FOOL CONFERENCE CALL
SYNOPSIS*
By Dale Wettlaufer
(MF Raleigh)
Tidewater, Inc.
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1440 Canal St.
New Orleans, LA 70112
Phone: 504-568-1010
ANN ARBOR, Mich., Jan. 21, 1997/FOOLWIRE/--- Tidewater Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TDW)") else Response.Write("(NYSE: TDW)") end if %> today announced earnings of $0.68 per share, on revenues of $212.4 million for the company's third quarter ended December 31, 1996. The consensus of analysts' estimates was $0.61, according to First Call. For the same period last year, net earnings were $0.39 per share, on revenues of $166.4 million. Comparable figures for Tidewater's fiscal second quarter, were EPS of $0.53 on revenues of $193.9 million.
The company attributed the improvement mainly to the continued strong performance of Tidewater's U.S. Gulf of Mexico based supply vessels. During the quarter, the average rate for the company's domestic supply vessels increased almost $800 per day, to $5,842. Currently, the average rate for this group of vessels stands at more than $6,400 per day.
In the follow-up conference call, President, CEO and chair William O'Malley pointed out that Tidewater's international fleet performance steadily improved over the past several months, also, causing international fleet revenues to climb by more than $5 million as compared with the September quarter.
O'Malley noted that the month of December is typically a "shoulder" month in which activity begins to decline seasonally but that no such decline occurred this year. Each month in the quarter was stronger than the preceding one and the market remains "very strong."
FINANCIAL OVERVIEW
Tidewater's 10-Q will be filed electronically later this day and will be available for detailed review at the SEC's Edgar Website.
Regarding the balance sheet, as of Dec. 31, 1996 cash was up to $53 million versus $34 million on Sept. 30, 1996. The company remains debt free. Shareholder equity stood at $786 million. The company commenced a stock repurchase program in early December and purchased 641,500 shares during the month at a total price of $28.5 million. A total of 1.57 million shares have been repurchased to date at an average price of $49.98 per share. That includes 500,000 shares bought on Jan. 15. Weighted average number of common shares outstanding was 62.7 million in the December quarter. Owing to the repurchases, that number should decline to approximately 61 million for the current quarter. The board authorized shares repurchases up to a limit of $200 million through March 1998, approximately $78 million of which has been expended thus far.
MARINE SEGMENT RESULTS. Revenues in the quarter totaled $184.1 million, compared to $167.7 million in the preceding quarter. Crew costs have stabilized and insurance costs are unchanged. Maintenance and repair expenses were down slightly in the quarter, while fuel, lubricating and supply costs were up slightly. Operating profit totaled $62.3 million for the Marine segment, as compared with $46.3 million in the preceding quarter.
On the domestic side of marine operations, supply and towing/supply vessels in operation at the end of December numbered 143. The average daily rental rate was $5,842, an increase of $800 over the preceding quarter. Average day rate is currently $6,400. Utilization is at 90%, steady with last quarter. Rate increases during the quarter were passed on nicely and the market remains "very strong."
On the international side, supply and towing/supply vessels number 164. Average day rate in the December quarter was $3,965, an increase of $130 over September. Utilization was 91%, up three percentage points over Sept. International offshore tugs number 52. Average day rate was $3,290, versus $2,916 in the September quarter. Utilization was 79.3% for the quarter, versus 70.3% in the preceding quarter. For the month of December by itself, the utilization rate was 85%. The company is "getting excellent results" internationally, and Mr. O'Malley declared himself "really pleased" with the situation.
Regionally, the statistics were as follows:
December September
Far East: 38 vessels 39 vessels
$3,496/day $3,223/day
79% utiliz. 84% utiliz.
Mid-East: 50 vessels 50 vessels
$3,334/day $3,337/day
91% utiliz. 69% utiliz.
W. Africa: 102 vessels 97 vessels
$3,497/day $3,368/day
91% utiliz. 90% utiliz.
Lat. Amer: 88 vessels 90 vessels
$3,339/day $3,363/day
90% utiliz. 84% utiliz.
North Sea: 26 vessels 27 vessels
$5,475/day $4,857/day
84% utiliz. 80% utiliz.
It was pointed out that West African operations constitute approximately one-third of Tidewater's marine operations. In the most recent contract renegotiations, the average day rate increased by $700, and the market remains very strong there. In Latin America, the company expects to do well when it comes time to renegotiate contracts later this year and early next year. Mexico was singled out as offering some promising opportunities, as well. Plans are to move 6 vessels from Europe to the U.S. market, replacing the moved equipment with vessels from the Far East.
COMPRESSION SEGMENT RESULTS. Revenues of $28.3 million compared with $26.2 million in the September quarter. Rental revenues totaled $18.2 million and product sales were $9.5 million. Gas compressor utilization was 77.6% versus 76.3% in the September quarter. On a horsepower basis, rental rates were $16.73 versus $16.75 in the September quarter. Operating profit was $3.3 million, as compared with $2.7 million.
QUESTIONS & ANSWERS
The company was asked what average day rate would justify the construction of additional vessels. The reply was that the current rates would justify construction of an $8 million research vessel, but the company prefers not to undertake that step right now.
In response to a question, the company noted that they would most likely negotiate a "hefty" increase in rates when contracts were renewed in the Alaska region next year. The contract for one vessel that will go to Alaska later this year was already signed at such a rate.
With regard to the Compression segment, the company observed that they had earlier made a decision not to sink additional capital into the segment, but they are now seeing some international opportunities that may justify rethinking that decision, especially if Tidewater should win some bids it is competing on currently. Compression segment backlog is approximately $12 million, the vast majority of which is international equipment sales.
The company noted that work in the Gulf of Mexico is basically in balance right now -- which is good news, considering that the winter months historically have exhibited reduced activity. The current circumstances could indicate that as the year progresses, demand will heighten. As it is, customers are very reluctant to give up any vessels that are leased to them.
Two vessels are involved in an upgrade and lengthening program. The first is in the shipyard now. When it is completed (a process that takes 90 to 120 days), the second will enter. After these vessels have been in use a while, the company will determine whether the program warrants expansion. Over the course of the year, capital expenditures will run an estimated $25 million, given that the company is not now in a building mode.
The company continues to look at acquisitions. In the U.S. market, that's unlikely in view of anti-trust concerns, In the international arena, however, the company is exploring some opportunities but has nothing to report now.
* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. Note: Statements made by a company other than historical information may constitute forward-looking statements for which the company can claim protection under the Safe Harbor Act. Please consult the company's filings with the SEC for information on risk factors which might cause actual results to differ materially from the information contained in these forward-looking statements.