UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------------
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
for the quarterly period ended March 31, 1999
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____________to _________________
------------------------------
Commission File Number: 0-22739
------------------------------
Cal Dive International, Inc.
(Exact Name of Registrant as Specified in its Charter)
Minnesota 95-3409686
(State or Other Jurisdiction of (IRS Employer Identification Number)
Incorporation or Organization)
400 N. Sam Houston Parkway E.
Suite 400
Houston, Texas 77060
(Address of Principal Executive Offices)
(281) 618-0400
(Registrant's telephone number,
Including area code)
------------------------------
Indicate by check whether the registrant (1) has filed all reports required
to be filed by Section 13(b) or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
At May 14, 1999 there were 14,696,681 shares of common stock, no par value
outstanding.
<PAGE>
CAL DIVE INTERNATIONAL, INC.
INDEX
Part I. Financial Information Page
Item 1. Financial Statements
Consolidated Balance Sheets -
March 31, 1999 and December 31, 1998....................................1
Consolidated Statements of Operations -
Three Months Ended March 31, 1999 and March 31, 1998....................2
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1999 and March 31, 1998....................3
Notes to Consolidated Financial Statements...................................4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................5
Part II: Other Information
Item 6. Exhibits and Reports on Form 8-K....................................8
Signatures...................................................................9
<PAGE>
PART I. FINANCIAL STATEMENTS
Item 1. Financial Statements
CAL DIVE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
March 31, Dec. 31,
1999 1998
----------- ----------
ASSETS (unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 39,584 $ 32,843
Accounts receivable --
Trade, net of revenue allowance
on gross amounts billed of
$3,132 and $1,335 21,540 20,350
Unbilled 4,897 10,703
Other current assets 12,932 9,190
--------- ---------
Total current assets 78,953 73,086
--------- ---------
PROPERTY AND EQUIPMENT 119,396 107,421
Less - Accumulated depreciation (30,527) (28,262)
--------- ---------
88,869 79,159
--------- ---------
OTHER ASSETS:
Cash deposits restricted for salvage
operations 2,475 2,408
Investment in Aquatica, Inc. 7,756 7,656
Other assets, net 3,430 1,926
--------- ---------
$ 181,483 $ 164,235
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 18,285 $ 15,949
Accrued liabilities 6,805 10,020
Income taxes payable 1,971 1,201
--------- ---------
Total current liabilities 27,061 27,170
LONG-TERM DEBT 0 0
DEFERRED INCOME TAXES 13,539 13,539
DECOMMISSIONING LIABILITIES 24,637 9,883
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, no par, 60,000 shares
authorized, 21,454 and 21,402
shares issued and outstanding 53,443 52,981
Retained earnings 66,554 64,413
Treasury stock, 6,820 shares, at cost (3,751) (3,751)
--------- ---------
Total shareholders' equity 116,246 113,643
--------- ---------
$ 181,483 $ 164,235
========= =========
The accompanying notes are an integral part of these
consolidated financial statements.
- 1 -
<PAGE>
CAL DIVE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended March 31,
----------------------------
1999 1998
--------- ---------
(unaudited)
NET REVENUES:
Subsea and salvage $ 23,255 $ 29,342
Natural gas and oil production 2,751 3,815
-------- --------
26,006 33,157
COST OF SALES:
Subsea and salvage 18,655 20,394
Natural gas and oil production 2,094 2,200
-------- --------
Gross profit 5,257 10,563
-------- --------
SELLING AND ADMINISTRATIVE EXPENSES:
Selling expenses 369 317
Administrative expenses 2,204 2,523
-------- --------
Total selling and administrative
expenses 2,573 2,840
-------- --------
INCOME FROM OPERATIONS 2,684 7,723
OTHER INCOME AND EXPENSE:
Equity in earnings of Aquatica, Inc. 100 133
Net interest (income) and other (448) (209)
-------- --------
INCOME BEFORE INCOME TAXES 3,232 8,065
Provision for income taxes 1,145 2,822
-------- --------
NET INCOME $ 2,087 $ 5,243
======== ========
EARNINGS PER COMMON SHARE:
Basic $ 0.14 $ 0.36
Diluted $ 0.14 $ 0.35
======== ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic 14,617 14,535
Diluted 14,995 14,999
======== ========
The accompanying notes are an integral part of these
consolidated financial statements.
- 2 -
<PAGE>
<TABLE>
<CAPTION>
CAL DIVE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Three Months Ended March 31,
----------------------------
1999 1998
---------- ---------
(unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $2,087 $5,243
Adjustments to reconcile net income to net cash
provided by operating activities --
Depreciation and amortization 2,748 1,996
Deferred income taxes 0 1,200
Equity in earnings of Aquatica, Inc. (100) (133)
Changes in operating assets and liabilities:
Accounts receivable, net 4,616 1,605
Other current assets (3,743) (3,176)
Accounts payable and accrued liabilities (879) 3,460
Income taxes payable/receivable 1,001 914
Other non-current, net (1,811) (1,140)
-------- --------
Net cash provided by operating activities 3,919 9,969
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (5,243) (6,789)
Prepayment of deferred lease abandonement cost 7,750 0
Acquisition of Investment in Aquatica, Inc. 0 (5,000)
Purchase of deposits restricted for salvage operations (67) (79)
Proceeds from sale of property 150 0
-------- --------
Net cash provided by (used in) investing
activities 2,590 (11,868)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options 232 45
-------- --------
Net cash provided by financing activities 232 45
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 6,741 (1,854)
CASH AND CASH EQUIVALENTS:
Balance, beginning of period 32,843 13,025
-------- --------
Balance, end of period $39,584 $11,171
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
- 3 -
<PAGE>
CAL DIVE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements include the accounts of Cal Dive
International, Inc. (Cal Dive or the Company) and its wholly owned subsidiaries,
Energy Resource Technology, Inc. (ERT) and Cal Dive Offshore, Ltd. All
significant intercompany accounts and transactions have been eliminated. These
financial statements are unaudited and have been prepared pursuant to
instructions for the Quarterly Report on Form 10-Q required to be filed with the
Securities and Exchange Commission and do not include all information and
footnotes normally included in financial statements prepared in accordance with
generally accepted accounting principles.
Management has reflected all adjustments (which were normal recurring
adjustments) which it believes are necessary for a fair presentation of the
consolidated balance sheets, results of operations, and cash flows, as
applicable. Operating results for the periods ended March 31, 1999, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1999. These financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K.
NOTE 2 - ACQUISITION OF OFFSHORE BLOCKS
During the first quarter, ERT acquired interests in ten blocks involving seven
separate fields from Sonat Exploration Company, five offshore blocks from Shell
Offshore, Inc. and two blocks from Vastar Resources, Inc. in exchange for cash
consideration, as well as assumption of the pro rata share of the related
decommissioning liabilities. Subsequent to quarter end, in April 1999, ERT
acquired interests in two fields from Spirit Energy and one from Newfield, along
with the acquisition of additional interest in a currently owned ERT property
from Samedan, in exchange for cash consideration, as well as assumption of the
seller's pro rata share of the related decommissioning liability. The
decommissioning obligations of $19.5 million assumed in these six transactions
were such that a cash outlay was not required in conjunction with the property
acquisitions.
NOTE 3 - BUSINESS SEGMENT INFORMATION (IN THOUSANDS)
MARCH 31, 1999 DECEMBER 31, 1998
-------------- -----------------
(unaudited)
Identifiable Assets --
Subsea and Salvage $151,750 $142,629
Natural Gas and Oil Production 29,733 21,606
-------- --------
Total $181,483 $164,235
======== ========
- 4 -
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
FORWARD LOOKING STATEMENTS AND ASSUMPTIONS
This Quarterly Report on Form 10-Q may contain or incorporate by reference
certain forward-looking statements, including by way of illustration and not of
limitation, statements relating to liquidity, margins, the Company's business
strategy, plans for future operations, and the industry conditions. The Company
strongly encourages readers to note that some or all of the assumptions, upon
which such forward-looking statements are based, are beyond the Company's
ability to control or estimate precisely, and may in some cases be subject to
rapid and material changes. Accordingly, evaluation of future prospects of the
Company must be made with caution when relying on forward-looking information.
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1999 AND 1998
REVENUES. During the three months ended March 31, 1999, the Company's
revenues declined 22% to $26.0 million compared to $33.2 million for the three
months ended March 31, 1998 with the Subsea and Salvage segment contributing 85%
of the decline. Included in 1998 revenues was $4 million contributed by
chartering the MARIANOS, a Coflexip vessel. The Company's traditional subsea
DSV's that work the Outer Continental Shelf (i.e., the CAL DIVERS I through V)
reported revenues $3.5 million lower than the first quarter of 1998 as the CAL
DIVERS I & III were in drydock for a combined eight weeks and the CAL DIVER IV
was sold (the replacement vessel is expected to be in the market in the second
half of 1999).
Natural gas and oil production revenue for the three months ended March
31, 1999 declined 28% to $2.7 million from $3.8 million during the comparable
prior year period due mainly to a decrease in average gas prices from $2.26/mcf
realized in the first quarter of 1998 compared to $1.71/mcf realized in the
first quarter of 1999.
GROSS PROFIT. Gross profit of $5.3 million for the first quarter of 1999
is half of the $10.6 million gross profit recorded in the comparable prior year
period due to the revenue decline coupled with a 12 point decline in margins
(from 32% to 20%). The decrease in gross profit margins is due primarily to the
more competitive market conditions and to setting aside of reserves due to a few
isolated customer bankruptcies (i.e., the allowance for doubtful accounts
increased from $1.3 million at yearend 1998 to $3.1 million at March 31, 1999).
In addition, the DP DSV BALMORAL SEA was warmstacked throughout February and
March further contributing to the margin decline.
Natural gas and oil production gross profit decreased $950,000 from $1.6
million in the first quarter of 1998 to $650,000 for the three months ended
March 31, 1999, due to the aforementioned decrease in average gas prices.
SELLING & ADMINISTRATIVE EXPENSES. Selling and administrative expenses
were $2.6 million in the first quarter of 1999, which is 9% less than the $2.8
million incurred in the first quarter of 1998 due mainly to personnel layoffs
implemented early in the first quarter of 1999.
- 5 -
<PAGE>
NET INTEREST. The Company reported net interest income and other of
$448,000 for the three months ended March 31, 1999 in contrast to $209,000 for
the three months ended March 31, 1998 due to an approximately $20 million
increase in average cash balances during the first quarter of 1999 as compared
to the first quarter of 1998.
INCOME TAXES. Income taxes decreased to $1.1 million for the three months
ended March 31, 1999, compared to $2.8 million in the comparable prior year
period due to decreased profitability.
NET INCOME. Net income of $2.1 million for the three months ended March
31, 1999 was $3.2 million, or 60%, less than the comparable period in 1998 as a
result of factors described above.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically funded its operating activities principally
from internally generated cash flow, even during industry-depressed years such
as 1992 and 1998. The Company completed an initial public offering of common
stock on July 7, 1997, with the sale of 2,875,000 shares generating net proceeds
to the Company of approximately $39.5 million, net of underwriting discounts and
issuance costs. The proceeds were used to fund capital expenditures during 1997
and to repay all outstanding long-term indebtedness. As of March 31, 1999, the
Company had $51.9 million of working capital (including $39.6 million of cash on
hand) and no debt outstanding. Additionally, CDI has approximately $40.0 million
available under a Revolving Credit Agreement. The Company has had, and
anticipates having additional discussions with third parties regarding possible
asset acquisitions (including natural gas and oil properties and vessels).
However, the Company can give no assurance that any such transaction can be
completed.
OPERATING ACTIVITIES. Net cash provided by operating activities was $3.9
million in the three months ended March 31, 1999, as compared to $10.0 million
in the first quarter of 1998. This reduction was due mainly to decreased
profitability during the first quarter of 1999 and a $3.5 million increase in
accounts payable and accrued liabilities during the first quarter of 1998
compared to a $900,000 decrease in the first quarter of 1999. The first quarter
1998 increase was due mainly to significant accruals during March 1998 for
various capital projects (including an upgrade of the SEA SORCERESS in
preparation for the Terra Nova project and costs associated with placing the
MERLIN in service). These reductions in operating cash flows were offset
somewhat by increased collections of accounts receivable during the first
quarter of 1999.
INVESTING ACTIVITIES. The Company incurred $5.2 million of capital
expenditures during the first quarter of 1999 compared to $6.8 million during
the comparable prior year period. Included in the $5.2 million of capital
expenditures in the first quarter of 1999 is $1.9 million related to well
recompletion work on the ERT properties acquired in the first quarter. The
remaining balance includes $1.3 million for the acquisition of thrusters for the
future upgrade of the SEA SORCERESS and new steel associated with the CAL DIVERS
I AND III US Coast Guard
- 6 -
<PAGE>
drydocks. In connection with the aforementioned ERT property acquisitions the
seller prepaid $7.8 million of the decommissioning liability.
In January 1998, ERT acquired interests in six blocks involving two
separate fields from Sonat Exploration Company for $1.0 million and assumption
of Sonat's pro rata share of the related decommissioning liability. The
remaining balance relates to costs associated with placing the MERLIN in service
and additions to the SEA SORCERESS in preparation for the Terra Nova project. In
February 1998, the Company purchased a significant minority equity investment in
Aquatica, Inc. (a surface diving company) for $5.0 million, in addition to a
commitment to lend additional funds of $5.0 million to allow Aquatica to
purchase vessels and fund other growth opportunities. Dependent upon various
preconditions, as defined, the shareholders of Aquatica, Inc. have the right to
convert their shares into Cal Dive shares at a ratio based on a formula which,
among other things, values their interest in Aquatica, Inc. and must be
accretive to Cal Dive shareholders.
FINANCING ACTIVITIES. The only financing activity during the first
quarters 1999 and 1998 represents exercise of employee stock options.
CAPITAL COMMITMENTS. The Company is considering the construction of a new
build multiservice vessel, the Q4000 and conversion of the SEA Sorceress.
Funding for these projects, if approved by the Board of Directors, is expected
to come from cash balances on hand, long-term borrowings and perhaps the
issuance of additional equity. In addition, as discussed previously, in
connection with its business strategy, management expects the Company to acquire
additional vessels as well as buy additional natural gas and oil properties.
IMPACT OF YEAR 2000 ISSUE
The Company has assessed what computer software and hardware will require
modification or replacement so that its computer systems will properly utilize
dates beyond December 31, 1999. The Company has purchased, and has implemented,
a new project management accounting system which is Year 2000 compliant. This
system, which fully integrates all of its modules, provides project managers and
accounting personnel with up-to-date information enabling them to better control
jobs in addition to providing benefits in inventory control and planned vessel
maintenance. CDI's vessel computer DP systems are partially dependent on
government satellites and the government has not yet confirmed that they have
solved Year 2000 data problems. If necessary, the vessels could operate for
sometime safely on redundant systems other than satellite information.
Accordingly, the Company believes that the Year 2000 issue will be resolved in a
timely manner and presently does not believe that the cost to become Year 2000
compliant will have a material adverse effect on the Company's consolidated
financial statements. The foregoing statements are intended to be and are hereby
designated "Year 2000 Readiness Disclosure" within the meaning of the Year 2000
Information Readiness and Disclosure Act.
- 7 -
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in various routine legal proceedings primarily
involving claims for personal injury under the General Maritime Laws of the
United States and Jones Act as a result of alleged negligence. In addition, the
Company from time to time incurs other claims, such as contract disputes, in the
normal course of business. The Company believes that the outcome of all such
proceedings would not have a material adverse effect on its consolidated
financial position, results of operations or net cash flows.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
Exhibit 27 - Financial Data Schedule. (Exhibit 27 is being submitted
as an exhibit only in the electronic format of this Quarterly Report
on Form 10-Q being submitted to the Securities and Exchange
Commission.)
(b) Reports on Form 8-K - None.
- 8 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CAL DIVE INTERNATIONAL, INC.
Date: May 14, 1999 By: S. James Nelson, Executive Vice President
and Chief Financial Officer
Date: May 14, 1999 By: A. Wade Pursell, Vice President-Finance
and Chief Accounting Officer
- 9 -
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 39,584
<SECURITIES> 0
<RECEIVABLES> 26,437
<ALLOWANCES> 3,132
<INVENTORY> 0
<CURRENT-ASSETS> 78,953
<PP&E> 119,396
<DEPRECIATION> 30,527
<TOTAL-ASSETS> 181,483
<CURRENT-LIABILITIES> 27,061
<BONDS> 0
0
0
<COMMON> 53,443
<OTHER-SE> 62,803
<TOTAL-LIABILITY-AND-EQUITY> 181,483
<SALES> 26,006
<TOTAL-REVENUES> 26,006
<CGS> 20,749
<TOTAL-COSTS> 23,322
<OTHER-EXPENSES> (100)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (448)
<INCOME-PRETAX> 3,232
<INCOME-TAX> 1,145
<INCOME-CONTINUING> 2,087
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,087
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
