2016 Tidewater Annual Report
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
002CSN6ABE
Investor
Investor
Relations
Relations
Requests for information concerning
Requests for information concerning
the Company should be directed to the
the Company should be directed to the
Investor Relations Department using the
Investor Relations Department using the
address or phone numbers listed below.
address or phone numbers listed below.
Requests for information can also be
Requests for information can also be
submitted at the Company’s website,
submitted at the Company’s website,
www.tdw.com.
www.tdw.com.
Tidewater Inc.
Tidewater Inc.
601 Poydras Street, Suite 1500
601 Poydras Street, Suite 1500
New Orleans, Louisiana 70130
New Orleans, Louisiana 70130
Toll Free: 1-800-678-8433
Toll Free: 1-800-678-8433
Phone: 1-504-568-1010
Phone: 1-504-568-1010
Email: connect@tdw.com
Email: connect@tdw.com
www.tdw.com
www.tdw.com
Corporate
Corporate
Officers
Officers
Jeffrey M. Platt
Jeffrey M. Platt
President, Chief Executive Officer
President, Chief Executive Officer
and Director
and Director
Latif Benhaddad
Latif Benhaddad
Vice President, Engineering
Vice President, Engineering
Joseph M. Bennett
Joseph M. Bennett
Executive Vice President and
Executive Vice President and
Chief Investor Relations Officer
Chief Investor Relations Officer
Kevin M. Carr
Kevin M. Carr
Vice President, Taxation
Vice President, Taxation
Craig J. Demarest
Craig J. Demarest
Vice President, Principal Accounting
Vice President, Principal Accounting
Office and Controller
Office and Controller
Quinn P. Fanning
Quinn P. Fanning
Executive Vice President and
Executive Vice President and
Chief Financial Officer
Chief Financial Officer
Jeffrey A. Gorski
Jeffrey A. Gorski
Executive Vice President and
Executive Vice President and
Chief Operating Officer
Chief Operating Officer
Mark A. Handin
Vice President
Mark A. Handin
Vice President
Gerard P. Kehoe
Senior Vice President
Gerard P. Kehoe
Senior Vice President
Bruce D. Lundstrom
Executive Vice President,
Bruce D. Lundstrom
General Counsel and Secretary
Executive Vice President,
General Counsel and Secretary
Matthew A. Mancheski
Vice President
Matthew A. Mancheski
Vice President
Darren J. Vorst
Vice President and Treasurer
Darren J. Vorst
Vice President and Treasurer
Board of
Board of
Directors
Directors
Richard A. Pattarozzi
Richard A. Pattarozzi
Chairman, Tidewater Inc. and Former
Chairman, Tidewater Inc. and Former
Vice President, Shell Oil Company
Vice President, Shell Oil Company
Jeffrey M. Platt
Jeffrey M. Platt
President, Chief Executive Officer
President, Chief Executive Officer
and Director, Tidewater Inc.
and Director, Tidewater Inc.
M. Jay Allison
M. Jay Allison
Chief Executive Officer and
Chief Executive Officer and
Chairman of the Board,
Chairman of the Board,
Comstock Resources, Inc.
Comstock Resources, Inc.
James C. Day
James C. Day
Former Chairman of the Board,
Former Chairman of the Board,
Chief Executive Officer and President,
Chief Executive Officer and President,
Noble Corporation
Noble Corporation
Richard T. du Moulin
Richard T. du Moulin
President, Intrepid Shipping LLC
President, Intrepid Shipping LLC
Morris E. Foster
Morris E. Foster
Former Vice President,
Former Vice President,
ExxonMobil Corporation and
ExxonMobil Corporation and
Former President, ExxonMobil
Former President, ExxonMobil
Production Compan y
Production Compan y
J. Wayne Leonard
Former Chairman and
J. Wayne Leonard
Chief Executive Officer,
Former Chairman and
Entergy Corporation
Chief Executive Officer,
Entergy Corporation
Richard D. Paterson
Former Global Leader of Consumer,
Richard D. Paterson
Industrial Products and Services Practices,
Former Global Leader of Consumer,
PriceWaterhouseCoopers, LLP
Industrial Products and Services Practices,
PriceWaterhouseCoopers, LLP
Robert L. Potter
Former President,
Robert L. Potter
FMC Technologies, Inc.
Former President,
FMC Technologies, Inc.
Cindy B. Taylor
President, Chief Executive
Cindy B. Taylor
Officer and Director,
President, Chief Executive
Oil States International, Inc.
Officer and Director,
Oil States International, Inc.
Jack E. Thompson
Management Consultant
Jack E. Thompson
Management Consultant
Corporate
Corporate
Information
Information
Information about stockholder
Information about stockholder
accounts may be obtained by contacting
accounts may be obtained by contacting
the Transfer Agent and Registrar for
the Transfer Agent and Registrar for
Tidewater’s common stock,Computer-
Tidewater’s common stock,Computer-
share Investor Services, P.O. Box 30170,
share Investor Services, P.O. Box 30170,
College Station, Texas 77842-3170.
College Station, Texas 77842-3170.
Overnight correspondence should
Overnight correspondence should
be sent to:
be sent to:
Computershare Investor Services,
Computershare Investor Services,
211 Quality Circle, Suite 210,
211 Quality Circle, Suite 210,
College Station, Texas 77845
College Station, Texas 77845
Phone: 781-575-2879 or 1-800-730-4001.
Phone: 781-575-2879 or 1-800-730-4001.
General stockholder information is
General stockholder information is
available on the Computershare website,
available on the Computershare website,
www.computershare.com/investor.
www.computershare.com/investor.
Duplicate Mailings
Duplicate Mailings
If you receive duplicate mailings of
If you receive duplicate mailings of
shareholder materials, you can help
shareholder materials, you can help
eliminate the added expense by
eliminate the added expense by
requesting that only one copy be sent.
requesting that only one copy be sent.
To eliminate duplicate mailings, contact
To eliminate duplicate mailings, contact
the Company’s Stock Transfer Agent and
Registrar listed above.
the Company’s Stock Transfer Agent and
Registrar listed above.
Stock Exchange
Tidewater’s common stock is traded on
Stock Exchange
the New York Stock Exchange under the
Tidewater’s common stock is traded on
symbol TDW.
the New York Stock Exchange under the
symbol TDW.
Form 10-K Report
Tidewater’s 2016 Annual Report on Form
Form 10-K Report
10-K may be obtained without charge
Tidewater’s 2016 Annual Report on Form
by contacting the Company’s Investor
10-K may be obtained without charge
Relations Department at corporate head-
by contacting the Company’s Investor
quarters. Tidewater’s SEC filings can
Relations Department at corporate head-
also be viewed online at the Company’s
quarters. Tidewater’s SEC filings can
website, www.tdw.com.
also be viewed online at the Company’s
website, www.tdw.com.
Website and E-mail Alerts
Information concerning the Company,
Website and E-mail Alerts
including quarterly financial results and
Information concerning the Company,
news releases, is available on the Com-
including quarterly financial results and
pany’s website at www.tdw.com. E-mail
news releases, is available on the Com-
alerts about the Company’s news
pany’s website at www.tdw.com. E-mail
releases, SEC filings and presentations
alerts about the Company’s news
are available by registering at the
releases, SEC filings and presentations
Company’s website.
are available by registering at the
Company’s website.
2016 Tidewater Annual Report
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To Our Shareholders
Dear Shareholders,
Fiscal 2016 was one of the most challenging years in Tidewater’s 60-year corporate
history, both operationally and financially. The dramatic decline in global oil prices during
2015 produced massive capital spending cuts by our customers who witnessed their cash
flows shrink sharply and the economics of their offshore projects undercut by low oil
prices. Retrenchment became our customers’ new business model and our commercial
reality. As you will read in the attached Form 10-K, there was a sharp decline in the demand
for our services during fiscal 2016, leading us to stack more vessels and downsize our
organization, which resulted in our revenues falling just over a third from the previous fiscal
year. Our profitability also suffered and was further affected negatively by asset impairment
charges and foreign currency losses. Our expectation of weaker financial results has also
required that we seek amendments and/or waivers from our lenders and noteholders
in regards to certain of our debt covenants as we deal with the fallout from this industry
downturn. Despite the challenges of fiscal 2016, we maintained our commitment to
operational excellence, delivering outstanding safety performance and continuing our
industry-leading compliance program. Through Tidewater’s global footprint, we delivered
high quality service to our customers, and our continued ability to do so remains a
substantial market advantage during this highly competitive period.
The continued depressed level of oil prices throughout last year created uncertainty
JEFFREY M. PLATT
President, Chief Executive Officer
and Director
among our customers. Concerned that low oil prices may extend well into the future, our customers have greatly reduced their activity
in nearly every geographic market and water depth of operation. With many projects reduced, delayed or, in some cases, cancelled,
the demand for our vessels has been reduced substantially. In addition, there was a continued delivery of new vessels into the market,
compounding the vessel oversupply situation and creating hurricane force headwinds for our industry and for our company.
The recent rebound in oil prices from the February 2016 low is generating some hope that the worst of this down-cycle in terms of
commodity pricing may be behind us. However, this recovery, while welcomed news, does not necessarily signal that offshore industry
activity will rebound in the near term, as we expect our customers will want to be convinced that any oil price recovery is sustainable.
As our customers dealt with deteriorating industry fundamentals, we redoubled our efforts to stay close to them to understand
their shifting vessel needs. This closeness enabled us to anticipate ways in which we could assist them in developing workable
programs addressing their cost reduction needs, while enabling us to more efficiently manage our fleet of offshore support vessels.
Often the agreed-to solution provided us benefits, either through specific contract enhancements or work elsewhere. These gains
demonstrate that by trading “things for things” rather than “things for promises,” we minimized the negative impact on our revenues
and profitability.
We outlined last year our positioning for navigating the downturn, which at that time, just as now, had no visible end. Since we
have no control over oil prices or our customers’ reaction to their movement, we must continue to focus on taking actions on those
things we can control, even if doing so necessitates making very difficult decisions. Our decisions were taken consistent with our
adherence to Tidewater’s core values. The quality of our equipment and employees are central to those values. We have completed
a multi-year effort to repopulate our vessel fleet – upgrading its capabilities for servicing the increasingly demanding needs of
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our clients. Our modernized fleet, coupled with our outstanding
all financial covenants in our debt facilities and note indentures
employees, has enabled us to extend, and even improve upon,
as of March 31, 2016; however, at the time of this letter, our
the service we provide to our clients.
internal financial forecast indicates that it is likely we will not be
During fiscal 2016, we reduced our plans for new vessel
in compliance with our minimum EBITDA to Interest ratio loan
additions, and as a result were able to significantly reduce our
covenant as early as June 30, 2016, the end of the first quarter of
future capital commitments. Through negotiations with shipyards
fiscal 2017. The uncertainty of our being in compliance with this
under contract to build 14 new vessels for us, we were able to
debt covenant without an amendment and/or waiver of the
cancel three of the contracts, achieve a discounted purchase price
requisite debt covenant in hand, led our independent accountants
for four vessels and convert the remaining seven contracts into
to include an explanatory “going concern” paragraph in their
options. These negotiations resulted in the return of installment
opinion on our year-end consolidated financial statements. The
payments and vessel shipyard credits, assuming that none of the
necessary short-term waivers were obtained subsequent to fiscal
seven options are exercised, totaling more than $86 million, while
year end so as to not create an event of default as a result of the
also relieving us of $131 million in future vessel commitments.
explanatory paragraph in the independent accountant’s opinion.
These successful arrangements improved our liquidity and helped
Successfully renegotiating our loan covenants to minimize the
our financial position, while enabling us to continue upgrading our
risk of triggering a default event in the future is a priority for
industry-leading young vessel fleet to better serve our customers’
management, and we will continue working with our lenders to
future needs without adding unneeded additional capacity to our
do so.
vessel fleet.
As we face an uncertain outlook, we acknowledge that the
Concurrent with the downsizing of our capital commitments,
physical laws of petroleum production coupled with low industry
additional downsizing efforts included reducing the number of
investment and growing oil consumption will restore energy
employees, largely driven by reduced vessel utilization and
balance resulting in higher commodity prices. The challenge is
the stacking of additional vessels, and the streamlining of our
not knowing when that will occur, which means we must remain
regional management structure. During fiscal 2016, we reduced
close to our clients in order to anticipate their changing needs so
our headcount by nearly 25 percent, and our organizational
we can respond quickly. Tidewater has a long history of navigating
adjustments enabled us to reduce overhead costs, while maintaining
the ups and downs of the oil and gas business. While this cycle
our global footprint.
may be deeper and last longer than most previous cycles, we
On the financial front, this past year’s market conditions
believe we are well positioned to be a survivor by continuing to
led us to make many other difficult decisions as well. First, the
focus on delivering high quality service for clients, sustaining safe
Board of Directors approved management’s recommendation to
and compliant operations, and protecting our financial position.
suspend our 25 cents per quarter dividend, a move that will
Following our core principles ensures that Tidewater will emerge
provide $47 million in annual cash savings, which will help
from this downturn well positioned to create shareholder value,
improve our liquidity as we manage through the downturn. To
the long-term goal of management.
further enhance our liquidity position, the Board of Directors
also approved management’s recommendation to suspend the
remaining $100 million authorization for share repurchases.
The resulting impact of deteriorating industry conditions
on our revenues and profitability has led the company into
negotiations with our lenders and noteholders with regards to a
possible future debt covenant issue. We were in compliance with
JEFFREY M. PLATT
President, Chief Executive Officer
and Director
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9735_FIN.pdf June 2, 2015 pg 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(cid:95)(cid:3) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
(cid:134)(cid:3) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
For the fiscal year ended March 31, 2016
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)
601 Poydras St., Suite 1500
New Orleans, Louisiana
(Address of principal executive offices)
72-048776
(I.R.S. Employer Identification No.)
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
Common Stock, par value $0.10
Name of each exchange on which registered
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:133) No (cid:95)
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:133) No (cid:95)
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:95) No (cid:133)
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:95) No (cid:133)
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:95)
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.
(cid:95)
(cid:134)
Large accelerated filer
Non-accelerated filer
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes (cid:133) No (cid:95)
As of September 30, 2015, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was
$612,316,523 based on the closing sales price as reported on the New York Stock Exchange of $13.14.
As of May 13, 2016, 47,067,715 shares of the registrant’s common stock $0.10 par value per share were outstanding. Registrant has
no other class of common stock outstanding.
(cid:134)
Accelerated filer
Smaller reporting company (cid:134)
Portions of the Registrant’s definitive proxy statement for its 2016 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.
DOCUMENTS INCORPORATED BY REFERENCE
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TIDEWATER INC.
FORM 10-K
FOR THE FISCAL YEAR ENDED MARCH 31, 2016
TABLE OF CONTENTS
FORWARD-LOOKING STATEMENT
PART I
ITEM 1. BUSINESS
ITEM 1A. RISK FACTORS
ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 2. PROPERTIES
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. MINE SAFETY DISCLOSURES
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
ITEM 6. SELECTED FINANCIAL DATA
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9B. OTHER INFORMATION
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
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FORWARD-LOOKING STATEMENT
In accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, this Annual Report
on Form 10-K and the information incorporated herein by reference contain certain forward-looking statements which
reflect the company’s current view with respect to future events and future financial performance, and all statements other
than statements of historical fact. 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, and
continuing depressed levels of oil and gas prices; consolidation of our customer base: fleet additions by competitors and
industry overcapacity; our views with respect to the need for and timing of the replenishment of our asset base, including
through acquisitions or vessel construction; 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; potential difficulty in meeting financial covenants in
material debt or other obligations of the company or in obtaining covenant relief from lenders or other contract parties;
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.
3
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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.
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 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 50 years of international experience.
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. At March 31, 2016, the company owned or chartered (under sale-leaseback
agreements) 269 vessels (excluding nine joint venture vessels, but including 77 stacked vessels) and eight 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.
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; 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;
Amsterdam, Holland; Cairo, Egypt; Luanda and Cabinda, Angola; Lagos and Onne Port, Nigeria; Douala, Cameroon;
Singapore; Perth, Australia; Shenzhen, China; 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 that we have established and
that 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 executive officer, its chief operating decision
maker, reviews operating results for the purposes of allocating resources and assessing performance. Our Americas
segment includes the activities of our North American operations, which include operations in the U.S. Gulf of Mexico
(GOM) and U.S. and Canadian coastal waters of the Pacific and Atlantic oceans, as well as operations offshore Mexico,
4
7674_fin.pdf 6
Trinidad and Brazil. The Asia/Pacific segment includes our Australian and Southeast Asian and Western Pacific
operations. Our Middle East/North Africa segment includes our operations in the Mediterranean and Red Seas, the Black
Sea, the 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
other arctic/cold water markets.
Our principal customers in each of these business segments are 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 for, develop 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 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 vessels 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 four 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 and, if the commodity pricing environment improves, deepwater exploration
and development could be a source of potential long-term 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 crude oil and
natural gas pricing assumptions. Although these projects are generally less susceptible to short-term fluctuations in the price
of crude oil and natural gas, deepwater exploration and development projects can be costly relative to other onshore and
offshore exploration and development. As a result, the recent decrease in crude oil prices has caused, and may continue to
cause, many E&P companies to reevaluate their future capital expenditures in regards to deepwater projects.
As of March 31, 2016, there were approximately 70 deepwater offshore rigs under construction, however, there is
uncertainty as to how many of those rigs, most of which are expected to enter service within the next two years, will
increase the offshore working rig fleet (which was approximately 500 rigs at March 31, 2016, or down approximately 155
rigs over the past 12 months) and how many of those rigs will replace older, less productive drilling units or be unable to
secure work at all. 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 whether there is an overall net growth in the number
of working 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.
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.
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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
Vessel operating profit:
Americas
Asia/Pacific
Middle East/North Africa
Sub-Saharan Africa/Europe
Other operating loss
2016
2015
2014
$ 342,995 505,699 410,731
89,045 150,820 154,618
168,471 205,787 186,524
354,889 606,052 666,588
16,642
$ 979,062 1,495,517 1,435,103
27,159
23,662
$
90,936
52,966 122,988
29,044
11,541
(1,687)
27,349
42,736
37,258
(4,490) 122,169 136,092
74,138 293,956 298,808
(4,564)
(1,930)
69,574 285,934 296,878
(8,022 )
Corporate general and administrative expenses
Corporate depreciation
Corporate expenses
(34,078)
(6,160)
(40,238)
(40,621 )
(4,014 )
(44,635 )
(47,703)
(3,073)
(50,776)
Gain on asset dispositions, net
Asset impairments
Goodwill impairment
Restructuring charge
Operating income (loss)
Total marine assets:
Americas
Asia/Pacific
Middle East/North Africa
Sub-Saharan Africa/Europe
Other
Total marine assets
26,037
(117,311)
—
(7,586)
(69,524)
23,796
(14,525 )
(283,699 )
(4,052 )
21,063
(9,341)
(56,283)
—
(37,181 ) 201,541
$
$ 1,101,699 1,016,133 1,017,736
514,948 506,265 421,379
582,281 666,983 613,303
1,822,682 2,064,010 2,383,507
31,545
$ 4,063,801 4,302,945 4,467,470
49,554
42,191
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 and Vessel Construction, Acquisition and Replacement Program
Over the last 15 years, the company has maintained a vessel construction, acquisition and replacement program, with the
intent of being able to operate in nearly all major oil and gas producing regions of the world by replacing older vessels in
the company’s fleet with larger, more technologically sophisticated vessels. During that period, the company purchased
and/or constructed 287 vessels at a total cost of approximately $4.9 billion (including 39 vessels at a cost of $309.8 million
which were subsequently sold in transactions other than sale/lease transactions). Although the company is near the
completion of its vessel construction, acquisition and replacement program, at March 31, 2016 the company had an
additional 6 vessels under construction for a total cost of approximately $251.4 million. To date, the company has
generally funded its vessel programs from its operating cash flows, together with 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.
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The company operates the largest number of new offshore support vessels among its competitors in the industry. The
company will continue to carefully consider whether future proposed investments and transactions have the appropriate
risk/return-on-investment profile.
The average age of the company’s 269 owned or chartered vessels (excluding joint-venture vessels) at March 31, 2016 is
approximately 9.8 years. The average age of 248 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 8.2 years. The remaining 21 vessels have an average age of 28.6 years. Of the company’s 269 vessels,
104 are deepwater platform supply vessels (PSVs) or deepwater anchor handling towing supply (AHTS) vessels, and
117 vessels are non-deepwater towing-supply vessels, which include both smaller PSVs and smaller AHTS vessels that
primarily serve the jackup drilling market. Included within our “other” vessel class are 48 vessels which are primarily crew
boats and offshore tugs.
At March 31, 2016, the company had commitments to build six vessels at a number of different shipyards around the
world at a total cost, including contract costs and other incidental costs, of approximately $251.4 million. At March 31,
2016, the company had invested approximately $183.9 million in progress payments towards the construction of the
six vessels, and the remaining expenditures necessary to complete construction was estimated at $67.5 million. The six
vessels under construction at March 31, 2016 are deepwater PSVs ranging between 4,700 and 6,100 deadweight tons of
cargo carrying capacity. Scheduled delivery for these newbuild vessels began in April 2016, with delivery of the final
vessel expected in May 2017.
The company also disposed of 713 vessels during the fiscal 2000 to fiscal 2016 period. Most of the vessels were sold at
prices that exceeded such vessels’ carrying values at the time of disposition by the company. In aggregate, proceeds from,
and pre-tax gains on, vessel dispositions during this period approximated $795 million and $330 million, respectively.
Further discussions of our vessel construction, acquisition and replacement program, including the various settlement
agreements with certain international shipyards related to the construction of vessels and the our capital commitments,
scheduled delivery dates and recent vessel sales are 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 in this Annual Report on
Form 10-K also contains a table comparing the actual March 31, 2016 vessel count and the average number of vessels by
class and geographic distribution during the three years ended March 31, 2016, 2015 and 2014.
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 vessel 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 PSVs (typically greater than 230-feet and/or with greater than
2,800 tons in dead weight cargo carrying capacity) and large, higher-horsepower AHTS vessels (generally greater than
10,000 horsepower). These vessels are generally chartered to customers for use in transporting supplies and equipment
from shore bases to deepwater and intermediate water depth 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 carrying 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 that generally do not have dynamic positioning capabilities. 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 offshore 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
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specialized equipment. Our customers have high standards in regards to safety and other operational competencies and
capabilities, in part 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 AHTS
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 respective functions and services as deepwater AHTS vessels and deepwater PSVs
except towing-supply vessels 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 by Major Classes of Vessels
Revenues from vessel operations were derived from the following classes of vessels in the following percentages:
Year Ended March 31,
2015
2014
2016
Deepwater
Towing-supply
Other
Subsea Services
55.0%
38.0%
7.0%
58.4 %
34.5 %
7.1 %
55.2%
37.1%
7.7%
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 ROVs. Two additional higher specification work-class ROVs
were added to the company’s fleet in fiscal 2015. Each ROV is capable of being deployed and redeployed worldwide on a
variety of vessels and platforms and we began ROV deployment and operations in fiscal 2015. Our expanded subsea
services capabilities include services and engineering solutions in all phases of the life of a subsea well, including
exploration, construction and installation, and maintenance, repair and inspection. Our equipment and subsea
professionals can support subsea operations 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.
Although the offshore exploration and production market is currently depressed, we may continue expanding our subsea
services capabilities to meet customer demand. While we are generally curtailing additional investment in subsea services
and other growth initiatives given reduced offshore activity levels, further expansion of our subsea services business, if
undertaken, may include organic growth through commissioning the construction of additional ROVs or acquisitions of
recently built ROVs and/or other ROV owners and operators.
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Customers and Contracting
The company’s operations are 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 for an active vessel
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
Petroleo Brasileiro SA
BP plc
2016
2015
2014
14.6%
11.0%
7.1%
12.7 %
11.8 %
10.1 %
18.1%
8.6%
8.9%
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 47% of our fiscal 2016 total revenues, while the ten largest customers in aggregate
accounted for approximately 69% of the company’s fiscal 2016 total revenues.
Competition
The principal competitive factors for the offshore vessel service industry are the suitability and availability of vessels and
related 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 is competitively well-positioned 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.
Increases in worldwide vessel capacity generally have the effect of lowering charter rates, particularly when there are lower
levels of exploration, field development and production activity as has been the case since late calendar 2014 when oil prices
began to trend lower.
According to IHS-Petrodata, the global offshore support vessel market at the end of March 2016 had approximately 435
new-build offshore support vessels (deepwater PSVs, deepwater AHTS vessels and towing-supply vessels only) either
under construction (355 vessels), on order or planned as of March 2016. These vessels are scheduled to be delivered into
the worldwide offshore vessel market primarily over the next 18-24 months. The current worldwide fleet of these classes of
vessels is estimated at approximately 3,440 vessels, of which we estimate that a significant portion are stacked or are not
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being actively marketed by the vessels’ owners. The worldwide offshore marine vessel industry, however, also has a large
number of aged vessels, including approximately 640 vessels, or 19%, 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 we
estimate the majority are already stacked or not actively marketed by the vessels’ owners, could potentially be removed from
the market in the near future if the cost of extending the vessels’ lives is not economical, especially in light of recent market
conditions.
Excluding the 640 vessels that are at least 25 years old from the overall population, the company estimates that the number
of offshore support vessels under construction (355 vessels) represents approximately 13% of the remaining worldwide fleet
of approximately 2,800 offshore support vessels.
Although the future attrition rate of the older offshore support vessels cannot be determined with certainty, the company
believes that the retirement and/or sale to owners outside of the oil and gas market of a vast majority of these aged vessels
(a majority of which the company believes have already been stacked or are not being actively marketed to oil and gas
development-focused customers by the vessels’ owners) could mitigate the potential negative effects on vessel utilization
and vessel pricing of (i) additional offshore support vessel supply resulting from the delivery of additional new-build vessels
and (ii) reduced demand for offshore support vessels resulting from reduced E&P spending. Similarly, the cancellation or
deferral of delivery of some portion of the 355 offshore support vessels that are under construction according to IHS-
Petrodata would also mitigate the potential negative effects on vessel utilization and vessel pricing of reduced demand for
offshore support vessels resulting from reduced E&P spending.
In addition, we and other offshore support vessel owners have selectively stacked more recently constructed vessels as a
result of the significant reduction in our customers’ offshore oil and gas-related activity and the resulting more challenging
offshore support vessel market that has existed since late calendar 2014. Should market conditions continue to remain
depressed, the stacking or underutilization of additional more recently constructed vessels by the offshore supply vessel
industry is likely.
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 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.
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 joint venture
agreement is currently effective and will expire, unless extended, two years after a new Angolan entity, which is intended to
be one of the Sonatide group of companies, has been incorporated. Based on recent communications with our partner and
the appropriate ministry in Luanda, the Angolan entity is expected to be incorporated in calendar 2016 after certain Angolan
regulatory approvals have been obtained.
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The challenges for the company to successfully operate in Angola remain significant. As the company has previously
reported, on July 1, 2013, additional elements of legislation (the “forex law”) became effective that generally require oil
companies engaged in exploration and production activities offshore Angola through governmental concessions 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 also imposes documentation and other requirements on service
companies such as Sonatide in order to effect payments that are denominated in currencies other than Angolan
kwanzas. The forex law has resulted in substantial customer payments being made to Sonatide in Angolan kwanzas.
A cumbersome payment process has deprived the company of significant cash and liquidity, because the conversion
of Angolan kwanzas into U.S. dollars and the subsequent expatriation of the funds causes payment delays, additional
operating costs and, through the company’s 49% ownership of Sonatide, foreign exchange losses. The payment
process exposes the company to further risk of currency devaluation prior to Sonatide’s conversion of Angolan
kwanza-denominated bank deposits to U.S. dollars and potentially additional taxes.
In response to the adoption of the forex law, the company and Sonangol negotiated and signed an agreement (the
“consortium agreement”) that allowed 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 Angolan kwanzas), and (ii) billings for services provided offshore (that can be paid in U.S. dollars). Sonatide
successfully converted select customer contracts to this split billing arrangement during the quarters ended March 31, 2015
and June 30, 2015. The consortium agreement expired in November 2015, and the parties have been discussing signing a
new consortium agreement for a one year term. If the parties are unable to agree on a new consortium agreement, the
parties would need to negotiate the terms of a new split billing arrangement that would continue to allow the company to
receive U.S. dollar payments for services provided offshore. In addition, it is not clear if this type of contracting will be
available to Sonatide over the longer term. If the company is unable to reach agreement on a new split billing arrangement,
any contract entered into after the expiration of the consortium agreement may result in the receipt of 100% Angolan
kwanzas, which would be subject to the challenges and risks described above. The split billing arrangements entered into
with customers prior to the expiration of the consortium agreement remain in force.
In November 2014, the National Bank of Angola issued regulations controlling the sale of foreign currency. These regulations
generally require oil companies to channel any U.S. dollar sales they choose to make through the National Bank of Angola to
buy Angolan kwanzas that are required to be used to pay for goods and services provided by foreign exchange resident
oilfield service companies. These foreign exchange resident oilfield services companies, in turn, generally have a need to
source U.S. dollars in order to pay for goods and services provided offshore. The regulations continue to permit tripartite
agreements among oil companies, commercial banks and service companies that provide for the sale of U.S. dollars by an
oil company to a commercial bank in exchange for Angolan kwanzas. These same U.S. dollars are then sold onward by the
commercial bank to the service company. The implementing regulations do, however, place constraints on those tripartite
agreements that did not previously exist, and the period of time that the tripartite agreements will be allowed remains
uncertain. If tripartite agreements or similar arrangements are not available to service companies in Angola that have a need
for U.S. dollars, then such service companies will be required to source U.S. dollars exclusively through the National Bank of
Angola. Sonatide has had some success to date in negotiating tripartite agreements and it continues to work with customers,
commercial banks and the National Bank of Angola in regards to utilizing these arrangements.
For the fiscal year ended March 31, 2016, the company collected (primarily through Sonatide) approximately $215 million
from its Angolan operations, which is slightly more than the approximately $213 million of revenue recognized for the same
period. Of the $215 million collected, approximately $122 million were U.S. dollars received by Sonatide on behalf of the
company or U.S. dollars directly received by the company from customers. The balance of $93 million collected resulted
from Sonatide’s converting Angolan kwanza into U.S. dollars and subsequently expatriating the dollars to facilitate payment
to the company. Additionally, the company received an approximate $15 million dividend payment from the Sonatide joint
venture during the third quarter of fiscal 2016. The company also reduced the net due from affiliate and due to affiliate
balances by approximately $84 million during the year ended March 31, 2016 through netting transactions based on an
agreement with the joint venture.
For the fiscal year ended March 31, 2015, the company collected (primarily through Sonatide) approximately $338 million
from its Angola operations, which is slightly less than the approximately $351 million of revenue recognized for the same
period. Of the $338 million collected, approximately $159 million represented U.S. dollars received by Sonatide on behalf of
the company or U.S. dollars directly received by the company from customers. The balance of $179 million that was
collected in fiscal 2015 resulted from Sonatide’s converting Angolan kwanzas into U.S. dollars and subsequently expatriating
the U.S. dollars to facilitate payment to the company. Additionally, the company received an approximate $10 million
dividend payment from the Sonatide joint venture during the third quarter of fiscal 2015.
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The company believes that the process for converting Angolan kwanzas continues to function, but the tight U.S. dollar
liquidity situation continues in Angola. Sonatide continues to press its commercial banks with which it has relationships to
increase the amount of U.S. dollars that are made available to Sonatide.
As of March 31, 2016, the company had approximately $339 million in amounts due from Sonatide, with approximately $97
million of the balance reflecting invoiced but unpaid vessel revenue related to services performed by the company through
the Sonatide joint venture. Remaining amounts due to the company from Sonatide are generally supported by cash
(primarily denominated in Angolan kwanzas) held by Sonatide that is pending conversion into U.S. dollars and the
subsequent expatriation of such funds.
For the year ended March 31, 2016, the company’s Angolan operations generated vessel revenues of approximately $213
million, or 22%, of its consolidated vessel revenue, from an average of approximately 65 company-owned vessels that are
marketed through the Sonatide joint venture (eight of which were stacked on average during the year ended March 31,
2016), and, for the year ended March 31, 2015, generated vessel revenues of approximately $351 million, or 23%, of
consolidated vessel revenue, from an average of approximately 80 company-owned vessels (eight of which were stacked
on average during the year ended March 31, 2015).
Sonatide owns eight vessels (three of which are currently stacked) and certain other assets, in addition to earning
commission income from company-owned vessels marketed through the Sonatide joint venture (owned 49% by the
company). In addition, as of March 31, 2016, Sonatide maintained the equivalent of approximately $119 million of primarily
Angolan kwanza-denominated deposits in Angolan banks, largely related to customer receipts that had not yet been
converted to U.S. dollars, expatriated and then remitted to the company, and approximately $3 million of U.S. dollar-
denominated deposits in banks outside of Angola. As of March 31, 2016 and March 31, 2015, the carrying value of the
company’s investment in the Sonatide joint venture, which is included in "Investments in, at equity, and advances to
unconsolidated companies," is approximately $37 million and $67 million, respectively.
Due from affiliate at March 31, 2016 and March 31, 2015 of approximately $339 million and $420 million, respectively,
represents cash received by Sonatide from customers and due to the company, and amounts due from customers that
are expected to be remitted to the company through Sonatide. The collection of the amounts due to Sonatide from
customers, and the subsequent conversion and expatriation process are subject to those risks and considerations set
forth above.
Due to affiliate at March 31, 2016 and March 31, 2015 of approximately $188 million and $186 million, respectively,
represents amounts due to Sonatide for commissions payable (approximately $32 million and $66 million, respectively) and
other costs paid by Sonatide on behalf of the company.
A presidential decree regulating maritime transportation activities was enacted in Angola in 2014. Following recent
discussions with port state authorities and local counsel, the company remains uncertain whether the authorities will interpret
the decree to require one hundred percent Angolan ownership of local vessel operators such as Sonatide. This interpretation
may result in the need to work with Sonangol to further restructure our Sonatide joint venture and our operations in Angola.
The company is seeking further clarification of the new decree. The company is exploring potential alternative structures in
order to comply.
The Angolan government enacted a statute, which came into effect on June 30, 2015, for a new levy that could impose an
additional 10% surcharge on certain foreign exchange transactions. The specific details of the levy have not yet been
disclosed and it is not clear if this new statute will apply to Sonatide’s scope of operations. The additional surcharge has not
been imposed on any Sonatide transactions to date. The company has undertaken efforts to mitigate the effects of the levy,
in the event the levy does apply to Sonatide’s operations, including successfully negotiating rate adjustments and termination
rights with some of its customers. The company will be unlikely to completely mitigate the effects of the levy, resulting in
increased costs and lower margins, if the levy is interpreted to apply to Sonatide’s operations.
Management continues to explore ways to profitably participate in the Angolan market while looking for opportunities to
reduce the overall level of exposure to the increased risks that the company believes currently characterize the Angolan
market. Included among mitigating measures taken by the company to address these risks is the redeployment of vessels
from time to time to other markets. Redeployment of vessels to and from Angola during the year ended March 31, 2016 has
resulted in a net 23 vessels transferred out of Angola.
As the company considers the redeployment of additional vessels from Angola to other markets, there would likely be
temporary negative financial effects associated with such redeployment, including mobilization costs and costs to
redeploy the company’s shore-based employees to other areas, in addition to lost revenues associated with potential
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downtime between vessel contracts. These financial impacts could, individually or in the aggregate, be material to the
company’s results of operations and cash flows for the periods when such costs would be incurred. The recent decline in
crude oil and natural gas prices, the reduction in spending expectations among E&P companies, the number of new-build
vessels which are expected to deliver within the next two years and the resulting potential overcapacity in the worldwide
offshore support vessel market may exacerbate such negative financial effects, particularly if a large re-deployment were
undertaken by the company in the near- to intermediate-term.
International Labour Organization’s Maritime Labour Convention
The International Labour Organization's Maritime Labour Convention, 2006 (the "Convention") mandates globally, among
other things, seafarer living and working conditions (accommodations, wages, conditions of employment, health and other
benefits) aboard ships that are engaged in commercial activities. Since its initial entry into force on August 20, 2013, 72
countries have now ratified the Convention, making for a diverse geographic footprint of enforcement.
Accordingly, the company continues prioritizing certification of its vessels to Convention requirements based on the dates
of enforcement by countries in which the company has operations, performs maintenance and repairs at shipyards, or
may make port calls during ocean voyages. Once obtained, vessel certifications are intended to be maintained, regardless
of the area of operation. Additionally, where possible, the company continues to work with operationally identified flag
states to seek substantial equivalencies to comparable national and industry laws that meet the intent of the Convention.
When obtained, these substantial equivalencies, allow the company to maintain its long-standing operational protocols
that meet the requirements of the Convention and mitigate changes in business processes that would offer no additional
substantive benefits to crew members. As ratifications continue, the company continues to assess its global seafarer labor
relationships and fleet operational practices to not only undertake compliance with the Convention but also gauge the
impact of effective enforcement, the effects of 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 10% of the company’s outstanding common stock was owned by non-
U.S. citizens as of March 31, 2016.
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 278 vessels
owned or operated by the company at March 31, 2016, 250 vessels were registered under flags other than the United
States and 28 vessels were registered under the U.S. flag.
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 deepwater PSVs, deepwater AHTS vessels, towing-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.
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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. The company’s position is that
each of its employees is a safety supervisor, who has the authority and the obligation to stop any operation that they
deem 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 production facilities:
hostile activities attributable to war, sabotage, piracy 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 directly or 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.
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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 any operations in Australia 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, 2016, the company had approximately 6,550 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, 2016 is
as follows:
Name
Age
Position
Jeffrey M. Platt .......
58 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.
Jeffrey A. Gorski .....
55 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.
Quinn P. Fanning ...
52 Chief Financial Officer since September 2008. Executive Vice President since July 2008.
Bruce D. Lundstrom ...
52 Executive Vice President since August 2008. General Counsel and Secretary since
September 2007. Senior Vice President from September 2007 to July 2008.
Joseph M. Bennett ....
60 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.
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. You should consider all 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.
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Depressed Prices for Oil and Gas and Resulting Changes in the Level of Capital Spending by Our Customers
Even in a more favorable commodity pricing climate, 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. The significant decline in crude oil and
natural gas prices that began in 2014 and continued throughout 2015 caused many of our customers to significantly reduce
drilling, completion and other production activities and related spending on our products and services in 2015. Many
exploration and production companies have already announced plans to further reduce spending and activity levels in 2016;
thus, we expect this trend to continue and potentially worsen in 2016 and potentially beyond. In addition, the reduction in
demand from our customers has resulted in an oversupply of the vessels available for service, and such oversupply has
substantially reduced the prices we can charge our customers for our services.
Many factors affect the supply of and demand for crude oil and natural gas and, therefore, influence prices of these
commodities, including:
(cid:120) domestic and foreign supply of oil and natural gas, including increased availability of non-traditional energy
resources such as shale oil and gas;
(cid:120) prices, and expectations about future prices, of oil and natural gas;
(cid:120) domestic and worldwide economic conditions, and the resulting global demand for oil and natural gas;
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
the price and quantity of imports of foreign oil and natural gas including the ability of OPEC to set and maintain
production levels for oil, and decisions by OPEC to change production levels;
sanctions imposed by the U.S., the European Union, or other governments against oil producing countries;
the cost of exploring for, developing, producing and delivering oil and natural gas;
the level of excess production capacity, available pipeline, storage and other transportation capacity;
lead times associated with acquiring equipment and products and availability of qualified personnel;
the expected rates of decline in production from existing and prospective wells;
the discovery rates of new oil and gas reserves;
federal, state and local regulation of (i) exploration and drilling activities, (ii) equipment, material, supplies or services
that we furnish and (iii) oil and gas exports;
(cid:120) public pressure on, and legislative and regulatory interest within, federal, state and local governments to stop,
significantly limit or regulate hydraulic fracturing activities;
(cid:120) weather conditions, including hurricanes, that can affect oil and natural gas operations over a wide area and severe
winter weather that can interfere with oil and gas development and production operations;
(cid:120) political instability in oil and natural gas producing countries;
(cid:120) advances in exploration, development and production technologies or in technologies affecting energy consumption
(such as fracking);
(cid:120)
the price and availability of alternative fuel and energy sources;
(cid:120) uncertainty in capital and commodities markets; and
(cid:120)
changes in the value of the U.S. dollar relative to other major global currencies.
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The ongoing depressed level of oil and natural gas prices significantly curtailed our customers’ drilling, completion and other
production activities and related spending on our services in fiscal 2016. 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 continuing depressed levels of crude oil and natural gas prices has reduced significantly the energy
industry’s level of capital spending and as long as current conditions persist, capital spending and demand for our services
may remain similarly depressed. It is difficult to predict how long the current commodity price conditions will continue, or to
what extent low commodity prices will affect our business. Because a prolonged material downturn 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, a downturn of any
such duration would likely result in a significant decline in demand for offshore support services. Declining or continuing
depressed oil and natural gas prices may result in negative pressures on:
(cid:120) our customer’s capital spending and spending on our services;
(cid:120) our charter rates and/or utilization rates;
(cid:120) our results of operations, cash flows and financial condition;
(cid:120)
the fair market value of our vessels;
(cid:120) our ability to maintain or increase our borrowing capacity;
(cid:120) our ability to obtain additional capital to finance our business and make acquisitions, and the cost of that capital; and
(cid:120)
the collectability of our receivables.
Moreover, higher commodity prices will not necessarily translate into increased demand for offshore support services or
sustained higher pricing for offshore support vessel services, in part because customer demand is based on future
commodity price expectations and not solely on current prices. Additionally, increased commodity demand may in the
future be satisfied by land-based energy resource production and any increased demand for offshore support vessel
services can be more than offset 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 as a widely-traded financial asset class.
To the extent 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.
Reduced Lending in the Energy Sector; Amendments to Credit Facility
Lower oil and gas prices, which have led to a sustained slowdown in the level of commercial activity by energy and
energy service companies, have put a significant number of credit facilities and other arrangements between borrowers
and lenders under stress. The eventual resolution of these credit challenges and the impact of such resolutions for
lenders or borrowers is currently unknown. However, there are a number of potential negative consequences for the
energy and energy services sectors that may result if commodity prices remain depressed or continue to decline,
including a general outflow of credit and capital from the energy and energy services sectors, further efforts by lenders
to reduce their loan exposure to the energy sector, the imposition of increased lending standards for the energy and
energy services sectors, higher borrowing costs and collateral requirements or a refusal to extend new credit or amend
existing credit facilities in the energy and energy services sectors. These potential negative consequences may be
exacerbated by the pressure exerted on financial institutions by bank regulatory agencies to respond quickly and
decisively to credit risk that develops in distressed industries. All of these factors may complicate the ability of
borrowers to achieve a favorable outcome in negotiating solutions to even marginally stressed credits.
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The company may be required to provide collateral, pay higher interest rates and otherwise agree to more restrictive terms in
order to secure amendments to its existing bank credit facility and other lending arrangements. Future debt financing
arrangements, if available at all, may also require collateral, higher interest rates and more restrictive terms. Collateral
requirements and higher borrowing costs may limit our long- and short-term financial flexibility, and any failure to obtain
amendments to existing debt arrangements or to secure future financing on terms that are acceptable to the company could
jeopardize our ability to (i) repay, refinance or reduce our debt obligations, (ii) fund, among other things, capital expenditures
and general working capital needs, or (iii) meet our other financial commitments as they come due.
We may record additional losses or impairment charges related to our vessels.
We review the vessels in our active fleet for impairment whenever events occur or changes in circumstances indicate that
the carrying amount of an asset group may not be recoverable and we also perform a review of our stacked vessels not
expected to return to active service every six months, or whenever changes in circumstances indicate that the carrying
amount of a vessel may not be recoverable. We have recorded impairment charges of $117.3 million, $14.5 million and $9.3
million during the years ended March 31, 2016, 2015 and 2014 respectively. In the event that offshore E&P industry
conditions continue to deteriorate, or persist at current levels, the company could be subject to additional vessel impairments
in future periods. An impairment loss on our property and equipment exists when the estimated undiscounted cash flows
expected to result from the use of the asset and its eventual disposition are less than its carrying amount. Any impairment
loss recognized represents the excess of the asset’s carrying value over the estimated fair value. As part of this analysis, we
make assumptions and estimates regarding future market conditions. To the extent actual results do not meet our estimated
assumptions we may take an impairment loss in the future. Additionally, there can be no assurance that we will not have to
take additional impairment charges in the future if the currently depressed market conditions persist.
The amount of our debt and the covenants in the agreements governing our debt could negatively impact our
financial condition, results of operations and business prospects.
As of March 31, 2016, we had $2,052.3 million of total debt. Our level of indebtedness, and the covenants contained in the
agreements governing our debt, could have important consequences for our operations, including:
(cid:120) making it more difficult for us to satisfy our obligations under the agreements governing our indebtedness and
increasing the risk that we may default on our debt obligations;
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
requiring us to dedicate a substantial portion of our cash flow from operations to required payments on
indebtedness, thereby reducing the availability of cash flow for working capital, capital expenditures and other
general business activities;
requiring that we pledge substantial collateral, including vessels which may limit flexibility in operating our business
and restrict our ability to sell assets;
limiting our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions,
general corporate purposes and other activities;
limiting management's flexibility in operating our business;
limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
(cid:120) diminishing our ability to successfully withstand a further downturn in our business or further worsening of
macroeconomic conditions;
(cid:120) placing us at a competitive disadvantage against less leveraged competitors; and making us vulnerable to increases
in interest rates, because certain of our debt has variable interest rates or because our current debt is at low fixed
interest rates and in exchange for accommodations to our existing debt instruments, debt holders may demand
higher interest rates; and
(cid:120)
limiting our ability to invest in the future in new vessels and to make other capital expenditures.
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Our long-term debt instruments are subject to affirmative and negative covenants, including financial ratios and tests, with
which we must comply (including a requirement that we comply with a 3.0x minimum interest coverage covenant). These
covenants include, among others, covenants that restrict our ability to take certain actions without the permission of the
holders of our indebtedness, including the incurrence of debt, the granting of liens, the making of investments and the sale of
assets. Please see “Status of Discussions with Lenders and Noteholders / Audit Opinion” disclosures in Liquidity and Capital
Resources in Item 7 of this report for a discussion of the events of default which have been waived through August 14, 2016
and the resulting reclassification of our long-term debt.
Our ability to satisfy required financial covenants, ratios and tests in our debt agreements can be limited by events beyond
our control, including continuing low commodity prices, reduced demand for our services, depressed valuations of our assets
as well as prevailing economic, financial and industry conditions, and we can offer no assurance that we will be able to
remain in compliance with such covenants or that the holders of our indebtedness will not seek to assert that we are not in
compliance with our covenants. A breach of any of these covenants, ratios or tests could result in a default, which may result
in a cross-default of other indebtedness. If we default, our lenders could declare all amounts of outstanding debt together
with accrued interest, to be immediately due and payable. The results of such actions would have a significant negative
impact on our results of operations, financial position and cash flows. Absent available alternatives such as refinancing or
restructuring our indebtedness or capital structure, we would not have sufficient liquidity to repay all of our outstanding
indebtedness. If such a result were to occur, we may be forced into bankruptcy or forced to seek bankruptcy protection to
restructure our business and capital structure and may have to liquidate our assets and may receive less than the value at
which those assets are carried on our financial statements.
We may not be able to generate sufficient cash flow to meet our debt service and other obligations.
Our ability to make payments on our indebtedness and to fund our operations depends on our ability to generate cash in the
future. This, to a large extent, is subject to conditions in the oil and natural gas industry, including commodity prices, demand
for our services and the prices we are able to charge for our services, general economic and financial conditions, competition
in the markets in which we operate, the impact of legislative and regulatory actions on how we conduct our business and
other factors, all of which are beyond our control.
Lower levels of offshore exploration and development activity and spending by our customers globally has had a direct and
significant impact on our financial performance, financial condition and financial outlook. As a result, we continue to explore
alternatives to improve our financial position and liquidity, including pursuing amendments to existing debt arrangements, a
debt restructuring and possible strategic transactions. We may not be able to implement any of these such actions, if
necessary, on commercially reasonable terms or at all, and, even if we are successful in implementing amendments to
existing debt arrangements, a debt restructuring or strategic transaction, such actions may not be successful in allowing us
to meet our debt obligations. If we are unable to generate sufficient cash flow to satisfy our debt or other obligations, or to
implement amendments to existing debt arrangements, a debt restructuring or strategic transaction, our creditors could
potentially force us into bankruptcy or we could be forced to seek bankruptcy protection to restructure our business and
capital structure, in which case we could be forced to liquidate our assets at potentially depressed valuations and may
receive less than the value at which those assets are carried on our financial statements. Even if we are able to implement
amendments to existing debt arrangements, a debt restructuring or strategic transaction, such amendments, debt
restructuring or strategic transaction may impose onerous terms on us. As a result, any amendments to existing debt
arrangements, debt restructuring, strategic transaction or bankruptcy proceeding could place equity holders at significant risk
of losing some or all of their interests in our company.
We participate in a capital-intensive industry. We may not be able to finance future growth of our operations or
future acquisitions.
Our activities require substantial capital expenditures. If our cash flows from operating activities are not sufficient to fund
capital expenditures, we would be required to further reduce these expenditures or to fund capital expenditures through debt
or equity issuance or through alternative financing plans or selling assets.
Our ability to raise debt or equity capital or to refinance or restructure existing debt arrangements will depend on the
condition of the capital markets and our financial condition at such time, among other things. Any refinancing of our debt
could be at higher interest rates and may require us to comply with more onerous covenants and may require us to
provide substantial collateral to some or all of our debt holders, which could further restrict our business operations. The
terms of existing or future debt instruments may restrict us from adopting some of these alternatives. We currently have
limited ability to raise new capital or refinance our indebtedness and, as a result, we have undertaken efforts to curtail our
spending, which
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may limit our ability to grow our business and our ability to sustain or improve our profits may be adversely affected. Any
of the foregoing consequences could materially and adversely affect our business, financial condition, results of
operations and prospects.
Any limitations in our ability to finance future capital expenditures may limit our ability to respond to changes in customer
preferences, technological change and other market conditions, which may diminish our competitive position within our
sector.
Consolidation of the Company’s Customer Base
Oil and natural gas companies and other energy companies 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 fiscal years ended
March 31, 2016, 2015 and 2014, the five largest customers accounted for approximately 47%, 45%, and 45%,
respectively, of the company’s total revenues, while the 10 largest customers accounted for approximately 69%, 62%, and
62%, respectively, of our total revenues. While it is normal for our customer base to change over time as our time charter
contracts expire and are replaced, 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 have contributed to an over-supplied
natural gas market. Production from unconventional resources has increased as drilling efficiencies have improved,
lowering the costs of extraction. There has been a buildup of crude oil and 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 crude oil and natural gas, whether from conventional or unconventional sources, without a
commensurate growth in demand for crude oil and natural gas will likely continue to weigh on crude oil and natural gas
prices. A prolonged period of low crude oil and natural gas prices would likely have a negative impact on development
plans of exploration and production companies), which in turn, may result in a decrease in demand for offshore support
vessel services.
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 company
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and 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, security operations, and seaborne refugee issues)
can have a material negative effect on our business, revenues and profitability.
Potential Overcapacity in the Offshore Marine Industry
Over the past decade, the combination of historically high commodity prices and technological advances resulted in
significant growth in deepwater exploration, field development and production. As a result, offshore service companies,
such as ours, constructed specialized offshore vessels that are capable of supporting deepwater and deep well (defined
by well depth rather than water depth) projects. During this time, construction of offshore vessels increased significantly in
order to meet projected requirements of customers and potential customers. 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. A discussion about the
company’s vessel fleet and 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 435 new-build offshore support vessels (deepwater PSVs,
deepwater AHTS vessels and towing-supply vessels only) either under construction (355 vessels), on order or planned as
of March 2016, which are expected to be delivered to the worldwide offshore support vessel market primarily over the next
18-24 months, according to IHS-Petrodata. The current worldwide fleet of these classes of vessels is estimated at
approximately 3,440 vessels, according to the same source. An increase in vessel capacity without a corresponding
increase in the working offshore rig count could exacerbate the industry’s currently oversupplied condition 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 U.S. shipping laws 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 U.S. shipping laws, or the administrative erosion of their 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 six remaining vessels currently under construction and 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 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 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.
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 and are exposed 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, including enforcement of customs, immigration or other
laws that are not well developed or consistently enforced; foreign government regulations that favor or require the
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awarding of contracts to local competitors; an inability to recruit, retain or obtain work visas for workers 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 foreign
currencies into U.S. dollars; expatriating customer and other payments made in jurisdictions outside of the United States;
and import/export quotas and restrictions or other trade barriers, most of which are beyond the control of the company.
See (i) Item 7 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 (ii) 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. While we no longer operate in Venezuela, we note that the company has substantial
operations in Brazil, Mexico, Saudi Arabia, Angola and throughout the west coast of Africa, which generate a large portion
of our revenue, where we are exposed to the risks described above.
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 in challenging areas, 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.
Risks Inherent in Acquiring Businesses
Although acquisitions have historically been 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 or issue equity to finance future acquisitions. Such additional debt service requirements may
impose a significant burden on our results of operations and financial condition, and any equity issuance could have a
dilutive impact on our stockholders. We cannot be certain that we will be able to successfully consolidate the operations
and assets of 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. We have recently expanded our capability to provide subsea services through the acquisition of
employees with specialized subsea skills 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 joint ventures with local companies, 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
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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 Item 1 and Item 3 in this Annual Report on Form 10-K for additional
discussion of our Sonatide joint venture in Angola and our joint venture in Nigeria, respectively.
International Operations Exposed to Currency Devaluation and Fluctuation Risk
As 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 is 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, we attempt to contract a significant majority of our 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 the financial impact of these risks by matching the currency of the company’s operating
costs with the currency of revenue streams when considered appropriate. We monitor the currency exchange risks
associated with all contracts not denominated in U.S. dollars.
As of March 31, 2016, Sonatide maintained the equivalent of approximately $119 million of Angola kwanza-denominated
deposits in Angolan banks, largely related to customer receipts that had not yet been converted to U.S. dollars,
expatriated and then remitted to the company. During fiscal 2016, the entities which comprise the operations of the
Sonatide joint venture recognized a foreign exchange loss of approximately $49.2 million, primarily as a result of the
devaluation of the Angolan kwanza relative to the U.S. dollar and the resulting revaluation of Sonatide’s Angolan kwanza-
denominated bank balances. The company has recognized 49% of the total foreign exchange loss, or approximately
$24.1 million, from the Sonatide entities through equity in net earnings/(losses) of unconsolidated companies. Any further
devaluation in the Angolan kwanza relative to the U.S. dollar would result in foreign exchange losses for Sonatide to the
extent the Angolan kwanza-denominated asset balances were in excess of kwanza-denominated liabilities, 49% of which
will be borne by the company. Sonatide may be able to mitigate this exposure, but a hypothetical ten percent devaluation
of the kwanza relative to the U.S. dollar on a net kwanza-denominated asset balance of $100 million would cause our
equity in net earnings of unconsolidated companies to be reduced by $4.9 million.
Operational Hazards
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. Some of these events could
be the result of (or exacerbated by) mechanical failure or navigation or operational errors. 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, increased costs and loss of
business. 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.
Our exposure to operating hazards may increase significantly with the expansion of our subsea operations, including
through the ownership and operation of ROVs and the provision of engineering design and consulting services for
customers’ subsea initiatives. For example, the company may lose equipment, including ROVs, in the course of our
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 our 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,
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uncontrollable flows of oil, gas, brine or well fluids, or other discharges of toxic gases or other pollutants. Finally, provision
of engineering design and consulting services could expose us to professional liability for errors and omissions made in
the course of those services.
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. While we maintain
insurance protection and seek to obtain indemnity agreements from our 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 us under all circumstances or against all risks. Our insurance coverages are subject to
deductibles and certain exclusions. The company does not directly or fully insure for business interruption. 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 our results of operations and financial
condition. Additionally, while we believe that we should be able to maintain adequate insurance in the future at rates
considered commercially acceptable, we cannot guarantee that such insurance will continue to be available at
commercially acceptable rates given the markets in which the company operates.
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 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 well as our results of
operations, and cash flows.
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, the United States Customs and Border Protection, and their foreign equivalents; as
well as to standards imposed by private industry organizations such as the American Bureau of Shipping, the Oil
Companies International Marine Forum, and the International Marine Contractors Association.
Further, many of the countries in which we operate have laws, regulations and enforcement systems that are less well
developed than the laws, regulations and enforcement systems of the United States, and the requirements of these
systems are not always readily discernible even to experienced and proactive participants. These countries’ laws can be
unclear, and, the application and enforcement of these laws and regulations can be unpredictable and subject to frequent
change or reinterpretation. Sometimes governments may apply such changes or reinterpretations with retroactive effect,
and may impose associated taxes, fees, fines or penalties on the company based on that reinterpretation or retroactive
effect. While the company endeavors to comply with applicable laws and regulations, our 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 imposing additional requirements or restrictions could adversely affect the company’s financial
condition, results of operations or cash flows.
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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.
Approximately 88% of the company’s revenues and a majority of the company’s net income are generated by its
operations outside of the United States. The company’s effective tax rate has averaged approximately 22% 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 our 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
Our operations are 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.
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. Notwithstanding the current downturn in the oil industry punctuated by lessened demand and lower oil prices, any
such regulations could ultimately 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 have adverse effect on
future 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 markets. In addition, the 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.
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Climate Change and Greenhouse Gas Restrictions
Due to concern over the risk of climate change, a number of countries have adopted, or are considering the adoption of,
regulatory frameworks to reduce greenhouse gas emissions. These include adoption of cap and trade regimes, carbon
taxes, restrictive permitting, increased efficiency standards, and incentives or mandates for renewable energy. These
requirements could make our customer’s products more expensive and reduce demand for hydrocarbons, as well as shift
hydrocarbon demand toward relatively lower-carbon sources such as natural gas, any of which may reduce demand for
our services.
Unionization Efforts and Collective Bargaining Negotiations
In locations in which the company is required to do so, 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.
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
For a discussion of our material legal proceedings, including “Arbitral Award for the Taking of the Company’s Venezuelan
Operations” and “Nigeria Marketing Agent Litigation” see the “Legal Proceedings” section of “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” in Item 7 and Note (12) of Notes to Consolidated Financial
Statements included in Item 8 of this Annual Report on Form 10-K.
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.
ITEM 4. MINE SAFETY DISCLOSURES
None
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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, 2016,
there were 649 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, 2016
(last business day of the month) was $6.83. 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 2016 common stock prices:
High
Low
Dividend
Fiscal 2015 common stock prices:
High
Low
Dividend
June 30 September 30 December 31 March 31
$
$
31.74 $
19.07
.25
56.95 $
47.41
.25
23.87 $
12.77
.25
56.46 $
38.96
.25
17.91 $
5.59
.25
40.05 $
28.40
.25
11.58
4.24
—
33.82
18.85
.25
Issuer Repurchases of Equity Securities
In May 2014, 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. In May 2015, the company’s Board of Directors
authorized an extension of its May 2014 common stock repurchase program from its original expiration date of
June 30, 2015 to June 30, 2016. In fiscal 2015, $100 million was used to repurchase common stock under the May 2014
share repurchase program. No shares were repurchased by the company during fiscal 2016.
In January 2016, the company suspended its common stock repurchase program.
The value of common stock repurchased, along with number of shares repurchased, and average price paid per share for
the years ended March 31, are as follows:
(In thousands, except share and per share data)
Aggregate cost of common stock repurchased
Shares of common stock repurchased
Average price paid per common share
2016
2015
2014
$
$
—
99,999
— 2,841,976
—
35.19
—
—
—
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
2016
2015
2014
$
34,965
0.75
49,127
1.00
49,973
1.00
In January 2016, the company suspended the quarterly dividend program.
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Performance Graph
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, 2011, at closing prices on March 31, 2011, 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 25 companies including Tidewater Inc.
Indexed returns
Years ended March 31
Company name/Index
Tidewater Inc.
S&P 500
Peer Group
2011
100
100
100
2012
91.99
108.54
79.58
2013
87.83
123.69
85.26
2014
86.10
150.73
104.06
2015
34.98
169.92
75.41
2016
13.32
172.95
60.59
Investors are cautioned against drawing conclusions from the data contained in the graph, as past results are not necessarily
indicative of future performance.
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.
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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)
Statement of Earnings Data :
Revenues:
Vessel revenues
Other operating revenues
$
Gain on asset dispositions, net
Asset impairments (F)
Goodwill Impairment (C)
Loss on early extinguishment of debt
Restructuring charge
Operating income (loss)
Net earnings (loss)
Basic earnings per common share
Diluted earnings per common share
Cash dividends declared per common share
Balance Sheet Data (at end of period):
Cash and cash equivalents
Total assets
Current maturities of long-term debt (E)
Long-term debt (E)
Total stockholders’ equity
Working capital (E)
Current ratio (E)
Cash Flow Data:
Net cash provided by operating activities
Net cash used in investing activities
Net cash (used in) provided by financing activities
2016
2015 (A) 2014 (B) 2013 (D)
2012
27,159
23,662
14,167
16,642
26,037
117,311
955,400 1,468,358 1,418,461 1,229,998 1,060,468
6,539
979,062 1,495,517 1,435,103 1,244,165 1,067,007
21,264
3,607
30,932
—
—
(37,181) 201,541 206,232 113,554
87,411
(65,190) 140,255 150,750
1.71
3.04
1.70
3.03
1.00
1.00
$
23,796
$
14,525
$
— 283,699
$
—
—
$
7,586
4,052
$
$
(69,524)
$ (160,183)
(3.41)
$
(3.41)
$
0.75
$
21,063
9,341
56,283
4,144
—
14,687
8,078
—
—
—
(1.34)
(1.34)
1.00
2.84
2.82
1.00
10,181
78,568
60,359
678,438
$
40,569 320,710
$ 4,990,547 4,756,162 4,885,829 4,168,055 4,061,618
—
$ 2,052,270
9,512
— 1,524,295 1,505,358 1,000,000 950,000
$
$ 2,299,520 2,474,488 2,679,384 2,561,756 2,526,357
$(1,135,814) 386,581 418,528 241,461 455,171
2.91
2.04
1.91
1.80
0.54
—
$
$ (134,996)
481,506
$
253,360 358,713 104,617 213,923 222,421
(231,418) (403,685 ) (413,487) (315,081)
(80,577) 167,650
(109,086) 318,858
(A) During fiscal 2015, the company recorded a $23.8 million ($23.8 million after-tax, or $0.51 per common share) non-cash adjustment related to the
valuation of deferred tax assets.
(B) 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 million after tax, or $0.06 per common share).
(C) During fiscal 2015, 2014 and 2012, the company recorded a $283.7 million ($214.9 million after-tax, or $4.43 per share), 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 (17) of Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
(D) 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) Working capital and current ratio includes amounts due to and from affiliates, as disclosed in Note (12) of Notes to Consolidated Financial
Statements included in Item 8 of this Annual Report on Form 10-K. Amounts at March 31, 2016 reflect the reclassification of the $2,042.1 million
of long-term debt to current as a result of an event of default (which have been waived through August 14, 2016) under various borrowing
agreements as more fully described in the “Status of Discussions with Lenders and Noteholders / Audit Opinion” discussion included in Liquidity,
Capital Resources and Other Matters in Part II, Item 7 of this Annual Report on Form 10-K.
(F)
Refer to the “Other Items” section of Management’s Discussion and Analysis section located in Part II, Item 7 of this Annual Report on Form 10-K.
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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, 2016 and 2015 and for the years ended March 31,
2016, 2015 and 2014 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 2016 Business Highlights and Key Focus
During fiscal 2016 the company continued to focus on identifying potential cost savings that could be realized given the
reduction in revenues attributable to lower crude oil prices and reduced E&P spending. Key elements of the company’s
strategy include sustaining the company’s offshore support vessel fleet and its global operating footprint, while safeguarding
its balance sheet and maintaining adequate liquidity to fund operations and the remaining payments related to six vessels
under construction at March 31, 2016. Operating management is focused on safe, compliant operations, minimizing
unscheduled vessel downtime, improving the oversight over major repairs and maintenance projects and drydockings and
maintaining disciplined cost control.
Primarily as a result of the significant industry downturn which occurred over the latter half of fiscal 2015 and continued
through fiscal 2016, the company’s revenue during fiscal 2016 decreased $516.5 million, or 35%, from the revenues
earned during fiscal 2015. The company’s consolidated net loss increased 146%, or $95 million during fiscal 2016,
despite the fact that fiscal 2015 net loss includes a $283.7 million non-cash goodwill impairment charge ($214.9 million
after-tax, or $4.43 per share) recorded during the third quarter of fiscal 2015 related to the company’s remaining goodwill
as disclosed in Note (15) of Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form
10-K.
The revenue reductions were accompanied by decreases in vessel operating costs which decreased 33%, or $273.2
million, during fiscal 2016 as compared to fiscal 2015. Crew costs decreased approximately 29%, or $124.9 million; repair
and maintenance costs decreased 45%, or $78.9 million; insurance costs decreased 52%, or $9.1 million; fuel, lube and
supplies costs decreased 30%, or $26.3 million; and other vessel costs decreased 27%, or $34 million; during fiscal 2016
as compared to fiscal 2015, primarily due to the reduction in the number of vessels operating, along with other cost cutting
initiatives implemented during fiscal 2016.
The company also experienced a 4%, or $7.1 million, increase in depreciation and amortization expense due to the higher
costs associated with acquiring and constructing the company’s newer, more sophisticated vessels.
General and administrative expenses decreased 19%, or $36 million, as a result of the company’s continuing efforts to
reduce overhead costs due to the downturn in the offshore oil services market and, in part, due to lower equity based
compensation expense as a result of the company’s lower stock price.
Additionally, asset impairments increased by $102.8 million, due to our stacking underutilized vessels (as a result of the
decrease in the volume of oil and gas exploration, field development and production spending by our customers) and a
decline in offshore support vessel values.
Increased borrowings, including borrowings under our revolving credit facility and obligations of Troms Offshore, resulted
in higher interest and other debt expenses of 7%, or $3.7 million.
Despite the net loss of $160.2 million and an operating loss of $69.5 million in fiscal 2016, net cash provided by operating
activities was $253.4 million for fiscal 2016, in part, reflecting $182.3 million of depreciation and amortization expense,
$117.3 million of non-cash impairment charges, and continuing efforts to collect receivables and amounts due from our
Angolan joint venture.
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Net cash used in investing activities declined $96.4 million to $135 million as $194.5 million of additions to property and
equipment were partially offset by refunds from cancelled vessel construction contracts of $46.1 million and proceeds
from asset sales of $10.7 million.
As of March 31, 2016 and 2015 the company’s net debt to net capitalization ratio was 37.4% and 37.0%, respectively. The
ratio was slightly higher in fiscal 2016 primarily due to the net loss in fiscal 2016 which was partially offset by debt
payments made during the year. The ratio of net debt to net capitalization is calculated by the company by dividing total
debt, net of cash and cash equivalents as of the balance sheet dates by the sum of shareholders’ equity and debt, net of
cash and cash equivalents and is relevant and useful to the company in order to determine financial leverage relative to
peers and the company’s ability to comply with existing debt agreements.
The company has successfully replaced the vast majority of the older vessels in its fleet with fewer, larger and more efficient
vessels that have a more extensive range of capabilities. These efforts are expected to be completed with the delivery of the
remaining six vessels currently under construction, with the company anticipating that it will use some portion of its available
cash, or future operating cash flows in order to complete the fleet renewal and modernization program. The company’s
vessel construction and acquisition program facilitated the company’s entrance into deepwater markets around the world and
allowed the company 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 recent years, the company has generally funded vessel additions with operating cash flow, together with asset sale
proceeds, funds provided by the various private placements of unsecured notes, borrowings under its credit facilities and
various leasing arrangements.
At March 31, 2016, the company had commitments to build six vessels at a number of different shipyards around the world
at a total cost, including contract costs and other incidental costs, of approximately $251.4 million. At March 31, 2016, the
company had invested approximately $183.9 million in progress payments towards the construction of these six vessels. At
March 31, 2016, the remaining expenditures necessary to complete construction of the six vessels currently under
construction (based on contract prices) was $67.5 million or approximately $36.5 million, net of expected returns from
shipyards of approximately $31 million.
Further discussions of our vessel construction, acquisition and replacement program, including the various settlement
agreements with certain international shipyards relating to the construction of vessels, the company’s capital
commitments, scheduled delivery dates and recent vessel sales, are disclosed in the “Our Global Vessel Fleet and Vessel
Construction, Acquisition and Replacement Program” section of Item 1, the “Vessel Count, Dispositions, Acquisitions and
Construction Programs” section of this Item 7 and Note (12) of Notes to Consolidated Financial Statements included in
Item 8 of this Annual Report on Form 10-K.
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 this 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 work in Angola stabilized in fiscal 2015 and was reduced to
approximately $339 million at March 31, 2016. The company’s outstanding payable to Sonatide (including commissions
payable) increased slightly to approximately $188 million at March 31, 2016. The company’s outstanding receivable from
Sonatide and outstanding payable to Sonatide (including commissions payable) at March 31, 2015 was approximately
$420 million and approximately $186 million, respectively. The company has funded net working capital related to
Sonatide with 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. For additional disclosure regarding the Sonatide Joint Venture,
refer to Part I, Item 1, of this Annual Report on Form 10-K.
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Macroeconomic Environment and Outlook
The primary driver of our business (and revenues) is the level of our customers’ capital and operating expenditures for
offshore 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, estimates of current
and future oil and natural gas production, the relative cost of exploring, developing and producing onshore and offshore oil
and natural gas, and our customers’ ability to access exploitable oil and natural gas resources. The prices of crude oil and
natural gas are critical factors in our customers’ investment and spending decisions, including their decisions to contract
drilling rigs and offshore support vessels in support of offshore exploration, field development and production activities in the
various global geographic markets, in most of which the company already operates.
After a significant decrease in the price of oil during fiscal 2015, largely due to an increase in global supply without a
commensurate increase in worldwide demand, the price of crude oil continued to decline during fiscal 2016. We anticipate
that our longer-term utilization and average day rate trends for our vessels will generally correlate with demand for, and the
price of, crude oil, which during May 2016, was trading at approximately $46 per barrel for West Texas Intermediate (WTI)
crude and $48 per barrel for Intercontinental Exchange (ICE) Brent crude, down from $60 and $65 per barrel, respectively, in
May 2015. The current pricing outlook and recent trend in crude oil prices will likely continue to suppress additional offshore
exploration and development activity. Current prices for WTI and ICE Brent are significantly below the average prices per
barrel reportedly used in exploration and production (E&P) companies’ capital expenditure budgets as reported in numerous
calendar 2016 E&P spending surveys. These surveys have forecasted an overall spending reduction of 11% to 17% which
includes a reduction in offshore spending of 20% to 25% as compared to calendar 2015 levels. This forecasted reduction is
expected to continue a trend of decreasing E&P spending from already depressed levels in 2015. The surveys also
recognize that if oil and gas prices ultimately remain below levels assumed in the E&P capital expenditure budgets for 2016,
the probability of further reductions in 2016 E&P spending is very likely.
The 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 also contributed to an oversupplied natural gas market.
High levels of onshore gas production and a prolonged downturn in natural gas prices have had a negative impact on the
offshore exploration and development plans of energy companies and the demand for offshore support vessel services.
Deepwater activity is a significant segment of the global offshore crude oil and natural gas markets, and, if the commodity
pricing environment improves, it could be a source of potential long-term 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
crude oil and natural gas pricing assumptions. Although these projects are generally less susceptible to short-term
fluctuations in the price of crude oil and natural gas, deepwater exploration and development projects can be costly relative
to other onshore and offshore exploration and development. As a result, the recent decrease in crude oil prices has caused,
and may continue to cause, many E&P companies to reevaluate their future capital expenditures in regards to deepwater
projects.
Reports published by IHS-Petrodata at the end of March 2016 indicate that the worldwide movable offshore drilling rig count
is estimated at approximately 930 rigs, of which approximately 500 offshore rigs were working as of the end of March 2016,
a decrease of approximately 24%, or 154 working rigs, since the beginning of the company’s 2016 fiscal year. While the
supply of, and demand for, offshore drilling rigs that meet the technical requirements of end user exploration and
development companies may be key drivers of pricing for contract drilling services, the company believes that the number of
rigs working offshore rather than the total population of moveable offshore drilling rigs is a better indicator of overall offshore
activity levels and the demand for offshore support vessel services.
Of the estimated 930 movable offshore rigs worldwide, approximately 33%, or approximately 305 rigs, are designed to
operate in deeper waters. Of the approximately 500 working offshore rigs at the end of March 2016, approximately 145 rigs,
or 29%, are designed to operate in deeper waters. As of March 2016, the number of working deepwater rigs was
approximately 39%, or 93 rigs, less than the number of deepwater rigs working a year ago. It is also estimated that
approximately 35% of the approximate 200 total offshore rigs currently under construction, or approximately 70 rigs, are
being built to operate in deeper waters, suggesting that newbuild deepwater rigs represent 48% of the approximately 145
deepwater rigs working in March 2016. As such, there is some uncertainty as to whether the deepwater rigs currently under
construction will, at least in the near to intermediate-term, increase the working fleet or merely replace older, less productive
drilling units. As a result, it is not clear what impact the delivery of additional rigs (deepwater and otherwise) within the next
several years will have on the working rig count, especially in an environment of expected reduced E&P spending.
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Investment is also being made in the floating production unit market, with approximately 65 new floating production units
under construction and expected to be delivered primarily over the next three years to supplement the approximately
350 floating production units already operating worldwide. Given the current economic environment, the risk of cancellation
of some new build contracts or the stacking of operating but underutilized floating production units continues to increase.
Worldwide shallow-water exploration and production activity has also decreased during the last twelve months. According to
IHS-Petrodata, there were approximately 315 working jack-up rigs as of March 2016 (64% of the 500 working offshore rigs),
which is a decrease of approximately 19%, or 74 rigs, from the number of jack-up rigs working a year ago. The construction
backlog for new jack-up rigs as of March 2016 (125 rigs) is comparable to the jack-up construction backlog as of March
2015, nearly all of which are scheduled for delivery in the next two years. As discussed above with regards to the deepwater
rig market and recognizing that 125 newbuild jackup rigs represent 39% of the approximately 315 jack up rigs working in
March 2016, there is also uncertainty as to how many of the jack-up rigs currently under construction will either increase the
working fleet or replace older, less productive jack-up rigs.
Also, according to IHS-Petrodata, there are approximately 435 new-build offshore support vessels (deepwater PSVs,
deepwater AHTS vessels and towing-supply vessels only) either under construction (355 vessels), on order or planned as of
March 2016. The majority of the vessels under construction are scheduled to be delivered within the next 18-24 months;
however, the company believes not all of these vessels will ultimately be completed based on current and expected future
offshore E&P market conditions. Further increases 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.
As of March 2016, the worldwide fleet of these classes of offshore support vessels (deepwater PSVs, deepwater AHTS
vessels and towing-supply vessels only) is estimated at approximately 3,440 vessels which include approximately
640 vessels that are at least 25 years old and nearing or exceeding original expectations of their estimated economic lives.
These older vessels, of which we estimate the majority are already stacked or not actively marketed by the vessels’ owners,
could potentially be removed from the market in the near future if the cost of extending the vessels’ lives is not economical,
especially in light of recent market conditions. Excluding the 640 vessels that are at least 25 years old from the overall
population, the company estimates that the number of offshore support vessels under construction (355 vessels) represents
approximately 13% of the remaining worldwide fleet of approximately 2,800 offshore support vessels.
In addition, we and other offshore support vessel owners have selectively stacked more recently constructed vessels as a
result of the significant reduction in our customers’ offshore oil and gas-related activity and the resulting more challenging
offshore support vessel market that has existed since late 2014. Should market conditions continue to deteriorate, the
stacking or underutilization of additional more recently constructed vessels by the offshore supply vessel industry is likely.
Although the future attrition rate of the 640 older offshore support vessels cannot be determined with certainty, the company
believes that the retirement and/or sale to owners outside of the oil and gas market of a vast majority of these aged vessels
(a majority of which the company believes have already been stacked or are not being actively marketed to oil and gas
development-focused customers by the vessels’ owners) could mitigate the potential negative effects on vessel utilization
and vessel pricing of (i) additional offshore support vessel supply resulting from the delivery of additional new-build vessels
and (ii) reduced demand for offshore support vessels resulting from reduced E&P spending. Similarly, the cancellation or
deferral of delivery of some portion of the 355 offshore support vessels that are under construction according to IHS-
Petrodata would also mitigate the potential negative effects on vessel utilization and vessel pricing of reduced demand for
offshore support vessels resulting from reduced E&P spending.
As discussed above, additional vessel demand, which also could mitigate the possible negative effects of the new-build
vessels being added to the offshore support vessel fleet, could 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
Although we believe investment in additional rigs, especially those capable of operating in deeper waters, indicates offshore
rig owner’s longer-term expectation for higher levels of activity, the decline in crude oil and natural gas prices, the reduction
in spending expectations among E&P companies and the number of new-build vessels which are expected to deliver within
the next 18-24 months indicates that there may be, at least in the short to intermediate-term, a period of potential
overcapacity in the worldwide offshore support vessel fleet which may lead to lower utilization and average day rates across
the offshore support vessel industry.
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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. 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. Crew costs may
continue to increase as competition for skilled personnel intensifies, though a weaker offshore energy market should
somewhat mitigate the upward trend in crew costs experienced in recent years. Overall labor costs may also be impacted by
the company’s operation of remotely operated vehicles (ROVs), which 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 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
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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, asset impairments 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
2016
%
2015
%
2014
%
$ 342,995
89,045
168,471
354,889
$ 955,400
36%
9%
18%
37%
100%
505,699
150,820
205,787
606,052
1,468,358
35 %
10 %
14 %
41 %
100 %
$ 303,219
94,873
8,585
61,992
92,464
$ 561,133
32%
10%
1%
6%
10%
59%
428,131
173,788
17,683
88,272
126,494
834,368
29 %
12 %
1 %
6 %
9 %
57 %
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%
The following table compares other operating revenues and costs related to the company’s ROV and related subsea
services operations, 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
2016
2015
2014
$
23,662
18,811
27,159
26,505
16,642
15,745
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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
2016
%
2015
%
2014
%
$ 103,647
37,761
3,065
19,566
19,474
183,513
$ 32,601
6,942
1,149
7,115
8,157
55,964
$ 50,525
21,602
1,455
7,596
13,127
94,305
$ 116,446
28,568
2,916
27,715
51,706
227,351
$ 561,133
30%
11%
1%
6%
6%
54%
148,034
57,782
5,095
26,792
33,494
271,197
37%
8%
1%
8%
9%
63%
62,660
19,582
2,181
11,330
8,667
104,420
30%
13%
1%
4%
8%
56%
62,517
25,228
3,822
14,372
15,183
121,122
33%
8%
1%
8%
14%
64%
59%
154,920
71,196
6,585
35,778
69,150
337,629
834,368
29 %
12 %
1 %
5 %
7 %
54 %
41 %
13 %
1 %
8 %
6 %
69 %
31 %
12 %
2 %
7 %
7 %
59 %
26 %
12 %
1 %
6 %
11 %
56 %
57 %
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%
The following table presents vessel operations general and administrative expenses by the company’s four geographic
segments, the related segment vessel operations general and administrative expenses as a percentage of segment
vessel revenues, total vessel operations general and administrative expenses and the related total vessel operations
general and administrative expenses as a percentage of total vessel revenues for the years ended March 31.
(In thousands)
Vessel operations general and
administrative expenses:
Americas
Asia/Pacific
Middle East/North Africa
Sub-Saharan Africa/Europe
Total vessel operations general and
administrative expenses
2016
%
2015
%
2014
%
$ 31,536
12,382
18,668
53,453
9%
14%
11%
15%
42,917
16,476
19,869
65,233
8 %
11 %
10 %
11 %
40,869
16,668
16,413
63,791
10%
11%
9%
10%
$ 116,039
12%
144,495
10 %
137,741
10%
37
7674_fin.pdf 39
The following table presents vessel operating leases by the company’s four geographic segments, the related segment
vessel operating leases as a percentage of segment vessel revenues, total vessel operating leases and the related total
vessel operating leases as a percentage of total vessel revenues for the years ended March 31.
(In thousands)
Vessel operating leases
Americas
Asia/Pacific
Middle East/North Africa
Sub-Saharan Africa/Europe
Total vessel operating leases
2016
%
2015
%
2014
$ 26,506
—
—
7,156
$ 33,662
8%
—
—
2%
4%
20,915
—
—
7,407
28,322
4 %
—
—
1 %
2 %
8,492
—
1,711
11,707
21,910
%
2%
—
1%
2%
2%
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.
Corporate general and administrative
expenses
Corporate depreciation
Corporate expenses
(34,078)
(6,160)
(40,238)
(3%)
(1%)
(4%)
(In thousands)
Vessel operating profit:
Americas (A)
Asia/Pacific (A)
Middle East/North Africa
Sub-Saharan Africa/Europe
Other operating loss
Gain on asset dispositions, net
Asset impairments
Goodwill impairment
Restructuring charge
Operating income (loss)
Foreign exchange gain
Equity in net earnings (losses) of
unconsolidated
companies
Interest income and other, net
Loss on early extinguishment of debt
Interest and other debt costs
Earnings (loss) before income taxes
2016
%
2015
%
2014
%
$ 52,966
(1,687)
27,349
(4,490)
74,138
(4,564)
69,574
5%
(<1%)
3%
(<1%)
8%
(<1%)
8%
122,988
11,541
37,258
122,169
293,956
(8,022)
285,934
(40,621)
(4,014)
(44,635)
23,796
(14,525)
(283,699)
(4,052)
(37,181)
8,678
26,037
(117,311)
—
(7,586)
$ (69,524)
(5,403)
3%
(12%)
—
(1%)
(7%)
(1%)
(13,581)
2,703
—
(53,752)
$ (139,557)
(1%)
<1%
—
(5%)
(14%)
10,179
1,927
—
(50,029)
(66,426)
8 %
1 %
3 %
8 %
20 %
(1 %)
19 %
(3 %)
(<1 %)
(3 %)
1 %
(1 %)
(19 %)
(<1 %)
(3 %)
1 %
1 %
<1 %
—
(3 %)
(4 %)
90,936
29,044
42,736
136,092
298,808
(1,930)
296,878
(47,703)
(3,073)
(50,776)
21,063
(9,341)
(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%)
2%
(1%)
(4%)
—
14%
<1%
1%
<1%
(<1%)
(3%)
12%
(A) Americas fiscal 2016 figure excludes restructuring charges of $3.6 million. Asia/Pacific fiscal 2016 and 2015 amounts exclude restructuring charges
of $4.0 million and $3.7 million, respectively. Refer to Other Items for further discussion of restructuring charges.
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7674_fin.pdf 40
Fiscal 2016 Compared to Fiscal 2015
Consolidated Results. The company’s revenue decreased 35%, or $516.5 million, in fiscal 2016 compared to fiscal 2015
and was primarily the result of customer reductions in exploration and production spending due to weak oil and gas
fundamentals which reduced vessel utilization and average day rates of offshore supply vessels worldwide. The company’s
consolidated net loss increased 146%, or $95 million during fiscal 2016 despite the fiscal 2015 non-cash goodwill impairment
charge of $283.7 million ($214.9 million after-tax, or $4.43 per share) recorded during the third quarter of fiscal 2015 as
disclosed in Note (16) of Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
Excluding the goodwill impairment charges taken in fiscal 2015 (net of associated tax benefits), net earnings decreased
210%, or $309.9 million, during fiscal 2016.
Vessel operating costs decreased 33%, or $273.2 million, during fiscal 2016 as compared to fiscal 2015. Crew costs
decreased approximately 29%, or $124.9 million; repair and maintenance costs decreased 45%, or $78.9 million;
insurance costs decreased 52%, or $9.1 million; other vessel costs decreased 27%, or $34 million; and supplies and fuel
cost decreased 30%, or $26.3 million, primarily due to lower activity levels in fiscal 2016 as compared to 2015.
Depreciation and amortization expense increased 4%, or $7.1 million, in fiscal 2016 as compared to fiscal 2015 due to
delivery of additional new vessels into the fleet during the last two fiscal years. General and administrative costs decreased
19%, or $36 million, reflecting cost control measures implemented by the company as a result of lower activity levels.
Asset impairments in fiscal year 2016 increased $102.8 million, from fiscal year 2015, primarily due to our stacking of
underutilized vessels (as a result of the decrease in the volume of oil and gas exploration, field development and production
spending by our customers) and a decline in offshore support vessel values.
Interest and other debt costs increased 7%, or $3.7 million, due primarily to lower amounts of capitalized interest as a
result of a decrease in the number of vessels under construction and higher average borrowings during fiscal 2016.
Despite the net loss of $160.2 million and an operating loss of $69.5 million in fiscal 2016, net cash provided by operating
activities was $253.4 million for fiscal 2016, in part, reflecting $182.3 million of depreciation and amortization expense,
$117.3 million of non-cash impairment charges, and continuing efforts to collect receivables and amounts due from our
Angolan joint venture.
Net cash used in investing activities declined $96.4 million to $135 million as $194.5 million of additions to property and
equipment were partially offset by refunds from cancelled vessel construction contracts of $46.1 million and proceeds
from asset sales of $10.7 million.
As of March 31, 2016 and 2015 the company’s net debt to net capitalization ratio was 37.4% and 37.0%, respectively. The
ratio was slightly higher in fiscal 2016 primarily due to the net loss in fiscal 2016 which was partially offset by debt
payments made during the year. The ratio of net debt to net capitalization is calculated by the company by dividing total
debt, net of cash and cash equivalents as of the balance sheet dates by the sum of shareholders’ equity and debt, net of
cash and cash equivalents and is relevant and useful to the company in order to determine financial leverage relative to
peers and the company’s ability to comply with existing debt agreements.
At March 31, 2016, the company had 269 owned or chartered vessels (excluding joint-venture vessels and vessels
withdrawn from service) in its fleet with an average age of 9.8 years. At March 31, 2016, the average age of 248 newer
vessels in the fleet (defined as vessels acquired or constructed since calendar year 2000 as part of the company’s new
build and acquisition program) is 8.2 years. The remaining 21 vessels, of which 13 are stacked at fiscal year-end, have an
average age of 28.6 years.
Americas Segment Operations. Vessel revenues in the Americas segment decreased 32%, or $162.7 million, during the
fiscal year ended March 31, 2016, as compared to fiscal 2015, due primarily to lower utilization and average day rates
across all vessel classes and a decrease in the number of active vessels which were on-hire during the current fiscal year,
most notably deepwater vessels, for which revenues decreased 33%, or $117.7 million, during the comparative periods.
During fiscal 2016, as compared to fiscal 2015, deepwater vessels experienced a decrease in utilization of 28 percentage
points and a decrease in average day rates of 14%. Revenues related to towing supply vessels also decreased 26%, or
$32.3 million, during these comparative periods, primarily as a result of decreased in utilization of 15 percentage points. In
addition, there were fewer towing supply vessels in active service during the fiscal 2016 as compared to fiscal 2015.
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7674_fin.pdf 41
The overall decreased day rates and utilization is primarily the result of a decrease in the level of oil and gas exploration, field
development and production spending in the region due to lower crude oil and natural gas prices, which resulted in our
stacking underutilized vessels in the region.
At the beginning of fiscal 2016, the company had 11 stacked Americas-based vessels. During fiscal year 2016, the company
stacked 24 additional vessels, sold six vessels from the previously stacked vessel fleet and returned one previously stacked
vessel to service, resulting in a total of 28 stacked Americas-based vessels as of March 31, 2016.
Operating profit for the Americas segment decreased 57%, or $70 million during fiscal year 2016 as compared to fiscal year
2015, primarily due to lower revenues. As a result of decreases in vessel activity and cost control measures, operating costs
(primarily crew costs and repair and maintenance costs) and general and administrative costs in the Americas segment have
also decreased, but were partially offset by an increase in vessel lease expenses.
Crew costs decreased 30%, or $44.4 million; repair and maintenance costs decreased 35%, or $20 million; and general and
administrative costs decreased 27%, or $11.4 million during fiscal year 2016 as compared to fiscal year 2015 due to the
decrease in operating activity in the segment and the deferral of drydockings due, in part, to the stacking of vessels. Vessel
operating lease costs increased 27%, or $5.6 million during fiscal year 2016 due to the increase in the number of leased
vessels operated by the company in the U.S. Gulf of Mexico and Mexico as vessels operated under leasing arrangements
were transferred in to the Americas segment from other segments and because vessels leased during fiscal 2015 incurred a
full year of lease expense in fiscal 2016.
Asia/Pacific Segment Operations. Vessel revenues in the Asia/Pacific segment decreased 41%, or $61.8 million, during
fiscal year 2016, as compared to fiscal year 2015, due to lower utilization and average day rates across all vessel classes.
Deepwater vessel revenue decreased during these comparative periods 36%, or $33.7 million, due to decreases in average
day rates of 14% and decreases in utilization of 31 percentage points. Towing supply vessels also experienced a revenue
decrease of 47%, or $25.1 million, during the comparative periods. During fiscal year 2016 as compared to fiscal year 2015,
towing supply vessels experienced a decrease in utilization of 14 percentage points and a decrease in average day rates of
43%. The overall decreased day rates and utilization is primarily the result of a decrease in the volume of oil and gas
exploration, field development and production spending in the region due to currently depressed crude oil and natural gas
prices which has led to the increased stacking of underutilized vessels in the region.
At the beginning of fiscal 2016, the company had one stacked Asia/Pacific-based vessel. During fiscal year 2016, the
company stacked 19 additional vessels and returned four previously stacked vessels to service, resulting in a total of 16
stacked Asia/Pacific-based vessels as of March 31, 2016.
Operating profit for the Asia/Pacific segment decreased 115%, or $13.2 million, during fiscal year 2016 as compared to fiscal
year 2015, primarily due to the reduction in revenue during the comparative periods which was partially offset by reductions
in vessel operating costs (primarily crew costs and repair and maintenance) and general and administrative expenses.
Crew costs decreased 48%, or $30.1 million, due to the reduction of operations in fiscal year 2016 as compared to fiscal
year 2015, especially as related to our Australian operations as those operations have been significantly curtailed. Repair
and maintenance costs decreased 65%, or $12.6 million, due to a reduction in the number of drydockings as vessels have
been moved from the region or stacked as a result of prevailing crude oil and gas E&P market conditions. General and
administrative expenses also decreased 25%, or $4.1 million, due to cost control measures implemented by the company in
response to the decline of vessel activity in the region especially as related to our Australian operations.
Middle East/North Africa Segment Operations. Vessel revenues in the Middle East/North Africa segment decreased
18%, or $37.3 million, during fiscal year 2016 as compared to fiscal year 2015, primarily due to decreased revenue from
towing supply vessels of 22%, or $26.1 million, during the comparative periods. The decrease in revenue from towing supply
vessels is a result of the decrease in utilization for this vessel class, which was nine percentage points lower, and a decrease
in average day rates which were 12% lower. During fiscal 2016 there were also fewer towing supply vessels in active service
as compared to the preceding fiscal year. Additionally, the segment experienced a decrease in revenues from deepwater
vessels of 13%, or $10.7 million, during the fiscal year 2016 due primarily to a decrease in utilization of 13 percentage points
and a decrease in average day rates of 13%. While not as severe as other segments, the decrease in overall vessel activity
in fiscal 2016 is a result of a decrease in the volume of oil and gas exploration, development and production spending in the
region as some countries in the segment have maintained a comparatively higher level of production.
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7674_fin.pdf 42
At the beginning of fiscal 2016, the company had two stacked Middle East/North Africa-based vessels. During the fiscal year
the company stacked seven additional vessels, resulting in a total of nine stacked Middle East/North Africa-based vessels as
of March 31, 2016.
Operating profit for the Middle East/North Africa segment decreased 27%, or $9.9 million, during fiscal year 2016 as
compared to fiscal year 2015, primarily due to the reductions in vessel revenues but were partially offset by decreases in
vessel operating costs (primarily crew costs and fuel, lube and supplies costs) and general and administrative costs.
Crew costs decreased 19%, or $12 million, and fuel, lube and supplies costs decreased 47%, or $6.8 million, during the
comparative periods as a result of decreased vessel activity in the region as a result of softer E&P market conditions.
General and administrative costs have also decreased 6%, or $1.2 million, during the comparative periods and are
attributable to cost control measures implemented by the company.
Sub-Saharan Africa/Europe Segment Operations. Vessel revenues in the Sub-Saharan Africa/Europe segment
decreased 41%, or $251.2 million, during fiscal year 2016 as compared to fiscal year 2015, due to decreased revenues
across all vessel classes. Revenues from deepwater vessels decreased 53%, or $171.7 million, during fiscal year 2016, as
compared to fiscal year 2015, primarily due to a utilization decrease of 26 percentage points and a decrease in average day
rates of 31%. Revenues from towing supply vessels decreased 28%, or $57.9 million, during the comparative periods,
primarily due to a decrease in utilization of 15 percentage points. Decreases to utilization and average day rates in the Sub-
Saharan Africa/Europe are a result of a decrease in the volume of oil and gas exploration, development and production
spending in the region which has led to the increased stacking of underutilized vessels in the region. During fiscal 2016
there were fewer vessels in active service in the Sub-Saharan Africa/Europe segment across all vessel classes as compared
to fiscal year 2015.
At the beginning of fiscal 2016, the company had seven stacked Sub-Saharan Africa/Europe-based vessels. During the fiscal
year the company stacked 28 additional vessels, sold nine vessels from the previously stacked vessel fleet and returned two
previously stacked vessels to work resulting in a total of 24 stacked Sub-Saharan Africa/Europe-based vessels as of
March 31, 2016.
Operating profit for the Sub-Saharan Africa/Europe segment decreased 104%, or $126.7 million, during fiscal year 2016 as
compared to fiscal year 2015, primarily due to decreased revenues, which were partially offset by decreases in vessel
operating costs (primarily crew costs and repair and maintenance costs) and decreases to general and administrative costs
during the same comparative periods.
Crew costs decreased 25%, or $38.5 million, during fiscal year 2016 as compared to fiscal year 2015 due to reduced
operating activity in the region. Repair and maintenance costs decreased 60%, or $42.6 million, during the same
comparative periods as drydockings in the current fiscal year have been deferred or cancelled as vessels are stacked as a
result of prevailing crude oil and gas E&P market conditions. General and administrative costs have also decreased 18%, or
$11.8 million, during the comparative periods and are attributable to cost control measures implemented by the company.
Other Items. In the fourth quarter of fiscal 2015 the Company’s management initiated a plan to begin reorganizing its
operations worldwide as a result of the continuing decline in oil prices and the resulting softening demand for the company’s
vessels. This plan consisted of select employee terminations and early retirements that are intended to eliminate redundant
or unneeded positions, reduce costs, and better align our workforce with anticipated activity levels in the geographic areas in
which the company presently operates. In connection with these efforts, the company recognized a $4.1 million restructuring
charge during the quarter ended March 31, 2015.
In fiscal 2016 the company’s management continued to restructure its operations to reduce operating costs as a result of the
continuing decline in oil prices and the resulting softening demand for the company’s vessels, and several contract
cancellations (particularly in regards to the company’s Brazil operations). This plan also consisted of select employee
terminations and early retirements to eliminate redundant or unneeded positions, reduce costs, and better align our
workforce with anticipated lower activity levels in the geographic areas in which the company presently operates. In
connection with these efforts, the company recognized a $7.6 million restructuring charge during the quarter ended
September 30, 2015. Although no payments were made related to this charge as of September 30, 2015, the company paid
$7.4 million of restructuring costs during the six months ended March 31, 2016.
41
7674_fin.pdf 43
Measures taken during these restructurings include the transfer and stacking of vessels from the company’s Australian and
Brazilian operations which resulted in the termination of mariners who were entitled to severance payments under the terms
of the enterprise bargaining agreements and in accordance with Australian and Brazilian labor laws.
Restructuring charges incurred by segment and cost type for the fiscal years ended March 31, are as follows:
(In thousands)
Americas:
Crew costs
Other vessel costs
Asia/Pacific:
Crew costs
Corporate:
General and administrative expenses
Total restructuring charges
2016
2015
$
$
3,410
203
—
—
3,973
3,697
—
7,586
355
4,052
Insurance and loss reserves expense decreased 51%, or $9.1 million, during fiscal year 2016 as compared to fiscal year
2015 primarily due to decreases in premiums and claims due to lower levels of vessel activity since March 31, 2015.
Included in gain on asset dispositions, net for fiscal year 2016 is $23.4 million of amortized gains from sale leaseback
transactions and $2.6 million of net gains related the sale of vessels and other assets. During fiscal year 2015 the company
recognized $17.7 million of amortized gains from sale leaseback transactions which are also included in gain on asset
dispositions, net.
Asset impairments recognized for fiscal year 2016 increased $102.8 million, from fiscal year 2015, primarily due to our
stacking underutilized vessels and a decline in offshore support vessel values as a result of the decrease in the volume of oil
and gas exploration, field development and production spending by our customers. During fiscal year 2016 the company
recognized impairments of $95.4 million on stacked vessels, $5.1 million on active vessels, a $2.4 million impairment related
to a vessel under construction that is currently the subject of an arbitration proceeding in Brazil (so as to reduce the carrying
value of this vessel to the amount that is covered by third party credit support), a $2.3 million impairment related to the
cancellation of vessel construction contracts and $12.1 million related to the write-down of inventory and the impairment of
other 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 and also performs a review of its stacked
vessels not expected to return to active service every six months or whenever changes in circumstances indicate that the
carrying amount of a vessel may not be recoverable. In the event that offshore E&P industry conditions continue to
deteriorate, or persist at current levels, the company could be subject to additional vessel impairments in future periods.
The table below summarizes the combined fair value of the assets that incurred impairments during the fiscal years ended
March 31, 2016 and 2015, along with the amount of impairment.
(In thousands)
Amount of impairment incurred
Combined fair value of assets incurring impairment
$
2016
117,311
422,655
2015
14,525
28,509
During fiscal year 2016, the company recognized a foreign exchange loss of $5.4 million, primarily related to the revaluation
of foreign currency denominated monetary assets and liabilities to the U.S. dollar reporting currency, most notably the
devaluation of the Brazilian reais relative to the U.S. dollar. Additionally, during fiscal year 2016, the entities which comprise
the operations of the Sonatide joint venture in Angola recognized foreign exchange losses of approximately $49.2 million,
primarily as a result of the devaluation relative to the U.S. dollar of Angolan kwanza-denominated bank balances. The
company has recognized (through equity in net earnings/(losses) of unconsolidated companies) 49% of Sonatide’s total
foreign exchange loss, or approximately $24.1 million.
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7674_fin.pdf 44
Fiscal 2015 Compared to Fiscal 2014
Consolidated Results. Despite the decrease in day rates and utilization towards the end of fiscal 2015, the company’s
revenue increased $60.4 million, or 4%, over the revenues earned during fiscal 2014 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 130%, or $181.6 million during fiscal 2015 largely due to a
$283.7 million non-cash goodwill impairment charge ($214.9 million after-tax, or $4.43 per share) recorded during the third
quarter of fiscal 2015 as disclosed in Note (16) of Notes to Consolidated Financial Statements included in Item 8 of this
Annual Report on Form 10-K. Excluding the goodwill impairment charges taken in fiscal 2015 and fiscal 2014 (net of
associated tax benefits), net earnings decreased approximately 19%, or approximately $34 million, during fiscal 2015.
Vessel operating costs increased 5%, or $38.5 million, during fiscal 2015 as compared to fiscal 2014. Crew costs
increased approximately 8%, or $31.8 million, during fiscal 2015 as compared to fiscal 2014, primarily because of the new
vessels delivered or acquired in the current fiscal year and the overall higher cost of personnel. Fuel, lube and supplies
costs increased 15%, or $11.7 million, during fiscal 2015 as compared to fiscal 2014, primarily due to the repositioning of
vessels to areas with more attractive contract opportunities.
Depreciation and amortization expense increased 5%, or $7.7 million, in fiscal 2015 as compared to fiscal 2014 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 1%, or $1.8 million, primarily due to the ramp up
of shore-based personnel to support the company’s subsea operations and vessel operations in the Americas and Middle
East/North Africa regions and the inclusion of Troms’ administrative related costs for a full fiscal year.
Interest and other debt costs also increased $6.2 million, or 14%, due to an increase in borrowings during fiscal 2015. The
overall decrease to pre-tax earnings and a decrease in the effective tax rate, contributed to a 103%, or $33.9 million
decrease to income tax expense. Adjusting for the goodwill impairment and related tax effects, the increase in the
effective tax rate for the year ended March 31, 2015 as compared to the year ended March 31, 2014 is primarily due to a
$17.8 million valuation allowance recorded against the company’s net deferred tax assets. Cumulative losses in recent
years and losses expected in the near term result in it being more likely than not that the net deferred tax assets will not
be realized in the foreseeable future. Of the $283.7 million goodwill impairment charge recognized in fiscal 2015, $45.2
million was non-deductible for U.S. income tax purposes, the effect of which was to increase the effective tax rate for the
year ended March 31, 2015.
At March 31, 2015, the company had 279 owned or chartered vessels (excluding joint-venture vessels and vessels
withdrawn from service) in its fleet with an average age of 9.5 years. At March 31, 2015, the average age of 254 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 7.7 years. The remaining 25 vessels, of which 9 are stacked at fiscal
year-end, have an average age of 28.4 years.
During fiscal 2015 and 2014, the company’s newer vessels generated $1,419 million and $1,342 million, respectively, of
consolidated vessel revenue and accounted for 97%, or $615.1 million, and 96%, or $602.2 million, respectively, of total
vessel margin (vessel revenues less vessel operating costs). Vessel operating costs during fiscal 2015 and 2014 for the
company’s new vessels excludes depreciation expense of $170.3 million and $152.9 million, and vessel operating lease
expense of $28.3 million and $21.9 million respectively.
Americas Segment Operations. Vessel revenues in the Americas segment increased approximately 23%, or
$95 million, during fiscal 2015 as compared to fiscal 2014, primarily due to higher revenues earned on both the deepwater
and towing-supply vessel classes. Revenues from the deepwater vessel class increased 34%, or $89.5 million, during the
same comparative periods, due to a nine percentage point increase in utilization, and due to an increased number of
deepwater vessels operating in the region as a result of newly delivered vessels and 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 2015. Revenues from the towing-supply vessels increased 9%, or $10 million, during the same
comparative periods, due to an increase in utilization of 16 percentage points.
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 2015, the company had 10 stacked Americas-based vessels. During fiscal
2015, the company stacked seven additional vessels and disposed of six vessels from the previously stacked vessel fleet,
resulting in a total of 11 stacked Americas-based vessels as of March 31, 2015.
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7674_fin.pdf 45
Operating profit for the Americas segment increased approximately 35%, or $32.1 million, during fiscal 2015 as compared
to fiscal 2014, primarily due to higher revenues, which were offset by a 19%, or $44.1 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 vessel operating lease costs, an increase in depreciation expense and an increase in general and
administrative expenses.
Crew costs increased 21%, or $25.2 million, during fiscal 2015 as compared to fiscal 2014, primarily due to an increase in
the number of vessels operating in this segment. Repair and maintenance costs increased 16%, or $8.1 million, during the
same comparative periods, due to an increase in the number and cost of drydockings performed. Fuel, lube and supplies
costs increased 34%, or $6.7 million, during the same comparative periods, due to the mobilization of larger deepwater
vessel into the region. Other vessel costs increased 15%, or $4.4 million, during the same comparative periods, due to the
number of vessel deliveries into the segment during fiscal 2015. Vessel operating lease costs increased 146%, or $12.4
million, during fiscal 2015 as compared to fiscal 2014, 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 10%, or $4.4 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.
General and administrative expenses increased 5%, or $2 million, during the same comparative periods in order to
support the higher levels of activity in the segment during fiscal 2015.
Asia/Pacific Segment Operations. Vessel revenues in the Asia/Pacific segment decreased approximately 3%, or $3.8
million, during fiscal 2015 as compared to fiscal 2014 primarily due to decreases in revenues from the towing-supply
vessel class. Revenues earned on the towing-supply vessels decreased $9.3 million, or 15%, during the same
comparative periods, due to a number of towing-supply vessels transferring out of the non-Australia areas within the
Asia/Pacific segment to other segments where charter opportunities for this class of vessel were considered by the
company to be more attractive. The decrease in revenues earned on the towing-supply vessels were offset by an increase
in revenues earned on the deepwater vessels. Deepwater vessels revenues increased $6.3 million, or 7%, during the
comparative periods, due to a net increase in the number of deepwater vessels operating the in the area, most notably in
Australia.
At the beginning of fiscal 2015, the company did not have any stacked Asia/Pacific vessels. During fiscal 2015, the
company stacked two vessels and reactivated one stacked vessel, resulting in a total of one stacked Asia/Pacific-based
vessel as of March 31, 2015.
Operating profit for the Asia/Pacific segment decreased $17.5 million, or 60%, during fiscal 2015 as compared to fiscal
2014, primarily due a $12.7 million, or 14%, increase in vessel operating costs (primarily crew costs, repair and
maintenance costs and fuel, lube and supplies costs) and an increase in depreciation expense.
Crew costs increased 6% or $3.6 million, during fiscal 2015 as compared to fiscal 2014, due to increased headcount on
vessels manned for certain projects and ramp up of crew work on new contracts in Australia. Repair and maintenance
costs increased 66%, or $7.8 million, during the same comparative periods, due to an increase in the number of
scheduled drydocks and additional inspections performed to prepare vessels for certain projects (also in Australia). Fuel,
lube and supplies costs increased 21%, or $2 million, and depreciation expense increased 7%, or $1.2 million during the
same comparative periods, as a result of a larger number of deepwater vessels operating the in region for most of the
fiscal year.
Middle East/North Africa Segment Operations. Vessel revenues in the Middle East/North Africa segment increased
approximately 10%, or $19.3 million, during fiscal 2015 as compared to fiscal 2014 primarily due to increases in revenues
from the deepwater vessel class. Deepwater vessel revenue increased 28%, or $18.8 million, during the comparative
periods, due to an increase in the number of deepwater vessels operating in the segment and a 9% increase in average
day rates. Increases in vessel revenues in the Middle East/North Africa segment is primarily the result of increased scale
of operations in the Black Sea and offshore Saudi Arabia (which, in turn was primarily driven by an increase in the number
of offshore rigs working in these areas).
Increases in dayrates in Middle East/North Africa reflect the transfer of larger, higher specification vessels from other
regions into the Middle East/North Africa region and lump sum mobilization fees.
At the beginning of fiscal 2015, the company had one stacked Middle East/North Africa-based vessel. During fiscal 2015,
the company stacked two additional vessels and disposed of one vessel previously stacked, resulting in a total of two
stacked Middle East/North Africa-based vessels as of March 31, 2015.
44
7674_fin.pdf 46
Operating profit for the Middle East/North Africa segment decreased $5.5 million, or 13%, during fiscal 2015 as compared
to fiscal 2014, primarily due to a 20%, or $19.9 million, increase in vessel operating costs (primarily crew costs, repair and
maintenance costs and other vessel costs), an increase in depreciation expense and an increase in general and
administrative expenses, which were partially offset by higher revenues.
Crew costs increased 25%, or $12.7 million; other vessel costs increased 16%, or $2 million; and depreciation expense
increased 13%, or $3.1 million, during fiscal 2015 as compared to fiscal 2014, primarily due to an increase in the number
of vessels operating in the segment. Repair and maintenance costs increased 31%, or $5.9 million, during the same
comparative periods, due to an increase in the number of drydockings performed in fiscal 2015 and the outfitting of
vessels in preparation for the start of new term contracts. General and administrative expenses increased 21%, or $3.5
million, due to the increase in shore passed personnel, primarily to support a higher level of activity in Saudi Arabia and in
the Black Sea.
Sub-Saharan Africa/Europe Segment Operations. Vessel revenues in the Sub-Saharan Africa/Europe segment
decreased approximately 9%, or $60.5 million, during fiscal 2015 as compared to fiscal 2014, primarily due to a decrease
in revenues from both the deepwater and towing-supply vessel classes. Revenues earned on the deepwater vessels
decreased 11%, or $38.4 million, and revenues earned on the towing-supply vessels decreased 10%, or $22.9 million,
during the comparative periods, primarily due to a reduction in the number of vessels in Sub-Saharan Africa due to
transfers of vessels from Sub-Saharan Africa (in particular, Angola) to other regions. These decreases were somewhat
offset by increases in vessel revenues generated by the company’s European operations driven by the acquisition of
Troms Offshore which occurred during fiscal 2014.
At the beginning of fiscal 2015, the company had four stacked Sub-Saharan Africa/Europe-based vessels. During fiscal
2015, the company stacked nine additional vessels, reactivated one vessel and disposed of five vessels from the
previously stacked vessel fleet, resulting in a total of seven stacked Sub-Saharan Africa/Europe-based vessels as of
March 31, 2015.
Operating profit for the Sub-Saharan Africa/Europe segment decreased approximately 10%, or $13.9 million, during fiscal
2015 as compared to fiscal 2014, primarily due to lower revenues, partially offset by a 10%, or $38.2 million, decrease in
vessel operating costs (primarily crew costs, repair and maintenance costs and other vessel costs), a decrease in vessel
operating lease costs and a decrease in depreciation expense.
Crew costs decreased 6%, or $9.7 million; other vessel costs decreased 7%, or $4.8 million; and depreciation expense
decreased 7%, or $5.6 million, during fiscal 2015 as compared to fiscal 2014, due to a decrease in the number of vessels
operating in the segment. Repair and maintenance costs decreased 26%, or $25.4 million, during the same comparative
periods, due to a fewer number of drydockings performed during the current period. Vessel operating lease costs
decreased 37%, or $4.3 million, during the same comparative periods, as vessels operated under lease arrangements
transferred to other segments.
Items. A goodwill
Other
the quarter ended
December 31, 2014. Please refer to the “Goodwill” section of Management Discussion and Analysis of this report for a
discussion on the company’s goodwill impairment.
impairment charge of $283.7 million was
recorded during
In the fourth quarter of fiscal 2015 the Company’s management initiated a plan to begin reorganizing its operations
worldwide as a result of the continuing decline in oil prices and the resulting softening demand for the company’s vessels.
This plan consists of select employee terminations and early retirements that are intended to eliminate redundant or
unneeded positions, reduce costs, and better align our workforce with anticipated activity levels in the geographic areas in
which the company presently operates. In connection with these efforts, the company recognized a $4.1 million
restructuring charge during the quarter ended March 31, 2015.
Reorganization efforts in fiscal 2015 most significantly included the redeployment of vessels from our Australian operation
to other international markets where opportunities to profitably operate such vessels were considered more robust. The
departure of these vessels from the Australian market and the associated reductions in onshore and offshore staffing
resulted in the termination of a number of mariners who were entitled to severance payments under the terms of the
enterprise bargaining agreement and in accordance with Australian labor laws.
Insurance and loss reserves expense decreased $1.9 million, or 10%, during fiscal 2015 as compared to fiscal 2014,
primarily due to downward adjustments to case-based and other reserves.
45
7674_fin.pdf 47
Gain on asset dispositions, net during fiscal 2015 decreased $2.5 million, or 21%, as compared to fiscal 2014. This
decrease is primarily due to a decrease in the number of vessels sold during the current fiscal year as well as an increase
in impairments related to vessels and other assets. Included in gain on asset dispositions, net for fiscal year 2015 are
$17.7 million of deferred gain amortization related to sale/leaseback transactions. Also included in gain on asset
dispositions, net is a gain related to the reversal of an accrued $3 million liability related to contingent consideration
potentially payable to the former owners of Troms Offshore based on the achievement by the Troms operation of certain
performance metrics subsequent to the acquisition by the company. The company’s current expectation is that such
performance metrics will not be achieved.
The company performed reviews of its assets for impairment during fiscal 2015 and 2014. 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
2015
2014
$
14,525
28,509
9,341
11,149
Vessel Class Revenue and Statistics by Segment
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. Specifications of available equipment and the scope 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.
46
7674_fin.pdf 48
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
(nine vessels at March 31, 2016). 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:
REVENUE BY VESSEL CLASS:(cid:3)
(In thousands)
Fiscal Year 2016
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
$
80,152
29,515
4,505
$ 114,172
61,776
24,121
3,313
89,210
49,792
22,254
3,917
75,963
43,802 235,522
92,768
16,878
14,705
2,970
63,650 342,995
$
$
$
$
19,833
8,104
—
27,937
20,386
26,189
691
47,266
$
53,966
41,198
13,774
$ 108,938
23,435
8,738
—
32,173
20,769
23,914
653
45,336
39,955
42,106
15,351
97,412
13,267
5,877
—
19,144
4,318
5,473
—
9,791
60,853
28,192
—
89,045
17,690
21,795
699
40,184
15,718
19,276
691
74,563
91,174
2,734
35,685 168,471
30,361
35,186
12,070
77,617
30,338 154,620
31,914 150,404
49,865
70,922 354,889
8,670
$ 174,337 145,935 111,110
85,112
105,006
16,686
18,970
94,176 525,558
73,541 362,538
67,304
12,331
$ 298,313 264,131 212,908 180,048 955,400
98,879
19,317
47
7674_fin.pdf 49
REVENUE BY VESSEL CLASS – continued:
(In thousands)
Fiscal Year 2015
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 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
$
82,282
29,517
8,184
85,249
27,518
4,382
$ 119,983 134,013 134,554 117,149
94,298
33,607
6,649
91,403
34,387
8,223
$
$
$
$
24,242
15,037
970
40,249
27,675
17,338
976
45,989
20,575
13,487
984
35,046
22,046
7,419
71
29,536
19,467
35,279
793
55,539
19,254
28,715
868
48,837
25,615
29,441
869
55,925
20,943
23,797
746
45,486
$
91,691
55,436
18,612
64,302
45,739
15,558
$ 165,739 162,113 152,601 125,599
81,129
52,532
18,940
89,193
54,617
18,303
353,232
125,029
27,438
505,699
94,538
53,281
3,001
150,820
85,279
117,232
3,276
205,787
326,315
208,324
71,413
606,052
$ 217,682 227,525 221,617 192,540
135,269 135,057 129,067 104,473
20,757
859,364
503,866
105,128
$ 381,510 390,952 378,126 317,770 1,468,358
Third
Second
Fourth
27,442
28,370
28,559
Year
First
$
$
$
$
$
$
55,032
27,670
7,542
74,859
26,073
7,778
90,244 101,929 109,848 108,710
72,048
30,451
7,349
61,811
30,861
9,257
24,292
17,722
942
42,956
19,923
16,559
948
37,430
20,142
15,235
948
36,325
23,834
13,114
959
37,907
15,852
24,497
864
41,213
15,732
28,763
875
45,370
18,805
31,481
872
51,158
16,114
31,979
690
48,783
$
87,251 106,541
56,772
54,860
15,626
15,106
86,064
59,803
21,183
$ 157,217 178,939 163,382 167,050
84,866
59,789
18,727
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
$ 182,427 204,007 195,861 200,871
124,749 132,955 136,956 130,969
30,610
783,166
525,629
109,666
$ 331,630 363,668 360,713 362,450 1,418,461
27,896
26,706
24,454
48
7674_fin.pdf 50
UTILIZATION:
Fiscal Year 2016
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 2015
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
7674_fin.pdf 51
First
Second
Third
Fourth
Year
81.3%
64.7
45.3
69.6%
45.0%
73.4
—
58.2%
70.1%
76.5
100.0
75.6%
68.4%
66.4
69.7
68.2%
65.1
56.5
47.8
59.7
59.9
79.7
—
68.3
73.7
74.9
91.9
75.2
57.2
63.9
73.5
65.1
70.7%
69.5
64.3
68.8%
63.0
67.0
67.9
65.7
Second
First
53.6
48.9
60.4
52.7
40.6
62.6
—
51.0
45.6
43.6
59.5
46.5
17.4
56.3
—
38.0
65.4
66.9
100.0
67.8
61.7
57.8
100.0
60.8
50.6
58.5
71.5
60.4
52.5
58.9
69.1
58.4
55.8
56.8
66.8
59.7
47.9
53.7
65.5
53.6
61.1
53.4
52.6
57.1
40.5
67.6
—
53.6
67.7
69.0
97.9
69.8
58.0
61.4
70.5
63.4
58.4
62.3
66.7
61.7
Third
Fourth
Year
91.9
70.3
76.9
80.9
82.4
93.6
100.0
89.6
80.4
71.1
100.0
74.7
85.5
78.5
71.3
77.9
87.0
76.2
73.9
79.3
87.3
74.5
56.7
77.2
66.9
76.6
100.0
73.9
89.3
79.6
100.0
83.2
85.7
78.8
73.3
78.7
84.9
77.7
71.0
78.6
88.3
65.7
50.2
73.2
66.6
63.2
7.5
62.5
81.8
68.7
100.0
73.7
76.5
71.5
67.2
71.3
80.7
68.3
63.4
71.4
89.0
68.2
63.3
76.5
71.4
81.1
77.2
77.2
81.1
78.3
98.0
79.9
83.7
76.0
72.5
76.9
84.1
75.2
71.4
77.3
88.7%
62.7
69.3
74.8%
70.6%
90.7
100.0
83.5%
72.1%
93.6
91.9
87.8%
86.3%
75.3
78.1
79.5%
83.8%
78.4
76.9
79.8%
49
UTILIZATION – continued:
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
AVERAGE DAY RATES:
Fiscal Year 2016
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
7674_fin.pdf 52
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
First
Second
Third
Fourth
Year
26,254
16,003
7,461
20,725
34,487
7,907
—
18,028
20,738
11,200
3,737
13,692
20,876
17,009
5,731
13,782
24,535
13,689
5,858
16,039
25,584
17,071
7,050
19,962
25,795
14,701
6,056
19,077
27,345
6,379
—
13,611
21,112
6,434
—
9,278
20,995
11,430
3,800
13,699
18,666
11,826
3,800
13,446
18,355
15,565
4,764
12,037
17,072
14,709
3,960
11,557
22,546
13,315
5,098
14,589
20,827
12,683
4,309
13,658
26,755
16,372
7,344
20,824
32,467
7,336
—
15,575
20,833
11,646
3,784
13,889
20,431
15,878
4,962
13,100
24,081
13,522
5,269
15,558
$
$
$
$
$
$
$
$
$
$
28,568
17,289
8,796
22,721
39,268
8,391
—
18,994
22,830
12,143
3,799
14,626
24,278
16,052
5,201
14,647
27,128
14,197
5,676
17,379
50
Fiscal Year 2015
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
AVERAGE DAY RATES – continued:
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
7674_fin.pdf 53
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
First
Second
Third
Fourth
Year
31,175
16,559
8,856
22,443
41,948
13,017
10,658
22,066
25,081
13,366
4,742
15,502
30,414
16,867
5,562
17,179
31,061
15,261
6,306
18,701
31,233
17,309
8,304
22,701
39,841
14,387
10,609
23,090
23,078
14,171
4,719
16,040
30,928
16,911
5,937
17,628
31,001
15,987
6,523
19,415
32,612
16,890
9,314
24,048
28,972
15,482
6,777
21,830
35,821
13,664
10,692
21,195
33,443
9,362
10,609
20,252
24,586
12,870
4,723
15,918
22,558
12,526
4,145
15,121
28,675
16,859
5,976
16,743
27,239
16,600
5,605
15,916
30,205
15,401
6,598
19,024
27,942
14,460
5,752
17,928
30,986
16,590
8,378
22,768
37,723
12,870
10,652
21,771
23,816
13,242
4,581
15,650
29,428
16,817
5,771
16,905
30,074
15,307
6,316
18,792
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
29,779
17,247
7,320
21,169
31,066
16,220
7,868
21,718
33,937
12,687
10,300
19,257
39,072
12,383
10,661
21,550
23,708
13,375
4,738
15,358
20,524
13,000
3,912
14,258
28,664
15,764
5,409
15,994
29,158
16,542
5,392
15,917
28,944
15,029
5,883
17,492
29,730
14,982
5,905
17,525
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
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
51
Vessel Count, Dispositions, Acquisitions and Construction Programs
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, 2016 vessel count:
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
Actual
Vessel
Count at
March 31,
2016
Average Number
of Vessels During
Year Ended March 31,
2015
2016
2014
41
27
9
77
28
49
13
17
1
31
16
15
15
31
2
48
9
39
35
42
36
113
24
89
192
77
269
—
9
278
39
30
10
79
18
61
13
15
1
29
9
20
14
31
2
47
5
42
36
42
39
117
18
99
222
50
272
—
9
281
35
30
14
79
9
70
10
14
1
25
—
25
12
31
2
45
1
44
36
45
47
128
6
122
261
16
277
—
11
288
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
Owned or chartered vessels include vessels stacked by the company. The company considers a vessel to be stacked if the
vessel crew is furloughed or substantially reduced 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 active service by performing any necessary
maintenance on the vessel and either rehiring or returning fleet personnel to operate the vessel. Although not currently
fulfilling charters, stacked vessels are considered to be in service and are included in the calculation of the company’s
utilization statistics.
The company had 77, 21 and 15 stacked vessels at March 31, 2016, 2015 and 2014, respectively.
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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
2016
2015 (A) 2014 (A)
—
—
1
1
15
17
7
—
—
10
—
17
1
1
—
9
2
13
7
—
1
5
—
13
—
3
27
12
6
48
19
9
8
11
1
48
(A)
Excluded from fiscal 2015 and 2014 vessel dispositions are 6 and 10 vessels, respectively 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.
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Vessel and Other Deliveries and Acquisitions
The table below summarizes the number of vessels and ROVs 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
2016
2015 (A) 2014 (B)
—
5
2
—
—
7
—
—
9
—
—
—
9
2
1
10
—
2
2
15
6
(A)
(B)
Excluded from fiscal 2015 vessel deliveries and acquisitions is one deepwater class PSV that was originally sold to a third party and leased back
in fiscal 2010. The company elected to repurchase this vessel from its lessor during fiscal 2015 as disclosed in Note (11) of Notes to Consolidated
Financial Statements included in Item 8 of this Annual Report on Form 10-K.
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.
Fiscal 2016. The company took delivery of five newly-built deepwater PSVs and two towing-supply vessels. One 268-foot,
4,000 DWT of cargo carrying capacity, deepwater PSV was constructed at an international shipyard for a total cost of $39.7
million. Three 275-foot, 4,600 DWT of cargo carrying capacity, deepwater PSVs were constructed at a different international
shipyard for a total aggregate cost of $89.7 million, or an average approximate cost per vessel of $29.9 million. One 310-foot,
6,000 DWT of cargo carrying capacity, deepwater PSV was constructed at a domestic shipyard for a total cost of $53.5
million. In addition, two 7,145 BHP towing-supply vessels were constructed at another international shipyard for a total cost
of $32.1 million, or an average approximate cost per vessel of $16.1 million.
Fiscal 2015. The company took delivery of nine newly-built deepwater PSVs. Two 246-foot deepwater PSVs were
constructed at an international shipyard for a total aggregate cost of $34.8 million, or an average approximate cost per
vessel of $17.4 million. Five 275-foot deepwater PSVs were constructed at two international shipyards for a total cost of
$144.9 million, or an average approximate cost per vessel of $29 million. One 268-feet deepwater PSV was constructed
at another international shipyard for a total cost of $38.4 million. One 261-feet deepwater PSV was constructed at a U.S.
shipyard for a total cost of $49.8 million. The company also acquired two ROVs for a total cost of $12.4 million, or an
average approximate cost per ROV of $6.2 million.
In addition to the 11 vessel and two ROV deliveries noted above, we acquired one additional deepwater class PSV during
fiscal 2015 which had been sold and leased back during fiscal 2006. The company elected to repurchase this vessel from
the lessor for a total cost of $11.2 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 2014. The company took delivery of six newly-built vessels and acquired nine vessels from third parties. Included
are two deepwater PSVs, which are 303-feet in length. The 303-foot PSVs were constructed at a U.S. shipyard for a total
aggregate cost of $123.3 million, or an average approximate cost per vessel of $61.6 million. The company also took
delivery of 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, or an average approximate cost per vessel
of $25.7 million. The company also took delivery of two waterjet crewboats at an international shipyard for $6 million. In
addition, the company acquired from third parties, two 290-feet deepwater PSVs for a total cost of $93.9 million (an average
approximate cost per vessel of $46.9 million) and a 247-foot deepwater AHTS vessel for $29 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
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(approximately $58.7 million per vessel). 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 (approximately $56.2 million
per vessel). The company also acquired six ROVs for a total cost of $31.9 million (approximately $5.3 million per ROV).
In addition to the 21 vessels and six ROV 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 (approximately
$10 million per vessel). 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.
Vessel and Other Commitments at March 31, 2016
The table below summarizes the various commitments to acquire and construct new vessels, by vessel type, as of
March 31, 2016:
(In thousands)
Deepwater:
261-foot PSV
292-foot PSV
300-foot PSV
310-foot PSV
Total Deepwater PSVs
Total commitments
Number
of
Vessels
Shipyard
Location
Delivery
Dates
Total
Cost
Amount
Invested
03/31/16
Remaining
Balance
03/31/16
International 6/2016, 7/2016
International
United States
United States
9/2016
1/2017, 5/2017
4/2016
2
1
2
1
6
6
$251,420 183,904
$251,420 183,904
67,516
67,516
(A)
(B)
Six additional option vessels and a fast supply boat are not included in the table above.
The company is entitled to receive a refund of prior shipyard payments totaling approximately $31 million which will offset the remaining balance of
vessel commitments. See further discussion below.
In June 2015, the company entered into settlement agreements with an international shipyard, which at the time was
constructing six 7,145 BHP towing-supply-class vessels and six 261-foot, 4,700 DWT tons of cargo capacity, deepwater
PSVs. Under the settlement agreements, contracts for three 7,145 BHP towing-supply-class vessels were terminated, and
the shipyard agreed with respect to these three cancelled contracts to (i) return to the company approximately $36 million
in aggregate installment payments, (ii) terminate the company’s obligation to make any additional payments, and (iii)
apply $3.5 million of accrued interest due to the company on the returned installment amounts to offset future installment
obligations on other vessels at this shipyard. Of the total $36 million in returned installments, the shipyard returned $24
million in June 2015 and the remaining $12 million in July 2015. The company recorded an impairment charge of $0.8
million in the first quarter of fiscal 2016 to write off the amounts not recoverable from the shipyard with respect to these
three vessels. The company applied the $3.5 million shipyard credit in the December quarter as an offset to other
payments made to the shipyard.
In September 2015, the company entered into additional settlement agreements with the same shipyard to resolve the
remaining nine vessels (three additional 7,145 BHP towing-supply-class vessels and six 261-foot, 4,700 deadweight tons
of cargo capacity, deepwater PSVs) then under construction. Under the settlement agreements, the company agreed to
substantial discounts to the purchase price for four of these vessels. The company took delivery of one towing-supply-
class vessel in September of 2015, and another towing-supply-class vessel in January of 2016, and is expected to take
delivery of two deepwater PSVs in the June quarter of 2016. Under the September 2015 settlement agreements, the
company received separate options, but not obligations to acquire, each of the remaining five vessels, with option dates
expiring in October 2016. Under the terms of these options, if the company does not elect to take delivery of any of these
vessels, (a) the company is entitled to receive the return of approximately $31 million in aggregate installment payments
(representing installment payments made to date on these five vessels) together with interest on these installments of
$3.7 million (which were issued to the company as “shipyard credits” and applied to future installment payments on the
two PSVs to be delivered) and (b) the company will be relieved of the obligation to pay the shipyard the approximately $75
million in remaining construction payments. The purchase prices for each of the five vessels that are subject to options
are unchanged by the settlement. The company declined to exercise the first of these options, and in January 2016
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received $12 million in refunded payments. The company has also taken the $3.7 million “shipyard credit” in the
December 2015 quarter as an offset against other payments made to the shipyard. The remaining four option vessels are
not included in the preceding table of vessel commitments as of March 31, 2016. Each settlement agreement (except for
the agreement with respect to the towing-supply vessel delivered in September 2015) was entered into subject to the
consent of the Bank of China, the issuer of the refundment guarantees on all nine vessels. The Bank of China has
subsequently issued consents for all eight remaining settlement agreements and has issued refundment guarantees on
the two remaining vessels under construction at March 31, 2016.
In April 2015, the company entered into negotiations with an international shipyard constructing two 275-foot, 3,800
deadweight tons of cargo capacity, deepwater PSVs to resolve issues associated with the late delivery of these vessels. In
May 2015, the company settled these issues with the shipyard. Under the terms of the settlement, the company can elect to
take delivery of one or both completed vessels at any time prior to June 30, 2016. That date is subject to two six month
extension periods, each extension requiring the mutual consent of the company and the shipyard. If the company does not
elect to take delivery of one or both vessels prior to June 30, 2016 (as that date may be extended by mutual agreement), (a)
the company is entitled to receive the return of $5.4 million in aggregate installment payments per vessel together with
interest on these installments (which aggregates to approximately $11.9 million) and (b) the company will be relieved of the
obligation to pay to the shipyard the $21.7 million of remaining payments per vessel. The company recorded an impairment
charge of $1.9 million in the fourth quarter of fiscal 2016 to write off the amounts not recovered from the shipyard. The
shipyard's obligation to return the $5.4 million (plus interest) per vessel if the company elects not to take delivery of one or
both vessels is secured by Bank of China refundment guarantees. These two vessels are not included in the preceding table
of vessel commitments as of March 31, 2016.
The company has experienced 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 June 30, 2015. During the first quarter of
fiscal 2016, the company recorded an impairment charge of $2.4 million (representing amounts not covered by insurance)
and reclassified the remaining $5.6 million from construction in progress to other non-current assets. This vessel is not
included in the preceding table of vessel commitments as of March 31, 2016.
Vessel Commitments Summary at March 31, 2016
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
Totals
(In thousands)
Expected quarterly cash outlay
Quarter Period Ended
06/16
09/16
12/16
03/17
06/17
2
2
2
2
—
—
1
1
1
1
$
10,449
43,553
2,311
6,313
4,890
The company believes it has sufficient liquidity and financial capacity to support the continued investment in the remaining
vessels under construction. 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 (5) of Notes to
Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
The company has $67.5 million in unfunded capital commitments associated with the six vessels currently under
construction (approximately $36.5 million, net of expected returns from shipyards) at March 31, 2016.
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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
2016
$ 94,803
23,781
6,282
17,331
11,614
$ 153,811
%
10%
2%
1%
2%
1%
16%
2015
115,450
29,219
11,839
20,381
12,930
189,819
%
8 %
2 %
1 %
1 %
1 %
13 %
2014
109,943
27,121
11,645
29,035
10,232
187,976
%
8%
2%
1%
1%
1%
13%
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
2016
$ 116,039
3,694
34,078
$ 153,811
%
76%
2%
22%
100%
2015
144,495
4,703
40,621
189,819
%
76 %
2 %
22 %
100 %
2014
137,741
2,532
47,703
187,976
%
74%
1%
25%
100%
General and administrative expenses during fiscal year 2016 were 19%, or $36 million, lower than fiscal year 2015.
Decreases across all components of general and administrative cost are a result of the company’s continuing efforts to
reduce overhead costs as a result of the downturn in the offshore oil services market. In addition, lower personnel costs are
also due, in part, to lower equity based compensation expense as a result of the company’s lower stock price.
General and administrative expenses were higher by approximately 1%, or $1.8 million, during fiscal 2015 as compared to
fiscal 2014. Increases in administrative payroll, other general and administrative costs and office and property costs of
$5.5 million, $2.7 million and $2.1 million respectively, were partially offset by decreases in professional services of $8.7
million. Incremental increases in personnel, office and property, other and sales and marketing costs are primarily related
to the ramp up of shore-based personnel to support the company’s subsea operations and vessel operations in the
Americas and Middle East/North Africa regions and the inclusion of Troms’ administrative related costs for a full year
versus ten months in fiscal 2014. Additionally, professional services costs were higher during fiscal 2014 year due to legal
fees associated with arbitration activities related to our historical operations in Venezuela, the administration of a
subsidiary company based in the United Kingdom and transaction costs related to the acquisition of Troms Offshore.
Liquidity, Capital Resources and Other Matters
Under the company’s principal credit arrangements, the company is subject to a requirement that it maintain financial ratios
of earnings before interest taxes depreciation and amortization (EBITDA) to interest expense and debt to total capitalization.
The company’s current ratio, level of working capital and amount of cash flows from operations for any year are primarily
related to fleet activity, vessel day rates and the timing of collections and disbursements. Vessel activity levels and vessel
day rates are, among other things, dependent upon the supply/demand relationship for offshore vessels, which tend to follow
the level of oil and natural gas exploration and production. Variations from year-to-year in these items are primarily the result
of market conditions. At March 31, 2016, the company’s working capital deficit of $1.1 billion was the result of the
reclassifications of long-term debt as more fully described in the following paragraphs.
Status of Discussions with Lenders and Noteholders / Audit Opinion
The decrease in oil and gas prices that began in the second half of fiscal 2015 and continued throughout fiscal 2016 has led
to materially lower levels of spending for offshore exploration and development by our customers globally. In addition, newly
constructed vessels have been delivered over the last several years, exacerbating weak vessel utilization. With reduced
demand for offshore support vessels along with increased supply, the company has experienced a significant decline in the
utilization of its vessels, average day rates received and vessel revenue. The company has implemented a number of
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significant cost reduction measures to mitigate the effects of significantly lower vessel revenue and, given the currently
challenging offshore vessel support market and business outlook, has taken other steps to improve its financial position and
liquidity.
At March 31, 2016, the company was in compliance with all financial covenants set forth in its debt facilities and note
indentures; however, we are forecasting that, as early as the quarter ending June 30, 2016, the company may no longer be
in compliance with the 3.0x minimum interest coverage ratio requirement contained in its Revolving Credit and Term Loan
Agreement (“Bank Loan Agreement”), the Troms Offshore Debt and the 2013 Senior Note Agreement (the “2013 Note
Agreement”). In the event of a covenant violation, which could occur as early as mid-August 2016 (when we are required to
certify that the interest coverage ratio has been met for the first fiscal quarter ending June 30, 2016), the lenders and/or the
noteholders could declare the company to be in default of the Bank Loan Agreement, the Troms Offshore Debt or the 2013
Note Agreement, as applicable, and accelerate the indebtedness thereunder, the effect of which would be to likewise cause
the company’s other Senior Notes, which were issued in 2010 and 2011, to be in default. Please refer to Note (5) of Notes to
Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional information
regarding the company’s outstanding debt.
Given that we expect that during fiscal 2017 we will not meet the 3.0x minimum interest coverage ratio requirement set forth
in the Bank Loan Agreement, the Troms Offshore Debt and the 2013 Note Agreement, which could result in the acceleration
of the debt under these agreements and the company’s other Senior Notes, the report of the company's independent
registered public accounting firm that accompanies our audited consolidated financial statements for the fiscal year ended
March 31, 2016 (the “audit opinion”) contains an explanatory paragraph regarding our ability to continue as a going concern.
Such going concern explanatory paragraph is required only because our internal forecast indicates that, within fiscal 2017,
we may no longer be in compliance with the minimum interest coverage ratio requirement.
In addition, the Bank Loan Agreement and the Troms Offshore Debt require that the company receive an unqualified audit
opinion from an independent certified public accountant which shall not be subject to a going concern or similar modification.
The failure to receive an audit opinion without any modification, in and of itself, is an event of default under these agreements
which would allow the lenders to accelerate the indebtedness thereunder, the effect of which would be to likewise cause all
of the company’s Senior Notes to be in default. Subsequent to March 31, 2016, the company obtained limited waivers from
the necessary lenders which waive the audit opinion requirement (i.e., no modifications) until August 14, 2016.
As a result of the event of default caused by our failure to receive an audit opinion with no modifications from our
independent certified public accountants (which has been waived only until August 14, 2016), all of the company’s
indebtedness (with the stated maturities as summarized in Note (5)) has been reclassified as a current liability in the
accompanying consolidated balance sheet at March 31, 2016. The explanatory paragraph in the audit opinion discussed
above also references the audit opinion-related event of default under various borrowing arrangements as an uncertainty
that raises substantial doubt about the company’s ability to continue as a going concern.
The company is engaged in discussions with its principal lenders and noteholders to amend and/or waive the company’s
3.0x minimum interest coverage ratio covenant in advance of any such potential default occurring, with the goal of
finalizing any amendments and/or waivers prior to the possible covenant breach. Any such amendments and/or waivers
would require successful negotiations with our bank group and noteholders, and may require the company to make certain
concessions under the existing agreements, such as providing collateral to secure the Bank Loan Agreement, the Troms
Offshore Debt and the Senior Notes, repaying all or a portion of the indebtedness outstanding under the revolving portion of
the Bank Loan Agreement, accepting a reduction in total borrowing capacity under the revolving credit facility, paying a
higher rate of interest, paying down a portion of the Troms Offshore Debt and/or Senior Notes, or some combination of the
above. In addition, such amendments and/or waivers will need to address the audit opinion requirement of the Bank Loan
Agreement and the Troms Offshore Debt (which, again, has been waived only until August 14, 2016). Obtaining the
covenant relief will require the company to reach an agreement that satisfies potentially divergent interests of our lenders
and noteholders.
If lenders or noteholders accelerate the company's outstanding indebtedness, the company’s multiple borrowings will
become immediately payable (as a result of cross default provisions), and the company will not have sufficient liquidity to
repay those accelerated amounts. If the company is unable to reach an agreement with lenders and noteholders to address
the potential defaults, the company would likely seek reorganization under Chapter 11 of the federal bankruptcy laws, which
could include a restructuring of the company’s various debt obligations.
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The company’s consolidated financial statements as of and for the year ended March 31, 2016 have been prepared
assuming the company will continue as a going concern, which contemplates continuity of operations, realization of assets
and the satisfaction of liabilities in the normal course of business for the twelve month period following the date of these
consolidated financial statements. However, for the above described reasons, indebtedness with the stated maturities as
summarized in Note (5) is classified as a current liability at March 31, 2016.
Availability of Cash
At March 31, 2016, the company had $678.4 million in cash and cash equivalents, of which $669.8 million was held by
foreign subsidiaries, all of which is available to the company without adverse tax consequences. The company currently
intends that earnings by foreign subsidiaries will be indefinitely reinvested in foreign jurisdictions in order to fund strategic
initiatives (such as investment, expansion and acquisitions), fund working capital requirements and repay debt (both third-
party and intercompany) of its foreign subsidiaries in the normal course of business. Moreover, the company does not
currently intend to repatriate earnings of its foreign subsidiaries to the United States because cash generated from the
company’s domestic businesses and the repayment of intercompany liabilities from foreign subsidiaries, are currently
sufficient to fund the cash needs of its operations in the United States. However, if, in the future, cash and cash equivalents
held by foreign subsidiaries are needed to fund the company’s operations in the United States, the repatriation of such
amounts to the United States could result in a significant 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 and future net cash provided by operating activities provide the company, in our opinion, with
sufficient liquidity to meet our liquidity requirements, including repayment of debt that becomes due and required payments
on vessel construction currently in progress.
Indebtedness
Please refer to the “Status of Discussions with Lenders and Noteholders / Audit Opinion” discussion included in “Liquidity,
Capital Resources and Other Matters” in Part II, Item 7 of this Annual Report on Form 10-K for additional information
regarding the company’s compliance with debt covenants and classification of all outstanding debt as a current liability.
Bank Loan Agreement
In May 2015, the company amended and extended its existing bank loan agreement. The amended bank loan agreement
matures in June 2019 and provides for a $900 million, five-year credit facility consisting of (i) a $600 million revolving credit
facility and (ii) a $300 million term loan facility.
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 and $600 million of revolver borrowings outstanding at
March 31, 2016 and $300 million in term loan borrowings and $20 million of revolver borrowings outstanding at
March 31, 2015 (whose fair value approximates the carrying value because the borrowings bear interest at variable rates).
The company had no available capacity under the revolver at March 31, 2016 and $580 million available under the revolver
at March 31, 2015.
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.
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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 to a group of institutional investors on November 15, 2013. 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
2016
2015
$ 500,000 500,000
8.4
7.4
4.86 %
4.86%
342,746 516,879
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
2016
2015
$ 165,000 165,000
5.6
4.6
4.42 %
4.42%
127,148 167,910
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
2016
2015
$ 382,500 425,000
4.6
4.1
4.25 %
4.35%
302,832 431,296
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, 2016 and 2015, is an after-tax loss of $1.5 million
($2.4 million pre-tax), and $1.8 million ($2.6 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
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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 entered into a note purchase agreement and issued $300 million of senior unsecured notes to a
group of institutional investors. The remaining amounts outstanding were fully paid in July 2015. 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
$
2016
2015
—
—
—
—
35,000
0.3
4.61 %
35,197
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 May 2015, Troms Offshore entered into a $31.3 million, U.S. dollar denominated, 12 year unsecured borrowing agreement
which matures in April 2027 and is secured by a company guarantee. The loan requires semi-annual principal payments of
$1.3 million (plus accrued interest) and bears interest at a fixed rate of 2.92% plus a premium based on Tidewater Inc.’s
consolidated funded indebtedness to total capitalization ratio (currently equal to 1.30% for a total all-in rate of 4.22%). As of
March 31, 2016, $30 million is outstanding under this agreement.
In March 2015, Troms Offshore entered into a $29.5 million, U.S. dollar denominated, 12 year unsecured borrowing
agreement which matures in January 2027 and is secured by a company guarantee. The loan requires semi-annual principal
payments of $1.2 million (plus accrued interest) and bears interest at a fixed rate of 2.91% plus a premium based on
Tidewater Inc.’s consolidated funded indebtedness to total capitalization ratio (currently equal to 1.30% for a total all-in rate
of 4.21%). As of March 31, 2016, $27 million is outstanding under this agreement.
A summary of U.S. dollar denominated Troms Offshore borrowings outstanding at March 31 is as follows:
(In thousands)
May 2015 notes (A)
Amount outstanding
Fair value of debt outstanding (Level 2)
March 2015 notes (A)
Amount outstanding
Fair value of debt outstanding (Level 2)
(A) Note requires semi-annual principal payments.
March 31,
2016
March 31,
2015
$
$
30,033
30,062
—
—
27,030
27,027
29,488
29,501
In January 2014, Troms Offshore entered into a 300 million NOK denominated, 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 the company’s consolidated funded
indebtedness to total capitalization ratio (currently equal to 1.50% for a total all-in rate of 3.81%).
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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. 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 replace the vessel security with a company guarantee.
A summary of Norwegian Kroner (NOK) denominated Troms Offshore borrowings outstanding at March 31 and their U.S.
dollar equivalents are as follows:
(In thousands)
3.81% January 2014 notes (A):
NOK denominated
U.S. dollar equivalent
Fair value in U.S. dollar equivalent (Level 2)
5.38% May 2012 notes (A):
NOK denominated
U.S. dollar equivalent
Fair value in U.S. dollar equivalent (Level 2)
Variable rate borrowings:
June 2013 borrowing agreement (B)
NOK denominated
U.S. dollar equivalent
May 2012 borrowing agreement (B)
NOK denominated
U.S. dollar equivalent
March 31,
2016
March 31,
2015
250,000
30,207
30,199
144,840
17,500
17,479
275,000
34,234
34,226
161,880
20,152
19,924
—
—
—
—
25,000
3,112
20,000
2,490
$
$
$
$
(A) Note requires semi-annual principal payments.
(B)
Fair values approximate carrying values because the borrowings bear interest at variable rates. The notes were repaid in fiscal 2016.
Each of the four Troms Offshore Debt tranches (two U.S. dollar denominated and two NOK denominated) require 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.
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 (6) of Notes to Consolidated Financial Statements
included in Item 8 of this Annual Report on Form 10-K.
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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
2016
2015
2014
$
$
53,752
10,451
64,203
50,029
13,673
63,702
43,814
11,497
55,311
Total interest and debt costs incurred in fiscal 2016 were slightly higher than fiscal 2015 due primarily to increased
average borrowings in fiscal 2016.
Total interest and debt costs incurred during fiscal 2015 were higher than those incurred during fiscal 2014 due primarily
to a full fiscal year of interest charges related to the 300 million NOK borrowing agreement which was funded in January
of 2014 and increased revolver borrowings during fiscal 2015.
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, 2016, 2015 and 2014.
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, 2016, 2015 and 2014.
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 (loss)
Depreciation and amortization
Benefit for deferred income taxes
Gain on asset dispositions, net
Asset impairments
Goodwill impairment
Changes in operating assets and liabilities
Changes in due to/from affiliate, net
Other non-cash items
Net cash provided by operating activities
2014
Change
Change
(95,027)
2016
$ (160,376)
182,309
(6,796)
(26,037)
65,593
(2,241)
117,311 102,786
7,105 175,204
(72,389 )
(23,796 )
14,525
2015
(65,349 ) (205,604) 140,255
7,724 167,480
(34,709)
(21,063)
9,341
56,283
44,163
(24,504) 108,588 369,263 (260,675)
3,542
22,286
$ 253,360 (105,353) 358,713 254,096 104,617
(37,680)
(2,733)
5,184
— (283,699) 283,699 227,416
(83,011 ) (127,174)
19,337 102,348
84,084
43,528
21,242
17,700
Cash flows from operations decreased 29%, or $105.4 million, to $253.4 million, during fiscal year 2016 as compared to
$358.7 million during fiscal year 2015 due to a $95 million increase in our net loss during fiscal 2016. Included in the net loss
in fiscal 2016 is $117.3 million of non-cash asset impairment charges. Included in the net loss in fiscal 2015 is $298.2 million
of non-cash impairment charges, including $14.5 million in asset impairment charges and a goodwill impairment charge of
$283.7 million. The combined year-to-year net change in non-cash impairment charges was $180.9 million. Before
impairment charges, earnings (loss) before income taxes for fiscal 2016 and fiscal 2015 was ($22.2) million and $231.8
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million, respectively, or a decrease of 110%, or $254 million. Income tax (benefit) expense in fiscal 2016 and fiscal 2015 was
respectively $20.8 million and ($1.1) million, an increase in tax expense of $21.9 million. The net loss before income taxes
and impairment charges in fiscal 2016 as compared to earnings before income taxes and impairment charges in fiscal 2015
is primarily due to lower revenues caused by the decline in offshore oil and gas exploration and drilling activity levels.
Additionally, the net reduction in the due to/from affiliate balance in fiscal 2016 was $24.5 million less than the net
reduction in the due to/from affiliate balance in fiscal 2015 (though net cash provided by operating activities in fiscal 2016
and fiscal 2015 respectively reflect a net reduction in the due to/from affiliate balance of $84.1 million and 108.6 million),
primarily attributable to cash collections received from and growth in amounts due to our Angolan joint venture operation
which is included within our Sub-Saharan Africa/Europe segment. For additional disclosure regarding the Sonatide Joint
Venture, refer to Part I, Item 1, of this Annual Report on Form 10-K. These decreases were partially offset by a $102.3
million increase in cash flow from operating assets and liabilities primarily due, in part, to the reduction of receivables as
compared to fiscal 2015 as a result of lower of revenues.
Cash flows from operations increased $254.1 million, or 243%, to $358.7 million, during fiscal 2015 as compared to
$104.6 million during fiscal 2014, due primarily to a reversal in fiscal 2015 of the significant growth during fiscal 2014 in
the net due to/from affiliate balance. These increases were partially offset by a $127.2 million decrease in cash flow from
changes in operating assets and liabilities (primarily due to the increase in trade receivables of $43.5 million and the
decrease in accounts payable and accrued expenses of $34.4 million), and a decrease in the benefit for deferred income
taxes. The decrease in due to/from affiliate is attributable to improved collections from our Angolan operation and growth
in the due to affiliate balance, which is included within 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)
Proceeds from sales of assets
Proceeds from sale/leaseback of assets
Additions to properties and equipment
Refunds from cancelled vessel construction contracts
Payments for acquisition, net of cash acquired
Other
Net cash used in investing activities
2016
10,690
Change
2,380
Change
(43,020)
2014
51,330
8,310
— (123,950) 123,950 (146,625) 270,575
(194,485) 169,709 (364,194 ) 230,501 (594,695)
—
—
— 127,737 (127,737)
(3,158)
3,674
96,422 (231,418 ) 172,267 (403,685)
46,119
—
2,680
$ (134,996)
46,119
—
2,164
516
—
2015
$
Investing activities for fiscal year 2016 used $135 million of cash, which is primarily attributed to $194.5 million of additions to
properties and equipment, net of $46.1 million of refunds received from a shipyard related to vessel contracts which were
cancelled due to late delivery. See “Vessels and Other Commitments” under Note (12) in the Notes to the Financial
Statements for additional information regarding the cancelled vessel construction contracts. Additions to properties and
equipment included $15.1 million in capitalized upgrades to existing vessels and equipment, $177.8 million for the
construction of offshore support vessels, and $1.6 million in other properties and equipment purchases.
Investing activities for fiscal 2015 used $231.4 million of cash, which is primarily attributed to $364.2 million of additions to
properties and equipment partially offset by $124 million in proceeds from the sale/leaseback of vessels. Additions to
properties and equipment included $17.9 million in capitalized upgrades to existing vessels and equipment, $326.3 million for
the construction and purchase of offshore support vessels, $14.4 million for ROV’s, and $5.6 million in other properties and
equipment purchases.
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
upgrades to existing vessels and equipment, $523 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.
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Financing Activities
Net cash provided by (used in) financing activities for the years ended March 31, is as follows:
(In thousands)
Principal payments on long-term debt
Debt borrowings
Debt issuance costs
Proceeds from exercise of stock options
Cash dividends
Excess tax (liability) benefit on stock options
exercised
Cash contributions from noncontrolling interests, net
Repurchases of common stock
Net cash provided by (used in) financing activities
Change
Change
(39,020)
2015
2016
(97,823 ) 1,005,231 (1,103,054)
$ (136,843)
656,338 517,850 138,488 (1,326,874) 1,465,362
(5,347)
6,863
(49,816)
(556 )
1,023
(48,834 )
(996)
—
(35,388)
(440)
(1,023)
13,446
4,791
(5,840)
982
2014
(1,605)
399
(99,999 )
$ 481,506 590,592 (109,086 )
—
—
179
(399)
99,999
(1,784 )
(2,083)
(4,152)
(99,999)
(427,944)
299
4,551
—
318,858
Financing activities for fiscal year 2016 provided $481.5 million of cash, primarily due to $600 million of revolver borrowings
(the proceeds from which were included in $678.4 million of cash and cash equivalents at March 31, 2016) and $31.3 million
of borrowings related to our wholly-owned Norwegian subsidiary. These amounts were partially offset by $136.8 million of
principal payments on debt which consisted of $77.5 million of payments on senior notes, $45 million of payments on the
revolving line of credit and $14.3 million of scheduled semiannual principal payments on the debt of our wholly-owned
Norwegian subsidiary as well as the payment of common stock dividends of $0.25 per common share during the first three
quarters of fiscal 2016.
Financing activities for fiscal 2015 used $109.1 million of cash, which included $97.8 million used to repay debt,
$48.8 million used for the quarterly payment of common stock dividends of $0.25 per common share, and $100 million
used to repurchase the company’s common stock. These uses of cash in financing activities were partially offset by an
increase in debt borrowings of $138.5 million, which in part, was used to fund vessel and ROV construction and purchase
commitments, to pay the quarterly common stock dividends, and to repurchase the company’s common stock.
Financing activities for fiscal 2014 provided $318.9 million of cash, primarily from $362.3 million in net debt financings,
which include $500 million of funding from the September 2013 senior notes, a $175 million increase in a bank term loan
and $50 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 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.
Other Liquidity Matters
At March 31, 2016, the company had approximately $678.4 million of cash and cash equivalents, of which $669.8 million
was held by foreign subsidiaries, all of which is available to the company without adverse tax consequences.
Vessel Construction. The company has successfully replaced the vast majority of the older vessels in its fleet with fewer,
larger and more efficient vessels that have a more extensive range of capabilities. These efforts are expected to continue
through the delivery of the remaining six vessels currently under construction, with the company anticipating that it will use
some portion of its future operating cash flows and available cash in order to complete the fleet renewal and modernization
program.
Further discussions of our vessel construction, acquisition and replacement program, including the various settlement
agreements with certain international shipyards relating to the construction of vessels, are disclosed in the “Our Global
Vessel Fleet and Vessel Construction, Acquisition and Replacement Program” section of Item 1, the “Vessel Count,
Dispositions, Acquisitions and Construction Programs” section of this Item 7 and Note (12) of Notes to Consolidated
Financial Statements included in Item 8 of this Annual Report on Form 10-K.
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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 generally 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 pursue successfully legal action to compel payment of these instruments. When third party
credit support that is acceptable to the company 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.
United Kingdom Pension Funds. In July 2013, a subsidiary of the company that was a participating employer in two
industry-wide multi-employer retirement funds in the United Kingdom known as the Merchant Navy Officers Pension Fund
(MNOPF) and the Merchant Navy Ratings Pension Fund (MNRPF) was placed into administration in the United Kingdom. In
December 2013, the administration was converted to a liquidation. Further details regarding these issues were previously
reported by the company in prior filings.
The final meeting of creditors in the liquidation took place in February 2016 and the liquidation was formally concluded. The
company believes that the liquidation resolved the company’s participation in both the MNOPF and the MNRPF. The
resolution of these issues did 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 million Brazilian reais (approximately $43.1 million as
of March 31, 2016). 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 overturning 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 million Brazilian reais (approximately $41.4 million as of March 31, 2016) 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 million Brazilian reais (approximately $35.4 million as of March 31, 2016) and rendered
decisions that disallowed all of those fines. The remaining fines totaling 28 million Brazilian reais (approximately $8 million
as of March 31, 2016) 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
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.
Repairs to U.S. Flag Vessels Operating Abroad. Near the end of fiscal 2015 the company became aware that it may
have had compliance deficiencies in documenting and declaring upon re-entry to the U.S. certain foreign purchases for or
repairs to U.S. flag vessels while they were working outside of the U.S. When a U.S. flag vessel operates abroad, certain
foreign purchases for or repairs made to the U.S. flag vessel while it is outside of the U.S. are subject to declaration and
entry with U.S. Customs and Boarder Protection (“CBP”) and are subject to 50% vessel repair duty. Certain foreign
purchases for or repairs to U.S. flag vessels are to be declared and reported to CBP upon such vessel’s arrival in the
U.S. During our examination of our most recent filings with CBP, we determined that it was necessary to file amended forms
with CBP to supplement previous filings. We have amended several vessel repair entries with CBP and have paid additional
vessel repair duty and interest associated with these amended forms. We continue to review and evaluate the return of other
U.S. flag vessels to the U.S. to determine whether it is necessary to adjust our responses in any of those instances. To the
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extent that further evaluation requires us to file amended entries for additional vessels, we do not yet know the magnitude of
any duties, civil penalties, fines or interest associated with amending the entries for these vessels. It is also possible that
CBP may seek to impose civil penalties, fines or interest in connection with amended forms already submitted.
Legal Proceedings
Nigeria Marketing Agent Litigation
In October 2012, Tidewater Inc. notified its Nigerian marketing agent, Phoenix Tide Offshore Nigeria Limited (“Phoenix
Tide”), that it was discontinuing its relationship with the marketing agent and two of its principals (H.H. The Otunba Ayora Dr.
Bola Kuforiji-Olubi, OON and Olutokunbo Afolabi Kuforiji). The company entered into a new strategic relationship with a
different Nigerian marketing agent 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.
The company is currently engaged in a number of legal disputes with Phoenix Tide and its two principals both in Nigeria and
in the United Kingdom. These disputes involve three primary issues. First, the company believes that Phoenix Tide
breached its contractual obligations to the company by discouraging various affiliates of TOTAL S.A. from paying
approximately $16 million (including U.S. dollar denominated invoices and Naira denominated invoices which have been
adjusted for the devaluation of the Naira relative to the U.S. dollar) due to Tidewater for vessel services performed in Nigeria.
The company will continue to actively pursue the collection of those monies. Second, the parties are disputing whether and
to what extent the company owes further contractual obligations to Phoenix Tide, including any obligation to pay Phoenix
Tide any further amounts for services previously performed. Third, the company is seeking to hold Phoenix Tide’s two
principals personally liable to the company for interfering with the company’s business relationship with TOTAL S.A.
In the United Kingdom, the company has been successful in obtaining favorable court orders against Phoenix Tide on a
variety of issues, including the fact that Phoenix Tide wrongly interfered in stopping the approximate $16 million payment
from TOTAL S.A. to the company, and is in the process of enforcing these orders. In April 2016, a United Kingdom court
ruled that Phoenix Tide’s two principals were personally responsible for interfering with the company’s business relationship
with TOTAL S.A. The damages award associated with that tortious interference will be determined at a second court hearing
likely to occur in the June quarter of fiscal 2017. Once the damages are assessed, the company will seek to enforce that
order against Phoenix Tide’s two principals. The disputes being litigated in Nigeria are proceeding more slowly and all
preliminary rulings by Nigerian courts are presently under appeal.
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.
Arbitral Award for the Taking of the Company’s Venezuelan Operations
On March 13, 2015, the three member tribunal constituted under the rules of the World Bank’s International Centre for the
Settlement of Investment Disputes (“ICSID”) awarded subsidiaries of the company compensation, including accrued interest
and costs, for the Bolivarian Republic of Venezuela’s (“Venezuela”) expropriation of the investments of those subsidiaries in
Venezuela. The award, issued in accordance with the provisions of the Venezuela-Barbados Bilateral Investment Treaty
(“BIT”), represented $46.4 million for the fair market value of the company’s principal Venezuelan operating subsidiary, plus
interest from May 8, 2009 to the date of payment of that amount accruing at an annual rate of 4.5% compounded quarterly
($16.8 million as of March 31, 2016) and $2.5 million for reimbursement of legal and other costs expended by the company
in connection with the arbitration. The aggregate award is therefore $65.7 million as of March 31, 2016. The nature of the
investments expropriated and the progress of the ICSID proceeding were previously reported by the company in prior filings.
The company is committed to taking appropriate steps to enforce and collect the award, which is enforceable in any of the
150 member states that are party to the ICSID Convention. As an initial step, the company was successful in having the
award recognized and entered on March 16, 2015 as a final judgment by the United States District Court for the Southern
District of New York. In July 2015, Venezuela applied to ICSID to annul the award and obtained a provisional stay of
enforcement. In August 2015, ICSID formed an annulment committee and the first hearing of the committee took place on
November 23, 2015. At that hearing, the committee heard arguments on the company’s motion to lift the provisional stay of
enforcement with respect to all or a substantial portion of the award during the pendency of the annulment proceedings. On
February 29, 2016, the committee ruled that the company is free to pursue the enforcement of a portion of the award
amounting to $37.3 million as of March 31, 2016. Enforcement of the balance of the award ($28.4 million as of March 31,
2016) will remain stayed until the conclusion of the annulment proceeding, which the company anticipates will occur this
calendar year. Even with the partial lifting of the stay of enforcement, the company recognizes that collection of the award
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may present significant practical challenges. Because the award has yet to be satisfied and post-award annulment
proceedings are pending, the net impact of these matters on the company cannot be reasonably estimated at this time and
the company has not recognized a gain related to these matters as of March 31, 2016.
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.
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Contractual Obligations and Contingent Commitments
Contractual Obligations
The following table summarizes the company’s consolidated contractual obligations as of March 31, 2016 and the effect
such obligations, inclusive of interest costs, are expected to have on the company’s liquidity and cash flows in future
periods. Long-term debt obligations are shown below according to their stated maturities. All of our long-term obligations
are shown as a current liability in our consolidated balance sheet as of March 31, 2016 as a result of an event of default in
various borrowing agreements caused by our failure to receive an audit opinion not subject to a going concern
explanatory paragraph from our independent certified public accountants (which has been waived only until August 14,
2016). Refer to the “Status of Discussions with Lenders and Noteholders / Audit Opinion” discussion included in Liquidity,
Capital Resources and Other Matters in Part II, Item 7 of this Annual Report on Form 10-K.
(In thousands)
Payments Due by Fiscal Year
Total
2017
2018
2019
2020
2021
More
Than
5 Years
Long-term debt obligations:
Term loan
Term loan interest
Revolver loan
Revolver loan interest
September 2013 senior notes
September 2013 senior notes interest
August 2011 senior notes
August 2011 senior notes interest
September 2010 senior notes
September 2010 senior notes interest
Troms debt
Troms debt interest
Total long-term debt obligations:
Operating lease obligations:
Operating leases
Bareboat charter leases
Total operating lease obligations:
Purchase obligations:
Vessel construction obligations (A)
Total purchase obligations
Other long-term obligations
Uncertain tax positions (B)
Pension and post-retirement obligations
Total other long-term obligations
Total obligations
5,880
—
—
—
—
—
5,880
—
—
5,880
—
$ 300,000
19,090
600,000
— 300,000
1,450
— 600,000
2,912
—
—
—
—
— 123,000 377,000
24,318 22,353 63,187
— 115,000
1,318
50,000 165,000 48,000
11,311
3,872
10,148 10,148 54,030
6,978
2,418,031 80,552 148,926 174,390 1,008,522 336,256 669,385
38,339 11,809 11,809 11,809
—
—
500,000
182,812 24,318 24,318 24,318
— 50,000
—
165,000
31,733
5,271
7,301
— 69,500 50,000
382,500
69,021 16,647 15,967 13,406
104,770 10,148 10,148 10,148
3,558
—
5,271
24,766
5,271
7,818
2,666
7,301
4,449
4,003
3,112
—
14,833
2,087
206,413 30,364 33,090 35,034
221,246 34,069 35,746 37,121
3,705
2,656
1,784
1,464
3,137
37,016 31,573 39,336
38,800 33,037 42,473
67,516 62,626
67,516 62,626
4,890
4,890
—
—
—
—
—
—
—
—
4,127
12,846
75,309
6,762
88,155 10,889
1,639
117
7,471 38,408
9,110 38,525
$ 2,794,948 188,136 199,472 221,333 1,057,221 378,403 750,383
2,673
7,149
9,822
1,781
8,118
9,899
2,509
7,401
9,910
(A)
(B)
Additional information regarding our vessel construction, acquisition and replacement program, including the various settlement agreements with
certain international shipyards relating to the construction of vessels, is disclosed in the “Our Global Vessel Fleet and Vessel Construction,
Acquisition and Replacement Program” section of Item 1, the “Vessel Count, Dispositions, Acquisitions and Construction Programs” section of
this Item 7 and Note (12) of Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
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.
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Letters of Credit and Surety Bonds
In the ordinary course of business, the company had other commitments that the company is contractually obligated to
fulfill with cash should the obligations be called. These obligations include standby letters of credit, surety bonds and
performance bonds that guarantee our performance as it relates to our vessel contracts, insurance, customs and other
obligations in various jurisdictions. While these obligations are not normally called, the obligation could be called by the
beneficiaries at any time before the expiration date should the company breach certain contractual and/or performance or
payment obligations. As of March 31, 2016, the company had $38.8 million of outstanding standby letters of credit, surety
bonds and performance bonds. These obligations are geographically concentrated in Mexico.
Off-Balance Sheet Arrangements
The company is accounting for its sale/leaseback transactions as operating leases and will record the payments as vessel
operating lease expense on a straight-line basis over the lease term. The deferred gains will be amortized to gain on
asset dispositions, net ratably over the respective lease term. Any deferred gain balance remaining upon the repurchase
of the vessels would reduce the vessels’ stated cost if the company elects to exercise the purchase options.
Fiscal 2015 Sale/Leasebacks
During fiscal 2015, the company sold six vessels to unrelated third parties, and simultaneously entered into bareboat
charter agreements with the purchasers. Under the sale/leaseback agreements the company has the right to re-acquire
the vessel for a fixed percentage of the original sales price at a defined date during the lease, deliver the vessel to the
owners at the end of the lease term, purchase the vessel at its then fair market value at the end of the lease term or
extend the leases for 24 months at mutually agreeable lease rates.
The following table provides the number of vessels, total proceeds, carrying values at the time of sale, deferred gains
recognized, lease expirations, and contractual purchase option timing for the vessels sold and leased back by the
company during fiscal 2015:
Fiscal 2015 Quarter
First
Second
Third
Fourth
Number of
Total
Deferred
Gain at time
of Sale
Carrying
Value at time
of Sale
Lease
Term
in Years
7
4,002 $
8,214 11,136 8.5
Proceeds
$ 13,400 $
19,350
78,200
13,000
7,885
$123,950 $ 50,564 $ 73,386
61%
47%
33,233 44,967 8 – 9 60%
50%
9,398
5,115
Purchase
Option
Percentage
7
Vessels
1
1
3
1
6
Purchase
Option at
at end of:
6th Year
8th Year
7th or 8th Year
6th Year
Fiscal 2014 Sale/Leasebacks
During fiscal 2014, the company sold ten vessels to unrelated third parties, and simultaneously entered into bareboat
charter agreements with the purchasers. Under the sale/leaseback agreements the company has the right to re-acquire
the vessel for a fixed percentage of the original sales price at a defined date during the lease, deliver the vessel to the
owners at the end of the lease term, purchase the vessel at its then fair market value at the end of the lease term or
extend the leases for 24 months at mutually agreeable lease rates.
The following table provides the number of vessels, total proceeds, carrying values at the time of sale, deferred gains
recognized, lease expirations, and contractual purchase option timing for the vessels sold and leased back by the
company during fiscal 2014:
Number of
Vessels
2
4
4
10
Total
Proceeds
Deferred
Gain at time
of Sale
Carrying
Value at time
of Sale
$ 65,550 $ 34,325 $ 31,225
141,900 105,649 36,251 7 – 9 54 - 68% 6th or 8th Year
32,845 30,460 7 – 10 53 - 59% 6th or 9th Year
63,305
$270,755 $ 172,819 $ 97,936
Lease
Term
in Years
7
Purchase
Option at
at end of:
6th Year
Purchase
Option
Percentage
55%
70
Fiscal 2014 Quarter
Second
Third
Fourth
7674_fin.pdf 72
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 company
accounted for the transactions as sale/leaseback transactions with operating lease treatment and expensed lease
payments over the charter terms.
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 was reduced by the previously unrecognized deferred gain of $39.6 million. Two
additional vessels were sold and leased back in April 2014 and March 2015, respectively. Refer to “Fiscal 2014
Sale/Leasebacks” above.
Fiscal 2006 Sale/Leaseback
In March 2006, the company entered into agreements to sell five vessels 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. 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. In November 2014, the company
repurchased a fifth leased vessel for a total cost of $11.2 million. Three of these vessels were sold and leased back in
fiscal 2015.
Future Minimum Lease Payments
As of March 31, 2015, the future minimum lease payments for the vessels under the operating lease terms are as follows:
Fiscal year ending (In thousands)
2017
2018
2019
2020
2021
Thereafter
Total future lease payments
Fiscal 2015
Sale/Leaseback
$
Fiscal 2014
Sale/Leaseback
Total
9,485
9,604
10,234
11,497
11,594
19,273
71,687
20,879 30,364
23,486 33,090
24,800 35,034
25,519 37,016
19,979 31,573
20,063 39,336
134,726 206,413
$
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.
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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.
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
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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.
During the quarter ended December, 31, 2014 the company performed its annual goodwill impairment assessment and
determined that the rapid and significant decline in crude oil and natural gas prices (which occurred and accelerated
throughout the latter part of the company’s third quarter of fiscal 2015), and the expected short to intermediate term effect
that the downturn might have on levels of exploration and production activity would likely have a negative effect on
average day rates and utilization levels of the company’s vessels. Expected future cash flow analyses using the projected
average day rates and utilization levels in this new commodity pricing environment were included in the company’s
valuation models and indicated that the carrying value of the Americas and Sub-Saharan Africa/Europe reporting units
were less than their respective fair values. A goodwill impairment charge of $283.7 million, to write-off the company’s
remaining goodwill, was recorded during the quarter ended December 31, 2014.
During the quarter ended December, 31, 2013 the company performed its annual goodwill impairment assessment 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. At the time of the December
2013 goodwill impairment assessment, the Asia/Pacific region continued to be challenged with excess vessel capacity as
a result of the significant number of vessels that had been built in this region over the previous 10 years. These additional
newbuilds had not been met by a commensurate increase in exploration, development or other activity within the region.
In recent years, the company has disposed of older vessels that had worked in the region and transferred vessels out of
the region to other regions where market opportunities were 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.
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 are expected to remain in active service, 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 estimates the fair value of each asset group and compares such estimated fair value, considered Level 3, as
defined by ASC 820, Fair Value Measurements and Disclosures, to the carrying value of each asset group in order to
determine if impairment exists. If an asset group fails the undiscounted cash flow test, management derives the fair value of
the asset group by estimating the fair value for each vessel in the group, considering items such as age, vessel class supply
and demand, and recent sales of similar vessels among other factors and for more significant vessel carrying values we may
obtain third-party appraisals for use by management in determining a vessel’s fair value. 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 and estimating undiscounted
cash flows 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.
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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 not expected to return to active service every six months or whenever changes
in circumstances indicate that the carrying amount of a vessel may not be recoverable. Management estimates the fair value
of each vessel not expected to return to active service (considered Level 3, as defined by ASC 820, Fair Value
Measurements and Disclosures) 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. For more significant vessel carrying values, we obtain
an estimate of the fair value of the stacked vessel from third-party appraisers or brokers for use in our determination of fair
value estimates. The company records an impairment charge when the carrying value of a stacked vessel not expected to
return to active service 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.
Income Taxes
The asset-liability method is used for determining the company’s income tax provisions, under which current and deferred
tax liabilities and assets are recorded in accordance with enacted tax laws and rates. Under this method, the amounts of
deferred tax liabilities and assets at the end of each period are determined using the tax rate expected to be in effect
when taxes are actually paid or recovered. In addition, the company determines its effective tax rate by estimating its
permanent differences resulting from differing treatment of items for tax and accounting purposes.
As a global company, we are subject to the jurisdiction of taxing authorities in the United States and by the respective tax
agencies in the countries in which we operate internationally, as well as to tax agreements and treaties among these
governments. Our operations in these different jurisdictions are taxed on various bases: actual income before taxes,
deemed profits (which are generally determined using a percentage of revenue rather than profits) and withholding taxes
based on revenue. Determination of taxable income in any tax jurisdiction requires the interpretation of the related tax
laws and regulations and the use of estimates and assumptions regarding significant future events such as the amount,
timing and character of deductions, permissible revenue recognition methods under the tax law and the sources and
character of income and tax credits. Changes in tax laws, regulations, agreements and treaties, foreign currency
exchange restrictions or our level of operations or profitability in each taxing jurisdiction could have an impact on the
amount of income taxes that we provide during any given year. The company is periodically audited by various taxing
authorities in the United States and by the respective tax agencies in the countries in which it operates internationally. The
tax audits generally include questions regarding the calculation of taxable income. Audit adjustments affecting permanent
differences could have an impact on the company’s effective tax rate.
The carrying value of the company’s net deferred tax assets is based on the company’s present belief that it is more likely
than not that it will be able to generate sufficient future taxable income in certain tax jurisdictions to utilize such deferred
tax assets, based on estimates and assumptions. If these estimates and related assumptions change in the future, the
company may be required to record or adjust valuation allowances against its deferred tax assets resulting in additional
income tax expense in the company’s consolidated statement of operations. Management evaluates the realizability of the
deferred tax assets and assesses the need for changes to valuation allowances on a quarterly basis. While the company
has considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the present
need for a valuation allowance, in the event the company were to determine that it would be able to realize its deferred tax
assets in the future in excess of its net recorded amount, an adjustment to the valuation allowance would increase income
in the period such determination was made. Should the company determine that it would not be able to realize all or part
of its net deferred tax asset in the future, an adjustment to the deferred tax asset would be charged to income in the
period such determination was made.
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 and relative cost of scheduled drydockings.
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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.
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, could 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. 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.
Environmental Compliance
During the ordinary course of business, the company’s operations are subject to a wide variety of environmental laws and
regulations that govern the discharge of oil and pollutants into navigable waters. Violations of these laws may result in civil
and criminal penalties, fines, injunction and other sanctions. Compliance with the existing governmental regulations that
have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the
protection of the environment has not had, nor is expected to have, a material effect on the company. Environmental laws
and regulations are subject to change however, and may impose increasingly strict requirements and, as such, the
company cannot estimate the ultimate cost of complying with such potential changes to environmental laws and
regulations.
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7674_fin.pdf 77
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 an accident was to 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, 2016, the company had a $300 million outstanding term loan borrowings and $600 million of revolver
borrowings. The fair market value of this debt approximates the carrying value because the borrowings bear interest at
variable rates which currently approximate 1.7% percent (1.5% margin plus 0.2% Eurodollar rate). A one percentage point
change in the Eurodollar interest rate on the $300 million term loan and $600 million revolver at March 31, 2016 would
change the company’s interest costs by approximately $9 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 existing terms on senior notes outstanding at March 31, 2016 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, 2016, would change with a 100 basis-point increase or decrease in market
interest rates.
(In thousands)
September 2013
August 2011
September 2010
Total
7674_fin.pdf 78
$
Estimated
Fair Value
Outstanding
Value
500,000 342,746
165,000 127,148
382,500 302,832
$ 1,047,500 772,726
100 Basis
Point Increase
324,676
122,435
293,097
740,208
100 Basis
Point Decrease
362,134
132,090
313,449
807,673
76
Troms Offshore Debt
Troms Offshore had 394.8 million NOK, or $47.7 million, as well as $57.1 million of U.S. denominated outstanding fixed
rate debt at March 31, 2016. The following table discloses how the estimated fair value of the fixed rate Troms Offshore
notes, as of March 31, 2016, would change with a 100 basis-point increase or decrease in market interest rates:
(In thousands)
Total
Foreign Exchange Risk
Estimated
Fair
Value
Outstanding
Value
104,770 104,767
$
100 Basis(cid:3)
Point Increase (cid:3)
100,263
100 Basis
Point Decrease
109,591
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.
As of March 31, 2016, Sonatide maintained the equivalent of approximately $119 million of Angola kwanza-denominated
deposits in Angolan banks, largely related to customer receipts that had not yet been converted to U.S. dollars, expatriated
and then remitted to the company. During fiscal year 2016, the entities which comprise the operations of the Sonatide joint
venture recognized a foreign exchange loss of approximately $49.2 million, primarily as a result of the devaluation of
Sonatide’s Angolan kwanza denominated bank accounts relative to the U.S. dollar. The company has recognized 49% of the
total foreign exchange loss, or approximately $24.1 million, through equity in net earnings/(losses) of unconsolidated
companies. Any further devaluation in the Angolan kwanza relative to the U.S. dollar would result in foreign exchange losses
for Sonatide to the extent the Angolan kwanza-denominated asset balances were in excess of kwanza-denominated
liabilities, 49% of which will be borne by the company A hypothetical ten percent devaluation of the kwanza relative to the
U.S. dollar on a net kwanza-denominated asset balance of $100 million would cause our equity in net earnings of
unconsolidated companies to be reduced by $4.9 million.
Derivatives
The company had two outstanding foreign exchange spot contracts at March 31, 2016, which had a notional value of $1.4
million and were settled April 1, 2016. The company had two foreign exchange spot contracts outstanding at
March 31, 2015, which had a notional value of $2.3 million and were settled April 1, 2015.
At March 31, 2016, the company had 13 Norwegian kroner (NOK) forward contracts outstanding, which are generally
intended to hedge a portion of the company’s foreign exchange exposure relating to its NOK denominated notes payable as
disclosed in Note (5). The forward contracts have expiration dates between July 1, 2016 and November 10, 2016. The
combined change in fair value of the outstanding forward contracts was $0.1 million, which was recorded as a foreign
exchange loss during the fiscal year ended March 31, 2016, because the forward contracts did not qualify as hedge
instruments. All changes in fair value of the forward contracts were recorded in earnings. The company did not have any
forward contracts outstanding at March 31, 2015.
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
77
7674_fin.pdf 79
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 Angolan operations are 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.
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 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
President and Chief Executive Officer, along with our Chief Financial Officer concluded that our disclosure controls and
procedures are effective in timely alerting them to material information relating to the company (including its consolidated
subsidiaries) required to be disclosed in the reports the company files and submits under the Exchange Act.
Management’s Annual Report on Internal Control Over Financial Reporting
Management’s assessment of the effectiveness of the company’s internal control over financial reporting is discussed in
“Management’s Report on Internal Control Over Financial Reporting” which is included in Item 15 of this Annual Report on
Form 10-K and appears on page F-2.
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7674_fin.pdf 80
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, 2016 that has materially affected, or is reasonably likely to materially affect, the company’s internal control over
financial reporting.
ITEM 9B. OTHER INFORMATION
None.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information required by this item is incorporated herein by reference to the 2016 Proxy Statement, which will be filed with
the SEC not later than 120 days subsequent to March 31, 2016.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item is incorporated herein by reference to the 2016 Proxy Statement, which will be filed with
the SEC not later than 120 days subsequent to March 31, 2016.
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 2016 Proxy Statement, which will be filed with
the SEC not later than 120 days subsequent to March 31, 2016.
Securities Authorized for Issuance under Equity Compensation Plans
The following table provides information as of March 31, 2016 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)
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (A))
(C)
1,777,124
$
31.73
323,988 (1)
—
1,777,124 (2)$
—
31.73
—
323,988
Plan category
Equity compensation plans
approved by stockholders
Equity compensation plans
not approved by stockholders
Balance at March 31, 2016
(1)
(2)
As of March 31, 2016, all such remaining shares are issuable as stock options or restricted stock or other stock-based awards under the
company’s 2014 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, 2016, these shares would
represent 3.6% 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 2016 Proxy Statement, which will be filed with
the SEC not later than 120 days subsequent to March 31, 2016.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Information required by this item is incorporated herein by reference to the 2016 Proxy Statement, which will be filed with
the SEC not later than 120 days subsequent to March 31, 2016.
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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this report:
(1) Financial Statements
PART IV
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
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).
3.2
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).
4.1
4.2
4.3
10.1
10.2
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).
Amendment No. 1, dated May 26, 2015, to Fourth Amended and Restated Credit Agreement, among
Tidewater Inc. and its domestic subsidiaries, Bank of America, N.A., as Administrative Agent and Lender,
and JPMorgan Chase Bank, N.A., Wells Fargo Bank, N.A., DNB Capital LLC, Compass Bank, The Bank of
Tokyo-Mitsubishi UFJ, Ltd., U.S. Bank National Association, Whitney Bank, Santander Bank, N.A., Regions
Bank, Amegy Bank, N.A., Northern Trust Company, and Standard Chartered Bank, as Lenders (filed with
the Commission as Exhibit 10.1 to the company’s quarterly report on Form 10-Q for the quarter ended June
30, 2015, File No. 1-6311).
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7674_fin.pdf 83
10.3
10.4
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).
10.5+
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).
10.6+
10.7+
10.8+
10.9+
10.10+
10.11+
10.12+
10.13+
10.14+
Form of Stock Option and Restricted Stock Agreement for the Grant of Incentive Stock Options, Non-
Qualified Stock Options and Restricted Stock Under the Tidewater Inc. 2006 Stock Incentive Plan (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).
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).
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).
Second Amendment to the Amended and Restated Tidewater Inc. Directors Deferred Stock Units Plan (filed
with the Commission as Exhibit 10.1 to the company’s quarterly report on From 10-Q for the quarter ended
September 30, 2014, File No. 1-6311).
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).
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).
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).
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).
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).
10.15+
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).
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7674_fin.pdf 84
10.16+
10.17+
10.18+
10.19+
10.20+
10.21+
10.22+
10.23+
Tidewater Inc. Company Performance Executive Officer Annual Incentive Plan for Fiscal Year 2016 (filed
with the Commission as Exhibit 10.2 to the company’s quarterly report on Form 10-Q for the quarter ended
June 30, 2015, File No. 1-6311).
Tidewater Inc. Individual Performance Executive Officer Annual Incentive Plan for Fiscal Year 2016 (filed
with the Commission as Exhibit 10.3 to the company’s quarterly report on Form 10-Q for the quarter ended
June 30, 2015, File No. 1-6311).
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).
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).
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).
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).
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).
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).
10.24+
Summary of Compensation Arrangements with Directors (filed with the Commission as Exhibit 10.29 to the
company’s annual report on Form 10-K for the fiscal year ended March 31, 2014, File No. 1-6311).
10.25+
10.26+
10.27+
10.28+
10.29+
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).
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).
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).
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).
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).
83
7674_fin.pdf 85
10.30+
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).
10.31+
10.33+
10.34+
10.35+
10.36+
10.37+
10.38+
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 10 to the
company’s current report on Form 8-K on December August 12, 2015, File No. 1-6311).
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).
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).
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).
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).
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).
Form of Restricted Stock Units Agreement under the Tidewater Inc. 2009 Stock Incentive Plan (2014
awards) (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, 2014, File No. 1-6311).
10.39+
Tidewater Inc. 2014 Stock Incentive Plan (filed with the Commission as Exhibit 10.3 to the company’s
current report on Form 8-K on August 4, 2014, File No. 1-6311).
10.40+
Form of Incentive Agreement under the Tidewater Inc. 2014 Stock Incentive Plan (filed with the Commission
as Exhibit 10.2 to the company’s current report on Form 8-K on March 23, 2015, File No. 1-6311).
10.41+
Second Amended and Restated Tidewater Inc. Phantom Stock Plan (filed with the Commission as Exhibit
10.3 to the company’s current report on Form 8-K on March 23, 2015, File No. 1-6311).
10.42+
10.43+
10.44+
21*
23*
Form of Officer Agreement under the Second Amended and Restated Tidewater Inc. Phantom Stock Plan
(filed with the Commission as Exhibit 10.4 to the company’s current report on Form 8-K on March 23, 2015,
File No. 1-6311).
Amendment Number Five to the Tidewater Inc. Supplemental Executive Retirement 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, 2015, File No. 1-6311).
Tidewater Inc. Directors Restricted Stock Unit Program (filed with the Commission as Exhibit 10.2 to the
company’s to the company’s quarterly report on Form 10-Q for the quarter ended December 31, 2015, File
No. 1-6311).
Subsidiaries of the company.
Consent of Independent Registered Accounting Firm – Deloitte & Touche LLP.
84
7674_fin.pdf 86
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.
85
7674_fin.pdf 87
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 26, 2016.
SIGNATURES
TIDEWATER INC.
(Registrant)
By:
/s/ Jeffrey M. Platt
Jeffrey M. Platt
President, Chief Executive Officer and Director
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 26, 2016.
/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/ J. Wayne Leonard
J. Wayne Leonard, Director
/s/ Richard D. Paterson
Richard D. Paterson, Director
/s/ James C. Day
James C. Day, Director
/s/ Cindy B. Taylor
Cindy B. Taylor, Director
/s/ Jack E. Thompson
Jack E. Thompson, Director
/s/ M. Jay Allison
M. Jay Allison, Director
86
7674_fin.pdf 88
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, 2016 and 2015
Consolidated Statements of Earnings, three years ended March 31, 2016
Consolidated Statements of Comprehensive Income, three years ended March 31, 2016
Consolidated Statements of Equity, three years ended March 31, 2016
Consolidated Statements of Cash Flows, three years ended March 31, 2016
Notes to Consolidated Financial Statements
Financial Statement Schedule
II. Tidewater Inc. and Subsidiaries Valuation and Qualifying Accounts
Page
F-2
F-3
F-4
F-5
F-6
F-7
F-8
F-9
F-10
F-62
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
7674_fin.pdf 89
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, 2016. 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 (2013). Based on our
assessment we believe that, as of March 31, 2016, 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, 2016, which appears on page F-3.
F-2
7674_fin.pdf 90
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, 2016, based on criteria established in Internal Control—Integrated Framework (2013) 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, 2016, based on the criteria established in Internal Control—Integrated Framework (2013) 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, 2016 of the
Company and our report dated May 26, 2016 expressed an unqualified opinion on those financial statements and financial
statement schedule and included an explanatory paragraph regarding certain conditions that give rise to substantial doubt
about the entity’s ability to continue as a going concern.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
May 26, 2016
F-3
7674_fin.pdf 91
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, 2016 and 2015, 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, 2016. Our audits also included the financial statement
schedule listed in the Index at Item 15. 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, 2016 and 2015, and the results of their operations and their cash flows for
each of the three years in the period ended March 31, 2016, 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.
The accompanying consolidated financial statements have been prepared assuming that Tidewater will continue as a going
concern. As discussed in Note 2, the company is in process of negotiating with lenders to cure an expected covenant
violation and events of default. These conditions raise substantial doubt about the Company’s ability to continue as a going
concern. Management's plans in regard to these matters are also discussed in Note 2 to the consolidated financial
statements. The consolidated financial statements do not include any adjustments that might result from the outcome of
these uncertainties.
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, 2016, based on the criteria established in Internal
Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
and our report dated May 26, 2016 expressed an unqualified opinion on the Company’s internal control over financial
reporting.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
May 26, 2016
F-4
7674_fin.pdf 92
TIDEWATER INC.
CONSOLIDATED BALANCE SHEETS
March 31, 2016 and 2015
(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 $11,450
in 2016 and $37,634 in 2015
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
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
47,067,715 shares at March 31, 2016 and 47,029,359 shares at
March 31, 2015
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
7674_fin.pdf 93
2016
2015
$
678,438
78,568
228,113
338,595
33,413
44,755
1,323,314
37,502
4,666,749
92,065
4,758,814
1,207,523
3,551,291
78,440
4,990,547
49,130
91,611
187,971
3,321
2,052,270
74,825
2,459,128
—
34,841
9,478
181,546
303,096
420,365
49,005
17,781
868,815
65,844
4,717,132
119,879
4,837,011
1,090,704
3,746,307
75,196
4,756,162
54,011
146,255
185,657
3,669
10,181
82,461
482,234
1,524,295
23,276
10,534
235,108
4,707
166,604
2,135,075
(6,866 )
2,299,520
6,034
2,305,554
4,990,547
4,703
159,940
2,330,223
(20,378)
2,474,488
6,227
2,480,715
4,756,162
$
$
$
2016
2015
2014
$
955,400
23,662
979,062
1,468,358
27,159
1,495,517
561,133
18,811
153,811
33,662
182,309
(26,037)
117,311
—
7,586
1,048,586
834,368
26,505
189,819
28,322
175,204
(23,796)
14,525
283,699
4,052
1,532,698
(69,524)
(37,181)
1,418,461
16,642
1,435,103
795,890
15,745
187,976
21,910
167,480
(21,063)
9,341
56,283
—
1,233,562
201,541
(5,403)
(13,581)
2,703
—
(53,752)
(70,033)
(139,557)
20,819
(160,376)
(193)
(160,183)
(3.41)
(3.41)
$
$
$
$
46,981,102
—
46,981,102
8,678
10,179
1,927
—
(50,029)
(29,245)
(66,426)
(1,077)
(65,349)
(159)
(65,190)
(1.34)
(1.34)
1,541
15,801
2,123
(4,144)
(43,814)
(28,493)
173,048
32,793
140,255
—
140,255
2.84
2.82
49,392,749
287,365
49,680,114
48,658,840
—
48,658,840
TIDEWATER INC.
CONSOLIDATED STATEMENTS OF EARNINGS
Years Ended March 31, 2016, 2015, and 2014
(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
Asset impairments
Goodwill impairment
Restructuring charge
Operating income (loss)
Other income (expenses):
Foreign exchange gain (loss)
Equity in net earnings (losses) of unconsolidated companies
Interest income and other, net
Loss on early extinguishment of debt
Interest and other debt costs, net
Earnings (loss) before income taxes
Income tax (benefit) expense
Net earnings (loss)
Less: Net losses attributable to noncontrolling interests
Net earnings (loss) attributable to Tidewater Inc.
Basic (loss) earnings per common share
Diluted (loss) earnings per common share
Weighted average common shares outstanding
Dilutive effect of stock options and restricted stock
Adjusted weighted average common shares
See accompanying Notes to Consolidated Financial Statements.
F-6
7674_fin.pdf 94
TIDEWATER INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
Net (loss) earnings
Other comprehensive income (loss):
Unrealized gains (losses) on available for sale securities, net of tax
of ($239), $0 and $115, respectively
Amortization of loss on derivative contract, net of tax of $77, $0
and $251, respectively
Change in supplemental executive retirement plan pension liability,
net of tax of $1,264, $0 and $409, respectively
Change in pension plan minimum liability, net of tax of $1,093, $0
and $763, respectively
Change in other benefit plan minimum liability, net of tax of $5,081,
($769) and $1,109, respectively
Total comprehensive (loss) income
See accompanying Notes to Consolidated Financial Statements.
2016
(160,376)
$
2015
2014
(65,349)
140,255
(443)
143
2,347
2,029
143
717
(1,845)
213
466
760
(5,739)
1,417
9,436
(146,864)
(1,429)
(73,502)
2,060
145,171
$
F-7
7674_fin.pdf 95
TIDEWATER INC.
CONSOLIDATED STATEMENTS OF EQUITY
Years Ended March 31, 2016, 2015 and 2014
(In thousands)
Common
stock
Additional
paid-
in capital
Retained
earnings
Accumulated
other
comprehensive
loss
Non
controlling
interest
Total
$
$
Balance at March 31, 2013
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
Total comprehensive loss
Stock option activity
Cash dividends declared ($1.00 per share)
Retirement of common stock
Amortization of restricted stock units
Amortization/cancellation of restricted stock
Cash received from noncontrolling interests, net
$
Balance at March 31, 2015
Total comprehensive loss
Stock option activity
Cash dividends declared ($.75 per share)
Amortization of restricted stock units
Amortization/cancellation of restricted stock
Balance at March 31, 2016
$
—
3
—
(284)
—
20
—
10
(6)
—
4,949 119,975 2,453,973
—
140,255
—
9,445
—
(49,973)
—
9,923
—
3,038
—
—
4,973 142,381 2,544,255
—
(65,190)
—
(691)
—
(49,127)
—
(99,715)
—
17 15,270
—
2,980
(6)
—
—
—
4,703 159,940 2,330,223
—
(160,183)
—
(278)
—
(34,965)
—
6,463
—
479
4,707 166,604 2,135,075
—
—
—
11
(7)
(17,141 )
4,916
—
—
—
—
—
(12,225 )
(8,153 )
—
—
—
—
—
—
(20,378 )
13,512
—
—
—
—
(6,866 )
— 2,561,756
—
145,171
—
9,465
—
(49,973)
—
9,933
—
3,032
5,987
5,987
5,987 2,685,371
(73,502)
(688)
(49,127)
(99,999)
15,287
2,974
399
6,227 2,480,715
(146,864)
(278)
(34,965)
6,474
472
6,034 2,305,554
(159)
—
—
—
—
—
399
(193)
—
—
—
—
See accompanying Notes to Consolidated Financial Statements.
F-8
7674_fin.pdf 96
TIDEWATER INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended March 31, 2016, 2015 and 2014
(In thousands)
Operating activities:
Net (loss) earnings
Adjustments to reconcile net (loss) earnings to net cash provided by
operating activities:
Depreciation and amortization
Benefit for deferred income taxes
Gain on asset dispositions, net
Asset impairments
Goodwill impairment
Equity in earnings (losses) of unconsolidated companies, net of
dividends
Compensation expense – stock based
Excess tax (benefit) liability on stock options exercised
Changes in assets and liabilities, net:
Trade and other receivables
Changes in due to/from affiliate, net
Marine operating supplies
Other current assets
Accounts payable
Accrued expenses
Accrued property and liability losses
Other current liabilities
Other liabilities and deferred credits
Other, net
Net cash provided by operating activities
Cash flows from investing activities:
Proceeds from sales of assets
Proceeds from sale/leaseback of assets
Additions to properties and equipment
Refunds from cancelled vessel construction contracts
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, net
Repurchases of common stock
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, 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
7674_fin.pdf 97
2016
2015
2014
$
(160,376)
(65,349)
140,255
182,309
(6,796)
(26,037)
117,311
—
28,704
13,219
1,605
71,540
84,084
13,672
5,976
(4,881)
(53,143)
(348)
(15,578)
231
1,868
253,360
10,690
—
(194,485)
46,119
—
2,680
(134,996)
(996)
(136,843)
656,338
—
(35,388)
(1,605)
—
—
481,506
599,870
78,568
678,438
175,204
(72,389)
(23,796)
14,525
283,699
(1,916)
21,374
1,784
(43,537)
108,588
6,148
2,794
(22,989)
(11,435)
38
118
4,875
(19,023)
358,713
8,310
123,950
(364,194)
—
—
516
(231,418)
(556)
(97,823)
138,488
1,023
(48,834)
(1,784)
399
(99,999)
(109,086)
18,209
60,359
78,568
50,729
51,585
—
49,390
74,310
2,068
167,480
(34,709)
(21,063)
9,341
56,283
(15,801)
19,642
(299)
13,485
(260,675)
5,715
(7,600)
(1,395)
34,458
(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
34,190
59,266
5,751
$
$
$
$
(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 and, 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.
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
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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:
2016
2015
Owned vessels in active service
Stacked vessels
Marine equipment and other assets under construction
Other property and equipment (A)
Totals
(A) Other property and equipment includes eight remotely operated vehicles.
(In thousands)(cid:3)
2,510,418
794,126
185,380
61,367
3,551,291
180 $
73
253 $
Number
Of
Vessels
Carrying
Value
Number
Of
Vessels
Carrying
Value
(In thousands)(cid:3)
242 $ 3,310,476
38,489
315,552
81,790
263 $ 3,746,307
21
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, 2016 and 2015 have an average age of 12.5 and 20.7
years, respectively.
All vessels are classified in the company’s consolidated balance sheets in Properties and Equipment. No vessels are
classified as held for sale because no vessel meets the criteria. Stacked vessels and vessels withdrawn from service are
reviewed for impairment semiannually 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 are expected to remain in active service, 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 estimates the fair value of each asset group and compares such estimated fair value, considered Level 3, as
defined by ASC 820, Fair Value Measurements and Disclosures, to the carrying value of each asset group in order to
determine if impairment exists. If an asset group fails the undiscounted cash flow test, management derives the fair value of
the asset group by estimating the fair value for each vessel in the group, considering items such as age, vessel class supply
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and demand, and recent sales of similar vessels among other factors and for vessels with more significant carrying values
we may obtain third-party appraisals for use by management in determining a vessel’s fair value. 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 and estimating undiscounted
cash flows 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 not expected to return to active service every six months or whenever changes
in circumstances indicate that the carrying amount of a vessel may not be recoverable. Management estimates the fair value
of each vessel not expected to return to active service (considered Level 3, as defined by ASC 820, Fair Value
Measurements and Disclosures) 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. For vessels with more significant carrying values, we
obtain an estimate of the fair value of the stacked vessel from third-party appraisers or brokers for use in our determination of
fair value estimates. The company records an impairment charge when the carrying value of a stacked vessel not expected
to return to active service 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. Refer
to Note (19) 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.
The company performed its annual goodwill impairment assessment as of December 31, 2014 and 2013 and recorded
goodwill impairment charges of $283.7 million and $56.3 million, respectively. The December 31, 2014 impairment charge
was due to the likely negative effect on average day rates and utilization levels of the company’s vessels as a result of the
rapid and significant decline in crude oil and natural gas prices which occurred and accelerated throughout the latter part of
the company’s third quarter of fiscal 2015. The December 31, 2013 impairment charge related to the company’s Asia/Pacific
segment. Refer to Note (16) for a complete discussion of Goodwill.
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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
2016
2015
$
12,799
14,203
Pension and Other Postretirement Benefits
follows
The company
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.
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
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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 may at times require prepayments or other forms of 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.
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
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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
Reclassifications
The company made certain reclassifications to prior period amounts to conform to the current year presentation, specifically,
the separate disclosure on the income statement and related schedules of asset impairments, which historically were
included as part of gain on asset dispositions, net. 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.
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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 2016, the FASB issued ASU 2016-02, Leases, which amended guidance for lease arrangements in order to
increase transparency and comparability by providing additional information to users of financial statements regarding an
entity's leasing activities. The revised guidance requires reporting entities to recognize lease assets and lease liabilities on
the balance sheet for substantially all lease arrangements. The new guidance is effective for the company in the first quarter
of fiscal year 2020 and will be applied on a modified retrospective basis beginning with the earliest period presented. The
company is currently evaluating the impact of adopting this guidance on our consolidated financial statements.
In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes, which simplifies the
presentation of deferred income taxes and requires that deferred tax assets and liabilities be classified as non-current on the
balance sheet. No prior periods would be retrospectively adjusted. The new guidance is effective for the company in the first
quarter of fiscal year 2018. The company believes that the impact of the implementation of this new guidance on its
consolidated financial statements and disclosures will not be significant.
In April 2015, the FASB issued ASU 2015-03, Interest-Imputation of Interest: Simplifying the Presentation of Debt Issue
Costs which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a
direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and
measurement guidance for debt issuance costs are not affected by this guidance. This new guidance is effective for the
company in the first quarter of fiscal 2017. The company believes that the impact of the implementation of this new guidance
on its consolidated financial statements and disclosures will not be significant.
In February 2015, the FASB issued ASU 2015-02, Consolidation – Amendments to the Consolidation Analysis, which affects
reporting entities that are required to evaluate whether certain legal entities should be consolidated. The ASU modifies the
evaluation of whether limited partnerships and similar legal entities are variable interest entities (“VIEs”) or voting interest
entities, eliminates the presumption that a general partner should consolidate a limited partnership and affects the
consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and
related party relationships. This new guidance is effective for the company in the first quarter of fiscal 2017. The company
believes that the impact of the implementation of this new guidance on its consolidated financial statements and disclosures
will not be significant.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. ASU 2014-09 supersedes prior
revenue recognition guidance and provides a five step recognition framework that will require entities to recognize the
amount of revenue to which it expects to be entitled for the transfer of goods and services. In July 2015, the FASB permitted
early adoption and deferred the effective date of this guidance one year, therefore, it will be effective for the company in the
first quarter of fiscal 2019 and may be implemented retrospectively to all years presented or in the period of adoption through
a cumulative adjustment. The company is evaluating the impact of the implementation of this new guidance on its
consolidated financial statements and disclosures.
(2) STATUS OF DISCUSSIONS WITH LENDERS AND NOTEHOLDERS / AUDIT OPINION
The decrease in oil and gas prices that began in the second half of fiscal 2015 and continued throughout fiscal 2016 has led
to materially lower levels of spending for offshore exploration and development by our customers globally. In addition, newly
constructed vessels have been delivered over the last several years, exacerbating weak vessel utilization. With reduced
demand for offshore support vessels along with increased supply, the company has experienced a significant decline in the
utilization of its vessels, average day rates received and vessel revenue. The company has implemented a number of
significant cost reduction measures to mitigate the effects of significantly lower vessel revenue and, given the currently
challenging offshore vessel support market and business outlook, has taken other steps to improve its financial position and
liquidity.
At March 31, 2016, the company was in compliance with all financial covenants set forth in its debt facilities and note
indentures; however, we are forecasting that, as early as the quarter ending June 30, 2016, the company may no longer be
in compliance with the 3.0x minimum interest coverage ratio requirement contained in its Revolving Credit and Term Loan
Agreement (“Bank Loan Agreement”), the Troms Offshore Debt and the 2013 Senior Note Agreement (the “2013 Note
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Agreement”). In the event of a covenant violation, which could occur as early as mid-August 2016 (when we are required to
certify that the interest coverage ratio has been met for the first fiscal quarter ending June 30, 2016), the lenders and/or the
noteholders could declare the company to be in default of the Bank Loan Agreement, the Troms Offshore Debt or the 2013
Note Agreement, as applicable, and accelerate the indebtedness thereunder, the effect of which would be to likewise cause
the company’s other Senior Notes, which were issued in 2010 and 2011, to be in default. Please refer to Note (5) of Notes to
Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional information
regarding the company’s outstanding debt.
Given that we expect that during fiscal 2017 we will not meet the 3.0x minimum interest coverage ratio requirement set forth
in the Bank Loan Agreement, the Troms Offshore Debt and the 2013 Note Agreement, which could result in the acceleration
of the debt under these agreements and the company’s other Senior Notes, the report of the company's independent
registered public accounting firm that accompanies our audited consolidated financial statements for the fiscal year ended
March 31, 2016 (the “audit opinion”) contains an explanatory paragraph regarding our ability to continue as a going concern.
Such going concern explanatory paragraph is required only because our internal forecast indicates that, within fiscal 2017,
we may no longer be in compliance with the minimum interest coverage ratio requirement.
In addition, the Bank Loan Agreement and the Troms Offshore Debt require that the company receive an unqualified audit
opinion from an independent certified public accountant which shall not be subject to a going concern or similar modification.
The failure to receive an audit opinion without any modification, in and of itself, is an event of default under these agreements
which would allow the lenders to accelerate the indebtedness thereunder, the effect of which would be to likewise cause all
of the company’s Senior Notes to be in default. Subsequent to March 31, 2016, the company obtained limited waivers from
the necessary lenders which waive the unqualified audit opinion requirement until August 14, 2016.
As a result of the event of default caused by our failure to receive an audit opinion with no modifications from our
independent certified public accountants (which has been waived only until August 14, 2016), all of the company’s
indebtedness (with the stated maturities as summarized in Note (5)) has been reclassified as a current liability in the
accompanying consolidated balance sheet at March 31, 2016. The explanatory paragraph in the audit opinion discussed
above also references the audit opinion-related event of default under various borrowing arrangements as an uncertainty
that raises substantial doubt about the company’s ability to continue as a going concern.
The company is engaged in discussions with its principal lenders and noteholders to amend and/or waive the company’s
3.0x minimum interest coverage ratio covenant in advance of any such potential default occurring, with the goal of
finalizing any amendments and/or waivers prior to the possible covenant breach. Any such amendments and/or waivers
would require successful negotiations with our bank group and noteholders, and may require the company to make certain
concessions under the existing agreements, such as providing collateral to secure the Bank Loan Agreement, the Troms
Offshore Debt and the Senior Notes, repaying all or a portion of the indebtedness outstanding under the revolving portion of
the Bank Loan Agreement, accepting a reduction in total borrowing capacity under the revolving credit facility, paying a
higher rate of interest, paying down a portion of the Troms Offshore Debt and/or Senior Notes, or some combination of the
above. In addition, such amendments and/or waivers will need to address the audit opinion requirement of the Bank Loan
Agreement and the Troms Offshore Debt (which, again, has been waived only until August 14, 2016). Obtaining the
covenant relief will require the company to reach an agreement that satisfies potentially divergent interests of our lenders
and noteholders.
If lenders or noteholders accelerate the company's outstanding indebtedness, the company’s multiple borrowings will
become immediately payable (as a result of cross default provisions), and the company will not have sufficient liquidity to
repay those accelerated amounts. If the company is unable to reach an agreement with lenders and noteholders to address
the potential defaults, the company would likely seek reorganization under Chapter 11 of the federal bankruptcy laws, which
could include a restructuring of the company’s various debt obligations.
The company’s consolidated financial statements as of and for the year ended March 31, 2016 have been prepared
assuming the company will continue as a going concern, which contemplates continuity of operations, realization of assets
and the satisfaction of liabilities in the normal course of business for the twelve month period following the date of these
consolidated financial statements. However, for the above described reasons, indebtedness with the stated maturities as
summarized in Note (5) is classified as a current liability at March 31, 2016.
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(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.
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%
$
2016
2015
37,141
361
63,893
1,951
$
37,502
65,844
(4)
INCOME TAXES
We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In
making such a determination, we consider all available positive and negative evidence, including future reversals of existing
taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If
we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount,
we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income
taxes.
We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) we determine
whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position
and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of
tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.
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
2016
(85,346)
(54,211)
(139,557)
$
$
2014
2015
(38,282 ) 217,816
(27,985 )
(44,768)
(66,267 ) 173,048
Income tax expense (benefit) for the years ended March 31, consists of the following:
(In thousands)
2016
Current
Deferred
2015
Current
Deferred
2014
Current
Deferred
7674_fin.pdf 106
U.S.
Federal
State
International
Total
$ (13,335)
(6,796)
$ (20,131)
(92)
—
(92)
41,042
—
41,042
27,615
(6,796)
20,819
$
4,869
(72,389)
$ (67,520)
$
(602)
(34,226)
$ (34,828)
(9)
—
(9)
4
—
4
66,452
—
66,452
71,312
(72,389)
(1,077)
68,100
(483 )
67,617
67,502
(34,709)
32,793
F-18
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:
Foreign income taxed at different rates
Foreign tax credits not previously recognized
FIN 48
Expenses which are not deductible for tax purposes
Non-deductible goodwill
Reversal of basis difference – sale leaseback
Valuation allowance – deferred tax assets
Amortization of deferrals associated with
intercompany sales to foreign tax jurisdictions
Expenses which are not deductible for book
purposes
Foreign taxes
State taxes
Other, net
2016
(48,845)
2015
(23,193 )
2014
60,567
$
90,779
—
(3,259)
191
—
—
(13,124)
(13,570 )
—
(1,703 )
472
15,811
—
17,829
(18,536)
(483)
(276)
720
2,941
(3,369)
(5,821)
(4,319)
(2,358 )
(1,475)
—
(744)
(60)
200
20,819
(832 )
5,688
(6 )
785
(1,077 )
(2,144)
—
3
666
32,793
$
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
(14.94%)
1.63 %
18.95%
2016
2015
2014
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
$
2016
2015
19,705
6,780
6,177
5,548
38,210
(4,705 )
33,505
21,874
8,731
2,327
3,901
36,833
(17,829 )
19,004
(33,505 )
(33,505 )
—
(19,004 )
(19,004 )
—
$
Gross deferred tax assets
Less valuation allowance
Net deferred tax assets
Deferred tax liabilities:
Depreciation and amortization
Gross deferred tax liabilities
Net deferred tax assets (liabilities)
F-19
7674_fin.pdf 107
Management assesses the available positive and negative evidence to estimate whether sufficient future U.S. taxable
income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence
evaluated was the cumulative loss for financial reporting purposes of domestic corporations that was incurred over the three-
year periods ended March 31, 2016 and 2015. Such objective evidence limits the ability to consider other subjective
evidence, such as our projections for future growth and tax planning strategies.
On the basis of this evaluation, a valuation allowance of $4.7 million as of March 31, 2016 and $17.8 million as of March 31,
2015 have been recorded against net deferred tax assets which are more likely than not to be unrealized. The amount of the
deferred tax asset considered realizable, however, could be adjusted if estimates of future U.S. taxable income during the
carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer
present and additional weight is given to subjective evidence such as our projections for growth and/or tax planning
strategies.
The company has not recognized a U.S. deferred tax liability associated with temporary differences related to investments in
foreign subsidiaries that are essentially permanent in duration. The differences relate primarily to undistributed earnings and
stock basis differences. Though the company does not anticipate repatriation of funds, a current U.S. tax liability would be
recognized when the company receives those foreign funds in a taxable manner such as through receipt of dividends or sale
of investments. A determination of the unrecognized deferred tax liability for temporary differences related to investments in
foreign subsidiaries is not practicable due to uncertainty regarding the use of foreign tax credits which would become
available as a result of a transaction.
The amount of foreign income that U.S. deferred taxes has not been recognized upon, as of March 31, is as follows:
(In thousands)
Foreign income not recognized for U.S. deferred taxes
2016
$ 2,439,297
The company has the following foreign tax credit carry-forwards that expire in 2022.
(In thousands)
Foreign tax credit carry-forwards
2016
$
2,327
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
2016
2015
$
13,046
32,321
16,305
44,607
Included in the liability balances for uncertain tax positions above are $7.5 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.
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
2016
$
12,099
40
F-20
7674_fin.pdf 108
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
Settlement and lapse of statute of limitations
Balance at March 31,
2016
2015
2014
$
19,698
20,066
14,868
1,223
—
(3,273)
17,648
1,342
—
(1,710 )
19,698
4,393
2,217
(1,412)
20,066
$
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 2008. 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
2016
2015
2014
$
(1,605)
(1,784 )
301
(5)
INDEBTEDNESS
Please refer to Note (2) of Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form
10-K for additional information regarding the company’s compliance with debt covenants and classification of all outstanding
debt as a current liability.
Bank Loan Agreement
In May 2015, the company amended and extended its existing bank loan agreement. The amended bank loan agreement
matures in June 2019 (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 and $600 million of revolver borrowings outstanding at
March 31, 2016 (whose fair value approximates the carrying value because the borrowings bear interest at variable rates).
The company had no available capacity under the revolver at March 31, 2016 and $580 million available under the
revolver at March 31, 2015.
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.
F-21
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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, 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
2016
2015
$ 500,000 500,000
8.4
7.4
4.86 %
4.86%
342,746 516,879
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
2016
2015
$ 165,000 165,000
5.6
4.6
4.42 %
4.42%
127,148 167,910
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
2016
2015
$ 382,500 425,000
4.6
4.1
4.25 %
4.35%
302,832 431,296
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, 2016 and 2015, is an after-tax loss of $1.5 million
($2.4 million pre-tax), and $1.8 million ($2.6 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.
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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
$
2016
2015
—
—
—
—
35,000
0.3
4.61 %
35,197
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 May 2015, Troms Offshore entered into a $31.3 million, U.S. dollar denominated, 12 year unsecured borrowing agreement
which matures in April 2027 and is secured by a company guarantee. The loan requires semi-annual principal payments of
$1.3 million (plus accrued interest) and bears interest at a fixed rate of 2.92% plus a premium based on Tidewater Inc.’s
consolidated funded indebtedness to total capitalization ratio (currently equal to 1.30% for a total all-in rate of 4.22%). As of
March 31, 2016, $30 million is outstanding under this agreement.
In March 2015, Troms Offshore entered into a $29.5 million, U.S. dollar denominated, 12 year unsecured borrowing
agreement which matures in January 2027 and is secured by a company guarantee. The loan requires semi-annual principal
payments of $1.2 million (plus accrued interest) and bears interest at a fixed rate of 2.91% plus a premium based on
Tidewater Inc.’s consolidated funded indebtedness to total capitalization ratio (currently equal to 1.30% for a total all-in rate
of 4.21%). As of March 31, 2016, $27 million is outstanding under this agreement.
A summary of U.S. dollar denominated Troms Offshore borrowings outstanding at March 31, is as follows:
(In thousands)
May 2015 notes (A)
Amount outstanding
Fair value of debt outstanding (Level 2)
March 2015 notes (A)
Amount outstanding
Fair value of debt outstanding (Level 2)
(A) Note requires semi-annual principal payments.
March 31,
2016
March 31,
2015
$
$
30,033
30,062
—
—
27,030
27,027
29,488
29,501
In January 2014, Troms Offshore entered into a 300 million NOK, 12 year unsecured borrowing agreement which matures
in January 2026 and is secured by a company guarantee. 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, 2016, 250 million NOK (approximately $30.2 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. 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. As of March 31, 2016, 144.8 million NOK (approximately $17.5 million) is outstanding under this agreement.
F-23
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A summary of Norwegian Kroner (NOK) denominated Troms Offshore borrowings outstanding at March 31, and their U.S.
dollar equivalents is as follows:
(In thousands)
3.81% January 2014 notes (A):
NOK denominated
U.S. dollar equivalent
Fair value in U.S. dollar equivalent (Level 2)
5.38% May 2012 notes (A):
NOK denominated
U.S. dollar equivalent
Fair value in U.S. dollar equivalent (Level 2)
Variable rate borrowings:
June 2013 borrowing agreement (B)
NOK denominated
U.S. dollar equivalent
May 2012 borrowing agreement (B)
NOK denominated
U.S. dollar equivalent
March 31,
2016
March 31,
2015
250,000
30,207
30,199
144,840
17,500
17,479
275,000
34,234
34,226
161,880
20,152
19,924
—
—
—
—
25,000
3,112
20,000
2,490
$
$
$
$
(A) Note requires semi-annual principal payments.
(B)
Fair values approximate carrying values because the borrowings bear interest at variable rates. The notes were repaid in fiscal 2016.
Each of the four Troms Offshore Debt tranches (two U.S. dollar denominated and two NOK denominated) require 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.
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-24
7674_fin.pdf 112
Summary of Long-Term Debt Outstanding
The following table summarizes debt outstanding at March 31:
(In thousands)
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 2016
NOK denominated borrowing agreement due fiscal 2019
USD denominated notes due fiscal 2027
USD denominated notes due fiscal 2028
Bank term loan due fiscal 2020
Revolving line of credit due fiscal 2020
Less: Current maturities of long-term debt
Total long-term debt
2016
2015
$
65,000
48,000
50,000
65,000
50,000
—
—
44,500
25,000
25,000
25,000
50,000
35,000
42,500
44,500
25,000
25,000
25,000
50,000
100,000 100,000
65,000
48,000
50,000
65,000
50,000
123,000 123,000
250,000 250,000
127,000 127,000
20,152
34,234
2,490
3,112
29,488
—
300,000 300,000
20,000
600,000
$ 2,052,270 1,534,476
10,181
2,052,270
— 1,524,295
$
17,500
30,207
—
—
27,030
30,033
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
2016
2015
2014
$
$
53,752
10,451
64,203
50,029
13,673
63,702
43,814
11,497
55,311
(6) EMPLOYEE RETIREMENT PLANS
U.S. Defined Benefit Pension Plan
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, 2016,
approximately 37 active 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 provided the company with more
predictable retirement plan costs and cash flows. The company’s future benefit obligations and requirements for cash
F-25
7674_fin.pdf 113
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 2016 and 2015.
Management is working with its actuary to determine if a contribution will be necessary during fiscal 2017.
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 contributed $0.2 million to the supplemental plan during fiscal 2016
and did not contribute to the plan during 2015.
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
2016
2015
$
8,811
(208 )
9,915
235
(168 )
25,072
126
25,510
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.
Effective November 20, 2015, the company eliminated its post-65 medical coverage for all current and future retirees
effective January 1, 2017. The plan amendment resulted in an additional net periodic postretirement benefit of $1.4 million
for the year ended March 31, 2016. The medical coverage remains unchanged for participants under age 65.
Investment Strategies
U.S. Pension Plan
The obligations of our pension plan are supported by assets held in a trust for the payment of 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.
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If the plan assets are less than the plan liabilities, the pension plan assets will be invested exclusively in fixed income debt
securities. Any investments in corporate bonds shall be at least investment grade, while mortgage and asset-backed
securities must be rated “A” or better. If an investment is placed on credit watch, or is downgraded to a level below the
investment grade, the holding will be liquidated, even at a loss, in a reasonable time period. The plan will only hold
investments in equity securities if the plan assets exceed the estimated plan liabilities.
The cash flow requirements of the pension plan will be analyzed at least annually. Portfolio repositioning will be required
when material changes to the plan liabilities are identified and when opportunities arise to better match cash flows with the
known liabilities. Additionally, trades will occur when opportunities arise to improve the yield-to-maturity or credit quality of
the portfolio.
The company’s policy for the pension plan is to contribute no less than the minimum required contribution by law and no
more than the maximum deductible amount. The plan does not invest in Tidewater stock.
Supplemental Plan
The investment policy of the supplemental plan is to assess the historical returns and risk associated with alternative
investment strategies to achieve an expected rate of return on plan assets. The objectives of the plan are designed to
maximize total returns within prudent parameters of risk for a retirement plan of this type. The below table summarizes the
supplemental plan’s minimum and maximum rate of return objectives for plan assets:
Equity securities
Debt securities
Cash and cash equivalents
Minimum
Expected
Rate of Return
on Plan Assets
5%
1%
0%
Maximum
Expected
Rate of Return
on Plan Assets
7%
3%
1%
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 4.15%, 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.
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7674_fin.pdf 115
U.S. Pension and Supplemental Plan Asset Allocations
The following table provides the target and actual asset allocations for the pension plan and the supplemental plan:
U.S. Pension plan:
Equity securities
Debt securities
Cash and other
Total
Supplemental plan:
Equity securities
Debt securities
Cash and other
Total
Significant Concentration Risks
U.S. Plans
Target
Actual as of
2016
Actual as of
2015
—
100%
—
100%
65%
35%
—
100%
—
95 %
5 %
100 %
58 %
39 %
3 %
100 %
—
95%
5%
100%
58%
39%
3%
100%
The pension plan and the supplemental plan assets are periodically evaluated for concentration risks. As of March 31,
2016, 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. 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. 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% of the 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-28
7674_fin.pdf 116
Fair Value of Pension Plans and Supplemental Plan Assets
Tidewater’s plan assets are accounted for at fair value and are classified within the fair value hierarchy based on the
lowest level of input that is significant to the fair value measurement, with the exception of investments for which fair value
is measured using the net asset value per share expedient.
The fair value hierarchy for the pension plans and supplemental plan assets measured at fair value as of March 31, 2016,
are as follows:
(In thousands)
Pension plan measured at fair value:
Debt securities:
Government securities
Collateralized mortgage securities
Corporate debt securities
Foreign debt securities
Cash and cash equivalents
Other
Total
Accrued income
Total fair value of plan assets
Supplemental plan measured at fair value:
Equity securities:
Common stock
Foreign stock
American depository receipts
Preferred American depository receipts
Real estate investment trusts
Debt securities:
Government debt securities
Open ended mutual funds
Cash and cash equivalents
Total
Other pending transactions
Total fair value of plan assets
Quoted prices in
active
markets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Measured
at Net
Asset
Value
Fair Value
$
3,104
47
48,378
1,499
2,247
1,077
$ 56,352
822
$ 57,174
$
$
$
3,290
159
1,311
13
61
1,711
1,663
343
8,551
260
8,811
—
3,104
—
47
— 48,378
—
1,499
1,901
346
1,013
64
3,514 52,838
—
4,336 52,838
822
3,290
159
1,311
13
61
972
—
13
5,819
291
6,110
—
—
—
—
—
739
—
282
1,021
(49 )
972
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,663
48
1,711
18
1,729
F-29
7674_fin.pdf 117
The following table provides the fair value hierarchy for the pension plans and supplemental plan assets measured at fair
value as of March 31, 2015:
(In thousands)
Pension plan measured at fair value:
Debt securities:
Government securities
Collateralized mortgage 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
Foreign stock
American depository receipts
Preferred American depository receipts
Real estate investment trusts
Debt securities:
Government debt securities
Open ended mutual funds
Cash and cash equivalents
Total
Other pending transactions
Total fair value of plan assets
Quoted prices in
active
markets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Measured
at Net
Asset
Value
Fair Value
$
3,116
400
51,758
1,529
1,816
$ 58,619
866
$ 59,485
$
3,859
201
1,685
15
59
1,926
1,916
377
$ 10,038
(123)
9,915
$
—
3,116
—
400
— 51,758
—
1,529
—
1,816
3,116 55,503
—
3,982 55,503
866
3,859
201
1,685
15
59
1,377
—
72
7,268
(123)
7,145
—
—
—
—
—
549
—
261
810
—
810
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,916
44
1,960
—
1,960
F-30
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Plan Assets and Obligations
Changes in plan assets and obligations during the years ended March 31, 2016 and 2015 and the funded status of the
U.S. defined benefit pension plan, Norway’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
Acquisition
Plan amendment
Plan settlement
Benefits paid
Actuarial (gain) loss
Foreign currency exchange rate changes
Benefit obligation at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return
Expected return
Actuarial loss
Administrative expenses
Acquisition
Employer contributions
Participant contributions
Plan settlement
Benefits paid
Foreign currency exchange rate changes
Fair value of plan assets at end of year
Payroll tax unrecognized in benefit obligation at end
of year
Unfunded status at end of year
Net amount recognized in the balance sheet
consists of:
Current liabilities
Noncurrent liabilities
Net amount recognized
Pension Benefits
2015
2016
Other Benefits
2016
2015
$
$
98,490
1,372
3,781
—
(440)
—
—
(4,726)
(2,583)
(64)
95,830
60,854
(6)
43
(134)
(36)
(225)
1,445
—
—
(4,727)
(40)
57,174
84,067
825
3,873
—
—
—
—
(4,405)
11,948
—
96,308
56,896
6,069
—
—
—
—
925
—
—
(4,405)
—
59,485
23,926
212
584
447
—
(15,961 )
—
(1,043 )
(2,592 )
—
5,573
—
—
—
—
—
—
596
447
—
(1,043 )
—
—
24,114
273
904
430
—
—
—
(863)
(932)
—
23,926
—
—
—
—
—
—
433
430
—
(863)
—
—
—
$ (38,740) $ (36,823) $
84
—
—
(5,573 ) $ (23,926)
$
(993)
(37,747)
$ (38,740)
(1,306)
(35,517)
(36,823)
(818 )
(4,755 )
(5,573 )
(908)
(23,018)
(23,926)
The following table provides the projected benefit obligation and accumulated benefit obligation for the pension plans:
(In thousands)
Projected benefit obligation
Accumulated benefit obligation
2016
2015
$
95,830
91,388
96,308
92,808
The following table provides information for pension plans with an accumulated benefit obligation in excess of plan assets
(includes both the pension plans and supplemental plan):
(In thousands)
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
$
2016
2015
95,830
91,388
57,174
96,308
92,808
59,485
F-31
7674_fin.pdf 119
Net periodic benefit cost for the pension plans 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
Administrational expenses
Payroll tax of net pension costs
Amortization of prior service cost
Amortization of net actuarial losses
Recognized actuarial loss
Settlement (gain)
Net periodic pension cost
2016
2015
2014
$
$
1,371
3,781
(2,163)
36
66
36
24
2,269
(245)
5,175
825
3,873
(2,741 )
—
—
50
—
988
—
2,995
790
3,581
(2,871)
—
—
50
—
1,103
—
2,653
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 (gain)
Net periodic postretirement benefit
2016
2015
2014
$
$
212
584
(2,996)
(1,040)
(3,240)
273
904
(2,032 )
(1,299 )
(2,154 )
405
1,048
(2,032)
(396)
(975)
Other changes in plan assets and benefit obligations recognized in other comprehensive (income) loss for the fiscal years
ended March 31 include the following components:
(In thousands)
Change in benefit obligation
Net (gain) loss
Settlement loss
Amortization of prior service (cost) credit
Amortization of net (loss) gain
Prior service (cost) credit arising during period
Total recognized in other comprehensive (income)
loss, before tax
Net of tax
Pension Benefits
2015
2016
Other Benefits
2016
2015
$
(343)
—
(36)
(2,269)
—
8,621
—
(50)
(988)
—
(2,592 )
—
2,996
1,040
(15,961 )
$
(2,648)
(1,721)
7,583
7,583
(14,517 )
(9,436 )
(932)
—
2,032
1,299
—
2,399
1,559
Amounts recognized as a component of accumulated other comprehensive income (loss) as of March 31, 2016 are as
follows:
(In thousands)
Unrecognized actuarial (loss) gain
Unrecognized prior service credit (cost)
Pre-tax amount included in accumulated other
comprehensive (loss) income
Pension Benefits Other Benefits
8,172
$
17,553
(19,169)
—
$
(19,169)
25,725
F-32
7674_fin.pdf 120
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) gain
Unrecognized prior service credit (cost)
Pension Benefits Other Benefits
1,072
$
4,346
(1,821)
—
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
4.15%
3.00%
4.00%
3.00%
4.00 %
N/A
4.00%
N/A
Pension Benefits
2015
2016
Other Benefits
2016
2015
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
4.00%
3.70%
3.00%
4.75%
5.00%
3.00%
4.25%
5.00%
3.00%
4.00 %
N/A
N/A
4.75%
N/A
N/A
4.25%
N/A
N/A
Pension Benefits
2015
2016
2014
2016
2015
2014
Other Benefits
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, 2016, 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,
2017
2018
2019
2020
2021
2022 – 2026
Total 10-year estimated future benefit payments
(In thousands)
Pension
Benefits
5,944
6,991
6,733
7,683
7,050
36,480
70,881
Other
Benefits
818
410
416
435
421
1,928
4,428
$
$
Health Care Cost Trends
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, 2016 for pre-65 medical and prescription drug
coverage and for post-65 medical coverage, including expected future trend rates.
Year ending March 31, 2016:
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, 2017:
Net periodic postretirement benefit obligation
Pre-65
Post-65
7.75%
7.90%
4.54%
2038
6.90 %
6.90 %
4.50 %
2029
7.75%
6.90 %
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7674_fin.pdf 121
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
$
Increase
250
119
1%
1%
Decrease
(227 )
(95 )
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. Effective
January 1, 2016, the company matches, in cash, 50% of the first 8% of eligible compensation deferred by the employee.
Prior to January 1, 2016, the company matched, with company 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
2016
2015
351,675
299,256
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
2016
2015
2014
$
3,443
202
4,216
52
3,854
82
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
F-34
7674_fin.pdf 122
participated in the now frozen defined benefit pension plan may receive an additional 1% to 8% depending on age and
years of service.
The company also provides retirement benefits to its eligible non-U.S. citizen employees working outside their respective
country of origin.
Effective December 1, 2015, the company amended its existing multinational savings plan to a self-directed multinational
defined contribution retirement plan (multinational retirement plan). The company subsequently removed approximately $6.4
million of plan assets and liabilities from the other assets and other liabilities and deferred credits section of the condensed
consolidated balance sheets. Non-U.S. citizen shore-based and certain offshore employees working outside their respective
country of origin are eligible to participate in the multinational retirement plan provided the employees are not enrolled in any
home country pension or retirement program. Participants of the multinational retirement plan may contribute 1% to 50% of
their base salary after the first month following hire or transfer to eligible positions. The company matches, in cash, 50% of
the first 6% of eligible compensation deferred by the employee which vests over five years. The company does not anticipate
its contribution expense for the multinational retirement plan will increase due to the amendment.
Prior to the amendment of this plan, participants could contribute 1% to 15% of their base salary and the company
matched, in cash, 50% of the first 6% of eligible compensation deferred by the employee. This former plan’s company
contributions vested over six years.
The amounts charged to expense related to the multinational retirement plan and multinational savings plan contributions,
for the fiscal years ended March 31, are as follows:
(In thousands)
Multinational plan expense
2016
2015
2014
$
596
494
465
The company also has a defined benefit pension plan that covers certain Norway citizen employees and other employees
who are permanent residents of Norway. Benefits are based on years of service and employee compensation. As of
March 31, 2016, approximately 146 active employees are covered by this plan. The company contributed a respective 3.8
million NOK and 4.8 million NOK (approximately $0.5 million and $0.6 million, respectively) to the defined benefit pension
plan during fiscal 2016 and 2015. Management is working with its actuary to determine if a contribution will be necessary
during fiscal 2017. The preceding fair value hierarchy tables and pension plan assets and obligations tables include the
Norway pension plan.
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 current assets at March 31, is as follows:
(In thousands)
Deposits on vessel construction options (A)
Deposits - general
Prepaid expenses
2016
2015
30,285
8,076
6,394
44,755
—
7,381
10,400
17,781
$
$
(A) Refer to Note (12) for additional discussion regarding the vessels under construction with option agreements.
F-35
7674_fin.pdf 123
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
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
2016
2015
9,412
33,505
6,754
14,472
14,297
78,440
10,468
19,004
7,396
23,208
15,120
75,196
2016
2015
32,041
12,864
8,282
7,193
79,549
45,838
14,514
15,120
11,869
10,596
91,611 146,255
2016
2015
45,854
23,798
5,173
74,825
56,620
25,057
784
82,461
$
$
$
$
$
$
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
$
$
2016
2015
4,755
41,690
23,018
41,279
112,721 136,238
34,573
181,546 235,108
22,380
(8) STOCK-BASED COMPENSATION AND INCENTIVE PLANS
The company’s employee stock option, restricted stock awards, restricted stock units (that settle in Tidewater common
stock), phantom stock, and cash-based performance unit 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 stock-based compensation and incentive 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.
F-36
7674_fin.pdf 124
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
2015
2016
2,257,963 2,580,880
480,839 871,674
Stock Option Plans
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 granted in fiscal 2016 and 2015 but not during fiscal 2014.
The fair value and assumptions used for the stock options issued during the years ended March 31, are as follows:
Weighted average fair value of stock options granted
Risk-free interest rate
Expected dividend yield
Expected stock price volatility
Expected stock option life
$
2016
2015
3.34 $
1.62 %
0.0 %
45 %
6.5 years
5.54
1.82%
2.4%
30%
6.5 years
The following table sets forth a summary of stock option activity of the company for fiscal years 2016, 2015 and 2014:
Outstanding at March 31, 2013
Granted
Exercised
Expired or cancelled/forfeited
Outstanding at March 31, 2014
Granted
Exercised
Expired or cancelled/forfeited
Outstanding at March 31, 2015
Granted
Exercised
Expired or cancelled/forfeited
Outstanding at March 31, 2016
Weighted-average
Exercise Price
Number of
Shares
$
$
—
36.86
—
46.24 1,556,275
—
(186,219 )
—
47.51 1,370,056
22.80 428,326
(29,118 )
35.21
42.97
(60,058 )
41.69 1,709,206
7.21 405,817
—
—
52.67
(337,899 )
31.73 1,777,124
Information regarding the 1,777,124 options outstanding at March 31, 2016 can be grouped into three general exercise-
price ranges as follows:
At March 31, 2016
Options outstanding
Weighted average exercise price of options outstanding
Weighted average remaining contractual life of options
outstanding
Options exercisable
Weighted average exercise price of options exercisable
Weighted average remaining contractual life of options
exercisable
$
$
$7.21 - $22.80
Exercise Price Range
$33.83 - $45.75
$56.56 - $65.69
819,161
15.08 $
648,047
40.49 $
309,916
57.42
9.5 years
142,802
22.80 $
3.6 years
648,047
40.49 $
1.8 years
309,916
57.42
9.0 years
3.6 years
1.8 years
F-37
7674_fin.pdf 125
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 $
2016
2015
2014
—
135,275
749
4,059
8,926
$
115
1,100,765 1,288,407 1,370,056
47.51
475
7,527
40
47.86
42.96
There was no intrinsic value of any options outstanding or exercisable at March 31, 2016.
Stock option compensation expense along with the reduction effect on basic and diluted earnings per share 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
$
2016
2015
2014
859
0.01
0.01
71
0.00
0.00
12
0.00
0.00
As of March 31, 2016, total unrecognized stock-option compensation costs amounted to $2.8 million or $1.9 million net of
tax. No stock option compensation costs were capitalized as part of the cost of an asset. Compensation costs for stock
options that have not yet vested will be recognized as the underlying stock options vest over the appropriate future period.
The level of unrecognized stock-option compensation will be affected by any future stock option grants and by the
termination of any employee who has received stock options that are unvested as of the employee’s termination date.
Restricted Stock Awards
The company has granted restricted stock awards to key employees, including officers, under several different employee
stock plans, which provides 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.
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The following table sets forth a summary of restricted stock award activity of the company for fiscal 2016, 2015 and 2014:
Weighted-average
Grant-Date
Fair Value
Non-vested balance at March 31, 2013
Granted
Vested
Cancelled/forfeited
Non-vested balance at March 31, 2014
Granted
Vested
Cancelled/forfeited
Non-vested balance at March 31, 2015
Granted
Vested
Cancelled/forfeited
Non-vested balance at March 31, 2016
$
50.95
55.04
56.71
35.76
54.75
—
57.46
47.09
56.94
—
55.04
54.43
—
Time Based
Performance
Shares
Based Shares
148,549 164,138
—
28,963
(1,749)
(93,739 )
(56,123)
(4,949 )
78,824 106,266
—
—
(37,861)
68,405
—
—
(68,405)
—
—
(48,574 )
(5,959 )
24,291
—
(24,291 )
—
—
All restricted stock awards have either fully vested or have been cancelled during fiscal 2016, as such there are no shares to
lapse during fiscal 2017.
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
2016
2015
2014
$
1,337
472
2,791
2,855
4,671
4,633
As of March 31, 2016, total unrecognized restricted stock compensation costs amounted to $0 million, or $0 million net of
tax. No restricted stock award compensation costs were capitalized as part of the costs of an asset. The amount of
unrecognized restricted stock compensation will be affected by any future restricted stock grants and by the separation of
an employee from the company who has received restricted stock grants that are unvested as of their separation date.
There were no modifications to the restricted stock awards during fiscal 2016, 2015 and 2014.
Restricted Stock Units
The company has granted restricted stock units (RSUs) to key employees, including officers, under the company’s
employee stock plan, which provides 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 there are 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.
Restricted stock unit compensation costs are recognized on a straight-line basis over the vesting period, and are net of
forfeitures.
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The following table sets forth a summary of restricted stock unit activity of the company for fiscal 2016, 2015, and 2014:
Weighted-average
Grant-Date
Fair Value
Time
Based
Units
Weight-average
Grant Date
Fair Value
Non-vested balance at March 31, 2013
Granted
Vested
Cancelled/forfeited
Non-vested balance at March 31, 2014
Granted
Vested
Cancelled/forfeited
Non-vested balance at March 31, 2015
Granted
Vested
Cancelled/forfeited
Non-vested balance at March 31, 2016
$
$
$
$
51.69 417,665
49.37 265,937
52.22 (175,673)
52.43
(12,720)
50.24 495,209
54.48
551
50.92 (237,229)
49.62
(7,381)
49.50 251,150
—
49.74 (152,231)
(9,280)
49.74
89,639
49.17
—
Performance
Based Units
69.62 165,241
91,132
56.44
—
—
—
—
53.58 256,373
—
—
—
53.58 256,373
—
—
—
—
69.95
(99,522)
61.75 156,851
—
—
—
Restrictions on approximately 89,456 time-based units outstanding at March 31, 2016 will lapse during fiscal 2017.
Restrictions on 69,546 performance-based units outstanding at March 31, 2016 will lapse if the performance criteria are
not met.
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
2016
2015
2014
$
7,572
10,505
12,080
17,214
9,176
12,664
As of March 31, 2016, total unrecognized restricted stock unit compensation costs amounted to $5.2 million, or $3.9
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 2016, 2015 and 2014.
Phantom Stock Plan
The company provides a Phantom Stock Plan to provide additional incentive compensation to key employees including
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.
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The following table sets forth a summary of phantom stock activity of the company for fiscal 2016, 2015 and 2014:
Weighted-average
Grant-Date
Fair Value
Time
Based
Shares
Performance
Based
Shares
Non-vested balance at March 31, 2013
Granted
Vested
Cancelled/forfeited
Non-vested balance at March 31, 2014
Granted
Vested
Cancelled/forfeited
Non-vested balance at March 31, 2015
Granted
Vested
Cancelled/forfeited
Non-vested balance at March 31, 2016
$
68,595
51.74
31,736
48.81
(35,095 )
51.45
(4,354 )
50.93
60,882
50.94
22.80 546,058
(33,987 )
48.47
50.70
(5,482 )
24.07 567,471
7.21 1,246,972
(190,052 )
24.92
23.93
(25,853 )
10.83 1,598,538
—
1,291
—
—
1,291
—
—
1,291
—
—
—
1,291
Restrictions on 596,464 time-based shares and 1,291 performance based shares will lapse in fiscal 2017. The fair value
of the non-vested phantom shares at March 31, 2016 is $6.83 per unit.
Phantom stock compensation expense and grant date fair value of phantom stock vested 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
2016
2015
2014
$
4,737
1,787
1,647
933
1,806
1,706
—
—
—
As of March 31, 2016, total unrecognized phantom stock compensation costs amounted to $10.8 million, or $8.3 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.
Cash-based Performance Plan
The company provides a Cash-based Performance Plan as additional incentive compensation to officers of the company.
The plan awards units equal to cash to participants where each unit represents the right to receive, at the end of a vesting
period, up to two dollars.
Vesting of the various cash-based performance units (CBU) is based on metrics such as a three year TSR as measured
against a three year TSR of a defined peer group and 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 cash-based performance units. The fair value of the ROTC CBUs is based on the market price of our
common stock on the date of grant less dividends associated with the ROTC component. The CBUs do not receive
dividend equivalents. The restrictions on the CBU’s lapse if the company meets specific targets as defined. Upon
retirement, the Compensation Committee of the Board of Directors will take into consideration the accelerated vesting of
the CBUs after certain age and service criteria are met. Cash-based performance unit compensation costs are recognized
on a straight-line basis over the vesting period, and are net of forfeitures.
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The following table sets forth a summary of cash-based performance plan unit activity of the company for fiscal 2016 and
2015:
Weighted-average
Grant-Date
Fair Value
Performance
Based
Units
Non-vested balance at March 31, 2014
$
Granted
Vested
Cancelled/forfeited
Non-vested balance at March 31, 2015
Granted
Vested
Cancelled/forfeited
Non-vested balance at March 31, 2016
$
—
—
—
—
1.10 4,519,703
—
—
1.10 4,519,703
1.22 3,527,333
—
1.10 (133,320 )
1.16 7,913,716
—
No cash-based performance units outstanding at March 31, 2016 will vest during fiscal 2017.
Cash-based performance unit compensation expense and grant date fair value for the year ended March 31, is as follows:
(In thousands)
Grant date fair value of cash-based performance units vested
Cash-based performance unit compensation expense
$
2016
2015
—
1,141
—
72
As of March 31, 2016, total unrecognized cash-based performance plan compensation costs amounted to $6.3 million, or
$4.3 million net of tax. No cash-based performance plan compensation costs were capitalized as part of the costs of an
asset. The amount of unrecognized cash-based performance plan compensation costs will be affected by any future cash-
based unit grants and by the separation of an employee from the company who has received cash-based performance
plan units that are unvested as of their separation date. There were no modifications to the cash-based performance plan
units during fiscal 2016 and 2015.
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 beginning fiscal
2013 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 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 to fiscal 2016, the participant can elect to receive annual installments of two to
ten years or a lump sum distribution.
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The following table sets forth a summary of deferred stock unit activity of the company for fiscal 2016, 2015 and 2014:
Balance at March 31, 2013
Dividend equivalents reinvested
Retirement distribution
Granted
Balance at March 31, 2014
Dividend equivalents reinvested
Retirement distribution
Granted
Balance at March 31, 2015
Dividend equivalents reinvested
Retirement distribution
Granted
Balance at March 31, 2016
Weighted-average
Grant-Date
Fair Value
Number
Of
Units
50.48 144,007
2,492
53.82
(26,661 )
59.65
49.47
26,550
48.68 146,388
3,794
34.63
(21,492 )
47.50
19.14
56,370
39.53 185,060
15,064
13.36
(4,874 )
19.14
6.83 168,380
23.58 363,630
$
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 (benefit)
2016
2015
2014
$
(904)
(2,477 )
1,737
(9) STOCKHOLDERS’ EQUITY
Common Stock
The number of authorized and issued common stock and preferred stock at March 31, are as follows:
2016
2015
Common stock shares authorized
Common stock par value
Common stock shares issued
Preferred stock shares authorized
Preferred stock par value
Preferred stock shares issued
0.10 $
125,000,000 125,000,000
$
0.10
47,067,715 47,029,359
3,000,000
No par
—
3,000,000
No par
—
Common Stock Repurchases
In May 2014, 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. In May 2015, the company’s Board of Directors
authorized an extension of its May 2014 common stock repurchase program from its original expiration date of June 30,
2015 to June 30, 2016. In fiscal 2015, $100 million was used to repurchase common stock under the May 2014 share
repurchase program. No shares were repurchased by the company during fiscal 2016.
In January 2016, the company suspended its common stock repurchase program.
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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
2016
2015
2014
$
$
—
99,999
— 2,841,976
—
35.19
—
—
—
Dividend Program
The declaration of dividends is at the discretion of the company’s Board of Directors, and will depend on the company’s
financial results, cash requirements, future prospects, and other factors deemed relevant by the 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
2016
2015
2014
$ 34,965 49,127 49,973
1.00
1.00
0.75
In January 2016, the company suspended the quarterly dividend program.
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:
Balance
at
3/31/14
For the year ended March 31, 2015
Net
period
OCI
Gains/(losses)
recognized
in OCI
Reclasses
from OCI to
net income
Remaining
balance
3/31/15
Balance
at
3/31/15
For the year ended March 31, 2016
Net
period
OCI
Gains/(losses)
recognized
in OCI
Reclasses
from OCI to
net income
Remaining
balance
3/31/16
92
(64 )
207
143
235
235
(573 )
130
(443)
(208)
(9,811 )
—
—
—
(9,811)
(9,811)
—
—
—
(9,811)
(116 )
(9,013 )
— (9,013)
(9,129)
(9,129)
13,812
— 13,812
4,683
(2,390 )
(12,225 )
—
(9,077 )
717
717
(1,673)
924 (8,153) (20,378) (20,378)
(1,673)
—
13,239
143
143
273 13,512
(1,530)
(6,866)
(in thousands)
Available for
sale
securities
Currency
translation
adjustment
Pension/Post-
retirement
benefits
Interest rate
swap
Total
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,
2016
2015
Affected line item in the condensed
consolidated statements of income
200
220
420
147
273
207 Interest income and other, net
717 Interest and other debt costs
924
—
924
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Included in accumulated other comprehensive loss for the year ended March 31, 2016, is an after-tax loss of $1.5 million
($2.4 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 (5). 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.
(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)
Net earnings (loss) available to common
shareholders
Weighted average outstanding shares of common
stock, basic
Dilutive effect of options and restricted stock awards
Weighted average common stock and equivalents
2016
2015
2014
$
(160,183)
(65,190 )
140,255
46,981,102 48,658,840 49,392,749
287,365
46,981,102 48,658,840 49,680,114
—
—
Earnings (loss) per share, basic (A)
Earnings (loss) per share, diluted (B)
Additional information:
Antidilutive options and restricted stock shares
$
$
(3.41)
(3.41)
(1.34 )
(1.34 )
2.84
2.82
489,325
284,635
34,486
(A)
(B)
The company calculates “Loss per share, basic” by dividing “Net loss available to common shareholders” by “Weighted average outstanding
share of common stock, basic”.
The company calculates “Loss per share, diluted” by dividing “Net loss available to common shareholders” by “Weighted average common stock
and equivalents”.
(11) SALE/LEASBACK ARRANGEMENTS
Fiscal 2015 Sale/Leasebacks
During fiscal 2015, the company sold six vessels to unrelated third parties, and simultaneously entered into bareboat
charter agreements with the purchasers. Under the sale/leaseback agreements the company has the right to re-acquire
the vessel for a fixed percentage of the original sales price at a defined date during the lease, deliver the vessel to the
owners at the end of the lease term, purchase the vessel at its then fair market value at the end of the lease term or
extend the leases for 24 months at mutually agreeable lease rates.
The company is accounting for these transactions as sale/leasebacks with operating lease treatment and will record the
payments as vessel operating lease expense on a straight-line basis over the lease term. The deferred gains will be
amortized to gain on asset dispositions, net ratably over the respective lease term. Any deferred gain balance remaining
upon the repurchase of the vessels would reduce the vessels’ stated cost if the company elects to exercise the purchase
options.
The following table provides the number of vessels, total proceeds, carrying values at the time of sale, deferred gains
recognized, lease expirations, and contractual purchase option timing for the vessels sold and leased back by the
company during fiscal 2015:
Fiscal 2015 Quarter
First
Second
Third
Fourth
Number of
Vessels
1
1
3
1
6
Deferred
Gain at time
of Sale
Carrying
Value at time
of Sale
Lease
Term
in Years
4,002 $
7
8,214 11,136 8.5
33,233 44,967 8 – 9 60% 7th or 8th Year
5,115
Total
Proceeds
$ 13,400 $
19,350
78,200
7,885
13,000
$123,950 $ 50,564 $ 73,386
Purchase
Option
Percentage
61%
47%
Purchase
Option at
at end of:
6th Year
8th Year
50%
6th Year
9,398
7
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Fiscal 2014 Sale/Leasebacks
During fiscal 2014, the company sold ten vessels to unrelated third parties, and simultaneously entered into bareboat
charter agreements with the purchasers. Under the sale/leaseback agreements the company has the right to re-acquire
the vessel for a fixed percentage of the original sales price at a defined date during the lease, deliver the vessel to the
owners at the end of the lease term, purchase the vessel at its then fair market value at the end of the lease term or
extend the leases for 24 months at mutually agreeable lease rates.
The company is accounting for these transactions as sale/leasebacks with operating lease treatment and will record the
payments as vessel operating lease expense on a straight-line basis over the lease term. The deferred gains will be
amortized to gain on asset dispositions, net ratably over the respective lease term. Any deferred gain balance remaining
upon the repurchase of the vessels would reduce the vessels’ stated cost if the company elects to exercise the purchase
options.
The following table provides the number of vessels, total proceeds, carrying values at the time of sale, deferred gains
recognized, lease expirations, and contractual purchase option timing for the vessels sold and leased back by the
company during fiscal 2014:
Fiscal 2014 Quarter
Second
Third
Fourth
Fiscal 2010 Sale/Leaseback
Number of
Vessels
2
4
4
10
Total
Proceeds
Deferred
Gain at time
of Sale
Carrying
Value at time
of Sale
$ 65,550 $ 34,325 $ 31,225
141,900 105,649 36,251 7 – 9 54 - 68% 6th or 8th Year
32,845 30,460 7 – 10 53 - 59% 6th or 9th Year
63,305
$270,755 $ 172,819 $ 97,936
Purchase
Option
Percentage
55%
Lease
Term
in Years
7
Purchase
Option at
at end of:
6th Year
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 company
accounted for the transactions as sale/leaseback transactions with operating lease treatment and expenses lease
payments over the five year charter hire operating lease terms.
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. Two
additional vessels were sold and leased back in April 2014 and March 2015, respectively. 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.
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. In November 2014, the company
repurchased a fifth leased vessel for a total cost of $11.2 million. Three of these vessels were sold and leased back in
fiscal 2015.
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Future Minimum Lease Payments
As of March 31, 2016, the future minimum lease payments for the vessels under the operating lease terms are as follows:
Fiscal year ending (In thousands)
2017
2018
2019
2020
2021
Thereafter
Total future lease payments
(12) COMMITMENTS AND CONTINGENCIES
Compensation Commitments
Fiscal 2015
Sale/Leaseback
9,485
$
9,604
10,234
11,497
11,594
19,273
71,687
$
Fiscal 2014
Sale/Leaseback Total
20,879 30,364
23,486 33,090
24,800 35,034
25,519 37,016
19,979 31,573
20,063 39,336
134,726 206,413
Change of control agreements exist with all of the company’s officers whereby each receives certain compensation and
benefits in the event that their employment is terminated for certain reasons during a two- or three-year protected period
following 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 $57 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, 2016:
(In thousands, except vessel count)
Vessels under construction (A):
Deepwater PSVs
Total vessel commitments
Number of
Vessels Total Cost
Invested
Through
3/31/16
Remaining
Balance
3/31/16
6 $ 251,420 183,904
6 $ 251,420 183,904
67,516
67,516
(A)
(B)
Six additional option vessels and a fast supply boat are not included in the table above.
The company is entitled to receive refunds of prior shipyard payments totaling approximately $31 million which would offset the remaining
balance of vessel commitments. See further discussion below.
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 4,700 and 6,100 deadweight tons (DWT) of cargo capacity. The new-build vessels began to deliver in April
2016, with delivery of the final new-build vessel expected in May 2017. The company has approximately $68 million in
unfunded capital commitments associated with the six vessels under construction (approximately $37 million, net of $31
million of expected refunds from shipyards) at March 31, 2016.
The company has successfully replaced the vast majority of the older vessels in its fleet with fewer, larger and more efficient
vessels that have a more extensive range of capabilities. These efforts are expected to continue with the delivery of the
remaining six vessels currently under construction. The company anticipates that it will use some portion of its available
cash, or future operating cash flows in order to fund current and any future commitments in connection with the completion of
the fleet renewal and modernization program.
In June 2015, the company entered into settlement agreements with an international shipyard, which at the time was
constructing six 7,145 BHP towing-supply-class vessels and six 261-foot, 4,700 DWT tons of cargo capacity, deepwater
PSVs. Under the settlement agreements, contracts for three 7,145 BHP towing-supply-class vessels were terminated, and
the shipyard agreed with respect to these three cancelled contracts to (i) return to the company approximately $36 million in
aggregate installment payments, (ii) terminate the company’s obligation to make any additional payments, and (iii) apply $3.5
million of accrued interest due to the company on the returned installment amounts to offset future installment obligations on
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other vessels at this shipyard. Of the total $36 million in returned installments, the shipyard returned $24 million in June 2015
and the remaining $12 million in July 2015. The company recorded an impairment charge of $0.8 million in the first quarter of
fiscal 2016 to write off the amounts not recoverable from the shipyard with respect to these three vessels. The company
applied the $3.5 million shipyard credit in the December quarter as an offset to other payments made to the shipyard.
In September 2015, the company entered into additional settlement agreements with the same shipyard to resolve the
remaining nine vessels (three additional 7,145 BHP towing-supply-class vessels and six 261-foot, 4,700 deadweight tons of
cargo capacity, deepwater PSVs) then under construction. Under the settlement agreements, the company agreed to
substantial discounts to the purchase price for four of these vessels. The company took delivery of one towing-supply-class
vessel in September of 2015, and another towing-supply-class vessel in January of 2016, and is expected to take delivery of
two deepwater PSVs in the June quarter of 2016. Under the September 2015 settlement agreements, the company received
separate options, but not obligations to acquire, each of the remaining five vessels, with option dates expiring in October
2016. Under the terms of these options, if the company does not elect to take delivery of any of these vessels, (a) the
company is entitled to receive the return of approximately $31 million in aggregate installment payments (representing
installment payments made to date on these five vessels) together with interest on these installments of $3.7 million (were
issued to the company as “shipyard credits” and applied to future installment payments on the two PSVs to be delivered) and
(b) the company will be relieved of the obligation to pay the shipyard the approximately $75 million in remaining construction
payments. The purchase prices for each of the five vessels that are subject to options are unchanged by the settlement. The
company declined to exercise the first of these options, and in January 2016 received $12 million in refunded payments. The
company has also taken the $3.7 million “shipyard credit” in the December 2015 quarter as an offset against other payments
made to the shipyard. The remaining four option vessels are not included in the preceding table of vessel commitments as of
March 31, 2016. Each settlement agreement (except for the agreement with respect to the towing-supply vessel delivered in
September 2015) was entered into subject to the consent of the Bank of China, the issuer of the refundment guarantees on
all nine vessels. The Bank of China has subsequently issued consents for all eight remaining settlement agreements and
has issued refundment guarantees on the two remaining vessels under construction at March 31, 2016.
In April 2015, the company entered into negotiations with an international shipyard constructing two 275-foot, 3,800
deadweight tons of cargo capacity, deepwater PSVs to resolve issues associated with the late delivery of these vessels. In
May 2015, the company settled these issues with the shipyard. Under the terms of the settlement, the company can elect to
take delivery of one or both completed vessels at any time prior to June 30, 2016. That date is subject to two six month
extension periods, each extension requiring the mutual consent of the company and the shipyard. If the company does not
elect to take delivery of one or both vessels prior to June 30, 2016 (as that date may be extended by mutual agreement), (a)
the company is entitled to receive the return of $5.4 million in aggregate installment payments per vessel together with
interest on these installments (which aggregates to approximately $11.9 million) and (b) the company will be relieved of the
obligation to pay to the shipyard the $21.7 million of remaining payments per vessel. The company recorded an impairment
charge of $1.9 million in the fourth quarter of fiscal 2016 to write off the amount not recovered from the shipyard. The
shipyard's obligation to return the $5.4 million (plus interest) per vessel if the company elects not to take delivery of one or
both vessels is secured by Bank of China refundment guarantees. These two vessels are not included in the preceding table
of vessel commitments as of March 31, 2016.
The company has experienced 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 June 30, 2015. During the first quarter of
fiscal 2016, the company recorded an impairment charge of $2.4 million (representing amounts not covered by insurance)
and reclassified the remaining $5.6 million from construction in progress to other non-current assets. This vessel is not
included in the preceding table of vessel commitments as of March 31, 2016.
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 generally 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
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well as the company’s ability to successfully pursue legal action to compel payment of these instruments. When third party
credit support that is acceptable to the company 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.
United Kingdom Pension Funds
In July 2013, a subsidiary of the company that was a participating employer in two industry-wide multi-employer retirement
funds in the United Kingdom known as the Merchant Navy Officers Pension Fund (MNOPF) and the Merchant Navy Ratings
Pension Fund (MNRPF) was placed into administration in the United Kingdom. In December 2013, the administration was
converted to a liquidation. Further details regarding these issues were previously reported by the company in prior filings.
The final meeting of creditors in the liquidation took place in February 2016 and the liquidation was formally concluded. The
company believes that the liquidation resolved the company’s participation in both the MNOPF and the MNRPF. The
resolution of these issues did 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 joint venture
agreement is currently effective and will expire, unless extended, two years after an Angolan entity, which is intended to be
one of the Sonatide group of companies, has been incorporated. Based on recent communications with our partner and the
appropriate ministry in Luanda, the Angolan entity is expected to be incorporated in calendar 2016 after certain Angolan
regulatory approvals have been obtained.
The challenges for the company to successfully operate in Angola remain significant. As the company has previously
reported, on July 1, 2013, additional elements of legislation (the “forex law”) became effective that generally require oil
companies engaged in exploration and production activities offshore Angola through governmental concessions 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 also imposes documentation and other requirements on service companies such as Sonatide in
order to effect payments that are denominated in currencies other than Angolan kwanzas. The forex law has resulted in
substantial customer payments being made to Sonatide in Angolan kwanzas. A cumbersome payment process has deprived
the company of significant cash and liquidity, because the conversion of Angolan kwanzas into U.S. dollars and the
subsequent expatriation of the funds causes payment delays, additional operating costs and, through the company’s 49%
ownership of Sonatide, foreign exchange losses. The payment process exposes the company to further risk of currency
devaluation prior to Sonatide’s conversion of Angolan kwanza-denominated bank deposits to U.S. dollars and potentially
additional taxes.
In response to the adoption of the forex law, the company and Sonangol negotiated and signed an agreement (the
“consortium agreement”) that allowed 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 Angolan kwanzas), and (ii) billings for services provided offshore (that can be paid in U.S. dollars). Sonatide
successfully converted select customer contracts to this split billing arrangement during the quarters ended March 31, 2015
and June 30, 2015. The consortium agreement expired in November 2015, and the parties have been discussing signing a
new consortium agreement for a one year term. If the parties are unable to agree on a new consortium agreement, the
parties would need to negotiate the terms of a new split billing arrangement that would continue to allow the company to
receive U.S. dollar payments for services provided offshore. In addition, it is not clear if this type of contracting will be
available to Sonatide over the longer term. If the company is unable to reach agreement on a new split billing arrangement,
any contract entered into after the expiration of the consortium agreement may result in the receipt of 100% Angolan
kwanzas, which would be subject to the challenges and risks described above. The split billing arrangements entered into
with customers prior to the expiration of the consortium agreement remain in force.
In November 2014, the National Bank of Angola issued regulations controlling the sale of foreign currency. These regulations
generally require oil companies to channel any U.S. dollar sales they choose to make through the National Bank of Angola to
buy Angolan kwanzas that are required to be used to pay for goods and services provided by foreign exchange resident
oilfield service companies. These foreign exchange resident oilfield services companies, in turn, generally have a need to
source U.S. dollars in order to pay for goods and services provided offshore. The regulations continue to permit tripartite
agreements among oil companies, commercial banks and service companies that provide for the sale of U.S. dollars by an
oil company to a commercial bank in exchange for Angolan kwanzas. These same U.S. dollars are then sold onward by the
commercial bank to the service company. The implementing regulations do, however, place constraints on those tripartite
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agreements that did not previously exist, and the period of time that the tripartite agreements will be allowed remains
uncertain. If tripartite agreements or similar arrangements are not available to service companies in Angola that have a need
for U.S. dollars, then such service companies will be required to source U.S. dollars exclusively through the National Bank of
Angola. Sonatide has had some success to date in negotiating tripartite agreements and it continues to work with customers,
commercial banks and the National Bank of Angola in regards to utilizing these arrangements.
For the fiscal year ended March 31, 2016, the company collected (primarily through Sonatide) approximately $215 million
from its Angolan operations, which is slightly more than the approximate $213 million of revenue recognized for the same
period. Of the $215 million collected, approximately $122 million were U.S. dollars received by Sonatide on behalf of the
company or U.S. dollars directly received by the company from customers. The balance of $93 million collected resulted
from Sonatide’s converting Angolan kwanza into U.S. dollars and subsequently expatriating the dollars to facilitate payment
to the company. Additionally, the company received an approximate $15 million dividend payment from the Sonatide joint
venture during the third quarter of fiscal 2016 The company also reduced the net due from affiliate and due to affiliate
balances by approximately $84 million during the year ended March 31, 2016 through netting transactions based on an
agreement with the joint venture.
For the fiscal year ended March 31, 2015, the company collected (primarily through Sonatide) approximately $338 million
from its Angola operations, which is slightly less than the approximately $351 million of revenue recognized for the same
period. Of the $338 million collected, approximately $159 million represented U.S. dollars received by Sonatide on behalf of
the company or dollars directly received by the company from customers. The balance of $179 million collected resulted
from Sonatide’s converting kwanza into dollars and subsequently expatriating the dollars facilitate payment to the company.
Additionally, the company received an approximate $10 million dividend payment from the Sonatide joint venture during the
third quarter of fiscal 2015.
The company believes that the process for converting Angolan kwanzas continues to function, but the tight U.S. dollar
liquidity situation continues in Angola. Sonatide continues to press its commercial banks with which it has relationships to
increase the amount of U.S. dollars that are made available to Sonatide.
As of March 31, 2016, the company had approximately $339 million in amounts due from Sonatide, with approximately $97
million of the balance reflecting invoiced but unpaid vessel revenue related to services performed by the company through
the Sonatide joint venture. Remaining amounts due to the company from Sonatide are generally supported by cash
(primarily denominated in Angolan kwanzas) held by Sonatide that is pending conversion into U.S. dollars and the
subsequent expatriation of such funds.
For the fiscal year ended March 31, 2016, the company’s Angolan operations generated vessel revenues of
approximately $213 million, or 22%, of its consolidated vessel revenue, from an average of approximately 65 company-
owned vessels that are marketed through the Sonatide joint venture (eight of which were stacked on average during the
year ended March 31, 2016), and, for the year ended March 31, 2015, generated vessel revenues of approximately $351
million, or 23%, of consolidated vessel revenue, from an average of approximately 80 company-owned vessels (eight of
which were stacked on average during the year ended March 31, 2015).
Sonatide joint venture owns eight vessels (three of which are currently stacked) and certain other assets, in addition to
earning commission income from company-owned vessels marketed through the Sonatide joint venture (owned 49% by
the company). In addition, as of March 31, 2016, Sonatide maintained the equivalent of approximately $119 million of
primarily kwanza-denominated deposits in Angolan banks, largely related to customer receipts that had not yet been
converted to U.S. dollars, expatriated and then remitted to the company, and approximately $3 million of U.S. dollar-
denominated deposits in banks outside of Angola. As of March 31, 2016 and March 31, 2015, the carrying value of the
company’s investment in the Sonatide joint venture, which is included in “Investments in, at equity, and advances to
unconsolidated companies,” is approximately $37 million and $67 million, respectively.
Due from affiliate at March 31, 2016 and March 31, 2015 of approximately $339 million and $420 million, respectively,
represents cash received by Sonatide from customers and due to the company, and amounts due from customers that
are expected to be remitted to the company through Sonatide. The collection of the amounts due to Sonatide from
customers, and the subsequent conversion and expatriation process are subject to those risks and considerations set
forth above.
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Due to affiliate at March 31, 2016 and March 31, 2015 of approximately $188 million and $186 million, respectively,
represents amounts due to Sonatide for commissions payable (approximately $32 million and $66 million, respectively) and
other costs paid by Sonatide on behalf of the company.
A presidential decree regulating maritime transportation activities was enacted in Angola in 2014. Following recent
discussions with port state authorities and local counsel, the company remains uncertain whether the authorities will interpret
the decree to require one hundred percent Angolan ownership of local vessel operators such as Sonatide. This interpretation
may result in the need to work with Sonangol to further restructure our Sonatide joint venture and our operations in Angola.
The company is seeking further clarification of the new decree. The company is exploring potential alternative structures in
order to comply.
The Angolan government enacted a statute, which came into effect on June 30, 2015, for a new levy that could impose an
additional 10% surcharge on certain foreign exchange transactions. The specific details of the levy have not yet been
disclosed and it is not clear if this new statute will apply to Sonatide’s scope of operations. The additional surcharge has not
been imposed on any Sonatide transactions to date. The company has undertaken efforts to mitigate the effects of the levy,
in the event the levy does apply to Sonatide’s operations, including successfully negotiating rate adjustments and termination
rights with some of its customers. The company will be unlikely to completely mitigate the effects of the levy, resulting in
increased costs and lower margins, if the levy is interpreted to apply to Sonatide’s operations.
Management continues to explore ways to profitably participate in the Angolan market while looking for opportunities to
reduce the overall level of exposure to the increased risks that the company believes currently characterize the Angolan
market. Included among mitigating measures taken by the company to address these risks is the redeployment of vessels
from time to time to other markets. Redeployment of vessels to and from Angola during the year ended March 31, 2016 has
resulted in a net 23 vessels transferred out of Angola.
As the company considers the redeployment of additional vessels from Angola to other markets, there would likely be
temporary negative financial effects associated with such redeployment, including mobilization costs and costs to
redeploy the company’s 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 the
company’s results of operations and cash flows for the periods when such costs would be incurred. The recent decline in
crude oil and natural gas prices, the reduction in spending expectations among E&P companies, the number of new-build
vessels which are expected to deliver within the next two years and the resulting potential overcapacity in the worldwide
offshore support vessel market may exacerbate such negative financial effects, particularly if a large re-deployment were
undertaken by the company in the near- to intermediate-term.
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 million Brazilian reais (approximately $43.1 million as of March 31,
2016). 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 overturning 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 million Brazilian reais (approximately $41.4 million as of March 31, 2016) 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 million Brazilian reais (approximately $35.4 million as of March 31, 2016) and rendered
decisions that disallowed all of those fines. The remaining fines totaling 28 million Brazilian reais (approximately $8 million
as of March 31, 2016) 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
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127 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.
Nigeria Marketing Agent Litigation
In October 2012, Tidewater Inc. notified its Nigerian marketing agent, Phoenix Tide Offshore Nigeria Limited (“Phoenix
Tide”), that it was discontinuing its relationship with the marketing agent and two of its principals (H.H. The Otunba Ayora Dr.
Bola Kuforiji-Olubi, OON and Olutokunbo Afolabi Kuforiji). The company entered into a new strategic relationship with a
different Nigerian marketing agent 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.
The company is currently engaged in a number of legal disputes with Phoenix Tide and its two principals both in Nigeria and
in the United Kingdom. These disputes involve three primary issues. First, the company believes that Phoenix Tide
breached its contractual obligations to the company by discouraging various affiliates of TOTAL S.A. from paying
approximately $16 million (including U.S. dollar denominated invoices and Naira denominated invoices which have been
adjusted for the devaluation of the Naira relative to the U.S. dollar) due to Tidewater for vessel services performed in Nigeria.
The company will continue to actively pursue the collection of those monies. Second, the parties are disputing whether and
to what extent the company owes further contractual obligations to Phoenix Tide, including any obligation to pay Phoenix
Tide any further amounts for services previously performed. Third, the company is seeking to hold Phoenix Tide’s two
principals personally liable to the company for interfering with the company’s business relationship with TOTAL S.A.
In the United Kingdom, the company has been successful in obtaining favorable court orders against Phoenix Tide on a
variety of issues, including the fact that Phoenix Tide wrongly interfered in stopping the approximate $16 million payment
from TOTAL S.A. to the company, and is in the process of enforcing these orders. In April 2016, a United Kingdom court
ruled that Phoenix Tide’s two principals were personally responsible for interfering with the company’s business relationship
with TOTAL S.A. The damages award associated with that tortious interference will be determined at a second court hearing
likely to occur in the June quarter of fiscal 2017. Once the damages are assessed, the company will seek to enforce that
order against Phoenix Tide’s two principals. The disputes being litigated in Nigeria are proceeding more slowly and all
preliminary rulings by Nigerian courts are presently under appeal.
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.
Arbitral Award for the Taking of the Company’s Venezuelan Operations
On March 13, 2015, the three member tribunal constituted under the rules of the World Bank’s International Centre for the
Settlement of Investment Disputes (“ICSID”) awarded subsidiaries of the company compensation, including accrued interest
and costs, for the Bolivarian Republic of Venezuela’s (“Venezuela”) expropriation of the investments of those subsidiaries in
Venezuela. The award, issued in accordance with the provisions of the Venezuela-Barbados Bilateral Investment Treaty
(“BIT”), represented $46.4 million for the fair market value of the company’s principal Venezuelan operating subsidiary, plus
interest from May 8, 2009 to the date of payment of that amount accruing at an annual rate of 4.5% compounded quarterly
($16.8 million as of March 31, 2016) and $2.5 million for reimbursement of legal and other costs expended by the company
in connection with the arbitration. The aggregate award is therefore $65.7 million as of March 31, 2016. The nature of the
investments expropriated and the progress of the ICSID proceeding were previously reported by the company in prior filings.
The company is committed to taking appropriate steps to enforce and collect the award, which is enforceable in any of the
150 member states that are party to the ICSID Convention. As an initial step, the company was successful in having the
award recognized and entered on March 16, 2015 as a final judgment by the United States District Court for the Southern
District of New York. In July 2015, Venezuela applied to ICSID to annul the award and obtained a provisional stay of
enforcement. In August 2015, ICSID formed an annulment committee and the first hearing of the committee took place on
November 23, 2015. At that hearing, the committee heard arguments on the company’s motion to lift the provisional stay of
enforcement with respect to all or a substantial portion of the award during the pendency of the annulment proceedings. On
February 29, 2016, the committee ruled that the company is free to pursue the enforcement of a portion of the award
amounting to $37.3 million as of March 31, 2016. Enforcement of the balance of the award ($28.4 million as of March 31,
2016) will remain stayed until the conclusion of the annulment proceeding, which the company anticipates will occur this
calendar year. Even with the partial lifting of the stay of enforcement, the company recognizes that collection of the award
may present significant practical challenges. Because the award has yet to be satisfied and post-award annulment
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proceedings are pending, the net impact of these matters on the company cannot be reasonably estimated at this time and
the company has not recognized a gain related to these matters as of March 31, 2016.
Repairs to U.S. Flagged Vessels Operating Abroad
Near the end of fiscal 2015 the company became aware that it may have had compliance deficiencies in documenting and
declaring upon re-entry to the U.S. certain foreign purchases for or repairs to U.S. flag vessels while they were working
outside of the U.S. When a U.S. flag vessel operates abroad, certain foreign purchases for or repairs made to the U.S. flag
vessel while it is outside of the U.S. are subject to declaration and entry with U.S. Customs and Boarder Protection (“CBP”)
and are subject to 50% vessel repair duty. Certain foreign purchases for or repairs to U.S. flag vessels are to be declared
and reported to CBP upon such vessel’s arrival in the U.S. During our examination of our most recent filings with CBP, we
determined that it was necessary to file amended forms with CBP to supplement previous filings. We have amended several
vessel repair entries with CBP and have paid additional vessel repair duty and interest associated with these amended
forms. We continue to review and evaluate the return of other U.S. flag vessels to the U.S. to determine whether it is
necessary to adjust our responses in any of those instances. To the extent that further evaluation requires us to file
amended entries for additional vessels, we do not yet know the magnitude of any duties, civil penalties, fines or interest
associated with amending the entries for these vessels. It is also possible that CBP may seek to impose civil penalties, fines
or interest in connection with amended forms already submitted.
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. Discussions related to the company’s Angolan operations
are disclosed in Note (12) of Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on
Form 10-K.
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.
(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.
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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 two outstanding foreign exchange spot contracts at March 31, 2016, which had a notional value of $1.4
million and were settled April 1, 2016 and had two foreign exchange spot contracts outstanding at March 31, 2015, which
had a notional value of $2.3 million and were settled April 1, 2015.
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, 2016, the company had 13 Norwegian kroner (NOK) forward contracts outstanding, which are generally
intended to hedge a portion of the company’s foreign exchange exposure relating to its NOK denominated notes payable as
disclosed in Note (5). The forward contracts have expiration dates between July 1, 2016 and November 10, 2016. The
combined change in fair value of the outstanding forward contracts was $0.1 million, all of which was recorded as a foreign
exchange loss during the fiscal year ended March 31, 2016, because the forward contracts did not qualify as hedge
instruments. All changes in fair value of the forward contracts were recorded in earnings. At March 31, 2015 the company did
not have any forward contracts outstanding.
The following table provides the fair value hierarchy for the company’s other financial instruments measured as of
March 31, 2016:
(In thousands)
Money market cash equivalents
Total fair value of assets
Quoted prices in
active markets
(Level 1)
643,770
643,770
Significant
unobservable
inputs
(Level 3)
Significant
observable
inputs
(Level 2)
—
—
—
—
Total
$ 643,770
$ 643,770
The following table provides the fair value hierarchy for the company’s other financial instruments measured as of
March 31, 2015:
(In thousands)
Money market cash equivalents
Total fair value of assets
Quoted prices in
active markets
(Level 1)
Total
$
$
3,007
3,007
3,007
3,007
Significant
unobservable
inputs
(Level 3)
Significant
observable
inputs
(Level 2)
—
—
—
—
(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-54
7674_fin.pdf 142
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
2016
2015
2014
$
3,252
17
2,988
13
12,247
48
Included in gain on dispositions of assets, net in fiscal 2016 are amortized gains on sale/leaseback transactions of $23.4
million.
Included in gain on dispositions of assets, net in fiscal 2015 are amortized gains on sale/leaseback transactions of $17.7
million as well as a gain related to the reversal of an accrued $3 million liability related to contingent consideration
potentially payable to the former owners of Troms Offshore based on the achievement by the Troms operation of certain
performance metrics subsequent to its acquisition by the company. The company’s current expectation is that such
performance metrics will not be achieved.
Included in gain on dispositions of assets, net in fiscal 2014 are amortized gains on sale/leaseback transactions of $3.7
million. Also included in gain on dispositions of assets, net in fiscal 2014 is a gain of $4 million related to the sale of the
company’s remaining shipyard.
(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-55
7674_fin.pdf 143
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/(loss):
Americas
Asia/Pacific
Middle East/North Africa
Sub-Saharan Africa/Europe
Other operating loss
Corporate general and administrative expenses (A)
Corporate depreciation
Corporate expenses
Gain on asset dispositions, net
Asset impairment
Goodwill impairment
Restructuring charge
Operating income / (loss)
Foreign exchange gain / (loss)
Equity in net earnings / (losses) of unconsolidated companies
Interest income and other, net
Loss on early extinguishment of debt
Interest and other debt costs
Earnings / (loss) 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)
2016
2015
2014
342,995
89,045
168,471
354,889
955,400
23,662
979,062
52,966
(1,687)
27,349
(4,490)
74,138
(4,564)
69,574
(34,078)
(6,160)
(40,238)
26,037
(117,311)
—
(7,586)
(69,524)
(5,403)
(13,581)
2,703
—
(53,752)
(139,557)
48,474
22,386
28,150
71,418
170,428
5,721
6,160
182,309
51,303
1,917
1,732
1,861
56,813
10
137,662
194,485
505,699
150,820
205,787
606,052
1,468,358
27,159
1,495,517
410,731
154,618
186,524
666,588
1,418,461
16,642
1,435,103
122,988
11,541
37,258
122,169
293,956
(8,022 )
285,934
(40,621 )
(4,014 )
(44,635 )
23,796
(14,525 )
(283,699 )
(4,052 )
(37,181 )
8,678
10,179
1,927
—
(50,029 )
(66,426 )
47,682
18,383
27,538
73,614
167,217
3,973
4,014
175,204
94,137
91,497
1,842
36,105
223,581
18,571
124,411
366,563
90,936
29,044
42,736
136,092
298,808
(1,930 )
296,878
(47,703 )
(3,073 )
(50,776 )
21,063
(9,341 )
(56,283 )
—
201,541
1,541
15,801
2,123
(4,144 )
(43,814 )
173,048
43,298
17,174
24,441
79,199
164,112
295
3,073
167,480
99,798
2,586
8,042
488,984
599,410
31,841
175,233
806,484
$
$
$
$
$
$
$
$
F-56
7674_fin.pdf 144
Total assets (D):
Americas
Asia/Pacific
Middle East/North Africa
Sub-Saharan Africa/Europe
Other
Investments in and advances to unconsolidated companies
Corporate (E)
$
$
1,101,699
514,948
582,281
1,822,682
4,021,610
42,191
4,063,801
37,502
4,101,303
889,244
4,990,547
1,016,133
506,265
666,983
2,064,010
4,253,391
49,554
4,302,945
65,844
4,368,789
387,373
4,756,162
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
(A)
(B)
(C)
Included in Corporate general and administrative expenses for the year ended March 31, 2014 are transaction costs of $3.7 million related to the
acquisition of Troms Offshore.
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.
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, 2016, 2015 and 2014, $136.8 million, $235.2 million and $228.9 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
% of Vessel
2016
Revenue
2015
% of Vessel
Revenue
2014
% of Vessel
Revenue
$ 235,522
92,768
14,705
$ 342,995
$ 60,853
28,192
—
$ 89,045
$ 74,563
91,174
2,734
$ 168,471
$ 154,620
150,404
49,865
$ 354,889
$ 525,558
362,538
67,304
$ 955,400
25%
9%
2%
36%
6%
3%
—
9%
8%
10%
<1%
18%
16%
16%
5%
37%
353,232
125,029
27,438
505,699
94,538
53,281
3,001
150,820
85,279
117,232
3,276
205,787
326,315
208,324
71,413
606,052
24 %
9 %
2 %
35 %
6 %
4 %
<1 %
10 %
6 %
8 %
<1 %
14 %
22 %
14 %
5 %
41 %
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%
55%
38%
7%
859,364
503,866
105,128
100% 1,468,358
58 %
35 %
7 %
100 %
783,166
525,629
109,666
1,418,461
55%
37%
8%
100%
F-57
7674_fin.pdf 145
The following table discloses our customers that accounted for 10% or more of total revenues during the years ended
March 31:
Chevron Corporation
Petroleo Brasileiro SA
BP plc
(16) GOODWILL
2016
2015
2014
14.6%
11.0%
7.1%
12.7 %
11.8 %
10.1 %
18.1%
8.6%
8.9%
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.
During the quarter ended December, 31, 2014 the company performed its annual goodwill impairment assessment and
determined that the rapid and significant decline in crude oil and natural gas prices (which occurred and accelerated
throughout the latter part of the company’s third quarter of fiscal 2015), and the expected short to intermediate term effect
that the downturn might have on levels of exploration and production activity would likely have a negative effect on average
day rates and utilization levels of the company’s vessels. Expected future cash flow analyses using the projected average
day rates and utilization levels in this new commodity pricing environment were included in the company’s valuation models
and indicated that the fair values of the Americas and Sub-Saharan Africa/Europe reporting units were less than their
respective carrying values. A goodwill impairment charge of $283.7 million, to write-off the company’s remaining goodwill,
was recorded during the quarter ended December 31, 2014.
F-58
7674_fin.pdf 146
During the quarter ended December, 31, 2013 the company performed its annual goodwill impairment assessment 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. At the time of the December
2013 goodwill impairment assessment, the Asia/Pacific region continued to be challenged with excess vessel capacity as
a result of the significant number of vessels that had been built in this region over the previous 10 years. These additional
newbuilds had not been met by a commensurate increase in exploration, development or other activity within the region.
In recent years, the company has disposed of older vessels that had 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 first quarter of fiscal 2014, $42.2 million of goodwill related to the acquisition of Troms Offshore was allocated
to the Sub-Saharan Africa/Europe segment.
Goodwill by reportable segment at March 31, 2016 and 2015 is as follows:
(In thousands)
Americas
Sub-Saharan Africa/Europe
Total carrying amount (A)
(In thousands)
Americas
Sub-Saharan Africa/Europe
Total carrying amount (B)
March 31,
2015
Goodwill acquired Impairments
—
—
—
—
—
—
—
—
—
March 31,
2016
—
—
—
$
$
March 31,
2014
$ 114,237
169,462
$ 283,699
Goodwill acquired Impairments
— 114,237
— 169,462
— 283,699
March 31,
2015
—
—
—
(A)
(B)
The total carrying amount of goodwill at March 31, 2016 and 2015 is net of accumulated impairment charges of $370.9 million.
The total carrying amount of goodwill at March 31, 2014 is net of accumulated impairment charges $30.9 million and $56.3 million related to the
Middle East/North Africa and Asia/Pacific segments, respectively.
(17) RESTRUCTURING CHARGE
In the fourth quarter of fiscal 2015 the Company’s management initiated a plan to begin reorganizing its operations
worldwide as a result of the continuing decline in oil prices and the resulting softening demand for the company’s vessels.
This plan consists of select employee terminations and early retirements that are intended to eliminate redundant or
unneeded positions, reduce costs, and better align our workforce with anticipated activity levels in the geographic areas in
which the company presently operates. In connection with these efforts, the company recognized a $4.1 million restructuring
charge during the quarter ended March 31, 2015.
In the second quarter of fiscal 2016 the company’s management continued to restructure its operations to reduce operating
costs as a result of the continuing decline in oil prices and the resulting softening demand for the company’s vessels, and
several contract cancellations (particularly in regards to the company’s Brazil operations). This plan also consisted of select
employee terminations and early retirements that are intended to eliminate redundant or unneeded positions, reduce costs,
and better align our workforce with anticipated lower activity levels in the geographic areas in which the company presently
operates. In connection with these efforts, the company recognized a $7.6 million restructuring charge during the quarter
ended September 30, 2015. Although no payments were made related to this charge as of September 30, 2015, the
company paid $7.4 million during the six months ended March 31, 2016.
Measures taken during these restructurings include the transfer and stacking of vessels from the company’s Australian and
Brazilian operations which resulted in the termination of mariners who were entitled to severance payments under the terms
of the enterprise bargaining agreements and in accordance with Australian and Brazilian labor laws.
F-59
7674_fin.pdf 147
Restructuring charges incurred by segment and cost type for the fiscal years ended March 31, are as follows:
(In thousands)
Americas:
Crew costs
Other vessel costs
Asia/Pacific:
Crew costs
Corporate:
General and administrative expenses
Total restructuring charges
2016
2015
2014
$
$
3,410
203
—
—
3,973
3,697
—
7,586
355
4,052
—
—
—
—
—
—
(18) 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 2016
Revenues
Operating income (loss) (A)
Net loss attributable to Tidewater Inc.
Basic loss per share attributable to Tidewater Inc.
Diluted loss per share attributable to Tidewater Inc.
Fiscal 2015
Revenues
Operating income (loss) (A)
Net earnings (loss) attributable to Tidewater Inc.
Basic earnings (loss)
per share attributable to Tidewater Inc.
Diluted earnings (loss)
per share attributable to Tidewater Inc.
First
Second
Third
Fourth
Quarter
$ 304,774 271,923 218,191 184,174
(56,569)
(81,787)
(1.74)
(1.74)
(17,644)
(43,835)
(.93)
(.93)
14,089
(15,052)
(.32)
(.32)
(9,400 )
(19,509 )
(.42 )
(.42 )
$
$
$ 385,677 397,524 387,554 324,762
25,672
(9,076)
84,723 (213,580 )
60,907 (160,694 )
66,004
43,673
$
$
.88
1.23
(3.31 )
(.19)
.88
1.22
(3.31 )
(.19)
(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 2016 and
2015 and gain on asset dispositions, net, by quarter for fiscal 2016 and 2015, are as follows:
(In thousands)
Fiscal 2016:
Goodwill impairment
Gain on asset dispositions, net
Fiscal 2015:
Goodwill impairment
Gain on asset dispositions, net
First
Second
Third
Fourth
$
$
$
$
—
7,351
—
6,111
5,883
6,692
—
3,893
— (283,699 )
4,699
4,500
—
10,704
F-60
7674_fin.pdf 148
(19) ASSET IMPAIRMENTS
The below table summarizes the combined fair value of the assets that incurred impairments during the fiscal years ended
March 31, 2016, 2015 and 2014.
(In thousands)
Amount of impairment incurred
Combined fair value of assets incurring impairment
2016
$ 117,311
422,655
2015
2014
14,525
28,509
9,341
11,149
Please refer to Note (1) for a discussion of the company’s accounting policy for accounting for the impairment of long-lived
assets.
F-61
7674_fin.pdf 149
TIDEWATER INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years Ended March 31, 2016, 2015 and 2014
(In thousands)
SCHEDULE II
Fiscal 2016
Deducted in balance sheet from Trade accounts receivables:
Description
Balance at
Beginning
of period
Additions
at Cost
Deductions
Balance
at
End of
Period
Allowance for doubtful accounts
$
37,634
2,768
28,952 (A)
11,450
Fiscal 2015
Deducted in balance sheet from Trade accounts receivables:
Allowance for doubtful accounts
$
35,737
2,405
508
37,634
Fiscal 2014
Deducted in balance sheet from Trade accounts receivables:
Allowance for doubtful accounts
$
46,332
1,399
11,994 (B)
35,737
(A) Of this amount, $28,412 represents previously reserved accounts receivables related to our Venezuelan operations which were removed from the
company’s books. Please refer to Note (11) of Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K
for additional information regarding the company’s Venezuelan operations.
(B) 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
F-62
7674_fin.pdf 150
7674_fin.pdf 151
7674_fin.pdf 152
Investor
Investor
Relations
Relations
Requests for information concerning
Requests for information concerning
the Company should be directed to the
the Company should be directed to the
Investor Relations Department using the
Investor Relations Department using the
address or phone numbers listed below.
address or phone numbers listed below.
Requests for information can also be
Requests for information can also be
submitted at the Company’s website,
submitted at the Company’s website,
www.tdw.com.
www.tdw.com.
Tidewater Inc.
Tidewater Inc.
601 Poydras Street, Suite 1500
601 Poydras Street, Suite 1500
New Orleans, Louisiana 70130
New Orleans, Louisiana 70130
Toll Free: 1-800-678-8433
Toll Free: 1-800-678-8433
Phone: 1-504-568-1010
Phone: 1-504-568-1010
Email: connect@tdw.com
Email: connect@tdw.com
www.tdw.com
www.tdw.com
Corporate
Corporate
Officers
Officers
Jeffrey M. Platt
Jeffrey M. Platt
President, Chief Executive Officer
President, Chief Executive Officer
and Director
and Director
Latif Benhaddad
Latif Benhaddad
Vice President, Engineering
Vice President, Engineering
Joseph M. Bennett
Joseph M. Bennett
Executive Vice President and
Executive Vice President and
Chief Investor Relations Officer
Chief Investor Relations Officer
Kevin M. Carr
Kevin M. Carr
Vice President, Taxation
Vice President, Taxation
Craig J. Demarest
Craig J. Demarest
Vice President, Principal Accounting
Vice President, Principal Accounting
Office and Controller
Office and Controller
Quinn P. Fanning
Quinn P. Fanning
Executive Vice President and
Executive Vice President and
Chief Financial Officer
Chief Financial Officer
Jeffrey A. Gorski
Jeffrey A. Gorski
Executive Vice President and
Executive Vice President and
Chief Operating Officer
Chief Operating Officer
Mark A. Handin
Vice President
Mark A. Handin
Vice President
Gerard P. Kehoe
Senior Vice President
Gerard P. Kehoe
Senior Vice President
Bruce D. Lundstrom
Executive Vice President,
Bruce D. Lundstrom
General Counsel and Secretary
Executive Vice President,
General Counsel and Secretary
Matthew A. Mancheski
Vice President
Matthew A. Mancheski
Vice President
Darren J. Vorst
Vice President and Treasurer
Darren J. Vorst
Vice President and Treasurer
Board of
Board of
Directors
Directors
Richard A. Pattarozzi
Richard A. Pattarozzi
Chairman, Tidewater Inc. and Former
Chairman, Tidewater Inc. and Former
Vice President, Shell Oil Company
Vice President, Shell Oil Company
Jeffrey M. Platt
Jeffrey M. Platt
President, Chief Executive Officer
President, Chief Executive Officer
and Director, Tidewater Inc.
and Director, Tidewater Inc.
M. Jay Allison
M. Jay Allison
Chief Executive Officer and
Chief Executive Officer and
Chairman of the Board,
Chairman of the Board,
Comstock Resources, Inc.
Comstock Resources, Inc.
James C. Day
James C. Day
Former Chairman of the Board,
Former Chairman of the Board,
Chief Executive Officer and President,
Chief Executive Officer and President,
Noble Corporation
Noble Corporation
Richard T. du Moulin
Richard T. du Moulin
President, Intrepid Shipping LLC
President, Intrepid Shipping LLC
Morris E. Foster
Morris E. Foster
Former Vice President,
Former Vice President,
ExxonMobil Corporation and
ExxonMobil Corporation and
Former President, ExxonMobil
Former President, ExxonMobil
Production Compan y
Production Compan y
J. Wayne Leonard
Former Chairman and
J. Wayne Leonard
Chief Executive Officer,
Former Chairman and
Entergy Corporation
Chief Executive Officer,
Entergy Corporation
Richard D. Paterson
Former Global Leader of Consumer,
Richard D. Paterson
Industrial Products and Services Practices,
Former Global Leader of Consumer,
PriceWaterhouseCoopers, LLP
Industrial Products and Services Practices,
PriceWaterhouseCoopers, LLP
Robert L. Potter
Former President,
Robert L. Potter
FMC Technologies, Inc.
Former President,
FMC Technologies, Inc.
Cindy B. Taylor
President, Chief Executive
Cindy B. Taylor
Officer and Director,
President, Chief Executive
Oil States International, Inc.
Officer and Director,
Oil States International, Inc.
Jack E. Thompson
Management Consultant
Jack E. Thompson
Management Consultant
Corporate
Corporate
Information
Information
Information about stockholder
Information about stockholder
accounts may be obtained by contacting
accounts may be obtained by contacting
the Transfer Agent and Registrar for
the Transfer Agent and Registrar for
Tidewater’s common stock,Computer-
Tidewater’s common stock,Computer-
share Investor Services, P.O. Box 30170,
share Investor Services, P.O. Box 30170,
College Station, Texas 77842-3170.
College Station, Texas 77842-3170.
Overnight correspondence should
Overnight correspondence should
be sent to:
be sent to:
Computershare Investor Services,
Computershare Investor Services,
211 Quality Circle, Suite 210,
211 Quality Circle, Suite 210,
College Station, Texas 77845
College Station, Texas 77845
Phone: 781-575-2879 or 1-800-730-4001.
Phone: 781-575-2879 or 1-800-730-4001.
General stockholder information is
General stockholder information is
available on the Computershare website,
available on the Computershare website,
www.computershare.com/investor.
www.computershare.com/investor.
Duplicate Mailings
Duplicate Mailings
If you receive duplicate mailings of
If you receive duplicate mailings of
shareholder materials, you can help
shareholder materials, you can help
eliminate the added expense by
eliminate the added expense by
requesting that only one copy be sent.
requesting that only one copy be sent.
To eliminate duplicate mailings, contact
To eliminate duplicate mailings, contact
the Company’s Stock Transfer Agent and
Registrar listed above.
the Company’s Stock Transfer Agent and
Registrar listed above.
Stock Exchange
Tidewater’s common stock is traded on
Stock Exchange
the New York Stock Exchange under the
Tidewater’s common stock is traded on
symbol TDW.
the New York Stock Exchange under the
symbol TDW.
Form 10-K Report
Tidewater’s 2016 Annual Report on Form
Form 10-K Report
10-K may be obtained without charge
Tidewater’s 2016 Annual Report on Form
by contacting the Company’s Investor
10-K may be obtained without charge
Relations Department at corporate head-
by contacting the Company’s Investor
quarters. Tidewater’s SEC filings can
Relations Department at corporate head-
also be viewed online at the Company’s
quarters. Tidewater’s SEC filings can
website, www.tdw.com.
also be viewed online at the Company’s
website, www.tdw.com.
Website and E-mail Alerts
Information concerning the Company,
Website and E-mail Alerts
including quarterly financial results and
Information concerning the Company,
news releases, is available on the Com-
including quarterly financial results and
pany’s website at www.tdw.com. E-mail
news releases, is available on the Com-
alerts about the Company’s news
pany’s website at www.tdw.com. E-mail
releases, SEC filings and presentations
alerts about the Company’s news
are available by registering at the
releases, SEC filings and presentations
Company’s website.
are available by registering at the
Company’s website.
2016 Tidewater Annual Report
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
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