COVINGTON, La., July 31 LA-Hornbeck-2Q-earns
COVINGTON, La., July 31 /PRNewswire-FirstCall/ -- Hornbeck Offshore
Services, Inc. (NYSE: HOS) announced today results for the second quarter
ended June 30, 2008. Following are highlights for the second quarter and the
Company's future outlook:
-- Record quarterly OSV revenue, operating income, net income and EBITDA
-- Q2 2008 OSV revenues increased 63% over Q2 2007 and 17% over Q1 2008
-- Q2 2008 OSV operating income increased 44% over Q2 2007 and 34% over Q1
2008
-- Q2 2008 OSV net income increased 37% over Q2 2007 and 34% over Q1 2008
-- Fleetwide effective new generation OSV dayrates are at record-levels,
up $2,000 over Q1 2008
-- Fleetwide effective dayrates for conventional OSVs increased 69% over
Q1 2008
-- Two new generation OSVs placed in service under fourth OSV newbuild
program
-- Twelve of 16 newbuild OSVs committed to customer charters in advance of
shipyard deliveries
-- Previously reported strategic review of TTB business is now well
underway
-- Company reaffirms full-year 2008 EBITDA guidance
Second quarter 2008 revenues increased 39.1% to $104.5 million compared to
$75.1 million for the second quarter of 2007. Operating income was $40.8
million, or 39.0% of revenues, for the second quarter of 2008 compared to
$33.9 million, or 45.1% of revenues, for the prior-year quarter. Net income
for the second quarter of 2008 was $25.5 million, or $0.94 per diluted share,
compared to $22.6 million, or $0.85 per diluted share in the year-ago quarter.
EBITDA for the second quarter of 2008 was $53.8 million compared to second
quarter 2007 EBITDA of $41.8 million. The primary reasons for the increase in
revenues, operating income, net income and EBITDA were the incremental
contribution of vessels acquired or newly constructed since June 2007 and
favorable market conditions for the Company's new generation offshore supply
vessels ("OSVs"). For additional information regarding EBITDA as a non-GAAP
financial measure, please see Note 10 to the accompanying data tables.
Included in second quarter 2008 EBITDA and net income was a $2.0 million
($1.3 million after-tax, or $0.05 per diluted share) gain on the May 2008 sale
of the Cape Scott, a foreign-flagged conventional vessel that was acquired as
part of the Sea Mar Fleet. Similarly, in the year-ago quarter, EBITDA and net
income included a gain on the sale of assets of $1.9 million ($1.2 million
after-tax, or $0.05 per diluted share) resulting from the April 2007 sale of
the HOS Hotshot, the Company's only fast supply vessel.
OSV Segment. Revenues from the OSV segment were $79.0 million for the
second quarter of 2008, an increase of 62.6% from $48.6 million for the same
period in 2007. OSV operating income increased 43.7% to $38.8 million for the
second quarter of 2008 from $27.0 million for the second quarter of 2007. The
Company's OSV revenues and operating income increased due to the full-quarter
contribution from 20 OSVs (the "Sea Mar Fleet") that were acquired in August
2007, and to a lesser extent, a market-driven increase in new generation OSV
dayrates and a partial-quarter contribution from one new generation OSV that
was delivered in May 2008 under the Company's fourth OSV newbuild program.
Average new generation OSV dayrates for the second quarter of 2008 improved to
$22,168 compared to $21,358 for the same period in 2007. New generation OSV
utilization was 96.6% for the second quarter of 2008 compared to 96.7% during
the same period in 2007. The increase in dayrates was primarily due to
favorable market conditions for new generation OSVs in the deepwater and
ultra-deepwater U.S. Gulf of Mexico ("GoM"). Effective, or utilization-
adjusted, dayrates for the Company's conventional OSVs for the second quarter
of 2008 were $8,300, or $3,400 higher than the first quarter of 2008. This
69% sequential increase in effective dayrates for these non-core assets was
primarily due to stronger market conditions associated with the seasonal pick-
up in offshore construction in the shallow water areas of the GoM,
demonstrating the kind of volatility that is typical of the conventional OSV
market.
TTB Segment. Revenues from the tug and tank barge ("TTB") segment of
$25.5 million for the second quarter of 2008 decreased by $1.0 million, or
3.8%, compared to $26.5 million for the same period in 2007. The decrease in
revenues was primarily the result of a softening in demand for the Company's
single-hulled vessels, which the Company believes is primarily attributable to
high petroleum product inventory levels resulting from weak consumer demand
driven by record-high commodity prices. The decrease in revenues was
partially offset by the full-quarter contribution from three newbuild double-
hulled tank barges, the Energy 6506, Energy 6507 and Energy 6508, that were
placed in service on various dates during the latter half of 2007 and the
first quarter of 2008. The Company's double-hulled tank barge average
dayrates were $22,449 for the second quarter of 2008, which was in-line with
the same period in 2007. Utilization for the double-hulled tank barge fleet
was 93.6% for the second quarter of 2008 compared to 99.2% for the same period
in 2007, primarily due to a market-related shift in contract mix from time
charters to contracts for affreightment ("COAs"). The Company's single-hulled
tank barge average dayrates were $20,491 for the second quarter of 2008, an
increase of $5,794, or 39.4%, from $14,697 for the same period in 2007. The
increase in single-hulled tank barge average dayrates was due to a contract
that the Company performed for upstream services in the GoM during the second
quarter of 2008. Excluding the incremental impact of this upstream job,
dayrates for single-hulled tank barges for the second quarter of 2008 would
have been $16,303. Single-hulled tank barge utilization was 37.0% for the
second quarter of 2008 compared to 86.7% for the same period in 2007. Recent
soft market conditions for this type of equipment led to the Company's
decision to stack four single-hulled vessels and one lower-horsepower tug on
various dates during the second quarter of 2008. These cost-cutting measures,
along with the non-renewal of three in-chartered tugs, should partially
mitigate the near-term effect of demand weakness, which is expected to
continue through the second half of 2008. Effective single-hulled tank barge
utilization, which excludes the impact of stacked tank barges, was 50.2% for
the three months ended June 30, 2008. As reported on June 6, 2008, the
Company announced that it had retained J.P. Morgan Securities Inc. to act as
its financial advisor in a thorough review of strategic alternatives for its
downstream TTB business, which is now well underway.
General and Administrative (G&A). G&A expenses of $9.4 million for the
second quarter of 2008 were 9.0% of revenues compared to $7.7 million, or
10.3% of revenues, for the second quarter of 2007. The Company's G&A expenses
are in-line with the 2008 annual guidance range of 9% to 10% of revenues.
Depreciation and Amortization. Depreciation and amortization expense was
$13.0 million for the second quarter of 2008, or $5.2 million higher than the
second quarter of 2007. This increase was due to additional depreciation
related to 27 vessels that were placed in service since June 2007 and, to a
lesser extent, increased amortization of drydock costs related to accelerated
drydockings. Depreciation and amortization expense is expected to continue to
increase from current levels as the vessels remaining under the Company's
current newbuild and conversion programs are placed in service and when these
and any other recently acquired and newly constructed vessels undergo their
initial 30 and 60 month recertifications.
First Half 2008 Results
Revenues for the first six months of 2008 increased 41.1% to $202.0
million compared to $143.2 million for the same period in 2007. Operating
income was $77.7 million, or 38.5% of revenues, for the first six months of
2008 compared to $60.3 million, or 42.1% of revenues, for the same period in
2007. Net income for the first six months of 2008 increased 21.0% to $48.5
million, or $1.79 per diluted share, compared to net income of $40.1 million,
or $1.52 per diluted share, for the first six months of 2007. The Company's
first-half 2008 results were positively impacted by the full-period
contribution from 20 OSVs that were acquired in August 2007, as well as the
market-driven increase in OSV dayrates, compared to the six months ended June
30, 2007. The Company's net income for the first six months of 2008 included
a $2.0 million ($1.3 million after tax or $0.05 per share) gain on the sale of
a foreign-flagged conventional vessel. In the first six months of 2007, the
Company's net income included a gain on the sale of assets of a fast supply
vessel of $1.9 million ($1.2 million after-tax, or $0.05 per diluted share).
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 reaffirms its EBITDA guidance for the
full-year 2008 to range between $220.0 million and $240.0 million and is
updating its diluted EPS guidance range solely to reflect current estimates of
depreciation, amortization, net interest expense and income taxes. The
Company's diluted EPS for fiscal 2008 is now expected to range between $3.72
and $4.20. The TTB segment is expected to contribute EBITDA in the range of
15% to 17% 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 $21,000 to $23,000 range and fleetwide new generation
OSV utilization is anticipated to average in the 90% range during the
remainder of the 2008 guidance period. Fleetwide average TTB dayrates for the
nine double-hulled barges are anticipated to remain in the $22,000 to $23,000
range. Double-hulled utilization is expected to dip into the mid to high-80%
range for the remainder of the 2008 guidance period, due, in part, to an
aggregate 132 out-of service days planned for the scheduled regulatory
drydocking of four of the Company's nine double-hulled tank barges during the
second half of 2008. Average dayrates for the Company's fleet of 12 single-
hulled barges are expected to be in the $16,000 to $17,000 range with average
utilization for such vessels in the 50% range for the second half of 2008.
The effective utilization of the Company's active fleet of eight single-hulled
barges for the remainder of 2008, after excluding the effect of four stacked
vessels, is expected to be in the mid-70% to low-80% range.
The Company's full-year 2008 guidance includes a partial contribution from
vessels to be delivered under its MPSV program, the fourth OSV newbuild
program and the recently completed second TTB newbuild program in accordance
with the estimated newbuild delivery expectations discussed below.
The Company expects cash operating expenses per vessel-day in fiscal 2008
for each segment to increase by 5% to 10% over fiscal 2007. Annual G&A
expenses are expected to remain in the range of 9% to 10% of revenues for
fiscal 2008. The projected FAS 123R stock-based compensation expense,
depreciation, amortization and net interest expense that underpin the
Company's updated diluted EPS guidance for the full-year 2008 are included in
the attached data tables. Projected FAS 123R stock-based compensation
expense, depreciation, amortization and net interest expense for the third
quarter of 2008 are $2.3 million, $8.5 million, $4.4 million and $1.4 million,
respectively. The Company's annual effective tax rate is expected to remain
at 36.3% for 2008.
Capital Expenditures Outlook
Update on Maintenance Capital Expenditures. Please refer to the attached
data table for a summary, by period, of historical and projected data for each
of the following three major categories of maintenance capital expenditures:
(i) deferred drydocking charges; (ii) other vessel capital improvements and
(iii) non-vessel related capital expenditures. The Company expects total
maintenance capital expenditures for fiscal 2008 to be approximately $71.7
million. Included in the 2008 projection of other vessel capital improvements
is approximately $14.7 million related to the acquisition of revenue-
generating modular equipment, such as remotely operated vehicles ("ROVs").
Included in the 2008 projection of non-vessel related capital expenditures is
approximately $22.6 million related to the recent expansion of and
improvements to HOS Port.
Update on MPSV Program. The Company's MPSV program consists of two U.S.-
flagged coastwise sulfur tankers that are being converted at domestic
shipyards into 370 class DP-2 new generation MPSVs and two newbuild T-22 class
DP-3 new generation MPSVs that are being constructed in foreign shipyards.
The first converted DP-2 MPSV is expected to be delivered from the shipyard in
the fourth quarter of 2008, while the second converted DP-2 MPSV is expected
to be delivered in mid-2009. The first newbuild DP-3 MPSV is now on sea trials
and is expected to be delivered from a foreign shipyard during the fourth
quarter of 2008, while the second newbuild DP-3 MPSV is expected to be
delivered during the fourth quarter of 2009. The Company's current EBITDA
guidance assumes a total of four vessel-months of combined contribution from
the two MPSVs that are expected to be delivered during 2008. Based on
internal estimates, the aggregate cost of this program is expected to be
approximately $450.0 million. From the inception of this program through June
30, 2008, the Company has incurred $296.9 million, or 66.0%, of total expected
project costs, including $43.1 million incurred during the second quarter of
2008.
Update on OSV Newbuild Program #4. During the second quarter of 2008, the
Company negotiated to increase the size and/or capabilities of eight of the 16
vessels currently planned or under construction under its fourth OSV newbuild
program, including the upgrade of two previously announced 250 EDF class OSVs
into two new proprietary 290 class OSVs, one of which is already committed to
a multi-year charter for well-stimulation service in the GoM. While the
Company has not experienced any significant cost overruns on this program, it
has increased the total project budget by approximately $87 million to reflect
the recent change in vessel mix and additional customer-driven, revenue-
generating mission equipment and/or design enhancements required by multi-year
specialty service time charters already awarded to six other vessels in this
program. Examples of incremental new vessel components include a 40-ton
crane, a dynamically positioned offshore access system ("OAS"), a cable-reel
system for deep-mooring support services and modular units for expanded crew
accommodations. Examples of customer-required design-modifications include
changes to ready certain vessels for ROV support and military specialty
services. In addition, the increased project budget includes pre-positioning
costs for mobilization of each military vessel to its initial on-charter
location and demonstration testing associated with the on-charter exercise
following shipyard delivery.
This newbuild program is now comprised of vessel construction at three
domestic shipyards to build six 240 ED class OSVs, seven 250 EDF class OSVs
and three 290 class OSVs, respectively.Twelve of these 16 new generation
DP-2 OSVs have been awarded contracts prior to their shipyard delivery. The
Company accepted delivery of the first two of the 240 ED class OSVs under this
program, the HOS Polestar and the HOS Shooting Star, in May 2008 and July
2008, respectively. These vessels were immediately chartered to customers in
Brazil and in the GoM. In addition, the first of the 250 EDF class vessels,
the HOS Mystique, was delivered from the shipyard in April 2008 to undergo
conversion for ROV support services under a multi-year charter commencing in
the third quarter of 2008. The Company has secured long-term commitments
ranging from two to ten years for nine of the remaining 13 vessels, which are
expected to be delivered at a rate of about one to two per quarter through
2010. The Company's current guidance assumes an average number of new
generation OSVs of 36.6 vessels in service for the full-year 2008. Based on
internal estimates, the aggregate cost of this program is expected to be
approximately $480.0 million. The Company believes that the 16 vessels built
under this program will produce financial results commensurate with its
targeted return on investment parameters. From the inception of this program
through June 30, 2008, the Company has incurred $177.8 million, or 37.0%, of
total expected project costs, including $53.7 million incurred during the
second quarter of 2008.
Update on TTB Newbuild Program #2. The Company's second TTB newbuild
program consisted 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. The
final vessel to be delivered under this program, the rebuilt ocean-going tug,
Erie Service, was placed in service in July 2008. The aggregate cost of this
now completed program is approximately $77.0 million.
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 second quarter 2008
financial results and recent developments at 10:00 a.m. Eastern (9:00 a.m.
Central) today, July 31, 2008. To participate in the call, dial (303) 262-
2130 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 August 7, 2008, and may be accessed by calling (303) 590-3000 and
using the pass code 11116410#.
Attached Data Tables
The Company has posted an electronic version of the following three 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 other select U.S. and international markets, and is a leading
short-haul transporter of petroleum products through its coastwise fleet of
ocean-going tugs and tank barges primarily in the northeastern U.S., the U.S.
Gulf of Mexico, the Great Lakes 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. The Company's actual future results might differ from the forward-
looking statements made in this press release for a variety of reasons, which
include: the Company's inability to successfully and timely complete its
various vessel construction and conversion programs, especially its MPSV
program, which involves the construction and integration of highly complex
vessels and systems; less than anticipated success in marketing and operating
its MPSVs, which are a class of vessels that the Company has not previously
owned or operated; the inability to re-charter the HOS Achiever (f/k/a the
Superior Achiever) due to the bankruptcy proceedings involving Superior
Offshore International, Inc.; further weakening of demand for TTB services;
inability of the Company to offset the loss of TTB revenues with OSV revenue
increases; inability to effectively curtail TTB operating expenses from
stacked vessels; inability to successfully implement any actions resulting
from the Company's strategic review of the TTB segment; unplanned customer
suspensions, cancellations or non-renewals of vessel charters, or failure to
finalize commitments to charter vessels; 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
inability 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, unexpected litigation and
insurance expenses, fluctuations in foreign currency valuations compared to
the U.S. dollar and risks associated with expanded foreign operations. Should
one or more of the foregoing risks or uncertainties materialize, or should the
Company's underlying assumptions prove incorrect, the Company's actual
results may vary materially from those anticipated in its forward-looking
statements, and the Company's 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 the Company has made with the Securities and Exchange Commission which
can be found on the Company's 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
10 to the attached data tables.
Contacts: Todd Hornbeck, CEO
Jim Harp, CFO
Hornbeck Offshore Services
985-727-6802
Ken Dennard, Managing Partner
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)
Statement of Operations (unaudited):
Three Months Ended Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2008 2008 2007 2008 2007
Revenues $104,473 $97,521 $75,071 $201,993 $143,161
Costs and expenses:
Operating expenses 43,299 39,795 27,52083,09454,625
Depreciation and
amortization 13,008 12,1897,81725,19615,005
General and
administrative expenses9,4148,5777,65117,99215,098
65,721 60,561 42,988 126,28284,728
Gain on sale of assets 2,001-1,852 2,001 1,842
Operating income 40,753 36,960 33,93577,71260,275
Other income (expense):
Interest income 235 9925,772 1,22711,780
Interest expense (1,203) (1,840) (4,270) (3,043) (9,175)
Other income, net(1) 62 1367511
(906)(835) 1,508(1,741)2,616
Income before income
taxes 39,847 36,125 35,44375,97162,891
Income tax expense 14,392 13,042 12,80627,43322,773
Net income $25,455 $23,083 $22,637 $48,538 $40,118
Basic earnings per share
of common stock $0.99$0.90$0.88 $1.88 $1.57
Diluted earnings per
share of common stock $0.94$0.86$0.85 $1.79 $1.52
Weighted average basic
shares outstanding 25,827 25,783 25,63925,80525,611
Weighted average diluted
shares outstanding(2) 27,157 26,938 26,52327,04926,362
Other Operating Data (unaudited):
Three Months Ended Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2008 2008 2007 2008 2007
Offshore Supply Vessels:
Average number of new
generation OSVs(3) 35.6 35.0 25.0 35.3 25.0
Average new generation
fleet capacity
(deadweight)(3) 82,682 80,90359,042 81,79359,042
Average new generation
vessel capacity
(deadweight) 2,3202,312 2,3622,316 2,362
Average new generation
utilization rate(4)96.6%92.1% 96.7%94.4% 94.1%
Average new generation
dayrate(5) $22,168 $21,020 $21,358 $21,613 $20,253
Effective dayrate(6) $21,414 $19,359 $20,653 $20,403 $19,058
Tugs and Tank Barges:
TTB Consolidated:
Average number of tank
barges721.0 20.3 18.0 20.6 18.0
Average fleet capacity
(barrels)(7) 1,745,256 1,696,158 1,549,566 1,720,707 1,549,566
Average barge size
(barrels)83,10783,436 86,087 83,27286,087
Average utilization
rate(4)61.3% 85.6%90.9%73.2% 92.5%
Effective utilization
rate(9)72.1% 85.6%90.9%79.2% 92.5%
Average dayrate(8) $21,789 $19,059 $17,772 $20,222 $17,726
Effective dayrate(6) $13,357 $16,315 $16,155 $14,803 $16,397
Double-hulled tank barges:
Average utilization
rate(4)93.6% 91.1%99.2%92.4% 97.9%
Average dayrate(8) $22,449 $21,781 $22,407 $22,134 $23,042
Effective dayrate(6) $21,012 $19,842 $22,228 $20,452 $22,558
Single-hulled tank barges:
Average utilization
rate(4)37.0% 81.8%86.7%59.4% 89.8%
Effective utilization
rate(9)50.2% 81.8%86.7%68.4% 89.8%
Average dayrate(8)$20,491 $16,937 $14,697 $18,044 $14,616
Effective dayrate(6) $7,582 $13,854 $12,742 $10,718 $13,125
Balance Sheet Data (unaudited):
As of As of
June 30,December 31,
2008 2007
Cash and cash equivalents$18,656 $173,552
Working capital 62,625 214,266
Property, plant and equipment, net 1,216,543 953,210
Total assets 1,381,571 1,262,051
Total long-term debt 589,574 549,547
Stockholders' equity 619,221 562,314
Cash Flow Data (unaudited):
Six Months Ended
June 30, June 30,
2008 2007
Cash provided by operating activities$95,578 $67,105
Cash used in investing activities (292,017) (113,924)
Cash provided by financing activities 41,587 1,384
Hornbeck Offshore Services, Inc. and Subsidiaries
Unaudited Other Financial Data
(in thousands, except Financial Ratios)
Other Financial Data (unaudited):
Three Months Ended Six Months Ended
June 30, March 31, June 30, June 30, June 30,
2008 2008 2007 2008 2007
Offshore Supply Vessels:
Revenues $78,974 $67,452 $48,609 $146,426 $89,751
Operating income $38,766 $29,030 $27,007 $67,796 $45,347
Operating margin 49.1%43.0%55.6% 46.3% 50.5%
Components of EBITDA(10)
Net income $24,397 $18,217 $17,833 $42,615 $29,973
Interest expense
(income), net 636 532 (913)1,168(1,629)
Income tax expense13,793 10,293 10,09324,08517,014
Depreciation 5,3294,7322,67110,061 5,297
Amortization 2,8822,5071,408 5,388 2,535
EBITDA(10) $47,037 $36,281 $31,092 $83,317 $53,190
Adjustments to EBITDA
Stock-based
compensation expense $1,565 $1,625 $950$3,190$1,924
Interest income 167 6523,606 819 7,428
Adjusted EBITDA(10) $48,769 $38,558 $35,648 $87,326 $62,542
EBITDA(10)
Reconciliation to GAAP:
EBITDA(10) $47,037 $36,281 $31,092 $83,317 $53,190
Cash paid for deferred
drydocking charges (2,228) (2,974) (1,888) (5,202) (4,832)
Cash paid for interest(7,734) (33) (7,110) (7,767) (7,140)
Cash paid for taxes (105) (1,575) (1,897) (1,680) (1,897)
Changes in working
capital(842) 15,2909,70314,44813,714
Stock-based
compensation expense 1,5651,625 950 3,190 1,924
Changes in other, net (1,873) 240 (1,882) (1,632) (1,972)
Net cash provided by
operating activities$35,820 $48,854 $28,968 $84,674 $52,987
Tugs and Tank Barges:
Revenues $25,499 $30,069 $26,462 $55,567 $53,410
Operating income$1,987 $7,930 $6,928$9,916 $14,928
Operating margin 7.8%26.4%26.2% 17.8% 27.9%
Components of EBITDA(10)
Net income$1,058 $4,866 $4,804$5,923 $10,145
Interest expense
(income), net 332 316 (589) 648 (976)
Income tax expense 5992,7492,713 3,348 5,759
Depreciation 2,9612,7302,269 5,691 4,450
Amortization 1,8362,2201,469 4,056 2,723
EBITDA(10)$6,786 $12,881 $10,666 $19,666 $22,101
Adjustments to EBITDA
Stock-based
compensation expense $1,071 $1,344 $739$2,415$1,510
Interest income 68 3402,166 408 4,352
Adjusted EBITDA(10) $7,925 $14,565 $13,571 $22,489 $27,963
EBITDA(10)
Reconciliation to GAAP:
EBITDA(10)$6,786 $12,881 $10,666 $19,666 $22,101
Cash paid for deferred
drydocking charges (3,114) (1,094) (2,493) (4,208) (5,643)
Cash paid for interest(3,723) (17) (4,175) (3,740) (4,192)
Cash paid for taxes (47) (1,710) (1,897) (1,757) (1,897)
Changes in working
capital (60) (1,502) 4,031(1,562)2,143
Stock-based
compensation expense 1,0711,344 739 2,415 1,510
Changes in other, net264 (174) 2249096
Net cash provided by
operating activities $1,177 $9,728 $7,095 $10,904 $14,118
Consolidated:
Revenues $104,473 $97,521 $75,071 $201,993 $143,161
Operating income $40,753 $36,960 $33,935 $77,712 $60,275
Operating margin 39.0%37.9%45.2% 38.5% 42.1%
Components of EBITDA(10)
Net income $25,455 $23,083 $22,637 $48,538 $40,118
Interest expense
(income), net 968 848 (1,502)1,816(2,605)
Income tax expense14,392 13,042 12,80627,43322,773
Depreciation 8,2907,4624,94015,752 9,747
Amortization 4,7184,7272,877 9,444 5,258
EBITDA(10) $53,823 $49,162 $41,758 $102,983 $75,291
Adjustments to EBITDA
Stock-based
compensation expense $2,636 $2,969 $1,689$5,605$3,434
Interest income 235 9925,772 1,22711,780
Adjusted EBITDA(10) $56,694 $53,123 $49,219 $109,815 $90,505
EBITDA(10)
Reconciliation to GAAP:
EBITDA(10) $53,823 $49,162 $41,758 $102,983 $75,291
Cash paid for deferred
drydocking charges (5,342) (4,068) (4,381) (9,410) (10,475)
Cash paid for interest (11,457) (50) (11,285) (11,507) (11,332)
Cash paid for taxes (152) (3,285) (3,794) (3,437) (3,794)
Changes in working
capital(902) 13,788 13,73412,88615,857
Stock-based
compensation expense 2,6362,9691,689 5,605 3,434
Changes in other, net (1,609) 66 (1,658) (1,542) (1,876)
Net cash provided by
operating activities$36,997 $58,582 $36,063 $95,578 $67,105
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 2008Full-Year 2008Pro Forma
Updated Estimate Prior Estimate Run-Rate(11)
Low HighLow High
Components of Projected
EBITDA(10)
Adjusted EBITDA(10) $232.9 $252.9 $232.7 $252.7 $417.1
Interest income 1.5 1.5 1.3 1.3 3.4
Stock-based compensation
expense11.411.411.4 11.411.4
EBITDA(10)$220.0 $240.0 $220.0 $240.0 $402.3
Depreciation35.235.236.7 36.760.5
Amortization18.718.717.0 17.029.7
Interest (income)
expense, net6.7 6.2 8.7 7.821.0
Income tax expense 57.965.357.2 64.8 105.7
Income tax rate 36.3% 36.3% 36.3% 36.3%36.3%
Net income$101.5 $114.6 $100.4 $113.7 $185.4
Weighted average diluted
shares outstanding(12) 27.327.327.3 27.327.3
Diluted earnings per share $3.72 $4.20 $3.68$4.16 $6.79
Projected EBITDA(10)
Reconciliation to GAAP:
EBITDA(10)$220.0 $240.0 $220.0 $240.0 $402.3
Cash paid for deferred
drydocking charges(19.4) (19.4) (19.3) (19.3) (30.9)
Cash paid for interest (25.9) (25.4) (28.3) (27.4) (22.6)
Cash paid for taxes (3.6) (7.7) (2.8)(2.8) (2.8)
Changes in working
capital(13)22.715.420.9 17.1 (24.2)
Stock-based compensation
expense11.411.411.4 11.411.4
Changes in other, net(13) (2.2) (2.2) (0.2)(0.2) (2.2)
Cash flows provided by
operating activities $203.0 $212.1 $201.7 $218.8 $331.0
Capital Expenditures Data (unaudited)(14):
Historical Data (in thousands):
Three Months EndedSix Months Ended
June 30, March 31, June 30, June 30, June 30,
2008 2008 2007 2008 2007
Maintenance Capital
Expenditures:
Deferred drydocking
charges$5,342$4,068 $4,382$9,410 $10,475
Other vessel capital
improvements6,038 8,0154,90014,053 6,519
Non-vessel related
capital expenditures 36422,1581,56222,522 2,508
$11,744 $34,241 $10,844 $45,985 $19,502
Growth Capital
Expenditures:
MPSV program$43,108 $107,913 $31,812 $151,021 $60,775
TTB newbuild program #2 3,351 3,835 12,500 7,18627,796
OSV newbuild program #4 53,69735,2438,22088,94016,644
$100,156 $146,991 $52,532 $247,147 $105,215
Forecasted Data:
1Q2008A 2Q2008A 3Q2008E 4Q2008E2008E
Maintenance Capital
Expenditures:
Deferred drydocking
charges $4.1 $5.3 $6.4 $3.6 $19.4
Other vessel capital
improvements 8.0 6.0 5.9 4.3 24.2
Non-vessel related
capital expenditures 22.2 0.3 1.4 4.2 28.1
$34.3 $11.6$13.7 $12.1 $71.7
Growth Capital
Expenditures:
MPSV program $107.9 $43.1$75.1 $16.7$242.8
TTB newbuild program #2 3.8 3.4 0.8 - 8.0
OSV newbuild program #435.2 53.7 65.3 61.8 216.0
$146.9$100.2 $141.2 $78.5$466.8
Full Construction Cycle Data:
Pre-2008A 2008E 2009E2010E Total
Growth Capital
Expenditures:
MPSV program $145.9$242.8$61.3 $ -$450.0
TTB newbuild program #269.0 8.0- - 77.0
OSV newbuild program #488.9 216.0153.9 21.2 480.0
$303.8$466.8 $215.2 $21.2 $1,007.0
(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 67 and 150 shares of
common stock for the three months ended March 31, 2008 and June 30,
2007, 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. For the six months ended June 30, 2007,
stock options representing rights to aquire 322 shares of commmon
stock were excluded from the calculation of diluted earnings per share
because the effect was anti-dilutive. As of June 30, 2008, March 31,
2008 and June 30, 2007, 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 $62.59 for such notes.
(3) The Company owned and operated 36 new generation OSVs as of June 30,
2008. Ten new generation OSVs were acquired on August 8, 2007 and one
newbuild 240 ED class OSV, the HOS Polestar, was placed in service on
May 3, 2008 under the Company's fourth OSV newbuild program. Excluded
from this data are 10 conventional OSVs that were also acquired on
August 8, 2007, including the Cape Scott, which was sold on May 16,
2008. The Company considers the conventional OSVs to be non-core
assets.
(4) Average utilization rates are average rates based on a 365-day year.
Vessels are considered utilized when they are generating revenues.
(5) Average new generation OSV dayrate represents average revenue per day,
which includes charter hire, crewing services, and net brokerage
revenues, based on the number of days during the period that the OSVs
generated revenues.
(6) Effective dayrate represents the average dayrate multiplied by the
utilization rate for the respective period.
(7) The averages for the three and six-month periods ended June 30, 2008
include the Energy 6506, Energy 6507 and Energy 6508, three double-
hulled tank barges delivered under the Company's second TTB newbuild
program in August 2007, November 2007 and March 2008, respectively.
(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) Effective utilization rate is based on a denominator comprised only of
vessel-days available for service by the active fleet, which excludes
the impact of stacked vessel days. The Company elected to stack four
single-hulled tank barges, the Energy 2201, Energy 6501, Energy 5501
and Energy 6504, on various dates throughout the second quarter of
2008. Vessels are considered utilized when they are generating
revenues.
(10) Non-GAAP Financial Measure
The Company discloses and discusses EBITDA as a non-GAAP financial
measure in its public releases, including quarterly earnings
releases, investor conference calls and other filings with the
Commission. The Company defines EBITDA as earnings (net income)
before interest, income taxes, depreciation and amortization. The
Company's measure of EBITDA may not be comparable to similarly titled
measures presented by other companies. Other companies may calculate
EBITDA differently than the Company, which may limit its usefulness
as a comparative measure.
The Company views EBITDA primarily as a liquidity measure and, as
such, believes that the GAAP financial measure most directly
comparable to it is cash flows provided by operating activities.
Because EBITDA is not a measure of financial performance calculated
in accordance with GAAP, it should not be considered in isolation or
as a substitute for operating income, net income or loss, cash flows
provided by operating, investing and financing activities, or other
income or cash flow statement data prepared in accordance with GAAP
EBITDA is widely used by investors and other users of the Company's
financial statements as a supplemental financial measure that, when
viewed with GAAP results and the accompanying reconciliations, the
Company believes provides additional information that is useful to
gain an understanding of the factors and trends affecting its ability
to service debt, pay deferred taxes and fund drydocking charges and
other maintenance capital expenditures. The Company also believes
the disclosure of EBITDA helps investors meaningfully evaluate and
compare its cash flow generating capacity from quarter to quarter and
year to year.
EBITDA is also a financial metric used by management (i) as a
supplemental internal measure for planning and forecasting overall
expectations and for evaluating actual results against such
expectations; (ii) as a significant criteria for annual incentive
cash bonuses paid to the Company's executive officers and other
shore-based employees; (iii) to compare to the EBITDA of other
companies when evaluating potential acquisitions; and (iv) to assess
the Company's ability to service existing fixed charges and incur
additional indebtedness.
In addition, the Company also makes certain adjustments, as
applicable, to EBITDA for losses on early extinguishment of debt,
FAS123R stock-based compensation expense and interest income, or
Adjusted EBITDA, to compute ratios used in certain financial
covenants of its credit agreements with various lenders and bond
investors. The Company believes that these ratios are material
components of such financial covenants and failure to comply with
such covenants could result in the acceleration of indebtedness or
the imposition of restrictions on the Company's financial
flexibility.
Set forth below are the material limitations associated with using
EBITDA as a non-GAAP financial measure compared to cash flows
provided by operating activities.
-- EBITDA does not reflect the future capital expenditure
requirements that may be necessary to replace the Company's
existing vessels as a result of normal wear and tear,
-- EBITDA does not reflect the interest, future principal payments
and other financing-related charges necessary to service the debt
that the Company has incurred in acquiring and constructing its
vessels,
-- EBITDA does not reflect the deferred income taxes that the Company
will eventually have to pay once the Company is no longer in an
overall tax net operating loss carryforward position, and
-- EBITDA does not reflect changes in the Company's net working
capital position.
Management compensates for the above-described limitations in using
EBITDA as a non-GAAP financial measure by only using EBITDA to
supplement the Company's GAAP results."
(11) "Pro Forma Run-Rate" scenario illustrates the estimated incremental
operating results from the recently acquired Sea Mar Fleet, recently-
delivered newbuilds or rebuilt vessels and all remaining vessels, if
any, that are currently under construction or conversion under the
Company's MPSV program and fourth OSV newbuild program, assuming all
of those vessels were placed in service as of January 1, 2008 and
were working at their contracted dayrates or current market dayrates
commensurate with their relative size and service capabilities. All
other key assumptions related to the Company's current and projected
operating fleet, including vessel dayrates, utilization, cash
operating expenses, delivery dates, drydocking schedule, SG&A and
income tax expense, are consistent with the Company's latest 2008
guidance above. After all vessels now under construction are
delivered, interest expense is expected to return to an annual run-
rate of $24.4 on a projected late-2010 debt balance of $550.0, offset
by $3.4 of interest income to be generated on a projected 2010 post-
construction period cash balance of $150.0.
(12) Projected weighted-average diluted shares do not reflect any
potential dilution resulting from the Company's 1.625% convertible
senior notes. The Company's convertible senior notes become dilutive
when the average price of the Company's stock exceeds the effective
conversion price of $62.59 for such notes.
(13) 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.
(14) 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.
