Hornbeck-Leevac Reports 2001 Results
Hornbeck-Leevac Marine Services, Inc. announced that revenues for the quarter ended December 31, 2001 increased 117.0 percent to $21.7 million compared to $10.0 million for the same quarter in 2000. Operating income was $8.7 million or 40.1 percent of revenues for the fourth quarter of 2001, compared to $3.9 million or 39.0 percent of revenues for the same quarter in 2000. Fourth quarter 2001 net income was $3.4 million compared to net income of $1.4 million for the fourth quarter 2000. As discussed below, the primary reason for the increase in financial results of operations for the fourth quarter 2001 over the prior year is the significant increase in size of the Company's fleet during 2001.
For the calendar year 2001, revenues increased 90.6 percent to $68.8 million resulting in operating income of $27.9 million or 40.6 percent of revenues, compared to calendar 2000 revenues of $36.1 million that resulted in operating income of $12.3 million or 34.1 percent of revenues. Income before extraordinary items totaled $11.9 million for the calendar year 2001 compared to net income of $2.7 million for the calendar year 2000.
Net income for the calendar year 2001 included a non-cash extraordinary loss of $2.0 million, net of taxes, resulting from the early extinguishment of debt. This extraordinary item related to the write-off of deferred financing costs upon the refinancing of all of the Company's debt through the issuance of $175.0 million of senior unsecured notes in July 2001.
Prior to October 24, 2001, the Company had put warrants outstanding, the accounting for which may differ depending on whether a company's equity is publicly-traded or privately-held. Based on the Company's method of accounting for these put warrants and the fact that it has publicly-traded debt and privately-held equity, pro forma disclosure is required by the Securities and Exchange Commission. Pro forma net income for the calendar year 2001 was $7.0 million compared to net income as reported of $10.0 million. The pro forma net loss for the calendar year 2000 was $4.5 million compared to net income as reported of $2.7 million. The $3.0 million and $7.3 million differences for calendar years 2001 and 2000, respectively, are attributable to additional interest expense related to the Company's previously outstanding put warrant. According to applicable accounting pronouncements, a company whose stock is not publicly-traded may elect to account for warrants that contain put options either as a liability or as equity. Upon issuance in 1998, the Company elected to account for these warrants as equity. Accordingly, the Company has been amortizing, through retained earnings, the fair market value of the warrants through June 5, 2003, the first date on which the put could have been exercised. The warrants were revalued each period-end with changes in value accounted for prospectively. As a result of the repurchase of the warrants, the un-amortized value of the warrants was accelerated and charged to retained earnings in the fourth quarter of 2001 in the Company's reported shareholders' equity of $59.9 million. Had the Company elected to account for the warrants as a liability rather than as equity, the warrants would have been adjusted to their fair value at each period-end with the fair value adjustment reported as a non-cash adjustment to interest expense. No additional change would have resulted from the repurchase of the warrants. In the event of an initial public offering of the Company's stock, the Company's financial statements would be required to reflect additional interest expense in the amount of the pro forma differences discussed above. Beginning in 2002, there will be no further pro forma effects relating to the put warrants due to the Company's repurchase of such warrants in October 2001.
While the Company experienced a 41 percent increase in average offshore supply vessel (OSV) dayrates and a 6 percent increase in fleetwide OSV utilization during 2001, the primary contributing factor to the Company's revenue growth in 2001 was the increase of its fleet from 23 to 44 vessels. The Company took delivery of two newly constructed, deepwater OSVs on April 27, 2001 and November 6, 2001, respectively; and acquired nine ocean-going tugs and nine ocean-going tank barges from the Spentonbush/Red Star Group, affiliates of Amerada Hess Corporation, on May 31, 2001, and one 402-ft. self-propelled tank barge from Freeport-McMoRan Sulfur LLC on November 15, 2001.
Accordingly, the 240-ft class HOS Innovator contributed to the Company's revenue growth for all of the fourth quarter of 2001 and for eight months during the calendar year ended December 31, 2001. The 265-ft. class BJ Blue Ray contributed to the Company's revenue growth for two months of each of the fourth quarter of 2001 and the calendar year ended December 31, 2001. The Spentonbush/Red Star acquisition contributed to the Company's revenue growth for all of the fourth quarter of 2001 and for seven months during the calendar year ended December 31, 2001.
Todd Hornbeck, President and CEO, stated, "We are very pleased with yet another quarter of record revenue and EBITDA, despite the unfavorable market conditions that exist in both of our business segments. In particular, we would have had an even better performance from our Northeast tank barge operations this quarter had it not been for the unseasonably warm winter being experienced there, a trend that unfortunately has continued into the first quarter of 2002."
The Company has taken delivery of the 240-ft. class HOS Dominator, its third vessel certified Dynamic Positioning Class II by the American Bureau of Shipping. The vessel was delivered into service, substantially on time and on budget, on February 20, 2002. Upon delivery, the vessel immediately commenced service under a three-year time charter, with a three-year renewal option, with Sonsub Inc., an affiliate of the ENI/Saipem Group, to support subsea completion services, primarily in the Gulf of Mexico. This agreement is on substantially the same terms as the 240-ft. class HOS Innovator, which was delivered to Sonsub in April 2001. The Company has three additional 265-ft. class offshore supply vessels under construction for delivery in 2002.
Mr. Hornbeck stated, "Our engineering and operations group has delivered yet another world-class vessel into our growing fleet of deepwater OSVs. Progress continues on contracting our remaining three 265-ft. class newbuilds that are scheduled for delivery in the second and third quarters of this year. We continue to see a significant level of interest in these vessels; however, we have narrowed the field and are in late-stage discussions with a short list of customers. We remain confident of our ability to secure long-term contracts for these vessels on attractive terms before their delivery from the shipyard."