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Long-Term Debt | 3 Months Ended
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Mar. 31, 2012
Long-Term Debt [Abstract] |
Long-Term Debt | Note 7 – Long-Term Debt Scheduled maturities of long-term debt outstanding as of March 31, 2012 were as follows (in thousands):
|  |  | Term Loan (1) |  |  | Revolving Credit Facility |  |  | Senior Unsecured Notes |  |  | 2025 Notes (2) |  |  | MARAD Debt |  |  | 2032 Notes (3) |  |  | Total |
Less than one year... |  | $ | 8,000 |  | $ | ─ |  | $ | ─ |  | $ | ─ |  | $ | 4,997 |  | $ | ─ |  | $ | 12,997 |
One to two years....... |  |  | 8,000 |  |  | ─ |  |  | ─ |  |  | ─ |  |  | 5,247 |  |  | ─ |  |  | 13,247 |
Two to three years.... |  |  | 8,000 |  |  | ─ |  |  | ─ |  |  | ─ |  |  | 5,508 |  |  | ─ |  |  | 13,508 |
Three to four years... |  |  | 355,000 |  |  | 100,000 |  |  | 274,960 |  |  | ─ |  |  | 5,783 |  |  | ─ |  |  | 735,743 |
Four to five years...... |  |  | ─ |  |  | ─ |  |  | ─ |  |  | ─ |  |  | 6,072 |  |  | ─ |  |  | 6,072 |
Over five years.......... |  |  | ─ |  |  | ─ |  |  | ─ |  |  | 157,830 |  |  | 80,149 |  |  | 200,000 |  |  | 437,979 |
Total debt................... |  |  | 379,000 |  |  | 100,000 |  |  | 274,960 |  |  | 157,830 |  |  | 107,756 |  |  | 200,000 |  |  | 1,219,546 |
Current maturities..... |  |  | (8,000 | ) |  | ─ |  |  | ─ |  |  | ─ |  |  | (4,997 | ) |  | ─ |  |  | (12,997 | )
Long-term debt, less current maturities... |  | $ | 371,000 |  | $ | 100,000 |  | $ | 274,960 |  | $ | 157,830 |  | $ | 102,759 |  | $ | 200,000 |  | $ | 1,206,549 |
Unamortized debt discount (4) |  |  | ─ |  |  | ─ |  |  | ─ |  |  | (3,688 | ) |  | ─ |  |  | (35,375 | ) |  | (39,063 | )
Long-term debt |  | $ | 371,000 |  | $ | 100,000 |  | $ | 274,960 |  | $ | 154,142 |  | $ | 102,759 |  | $ | 164,625 |  | $ | 1,167,486 |
(1) Amounts reflect both our Term Loan and new Term Loan A. (2) Beginning in December 2012, the holders of these Convertible Senior Notes may require us to repurchase these notes or we may at our own option elect to repurchase notes. These notes will mature in March 2025. (3) Beginning in March 2018, the holders of these Convertible Senior Notes may require us to repurchase these notes or we may at our election elect to repurchase the notes. These notes will mature in March 2032. (4) The notes will increase to their principal amount through accretion of non-cash interest charges through December 2012 for the Convertible Senior Notes due 2025 and March 2018 for the Convertible Senior Notes due 2032. At March 31, 2012, unsecured letters of credit issued totaled approximately $46.2 million (see “Credit Agreement” below). These letters of credit primarily guarantee asset retirement obligations as well as various contract bidding, contractual performance, insurance activities and shipyard commitments. The following table details our interest expense and capitalized interest for the three-month periods ended March 31, 2012 and 2011:
|  |  | Three Months Ended |
|  |  | March 31, |
|  |  | 2012 |  |  |  | 2011 |
|  |  | (in thousands) |
Interest expense............................................ |  | $ | 22,809 |  |  | $ | 24,767 |
Interest income............................................. |  |  | (570 | ) |  |  | (476 | )
Capitalized interest ....................................... |  |  | (479 | ) |  |  | (55 | )
Interest expense, net................................ |  | $ | 21,760 |  |  | $ | 24,236 |
Included below is a summary of certain components of our indebtedness. For additional information regarding our debt see Note 9 of our 2011 Form 10-K. Senior Unsecured Notes In December 2007, we issued $550 million of 9.5% Senior Unsecured Notes due 2016 (“Senior Unsecured Notes”). Interest on the Senior Unsecured Notes is payable semiannually in arrears on each January 15 and July 15, commencing July 15, 2008. The Senior Unsecured Notes are fully and unconditionally guaranteed by substantially all of our existing restricted domestic subsidiaries, except for Cal Dive I-Title XI, Inc. In addition, any future restricted domestic subsidiaries that guarantee any of our indebtedness and/or our restricted subsidiaries’ indebtedness are required to guarantee the Senior Unsecured Notes. Our foreign subsidiaries are not guarantors. At December 31, 2011, we had $475.0 million of Senior Unsecured Notes outstanding. Prior to stated maturity, after January 15, 2012, we may redeem all or a portion of the Senior Unsecured Notes, on not less than 30 days’ nor more than 60 days’ prior notice at the redemption prices (expressed as percentages of the principal amount) set forth below, plus accrued and unpaid interest, in any, thereon to the applicable redemption date.
Year |  | Redemption Price
2012............................................................................................................................................ |  | 104.750%
2013............................................................................................................................................ |  | 102.375%
2014 and thereafter....................................................................................................................... |  | 100.000%
In March 2012, we purchased a portion of these Senior Unsecured Notes that resulted in an early extinguishment of $200.0 million of our balance outstanding. In these transactions we paid an aggregate amount of $213.5 million, including $200.0 million in principal, $9.5 million in premium for the repurchased Senior Unsecured Notes and $4.0 million of accrued interest. We also recorded a $2.0 million charge to accelerate a pro rata portion of the deferred financing costs associated with the original issuance of the Senior Unsecured Notes. The loss on the early extinguishment of these related Senior Unsecured Notes totaled $11.5 million and is reflected as a component of “Loss on early extinguishment of long term debt” in the accompanying condensed consolidated statements of operations and comprehensive income. Credit Agreement In July 2006, we entered into a credit agreement (the “Credit Agreement”) under which we borrowed $835 million in a term loan (the “Term Loan”) and were able to borrow up to $300 million (the “Revolving Loans”) under a revolving credit facility (the “Revolving Credit Facility”). The Credit Agreement has been amended six times, most recently in March 2012, to address certain issues with regard to covenants, maturity and the borrowing limits under the Term Loans and Revolving Credit Facility. For additional information regarding the current terms of our credit facility see Note 9 of our 2011 Form 10-K. On February 21, 2012, we entered into an amendment to our Credit Agreement. Under the terms of the amendment the participating lenders agree to loan us $100.0 million pursuant to a new term loan (“Term Loan A”). The terms of the new Term Loan A are the same as those governing the Revolving Credit Facility, with the Term Loan A requiring a $5 million annual payment of its principal balance. The Term Loan A was funded in late March 2012 and we used the borrowings under Term Loan A to repurchase a portion of our Senior Unsecured Notes. The Term Loan currently bears interest either at the one-, two-, three- or six-month LIBOR at our election plus an applicable margin of between 2.25% and 3.5% depending on our consolidated leverage ratio. Our average interest rate on the Term Loan for the three-month periods ended March 31, 2012 and 2011 was approximately 4.0% and 3.0%, respectively, including the effects of our interest rate swaps (Note 16). Our Term Loan is currently scheduled to mature on July 1, 2015 but could be extended to July 1, 2016 if our Senior Unsecured Notes are fully repaid or refinanced by July 1, 2015. As amended our Revolving Credit Facility provides for $600 million in borrowing capacity. The full amount of the Revolving Credit Facility may be used for issuances of letters of credit. In late March 2012, we borrowed $100.0 million under our Revolving Credit Facility to repurchase a portion of our Senior Unsecured Notes. Accordingly, at March 31, 2012, we had $100.0 million drawn on the Revolving Credit Facility and our availability under the Revolving Credit Facility totaled $453.8 million, net of $46.2 million of letters of credit issued. There were no borrowings outstanding at December 31, 2011. The Revolving Loans bear interest based on one-, two-, three- or six-month LIBOR rates or on Base Rates at our current election, plus an applicable margin. The margin ranges from 1.5% to 3.5%, depending on our consolidated leverage ratio. The average interest rate under the Revolving Credit Facility totaled 3.0% for the period in which we had borrowings outstanding during the three-month period ended March 31, 2012. The Credit Agreement contains various covenants regarding, among other things, collateral, capital expenditures, investments, dispositions, indebtedness and financial performance that are customary for this type of financing and for companies in our industry. As the rates for our Term Loan are subject to market influences and will vary over the term of the Credit Agreement, we may enter into various cash flow hedging interest rate swaps to stabilize cash flows relating to a portion of our interest payments for our Term Loan. In January 2010, we entered into $200 million, two-year interest rate swaps to stabilize cash flows relating to a portion of our interest payments on our Term Loan, which extended to January 2012. In August 2011, we entered into additional two-year interest rate swap contracts to assist in stabilizing cash flows related to our interest payments from January 2012 through January 2014 (Note 16). Convertible Senior Notes In March 2005, we issued $300 million of our 3.25% Convertible Senior Notes at 100% of the principal amount to certain qualified institutional buyers (the “2025 Notes”). The 2025 Notes are convertible into cash and, if applicable, shares of our common stock based on the specified conversion rate, subject to adjustment. The 2025 Notes can be converted prior to the stated maturity (March 2025) under certain triggering events specified in the indenture governing the 2025 Notes. No conversion triggers were met during the three-month period ended March 31, 2012. The first dates for early redemption of the 2025 Notes are in December 2012, with the holders of the 2025 Notes being able to put them to us on December 15, 2012 and our being able to call the 2025 Notes at any time after December 20, 2012 (see Note 9 of our 2011 Form 10-K). To the extent we do not have long-term financing secured to cover such conversion and/or redemption, the 2025 Notes would be classified as a current liability in the accompanying consolidated balance sheet. As the holders have the option to require us to redeem the 2025 Notes on December 15, 2012, we assessed whether or not this indebtedness was required to be classified as a current liability at March 31, 2012 and concluded that it still qualified as a long term debt because a) we possess enough borrowing capacity under our Revolving Credit Facility (see “Credit Agreement” above) to settle the notes in full and b) it is our intent to utilize our Revolving Credit Facility borrowings or other alternative financing proceeds to settle our 2025 Notes, if and when the holders exercise their redemption option. The remaining balance of our 2025 Notes was $157.8 million at March 31, 2012. In association with the issuance of additional Convertible Senior Notes (see “2032 Notes” below), we repurchased $142.2 million in aggregate principal of our 2025 Notes. In these repurchase transactions we paid an aggregate amount of $145.1 million, representing principal plus $1.8 million of premium and $1.1 million of accrued interest on these repurchased 2025 Notes. The loss on the early extinguishment of these related 2025 Notes totaled $5.6 million and is reflected as a component of “Loss on early extinguishment of long term debt” in the accompanying condensed consolidated statements of operations and comprehensive income. The loss on early extinguishment includes the acceleration of $3.5 million of related unamortized discounts associated with the 2025 Notes, the $1.8 million premium paid in connection with the repurchase of a portion of the 2025 Notes and a $0.3 million charge to accelerate a pro rata portion of the deferred financing costs associated with the original issuance of these 2025 Notes. The effective interest rate for the 2025 Notes is 6.6% after considering the effect of the accretion of the related debt discount that represented the equity component of the Convertible Notes at their inception. Our average share price for the both the first quarter of 2012 and 2011 was below the $32.14 per share conversion price. As a result of our share price being lower than the $32.14 per share conversion price for these periods there are no shares included in our diluted earnings per share calculation associated with the assumed conversion of our 2025 Notes. In the event our average share price exceeds the conversion price, there would be a premium, payable in shares of common stock, in addition to the principal amount, which is paid in cash, and such shares would be issued on conversion. 2032 Notes In March 2012, we completed the public offering and sale of $200.0 million in aggregate principal amount of 3.25% Convertible Senior Notes due 2032 (the “2032 Notes”). The net proceeds from the issuance of the 2032 Notes were $195.0 million, after deducting the underwriter’s discounts and commissions and estimated offering expenses. We used the net proceeds to repurchase and retire $142.2 million of aggregate principal amount of our 2025 Notes (see above), in separate, privately negotiated transactions, and intend to use the remaining net proceeds for other general corporate purposes, including the repayment of other indebtedness. The registered 2032 Notes bear interest at a rate of 3.25% per annum, payable semi-annually in arrears on March 15 and September 15 of each year, beginning on September 15, 2012. The 2032 Notes will mature on March 15, 2032, unless earlier converted, redeemed or repurchased by us. The 2032 Notes are convertible in certain circumstances and during certain periods at an initial conversion rate of 39.9752 shares of common stock per $1,000 principal amount of the 2032 Notes (which represents an initial conversion price of approximately $25.02 per share of common stock), subject to adjustment in certain circumstances as set forth in the indenture governing the 2032 Notes. The initial conversion price represents a conversion premium of 35.0% over the closing price of our common stock on March 6, 2012 of $18.53 per share. Prior to March 20, 2018, the 2032 Notes will not be redeemable. On or after March 20, 2018, we may, at our option, redeem some or all of the 2032 Notes in cash, at any time, upon at least 30 days’ notice at a price equal to 100% of the principal amount of the 2032 Notes to be redeemed plus accrued and unpaid interest (including contingent interest, if any) up to but excluding the redemption date. Holders may require us to purchase in cash some or all of their 2032 Notes at a repurchase price equal to 100% of the principal amount of the 2032 Notes, plus accrued and unpaid interest (including contingent interest, if any) up to but excluding the applicable repurchase date, on March 15, 2018, March 15, 2022 and March 15, 2027, or, subject to specified exceptions, at any time prior to the 2032 Notes’ maturity following a fundamental change. In connection with the issuance of our 2032 Notes, we recorded a discount of $35.4 million as required under existing accounting requirements. To arrive at this discount amount, we estimated the fair value of the liability component of the 2032 Notes as of the date of their issuance (March 12, 2012) using an income approach. To determine this estimated fair value, we used borrowing rates of similar market transactions involving comparable liabilities at the time of issuance and an expected life of 6.0 years. In selecting the expected life, we selected the earliest date that the holder could require us to repurchase all or a portion of the 2032 Notes (March 15, 2018). The effective interest rate for the 2032 Notes is 6.9% after considering the effect of the accretion of the related debt discount that represented the equity component of the 2032 Notes at their inception. MARAD Debt This U.S. government guaranteed financing ("MARAD Debt") is pursuant to Title XI of the Merchant Marine Act of 1936 which is administered by the Maritime Administration, and was used to finance the construction of the Q4000. The MARAD Debt is payable in equal semi-annual installments beginning in August 2002 and matures 25 years from such date. The MARAD Debt is collateralized by the Q4000, with us guaranteeing 50% of the debt, and initially bore interest at a floating rate which approximated AAA Commercial Paper yields plus 20 basis points. As provided for in the MARAD Debt agreements, in September 2005, we fixed the interest rate on the debt through the issuance of a 4.93% fixed-rate note with the same maturity date (February 2027). Other In accordance with our Credit Agreement, Senior Unsecured Notes, 2025 Notes, 2032 Notes and MARAD Debt agreements, we are required to comply with certain covenants, including the maintenance of minimum net worth, working capital and debt-to-equity requirements, and restrictions that limit our ability to incur certain types of additional indebtedness. As of March 31, 2012, we were in compliance with these covenants and restrictions. Deferred financing costs of $28.1 million and $26.5 million are included in other assets, net as of March 31, 2012 and December 31, 2011, respectively, and are being amortized over the life of the respective financing agreements.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.19,20,22) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 19, 20, 22 -Article 5 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 129 -Paragraph 2, 4 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. + Details
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