Q2 2005 diluted EPS quadruples to $0.36 compared to $0.09 in Q2 2004
Q3 OSV dayrates currently exceed previous all-time high of $12,700 set in 2001
NEW ORLEANS, Aug. 4 /PRNewswire-FirstCall/ -- Hornbeck Offshore Services,
Inc. (NYSE: HOS) announced today its results for the second quarter ended June
30, 2005. Second quarter revenues increased $10.8 million, or 35.6%, to $41.1
million compared to $30.3 million for the second quarter of 2004. Operating
income was $13.8 million, or 33.6% of revenues, for the second quarter of 2005
compared to $7.6 million, or 25.1% of revenues, for the same quarter in 2004.
These increases were driven primarily by continued strengthening in OSV market
conditions in the U.S. Gulf of Mexico.
Net income for the second quarter of 2005 increased 400% to $7.7 million,
or $0.36 per diluted share, compared to net income for the second quarter of
2004 of $1.9 million, or $0.09 per diluted share. This increase in quarterly
net income includes an after-tax gain on the sale of assets of $0.7 million,
or $0.03 per diluted share, resulting from the disposition of one recently
retired OPA 90 single-hulled tank barge, the Energy 9801, and one offshore
tug, the Yabucoa Service.
Significantly higher dayrates and utilization in the OSV segment
contributed to a 61.7% increase in EBITDA to $21.5 million over the second
quarter of 2004, which exceeded the Company's guidance range of $18 to $20
million for the second quarter of 2005. 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 on-
going increase in drilling and production activity in the deepwater and deep
shelf segments of the U.S. Gulf of Mexico continues to put upward pressure on
our OSV dayrates. Market indications are that all available U.S.-flagged new
generation OSVs in the Gulf of Mexico are currently working at full practical
utilization, with anecdotal signs of additional increases in drilling and
production activity visible into 2007. Since the end of the second quarter,
our fleetwide average OSV dayrates have broken through our previous all-time
high of $12,700 set in the fourth quarter of 2001. Our fleet is currently
averaging above $13,000 per day, with leading edge spot rates averaging well
above that level. With roughly 40% and 70% of our available vessel days for
the remainder of 2005 and calendar 2006 still uncontracted, our OSV fleet is
well positioned to participate in any further rate increases over current
levels.
"With our tug and tank barge fleet complement currently in a state of
transition, we are pleased that our revenue for that segment for the first
half of 2005 is in-line with the first half of 2004 and ahead of plan year-to-
date, even though our average fleet capacity was down 17% from the prior-year
period. Also, we look forward to the incremental contribution that our five
new barges are expected to have on our 2006 results," added Hornbeck.
OSV Segment. Revenues from the OSV segment were $26.6 million for the
second quarter of 2005, an increase of 52.9% from $17.4 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. The Company's OSV utilization rate was 96.6% for the three months
ended June 30, 2005, compared to 83.8% achieved for the same period of 2004.
The average OSV dayrate in the second quarter of 2005 improved 28.2%, or
$2,722 per day, to $12,364 compared to $9,642 for the same period of 2004.
Second quarter 2005 average fleet utilization was up 2 points sequentially
from the first quarter of 2005, while average dayrates improved $787 per day
over the first quarter of 2005. In addition, our effective, or utilization
adjusted, dayrate increased 47.8% from the prior year quarter and 9.2% from
the sequential quarter. These improvements in operations resulted in our
operating income being more than double the prior year quarter.
Tug and Tank Barge Segment. Tug and tank barge segment revenues for the
second quarter of 2005 were up 12.2% over the same period in 2004 to $14.5
million, despite having 182 less barge days available in the second quarter.
Operating income decreased by $0.1 million to $1.4 million, due in part to
higher depreciation and amortization. Utilization in the tug and tank barge
segment increased to 85.4% from 79.9% in last year's second quarter, primarily
due to a change in contract mix from contracts of affreightment (COA) to time
charters and less drydocking and repair activities. Average dayrates grew to
$12,673 from $10,842 during the same period. The increase in average dayrates
was primarily related to the OPA 90-related tightening of the tank barge
market in the northeastern United States. A transitional decrease in fleet
capacity, coupled with a related increase in external tug usage, contributed
to a reduction in operating margins to 9.6% from 11.9% a year ago. However,
operating margins in this segment are expected to increase in 2006 once all
five of the double-hulled barges under the current newbuild program are in
service for a full year.
First Half Results
Revenues for the first six months of 2005 increased 28.2% to $79.0 million
compared to $61.6 million for the same period in 2004. Operating income was
$26.3 million, or 33.3% of revenues, for the six months of 2005 compared to
$16.5 million, or 26.8% of revenues, for the same period in 2004. Net income
for the first six months of 2005 increased over 300% to $13.0 million, or
$0.61 per diluted share, compared to net income of $4.3 million, or $0.23 per
diluted share, for the first six months of 2004. The Company's first half
results were positively impacted by the addition of two foreign-flagged
anchor-handling towing supply (AHTS) vessels that were acquired in 2005 and
one fast supply vessel that was acquired in April 2004. The Company's net
income for the first six 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.
Outlook
The following statements are based on management's current expectations.
These statements are forward-looking and actual results may differ materially.
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 completed after the
date of this news release.
In addition, the Company's guidance ranges are based on the assumption
that current market conditions in both of the Company's business segments will
continue through at least the end of 2006. Any material change in market
conditions in either of the Company's two business segments could affect its
guidance.
Jim Harp, the Company's Executive Vice President and CFO, stated, "We have
again upwardly revised our annual 2005 and 2006 guidance ranges to reflect our
actual results for the second quarter of 2005 and currently expected fleet
complement through 2006, as well as our latest market outlook based on current
visibility in each of our business segments. We are increasingly more
comfortable that the robust market conditions we are experiencing in the Gulf
of Mexico will continue through 2006, and possibly beyond. We are also
optimistic that the supply-demand equation affecting our northeastern U.S.
barge operations will remain favorable for the foreseeable future. Our 2006
guidance includes a full-year contribution from all five of our newbuild tank
barges, but does not reflect any contribution from the multipurpose supply
vessel (MPSV) conversion program that we announced last quarter. For guidance
purposes, we do not expect to place the two 370 class MPSVs into service until
the first quarter of 2007, at which time we expect them to contribute, in the
aggregate, incremental full-year diluted EPS in the range of $0.25 to $0.35."
Third Quarter 2005 Guidance. The Company expects EBITDA for the third
quarter of 2005 to range between $22.0 million and $24.0 million. Please
refer to the attached 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 for the third quarter of 2005 to
range between $0.34 and $0.40.
Updated Calendar 2005 Guidance. The Company now expects total EBITDA for
the full year 2005 to range between $85.0 million and $90.0 million and
diluted earnings per share is now expected to range between $1.34 and $1.49,
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 $100.0 million and $110.0 million and
diluted earnings per share is now expected to range between $1.60 and $1.89.
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. Average OSV dayrates are expected to remain at or above
$13,000 and average fleetwide utilization is expected to remain in the mid-90%
range throughout the 2005 and 2006 guidance periods. While fleetwide average
OSV dayrates have recently exceeded historical peak levels of roughly $12,700,
the Company has assumed for guidance purposes a gradual increase in effective
OSV dayrates for the balance of 2005 from current levels, while holding 2006
constant with expected 2005 year-end levels.
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 upwardly
revised guidance range of $85.0 million to $90.0 million. Guidance for 2006
assumes a full-year contribution from all five new barges, which is expected
to result in EBITDA from the tug and tank barge segment of approximately 33%
of the mid-point of the company-wide 2006 guidance range of $100 million to
$110 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.
Recent Developments
Tank Barge Newbuild Program Update. On July 10, 2005, the Energy 11103,
the second double-hulled tank barge, and first of three 110,000-barrel units,
to be built under the Company's current newbuild program, was delivered and,
upon its mobilization to the northeastern United States from the shipyard,
immediately commenced service under a fixed two-year time charter with a major
oil company. The remaining three double-hulled tank barges currently under
construction are still expected to be delivered during the fourth quarter
2005.
Rationalization of Tug & Tank Barge Fleet. During the second quarter of
2005, the Company sold one inactive single-hulled tank barge, the Energy 9801,
and one offshore tug, the Yabucoa Service. Gross proceeds from the sale of
the two vessels were $2.0 million, which resulted in an aggregate pre-tax gain
of $1.1 million. The disposition of the Energy 9801, which was retired from
service pursuant to OPA 90 in December 2004, was an unexpected windfall for
the Company and eliminated further stacking costs that would have otherwise
been incurred. The sale of the tug was part of the Company's on-going efforts
to rationalize its tug fleet to better position itself to power the larger
barges now under construction. In addition, the Company recently signed an
agreement to purchase two additional 6,000 horsepower tugs, which it expects
to retrofit and place in service during the fourth quarter of this year as the
newbuild tank barges are delivered from the shipyard. The estimated aggregate
cost to purchase and retrofit these two additional higher horsepower tugs is
approximately $16.0 million.
Change in Disclosures relating to EBITDA. In response to a recent review
by the Securities and Exchange Commission (SEC) of the Company's Annual Report
on Form 10-K for the calendar year 2004, commencing with this press release
the Company is modifying its required disclosures regarding the use of EBITDA
as a non-GAAP financial measure. Notable changes from prior disclosures
include the exclusion of interest income from the Company's definition of
EBITDA. In addition, the Company is changing its presentation to discuss
EBITDA primarily as a liquidity measure and, as such, to reconcile EBITDA to
cash flows provided by operating activities. The Company also plans to amend
its Annual Report on Form 10-K for the calendar year 2004 and its Quarterly
Report on Form 10-Q for the first quarter ended March 31, 2005 to reflect
these changes in EBITDA disclosure. In addition, with respect to the amended
Form 10-K, the Company plans to set forth risk factors comparable to those
disclosed in its Form 10-Q for the first quarter of 2005.
Conference Call
The Company will hold a conference call to discuss its second quarter 2005
financial results and recent developments at 10:00 a.m. Eastern (9:00 a.m.
Central) today, August 4, 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 30 days on the "IR Home" page under the "Investors"
section of the Company's website. Additionally, a telephonic replay will be
available through August 11, 2005, and may be accessed by calling (303) 590-
3000 and using the pass code 11034723.
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. For more information, please visit the Company's website
at http://www.hornbeckoffshore.com under the captions, "News" and "Investors."
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 Quarterly Report on Form 10-Q 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 losses 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 are also
provided in this press release.
Contacts: Todd Hornbeck, CEO
Jim Harp, CFO
Hornbeck Offshore Services
985-727-6802
Ken Dennard, Managing Partner
Lisa Elliott, Sr. Vice President
DRG&E / 713-529-6600
Hornbeck Offshore Services, Inc. and Subsidiaries
Unaudited Consolidated Statements of Operations
(in thousands, except Other Operating and Per Share Data)
Three Months Ended Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2005 2005 2004 2005 2004
Statement of Operations
(unaudited):
Revenues $41,083 $37,904 $30,288 $78,986 $61,635
Operating expenses 15,879 15,588 13,696 31,468 28,047
Depreciation and
amortization 6,607 5,999 5,620 12,607 10,827
General and
administrative
expenses 4,752 3,820 3,332 8,571 6,292
Total operating
expenses 27,238 25,407 22,648 52,646 45,166
Operating income 13,845 12,497 7,640 26,340 16,469
Interest expense (2,854) (2,585) (4,656) (5,438) (9,801)
Interest income 120 124 68 243 106
Loss on early
extinguishment of debt - (1,698) - (1,698) -
Gain (loss) of sale of
assets 1,083 (11) - 1,072 -
Other income (expense),
net (1) 14 42 4 57 (6)
Income before income
taxes 12,208 8,369 3,056 20,576 6,768
Income tax expense (4,485) (3,131) (1,126) (7,615) (2,500)
Net income $7,723 $5,238 $1,930 $12,961 $4,268
Basic earnings per
share of common stock $0.37 $0.25 $0.09 $0.62 $0.24
Diluted earnings per
share of common stock $0.36 $0.25 $0.09 $0.61 $0.23
Weighted average basic
shares outstanding(2) 20,850 20,827 20,752 20,839 17,838
Weighted average
diluted shares
outstanding(2) 21,296 21,251 21,388 21,274 18,317
Other Operating Data
(unaudited):
Offshore Supply
Vessels:
Average number 24.3 24.0 23.0 24.2 22.7
Average vessel
capacity
(deadweight) 2,429 2,392 2,351 2,429 2,351
Average
utilization rate(3) 96.6% 94.5% 83.8% 95.5% 81.1%
Average dayrate(4) $12,364 $11,577 $9,642 $11,980 $9,636
Effective dayrate(6) $11,944 $10,940 $8,080 $11,441 $7,815
Tugs and Tank Barges:
Average number of
tank barges 14.0 13.3 16.0 13.7 16.0
Average fleet
capacity
(barrels) 1,013,002 923,002 1,156,330 968,002 1,156,330
Average barge size
(barrels) 72,357 65,929 72,271 69,143 72,271
Average
utilization rate(3) 85.4% 85.5% 79.9% 85.5% 85.5%
Average dayrate(5) $12,673 $13,192 $10,842 $12,924 $11,181
Effective
dayrate(6) $10,823 $11,279 $8,663 $11,050 $9,560
As of June 30 As of December 31,
2005 2004
Balance Sheet Data (unaudited):
Cash and cash equivalents $12,443 $54,301
Working capital 27,832 52,556
Property, plant and equipment, net 422,363 361,219
Total assets 487,069 460,571
Total short-term debt(7) - 15,449
Total long-term debt 241,000 225,000
Stockholders' equity 196,720 182,904
Six Months Ended
June 30, June 30,
2005 2004
Cash Flow Data (unaudited):
Cash provided by operating activities $28,450 $12,907
Cash used in investing activities (69,393) (35,307)
Cash provided by (used in) financing
activities (924) 33,225
(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 June 30, 2005 and 2004 and March
31, 2005, stock options representing rights to acquire 4, 377 and 312
million 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) 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.
(6) Effective dayrate represents the average dayrate multiplied by the
utilization rate for the respective period.
(7) 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.
Hornbeck Offshore Services, Inc. and Subsidiaries
Unaudited Other Financial Data
(in thousands, except Other Operating and Per Share Data)
Three Months Ended Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2005 2005 2004 2005 2004
Other Financial
Data (unaudited):
Offshore Supply
Vessels:
Revenues $26,570 $23,844 $17,354 $50,414 $32,919
Operating
income $12,446 $10,248 $6,106 $22,693 $10,899
Operating
margin 46.8% 43.0% 35.2% 45.0% 33.1%
Components of
EBITDA(8)
Net income $6,576 $4,179 $1,574 $10,755 $1,924
Interest
expense, net 2,078 1,949 3,727 4,027 7,849
Income tax
expense 3,807 2,498 876 6,304 1,121
Depreciation 3,161 3,048 2,935 6,210 5,686
Amortization 507 460 338 967 506
Loss on early
extinguishment
of debt - 1,658 - 1,658 -
EBITDA(8) $16,129 $13,792 $9,450 $29,921 $17,086
EBITDA(8)
Reconciliation
to GAAP:
EBITDA(8) $16,129 $13,792 $9,450 $29,921 $17,086
Cash paid for
deferred
drydocking
charges (700) (844) (1,658) (1,545) (2,793)
Cash paid for
interest (3,596) (628) (41) (4,450) (8,370)
Changes in
working
capital (227) (2,051) (3,503) (2,052) 3,193
Changes in
other, net (39) (13) 37 (51) (66)
Net cash
provided by
operating
activities $11,567 $10,256 $4,285 $21,823 $9,050
Tugs and Tank
Barges:
Revenues $14,513 $14,060 $12,934 $28,572 $28,716
Operating
income $1,399 $2,249 $1,534 $3,647 $5,570
Operating
margin 9.6% 16.0% 11.9% 12.8% 19.4%
Components
of EBITDA(8)
Net income $1,147 $1,059 $356 $2,206 $2,344
Interest
expense, net 656 512 861 1,168 1,846
Income tax
expense 678 633 250 1,311 1,379
Depreciation 1,636 1,365 1,463 3,001 2,871
Amortization 1,303 1,126 884 2,429 1,764
Loss on early
extinguishment
of debt - 40 40
EBITDA(8) $5,420 $4,735 $3,814 $10,155 $10,204
EBITDA(8)
Reconciliation
to GAAP:
EBITDA(8) $5,420 $4,735 $3,814 $10,155 $10,204
Cash paid for
deferred
drydocking
charges (1,003) (1,140) (1,137) (2,142) (1,730)
Cash paid
for
interest (3,830) (148) (9) (3,752) (1,938)
Changes in
working
capital 1,091 2,686 (303) 3,551 (2,678)
Changes
in other,
net (1,136) (48) 56 (1,185) (1)
Net cash
provided by
operating
activities $542 $6,085 $2,421 $6,627 $3,857
Consolidated:
Revenues $41,083 $37,904 $30,288 $78,986 $61,635
Operating
income $13,845 $12,497 $7,640 $26,340 $16,469
Operating
margin 33.7% 33.0% 25.2% 33.3% 26.7%
Components of
EBITDA(8)
Net income $7,723 $5,238 $1,930 $12,961 $4,268
Interest
expense,
net 2,734 2,461 4,588 5,195 9,695
Income tax
expense 4,485 3,131 1,126 7,615 2,500
Depreciation 4,797 4,413 4,399 9,211 8,557
Amortization 1,810 1,586 1,221 3,396 2,270
Loss on early
extinguishment
of debt - 1,698 - 1,698 -
EBITDA(8) $21,549 $18,527 $13,264 $40,076 $27,290
EBITDA(8)
Reconciliation
to GAAP:
EBITDA(8) $21,549 $18,527 $13,264 $40,076 $27,290
Cash paid
for deferred
drydocking
charges (1,703) (1,984) (2,795) (3,687) (4,523)
Cash paid
for
interest (7,426) (776) (50) (8,202) (10,308)
Changes in
working
capital 864 635 (3,806) 1,499 515
Changes in
other, net (1,175) (61) 93 (1,236) (67)
Net cash
provided by
operating
activities $12,109 $16,341 $6,706 $28,450 $12,907
Hornbeck Offshore Services, Inc. and Subsidiaries
Unaudited Other Financial Data
(in millions, except Per Share Data)
2005 Guidance and Projected EBITDA Reconciliation:
Third Full-Year 2005 Full-Year 2005
Quarter Updated Prior
2005 Estimate Estimate(10)
Low High Low High Low High
Components of EBITDA(8)
EBITDA(8) $22.0 $24.0 $85.0 $90.0 $77.5 $82.5
Depreciation 5.3 5.3 20.2 20.2 20.2 20.2
Amortization 1.8 1.8 6.9 6.9 6.9 6.9
Interest expense, net 3.1 3.1 12.0 12.0 12.1 12.1
Income tax expense 4.4 5.2 17.2 19.1 14.4 16.2
Income tax rate 37.5% 37.5% 37.5% 37.5% 37.5% 37.5%
Net income before adjustments $7.4 $8.6 $28.7 $31.8 $23.9 $27.1
Weighted average diluted
shares outstanding 21.4 21.4 21.4 21.4 21.3 21.3
Earnings per diluted share
before adjustments $0.34 $0.40 $1.34 $1.49 $1.12 $1.27
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 for Not Not Not Not Not Not
stock options appli- appli- appli- appli- appli- appli-
cable cable cable cable cable cable
EBITDA Reconciliation to GAAP:
EBITDA(8) $22.0 $24.0 $85.0 $90.0
Cash paid for deferred
drydocking
charges (1.5) (1.5) (6.0) (6.0)
Cash paid for
interest (0.6) (0.6) (16.1) (16.1)
Changes in working
capital(9) 1.1 (1.5) 2.0 0.4
Changes in other,
net(9) (0.7) (0.7) (0.1) (0.1)
Cash flows provided by
operating activities(9) $20.3 $19.7 $64.8 $68.2
2006 Guidance and Projected EBITDA Reconciliation:
Full-Year 2006 Full-Year 2006
Updated Estimate Prior Estimate(10)
Low High Low High
Components of EBITDA(8)
EBITDA(8) $100.0 $110.0 $90.0 $100.0
Depreciation 24.2 24.2 24.3 24.3
Amortization 7.4 7.4 6.8 6.8
Interest expense, net 13.0 13.0 12.6 12.6
Income tax expense 20.8 24.5 17.4 21.1
Income tax rate 37.5% 37.5% 37.5% 37.5%
Net income before adjustments $34.6 $40.9 $28.9 $35.2
Weighted average diluted shares
outstanding 21.6 21.6 21.3 21.3
Earnings per diluted share before
adjustments $1.60 $1.89 $1.36 $1.65
Adjustments not included above:
Compensation expense for stock Not Not Not Not
options appli- appli- appli- appli-
caple caple caple caple
EBITDA Reconciliation to GAAP:
EBITDA(8) $100.0 $110.0
Cash paid for deferred drydocking
charges (9.1) (9.1)
Cash paid for interest (14.8) (14.8)
Changes in working capital(9) 7.0 4.8
Changes in other,
net(9) (0.2) (0.2)
Cash flows provided by operating
activities(9) $82.9 $90.7
Projected Capital Expenditures:
Third Quarter Full-Year Full-Year
2005 2005 2006
Low High Low High Low High
Maintenance Capital
Expenditures:
Deferred drydocking charges $1.5 $1.5 $6.5 $6.5 $8.0 $9.0
Other vessel capital
improvements 2.4 2.4 6.0 6.0 9.0 10.0
Non-vessel related capital
improvements 0.9 0.9 3.4 3.4 3.0 4.0
$4.8 $4.8 $15.9 $15.9 $20.0 $23.0
Growth Capital Expenditures:
Tank barge newbuild program $13.1 $13.1 $53.5 $53.5 $- $-
MPSV conversion program 8.5 10.5 22.0 26.0 33.0 39.0
Tug acquisition and retrofit
costs 8.0 8.0 16.0 16.0 - -
AHTS acquisition and retrofit
costs 2.5 2.5 28.0 30.0 - -
$29.6 $31.6 $91.5 $95.5 $33.0 $39.0
(8) 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 reconciliation, 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 and incur additional
indebtedness.
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.
(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 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.
(10) The Company's new disclosure presentation of EBITDA as a liquidity
measure was not adopted until the time of this press release.
Therefore, EBITDA was not previously reconciled to "cash flows
provided by operating activities" as its most directly comparable
GAAP financial measure at the time that the prior forward guidance
estimates for 2005 and 2006 were originally reported.
SOURCE Hornbeck Offshore Services, Inc.
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Related links:
http://www.hornbeckoffshore.com
CONTACT:
Todd Hornbeck, CEO, or Jim Harp, CFO, both of
Hornbeck Offshore Services, +1-985-727-6802; or Ken Dennard,
Managing Partner, or Lisa Elliott, Sr. Vice President, both of
DRG&E, +1-713-529-6600, for Hornbeck Offshore Services, Inc.
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