GulfMark Offshore Reports Quarterly Operating Results
GulfMark Offshore has announced results of operations for the three and nine months ended September 30, 2009.
As previously announced, we initiated a restructuring that we expect to complete in the first quarter of 2010 that is intended to help preserve the Company's status as a U.S. citizen under certain U.S. maritime and vessel documentation laws by, among other things, limiting the percentage of outstanding shares of Company common stock that may be owned or controlled in the aggregate by non-U.S. citizens. More information on this reorganization is available in the Form S-4 document filed with the Securities and Exchange Commission on October 21, 2009.
In addition, during the fourth quarter we executed a credit approved term sheet related to refinancing $200.0 million of our outstanding indebtedness that otherwise would be maturing on June 30, 2010. Our expectation is to complete this refinancing in the fourth quarter.
Results of Operations
Net income for the third quarter was $12.7 million, or $0.50 per diluted share, reflecting weaker margins in the Americas and the North Sea, increased dry dock activity ahead of the previously identified plan, higher than normal professional fees and a higher revised tax rate.
Revenue for the third quarter of 2009 was $90.8 million, a decrease of 27% over the same period in the prior year. Operating income, excluding special items, was $19.8 million in the third quarter of 2009, a decrease of 61% over the same period in 2008. The decrease was due to lower operating performance in the Americas, where operating margins decreased to 4% from 33% in the prior year, and to lower operating performance in the North Sea, where operating margins reduced to 28%. The Southeast Asia region continues to perform very well, with operating margins of 69% in the third quarter, essentially flat with the prior year quarter.
Dry dock expense was approximately $1.4 million higher than expected for the quarter, partially due to accelerating dry docks originally envisioned for future periods. We are expecting that full year dry dock expense will be $16.5 million, which is down from the $19.0 million we were originally expecting for the full year 2009. Year to date dry dock expense is $11.3 million and dry dock expense for the fourth quarter is still anticipated to be approximately $5.0 million.
During the third quarter we had approximately $0.9 million of professional fees related to the ongoing effort to recover the loss we recognized in the first quarter related to the shipyard bankruptcy and also to the Jones Act restructuring we announced last week. We expect those fees to be elevated in the fourth quarter as well.
Operating income for the third quarter of 2009, excluding special items, decreased $18.4 million, or 48%, compared to the second quarter of 2009. Utilization in the Americas decreased operating income by $8.8 million, and utilization in the North Sea decreased operating income by $4.7 million. Operating income was also impacted by a sequential quarterly increase of $3.8 million in dry dock expense.
Revenue for the first nine months of 2009 increased 5% over the same period in the prior year to $304.2 million, a combination of an increase from the acquisition of GulfMark Americas offset by a decrease in activity levels in the Americas and in the North Sea. Net income before special items was $80.0 million, or $3.16 per diluted share for the nine month period ended September 30, 2009.
Commenting on the period, Bruce Streeter, President & CEO, stated, "We have undergone a period where activity in two of our key operating areas, the North Sea and the Gulf of Mexico, was weaker in comparison to earlier periods. Other locations have held up reasonably well. Recent indications of a bottoming in jack-up demand, improved post hurricane season activity in the U.S. Gulf, and potential budgets based on higher oil prices are all suggestive of potential improvements in demand going forward. During this quarter when activity was reduced we exceeded our anticipated dry dock plan, including accomplishing one docking originally scheduled for early next year that now will not interfere with future contract arrangements. Our administrative costs this quarter were higher than normal reflecting legal fees in connection with developing a comprehensive plan and structure to ensure continuation of the company's rights and privileges under the Jones Act and related to claims and the ongoing effort to recover the loss from the shipyard bankruptcy we announced in the first quarter.
"During the first half of next year we will add three additional vessels. One is a very large PSV of a similar design to the one delivering in Norway in November and the remaining two are medium sized anchor handlers being built in Poland. These two boats were ordered to augment the highly successful group of medium sized anchor handlers we built at Keppel in Singapore, and as you can see from our results in Southeast Asia the market for this type of vessel is still strong. Although their potential usage is worldwide we are currently looking at potential contracts already developing in West Africa.
"Thus while we expect a difficult fourth quarter, we are adjusting to changes in market demand and attempting to position ourselves appropriately for the future market as it develops. We have a strong balance sheet and with the expected completion of the refinancing will have no debt maturities through 2012, and we feel that we are well positioned to take advantage of opportunities that will certainly develop in the marketplace."
Liquidity and Capital Commitments
Cash flow from operations totaled $47.5 million for the three months ended September 30, 2009, compared to $51.9 million for the same period in 2008. Estimated cash commitments for the remainder of 2009 for the new build program total approximately $48.0 million and are expected to be funded from cash on hand. Cash on hand at quarter end was $198.1 million and we have $95.0 million available under our $175.0 million revolving credit facility. Total debt at September 30, 2009 was $463.5 million, and net of cash on hand that amount is $265.4 million. Of the total debt balance, $223.8 million matures on June 30, 2010, although we have executed a credit approved term sheet to refinance $200.0 million of this debt that we expect to complete later in the fourth quarter. Consequently, we have reclassified a portion of that balance to long-term debt.
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