SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
[ ] 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 1-5471
GLOBAL MARINE INC.
(Exact name of registrant as specified in its charter)
Delaware 95-1849298
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
777 N. Eldridge Road, Houston, Texas 77079
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 596-5100
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for 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 X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: Common Stock, $.10
par value, 164,327,011 shares outstanding as of June 30, 1994.
<PAGE>
GLOBAL MARINE INC.
TABLE OF CONTENTS TO FORM 10-Q
QUARTER ENDED JUNE 30, 1994
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Report of Independent Accountants 2
Condensed Consolidated Statement of Operations
Three and Six Months Ended June 30, 1994, and 1993 3
Condensed Consolidated Balance Sheet
June 30, 1994, and December 31, 1993 4
Condensed Consolidated Statement of Cash Flows
Six Months Ended June 30, 1994, and 1993 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURE 17
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Global Marine Inc.
We have made a review of the condensed consolidated balance sheet
of Global Marine Inc. and subsidiaries as of June 30, 1994, and the
related condensed consolidated statement of operations for the
three- and six-month periods ended June 30, 1994 and 1993, and the
condensed consolidated statement of cash flows for the six-month
periods ended June 30, 1994, and 1993. These financial statements
are the responsibility of the Company's management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review
of interim financial information consists principally of applying
analytical procedures to financial data and making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the condensed consolidated financial
statements referred to above for them to be in conformity with
generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet as of December
31, 1993, and the related consolidated statements of operations,
shareholders' equity, and cash flows for the year then ended (not
presented herein); and in our report dated February 11, 1994, we
expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of December
31, 1993, is fairly stated, in all material respects, in relation
to the consolidated balance sheet from which it has been derived.
/s/ Coopers & Lybrand L.L.P.
Houston, Texas
August 3, 1994
<PAGE>
<TABLE>
GLOBAL MARINE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in millions, except per share amounts)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Revenues:
Marine drilling $73.8 $ 51.2 $139.0 $109.4
Oil and gas 2.5 3.3 5.3 6.1
Total revenues 76.3 54.5 144.3 115.5
Expenses:
Marine drilling 57.9 45.5 108.5 93.9
Oil and gas .7 .9 1.7 1.9
Depreciation, depletion and amortization 9.3 8.6 18.6 17.8
General and administrative 3.5 3.8 6.8 7.0
Total operating expenses 71.4 58.8 135.6 120.6
Operating income (loss) 4.9 (4.3) 8.7 (5.1)
Other income (expense):
Interest expense (7.5) (8.0) (15.1) (16.2)
Interest capitalized .8 - 1.3 -
Interest income .7 .5 1.3 1.1
Dividend income (note 3) .2 - 1.3 -
Gain on sale of marketable securities (note 3) .1 - .1 -
Total other income (expense) (5.7) (7.5) (11.1) (15.1)
Loss before income taxes (.8) (11.8) (2.4) (20.2)
Income tax expense - .1 .1 1.0
Loss before cumulative effect
of change in accounting principle (.8) (11.9) (2.5) (21.2)
Cumulative effect of change in accounting
for postemployment benefits (note 2) - - (3.5) -
Net loss $ (.8) $(11.9) $ (6.0) $(21.2)
Net loss per common share (note 4):
Before cumulative effect of
change in accounting principle $0.00 $(0.08) $(0.02) $(0.15)
Cumulative effect of change in accounting for
postemployment benefits (note 2) - - (0.02) -
Net loss per common share $0.00 $(0.08) $(0.04) $(0.15)
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
GLOBAL MARINE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(in millions)
<CAPTION>
June 30, December 31,
1994 1993
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 42.0 $ 31.2
Marketable securities (note 3) 18.1 20.2
Accounts receivable, net of allowances 51.2 57.9
Costs incurred on turnkey drilling contracts in progress 5.9 1.5
Prepaid expenses 6.4 6.5
Investment, at cost - 15.0
Note receivable - 10.2
Other current assets .8 1.9
Total current assets 124.4 144.4
Properties:
Rigs and drilling equipment, less accumulated
depreciation of $151.1 and $134.0 at June 30, 1994
and December 31, 1993, respectively 333.6 311.2
Oil and gas properties, full cost method, less
accumulated depreciation, depletion and amortization
of $28.9 and $29.5 at June 30, 1994 and
December 31, 1993, respectively 4.9 3.4
Net properties 338.5 314.6
Marketable securities (note 5) 12.4 -
Note receivable - 7.5
Other assets 19.2 26.4
Total assets $ 494.5 $ 492.9
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
GLOBAL MARINE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (Continued)
(in millions)
<CAPTION>
June 30, December 31,
1994 1993
<S> <C> <C>
Current liabilities:
Accounts payable $ 23.0 $ 19.9
Accrued liabilities:
Compensation and related employee costs 8.8 9.4
Claims and allowances 2.8 3.0
Income taxes 1.8 2.0
Interest 1.2 1.2
Other 1.0 1.7
Total current liabilities 38.6 37.2
Long-term debt 225.0 225.0
Other long-term liabilities 25.4 25.3
Shareholders' equity:
Preferred stock, $0.01 par value, 10 million
shares authorized, no shares issued or outstanding - -
Common stock, $0.10 par value, 300 million shares
authorized, 164,327,011 shares and 162,832,799
shares issued and outstanding at June 30, 1994
and December 31, 1993, respectively 16.4 16.3
Additional paid-in capital 259.8 254.7
Accumulated deficit (71.6) (65.6)
Unrealized gain on available-for-sale securities (note 3) .9 -
Total shareholders' equity 205.5 205.4
Total liabilities and shareholders' equity $ 494.5 $ 492.9
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
GLOBAL MARINE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
<CAPTION>
Six Months Ended
June 30,
1994 1993
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (6.0) $(21.2)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation, depletion and amortization 18.6 17.8
Cumulative effect of change in accounting principle 3.5 -
Decrease in accounts receivable 6.7 4.8
Decrease in note receivable 17.9 -
Increase in other current assets (3.2) (2.4)
Increase (decrease) in accounts payable 3.1 (2.0)
Increase in accrued interest - 1.0
Decrease in other accrued liabilities (.1) (.6)
Other, net 3.3 (3.9)
Net cash flow provided by (used in)
operating activities 43.8 (6.5)
Cash flows from investing activities:
Capital expenditures (41.2) (9.2)
Purchases of marketable securities (20.0) (9.6)
Proceeds from maturities of held-to-maturity securities 19.5 10.5
Proceeds from sales of available-for-sale securities 6.0 -
Disposals of properties 1.7 8.9
Other .4 .7
Net cash flow provided by (used in)
investing activities (33.6) 1.3
Cash flows from financing activities:
Common stock offering, net of expenses - 7.8
Payments on long-term debt - (.2)
Other .6 .9
Net cash flow provided by financing activities .6 8.5
Increase in cash and cash equivalents 10.8 3.3
Cash and cash equivalents at beginning of period 31.2 23.3
Cash and cash equivalents at end of period $ 42.0 $ 26.6
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
GLOBAL MARINE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1994
NOTE 1 - GENERAL
The financial statements reflect all adjustments which are, in the
opinion of management, necessary for a fair statement of the results
for the interim periods. Such adjustments are considered to be of
a normal recurring nature unless otherwise identified. Certain
reclassifications have been made to the prior-year period to
conform to the current period presentation. The term "Company"
refers to Global Marine Inc. and, unless the context otherwise
requires, to the Company's consolidated subsidiaries.
The year-end condensed balance sheet data was derived from audited
financial statements, but does not include all disclosures required
by generally accepted accounting principles.
NOTE 2 - ACCOUNTING CHANGES
Effective January 1, 1994, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 112, "Employers'
Accounting for Postemployment Benefits." SFAS No. 112 requires the
recognition of expense for postemployment benefits on an accrual
basis, rather than the cash-basis approach used previously.
Postemployment benefits include severance pay, disability-related
benefits and continuation of health care costs during the period
after employment but before retirement. The cumulative impact of
this change as of January 1, 1994 was an increase in the net loss
in the amount of $3.5 million ($0.02 per share) in the first
quarter of 1994. Other than the cumulative effect, the effect of
the accounting change on the net loss was not material. Assuming
the accounting change was applied retroactively to January 1, 1993,
the effect of the change on the net loss and the net loss per share
for the three and six months ended June 30, 1993, other than the
cumulative effect, would not have been material.
Effective January 1, 1994, the Company also adopted SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities."
The new standard expands the use of fair value accounting for
certain investments in debt and equity securities but retains the
use of the amortized cost method for investments in debt securities
that the Company has the intent and ability to hold to maturity.
The adoption of the new standard had no effect, as of January 1,
1994, on the accounting for the Company's investments in marketable
securities, which consisted entirely of debt securities as of that
date, because the Company holds such securities to maturity.
Under SFAS No. 115, investments in debt and equity securities are
classified into three categories: trading securities, available-
for-sale securities, and held-to-maturity securities. Unrealized
holding gains or losses on securities classified as available-for-
sale are excluded from earnings and reported as a net amount in a
separate component of shareholders' equity until realized. As of
June 30, 1994, the status of the Company's investments in debt and
equity securities was as follows:
<TABLE>
<CAPTION>
Carrying Unrealized
Balance Sheet Classification Fair Value Value Gain
(in millions)
<S> <C> <C> <C>
Available-for-sale:
Marketable securities - current $10.0 $10.0 $0.9
Total available-for-sale 10.0 10.0 0.9
Held-to-maturity:
Cash equivalents 39.0 39.0 -
Marketable securities - current 8.1 8.1 -
Marketable securities - long-term 12.4 12.4 -
Total held-to-maturity 59.5 59.5 -
Total investments in securities $69.5 $69.5 $0.9
</TABLE>
Available-for-sale securities consist entirely of common stock of
Transco (see note 3). All of the Company's held-to-maturity
securities mature within one year of June 30, 1994.
Proceeds from sales of available-for-sale securities totaled $6.0
million for the three and six months ended June 30, 1994, resulting
in a realized gain of $0.1 million. The change in the net
unrealized holding gain on available-for-sale securities that has
been included in the separate component of shareholders' equity
during the six months ended June 30, 1994 totaled $0.9 million.
NOTE 3 - RECEIPT AND SALE OF TRANSCO STOCK
In February 1994, the Company received 1,017,771 previously
escrowed shares of common stock, $0.50 par value per share, of
Transco Energy Company ("Transco"), pursuant to the 1992 settlement
of take-or-pay litigation, plus $1.1 million in previously escrowed
dividends which were declared and paid on the escrowed shares
during the period from June 1992 through February 1994, plus
interest. Upon receipt of the Transco shares, the Company
reclassified the then $15.0 million carrying value of the stock
from a current investment account to marketable securities.
The number of shares of Transco common stock which the Company may
sell during any three-month period is limited by Rule 144 under the
Securities Act of 1933. The number of shares sold under Rule 144
may not exceed the greater of (i) one percent of the outstanding
shares of Transco common stock or (ii) the average weekly trading
volume for the stock during the four weeks preceding the sale. As
a result, the Company is limited to sales of no more than
approximately 400,000 shares of Transco common stock during any
three-month period. In early June, the Company sold 400,000 shares
of Transco common stock for $6.0 million, resulting in a realized
gain of $0.1 million. The Company estimates that it may sell a
maximum of approximately 400,000 shares under Rule 144 no sooner
than early September 1994.
NOTE 4 - NET LOSS PER SHARE
The net losses per common share for the three and six months ended
June 30, 1994, were based on 163,494,599 and 163,313,127 weighted
average common shares outstanding, respectively. The net losses
per common share for the three and six months ended June 30, 1993,
were based on 145,157,616 and 144,431,232 weighted average common
shares outstanding, respectively.
NOTE 5 - RIG ACQUISITIONS
In February 1994, the Company purchased two jackup drilling rigs,
the Glomar Adriatic IX and Glomar Adriatic X, for a purchase price
of $26.0 million in cash, $1.0 million in notes payable, and up to
900,000 shares of Global Marine Inc. common stock. The purchase
price, including the number of shares to be issued, was subject to
adjustment based on the results of further inspection of the rigs.
In June 1994, by mutual agreement with the seller, the Company
canceled the aforementioned $1.0 million in notes payable and
issued to the seller's nominee 750,000 shares of Global Marine Inc.
common stock to complete the purchase of the two rigs.
In May 1994, the Company entered into an agreement to purchase a
1983 Marathon LeTourneau 116-C jackup drilling rig, known as the
"Bay Driller," from British Gas for 9,250,000 pounds sterling. The Company
made a ten percent down payment valued at $1.4 million. In addition,
the Company purchased time deposits denominated in British pounds
valued at $12.4 million, which is equal to the remainder of the
purchase price and is due upon delivery of the rig. Such time
deposits are classified as noncurrent marketable securities on the
condensed consolidated balance sheet as of June 30, 1994.
Under the terms of the agreement, the Company will take delivery of
the Bay Driller on October 1, 1994. The Bay Driller is currently
operated as an accommodation unit by British Gas. Prior to
utilizing the rig for drilling projects, the Company would need to
replace the rig's existing specialized drilling equipment with
standard drilling equipment at a cost presently estimated to be
approximately $10 million.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OPERATING RESULTS
SUMMARY
The Company reported operating income of $4.9 million for the
quarter ended June 30, 1994, compared to an operating loss of $4.3
million for the quarter ended June 30, 1993. For the six months
ended June 30, 1994, the Company reported operating income of $8.7
million compared to an operating loss of $5.1 million for the six
months ended June 30, 1993. The improvement in operating results
is due to (i) increased contract drilling dayrates and utilization
in the U.S. Gulf of Mexico, (ii) higher revenues and lower
operating expenses resulting from the redeployment to the Gulf of
five of the Company's rigs from weak overseas markets during the
period from April 1993 to November 1993, (iii) lower mobilization
expense and (iv) an increase in the number of turnkey drilling
contracts completed, partially offset by normal declines in oil and
gas production. Data relating to the Company's operations by
business segment follows:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1994 1993 % Change 1994 1993 % Change
(in millions) (in millions)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Marine drilling:
Contract drilling $46.7 $44.0 +6% $ 98.6 $ 92.6 +6%
Turnkey drilling 30.1 7.7 +291% 44.9 17.6 +155%
Intrasegment elimination (3.0) (0.5) (4.5) (0.8)
Total marine drilling 73.8 51.2 +44% 139.0 109.4 +27%
Oil and gas 2.5 3.3 -24% 5.3 6.1 -13%
Total revenues $76.3 $54.5 +40% $144.3 $115.5 +25%
Operating income:
Marine drilling:
Contract drilling $ 2.9 $(3.3) n/m (2) $ 8.9 $ (2.2) n/m (2)
Turnkey drilling 5.7 1.7 +235% 5.8 3.0 +93%
Elimination (1) (1.4) (0.4) (1.5) (0.7)
Total marine drilling 7.2 (2.0) n/m (2) 13.2 0.1 n/m (2)
Oil and gas 1.2 1.6 -25% 2.5 2.0 +25%
Corporate expenses (3.5) (3.9) -10% (7.0) (7.2) -3%
Total operating income (loss) $ 4.9 $(4.3) n/m (2) $ 8.7 $ (5.1) n/m (2)
(1) Deferral of turnkey profit on oil and gas wells drilled on properties in
which the Company has an economic interest.
(2) Not meaningful.
</TABLE>
In the North Sea and West Africa, low oil prices continue to
depress demand for offshore drilling services, resulting in low
dayrates and utilization. The strength in the Gulf of Mexico
offshore drilling market, which is attributable to higher natural
gas prices, has resulted in an increase in the supply of rigs
competing for jobs in the Gulf as contractors have relocated a
significant number of rigs to the Gulf from weak overseas markets.
This increase in Gulf supply has resulted in downward pressures on
Gulf dayrates through the first six months of 1994. Since June 30,
however, Gulf dayrates appear to have stabilized.
Although the outlook for the Company for 1994 is improved over
1993, the Company expects to report a net loss for the full year
1994.
Marine Drilling Operations
Contract drilling. Data with respect to the Company's contract
drilling operations follows:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1994 1993 %Change 1994 1993 % Change
<S> <C> <C> <C> <C> <C> <C>
Contract drilling revenues
by area (in millions):
Gulf of Mexico $27.5 $ 15.4 +79% $ 57.3 $ 26.0 +120%
North Sea 4.5 15.1 -70% 11.1 34.4 -68%
West Africa 6.8 6.1 +11% 13.9 17.8 -22%
Other 7.9 7.4 +7% 16.3 14.4 +13%
Total $46.7 $44.0 +6% $ 98.6 $ 92.6 +6%
Average rig utilization 87% 78% 90% 81%
Fleet average dayrate $23,200 $24,500 $23,800 $24,600
</TABLE>
Despite a lower fleet average dayrate for the second quarter of
1994 compared to the prior-year second quarter, the increased
utilization resulted in a $2.7 million increase in contract
drilling revenues. Revenues from the Gulf of Mexico increased by
$12.1 million due to (i) the September 1993 deployment of two of
three rigs acquired from Transocean Drilling AS, (ii) the 1993
redeployment to the Gulf of two rigs from West Africa and three
rigs from the North Sea and (iii) higher dayrates for the Company's
other rigs in the Gulf of Mexico. Revenues from the North Sea
decreased by $10.6 million due to (i) the sale of the offshore
drilling rig, Glomar Moray Firth, to Transocean Drilling AS in
September 1993 and the termination of a management contract with
respect to that rig in December 1993, (ii) the redeployment of the
three rigs from the North Sea to the Gulf of Mexico and (iii) lower
North Sea dayrates and utilization. Revenues attributable to
offshore West Africa increased by $0.7 million primarily due to
higher utilization in 1994. The $0.5 million increase in revenues
in the "other" category was due to the September 1993 acquisition
of the third rig from Transocean Drilling AS.
Revenues in the first six months of 1994 increased by $6.0 million
over the comparable prior-year period despite the slightly lower
fleet average dayrate. Revenues from the Gulf of Mexico increased
by $31.3 million, and revenues from the North Sea decreased by
$23.3 million for the reasons discussed above. Revenues from West
Africa decreased by $3.9 million due to the redeployment of the two
rigs from offshore West Africa to the Gulf of Mexico in the second
quarter of 1993 and the sale of the offshore drilling rig, Glomar
Biscay II, in the first quarter of 1993. The $1.9 million increase
in revenues in the "other" category was due to one of the three
rigs acquired from Transocean Drilling AS in September 1993 and to
the May 1993 redeployment of the Glomar Adriatic IV from the Gulf
of Mexico to Trinidad.
The Company's operating profit margin for contract drilling
operations for the three and six months ended June 30, 1994,
increased to 6 percent and 9 percent, respectively, from losses in
each of the comparable prior-year periods. For comparison
purposes, the Company's operating profit margins for contract
drilling operations for each of the full years ended December 31,
1993, 1992 and 1991 were 2 percent, 8 percent and 19 percent,
respectively. The percentage for 1993 was relatively low primarily
as a result of the cost of mobilizing a number of rigs from the
North Sea and West Africa to the Gulf of Mexico in 1993. The
percentages for 1991 and, to a lesser extent, for 1992 were higher
than for 1993 as a result of a greater number of rigs operating in
the North Sea at dayrates higher than those earned by the Company's
other rigs during 1991 and 1992. Furthermore, operating profit
margins are affected by the level of the Company's rig utilization.
As utilization declines, operating profit margins decline due to
the fact that a significant portion of operating costs, such as
depreciation expense, are fixed.
The Company anticipates that contracts on 13 of the Company's 23
rigs under contract as of July 31, 1994, will expire at varying
times on or prior to September 30, 1994. No assurance can be made
that the Company will obtain drilling contracts for the two rigs
that are presently available or for its other rigs upon the
completion of existing contracts. Short-term contracts have been
typical in the industry for the past decade; the Company considers
its upcoming contract expirations typical of prevailing market
conditions and normal in the Company's course of business.
In the Gulf of Mexico, the number of rigs under contract as well as
the number of rigs available increased throughout 1993 due to
stronger domestic natural gas prices and a growing number of
drilling prospects developed from enhanced seismic technology. In
the Gulf of Mexico, average drilling industry demand increased to
129 rigs under contract (73 percent utilization) for the quarter
ended June 30, 1994, from 125 rigs (74 percent utilization) for the
quarter ended March 31, 1994, and 113 rigs (77 percent utilization)
for the second quarter of 1993. For the first six months of 1994
average demand increased to 127 rigs under contract (74 percent
utilization) from 109 rigs under contract (75 percent utilization)
for the first six months of 1993. If natural gas prices remain at
current levels, drilling activity is expected to remain strong.
Dayrates in the Gulf of Mexico appear to have stabilized recently
after trending downward for the first six months of the year as the
supply of rigs continued to increase due to the arrival of rigs
from weak overseas markets. As of July 31, 1994, all twelve of the
Company's rigs in the Gulf of Mexico were under contract. The Company's
average utilization rate in the Gulf of Mexico for the six months
ended June 30, 1994, was 99 percent.
In the North Sea, low oil prices continue to negatively affect
demand for offshore drilling rigs. U.K. oil prices have trended
downward from approximately $21 per barrel in June of 1992 to a
range of $13 per barrel to $18 per barrel since July of 1993. In
addition, the reduction in U.K. tax relief for exploration and
appraisal expenditures has further depressed the North Sea drilling
market. As a result, the outlook for North Sea activity remains
uncertain. In the North Sea, average demand decreased to 60 rigs
under contract (71 percent utilization) for the quarter ended June
30, 1994, from 68 rigs (78 percent utilization) for the quarter
ended March 31, 1994, and 80 rigs (77 percent utilization) for the
second quarter of 1993. For the first six months of 1994 average
demand decreased to 65 rigs under contract (75 percent utilization)
from 83 rigs under contract (77 percent utilization) for the first
six months of 1993. As of July 31, 1994, all three of the
Company's rigs in the North Sea were under contract. The Company's average
utilization rate in the North Sea for the six months ended June 30, 1994,
was 60 percent.
In West Africa, the civil war in Angola, the reduction of the
Nigerian national oil company's participation in ongoing projects
and low oil prices have caused a reduction in the demand for
offshore drilling rigs and, accordingly, a reduction in dayrates.
Offshore West Africa, average demand decreased to 23 rigs under
contract (72 percent utilization) for the quarter ended June 30,
1994, from 24 rigs (73 percent utilization) for the quarter ended
March 31, 1994, and 27 rigs (70 percent utilization) for the second
quarter of 1993. For the first six months of 1994 average demand
decreased to 23 rigs under contract (73 percent utilization) from
29 rigs under contract (74 percent utilization) for the first six
months of 1993. All three of the Company's rigs located offshore
West Africa were employed as of July 31, 1994. The Company's average
utilization rate offshore West Aftica for the six months ended June
30, 1994, was 100 percent.
Turnkey Drilling. Turnkey drilling operations completed thirteen
wells during the second quarter of 1994 compared to three wells in
the prior-year second quarter, resulting in a $22.4 million
increase in revenues and a $4.0 million increase in operating
income. Turnkey drilling operations completed seventeen wells
during the first six months of 1994 compared to six wells in the
comparable prior-year period. Revenues and operating income from
turnkey drilling for the first six months of 1994 increased by
$27.3 million and $2.8 million, respectively, over the first six
months of 1993 due to the increased number of wells completed. The
effect of the increased number of wells was partially offset by a
lower average profit margin per well.
OIL AND GAS OPERATIONS
Data related to the Company's oil and gas sales follows:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1994 1993 % Change 1994 1993 % Change
<S> <C> <C> <C> <C> <C> <C>
Gas:
Production (in millions
of cubic feet) 996 1,236 -19% 2,034 2,503 -19%
Average sale price (per
thousand cubic feet) $1.90 $2.04 -7% $2.06 $1.83 +13%
Oil:
Production (in barrels) 38,305 40,465 -5% 74,028 82,137 -10%
Average sale price (per barrel) $16.20 $18.00 -10% $14.81 $18.23 -19%
</TABLE>
Revenues from the sale of oil and gas decreased for the quarter and
six months ended June 30, 1994, compared to the comparable prior-
year periods as a result of normal declines in both oil and gas
production, a lower average sale price for oil and, for the quarter
ended June 30, 1994, a lower average gas price. In the six months
ended June 30, 1994, a slightly higher average sale price for gas
partially offset the decline in production.
Oil and gas operating income decreased in the second quarter of
1994 as compared to the second quarter of 1993 due to the lower
revenues discussed above that were offset in part by a lower
depletion rate. The lower depletion rate resulted from a property
sale in 1993 and the attendant reduction in the depletable base.
Operating income from oil and gas increased in the first six months
of 1994 as compared to the first six months of 1993, despite the
decrease in revenues, primarily due to the lower depletion rate.
OTHER INCOME AND EXPENSE
Interest expense for the three and six months ended June 30, 1994,
declined by $0.5 million and $1.1 million, respectively, as
compared with the comparable prior-year periods. The decrease in
interest expense was due to the reduction in long-term debt
resulting from the retirement of the rig mortgage note for the
Glomar Baltic I in August 1993.
During the three and six months ended June 30, 1994, the Company
capitalized $0.8 million and $1.3 million, respectively, of
interest attributable to the acquisition and refurbishment of two
offshore drilling rigs, the Glomar Adriatic IX and Glomar Adriatic
X, which were acquired in February 1994.
The Company recognized and received dividend income of $0.2 million
and $1.3 million in the three and six months, respectively, ended
June 30, 1994, on its investment in common stock of Transco. The
$1.1 million in dividends received in the first quarter of 1994
relate to the period from June 1992 through February 1994, during
which period such dividends were held in escrow. Prior to February
1994, the exact amount of the dividends to be received by the
Company was not determinable.
Income tax expense consists primarily of current foreign income
taxes. The Company's net operating losses provide no current
federal income tax benefit.
In the first quarter of 1994 the Company adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits." The adoption
of SFAS No. 112 resulted in a charge to earnings in the amount of
$3.5 million for the cumulative effect of the change.
LIQUIDITY AND CAPITAL RESOURCES
Capitalized words which appear in the following discussion that are
not defined herein are defined in the Company's Annual Report on
Form 10-K for the year ended December 31, 1993.
In February 1994, the Company received 1,017,771 previously
escrowed shares of Transco common stock, pursuant to the 1992
settlement of take-or-pay litigation, plus $1.1 million in
previously escrowed dividends which were declared and paid on the
escrowed shares during the period from June 1992 through February
1994, plus interest. The number of shares of Transco common stock
which the Company may sell during any three-month period is limited
by Rule 144 under the Securities Act of 1933; as a result, the
Company may not be able to complete the sale of all of the Transco
shares until late 1994. In June 1994, the Company sold 400,000
shares of Transco common stock for $6.0 million, resulting in a
gain of $0.1 million. The Company estimates that it may sell a
maximum of approximately 400,000 shares no sooner than early
September 1994. As of June 30, 1994, the market value of the
Transco shares held by the Company was $10.0 million. (See note 3
of notes to condensed consolidated financial statements in Part I,
Item 1 of this Quarterly Report on Form 10-Q.)
In March 1994, the Company received $15.2 million in proceeds from
the sale of U.S. government securities which were previously held
in trust in connection with the Transco Note. The proceeds
represented the remaining balance due under the note, which was to
mature quarterly through July 1995.
In February 1994, the Company purchased two jackup drilling rigs,
the Glomar Adriatic IX and Glomar Adriatic X. The Company paid
$26.0 million in cash and, during the second quarter of 1994,
issued to the seller's nominee 750,000 shares of Global Marine Inc.
common stock to complete the purchase. In addition, the Company
anticipates spending approximately $15 million to refurbish and
upgrade the rigs during 1994 and the first quarter of 1995.
In May 1994, the Company signed an agreement to purchase another
offshore drilling unit, a 1983 Marathon LeTourneau 116-C jackup
known as the "Bay Driller," at a price of 9,250,000 pounds sterling for
delivery in October 1994. The Company made a ten percent down payment
valued at $1.4 million. In addition, the Company purchased time
deposits denominated in British pounds valued at $12.4 million,
which is equal to the remainder of the purchase price and is due at
the time of delivery. Funds reserved for the remainder of the
purchase price of the Bay Driller are classified as a noncurrent
asset on the condensed consolidated balance sheet as of June 30,
1994. The Bay Driller is currently outfitted and used by the
seller as an accommodation unit. The Company estimates it would
need to spend approximately $10 million in addition to the purchase
price to outfit the Bay Driller with suitable drilling equipment
before it can be operated as an offshore drilling unit. The
Company does not expect to make such additional expenditures prior
to 1995. (See note 5 of notes to condensed consolidated financial
statements in Part I, Item 1 of this Quarterly Report on Form 10-
Q.)
As of June 30, 1994, the Company had $60.1 million in cash and
marketable securities classified as current and $12.4 million
classified as long-term. At that date, $19.0 million of the
current balance (including $10.0 million of Transco common stock)
was restricted from use for general corporate purposes. The $12.4
million noncurrent balance was reserved for the purchase of the Bay
Driller. As of December 31, 1993, the Company had $44.6 million in
cash and marketable securities, net of restricted amounts of $6.8
million.
During the six months ended June 30, 1994, cash flow provided by
operations increased to $43.8 million from a cash use of $6.5
million in the prior-year comparable period, primarily resulting
from higher revenues, lower contract drilling cash operating
expenses, the liquidation of the Transco Note and favorable working
capital changes, other than the liquidation of the Transco Note.
Working capital decreased to $85.8 million at June 30, 1994 from
$107.2 million at December 31, 1993, due to the purchase of the
Glomar Adriatic IX and Glomar Adriatic X offshore drilling rigs,
and the reclassification to long-term of funds reserved to complete
the purchase of the Bay Driller.
Capital expenditures for the remainder of 1994 for the Company's
drilling fleet, other than for the refurbishment of the Glomar
Adriatic IX and Glomar Adriatic X and the purchase of the Bay
Driller, are estimated to be $7 million, principally for capital
additions and improvements to the Company's rigs currently in
service. Capital expenditures for the Company's oil and gas
operations are estimated to be $2 million for the remainder of
1994, principally for exploratory drilling, development drilling of
producing properties, the purchase of equipment used in connection
with producing properties, and workovers and recompletions.
The Company believes that it will be able to meet all of its
current obligations, including capital expenditures and debt
service, from its cash flow from operations and its cash, cash
equivalents and marketable securities. The Company's ability,
however, to pay the principal amount of its Senior Secured Notes
upon maturity in December 1999 would require a substantial
improvement in current industry conditions. The Company estimates
that the average dayrate earned by the Company's contract drilling
fleet would have to increase from $23,800 per rig earned for the
first six months of 1994 to approximately $29,000 per rig during
the period from July 1, 1994, through the date of maturity of the
Senior Secured Notes in order to cover all cash operating, capital
and financing costs, including principal payments, during the
period up to and including the maturity of the Senior Secured
Notes. This estimate assumes the continuation of rig utilization
and operating expenses at current levels and does not include
sources of liquidity other than cash flow from the Company's
contract drilling fleet.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the Company was held on May
12, 1994. At the meeting, four directors were elected by a vote of
holders of Common Stock, $.10 par value per share, as outlined in
the Company's Proxy Statement relating to the meeting. With
respect to the election of directors, (i) proxies were solicited
pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended, (ii) there was no solicitation in opposition to
the management's nominees as listed in the Proxy Statement, and
(iii) all of such nominees were elected. The following numbers of
votes were cast as to the director nominees: Edward J. Campbell,
146,339,262 votes for and 1,214,532 votes withheld; Peter T. Flawn,
146,336,141 votes for and 1,217,673 votes withheld; John M. Galvin,
146,337,810 votes for and 1,216,004 votes withheld; and Lynn L.
Leigh, 146,338,019 votes for and 1,215,795 votes withheld. Also
voted upon at the Annual Meeting was a proposal to amend the
Company's Restated Certificate of Incorporation to increase the
number of authorized shares of the Company's Common Stock, from
200,000,000 to 300,000,000, with 139,195,328 votes being cast for
the proposal, 7,797,103 votes being cast against the proposal, and
561,383 abstentions and broker non-votes. The final matter voted
upon at the meeting was the ratification of the appointment of
Coopers & Lybrand as independent certified public accountants of
the Company and its subsidiaries for 1994, with 146,565,185 votes
being cast for ratification, 451,705 votes being cast against
ratification, and 536,924 abstentions and broker non-votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4.1 Restated Certificate of Incorporation of the Company as
filed with the Secretary of State of Delaware on March
15, 1989, effective March 16, 1989. (Incorporated herein
by this reference to Exhibit 3(i).1 of the Registrant's
Annual Report on Form 10-K for the year ended December
31, 1993.)
4.2 Certificate of Amendment of the Restated Certificate of
Incorporation of the Company as filed with the Secretary
of State of Delaware on May 11, 1990. (Incorporated
herein by this reference to Exhibit 3(i).2 of the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1993.)
4.3 Certificate of Correction of the Restated Certificate of
Incorporation of the Company as filed with the Secretary
of State of Delaware on September 25, 1990.
(Incorporated herein by this reference to Exhibit 3(i).3
of the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1993.)
4.4 Certificate of Amendment of the Restated Certificate of
Incorporation of the Company as filed with the Secretary
of State of Delaware on May 11, 1992. (Incorporated
herein by this reference to Exhibit 3(i).4 of the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1993.)
4.5 Certificate of Amendment of the Restated Certificate of
Incorporation of the Company as filed with the Secretary
of State of Delaware on May 12, 1994. (Incorporated
herein by this reference to Exhibit 4.5 of the
Registrant's Registration Statement on Form S-3 (No. 33-
53691) filed with the Commission on May 18, 1994.)
10.1 Form of Performance Stock Memorandum dated June 7, 1994,
regarding conditional opportunity to acquire Company
stock granted to six executive officers, respectively.
15.1 Letter of Independent Accountants regarding Awareness of
Incorporation by Reference.
(b) Reports on Form 8-K
The Company did not file any Current Reports on Form 8-K
during the second quarter of 1994.
SIGNATURE
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.
GLOBAL MARINE INC.
(Registrant)
Dated: August 5, 1994 /s/ Thomas R. Johnson
Thomas R. Johnson
Vice President and Corporate Controller
(Duly Authorized Officer and Principal
Accounting Officer of the Registrant)
INDEX TO EXHIBITS
4.1 Restated Certificate of Incorporation of the Company as filed with the
Secretary of State of Delaware on March 15, 1989, effective March 16,
1989. (Incorporated herein by this reference to Exhibit 3(i).1 of the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1993.)
4.2 Certificate of Amendment of the Restated Certificate of Incorporation
of the Company as filed with the Secretary of State of Delaware on May
11, 1990. (Incorporated herein by this reference to Exhibit 3(i).2 of
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993.)
4.3 Certificate of Correction of the Restated Certificate of Incorporation
of the Company as filed with the Secretary of State of Delaware on
September 25, 1990. (Incorporated herein by this reference to
Exhibit 3(i).3 of the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1993.)
4.4 Certificate of Amendment of the Restated Certificate of Incorporation
of the Company as filed with the Secretary of State of Delaware on May
11, 1992. (Incorporated herein by this reference to Exhibit 3(i).4 of
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993.)
4.5 Certificate of Amendment of the Restated Certificate of Incorporation
of the Company as filed with the Secretary of State of Delaware on May
12, 1994. (Incorporated herein by this reference to Exhibit 4.5 of the
Registrant's Registration Statement on Form S-3 (No. 33-53691) filed
with the Commission on May 18, 1994.)
10.1 Form of Performance Stock Memorandum dated June 7, 1994, regarding
conditional opportunity to acquire Company stock granted to six
executive officers, respectively.
15.1 Letter of Independent Accountants regarding Awareness of Incorporation
by Reference.
EXHIBIT 10.1
07 June 1994
TO:
PERFORMANCE STOCK
In order to provide incentive specifically directed toward
achievement of long term performance goals, you have been granted
an opportunity to acquire as many as 35,000 shares of Global Marine
common stock. This grant was approved when the Board met in May.
At the time of the first regular Board meeting in 1997, the company
will allow you to acquire none, some or all of these shares,
depending on the extent to which certain performance objectives
have been achieved.
This grant amounts to an incremental opportunity to earn
significant compensation, provided that we are able to achieve the
ambitious targets established for EPS, EBITDA and stock price.
This incentive arrangement is designed so that the management team
wins if the shareholders win.
The terms and conditions of your grant under this incentive
arrangement are outlined in the attached Exhibit "A". The
conditions are based on the company's performance during the period
1994-1996, as measured against long term performance goals
established by the Board.
I look forward to working with you during the next three years, in
an effective mutual effort to assure that the target goals are more
than accomplished.
C. R. Luigs
<PAGE>
EXHIBIT A
GLOBAL MARINE INC.
TERMS AND CONDITIONS
OF
OPPORTUNITY TO ACQUIRE PERFORMANCE STOCK
(Performance Period 1994-1996)
GLOBAL MARINE INC. (the "Company"), desiring to afford you a
conditional opportunity to acquire shares of the Company's common
stock, $.10 par value per share (the "Common Stock"), as added
incentive to achieve the long-term objectives of the Company and
its subsidiaries, has established the following terms and
conditions under which it will offer shares of Common Stock to you
under the Company's 1989 Stock Option and Incentive Plan (the
"Plan").
1. Conditional Opportunity to Acquire Shares. At the time of the
first regular meeting of the Company's board of directors held
in 1997, the Company will offer shares of the Common Stock to
you, up to the full number of shares stated in the first
paragraph of the cover page of this memorandum (the "Shares"),
subject to the terms and conditions outlined in this
memorandum and the terms and conditions of the Plan as amended
from time to time in accordance with its terms. The Shares
will be offered to you and you will have the opportunity to
acquire the Shares in the form of an incentive stock purchase
under the Plan, at the same price and by substantially the
same method used in paying 1993 incentive bonus awards to the
Company's executive officers in February 1994.
2. Number of Shares to be Offered. The Company will offer you
none, some or all of the Shares. The exact number of Shares
to be offered will depend on the performance of the Company
and its subsidiaries during the period 1994-1996 as measured
against the following long-term performance goals (the
"Performance Goals") established by the Compensation Committee
of the Company's board of directors (the "Compensation
Committee"):
Cumulative EBITDA: Cumulative earnings of the Company and
its subsidiaries on a consolidated basis
before interest, taxes, depreciation and
amortization for fiscal years 1994, 1995
and 1996.
Threshold = $220 million; Target = $270
million.
1996 E.P.S.: Earnings per share of the Company's
Common Stock for fiscal year 1996.
Threshold = $0.20/share; Target =
$0.35/share.
Stock Price: Average of the daily closing prices for
one share of the Company's Common Stock
during the fourth quarter of 1996
compared to the average of the daily
closing prices for one share of the
Company's Common Stock during the fourth
quarter of 1993.
Threshold = +30%; Target = +50%.
The total number of Shares stated in the first paragraph of
the cover page of this memorandum has been allocated among the
three Performance Goals as follows: 40% are Cumulative EBITDA
Shares; 40% are 1996 E.P.S. Shares; and 20% are Stock Price
Shares. You will be offered a percentage of the Shares
allocated to each Performance Goal, depending on actual
performance as measured against that respective Performance
Goal, as follows:
Performance: Percentage
Below Threshold 0%
At Threshold 25%
Between Threshold A proportionate percentage
and Target between 25% and 100%, based on
straight-line interpolation
between the threshold and
target objectives.
At or Above Target 100%
3. Non-Transferable. You may not transfer your right to acquire
Shares under this memorandum other than by will or by the laws
of descent and distribution.
4. Termination of Employment. You will not be entitled to
acquire any of the Shares after termination of your employment
with the Company and its subsidiaries unless such termination
is by reason of early retirement not objected to by the
Compensation Committee, normal retirement, disability or
death, or unless your employment with the Company and its
subsidiaries is terminated by the Company or any such
subsidiary other than for cause (to mean acts of misconduct
harmful to the Company, inadequate performance or
incompetence). If your employment is terminated by reason of
early retirement not objected to by the Compensation
Committee, normal retirement or disability, or by the Company
or any of its subsidiaries other than for cause, the number of
Shares that the Company would otherwise offer to you at the
time of the Company's first regular board meeting held in 1997
will be prorated based on your months of employment completed
during the period 1994-1996 compared to 36 months, and the
Company will offer to you or your legal representative or
representatives, at the time of said board meeting, a reduced
number of Shares based on such proration. If your employment
is terminated by reason of your death, the total number of
Shares stated in the first paragraph of the cover page of this
memorandum will be multiplied by 50% and the resulting number
will be prorated based on your months of employment completed
during the period 1994-1996 compared to 36 months, and the
Company will offer to the appropriate person or persons named
under your last will and testament or determined under
applicable intestate laws, at the time of the Company's first
regular board meeting held in 1997, a reduced number of Shares
based on such multiplication and proration. Termination of
your "employment" with the Company and its subsidiaries will
be deemed to occur at the close of business on the earliest of
(i) the last day on which you are assigned to a position with
the Company or any of its subsidiaries for the purpose of
performing your occupation, in the case of termination by
reason of your early or normal retirement, disability or
death, (ii) the last day of the period during which you are
entitled to receive salary continuation under any agreement,
policy, plan or other arrangement with the Company or any of
its affiliates, in the case of any termination entitling you
to such salary continuation, (iii) the last day of an approved
leave of absence if you do not resume the performance of your
occupation for the Company or any of its subsidiaries on or
before the next business day, and (iv) the last day on which
you are assigned to a position with the Company or any of its
subsidiaries for the purpose of performing your occupation in
any other case. For purposes of this paragraph, the term
"disability" shall mean any physical or mental condition which
totally and permanently prevents you from engaging in any
substantial gainful activity, as reasonably determined in good
faith by the Compensation Committee.
5. Adjustments. Except as provided in the following paragraph,
if outstanding shares of the class then subject to the
conditional opportunity to acquire Shares outlined herein are
increased, decreased, changed into or exchanged for a
different number or kind of shares or securities of the
Company through reorganization, recapitalization,
reclassification, stock dividend, stock split or reverse stock
split, then there will be substituted for each Share then
subject to such opportunity and for each share upon which any
of the Performance Goals are then based the number and class
of shares or securities into or for which each share of the
class subject to such opportunity shall be so changed or
exchanged, all without any change in the aggregate purchase
price for the Shares then subject to such opportunity, but
with a corresponding adjustment in the purchase price per
Share. Such adjustments will become effective on the
effective date of any such transaction; except that in the
event of a stock dividend or of a stock split effected by
means of a stock dividend or distribution, such adjustments
will become effective immediately after the record date
therefor.
Upon a dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company with
one or more corporations as a result of which the Company is
not the surviving company, your opportunity to acquire Shares
and the obligations of the Company hereunder will terminate,
unless provision is made in writing in connection with such
transaction for the assumption of such obligations, or the
substitution for such obligations of similar obligations
involving the stock of a successor employer corporation, or a
parent or subsidiary thereof, with appropriate adjustments as
to the conditions thereof and the number and kind of Shares
and prices, in which event your opportunity to acquire Shares
and the obligations of the Company hereunder will continue in
the manner and under the terms so provided.
Adjustments under this Section 5 will be made by the
Compensation Committee, whose determination as to what
adjustments will be made, and the extent thereof, will be
final, binding and conclusive. No fractional shares of stock
will be issued pursuant to any acquisition of Shares or in
connection with any adjustment contemplated herein.
6. Limitation. You will not be entitled to the privileges of
stock ownership in respect of any of the Shares until they
have been issued and delivered pursuant to the terms and
conditions of this memorandum and the Plan.
7. Requirements of Law and Stock Exchanges. Your right to
acquire the Shares and issuance of the Shares will be subject
to compliance with all applicable requirements of law. In
addition, the Company will not be required to issue or deliver
any certificate or certificates for any of the Shares prior to
the admission of such Shares to listing on notice of issuance
on any stock exchange on which shares of the same class are
then listed.
By acquiring any of the Shares as contemplated herein, you
will be representing and agreeing for yourself and your
transferees by will or by the laws of descent and distribution
that, unless a registration statement under the Securities Act
of 1933, as amended (the "Securities Act"), is in effect as to
the Shares acquired, any and all Shares so acquired will be
acquired for investment and not for sale or distribution, and
each such acquisition will be accompanied by a representation
and warranty in writing, signed by the person entitled to make
such acquisition, that the Shares are being so acquired in
good faith for investment and not for sale or distribution.
In the event the Company's legal counsel, at the Company's
request, advises it that registration under the Securities Act
of the acquired Shares is required prior to issuance thereof,
the Company will not be required to issue or deliver the
Shares unless and until such legal counsel advises it that
such registration has been completed or is not required.
By acquiring any of the Shares, you also will be representing
and agreeing for yourself and your transferees by will or the
laws of descent and distribution that if you are an officer of
the Company or any other person who might be deemed an
"affiliate" of the Company under the Securities Act at the
time any Shares that have been acquired are proposed to be
sold, you or they will not sell such Shares (a) without giving
thirty days advance notice in writing to the Company, and (b)
until the Company has advised you or them that such sale may
be made without registration under the Securities Act or, if
such registration is required, that such registration has been
effected.
8. Restrictions on Share Transfer by Certain Persons. In the
case of Cumulative EBITDA Shares and 1996 E.P.S. Shares, until
six months have elapsed after the date of the Company's
unconditional offer of such Shares to you, or, in the case of
Stock Price Shares, until six months have elapsed after the
date the Compensation Committee approved the recommendation
that you be granted a conditional opportunity to acquire such
Shares, you may not transfer such Shares in a transaction that
would constitute a "sale" under Section 16 of the Exchange Act
if you are at the time of the sale (a) a director of Global
Marine Inc., (b) an "officer" of Global Marine Inc. as such
term is defined for purposes of the rules of the Securities
and Exchange Commission under Section 16 of the Exchange Act,
or (c) a beneficial owner of more than ten percent of the
issued and outstanding common stock of Global Marine Inc.
9. Wage Withholding and Employment Taxes. Your acquisition of
any of the Shares as outlined herein may result in ordinary
income at the time of acquisition. Such ordinary income will
be subject to both wage withholding and employment taxes.
Your employer will effect any such withholding and/or deduct
any such taxes from any cash compensation that the Company or
any of its subsidiaries may pay you.
10. Continued Employment and Future Grants. Neither the granting
to you of an opportunity to acquire stock nor the other
arrangements outlined herein give you the right to remain in
the employ of the Company or any of its subsidiaries or to be
selected to receive similar or identical grants in the future.
11. Global Marine Inc. 1989 Stock Option and Incentive Plan, the
Board and the Committee. The opportunity to acquire Shares
outlined in this memorandum has been granted to you, and any
offer or sale of Shares will be made, under and pursuant to
the Plan as the same shall have been amended from time to time
in accordance with its terms. The decision of the Company's
board of directors or the Committee on any questions
concerning the interpretation or administration of the Plan or
any matters covered in this memorandum will be final and
conclusive. No amendment to the Plan or decision of the board
or the Committee will deprive you, without your consent, of
any rights hereunder.
A copy of the Plan in its present form is available at the
Company's principal office for inspection during business
hours by you or other persons who may be entitled to acquire
any of the Shares as contemplated herein.
References in this Exhibit A to "this memorandum" (and indirect
references such as "hereof," "hereunder" and "herein") refer to the
attached cover page of this memorandum and this Exhibit A, each of
which constitutes an integral part of this memorandum.
EXHIBIT 15.1
ACCOUNTANTS' AWARENESS LETTER
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Global Marine Inc.
Registration Statements
We are aware that our report dated August 3, 1994, on our review
of the condensed consolidated interim financial information of
Global Marine Inc. and subsidiaries for the three and six months
ended June 30, 1994, and included in this Quarterly Report on
Form 10-Q is incorporated by reference in (i) the prospectus
constituting part of the Company's Registration Statements on
Form S-8 (Registration Nos. 33-32088, 33-40961, and 33-63326),
respectively, for the Global Marine Inc. 1989 Stock Option and
Incentive Plan, (ii) the prospectus constituting part of the
Company's Registration Statement on Form S-8 (Registration No.
33-40266) for the Global Marine Savings Incentive Plan, (iii) the
prospectus constituting part of the Company's Registration
Statement on Form S-8 (Registration No. 33-40961) for the Global
Marine Inc. 1990 Non-Employee Director Stock Option Plan, and
(iv) the prospectus constituting part of the Company's
Registration Statement on Form S-3 (Registration No. 33-53691)
pertaining to sales of 750,000 shares of the Company's Common
Stock, $.10 par value per share, by a stockholder. Pursuant to
Rule 436(c) under the Securities Act of 1933, this report should
not be considered a part of any of said registration statements
prepared or certified by us within the meaning of Sections 7 and
11 of that Act.
Houston, Texas /s/ Coopers & Lybrand L.L.P.
August 4, 1994
