2011 was an extremely challenging year as we felt the full impact of the lack of drilling in 2010 in the Gulf of Mexico coupled with the delays in the permitting process our customers faced as a result of the Macondo well blowout in 2010. The good news is that the permitting and drilling levels did improve over the course of 2011, from which we expect to benefit in 2012 and beyond. We expect new construction activity to continue to improve in the Gulf of Mexico. In addition, we look forward to performing light well intervention work in 2012 with the Uncle John, our most profitable asset, in deeper water as this is part of our long term strategy. Internationally, we expect a very active year in Mexico and continued strong demand for our services in Australia. We also expect to benefit in 2012 both domestically and internationally from our significant cost reduction initiatives implemented in 2011.
While we hope for meaningful improvement for the full year 2012, during the first quarter the winter weather conditions in the Gulf of Mexico limit our opportunities to perform projects. In addition, three of our most profitable assets, the Uncle John, Atlantic and Kestrel, will be in dry dock during the quarter and we will not have a reoccurrence of a large construction project such as the one we had in the Bahamas during the first quarter of 2011. Our cost savings initiatives and an active first quarter in Australia should help to partially offset this. Based on these factors, we expect the first quarter financial results to be at a level less profitable than the first quarter of 2011. We expect to begin to see improvement in our financial results for 2012 starting in the second quarter.”
- Backlog: Contracted backlog was $178 million as of December 31, 2011 compared to backlog of $221 million at September 30, 2011 and $191 million at December 31, 2010. Despite the improved outlook for the offshore market in the Gulf of Mexico, the backlog was less at December 31, 2011 than the backlog at prior year end primarily due to the remaining work on the large construction project in the Bahamas that was included in the prior year end backlog and completed during the first quarter of 2011, and the fact that the Company’s three most profitable assets in the Gulf of Mexico will be in dry dock during the majority of the first quarter of 2012.
- Revenues: Fiscal year 2011 revenues decreased by $56.7 million to $479.8 million as compared to fiscal year 2010, while fourth quarter 2011 revenues decreased by $33.6 million to $127.4 million as compared to the fourth quarter of 2010. The annual decrease is primarily due to the reduced activity levels in the U.S. Gulf of Mexico offset by increased activity in Australia. The decrease in the fourth quarter is primarily due to lower utilization across most domestic assets during the fourth quarter of 2011 as a result of harsher weather conditions in the Gulf of Mexico, the regulatory dry docking of the DP saturation diving vessel Uncle John in the fourth quarter of 2011 and higher activity in the fourth quarter of 2010 from a large construction project in the Bahamas that did not recur in the fourth quarter of 2011. Partially offsetting these decreases were increased revenues in Australia.
- Gross Profit: Fiscal year 2011 gross profit decreased by $48.2 million to $14.3 million as compared to fiscal year 2010, while fourth quarter 2011 gross profit decreased by $15.9 million to $7.8 million as compared to the fourth quarter of 2010. The annual and quarterly decreases are primarily due to the same reasons as the revenue decreases discussed above.
- SG&A: Fiscal year 2011 SG&A decreased by $1.0 million to $59.2 million as compared to fiscal year 2010, while fourth quarter 2011 SG&A decreased by $2.0 million to $12.9 million as compared to the fourth quarter of 2010. The annual and quarterly decreases are primarily due to lower incentive compensation and various cost reduction measures implemented by the Company in response to the current level of business activity. Partially offsetting the annual decrease are severance related costs incurred during the first nine months of 2011. As a percentage of revenue, SG&A was 12% for the full year 2011 compared to 11% for 2010.
- Net Interest Expense: Fiscal year 2011 net interest expense increased by $.2 million to $9.2 million as compared to fiscal year 2010, while fourth quarter 2011 net interest expense increased by $.6 million to $2.8 million as compared to the fourth quarter 2010, primarily due to higher outstanding borrowings under the revolving credit facility during the fourth quarter of 2011 compared to the fourth quarter of 2010.
- Income Tax Expense: The effective tax benefit rate for the year 2011 was 22.9% compared to 1.7% for 2010, while the effective tax rate for the fourth quarter of 2011 was 9.5% compared to 137.8% for the fourth quarter of 2010. The increase in the annual tax benefit rate was primarily due to the non-recurring goodwill impairment charge recorded in 2010 that had a minimal tax benefit. The change in the effective tax rate for the fourth quarter is primarily due to a non-cash valuation allowance recorded in the fourth quarter of 2010 due to the uncertainty of the future tax benefit related to certain foreign net operating losses. Since the Company reported pre-tax income for the fourth quarter of 2010 versus a pre-tax loss in the fourth quarter of 2011, the valuation allowance increased the effective tax rate thereby increasing the tax expense in the fourth quarter of 2010.
- Balance Sheet: Total debt was $150.0 million under a term loan, and cash and cash equivalents were $15.6 million, for a net debt position of $134.4 million as of December 31, 2011, compared to net debt positions of $177.8 million at September 30, 2011 and $140.8 million at December 31, 2010. As of December 31, 2011, the Company had no borrowings outstanding under its $150.0 million revolving credit facility.
Further details will be provided during Cal Dive’s conference call, scheduled for 9 a.m. Central Time on March 1, 2012. The teleconference dial-in numbers are: (866) 202-3109 (domestic), (617) 213-8844 (international), passcode 42603363. 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 and the Mediterranean, with a fleet of 29 vessels, including 19 surface and saturation diving support vessels and 10 construction barges.