All other schedules are omitted as the required information is inapplicable or the information is presented in the financial statements or the related notes.
Cash, cash equivalents and restricted cash at December 31, 2020 and 2019 includes $3.2 million and $3.6 million, respectively, in long-term restricted cash.
(1)
|
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Nature of Operations
We provide 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. Our revenues, net earnings and cash flows from operations are dependent upon the activity level of the vessel fleet (utilization) and the price we are able to charge for these services (day-rate). The level of our business activity is driven by the amount of installed offshore oil and gas production facilities, the level of offshore drilling and exploration activity, and the general level of offshore construction projects such as pipeline and windfarm construction and support. Our customers’ offshore activity, in turn, is dependent on crude oil and natural gas prices, which fluctuate depending on the respective levels of supply and demand for crude oil and natural gas and the future outlook for such levels.
Unless otherwise required by the context, the terms “we”, “us”, “our” and “company” as used herein refer to Tidewater Inc. and its consolidated subsidiaries and predecessors.
Principles of Consolidation
The consolidated financial statements include the accounts of Tidewater Inc. and its subsidiaries. Intercompany balances and transactions are eliminated in consolidation.
Business Combination
On November 15, 2018 (the Merger Date) we completed our business combination with GulfMark Offshore, Inc. (GulfMark). Assets acquired and liabilities assumed in the business combination have been recorded at their estimated fair values as of the Merger Date under the acquisition method of accounting. The estimated fair values of certain assets and liabilities require judgments and assumptions. Refer to Note (2), for further details on the impact of this business combination on our consolidated financial statements.
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 recorded amounts of revenues and expenses during the reporting period. The accompanying consolidated financial statements include estimates for allowance for credit losses, useful lives of property and equipment, 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
We consider all highly liquid investments with maturities of three months or less when purchased to be cash equivalents.
Restricted Cash
We consider cash as restricted when there are contractual agreements that govern the use or withdrawal of the funds.
Marine Operating Supplies
Marine operating supplies, which consist primarily of operating parts and supplies for our vessels as well as fuel, are stated at the lower of weighted-average cost or net realizable value.
Properties and Equipment
Depreciation and Amortization
Upon emergence from Chapter 11 bankruptcy on July 31, 2017, properties and equipment were stated at their fair market values in accordance with fresh-start accounting. Properties and equipment acquired subsequent to fresh start are stated at their acquisition cost. Depreciation is computed primarily on the straight-line basis beginning on acquisition date or on the date construction is completed, with salvage values of 7.5% for marine equipment, using estimated useful lives of 10 - 20 years for marine equipment and 3 - 10 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 operations.
Maintenance and Repairs
The majority of our vessels require certification inspections twice in every five-year period. These costs include drydocking and survey costs necessary to ensure compliance with applicable regulations and maintain certifications for vessels with classification societies. These certification costs are typically incurred while the vessel is in drydock and may be incurred concurrent with other vessel maintenance and improvement activities. Costs related to the certification of vessels are deferred and amortized over 30 months on a straight-line basis.
Maintenance costs incurred at the time of the recertification drydocking that are not related to the certification of the vessel are expensed as incurred.
Costs related to vessel improvements that either extend the vessel’s useful life or increase the vessel’s functionality are capitalized and depreciated. Vessel modifications that are performed for a specific customer contract are capitalized and amortized over the firm contract term. Major modifications to equipment that are being performed not only for a specific customer contract are capitalized and amortized over the remaining life of the equipment.
Net Properties and Equipment
The following are summaries of net properties and equipment:
|
|
December 31,
|
|
|
December 31,
|
|
(In thousands)
|
|
2020
|
|
|
2019
|
|
Properties and equipment:
|
|
|
|
|
|
|
|
|
Vessels and related equipment
|
|
$
|
940,175
|
|
|
$
|
1,051,558
|
|
Other properties and equipment
|
|
|
16,861
|
|
|
|
13,119
|
|
|
|
|
957,036
|
|
|
|
1,064,677
|
|
Less accumulated depreciation and amortization
|
|
|
176,718
|
|
|
|
125,716
|
|
Net properties and equipment
|
|
$
|
780,318
|
|
|
$
|
938,961
|
|
As of December 31, 2020, we owned 172 offshore service vessels, including 23 that were reclassified as assets held for sale in current assets. Excluding the 23 vessels held for sale, we owned 149 vessels, 114 of which were actively employed and 35 of which were stacked. As of December 31, 2019, we owned 217 vessels, including 46 that were classified as held for sale and 19 that were stacked. We consider a vessel to be stacked if the vessel crew is disembarked and limited maintenance is being performed. We reduce operating costs by stacking vessels when we do not foresee opportunities to profitably or strategically operate the vessels in the near future. Vessels are stacked when market conditions warrant and they are removed from stack when they are returned to active service, sold or otherwise disposed. We consider our current stacked vessels to be available for return to service. Stacked vessels are considered to be in service and are included in our utilization statistics. Refer to Note (8) for additional discussion of our asset impairments and the reclassification of the vessels held for sale.
Impairment of Long-Lived Assets
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. 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. Due in part to the modernization of our fleet more newer vessels are being stacked and are expected to return to active service. Stacked vessels expected to return to active service are generally newer vessels, have similar capabilities and likelihood of future active service as other currently operating vessels, are generally current with classification societies in regard to their regulatory certification status, and are being actively marketed. Stacked vessels expected to return to active service are evaluated for impairment as part of their assigned active asset group and not individually.
We estimate cash flows based upon historical data adjusted for our best estimate of expected future market performance, which, in turn, is based on industry trends. The primary estimates and assumptions used in reviewing active vessel groups for impairment and estimating undiscounted cash flows include utilization rates, average day rates and average daily operating expenses. These estimates are made based on recent actual trends in utilization, day rates 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 we believe our 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 our 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.
If an asset group fails the undiscounted cash flow test, we estimate the fair value of each asset group and compare such estimated fair value to the carrying value of each asset group in order to determine if impairment exists.
In addition to the periodic review of our active long-lived assets for impairment when circumstances warrant, we also perform a review of our stacked vessels not expected to return to active service whenever changes in circumstances indicate that the carrying amount of a vessel may not be recoverable.
Refer to Note (8) for discussion of our evaluations of long-lived assets for impairment during 2020.
Accrued Property and Liability Losses
Effective July 1, 2018, we ceased self-insuring claims through our insurance subsidiary. Insurance coverage is now provided by third party insurers. We establish case-based reserves for estimates of reported losses on outstanding claims, estimates received from ceding reinsurers, and reserves based on past experience of unreported losses. Such losses principally relate to our 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.
Pension Benefits
We follow the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 715, Compensation – Retirement Benefits, and use a December 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, retirement ages, mortality rates, expected long-term return on plan assets, and other assumptions, all of which have a significant impact on the amounts reported.
Our 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. We consider a number of factors in developing pension assumptions, including an evaluation of relevant discount rates, expected long-term returns on plan assets, plan asset allocations, expected changes in retirement benefits, analyses of current market conditions and input from actuaries and other consultants.
For the long-term rate of return, we developed assumptions 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 reflect the theoretical rate at which liabilities could be settled in the bond market at December 31, 2020.
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 we consider those earnings to be permanently invested abroad.
We record uncertain tax positions on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions would 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 was more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. The recognition and measurement of tax liabilities for uncertain tax positions in any tax jurisdiction requires the interpretation of the related tax laws and regulations as well as the use of estimates and assumptions regarding significant future events. 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 during any given year.
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. The base rate of hire for a time charter contract is generally a fixed rate, provided, however, that some longer-term contracts at times include escalation clauses to recover specific additional costs.
Operating Costs
Vessel operating costs are incurred on a daily basis and consist primarily of costs such as crew wages; repair and maintenance; insurance; fuel, lube oil and supplies; and other vessel expenses, which include 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 repairs carried out during drydockings, which occur during the 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 our 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 our foreign currency denominated monetary assets and liabilities are included in the consolidated statements of operations.
Earnings Per Share
We report both basic earnings (loss) per share and diluted earnings (loss) per share. The calculation of basic earnings (loss) per share is computed based on the weighted average number of shares of common stock outstanding. Diluted earnings (loss) 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 (loss) per share includes the dilutive effect of stock options and restricted stock grants (both time and performance based) awarded as part of our 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.
The components of basic and diluted earnings (loss) per share, are as follows:
|
|
Year Ended December 31,
|
|
(In thousands, except share and per share data)
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Net loss available to common shareholders
|
|
$
|
(196,242
|
)
|
|
$
|
(141,743
|
)
|
|
$
|
(171,517
|
)
|
Weighted average outstanding shares of common stock, basic
|
|
|
40,354,638
|
|
|
|
38,204,934
|
|
|
|
26,589,883
|
|
Dilutive effect of options, warrants and stock awards
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Weighted average common stock and equivalents
|
|
|
40,354,638
|
|
|
|
38,204,934
|
|
|
|
26,589,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share, basic
|
|
$
|
(4.86
|
)
|
|
$
|
(3.71
|
)
|
|
$
|
(6.45
|
)
|
Loss per share, diluted
|
|
$
|
(4.86
|
)
|
|
$
|
(3.71
|
)
|
|
$
|
(6.45
|
)
|
Additional information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Incremental "in-the-money" options, warrants, and restricted stock awards and units outstanding at the end of the period (A)
|
|
|
2,235,310
|
|
|
|
2,483,956
|
|
|
|
5,282,574
|
|
|
(A)
|
For years ended December 31, 2020, 2019 and 2018 we also had 5,923,399 shares of “out-of- the-money” warrants outstanding at the end of each period.
|
Concentrations of Credit Risk
Our 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. We manage our exposure to risk by performing ongoing credit evaluations of our customers’ financial condition and may at times require prepayments or other forms of collateral. We also have net receivable balances related to joint ventures in which we own less than 50%. We review and evaluate these receivables for collectability in a similar manner as we evaluate trade receivables. We maintain an allowance for credit loss based on expected collectability and do not believe we are generally exposed to concentrations of credit risk that are likely to have a material adverse impact on our financial position, results of operations, or cash flows.
Stock-Based Compensation
Stock-based compensation transactions are accounted for using a fair-value-based method. We use the Black-Scholes option-pricing model to determine the fair-value of stock-based awards.
Comprehensive Income (Loss)
We report total comprehensive income (loss) and its components. Accumulated other comprehensive income ( loss) is comprised of unrealized gains and losses on available-for-sale securities and any minimum pension liability for our U.S. Defined Benefits Pension Plans.
Fair Value Measurements
We follow the provisions of ASC 820, 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
Our primary financial instruments consist of cash and cash equivalents, restricted cash, trade receivables and trade payables with book values that are considered to be representative of their respective fair values.
Our 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
Recently Adopted Accounting Pronouncements
From time-to-time new accounting pronouncements are issued by the FASB that we adopt 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 our consolidated financial statements upon adoption.
On August 28, 2018, the FASB issued Accounting Standards Update (ASU) 2018-13, Fair Value Measurement: - Changes to The Disclosure Requirements for Fair Value Measurement, which eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project. Entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but public companies will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. We adopted this standard on January 1, 2020 and it did not have any impact on our consolidated financial position, net earnings or cash flow. See Note (8) for application of this standard.
On June 16, 2016, the FASB issued ASU 2016-13, Financial Instruments–Credit Losses, which introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. The new model will apply to: (i) loans, accounts receivable, trade receivables, and other financial assets measured at amortized cost, (ii) loan commitments and certain other off-balance sheet credit exposures, (iii) debt securities and other financial assets measured at fair value through other comprehensive income and (iv) beneficial interests in securitized financial assets.
Expected credit losses are recognized on the initial recognition of our trade accounts receivable, contract assets and net amounts due from our less than 50% owned joint ventures. In each subsequent reporting period, even if a loss has not yet been incurred, credit losses are recognized based on the history of credit losses and current conditions, as well as reasonable and supportable forecasts affecting collectability. We developed an expected credit loss model applicable to our trade accounts receivable and contract assets that considers our historical performance and the economic environment, as well as the credit risk and its expected development for each group of customers that share similar risk characteristics. We segmented our trade accounts receivable and contract assets by type of client, except for individual account balances that have deteriorated in credit quality, which are evaluated individually. We then determined, for each of these client asset groups, the average expected credit loss utilizing our actual credit loss experience over the last five years, which was adjusted as discussed above, and was applied to the balance attributable to each segment in our trade accounts receivable and contract asset balances. We review and evaluate our net receivables due from joint ventures for collectability in a similar manner as we evaluate trade receivables. This standard was adopted through a cumulative-effect adjustment to the accumulated deficit as of January 1, 2020, which is the beginning of the first period in which this guidance is effective. Periods prior to the adoption date that are presented for comparative purposes are not adjusted. Adopting this standard on January 1, 2020 increased the allowance for expected credit losses by approximately $0.2 million.
Activity in the allowance for credit losses for the year ended December 31, 2020 is as follows:
|
|
Trade
|
|
|
Due
|
|
|
|
and
|
|
|
from
|
|
(In thousands)
|
|
Other Receivables
|
|
|
Affiliate
|
|
Balance at January 1, 2020
|
|
$
|
70
|
|
|
$
|
20,083
|
|
Cumulative effect adjustment upon adoption of standard
|
|
|
163
|
|
|
|
—
|
|
Current period provision for expected credit losses
|
|
|
1,283
|
|
|
|
52,981
|
|
Other
|
|
|
—
|
|
|
|
(1,264
|
)
|
Balance at December 31, 2020
|
|
$
|
1,516
|
|
|
$
|
71,800
|
|
Recently Issued Accounting Standards Not Yet Adopted
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifying and amending existing guidance to simplify the accounting for income taxes. The guidance is effective for annual and interim periods beginning after December 15, 2020 with early adoption permitted. We adopted this standard on January 1, 2021 and it will not have a material impact on our consolidated financial statements and related disclosures.
In August 2018 the FASB issued ASU 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans – General, which modifies the disclosure requirements for employers that sponsor defined benefit plans or other postretirement plans. This ASU removes certain disclosures that no longer are considered cost beneficial, clarifies the specific requirements of certain other disclosures, and adds disclosure requirements identified as relevant. The guidance is effective for annual and interim periods beginning after December 15, 2020 with early adoption permitted. We adopted this standard on January 1, 2021 and it will not have a material impact on our defined benefit plan disclosures.
(2) BUSINESS COMBINATION
On the Merger Date, we completed our business combination with GulfMark pursuant to the Agreement and Plan of Merger, dated July 15, 2018 (the “business combination”). GulfMark’s results are included in our consolidated results beginning on the Merger Date.
Revenues of GulfMark from the Merger Date included in our consolidated statements of operations were $12.7 million for the year ended December 31, 2018. The net loss of GulfMark from the Merger Date was $30.6 million for the year ended December 31, 2018.
Purchase Consideration
Upon completion of the business combination, GulfMark stockholders received 1.1 (the Exchange Ratio) shares of Tidewater common stock in exchange for each share of GulfMark owned. Outstanding GulfMark Creditor Warrants (GLF Creditor Warrants) and GulfMark Equity Warrants (GLF Equity Warrants) were assumed from GulfMark with each warrant becoming exercisable for 1.1 shares of Tidewater common stock on substantially the same terms and conditions as provided in the warrant agreements governing the GLF Creditor Warrants and the GLF Equity Warrants. All outstanding GulfMark restricted stock units (awards granted to GulfMark directors and management prior to the merger) were converted into substantially similar awards to acquire Tidewater common stock with the number of restricted stock units being adjusted by the Exchange Ratio. The fair value of the Tidewater common stock and warrants issued as part of the consideration paid for GulfMark was determined based on the closing price of Tidewater’s common stock on the New York Stock Exchange on November 14, 2018.
Upon consummation of the business combination, we utilized cash from GulfMark and cash on hand to repay the $100 million outstanding balance of GulfMark’s term loan facility. The total purchase consideration for this business combination was $385.5 million.
Assets Acquired and Liabilities Assumed
Assets acquired and liabilities assumed in the business combination have been recorded at their estimated fair values as of the Merger Date under the acquisition method of accounting. The estimated fair values of certain assets and liabilities including long-lived assets and contingencies require judgments and assumptions. There were no adjustments to the original fair value estimates during the measurement period subsequent to the Merger Date.
Upon consummation of the business combination, the $100.0 million GulfMark term loan was repaid. The amounts for assets acquired and liabilities as of the Merger Date were as follows:
|
|
Estimated Fair
|
|
(In thousands)
|
|
Value
|
|
Assets:
|
|
|
|
|
Current assets
|
|
$
|
77,942
|
|
Property and equipment
|
|
|
360,701
|
|
Other assets
|
|
|
779
|
|
Liabilities:
|
|
|
|
|
Current liabilities
|
|
|
33,881
|
|
Long term debt
|
|
|
100,000
|
|
Other liabilities
|
|
|
20,049
|
|
Net assets acquired
|
|
$
|
285,492
|
|
Business Combination Related Costs
Business combination related costs were expensed as incurred and consisted of various advisory, legal, accounting, valuation and other professional fees totaling $9.0 million for the year ended December 31, 2018. These costs are included in general and administrative expense in our consolidated statement of operations.
Property and Equipment
Property and equipment acquired in the business combination consisted primarily of 65 offshore support vessels. We recorded property and equipment acquired at its estimated fair value of approximately $361.0 million. The fair values of the offshore support vessels were estimated by applying an income approach, using projected discounted cash flows or a market approach. We estimated the remaining useful lives for the GulfMark fleet, which ranged from 1 to 18 years based on an original estimated useful life of 20 years.
Deferred Taxes
The business combination was executed through the acquisition of GulfMark’s outstanding common stock and therefore the historical tax bases of the acquired assets and assumed liabilities, net operating losses and other tax attributes of GulfMark were assumed at the Merger Date. However, adjustments to the deferred tax assets and liabilities for the tax effects of the difference between the acquisition date fair values and the tax bases of assets acquired and liabilities assumed were nearly completely offset by valuation allowances which resulted in only a minor change to the net deferred tax accounts of GulfMark.
Pro Forma Impact of the Merger
The following unaudited supplemental pro forma results present consolidated information as if the business combination was completed on January 1, 2018. The pro forma results include, among others, (i) a reduction in depreciation expense for adjustments to property and equipment and (ii) a reduction in interest expense resulting from the extinguishment of the GulfMark Term Loan Facility. The pro forma results do not include any potential synergies or non-recurring charges that may result directly from the business combination.
|
|
Year
|
|
(Unaudited)
|
|
Ended
|
|
(in millions, except per share amounts)
|
|
December 31, 2018
|
|
Revenues
|
|
$
|
500,118
|
|
Net loss
|
|
|
(196,057
|
)
|
Basic loss per common share
|
|
|
(5.66
|
)
|
Diluted loss per common share
|
|
|
(5.66
|
)
|
(3) REVENUE RECOGNITION
Our primary source of revenue is derived from charter contracts for which we provide a vessel and crew on a rate per day of service basis. Services provided under respective charter contracts represent a single performance obligation satisfied over time and are comprised of a series of time increments; therefore, vessel revenues are recognized on a daily basis throughout the contract period. There are no material differences in the cost structure of our contracts because operating costs are generally the same without regard to the length of a contract. Customers are typically billed on a monthly basis for day rate services and payment terms are generally 30 to 45 days.
Occasionally, customers pay additional lump-sum fees to us in order to either mobilize a vessel to a new location prior to the start of a charter contract or demobilize the vessel at the end of a charter contract. Mobilizations are not a separate performance obligation; thus, we have determined that mobilization fees are a component of the vessel’s charter contract. As such, we defer lump-sum mobilization fees as a liability and recognize such fees as revenue consistent with the pattern of revenue recognition primarily on a straight-line basis over the term of the vessel’s respective charter. Lump-sum demobilization revenue expected to be received upon contract termination is deferred as an asset and recognized ratably as revenue only in circumstances where the receipt of the demobilization fee at the end of the contract can be estimated and there is a high degree of certainty that collection will occur.
Customers also occasionally reimburse us for modifications to vessels in order to meet contractual requirements. These vessel modifications are not considered to be a separate performance obligation of the vessel’s charter; thus, we record a liability for lump-sum payments made by customers for vessel modification and recognize it as revenue consistent with the pattern of revenue recognition primarily on a straight-line basis over the term of the vessel’s respective charter.
Total revenue is determined for each individual contract by estimating both fixed (mobilization, demobilization and vessels modifications) and variable (day rate services) consideration expected to be earned over the contract term.
Costs associated with customer-directed mobilizations and reimbursed modifications to vessels are considered costs of fulfilling a charter contract and are expected to be recovered. Mobilization costs such as crew, travel, fuel, port fees, temporary importation fees and other costs are deferred as an asset and amortized as other vessel operating expenses consistent with the pattern of revenue recognition primarily on a straight-line basis over the term of such vessel’s charter. Costs incurred for modifications to vessels in order to meet contractual requirements are capitalized as a fixed asset and depreciated either over the term of the respective charter contract or over the remaining estimated useful life of the vessel in instances where the modification is a permanent upgrade to the vessel and enhances its usefulness.
Refer to Note (14) for the amount of revenue by segment and in total for the worldwide fleet.
Contract Balances
Trade accounts receivables are recognized when revenue is earned and collectible. Contract assets include pre-contract costs, primarily related to vessel mobilizations, which have been deferred and will be amortized as other vessel expenses consistent with the pattern of revenue recognition primarily on a straight-line basis over the term of such vessel’s charter. Contract liabilities include payments received for mobilizations or reimbursable vessel modifications to be recognized consistent with the pattern of revenue recognition primarily on a straight-line basis over the term of such vessel’s charter. At December 31, 2020 we had $2.2 million and $4.3 million of deferred mobilization costs included with other current assets and other assets, respectively, and we have $0.4 million of deferred mobilization revenue related to unsatisfied performance obligations included within other current liabilities, all of which will be recognized during the year end December 31, 2021. At December 31, 2019 we had $4.1 million and $0.8 million of deferred mobilization costs included with other current assets and other assets, respectively, and we have $1.0 million of deferred mobilization revenue related to unsatisfied performance obligations included within other current liabilities all of which were recognized during the year ended December 31, 2020.
(4) INDEBTEDNESS
The following table summarizes debt outstanding based on stated maturities:
|
|
December 31,
|
|
|
December 31,
|
|
(In thousands)
|
|
2020
|
|
|
2019
|
|
Secured notes:
|
|
|
|
|
|
|
|
|
8.00% Secured notes due August 2022
|
|
$
|
147,049
|
|
|
$
|
224,793
|
|
Troms Offshore borrowings:
|
|
|
|
|
|
|
|
|
NOK denominated notes due May 2024
|
|
|
5,954
|
|
|
|
10,260
|
|
NOK denominated notes due January 2026
|
|
|
14,559
|
|
|
|
20,788
|
|
USD denominated notes due January 2027
|
|
|
14,744
|
|
|
|
20,273
|
|
USD denominated notes due April 2027
|
|
|
15,669
|
|
|
|
21,545
|
|
|
|
|
197,975
|
|
|
|
297,659
|
|
Debt premium and discount, net
|
|
|
(5,244
|
)
|
|
|
(8,725
|
)
|
Less: Current portion of long-term debt
|
|
|
(27,797
|
)
|
|
|
(9,890
|
)
|
Total long-term debt
|
|
$
|
164,934
|
|
|
$
|
279,044
|
|
We may from time to time seek to retire or purchase our outstanding debt through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
Secured Notes
Upon our emergence from Chapter 11 bankruptcy on July 31, 2017 and pursuant to the terms of the plan of reorganization, we entered into an indenture (the Indenture) by and among our wholly-owned subsidiaries named as guarantors therein (the Guarantors), and Wilmington Trust, National Association, as trustee and collateral agent (the Trustee), and issued $350.0 million aggregate principal amount of our 8.00% Senior Secured Notes due 2022 (the Secured Notes).
We amended the Indenture pursuant to the Third Supplemental Indenture dated November 22, 2019 to allow for additional flexibility in our financial covenants, the ability to incur indebtedness, grant liens and make restricted payments. Additional revisions were made to enhance operational flexibility and streamline compliance provisions. We further amended the Indenture pursuant to the Fourth Supplemental Indenture dated November 19, 2020 to allow for additional flexibility in our financial covenants.
The Secured Notes will mature on August 1, 2022. Interest on the Secured Notes accrues at a rate of 8.00% per annum and is payable quarterly in arrears on February 1, May 1, August 1, and November 1 of each year in cash. The Secured Notes are secured by substantially all of our assets and our Guarantors.
As of December 31, 2020, the fair value (Level 2) of the Secured Notes was $141.4 million.
The Secured Notes have a trailing twelve month interest coverage requirement. Compliance with this covenant has been waived from April 1, 2021 through December 31, 2021. Minimum liquidity requirements and other covenants are set forth in the Indenture and are in effect from July 31, 2017. The Indenture also contains certain customary events of default and has a make-whole provision.
Until terminated under the circumstances described in this paragraph, the Secured Notes and the guarantees by the Guarantors are secured by the Collateral pursuant to the terms of the Indenture and the related security documents. The Trustee’s liens upon the Collateral and the right of the holders of the Secured Notes to the benefits and proceeds of the Trustee’s liens on the Collateral will terminate and be discharged in certain circumstances described in the Indenture, including: (i) upon satisfaction and discharge of the Indenture in accordance with the terms thereof; or (ii) as to any Collateral that is sold, transferred or otherwise disposed of by us or the Guarantors in a transaction or other circumstance that complies with the terms of the Indenture, at the time of such sale, transfer or other disposition.
Secured Notes Tender Offer
We are obligated to offer to repurchase the Secured Notes at par in amounts that generally approximate 65% of asset sale proceeds as defined in the Indenture.
In February and December of 2018, we commenced offers to repurchase up to $24.7 million and $25.4 million, respectively, of the Secured Notes. In March 2018 and January 2019, we repurchased $0.04 million and $0.1 million, respectively, of the Secured Notes in accordance with these tender offer obligations.
The $2.1 million and $5.8 million restricted cash on the balance sheet at December 31, 2020 and 2019, represent proceeds from asset sales since the date of the last tender offer and is restricted as of that date by the terms of the Indenture. Upon completion of the November 2020 tender offer described below, the restriction on the non-tendered amount of restricted cash as of December 31, 2019 was released. The restricted cash at December 31, 2020 remains restricted until the next tender offer is complete.
We completed a successful voluntary tender offer for our Secured Notes in November 2019 that resulted in the repurchase of notes with a face value of $125.0 million plus a premium of 8.5% for total repurchase price of $135.6 million. We accounted for this tender as a modification of debt and deferred the premium and other costs of $11.4 million which will be expensed under the interest method over the remaining term.
During August and September 2020, we repurchased $27.7 million of the Secured Notes in open market transactions.
We completed a successful voluntary tender offer for our Secured Notes in November 2020 that resulted in the repurchase of notes with a face value of $50.0 million, which included the release of all restricted cash described above, for a total repurchase price of $50.3 million. We accounted for this tender as a modification of debt and deferred the premium and other costs of $0.6 million which will be expensed under the interest method over the remaining term.
Troms Offshore Debt
Between 2012 and 2014 our indirect wholly owned subsidiary, Troms Offshore, entered into two Norwegian kroner (NOK) denominated 12 year borrowing agreements aggregating 504.4 million NOK maturing in May 2024 and January 2026. In addition, in 2015 Troms Offshore entered into to two U.S. dollar denominated 12 year borrowing agreements aggregating $60.8 million and maturing in early 2027. Each loan requires semi-annual principal and interest payments and bears interest at fixed rates ranging from 4.56% to 6.13%.
Amounts outstanding on each of these borrowing agreements are indicated on the table below including the U.S. dollar equivalents for the NOK denominated borrowing agreements.
|
|
December 31,
|
|
|
December 31,
|
|
(In thousands)
|
|
2020
|
|
|
2019
|
|
Notes due May 2024
|
|
|
|
|
|
|
|
|
NOK denominated
|
|
|
51,120
|
|
|
|
89,460
|
|
U.S. dollar equivalent
|
|
$
|
5,954
|
|
|
$
|
10,260
|
|
Fair value in U.S. dollar equivalent (Level 2)
|
|
|
5,954
|
|
|
|
10,259
|
|
Notes due January 2026
|
|
|
|
|
|
|
|
|
NOK denominated
|
|
|
125,000
|
|
|
|
181,250
|
|
U.S. dollar equivalent
|
|
$
|
14,559
|
|
|
$
|
20,788
|
|
Fair value in U.S. dollar equivalent (Level 2)
|
|
|
14,789
|
|
|
|
20,792
|
|
Notes due January 2027
|
|
|
|
|
|
|
|
|
Amount outstanding
|
|
$
|
14,744
|
|
|
$
|
20,273
|
|
Fair value of debt outstanding (Level 2)
|
|
|
15,040
|
|
|
|
20,278
|
|
Notes due April 2027
|
|
|
|
|
|
|
|
|
Amount outstanding
|
|
$
|
15,669
|
|
|
$
|
21,545
|
|
Fair value of debt outstanding (Level 2)
|
|
|
15,775
|
|
|
|
21,546
|
|
When we emerged from Chapter 11 bankruptcy in 2017 the Troms Offshore credit agreement was amended and restated to (i) reduce by 50% the required principal payments due through March 31, 2019, (ii) modestly increase the interest rates on amounts outstanding through April 2023, and (iii) provide for security and additional guarantees, including (a) mortgages on six vessels and related assignments of earnings and insurances, (b) share pledges by Troms Offshore and certain subsidiaries of Troms Offshore, and (c) guarantees by certain subsidiaries of Troms Offshore.
An amendment and restatement was executed in December 2020 whereby the financial covenants were conformed to match the November 2020 amendments to the covenants governing the Senior Notes, as described above, and included an obligation to prepay (1) the amounts deferred in the 2017 amendment and restatement and (2) an additional amount representing a percentage of Senior Notes prepayments that will not exceed $45 million including the prepayment of the amounts deferred in the 2017 amendment and restatement. The prepayment associated with this amendment made in December 2020 totaled $12.5 million. Additional prepayment obligations of $22.8 million are due in the first half of 2021 and are reflected in current portion of long-term debt on our consolidated balance sheet.
GulfMark Term Loan Facility
Upon consummation of the business combination, we repaid the $100.0 million outstanding balance of GulfMark’s Term Loan Facility plus accrued interest and an early extinguishment penalty which resulted in the recognition of a loss on early extinguishment of debt of $8.1 million for the year ended December 31, 2018.
Debt Costs
We capitalize a portion of our interest costs incurred on borrowed funds used to construct vessels. Interest and debt costs incurred, net of interest capitalized are as follows:
|
|
Year Ended December 31,
|
|
(In thousands)
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Interest and debt costs incurred, net of interest capitalized
|
|
$
|
24,156
|
|
|
$
|
29,068
|
|
|
$
|
30,439
|
|
Interest costs capitalized
|
|
|
—
|
|
|
|
—
|
|
|
|
521
|
|
Total interest and debt costs
|
|
$
|
24,156
|
|
|
$
|
29,068
|
|
|
$
|
30,960
|
|
(5)
|
INVESTMENT IN UNCONSOLIDATED AFFILIATES
|
We maintained the following balances with our unconsolidated affiliates:
|
|
December 31,
|
|
|
December 31,
|
|
(in thousands)
|
|
2020
|
|
|
2019
|
|
Due from affiliates:
|
|
|
|
|
|
|
|
|
Angolan joint venture (Sonatide)
|
|
$
|
41,623
|
|
|
$
|
89,246
|
|
Nigerian joint venture (DTDW)
|
|
|
20,427
|
|
|
|
36,726
|
|
|
|
|
62,050
|
|
|
|
125,972
|
|
Due to affiliates:
|
|
|
|
|
|
|
|
|
Sonatide
|
|
$
|
32,767
|
|
|
$
|
31,475
|
|
DTDW
|
|
|
20,427
|
|
|
|
18,711
|
|
|
|
|
53,194
|
|
|
|
50,186
|
|
Due from affiliates, net of due to affiliates
|
|
$
|
8,856
|
|
|
$
|
75,786
|
|
Amounts due from Sonatide
Amounts due from Sonatide (Due from affiliate in the consolidated balance sheets) at December 31, 2020 and December 31, 2019 of approximately $41.6 million and $89.2 million, respectively, represent cash received by Sonatide from customers and due to us, amounts due from customers that are expected to be remitted to us through Sonatide and costs incurred by us on behalf of Sonatide. The following table displays the activity in the due from affiliate account related to Sonatide for the periods indicated:
|
|
Year Ended December 31,
|
|
(In thousands)
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Due from Sonatide at beginning of year
|
|
$
|
89,246
|
|
|
$
|
109,176
|
|
|
$
|
230,315
|
|
Revenue earned by the company through Sonatide
|
|
|
44,254
|
|
|
|
52,372
|
|
|
|
56,916
|
|
Less amounts received from Sonatide
|
|
|
(36,160
|
)
|
|
|
(60,486
|
)
|
|
|
(76,878
|
)
|
Less amounts used to offset Due to Sonatide obligations (A)
|
|
|
(11,848
|
)
|
|
|
(10,551
|
)
|
|
|
(78,993
|
)
|
Less impairment of due from affiliate
|
|
|
(40,900
|
)
|
|
|
—
|
|
|
|
(20,083
|
)
|
Other
|
|
|
(2,969
|
)
|
|
|
(1,265
|
)
|
|
|
(2,101
|
)
|
|
|
$
|
41,623
|
|
|
$
|
89,246
|
|
|
$
|
109,176
|
|
|
(A)
|
We reduced the respective due from affiliates and due to affiliates balances each period through netting transactions based on agreement with the joint venture.
|
The obligation to us from Sonatide is denominated in U.S. dollars; however, the underlying third-party customer payments to Sonatide were satisfied, in part, in Angolan kwanzas. In late 2019, we were informed that, as part of a broad privatization program, Sonagal intends to seek to divest itself from Sonatide.
In the second quarter of 2020 Sonatide declared a $35.0 million dividend. On June 22, 2020, Sonangol received $17.8 million and we received $17.2 million. Our share of the dividend is reflected as dividend income from unconsolidated company in the consolidated statement of operations because (i) our investment in Sonatide had previously been written down to zero, (ii) the distributions are not refundable and (iii) we are not liable for the obligations of or committed to provide financial support to Sonatide. In addition, as a result of the aforementioned dividend payment, the cash balances of the joint venture were significantly reduced and we determined that, as a result, a significant portion of our net due from Sonatide balance was compromised.
Sonatide had approximately $9.4 million of cash on hand, including $1.6 million denominated in Angolan kwanzas at December 31, 2020 plus approximately $9.8 million of net trade accounts receivable, providing approximately $19.2 million of current assets to satisfy the net due from Sonatide. Given prior discussions with our partner regarding how the net losses from the devaluation of certain Angolan kwanza denominated accounts should be shared, we continue to evaluate our net due from Sonatide balance for potential impairment based on available liquidity held by Sonatide. We determined that a portion of our net due from balance was compromised and in December 2018 we recorded an approximate $20.0 million asset impairment charge. During the year ended December 31, 2020, we recorded a $40.9 million affiliate credit loss impairment expense. We will continue to monitor the net due from Sonatide balance for possible additional impairment in future periods.
Amounts due to Sonatide
Amounts due to Sonatide (Due to affiliate in the consolidated balance sheets) at December 31, 2020 and 2019 of approximately $32.8 million and $31.5 million, respectively, primarily represents commissions payable and other costs paid by Sonatide on our behalf. The following table displays the activity in the due to affiliate account related to Sonatide for the periods indicated:
|
|
Year Ended December 31,
|
|
(In thousands)
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Due to Sonatide at beginning of year
|
|
$
|
31,475
|
|
|
$
|
29,347
|
|
|
$
|
99,448
|
|
Plus commissions payable to Sonatide
|
|
|
4,152
|
|
|
|
4,937
|
|
|
|
5,502
|
|
Plus amounts paid by Sonatide on behalf of the company
|
|
|
9,037
|
|
|
|
9,654
|
|
|
|
14,778
|
|
Less commissions paid to Sonatide
|
|
|
—
|
|
|
|
(5,961
|
)
|
|
|
(13,906
|
)
|
Less amounts used to offset Due from Sonatide obligations (A)
|
|
|
(11,848
|
)
|
|
|
(10,551
|
)
|
|
|
(78,993
|
)
|
Other
|
|
|
(49
|
)
|
|
|
4,049
|
|
|
|
2,518
|
|
|
|
$
|
32,767
|
|
|
$
|
31,475
|
|
|
$
|
29,347
|
|
|
(A)
|
We reduced the respective due from affiliates and due to affiliates balances each period through netting transactions based on agreement with the joint venture.
|
Sonatide Operations
Sonatide’s principal earnings are from the commissions paid by us to the joint venture for company vessels chartered in to Angola. In addition, Sonatide owns two vessels that may generate operating income and cash flow.
Company operations in Angola
For the year ended December 31, 2020, our Angolan operation generated vessel revenues of approximately $45.3 million or 11.7% of our consolidated vessel revenues, from an average of approximately 23 company owned vessels that are marketed through Sonatide, 6 of which were stacked on average during the year ended December 31, 2020.
For the year ended December 31, 2019, our Angolan operation generated vessel revenues of approximately $52.1 million or 10.9% of our consolidated vessel revenues, from an average of approximately 32 company owned vessels that are marketed through Sonatide, 13 of which were stacked on average during the year ended December 31, 2019.
For the year ended December 31, 2018, our Angolan operations generated vessel revenues of approximately $59.0 million, or 15%, of our consolidated vessel revenue, from an average of approximately 37 company-owned vessels that are marketed through Sonatide, 16 of which were stacked on average during the year ended December 31, 2018.
Amounts due from DTDW
We own 40% of DTDW in Nigeria. Our partner, who owns 60%, is a Nigerian national. DTDW owns one offshore service vessel and has long term debt of $4.7 million which is secured by the vessel and guarantees from the DTDW partners. We also operate company owned vessels in Nigeria for which the joint venture receives a commission. As of December 31, 2020, we had no company owned vessels operating in Nigeria and the DTDW owned vessel was not employed. At the beginning of 2020 we had expected that we would be operating numerous vessels in Nigeria, but in the second quarter of 2020 the COVID-19 pandemic and resulting oil price reduction (further described in Note 8) caused our primary customer in Nigeria to eliminate all planned operations for 2020. As a result, the near-term cash flow projections indicate that DTDW does not have sufficient funds to meet its obligations to us or to the holder of its long-term debt. Therefore, we recorded affiliate credit loss impairment expense for the year ending December 31, 2020 totaling $12.1 million. In addition, based on our analysis we have determined that DTDW will be unable to pay its debt obligation and the debt will not be satisfied by liquidating the vessel and, as a result, we recorded additional impairment expense of $2.0 million for our expected share of the obligation guarantee during the year ended December 31, 2020.
Losses before income taxes derived from United States and non-U.S. operations are as follows:
|
|
Year Ended December 31,
|
|
(In thousands)
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Non-U.S.
|
|
$
|
(137,225
|
)
|
|
$
|
(44,205
|
)
|
|
$
|
(99,607
|
)
|
United States
|
|
|
(60,436
|
)
|
|
|
(69,290
|
)
|
|
|
(53,912
|
)
|
|
|
$
|
(197,661
|
)
|
|
$
|
(113,495
|
)
|
|
$
|
(153,519
|
)
|
Income tax expense (benefit) consists of the following:
|
|
U.S.
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Federal
|
|
|
State
|
|
|
Non-U.S.
|
|
|
Total
|
|
Year Ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
962
|
|
|
|
—
|
|
|
|
16,718
|
|
|
|
17,680
|
|
Deferred
|
|
|
531
|
|
|
|
250
|
|
|
|
(209
|
)
|
|
|
572
|
|
|
|
$
|
1,493
|
|
|
|
250
|
|
|
|
16,509
|
|
|
|
18,252
|
|
Year Ended December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
649
|
|
|
|
—
|
|
|
|
26,403
|
|
|
|
27,052
|
|
Deferred
|
|
|
672
|
|
|
|
—
|
|
|
|
—
|
|
|
|
672
|
|
|
|
$
|
1,321
|
|
|
|
—
|
|
|
|
26,403
|
|
|
|
27,724
|
|
Year Ended December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
(21,005
|
)
|
|
|
—
|
|
|
|
18,816
|
|
|
|
(2,189
|
)
|
Deferred
|
|
|
(30
|
)
|
|
|
—
|
|
|
|
1,254
|
|
|
|
1,224
|
|
|
|
$
|
(21,035
|
)
|
|
|
—
|
|
|
|
20,070
|
|
|
|
(965
|
)
|
The actual income tax expense above differs from the amounts computed by applying the U.S. federal statutory tax rate of 21% to pre-tax earnings as a result of the following:
|
|
Year Ended December 31,
|
|
(In thousands)
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Computed “expected” tax benefit
|
|
$
|
(41,509
|
)
|
|
$
|
(23,834
|
)
|
|
|
(32,239
|
)
|
Increase (reduction) resulting from:
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign income taxed at different rates
|
|
|
27,639
|
|
|
|
9,283
|
|
|
|
20,917
|
|
Uncertain tax positions
|
|
|
(62,833
|
)
|
|
|
5,145
|
|
|
|
2,264
|
|
Nondeductible transaction costs
|
|
|
—
|
|
|
|
—
|
|
|
|
1,091
|
|
Valuation allowance – deferred tax assets
|
|
|
43,455
|
|
|
|
15,707
|
|
|
|
38,778
|
|
Valuation allowance -deferred tax true-up
|
|
|
(6,523
|
)
|
|
|
—
|
|
|
|
—
|
|
Deferred tax true-up
|
|
|
6,523
|
|
|
|
—
|
|
|
|
—
|
|
Foreign taxes
|
|
|
12,520
|
|
|
|
20,778
|
|
|
|
13,012
|
|
State taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
246
|
|
Return to accrual
|
|
|
11,401
|
|
|
|
(2,247
|
)
|
|
|
(28,176
|
)
|
162(m) - Executive compensation
|
|
|
286
|
|
|
|
28
|
|
|
|
2,818
|
|
Subpart F income
|
|
|
5,631
|
|
|
|
1,227
|
|
|
|
—
|
|
Other, net
|
|
|
2,445
|
|
|
|
1,637
|
|
|
|
(459
|
)
|
|
|
$
|
(965
|
)
|
|
$
|
27,724
|
|
|
|
18,252
|
|
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:
|
|
December 31,
|
|
|
December 31,
|
|
(In thousands)
|
|
2020
|
|
|
2019
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Accrued employee benefit plan costs
|
|
$
|
8,815
|
|
|
$
|
7,422
|
|
Stock based compensation
|
|
|
407
|
|
|
|
972
|
|
Net operating loss and tax credit carryforwards
|
|
|
148,699
|
|
|
|
99,281
|
|
Restructuring fees not currently deductible for tax purposes
|
|
|
1,415
|
|
|
|
2,264
|
|
Disallowed business interest expense carryforward
|
|
|
5,546
|
|
|
|
5,105
|
|
Other
|
|
|
2,518
|
|
|
|
3,380
|
|
Gross deferred tax assets
|
|
|
167,400
|
|
|
|
118,424
|
|
Less valuation allowance
|
|
|
(140,428
|
)
|
|
|
(103,496
|
)
|
Net deferred tax assets
|
|
|
26,972
|
|
|
|
14,928
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
(25,883
|
)
|
|
|
(11,246
|
)
|
Outside basis difference deferred tax liability
|
|
|
(2,891
|
)
|
|
|
(2,892
|
)
|
Foreign interest withholding tax
|
|
|
(859
|
)
|
|
|
—
|
|
Other
|
|
|
(754
|
)
|
|
|
(2,981
|
)
|
Gross deferred tax liabilities
|
|
|
(30,387
|
)
|
|
|
(17,119
|
)
|
Net deferred tax assets (liabilities)
|
|
$
|
(3,415
|
)
|
|
$
|
(2,191
|
)
|
On November 15, 2018 we completed a series of mergers through which all of the shares of GulfMark Offshore, Inc. were acquired. The merger transactions qualified as tax free reorganization under Internal Revenue Code (IRC) Section 368(a), resulting in a carryover of tax basis in the assets and liabilities of GulfMark. Tidewater recorded net deferred liabilities of $1.0 million after valuation allowance in the opening balance sheet of GulfMark.
On March 27, 2020, the United States enacted the CARES Act, which made changes to existing U.S. tax laws, including, but not limited to, (1) allowing U.S. federal net operating losses originated in the 2018, 2019 or 2020 tax years to be carried back five years to recover taxes paid based upon taxable income in the prior five years, (2) eliminated the 80% of taxable income limitation on net operating losses for the 2018, 2019 and 2020 tax years (the 80% limitation will be reinstated for tax years after 2020), (3) accelerating the refund of prior year alternative minimum tax credits, and (4) modifying the limitation on deductible interest expense. Considering the available carryback, we have recorded a tax benefit of $6.9 million related to the realization of net operating loss deferred tax assets on which a valuation allowance was previously recorded. The change in the deductible interest limitation from 30% to 50% has led to an additional interest expense deduction of $6.0 million in the current year.
As of December 31, 2020, the Company had U.S. federal net operating loss carryforwards of $320.7 million, which includes $159.3 million of net operating losses subject to an IRC Section 382 limitation. As of December 31, 2019, the Company had $300.0 million of U.S. federal net operating losses, which includes $145.9 million of net operating losses subject to an IRC Section 382 limitation. We have $387.4 million foreign tax credits as of December 31, 2020. We have foreign net operating loss carryforwards of $110.9 million that will expire beginning in 2026 with many having indefinite carryforward periods.
IRC Sections 382 and 383 provide an annual limitation with respect to the ability of a corporation to utilize its tax attributes, as well as certain built-in-losses, against future U.S. taxable income in the event of a change in ownership. Our emergence from Chapter 11 bankruptcy proceedings in 2017 is considered a change in ownership for purposes of IRC Section 382. The Company’s annual limitation under the IRC is approximately $15.0 million which is based on our value as of the ownership change date. In addition, the merger with GulfMark resulted in a change in ownership of GulfMark for purposes of IRC Section 382. The GulfMark ownership change results in an annual limitation of approximately $7.0 million on GulfMark’s tax attributes generated prior to the ownership change date, which begin to expire in 2032. The Company has recorded a valuation allowance on the net operating loss balance as it believes that it is more likely than not that the deferred tax asset will not be realized.
Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit the use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated were the cumulative losses for financial reporting purposes that were incurred over the three-year periods ended December 31, 2020. Such objective negative 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, for the period ended December 31, 2020, a valuation allowance of $140.4 million was recorded against our net deferred tax asset. For the period ended December 31, 2019, a valuation allowance of $103.5 million was recorded against our net deferred tax asset. The increase in the valuation allowance was primarily attributable to the additional valuation allowance on foreign tax credits that were previously reduced by uncertain tax positions which were released by a statute of limitation expiration. The amount of the deferred tax asset considered realizable 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.
We have not recognized a U.S. deferred tax liability associated with temporary differences related to investments in our non-U.S. holding companies as the Company does not intend to dispose of the stock of these companies. These differences relate primarily to stock basis differences attributable to factors other than earnings, given that any untaxed cumulative earnings were subject to taxation in the U.S. in 2017 in accordance with the Tax Act. Further, any post-2017 earnings of these subsidiaries will either be taxed currently for U.S. purposes or will be permanently exempt from U.S. taxation. It is not practicable to estimate the deferred tax liability associated with temporary differences related to investments in our non-U.S. holding companies due to the legal structure and complexity of U.S. and non-U.S. tax laws.
Historically, it has been the practice and intention of the Company to indefinitely reinvest the earnings of its non-U.S. subsidiaries. In light of the significant changes made by the Tax Act, the Company will no longer be indefinitely reinvested with regards to its non-U.S. earnings which can be repatriated free of taxation. However, the Company is indefinitely reinvested in the non-U.S. earnings that could be subject to taxation and no deferred taxes have been provided. As of December 31, 2020, the non-U.S. positive unremitted earnings, for which the Company is indefinitely reinvested, are $140.8 million. It is not practicable for the Company to estimate the amount of taxes on positive unremitted earnings due to the legal structure and complexity of non-U.S. tax laws. The Company decides each period whether to indefinitely reinvest these earnings. If, as a result of these reassessments, the Company distributes these earnings in the future, additional tax liabilities could result.
We record uncertain tax positions 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. The recognition and measurement of tax liabilities for uncertain tax positions in any tax jurisdiction requires the interpretation of the related tax laws and regulations as well as the use of estimates and assumptions regarding significant future events. 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 during any given year.
Our balance sheet reflects the following in accordance with ASC 740:
|
|
December 31,
|
|
|
December 31,
|
|
(In thousands)
|
|
2020
|
|
|
2019
|
|
Tax liabilities for uncertain tax positions
|
|
$
|
35,304
|
|
|
$
|
48,577
|
|
Income tax payable
|
|
|
15,928
|
|
|
|
13,760
|
|
Income tax receivable
|
|
|
8,280
|
|
|
|
3,798
|
|
Included in the liability balances for uncertain tax positions above for the periods ending December 31, 2020 and 2019, are $22.1 million and $24.8 million of penalties and interest, respectively. Penalties and interest related to income tax liabilities are included in income tax expense. Income tax payable is included in other current liabilities.
A reconciliation of the beginning and ending amount of all unrecognized tax benefits, and the liability for uncertain tax positions (but excluding related penalties and interest) are as follows:
(In thousands)
|
|
|
|
|
Balance at December 31, 2017
|
|
$
|
404,571
|
|
Additions from GulfMark business combination
|
|
|
8,857
|
|
Additions based on tax positions related to a prior year
|
|
|
6,903
|
|
Settlement and lapse of statute of limitations
|
|
|
(2,953
|
)
|
Reductions based on tax positions related to a prior year
|
|
|
(18,086
|
)
|
Balance at December 31, 2018 (A)
|
|
$
|
399,292
|
|
Additions based on tax positions related to the current year
|
|
|
14,741
|
|
Additions based on tax positions related to a prior year
|
|
|
1,964
|
|
Settlement and lapse of statute of limitations
|
|
|
(1,897
|
)
|
Reductions based on tax positions related to a prior year
|
|
|
(58
|
)
|
Balance at December 31, 2019 (A)
|
|
$
|
414,042
|
|
Additions based on tax positions related to a prior year
|
|
|
2,223
|
|
Settlement and lapse of statute of limitations
|
|
|
(64,458
|
)
|
Reductions based on tax positions related to a prior year
|
|
|
(760
|
)
|
Balance at December 31, 2020 (A)
|
|
$
|
351,047
|
|
|
(A)
|
The gross balance reported as uncertain tax positions is largely offset by $337.9 million of foreign tax credits and other tax attributes.
|
It is reasonably possible that a decrease of $5.9 million in unrecognized tax benefits may be necessary within the coming year due to the lapse of statutes of limitations or audit settlements.
The amount of unrecognized tax benefits that, if recognized for tax purposes, would affect the effective tax rate are $35.3 million and $48.6 million as of December 31, 2020 and December 31, 2019 respectively.
With limited exceptions, we are no longer subject to tax audits by U.S. federal, state, local or foreign taxing authorities for fiscal years prior to March 2015. In October 2019, the Company received notification from the Internal Revenue Service (“IRS”) that the Company’s U.S. income tax return ended March 31, 2017 and December 31, 2017 was selected for examination. In March 2020, the IRS notified management that the IRS will not proceed with the audit examination for the tax years ended March 31, 2017 and December 31, 2017. In October 2020, the Company received notification from the IRS that the GulfMark U.S. income tax return ending December 31, 2017 was selected for examination. We have ongoing examinations by various foreign tax authorities and do not believe that the results of these examinations will have a material adverse effect on our financial position or results of operations.
The Tax Act
The Tax Act was enacted on December 22, 2017 and introduced significant changes to U.S. income tax law, including a reduction in the statutory income tax rate from 35% to 21% effective January 1, 2018, a one-time transition tax on deemed repatriation of deferred foreign income, a base erosion anti-abuse tax (“BEAT”) that effectively imposes a minimum tax on certain payments to non-U.S. affiliates, new and revised rules relating to the current taxation of certain income of foreign subsidiaries under the global intangible low-tax income (“GILTI”) regime, changes to net operating loss carryforwards, immediate expensing for capital expenditures, and revised rules associated with limitations on the deduction of interest.
We finalized our calculations of the transition tax liability resulting from the Tax Act enacted on December 22, 2017 during 2018 and determined that we had no remaining earnings and profits to recognize as a one-time transition tax.
The Tax Act subjects a US shareholder to tax on GILTI earned by certain foreign subsidiaries. We have made an accounting policy election to account for GILTI in the year the tax is incurred. Due to current year losses, no GILTI was recognized for the years ending December 31, 2020, 2019 or 2018.
The BEAT provisions in the Tax Act eliminate the deduction of certain base-erosion payments made to related foreign corporations beginning in 2018, and impose a minimum tax if greater than regular tax. The BEAT did not have a material impact on our provision for income tax.
(7) LEASES
We have operating leases primarily for office space, temporary residences, automobiles and office equipment. Contracts containing assets that we benefit from and control are recognized on our balance sheet. Leases with an initial term of 12 months or less are not recorded on the balance sheet. We recognized lease expense for these leases on a straight-line basis over the lease term. We combine the lease and non-lease components for all of our lease agreements.
Certain leases include one or more options to renew, with renewal terms that can extend the lease term from one to ten years. The exercise of lease renewal options is at our sole discretion, and lease renewal options are not included in our lease terms if they are not reasonably certain to be exercised. Our lease agreements do not contain any residual value guarantees or restrictive covenants or options to purchase the leased property. The amount of right of use assets and lease liabilities recorded on our Consolidated Balance Sheet at December 31, 2020 and 2019, respectively, are as follows.
Leases (In thousands)
|
Classification
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Operating
|
Other assets
|
|
$
|
3,372
|
|
|
$
|
4,338
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
Operating
|
Other current liabilities
|
|
|
1,134
|
|
|
|
501
|
|
Noncurrent
|
|
|
|
|
|
|
|
|
|
Operating
|
Other liabilities
|
|
|
2,668
|
|
|
|
4,274
|
|
Total lease liabilities
|
|
$
|
3,802
|
|
|
$
|
4,775
|
|
Future payments to be made on our operating lease liabilities at December 31, 2020 will be as follows.
Maturity of lease liabilities (In thousands)
|
|
Operating leases
|
|
2021
|
|
$
|
1,318
|
|
2022
|
|
|
1,094
|
|
2023
|
|
|
717
|
|
2024
|
|
|
273
|
|
2025
|
|
|
273
|
|
After 2025
|
|
|
547
|
|
Total lease payments
|
|
$
|
4,222
|
|
Less: Interest
|
|
|
(420
|
)
|
Present value of lease liabilities
|
|
$
|
3,802
|
|
As most of our leases do not provide an implicit interest rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments.
We used the incremental borrowing rate on January 1, 2019 for operating leases that began prior to that date.
Lease costs included in general and administrative expense for the two years ended December 31, 2020 and 2019, respectively, is as follows.
|
|
|
Year Ended
|
|
|
Year Ended
|
|
Lease costs (In thousands)
|
Classification
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
Operating lease costs
|
General and administrative
|
|
|
1,270
|
|
|
|
1,336
|
|
Short-term leases
|
General and administrative
|
|
|
3,483
|
|
|
|
4,840
|
|
Variable lease costs
|
General and administrative
|
|
|
392
|
|
|
|
313
|
|
Sublease income
|
General and administrative
|
|
|
—
|
|
|
|
(3
|
)
|
Net lease cost
|
|
|
5,145
|
|
|
|
6,486
|
|
Our weighted average remaining lease term and weighted average discount rate at December 31, 2020 is as follows.
Lease term and discount rate
|
|
December 31, 2020
|
|
Weighted average remaining lease term in years
|
|
|
3.1
|
|
Weighted average discount rate
|
|
|
7.3
|
%
|
The cash paid for operating leases included in operating cash flows and in the measurement of lease liabilities for the years ended December 31, 2020 and 2019 was $1.0 million and $1.4 million, respectively. Right-of-use assets obtained in exchange for operating lease obligations were $0.3 million and $0.8 million, for the years ended December 31, 2020 and 2019, respectively.
(8)
|
ASSETS HELD FOR SALE, ASSET SALES AND ASSET IMPAIIMENTS
|
In previous years, we sought opportunities to dispose of our older vessels when market conditions warranted and opportunities would arise. As a result, vessel dispositions would vary from year to year, and gains (losses) on sales of assets would also fluctuate significantly from period to period. The majority of our vessels were sold to buyers with whom we do not compete in the offshore energy industry. We continue to employ that strategy, but to a lesser extent. In the fourth quarter of 2019, we made a strategic decision to reduce the size of our fleet and to remove assets that were not considered to be part of our long-term plans. As a result, we evaluated our fleet for vessels to be considered for disposal and identified 46 (approximately 20% of our total vessels at the time) vessels to be classified as held for sale. Beginning late in the first quarter of 2020, the industry and world economies were affected by a global pandemic and a concurrent reduction in the demand for and the price of crude oil (see discussion below in this Note 8). The pandemic and oil price impact severely affected the oil and gas industry and caused us to expand our disposal program to include more vessels. In the second and fourth quarters of 2020, we added 32 vessels to our assets held for sale. During 2020, we sold a total of 53 of the vessels that were classified as held for sale, moved two vessels back into our active fleet and have 23 vessels remaining in the held for sale account as of December 31, 2020. See the following tables for additions and dispositions related to assets held for sale as well as net gains on sales of vessels and impairments recorded when the assets were valued at net realizable value upon classification as held for sale.
77
Following is the activity in assets held for sale during the years ended December 31:
(Dollars in thousands)
|
|
|
Number of Vessels
|
|
|
|
2020
|
|
|
|
Number of Vessels
|
|
|
|
2019
|
|
|
|
Number of Vessels
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
|
46
|
|
|
$
|
39,287
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
Additions
|
|
|
32
|
|
|
|
97,664
|
|
|
|
46
|
|
|
|
66,033
|
|
|
|
—
|
|
|
|
—
|
|
Sales
|
|
|
(53
|
)
|
|
|
(26,877
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Reactivation
|
|
|
(2
|
)
|
|
|
(500
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Impairment
|
|
|
—
|
|
|
|
(75,177
|
)
|
|
|
—
|
|
|
|
(26,746
|
)
|
|
|
—
|
|
|
|
—
|
|
Ending balance
|
|
|
23
|
|
|
$
|
34,397
|
|
|
|
46
|
|
|
$
|
39,287
|
|
|
|
—
|
|
|
$
|
—
|
|
Following is the summary of vessel sales and the gains on sales of vessels for the years ended December 31:
(Dollars in thousands)
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessels sold from active fleet
|
|
|
3
|
|
|
|
40
|
|
|
|
38
|
|
Gain on sale of active vessels, net
|
|
$
|
1,217
|
|
|
$
|
2,434
|
|
|
$
|
10,935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessels sold from assets held for sale
|
|
|
53
|
|
|
|
—
|
|
|
|
—
|
|
Gain on vessels sold from assets held for sale, net
|
|
$
|
6,384
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Total vessels sold
|
|
|
56
|
|
|
|
40
|
|
|
|
38
|
|
Total gain on sales of vessels, net
|
|
$
|
7,601
|
|
|
$
|
2,434
|
|
|
$
|
10,935
|
|
During the year December 31, 2020, we recorded $75.2 million in impairment related to our assets held for sale. We consider the valuation approach for our assets held for sale to be a Level 3 fair value measurement due to the level of estimation involved in valuing assets to be recycled or sold. We determined the fair value of the vessels held for sale using two methodologies depending on the vessel and on our planned method of disposition. We designated certain vessels to be recycled and valued those vessels using recycling yard pricing schedules based on dollars per ton. We generally value vessels that will be sold rather than recycled at the midpoint of a value range based on sales agreements or using comparative sales in the marketplace. We do not separate our asset impairment expense by segment because of the significant movement of our assets between segments.
In conjunction with our review of conditions that would indicate potential impairment in the value of our assets, we identified certain obsolete marine service and vessel supplies and parts inventory and charged $2.9 million and $5.2 million, respectively, of impairment expense for the years ended December 31, 2020 and 2019. We considered this valuation approach to be a Level 3 fair value measurement due to the level of estimation involved in valuing obsolete inventory.
In 2011, we contracted with a Brazilian shipyard to construct a vessel that was not completed. We initiated arbitration proceedings seeking completion of the hull or rescission of the contract and the return of funds. In response, the shipyard initiated a separate lawsuit seeking the amounts due under the contract. As of the fresh-start date, we recorded $1.8 million in other assets which represented the unimpaired balance of the construction costs that were expected to be returned to us once the dispute was resolved. During 2019, our final appeal was denied and the case was remanded back to the original courts. Our local counsel informed us that it was now more likely that not that the shipyard would prevail in the dispute and that we would be liable for the additional payment of $4.0 million. As a result, a $5.8 million expense was recorded in the fourth quarter of 2019. In 2020 the dispute with the shipyard was settled. We conveyed the ownership of the partially completed vessel to the shipyard in exchange for a release of any and all obligations under the contract with the shipyard. Accordingly, a $4.0 million credit was recorded in the fourth quarter of 2020, as no additional amounts are payable under the contract to the shipyard.
Impairments incurred during the last three years are primarily the result of our customers' reduction in offshore exploration and production expenditures caused by the ongoing and sustained low levels of crude oil and natural gas prices as well as our efforts to reduce the oversupply of vessels which currently exists in the offshore supply vessel market through the sale and recycling of vessels.
Following is a summary of impairment of vessels in our active fleet, assets held for sale, marine service and vessel supplies and other impairment and costs during the years ended December 31:
(Dollars in thousands)
|
|
|
Number of Vessels
|
|
|
|
2020
|
|
|
|
Number of Vessels
|
|
|
|
2019
|
|
|
|
Number of Vessels
|
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active vessels
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
56
|
|
|
$
|
61,132
|
|
Assets held for sale
|
|
|
47
|
|
|
|
75,177
|
|
|
|
35
|
|
|
|
26,746
|
|
|
|
—
|
|
|
|
—
|
|
Obsolete inventory
|
|
|
—
|
|
|
|
2,959
|
|
|
|
—
|
|
|
|
5,223
|
|
|
|
—
|
|
|
|
—
|
|
Other
|
|
|
—
|
|
|
|
(4,027
|
)
|
|
|
—
|
|
|
|
5,804
|
|
|
|
—
|
|
|
|
—
|
|
Total impairment and other expense
|
|
|
|
|
|
$
|
74,109
|
|
|
|
|
|
|
$
|
37,773
|
|
|
|
|
|
|
$
|
61,132
|
|
In early 2020, it became evident that a novel coronavirus originating in Asia (COVID-19) could become a pandemic with worldwide reach. By mid- March, when the World Health Organization declared the outbreak to be a pandemic (the COVID-19 pandemic), much of the industrialized world had initiated severe measures to lessen its impact. The ongoing COVID-19 pandemic created significant volatility, uncertainty, and economic disruption during the first quarter of 2020. With respect to our particular sector, the COVID-19 pandemic resulted in a much lower demand for oil as national, regional, and local governments imposed travel restrictions, border closings, restrictions on public gatherings, stay at home orders, and limitations on business operations in order to contain its spread. During this same time period, oil-producing countries struggled to reach consensus on worldwide production levels, resulting in both a market oversupply of oil and a precipitous fall in oil prices. Combined, these conditions adversely affected our operations and business beginning in the latter part of the first quarter of 2020 and continuing throughout the remainder of the year. The reduction in demand for hydrocarbons together with an unprecedented decline in the price of oil has resulted in our primary customers, the oil and gas companies, making material reductions to their planned spending on offshore projects, compounding the effect of the virus on offshore operations. Further, these conditions, separately or together, are expected to continue to impact the demand for our services, the utilization and/or rates we can achieve for our assets and services, and the outlook for our industry in general.
In the first and second quarters of 2020, we considered these events to be indicators that the value of our active offshore vessel fleet may be impaired. As a result, as of March 31, 2020 and June 30, 2020 , we performed Step 1 evaluations of our active offshore fleet under FASB Accounting Standards Codification 360, which governs the methodology for identifying and recording impairment of long-lived assets to determine if any of our asset groups have net book value in excess of undiscounted future net cash flows. Our evaluations did not indicate impairment of any of our asset groups. During the third quarter conditions related to the pandemic and oil price environment did not worsen from the second quarter and in the fourth quarter industry conditions marginally improved compared with the third quarter. As a result, we did not identify additional events or conditions that would require us to perform a Step 1 evaluation during either quarter. We will continue to monitor the expected future cash flows and the fair market value of our asset groups for impairment.
Please refer to Note (1) for a discussion of our accounting policy for accounting for the impairment of long-lived assets.
(9)
|
EMPLOYEE RETIREMENT PLANS
|
Defined Benefit Pension Plan
We have a defined benefit pension plan (pension plan) that covers certain U.S. employees that are citizens or permanent residents of the United States. Benefits are based on years of service and employee compensation. On December 31, 2010, the pension plan was frozen and accrual of benefits was discontinued. We contributed $1.1 million to the plan during the year ended December 31, 2019. We did not contribute to the plan during the years ended December 31, 2020 and 2018, respectively. We may contribute to this plan in 2021, but the amount, if any, has not been determined.
We had defined benefit pension plans that covered a small number of current and former Norwegian employees. Benefits were based on years of service and employee compensation. All of our Norwegian plan participants were transferred from our defined benefit plans primarily into a defined contribution plan during 2020. Amounts contributed to these defined benefit plans were immaterial during the three years ended December 31, 2020.
Supplemental Executive Retirement Plan
We also offer a non-contributory, defined benefit supplemental executive retirement plan (supplemental plan) that provides pension benefits to certain employees in excess of those allowed under our tax-qualified pension plan. The supplemental plan was closed to new participation in 2010 and was amended to freeze all previously accrued pension benefits and discontinue the accrual of future benefits and any other contributions effective January 1, 2018. We contributed $1.6 million, $3.2 million and $0.9 million during the years ended December 31, 2020, 2019 and 2018, respectively. Any future accrual of benefits under the supplemental plan or other contributions to the supplemental plan will be determined at our sole discretion.
A Rabbi Trust was established to provide us with a vehicle to invest in a variety of marketable securities. In April 2018, a lump sum distribution of $8.9 million was paid to our retiring President and Chief Executive Officer in settlement of his supplemental executive retirement plan obligation, resulting in a settlement loss of $0.3 million. This distribution was funded by substantially all of the investments held by the Rabbi Trust which was liquidated in 2019.
Postretirement Benefit Plan
Qualified retired employees were covered by a program which provided limited health care and life insurance benefits. This plan terminated on January 1, 2019 resulting in a gain of $4.0 million that we recorded in the year ended December 31, 2018. Costs of the program were based on actuarially determined amounts and were accrued over the period from the date of hire to the full eligibility date of employees who were expected to qualify for these benefits. This plan was funded as benefits were paid.
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. We are obligated to adequately fund the trust. For the pension plan assets, we have the following primary investment objectives: (1) closely match the cash flows from the plan’s investments from interest payments and maturities with the long-term financial obligations from the plan’s liabilities; and (2) enhance the plan’s investment returns without taking on undue risk by industries, maturities or geographies of the underlying investment holdings.
The plan has historically invested in a fixed income only strategy, however because interest rates are forecasted by the United States (U.S.) Federal Reserve to remain low through 2023, it was determined in 2020 that the portfolio should be more broadly diversified. The pension plan’s current target rate of return is 150 basis points above the simple average of the Bloomberg Barclays US Aggregate Bond Index return and the total return of the S&P 500 including dividends.
The fixed income portion of the pension plan investment portfolio will be approximately 50% and is comprised primarily of US Government bonds. The remainder of the portfolio will include a well-diversified structure that will include a wide array of asset classes comprised of domestic equities with a small percentage allocated to foreign markets. Alternative investments are allowed but may not exceed 25% of the market value of the portfolio. Illiquid equity holdings, private placements or restricted equities are not permissible investments for the plan.
The cash flow requirements of the pension plan are analyzed at least annually. The plan does not invest in Tidewater stock.
Our 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 pension plan assets are periodically evaluated for concentration risks. As of December 31, 2020, we did not have any individual asset investments that comprised 10% or more of each plan’s overall assets.
U.S. Pension Plan Asset Allocations
The following table provides the target and actual asset allocations for the pension plan:
|
|
|
|
|
|
Actual as of
|
|
|
Actual as of
|
|
|
|
Target
|
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
U.S. Pension plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
—
|
%
|
|
|
3
|
%
|
|
|
—
|
%
|
Debt securities
|
|
|
50
|
%
|
|
|
53
|
%
|
|
|
96
|
%
|
Equity securities
|
|
|
50
|
%
|
|
|
44
|
%
|
|
|
4
|
%
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
Fair Value of Pension Plans 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 following table provides the fair value hierarchy for our domestic pension plan measured at fair value as of December 31, 2020:
|
|
|
|
|
|
Quoted prices in
|
|
|
Significant
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
|
|
active
|
|
|
observable
|
|
|
unobservable
|
|
|
Measured at
|
|
|
|
|
|
|
|
markets
|
|
|
inputs
|
|
|
inputs
|
|
|
Net Asset
|
|
(In thousands)
|
|
Fair Value
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Value
|
|
Pension plan measured at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities, primarily exchange traded funds
|
|
$
|
24,947
|
|
|
|
21,780
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,167
|
|
Debt securities, primarily exchange traded funds
|
|
|
29,922
|
|
|
|
17,925
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11,997
|
|
Cash and cash equivalents
|
|
|
1,626
|
|
|
|
—
|
|
|
|
1,626
|
|
|
|
—
|
|
|
|
—
|
|
Total fair value of plan assets
|
|
$
|
56,495
|
|
|
|
39,705
|
|
|
|
1,626
|
|
|
|
—
|
|
|
|
15,164
|
|
The fair value hierarchy for the pension plans assets measured at fair value as of December 31, 2019, are as follows:
|
|
|
|
|
|
Quoted prices in
|
|
|
Significant
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
|
|
active
|
|
|
observable
|
|
|
unobservable
|
|
|
Measured at
|
|
|
|
|
|
|
|
markets
|
|
|
inputs
|
|
|
inputs
|
|
|
Net Asset
|
|
(In thousands)
|
|
Fair Value
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Value
|
|
Pension plan measured at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities:
|
|
$
|
699
|
|
|
|
699
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government securities
|
|
|
5,870
|
|
|
|
5,870
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Collateralized mortgage securities
|
|
|
765
|
|
|
|
—
|
|
|
|
765
|
|
|
|
—
|
|
|
|
—
|
|
Corporate debt securities
|
|
|
47,839
|
|
|
|
—
|
|
|
|
47,839
|
|
|
|
—
|
|
|
|
—
|
|
Cash and cash equivalents
|
|
|
2,526
|
|
|
|
—
|
|
|
|
2,526
|
|
|
|
—
|
|
|
|
—
|
|
Other
|
|
|
1,396
|
|
|
|
—
|
|
|
|
1,396
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
59,095
|
|
|
|
6,569
|
|
|
|
52,526
|
|
|
|
—
|
|
|
|
—
|
|
Accrued income
|
|
|
530
|
|
|
|
530
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total fair value of plan assets
|
|
$
|
59,625
|
|
|
|
7,099
|
|
|
|
52,526
|
|
|
|
—
|
|
|
|
—
|
|
Plan Assets and Obligations
Changes in combined plan assets and obligations and the funded status of the U.S. defined benefit pension plan, Norway’s defined benefit pension plan (discontinued in the fourth quarter of 2020), and the supplemental plan (Pension Benefits) and the postretirement health care and life insurance plan (Other Benefits), which was discontinued as of January 1, 2019, are as follows:
|
|
Year Ended December 31,
|
|
(In thousands)
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of the period
|
|
$
|
91,654
|
|
|
$
|
90,247
|
|
|
$
|
103,443
|
|
Increase in benefit obligation due to business combination
|
|
|
—
|
|
|
|
—
|
|
|
|
5,474
|
|
Service cost
|
|
|
112
|
|
|
|
427
|
|
|
|
294
|
|
Interest cost
|
|
|
2,907
|
|
|
|
3,751
|
|
|
|
3,605
|
|
Benefits paid
|
|
|
(5,990
|
)
|
|
|
(5,967
|
)
|
|
|
(5,467
|
)
|
Actuarial (gain) loss (A)
|
|
|
5,277
|
|
|
|
8,198
|
|
|
|
(8,105
|
)
|
Settlement
|
|
|
(4,407
|
)
|
|
|
(4,978
|
)
|
|
|
(8,885
|
)
|
Foreign currency exchange rate changes
|
|
|
(593
|
)
|
|
|
(24
|
)
|
|
|
(112
|
)
|
Benefit obligation at end of the period
|
|
$
|
88,960
|
|
|
$
|
91,654
|
|
|
$
|
90,247
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of the period
|
|
$
|
59,625
|
|
|
$
|
56,790
|
|
|
$
|
57,536
|
|
Increase in plan assets due to business combination
|
|
|
—
|
|
|
|
—
|
|
|
|
5,463
|
|
Actual return
|
|
|
6,890
|
|
|
|
7,498
|
|
|
|
(2,128
|
)
|
Expected return
|
|
|
—
|
|
|
|
—
|
|
|
|
112
|
|
Actuarial loss
|
|
|
18
|
|
|
|
983
|
|
|
|
(275
|
)
|
Administrative expenses
|
|
|
(49
|
)
|
|
|
(68
|
)
|
|
|
(36
|
)
|
Employer contributions
|
|
|
1,615
|
|
|
|
5,027
|
|
|
|
10,546
|
|
Benefits paid
|
|
|
(5,990
|
)
|
|
|
(5,967
|
)
|
|
|
(5,467
|
)
|
Settlement
|
|
|
(5,000
|
)
|
|
|
(4,638
|
)
|
|
|
(8,885
|
)
|
Foreign currency exchange rate changes
|
|
|
(614
|
)
|
|
|
—
|
|
|
|
(76
|
)
|
Fair value of plan assets at end of the period
|
|
|
56,495
|
|
|
|
59,625
|
|
|
|
56,790
|
|
Payroll tax unrecognized in benefit obligation at end of the period
|
|
|
—
|
|
|
|
—
|
|
|
|
84
|
|
Unfunded status at end of the period
|
|
$
|
(32,465
|
)
|
|
$
|
(32,029
|
)
|
|
$
|
(33,541
|
)
|
Net amount recognized in the balance sheet consists of:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
(1,524
|
)
|
|
$
|
(1,422
|
)
|
|
$
|
(1,380
|
)
|
Noncurrent liabilities
|
|
|
(30,941
|
)
|
|
|
(30,607
|
)
|
|
|
(32,161
|
)
|
Net amount recognized
|
|
$
|
(32,465
|
)
|
|
$
|
(32,029
|
)
|
|
$
|
(33,541
|
)
|
(A) The change in the actuarial (gain) loss for the three years ended December 31, 2020 was primarily attributable to changes in the discount rate.
|
|
|
Other Benefits
|
|
|
|
Year Ended
|
|
(In thousands)
|
|
December 31, 2018
|
|
Change in benefit obligation:
|
|
|
|
|
Benefit obligation at beginning of the period
|
|
$
|
2,924
|
|
Service cost
|
|
|
61
|
|
Interest cost
|
|
|
117
|
|
Participant contributions
|
|
|
218
|
|
Plan amendment
|
|
|
(2,954
|
)
|
Benefits paid
|
|
|
(595
|
)
|
Actuarial loss
|
|
|
229
|
|
Benefit obligation at end of the period
|
|
$
|
—
|
|
Change in plan assets:
|
|
|
|
|
Fair value of plan assets at beginning of the period
|
|
$
|
—
|
|
Employer contributions
|
|
|
377
|
|
Participant contributions
|
|
|
218
|
|
Benefits paid
|
|
|
(595
|
)
|
Fair value of plan assets at end of the period
|
|
|
—
|
|
Unfunded status at end of the period
|
|
$
|
—
|
|
The following table provides combined information for pension plans with an accumulated benefit obligation in excess of plan assets (includes both the pension plans and supplemental plan):
|
|
December 31,
|
|
|
December 31,
|
|
(In thousands)
|
|
2020
|
|
|
2019
|
|
Projected benefit obligation
|
|
$
|
88,960
|
|
|
$
|
91,654
|
|
Accumulated benefit obligation
|
|
|
88,960
|
|
|
|
91,109
|
|
Fair value of plan assets
|
|
|
56,495
|
|
|
|
59,625
|
|
Net periodic combined benefit cost for the pension plans and the supplemental plan include the following components:
|
|
Year Ended December 31,
|
|
(In thousands)
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Service cost
|
|
$
|
109
|
|
|
$
|
427
|
|
|
|
294
|
|
Interest cost
|
|
|
2,907
|
|
|
|
3,751
|
|
|
|
3,605
|
|
Expected return on plan assets
|
|
|
(2,191
|
)
|
|
|
(2,375
|
)
|
|
|
(2,042
|
)
|
Administrational expenses
|
|
|
49
|
|
|
|
71
|
|
|
|
36
|
|
Payroll tax of net pension costs
|
|
|
14
|
|
|
|
55
|
|
|
|
42
|
|
Amortization of net actuarial losses
|
|
|
(5
|
)
|
|
|
(592
|
)
|
|
|
30
|
|
Recognized actuarial loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Settlement/Curtailment (gain) loss
|
|
|
738
|
|
|
|
(219
|
)
|
|
|
335
|
|
Net periodic pension cost
|
|
$
|
1,621
|
|
|
$
|
1,118
|
|
|
|
2,300
|
|
Net periodic benefit cost for the postretirement health care and life insurance plan, which was discontinued as of January 1, 2019, includes the following components:
|
|
Year Ended
|
|
(In thousands)
|
|
December 31, 2018
|
|
Service cost
|
|
$
|
61
|
|
Interest cost
|
|
|
117
|
|
Amortization of prior service cost
|
|
|
(299
|
)
|
Recognized actuarial loss
|
|
|
42
|
|
Net curtailment gain
|
|
|
(4,005
|
)
|
Net periodic postretirement benefit
|
|
$
|
(4,084
|
)
|
The components of the net periodic combined pension cost and the net periodic combined postretirement benefit, except for the service costs are included in the caption “Interest income and other, net.” Service costs are included in the caption “Vessel operating costs.”
Other changes in combined plan assets and benefit obligations recognized in other comprehensive (income) loss include the following components:
|
|
Pension Benefits
|
|
|
|
Year Ended December 31,
|
|
(In thousands)
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Net (gain) loss
|
|
$
|
(568
|
)
|
|
$
|
2,612
|
|
|
|
(3,441
|
)
|
Settlement recognized
|
|
|
—
|
|
|
|
(182
|
)
|
|
|
(335
|
)
|
Total recognized in other comprehensive (income) loss, before tax and net of tax
|
|
$
|
(568
|
)
|
|
$
|
2,430
|
|
|
|
(3,776
|
)
|
|
|
Other Benefits
|
|
|
|
Year
|
|
|
|
Ended
|
|
|
|
December 31,
|
|
(In thousands)
|
|
2018
|
|
Net (gain) loss
|
|
$
|
229
|
|
Amortization of prior service (cost) credit
|
|
|
1,861
|
|
Amortization of net (loss) gain
|
|
|
(554
|
)
|
Total recognized in other comprehensive (income) loss, before tax and net of tax
|
|
$
|
1,536
|
|
We do not expect to recognize any unrecognized actuarial (loss) gain or unrecognized prior service credit (cost) as a component of net periodic benefit costs during the next year.
Discount rates of 2.5% and 3.5% were used to determine net benefit obligations as of December 2020 and 2019, respectively.
Assumptions used to determine net periodic benefit costs are as follows:
|
|
Pension Benefits
|
|
|
|
2020
|
|
|
2019
|
|
Discount rate
|
|
|
3.5
|
%
|
|
|
4.5
|
%
|
Expected long-term rate of return on assets
|
|
|
4.0
|
%
|
|
|
4.0
|
%
|
Rates of annual increase in compensation levels
|
|
|
2.3
|
%
|
|
|
2.8
|
%
|
To develop the expected long-term rate of return on assets assumption, we 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 our qualified pension benefit obligations at December 31, 2020, we expect that combined benefits to be paid over the next ten years will be as follows:
|
|
Pension
|
|
Year ending December 31, (In thousands)
|
|
Benefits
|
|
2021
|
|
$
|
5,860
|
|
2022
|
|
|
5,833
|
|
2023
|
|
|
5,777
|
|
2024
|
|
|
5,762
|
|
2025
|
|
|
5,686
|
|
2026 – 2030
|
|
|
26,605
|
|
Total 10-year estimated future benefit payments
|
|
$
|
55,523
|
|
Defined Contribution Plans
We have two defined contribution plans described below.
Retirement Contributions
Prior to 2019, all eligible U.S. fleet personnel received retirement contributions. This benefit was noncontributory by the employee, but we contributed, in cash, 3% of an eligible employee’s compensation to a trust on behalf of the employees. Our contributions vested over five years. We ceased contributing to the employee retirement plan effective January 1, 2018. Any future employer contributions to this plan will be determined at our discretion.
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. Prior to January 1, 2018, we matched, in cash, 50% of the first 8% of eligible compensation deferred by the employee. Company contributions vest over five years. Any future employer contributions to this plan will be determined at our discretion.
The plan held no shares of Tidewater common stock for the years ended December 31, 2020 and 2019, respectively, but held 7,075 shares Tidewater Common Stock for the year ended December 31, 2018.
Other Plans
A non-qualified supplemental savings plan is provided to executive officers who have the opportunity to defer additional eligible compensation that cannot be deferred under the existing 401(k) plan due to IRS limitations. An optional company match or contribution of restoration benefits was ceased effective January 1, 2018.
We also provided retirement benefits to our eligible non-U.S. citizen employees working outside their respective country of origin pursuant to a self-directed multinational defined contribution retirement plan (multinational retirement plan). Non-U.S. citizen shore-based and certain offshore employees working outside their respective country of origin were eligible to participate in the multinational retirement plan provided the employees were not enrolled in any home country pension or retirement program. Participants of the multinational retirement plan could contribute 1% to 50% of their base salary. Prior to January 1, 2018 when we ceased contributing to this plan, we matched, in cash, 50% of the first 6% of eligible compensation deferred by the employee which vests over five years.
Multi-employer Pension Obligations
Certain of our current and former U.K. subsidiaries are participating in two multi-employer retirement funds known as the Merchant Navy Officers Pension Fund, or MNOPF and the Merchant Navy Ratings Pension Fund or MNRPF. At December 31, 2020 and 2019, we had recorded $0.7 million and $1.0 million, respectively, related to these liabilities. The status of the funds is calculated by an actuarial firm approximately every three years. The last assessment was completed in March 2018 for the MNOPF Plan and March 2017 for the MNRPF Plan. We expense $0.2 million per annum for these plans.
(10) STOCK-BASED COMPENSATION AND INCENTIVE PLANS
Our long-term incentive plans have included restricted stock units (RSUs), stock options and phantom stock. As of December 31, 2020, the Tidewater Inc. 2017 Stock Incentive Plan (the “2017 Plan”) and the GulfMark Management Incentive Plan (“Legacy GLF Plan”) are our only two active equity incentive plans and the only types of awards outstanding under either plan are RSUs and stock options that settle in shares of Tidewater common stock.
The number of common stock shares reserved for issuance under the plans and the number of shares available for future grants are as follows:
|
|
Year Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Shares of common stock reserved for issuance under the plans
|
|
|
3,973,228
|
|
|
|
3,973,228
|
|
|
|
3,973,228
|
|
Shares of common stock available for future grants
|
|
|
1,591,577
|
|
|
|
2,187,101
|
|
|
|
2,325,102
|
|
Restricted Stock Units
We have granted RSUs to key employees, including officers and non-employee directors. We have generally awarded 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.
We have also awarded 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 based on various operating and financial metrics. The fair value of the performance-based 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 awarded to key employees lapse over a three-year period from the date of the award. The restrictions on the time-based RSUs awarded to non-employee directors lapse over a one-year period. Time-based RSUs 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 we meet 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, and there are no voting rights until the restricted stock units vest. If dividends are declared, dividend equivalents are accrued on performance-based restricted shares and ultimately paid only if the performance criteria are achieved. RSU compensation costs are recognized on a straight-line basis over the vesting period, and are net of forfeitures.
RSUs granted to officers and employees under the 2017 Incentive Plan generally have a vesting period over three years in equal installments from the date of grant, except that (i) the RSUs granted to directors vest over one year and (ii) certain RSUs granted to our officers are performance based and vest on the third anniversary of the date of grant, based on our performance as measured.
The following table sets forth a summary of our restricted stock unit activity:
|
|
Weighted-average
|
|
|
Time
|
|
|
Weight-average
|
|
|
|
|
|
|
|
Grant-Date
|
|
|
Based
|
|
|
Grant Date
|
|
|
Performance
|
|
|
|
Fair Value
|
|
|
Units
|
|
|
Fair Value
|
|
|
Based Units
|
|
Non-vested balance at December 31, 2017
|
|
|
24.41
|
|
|
|
1,157,646
|
|
|
|
—
|
|
|
|
—
|
|
Granted
|
|
|
24.58
|
|
|
|
455,063
|
|
|
|
26.04
|
|
|
|
63,365
|
|
Vested
|
|
|
24.84
|
|
|
|
(503,677
|
)
|
|
|
—
|
|
|
|
—
|
|
Cancelled/forfeited
|
|
|
27.15
|
|
|
|
(27,948
|
)
|
|
|
—
|
|
|
|
—
|
|
Non-vested balance at December 31, 2018
|
|
|
24.21
|
|
|
|
1,081,084
|
|
|
|
26.04
|
|
|
|
63,365
|
|
Granted
|
|
|
23.44
|
|
|
|
186,143
|
|
|
|
24.50
|
|
|
|
101,143
|
|
Vested
|
|
|
24.45
|
|
|
|
(784,868
|
)
|
|
|
—
|
|
|
|
—
|
|
Cancelled/forfeited
|
|
|
24.70
|
|
|
|
(78,591
|
)
|
|
|
24.50
|
|
|
|
(70,694
|
)
|
Non-vested balance at December 31, 2019
|
|
|
23.32
|
|
|
|
403,768
|
|
|
|
25.54
|
|
|
|
93,814
|
|
Granted
|
|
|
5.95
|
|
|
|
594,234
|
|
|
|
—
|
|
|
|
—
|
|
Vested
|
|
|
24.05
|
|
|
|
(265,919
|
)
|
|
|
26.04
|
|
|
|
(63,365
|
)
|
Non-vested balance at December 31, 2020
|
|
|
8.95
|
|
|
|
732,083
|
|
|
|
24.50
|
|
|
|
30,449
|
|
Restrictions on 449,870 time-based units outstanding at December 31, 2020 will lapse during fiscal 2021.
Restricted stock unit compensation expense and grant date fair value are as follows:
|
|
Year Ended December 31,
|
|
(In thousands)
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Grant date fair value of restricted stock units vested
|
|
$
|
6,395
|
|
|
$
|
19,193
|
|
|
$
|
12,513
|
|
Restricted stock unit compensation expense
|
|
|
5,117
|
|
|
|
19,603
|
|
|
|
13,406
|
|
As of December 31, 2020, total unrecognized RSU compensation costs totaled approximately $4.7 million, or $3.7 million net of tax which will be recognized over a weighted average period of two years, compared to $6.3 million, or $5.0 million net of tax, at December 31, 2019 and $22.6 million, $17.1 million, net of tax, at December 31, 2018. No RSU compensation costs were capitalized as part of the costs of an asset. The amount of unrecognized RSU compensation costs will be affected by any future restricted stock unit grants and by the separation of an employee who has received RSUs that are unvested as of their separation date. There were no modifications to the RSUs during the years ended December 31, 2020, 2019 and 2018. Forfeitures are recognized as an adjustment to compensation expense for all RSUs in the same period as the forfeitures occur.
Stock Option Plan
Tidewater has 344,598 stock options that were granted in 2020 all of which are outstanding as of December 31, 2020. The weighted average exercise price was $6.48, with a weighted average remaining contractual term of 9.3 years. The stock options vest ratably over a three-year period and have a life of ten years. None of the stock options have been forfeited or exercised or are exercisable. As of December 31, 2020, there was $0.9 million of unrecognized compensation costs related to the stock options that is expected to be recognized over a weighted-average period of 2.3 years.
Phantom Stock Plan
We previously provided a Phantom Stock Plan (PSP) to provide additional incentive compensation to key employees. Participants in the PSP had the right to receive the value of a share of common stock in cash at vesting. Participants had no voting or other rights as a stockholder. The phantom shares generally had a three-year vesting period. No new awards have been issued under the Phantom Stock Plan since 2016.
The following table sets forth a summary of our phantom stock activity:
|
|
Weighted-
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
average
|
|
|
Time
|
|
|
average
|
|
|
|
|
|
|
average
|
|
|
|
|
|
|
|
Grant-Date
|
|
|
Based
|
|
|
Grant-Date
|
|
|
Series A
|
|
|
Grant-Date
|
|
|
Series B
|
|
|
|
Fair Value
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Warrants
|
|
|
Fair Value
|
|
|
Warrants
|
|
Non-vested balance at December 31, 2017
|
|
$
|
308.24
|
|
|
|
13,526
|
|
|
|
1.00
|
|
|
|
21,934
|
|
|
|
0.98
|
|
|
|
23,712
|
|
Vested
|
|
|
360.14
|
|
|
|
(8,223
|
)
|
|
|
1.00
|
|
|
|
(13,009
|
)
|
|
|
0.98
|
|
|
|
(14,064
|
)
|
Cancelled
|
|
|
240.39
|
|
|
|
(786
|
)
|
|
|
1.00
|
|
|
|
(1,275
|
)
|
|
|
0.98
|
|
|
|
(1,379
|
)
|
Non-vested balance at December 31, 2018
|
|
$
|
226.50
|
|
|
|
4,517
|
|
|
|
1.00
|
|
|
|
7,650
|
|
|
|
2.94
|
|
|
|
8,269
|
|
Vested
|
|
|
226.50
|
|
|
|
(4,517
|
)
|
|
|
1.00
|
|
|
|
(7,650
|
)
|
|
|
2.94
|
|
|
|
(8,269
|
)
|
Non-vested balance at December 31, 2019
|
|
$
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
The grant date fair value of phantom stock vested was $1.1 million and $3.0 million, respectively, for the years ended December 31, 2019 and 2018. Phantom stock compensation expense was immaterial for both years.
(11)
|
STOCKHOLDERS’ EQUITY
|
Common Stock
The number of shares of authorized and issued common stock and preferred stock are as follows:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Common stock shares authorized
|
|
|
125,000,000
|
|
|
|
125,000,000
|
|
Common stock par value
|
|
$
|
0.001
|
|
|
$
|
0.001
|
|
Common stock shares issued
|
|
|
40,704,984
|
|
|
|
39,941,327
|
|
Preferred stock shares authorized
|
|
|
3,000,000
|
|
|
|
3,000,000
|
|
Preferred stock par value
|
|
No par
|
|
|
No par
|
|
Preferred stock shares issued
|
|
|
—
|
|
|
|
—
|
|
Common Stock Repurchases
No shares were repurchased during the years ended December 31, 2020, 2019 and 2018.
Dividend Program
There were no dividends declared during the years ended December 31, 2020, 2019 and 2018.
Warrants
During 2017, we issued 11,543,814 New Creditor Warrants upon emergence from bankruptcy. In addition, 2,432,432 Series A Warrants and 2,629,657 Series B Warrants were issued to the holders of common stock with exercise prices of $57.06 and $62.28, respectively. As of December 31, 2020, we had 657,203 shares of common stock issuable upon the exercise of the New Creditor Warrants. No Series A Warrants or Series B Warrants have been exercised.
In conjunction with the merger with GulfMark, Tidewater assumed approximately 2.3 million $0.01 Creditor Warrants (GLF Creditor Warrants) and approximately 0.8 million Equity Warrants (GLF Equity Warrants) with an exercise price of $100 and each warrant becoming exercisable for 1.1 shares of Tidewater common stock on substantially the same terms and conditions as provided in the warrant agreements governing the GLF Creditor Warrants and the GLF Equity Warrants. As of December 31, 2020, we had 815,575 shares of common stock issuable upon the exercise of the GLF Creditor Warrants. No GLF Equity Warrants have been exercised.
Accumulated Other Comprehensive Loss
The changes in accumulated other comprehensive income by component, net of tax, are as follows:
|
|
Year Ended December 31,
|
|
(In thousands)
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Balance at December 31
|
|
$
|
(236
|
)
|
|
$
|
2,194
|
|
|
$
|
(147
|
)
|
Pension benefits recognized in OCI
|
|
|
(568
|
)
|
|
|
(2,430
|
)
|
|
|
4,133
|
|
Available for sale securities recognized in OCI
|
|
|
—
|
|
|
|
—
|
|
|
|
(660
|
)
|
Reclasses from OCI to net income
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,132
|
)
|
Balance at December 31
|
|
$
|
(804
|
)
|
|
$
|
(236
|
)
|
|
$
|
2,194
|
|
The following table summarizes the reclassifications from accumulated other comprehensive loss to the consolidated statement of income:
|
|
Year
|
|
|
|
|
Ended
|
|
|
|
|
December 31,
|
|
Affected line item in the consolidated
|
(In thousands)
|
|
2018
|
|
statements of income
|
Retiree medical plan
|
|
|
(1,536
|
)
|
Interest income and other, net
|
Realized gains on available for sale securities
|
|
|
404
|
|
Interest and other debt costs
|
Total pre-tax and net of tax amounts
|
|
|
(1,132
|
)
|
|
Tax Benefits Preservation Plan
On April 13, 2020, we adopted a Tax Benefits Preservation Plan (the Plan) as a measure to protect our existing net operating loss carryforwards ($320.7 million at December 31, 2020) and foreign tax credits ($387.4 million at December 31, 2020) (Tax Attributes) and to reduce our potential future tax liabilities. Use of our Tax Attributes will be substantially limited if we experience an “ownership change” as defined in Section 382 of the Internal Revenue Code (Section 382).
While the Plan is in effect, any person or group that acquires beneficial ownership of 4.99% or more of our common stock then outstanding without approval from our Board of Directors (the Board) or without meeting certain customary exceptions would be subject to significant dilution in their ownership interest in our company. Stockholders who currently own 4.99% or more of our outstanding common stock will not trigger the Plan unless they acquire 0.5% or more additional shares of common stock.
Pursuant to the Plan, one right will be distributed to our stockholders for each share of our common stock owned of record at the close of business on April 24, 2020. Each right would initially represent the right to purchase from the Company one one-thousandth of a share of our Series A Junior Participating Preferred Stock, no par value (the “Preferred Stock”) at a purchase price of $38.00 per one one-thousandth of a share. The preferred stock will entitle the holder to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of preferred stock. The Board may redeem the rights in whole, but not in part, for $0.001 per right (subject to adjustment) at any time prior to the close of business on the tenth business day after the first date of public announcement that any person or group has triggered the Plan.
The rights will expire on the earliest of (i) the close of business on April 13, 2023, (ii) the time at which the rights are redeemed or exchanged, or (iii) the time at which the Board determines that the Tax Attributes are fully utilized, expired, no longer necessary or become limited under Section 382.
(12) COMMITMENTS AND CONTINGENCIES
Lease Commitments
As of December 31, 2018, we had long-term operating leases for office space, automobiles, temporary residences and office equipment. Aggregate operating lease expenses for the year ended December 31, 2018 were $3.8 million.
Currency Devaluation and Fluctuation Risk
Due to our international operations, we are 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 we are 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, we attempt to contract a significant majority of our services in U.S. dollars. In addition, we attempt to minimize the 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. We continually monitor the currency exchange risks associated with all contracts not denominated in U.S. dollars.
Legal Proceedings
Various legal proceedings and claims are outstanding which arose in the ordinary course of business. In the opinion of management, the amount of ultimate liability, if any, with respect to these actions, will not have a material adverse effect on our financial position, results of operations, or cash flows.
(13)
|
ACCRUED EXPENSES, OTHER CURRENT LIABILITIES, AND OTHER LIABILITIES
|
A summary of accrued expenses as of December 31, is as follows:
(In thousands)
|
|
2020
|
|
|
2019
|
|
Payroll and related payables
|
|
$
|
17,201
|
|
|
$
|
16,351
|
|
Accrued vessel expenses
|
|
|
17,129
|
|
|
|
38,383
|
|
Accrued interest expense
|
|
|
3,240
|
|
|
|
4,570
|
|
Other accrued expenses
|
|
|
14,852
|
|
|
|
14,696
|
|
|
|
$
|
52,422
|
|
|
$
|
74,000
|
|
A summary of other current liabilities as of December 31, is as follows:
(In thousands)
|
|
2020
|
|
|
2019
|
|
Taxes payable
|
|
$
|
23,883
|
|
|
$
|
18,661
|
|
Other
|
|
|
8,902
|
|
|
|
5,439
|
|
|
|
$
|
32,785
|
|
|
$
|
24,100
|
|
A summary of other liabilities as of December 31, is as follows:
(In thousands)
|
|
2020
|
|
|
2019
|
|
Pension liabilities
|
|
$
|
31,736
|
|
|
$
|
32,545
|
|
Liability for uncertain tax positions
|
|
|
35,304
|
|
|
|
48,577
|
|
Other
|
|
|
12,752
|
|
|
|
17,275
|
|
|
|
$
|
79,792
|
|
|
$
|
98,397
|
|
(14) SEGMENT INFORMATION, GEOGRAPHICAL DATA AND MAJOR CUSTOMERS
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.
The following table provides a comparison of revenues, vessel operating profit, depreciation and amortization, and additions to properties and equipment. Vessel revenues and operating costs relate to our owned and operated vessels while other operating revenues relate to the activities of our other miscellaneous marine-related businesses.
|
|
Year Ended December 31,
|
|
(In thousands)
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Vessel revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
126,676
|
|
|
|
136,958
|
|
|
|
118,534
|
|
Middle East/Asia Pacific
|
|
|
97,133
|
|
|
|
90,321
|
|
|
|
80,195
|
|
Europe/Mediterranean
|
|
|
83,602
|
|
|
|
123,711
|
|
|
|
56,263
|
|
West Africa
|
|
|
78,763
|
|
|
|
126,025
|
|
|
|
142,214
|
|
|
|
$
|
386,174
|
|
|
|
477,015
|
|
|
|
397,206
|
|
Other operating revenues
|
|
|
10,864
|
|
|
|
9,534
|
|
|
|
9,314
|
|
|
|
$
|
397,038
|
|
|
|
486,549
|
|
|
|
406,520
|
|
Vessel operating profit (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
4,944
|
|
|
|
(805
|
)
|
|
|
8,860
|
|
Middle East/Asia Pacific
|
|
|
(5,935
|
)
|
|
|
(6,044
|
)
|
|
|
(4,417
|
)
|
Europe/Mediterranean
|
|
|
(8,629
|
)
|
|
|
(1,289
|
)
|
|
|
(9,359
|
)
|
West Africa
|
|
|
(27,508
|
)
|
|
|
8,298
|
|
|
|
7,240
|
|
|
|
$
|
(37,128
|
)
|
|
|
160
|
|
|
|
2,324
|
|
Other operating profit
|
|
|
7,458
|
|
|
|
6,734
|
|
|
|
3,742
|
|
|
|
|
(29,670
|
)
|
|
|
6,894
|
|
|
|
6,066
|
|
Corporate expenses
|
|
$
|
(35,633
|
)
|
|
|
(57,988
|
)
|
|
|
(42,972
|
)
|
Gain on asset dispositions, net
|
|
|
7,591
|
|
|
|
2,263
|
|
|
|
10,624
|
|
Affiliate credit loss impairment expense
|
|
|
(52,981
|
)
|
|
|
—
|
|
|
|
—
|
|
Affiliate guarantee obligation
|
|
|
(2,000
|
)
|
|
|
—
|
|
|
|
—
|
|
Impairment of due from affiliate
|
|
|
—
|
|
|
|
—
|
|
|
|
(20,083
|
)
|
Asset impairments and other
|
|
|
(74,109
|
)
|
|
|
(37,773
|
)
|
|
|
(61,132
|
)
|
Operating loss
|
|
$
|
(186,802
|
)
|
|
|
(86,604
|
)
|
|
|
(107,497
|
)
|
Depreciation and amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
32,079
|
|
|
|
27,493
|
|
|
|
16,047
|
|
Middle East/Asia Pacific
|
|
|
24,244
|
|
|
|
21,440
|
|
|
|
11,871
|
|
Europe/Mediterranean
|
|
|
29,222
|
|
|
|
30,053
|
|
|
|
11,385
|
|
West Africa
|
|
|
27,787
|
|
|
|
21,166
|
|
|
|
16,612
|
|
Corporate and other
|
|
|
3,377
|
|
|
|
1,779
|
|
|
|
2,378
|
|
|
|
$
|
116,709
|
|
|
|
101,931
|
|
|
|
58,293
|
|
Additions to properties and equipment:
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
2,842
|
|
|
|
969
|
|
|
|
3,771
|
|
Middle East/Asia Pacific
|
|
|
2,629
|
|
|
|
5,237
|
|
|
|
2,982
|
|
Europe/Mediterranean
|
|
|
1,059
|
|
|
|
4,001
|
|
|
|
185
|
|
West Africa
|
|
|
6,028
|
|
|
|
2,721
|
|
|
|
10,135
|
|
Corporate
|
|
|
2,342
|
|
|
|
5,070
|
|
|
|
4,318
|
|
|
|
$
|
14,900
|
|
|
|
17,998
|
|
|
|
21,391
|
|
Total assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
338,649
|
|
|
|
375,297
|
|
|
|
380,168
|
|
Middle East/Asia Pacific
|
|
|
226,422
|
|
|
|
270,413
|
|
|
|
233,611
|
|
Europe/Mediterranean
|
|
|
302,214
|
|
|
|
358,943
|
|
|
|
316,524
|
|
West Africa
|
|
|
242,825
|
|
|
|
376,087
|
|
|
|
483,234
|
|
Investments in and advances to unconsolidated companies and other
|
|
|
—
|
|
|
|
—
|
|
|
|
8,479
|
|
Corporate
|
|
|
141,067
|
|
|
|
198,788
|
|
|
|
405,723
|
|
|
|
$
|
1,251,177
|
|
|
|
1,579,528
|
|
|
|
1,827,739
|
|
The following table discloses our customers that accounted for 10% or more of total revenues:
|
|
Year Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
Chevron Corporation
|
|
|
14.3
|
%
|
|
|
13.0
|
%
|
|
|
15.0
|
%
|
Saudi Aramco
|
|
|
11.5
|
%
|
|
|
*
|
|
|
|
*
|
|
* Less than 10% of total revenues.
(15)
|
RESTRUCTURING CHARGES
|
In the fourth quarter of 2018, we finalized plans to abandon duplicate office facilities with lease terms expiring between 2023 and 2026 in St. Rose and New Orleans, Louisiana, Houston, Texas and Aberdeen, Scotland. Those closures resulted in $7.3 million, $6.8 million and $1.5 million respectively, of lease exit and severance charges in the fourth quarter of 2018 and the years ended December 31, 2019 and 2020, respectively. These charges are included in general and administrative expense in our consolidated Statement of Operations.
Activity for the lease exit and severance liabilities for the two years ended December 31, 2020 were:
|
|
Lease Exit Costs
|
|
|
Severance
|
|
|
|
|
|
|
|
Europe/
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Mediterranean
|
|
|
Corporate
|
|
|
Company
|
|
|
Total
|
|
Balance at December 31, 2018
|
|
$
|
2,005
|
|
|
|
4,463
|
|
|
|
285
|
|
|
$
|
6,753
|
|
Charges (credits)
|
|
|
44
|
|
|
|
(33
|
)
|
|
|
6,811
|
|
|
|
6,822
|
|
Cash payments
|
|
|
(258
|
)
|
|
|
(2,112
|
)
|
|
|
(6,824
|
)
|
|
|
(9,194
|
)
|
Balance at December 31, 2019
|
|
$
|
1,791
|
|
|
|
2,318
|
|
|
|
272
|
|
|
$
|
4,381
|
|
Charges
|
|
|
71
|
|
|
|
63
|
|
|
|
1,367
|
|
|
|
1,501
|
|
Cash payments
|
|
|
(306
|
)
|
|
|
(602
|
)
|
|
|
(1,639
|
)
|
|
|
(2,547
|
)
|
Balance at December 31, 2020
|
|
$
|
1,556
|
|
|
|
1,779
|
|
|
|
—
|
|
|
$
|
3,335
|
|
SCHEDULE II
TIDEWATER INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
|
|
|
|
Balance at
|
|
|
|
|
|
|
|
|
|
|
at
|
|
|
|
Beginning
|
|
|
Additions
|
|
|
|
|
|
|
End of
|
|
Description
|
|
of period
|
|
|
at Cost
|
|
|
Deductions
|
|
|
Period
|
|
Year Ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deducted in balance sheet from trade accounts receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
1,800
|
|
|
|
900
|
|
|
|
—
|
|
|
|
2,700
|
|
Year Ended December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deducted in balance sheet from trade accounts receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
2,700
|
|
|
|
—
|
|
|
|
2,630
|
|
|
|
70
|
|
Year Ended December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deducted in balance sheet from trade accounts receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses
|
|
$
|
70
|
|
|
|
1,446
|
|
|
|
—
|
|
|
|
1,516
|
|