GulfMark Offshore Announces Third Quarter 2015 Operating Results

Houston, Texas, UNITED STATES


HOUSTON, Nov. 09, 2015 (GLOBE NEWSWIRE) -- GulfMark Offshore, Inc. (“GulfMark” or the “Company”) (NYSE:GLF) today announced its results of operations for the three- and nine-month periods ended September 30, 2015. Quarterly highlights include:

  • Generated Cash from Operations of $7.9 Million After Semi-Annual Interest Payments.
  • Reduced Direct Operating Expenses, Before Special Items, by 10% vs. Previous Quarter.
  • Forecasting Additional Decrease in Direct Operating Expenses of Approximately 19% from Q3 to Q4 2015, Before Special Items.
  • Lowered General and Administrative Expenses, Before Special Items, by 4% vs. Previous Quarter.
  • Recorded Non-Cash Pre-Tax Impairments to PP&E, Goodwill, and Intangible Assets of $152.1 Million.
  • Total Liquidity Was Approximately $280.0 Million at Quarter End.


For the third quarter ended September 30, 2015, revenue was $60.7 million, and net loss was $185.2 million, or $7.48 per diluted share. Included in the results are after-tax special items described below that totaled $171.6 million or $6.93 per diluted share. Quarterly loss before these special items was $13.6 million or $0.55 per diluted share.

Quintin Kneen, President and CEO, commented, “In this difficult operating environment, we are pleased with our ability to improve the aspects of our business that are under our control during the downturn. Our cost reductions continue to be strong, and we see costs falling even further in the coming quarters. Our ability to quickly reduce costs has been essential to our ability to maintain positive cash flows and decreasing debt levels.

“We are managing our working capital efficiently. We generated cash from operations during the quarter, even after taking into account our semi-annual interest payments. We paid down our revolver by $49 million during the quarter, and we improved our net debt position from last quarter. We are committed to preserving liquidity, creating operational flexibility, and continuing to reduce our level of net debt prospectively.

“Regionally, our franchise position in the North Sea region continues to perform extremely well in a difficult market. Our September utilization was the highest utilization month of the quarter, approaching 85% and reversing the downward trend we had seen for several months. Our Norwegian vessels performed well, achieving higher than 97% utilization during the quarter, and our UK vessels saw a 4 percentage point increase in utilization during the last month of the quarter. Our overall utilization in the North Sea during Q3 was 84%, while our marketed utilization was an exceptional 94%. 

“Overall, the global market continues to be difficult, with decreasing rates and utilization. Although consolidated revenue was below guidance, we continued to make significant strides in reducing operating costs, which came in at the low end of our guidance. We anticipate maintaining positive cash flow from operations by exploiting market opportunities as they arise and furthering the expense reduction initiatives in progress. Our anticipated full-year 2015 direct operating expense savings are approximately $70 million, which is an improvement of more than $10 million since the end of the second quarter. We are confident that there are more cost savings to come in 2016. Importantly, we believe that we can accomplish these cost savings while maintaining our overall commitment to safety and quality.”

Kneen continued, “We remain focused on our previously stated goals of opportunistically selling vessels, reducing operating costs and maintaining capital discipline.”

Consolidated Third-Quarter Results

Consolidated revenue for the third quarter of 2015 was $60.7 million, compared with $74.5 million in the second quarter. Consolidated revenue fell due to a 10% sequential decrease in average day rate to $14,810 from $16,428 in the previous quarter, while utilization fell to 64% from 69% in the second quarter. Consolidated operating loss was $167.1 million, compared with $4.2 million in the second quarter. Excluding special items in both quarters, consolidated operating loss sequentially declined to $12.8 million from a loss of $2.7 million in the second quarter, due to lower revenue partially offset by lower operating and general and administrative costs.

The third quarter results include five special items totaling $171.6 million net of tax ($6.93 per diluted share), of which $168.7 million ($6.81 per diluted share) was non-cash. The Company impaired a portion of its U.S.-based fleet, U.S. construction in progress, all of its goodwill, and all of its intangible assets. As a result, these impairment charges, net of tax, include $72.0 million related to vessels and equipment and construction in progress, $22.5 million related to goodwill, and $8.5 million related to intangible assets. The Company also recorded discrete non-cash tax charges during the quarter, including a non-cash charge for the repatriation of a portion of its foreign cash. The net amount recorded for these special items was a one-time non-cash tax charge of $66.2 million. Additionally, the Company recorded workforce redundancy charges during the quarter, recorded a gain on the previously disclosed asset sale, and wrote down debt issuance costs associated with the revolving credit facilities amendments. A summary of these special charges is provided in the tables at the end of the earnings release.


Regional Results for the Third Quarter

In the North Sea region, third-quarter revenue was $33.7 million, compared with $36.6 million in the second quarter. The average day rate fell 7% to $15,985 from $17,110 in the second quarter, which was the primary reason for the decrease in revenue. Although rates fell slightly, the Company exited the summer work season with improved utilization. Utilization remained relatively flat from the prior quarter, and the Company’s utilization in the North Sea, exclusive of stacked vessels, was 94% during the third quarter. The Company has seven vessels currently stacked in the North Sea.

Third-quarter revenue in the Southeast Asia region was $7.2 million, compared with $11.0 million in the second quarter. The change in revenue was due to a decline in average day rate of 13% to $10,331 from $11,817 in the second quarter, combined with an 11 percentage point utilization decline. The Company has three vessels currently stacked in Southeast Asia.

Third-quarter revenue for the Americas region was $19.7 million, compared with $26.9 million in the previous quarter. Average day rate decreased 15% from the prior quarter due to the continued softening in the market. Utilization decreased 8 percentage points to 47% from 55% in the second quarter, due to the continued weakness in the spot market and the effect of stacking several vessels in the U.S. Gulf of Mexico. The Company’s utilization in the Americas, exclusive of stacked vessels, was 66% during the third quarter. The Company has 13 vessels currently stacked in the Americas.

Consolidated Operating Expenses for the Third Quarter

Direct operating expenses for the third quarter were $40.5 million including the workforce redundancy charges. This is a decrease of $5.4 million, or 12%, from the second quarter. The decrease was due mainly to lower labor costs related to stacking vessels and wage reductions, combined with lower repairs and maintenance, supplies and consumables and fuel expense. Drydock expense in the third quarter was $3.9 million, slightly below the Company’s previous guidance. General and administrative expense was $13.3 million for the third quarter. Excluding exit and severance costs, general and administrative expense was $11.1 million, on the low end of the Company’s guided quarterly run rate. Including the special items mentioned previously, tax expense during the quarter was $8.0 million. The Company expects a tax rate of 35% to 40% going forward, though cash taxes will likely be close to zero in the near term as the company continues to absorb net operating losses.

Guidance

Looking forward, the Company expects revenue in the fourth quarter to be between $46 and $51 million. GulfMark expects fleet-wide utilization to be between 53% and 57% for the fourth quarter, and expects its global average day rate for the fourth quarter to decrease by approximately 7% to 10% sequentially. Due to its expense reduction initiatives, GulfMark now anticipates fourth quarter direct operating expenses to be between $31 million and $34 million, and full year direct operating expenses to be between $166 and $169 million excluding special items. This represents an additional reduction of more than $10 million or 5% from the previous annual target. Excluding special items, the Company expects general and administrative expense to be between $10 million and $11 million in the fourth quarter. The Company does not expect to incur any drydock expense during the fourth quarter, resulting in a full-year expected drydock expense of $15.3 million.

Liquidity and Capital Commitments

Cash provided by operating activities totaled $7.9 million in the third quarter. Cash on hand at September 30, 2015, was $31.2 million, and $23.0 million was drawn on the revolving credit facilities. Total debt at September 30, 2015 was $523.6 million, and debt net of cash was $492.5 million. Net debt was reduced by approximately $2.0 million during the quarter. Net debt to book capital was 39% at the end of the quarter, and total liquidity (cash plus available revolver) was approximately $280.0 million at September 30.

Net capital expenditures during the third quarter totaled $3.1 million, which included $7.3 million of payments on the construction of new vessels and $3.3 million for vessel enhancements and other capital expenditures, offset by proceeds of $7.5 million received for the sale of one vessel. As of September 30, 2015, the Company had approximately $61.0 million of remaining capital commitments related to the construction of three vessels. The Company expects to fund these commitments from cash on hand, cash generated by operations, and borrowings under the revolving credit facilities.

Conference Call/Webcast Information

GulfMark will conduct a conference call to discuss earnings with analysts, investors and other interested parties at 9:00 a.m. Eastern Time on Monday, November 9, 2015. To participate in the call, investors in the U.S. should dial 1-888-317-6003 at least 10 minutes before the start time and when prompted, enter the conference passcode 9553386. Canada-based callers should dial 1-866-284-3684, and international callers outside of North America should dial 1-412-317-6061. The webcast of the conference call also can be accessed by visiting our website, www.gulfmark.com. An audio file of the earnings conference call will be available on the Company’s website approximately two hours after the end of the call.

GulfMark Offshore, Inc. provides marine transportation services to the energy industry through a fleet of offshore support vessels serving major offshore energy markets in the world.

Certain statements and information in this press release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The words “believe,” “expect,” “anticipate,” “plan,” “intend,” “foresee,” “should,” “would,” “could” or other similar expressions are intended to identify forward-looking statements, which are generally not historical in nature. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. All comments concerning our expectations for future revenues are based on our forecasts for our existing operations. Our forward-looking statements involve significant risks and uncertainties (some of which are beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections. Factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: the price of oil and gas and its effect on offshore drilling, vessel utilization and day rates; industry volatility; fluctuations in the size of the offshore marine vessel fleet in areas where the Company operates; changes in competitive factors; delays or cost overruns on construction projects, and other material factors that are described from time to time in the Company’s filings with the SEC, including the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Consequently, the forward-looking statements contained herein should not be regarded as representations that the projected outcomes can or will be achieved. These forward-looking statements speak only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise.                      

 UNAUDITED
 
Income StatementsThree Months Ended Nine Months Ended
(in thousands, except per share data)September 30, June 30, September 30, September 30, September 30,
 2015   2015  2014   2015  2014 
          
Revenue$  60,668  $  74,461  $  128,686  $  224,221  $  379,651 
Direct operating expenses   40,509     45,946     62,230     137,680     178,253 
Drydock expense   3,932     2,436     4,353     15,341     16,249 
General and administrative expenses   13,315     11,521     15,021     35,800     46,913 
Depreciation and amortization   18,674     18,765     19,168     55,927     56,729 
Impairment charges   152,103     -     -     152,103     7,459 
Gain on sale of assets and other   (784)    -     (6,877)    (784)    (6,877)
Operating Income (Loss)   (167,081)    (4,207)    34,791     (171,846)    80,925 
          
Interest expense   (9,979)    (8,194)    (7,840)    (26,331)    (22,002)
Interest income   71     74     49     189     79 
Foreign currency gain (loss) and other   (267)    (30)    (1,859)    (970)    (345)
Income (loss) before income taxes   (177,256)    (12,357)    25,141     (198,958)    58,657 
Income tax benefit (provision)   (7,970)    4,112     (797)    361     (3,557)
Net Income (Loss)$  (185,226) $  (8,245) $  24,344  $  (198,597) $  55,100 
          
Diluted earnings (loss) per share$  (7.48) $  (0.33) $  0.92  $  (8.04) $  2.09 
Weighted average diluted common shares   24,767     24,696     26,390     24,690     26,394 
          
Other Data        
Revenue by Region (000's)         
North Sea$  33,743  $  36,578  $  61,781  $  110,521  $  172,658 
Southeast Asia   7,185     10,989     13,930     31,503     49,665 
Americas   19,740     26,894     52,975     82,197     157,328 
Total $  60,668  $  74,461  $  128,686  $  224,221  $  379,651 
          
Rates Per Day Worked         
North Sea$  15,985  $  17,110  $  23,974  $  17,155  $  23,151 
Southeast Asia   10,331     11,817     15,419     12,209     15,329 
Americas   15,310     17,991     23,969     17,919     23,286 
Total $  14,810  $  16,428  $  22,587  $  16,495  $  21,716 
          
Overall Utilization          
North Sea 83.5%  82.9%  90.9%  83.2%  89.9%
Southeast Asia 59.4%  70.4%  66.8%  71.5%  78.0%
Americas 47.0%  55.1%  83.2%  56.4%  87.1%
Total  63.7%  69.1%  83.1%  69.9%  86.4%
          
Average Owned Vessels         
North Sea   28.1     29.0     31.0     28.8     30.4 
Southeast Asia   13.0     13.0     15.1     13.0     15.7 
Americas   30.0     30.0     29.0     30.0     28.6 
Total    71.1     72.0     75.1     71.7     74.7 
          
Drydock Days         
North Sea   17     -      -     79     96 
Southeast Asia   41     27     22     77     88 
Americas   8     33     65     175     189 
Total    66     60     87     331     373 
          
Drydock Expenditures (000's)$  3,932  $  2,436  $  4,353  $  15,341  $  16,249 

 

 


Consolidated Balance Sheets    As of
(dollars in thousands)    September 30, June 30, September 30,
    2015   2015  2014 
Current assets:         
Cash and cash equivalents    $  31,172  $  78,390  $  32,663 
Trade accounts receivable, net of allowance for doubtful accounts of $1,424, $1,477, and $2,504, respectively    55,353     70,634     102,728 
Other accounts receivable       7,624     8,158     11,621 
Prepaid expenses and other current assets       19,459     21,057     24,273 
Total current assets        113,608     178,239     171,285 
          
Vessels, equipment and other fixed assets at cost, net of accumulated depreciation of $458,917, $461,485 and $453,880, respectively    1,228,229     1,369,451     1,427,228 
Construction in progress       69,596     90,799     122,000 
Goodwill       -     23,755     28,979 
Intangibles, net of accumulated amortization of $0, $20,182 and $18,018, respectively    -     14,416     16,581 
                
Cash held in escrow       -     -     3,683 
Deferred costs and other assets       18,182     20,131     22,062 
Total assets    $1,429,615  $1,696,791  $1,791,818 
          
Current liabilities:         
Accounts payable    $  15,051  $  13,010  $  27,720 
Income and other taxes payable       7,482     6,174     5,507 
Accrued personnel costs       13,421     14,617     22,620 
Accrued interest cost       1,604     9,649     1,451 
Other accrued liabilities       5,354     6,888     12,143 
Total current liabilities       42,912     50,338     69,441 
Long-term debt       523,638     572,669     518,959 
Long-term income taxes:        
Deferred tax liabilities     106,121     93,603     102,538 
Other income taxes payable       20,834     25,378     24,668 
Other liabilities      6,837     6,127     6,390 
Stockholders' equity:        
Preferred stock, no par value; 2,000 authorized; no shares issued    -     -     - 
Class A Common Stock, $0.01 par value; 60,000 shares authorized; 27,965, 27,934 and 27,276 shares issued and 25,738, 25,706 and 26,723 outstanding, respectively; Class B Common Stock $0.01 par value; 60,000 shares authorized; no shares issued    273     272     270 
Additional paid-in capital      416,602     414,751     408,734 
Retained earnings      460,819     646,043     658,339 
Accumulated other comprehensive income (loss)    (79,928)    (43,042)    25,454 
Treasury stock, at cost      (76,987)    (77,792)    (30,610)
Deferred compensation expense     8,494     8,444     7,635 
Total stockholders' equity     729,273     948,676    1,069,822 
  Total liabilities and stockholders' equity  $1,429,615  $1,696,791  $1,791,818 

 


Consolidated Statements of Cash Flows (unaudited)Three Months Ended Nine Months Ended
(dollars in thousands)September 30, June 30, September 30, September 30, September 30,
 2015   2015  2014   2015  2014 
Cash flows from operating activities:         
Net income (loss)$  (185,226) $  (8,245) $  24,344  $  (198,597) $  55,100 
 Adjustments to reconcile net income (loss) to net cash provided by operating activities:         
 Depreciation and amortization   18,674     18,765     19,168     55,927     56,729 
 Gain on sale of assets   (784)    -     (5,520)    (784)    (5,520)
 Stock-based compensation   1,621     1,845     1,817     5,270     7,459 
 Amortization of deferred financing costs   594     623     470     1,799     5,607 
 Provision for doubtful accounts receivable, net of write-offs   (5)    (63)    (16)    (960)    1,396 
 Impairment charge   152,103     -     -     152,103     2,158 
 Deferred income tax benefit   12,614     (5,391)    (2,107)    2,689     (1,969)
 Foreign currency transaction (gain) loss   634     (1,043)    1,820     157   888 
Change in operating assets and liabilities:         
Accounts receivable$  14,199  $  8,360  $  21,430  $  33,281  $  (7,010)
Prepaids and other   836     49     (272)    (2,674)    (6,601)
Accounts payable   2,373     (5,608)    (87)    (6,998)    966 
Other accrued liabilities and other   (9,684)    5,490     (5,216)    (15,924)    (3,891)
Net cash provided by operating activities$  7,949  $  14,782  $  55,831  $  25,289  $  105,312 
Cash flows from investing activities:         
Purchases of vessels, equipment and other fixed assets   (10,570)    (9,686)    (20,892)    (31,874)    (142,523)
Release of deposits held in escrow   -      -      -      3,683     5,060 
Proceeds from disposition of vessels and equipment   7,511     -      15,361     8,226     15,361 
 Net cash used in investing activities   (3,059)    (9,686)    (5,531)    (19,965)    (122,102)
Cash flows from financing activities:         
Proceeds from borrowings under revolving loan facilities   11,000     12,000     -      39,000     50,045 
                    
Repayment of borrowing under revolving loan facilities   (60,000)    -      (25,703)    (60,000)    (30,703)
Cash dividends   -      -      (6,586)    -      (20,007)
Stock repurchases   -        (8,189)    -      (8,189)
Debt issuance costs   (1,352)    (35)    (2,561)    (2,578)    (2,561)
Proceeds from issuance of stock   174     221     265     702     787 
 Net cash provided by (used in) investing activities$  (50,178) $  12,186  $  (42,774) $  (22,876) $  (10,628)
Effect of exchange rate changes on cash   (1,930)    1,261     (803)    (2,061)    (485)
Net increase (decrease) in cash and cash equivalents   (47,218)    18,543     6,723     (19,613)    (27,903)
Cash and cash equivalents at beginning of period   78,390     59,847     25,940     50,785     60,566 
Cash and cash equivalents at end of period$  31,172  $  78,390  $  32,663  $  31,172  $  32,663 
Supplemental cash flow information:         
Interest paid, net of interest capitalized$  15,396  $  (588) $  16,216  $  30,169  $  28,603 
Income taxes paid, net   437     538     1,223     1,371     3,585 

 


Contract CoverAs of November 9, 2015 As of October 20, 2014  
  2015   2016   2014   2015   
Region:Vessel Days Vessel Days Vessel Days Vessel Days  
North Sea 65%  38%  72%  39%  
Southeast Asia 44%  19%  84%  22%  
Americas 28%  7%  57%  16%  
Overall Fleet 46%  22%  68%  26%  
          
 
Reconciliation of Non-GAAP Measures: Three Months Ended September 30, 2015
(dollars in millions, except per share data)Operating
Income (Loss)
 Other
Expense
 Tax
(Provision)
Benefit
 Net Income
(Loss)
 Diluted EPS
Before Special Items$  (12.8) $  (8.4) $  7.6  $  (13.6) $  (0.55)
Impairment Charge   (152.1)    -      49.1     (103.0)    (4.16)
Tax Repatriation Charge and Other   -      -      (66.2)    (66.2)    (2.67)
Gain of Vessel Sale   0.8     -      -      0.8     0.03 
Loan Fee Write-Off   -      (1.8)    0.7     (1.1)    (0.04)
Workforce Redundancy Charges   (2.9)    -      0.8     (2.1)    (0.09)
U.S. GAAP$  (167.1) $  (10.2) $  (8.0) $  (185.2) $  (7.48)
          
Reconciliation of Non-GAAP Measures: Three Months Ended June 30, 2015
(dollars in millions, except per share data)Operating
Income(Loss)
 Other
Expense
 Tax
(Provision)
Benefit
 Net Income
(Loss)
 Diluted EPS
Before Special Items$  (2.7) $  (8.2) $  4.1  $  (6.8) $  (0.27)
Workforce Redundancy Charges   (1.5)    -      0.0     (1.5)    (0.06)
U.S. GAAP$  (4.2) $  (8.2) $  4.1  $  (8.2) $  (0.33)
          

 

Vessel Count by Reporting Segment       
  North Sea   Southeast
Asia 
  Americas   Total 
Owned Vessels as of July 22, 201528 13 30 71
Newbuild Deliveries/Additions0 0 0 0
Sales & Dispositions0 0 0 0
Owned Vessels as of November 9, 201528 13 30 71
Managed Vessels3 0 0 3
Total Fleet as of November 9, 201531 13 30 74



        

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