Cal Dive International, Inc. (NYSE: DVR) reported a second
quarter 2014 loss of $29.1 million, or $0.31 per diluted share, on
revenues of $121.7 million. Included in the loss for the second
quarter 2014 is a $6.2 million after-tax charge for the provision
of doubtful accounts related to a receivable owed by a contractor
in Mexico that became subject to bankruptcy proceedings in July,
and a $3.0 million after-tax loss related to the early
extinguishment of debt from the Company’s previously announced
refinancing during the second quarter. This compares to a loss of
$1.7 million, or $0.02 per diluted share, on revenues of $121.0
million for the second quarter 2013. Included in the loss for the
second quarter 2013 is a $4.0 million after-tax gain related to a
mark-to-market adjustment on the Company’s convertible debt.
The second quarter was significantly impacted by unseasonably
adverse weather that delayed the Company’s completion of two of its
four Mexico projects. The Company is now 100% complete on one of
the projects, and expects to complete the second project by
mid-August. The remaining two Mexico projects have been temporarily
suspended by Pemex as it waits for platforms to be installed by
other contractors. Once the two platforms are installed, the
Company will complete its remaining scopes of work. Based on
Pemex’s current project schedule, the Company expects to resume
work on these projects late in the third quarter, and to complete
both projects in the fourth quarter. During the second quarter, the
Company also completed a project in Ecuador, and continued to be
busy in Australia and Southeast Asia. The Company also commenced an
air diving project in the North Sea in the second quarter that was
completed during the third quarter, and commenced a second project
in that region in the third quarter.
In the U.S. Gulf of Mexico, the second quarter was adversely
affected by unseasonable weather and customer delays that delayed
the start of the summer work season. However, the Company’s vessels
are now experiencing high utilization levels, and domestic backlog
at the end of the second quarter is the highest it has been in
several years.
Revolving Credit Agreement Refinancing
The Company has received financing proposals in the form of
preliminary commitment letters from four lenders providing for the
refinancing of the Company’s revolving credit facility in an amount
up to its previous capacity of $125.0 million. Under the terms of
the most recent amendment to the revolving credit facility, the
size of the facility was required to be reduced by $5.0 million per
month from May 31, 2014 to December 31, 2014 until reduced to $85.0
million. All four commitment letters are subject to customary
closing conditions, and the Company expects a closing of the
refinancing to occur by the end of August 2014. Under the terms of
certain waivers of non-compliance of financial covenants under the
Company’s loan agreements as of June 30, 2014 due to the second
quarter results, the Company is required to refinance its revolving
credit facility due 2016 by September 30, 2014. Because of this
requirement and certain cross default provisions contained in the
Company’s loan agreements, all of the Company’s indebtedness has
been reflected as current on its balance sheet. Upon completion of
the refinancing, the Company expects that its indebtedness will be
reclassified to long-term debt.
Appointment of New Board Member
On Thursday, August 7, 2014, the Board of Directors of Cal Dive
appointed Mr. Donald D. Patteson, Jr. to the Company’s Board as an
independent director. Mr. Patteson’s appointment expands the Board
to five directors, four of whom are independent. Mr. Patteson will
serve on each of the Board’s three standing committees (Audit,
Compensation and Corporate Governance and Nominating).
Mr. Patteson has served in various managerial and finance and
accounting roles in the oil and gas industry throughout his career,
including with Atwood Oceanics, Houston Offshore International, and
Western Oceanic. Mr. Patteson was most recently the founder and
Chairman of Sovereign Business Forms, Inc., a consolidator in a
segment of the printing industry, and prior to this he served as
Managing Director of Sovereign Capital Partners, an investment firm
specializing in leveraged buyouts. Mr. Patteson currently also
serves on the boards of Rosetta Resources, Inc. and Carriage
Services, Inc.
Engagement of Advisors
In mid-May 2014, the Company’s Board of Directors authorized
management to explore a broad range of strategic alternatives to
enhance stockholder value. The Company has engaged
PricewaterhouseCoopers LLP as the Company’s financial advisor to
assist with: (i) the evaluation and negotiation of potential
refinancing options, (ii) an evaluation of the Company’s current
capital structure and possible recapitalization of the Company, and
(iii) an evaluation and transformation of the Company’s cost
structure. Lazard Frères & Co. LLC has also been engaged as the
Company’s financial advisor to assist with the evaluation of a full
range of options in order to strengthen the balance sheet and
enhance stockholder value, including: (i) a strategic joint venture
or partnership in respect of any of the Company’s regional
operations worldwide, (ii) a sale of specific assets or divisions,
(iii) a merger, acquisition or other strategic transaction
involving the Company, or (iv) continuing to execute the Company’s
business plan. There is no assurance that the Company will pursue
any strategic alternatives that are identified, or that the process
will result in any material transaction involving the Company. The
Company does not intend to disclose further developments with
respect to this process, unless and until its Board of Directors
approves a specific transaction or otherwise concludes the review
of strategic alternatives.
Commenting on the Company’s second quarter results, Cal Dive’s
Chairman, President and Chief Executive Officer, Quinn Hébert,
stated, “Much of the latter half of the second quarter was impacted
by unseasonably adverse weather conditions, especially during the
latter half of May and during June when we expected activity levels
to ramp up for the summer work season. This weather delayed the
timing of the start of projects in the U.S. Gulf of Mexico and also
caused delays in our progress on two of our four current projects
in Mexico for Pemex. We completed one of the Pemex projects during
June and expect to complete the second project in the third
quarter. Based on Pemex’s current project schedule, we are on track
to complete the remaining two projects during the fourth
quarter.”
Mr. Hébert continued, “Since the second quarter, the weather has
improved, and our domestic fleet has experienced high levels of
utilization, both for booked work that was included in our backlog
at the end of the second quarter, as well as for new projects we
have won during the third quarter. The level of domestic project
awards we are seeing point to a continued market improvement in the
U.S. Gulf of Mexico.”
Mr. Hébert added, “I would like to welcome Don Patteson to our
Board. His extensive experience as a chief executive officer and
chief financial officer in various industries, including the oil
and gas industry, will add valuable perspective and insight to our
Board.”
Finally, Mr. Hébert also stated, “As we continue to execute on
our strategic plan to increase our international presence and
reduce our exposure to the U.S. Gulf of Mexico, we have experienced
increasing demands on our working capital and constraints on our
liquidity. The initiation of a review of strategic alternatives
will allow us to explore options that can address the Company’s
challenges in a way best suited to enhance stockholder value. While
we review alternatives, we will remain focused on executing our
business plan, with a commitment to excellent project execution and
safety performance. The refinancing of our revolving credit
facility will provide additional liquidity to fund our near-term
growth opportunities.”
Financial Highlights
--
Backlog: Contracted backlog was $234
million as of June 30, 2014. This compares to backlog of $249
million at December 31, 2013 and $400 million at June 30, 2013. Of
this backlog, $161 million relates to international projects with
$73 million relating to projects in the U.S. Gulf of Mexico and 64%
is expected to be performed during the remainder of 2014.
--
Revenues: Second quarter 2014 revenues
increased by $0.7 million to $121.7 million compared to the second
quarter 2013. Although revenue was relatively unchanged,
international revenues increased 17% while domestic revenues
decreased 29%, mostly due to unseasonably adverse weather and
customer delays in project schedules, as well as lower utilization
of the Company’s dive support vessels, including the impact of the
sale of its surface diving fleet effective May 31, 2014.
--
Gross Profit (Loss): Second quarter 2014
gross loss was $17.4 million, a deterioration of $20.0 million
compared to gross profit of $2.6 million for the second quarter
2013. The loss is primarily attributable to cost overruns from
delays related to unseasonably adverse weather conditions on two of
the Company’s projects in Mexico, as well as lower utilization in
the U.S. Gulf of Mexico due to unseasonably adverse weather and
customer delays in project schedules.
--
G&A: Second quarter 2014 G&A
expense was $11.6 million, or 9.5% of revenues, compared to $10.8
million, or 8.9% of revenues, for the second quarter 2013. The
increase is due to higher international G&A expense.
--
Interest Expense: Second quarter 2014 net
interest expense increased by $3.3 million to $8.0 million as
compared to second quarter 2013, primarily due to higher levels of
debt due to working capital requirements in Mexico and higher
interest rate margins on outstanding indebtedness.
--
Income Tax: The effective tax benefit rate
for the second quarter 2014 was 36.8% compared to a tax benefit
rate of 38.0% for the second quarter 2013.
--
Balance Sheet: As of June 30, 2014, total
debt consisted of $86.25 million in convertible notes, $100.0
million under a senior secured second lien term loan and $77.6
million outstanding under a revolving credit facility. Cash and
cash equivalents were $2.6 million, for a net debt position of
$261.3 million at June 30, 2014, compared to a net debt position of
$237.9 million at March 31, 2014 and $200.0 million at December 31,
2013. The increase in net debt is primarily due to the continued
working capital needs for the Company’s four projects in Mexico.
Total debt presented on the consolidated balance sheet at June 30,
2014 is net of a debt discount of $16.6 million on the Company’s
convertible debt.
Conference Call Information
Cal Dive’s conference call has been scheduled for 11:00 a.m.
Central Time today, August 11, 2014. The teleconference dial-in
numbers are: (866) 953-6856 (domestic), (617) 399-3480
(international), passcode 64247475. The Company will post the slide
presentation prior to the conference call. Investors will be able
to obtain the slide presentation and listen to the live conference
call broadcast from the Investor Relations page at
www.caldive.com.
A replay of the call will also be available from the Investor
Relations-Audio Archives page. A telephonic replay of the
conference call will be available beginning approximately three
hours after the completion of the conference call and will remain
available for one week. To access the replay, call (888) 286-8010
(domestic) or (617) 801-6888 (international), passcode
89353879.
About Cal Dive International, Inc.
Cal Dive International, Inc., headquartered in Houston, Texas,
is a marine contractor that provides manned diving, pipelay and
pipe burial, platform installation and salvage, and light well
intervention services to the offshore oil and natural gas industry
on the Gulf of Mexico OCS, Northeastern U.S., Latin America,
Southeast Asia, China, Australia, West Africa, the Middle East, and
Europe, with a diversified fleet of dive support vessels and
construction barges.
Cautionary Statement
This press release may include “forward-looking” statements that
are generally identifiable through the use of words such as
“believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,”
“project” and similar expressions and include any statements that
are made regarding earnings expectations. The forward-looking
statements speak only as of the date of this release, and the
Company undertakes no obligation to update or revise such
statements to reflect new information or events as they occur.
These statements are based on a number of assumptions, risks and
uncertainties, many of which are beyond the control of the Company.
Investors are cautioned that any such statements are not guarantees
of future performance and that actual future results may differ
materially due to a variety of factors, including the Company’s
significant indebtedness and constraints on the Company’s
liquidity, current economic and financial market conditions,
changes in commodity prices for natural gas and oil, and in the
level of offshore exploration, development and production activity
in the oil and natural gas industry, the Company’s inability to
obtain contracts with favorable pricing terms if there is a
downturn in its business cycle, intense competition and pricing
pressure in the Company’s industry, the risks of cost overruns on
fixed price contracts, the uncertainties inherent in competitive
bidding for work, the operational risks inherent in the Company’s
business, risks associated with the Company’s increasing presence
internationally, and other risks detailed in the Company’s most
recently filed Annual Report on Form 10-K.
CAL DIVE INTERNATIONAL, INC. and
SUBSIDIARIES
Condensed Consolidated Statements of
Operations
(in thousands, except per share
amounts)
Three Months Ended
Six Months Ended
June 30,
June 30,
2014 2013 2014
2013 (unaudited) (unaudited)
Revenues
$ 121,689 $ 120,986 $ 240,793 $ 201,905
Cost of sales
139,120 118,356 264,443
210,792
Gross profit (loss )
(17,431 ) 2,630 (23,650 ) (8,887 )
General and administrative expenses
11,581 10,802 21,608 22,711
Provision for doubtful accounts
9,508 - 9,508 -
Asset impairment
1,947 - 1,947 125
(Gain) on sale of assets, net
(7,305 ) (3,143 ) (8,917 )
(3,123 )
Operating loss
(33,162 ) (5,029 ) (47,796 ) (28,600 )
Interest expense, net
7,977 4,630 13,585 9,262
Interest expense - adjustment to
conversion feature of convertible debt
- (6,425 ) - (6,362 )
Loss on early extinguishment of debt
4,652 - 4,652 -
Other expense, net
414 376 220 455
Loss before income taxes
(46,205 ) (3,610 ) (66,253 ) (31,955 )
Income tax benefit
(17,004 ) (1,372 ) (23,901 ) (10,691 )
Net loss
(29,201 ) (2,238 ) (42,352 ) (21,264 )
Loss attributable to noncontrolling
interest
(126 ) (570 ) (226 ) (1,946 )
Loss attributable to Cal Dive
$ (29,075 ) $ (1,668 ) $ (42,126 ) $ (19,318 )
Loss per share attributable to Cal
Dive:
Basic and diluted
$ (0.31 ) $ (0.02 ) $ (0.44 ) $ (0.21 )
Weighted average shares outstanding:
Basic and diluted
95,242 93,748 95,108
93,808
Other financial data:
Depreciation and amortization
$ 13,896 $ 13,631 $ 28,256 $ 27,811
Non-cash stock compensation expense
1,493 1,406 2,428 2,854
Severance charges
300 - 1,345 -
Adjusted EBITDA
(6,306 ) 10,202 (4,306 ) 3,681
CAL DIVE INTERNATIONAL, INC. and
SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
June 30,2014
December 31,2013
ASSETS
(unaudited)
Current assets:
Cash
$ 2,583 $ 12,190
Accounts receivable, net
199,313 180,582
Other current assets
23,949 37,271 Total current assets 225,845
230,043
Net property and equipment
352,728 388,580
Other assets, net
32,529 32,059 Total assets $ 611,102 $ 650,682
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$ 93,081 $ 114,663
Other current liabilities
31,940 33,342
Current maturities of long-term debt
247,298 13,989 Total current liabilities
372,319 161,994
Long-term debt
- 179,464
Other long-term liabilities
36,830 67,207 Total liabilities 409,149
408,665
Total equity
201,953 242,017 Total liabilities and equity $
611,102 $ 650,682
Reconciliation of Non-GAAP Financial
Measures
For the Periods Ended June 30, 2014 and
2013
(in thousands)
In addition to net income, one primary
measure that the Company uses to evaluate financial performance is
earnings before net interest expense, taxes, depreciation and
amortization, or EBITDA. The Company includes other items and
adjustments in its definition of Adjusted EBITDA outlined below.
The Company uses Adjusted EBITDA to measure operational strengths
and the performance of its business and not to measure liquidity.
Adjusted 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 reported in accordance with GAAP. Adjusted EBITDA
should not be considered in isolation or as a substitute for, but
instead is supplemental to, income from operations, net income and
other income data prepared in accordance with GAAP. Furthermore,
Adjusted EBITDA presentations may vary among companies; thus, the
Company's Adjusted EBITDA may not be comparable to similarly titled
measures of other companies.
The Company believes Adjusted EBITDA is
useful as a measurement tool because it helps investors evaluate
and compare operating performance from period to period by removing
the impact of capital structure (primarily interest charges from
outstanding debt) and asset base (primarily depreciation and
amortization of vessels) from operating results. The Company's
management uses Adjusted EBITDA in communications with lenders,
rating agencies and others, concerning financial performance.
The following table presents a
reconciliation of income (loss) attributable to Cal Dive to
Adjusted EBITDA, which is the most directly comparable GAAP
financial measure of the Company's operating results:
(all amounts in
thousands)
Three Months Ended
Six Months Ended
June 30,
June 30,
2014 2013 2014
2013
Loss attributable to Cal Dive
$ (29,075 ) $ (1,668 )
$ (42,126 ) $ (19,318 )
Net interest expense 7,977 4,630 13,585 9,262 Interest expense -
conversion feature adjustment - (6,425 ) - (6,362 ) Income tax
benefit (17,004 ) (1,372 ) (23,901 ) (10,691 ) Depreciation and
amortization 13,896 13,631
28,256 27,811
EBITDA $ (24,206 ) $
8,796 $ (24,186 ) $ 702 Non-cash stock
compensation expense 1,493 1,406 2,428 2,854 Non-cash impairment
charges 1,947 - 1,947 125 Loss on early extinguishment of debt
4,652 - 4,652 - Provision for doubtful accounts 9,508 - 9,508 -
Severance charges 300 - 1,345
-
Adjusted EBITDA $ (6,306 ) $ 10,202
$ (4,306 ) $ 3,681 As of 6/30/14 Total Debt
(1) $ 263,850 Less: Cash (2,583 ) Net Debt $ 261,267
(1) Total debt consists of outstanding balances on a
revolver, second lien secured term loan and the principal amount of
convertible debt.
Cal Dive International, Inc.Ike Smith, 713-243-2713Vice
President - Finance
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