News & Media
Odyssey Obtains Default Judgement on Admirality Arrest of Shipwreck
Tampa, FL - March 16, 2007 - Odyssey Marine Exploration (AMEX: OMR), a leader in the field of deep-ocean shipwreck exploration, today reported full year 2006 financial results.
For the full year 2006, Odyssey reported revenues of $5.1 million, compared to $10.0 million in 2005. The Company reported a net loss of $19.1 million for the full year 2006, compared to a net loss of $14.9 million in 2005. The net loss per share for the full year 2006 was $.41, compared to a net loss per share of $.35 in 2005.
While overall expenses increased $3.1 million from $20.6 million in 2005 to $23.7 million in 2006, marketing, general and administrative expenses decreased $.6 million. Vessel operations expenses increased $2.8 million, primarily due to the addition of a new search and inspection vessel as part of Odyssey's strategy to strengthen its core business of locating and excavating shipwrecks. Odyssey attributed the 2006 annual loss to several factors. The revenue decrease of $4.9 million in 2006 is primarily due to a lower availability of high-value numismatic gold coins, sales to fewer independent coin dealers and a shift to a higher volume of lower priced silver coins. New sales and marketing initiatives are being implemented to improve opportunities to increase revenue in 2007. The expense increase is due to higher operations and research costs, the addition of a chartered vessel for the Company's "Atlas" search project, the purchase and operation of a new search and inspection vessel, and an acceleration in estimated useful lives of certain assets and leasehold improvements in 2006 as a result of the Company's lease termination in New Orleans.
"While this year's results fell short of our expectations we continue to focus on strengthening the pillars that our unique industry rests on - research, operational resources and marketing. In 2006 we upgraded our fleet and expanded operational capabilities with an upgraded search and inspection platform, added an additional recovery Remotely Operated Vehicle, and upgraded search technology. We have built up our R&D resources and technological capabilities to meet the increasing sophistication our projects demand. We continue to devote significant efforts to developing and solidifying a variety of channels to market our coins, artifacts, and shipwreck merchandise and are seeing very promising results, including a steadily rising retail price realized in our shipwreck coin sales. The good news is that the marketing channels that we have developed should prove valuable for future finds as well as for the substantial inventory of silver coins that remain in our inventory." said John Morris, Odyssey's Chief Executive Officer.
Revenues are generated primarily through the sale of gold and silver coins, but also include other artifacts and merchandise. Revenues for 2006 and 2005 were $5.1 million and $10.0 million, respectively, representing sales volume of gold and silver coins of approximately 2,700 coins in 2006 and 2,500 coins in 2005. The volume mix of gold and silver coins in 2006 was approximately 17% and 83%, respectively, and in 2005 was 53% and 47%, respectively. While Odyssey continues to sell numismatic coins to independent coin dealers, there has been a significant shift beginning in the second quarter 2006 to its direct marketing sales efforts. In 2006, the Company sold through three independent dealers of which two represented 65% of total sales.
Direct sales efforts (inbound and outbound call center and related infrastructure) were outsourced beginning in the second quarter 2006 to an experienced direct marketing partner. The Company has been extremely pleased with the marketing programs and sales efforts of its direct marketing partner where its focus is selling the Company's silver coin inventory directly to consumers at higher unit prices than it was receiving through its indirect wholesale channels. Another benefit of this outsourcing is the significant reduction of overhead costs associated with the Company's direct sales company-operated call center. Odyssey is testing a variety of advertising methods and media that are beginning to show great promise. The Company intends to increase its investment in the advertising programs that are demonstrating positive sales results.
Cost and Expenses
Cost of sales as a percentage of revenue for 2006 and 2005 was 21% and 11%, respectively. Cost of sales consists of shipwreck recovery costs, grading, conservation, packaging and shipping costs associated with artifact, merchandise and book sales. The higher cost of sales percentage in 2006 is attributable to a higher sales mix of silver versus gold coins.
Operations and research expenses were $15.0 million in 2006, compared to $11.3 million in 2005. Of the $3.7 million increase in 2006, $2.8 million was due to vessel operations primarily associated with the purchase of a search and inspection vessel in June 2006. The remaining $.9 million increase pertains to Odyssey's themed attraction segment and the closing of the Company's attraction in New Orleans in September 2006 and subsequent lease termination caused an acceleration of estimated useful lives of certain assets and leasehold improvements.
Marketing, general and administrative expenses were $8.7 million in 2006 as compared to $9.3 million in 2005. Of the $0.6 million decrease, $1.1 million related to reduced sales and marketing expenses primarily due to the closing of our direct sales company-operated call center in May 2006. These expenses were offset by increased share-based compensation costs associated with our annual incentive plan and adoption of FASB 123R in 2006.
Other income and expense generally consists of interest income on investments offset by interest expense on the Company's revolving credit facility and equipment loans. For 2006, $.9 million of other income was recorded due to business interruption insurance proceeds received for Odyssey's themed attraction in New Orleans related to Hurricane Katrina.
Active Operational Projects
In the past Odyssey Marine Exploration has from time to time disclosed information concerning each of its existing and planned search operations. In order to protect the identities of the targets of its planned search operations, the Company has decided to defer disclosing specific information relating to its search targets until it has located the targeted shipwreck or shipwrecks and determined a course of action to protect its property rights.
Western Mediterranean Project
In April 2005, the Odyssey Explorer performed survey and archaeological work in the western Mediterranean. The Company located 23 shipwreck sites, produced 14 pre-disturbance photomosaics and completed preliminary excavations on seven sites. The archaeological work resulted in the recovery of approximately 400 artifacts plus a substantial number of trading beads currently undergoing conservation and study by Odyssey's research department. Odyssey has performed additional work on potential high-value shipwreck projects in the Mediterranean area on its winter/spring 2007 operations schedule.
"Atlas" Search Project
The "Atlas" project is believed to be the most extensive shipwreck search operation ever launched. A minimum of five high-value shipwrecks are believed to be in the search area, which encompasses more than 5,000 square miles. Odyssey began search operations during the 2005 season and resumed operations in April 2006. During the 2006 season, work was concentrated in the seven search block areas which encompass the "Atlas" target of highest value, code-named "Tripoli." During 2005, much of the area was searched with high-resolution side-scan sonar. During 2006, a second pass was completed which included acoustic and magnetometer data-streams which helped Odyssey create a larger database of information. Overlaying all three layers provided an extremely precise, high-resolution map of the seven search blocks.
Once targets of interest were logged, additional high-resolution imagery and magnetometer surveys were utilized to further classify and map targets before ROVs were deployed to visually inspect and recover any artifacts deemed necessary for identification. During the entire 2006 survey period, at least two ships were mobilized to engage in this search operation, and during part of the summer, three ships were utilized.
A summary of the operations conducted in the "Atlas/Tripoli" search area can be found in an operations update issued by the Company on November 30, 2006 at http://shipwreck.net/pr128.html.
Odyssey filed an Admiralty arrest in the U.S. District Court for the Middle District of Florida in September 2006. On October 30, 2006, the U.S. District Court granted the Company's Motion for Preliminary Injunction appointing Odyssey as the exclusive finder-in-possession of the shipwrecked vessel, and prohibiting any interference with Odyssey's intended excavation of the site, which is believed to be the remains of a 17th century merchant vessel located outside the territorial waters of any country. However, until further ROV inspections and a preliminary archaeological excavation are completed on the arrested shipwreck site, the Company is not prepared to confirm the identity or potential value of the shipwreck.
Odyssey intends to continue ROV inspections of the "Atlas" area beginning in the spring of 2007 when the weather window re-opens. For reasons of security and strategic confidentiality, the Company does not disclose the location of the "Atlas" project area.
HMS Sussex Project
The Sussex project is an expedition to locate and recover artifacts and cargo of a large colonial-period British warship, HMS Sussex, which was lost in a severe storm in 1694. Based on documentary research conducted by contract researchers and Odyssey's in-house research team in libraries and historical archives in Great Britain, France and other countries, the Company believes there is a high probability the ship was carrying a cargo of coins with a substantial numismatic value. Odyssey's analysis of the data was accumulated from a review of ship's logs, court martial records, state papers, treasury books and various other letters and reports. The Company conducted offshore search operations on this project in 1998, 1999, 2000 and 2001. Based on the results of these search operations, Odyssey believes there is a high probability it has located the remains of HMS Sussex.
On September 27, 2002, Odyssey entered into an agreement with the Government of the United Kingdom of Great Britain and Northern Ireland (referred to as Her Majesty's Government or HMG) which allows the Company to conduct an archaeologically sensitive exploration of the shipwreck believed to be HMS Sussex and to recover artifacts from the shipwreck site.
In late 2005 and early 2006, Odyssey completed to the satisfaction of the Government of the United Kingdom all work detailed in Phase 1A of the Sussex archaeological project plan. The Company has also completed a portion of Phase 1B. (A public version of the project plan is available for viewing at www.shipwreck.net/sussexpp.php .)
A diplomatic note has been issued by the Kingdom of Spain and acknowledged by the UK Government which sets forth the terms of the arrangement under which the UK Government, Odyssey, the Kingdom of Spain and the Junta of Andalucia intend to cooperate in the next phases of archaeological investigation of the site believed to be HMS Sussex. Pursuant to the diplomatic notes, Odyssey has consented to allow archaeologists designated by the Junta of Andalucia to join the expedition. In addition, regular reports will be furnished to the Junta detailing activities that take place during the course of operations.
Additional project information can be found on the Company's website at http://shipwreck.net/sussex.html .
About Odyssey Marine Exploration Odyssey Marine Exploration is an American Stock Exchange listed company with several shipwreck projects in various stages of development throughout the world. Additional information about Odyssey, its projects and archaeological methodologies, is available at www.shipwreck.net.
For additional information, please contact Natja Igney at 813-876-1776 (ext. 2553). Consolidated Financial Statements (PDF). You will need Adobe Acrobat to view this file. If you do not have this program, you can download a free Adobe Acrobat Reader at Adobe.com
Odyssey Marine Exploration believes the information set forth in this Press Release may include "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. Certain factors that could cause results to differ materially from those projected in the forward-looking statements are set forth in "Risk Factors," and "Business" in the Company's annual report on Form 10-K for the year ended December 31, 2006, which has been filed with the Securities and Exchange Commission.
|© Copyright, 1998 , Odyssey Marine Exploration, Inc., Tampa, FL 33679-2057, USA - All Rights Reserved|