<PAGE> 1
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 September 30, 2000
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____________to ______________
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Commission File Number: 0-22739
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Cal Dive International, Inc.
(Exact Name of Registrant as Specified in its Charter)
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<S> <C>
Minnesota 95-3409686
(State or Other Jurisdiction of Incorporation or (IRS Employer Identification Number)
Organization)
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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 October 14, 2000 there were 16,121,909 shares of common stock, no par
value outstanding.
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CAL DIVE INTERNATIONAL, INC.
INDEX
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Part I. Financial Information Page
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Item 1. Financial Statements
Consolidated Balance Sheets -
September 30, 2000 and December 31, 1999......................1
Consolidated Statements of Operations -
Three Months Ended September 30, 2000 and
September 30, 1999........................................2
Nine Months Ended September 30, 2000 and
September 30, 1999........................................3
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 2000 and
September 30, 1999........................................4
Notes to Consolidated Financial Statements........................5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................7
Part II: Other Information
Item 6. Exhibits and Reports on Form 8-K.........................12
Signatures.......................................................13
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PART I. FINANCIAL STATEMENTS
Item 1. Financial Statements
CAL DIVE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
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<CAPTION>
Sept. 30, Dec. 31,
2000 1999
--------------- --------------
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ASSETS (unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 49,727 $ 11,310
Restricted Cash 3,059 8,686
Accounts receivable --
Trade, net of revenue allowance on gross
amounts billed of $2,349 and $1,789 33,544 48,191
Unbilled 5,985 3,430
Other current assets 22,222 16,327
-------- --------
Total current assets 114,537 87,944
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PROPERTY AND EQUIPMENT 242,157 180,519
Less - Accumulated depreciation (60,175) (45,862)
-------- --------
181,982 134,657
-------- --------
OTHER ASSETS:
Goodwill 13,357 13,792
Other assets, net 13,544 7,329
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$323,420 $243,722
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 29,153 $ 31,834
Accrued liabilities 20,151 17,223
Income taxes payable 989 0
-------- --------
Total current liabilities 50,293 49,057
LONG-TERM DEBT 40,054 0
DEFERRED INCOME TAXES 20,937 16,837
DECOMMISSIONING LIABILITIES 27,477 26,956
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, no par, 60,000 shares
authorized, 22,894 and 22,395 shares issued
and outstanding 92,538 73,311
Retained earnings 95,872 81,312
Treasury stock, 6,821 shares, at cost (3,751) (3,751)
-------- --------
Total shareholders' equity 184,659 150,872
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$323,420 $243,722
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The accompanying notes are an integral part of these consolidated financial
statements.
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CAL DIVE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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<CAPTION>
Three Months Ended Sept. 30,
---------------------------------
2000 1999
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(unaudited)
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NET REVENUES:
Subsea and salvage $26,274 $42,861
Natural gas and oil production 23,433 15,609
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49,707 58,470
COST OF SALES:
Subsea and salvage 23,437 31,781
Natural gas and oil production 9,084 8,734
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Gross profit 17,186 17,955
SELLING AND ADMINISTRATIVE EXPENSES 5,032 4,083
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INCOME FROM OPERATIONS 12,154 13,872
NET INTEREST (INCOME) AND OTHER 505 (228)
------- -------
INCOME BEFORE INCOME TAXES 11,649 14,100
Provision for income taxes 4,077 4,936
Minority interest (114) 147
------- -------
NET INCOME $ 7,686 $ 9,017
======= =======
EARNINGS PER COMMON SHARE:
Basic $ 0.49 $ 0.59
Diluted $ 0.47 $ 0.58
======= =======
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic 15,753 15,215
Diluted 16,183 15,641
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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CAL DIVE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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<CAPTION>
Nine Months Ended Sept. 30,
-----------------------------------
2000 1999
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(unaudited)
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NET REVENUES:
Subsea and salvage $80,582 $95,678
Natural gas and oil production 49,135 22,902
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129,717 118,580
COST OF SALES:
Subsea and salvage 70,197 74,940
Natural gas and oil production 23,519 14,704
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Gross profit 36,001 28,936
SELLING AND ADMINISTRATIVE EXPENSES 14,281 9,111
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INCOME FROM OPERATIONS 21,720 19,825
NET INTEREST (INCOME) AND OTHER 332 (1,548)
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INCOME BEFORE INCOME TAXES 21,388 21,373
Provision for income taxes 7,486 7,481
Minority interest (658) 147
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NET INCOME $14,560 $13,745
======= =======
EARNINGS PER COMMON SHARE:
Basic $ 0.93 $ 0.93
Diluted $ 0.90 $ 0.90
======= =======
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic 15,692 14,841
Diluted 16,101 15,211
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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CAL DIVE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
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<CAPTION>
Nine Months Ended Sept. 30,
-----------------------------------
2000 1999
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(unaudited)
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $14,560 $13,745
Adjustments to reconcile net income to net cash
provided by operating activities --
Depreciation and amortization 22,249 15,519
Deferred income taxes 4,100 1,924
Gain on sale of property (2,809) (7,354)
Equity in earnings of Aquatica, Inc. 0 (600)
Minority interest in earnings (658) 147
Changes in operating assets and liabilities:
Accounts receivable, net 18,298 (11,904)
Other current assets (5,895) (2,801)
Accounts payable and accrued liabilities 1,698 9,879
Income taxes payable/receivable 2,933 3,823
Other non-current, net (12,672) (5,226)
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Net cash provided by operating activities 41,804 17,152
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (71,178) (51,474)
Restricted cash 5,626 (7,089)
Prepayment of lease abandonment costs 0 7,750
Cash received in acquisition, net 0 418
Proceeds from sale of properties 3,124 7,702
Deposits restricted for salvage operations 1,704 (131)
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Net cash used in investing activities (60,724) (42,824)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under term loan facility 40,054 0
Sale of common stock, net of transaction costs 15,367 0
Exercise of stock options 1,916 2,617
------- -------
Net cash provided by financing activities 57,337 2,617
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 38,417 (23,055)
CASH AND CASH EQUIVALENTS:
Balance, beginning of period 11,310 32,380
------- -------
Balance, end of period $49,727 $ 9,325
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</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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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 Aquatica, Inc. All significant
intercompany accounts and transactions have been eliminated. These financial
statements are unaudited, 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 September 30, 2000, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2000. 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 for its fiscal year ended December 31, 1999
and the Company's Prospectus Supplement on Form S-3.
Note 2 - Acquisition of Offshore Blocks
During the first quarter, ERT acquired interests in six offshore blocks from EEX
Corporation and agreed to operate the remaining EEX properties on the Outer
Continental Shelf (OCS). The acquired offshore blocks include working interests
from 40% to 75% in five platforms, one caisson and 13. ERT agreed to a purchase
price of $4.9 million and assumed EEX's prorated share of the abandonment
obligation for the acquired interests, and entered into a two-year contract to
manage the remaining EEX operated properties. EEX personnel who operated these
properties became ERT employees.
In April, 2000, ERT acquired a 20% working interest in Gunnison, a Deepwater
prospect in the Gulf of Mexico of Kerr-McGee Oil & Gas Corporation. Kerr-McGee,
the operator, has drilled an initial well and sidetrack in 3,200 feet of water
at Garden Banks 668, one of three lease blocks that comprise the Gunnison
prospect and encountered significant potential reserves. Consistent with CDI's
philosophy of avoiding exploratory risk, financing for up to $15 million of the
exploratory costs is being provided by an investment partnership, the investors
of which are CDI senior management in exchange for a 25% override of CDI's 20%
working interest. Once the decision has been made to begin development, CDI has
the right to participate in field development planning and funding and will
collaborate with the working interest owners in the execution of subsea
construction work.
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In September, 2000, ERT sold a platform and interests in two fields. An ERT
operating policy is that we will sell assets (offshore leases, platforms,
compressors, etc.) when the expected future revenue stream can be accelerated in
a single transaction. The net result of this sale was to add approximately 7
cents to third quarter diluted earnings per share. A year ago property sales in
the third quarter added 13 cents to earnings. We have now sold 12 of 49 leases
acquired since the inception of ERT.
Note 3 - Business Segment Information (in thousands)
Sept. 30, 2000 December 31, 1999
-------------- -----------------
(unaudited)
Identifiable Assets --
Subsea and Salvage $279,550 $197,570
Natural Gas and Oil Production 43,870 46,152
-------- --------
Total $323,420 $243,722
-------- --------
Note 4 - Loss of Vessel
In late June, 2000 the DP DSV Balmoral Sea caught fire while at dockside in New
Orleans, LA. The fire broke out as the vessel was being prepared to enter
drydock for an extended period. The vessel crew was evacuated and no injuries
were reported. During the fire fighting operation conducted by the City of New
Orleans, the vessel listed and sank in approximately 30 feet of water. The
vessel has been deemed a total loss by insurance underwriters; her book value
(approximately $7 million) is fully insured as are all salvage and removal
costs.
Note 5 - MARAD Financing
In August 2000, the Company closed a long-term financing for construction of the
Q4000. This $138.5 million financing is pursuant to Title XI of the Merchant
Marine Act of 1936 which is administered by MARAD. At the time the financing
closed, the Company made an initial draw of $40.1 million toward construction
costs with additional draws expected to occur in the first quarter of 2001 and
upon delivery of the vessel.
Note 6 - Secondary Stock Offering
In September 2000, CDI completed a secondary stock offering with Coflexip
selling 3,699,788 shares of common stock at $52.625 per share. The
over-allotment option was exercised resulting in the Company issuing 304,968
shares of common stock and receiving net proceeds of $15.4 million and Owen
Kratz, our Chairman, selling 250,000 shares.
Note 7 - Subsequent Event - Stock Split
In October 2000, our Board of Directors declared a two-for-one split of CDI's
common stock in the form of a 100% stock distribution on November 13, 2000 to
all holders of record at the close of business on October 30, 2000 . Such stock
split is not reflected in the accompanying financial statements.
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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 includes or incorporates by
reference certain statements that may be deemed "forward looking statements"
under applicable law. Forward looking statements and assumptions in this Form
10-Q that are not statements of historical fact involve risks and assumptions
that could cause actual results to vary materially from those predicted,
including among other things, unexpected delays and operational issues
associated with turnkey projects, the price of crude oil and natural gas,
offshore weather conditions, change in site conditions, and capital expenditures
by customers. 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 change.
RESULTS OF OPERATIONS
Comparison of Three Months Ended September 30, 2000 and 1999
Revenues. During the three months ended September 30, 2000, the
Company's revenues decreased 15% to $49.7 million compared to $58.5 million for
the three months ended September 30, 1999. The decrease was generated by the
Subsea and Salvage segment, which experienced a 39% decrease in revenues,
partially offset by a $7.8 million increase in the Natural Gas and Oil
Production segment. The decline in Subsea and Salvage was due mainly to the
Company having two major DP vessels out of service for a combined 105 days
during the third quarter of 2000. In addition, during the third quarter of 1999
two significant deepwater projects (Exxon Diana and EEX Cooper) were in full
swing.
Natural gas and oil production revenue for the three months ended
September 30, 2000 increased $7.8 million to $23.4 million from $15.6 million
during the comparable prior year period due to an increase in production (4.3
Bcfe in the third quarter of 2000 versus 2.8 Bcfe in the comparable quarter of
1999) coupled with an increase in average gas prices from $2.70/mcfe realized in
the third quarter of 1999 compared to $4.60/mcfe in the third quarter of 2000.
Finally, during the third quarter of 2000 and also during the third quarter of
1999, CDI completed the sale of interests in certain offshore blocks pursuant to
our policy of selling assets when the expected future revenue stream can be
accelerated in a single transaction.
Gross Profit. Gross profit of $17.2 million for the third quarter of
2000 represents a 4% decrease compared to the $18.0 million recorded in the
comparable prior year period due to the aforementioned revenue decrease in
Subsea and Salvage partially offset by a 4 point increase in margins (from 31%
to 35%). The margin increase is due mainly to Natural Gas and Oil Production
margins improving 17 points to 61% for the three months ended September 30, 2000
from 44% during the comparable prior year period. Margins of Subsea and Salvage
remained at the depressed levels of the second quarter of 2000.
Natural gas and oil production gross profit increased $7.5 million from
$6.9 million in the third quarter of 1999 to $14.3 million for the three months
ended September 30, 2000, due mainly to the aforementioned increases in average
gas prices and production.
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Selling & Administrative Expenses. Selling and administrative expenses
were $5.0 million in the third quarter of 2000, which is 23% more than the $4.1
million incurred in the third quarter of 1999 due mainly to the ERT employee
incentive program and consolidation of Aquatica, Inc.'s results since August,
1999 when we acquired the remaining 55% of that company which we did not already
own.
Net Interest. The Company reported net interest expense and other of
$505,000 for the three months ended September 30, 2000 in contrast to $228,000
of net interest income and other for the three months ended September 30, 1999.
The change between periods is due to the reduction in cash balances as a result
of our CAPEX program (Q4000 vessel construction) combined with the recording of
goodwill amortization expense beginning in August, 1999 upon acquiring Aquatica,
Inc. and amortization of a non-compete agreement relating to the retirement of
ERT's former President beginning in the third quarter of 2000.
Income Taxes. Income taxes decreased to $4.1 million for the three
months ended September 30, 2000, compared to $4.9 million in the comparable
prior year period due to decreased profitability.
Net Income. Net income of $7.7 million for the three months ended
September 30, 2000 was $1.3 million, or 15%, less than the comparable period in
1999 as a result of factors described above. Fully diluted earnings per share
declined by a larger percentage (19%) during the third quarter of 2000 compared
to the third quarter of 1999 due to additional shares related to the acquisition
of Aquatica, Inc. in August, 1999 and exercise of employee stock options.
Comparison of Nine Months Ended September 30, 2000 and 1999
Revenues. During the nine months ended September 30, 2000, the
Company's revenues increased 9% to $129.7 million compared to $118.6 million for
the nine months ended September 30, 1999 with an increase in Natural Gas and Oil
Production revenues offsetting a 16% decline in Subsea and Salvage segment
revenues. The Subsea and Salvage segment declined as last year included three
major projects: Exxon Diana, EEX Cooper and Sonat (salvage). In addition eight
vessels were out of service during the first half of 2000 for a combined 416
days for U.S. Coast Guard and ABS inspections and two major DP vessels being out
of service a combined 105 days during the third quarter of 2000. This compares
to three vessels being out of service for a combined 113 days during the first
nine months of 1999.
Natural gas and oil production revenue for the nine months ended
September 30, 2000 increased 115% to $49.1 million from $22.9 million during the
comparable prior year period due to a 93% increase in production as a result of
the acquisition of interests in six offshore blocks from EEX during the first
quarter, additional production from 1999 property acquisitions and well
exploitation program and to improved commodity prices.
Gross Profit. Gross profit of $36.0 million for the first nine months
of 2000 was 24% better than the $28.9 million gross profit recorded in the
comparable prior year period due mainly
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to the revenue improvement as well as a four point improvement in margins (28%
the first nine months of 2000 versus 24% in the comparable prior year period).
Subsea and Salvage margins declined from 22% for the first nine months of 1999
to 13% during the first nine months of 2000. The primary reasons for this
decline were the additional drydock time in the first half of 2000 as discussed
above and low utilization of the Cal Dive Aker Dove which resulted in a loss due
to a lack of utilization and repairs (while the repairs involve warranty items
we had to absorb fixed costs while at the dock).
Natural gas and oil production gross profit increased $17.4 million
from $8.2 million in the first nine months of 1999 to $25.6 million for the nine
months ended September 30, 2000 (and margins improved from 36% to 52%), due to
the aforementioned production and commodity pricing improvements.
Selling & Administrative Expenses. Selling and administrative expenses
were $14.3 million in the first nine months of 2000, which is 57% more than the
$9.1 million incurred in the first nine months of 1999 due mainly to the
consolidation of Aquatica, Inc. and improved operating results for ERT, whose
incentive plan tracks their operating results. The remainder of the increase is
due mainly to additional personnel added to the Deepwater group within Subsea.
Net Interest. The Company reported net interest expense and other of
$332,000 for the nine months ended September 30, 2000 in contrast to $1.5
million of net interest income and other for the nine months ended September 30,
1999 as average cash balances declined during the first nine months of 2000 as
compared to the first nine months of 1999. This decrease is due mainly to the
Company's capital program (Q4000 vessel construction) combined with the
recording of goodwill amortization expense beginning in August, 1999 upon
acquiring Aquatica, Inc. and amortization of a non-compete agreement relating to
the retirement of ERT's former President beginning in the third quarter of 2000.
Income Taxes. Income taxes were unchanged at $7.5 million for the nine
months ended September 30, 2000, compared to the comparable prior year period as
pre-tax income for both periods was $21.4 million.
Net Income. Net income of $14.6 million for the nine months ended
September 30, 2000 was $800,000, or 6%, more than the comparable period in 1999
as a result of factors described above. The increase (versus pre-tax income
remaining the same) was due to our sharing, via the Minority Interest line, of
the operating losses experienced on the Cal Dive Aker Dove in 2000 with Aker
Maritime. Fully diluted earnings per share remained unchanged during the nine
months ended September 30, 2000 compared to the comparable prior year period due
to additional shares related to the acquisition of Aquatica, Inc. in August,
1999 and exercise of employee stock options.
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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 1998/1999. 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, which
resulted in $15 million of cash on hand after paying off all debt outstanding.
The following three years internally generated cash flow, along with proceeds
received from the sale and leaseback of the Cal Dive Aker Dove of $20.0 million,
funded approximately $164 million of capital expenditures while enabling the
Company to remain essentially debt free. During the third quarter of 2000 we
closed the long-term MARAD financing for construction of the Q4000 and made an
initial draw of $40.1 million on a total commitment of $138.5 million. Since we
had already funded almost $67 million of the newbuild vessel's constructions
costs out of cash flow, the $25 million net balance from this first draw is
available for general corporate purposes. Insurance proceeds received during the
quarter relating to the loss of the Balmoral Sea and $15.4 million of proceeds
received from the exercise of the over-allotment option in the secondary stock
offering lifted cash balances as of September 30, 2000 to nearly $50 million.
Operating Activities. Net cash provided by operating activities was
$41.8 million during the nine months ended September 30, 2000, as compared to
$17.2 million during the first nine months of 1999. This increase was due mainly
to $18.3 million of funding from accounts receivable collections during the
first nine months of 2000 compared to an $11.9 million increase in accounts
receivable during the first nine months of 1999 as we collected all amounts due
on the EEX Cooper abandonment project (the largest contract ever in CDI's
history) during the first quarter of 2000. In addition, depreciation and
amortization increased $6.7 million to $22.2 million for the first nine months
of 2000 due mainly to increased ERT depletion as a result of the increased
production along with the recording of goodwill amortization expense beginning
in August, 1999 upon acquiring Aquatica, Inc. and amortization of a non-compete
agreement relating to the retirement of ERT's former President beginning in the
third quarter of 2000.
Investing Activities. The Company incurred $71.2 million of capital
expenditures during the first nine months of 2000 compared to $51.5 million
during the comparable prior year period. Included in the $71.2 million of
capital expenditures in the first nine months of 2000 is $51 million for the
construction of the Q4000. Through the end of September 2000 we have funded
approximately $81 million of the estimated $150 million cost of the vessel. Also
during the first nine months of 2000, ERT acquired interests in six offshore
blocks from EEX Corporation and agreed to operate the remaining EEX properties
on the Outer Continental Shelf (OCS). ERT agreed to a purchase price of $4.9
million and assumed EEX's prorated share of the abandonment obligation for the
acquired interests, and entered into a two-year contract to manage the remaining
EEX operated properties. In connection with this transaction, $8.2 million of
previously restricted funds were utilized as the acquisition was structured as a
"Like-Kind Exchanges" for tax purposes. In September, 2000, ERT sold a platform
and interests in two fields. This sale was also structured as a "Like-Kind
Exchange" and accordingly the cash received is restricted for acquisition of
additional natural gas and oil properties.
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<PAGE> 13
Included in the $51.5 million of capital expenditures in the first nine
months of 1999 is $18 million for the acquisition of Hvide Marine's interest the
Cal Dive Aker Dove and $12.5 million related to the construction of the Q4000.
In addition, $14.8 million is related to ERT property acquisitions and well
recompletion work on the ERT properties acquired. In connection with one of the
ERT property acquisitions the seller prepaid $7.8 million of the related
decommissioning liability.
Financing Activities. In August, 2000, we closed the long-term MARAD
financing for construction of the Q4000 and made an initial draw of $40.1
million (total commitment of $138.5 million). In September 2000, exercise of the
over-allotment option upon completion of the secondary offer of shares by
Coflexip resulted in proceeds of $15.4 million, net of transaction costs. The
only other financing activity during the first nine months of 2000 and 1999
represents exercise of employee stock options.
Capital Commitments. Our Board of Directors has approved a 2000 capital
budget which includes approximately $85 million of costs associated with the
Q4000. We have recently closed the long-term financing for construction of the
Q4000. This $138.5 million financing is pursuant to Title XI of the Merchant
Marine Act of 1936 which is administered by MARAD. At the time the financing
closed, we made an initial draw of $40.1 million toward construction costs with
additional draws expected to occur during early 2001 and upon delivery of the
vessel. As a result of the June 2000 loss of the Balmoral Sea, we have
accelerated the timing of the conversion of the Sea Sorceress to full dynamic
positioning which will add approximately $27 million to our 2000 capital budget.
In addition, approximately $15 million of well operations equipment was recently
approved by our Board of Directors.
We have acquired a working interest in the Gunnison prospect, a
Deepwater Gulf oil and natural gas project, in partnership with Kerr-McGee oil &
Gas Corporation, the operator. Consistent with our philosophy of avoiding
exploratory risk, financing for the exploratory costs is being provided by an
investment partnership, consisting of members of Cal Dive's senior management,
in exchange for an overriding royalty interest equal to 25% of our 20% working
interest. The investment partnership has agreed to fund up to $15.0 million of
our exploratory and appraisal activities required under the agreement pursuant
to which we acquired our working interest. Once a sanctioned project has been
determined, CDI has the right to participate in field development planning and
to collaborate with the working interest owners in the execution of all related
subsea construction work. We have also agreed with the investment partnership to
fund up to $49 million in development costs and up to $1 million of certain
additional costs for the Gunnison prospect.
In connection with our business strategy, we evaluate acquisition
opportunities (including additional vessels as well as interests in offshore
natural gas and oil properties). No such acquisitions are currently pending.
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<PAGE> 14
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.
The Company entered into a subcontract with Seacore Marine Contractors
Limited to provide the Sea Sorceress for subsea excavation in Canada. Seacore
was inturn contracted by Coflexip Stena Offshore Newfoundland Limited, a
subsidiary of Coflexip ("CSO Nfl"), as representative of the consortium of
companies contracted to perform services on the project. Due to difficulties
with respect to the sea states and soil conditions the contract was terminated.
Seacore was provided a performance bond of $5 million with respect to the
subcontract. No call has been made on this bond. Although CSO Nfl has alleged
that the Sea Sorceress was unable to adequately perform the excavation work
required under the subcontract, Seacore and the Company believe the contract was
wrongfully terminated and are vigorously defending this claim and seeking
damages in arbitration. In another commercial dispute, EEX Corporation sued Cal
Dive and others alleging breach of fiduciary duty by a former EEX employee and
damages resulting from certain construction agreements. Cal Dive has responded
alleging EEX Corporation breached various provisions of the same contracts and
is seeking a declaratory judgment that the defendants are not liable. The
Company believes that the outcome of all such proceedings is not likely to have
a material adverse effect on its business or financial condition.
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 -
Current Report on Form 8-K filed September 22, 2000 to report
an underwritten public offering under Item 5 and to file the
Underwriter's Agreement for such offering as an exhibit under
Item 7.
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<PAGE> 15
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: October 14, 2000 By:
---------------------------------------
S. James Nelson, Vice Chairman
Date: October 14, 2000 By:
---------------------------------------
A. Wade Pursell, Senior Vice President
Chief Financial Officer
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<PAGE> 16
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
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27 Financial Data Schedule
