HOUSTON, March 15, 2004 (PRIMEZONE) -- Horizon Offshore, Inc. (Nasdaq:HOFF) today reported a net loss for 2003 of $(72.5) million, or $(2.74) per share-diluted. This compares with net loss of $(5.5) million, or $(0.22) per share-diluted, for 2002.
For the three months ended December 31, 2003, Horizon reported a net loss of $(65.2) million, or $(2.46) per share-diluted, on revenues of $65.6 million, compared with net loss of $(10.4) million, or $(0.39) per share-diluted, on revenues of $88.0 million for the fourth quarter of 2002.
For the fiscal year 2003, gross profit was $6.5 million, or 2.4 percent, on revenues of $270.3 million, compared with gross profit of $30.4 million, or 10.7 percent, on revenues of $283.4 million for 2002. Pre-tax net loss was $(80.1) million, with an income tax benefit of $(7.6) million for 2003, compared with pre-tax net loss of $(8.6) million and an income tax benefit of $(3.1) million for 2002.
During the fourth quarter of 2003, the company recorded a $33.1 million reserve for unapproved claims from Pemex as a result of communications with Pemex, subsequent to the formal submission of claims in 2003 and the inability to reach an agreement on the amount and timing of payment of the unapproved claims. If Horizon determines it will be unsuccessful in resolving these claims through negotiations, Horizon may elect to submit its claims, with a remaining carrying value of $25.5 million as of December 31, 2003, to arbitration in Mexico in order to resolve this matter. The carrying value is the amount that is believed to be collectible; however, an adverse outcome from this arbitration could result in a further loss of up to the carrying value of the claim of $25.5 million.
Also included in the loss reported for 2003 is a $21.3 million impairment loss on the Phoenix Horizon, two diving support vessels, one small construction vessel, a cargo barge and related marine equipment based upon the carrying value of these vessels and equipment in excess of their estimated fair value as determined by the estimated discounted future cash flows. A $9.9 million impairment loss related to the Phoenix Horizon was recognized for the year ended December 31, 2002. The impairment of the Phoenix Horizon is a result of a further decline in its fair market value and management's decision not to make capital improvements required to place the vessel into service due to the availability of other operational assets. The sustained difficult economic environment, depressed market for the marine construction industry and increased competition for construction projects throughout 2003 has resulted in a decline in the utilization of Horizon's vessels, triggering the impairment of the other vessels, the cargo barge and related marine equipment.
A valuation allowance that fully offset the net deferred tax assets, which are not expected to be realized due to the uncertainty of future taxable income, in the amount of $23.1 million was charged as income tax expense and further impacted the net loss for 2003.
During 2003, a significant portion of the company's revenues related to projects in the Northeastern U.S. and from operations in the Southeast Asia region, as compared to revenues related to Pemex projects for 2002. The change in customer mix in 2003 compared to 2002 impacted total revenues and gross profit. Lower margins on projects in the Northeastern U.S., downtime on vessels operating in the northern U.S. Gulf of Mexico because of unanticipated inclement weather conditions, and schedule slippage in several major projects in the U.S. Gulf of Mexico and West Africa contributed to a decrease in gross profit for 2003.
"In addition to lower revenues and profit margins on projects, the cost of carrying the Pemex claims and other receivables significantly affected our liquidity and operations in 2003. We have worked diligently with our lenders to amend debt covenants and to obtain additional financing. The company is currently positioned to take advantage of market opportunities. We were awarded a contract from the Israel Electric Corporation for the installation of a 30" diameter natural gas transmission system, and we have also been awarded a contract from Pemex for the engineering, procurement and construction of several pipelines in the Bay of Campeche," said Bill Lam, President and Chief Executive Officer President. "We believe that the combination of our current operating assets and experienced personnel will allow us to competitively bid jobs and obtain a backlog of work that will initiate our return to improved operating results."
Horizon and its subsidiaries provide marine construction services to the offshore oil and gas industry in the U.S. Gulf of Mexico, West Africa, Southeast Asia, and Latin America. The Company's fleet is used to perform a wide range of marine construction activities, including installation of marine pipelines to transport oil and gas and other sub sea production systems, and the installation and abandonment of production platforms.
This press release contains certain forward-looking statements within the meaning of the Private Securities Reform Act of 1995, which involve known and unknown risk, uncertainties and other factors. Among the factors that could cause actual results to differ materially are: the Company's substantial amount of debt, high reliance on external sources of financing and improved cash flow to meet its obligations and reduce its existing debt, resolution of the Company's outstanding claims against Pemex and others; industry conditions and volatility; prices of oil and gas; the Company's ability to obtain and the timing of new projects; changes in competitive factors; and other material factors that are described from time to time in the Company's filings with the Securities and Exchange Commission.
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.
Summary Financial and Operating Data
(Unaudited)
(In thousands, except share and per share data)
For the Year Ended For the Three Months Ended
December 31, December 31,
------------------ --------------------------
Income Statement Data:
2003 2002 2003 2002
---- ---- ---- ----
Contract
revenues $ 270,313 $ 283,410 $ 65,554 $ 88,039
Cost of
contract
revenues 263,812 253,016 68,306 83,874
----------- ----------- ----------- -----------
Gross
profit 6,501 30,394 (2,752) 4,165
Selling,
general
and
administrative
expenses 21,749 21,845 4,452 8,101
Pemex
reserve 33,092 -- 33,092 --
Impairment
of
property
and
equipment 21,332 9,852 21,332 9,852
----------- ----------- ----------- -----------
Operating
income
(loss) (69,672) (1,303) (61,628) (13,788)
Other:
Interest
expense,
net of
amount
capitalized (9,542) (4,585) (3,041) (1,528)
Interest
income 67 91 37 16
Loss on debt
extinguishment (868) -- -- --
Other income
(expense), net (88) (2,831) 119 (316)
----------- ----------- ----------- -----------
Net income
(loss)
before
income
taxes (80,103) (8,628) (64,513) (15,616)
Income tax
provision
(benefit) (7,599) (3,079) 697 (5,245)
----------- ----------- ----------- -----------
Net income
(loss) $ (72,504) $ (5,549) $ (65,210) $ (10,371)
Earnings
per share:
Net loss
per share --
basic and
diluted $ (2.74) $ (0.22) $ (2.46) $ (0.39)
=========== =========== =========== ===========
Weighted average
shares
used in
computing
net loss
per share:
Basic and
diluted 26,429,014 25,573,326 26,467,090 26,365,693
Other Non-
GAAP
Financial
Data:
Adjusted
EBITDA(1) $ (29,578) $ 21,677 $ (35,353) $ 503
Adjusted
EBITDA
calculation
is as
follows:
Net loss $ (72,504) $ (5,549) $ (65,210) $ (10,371)
Income tax
provision
(benefit) (7,599) (3,079) 697 (5,245)
Net
interest
expense 9,475 4,494 2,705 1,512
Depreciation
and
amortization 19,718 15,959 5,123 4,755
Non-cash
impairment
of property &
equipment 21,332 9,852 9,852 21,332
----------- ----------- ----------- -----------
Adjusted
EBITDA $ (29,578) $ 21,677 $ (35,353) $ 503
=========== =========== =========== ===========
(1) Horizon calculates Adjusted EBITDA (earnings before interest,
income taxes, depreciation and amortization) as net income or
loss excluding income taxes, net interest expense, depreciation
and amortization, cumulative effect of accounting change and
impairment of property and equipment. Earnings include revenues
for services for which non-cash consideration is received.
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. A reconciliation
of the non-GAAP measure to Horizon's income statement is
included. Horizon believes Adjusted EBITDA is a commonly
applied measurement of financial performance. 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 -- such as impairments and other non-cash
charges, or that are subject to variations that are not
caused by operational performance -- such as tax rates or
interest rates. 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.
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