Hornbeck announced results for the fourth quarter ended December 31, 2010. Following are highlights for this period and the Company's future outlook:
Fourth quarter 2010 revenues increased 10.2% to $97.3 million compared to $88.3 million for the fourth quarter of 2009 and decreased 22.4% compared to $125.4 million for the third quarter of 2010. Operating income was $18.7 million, or 19.2% of revenues, for the fourth quarter of 2010 compared to $24.2 million, or 27.4% of revenues, for the prior-year quarter; and $43.3 million, or 34.5% of revenues, for the third quarter of 2010. Net income for the fourth quarter of 2010 was $2.6 million, or $0.10 per diluted share, compared to $9.3 million, or $0.34 per diluted share for the year-ago quarter; and $18.2 million, or $0.67 per diluted share for the third quarter of 2010. EBITDA for the fourth quarter of 2010 was $38.9 million compared to fourth quarter 2009 EBITDA of $41.2 million and third quarter 2010 EBITDA of $63.1 million. For additional information regarding EBITDA as a non-GAAP financial measure, please see Note 11 to the accompanying data tables.
Upstream Segment. Revenues from the Upstream segment were $85.4 million for the fourth quarter of 2010, an increase of $6.7 million, or 8.5%, from $78.7 million for the fourth quarter of 2009 and a decrease of $26.6 million, or 23.8%, from $112.0 million for the third quarter of 2010. The vessels placed in service since the fourth quarter of 2009 under the Company's newbuild and conversion programs accounted for a $16.8 million year-over-year increase in Upstream revenues. These incremental revenues were offset by a $7.3 million decrease in revenue for new generation OSVs that were in service during 2009, but have either been stacked or sold on various dates since then and a decline in activity at the Company's shore-base port facility. The Company's new generation OSVs that were in service during each of the quarters ended December 31, 2010 and 2009 accounted for a $2.8 million revenue decrease. Upstream operating income decreased $9.8 million to $17.7 million, or 20.7% of revenues, for the fourth quarter of 2010 from $27.5 million, or 34.9% of revenues, for the fourth quarter of 2009. Average new generation OSV dayrates for the fourth quarter of 2010 were $20,694 compared to $19,880 for the same period in 2009 and $21,628 for the third quarter of 2010. New generation OSV dayrates and Upstream operating income for the fourth quarter of 2010 declined from the sequential quarter largely due to the winding down of post-Macondo oil spill response activities in the Gulf of Mexico ("GoM"). During the fourth quarter of 2010, the Company had as many as seven new generation OSVs and four MPSVs assisting with oil spill-related activities, which represented roughly 10% and 65% of the total new generation OSV and MPSV vessel-days worked, respectively. As of December 31, 2010, all such spill-related activities had been completed by the Company's Upstream vessels. New generation OSV utilization was 66.3% for the fourth quarter of 2010 compared to 73.1% during the year-ago quarter and 75.7% for the sequential quarter. The decrease in utilization was primarily driven by having 867 days out-of-service related to stacked vessels during the fourth quarter of 2010. The Company had an average of 9.4 stacked new generation OSVs during the fourth quarter of 2010 compared to quarterly averages of 8.7 stacked vessels during the year-ago quarter and 5.1 stacked vessels during the sequential quarter. Effective new generation OSV utilization for the Company's active fleet, which excludes the impact of stacked vessels, was 81.3% for the fourth quarter of 2010 compared to 89.2% for the year-ago quarter and 84.2% for the sequential quarter.
General and Administrative ("G&A"). G&A expenses of $8.5 million for the fourth quarter of 2010 were 8.7% of revenues compared to $7.5 million, or 8.5% of revenues, for the fourth quarter of 2009. This increase in G&A expense is primarily attributable to higher personnel costs compared to the prior-year quarter commensurate with the Company's larger, more geographically diverse fleet. Fourth quarter G&A expense margin was slightly below the Company's 2010 annual guidance range of 9% to 11% of revenues. The Company allocated 92% of its fourth quarter 2010 G&A expenses to the Upstream segment and 8% to the Downstream segment.
Depreciation and Amortization. Depreciation and amortization expense was $20.1 million for the fourth quarter of 2010, or $2.7 million higher than the prior-year quarter. This increase was due to the incremental depreciation related to four new generation OSVs and one MPSV that were placed in service since the fourth quarter of 2009. Depreciation and amortization expense is expected to continue to increase from current levels when any recently acquired or newly constructed vessels undergo their initial 30-month and 60-month recertifications.
Interest Expense. Interest expense increased $6.4 million during the three months ended December 31, 2010 compared to the same period in 2009, primarily due to a steep decline in construction work-in-progress. As the Company no longer has any vessels under construction or conversion, interest expense for the fourth quarter increased significantly from the year-ago quarter due to lower capitalized interest. The Company did not have any capitalized construction period interest for the fourth quarter of 2010, compared to $6.1 million for the year-ago quarter, or 42% of its total interest costs for such quarter. The Company capitalized annual construction period interest of $3.7 million, or 6% of its total interest costs for the full fiscal year 2010.
Annual 2010 Results
Revenues for 2010 increased 9.0% to $420.8 million compared to $385.9 million for 2009. Operating income was $112.2 million, or 26.7% of revenues, for 2010 compared to $101.7 million, or 26.4% of revenues, for the prior year. Net income for 2010 decreased 27.8% to $36.4 million, or $1.34 per diluted share, compared to $50.4 million, or $1.87 per diluted share for 2009. Excluding the June 2009 Downstream non-cash impairment charge of $26.7 million, or $0.62 per diluted share, operating income, operating margin, net income and diluted EPS for 2009 were $128.4 million, 33.3%, $67.1 million and $2.49 per share, respectively. The year-over-year decrease in adjusted operating income and net income was substantially due to the incremental costs and downtime for mobilizing eight vessels to Latin America for multi-year charters and related importation delays. The Company's revenues for 2010 were higher than 2009 due to the incremental contributions from vessels added to the Company's fleet through its newbuild and conversion programs since the fourth quarter of 2009 and the temporary demand from oil spill relief activities. The Company's net income for 2010 included an aggregate pre-tax gain of $1.9 million ($1.2 million after tax or $0.04 per diluted share) for the sale of two conventional OSV's, one older, lower horsepower tug and two single-hulled tank barges. The Company's net income for 2009 included an aggregate pre-tax gain of $1.1 million ($0.7 million after-tax, or $0.03 per diluted share) gain on the sale of three conventional OSVs, six single-hulled tank barges and one older, lower-horsepower tug. EBITDA for 2010 was $189.6 million, approximately 26% of which was derived from the Company's effective MPSV fleet of 3.5 vessels, compared to 2009 EBITDA of $194.5 million.
Status of Pending Legal Actions Against the Department of the Interior ("DOI"). On February 2, 2011, a Federal district judge granted the Company's motion for recovery of attorney's fees and costs against the DOI. The motion was granted on the basis that the U.S. government was in contempt of the Court's original preliminary injunction order, which was granted on June 22, 2010 in response to the Company's legal challenge of the drilling moratorium in the GoM ("permitorium"). The case has been referred to a magistrate to determine the monetary award for fees and expenses to which the Company is entitled.
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