Cal Dive Reports Fourth Quarter, Full Year Financial Results
Cal Dive International 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.”
- 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.
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