HOUSTON, Aug. 7, 2006 (PRIMEZONE) -- Horizon Offshore, Inc. (Nasdaq:HOFF) today announced a correction to its financial results for the second quarter ended June 30, 2006, as previously reported in a press release dated August 3, 2006. The correction results from the Company's receipt of notification on August 4, 2006 that an arbitral panel in Mexico rejected the claims of its subsidiary, ECH Offshore S. de R.L. de C.V., against Petroleos Mexicanos (Pemex). These claims were related to interruptions due to adverse weather conditions in connection with Pemex's EPC 64 project. The financial results for the second quarter reported in the August 3, 2006 release have been corrected to account for the effect of the arbitrators' ruling. The complete corrected text follows:
Horizon Offshore, Inc. (Nasdaq:HOFF) today reported net income for the quarter ended June 30, 2006 of $16.9 million, or $0.55 per share-diluted. For the six months ended June 30, 2006, the Company reported net income of $32.3 million, or $1.06 per share-diluted. For the three and six months ended June 30, 2006, earnings include a charge of $(0.38) per share-diluted related to the write-off of the remaining carrying value of the EPC 64 contract claims against Petroleos Mexicanos (Pemex) (and related accrued expenses), and $0.36 per share-diluted related to a gain from the June 30, 2006 settlement of the Company's insurance claim for fire damage to the Gulf Horizon.
Summary of Results
(in thousands, except per share data and percentages)
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
--------------------------------------------------
Contract revenues $ 156,940 $ 70,504 $ 286,885 $ 107,850
Gross profit 39,286 9,124 77,677 11,720
Margin 25.0% 12.9% 27.1% 10.9%
Operating income
(loss) 26,063 419 56,196 (2,553)
Net income (loss) 16,870 (27,738) 32,341 (43,211)
Diluted earnings
(loss) per share 0.55 (15.24) 1.06 (27.77)
Adjusted EBITDA 20,840 5,416 59,323 6,030
The strong operating results for the second quarter of 2006 are primarily due to the Company's domestic and Latin America operations. The demand for construction services in the U.S. Gulf of Mexico has remained strong during the second quarter of 2006 driving increased prices on offshore construction contracts and high vessel utilization. The Company has maximized utilization of its vessels, personnel and marine bases in response to this demand, which has positively impacted its gross profit and margins. Revenues and gross profit also increased significantly for Latin America as work continued on two significant projects for Pemex during the second quarter of 2006.
On August 4, 2006, the Company received notice that an arbitral panel in Mexico rejected the claims of its subsidiary, ECH Offshore S. de R.L. de C.V., against Pemex. These claims were related to interruptions due to adverse weather conditions in connection with Pemex's EPC 64 project. As of June 30, 2006, the Company wrote off the remaining carrying value for these claims of $18.5 million and related accrued expenses.
Additionally, on June 30, 2006, the Company settled its claims against the underwriters on the marine hull insurance policy covering physical damage to the Gulf Horizon for $14.3 million, resulting in a $14.3 million gain on the insurance settlement.
On June 28, 2006, the Company completed the sale of 2,000,000 shares of its common stock in an underwritten public offering and received net proceeds of $38.6 million after deducting the underwriting discount and expenses. Some of the Company's existing stockholders also sold an aggregate of 7,775,000 shares of common stock in the public offering. $15.3 million of the $38.6 million in net proceeds was used to repay debt, including accrued interest, and the remaining proceeds will be used to fund capital expenditures and working capital requirements. At June 30, 2006, cash and cash equivalents were approximately $57.1 million and working capital was $141.6 million. The Company expects that its existing cash and cash equivalents, borrowing capacity available under its revolving credit facility and cash expected to be generated from future operations should support its business needs going forward, allowing the Company to capitalize on market opportunities as they arise.
David Sharp, President and Chief Executive Officer of Horizon Offshore, Inc., stated, "We are pleased to report strong earnings and profitability for the second quarter of 2006. These results demonstrate the strength of our operating capabilities and our focus on performance and profitability. Our current financial capacity will provide the flexibility to realize the benefits of the substantial demand for marine construction services. Our current backlog is over $188 million."
About Horizon Offshore, Inc.
Horizon and its subsidiaries provide marine construction services for the offshore oil and gas industry. 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.
The Horizon Offshore logo is available at http://media.primezone.com/prs/single/?pkgid=760
Forward Looking Statements
This press release contains certain forward-looking statements within the meaning of the Private Securities Reform Act of 1995, which represent the Company's expectations and beliefs concerning future events that involve risks and uncertainties which could cause actual results to differ materially from those currently anticipated. All statements other than statements of historical facts included in this release are forward-looking statements. Factors that could cause actual results to differ materially from those expressed or implied in such forward-looking statements include the factors described from time to time in the Company's filings with the Securities and Exchange Commission. Consequently, all of the forward-looking statements made in this press release are qualified by these and other factors, risks, and uncertainties.
Actual events, circumstances, effects and results may be materially different from the results, performance or achievements expressed or implied by the forward-looking statements. Consequently, the forward-looking statements often identified with words like "should," "expects," "believes," "anticipates," "may," "could," etc., contained herein should not be regarded as representations by Horizon or any other person that the projected outcomes can or will be achieved.
Horizon Offshore, Inc.
Consolidated Statements of Operations
(Unaudited)
(In thousands, except share and per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
----------------------------------------------
Contract revenues $ 156,940 $ 70,504 $ 286,885 $ 107,850
Cost of contract
revenues 117,654 61,380 209,208 96,130
--------- --------- --------- ---------
Gross profit 39,286 9,124 77,677 11,720
Selling, general and
administrative
expenses 9,065 6,994 17,323 12,562
Gain on insurance
settlement (14,300) -- (14,300) --
Reserve for claims and
receivables 18,458 1,711 18,458 1,711
--------- --------- --------- ---------
Operating income
(loss) 26,063 419 56,196 (2,553)
Other:
Interest expense (3,540) (6,555) (7,625) (16,869)
Interest income 399 264 792 302
Loss on debt
extinguishment -- (21,875) (2,402) (23,138)
Other income
(expense), net (12) 20 (37) (37)
--------- --------- --------- ---------
Net income (loss)
before income taxes 22,910 (27,727) 46,924 (42,295)
Income tax provision 6,040 11 14,583 916
--------- --------- --------- ---------
Net income (loss) $ 16,870 $ (27,738) $ 32,341 $ (43,211)
========= ========= ========= =========
Earnings (loss) per
share:
Net income (loss) per
share - basic $ 0.57 $ (15.24) $ 1.09 $ (27.77)
========= ========= ========= =========
Net income (loss) per
share - diluted $ 0.55 $ (15.24) $ 1.06 $ (27.77)
========= ========= ========= =========
Weighted average shares
used in computing
earnings (loss) per
share:
Basic 29,604,003 1,820,398 29,582,058 1,556,051
Diluted 30,419,709 1,820,398 30,397,567 1,556,051
Other Non-GAAP
Financial Data:
Adjusted EBITDA(a) $ 20,840 $ 5,416 $ 59,323 $ 6,030
Adjusted EBITDA
calculation is as follows:
Net income (loss) $ 16,870 $ (27,738) $ 32,341 $ (43,211)
Income tax provision 6,040 11 14,583 916
Net interest expense 3,141 6,291 6,833 16,567
Depreciation and
amortization 6,708 4,977 13,034 8,620
Loss on debt
extinguishment -- 21,875 2,402 23,138
Stock based
compensation 2,381 -- 4,430 --
Gain on insurance
settlement (14,300) -- (14,300) --
--------- --------- --------- ---------
Adjusted EBITDA $ 20,840 $ 5,416 $ 59,323 $ 6,030
(a) Horizon calculates Adjusted EBITDA (adjusted earnings before
interest, taxes, depreciation and amortization) as net income or
loss excluding income taxes, net interest expense, depreciation
and amortization, and adjusted for loss on debt extinguishment,
stock-based compensation and gain on insurance settlement.
Adjusted EBITDA is not calculated in accordance with Generally
Accepted Accounting Principles (GAAP), but is a non-GAAP measure
that is derived from items in Horizon's GAAP financials and is
used as a measure of operational performance. Management
references this non-GAAP financial measure frequently in its
decision-making because it provides supplemental information that
facilitates internal comparisons to historical operating
performance of prior periods and external comparisons to
competitors' historical operating performance. Horizon also has
aligned the disclosure of Adjusted EBITDA with the financial
covenants in its material credit agreements with various lenders,
which include ratios requiring a determination of EBITDA, as
defined. Adjusted EBITDA is a material component of the financial
covenants in Horizon's credit agreements and non-compliance with
the covenants could result in the acceleration of indebtedness.
Horizon believes Adjusted EBITDA is a commonly applied
measurement of financial performance by investors. Horizon
believes Adjusted EBITDA is useful to investors because it gives
a measure of operational performance without taking into account
items that Horizon does not believe relate directly to operations
or that are subject to variations that are not caused by
operational performance. Horizon also uses Adjusted EBITDA to
facilitate quantification of planned business activities and
enhance subsequent follow-up with comparisons of actual to
planned Adjusted EBITDA. In addition, some incentive compensation
for management and employees is based on Adjusted EBITDA. This
non-GAAP measure is not intended to be a substitute for GAAP
measures, and investors are advised to review this non-GAAP
measure in conjunction with GAAP information provided by Horizon.
Adjusted EBITDA should not be construed as a substitute for
income from operations, net income (loss) or cash flows from
operating activities (all determined in accordance with GAAP) for
the purpose of analyzing Horizon's operating performance,
financial position and cash flows. Horizon's computation of
Adjusted EBITDA may not be comparable to similar titled measures
of other companies. A reconciliation of this non-GAAP measure to
Horizon's net income (loss) is included.
Consolidated Balance Sheets
(Unaudited)
(In thousands, except share data)
June 30, December 31,
2006 2005
---- ----
ASSETS
Current Assets:
Cash and cash equivalents $ 57,052 $ 42,960
Restricted cash 1,775 4,055
Accounts receivable --
Contract receivables 66,675 43,423
Costs in excess of billings, net 107,704 90,229
Insurance receivable 14,300 --
Other 2,748 1,209
Other current assets 3,657 6,622
--------- ---------
Total current assets 253,911 188,498
Property and equipment, net 204,623 186,416
Restricted cash 7,967 7,967
Other assets 21,534 19,840
--------- ---------
$ 488,035 $ 402,721
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 13,491 $ 15,474
Accrued liabilities 10,265 6,617
Accrued job costs 61,127 56,085
Billings in excess of costs 2,715 7,386
Current maturities of long-term
debt 20,342 26,130
Current taxes payable 4,384 2,687
--------- ---------
Total current liabilities 112,324 114,379
Long-term debt, net of current
maturities 97,977 27,340
Related party debt -- 63,794
Subordinated notes 13,364 12,845
Deferred income taxes 4,863 --
Other liabilities 677 877
--------- ---------
Total liabilities 229,205 219,235
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, $0.00001 par
value, 5,000,000 shares
authorized, none issued and
outstanding -- --
Common stock, $0.00001 par value,
100,000,000 shares authorized,
32,375,258 shares issued and
outstanding and 30,384,871 shares
issued, respectively -- --
Deferred compensation -- (8,333)
Additional paid-in capital 415,261 382,239
Accumulated deficit (156,435) (188,776)
Treasury stock, none and 10,031
shares, respectively -- (1,644)
Accumulated other comprehensive
income 4 --
--------- ---------
Total stockholders' equity 258,830 183,486
--------- ---------
$ 488,035 $ 402,721
========= =========