Trico Marine Services, Inc. today announced its financial results for the fourth quarter of 2008 of $0.30 per adjusted diluted share, a non-GAAP measure, on revenues of $177.9 million. This excludes the effect of a non-cash impairment charge for goodwill and other intangibles totaling $172.8 million, a non-cash gain of $9.0 million on conversion of debt and a non-cash gain totaling $23.4 million related to the accounting treatment for the derivative component of Trico's 6.5% convertible senior notes.
Chairman and Chief Executive Officer, Joseph S. Compofelice, commented: "Our fourth quarter EPS met expectations but the more important point is that 2008 marked the transformation of Trico from an OSV operator to an international subsea services provider with our acquisitions of DeepOcean and CTC Marine. As 2008 progressed, industry growth was dampened by growing weakness in global economic conditions and the decline in oil prices that clearly impacted our ability to maximize value during the fourth quarter. Nevertheless, the fundamentals of subsea growth will remain strong, with national oil companies confirming their intentions for spending in their 2009 plans. We believe that the subsea market will continue in 2009 and 2010 to provide unit volume growth, one of the few areas of oilfield service able to do so." Mr. Compofelice concluded: "We remain cautiously optimistic as we exercise prudent judgment with our liquidity, continue to focus our subsea service and vessel utilization with national oil companies and international majors worldwide, and focus on cost containment in the weaker OSV segment of our business."
Total revenues for the fourth quarter of 2008 were $177.9 million, compared to $214.8 million for the third quarter. Contributing to the decrease in revenues from the third quarter was a $23.9 million effect as a result of the strengthening U.S. Dollar against European currencies. EBITDA for the fourth quarter was $30.3 million, before the impairment charge, compared to $41.5 million in the third quarter.
The primary reasons for the reduction in revenues and EBITDA, other than the effects of the stronger dollar mentioned above, were lower utilization of vessels in the Subsea Services division, and lower utilization and increased operating expenses in the Towing and Supply division, particularly in the North Sea. The lower utilization of our subsea service vessels was due to a voluntary acceleration of a dry docking of one large construction vessel to better position the vessel for a new 2009 long-term contract as well as a planned mobilization of one vessel to the Mediterranean. The cost of these two vessel decisions increased fourth quarter spending by about $3 million.
In Trico's Subsea Services division, principally DeepOcean, operating results were slightly below Trico's expectations due to seasonal softness in the North Sea, low utilization on two vessels for reasons previously mentioned and downtime while a new vessel, the Edda Fauna, was in drydock for warranty repair. The Edda Fauna was delivered in the first quarter of 2008.
In March 2009, Trico will take delivery of one additional newbuild, the first delivery of eight multi-purpose platform supply vessels acquired as part of Active Subsea with the second of the eight vessels due in June 2009.
In Trico's Subsea Trenching and Protection division, CTC Marine, we were pleased with the performance in what is typically a seasonally slow quarter. The division experienced high utilization in the fourth quarter, including work in China and Brazil that we expect to continue through the first quarter of 2009. This quarter was the second best quarter in terms of revenue, operating income and margins in CTC's recent history.
For the Towing and Supply division, day rates and utilization reflected the weakness in the North Sea spot market. Contributing to the decrease in revenues from the third quarter was a $4.4 million effect as a result of the strengthening U.S. Dollar against European currencies.
During the fourth quarter of 2008, Trico took delivery of one newbuild vessel, an SPSV, the Trico Moon. Since delivery, the vessel has been contracted for work in the U.S. Gulf of Mexico. The Trico Moon will start work on a two-year contract in Mexico in March 2009.
While the operating results were not as strong as the third quarter, we are encouraged by some recent developments which we anticipate will be reflected in our results commencing in the middle of the second quarter of 2009. These new contract awards reflect both our ability to establish a meaningful presence in critical growth markets for subsea services, such as Mexico, Brazil, and Australia, as well as our ability to leverage our group structure to provide opportunities for our other vessels and services when we have secured a contract award for one suite of services. These opportunities include:
• Two new four- to six-month contracts in China and the Mediterranean for Subsea Trenching and Protection Services.
• A strong outlook in Mexico for our three larger construction vessels.
• Approximately $100 million of previously announced contract awards in our Subsea Services and Subsea Trenching and Protection segments.
Our backlog remains healthy at approximately $0.9 billion of termed out or long-term contracts spread principally across the Subsea Services and Towing and Supply businesses. In the fourth quarter of 2008, approximately 80% of our business was with major or national oil companies, and 92% of our business was in international waters. We are experiencing weakness in the Towing and Supply division in the North Sea and the U.S. Gulf of Mexico, and are currently taking steps to reduce costs in areas where our activity has declined, including the closing or consolidation of several offices.
At December 2008, Trico had $95 million in cash and $712 million in net debt. During the fourth quarter of 2008, the company converted $22 million of convertible debt into equity and drew down $30 million under its credit facilities. The company realized a gain on the conversion of debt of $9 million.
At December 2008, the company's cash and credit availability to fund capital expenditures was $252 million. Committed capital expenditures through the end of 2011 are $183 million. We believe that our liquidity and projected cash flows from operations will be sufficient to meet our cash requirements for the next twelve months and the foreseeable future and to fund our commitments for vessel newbuilds.
Conference call information
Trico will conduct a conference call at 8:30 a.m. ET on Monday, March 2, 2009, to discuss the results with analysts, investors and other interested parties. Individuals who wish to participate in the conference call should dial (877) 874-1586, access code 5429910, in the United States or (719) 325-4826, access code 5429910, from outside the country.
A telephonic replay of the conference call will be available until March 16, 2009, starting approximately 1 hour after the completion of the call, and can be accessed by dialing (888) 203-1112 access code 5429910 (international calls should use (719) 457-0820, access code 5429910).