Tidewater Inc.
601 Poydras Street, Suite 1500
New Orleans, Louisiana 70130
Toll Free: 1-800-678-8433
Phone: 1-504-568-1010
Email: connect@tdw.com
www.tdw.com
2014 ANNUAL REPORT
002CSN39C7
Evolving Strategies for Changing Times
As the offshore industry moves firmly into an expansionary
phase, Tidewater’s long-term strategy of upgrading and
expanding our fleet with larger, more capable vessels,
expanding our geographical footprint and entering the
subsea service market with our new fleet of remotely
operated vehicles will enable us to support our clients’
efforts to find and develop additional crude oil and natural
gas supplies to meet the world’s growing energy needs.
Our strategy has been executed while we maintain safe
and efficient operations for our employees and customers
and carefully invest the capital entrusted to us by our
shareholders. These steps are designed to sustain our
financial strength and provide superior service to our
clients while generating solid returns for our shareholders.
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To Our Shareholders
“We have a solid financial footing, a strong set of core
values and a solid business strategy. This foundation
allows us to grow, provide superior service to our clients
and generate solid returns for our shareholders.”
Jeffrey M. Platt
President, CEO and Director
Rising to the Challenge
Our last annual report highlighted the similarities of our business to
competing in a triathlon — races with varying durations and physical
challenges. Our races never end as our business cycles have varying
durations and the operational challenges are constantly changing. Last
year, we were favored with positive market conditions, but we still faced
challenges to our near-, medium- and long-term strategies. That said, fiscal
2014 was a successful year; it was a transitional year; it was an evolutionary
year; it was a year of rededication; and it marked a year of opportunity.
Success. The fiscal 2014 offshore market exhibited steadily improving
activity that contributed to our 15% increase in vessel revenues. Tidewater’s
more than a decade-long strategy of replacing and enhancing our aging fleet
is reaping rewards. Our “new” fleet of vessels has grown to 245 vessels by
fiscal year end, with 30 additional units under construction. Utilization of these
vessels averaged over 83% during the year, and the average dayrate of this
“new” vessel fleet was approximately $18,275, an 11% improvement from the
prior fiscal year.
Transition. We successfully negotiated a new Sonatide joint venture
agreement with our partner (Sonangol) in Angola. While new Angolan foreign
exchange regulations elevated our working capital levels in Angola, we have
learned to work within these new regulations and we are evaluating the
right fleet mix in Angola in order to ease that strain going forward.
Evolution. We took two significant steps to expand our capabilities
to better serve our clients. We acquired a Norway-based company, Troms
Offshore Supply AS, including their experienced management team and
fleet of deepwater vessels, expanding our geographical footprint into the
active North Sea market. Additionally, this fleet adds to our capability to
support our clients as they expand their exploration and development
efforts into the Arctic and other cold water regions of the world. Another
step undertaken was establishing a subsea operation with the purchase of six
work-class, remotely operated vehicles (ROVs) that will enable our vessels to
support our clients’ deepwater construction and maintenance needs.
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Rededication. Safety is a core value at Tidewater. Last year started
with two unfortunate lost time accidents (LTAs) that ended an extended
period of record safety performance which included no LTAs in the previous
fiscal year. We utilized those LTAs to rededicate our focus on being the
safest offshore vessel company. We strive for that goal because it is both
good business and a moral obligation to ensure that our employees and
customers will live, work and return home safely after every shift.
Opportunity. The offshore industry is in the midst of a significant
growth phase that will provide additional work opportunities and also
present additional challenges. The most significant challenge is the
unanswered question of how many of the approximately 250 new drilling
rigs under construction will be additive to the working offshore rig fleet
versus replacements for older rigs. While some analysts are concerned
about a temporary indigestion for the industry from this influx of new rigs,
we view their arrival as opportunities. Whether the rigs are additive or
replacements, the capability of the offshore rig fleet will grow, placing
greater demands on our vessels. That is why we have been renewing
our fleet for over the past decade, and why we have continued to add
new vessels with greater capabilities to the fleet to meet our customers’
future needs.
It is said: The past is prologue. That is true for Tidewater. We have a
solid financial footing, a strong set of core values and a solid business
strategy. This foundation allows us to grow, provide superior service to our
clients and generate solid returns for our shareholders.
Jeffrey M. Platt
President, CEO and Director
>> Revenues
($ in Millions)
$1,435
$1,244
$1,067
>> Adjusted Net Earnings*
($ in Millions)
>> Adjusted Diluted Earnings
Per Common Share*
$183
$151
$3.69
$3.03
$109
$2.13
2012
2013
2014
2012
2013
2014
2012
2013
2014
* Fiscal years 2012 and 2014 are exclusive of after-tax goodwill impairment charges of $22 million ($0.43 per share) and $43 million ($0.87 per share), respectively. Unadjusted
Net Earnings and Diluted Earnings per Common Share in fiscal years 2012 and 2014 were $87 million ($1.70 per share) and $140 million ($2.82 per share), respectively.
3
Review of Operations
“The significance of last
year’s financial performance
was its validation of our
long-standing strategy for
renewing our vessel fleet to
better serve our customers
who continue to seek new
hydrocarbon resources in
all depths of waters globally,
including the more harsh
environments that challenge
the capabilities of older
vessels.”
Not Just Bigger.. Better..
A second year of steady improvement for offshore oil and gas activity contributed to another
healthy year of vessel revenue gains for Tidewater. Total vessel revenues increased by 15%
over those recorded for fiscal 2013. The significance of last year’s financial performance was
its validation of our long-standing strategy for renewing our vessel fleet to better serve our
customers who continue to seek new hydrocarbon resources in all depths of waters globally,
including the more harsh environments that challenge the capabilities of older vessels. Today,
approximately one third of our active vessel fleet is made up of new, larger and more capable
deepwater vessels whose average age is less than seven years at fiscal year end. Another 39%
of our active vessel fleet is comprised of similarly new and more capable towing supply vessels
for supporting jack up drilling rigs. All of our new vessels collectively generated 95% of total
vessel revenues in fiscal 2014.
Having made significant progress with our broad-based fleet renewal efforts in recent years,
during fiscal 2014 we focused our investments on growing the company’s presence in key
markets and on further upgrading our asset base and operating capabilities. The acquisition of
Troms Offshore Supply AS, which was completed in June 2013, is a good example of our desire
to not just be bigger, but to be better. Troms provided us with six new deepwater PSVs capable
of working in the cold waters of the world. These vessels, when paired with additional ice-class
PSVs already in the Tidewater fleet and a high quality, Norway-based management team, give us
significant capacity to serve our clients working in the North Sea, off Eastern Canada and in the
Arctic – all regions where exploration and development activity is growing.
Another tenant of our long-term strategy is to seek opportunities to expand into adjacent
marine markets, again to enhance our ability to meet expanding client needs. A natural expansion
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was into the subsea market. Our entry into that market is being led by an experienced
team of subsea managers and engineers, and during fiscal 2014, we purchased six state-of-
the-art, work-class remotely operated vehicles and support equipment for $32 million. Our
objective is to grow this sector into a $50-100 million annual revenue business within three
to five years.
Last year, we also completed negotiations with our long-time joint venture partner in
Angola to form a new two-year joint venture to serve this significant West African offshore
market. Negotiating the details of this new arrangement and navigating Angola’s new foreign
exchange regulations required extensive management time and attention in fiscal 2014. Despite
near-term challenges, we intend to remain a market leading service provider in Angola and to
support our customers’ growing operations in this important market.
The primary driver for our business remains the number of working offshore drilling rigs.
The offshore industry is in an expansionary phase. Last year, the active global offshore rig fleet
grew by approximately 40 working rigs. There are roughly 250 new offshore rigs on order or
under construction at fiscal year end, with approximately 65% of these expected to be delivered
by the end of calendar 2015. The major unknown about this expansion is how many of the new
rigs will be additive to the working fleet versus those that merely replace older, less capable units
that are retired. Our expectation is that the global drilling fleet will experience a meaningful
increase in working rigs over the next few years, boosting demand for more modern support
vessels. We believe our modern vessel fleet that supports deepwater, mid-water and shallow
water activity in a multitude of countries globally positions us well to compete in the vessel
market of the future.
>> Capital Expenditures
($ in Millions)
$595
$441
$357
2012
2013
2014
>> Long-term Debt
($ in Millions)
$1,505
$1,000
$950
2012
2013
2014
>> Stockholders’ Equity
($ in Millions)
$2,679
$2,526
$2,562
2012
2013
2014
5
Review of Operations
Last year, three of our geographic units experienced healthy demand, producing year-
over-year vessel revenue and vessel operating profit gains from the previous fiscal year. Each
of these three geographic regions’ improvements were the result of steady increases in both
average vessel utilization and average dayrates, along with a growing number of active vessels.
The only segment that failed to grow was Asia/Pacific, which did experience improved drilling
activity, but is burdened with excess capacity of support vessels. We have responded by shifting
vessels to other regions where employment opportunities are better and by disposing of several
2013
2014
6
older vessels. With a reduced presence in the region and lower projected vessel revenues, we
determined that goodwill allocated to the Asia/Pacific region was impaired and we recorded
a goodwill impairment charge against our pre-tax earnings of $56.3 million. It is important to
understand that this accounting adjustment had no negative impact on our cash flow.
Our safety record suffered from three lost time accidents last year following a year with none.
We seized on those accidents to refocus our almost 9,000 employees on working safely and
efficiently in the difficult offshore environment. Our safety performance improved throughout the
year enabling us to surpass our annual corporate safety target. Safe operations are a core value
and continued top priority at Tidewater. Every employee and client is entitled to return home
safely after every working shift. An additional obligation extends to our compliance efforts to
conduct our business legally and ethically, because that is the correct way to operate. Global
compliance is critical for a company with our global footprint.
During fiscal 2014, we took delivery of six newly constructed vessels and purchased nine
existing new vessels. We have commitments for 12 new vessels to be delivered during fiscal 2015
and another 18 thereafter, in furtherance of our fleet renewal strategy. By fiscal 2014 year
end, we had committed to over $5 billion in our fleet renewal strategy over the past 14 years,
which has largely been financed out of the company’s operating cash flows, proceeds from
disposals of our older vessels and various debt financings. We have executed our strategy
while maintaining a solid financial foundation. At year-end, we had a net debt to net book
capital ratio of 35%. We also had over $650 million of liquidity, which provides us flexibility to
capitalize on potential opportunities such as the Troms purchase. We are well positioned to grow our
revenues and earnings as the offshore cycle continues expanding. Our objective remains to be
good stewards of our shareholders’ capital and deliver superior service to our clients and solid
financial returns for our shareholders.
7
“We have executed our strategy while maintaining a
solid financial foundation. At year-end, we had a net debt
to net book capital ratio of 35 percent. We also had over
$650 million of liquidity.”
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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 30170, College Station, Texas 77842-3170. Overnight correspondence should be sent to:
Computershare, 211 Quality Circle, Suite 210, College Station, Texas 77845, 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 2014 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 1500
New Orleans, Louisiana 70130
Toll Free: 1-800-678-8433
Phone: 1-504-568-1010
Email: connect@tdw.com
www.tdw.com
10
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________
FORM 10-K
(cid:95) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2014
(cid:134) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE 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 1500
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 (cid:58) No (cid:134)
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 (cid:134) No (cid:58)
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 (cid:58) No (cid:134)
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 (cid:58) No (cid:134)
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. (cid:134)(cid:3)
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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 the definition of “large accelerated filer,” “accelerated
filer” and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer (cid:58) Accelerated filer (cid:134) Non-accelerated filer (cid:134)(cid:3) Smaller reporting company (cid:134)(cid:3)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes (cid:134) No (cid:58)(cid:3)
As of September 30, 2013, the aggregate market value of the registrant’s common stock held by non-affiliates
of the registrant was $2,907,095,275 based on the closing sales price as reported on the New York Stock
Exchange of $59.36.
As of April 30, 2014, 49,730,442 shares of the registrant’s 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 2014 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
are 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, 2014
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.
PROPERTIES
LEGAL PROCEEDINGS
MINE SAFETY DISCLOSURES
PART II
ITEM 5.
ITEM 6.
ITEM 7.
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
SELECTED FINANCIAL DATA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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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
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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
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3
FORWARD-LOOKING STATEMENT
In accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the
company notes that 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 future 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
Annual Report on Form 10-K including in Item 1A. “Risk Factors” and include, without limitation, volatility in
worldwide energy demand and oil and gas prices; consolidation of our customer base: fleet additions by
competitors and industry overcapacity; changes in capital spending by customers in the energy industry for
offshore exploration, field development and production; loss of a major customer: changing customer
demands for vessel specifications, which may make some of our older vessels technologically obsolete for
certain customer projects or in certain markets; delays and other problems associated with vessel
construction and maintenance: uncertainty of global financial market conditions and difficulty in accessing
credit or capital; acts of terrorism and piracy; integration of acquired businesses and entry into new lines of
business; disagreements with our joint venture partners; significant weather conditions; unsettled political
conditions, war, civil unrest and governmental actions, such as expropriation or enforcement of customs or
other laws that are not well developed or consistently enforced, or requirements that services provided
locally be paid in local currency, in each case especially in higher political risk countries where we operate;
foreign currency fluctuations; labor changes proposed by international conventions; increased regulatory
burdens and oversight; changes in laws governing the taxation of foreign source income; retention of skilled
workers; 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,” “can,”
“potential,” “expect,” “project,” “target,” “anticipate,” “estimate,” “forecast,” “believe,” “think,” “could,” “continue,”
“intend,” “seek,” “plan,” and similar expressions contained in this Annual Report on Form 10-K, are 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, which the company may or may not be able to control. Further, the
company may make changes to its business plans that could or will affect its results. 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 Annual Report on Form 10-K, the company 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 its 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 non-controlling interests
(generally where required to satisfy local ownership or local content requirements). Unless otherwise required
by the context, the term "company" as used herein refers to Tidewater Inc. and its consolidated subsidiaries.
4
About Tidewater
The company’s vessels and associated vessel services provide support of all phases of offshore exploration,
field development and production. These services include towing of, and anchor handling for, mobile offshore
drilling units; transporting supplies and personnel necessary to sustain drilling, workover and production
activities; offshore construction, remotely operated vehicle (ROV) operations, and seismic and subsea support;
and a variety of specialized services such as pipe and cable laying. The company’s offshore support 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 geographic operating footprints in the offshore energy industry with
operations in most of the world's significant offshore crude oil and natural gas exploration and production
offshore regions. Our global operating footprint allows us to react quickly to changing local market conditions
and to respond to the changing requirements of the many customers with which we believe we have strong
relationships. 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, 2014, the company owned or chartered 294 vessels (of which 11 were owned by joint ventures
and 15 were stacked) and six ROVs available to serve the global energy industry. Please refer to Note (1) of
Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for
additional information regarding our stacked vessels and vessels withdrawn from service.
Historically, the company operated two shipyards that performed repairs and new construction work for third-
party customers, as well as the construction, repair and modification of the company’s own vessels. However,
one of the two shipyards was sold during fiscal 2013 and the remaining shipyard was sold during the first
quarter of fiscal 2014.
Our revenues, net earnings and cash flows from operations are largely dependent upon the activity level of our
offshore support vessel fleet. As is the case with other energy service companies, our business activity is
largely dependent on the level of crude oil and natural gas and exploration, field development and production
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 1500, 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. 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; Dubai, United Arab Emirates, and Oslo
and Tromso, Norway. 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
We 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. These segments are consistent with 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.
Our Americas segment includes the activities of our North American operations, which include the U.S. Gulf of
Mexico (GOM) and U.S. and Canadian coastal waters of the Pacific and Atlantic oceans, Mexico, Trinidad and
Brazilian operations. The Asia/Pacific segment includes our Australian and Southeast Asian and Western
Pacific operations. Middle East/North Africa includes our operations in the Mediterranean and Red Seas, the
5
Arabian Gulf and offshore India. Lastly, our Sub-Saharan Africa/Europe segment includes operations
conducted along the East and West Coasts of Africa as well as operations in and around the Caspian Sea, the
North Sea and certain arctic/cold water markets.
Our principal customers in each of these business segments are the large, international oil and natural gas
exploration, field development and production companies (IOCs); select independent exploration and
production (E&P) companies; foreign government-owned or government-controlled organizations and other
companies that explore and produce oil and natural gas (NOCs); 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 dispersed throughout the major offshore crude oil and natural gas exploration, field
development and production 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 generally
enable the company to respond relatively quickly to changing market conditions and customer requirements.
Revenues in each of our segments are derived primarily from vessel time charter or similar contracts that are
generally three months to three years in duration as determined by customer requirements, and, to a lesser
extent, from vessel time charter contracts on a “spot” basis, which is a short-term (one day to three months)
agreement 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 allow the company 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. In recent years, the
deepwater offshore market has been a growing sector in the offshore crude oil and natural gas markets due to
technological developments that have made deepwater exploration and development feasible. It is the one
sector that did not experience significant negative effects from the 2008-2009 global economic recession,
largely because deepwater exploration and development projects involve 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 2010 Deepwater Horizon incident did negatively affect the level of drilling activity of
the U.S. 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 was initially slow. Within our Americas segment, in recent years, drilling activity in the shallow and
intermediate waters of the U.S. GOM has also been negatively impacted by low natural gas prices.
As of March 31, 2014, there were approximately 250 deepwater offshore rigs under construction, however,
there is some uncertainty as to how many of those rigs, most of which are expected to enter service within the
next two years, will increase the working fleet and how many of those rigs will replace older, less productive
drilling units. Although some older units will likely be stacked as new equipment is delivered, we believe that the
deepwater drilling fleet as a whole, will experience a net increase over the next few years. The dayrates and the
overall utilization of the worldwide deepwater offshore supply vessel fleet, which is also expected to increase in
size, will, at least in part, depend upon the overall net growth in the number of deepwater rigs.
Please refer to Item 7 of this Annual Report on Form 10-K for a greater discussion of the company’s segments,
including the macroeconomic environment in which we operate. In addition, please refer to Note (15) of Notes
to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for segment,
geographical data and major customer information.
6
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 Arabian Gulf, the Mediterranean Sea and areas
offshore Australia, Brazil, India, Malaysia, Mexico, Norway, the United Kingdom, 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.
Revenues and operating profit derived from our 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
Operating profit:
Vessel activity:
Americas
Asia/Pacific
Middle East/North Africa
Sub-Saharan Africa/Europe
Other operating profit
Corporate general and administrative expenses
Corporate depreciation
Corporate expenses
Gain on asset dispositions, net
Goodwill impairment
Operating income
Total marine assets:
Americas
Asia/Pacific
Middle East/North Africa
Sub-Saharan Africa/Europe
Other
Total marine assets
2014
2013
2012
$
410,731
154,618
186,524
666,588
16,642
327,059
184,014
149,412
569,513
14,167
324,529
153,752
109,489
472,698
6,539
$
1,435,103
1,244,165
1,067,007
$
$
$
90,936
29,044
42,736
136,092
298,808
(1,930)
296,878
(47,703)
(3,073)
(50,776)
11,722
(56,283)
201,541
1,017,736
421,379
613,303
2,383,507
31,545
$
4,467,470
40,318
43,704
39,069
129,460
252,551
(833)
251,718
(48,704)
(3,391)
(52,095)
6,609
---
206,232
880,368
607,546
507,124
1,706,355
5,102
3,706,495
56,003
16,125
805
97,142
170,075
(2,867)
167,208
(36,665)
(3,714)
(40,379)
17,657
(30,932)
113,554
1,025,327
654,357
405,625
1,565,260
6,576
3,657,145
Please refer to Item 7 of this Annual Report on Form 10-K and Note (15) of Notes to Consolidated Financial
Statements included in Item 8 of this Annual Report on Form 10-K 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 vessel construction, acquisition and replacement program, with an intent of being
able to operate in nearly all major oil and gas producing regions of the world. In recent years our focus has
been on replacing older vessels in the company’s fleet with larger, more technologically sophisticated vessels.
Since calendar 2000, the company has purchased and/or constructed 271 vessels at a total cost of
approximately $4.4 billion (including 26 vessels at a cost of $270.8 million which were subsequently sold in
transaction other than sale/lease transactions). At March 31, 2014, the company had an additional 30 vessels
under construction for a total cost of approximately $833 million. To date, the company has generally funded its
vessel programs from its operating cash flows: funds provided by four private debt placements of senior
unsecured notes and borrowings under bank credit facilities, proceeds from the disposition of (generally older)
vessels, and various vessel sale-leaseback arrangements.
7
The company’s strategy contemplates both organic growth through the construction of vessels at a variety of
shipyards worldwide and possible strategic acquisitions of recently built vessels and/or other vessel owners and
operators. The company has the largest number of new offshore support vessels among its competitors in the
industry. 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/return-on-investment profile.
The average age of the company's 283 owned or chartered vessels (excluding joint-venture vessels) at
March 31, 2014 is approximately 9.9 years. The average age of 245 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 6.9 years. The remaining 38 vessels have an
average age of 28.8 years. Of the company’s 283 vessels, 92 are deepwater platform supply vessels (PSVs) or
deepwater anchor handling towing supply (AHTS) vessels and 126 vessels are non-deepwater towing-supply
vessels, which include both smaller PSVs and smaller AHTS vessels that primarily serve the jackup drilling
market. Sixty-five vessels are included within our “other” vessel class, which is primarily comprised of crew
boats and offshore tugs.
At March 31, 2014, the company had commitments to build 30 vessels at a number of different shipyards
around the world at a total cost, including contract costs and other incidental costs, of approximately
$833 million. At March 31, 2014, the company had invested approximately $260 million in progress payments
towards the construction of the 30 vessels, and the remaining expenditures necessary to complete construction
was estimated at $573 million. Of the 30 new construction commitment vessels, 23 are PSVs ranging between
3,000 and 6,360 deadweight tons of cargo capacity, six are non-deepwater towing supply class AHTS vessels
with 7,145 brake horsepower (BHP) and one is a fast supply vessel. Scheduled delivery for these newbuild
vessels will begin in June 2014, with delivery of the final vessel expected in June 2016. Additionally, the
company has one partially constructed fast supply boat under construction in Brazil that is experiencing
substantial delay. This fast supply boat 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 (12) of Notes to Consolidated Financial Statements included in Item 8 of
this Annual Report on Form 10-K.
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 (12) of
Notes to Consolidated Financial Statements included in Item 8 of this Annual report on Form 10-K. The “Vessel
Count, Dispositions, Acquisitions and Construction Programs” section of Item 7 also contains a table comparing
the actual March 31, 2014 vessel count and the average number of vessels by class and geographic
distribution during the three years ended March 31, 2014, 2013 and 2012.
Between April 1999 and March 2014, the company also disposed of 683 vessels. Most of the vessels were sold
at prices that exceeded their carrying values. In aggregate, proceeds from, and pre-tax gains on, vessel
dispositions during this period approximated $776 million and $324 million, respectively.
Our Vessel Classifications
Our vessels routinely move from one geographic region and reporting segment to another, and from one
operating area to another operating area within the geographic regions and reporting segments. We disclose
our vessel statistical information, including revenue, utilization and average day rates, by vessel class. Listed
below are our three 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 Annual Report on Form 10-K.
Deepwater Vessels
Deepwater vessels, in the aggregate, are currently the company’s largest contributor to consolidated vessel
revenue and vessel operating margin. Included in this vessel class are large (typically greater than 230-feet
and/or with greater than 2,800 tons in dead weight cargo carrying capacity) PSVs and large, higher-horsepower
(generally greater than 10,000 horsepower) AHTS vessels. These vessels are generally chartered to customers
for use in transporting supplies and equipment from shore bases to deepwater and intermediate water depth
8
offshore drilling rigs and production platforms and for otherwise supporting intermediate and deepwater drilling,
production, construction and maintenance operations. Deepwater PSVs generally have large cargo capacities,
both below deck (liquid mud tanks and dry bulk tanks) and above deck. Deepwater AHTS vessels are equipped
to tow drilling rigs and other marine equipment, as well as to set anchors for the positioning and mooring of
drilling rigs. Many of our deepwater PSVs and AHTS vessels are outfitted with dynamic positioning capabilities,
which allow the vessel to maintain an absolute or relative position when mooring to an installation, rig or
another vessel is deemed unsafe, impractical or undesirable. Many of our deepwater vessels also have oil
recovery, firefighting, standby rescue and/or other specialized equipment. Our customers demand a high level
of safety and technological advancements to meet the more stringent regulatory standards, especially in the
wake of the 2010 Deepwater Horizon incident.
Our deepwater class of vessel also includes specialty vessels that can support offshore well stimulation,
construction work, subsea services and/or serve as remote accommodation facilities. These vessels are
generally available for routine supply and towing services, but these vessels are also 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). Our MPSV is approximately 311
feet in length, has a 100-ton active heave compensating crane, a moonpool and a helideck and is designed for
subsea service and light construction support activities. This vessel is significantly larger in size, more versatile,
and more specialized than the PSVs discussed above. The MPSV typically commands a higher day rate
because the vessel has more capabilities, and because the vessel has a higher construction cost and higher
operating costs.
Towing-Supply Vessels
This is currently 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 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.
Other Vessels
The company's “Other” vessels include crew boats, utility vessels and offshore tugs. Crew boats 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 are
used to tow floating drilling rigs and barges; to assist in the docking of tankers; and to assist pipe laying, cable
laying and construction barges.
Revenue Contribution of Main Classes of Vessels
Revenues from vessel operations were derived from the following classes of vessels in the following
percentages:
Deepwater ................................................................................................................................. 55.2%
Towing-supply ........................................................................................................................... 37.1%
Other .......................................................................................................................................... 7.7%
2014
Year Ended March 31,
2013
49.2%
42.4%
8.4%
2012
44.2%
44.9%
10.9%
Subsea Services
Historically, the company’s subsea services were composed primarily of seismic and subsea vessel support.
During fiscal 2014 the company expanded its subsea services capabilities by hiring a dedicated group of
employees with substantial ROV and subsea expertise and by purchasing six work-class remotely operated
vehicles (ROVs). Each ROV is capable of being deployed and redeployed worldwide on a variety of vessels
and platforms and we expect to begin ROV deployment and operations in fiscal 2015. Our expanded subsea
services capabilities include services and engineering solutions in all phases of the life of
9
a subsea well, including exploration; construction and installation; and maintenance, repair and inspection, in
water depths of up to 13,000 feet. In connection with the purchase of ROVs, the company has developed a
proprietary operations management system customized for the operation of ROVs. Tidewater intends to
continue expanding its subsea services capabilities to meet customer demand, and that expansion may
include organic growth through commissioning the construction of additional ROVs or acquisitions of recently
built ROVs and/or other ROV owners and operators.
Shipyard Operations
Quality Shipyards, L.L.C., a wholly-owned subsidiary of the company, operated two shipyards in Houma,
Louisiana, that constructed, upgraded and repaired vessels. The shipyards performed repair work and new
construction work for third-party customers, as well as the construction, repair and modification of the
company’s own vessels. One of the two shipyards was sold during fiscal 2013, and the remaining shipyard was
sold during the first quarter of fiscal 2014. During fiscal 2013, one partially constructed, deepwater PSV was
transferred to another unaffiliated U.S. shipyard for completion. That vessel is expected to be delivered into the
company’s owned and operated offshore support vessel fleet in for August 2014.
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 is 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 Annual Report on Form 10-K.
The company’s principal customers are IOCs; select independent E&P companies; NOCs; 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.
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 any of our
last three fiscal years:
Chevron Corporation (including its worldwide subsidiaries and affiliates)
Petroleo Brasileiro SA
2014
18.1%
8.6%
2013
17.8%
8.6%
2012
17.4%
14.6%
While it is normal for our customer base to change over time as our vessel 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. Our five largest
customers in aggregate accounted for approximately 45% of our fiscal 2014 total revenues, while the 10 largest
customers in aggregate accounted for approximately 62% of the company’s fiscal 2014 total revenues.
Consolidation activity amongst exploration, development, and production companies can reduce 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, at least initially, on increasing efficiency and
reducing costs and delay or abandon exploration activity with less promise. Such activity can adversely affect
demand for our vessels, and reduce the company's 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.
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. According to IHS-Petrodata, the
global offshore support vessel market at the end of March 2014 had approximately 430 new-build offshore
support vessels (PSVs and AHTS vessels only) under construction that are expected to be delivered into the
worldwide offshore vessel market primarily over the next three years. The current worldwide fleet of these
classes of vessels is estimated at approximately 3,100 vessels, of which Tidewater estimates more than 10%
are stacked or are not being actively marketed by the vessels’ owners. The worldwide offshore marine vessel
industry, however, also has a large number of aged vessels, including approximately 700 vessels, or 22%, 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, of which Tidewater estimates 40% to 50% are either
already stacked or are not being actively marketed by the vessels’ owners, could potentially be removed from
the market within the next few years as the cost of extending these vessels’ lives may not be 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, which could mitigate the possible negative effects of the new-build vessels being added to the
offshore support vessel fleet, could also be created by the delivery of new drilling rigs and floating production
units to the extent such new drilling rigs and/or floating production units both become operational and are not
offset by the idling or retirement of existing active drilling rigs and floating production units.
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 overall 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 or make it advisable that the
company 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.
11
Sonatide Joint Venture
As previously reported, in November 2013, a subsidiary of the company and its joint venture partner in Angola,
Sonangol Holdings Lda. (“Sonangol”), executed a new joint venture agreement for their joint venture, Sonatide.
The new joint venture agreement will have a two year term once an Angolan entity, which is intended to be one
of the Sonatide group of companies, has been incorporated. The Angolan entity is expected to be incorporated
in late 2014 after certain Angolan regulatory approvals are obtained.
The challenges presented to the company to successfully operate in Angola continue to remain significant. As
the company has previously reported, on July 1, 2013, elements of new legislation (the “forex law”) became
effective that requires oil companies participating in concessions from Angola that engage in exploration and
production activities offshore Angola to pay for goods and services provided by foreign exchange residents in
Angolan kwanzas that are initially deposited into an Angolan bank account. The forex law (and interpretations
of the forex law by a number of market participants absent official guidance from the National Bank of Angola or
the government of Angola) will likely result in substantial customer payments to Sonatide being made in
Angolan kwanzas. Such a result could be unfavorable, because the conversion of Angolan kwanzas into U.S.
dollars and expatriation of the funds may result in payment delays, currency devaluation risk prior to conversion
of kwanzas to dollars, additional costs to convert kwanzas into dollars and potentially additional taxes.
In response to the new forex law, Tidewater and Sonangol negotiated an agreement (the “consortium
agreement”) that is intended to allow the Sonatide joint venture to enter into contracts with customers that
allocate billings for services provided by Sonatide between (i) billings for local services that are provided by a
foreign exchange resident (that must be paid in kwanzas), and (ii) billings for services provided offshore (that
can be paid in dollars). However, due to some recent uncertainty that has been expressed as to how Angola
will interpret and enforce the forex law, Sonatide is not yet utilizing the split payment arrangement contemplated
by the consortium agreement (which the company understands is comparable to arrangements utilized, or
intended to be utilized, by other service companies operating in Angola).
The company understands that the National Bank of Angola will issue a clarifying interpretation of the forex law
by the end of calendar 2014. Any clarifying interpretation provided by the National Bank of Angola, and the
resulting method and form of payment for goods and services that is utilized by the oil companies operating
offshore Angola, should allow Sonatide, the company and other market participants to better assess the risk
profile of the Angolan market over the longer term (i.e., this is an industry issue).
In the meantime, as discussed in further detail below, the uncertainty surrounding whether the proposed
consortium structure will be acceptable has required the company to take measures to maintain adequate
liquidity and to continue its business activities in Angola.
As of March 31, 2014, the company had approximately $430 million in amounts due from Sonatide, largely
reflecting unpaid vessel revenue (billed and unbilled) related to services performed by the company through the
Sonatide joint venture. These amounts have accumulated since late calendar 2012 when the initial provisions
of the forex law relating to payments for goods and services provided by foreign exchange residents took effect
(and payments were required to be paid into local bank accounts). Beginning in June 2013, when the second
provisions of the forex law took effect (and the local payments had to be in kwanza), Sonatide generally
accrued for but did not deliver invoices to customers for vessel revenue related to Sonatide and the company’s
collective Angolan operations in order to minimize the exposure that Sonatide would be paid for a substantial
amount of charter hire in kwanzas and into an Angolan bank. In the interim, the company utilized its credit
facility and other arrangements to fund the substantial working capital requirements related to its Angola
operations.
In the fourth quarter of fiscal 2014 Sonatide received customer payments in Angolan kwanza that was
equivalent to approximately $67 million. Additionally, in the first quarter of fiscal 2015, Sonatide began sending
invoices to those customers who have insisted on paying U.S. dollar denominated invoices in kwanza. Sonatide
will then seek to convert those kwanzas into U.S. dollars and repatriate those U.S. dollars abroad in order to
pay the amounts that Sonatide owes the company. That conversion and repatriation is subject to those risks
and considerations set forth above.
12
In addition, beginning in February 2014, Sonatide has been entering into some customer agreements that
contain split dollar/kwanza payments (typically 70% dollars and 30% kwanzas). While the company is
confident that these split payment contracts comply with current Angolan law, it is not clear if this type of
contracting will be available to Sonatide over the longer term
Management intends to look for other ways to continue to profitably participate in the Angola market while
reducing the overall level of exposure of the company to the increased risks that the company believes
currently characterize the Angolan market, including the likely redeployment of vessels to other markets where
demand for the company’s vessels remains strong. During the year ended March 31, 2014, the company
redeployed vessels from its Angolan operations to other markets and also transferred vessels into its Angolan
operations from other markets resulting in a net increase of one vessel operating in the area. Redeployment of
vessels to other markets in the quarter ended March 31, 2014 has been more significant (net 5 vessels
transferred out) than in prior quarters.
The global market for offshore support vessels is currently reasonably well balanced, with offshore vessel
supply approximately equal to offshore vessel demand; however, there would likely be negative financial
impacts associated with the 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 for the periods when such costs would be incurred. 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 a majority of these vessels at prevailing market day rates.
For the year ended March 31, 2014, Tidewater’s Angolan operations generated vessel revenues of
approximately $356.8 million, or 25%, of its consolidated vessel revenue, from an average of approximately 90
Tidewater-owned vessels that are marketed through the Sonatide joint venture (5 of which were stacked on
average during the year ended March 31, 2014), and, for the year ended March 31, 2013, generated vessel
revenues of approximately $271 million, or 22%, of consolidated vessel revenue, from an average of
approximately 85 Tidewater-owned vessels (9 of which were stacked on average during the year ended
March 31, 2013).
In addition to the company’s Angolan operations, which reflect the results of Tidewater-owned vessels
marketed through the Sonatide joint venture (owned 49% by Tidewater), ten vessels and other assets are
owned by the Sonatide joint venture. As of March 31, 2014 and 2013, 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 $62 million and $46 million, respectively.
Due from Affiliate at March 31, 2014 and 2013 of approximately $430 million and $119 million, respectively,
represents cash received by Sonatide from customers and due to the company, costs paid by Tidewater on
behalf of Sonatide and, finally, amounts due from customers which are expected to be remitted to the company
through Sonatide.
Due to Affiliate at March 31, 2014 and 2013 of approximately $86 million and $36 million, respectively,
represents amounts due to Sonatide for commissions payable (approximately $43 million and $7 million,
respectively) and other costs paid by Sonatide on behalf of the company.
Continuing normal course operations have caused (and will cause) amounts due from and to Sonatide to
fluctuate in periods subsequent to the balance sheet date. Subsequent to March 31, 2014 the company has
collected approximately $66 million of cash from Sonatide, which represents approximately 62 days of revenue
(based on revenues of our Angolan operations for the quarter ended March 31, 2014).
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.
13
As of August 20, 2012, more than 50% of the world’s vessel tonnage ratified the Convention, meeting the
requisites for the Convention to become law effective August 20, 2013 for the first 30 countries that ratified as
of August 2012. Since then, additional countries have ratified the Convention, and their effective dates for
enforcement will be one year from their respective dates of ratification.
Presently, the 57 countries that have ratified are: Antigua and Barbuda, Australia, Bahamas, Barbados,
Belgium, Benin, Bosnia and Herzegovina, Bulgaria, Canada, Croatia, Cyprus, Denmark, Fiji, Finland, France,
Gabon, Germany, Greece, Hungary, Italy, Japan, Kiribati, Republic of the Congo, Republic of Korea, Latvia,
Lebanon, Liberia, Lithuania, Luxembourg, Malaysia, Malta, Marshall Islands, Morocco, Netherlands, Nicaragua,
Nigeria, Norway, Palau, Panama, Philippines, Poland, Russian Federation, Saint Kitts and Nevis, St. Vincent
and the Grenadines, Samoa, Serbia, Seychelles, Singapore, South Africa, Spain, Sweden, Switzerland, Togo,
Tuvalu, United Kingdom, and Vietnam. Notably, although Fiji, Gabon, and Lebanon have submitted instruments
of ratification, their respective registrations for Member state social protection benefits are still pending.
Because the company has steadfastly maintained that this Convention is unnecessary in light of existing
international labor laws that offer substantial equivalency to the labor provisions of the Convention, the
company actively worked with its flag state and industry representatives to seek substantial equivalencies to
comparable national and industry laws that meet the intent of the Convention. The company is presently
undergoing Convention certification on its vessels on an “as needed” priority basis linked to dates of
enforcement by countries, drydock transits, or ocean voyages.
The company continues to assess its global seafarer labor relationships and to review its fleet operational
practices in light of the Convention requirements. In those circumstances where the Convention does apply,
the company and its customers' operations may be negatively affected by future compliance costs, which
cannot be reasonably estimated at this time.
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.
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 15% of the company's outstanding common stock was owned by non-U.S. citizens as of
March 31, 2014.
The company’s vessel operations in the U.S. GOM are considered to be coastwise trade. United States law
requires that vessels engaged in the U.S. coastwise trade must be built in the U.S. and registered under U.S
flag. 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 zone. Of the total 294 vessels owned or operated by the company at March 31, 2014,
259 vessels were registered under flags other than the United States and 35 vessels were registered under the
U.S. flag.
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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, injunctions 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.
The company is also involved in various legal proceedings that relate to asbestos and other environmental
matters. 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 dedicated to ensuring the safety of our operations for both our employees and our customers.
Tidewater’s principal operations occur in offshore waters where the workplace environment presents many
safety challenges. Management communicates frequently with company personnel to promote safety and instill
safe work habits through the use of company media directed at, and regular training of, both our seamen and
shore-based personnel. Personnel and resources are dedicated to ensure safe operations and regulatory
compliance. Our Director of Health, Safety, Environment and Security (HSES) Management is involved in
numerous proactive efforts to prevent accidents and injuries from occurring. The HSES Director also reviews all
incidents that occur throughout the company, focusing on lessons that can be learned from such incidents and
opportunities to incorporate such lessons into the company’s on-going safety-related training. In addition, the
company employs safety personnel in every operating region to be responsible for administering the company’s
safety programs and fostering the company’s safety culture. We believe that every Tidewater employee is a
safety supervisor, who has the authority and the obligation to stop any operation that he deems to be unsafe.
Risk Management
The operation of any marine vessel involves an inherent risk of marine losses (including physical damage to the
vessel) attributable to adverse sea and weather conditions, mechanical failure, and collisions. In addition, the
nature of our operations exposes the company to the potential risks of damage to and loss of drilling rigs and
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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 lead to 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, in part, by maintaining self-
insurance up to certain individual and aggregate loss limits. 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. headquartered 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
that such insurance will continue to be available at commercially acceptable rates given the markets in which
the company operates..
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, the monsoon season, and other severe weather can negatively or positively impact vessel
operations. In particular, 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 area. 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
offshore India in Southeast Asia and in the Western Pacific are impacted by the monsoon season, which moves
across the region from November to April. Vessels that operate in the North Sea can be impacted by a
seasonal slowdown in the winter months, generally from November to March. 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 even during
the non-cyclone season and, as such, the impact of the cyclone season on our operations is not significant.
Although hurricanes, cyclones, monsoons and other severe weather can have a seasonal impact on
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 for the company's offshore support vessel and other services
than on any seasonal variation.
Employees
As of March 31, 2014, the company had approximately 8,900 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, 2014 is as follows:
Name
Age
Position
Jeffrey M. Platt ............................... 56
Jeffrey A. Gorski ............................. 53
Quinn P. Fanning ........................... 50
President and Chief Executive Officer since June 2012. 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 Operating Officer and Executive Vice President since June
2012. Senior Vice President from January 2012 to May 2012. Prior to
January 2012, Mr. Gorski was a Vice-President of Global Accounts
with Schlumberger Inc., a publicly-held oilfield services company.
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.
Bruce D. Lundstrom ....................... 50
Joseph M. Bennett ......................... 58
Executive Vice President since August 2008. Senior Vice President
from September 2007 to July 2008. General Counsel and Secretary
since September 2007.
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.
There are no family relationships between any of the directors or executive officers of the company or any
arrangements or understandings between any of the executive officers and any other person pursuant to
which any of the executive officers were selected as an officer. The company's executive 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.
The company has adopted a Code of Business Conduct and Ethics (Code), which is applicable to 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. The Code is publicly
available on our website at www.tdw.com. 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 for our chief executive officer, chief financial officer
and principal accounting officer. 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 is also available in print to any stockholder upon written
request addressed to Tidewater Inc., 601 Poydras Street, Suite 1500, New Orleans, Louisiana 70130.
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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 that we have identified as affecting or
potentially affecting our company and the offshore marine service industry which could cause our actual results
to differ materially from those anticipated, projected or assumed in the forward-looking statement. 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.
Volatility of Oil and Gas Prices
Prices for crude oil and natural gas are highly volatile and 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 can cause prices for crude oil
and natural gas to decrease. In addition, global military, political, and economic events, including civil unrest in
the oil producing and exporting countries of the Middle East and North Africa, have historically 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 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; increased availability of shale gas and other non-traditional energy resources:
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 services, In such event, we could experience 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 services or sustained higher pricing for offshore support vessel services. Increased commodity
demand can be satisfied by land-based energy resources and increased demand for offshore support vessel
services can be overwhelmed by an increased supply of offshore support vessels resulting from the
construction of additional offshore support vessels.
Crude oil pricing volatility has increased in recent years as crude oil has emerged into a widely-traded financial
asset class. To the extent to speculative trading of crude oil causes excessive crude oil pricing volatility, our
results of operations could potentially be negatively impacted if such price volatility affects spending and
investment decisions of offshore exploration, development and production companies.
Changes in the Level of Capital Spending by Our Customers
Demand for our offshore services, and thus our results of operations are highly dependent on the level of
spending and investment in regards to offshore exploration, development and production 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 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.
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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; the local and international economic and political
environment; the technological feasibility and relative cost of developing non-hydrocarbon based energy
resources; the relative cost of developing offshore and onshore crude oil and natural gas resources; and the
availability and cost of financing.
Consolidation of the Company's Customer Base
Oil and natural gas companies, other energy and energy services companies have undergone consolidation,
and additional consolidation is possible. Consolidation reduces the number of customers for the company’s
equipment, and may negatively affect exploration, development and production activity as consolidated
companies focus, at least initially, 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 offshore services.
High Level of Competition in the Offshore Marine Service Industry
We operate in a highly competitive industry, which could depress charter and utilization rates 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 our vessels and ROVs; availability of vessels
and ROVs; safety and efficiency; cost of mobilizing vessels and ROVs 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.
Loss of a Major Customer
We derive a significant amount of revenue from a relatively small number of customers. For the years ended
March 31, 2014, 2013 and 2012, the five largest customers accounted for approximately 45%, 42%, and 43%,
respectively, of the company’s total revenues, while the 10 largest customers accounted for approximately
62%, 57%, and 59%, respectively, 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 were to decide to interrupt or curtail
their activities, in general, or their activities with us: terminate their contracts with us; fail to renew existing
contracts; and/or refuse to award new contracts.
Unconventional Crude Oil and Unconventional Natural Gas Production Can Exert Downward Pricing
Pressures on the Price of Crude Oil and Natural Gas
The rise in production of unconventional crude oil and gas resources in North America and the commissioning
of a number of new large Liquefied Natural Gas (LNG) export facilities around the world are, at least to date,
primarily contributing to an over-supplied natural gas market. While production of crude oil and natural gas from
unconventional sources is still a relatively small portion of the worldwide crude oil and natural gas production,
production from unconventional resources is increasing because improved drilling efficiencies are lowering the
costs of extraction. There is an oversupply of natural gas inventories in the United States in part due to the
increased development of unconventional crude oil and natural gas resources. 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 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.
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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 our customers’ 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, revenues and
profitability.
Prolonged material 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.
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 requirements. Excess
offshore support vessel capacity usually exerts downward pressure on charter day rates. Excess capacity can
occur when newly constructed vessels enter the worldwide offshore support vessel market and also when
vessels migrate between markets. 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
Annual Report on Form 10-K.
The offshore support vessel market has approximately 450 new-build offshore support vessels (PSVs and
AHTS vessels only), under construction as of March 31, 2014, which are expected to be delivered to the
worldwide offshore support vessel market primarily over the next three years, according to IHS-Petrodata. The
current worldwide fleet of these classes of vessels is estimated at approximately 3,100 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-
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.
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 delays and cost overruns, resulting from shortages and/or
delivery delays in regards to equipment, materials and skilled labor, including third-party service technicians. In
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addition, the cost, timing and duration of drydockings and repairs and maintenance can be negatively impacted
by lack of shipyard availability, unforeseen design and engineering problems, work stoppages, weather,
financial, labor and other difficulties at shipyards, including the inability to obtain necessary certifications and
approvals.
A significant delay in either construction or drydockings of vessels could negatively impact on our ability to fulfill
contractual commitments. 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 also diminish from levels originally anticipated. If the company fails to obtain
favorable contracts for newly constructed vessels, such failure could have a negative impact on the company's
revenues and profitability.
Difficult economic market conditions and/or prolonged distress in credit and capital markets may also 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 a risk of insolvency of the
shipyards that construct, repair or drydock our vessels, which could adversely affect our new construction or
repair programs, and consequently, could adversely affect our financial condition, results of operations or cash
flows.
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 Annual Report on Form 10-K and Note (12) of Notes to Consolidated Financial
Statements included in Item 8 of this Annual Report on Form 10-K for a discussion of our Venezuelan
operations regarding vessel seizures and Item 1 and Note (12) of Notes to Consolidated Financial Statements
included in Item 8 in this Annual Report on Form 10-K for a discussion of our Sonatide joint venture in Angola),
including enforcement of customs, immigration or other laws that are not well developed or consistently
enforced; foreign government regulations that favor or require the awarding of contracts to local competitors; an
inability to recruit, retain or obtain work visas for managers of international operations; difficulties or delays in
collecting customer and other accounts receivable; changing taxation policies; fluctuations in currency
exchange rates; foreign currency revaluations and devaluations; restrictions on converting and/or repatriating
foreign currencies; 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 several 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, other acts of war or hostility and civil unrest 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 or civil unrest may be directed against the United
States domestically or abroad, and such acts of terrorism or civil unrest could be directed against properties
and personnel of U.S. headquartered 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, civil unrest or war.
Control of Risks Inherent in Acquiring Businesses
Acquisitions have been and we believe will continue to be, an element of our business strategy. We cannot
assure that we will be able to identify and acquire acceptable acquisition candidates on terms favorable to us in
the future. We may be required to incur substantial indebtedness to finance future acquisitions. Such
additional debt service requirements may impose a significant burden on our results of operations and financial
condition. We cannot assure you that we will be able to successfully consolidate the operations and assets of
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any acquired business with our own business. Acquisitions may not perform as expected when the transaction
was consummated and may be dilutive to our overall operating results. In addition, our management may not
be able to effectively manage a substantially larger business or successfully operate a new line of business.
Entry into New Lines of Business
Historically, the company’s operations and acquisitions focused primarily on offshore marine vessel services for
the oil and gas industry. The company has recently expanded its capability to provide subsea services through
the acquisition of specialized employees and ROVs. The company may expand its subsea capabilities further
and enter into additional lines of business. Entry into, or further development of, lines of business in which the
company has not historically operated may expose us to business and operational risks that are different from
those we have experienced historically. Our management may not be able to effectively manage these
additional risks or implement successful business strategies in new lines of business. Additionally, our
competitors in these lines of business may possess substantially greater operational knowledge, resources and
experience than the company.
Doing Business through Joint Venture Operations
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 often 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, put assets dedicated to the joint venture at risk, or 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 assets in another
market. The unwinding of an existing joint venture 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 assets to another market could adversely affect our financial condition, results of
operations or cash flows. Please refer to Part 1, Item 1 in this Annual Report on Form 10-K for additional
discussion of our Sonatide joint venture in Angola.
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. In some instances, we receive
payments in currencies which are not easily traded and may be illiquid. 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
monetary assets and liabilities denominated in currencies other than the U.S. dollar 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 and, when feasible, the company attempts to not maintain large, non-U.S. dollar-
denominated cash balances. 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 monitors the currency exchange risks associated with all contracts not
denominated in U.S. dollars.
22
Operational Hazards Inherent to the Offshore Marine Vessel Industry
The operation of any offshore marine asset 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 and operational errors; collisions and property losses to our marine assets;
damage to and loss of drilling rigs and production facilities owned by others; war, sabotage, piracy 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 our personnel and assets, cargo, equipment under tow and other
property, as well as the environment. Any such event may result in a reduction in our 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 and ROVs 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 current contractual
terms, 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.
Our offshore oilfield operations involve a variety of operating hazards and risks that could cause
losses.
The company’s operations are subject to the hazards inherent in the offshore oilfield business. These include
blowouts, explosions, fires, collisions, capsizings, sinkings, groundings and severe weather conditions.
These hazards could result in personal injury and loss of life, severe damage to or destruction of property
and equipment (including to the property and equipment of third parties), pollution or environmental damage
and suspension of operations. Damages arising from such occurrences may result in lawsuits alleging large
claims, and the company may incur substantial liabilities or losses as a result of these hazards.
The company’s exposure to operating hazards may increase significantly with the expansion of its subsea
operations, including through the ownership and operation of ROVs. For example, the company may lose
equipment, including ROVs, in the course of its subsea operations. This equipment may be difficult or costly
to replace, and such losses may result in work stoppages or the loss of customers. Additionally, many of the
company’s subsea operations will be performed on or near existing oil and gas infrastructure. These
operations may expose us to new or increased liability relating to explosions, blowouts and cratering;
mechanical problems, including pipe failure; and environmental accidents, including oil spills, gas leaks or
ruptures, uncontrollable flows of oil, gas, brine or well fluids, or other discharges of toxic gases or other
pollutants.
While the company maintains insurance protection against some of these risks, and seeks to obtain
indemnity agreements from its customers requiring the customers to hold the company harmless from some
of these risks, the company’s insurance and contractual indemnity protection may not be sufficient or
effective to protect it under all circumstances or against all risks. The occurrence of a significant event not
fully insured or indemnified against or the failure of a customer to meet its indemnification obligations to the
company could materially and adversely affect its results of operations and financial condition.
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. 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 themselves not 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 and business reputation, as
23
well as our, 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 (12) of Notes to Consolidated Financial Statements included in Item 8 of this Annual
Report on Form 10-K.
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 discernible even to
experienced and proactive participants. Further, these laws, the application and enforcement of these laws and
regulations 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, several years ago the company revitalized and strengthened its compliance training, making
available and using a worldwide compliance reporting system and performing 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.
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 with lower statutory rates and higher than
anticipated earnings in countries with higher statutory rates, or by changes in the valuation of our deferred tax
assets and liabilities.
24
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 19% 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 could 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 U.S. 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 were to be 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 and adversely affected.
Compliance with Environmental Regulations
A variety of regulatory developments, proposals and requirements have been introduced (and in some cases
enacted) in the U.S. and various other countries that are focused on restricting the emission of carbon dioxide,
methane and other gases. Any such regulations could result in the 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 support vessels, ROVs and other assets, 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, increased regulation of environmental
emissions may create greater incentives for use of alternative energy sources. Unless and until regulations are
implemented and their effects are known, we cannot reasonably or reliably estimate their 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.
Retention of a Sufficient Number of Skilled Workers
Our operations require personnel with specialized skills and experience. As a result, our ability to remain
productive and profitable will, in part, depend upon our ability to employ and retain skilled workers. In addition,
our ability to expand our operations depends in part on our ability to increase the size of our skilled labor force.
The demand for skilled workers in our industry is high, and the supply is limited. We could be faced with
shortages of experienced personnel as we expand our operations and enter new markets. In developed
countries, many senior engineers, managers and other professionals are reaching retirement age, with no
assurance that enough highly skilled graduates and younger workers will be available to replace them.
Unionization Efforts and Collective Bargaining Negotiations
Where locally required, the company has union workers, subject to collective bargaining agreements, that
are periodically in negotiation. These negotiations could result in higher personnel expenses, other increased
costs, or increased operational restrictions. Further, efforts have been made from time to time to unionize
other portions of our workforce, including our U.S. GOM employees. We have also been subjected to
threatened strikes or work stoppages and other labor disruptions in certain countries. Additional unionization
efforts, new collective bargaining agreements or work stoppages could materially increase our costs and
operating restrictions, reduce our revenues, or limit our flexibility.
25
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Information on Properties is contained in Item 1 of this Annual Report on Form 10-K.
ITEM 3. LEGAL PROCEEDINGS
Nana Tide Sinking
On December 21, 2012, one of the company’s anchor handling tugs, the NANA TIDE, sunk in shallow waters
off the coast of the Democratic Republic of Congo (DRC). The cause of the loss is not known. The vessel was
raised and recovered in early February 2014 and is now at a nearby port in the DRC. The NANA TIDE is
inoperative and cannot be restored. The company currently intends to tow the vessel to a scrapping facility in a
nearby country and to sell the vessel for scrap. The company is presently awaiting permission from DRC
authorities to tow the vessel out of the DRC. We have been advised by DRC authorities that they are
investigating the incident and they object to the vessel being towed from the DRC pending that investigation.
We are currently uncertain as to the nature and timing of that investigation.
In January 2013, the Ministry of the Environment, Nature Conservation, and Tourism, an agency of the DRC
with jurisdiction over environmental affairs, delivered a letter requesting that the company pay $0.25 million to
the DRC. The request was made as indemnification for alleged environmental damages to the coastal waters
of the DRC related to the sinking of the NANA TIDE. There has been no further environmental impact reported,
other than the previously reported sheen, from time to time, in the immediate vicinity of the NANA TIDE prior to
the vessel being raised.
By letter dated March 24, 2014 and delivered on April 17, 2014, Tidewater received a fine of approx. $1.2 million
from the Ministry of Transport for failing to present appropriate authorization for the salvage operations to the
Ministry of Transport. We are presently collecting responsive documents and further investigating this issue.
The company believes that any such fines or assessments will be covered by insurance policies maintained by
the company.
Nigeria Marketing Agent Litigation
On March 1, 2013, Tidewater filed suit in the London Commercial Court against Tidewater’s Nigerian marketing
agent for breach of the agent’s obligations under contractual agreements between the parties. The alleged
breach involves actions of the Nigerian marketing agent to discourage various affiliates of TOTAL S.A. from
paying approximately $19 million (including Naira and U.S. dollar denominated invoices) due to the company
for vessel services performed in Nigeria. Shortly after the London Commercial Court filing, TOTAL commenced
interpleader proceedings in Nigeria naming the Nigerian agent and the company as respondents and seeking
an order which would allow TOTAL to deposit those monies with a Nigerian court for the respondents to
resolve. On April 25, 2013, Tidewater filed motions in the Nigerian Federal High Court to stop the interpleader
proceedings in Nigeria or alternatively stay them until the resolution of the suit filed in London. The company
will continue to actively pursue the collection of those monies. On April 30, 2013, the Nigerian marketing agent
filed a separate suit in the Nigerian Federal High Court naming Tidewater and certain TOTAL affiliates as
defendants. The suit seeks various declarations and orders, including a claim for the monies that are subject to
the above interpleader proceedings, and other relief. The company is seeking dismissal of this suit and
otherwise intends to vigorously defend against the claims made. The company has not reserved for this
receivable and believes that the ultimate resolution of this matter will not have a material effect on the
consolidated financial statements.
In October, 2012, Tidewater had notified the Nigerian marketing agent that it was discontinuing its relationship
with the Nigerian marketing agent. The company has entered into a new strategic relationship with a different
Nigerian counterparty that it believes will better serve the company’s long term interests in Nigeria. This new
strategic relationship is currently functioning as the company intended.
26
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 (12) of
Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
ITEM 4. MINE SAFETY DISCLOSURES
None
27
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, 2014, there were 710 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 31, 2014 (last business day of the month) was $48.62. 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 2014 common stock prices:
High
Low
Dividend
Fiscal 2013 common stock prices:
High
Low
Dividend
June 30
September 30
December 31
March 31
$
$
61.57
46.90
.25
56.71
43.14
.25
$
$
62.25
53.11
.25
53.06
46.05
.25
$
$
63.20
54.34
.25
49.20
42.33
.25
$
$
60.46
45.51
.25
50.93
45.07
.25
Issuer Repurchases of Equity Securities
In May 2014, 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
period for this authorization is July 1, 2014 through June 30, 2015. 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 evaluates share repurchase opportunities relative to other investment
opportunities and in the context of current conditions in the credit and capital markets.
In May 2013, 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
period for this authorization is July 1, 2013 through June 30, 2014. At March 31, 2014, $200.0 million remains
available to repurchase shares under the May 2013 share repurchase program.
In May 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
period for this authorization was July 1, 2012 through June 30, 2013. The May 2012 repurchase program
ended on June 30, 2013 and the company utilized $20.0 million of the $200.0 million authorized.
In May 2011, 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
period for this authorization was July 1, 2011 through June 30, 2012. The May 2011 repurchase program
ended on June 30, 2012 and the company utilized $100.0 million of the $200.0 million authorized.
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)
Aggregate cost of common stock repurchased
Shares of common stock repurchased
Average price paid per common share
$
$
2014
---
---
---
2013
85,034
1,856,900
45.79
2012
35,015
739,231
47.37
28
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 each of the last three years ended March 31, as follows:
(In thousands, except per share data)
Dividends declared
Dividend per share
Performance Graph
$
2014
49,973
1.00
2013
49,766
1.00
2012
51,370
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, 2009, at closing prices on March 31, 2009, and the reinvestment of
dividends into additional shares of the same class of equity securities at the frequency with which dividends are
paid on such securities during the applicable fiscal year. The Value Line Oilfield Services Group consists of 26
companies including Tidewater Inc.
Comparison of Cumulative Five Year Total Return
Tidewater Inc.
S&P 500
Peer Group
$350
$300
$250
$200
$150
$100
$50
$0
2009
2010
2011
2012
2013
2014
Indexed returns
Years ended March 31
Company name/Index
Tidewater Inc.
S&P 500
Peer Group
2009
2010
2011
2012
2013
2014
100
100
100
130.09
149.77
166.25
168.17
173.20
240.04
154.69
187.99
192.06
147.70
214.24
207.23
144.79
261.07
249.98
Investors are cautioned against drawing conclusions from the data contained in the graph, as past results are
not necessarily indicative of future performance.
29
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 Annual Report on Form 10-K.
Years Ended March 31
(In thousands, except ratio and per share amounts)
2014 (A)
2013 (C)
2012
2011 (D)
2010 (E)
Statement of Earnings Data :
Revenues:
Vessel revenues
Other operating revenues
Gain on asset dispositions, net
Provision for Venezuelan operations
Goodwill Impairment (B)
Loss on early extinguishment of debt
Net earnings
Basic earnings per common share
Diluted earnings per common share
Cash dividends declared per
common share
$ 1,418,461
16,642
$ 1,435,103
11,722
---
56,283
4,144
1,229,998
14,167
1,244,165
6,609
---
---
----
140,255
150,750
2.84
2.82
1.00
3.04
3.03
1.00
$
$
$
$
$
$
$
$
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
---
----
105,616
259,476
2.06
2.05
1.00
5.04
5.02
1.00
Balance Sheet Data (at end of period):
Cash and cash equivalents
$
60,359
40,569
320,710
245,720
223,070
Total assets
$ 4,885,829
4,168,055
4,061,618
3,748,116
3,293,357
Current maturities of long-term debt
Long-term debt
Equity
Working capital
Current ratio
$
9,512
$ 1,505,358
$ 2,685,371
418,528
$
2.04
---
1,000,000
2,561,756
241,461
1.91
---
950,000
2,526,357
455,171
2.91
---
700,000
2,513,944
395,558
3.15
25,000
275,000
2,464,030
380,915
2.86
Cash Flow Data:
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by (used in)
financing activities
$
$
104,617
213,923
222,421
264,206
328,261
(403,685)
(413,487)
(315,081)
(569,943)
(298,482)
$
318,858
(80,577)
167,650
328,387
(57,502)
(A) During fiscal 2014, the company incurred transaction costs of $3.7 million ($2.4 million after tax, or $0.05 per common share) related to
the purchase of Troms Offshore and a loss on early extinguishment of debt that was issued by Troms Offshore and retired by the
company of $4.1 million, ($3.0 million after tax, or $0.06 per common share).
(B) During fiscal 2014 and 2012, the company recorded a $56.3 million ($43.4 million after-tax, or $0.87 per share) and a $30.9 million
($22.1 million after-tax, or $0.43 per share) non-cash goodwill impairment charge respectively, as disclosed in Note 16 of Notes to
Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
(C) During fiscal 2013, the company recorded a settlement charge of $5.2 million ($3.4 million after tax, or $0.07 per commons share)
related to the payment of retirement benefits to a former Chief Executive Officer.
(E)
(D) 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 (12) of
Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
In addition to the Provision for Venezuelan operations 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, (2) an $11.4 million, or $0.22 per
common share, proposed settlement with the SEC related to the internal investigation, 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. Refer to Part 2,
Item 7 of this Annual Report on Form 10-K for additional disclosures regarding the company’s Venezuelan operations.
30
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, 2014 and 2013 and for
the years ended March 31, 2014, 2013 and 2012 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 Annual Report on Form 10-K. With respect to this section, the
cautionary language applicable to such forward-looking statements described under “Forward-Looking
Statements” found before Item 1 of this Annual Report on Form 10-K is incorporated by reference into this
Item 7.
Fiscal 2014 Business Highlights and Key Focus
During fiscal 2014 the company continued to focus on enhancing 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 vessels that had more limited 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 vessel downtime, improving the oversight over major
repairs and maintenance projects and drydockings and maintaining disciplined cost control.
The company’s strategy includes the continuing assessment of opportunities to acquire vessels and/or
companies that own and operate offshore support 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 offshore support
vessels (PSVs and AHTS vessels only), including deepwater PSVs and AHTS vessels and towing-supply
vessels, among its competitors in the industry.
During fiscal 2014, we continued to execute our vessel construction and acquisition program that had begun in
calendar year 2000, most notably through the acquisition of Troms Offshore Supply AS, which was completed
in June 2013 and expanded the company’s global footprint into the Norwegian sector of the North Sea and
supplemented the company’s experience and vessel fleet operating in harsh environments, including cold
climates.
More broadly, the company’s on-going vessel construction and acquisition program has facilitated the
company’s entrance into deepwater markets around the world and allowed the company to begin to replace its
non-deepwater towing-supply fleet with fewer, larger, and more technologically sophisticated vessels. 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 and of meeting deepwater and non-deepwater
offshore support vessel requirements of the company’s key customers. In addition to the construction and
acquisition of vessels, the company acquired six remotely operated vehicles (ROV) during fiscal 2014 in order
to further enhance the range of offshore services provided to customers.
In recent years, the company has generally funded vessel additions with operating cash flow, asset sale
proceeds, funds provided by the various private placements of unsecured notes, borrowings under its credit
facilities and various leasing arrangements.
The company intends to continue to pursue its fleet modernization strategy on a disciplined basis and, in each
case, will carefully consider whether proposed investment opportunities have the appropriate risk/return-on-
investment profile.
At March 31, 2014, the company had commitments to build 30 vessels at a number of different shipyards
around the world at a total cost, including contract costs and other incidental costs, of approximately
$833 million. At March 31, 2014, the company had invested approximately $260 million in progress payments
towards the construction of these 30 vessels. At March 31, 2014, the remaining expenditures necessary to
31
complete construction of the 30 vessels currently under construction (based on contract prices) was
$573 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 (12) of Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form
10-K.
The company’s outstanding receivable from Sonatide for billed and unbilled work in Angola continued to
increase to a total of approximately $430 million at March 31, 2014, which the company has temporarily funded
through debt. The company has had some success in obtaining contracts that allow for a portion of services to
be paid in dollars and has initiated some conversion of kwanzas into dollars. While the company continues to
pursue a long-term solution, it believes over time all or substantially all of the work will be invoiced and paid. For
additional disclosure regarding the Sonatide Joint Venture, refer to Part 1, Item 1, of this Annual Report on
Form 10-K.
The company’s revenue during fiscal 2014 increased $190.9 million, or 15%, over the revenues earned during
fiscal 2013, primarily driven by the overall increases in utilization and average day rates experienced in fiscal
2014 due to the increased number of newer and more sophisticated vessels in the company’s fleet including
the acquisition of Troms Offshore. The company’s consolidated net earnings decreased 7%, or $10.5 million
during fiscal 2014. Net earnings in fiscal 2014 reflect, in part, a $56.3 million non-cash goodwill impairment
charge ($43.4 million after-tax, or $0.87 per share) recorded during the third quarter of fiscal 2014 on the
company’s Asia/Pacific segment as disclosed in Note (16) of Notes to Consolidated Financial Statements
included in Part I, Item 1 of this Annual Report on Form 10-K, a $4.1 million loss on the early extinguishment of
Norwegian Kroner denominated public bonds that were issued by Troms Offshore and retired by the company
in fiscal 2014 and approximately $3.7 million in transaction expenses incurred in connection with the Troms
Offshore acquisition, which is included in general and administrative expenses.
The increases in revenues were accompanied by increases in vessel operating costs which increased 15%, or
$103.3 million, during fiscal 2014 as compared to fiscal 2013, $25.7 million of which was directly related to
vessels added to the fleet by the acquisition of Troms Offshore. Crew costs increased approximately 11%, or
$40.2 million, during fiscal 2014 as compared to fiscal 2013, primarily because the average size of the vessels
that the company operated increased during fiscal 2014 (due to the delivery or acquisition of newer, larger
vessels and the disposition of older, smaller vessels) and because of the overall higher cost of personnel
necessary to operate the company’s vessels. Repair and maintenance cost increased 34%, or $44.7 million,
during the same comparative periods, and is attributable to a greater number of scheduled and unscheduled
repairs and maintenance and vessel dry dockings. Other vessel operating costs increased $21.9 million, or
21%, during the same comparative periods.
The company also experienced increases in depreciation and amortization of 14%, or $20.2 million, due to the
higher costs associated with acquiring and constructing the company’s newer, more sophisticated vessels.
General and administrative expenses increased 7%, or $12.4 million, primarily due to increased professional
services, including costs incurred for the acquisition of Troms Offshore, additions to shore-based staff made in
connection with the Troms Offshore transaction, arbitration activities related to our historical operations in
Venezuela and legal fees associated with the administration of a subsidiary company based in the United
Kingdom. Additionally, gains on asset dispositions, net, increased by 77%, or $5.1 million, due a larger number
of vessels sold compared to the prior year as well as a gain on the sale of one of the company’s shipyards
during fiscal 2014.
Increases to borrowings, including obligations of Troms Offshore, resulted in higher interest and other debt
expenses of $14.1 million, or 47%, as disclosed in Note 0 of Notes to Consolidated Financial Statements
included in Item 8 of this Annual Report on Form 10-K. As noted above, in fiscal 2014, the company also
recorded a $4.1 million loss on the early extinguishment of Norwegian Kroner denominated public bonds that
were issued by Troms Offshore. The overall decrease to pre-tax earnings contributed to a 26%, or $11.6 million
decrease to income tax expense.
32
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 in companies’ investment and spending decisions, including such
companies decisions to contract drilling rigs and offshore support vessels in support of offshore exploration,
field development and production activities in the various international or U.S. markets.
The price of crude oil has experienced considerable volatility since March 31, 2013, with a slight overall decline
in price due to the relatively modest increases in worldwide crude oil demand and production increases and
elevated inventory levels. Some analysts believe that the global economy experienced a modest overall
recovery during calendar year 2013 and is poised for incrementally higher growth levels in calendar year 2014.
This overall recovery has been led by improvements in China’s economy over the latter half of calendar year
2013, European markets moving out of recession and growth in the U.S. economy. As a result of these
economic improvements, a number of analysts expect worldwide demand for crude in calendar year 2014 to
increase at a rate higher than in 2013 primarily driven by China, the Middle East and Latin America with modest
growth projected for the U.S.
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 at the end of March 2014, was trading around $102 per barrel for
West Texas Intermediate (WTI) crude and around $108 per barrel for Intercontinental Exchange (ICE) Brent
crude. The favorable pricing outlook for crude oil bodes 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.
Although natural gas prices increased slightly during the company’s fiscal year 2014, they have remained low
from a historical perspective, primarily due to increased supply, which has resulted in increases in natural gas
inventories. The continuing rise in production of unconventional gas resources in North America and the
commissioning of a number of new, large, Liquefied Natural Gas (LNG) export facilities around the world
have contributed to an oversupplied natural gas market. Oversupplied natural gas inventories in the U.S.
continue to exert downward pricing pressures on natural gas prices in the U.S. Prolonged periods of
oversupply of natural gas (whether from conventional or unconventional natural gas production or gas
produced as a byproduct of conventional or unconventional crude oil production) will likely continue to
suppress prices for natural gas, although over the longer term, relatively low natural gas prices may also lead
to increased demand for the resource. High levels of onshore gas production along with a prolonged
downturn in natural gas prices can negatively impact the offshore exploration and development plans of
energy companies, which in turn, would suppress demand for offshore support vessel services, primarily in
the Americas segment (specifically our U.S. operations where natural gas is a more prevalent, exploitable
hydrocarbon resource). As of the end of March 2014, natural gas was trading in the U.S. at approximately
$4.40 per Mcf which is modestly higher than $4.00 per Mcf in March 2013.
Certain oil and gas industry analysts have reported in their surveys of 2014 E&P expenditure (both land-based
and offshore) surveys that global capital expenditure budgets for E&P companies are forecast to increase in
calendar year 2014 by 4%-6% over calendar year 2013 levels, with global offshore spending expected to grow
at a considerably faster rate than global onshore spending. The surveys further note that international capital
spending budgets will increase approximately 4%-6% while North American capital spending budgets are
forecast to increase 4%-7% as compared to 2013 estimated levels. It is anticipated by these analysts that the
North American capital budget increases will be driven by onshore projects as well as offshore in the US
GOM, while international E&P spending is expected to be largely offshore, with the strongest markets expected
to include Latin America and the Middle East. Capital expenditure budgets incorporated into the spending
surveys were based on an approximate $89-$92 WTI and $98 Brent average prices per barrel of oil. E&P
companies are estimated to be using an approximate $3.66-$3.91 per Mcf average natural gas price for their
2014 capital budgets.
33
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 potential growth for the company. 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 to be 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 IHS-Petrodata at the end of March 2014 indicate that the worldwide movable offshore
drilling rig count, estimated at approximately 925 rigs, approximately 35% of which are designed to operate in
deeper waters, will increase with the delivery within the next several years of approximately 100 new-build
deepwater rigs that are on order and under construction. Of the estimated 925 movable offshore rigs
worldwide, approximately 700 offshore rigs were working as of March 31, 2014, approximately 250 of which
are designed to operate in deeper waters. It is further estimated that approximately 40% of the new-build rigs
are being built to operate in deeper waters, which we believe highlights offshore rig owner’ expectation for
increased deepwater exploration and development in the coming years. Investment is also being made in the
floating production unit market, with approximately 76 new floating production units under construction and
expected to be delivered primarily over the next three years to supplement the approximately 382 floating
production units already in existence worldwide. There is some uncertainty as to how many of the deepwater
rigs currently under construction, will either increase the working fleet or replace older, less productive drilling
units. Although there will be some stacking of older units as new equipment is delivered, we believe that the
deepwater drilling fleet as a whole, will experience a net increase over the next few years.
In addition to the increase in deepwater drilling activity, shallow-water exploration and production activity has
also increased during the last 12 months. According to IHS-Petrodata, with approximately 380 working jack
up rigs as of March 2014, the number of working jack-up rigs represents an increase of approximately 6%
from the number of jack-up rigs working a year ago. Orders for new jack-up rigs have also increased nearly
50% over the last 12 months to approximately 140 jack-up rigs, nearly all of which are scheduled for delivery
in the next three years.
In recent reports, IHS-Petrodata also estimated that total worldwide working offshore rigs (including rigs
designed to operate in deeper water and jack-up rigs) will increase by approximately 50 rigs, or approximately
7%, in our fiscal 2015. Based on this estimate, the growth in the worldwide working rig count in fiscal 2015
would be comparable to that experienced in our fiscal 2014.
Also according to IHS-Petrodata, there were approximately 450 new-build offshore support vessels (deepwater
PSVs, deepwater AHTS vessels and towing-supply vessels only) under construction, on order or planned as of
March 2014, most of which are expected to be delivered to the worldwide offshore vessel market within the
next two years. Also as of March 2014, the worldwide fleet of these classes of vessels is estimated at
approximately 3,100 vessels, of which Tidewater estimates more than 10% are currently stacked or are not
being actively marketed by the vessels’ owners.
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
690 vessels, or 22%, 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, of which Tidewater estimates
40% to 50% are either stacked or are not being actively marketed by the vessels’ owners, 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 negative effects of new-build vessels on vessel utilization and vessel pricing. Additional vessel
demand, which could mitigate the possible negative effects of the new-build vessels being added to the
offshore support vessel fleet, could also be created by the delivery of new drilling rigs and floating production
units to the extent such new drilling rigs and/or floating production units both become operational and are not
offset by the idling or retirement of existing active drilling rigs and floating production units.
34
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 the many other vessel operators in our industry, our
business activity is largely dependent on the level of exploration, field development and production 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.
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.
Principal Factors That Drive Our Operating Costs
Operating costs consist primarily of crew costs, repair and maintenance costs, insurance costs and loss
reserves, fuel, lube oil and supplies costs and other vessel operating costs.
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 PSVs and AHTS vessels generally require a greater
number of specially trained, more highly compensated fleet personnel than the company’s older, smaller and
less sophisticated vessels. Competition for skilled crew personnel has intensified as with the delivery of recently
built offshore rigs and support vessels. The delivery of new-build offshore rigs and support vessels currently
under construction may further increase the number of technologically sophisticated offshore rigs and support
vessels operating worldwide. It is expected that crew cost will likely continue to increase as competition for
skilled personnel intensifies. This trend is expected to continue as the company commences the operation of
remotely operated vehicles (ROVs), which also generally require more highly compensated personnel than the
company’s existing fleet.
The timing and amount of repair and maintenance costs are influenced by expectations of future customer
demand for our vessels, as well as vessel age and drydockings and other major repairs and maintenance
mandated by regulatory agencies. A certain number of periodic drydockings are required to meet regulatory
requirements. The company will generally incur drydocking and other major repairs and maintenance 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
regulatory drydock or major or repairs and maintenance, 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 and other major repairs and
maintenance costs, but it also generally 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, major repairs and maintenance and drydockings take on an increased significance to the company
and its financial performance. Older vessels may require frequent and expensive repairs and maintenance.
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 major repairs and
maintenance, 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, repair and maintenance expense
in any period could decline. The combination of these factors can create volatility in period to period repairs and
maintenance expense, and incrementally increase the volatility of the company’s revenues and operating
income, thus making period-to-period comparisons of financial results more difficult.
Although the company attempts to efficiently manage its major repairs and maintenance and 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 major repair and
maintenance and drydocking costs and days off hire (due to vessels being drydocked) have contributed to
35
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 and associated
major repairs and maintenance.
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, including commissions paid to unconsolidated joint venture companies,
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 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
Tidewater manages and measures its 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, vessel operating leases, 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
Other
Total vessel operating costs
2014
%
2013
%
2012
%
$
410,731
154,618
186,524
666,588
$ 1,418,461
$
$
396,332
177,331
19,628
76,609
125,990
795,890
29%
11%
13%
47%
100%
28%
13%
1%
5%
9%
56%
327,059
184,014
149,412
569,513
1,229,998
356,165
132,587
20,765
79,023
104,041
692,581
27%
15%
12%
46%
100%
29%
11%
2%
6%
8%
56%
324,529
153,752
109,489
472,698
1,060,468
327,762
103,257
17,507
76,904
94,740
620,170
31%
14%
10%
45%
100%
31%
10%
2%
7%
9%
59%
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
$
2014
16,642
15,745
2013
14,167
12,216
2012
6,539
7,115
36
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
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
Other
Sub-Saharan Africa/Europe:
Crew costs
Repair and maintenance
Insurance and loss reserves
Fuel, lube and supplies
Other
Total vessel operating costs
2014
%
2013
%
2012
%
$
$
$
$
$
122,790
49,693
5,530
20,045
29,078
227,136
59,075
11,772
1,691
9,370
9,824
91,732
49,844
19,316
3,138
15,780
13,145
101,223
164,623
96,550
9,269
31,414
73,943
375,799
795,890
30%
12%
1%
5%
7%
55%
38%
8%
1%
6%
6%
59%
27%
10%
2%
8%
7%
54%
25%
14%
1%
5%
11%
56%
56%
112,339
44,798
5,171
19,081
23,015
204,404
69,726
10,469
2,510
10,887
9,313
102,905
39,227
11,530
2,869
11,598
9,653
74,877
134,873
65,790
10,215
37,457
62,060
310,395
692,581
34%
14%
1%
6%
7%
62%
38%
6%
1%
6%
5%
56%
26%
8%
2%
8%
7%
51%
24%
11%
2%
7%
11%
55%
56%
112,138
31,430
5,259
18,092
19,087
186,006
60,777
13,180
2,257
13,786
9,993
99,993
35,375
16,473
2,995
13,217
9,268
77,328
119,472
42,174
6,996
31,809
56,392
256,843
620,170
35%
10%
2%
6%
6%
58%
40%
9%
1%
9%
6%
65%
32%
15%
3%
12%
8%
70%
25%
9%
1%
7%
12%
54%
59%
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
Other operating profit
Corporate general and administrative expenses
Corporate depreciation
Corporate expenses
Gain on asset dispositions, net
Goodwill impairment
Operating income
Foreign exchange gain
Equity in net earnings of unconsolidated companies
Interest income and other, net
Loss on early extinguishment of debt
Interest and other debt costs
Earnings before income taxes
2014
%
2013
%
2012
%
$
$
90,936
29,044
42,736
136,092
298,808
(1,930)
296,878
(47,703)
(3,073)
(50,776)
11,722
(56,283)
201,541
1,541
15,801
2,123
(4,144)
(43,814)
173,048
6%
2%
3%
10%
21%
(<1%)
21%
(4%)
(<1%)
(4%)
1%
(4%)
14%
<1%
1%
<1%
(<1%)
(3%)
12%
40,318
43,704
39,069
129,460
252,551
(833)
251,718
(48,704)
(3,391)
(52,095)
6,609
---
206,232
3,011
12,189
3,476
---
(29,745)
195,163
3%
4%
3%
10%
20%
(<1%)
20%
(4%)
(<1%)
(4%)
1%
---
17%
<1%
1%
<1%
---
(2%)
16%
56,003
16,125
805
97,142
170,075
(2,867)
167,208
(36,665)
(3,714)
(40,379)
17,657
(30,932)
113,554
3,309
13,041
3,440
---
(22,308)
111,036
5%
2%
<1%
9%
16%
(<1%)
16%
(4%)
(<1%)
(4%)
2%
(3%)
11%
<1%
1%
<1%
---
(2%)
10%
37
Fiscal 2014 Compared to Fiscal 2013
Consolidated Results. The company’s revenue during fiscal 2014 increased $190.9 million, or 15%, over the
revenues earned during fiscal 2013 and were primarily attributable to increases in demand in certain markets
and the additions of new vessels delivered or acquired during the current fiscal year. The company’s
consolidated net earnings decreased 7%, or $10.5 million during fiscal 2014 partially due to a $56.3 million non-
cash goodwill impairment charge ($43.4 million after-tax, or $0.87 per share) recorded during the third quarter
of fiscal 2014 in the company’s Asia/Pacific segment as disclosed in Note (16) of Notes to Consolidated
Financial Statements included in Item 8 of this Annual Report on Form 10-K, a $4.1 million loss on the early
extinguishment of Norwegian Kroner denominated public bonds that were issued by Troms Offshore and
retired by the company in fiscal 2014 and approximately $3.7 million in transaction expenses incurred in
connection with the Troms Offshore acquisition, which is included in general and administrative expenses.
Vessel operating costs increased 15%, or $103.3 million, during fiscal 2014 as compared to fiscal 2013. Crew
costs increased approximately 11%, or $40.2 million, during fiscal 2014 as compared to fiscal 2013, primarily
because of the new vessels delivered or acquired in the current fiscal year and the overall higher cost of
personnel. Repair and maintenance costs increased 34%, or $44.7 million, during fiscal 2014, because a
greater number and higher average cost of drydockings that were performed during fiscal year 2014. Other
vessel operating costs increased $21.9 million, or 21%, during the same comparative periods primarily due to
an increase in broker fees (primarily in our Sub-Saharan Africa/Europe region) and costs related to an
increased number of vessels transferring to and operating in certain other areas (in particular, the Americas and
Middle East/North Africa regions).
Depreciation and amortization increased 14%, or $20.2 million, in fiscal 2014 as compared to fiscal 2013 due to
delivery of additional new vessels into the fleet and the higher acquisition/construction costs of the company’s
newer, more sophisticated vessels. General and administrative costs increased 7%, or $12.4 million, primarily
due to approximately $3.7 million in professional services incurred in connection with the Troms Offshore
acquisition, arbitration activities related to our historical operations in Venezuela and legal fees associated with
the placing into administration a subsidiary company based in the United Kingdom.
Interest and other debt expense also increased $14.1 million, or 47%, due to an increase in borrowings during
2014. The company also recorded a $4.1 million loss on the early extinguishment of Norwegian Kroner
denominated public bonds that were issued by Troms Offshore and retired by the company in fiscal 2014. The
overall decrease to pre-tax earnings, and certain discrete items recognized in fiscal 2013 and fiscal 2014
contributed to a 26%, or $11.6 million decrease to income tax expense.
At March 31, 2014, the company had 283 owned or chartered vessels (excluding joint-venture vessels and
vessels withdrawn from service) in its fleet with an average age of 9.9 years. At March 31, 2014, the average
age of 245 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 6.9 years. The remaining 38 vessels,
of which 15 are stacked at fiscal year-end, have an average age of 28.8 years.
During fiscal 2014 and 2013, the company's newer vessels generated $1,342 million and $1,128 million,
respectively, of consolidated vessel revenue and accounted for 96%, or $602.2 million, and 98%, or
$524.7 million, respectively, of total vessel margin (vessel revenues less vessel operating costs). Vessel
operating costs during fiscal 2014 and 2013 for the company’s new vessels excludes depreciation expense of
$152.9 million and $127.5 million, and vessel operating lease expense of $21.9 million and $16.8 million
respectively.
Americas Segment Operations. Vessel revenues in the Americas segment increased approximately 26%, or
$83.7 million, during fiscal 2014 as compared to fiscal 2013, primarily due to higher revenues earned on the
deepwater vessels. Revenues from the deepwater vessel class increased 47%, or $84.7 million, during the
same comparative periods, due to a 9% increase in average day rates, and due to an increased number of
deepwater vessels operating in the region as a result of newly delivered vessels and because deepwater
vessels transferred into the Americas region from other regions primarily as a result of the increased demand
for deepwater drilling services in Brazil and the U.S. GOM during fiscal 2014.
38
Utilization for the Americas-based vessels increased seven percentage points, during fiscal 2014 as compared
to fiscal 2013; however, this increase is partially a result of the sale of 18 older, stacked vessels from the
Americas fleet during fiscal 2014. 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 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 2014, the company had 26 Americas-based stacked
vessels. During fiscal 2014, the company stacked three additional vessels, reactivated one vessel and
disposed of 18 vessels from the previously stacked vessel fleet, resulting in a total of 10 stacked Americas-
based vessels as of March 31, 2014.
Operating profit for the Americas segment increased approximately 126%, or $50.6 million, during fiscal 2014
as compared to fiscal 2013, primarily due to higher revenues, which were offset by an 11%, or $22.7 million,
increase in vessel operating costs (primarily crew costs, repair and maintenance costs and other vessel costs),
an increase in vessel operating lease costs and an increase in depreciation expense. Fiscal 2014 general and
administrative expenses were comparable to the prior period.
Crew costs increased 9%, or $10.5 million, during fiscal 2014 as compared to fiscal 2013, primarily due to an
increase in the number of vessels operating in this segment. Repair and maintenance costs increased 11%, or
$4.9 million, during the same comparative periods, due to an increase in the number and cost of drydockings
performed, and the outfitting of vessels which transferred into the segment for work on new contracts in fiscal
2014. Other vessel costs increased 26%, or $6.1 million, during the same comparative periods, due to the
number of vessel deliveries into the segment during fiscal 2014. Vessel operating lease costs increased 220%,
or $5.8 million, during fiscal 2014 as compared to fiscal 2013, due to the increase in the number of vessels
operated by the company in the U.S. GOM pursuant to leasing arrangements. Depreciation expense increased
7%, or $2.8 million, during the same comparative periods, due to the increase in the number of deepwater
vessels operating in the area, which was partially offset by the disposition of vessels in the Americas segment
pursuant to sale/lease transactions.
Asia/Pacific Segment Operations. Vessel revenues in the Asia/Pacific segment decreased approximately
16%, or $29.4 million, during fiscal 2014 as compared to fiscal 2013, primarily due to lower revenues earned on
the towing-supply and deepwater vessel classes. Revenues on the towing-supply class decreased $21.6
million, or $26%, and revenues on the deepwater vessel class decreased $7.9 million, or 8%, during the same
comparative periods. Decreases in vessel revenue for both vessel classes are attributable to the transfer of
vessels to other segments where market opportunities are currently considered to be more attractive. The
company believes that the Asia/Pacific region continues to be challenged with an excess capacity of vessels as
a result of the significant number of vessels that have been built in this region over the past 10 years, without a
commensurate increase in working rig count within the region. Please refer to the Goodwill disclosure in Item 7
of this Annual Report on Form 10-K for a discussion of a $56.3 million impairment charge related to the
Asia/Pacific segment recorded in the quarter ended December 31, 2013.
Within the Asia/Pacific segment, the company also continued to dispose of vessels that could not find attractive
charters. At the beginning of fiscal 2014, the company had nine Asia/Pacific-based stacked vessels, all of which
were sold during fiscal 2014.
Operating profit for the Asia/Pacific segment decreased $14.7 million, or 34%, during fiscal 2014 as compared
to fiscal 2013, primarily due to lower revenues which were partially offset by an $11.2 million, or 11%, decrease
in vessel operating costs (primarily crew costs) and a decrease in depreciation expense.
Crew costs decreased 15% or $10.7 million, and depreciation expense decreased 12%, or $2.2 million, during
fiscal 2014 as compared to fiscal 2013, due to a decrease in the number of vessels operating in the segment.
Middle East/North Africa Segment Operations. Vessel revenues in the Middle East/North Africa segment
increased approximately 25%, or $37.1 million, during fiscal 2014 as compared to fiscal 2013 primarily due to
increases in revenues from the towing-supply class of vessels of 30%, or $26.8 million, due to a 16% increase
in average day rates and a seven percentage point increase in utilization rates. In addition, deepwater vessel
39
revenue increased 19%, or $10.6 million, during the same comparative periods, due to a 10% increase in
average day rates. Increases in dayrates and overall utilization in Middle East/North Africa segment is primarily
the result of increased operations in the Mediterranean Sea and offshore Saudi Arabia, which in turn has
primarily been driven by an increase in the number of jack up rigs working in this region.
At the beginning of fiscal 2014, the company had six Middle East/North Africa-based stacked vessels. During
fiscal 2014, the company stacked one additional vessel and disposed of six vessels from the previously stacked
vessel
total of one stacked Middle East/North Africa-based vessel as of
March 31, 2014.
resulting
in a
fleet,
Operating profit for the Middle East/North Africa segment increased $3.7 million, or 9%, during fiscal 2014 as
compared to fiscal 2013, primarily due to higher revenues which were partially offset by a 35%, or $26.3 million,
increase in vessel operating costs (primarily crew costs, repair and maintenance costs, fuel, lube and supplies
costs and other vessel costs), an increase in depreciation expense and an increase in general and
administrative expenses.
Crew costs increased 27%, or $10.6 million; fuel, lube and supplies costs increased 36%, or $4.2 million; other
vessel costs increased 36%, or $3.5 million; and depreciation expense increased 30%, or $5.7 million during
fiscal 2014 as compared to fiscal 2013, primarily due to an increase in the number of vessels operating in the
segment. Repair and maintenance costs increased 68%, or $7.8 million, during the same comparative periods,
due to an increase in the number and cost of major repairs and maintenance and drydockings performed in
fiscal 2014 and the outfitting of vessels in preparation for the start of new term contracts. General and
administrative expenses increased 12%, or $1.8 million, during the same comparative periods as a result of the
increase in shore-based personnel, primarily to support our growing operations in Saudi Arabia.
Sub-Saharan Africa/Europe Segment Operations. Vessel revenues in the Sub-Saharan Africa/Europe
segment increased approximately 17%, or $97.1 million, during fiscal 2014 as compared to fiscal 2013,
primarily due to an increase in revenues from the deepwater vessel class. Revenues attributable to deepwater
vessels increased 33%, or $91.2 million, due to a 16% increase in average day rates and a five percentage
point increase in utilization rates. Average day rates on the deepwater vessels and towing-supply vessels
increased due to the replacement of older vessels operating in the area with the higher specification vessels
that are generally required by our customers in the region. Revenues from deepwater vessels during fiscal
2014 also include $55.6 million from vessels added to the company’s fleet with the June 2013 acquisition of
Troms Offshore. Towing-supply vessel revenue increased 2%, or $4.9 million, during the same comparative
periods, due to an 8% increase in average day rates and a four percentage point increase in utilization.
At the beginning of fiscal 2014, the company had 10 Sub-Saharan Africa/Europe-based stacked vessels.
During fiscal 2014, the company stacked four additional vessels, reactivated one vessel and disposed of nine
vessels from the previously stacked vessel fleet, resulting in a total of four stacked Sub-Saharan Africa/Europe-
based vessels as of March 31, 2014.
Operating profit for the Sub-Saharan Africa/Europe segment increased approximately 5%, or $6.6 million,
during fiscal 2014 as compared to fiscal 2013, primarily due to higher revenues, partially offset by a 21%, or
$65.4 million, increase in vessel operating costs (primarily crew costs and repair and maintenance costs and
other vessel operating costs), an increase in depreciation expense and an increase in general and
administrative expenses.
Crew costs increased approximately 22%, or $29.8 million, during fiscal 2014 as compared to fiscal 2013, due
to an increase in the number of vessels operating in the segment. Additionally, $15.6 million of the increase in
crew costs is directly attributable to the June 2013 acquisition of Troms Offshore. Repair and maintenance cost
increased 47%, or $30.8 million, during the same comparative periods, due to an increase in the number and
cost of major repairs and maintenance and drydockings performed during the current period. Other vessel
costs also increased 19%, or $11.9 million, during fiscal 2014 as compared to fiscal 2013, primarily due to
commissions paid to brokers, including commissions to unconsolidated joint venture companies. Depreciation
expense increased 21%, or $14.0 million, during the same comparative periods, due to an increase in the
number of vessels operating in this segment. General and administrative expenses increased 22%, or $11.5
million, during the same comparative periods, due to increases in administrative payroll in part, related to the
acquisition of Troms Offshore.
40
Other Items. Insurance and loss reserves expense decreased $1.1 million, or 6%, during fiscal 2014 as
compared to fiscal 2013, primarily due to downward adjustments to case-based and other reserves and to
additional insurance costs incurred in fiscal 2013 associated with the sinking of a vessel.
Gain on asset dispositions, net during fiscal 2014 increased $5.1 million, or 77%, as compared to fiscal 2013,
due, in part, to a $7.9 million gain recognized on the sale of a vessel to an unconsolidated joint venture (a
gain was recognized based on the company’s proportional ownership of the joint venture) and a $4.6 million
gain recognized on the disposition of the company’s remaining shipyard during fiscal 2014. 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 reviews of its assets for impairment during fiscal 2014 and 2013. 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 2013 Compared to Fiscal 2012
$
2014
9,341
11,149
2013
8,078
14,733
Consolidated Results. The company’s revenue during fiscal 2013 increased $177.2 million, or 17%, over the
revenues earned during fiscal 2012 and were primarily attributable to increases in demand in certain markets
and the additions of new vessels delivered or acquired during fiscal 2013. The company’s consolidated net
earnings also increased 73%, or $63.3 million during fiscal 2013 partially due to a $30.9 million non-cash
goodwill impairment charge ($22.1 million after-tax, or $0.43 per share) recorded during the second quarter of
fiscal 2012 on the company’s Middle East/North Africa segment as disclosed in Note (16) of Notes to
Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
Vessel operating costs increased 11%, or 71.3 million, during fiscal 2013 as compared to fiscal 2012. Crew
costs increased approximately 9%, or $28.4 million, during fiscal 2013 as compared to fiscal 2012, primarily
because of the company’s increased vessel utilization in the fiscal 2013 and the overall higher cost of
personnel. Repair and maintenance costs increased 28%, or $29.3 million, during fiscal 2013, because a
greater number of drydockings were performed during fiscal year 2013. Other vessel operating costs also
increased $9.3 million, or 10%, during the same comparative periods primarily due to an increase in broker
fees.
Depreciation and amortization expense increased 7%, or $8.9 million, in fiscal 2013 as compared to fiscal
2012, due to the higher acquisition/construction costs of the company’s newer, more sophisticated vessels.
General and administrative costs increased 12%, or $19.0 million, primarily due to higher personnel costs
resulting from higher accruals for incentive bonuses, the settlement of a supplemental retirement plan of the
former chief executive officer of the company, higher costs related to stock-based compensation awards and
higher office and property expenses (primarily office rent and information technology costs). Interest and other
debt expense also increased $7.4 million, or 33%, due to an increase in borrowings (as disclosed in Note 0 of
Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K) and
income tax expense increased 88%, or $20.8 million, due to higher overall income before taxes.
At March 31, 2013, the company had 316 owned or chartered vessels (excluding joint-venture vessels and
vessels withdrawn from service) in its fleet with an average age of 12.6 years. At March 31, 2013, the average
age of 232 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 6.2 years. The remaining 84 vessels,
of which 51 were stacked at fiscal year-end, had an average age of 30.1 years.
41
During fiscal 2013 and 2012, the company's newer vessels generated $1,128 million and $911.5 million,
respectively, of consolidated revenue and accounted for 98%, or $507.8 million, and 86%, or $386.1 million,
respectively, of total vessel margin (vessel revenues less vessel operating costs). Vessel operating costs
exclude depreciation on the company’s new vessels of $127.5 million and $111.6 million, respectively, during
the same comparative periods.
Americas Segment Operations. Vessel revenues in the Americas segment increased approximately 1%, or
$2.5 million, during fiscal 2013 as compared to fiscal 2012. Americas-based vessel revenue increased
modestly during the comparative periods; however, increases in revenues generated by the deepwater vessels
were largely offset by lower revenues generated by the towing-supply and other vessel classes. Revenues on
the deepwater vessels increased 22%, or $32.1 million, during the comparative periods, due to a 10% increase
in average day rates, and due to an increased number of deepwater vessels operating in the area as a result of
newly delivered vessels and because deepwater vessels transferred into the Americas segment from other
segments. Revenue from the towing-supply class of vessels decreased 16%, or $23.0 million, during the same
comparative periods, due to fewer towing-supply vessels operating in the Americas segment as a result of
vessels being stacked during fiscal 2013. Revenue for the other vessel class decreased $6.6 million, or 20%,
due to a fewer number of other vessels operating in this segment, primarily due to the stacking and/or sale of
vessels.
Utilization rates for the Americas-based vessels increased two percentage points, during fiscal 2013 as
compared to fiscal 2012; however, this increase is partially a result of the sale of 25 older, stacked vessels from
the Americas fleet during this two-year period, with a significant number of those vessels sold in the later part of
fiscal 2012. Within the Americas segment, the company stacked, and in some cases disposed of, vessels that
could not find attractive charters. At the beginning of fiscal 2013, the company had 21 Americas-based stacked
vessels. During fiscal 2013, the company stacked seven additional vessels, reactivated one vessel and
disposed of one vessel from the previously stacked vessel fleet, resulting in a total of 26 stacked Americas-
based vessels as of March 31, 2013.
Operating profit for the Americas segment decreased approximately 28%, or $15.7 million, during fiscal 2013
as compared to fiscal 2012, primarily due to a 9%, or $17.4 million, increase in vessel operating costs (primarily
repair and maintenance costs and other vessel costs) and a 6%, or $2.3 million, increase in depreciation
expense which offset the increase in revenues. Fiscal 2013 general and administrative expenses were
comparable to the prior period.
Repair and maintenance costs increased 43%, or $13.4 million, during fiscal 2013 as compared to fiscal 2012,
due to an increase in the number of major repairs and maintenance and drydockings that were performed in the
region, primarily in Brazil. Other vessel costs increased 21%, or $3.9 million, during the same comparative
periods, due to an increase in the number of new vessels operating in this segment. The increase in
depreciation expense is primarily related to the increase in the number of deepwater vessels operating in the
area.
Asia/Pacific Segment Operations. Vessel revenues in the Asia/Pacific segment increased approximately
20%, or $30.2 million, during fiscal 2013 as compared to fiscal 2012, primarily due to higher revenues earned
on the deepwater vessels. Revenues on the deepwater vessels increased $20.6 million, or 27%, during the
same comparative periods, due to a 22% increase in average date rates and a 10 percentage point increase in
utilization rates. Increases in average day rates for deepwater vessels were primarily due to the addition of
newer, larger vessels in the segment and the renewal of contracts at higher rates. Also, revenue on the towing-
supply class of vessels increased $10.4 million, or 14%, due to a 12 percentage point increase in utilization
rates. Increases in utilization for these vessel classes was the result of under-utilized vessels in the segment
put to work following the resolution of delays on certain customer projects at the end of fiscal 2012. Increases
in average day rates for deepwater vessels were primarily due to the addition of newer vessels in the segment
and the renewal of contracts at higher rates.
Within the Asia/Pacific segment, the company disposed of a number of vessels that could not find attractive
charters. At the beginning of fiscal 2013, the company had 16 Asia/Pacific-based stacked vessels. During fiscal
2013, the company disposed of seven vessels from the previously stacked vessel fleet, resulting in a total of
nine stacked Asia/Pacific-based vessels as of March 31, 2013.
42
Asia/Pacific segment operating profit increased $27.5 million, or 171%, during fiscal 2013 as compared to fiscal
2012, primarily due to higher revenues which were minimally offset by slightly higher vessel operating costs
(crew costs, offset by lower repair and maintenance and vessel operating leases). Fiscal 2013 depreciation
expense and general and administrative expenses were comparable to the prior period.
Crew costs increased 14.7% or $8.9 million, during fiscal 2013 as compared to fiscal 2012, due to increases in
crew personnel operating in Australia after delays on certain customer projects ended. Repair and maintenance
costs decreased approximately 21%, or $2.7 million, and fuel, lube and supplies costs decreased 21%, or $2.9
million, during the same comparative periods, due to the number of new vessels delivered from Asian shipyards
and outfitted in the Asia/Pacific region prior to such vessels’ mobilizing to other regions where vessels were put
into service.
Middle East/North Africa Segment Operations. Vessel revenues in the Middle East/North Africa segment
increased approximately 37%, or $39.9 million, during fiscal 2013 as compared to fiscal 2012. These increases
were primarily attributable to increases in revenues from the towing-supply vessels of 58%, or $33.0 million,
during the same comparative period, due to a 16 percentage point increase in utilization rates and 31%
increase in average day rates, resulting from the resolution of delays in the acceptance of certain vessels and
cancellations of other vessel contracts as part of a multi-vessel charter that the company had committed to with
one customer in the Middle East. In addition, deepwater vessel revenue increased 20%, or $9.4 million, during
the same comparative periods, due to a 13% increase in average day rates resulting from the replacement in
the region of older vessels with the newer, more sophisticated vessels that our customers were requiring in the
region.
At the beginning of fiscal 2013, the company had seven Middle East/North Africa-based stacked vessels.
During fiscal 2013, the company stacked one additional vessel and disposed of two vessels from the previously
stacked vessel fleet, resulting in a total of six stacked Middle East/North Africa-based vessels as of
March 31, 2013.
Operating profit related to the Middle East/North Africa segment increased $38.3 million, during fiscal 2013 as
compared to fiscal 2012, primarily due to higher revenues which were minimally offset by higher general and
administrative expense which increased 24% or $2.8 million due to a higher number of administrative
personnel, higher office and property costs and other costs associated with an increase in operational activity in
the region.
Sub-Saharan Africa/Europe Segment Operations. Vessel revenues in the Sub-Saharan Africa/Europe
segment increased approximately 21%, or $96.8 million, during fiscal 2013 as compared to fiscal 2012.
Revenues attributable to deepwater vessels increased 37%, or $73.8 million, during the same comparative
periods, due to a 16% increase in average day rates. Towing-supply vessel revenue increased 14%, or 27.4
million, during the same comparative periods, due to a 9% increase in average day rates and an 11 percentage
point increase in utilization. Average day rates on both deepwater vessels and towing-supply vessels operating
the segment increased due to the replacement of older vessels in the area with newer, more sophisticated
vessels. In addition, a number of vessel charter agreements in the region renewed at higher average day rates.
Utilization rates for the Sub-Saharan Africa/Europe-based vessels increased four percentage points during
fiscal 2013 as compared to fiscal 2012; however, this increase is partially a result of the disposition of 21 older,
stacked vessels from the Sub-Saharan/Europe-based vessel fleet during this two year period. Within the Sub-
Saharan Africa/Europe segment, the company stacked, and in some cases disposed of vessels that could not
find attractive charters. At the beginning of fiscal 2013, the company had 23 Sub-Saharan Africa/Europe-based
stacked vessels. During fiscal 2013, the company stacked five additional vessels and sold 18 vessels from the
previously stacked vessel fleet, resulting in a total of 10 stacked Sub-Saharan Africa/Europe-based vessels as
of March 31, 2013.
Sub-Saharan Africa/Europe segment operating profit increased approximately 33%, or $32.3 million, during
fiscal 2013 as compared to fiscal 2012, primarily due to higher revenues, which were partially offset by an
approximate 20%, or $53.3 million, increase in vessel operating costs (primarily crew costs and repair and
maintenance costs and other vessel operating costs); an increase in depreciation expense and an increase in
general and administrative expenses.
43
Crew costs increased approximately 13%, or $15.4 million, during fiscal 2013 as compared to fiscal 2012, due
to an increase in the number of deepwater vessels operating in the segment. Repair and maintenance cost
increased 56%, or $23.6 million, during the same comparative periods, due to an increase in the number and
cost of major repairs and maintenance and drydockings that were undertaken in the region during fiscal 2013.
Other vessel costs also increased 10%, or $5.7 million, during fiscal 2013 as compared to fiscal 2012 primarily
due to higher fees paid to brokers, including commissions paid to unconsolidated joint venture companies.
Depreciation expense increased 12%, or $7.1 million, during the same comparative periods, due to an increase
in the number of vessels operating in this segment. General and administrative expenses increased 9%, or
$4.1 million, during the same comparative periods, most notably due to increases in office and property costs.
Other Items. Insurance and loss reserves expense increased $3.3 million, or 19%, during fiscal 2013 as
compared to fiscal 2012, primarily due to additional premium costs due as a result of the sinking of a 3,800
BHP tug (net book value of approximately $4.2 million). The company believes that its insurance coverage,
subject to customary retentions, deductibles and premium adjustments, is adequate to provide for the loss and
any claims that may arise as a result of the sinking. The company is unaware of any personal injuries resulting
from the incident.
Gain on asset dispositions, net during fiscal 2013 decreased $11.0 million, or 63%, as compared to fiscal 2012,
primarily due to a lower number of vessels disposed during fiscal 2013 and an increase in asset impairment
charges in fiscal 2013. Also included in gain on asset dispositions, net is a gain of $2.3 million related to the
sale of one of the company’s two shipyards.
The company performed reviews of its assets for impairment during fiscal 2013 and 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
Vessel Class Revenue and Statistics by Segment
$
2013
8,078
14,733
2012
3,607
8,175
Vessel utilization is determined primarily by market conditions and to a lesser extent by major repairs and
maintenance and 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 support vessels. Suitability of available 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 depress 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 (which includes stacked
vessels and vessels undergoing major repairs and maintenance and/or in drydock) but do not include vessels
owned by joint ventures (11 vessels at March 31, 2014). 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:
44
REVENUE BY VESSEL CLASS:
(In thousands)
Fiscal Year 2014
Americas fleet:
Deepwater
Towing-supply
Other
Total
Asia/Pacific fleet:
Deepwater
Towing-supply
Other
Total
Middle East/North Africa fleet:
Deepwater
Towing-supply
Other
Total
Sub-Saharan Africa/Europe fleet:
Deepwater
Towing-supply
Other
Total
Worldwide fleet:
Deepwater
Towing-supply
Other
Total
Fiscal Year 2013
Americas fleet:
Deepwater
Towing-supply
Other
Total
Asia/Pacific fleet:
Deepwater
Towing-supply
Other
Total
Middle East/North Africa fleet:
Deepwater
Towing-supply
Other
Total
Sub-Saharan Africa/Europe fleet:
Deepwater
Towing-supply
Other
Total
Worldwide fleet:
Deepwater
Towing-supply
Other
Total
First
Second
Third
Fourth
Year
61,811
30,861
9,257
101,929
19,923
16,559
948
37,430
15,732
28,763
875
45,370
106,541
56,772
15,626
178,939
204,007
132,955
26,706
363,668
Second
44,747
31,109
6,460
82,316
24,592
20,229
917
45,738
12,275
18,859
917
32,051
67,696
63,548
18,473
149,717
149,310
133,745
26,767
309,822
72,048
30,451
7,349
109,848
20,142
15,235
948
36,325
18,805
31,481
872
51,158
84,866
59,789
18,727
163,382
195,861
136,956
27,896
360,713
Third
48,089
29,418
7,025
84,532
21,862
19,277
918
42,057
15,407
25,870
750
42,027
64,509
54,816
17,102
136,427
149,867
129,381
25,795
305,043
74,859
26,073
7,778
108,710
23,834
13,114
959
37,907
16,114
31,979
690
48,783
86,064
59,803
21,183
167,050
200,871
130,969
30,610
362,450
Fourth
49,916
25,938
6,707
82,561
24,327
19,211
939
44,477
16,979
25,173
732
42,884
78,724
58,981
17,412
155,117
169,946
129,303
25,790
325,039
263,750
115,055
31,926
410,731
88,191
62,630
3,797
154,618
66,503
116,720
3,301
186,524
364,722
231,224
70,642
666,588
783,166
525,629
109,666
1,418,461
Year
179,032
120,817
27,210
327,059
96,118
84,217
3,679
184,014
55,945
89,902
3,565
149,412
273,544
226,357
69,612
569,513
604,639
521,293
104,066
1,229,998
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
55,032
27,670
7,542
90,244
24,292
17,722
942
42,956
15,852
24,497
864
41,213
87,251
54,860
15,106
157,217
182,427
124,749
24,454
331,630
First
36,280
34,352
7,018
77,650
25,337
25,500
905
51,742
11,284
20,000
1,166
32,450
62,615
49,012
16,625
128,252
135,516
128,864
25,714
290,094
45
REVENUE BY VESSEL CLASS - continued:
(In thousands)
Fiscal Year 2012
Americas fleet:
Deepwater
Towing-supply
Other
Total
Asia/Pacific fleet:
Deepwater
Towing-supply
Other
Total
Middle East/North Africa fleet:
Deepwater
Towing-supply
Other
Total
Sub-Saharan Africa/Europe fleet:
Deepwater
Towing-supply
Other
Total
Worldwide fleet:
Deepwater
Towing-supply
Other
Total
UTILIZATION:
Fiscal Year 2014
Americas fleet:
Deepwater
Towing-supply
Other
Total
Asia/Pacific fleet:
Deepwater
Towing-supply
Other
Total
Middle East/North Africa fleet:
Deepwater
Towing-supply
Other
Total
Sub-Saharan Africa/Europe fleet:
Deepwater
Towing-supply
Other
Total
Worldwide fleet:
Deepwater
Towing-supply
Other
Total
First
Second
Third
Fourth
Year
$
$
$
$
$
$
$
$
$
$
36,405
35,686
8,586
80,677
15,929
18,444
1,126
35,499
10,751
13,474
1,832
26,057
38,506
52,626
19,950
111,082
101,591
120,230
31,494
253,315
36,639
36,648
8,605
81,892
12,264
15,870
993
29,127
11,782
11,616
1,412
24,810
45,605
48,698
18,280
112,583
106,290
112,832
29,290
248,412
38,861
35,866
8,014
82,741
20,445
19,334
1,140
40,919
12,647
13,778
1,414
27,839
51,194
49,519
18,274
118,987
123,147
118,497
28,842
270,486
35,045
35,596
8,578
79,219
26,857
20,197
1,153
48,207
11,331
18,034
1,418
30,783
64,392
48,161
17,493
130,046
137,625
121,988
28,642
288,255
146,950
143,796
33,783
324,529
75,495
73,845
4,412
153,752
46,511
56,902
6,076
109,489
199,697
199,004
73,997
472,698
468,653
473,547
118,268
1,060,468
First
Second
Third
Fourth
Year
77.8%
43.2
82.2
60.1%
92.7%
64.5
100.0
72.2%
91.3%
72.1
44.7
73.3%
79.3%
67.6
70.2
71.8%
81.2%
60.8
71.5
68.8%
72.3
49.5
91.6
63.9
80.1
73.0
100.0
75.8
81.2
86.1
81.8
84.7
88.8
66.8
72.5
75.0
81.9
66.3
77.3
73.2
85.3
60.9
78.0
73.9
77.2
70.6
100.0
73.6
71.0
84.8
100.0
81.7
83.0
73.8
76.8
77.3
81.7
72.8
78.1
76.7
83.7
59.5
78.4
73.2
84.7
82.7
100.0
84.1
71.3
88.2
98.1
84.0
83.1
77.9
89.2
83.3
81.9
76.6
87.3
80.8
80.0
51.9
82.6
67.4
83.5
71.6
100.0
76.0
77.6
82.8
73.0
80.9
83.6
71.3
77.1
76.7
81.7
68.6
78.5
74.7
46
UTILIZATION - continued:
Fiscal Year 2013
Americas fleet:
Deepwater
Towing-supply
Other
Total
Asia/Pacific fleet:
Deepwater
Towing-supply
Other
Total
Middle East/North Africa fleet:
Deepwater
Towing-supply
Other
Total
Sub-Saharan Africa/Europe fleet:
Deepwater
Towing-supply
Other
Total
Worldwide fleet:
Deepwater
Towing-supply
Other
Total
Fiscal Year 2012
Americas fleet:
Deepwater
Towing-supply
Other
Total
Asia/Pacific fleet:
Deepwater
Towing-supply
Other
Total
Middle East/North Africa fleet:
Deepwater
Towing-supply
Other
Total
Sub-Saharan Africa/Europe fleet:
Deepwater
Towing-supply
Other
Total
Worldwide fleet:
Deepwater
Towing-supply
Other
Total
First
Second
Third
Fourth
Year
73.7%
53.4
80.5
63.3%
92.6%
54.9
58.7
62.5%
93.6%
77.2
42.2
75.0%
84.1%
60.3
76.6
71.3%
83.1%
60.0
74.2
68.4%
70.7
48.2
72.5
58.6
81.2
52.2
100.0
58.7
91.8
71.2
34.5
69.9
83.0
67.8
79.9
75.4
79.8
59.9
74.7
67.8
73.1
48.0
82.4
60.9
89.2
52.4
100.0
60.5
89.8
80.1
28.6
75.1
70.3
66.9
77.2
71.1
75.2
61.1
74.5
67.5
80.4
41.9
81.0
59.1
83.6
54.5
100.0
62.4
98.6
74.7
29.3
73.4
76.3
73.3
78.7
75.9
80.6
61.2
75.2
69.4
74.4
48.0
79.0
60.5
86.8
53.5
85.1
61.0
93.5
75.8
33.7
73.3
78.2
66.9
78.1
73.4
79.6
60.6
74.6
68.3
First
Second
Third
Fourth
Year
70.8%
43.3
70.5
54.3%
71.1%
42.5
100.0
51.1%
76.3%
57.6
63.2
61.6%
81.6%
56.8
84.1
70.1%
75.7%
50.3
79.3
61.5%
73.5
46.9
66.3
56.8
59.6
36.3
79.3
42.8
91.6
49.7
50.0
57.4
88.1
54.6
80.0
69.2
79.3
48.1
74.1
60.2
79.7
54.2
59.6
61.0
83.5
43.8
100.0
54.4
98.8
59.2
50.0
65.2
83.8
56.9
79.7
70.0
84.2
53.9
72.4
64.6
75.9
53.1
69.4
61.4
95.3
43.1
100.0
55.9
100.0
73.3
50.0
74.4
84.0
55.0
75.5
68.4
84.9
55.0
72.6
65.4
74.9
49.0
66.3
58.2
76.8
41.3
94.8
50.9
91.2
59.9
53.3
64.5
84.4
55.8
79.8
69.4
81.1
51.7
74.6
62.9
47
AVERAGE DAY RATES:
Fiscal Year 2014
Americas fleet:
Deepwater
Towing-supply
Other
Total
Asia/Pacific fleet:
Deepwater
Towing-supply
Other
Total
Middle East/North Africa fleet:
Deepwater
Towing-supply
Other
Total
Sub-Saharan Africa/Europe fleet:
Deepwater
Towing-supply
Other
Total
Worldwide fleet:
Deepwater
Towing-supply
Other
Total
Fiscal Year 2013
Americas fleet:
Deepwater
Towing-supply
Other
Total
Asia/Pacific fleet:
Deepwater
Towing-supply
Other
Total
Middle East/North Africa fleet:
Deepwater
Towing-supply
Other
Total
Sub-Saharan Africa/Europe fleet:
Deepwater
Towing-supply
Other
Total
Worldwide fleet:
Deepwater
Towing-supply
Other
Total
First
Second
Third
Fourth
Year
31,953
15,520
7,843
19,974
37,812
12,430
10,300
19,184
22,195
12,440
4,750
14,156
30,244
15,737
4,779
17,206
30,481
14,389
5,651
17,603
Second
28,450
14,103
6,094
17,012
42,037
12,663
9,972
20,109
18,359
9,857
4,812
11,561
25,235
15,721
5,236
14,602
27,102
13,705
5,496
15,384
29,779
17,247
7,320
21,169
33,937
12,687
10,300
19,257
23,708
13,375
4,738
15,358
28,664
15,764
5,409
15,994
28,944
15,029
5,883
17,492
Third
28,721
13,721
6,181
17,060
35,453
12,592
9,972
18,779
20,710
12,020
4,750
13,761
25,853
14,318
5,054
14,053
27,100
13,399
5,407
15,286
31,066
16,220
7,868
21,718
39,072
12,383
10,661
21,550
20,524
13,000
3,912
14,258
29,158
16,542
5,392
15,917
29,730
14,982
5,905
17,525
Fourth
29,480
14,330
6,132
17,960
37,370
13,976
10,432
21,024
21,259
12,689
4,628
14,583
26,468
14,996
5,300
15,218
27,782
14,207
5,573
16,378
30,629
16,010
7,502
20,482
37,549
12,645
10,402
20,167
21,913
12,862
4,543
14,531
28,932
15,858
5,136
16,282
29,441
14,684
5,741
17,405
Year
28,216
14,064
6,097
16,861
36,424
13,378
10,079
19,789
19,926
11,116
4,836
12,844
25,056
14,684
5,118
14,261
26,626
13,580
5,430
15,325
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
29,786
15,161
6,965
18,977
39,291
13,022
10,353
20,749
21,202
12,567
4,750
14,316
27,514
15,386
4,883
15,993
28,572
14,338
5,496
16,976
First
25,829
14,135
5,987
15,508
32,225
14,229
9,945
19,384
18,920
9,812
5,056
11,325
22,643
13,572
4,884
13,113
24,406
13,054
5,250
14,275
48
AVERAGE DAY RATES - continued:
Fiscal Year 2012
Americas fleet:
Deepwater
Towing-supply
Other
Total
Asia/Pacific fleet:
Deepwater
Towing-supply
Other
Total
Middle East/North Africa fleet:
Deepwater
Towing-supply
Other
Total
Sub-Saharan Africa/Europe fleet:
Deepwater
Towing-supply
Other
Total
Worldwide fleet:
Deepwater
Towing-supply
Other
Total
First
Second
Third
Fourth
Year
$
$
$
$
$
$
$
$
$
$
26,360
14,031
6,044
15,094
21,436
12,519
6,189
14,801
18,147
7,738
5,302
9,726
20,399
13,228
5,008
11,278
22,065
12,349
5,310
12,496
24,863
14,786
6,408
15,466
20,619
11,974
6,807
14,098
17,466
8,513
5,117
10,716
20,375
13,121
4,779
11,518
21,338
12,706
5,240
12,771
25,247
13,812
6,431
15,373
25,357
12,836
6,189
16,389
17,484
8,604
5,127
10,705
21,719
13,482
4,889
12,181
22,696
12,636
5,298
13,359
25,911
13,704
6,791
15,197
30,982
13,751
6,335
19,148
17,788
8,992
5,194
10,558
23,254
13,894
4,993
13,353
24,465
12,790
5,485
14,140
25,573
14,076
6,407
15,283
25,073
12,790
6,358
16,221
17,703
8,477
5,192
10,417
21,584
13,420
4,917
12,080
22,709
12,617
5,330
13,197
The day-based utilization percentages, average day rates and the average number of the company’s new
vessels (defined as vessels acquired or constructed since calendar year 2000 as part of its new build and
acquisition program) by vessel class and in total for each of the quarters in the years ended March 31:
Fiscal Year 2014
UTILIZATION:
Deepwater
PSVs
AHTS vessels
Towing-supply
Other
Total
AVERAGE VESSEL DAY RATES:
Deepwater
PSVs
AHTS vessels
Towing-supply
Other
Total
AVERAGE VESSEL COUNT:
Deepwater
PSVs
AHTS vessels
Towing-supply
Other
Total
First
Second
Third
Fourth
Year
84.0 %
95.9
81.7
73.3
81.2 %
$
$
28,689
29,561
14,595
5,843
17,955
69
11
103
53
236
84.6
87.9
85.7
73.2
82.7
31,053
28,885
14,484
5,635
18,637
73
11
103
52
239
82.7
95.8
85.5
81.8
84.3
29,092
29,141
15,144
6,036
18,209
75
12
104
52
243
86.1
73.9
84.4
91.8
86.0
29,735
31,158
15,126
6,126
18,287
76
12
105
52
245
84.4
88.2
84.3
80.0
83.6
29,659
29,628
14,840
5,924
18,275
73
11
104
52
240
49
Fiscal Year 2013
UTILIZATION:
Deepwater
PSVs
AHTS vessels
Towing-supply
Other
Total
AVERAGE VESSEL DAY RATES:
Deepwater
PSVs
AHTS vessels
Towing-supply
Other
Total
AVERAGE VESSEL COUNT:
Deepwater
PSVs
AHTS vessels
Towing-supply
Other
Total
Fiscal Year 2012
UTILIZATION:
Deepwater
PSVs
AHTS vessels
Towing-supply
Other
Total
AVERAGE VESSEL DAY RATES:
Deepwater
PSVs
AHTS vessels
Towing-supply
Other
Total
AVERAGE VESSEL COUNT:
Deepwater
PSVs
AHTS vessels
Towing-supply
Other
Total
First
Second
Third
Fourth
Year
85.9 %
93.7
89.3
78.7
86.2 %
$
$
24,062
28,908
13,663
5,657
15,466
55
11
101
50
217
First
83.8 %
69.0
82.4
91.7
84.4 %
$
$
20,688
29,846
14,351
5,768
14,091
47
11
85
51
194
84.6
79.3
87.6
80.3
84.7
27,224
30,226
14,456
5,868
16,660
57
11
101
49
218
Second
85.6
77.1
75.0
85.8
80.5
20,547
27,573
14,473
5,633
14,291
49
11
88
51
199
78.3
81.8
86.3
78.6
82.1
27,223
30,366
13,969
5,765
16,503
62
11
102
49
224
Third
90.2
92.3
78.3
83.9
83.4
21,990
27,177
14,007
5,737
14,835
51
11
93
51
206
82.9
99.0
84.8
79.5
83.8
27,889
29,779
14,490
6,004
17,458
67
11
103
48
229
Fourth
90.2
87.7
79.6
81.8
83.2
24,394
27,764
13,831
5,939
15,658
54
11
99
49
213
82.8
88.4
87.0
79.3
84.2
26,652
29,787
14,141
5,823
16,526
60
11
102
49
222
Year
87.6
81.5
78.8
85.8
82.9
22,018
27,989
14,150
5,766
14,741
50
11
91
50
202
50
Vessel Count, Dispositions, Acquisitions and Construction Programs
The average age of the company's 283 owned or chartered vessels (excluding joint-venture vessels and
vessels withdrawn from service) in its fleet at March 31, 2014 is approximately 9.9 years. The average age of
245 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 6.9 years. The
remaining 38 vessels have an average age of 28.8 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, 2014 vessel count:
Actual Vessel
Count at
March 31,
2014
Average Number
of Vessels During
Year Ended March 31,
2013
2012
2014
Americas fleet:
Deepwater
Towing-supply
Other
Total
Less stacked vessels
Active vessels
Asia/Pacific fleet:
Deepwater
Towing-supply
Other
Total
Less stacked vessels
Active vessels
Middle East/North Africa fleet:
Deepwater
Towing-supply
Other
Total
Less stacked vessels
Active vessels
Sub-Saharan Africa/Europe fleet:
Deepwater
Towing-supply
Other
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
32
30
14
76
10
66
8
14
1
23
--
23
12
31
2
45
1
44
40
51
48
139
4
135
268
15
283
--
11
294
29
38
14
81
18
63
8
19
1
28
4
24
11
30
3
44
1
43
41
56
49
146
9
137
267
32
299
1
10
310
23
50
15
88
25
63
8
32
1
41
12
29
8
29
6
43
7
36
38
63
48
149
17
132
260
61
321
2
10
333
21
57
21
99
33
66
11
38
2
51
18
33
8
31
6
45
8
37
30
74
50
154
27
127
263
86
349
3
10
362
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.
51
The company had 15, 51 and 67 stacked vessels at March 31, 2014, 2013 and 2012, respectively. Most of the
vessels stacked at March 31, 2014 are being marketed for sale and are not expected to return to the active
fleet, primarily due to their age.
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:
Deepwater:
AHTS vessels
PSVs
Towing-supply:
AHTS vessels
PSVs
Other
Total
Number of vessels disposed by segment:
Americas
Asia/Pacific
Middle East/North Africa
Sub-Saharan Africa/Europe
Vessels withdrawn from service
Total
2014 (A)
2013
2012
--
3
27
12
6
48
19
9
8
11
1
48
--
1
15
8
8
32
2
8
3
19
--
32
1
1
39
10
9
60
27
7
12
12
2
60
(A) Excluded from fiscal 2014 vessel dispositions are 10 vessels that were sold and leased back by the company as disclosed in Note (11)
of Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
Vessel and Other 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:
AHTS vessels
PSVs
Towing-supply:
AHTS vessels
PSVs
Other:
Crewboats
Total number of vessels added to the fleet
Total remotely operated vehicles
Number of vessels added
2014 (A)
2013 (B)
2012
1
10
--
2
2
15
6
--
13
2
1
2
18
--
--
9
14
1
--
24
--
(A) Excluded from fiscal 2014 vessel deliveries and acquisitions are two deepwater class PSVs and six towing-supply PSVs that were
originally sold to a third party and leased back in fiscal 2006 and 2010. The company elected to repurchase these vessels from the
lessors during fiscal 2014 as disclosed in Note (11) of Notes to Consolidated Financial Statements included in Item 8 of this Annual
Report on Form 10-K.
(B) Excluded from fiscal 2013 vessel deliveries and acquisitions are two towing-supply class PSVs that were originally sold to a third party
and leased back in fiscal 2006 and 2007. The company elected to repurchase these vessels from the lessors during fiscal 2013 as
disclosed in Note (11) of Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
Fiscal 2014. The company took delivery of six newly-built vessels and acquired nine vessels from third parties.
Two of the delivered vessels are deepwater PSVs, which are both 303-feet in length. The 303-feet PSVs were
constructed at a U.S. shipyard for a total aggregate cost of $123.3 million. The company also took delivery of
52
two towing-supply PSVs, of which one is 220-feet in length, and one is 217-feet in length. These two vessels
were constructed at an international shipyard for a total aggregate cost of $51.4 million. The company also took
delivery of two waterjet crewboats at an international shipyard for $6.0 million. In addition, the company
acquired from third parties, two 290-feet deepwater PSVs for a total cost of $93.9 million and a 247-feet
deepwater AHTS vessel for $29.0 million. The company also acquired a fleet of four deepwater PSVs, ranging
from 280-feet to 285-feet, as a result of the Troms Offshore Supply AS acquisition. The purchase price
allocated to these four vessels totals an aggregate $234.9 million. Two Troms vessel construction projects
(related to a 270-foot, deepwater PSV and a 310-foot, deepwater PSVs) were also completed in fiscal 2014 for
a total cost of $112.4 million. The company also acquired six remotely operated vehicles (ROV) for a total cost
of $31.9 million.
In addition to the 21 deliveries noted above, we acquired two additional deepwater class PSVs and six towing-
supply class PSVs during fiscal 2014 which had been sold and leased back during fiscal 2008 and fiscal 2010.
The company elected to repurchase these vessels from the lessors for an aggregate total of $78.8 million.
Please refer to the “Off-Balance Sheet Arrangements” section of Item 7 for a discussion on the company’s
sale/leaseback vessels and to Note (11) of Notes to Consolidated Financial Statements included in Item 8 of
this Annual Report on Form 10-K.
Fiscal 2013. The company took delivery of eleven newly-built vessels and acquired seven vessels from third
parties. Seven of the delivered vessels are deepwater PSVs, six of which are 286-feet in length and one is 249-
feet in length. The six 286-feet PSVs were constructed at an international shipyard for a total aggregate cost of
$175.9 million. The 249-feet PSV was built at a different international shipyard for $19.2 million. The company
also took delivery of two towing-supply class AHTS vessels that have 8,200 brake horse power (BHP). These
two vessels were constructed at an international shipyard for a total aggregate cost of $47.6 million. The
company also took delivery of two waterjet crewboats that were built at an international shipyard for $6.0
million. In addition, the company acquired six deepwater PSVs for a total cost of $170.0 million (which range
between 220-feet to 250-feet in length) and one towing-supply class PSV for a total cost of $13.0 million.
In addition to the 18 deliveries noted above, we acquired two additional towing-supply class PSVs during fiscal
2013 which were originally taken delivery of, then sold and leased back during fiscal 2006 and 2007. The
company elected to repurchase these vessels from the lessors for an aggregate total of $17.2 million. Please
refer to the “Off-Balance Sheet Arrangements” section of Item 7 for a discussion on the company’s
sale/leaseback vessels and to Note (11) of Notes to Consolidated Financial Statements included in Item 8 of
this Annual Report on Form 10-K.
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 class AHTS vessels and the other seven are deepwater class
PSVs. The six AHTS 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 PSV was built by Quality
Shipyard, L.L.C., the company’s then active, wholly-owned shipyard subsidiary for a cost of $36.1 million. The
other six deepwater PSVs measure 286-feet and were constructed at the same international shipyard for
$172.0 million. The company also acquired a 246-foot deepwater PSV and a 250-foot deepwater PSV for a
total aggregate cost of $41.6 million and acquired eight 5,150 BHP towing-supply class, AHTS vessels for a
total aggregate total cost of $96.7 million.
Vessel Construction and Acquisition Expenditures at March 31, 2014
At March 31, 2014, the company had six 7,145 BHP towing-supply class AHTS vessels under construction at
an international shipyard, for a total estimated cost of $116.3 million. The vessels are expected to be delivered
beginning in January 2015 with final delivery of the last vessel in February 2016. As of March 31, 2014, the
company had invested $55.2 million in these vessels.
The company is also committed to the construction of 23 PSVs, including two 246-foot, six 261-foot, one 264-
foot, ten 275-foot, two 310-foot and two 300-foot deepwater PSVs for a total estimated cost of $708.9 million.
Two of the 300-foot and one 264-foot deepwater PSVs are being constructed at a U.S. shipyard. A different
U.S. shipyard is constructing the two 310-foot deepwater PSVs. Two different international shipyards are
constructing four and six 275-foot deepwater PSVs, respectively. Three other international shipyards are
constructing two 246-foot and six 261-foot deepwater PSVs, respectively. The two 246-foot deepwater PSVs
53
are expected to deliver in June 2014 and July 2014, and the six 261-foot deepwater PSVs have expected
delivery dates ranging from September 2015 to June 2016. The 264-foot deepwater PSV is expected to deliver
in August 2014. The ten 275-foot deepwater PSVs are expected to be delivered beginning in July 2014, with
final delivery of the tenth vessel in July 2015. The two 300-foot deepwater PSVs are scheduled for delivery in
September 2015 and February 2016. The two 310-foot deepwater PSVs constructed at U.S. shipyards are
scheduled for delivery in November 2015 and February 2016. As of March 31, 2014, $196.5 million was
invested in these 23 vessels.
Currently the company is experiencing substantial delay with one fast 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 has suspended construction on
the vessel and both parties continue 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, 2014. The company had
committed and invested $8.0 million as of March 31, 2014.
In December 2013, the company took delivery of the second of two deepwater PSVs constructed in a U.S.
shipyard. In connection with the delivery of those vessels, the company and the shipyard agreed to hold $11.7
million in escrow with a financial institution pending resolution of disputes over whether all or a portion of those
funds are due to the shipyard as the shipyard has claimed. Some of the disputes may be resolved by high level
management meetings between the parties or through a structured mediation. The balance of the claims will
need to be resolved through litigation in New York state court. Although formal dispute resolution efforts are
currently at an early stage, initial negotiations have thus far failed to resolve the parties’ disputes, and the
company has retained New York counsel to represent the company in the mediation and litigation procedures.
The escrowed amounts have been included in the cost of the acquired vessels.
Vessel Commitments Summary at March 31, 2014
The table below summarizes the various vessel commitments, including vessels under construction and vessel
acquisition, by vessel class and type as of March 31, 2014:
Number
of
Vessels
Vessel class and type
In thousands, except number of vessels:
Deepwater PSVs
Towing-supply vessels
Other
Totals
18
6
1
25
Non-U.S. Built
U.S. Built
Total
Cost
Invested Remaining
Through
3/31/14
Balance
3/31/14
Number
of
Vessels
Total
Cost
Invested
Through
3/31/14
Remaining
Balance
3/31/14
$ 454,911
116,288
8,014
$ 579,213
108,431
55,163
8,014
171,608
346,480
61,125
---
407,605
5
---
---
5
253,972
---
---
253,972
88,037
---
---
88,037
165,935
---
---
165,935
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:
Vessel class and type
Deepwater PSVs
Towing-supply vessels
Other
Totals
(In thousands)
Expected quarterly cash outlay
Quarter Period Ended
06/14
1
---
---
1
09/14
5
---
---
5
12/14
4
---
---
4
03/15
1
1
---
2
06/15
1
1
1
3
Thereafter
11
4
---
15
$
53,150
117,010
134,337
64,114
75,500
129,429 (A)
(A) The $129,429 of ‘Thereafter’ vessel construction obligations is expected to be paid out as follows: $117,298 in the remaining quarters
of fiscal 2016 and $12,131 during fiscal 2017.
54
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, proceeds from the disposition of (generally older) vessels, revolving bank credit facility borrowings, a bank
term loan, various leasing arrangements, and funds provided by the sale of senior unsecured notes as
disclosed in Note 0 of Notes to Consolidated Financial Statements included in Item 8 of this Annual Report
on Form 10-K. The company has $573.5 million in unfunded capital commitments associated with the 30
vessels currently under construction at March 31, 2014.
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
2014
109,943
27,121
11,645
29,035
10,232
187,976
$
$
%
8%
2%
1%
1%
1%
13%
2013
109,058
26,270
9,819
19,510
10,952
175,609
%
9%
2%
1%
1%
1%
14%
2012
92,293
23,615
9,407
22,326
8,929
156,570
%
9%
2%
1%
2%
1%
15%
Segment and corporate general and administrative expenses and the related percentage of total general and
administrative expenses for the years ended March 31 were as follows:
(In thousands)
Vessel operations
Other operating activities
Corporate
2014
137,741
2,532
47,703
187,976
$
$
%
74%
1%
25%
100%
2013
124,132
2,773
48,704
175,609
%
71%
1%
28%
100%
2012
117,627
2,278
36,665
156,570
%
75%
1%
24%
100%
General and administrative expenses were higher by approximately 7%, or $12.4 million, during fiscal 2014 as
compared to fiscal 2013, primarily due to increases in professional services costs of 49%, or $9.5 million,
which were related the acquisition of Troms Offshore, arbitration activities related to our historical operations
in Venezuela, and legal fees associated with the placing into administration of a subsidiary company based
in the United Kingdom.
General and administrative expenses were higher by approximately 12%, or $19.0 million, during fiscal 2013 as
compared to fiscal 2012, primarily due to higher personnel costs resulting from pay raises for administrative
personnel; higher accruals for incentive bonuses; the settlement of a supplemental retirement plan of the former
chief executive officer of the company; higher costs related to stock-based compensation awards and higher
office and property expenses (primarily office rent and information technology costs). These increases were
partially offset by decreases in professional expenses.
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 support 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, 2014, the company had $60.4 million in cash and cash equivalents, of which $51.9 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
55
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 receivables due 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 including
continuing to pay the quarterly dividend. 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 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 credit facilities provide the company, in our opinion, with sufficient liquidity to meet our
requirements, including 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. In June 2013, the company amended and extended its
existing credit facility. The amended credit agreement matures in June 2018 (the “Maturity Date”) and provides
for a $900 million, five-year credit facility (“credit facility”) consisting of a (i) $600 million revolving credit facility
(the “revolver”) and a (ii) $300 million term loan facility (“term loan”).
Borrowings under the credit facility are unsecured and bear interest at the company’s option at (i) the greater of
prime or the federal funds rate plus 0.25 to 1.00%, or (ii) Eurodollar rates, plus margins ranging from 1.25 to
2.00% based on the company’s consolidated funded debt to capitalization ratio. Commitment fees on the
unused portion of the facilities range from 0.15 to 0.30% based on the company’s funded debt to total
capitalization ratio. The credit facility requires that the company maintain a ratio of consolidated debt to
consolidated total capitalization that does not exceed 55%, and maintain a 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, including capitalized interest, for such period) of not less
than 3.0 to 1.0. 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 had $300.0 million in term loan borrowings outstanding at March 31, 2014 (whose fair value
approximates the carrying value because the borrowings bear interest at variable rates), and has the entire
$600.0 million available under the revolver to fund future liquidity needs at March 31, 2014. The company had
$125 million of term loan borrowings and $110 million outstanding under the revolver at March 31, 2013.
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.
56
September 2013 Senior Notes
On September 30, 2013, the company executed a note purchase agreement for $500 million and issued
$300 million of senior unsecured notes to a group of institutional investors. The company issued the remaining
$200 million of senior unsecured notes on November 15, 2013. A summary of these outstanding notes at
March 31, 2014, 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
$
March 31,
2014
500,000
9.4
4.86%
520,979
The multiple series of notes totaling $500 million were issued with maturities ranging from approximately seven
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 ratio of
consolidated debt to consolidated total capitalization that does not exceed 55% and maintain a ratio of
consolidated EBITDA to consolidated interest charges, including capitalized interest, of not less than 3.0 to 1.0.
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 outstanding notes 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
$
2014
165,000
6.6
4.42%
168,653
2013
165,000
7.6
4.42%
179,802
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 ratio of consolidated debt to
consolidated total capitalization that does not exceed 55%.
September 2010 Senior Notes
In fiscal 2011, the company completed the sale of $425 million of senior unsecured notes. A summary of the
aggregate amount of these outstanding notes 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
$
2014
425,000
5.6
4.25%
436,254
2013
425,000
6.6
4.25%
458,520
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 ratio of consolidated debt to consolidated
total capitalization that does not exceed 55%.
Included in accumulated other comprehensive income at March 31, 2014 and 2013, is an after-tax loss of
$2.4 million ($3.7 million pre-tax), and $2.9 million ($4.4 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 to
interest expense over the term of the individual notes matching the term of the hedges to interest expense.
57
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 these outstanding notes 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
$
2014
35,000
1.3
4.61%
36,018
2013
175,000
0.7
4.47%
178,227
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 require that the company
maintain a ratio of consolidated debt to consolidated total capitalization that does not exceed 55%.
Troms Offshore Debt
In January 2014, Troms Offshore entered into a new 300 million NOK, 12 year unsecured borrowing agreement
which matures in January 2026. The loan requires semi-annual principal payments of 12.5 million NOK (plus
accrued interest) and bears interest at a fixed rate of 2.31% plus a premium based on Tidewater Inc.’s
consolidated funded indebtedness to total capitalization ratio (currently equal to 1.50% for a total all-in rate of
3.81%). As of March 31, 2014, 300.0 million NOK (approximately $50.0 million) is outstanding under this
agreement.
In May 2012, Troms Offshore entered into a 204.4 million NOK denominated borrowing agreement which
matures in May 2024. The loan requires semi-annual principal payments of 8.5 million NOK (plus accrued
interest), bears interest at a fixed rate of 6.38% and is secured by certain guarantees and various types of
collateral, including a vessel. As of March 31, 2014, 178.9 million NOK (approximately $29.8 million) is
outstanding under this agreement. In January 2014, the loan was amended to, among other things, change the
interest rate to a fixed rate equal to 3.88% plus a premium based on Tidewater’s funded indebtedness to
capitalization ratio (currently equal to 1.50% for a total all-in rate of 5.38%), change the borrower, change the
export creditor guarantor, and to replace the vessel security with a company guarantee.
In May 2012, Troms Offshore entered into a 35.0 million NOK denominated borrowing agreement with a
shipyard which matures in May 2015. In June 2013, Troms Offshore entered into a 25.0 million NOK
denominated borrowing agreement a Norwegian Bank, which matures in June 2019. These borrowings bear
interest based on three month NIBOR plus a credit spread of 2.0% to 3.5%. As of March 31, 2014 60.0 million
NOK (approximately $10.0 million) is outstanding under these agreements.
Troms Offshore had 60.0 million NOK, or approximately $10.0 million, outstanding in floating rate debt at
March 31, 2014 (whose fair value approximates the carrying value because the borrowings bear interest at
variable NIBOR rates plus a margin). Troms Offshore also had 478.9 million NOK, or $79.9 million, of
outstanding fixed rate debt at March 31, 2014, which has an estimated fair value of 477.5 million NOK, or $79.6
million. These estimated fair values are based on Level 2 inputs.
In June 2013, Troms Offshore repaid a 188.9 million NOK loan (approximately $32.5 million), plus accrued
interest that was secured with various guarantees and collateral, including a vessel.
During the second quarter of fiscal 2014, the company repaid prior to maturity 500 million Norwegian Kroner
(NOK) denominated (approximately $82.1 million) public bonds (plus accrued interest) that had been issued by
Troms Offshore in April 2013. The repayment of these bonds, at an average price of approximately 105.0% of
par value, resulted in the recognition of a loss on early extinguishment of debt of approximately 26 million NOK
(approximately $4.1 million).
For additional disclosure regarding the company’s debt, refer to Note 0 of Notes to Consolidated Financial
Statements included in Item 8 of this Annual Report on Form 10-K.
58
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
2014
43,814
11,497
55,311
$
$
2013
29,745
10,602
40,347
2012
22,308
14,743
37,051
Total interest and debt costs incurred during fiscal 2014 were higher than those incurred during fiscal 2013 due
to the issuance of $500 million senior notes during fiscal 2014, Norwegian Kroner denominated debt obligations
owed by Troms Offshore when it was acquired by the company in June 2013, the funding of approximately
$50.0 million in additional NOK denominated notes in January 2014, and higher commitment fees on the
unused portion of the company’s credit facilities. Total interest and debt costs incurred during fiscal 2013 were
higher than those incurred during fiscal 2012 due to an increase in interest expense related to additional
borrowings from the revolving line of credit during fiscal 2013.
Share Repurchases
Please refer to Item 5, Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities, of this Annual Report on Form 10-K for a discussion of the company’s share
repurchase programs for the years ended March 31, 2014, 2013 and 2012.
Dividends
Please refer to Item 5, Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities, of this Annual Report on Form 10-K for a discussion of the company’s
dividends declared for the years ended March 31, 2014, 2013 and 2012.
Operating Activities
Net cash provided by operating activities for any period will fluctuate according to the level of business activity
for the applicable period.
Net cash provided by operating activities for the years ended March 31, is as follows:
(In thousands)
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
Changes in operating assets and liabilities
Other non-cash items
$
2014
140,255
167,480
(34,709)
---
(11,722)
56,283
(216,512)
3,542
Change
(10,495)
20,181
(22,976)
---
(5,113)
56,283
(131,560)
(15,626)
Net cash provided by operating activities
$
104,617
(109,306)
2013
Change
150,750
147,299
(11,733)
---
(6,609)
---
(84,952)
19,168
213,923
63,339
8,943
12,021
6,021
11,048
(30,932)
(89,609)
10,671
(8,498)
2012
87,411
138,356
(23,754)
(6,021)
(17,657)
30,932
4,657
8,497
222,421
Cash flows from operations decreased $109.3 million, or 51%, to $104.6 million, during fiscal 2014 as
compared to $213.9 million during fiscal 2013, due primarily to changes in net operating assets and liabilities;
most significantly, an increase in net amounts due from affiliate of $260.7 million. This increase in net amounts
due from affiliates for the period ending March 31, 2014, is attributable to our Angolan operation, which is
included within our Sub-Saharan Africa/Europe segment. Changes in local laws in Angola have resulted in key
customers making payments for goods and services into local bank accounts of an unconsolidated affiliate
beginning in the third quarter of fiscal 2013 and the deferral of our billing certain customers for vessel charters
beginning in the second quarter of fiscal 2014. For additional disclosure regarding the Sonatide Joint Venture,
refer to Part 1, Item 1, of this Annual Report on Form 10-K.
59
The company expects that the currently high working capital levels will normalize over the coming quarters as it
adjusts its procedures and contracting arrangements with customers to comply with the new requirements. To
date, the company has funded the recent increase in the level of working capital with additional borrowings and
other arrangements. It is important, however, for the company and Sonatide to implement new invoicing and
remittance processes for onshore and offshore work expeditiously in order to avoid the necessity of continuing
to borrow funds to provide for out of the ordinary levels of working capital. As noted under the Sonatide Joint
Venture disclosure above, while the execution of the new joint venture agreement has occurred, finalization of a
consortium payment scheme or similar arrangement with our partner and our customers remains pending.
Cash flows from operations decreased $8.5 million, or 4%, to $213.9 million, during fiscal 2013 as compared
to $222.4 million during fiscal 2012. Decreases in the net change in operating assets and liabilities caused by
higher working capital balances in fiscal 2013 versus fiscal 2012 and the impact of the fiscal 2012 goodwill
impairment charge as well as an increase in net earnings, a decrease in net gains on asset dispositions
(primarily due to a decrease in the number of vessels sold), an increase in depreciation and amortization
expense and an increase in other non-cash items related to stock based compensation. Decreases in cash
provided by operating assets and liabilities are primarily attributable to increases in trade receivables of
$42.8 million as well as increases in other receivables of $38.7 million. Increases to other receivables are
primarily attributable to statutory changes in Angola, which require payments to non-domestic companies be
processed through local banks and a payment issue relating to a dispute with our previous marketing agent
in Nigeria. Both of these issues involve our Sub-Saharan Africa/Europe segment.
Investing Activities
Net cash used in investing activities for the years ended March 31, is as follows:
(In thousands)
2014
Change
2013
Change
2012
Proceeds from sales of assets
Proceeds from sale/leaseback of assets
Additions to properties and equipment
Payments for acquisition, net of cash acquired
Other
$
51,330
270,575
(594,695)
(127,737)
(3,158)
10,490
284,137
(154,123)
(127,737)
(2,965)
Net cash used in investing activities
$
(403,685)
9,802
27,278
---
(440,572)
---
(193)
(413,487)
(15,571)
---
(83,462)
---
627
(98,406)
42,849
---
(357,110)
---
(820)
(315,081)
Investing activities for fiscal 2014 used $403.7 million of cash, which is primarily attributed to $594.7 million of
additions to properties and equipment as well as $127.7 million used in the Troms Offshore acquisition partially
offset by $270.6 million in proceeds from the sale/leaseback of vessels. Additions to properties and equipment
included $33.2 million in capitalized major repair costs, $523.0 million, for the construction and purchase of
offshore support vessels (including $62.7 million for the repurchase of vessels under lease agreements), $32.2
million for ROV’s, and $6.3 million in other properties and equipment purchases.
Investing activities in fiscal 2013 used $413.5 million of cash, which is attributed to $440.6 million of additions to
properties and equipment, partially offset by $27.3 million in proceeds from the sales of assets. Additions to
properties and equipment were comprised of $38.3 million in capitalized major repair costs, $400.5 million for
the construction and purchase of offshore marine vessels, including $17.8 million for the repurchase of vessels
under lease agreements, and $1.8 million in other properties and equipment purchases.
Investing activities in 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 $42.8 million in proceeds from the sales of assets. Additions to
properties and equipment were comprised of $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.
60
Financing Activities
Net cash provided by (used in) financing activities for the years ended March 31, is as follows:
(In thousands)
2014
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
Cash received from noncontrolling interests
Stock repurchases
$ (1,103,054)
1,465,362
(5,347)
6,863
(49,816)
299
4,551
---
(1,043,054)
1,355,362
(5,296)
3,045
(228)
21
4,551
85,034
2013
(60,000)
110,000
(51)
3,818
(49,588)
278
---
(85,034)
Change
(20,000)
(180,000)
244
(1,593)
1,673
1,468
---
(50,019)
2012
(40,000)
290,000
(295)
5,411
(51,261)
(1,190)
---
(35,015)
Net cash provided by (used in) financing activities
$
318,858
399,435
(80,577)
(248,227)
167,650
Financing activities for fiscal 2014 provided $318.9 million of cash, primarily from $362.3 million in net debt
financings, which include $500.0 million of funding from the September 2013 senior notes, a $175.0 million
increase in a bank term loan and $50.0 million of NOK denominated debt related to a Troms Offshore vessel
delivery. The additional debt was used to fund the Troms Offshore acquisition, to repay $140.0 million of 2003
senior notes, to repay $114.6 million of Troms Offshore debt obligations, to fund vessel and ROV construction
and purchase commitments, to pay$49.8 million of quarterly common stock dividends of $0.25 per common
share and to fund the increase in working capital caused by our Angolan operations. Refer to Item 1 of this
Annual Report on Form 10-K for a greater discussion of the company’s Angolan operations.
Fiscal 2013 financing activities used $80.6 million of cash, which included $60.0 million used to repay debt,
$49.6 million used for the quarterly payment of common stock dividends of $0.25 per common share, and $85.0
million used to repurchase the company’s common stock. These uses of cash were partially offset by $110.0
million of bank line of credit borrowings, and $3.8 million of proceeds from the issuance of common stock
resulting from stock option exercises.
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.
Other Liquidity Matters
Vessel Construction. With its commitment to modernizing its fleet through its vessel construction and
acquisition program since fiscal year 2000, the company is replacing its older fleet of vessels with fewer, larger
and more efficient vessels, while also enhancing the size and capabilities of the company’s fleet. These efforts
will continue, with the company anticipating that it will use its 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.
At March 31, 2014, the company had approximately $60.4 million of cash and cash equivalents, of which
$51.9 million was held by foreign subsidiaries and is not expected to be repatriated. In addition, there was
$600 million of committed credit facilities available to the company at March 31, 2014.
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
61
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.
In December 2013, the company took delivery of the second of two deepwater PSVs constructed in a U.S.
shipyard. In connection with the delivery of those vessels, the company and the shipyard agreed to hold $11.7
million in escrow with a financial institution pending resolution of disputes over whether all or a portion of those
funds are due to the shipyard as the shipyard has claimed. Some of the disputes may be resolved by high level
management meetings between the parties or through a structured mediation. The balance of the claims will
need to be resolved through litigation in New York state court. Although formal dispute resolution efforts are
currently at an early stage, initial negotiations have thus far failed to resolve the parties’ disputes, and the
company has retained New York counsel to represent the company in the mediation and litigation procedures.
The escrowed amounts have been included in the cost of the acquired vessels.
Sale of Shipyard. As previously disclosed on Form 8-K, on June 30, 2013, the company completed the sale of
the company’s remaining shipyard to a third party for $9.5 million and recognized a gain of $4.0 million. The
company no longer operates shipyards.
Merchant Navy Officers Pension Fund. After consultation with its advisers, on July 15, 2013, a subsidiary of
the company was placed into administration in the United Kingdom. Joint administrators were appointed to
administer and distribute the subsidiary’s assets to the subsidiary’s creditors. The vessels owned by the
subsidiary had become aged and were no longer economical to operate, which has caused the subsidiary’s
main business to decline in recent years. Only one vessel generated revenue as of the date of the
administration. As part of the administration, the company agreed to acquire seven vessels from the subsidiary
(in exchange for cash) and to waive certain intercompany claims. The purchase price valuation for the vessels,
all but one of which were stacked, was based on independent, third party appraisals of the vessels.
The company previously reported that a 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 subsidiary that participates in the MNOPF is the entity that was placed into administration
in the U.K. MNOPF is that subsidiary’s largest creditor, and has claimed as an unsecured creditor in the
administration. The Company believed that the administration was in the best interests of the subsidiary and its
principal stakeholders, including the MNOPF. The MNOPF indicated that it did not object to the insolvency
process and that, aside from asserting its claim in the subsidiary’s administration and based on the company's
representations of the financial status and other relevant aspects of the subsidiary, MNOPF will not pursue the
subsidiary in connection with any amounts due or which may become due to the Fund.
In December 2013, the administration was converted to a liquidation. That conversion allowed for an interim
cash liquidation distribution to be made to MNOPF. The conversion is not expected to have any impact on the
company. The liquidation is expected to be completed in calendar 2014. The company believes that the
liquidation will resolve the subsidiary's participation in the MNOPF. The company also believes that the ultimate
resolution of this matter will not have a material effect on the consolidated financial statements.
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 $68.4 million as of March 31, 2014). 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, 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.
62
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) 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 board issued a decision that disallowed 149.0 million Brazilian
reais (approximately $65.8 million as of March 31, 2014) of the total fines sought by the Macae Customs Office.
In two separate proceedings in 2013, a secondary administrative appeals board considered fines totaling 127.0
million Brazilian reais (approximately $56.0 million as of March 31, 2014) and rendered decisions that
disallowed all of those fines. The remaining fines totaling 28.0 million Brazilian reais (approximately
$12.3 million as of March 31, 2014) are still subject to a secondary administrative appeals board hearing, but
the company believes that both decisions will be helpful in that upcoming hearing. The secondary board
decisions disallowing the fines totaling 127.0 million Brazilian reais are, however, still subject to the possibility of
further administrative appeal by the authorities that imposed the initial 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.
The company’s two Brazilian subsidiaries have not been similarly notified by the Brazilian state that they have
an import tax liability related to their 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 has imported several vessels to start new charters in Brazil, the company filed several
suits in 2011, 2012 and 2013, against the Brazilian state and has deposited (or, in recent cases, is in the
process of depositing) the respective state tax for these newly imported vessels. As of March 31, 2014, 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.
Supplemental Retirement Plan. As a result of the May 31, 2012 retirement of Dean E. Taylor, former
President and Chief Executive Officer of Tidewater Inc., Mr. Taylor received in December 2012 a $13.0 million
lump sum distribution in full settlement and discharge of his supplemental executive retirement plan benefit. A
settlement loss of $5.2 million related to this distribution was recorded in general and administrative expenses
during the quarter ended December 31, 2012. The settlement loss is the result of the recognition of previously
unrecognized actuarial losses that were being amortized over time from accumulated other comprehensive
income to pension expense. As a result of the December 2012 lump sum distribution, a portion of the
previously unrecognized actuarial losses was required to be recognized in earnings in the current quarter in
accordance with ASC 715.
63
Legal Proceedings. On March 1, 2013, Tidewater filed suit in the London Commercial Court against
Tidewater’s Nigerian marketing agent for breach of the agent’s obligations under contractual agreements
between the parties. The alleged breach involves actions of the Nigerian marketing agent to discourage various
affiliates of TOTAL S.A. from paying approximately $19 million due to the company for vessel services
performed in Nigeria. Shortly after the London Commercial Court filing, TOTAL commenced interpleader
proceedings in Nigeria naming the Nigerian agent and the company as respondents and seeking an order
which would allow TOTAL to deposit those monies with a Nigerian court for the respondents to resolve. On
April 25, 2013, Tidewater filed motions in the Nigerian Federal High Court to stop the interpleader proceedings
in Nigeria or alternatively stay them until the resolution of the suit filed in London. The company will continue to
actively pursue the collection of those monies. On April 30, 2013, the Nigerian marketing agent filed a separate
suit in the Nigerian Federal High Court naming Tidewater and certain TOTAL affiliates as defendants. The suit
seeks various declarations and orders, including a claim for the monies that are subject to the above
interpleader proceedings, and other relief. The company is seeking dismissal of this suit and otherwise intends
to vigorously defend against the claims made. The company has not reserved for this receivable and believes
that the ultimate resolution of this matter will not have a material effect on the consolidated financial statements.
In October, 2012, Tidewater had notified the Nigerian marketing agent that it was discontinuing its relationship
with the Nigerian marketing agent. The company has entered into a new strategic relationship with a different
Nigerian counterparty that it believes will better serve the company’s long term interests in Nigeria. This new
strategic relationship is currently functioning as the company intended.
On December 21, 2012, one of the company’s anchor handling tugs, the NANA TIDE, sunk in shallow waters
off the coast of the Democratic Republic of Congo (DRC). The cause of the loss is not known. The vessel was
raised and recovered in early February 2014 and is now at a nearby port in the DRC. The NANA TIDE is
inoperative and cannot be restored. The company currently intends to tow the vessel to a scrapping facility in a
nearby country and to sell the vessel for scrap. The company is presently awaiting permission from DRC
authorities to tow the vessel out of the DRC. We have been advised by DRC authorities that they are
investigating the sinking and do not wish the vessel to be towed from the DRC pending that investigation. We
are currently uncertain as to the nature and timing of that investigation.
In January 2013, the Ministry of the Environment, Nature Conservation, and Tourism, an agency of the DRC
with jurisdiction over environmental affairs, delivered a letter requesting that the company pay $0.25 million to
the DRC. The request was made as indemnification for alleged environmental damages to the coastal waters
of the DRC related to the sinking of the NANA TIDE. There has been no further environmental impact reported,
other than the previously reported sheen, from time to time, in the immediate vicinity of the NANA TIDE prior to
the vessel being raised.
By letter dated March 24, 2014, and delivered on April 17, 2014, Tidewater received a fine of $1.2 million from
the Ministry of Transport for failing to present appropriate authorization for the salvage operations to the
Ministry of Transport. We are presently collecting responsive documents and further investigating this issue.
The company believes that any such fines or assessments will be covered by insurance policies maintained by
the company.
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 (12) of Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on
Form 10-K.
64
Venezuelan Operations
On February 16, 2010, Tidewater and certain of its subsidiaries (collectively, the “Claimants”) filed with the
International Centre for Settlement of Investment Disputes (“ICSID”) a Request for Arbitration against the
Bolivarian Republic of Venezuela. As previously reported by Tidewater, in May 2009 Petróleos de Venezuela,
S.A. (“PDVSA”), the national oil company of Venezuela, took possession and control of (a) eleven of the
Claimants’ vessels that were then supporting PDVSA operations in Lake Maracaibo, (b) the Claimants’ shore-
based headquarters adjacent to Lake Maracaibo, (c) the Claimants’ operations in Lake Maracaibo, and (d)
certain other related assets. The company also previously reported that in July 2009 Petrosucre, S.A., a
subsidiary of PDVSA, took possession and control of the Claimants’ four vessels, operations, and related
assets in the Gulf of Paria. It is Tidewater’s position that, through those measures, the Republic of Venezuela
directly or indirectly expropriated the Claimants’ investments, including the capital stock of the Claimants’
principal operating subsidiary in Venezuela.
The Claimants alleged in the Request for Arbitration that each of the measures taken by the Republic of
Venezuela against the Claimants violates the Republic of Venezuela’s obligations under the bilateral
investment treaty with Barbados and rules and principles of Venezuelan law and international law. An arbitral
tribunal was constituted under the ICSID Convention to resolve the dispute. The tribunal first addressed the
Republic of Venezuela’s objections to the tribunal’s jurisdiction over the dispute. After two rounds of briefing by
the parties, a hearing on jurisdiction was held in Washington, D.C. on February 29 and March 1, 2012.
On February 8, 2013, the tribunal issued its decision on jurisdiction. The tribunal found that it has jurisdiction
over the claims under the Venezuela-Barbados bilateral investment treaty, including the claim for compensation
for the expropriation of Tidewater’s principal operating subsidiary, but that it does not have jurisdiction based on
Venezuela’s investment law. The practical effect of the tribunal’s decision is to exclude from the case the
claims for expropriation of the fifteen vessels described above. The proceeding will now move to the merits,
including a determination whether the Republic of Venezuela violated the Venezuela-Barbados bilateral
investment treaty and a valuation of Tidewater’s principal operating subsidiary in Venezuela. At the time of the
expropriation, the principal operating subsidiary had sizeable accounts receivable from PDVSA and Petrosucre,
denominated in both U.S. Dollars and Venezuelan Bolivars. The company expects those accounts receivable
to form part of the total valuation of Tidewater’s principal operating subsidiary. As a result of the seizures, the
lack of further operations in Venezuela, and the continuing uncertainty about the timing and amount of the
compensation the company might collect in the future, the company recorded a $44.8 million provision during
the quarter ended June 30, 2009, to fully reserve accounts receivable due from PDVSA and Petrosucre.
While the tribunal determined that it does not have jurisdiction over the claim for the seizure of the fifteen
vessels, Tidewater received during fiscal 2011 insurance proceeds for the insured value of those vessels (less
an additional premium payment triggered by those proceeds). Tidewater believes that the claims remaining in
the case, over which the tribunal upheld jurisdiction, represent the most substantial portion of the overall value
lost as a result of the measures taken by the Republic of Venezuela. Tidewater has discussed the nature of the
insurance proceeds received for the fifteen vessels in previous quarterly and annual filings.
The tribunal has issued a briefing and hearing schedule to determine the merits of the claims over which the
tribunal has jurisdiction. That schedule culminates in a final hearing in mid-2014.
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 the results of the investigation, and the company has entered into separate agreements with these
two U.S. agencies to resolve the matters reported by special counsel. The company subsequently also entered
into an agreement with the Federal Government of Nigeria (FGN) to resolve similar issues with the FGN. The
company has previously reported the principal terms of these three agreements. Certain aspects of the
agreement with the DOJ are set forth below.
65
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 DPA, in return for the satisfaction of a number of conditions. The DPA expired on
November 11, 2013, and on November 26, 2013, a U.S. District Judge for the Southern District of Texas
entered an Order dismissing (with prejudice) all criminal charges.
Contractual Obligations and Contingent Commitments
Contractual Obligations
The following table summarizes the company’s consolidated contractual obligations as of March 31, 2014 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
Payments Due by Fiscal Year
Total
2015
2016
2017
2018
2019
$
300,000
---
---
---
---
300,000
21,313
5,019
5,019
5,019
5,019
1,237
More Than
5 Years
---
---
September 2013 senior notes
500,000
---
---
---
---
---
500,000
September 2013 senior notes interest
232,461
24,318
24,318
24,318
24,318
24,318
110,871
August 2011 senior notes
165,000
---
---
---
---
50,000
115,000
August 2011 senior notes interest
45,813
7,301
7,301
7,301
7,301
5,271
11,338
September 2010 senior notes
425,000
---
42,500
---
69,500
50,000
263,000
September 2010 senior notes interest
104,755
18,041
17,693
16,647
15,967
13,406
23,001
July 2003 senior notes
35,000
---
35,000
July 2003 senior notes interest
2,151
1,613
538
Troms NOK denominated debt
89,870
9,511
10,346
Troms NOK denominated debt interest
21,315
Uncertain tax positions (A)
Operating leases
18,008
22,284
3,790
8,631
7,981
3,306
2,534
3,890
---
---
7,011
2,961
2,326
1,763
---
---
7,011
2,650
1,882
1,578
---
---
---
---
7,011
48,980
2,338
1,973
1,431
6,270
662
5,641
Bareboat charter leases
179,109
22,524
22,158
20,879
23,485
24,800
65,263
Purchase obligations-other
5,476
5,476
---
---
Vessel construction obligations
573,540
368,611
192,798
12,131
---
---
---
---
---
---
Pension and post-retirement obligations
76,906
6,369
6,693
6,998
7,333
7,640
41,873
Total obligations
$ 2,818,001
489,185
374,094
107,354
166,044
489,425 1,191,899
(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
66
company breach certain contractual and/or performance or payment obligations. As of March 31, 2014, the
company had $46.6 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 2014 Sale/Leasebacks
In March of 2014, the company sold four vessels to an unrelated third party, and simultaneously entered into
bareboat charter agreements with the purchasers. The sale/leaseback transactions resulted in proceeds to the
company of $63.3 million and deferred gains totaling $30.5 million. The aggregate carrying value of the four
vessels was $32.8 million at their respective dates of sale. Two of the vessel leases are for seven years and will
expire in March 2021, and the other two leases are for ten years and will expire in March 2024. Under the
sale/leaseback agreements which expire in March 2021, the company has the right to re-acquire the vessels at
approximately 59% of the original sales price at the end of the sixth year, deliver the vessel to the owner at the
end of the lease term, purchase the vessels at their then fair market values at the end of the lease term or
extend the lease for 24 months at mutually agreeable lease rates. Under the two sale/leaseback agreements
which expire in March 2024, the company has the right to re-acquire the vessels at the end of the ninth year for
approximately 53% of the original sales price, re-acquire the vessel at the end of the lease term at its then fair
market value or deliver the vessel to the owner at the end of the lease term.
During the third quarter of fiscal 2014, the company sold four vessels to unrelated third parties, and
simultaneously entered into bareboat charter agreements with the purchasers. The sale/leaseback transactions
resulted in proceeds to the company of $141.9 million and deferred gains totaling $36.2 million. The aggregate
carrying value of the four vessels was $105.7 million at their respective dates of sale. The leases on three of
the vessels will expire in the quarter ending December 2020, and the fourth lease expires in December 2022.
Under the sale/leaseback agreements which expire during the quarter ending December 2020, the company
has the right to re-acquire the vessels at values ranging from 59% to 62% of the original sales price at the end
of the sixth year, deliver the vessel to the owner at the end of the lease term, purchase the vessels at their then
fair market values at the end of the lease term or extend the lease for 24 months at mutually agreeable lease
rates. Under the sale/leaseback agreement which expires in December 2022, the company has the right to re-
acquire the vessel at the end of the sixth year for $43.6 million or at the end of the eighth year for $34.5 million,
re-acquire the vessel at the end of the lease term at its then fair market value or deliver the vessel to the owner
at the end of the lease term and pay a return fee of $2.9 million.
In September 2013, the company sold two vessels to an unrelated third party, and simultaneously entered into
bareboat charter agreements with the purchaser. The sale/leaseback transactions, which expire in September
2020, resulted in proceeds to the company of $65.6 million and a deferred gain of $31.3 million. The aggregate
carrying value of the two vessels was $34.3 million at the dates of sale. Under each September 2013
sale/leaseback agreement, the company has the right to either re-acquire the two vessels at approximately
55% of the original sales price at the end of the sixth year, deliver the vessel to the owner at the end of the
lease term, purchase the vessels at their then fair market values at the end of the lease term or extend the
lease for 24 months at mutually agreeable lease rates.
The company is accounting for the transactions as sale/leaseback transactions with operating lease treatment
and expenses lease payments over the respective lease term. The deferred gains are amortized to gain on
asset dispositions, net ratably over the respective lease term. Any deferred gain balance remaining upon the
repurchase of the vessel would reduce the vessels’ stated cost if the company elected to exercise the purchase
options.
Fiscal 2010 Sale/Leaseback
In June and July 2009, the company sold six vessels to unrelated third-party companies, and simultaneously
entered into bareboat charter agreements for the vessels with the purchasers.
67
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.
During the fourth quarter of fiscal 2014, the company elected to repurchase all six vessels from their respective
lessors for an aggregate price of $78.8 million. Three of these were subsequently sold and leased back in
March 2014. The carrying value of these purchased vessels has been reduced by the previously unrecognized
deferred gain of $39.6 million. Refer to “Fiscal 2014 Sale/Leasebacks” above.
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 an unrelated third party, for $76.5 million and simultaneously entered into bareboat charter
agreements with the same unrelated third party 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 operating lease for all five charter hire agreements were for eight year terms. The company has
the option to extend the respective bareboat charter agreements three times, each for a period of 12 months. 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 bareboat charter agreements on the first two vessels, whose original expiration dates were in calendar
year 2014, ended in September and October 2012 because the company exercised its option to repurchase
these vessels as discussed below. 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.
The company may 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. The company may also purchase each of the
vessels at a mutually agreed upon price at any time during the lease term. In September 2012, the company
elected to repurchase one of its leased vessels from the lessor for $8.8 million. During October 2012, the
company repurchased a second leased vessel, for $8.4 million. In March 2014, the company repurchased a
third and fourth leased vessel for a total cost of $22.8 million.
68
Future Minimum Lease Payments
As of March 31, 2014, the future minimum lease payments for the vessels under the operating lease terms are
as follows:
Fiscal year ending (In thousands)
2015
2016
2017
2018
2019
2020 and Thereafter
Total future lease payments
Fiscal 2014
Sale/Leaseback
20,879
20,879
20,879
23,485
24,800
65,263
176,185
$
$
Fiscal 2006
Sale/Leaseback
1,645
1,279
---
---
---
---
2,924
Total
22,524
22,158
20,879
23,485
24,800
65,263
179,109
The operating lease expense on these bareboat charter arrangements for the years ended March 31, are as
follows:
(In thousands)
Vessel operating leases
2014
21,910
$
2013
16,837
2012
17,967
For more disclosure on the company’s sale-leaseback arrangement refer to Note (11) of Notes to Consolidated
Financial Statements included in Item 8 of this Annual Report on Form 10-K.
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 our attention that may vary the 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 Annual Report on
Form 10-K, 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 our 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 (generally three months to three 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.
69
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.
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 has the
option of assessing qualitative factors to determine whether it is more likely than not that the fair value of a
reporting unit exceeds its carrying amount. In the event that a qualitative assessment indicates that the fair
value of a reporting unit exceeds its carrying value, the two step impairment test is not necessary. If, however,
the assessment of qualitative factors indicates otherwise, the standard 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 must be performed. 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, 2014, the company’s goodwill balance represented 6% of total assets and 11% 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.
its annual goodwill
impairment assessment during
the quarter ended
The company performed
December 31, 2013 and determined that the carrying value of its Asia/Pacific unit exceeded its fair value as a
result of the general decline in the level of business and, therefore, expected future cash flow for the company
in this region. The Asia/Pacific region continues to be challenged with an excess capacity of vessels as a result
of the significant number of vessels that have been built in this region over the past 10 years, without a
commensurate increase in working rig count within the region. In recent years, the company has both disposed
of older vessels that previously worked in the region and transferred vessels out of the region to other regions
where market opportunities are currently more robust. In accordance with ASC 350, goodwill is not reallocated
among the segments based on vessel movements. A goodwill impairment charge of $56.3 million was recorded
during the quarter ended December 31, 2013.
70
During the year ended March 31, 2014, $42.2 million of goodwill related to the acquisition of Troms Offshore
was allocated to the Sub-Saharan Africa/Europe segment.
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 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.
71
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.
Drydocking Costs
The company expenses maintenance and repair costs as incurred during the asset’s original estimated useful
life (its original depreciable life). 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 certification inspections
twice in every five year period, and the company schedules major repairs and maintenance, including time the
vessel will be in a dry dock, when it is anticipated that the work can be performed. While the actual length of
time between drydockings and major repairs and maintenance can vary, in the case of major repairs incurred
after a vessel’s original estimated useful life, we use a 30 month amortization period for these costs 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 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.
72
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 Annual Report on Form 10-K.
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.
The company’s newer technologically sophisticated AHTS vessels and PSVs 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 have 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 until the calendar year 2008-2009 global recession. The price of steel
then peaked in 2011 due to increased worldwide demand for the metal, which demand has since declined due
to the weakening of steel consumption and global economic industrial activity as a whole. 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
73
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.
The company is also involved in various legal proceedings that relate to asbestos and other environmental
matters. 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.
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 the “Liquidity, Capital Resources and Other Matters” section of Item 7 of this Annual Report on
Form 10-K for a discussion on the company’s revolving credit and term loan agreement and required cash
payments for our indebtedness.
At March 31, 2014, the company had a $300 million term loan outstanding. The fair market value of this debt
approximates the carrying value because the borrowings bear interest at variable Eurodollar rates plus a
margin based on leverage, which together currently approximate 1.65% percent (1.5% margin plus 0.15%
Eurodollar rate). A one percentage point change in the Eurodollar interest rate on the term loan at
March 31, 2014 would change the company’s interest costs by approximately $3.0 million annually.
Senior Notes
Please refer to the “Liquidity, Capital Resources and Other Matters” section of Item 7 of this Annual Report on
Form 10-K for a discussion on the company’s outstanding senior notes debt.
Because the senior notes outstanding at March 31, 2014 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, 2014, would change with a 100 basis-point increase or
decrease in market interest rates.
(In thousands)
September 2013
August 2011
September 2010
July 2003
Total
Outstanding
Value
500,000
165,000
425,000
35,000
1,125,000
$
$
Estimated
Fair Value
520,979
168,653
436,254
36,018
1,161,904
100 Basis
Point Increase
483,983
159,511
415,560
35,557
1,094,611
100 Basis
Point Decrease
561,558
178,431
458,642
36,487
1,235,118
74
Troms Offshore Debt
Troms Offshore has 60.0 million NOK, or approximately $10.0 million, outstanding in floating rate debt at
March 31, 2014 (whose fair value approximates the carrying value because the borrowings bear interest at
variable NIBOR rates plus a margin). Troms Offshore also has 478.9 million NOK, or $ 79.9 million, of
outstanding fixed rate debt at March 31, 2014. The following table discloses the estimated fair value of the
fixed rate Troms Offshore notes, as of March 31, 2014, and how the estimated fair value would change with a
100 basis-point increase or decrease in market interest rates:
(In thousands)
Total
Foreign Exchange Risk
Outstanding
Value
79,865
$
Estimated
Fair Value
79,633
100 Basis
Point Increase
75,907
100 Basis
Point Decrease
83,645
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 four foreign exchange spot contracts outstanding at March 31, 2014, which had a notional
value of $2.3 million. The spot contracts settled by April 2, 2014. The company did not have any spot contracts
outstanding at March 31, 2013.
At March 31, 2014, the company did not have any forward contracts outstanding.
At March 31, 2013, the company had three British pound forward contracts outstanding, which are 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 Annual Report on Form 10-K
and elsewhere in this document. The forward contracts have expiration dates between June 20, 2013 and
December 18, 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 loss during the fiscal year ended March 31, 2013,
because the forward contracts did not qualify as hedge instruments. All changes in fair value of the forward
contracts were recorded in earnings on a quarterly basis.
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
75
disclosed in the “Liquidity, Capital Resources and Other Matters” section of this Item 7 and in Note (12) of
Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
Devaluation of Venezuelan Bolivar Fuerte in February 2013
The company accounted for its operations in Venezuela using the U.S. dollar as its functional currency. In
February 2013, the Venezuelan government announced a devaluation of the Venezuelan bolivar fuerte which
modified the official fixed rate from 4.3 Venezuelan bolivar fuerte per U.S. dollar to 6.3 bolivar fuertes per
U.S. dollar. In connection with the revaluation of its Venezuelan bolivar fuerte denominated net liability position,
the company recorded a $3.6 million foreign exchange gain related to this devaluation in its fiscal 2013 fourth
quarter.
For additional disclosure on the company’s currency exchange risk, including a discussion on the company’s
Venezuelan operations, refer to Note (12) of Notes to Consolidated Financial Statements included in Item 8 of
this Annual Report on Form 10-K. For additional disclosure on the company’s derivative financial instruments
refer to Note (13) of Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on
Form 10-K.
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
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 15of this Annual Report on Form 10-K and appears on page F-2.
76
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 of 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, 2014 that has materially affected, or is reasonably likely to materially affect, the company’s
internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
77
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information required by this item is incorporated herein by reference to the 2014 Proxy Statement, which will be
filed with the SEC not later than 120 days subsequent to March 31, 2014
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item is incorporated herein by reference to the 2014 Proxy Statement, which will be
filed with the SEC not later than 120 days subsequent to March 31, 2014.
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 2014 Proxy Statement, which will be
filed with the SEC not later than 120 days subsequent to March 31, 2014.
Securities Authorized for Issuance under Equity Compensation Plans
The following table provides information as of March 31, 2014 about the company’s equity compensation plans
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 stockholders
Equity compensation plans
not approved by stockholders
1,370,056
---
Balance at March 31, 2014
1,370,056
(2)
$47.51
---
$47.51
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (A))
(C)
99,249
(1)
---
99,249
(1) As of March 31, 2014, 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 2006 Stock Incentive Plan.
If the exercise of these outstanding options and issuance of additional common shares had occurred as of March 31, 2014, these
shares would represent 2.7% 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 2014 Proxy Statement, which will be
filed with the SEC not later than 120 days subsequent to March 31, 2014.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Information required by this item is incorporated herein by reference to the 2014 Proxy Statement, which will be
filed with the SEC not later than 120 days subsequent to March 31, 2014.
78
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
4.1
4.2
4.3
10.1
10.2
10.3
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).
Amended and Restated Bylaws of Tidewater Inc. dated May 17, 2012 (filed with the Commission as
Exhibit 3.2 to the company’s current report on Form 8-K on May 22, 2012, File No. 1-6311).
Note Purchase Agreement, dated July 1, 2003, by and among Tidewater Inc., certain of its
subsidiaries, and certain institutional investors (filed with the Commission as Exhibit 4 to the
company’s quarterly report on Form 10-Q for the quarter ended June 30, 2003, File No. 1-6311).
Note Purchase Agreement, dated September 9, 2010, by and among Tidewater Inc., certain of its
subsidiaries, and certain institutional investors (filed with the Commission as Exhibit 10.1 to the
company’s current report on Form 8-K on September 15, 2010, File No. 1-6311).
Note Purchase Agreement, dated September 30, 2013, by and among Tidewater Inc., certain of its
subsidiaries, and certain institutional investors (filed with the Commission as Exhibit 10.1 to the
company’s current report on Form 8-K on October 3, 2013, File No. 1-6311).
Fourth Amended and Restated Credit Agreement, dated June 21, 2013, among Tidewater Inc. and
its domestic subsidiaries, Bank of America, N.A., as Administrative Agent, L/C Issuer and Swing
Line Lender, Wells Fargo Bank, N.A., as Syndication Agent, and JPMorgan Chase Bank, N.A.,
DNB Bank ASA, New York Branch, The Bank of Tokyo-Mitsubishi UFJ, Ltd., BBVA Compass,
Sovereign Bank, N.A., Regions Bank, and U.S. Bank National Association, as Co-Documentation
Agents, and the lenders party thereto (filed with the Commission as Exhibit 10.1 to the company’s
current report on Form 8-K on June 25, 2013, File No. 1-6311).
Series A and B Note Purchase Agreement, dated August 15, 2011, by and among Tidewater Inc.,
certain of its subsidiaries, and certain institutional investors (filed with the Commission as Exhibit
10.1 to the company’s current report on Form 8-K on August 17, 2011, File No. 1-6311).
Series C Note Purchase Agreement, dated August 15, 2011, by and among Tidewater Inc., certain
of its subsidiaries, and certain institutional investors (filed with the Commission as Exhibit 10.2 to
the company’s current report on Form 8-K on August 17, 2011, File No. 1-6311).
79
10.4+
10.5+
10.6+
10.7+
10.8+
10.9+
Tidewater Inc. 2001 Stock Incentive Plan effective November 21, 2001 (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).
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 10.11 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).
10.10+ 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 10.15 to the company’s annual report on Form 10-K for the fiscal year ended
March 31, 2006, File No. 1-6311).
10.11+ Tidewater Inc. 2006 Stock Incentive Plan effective July 20, 2006 (filed with the Commission as
Exhibit 99.1 to the company’s current report on Form 8-K on March 27, 2007, File No. 1-6311).
10.12+ 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).
10.13+ 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).
10.14+ Amendment to the Amended and Restated Tidewater Inc. Directors Deferred Stock Units Plan
effective November 15, 2012 (filed with the Commission as Exhibit 10.1 to the company’s quarterly
report on Form 10-Q for the quarter ended December 31, 2012, File No. 1-6311).
80
10.15+ 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 effective as of July 30, 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).
10.16+ 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 fiscal year ended March 31, 2009, File No. 1-6311).
10.17+ Amended and Restated Non-Qualified Pension Plan for Outside Directors of Tidewater Inc. amended
through 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).
10.18+ 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).
10.19+ 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).
10.20+ 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).
10.21+ Tidewater Inc. Individual Performance Executive Officer Annual Incentive Plan for Fiscal Year 2014
(filed with the Commission as Exhibit 10.2 to the company’s quarterly report on Form 10-Q for the
quarter ended June 30, 2013, File No. 1-6311).
10.22+ Tidewater Inc. Company Performance Executive Officer Annual Incentive Plan for Fiscal Year 2014
(filed with the Commission as Exhibit 10.1 to the company’s quarterly report on Form 10-Q for the
quarter ended June 30, 2013, 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 fiscal year ended March 31, 2009, File No. 1-6311).
81
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 fiscal year ended March 31, 2009, File No. 1-6311).
10.29*+ Summary of Compensation Arrangements with Directors.
10.30+ Amended and Restated Change of Control Agreement between Tidewater Inc. and Jeffrey A. Gorski
effective as of June 1, 2012 (filed with the Commission as Exhibit 10.30 to the company’s annual
report on Form 10-K for the fiscal year ended March 31, 2013, File No. 1-6311).
10.31+ 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).
10.32+ 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).
10.33+ 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).
10.34+ 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).
10.35+ Tidewater Inc. 2009 Stock Incentive Plan (filed with the Commission as Exhibit 99.1 to the
company’s current report on Form 8-K on July 10, 2009, File No. 1-6311).
10.36+ Form of Tidewater Inc. Indemnification Agreement entered into with each member of the Board of
Directors, each executive officer and the principal accounting officer (filed with the Commission as
Exhibit 99.1 to the company’s current report on Form 8-K on December 15, 2009, File No. 1-6311).
10.37+ 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).
10.38+ Form of Restricted Stock Agreement for the grant of Restricted Stock under the Tidewater Inc. 2009
Stock Incentive Plan and Tidewater Inc. 2006 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).
10.39+ 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).
10.40+ 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).
10.41+ 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).
82
10.42+ 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).
10.43+ Form of Restricted Stock Units Agreement under the Tidewater Inc. 2009 Stock Incentive Plan (2012
and 2013 awards) (filed with the Commission as Exhibit 10.46 to the company’s annual report on
Form 10-K for the fiscal year ended March 31, 2012, File No. 1-6311).
10.44*+
Form of Restricted Stock Units Agreement under the Tidewater Inc. 2009 Stock Incentive Plan
(2014 awards).
10.45+ Retirement and Non-Executive Chairman Agreement between Tidewater Inc. and Dean E. Taylor
(filed with the Commission 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(a) or 15d-14(a) 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(a) or 15d-14(a) of the Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS* XBRL Instance Document.
101.SCH* XBRL Taxonomy Extension Schema.
101.CAL* XBRL Taxonomy Extension Calculation Linkbase.
101.DEF* XBRL Taxonomy Extension Definition Linkbase.
101.LAB* XBRL Taxonomy Extension Label Linkbase.
101.PRE* XBRL Taxonomy Extension Presentation Linkbase.
* Filed herewith.
+ Indicates a management contract or compensatory plan or arrangement.
83
SIGNATURES
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, 2014.
TIDEWATER INC.
(Registrant)
By: /s/ Jeffrey M. Platt
Jeffrey M. Platt
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, 2014.
/s/ Jeffrey M. Platt
Jeffrey M. Platt, President, Chief Executive Officer
and Director
/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/ Morris E. Foster
Morris E. Foster, Director
/s/ Richard A. Pattarozzi
Richard A. Pattarozzi, Chairman of the Board of
Directors
/s/ Richard T. du Moulin
Richard T. du Moulin, Director
/s/ Robert L. Potter
Robert L. Potter, Director
/s/ Dean E. Taylor
Dean E. Taylor, 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
84
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, 2014 and 2013
Consolidated Statements of Earnings, three years ended March 31, 2014
Consolidated Statements of Comprehensive Income, three years ended March 31, 2014
Consolidated Statements of Equity, three years ended March 31, 2014
Consolidated Statements of Cash Flows, three years ended March 31, 2014
Notes to Consolidated Financial Statements
Financial Statement Schedule
Page
F-2
F-3
F-4
F-5
F-6
F-7
F-8
F-9
F-10
II. Tidewater Inc. and Subsidiaries Valuation and Qualifying Accounts
F-56
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 Rule 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, 2014. 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 (1992). Based on our assessment we believe that, as of March 31, 2014, 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, 2014, 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, 2014, based on criteria established in Internal Control—Integrated Framework (1992) 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, 2014, based on the criteria established in Internal Control—Integrated Framework
(1992) 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, 2014 of the Company and our report dated May 21, 2014 expressed an unqualified opinion
on those financial statements and financial statement schedule.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
May 21, 2014
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, 2014 and 2013, and the related consolidated statements of earnings,
comprehensive income, equity and cash flows for each of the three years in the period ended March 31, 2014.
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, 2014 and 2013, and the results of their operations
and their cash flows for each of the three years in the period ended March 31, 2014, 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, 2014, based on the
criteria established in Internal Control—Integrated Framework (1992) issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated May 21, 2014 expressed an unqualified
opinion on the Company’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
May 21, 2014
F-4
TIDEWATER INC.
CONSOLIDATED BALANCE SHEETS
March 31, 2014 and 2013
(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 $35,737 in 2014 and $46,332 in 2013
Due from affiliate
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 EQUITY
Current liabilities:
Accounts payable
Accrued expenses
Due to affiliate
Accrued property and liability losses
Current portion of long-term debt
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 12)
Equity:
Common stock of $0.10 par value, 125,000,000 shares
authorized, issued 49,730,442 shares at March 31, 2014
and 49,485,832 shares at March 31, 2013
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Total stockholders’ equity
Noncontrolling interests
Total equity
Total liabilities and equity
$
See accompanying Notes to Consolidated Financial Statements.
F-5
2014
2013
$
60,359
40,569
$
$
252,421
429,450
57,392
20,587
820,209
63,928
4,521,102
97,714
4,618,816
997,208
3,621,608
283,699
96,385
4,885,829
74,515
157,302
86,154
3,631
9,512
70,567
401,681
1,505,358
108,929
5,286
179,204
274,512
118,926
62,348
11,735
508,090
46,047
4,250,169
83,779
4,333,948
1,144,129
3,189,819
297,822
126,277
4,168,055
59,371
127,012
36,305
4,133
---
39,808
266,629
1,000,000
189,763
10,833
139,074
4,973
142,381
2,544,255
(12,225)
2,679,384
5,987
2,685,371
4,885,829
4,949
119,975
2,453,973
(17,141)
2,561,756
---
2,561,756
4,168,055
TIDEWATER INC.
CONSOLIDATED STATEMENTS OF EARNINGS
Years Ended March 31, 2014, 2013, and 2012
(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
General and administrative
Vessel operating leases
Depreciation and amortization
Gain on asset dispositions, net
Goodwill impairment
Operating income
Other income (expenses):
Foreign exchange gain
Equity in net earnings of unconsolidated companies
Interest income and other, net
Loss on early extinguishment of debt
Interest and other debt costs, net
Earnings before income taxes
Income tax expense
Net earnings
Basic earnings per common share
Diluted earnings per common share
2014
2013
2012
$
$
$
$
1,418,461
16,642
1,435,103
795,890
15,745
187,976
21,910
167,480
(11,722)
56,283
1,233,562
201,541
1,541
15,801
2,123
(4,144)
(43,814)
(28,493)
173,048
32,793
140,255
2.84
2.82
1,229,998
14,167
1,244,165
692,581
12,216
175,609
16,837
147,299
(6,609)
---
1,037,933
206,232
3,011
12,189
3,476
---
(29,745)
(11,069)
195,163
44,413
150,750
3.04
3.03
1,060,468
6,539
1,067,007
620,170
7,115
156,570
17,967
138,356
(17,657)
30,932
953,453
113,554
3,309
13,041
3,440
---
(22,308)
(2,518)
111,036
23,625
87,411
1.71
1.70
Weighted average common shares outstanding
Dilutive effect of stock options and restricted stock
Adjusted weighted average common shares
49,392,749
287,365
49,680,114
49,550,391
183,649
49,734,040
51,165,460
264,107
51,429,567
See accompanying Notes to Consolidated Financial Statements.
F-6
TIDEWATER INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
Net earnings
Other comprehensive income (loss):
Unrealized gains (losses) on available for sale securities,
net of tax of $115, ($200) and ($146), respectively
$
Amortization of loss on derivative contract,
net of tax of $251, $251 and $251, respectively
Change in supplemental executive retirement
plan pension liability, net of tax of $409, $1,306
and ($693) respectively
Change in Pension Plan minimum liability,
net of tax of $763, ($290) and $481, respectively
Change in Other Benefit Plan minimum liability,
net of tax of $1,109, $111 and ($510), respectively
Total comprehensive income
$
See accompanying Notes to Consolidated Financial Statements.
2014
140,255
2013
150,750
2012
87,411
213
466
760
1,417
(372)
466
(272)
467
2,427
(1,288)
(539)
894
2,060
145,171
207
152,939
(947)
86,265
F-7
TIDEWATER INC.
CONSOLIDATED STATEMENTS OF EQUITY
Years Ended March 31, 2014, 2013 and 2012
(In thousands)
Balance at March 31, 2011
Total comprehensive income
Stock option activity
Cash dividends declared ($1.00 per share)
Retirement of common stock
Amortization of restricted stock units
Amortization/cancellation of restricted stock
Balance at March 31, 2012
Total comprehensive income
Stock option activity
Cash dividends declared ($1.00 per share)
Retirement of common stock
Amortization of restricted stock units
Amortization/cancellation of restricted stock
Balance at March 31, 2013
Total comprehensive income
Stock option activity
Cash dividends declared ($1.00 per share)
Amortization of restricted stock units
Amortization/cancellation of restricted stock
Noncontrolling interests
Balance at March 31, 2014
Common
stock
5,188
---
14
---
(74)
---
(3)
5,125
---
14
---
(187)
6
(9)
4,949
---
20
---
10
(6)
---
4,973
Additional
paid-in
capital
90,204
---
8,100
---
---
272
4,150
102,726
---
6,131
---
---
6,705
4,413
119,975
---
9,445
---
9,923
3,038
---
142,381
$
$
$
$
Accumulated
other
comprehensive
loss
(18,184)
(1,146)
---
---
---
---
---
(19,330)
2,189
---
---
---
---
---
(17,141)
4,916
---
---
---
---
---
(12,225)
Retained
earnings
2,436,736
87,411
---
(51,370)
(34,941)
---
---
2,437,836
150,750
---
(49,766)
(84,847)
---
---
2,453,973
140,255
---
(49,973)
---
---
---
2,544,255
Non
controlling
interest
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
5,987
5,987
Total
2,513,944
86,265
8,114
(51,370)
(35,015)
272
4,147
2,526,357
152,939
6,145
(49,766)
(85,034)
6,711
4,404
2,561,756
145,171
9,465
(49,973)
9,933
3,032
5,987
2,685,371
See accompanying Notes to Consolidated Financial Statements.
F-8
TIDEWATER INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended March 31, 2014, 2013 and 2012
(In thousands)
Operating activities:
Net earnings
Adjustments to reconcile net earnings to net cash
2014
2013
2012
$ 140,255
150,750
87,411
provided by operating activities:
167,480
Depreciation and amortization
(34,709)
Benefit for deferred income taxes
---
Reversal of liabilities for uncertain tax positions
(11,722)
Gain on asset dispositions, net
Goodwill impairment
56,283
Equity in earnings of unconsolidated companies, net of dividends (15,801)
19,642
Compensation expense – stock based
Excess tax (benefit) liability on stock options exercised
(299)
Changes in assets and liabilities, net:
147,299
(11,733)
---
(6,609)
---
30
19,416
(278)
(38,438)
(44,012)
(8,498)
(1,663)
(5,888)
9,098
(12,065)
497
4,846
822
10,349
213,923
138,356
(23,754)
(6,021)
(17,657)
30,932
(7,033)
14,340
1,190
(33,650)
(4,365)
(3,102)
140
(2,423)
(680)
29,010
(210)
8,700
7,947
3,290
222,421
27,278
---
(440,572)
---
(193)
(413,487)
42,849
---
(357,110)
---
(820)
(315,081)
(51)
(60,000)
110,000
3,818
(49,588)
278
---
(85,034)
(80,577)
(280,141)
320,710
40,569
(295)
(40,000)
290,000
5,411
(51,261)
(1,190)
---
(35,015)
167,650
74,990
245,720
320,710
13,485
(310,524)
5,715
(7,600)
(1,395)
34,458
49,849
(429)
10,373
(11,842)
1,398
104,617
51,330
270,575
(594,695)
(127,737)
(3,158)
(403,685)
(5,347)
(1,103,054)
1,465,362
6,863
(49,816)
299
4,551
---
318,858
19,790
40,569
60,359
$
$
$
$
$
45,687
34,190
59,266
38,045
27,443
54,722
36,839
22,096
49,332
5,751
12,010
10,850
Trade and other receivables
Due from affiliate
Marine operating supplies
Other current assets
Accounts payable
Accrued expenses
Due to affiliate
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 sale/leaseback of assets
Additions to properties and equipment
Payments for acquisition, net of cash acquired
Other
Net cash used in investing activities
Cash flows from financing activities:
Debt issuance costs
Principal payments on long-term debt
Debt borrowings
Proceeds from exercise of stock options
Cash dividends
Excess tax benefit (liability) on stock options exercised
Cash contributions from noncontrolling interests
Stock repurchases
Net cash (used in) provided by 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
Interest, net of amounts capitalized
Income taxes
Supplemental disclosure of noncash investing activities:
Additions to properties and equipment
See accompanying Notes to Consolidated Financial Statements.
F-9
(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-10
Maintenance and Repairs
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 major repairs and maintenance, including time the vessel
will be in a dry dock, when it is anticipated that the work can be performed. While the actual length of time
between major repairs and maintenance and drydockings can vary, in the case of major repairs incurred after a
vessel’s original estimated useful life, we use a 30 month amortization period for depreciating the capitalized
costs of these major repairs and maintenance and drydockings.
Net Properties and Equipment
The following is a summary of net properties and equipment at March 31:
Number
Of Vessels
2014
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 (A)
257
15
---
$ 3,281,391
9,743
---
268,189
62,285
Number
Of Vessels
2013
Carrying
Value
(In thousands)
$
256
51
2
2,882,908
30,084
633
239,287
36,907
Totals
272
$ 3,621,608
309
$
3,189,819
(A) Other property and equipment includes six remotely operated vehicles the company took delivery of in fiscal 2014.
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, 2014 and 2013 have an average age of 32.2 and 31.5 years, respectively. A vast majority
of vessels stacked at March 31, 2014 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. There are no vessels withdrawn from service at March 31, 2014. Two vessels withdrawn from
service at March 31, 2013 had an average age of 32.5 years.
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 or whenever changes in circumstances
indicate that the carrying amount of a vessel may not be recoverable.
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
F-11
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 (13) 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. and the fiscal 2014 acquisition of Troms Offshore. 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 has the option of assessing qualitative factors to determine whether it is more likely than not that the
fair value of a reporting unit exceeds its carrying amount. In the event that a qualitative assessment indicates
that the fair value of a reporting unit exceeds its carrying value the two step impairment test is not necessary. If,
however, the assessment of qualitative factors indicates otherwise, the standard 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 must be performed. 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.
F-12
During the year ended March 31, 2014, $42.2 million of goodwill related to the acquisition of Troms Offshore
was allocated to the Sub-Saharan Africa/Europe segment. The company performed its annual goodwill
impairment assessment as of December 31, 2013 and recorded a goodwill impairment charge of $56.3 million
related to the Asia/Pacific segment. Refer to Note (16) for a complete discussion of Goodwill.
Accrued Property and Liability Losses
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
$
2014
8,917
2013
14,966
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 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 eventually
becomes constant. Refer to Note (6) 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 (4)
for a complete discussion on income taxes.
F-13
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 three 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; 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 from the revaluation of the company’s foreign currency denominated monetary assets and
liabilities 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 (10),
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
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 (8) for a complete discussion on stock-based compensation.
F-14
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 (9) 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.
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
F-15
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 February 2013, the FASB issued ASU 2013-02 Reporting of Amounts Reclassified Out of Accumulated
Other Comprehensive Income. This guidance requires entities to present changes in accumulated other
comprehensive income by component, including the amounts of changes that are due to reclassifications and
the amounts that are due to current period other comprehensive income. Entities are also required to present
significant amounts reclassified out of accumulated other comprehensive income by the respective line items of
net income. The new guidance was effective for us beginning April 1, 2013 and includes disclosure changes
only.
(2) ACQUISITION
Troms Offshore Supply AS
On June 4, 2013, the company, through a subsidiary, acquired Troms Offshore Supply AS, a Norwegian
company (Troms Offshore). At the time of the acquisition, Troms Offshore owned four deepwater PSVs, and
had two additional deepwater PSVs under construction, one of which was delivered shortly after the acquisition
and the other delivered in January 2014. The purchase price (not including transaction costs) consisted of a
$150.0 million cash payment to the shareholders of Troms Offshore and the assumption of approximately
$261.3 million of combined Troms Offshore obligations, comprised of net interest-bearing debt and the
remaining installment payments due on vessels under construction. The company has performed a fair value
analysis and the purchase price was allocated to the acquired assets and liabilities based on their fair values
resulting in $42.2 million of goodwill, all of which was allocated to our Sub-Saharan Africa/Europe segment.
The following table summarizes the allocation of the purchase price for the acquisition of Troms Offshore:
(In thousands)
Cash
Trade receivables and other current assets
Vessels
Goodwill
Payable and other liabilities
Notes payable
Total purchase price
$
$
22,263
9,816
245,605
42,160
(13,020)
(156,824)
150,000
The effect of the acquisition on pro forma results of operations and the condensed consolidated statement of
operations for the years ended March 31, 2014 and 2013 are immaterial and therefore not presented.
(3)
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.
F-16
Investments in, at equity, and advances to unconsolidated joint venture companies at March 31, were as
follows:
(In thousands)
Sonatide Marine, Ltd. (Angola)
DTDW Holdings, Ltd. (Nigeria)
Investments in, at equity, and advances to unconsolidated companies
Percentage
Ownership
49%
40%
$
$
2014
62,126
1,802
63,928
2013
46,047
---
46,047
During the third quarter of fiscal 2014, the company advanced $1.9 million to a 40%-owned unconsolidated joint
venture company located in Nigeria. The company also sold a vessel to this unconsolidated joint venture
company for $23.3 million, and recognized a gain in the third quarter of fiscal 2014 of $7.9 million and a
deferred gain of $5.2 million based on proportional ownership of the joint venture.
(4)
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
$
$
2014
217,816
(44,768)
173,048
2013
246,863
(51,700)
195,163
2012
148,369
(37,333)
111,036
Income tax expense (benefit) for the years ended March 31, consists of the following:
(In thousands)
Federal
State
International
Total
U.S.
2014
Current
Deferred
2013
Current
Deferred
2012
Current
Deferred
$
$
$
$
$
$
(602)
(34,226)
(34,828)
(7,633)
(11,335)
(18,968)
(5,009)
(24,545)
(29,554)
4
--
4
(313)
---
(313)
(558)
---
(558)
68,100
(483)
67,617
67,502
(34,709)
32,793
64,092
(398)
63,694
56,146
(11,733)
44,413
54,363
(626)
53,737
48,796
(25,171)
23,625
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
Reversal of basis difference – sale leaseback
Valuation allowance – foreign tax credits
Amortization of deferrals associated with intercompany
sales to foreign tax jurisdictions
Expenses which are not deductible for book purposes
State taxes
Other, net
2014
60,567
$
---
(18,536)
(483)
3,661
(3,369)
(5,821)
(1,475)
(2,144)
3
390
32,793
$
2013
68,307
---
(23,965)
(398)
498
---
5,821
(6,232)
---
(203)
585
44,413
2012
38,863
(4,187)
(13,504)
(626)
2,889
---
---
326
---
(363)
227
23,625
F-17
Income taxes resulting from intercompany vessel sales, as well as the tax effect of any reversing temporary
differences resulting from the sales, are deferred and amortized on a straight-line basis over the remaining
useful lives of the vessels.
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
2014
18.95%
2013
22.76%
2012
21.28%
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:
Accrued employee benefit plan costs
Stock based compensation
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
Gross deferred tax liabilities
Net deferred tax liabilities
2014
2013
21,423
7,162
2,895
2,896
34,376
---
34,376
18,162
6,451
45,640
8,673
78,926
5,821
73,105
(108,929)
(108,929)
(74,553)
(189,763)
(189,763)
(116,658)
$
$
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.
F-18
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
The company has the following foreign tax credit carry-forwards that expire in 2022.
(In thousands)
Foreign tax credit carry-forwards
2014
$
2,374,503
2014
2,895
$
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
$
2014
18,008
36,472
2013
14,269
30,906
Included in the liability balances for uncertain tax positions above are $9.2 million of penalties and interest. The
tax liabilities for uncertain tax positions are primarily 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. As the result of the anticipated settling of a tax
dispute, the company believes it is reasonably possible that it will make a tax payment that will result in a
decrease of income tax payable of up to $4 million within the next twelve months.
Unrecognized tax benefits, which are not included in the liability for uncertain tax positions above as they have
not been recognized in previous tax filings, and 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
$
2014
11,230
24
A reconciliation of the beginning and ending amount of all unrecognized tax benefits, including the
unrecognized tax benefit related to state tax issues and the liability for uncertain tax positions (but excluding
related penalties and interest) 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
Additions based on tax positions related to prior years
Reductions for tax positions of prior years
Exchange rate fluctuation
Settlement and lapse of statute of limitations
Balance at March 31,
$
$
2014
14,868
4,393
2,217
(1,412)
---
---
20,066
2013
15,727
2,041
---
(2,900)
---
---
14,868
2012
15,220
2,813
---
(1,375)
---
(931)
15,727
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 2006. 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 benefit transactions
$
2014
301
2013
359
2012
738
F-19
(5)
INDEBTEDNESS
Revolving Credit and Term Loan Agreement
In June 2013, the company amended and extended its existing credit facility. The amended credit agreement
matures in June 2018 (the “Maturity Date”) and provides for a $900 million, five-year credit facility (“credit
facility”) consisting of a (i) $600 million revolving credit facility (the “revolver”) and a (ii) $300 million term loan
facility (“term loan”).
Borrowings under the credit facility are unsecured and bear interest at the company’s option at (i) the greater of
prime or the federal funds rate plus 0.25 to 1.00%, or (ii) Eurodollar rates, plus margins ranging from 1.25 to
2.00% based on the company’s consolidated funded debt to capitalization ratio. Commitment fees on the
unused portion of the facilities range from 0.15 to 0.30% based on the company’s funded debt to total
capitalization ratio. The credit facility requires that the company maintain a ratio of consolidated debt to
consolidated total capitalization that does not exceed 55%, and maintain a 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, including capitalized interest, for such period) of not less
than 3.0 to 1.0. 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 had $300 million in term loan borrowings outstanding at March 31, 2014 (whose fair value
approximates the carrying value because the borrowings bear interest at variable rates), and has the entire
$600.0 million available under the revolver to fund future liquidity needs at March 31, 2014. The company had
$125 million of term loan borrowings and $110 million of revolver borrowings outstanding at March 31, 2013.
These estimated fair values are based on Level 2 inputs.
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. These estimated fair values are based on
Level 2 inputs.
September 2013 Senior Notes
On September 30, 2013, the company executed a note purchase agreement for $500 million and issued
$300 million of senior unsecured notes to a group of institutional investors. The company issued the remaining
$200 million of senior unsecured notes on November 15, 2013. A summary of these outstanding notes at
March 31, 2014, 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
$
March 31,
2014
500,000
9.4
4.86%
520,979
The multiple series of notes totaling $500 million were issued with maturities ranging from approximately seven
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 ratio of
consolidated debt to consolidated total capitalization that does not exceed 55% and maintain a ratio of
consolidated EBITDA to consolidated interest charges, including capitalized interest, of not less than 3.0 to 1.0.
F-20
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 outstanding notes 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
$
2014
165,000
6.6
4.42%
168,653
2013
165,000
7.6
4.42%
179,802
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 ratio of consolidated debt to
consolidated total capitalization that does not exceed 55%.
September 2010 Senior Notes
In fiscal 2011, the company completed the sale of $425 million of senior unsecured notes. A summary of the
aggregate amount of these outstanding notes 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
$
2014
425,000
5.6
4.25%
436,254
2013
425,000
6.6
4.25%
458,520
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 ratio of consolidated debt to consolidated
total capitalization that does not exceed 55%.
Included in accumulated other comprehensive income at March 31, 2014 and 2013, is an after-tax loss of
$2.4 million ($3.7 million pre-tax), and $2.9 million ($4.4 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 to
interest expense 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 these outstanding notes 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
$
2014
35,000
1.3
4.61%
36,018
2013
175,000
0.7
4.47%
178,227
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 require that the company
maintain a ratio of consolidated debt to consolidated total capitalization that does not exceed 55%.
F-21
Troms Offshore Debt
In January 2014, Troms Offshore entered into a new 300 million NOK, 12 year unsecured borrowing agreement
which matures in January 2026. The loan requires semi-annual principal payments of 12.5 million NOK (plus
accrued interest) and bears interest at a fixed rate of 2.31% plus a premium based on Tidewater Inc.’s
consolidated funded indebtedness to total capitalization ratio (currently equal to 1.50% for a total all-in rate of
3.81%). As of March 31, 2014, 300.0 million NOK (approximately $50.0 million) is outstanding under this
agreement.
In May 2012, Troms Offshore entered into a 204.4 million NOK denominated borrowing agreement which
matures in May 2024. The loan requires semi-annual principal payments of 8.5 million NOK (plus accrued
interest), bears interest at a fixed rate of 6.38% and is secured by certain guarantees and various types of
collateral, including a vessel. As of March 31, 2014, 178.9 million NOK (approximately $29.8 million) is
outstanding under this agreement. In January 2014, the loan was amended to, among other things, change the
interest rate to a fixed rate equal to 3.88% plus a premium based on Tidewater’s funded indebtedness to
capitalization ratio (currently equal to 1.50% for a total all-in rate of 5.38%), change the borrower, change the
export creditor guarantor, and to replace the vessel security with a company guarantee.
In May 2012, Troms Offshore entered into a 35.0 million NOK denominated borrowing agreement with a
shipyard which matures in May 2015. In June 2013, Troms Offshore entered into a 25.0 million NOK
denominated borrowing agreement a Norwegian Bank, which matures in June 2019. These borrowings bear
interest based on three month NIBOR plus a credit spread of 2.0% to 3.5%. As of March 31, 2014 60.0 million
NOK (approximately $10.0 million) is outstanding under these agreements.
Troms Offshore had 60.0 million NOK, or approximately $10.0 million, outstanding in floating rate debt at
March 31, 2014 (whose fair value approximates the carrying value because the borrowings bear interest at
variable NIBOR rates plus a margin). Troms Offshore also had 478.9 million NOK, or $79.9 million, of
outstanding fixed rate debt at March 31, 2014, which has an estimated fair value of 477.5 million NOK, or $79.6
million. These estimated fair values are based on Level 2 inputs.
In June 2013, Troms Offshore repaid a 188.9 million NOK loan (approximately $32.5 million), plus accrued
interest that was secured with various guarantees and collateral, including a vessel.
During the second quarter of fiscal 2014, the company repaid prior to maturity 500 million Norwegian Kroner
(NOK) denominated (approximately $82.1 million) public bonds (plus accrued interest) that had been issued by
Troms Offshore in April 2013. The repayment of these bonds, at an average price of approximately 105.0% of
par value, resulted in the recognition of a loss on early extinguishment of debt of approximately 26 million NOK
(approximately $4.1 million).
F-22
Summary of Long-Term Debt Outstanding
The following table summarizes debt outstanding at March 31:
(In thousands)
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
4.26% September 2013 senior notes due fiscal 2021
5.01% September 2013 senior notes due fiscal 2024
5.16% September 2013 senior notes due fiscal 2026
NOK denominated notes due fiscal 2025
NOK denominated notes due fiscal 2026
NOK denominated borrowing agreement due fiscal 2015
NOK denominated borrowing agreement due fiscal 2019
Term Loan
Revolving line of credit
Less: Current maturities of long-term debt
Total
Debt Costs
$
2014
---
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
123,000
250,000
127,000
29,837
50,028
5,837
4,168
300,000
---
2013
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
110,000
$
1,514,870
9,512
$
1,505,358
1,000,000
---
1,000,000
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
(6) EMPLOYEE RETIREMENT PLANS
U.S. Defined Benefit Pension Plan
2014
43,814
11,497
55,311
$
$
2013
29,745
10,602
40,347
2012
22,308
14,743
37,051
The company has a defined benefit pension plan (pension plan) that covers certain U.S. citizen employees and
other 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. As of March 31, 2014, approximately 48 employees are covered by this plan. This
change did not affect benefits earned by participants prior to January 1, 2011. Active employees who previously
accrued benefits under the pension plan continue to accrue benefits as participants in the company’s defined
contribution retirement plan effective January 1, 2011. The transfer of employee benefits from a defined benefit
pension plan to a defined contribution plan have provided the company with more predictable retirement plan
costs and cash flows. The company’s future benefit obligations and requirements for cash contributions for the
frozen pension plan have also been reduced. Losses associated with the curtailment of the pension plan were
immaterial. No amounts were contributed to the defined benefit pension plan during fiscal 2014 and 2013.
Management is working with its actuary to determine if a contribution will be necessary during fiscal 2015.
F-23
Supplemental Executive Retirement Plan
The company also offers a non-contributory, defined benefit supplemental executive retirement plan
(supplemental plan) that provides pension benefits to certain employees in excess of those allowed under the
company’s tax-qualified pension plan. A Rabbi Trust has been established for the benefit of participants in the
supplemental plan. The Rabbi Trust assets, which are invested in a variety of marketable securities (but not
Tidewater stock), 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 supplemental
plan is a non-qualified plan and, as such, the company is not required to make contributions to the
supplemental plan. The company did not contribute to the supplemental plan during fiscal 2014 and 2013.
Management has not made any decision on funding the plan during fiscal 2015.
As a result of the May 31, 2012 retirement of Dean E. Taylor, former President and Chief Executive Officer of
Tidewater Inc., Mr. Taylor received in December 2012 a $13.0 million lump sum distribution in full settlement
and discharge of his supplemental executive retirement plan benefit. A settlement loss of $5.2 million related to
this distribution was recorded
the quarter ended
December 31, 2012. The settlement loss is the result of the recognition of previously unrecognized actuarial
losses that were being amortized over time from accumulated other comprehensive income to pension
expense. As a result of the December 2012 lump sum distribution, a portion of the previously unrecognized
actuarial losses was required to be recognized in earnings in the current quarter in accordance with ASC 715.
in general and administrative expenses during
Investments held in a Rabbi Trust in the supplemental plan are included in other assets at fair value. 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 (loss) gains in carrying value of trust assets
Unrealized (loss) gains in carrying value of trust assets are net of income tax expense of
Obligations under the supplemental plan
2014
$ 10,285
92
49
21,918
2013
10,486
(121)
(65)
21,431
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.
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
F-24
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%
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.
F-25
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
2014
Actual as of
2013
---
96%
4%
100%
60%
37%
3%
100%
---
98%
2%
100%
60%
35%
5%
100%
Significant Concentration Risks
The pension plan and the supplemental plan assets are periodically evaluated for concentration risks. As of
March 31, 2014, 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-26
Fair Value of Pension Plan and Supplemental Plan Assets
The fair value hierarchy for the pension plan and supplemental plan assets measured at fair value as of March
31, 2014, are as follows:
(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
Fair
Value
Quoted prices in
active markets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
$
$
$
$
$
2,935
50,113
1,443
1,511
56,002
894
56,896
4,141
---
231
1,809
15
38
1,975
1,797
369
10,375
(90)
2,935
---
---
---
2,935
894
3,829
4,141
---
231
1,809
15
38
1,363
1,797
57
9,451
(90)
9,361
---
50,113
1,443
1,511
53,067
---
53,067
---
---
---
---
---
---
612
---
312
924
---
924
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
Total fair value of plan assets
$
10,285
The following table provides the fair value hierarchy for the pension plan and supplemental plan assets
measured at fair value as of March 31, 2013:
(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
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)
3,142
---
---
---
3,142
907
4,049
4,240
---
285
1,811
16
1,240
1,743
93
9,428
(149)
9,279
---
53,352
1,416
614
55,382
---
55,382
---
---
---
---
---
767
---
440
1,207
---
1,207
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
$
$
$
$
$
$
3,142
53,352
1,416
614
58,524
907
59,431
4,240
---
285
1,811
16
2,007
1,743
533
10,635
(149)
10,486
F-27
Plan Assets and Obligations
Changes in plan assets and obligations during the years ended March 31, 2014 and 2013 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
ERRP reimbursement
Plan settlement
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
Plan settlement
Benefits 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
2014
2013
Other Benefits
2014
2013
88,238
790
3,581
---
---
---
(4,250)
(4,292)
84,067
59,431
776
939
---
---
---
(4,250)
56,896
93,356
983
4,098
---
---
(13,046)
(3,965)
6,812
88,238
56,917
5,605
13,920
---
---
(13,046)
(3,965)
59,431
29,006
405
1,048
436
(26)
---
(962)
(5,793)
24,114
---
---
552
436
(26)
---
(962)
---
29,262
475
1,235
428
274
---
(960)
(1,708)
29,006
---
---
258
428
274
---
(960)
---
56,896
84,067
59,431
88,238
---
24,114
---
29,006
(27,171)
(28,807)
(24,114)
(29,006)
(1,162)
(26,009)
(27,171)
(1,070)
(27,737)
(28,807)
(1,129)
(22,985)
(24,114)
(1,329)
(27,677)
(29,006)
$
$
$
$
$
$
The following table provides the projected benefit obligation and accumulated benefit obligation for the pension
plans:
(In thousands)
Projected benefit obligation
Accumulated benefit obligation
$
2014
84,067
81,223
2013
88,238
85,631
F-28
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
$
2014
84,067
81,223
56,896
2013
88,238
85,631
59,431
Net periodic benefit 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
Settlement loss
Net periodic pension cost
$
2014
790
3,581
(2,871)
50
1,103
---
$
2,653
2013
983
4,098
(2,748)
50
1,648
5,161
9,192
2012
875
4,412
(2,576)
50
1,760
---
4,521
Net periodic benefit cost for the postretirement health care and life insurance plan 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
2014
405
1,048
(2,032)
(396)
(975)
$
$
2013
475
1,235
(2,032)
---
(322)
2012
554
1,379
(2,032)
(4)
(103)
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
Net loss (gain)
Settlement loss
Amortization of prior service cost
Amortization of net (loss) gain
Other
Total recognized in other comprehensive income (loss)
Net of 35% tax rate
Pension Benefits
2014
2013
Other Benefits
2014
2013
$
$
(2,196)
---
(50)
(1,103)
---
(3,349)
(2,177)
3,954
(5,161)
(50)
(1,648)
---
(2,905)
(1,888)
(5,793)
---
2,032
395
197
(3,169)
(2,060)
(1,708)
---
2,032
---
(643)
(319)
(207)
Amounts recognized as a component of accumulated other comprehensive (income) loss as of March 31, 2014
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
$
$
14,148
85
14,233
Other Benefits
(6,986)
(6,620)
(13,606)
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
$
(976)
(50)
Other Benefits
---
2,032
F-29
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
2014
4.75%
3.00%
2013
4.25%
3.00%
2014
4.75%
N/A
2013
4.25%
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
2014
4.75%
5.00%
3.00%
2013
4.75%
5.00%
3.00%
2012
5.25%
5.00%
3.00%
2014
4.75%
N/A
N/A
2013
4.75%
N/A
N/A
2012
5.25%
N/A
N/A
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
obligations at March 31, 2014, 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,
2015
2016
2017
2018
2019
2020 – 2024
(In thousands)
$
Pension
Benefits
5,240
5,509
5,735
5,997
6,216
33,992
Total 10-year estimated future benefit payments
$
62,689
Health Care Cost Trends
Other
Benefits
1,129
1,184
1,263
1,336
1,424
7,881
14,217
The following table discloses the assumed health care cost trends used in measuring the accumulated
postretirement benefit obligation and net periodic postretirement benefit cost at March 31, 2014 for pre-65
medical and prescription drug coverage and for post-65 medical coverage, including expected future trend
rates.
Year ending March 31, 2014
Accumulated postretirement benefit obligation
Net periodic postretirement benefit obligation
Ultimate health care cost trend
Ultimate year health care cost trend rate is achieved
Year ending March 31, 2015
Net periodic postretirement benefit obligation
Pre-65
Post-65
8.2%
8.7%
4.5%
2029
8.2%
6.9%
6.9%
4.5%
2029
6.9%
A one-percentage rate increase (decrease) in the assumed health care cost trend rates has the following
effects on the accumulated postretirement benefit obligation as of March 31:
(In thousands)
Accumulated postretirement benefit obligation
Aggregate service and interest cost
1%
Increase
3,232
222
$
1%
Decrease
2,664
179
F-30
Defined Contribution Plans
Prior to February 2013, the company maintained the below two defined contribution plans. The plans were
merged in February 2013 to provide administrative efficiencies, potential savings on service provider fees and
to simplify the participant experience. Following the merger, the provisions of the two plans remained
substantially similar with the exception of cost neutral changes that were approved to simplify the administration
of the combined plan.
Retirement Contributions
All eligible U.S. fleet personnel, along with all new eligible employees of the company hired after December 31,
1995 are eligible to receive retirement contributions. Effective January 1, 2011, the active employees who
participated in the now frozen defined benefit pension plan also became eligible for retirement contributions.
This benefit 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) Savings Contribution
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 five 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
2014
273,662
2013
271,237
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
$
2014
3,854
82
2013
3,356
115
2012
3,120
335
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 may receive an additional 1% to 8% depending on age and years of service.
F-31
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
2014
465
$
2013
420
2012
415
The company also provides certain benefits programs which are maintained in several other countries that
provide retirement income for covered employees.
(7) 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
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 gain on vessel sales - current
Other
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
Other
$
$
$
2014
5,219
34,376
8,728
23,212
9,106
15,744
96,385
2014
27,248
8,263
96,468
14,816
10,507
2013
10,833
73,105
5,133
23,149
9,106
4,951
126,277
2013
23,453
7,118
77,851
8,096
10,494
$
157,302
127,012
$
$
$
2014
56,080
13,996
491
70,567
2014
23,185
35,234
85,316
35,469
2013
38,100
1,374
334
39,808
2013
27,681
37,096
39,568
34,729
$
179,204
139,074
F-32
(8) 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 restricted stock, stock unit and 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. The
restricted stock and stock unit awards include performance shares.
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,
2014
1,469,305
99,249
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.
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 2014, 2013 or
2012.
The following table sets forth a summary of stock option activity of the company for fiscal years 2014, 2013 and
2012:
Weighted-average
Exercise Price
45.36
---
38.71
56.44
44.93
---
29.09
52.47
46.24
---
36.86
---
$
47.51
Number
of Shares
1,875,476
---
(146,508)
(3,544)
1,725,424
---
(141,542)
(27,607)
1,556,275
---
(186,219)
---
1,370,056
Outstanding at March 31, 2011
Granted (A)
Exercised
Expired or cancelled/forfeited
Outstanding at March 31, 2012
Granted (A)
Exercised
Expired or cancelled/forfeited
Outstanding at March 31, 2013
Granted (A)
Exercised
Expired or cancelled/forfeited
Outstanding at March 31, 2014
(A) Stock options were not granted during fiscal 2014, 2013 and 2012.
F-33
Information regarding the 1,370,056 options outstanding and exercisable at March 31, 2014 can be grouped
into three general exercise-price ranges as follows:
At March 31, 2014
Options outstanding and exercisable
Weighted average exercise price
Weighted average remaining contractual life
$33.83 - $37.55
371,961
$34.37
4.4 years
Exercise Price Range
$45.75 - $48.96
394,514
$45.86
6.0 years
$55.76 - $65.69
603,581
$56.70
3.0 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
$
2014
4,059
8,926
$
115
1,370,056
47.51
$
2013
2,544
144,537
2,154
1,547,349
46.27
2012
2,800
328,325
4,117
1,561,836
44.86
The aggregate intrinsic value of the options outstanding and exercisable at March 31, 2014 was $6.4 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
$
2014
12
0.00
0.00
2013
2,049
0.03
0.03
2012
3,892
0.05
0.05
There were no unrecognized stock-option compensation costs as of March 31, 2014. 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 are achieved. All of the
restricted stock awards are classified as equity awards in stockholders’ equity. The value of restricted stock
awards is generally amortized on a straight-line basis to earnings over the respective vesting periods and is net
of forfeitures.
F-34
The following table sets forth a summary of restricted stock award activity of the company for fiscal 2014, 2013
and 2012:
Non-vested balance at March 31, 2011
Granted
Vested
Cancelled/forfeited
Non-vested balance at March 31, 2012
Granted
Vested
Cancelled/forfeited
Non-vested balance at March 31, 2013
Granted
Vested
Cancelled/forfeited
Non-vested balance at March 31, 2014
Weighted-average
Grant-Date
Fair Value
51.13
54.59
50.11
---
51.43
---
49.53
56.84
50.95
55.04
56.71
35.76
$
54.75
Time
Based
Shares
369,599
7,500
(110,681)
---
266,418
---
(110,802)
(7,067)
148,549
28,963
(93,739)
(4,949)
78,824
Performance
Based
Shares
228,624
---
(4,983)
---
223,641
---
---
(59,503)
164,138
---
(1,749)
(56,123)
106,266
Restrictions on approximately 49,861 time-based restricted stock awards will lapse during fiscal 2015, and
restrictions on 37,861 performance-based restricted stock awards outstanding at March 31, 2014 will lapse
during fiscal 2015 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
$
2014
4,429
4,633
2013
5,488
5,987
2012
5,796
6,171
As of March 31, 2014, total unrecognized restricted stock compensation costs amounted to $4.8 million, or $3.8
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 2014, 2013 and 2012.
Restricted Stock Units
The company has granted restricted stock units (RSUs) 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 RSUs, 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. Vesting of the various
performance-based restricted stock units is based on metrics such as a three year Total Shareholder Return
(TSR) as measured against a three year TSR of a defined peer group and Return on Total Capital (ROTC) for
the company over a three year performance period. The company uses assumptions underlying the Black-
Scholes methodology to produce a Monte Carlo simulation model to value the TSR performance-based
restricted stock units. The fair value of the ROTC performance-based RSUs and time-based RSUs is based on
the market price of our common stock on the date of grant. The restrictions on the time-based RSUs 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 RSUs 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 are achieved. Upon retirement, the Compensation
F-35
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 2014, 2013
and 2012:
Non-vested balance at March 31, 2011
Granted
Vested
Cancelled/forfeited
Non-vested balance at March 31, 2012
Granted
Vested
Cancelled/forfeited
Non-vested balance at March 31, 2013
Granted
Vested
Cancelled/forfeited
Non-vested balance at March 31, 2014
Weighted-average
Grant-Date
Fair Value
$
$
$
$
---
54.18
---
---
54.18
50.16
54.17
54.18
51.69
49.37
52.22
52.43
50.24
Time
Based
Units
---
248,288
---
---
248,288
259,158
(79,507)
(10,274)
417,665
265,937
(175,673)
(12,720)
495,209
Weight-average
Grant Date
Fair Value
Performance
Based
Units
---
72.23
---
---
72.23
67.11
---
72.23
69.62
49.34
---
---
51.06
---
84,394
---
---
84,394
84,323
---
(3,476)
165,241
91,132
---
---
256,373
Restrictions on approximately 228,207 time-based shares will lapse during fiscal 2015, and no performance-
based shares outstanding at March 31, 2014 will vest during fiscal 2015.
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
2014
$ 8,684
12,664
2013
4,307
7,836
2012
---
272
As of March 31, 2014, total unrecognized restricted stock unit compensation costs amounted to $34.2 million,
or $21.7 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 2014, 2013 and 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-36
The following table sets forth a summary of phantom stock activity of the company for fiscal 2014, 2013 and
2012:
Non-vested balance at March 31, 2011
Granted
Vested
Cancelled/forfeited
Non-vested balance at March 31, 2012
Granted
Vested
Cancelled/forfeited
Non-vested balance at March 31, 2013
Granted
Vested
Cancelled/forfeited
Non-vested balance at March 31, 2014
Weighted-average
Grant-Date
Fair Value
46.08
54.18
41.61
46.16
49.23
50.76
43.60
54.26
51.74
48.81
51.45
50.93
$
50.94
Time
Based
Shares
138,068
22,845
(51,255)
(6,347)
103,311
27,100
(54,823)
(6,993)
68,595
31,736
(35,095)
(4,354)
60,882
Performance
Based
Shares
28,059
---
---
---
28,059
---
---
(28,059)
---
1,291
---
---
1,291
Restrictions on 30,689 time-based shares will lapse in fiscal 2015. The fair value of the non-vested phantom
shares at March 31, 2014 is $48.62 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
$
2014
1,806
1,706
---
2013
2,390
2,507
---
2012
3,041
3,180
---
As of March 31, 2014, total unrecognized phantom stock compensation costs amounted to $3.1 million, or
$2.8 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 $115,000
during fiscal 2014 and $100,000 prior to fiscal 2013 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 granted from inception of the plan to
March 2013 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. For these units, the participant can
elect to receive five annual installments or a lump sum. Beginning with deferred stock units granted in fiscal
2014, participants will have the additional option of electing a distribution 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 or distribution date commencing on an anniversary of the grant date, whichever is earlier. For
the units granted in fiscal 2014, the participant can elect to receive annual installments of two to ten years or a
lump sum distribution.
F-37
The following table sets forth a summary of deferred stock unit activity of the company for fiscal 2014, 2013 and
2012:
Balance at March 31, 2011
Dividend equivalents reinvested
Retirement distribution
Granted
Balance at March 31, 2012
Dividend equivalents reinvested
Retirement distribution
Granted
Balance at March 31, 2013
Dividend equivalents reinvested
Retirement distribution
Granted
Balance at March 31, 2014
Weighted-average
Grant-Date
Fair Value
49.80
50.49
---
54.02
50.56
46.73
---
50.48
50.48
53.82
59.65
49.47
$
48.68
Number
Of
Units
92,365
1,843
---
20,372
114,580
2,472
---
26,955
144,007
2,492
(26,661)
26,550
146,388
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
(9) STOCKHOLDERS’ EQUITY
Common Stock
2014
1,737
$
2013
1,085
2012
700
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
2014
125,000,000
$0.10
49,730,442
3,000,000
No par
---
2013
125,000,000
$0.10
49,485,832
3,000,000
No par
---
In May 2014, 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
period for this authorization is July 1, 2014 through June 30, 2015. 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 evaluates share repurchase opportunities relative to other investment
opportunities and in the context of current conditions in the credit and capital markets.
In May 2013, the company’s Board of Directors authorized the company to spend up to $200 million to
repurchase shares of its common stock in open-market or privately-negotiated transactions. The effective
period for this authorization is July 1, 2013 through June 30, 2014. At March 31, 2014, $200.0 million remains
available to repurchase shares under the May 2013 share repurchase program.
In May 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
period for this authorization was July 1, 2012 through June 30, 2013. The May 2012 repurchase program
ended on June 30, 2013 and the company utilized $20.0 million of the $200.0 million authorized.
F-38
In May 2011, the company’s Board of Directors replaced its then existing July 2009 share repurchase program
with a $200.0 million repurchase program that stayed in effect through June 30, 2012. The May 20111
repurchase program authorized the company to repurchase shares of its common stock in open-market or
privately-negotiated transactions. The authorization of the May 2011 repurchase program ended on June 30,
2012, and the company utilized $100.0 million of the $200.0 million authorized.
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)
Aggregate cost of common stock repurchased
Shares of common stock repurchased
Average price paid per common share
Dividend Program
$
$
2014
---
---
---
2013
85,034
1,856,900
45.79
2012
35,015
739,231
47.37
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
$
2014
49,973
1.00
2013
49,766
1.00
2012
51,370
1.00
Accumulated Other Comprehensive Loss
The changes in accumulated other comprehensive income by component, net of tax for the years ended
March 31, are as follows:
For the year ended March 31, 2013
For the year ended March 31, 2014
Balance Gains/(losses) Reclasses
from OCI to
net income
recognized
in OCI
at
3/31/12
Net
period
OCI
Remaining
balance
3/31/13
Balance Gains/(losses) Reclasses
from OCI to
recognized
net income
in OCI
at
3/31/13
Net
period
OCI
Remaining
balance
3/31/14
(in thousands)
Available for sale
securities
Currency translation
adjustment
Pension/Post-
retirement benefits
Interest rate
swap
Total
251
(1,049)
677
(372)
(121)
(121)
(9,811)
---
(6,448)
2,095
---
---
---
(9,811)
(9,811)
2,095
(4,353)
(4,353)
4,237
(3,322)
(19,330)
---
1,046
466
1,143
466
2,189
(2,856)
(17,141)
(2,856)
(17,141)
---
4,145
(92)
---
305
---
---
466
771
213
---
4,237
466
4,916
92
(9,811)
(116)
(2,390)
(12,225)
The following table summarizes the reclassifications from accumulated other comprehensive loss to the
condensed consolidated statement of income for the years ended March 31,
(In thousands)
Realized gains on available for sale securities
Amortization of interest rate swap
Total pre-tax amounts
Tax effect
Total gains for the period, net of tax
$
$
Year Ended
March 31,
2014
469
717
1,186
415
771
2013
1,042
717
1,759
616
1,143
Affected line item in the condensed
consolidated statements of income
Interest income and other, net
Interest and other debt costs
Included in accumulated other comprehensive loss for the year ended March 31, 2014, is an after-tax loss of
$2.4 million ($3.7 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 0. 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.
F-39
(10) 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)
2014
2013
2012
Net Income available to common shareholders (A)
$
140,255
150,750
87,411
Weighted average outstanding shares of common stock, basic (B)
Dilutive effect of options and restricted stock awards
Weighted average common stock and equivalents (C)
49,392,749
287,365
49,680,114
49,550,391
183,649
49,734,040
51,165,460
264,107
51,429,567
Earnings per share, basic (A/B)
Earnings per share, diluted (A/C)
Additional information:
Antidilutive options and restricted stock shares
(11) SALE/LEASBACK ARRANGEMENTS
Fiscal 2014 Sale/Leasebacks
$
$
2.84
2.82
3.04
3.03
34,486
82,758
1.71
1.70
---
In March of 2014, the company sold four vessels to an unrelated third party, and simultaneously entered into
bareboat charter agreements with the purchasers. The sale/leaseback transactions resulted in proceeds to the
company of $63.3 million and deferred gains totaling $30.5 million. The aggregate carrying value of the four
vessels was $32.8 million at their respective dates of sale. Two of the vessel leases are for seven years and will
expire in March 2021, and the other two leases are for ten years and will expire in March 2024. Under the
sale/leaseback agreements which expire in March 2021, the company has the right to re-acquire the vessels at
approximately 59% of the original sales price at the end of the sixth year, deliver the vessel to the owner at the
end of the lease term, purchase the vessels at their then fair market values at the end of the lease term or
extend the lease for 24 months at mutually agreeable lease rates. Under the two sale/leaseback agreements
which expire in March 2024, the company has the right to re-acquire the vessels at the end of the ninth year for
approximately 53% of the original sales price, re-acquire the vessel at the end of the lease term at its then fair
market value or deliver the vessel to the owner at the end of the lease term.
During the third quarter of fiscal 2014, the company sold four vessels to unrelated third parties, and
simultaneously entered into bareboat charter agreements with the purchasers. The sale/leaseback transactions
resulted in proceeds to the company of $141.9 million and deferred gains totaling $36.2 million. The aggregate
carrying value of the four vessels was $105.7 million at their respective dates of sale. The leases on three of
the vessels will expire in the quarter ending December 2020, and the fourth lease expires in December 2022.
Under the sale/leaseback agreements which expire during the quarter ending December 2020, the company
has the right to re-acquire the vessels at values ranging from 59% to 62% of the original sales price at the end
of the sixth year, deliver the vessel to the owner at the end of the lease term, purchase the vessels at their then
fair market values at the end of the lease term or extend the lease for 24 months at mutually agreeable lease
rates. Under the sale/leaseback agreement which expires in December 2022, the company has the right to re-
acquire the vessel at the end of the sixth year for $43.6 million or at the end of the eighth year for $34.5 million,
re-acquire the vessel at the end of the lease term at its then fair market value or deliver the vessel to the owner
at the end of the lease term and pay a return fee of $2.9 million.
In September 2013, the company sold two vessels to an unrelated third party, and simultaneously entered into
bareboat charter agreements with the purchaser. The sale/leaseback transactions, which expire in September
2020, resulted in proceeds to the company of $65.6 million and a deferred gain of $31.3 million. The aggregate
carrying value of the two vessels was $34.3 million at the dates of sale. Under each September 2013
sale/leaseback agreement, the company has the right to either re-acquire the two vessels at approximately
55% of the original sales price at the end of the sixth year, deliver the vessel to the owner at the end of the
lease term, purchase the vessels at their then fair market values at the end of the lease term or extend the
lease for 24 months at mutually agreeable lease rates.
F-40
The company is accounting for the transactions as sale/leaseback transactions with operating lease treatment
and expenses lease payments over the respective lease term. The deferred gains are amortized to gain on
asset dispositions, net ratably over the respective lease term. Any deferred gain balance remaining upon the
repurchase of the vessel would reduce the vessels’ stated cost if the company elected to exercise the purchase
options.
Fiscal 2010 Sale/Leaseback
In June and July 2009, the company sold six vessels to unrelated third-party companies, and simultaneously
entered into bareboat charter agreements for the vessels with the purchasers.
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.
During the fourth quarter of fiscal 2014, the company elected to repurchase the six vessels from their respective
lessors for an aggregate price of $78.8 million. Three of these were sold and leased back in March 2014. The
carrying value of these purchased vessels was reduced by the previously recognized deferred gains of $39.6
million. Refer to “Fiscal 2014 Sale/Leasebacks” above.
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 an unrelated third party, for $76.5 million and simultaneously entered into bareboat charter
agreements with the same unrelated third party 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 operating lease for all five charter hire agreements were for eight year terms. The company has
the option to extend the respective bareboat charter agreements three times, each for a period of 12 months. 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 bareboat charter agreements on the first two vessels, whose original expiration dates were in calendar
year 2014, ended in September and October 2012 because the company exercised its option to repurchase
these vessels as discussed below. 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.
F-41
The company may 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. The company may also purchase each of the
vessels at a mutually agreed upon price at any time during the lease term. In September 2012, the company
elected to repurchase one of its leased vessels from the lessor for $8.8 million. During October 2012, the
company repurchased a second leased vessel, for $8.4 million. In March 2014, the company repurchased a
third and fourth leased vessel for a total cost of $22.8 million.
Future Minimum Lease Payments
As of March 31, 2014, the future minimum lease payments for the vessels under the operating lease terms are
as follows:
Fiscal year ending (In thousands)
2015
2016
2017
2018
2019
2020 and Thereafter
Total future lease payments
Fiscal 2014
Sale/Leaseback
20,879
20,879
20,879
23,485
24,800
65,263
176,185
$
$
Fiscal 2006
Sale/Leaseback
1,645
1,279
---
---
---
---
2,924
Total
22,524
22,158
20,879
23,485
24,800
65,263
179,109
The operating lease expense on these bareboat charter arrangements for the years ended March 31, are as
follows:
(In thousands)
Vessel operating leases
2014
21,910
$
2013
16,837
2012
17,967
(12) 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 $34.3 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, 2014:
(In thousands, except vessel count)
Vessels under construction:
Deepwater PSVs
Towing supply vessels
Other
Total vessel commitments
Number
of
Vessels
23
6
1
30
$
$
Total
Cost
708,883
116,288
8,014
833,185
Invested
Through
3/31/14
196,468
55,163
8,014
259,645
Remaining
Balance
3/31/14
512,415
61,125
---
573,540
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. The
deepwater PSVs under construction range between 3,000 and 6,360 deadweight tons (DWT) of cargo capacity
while the towing-supply/supply vessels under construction are AHTS vessels that have 7,145 brake
horsepower (BHP). The new-build vessels are estimated to deliver starting in June 2014, with delivery of the
final new-build vessel expected in June 2016.
With its commitment to modernizing its fleet through its vessel construction and acquisition program over the
past decade, the company is replacing its older fleet of vessels with fewer, larger and more efficient vessels,
while also enhancing the size and capabilities of the company’s fleet. These efforts are expected to continue,
F-42
with the company anticipating that it will use some portion of its future operating cash flows and existing
borrowing capacity as well as possible new borrowings or lease arrangements in order 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.
Currently the company is experiencing substantial delay with one fast 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 has suspended construction on
the vessel and both parties continue 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, 2014. The company had
committed and invested $8.0 million as of March 31, 2014.
In December 2013, the company took delivery of the second of two deepwater PSVs constructed in a U.S.
shipyard. In connection with the delivery of those vessels, the company and the shipyard agreed to hold $11.7
million in escrow with a financial institution pending resolution of disputes over whether all or a portion of those
funds are due to the shipyard as the shipyard has claimed. Some of the disputes may be resolved by high level
management meetings between the parties or through a structured mediation. The balance of the claims will
need to be resolved through litigation in New York state court. Although formal dispute resolution efforts are
currently at an early stage, initial negotiations have thus far failed to resolve the parties’ disputes, and the
company has retained New York counsel to represent the company in the mediation and litigation procedures.
The escrowed amounts have been included in the cost of the acquired vessels.
The company generally requires shipyards to provide third party credit support in the event that vessels are not
completed and delivered timely and 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 minimizing pre-delivery payments
and through other contract terms with the shipyard.
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 the results of the investigation, and the company has entered into separate agreements with these
two U.S. agencies to resolve the matters reported by special counsel. The company subsequently also entered
into an agreement with the Federal Government of Nigeria (FGN) to resolve similar issues with the FGN. The
company has previously reported the principal terms of these three agreements. Certain aspects of the
agreement with the DOJ are set forth below.
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 DPA, in return for the satisfaction of a number of conditions. The DPA expired on
November 11, 2013, and on November 26, 2013, a U.S. District Judge for the Southern District of Texas
entered an Order dismissing (with prejudice) all criminal charges.
F-43
Merchant Navy Officers Pension Fund
After consultation with its advisers, on July 15, 2013, a subsidiary of the company was placed into
administration in the United Kingdom. Joint administrators were appointed to administer and distribute the
subsidiary’s assets to the subsidiary’s creditors. The vessels owned by the subsidiary had become aged and
were no longer economical to operate, which has caused the subsidiary’s main business to decline in recent
years. Only one vessel generated revenue as of the date of the administration. As part of the administration, the
company agreed to acquire seven vessels from the subsidiary (in exchange for cash) and to waive certain
intercompany claims. The purchase price valuation for the vessels, all but one of which were stacked,
was based on independent, third party appraisals of the vessels.
The company previously reported that a 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 subsidiary that participates in the MNOPF is the entity that was placed into administration
in the U.K. MNOPF is that subsidiary’s largest creditor, and has claimed as an unsecured creditor in the
administration. The Company believed that the administration was in the best interests of the subsidiary and its
principal stakeholders, including the MNOPF. The MNOPF indicated that it did not object to the insolvency
process and that, aside from asserting its claim in the subsidiary’s administration and based on the company's
representations of the financial status and other relevant aspects of the subsidiary, MNOPF will not pursue the
subsidiary in connection with any amounts due or which may become due to the Fund.
In December 2013, the administration was converted to a liquidation. That conversion allowed for an interim
cash liquidation distribution to be made to MNOPF. The conversion is not expected to have any impact on the
company. The liquidation is expected to be completed in calendar 2014. The company believes that the
liquidation will resolve the subsidiary's participation in the MNOPF. The company also believes that the ultimate
resolution of this matter will not have a material effect on the consolidated financial statements.
Sonatide Joint Venture
As previously reported, in November 2013, a subsidiary of the company and its joint venture partner in Angola,
Sonangol Holdings Lda. (“Sonangol”), executed a new joint venture agreement for their joint venture, Sonatide.
The new joint venture agreement will have a two year term once an Angolan entity, which is intended to be one
of the Sonatide group of companies, has been incorporated. The Angolan entity is expected to be incorporated
in late 2014 after certain Angolan regulatory approvals are obtained.
The challenges presented to the company to successfully operate in Angola continue to remain significant. As
the company has previously reported, on July 1, 2013, elements of new legislation (the “forex law”) became
effective that requires oil companies participating in concessions from Angola that engage in exploration and
production activities offshore Angola to pay for goods and services provided by foreign exchange residents in
Angolan kwanzas that are initially deposited into an Angolan bank account. The forex law (and interpretations
of the forex law by a number of market participants absent official guidance from the National Bank of Angola or
the government of Angola) will likely result in substantial customer payments to Sonatide being made in
Angolan kwanzas. Such a result could be unfavorable, because the conversion of Angolan kwanzas into U.S.
dollars and expatriation of the funds may result in payment delays, currency devaluation risk prior to conversion
of kwanzas to dollars, additional costs to convert kwanzas into dollars and potentially additional taxes.
In response to the new forex law, Tidewater and Sonangol negotiated an agreement (the “consortium
agreement”) that is intended to allow the Sonatide joint venture to enter into contracts with customers that
allocate billings for services provided by Sonatide between (i) billings for local services that are provided by a
foreign exchange resident (that must be paid in kwanzas), and (ii) billings for services provided offshore (that
can be paid in dollars). However, due to some recent uncertainty that has been expressed as to how Angola
will interpret and enforce the forex law, Sonatide is not yet utilizing the split payment arrangement contemplated
by the consortium agreement (which the company understands is comparable to arrangements utilized, or
intended to be utilized, by other service companies operating in Angola).
F-44
The company understands that the National Bank of Angola will issue a clarifying interpretation of the forex law
by the end of calendar 2014. Any clarifying interpretation provided by the National Bank of Angola, and the
resulting method and form of payment for goods and services that is utilized by the oil companies operating
offshore Angola, should allow Sonatide, the company and other market participants to better assess the risk
profile of the Angolan market over the longer term (i.e., this is an industry issue).
In the meantime, as discussed in further detail below, the uncertainty surrounding whether the proposed
consortium structure will be acceptable has required the company to take measures to maintain adequate
liquidity and to continue its business activities in Angola.
As of March 31, 2014, the company had approximately $430 million in amounts due from Sonatide, largely
reflecting unpaid vessel revenue (billed and unbilled) related to services performed by the company through the
Sonatide joint venture. These amounts have accumulated since late calendar 2012 when the initial provisions
of the forex law relating to payments for goods and services provided by foreign exchange residents took effect
(and payments were required to be paid into local bank accounts). Beginning in June 2013, when the second
provisions of the forex law took effect (and the local payments had to be in kwanza), Sonatide generally
accrued for but did not deliver invoices to customers for vessel revenue related to Sonatide and the company’s
collective Angolan operations in order to minimize the exposure that Sonatide would be paid for a substantial
amount of charter hire in kwanzas and into an Angolan bank. In the interim, the company utilized its credit
facility and other arrangements to fund the substantial working capital requirements related to its Angola
operations.
In the fourth quarter of fiscal 2014 Sonatide received customer payments in Angolan kwanza that was
equivalent to approximately $67 million. Additionally, in the first quarter of fiscal 2015, Sonatide began sending
invoices to those customers who have insisted on paying U.S. dollar denominated invoices in kwanza.
Sonatide will then seek to convert those kwanzas into U.S. dollars and repatriate those U.S. dollars abroad in
order to pay the amounts that Sonatide owes the company. That conversion and repatriation is subject to those
risks and considerations set forth above.
In addition, beginning in February 2014, Sonatide has been entering into some customer agreements that
contain split dollar/kwanza payments (typically 70% dollars and 30% kwanzas). While the company is confident
that these split payment contracts comply with current Angolan law, it is not clear if this type of contracting will
be available to Sonatide over the longer term
Management intends to look for other ways to continue to profitably participate in the Angola market while
reducing the overall level of exposure of the company to the increased risks that the company believes
currently characterize the Angolan market, including the likely redeployment of vessels to other markets where
demand for the company’s vessels remains strong. During the year ended March 31, 2014, the company
redeployed vessels from its Angolan operations to other markets and also transferred vessels into its Angolan
operations from other markets resulting in a net increase of one vessel operating in the area. Redeployment of
vessels to other markets in the quarter ended March 31, 2014 has been more significant (net 5 vessels
transferred) than in prior quarters.
The global market for offshore support vessels is currently reasonably well balanced, with offshore vessel
supply approximately equal to offshore vessel demand; however, there would likely be negative financial
impacts associated with the 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 for the periods when such costs would be incurred. 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 a majority of these vessels at prevailing market day rates.
For the year ended March 31, 2014, Tidewater’s Angolan operations generated vessel revenues of
approximately $356.8 million, or 25%, of its consolidated vessel revenue, from an average of approximately 90
Tidewater-owned vessels that are marketed through the Sonatide joint venture (5 of which were stacked on
average during the year ended March 31, 2014), and, for the year ended March 31, 2013, generated vessel
F-45
revenues of approximately $271 million, or 22%, of consolidated vessel revenue, from an average of
approximately 85 Tidewater-owned vessels (9 of which were stacked on average during the year ended
March 31, 2013).
In addition to the company’s Angolan operations, which reflect the results of Tidewater-owned vessels
marketed through the Sonatide joint venture (owned 49% by Tidewater), ten vessels and other assets are
owned by the Sonatide joint venture. As of March 31, 2014 and 2013, 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 $62 million and $46 million, respectively.
Due from Affiliate at March 31, 2014 and 2013 of approximately $430 million and $119 million, respectively,
represents cash received by Sonatide from customers and due to the company, costs paid by Tidewater on
behalf of Sonatide and, finally, amounts due from customers which are expected to be remitted to the company
through Sonatide.
Due from Affiliate at March 31, 2014 and 2013 of approximately $86 million and $36 million, respectively,
represents amounts due to Sonatide for commissions payable (approximately $43 million and $7 million,
respectively) and other costs paid by Sonatide on behalf of the company.
Continuing normal course operations have caused (and will cause) amounts due from and to Sonatide to
fluctuate in periods subsequent to the balance sheet date. Subsequent to March 31, 2014 the company has
collected approximately $66 million of cash from Sonatide, which represents approximately 62 days of revenue
(based on revenues of our Angolan operations for the quarter ended March 31, 2014).
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
$68.4 million as of March 31, 2014). 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, 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) 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 board issued a decision that disallowed 149.0 million Brazilian
reais (approximately $65.8 million as of March 31, 2014) of the total fines sought by the Macae Customs Office.
In two separate proceedings in 2013, a secondary administrative appeals board considered fines totaling 127.0
million Brazilian reais (approximately $56.0 million as of March 31, 2014) and rendered decisions that
disallowed all of those fines. The remaining fines totaling 28.0 million Brazilian reais (approximately
$12.4 million as of March 31, 2014) are still subject to a secondary administrative appeals board hearing, but
the company believes that both decisions will be helpful in that upcoming hearing. The secondary board
decisions disallowing the fines totaling 127.0 million Brazilian reais are, however, still subject to the possibility of
further administrative appeal by the authorities that imposed the initial fines. The company believes that the
ultimate resolution of this matter will not have a material effect on the consolidated financial statements.
F-46
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.
The company’s two Brazilian subsidiaries have not been similarly notified by the Brazilian state that they have
an import tax liability related to their 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 has imported several vessels to start new charters in Brazil, the company filed several
suits in 2011, 2012 and 2013, against the Brazilian state and has deposited (or, in recent cases, is in the
process of depositing) the respective state tax for these newly imported vessels. As of March 31, 2014, 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.
Nigeria Marketing Agent Litigation
On March 1, 2013, Tidewater filed suit in the London Commercial Court against Tidewater’s Nigerian marketing
agent for breach of the agent’s obligations under contractual agreements between the parties. The alleged
breach involves actions of the Nigerian marketing agent to discourage various affiliates of TOTAL S.A. from
paying approximately $19 million (including Naira and U.S. dollar denominated invoices) due to the company
for vessel services performed in Nigeria. Shortly after the London Commercial Court filing, TOTAL commenced
interpleader proceedings in Nigeria naming the Nigerian agent and the company as respondents and seeking
an order which would allow TOTAL to deposit those monies with a Nigerian court for the respondents to
resolve. On April 25, 2013, Tidewater filed motions in the Nigerian Federal High Court to stop the interpleader
proceedings in Nigeria or alternatively stay them until the resolution of the suit filed in London. The company
will continue to actively pursue the collection of those monies. On April 30, 2013, the Nigerian marketing agent
filed a separate suit in the Nigerian Federal High Court naming Tidewater and certain TOTAL affiliates as
defendants. The suit seeks various declarations and orders, including a claim for the monies that are subject to
the above interpleader proceedings, and other relief. The company is seeking dismissal of this suit and
otherwise intends to vigorously defend against the claims made. The company has not reserved for this
receivable and believes that the ultimate resolution of this matter will not have a material effect on the
consolidated financial statements.
In October, 2012, Tidewater had notified the Nigerian marketing agent that it was discontinuing its relationship
with the Nigerian marketing agent. The company has entered into a new strategic relationship with a different
Nigerian counterparty that it believes will better serve the company’s long term interests in Nigeria. This new
strategic relationship is currently functioning as the company intended.
Venezuelan Operations
On February 16, 2010, Tidewater and certain of its subsidiaries (collectively, the “Claimants”) filed with the
International Centre for Settlement of Investment Disputes (“ICSID”) a Request for Arbitration against the
Bolivarian Republic of Venezuela. As previously reported by Tidewater, in May 2009 Petróleos de Venezuela,
F-47
S.A. (“PDVSA”), the national oil company of Venezuela, took possession and control of (a) eleven of the
Claimants’ vessels that were then supporting PDVSA operations in Lake Maracaibo, (b) the Claimants’ shore-
based headquarters adjacent to Lake Maracaibo, (c) the Claimants’ operations in Lake Maracaibo, and (d)
certain other related assets. The company also previously reported that in July 2009 Petrosucre, S.A., a
subsidiary of PDVSA, took possession and control of the Claimants’ four vessels, operations, and related
assets in the Gulf of Paria. It is Tidewater’s position that, through those measures, the Republic of Venezuela
directly or indirectly expropriated the Claimants’ investments, including the capital stock of the Claimants’
principal operating subsidiary in Venezuela.
The Claimants alleged in the Request for Arbitration that each of the measures taken by the Republic of
Venezuela against the Claimants violates the Republic of Venezuela’s obligations under the bilateral
investment treaty with Barbados and rules and principles of Venezuelan law and international law. An arbitral
tribunal was constituted under the ICSID Convention to resolve the dispute. The tribunal first addressed the
Republic of Venezuela’s objections to the tribunal’s jurisdiction over the dispute. After two rounds of briefing by
the parties, a hearing on jurisdiction was held in Washington, D.C. on February 29 and March 1, 2012.
On February 8, 2013, the tribunal issued its decision on jurisdiction. The tribunal found that it has jurisdiction
over the claims under the Venezuela-Barbados bilateral investment treaty, including the claim for compensation
for the expropriation of Tidewater’s principal operating subsidiary, but that it does not have jurisdiction based on
Venezuela’s investment law. The practical effect of the tribunal’s decision is to exclude from the case the
claims for expropriation of the fifteen vessels described above. The proceeding will now move to the merits,
including a determination whether the Republic of Venezuela violated the Venezuela-Barbados bilateral
investment treaty and a valuation of Tidewater’s principal operating subsidiary in Venezuela. At the time of the
expropriation, the principal operating subsidiary had sizeable accounts receivable from PDVSA and Petrosucre,
denominated in both U.S. Dollars and Venezuelan Bolivars. The company expects those accounts receivable
to form part of the total valuation of Tidewater’s principal operating subsidiary. As a result of the seizures, the
lack of further operations in Venezuela, and the continuing uncertainty about the timing and amount of the
compensation the company might collect in the future, the company recorded a $44.8 million provision during
the quarter ended June 30, 2009, to fully reserve accounts receivable due from PDVSA and Petrosucre.
While the tribunal determined that it does not have jurisdiction over the claim for the seizure of the fifteen
vessels, Tidewater received during fiscal 2011 insurance proceeds for the insured value of those vessels (less
an additional premium payment triggered by those proceeds). Tidewater believes that the claims remaining in
the case, over which the tribunal upheld jurisdiction, represent the most substantial portion of the overall value
lost as a result of the measures taken by the Republic of Venezuela. Tidewater has discussed the nature of the
insurance proceeds received for the fifteen vessels in previous quarterly and annual filings.
The tribunal has issued a briefing and hearing schedule to determine the merits of the claims over which the
tribunal has jurisdiction. That schedule culminates in a final hearing in mid-2014.
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-48
(13) 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 four foreign exchange spot contracts outstanding at March 31, 2014, which had a notional
value of $2.3 million. The spot contracts settled by April 2, 2014. The company did not have any spot contracts
outstanding at March 31, 2013.
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. Forward contracts are valued using
counterparty quotations, and we validate the information obtained from the counterparties in calculating the
ultimate fair values using the market approach and obtaining broker quotations. As such, these derivative
contracts are classified as Level 2.
At March 31, 2014, the company did not have any forward contracts outstanding.
At March 31, 2013, the company had three British pound forward contracts outstanding, which are 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 have expiration dates between June 20, 2013
and December 18, 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 loss during the fiscal year ended March 31, 2013,
because the forward contracts did not qualify as hedge instruments. All changes in fair value of the forward
contracts were recorded in earnings on a quarterly basis.
The following table provides the fair value hierarchy for the company’s other financial instruments measured as
of March 31, 2014:
(In thousands)
Money market cash equivalents
Total fair value of assets
Total
16,559
16,559
$
$
Quoted prices in
active markets
(Level 1)
16,559
16,559
Significant
observable
inputs
(Level 2)
---
---
Significant
unobservable
inputs
(Level 3)
---
---
F-49
The following table provides the fair value hierarchy for the company’s other financial instruments measured as
of March 31, 2013:
(In thousands)
Money market cash equivalents
Long-term British pound forward derivative contracts
Total fair value of assets
Total
949
4,359
5,308
$
$
Quoted prices in
active markets
(Level 1)
949
---
949
Significant
observable
inputs
(Level 2)
---
4,359
4,359
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. Active, non-stacked
vessels are grouped together for impairment testing purposes with vessels of similar operating and marketing
characteristics. Active vessel groupings are also subdivided between 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, which are
unobservable inputs. 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 fair values of impaired assets are based on
expected net proceeds from asset sales or appraisals performed by third parties. The impairment charges were
recorded in gain on asset dispositions, net.
(In thousands)
Amount of impairment incurred
Combined fair value of assets incurring impairment
$
2014
9,341
11,149
2013
8,078
14,733
2012
3,607
8,175
(14) GAIN ON DISPOSITION OF ASSETS, NET
The company seeks opportunities to dispose its older vessels when market conditions warrant and
opportunities arise. As such, vessel dispositions vary from year to year, and gains on sales of assets may also
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-50
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
$
2014
12,247
48
2013
12,191
32
2012
20,024
60
Also included in gain on dispositions of assets, net are gains of $4.0 million and $2.3 million related to the sale
of the company’s two shipyards in fiscal 2014 and fiscal 2013 respectively and, amortized gains on
sale/leaseback transactions of $3.7 million. Please refer to Note (13) above for a discussion on asset
impairment.
(15) 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.
We manage and measure our business performance in four distinct operating segments: Americas,
Asia/Pacific, Middle East/North Africa, and Sub-Saharan Africa/Europe. These 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.
F-51
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 :
Americas
Asia/Pacific
Middle East/North Africa
Sub-Saharan Africa/Europe
Other operating revenues
Vessel operating profit:
Americas
Asia/Pacific
Middle East/North Africa
Sub-Saharan Africa/Europe
Other operating profit
Corporate general and administrative expenses (A)
Corporate depreciation
Corporate expenses
Gain on asset dispositions, net
Goodwill impairment
Operating income
Foreign exchange gain
Equity in net earnings of unconsolidated companies
Interest income and other, net
Loss on early extinguishment of debt
Interest and other debt costs
Earnings before income taxes
Depreciation and amortization:
Americas
Asia/Pacific
Middle East/North Africa
Sub-Saharan Africa/Europe
Other
Corporate
Additions to properties and equipment:
Americas
Asia/Pacific
Middle East/North Africa
Sub-Saharan Africa/Europe (B)
Other
Corporate (C)
Total assets (D):
Americas
Asia/Pacific
Middle East/North Africa
Sub-Saharan Africa/Europe
Other
Investments in and advances to unconsolidated companies
Corporate (E)
F-52
2014
2013
2012
410,731
154,618
186,524
666,588
1,418,461
16,642
1,435,103
327,059
184,014
149,412
569,513
1,229,998
14,167
1,244,165
324,529
153,752
109,489
472,698
1,060,468
6,539
1,067,007
90,936
29,044
42,736
136,092
298,808
(1,930)
296,878
(47,703)
(3,073)
(50,776)
11,722
(56,283)
201,541
1,541
15,801
2,123
(4,144)
(43,814)
173,048
43,297
17,174
24,441
79,199
164,111
296
3,073
167,480
99,798
2,586
8,042
488,984
599,410
31,841
175,233
806,484
40,318
43,704
39,069
129,460
252,551
(833)
251,718
(48,704)
(3,391)
(52,095)
6,609
---
206,232
3,011
12,189
3,476
---
(29,745)
195,163
40,454
19,416
18,784
65,241
143,895
13
3,391
147,299
52,299
19,858
3,833
197,534
273,524
---
179,058
452,582
56,003
16,125
805
97,142
170,075
(2,867)
167,208
(36,665)
(3,714)
(40,379)
17,657
(30,932)
113,554
3,309
13,041
3,440
---
(22,308)
111,036
38,128
20,758
17,606
58,137
134,629
13
3,714
138,356
7,279
64,431
16,828
84,491
173,029
---
194,931
367,960
1,017,736
421,379
613,303
2,383,507
4,435,925
31,545
4,467,470
63,928
4,531,398
354,431
4,885,829
880,368
607,546
507,124
1,706,355
3,701,393
5,102
3,706,495
46,047
3,752,542
415,513
4,168,055
1,025,386
654,357
405,625
1,519,124
3,604,492
6,576
3,611,068
46,077
3,657,145
404,473
4,061,618
$
$
$
$
$
$
$
$
$
$
(A)
Included in Corporate general and administrative expenses for the year ended March 31, 2014 and 2013 are transaction costs of
$3.7 million related to the acquisition of Troms Offshore and a settlement charge of $5.2 million related to the payment of retirement
benefits to a former Chief Executive Officer, respectively.
(B)
Included in Sub-Saharan Africa/Europe for the year ended March 31, 2014 is $245.6 million related to vessels acquired through the
acquisition of Troms Offshore.
(C)
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.
(D) 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.
(E)
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, 2014, 2013 and 2012, $228.9 million, $229.3 million and $249.4 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 for the years ended March 31,:
Revenue by vessel class:
(In thousands):
Americas fleet:
Deepwater
Towing-supply
Other
Total
Asia/Pacific fleet:
Deepwater
Towing-supply
Other
Total
Middle East/North Africa fleet:
Deepwater
Towing-supply
Other
Total
Sub-Saharan Africa/Europe fleet:
Deepwater
Towing-supply
Other
Total
Worldwide fleet:
Deepwater
Towing-supply
Other
Total
2014
% of Vessel
Revenue
2013
% of Vessel
Revenue
2012
% of Vessel
Revenue
263,750
115,055
31,926
410,731
88,191
62,630
3,797
154,618
66,503
116,720
3,301
186,524
364,722
231,224
70,642
666,588
18%
8%
3%
29%
6%
5%
<1%
11%
5%
8%
<1%
13%
26%
16%
5%
47%
179,032
120,817
27,210
327,059
96,118
84,217
3,679
184,014
55,945
89,902
3,565
149,412
273,544
226,357
69,612
569,513
15%
10%
2%
27%
8%
7%
<1%
15%
5%
7%
<1%
12%
22%
18%
6%
46%
146,950
143,796
33,783
324,529
75,495
73,845
4,412
153,752
46,511
56,902
6,076
109,489
199,697
201,463
71,538
472,698
14%
14%
3%
31%
7%
7%
<1%
14%
4%
5%
1%
10%
19%
19%
7%
45%
783,166
525,629
109,666
1,418,461
55%
37%
8%
100%
604,639
521,293
104,066
1,229,998
50%
42%
8%
100%
468,653
476,006
115,809
1,060,468
44%
45%
11%
100%
$
$
$
$
$
$
$
$
$
$
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
2014
18.1%
8.6%
2013
17.8%
8.6%
2012
17.4%
14.6%
F-53
(16) 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.
its annual goodwill
impairment assessment during
the quarter ended
The company performed
December 31, 2013 and determined that the carrying value of its Asia/Pacific unit exceeded its fair value as a
result of the general decline in the level of business and, therefore, expected future cash flow for the company
in this region. The Asia/Pacific region continues to be challenged with an excess capacity of vessels as a result
of the significant number of vessels that have been built in this region over the past 10 years, without a
commensurate increase in working rig count within the region. In recent years, the company has both disposed
of older vessels that previously worked in the region and transferred vessels out of the region to other regions
where market opportunities are currently more robust. In accordance with ASC 350 goodwill is not reallocated
based on vessel movements. A goodwill impairment charge of $56.3 million was recorded during the quarter
ended December 31, 2013.
During the year ended March 31, 2014, $42.2 million of goodwill related to the acquisition of Troms Offshore
was allocated to the Sub-Saharan Africa/Europe segment.
Goodwill and changes to goodwill by reportable segment for the years ended March 31, 2014 and 2013 are as
follows:
(In thousands)
Americas
Asia/Pacific
Sub-Saharan Africa/Europe
Total carrying amount
(In thousands)
Americas
Asia/Pacific
Sub-Saharan Africa/Europe
Total carrying amount (A)
$
$
$
$
2013
114,237
56,283
127,302
297,822
2012
114,237
56,283
127,302
297,822
Goodwill acquired
Impairments
---
---
42,160
42,160
---
56,283
---
56,283
Goodwill acquired
Impairments
---
---
---
---
---
---
---
---
2014
114,237
---
169,462
283,699
2013
114,237
56,283
127,302
297,822
(A)
The total carrying amount of goodwill at March 31, 2012 is net of accumulated impairment charges $30.9 million related to the Middle
East/North Africa segment.
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
2014
6%
11%
2013
7%
12%
F-54
(17) 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 2014
Revenues
Operating income(A)
Net earnings
Basic earnings per share
Diluted earnings per share
Fiscal 2013
Revenues
Operating income (A)
Net earnings
Basic earnings per share
Diluted earnings per share
First
Second
Third
Fourth
Quarter
$
$
$
$
$
$
334,085
43,425
30,083
.61
.61
294,448
49,487
32,856
.65
.65
367,937
76,565
54,172
1.10
1.09
311,918
57,197
41,356
.84
.83
365,248
20,488
12,583
.25
.25
309,466
40,974
29,947
.61
.61
367,833
61,063
43,417
.88
.88
328,333
58,574
46,591
.95
.95
(A) Operating income consists of revenues less operating costs and expenses, depreciation, vessel operating leases, goodwill impairment,
general and administrative expenses and gain on asset dispositions, net, of the company’s operations. Goodwill impairment by quarter
for fiscal 2014 and gain on asset dispositions, net, by quarter for fiscal 2014 and 2013, are as follows:
(In thousands)
Fiscal 2014:
Goodwill impairment
Gain on asset dispositions, net
Fiscal 2013:
Gain on asset dispositions, net
(18) SUBSEQUENT EVENTS
First
--
2,140
838
$
$
$
Second
Third
Fourth
--
49
(56,283)
7,170
1,833
99
--
2,363
3,839
The company committed approximately $134 million for the construction of one 292-foot deepwater PSV and
two 268-foot PSVs. The 292-foot deepwater PSV will be built in an international shipyard and has an
estimated delivery date of April 2016. The two 268-foot deepwater PSVs will be built in a different
international shipyard and have estimated delivery dates of January and April 2015.
Subsequent to March 31, 2014 the company has collected approximately $66 million of cash from Sonatide,
which represents approximately 62 days of revenue (based on revenues of our Angolan operations for the
quarter ended March 31, 2014).
In May 2014, 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
period for this authorization is July 1, 2014 through June 30, 2015. 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 evaluates share repurchase opportunities relative to other investment
opportunities and in the context of current conditions in the credit and capital markets.
F-55
TIDEWATER INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years Ended March 31, 2014, 2013 and 2012
(In thousands)
SCHEDULE II
Description
Fiscal 2014
Deducted in balance sheet from
Trade accounts receivables:
Allowance for doubtful accounts
Fiscal 2013
Deducted in balance sheet from
Trade accounts receivables:
Allowance for doubtful accounts
Fiscal 2012
Deducted in balance sheet from
Trade accounts receivables:
Allowance for doubtful accounts
Balance at
Beginning
of period
Additions
at Cost
Deductions
Balance
at
End of
Period
$ 46,332
1,399
11,994(A)
35,737
$ 49,921
900
4,489 (B)
46,332
$ 50,677
666
1,422(C)
49,921
(A) Of this amount, $3,151 represents the collections from one customer located in Mexico and $8,843
represents accounts receivable amounts considered uncollectible and removed from accounts receivable
with an offsetting reduction to the allowance for doubtful accounts.
(B) Of this amount, $3,852 is related to the revaluation of the allowance for doubtful accounts related to
Venezuelan receivables and $637 related to receivables considered uncollectible and removed from
accounts receivable by reducing the allowance for doubtful accounts.
(C) 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.
F-56
6004_CvrC4__ 6/10/14 5:39 PM Page 2
Board of Directors
Evolving Strategies for Changing Times
Sitting Left to Right:
Standing Left to Right:
Richard A. Pattarozzi
Chairman, Tidewater Inc. and
Former Vice President,
Shell Oil Company
Jeffrey M. Platt
President, Chief Executive Officer
and Director, Tidewater Inc.
Cindy B. Taylor
President and Chief Executive Officer,
Oil States International, Inc.
Nicholas J. Sutton
Chairman and Chief Executive Officer,
Resolute Energy Corporation
M. Jay Allison
President, Chief Executive Officer
and Chairman of the Board,
Comstock Resources, 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
Jack E. Thompson
Management Consultant
J. Wayne Leonard
Former Chairman and Chief Executive
Officer, Entergy Corporation
Dean E. Taylor
Former Chairman, President and
Chief Executive Officer, Tidewater Inc.
James C. Day
Former Chairman of the Board
and Chief Executive Officer,
Noble Corporation
Robert L. Potter
Retired President,
FMC Technologies, Inc.
Corporate Officers
Sitting Left to Right:
Standing Left to Right:
Quinn P. Fanning
Executive Vice President and
Chief Financial Officer
Craig J. Demarest
Vice President, Principal Accounting
Officer and Controller
Jeffrey M. Platt
President, Chief Executive Officer
and Director
Bruce D. Lundstrom
Executive Vice President,
General Counsel and Secretary
Joseph M. Bennett
Executive Vice President and
Chief Investor Relations Officer
Darren J. Vorst
Vice President and Treasurer
Matthew A. Mancheski
Vice President
Jeff A. Gorski
Executive Vice President and
Chief Operating Officer
William R. Brown, IV
Vice President
Mark A. Handin
Vice President
Deborah Willingham
Vice President and
Chief Human Resources Officer
Gerard P. Kehoe
Senior Vice President
Kevin M. Carr
Vice President, Taxation
Management Certifications
On August 19, 2013, in accordance with Section 3.03A.12(a) of the New York Stock Exchange Listed Company Manual, the Company’s manage-
ment 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, 2014, 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 1500
New Orleans, Louisiana 70130
Toll Free: 1-800-678-8433
Phone: 1-504-568-1010
Email: connect@tdw.com
www.tdw.com
002CSN39C7