Helix Energy Solutions Group Inc – ‘10-Q’ for 3/31/98

As of:  Monday, 5/4/98   ·   For:  3/31/98   ·   Accession #:  890566-98-805   ·   File #:  0-22739

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Quarterly Report   —   Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                      12     46K 
 2: EX-18.1     Letter re: Change in Accounting Principles             2     10K 
 3: EX-27.      Financial Data Schedule (Pre-XBRL)                     1      6K 

10-Q   —   Quarterly Report
Document Table of Contents

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 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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, 1998

( )        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 of Other Jurisdiction of         (I.R.S. 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
(Registrants telephone number,
Including area code)

------------------

 Indicate by check mark 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 [ ]   No [X]                             

   At May 4, 1998 there were 14,544,831 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 -                                                   

March 31, 1998 and December 31, 1997........................1         

Consolidated Statements of Operations -                                         

Three Months Ended March 31, 1998 and                                 
March 31, 1997...........................................2      

Consolidated Statements of Cash Flows -                                         

Three Months Ended March 31, 1998 and                                 
March 31, 1997...........................................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 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)

                                                        March 31,     Dec. 31,
                                                       1998         1997
                                                        ---------    ---------
          ASSETS                           (unaudited)
CURRENT ASSETS:                                                                 
   Cash and cash equivalents ........................   $  11,171    $  13,025
Accounts receivable --                                                  
Trade, net of revenue allowance                               
on gross amounts billed of                          
             $1,220 (unaudited) and $1,822 ..........      21,877       23,856
        Unbilled ....................................       8,508        8,134
   Other current assets .............................       8,123        4,947
                                                        ---------    ---------
       Total current assets .........................      49,679       49,962
                                                        ---------    ---------
PROPERTY AND EQUIPMENT ...............................     100,245       89,499 
    Less - Accumulated depreciation ..................     (22,001)     (20,021)
                                                        ---------    ---------
                                                           78,244       69,478
                                                        ---------    ---------
OTHER ASSETS:                                                                   
Cash deposits restricted for salvage                                    
        operations ..................................       5,749        5,670
   Other assets, net ................................       6,635          490
                                                        ---------    ---------
                                                        $ 140,307    $ 125,600
                                                        =========    =========
LIABILITIES AND SHAREHOLDERS' EQUITY                            
CURRENT LIABILITIES:                                                            
   Accounts payable .................................   $  18,341    $  12,919
   Accrued liabilities ..............................       5,552        7,514
   Income taxes payable .............................       1,516          602
                                                        ---------    ---------
        Total current liabilities ...................      25,409       21,035
LONG-TERM DEBT .......................................           0            0 
DEFERRED INCOME TAXES ................................       9,945        8,745 
DECOMMISSIONING LIABILITIES ..........................      10,226        6,451 
COMMITMENTS AND CONTINGENCIES                                                   
SHAREHOLDERS' EQUITY:                                                           
Common stock, no par, 60,000 shares                                     
authorized, 21,355 and 21,345 shares issued                   
        and outstanding .............................      52,947       52,832
   Retained earnings ................................      45,531       40,288
    Treasury stock, 6,821 shares, at cost ............      (3,751)      (3,751)
                                                        ---------    ---------
        Total shareholders' equity ..................      94,727       89,369
                                                        ---------    ---------
                                                        $ 140,307    $ 125,600
                                                        =========    =========

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 March 31,
                                               -------------------------
                                                1998              1997
                                               --------          -------
                                               (unaudited)
NET REVENUES:                                                                   
Subsea and salvage .......................     $ 29,342          $13,588
Natural gas and oil production ...........        3,815            4,856
                                               --------          -------
                                                 33,157           18,444
COST OF SALES:                                                                  
Subsea and salvage .......................       20,394           10,780
Natural gas and oil production ...........        2,200            2,241
                                               --------          -------
     Gross profit ........................       10,563            5,423
                                               --------          -------
SELLING AND ADMINISTRATIVE EXPENSES:                                            
Selling expenses .........................          317              362
Administrative expenses ..................        2,523            1,854
                                               --------          -------
Total selling and                                             
       administrative expenses ...........        2,840            2,216
                                               --------          -------
INCOME FROM OPERATIONS .......................        7,723            3,207    

OTHER INCOME AND EXPENSE:                                                       
Interest (income) expense, net ...........         (222)             318
Other (income) expense, net ..............         (120)              13
                                               --------          -------
INCOME BEFORE INCOME TAXES ...................        8,065            2,876    
Provision for income taxes ...............        2,822              991
                                               --------          -------
NET INCOME ...................................     $  5,243          $ 1,885    
                                               ========          =======
EARNINGS PER COMMON SHARE:                                                      
Basic ....................................     $   0.36          $  0.17
Diluted ..................................     $   0.35          $  0.17
                                               ========          =======
WEIGHTED AVERAGE COMMON SHARES                                                  
OUTSTANDING                                                                 
Basic ....................................       14,535           11,099
Diluted ..................................       15,000           11,272
                                               ========          =======

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)

                                                Three Months Ended March 31,
                                               -----------------------
                                               1998           1997
                                               --------       --------
                                               (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:                                           
Net income ...................................  $  5,243       $  1,885 
Adjustments to reconcile net income to                                  
net cash provided by operating                                      
activities --                                                       
    Depreciation and amortization ...........     1,996          1,845
    Deferred income taxes ...................     1,200            500
Changes in operating assets and liabilities:                            
    Accounts receivable, net ................     1,605          9,215
     Other current assets ....................    (3,176)          (685)
     Accounts payable and accrued liabilities      3,460         (3,210)
    Income taxes payable/receivable .........       914            419
    Other non-current, net ..................    (1,273)            84
                                               --------       --------
Net cash provided by operating                            
        activities ..........................     9,969         10,053
                                               --------       --------
CASH FLOWS FROM INVESTING ACTIVITIES:                                           
Capital expenditures .........................    (6,789)        (3,017)
Investment in Aquatica, Inc. .................    (5,000)             0 
Purchase of deposits restricted for                                     
  salvage operations .........................       (79)          (131)
                                               --------       --------
Net cash used in investing                                
         activities ..........................   (11,868)        (3,148)
                                               --------       --------
CASH FLOWS FROM FINANCING ACTIVITIES:                                           
Exercise of stock options ....................        45              0 
Repayments of long-term debt .................         0         (6,000)
                                               --------       --------
Net cash provided by (used in) financing                  
         activities ..........................        45         (6,000)
                                               --------       --------
NET INCREASE (DECREASE) IN CASH AND                                             
CASH EQUIVALENTS ...............................    (1,854)           905   
CASH AND CASH EQUIVALENTS:                                                      
Balance, beginning of period .................    13,025            204 
                                               --------       --------
Balance, end of period .......................  $ 11,171       $  1,109 
                                               ========       ========

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. 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, 1998, are not     
necessarily indicative of the results that may be expected for the year ending  
December 31, 1998. 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 - INVESTMENT IN AQUATICA, INC.                                           

In February 1998, CDI purchased a significant minority equity interest in       
Aquatica, Inc. for $5 million, in addition to a commitment to lend additional   
funds of up to $5 million to allow Aquatica to purchase vessels and fund other  
growth opportunities. Aquatica, Inc., headquartered in Lafayette, Louisiana, is 
a surface diving company founded in October 1997 with the acquisition of        
Acadiana Divers, a 15 year old surface diving company. 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. CDI will account for this investment on the 
equity basis of accounting for financial reporting purposes.                    

NOTE 3 - ACQUISITION OF OFFSHORE BLOCKS                                         

In January 1998, ERT acquired interests in six blocks involving two separate    
fields (a 55% interest in East Cameron 231 and a 10% interest in East Cameron   
353) from Sonat Exploration Company ("Sonat"). The properties were purchased in 
exchange for cash of $1 million, as well as assumption of Sonat's pro rata share
of the related decommissioning liability.                                       

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NOTE 4 - CHANGE IN ACCOUNTING POLICY                                            

Effective January 1, 1998, the Company changed its method of accounting         
for regulatory (U.S. Coast Guard, American Bureau of Shipping and Det Norske    
Veritas) related drydock inspection and certification expenditures. This change 
was made due to the significant changes in the composition of the Company's     
fleet which has been expanded to include more sophisticated dynamically         
positioned vessels that are capable of working in the deepwater Gulf of Mexico, 
a key to Cal Dive's operating strategy. The change also coincides with the first
time these vessels were due for drydock inspection and certification since being
acquired by CDI. The Company previously expensed inspection and certification   
costs as incurred; however, effective January 1, 1998, such expenditures will be
capitalized and amortized over the 30-month period between regulatory mandated  
drydock inspections and certification. This predominant industry practice       
provides better matching of expenses with the period benefited (i.e.,           
certification to operate the vessel for a 30-month period between required      
drydock inspections and to meet bonding and insurance coverage requirements).   
This change had an $800,000 positive impact on net income, or $0.05 per share,  
in the Company's first quarter 1998 consolidated financial statements. The      
cumulative effect of this change in accounting principle is immaterial to the   
Company's consolidated financial statements taken as a whole.                   

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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 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, 1998 AND 1997                        

 REVENUES. During the three months ended March 31, 1998, the Company's
revenues increased 80% to $33.2 million compared to $18.4 million for the three 
months ended March 31, 1997 with the Subsea and Salvage segment contributing all
of the increase. The majority of the increase was due to increased demand for   
services provided by CDI's DP vessels, particularly the UNCLE JOHN which        
contributed nearly half of the increase compared to the first quarter of 1997   
when the vessel was out of service for six weeks to have its derrick installed. 
The chartering of the MARIANOS during the three months ended March 31, 1998     
contributed $3.9 million as the vessel filled in while the WITCH QUEEN was in   
drydock for scheduled maintenance. During the first three months of 1998 an     
increased level of customer emergency repairs created strong demand for the     
4-Point moored saturation vessels (CAL DIVERS I AND II). As a result, total     
vessel utilization days were 574 for the CDI fleet in the first quarter of 1998,
an increase of 34% over the same period of the prior year.                      

   Natural gas and oil production revenue for the three months ended March
31, 1998 declined 21% to $3.8 million from $4.9 million during the comparable   
prior year period due to a decrease in average gas prices realized in the first 
quarter of 1998. Production of 1.5 Bcf for the three months ended March 31,1998 
was virtually unchanged from first quarter 1997 levels.                         

     GROSS PROFIT. Gross profit of $10.6 million for the first quarter of 1998
nearly doubled the $5.4 million gross profit recorded in the comparable prior   
year period with the UNCLE JOHN providing over half of the increase. The        
remainder of the increase is due mainly to the aforementioned stronger demand in
1998 for services provided by the 4-Point saturation vessels and to the impact  
of a change in the method of accounting for regulatory related drydock          
inspection and certification expenditures. The Company previously expensed such 
amounts as incurred; however, effective January 1, 1998, such expenditures will 
be capitalized and amortized over the 30-month period between regulatory        
mandated drydock inspections which is consistent with industry-wide practice.   
The impact of this change on CDI's gross profit for the first quarter of 1998   
was to increase the results by approximately $1.2 million. Subsea and Salvage   
margins increased from 21% in the three months ended March 31, 1997, to 27%     
(after deducting the impact of the accounting change) in the three months ended 
March 31, 1998 due mainly to the factors mentioned above.                       

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       Natural gas and oil production gross profit decreased from $2.6 million
in the first quarter of 1997 to $1.6 million for the three months ended March   
31, 1998, due mainly to the decrease in average gas prices.                     

  SELLING & ADMINISTRATIVE EXPENSES. Selling and administrative expenses
were 8.6% of first quarter 1998 revenues, an improvement from 12% in the        
comparable prior year period. Such expenses for the three months ended March 31,
1998 were $2.8 million as compared to $2.2 million in the comparable prior year 
period. The increase was due mainly to the addition of new personnel to support 
the Company's Deepwater strategy and growth in its base business.               

      NET INTEREST. The Company reported net interest income of $222,000 for the
three months ended March 31, 1998 in contrast to net interest expense of        
$318,000 for the three months ended March 31, 1997. This improvement was due to 
the repayment of all outstanding debt with proceeds from its initial public     
offering of Common Stock in July 1997.                                          

     INCOME TAXES. Income taxes increased to $2.8 million for the three months
ended March 31, 1998, compared to $1.0 million in the comparable prior year     
period due to increased profitability.                                          

NET INCOME. Net income of $5.2 million for the three months ended   
March 31, 1998 was $3.4 million, or 178%, more than the comparable period in    
1997 as a result of factors described above. The above-mentioned accounting     
change increased CDI's net income for the first quarter of 1998 by approximately
$800,000.                                                                       

LIQUIDITY AND CAPITAL RESOURCES                                                 

    The Company has historically funded its operating activities principally
from internally generated cash flow. 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, 1998, the Company had $24.3 million of working    
capital (including $11.2 million of cash on hand) and no debt outstanding after 
funding the acquisition of two vessels in late 1997(SEA SORCERESS AND MERLIN),  
ERT's purchase of offshore properties and the equity investment in Aquatica.    
Additionally, CDI has approximately $37.0 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 
virtually unchanged at $10.0 million in the three months ended March 31, 1998,  
as compared to the first quarter of 1997. Increased profitability during the    
first quarter of 1998 offset significant accounts receivable collections during 
the first quarter of 1997. Accounts payable increased $5.4 million at March 31, 
1998 as compared to December 31, 1997 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).                                                 

INVESTING ACTIVITIES. The Company incurred $6.8 million of capital  
expenditures during the first quarter of 1998 compared to $3.0 million during   
the comparable prior year period. 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. The Company incurred capital expenditures of $2.1 million in
the first quarter of 1997 related to                                            

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the installation of a derrick on the UNCLE JOHN. 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.                                                           

FINANCING ACTIVITIES. The Company was debt free throughout the first
quarter of 1998. Excess cash funds, which averaged $13.3 million, were invested 
in U.S. Government securities which yielded approximately 5.5%. During the first
two quarters of 1997, the Company repaid $5.0 million, net of its borrowings    
under the Revolving Credit Agreement with Fleet Capital Corporation and in the  
third quarter repaid the remaining $20.0 million outstanding with proceeds from 
its initial public offering.                                                    

   CAPITAL COMMITMENTS. The Company does not have any material commitments
for capital expenditures for the next year. However, as discussed previously, in
connection with its business strategy, management expects the Company to acquire
or build additional vessels as well as buy additional natural gas and oil       
properties.                                                                     

IMPACT OF YEAR 2000 ISSUE                                                       

     The Company has assessed what computer software will require modification
or replacement so that its computer systems will properly utilize dates beyond  
December 31, 1999. The Company has purchased, and is presently implementing, a  
new project management accounting system which is Year 2000 compliant. This     
system, which fully integrates all of its modules, will provide project managers
and accounting personnel with up-to-date information enabling them to better    
control jobs in addition to providing benefits inventory control and planned    
vessel maintenance. This implementation will be completed during 1998.          
Accordingly, the Company believes that with this conversion, 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. Finally, CDI's vessel computer DP  
systems are dependent on government satellites and the government has not yet   
confirmed that they have solved Year 2000 data problems.                        

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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. 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 18 - Letter from Arhtur Andersen LLP regarding change in
accounting principle.                                       

        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 4, 1998                                By: /s/ S. JAMES NELSON        
                                                    S. James Nelson, Executive
                                                  Vice President and Chief
                                           Financial Officer

Date: May 4, 1998                                By: /s/ A. WADE PURSELL        
                                                A. Wade Pursell,  Vice
                                               President-Finance and
                                                  Chief Accounting Officer

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Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10-Q’ Filing		Date		First		Last			Other Filings
		12/31/99		10					10-K
		12/31/98		6					10-K,  4
Filed on:		5/4/98		1		12			S-1/A
For Period End:		3/31/98		1		9			10-K,  4
		1/1/98		7		8
		12/31/97		2		9			10-K
		7/7/97		9					3,  4
		3/31/97		2		9
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