Operating revenue from continuing operation for the third quarter of 2010 amounted to USD 120.4 million, an increase of USD 0.5 million from the third quarter of 2009 and a reduction of USD 6.5 million from the previous quarter.
Gross result from continuing operation for the third quarter of 2010 amounted to USD 22.9 million, an increase of USD 1.8 million from the third quarter of 2009 and an increase of USD 0.9 million from the previous quarter.
Administration costs were MUSD 20.6 for the quarter, compared to MUSD 17.7 last quarter. Third quarter 2010 includes one-time restructuring costs of MUSD 1.6 related to severance payments. The remaining difference is due to slightly higher operating costs in Middle East
combined and accrued provisions for bad debt. The EBITDA from continuing operations for the third quarter ended at USD 2.3 million, an increase of USD 0.4 million from third quarter 2009 and a reduction of USD 2.1 million from previous quarter.
Depreciation was USD 1.9 million, same level as last quarter. The operating result (EBIT) from continuing operations ended at USD 0.5 million, a reduction of USD 0.3 million from the third quarter of 2009 and of USD 2.1 million from the previous quarter.
Third quarter net interest costs were USD 3.0 million, slightly up from USD 2.9 million last quarter. Other interest expenses amounting to USD 0.3 million is amortization of accrued expenses connected to the 2009 bond loan.
Other financial items ended with a cost of USD 2.3 million. This is an unrealized currency loss of USD 7.9 million on the bond loans, offset by gain from hedging instruments of USD 6.5 million.
Pre-tax result from continuing operations for the third quarter of 2010 was a loss of USD 5.1 million, USD 3.2 million below the result for the third quarter of 2009 and USD 5.3 million below from the previous quarter. Tax expenses are booked with USD 0.9 million for the
third quarter of 2010. The result from discontinued operation is booked with an loss of USD 0.7 million.
IMPORTANT EVENTS AFTER Q3
In November EMS SS Spain were awarded a four year supply contract for provisions with a NATO military customer. The contract has a total value of USD 100 million over the four years. It is expected to be fully operational at the end of the first quarter 2011. The Company has since the summer been negotiating amendments to its current bond loan agreements. As part of the restructuring process, the Company has called for a bondholders’ meeting 26 November in order to vote for a financial restructuring plan involving restructuring and amendments of the loan agreements for the;
i) FRN Eitzen Maritime Services ASA Callable Bond Issue 2007/2010 (the “FRN 2007 Loan”);
ii) 13.15% Eitzen Maritime Services ASA Callable Bond Issue 2009 / 2012 (the “2009 Loan”); and
iii) FRN Eitzen Maritime Services ASA Callable Bond Issue 2009/2012 (the “FRN 2009 Loan”). The proposed Financial Restructuring plan (“Restructuring”) includes a proposal for a new debt repayment schedule as well as a strengthening of the Company’s balance sheet through an issue of new equity. The objective of the Restructuring is to secure a viable financial platform for Eitzen Maritime Services going forward and a debt amortization schedule that better fits the current operating cash flow and market conditions. The Restructuring is described in the summons to bondholders’ meetings for the FRN 2007 Loan, the 2009 Loan and the FRN 2009 Loan. The bondholders’ meeting will be held on 26 November 2010 at 13:00 hours (CET). In the period between the bondholders’ meeting and the completion of the Restructuring, the Company has requested the bondholders for a general temporary waiver of the Company’s obligations under the present bond loan agreements. Bondholders representing minimum 66.67% of the three outstanding bond loans have committed to vote in favor of the proposed Restructuring and the temporary waivers, securing the final approval of the financial restructuring. The proposed amendments to the bond loan agreements are furthermore conditional on the completion of the Equity Issue as described below. As part of the proposed Restructuring, the Company will complete an Equity issue of minimum NOK 146,250,000 (the “Equity Issue”). Camillo Eitzen & Co ASA, the main shareholder of the Company, has agreed to guarantee and subscribe for up to NOK 73,125,000 in the Equity Issue.
The remainder shall be guaranteed by the bondholders in the 2009 Loan and the FRN 2009 Loan together through a conversion of accumulated interest and principal at a price of minimum NOK 0.60 per share (the “Bondholder Equity Guarantee”). The booked equity after the new issue of shares will be approximately USD 84.0 million, with a potential deduction of USD 4.1 million related to the above mentioned put option that the buyer of ship management has, using his right to settle in the form of 34.2 million EMS shares. The Equity Issue is conditional upon approval of the material elements of the Restructuring by the bondholders in the FRN 2007 Loan, the 2009 Loan and the FRN 2009 Loan, and shareholders’ approval. A notice for an extraordinary general meeting was submitted November 22nd.
Camillo Eitzen & Co ASA and affiliated companies have committed to vote in favor of the Equity Issue. The proposed amendments to the bond loan agreements are furthermore conditional on the completion of the Equity Issue. Further details on timing of the Equity Issue will be announced later. It is anticipated that the Equity Issue will be completed through a private placement shortly following the scheduled bondholders meetings, where existing shareholders will be invited to participate. The company has incurred restructuring and refinancing cost which will be booked in the fourth quarter. Some additional expenses in relation to the organizational changes are also anticipated and will have a one-time negative effect on the results in the fourth quarter.
OPERATIONS During the quarter EMS reorganized its operations, and introduced an organization which represents the new group subsequent to the divestment of the Ship Management activities. In connection to this there were changes done to the management. In connection to this EMS booked extraordinary charges of USD 1.6 million to cover costs related to the change. The new organization consists of 4 regional VPs and VP for procurement, sales and IT plus a CFO all reporting directly to the CEO. The reported revenue is flat compared to the third quarter 2009. However the development in our key sectors has been very positive with revenues from the Merchant sector reaching USD 44.2 million (+17%), Offshore sector USD 9.9 million (+30%) and Military USD 48.5 million (+7%) compared to third quarter 2009. This strong growth fully compensate for revenue reduction from divested activities and other adjustments. Procurement has been a key focus area. During the first nine month EMS has used external consultant to accelerate development and implementation of a new supply chain structure. This is now transferred into a VP in the line organization with the responsibility to deliver the expected synergies. Overall costs of the project have been USD 1.4 million, which has been included in the results YTD pro rata per quarter.
Gross result from continuing operation for the third quarter of 2010 amounted to USD 22.9 million, an increase of USD 1.8 million from the third quarter of 2009 and an increase of USD 0.9 million from the previous quarter.
Administration costs were MUSD 20.6 for the quarter, compared to MUSD 17.7 last quarter. Third quarter 2010 includes one-time restructuring costs of MUSD 1.6 related to severance payments. The remaining difference is due to slightly higher operating costs in Middle East
combined and accrued provisions for bad debt. The EBITDA from continuing operations for the third quarter ended at USD 2.3 million, an increase of USD 0.4 million from third quarter 2009 and a reduction of USD 2.1 million from previous quarter.
Depreciation was USD 1.9 million, same level as last quarter. The operating result (EBIT) from continuing operations ended at USD 0.5 million, a reduction of USD 0.3 million from the third quarter of 2009 and of USD 2.1 million from the previous quarter.
Third quarter net interest costs were USD 3.0 million, slightly up from USD 2.9 million last quarter. Other interest expenses amounting to USD 0.3 million is amortization of accrued expenses connected to the 2009 bond loan.
Other financial items ended with a cost of USD 2.3 million. This is an unrealized currency loss of USD 7.9 million on the bond loans, offset by gain from hedging instruments of USD 6.5 million.
Pre-tax result from continuing operations for the third quarter of 2010 was a loss of USD 5.1 million, USD 3.2 million below the result for the third quarter of 2009 and USD 5.3 million below from the previous quarter. Tax expenses are booked with USD 0.9 million for the
third quarter of 2010. The result from discontinued operation is booked with an loss of USD 0.7 million.
IMPORTANT EVENTS AFTER Q3
In November EMS SS Spain were awarded a four year supply contract for provisions with a NATO military customer. The contract has a total value of USD 100 million over the four years. It is expected to be fully operational at the end of the first quarter 2011. The Company has since the summer been negotiating amendments to its current bond loan agreements. As part of the restructuring process, the Company has called for a bondholders’ meeting 26 November in order to vote for a financial restructuring plan involving restructuring and amendments of the loan agreements for the;
i) FRN Eitzen Maritime Services ASA Callable Bond Issue 2007/2010 (the “FRN 2007 Loan”);
ii) 13.15% Eitzen Maritime Services ASA Callable Bond Issue 2009 / 2012 (the “2009 Loan”); and
iii) FRN Eitzen Maritime Services ASA Callable Bond Issue 2009/2012 (the “FRN 2009 Loan”). The proposed Financial Restructuring plan (“Restructuring”) includes a proposal for a new debt repayment schedule as well as a strengthening of the Company’s balance sheet through an issue of new equity. The objective of the Restructuring is to secure a viable financial platform for Eitzen Maritime Services going forward and a debt amortization schedule that better fits the current operating cash flow and market conditions. The Restructuring is described in the summons to bondholders’ meetings for the FRN 2007 Loan, the 2009 Loan and the FRN 2009 Loan. The bondholders’ meeting will be held on 26 November 2010 at 13:00 hours (CET). In the period between the bondholders’ meeting and the completion of the Restructuring, the Company has requested the bondholders for a general temporary waiver of the Company’s obligations under the present bond loan agreements. Bondholders representing minimum 66.67% of the three outstanding bond loans have committed to vote in favor of the proposed Restructuring and the temporary waivers, securing the final approval of the financial restructuring. The proposed amendments to the bond loan agreements are furthermore conditional on the completion of the Equity Issue as described below. As part of the proposed Restructuring, the Company will complete an Equity issue of minimum NOK 146,250,000 (the “Equity Issue”). Camillo Eitzen & Co ASA, the main shareholder of the Company, has agreed to guarantee and subscribe for up to NOK 73,125,000 in the Equity Issue.
The remainder shall be guaranteed by the bondholders in the 2009 Loan and the FRN 2009 Loan together through a conversion of accumulated interest and principal at a price of minimum NOK 0.60 per share (the “Bondholder Equity Guarantee”). The booked equity after the new issue of shares will be approximately USD 84.0 million, with a potential deduction of USD 4.1 million related to the above mentioned put option that the buyer of ship management has, using his right to settle in the form of 34.2 million EMS shares. The Equity Issue is conditional upon approval of the material elements of the Restructuring by the bondholders in the FRN 2007 Loan, the 2009 Loan and the FRN 2009 Loan, and shareholders’ approval. A notice for an extraordinary general meeting was submitted November 22nd.
Camillo Eitzen & Co ASA and affiliated companies have committed to vote in favor of the Equity Issue. The proposed amendments to the bond loan agreements are furthermore conditional on the completion of the Equity Issue. Further details on timing of the Equity Issue will be announced later. It is anticipated that the Equity Issue will be completed through a private placement shortly following the scheduled bondholders meetings, where existing shareholders will be invited to participate. The company has incurred restructuring and refinancing cost which will be booked in the fourth quarter. Some additional expenses in relation to the organizational changes are also anticipated and will have a one-time negative effect on the results in the fourth quarter.
OPERATIONS During the quarter EMS reorganized its operations, and introduced an organization which represents the new group subsequent to the divestment of the Ship Management activities. In connection to this there were changes done to the management. In connection to this EMS booked extraordinary charges of USD 1.6 million to cover costs related to the change. The new organization consists of 4 regional VPs and VP for procurement, sales and IT plus a CFO all reporting directly to the CEO. The reported revenue is flat compared to the third quarter 2009. However the development in our key sectors has been very positive with revenues from the Merchant sector reaching USD 44.2 million (+17%), Offshore sector USD 9.9 million (+30%) and Military USD 48.5 million (+7%) compared to third quarter 2009. This strong growth fully compensate for revenue reduction from divested activities and other adjustments. Procurement has been a key focus area. During the first nine month EMS has used external consultant to accelerate development and implementation of a new supply chain structure. This is now transferred into a VP in the line organization with the responsibility to deliver the expected synergies. Overall costs of the project have been USD 1.4 million, which has been included in the results YTD pro rata per quarter.