if you look at the numbers the operating expenses as a percent of income was 44%, the highest they've recorded (average is always been around 33%). without the increase in operating expenses, their earnings are $.18 higher. they stated earlier they could get operating expenses down to 30% or better, if necessary, in a difficult market. the increase in operating expenses is due, as the report states, to quickening the pace of upgrades, which according to the report, is now complete for future quarters and would imply that going forward operating expenses will drop to a more meaningful level. utilization rates were adversely affected by the quickened pace toward upgrades, i.e., the upgrades were to extend over two more quarters, but they loaded the upgrades for this quarter: meaning, going forward numbers improve as labor costs decrease. i'd be surprised if this was not partially the case. utilization of mid-50s is due in part, as the report states, to quickened pace of upgrades.
the increased upgrades would also imply that they would be more competitive against TDW in the gulf for future contracts. |
