Acquirers Small and Micro Deep Value ETF

Third-quarter 2007 revenue was $75.5 million, versus $41.9 million in Q2 2007 and $64.4 million in Q3 2006. Adjusted EBITDA was $11.1 million versus $22.8 million in Q3 2006, and net income was $3.6 million, or $0.14 per diluted share, versus $13.7 million, or $0.92 per diluted share, in Q3 2006. SG&A was $10.3 million, including $3.3 million of non-cash stock compensation, and depreciation/amortization was $2.2 million. One-time charges in Q3 totaled $900,000, or $0.03 per share. Full-year 2007 revenue is expected to be $265 million to $275 million, fourth-quarter adjusted EBITDA is expected to be $16 million to $18 million, and fourth-quarter EPS is expected to be $0.12 to $0.16, including one-time charges related to severance and debt extinguishment of $0.16 to $0.20 per share. For 2008, revenue is expected to be $320 million to $350 million, excluding any revenue from the Superior Achiever. Capital expenditures through September 30 were $117 million, with $17 million expected in Q4 and about $39 million remaining for the Achiever after that.

Jim Mermis framed the quarter as a step forward, but not yet the end goal, saying the company is moving from a Gulf of Mexico shallow-water operator toward an international, project-driven subsea construction and project management business. He highlighted the pending Ocean Flow acquisition, the Superior Achiever, and expansion in Trinidad, the Middle East, and Africa as the core of that transition. His tone was constructive and strategic, with repeated emphasis on higher-margin, longer-term, deeper-water work.

Roger Burks focused on the quarter’s financial drivers and the outlook. He cited $75.5 million of revenue, $10.3 million of SG&A, $2.2 million of D&A, $3.6 million of net income, and $11.1 million of adjusted EBITDA, and noted that drydockings of the Endeavor and Gulmar Falcon plus weak four-point and callout diving demand hurt results. He also said total long-term debt was $59.2 million, capital spending reached $117 million through September 30, $17 million is expected in Q4, and about $39 million remains for the Achiever; he added that the company amended covenants, received waivers, and is working on term-loan refinancing.

Analysts pressed management on international opportunities, the soft Gulf of Mexico market, debt covenant issues, and insider stock sales. Management said it had about $300 million of bids outstanding in West Africa and the Middle East, with awards expected soon, and said the four-point vessels may be moved to Africa or the Middle East where utilization and day rates are better. On liquidity, Roger Burks said the company was comfortable with its position after covenant changes and waivers, and that it expected a commitment letter from an alternative term-loan lender soon. On insider selling, Jim Mermis said some sales were for taxes and diversification, and that he still held over eight times his yearly earnings in company stock.