FOURTH QUARTER RESULTS
Revenues for the quarter ended December 31, 2003 were $19.4 million, a decrease of 20.9 percent compared to revenues of $24.5 million for the fourth quarter of 2002. Gross profit (revenues less cost of sales) for the fourth quarter of 2003 was $0.2 million or 1.2 percent of revenues compared to gross profit for the fourth quarter of 2002 which was $5.9 million, or 24.0 percent of revenues. The fourth quarter 2003 net loss was $6.8 million, or $0.54 per diluted share, compared to net income in the fourth quarter of 2002 which was $0.5 million, or $0.04 per diluted share. Fourth quarter 2003 net results were adversely impacted by a $1.6 million (non-cash) ($1.0 million after tax effect, or $0.08 per diluted share) SFAS No. 144 asset impairment charge related to the Midnight Carrier, $2.6 million ($1.7 million after tax effect, or $0.13 per diluted share) of charges relating to claims and settlements for work completed in prior periods and a $1.3 million ($0.11 per diluted share) deferred tax asset valuation allowance.
For the year ended December 31, 2003, revenues decreased 3.6 percent to $65.6 million generating a gross profit of $6.4 million or 9.7 percent of revenues, compared to 2002 revenues of $68.0 million that produced a gross profit of $14.6 million, or 21.5 percent of revenues. Included in cost of sales in 2003 was $2.1 million ($1.3 million after tax effect, or $0.11 per diluted share) of costs related to the termination of the Midnight Hunter charter. The net loss for the twelve months ended December 31, 2003 totaled $9.2 million, or $0.73 per diluted share, compared to net income in the twelve months ended December 31, 2002 which was $0.4 million, or $0.03 per diluted share. Net results for the year ended December 31, 2003 were adversely impacted by a $1.6 million (non-cash) ($1.0 million after tax effect, or $0.08 per diluted share) SFAS No. 144 asset impairment charge related to the Midnight Carrier, $3.0 million ($1.9 million after tax effect, or $0.15 per diluted share) of charges relating to claims and settlements for work completed in prior periods, a $0.5 million ($0.3 million after tax effect, or $0.03 per diluted share) charge related to costs to establish and commence bidding operations in Mexico and a $1.3 million ($0.11 per diluted share) deferred tax asset valuation allowance.
Our independent auditors, Ernst & Young LLP, concluded, as required by generally accepted auditing standards, that their auditors' report on the Company's 2003 financial statements, included in our annual report on Form 10-K, should include an explanatory paragraph regarding our ability to continue as a going concern, and accordingly, they included such a paragraph in their report. Therefore, the Company's management has developed a financial plan, that is fully described in the Company's Form 10-K filed with the SEC. Among other measures, our plan includes pursuing means of raising additional capital. Raising additional capital during 2004 and 2005 is a requirement for the Company to continue to conduct operations, meet its obligations and support the operations of the Midnight Express. Because certain transactions included in our business plan are not yet complete, there are inherent uncertainties associated with such transactions.
Lyle G. Stockstill, Torch Offshore, Inc. Chairman and Chief Executive Officer, commented, "Overall in 2003, market conditions remained relatively weak as drilling activity in the Gulf of Mexico continued at depressed levels. These levels of capital expenditures by the oil and natural gas companies drove market prices to lower levels, and as a result, adversely impacted our gross profit margins and utilization levels. Because of these market conditions, an adverse arbitration ruling related to the Midnight Hunter termination, and other events with a direct impact on our earnings, we experienced a significant loss in 2003."
Stockstill added, "We have disclosed our financial plan for 2004 in our annual report and are confident that it will provide sufficient financial resources. The Midnight Express was a large undertaking for a company of our size and this has put a burden on our current financial resources. However, we believe the payoff in this investment is on the short-term horizon as we expect the vessel to enter our active fleet in the second half of 2004."
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