HOUSTON, April 1, 2008 /PRNewswire-FirstCall/ -- Superior Offshore
International, Inc. (NASDAQ:DEEP) (the "Company") today announced
it was unable to file its Annual Report on Form 10-K for the year
ended December 31, 2007 (the "Form 10-K") within the prescribed
time period because the Company's management needs additional time
to complete the financial statement review and approval process and
needs to provide additional documentation to its independent
registered public accounting firm, KPMG LLP, in order to resolve
certain pending items. In addition, management's negotiations to
obtain additional financing in order to address the Company's
liquidity position, as further described below, has contributed to
this delay. If the Company is unable to obtain adequate additional
or alternate financing, the Company expects that KPMG LLP would be
required to include an explanatory paragraph in their opinion with
respect to the Company's financial statements for the year ended
December 31, 2007 expressing doubt about the ability of the Company
to continue as a going concern. Even if the Company obtains
additional financing, KPMG LLP may still conclude that it is
necessary to include such a paragraph in its opinion. Liquidity and
Capital Resources The Company presently has extremely limited
liquidity and requires substantial additional financing to fund its
operations and pay its obligations. As of March 31, 2008, the
Company estimates on a preliminary basis that its total current
liabilities exceeded its total current assets, before considering
current deferred tax assets, by approximately $7.0 million. As of
March 31, 2008, the Company had less than approximately $1.8
million outstanding under its senior secured credit facility with
JPMorgan Chase Bank, N.A. The Company is currently in default under
such credit facility. The Company's borrowing base capacity under
such credit facility, which is affected by the composition of the
Company's eligible domestic accounts receivable, was not sufficient
to enable the Company to borrow significant additional funds under
the facility as of March 31, 2008. Additional Financing On February
1, 2008, the Company retained Tudor, Pickering, Holt & Co.
Securities, Inc. as the Company's financial advisor to assist the
Company's Board of Directors in exploring a range of financial and
strategic alternatives. These alternatives include, among others,
obtaining additional or alternate sources of debt or equity
financing, a sale or merger of the Company or other strategic
transaction, a sale of certain company assets and execution of the
Company's business plan. In the event that the Company is unable to
obtain additional financing in early April 2008, the Company will
need to sell additional assets or obtain capital from other sources
to fund its operations and pay its obligations. Additional
indebtedness or equity financing may not be available to the
Company or, if available, such additional indebtedness or equity
financing may not be available on a timely basis or on terms
acceptable to the Company. In addition, the Company can provide no
assurance as to the timing of any asset sales or the proceeds that
could be realized by the Company from any such asset sales. Failure
to obtain adequate financing or to raise funds from asset sales,
should the need develop, could impair the Company's ability to meet
its working capital requirements, to fund vessel charter
obligations as they become due, to make necessary capital
expenditures, to repay the Company's debts as they come due and
otherwise to operate its business, and ultimately could require the
Company to liquidate or initiate bankruptcy proceedings. Senior
Management Changes As previously announced, on January 27, 2008
James J. Mermis resigned as Chief Executive Officer and Director
effective on such date, and on February 8, 2008 Roger D. Burks
resigned as Chief Financial Officer and Director, effective March
31, 2008. On January 27, 2008, the Board of Directors of the
Company appointed E. Donald Terry, previously an independent
director of the Company, to serve as Interim President and Chief
Executive Officer of the Company until a successor is named. On
February 11, 2008, the Board of Directors of the Company appointed
Thomas E. Daman to serve as the Company's Executive Vice President
and Chief Financial Officer effective as of April 1, 2008. Cost
Savings Initiatives Since the appointment of Mr. Terry as Interim
President and Chief Executive Officer, the Company has undertaken a
number of initiatives to reduce costs and improve its efficiency
and results of operations. In January 2008, the Company terminated
the charter for the Adams Surveyor. In February 2008, the Company
restructured its ROV division and terminated approximately 43
persons in that division. In March 2008, the Company closed its
fabrication operation and approximately 80 individuals employed at
that facility were terminated or resigned. In addition, in March
2008 the Company terminated approximately 11 persons on its
corporate staff. Because of the timing of these initiatives, the
benefit of the cost savings will not be fully reflected in the
Company's results of operations until the second quarter of 2008.
The Company is continuing to evaluate its operations and cost
structure in an effort to identify additional cost savings. Asset
Sales and Contract Terminations As previously announced, in January
2008, the Company sold the Superior Achiever, which was under
construction, to Hornbeck Offshore Services LLC, or "Hornbeck," for
approximately $70.0 million, the proceeds of which the Company
used, among other things, to repay in full its term loan obligation
to Fortis Capital Corp. and to repay a portion of its borrowings
under its senior secured credit facility with JPMorgan Chase Bank.
Following the sale, the Company has no further obligations to the
shipbuilder with respect to the construction of the vessel;
however, if certain construction costs for the Superior Achiever
exceed $120.0 million, the Company will reimburse Hornbeck for the
amount of such excess, up to $8.0 million. In addition, in
connection with the sale of the Superior Achiever, the Company and
Hornbeck entered into a five-year time charter for the Superior
Achiever, or under certain circumstances, the HOS Iron Horse. The
Company has the option to terminate the charter by giving 90 days'
advance notice and paying a termination fee prior to the end of
each six-month period within the term. The Company has provided
Hornbeck with an $8.0 million cash secured letter of credit to
secure its obligations to Hornbeck. On February 29, 2008, the
Company sold its subsidiary, Superior Offshore South Africa (Pty)
Ltd., which owns the subsea construction, commercial diving,
offshore crude oil and natural gas logistical support and marine
salvage businesses that were acquired in December 2006 from Subtech
Diving and Marine, in exchange for the settlement of a remaining
liability of approximately $2.5 million under the related purchase
agreement. The Company has received a refundable deposit of $1.8
million for the sale or charter of the Gulf Diver V, one of the
Company's four-point vessels, from a related party. The Company
expects to consummate the sale, which is subject to lender approval
and definitive documentation, in early April 2008. The Company may
be required to recognize an impairment of up to $2.0 million in
connection with the sale of the vessel. The Company may sell
certain additional assets to generate cash to fund its operations
and to pay its obligations. The assets that may be sold include,
among others, two work class ROVs, and certain equipment previously
used in the Company's fabrication operations. Operations Update The
Company has entered into a contract for the Superior Endeavor to
work in Saudi Arabia for approximately one year. The vessel is
currently in transit and is expected to arrive in approximately two
weeks. The Company has entered into a subcharter for the Gulmar
Condor, which the Company has chartered until April 2009, to work
in the U.S. Gulf of Mexico for approximately six months, beginning
March 10, 2008. On March 24, 2008, the charter for the Gulmar
Falcon was terminated by the vessel owner due to the Company's
inability to pay its obligations thereunder when due. Although the
vessel owner has terminated the charter for Gulmar Falcon, the
Company is continuing to use the vessel on a short term basis until
it completes its current project. The Seamec III, which the Company
has chartered until July 2008, is currently in Trinidad. The
Company currently expects the vessel to return to the U.S. Gulf of
Mexico, upon settlement of certain vendor invoices in the amount of
approximately $1.0 million. During the first quarter of 2008, the
Company experienced very low utilization and day rates for its four
point vessels, which are used in the U.S. Gulf of Mexico. First
Quarter of 2008 Update The Company has not yet finalized its
financial statements for the three months ended March 31, 2008.
Based on preliminary unaudited financial information that is not
yet complete and may materially change, the Company currently
expects that its revenues for the first quarter of 2008 will not
exceed $21.0 million and that its net loss for the first quarter of
2008 will be more than $32.0 million. As described above under
"Cost Savings Initiatives", the Company has undertaken a number of
cost savings initiatives the benefit of which will not be fully
reflected in the Company's results of operations until the second
quarter of 2008. If the Company incurs any pre-tax loss for the
remainder of 2008 in excess of the amount recognized in the first
quarter of 2008, management does not expect the Company to
recognize any additional tax benefits associated with that loss.
The Company expects to record the following charges in the first
quarter of 2008, which are reflected in the calculation of the
Company's estimated net loss for the quarter disclosed above: --
approximately $4.6 million related to the disposition of the
Company's subsidiary, Superior Offshore South Africa (Pty) Ltd., as
discussed above; -- approximately $650,000 on the sale of the
Superior Achiever, as discussed above; -- approximately $5.5
million related to the cancellation of a contract to build a
portable Saturation Diving System with Unique Systems LLC; --
approximately $825,000 related to the early termination of the
charter for the Adams Surveyor; -- approximately $3.5 million
related to the early termination of the Gulmar Falcon, as discussed
above; -- a severance charge of approximately $675,000 and $1.6
million stock-based compensation severance in the first quarter of
2008 related to Mr. Burks' resignation from the Company and the
disposition of the Company's subsidiary, Superior Offshore South
Africa (Pty) Ltd., which is discussed above; and -- approximately
$1.4 million for early extinguishment of debt in conjunction with
the payoff of the term loan with Fortis Capital Corp. upon the sale
of the Superior Achiever in January 2008, as described above. The
foregoing estimates include forward-looking statements and are
subject to significant risks and uncertainties. Accordingly, the
Company's final results for the first quarter of 2008 may be
materially different than the foregoing estimates. Pending
Litigation As previously announced, several putative class-action
lawsuits have been filed against the Company alleging violations of
the federal securities laws. In addition, two shareholder
derivative lawsuits have been filed alleging violations of various
laws. The Company believes that each of these lawsuits is without
merit and the Company will defend itself vigorously. Preliminary
Unaudited Results of Operations -- Year Ended December 31, 2007 The
following results of operations are preliminary and have not been
audited or otherwise reviewed by the Company's independent auditors
or the Company's Audit Committee. In addition, the following
preliminary unaudited results of operations have not been reviewed
by all members of the Company's management that are expected to
review such information before the filing of the Form 10-K. The
following preliminary unaudited results of operations constitute
forward-looking statements and are subject to significant risks and
uncertainties. Accordingly, the Company's final, audited results of
operations could be materially different from the preliminary
unaudited results set forth below. Revenues. The Company
anticipates reporting revenues for the year ended December 31, 2007
of $260.8 million compared with $243.4 million for the year ended
December 31, 2006, an increase of $17.4 million. The Company
anticipates reporting that total vessel revenue days were 2,205 in
2007 compared with 2,686 in 2006, a decrease of 17.9%; that owned
and long-term charter vessel revenue days were 1,164 in 2007
compared with 1,309 in 2006, a decrease of 11.1%, and that
short-term charter vessel revenue days were 1,041 in 2007 compared
with 1,377 in 2006, a decrease of 24.4%. Vessel utilization was 54%
in 2007 compared to 89% in 2006. The increase in the Company's
revenues from the year ended December 31, 2006 to the year December
31, 2007 was mainly due to the Company's British Petroleum Trinidad
& Tobago project, which commenced early in the third quarter of
2007. In addition, the Company's revenues in 2007 were favorably
affected by continued provision of diving personnel and technical
expertise on vessels and platforms owned and operated by third
parties. Revenues were negatively affected by the drydocking of the
Superior Endeavour for scheduled upgrades beginning in early
February 2007 and the drydocking of the Gulmar Falcon for scheduled
upgrades beginning in July 2007. The Company placed the Superior
Endeavour and the Gulmar Falcon back in service in September 2007
and October 2007, respectively. The Superior Endeavour, despite
re-entering service in the third quarter of 2007, did not generate
revenues until early October, while the Gulmar Falcon did not
generate revenues until early November. The Company anticipates
reporting that revenues relating to the Company's fabrication
facility for the year ended December 31, 2007 were $7.8 million
compared with $13.3 million for the year ended December 31, 2006, a
decrease of $5.5 million, due to a decrease in the number of Gulf
of Mexico projects requiring fabrication. Costs of Revenues
(excluding depreciation and amortization). Costs of revenues
consist mainly of vessel charter costs, labor costs and related
employee benefits, consumables and third-party equipment rentals.
The Company anticipates reporting that costs of revenues for the
year ended December 31, 2007 were $215.8 million compared with
$141.8 million for the year ended December 31, 2006, an increase of
$74.0 million. This increase was substantially due to increased
third party equipment and vessel rentals and related mobilization
of $123.1 million in 2007 compared with $76.0 million for 2006, and
a $7.2 million charge with respect to the charter for the Toisa
Puma and its subsequent termination. In addition, labor costs and
related employee benefits costs were $59.7 million for the year
December 31, 2007 compared with $33.1 million for the year ended
December 31, 2006, due to the addition of the Company's foreign
subsidiaries. Increased downtime for certain of the Company's
vessels due to equipment upgrades or low utilization also
contributed to higher costs, as these vessels were unable to
generate sufficient revenues to offset labor and other operating
costs associated with the vessels. Operating Expenses. Operating
expenses consist of selling, general and administrative costs not
directly related to a specific project or job, depreciation and
amortization, disposal of assets, insurance and bad debt expense.
The Company anticipates reporting that operating expenses for the
year ended December 31, 2007 were $73.5 million compared with $27.4
million for the year ended December 31, 2006, an increase of $46.1
million. The Company anticipates reporting that this increase was
attributable to several factors: salaries, labor costs and related
employee benefits increased $4.9 million due to increases in
salaries and the size of the Company's staff; stock based
compensation increased $12.6 million due to awards made under the
2007 stock incentive plan; professional fees increased $8.5 million
due to reporting and other obligations under the Securities
Exchange Act of 1934, compliance with the Sarbanes-Oxley Act, as
well as several financing transactions; an impairment charge of
$4.3 million on the Gulf Diver IV, which in December 2007
management decided to sell; and bad debt expense of $12.2 million
due to write offs associated with four customers due to contract
disputes and operational considerations. The Company also recorded
a cash severance charge of $1.0 million and stock based
compensation charge of $4.9 million in connection with the
resignations of R. Joshua Koch, Jr. and Patrice Chemin from the
Company in the fourth quarter of 2007. In addition, the Company is
attempting to receive final documentation from two foreign-owned
companies that operated on its behalf in U.S. waters in 2005, 2006
and 2007. This documentation, which the Company currently
anticipates receiving, is to mitigate the income taxes due on these
foreign companies' U.S. operations. If the Company is unable to
receive such documentation, payments of approximately $3.2 million
will be made to the U.S. Internal Revenue Service on behalf of the
foreign companies and rebilled to one of the two companies and the
Company anticipates a charge of $1.5 million will be taken with
respect to the other company. Non-Operating Expenses. The Company
anticipates reporting that interest income (expense), net for the
year ended December 31, 2007 was $(1.0) million compared with $0.1
million for the year ended December 31, 2006, an increase of $(0.9)
million. Loss on extinguishment of debt was $4.6 million for the
year ended December 31, 2007, compared with $0 for the year ended
December 31, 2006, due to the write off of debt issuance costs of
$3.9 million upon early payment of the Company's senior secured
term loan and a commitment fee of $0.7 million with respect to a
potential new term loan. Provision (Benefit) for Income Taxes. The
Company anticipates reporting that benefit for income taxes for the
year ended December 31, 2007 was $(13.8) million compared with a
provision of $25.8 million for the year ended December 31, 2006, a
decrease of $39.6 million. This decrease was due to lower
profitability. The Company anticipates reporting that its effective
tax rate was 40.4% for the year ended December 31, 2007 and 34.8%
for the year ended December 31, 2006. FORWARD-LOOKING STATEMENTS
This Notification of Late Filing on Form 12b-25 contains statements
that are "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933, as amended, and the Section 21E
of the Securities Exchange Act of 1934, as amended. All statements
contained in this notice, other than statements of historical fact,
are, or may be deemed to be, forward-looking statements. Such
forward-looking statements only speak as of the date of this notice
and the Company assumes no obligation to update the information
included in this notice. Such forward-looking statements include
information concerning the Company's estimated results of
operations, possible sources of capital, possible strategic
alternatives, possible asset sales and the duration of customer
projects and contracts. These statements often include words such
as "believe," "expect," "anticipate," "intend," "plan," "estimate"
or similar expressions. These statements are not guarantees of
performance or results and they involve risks, uncertainties and
assumptions, including the risk of continued delay in the
completion of the Company's financial statements. Although the
Company believes that these forward-looking statements are based on
reasonable assumptions, there are many factors that could affect
the Company's actual financial results or results of operations and
could cause actual results to differ materially from those in the
forward-looking statements. In addition, investors should also
review the factors contained in the "Risk Factors" section of the
Company's Prospectus dated April 19, 2007 and filed with the
Securities and Exchange Commission on April 20, 2007. Contacts:
Superior Offshore International Thomas E. Daman, CFO 713-910-1875
DRG&E Ken Dennard 713-529-6600 DATASOURCE: Superior Offshore
International, Inc. CONTACT: Thomas E. Daman, CFO of Superior
Offshore International, +1-713-910-1875, ; or Ken Dennard of
DRG&E, +1-713-529-6600, , for Superior Offshore International
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