Operator: Welcome to the Fiscal 2013 Fourth Quarter Earnings Conference Call. My name is John and I will be your operator for today's call. At this time all participants are in listen-only mode. Later we will conduct a question-and-answer session. Please note that this conference is being recorded.
I will now turn the call over to Mr. Joe Bennett. Mr. Bennett, you may begin.
Joseph M. Bennett - EVP and Chief IR Officer: Thank you, John. Good morning, everyone, and welcome to Tidewater's fiscal 2013 full-year and fourth quarter earnings results conference call for the period ended March 31, 2013. I am Joe Bennett, Tidewater's Executive Vice President and Chief Investor Relations Officer. With me this morning on the call are our President and CEO, Jeff Platt; Quinn Fanning, our Executive VP and CFO; and Bruce Lundstrom, our Executive Vice President, General Counsel and Secretary.
We will follow our usual conference call format. After the formalities, I'll turn the call over to Jeff for his initial comments, to be followed by Quinn's review of the financial details for the year and quarter. Jeff will then provide some wrap-up comments before we open the call for questions.
During today's conference call, Jeff, Quinn, I and other Tidewater management may make certain comments that are forward-looking statements and not statements of historical facts. I know that you understand that there are risks, uncertainties and other factors that may cause the Company's actual future performance to be materially different from that stated or implied by any comment that we may make during today's conference call. Additional information concerning the factors that could cause actual results to differ materially from those stated or implied by the forward-looking statements may be found in the Risk Factors section of Tidewater's most recent Form 10-K.
With that, I'll turn the call over to Jeff.
Jeffrey M. Platt - President and CEO: Thank you, Joe, and good morning to everyone. Earlier this morning we reported fully diluted earnings per share for fiscal 2013 of $3.03, compared to our fiscal 2012 $1.70 per share results. We remind you, however, that our fiscal 2012 results had been affected by $30.9 million pre-tax goodwill charge. Excluding that goodwill charge, our after-tax adjusted earnings would have been ($2.13) per share for fiscal 2012. This year's annual earnings results did include $3.4 million after-tax charge or $0.07 per share associated with the settlement of our former CEO Dean Taylor's retirement benefits which we previously reported in our third fiscal quarter.
For our fourth fiscal quarter, we reported fully diluted earnings per share of $0.95 compared to the $0.66 we earned in fiscal 2012's fourth quarter. Our results for this quarter were substantially better than the consensus estimate of $0.61 and Quinn will provide you with additional information as to the reasons for this solid performance.
Vessel revenues in the quarter were $325 million, which is an increase of approximately 7% from the vessel revenues we reported our prior quarter. But importantly, this quarter's revenues represent an increase of approximately 13% over the vessel revenues of last year's fourth quarter. Our vessel revenues reflect the improving health of our industry that we have noted in previous conference calls and presentations and the fruits of our continued investment in our vessel fleet over the past several years.
We said we thought you would see a rising stairstep pattern to our future revenues, and we believe our latest quarter's revenues signal another step-up. Our assessment is that the underlying fundamentals of the offshore business are good and appear to be strengthening. Not only do our financial results reflect this improvement, but our recent investing activity should demonstrate our growing confidence in the strengthening the industry cycle.
Last week, we announced an agreement to purchase Troms Offshore Supply of Norway for approximately $395 million. The transaction, which is scheduled to close in the second calendar quarter, will bring us five large modern and technically advanced PSVs with the six under construction and an option for a seventh. The acquisition expands our global footprint into the Norwegian sector of the North Sea, a market we have not previously served, but an important market in the long-term future of the offshore oil and gas business.
Troms vessels and more importantly their experienced management team and employees will provide us with the increased capability to work in harsh environments and in cold climates such as the Arctic, where oiling companies are targeting exploration. We are excited about the proven capabilities and the expertise that Troms team will bring to Tidewater. The Troms vessels coupled with the three STX vessels acquired last quarter, two of which having already been delivered and our two U.S. flag vessels that are (puller class) have been designated due for delivery before the end of this year provide Tidewater with a complement of vessels and management expertise that will have the capability of competing vigorously for opportunities in the expanding global cold water offshore market.
On last quarter's call, we discussed the impact of drydocks on Tidewater's financial results. This quarter as Quinn will explain to you, we essentially hit our drydocking numbers both in terms of the number of drydocks completed and the dollar amount spent. It's important that you keep in mind that Tidewater now has a fleet of over 230 new vessels, representing more than 85% of our total active vessel fleet. Although these new, larger and more technically advanced vessels have enabled us to earn higher dayrates, they cost more to build or acquire and they are more expensive to maintain. When one of these vessels go into a shipyard for a regulatory drydocking or other extended work, we experienced a significant short-term revenue loss associated with the vessels downtime coupled with the cost of the drydock, which we expense at the time our vessel enters the yard.
This issue of earnings volatility, caused by drydockings is not unique to Tidewater but rather it's an industry-wide challenge with a large new vessel fleet we will continue to have a number of drydockings every quarter. We continue to work with our customers and the available qualified shipyards to complete the necessary work as efficiently as possible. Nevertheless, we may continue to experience volatility in the number of drydockings undertaking each quarter. Quinn will comment more on this topic in just a minute.
The Tidewater safety culture remains one of our key points of emphasis. I'm very pleased to announce that for the entire fiscal year ended March 31, 2013, our Company comprised of approximately 8,000 employees experienced no lost time accidents. This performance speaks to the diligence of our employees and their daily work. This is only the second time in Tidewater's history that we have achieved this significant milestone. While the outstanding safety performance last year, earned our employees additional well deserved remuneration.
Our best reward is making sure everyone goes home safely each night. We can never allow our focus on safety to waiver as it only takes a split second for an accident to occur. I thank all of our employees worldwide for their diligence in operating our fleet safely during fiscal 2013.
Turning to Angola, our JV agreement with our joint venture partner Sonangol expired by its own term on March 31, 2013. We continue to have constructive discussions with Sonangol about a new long-term JV agreement but nothing has yet being formalized.
I believe our relationship with Sonangol remains solid, and our discussions will lead to a new Sonatide joint venture agreement that will satisfy Sonangol objectives while ensuring that the interest of Tidewater shareholders are protected.
In the meantime, I can report that our vessels operating in Angola remain hard at work and we continue to respond to requests for additional vessels to support activity in Angola. We will continue our policy of limiting our comments about this topic to official releases and we'll look to provide additional information when there is something additional to report.
Now, let me turn the call over to Quinn to discuss our financial results for the fiscal year and fourth quarter and to provide you some commentary about next quarter. Quinn?
Quinn P. Fanning - EVP and CFO: Thank you, Jeff. Good morning, everyone. First I will call your attention to the earnings press release that we put out this morning prior to the market's opening. We expect to file our annual report on Form 10-K through the EDGAR filing service some time before the close of business today.
I intend to focus my comments on the quarter just completed and our near to intermediate-term outlook. As usual I will also provide a recap of capital commitments and available liquidity. I will then conclude my remarks with a few perspectives on (indiscernible) offshore transaction, which is not explicitly incorporated into the guidance that I will provide for the June quarter.
As Jeff noted in his introductory remarks, we reported diluted earnings per common share of $0.95 in the March versus diluted earnings per common share of $0.61 for December quarter which again was net of $0.07 in the SERP settlement charge.
Focusing on the big picture, vessel revenue for the March quarter at $325 million was above the vessel revenue guidance range that I provided in February. Operating expenses at $186 million was below vessel operating expense guidance range that I provided and vessel level operating margin at approximately 43% was about 3 percentage points better than the high-end of the range that I provided on our last call. As vessel deliveries and vessels in drydock are frequently key drivers of quarterly financial results, I will note a couple of items for you in order to provide some initial context. First, incremental vessel revenue from six new vessels that were delivered in the March quarter and five vessels that were delivered in the December quarter totaled about $8 million in the March quarter. Demand for our new equipment remains very good across most geo markets and the team has been reasonably effective at getting new vessels on charter at good rates. Second, as we discussed on recent earnings conference calls, it can be challenging for us to accurately forecast which vessels will be on or off-charter for scheduled and unscheduled repairs and for required regulatory drydocks. It is also difficult to note precisely (when) such vessels will enter and leave the shipyard.
So relative to our expectations at the time of our last earnings conference call, note that vessel revenue and vessel operating margin in the March quarter included a net benefit of a couple of million dollars related to drydocks, i.e., lost revenue due to vessels in drydock was a couple million dollars lower than we expected at the time of our last earnings conference call.
Just as the cost of the individual drydock can be higher or lower than anticipated, recognized that lost revenue estimates can be impacted by the acceleration in deferral of drydocks and by drydocks that take greater or fewer number of days than was originally anticipated. To be clear, the drydocks that were deferred in the March quarter will eventually be done and it will likely be done in the June quarter. When I get to it, our guidance will incorporate the best available information we have in regards to the impacts scheduled maintenance and repairs will have on the quarter.
With these two points in mind, (I'll put a) couple of operating statistics for the March quarter. Active vessels at 265 vessels were up two vessels quarter-over-quarter. Utilization of the active fleet in the March quarter was respectable 83% and was up modestly quarter-over-quarter. As discussed, utilization in the March quarter reflects a relatively high drydocking schedule even after the deferral of a couple of drydocks. The March quarter's vessel utilization also reflects a modest drag associated with newly delivered vessels getting to their first job. I highlight this primarily to note that if vessel demand trends remain positive at fiscal '14 as we expect, we hope to realize a couple of points of additional utilization of the marketed fleet in the coming quarters. Average dayrates for the active fleet at $16,400 today were about 7% quarter-over-quarter.
Looking at the key asset classes, the deepwater class of vessels, which account for about 52% of consolidated fourth-quarter vessel revenue and for which average active vessel comp was up three levels quarter-over-quarter to 80 vessels, utilization of active vessels was up about 6.5 percentage points quarter-over-quarter.
For the towing supply and supply class of equipment, which was about 40% of consolidated fourth-quarter vessel revenue and for which average active fleet count was flat quarter-over-quarter at 120 vessels, the utilization of active vessels was off about 3 percentage points quarter-over-quarter.
I'd be a bit cautious in reading too much in the differences in quarter-over-quarter utilization trends for deepwater vessels for which utilization was up quarter-over-quarter and the towing supply and supply vessels for which utilization was down quarter-over-quarter. At least in my view, the quarterly trend reflects scheduled maintenance time and new vessel deliveries in the March quarter, more or so than the possibility that the two asset classes are trending in opposite directions.
In fact, except for scheduled and unscheduled maintenance, our sense is that demand is stable to improving and our expectation is that utilization should remain high across all asset classes fiscal '14 and perhaps beyond fiscal '14. Average dayrates for the active deepwater vessels were up about $600 or about 2% quarter-over-quarter. This trend is consistent with our expectation that average deepwater dayrates will continue to trend up as vessels currently in the fleet roll on to new charters that are set at current market rates and as we continue to take delivery of larger, higher spec vessels that will generally command higher dayrates than the average dayrates of our current fleet. Again, demand for deepwater vessels is good across geographies and we expect that recently observed trend in average deepwater dayrates to continue through fiscal '14.
Average dayrates for the active towing supply and supply fleet were up about $800 or about 6% quarter-over-quarter. The quarter-over-quarter trend in towing supply and supply dayrates on the other hand reflects a combination of rate increases in select geographic markets and only for certain sub-classes of vessels. Towing supply and supply dayrates also reflect lump sum demobilization fees, which account for about 30% of the $800 quarter-over-quarter increase in average dayrates.
Our expectation remains that towing supply and supply dayrates will move up as the number of work in jackup rigs moves up. However, I'd characterize our efforts in increased towing supply and supply dayrates as a more work-in-progress and a mission accomplished. As a result, I'd be a bit cautious in extrapolating the quarter-over-quarter average dayrate trend that was observed in towing supply and supply class in the March quarter until we have a few more data points supporting the case to real rate traction. I can assure you however, that we are working hard to push rates when there is an opportunity to do so.
Turning to vessel operating cost; vessel OpEx for the March quarter was about $186 million versus about $181 million in the December quarter, which as previously noted was below my guidance in February. Repair and maintenance expense at about $36.5 million was up slightly quarter-over-quarter, but was generally consistent with where we were projecting R&M cost at the time for our last earnings conference call, reflecting generally offsetting effects of deferred drydocks and a combination accelerated drydocks, margins repairs and cost increases on drydocks are already in process.
Crew costs are up quarter-over-quarter by about $3 million. We are still below our expectation for the time of our last earnings conference call in February. Our expectation, of course, is that crew cost will trend upward with fleet growth. For reference, Tidewater's crew cost as a percentage of vessel revenue was 29% in fiscal '13, although that percentage varies quite significantly across our four regions.
Finally, as expected, insurance and loss cost at about $4.2 million were down about $3 million quarter-over-quarter, largely reflecting higher cost in the December quarter related to the Nana Tide incident. Going forward, quarterly insurance and lost cost should be reasonably close to the quarterly average in fiscal 2013 of about $5 million a quarter. Overall, vessel level cash operating margin for the March was $139 million, or about 43% of vessel revenue.
Looking at our geographic reporting segments for the large Sub-Saharan Africa/Europe segment which accounted for about 48% of consolidated fourth quarter vessel revenue, vessel revenue was up better than expected 14% quarter-over-quarter, reflecting a combination of additional vessels in the region, higher average day rates and better-than-expected utilization due in part to the previously referenced deferral of drydocks.
For the America segment, which accounted for about 25% of consolidated fourth quarter vessel revenue, vessel revenue was off modestly quarter-over-quarter but it was generally consistent with our expectations.
For the smaller Asia-Pacific and MENA segments each of which accounted for about 13% of fourth quarter consolidated vessel revenue. The quarter-over-quarter quarter vessel revenue trend was positive. For Asia-Pacific vessel revenue was up about 6% quarter-over-quarter, with particularly good growth in Australia. In our MENA region, vessel revenue was up very modestly quarter-over-quarter, but the region experienced very good year-over-year growth, largely as a result of successfully scaling up our business in Saudi Arabia over the last couple of years.
Vessel margins in the March quarter for all but the Americas segment were above 40%, and with the exception of the better than expected performance in Sub-Saharan Africa, in the March quarter all four regions generally performed in a manner consistent with expectations.
Below the vessel operating margins, G&A expense for the March quarter at about $47 million was up quarter-over-quarter, reflecting both higher professional services costs and higher compensation costs. A portion of the increase compensation expense is attributable to the higher share price at March 31 and a portion of the increased cost is attributable to incentive compensation tied to better financial and safety results than was assumed in our expense accruals through December 31.
Also worth noting in the March quarter was a $3.6 million foreign exchange gain related to the February devaluation of the Venezuelan bolivar. If this is counterintuitive to those on the call, recall that at the time of the nationalization of our business in Venezuela in fiscal 2010, we wrote-off long-lived assets and we took 100% provision for potentially uncollectible accounts receivable of PDVSA and its affiliates. As a result, our Venezuelan operations are presently carried into our consolidated financial statements as a net liability. The devaluation of the bolivar has the effect of reducing financial statement value of bolivar-denominated liabilities.
Finally, our effective tax rate for fiscal 2013 was a bit less than 23%, which was a couple of percentage points lower than the guidance that was provided in February. The lower tax rate can be largely attributed to the previously referenced foreign exchange gain, which there is no associated tax expense and better-than-expected pre-tax results in lower tax rate jurisdictions, including Africa and Australia. The effective tax rate for the March quarter also reflects a reversal of an over accrual of tax expense through the first nine months of the fiscal year.
Turning to our outlook; we continue to expect that the newer vessels within both the deepwater and the towing supply and supply classes of equipment will continue to experience high utilization, positively or negatively impacted by the timing of drydocks. We expect that average deepwater dayrates will continue to trend positive as vessels roll to charters reflecting current marketing conditions, whereas near-term dayrate traction in the towing supply and supply class of equipment will likely require further improvements in the jackup market, which from our perspective already appears to be occurring.
As a prospective fleet count, we took delivery of six new vessels in the March quarter. Based on commitment as of March 31, we expect to take delivery of three additional vessels in the June quarter, including one large deepwater PSV and two crewboats. There is also a good chance that the Troms offshore transaction can close before June 30, but I'm excluding additional vessels related to the Troms transaction from these numbers. To the extent that the Troms transaction closes in the June quarter, we will of course highlight all financial statement effects of the transaction on our next earnings conference call.
In this context, internal estimates currently pegged the June quarter's vessel revenue somewhere between $320 million and $330 million, reflecting slow and steady improvement from a solid March quarter, despite the fact we may be contending with drydock related headwinds for a couple of quarters.
Based also on what we know today, OpEx for the June quarter will probably fall within a range of $195 million and $200 million, reflecting incremental OpEx related to new vessel deliveries and higher estimated cost for planned repairs and maintenance and regulatory drydockings.
It may be helpful to note that quarterly repair and maintenance expense in fiscal '13 averaged about $33 million. Individual quarters were as high as $36.5 million and as low as $27.2 million. With the growth in increased complexity of the fleet, on average we would expect quarterly repair and maintenance expense to be 10% to 15% higher in fiscal 2014 than it was in fiscal 2013.
As was the case in fiscal '13, we could also find that individual quarters could be 15% or 20% higher or lower than the quarterly average for the fiscal year. I'll also note that our current expectations of the repair and maintenance cost in the first half of the fiscal year will be higher than the second half of the fiscal year.
Well, I will try to incorporate the most current information that is available to me in my quarterly OpEx guidance. I will note that a $5 million quarter-to-quarter swing in R&M cost as well within what I'd expect to be ordinary course volatility. In any event, based on the vessel revenue and OpEx guidance range as provided, vessel operating margin for the June quarter should be somewhere between 38% and 41%. Although, I personally feel that the June vessel margins will be in the upper half of this margin percentage range.
In addition, vessel margins are expected to move up as fiscal 2014 progresses given our positive fundamental outlook, expected fleet additions and an expectation that drydocking activity will be lower in the second half of the year than in the first half of the year. Again the timing of drydocks can and will result in quarter-to-quarter volatility.
In terms of our expectations for relative performance by region, note that the Sub-Saharan Africa and Europe region has a particularly heavy drydock schedule in the first half of fiscal '14 and this will weigh a bit on the region's vessel operating margins.
Within the Americas region, our Brazil area will also likely lag the other areas within the region for a quarter or two as the area prepares vessels for handful of multiyear contracts that were recently approved by Petrobras. Despite the near term cost in downtime, the rates achieved for this equipment are very good rates in our view.
Other areas within the Americas segment, including U.S. Gulf of Mexico are expected to continue to perform well pick up the slack in the region in the near term. As a result, we expect overall results in the Americas region to be good throughout fiscal '14.
Go forward general and administrative expenses should be in the area of $44 million or $45 million per quarter. Safe assumption for fiscal '14 effective tax rate is 23% or 24%. As always the geographic mix of pre-tax earnings and margin trends can cause the tax rate to be volatile on quarter-to-quarter basis.
To quickly summarize Tidewater's current financial profile, cash flow from operations for fiscal '13 was $214 million. CapEx and proceeds from asset dispositions for the fiscal year were approximately $441 million and approximately $27 million, respectively. We also spent $85 million in fiscal '13 to acquire about $1.9 million Tidewater shares at an average price of just under $46 per share. As you probably saw last week the Tidewater board approved a new $200 million share buyback authorization which is effective from July 1, 2013 through June 30, 2014. This latest authorization is essentially reset and continuation of the current authorization which is set to expire on June 30, 2013. New vessel commitments made in March quarter totaled $193 million for nine vessels including six deepwater PSVs and three towing-supply and supply vessels, one of which was a vessel purchase that we closed in February. In total, unfunded vessel commitments at March 31 approximated $600 million, including 30 vessel construction projects and two vessel purchase commitments.
Total debt at March 31 was about $1 billion and cash at 3/31 was about $41 million. As a result, net debt at year-end was approximately ($950 billion) and net debt-to-net book capital at 3/31 was about 27%. Total liquidity at 3/31, including availability under committed bank facilities was approximately $400 million.
As to funding needs, CapEx in the June quarter is expected to be about $100 million based on commitments as of March 31, over and above CapEx related to commitments as of 3/31, an additional $200 million in cash will likely be required in the June quarter in order to close the acquisition of Troms, including our making the final payment on the fifth Troms' vessel which we expect to be delivered essentially concurrent with closing. Note that we will also assume approximately $150 million of Troms debt upon closing.
To wrap things up, I'll note that we think about the Troms Offshore acquisition as being closely linked to our December agreement to acquire three Norwegian-built deepwater PSVs from STX Pan Ocean. Two of the STX Pan Ocean vessels were delivered in recent months, as Jeff noted, and the third vessel is expected to be delivered in our second fiscal quarter. Without an allocation of purchase price to non-vessel assets, our implied cost for the seven Troms' vessels, which include one option vessel and the three STX Pan Ocean vessels is about $58 million per vessel. Newbuild pricing for comparable equipment is likely in the $60 million to $65 million area with the best case delivery likely in 2014 or early 2015. Our overall estimated cost per deadweight ton is approximately $12,000. Depending upon your dayrate assumptions, the combined value of the two transactions would likely fall within a range of 6.5 to 7.5 times fully delivered EBITDA.
As Jeff noted, we think that the Troms after transactional add much more to the Tidewater global franchise and it ships an incremental EBITDA. But I'm personally very comfortable that the economics are compelling on a standalone basis.
At closing, which is expected be in our first fiscal quarter we will likely use currently available credit facilities to fund the cash portion of the purchase price. While we are still evaluating term financing alternatives, we expect that the Troms transaction and other planned CapEx will be funded with operating cash flow and a mix of bank and other debt arrangements. Importantly, we believe that our financing plan will allow us to continue to maintain strong investment-grade type credit metrics. As such, we have no plans for secondary offering of common stock in connection with the Troms Offshore transaction or to otherwise raise traditional equity capital.
While we still have work to do on personal accounting, integration planning and alike based on our operating estimates and financing plan our expectation is that these two complementary transactions will be modestly accretive to earnings and cash flow.
With that I'll turn the call back over to Jeff.
Jeff A. Gorski - EVP and COO: Thanks Quinn. As I said at the outset of the call, we believe our quarterly results demonstrate that the underlying fundamentals of our industry are solid and the industry's recovery continues. As a result, we believe the outlook for Tidewater's business is promising. The health of those businesses servicing offshore exploration and development companies starts with the help of oil and gas company cash flows and spending. With commodity prices remaining strong, oil company cash flows remain healthy and the companies appear to be willing to spend more money on exploration and development. We see nothing to suggest any retrenchment in spending and in fact the March Gulf of Mexico lease sale results support that view.
In recent months, we have seen the international offshore rig count continue to increase. International spending's is a particular interest for us as roughly 90% of our revenues are earned outside of west waters. Our results demonstrate that the improvement in international activity is occurring across the board not just in select markets.
Our fleet utilization rates are strong and we experienced healthy average day rate increases for each class of vessel in our fleet. At the present time, the worldwide offshore drilling and rig fleet is averaging about an 85% utilization rate with floating drilling rigs at about 91% and jackup utilization at 86%. The composition of the offshore drilling rig fleet is roughly 58% jackups and 42% floaters.
So, while the floating drilling rig market is important for our vessel utilization and earnings, an increase in the number of working jackup rigs can have a meaningful impact on our future financial results. Our deepwater vessel class is experiencing nearly full practical utilization and dayrates in this segment have increased nicely over recent quarters, with a good portion of class still to roll on to new contracts at historically high dayrates.
On the other hand, our 100 plus towing supply and supply fleet is primarily dependent on the number of working jackups. As mentioned, this rig segment is operating globally at about 86% utilization suggesting that further increases in active jackups may bring pricing power to our vessels. A key to the jackup rig markets continued improvement will likely be tied to the approximately 50 newbuild jackups scheduled for delivery during the next 12 months. If these additional rigs are largely incremental to the working rig count, our towing supply vessels should experience increased demand and presumably support higher day rates.
With the recent surge in activity in the global jackup market, recent commitments by a number of drilling companies suggest that a good number of these newbuild jackups should be incremental to the global working jackup count.
Currently, there are over 200 new floaters and jackup rigs on order with more than half scheduled for delivery over the next two years. This is a huge financial commitment by petroleum industry to offshore exploration and development. In addition, we are beginning to see a shift from pure exploration drilling to increased development drilling. We believe these trends signal a positive long-term outlook for the OSV business.
As the global drilling rig fleet expansion unfolds, we regularly dialog with key operators to make sure we have the types of support vessels our clients will need. Our Troms Offshore acquisition is a reflection of this dialog and our desire to make sure we are well positioned to meet our customers' global needs both today and tomorrow. We are fully committed to operating a support vessel fleet in the future that can handle the demands in all geographic markets and water depths in which our clients wish to work. At the same time, we remain dedicated to building a stronger and more profitable company that can take advantage of whatever other offshore opportunities the market presents. Tidewater has a strong balance sheet with (ready) liquidity, providing us significant financial flexibility that will allow us to capitalize on any attractively valued opportunity that might materialize in order to grow our earnings faster. In that vein, Tidewater's management continues to evaluate other opportunities to grow the Company which is not a recent development, but rather a refinement of our long-term growth plan established several years ago. We will focus on opportunities to accelerate the Company's growth without compromising our strong financial foundation. Our overriding objective is to create greater shareholder value by building a larger, financially sound company that possesses meaningful earnings power and that participates in the rapidly growing segments of the offshore market. We are focused on long-term growth opportunities and recognize that our quarterly earnings pattern will continue to fluctuate, but we fully anticipate that over a reasonable period of time, we will grow our revenue, profits, and most importantly, shareholder value.
John, with that, we are ready to take questions.
Operator: Jeff Tillery, Tudor, Pickering, Holt.
Jeff Tillery - Tudor, Pickering, Holt & Co.: You've talked about the R&M inflation expected for the full year in the 10% to 15% range. Can we think about the overall operating costs for the vessel fleet as inflating kind of in that same range year-over-year?
Quinn P. Fanning - EVP and CFO: Our hope is, is that labor inflation would not be at that level. We've generally been trending levels less than that and I'm not seeing any numbers that would suggest that we are going to be heating anywhere close to 15% labor inflation. On a unit basis, obviously, we will closely track the vessels that we're accruing.
Jeff Tillery - Tudor, Pickering, Holt & Co.: Taking into account the amount of labor you need to hire, should we think about that overall cost numbers being up in that 15% range year-over-year?
Quinn P. Fanning - EVP and CFO: I think the, obviously, in weaker markets, labor has tended to move with the exception of a couple of key jurisdictions either down or trend flat, the jurisdictions I would highlight that was not the case over the last couple of years, that were otherwise a week market for Brazil and Australia, and more recently the U.S. Gulf of Mexico. We've also had like many in the offshore space pressure tied to specific technical skills, where we're competing for individuals with some of the rig owners and that's specifically the DP operator, but I think the – where I would instead focus you on labor costs is where we have tracked relative to vessel revenue, it's not a perfect measure. For the general matter we have been in the low 30s as a percentage of vessel revenue in the cyclical trough or rebuilding period. And we tend to – at least keep on our operating footprint presently below the 30% level in a decent market. But again, as I mentioned, region by region cost of those percentage vessel revenue can be quite volatile and America as an example are probably 7 to 8 percentage points higher than some of the African regions.
Jeff Tillery - Tudor, Pickering, Holt & Co.: There is good rate progression, across the board this quarter. So it sounds like the only thing that you might consider unusual in the March quarter was a couple of hundred dollars a day and the towing supply group that was from mobilization, amortization is that a fair characterization of the March quarter?
Quinn P. Fanning - EVP and CFO: No, I guess, to make one point, it was not an amortization of demobilization fee, it was actual cash paid to us by customer in connection with contractual agreements, it did have defect though of maybe, distorting is a bad word, but day rates did include the demobilization fees (indiscernible) explains by class. And of the $800 quarter-over-quarter progression I think it was $200 some. But we cleared certain geographies we are experiencing somewhat rate progression. I'd say the 7,000 to 10,000 rate course of our classes trending better than the smaller vessels within that class and certain markets likewise are doing better than others. But we are optimistic about the class as Jeff and I both mentioned that’s just not moving us fast as we like it to and certainly the trends in the jackup market would hopefully change that a bit in the coming quarters.
Jeff Tillery - Tudor, Pickering, Holt & Co.: But kind of the underlying trend of improvement we saw in the quarter, really nothing unusual to negate that, that we saw in the March quarter, just little bit of help from some of the lump sum payments.
Quinn P. Fanning - EVP and CFO: Correct.
Jeffrey M. Platt - President and CEO: We agree with that.
Operator: Ian Macpherson, Simmons.
Ian Macpherson - Simmons & Company: Thank you for the helpful color on the evaluation around Troms. It seems like Tidewater has resisted Norwegian market for some time, and in periods what’s changed was Troms involved in opportunistic situation or have you seen the strategic imperative of the cold water harsh environment in geographic market, becoming too important to avoid at this point. And just thoughts on further consolidation opportunities in the market going forward?
Jeffrey M. Platt - President and CEO: It wasn't purpose for the Tidewater did not participate in the Norwegian market it has been always been one that we've kept an eye on in the North Sea market as a whole, sometimes that was a good thing, sometimes it wasn't such a good thing when that market gets good it can get good. I think it is a natural progression for us where we are with the fleet recapitalization. We certainly take note of what our clients are doing they lead the way and certainly the Arctic harsh water environment seems to have some tremendous opportunities and when we look at that we look it for the right opportunities not just an iron purchase we wanted to have the competency of a management team that has the experience operating that to add to Tidewater and it came out to be what we think as a very good fit for Tidewater and I think one that certainly positions us well today and also looking ahead as the Arctic unfolds which it may turn out to be the very large new opportunities that our clients are certainly excited about and we are going to be positioned to grow with that. So, that's little bit of the insight with respect to the Troms acquisition and I guess the second part of your question. Could you repeat it again?
Ian Macpherson - Simmons & Company: What you think about the opportunities that for further MD&A?
Jeffrey M. Platt - President and CEO: That's nothing new. Our (indiscernible) has always been to acquire vessels or potential companies to have some consolidation. When you look at what we've actually done buying companies certainly is a pretty short list you have to go back ways so we've done that. But a lot of the assets that we have acquired since we started the recapitalization we've done a pretty good job of buying assets that are already committed to the industry that is our (vent) and again our financial position allows us to make a move when the opportunities present itself. We'd always to like to see consolidation. It is still a fragmented market. We are certainly looking all the time at potential opportunities for Tidewater.
Ian Macpherson - Simmons & Company: Then, just lastly on Troms, since the 6.5 to 7.5 EBITDA range that you've described, is there any – are there any aspects of the backlog on that fleet that could better distort it from the current market rates when we're thinking about the run rate for year two or year three of that acquisition. Are there any contracts to below market or et cetera?
Quinn P. Fanning - EVP and CFO: They do have some term coverage, which I guess relative to current market rates. One could argue should price up in due course, but to be clear, the – I would say EBITDA is a function of what your day rate and OpEx assumptions would be and I would certainly acknowledge that – smart people can disagree on the precise rate that group of assets can realize in the market, but just to clarify one point, the range of EBITDA multiples I use would capture effectively a 10-vessel fleet, which includes the three STX Pan Ocean vessels, which effectively were frontrunners to this transaction and are essentially identical sisters to some of the vessels in Troms. There is also the one vessel that is under construction that will be delivered in early '14 and the one option vessel, so that's where you get to 10 vessels with the average price, I think I said $58 million on average and 6.5 to 7.5 times fully delivered EBITDA.
Ian Macpherson - Simmons & Company: Then, just lastly, does Troms bring you the shore base support that you need to run this fleet or do you foresee additional investment on that side to round out?
Jeff A. Gorski - EVP and COO: Very confident management team. They run a tight ship up there. I think it's going to fit nicely in Tidewater and I think that we have the ability to grow without much shore base expansion.
Quinn P. Fanning - EVP and CFO: The shore base is not an (indiscernible). We do have an office or Troms, I should say, has office in Oslo, which has corporate and marketing personnel in it. But the real operating bases in Troms, which is in northern Norway and we think that's a very positive point of differentiation for the platform as it's developing, jumping off point in the Barents Sea and some of the other cold water markets that we're interested in.
Operator: Joseph Gibney, Capital One.
Joseph Gibney - Capital One: Quinn that question is for you. Big picture G&A question. I understand that $44 million, $45 million sequential guidance. Just thoughts on G&A going forward and it can be a significant factor in the model as you guys are expanding your fleet, expanding some of your geographic footprint. What are some thoughts around, presumably moving into a better operating environment as well. What are thoughts on G&A growth and how we should be thinking about that on our model?
Quinn P. Fanning - EVP and CFO: I think the reality of a relatively high operating cost business model is that, we'd like to think that we have at least near term overhead reabsorption benefits with growth. The Troms, transactions perhaps account for example to that where we're actually adding vessels, periodically gross margin and some incremental G&A, but we think it also comes with franchises we've talked about, but now we built out an area in Saudi Arabia, as an example over the last couple of years East Africa is a growing market that may ultimately result in some incremental shore base support, but no, I wouldn't think that growth of our fleet would come along with comparable growth in G&A. We would like to think that the fleet that we are running at least in the business we are presently in will be supported by the existing cost platform with natural year-over-year growth as we – inflation factors and things like that. And obviously we have incentive compensation metrics for their safety and financially based that have -- which are more earnings and more return on capital, G&A will grow with it.
Joseph Gibney - Capital One: Just additional question on the Troms debt assumption, sorry if I missed it, I believe you referenced just want to clarify, did you indicate it's a $150 million in Troms debt that you are assuming in the transaction?
Quinn P. Fanning - EVP and CFO: It is about $150 million in debt in place on a gross basis. I think the net debt at March 31 for Troms was about $139 million. If you can refer to our press release that we put out, it was a reference to assumed obligations, and that was a combination of net interest bearing debt and that's a $139 million or $140 million number I just referenced and remaining payments are on the construction and process.
Joseph Gibney - Capital One: Jeff, just one last one for you, just wanted to get sort of big picture view on Middle East, I know there is a tender out there with Aramco currently just general outlook for Middle East I'll appreciate it.
Jeff A. Gorski - EVP and COO: Yes, overall the jackup rig count continues to increase, I think Aramco is talking about stepping or they stepped out in a little bit deeper water than what they originally have been. So, overall we are pretty optimistic if that will continue to show a nice growth.
Operator: Jonathan Donnell, Howard Weil.
Jonathan Donnell - Howard Weil: Wondering if you could give us an update on your deepwater fleet and does the number of boats that still are set to roll-off of the legacy contracts they've been about 50% as of the last update. I just wonder if we can get an update on that number?
Jeffrey M. Platt - President and CEO: I think that's still about right. There is about 50% that would be (indiscernible) on to the new contract so I still think that's about right.
Jonathan Donnell - Howard Weil: So, there is still just, I guess, organic growth just those leading edge day rates for those to be moving up without seeing another step change from the overall rate landscape then?
Jeffrey M. Platt - President and CEO: Yeah, that's right. But we still are pressing the leading edge day rates too that we haven't given up on that at all but nonetheless about 50% will have that pretty significant increase because they are coming off a legacy contracts to the new contracts.
Jeff A. Gorski - EVP and COO: Jon, you see the increase in this quarter it is the March quarter's deepwater day rates and that's just part of that process kind of unfolding as we suggested last quarter that it would be doing over the next 12 to 15 months.
Jonathan Donnell - Howard Weil: Jeff, you alluded a little bit at the end of the call about sort of the opportunities that you look for outside of maybe the traditional just drilling and production support. Wonder if you can kind of give us an update on maybe the percentage of your operations right now that maybe are one that maybe a little outside the regular demand drivers that think about perhaps the seismic or kind of P&A work and maybe your thoughts on specific ways you might be expanding that or if you think that that's going to – that percentage might be changing over time?
Jeffrey M. Platt - President and CEO: Jon, I really don't have any percentages to give you on the conventional business Tidewater is in today. We are involved in some of the seismic work mostly that is not in the actual seismic acquisition, but some of the support vessels to that. We do some work around, some light subsea work. We have installed jumpers in wellheads. We are doing some of that today. So, we've got our finger in some of that, but to actually come out and give you some numbers and where that might go, I think, that's premature.
Operator: Gregory Lewis, Credit Suisse.
Gregory Lewis - Credit Suisse: Jeff, you touched a little bit on the Brazil tender that you guys won. Could you provide a little bit more color in terms of maybe the number of boats that were involved? I think right now you have around 15, 16 boats down in Brazil currently operating. Any of these new tenders that you've won in Brazil, is any of that incremental boat demand or is that more just contract or resets of existing tonnage that's already down there?
Jeffrey M. Platt - President and CEO: Greg, I think, we've talked a little bit about it before. It's a combination of both in that tender, and it was around 10 boat package for Tidewater. There were vessels that were in country on Petrobras contracts. Those will roll over and reset nicely, nice day rate increases on those, and then there is an incremental of about six ships that will be coming into Brazil that would be incremental for us down there. Again, we are very happy with this contract. Dayrates finally have moved back into an area that makes sense for us financially. So, we're pretty pleased with that contract award.
Gregory Lewis - Credit Suisse: On that, do we have any sense where those six boats are going to be being pulled from? Are those newbuilds? Are those in another basin in the Atlantic?
Jeffrey M. Platt - President and CEO: Greg, I really don't like to get down into granular detail and everybody would like that. Suffice to say these boats coming into Brazil, just to give you some general ideas on it, these are not the brand new biggest deepwater PSV, they are deepwater ships, but they tend to be some of our little bit older new deepwater boats. They are predominantly are DP-1, so again we're moving them into a very nice market and it's going to again tighten up the market for some of our new equipment coming in in other areas, but overall it's a good contract for Tidewater, we're very happy with it.
Gregory Lewis - Credit Suisse: Then just real quick wanted to follow-up on Troms real quickly. I guess the two STX boats that were acquired and they are on the water currently, are those currently operating in Norway or they're somewhere else.
Jeff A. Gorski - EVP and COO: They're somewhere else and just to make sure we acquired three STX boats, two of which have been delivered, one will be yet delivered, I think June is the delivery date, we're expecting on that.
Gregory Lewis - Credit Suisse: With Troms there is a chance that maybe that final newbuild maybe sticks around Norway?
Jeffrey M. Platt - President and CEO: There is a chance for us to stick certainly in the North Sea, could be in Norway, and potentially you could move out in Norway too. Again, we're not married to any one geographic market. It certainly makes sense that that fleet or those vessels definitely have the characteristics that it make sense to work those pretty closely with the Troms acquisition.
Gregory Lewis - Credit Suisse: Then Quinn, real quick. I don't know if this has already been done or not or we just have to wait maybe for the next 10-Q. Is there any sort of estimate for what the goodwill is going to be for the Troms acquisition?
Quinn P. Fanning - EVP and CFO: No, as I mentioned we still have (indiscernible) drill to run and obviously some integration planning as well. So hopefully, we will be able to report that to you at our future earnings conference call and I would like to think it's going to be our next one.
Operator: (Mathias Justin, Morgan Stanley).
Mathias Justin - Morgan Stanley: So I just have two more questions. Most of the things were covered. One, on the Troms and the STX and North Sea region, I was wondering if you plan on making any further acquisitions in that area or growing that market further after this acquisition?
Jeffrey M. Platt - President and CEO: We're always looking at potential acquisitions both vessels and companies on a worldwide basis and leave it that, I mean we are always looking for the right opportunity for us.
Mathias Justin - Morgan Stanley: And then just one more technical question is that, if you could give us some guidance on how you think the operating expenses are going to be for the newly acquired vessels through Troms and STX business? If there is any difference there from the rest?
Quinn P. Fanning - EVP and CFO: Well, I think ultimately it will be a function of what jurisdiction we are operating in. But as you might expect the North Sea and Norwegian sector in particular and the cold water markets in particular tend to realize higher day rates, and also experience somewhat higher operating expenses. But there is data available by asset class for the Norwegian sector of the North Sea and I could give you numbers, but it will be somewhat (indiscernible) setting in that revenue just rely on the geographic data that ODS and others provide.
Operator: Matt Conlan, Wells Fargo.
Matthew Conlan - Wells Fargo: I wanted to ask about the Norwegian PSV market a little bit. On the rig side that’s a very exclusive market and contracts are generally longer term than other markets. Is that similar characteristic to the PSV market in Norway?
Jeff A. Gorski - EVP and COO: You do have a function up there that’s certainly longer term than Norwegian market is really a pretty unique subset of the North Sea. We certainly believe it's the one that we absolutely want to be in. Obviously, that's why we did the deal. So again, it's typically higher end, higher requirements for execution and it's a market where we're very favorable too.
Matthew Conlan - Wells Fargo: But these higher-end vessels can leave and come back pretty freely?
Jeffrey M. Platt - President and CEO: Could you say it again, please?
Matthew Conlan - Wells Fargo: So, do these vessels leave the Norwegian side and come back pretty freely?
Jeffrey M. Platt - President and CEO: There tends to be a large number that are on more term contracts, in that respect, they don't. Statoil has I think 50% of the market there. It's a very high-end client, they have very high expectations and requirements for the service provided to them, and no, it's not a lot of churn, if you will, in a majority of that business. So, no, it's not necessarily a spot market type mentality, where vessels freely move in and out. There is some spot activity there, but it tends to be much less than some of the other sectors in the North Sea.
Matthew Conlan - Wells Fargo: If you don't mind, just a touch on the towing-supply/supply market again. It sounds like $550 to $600 a day was the real increase in day rates. It really seem to be pretty broad-based improved in every region, it seems to me there should be some more momentum of day rate follow-through there than you've been describing on the call. It sounds you are being a little bit more cautious on it than I would have (think)?
Jeffrey M. Platt - President and CEO: I would've (think) that rates would be moving faster too. Your observations are all generally correct. The adjusted quarter-over-quarter progression in rates, if you back out the demobilization and other one that imply that that's not real money. Demand that was just lumpy in the way we received it. But if you were to compare over eight quarters or for something like that, what has happened with average day rates in the deepwater class and average towing-supply and supply rates, that's really a tale of two fleets. As Jeff indicated with the new jackup deliveries, particularly if they are incremental working rigs with supply demand dynamic within the towing-supply and supply class should improve and as I believe Jeff mentioned on the last call, when they do improve they should translate into improved financial results faster because the contract terms tend to be shorter. So you can go back to our fiscal 2008 or 2009 and see when those rates run, they run pretty good. But at least from our perspective, it has not been experienced across geographies as we've experienced in the deepwater class and across subcategories of equipment, and at least our experience to date has been that the larger of the – at least towing supply vessels have moved better than the smaller ones, and by large and smaller, I'm generally talking about 7,000 to 10,000 brake horsepower as compared to the 5,000 to 7,000.
Matthew Conlan - Wells Fargo: Okay. Well, I'm glad you're not satisfied yet and I look forward future quarters.
Jeffrey M. Platt - President and CEO: Matt, just as you know, we never are satisfied.
Operator: David Smith, Johnson Rice.
David Smith - Johnson Rice: Speaking of never being satisfied. Hope you are satisfied with the LTI record this quarter. If I heard that right that was the second time in your history.
Jeffrey M. Platt - President and CEO: David, it was actually the year we finished the full fiscal year, which is obviously four quarters without a loss time accident.
David Smith - Johnson Rice: I wanted to ask about the regions where towing supply isn't seeing pricing improvement. Do those regions have excess local capacity that they can't easily move to the regions where we are getting price traction?
Jeffrey M. Platt - President and CEO: That segment is pretty fragmented. Ourselves and our biggest competitor were (indiscernible) who also have has in past and their announcements, both of us have seen I think pretty good utilization, in fact very high utilization in it. It's still a very fragmented market and a lot of the company, smaller companies; they may not have the wherewithal to actually move large geographic areas. So, I think little bit of that's in play. Certainly the Far East where are a lot of that equipment has been built and a good bit of it is owned by smaller operators wanting to move very far afield from that, it's not something they have the expertise capabilities or much of an appetite to do, so I think some of that's did play.
Operator: Mark Brown, Citigroup.
Mark Brown - Citigroup: Just wanted to ask if you -- what your views of the Gulf of Mexico market are and did you might have missed this, but have you ordered additional vessels for that market recently.
Jeffrey M. Platt - President and CEO: Mark, overall we look at the Gulf like everyone else does, it's certainly improving and it continues to improve, we're happy to be part of it. We did, it was public since some of the trade journals. We added two move large PSVs on order, probably within the last month. I think we signed the paperwork on that, so we have added two more to the queue for Tidewater.
Mark Brown - Citigroup: In the press release for Troms, I think it mentioned some language at the end that there might be earn out provision or something of that effect. I was just wondering if you could talk about that a little bit?
Jeffrey M. Platt - President and CEO: Yes, sure. As is frequently the case and it tends to bridge differing valuations views of buyer and a seller, we agreed with principle seller, which is a Norwegian private equity firm by the name of HitecVision, very well-known well regarded firm. We basically took a point of view as to how we thought that the market would develop over the next couple of years in terms of rates and OpEx that we were comfortable putting our hand over heart on as, I don't know if it's 95% confidence interval case or whatever you want to call, but something that we were highly confident in our ability to execute. We think the transaction economics that were laid out in the press release that $395 million reference is well supported by (ION) and those cash flows that we anticipated from the acquired vessels. The way we think about and what we agreed to what the sellers is that to the extent that without performance beyond what essentially remodeled to support our purchase price, there is a sharing mechanism that is based on essentially an adjusted EBITDA metrics over that four year period that's referenced in the press release. So, we will be more than happy to make the additional payments to seller because it will be a portion of outperformance as we modeled it. Is that responsive or? Is that what you were looking for?
Mark Brown - Citigroup: Yes, thank you.
Operator: We have no further questions at this time.
Jeffrey M. Platt - President and CEO: John, we appreciate your assistance with this call. We appreciate everyone's interest in Tidewater and you all have a great day. Thank you very much.
Operator: Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.