UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2016
|
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission File Number: 1-6311
Tidewater Inc.
(Exact name of registrant as specified in its charter)
|
Delaware |
|
72-0487776 |
|
(State of incorporation) |
|
(I.R.S. Employer Identification No.) |
601 Poydras St., Suite 1500
New Orleans, Louisiana 70130
(Address of principal executive offices) (zip code)
Registrant’s telephone number, including area code: (504) 568-1010
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
|
Large accelerated filer ☒ |
Accelerated filer ☐ |
Non-accelerated filer ☐ |
Smaller reporting company ☐ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
47,068,079 shares of Tidewater Inc. common stock $.10 par value per share were outstanding on October 21, 2016. Registrant has no other class of common stock outstanding.
|
ITEM 1. |
FINANCIAL STATEMENTS |
TIDEWATER INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and par value data)
|
|
|
September 30, |
|
|
March 31, |
|
||
|
ASSETS |
|
2016 |
|
|
2016 |
|
||
|
Current assets: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
674,923 |
|
|
|
678,438 |
|
|
Trade and other receivables, net |
|
|
209,850 |
|
|
|
228,113 |
|
|
Due from affiliate |
|
|
300,757 |
|
|
|
338,595 |
|
|
Marine operating supplies |
|
|
31,124 |
|
|
|
33,413 |
|
|
Other current assets |
|
|
31,874 |
|
|
|
44,755 |
|
|
Total current assets |
|
|
1,248,528 |
|
|
|
1,323,314 |
|
|
Investments in, at equity, and advances to unconsolidated companies |
|
|
38,200 |
|
|
|
37,502 |
|
|
Properties and equipment: |
|
|
|
|
|
|
|
|
|
Vessels and related equipment |
|
|
4,486,959 |
|
|
|
4,666,749 |
|
|
Other properties and equipment |
|
|
78,459 |
|
|
|
92,065 |
|
|
|
|
|
4,565,418 |
|
|
|
4,758,814 |
|
|
Less accumulated depreciation and amortization |
|
|
1,253,851 |
|
|
|
1,207,523 |
|
|
Net properties and equipment |
|
|
3,311,567 |
|
|
|
3,551,291 |
|
|
Other assets |
|
|
89,967 |
|
|
|
71,686 |
|
|
Total assets |
|
$ |
4,688,262 |
|
|
|
4,983,793 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
64,231 |
|
|
|
49,130 |
|
|
Accrued expenses |
|
|
76,085 |
|
|
|
91,611 |
|
|
Due to affiliate |
|
|
175,925 |
|
|
|
187,971 |
|
|
Accrued property and liability losses |
|
|
3,602 |
|
|
|
3,321 |
|
|
Current portion of long-term debt |
|
|
2,041,367 |
|
|
|
2,045,516 |
|
|
Other current liabilities |
|
|
60,345 |
|
|
|
74,825 |
|
|
Total current liabilities |
|
|
2,421,555 |
|
|
|
2,452,374 |
|
|
Deferred income taxes |
|
|
48,204 |
|
|
|
34,841 |
|
|
Accrued property and liability losses |
|
|
11,210 |
|
|
|
9,478 |
|
|
Other liabilities and deferred credits |
|
|
164,530 |
|
|
|
181,546 |
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies (Note 8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
|
|
Common stock of $0.10 par value, 125,000,000 shares authorized, issued 47,068,079 shares at September 30, 2016 and 47,067,715 shares at March 31, 2016 |
|
|
4,707 |
|
|
|
4,707 |
|
|
Additional paid-in capital |
|
|
169,443 |
|
|
|
166,604 |
|
|
Retained earnings |
|
|
1,867,701 |
|
|
|
2,135,075 |
|
|
Accumulated other comprehensive loss |
|
|
(6,443 |
) |
|
|
(6,866 |
) |
|
Total stockholders’ equity |
|
|
2,035,408 |
|
|
|
2,299,520 |
|
|
Noncontrolling Interests |
|
|
7,355 |
|
|
|
6,034 |
|
|
Total equity |
|
|
2,042,763 |
|
|
|
2,305,554 |
|
|
Total liabilities and equity |
|
$ |
4,688,262 |
|
|
|
4,983,793 |
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
2
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
(Unaudited)
(In thousands, except share and per share data)
|
|
|
Quarter Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessel revenues |
|
$ |
139,361 |
|
|
|
264,131 |
|
|
|
301,791 |
|
|
|
562,444 |
|
|
Other operating revenues |
|
|
4,361 |
|
|
|
7,792 |
|
|
|
9,856 |
|
|
|
14,253 |
|
|
|
|
|
143,722 |
|
|
|
271,923 |
|
|
|
311,647 |
|
|
|
576,697 |
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessel operating costs |
|
|
87,094 |
|
|
|
158,612 |
|
|
|
195,968 |
|
|
|
337,893 |
|
|
Costs of other operating revenues |
|
|
3,423 |
|
|
|
6,102 |
|
|
|
7,326 |
|
|
|
11,846 |
|
|
General and administrative |
|
|
32,954 |
|
|
|
37,286 |
|
|
|
70,001 |
|
|
|
81,239 |
|
|
Vessel operating leases |
|
|
8,441 |
|
|
|
8,441 |
|
|
|
16,882 |
|
|
|
16,884 |
|
|
Depreciation and amortization |
|
|
43,845 |
|
|
|
45,979 |
|
|
|
88,397 |
|
|
|
91,636 |
|
|
Gain on asset dispositions, net |
|
|
(6,253 |
) |
|
|
(6,111 |
) |
|
|
(11,896 |
) |
|
|
(13,462 |
) |
|
Asset impairments |
|
|
129,562 |
|
|
|
31,672 |
|
|
|
166,448 |
|
|
|
46,630 |
|
|
Restructuring charge |
|
|
— |
|
|
|
7,586 |
|
|
|
— |
|
|
|
7,586 |
|
|
|
|
|
299,066 |
|
|
|
289,567 |
|
|
|
533,126 |
|
|
|
580,252 |
|
|
Operating loss |
|
|
(155,344 |
) |
|
|
(17,644 |
) |
|
|
(221,479 |
) |
|
|
(3,555 |
) |
|
Other income (expenses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange gain (loss) |
|
|
(2,539 |
) |
|
|
844 |
|
|
|
(5,272 |
) |
|
|
(3,289 |
) |
|
Equity in net earnings (losses) of unconsolidated companies |
|
|
1,313 |
|
|
|
(2,919 |
) |
|
|
1,312 |
|
|
|
(5,360 |
) |
|
Interest income and other, net |
|
|
992 |
|
|
|
355 |
|
|
|
2,168 |
|
|
|
1,145 |
|
|
Interest and other debt costs, net |
|
|
(18,477 |
) |
|
|
(13,247 |
) |
|
|
(35,431 |
) |
|
|
(26,429 |
) |
|
|
|
|
(18,711 |
) |
|
|
(14,967 |
) |
|
|
(37,223 |
) |
|
|
(33,933 |
) |
|
Loss before income taxes |
|
|
(174,055 |
) |
|
|
(32,611 |
) |
|
|
(258,702 |
) |
|
|
(37,488 |
) |
|
Income tax expense |
|
|
3,568 |
|
|
|
11,388 |
|
|
|
7,564 |
|
|
|
21,675 |
|
|
Net Loss |
|
$ |
(177,623 |
) |
|
|
(43,999 |
) |
|
|
(266,266 |
) |
|
|
(59,163 |
) |
|
Less: Net income (loss) attributable to noncontrolling interests |
|
|
867 |
|
|
|
(164 |
) |
|
|
1,321 |
|
|
|
(276 |
) |
|
Net loss attributable to Tidewater Inc. |
|
$ |
(178,490 |
) |
|
|
(43,835 |
) |
|
|
(267,587 |
) |
|
|
(58,887 |
) |
|
Basic loss per common share |
|
$ |
(3.79 |
) |
|
|
(0.93 |
) |
|
|
(5.69 |
) |
|
|
(1.25 |
) |
|
Diluted loss per common share |
|
$ |
(3.79 |
) |
|
|
(0.93 |
) |
|
|
(5.69 |
) |
|
|
(1.25 |
) |
|
Weighted average common shares outstanding |
|
|
47,067,864 |
|
|
|
46,942,950 |
|
|
|
47,067,790 |
|
|
|
46,962,242 |
|
|
Dilutive effect of stock options and restricted stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Adjusted weighted average common shares |
|
|
47,067,864 |
|
|
|
46,942,950 |
|
|
|
47,067,790 |
|
|
|
46,962,242 |
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
(In thousands)
|
|
|
Quarter Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
|
Net loss |
|
$ |
(177,623 |
) |
|
|
(43,999 |
) |
|
|
(266,266 |
) |
|
|
(59,163 |
) |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses) on available for sale securities, net of tax of $0, $0, $0 and $0 |
|
|
119 |
|
|
|
(627 |
) |
|
|
280 |
|
|
|
(679 |
) |
|
Amortization of loss on derivative contract, net of tax of $0, $0, $0 and $0 |
|
|
72 |
|
|
|
180 |
|
|
|
143 |
|
|
|
359 |
|
|
Change in other benefit plan minimum liability, net of tax of $0, $0, $0 and $0 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
70 |
|
|
Total comprehensive loss |
|
$ |
(177,432 |
) |
|
|
(44,446 |
) |
|
|
(265,843 |
) |
|
|
(59,413 |
) |
The accompanying notes are an integral part of the condensed consolidated financial statements.
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
|
|
|
Six Months Ended |
|
|||||
|
|
|
September 30, |
|
|||||
|
|
|
2016 |
|
|
2015 |
|
||
|
Operating activities: |
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(266,266 |
) |
|
|
(59,163 |
) |
|
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
88,397 |
|
|
|
91,636 |
|
|
Provision for deferred income taxes |
|
|
— |
|
|
|
128 |
|
|
Gain on asset dispositions, net |
|
|
(11,896 |
) |
|
|
(13,462 |
) |
|
Asset impairments |
|
|
166,448 |
|
|
|
46,630 |
|
|
Equity in earnings (losses) of unconsolidated companies, less dividends |
|
|
(1,659 |
) |
|
|
6,424 |
|
|
Compensation expense - stock-based |
|
|
2,628 |
|
|
|
6,614 |
|
|
Changes in assets and liabilities, net: |
|
|
|
|
|
|
|
|
|
Trade and other receivables |
|
|
18,263 |
|
|
|
30,891 |
|
|
Changes in due to/from affiliate, net |
|
|
25,792 |
|
|
|
53,769 |
|
|
Marine operating supplies |
|
|
2,289 |
|
|
|
11,370 |
|
|
Other current assets |
|
|
(1,827 |
) |
|
|
(3,681 |
) |
|
Accounts payable |
|
|
9,671 |
|
|
|
5,228 |
|
|
Accrued expenses |
|
|
(16,386 |
) |
|
|
(13,512 |
) |
|
Accrued property and liability losses |
|
|
281 |
|
|
|
(212 |
) |
|
Other current liabilities |
|
|
(9,716 |
) |
|
|
(6,011 |
) |
|
Other liabilities and deferred credits |
|
|
(5,173 |
) |
|
|
2,594 |
|
|
Other, net |
|
|
(1,448 |
) |
|
|
4,648 |
|
|
Net cash provided by (used in) operating activities |
|
|
(602 |
) |
|
|
163,891 |
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
Proceeds from sales of assets |
|
|
1,839 |
|
|
|
6,133 |
|
|
Additions to properties and equipment |
|
|
(9,509 |
) |
|
|
(138,990 |
) |
|
Refunds from cancelled vessel construction contracts |
|
|
11,515 |
|
|
|
36,190 |
|
|
Net cash provided by (used in) investing activities |
|
|
3,845 |
|
|
|
(96,667 |
) |
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
Principal payment on long-term debt |
|
|
(5,036 |
) |
|
|
(64,374 |
) |
|
Debt borrowings |
|
|
— |
|
|
|
31,338 |
|
|
Cash dividends |
|
|
— |
|
|
|
(23,579 |
) |
|
Other |
|
|
(1,722 |
) |
|
|
(961 |
) |
|
Net cash used in financing activities |
|
|
(6,758 |
) |
|
|
(57,576 |
) |
|
Net change in cash and cash equivalents |
|
|
(3,515 |
) |
|
|
9,648 |
|
|
Cash and cash equivalents at beginning of period |
|
|
678,438 |
|
|
|
78,568 |
|
|
Cash and cash equivalents at end of period |
|
$ |
674,923 |
|
|
|
88,216 |
|
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
|
|
|
|
Interest, net of amounts capitalized |
|
$ |
34,209 |
|
|
|
24,894 |
|
|
Income taxes |
|
$ |
16,790 |
|
|
|
27,853 |
|
|
Supplemental disclosure of non-cash investing activities: |
|
|
|
|
|
|
|
|
|
Additions to properties and equipment |
|
$ |
10,477 |
|
|
|
1,471 |
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
5
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
other |
|
|
Non |
|
|
|
|
|
|||
|
|
|
Common |
|
|
paid-in |
|
|
Retained |
|
|
comprehensive |
|
|
controlling |
|
|
|
|
|
|||||
|
|
|
stock |
|
|
capital |
|
|
earnings |
|
|
loss |
|
|
interest |
|
|
Total |
|
||||||
|
Balance at March 31, 2016 |
|
$ |
4,707 |
|
|
|
166,604 |
|
|
|
2,135,075 |
|
|
|
(6,866 |
) |
|
|
6,034 |
|
|
|
2,305,554 |
|
|
Total comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
(267,587 |
) |
|
|
423 |
|
|
|
1,321 |
|
|
|
(265,843 |
) |
|
Stock option activity |
|
|
— |
|
|
|
577 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
577 |
|
|
Cancellation of restricted stock awards |
|
|
— |
|
|
|
— |
|
|
|
213 |
|
|
|
— |
|
|
|
— |
|
|
|
213 |
|
|
Amortization/cancellation of restricted stock units |
|
|
— |
|
|
|
2,262 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,262 |
|
|
Balance at September 30, 2016 |
|
$ |
4,707 |
|
|
|
169,443 |
|
|
|
1,867,701 |
|
|
|
(6,443 |
) |
|
|
7,355 |
|
|
|
2,042,763 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2015 |
|
$ |
4,703 |
|
|
|
159,940 |
|
|
|
2,330,223 |
|
|
|
(20,378 |
) |
|
|
6,227 |
|
|
|
2,480,715 |
|
|
Total comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
(58,887 |
) |
|
|
(250 |
) |
|
|
(276 |
) |
|
|
(59,413 |
) |
|
Stock option activity |
|
|
— |
|
|
|
421 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
421 |
|
|
Cash dividends declared ($.50 per share) |
|
|
— |
|
|
|
— |
|
|
|
(23,154 |
) |
|
|
— |
|
|
|
— |
|
|
|
(23,154 |
) |
|
Amortization of restricted stock units |
|
|
1 |
|
|
|
5,186 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5,187 |
|
|
Amortization/cancellation of restricted stock awards |
|
|
(7 |
) |
|
|
243 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
236 |
|
|
Balance at September 30, 2015 |
|
$ |
4,697 |
|
|
|
165,790 |
|
|
|
2,248,182 |
|
|
|
(20,628 |
) |
|
|
5,951 |
|
|
|
2,403,992 |
|
The accompanying notes are an integral part of the condensed consolidated financial statements.
6
The unaudited condensed consolidated financial statements for the interim periods presented herein have been prepared in conformity with United States generally accepted accounting principles and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the unaudited condensed consolidated financial statements at the dates and for the periods indicated as required by Rule 10-01 of Regulation S‑X of the Securities and Exchange Commission (SEC). Results of operations for interim periods are not necessarily indicative of results of operations for the respective full years. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto in the company’s Annual Report on Form 10-K for the year ended March 31, 2016, filed with the SEC on May 26, 2016. All subsequent references to “Notes” refer to Notes to Consolidated Financial Statements located in Item 1 of this Quarterly Report on Form 10-Q, unless otherwise stated.
The unaudited condensed consolidated financial statements include the accounts of Tidewater Inc. and its subsidiaries. Intercompany balances and transactions are eliminated in consolidation. The company uses the equity method to account for equity investments over which the company exercises significant influence but does not exercise control and is not the primary beneficiary. Unless otherwise specified, all per share information included in this document is on a diluted earnings per share basis.
The company made certain reclassifications to prior period amounts to conform to the current year presentation, specifically, a modification to the company’s reportable segments (refer to Note 12) and the adoption of ASU 2015-03, Interest-Imputation of Interest: Simplifying the Presentation of Debt Issue Costs (refer to Note 6). These reclassifications did not have a material effect on the condensed consolidated statements of earnings, balance sheets or cash flows.
(2)STATUS OF DISCUSSIONS WITH LENDERS AND NOTEHOLDERS
Please refer to Note (6) of Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q and Note (5) of Notes to Consolidated Financial Statements included in Item 8 of the company’s Annual Report on Form 10-K for the year ended March 31, 2016 for additional information regarding the company’s outstanding debt.
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 the company’s 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 a higher number of newer generation vessels, 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 support vessel market and business outlook, continues its efforts to reduce its operating costs and preserve its liquidity.
At June 30, 2016 and September 30, 2016, the company did not meet the 3.0x minimum interest coverage ratio covenant (the “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”). Failure to meet the minimum interest coverage ratio requirement would have resulted in covenant noncompliance; however, as discussed in more detail below, limited waivers were received. Without these limited waivers, the respective lenders and/or the noteholders would have had the ability to declare the company to be in default of the Bank Loan Agreement, the Troms Offshore Debt and/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.
The company’s bank loans and its notes are linked together by cross-default provisions, such that if either the lenders or the noteholders declare the loans or notes to be in default, the other indebtedness likewise will be in default, and all of the debt at that time may be accelerated if the majority of lenders or noteholders under the respective debt agreements elect to accelerate. If the company is not in compliance with covenants set forth in the agreements evidencing these debt obligations, and such non-compliance is not waived, then the holders of a majority of loans may declare the bank loans to be in default, and the holders of a majority in principal amount of any of the three classes of the company’s notes may declare that class of notes to be in default. In such event, all of our indebtedness would be accelerated, and the company will not have sufficient liquidity to repay those accelerated amounts. The decision as to whether to accelerate the debt upon the company’s non-compliance with the debt covenants lies with the lenders and noteholders.
7
While the company is continuing to work toward amendments to its various debt arrangements that will be acceptable to all parties, there is a possibility that the lenders, noteholders and the company will not be able to negotiate new debt terms that are acceptable to all parties, in which case the company will likely seek reorganization under Chapter 11 of the federal bankruptcy laws, which could include a restructuring of the company’s various debt obligations and could place equity holders at significant risk of losing some or all of their interests in the company.
Given that the company expected it would not meet the minimum interest coverage ratio requirement set forth in the Bank Loan Agreement, the Troms Offshore Debt and the 2013 Note Agreement during fiscal 2017, 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 accompanied the company’s audited consolidated financial statements for the fiscal year ended March 31, 2016 (the “audit opinion”) contained an explanatory paragraph regarding the company’s ability to continue as a going concern. Such going concern explanatory paragraph was required because the company’s internal forecast indicated that, within fiscal 2017, the company 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 that is not subject to a going concern or similar modification. The inability of the company to obtain an audit opinion without any modification is an independent 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. The explanatory paragraph in the audit opinion 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. As a result of the company’s failure to receive an audit opinion with no modifications from the company’s independent certified public accountants, and because the waivers are for a limited period that is less than one year, all of the company’s indebtedness has been classified as a current liability in the accompanying consolidated balance sheet since March 31, 2016.
As previously reported, the company obtained limited waivers from the necessary lenders which waived the unqualified audit opinion requirement and/or waived the minimum interest coverage ratio requirement until October 21, 2016. Prior to the October 21, 2016 expiry of such limited waivers, the company obtained limited waivers from the necessary lenders and noteholders which extend the waiver of the unqualified audit opinion requirement and/or waive the minimum interest coverage ratio requirement until November 11, 2016.
The company continues to engage in discussions with its principal lenders and noteholders to amend the company’s various debt arrangements in advance of the expiration of the waivers on November 11, 2016. In its October 21, 2016 press release announcing the most recent extension, the company reported that recent industry data, including data regarding projected levels of offshore drilling activity, a primary driver of activity within the offshore service vessel industry, had led the company to conclude that important debt terms will require further negotiation. Such negotiations, if successfully concluded, would 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 a portion of the indebtedness outstanding under the Bank Loan Agreement, accepting a reduction in total borrowing capacity under the revolving credit facility, paying a higher rate of interest, issuing some form of equity or equity linked compensation enhancement, paying down a portion of the Troms Offshore Debt and/or Senior Notes, or some combination of the above. In addition, such amendments will need to address the audit opinion requirement of the Bank Loan Agreement and the Troms Offshore Debt (the waiver of which has been extended until November 11, 2016). Obtaining the covenant relief will require the company to reach an agreement that satisfies potentially divergent interests of its principal lenders and noteholders.
The company’s unaudited condensed consolidated financial statements as of and for the quarter and six months ended September 30, 2016 were prepared assuming the company would 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.
8
Dividends
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 quarters and six-month periods ended September 30, 2016 and 2015:
|
|
|
Quarter Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
(In thousands, except dividend per share) |
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
||||
|
Dividends declared |
|
$ |
— |
|
|
|
11,814 |
|
|
|
— |
|
|
|
23,154 |
|
|
Dividend per share |
|
|
— |
|
|
|
0.25 |
|
|
|
— |
|
|
|
0.50 |
|
In January 2016, the company suspended the quarterly dividend program in order to preserve liquidity.
Accumulated Other Comprehensive Loss
The changes in accumulated other comprehensive income (loss) by component, net of tax for the quarters and six month periods ended September 30, 2016 and 2015 are as follows:
|
|
|
For the quarter ended September 30, 2016 |
|
|
For the six months ended September 30, 2016 |
|
||||||||||||||||||||||||||||||||||||||||
|
|
|
Balance |
|
|
Gains/(losses) |
|
Reclasses |
|
Net |
|
Remaining |
|
|
Balance |
|
|
Gains/(losses) |
|
Reclasses |
|
Net |
|
|
|
Remaining |
|
||||||||||||||||||||
|
|
|
at |
|
|
recognized |
|
from OCI to |
|
period |
|
balance |
|
|
at |
|
|
recognized |
|
from OCI to |
|
period |
|
|
|
balance |
|
||||||||||||||||||||
|
(in thousands) |
|
6/30/16 |
|
|
in OCI |
|
net income |
|
OCI |
|
9/30/16 |
|
|
3/31/16 |
|
|
in OCI |
|
net income |
|
OCI |
|
|
|
9/30/16 |
|
||||||||||||||||||||
|
Available for sale securities |
|
|
(47 |
) |
|
|
79 |
|
|
|
|
40 |
|
|
|
|
119 |
|
|
|
|
72 |
|
|
|
(208 |
) |
|
|
138 |
|
|
|
|
142 |
|
|
|
|
280 |
|
|
|
|
72 |
|
|
Currency translation adjustment |
|
|
(9,811 |
) |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
(9,811 |
) |
|
|
(9,811 |
) |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
(9,811 |
) |
|
Pension/Post- retirement benefits |
|
|
4,683 |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
4,683 |
|
|
|
4,683 |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
4,683 |
|
|
Interest rate swaps |
|
|
(1,459 |
) |
|
|
— |
|
|
|
|
72 |
|
|
|
|
72 |
|
|
|
|
(1,387 |
) |
|
|
(1,530 |
) |
|
|
— |
|
|
|
|
143 |
|
|
|
|
143 |
|
|
|
|
(1,387 |
) |
|
Total |
|
|
(6,634 |
) |
|
|
79 |
|
|
|
|
112 |
|
|
|
|
191 |
|
|
|
|
(6,443 |
) |
|
|
(6,866 |
) |
|
|
138 |
|
|
|
|
285 |
|
|
|
|
423 |
|
|
|
|
(6,443 |
) |
|
|
|
For the quarter ended September 30, 2015 |
|
|
For the six months ended September 30, 2015 |
|
||||||||||||||||||||||||||||||||||||||||
|
|
|
Balance |
|
|
Gains/(losses) |
|
Reclasses |
|
Net |
|
Remaining |
|
|
Balance |
|
|
Gains/(losses) |
|
Reclasses |
|
Net |
|
Remaining |
|
||||||||||||||||||||||
|
|
|
at |
|
|
recognized |
|
from OCI to |
|
period |
|
balance |
|
|
at |
|
|
recognized |
|
from OCI to |
|
period |
|
balance |
|
||||||||||||||||||||||
|
(in thousands) |
|
6/30/15 |
|
|
in OCI |
|
net income |
|
OCI |
|
9/30/15 |
|
|
3/31/15 |
|
|
in OCI |
|
net income |
|
OCI |
|
9/30/15 |
|
||||||||||||||||||||||
|
Available for sale securities |
|
|
183 |
|
|
|
(690 |
) |
|
|
|
63 |
|
|
|
|
(627 |
) |
|
|
|
(444 |
) |
|
|
235 |
|
|
|
(804 |
) |
|
|
|
125 |
|
|
|
|
(679 |
) |
|
|
|
(444 |
) |
|
Currency translation adjustment |
|
|
(9,811 |
) |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
(9,811 |
) |
|
|
(9,811 |
) |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
(9,811 |
) |
|
Pension/Post- retirement benefits |
|
|
(9,059 |
) |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
(9,059 |
) |
|
|
(9,129 |
) |
|
|
70 |
|
|
|
|
— |
|
|
|
|
70 |
|
|
|
|
(9,059 |
) |
|
Interest rate swaps |
|
|
(1,494 |
) |
|
|
— |
|||||||||||||||||||||||||||||||||||||||