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 June 30, 2001
( ) 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)
Minnesota 95-3409686
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification Number)
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)
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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 August 14, 2001 there were 32,543,677 shares of common stock, no par
value outstanding.
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CAL DIVE INTERNATIONAL, INC.
INDEX
Part I. Financial Information Page
Item 1. Financial Statements
Consolidated Balance Sheets -
June 30, 2001 and December 31, 2000..........................................1
Consolidated Statements of Operations -
Three Months Ended June 30, 2001 and
June 30, 2000...........................................................2
Six Months Ended June 30, 2001 and
June 30, 2000...........................................................3
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 2001 and
June 30, 2000...........................................................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)
June 30, Dec. 31,
2001 2000
------------- -------------
ASSETS (unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 23,472 $ 44,838
Restricted cash 0 2,624
Accounts receivable --
Trade, net of revenue allowance
on gross amounts billed of
$2,181 and $1,770 41,466 42,924
Unbilled 3,028 1,902
Income tax receivable 0 10,014
Other current assets 18,184 20,975
------------- -------------
Total current assets 86,150 123,277
------------- -------------
PROPERTY AND EQUIPMENT 339,270 266,102
Less - Accumulated depreciation (82,400) (67,560)
------------- -------------
256,870 198,542
------------- -------------
OTHER ASSETS:
Goodwill 15,340 12,878
Other assets, net 13,554 12,791
------------- -------------
$ 371,914 $ 347,488
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 21,640 $ 25,461
Accrued liabilities 19,514 21,435
Income taxes payable 0 0
------------- -------------
Total current liabilities 41,154 46,896
LONG-TERM DEBT 40,054 40,054
DEFERRED INCOME TAXES 45,461 38,272
DECOMMISSIONING LIABILITIES 27,389 27,541
SHAREHOLDERS' EQUITY:
Common stock, no par, 120,000 shares
authorized, 46,184 and 44,885 shares issued 98,649 93,838
Retained earnings 122,958 104,638
Treasury stock, 13,640 shares, at cost (3,751) (3,751)
------------- -------------
Total shareholders' equity 217,856 194,725
------------- -------------
$ 371,914 $ 347,488
============= =============
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)
Three Months Ended June 30,
-----------------------------
2001 2000
------------- -------------
(unaudited)
NET REVENUES:
Subsea and salvage $ 32,577 $ 23,970
Natural gas and oil production 16,209 15,931
------------- -------------
48,786 39,901
COST OF SALES:
Subsea and salvage 23,654 21,583
Natural gas and oil production 8,218 7,900
------------- -------------
Gross profit 16,914 10,418
SELLING AND ADMINISTRATIVE EXPENSES 4,863 4,953
------------- -------------
INCOME FROM OPERATIONS 12,051 5,465
NET INTEREST (INCOME) AND OTHER 442 27
------------- -------------
INCOME BEFORE INCOME TAXES 11,609 5,438
Provision for income taxes 4,063 1,904
Minority interest 0 (126)
------------- -------------
NET INCOME $ 7,546 $ 3,660
============= =============
EARNINGS PER COMMON SHARE:
Basic $ 0.23 $ 0.12
Diluted $ 0.23 $ 0.11
============= =============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic 32,470 31,422
Diluted 33,212 32,310
============= =============
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)
Six Months Ended June 30,
------------------------------
2001 2000
------------- -------------
(unaudited)
NET REVENUES:
Subsea and salvage $ 63,859 $ 54,308
Natural gas and oil production 43,409 25,702
------------- -------------
107,268 80,010
COST OF SALES:
Subsea and salvage 48,824 46,760
Natural gas and oil production 19,272 14,435
------------- -------------
Gross profit 39,172 18,815
SELLING AND ADMINISTRATIVE EXPENSES 10,470 9,249
------------- -------------
INCOME FROM OPERATIONS 28,702 9,566
NET INTEREST (INCOME) AND OTHER 733 (173)
------------- -------------
INCOME BEFORE INCOME TAXES 27,969 9,739
Provision for income taxes 9,789 3,409
Minority interest (140) (544)
------------- -------------
NET INCOME $ 18,320 $ 6,874
============= =============
EARNINGS PER COMMON SHARE:
Basic $ 0.55 $ 0.22
Diluted $ 0.55 $ 0.21
============= =============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic 33,130 31,320
Diluted 33,388 32,208
============= =============
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)
Six Months Ended June 30,
------------------------------
2001 2000
------------- -------------
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 18,320 $ 6,874
Adjustments to reconcile net income to net cash
provided by operating activities --
Depreciation and amortization 18,782 13,076
Deferred income taxes 7,189 205
Changes in operating assets and liabilities:
Accounts receivable, net (390) 17,700
Other current assets 3,656 (1,740)
Accounts payable and accrued liabilities (4,707) (6,045)
Income taxes payable/receivable 10,066 2,845
Other non-current, net (6,579) (9,419)
------------- -------------
Net cash provided by operating activities 46,337 23,496
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (63,237) (47,390)
Purchase of Professional Divers of New Orleans, Inc. (11,500) 0
Restricted cash 2,622 8,188
(Purchase) release of deposits restricted for salvage operations 782 1,713
------------- -------------
Net cash used in investing activities (71,333) (37,489)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under term loan facility 0 1,090
Exercise of stock options 3,630 1,593
------------- -------------
Net cash provided by financing activities 3,630 2,683
------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (21,366) (11,310)
CASH AND CASH EQUIVALENTS:
Balance, beginning of period 44,838 11,310
------------- -------------
Balance, end of period $ 23,472 $ 0
============= =============
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 period ended June 30, 2001, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2001. These financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in the
Company's 2000 Annual Report on Form 10-K.
Note 2 - Recent Accounting Pronouncements
In July 2001, the FASB issued Statement of Financial Accounting Standards No.
141, Business Combinations which supersedes Accounting Principles Board (APB)
Opinion No. 16, Business Combinations. SFAS 141 eliminates the
pooling-of-interests method of accounting for business combinations and modifies
the application of the purchase accounting method. The elimination of the
pooling-of-interests method is effective for transactions initiated after June
30, 2001. The remaining provisions of SFAS 141 will be effective for
transactions accounted for using the purchase method that are completed after
June 30, 2001.
In July 2001, the FASB also issued Statement of Financial Accounting Standards
No. 142, Goodwill and Intangible Assets which supersedes APB Opinion No. 17,
Intangible Assets. SFAS 142 eliminates the current requirement to amortize
goodwill and indefinite-lived intangible assets, addresses the amortization of
intangible assets with a defined life and addresses the impairment testing and
recognition for goodwill and intangible assets. SFAS 142 will apply to goodwill
and intangible assets arising from transactions completed before and after the
Statement's effective date. SFAS 142 is effective for 2002. Cal Dive is
currently evaluating the possible effects of the adoption of this standard on
its financial position and results of operations.
Note 3 - Professional Divers Acquisition
In March, 2001, CDI acquired substantially all of the assets of Professional
Divers of New Orleans, Inc. (PDNO) in exchange for $11.5 million. The assets
purchased included the Sea Level 21 (a 165-foot four-point moored DSV renamed
the Mr. Sonny), three utility vessels and associated diving equipment including
two saturation diving systems. PDNO offshore personnel,
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comprising 20 diver/tender teams and marine crews that operate the four DSVs,
were offered employment positions with CDI's wholly-owned subsidiary, Aquatica,
Inc., most of which accepted the offer. This acquisition was accounted for as a
purchase with the acquisition price of $11.5 million being allocated to the
assets acquired and liabilities assumed based upon their estimated fair values.
The fair value of tangible asset acquired and liabilities assumed was $8.7
million and $0, respectively. The balance of the purchase price ($2.8 million)
was recorded as excess of cost over net assets acquired (goodwill) and is
currently being amortized over its estimated remaining useful life of 25 years.
Note 4 - Horizon Offshore
In February, 2001, CDI formed a joint venture with Horizon Offshore, Inc. to
conduct small diameter reeled pipelay projects in deepwater areas of the U.S.
Gulf of Mexico. The two companies are funding the estimated $15 million cost of
pipelay equipment to be deployed from CDI's Sea Sorceress. In addition, Horizon
is constructing a pipe spooling facility at its Port Arthur, Texas shore base.
In March, 2001, the two companies announced that the Alliance Agreement covering
operation on the Outer Continental Shelf was extended for a three-year period.
Principal features of the Alliance are that CDI provides Dive Support Vessel
services behind Horizon pipelay barges while Horizon supplies pipelay, derrick
barge and heavy lift capacity to Cal Dive. The Alliance was also expanded to
include CDI providing the diving personnel working from Horizon barges, a
service Horizon handled internally last year.
Note 5 - Business Segment Information (in thousands)
June 30, 2001 December 31, 2000
--------------- -----------------
(unaudited)
Identifiable Assets --
Subsea and Salvage $ 338,874 $ 301,416
Natural Gas and Oil Production 33,040 46,072
--------------- ---------------
Total $ 371,914 $ 347,488
--------------- ---------------
Note 6 - Acquisition of Deepwater Vessel
In May 2001, Cal Dive acquired a DP marine construction vessel, the Mystic
Viking (formerly the Bergen Viking). The 240 foot by 52 foot vessel is DP-2
class, similar to the Witch Queen. The Mystic Viking replaces the Balmoral Sea
(lost last year to fire) and the Cal Dive Aker Dove (Cal Dive's ownership was
transferred to Aker effective April 1, 2001). A major upgrade program to install
construction and diving related equipment below deck is planned for the first
quarter of 2002.
Note 7 - Subsequent Event - MARAD Debt
In August 2001, the Company drew an additional $38.5 million on the MARAD debt
taking Cal Dive's total outstanding debt on this $138.5 million commitment to
$78.5 million.
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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 June 30, 2001 and 2000
Revenues. During the three months ended June 30, 2001, the Company's
revenues increased 22% to $48.8 million compared to $39.9 million for the three
months ended June 30, 2000. The increase was generated primarily by the Subsea
and Salvage segment. In the Subsea and Salvage segment an increase in DSV
construction activity on the Outer Continental Shelf ($7.6 million) and our DP
vessels working at near full utilization ($3 million) easily offset a decline in
salvage activity ($2 million).
Natural gas and oil production revenue for the three months ended June
30, 2001 increased slightly to $16.2 million from $15.9 million during the
comparable prior year period. The increase was due to a higher average realized
natural gas price of $4.50 per mcf versus $3.40 during the second quarter of
2000. This more than offset a decline in production from 4.2 Bcfe in the second
quarter of 2000 to 3.55 Bcfe during the three months ended June 30, 2001.
Realized oil prices remained relatively constant at $26.20 per barrel during the
second quarter of 2001 versus $26.50 during the comparable prior year quarter.
Gross Profit. Gross profit of $16.9 million for the second quarter of
2001 represents a 62% increase compared to the $10.4 million recorded in the
comparable prior year period due to the aforementioned revenue increase in
Subsea and Salvage segment activity. Margins also improved from 26% during the
second quarter of 2000 to 35% during the second quarter of 2001. The margin
increase is due to the marine construction activities, specifically improved
pricing and outstanding offshore performance on turnkey projects.
Natural gas and oil production gross profit was relatively unchanged at $
8.0 million in the second quarter of 2001 compared to the three months ended
June 30, 2000, due to the aforementioned increases in average gas prices
offsetting the production decline as margins remained near the 50% level.
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Selling & Administrative Expenses. Selling and administrative expenses
were $4.9 million in the second quarter of 2001, which is just below the $5.0
million incurred in the second quarter of 2000. With the increase in revenues,
this had the effect of adding two percentage points to operating margins.
Net Interest. The Company reported net interest expense and other of
$442,000 for the three months ended June 30, 2001 in contrast to $27,000 for the
three months ended June 30, 2000. The increase between periods is due to the
reduction in cash balances (net of MARAD debt) as a result of our CAPEX program
(Q4000 vessel construction and Sea Sorceress conversion), combined with the
amortization of non-compete agreements and additional goodwill amortization.
Income Taxes. Income taxes increased to $4.1 million for the three months
ended June 30, 2001 compared to $1.9 million in the comparable prior year period
due to increased profitability.
Net Income. Net income of $7.5 million for the three months ended June
30, 2001 was $3.9 million, or 106%, more than the comparable period in 2000 as a
result of factors described above.
Comparison of Six Months Ended June 30, 2001 and 2000
Revenues. During the six months ended June 30, 2001, the Company's
revenues increased 34% to $107.3 million compared to $80.0 million for the six
months ended June 30, 2000 with the Natural Gas and Oil Production segment
contributing $17.7 million of the increase and the Subsea and Salvage segment
contributing the remaining $9.6 million increase. In the Subsea and Salvage
segment stronger demand for construction activity on the Outer Continental Shelf
was more than enough to absorb a $2.5 million decline in revenue generated by
our DP fleet (due mainly to the loss of the Balmoral Sea in June, 2000) and a
$1.2 million decline in salvage activity.
Natural gas and oil production revenue for the six months ended June 30,
2001 increased 69% to $43.4 million from $25.7 million during the comparable
prior year period due to a 84% increase in average realized natural gas prices
from $3.10 per mcf during the first half of 2000 compared to $5.70 per mcf
during the first six months of 2001 and a slight increase (4%) in production
from 7.5 Bcfe in the first half of 2000 compared 7.8 Bcfe during the first half
of 2001.
Gross Profit. Gross profit of $39.2 million for the first half of 2001
was 108% better than the $18.8 million gross profit recorded in the comparable
prior year period due mainly to the revenue improvement as well as a 13 point
improvement in margins (36.5% the first half of 2001 versus 23.5% in the
comparable prior year period). Subsea and Salvage margins improved from 14% for
the first half of 2000 to 23% during the first half of 2001 due mainly to the
aforementioned increase in marine construction activity and excellent offshore
performance during the second quarter of 2001.
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Natural gas and oil production gross profit increased $12.9 million from
$11.3 million in the first half of 2000 to $24.1 million for the six months
ended June 30, 2001 (and margins improved from 44% to 56%), due to the
aforementioned commodity pricing improvements.
Selling & Administrative Expenses. Selling and administrative expenses
were $10.5 million in the first half of 2001, which is 13% more than the $9.2
million incurred in the first half of 2000 due mainly to the ERT employee
incentive program which tracks that subsidiary's significantly improved
operating results.
Net Interest. The Company reported net interest expense and other of
$733,000 for the six months ended June 30, 2001 in contrast to $173,000 of net
interest income and other for the six months ended June 30, 2000 as average cash
balances (net of MARAD financing) declined during the first half of 2001 as
compared to the first half of 2000 due mainly to the Company's capital spending
program (Q4000 vessel construction and Sea Sorceress upgrade).
Income Taxes. Income taxes increased to $9.8 million for the six months
ended June 30, 2001, compared to $3.4 million in the comparable prior year
period due to increased profitability.
Net Income. Net income of $18.3 million for the six months ended June
30, 2001 was $11.4 million, or 167%, more than the comparable period in 2000 as
a result of factors described above.
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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 net proceeds of approximately $39.5
million resulting 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. Through June 30, 2001, we have funded over $115 million of the newbuild
vessel's construction costs. Significant internally generated cash flow in the
first half of 2001 coupled with the collection of a $10 million tax refund
enabled us to acquire the Mystic Viking (a 240 foot DP vessel) and Professional
Divers of New Orleans, Inc. maintaining cash balances of $23.5 million as of
June 30, 2001.
Operating Activities. Net cash provided by operating activities was $46.3
million during the six months ended June 30, 2001, as compared to $23.5 million
during the first six months of 2000. This increase was due mainly to increased
profitability and collection of a $10 million tax refund from the Internal
Revenue Service (reflected in Changes in Income Taxes Payable/Receivable)
relating to the deduction of Q4000 construction costs as research and
development expenditures for federal tax purposes, offset by a $18.1 million
decrease in funding from accounts receivable collections during the first six
months of 2001 compared to the first six months of 2000 when 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 $5.7 million to $18.8 million for the first half of 2001
due mainly to ERT depletion as a result of the increased production.
Investing Activities. The Company incurred $63.2 million of capital
expenditures during the first six months of 2001 compared to $47.4 million
during the comparable prior year period. Included in the $63.2 million of
capital expenditures in the first six months of 2001 is $23.4 million for the
construction of the Q4000 and $14.5 million relating to the Sea Sorceress DP
conversion project. In addition, in May 2001, Cal Dive acquired a DP marine
construction vessel, the Mystic Viking (formerly the Bergen Viking) for cash.
The remaining capital expenditures relate primarily to rig recompletion and
exploitation work of ERT. In March, 2001, CDI acquired substantially all of the
assets of Professional Divers of New Orleans, Inc. (PDNO) in exchange for $11.5
million. The assets purchased included the Sea Level 21 (a 165-foot four-point
moored DSV renamed the Mr. Sonny), three utility vessels and associated diving
equipment including two saturation diving systems.
Included in the $47.4 million of capital expenditures in the first half
of 2000 was $33 million for the construction of the Q4000. 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
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two-year contract to manage the remaining EEX operated properties. In connection
with this transaction, $8.2 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).
Financing Activities. The only financing activity during the first half
of 2001 represents exercise of employee stock options. On June 30, 2000 the
Company drew $1.1 million on its Revolving Credit Facility to prepay certain
vendors. The only other financing activity during the first of 2000 represents
exercise of employee stock options.
Capital Commitments. Our Board of Directors has approved a capital budget
of up to $150 million for the year 2001, with approximately $80 million of that
associated with the Q4000 and the Sea Sorceress. We have also set aside up to
$50 million for production contracting (ERT prospect acquisitions and initial
Gunnison development costs), although timing of these events is difficult to
predict. In May 2001, we acquired a DP marine construction vessel, the Mystic
Viking (formerly the Bergen Viking) for an undisclosed sum of cash. This
purchase is in addition to the $150 million approved capital budget. In June,
2001, we reached an agreement with Amfels Shipyard to further enhance the
Q4000's deepwater capabilities by adding well completions capability. This
upgrade will result in additional capital expenditures of $30 million in
addition to the $150 million previously budgeted. Delivery of the Q4000 is now
scheduled for the end of the first quarter of 2002. In August, 2001, we drew an
additional $38.5 million on the MARAD debt taking our total outstanding debt on
this $138.5 million commitment to $78.5 million.
During 2000, ERT acquired a 20% working interest in the Gunnison
prospect, a Deepwater project that has encountered significant potential
reserves, in partnership with Kerr-McGee Oil & Gas Corporation, the operator.
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. Cal Dive has agreed to fund up to
$49 million in development costs and up to $1 million of certain additional
costs if the Gunnison prospect is declared a sanctioned project.
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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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 in turn 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 -
None
(b) Reports on Form 8-K -
Current Report on Form 8-K filed May 3, 2001 to report the
Company's 2001 first quarter financial results and its
forecasted results for the quarter ending June 30, 2001.
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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: August 14, 2001 By: /s/ S. JAMES NELSON
------------------------------------
S. James Nelson, Vice Chairman
Date: August 14, 2001 By: /s/ A. WADE PURSELL
------------------------------------
A. Wade Pursell,
Senior Vice President
Chief Financial Officer
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