for the pension plan and the supplemental plan for the fiscal years ended March 31
include the following components:
(In thousands)
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Recognized actuarial loss
Curtailment
Net periodic pension cost
$
2012
875
4,412
(2,576)
50
1,760
---
$
4,521
2011
922
4,461
(2,479)
14
1,698
---
4,616
2010
900
4,700
(2,305)
38
1,352
3,658
8,343
F-26
Net periodic postretirement health care and life insurance costs for the fiscal years ended March 31 include the
following components:
(In thousands)
Service cost
Interest cost
Amortization of prior service cost
Recognized actuarial loss
Net periodic postretirement (benefit) cost
2012
554
1,379
(2,032)
(4)
(103)
$
$
2011
581
1,458
(2,032)
(20)
(13)
2010
1,005
2,145
(2,006)
457
1,601
Other changes in plan assets and benefit obligations recognized in other comprehensive income for the fiscal
years ended March 31 include the following components:
(In thousands)
Change in benefit obligation
Transition obligation
Prior service cost
Net loss (gain)
Settlement of net transition obligation
Amortization of transition obligation
Amortization of prior service cost
Amortization of net (loss) gain
Total recognized in other comprehensive income (loss)
Net of 35% tax rate
Pension Benefits
2012
2011
Other Benefits
2012
2011
$
$
---
---
2,415
---
---
(50)
(1,760)
605
393
---
234
1,401
---
---
(14)
(1,698)
(77)
(50)
---
---
(579)
---
---
2,032
4
1,457
947
---
83
(3,903)
---
---
2,032
20
(1,768)
(1,149)
Amounts recognized as a component of accumulated other comprehensive (income) loss as of March 31, 2012
are as follows:
(In thousands)
Unrecognized actuarial loss
Unrecognized prior service cost (benefit)
Pre-tax amount included in accumulated other comprehensive loss (income)
Pension Benefits
$
$
(20,302)
(184)
(20,486)
Other Benefits
120
(10,685)
(10,565)
The company expects to recognize the following amounts as a component of net periodic benefit costs during
the next fiscal year:
(In thousands)
Unrecognized actuarial loss
Unrecognized prior service cost (benefit)
Pension Benefits
$
1,656
50
Other Benefits
---
(2,032)
Assumptions used to determine net benefit obligations for the fiscal years ended March 31, are as follows:
Discount rate
Rates of annual increase in compensation levels
Pension Benefits
Other Benefits
2012
4.75%
3.00%
2011
5.25%
3.00%
2012
4.75%
N/A
2011
5.25%
N/A
Assumptions used to determine net periodic benefit costs for the fiscal years ended March 31, are as follows:
Discount rate
Expected long-term rate of return on assets
Rates of annual increase in compensation levels
Pension Benefits
Other Benefits
2012
5.25%
5.00%
3.00%
2011
5.75%
5.00%
3.00%
2010
7.25%
5.75%
3.00%
2012
5.25%
N/A
N/A
2011
5.75%
N/A
N/A
2010
7.25%
N/A
N/A
F-27
To develop the expected long-term rate of return on assets assumption, the company considered the current
level of expected returns on various asset classes. The expected return for each asset class was then weighted
based on the target asset allocation to develop the expected return on plan assets assumption for the portfolio.
Based upon the assumptions used to measure the company’s qualified pension and postretirement benefit
obligation at March 31, 2012, including pension and postretirement benefits attributable to estimated future
employee service, the company expects that benefits to be paid over the next ten years will be as follows:
Year ending March 31,
2013
2014
2015
2016
2017
2018 – 2022
(In thousands)
$
Pension
Benefits
7,862
15,569
5,082
5,255
5,416
28,368
Total 10-year estimated future benefit payments
$
67,552
Health Care Cost Trends
Other
Benefits
1,453
1,522
1,636
1,672
1,794
9,948
18,025
The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation
at March 31, 2012 was 9.1% for pre-65 medical and prescription drug coverage and 7.0% for post-65 medical
coverage; gradually declining to 4.5% in the year 2029. The assumed health care cost trend rate used in
measuring the net periodic postretirement benefit cost for the year ended March 31, 2012 was 9.5% for pre-65
medical and prescription drug coverage and 7.0% for post-65 medical coverage; gradually declining to 4.5% in
the year 2029. The health care cost trend rate used in measuring the net periodic postretirement benefit cost for
fiscal 2013 is expected to be 9.1% for pre-65 medical and prescription drug coverage and 7.0% for post-65
medical coverage.
A 1% increase in the assumed health care cost trend rates for each year would increase the accumulated
postretirement benefit obligation by approximately $3.9 million at March 31, 2012 and increase the total of
service and interest cost for the year ended March 31, 2012 by $0.3 million. A 1% decrease in the assumed
health care cost trend rates for each year would decrease the accumulated postretirement benefit obligation by
approximately $3.2 million at March 31, 2012 and decrease the total of service and interest cost for the year
ended March 31, 2012 by $0.2 million.
Defined Contribution Plans
Retirement Plan
A defined contribution retirement plan covers all eligible U.S. fleet personnel, along with all new eligible
employees of the company hired after December 31, 1995. Effective January 1, 2011, the active employees
who participated in the now frozen defined benefit pension plan have become participants in the company’s
defined contribution retirement plan. This plan is noncontributory by the employee, but the company
contributes, in cash, 3% of an eligible employee’s compensation to a trust on behalf of the employees. The
active employees who participated in the now frozen defined benefit pension plan may receive an additional
1% to 8% depending on age and years of service. Company contributions vest over five years.
401(k) Plan
Upon meeting various citizenship, age and service requirements, employees are eligible to participate in a
defined contribution savings plan and can contribute from 2% to 75% of their base salary to an employee
benefit trust. The company matches with company common stock 50% of the first 8% of eligible compensation
deferred by the employee. Company contributions vest over six years.
The plan held the following number of shares of Tidewater common stock as of March 31:
Number of shares of Tidewater common stock held by 401(k) plan
2012
256,816
2011
288,200
F-28
The amounts charged to expense related to the above defined contribution plans, for the fiscal years ended
March 31, are as follows:
(In thousands)
Defined contribution plans expense, net of forfeitures
Defined contribution plans forfeitures
$
2012
3,120
335
2011
2,985
154
2010
2,674
568
Other Plans
A non-qualified supplemental savings plan is provided to executive officers who have the opportunity to defer
up to 50% of their eligible compensation that cannot be deferred under the existing 401(k) plan due to IRS
limitations. A company match may be provided on these contributions equal to 50% of the first 8% of eligible
compensation deferred by the employee to the extent the employee is not able to receive the full amount of
company match to the 401(k) plan due to IRS limitations. The plan also allows participants to defer up to 100%
of their bonuses. In addition, an amount equal to any refunds that must be made due to the failure of the 401(k)
nondiscrimination test may be deferred into this plan.
Effective March 4, 2010, the non-qualified supplemental savings plan was modified to allow the company to
contribute restoration benefits to eligible employees. Employees who do not accrue a benefit in the
supplemental executive retirement plan and who are eligible for a contribution in the defined contribution
retirement plan automatically become eligible for the restoration benefit when the employee’s eligible retirement
compensation exceeds the section 401(a)(17) limit. The restoration benefit is noncontributory by the employee,
but the company contributes, in cash, 3% of an eligible employee’s compensation above the 401(a)(17) limit to
a trust on behalf of the employees. The active employees who participated in the now frozen defined benefit
pension plan receive an additional 1% to 8% depending on age and years of service.
The company also provides a multinational savings plan to eligible non-U.S. citizen employees working outside
their respective country of origin and who have been employed for one year of continuous service with the
company. Participants of the plan may contribute 1% to 15% of their base salary. The company matches, in
cash, 50% of the first 6% of eligible compensation deferred by the employee. Company contributions vest over
six years.
The amounts charged to expense related to the multinational pension savings plan contributions, for the fiscal
years ended March 31, are as follows:
(In thousands)
Multinational pension savings plan expense
2012
415
$
2011
438
2010
438
The company also provides certain benefits programs which are maintained in several other countries that
provide retirement income for covered employees.
(6) OTHER ASSETS, ACCRUED EXPENSES, OTHER CURRENT LIABILITIES, AND OTHER
LIABILITIES AND DEFERRED CREDITS
A summary of other assets at March 31, is as follows:
(In thousands)
Recoverable insurance losses
Deferred income tax assets
Deferred finance charges – revolver
Savings plans and supplemental plan
Noncurrent tax receivable
Other
$
2012
3,150
64,090
6,797
29,538
9,106
5,173
$
117,854
2011
5,327
42,444
8,232
31,263
7,737
4,388
99,391
F-29
A summary of accrued expenses at March 31, is as follows:
(In thousands)
Payroll and related payables
Commissions payable
Accrued vessel expenses
Accrued interest expense
Other accrued expenses
A summary of other current liabilities at March 31, is as follows:
(In thousands)
Taxes payable
Deferred credits - current
Dividend payable
A summary of other liabilities and deferred credits at March 31, is as follows:
(In thousands)
Postretirement benefits liability
Pension liabilities
Deferred gain on vessel sales
Income taxes
Other
$
2012
31,729
14,309
76,078
8,095
4,742
2011
37,239
15,639
55,920
9,393
2,678
$
134,953
120,869
$
$
$
2012
23,791
2,278
156
26,225
2012
27,809
40,875
39,568
---
20,303
2011
11,187
2,463
47
13,697
2011
27,032
39,085
39,568
5,295
17,541
$
128,555
128,521
(7) STOCK-BASED COMPENSATION AND INCENTIVE PLANS
General
The company’s employee stock option, restricted stock awards, restricted stock units (that settle in Tidewater
common stock), and phantom stock plans are long-term retention plans that are intended to attract, retain and
provide incentives for talented employees, including officers and non-employee directors, and to align
stockholder and employee interests. The company believes its employee stock option plans are critical to its
operations and productivity. The employee stock option plans allow the company to grant, on a discretionary
basis, both incentive and non-qualified stock options as well as restricted stock.
Under the company's stock option and restricted stock plans, the Compensation Committee of the Board of
Directors has the authority to grant stock options, restricted shares and restricted stock units of the company's
stock to officers and other key employees. Under the terms of the plans, stock options are granted with an
exercise price equal to the stock's closing fair market value on the date of grant.
The number of common stock shares reserved for issuance under the plans and the number of shares
available for future grants at March 31, are as follows:
Shares of common stock reserved for issuance under the plans
Shares of common stock available for future grants
Stock Option Plans
March 31,
2012
2,611,678
886,254
The company has granted stock options to its directors and employees, including officers, under several
different stock incentive plans. Generally, options granted vest annually over a three-year vesting period
measured from the date of grant. Options not previously exercised expire at the earlier of either three months
after termination of the grantee’s employment or ten years after the date of grant. Upon retirement, unvested
stock options are forfeited. The retiree has two years post retirement to exercise vested options. All of the stock
options are classified as equity awards.
F-30
The company uses the Black-Scholes option-pricing model to determine the fair value of options granted and to
calculate the share-based compensation expense. Stock options were not granted during fiscal 2012. The fair
value and assumptions used for the stock options issued for the following years ended March 31, are as
follows:
Weighted average fair value of stock options granted
Risk-free interest rate
Expected dividend yield
Expected stock price volatility
Expected stock option life
2011
$15.92
2.66%
2.19%
38.40%
6.0 years
2010
$14.87
2.66%
2.19%
38.40%
6.0 years
The following table sets forth a summary of stock option activity of the company for fiscal years 2012, 2011 and
2010:
Outstanding at March 31, 2009
Granted
Exercised
Expired or cancelled/forfeited
Outstanding at March 31, 2010
Granted
Exercised
Expired or cancelled/forfeited
Outstanding at March 31, 2011
Granted (A)
Exercised
Expired or cancelled/forfeited
Outstanding at March 31, 2012
Weighted-average
Exercise Price
$
43.10
45.75
30.13
51.96
43.94
48.96
36.72
52.43
45.36
---
38.71
56.44
$
44.93
Number
of Shares
1,812,007
463,305
(62,112)
(20,933)
2,192,267
13,275
(236,765)
(93,301)
1,875,476
---
(146,508)
(3,544)
1,725,424
(A) Stock options were not granted during fiscal 2012.
Information regarding the 1,725,424 options outstanding at March 31, 2012 can be grouped into three general
exercise-price ranges as follows:
At March 31, 2012
Options outstanding
Weighted average exercise price
Weighted average remaining contractual life
Options exercisable
Weighted average exercise price of options exercisable
Weighted average remaining contractual life of exercisable shares
$25.84 - $33.83
575,149
$31.92
5.2 years
569,053
$31.90
5.2 years
Exercise Price Range
$37.55 - $48.96
508,719
$44.83
6.5 years
354,057
$44.39
6.3 years
$55.76 - $65.69
641,556
$56.68
5.0 years
638,726
$56.68
5.0 years
Additional information regarding stock options for the years ended March 31, are as follows:
(In thousands, except number of stock options and weighted average price)
Intrinsic value of options exercised
Number of stock options vested
Fair value of stock options vested
Number of options exercisable
Weighted average exercise price of options exercisable
$
2012
2,800
328,325
$
4,117
1,561,836
44.86
$
2011
4,480
409,649
5,564
1,383,563
45.46
2010
1,052
256,550
3,293
1,278,525
44.98
The aggregate intrinsic value of the options outstanding at March 31, 2012 was $17.4 million. The aggregate
intrinsic value of options exercisable at March 31, 2012 was $16.0 million.
Stock option compensation expense along with the reduction effect on basic and diluted earnings per share,
and stock option compensation expense for the years ended March 31, are as follows:
(In thousands, except per share data)
Stock option compensation expense
Basic earnings per share reduced by
Diluted earnings per share reduced by
$
2012
3,892
0.05
0.05
2011
5,506
0.07
0.07
2010
3,618
0.05
0.05
F-31
As of March 31, 2012, total unrecognized stock-option compensation costs amounted to $2.2 million or
$1.6 million net of tax. No stock option compensation costs were capitalized as part of the cost of an asset.
Compensation costs for stock options that have not yet vested will be recognized as the underlying stock
options vest over the appropriate future period. The level of unrecognized stock-option compensation will be
affected by any future stock option grants and by the termination of any employee who has received stock
options that are unvested as of the employee’s termination date.
Restricted Stock Awards
The company has granted restricted stock awards to key employees, including officers, under several different
employee stock plans, which provide for the granting of restricted stock and/or performance awards to officers
and key employees. The company awards both time-based and performance-based shares of restricted stock
awards. The restrictions on the time-based restricted stock awards lapse generally over a four year period and
require no goals to be achieved other than the passage of time and continued employment. The restrictions on
the performance-based restricted stock award lapse if the company meets specific targets. During the restricted
period, the restricted shares may not be transferred or encumbered, but the recipient has the right to vote the
restricted shares and receive dividends on the time-based restricted shares. Dividends are accrued on
performance-based restricted shares and ultimately paid only if the performance criteria is achieved. All of the
restricted stock awards are classified as equity awards in stockholders’ equity. The deferred amount is
generally amortized on a straight-line basis to earnings over the respective vesting periods and is net of
forfeitures.
The following table sets forth a summary of restricted stock award activity of the company for fiscal 2012, 2011
and 2010:
Non-vested balance at March 31, 2009
Granted
Vested
Cancelled/forfeited
Non-vested balance at March 31, 2010
Granted
Vested
Cancelled/forfeited
Non-vested balance at March 31, 2011
Granted
Vested
Cancelled/forfeited
Non-vested balance at March 31, 2012
Weighted-average
Grant-Date
Fair Value
$
47.69
45.75
52.53
56.51
45.03
57.50
49.02
57.37
51.13
54.59
50.11
---
$
51.43
Time
Based
Shares
125,753
75,722
(40,833)
(204)
160,438
256,770
(47,609)
---
369,599
7,500
(110,681)
---
266,418
Performance
Based
Shares
292,771
37,861
(116,950)
(797)
212,885
70,678
(52,264)
(2,675)
228,624
---
(4,983)
---
223,641
Restrictions on approximately 113,160 time-based and 57,230 performance-based restricted stock awards
outstanding at March 31, 2012 would lapse during fiscal 2013 if performance-based targets are achieved.
Restricted stock award compensation expense and grant date fair value for the years ended March 31, is as
follows:
(In thousands)
Grant date fair value of restricted stock vested
Restricted stock compensation expense
$
2012
5,796
6,171
2011
4,896
3,435
2010
8,288
5,123
As of March 31, 2012, total unrecognized restricted stock compensation costs amounted to $24.4 million, or
$17.0 million net of tax. No restricted stock award compensation costs were capitalized as part of the costs of
an asset. The amount of unrecognized restricted stock compensation will be affected by any future restricted
stock grants and by the separation of an employee from the company who has received restricted stock grants
that are unvested as of their separation date. There were no modifications to the restricted stock awards during
fiscal 2012.
F-32
Restricted Stock Units
The company has granted restricted stock units to key employees, including officers, under the company’s
employee stock plan, which provide for the granting of restricted stock units to officers and key employees. The
company awards time-based units, where each unit represents the right to receive, at the end of a vesting
period, one unrestricted share of Tidewater common stock with no exercise price. The company also awards
performance-based restricted stock units, where each unit represents the right to receive, at the end of a
vesting period, up to two shares of Tidewater common stock with no exercise price. The company uses
assumptions underlying the Black-Scholes methodology to produce a Monte Carlo simulation model to value
the performance-based restricted stock units. The fair value of the time-based restricted stock units is based on
the market price of our common stock on the date of grant. Vesting of the performance-based restricted stock
units is based on the company’s three year Total Shareholder Return (TSR) as measured against a three year
TSR of a defined peer group. The restrictions on the time-based restricted stock units lapse over a three year
period from the date of the award and require no goals to be achieved other than the passage of time and
continued employment. The restrictions on the performance-based restricted stock units lapse if the company
meets specific targets as defined. During the restricted period, the restricted stock units may not be transferred
or encumbered, but the recipient has the right to receive dividend equivalents on the restricted stock units, but
have no voting rights until the units vest. Dividend equivalents are accrued on performance-based restricted
shares and ultimately paid only if the performance criteria is achieved. Upon retirement, the Compensation
Committee of the Board of Directors will take into consideration the accelerated vesting of the restricted stock
units after certain age and service criteria are met. Restricted stock unit compensation costs are recognized on
a straight-line basis over the vesting period, and are net of forfeitures.
The following table sets forth a summary of restricted stock unit activity of the company for fiscal 2012:
Non-vested balance at March 31, 2011
Granted
Vested
Cancelled/forfeited
Non-vested balance at March 31, 2012
Weighted-average
Grant-Date
Fair Value
Time
Based
Units
$
$
---
54.18
---
---
54.18
---
248,288
---
---
248,288
Weight-average
Grant Date
Fair Value
---
72.23
---
---
72.23
Performance
Based
Units
84,394
---
---
84,394
Restrictions on approximately 82,779 time-based shares and no performance-based shares outstanding at
March 31, 2012 would lapse during fiscal 2013 if performance-based targets are achieved.
Restricted stock unit compensation expense and grant date fair value for the year ended March 31, is as
follows:
(In thousands)
Grant date fair value of restricted stock units vested
Restricted stock unit compensation expense
$
2012
---
272
As of March 31, 2012, total unrecognized restricted stock unit compensation costs amounted to $19.3 million,
or $14.2 million net of tax. No restricted stock unit compensation costs were capitalized as part of the costs of
an asset. The amount of unrecognized restricted stock unit compensation costs will be affected by any future
restricted stock unit grants and by the separation of an employee from the company who has received
restricted stock units that are unvested as of their separation date. There were no modifications to the restricted
stock units during fiscal 2012.
Phantom Stock Plan
The company provides a Phantom Stock Plan to provide additional incentive compensation to certain key
employees who are not officers of the company. The plan awards phantom stock units to participants who have
the right to receive the value of a share of common stock in cash from the company. Participants have no
voting or other rights as a shareholder with respect to any common stock as a result of participation in the
phantom stock plan. The phantom shares generally have a three or four-year vesting period from the grant date
of the award provided the employee remains employed by the company during the vesting period. Participants
receive dividend equivalents at the same rate as dividends on the company’s common stock.
F-33
The following table sets forth a summary of phantom stock activity of the company for fiscal 2012, 2011 and
2010:
Non-vested balance at March 31, 2009
Granted
Vested
Cancelled/forfeited
Non-vested balance at March 31, 2010
Granted
Vested
Cancelled/forfeited
Non-vested balance at March 31, 2011
Granted
Vested
Cancelled/forfeited
Non-vested balance at March 31, 2012
Weighted-average
Grant-Date
Fair Value
$
44.73
45.69
45.34
43.14
44.94
57.62
62.21
44.88
40.58
54.18
59.33
46.16
$
35.36
Time
Based
Shares
131,927
77,004
(36,841)
(2,779)
169,311
32,107
(49,427)
(13,923)
138,068
22,845
(51,255)
(6,347)
103,311
Performance
Based
Shares
70,325
---
(19,875)
(748)
49,702
---
(16,070)
(5,573)
28,059
---
---
---
28,059
time-based shares and 28,059 performance-based shares outstanding at
Restrictions on 58,461
March 31, 2012 would lapse during fiscal 2013 should performance-based targets be achieved. The fair value
of the non-vested phantom shares at March 31, 2012 is $54.02 per unit.
Phantom stock compensation expense and grant date fair value for the years ended March 31, are as follows:
(In thousands)
Grant date fair value of phantom stock vested
Phantom stock compensation expense
Phantom stock compensation costs capitalized as part of an asset
$
2012
3,041
3,180
---
2011
4,075
3,893
---
2010
2,572
2,460
---
As of March 31, 2012, total unrecognized phantom stock compensation costs amounted to $4.4 million, or
$4.0 million net of tax. The liability for this plan will be adjusted in the future until paid to the participant to reflect
the value of the units at the respective quarter end Tidewater stock price.
Non-Employee Board of Directors Deferred Stock Unit Plan
The company provides a Deferred Stock Unit Plan to its non-employee directors. The plan provides that each
non-employee director is granted annually a number of stock units having an aggregate value of $100,000 on
the date of grant. Dividend equivalents are paid on the stock units at the same rate as dividends on the
company’s common stock and are re-invested as additional stock units based upon the fair market value of a
share of company common stock on the date of payment of the dividend. A stock unit represents the right to
receive from the company the equivalent value of one share of company’s common stock in cash. Payment of
the value of the stock unit shall be made upon the earlier of the date that is 15 days following the date the
participant ceases to be a director for any reason or upon a change of control of the company. The participant
can elect to receive five annual installments or a lump sum.
F-34
The following table sets forth a summary of deferred stock unit activity of the company for fiscal 2012, 2011 and
2010:
Balance at March 31, 2009
Dividend equivalents reinvested
Retirement distribution
Granted
Balance at March 31, 2010
Dividend equivalents reinvested
Retirement distribution
Granted
Balance at March 31, 2011
Dividend equivalents reinvested
Retirement distribution
Granted
Balance at March 31, 2012
Weighted-average
Grant-Date
Fair Value
$
46.90
45.10
42.05
47.11
47.40
46.92
---
59.85
49.80
50.49
---
54.02
Number
Of
Units
56,949
1,167
(7,000)
21,812
72,928
1,568
---
17,869
92,365
1,843
---
20,372
$
50.56
114,580
Deferred stock units are fully vested at the time of grant. The liability for this plan will be adjusted in the future
until paid to the participant to reflect the value of the units at the respective quarter end Tidewater stock price.
Deferred stock unit compensation expense, which is reflected in general and administrative expenses, for the
years ended March 31, are as follows:
(In thousands)
Deferred stock units compensation expense
(8) STOCKHOLDERS’ EQUITY
Common Stock
2012
700
$
2011
2,117
2010
1,560
The number of authorized and issued common stock and preferred stock at March 31, are as follows:
Common stock shares authorized
Common stock par value
Common stock shares issued
Preferred stock shares authorized
Preferred stock par value
Preferred stock shares issued
Common Stock Repurchases
2012
125,000,000
$0.10
51,250,995
3,000,000
No par
0
2011
125,000,000
$0.10
51,876,038
3,000,000
No par
0
In May 2011, the company’s Board of Directors replaced its then existing July 2009 share repurchase program
with a new $200.0 million repurchase program that is in effect through June 30, 2012. The Board of Directors
authorized the company to repurchase shares of its common stock in open-market or privately-negotiated
transactions. The company uses its available cash and, when considered advantageous, borrowings under its
revolving credit facility, or other borrowings, to fund any share repurchases. The company will evaluate share
repurchase opportunities relative to other investment opportunities and in the context of current conditions in
the credit and capital markets. At March 31, 2012, $165.0 million authorization remains available to repurchase
shares under the May 2011 share repurchase program.
The company’s Board of Directors had previously authorized the company in July 2009 to repurchase up to
$200.0 million in shares of its common stock in open-market or privately-negotiated transactions. The Board of
Directors’ authorization for this repurchase program was replaced in May 2011 when the Board of Directors
extended the program.
F-35
The value of common stock repurchased, along with number of shares repurchased, and average price paid
per share for the years ended March 31, is as follows:
(In thousands, except share and per share data)
Value of common stock repurchased
Shares of common stock repurchased
Average price paid per common share
2012
35,015
739,231
47.37
$
$
2011
19,998
486,800
41.06
2010
---
---
---
All shares of common stock repurchased during fiscal 2012 occurred in the third quarter ended
December 31, 2011, while the shares repurchased during fiscal 2011 occurred during the first quarter ended
June 30, 2010.
Dividend Program
The declaration of dividends is at the discretion of the company’s Board of Directors. The Board of Directors
declared the following dividends for the years ended March 31, are as follows:
(In thousands, except per share data)
Dividends declared
Dividend per share
$
2012
51,370
1.00
2011
51,507
1.00
2010
51,735
1.00
Accumulated Other Comprehensive Income (Loss)
A summary of accumulated other comprehensive income and related tax effect at March 31, follows:
(In thousands)
Currency translation adjustments
Unrealized gains on available-for-sale securities, net of tax of $135 in 2012 and $281 in 2011
Benefit plans minimum liabilities, net of tax of $3,473 in 2012 and $2,751 in 2011
Realized loss on derivative, net of tax of $2,039 in 2012 and $2,140 in 2011
Amortization on loss of derivative
2012
$
9,811
(250)
6,449
3,787
(467)
$ 19,330
2011
9,811
(522)
5,108
3,974
(187)
18,184
Included in accumulated other comprehensive loss for the year ended March 31, 2011, is an after-tax loss of
$3.3 million ($5.1 million pre-tax) relating to interest rate hedges, which are cash flow hedges, entered into in
July 2010 in connection with the September 2010 senior notes offering as disclosed in Note (4). The interest
rate hedges settled in August 2010 concurrent with the pricing of the senior unsecured notes. The hedges met
the effectiveness criteria and will be amortized over the term of the individual notes matching the term of the
hedges to interest expense.
(9) EARNINGS PER SHARE
The components of basic and diluted earnings per share for the years ended March 31, are as follows:
(In thousands, except share and per share data)
2012
2011
2010
Net Income available to common shareholders (A)
$
87,411
105,616
259,476
Weighted average outstanding shares of common stock, basic (B)
Dilutive effect of options and restricted stock awards
Weighted average common stock and equivalents (C)
51,165,460
264,107
51,429,567
51,221,800
265,283
51,487,083
51,447,077
241,953
51,689,030
Earnings per share, basic (A/B)
Earnings per share, diluted (A/C)
Additional information:
Antidilutive options and restricted stock
$
$
1.71
1.70
---
2.06
2.05
---
5.04
5.02
---
F-36
(10) SALE/LEASBACK ARRANGEMENTS
Fiscal 2010 Sale/Leaseback
In June 2009, the company sold five vessels to four unrelated third-party companies, and simultaneously
entered into bareboat charter agreements for the vessels with the purchasers. In July 2009, the company sold
an additional vessel to an unrelated third-party company, and simultaneously entered into a bareboat charter
agreement with that purchaser.
The sale/leaseback transactions resulted in proceeds to the company of approximately $101.8 million and a
deferred gain of $39.6 million. The aggregate carrying value of the six vessels was $62.2 million at the dates of
sale. The leases on the five vessels sold in June 2009 will expire June 30, 2014, and the lease on the vessel
sold in July 2009 will expire July 30, 2014. The company is accounting for the transactions as sale/leaseback
transactions with operating lease treatment and expenses lease payments over the five year charter hire
operating lease terms.
Under the sale/leaseback agreements, the company has the right to either re-acquire the six vessels at 75% of
the original sales price or cause the owners to sell the vessels to a third-party under an arrangement where the
company guarantees approximately 84% of the original lease value to the third party purchaser. The company
also has the right to re-acquire the vessels prior to the end of the charter term with penalties of up to
5% assessed if purchased in years one and two of the five year lease. The company will recognize the deferred
gain as income if it does not exercise its option to purchase the six vessels at the end of the operating lease
term. If the company exercises its option to purchase these vessels, the deferred gain will reduce the vessels’
stated cost after exercising the purchase option.
Fiscal 2006 Sale/Leaseback
In March 2006, the company entered into agreements to sell five of its vessels that were under construction at
the time to Banc of America Leasing & Capital LLC (BOAL&C), an unrelated third party, for $76.5 million and
simultaneously entered into bareboat charter agreements with BOAL&C upon the vessels’ delivery to the
market. Construction on these five vessels was completed at various times between March 2006 and
March 2008, at which time the company sold the respective vessels and simultaneously entered into bareboat
charter agreements.
The company accounted for all five transactions as sale/leaseback transactions with operating lease treatment.
Accordingly, the company did not record the assets on its books and the company is expensing periodic lease
payments.
The bareboat charter agreements on the first two vessels expire in calendar year 2014 unless extended. The
company has the option to extend the respective bareboat charter agreements three times, each for a period of
12 months, which would provide the company the opportunity to extend the operating leases through calendar
year 2017. The bareboat charter agreements on the third and fourth vessels expire in 2015 and the company
has the option to extend the bareboat charter agreements three times, each for a period of 12 months, which
would provide the company the opportunity to extend the operating leases through calendar year 2018. The
bareboat charter agreement on the fifth vessel expires in 2016. The company has the option to extend the
bareboat charter agreements three times, each for a period of 12 months, which would provide the company
the opportunity to extend the operating leases through calendar year 2019. At the end of the basic term (or
extended option periods), the company has an option to purchase each of the vessels at its then fair market
value or to redeliver the vessel to its owner. The company may also purchase each of the vessels at their fixed
amortized values, as outlined in the bareboat charter agreements, at the end of the fifth year, and again at the
end of the seventh year, from the commencement dates of the respective charter agreements.
F-37
Future Minimum Lease Payments
As of March 31, 2012, the future minimum lease payments for the vessels under the operating lease terms are
as follows:
Fiscal year ending (In thousands)
2013
2014
2015
2016
Thereafter
Total future lease payments
Fiscal 2010
Sale/Leaseback
10,702
10,703
2,836
---
---
24,241
$
$
Fiscal 2006
Sale/Leaseback
6,924
6,906
5,243
2,304
---
21,377
Total
17,626
17,609
8,079
2,304
---
45,618
The operating lease expense on these bareboat charter arrangements, which are reflected in vessel operating
costs, for the years ended March 31, are as follows:
(In thousands)
Vessel operating leases
2012
17,967
$
2011
17,964
2010
15,054
(11) COMMITMENTS AND CONTINGENCIES
Compensation Commitments
Compensation continuation agreements exist with all of the company’s officers whereby each receives
compensation and benefits in the event that their employment is terminated following certain events relating to
a change in control of the company. The maximum amount of cash compensation that could be paid under the
agreements, based on present salary levels, is approximately $39.9 million.
Vessel Commitments
The table below summarizes the company’s various vessel commitments to acquire and construct new vessels,
by vessel type, as of March 31, 2012:
(In thousands, except vessel count)
Vessels under construction:
Anchor handling towing supply
Platform supply vessels
Crewboats
Total vessels under construction
Vessels to be purchased:
Platform supply vessels
Total vessels to be purchased
Total vessel commitments
Number
of
Vessels
2
15
5
22
3
3
25
Total
Cost
47,584
488,388
22,369
558,341
58,387
58,387
616,728
$
$
Invested
Through
3/31/12
37,839
195,738
10,969
244,546
12,891
12,891
257,437
Remaining
Balance
03/31/12
9,745
292,650
11,400
313,795
45,496
45,496
359,291
The total cost of the various vessel new-build commitments includes contract costs and other incidental costs.
The company has vessels under construction at a number of different shipyards around the world (with one of
these vessels being constructed in the United States by the company’s wholly-owned shipyard, Quality
Shipyards, L.L.C.). The anchor handling towing supply vessels under construction have 8,200 brake
horsepower (BHP), while the platform supply vessels (PSV) under construction range between 1,900 and
6,360 deadweight tons of cargo capacity. Scheduled delivery for the new-build vessels began in April 2012,
with delivery of the final new-build vessel expected in May 2014.
Regarding the vessels to be purchased, the company took possession of one PSV in April 2012 that has
3,000 deadweight tons of cargo capacity for a total cost of $19.8 million. The company plans to take possession
of the remaining two PSVs, which have 3,500 deadweight tons of cargo capacity, in July 2012 and in
September 2012 for a total aggregate cost of $38.6 million. As of March 31, 2012, the company had invested
$12.9 million for the acquisition of these three vessels.
F-38
The company’s vessel construction program has been designed to replace over time the company’s older fleet
of vessels with fewer, larger and more efficient vessels, while also opportunistically revamping the size and
capabilities of the company’s fleet. The company anticipates using future operating cash flows, existing
borrowing capacity and new borrowings or lease arrangements to fund current and future commitments in
connection with the fleet renewal and modernization program. The company continues to evaluate its fleet
renewal program, whether through new construction or acquisitions, relative to other investment opportunities
and uses of cash, including the current share repurchase authorization, and in the context of current conditions
in the credit and capital markets.
The company generally requires shipyards to provide third party credit support in the event that vessels are not
completed and delivered in accordance with the terms of the shipbuilding contracts. That third party credit
support typically guarantees the return of amounts paid by the company, and generally takes the form of
refundment guarantees or standby letters of credit issued by major financial institutions located in the country of
the shipyard. While the company seeks to minimize its shipyard credit risk by requiring these instruments, the
ultimate return of amounts paid by the company in the event of shipyard default is still subject to the
creditworthiness of the shipyard and the provider of the credit support, as well as the company’s ability to
successfully pursue legal action to compel payment of these instruments. When third party credit support is not
available or cost effective, the company endeavors to limit its credit risk by requiring cash deposits and through
other contract terms with the shipyard and other counterparties.
Currently the company is experiencing substantial delay with one fast, crew/supply boat under construction in
Brazil that was originally scheduled to be delivered in September 2009. On April 5, 2011, pursuant to the vessel
construction contract, the company sent the subject shipyard a letter initiating arbitration in order to resolve
disputes of such matters as the shipyard’s failure to achieve payment milestones, its failure to follow the
construction schedule, and its failure to timely deliver the vessel. The company believes that the shipyard has
suspended construction of the vessel. The company continues to pursue that arbitration. The company has
third party credit support in the form of insurance coverage for 90% of the progress payments made on this
vessel, or all but approximately $2.4 million of the carrying value of the accumulated costs through
March 31, 2012.
In March 2012, the company terminated four PSV construction projects in Indonesia due to unjustified delays
beyond the agreed delivery dates. The vessels were originally scheduled to deliver between May and
November 2012, but had projected delivery dates ranging from August to December 2013 at the time the
projects were terminated. The company had refundment guarantees in place supporting the progress payments
that were made on these vessels and received the full refund including interest. During November and
December of 2011, the company canceled its purchase agreements with the same shipyard for two anchor
handling towing supply vessels under construction in Indonesia. The cancellations, which were due to
unjustified delays beyond the agreed delivery dates, were authorized under the purchase agreements. No
deposits or progress payments were involved in these two cancellations.
Two vessels under construction at a domestic shipyard have fallen substantially behind schedule. The shipyard
recently notified the company that the shipyard should be entitled to a delay in the delivery date for both vessels
and an increase in the contract price for the first vessel because the company was late in completing and
providing the shipyard with the vessel's detailed design drawings. The detailed design drawings were
developed for the company by a third party designer. While the company believes that other factors also
contributed to the delay, negotiations with the shipyard are ongoing in an attempt to reach an amicable
settlement of these issues. These negotiations are at a preliminary stage.
Completion of Internal Investigation and Settlements with United States and Nigerian Agencies
The company has previously reported that special counsel engaged by the company’s Audit Committee had
completed an internal investigation into certain Foreign Corrupt Practices Act (FCPA) matters and reported its
findings to the Audit Committee. The substantive areas of the internal investigation have been reported publicly
by the company in prior filings.
Special counsel has reported to the Department of Justice (DOJ) and the Securities and Exchange
Commission (SEC) the results of the investigation, and the company has entered into separate agreements
with the two agencies to resolve the matters reported by special counsel. The company has previously reported
the principal terms of these agreements.
F-39
Securities and Exchange Commission
As previously reported, the company reached an agreement with the SEC to resolve its previously disclosed
investigation of possible violations of the FCPA. Under the agreement, the company consented to the filing in
federal district court of a complaint (“SEC Complaint”) by the SEC against Tidewater Inc., without admitting or
denying the allegations in the SEC Complaint, and to the entry by the court of a final judgment and permanent
injunction. On November 8, 2010, a federal district court entered a final judgment approving the agreement.
The agreement required Tidewater Inc. to pay a total of approximately $11.4 million, consisting of $8.4 million
(principally representing disgorgement of profits and prejudgment interest) payable at the time of settlement
and a contingent civil penalty of $3.0 million. The contingent civil penalty was to be payable to the SEC in the
event that the company had not otherwise agreed within 18 months of the date the court entered judgment to
pay fines or penalties of at least that amount to another United States government authority (or authorities) in
connection with the matters covered by the SEC Complaint. Given the agreement reached with the DOJ
(discussed below), no contingent civil penalty was required to be paid to the SEC. The full $11.4 million
financial charge associated with the settlement with the SEC, however, was recorded in the fourth quarter of
fiscal 2010 and was included in general and administrative expenses. The $8.4 million settlement was paid to
the SEC in the third quarter of fiscal 2011 after the federal district court approved the agreement.
Department of Justice
The company reached an agreement with the DOJ to resolve its previously disclosed investigation of possible
violations of the FCPA. Under the agreement, Tidewater Marine International Inc. (“TMII”), a wholly-owned
subsidiary of the company organized in the Cayman Islands, and the DOJ entered into a Deferred Prosecution
Agreement (“DPA”). Pursuant to the DPA, the DOJ deferred criminal charges against TMII for a period of three
years and seven days from the date of judicial approval of the Agreement, in return for: (a) TMII’s acceptance of
responsibility for, and agreement not to contest or contradict the truthfulness of, the statement of facts and
allegations contained in a three-count criminal information to be filed concurrently with the DPA; (b) TMII’s
payment of a $7.35 million fine, (c) TMII’s and Tidewater Inc.’s compliance with certain undertakings relating to
compliance with the FCPA and other applicable laws in connection with the Company’s operations, and
cooperation with domestic and foreign authorities in connection with the matters that are the subject of the
DPA; (d) TMII’s and Tidewater Inc.’s agreement to continue to address any deficiencies in the company’s
internal controls, policies and procedures relating to compliance with the FCPA and other applicable anti-
corruption laws, if and to the extent not already addressed; and (e) Tidewater Inc.’s agreement to report to the
DOJ in writing annually for the term of the DPA regarding remediation of the matters that are the subject of the
DPA, the implementation of any enhanced internal controls, and any evidence of improper payments the
company may have discovered during the term of the DPA. Tidewater submitted its first annual report to the
DOJ in November 2011.
If TMII and Tidewater Inc. comply with the DPA during its term, the DOJ will not bring the charges set out in the
information. In the event TMII or Tidewater Inc. breaches the DPA, the DOJ has discretion to extend its term for
up to a year, or bring certain criminal charges against TMII as outlined in the DPA.
A federal district court accepted the DPA on November 9, 2010. In the quarter ended December 31, 2010, TMII
paid the $7.35 million fine. Implementation of the DOJ settlement eliminated the $3.0 million contingent civil
penalty in connection with the SEC civil settlement detailed above. An additional financial charge of
$4.35 million associated with the DOJ settlement was recorded during the quarter ended September 30, 2010
and was included in general and administrative expenses.
Settlement with the Nigerian Government
The company announced on March 3, 2011, that it had reached an agreement with the Federal Government of
Nigeria (“FGN”) to settle and resolve the previously disclosed investigation by the FGN. As part of that
agreement, one of the company’s Nigerian subsidiaries agreed to pay $6.0 million to the FGN and to pay an
additional $0.3 million for the FGN’s attorneys’ fees and other expenses. The total $6.3 million ($0.12 per
diluted common share) settlement payments were recorded and paid during the quarter ended March 31, 2011.
F-40
Merchant Navy Officers Pension Fund
A current subsidiary of the company is a participating employer in an industry-wide multi-employer retirement
fund in the United Kingdom, known as the Merchant Navy Officers Pension Fund (MNOPF). The company has
been informed by the Trustee of the MNOPF that the Fund has a deficit that will require contributions from the
participating employers. The amount and timing of the company's share of the fund's deficit depends on a
number of factors, including updated calculations of the total fund deficit, theories of contribution imposed as
determined by and within the scope of the Trustee's authority, the number of then participating solvent
employers, and the final formula adopted to allocate the required contribution among such participating
employers. The amount payable to MNOPF based on assessments was $6.7 million and $9.6 million at
March 31, 2012 and 2011, respectively, all of which has been accrued. The company recorded $0.3 million and
$6.0 million of additional liabilities during fiscal 2012 and 2011, respectively. No additional liabilities were
recorded during fiscal 2010. Payments totaling $3.1 million and $0.9 million were paid to the fund during fiscal
2012 and 2011, respectively. In the future, the fund's Trustee may claim that the company owes additional
amounts for various reasons, including negative fund investment returns or the inability of other assessed
participating employers to contribute their share of respective allocations, failing which, the company and other
solvent participating employers will be asked for additional contributions. In October 2010, the Trustee advised
the company of its intention to accelerate previously agreed installment payments for the company and other
participating employers in the scheme. The company objected to that decision and has reached an agreement
in principle with the Trustee to pay the total remaining assessments (aggregating $6.7 million as of March 31,
2012) in installments through October 2014. This agreement in principle is subject to final confirmation by the
company and the Trustee.
Sonatide Joint Venture
The company has previously announced that its existing Sonatide joint venture agreement with Sonangol had
been extended to May 31, 2012 to allow ongoing joint venture restructuring negotiations to continue.
The company has from time to time also provided updates regarding the status of its continuing negotiations
with Sonangol to put its Sonatide joint venture on a more permanent footing after a number of temporary
extensions of the original joint venture agreement. As previously disclosed, in March 2012, Sonangol informed
Tidewater that it would not permit further vessel contracting activity by Sonatide until the joint venture
negotiations had been resolved to the parties’ mutual satisfaction. As a result, the company has begun
deploying vessels (at prevailing market day rates) to other markets as those vessels become available.
The company has recently exchanged proposals and is continuing discussions with Sonangol. In the most
recent meeting between the two negotiating teams, only modest progress was made in the restructuring
negotiations, and important and fundamental issues regarding the restructured relationship remain outstanding
and unresolved. In that meeting, Sonangol and the company discussed a number of topics, up to and including
the potential issues associated with a wind up of the existing joint venture in the event restructuring discussions
are not ultimately successful. If negotiations relating to putting the Sonatide joint venture on a more permanent
footing are ultimately unsuccessful, the company will work toward an orderly wind up of the joint venture. We
believe, however, that the joint venture would be allowed to honor existing vessel charter agreements through
their contract terms. Even though the global market for offshore supply vessels appears to be well balanced
(and the market for deepwater supply vessels is currently strong), there would be financial impacts associated
with the wind up of the existing joint venture and the possible redeployment of vessels to other markets,
including mobilization costs and costs to redeploy Tidewater shore-based employees to other areas, in addition
to lost revenues associated with potential downtime between vessel contracts. These financial impacts could,
individually or in the aggregate, be material to our results of operations and cash flows. If there is a need to
redeploy vessels which are currently deployed in Angola to other international markets, Tidewater believes that
there is sufficient demand for these vessels at prevailing market day rates.
For the year ended March 31, 2012, Tidewater’s Angolan operations generated vessel revenues of
approximately $254 million, or 24% of its consolidated vessel revenue, from an average of approximately
93 vessels (14 of which were stacked on average in fiscal 2012), and, for the year ended March 31, 2011,
generated vessel revenues of approximately $237 million, or 23% of consolidated vessel revenue, from an
average of approximately 97 vessels (13 of which were stacked on average in fiscal 2011). As of
March 31, 2012, the carrying value of Tidewater's investment in the Sonatide joint venture, which is included in
"Investments in, at equity, and advances to unconsolidated companies," is approximately $46 million.
F-41
Brazilian Customs
In April 2011, two Brazilian subsidiaries of Tidewater were notified by the Customs Office in Macae, Brazil that
they were jointly and severally being assessed fines of 155.0 million Brazilian reais (approximately $90.3 million
as of March 31, 2012). The assessment of these fines is for the alleged failure of these subsidiaries to obtain
import licenses with respect to 17 Tidewater vessels that provided Brazilian offshore vessel services to
Petrobras, the Brazilian national oil company, over a three-year period ending December 2009. After
consultation with its Brazilian tax advisors, Tidewater and its Brazilian subsidiaries believe that vessels that
provide services under contract to the Brazilian offshore oil and gas industry are deemed, under applicable law
and regulations, to be temporarily imported into Brazil, and thus exempt from the import license requirement.
The Macae Customs Office has now, without a change in the underlying applicable law or regulations, taken
the position that the temporary importation exemption is only available to new, and not used, goods imported
into Brazil and therefore it was improper for the company to deem its vessels as being temporarily imported.
The fines have been assessed based on this new interpretation of Brazilian customs law taken by the Macae
Customs Office. After consultation with its Brazilian tax advisors, the company believes that the assessment is
without legal justification and that the Macae Customs Office has misinterpreted applicable Brazilian law on
duties and customs. The company is vigorously contesting these fines (which it has neither paid nor accrued
for) and, based on the advice of its Brazilian counsel, believes that it has a high probability of success with
respect to the overturn of the entire amount of the fines, either at the administrative appeal level or, if
necessary, in Brazilian courts. In December 2011, an administrative appeals board issued a decision that
disallowed 149.0 million Brazilian reais (approximately $86.8 million as of March 31, 2012) of the total fines
sought by the Macae Customs Office. The full decision is subject to further administrative appellate review, and
the company understands that this further full review by a secondary appellate board is ongoing. The company
is contesting the decision with respect to the remaining 6.0 million Brazilian reais (approximately $3.5 million as
of March 31, 2012) in fines. The company believes that the ultimate resolution of this matter will not have a
material effect on the consolidated financial statements.
Potential for Future Brazilian State Tax Assessment
The company is aware that a Brazilian state in which the company has operations has notified two of the
company’s competitors that they are liable for unpaid taxes (and penalties and interest thereon) for failure to
pay state import taxes with respect to vessels that such competitors operate within the coastal waters of such
state pursuant to charter agreements. The import tax being asserted is equal to a percentage (which could be
as high as 16% for vessels entering that state’s waters prior to December 31, 2010 and 3% thereafter) of the
affected vessels’ declared values. The company understands that the two companies involved are contesting
the assessment through administrative proceedings before the taxing authority.
To date, the company’s two Brazilian subsidiaries, as well as vessels for all other competitors (more than a
hundred competitors), have not been similarly notified by the Brazilian state that it has an import tax liability
related to its vessel activities imported through that state. Although the company has been advised by its
Brazilian tax counsel that substantial defenses would be available if a similar tax claim were asserted against
the company, if an import tax claim were to be asserted, it could be for a substantial amount given that the
company has had substantial and continuing operations within the territory of the state (although the amount
could fluctuate significantly depending on the administrative determination of the taxing authority as to the rate
to apply, the vessels subject to the levy and the time periods covered). In addition, under certain circumstances,
the company might be required to post a bond or other adequate security in the amount of the assessment
(plus any interest and penalties) if it became necessary to challenge the assessment in a Brazilian court. The
statute of limitations for the Brazilian state to levy an assessment of the import tax is five years from the date of
a vessel’s entry into Brazil. The company has not yet determined the potential tax assessment, and according
to the Brazilian tax counsel, chances of defeating a possible claim/notification from the State authorities in court
are probable. To obtain legal certainty and predictability for future charter agreements and because the
company was importing two vessels to start new charters in Brazil, the company filed two suits on
August 22, 2011 and April 5, 2012, respectively, against the Brazilian state and judicially deposited the
respective state tax for these newly imported vessels. As of March 31, 2012, no accrual has been recorded for
any liability associated with any potential future assessment for previous periods based on management’s
assessment, after consultation with Brazilian counsel, that a liability for such taxes was not probable.
F-42
Venezuelan Operations
The company has previously reported that in May 2009 the Venezuelan National Assembly enacted a law (the
Reserve Law) whereby the Bolivarian Republic of Venezuela (Venezuela) reserved to itself assets and services
related to maritime activities on Lake Maracaibo. The company also previously reported that in May 2009,
Petróleos de Venezuela, S.A. (PDVSA), the Venezuelan national oil company, invoking the Reserve Law, took
possession of (a) 11 of the company’s vessels that were then supporting PDVSA operations in the Lake
Maracaibo region, (b) the company’s shore-based facility adjacent to Lake Maracaibo and (c) certain other
related assets. The company has also previously reported that in July 2009, Petrosucre, S.A. (Petrosucre), a
subsidiary of PDVSA, took control of four additional company vessels. As a consequence of these measures,
the company (i) no longer has possession or control of those assets, (ii) no longer operates them or provides
support for their operations, and (iii) no longer has any other vessels or operations in Venezuela.
As a result of the May 2009 seizure of the 11 vessels and other assets discussed above, the company
recorded a charge of $3.75 million ($2.9 million after tax, or $0.06 per common share), during the quarter ended
June 30, 2009, to write off the net book value of the assets seized. As a result of the July 2009 vessel seizures,
the company recorded a charge of $0.5 million ($0.4 million after tax, or $0.01 per common share) during the
quarter ended September 30, 2009, to write off the net book value of those assets.
As a result of the asset seizures referred to above, the lack of further operations in Venezuela, and the
continuing uncertainty about the timing and amount of the compensation that the company may collect in the
future (including compensation for the taking of the accounts receivable payable by PDVSA and Petrosucre),
the company recorded a $44.8 million ($44.8 million after tax, or $0.87 per common share) provision during the
quarter ended June 30, 2009, to fully reserve accounts receivable payable by PDVSA and Petrosucre.
As previously reported by the company, the company filed with the International Centre for Settlement of
Investment Disputes (ICSID) a Request for Arbitration against the Republic of Venezuela seeking
compensation for the expropriation of the company’s Venezuelan investments. On January 24, 2011, the
arbitration tribunal, appointed under the ICSID Convention to resolve the investment dispute, held its first
session on procedural issues in Washington, D.C. The arbitration tribunal established a briefing and hearing
schedule related to jurisdictional issues. The briefing and hearings on jurisdiction concluded on March 1, 2012.
The company expects the arbitration tribunal to issue a written ruling on jurisdictional issues in the second half
of 2012. To the extent that the arbitration tribunal finds a basis for jurisdiction over this dispute, the company
intends to continue diligently to prosecute its claim in the arbitration. While the company believes, after
consultation with its advisors, that it is entitled to full reparation for the losses suffered as a result of the actions
taken by the Republic, there can be no assurances that the company will prevail in the arbitration.
Currency Devaluation and Fluctuation Risk
Due to the company’s global operations, the company is exposed to foreign currency exchange rate
fluctuations and exchange rate risks on all charter hire contracts denominated in foreign currencies. For some
of our non-U.S. contracts, a portion of the revenue and local expenses are incurred in local currencies with the
result that the company is at risk of changes in the exchange rates between the U.S. dollar and foreign
currencies. We generally do not hedge against any foreign currency rate fluctuations associated with foreign
currency contracts that arise in the normal course of business, which exposes us to the risk of exchange rate
losses. To minimize the financial impact of these items, the company attempts to contract a significant majority
of its services in U.S. dollars. In addition, the company attempts to minimize its financial impact of these risks,
by matching the currency of the company’s operating costs with the currency of the revenue streams when
considered appropriate. The company continually monitors the currency exchange risks associated with all
contracts not denominated in U.S. dollars.
Legal Proceedings
Various legal proceedings and claims are outstanding which arose in the ordinary course of business. In the
opinion of management, the amount of ultimate liability, if any, with respect to these actions, will not have a
material adverse effect on the company's financial position, results of operations, or cash flows.
F-43
(12) FAIR VALUE MEASUREMENTS AND DISCLOSURES
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Other Financial Instruments
The company’s primary financial instruments consist of cash and cash equivalents, trade receivables and trade
payables with book values that are considered to be representative of their respective fair values. The company
periodically utilizes derivative financial instruments to hedge against foreign currency denominated assets and
liabilities, currency commitments, or to lock in desired interest rates. These transactions are generally spot or
forward currency contracts or interest rate swaps that are entered into with major financial institutions.
Derivative financial instruments are intended to reduce the company’s exposure to foreign currency exchange
risk and interest rate risk. The company enters into derivative instruments only to the extent considered
necessary to address its risk management objectives and does not use derivative contracts for speculative
purposes. The derivative instruments are recorded at fair value using quoted prices and quotes obtainable from
the counterparties to the derivative instruments.
Cash Equivalents. The company’s cash equivalents, which are securities with maturities less than 90 days,
are held in money market funds or time deposit accounts with highly rated financial institutions. The carrying
value for cash equivalents is considered to be representative of its fair value due to the short duration and
conservative nature of the cash equivalent investment portfolio.
Spot Derivatives. Spot derivative financial instruments are short-term in nature and generally settle within two
business days. The fair value of spot derivatives approximates the carrying value due to the short-term nature
of this instrument, and as a result, no gains or losses are recognized.
The company had one foreign exchange spot contract outstanding at March 31, 2012, which totaled a notional
value of $1.0 million. The one spot contract settled by April 2, 2012. The company had eight purchase and one
sell foreign exchange spot contracts outstanding at March 31, 2011, which totaled an aggregate notional value
of $3.6 million. All nine spot contracts settled by April 4, 2011.
Forward Derivatives. Forward derivative financial instruments are generally longer-term in nature but
generally do not exceed one year. The accounting for gains or losses on forward contracts is dependent on the
nature of the risk being hedged and the effectiveness of the hedge.
At March 31, 2012, the company had four British pound forward contracts outstanding, which is generally
intended to hedge the company’s foreign exchange exposure relating to its MNOPF liability as disclosed in
Note (11) and elsewhere in this document. The forward contracts expire at various times through March 2013.
The combined change in fair value of the forward contracts was approximately $0.1 million, all of which was
recorded as a foreign exchange gain during the fiscal year ended March 31, 2012, because the forward
contracts did not qualify as hedge instruments. All changes in fair value of the forward contracts were recorded
in earnings.
At March 31, 2011, the company had three British pound forward contracts outstanding, related to the
company’s foreign exchange exposure on its MNOPF liability. The combined change in fair value of these
forward contracts at March 31, 2011 was approximately $0.3 million, all of which was recorded as a foreign
exchange gain during the fiscal year ended March 31, 2011, because the forward contracts did not qualify as
hedge instruments.
The following table provides the fair value hierarchy for the company’s other financial instruments measured as
of March 31, 2012:
(In thousands)
Money market cash equivalents
Long-term British pound forward derivative contracts
Total fair value of assets
Total
288,446
7,042
295,488
$
$
Quoted prices in
active markets
(Level 1)
288,446
---
288,446
Significant
observable
inputs
(Level 2)
---
7,042
7,042
Significant
unobservable
inputs
(Level 3)
---
---
---
F-44
The following table provides the fair value hierarchy for the company’s other financial instruments measured as
of March 31, 2011:
(In thousands)
Money market cash equivalents
Long-term British pound forward derivative contracts
Total fair value of assets
Total
222,673
8,179
230,852
$
$
Quoted prices in
active markets
(Level 1)
222,673
---
222,673
Significant
observable
inputs
(Level 2)
---
8,179
8,179
Significant
unobservable
inputs
(Level 3)
---
---
---
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Asset Impairments
The company accounts for long-lived assets in accordance with ASC 360-10-35, Impairment or Disposal of
Long-Lived Assets. The company reviews the vessels in its active fleet for impairment whenever events occur
or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. In
such evaluation the estimated future undiscounted cash flows generated by an asset group are compared with
the carrying amount of the asset group to determine if a write-down may be required. With respect to vessels
that have not been stacked, we group together for impairment testing purposes vessels with similar operating
and marketing characteristics. We also subdivide our groupings of assets with similar operating and marketing
characteristics between our older vessels and newer vessels.
The company estimates cash flows based upon historical data adjusted for the company’s best estimate of
expected future market performance, which, in turn, is based on industry trends. If an asset group fails the
undiscounted cash flow test, the company uses the discounted cash flow method to determine the estimated
fair value of each asset group and compares such estimated fair value (considered Level 3, as defined by ASC
360) to the carrying value of each asset group in order to determine if impairment exists. If impairment exists,
the carrying value of the asset group is reduced to its estimated fair value.
In addition to the periodic review of its active long-lived assets for impairment when circumstances warrant, the
company also performs a review of its stacked vessels and vessels withdrawn from service every six months or
whenever changes in circumstances indicate that the carrying amount of a vessel may not be recoverable.
Management estimates each stacked vessel’s fair value by considering items such as the vessel’s age, length
of time stacked, likelihood of a return to active service, actual recent sales of similar vessels, among others. In
certain situations we obtain an estimate of the fair value of the stacked vessel from third-party appraisers or
brokers. The company records an impairment charge when the carrying value of a vessel withdrawn from
service or a stacked vessel exceeds its estimated fair value. The estimates of fair value of stacked vessels are
also subject to significant variability, are sensitive to changes in market conditions, and are reasonably likely to
change in the future.
The below table summarizes the combined fair value of the assets that incurred impairments along with the
amount of impairment during the years ended March 31. The impairment charges were recorded in gain on
asset dispositions, net.
(In thousands)
Amount of impairment incurred
Combined fair value of assets incurring impairment
$
2012
3,607
8,175
2011
8,958
13,646
2010
3,102
10,580
(13) GAIN ON DISPOSITION OF ASSETS, NET
The company seeks opportunities to dispose its older vessels when market conditions warrant and
opportunities arise. As such, dispositions of vessels can vary from year to year; therefore, gains on sales of
assets may fluctuate significantly from period to period. The majority of the company’s vessels are sold to
buyers who do not compete with the company in the offshore energy industry.
F-45
The number of vessels disposed along with the gain on the dispositions for the years ended March 31, are as
follows:
(In thousands, except number of vessels disposed)
Gain on vessels disposed
Number of vessels disposed (A)
$
2012
20,024
60
2011
21,663
46
2010
30,646
55
(A) The number of vessels disposed in Fiscal 2010 excludes 15 vessels seized by the Venezuelan government
Also included in gain on dispositions of assets, net are asset impairments. Please refer to Note (12) above for a
discussion on asset impairment.
(14) SEGMENT INFORMATION, GEOGRAPHICAL DATA AND MAJOR CUSTOMERS
The company follows the disclosure requirements of ASC 280, Segment Reporting. Operating business
segments are defined as a component of an enterprise for which separate financial information is available and
is evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing
performance.
During the quarter ended September 30, 2011, our International and United States segments were reorganized
to form four new operating segments. We now manage and measure our business performance in four distinct
operating segments which are based on our geographical organization: Americas, Asia/Pacific, Middle
East/North Africa, and Sub-Saharan Africa/Europe. The new segments are reflective of how the company’s
chief operating decision maker (CODM) reviews operating results for the purposes of allocating resources and
assessing performance. The company’s CODM is its Chief Executive Officer. Moreover, management decided
to reorganize its reporting segments because the company’s Sub-Saharan Africa/Europe and Latin American
business regions gained greater significance as a percentage of consolidated revenues and operating profit,
while our former United States segment decreased in its significance to consolidated revenues and operating
profit. Prior period disclosures have been adjusted to reflect the change in reportable segments.
F-46
The following table provides a comparison of revenues, vessel operating profit, depreciation and amortization,
and additions to properties and equipment for the years ended March 31. Vessel revenues and operating costs
relate to vessels owned and operated by the company while other operating revenues relate to the activities of
the company's shipyards, brokered vessels and other miscellaneous marine-related businesses.
(In thousands)
Revenues:
Vessel revenues (A):
Americas
Asia/Pacific
Middle East/N. Africa
Sub-Saharan Africa/Europe
Other operating revenues
Vessel operating profit:
Americas
Asia/Pacific
Middle East/N. Africa
Sub-Saharan Africa/Europe
Corporate expenses
Goodwill impairment
Gain on asset dispositions, net
Other operating services
Operating income
Foreign exchange gain (loss)
Equity in net earnings of unconsolidated companies
Interest income and other, net
Interest and other debt costs
Earnings before income taxes
Depreciation and amortization:
Americas
Asia/Pacific
Middle East/N. Africa
Sub-Saharan Africa/Europe
Corporate
Additions to properties and equipment:
Americas
Asia/Pacific
Middle East/N. Africa
Sub-Saharan Africa/Europe
Corporate (B)
Total assets (A):
Marine:
Americas
Asia/Pacific
Middle East/N. Africa
Sub-Saharan Africa/Europe
Investments in and advances to unconsolidated Marine companies
Corporate (C)
2012
2011
2010
324,529
153,752
109,489
472,698
1,060,468
6,539
1,067,007
362,825
176,877
92,151
419,360
1,051,213
4,175
1,055,388
393,270
170,358
93,379
481,155
1,138,162
30,472
1,168,634
56,003
16,125
805
97,142
170,075
(40,379)
(30,932)
17,657
(2,867)
113,554
3,309
13,041
3,440
(22,308)
111,036
38,140
20,758
17,606
58,137
3,715
138,356
7,279
64,431
16,828
84,491
194,931
367,960
49,341
22,308
18,990
82,993
173,632
(46,361)
---
13,228
(1,163)
139,336
2,278
12,185
5,065
(10,769)
148,095
45,442
25,453
14,324
52,871
2,486
140,576
12,031
5,514
1,152
3,646
592,946
615,289
37,533
49,049
29,936
145,032
261,550
(51,432)
---
28,178
2,034
240,330
4,094
18,107
6,882
(1,679)
267,734
46,885
23,882
11,287
46,874
1,256
130,184
16,285
3,720
14,032
4,436
413,500
451,973
1,031,962
654,357
405,625
1,519,124
3,611,068
46,077
3,657,145
404,473
4,061,618
975,269
583,569
369,122
1,286,554
3,214,514
39,044
3,253,558
494,558
3,748,116
1,072,273
436,985
192,938
1,133,530
2,835,726
40,614
2,876,340
417,017
3,293,357
$
$
$
$
$
$
$
$
$
$
(A) Marine support services are conducted worldwide with assets that are highly mobile. Revenues are principally derived
from offshore service vessels, which regularly and routinely move from one operating area to another, often to and from
offshore operating areas in different continents. Because of this asset mobility, revenues and long-lived assets
attributable to the company's international marine operations in any one country are not material. Equity in net assets of
non-U.S. subsidiaries is $3.1 billion, $2.8 billion and $2.4 million at March 31, 2012, 2011 and 2010, respectively.
Identifiable assets include accounts receivable and other balances denominated in currencies other than the U.S.
dollar, which aggregate approximately $0.3 million, $0.5 million and $1.4 million at March 31, 2012, 2011, and 2010,
respectively. These amounts are subject to the usual risks of fluctuating exchange rates and government-imposed
exchange controls.
F-47
(B) Included in Corporate are additions to properties and equipment relating to vessels currently under construction which
have not yet been assigned to a non-corporate reporting segment as of the dates presented.
(C) Included in Corporate are vessels currently under construction which have not yet been assigned to a non-corporate
reporting segment. The vessel construction costs will be reported in Corporate until the earlier of the vessels being
assigned to a non-corporate reporting segment or the vessels’ delivery. At March 31, 2012, 2011 and 2010,
$249.4 million, $355.3 million and $256.3 million, respectively, of vessel construction costs are included in Corporate.
The following table discloses the amount of revenue by segment, and in total for the worldwide fleet, along with
the respective percentage of total vessel revenue:
Revenue by vessel class:
(In thousands):
Americas fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Other
Total
Asia/Pacific fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
Middle East/N. Africa fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
Sub-Saharan Africa/Europe fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Total
Worldwide fleet:
Deepwater vessels
Towing-supply/supply
Crew/utility
Offshore tugs
Other
Total
2012
% of Vessel
Revenue
2011
% of Vessel
Revenue
2010
% of Vessel
Revenue
$
$
$
$
$
$
$
$
$
$
146,950
143,796
29,535
4,248
---
324,529
75,495
73,845
876
3,536
153,752
46,511
56,902
---
6,076
109,489
199,697
201,463
51,010
20,528
472,698
14%
14%
3%
<1%
---
31%
7%
7%
<1%
<1%
14%
4%
5%
---
1%
10%
19%
19%
5%
2%
45%
181,244
149,151
30,104
2,326
---
362,825
82,919
89,517
975
3,466
176,877
28,460
56,869
---
6,822
92,151
123,707
221,595
50,549
23,509
419,360
17%
14%
3%
<1%
---
35%
8%
9%
<1%
<1%
17%
3%
5%
---
1%
9%
12%
21%
5%
2%
40%
178,623
172,959
34,000
7,121
567
393,270
44,782
123,850
928
798
170,358
28,566
54,115
1,244
9,454
93,379
110,517
296,094
54,237
20,307
481,155
468,653
476,006
81,421
34,388
---
1,060,468
44%
45%
8%
3%
---
100%
416,330
517,132
81,628
36,123
---
1,051,213
40%
49%
8%
3%
---
100%
362,488
647,018
90,409
37,680
567
1,138,162
16%
15%
3%
1%
<1%
35%
4%
11%
<1%
<1%
15%
3%
5%
<1%
1%
8%
10%
26%
5%
2%
42%
32%
57%
8%
3%
<1%
100%
The following table discloses our customers that accounted for 10% or more of total revenues during the years
ended March 31:
Chevron Corporation
Petroleo Brasileiro SA
2012
17.4%
14.6%
2011
16.2%
15.4%
2010
18.3%
13.1%
F-48
(15) GOODWILL
The company tests goodwill for impairment annually at the reporting unit level using carrying amounts as of
December 31 or more frequently if events and circumstances indicate that goodwill might be impaired. The
company uses the two-step method for evaluating goodwill for impairment as prescribed in ASC 350,
Intangibles-Goodwill and Other (ASC 350). Step one involves comparing the fair value of the reporting unit to its
carrying amount. If the fair value of the reporting unit is greater than its carrying amount, there is no impairment.
If the reporting unit’s carrying amount is greater than the fair value, the second step must be completed to
measure the amount of impairment, if any. Step two involves calculating the implied fair value of goodwill by
deducting the fair value of all tangible and intangible assets, excluding goodwill, of the reporting unit from the
fair value of the reporting unit as determined in step one. The implied fair value of goodwill determined in this
step is compared to the carrying value of goodwill. If the implied fair value of goodwill is less than the carrying
value of goodwill, an impairment loss is recognized equal to the difference. The company performed its annual
impairment test as of December 31, 2010 on its then existing International and United States reporting units,
and the test determined there was no goodwill impairment.
As discussed in Note (14), the company changed its reportable segments during the quarter ended
September 30, 2011 from International and United States to Americas, Asia/Pacific, Middle East/North Africa,
and Sub-Saharan Africa/Europe. The company performed an interim goodwill impairment assessment prior to
changing its reportable segments and determined there was no goodwill impairment.
Goodwill of approximately $49.4 million historically assigned to the United States segment was assigned to the
Americas segment. Goodwill of approximately $279.4 million historically assigned to the International segment
was allocated among the new reportable segments based on their relative fair values.
The company also performed an interim goodwill impairment assessment on the new reporting units using
September 30, 2011 carrying values and determined on the basis of the step one impairment test that the
carrying value of its Middle East/North Africa unit exceeded its fair value thus triggering the second step of the
analysis as prescribed by ASC 350. An estimated goodwill impairment charge of $30.9 million was recorded
during the quarter ended September 30, 2011. Step two of the assessment was completed during the quarter
ended December 31, 2011 and there was no further adjustment to goodwill.
Goodwill by reportable segment at March 31, is as follows:
(In thousands)
Americas
Asia/Pacific
Middle East/N. Africa
Sub-Saharan Africa/Europe
2012
114,237
56,283
---
127,302
297,822
$
$
2011
114,237
56,283
30,932
127,302
328,754
Goodwill, as a percentage of total assets and stockholders’ equity, at March 31, is as follows:
Goodwill as a percentage of total assets
Goodwill as a percentage of stockholders’ equity
2012
7%
12%
2011
9%
13%
F-49
(16) QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected financial information for interim periods for the years ended March 31, is as follows:
(In thousands except per share data)
Fiscal 2012
Revenues
Operating income (loss)(A)
Net earnings (loss) (B)
Basic earnings (loss) per share
Diluted earnings (loss) per share
Fiscal 2011
Revenues
Operating income (A)
Net earnings (B)
Basic earnings per share
Diluted earnings per share
First
Second
Third
Fourth
Quarter
$
$
$
$
$
$
254,607
31,461
24,558
0.48
0.48
262,525
45,267
39,831
0.78
0.77
250,894
(5,481)
(4,876)
(0.10)
(0.10)
267,100
26,892
19,403
0.38
0.38
272,111
41,191
34,087
0.67
0.67
271,775
42,602
34,363
0.67
0.67
289,395
46,383
33,642
0.66
0.66
253,988
24,575
12,019
0.23
0.23
(A) Operating income consists of revenues less operating costs and expenses, depreciation, goodwill impairment, general and
administrative expenses and gain on asset dispositions, net, of the company’s operations. Goodwill impairment by quarter for fiscal
2012 and Gain on asset dispositions, net, by quarter for fiscal 2012 and 2011, are as follows:
(In thousands)
Fiscal 2012:
Goodwill impairment
Gain on asset dispositions, net
Fiscal 2011:
Gain on asset dispositions, net
First
---
1,717
5,558
$
$
$
Second
(30,932)
9,458
3,638
Third
---
2,496
2,425
Fourth
---
3,986
1,607
(B)
Included in fiscal 2011 net earnings are the settlements with the DOJ related to the internal investigation and with the Federal
Government of Nigeria. The settlements for these matters by quarter for fiscal 2011 are as follows:
(In thousands)
Fiscal 2011:
DOJ settlement
DOJ settlement per common share
FGN settlement
FGN settlement per common share
(17) SUBSEQUENT EVENTS
First
Second
Third
Fourth
$
$
$
$
---
---
---
---
(4,350)
0.08
---
---
---
---
---
---
---
---
(6,300)
0.12
The company took delivery of two deepwater PSV vessels in late April 2012 and one non-deepwater anchor
handling towing supply vessel in early May 2012. In addition, the company is committed to the construction of
four deepwater PSVs with one shipyard for a total cost of $118.0 million.
In addition, on April 18, 2012, Dean E. Taylor, President, Chief Executive Officer and Chairman of the Board
announced his retirement as President and Chief Executive Officer of Tidewater Inc. effective May 31, 2012. To
succeed Mr. Taylor as President and Chief Executive Officer is Jeffrey M. Platt effective June 1, 2012. Mr.
Taylor will continue as Tidewater’s non-executive Chairman of the Board. As a result of our CEO’s retirement,
Mr. Taylor is expected to receive in December 2012 a $12.6 million lump sum distribution in settlement of his
supplemental executive retirement plan obligation. A settlement loss, which is currently estimated to be
$4.4 million, will be recorded at the time of distribution.
During the period April 1, 2012 through May 15, 2012, pursuant to the company’s stock repurchase plan
discussed in Note (8), the company repurchased 435,300 shares of common stock for an aggregated price of
$21.4 million, or an average price of $49.28 per share.
On May 17, 2012, the company’s Board of Directors authorized the company to spend up to $200.00 million to
repurchase shares of its common stock in open-market or privately-negotiated transactions. The effective date
of this new authorization is July 1, 2012 through June 30, 2013. The company will use its available cash and,
when considered advantageous, borrowings under its revolving credit facility or other borrowings, to fund any
share repurchases.
F-50
TIDEWATER INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years Ended March 31, 2012, 2011 and 2010
(In thousands)
Column A
Column B
Column C
Column D
Balance at
Beginning
of period
Additions
at Cost
Deductions
SCHEDULE II
Column E
Balance
at
End of
Period
Description
Fiscal 2012
Deducted in balance sheet from
trade accounts receivables:
Allowance for doubtful accounts
Fiscal 2011
Deducted in balance sheet from
trade accounts receivables:
Allowance for doubtful accounts
Fiscal 2010
Deducted in balance sheet from
trade accounts receivables:
Allowance for doubtful accounts
$ 50,677
666
1,422 (A)
49,921
$ 38,632
12,562 (C)
517 (B)
50,677
$ 5,773
45,267
12,408 (D)
38,632
(A) Of this amount, $1,000 represents the collections from one customer located in Mexico and $422
represents accounts receivable amounts considered uncollectible and removed from accounts receivable
by reducing the allowance for doubtful accounts.
(B) Accounts receivable amounts considered uncollectible and removed from accounts receivable by
reducing the allowance for doubtful accounts.
(C) Of this amount, $12,000 represents accounts receivable amounts the company is in pursuit of collecting
from one customer located in Mexico. This amount was reclassified from deferred revenue in the current
year as a result of a determination of the likelihood of collectability of the related receivables.
(D) Of this amount, $8 represents accounts receivable amounts considered uncollectible and removed from
accounts receivable by reducing allowance for doubtful accounts and $12,400 represents the revaluation
of the allowance for doubtful accounts provision on the company’s Venezuelan receivables due to the
50% devaluation of the Venezuelan bolivar fuerte relative to the U.S. dollar.
F-51
Board of Directors
Board of Directors
Corporate Officers
Corporate Officers
Sitting left to right:
Richard A. Pattarozzi
Former Vice President,
Shell Oil Company
M. Jay Allison
President, Chief Executive
Officer and Chairman
of the Board,
Comstock Resources, Inc.
Dean E. Taylor
Chairman, President and
Chief Executive Officer
Cindy B. Taylor
President and Chief
Executive Officer,
Oil States International, Inc.
Jon C. Madonna
Former Chairman and
Chief Executive Officer,
KPMG LLP
J. Wayne Leonard
Chairman and Chief Executive
Officer, Entergy Corporation
Sitting left to right:
Deborah Willingham
Vice President and Chief
Human Resources Officer
Darren J. Vorst
Vice President and Treasurer
Bruce D. Lundstrom
Executive Vice President,
General Counsel and Secretary
Dean E. Taylor
Chairman, President and
Chief Executive Officer
Joseph M. Bennett
Executive Vice President and
Chief Investor Relations Officer
Gerard P. Kehoe
Senior Vice President
Craig J. Demarest
Vice President, Principal Accounting
Officer and Controller
Standing Left to Right:
Jack E. Thompson
Management Consultant
Nicholas J. Sutton
Chairman and Chief Executive Officer,
Resolute Energy Corporation
James C. Day
Former Chairman of the Board
and Chief Executive Officer,
Noble Corporation
Joseph H. Netherland
Former Chairman of the Board,
FMC Technologies, Inc.
Morris E. Foster
Former Vice President of ExxonMobil
Corporation and Former President
of ExxonMobil Production Company
Richard T. du Moulin
President, Intrepid Shipping LLC
Standing Left to Right:
Kevin M. Carr
Vice President, Taxation
William R. Brown, IV
Vice President
George N. Greer
Vice President
Jeffrey M. Platt
Chief Operating Officer
Matthew A. Mancheski
Vice President, Chief Information
Officer and Chief Strategic
Planning Officer
Mark A. Handin
Vice President
Quinn P. Fanning
Executive Vice President and
Chief Financial Officer
Jeff A. Gorski
Senior Vice President
M a n ag e m e n t C e rt i f i cati o n s
On August 5, 2011, in accordance with Section 3.03A.12(a) of the New York Stock Exchange Listed Company Manual, the Company’s management
submitted its certification to the New York Stock Exchange stating that it was not aware of any violations by the Company of the
Exchange’s Corporate Governance listing standards as of that date.
The certifications with respect to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2012, required by Section 302
of the Sarbanes-Oxley Act, have been filed as Exhibits 31.1 and 31.2 to the Company’s Annual Report on Form 10-K.
www.tdw.com
TIDEWATER INC.
601 Poydras Street, Suite 1900
New Orleans, Louisiana 70130
Toll Free: 1-800-678-8433
Phone: 1-504-568-1010
Email: connect@tdw.com
www.tdw.com
002CSN1318