<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
/_/ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------- --------
Commission file number 0-10809
HORNBECK OFFSHORE SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 74-2153030
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7707 HARBORSIDE DRIVE
GALVESTON, TEXAS 77554
(Address of principal executive offices)
(Zip code)
(409) 744-9500
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes /X/ No /_/
Indicated the number of shares outstanding of each of the issuers classes
of common stock, as of the latest practicable date. The total number of shares
of Common Stock, par value $.10 per share, outstanding as of March 31, 1995 was
13,137,950.
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HORNBECK OFFSHORE SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED) (IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1994 1995
Assets ------------- ---------
------
<S> <C> <C>
Cash and equivalents $ 8,572 $ 13,552
Accounts receivable 11,747 9,709
Prepaid and other current assets 2,001 2,129
Total current assets 22,320 25,390
Property and equipment, net 101,563 99,347
Investment in affiliated company 16,851 14,586
Reserve funds and restricted cash 1,280 1,166
Other assets, net 5,868 5,719
-------- --------
$147,882 $146,208
======== ========
Liabilities and shareholders' equity
- - ------------------------------------
Accounts payable $ 1,570 $ 1,900
Accrued interest 86 100
Income taxes payable 358 124
Other liabilities 2,092 2,185
Current portion of long-term debt 3,467 3,467
Total current liabilities 7,573 7,776
Long-term debt 21,023 20,034
Deferred income taxes 12,379 12,787
Stockholders' equity:
Common stock 1,324 1,314
Additional paid-in capital 83,639 81,866
Retained earnings 21,944 22,431
-------- --------
Total stockholders equity 106,907 105,611
-------- --------
$147,882 $146,208
======== ========
</TABLE>
<PAGE>
HORNBECK OFFSHORE SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31
-----------------
1994 1995
------- -------
<S> <C> <C>
Revenues $11,506 $12,671
Cost and expenses:
Direct labor and other operating
expenses 5,765 7,043
Depreciation and amortization 2,273 3,281
General and administrative
expenses 934 971
------- -------
8,972 11,295
------- -------
Other income (expense):
Foreign exchange gain 71
Gain on sale of assets 4 3
Equity in earnings (loss) of 269 (330)
affiliates
Other costs and expenses (39) (14)
Interest and other income 230 232
Interest expense (223) (467)
------- -------
231 (505)
------- -------
Income before income taxes 2,765 871
Income taxes 863 384
------- -------
Net income $ 1,902 $ 487
======= =======
Earnings per share $0.14 $0.04
Weighted average shares outstanding (in 13,482 13,374
thousands)
</TABLE>
<PAGE>
HORNBECK OFFSHORE SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31
-------------------
1994 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers and $12,861 $14,710
affiliates
Cash paid to suppliers and employees (4,843) (7,592)
Interest and other income received 380 209
Interest paid (217) (453)
Cash paid for income taxes (448) (210)
------- -------
Net cash provided by operating
activities 7,733 6,664
------- -------
Cash flows from investing activities:
Capital and drydocking expenditures (4,795) (1,147)
Sale of marketable securities 27,310
Decrease (increase) in reserve funds (46)
Affiliate loan repayments 219
Sale of property and equipment 475 3
Other 88
------- -------
Net cash provided (used) by investing
activities 22,944 (837)
------- -------
Cash flows from financing activities:
Payment of long-term debt (3,794) (852)
Issuance of common stock 48 5
------- -------
Net cash used by financing activities (3,746) (847)
------- -------
Net increase in cash and equivalents 26,931 4,980
Cash and equivalents at beginning of
period 7,013 8,572
------- -------
Cash and equivalents at end of period $33,944 $13,552
======= =======
</TABLE>
<PAGE>
HORNBECK OFFSHORE SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
(continued)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31
-----------------
1994 1995
------- -------
<S> <C> <C>
Reconciliation of net income to net cash
provided by operating activities:
Net income $1,902 $ 487
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 2,312 3,295
Other non cash (income) expense, net 191 (75)
Deferred income taxes 500 408
Equity in (earnings) loss of (269) 330
affiliates
Changes in current assets and
liabilities:
Accounts receivable 1,808 2,038
Prepaid and other current assets 501 (22)
Accounts payable 638 330
Accrued interest (1) 14
Taxes payable (85) (234)
Other accrued liabilities 236 93
------ ------
Net cash provided by operating
activities $7,733 $6,664
====== ======
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
HORNBECK OFFSHORE SERVICES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The condensed consolidated balance sheet as of March 31, 1995, the condensed
consolidated statements of income and the condensed consolidated statements of
cash flows for the three months ended March 31, 1994 and March 31, 1995 have
been prepared by the Company, without audit. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and cash flows at
March 31, 1995 and for all periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these condensed
consolidated financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report on Form 10-
K for the year ended December 31, 1994. The results of operations for the period
ended March 31, 1995 are not necessarily indicative of the operating results for
the full year.
NOTE 2 - EARNINGS PER SHARE
Primary earnings per share is computed by dividing earnings applicable to common
stock by the sum of the weighted average number of shares outstanding during the
period plus common stock equivalents unless common stock equivalents are anti-
dilutive. Common stock equivalents include the effect of stock options granted
to employees.
NOTE 3 - COMMITMENTS AND CONTINGENCIES
The Company is not a party to any legal proceedings the results of which could,
in the opinion of management, have a material adverse effect upon the financial
position of the Company.
NOTE 4 - RETURN OF COMMON STOCK FROM ESCROW
In connection with the Company's initial purchase of Ravensworth Investments
Limited ("Ravensworth"), approximately 106,000 shares of the Company's common
stock placed in escrow at the time of acquisition were returned to the Company
as of March 31, 1995 based on Ravensworth's actual earnings for 1994 compared to
targeted earnings as described under the Agreement. Such shares, valued at
approximately $1.8 million, were cancelled and stockholders' equity and
Ravensworth investment accounts were reduced accordingly.
<PAGE>
ITEM 2 - MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company's operating revenue is directly affected by average dayrates and
fleet utilization which are closely aligned with the offshore oil and gas
exploration and development industry. The level of exploration and development
of offshore areas is affected by both short-term and long-term trends in oil and
gas which, in turn, are related to the demand for petroleum products and the
current availability of oil and gas resources. Although different geographic
markets were affected at different times and to varying degrees, the level of
activity in the oil and gas exploration and development industry and, therefore,
the offshore marine services industry, was depressed in the U.S. Gulf of Mexico
during the middle 1980's. In the period between 1988 and 1994, the U.S. Gulf of
Mexico's market has experienced several periods of increased offshore activity
as well as periods, both seasonal and otherwise, where demand for vessel
services has decreased. Many industry experts anticipate that increased natural
gas demand will increase activity in the U.S. Gulf. On the other hand, a reduced
level of oil and gas prices could lead to less exploration and development of
offshore areas, reduced activity for the offshore marine services industry, and
adversely effect the Company's financial condition and results of operations.
Internationally, in the North Sea, since the Company's 1993 acquisition of its
Ravensworth affiliate, safety standby vessel demand has declined due to lower
drilling activity caused by oil price declines and certain tax law changes
affecting that area. Currently, there are industry expectations of increased
drilling activity in the North Sea during 1995. Such drilling activity changes
would increase demand and, potentially, dayrates for the safety standby vessel
market. The Company, however, cannot predict future demand levels for its
markets.
As the offshore marine services industry is cyclical, periods of increased
demand for services result in higher utilization and dayrates. An upward or
downward movement in dayrates has little direct impact on operating costs and
expenses for a vessel. An increase or decrease in utilization of a vessel will
incrementally increase or decrease certain operating costs and expenses but
generally not in proportion to the associated revenue change. The Company's
results of operations have not been significantly affected by inflation during
the past five years. Since the time of the Company's investment in Ravensworth
in mid-1993, it has become exposed to potential foreign exchange gains or
losses. Through March 31, 1995, the Company has not recorded any significant
foreign exchange gains or losses.
The Company seeks to expand its fleet through acquisitions when industry cycles
or other factors create attractive purchase opportunities. Through
acquisitions, including those described below, the Company has grown to become
the operator of the second largest fleet of supply vessels in the Gulf of Mexico
and the third largest such fleet in the world.
The Oil & Gas Acquisition
On November 15, 1994, the Company added to its Gulf fleet by completing the
acquisition of thirteen (13) large offshore supply vessels and related assets
(collectively, the "Oil & Gas Vessels") from Oil & Gas Rental Services, Inc. for
aggregate consideration of $46,000,000 in cash.
<PAGE>
One-half of the purchase price was paid from the Company's cash reserves, while
the other one-half was obtained under new loan facilities. In connection with
the Company's acquisition of the Oil & Gas Vessels, on November 15, 1994, the
Company entered into a loan agreement to provide a portion of the funds for the
Oil & Gas Acquisition under a term loan as well as a revolving credit facility.
The $20,000,000 term loan is secured by the thirteen acquired Oil & Gas Vessels.
The Seaboard Acquisition
Effective November 30, 1994, the Company's newly formed 49.9% owned affiliate,
Seaboard Holdings Limited, acquired all of the outstanding capital stock of
Seaboard Offshore Group Limited (SOGL) which, together with its subsidiaries,
owns six safety-standby vessels operating in the North Sea. The acquisition of
the SOGL equity securities was accomplished for nominal consideration. To
facilitate the transaction, the Company made a (Pounds)1.5 million loan to SOGL
and guaranteed approximately (Pounds)302,000 of SOGL debt. Ravensworth Holdings
Limited, the 50.1% owner of the Company's 49.9% owned North Sea affiliate,
Ravensworth, guaranteed to the Company the repayment of 50.1% of the loan to
SOGL. The Company also acquired a 49.9% interest in Hornbeck Offshore Limited,
which will provide management services to the six Seaboard vessels and the 23
Ravensworth vessels.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided from operating activities totaled $6,664,000 for the first three
months of 1995 compared to $7,733,000 in the same period in the prior year. The
Company had cash and equivalents of $13,552,000 at March 31, 1995. The change
in operating cash flow resulted from lower profitability in 1995 compared to
1994.
In connection with the Oil & Gas Acquisition, the Company entered into a loan
agreement (the "Loan Agreement") with a bank, as lender, and as agent for any
future lenders who may participate in the loans under the Loan Agreement
(collectively, the "Lenders") to provide a portion of the funds for the Oil &
Gas Acquisition and a revolving credit facility. Under the Loan Agreement, the
Company obtained a term loan in the amount of $20 million, payable over a five-
year period in quarterly installments of $714,284 which commenced March 31,
1995, with the balance due November 15, 1999. The term loan is secured by the
thirteen acquired Oil & Gas Vessels. The Loan Agreement also provides for a
revolving credit facility of up to $10 million based on a Borrowing Base (as
defined in the Loan Agreement) comprised of eligible accounts receivable of the
Company and its subsidiaries. The loans bear interest at the agents prime rate
or, at the election of the Company, at LIBOR plus 1%.
The Company anticipates it will be able to generate sufficient cash flow from
operations to meet its debt repayment and capital expenditure requirements and
be in a position to invest a portion of its cash flow in other acquisitions in
the offshore marine services industry. Planned growth will be funded through
future cash flow and/or additional debt or equity financing. The Company
believes that it possesses sufficient unencumbered assets (recognizing that only
22 of the 57 U.S. flag vessels in which the Company has an ownership interest
constitute collateral for outstanding debt) to support future debt financing.
<PAGE>
Pursuant to an option agreement entered into in connection with the Ravensworth
acquisition, the Company may acquire the remaining 50.1% of Ravensworth equity
that it does not presently own during the period January 1, 1995 through March
31, 1997. The option price will bear interest from the original acquisition
date and the option prices are subject to upward or downward adjustment based on
actual Ravensworth EBDIT performance. Performance of the North Sea Manager and
of Seaboard is combined with that of Ravensworth for purposes of making such
EBDIT calculations. Based on Ravensworth's EBDIT performance in 1994, the option
price for the 9.9% option exercised effective July 23, 1993 is being adjusted
downward by approximately $1,800,000, resulting in the surrender and
cancellation of approximately 106,000 shares of the Company's common stock
originally issued as partial consideration for such option exercise. Assuming no
performance adjustments and exercises of the options on March 31, 1996 and March
31, 1997, the total future purchase price, including interest amounts to a
payment of approximately $5.7 million in cash together with $11.4 million of
Hornbeck common stock. Pursuant to option agreements entered into in connection
with the formation of the North Sea Manager and the Seaboard Acquisition, the
Company may acquire the remaining 50.1% of the North Sea Manager and Seaboard
that it does not presently own. In connection with the exercise of its options
to acquire the remaining outstanding capital stock of Ravensworth, the Company
will be entitled to receive for no additional consideration a corresponding
amount of the remaining equity interests in North Sea Manager. Provided that the
Company has exercised its options to acquire the remainder of the capital stock
of Ravensworth, the Company may exercise an option to acquire the remaining
outstanding capital stock of Seaboard.
The Company's commitments for future capital expenditures were not material at
March 31, 1995. The Company is subject to regulations which require supply
vessels to be drydocked twice in a five-year period and, therefore, each year a
portion of the Company's vessels undergo routine drydocking for maintenance and
repairs.
RESULTS OF OPERATIONS
Quarter ended March 31, 1995 versus quarter ended March 31, 1994:
Revenues increased by $1,165,000 or 10% from $11,506,000 in the first quarter of
1994 to $12,671,000 in the first quarter of 1995. Relevant fleet statistics
affecting the Company's revenues are as follows:
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31
-----------------------
1994 1995
---------- ----------
<S> <C> <C>
Average supply vessel dayrate $3,776 $3,154
Average fleet utilization 75% 74%
Number of vessels in fleet at end of 50 63
period
</TABLE>
Revenues increased due to the larger number of vessels in the fleet. This
increase was partially offset by the impact of lower dayrates. Direct labor and
other operating expenses increased from $5,765,000 in the first quarter of 1994
to $7,043,000 in the first quarter of 1995, an increase of $1,278,000 or 22%.
This increase is due to the increased number of
<PAGE>
vessels in the fleet in 1995. Depreciation and amortization also increased
because of the acquisition of vessels since the first quarter of 1994. Average
depreciation on a per vessel basis increased in 1995 because vessels acquired
since the first quarter of 1994 cost more than the average vessel in the
existing fleet.
The Company reported a loss of $330,000 representing its share of losses of
certain affiliates the three months ended March 31, 1995 as compared to income
of $269,000 in the same period of the prior year. The Company's North Sea safety
standby vessel affiliates recognized losses because of lower revenues due
primarily to decreased utilization and dayrates and because of higher expense
levels associated with certain vessels being repaired or upgraded in
anticipation of stronger market demand in the second half of 1995. Interest
expense increased $244,000 or 109% because of the additional borrowings made in
November 1994 in connection with the Oil & Gas acquisition.
Income taxes represent a lower or higher percentage of pretax income than an
expected "statutory" rate of approximately 35% due primarily to the fact that no
income tax effect is recognized for the Company's equity in earnings of foreign
affiliates. Additionally, in 1995, certain property taxes paid on vessels
generate state income tax credits which lower effective state tax rates.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Not applicable
Item 2. Not applicable
Item 3. Not applicable
Item 4. Not applicable
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K - None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HORNBECK OFFSHORE SERVICES, INC.
(Registrant)
DATE: May 4, 1995 By: /s/ Larry D. Hornbeck
--------------------------------------------
Larry D. Hornbeck, Chairman of the Board,
President and Chief Executive Officer
DATE: May 4, 1995 By: /s/ Robert W. Hampton
--------------------------------------------
Robert W. Hampton, Vice President, Treasurer
Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 13,552
<SECURITIES> 0
<RECEIVABLES> 9,709
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 25,390
<PP&E> 121,451
<DEPRECIATION> (22,104)
<TOTAL-ASSETS> 146,208
<CURRENT-LIABILITIES> 7,776
<BONDS> 20,034
<COMMON> 83,180
0
0
<OTHER-SE> 22,431
<TOTAL-LIABILITY-AND-EQUITY> 146,208
<SALES> 12,671
<TOTAL-REVENUES> 12,671
<CGS> 0
<TOTAL-COSTS> 11,295
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 467
<INCOME-PRETAX> 871
<INCOME-TAX> 384
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 487
<EPS-PRIMARY> .04
<EPS-DILUTED> .0
</TABLE>
