Hornbeck Offshore Announces Third Quarter 2019 Results
COVINGTON, La., Oct. 30, 2019 /PRNewswire/ -- Hornbeck Offshore Services, Inc. (NYSE:HOS) announced today results for the third quarter ended September 30, 2019. Following is an executive summary for this period and the Company's future outlook:
-- 3Q2019 revenues were $52.8 million, a decrease of $4.0 million, or 7%,
from 2Q2019 revenues of $56.8 million
-- 3Q2019 diluted EPS was $(1.09), a decrease of $0.25, or 30%, from 2Q2019
diluted EPS of $(0.84)
-- 3Q2019 net loss was $(41.4) million, an increase of $9.5 million, or
30%, from 2Q2019 net loss of $(31.9) million
-- 3Q2019 EBITDA was $(1.9) million, a decrease of $5.5 million, or 153%,
from 2Q2019 EBITDA of $3.6 million
-- 3Q2019 average new gen OSV dayrates were $19,750, a sequential increase
of $1,552, or 9%
-- 3Q2019 effective (utilization-adjusted) new gen OSV dayrates were
$4,622, a sequential decrease of $1,256, or 21%
-- 3Q2019 utilization of the Company's new gen OSV fleet was 23.4%, down
from 32.3% sequentially
-- 3Q2019 effective utilization of the Company's active new gen OSVs was
49.9%, down from 70.4% sequentially
-- The Company has 35 OSVs and two MPSVs stacked, but plans to reactivate
one OSV and one MPSV in 4Q2019 and 1Q2020, respectively
-- Quarter-end cash and cash equivalents were $136 million, down from $143
million sequentially
The Company recorded a net loss for the third quarter of 2019 of $(41.4) million, or $(1.09) per diluted share, compared to a net loss of $(31.2) million, or $(0.83) per diluted share, for the third quarter of 2018; and a net loss of $(31.9) million, or $(0.84) per diluted share, for the second quarter of 2019. Diluted common shares for the third quarter of 2019 were 38.0 million compared to 37.6 million and 37.9 million for the third quarter of 2018 and the second quarter of 2019, respectively. GAAP requires the use of basic shares outstanding for diluted EPS when reporting a net loss. EBITDA for the third quarter of 2019 was $(1.9) million compared to $5.2 million for the third quarter of 2018 and $3.6 million for the second quarter of 2019. For additional information regarding EBITDA as a non-GAAP financial measure, please see Note 10 to the accompanying data tables.
Revenues. Revenues were $52.8 million for the third quarter of 2019, a decrease of $5.7 million, or 9.7%, from $58.5 million for the third quarter of 2018; and a decrease of $4.0 million, or 7.0%, from $56.8 million for the second quarter of 2019. The year-over-year decrease in revenues resulted from continuing soft market conditions for the Company's vessels. The sequential decrease in revenues resulted from a decline in revenues from the Company's OSVs, partially offset by improved market conditions for the Company's MPSVs. As of September 30, 2019, the Company had 37 vessels stacked, comprised of 35 OSVs and two MPSVs. For the three months ended September 30, 2019, the Company had an average of 37.0 vessels stacked compared to 40.7 vessels stacked in the prior-year quarter and 37.8 vessels stacked in the sequential quarter. Operating loss was $(30.2) million, or (57.2)% of revenues, for the third quarter of 2019 compared to an operating loss of $(22.4) million, or (38.3)% of revenues, for the prior-year quarter; and an operating loss of $(24.8) million, or (43.6)% of revenues, for the second quarter of 2019. Average new generation OSV dayrates for the third quarter of 2019 were $19,750 compared to $19,446 for the same period in 2018 and $18,198 for the second quarter of 2019. New generation OSV utilization was 23.4% for the third quarter of 2019 compared to 26.1% for the year-ago quarter and 32.3% for the sequential quarter. Excluding stacked vessel days, the Company's new generation OSV effective utilization was 49.9%, 65.4% and 70.4% for the same periods, respectively. Utilization-adjusted, or effective, new generation OSV dayrates for the third quarter of 2019 were $4,622 compared to $5,075 for the same period in 2018 and $5,878 for the second quarter of 2019.
Operating Expenses. Operating expenses were $41.1 million for the third quarter of 2019, an increase of $2.9 million, or 7.6%, from $38.2 million for the third quarter of 2018; and an increase of $0.9 million, or 2.2%, from $40.2 million for the second quarter of 2019. The year-over-year and sequential increases in operating expenses was primarily due to a higher number of active vessels in the Company's fleet during the three months ended September 30, 2019.
General and Administrative ("G&A"). G&A expense was $13.4 million for the third quarter of 2019 compared to $15.1 million for the third quarter of 2018, and $13.0 million for the second quarter of 2019. The year-over-year decrease was due to lower long-term incentive compensation expense during the three months ended September 30, 2019. Long-term incentive compensation expense was higher in the prior-year quarter primarily due to a "mark-to-market" adjustment on cash-settled stock-based awards to reflect the increase in the Company's stock price during such quarter. Nearly all of these cash-settled share-based awards were modified to settle in stock during the second quarter of 2019 at a price that was lower than such awards were valued during the three months ended September 30, 2018. This favorable variance was partially offset by higher bad debt reserves.
Depreciation and Amortization. Depreciation and amortization expense was $28.6 million for the third quarter of 2019, or $1.0 million higher than the year-ago quarter and $0.2 million higher than the sequential quarter. Depreciation expense was in-line with the year-ago and sequential quarters. The year-over-year increase in amortization expense of $1.3 million is primarily due to costs associated with the initial special surveys for vessels that were placed in service under the Company's fifth OSV newbuild program and costs associated with the drydocking of two vessels that were acquired in the second quarter of 2018. Amortization expense is expected to increase temporarily whenever market conditions warrant reactivation of currently stacked vessels, which will then require the Company to drydock such vessels and, thereafter, to revert to historical average levels.
Interest Expense. Interest expense was $22.3 million during the third quarter of 2019, which was $5.8 million higher than the same period in 2018 and $2.3 million higher than the sequential quarter. The year-over-year increase was primarily due to additional interest expense associated with the issuance of additional first-lien and second-lien term loans, as well as loans under the Senior Credit Facility, since September 30, 2018.
Nine Month Results
Revenues for the first nine months of 2019 increased 3.3% to $163.7 million compared to $158.5 million for the same period in 2018. Operating loss was $(81.7) million, or (49.9)% of revenues, for the first nine months of 2019 compared to an operating loss of $(71.8) million, or (45.3)% of revenues, for the prior-year period. Net loss for the first nine months of 2019 increased $15.1 million to a net loss of $(110.0) million, or $(2.90) per diluted share, compared to a net loss of $(94.9) million, or $(2.53) per diluted share, for the first nine months of 2018. EBITDA for the first nine months of 2019 decreased 65.2% to $3.2 million compared to $9.2 million for the first nine months of 2018. The year-over-year increase in vessel revenues is attributable to modestly improved market conditions for the Company's OSVs. For the nine months ended September 30, 2019, the Company had an average of 36.2 active vessels compared to 29.8 active vessels in the prior-year period.
Recent Developments
Outcome of Shipyard Arbitration Proceedings. On January 22, 2016, the Company initiated an arbitration demand in accordance with the vessel construction agreement dated November 14, 2011 with VT Halter Marine, Inc. ("Halter") to construct ten 300 class OSVs as part of the Company's fifth OSV newbuild program. On October 21, 2019, the arbitration panel awarded damages in the amount of $18.0 million related to the Company's claims, offset by $2.1 million awarded to Halter for its counterclaims. Terms for the award require payment to be made within 60 days to avoid interest charges. Limited appeal rights are available to the parties.
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 11 and 12 of this press release. These statements are forward-looking and actual results may differ materially, particularly given the volatility inherent in, and the currently depressed market conditions of, the Company's industry. Other than as expressly stated, these statements do not include the potential impact of any significant further change in commodity prices for oil and natural gas; any additional future repositioning voyages; any additional stacking or reactivation of vessels; unexpected vessel repairs or shipyard delays; or future capital transactions, such as vessel acquisitions, modifications or divestitures, business combinations, possible share or note 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 8 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 commodity prices and the Company's expectations related to the planned capital spending budgets of its customers.
Vessel Counts. As of September 30, 2019, the Company's fleet of owned vessels consisted of 66 new generation OSVs and eight MPSVs. The forecasted vessel counts presented in this press release reflect the two MPSV newbuilds now projected to be delivered during fiscal 2021, as discussed further below. With an average of 35.3 new generation OSVs and 2.1 MPSVs projected to be stacked during fiscal 2019, the Company's active fleet for 2019 is expected to be comprised of an average of 30.7 new generation OSVs and 5.9 MPSVs. With an assumed average of 34.0 new generation OSVs and 1.0 MPSV projected to be stacked during fiscal 2020, the Company's active fleet for fiscal 2020 is expected to be comprised of an average of 32.0 new generation OSVs and 7.0 MPSVs.
Operating Expenses. Aggregate cash operating expenses are projected to be in the range of $40.0 million to $45.0 million for the fourth quarter of 2019, and $161.7 million to $166.7 million for the full-year 2019. Reflected in the cash opex guidance ranges above are the anticipated continuing results of several cost containment measures initiated by the Company since the fourth quarter of 2014 due to prevailing market conditions, including, among other actions, the stacking of vessels on various dates from October 1, 2014 through September 30, 2019, as well as company-wide headcount reductions and across-the-board pay-cuts for shoreside and vessel personnel. The Company plans to reactivate one 265 class OSV during the fourth quarter of 2019 and one MPSV during the first quarter of 2020. The Company may choose to stack or reactivate 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 Expense. G&A expense is expected to be in the approximate range of $12.0 million to $14.0 million for the fourth quarter of 2019; and $50.4 million to $52.4 million for the full fiscal year 2019.
Other Financial Data. Quarterly depreciation, amortization, net interest expense, cash income tax refunds, cash interest expense, weighted-average basic shares outstanding and weighted-average diluted shares outstanding for the fourth quarter of 2019 are projected to be $24.3 million, $4.7 million, $18.6 million, $(4.0) million, $19.2 million, 38.0 million and 40.9 million, respectively. As a reminder, please note that GAAP requires the use of basic shares outstanding for diluted EPS when reporting a net loss. Guidance for depreciation, amortization, net interest expense, cash income taxes and cash interest expense for the full fiscal years 2019 and 2020 is provided on page 12 of this press release. The Company's annual effective tax benefit rate is expected to be between 20.0% and 25.0% for fiscal years 2019 and 2020.
Capital Expenditures Outlook
Update on OSV Newbuild Program #5. During the first quarter of 2018, the Company notified the shipyard that was constructing the remaining two vessels in the Company's nearly completed 24-vessel domestic newbuild program that it was terminating the construction contracts for such vessels. The Company has worked with the performance bond surety and will select and contract with a shipyard that can finish construction and deliver such vessels. On October 2, 2018, the shipyard filed suit against the Company in the 22nd Judicial District Court for the Parish of St. Tammany in the State of Louisiana. The Company has responded to the suit and has alleged counter-claims. The Company intends to vigorously defend the shipyard's claims and considers them to be without merit. The surety has authorized the Company to select a completion yard and, subject to a reservation of rights, has offered to fund the cost to complete the vessels in excess of their contract price of up to the full amount of the performance bond. However, the surety's offer is not in compliance with the terms of the performance bond as the surety has offered to indemnify the Company for payments it makes in excess of the contract price, rather than to pay the completion yard directly. Consequently, the Company has initiated legal proceedings against the surety as a third-party claim in the shipyard litigation.
As of the date of the contract termination, the two remaining vessels, both of which are domestic 400 class MPSVs, were projected to be delivered in the second and third quarters of 2019, respectively. These projected delivery dates were subsequently amended, for guidance purposes, to be the second and third quarters of 2020. Due to the continued uncertainty of the timing and location of future construction activities, the Company is now updating its forward guidance for the delivery dates related to these vessels to be the second and third quarters of 2021, respectively. For guidance purposes, the Company has tentatively projected to incur the remaining cash outlays associated with this program during fiscal 2020 and fiscal 2021, as set forth below. However, the timing of the remaining construction draws remains subject to change commensurate with any further changes in the delivery dates of such vessels.
As noted above, the Company owns 66 new generation OSVs and eight MPSVs as of September 30, 2019. Based on the projected MPSV in-service dates, the Company expects to own eight MPSVs as of December 31, 2019 and December 31, 2020, respectively, and ten MPSVs as of December 31, 2021. These vessel additions result in a projected average MPSV fleet complement of 8.0, 8.0, 9.0 and 10.0 vessels for the fiscal years 2019, 2020, 2021 and 2022, 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 $2.2 million and $22.9 million are currently expected to be incurred in the fiscal years 2019 and 2020, respectively. However, the timing of these remaining construction draws remains subject to change commensurate with any potential further changes in the delivery dates of the final two newbuild vessels, as discussed above. From the inception of this program through September 30, 2019, the Company has incurred $1,276.3 million, or 95.6%, of total project costs. The Company does not expect to incur any newbuild project costs during the fourth quarter of 2019.
Update on Maintenance Capital Expenditures. Please refer to the attached data table on page 11 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 2018, 2019 and 2020. 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 $35.5 million and $16.1 million for the full fiscal years 2019 and 2020, respectively. These cash outlays are expected to be incurred over 750 and 228 days of aggregate commercial downtime in 2019 and 2020, respectively, during which the applicable vessels will not earn revenue.
Update on Other Capital Expenditures. Please refer to the attached data tables on page 11 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 2018, 2019 and 2020. Other capital expenditures, which are generally non-recurring, are comprised of the following: (i) commercial-related capital expenditures, including 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 commercial-related intangibles; 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 commercial-related capital expenditures and non-vessel capital expenditures to be approximately $2.8 million and $2.6 million, respectively, for the full fiscal years 2019 and 2020, respectively.
Liquidity Outlook
As of September 30, 2019, the Company had an unrestricted cash balance of $136.4 million, which represents a sequential decrease of $6.3 million. The Company also had a restricted cash balance of $56.5 million. The Company projects that, even with the currently depressed operating levels, cash generated from operations together with cash on hand should be sufficient to fund its operations and commitments through at least March 31, 2020. However, absent the combination of a significant recovery of market conditions such that cash flow from operations were to increase materially from currently projected levels, coupled with the refinancing and/or further management of its funded debt obligations, the Company does not currently expect to have sufficient liquidity to fully repay the remaining balance of its 5.875% Senior Notes and its 5.000% Senior Notes as they mature in fiscal years 2020 and 2021, respectively. The Company remains fully cognizant of the challenges currently facing the offshore oil and gas industry and continues to review its capital structure and assess its strategic options.
Conference Call
The Company will hold a conference call to discuss its third quarter 2019 financial results and recent developments at 10:00 a.m. Eastern (9:00 a.m. Central) tomorrow, October 31, 2019. 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 November 14, 2019, and may be accessed by calling (201) 612-7415 and using the pass code 13694949#.
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 74 vessels primarily serving the energy industry and expects to add two ultra high-spec MPSV newbuilds to its fleet in fiscal 2021.
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 impacts from changes in oil and natural gas prices in the U.S. and worldwide; continued weakness in demand and/or pricing for the Company's services through and beyond the maturity of any of the Company's long-term debt; unplanned customer suspensions, cancellations, rate reductions or non-renewals of vessel charters or vessel management contracts or failures to finalize commitments to charter or manage vessels; continued weakness in capital spending by customers on offshore exploration and development; the inability to accurately predict vessel utilization levels and dayrates; sustained weakness in the number of deepwater and ultra-deepwater drilling units operating in the GoM or other regions where the Company operates; the Company's inability to successfully complete the final two vessels of its current vessel newbuild program on-budget, including any failure or refusal by the issuer of performance bonds to honor the bond contract or to cover cost overruns that may result at a completion shipyard; the inability to successfully market the vessels that the Company owns, is constructing or might acquire; the U.S. government's cancellation or non-renewal of the management, operations and maintenance contracts for non-owned 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; disputes with vendors; bureaucratic, administrative, operating or court-imposed barriers that prevent or delay vessels in foreign markets from going or remaining on-hire; administrative, judicial or political barriers to exploration and production activities in Mexico, Brazil or other foreign locations; disruption in the timing and/or extent of Mexican offshore activities or changes in law or governmental policy in Mexico that restricts or slows the pace of further development of its offshore oilfields; changes in law or governmental policy or judicial action in Mexico affecting the Company's Mexican registration of vessels; administrative or other legal changes in Mexican cabotage laws; other legal or administrative changes in Mexico that adversely impact planned or expected offshore energy development; unanticipated difficulty in effectively competing in or operating in international markets; less than anticipated subsea infrastructure and field development demand in the Greater GoM Operating Region and other markets affecting the Company's MPSVs; sustained vessel over-capacity for existing demand levels 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 or acquire; any success in unionizing any of the Company's U.S. fleet personnel; regulatory risks; the repeal or administrative weakening of the Jones Act or adverse changes in the interpretation of the Jones Act; 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; other industry risks; 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; the possible loss or material limitation of the Company's tax net operating loss carryforwards and other attributes due to a change in control, as defined in Section 382 of the Internal Revenue Code; or the inability of the Company to refinance or otherwise retire certain funded debt obligations that come due in 2020 and 2021; the potential for any impairment charges that could arise in the future and that would reduce the Company's consolidated net tangible assets which, in turn, would further limit the Company's ability to grant certain liens, make certain investments, and incur certain debt permitted under the Company's senior notes indentures and term loan agreements; or an adverse decision in any potential dispute involving the permissibility of the exchange of 2020 senior notes for second-lien term loans due February 2025. In addition, the Company's future results may be impacted by adverse economic conditions, such as inflation, deflation, lack of liquidity in the capital markets or an increase in interest rates, 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, if and when required. 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 existing indebtedness. 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.
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
Nine Months Ended
September 30,
June 30,
September 30,
September 30,
September 30,
2019 2019 2018 2019 2018
Revenues $52,830 $56,845 $58,468 $163,711 $158,486
Costs and expenses:
Operating expenses 41,131 40,217 38,203 121,742 109,030
Depreciation and
amortization 28,592 28,386 27,568 85,360 81,094
General and administrative
expense 13,362 13,049 15,134 38,378 40,255
83,085 81,652 80,905 245,480 230,379
Gain on sale of assets 7 29 25 62 55
Operating loss (30,248) (24,778) (22,412) (81,707) (71,838)
Other income (expense):
Loss on early
extinguishment of debt - (71)
Interest income 1,314 921 531 3,349 1,693
Interest expense (22,249) (19,995) (16,548) (61,970) (46,894)
Other income (expense), net
(1) (268) 4 23 (351) (41)
(21,203) (19,070) (15,994) (59,043) (45,242)
Loss before income taxes (51,451) (43,848) (38,406) (140,750) (117,080)
Income tax benefit (10,047) (11,905) (7,223) (30,783) (22,152)
Net loss $(41,404) $(31,943) $(31,183) $(109,967) $(94,928)
Earnings per share
Basic loss per common share $(1.09) $(0.84) $(0.83) $(2.90) $(2.53)
Diluted loss per common
share $(1.09) $(0.84) $(0.83) $(2.90) $(2.53)
Weighted average basic
shares outstanding 37,993 37,876 37,595 37,886 37,479
Weighted average diluted
shares outstanding (2) 37,993 37,876 37,595 37,886 37,479
Other Operating Data (unaudited):
Three Months Ended
Nine Months Ended
September 30,
June 30,
September 30,
September 30,
September 30,
2019 2019 2018 2019 2018
Offshore Supply Vessels:
Average number of new
generation OSVs (3) 66.0 66.0 66.0 66.0 64.0
Average number of active
new generation OSVs 4 31.0 30.2 26.3 30.3 22.4
Average new generation OSV
fleet capacity
(deadweight) (3) 238,845 238,845 238,783 238,845 229,260
Average new generation OSV
capacity (deadweight) 3,619 3,619 3,618 3,619 3,584
Average new generation
utilization rate 5 23.4% 32.3% 26.1% 29.4% 24.7%
Effective new generation
utilization rate 6 49.9% 70.4% 65.4% 63.9% 70.5%
Average new generation
dayrate 7 $19,750 $18,198 $19,446 $18,600 $19,097
Effective dayrate 8 $4,622 $5,878 $5,075 $5,468 $4,717
Balance Sheet Data (unaudited):
As of
As of
September 30, December 31,
2019 2018
Cash and cash equivalents $136,401 $224,936
Restricted cash -current 227
Working capital (79,446) 138,386
Restricted cash -
noncurrent 56,223
Property, plant and
equipment, net 2,360,254 2,434,829
Total assets 2,691,806 2,764,637
Total short-term debt 223,826 96,311
Total long-term debt 1,040,392 1,123,625
Stockholders' equity 1,197,894 1,307,926
Cash Flow Data (unaudited):
Nine Months Ended
September 30,
September 30,
2019 2018
Cash used in operating
activities $(72,277) $(25,776)
Cash used in investing
activities (3,888) (51,858)
Cash provided by (used in)
financing activities 44,318 (276)
Hornbeck Offshore Services, Inc. and Subsidiaries
Unaudited Other Financial Data
(in thousands, except Financial Ratios)
Other Financial Data (unaudited):
Three Months Ended
Nine Months Ended
September 30,
June 30,
September 30,
September 30,
September 30,
2019 2019 2018 2019 2018
Vessel revenues $43,683 $47,257 $49,401 $136,192 $132,016
Non-vessel revenues 9 9,147 9,588 9,067 27,519 26,470
Total revenues $52,830 $56,845 $58,468 $163,711 $158,486
Operating loss $(30,248) $(24,778) $(22,412) $(81,707) $(71,838)
Operating deficit
(57.3%) (43.6%)
(38.3%)
(49.9%)
(45.3%)
EBITDA 10 Reconciliation to GAAP:
Net cash flows used in
operating activities $(23,617) $(22,517) $1,878 $(72,277) $(25,776)
Cash paid for deferred
drydocking charges 7,395 6,305 3,882 23,000 7,233
Cash paid for interest 24,131 19,680 10,724 63,318 40,028
Cash paid for (refunds
of) income taxes 391 1,316 283 369 933
Changes in working
capital (8,027) (645) (7,405) (7,230) (4,248)
Stock-based
compensation expense (876) (684) (4,169) (2,535) (8,922)
Loss on early
extinguishment of debt - (71)
Gain (loss) on sale of
assets 7 29 25 62 55
Changes in other, net (1,328) 128 (39) (1,405) (88)
EBITDA 10 $(1,924) $3,612 $5,179 $3,231 $9,215
Components of EBITDA 10
Net loss $(41,404) $(31,943) $(31,183) $(109,967) $(94,928)
Interest expense, net 20,935 19,074 16,017 58,621 45,201
Income tax benefit (10,047) (11,905) (7,223) (30,783) (22,152)
Depreciation 24,559 24,657 24,843 73,987 74,121
Amortization 4,033 3,729 2,725 11,373 6,973
EBITDA 10 $(1,924) $3,612 $5,179 $3,231 $9,215
Adjustments to EBITDA
Loss on early
extinguishment of debt
$ -
$ -
$ - $71
$ -
Stock-based
compensation expense 876 684 4,169 2,535 8,922
Interest income 1,314 921 531 3,349 1,693
Adjusted EBITDA 10 $266 $5,217 $9,879 $9,186 $19,830
Hornbeck Offshore Services, Inc. and Subsidiaries
Unaudited Other Financial Data
Capital Expenditures and Drydock Downtime Data (unaudited):
Historical Data:
Three Months Ended Nine Months Ended
September 30, June 30,
September 30,
September 30,
September 30,
2019 2019 2018 2019 2018
Drydock Downtime:
New Generation OSVs
Number of vessels
commencing drydock
activities 5.0 3.0 4.0 14.0 10.0
Commercial downtime
(in days) 216 143 70 537 249
MPSVs
Number of vessels
commencing drydock
activities - 1.0 5.0 1.0
Commercial downtime
(in days) 62 16 110 24
Commercial-related Downtime11:
New Generation OSVs
Number of vessels
commencing
commercial-related
downtime -
Commercial downtime
(in days) -
MPSVs
Number of vessels
commencing
commercial-related
downtime -
Commercial downtime
(in days) -
Maintenance and Other Capital Expenditures (in thousands):
Maintenance Capital Expenditures:
Deferred drydocking
charges $7,395 $6,305 $3,882 $23,000 $7,233
Other vessel capital
improvements 188 726 1,744 1,207 5,817
7,583 7,031 5,626 24,207 13,050
Other Capital Expenditures:
Commercial-related
capital expenditures - 69 229 5,478
Non-vessel related
capital expenditures 79 205 26 355 107
79 205 95 584 5,585
$7,662 $7,236 $5,721 $24,791 $18,635
Growth Capital Expenditures (in thousands):
OSV newbuild program
#5 $1 $2,161 $913 $2,165 $1,401
Vessel acquisitions - 36,869
$1 $2,161 $913 $2,165 $38,270
Forecasted Data12:
1Q 2019A 2Q 2019A
3Q 2019A
4Q 2019E
2019E 2020E
Drydock Downtime:
New Generation OSVs
Number of vessels
commencing drydock
activities 6.0 3.0 5.0 4.0 18.0 8.0
Commercial downtime
(in days) 116 143 216 125 600 228
MPSVs
Number of vessels
commencing drydock
activities 3.0 1.0 1.0 5.0
Commercial downtime
(in days) 32 16 62 40 150
Commercial-related Downtime11:
New Generation OSVs
Number of vessels
commencing
commercial-related
downtime - 1.0 1.0
Commercial downtime
(in days) - 45 45 75
MPSVs
Number of vessels
commencing
commercial-related
downtime -
Commercial downtime
(in days) -
Maintenance and Other Capital Expenditures (in thousands):
Maintenance Capital Expenditures:
Deferred drydocking
charges $9,300 $6,305 $7,395 $10,385 $33,385 $14,134
Other vessel capital
improvements 293 726 188 937 2,144 1,922
9,593 7,031 7,583 11,322 35,529 16,056
Other Capital Expenditures:
Commercial-related
capital expenditures 229 2,066 2,295 2,066
Non-vessel related
capital expenditures 71 205 79 100 455 500
300 205 79 2,166 2,750 2,566
$9,893 $7,236 $7,662 $13,488 $38,279 $18,622
Growth Capital Expenditures (in thousands):
OSV newbuild program
#5 $3 $2,161 $1
$ - $2,165 $22,900
Hornbeck Offshore Services, Inc. and Subsidiaries
Unaudited Other Fleet and Financial Data
(in millions, except Average Vessels and Tax Rate)
Forward Guidance of Selected Data (unaudited):
4Q 2019E
Full-Year 2019E
Full-Year 2020E
Avg Vessels
Avg Vessels
Avg Vessels
Fleet Data (as of 30-Oct-2019):
New generation OSVs -
Active 31.7 30.7 32.0
New generation OSVs -
Stacked 13 34.3 35.3 34.0
New generation OSVs -
Total 66.0 66.0 66.0
New generation MPSVs -
Active 6.0 5.9 7.0
New generation MPSVs -
Stacked 2.0 2.1 1.0
New generation MPSVs -
Total 8.0 8.0 8.0
Total 74.0 74.0 74.0
4Q 2019E Range Full-Year 2019E Range
Cost Data:
Low14
High 14
Low14
High 14
Operating expenses $40.0 $45.0 $161.7 $166.7
General and administrative
expense $12.0 $14.0 $50.4 $52.4
1Q 2019A
2Q 2019A
3Q 2019A
4Q 2019E
2019E
2020E
Other Financial Data:
Depreciation $24.8 $24.7 $24.6 $24.3 $98.4 $96.9
Amortization 3.6 3.7 4.0 4.7 16.0 18.4
Interest expense, net:
Interest expense 15 $20.1 $21.3 $23.6 $21.3 $86.3 $80.4
Incremental non-cash OID
interest expense 16 0.8 0.3 0.2 1.3
Amortization of deferred
gain 17 (1.2) (1.6) (1.6) (1.7) (6.1) (6.8)
Capitalized interest - (5.6)
Interest income (1.1) (0.9) (1.3) (1.0) (4.3)
Total interest expense,
net $18.6 $19.1 $20.9 $18.6 $77.2 $68.0
Income tax benefit rate 19.4% 27.2% 19.5% 22.5% 22.5% 20.0%
Cash paid for (refunds of)
income taxes $(1.3) $1.3 $0.4 $(4.0) $(3.6) $1.8
Cash paid for interest 15 19.5 19.7 24.1 19.2 82.5 78.1
Weighted average basic
shares outstanding 37.8 37.9 38.0 38.0 37.9 38.9
Weighted average diluted
shares outstanding 38.0 38.5 40.9 40.9 39.5 42.8
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
nine months ended September 30,
2019, three and nine months ended
September 30, 2018, and the three
months ended June 30, 2019, the
Company excluded the dilutive effect
of equity awards representing the
rights to acquire 4,683, 3,659, 529,
602 and 2,439 shares of common
stock, respectively, because the
effect was anti-dilutive. As of
June 30, 2019 and September 30,
2018, 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 66 new generation
OSVs as of September 30, 2019,
including the four OSVs acquired
from Aries Marine in May 2018.
Excluded from this data are eight
MPSVs owned by the Company and four
non-owned OSVs operated by the
Company for the U.S. Navy.
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 based
on a 365-day year for all active and
stacked vessels. 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
average new generation utilization
rate for the respective period.
9 Represents revenues from shore-based
operations, vessel-management
services related to non-owned
vessels, 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 EBITDA 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 has also
historically made certain
adjustments, as applicable, to
EBITDA for gains or 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 such ratios can, at
times, 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 October 30, 2019, the Company's
inactive fleet of 35 new generation
OSVs that were "stacked" was
comprised of the following: ten 200
class OSVs, twenty-two 240 class
OSVs and three 265 class OSVs. In
addition, the Company plans to
reactivate one 265 class OSV during
the fourth quarter of 2019.
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 Interest on the Company's first-lien
term loans and Senior Credit
Facility is variable based on
changes in LIBOR, or the London
Interbank Offered Rate. The
guidance included in this press
release related to such facility is
based on industry estimates of LIBOR
in future periods as of October 30,
2019. Actual results may differ
from this estimate. Interest
expense on the Company's second-
lien term loans, 2020 senior notes
and 2021 senior notes are at fixed
rates of 9.5%, 5.875% and 5.0%,
respectively.
16 Represents incremental imputed non-
cash OID interest expense required
by accounting standards pertaining
to the Company's 1.500% convertible
senior notes due 2019.
17 Represents the non-cash recognition
of the $21.4 million gain on the
debt-for-debt exchange associated
with the Company's first-lien term
loans and the $21.3 million gain on
the debt-for-debt exchange
associated with the Company's
second-lien term loans. Such
amounts are being deferred and
amortized prospectively as yield
adjustments to interest expense as
required by GAAP under debt
modification accounting.
Contacts: Todd Hornbeck, CEO
Jim Harp, CFO
Hornbeck Offshore Services
985-727-6802
Ken Dennard, Managing
Partner
Dennard Lascar /
713-529-6600
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SOURCE Hornbeck Offshore Services, Inc.
