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Hornbeck Offshore Announces Fourth Quarter and Annual 2007 Results
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Completes Expansion of Revolver Borrowing Base from $100 million to $250 million COVINGTON, La., Feb. 21 /PRNewswire-FirstCall/ -- Hornbeck Offshore Services, Inc. (NYSE: HOS) announced today results for the fourth quarter and year ended December 31, 2007. Following are highlights for such periods:
Fourth quarter 2007 revenues increased 54.8% to $101.1 million compared to $65.3 million for the fourth quarter of 2006. Operating income was $40.7 million, or 40.3% of revenues, for the fourth quarter of 2007 compared to $25.5 million, or 39.1% of revenues, for the prior-year quarter. Net income for the fourth quarter of 2007 was $25.8 million, or $0.97 per diluted share, compared to $16.6 million, or $0.62 per diluted share in the year-ago quarter. EBITDA for the fourth quarter of 2007 was $51.5 million compared to fourth quarter 2006 EBITDA of $34.2 million. The primary reasons for the increase in revenues, operating income, EBITDA and net income were the incremental contribution of recently acquired and newly constructed vessels and favorable market conditions for both segments of our business. For additional information regarding EBITDA as a non-GAAP financial measure, please see Note 9 to the accompanying data tables. OSV Segment. Revenues from the offshore supply vessel ("OSV") segment were $72.2 million for the fourth quarter of 2007, an increase of 83.7% from $39.3 million for the same period in 2006. OSV operating income nearly doubled to $32.7 million for the fourth quarter of 2007 from $17.0 million for the fourth quarter of 2006. The Company's OSV revenues and operating income increased primarily due to the full-quarter contribution from 20 OSVs (the "Sea Mar Fleet") that were acquired in August 2007 from certain affiliates of Nabors Industries, Ltd. and a market-driven increase in new generation OSV effective dayrates of approximately $3,700. Average OSV dayrates for the fourth quarter of 2007 improved 15.3%, or $2,963 per day, to $22,315 compared to $19,352 for the same period in 2006. OSV utilization was 90.4% for the fourth quarter of 2007 compared to 84.9% during the same period in 2006. This increase in utilization and dayrates was primarily due to favorable market conditions for new generation OSVs in the deepwater and ultra-deepwater U.S. Gulf of Mexico ("GoM"). TTB Segment. Revenues from the tug and tank barge ("TTB") segment of $28.8 million for the fourth quarter of 2007 increased by $2.8 million, or 10.8%, compared to $26.0 million for the same period in 2006. This revenue increase was primarily related to the full-quarter contribution of the Energy 6506 and a partial-quarter contribution from the Energy 6507, two double- hulled tank barges delivered under our second TTB newbuild program in August 2007 and November 2007, respectively. Average TTB dayrates rose $1,656 to $18,455 from $16,799 in the fourth quarter of 2006. Utilization in the TTB segment for the fourth quarter of 2007 was 87.1% compared to 92.4% in the prior-year quarter. Operating income for the fourth quarter of 2007 was up 15.7% to $8.1 million, or 28.0% of revenues, compared to operating income for the fourth quarter of 2006 of $7.0 million, or 26.9% of revenues, excluding the $1.5 million gain on sale of an ocean-going tug in October 2006. General and Administrative (G&A). G&A expenses of $9.0 million for the fourth quarter of 2007 were 8.9% of revenues and below the Company's previously reported guidance for G&A expenses of 10% of revenues. In the fourth quarter of 2006, G&A expenses were 10.1% of revenues. Depreciation and Amortization. Depreciation and amortization expense was $10.8 million for the fourth quarter of 2007, or $2.1 million higher than the fourth quarter of 2006. Additional depreciation resulted from recently acquired or newly constructed vessels. Amortization was driven by higher per- unit drydocking costs related to continued high demand for shipyard services and delays caused by shipyard labor shortages. These increases in depreciation and amortization were partially offset by lower depreciation resulting from a change in the estimated salvage values for the Company's marine equipment adopted at the beginning of 2007. Annual 2007 Results Revenues for 2007 increased 23.5% to $339.0 million compared to $274.6 million for 2006. Operating income was $145.9 million, or 43.0% of revenues, for 2007 compared to $120.4 million, or 43.8% of revenues, for 2006. Net income for 2007 increased 25.2% to $94.8 million, or $3.58 per diluted share, compared to net income of $75.7 million, or $2.76 per diluted share, for 2006. Net income in 2006 and 2007 each included pre-tax gains on vessel sales of $1.9 million, or $0.04 per diluted share. The Company's results for 2007 were favorably impacted by a significant increase in effective new generation OSV dayrates and the incremental contribution from recently acquired or newly constructed vessels delivered during the latter half of 2007. Recent Development On February 20, 2008, the Company completed its plans to increase the $100.0 million borrowing base of its existing senior secured revolving credit facility to $250.0 million, the maximum amount of its "accordion" feature. As required by the September 2006 credit agreement, the Company posted 16 additional OSVs as collateral. While presently undrawn, the expanded credit facility is expected to fund, during the peak of its aggregate construction draw schedule, a portion of the Company's on-going newbuild and conversion programs. However, any such draw is projected to be repaid in full by the end of the construction cycle in 2010. 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 Annual 2008 Guidance. The Company expects EBITDA for the full-year 2008 to range between $220.0 million and $240.0 million and diluted EPS is expected to range between $3.68 and $4.16. The TTB segment is expected to generate EBITDA in the range of 20% to 25% of the mid-point of the company-wide 2008 guidance range. Key Assumptions. The Company's forward earnings guidance, outlined above and in the attached data tables, assumes that current OSV and TTB market conditions remain constant. Fleetwide average new generation OSV dayrates are anticipated to be in the $19,000 to $21,000 range and fleetwide new generation OSV utilization is anticipated to average in the 90% range during the 2008 guidance period. Fleetwide average TTB dayrates are generally anticipated to be in the $16,000 to $18,000 range and fleetwide TTB utilization is anticipated to be in the mid-80% to low-90% range during the 2008 guidance period. The Company's 2008 guidance includes a partial contribution from vessels to be delivered under its MPSV program, the fourth OSV newbuild program and the second TTB newbuild program in accordance with the estimated newbuild delivery expectations discussed below. The Company expects cash operating expenses per vessel-day in 2008 for each segment to increase by 5% to 10% over 2007. Annual G&A expenses are expected to remain in the range of 9% to 10% of revenues for 2008. Projected depreciation, amortization and interest expense, net, for the full-year 2008 are included in the attached data tables. Projected depreciation, amortization and interest expense, net, for the first quarter of 2008 are $7.5 million, $4.1 million and $0.4 million, respectively. The Company's annual effective tax rate is expected to be flat at 36.3% for 2008. Capital Expenditures Outlook Update on Maintenance Capital Expenditures. The Company expects total maintenance capital expenditures for the full-year 2008 to be approximately $68.3 million, which includes approximately $24.6 million of non-vessel related capital expenditures primarily related to the recent acquisition of and planned improvements to the shore-base adjacent to HOS Port.. 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 expenditures. Update on MPSV Program. In January 2008, the Company closed on its acquisition of the shipyard contract for the Superior Achiever, a T-22 class DP-3 new generation multi-purpose support vessel ("MPSV") and related owner- furnished equipment, from Superior Offshore International, Inc. The Company's MPSV program now consists of two U.S.-flagged coastwise sulfur tankers that are being converted in a domestic shipyard into 370 class DP-2 new generation MPSVs and two newbuild T-22 class DP-3 new generation MPSVs, including the Superior Achiever, that are being constructed in a foreign shipyard. These four MPSVs are expected to be placed in service on various dates in 2008 and 2009. The first converted DP-2 MPSV is expected to be delivered in the third quarter of 2008 and the second converted DP-2 MPSV is expected to be delivered in late-2008 or early-2009. The first newbuild DP-3 MPSV is expected to be delivered in the fourth quarter of 2008 and the second newbuild DP-3 MPSV is expected to be delivered in the fourth quarter of 2009. The aggregate cost for the Company's MPSV program, inclusive of the recently acquired Superior Achiever, is expected to be approximately $450.0 million. From the inception of this program through December 31, 2007, the Company has incurred $145.9 million, or 32.4%, of total project costs, including $22.7 million incurred during the fourth quarter of 2007. Update on OSV Newbuild Program #4. In January 2008, the Company expanded its fourth OSV newbuild program to include two additional 240 ED class OSVs. This program now consists of vessel construction contracts with three domestic shipyards to build six proprietary 240 ED class OSVs, nine proprietary 250 EDF class OSVs and one 285 class new generation OSV, respectively. These 16 new generation OSVs are expected to be placed in service on various dates from 2008 to 2010. The first vessel is expected to be placed in service in the second quarter of 2008 with the remaining vessels to be delivered at a rate of one or two per quarter through 2010. The Company's current guidance assumes an average number of new generation OSVs of 37 to 38 vessels in service for 2008. The aggregate cost for the Company's fourth OSV newbuild program, inclusive of the recently announced additional vessels, is expected to be approximately $393.0 million. From the inception of this program through December 31, 2007, the Company has incurred $93.6 million, or 23.8%, of total project costs, including $38.4 million incurred during the fourth quarter of 2007. Update on TTB Newbuild Program #2. The Company's second TTB newbuild program consists of vessel construction contracts with three domestic shipyards to build three 60,000-barrel double-hulled tank barges and retrofit four 3,000 horsepower ocean-going tugs that were purchased in July 2006. During the second half of 2007, the Company delivered four vessels under this program. The newbuild tank barge, Energy 6506, and the retrofitted ocean- going tug, Michigan Service, were placed in service in the third quarter of 2007. The retrofitted ocean-going tug, Huron Service, and the newbuild tank barge, Energy 6507, were placed in service in the fourth quarter of 2007. The retrofitted ocean-going tug, Superior Service, and the newbuild tank barge, Energy 6508, are expected to be placed in service by the end of the first quarter of 2008. The final retrofitted ocean-going tug, Erie Service, is expected to be delivered during the second quarter of 2008. The Company estimates the aggregate cost of its second TTB newbuild program to be approximately $77.0 million. From the inception of this program through December 31, 2007, the Company has incurred $69.0 million, or 89.6%, of total project costs, including $8.1 million incurred during the fourth quarter of 2007. 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 2007 financial results and recent developments at 10:00 a.m. Eastern (9:00 a.m. Central) today, February 21, 2008. To participate in the call, dial (303) 262-2137 and ask for the Hornbeck Offshore call at least 10 minutes prior to the start time. To access it live over the Internet, please log onto the web at http://www.hornbeckoffshore.com, on the "IR Home" page of the "Investors" section of the Company's website at least fifteen minutes early to register, download and install any necessary audio software. Please call the Company's investor relations firm, DRG&E, at (713) 529-6600 to be added to its e-mail distribution list for future Hornbeck Offshore news releases. 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 February 28, 2008, and may be accessed by calling (303) 590-3000 and using the pass code 11108364#. Attached Data Tables The Company has posted an electronic version of the following four pages of data tables, which are downloadable in Excel(TM) format, on the "IR Home" page of the "Investors" section of the Hornbeck Offshore website for the convenience of analysts and investors. 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., the U.S. Gulf of Mexico and in Puerto Rico. Hornbeck Offshore currently owns a fleet of over 80 vessels primarily serving the energy industry. 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," "intend," "may," "might," "plan," "potential," "predict," "forecast," "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. Our actual future results might differ from the forward-looking statements made in this press release for a variety of reasons, which include: our inability to successfully and timely complete our various vessel construction and conversion programs, especially our MPSV program, which involves the construction and integration of highly complex vessels and systems; unsuccessful operations of our MPSVs, which are a class of vessels that we have not previously owned or operated; the inability to successfully market our MPSVs at dayrates that we have forecasted; unplanned customer suspensions, cancellations or non-renewals of vessel charters; industry risks, changes in capital spending budgets by customers, fluctuations in oil and natural gas prices, variations in demand for vessel services, increases in operating costs, the inability to accurately predict vessel utilization levels and dayrates, less than anticipated subsea infrastructure demand activity in the GoM and other markets, the level of fleet additions by competitors that could result in over-capacity, economic and political risks, weather related risks, the ability to attract and retain qualified marine personnel, regulatory risks, the repeal or administrative weakening of the Jones Act, drydocking delays and cost overruns and related risks, vessel accidents, unplanned customer suspensions, cancellations or non-renewal of contracts, unexpected litigation and insurance expenses, fluctuations in foreign currency valuations compared to the U.S. dollar, risks associated with and expanded foreign operations Should one or more of the foregoing risks or uncertainties materialize, or should our underlying assumptions prove incorrect, our actual results may vary materially from those anticipated in our forward-looking statements, and our business, financial condition and results of operations could be materially and adversely affected. Additional factors that you should consider are set forth in detail in the Risk Factors section of the Company's most recent Annual Report on Form 10-K as well as other filings we have made with the Securities and Exchange Commission which can be found on our website www.hornbeckoffshore.com. This press release also contains references to the non-GAAP financial measures of earnings, or net income, before interest, income taxes, depreciation and amortization, or EBITDA, and Adjusted EBITDA. The Company views EBITDA and Adjusted EBITDA primarily as liquidity measures and, therefore, believes that the GAAP financial measure most directly comparable to such measures is cash flows provided by operating activities. Reconciliations of EBITDA and Adjusted EBITDA to cash flows provided by operating activities are provided in the table below. Management's opinion regarding the usefulness of EBITDA and Adjusted EBITDA 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 filed with the Securities and Exchange Commission as well as in Note 9 to the attached data tables.
Contacts: Todd Hornbeck, CEO
Ken Dennard, Managing Partner
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 Twelve Months Ended
December September December December December
31, 2007 30, 2007 31, 2006 31, 2007 31, 2006
Revenues $101,062 $94,746 $65,298 $338,970 $274,551
Costs and expenses:
Operating
expenses 40,553 31,697 26,081 126,876 95,591
Depreciation and
amortization 10,828 9,332 8,697 35,169 32,021
General and
administrative
expenses 8,957 8,802 6,580 32,857 28,388
60,338 49,831 41,358 194,902 156,000
Gain on sale of
assets - 17 1,526 1,859 1,854
Operating income 40,724 44,932 25,466 145,927 120,405
Other income (expense):
Interest income 2,564 4,070 5,390 18,414 16,074
Interest expense (2,799) (3,723) (4,732) (15,697) (17,675)
Other income,
net(1) (71) 17 2 (43) 70
(306) 364 660 2,674 (1,531)
Income before income
taxes 40,418 45,296 26,126 148,601 118,874
Income tax expense 14,624 16,414 9,502 53,810 43,159
Net income $25,794 $28,882 $16,624 $94,791 $75,715
Basic earnings per
share of common
stock $1.00 $1.12 $0.63 $3.69 $2.81
Diluted earnings
per share of common
stock $0.97 $1.09 $0.62 $3.58 $2.76
Weighted average
basic shares
outstanding 25,731 25,694 26,260 25,662 26,966
Weighted average
diluted shares
outstanding(2) 26,661 26,559 26,802 26,467 27,461
Other Operating Data (unaudited):
Three Months Ended Twelve Months Ended
December September December December December
31, 2007 30, 2007 31, 2006 31, 2007 31, 2006
Offshore Supply Vessels:
Average number of
new generation
OSVs(3) 35.0 30.9 25.0 29.0 25.0
Average new generation
fleet capacity
(deadweight)(3) 80,903 71,971 59,042 67,739 59,042
Average new
generation vessel
capacity
(deadweight) 2,312 2,331 2,362 2,341 2,362
Average new
generation
utilization rate(4) 90.4% 95.2% 84.9% 93.3% 90.3%
Average new
generation
dayrate(5) $22,315 $22,605 $19,352 $21,505 $19,380
Effective
dayrate(6) $20,173 $21,520 $16,430 $20,064 $17,500
Tugs and Tank Barges:
Average number of
tank barges(7) 19.5 18.4 18.0 18.5 17.6
Average fleet
capacity
(barrels)(7) 1,647,411 1,573,414 1,538,071 1,579,989 1,488,177
Average barge size
(barrels) 83,787 84,332 85,448 85,071 84,267
Average utilization
rate(4) 87.1% 91.0% 92.4% 90.7% 92.7%
Average dayrate(8) $18,455 $18,430 $16,799 $18,089 $18,064
Effective
dayrate(6) $16,074 $16,771 $15,522 $16,407 $16,745
Balance Sheet Data (unaudited):
As of As of
December 31, December 31,
2007 2006
Cash and cash equivalents $173,552 $474,261
Working capital 214,266 489,261
Property, plant and equipment,
net 953,210 531,951
Total assets 1,262,051 1,098,380
Total long-term debt 549,547 549,497
Stockholders' equity 562,314 454,873
Cash Flow Data (unaudited):
Twelve Months Ended
December 31, December 31,
2007 2006
Cash provided by operating
activities $135,408 $131,790
Cash used in investing
activities (438,890) (87,138)
Cash provided by financing
activities 2,710 157,797
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, 2007 30, 2007 31, 2006 31, 2007 31, 2006
Offshore Supply Vessels:
Revenues $72,224 $66,379 $39,318 $228,355 $166,381
Operating income $32,653 $35,935 $16,969 $113,934 $80,357
Operating margin 45.2% 54.1% 43.2% 49.9% 48.3%
Components of EBITDA(9)
Net income $20,664 $22,930 $11,288 $73,565 $51,279
Interest expense
(income), net 333 (13) (769) (1,309) (83)
Income tax
expense 11,666 13,036 6,454 41,717 29,230
Depreciation 4,568 3,576 3,542 13,443 13,961
Amortization 2,141 1,784 941 6,460 3,383
EBITDA(9) $39,372 $41,313 $21,456 $133,876 $97,770
Adjustments to EBITDA
Stock-based
compensation
expense $987 $1,078 $707 $3,989 $2,770
Interest income 1,595 2,549 3,775 11,572 11,386
Adjusted
EBITDA(9) $41,954 $44,940 $25,938 $149,437 $111,926
EBITDA(9) Reconciliation to GAAP:
EBITDA(9) $39,372 $41,313 $21,456 $133,876 $97,770
Cash paid for
deferred drydocking
charges (2,908) (4,651) (1,987) (12,391) (6,727)
Cash paid for
interest (3,223) (959) (5,741) (11,322) (11,678)
Cash paid for
taxes (730) - (150) (2,627) (699)
Changes in working
capital (13,262) (12,757) 9,765 (12,305) 2,269
Stock-based
compensation
expense 987 1,078 707 3,989 2,770
Changes in other,
net (34) 45 (23) (1,961) 164
Net cash provided
by operating
activities $20,202 $24,069 $24,027 $97,259 $83,869
Tugs and Tank Barges:
Revenues $28,838 $28,367 $25,980 $110,615 $108,170
Operating income $8,071 $8,997 $8,498 $31,993 $40,048
Operating margin 28.0% 31.7% 32.7% 28.9% 37.0%
Components of EBITDA(9)
Net income $5,130 $5,952 $5,338 $21,226 $24,436
Interest expense
(income), net (98) (334) 111 (1,408) 1,684
Income tax
expense 2,958 3,378 3,049 12,093 13,929
Depreciation 2,591 2,464 2,596 9,507 10,109
Amortization 1,528 1,508 1,617 5,759 4,568
EBITDA(9) $12,109 $12,968 $12,711 $47,177 $54,726
Adjustments to EBITDA
Stock-based
compensation
expense $891 $1,000 $541 $3,401 $2,426
Interest income 969 1,521 1,615 6,842 4,687
Adjusted
EBITDA(9) $13,969 $15,489 $14,867 $57,420 $61,839
EBITDA(9) Reconciliation to GAAP:
EBITDA(9) $12,109 $12,968 $12,711 $47,177 $54,726
Cash paid for
deferred
drydocking
charges (487) (1,291) (2,977) (7,421) (6,154)
Cash paid for
interest (7,998) 868 (3,447) (11,322) (6,859)
Cash paid for
taxes (275) - (149) (2,172) (699)
Changes in working
capital 5,771 263 (2,040) 8,177 6,322
Stock-based
compensation
expense 891 1,000 541 3,401 2,426
Changes in other,
net 82 131 (1,668) 309 (1,841)
Net cash provided by
operating
activities $10,093 $13,939 $2,971 $38,149 $47,921
Consolidated:
Revenues $101,062 $94,746 $65,298 $338,970 $274,551
Operating income $40,724 $44,932 $25,467 $145,927 $120,405
Operating margin 40.3% 47.4% 39.0% 43.1% 43.9%
Components of EBITDA(9)
Net income $25,794 $28,882 $16,626 $94,791 $75,715
Interest expense
(income), net 235 (347) (658) (2,717) 1,601
Income tax
expense 14,624 16,414 9,503 53,810 43,159
Depreciation 7,159 6,040 6,138 22,950 24,070
Amortization 3,669 3,292 2,558 12,219 7,951
EBITDA(9) $51,481 $54,281 $34,167 $181,053 $152,496
Adjustments to EBITDA
Stock-based
compensation
expense $1,878 $2,078 $1,248 $7,390 $5,196
Interest income 2,564 4,070 5,390 18,414 16,073
Adjusted
EBITDA(9) $55,923 $60,429 $40,805 $206,857 $173,765
EBITDA(9) Reconciliation to GAAP:
EBITDA(9) $51,481 $54,281 $34,167 $181,053 $152,496
Cash paid for
deferred
drydocking
charges (3,395) (5,942) (4,964) (19,812) (12,881)
Cash paid for
interest (11,221) (91) (9,188) (22,644) (18,537)
Cash paid for
taxes (1,005) - (299) (4,799) (1,398)
Changes in working
capital (7,491) (12,494) 7,725 (4,128) 8,591
Stock-based
compensation
expense 1,878 2,078 1,248 7,390 5,196
Changes in other,
net 48 176 (1,691) (1,652) (1,677)
Net cash provided
by operating
activities $30,295 $38,008 $26,998 $135,408 $131,790
Hornbeck Offshore Services, Inc. and Subsidiaries
Unaudited Other Financial Data
(in millions, except Historical Data)
Forward Earnings Guidance and Projected EBITDA Reconciliation: (Unaudited)
2008 Guidance Full-Year 2008 Pro Forma
Estimate Run-Rate(10)
Low High
Components of Projected EBITDA(9)
Adjusted EBITDA(9) $231.6 $251.6 $390.3
Interest income 1.3 1.3 7.0
Stock-based compensation expense 10.3 10.3 10.3
EBITDA(9) $220.0 $240.0 $373.0
Depreciation 36.7 36.7 57.7
Amortization 17.0 17.0 29.4
Interest (income) expense, net 8.7 7.8 17.4
Income tax expense 57.2 64.8 97.5
Income tax rate 36.3% 36.3% 36.3%
Net income $100.4 $113.7 $171.0
Weighted average diluted shares
outstanding 27.3 27.3 27.3
Diluted earnings per share $3.68 $4.16 $6.26
Projected EBITDA(9) Reconciliation to GAAP:
EBITDA(9) $220.0 $240.0 $373.0
Cash paid for deferred
drydocking charges (19.3) (19.3) (30.9)
Cash paid for interest (28.3) (27.4) (22.6)
Cash paid for taxes (2.8) (2.8) (2.8)
Changes in working capital(11) 20.9 17.1 (23.3)
Stock-based compensation expense 10.3 10.3 10.3
Changes in other, net(11) (0.2) (0.2) (0.2)
Cash flows provided by operating
activities $200.6 $217.7 $303.5
Capital Expenditures Data (unaudited)(12):
Historical Data (in thousands):
Three Months Ended Twelve Months Ended
December September December December December
31, 2007 30, 2007 31, 2006 31, 2007 31, 2006
Maintenance Capital
Expenditures:
Deferred drydocking
charges $3,395 $5,942 $4,964 $19,812 $12,881
Other vessel
capital
improvements 8,543 2,904 3,569 17,966 8,420
Non-vessel related
capital
expenditures 727 1,633 1,684 4,868 5,067
$12,665 $10,479 $10,217 $42,646 $26,368
Growth Capital Expenditures:
TTB newbuild
program #1 $- $- $460 $- $5,870
AHTS acquisition
and retrofit costs - - - - 2,338
MPSV program 22,725 23,154 12,063 106,654 27,316
TTB newbuild
program #2 8,147 13,595 3,640 49,538 15,384
OSV newbuild
program #4 38,423 16,437 9,086 71,504 22,507
Sea Mar Fleet
acquisition - 186,000 - 186,000 -
$69,295 $239,186 $25,249 $413,696 $73,415
Forecasted Data:
1Q2008E 2Q2008E 3Q2008E 4Q2008E 2008E
Maintenance Capital
Expenditures:
Deferred drydocking
charges $4.2 $6.7 $3.3 $5.1 $19.3
Other vessel capital
improvements 12.9 9.0 0.6 1.9 24.4
Non-vessel related
capital
expenditures 19.0 1.2 3.3 1.1 24.6
$36.1 $16.9 $7.2 $8.1 $68.3
Growth Capital
Expenditures:
MPSV program $117.0 $79.9 $56.2 $22.8 $275.9
TTB newbuild
program #2 6.0 2.0 - - 8.0
OSV newbuild
program #4 51.4 48.4 40.5 32.3 172.6
$174.4 $130.3 $96.7 $55.1 $456.5
Full Construction Cycle Data:
Pre-2007A 2007A 2008E 2009E 2010E Total
Growth Capital
Expenditures:
MPSV program $39.2 $106.7 $275.9 $28.2 $- $450.0
TTB newbuild
program #2 19.4 49.6 8.0 - - 77.0
OSV newbuild
program #4 22.1 71.5 172.6 102.7 24.1 393.0
Sea Mar Fleet
acquisition - 186.0 - - - 186.0
$80.7 $413.8 $456.5 $130.9 $24.1 $1,106.0
(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 71, 74 and 164 shares of
common stock for the three months ended December 31, 2007, September
30, 2007 and December 31, 2006, respectively, and 146 and 323 shares
of common stock for the twelve months ended December 31, 2007 and
2006, 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 December 31, 2007, September 30, 2007
and December 31, 2006, the 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 such notes.
(3) The Company owned and operated 35 new generation OSVs as of December
31, 2007. Ten new generation OSVs were acquired on August 8, 2007.
Excluded from this data are 10 conventional OSVs that were also
acquired on August 8, 2007, which the Company considers 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 quarter ended December 31, 2007 include the
Energy 6506 and the Energy 6507, two double-hulled tank barges
delivered under the Company's second TTB newbuild program in August
2007 and November 2007, respectively. The average for the quarter
ended December 31, 2006 reflects the sale of the Energy 2202 in May
2006 and includes the Energy 8701, a previously retired single-hulled
tank barge that was reactivated in October 2006.
(8) 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.
(9) 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, 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."
(10) "Pro Forma Run-Rate" scenario illustrates the estimated incremental
operating results from the recently acquired Sea Mar Fleet, recently-
delivered newbuild vessels and all remaining vessels that are
currently under construction under the Company's MPSV program, fourth
OSV newbuild program and second TTB newbuild program, assuming all of
those vessels were placed in service as of January 1, 2008 and were
working at current market dayrates commensurate with their relative
size and service capabilities at full practical utilization in the
low to mid-90% range assuming a full normalized drydocking schedule.
All other key assumptions related to the Company's current operating
fleet, including vessel dayrates, utilization, cash operating
expenses, SG&A and income tax expense, are consistent with the
Company's current 2008 guidance. After all vessels currently under
construction are delivered, interest expense is expected to return to
an annual run-rate of $24.4, offset by $6.5 of interest income to be
generated on a projected post-construction period cash balance in
2010 of $130.0.
(11) 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.
(12) The capital expenditure amounts included in this table are cash
outlays before the allocation of construction period interest, as
applicable.
SOURCE Hornbeck Offshore Services, Inc. CONTACT: Todd Hornbeck, CEO or Jim Harp, CFO, both of Hornbeck Offshore Services, +1-985-727-6802; or Ken Dennard, Managing Partner of DRG&E, +1-713-529-6600 |