Horizon Offshore Provides Financial Guidance for 2005
Horizon Offshore, announced financial guidance for 2005. The Company presently estimates EBITDA (earnings before interest, taxes, depreciation, amortization and non-cash charges, as defined) to be between $45 million and $50 million for fiscal year 2005. These estimates have been reduced for unusually higher than normal charges of approximately $6.5 million mostly related to legal costs incurred and settlement charges recorded on outstanding claims and litigation and other non-recurring charges with respect to the Company's recapitalization.
For the third quarter of 2005, the Company currently estimates gross profit of $20 million to $22 million and operating income of $13 million to $15 million. The Company currently estimates gross profit of $17 million to $20 million and operating income of $11 million to $14 million for the fourth quarter of 2005.
The Company's current earnings guidance for the third quarter of 2005 is a net loss of $(32) million to $(35) million, which includes a $(41.0) million non-cash charge to interest expense related to the conversion of its Series B Mandatorily Redeemable Convertible Preferred Stock (the Series B Preferred Stock). For the fourth quarter of 2005, the Company currently estimates net income of $1 million to $5 million. Revenues for fiscal year 2005 presently are expected to be between $325 million and $335 million.
The Company reported that it sustained minimal damage to its offshore equipment and property along the Gulf Coast during Hurricane Katrina. The minimal damage has been repaired and these assets have been placed back into service. The Company is pleased to report that it has located all of its employees working and living along the Gulf Coast and is assisting those employees affected by Hurricane Katrina by providing housing and other essentials.
The Company is currently working with oil and gas companies operating in the U.S. Gulf of Mexico as these companies assess the damage to offshore platforms and pipelines caused by Hurricane Katrina. According to a recent report from the Minerals Management Service (MMS), initial estimates indicated that Hurricane Katrina damaged 58 platforms and rigs in the U.S. Gulf of Mexico, and the damage assessment continues with additional damaged platforms expected to be identified. These oil and gas companies also continue to assess damage caused to underwater pipelines connecting the offshore platforms to shore or to other platforms and pipelines. These damage assessments could take several more weeks to complete.
"We are saddened by the loss of lives and damage caused by Hurricane Katrina, and at the same time, are thankful for the safety of our employees," said David W. Sharp, President and CEO. Commenting on the Company's guidance, Mr. Sharp said, "We expect our 2005 EBITDA to be at record levels due to the contract activity in the Gulf of Mexico and our operations in West Africa and offshore Mexico. We will continue to capitalize on opportunities in the market areas that match our contract profitability targets and equipment and personnel capabilities."
The Company also announced today that all of the matters proposed for action at its annual meeting of stockholders held on Tuesday, September 13, 2005 were approved. These matters included declassification of the Company's Board of Directors, the election of five directors for a one year term, an increase in the number of authorized shares of its common stock from 100 million to 1.5 billion, a reduction in the par value of its common and preferred stock from $1.00 to $0.001 per share, elimination of all supermajority vote requirements, approval of a new stock incentive plan, and the ratification of the selection of its independent registered public accounting firm. The amendments to the Company's certificate of incorporation required for the matters above have be filed with the Secretary of State of Delaware. In accordance with its previously announced recapitalization plan and upon amendment of the Company's certificate of incorporation to increase the number of its authorized shares of common stock from 100 million to 1.5 billion, the Company converted all of the one million shares of its Series B Preferred Stock into 554,139,356 shares of its common stock on September 15, 2005. The holders of the 60,000,015 shares of common stock issued on June 10, 2005 in the debt for equity exchange transaction also acquired these 554,139,356 shares of common stock, which total shares are equivalent to 95% of the Company's aggregate outstanding common stock. If the holders of these shares of common stock act together, they are in a position to control or exercise substantial influence over the outcome of all matters requiring a stockholder vote. The conversion of the Series B Preferred Stock will result in further, significant dilution to the Company's stockholders and the book value per share of the Company's common stock. Accordingly, any investment in the Company's common stock will continue to be highly speculative.
The Company urges caution in considering its current trends
and the earnings guidance disclosed in this press release.
The marine construction industry is highly competitive,
and trends and guidance are subject to numerous factors
and influences, some of which are discussed in the cautionary
language below in this press release. The Company disclaims
any obligation to update disclosed information on trends
or targets other than in its periodic filings with the Securities
and Exchange Commission.
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