The Company sustained damage to certain of its oil and gas production facilities in Hurricanes Katrina and Rita during the third quarter. Included in the fourth quarter earnings was approximately $7 million pre-tax of repair and inspection costs resulting from these hurricanes.
The Company's effective tax rate fell to 27% in the fourth quarter, resulting in a 33% effective rate for 2005 due primarily to improved profitability both domestically and in foreign jurisdictions.
Summary of Results (in thousands, except per share amounts and percentages) Fourth Quarter Third Quarter Full Year 2005 2004 2005 2005 2004 Revenues $264,028 $162,990 $209,338 $799,472 $543,392 Gross Profit 95,852 53,030 82,928 283,072 171,912 36% 33% 40% 35% 32% Net Income 56,006 25,269 42,671 150,125 79,916 21% 16% 20% 19% 15% Diluted Earnings Per Share 0.69 0.32 0.53 1.86 1.03
Owen Kratz, Chairman and Chief Executive Officer of Cal Dive, stated, "I am very pleased that we were able to deliver our best ever quarter despite the negative impact of hurricanes Katrina and Rita on our Oil and Gas division. As predicted, improved Marine Contracting results more than offset the deferral of around 2.5 bcfe of production and the significant repair costs mentioned above.
"Our people faced many challenges during the year and once again they excelled in this quarter by launching ten acquired assets in our Marine Contracting fleet and by bringing back our oil and gas production to near pre- storm levels.
"We are very proud of our performance in 2005 and look forward to continued growth and success during 2006. Our earnings guidance for the year remains in the range of $2.30 - $3.30 per diluted share (excluding the recently announced acquisition of Remington Oil and Gas) and we will provide our first update to that range at the end of the first quarter."
Financial Highlights * Revenues: The $101.0 million increase in year-over-year fourth quarter revenues was driven primarily by significant improvements in Marine Contracting revenues due to the introduction of newly acquired assets and much better market conditions. * Margins: 36% was three points better than the year-ago quarter due to a significant increase in Marine Contracting margins driven by improved market conditions. * SG&A: $21.2 million increased $7.1 million from the same period a year ago due primarily to additional incentive compensation accruals as a result of improved profitability. This level of SG&A was 8% of fourth quarter revenues, compared to 9% in the year ago quarter. * Equity in Earnings: $5.3 million reflects our share of Deepwater Gateway, L.L.C.'s earnings for the quarter relating to the Marco Polo facility as well as our share of Offshore Technology Services Limited's earnings which is the Trinidadian company to which we contributed the Witch Queen. * Income Tax Provision: The Company's effective tax rate fell to 27% in the fourth quarter, resulting in a 33% effective rate for the full year 2005. This was primarily due to the Company's ability to realize foreign tax credits and oil and gas percentage depletion due to improved profitability both domestically and in foreign jurisdictions and implementation of the Internal Revenue Code 199 manufacturing deduction as it relates to oil and gas production. This resulted in a benefit for the fourth quarter for previously unrecognized deferred tax assets. We estimate our effective rate for 2006 will be between 34% and 35%. * Balance Sheet: During the fourth quarter, the Company acquired the Gulf of Mexico assets from Stolt Offshore. Total debt as of December 31, 2005 was $447 million. This represents 40% debt to book capitalization and with $353 million of EBITDA during 2005, this represents 1.3 times trailing twelve month EBITDA. In addition, the Company had $91 million of unrestricted cash as of December 31, 2005. Most of these funds will be utilized for the final phases of the acquisition of certain assets of Stolt Offshore.
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