The Company's revenues for the fourth quarter of 2006 compared to the last quarter of 2005 decreased; however, strong pricing and vessel utilization in the U.S. Gulf of Mexico and the Company's performance on its second major contract as part of the Ku-Maloob-Zaap project for Pemex improved gross margin, gross profit and operating income for the fourth quarter of 2006. The revenues and gross profit from domestic operations reflect stable marine construction activity in the U. S. Gulf of Mexico. In Latin America, the Company substantially completed one project for Pemex in the fourth quarter of 2006 and expects to complete its second project for Pemex during the second quarter of 2007. The Company's revenues in West Africa decreased for the fourth quarter of 2006 compared to 2005, and the Company recorded additional losses in this geographic segment due to additional costs incurred to complete the West Africa Gas Pipeline project. The Company's Southeast Asia geographic segment generated strong results for the fourth quarter of 2006 due to a significant time charter of its combination barge, the Sea Horizon.
Net income for the fourth quarter of 2006 was $13.8 million, or $0.43 per diluted share, compared with a net loss of $(30.9) million, or $(2.87) per diluted share, for the fourth quarter of 2005. The net loss for the fourth quarter of 2005 included non-cash charges of $40.0 million in connection with the Company's recapitalization plan completed during 2005.
The Company's operating results for the fourth quarter of 2006 reflect continued strong demand for offshore exploration, development and construction activity in the U.S. Gulf of Mexico that began during the second half of 2005 compared to the past few years.
2006 FISCAL YEAR HIGHLIGHTS * Revenues increased 68% from 2005 to $547.3 million in 2006 * Gross profit increased 159% from 2005 to $147.2 million and gross margin was 26.9% of 2006 revenues * Operating income increased 402% from 2005, and Adjusted EBITDA increased 160% from 2005 * Diluted earnings per share were $2.14 for 2006, which meets the Company's earnings guidance for 2006 previously provided, compared to a diluted loss per share of $(16.09) for 2005 * Cash flows from operations for 2006 were $52.1 million compared to $(2.3) million for 2005
The Company's strong performance in 2006 resulted in record revenues, gross profit, operating income and net income and record Adjusted EBITDA which included a pre-tax reduction of $18.5 million related to the reserve for the remaining carrying value of the Company's 2002 and 2003 Pemex EPC 64 claims. The Company's domestic and Latin America geographic segments reported strong operating results for 2006. Capacity constraints due to the high demand for marine construction services because of the hurricane-related repair and salvage work in the U.S. Gulf of Mexico generated improved pricing and vessel utilization during 2006. The Company's strong results for its domestic and Latin America geographic segments were partially offset by losses in its West Africa geographic segment. The Company's operations in Southeast Asia also provided strong results for 2006 due to the time charter of the Sea Horizon during the second half of 2006. The Company expects to work this vessel on time charter for most of 2007.
Operating income of $109.8 million reflects the Company's strong operating results for 2006 and includes a $14.3 million gain on insurance settlement for claims related to the Gulf Horizon and an $(18.5) million reserve for the remaining carrying value of the Pemex EPC 64 claims.
Net income for 2006 was $67.0 million, or $2.14 per diluted share, compared to a net loss of $(71.1) million, or $(16.09) per diluted share. The net loss for 2005 included non-cash charges of $63.1 million related to the completion of the Company's recapitalization plan during 2005.
"Horizon is proud of its record setting performance in 2006. We remain well-positioned for continued success in what we believe will be a strong market for our services both domestically and internationally in 2007,'' said David W. Sharp, President and Chief Executive Officer of Horizon Offshore, Inc. ``We expect that the demand for marine construction services will support solid utilization and margin levels during 2007. The market has returned to more traditional seasonality and stable pricing levels, when compared to the record levels of demand, pricing and utilization in the U.S. Gulf of Mexico that we experienced during 2006.''
Summary of Results (Unaudited) (In thousands, except per share data and percentages) Three Months Ended Year Ended December 31, December 31, 2006 2005 2006 2005 ------------------------------------------------- Contract revenues $ 116,671 $ 124,389 $ 547,289 $ 325,044 Gross profit 30,442 24,064 147,249 56,764 Margin 26.1% 19.3% 26.9% 17.5% Operating income 22,816 15,585 109,824 21,870 Net income (loss) 13,803 (30,925) 67,010 (71,056) Diluted earnings (loss) per share 0.43 (2.87) 2.14 (16.09) Adjusted EBITDA 32,187 24,638 132,030 50,696 2006 FOURTH QUARTER HIGHLIGHTS * Gross profit increased 27% from 2005 to $30.4 million and gross margin was 26.1% of 2006 fourth quarter revenues * Operating income increased 46% from 2005, and Adjusted EBITDA increased 31% from 2005 * Diluted earnings per share were $0.43 for 2006 compared to a diluted loss per share of $(2.87) for 2005
Horizon and its subsidiaries provide marine construction services for the offshore oil and gas and energy industries. The Company's fleet is used to perform a wide range of marine construction activities, including installation and repair of marine pipelines to transport oil and gas and other sub sea production systems, and the installation and abandonment of production platforms.
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