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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, 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 (IRS Employer Identification Number)
or 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 May 15, 2000 there were 15,711,671 shares of common stock, no par
value outstanding.
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CAL DIVE INTERNATIONAL, INC.
INDEX
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Page
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Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -
March 31, 2000 and December 31, 1999 ........................................1
Consolidated Statements of Operations -
Three Months Ended March 31, 2000 and
March 31, 1999 ............................................................2
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 2000 and
March 31, 1999 ............................................................3
Notes to Consolidated Financial Statements .......................................4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations .....................................6
Part II: Other Information
Item 1. Legal Proceedings .......................................................9
Item 6. Exhibits and Reports on Form 8-K ........................................9
Signatures ......................................................................10
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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>
March 31, Dec. 31,
2000 1999
------------ ------------
(unaudited)
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 14,432 $ 11,310
Restricted cash 49 8,686
Accounts receivable --
Trade, net of revenue allowance
on gross amounts billed of
$2,091 and $1,789 22,143 48,191
Unbilled 8,040 3,430
Other current assets 19,808 16,327
------------ ------------
Total current assets 64,472 87,944
------------ ------------
PROPERTY AND EQUIPMENT 202,811 180,519
Less - Accumulated depreciation (50,288) (45,862)
------------ ------------
152,523 134,657
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OTHER ASSETS:
Goodwill 13,644 13,792
Other assets, net 10,274 7,329
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$ 240,913 $ 243,722
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 23,443 $ 31,834
Accrued liabilities 13,746 17,223
Income taxes payable 140 0
------------ ------------
Total current liabilities 37,329 49,057
LONG-TERM DEBT 0 0
DEFERRED INCOME TAXES 16,980 16,837
DECOMMISSIONING LIABILITIES 30,368 26,956
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, no par, 60,000 shares
authorized, 22,509 and 22,395 shares issued 75,461 73,311
Retained earnings 84,526 81,312
Treasury stock, 6,820 shares, at cost (3,751) (3,751)
------------ ------------
Total shareholders' equity 156,236 150,872
------------ ------------
$ 240,913 $ 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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Three Months Ended March 31,
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2000 1999
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(unaudited)
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NET REVENUES:
Subsea and salvage $ 30,338 $ 23,255
Natural gas and oil production 9,771 2,751
------------ ------------
40,109 26,006
COST OF SALES:
Subsea and salvage 25,177 18,655
Natural gas and oil production 6,535 2,094
------------ ------------
Gross profit 8,397 5,257
SELLING AND ADMINISTRATIVE EXPENSES 4,296 2,573
------------ ------------
INCOME FROM OPERATIONS 4,101 2,684
NET INTEREST (INCOME) AND OTHER (200) (548)
------------ ------------
INCOME BEFORE INCOME TAXES 4,301 3,232
Provision for income taxes 1,505 1,145
Minority interest (418) 0
------------ ------------
NET INCOME $ 3,214 $ 2,087
============ ============
EARNINGS PER COMMON SHARE:
Basic $ 0.21 $ 0.14
Diluted $ 0.20 $ 0.14
============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic 15,610 14,617
Diluted 16,007 14,995
============ ============
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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 CASH FLOWS
(IN THOUSANDS)
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Three Months Ended March 31,
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2000 1999
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(unaudited)
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,214 $ 2,087
Adjustments to reconcile net income to net cash
provided by operating activities --
Depreciation and amortization 5,470 2,748
Deferred income taxes 143 0
Equity in earnings of Aquatica, Inc. 0 (100)
Changes in operating assets and liabilities:
Accounts receivable, net 21,438 4,616
Other current assets (3,482) (3,743)
Accounts payable and accrued liabilities (11,413) (879)
Income taxes payable/receivable 140 1,001
Other non-current, net (3,617) (1,811)
------------ ------------
Net cash provided by operating activities 11,893 3,919
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (19,151) (5,310)
Restricted cash 8,637 0
Prepayment of deferred lease abandonment cost 0 7,750
Minority interest in Cal Dive Aker Dove (418) 0
Proceeds from sale of property 11 150
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Net cash provided by (used in) investing activities (10,921) 2,590
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CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options 2,150 232
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Net cash provided by financing activities 2,150 232
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NET INCREASE IN CASH AND CASH EQUIVALENTS 3,122 6,741
CASH AND CASH EQUIVALENTS:
Balance, beginning of period 11,310 32,843
------------ ------------
Balance, end of period $ 14,432 $ 39,584
============ ============
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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
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 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, 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.
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 wells currently producing
23 mmcf per day (13 mmcf net). 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 also became ERT
employees.
Note 3 - Business Segment Information (in thousands)
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March 31, 2000 December 31, 1999
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(unaudited)
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Identifiable Assets --
Subsea and Salvage $ 182,855 $ 197,570
Natural Gas and Oil Production 58,058 46,152
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Total $ 240,913 $ 243,722
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Note 4 - Subsequent Event - Acquisition of Interest in Deepwater Prospect
In April, 2000, ERT acquired a 20% working interest in Gunnison, a Deepwater
prospect of Kerr-McGee Oil & Gas Corporation. Kerr-McGee, the operator, is
currently drilling an initial well in 3,200 feet of water at Garden Banks 668,
one of three lease blocks that comprise the Gunnison prospect. Because ERT is a
production company that does not engage directly in exploration, CDI has put in
place an outside financial mechanism (an investment group controlled by CDI's
Chairman and CEO) to cover its proportionate drilling cost exposure so that CDI
shareholders are essentially shielded from exploratory risk. In the event that
exploratory drilling is successful and a development decision is made, CDI will
actively participate in field development planning and will collaborate with the
working interest owners in the execution of subsea construction work.
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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,
weather conditions in offshore markets, 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 March 31, 2000 and 1999
Revenues. During the three months ended March 31, 2000, the Company's
revenues increased 54% to $40.1 million compared to $26.0 million for the three
months ended March 31, 1999 with both the Subsea and Salvage segment and Natural
Gas and Oil Production segment each contributing approximately $7 million of the
increase. 74% of the Subsea and Salvage increase related to new assets and the
successful completion of the EEX Cooper deepwater abandonment project (which
provided 22% of total revenues in the quarter). New assets include the newbuild
DP vessel Cal Dive Aker Dove, which was placed in service in the third quarter
of 1999, and Aquatica, Inc. which has been consolidated since the third quarter
of 1999 when CDI acquired the remaining 55% of this company. This increase was
achieved despite the fact that six vessels were out of service during the first
quarter of 2000 for a combined 210 days for U. S. Coast Guard and ABS
inspections compared to two vessels for a combined 80 days during the first
quarter of 1999.
Natural gas and oil production revenue for the three months ended March
31, 2000 increased 255% to $9.8 million from $2.8 million during the comparable
prior year period due mainly to a 150% increase in production as a result of the
acquisition of interests in six offshore blocks from EEX during the first
quarter (five weeks of production and management fees) as well as additional
production obtained from 1999 property acquisitions and well exploitation
program. The remaining increase was due to improved commodity prices (we
realized an average gas price of $2.73 per mcf in the first quarter of 2000, an
increase of $1.02, or 60%, over the first quarter of 1999).
Gross Profit. Gross profit of $8.4 million for the first quarter of
2000 was 60% better than the $5.3 million gross profit recorded in the
comparable prior year period due to the revenue improvement as margins were
essentially constant at 21%. Subsea and Salvage margins declined from 20% for
the first quarter of 1999 to 17% during the first quarter of 2000. The primary
reasons for this decline were the Merlin working the entire quarter on a
bare-boat charter in Trinidad during 2000 at rates which resulted in essentially
break-even results for this vessel and low utilization of the Cal Dive Aker Dove
which resulted in a loss due to a lack of utilization in the rig move and anchor
handling market.
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Natural gas and oil production gross profit increased $2.6 million from
$657,000 in the first quarter of 1999 to $3.2 million for the three months ended
March 31, 2000 (and margins improved from 24% to 33%), due to the aforementioned
production and commodity pricing improvements.
Selling & Administrative Expenses. Selling and administrative expenses
were $4.3 million in the first quarter of 2000, which is 67% more than the $2.6
million incurred in the first quarter of 1999 due mainly to the consolidation of
Aquatica, Inc. ($600,000) and improved operating results for ERT, whose
incentive plan tracks their operating results ($700,000). The remainder of the
increase is due to additional personnel added to the Deepwater group within
Subsea.
Net Interest. The Company reported net interest income and other of
$200,000 for the three months ended March 31, 2000 in contrast to $548,000 for
the three months ended March 31, 1999 as average cash balances declined during
the first quarter of 2000 as compared to the first quarter of 1999 due mainly to
the Company's capital spending program (Q4000 vessel construction).
Income Taxes. Income taxes increased to $1.5 million for the three
months ended March 31, 2000, compared to $1.1 million in the comparable prior
year period due to increased profitability.
Net Income. Net income of $3.2 million for the three months ended March
31, 2000 was $1.1 million, or 54%, more than the comparable period in 1999 as a
result of factors described above. Diluted earnings per share increased only 43%
reflecting the additional shares issued to acquire Aquatica, Inc. in the third
quarter of 1999.
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.
In the past 33 months internally generated cash flow has funded approximately
$135 million of capital expenditures while enabling the Company to remain debt
free. As of March 31, 2000, the Company had $27.1 million of working capital
(including $14.4 million of cash on hand) and no debt outstanding. Additionally,
CDI has approximately $40.0 million available under a Revolving Credit
Agreement.
Operating Activities. Net cash provided by operating activities was
$11.9 million in the three months ended March 31, 2000, as compared to $3.9
million in the first quarter of 1999. This increase was due mainly to $21.4
million of funding from accounts receivable collections during the first quarter
of 2000 compared to $4.6 million in the first quarter of 1999 as we collected
all amounts due on the EEX Cooper abandonment project (the largest
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<PAGE> 10
contract ever in CDI's history) during the first quarter of 2000. In addition,
depreciation and amortization increased $2.7 million to $5.5 million for the
first quarter of 2000 due mainly to increased ERT depletion as a result of the
increased production. These increases were partially offset by an $11.4 million
reduction in accounts payable and accrued liabilities which occurred primarily
as a result of completion of the EEX Cooper project (and payment of all related
third party costs) and payment during the first quarter for the Uncle John's new
engines (which were previously committed and accrued for) which will be
installed during the second quarter.
Investing Activities. The Company incurred $19.2 million of capital
expenditures during the first quarter of 2000 compared to $5.3 million during
the comparable prior year period. Included in the $19.2 million of capital
expenditures in the first quarter of 2000 is $10 million for the construction of
the Q4000. Through the end of April 2000 we have funded approximately $50
million, or one-third of the estimated $150 million cost of the vessel. Also
during the first quarter 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). The acquired offshore blocks include working
interests from 40% to 75% in five platforms, one caisson and 13 wells currently
producing 23 mmcf per day (13 mmcf net). 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 also became
ERT employees. In connection with this transaction, $8.6 million of previously
restricted funds were utilized in the acquisition (these funds were obtained in
late 1999 from the sale of properties qualifying as "Like-Kind Exchanges" for
tax purposes).
Included in the $5.3 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
drydocks. In connection with the aforementioned ERT property acquisitions the
seller prepaid $7.8 million of the decommissioning liability.
Financing Activities. The only financing activity during the first
quarters 2000 and 1999 represents exercise of employee stock options.
Capital Commitments. The Board of Directors has approved a capital
budget of $120 million for the year 2000 with approximately $85 million of that
associated with the Q4000. CDI recently received a commitment from the Maritime
Administration (MARAD) regarding the application for Title XI financing for the
Q4000, a newbuild, ultra-deepwater semi-submersible vessel. We expect this
financing to be formally approved during the second quarter of 2000 and initial
construction funding to be drawn early in the third quarter. We expect to submit
to the CDI Board a supplemental appropriation of $20 million to $30 million to
convert the Sea Sorceress to full DP or purchase an existing DP vessel having
similar Deepwater construction features. In addition, in connection with its
business strategy, management expects the Company to acquire additional vessels
as well as acquire interest in offshore natural gas and oil properties.
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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.
In 1998, CDI entered into a subcontract with Seacore Marine Contractors
Limited (Seacore) to provide a vessel (the Sea Sorceress) for the excavation of
glory holes on the Terra Nova Project in the North Atlantic ocean. Seacore was
in turn contracted by Coflexip Stena Offshore (Coflexip). Due to unforeseen
difficulties with respect to the sea states and soil conditions, Coflexip chose
to suspend glory hole dredging for the 1998 season. Subsequently, Coflexip
formally terminated the bond provided by Seacore. CDI has provided Seacore a
performance bond of $5 million with respect to the subcontract of the Sea
Sorceress although no call has been made on this bond. Seacore and CDI believe
the contract was wrongfully terminated and are vigorously defending this claim
and seeking damages in arbitration.
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.
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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 15, 2000 By: /s/ JAMES NELSON
-----------------------------------------
S. James Nelson, Executive Vice President
and Chief Financial Officer
Date: May 15, 2000 By: /s/ A. WADE PURSELL
-----------------------------------------
A. Wade Pursell, Vice President-Finance
and Chief Accounting Officer
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EXHIBIT INDEX
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EXHIBIT
NUMBER DESCRIPTION
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27 Financial Data Schedule
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 14,432
<SECURITIES> 0
<RECEIVABLES> 30,183
<ALLOWANCES> 2,091
<INVENTORY> 0
<CURRENT-ASSETS> 64,472
<PP&E> 202,811
<DEPRECIATION> 50,288
<TOTAL-ASSETS> 240,913
<CURRENT-LIABILITIES> 37,329
<BONDS> 0
0
0
<COMMON> 71,710
<OTHER-SE> 84,526
<TOTAL-LIABILITY-AND-EQUITY> 240,913
<SALES> 40,109
<TOTAL-REVENUES> 40,109
<CGS> 31,712
<TOTAL-COSTS> 36,008
<OTHER-EXPENSES> (200)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (200)
<INCOME-PRETAX> 4,301
<INCOME-TAX> 1,505
<INCOME-CONTINUING> 3,214
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,214
<EPS-BASIC> 0.21
<EPS-DILUTED> 0.20
</TABLE>
