UNITED STATES
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 September 30, 2000
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 Parkway, Houston, Texas 77079-4493
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (281) 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 [ ]
The number of shares of the registrant's Common Stock, par value
$.10 per share, outstanding as of October 31, 2000 was 175,922,934.
<PAGE>
GLOBAL MARINE INC.
TABLE OF CONTENTS TO FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2000
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Report of Independent Accountants 2
Condensed Consolidated Statement of Income for the
Three and Nine Months Ended September 30, 2000 and 1999 3
Condensed Consolidated Balance Sheet as of
September 30, 2000 and December 31, 1999 4
Condensed Consolidated Statement of Cash Flows for the
Nine Months Ended September 30, 2000 and 1999 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 21
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 6. Exhibits and Reports on Form 8-K 22
SIGNATURE 22
<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 reviewed the accompanying condensed consolidated balance
sheet of Global Marine Inc. and subsidiaries as of September 30,
2000, and the related condensed consolidated statement of income
for the three and nine-month periods ended September 30, 2000 and
1999, and the condensed consolidated statement of cash flows for
the nine months ended September 30, 2000 and 1999. 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 accompanying condensed
consolidated interim financial statements for them to be in
conformity with accounting principles generally accepted in the
United States of America.
We previously audited in accordance with auditing standards
generally accepted in the United States of America, the consolidated
balance sheet as of December 31, 1999, and the related consolidated
statements of income, stockholders' equity, and of cash flows for the
year then ended (not presented herein); and in our report dated February 29,
2000, 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, 1999, is fairly stated in all material respects in
relation to the consolidated balance sheet from which it has been
derived.
/s/ PricewaterhouseCoopers LLP
Houston, Texas
November 9, 2000
<PAGE>
<TABLE>
GLOBAL MARINE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(In millions, except per-share amounts)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Contract drilling $154.4 $106.9 $412.8 $404.6
Drilling management 111.9 59.0 281.1 182.6
Oil and gas 5.7 2.7 13.5 5.1
----- ----- ----- -----
Total revenues 272.0 168.6 707.4 592.3
Expenses:
Contract drilling 77.4 65.1 216.6 207.2
Drilling management 105.4 49.9 261.4 175.3
Oil and gas 1.3 .8 2.3 2.1
Depreciation, depletion,
and amortization 27.8 22.4 77.6 65.7
Restructure costs (Note 4) - - 5.2 -
General and administrative 5.5 5.3 17.7 17.2
----- ----- ----- -----
Total operating expenses 217.4 143.5 580.8 467.5
----- ----- ----- -----
Operating income 54.6 25.1 126.6 124.8
Other income (expense):
Interest expense (15.5) (13.8) (49.6) (40.8)
Interest capitalized 5.0 7.0 22.8 17.0
Interest income 1.2 .5 2.7 2.0
----- ----- ----- -----
Total other income (expense) (9.3) (6.3) (24.1) (21.8)
----- ----- ----- -----
Income before income taxes 45.3 18.8 102.5 103.0
Provision for income taxes (Note 5):
Current tax provision 5.9 1.3 9.4 .9
Deferred tax provision 7.1 3.7 20.1 23.3
----- ----- ----- -----
Total provision for income taxes 13.0 5.0 29.5 24.2
----- ----- ----- -----
Net income $ 32.3 $ 13.8 $ 73.0 $ 78.8
===== ===== ===== =====
Earnings per share (Note 3):
Basic $ 0.18 $ 0.08 $ 0.42 $ 0.45
Diluted $ 0.18 $ 0.08 $ 0.41 $ 0.45
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
GLOBAL MARINE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
($ in millions)
ASSETS
<CAPTION>
September 30, December 31,
2000 1999
------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 62.0 $ 83.3
Accounts receivable, net of allowances 134.1 101.1
Costs incurred on turnkey drilling
contracts in progress 14.9 12.9
Prepaid expenses 11.9 11.2
Other current assets 2.4 4.5
------ ------
Total current assets 225.3 213.0
Properties and equipment:
Rigs and drilling equipment, less accumulated
depreciation of $520.0 at September 30, 2000
and $450.2 at December 31, 1999 1,562.1 1,225.8
Construction in progress 355.8 632.2
Oil and gas properties, full-cost method, less accumulated
depreciation, depletion, and amortization of $19.7 at
September 30, 2000 and $16.3 at December 31, 1999
7.7 10.6
------- --------
Net properties and equipment 1,925.6 1,868.6
Future income tax benefits 77.7 90.7
Other assets 91.8 92.2
------- --------
Total assets $2,320.4 $2,264.5
======= =======
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
GLOBAL MARINE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (Continued)
($ in millions)
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt $ - $ 7.9
Accounts payable 99.7 94.0
Accrued compensation and related employee costs 29.6 21.6
Accrued income taxes 11.2 6.1
Accrued interest 8.8 10.7
Other accrued liabilities 11.9 9.3
------- -------
Total current liabilities 161.2 149.6
Long-term debt (Note 2) 898.6 937.8
Capital lease obligation 16.9 17.5
Other long-term liabilities 15.5 24.6
Contingencies (Note 7) - -
Stockholders' 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, 175,894,967 shares and 174,421,339
shares issued and outstanding at September 30, 2000
and December 31, 1999, respectively 17.6 17.4
Additional paid-in capital 348.4 328.6
Retained earnings 864.1 791.1
Accumulated other comprehensive loss (1.9) (2.1)
------- -------
Total stockholders' equity 1,228.2 1,135.0
------- -------
Total liabilities and stockholders' equity $2,320.4 $2,264.5
======= =======
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
GLOBAL MARINE INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
<CAPTION>
Nine Months Ended
September 30,
-----------------
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 73.0 $ 78.8
Adjustments to reconcile net income to net
cash flow provided by operating activities:
Depreciation, depletion, and amortization 77.6 65.7
Deferred income taxes 20.1 23.3
(Increase) decrease in accounts receivable (33.8) 56.9
Increase in costs incurred on turnkey
drilling contracts in progress (2.0) (3.4)
Decrease in prepaid expenses and other current assets 1.1 .4
Decrease in noncurrent receivables .2 8.0
Increase (decrease) in accounts payable 5.7 (28.4)
Decrease in accrued interest (1.9) -
Increase (decrease) in other accrued liabilities 15.6 (10.2)
Other, net .6 11.2
------ ------
Net cash flow provided by operating activities 156.2 202.3
Cash flows from investing activities:
Capital expenditures (133.6) (287.7)
Proceeds from sales of properties and equipment 1.8 2.6
Other .3 (.4)
------ ------
Net cash flow used in investing activities (131.5) (285.5)
Cash flows from financing activities:
Increases in long-term debt 754.2 305.2
Reductions of long-term debt (804.3) (245.3)
Proceeds from exercises of employee stock options 12.9 3.3
Debt issue costs (7.0) -
Other (1.8) (1.8)
------ ------
Net cash flow (used in) provided by financing activities (46.0) 61.4
------ ------
Decrease in cash and cash equivalents (21.3) (21.8)
Cash and cash equivalents at beginning of period 83.3 56.9
------ ------
Cash and cash equivalents at end of period $ 62.0 $ 35.1
====== ======
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
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 consolidated balance sheet was derived
from audited financial statements but does not include all
disclosures required by accounting principles generally accepted
in the United States of America.
The term "Company" refers to Global Marine Inc. and, unless the
context otherwise requires, to the Company's consolidated
subsidiaries.
These interim financial statements should be read in conjunction
with the Company's audited financial statements for the year
ended December 31, 1999.
In December 1999, the staff of the Securities and Exchange
Commission issued Staff Accounting Bulletin No. 101 ("SAB 101"),
"Revenue Recognition in Financial Statements," which provides the
staff's interpretations of the application of generally accepted
accounting principles to revenue recognition. The Company is
required to implement SAB 101 no later than the fourth quarter of
2000. The Company does not expect the implementation of SAB101 to
have a material effect on the Company's results of operations,
financial position or cash flows.
Note 2 - Long-term Debt
Long-term debt as of September 30, 2000, and December 31, 1999,
consisted of the following:
<TABLE>
<CAPTION>
9/30/00 12/31/99
------- --------
(In millions)
<S> <C> <C>
7-1/8% Notes due 2007, net of discount $299.5 $299.5
7% Notes due 2028, net of discount 296.5 296.3
Zero Coupon Convertible Debentures due 2020, net of discount 302.6 -
Commercial paper - 235.9
Borrowings under bank credit facilities - 114.0
----- ------
Total long-term debt, including current maturities 898.6 945.7
Less current maturities - 7.9
----- ------
Long-term debt $898.6 $937.8
===== =====
</TABLE>
In June 2000 the Company completed a private placement of Zero
Coupon Convertible Debentures due June 23, 2020, and received net
proceeds of $292.7 million after deduction for legal, accounting,
and underwriting fees. The Company used the proceeds, plus
available cash, to pay off outstanding commercial paper. Proceeds
from issuances of commercial paper were used primarily to finance
<PAGE>
construction of the Glomar C.R. Luigs and Glomar Jack Ryan
drillships, and for general corporate purposes.
The convertible debentures were issued at a price of $499.60 per
debenture, which represents a yield to maturity of 3.5 percent
per annum to reach an accreted value at maturity of $1,000 per
debenture. The Company has the right to redeem the debentures in
whole or in part on or after June 23, 2005, at a price equal to
the issuance price plus accrued original issue discount through
the date of redemption. Each debenture is convertible into
12.2182 shares of Global Marine Inc. common stock (7,330,920
total shares) at the option of the holder at any time prior to
maturity, unless previously redeemed. Holders have the right to
require the Company to repurchase the debentures on the fifth,
tenth, and fifteenth anniversaries of the issuance at a price
equal to the accreted value through the date of repurchase. The
Company may pay the repurchase price with either cash or shares
of the Company's common stock or a combination of cash and shares
of common stock.
In July 2000 the Company terminated its $150 million and $50
million committed, unsecured revolving bank credit facilities.
With the termination of these two facilities, aggregate availability
for borrowings under the Company's remaining $240 million bank credit
facility, which expires December 2002, and the commercial paper
program is $240 million. As of October 31, 2000, there were no
borrowings under the $240 million facility or the commercial paper
program.
Note 3 - Earnings per Share
A reconciliation of the numerators and denominators of the basic
and diluted per-share computations for net income follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
2000 1999 2000 1999
---- ---- ---- ----
($ in millions, except per-share data)
<S> <C> <C> <C> <C>
Net income (numerator): $32.3 $13.8 $73.0 $78.8
=========== =========== =========== ===========
Shares (denominator):
Shares - Basic 175,586,481 174,242,291 175,135,889 173,849,801
Effect of employee stock options 4,518,352 3,291,791 4,018,224 2,713,247
----------- ----------- ----------- -----------
Shares - Diluted 180,104,833 177,534,082 179,154,113 176,563,048
=========== =========== =========== ===========
Earnings per share:
Basic $0.18 $0.08 $0.42 $0.45
Diluted $0.18 $0.08 $0.41 $0.45
</TABLE>
Diluted per-share computations for the three and nine months
ended September 30, 2000, exclude 7,330,920 potentially dilutive
shares issuable upon conversion of the Company's Zero Coupon
Convertible Debentures because they are antidilutive based on the
present level of earnings. As discussed in Note 2, holders of the
Zero Coupon Convertible Debentures have the right to require the
Company to repurchase the debentures on the fifth, tenth, and
fifteenth anniversaries of the issuance. The Company may pay the
repurchase price with either cash or shares of the Company's common
stock or a combination thereof. The Company does not anticipate
using common stock to satisfy any such future purchase obligation.
<PAGE>
Note 4 - Restructure Costs
In the first quarter of 2000, the Company began implementing a
restructuring designed to streamline its organization and improve
efficiency. The restructuring involves a workforce reduction of
approximately 89 positions, a consolidation of administrative
offices in Houston and Europe, and closure of a materials control
facility in Houston. The employee functions affected are
primarily corporate support in nature and include materials
control, engineering, accounting, and information technology,
among others. Approximately 80 percent of the affected positions
are located in Houston, and the remaining 20 percent are located
in Europe. The Company recorded a $5.2 million pretax charge in
the first quarter of 2000 in connection with the restructuring,
consisting of $4.3 million for employee severance costs and $0.9
million for office and facility closures. Cash payments for
severance could be paid over various periods generally ranging
from six weeks to twelve months from the date of termination,
based on salary grade and length of service. Cash payments
through September 30, 2000, under the restructuring totaled $2.6
million, consisting of $2.4 million for employee severance and
$0.2 million for facility closures.
Note 5 - Income Taxes
The Company's effective income tax rate for financial reporting
purposes was approximately 29 percent for both the quarter and
nine months ended September 30, 2000. This compares to an
effective rate of 27 percent for the third quarter of 1999, 23
percent for the nine months ended September 30, 1999, and the
U.S. federal statutory rate of 35 percent. The Company's
effective tax rate for a period is estimated based on the
Company's projected annual income and relative amounts of U.S.
and foreign income. The increase in the Company's effective rate
for 2000 as compared to 1999 was due to an increase in U.S.
earnings relative to earnings from the Company's foreign markets,
and the fact that the U.S. statutory rate of 35 percent was
generally higher than the rates applicable to the Company's non-
U.S. earnings.
<PAGE>
Note 6 - Segment Information
Information by operating segment, together with reconciliations
to the consolidated totals, is presented in the following table:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- --------------------
2000 1999 2000 1999
---- ---- ---- ----
(In millions)
<S> <C> <C> <C> <C>
Revenues from external customers:
Contract drilling $ 154.4 $ 106.9 $ 412.8 $ 404.6
Drilling management services 111.9 59.0 281.1 182.6
Oil and gas 5.7 2.7 13.5 5.1
------ ------ ------ ------
Consolidated $ 272.0 $ 168.6 $ 707.4 $ 592.3
====== ====== ====== ======
Intersegment revenues:
Contract drilling $ 2.5 $ 2.3 $ 4.4 $ 6.2
Drilling management services 2.9 1.1 7.8 6.0
Intersegment eliminations (5.4) (3.4) (12.2) (12.2)
------ ------ ------ ------
Consolidated $ - $ - $ - $ -
====== ====== ====== ======
Total revenues:
Contract drilling $ 156.9 $ 109.2 $ 417.2 $ 410.8
Drilling management services 114.8 60.1 288.9 188.6
Oil and gas 5.7 2.7 13.5 5.1
Intersegment eliminations (5.4) (3.4) (12.2) (12.2)
------ ------ ------ ------
Consolidated $ 272.0 $ 168.6 $ 707.4 $ 592.3
====== ====== ====== ======
Operating income:
Contract drilling $ 50.6 $ 20.9 $ 123.8 $ 135.3
Drilling management services 6.4 9.0 19.5 7.1
Oil and gas 3.4 .8 7.8 .7
Restructure costs - - (5.2) -
Corporate expenses (5.8) (5.6) (19.3) (18.3)
------ ------ ------ ------
Consolidated $ 54.6 $ 25.1 $ 126.6 $ 124.8
====== ====== ====== ======
</TABLE>
Note 7 - Contingencies
In 1998 the Company entered into fixed-price contracts with
Harland and Wolff Shipbuilding and Heavy Industries Limited (the
"Shipbuilder") totaling $315 million for the construction of two
dynamically positioned, ultra-deepwater drillships, the Glomar
C.R. Luigs and the Glomar Jack Ryan, for delivery in the fourth
quarter of 1999 and first quarter of 2000, respectively.
Pursuant to two fully-defeased long-term lease agreements, the
Company has novated the construction contracts for the drillships
to two
<PAGE>
financial institutions, which now own the drillships and
have agreed to lease them to the Company. The Company acted as
the lessors' construction supervisor and has paid on behalf of
the lessors, or provided for the lessors' payment of, all amounts
it believes were required under the terms of the contracts,
including payments for all approved change orders.
In October 1999 the Company received a claim from the Shipbuilder
alleging breach of contract in connection with the Company's
obligations regarding design of the drillships, the timely
delivery to the Shipbuilder of owner-furnished equipment, and
design change orders. In its claim, the Shipbuilder also
requested additional compensation for increases in the
drillships' steel weight. The amount of the Shipbuilder's claim
in excess of the contract price totals GBP133 million ($191
million). With the exception of a small portion of the steel-
weight claim, the Company believes that the claim is totally
without merit. The contracts provide that such claims are to be
resolved through arbitration in London.
Because the Company was concerned about the Shipbuilder's
financial viability and the satisfactory completion of the
drillships, in November 1999 the Company agreed to provide
additional funding to the Shipbuilder for completion of the two
drillships in exchange for certain assurances by the Shipbuilder
and its parent, Fred. Olsen Energy ASA (the "Funding Agreement").
Under the terms of the Funding Agreement, the Company released
two cash collateralized letters of credit, giving the Shipbuilder
access to $40 million of its own funds. In addition, the Company
agreed to advance to the Shipbuilder, without prejudice to any
issues of liability under the shipbuilding contracts, GBP57
million ($92.6 million) above the drillships' $315 million
contract price. The Company also agreed to advance amounts equal
to half of subsequent cost overruns until the Company's total
advances under the Funding Agreement reached GBP65 million
($104.7 million). As of October 31, 2000, the Company had
advanced GBP63.9 million ($103.1 million) under the Funding
Agreement, including GBP6.9 million ($10.5 million) in connection
with its share of cost overruns. The Funding Agreement provided
that if the maximum advances of GBP65 million were made by the
Company, the Shipbuilder's parent, Fred. Olsen Energy ASA, would
provide all additional funds necessary to keep the Shipbuilder
solvent and working in an expeditious and diligent manner and to
enable it to deliver the two completed drillships. In addition,
under certain circumstances, the Shipbuilder's parent will pay up
to GBP3 million ($4.3 million) of the Shipbuilder's warranty with
respect to the two drillships. The Glomar C.R. Luigs was
delivered on March 16, 2000. The status of the Glomar Jack Ryan
is discussed below.
The Funding Agreement did not settle any portion of the
Shipbuilder's claim of GBP133 million ($191 million). The
agreement provides that the Shipbuilder will repay to the Company
amounts advanced under the Funding Agreement to the extent the
amount of the advanced funds exceeds any arbitration award in
favor of the Shipbuilder and that the Company will pay the
Shipbuilder to the extent any arbitration award in favor of the
Shipbuilder exceeds the funds so advanced. In view of the
current financial condition of the Shipbuilder, collection from
the Shipbuilder of any amounts to which the Company may be
entitled under the Funding Agreement is doubtful.
On August 1, 2000, the Company delivered notice to the
Shipbuilder of its intent to take possession of the Glomar Jack
Ryan following the Shipbuilder's failure to timely deliver the
vessel in accordance with the construction contract as amended by
the Funding Agreement. Following the Shipbuilder's refusal to
<PAGE>
grant possession of the vessel to the Company, the Company filed
an application for a mandatory injunction with the London
Commercial Court requesting that the Shipbuilder be ordered to do
so. The Court granted the injunction on August 11, 2000, on the
condition that the Company post a bond in the amount of $100
million to secure the Shipbuilder's lien for the delivery
installment in the amount of $35.8 million, inclusive of $4.8
million for change orders and shipyard expenses, and the
unsecured balance of the Shipbuilder's previously disclosed
claims. The Company believes that the Shipbuilder defaulted on
its obligation to deliver the vessel by July 31, 2000, and that,
as a result, the delivery installment is not owed. The
Shipbuilder contested this, and the arbitration panel issued a
preliminary award requiring the payment to the Shipbuilder of
$31.8 million of the $35.8 million contractual delivery
installment. The Company appealed the arbitrator's award and has
provided for the deposit of $31.8 million in the Registry of the
Commercial Court in London pending a final determination of
whether, or to what extent, that amount will have to be paid to
the Shipbuilder. If this decision is upheld on appeal, or if the
decision is overturned on appeal but if it is ultimately
determined that the Shipbuilder was not in default, the net
effect will be that the Company will have provided for the
payment of the full contract price of $315 million plus the cost
of certain agreed change orders and related expenses. This price
excludes amounts totaling $103.1 million that the Company has
advanced under the Funding Agreement. The Company's liability
for the previously disclosed claims and Company advances under
the Funding Agreement will be subject to determination in
arbitration proceedings that are currently underway in London.
In the third quarter of 2000, the Glomar Jack Ryan was moved to a
shipyard in Galveston, Texas, for final completion and
commissioning. As of November 9, 2000, the ship was undergoing
sea trials.
The Company is seeking to resolve a dispute with Sedco Forex
Offshore ("Sedco") with respect to a bareboat charter agreement
for the drilling rig, Glomar Grand Banks. The Company assumed
rights to the bareboat charter at the time it acquired ownership
of the rig in 1997. At issue are (i) the date of termination of
the charter, (ii) the condition of the rig upon its return to the
Company, and (iii) Sedco's liability to pay additional dayrate.
With regard to the first issue, the Company has contended that
the charter expired on January 20, 1998. The parties commenced
arbitration proceedings, and the arbitration panel ruled in favor
of the Company on that issue. With respect to the other issues,
the Company contends Sedco is responsible under the charter for
paying the cost of certain repairs to the rig and for paying a
market dayrate for the period following termination of the
charter and while the rig was in the shipyard for repairs prior
to its return to work for another customer. Sedco finished using
the rig for drilling in May 1998, at which time the rig entered a
shipyard to undergo the repairs at issue. The Company completed
the repairs in October 1998 and mobilized the rig to the east
coast of Canada, where it was operating from December 1998 to
July 2000. An arbitration hearing in respect of certain
preliminary legal issues was held in late May 2000. Full
evidentiary hearings began in September 2000, with additional
hearings scheduled in November 2000 and late 2001. Schlumberger
Limited, the parent of Sedco at the time the claims arose, has
issued a guaranty in favor of the Company in the amount of $140
million as security for any award ultimately handed down by the
arbitration tribunal.
The Company has recorded a noncurrent receivable from Sedco in
the amount of $58.5 million at September 30, 2000, consisting of
$35.3 million of costs incurred in connection with rig repairs for
which the Company contends Sedco is responsible and $23.2 million of
dayrate revenue recognized in
<PAGE>
1998 in connection with the arbitration ruling. The
total amount of the receivable from Sedco recorded at December
31, 1999 was $56.7 million.
The Company is involved in various lawsuits resulting from
personal injury and property damage. In the opinion of
management, resolution of these matters will not have a material
adverse effect on the Company's results of operations, financial
position, or cash flows.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Operating Results
Summary
Data relating to the Company's operations by business segment
follows:
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
% Increase % Increase
2000 1999 (Decrease) 2000 1999 (Decrease)
---- ---- -------- ---- ---- --------
($ in millions)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Contract drilling $156.9 $109.2 44% $417.2 $410.8 2%
Drilling management 114.8 60.1 91% 288.9 188.6 53%
Oil and gas 5.7 2.7 111% 13.5 5.1 165%
Less: Intersegment revenues (5.4) (3.4) 59% (12.2) (12.2) na
----- ----- ----- -----
$272.0 $168.6 61% $707.4 $592.3 19%
====== ====== ====== ======
Operating income:
Contract drilling $ 50.6 $ 20.9 142% $123.8 $135.3 (8%)
Drilling management 6.4 9.0 (29%) 19.5 7.1 175%
Oil and gas 3.4 .8 325% 7.8 .7 1014%
Restructure costs - - na (5.2) - na
Corporate expenses (5.8) (5.6) 4% (19.3) (18.3) 5%
----- ----- ----- -----
$ 54.6 $ 25.1 118% $126.6 $124.8 1%
====== ====== ====== ======
</TABLE>
Operating income increased by $29.5 million to $54.6 million for
the third quarter of 2000 from $25.1 million for the third
quarter of 1999 primarily due to increases in average rig
utilization and dayrates for contract drilling and the addition
to the fleet of the Glomar C.R. Luigs ultra-deepwater drillship
in April 2000.
Operating income increased by $1.8 million to $126.6 million for
the nine months ended September 30, 2000, from $124.8 million for
the nine months ended September 30, 1999. The increase was
attributable to higher income from drilling management services
and oil and gas, higher average rig utilization for contract
drilling, and the addition to the fleet of the Glomar C.R. Luigs,
partly offset by lower average dayrates for contract drilling.
Operating income for the nine months ended September 30, 2000,
included a one-time $5.2 million charge in connection with a
planned restructuring comprised of a workforce reduction and
consolidation of facilities.
Since the third quarter of 1999, the Company has seen continued
improvement in offshore drilling markets for jackup rigs in the
U.S. Gulf of Mexico and offshore West Africa. In the U.S. Gulf
of Mexico, the Company's average rig utilization rate was 100
percent for the nine months ended September 30, 2000, as compared
to an industry average of 78 percent for the region. From August
1999 to October 2000, spot market dayrates for premium jackups in
the U.S. Gulf of Mexico have increased about three-fold, on
average. In West Africa, where four of the Company's rigs were
cold-stacked at year-end 1999, the Company reactivated two rigs
in the first quarter of 2000, and a third rig reentered service
in the third quarter of 2000. In addition, the Glomar Robert F.
Bauer drillship, which had been cold-stacked in Peru since June
1999, returned to work offshore West Africa in April 2000. In
July 2000 the Glomar Labrador jackup commenced operations
offshore Trinidad, where the rig is currently contracted through
<PAGE>
November 2001. Prior to July, the rig had been idle in
Argentina for nearly a year. The Glomar Adriatic VI jackup,
however, completed operations under a high-dayrate, two-year
contract in the North Sea in July 2000 and resumed operations in
September 2000 at a rate that is $50,000 per day lower than the
previous contract.
While recovery in the North Sea rig market has lagged the
Company's other key regions, recent bid requests from North Sea
operators suggest that previously announced plans for increased
spending by major oil companies may be materializing. On October
10, 2000, the Company reactivated the Glomar Arctic III
semisubmersible drilling rig in the North Sea under a 540-day,
$25.1 million contract. In addition, the Company recently
committed to reactivate both the Glomar Arctic IV semisubmersible
in the North Sea and the Glomar Grand Banks semisubmersible
offshore Eastern Canada in February 2001. The Company believes
that improving international markets will allow it to reactivate
its remaining idle rig, the Glomar High Island III jackup, in the
first quarter of 2001.
On March 16, 2000, the Company took delivery of the Glomar C.R.
Luigs, the first of two newly constructed, dynamically-
positioned, ultra-deepwater drillships. The Glomar C.R. Luigs
entered service on April 21, 2000, for the first of two customers
under contracts totaling approximately three years. The Company's
other new-build, ultra-deepwater drillship, Glomar Jack Ryan, was
moved to a shipyard in Galveston, Texas, in the third quarter of
2000 for final completion and commissioning. The Company
estimates that the ship could be accepted by the customer and
begin earning dayrate in late November 2000.
The Company expects utilization in the fourth quarter of 2000 to
be slightly higher than the third quarter of 2000 with the
reactivation of the Glomar Arctic III in October and the
commencement of operations of the Glomar Jack Ryan in November.
At September 30, 2000, the Company had $867 million of contract
drilling backlog, which is expected to be realized as follows:
$156 million during the remainder of 2000, $353 million in 2001,
and $358 million in 2002 through 2003. Contract drilling backlog
at December 31, 1999 was $1.0 billion.
The Company's results of operations could be limited by its
ability to find and retain qualified personnel in a tightening
market for offshore labor. In recognition of this, effective June
1, 2000, the Company increased compensation levels for certain of
its offshore positions between five and ten percent.
Approximately 40 percent of the overall impact is expected to be
recoverable from customers under dayrate adjustment provisions of
certain contracts expiring from July 2002 to October 2003. The
Company believes that it has not experienced any adverse effect on
operations to date resulting from its ability to find or retain
qualified personnel and that its compensation levels are competitive
within the industry.
<PAGE>
Contract Drilling Operations
Data with respect to the Company's contract drilling operations
follows:
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
% Increase % Increase
2000 1999 (Decrease) 2000 1999 (Decrease)
---- ---- -------- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
Contract drilling revenues by area
(in millions): (1)
Gulf of Mexico $ 104.2 $ 40.9 155% $ 235.7 $ 140.7 68%
West Africa 21.8 24.7 (12%) 78.0 75.9 3%
North Sea 13.1 28.3 (54%) 51.0 108.6 (53%)
Other 17.8 15.3 16% 52.5 85.6 (39%)
------ ------ ------ ------
$ 156.9 $ 109.2 44% $ 417.2 $ 410.8 2%
====== ====== ====== ======
Average rig utilization (2) 85% 71% 82% 78%
Average dayrate $59,200 $53,600 $57,100 $61,600
----------------------
(1) Includes revenues earned from affiliates.
(2) Excludes the Glomar Beaufort Sea I concrete island drilling
system, a currently inactive, special-purpose mobile offshore
rig designed for arctic operations.
</TABLE>
Of the $47.7 million increase in contract drilling revenues for the
third quarter of 2000 as compared with the third quarter of 1999,
$21.8 million was attributable to an increase in average rig
utilization, $17.5 million was attributable to the addition to the
fleet of the Glomar C.R. Luigs drillship in April 2000, and $8.5
million was attributable to higher average dayrates, primarily for
jackup rigs in the U.S. Gulf of Mexico. The increase in average rig
utilization was attributable primarily to the U.S. Gulf of Mexico and
West Africa, partly offset by a decrease in the North Sea.
Of the $6.4 million increase in contract drilling revenues for the
nine months ended September 30, 2000, as compared with the nine months
ended September 30, 1999, $29.8 million was attributable to the
addition to the fleet of the Glomar C.R. Luigs drillship in April
2000, and $17.8 million was attributable to an increase in average rig
utilization primarily in the U.S. Gulf of Mexico and West Africa.
These increases in contract drilling revenues were partly offset by a
$40.8 million decrease attributable to lower average dayrates. The
lower average dayrates were due in part to the expiration of higher
dayrate contracts signed when rig markets were tighter and
unanticipated rig downtime attributable primarily to repair work on
certain deepwater rigs and were partly offset by higher dayrates for
jackup rigs in the U.S. Gulf of Mexico.
In the third quarter of 2000, the Company averaged 100 percent
utilization for its rigs in the U.S. Gulf of Mexico, 84 percent
offshore West Africa, and 49 percent in the North Sea. This compares
with the Company's average rig utilization for the third quarter of
1999 of 96 percent in the U.S. Gulf of Mexico, 43 percent in West
Africa, and 76 percent in the North Sea.
For the nine months ended September 30, 2000, the Company averaged 100
percent utilization for its rigs in the U.S. Gulf of Mexico, 74
percent offshore West Africa, and 56 percent in the North Sea. This
compares with the Company's average rig utilization for the nine
months ended September 30, 1999, of 96 percent in the U.S. Gulf of
Mexico, 48 percent in West Africa, and 87 percent in the North Sea.
<PAGE>
The mobilization of rigs between the geographic areas shown in the
preceding table also affected each area's revenues over the periods
indicated. Specifically, the Company mobilized one drillship from
West Africa to offshore Peru in April 1999 and back to West Africa in
April 2000, one drillship from the U.S. Gulf of Mexico to West Africa
in May 1999 and back to the U.S. Gulf of Mexico in June 2000, two
jackups from West Africa to the U.S. Gulf of Mexico in October 1999,
and one jackup from the North Sea to the U.S. Gulf of Mexico in
January 2000.
The Company's operating profit margin for contract drilling operations
increased to 32 percent for the third quarter of 2000 from 19 percent
for the third quarter of 1999 due to increases in average rig
utilization and dayrates. Contract drilling operating expenses
increased by $18.0 million primarily due to higher depreciation and
other operating costs in connection with the addition of the Glomar
C.R. Luigs to the drilling rig fleet and higher operating costs due to
fewer cold-stacked rigs in the third quarter of 2000 as compared to
the third quarter of 1999. The Company had four cold-stacked rigs
during all of the third quarter of 2000 as compared to as many as
eleven cold-stacked rigs during the third quarter of 1999.
The Company's operating profit margin for contract drilling operations
decreased to 30 percent for the nine months ended September 30, 2000,
from 33 percent for the nine months ended September 30, 1999, due to
lower average dayrates, partly offset by an increase in average rig
utilization. Contract drilling operating expenses increased by $17.9
million primarily due to higher depreciation and other operating costs
in connection with the addition of the Glomar C.R. Luigs.
As of October 31, 2000, sixteen of the Company's rigs were located in
the U.S. Gulf of Mexico, eight were offshore West Africa, five were in
the North Sea, two were offshore Trinidad, and one was offshore the
east coast of Canada. As of October 31, 2000, one of the Company's
thirty-two active rigs, the Glomar High Island III jackup offshore
West Africa, was without a contract or commitment.
Drilling Management Services
Drilling management services revenues increased by $54.7 million to
$114.8 million in the third quarter of 2000 from $60.1 million in the
third quarter of 1999. The increase in revenues consisted of a $45.7
million increase attributable to an increase in the number of turnkey
projects and a $17.7 million increase attributable to daywork and
other revenues, partly offset by an $8.7 million decrease attributable
to lower average revenues per turnkey project. The Company completed
37 turnkey projects in the third quarter of 2000 (26 wells drilled and
11 well completions) as compared to 17 turnkey projects in the third
quarter of 1999 (15 wells drilled and 2 well completions).
Drilling management services revenues increased by $100.3 million to
$288.9 million for the nine months ended September 30, 2000, from
$188.6 million for the nine months ended September 30, 1999. The
increase in revenues consisted of an $84.6 million increase
attributable to an increase in the number of turnkey projects, a $10.9
million increase attributable to daywork and other revenues, and a
$4.8 million increase attributable to higher average revenues per
turnkey project. The Company completed 96 turnkey projects for the
nine months ended September 30, 2000 (75 wells drilled and 21 well
completions), as compared to 61 turnkey projects for the nine months
ended September 30, 1999 (52 wells drilled and 9 well completions).
Operating income decreased by $2.6 million to $6.4 million in the
third quarter of 2000 from $9.0 million in the third quarter of 1999.
The decrease was due in part to $2.3 million of estimated losses
<PAGE>
recognized in the third quarter of 2000 related to two wells in
progress at September 30, 2000, that were expected to be completed at
a loss compared to none for the third quarter of 1999.
Operating income increased by $12.4 million to $19.5 million for the
nine months ended September 30, 2000, from $7.1 million for the nine
months ended September 30, 1999. The improvement in drilling
management services operating results for the nine months ended
September 30, 2000, as compared to the prior-year period was due in
part to a decrease in the number of rigs under term contract to the
Company. During 1999 the Company was paying above-market rates for
the use of as many as sixteen rigs under term contracts signed in late
1997 and early 1998, when market rates were higher. The incremental
cost of these rigs above what they would have cost if contracted as
needed on the spot market was estimated to be $11.5 million for the
nine months ended September 30, 1999. By June 30, 1999, the Company
had substantially fulfilled all obligations related to rigs contracted
at above-market rates. Currently, the Company is contracting rigs as
needed on a well-by-well basis.
Other Income and Expense
General and administrative expenses increased to $5.5 million in the
third quarter of 2000 from $5.3 million in the third quarter of 1999.
General and administrative expenses increased to $17.7 million for the
nine months ended September 30, 2000, from $17.2 million for the nine
months ended September 30, 1999. The increases were due primarily to
higher compensation expense, partly offset by lower professional fees
and other expenses in connection with the Company's cost-cutting
program. The increase in compensation expense was attributable to
accrued expenses under a long-term, stock-based compensation plan,
which is based on Company performance and the market price of the
Company's common stock.
Interest expense increased to $15.5 million in the third quarter of
2000 from $13.8 million in the third quarter of 1999. Interest
expense increased to $49.6 million for the nine months ended September
30, 2000, from $40.8 million for the comparable prior-year period.
The increases were primarily due to higher debt incurred to finance
the construction of the Glomar C.R. Luigs and the Glomar Jack Ryan
drillships.
In connection with construction of the two drillships, the Company
capitalized $5.0 million of interest expense for the third quarter of
2000 as compared to $7.0 million for the third quarter of 1999, and
$22.8 million for the nine months ended September 30, 2000, as
compared to $17.0 million for the comparable prior-year period.
Interest income increased to $1.2 million in the third quarter of 2000
from $0.5 million in the third quarter of 1999. Interest income
increased to $2.7 million for the nine months ended September 30,
2000, from $2.0 million for the comparable prior-year period. The
increases were primarily due to higher average cash balances in the
third quarter of 2000 as compared to the third quarter of 1999.
The Company's effective income tax rate for financial reporting
purposes was approximately 29 percent for both the quarter and nine
months ended September 30, 2000. This compares to an effective rate
of 27 percent for the third quarter of 1999, 23 percent for the nine
months ended September 30, 1999, and the U.S. federal statutory rate
of 35 percent. The increase in the effective income tax rate was due
to an increase in U.S. earnings relative to earnings from the
Company's foreign markets. The Company's effective tax rate for a
period is estimated based on the Company's projected annual income and
relative amounts of U.S. and foreign income. Because of the
differences between U.S. and foreign tax rates, the
<PAGE>
Company's effective income tax rate can be expected to fluctuate from year
to year as the relative amounts of the Company's U.S. and foreign
earnings fluctuate.
In the first quarter of 2000, the Company began implementing a
restructuring designed to streamline its organization and improve
efficiency. The restructuring involves a workforce reduction of
approximately 89 positions, a consolidation of administrative offices
in Houston and Europe, and closure of a materials control facility in
Houston. The employee functions affected are primarily corporate
support in nature and include materials control, engineering,
accounting, and information technology, among others. Approximately 80
percent of the affected positions are located in Houston, and the
remaining 20 percent are located in Europe. The Company recorded a
$5.2 million pretax charge in the first quarter of 2000 in connection
with the restructuring, consisting of $4.3 million for employee
severance costs and $0.9 million for office and facility closures.
Cash payments for severance could be paid over various periods
generally ranging from six weeks to twelve months from the date of
termination, based on salary grade and length of service. As of
September 30, 2000, cash payments under the restructuring totaled $2.6
million, consisting of $2.4 million for employee severance and $0.2
million for facility closures. Payments contemplated under the
restructuring will be substantially completed by mid-2001. The
Company expects to record pretax savings of approximately $1.5 million
per quarter after the plan's implementation is completed in or about
the fourth quarter of 2000. Approximately 80 percent of the savings
is expected to be realized through lower contract drilling expenses,
and the remainder is expected to be realized through lower drilling
management and general and administrative expenses.
Liquidity and Capital Resources
In June 2000 the Company completed a private placement of Zero Coupon
Convertible Debentures due June 23, 2020, and received net proceeds of
$292.7 million after deduction for legal, accounting, and underwriting
fees. The Company used the proceeds, plus available cash, to pay off
outstanding commercial paper. Proceeds from issuances of commercial
paper were used primarily to finance construction of the Glomar C.R.
Luigs and Glomar Jack Ryan drillships, and for general corporate
purposes.
The convertible debentures were issued at a price of $499.60 per
debenture, which represents a yield to maturity of 3.5 percent per
annum to reach an accreted value at maturity of $1,000 per debenture.
The Company has the right to redeem the debentures in whole or in part
on or after June 23, 2005, at a price equal to the issuance price plus
accrued original issue discount through the date of redemption. Each
debenture is convertible into 12.2182 shares of Global Marine Inc.
common stock (7,330,920 total shares) at the option of the holder at
any time prior to maturity, unless previously redeemed. Holders have
the right to require the Company to repurchase the debentures on the
fifth, tenth, and fifteenth anniversaries of the issuance at a price
equal to the accreted value through the date of repurchase. The
Company may pay the repurchase price with either cash or shares of the
Company's common stock or a combination of cash and shares of common
stock.
In July 2000 the Company terminated its $150 million and $50 million
committed, unsecured revolving bank credit facilities. With the
termination of these two facilities, aggregate availability for
borrowings under the Company's remaining $240 million bank credit facility,
which expires December 2002, and the commercial paper program is $240
million. As of October 31, 2000, there were no borrowings under the
$240 million facility or the commercial paper program.
<PAGE>
For the nine months ended September 30, 2000, $292.7 million of cash
flow was provided from issuance of the Zero Coupon Convertible
Debentures (after deduction for legal, accounting, and underwriting
fees), $156.2 million was provided by operating activities, $12.9
million was provided from exercises of employee stock options, $1.8
million was provided from sales of properties and equipment, and $0.3
million was provided from maturities of marketable securities. From
these amounts, plus available cash, $349.8 million was used to reduce
long-term debt, $133.6 million was used for capital expenditures, and
$1.8 million was used for other purposes.
For the nine months ended September 30, 1999, $202.3 million of cash
flow was provided by operating activities, $59.9 million was provided
from the Company's bank revolving credit facilities and commercial
paper program (net of payments), $3.3 million was provided from
exercises of employee stock options, and $2.6 million was provided
from sales of properties and equipment. From these amounts, plus
available cash, $287.7 million was used for capital expenditures, and
$2.2 million was used for other purposes.
Capital expenditures for the full year 2000 are presently estimated to
be $193 million. This amount consists of $68 million for construction
of the Glomar Jack Ryan, $34 million for construction of the Glomar
C.R. Luigs, $21 million for planned refurbishments and upgrades to the
Glomar Arctic IV, $5 million for upgrades to the Glomar Adriatic VI,
$38 million for improvements to the remainder of the drilling fleet,
$24 million for capitalized interest, and $3 million for other
expenditures.
As of September 30, 2000, the Company had $62.0 million in cash and
cash equivalents, as compared to $83.3 million at December 31, 1999.
The Company believes it will be able to meet all of its current
obligations, including working capital requirements, capital
expenditures and debt service, from its cash flow from operations, its
cash and cash equivalents, and its existing bank credit facilities.
In December 1999, the staff of the Securities and Exchange Commission
issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue
Recognition in Financial Statements," which provides the staff's
interpretations of the application of generally accepted accounting
principles to revenue recognition. The Company is required to
implement SAB 101 no later than the fourth quarter of 2000. The
Company does not expect the implementation of SAB101 to have a material
effect on the Company's results of operations, financial position or
cash flows.
Forward-Looking Statements
Under the Private Securities Litigation Reform Act of 1995, companies
are provided a "safe harbor" for discussing their expectations
regarding future performance. We believe it is in the best interests
of our stockholders and the investment community to use these
provisions and provide such forward-looking information. We do so in
this report and other communications. Our forward-looking statements
include things such as our belief that we will not use common stock to
satisfy any future obligation to purchase outstanding Zero Coupon
Convertible Debentures; our expression of doubt regarding collection
from the Shipbuilder of any amounts to which we may be entitled under
the Funding Agreement; our estimate of when the Glomar Jack Ryan could
be accepted by the customer and begin earning dayrate under its
drilling contract; our belief that recent bid requests from North Sea
operators suggest that previously announced plans for increased
spending by major oil companies may be materializing; our belief that
improving international markets will allow us to reactivate our
remaining idle rig in the first quarter of 2001; our expectation that
utilization in the fourth quarter of 2000 will be slightly higher than
in the third quarter of 2000; our expectation as to
<PAGE>
when our contract drilling backlog will be realized; our belief that results
of operations could be limited by our ability to find and retain
qualified personnel in a tightening market for offshore labor, but
that approximately 40 percent of the overall impact will be
recoverable from customers under certain contract provisions; our
expectation that our effective income tax rate will fluctuate from
year to year; our expectation that we will record pretax savings of
approximately $1.5 million per quarter after our restructuring's
implementation is completed, and our expectation as to the expected
sources of the savings; our estimate and breakdown of 2000 capital
expenditures; our belief that we will be able to meet all of our
current obligations from cash flow from operations, cash and cash
equivalents, and our existing bank credit facilities; our expectation
that a purported antitrust class action lawsuit will not have a
material adverse effect on our business or financial position, results
of operations or cash flows; and other statements that are not
historical facts.
Our forward-looking statements speak only as of the date of this
report and are based on currently available industry, financial, and
economic data and our operating plans. They are also inherently
uncertain, and investors must recognize that events could turn out to
be materially different from our expectations.
Factors that could cause or contribute to such differences include,
but are not limited to, changes in the markets for oil and gas and for
offshore drilling services, including changes in demand for our
services which may result from changes in oil and gas operators'
drilling programs due to factors such as changing oil and gas prices,
a general economic slowdown or regional or worldwide recession, and
changes in oil and gas drilling technology; unanticipated costs or
delays putting the Glomar Jack Ryan or other rigs to work due to
things such as contract disputes, design and engineering problems, or
other mechanical problems; the uncertainty involved in dealing with
other parties and resolving disputed matters through arbitration,
litigation, or by other means; unanticipated changes in labor markets
due to things such as general economic trends; the need to make
accounting and other adjustments in connection with our restructuring
plan as we gather more information regarding the actual impact of our
current restructuring; changing tax laws and regulations, as well as
changing interpretations of such laws and regulations; and such other
risk factors as may be discussed in the Company's reports filed with
the U.S. Securities and Exchange Commission.
The Company disclaims any obligation or undertaking to disseminate any
updates or revisions to its statements, forward-looking or otherwise,
to reflect changes in the Company's expectations or any change in
events, conditions, or circumstances on which any such statements are
based.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
No material change from December 31, 1999.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in legal proceedings with Harland and Wolff
Shipbuilding and Heavy Industries Limited relating to construction of
the Glomar C.R. Luigs and the Glomar Jack Ryan, which are discussed in
Note 7, Contingencies, in Notes to Condensed Consolidated Financial
Statements in PART I, Item 1, of this Quarterly Report on Form 10-Q.
<PAGE>
The Company and a number of other participants in the offshore
contract drilling business in the Gulf of Mexico are defendants in a
purported antitrust class action lawsuit filed in the federal district
court in Galveston, Texas. The plaintiff alleges a conspiracy among
the defendants to depress wages and benefits paid to their offshore
employees. The plaintiff seeks an unspecified amount of treble
damages and other relief on behalf of himself and an alleged class of
offshore workers. While the Company vigorously denies these
allegations and does not expect that this matter will have a material
adverse effect on its business or financial position, results of
operations or cash flows, the Company cannot provide any assurance as
to its outcome.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
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 reports on Form 8-K during the
quarter ended September 30, 2000.
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: November 10, 2000 /s/ Douglas C. Stegall
-------------------------------------
Douglas C. Stegall
Vice President and Controller
(Duly Authorized Officer and Principal
Accounting Officer of the Registrant)
