GulfMark Offshore's Year End '09 Revenue Down 6%
GulfMark Offshore announced results of operations for the three months and year ended December 31, 2009.
For the year ended December 31, 2009, revenue was $388.9 million, a 6% decrease compared to 2008, primarily reflecting a decrease in activity levels in the Americas and North Sea. Cash flow from operations for the year totaled $171.0 million. Net income for the year was $50.6 million, or $1.99 per diluted share. Net income for the year before special items was $83.8 million, or $3.29 per diluted share.
As announced earlier today, our stockholders approved a plan of reorganization 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.
During the fourth quarter the Company completed the previously announced refinancing of $200.0 million of outstanding indebtedness that otherwise would mature on June 30, 2010. The new $200.0 million term loan facility matures December 31, 2012, and in conjunction with the refinancing, the Company repaid $23.8 million under the previous term loan facility. Unrelated to the refinancing, the Company repaid $80.0 million that was outstanding under its $175.0 million revolving credit facility, for total debt repayments of $103.8 million during the fourth quarter. The Company took a $0.59 per diluted share, or $15.1 million, non-cash tax charge related to the repatriation of $43.0 million in cash to the U.S. from international operations. The cash was used to fund the debt repayments. The tax was a non-cash charge that will utilize net operating loss carryforwards that have been accumulated by the U.S. operations.
In February 2010, the Norwegian government declared the 2007 revisions to the tonnage tax unconstitutional. This is a positive development for the Company and, assuming no further developments, will likely result in the Company reversing what remains of the $24.4 million charge it took in 2007 related to this tax law change. At December 31, 2009, the Company had $12.2 million accrued related to this tax and since 2007 had made payments of $3.1 million.
Results of Operations
Fourth quarter results were affected by certain items that impact comparability to past quarters. During the quarter, the Company took steps to relocate six vessels in an effort to strategically position vessels and improve future revenue generation through higher future day rates and improved utilization. These vessel moves resulted in additional fuel, supplies, and crewing expense of approximately $1.6 million during the quarter. The Company also increased its pension accrual based on information provided by the plan regulator, which resulted in a $3.7 million increase to the liability related to its three multi-employer pension plans at operations in the North Sea.
The Company had considerably greater movement of vessels between locations during the fourth quarter and second half of the year than in previous years. This included vessels on charter moving between locations and vessels mobilized to undertake new charters. Much of the associated cost was covered by charter hire and mobilization fees, but the overall expense remained higher than normal. In preparation for contracts beginning in 2010, coupled with unplanned equipment maintenance, the Company performed major repairs and maintenance on vessels that resulted in related expense of approximately $1.4 million more than expected during the quarter.
Reported revenue for the fourth quarter of 2009 was $84.7 million, a decrease of $37.2 million, or 31% from the same period in the prior year and a decrease of $6.1 million, or 7%, from the previous quarter. The decrease from the prior year quarter is primarily due to lower utilization and day rates in the North Sea and the Americas, resulting in revenue decreases of $18.5 million and $18.6 million in those regions, respectively. The decrease in revenue from the prior quarter is primarily due to lower utilization and day rates in the North Sea, which decreased revenue by $6.3 million.
Drydock expense was approximately $2.0 million lower than the previous quarter. This was due to the mix of drydocks with some pulled forward from the 2010 plan, some deferred to 2010 and some accelerated into the third quarter. Full year drydock expense was $15.7 million, which is lower than our previous annual guidance of $16.5 million. The reduction in cost is not expected to result in an increase in drydocks planned for 2010.
Operating income before gains on vessel sales for the fourth quarter of 2009 decreased $47.9 million, or 84%, from the same period in the prior year, and reported operating income decreased sequentially $10.6 million, or 54%, from the previous quarter. The primary drivers of the sequential decrease were the increased operating costs and the decrease in revenue discussed above. Southeast Asia continued to deliver very strong results, with 79% operating income margins in the fourth quarter and a 6% increase in sequential quarterly revenue. Operating income in the Americas region also benefited from a 7.5 percentage point sequential increase in utilization during the period, led principally by a 10.0 percentage point increase in utilization in the Gulf of Mexico.
Excluding gains on vessel sales, net income for the fourth quarter was $3.8 million, or $0.15 per diluted share, before the $15.1 million, or $0.59 per diluted share, non-cash tax charge, compared to $43.3 million, or $1.72 per diluted share, for the fourth quarter of 2008. Reported net loss for the fourth quarter was $11.3 million, or $0.44 per diluted share.
Bruce Streeter, President and CEO, stated, "The fourth quarter was very active with a number of vessels moving and an increase in maintenance and drydock activity to position the Company for opportunities in 2010 as they develop. We moved vessels into Trinidad and mobilized a vessel to Ghana, and in doing so we incurred additional cost associated with fueling and supplying those moves. Several contracted vessels also shifted working locations and as the quarter progressed we had more crew activity in the U.S. flagged vessels as utilization started to improve. We did all of this to best position our fleet and we are starting to see those moves pay off in increased utilization. We indicated on the last conference call that the fourth quarter was going to be difficult in the North Sea and the Americas. The varied additional costs in the quarter resulted in weaker performance, but should result in a benefit to future operations. Southeast Asia held up very well, however we may see some softness in that region during the early part of 2010, which we anticipate to be moderate and reasonably short-lived.
"In December we had the pension charge of $3.7 million in the North Sea which includes the U.K. and Norway locations. The majority of the charge, ($3.2 million), relates to the U.K. location. Those of you who have been following us for some time know that every three years we get an update on the funding status of the multi-employer pension plans in which we participate in the U.K. Based on initial estimates, we accrued the additional charge in the quarter. The estimate was higher than we anticipated due to a decreased in value of the equity investments held by the fund.
"We took delivery of the Highland Prince in November and today took delivery of the North Purpose, both state-of-the-art 284 ft PSVs that will be working in the North Sea region. Additionally, the two remaining medium-sized anchor handlers being built in Poland are scheduled for delivery in the third quarter. These two boats will augment the highly successful group of medium sized anchor handlers in the Southeast Asia fleet, although their potential usage is worldwide. Today, after adding the North Purpose nearly two months ahead of schedule to take advantage of market opportunities, our new construction program is largely complete and the vast majority of the costs associated with the program have been incurred."
Mr. Streeter continued, "We expected a difficult fourth quarter. We knew we would face a tough market and we adjusted our activity and repositioned our fleet to best take advantage of the competitive landscape we perceived. As always, we are focused on generating maximum long-term earnings even if that involves some reduction in short-term profitability. During 2009, which was not a very inspiring period for our industry, we had a number of significant achievements, including the refinancing of the debt assumed in the Rigdon acquisition, a substantial reduction of total debt, and we added safeguards to our Jones Act position. Combined with our strong balance sheet, our fleet mix and positioning give us greater opportunity to take advantage of a larger range of possibilities than ever before."
Liquidity and Capital Commitments
Cash flow from operations totaled $32.4 million in the fourth quarter, compared to $47.5 million for the third quarter. Remaining commitments for the new build program total approximately $57.8 million. These commitments will complete the new build program requirements and are expected to be funded from cash on hand and cash generated from operations throughout 2010. Cash on hand at year end was $92.1 million and the Company has no amount drawn under its $175.0 million revolving credit facility. Total debt at December 31, 2009 was $359.7 million, and debt net of cash on hand was $267.6 million.
Thus far during 2010, the Company has paid $47.0 million of the $68.5 million new build requirement. This amount was paid out of cash on hand and the final $21.5 million is likewise expected to be paid out of cash on hand and cash generated from operations.