Press Release
View printer-friendly version |
| << Back |
|
Hornbeck Offshore Announces Record Results for Third Quarter 2005, Updates Calendar 2005 and Increases Calendar 2006 Guidance
|
|
Current average OSV dayrates are $15,000 with leading-edge spot rates above $17,000 Third double-hulled tank barge delivered from shipyard in October 2005 Fourth and fifth newbuild tank barges are on-track for Q4 2005 deliveries COVINGTON, La., Nov. 3 /PRNewswire-FirstCall/ -- Hornbeck Offshore Services, Inc. (NYSE: HOS) announced today record results for the third quarter ended September 30, 2005. Third quarter revenues increased $13.6 million, or 41.3%, to $46.5 million compared to $32.9 million for the third quarter of 2004. Operating income was $16.8 million, or 36.1% of revenues, for the third quarter of 2005 compared to $9.2 million, or 28.0% of revenues, for the same quarter in 2004. The Company's record results continue to be driven primarily by strong OSV market conditions in the U.S. Gulf of Mexico. Net income for the third quarter of 2005 was $9.4 million, or $0.44 per diluted share, which nearly tripled net income for the third quarter of 2004 of $3.3 million, or $0.15 per diluted share. This increase in quarterly net income includes an after-tax gain on the disposition of assets of $0.5 million, or $0.02 per diluted share, resulting from the sales of one of the OPA 90 single-hulled tank barges that the Company retired from service in December 2004, the Energy 9501, and one lower horsepower offshore tug, the North Service. Significantly higher dayrates and utilization in the OSV segment primarily contributed to a 63.5% increase in EBITDA to $25.0 million over the third quarter of 2004. The Company's third quarter 2005 EBITDA results were at the high end of the updated guidance range of $23 to $25 million, which was increased on September 26, 2005 from an initial quarterly guidance range of $22 to $24 million. Please refer to the attached table for a definition and reconciliation of EBITDA to its most directly comparable GAAP financial measure. Todd Hornbeck, the Company's Chairman, President and CEO, stated, "The demand for our new generation equipment, which was already high before the hurricane season due to increased drilling and production activity in the deepwater and deep shelf segments of our market, has increased further since Hurricanes Katrina and Rita. These recent hurricanes that devastated the Gulf Coast region had a significant impact on offshore drilling and production facilities and resulted in offshore inspection, repair and construction activity that we believe may last two years or more. The substantial increase since 2001 in deepwater and ultra-deepwater production and subsea installations set the stage for the significant damage to offshore infrastructure in the U.S. Gulf of Mexico (GoM). Notwithstanding the extensive oilfield damage that was caused in the path of the two storms, market indications continue to support our bullish outlook for a protracted up-cycle in the GoM, with multi-year term contracts being fixed for existing rigs and rigs currently under construction for service into 2010. Currently, four of our vessels are working exclusively on hurricane-related ROV support activity. "We believe that we are now entering another phase of step-change innovation in our industry. These two back-to-back Category 5 hurricanes, which were historically unprecedented in the GoM oilfield, have revealed how crucial a reliable domestic oil and gas supply-chain really is to our nation. Future deepwater rigs and offshore production units will have to be engineered and new equipment developed to withstand wind forces and wave action now better understood from the new meteorological data supplied by Hurricanes Katrina and Rita. As with the advent of the deepwater market in the mid- 1990's, new designs and engineering will likely require new, more versatile offshore service vessels to complement our existing multi-class fleet of OSVs to service the demand drivers of the future, which further underscores the rationale behind our recently announced MPSV conversion and proprietary OSV newbuild programs. "Since the end of the third quarter, our fleetwide average OSV dayrates have exceeded $15,000, which is up about $1,000 per day from the level we reported just prior to the launch of our recent debt and equity roadshow. Leading-edge rates are averaging well above that level with spot rates for our 200 class vessels starting at $17,000 per day. We remain well positioned to participate in any further rate increases over current levels with roughly 20% and 65% of our available vessel days for the remainder of 2005 and calendar 2006 still uncontracted," Mr. Hornbeck continued. "Our tug and tank barge fleet continued to provide stable cash flows during the third quarter, despite having 43 less vessel service days than expected on our last call due to accelerated 2006 drydockings that were undertaken in September to position certain of our vessels for high margin winter season time charters. With the October delivery of our third double- hulled tank barge newbuild, the Energy 11104, and the final two barges of our first tank barge newbuild program scheduled to be delivered and placed in service later this quarter, we continue to move toward a new EBITDA run-rate of roughly 50% higher than historical levels for this division. Our tug and tank barge segment, with a full year contribution from our first double-hulled newbuild program, is expected to provide the operating cash flow necessary to cover 100% of our estimated company-wide debt-service and deferred drydocking charges for calendar 2006," added Mr. Hornbeck. OSV Segment. Revenues from the OSV segment were $31.3 million for the third quarter of 2005, an increase of 55.0% from $20.2 million for the same period in 2004. The net increase in segment revenues is due to the quarter- over-quarter increase in average dayrates and utilization, primarily related to a substantial improvement in OSV market conditions in the U.S. Gulf of Mexico, as well as the addition of two vessels in early 2005. The Company's OSV utilization rate was 98.7% for the three months ended September 30, 2005, compared to 93.2% achieved for the same period of 2004. The average OSV dayrate for the third quarter of 2005 improved 35.1%, or $3,542 per day, to $13,638 compared to $10,096 for the same period of 2004. The Company's effective, or utilization adjusted, dayrate increased 43.1% from the prior- year quarter. These market-driven improvements resulted in operating income nearly doubling that of the prior-year quarter, illustrating the operating leverage for this segment. Tug and Tank Barge Segment. Tug and tank barge segment revenues for the third quarter of 2005 were up 18.9% over the same period in 2004 to $15.1 million compared to the prior-year quarter. Utilization in the tug and tank barge segment increased to 83.9% from 76.0% for the third quarter of 2004, primarily due to a change in contract mix from contracts of affreightment (COA) to time charters and less drydocking and repair activity. Average dayrates rose to $12,809 compared to $11,151 during the same period of 2004. The increase in average dayrates was primarily related to the OPA 90-related tightening of the tank barge market in the northeastern United States and an increase in the Company's average mix of double-hulled barge capacity. Operating income decreased by $0.3 million to $1.2 million and operating margins decreased from 12.1% a year ago to 7.8% this quarter due to expected increases in allocated corporate G&A costs and higher depreciation and amortization expenses based on the changing fleet mix. However, operating margins in this segment are expected to increase in 2006, with further dayrate expansion once all five of the double-hulled barges constructed under the first tank barge newbuild program are in service for a full year. G&A. G&A costs for the third quarter of 2005 were up $2.2 million over the same period in 2004 to $5.7 million and up $1.0 million sequentially. G&A increases resulted from higher personnel and health insurance costs and rising costs associated with corporate governance initiatives, such as compliance with the Sarbanes-Oxley Act. G&A costs for calendar 2005 are still expected to be roughly 11% of revenues, which is consistent with prior guidance. Nine Month Results Revenues for the first nine months of 2005 increased 32.7% to $125.4 million compared to $94.5 million for the same period in 2004. Operating income was $43.1 million, or 34.4% of revenues, for the nine months of 2005 compared to $25.7 million, or 27.2% of revenues, for the same period in 2004. Net income for the first nine months of 2005 nearly tripled to $22.4 million, or $1.05 per diluted share, compared to net income of $7.6 million, or $0.39 per diluted share, for the first nine months of 2004. The Company's results for the current nine months were positively impacted by strong market conditions in the OSV segment along with the incremental contributions from acquired vessels and newly constructed vessels delivered since September 2004. The Company's net income for the first nine months of 2005 included a $1.7 million ($1.1 million after tax or $0.05 per share) loss on early extinguishment of debt related to the January 2005 redemption of the non- tendered 10.625% senior notes that were still outstanding as of December 31, 2004. Earnings 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. 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 business combinations, divestitures, financings, unannounced newbuilds or vessel acquisitions that may be commenced or completed after the date of this news release. Fourth Quarter 2005 Guidance. The Company expects EBITDA for the fourth quarter of 2005 to range between $28.0 million and $30.0 million. Please refer to the attached data table for a definition and reconciliation of forward EBITDA guidance to its most directly comparable GAAP financial measure. The Company expects diluted earnings per share, or EPS, for the fourth quarter of 2005 to range between $0.41 and $0.46. Updated Calendar 2005 Guidance. Recognizing its actual results for the first nine months of 2005 and the favorable outlook for the balance of the year, the Company now expects total EBITDA for the full year 2005 to range between $93.0 million and $95.0 million and diluted EPS is now expected to range between $1.51 and $1.56, excluding the aforementioned $0.05 per share loss on early extinguishment of debt incurred during the first quarter of 2005. Updated Calendar 2006 Guidance. The Company now expects total EBITDA for the full year 2006 to range between $115.0 million and $120.0 million and diluted EPS is now expected to range between $1.69 and $1.81. Effect of Recent Public Equity Offering. On October 5, 2005, the Company issued 6.1 million of additional new shares of common stock in an underwritten public equity offering. This offering and a private placement of debt that closed on October 4, 2005 resulted in aggregate gross proceeds to the Company of $290.1 million. The upwardly revised EPS guidance ranges for each of the periods presented above reflect higher expected net income from improving OSV market conditions offset, in part, by the increase in total weighted-average number of shares of common stock outstanding after the recent common stock offering. The above guidance ranges do not reflect incremental vessel-related net income associated with the deployment of capital raised, as the primary use of proceeds from the public equity offering is for the construction or conversion of vessels that are not expected to contribute operating results until after 2006. The construction period for such vessels is expected to extend through mid-2008. Based on current projections of operating cash flow during the roughly 2.5 year construction period, the Company believes that, without drawing on its $100.0 million revolving credit facility or issuing additional long-term capital, it could use up to $150.0 million of its current cash position for potential acquisitions it may identify in the future that would be immediately accretive to net income and still maintain a minimum cash balance of $25.0 million. The Company remains committed to its growth strategy of making opportunistic acquisitions that meet its strategic and financial investment criteria. However, the timing of such acquisitions are not predictable or solely within the Company's control. Key Assumptions. The above guidance reflects management's belief that current favorable OSV market conditions will continue through the remainder of 2005 and all of 2006. Fleetwide average OSV dayrates are expected to remain at or above $15,000 and fleetwide average utilization is expected to remain in the mid-90% range throughout the 2005 and 2006 guidance periods. The above guidance also reflects the fact that 2005 is a transition year for the Hornbeck tug and tank barge fleet. The first half of 2005 was impacted by the temporary loss of tank barge capacity due to the timing of OPA 90 retirements and newbuild delivery dates, the extra cost burden related to a lower tug-barge ratio in early 2005, as well as the previously reported delays in delivery schedules for the first two newbuilds of the Company's five barge newbuild program. The net effect of the decrease in capacity due to such OPA 90-related retirements and the incremental contribution from the newbuild capacity is expected to result in EBITDA from the tug and tank barge segment of approximately 25% of the mid-point of the company-wide 2005 guidance range of $93.0 million to $95.0 million. Guidance for 2006 assumes a full-year contribution from all five new double-hulled barges, which is expected to result in EBITDA from the tug and tank barge segment of approximately 30% of the mid-point of the updated company-wide 2006 guidance range of $115.0 million to $120.0 million. The Company expects year-over-year increases of approximately 10% in its aggregate operating and G&A expenses for both 2005 and 2006 commensurate with prevailing oilfield service industry trends and higher costs related to corporate governance. G&A is assumed to remain at approximately 11% of revenue for both 2005 and 2006. However, the above guidance assumes that improvements in revenue will allow the Company to maintain or improve operating and net income margins for each of the next two years. Capital Expenditure Outlook Based on the key assumptions outlined below and in the attached data tables, the following statements reflect management's current expectations regarding future capital expenditures. 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 business combinations, divestitures, financings, unannounced newbuilds or vessel acquisitions that may be commenced or completed after the date of this news release. Update on Maintenance Capital Expenditures. The Company expects maintenance capital expenditures for the fourth quarter of 2005 to be approximately $3.4 million. The Company expects maintenance capital expenditures for the full calendar year 2005 to be approximately $14.2 million. The Company expects maintenance capital expenditures for the full calendar year 2006 to range between $18.5 million and $23.0 million. 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; (iii) non-vessel related capital improvements. Update on TTB Newbuild Program #1. On November 6, 2003, the Company announced the commencement of its first tug and tank barge newbuild program ("TTB Newbuild Program #1"), which is expected to be completed during the fourth quarter of 2005. That program ultimately included the construction of five double-hulled tank barges with total carrying-capacity of 600,000 barrels and the purchase and retrofit of four 6,000 horsepower ocean-going tugs. As noted above, the Company took delivery of its third double-hulled newbuild tank barge in October 2005 and expects to take shipyard deliveries of the remaining two double-hulled tank barges under this newbuild program by the end of 2005. The Company recently purchased the second two 6,000 horsepower offshore tugs under this program, renamed the Eagle Service and Patriot Service, and are currently retrofitting such vessels for service in the northeastern U.S. These two offshore tugs are also expected to be placed in service by the end of 2005. The aggregate total cost of the Company's first tug and tank barge newbuild program is expected to be on-budget at roughly $121.0 million. Update on MPSV Conversion Program. On May 5, 2005, the Company announced a conversion program to retrofit two coastwise sulfur tankers into U.S.- flagged, new generation 370-foot multi-purpose supply vessels, or MPSVs ("MPSV Conversion Program"). The total project cost to acquire and convert the two vessels is currently estimated to be $65.0 million in the aggregate. The Company has ordered certain vessel components and critical path machinery, which will ultimately be furnished to the shipyard for the conversion, and is evaluating prospective domestic shipyards. However, it has not yet contractually committed to a shipyard for this conversion program. The Company now anticipates delivery of the converted vessels during the first half of 2007. Update on OSV Newbuild Program #4. On September 26, 2005, the Company announced the commencement of its fourth new vessel construction program for its OSV business segment ("OSV Newbuild Program #4"). Based on the latest internal estimates, the incremental cost of this expansion program is expected to be approximately $170.0 million in the aggregate. The precise number of vessels to be constructed and their specifications will be finalized as certain milestones are completed, including the negotiation of shipyard contracts. The Company currently plans to build OSVs with approximately 20,000 deadweight tons of capacity. The Company anticipates delivery of these newly constructed vessels beginning in mid-2007 and extending through mid- 2008. Update on TTB Newbuild Program #2. On September 26, 2005, the Company also announced the commencement of its second new vessel construction program for its tug and tank barge business segment ("TTB Newbuild Program #2"). The Company is currently seeking bids from domestic shipyards for this program. Based on the latest internal estimates, the incremental cost of this expansion program is currently expected to be approximately $105.0 million in the aggregate, which is slightly higher than previously announced. The precise number of vessels to be constructed and their specifications will be finalized as certain milestones are completed, including the negotiation of shipyard contracts. The Company currently plans to build double-hulled tank barges with approximately 400,000 barrels of carrying capacity plus related offshore tugs. The Company anticipates delivery of these newly constructed vessels during calendar 2007. Please refer to the attached data tables for a summary, by period, of historical and projected data for each of the pending growth initiatives outlined above. All of the above capital cost and delivery date estimates for pending growth initiatives are based on the latest available information and are subject to change. The Company plans to refine these estimates as soon as firm shipyard contracts are executed, which will likely occur within the next few months. All of the figures set forth above represent expected cash outlays and do not include capitalized construction period interest. Conference Call The Company will hold a conference call to discuss its third quarter 2005 financial results and recent developments at 10:00 a.m. Eastern (9:00 a.m. Central) today, November 3, 2005. To participate in the call, dial (303) 262- 2131 and ask for the Hornbeck Offshore call at least 10 minutes prior to the start time, or access it live over the Internet by logging onto the web at http://www.hornbeckoffshore.com, on the "IR Home" page of the "Investors" section of the Company's website. To listen to the live call on the web, please visit the website at least fifteen minutes early to register, download and install any necessary audio software. An archived version of the web cast will be available shortly after the call for a period of 60 days on the "IR Home" page under the "Investors" section of the Company's website. Additionally, a telephonic replay will be available through November 10, 2005, and may be accessed by calling (303) 590- 3000 and using the pass code 11041731. In addition, for the convenience of the Company's investors and the research analyst community, a Microsoft Excel version of the attached data tables, which include additional new features, will be posted to the Hornbeck Offshore website in accordance with the Company's on-going efforts to increase the transparency and enhance the usability of its investor relations materials. Hornbeck Offshore Services, Inc. is a leading provider of technologically advanced, new generation offshore supply vessels primarily in the U.S. Gulf of Mexico and select international markets, and is a leading transporter of petroleum products through its fleet of ocean-going tugs and tank barges primarily in the northeastern U.S. and in Puerto Rico. Hornbeck Offshore currently owns and operates a fleet of over 50 U.S.-flagged vessels serving the energy industry. Forward-Looking Statements and Regulation G Reconciliation This press release contains forward-looking statements in which Hornbeck Offshore 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 and projections about future events. Accuracy of the assumptions, expectations and projections depend on events that change over time and are thus susceptible to change based on actual experience and new developments. Although the Company believes that the assumptions, expectations and projections reflected in these forward-looking statements are reasonable based on the information known to the Company today, the Company can give no assurance that the assumptions, expectations and projections will prove to be correct. The Company cautions readers that it undertakes no obligation to update or publicly release any revisions to the forward-looking statements in this press release hereafter to reflect the occurrence of any events or circumstances or any changes in its assumptions, expectations and projections, except to the extent required by applicable law. Additionally, important factors that might cause future results to differ from these assumptions, expectations and projections include industry risks, oil and natural gas prices, economic and political risks, weather related risks, regulatory risks, and other factors described in the Company's most recent Annual Report on Form 10-K, as amended by Form 10-K/A, and other filings filed with the Securities and Exchange Commission. This press release also contains the non-GAAP financial measure of earnings (net income) before interest, income tax expense, depreciation, amortization and loss on early extinguishment of debt, or EBITDA. Reconciliations of this financial measure to the most directly comparable GAAP financial measure are provided in this press release. Management's opinion regarding the usefulness of such measures to investors and a description of the ways in which management uses such measures can be found in the Company's most recent Annual Report on Form 10-K, as amended by Form 10-K/A, as filed with the Securities and Exchange Commission.
Hornbeck Offshore Services, Inc. and Subsidiaries
Unaudited Consolidated Statements of Operations
(in thousands, except Other Operating and Per Share Data)
Statement of Operations (unaudited):
Three Months Ended
September 30, June 30, September 30,
2005 2005 2004
Revenues $46,462 $41,083 $32,892
Operating expenses 16,577 15,879 14,066
Depreciation and amortization 7,381 6,607 6,050
General and administrative expenses 5,714 4,752 3,537
Total operating expenses 29,672 27,238 23,653
Operating income 16,790 13,845 9,239
Interest expense (3,112) (2,854) (4,089)
Interest income 153 120 107
Loss on early extinguishment of debt - - -
Gain of sale of assets 829 1,083 -
Other income, net (1) 47 14 28
Income before income taxes 14,707 12,208 5,285
Income tax expense (5,309) (4,485) (1,982)
Net income $9,398 $7,723 $3,303
Basic earnings per share of common
stock $0.45 $0.37 $0.16
Diluted earnings per share of common
stock $0.44 $0.36 $0.15
Weighted average basic shares
outstanding (2) 20,954 20,850 20,802
Weighted average diluted shares
outstanding (2) 21,455 21,296 21,383
Nine Months Ended
September 30, September 30,
2005 2004
Revenues $125,449 $94,526
Operating expenses 48,044 42,113
Depreciation and amortization 19,987 16,876
General and administrative expenses 14,286 9,829
Total operating expenses 82,317 68,818
Operating income 43,132 25,708
Interest expense (8,550) (13,890)
Interest income 395 213
Loss on early extinguishment of debt (1,698) -
Gain of sale of assets 1,901 -
Other income, net (1) 104 24
Income before income taxes 35,284 12,055
Income tax expense (12,924) (4,482)
Net income $22,360 $7,573
Basic earnings per share of common
stock $1.07 $0.40
Diluted earnings per share of common
stock $1.05 $0.39
Weighted average basic shares
outstanding (2) 20,877 18,834
Weighted average diluted shares
outstanding (2) 21,338 19,386
Other Operating Data (unaudited):
Three Months Ended
September 30, June 30, September 30,
2005 2005 2004
Offshore Supply Vessels:
Average number 25.0 24.3 23.0
Average fleet capacity
(deadweight) 59,042 56,311 52,398
Average vessel capacity
(deadweight) 2,362 2,329 2,278
Average utilization rate (3) 98.7% 96.6% 93.2%
Average dayrate (4) $13,638 $12,364 $10,096
Effective dayrate (5) $13,461 $11,944 $9,409
Tugs and Tank Barges:
Average number of tank barges 14.9 14.0 16.0
Average fleet capacity
(barrels) 1,111,174 1,013,002 1,156,330
Average barge size (barrels) 74,078 72,357 72,271
Average utilization rate (3) 83.9% 85.4% 76.0%
Average dayrate (6) $12,809 $12,673 $11,151
Effective dayrate (5) $10,747 $10,823 $8,475
Nine Months Ended
September 30, September 30,
2005 2004
Offshore Supply Vessels:
Average number 24.4 22.8
Average fleet capacity
(deadweight) 56,798 51,666
Average vessel capacity
(deadweight) 2,337 2,272
Average utilization rate (3) 96.6% 85.2%
Average dayrate (4) $12,567 $9,864
Effective dayrate (5) $12,140 $8,404
Tugs and Tank Barges:
Average number of tank barges 14.1 16.0
Average fleet capacity (barrels) 1,010,403 1,156,330
Average barge size (barrels) 70,408 72,271
Average utilization rate (3) 84.9% 82.3%
Average dayrate (6) $12,884 $11,278
Effective dayrate (5) $10,939 $9,282
Balance Sheet Data (unaudited):
Pro Forma
As of As of As of
September 30, September December 31,
2005 (7) 30, 2005 2004
Cash and cash equivalents $271,990 $14,496 $54,301
Working capital 284,577 27,083 52,556
Property, plant and equipment, net 444,246 444,246 361,219
Total assets 772,281 514,787 460,571
Total short-term debt (8) - - 15,449
Total long-term debt 299,438 246,000 225,000
Stockholders' equity 414,396 208,965 182,904
Cash Flow Data (unaudited):
Nine Months Ended
September 30, September 30,
2005 2004
Cash provided by operating activities $52,222 $14,626
Cash used in investing activities (97,036) (43,222)
Cash provided by (used in) financing
activities 4,982 33,184
Hornbeck Offshore Services, Inc. and Subsidiaries
Unaudited Other Financial Data
(in thousands, except Financial Ratios)
Other Financial Data (unaudited):
Three Months Ended Nine Months Ended
September June September September September
30, 30, 30, 30, 30,
2005 2005 2004 2005 2004
Offshore Supply Vessels:
Revenues $31,341 $26,570 $20,231 $81,756 $53,149
Operating income $15,605 $12,446 $7,704 $38,299 $18,603
Operating margin 49.8% 46.8% 38.1% 46.8% 35.0%
Components of EBITDA (9)
Net income $8,614 $6,576 $2,810 $19,369 $4,735
Interest expense, net 2,148 2,078 3,235 6,175 11,084
Income tax expense 4,891 3,807 1,681 11,195 2,802
Depreciation 3,346 3,161 2,934 9,555 8,620
Amortization 580 507 386 1,547 891
Loss on early
extinguishment of debt - - - 1,658 -
EBITDA (9) $19,579 $16,129 $11,046 $49,499 $28,132
EBITDA (9) Reconciliation to GAAP:
EBITDA (9) $19,579 $16,129 $11,046 $49,499 $28,132
Cash paid for deferred
drydocking charges (975) (700) (313) (2,520) (3,106)
Cash paid for interest (159) (3,596) (6,866) (4,609) (15,236)
Changes in
working capital (1,439) (227) (1,101) (3,492) 2,092
Changes in other, net (1) (39) (67) (52) (133)
Net cash provided by
operating activities $17,005 $11,567 $2,699 $38,826 $11,749
Tugs and Tank Barges:
Revenues $15,121 $14,513 $12,661 $43,693 $41,377
Operating income $1,185 $1,399 $1,535 $4,833 $7,105
Operating margin 7.8% 9.6% 12.1% 11.1% 17.2%
Components of EBITDA (9)
Net income $784 $1,147 $493 $2,991 $2,838
Interest expense, net 811 656 747 1,980 2,593
Income tax expense 418 678 301 1,729 1,680
Depreciation 2,000 1,636 1,472 5,001 4,343
Amortization 1,455 1,303 1,258 3,884 3,022
Loss on early
extinguishment of debt - - - 40 -
EBITDA (9) $5,468 $5,420 $4,271 $15,625 $14,476
EBITDA (9) Reconciliation to GAAP:
EBITDA (9) $5,468 $5,420 $4,271 $15,625 $14,476
Cash paid for deferred
drydocking charges (236) (1,003) (2,321) (2,378) (4,051)
Cash paid for interest (57) (3,830) (1,498) (3,809) (3,436)
Changes in
working capital 2,185 1,091 (1,446) 5,736 (4,125)
Changes in other, net (593) (1,136) 14 (1,778) 13
Net cash provided by
(used in) operating
activities $6,767 $542 $(980) $13,396 $2,877
Consolidated:
Revenues $46,462 $41,083 $32,892 $125,449 $94,526
Operating income $16,790 $13,845 $9,239 $43,132 $25,708
Operating margin 36.1% 33.7% 28.1% 34.4% 27.2%
Components of EBITDA (9)
Net income $9,398 $7,723 $3,303 $22,360 $7,573
Interest expense, net 2,959 2,734 3,982 8,155 13,677
Income tax expense 5,309 4,485 1,982 12,924 4,482
Depreciation 5,346 4,797 4,406 14,556 12,963
Amortization 2,035 1,810 1,644 5,431 3,913
Loss on early
extinguishment of debt - - - 1,698 -
EBITDA (9) $25,047 $21,549 $15,317 $65,124 $42,608
EBITDA (9) Reconciliation to GAAP:
EBITDA (9) $25,047 $21,549 $15,317 $65,124 $42,608
Cash paid for deferred
drydocking charges (1,211) (1,703) (2,634) (4,898) (7,157)
Cash paid for interest (216) (7,426) (8,364) (8,418) (18,672)
Changes in
working capital 746 864 (2,547) 2,244 (2,033)
Changes in other, net (594) (1,175) (53) (1,830) (120)
Net cash provided by
operating activities $23,772 $12,109 $1,719 $52,222 $14,626
Hornbeck Offshore Services, Inc. and Subsidiaries
Unaudited Other Financial Data
(in millions, except Per Share Data and Tax Rates)
Forward Earnings Guidance and Projected EBITDA Reconciliation: (Unaudited)
2005 Guidance
Full-Year
2005 Full-Year
Fourth Quarter Updated 2005
2005 Estimate Prior Estimate
Low High Low High Low High
Components of Projected
EBITDA (9)
EBITDA (9) $28.0 $30.0 $93.0 $95.0 $90.0 $95.0
Depreciation 5.8 5.8 20.4 20.4 20.2 20.2
Amortization 1.9 1.9 7.3 7.3 6.9 6.9
Interest expense, net 2.7 2.7 10.9 10.9 12.6 12.6
Income tax expense 6.4 7.2 19.9 20.6 18.9 20.7
Income tax rate 36.5% 36.5% 36.5% 36.5% 37.5% 37.5%
Net income before adjustments $11.2 $12.4 $34.5 $35.8 $31.4 $34.6
Weighted average diluted
shares outstanding 27.3 27.3 22.9 22.9 22.6 22.6
Earnings per diluted share
before adjustments $0.41 $0.46 $1.51 $1.56 $1.39 $1.53
Adjustments not included above:
Loss on early extinguishment
of debt, net of taxes None None $1.1 $1.1 $1.1 $1.1
Loss on early extinguishment
of debt, per share None None $0.05 $0.05 $0.05 $0.05
Compensation expense Not Not Not Not Not Not
for stock options appli- appli- appli- appli- appli- appli-
cable cable cable cable cable cable
Projected EBITDA Reconciliation
to GAAP:
EBITDA (9) $28.0 $30.0 $93.0 $95.0 $90.0 $95.0
Cash paid for deferred
drydocking
charges (1.5) (1.5) (6.0) (6.0) (6.0) (6.0)
Cash paid for
interest (9.3) (9.3) (17.8) (17.8) (15.6) (15.6)
Changes in working
capital (11) 7.5 7.5 3.6 2.7 1.1 (0.6)
Changes in other, net (11) (0.7) (0.7) (0.1) (0.1) (0.1) (0.1)
Cash flows provided by
operating activities $24.0 $26.0 $72.7 $73.8 $69.4 $72.7
2006 Guidance
Full-Year 2006 Full-Year 2006
Updated Estimate Prior Estimate
Low High Low High
Components of Projected EBITDA (9)
EBITDA (9) $115.0 $120.0 $110.0 $115.0
Depreciation 25.0 25.0 25.0 25.0
Amortization 7.5 7.5 7.4 7.4
Interest expense, net 9.0 9.0 9.0 9.0
Income tax expense 26.8 28.7 25.7 27.6
Income tax rate 36.5% 36.5% 37.5% 37.5%
Net income before adjustments $46.7 $49.8 $42.9 $46.0
Weighted average diluted shares
outstanding 27.6 27.6 26.2 26.2
Earnings per diluted share before
adjustments $1.69 $1.81 $1.64 $1.76
Adjustments not included above:
Compensation expense for stock
options TBD TBD TBD TBD
Projected EBITDA Reconciliation to
GAAP:
EBITDA (9) $115.0 $120.0 $110.0 $115.0
Cash paid for deferred drydocking
charges (9.1) (9.1) (9.1) (9.1)
Cash paid for
interest (18.7) (18.7) (18.7) (18.7)
Changes in working capital (10) 13.7 12.6 13.3 12.1
Changes in other, net (10) (0.2) (0.2) (0.2) (0.2)
Cash flows provided by operating
activities $100.7 $104.6 $95.3 $99.1
Pro Forma 2006E Guidance (Post-Construction Peak)
Pre-Offering
Pre-Newbuild OSV TTB
2006E Expansion(11) Expansion(12) Peak(13)
Components of
Projected EBITDA (9)
EBITDA (9) $117.5 $43.0 $16.5 $177.0
Depreciation 25.0 9.7 3.8 38.5
Amortization 7.5 - - 7.5
Interest expense (14) 14.4 3.1 1.7 19.2
Income tax expense (15) 25.8 11.0 4.0 40.8
Net Income before
adjustments $44.8 $19.2 $7.0 $71.0
Weighted average diluted
shares outstanding 21.6 27.6
Earnings per diluted
share before
adjustments $2.07 $2.57
Adjustments not
included above:
Compensation expense
for stock options TBD TBD
Projected EBITDA
Reconciliation to GAAP:
EBITDA (9) $117.5 $43.0 $16.5 $177.0
Cash paid for deferred
drydocking charges (9.1) - - (9.1)
Cash paid for interest (18.7) - - (18.7)
Changes in working
capital (10) 12.6 (16.9) (2.0) (6.3)
Changes in other,
net (10) (0.2) - - (0.2)
Cash flows provided
by operating
activities $102.1 $26.1 $14.5 $142.7
Hornbeck Offshore Services, Inc. and Subsidiaries
Unaudited Other Financial Data
(in millions, except Historical Data)
Capital Expenditures Data (unaudited):
Historical Data (in thousands):
Three Months Ended Nine Months Ended
September June September September September
30, 30, 30, 30, 30,
2005 2005 2004 2005 2004
Maintenance Capital
Expenditures:
Deferred drydocking
charges $1,211 $1,703 $2,634 $4,898 $7,157
Other vessel capital
improvements 817 1,241 1,401 3,124 5,037
Non-vessel related
capital improvements 605 781 199 2,167 903
$2,633 $3,725 $4,234 $10,189 $13,097
Growth Capital Expenditures:
TTB newbuild
program #1 $24,042 $13,509 $8,861 $58,622 $32,857
AHTS acquisition and
retrofit costs 420 2,392 - 27,875 -
MPSV conversion
program 600 - - 3,974 -
$25,062 $15,901 $8,861 $90,471 $32,857
Projected Data:
Fourth Quarter Full-Year Full-Year
2005 2005 2006
Low High Low High Low High
Maintenance Capital
Expenditures:
Deferred drydocking
charges $1.3 $1.3 $6.2 $6.2 $11.0 $13.0
Other vessel capital
improvements 1.6 1.6 5.3 5.3 5.0 7.0
Non-vessel related capital
improvements 0.5 0.5 2.7 2.7 2.5 3.0
$3.4 $3.4 $14.2 $14.2 $18.5 $23.0
Growth Capital Expenditures:
TTB newbuild program #1 $11.0 $11.0 $69.6 $69.6 $- $-
AHTS acquisition and
retrofit costs 2.1 2.1 30.0 30.0 - -
MPSV conversion program 5.0 5.0 9.2 9.2 35.0 45.0
OSV newbuild program #4 - - 5.0 5.0 50.0 60.0
TTB newbuild program #2 - - - - 35.0 45.0
$18.1 $18.1 $113.8 $113.8 $120.0 $150.0
Full Construction Cycle Data:
Pre-
2005 2005 2006 2007 2008 Total
Growth Capital Expenditures:
TTB newbuild program #1 $51.4 $69.6 $- $- $- $121.0
AHTS acquisition and
retrofit costs - 30.0 - - $- 30.0
MPSV conversion program 3.8 9.2 40.0 12.0 - 65.0
OSV newbuild program #4 - 5.0 55.0 85.0 25.0 170.0
TTB newbuild program #2 - - 40.0 65.0 - 105.0
$55.2 $113.8 $135.0 $162.0 $25.0 $491.0
(1) Represents other income and expenses, including foreign currency
exchange gains or losses and minority interests in income or loss
from unconsolidated entities.
(2) On March 31, 2004, the Company issued 6,000 shares of common stock
pursuant to its IPO, which resulted in 20,648 basic shares
outstanding on the close of business on March 31, 2004. An
additional 126 basic shares were issued in connection with the IPO by
the Company on April 28, 2004. For the three months ended September
30, 2005 and 2004 and June 31, 2005, stock options representing
rights to acquire 5, 4 and 354 shares, respectively, of common stock
were excluded from the calculation of diluted earnings per share
because the effect was anti-dilutive. For the nine months ending
September 30, 2005 and 2004, stock options representing rights to
acquire 34 and 356 shares, respectively of common stock were excluded
from the calculation of diluted earnings per share because the effect
was anti-dilutive. Stock options are anti-dilutive when the results
from operations are a net loss or when the exercise price of the
options is greater than the average market price of the common stock
for the period.
(3) Utilization rates are average rates based on a 365-day year. Vessels
are considered utilized when they are generating revenues.
(4) Average dayrates represent average revenue per day, which includes
charter hire and brokerage revenue, based on the number of days
during the period that the offshore supply vessels generated revenue.
(5) Effective dayrate represents the average dayrate multiplied by the
utilization rate for the respective period.
(6) 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.
(7) Amounts represent the pro forma effect of the debt and equity
offerings that were completed in early October 2005
(8) Represents the remaining balance of $15.5 million in aggregate
principal amount of the Company's 10.625% senior notes due 2008 that
was redeemed on January 14, 2005.
(9) Non-GAAP Financial Measures
We disclose and discuss EBITDA as a non-GAAP financial measure in our
public releases, including quarterly earnings releases, investor
conference calls and other filings with the SEC. We define EBITDA as
earnings (net income) before interest, income taxes, depreciation,
amortization and losses on early extinguishment of debt. Our measure
of EBITDA may not be comparable to similarly titled measures
presented by other companies. Other companies may calculate EBITDA
differently than we do, which may limit its usefulness as a
comparative measure.
We view EBITDA primarily as a liquidity measure and, as such, we
believe 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 our financial
statements as a supplemental financial measure that, when viewed with
our GAAP results and the accompanying reconciliations, we believe
provides additional information that is useful to gain an
understanding of the factors and trends affecting our ability to
service debt, pay deferred taxes and fund drydocking charges and
other maintenance capital expenditures. We also believe the
disclosure of EBITDA helps investors meaningfully evaluate and
compare our cash flow generating capacity from quarter to quarter and
year to year.
EBITDA is also one of the financial metrics 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 our executive officers and other shore-based
employees; (iii) to compare to the EBITDA of other companies when
evaluating potential acquisitions; and (iv) to assess our ability to
service existing fixed charges, incur additional indebtedness and
execute our growth strategy.
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 our 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 we have incurred in acquiring and constructing our vessels,
* EBITDA does not reflect the deferred income taxes that we will
eventually have to pay once we are no longer in an overall tax net
operating loss carryforward position, and
* EBITDA does not reflect changes in our 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 our GAAP results.
(10) 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.
(11) Includes a full-year contribution of operating results from vessels
planned for our MPSV conversion program and our OSV Newbuild Program
#4.
(12) Includes a full-year contribution of operating results from vessels
planned for our TTB Newbuild Program #2.
(13) Peak scenario illustrates fleet operating leverage with the following
pro forma assumptions: full-year contribution from current and
planned vessel fleet (including, respectively, converted MPSVs, new
OSVs and new ocean-going tugs and tank barges), historical peak
average dayrates and full practical utilization level of 97.5%
assuming a normalized drydocking schedule. All other assumptions,
including vessel cash operating expense and SG&A, are consistent with
updated 2006E guidance assumptions.
(14) Interest expense does not include any offsetting interest income in
the peak scenario.
(15) Our effective tax rate is approximately 36.5%, which is slightly
lower than our historical run-rate, and reflects vessels shifting to
and from foreign regions, which resulted in a change in our estimated
foreign tax liability.
Contacts: Todd Hornbeck, CEO
SOURCE Hornbeck Offshore Services, Inc. |