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 March 31, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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, 164,885,284 shares outstanding as of
April 30, 1995.
GLOBAL MARINE INC.
TABLE OF CONTENTS TO FORM 10-Q
QUARTER ENDED MARCH 31, 1995
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Report of Independent Accountants 2
Condensed Consolidated Statement of Operations
Three Months Ended March 31, 1995, and 1994 3
Condensed Consolidated Balance Sheet
March 31, 1995, and December 31, 1994 4
Condensed Consolidated Statement of Cash Flows
Three Months Ended March 31, 1995, and 1994 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II - OTHER INFORMATION
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURE 15
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 March 31, 1995, and
the related condensed consolidated statements of operations and
cash flows for the three-month periods ended March 31, 1995, and
1994. 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, 1994, 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 10, 1995, 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, 1994, 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
May 10, 1995
<TABLE>
GLOBAL MARINE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In millions, except per share amounts)
Three Months Ended
March 31,
1995 1994
Revenues:
<S> <C> <C>
Contract drilling $ 56.7 $ 50.4
Drilling management 57.0 14.8
Oil and gas 2.4 2.8
Total revenues 116.1 68.0
Expenses:
Contract drilling 42.5 35.8
Drilling management 52.2 14.8
Oil and gas 1.2 1.0
Depreciation, depletion and amortization (Note 3) 7.2 9.3
General and administrative 3.3 3.3
Total operating expenses 106.4 64.2
Operating income 9.7 3.8
Other income (expense):
Interest expense (7.6) (7.6)
Interest capitalized 1.6 .5
Interest income 1.0 .6
Other .1 1.1
Total other income (expense) (4.9) (5.4)
Income (loss) before income taxes 4.8 (1.6)
Income tax expense .3 .1
Income (loss) before cumulative effect of
change in accounting principle 4.5 (1.7)
Cumulative effect of change in
accounting for postemployment benefits - (3.5)
Net income (loss) $ 4.5 $ (5.2)
Net income (loss) per common share:
Before cumulative effect of
change in accounting principle $ 0.03 $(0.01)
Cumulative effect of change in
accounting for postemployment benefits - (0.02)
Net income (loss) per common share $ 0.03 $(0.03)
See notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
GLOBAL MARINE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions)
<CAPTION>
March 31, December 31,
1995 1994
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 37.7 $ 33.3
Marketable securities 30.2 24.6
Accounts receivable, net of allowances 67.4 63.1
Costs incurred on turnkey drilling contracts in progress 1.5 18.5
Prepaid expenses 6.5 10.0
Other current assets 1.5 .3
Total current assets 144.8 149.8
Properties:
Rigs and drilling equipment, less accumulated
depreciation of $174.7 and $168.4 at March 31,
1995 and December 31, 1994, respectively 350.2 346.9
Oil and gas properties, full cost method, less
accumulated depreciation, depletion and amortization
of $27.6 and $26.9 at March 31, 1995 and December 31,
1994, respectively 7.4 6.5
Net properties 357.6 353.4
Other assets 7.3 9.2
Total assets $ 509.7 $ 512.4
See notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
GLOBAL MARINE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (Continued)
(In millions)
<CAPTION>
March 31, December 31,
1995 1994
Current liabilities:
<S> <C> <C>
Accounts payable $ 20.7 $ 39.5
Accrued liabilities:
Interest 8.4 1.2
Compensation and related employee costs 8.3 9.0
Claims and allowances 1.7 1.4
Income taxes 2.1 1.9
Other 7.9 3.4
Total current liabilities 49.1 56.4
Long-term debt 225.0 225.0
Other long-term liabilities 17.2 18.7
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, 164,881,034 shares and 164,408,185
shares issued and outstanding at March 31, 1995 and
December 31, 1994, respectively 16.5 16.4
Additional paid-in capital 261.7 260.2
Accumulated deficit (59.8) (64.3)
Total shareholders' equity 218.4 212.3
Total liabilities and shareholders' equity $ 509.7 $ 512.4
See notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
GLOBAL MARINE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
<CAPTION>
Three Months Ended
March 31,
1995 1994
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $ 4.5 $ (5.2)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation, depletion and amortization 7.2 9.3
Cumulative effect of change in accounting principle - 3.5
(Increase) decrease in accounts receivable (4.3) 8.9
Decrease in note receivable - 17.9
(Increase) decrease in costs incurred on turnkey
drilling contracts in progress 17.0 (1.0)
Decrease in other current assets 3.4 1.0
Decrease in accounts payable (18.8) (5.1)
Increase in accrued liabilities 12.0 6.2
Other, net .3 2.3
Net cash flow provided by operating activities 21.3 37.8
Cash flows from investing activities:
Purchases of held-to-maturity securities (23.5) (4.2)
Proceeds from maturities of held-to-maturity securities 17.9 19.6
Capital expenditures (11.9) (34.6)
Disposals of properties .5 .9
Other - 2.1
Net cash flow used in investing activities (17.0) (16.2)
Cash flows from financing activities:
Proceeds from exercise of employee stock options .1 .1
Net cash flow provided by financing activities .1 .1
Increase in cash and cash equivalents 4.4 21.7
Cash and cash equivalents at beginning of period 33.3 31.2
Cash and cash equivalents at end of period $ 37.7 $ 52.9
See notes to condensed consolidated financial statements.
</TABLE>
GLOBAL MARINE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995
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.
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. 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.
Note 2 - Change in Accounting Principle
Effective January 1, 1995, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of," which requires that certain long-lived assets be
reviewed for impairment whenever events indicate that the carrying
amount of an asset may not be recoverable, and that an impairment
loss be recognized under certain circumstances in the amount by
which the carrying value exceeds the fair value of the asset. The
adoption of SFAS No. 121 had no effect on the Company.
Note 3 - Change in Estimated Rig Lives
Effective January 1, 1995, the Company increased to 25 years the
estimated useful lives of its jackup drilling rigs and increased to
20 years the estimated useful lives of its semisubmersible drilling
rigs and drillship. In addition, salvage values were reduced to
$500,000 per rig for jackups and $1,000,000 per rig for both
semisubmersibles and the drillship. The effect of the change in
estimated service lives and salvage values was a $2.6 million
reduction in depreciation expense for the quarter ended March 31,
1995.
Note 4 - Net Income (Loss) per Share
Net income per common share is based on the weighted average number
of common shares outstanding and, for those periods in which they
have a dilutive effect, shares contingently issuable due to
outstanding options and incentive sales. The net loss per common
share is based on the weighted average number of common shares
outstanding. The weighted average shares for the three months
ended March 31, 1995 and 1994, were 164,642,060 and 163,129,928,
respectively. Net income per share for the quarter ended March 31,
1995 excluded the effect of contingently issuable shares because
their effect was not material.
Note 5 - Subsequent Events
On April 10, 1995, the Company entered into an agreement to sell
one of its offshore drilling rigs, the Glomar Main Pass III, to
Dual Drilling Company, the customer that has been leasing the rig
from the Company under a bareboat charter. The sale is subject to
certain regulatory approvals and the consummation of Dual's pending
agreement to sell one of its offshore drilling rigs. If the sale
is completed, the proceeds to the Company will be approximately
$22.5 million in cash, and the Company will recognize a gain of
approximately $14.5 million in the second quarter of 1995. The
Company intends to use the sale proceeds for the purchase of
drilling equipment.
On April 28, 1995, the Company completed the previously reported
purchase of the Glomar Beaufort Sea I, which, prior to January
1995, had been chartered by the Company under a long-term lease.
The Company has agreed to pay a purchase price of up to $9.3
million out of the rig's future cash flow or proceeds from the sale
of the rig, if any. The full $9.3 million will be paid only if the
Company's share of future cash flow or rig sale proceeds exceeds
$48 million. The Company will have no obligation to pay any
amount if the rig fails to generate any future cash flow.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OPERATING RESULTS
Summary
The Company reported operating income of $9.7 million for the first
quarter of 1995 compared to $3.8 million for the prior-year first
quarter. The improvement in operating results is due to the
increase in the number of turnkey wells completed, higher average
gross profit margins on the 1995 turnkey wells and lower contract
drilling depreciation expense due to a change in estimated service
lives, partially offset by a decline in oil and gas results due to
lower gas prices. Data relating to the Company's operations by
business segment follows:
<TABLE>
Three Months Ended
March 31, Increase
1995 1994 (Decrease)
(in millions)
Revenues:
<S> <C> <C> <C>
Contract drilling $ 57.4 $51.9 $ 5.5
Drilling management 59.3 14.8 44.5
Oil and gas 2.4 2.8 (0.4)
Less: Intersegment revenues (3.0) (1.5) (1.5)
Total revenues $116.1 $68.0 $48.1
Operating income:
Contract drilling $ 7.8 $ 6.0 $ 1.8
Drilling management 5.7 0.1 5.6
Oil and gas 0.5 1.3 (0.8)
Corporate expenses (3.4) (3.5) 0.1
Elimination (1) (0.9) (0.1) (0.8)
Total operating income $ 9.7 $ 3.8 $ 5.9
(1) Deferral of profits earned on turnkey wells drilled on oil and
gas properties in which the Company has working interests.
</TABLE>
In the U.K. sector of the North Sea, higher oil and gas prices and
a decrease in the number of rigs available, among other factors,
have resulted in higher dayrates since October of 1994. Offshore
West Africa, dayrates and utilization remain stable despite
previous political unrest. In the U.S. Gulf of Mexico, industry
demand began weakening in late December 1994 due to low natural gas
prices, but appears to have stabilized during the first quarter of
1995. Drilling activity in the Gulf of Mexico is expected to
remain depressed, however, unless natural gas prices strengthen.
The Company reported net income of $4.5 million for the first
quarter of 1995 as compared with a net loss of $5.2 million for the
first quarter of 1994. The net loss for the first quarter of 1994
included a charge for the cumulative effect of the change in
accounting for postemployment benefits of $3.5 million. Excluding
the effect of the change in accounting for postemployment benefits,
the net loss for the first quarter of 1994 was $1.7 million. If
markets remain stable, the Company expects to report net income for
the full year 1995 due to improved contract and turnkey drilling
operations.
Contract Drilling Operations
Data with respect to the Company's contract drilling operations
follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31, Increase
1995 1994 (Decrease)
Contract drilling revenues by area (in millions) (1):
<S> <C> <C> <C>
Gulf of Mexico $28.6 $29.8 $(1.2)
West Africa 10.3 7.1 3.2
North Sea 8.9 6.6 2.3
Other 9.6 8.4 1.2
Total $57.4 $51.9 $ 5.5
Average rig utilization 90% 92%
Average dayrate (2) $27,300 $24,300
(1) Includes revenues earned from affiliates.
(2) Contract drilling revenues less non-rig related revenues
divided by aggregate contract days.
</TABLE>
The decrease in rig utilization for the first quarter of 1995 as
compared with the first quarter of 1994 was attributable to the
November 1994 purchase of the Glomar Adriatic XI, which was idle
during the first quarter of 1995. Excluding the effect of the
Glomar Adriatic XI, the utilization rate was unchanged at 92
percent for both periods. The Glomar Adriatic XI is currently
undergoing reconfiguration, primarily to replace the rig's existing
special-purpose drilling equipment with an enhanced drilling
package. The Company has a letter of intent from a customer to
contract the rig beginning in August 1995. The Glomar Adriatic IX
and Glomar Adriatic X were purchased by the Company in February
1994 and have been undergoing refurbishment since that time.
Refurbishment of the Glomar Adriatic IX was completed in March
1995, and the rig has mobilized to Nigeria where it is committed to
begin drilling in May 1995. The Glomar Adriatic X is expected to
become available for operations in September 1995.
The increase in the fleet average dayrate received by the Company
resulted in a $6.1 million increase in contract drilling revenues
offset by a $0.6 million decrease in non-dayrate revenues.
Revenues from the Gulf of Mexico decreased by $1.2 million due to
lower dayrates. Revenues from the North Sea increased by $2.3
million due to higher utilization. Despite the recent increase in
market dayrates for semisubmersibles in the U.K. sector of the
North Sea, the Company's revenues from the North Sea will not be
significantly impacted by the higher dayrates until the second
quarter of 1995. Dayrates for one of the Company's three rigs
operating in the North Sea more than doubled on March 1, and the
dayrate for another increased by 65 percent on April 1, 1995.
Revenues attributable to offshore West Africa increased by $3.2
million, despite lower utilization, primarily due to the
mobilization of two rigs to offshore West Africa in 1994, one from
Saudi Arabia and the other from Alaska. Despite the mobilization
of two rigs to West Africa, revenues in the "Other" category
increased by $1.2 million due to a higher dayrate on the drillship
in Australia.
Effective January 1, 1995, the Company increased to 25 years the
estimated useful lives of its jackup drilling rigs and increased to
20 years the estimated useful lives of its semisubmersible drilling
rigs and drillship. In addition, salvage values were reduced to
$500,000 per rig for jackups and $1,000,000 per rig for both
semisubmersibles and the drillship. The effect of the change in
estimated service lives and salvage values was to decrease
depreciation expense by approximately $2.6 million in the first
quarter of 1995.
The Company's operating profit margin for contract drilling
operations for the first quarter of 1995 increased to 14 percent
from 12 percent in the first quarter of 1994 due to the decrease in
depreciation expense discussed above. Operating expenses other
than depreciation increased by $5.9 million in part due to (i) the
operation of the Company's drillship in 1995 in Australia, which is
a more costly market in which to operate than in Indonesia, where
the rig operated in the first quarter of 1994, (ii) the
commencement in 1995 of the Company's contract to manage a
production platform, and (iii) the commencement of a drilling
contract in Angola for a rig which, in the first quarter of 1994,
was leased to an operator in Saudi Arabia under a bareboat charter
agreement.
Short-term contracts have been typical in the industry for the past
decade. The Company anticipates that contracts on 15 of the
Company's 25 rigs under contract or letter of intent as of May 11,
1995, will expire at varying times on or prior to June 30, 1995.
No assurance can be made that the Company will obtain drilling
contracts for the rig in service that is presently available, for
the uncommitted rig currently undergoing refurbishment, or for its
other rigs upon the completion of existing contracts. The Company
considers its upcoming contract expirations typical of prevailing
market conditions and in the normal course of business.
In response to low natural gas prices, demand for offshore drilling
rigs in the U.S. Gulf of Mexico began weakening in late December
1994 resulting in lower dayrates. In the Gulf of Mexico, average
demand decreased to 122 rigs under contract (68 percent
utilization) for the quarter ended March 31, 1995, from 138 rigs
(77 percent utilization) for the quarter ended December 31, 1994.
For the quarter ended March 31, 1994, an average of 125 Gulf rigs
were under contract (74 percent utilization). Recently, gas prices
have increased from a low of $1.27 per thousand cubic feet in
January 1995 to $1.49 per thousand cubic feet as of May 8, 1995,
and drilling demand in the Gulf appears to have stabilized. Unless
natural gas prices continue to strengthen, drilling activity is
expected to remain depressed. As of May 11, 1995, all twelve of
the Company's rigs in the Gulf of Mexico were under contract. The
Company's average utilization rate for its rigs in the Gulf of
Mexico in the first quarter of 1995 was 99 percent.
Offshore West Africa, average demand increased to 29 rigs under
contract (83 percent utilization) for the quarter ended March 31,
1995, from 27 rigs (81 percent utilization) for the quarter ended
December 31, 1994. For the quarter ended March 31, 1994, an
average of 24 rigs were under contract (73 percent utilization).
As of May 11, 1995, all six of the Company's rigs located offshore
West Africa were committed under contract or letter of intent. The
Company's average utilization rate for its rigs in West Africa in
the first quarter of 1995 was 82 percent.
In the U.K. sector of the North Sea (i) higher oil prices, (ii)
promising oil discoveries west of the Shetland Islands, (iii)
operators' increased drilling to fulfill commitments to drill
previously awarded blocks, (iv) fewer available North Sea rigs as
a result of mobilizations to other areas and (v) increased levels
of operators' cash flow, among other factors, have recently
resulted in higher North Sea dayrates, particularly for
semisubmersible rigs, as operators began contracting available rigs
to fulfill 1995 drilling programs. In the North Sea, average
demand remained at 63 rigs under contract (80 percent utilization)
for the quarter ended March 31, 1995 as compared to 63 rigs (77
percent utilization) for the quarter ended December 31, 1994. In
the first quarter of 1994, an average of 68 North Sea rigs were
under contract (78 percent utilization). Despite the decrease in
rigs under contract since the first quarter of 1994, utilization
rates have risen due to the decline in the number of available rigs
in the region. If present trends continue, the number of rigs
under contract in the North Sea for the industry as a whole is
expected to increase in 1995. As of May 11, 1995, all three of the
Company's drilling rigs in the North Sea were under contract. The
Company's average utilization rate for its drilling rigs in the
North Sea in the first quarter of 1995 was 100 percent.
Drilling Management Services
Drilling management services reported a $44.5 million increase in
revenues, from $14.8 million in the first quarter of 1994 to $59.3
million in the first quarter of 1995, and a $5.6 million increase
in operating income, from $0.1 million in the first quarter of 1994
to $5.7 million in the first quarter of 1995. The improvement
resulted from the completion of 18 turnkey wells in the first
quarter of 1995 as compared to the completion of 4 wells in the
first quarter of 1994 and from higher average gross profit margins
on the 1995 wells. The increase in the number of turnkey wells
drilled was attributable in part to oil and gas operators'
increased acceptance of turnkey drilling as an alternative to
dayrate contract drilling in both the U.S. Gulf of Mexico and
Europe. For the full year 1995, the Company expects to complete a
comparable number of turnkey wells as were completed in 1994, when
the Company completed 52 wells.
As a result of corporate consolidation adjustments, drilling
management operating income was reduced by $0.9 million to $4.8
million in the first quarter of 1995 and by $0.1 million to
breakeven for the first quarter of 1994. The adjustments were
required to reduce earnings by an amount of up to 100 percent of
the profits earned on turnkey drilling contracts for wells drilled
on oil and gas properties in which the Company had working
interests. The amount of profit per well which must be eliminated
is that amount which equals the Company's share of exploration
costs required under each applicable working interest agreement.
Oil and Gas Operations
Production volume and price information with respect to the
Company's sales of oil and gas follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31, Percentage
1995 1994 Change
Gas
<S> <C> <C> <C>
Production (in millions of cubic feet) 1,109 1,038 +7%
Average sale price (per thousand cubic feet) $1.50 $2.20 -32%
Oil
Production (in barrels) 42,457 35,723 +19%
Average sale price (per barrel) $17.62 $13.31 +32%
</TABLE>
Oil and gas revenues of $2.4 million and operating income of $0.5
million for the first quarter of 1995 were lower than the
comparable prior-year period by $0.4 million and $0.8 million,
respectively. The decrease in revenues was primarily due to lower
gas prices, partially offset by higher oil prices and higher
volumes of oil and gas produced due to production from two new
properties. The decrease in operating income was attributable to
the lower revenues, higher employee severance costs and higher
depletion expense due to an increase in the depletion rate and to
the increase in production volume.
Other Income and Expense
Interest expense of $7.6 million for the first quarter of 1995 was
unchanged from the first quarter of 1994.
Interest capitalized for the first quarter of 1995 increased by
$1.1 million to $1.6 million from $0.5 million for the prior-year
first quarter due to the capitalization of three full months of
interest in connection with the acquisition and refurbishment of
the Glomar Adriatic IX and Glomar Adriatic X, which were acquired
in February 1994, and one month of interest on the Glomar Adriatic
XI, which was removed from the active fleet in March 1995 in order
to replace its existing drilling equipment with an enhanced
drilling package.
Interest income in the first quarter of 1995 increased by $0.4
million to $1.0 million from $0.6 million in the prior-year first
quarter primarily due to higher interest rates earned on the
Company's short-term investments.
The Company recognized and received dividend income of $1.1 million
in the first quarter of 1994 on its investment in Transco Energy
Company common stock, which the Company sold in 1994.
Income tax expense consists primarily of foreign taxes. Despite
reporting pretax income for the first quarter of 1995, the
provision for U.S. federal income taxes was not significant due to
the utilization of net operating loss carryforwards.
In the first quarter of 1994 the Company adopted Statement of
Financial Accounting Standards 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, 1994.
Capital expenditures for the full year 1995 are anticipated to be
$59 million, including $20 million for the completion of the
refurbishment and mobilization of the Glomar Adriatic IX and Glomar
Adriatic X, $17 million for the replacement of the drilling package
and other improvements with respect to the Glomar Adriatic XI, $10
million for improvements to the remainder of the drilling fleet, $5
million for interest capitalized, $4 million for exploration costs
in connection with the Company's oil and gas operations, and $3
million for other expenditures.
For the three months ended March 31, 1995, cash flow provided by
operating activities amounted to $21.3 million, of which $11.9
million and $5.6 million were used for capital expenditures and
purchases of marketable securities (net of maturities),
respectively. For the comparable prior-year period, cash flow
provided by operating activities totaled $37.8 million. The prior
year period included $17.9 million in proceeds from the liquidation
of the promissory note received in connection with the 1992
settlement of the Company's take-or-pay litigation against
Transcontinental Gas Pipe Line Corporation.
As of March 31, 1995, the Company had $67.9 million in cash, cash
equivalents and marketable securities, including $11.0 million
which was restricted from use for general corporate purposes. The
restricted amount includes $8.5 million in proceeds from asset
sales and $2.5 million collateralizing outstanding operating
letters of credit. The use of the proceeds from sales of assets is
limited under the terms of the indenture governing the Senior
Secured Notes. Of the asset sales proceeds, $3.5 million became
available to the Company for general corporate purposes in April
1995. As of December 31, 1994, the Company had $57.9 million in
cash and marketable securities, including restricted amounts of
$19.3 million.
In April 1995, the Company entered into an agreement to sell one of
its offshore drilling rigs, the Glomar Main Pass III, to Dual
Drilling Company. If the sale is completed, the proceeds to the
Company will be approximately $22.5 million in cash in the second
quarter of 1995. (See Note 5 of Notes to Condensed Consolidated
Financial Statements.)
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 the Senior Secured Notes
upon maturity in December 1999 from its cash flow from operations
would require a substantial improvement in current industry
conditions, including an increase in the average dayrate earned by
the Company's contract drilling fleet. The Company may have
available to it sources of liquidity other than cash flow from the
Company's contract drilling fleet, including certain asset sales
and equity or debt financings, to retire or otherwise refinance the
principal amount of the Senior Secured Notes on or prior to
maturity.
On April 13, 1995, the Company filed with the Securities and
Exchange Commission a Registration Statement on Form S-3 for the
proposed offering from time to time of (i) debt securities, which
may be subordinated to other indebtedness of the Company, (ii)
shares of preferred stock, $.01 par value per share, and/or (iii)
shares of common stock, $.10 par value per share, for an aggregate
initial public offering price not to exceed $75 million. Any net
proceeds from the sale of offered securities would be used for
general corporate purposes which may include, but are not limited
to, capital expenditures and the financing of acquisitions. The
Registration Statement is subject to review by the Commission prior
to being declared effective and sales, if any, being made
thereunder.
PART II - OTHER INFORMATION
Item 5. Other Information
On April 10, 1995, the Company entered into an agreement to sell a
Friede and Goldman design 300-foot cantilevered jackup drilling
rig, the "Glomar Main Pass III," to Dual Drilling Company. The
sale is subject to certain regulatory approvals and the
consummation of Dual's pending agreement to sell its Dual Rig 97 to
Egyptian Drilling Company. For further information, see Note 5 of
Notes to Condensed Consolidated Financial Statements in Item 1 and
"Liquidity and Capital Resources" in Item 2, "Management's
Discussion and Analysis of Financial Condition and Results of
Operations," in Part I of this Quarterly Report on Form 10-Q.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Sale and Purchase Agreement, dated April 10, 1995,
between Global Marine Australia Inc. and Dual Drilling
Company. (Incorporated herein by this reference to
Exhibit 99.1 of the Registrant's Registration Statement
on Form S-3 (No. 33-58577) filed with the Commission on
April 13, 1995.)
15.1 Letter of Independent Accountants regarding Awareness of
Incorporation by Reference.
27.1 Financial Data Schedule. (Exhibit 27.1 is being
submitted as an exhibit only in the electronic format of
this Quarterly Report on Form 10-Q being submitted to the
Securities and Exchange Commission. Exhibit 27.1 shall
not be deemed filed for purposes of Section 11 of the
Securities Act of 1933, Section 18 of the Securities
Exchange Act of 1934 or Section 323 of the Trust
Indenture Act, or otherwise be subject to the liabilities
of such sections, nor shall it be deemed a part of any
registration statement to which it relates.)
(b) Reports on Form 8-K
The Company did not file any Current Reports on Form 8-K
during the first quarter of 1995.
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: May 11, 1995 /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
10.1 Sale and Purchase Agreement, dated April 10, 1995,
between Global Marine Australia Inc. and Dual Drilling
Company. (Incorporated herein by this reference to
Exhibit 99.1 of the Registrant's Registration Statement
on Form S-3 (No. 33-58577) filed with the Commission on
April 13, 1995.)
15.1 Letter of Independent Accountants regarding Awareness
of Incorporation by Reference.
27.1 Financial Data Schedule. (Exhibit 27.1 is being
submitted as an exhibit only in the electronic format
of this Quarterly Report on Form 10-Q being submitted
to the Securities and Exchange Commission. Exhibit
27.1 shall not be deemed filed for purposes of Section
11 of the Securities Act of 1933, Section 18 of the
Securities Exchange Act of 1934 or Section 323 of the
Trust Indenture Act, or otherwise be subject to the
liabilities of such sections, nor shall it be deemed a
part of any registration statement to which it
relates.)
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 May 10, 1995, on our review of
the condensed consolidated interim financial information of
Global Marine Inc. and subsidiaries for the three months ended
March 31, 1995, 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, (iv)
the prospectus constituting part of the Company's Registration
Statement on Form S-8 (Registration Statement No. 33-57691) for
the Global Marine Inc. 1994 Non-Employee Stock Option and
Incentive Plan and (v)the prospectus constituting part of the
Company's Registration Statement on Form S-3 (Registration No.
33-58577) for the proposed offering of up to $75,000,000 of debt
securities, preferred stock and/or common stock. 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.
May 11, 1995
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<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated balance sheet of Global Marine Inc. and subsidiaries as
of 3-31-95 and the related condensed consolidated statement of operations for
the three months ended 3-31-95, and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 37,700
<SECURITIES> 30,200
<RECEIVABLES> 68,600
<ALLOWANCES> 1,200
<INVENTORY> 0
<CURRENT-ASSETS> 144,800
<PP&E> 559,900
<DEPRECIATION> 202,300
<TOTAL-ASSETS> 509,700
<CURRENT-LIABILITIES> 49,100
<BONDS> 225,000
<COMMON> 16,500
0
0
<OTHER-SE> 201,900
<TOTAL-LIABILITY-AND-EQUITY> 509,700
<SALES> 2,400
<TOTAL-REVENUES> 116,100
<CGS> 1,900
<TOTAL-COSTS> 103,100
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<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,600
<INCOME-PRETAX> 4,800
<INCOME-TAX> 300
<INCOME-CONTINUING> 4,500
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<NET-INCOME> 4,500
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