SEC Filing | Helix Energy Solutions Group, Inc.

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.

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

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 -

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 -

CAL DIVE INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) Three Months Ended March 31, ---------------------------- 1999 1998 ---------- --------- (unaudited) 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 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. - 3 -

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 -

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 -

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 -

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 -

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 -

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 -

5 1,000 3-MOS DEC-31-1999 MAR-31-1999 39,584 0 26,437 3,132 0 78,953 119,396 30,527 181,483 27,061 0 0 0 53,443 62,803 181,483 26,006 26,006 20,749 23,322 (100) 0 (448) 3,232 1,145 2,087 0 0 0 2,087 .14 .14