HORNBECK OFFSHORE SERVICES, INC. COVINGTON, La., Aug. 3, 2016 /PRNewswire/ -- Hornbeck Offshore Services, Inc. (NYSE:HOS) announced today results for the second quarter ended June 30, 2016. Following is an executive summary for this period and the Company's future outlook:
-- 2Q2016 diluted EPS was $(0.57), an incremental loss of $0.36 from 1Q2016
diluted EPS of $(0.21)
-- 2Q2016 revenues were $53.7 million, a decrease of $23.1 million, or 30%,
from 1Q2016 revenues of $76.8 million
-- 2Q2016 EBITDA was $6.9 million, a decrease of $21.3 million, or 76%,
from 1Q2016 EBITDA of $28.2 million
-- 2Q2016 operating loss was (40)% of revenues, down from 1Q2016 operating
loss of (1)%
-- 2Q2016 average new gen OSV dayrates were $26,642, an increase of $2,041,
or 8%, from the sequential quarter
-- 2Q2016 utilization of the Company's new gen OSV fleet was 24%, down from
35% sequentially
-- 2Q2016 effective utilization of the Company's active new gen OSVs was
74%, down from 77% sequentially
-- 2Q2016 effective new gen OSV dayrates were $6,367, a decrease of $2,268,
or 26%, from the sequential quarter
-- Total cash of $225 million with only $79 million of growth capex
remaining to be funded under the 24-vessel newbuild program
-- Company reached agreement with shipyard to postpone delivery of final
two MPSVs and push $43 million of growth capex into 2018
-- By the end of September 2016, the Company now expects to have stacked a
total of 48 new gen OSVs, up from 46 since last reported
-- Annualized cash opex and G&A savings due to proactive cost containment
measures are now $210 million, up from $185 million
-- On July 29, 2016, the Company amended its revolving credit facility
generally applicable commencing with 3Q2016
The Company recorded a net loss for the second quarter of 2016 of $(20.6) million, or $(0.57) per diluted share, compared to net income of $19.2 million, or $0.53 per diluted share, for the year-ago quarter; and a net loss of $(7.5) million, or $(0.21) per diluted share, for the first quarter of 2016. Diluted common shares for the second quarter of 2016 were 36.2 million compared to 36.3 million and 36.1 for the second quarter of 2015 and the first quarter of 2016, respectively. GAAP requires the use of basic shares outstanding for diluted EPS when reporting a net loss. EBITDA for the second quarter of 2016 was $6.9 million compared to $66.3 million in the second quarter of 2015 and $28.2 million in the first quarter of 2016. For additional information regarding EBITDA as a non-GAAP financial measure, please see Note 10 to the accompanying data tables.
Revenues. Revenues were $53.7 million for the second quarter of 2016, a decrease of $82.7 million, or 60.6%, from $136.4 million for the second quarter of 2015; and a decrease of $23.1 million, or 30.1%, from $76.8 million for the first quarter of 2016. The year-over-year decrease in revenues was primarily due to soft market conditions worldwide, which led to the Company's decision to stack 31 incremental OSVs on various dates since March 2015. As of June 30, 2016, the Company had 44 OSVs stacked. For the three months ended June 30, 2016, the Company had an average of 41.9 vessels stacked compared to 17.6 vessels stacked in the prior-year quarter and 33.7 vessels in the sequential quarter. The year-over-year decrease in revenue was partially offset by $4.5 million in revenue earned from the full or partial-period contribution of four vessels that were placed in service since March 2015 under the Company's fifth OSV newbuild program. Operating loss was $(21.5) million, or (40.1)% of revenues, for the second quarter of 2016, compared to operating income of $39.4 million, or 28.8% of revenues, for the prior-year quarter; and operating loss of $(0.8) million, or (1.0)% of revenues, for the first quarter of 2016. Average new generation OSV dayrates for the second quarter of 2016 were $26,642 compared to $28,178 for the same period in 2015 and $24,601 for the first quarter of 2016. New generation OSV utilization was 23.9% for the second quarter of 2016 compared to 56.2% for the year-ago quarter and 35.1% for the sequential quarter. Excluding stacked vessel days, the Company's new generation OSV effective utilization was 73.8%, 79.9% and 77.4% for the same periods, respectively. The year-over-year decrease in utilization is primarily due to soft market conditions for high-spec OSVs operating in the GoM and the incremental vessels that were stacked. Utilization-adjusted, or effective, new generation OSV dayrates for the second quarter of 2016 were $6,367 compared to $15,836 for the same period in 2015 and $8,635 for the first quarter of 2016.
Operating Expenses. Operating expenses were $34.3 million for the second quarter of 2016, a decrease of $23.2 million, or 40.3%, from $57.5 million for the second quarter of 2015; and a decrease of $6.1 million, or 15.1%, from $40.4 million for the first quarter of 2016. The year-over-year decrease in operating expenses was primarily due to vessels that the Company removed from its active fleet count through its stacking strategy since March 2015, which resulted in a substantial reduction in mariner headcount, mariner pay cuts and reductions in other operating expenses. This decrease was partially offset by $3.3 million of operating costs related to the full or partial-period contribution from newbuilds added to the Company's fleet since March 2015.
General and Administrative ("G&A"). G&A expenses of $12.4 million for the second quarter of 2016 were 23.1% of revenues compared to $13.1 million, or 9.6% of revenues, for the second quarter of 2015; and $8.7 million, or 11.3% of revenues, for the first quarter of 2016. The year-over-year decrease in G&A expenses was primarily attributable to lower shoreside compensation expense. Shoreside compensation expense was lower due to workforce reductions that were implemented in late 2015 and during the first half of 2016, as well as lower short-term incentive compensation expense. This favorable variance was partially offset by a $1.0 million increase in bad debt reserves. The sequential increase in G&A expenses was primarily attributable to an incremental $1.1 million in bad debt reserves, offset in part by $0.6 million of lower short-term incentive compensation expense related to the 2016 plan year. In addition, the first quarter of 2016 was favorably impacted by $2.0 million of lower long-term stock-based incentive compensation expense and $1.1 million of lower short-term incentive compensation expense related to the 2015 plan year. After adjusting for these reconciling items, G&A expenses for the first two quarters of 2016 were comparable at $11.8 million and $11.9 million, respectively.
Depreciation and Amortization. Depreciation and amortization expense was $28.5 million for the second quarter of 2016, or $2.0 million higher than the year-ago quarter and in line with the sequential quarter. Depreciation increased by $2.5 million over the year-ago quarter primarily due to the contribution of four HOSMAX vessels that were placed in service since March 2015. The depreciation increase was partially offset by a decrease in amortization expense of $0.5 million, which was mainly driven lower by postponed recertifications for certain of the Company's stacked OSVs. Depreciation expense is expected to increase from current levels as the vessels under the Company's current newbuild program are placed in service. Amortization expense is expected to decrease as the result of the deferral of regulatory recertification activities for vessels that have been stacked.
Interest Expense. Interest expense was $11.0 million during the second quarter of 2016, or $1.1 million higher than the prior-year quarter. The increase was primarily due to the Company capitalizing a lower percentage of interest compared to the prior-year period driven by a lower average construction work-in-progress balance under the Company's newbuild program. The Company recorded $5.1 million of capitalized construction period interest, or roughly 32% of its total interest costs, for the second quarter of 2016 compared to $6.1 million, or roughly 38% of its total interest costs, for the year-ago quarter.
Six Month Results
Revenue for the first six months of 2016 decreased 51.9% to $130.5 million compared to $271.1 million for the same period in 2015. Operating loss was $(22.3) million, or (17.1)% of revenues, for the first six months of 2016 compared to operating income of $106.3 million, or 39.2% of revenues, for the prior-year period. Net income for the first six months of 2016 decreased $83.2 million to a net loss of $(28.1) million, or $(0.78) per diluted share, compared to net income of $55.1 million, or $1.52 per diluted share, for the first six months of 2015. EBITDA for the first six months of 2016 decreased 78.2% to $35.1 million compared to $161.1 million for the first six months of 2015. The Company recorded a $33.1 million ($20.7 million after tax and $0.57 per diluted share) pre-tax gain on sale of assets during the first six months of 2015. This gain resulted from the February 2015 sale of three 250EDF class OSVs previously chartered to the U.S. Navy. Excluding the impact of such gain on sale of assets, operating income, net income, diluted EPS and EBITDA for the first six months of 2015 would have been $73.2 million, $34.4 million, $0.95 per share and $128.0 million, respectively. The year-over-year decrease in vessel revenues primarily resulted from soft market conditions in the GoM, which led to the Company's decision to stack 39 OSVs on various dates from December 2014 through June 30, 2016. For the six months ended June 30, 2016, the Company had an average of 37.8 vessels stacked compared to 13.5 vessels stacked in the prior-year period. The decrease in revenue was partially offset by $11.6 million in revenue earned from the full or partial-period contribution of six vessels that were placed in-service under the Company's fifth OSV newbuild program since December 2014.
Recent Developments
Revolving Credit Facility Amendment. On July 29, 2016, the Company amended its existing revolving credit facility as discussed below. The amended facility provides continued access to a reduced level of standby liquidity for working capital and general corporate purposes, including acquisitions, newbuild and conversion programs and other capital expenditures. The borrowing base was reduced from $300 million to $200 million. The unused commitment fee was increased to 50 basis points for all pricing levels. The LIBOR spread for funded borrowings was increased by 25 basis points for all pricing levels, resulting in a new range of L+225 to L+325. The minimum collateral-to-loan value ratio under the amended facility was restored to its prior level of 200% of the borrowing base, which had been reduced to 150% of the borrowing base when the facility was amended and extended in February 2015. Accordingly, the number of vessels pledged as collateral was increased from 10 OSVs valued in excess of $450 million to 12 OSVs valued in excess of $400 million. None of the Company's remaining assets have been granted as security. The amended credit facility reduces the minimum interest coverage ratio from 3.00x to 1.00x with step-ups to 1.25x in the third quarter of 2018 and 1.50x in the first quarter of 2019 and delays the step-down in the total debt-to-capitalization ratio from 55% to 50% by six quarters to the third quarter of 2018. The Company has the option of making a one-time election to suspend the interest coverage ratio for a holiday period of no more than four quarters, ending no later than the fourth quarter of 2017, with a single permitted rescission. If the Company elects to exercise the interest coverage holiday, then the borrowing base will be capped at $75 million during the period of the holiday and the LIBOR spreads for funded borrowings will be increased by an additional 50 basis points during and after the holiday. The Company's amended revolving credit facility also limits the Company's cash balance to $50 million at any time the facility is drawn, increases the minimum liquidity (cash and revolver availability) level required for prepayment of the Company's 2019 convertible senior notes, 2020 senior notes, and 2021 senior notes from $100 million to $150 million, and increases the minimum liquidity level required to permit a merger, formation or acquisition of a subsidiary or an investment (other than certain permitted investments) from $20 million to $100 million. However, the foregoing is only a summary of some of the more significant amendments, is not necessarily complete, and is qualified by the full text of the First Amendment to the Second Amended and Restated Credit Agreement, which will be included as an exhibit to the Company's Current Report on Form 8-K related to this matter dated July 29, 2016, expected to be filed on or about August 4, 2016. The Company was in compliance with all of the covenants of its existing revolving credit facility for the quarter ended June 30, 2016 and through the date of the First Amendment, and remains in compliance thereafter. Such Amendment was effective July 29, 2016, but is generally applicable commencing with the quarter ending September 30, 2016. As of June 30, 2016 and August 3, 2016, there were no amounts drawn under the Company's revolving credit facility.
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 operating results and certain events during the Company's guidance period as set forth on pages 12 and 13. These statements are forward-looking and actual results may differ materially given the volatility inherent in the Company's industry. Other than as expressly stated, these statements do not include the potential impact of any significant further decline in commodity prices for oil and natural gas; any additional future repositioning voyages; unexpected vessel repairs or shipyard delays; or future capital transactions, such as vessel acquisitions, modifications or divestitures, business combinations, possible additional share repurchases or financings that may be commenced after the date of this disclosure. Additional cautionary information concerning forward-looking statements can be found on page 9 of this news release.
Forward Guidance
The Company's forward guidance for selected operating and financial data, outlined below and in the attached data tables, reflects the current state of depressed commodity prices and planned decreases in the capital spending budgets of its customers.
Vessel Counts. As of June 30, 2016, the Company's fleet consisted of 62 new generation OSVs and six MPSVs. The forecasted vessel counts presented in this press release reflect the anticipated fiscal 2016 and 2018 MPSV newbuild deliveries discussed below. With an average of 42.5 new generation OSVs projected to be stacked during fiscal 2016, the Company's active fleet for 2016 is expected to be comprised of an average of 19.4 new generation OSVs and 6.7 MPSVs. With an assumed average of 48.0 new generation OSVs projected to be stacked during fiscal 2017, the Company's active fleet for 2017 is expected to be comprised of an average of 14.0 new generation OSVs and 8.0 MPSVs.
Operating Expenses.Aggregate cash operating expenses are projected to be in the range of $30.0 million to $35.0 million for the third quarter of 2016, and $135.0 million to $145.0 million for the full-year 2016. Reflected in the cash opex guidance range above are the anticipated results of several cost containment measures initiated by the Company due to prevailing market conditions, including, among other actions, the stacking of 48 new generation OSVs, including eight 300 class OSVs, on various dates since October 1, 2014, as well as company-wide headcount reductions and across-the-board pay-cuts for shoreside and vessel personnel. Since the end of the quarter, the Company has stacked one 300 class OSV and plans to stack three additional OSVs, including one 300 class OSV, during the third quarter of 2016 and may choose to stack additional vessels as market conditions warrant. The cash operating expense estimate above is exclusive of any additional repositioning expenses the Company may incur in connection with the potential relocation of more of its vessels into international markets or back to the GoM, and any customer-required cost-of-sales related to future contract fixtures that are typically recovered through higher dayrates.
G&A Expenses.G&A expenses are expected to be in the approximate range of $10.0 million to $12.0 million for the third quarter of 2016, and $40.0 million to $43.0 million for the full-year 2016.
Other Financial Data.Quarterly depreciation, amortization, net interest expense, cash income taxes, cash interest expense, weighted-average basic shares outstanding and weighted-average diluted shares outstanding for the third quarter of 2016 are projected to be $23.6 million, $4.2 million, $13.9 million, $0.5 million, $13.8 million, 36.3 million and 37.3 million, respectively. Guidance for depreciation, amortization, net interest expense, cash income taxes and cash interest expense for the full fiscal years 2016 and 2017 is provided on page 13 of this press release. The Company's annual effective tax rate is expected to be roughly 35.0% for fiscal 2016 and 34.5% for fiscal 2017.
Capital Expenditures Outlook
Update on OSV Newbuild Program #5.The Company also announced today that it has reached an agreement with the shipyard to postpone the delivery of the final two MPSVs to be delivered under this program to the first and second quarters of 2018 without any additional cost to the Company. In addition, the payment terms for the remainder of the contract were adjusted to shift $43.3 million of construction milestone draws from the remainder of 2016 and 2017 into 2018. The Company's fifth OSV newbuild program consists of four 300 class OSVs, five 310 class OSVs, ten 320 class OSVs, three 310 class MPSVs and two 400 class MPSVs. As of August 3, 2016, the Company has placed 20 vessels in-service under this program. The four remaining vessels under this 24-vessel domestic newbuild program are currently expected to be delivered in accordance with the table below:
2016 2017 2018 Total
---- ---- ---- -----
3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
--- --- --- --- --- --- --- --- --- ---
Estimated
In-Service Dates:
310 class MPSVs 2 - - - - - - - - - 2
400 class MPSVs - - - - - - 1 1 - - 2
Total Newbuilds 2 - - - - - 1 1 - - 4
--- --- --- --- --- --- --- --- --- --- ---
The Company owns 62 new generation OSVs, including two newbuilds delivered in the first quarter of 2016. These vessel deliveries result in an average new generation OSV fleet complement of 61.9 and 62.0 vessels for the fiscal years 2016 and 2017, of which 42.5 and 48.0 vessels are projected to be stacked, respectively. Based on the above schedule of projected vessel in-service dates, the Company expects to own and operate eight, eight and ten MPSVs as of December 31, 2016, 2017 and 2018, respectively. These vessel additions result in a projected average MPSV fleet complement of 6.7, 8.0, 9.4 and 10.0 vessels for the fiscal years 2016, 2017, 2018 and 2019, respectively. The aggregate cost of the Company's fifth OSV newbuild program, excluding construction period interest, is expected to be approximately $1,335.0 million, of which $67.7 million, $22.3 million and $43.3 million are expected to be incurred in the full fiscal years 2016, 2017 and 2018, respectively. From the inception of this program through June 30, 2016, the Company has incurred $1,256.2 million, or 94.1%, of total expected project costs, including $25.0 million that was spent during the second quarter of 2016. The Company expects to incur newbuild project costs of $9.2 million during the third quarter of 2016.
Update on Maintenance Capital Expenditures. Please refer to the attached data table on page 12 of this press release for a summary, by period and by vessel type, of historical and projected data for drydock downtime (in days) and maintenance capital expenditures for each of the quarterly and/or annual periods presented for the fiscal years 2015, 2016 and 2017. Maintenance capital expenditures, which are recurring in nature, primarily include regulatory drydocking charges incurred for the recertification of vessels and other vessel capital improvements that extend or maintain a vessel's economic useful life. The Company expects that its maintenance capital expenditures for its fleet of vessels will be approximately $10.8 million and $7.7 million for the full fiscal years 2016 and 2017, respectively. These cash outlays are expected to be incurred over approximately 211 and 120 days of aggregate commercial downtime in 2016 and 2017, respectively, during which the vessels will not earn revenue.
Update on Other Capital Expenditures. Please refer to the attached data tables on page 12 of this press release for a summary, by period, of historical and projected data for other capital expenditures, for each of the quarterly and/or annual periods presented for the fiscal years 2015, 2016 and 2017. Other capital expenditures, which are generally non-recurring, are comprised of the following: (i) commercial-related vessel improvements, such as the addition of cranes, ROVs, helidecks, living quarters and other specialized vessel equipment, or the modification of vessel capacities or capabilities, such as DP upgrades and mid-body extensions, which costs are typically included in and offset, in whole or in part, by higher dayrates charged to customers, and the speculative relocation of vessels from one geographic market to another; and (ii) non-vessel related capital expenditures, including costs related to the Company's shore-based facilities, leasehold improvements and other corporate expenditures, such as information technology or office furniture and equipment. The Company expects miscellaneous incremental commercial-related vessel improvements and non-vessel capital expenditures to be approximately $16.0 million and $1.0 million, respectively, for the full fiscal years 2016 and 2017, respectively. These cash outlays are expected to be incurred over approximately 248 days of aggregate commercial downtime in 2016, during which the vessels will not earn revenue.
Liquidity Outlook
As of June 30, 2016, the Company had a cash balance of $224.5 million and an undrawn $300.0 million revolving credit facility. On July 29, 2016, the Company amended the terms of its existing revolving credit facility. Among the amended terms, the borrowing base was reduced from $300 million to $200 million. The Company projects that, even with the current depressed operating levels, cash generated from operations together with cash on hand should be sufficient to fund its operations and commitments at least through the end of its current guidance period without drawing on its revolving credit facility. The Company has three tranches of funded unsecured debt outstanding that mature in fiscal years 2019, 2020 and 2021, respectively. The Company anticipates addressing each of these tranches of debt well in advance of their respective maturities, either by refinancing or otherwise retiring such debt. While the Company has an authorized share repurchase program, it will continue to prioritize its usage of cash appropriate to the current market cycle and its longer term commitments.
Conference Call
The Company will hold a conference call to discuss its second quarter 2016 financial results and recent developments at 10:00 a.m. Eastern (9:00 a.m. Central) tomorrow, August 4, 2016. To participate in the call, dial (412) 902-0030 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 "Investors" homepage 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, Dennard-Lascar, 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 "Investors" homepage of the Company's website. Additionally, a telephonic replay will be available through August 11, 2016, and may be accessed by calling (201) 612-7415 and using the pass code 13640302#.
Attached Data Tables
The Company has posted an electronic version of the following four pages of data tables, which are downloadable in Microsoft Excel(TM) format, on the "Investors" homepage of the Hornbeck Offshore website for the convenience of analysts and investors.
In addition, the Company uses its website as a means of disclosing material non-public information and for complying with disclosure obligations under SEC Regulation FD. Such disclosures will be included on the Company's website under the heading "Investors." Accordingly, investors should monitor that portion of the Company's website, in addition to following the Company's press releases, SEC filings, public conference calls and webcasts.
Hornbeck Offshore Services, Inc. is a leading provider of technologically advanced, new generation offshore service vessels primarily in the Gulf of Mexico and Latin America. Hornbeck Offshore currently owns a fleet of 68 vessels primarily serving the energy industry and has four additional ultra high-spec Upstream vessels under construction for delivery through 2018.
Forward-Looking Statements
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," "forecast," "intend," "may," "might," "plan," "potential," "predict," "project," "remain," "should," "will," or other comparable words or the negative of such words. The accuracy of the Company's assumptions, expectations, beliefs and projections depends 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, including sustained or further declines in oil and natural gas prices; a sustained weakening of demand for the Company's services; unplanned customer suspensions, cancellations, rate reductions or non-renewals of vessel charters, vessel management contracts or failures to finalize commitments to charter or manage vessels; sustained or further reductions in capital spending budgets by customers; the inability to accurately predict vessel utilization levels and dayrates; fewer than anticipated deepwater and ultra-deepwater drilling units operating in the GoM or other regions where the Company operates; the effect of inconsistency by the United States government in the pace of issuing drilling permits and plan approvals in the GoM or other drilling regions; the Company's inability to successfully complete the remainder of its current vessel newbuild program on-time and on-budget, which involves the construction and integration of highly complex vessels and systems; the inability to successfully market the vessels that the Company owns, is constructing or might acquire; the government's cancellation or non-renewal of the management, operations and maintenance ("O&M") contracts for vessels; an oil spill or other significant event in the United States or another offshore drilling region that could have a broad impact on deepwater and other offshore energy exploration and production activities, such as the suspension of activities or significant regulatory responses; the imposition of laws or regulations that result in reduced exploration and production activities or that increase the Company's operating costs or operating requirements; environmental litigation that impacts customer plans or projects; disputes with customers; bureaucratic, administrative or operating barriers that delay vessels in foreign markets from going on-hire or result in contractual penalties or deductions imposed by foreign customers; industry risks; the impact stemming from the reduction of Petrobras' announced plans for or administrative barriers to exploration and production activities in Brazil; recent disruption in Mexican offshore activities; age or other restrictions imposed on our vessels by customers; unanticipated difficulty in effectively competing in or operating in international markets; less than anticipated subsea infrastructure and field development demand in the GoM and other markets affecting our MPSVs; sustained vessel over capacity in the markets in which the Company competes; economic and geopolitical risks; weather-related risks; upon a return to improved operating conditions, the shortage of or the inability to attract and retain qualified personnel, when needed, including vessel personnel for active vessels or vessels the Company may reactivate; any success in unionizing the Company's U.S. fleet personnel; regulatory risks; the repeal or administrative weakening of the Jones Act or changes in the interpretation of the Jones Act related to the U.S. citizenship qualification; drydocking delays and cost overruns and related risks; vessel accidents, pollution incidents, or other events resulting in lost revenue, fines, penalties or other expenses that are unrecoverable from insurance policies or other third parties; unexpected litigation and insurance expenses; or fluctuations in foreign currency valuations compared to the U.S. dollar and risks associated with expanded foreign operations, such as non-compliance with or the unanticipated effect of tax laws, customs laws, immigration laws, or other legislation that result in higher than anticipated tax rates or other costs; the inability to repatriate foreign-sourced earnings and profits; or the inability of the Company to refinance or otherwise retire funded debt obligations that come due in 2019, 2020 and 2021. In addition, the Company's future results may be impacted by adverse economic conditions, such as inflation, deflation, or lack of liquidity in the capital markets, that may negatively affect it or parties with whom it does business resulting in their non-payment or inability to perform obligations owed to the Company, such as the failure of customers to fulfill their contractual obligations or the failure by individual banks to provide funding under the Company's credit agreement, if required. Further, the Company can give no assurance regarding when and to what extent it will effect share repurchases. Should one or more of the foregoing risks or uncertainties materialize in a way that negatively impacts the Company, 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 its business, financial condition and results of operations could be materially and adversely affected and, if sufficiently severe, could result in noncompliance with certain covenants of the Company's recently amended and currently undrawn revolving credit facility. 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 and will make with the Securities and Exchange Commission which, after their filing, can be found on the Company's website www.hornbeckoffshore.com.
Regulation G Reconciliation
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 measure 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 to investors and a description of the ways in which management uses such measure 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
Dennard-Lascar /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,
2016 2016 2015 2016 2015
---- ---- ---- ---- ----
Revenues $53,673 $76,820 $136,446 $130,493 $271,070
Costs and expenses:
Operating expenses 34,330 40,429 57,542 74,759 118,962
Depreciation and amortization 28,474 28,452 26,486 56,926 53,956
General and administrative expenses 12,379 8,674 13,063 21,053 24,955
75,183 77,555 97,091 152,738 197,873
------ ------ ------ ------- -------
Gain (loss) on sale of assets - (45) - (45) 33,056
--- --- --- --- ------
Operating income (loss) (21,510) (780) 39,355 (22,290) 106,253
Other income (expense):
Interest income 386 377 393 763 607
Interest expense (11,004) (11,064) (9,921) (22,068) (20,183)
Other income (expense), net (1) (48) 504 482 456 922
--- --- --- --- ---
(10,666) (10,183) (9,046) (20,849) (18,654)
------- ------- ------ ------- -------
Income (loss) before income taxes (32,176) (10,963) 30,309 (43,139) 87,599
Income tax expense (benefit) (11,590) (3,449) 11,094 (15,039) 32,531
Net income (loss) $(20,586) $(7,514) $19,215 $(28,100) $55,068
======== ======= ======= ======== =======
Earnings per share
Basic earnings (loss) per common share $(0.57) $(0.21) $0.54 $(0.78) $1.54
====== ====== ===== ====== =====
Diluted earnings (loss) per common share $(0.57) $(0.21) $0.53 $(0.78) $1.52
====== ====== ===== ====== =====
Weighted average basic shares outstanding 36,191 36,085 35,706 36,138 35,668
====== ====== ====== ====== ======
Weighted average diluted shares outstanding (2) 36,191 36,085 36,253 36,138 36,190
====== ====== ====== ====== ======
Other Operating Data (unaudited):
Three Months Ended Six Months Ended
------------------ ----------------
June 30, March 31, June 30, June 30, June 30,
2016 2016 2015 2016 2015
---- ---- ---- ---- ----
Offshore Supply Vessels:
Average number of new generation OSVs (3) 62.0 61.6 59.2 61.8 60.3
Average number of active new generation OSVs 4 20.1 27.9 41.6 24.0 46.8
Average new generation OSV fleet capacity (deadweight) (3) 221,629 219,398 202,172 220,514 205,333
Average new generation OSV capacity (deadweight) 3,575 3,561 3,413 3,568 3,404
Average new generation utilization rate 5 23.9% 35.1% 56.2% 29.5% 60.5%
Effective new generation utilization rate 6 73.8% 77.4% 79.9% 75.9% 78.1%
Average new generation dayrate 7 $26,642 $24,601 $28,178 $25,431 $27,381
Effective dayrate 8 $6,367 $8,635 $15,836 $7,502 $16,566
Balance Sheet Data (unaudited):
As of As of
June 30, December 31,
2016 2015
---- ----
Cash and cash equivalents $224,525 $259,801
Working capital 234,306 278,491
Property, plant and equipment, net 2,615,243 2,574,661
Total assets 2,941,232 2,984,416
Total long-term debt 1,076,915 1,070,281
Stockholders' equity 1,440,106 1,446,163
Cash Flow Data (unaudited):
Six Months Ended
----------------
June 30, June 30,
2016 2015
---- ----
Cash provided by operating activities $42,246 $134,749
Cash used in investing activities (79,378) (56,182)
Cash provided by (used in) financing activities 727 (31)
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,
2016 2016 2015 2016 2015
---- ---- ---- ---- ----
Vessel revenues $45,284 $68,216 $128,071 $113,500 $258,247
Non-vessel revenues 9 8,389 8,604 8,375 16,993 12,823
Total revenues $53,673 $76,820 $136,446 $130,493 $271,070
======= ======= ======== ======== ========
Operating income (loss) $(21,510) $(780) $39,355 $(22,290) $106,253
Operating margin
(deficit) (40.1%) (1.0%) 28.8% (17.1%) 39.2%
Components of EBITDA 10
Net income (loss) $(20,586) $(7,514) $19,215 $(28,100) $55,068
Interest expense, net 10,618 10,687 9,528 21,305 19,576
Income tax expense
(benefit) (11,590) (3,449) 11,094 (15,039) 32,531
Depreciation 22,658 22,173 20,172 44,831 40,156
Amortization 5,816 6,279 6,314 12,095 13,800
EBITDA 10 $6,916 $28,176 $66,323 $35,092 $161,131
====== ======= ======= ======= ========
Adjustments to EBITDA
Stock-based
compensation expense 3,044 1,172 2,802 4,216 4,774
Interest income 386 377 393 763 607
Adjusted EBITDA 10 $10,346 $29,725 $69,518 $40,071 $166,512
======= ======= ======= ======= ========
EBITDA 10 Reconciliation to GAAP:
EBITDA 10 $6,916 $28,176 $66,323 $35,092 $161,131
Cash paid for deferred
drydocking charges (1,110) (1,207) (3,756) (2,317) (6,309)
Cash paid for interest (11,300) (13,787) (11,240) (25,087) (25,272)
Cash paid for taxes (490) (1,752) (511) (2,242) (1,884)
Changes in working
capital 4,976 26,709 19,953 31,685 36,285
Stock-based
compensation expense 3,044 1,172 2,802 4,216 4,774
(Gain) loss on sale of
assets - 45 - 45 (33,056)
Changes in other, net 957 (103) (260) 854 (920)
Net cash provided by
operating activities $2,993 $39,253 $73,311 $42,246 $134,749
====== ======= ======= ======= ========
Hornbeck Offshore Services, Inc. and Subsidiaries
Unaudited Other Financial Data
Capital Expenditures and Drydock Downtime Data (unaudited):
Historical Data:
Three Months Ended Six Months Ended
------------------ ----------------
June 30, March 31, June 30, June 30, June 30,
2016 2016 2015 2016 2015
---- ---- ---- ---- ----
Drydock Downtime:
New-Generation OSVs
Number of vessels commencing drydock
activities 1.0 2.0 4.0 3.0 6.0
Commercial downtime (in days) 84 63 104 147 162
MPSVs
Number of vessels commencing drydock
activities - - - - -
Commercial downtime (in days) - - - - -
Commercial-related Downtime11:
New-Generation OSVs
Number of vessels commencing
commercial-related downtime 1.0 - - 1.0 1.0
Commercial downtime (in days) 27 - 86 27 266
MPSVs
Number of vessels commencing
commercial-related downtime 1.0 1.0 - 2.0 -
Commercial downtime (in days) 52 149 - 201 -
Maintenance and Other Capital Expenditures (in thousands):
Maintenance Capital Expenditures:
Deferred drydocking charges $1,110 $1,207 $3,756 $2,317 $6,309
Other vessel capital improvements 2,154 3,519 1,820 5,673 4,070
3,264 4,726 5,576 7,990 10,379
----- ----- ----- ----- ------
Other Capital Expenditures:
Commercial-related vessel improvements 4,056 6,829 12,583 10,885 32,175
Non-vessel related capital
expenditures 9 266 10,217 275 14,605
4,065 7,095 22,800 11,160 46,780
----- ----- ------ ------ ------
$7,329 $11,821 $28,376 $19,150 $57,159
====== ======= ======= ======= =======
Growth Capital Expenditures (in thousands):
OSV newbuild program #5 $25,027 $29,507 $61,554 $54,534 $109,317
======= ======= ======= ======= ========
Forecasted Data12:
1Q 2016A 2Q 2016A 3Q 2016E 4Q 2016E 2016E 2017E
-------- -------- -------- -------- ----- -----
Drydock Downtime:
New-Generation OSVs
Number of vessels commencing drydock
activities 2.0 1.0 - 1.0 4.0 5.0
Commercial downtime (in days) 63 84 28 10 185 90
MPSVs
Number of vessels commencing drydock
activities - - - 1.0 1.0 2.0
Commercial downtime (in days) - - - 26 26 30
Commercial-related Downtime11:
New-Generation OSVs
Number of vessels commencing
commercial-related downtime - 1.0 - - 1.0 -
Commercial downtime (in days) - 27 - - 27 -
MPSVs
Number of vessels commencing
commercial-related downtime 1.0 1.0 1.0 - 3.0 -
Commercial downtime (in days) 149 52 20 - 221 -
Maintenance and Other Capital Expenditures (in millions):
Maintenance Capital Expenditures:
Deferred drydocking charges $1.2 $1.1 $1.3 $0.9 $4.5 $6.8
Other vessel capital improvements 3.5 2.2 0.5 0.1 6.3 0.9
4.7 3.3 1.8 1.0 10.8 7.7
--- --- --- --- ---- ---
Other Capital Expenditures:
Commercial-related vessel improvements 6.8 4.1 4.5 0.1 15.5 -
Non-vessel related capital
expenditures 0.3 - 0.1 0.1 0.5 1.0
7.1 4.1 4.6 0.2 16.0 1.0
--- --- --- --- ---- ---
$11.8 $7.4 $6.4 $1.2 $26.8 $8.7
===== ==== ==== ==== ===== ====
Growth Capital Expenditures (in millions):
OSV newbuild program #5 $29.5 $25.0 $9.2 $4.0 $67.7 $22.3
===== ===== ==== ==== ===== =====
Hornbeck Offshore Services, Inc. and Subsidiaries
Unaudited Other Fleet and Financial Data
(in millions, except Average Vessels, Contract Backlog and Tax Rate)
Forward Guidance of Selected Data (unaudited):
3Q 2016E Full-Year 2016E Full-Year 2017E
Avg Vessels Avg Vessels Avg Vessels
----------- ----------- -----------
Fleet Data (as of 3-Aug-2016):
Upstream
New generation OSVs - Active 15.8 19.4 14.0
New generation OSVs - Stacked 13 46.2 42.5 48.0
New generation OSVs - Total 62.0 61.9 62.0
New generation MPSVs 6.8 6.7 8.0
Total Upstream 68.8 68.6 70.0
==== ==== ====
3Q 2016E Range Full-Year 2016E Range
-------------- ---------------------
Cost Data: Low14 High 14 Low14 High 14
----- ------- ----- -------
Operating expenses $30.0 $35.0 $135.0 $145.0
General and administrative expenses $10.0 $12.0 $40.0 $43.0
1Q 2016A 2Q 2016A 3Q 2016E 4Q 2016E 2016E 2017E
-------- -------- -------- -------- ----- -----
Other Financial Data:
Depreciation $22.2 $22.7 $23.6 $24.4 $92.9 $97.1
Amortization 6.3 5.8 4.2 3.8 20.1 11.2
Interest expense, net:
Interest expense $13.5 $13.5 $13.5 $13.5 $54.0 $54.0
Write-off of unamortized revolver issuance costs - - 0.9 - 0.9 -
Incremental non-cash OID interest expense 15 2.6 2.6 2.6 2.7 10.5 11.1
Capitalized interest (5.0) (5.1) (2.9) (2.0) (15.0) (8.8)
Interest income (0.4) (0.4) (0.2) (0.2) (1.2) (0.5)
Total interest expense, net $10.7 $10.6 $13.9 $14.0 $49.2 $55.8
Income tax rate 31.5% 36.0% 35.0% 35.0% 35.0% 34.5%
Cash income taxes $1.8 $0.5 $0.5 $0.5 $3.3 $1.8
Cash interest expense 13.8 11.3 13.8 11.3 50.2 50.2
Weighted average basic shares outstanding 36.1 36.2 36.3 36.3 36.2 36.8
Weighted average diluted shares outstanding 16 36.8 37.2 37.3 37.3 37.2 37.7
1 Represents other
income and
expenses,
including equity
in income from
investments and
foreign currency
transaction gains
or losses.
2 Due to net losses
for the three and
six months ended
June 30, 2016 and
the three months
ended March 31,
2016, the Company
excluded the
dilutive effect of
equity awards
representing the
rights to acquire
992, 966 and 939
shares of common
stock,
respectively,
because the effect
was anti-
dilutive. Stock
options
representing
rights to acquire
326 and 332 shares
of common stock
for the three and
six months ended
June 30, 2015 were
excluded from the
calculation of
diluted earnings
per share, because
the effect was
antidilutive after
considering the
exercise price of
the options in
comparison to the
average market
price, proceeds
from exercise,
taxes and related
unamortized
compensation. As
of June 30, 2016,
March 31, 2016,
and June 30, 2015,
the 1.500%
convertible senior
notes were not
dilutive, as the
average price of
the Company's
stock was less
than the effective
conversion price
of $68.53 for such
notes.
3 The Company owned
62 new generation
OSVs as of June
30, 2016.
Excluded from this
data are six MPSVs
owned and operated
by the Company.
4 In response to weak
market conditions,
the Company
elected to stack
certain of its new
generation OSVs on
various dates
since October 1,
2014. Active new
generation OSVs
represent vessels
that are
immediately
available for
service during
each respective
period.
5 Average utilization
rates are average
rates based on a
365-day year.
Vessels are
considered
utilized when they
are generating
revenues.
6 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.
7 Average new
generation OSV
dayrates represent
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.
8 Effective dayrate
represents the
average dayrate
multiplied by the
utilization rate
for the respective
period.
9 Represents revenues
from shore-based
operations,
vessel-management
services,
including from the
O&M contract with
the U.S. Navy, and
ancillary
equipment rentals,
including from
ROVs.
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
Securities and
Exchange
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, stock-based
compensation
expense and
interest income,
or Adjusted
EBITDA, to
internally
evaluate its
performance based
on the computation
of ratios used in
certain financial
covenants of its
credit agreements
with various
lenders. The
Company believes
that these ratios
can be material
components of
financial
covenants and,
when applicable,
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 it is no longer in an
overall tax net operating loss
position, as applicable, 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 Commercial-related
Downtime results
from commercial-
related vessel
improvements, such
as the addition of
cranes, ROVs,
helidecks, living
quarters and other
specialized vessel
equipment; the
modification of
vessel capacities
or capabilities,
such as DP
upgrades and mid-
body extensions,
which costs are
typically included
in and offset, in
whole or in part,
by higher dayrates
charged to
customers; and the
speculative
relocation of
vessels from one
geographic market
to another.
12 The capital
expenditure
amounts included
in this table are
anticipated cash
outlays before the
allocation of
construction
period interest,
as applicable.
13 As of August 3,
2016, the
Company's inactive
fleet of 45 new
generation OSVs
that were
"stacked" was
comprised of the
following: eleven
200 class OSVs,
twenty-four 240
class OSVs, three
265 class OSVs and
seven 300 class
OSVs. In
addition, the
Company plans to
stack two 240
class OSVs and one
300 class OSV
during the third
quarter of 2016.
14 The "low" and
"high" ends of the
guidance ranges
set forth in this
table are not
intended to cover
unexpected
variations from
currently
anticipated market
conditions. These
ranges provide
only a reasonable
deviation from the
conditions that
are expected to
occur.
15 Represents
incremental
imputed non-cash
OID interest
expense required
by accounting
standards
pertaining to the
Company's 1.500%
convertible senior
notes due 2019.
16 Projected weighted-
average diluted
shares do not
reflect any
potential dilution
resulting from the
Company's 1.500%
convertible senior
notes. Warrants
related to the
Company's 1.500%
convertible senior
notes become
dilutive when the
average price of
the Company's
stock exceeds the
effective
conversion price
for such notes of
$68.53.
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/hornbeck-offshore-announces-second-quarter-2016-results-300308794.html
SOURCE Hornbeck Offshore Services, Inc.
