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News and Information Article
Q4 2005 diluted EPS was $0.55 versus ($0.48) in Q4 2004, including bond
refinancing charges
Q4 2005 diluted EPS was $0.55 versus $0.22 in Q4 2004, excluding bond
refinancing charges
Increasing 2006 guidance and initiating 2007 guidance
COVINGTON, La., Feb. 23 /-FirstCall/ -- Hornbeck Offshore
Services, Inc. (NYSE: HOS) announced today record results for the fourth
quarter and year ended December 31, 2005. Highlights for the fourth quarter
included:
* Comparable Q4 2005 diluted EPS was up 150% over Q4 2004
* Q4 2005 net income was $15.1 million, more than triple Q4 2004
* Significant expansion in TTB operating margins, nearly double Q4 2004
and triple Q3 2005
* Current fleet average OSV dayrates at $18,500 with leading-edge spot
rates above $20,000
* Current fleet average TTB dayrates at $15,000 with leading-edge spot
rates around $17,000
* Multiple long-term contracts recently signed in each business segment
* Final two double-hulled tank barges delivered in Q4 2005 under TTB
Newbuild Program #1
* Service-line diversification into shore-based logistics, military and
deepwater well test markets
* Acquired GoM port facility to support OSV segment
* Recently awarded four long-term military contracts for OSVs
* Expanding OSV Newbuild Program #4 by 17,000 deadweight tons of
additional OSV capacity
Fourth quarter revenues increased $19.3 million, or 51.1%, to $57.1
million compared to $37.8 million for the fourth quarter of 2004. Operating
income was $24.9 million, or 43.6% of revenues, for the fourth quarter of 2005
compared to $10.2 million, or 27.0% of revenues, for the prior-year quarter.
These record operating results were primarily driven by continued full
practical utilization of the Companys offshore supply vessel (OSV) fleet in
the U.S. Gulf of Mexico (GoM) at record dayrates and greater tug and tank
barge (TTB) fleet capacity due to 2005 vessel deliveries under TTB Newbuild
Program #1. In addition, the Company has experienced a substantial increase
in demand for its TTB vessels and has been successful in developing innovative
new applications for its proprietary new double-hulled barges in the upstream
GoM market.
Fourth quarter 2005 EBITDA was $32.2 million, or roughly double fourth
quarter 2004 EBITDA of $16.5 million and above the high-end of Hornbecks
guidance range of $28.0 million to $30.0 million. For additional information
regarding EBITDA as a non-GAAP financial measure, please see more discussion
on this subject later in this release.
Net income for the fourth quarter of 2005 was $15.1 million, or $0.55 per
diluted share, compared to $4.7 million, or $0.22 per diluted share, of
adjusted net income reported in the fourth quarter of 2004, excluding bond
refinancing charges for the retirement of old senior notes. Net income for
the fourth quarter of 2005 was more than triple the amount of adjusted net
income recorded in the fourth quarter of 2004, while diluted EPS more than
doubled despite having roughly 6.5 million of additional weighted average
diluted shares outstanding in the fourth quarter of 2005. Included in net
income for the fourth quarter of 2005 was approximately $2.8 million ($1.8
million after-tax or $0.06 per diluted share) of interest income, up from $0.1
million in the fourth quarter of 2004, due to the substantially higher cash
position resulting from proceeds raised during the Companys recent debt and
equity offerings, which were completed in early October 2005.
Todd Hornbeck, the Companys Chairman, President and CEO, stated, "We are
extremely pleased with the record financial results that we achieved for the
fourth quarter and calendar 2005. Our strategy of keeping a large portion of
our fleet on short-term fixtures resulted in higher dayrates as vessels rolled
to new contracts in an improving market. With effective dayrates for our OSV
and tug and tank barge segments each gaining about $3,800 per day compared to
the fourth quarter of 2004 and the recent cash infusion resulting from our
October 2005 debt and equity offerings, we believe that Hornbeck Offshore is
well positioned to continue our profitable growth track by reinvesting in both
fleets. Our currently announced newbuild programs, alone, provide us with
visible year-over-year increases in fleet capacity through 2009. Plus, we
have a significant amount of excess cash still left to deploy as we continue
to actively pursue strategic acquisitions in both fleet segments that meet our
internal investment parameters.
"Published reports reflect that E&P companies operating in the GoM have
increased capital spending budgets for 2006. In addition, there continues to
be a substantial backlog of repair work resulting from the past two hurricane
seasons. Therefore, we expect demand for our OSVs to remain high with leading
edge spot dayrates at or above $20,000 for the remainder of 2006.
Furthermore, we have recently experienced increased demand for our equipment
in both fleets for non-traditional applications, such as military service for
our OSVs and deepwater well test projects in the GoM for our new double-hulled
tank barges. By developing these new service offerings for our fleet, we have
been able to expand our customer base while we are in an up-market. By
removing capacity from our traditional oilfield market, we have the added
benefit of further tightening an already robust market for the rest of our OSV
fleet over the near term. We believe that our proprietary vessels are well
suited for a variety of marine applications, some of which are only now
revealing themselves as enabling technology unfolds around us."
OSV Segment. Revenues from the OSV segment were $35.7 million for the
fourth quarter of 2005, an increase of 60.8% from $22.2 million for the same
period in 2004. This increase in revenue is the result of significantly
higher dayrates in the GoM, along with having two additional vessels operating
in the 2005 quarter. The Companys OSV utilization rate was 94.8% for the
three months ended December 31, 2005, compared to 94.3% achieved for the same
period of 2004. Utilization was about the same as the prior-year quarter
despite having 68 more vessel days out-of-service in the current quarter
compared to the prior-year quarter. The average OSV dayrate for the fourth
quarter of 2005 improved 45.6%, or just under $5,000 per day, to $15,903
compared to $10,926 for the same period of 2004. In addition, the Companys
effective, or utilization adjusted, dayrate increased 46.3% from the prior-
year quarter. These market-driven improvements resulted in OSV operating
income more than doubling that of the prior year quarter, illustrating the
operating leverage for this segment.
Tug and Tank Barge Segment. Tug and tank barge (TTB) segment revenues for
the fourth quarter of 2005 were up 37.8% over the same period in 2004 to $21.5
million. Utilization in the tug and tank barge segment increased to 92.9%
from 82.1% for the fourth quarter of 2004. This increase in utilization is
primarily the result of more vessels operating under time charters than
contracts of affreightment (COA). Average dayrates rose to $15,098 compared
to $12,642 during the same period of 2004. The increase in average dayrates
was primarily related to increased demand for double-hulled tank barges, in
general, as well as a change in fleet compliment to a greater mix of larger,
double-hulled barges, which command much higher dayrates than the Companys
fleetwide average. In addition, the Company entered the deepwater well test
market on the upstream side of its business with one of its newly constructed
double-hulled tank barges in December 2005. This new service-line contributed
about $1,500 of the TTB fleetwide-average dayrate increase for the quarter.
All five of the newbuild double-hulled barges constructed under the Companys
TTB Newbuild Program #1 were placed in service by the end of 2005. Operating
income increased by $3.8 million to $6.2 million for the fourth quarter 2005,
while operating margins nearly doubled from 15.5% in the fourth quarter of
2004 to 29.1% this quarter.
General and Administrative (G&A). G&A costs for the fourth quarter of
2005 were up $1.1 million over the same period in 2004 to $6.0 million. G&A
increases resulted from higher personnel and health insurance costs, increased
state and local tax expenses and rising costs associated with corporate
governance initiatives, such as compliance with the Sarbanes-Oxley Act. A
large component of the Companys G&A costs are variable incentive compensation
bonuses commensurate with the record financial results produced by the Company
in 2005. However, despite record bonus levels, the Companys G&A margin of
11% of revenue was still in-line with its industry peers and its previous
guidance for this expense category.
Calendar 2005 Results
Revenues for 2005 increased 38.0% to $182.6 million compared to $132.3
million for 2004. Operating income was $68.1 million, or 37.3% of revenues
for 2005 compared to $35.8 million, or 27.1% of revenues for 2004. Net income
for 2005 was $37.4 million, or $1.64 per diluted share, which included a $1.7
million ($1.1 million after tax or $0.05 per diluted share) loss on early
extinguishment of debt. This bond refinancing charge related to the January
2005 redemption of the non-tendered 10.625% senior notes that were still
outstanding as of December 31, 2004. The Companys record results for the
current year were positively impacted by strong market conditions in both
segments coupled with incremental contributions from acquired and newly
constructed vessels delivered since the beginning of 2005.
Recent Developments
Acquisition of GoM Port Facility. To support its rapidly expanding OSV
operations in the Gulf of Mexico and to support customers logistics
requirements, the Company acquired in December 2005 a shore base facility
located in Port Fourchon, Louisiana for approximately $5.0 million. The
facility lease has eight years remaining on its initial term, with four
additional five-year renewal periods. Formerly known as ASCO Magnolia, the
facility has been renamed HOS Port. The Company is currently developing
expansion plans for the facility. Mr. Hornbeck stated, "The addition of HOS
Port is another step in our growth and has allowed us to establish a foothold
in Port Fourchon, which is the jumping off point for the vast majority of
deepwater and ultra-deepwater activity in the GoM. This action further
underscores our long-term commitment to, and continued bullish outlook for,
our primary operating market. HOS Port will not only support our existing OSV
fleet, but will also provide a key logistics base for our HOS 370 class MPSVs
once they are delivered."
Long-Term Military Contracts Prompt Expansion of OSV Newbuild Program #4.
In response to the demonstration of certain enhanced capabilities developed by
Hornbeck Offshore of its proprietary vessels, the Company was recently able to
place all four of its 240 ED class OSVs on long-term time charters with the
U.S. military at current market dayrates. Due to the popularity of the 240 ED
class design with our oilfield customers in the GoM, the Company plans to
build four new 240 "EDF class" vessels to replace the four 240 ED class
vessels that are now serving the military. The new 240 EDF design is an
adaptation of the Companys proprietary 240 ED design with modifications that
allow for faster transit speeds.
Based on internal estimates, the incremental cost of four new vessels is
expected to be approximately $80.0 million in the aggregate, excluding
capitalized construction period interest. The Company has contracted with a
Gulf Coast shipyard for the construction of two of the four 240 EDF class
OSVs. The Company has also signed a letter of intent with a West Coast
shipyard for the two remaining vessels, plus options for two additional
vessels. All of the new OSVs to be constructed under this expansion of the
OSV Newbuild Program #4 are expected to be delivered by mid to late-2008, with
the first vessel due out in late 2007. These four vessels, which comprise
approximately 11,000 deadweight tons in the aggregate (17,000 deadweight tons,
if the optional two vessels are built), are in addition to the 20,000
deadweight tons of new generation OSV vessel capacity originally announced in
September 2005 as OSV Newbuild Program #4. (For more information on that
program, please see below.)
Mr. Hornbeck added, "We have a long and successful history of on-time, on-
budget deliveries with the Gulf Coast shipyard that is building the first two
240 EDF class OSVs. This is the same shipyard that has previously built
thirteen vessels for us, including all four of our 240 ED class OSVs on which
the EDF-design is based. Using a West Coast shipyard for the other two
vessels allows us to diversify away from the Gulf Coast region and to mitigate
the impact of future hurricane seasons on the construction of our vessels."
Recent Increase in 2006 Contract Coverage. With dayrates currently at
all-time record levels, the Company has recently signed term contracts, some
of which may extend into 2008, for ten of its vessels, six in its OSV fleet
and four in its TTB fleet, at prevailing market dayrates. As of the date of
its last earnings call in early November 2005, the Company had approximately
30% and 40% of its available vessel days for the calendar year 2006 contracted
for its OSV and TTB fleets, respectively, compared to approximately 67% and
81%, respectively, today. However, in keeping with the Companys optimistic
outlook in each of its two business lines, only 17% and 18% of the Companys
available vessel days in its OSV and TTB segments are now contracted for 2007,
respectively. The Company still believes that the GoM is in the midst of an
extended multi-year up-cycle and, therefore, currently plans to maintain a
contracting strategy over the near term designed to preserve its ability to
participate in further dayrate expansion on the balance of its fleet
throughout the remainder of the guidance period.
Future Outlook
Based on the key assumptions outlined below and in the attached data
tables, the following statements reflect managements 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 vessel acquisitions, business combinations,
divestitures, financings and unannounced newbuild programs that may be
commenced after the date of this news release.
Earnings Outlook
FAS 123R Treatment. Pursuant to the required change in method of
accounting for compensation expense for stock awards required by FAS 123R,
effective January 1, 2006, for financial reporting purposes under GAAP, the
Company expects to report FAS 123R compensation expense for stock awards of
$0.5 million, $4.5 million and $7.0 million for the first quarter of 2006 and
the full calendar years 2006 and 2007, respectively. To be consistent with
the Companys prior earnings guidance and the Companys understanding of what
is typically excluded from current analyst estimates, all of the following
forward guidance figures mentioned in the immediately following five
paragraphs are adjusted to exclude FAS 123R compensation expense for stock
awards.
First Quarter 2006 Guidance. The Company expects adjusted EBITDA for the
first quarter of 2006 to range between $28.5 million and $30.5 million.
Please refer to the attached data table for a definition and reconciliation of
forward EBITDA and adjusted EBITDA guidance to its most directly comparable
GAAP financial measure. The Company expects adjusted diluted earnings per
share, or EPS, for the first quarter of 2006 to range between $0.45 and $0.49.
While the Company generally expects to maintain a utilization rate in the mid-
90s for its OSV segment, utilization for the first quarter of 2006 is
expected to be below the average for the year, ranging between 85% and 90% for
the first quarter, due to several vessels being out-of-service for
approximately 122 days for unscheduled drydockings and in preparation to
commence long-term contracts.
Calendar 2006 Guidance. The Company now expects total adjusted EBITDA for
the full year 2006 to range between $130 million and $135 million, and
adjusted diluted EPS for 2006 is now expected to range between $2.09 and
$2.20.
Calendar 2007 Guidance. The Company expects total adjusted EBITDA for the
full year 2007 to range between $147 million and $157 million, and adjusted
diluted EPS for 2007 is expected to range between $2.36 and $2.59.
Key Assumptions. The above guidance reflects managements belief that
current favorable OSV and TTB market conditions will continue throughout the
remainder of 2006 and all of 2007. Fleetwide average OSV dayrates are expected
to remain above $18,000 and fleetwide average OSV utilization is expected to
average in the mid-90% range for 2006 and throughout 2007 guidance periods.
Fleetwide average TTB dayrates are expected to remain above $15,000 and
fleetwide average TTB utilization is expected to average in the low-90% range
for 2006 and throughout 2007 guidance periods. The effect of the incremental
contribution from the TTB newbuild capacity added in 2005 is expected to
result in adjusted EBITDA from the TTB segment in 2006 of approximately 30% of
the mid-point of the company-wide guidance range of $130 million to $135
million for 2006. Guidance for 2007 assumes a partial contribution from the
Companys announced newbuild and conversion programs as outlined in greater
detail below. In 2007, the Company expects a partial contribution from the
two vessels in its MPSV conversion program and possibly certain of the OSVs to
be constructed under its recently expanded OSV Newbuild Program #4. Guidance
for 2007 also assumes a partial contribution from the announced TTB Newbuild
Program #2, which is expected to result in adjusted EBITDA from the TTB
segment of approximately 25% to 30% of the mid-point of the company-wide 2007
guidance range of $147 million to $157 million.
The Company expects year-over-year increases commensurate with prevailing
oilfield service industry trends of between 15% and 20% of its aggregate
operating expenses for 2006, primarily resulting from significantly higher
crew wages due to labor shortages and increased demand for qualified mariners.
G&A is assumed to remain at approximately 10% to 12% of revenue for both 2006
and 2007. 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 Expenditures Outlook
"In response to temporary disruptions caused by Hurricanes Katrina and
Rita, we have focused on identifying alternative domestic shipyards outside of
the Gulf Coast region to service our maintenance and growth capex needs in the
future. While we are not immune from the collateral effect of these recent
hurricanes, which have caused some delays and increased the cost of most of
our newbuild programs, we have responded quickly and have made some mid-course
adjustments to some of our pending growth initiatives, which we have outlined
below," added Mr. Hornbeck.
Update on Maintenance Capital Expenditures. The Company expects
maintenance capital expenditures for the first quarter of 2006 to be
approximately $2.0 million. The Company expects maintenance capital
expenditures for the full calendar year 2006 to be approximately $21.0
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. In November 2003, the Company
announced its first new vessel construction program for its TTB business
segment. This program was ultimately expanded to include 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. The
Company took delivery of the final two double-hulled tank barges during the
fourth quarter of 2005 and expects to complete the retrofit of the final two
remaining offshore tugs under this program, renamed the Eagle Service and
Patriot Service, during the first quarter of 2006. The conversions of these
two tugs were expected to be completed during the fourth quarter of 2005, but
were delayed at the GoM shipyard where they were drydocked. As of December
31, 2005, the Company has expended $116.4 million in total costs related to
this newbuild program. The aggregate total cost of TTB Newbuild Program #1 is
expected to be on-budget at roughly $121.0 million.
Update on MPSV Conversion Program. In May 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. The total
project cost to acquire and convert the two vessels was 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 anticipates delivery of the converted vessels
during 2007.
Update on OSV Newbuild Program #4. In September 2005, the Company
announced its fourth new vessel construction program for its OSV business
segment. This newbuild program is expected to add approximately 20,000
deadweight tons of capacity to the Companys OSV fleet at a cost of
approximately $170.0 million in the aggregate. Today, the Company announced
its plans to expand this newbuild program by up to 17,000 additional
deadweight tons of capacity. Given the complexity and unique design
attributes of the OSVs originally contemplated under this program, and in
light of capacity constraints and price escalations at candidate shipyards,
the Company has decided that it would be more productive, at this time, to
focus its efforts on the construction of the new vessels announced this
morning, which are based on an existing, fully engineered, proprietary design,
and resume the original scope of the program once shipyard pricing and
delivery conditions improve.
Update on TTB Newbuild Program #2. In September 2005, the Company
announced its second new vessel construction program for its TTB business
segment. This newbuild program is expected to add approximately 400,000 of
total barrel-carrying capacity of double-hulled barges and the related "power"
units to the Companys TTB fleet at a cost of approximately $105.0 million in
the aggregate. The Company has signed a contract with a Gulf Coast shipyard
for three 60,000-barrel double-hulled barges, or 180,000 barrels in the
aggregate, and will continue to seek bids from domestic shipyards for
additional vessels under this program. The precise number of additional
vessels to be constructed and their specifications will be finalized as
certain milestones are completed, including the negotiation of shipyard
contracts. All of the new vessels to be constructed under the TTB Newbuild
Program #2 are now expected to be delivered from early 2007 through mid-2008.
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
several 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 fourth quarter 2005
financial results and recent developments at 10:00 a.m. Eastern (9:00 a.m.
Central) today, February 23, 2006. 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, 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 Companys 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 Companys website. Additionally, a telephonic replay will be
available through March 2, 2006, and may be accessed by calling (303) 590-3000
and using the pass code 11052105.
Attached Data Tables
The Company has posted an electronic version of the following four pages
of data tables, which is downloadable in Excel(TM) format, on the "IR Home"
page of the "Investors" section of the Companys 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. and in Puerto Rico. Hornbeck Offshore
currently owns and operates a fleet of 60 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
Companys 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 taxes, 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. Managements opinion regarding the usefulness of such
measure to investors and a description of the ways in which management uses
such measure can be found in the Companys 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 Twelve Months Ended
December September December December December
31, 30, 31, 31, 31,
2005 2005 2004 2005 2004
Revenues $57,137 $46,462 $37,784 $182,586 $132,261
Operating expenses 18,866 16,577 16,408 66,910 58,520
Depreciation and
amortization 7,283 7,381 6,260 27,270 23,135
General and administrative
expenses 6,041 5,714 4,930 20,327 14,759
Total operating expenses 32,190 29,672 27,598 114,507 96,414
Operating income 24,947 16,790 10,186 68,079 35,847
Interest expense (4,008) (3,112) (3,808) (12,558) (17,698)
Interest income 2,783 153 143 3,178 356
Loss on early
extinguishment of debt - - (22,443) (1,698) (22,443)
Gain (loss) on sale of
assets (8) 829 10 1,893 65
Other income (expense),
net (1) (17) 47 53 87 70
Income (loss) before
income taxes 23,697 14,707 (15,859) 58,981 (3,803)
Income tax expense
(benefit) 8,614 5,309 (5,801) 21,538 (1,320)
Net income (loss) $15,083 $9,398 $(10,058) $37,443 $(2,483)
Basic earnings (loss) per
share of common stock $0.56 $0.45 $(0.48) $1.67 $(0.13)
Diluted earnings (loss)
per share of common stock $0.55 $0.44 $(0.48) $1.64 $(0.13)
Weighted average basic
shares outstanding (2) 26,794 20,954 20,815 22,369 19,330
Weighted average diluted
shares outstanding (2) 27,261 21,455 20,815 22,837 19,330
Other Operating Data (unaudited):
Three Months Ended Twelve Months Ended
December September December December December
31, 30, 31, 31, 31,
2005 2005 2004 2005 2004
Offshore Supply Vessels:
Average number 25.0 25.0 23.0 24.6 22.8
Average fleet
capacity
(deadweight) 59,042 59,042 52,398 57,658 51,938
Average vessel
capacity
(deadweight) 2,362 2,362 2,278 2,341 2,274
Average
utilization
rate (3) 94.8% 98.7% 94.3% 96.2% 87.5%
Average
dayrate (4) $15,903 $13,638 $10,926 $13,413 $10,154
Effective
dayrate (5) $15,076 $13,461 $10,303 $12,903 $8,885
Tugs and Tank Barges:
Average number
of tank barges 16.1 14.9 16.0 14.6 16.0
Average fleet
capacity
(barrels) 1,257,090 1,111,174 1,156,330 1,072,075 1,156,330
Average barge
size
(barrels) 75,381 74,078 72,271 71,651 72,271
Average
utilization
rate (3) 92.9% 83.9% 82.1% 87.1% 82.2%
Average
dayrate (6) $15,098 $12,809 $12,642 $13,542 $11,620
Effective
dayrate (5) $14,026 $10,747 $10,379 $11,795 $9,552
Balance Sheet Data (unaudited):
As of As of
December 31, December 31,
2005 2004
Cash and cash equivalents $271,739 $54,301
Working capital 290,471 52,556
Property, plant and equipment, net 462,041 361,219
Total assets 796,675 460,571
Total short-term debt (7) - 15,449
Total long-term debt 299,449 225,000
Stockholders equity $429,495 $182,904
Cash Flow Data (unaudited):
Twelve Months Ended
December 31, December 31,
2005 2004
Cash provided by operating activities $75,806 $21,405
Cash used in investing activities (120,617) (61,378)
Cash provided by financing activities $262,202 $81,358
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, 30, 31, 31, 31,
2005 2005 2004 2005 2004
Offshore Supply Vessels:
Revenues $35,680 $31,341 $22,168 $117,435 $75,293
Operating income $18,704 $15,605 $7,772 $57,003 $26,351
Operating margin 52.4% 49.8% 35.1% 48.5% 35.0%
Components of EBITDA (8)
Net income (loss) $11,462 $8,614 $(7,887) $30,831 $(3,152)
Interest expense, net 686 2,148 2,985 6,861 14,069
Income tax expense
(benefit) 6,539 4,891 (4,466) 17,734 (1,664)
Depreciation 3,358 3,346 2,953 12,913 11,573
Amortization 737 580 412 2,284 1,303
Loss on early
extinguishment
of debt - - 17,200 1,658 17,200
EBITDA (8) $22,782 $19,579 $11,197 $72,281 $39,329
EBITDA (8) Reconciliation
to GAAP:
EBITDA (8) $22,782 $19,579 $11,197 $72,281 $39,329
Cash paid for deferred
drydocking charges (590) (975) (268) (3,110) (3,374)
Cash paid for interest (6,438) (159) (4,270) (11,047) (19,506)
Changes in working
capital 1,386 (1,439) (5,310) (2,106) (3,218)
Changes in other, net (43) (1) (85) (95) (218)
Net cash provided by
operating
activities $17,097 $17,005 $1,264 $55,923 $13,013
Tugs and Tank Barges:
Revenues $21,457 $15,121 $15,616 $65,151 $56,968
Operating income $6,243 $1,185 $2,414 $11,076 $9,496
Operating margin 29.1% 7.8% 15.5% 17.0% 16.7%
Components of EBITDA (8)
Net income (loss) 3,621 $784 $(2,171) $6,612 $669
Interest expense, net 539 811 680 2,519 3,273
Income tax expense
(benefit) 2,075 418 (1,335) 3,804 344
Depreciation 2,040 2,000 1,493 7,041 5,835
Amortization 1,148 1,455 1,402 5,032 4,424
Loss on early
extinguishment of debt - - 5,243 40 5,243
EBITDA (8) $9,423 $5,468 $5,312 $25,048 $19,788
EBITDA (8) Reconciliation
to GAAP:
EBITDA (8) $9,423 $5,468 $5,312 $25,048 $19,788
Cash paid for deferred
drydocking charges (1,339) (236) (1,104) (3,717) (5,156)
Cash paid for interest (3,032) (57) (1,081) (6,841) (4,517)
Changes in working
capital 1,509 2,185 2,381 7,245 (1,742)
Changes in other, net (74) (593) 7 (1,852) 19
Net cash provided by
operating activities $6,487 $6,767 $5,515 $19,883 $8,392
Consolidated:
Revenues $57,137 $46,462 $37,784 $182,586 $132,261
Operating income $24,947 $16,790 $10,186 $68,079 $35,847
Operating margin 43.7% 36.1% 27.0% 37.3% 27.1%
Components of EBITDA (8)
Net income (loss) $15,083 $9,398 $(10,058) $37,443 $(2,483)
Interest expense, net 1,225 2,959 3,665 9,380 17,342
Income tax expense
(benefit) 8,614 5,309 (5,801) 21,538 (1,320)
Depreciation 5,398 5,346 4,446 19,954 17,408
Amortization 1,885 2,035 1,814 7,316 5,727
Loss on early
extinguishment
of debt - - 22,443 1,698 22,443
EBITDA (8) $32,205 $25,047 $16,509 $97,329 $59,117
EBITDA (8) Reconciliation
to GAAP:
EBITDA (8) $32,205 $25,047 $16,509 $97,329 $59,117
Cash paid for deferred
drydocking charges (1,929) (1,211) (1,372) (6,827) (8,530)
Cash paid for interest (9,470) (216) (5,351) (17,888) (24,023)
Changes in working
capital 2,895 746 (2,929) 5,139 (4,960)
Changes in other, net (117) (594) (78) (1,947) (199)
Net cash provided by
operating
activities $23,584 $23,772 $6,779 $75,806 $21,405
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)
2006 Guidance
First Quarter Full-Year 2006 Full-Year 2006
2006 Updated Estimate Prior Estimate
Low High Low High Low High
Components of Projected
EBITDA (8)
EBITDA, as adjusted (8) $28.9 $30.9 $129.5 $134.5 $115.0 $120.0
Less: Compensation expense
for stock awards 0.9 0.9 4.5 4.5 TBD TBD
EBITDA, as reported (8) $28.0 $30.0 $125.0 $130.0 $115.0 $120.0
Depreciation 5.7 5.7 24.6 24.6 25.0 25.0
Amortization 1.7 1.7 7.9 7.9 7.5 7.5
Interest expense, net 2.1 2.1 5.8 5.8 9.0 9.0
Income tax expense 6.8 7.5 31.6 33.5 26.8 28.7
Income tax rate 36.5% 36.5% 36.5% 36.5% 36.5% 36.5%
Net income, as reported $11.7 $13.0 $55.1 $58.2 $46.7 $49.8
Weighted average diluted
shares outstanding 27.6 27.6 27.7 27.7 27.6 27.6
Earnings per diluted
share, as reported $0.43 $0.47 $1.99 $2.10 $1.69 $1.81
Adjustments included
above:
Compensation expense for
stock awards, net of tax $0.6 $0.6 $2.9 $2.9 TBD TBD
Net income, as adjusted $12.3 $13.6 $58.0 $61.1 $46.7 $49.8
Earnings per diluted
share, as adjusted $0.45 $0.49 $2.09 $2.21 $1.69 $1.81
Projected EBITDA(8)
Reconciliation to GAAP:
EBITDA, as reported (8) $28.0 $30.0 $125.0 $130.0 $115.0 $120.0
Cash paid for deferred
drydocking
charges (0.8) (0.8) (10.9) (10.9) (9.1) (9.1)
Cash paid for
interest - - (18.5) (18.5) (18.7) (18.7)
Changes in working
capital (9) (12.2) (15.2) 9.7 9.0 13.7 12.6
Changes in other,
net (9) (0.2) (0.2) (0.2) (0.2) (0.2) (0.2)
Cash flows provided by
operating activities $14.8 $13.8 $105.1 $109.4 $100.7 $104.6
2007 Guidance
Full-Year 2007
Low High
Components of Projected EBITDA (8)
EBITDA, as adjusted (8) $146.9 $156.9
Less: Compensation expense for
stock awards 6.9 6.9
EBITDA, as reported (8) $140.0 $150.0
Depreciation 29.7 29.7
Amortization 9.6 9.6
Interest expense, net 4.3 4.3
Income tax expense 35.2 38.8
Income tax rate 36.5% 36.5%
Net income, as reported $61.2 $67.6
Weighted average diluted shares
outstanding 27.8 27.8
Earnings per diluted share, as
reported $2.20 $2.43
Adjustments included above:
Compensation expense for stock
awards, net of tax $4.4 $4.4
Net income, as adjusted $65.6 $72.0
Earnings per diluted share, as
adjusted $2.36 $2.59
Projected EBITDA(8) Reconciliation to GAAP:
EBITDA, as reported (8) $140.0 $150.0
Cash paid for deferred drydocking
charges (9.2) (9.2)
Cash paid for interest (18.3) (18.3)
Changes in working capital (9) 15.0 14.2
Changes in other, net (9) (0.2) (0.2)
Cash flows provided by operating
activities $127.3 $136.5
Pro Forma 2006E Guidance (Post-Construction Peak)
Pre- OSV TTB
Newbuild Expansion Expansion Peak
Components of Projected 2006E (10) (11) (12)
EBITDA (8)
EBITDA (8) $127.5 $66.5 $16.3 $210.3
Depreciation 24.6 14.2 3.6 42.4
Amortization 7.9 - - 7.9
Interest expense, net (13) 5.7 5.8 1.7 13.2
Income tax expense (14) 32.6 17.0 4.0 53.6
Net Income $56.7 $29.5 $7.0 $93.2
Weighted average diluted shares
outstanding 27.7 27.7
Earnings per diluted share $2.05 $3.36
Projected EBITDA(8) Reconciliation to
GAAP:
EBITDA (8) $127.5 $66.5 $16.3 $210.3
Cash paid for deferred drydocking
charges (10.9) - - (10.9)
Cash paid for interest (18.5) - - (18.5)
Changes in working capital (9) 9.3 (10.9) (2.9) (4.5)
Changes in other, net (9) (0.2) - - (0.2)
Cash flows provided by operating
activities $107.2 $55.6 $13.4 $176.2
Hornbeck Offshore Services, Inc. and Subsidiaries
Unaudited Other Financial Data
(in millions, except Historical Data)
Capital Expenditures Data (unaudited) (15):
Historical Data (in thousands):
Three Months Ended Twelve Months Ended
December September December December December
31, 30, 31, 31, 31,
2005 2005 2004 2005 2004
Maintenance Capital
Expenditures:
Deferred drydocking
charges $1,929 1,211 $1,373 $6,827 $8,530
Other vessel capital
improvements, net (56) 1,728 3,750 3,979 8,786
Non-vessel related capital
improvements 410 605 64 2,577 968
$2,283 $3,544 $5,187 $13,383 $18,284
Growth Capital Expenditures:
TTB newbuild
program #1 $7,924 $22,693 $13,223 $65,775 $42,965
AHTS acquisition and
retrofit costs 1,306 258 - 29,181 -
MPSV conversion program 4,090 246 - 8,064 2,433
TTB newbuild program #2 3,690 - - 3,690 -
OSV newbuild program #4 5,062 - - 5,062 -
$22,072 $23,197 $13,223 $111,772 $45,398
Projected Data:
1Q2006E 2Q2006E 3Q2006E 4Q2006E 2006E 2007E
Maintenance Capital
Expenditures:
Deferred drydocking
charges $0.8 $2.8 $2.6 $4.7 $10.9 $9.2
Other vessel capital
improvements 0.1 1.2 0.8 1.0 3.1 3.3
Non-vessel related capital
improvements 1.1 4.0 0.4 0.7 6.2 5.5
$2.0 $8.0 $3.8 $6.4 $20.2 $18.0
Growth Capital Expenditures:
TTB newbuild program #1 $4.6 $- $- $- $4.6 $-
MPSV conversion program 5.0 5.0 15.0 15.0 40.0 13.1
TTB newbuild program #2 2.0 12.5 20.0 15.7 50.2 45.9
OSV newbuild program #4 2.4 - - 1.2 3.6 81.4
$14.0 $17.5 $35.0 $31.9 $98.4 $140.4
Full Construction Cycle Data: 2008 and
Pre- there-
2005 2005 2006 2007 after Total
Growth Capital Expenditures:
TTB newbuild program #1 $50.6 $65.8 $4.6 $- $- $121.0
MPSV conversion program 3.8 8.1 40.0 13.1 - 65.0
TTB newbuild program #2 - 3.7 50.2 45.9 5.2 105.0
OSV newbuild program #4 - 5.1 3.6 81.4 199.9 290.0
$54.4 $82.7 $98.4 $140.4 $205.1 $581.0
(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 October 6, 2005, the Company issued 6,100 shares of common stock,
which resulted in 27,151 basic shares outstanding on the close of
business on December 31, 2005. For the three months ended December
31, 2005 and 2004 and September 30, 2005, stock options representing
rights to acquire 23, 262 and 5 shares, respectively, of common stock
were excluded from the calculation of diluted earnings per share
because the effect was anti-dilutive. For the years ending December
31, 2005 and 2004, stock options representing rights to acquire 42
and 273 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) Represents the remaining balance of $15,449 in aggregate principal
amount of the Companys 10.625% senior notes due 2008 that was
redeemed on January 14, 2005.
(8) Non-GAAP Financial Measure
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.
EBITDA, as adjusted, is prior to the impact of compensation expense
relating to stock options and grants.
(9) 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 Companys 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.
(10) Includes a full-year contribution of operating results from vessels
planned for our MPSV conversion program and our OSV Newbuild Program
#5.
(11) Includes a full-year contribution of operating results from vessels
planned for our TTB Newbuild Program #2.
(12) 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 under OSV Newbuild Program #5 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.
(13) Interest expense, net assumes $19.2 of interest expense offset by
$6.0 of interest income on a projected post construction cash balance
of $150.0.
(14) 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.
(15) The amounts included in this table are cash outlays prior to
construction period interest, if applicable.
Contacts: Todd Hornbeck, CEO
Jim Harp, CFO
Hornbeck Offshore Services 985-727-6802
Ken Dennard, Managing Partner
DRG&E / 713-529-6600
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