Hornbeck Offshore Services, Inc 10-Q for FY2020 Q2

Hornbeck Offshore Services, Inc. (HOS)

10-Q 2020-07-24 For: 2020-06-30

Added on April 09, 2026

About this 10-Q

Hornbeck Offshore Services, Inc filed this 10-Q on July 24, 2020, covering the quarter ended June 30, 2020 (FY2020 Q2).

Headline figures

Quarter ended June 30, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $199.15M; down 1.3% from $201.73M a year earlier
Net income: $5.45M; down 67.7% from net income of $16.85M a year earlier
Diluted EPS: $0.04; down 63.6% from $0.11 a year earlier

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PART I.	FINANCIAL INFORMATION	PAGE

Item 1.	Financial Statements:

	Condensed Consolidated Balance Sheets – June 30, 2020 (Unaudited) and December 31, 2019	3

	Condensed Consolidated Statements of Operations (Unaudited) – Three and six months ended June 30, 2020 and 2019	4

	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) – Three and six months ended June 30, 2020 and 2019	5

	Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) – Three months ended June 30, 2020 and 2019	6

	Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) – Six months ended June 30, 2020 and 2019	7

	Condensed Consolidated Statements of Cash Flows (Unaudited) – Six months ended June 30, 2020 and 2019	8

	Notes to Condensed Consolidated Financial Statements (Unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44

Item 4.	Controls and Procedures	44

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	45

Item 1A.	Risk Factors	45

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46

Item 6.	Exhibits	47

	Signatures	48


	June 30, 2020		December 31, 2019
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	178,367	$	208,431
Restricted cash	42,127		54,130
Accounts receivable, net of allowance for credit losses of $3,209 and $0, respectively	165,941		125,457

Other current assets	91,818		50,450
Total current assets	478,253		438,468
Property and equipment	2,879,522		2,922,274
Less accumulated depreciation	(1,100,105)		(1,049,637)
Property and equipment, net	1,779,417		1,872,637


Operating lease right-of-use assets	174,803		201,118
Other assets, net	52,196		84,508
Total assets	$	2,484,669	$	2,596,731

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	71,402	$	69,055
Accrued liabilities	80,268		62,389

Current maturities of long-term debt	82,028		99,731
Current operating lease liabilities	53,023		53,785
Total current liabilities	286,721		284,960
Long-term debt	304,834		306,122
Operating lease liabilities	124,983		151,827
Deferred tax liabilities	103,773		112,132
Other non-current liabilities	6,286		38,644
Total liabilities	826,597		893,685
Redeemable noncontrolling interests	3,372		3,455
Shareholders’ equity:
Common stock, no par, 240,000 shares authorized, 150,040 and 148,888 shares issued, respectively	1,318,531		1,318,961
Retained earnings	436,107		445,370
Accumulated other comprehensive loss	(99,938)		(64,740)
Total shareholders’ equity	1,654,700		1,699,591
Total liabilities, redeemable noncontrolling interests and shareholders’ equity	$	2,484,669	$	2,596,731


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019

Net revenues	$	199,147	$	201,728	$	380,168	$	368,551
Cost of sales	169,571		161,794		348,582		312,363
Gross profit	29,576		39,934		31,586		56,188
Gain on disposition of assets, net	473		—		473		—
Goodwill impairment	—		—		(6,689)		—
Selling, general and administrative expenses	(15,855)		(16,862)		(32,203)		(32,847)
Income (loss) from operations	14,194		23,072		(6,833)		23,341
Equity in losses of investment	(2)		(29)		(22)		(69)
Net interest expense	(7,063)		(2,205)		(12,809)		(4,303)
Loss on extinguishment of long-term debt	—		(18)		—		(18)
Other expense, net	(2,069)		(1,311)		(12,496)		(145)
Royalty income and other	119		190		2,318		2,535
Income (loss) before income taxes	5,179		19,699		(29,842)		21,341
Income tax provision (benefit)	(271)		2,876		(21,364)		3,200
Net income (loss)	5,450		16,823		(8,478)		18,141
Net loss attributable to redeemable noncontrolling interests	—		(31)		(1,990)		(31)
Net income (loss) attributable to common shareholders	$	5,450	$	16,854	$	(6,488)	$	18,172

Earnings (loss) per share of common stock:
Basic	$	0.04	$	0.11	$	(0.06)	$	0.12
Diluted	$	0.04	$	0.11	$	(0.06)	$	0.12

Weighted average common shares outstanding:
Basic	148,971		147,521		148,917		147,471
Diluted	149,691		148,101		148,917		147,931


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019

Net income (loss)	$	5,450	$	16,823	$	(8,478)	$	18,141
Other comprehensive income (loss), net of tax:
Net unrealized gain (loss) on hedges arising during the period	1		(278)		(95)		(427)
Reclassifications into earnings	25		1,975		452		3,821
Income taxes on hedges	(6)		(340)		(72)		(682)
Net change in hedges, net of tax	20		1,357		285		2,712





Foreign currency translation loss	(1,896)		(3,065)		(35,483)		(263)
Other comprehensive income (loss), net of tax	(1,876)		(1,708)		(35,198)		2,449
Comprehensive income (loss)	3,574		15,115		(43,676)		20,590
Less comprehensive loss attributable to redeemable noncontrolling interests:
Net loss	—		(31)		(1,990)		(31)
Foreign currency translation loss	(20)		—		(248)		—
Comprehensive loss attributable to redeemable noncontrolling interests	(20)		(31)		(2,238)		(31)
Comprehensive income (loss) attributable to common shareholders	$	3,594	$	15,146	$	(41,438)	$	20,621


	Common Stock					Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders’ Equity		Redeemable Noncontrolling Interests
	Shares	Amount

Balance, March 31, 2020	149,962	$	1,316,401	$	430,726	$	(98,062)	$	1,649,065	$	3,323
Net income	—	—		5,450		—		5,450		—
Foreign currency translation adjustments	—	—		—		(1,896)		(1,896)		(20)
Unrealized gain on hedges, net of tax	—	—		—		20		20		—

Accretion of redeemable noncontrolling interests	—	—		(69)		—		(69)		69
Activity in company stock plans, net and other	78	217		—		—		217		—
Share-based compensation	—	1,913		—		—		1,913		—
Balance, June 30, 2020	150,040	$	1,318,531	$	436,107	$	(99,938)	$	1,654,700	$	3,372


☑						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	June 30, 2020		December 31, 2019

Contract assets (Note 10)	$	443	$	740
Prepaids	11,001		12,635
Deferred costs (Note 10)	25,774		28,340
Income tax receivable	18,927		1,261
Other receivable ⁽¹⁾	28,541		—
Other	7,132		7,474
Total other current assets	$	91,818	$	50,450


	June 30, 2020		December 31, 2019

Accrued payroll and related benefits	$	21,800	$	31,417
Investee losses in excess of investment (Note 4)	2,248		4,069
Deferred revenue (Note 10)	10,530		11,568
Asset retirement obligations (Note 14)	29,562		—
Derivative liability (Note 19)	—		1,002
Other	16,128		14,333
Total accrued liabilities	$	80,268	$	62,389


	Vessels		Facilities and Equipment		Total

Remainder of 2020	$	29,916	$	3,051	$	32,967
2021	54,347		5,598		59,945
2022	52,106		5,093		57,199
2023	34,580		4,562		39,142
2024	2,470		4,296		6,766
Thereafter	—		5,937		5,937
Total lease payments	$	173,419	$	28,537	$	201,956
Less: imputed interest	(18,665)		(5,285)		(23,950)
Total operating lease liabilities	$	154,754	$	23,252	$	178,006

Current operating lease liabilities	$	48,351	$	4,672	$	53,023
Non-current operating lease liabilities	106,403		18,580		124,983
Total operating lease liabilities	$	154,754	$	23,252	$	178,006


	June 30, 2020		December 31, 2019

Weighted average remaining lease term	3.5 years		4.0 years
Weighted average discount rate	7.53	%	7.54	%


	Well Intervention

Balance at December 31, 2019	$	7,157

Impairment loss ⁽¹⁾	(6,689)
Other adjustments ⁽²⁾	(468)
Balance at June 30, 2020	$	—


	Term Loan ⁽¹⁾		2022 Notes		2023 Notes		MARAD Debt		Nordea Q5000 Loan		Total

Less than one year	$	3,500	$	—	$	—	$	7,378	$	71,428	$	82,306
One to two years	28,000		125,000		—		7,746		—		160,746
Two to three years	—		—		—		8,133		—		8,133
Three to four years	—		—		125,000		8,538		—		133,538
Four to five years	—		—		—		8,965		—		8,965
Over five years	—		—		—		19,294		—		19,294
Gross debt	31,500		125,000		125,000		60,054		71,428		412,982
Unamortized debt discounts ⁽²⁾	—		(6,395)		(12,829)		—		—		(19,224)
Unamortized debt issuance costs ⁽³⁾	(286)		(971)		(2,068)		(3,293)		(278)		(6,896)
Total debt	31,214		117,634		110,103		56,761		71,150		386,862
Less: current maturities	(3,500)		—		—		(7,378)		(71,150)		(82,028)
Long-term debt	$	27,714	$	117,634	$	110,103	$	49,383	$	—	$	304,834


	June 30, 2020		December 31, 2019

Cumulative foreign currency translation adjustment	$	(99,938)	$	(64,455)
Net unrealized loss on hedges, net of tax ⁽¹⁾	—		(285)
Accumulated OCI	$	(99,938)	$	(64,740)


	Well Intervention			Robotics			Production Facilities			Intercompany Eliminations ⁽¹⁾			Total Revenue
Three months ended June 30, 2020
Short-term		$	55,368		$	36,084		$	—		$	—		$	91,452
Long-term		90,473			14,752			13,593			(11,123)			107,695
Total		$	145,841		$	50,836		$	13,593		$	(11,123)		$	199,147


Three months ended June 30, 2019
Short-term		$	62,788		$	28,701		$	—		$	—		$	91,489
Long-term		96,286			16,745			15,621			(18,413)			110,239
Total		$	159,074		$	45,446		$	15,621		$	(18,413)		$	201,728

Six months ended June 30, 2020
Short-term		$	137,692		$	58,525		$	—		$	—		$	196,217
Long-term		148,801			27,569			29,134			(21,553)			183,951
Total		$	286,493		$	86,094		$	29,134		$	(21,553)		$	380,168


Six months ended June 30, 2019
Short-term		$	92,593		$	53,631		$	—		$	—		$	146,224
Long-term		188,712			30,856			30,874			(28,115)			222,327
Total		$	281,305		$	84,487		$	30,874		$	(28,115)		$	368,551


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019

Operating lease cost	$	16,106	$	18,056	$	32,429	$	36,189
Variable lease cost	3,840		3,222		7,052		6,297
Short-term lease cost	9,992		4,804		17,166		8,962
Sublease income	(328)		(373)		(607)		(726)
Net lease cost	$	29,610	$	25,709	$	56,040	$	50,722


	Three Months Ended June 30,														Six Months Ended June 30,
	2020						2019						2020				2019

Taxes at U.S. statutory rate	$	1,087	21.0	%	$	4,137	21.0	%	$	(6,267)	21.0	%	$	4,482	21.0	%
Foreign tax provision	(2,166)		(41.8)		(1,664)		(8.4)		(1,116)		3.7		(1,914)		(9.0)
CARES Act	580		11.2		—		—		(5,234)		17.6		—		—
Subsidiary restructuring	—		—		—		—		(8,333)		27.9		—		—
Other	228		4.4		403		2.0		(414)		1.4		632		3.0
Income tax provision (benefit)	$	(271)	(5.2)	%	$	2,876	14.6	%	$	(21,364)	71.6	%	$	3,200	15.0	%


Date of Grant	Shares/ Units	Grant Date Fair Value Per Share/Unit		Vesting Period

January 2, 2020 ⁽¹⁾	369,938	$	9.63	33% per year over three years
January 2, 2020 ⁽²⁾	369,938	13.15		100% on January 2, 2023
January 2, 2020 ⁽³⁾	5,679	9.63		100% on January 1, 2022
April 1, 2020 ⁽³⁾	43,351	1.64		100% on January 1, 2022



	Three Months Ended June 30, 2020					Three Months Ended June 30, 2019
	Income		Shares	Income		Shares
Basic:
Net income attributable to common shareholders	$	5,450		$	16,854
Less: Undistributed earnings allocated to participating securities	(37)			(141)
Accretion of redeemable noncontrolling interests	(69)			(18)
Net income available to common shareholders, basic	$	5,344	148,971	$	16,695	147,521


Diluted:
Net income available to common shareholders, basic	$	5,344	148,971	$	16,695	147,521
Effect of dilutive securities:
Share-based awards other than participating securities	—		720	—		580

Net income available to common shareholders, diluted	$	5,344	149,691	$	16,695	148,101



	Six Months Ended June 30, 2020					Six Months Ended June 30, 2019
	Income		Shares	Income		Shares
Basic:
Net income (loss) attributable to common shareholders	$	(6,488)		$	18,172
Less: Undistributed earnings allocated to participating securities	—			(159)
Accretion of redeemable noncontrolling interests	(2,155)			(18)
Net income (loss) available to common shareholders, basic	$	(8,643)	148,917	$	17,995	147,471


Diluted:
Net income (loss) available to common shareholders, basic	$	(8,643)	148,917	$	17,995	147,471
Effect of dilutive securities:
Share-based awards other than participating securities	—		—	—		460

Net income (loss) available to common shareholders, diluted	$	(8,643)	148,917	$	17,995	147,931


AROs at January 1, 2020	$	28,258



Accretion expense	1,304
AROs at June 30, 2020	$	29,562


	Allowance for Credit Losses

Balance at December 31, 2019	$	—
Initial adoption of ASU 2016-13 (Note 1)	785
Provision for current expected credit losses ⁽¹⁾	2,424
Balance at June 30, 2020	$	3,209



	Level 1		Level 2		Level 3		Total		Valuation Approach
Assets:
Interest rate swaps	$	—	$	44	$	—	$	44	(c)

Liabilities:
Foreign exchange contracts — hedging instruments	—		401		—		401		(c)
Foreign exchange contracts — non-hedging instruments	—		601		—		601		(c)
Total net liability	$	—	$	958	$	—	$	958


	June 30, 2020						December 31, 2019
	Principal Amount ⁽¹⁾		Fair Value ^{(2) (3)}		Principal Amount ⁽¹⁾		Fair Value ^{(2) (3)}

Term Loan (matures December 2021)	$	31,500	$	30,476	$	33,250	$	32,959
Nordea Q5000 Loan (matures January 2021) ⁽⁴⁾	71,428		71,830		89,286		89,398
MARAD Debt (matures February 2027)	60,054		65,444		63,610		68,643
2022 Notes (mature May 2022)	125,000		105,625		125,000		134,225
2023 Notes (mature September 2023)	125,000		99,375		125,000		162,188
Total debt	$	412,982	$	372,750	$	436,146	$	487,413



	Balance Sheet Location	Fair Value
Asset Derivative Instruments:
Interest rate swaps	Other current assets	$	44

		$	44


Liability Derivative Instruments:

Foreign exchange contracts	Accrued liabilities	$	401


		$	401


	Unrealized Gain (Loss) Recognized in OCI
	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019

Foreign exchange contracts	$	—	$	(24)	$	(54)	$	(58)
Interest rate swaps	1		(254)		(41)		(369)
	$	1	$	(278)	$	(95)	$	(427)


	Location of Gain (Loss) Reclassified from Accumulated OCI into Earnings	Gain (Loss) Reclassified from Accumulated OCI into Earnings
				Three Months Ended June 30,									Six Months Ended June 30,
				2020			2019			2020			2019

Foreign exchange contracts	Cost of sales	$	—		$	(2,185)		$	(455)		$	(4,263)
Interest rate swaps	Net interest expense	(25)			210			3			442
		$	(25)		$	(1,975)		$	(452)		$	(3,821)


	Location of Loss Recognized in Earnings	Loss Recognized in Earnings
				Three Months Ended June 30,									Six Months Ended June 30,
				2020			2019			2020			2019

Foreign exchange contracts	Other expense, net	$	—		$	(2)		$	(81)		$	(42)

		$	—		$	(2)		$	(81)		$	(42)


	Three Months Ended June 30,						Increase/ (Decrease)
	2020		2019		Amount		Percent
Net revenues —
Well Intervention	$	145,841	$	159,074	$	(13,233)	(8)	%
Robotics	50,836		45,446		5,390		12	%
Production Facilities	13,593		15,621		(2,028)		(13)	%

Intercompany eliminations	(11,123)		(18,413)		7,290
	$	199,147	$	201,728	$	(2,581)	(1)	%

Gross profit (loss) —
Well Intervention	$	15,287	$	30,237	$	(14,950)	(49)	%
Robotics	11,092		5,137		5,955		116	%
Production Facilities	3,670		4,900		(1,230)		(25)	%
Corporate, eliminations and other	(473)		(340)		(133)
	$	29,576	$	39,934	$	(10,358)	(26)	%

Gross margin —
Well Intervention	10%		19%
Robotics	22%		11%
Production Facilities	27%		31%
Total company	15%		20%

Number of vessels or robotics assets ⁽¹⁾ / Utilization ⁽²⁾
Well Intervention vessels	7/72%		6/94%
Robotics assets ⁽³⁾	49/34%		51/41%
Chartered robotics vessels	6/95%		4/92%


	June 30, 2020		December 31, 2019

Net working capital	$	191,532	$	153,508
Long-term debt ⁽¹⁾	304,834		306,122
Liquidity ⁽²⁾	350,814		379,533


	Total ⁽¹⁾		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years

Term Loan	$	31,500	$	3,500	$	28,000	$	—	$	—
Nordea Q5000 Loan	71,428		71,428		—		—		—
MARAD Debt	60,054		7,378		15,879		17,503		19,294
2022 Notes ⁽²⁾	125,000		—		125,000		—		—
2023 Notes ⁽³⁾	125,000		—		—		125,000		—
Interest related to debt ⁽⁴⁾	41,179		16,565		20,101		3,702		811
Property and equipment	3,942		3,812		130		—		—
Operating leases ⁽⁵⁾	311,727		100,465		176,947		30,265		4,050
Total cash obligations	$	769,830	$	203,148	$	366,057	$	176,470	$	24,155


Period	(a) Total number of shares purchased ⁽¹⁾	(b) Average price paid per share		(c) Total number of shares purchased as part of publicly announced program	(d) Maximum number of shares that may yet be purchased under the program ⁽²⁾
April 1 to April 30, 2020	—	$	—	—	6,518,966
May 1 to May 31, 2020	—	—		—	6,585,674
June 1 to June 30, 2020	—	—		—	6,585,674
	—	$	—	—