GulfMark Offshore Reports Q1 2009 Results
GulfMark Offshore announced results of operations for the three months ended March 31, 2009. Net income for the first quarter of 2009 was $14.2 million, or $0.56 per diluted share. Excluding special items, which net to $0.76 per diluted share and which are detailed further below, earnings per share for the first quarter of 2009 was $1.32 per diluted share.
1st Quarter 2009 Compared to 1st Quarter 2008
Revenue for the first quarter of 2009 was $108.8 million, an increase of 30.5% over the same period in the prior year. Operating income, excluding special items, was $43.2 million in the first quarter of 2009, an increase of 25% over the same period in 2008. GulfMark Americas, which was acquired on July 1, 2008, contributed revenue of $36.3 million during the first quarter and operating income of $15.0 million.
1st Quarter 2009 Compared to 4th Quarter 2008
Operating income, excluding special items, decreased $13.9 million, or 24.4%, for the first quarter of 2009 compared to the fourth quarter of 2008. The decrease came primarily from lower utilization in the North Sea, although both Southeast Asia and the Americas were slightly below the record levels obtained in the fourth quarter. A decrease in the average number of vessels also contributed to the reduction in operating income and reflected fewer available vessel days resulting from vessel sales in both the fourth quarter of 2008 as well as the first quarter of 2009.
Commenting on the results, Bruce Streeter, President and CEO, said, "This year, as in most past years, we anticipated lower first quarter demand in the North Sea. We took advantage of the seasonal weakness through a number of actions designed enhance the North Sea fleet position for future periods including: (1) mobilization of two vessels back to the North Sea from Egypt; (2) maintenance actions on two vessels; (3) completion of three planned dry docks; (4) upgrade of two vessels to DP2 (dynamic positioning); and (5) the completion of DP1 installation on a third vessel. Although we experienced a slight improvement in the consolidated average day rate as compared to the fourth quarter of 2008, the impact of currency and the actions mentioned above resulted in a minor reduction in the North Sea average day rate. In the Gulf of Mexico, contract cover allowed rates and utilization to hold until late in the quarter when day rates and utilization opportunities for the smaller PSVs and the FSV/crewboats came under significant pressure. We took delivery of two vessels during the quarter: the Swordfish, a Gulf of Mexico crewboat that we announced in the last earnings release; and late in the quarter we took delivery of the Cherokee, a 250 foot AHTS vessel that went immediately on a long term contract in Southeast Asia. In addition, we took delivery of the Blacktip, a 181 foot FSV, in mid-April that went immediately to work in the Gulf of Mexico.
"We continually monitor market conditions to determine the optimal mix of term versus spot contract coverage. The impact of the overall economic conditions and the resulting reduction in industry activity will increase the number of vessels available in the spot market. We expect that this will put pressure on near-term utilization. Our best protection from current conditions is our forward contract cover, the percentage of days existing vessels are under contract or option. Currently, our contract cover for the remainder of 2009 is 64%. Despite the market developments of the first quarter of 2009, our contract cover for 2010 increased to 38% from the 34% we reported last quarter, a level that is consistent with the forward year contract cover we experienced for 2007 and 2006."
The following is a description of the special items referred to above that impact the comparability of the first quarter of 2009 to previous quarters. A reconciliation of these items to their most comparable U.S. GAAP measurement is included in the tables at the end of this press release.
We previously announced an impairment of the construction in progress balance related to three vessels we were constructing for the Gulf of Mexico market for delivery in the first half of 2010. The impairment charge was $46.2 million with an after-tax impact of $29.2 million, or $1.16 per diluted share. While the Company intends to pursue all contractual and legal remedies available to recover its investment, due to the uncertainty of recovery, the Company is taking an impairment charge for the full amount of its investment in these vessels.
Gains on disposal of vessels of $4.6 million, or $0.18 per diluted share, include the sale in the first quarter of the 1986 built Highland Sprite, which resulted in a net gain of $3.2 million. Additionally, during the first quarter one of our vessels, the 1976 built Sea Searcher, sustained damage that resulted in a total loss for insurance purposes. Insurance proceeds resulted in a gain of $1.4 million on this involuntary conversion.
The first quarter of 2009 also includes a net tax benefit of $5.5 million, or $0.22 per diluted share, related principally to changes enacted in January 2009 by the Norwegian taxing authority.
Liquidity and Capital Commitments
Cash flow from operations totaled $37.1 million for the three months ended March 31, 2009, compared to $23.0 million for the same period in 2008. Estimated cash commitments for the remainder of 2009 for the new build program total approximately $71.1 million and are expected to be funded from cash on hand. Liquidity at quarter-end was $259.1 million, consisting of $168.4 million of working capital and $90.7 million available under the $175.0 revolving credit facility. Total debt at March 31, 2009 was $477.2 million and cash on hand was $116.4 million.