Cal Dive Reports Fourth Quarter and Year End 2009 Results

By Benzinga Staff
February 24, 2010 4:47 PM

HOUSTON--(BUSINESS WIRE)--

Cal Dive International, Inc. (NYSE: DVR) reported 2009 annual net income of $76.6 million, or $.81 per diluted share, compared to $109.5 million and $1.03 per diluted share for the same period of 2008. The decrease in net income is primarily due to a decrease in new construction services partially offset by an increase in demand for hurricane repair work.

Cal Dive also reported fourth quarter 2009 net income of $2.8 million, or $.03 per diluted share, compared to $46.1 million and $.43 per diluted share for the same period of 2008. The decrease in net income is primarily due to the decrease in demand for new construction services as well as a decrease in hurricane repair work due to a reduced urgency by customers in completing the remaining hurricane repair and salvage work as compared to the fourth quarter of 2008, which immediately followed hurricanes Gustav and Ike. During the fourth quarter of 2009, the Company also experienced unexpected mechanical downtime for one of its vessels working internationally, which also contributed to a higher effective tax rate for the fourth quarter as a lower percentage of income was earned from foreign tax jurisdictions.

Quinn Hébert, President and Chief Executive Officer of Cal Dive, stated, “While the fourth quarter was certainly a slow close to the year, 2009 was a successful year for Cal Dive in terms of offshore execution, significant international awards, safety performance and solid financial results. Long term, we believe the underlying fundamentals for demand for our services remain strong and we expect the market to improve during the second half of 2010 and beyond based on current bidding activity levels, drilling forecasts and outlooks of key customers. However, we do anticipate a challenging market during the first half of 2010 and our earnings for that period to be well below that of the corresponding period for 2009. While our visibility is always limited at this time of the year, it is evident that our customers are taking a cautious approach to spending in the areas we perform offshore services. There will be reduced demand for new construction work in 2010 due to less drilling activity in 2009 and there is no project scheduled for 2010 similar to the large offshore LNG terminal project we completed in 2009. While there remains a significant amount of hurricane repair and salvage remaining in the US Gulf of Mexico, our customers are approaching the work in a less urgent and more systematic fashion. These factors have lead to lower utilization levels as well as significant pricing pressure across our fleet including our saturation diving vessels, which are our most profitable assets. Due to these market factors, typical winter seasonality and our required regulatory dry dock schedule, the first quarter of 2010 activity levels are expected to be the slowest of the year resulting in a net loss for that quarter.

Cal Dive has been through this type of cycle many times in our long history and we have an experienced management team that knows how to manage through it. Cal Dive’s business model is built to endure such a cycle through excellent offshore performance, disciplined cost control, and the strategy of owning versus chartering our assets. We have also taken several measures to further reduce our fixed overhead cost structure. While these decisions are never made lightly, we are confident it is the right thing to do heading into a challenging market. We continue to monitor the international markets in an effort to find the right strategic acquisition opportunities to expand the reach of our international operations. Our strong balance sheet and liquidity through cash on hand and the availability of nearly all of our $300 million revolving credit facility puts us in a position to be able to take advantage of the right growth opportunities when they present themselves.”

Financial Highlights

Backlog: Contracted backlog was $183.0 million as of December 31, 2009 compared to a backlog of $213.0 million at September 30, 2009 and $350.0 million at December 31, 2008.
Revenues: Annual 2009 revenues decreased by $27.5 million, or 3%, to $829.4 million as compared to the full year 2008, while fourth quarter 2009 revenues decreased by $114.3 million, or 44%, to $147.4 million as compared to the fourth quarter of 2008. The annual decrease is primarily due to the reduction in new construction services partially offset by an increase in demand for hurricane repair work. The fourth quarter decrease is also due to reduced new construction services as well as less urgent demand for hurricane repair work.
Gross Profit: Annual 2009 gross profit decreased by $38.1 million, or 15%, to $215.9 million as compared to the full year 2008, while fourth quarter 2009 gross profit decreased by $53.3 million, or 60%, to $36.2 million as compared to the fourth quarter of 2008. The annual and quarterly decreases are due to the same reasons as the revenue decreases discussed above.
SG&A: Annual 2009 SG&A decreased by $.7 million to $73.8 million as compared to the full year 2008, while fourth quarter 2009 SG&A increased by $.5 million to $20.1 million as compared to the fourth quarter of 2008. As a percentage of revenue, SG&A was 8.9% for the full year 2009 compared to 8.7% for 2008.
Provision for Doubtful Accounts: Provision for doubtful accounts was $8.0 million for the full year 2009 and $1.5 for the fourth quarter of 2009 relating to the doubtful collection of certain trade receivables recorded. There was no provision recorded during 2008.
Net Interest Expense: Annual 2009 net interest expense decreased by $7.5 million to $13.8 million as compared to the full year 2008, while fourth quarter 2009 net interest expense decreased by $1.2 million to $3.2 million as compared to the fourth quarter 2008, primarily due to lower variable interest rates associated with outstanding borrowings.
Income Tax Expense: The effective tax rate for the full year 2009 was 35.4% compared to 30.4% for 2008, while the effective tax rate for the fourth quarter of 2009 was 71.7% compared to 28.6% for the fourth quarter of 2008. The rate increase is primarily due to a lower percentage of profits being derived from foreign tax jurisdictions. During the fourth quarter of 2009, one of the Company’s diving vessels working internationally experienced unexpected mechanical downtime, which significantly contributed to this trend.
Balance Sheet: Total debt was $235.0 million and cash and cash equivalents were $52.4 million for a net debt position of $182.6 million as of December 31, 2009, compared to a net debt position of $230.4 at September 30, 2009 and $254.4 million at December 31, 2008. During the fourth quarter of 2009, the Company repaid the $100 million outstanding balance under its revolving credit facility leaving it with $295.5 million available under the facility.

Further details will be provided during Cal Dive’s conference call, scheduled for 10 a.m. Central Time on February 25, 2010. The teleconference dial-in numbers are: (866) 804-6925 (domestic), (857) 350-1671 (international), passcode 56257340. Investors will be able to obtain the slide presentation and listen to the live conference call broadcast from the Investor Relations page at http://www.caldive.com. A replay will also be available from the Investor Relations-Presentations page.

Cal Dive International, Inc., headquartered in Houston, Texas, is a marine contractor that provides an integrated offshore construction solution to its customers, including manned diving, pipelay and pipe burial, platform installation and platform salvage services to the offshore oil and natural gas industry on the Gulf of Mexico OCS, Northeastern U.S., Latin America, Southeast Asia, China, Australia, the Middle East, India and the Mediterranean, with a fleet of 31 vessels, including 21 surface and saturation diving support vessels and 10 construction barges.

CAUTIONARY STATEMENT

This press release may include “forward-looking” statements that are generally identifiable through our use of words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “project” and similar expressions and include any statements that we make regarding our earnings expectations. The forward-looking statements speak only as of the date of this release, and we undertake no obligation to update or revise such statements to reflect new information or events as they occur. Our actual future results may differ materially due to a variety of factors, including changes in the level of offshore exploration, development and production activity in the oil and natural gas industry, our inability to obtain contracts with favorable pricing terms if there is a downturn in our business cycle, intense competition in our industry, the operational risks inherent in our business, and other risks detailed in our Annual Report on Form 10-K.

CAL DIVE INTERNATIONAL, INC.
Comparative Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)

	4th Quarter						Year Ended
		2009			2008			2009			2008
	(unaudited)						(unaudited)

Revenues	$	147,396		$	261,656		$	829,362		$	856,906
Cost of sales		111,208			172,138			613,477			602,899
Gross profit		36,188			89,518			215,885			254,007
Selling and administrative expenses		20,063			19,590			73,787			74,500
Gain (loss) on sale of assets		(99	)		18			(99	)		204
Provision for doubtful accounts		1,515			-			7,992			-
Income from operations		14,511			69,946			134,007			179,711
Equity earnings of investment		-			-			400			-
Interest expense, net		3,203			4,425			13,801			21,312
Other expense, net		(1,275	)		(973	)		(2,069	)		(973	)
Income before income taxes		10,033			64,548			118,537			157,426
Provision for income taxes		7,193			18,452			41,910			47,927
Net income	$	2,840		$	46,096		$	76,627		$	109,499

Other financial data:
Depreciation and amortization		18,469			19,035			76,313			71,195
EBITDA		34,178			89,630			216,453			255,954

Weighted avg. shares outstanding:
Basic		90,378			104,547			91,884			104,418
Diluted		90,385			104,547			91,927			104,418
Earnings per share:
Basic	$	0.03		$	0.43		$	0.81		$	1.03
Diluted	$	0.03		$	0.43		$	0.81		$	1.03

CAL DIVE INTERNATIONAL, INC.
Comparative Condensed Consolidated Balance Sheet
(in thousands)

			December 31,
ASSETS				2009		2008
			(unaudited)
Current assets:
	Cash and cash equivalents		$	52,413	$	60,556
	Accounts receivable			119,499		167,714
	Contracts in progress			24,511		56,764
	Affiliated, net			-		54,944
	Deferred income taxes			3,183		5,562
	Other current assets			25,102		23,597
		Total current assets		224,708		369,137

Net property and equipment				609,233		604,242
Goodwill				292,469		292,469
Deferred drydock costs				16,976		24,784
Other assets, net				12,593		18,976
		Total assets	$	1,155,979	$	1,309,608


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
	Accounts payable		$	49,680	$	77,440
	Advanced billings on contracts			3,512		10,958
	Current maturities of long-term debt			80,000		80,000
	Income tax payable			6,025		14,900
	Accrued liabilities			39,668		58,995
		Total current liabilities		178,885		242,293

Long-term debt				155,000		235,000
Long-term payable to affiliate				-		2,695
Deferred income taxes				121,973		116,790
Other long term liabilities				5,323		7,133
		Total liabilities		461,181		603,911

Stockholders' equity				694,798		705,697
		Total liabilities and stockholders' equity	$	1,155,979	$	1,309,608

Calculation of Earnings Per Share
(in thousands, except per share amounts)

Basic EPS is computed by dividing undistributed net income attributable to common shares by the basic weighted-average shares of outstanding common stock. The calculation of diluted EPS is similar to basic EPS, except the denominator includes dilutive common stock equivalents. The components of basic and diluted EPS for common shares under the two-class method for quarters and years ended December 31, 2009 and 2008 were as follows:

		4th Quarter				Year Ended
		2009		2008		2009		2008
		(unaudited)				(unaudited)
Numerator:
	Net income	$	2,840	$	46,096	$	76,627	$	109,499
	Less: Undistributed net income allocated to unvested restricted stock		86		689		2,205		1,444
Undistributed net income attributable to common shares		$	2,754	$	45,407	$	74,422	$	108,055

Denominator:
	Basic weighted average shares outstanding		90,378		104,547		91,884		104,418
	Dilutive employee stock purchase plan		7		-		43		-
	Diluted weighted average shares outstanding		90,385		104,547		91,927		104,418

Earnings per Share:
	Total basic	$	0.03	$	0.43	$	0.81	$	1.03
	Total diluted	$	0.03	$	0.43	$	0.81	$	1.03

Reconciliation of Non-GAAP Financial Measures
For the Periods Ended December 31, 2009 and 2008
(in thousands)

In addition to net income, one primary measure that we use to evaluate our financial performance is earnings before net interest expense, taxes, depreciation and amortization, or EBITDA. We use EBITDA to measure our operational strengths and the performance of our business and not to measure our liquidity. EBITDA does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues, and should be considered in addition to, and not as a substitute for, net income and other measures of financial performance we report in accordance with GAAP. Furthermore, EBITDA presentations may vary among companies; thus, our EBITDA may not be comparable to similarly titled measures of other companies. We believe EBITDA is useful as a measurement tool because it helps investors evaluate and compare our operating performance from period to period by removing the impact of our capital structure (primarily interest charges from our outstanding debt) and asset base (primarily depreciation and amortization of our vessels) from our operating results. Our management uses EBITDA (i) to assess compliance with financial ratios and covenants that will be included in our revolving credit facility; and (ii) in communications with lenders, rating agencies and others, concerning our financial performance. The following table presents a reconciliation of EBITDA to net income, which is the most directly comparable GAAP financial measure of our operating results:

		4th Quarter				Year Ended
		2009		2008		2009		2008
		(unaudited)				(unaudited)
EBITDA	$	34,178		$	89,630	$	216,453	$	255,954
Less: Depreciation & Amortization		18,469			19,035		76,313		71,195
Less: Non-Cash Stock Compensation Expense		1,943			1,622		7,272		6,021
Less: Net Interest Expense		3,203			4,425		13,801		21,312
Less: Provision for Income Taxes		7,193			18,452		41,910		47,927
Less: Non-Cash Impairment Charge		530			-		530		-
Net Income	$	2,840		$	46,096	$	76,627	$	109,499


		As of 12/31/09
Total Debt	$	235,000
Less: Cash		(52,413	)
Net Debt	$	182,587