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GulfMark Offshore Announces Fourth Quarter 2015 Operating Results

HOUSTON, Feb. 29, 2016 (GLOBE NEWSWIRE) -- GulfMark Offshore, Inc. (“GulfMark” or the “Company”) (NYSE:GLF) today announced its results of operations for the three- and twelve-month periods ended December 31, 2015. Quarterly highlights include:

  • Generated Cash from Operations During the Fourth Quarter of $18.1 Million.
  • Reduced Direct Operating Expenses Before Special Items by 28% vs. Previous Quarter.
  • Forecasting an Additional Decrease in Direct Operating Expenses of Approximately 20% from the Fourth Quarter 2015 to the First Quarter 2016 Before Special Items.
  • Reduced General and Administrative Expenses Before Special Items by 7% vs. Previous Quarter.
  • Successfully Amended Revolving Credit Facilities Providing Substantial Covenant Relief through Mid-2017 and Continuing Covenant Relief Thereafter.
  • Fully Repaid Revolving Credit Facilities by Year End.
  • Current Liquidity is Approximately $200 Million.
  • Deferred Committed Capital Expenditures of Approximately $22 Million Until 2017 by Postponing the Delivery of One of Three Remaining Vessels Under Construction.
  • Continued Successful Vessel Disposition Program and Sold Last Remaining Vessel Older than 20 Years.
  • Reinvested Vessel Sale Proceeds through the Repurchase of Company Bonds.
  • Significantly Curtailing Unprofitable Brazilian Operation Subsequent to Year End.

For the fourth quarter ended December 31, 2015, revenue was $50.6 million, and net loss was $16.6 million, or $0.67 per diluted share. Included in the results are special items described below that totaled $7.1 million or $0.29 per diluted share after tax. Quarterly loss before these special items was $9.5 million or $0.38 per diluted share.

Quintin Kneen, President and CEO, commented, “Our Company continues to generate positive cash flow, sell older assets and reduce debt in a tough market. We again generated substantial cash flow during the quarter and used that cash to fully repay our revolving credit facilities. We continued to high-grade our fleet with the sale of our last vessel that was more than 20 years old, and we used the proceeds to repurchase some of our bonds at a substantial discount, which further reduced our debt. Since the beginning of the downturn, we have been proactive in reducing costs to provide us with sufficient liquidity while decreasing our overall debt. With the recent amendments to our revolving credit facilities, we project strong liquidity for the foreseeable future. We will continue to be innovative and forward-looking in our cost and liability management as we lead the Company through this downturn.

“We continue to benefit from managing our capital expenditure requirements and high-grading our fleet. We successfully deferred approximately $22 million of committed capital expenditures into early 2017. We sold three of our older vessels during the year, which decreased the average age of our fleet by about a year. We are optimistic that we can sell as many vessels in 2016 as we did in 2015 by continuing our successful vessel disposition program.

“Our franchise position in the North Sea continues to outperform in this environment. As expected, our overall utilization fell during the fourth quarter due to normal seasonality. Importantly, our marketed utilization improved to 97% from 94% in the previous quarter, and our fourth-quarter day rate increased due to occasional tightening in the spot market caused by fewer overall active vessels. In addition, we reactivated two stacked vessels subsequent to year-end, which is a sign that the market is finding a bottom and allocating existing work to higher quality tonnage and companies.

“Overall, consolidated revenue was on the high-end of our guidance, and our operating costs came in at the low-end of our guidance, which demonstrates our continuing ability to reduce operating costs. In 2015, we reduced our full-year direct operating expenses by approximately $70 million while improving safety metrics, and we should further reduce direct operating expenses by about the same amount in 2016. We continue to accomplish this while maintaining our overall commitment to our customers, safety and reliability.”

Consolidated Fourth-Quarter Results

Consolidated revenue for the fourth quarter of 2015 was $50.6 million, compared with $60.7 million in the third quarter. Consolidated revenue fell due to a 4% sequential decrease in average day rate to $14,230 from $14,810 in the previous quarter, while utilization fell 11 percentage points to 53% from 64% in the third quarter. Consolidated operating loss was $11.7 million, compared with $167.1 million in the third quarter. Excluding special items in both quarters, consolidated operating loss sequentially improved to $5.2 million from a loss of $12.8 million in the third quarter, due to lower operating expenses, general and administrative expenses and drydock expense, partially offset by lower revenue.

The fourth quarter results include four special items totaling $7.1 million net of tax ($0.29 per diluted share), of which $2.5 million ($0.10 per diluted share) was non-cash. The Company recorded net of tax workforce redundancy and exit charges of $4.2 million and a loss on the sale of assets of $1.9 million. Additionally, the Company wrote down debt issuance costs of $1.3 million net of tax associated with the revolving credit facility amendment that took place in December 2015. The fourth special item was a $0.3 million net of tax gain on extinguishment of debt as a result of repurchasing Company bonds at a discount on the open market. A summary of these special charges is provided in the tables at the end of the earnings release.

Regional Results for the Fourth Quarter

In the North Sea region, fourth-quarter revenue was $31.7 million, compared with $33.7 million in the third quarter. The average day rate increased 2% to $16,306 from $15,985 in the third quarter, however utilization decreased to 72.1% in the fourth quarter compared to 83.5% in the third quarter due to typical calendar year seasonality. Utilization in the North Sea, exclusive of stacked vessels, was 97% during the fourth quarter. The Company has eight vessels currently stacked in the North Sea.

Fourth-quarter revenue in the Southeast Asia region was $4.0 million, compared with $7.2 million in the third quarter. The change in revenue was due to a decline in average day rate of 24% to $7,803 from $10,331 in the third quarter, combined with a 17 percentage point utilization decline due to the decreased offshore activity in the region combined with an increasing oversupply of vessels. The Company has seven vessels currently stacked in Southeast Asia.

Fourth-quarter revenue for the Americas region was $14.9 million, compared with $19.7 million in the previous quarter. The average day rate decreased 10% from the prior quarter due to the continued softening in the market. Utilization decreased 8 percentage points to 39% from 47% in the third quarter, due to a highly competitive spot market and the effect of stacking several vessels in the U.S. Gulf of Mexico. Additionally, during the quarter the Company began to wind down its operations in Brazil, mobilizing all but one vessel out of the region. The remaining vessel is currently stacked in Brazil. Utilization in the Americas, exclusive of stacked vessels, was 75% during the fourth quarter. The Company has 22 vessels currently stacked in the Americas, of which 16 are U.S. Flagged, DP2, highly sophisticated PSVs.

Consolidated Operating Expenses for the Fourth Quarter

Direct operating expenses for the fourth quarter were $32.2 million including the workforce redundancy charges. This is a decrease of $8.4 million, or 21%, from the third quarter. The decrease was due mainly to lower mariner head count and mariner wage reductions as the Company continues to stack vessels, coupled with lower repairs and maintenance, supplies and consumables and fuel expense. Excluding the workforce redundancy and exit charges, direct operating expenses were $28.7 million. General and administrative expense was $11.5 million for the fourth quarter. Excluding exit and severance costs, general and administrative expense was $10.4 million, within the Company’s guided quarterly run rate. Including the special items mentioned previously, tax benefit during the quarter was $5.3 million. The Company expects a tax rate of 35% to 40% going forward, though cash taxes should be close to zero in the near term as the Company continues to absorb net operating losses.

Guidance

Due to the fluctuations in offshore spending by our customers and limited forward visibility, the Company will no longer provide revenue guidance. GulfMark continues to execute its expense reduction initiatives, and now anticipates first-quarter direct operating expenses to be between $21 million and $24 million excluding special items. Excluding special items, the Company expects general and administrative expense to be between $9 million and $10 million in the first quarter in 2016. In addition, the Company expects to incur about $1 million in drydock expense in the first quarter.

Liquidity and Capital Commitments

Cash provided by operating activities totaled $18.1 million in the fourth quarter. Cash on hand at December 31, 2015, was $21.9 million, and no amounts were drawn on the revolving credit facilities. Total debt at December 31, 2015, was $499.6 million, and debt net of cash was $477.7 million. Net debt was reduced by $14.8 million during the quarter. Net debt to book capital was 40% at the end of the quarter, and total liquidity (cash plus available revolvers) was approximately $190.0 million at December 31, 2015.

Net capital expenditures during the fourth quarter totaled $2.9 million, which included $3.1 million of payments on the construction of new vessels and $0.5 million for vessel enhancements and other capital expenditures, partially offset by proceeds of $0.7 million received for the sale of one vessel. As of December 31, 2015, the Company had approximately $58 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 results of operations with analysts, investors and other interested parties at 9:00 a.m. Eastern Time on Tuesday, March 1, 2016. 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 5203450. 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 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. For additional information regarding the offshore vessel market, our business and liquidity outlook and risk factors facing our company that could cause our actual results to differ materially from those anticipated or assumed in forward-looking statements, please refer to our Annual Report on Form 10-K for the year ended December 31, 2015 and our other reports and filings with the SEC.

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,” “expected to be,” “anticipate,” “plan,” “intend,” “foresee,” “forecast,” “continue,” “can,” “will,” “will continue,” “may,” “should,” “would,” “could” or other similar expressions are intended to identify forward-looking statements, which are generally not historical in nature. Statements in this press release that contain forward-looking statements may include, but are not limited to, information concerning our possible or assumed future results of operations and statements about future operating expenses, liquidity, vessels sales, market developments, taxes, reductions in costs and expenses and funding of capital commitments. 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 or anticipated 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.


Income StatementsThree Months Ended Twelve Months Ended
(in thousands, except per share data)December 31, September 30, December 31, December 31, December 31,
2015 2015 2014 2015 2014
Revenue$ 50,585 $ 60,668 $ 116,118 $ 274,806 $ 495,769
Direct operating expenses 32,157 40,509 57,991 169,837 236,244
Drydock expense 46 3,932 8,591 15,387 24,840
General and administrative expenses 11,480 13,315 15,815 47,280 62,728
Depreciation and amortization 16,664 18,674 18,607 72,591 75,336
Impairment charges - 152,103 1,536 152,103 8,995
(Gain) loss on sale of assets and other 1,944 (784) (7,162) 1,160 (14,039)
Operating Income (Loss) (11,706) (167,081) 20,740 (183,552) 101,665
Interest expense (10,615) (9,979) (7,330) (36,946) (29,332)
Interest income 71 71 228 260 307
Gain on extinguishment of debt 458 - - 458 -
Foreign currency gain (loss) and other (118) (267) (649) (1,088) (995)
Income (loss) before income taxes (21,910) (177,256) 12,989 (220,868) 71,645
Income tax benefit (provision) 5,272 (7,970) (5,713) 5,633 (9,270)
Net Income (Loss)$ (16,638) $ (185,226) $ 7,276 $ (215,235) $ 62,375
Diluted earnings (loss) per share$ (0.67) $ (7.48) $ 0.29 $ (8.70) $ 2.39
Weighted average diluted common shares 24,848 24,767 25,230 24,729 26,097
Other Data
Revenue by Region (000's)
North Sea$ 31,647 $ 33,743 $ 52,595 $ 142,168 $ 225,253
Southeast Asia 4,021 7,185 15,088 35,524 64,753
Americas 14,917 19,740 48,435 97,114 205,763
Total $ 50,585 $ 60,668 $ 116,118 $ 274,806 $ 495,769
Rates Per Day Worked
North Sea$ 16,306 $ 15,985 $ 21,655 $ 16,991 $ 22,782
Southeast Asia 7,803 10,331 14,827 11,471 15,210
Americas 13,756 15,310 23,124 17,128 23,248
Total $ 14,230 $ 14,810 $ 20,939 $ 16,053 $ 21,529
Overall Utilization
North Sea 72.1% 83.5% 86.4% 80.5% 89.0%
Southeast Asia 42.7% 59.4% 82.8% 64.2% 79.1%
Americas 39.2% 47.0% 78.9% 52.1% 85.0%
Total 52.7% 63.7% 82.8% 65.6% 85.5%
Average Owned Vessels
North Sea 27.5 28.1 30.6 28.4 30.4
Southeast Asia 13.0 13.0 13.6 13.0 15.2
Americas 30.0 30.0 29.0 30.0 28.7
Total 70.5 71.1 73.3 71.4 74.3
Drydock Days
North Sea - 17 55 79 151
Southeast Asia 5 41 7 82 95
Americas - 8 118 175 307
Total 5 66 180 336 553
Drydock Expenditures (000's)$ 46 $ 3,932 $ 8,591 $ 15,387 $ 24,840

Consolidated Balance Sheets As of
(in thousands) December 31, September 30, December 31,
2015 2015 2014
Current assets:
Cash and cash equivalents $ 21,939 $ 31,172 $ 50,785
Trade accounts receivable, net of allowance for doubtful accounts of $1,480, $1,424, and $2,506, respectively 40,838 55,353 88,721
Other accounts receivable 7,571 7,624 9,410
Prepaid expenses and other current assets 16,649 19,459 17,825
Total current assets 86,997 113,608 166,741
Vessels, equipment and other fixed assets at cost, net of accumulated depreciation of $457,670, $458,917 and $428,538, respectively 1,195,669 1,228,229 1,356,839
Construction in progress 70,817 69,596 127,722
Goodwill - - 25,010
Intangibles, net of accumulated amortization of $0, $0 and $18,741, respectively - - 15,861
Cash held in escrow - - 3,683
Deferred costs and other assets 16,787 18,182 20,499
Total assets 1,370,270
1,429,615 1,716,355
Current liabilities:
Accounts payable $ 13,170 $ 15,051 $ 22,494
Income and other taxes payable 6,485 7,482 4,578
Accrued personnel costs 12,942 13,421 20,403
Accrued interest cost 9,620 1,604 9,610
Other accrued liabilities 5,316 5,354 10,338
Total current liabilities 47,533 42,912 �� 67,423
Long-term debt 499,607 523,638 544,732
Long-term income taxes:
Deferred tax liabilities 99,439 106,121 104,346
Other income taxes payable 21,351 20,834 24,730
Other liabilities 4,032 6,837 6,371
Stockholders' equity:
Preferred stock, $0.01 par value; 2,000 authorized; no shares issued - - -
Class A Common Stock, $0.01 par value; 60,000 shares authorized; 27,994, 27,965 and 27,361 shares issued
and 25,792, 25,738 and 25,114 outstanding, respectively; Class B Common Stock $0.01 par value; 60,000 shares authorized; no shares issued
274 273 271
Additional paid-in capital 417,289 416,602 410,641
Retained earnings 444,181 460,819 659,403
Accumulated other comprehensive income (loss) (96,234) (79,928) (30,665)
Treasury stock, at cost (75,922) (76,987) (78,441)
Deferred compensation expense 8,720 8,494 7,544
Total stockholders' equity 698,308 729,273 968,753
Total liabilities and stockholders' equity 1,370,270 1,429,615 1,716,355

Consolidated Statements of Cash FlowsThree Months Ended Twelve Months Ended
(in thousands)December 31, September 30, December 31, December 31, December 31,
2015 2015 2014 2015 2014
Cash flows from operating activities:
Net income (loss)$ (16,638) $ (185,226) $ 7,275 $ (215,235) $ 62,375
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 16,664 18,674 18,607 72,591 75,336
(Gain) loss on sale of assets 1,944 (784) (6,941) 1,160 (12,461)
Stock-based compensation 1,465 1,621 1,723 6,735 7,330
Amortization of deferred financing costs 595 594 549 2,394 1,945
Provision for doubtful accounts receivable, net of write-offs 98 (5) 1,078 (862) 3,236
Impairment charge - 152,103 1,536 152,103 8,995
Gain on extinguishment of debt (458) - - (458) -
Deferred income tax (benefit) provision (6,473) 12,614 1,903 (3,784) (66)
Foreign currency transaction (gain) loss (317) 634 602 (160) 1,490
Change in operating assets and liabilities:
Accounts receivable$ 14,036 $ 14,199 $ 12,710 $ 47,317 $ 5,700
Prepaids and other 2,888 836 2,844 214 (476)
Accounts payable (1,604) 2,373 (4,854) (8,602) (3,888)
Other accrued liabilities and other 5,868 (9,684) 11,504 (10,056) 4,332
Net cash provided by operating activities$ 18,068 $ 7,949 $ 48,536 $ 43,357 $ 153,848
Cash flows from investing activities:
Purchases of vessels, equipment and other fixed assets (3,554) (10,570) (15,902) (35,428) (158,425)
Release of deposits held in escrow - - - 3,683 5,060
Proceeds from disposition of vessels and equipment 684 7,511 16,900 8,910 32,261
Net cash used in investing activities (2,870) (3,059) 998 (22,835) (121,104)
Cash flows from financing activities:
Repayment of 6.375% senior notes (542) - - (542) -
Proceeds from borrowings under revolving loan facilities 8,000 11,000 190,000 47,000 47,167
Repayment of borrowing under revolving loan facilities (31,000) (60,000) (162,175) (91,000) -
Cash dividends - - (6,145) - (26,152)
Stock repurchases - - (49,698) - (57,887)
Debt issuance costs (988) (1,352) (1,637) (3,566) (4,198)
Proceeds from issuance of stock 125 174 259 827 1,046
Net cash provided by (used in) investing activities$ (24,405) $ (50,178) $ (29,396) $ (47,281) $ (40,024)
Effect of exchange rate changes on cash (26) (1,930) (2,016) (2,087) (2,501)
Net increase (decrease) in cash and cash equivalents (9,233) (47,218) 18,122 (28,846) (9,781)
Cash and cash equivalents at beginning of period 31,172 78,390 32,663 50,785 60,566
Cash and cash equivalents at end of period$ 21,939 $ 31,172 $ 50,785 $ 21,939 $ 50,785
Supplemental cash flow information:
Interest paid, net of interest capitalized$ (335) $ 15,396 $ (1,536) $ 29,834 $ 27,067
Income taxes paid, net 677 437 869 2,048 4,454


Contract CoverAs of February 29, 2016 As of February 16, 2015
2016 2017 2015 2016
Region:Vessel Days Vessel Days Vessel Days Vessel Days
North Sea 41% 18% 53% 25%
Southeast Asia 23% 17% 37% 13%
Americas 2% 0% 34% 10%
Overall Fleet 21% 10% 42% 17%
Reconciliation of Non-GAAP Measures: Three Months Ended December 31, 2015
(dollars in millions, except per share data)Operating
Income (Loss)
Other
Expense
Tax
(Provision)
Benefit
Net Income
(Loss)
Diluted EPS
Before Special Items$ (5.2) $ (8.5) $ 4.3 $ (9.5) $ (0.38)
Gain on Extinguishment of Debt - 0.5 (0.2) 0.3 0.01
Gain (Loss) on Asset Sales (1.9) - - (1.9) (0.08)
Loan Fee Write-Off - (2.1) 0.8 (1.3) (0.05)
Workforce Redundancy and Exit Cost (4.6) - 0.4 (4.2) (0.17)
U.S. GAAP$ (11.7) $ (10.2) $ 5.3 $ (16.6) $ (0.67)
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 and Exit Cost (2.9) - 0.8 (2.1) (0.09)
U.S. GAAP$ (167.1) $ (10.2) $ (8.0) $ (185.2) $ (7.48)

Vessel Count by Reporting Segment
North Sea Southeast
Asia
Americas Total
Owned Vessels as of November 9, 2015 28 13 30 71
Sales & Dispositions (1) 0 0 (1)
Owned Vessels as of February 29, 2016 27 13 30 70
Managed Vessels 3 0 0 3
Total Fleet as of February 29, 2016 30 13 30 73

Contact: Michael Newman Investor Relations E-mail: Michael.Newman@GulfMark.com (713) 963-9522

Source:GulfMark Offshore, Inc.