Press Release
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Hornbeck Offshore Announces Fourth Quarter and Annual 2008 Results
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COVINGTON, La.,
-- Segment names have been changed to Upstream and Downstream from OSV
and TTB, respectively.
-- Record quarterly Upstream revenue, net income and EBITDA
-- Q4 2008 Upstream revenues increased 38% over Q4 2007
-- Q4 2008 Upstream operating income increased 63% over Q4 2007
-- Q4 2008 Upstream net income increased 61% over Q4 2007
-- Q4 2008 diluted EPS was 35% higher than Q4 2007
-- Fleetwide effective new generation OSV dayrates at new record-levels,
up
Fourth quarter 2008 revenues increased 19.7% to Upstream Segment. Revenues from the Upstream segment were Downstream Segment. Revenues from the Downstream segment of General and Administrative ("G&A"). G&A expenses of Depreciation and Amortization. Depreciation and amortization expense was
Annual 2008 Results Revenues for 2008 increased 27.5% to Future Outlook Based on the key assumptions outlined below and in the attached data tables, the following statements reflect management's current expectations regarding future earnings and certain events. These statements are forward-looking and actual results may differ materially. Other than as expressly stated, these statements do not include the potential impact of any future capital transactions, such as vessel acquisitions, divestitures, unexpected vessel repairs and shipyard delays, business combinations, financings and unannounced newbuild programs that may be commenced after the date of this disclosure. For additional information concerning forward-looking statements, please see the note at the end of this news release. Earnings Outlook New Accounting Rule for Convertible Senior Notes. Pursuant to the
required change in method of accounting for convertible debt instruments
required by FASB Staff Position (FSP) No. APB 14-1, "Accounting for
Convertible Debt Instruments That May Be Settled in Cash upon Conversion
(Including Partial Cash Settlement)," effective The table below reflects the Company's retrospective adoption of APB 14-1
as of
Year Ended December 31,
-----------------------
2009 2008 2007 2006
---- ---- ---- ----
Forecast Actual Actual Actual
Incremental non-cash interest
expense $10,079 $9,388 $8,744 $1,398
Less: capitalized interest (1) (5,295) (7,348) (3,142) (207)
Net incremental non-cash interest
expense $4,784 $2,040 $5,602 $1,191
Earnings per common share:
Basic $0.12 $0.05 $0.14 $0.03
Diluted $0.11 $0.05 $0.13 $0.03
As of December 31,
------------------
2008 2007 2006
---- ---- ----
Long-term debt, as reported $674,602 $549,547 $549,497
APB 14-1 adjustment (56,083) (65,471) (74,215)
Long-term debt, as adjusted $618,519 $484,076 $475,282
Equity, as reported $694,378 $562,314 $454,873
APB 14-1 adjustment 42,522 43,833 47,407
Equity, as adjusted $736,900 $606,147 $502,280
(1) Capitalized interest for 2009 is estimated based on current cash
outflow assumptions for on-going newbuild construction and conversion
programs. Actual capitalized interest may vary from the estimates
above.
Annual 2009 Guidance. The Company expects total EBITDA for fiscal 2009 to
range between Key Assumptions. The Company's forward earnings guidance, outlined above
and in the attached data tables, assumes that current Upstream and Downstream
market conditions remain constant. Fleetwide average new generation OSV
dayrates are anticipated to remain in the The Company's full-year 2009 Upstream guidance includes a partial
contribution from vessels to be delivered under its MPSV program and its
fourth OSV newbuild program with the estimated newbuild delivery expectations
discussed below. In recognition of substantially reduced demand on the
shallow-shelf for conventional vessels in early 2009, the annual 2009 guidance
reflects the recent stacking of five of these vessels, which the Company
considers non-core assets. The 2009 Downstream guidance reflects a full-year
contribution from the Company's active fleet of nine double-hulled barges and
three single-hulled barges for 2009, after excluding the effect of seven
stacked vessels. In addition, the Downstream fleet complement reflects a
partial-year impact from the Energy 11101, due to this vessel reaching its OPA
90 phase out date in the first quarter of 2009, and it excludes any
contribution from the Energy 11102, a vessel that reached its OPA 90 phase out
in The Company expects that cash operating expenses per vessel-day in fiscal
2009 will not materially increase over fiscal 2008 levels, excluding
contract-related costs recoverable through higher dayrates or other revenue.
Annual G&A expenses are expected to be in the range of 9% to 10% of revenues
for fiscal 2009. The projected annual FAS 123R stock-based compensation
expense, depreciation, amortization and net interest expense that underpin the
Company's diluted EPS guidance for the full-year 2009 are included in the
attached data tables. Projected quarterly FAS 123R stock-based compensation
expense, depreciation, amortization and net interest expense for the quarter
ending Capital Expenditures Outlook Update on Maintenance Capital Expenditures. Please refer to the attached
data table for a summary, by period, of historical and projected data for each
of the following three major categories of maintenance capital expenditures:
(i) deferred drydocking charges; (ii) other vessel capital improvements and
(iii) non-vessel related capital expenditures. The Company expects total
maintenance capital expenditures for the full-year 2009 to be approximately
Update on MPSV Program. The Company's MPSV program consists of two
U.S.-flagged coastwise sulfur tankers that are being converted at domestic
shipyards into 370 class DP-2 new generation MPSVs and two newbuild T-22 class
DP-3 new generation MPSVs that have been or are being constructed in foreign
shipyards. Commissioning and certification continues on the first converted
DP-2 MPSV, the HOS Centerline, which is expected to enter service in the next
few weeks. The second converted DP-2 MPSV, the HOS Strongline, is expected to
be delivered in the fourth quarter of 2009. The first T-22 MPSV, the HOS
Achiever, was placed in service in Update on OSV Newbuild Program #4. The Company's fourth OSV newbuild
program currently consists of vessel construction contracts with three
domestic shipyards to build six 240 ED class OSVs, nine 250 EDF class OSVs and
one 290 class OSV, respectively. Eleven of these 16 new generation DP-2 OSVs
have been awarded customer contracts prior to their shipyard delivery. Three
of the 240 ED class OSVs under this program, the HOS Polestar, the HOS
Shooting Star and the HOS North Star, were placed in service in
1Q2009E 2Q2009E 3Q2009E 4Q2009E 1Q2010E 2Q2010E 3Q2010E 4Q2010E
Estimated
In-Service
Dates:
240ED class
OSVs 1 - - 1 1 - - -
250EDF class
OSVs - - 2 1 2 1 1 -
290 class OSV 1 - - - - - - -
2 - 2 2 3 1 1 -
Based on the above schedule of projected vessel in-service dates, the
Company expects to own and operate 46 and 51 new generation OSVs as of
Update on Liquidity. The Company believes that its current working
capital, available capacity under its existing revolving credit facility and
projected cash flows from operations for the fiscal years 2009 and 2010 will
be more than sufficient to meet its anticipated operating needs and the total
remaining cash requirements under its MPSV and OSV newbuild programs of
approximately Please refer to the attached data tables for a summary, by period, of historical and projected data for each of the contracted growth initiatives outlined above. All of the above capital costs and delivery date estimates for contracted growth initiatives are based on the latest available information and are subject to change. All of the figures set forth above represent expected cash outlays and do not include the allocation of construction period interest. Conference Call The Company will hold a conference call to discuss its fourth quarter 2008
financial results and recent developments at Attached Data Tables The Company has posted an electronic version of the following three pages of data tables, which are downloadable in Microsoft Excel format, on the "IR Home" page of the "Investors" section of the Hornbeck Offshore website for the convenience of analysts and investors. Forward-Looking Statements and Regulation G Reconciliation This Press Release contains "forward-looking statements," as contemplated
by the Private Securities Litigation Reform Act of 1995, in which the Company
discusses factors it believes may affect its performance in the future.
Forward-looking statements are all statements other than historical facts,
such as statements regarding assumptions, expectations, beliefs and
projections about future events or conditions. You can generally identify
forward-looking statements by the appearance in such a statement of words like
"anticipate," "believe," "continue," "could," "estimate," "expect,"
"forecast," "intend," "may," "might," "plan," "potential," "predict,"
"project," "should" or "will" or other comparable words or the negative of
such words. The accuracy of the Company's assumptions, expectations, beliefs
and projections depend on events or conditions that change over time and are
thus susceptible to change based on actual experience, new developments and
known and unknown risks. The Company gives no assurance that the
forward-looking statements will prove to be correct and does not undertake any
duty to update them. The Company's actual future results might differ from
the forward-looking statements made in this Press Release for a variety of
reasons, which include: the Company's inability to successfully or timely
complete its various vessel construction and conversion programs, especially
its MPSV program, which involves the construction and integration of highly
complex vessels and systems; changes in its vessel construction and conversion
budgets; less than anticipated success in marketing and operating its MPSVs,
which are a class of vessels that the Company has not previously owned or
operated; further weakening of demand for the Company's services; inability to
effectively curtail operating expenses from stacked vessels; inability to sell
or otherwise dispose of non-core assets on acceptable terms; unplanned
customer suspensions, cancellations, rate reductions or non-renewals of vessel
charters or failures to finalize commitments to charter vessels; the inability
or unwillingness by customers to place on hire contractually committed vessels
that are part of the Company's newbuild programs, when such vessels are
available for service; industry risks; further reductions in capital spending
budgets by customers; further decline in oil and natural gas prices; increases
in operating costs; the inability to accurately predict vessel utilization
levels and dayrates; less than anticipated subsea infrastructure demand
activity in the U.S. Gulf of
Contacts:
Statement of Operations (unaudited):
Three Months Ended Twelve Months Ended
------------------ -------------------
December September December December December
31, 2008 30, 2008 31, 2007 31, 2008 31, 2007
-------- --------- -------- -------- --------
Revenues $121,029 $109,060 $101,062 $432,084 $338,970
Costs and expenses:
Operating expenses 40,168 41,270 40,553 164,532 126,876
Depreciation and
amortization 13,963 12,842 10,828 52,002 35,169
General and
administrative
expenses 10,437 8,726 8,957 37,155 32,857
------ ----- ----- ------ ------
64,568 62,838 60,338 253,689 194,902
------ ------ ------ ------- -------
Gain on sale of
assets - 6,401 - 8,402 1,859
--- ----- --- ----- -----
Operating income 56,461 52,623 40,724 186,797 145,927
Other income (expense): Interest income 155 142 2,564 1,525 18,414 Interest expense (2,187) (1,062) (2,799) (6,292) (15,697) Other income, net(1) 49 67 (71) 190 (43)
-- -- ---- --- ---
(1,983) (853) (306) (4,577) 2,674
------ ---- ---- ------ -----
Income before income taxes 54,478 51,770 40,418 182,220 148,601
Income tax expense 19,399 18,275 14,624 65,107 53,810
------ ------ ------ ------ ------
Net income $35,079 $33,495 $25,794 $117,113 $94,791
======= ======= ======= ======== =======
Basic earnings per
share of common
stock $1.36 $1.29 $1.00 $4.53 $3.69
===== ===== ===== ===== =====
Diluted earnings per share of common
stock $1.31 $1.24 $0.97 $4.33 $3.58
===== ===== ===== ===== =====
Weighted average
basic shares
outstanding 25,882 25,867 25,731 25,840 25,662
====== ====== ====== ====== ======
Weighted average
diluted shares
outstanding(2) 26,803 27,089 26,661 27,020 26,467
====== ====== ====== ====== ======
Other Operating Data (unaudited):
Three Months Ended Twelve Months Ended
------------------ -------------------
December September December December December
31, 2008 30, 2008 31, 2007 31, 2008 31, 2007
-------- --------- -------- -------- --------
Offshore Supply Vessels: Average number of
new generation
OSVs(3) 38.3 36.8 35.0 36.4 29.0
Average new
generation fleet
capacity
(deadweight)(3) 90,096 85,885 80,903 84,892 67,739 Average new generation vessel capacity
(deadweight) 2,352 2,333 2,312 2,329 2,341
Average new
generation
utilization
rate(4) 96.4% 96.1% 90.4% 95.4% 93.3%
Average new
generation
dayrate(5) $24,385 $23,884 $22,315 $22,939 $21,505
Effective
dayrate(6) $23,507 $22,953 $20,173 $21,884 $20,064
Tugs and Tank Barges:
TTB Consolidated:
Average number of
tank barges(7) 21.0 21.0 19.5 20.8 18.5
Average fleet
capacity
(barrels)(7) 1,745,256 1,745,256 1,647,411 1,732,982 1,579,989
Average barge
size (barrels) 83,107 83,107 83,787 83,190 85,071
Average utilization
rate(4) 59.4% 53.7% 87.1% 64.8% 90.7%
Effective utilization
rate(8) 83.6% 73.3% 87.1% 78.8% 90.7%
Average dayrate(9) Effective dayrate(6) Double-hulled tank barges: Average utilization rate(4) 75.6% 80.2% 83.9% 85.0% 92.4%
Average
dayrate(9) $20,157 $22,642 $22,941 $21,806 $23,026
Effective
dayrate(6) $15,239 $18,159 $19,247 $18,535 $21,276
Single-hulled tank barges: Average utilization
rate(4) 47.2% 33.8% 89.1% 49.9% 89.8%
Effective utilization
rate(8) 95.9% 63.5% 89.1% 72.3% 89.8%
Average dayrate(9) Effective dayrate(6) Balance Sheet Data (unaudited):
As of As of
December 31, December 31,
2008 2007
---- ----
Cash and cash equivalents $20,216 $173,552
Working capital 66,069 214,266
Property, plant and equipment, net 1,394,643 953,210 Total assets 1,585,046 1,262,051
Total long-term debt 674,602 549,547
Stockholders' equity 694,378 562,314
Cash Flow Data (unaudited):
Twelve Months Ended
-------------------
Cash provided by operating activities Cash used in investing activities (479,944) (438,890)
Cash provided by financing activities 127,109 2,710
Hornbeck Offshore Services, Inc. and Subsidiaries
Unaudited Other Financial Data
(in thousands, except Financial Ratios)
Other Financial Data (unaudited):
Three Months Ended Twelve Months Ended
------------------ -------------------
December September December December December
31, 2008 30, 2008 31, 2007 31, 2008 31, 2007
-------- --------- -------- -------- --------
---------
Upstream:
---------
Revenues $99,918 $88,015 $72,224 $334,360 $228,355
Operating income Operating margin 53.2% 58.3% 45.2% 51.5% 49.9% Components of EBITDA(10) Net income $33,286 $32,862 $20,664 $108,762 $73,565
Interest expense
(income), net 1,470 614 333 3,251 (1,309)
Income tax
expense 18,451 17,930 11,666 60,466 41,717
Depreciation 6,368 5,466 4,568 21,895 13,443
Amortization 3,045 2,629 2,141 11,063 6,460
----- ----- ----- ------ -----
EBITDA(10) $62,620 $59,501 $39,372 $205,437 $133,876
======= ======= ======= ======== ========
Adjustments to EBITDA Stock-based
compensation
expense $1,746 $2,019 $987 $7,366 $3,989
Interest income 128 106 1,595 1,054 11,572
--- --- ----- ----- ------
Adjusted
EBITDA(10) $64,494 $61,626 $41,954 $213,857 $149,437
======= ======= ======= ======== ========
EBITDA(10) Reconciliation to GAAP: EBITDA(10) Cash paid for deferred drydocking charges (2,759) (5,070) (2,908) (13,031) (12,391) Cash paid for
interest (9,142) (594) (3,223) (18,186) (11,322)
Cash paid for taxes (2,023) (659) (730) (4,362) (2,627) Changes in working
capital (1,118) (9,992) (13,262) 3,115 (12,305)
Stock-based compensation
expense 1,746 2,019 987 7,366 3,989
Changes in other,
net 1,394 (6,760) (34) (6,999) (1,961)
----- ------ --- ------ ------
Net cash provided by operating
activities $50,718 $38,445 $20,202 $173,340 $97,259
======= ======= ======= ======== =======
-----------
Downstream:
-----------
Revenues $21,111 $21,045 $28,838 $97,724 $110,615
Operating income $3,302 $1,284 $8,071 $14,504 $31,993
Operating margin 15.6% 6.1% 28.0% 14.8% 28.9%
Components of EBITDA(10) Net income $1,793 $633 $5,130 $8,351 $21,226
Interest expense
(income), net 562 306 (98) 1,516 (1,408)
Income tax expense 948 345 2,958 4,641 12,093
Depreciation 2,915 2,997 2,591 11,603 9,507
Amortization 1,635 1,750 1,528 7,441 5,759
----- ----- ----- ----- -----
EBITDA(10) $7,853 $6,031 $12,109 $33,552 $47,177
====== ====== ======= ======= =======
Adjustments to EBITDA
Stock-based
compensation
expense $637 $809 $891 $3,449 $3,401
Interest income 27 36 969 471 6,842
-- -- --- --- -----
Adjusted
EBITDA(10) $8,517 $6,876 $13,969 $37,472 $57,420
====== ====== ======= ======= =======
EBITDA(10) Reconciliation to GAAP: EBITDA(10) $7,853 $6,031 $12,109 $33,552 $47,177
Cash paid for
deferred
drydocking
charges (2,193) (341) (487) (6,742) (7,421)
Cash paid for
interest (3,415) (323) (7,998) (6,795) (11,322)
Cash paid for taxes - - (275) (1,757) (2,172) Changes in working
capital 1,346 4,934 5,771 4,942 8,177
Stock-based compensation
expense 637 809 891 3,449 3,401
Changes in other,
net (477) (119) 82 (506) 309
---- ---- -- ---- ---
Net cash provided by operating
activities $3,751 $10,991 $10,093 $26,143 $38,149
====== ======= ======= ======= =======
-------------
Consolidated:
-------------
Revenues $121,029 $109,060 $101,062 $432,084 $338,970
Operating income $56,461 $52,623 $40,724 $186,797 $145,927
Operating margin 46.7% 48.3% 40.3% 43.2% 43.1%
Components of EBITDA(10) Net income Interest expense (income), net 2,032 920 235 4,767 (2,717) Income tax expense 19,399 18,275 14,624 65,107 53,810 Depreciation 9,283 8,463 7,159 33,498 22,950
Amortization 4,680 4,379 3,669 18,504 12,219
----- ----- ----- ------ ------
EBITDA(10) $70,473 $65,532 $51,481 $238,989 $181,053
======= ======= ======= ======== ========
Adjustments to EBITDA Stock-based
compensation
expense $2,383 $2,828 $1,878 $10,815 $7,390
Interest income 155 142 2,564 1,525 18,414
--- --- ----- ----- ------
Adjusted
EBITDA(10) $73,011 $68,502 $55,923 $251,329 $206,857
======= ======= ======= ======== ========
EBITDA(10) Reconciliation to GAAP: EBITDA(10) $70,473 $65,532 $51,481 $238,989 $181,053
Cash paid for
deferred
drydocking
charges (4,952) (5,411) (3,395) (19,773) (19,812)
Cash paid for
interest (12,557) (917) (11,221) (24,981) (22,644)
Cash paid for
taxes (2,023) (659) (1,005) (6,119) (4,799)
Changes in
working capital 228 (5,058) (7,491) 8,057 (4,128) Stock-based compensation
expense 2,383 2,828 1,878 10,815 7,390
Changes in other,
net 917 (6,879) 48 (7,505) (1,652)
--- ------ -- ------ ------
Net cash provided
by operating
activities $54,469 $49,436 $30,295 $199,483 $135,408
======= ======= ======= ======== ========
Hornbeck Offshore Services, Inc. and Subsidiaries
Unaudited Other Financial Data
(in millions, except Historical Data)
Forward Earnings Guidance and Projected EBITDA Reconciliation: (Unaudited)
2009 Guidance Full-Year 2009 Pro Forma Run-Rate
Estimate Estimate(11)
-------- -----------
Low High Low High
--- ---- --- ----
Components of Projected EBITDA(10) Adjusted EBITDA(10) $240.2 $260.2 $337.8 $411.5
Interest income 0.2 0.2 0.5 0.5
Stock-based compensation
expense 10.0 10.0 10.0 10.0
---- ---- ---- ----
EBITDA(10) $230.0 $250.0 $327.3 $401.0
Depreciation 45.0 45.0 59.2 59.2
Amortization 22.5 22.5 33.3 33.3
Interest expense, net:
Interest expense 27.7 27.3 24.7 24.7
Incremental APB 14-1
non-cash interest
expense(12) 10.1 10.1 10.1 10.1
Capitalized interest (19.7) (19.7) - -
Interest income (0.2) (0.2) (0.5) (0.5)
---- ---- ---- ----
Total interest expense, net 17.9 17.5 34.3 34.3 Income tax expense 52.5 59.9 72.8 99.5
Income tax rate 36.3% 36.3% 36.3% 36.3%
Net income $92.1 $105.1 $127.7 $174.7
Weighted average diluted
shares outstanding(13) 27.2 27.2 27.2 27.2
Diluted earnings per share,
as reported $3.39 $3.86 $4.69 $6.42
Incremental APB 14-1 non-cash
interest expense(12) 0.11 0.11 0.24 0.24
---- ---- ---- ----
Diluted earnings per share,
as adjusted(14) $3.50 $3.97 $4.93 $6.66
Projected EBITDA(10) Reconciliation to GAAP: EBITDA(10) $230.0 $250.0 $327.3 $401.0
Cash paid for deferred
drydocking charges (21.7) (21.7) (29.1) (29.1)
Cash paid for interest (25.8) (25.5) (22.9) (22.9)
Cash paid for taxes (14.5) (14.5) (14.5) (14.5)
Changes in working
capital(15) 12.9 7.9 (29.0) (31.3)
Stock-based compensation
expense 10.0 10.0 10.0 10.0
Changes in other, net(15) 1.9 1.9 1.9 1.9
--- --- --- ---
Cash flows provided by
operating activities $192.8 $208.1 $243.7 $315.1
====== ====== ====== ======
Capital Expenditures Data (unaudited)(16): Historical Data (in thousands):
Three Months Ended Twelve Months Ended
------------------ -------------------
December September December December December
31, 2008 30, 2008 31, 2007 31, 2008 31, 2007
-------- --------- -------- -------- --------
Maintenance Capital Expenditures: Deferred drydocking
charges $4,952 $5,411 $3,395 $19,773 $19,812
Other vessel capital improvements 2,865 5,274 8,543 22,192 17,966 Non-vessel related capital expenditures 272 897 727 23,691 4,868
--- --- --- ------ -----
$8,089 $11,582 $12,665 $65,656 $42,646
====== ======= ======= ======= =======
Growth Capital Expenditures: MPSV program $11,777 $76,857 $22,725 $239,655 $106,654
TTB newbuild
program #2 - 1,592 8,147 8,778 49,538
OSV newbuild
program #4 51,013 42,503 38,423 182,456 71,504
Sea Mar acquisition - - - - 186,000 --- --- --- --- -------
$62,790 $120,952 $69,295 $430,889 $413,696
======= ======== ======= ======== ========
Forecasted Data:
1Q2009E 2Q2009E 3Q2009E 4Q2009E 2009E
------- ------- ------- ------- -----
Maintenance Capital Expenditures: Deferred drydocking
charges $5.7 $8.5 $1.8 $5.7 $21.7
Other vessel capital
improvements 0.4 0.8 0.2 0.7 2.1
Non-vessel related
capital expenditures 4.1 0.8 1.3 0.8 7.0
--- --- --- --- ---
$10.2 $10.1 $3.3 $7.2 $30.8
===== ===== ==== ==== =====
Growth Capital Expenditures: MPSV program $42.5 $12.6 $22.5 $11.8 $89.4
OSV newbuild program #4 45.7 35.9 35.4 20.4 137.4
---- ---- ---- ---- -----
$88.2 $48.5 $57.9 $32.2 $226.8
===== ===== ===== ===== ======
Full Construction Cycle Data:
Pre-2008A 2008A 2009E 2010E Total
--------- ----- ----- ----- -----
Growth Capital Expenditures: MPSV program $145.9 $239.7 $89.4 $- $475.0
OSV newbuild program #4 88.9 182.5 137.4 41.2 450.0
---- ----- ----- ---- -----
$234.8 $422.2 $226.8 $41.2 $925.0
====== ====== ====== ===== ======
1 Represents other income and expenses, including gains or losses related to foreign currency exchange and minority interests in income or loss from unconsolidated entities. 2 Stock options representing rights to acquire 430, 74 and 71 shares of common stock for the three months ended 2008 and stock for the twelve months ended respectively, were excluded from the calculation of diluted earnings per share, because the effect was antidilutive after considering the exercise price of the options in comparison to the average market price, proceeds from exercise, taxes, and related unamortized compensation. As of 1.625% convertible senior notes were not dilutive, as the average price of the Company's stock was less than the effective conversion price of 3 The Company owned 39 new generation OSVs as of new generation OSVs were acquired on OSVs were placed in service under the Company's fourth OSV newbuild program. Excluded from this data are 10 conventional OSVs that were also acquired in in were sold in conventional OSVs to be non-core assets. 4 Average utilization rates are average rates based on a 365-day year. Vessels are considered utilized when they are generating revenues. 5 Average new generation OSV dayrate represents average revenue per day, which includes charter hire, crewing services, and net brokerage revenues, based on the number of days during the period that the OSVs generated revenues. 6 Effective dayrate represents the average dayrate multiplied by the utilization rate for the respective period. 7 The averages for the three and twelve-month periods ended December 31, 2008 include the Energy 6506, Energy 6507 and Energy 6508, three double-hulled tank barges delivered under the Company's second TTB newbuild program in respectively. 8 Effective utilization rate is based on a denominator comprised only of vessel-days available for service by the active fleet, which excludes the impact of stacked vessel days. As of following single-hulled tank barges were stacked: the Energy 2201, Energy 6501, Energy 6502, Energy 6504, Energy 7001, and Energy 7002. Vessels are considered utilized when they are generating revenues. 9 Average dayrates represent average revenue per day, including time charters, brokerage revenue, revenues generated on a per- barrel-transported basis, demurrage, shipdocking and fuel surcharge revenue, based on the number of days during the period that the tank barges generated revenue. For purposes of brokerage arrangements, this calculation excludes that portion of revenue that is equal to the cost paid by customers of in-chartering third party equipment. 10 Non-GAAP Financial Measure The Company discloses and discusses EBITDA as a non-GAAP financial
measure in its public releases, including quarterly earnings releases,
investor conference calls and other filings with the Commission. The
Company defines EBITDA as earnings (net income) before interest,
income taxes, depreciation and amortization. The Company's measure of
EBITDA may not be comparable to similarly titled measures presented by
other companies. Other companies may calculate EBITDA differently
than the Company, which may limit its usefulness as a comparative
measure.
The Company views EBITDA primarily as a liquidity measure and, as
such, believes that the GAAP financial measure most directly
comparable to it is cash flows provided by operating activities.
Because EBITDA is not a measure of financial performance calculated in
accordance with GAAP, it should not be considered in isolation or as a
substitute for operating income, net income or loss, cash flows
provided by operating, investing and financing activities, or other
income or cash flow statement data prepared in accordance with GAAP.
EBITDA is widely used by investors and other users of the Company's
financial statements as a supplemental financial measure that, when
viewed with GAAP results and the accompanying reconciliations, the
Company believes provides additional information that is useful to
gain an understanding of the factors and trends affecting its ability
to service debt, pay deferred taxes and fund drydocking charges and
other maintenance capital expenditures. The Company also believes the
disclosure of EBITDA helps investors meaningfully evaluate and compare
its cash flow generating capacity from quarter to quarter and year to
year.
EBITDA is also a financial metric used by management (i) as a
supplemental internal measure for planning and forecasting overall
expectations and for evaluating actual results against such
expectations; (ii) as a significant criteria for annual incentive cash
bonuses paid to the Company's executive officers and other shore-based
employees; (iii) to compare to the EBITDA of other companies when
evaluating potential acquisitions; and (iv) to assess the Company's
ability to service existing fixed charges and incur additional
indebtedness.
In addition, the Company also makes certain adjustments, as
applicable, to EBITDA for losses on early extinguishment of debt,
FAS123R stock-based compensation expense and interest income, or
Adjusted EBITDA, to compute ratios used in certain financial covenants
of its credit agreements with various lenders and bond investors. The
Company believes that these ratios are material components of such
financial covenants and failure to comply with such covenants could
result in the acceleration of indebtedness or the imposition of
restrictions on the Company's financial flexibility.
Set forth below are the material limitations associated with using
EBITDA as a non-GAAP financial measure compared to cash flows provided
by operating activities.
-- EBITDA does not reflect the future capital expenditure requirements
that may be necessary to replace the Company's existing vessels as
a result of normal wear and tear,
-- EBITDA does not reflect the interest, future principal payments and
other financing-related charges necessary to service the debt that
the Company has incurred in acquiring and constructing its vessels,
-- EBITDA does not reflect the deferred income taxes that the Company
will eventually have to pay once the Company is no longer in an
overall tax net operating loss carryforward position, as
applicable, and
-- EBITDA does not reflect changes in the Company's net working
capital position.
Management compensates for the above-described limitations in using
EBITDA as a non-GAAP financial measure by only using EBITDA to
supplement the Company's GAAP results.
11 "Pro Forma Run-Rate -- Low" scenario illustrates the estimated incremental operating results from any recently acquired or constructed
vessels that have been placed in service since
12 Represents incremental non-cash interest expense resulting from the recent adoption of APB 14-1. See "New Accounting Rule for Convertible Senior Notes" in the Future Outlook section of this press release for more information regarding APB 14-1. 13 Projected weighted-average diluted shares do not reflect any potential dilution resulting from the Company's 1.625% convertible senior notes.
The Company's convertible senior notes become dilutive when the average
price of the Company's stock exceeds the effective conversion price of
14 Diluted earnings per share, as adjusted, excludes the incremental impact of the recent adoption of APB 14-1. See "New Accounting Rule for Convertible Senior Notes" in the Future Outlook section of this press release for more information regarding APB 14-1. 15 Projected cash flows provided by operating activities are based, in part, on estimated future "changes in working capital" and "changes in
other, net," that are susceptible to significant variances due to the
timing at quarter-end of cash inflows and outflows, most of which are
beyond the Company's ability to control. However, any future variances
in those two line items from the above forward looking reconciliations
should result in an equal and opposite adjustment to actual cash flows
provided by operating activities.
16 The capital expenditure amounts included in this table are cash outlays before the allocation of construction period interest, as applicable.
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