UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
Commission File Number: 2-56600
Global Industries, Ltd.
(Exact name of registrant as specified in its charter)
Louisiana 72-1212563
(State or other jurisdiction of incorporation or organization)(I.R.S.
Employer Identification No.)
107 Global Circle
P.O. Box 31936, Lafayette, LA 70593-1936
(Address of principal executive offices) (Zip Code)
(318) 989-0000
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed since
last report)
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. x Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares of the Registrant's Common Stock
outstanding as of October 31, 1997 was 91,178,124.
Global Industries, Ltd.
Index - Form 10-Q
Part I
Item 1. Financial Statements - Unaudited
Independent Accountants' Report 3
Consolidated Statements of Operations 4
Consolidated Balance Sheets 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Part II
Item 1. Legal Proceedings 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 6. Exhibits and Reports on Form 8-K 17
Signature 18
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Shareholders of
Global Industries, Ltd.
We have reviewed the condensed consolidated financial statements
of Global Industries, Ltd. and subsidiaries, as listed in the
accompanying index, as of September 30, 1997 and for the three-
month and six-month periods ended September 30, 1997 and 1996.
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 of 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 such condensed consolidated
financial statements 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 of Global
Industries, Ltd. and subsidiaries as of March 31, 1997, 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 June 6, 1997 (June 24, 1997 as
to Note 13), 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 March 31, 1997 is fairly stated, in all
material respects, in relation to the consolidated balance sheet
from which it has been derived.
DELOITTE & TOUCHE LLP
October 31, 1997
New Orleans, Louisiana
Global Industries, Ltd.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
Quarter Ended Six Months Ended
September 30, September 30,
1997 1996 1997 1996
Revenues $108,772 $72,431 $171,948 $122,763
Cost of Revenues 70,915 50,647 113,252 88,626
-------- ------ ------- -------
Gross Profit 37,857 21,784 58,696 34,137
Equity in Net Earnings
(Loss) of
Unconsolidated Affiliate (471) -- (2,127) --
Selling, General and
Administrative
Expenses 6,448 3,594 10,695 6,564
-------- ------ ------ ------
Operating Income 30,938 18,190 45,874 27,573
-------- ------ ------ ------
Other Income (Expense):
Interest Expense (350) (382) (480) (453)
Other 597 69 2,112 206
-------- ------ ------ ------
247 (313) 1,632 (247)
-------- ------ -------- ------
Income Before Income Taxes 31,185 17,877 47,506 27,326
Provision for Income Taxes 11,850 5,360 18,052 8,166
-------- ------- -------- -------
Net Income $ 19,335 $12,517 $ 29,454 $19,160
======== ======= ======== =======
Weighted Average Common
Shares Outstanding 93,907,000 79,134,000 93,392,000 78,952,000
========== ========== ========== ==========
Net Income Per Share $ .21 $ .16 $ .32 $ .24
========== ========== ========== ==========
See Notes to Consolidated Financial Statements.
Global Industries, Ltd.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
September 30, March 31,
1997 1997
ASSETS
Current Assets:
Cash $ 10,614 $ 63,981
Escrowed funds 1,332 19,112
Receivables 106,373 51,762
Advances to unconsolidated affiliate 9,502 13,913
Prepaid expenses and other 7,331 2,874
--------- ----------
Total current assets 135,152 151,642
--------- ----------
Escrowed Funds 108 1,447
--------- ----------
Property and Equipment, net 389,298 243,915
--------- ----------
Other Assets:
Deferred charges, net 8,588 6,469
Investment in and advances to
unconsolidated affiliate 1,405 15,071
Other 3,924 4,143
--------- ----------
Total other assets 13,917 25,683
--------- ----------
Total $ 538,475 $ 422,687
========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $ 1,795 $ 2,266
Accounts payable 49,312 29,828
Accrued liabilities 17,795 9,453
Accrued profit-sharing 4,425 3,566
Insurance payable 2,843 2,802
--------- ----------
Total current liabilities 76,170 47,915
--------- ----------
Long-Term Debt 97,451 40,947
--------- ----------
Deferred Income Taxes 25,598 21,598
--------- ----------
Commitments and Contingencies
Shareholders' Equity:
Preferred stock -- --
Common stock, issued and outstanding,
91,156,074 and 90,556,750 shares,
respectively 912 906
Additional paid-in capital 202,440 201,331
Translation adjustment (3,531) --
Retained earnings 139,435 109,990
--------- ---------
Total shareholders' equity 339,256 312,227
--------- ---------
Total $ 538,475 $ 422,687
========= =========
See Notes to Consolidated Financial Statements.
Global Industries, Ltd.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Six Months Ended
September 30,
1997 1996
Cash Flows From Operating Activities:
Net income $29,454 $ 19,160
Adjustments to reconcile net income to
net cash provided
by (used in) operating activities:
Depreciation and amortization 13,219 8,233
Deferred income taxes 4,000 3,000
Equity in net (earnings) loss of
unconsolidated affiliate 2,134 --
Other (3) 12
Changes in operating assets and
liabilities (net of acquisitions):
Receivables (37,776) (10,820)
Prepaid expenses and other (3,534) 1,382
Accounts payable and accrued 18,222 8,867
liabilities --------- ---------
Net cash provided by (used in)
operating activities 25,716 29,834
--------- ---------
Cash Flows From Investing Activities:
Additions to property and equipment (net (63,148) (31,309)
of acquisitions)
Escrowed funds, bond proceeds 19,119 (20,535)
Acquisition of business, net of cash (103,805) (5,981)
acquired
Additions to deferred charges (3,918) (4,170)
Net repayment of advances to 15,943 --
unconsolidated affiliate
Other 142 91
--------- --------
Net cash (used in) investing (135,667) (61,904)
activities --------- --------
Cash Flows From Financing Activities:
Proceeds from sale of common stock 1,001 833
Net proceeds (repayment) of long-term 56,033 32,144
debt --------- --------
Net cash provided by (used in) 57,034 32,977
financing activities
Effect of Exchange Rate Changes on Cash (450) --
--------- --------
Cash:
Increase (Decrease) (53,367) 907
Beginning of period 63,981 5,430
--------- ---------
End of period $10,614 $ 6,337
========= =========
Supplemental Cash Flow Information:
Interest paid, net of amount capitalized $ 599 $ 393
Income taxes paid 6,184 2,572
See Notes to Consolidated Financial Statements.
Global Industries, Ltd.
Notes To Consolidated Financial Statements (Unaudited)
1. Basis of Presentation - The accompanying unaudited consolidated
financial statements include the accounts of Global Industries,
Ltd. and its wholly owned subsidiaries (the "Company").
Effective December 23, 1996, the Company acquired a 49% ownership
interest in CCC Fabricaciones y Construcciones, S.A. de C.V.
("CCC"), which is accounted for by the equity method.
In the opinion of management of the Company, all adjustments
(such adjustments consisting only of a normal recurring nature)
necessary for a fair presentation of the operating results for
the interim periods presented have been included in the unaudited
consolidated financial statements. Operating results for the
period ended September 30, 1997, are not necessarily indicative
of the results that may be expected for the year ending March 31,
1998. These financial statements should be read in conjunction
with the Company's audited consolidated financial statements and
related notes thereto included in the Company's Annual Report on
Form 10-K for the fiscal year ended March 31, 1997.
The accompanying consolidated financial statements have been
adjusted to reflect the two-for-one common stock split effected
in October 1997.
The financial statements required by Rule 10-01 of Regulation S-X
have been reviewed by independent public accountants as stated in
their report included herein.
2. Commitments and Contingencies - The Company is a party in legal
proceedings and potential claims arising in the ordinary course
of business. Management does not believe these matters will
materially effect the Company's consolidated financial
statements.
The Company has guaranteed certain indebtedness and commitments
of CCC approximating $31.5 million at September 30, 1997.
The Company estimates that the cost to complete capital
expenditure projects in progress at September 30, 1997
approximates $83 million.
3. Business Acquisition - On July 31, 1997, the Company completed
the acquisition of certain business operations and assets of Sub
Sea International, Inc. and certain of its subsidiaries. The
major assets acquired in the transaction include three
construction barges, four liftboats and one dive support vessel
based in the United States, four support vessels based in the
Middle East, and support vessels and ROVs based in the Far East
and Asia Pacific. The transaction was accounted for by the
purchase method and, accordingly, the acquisition cost of $104
million (consisting of the purchase price of $102 million, and
directly related acquisition costs of $2 million) was allocated
to the net assets acquired based on their estimated fair market
value. The results of operations of the acquired business
operations and assets are included in the accompanying 1997
financial statements since the date of acquisition.
The following unaudited pro forma income statement data for the
six months ended September 30, 1997 and 1996 reflects the effect
of the acquisition assuming it occurred effective as of the
beginning of each period presented:
Six Months Ended
September 30,
1997 1996
(in thousands, except per share data)
Revenues $207,304 $177,255
Net income 27,684 16,751
Net income per share 0.30 0.21
4. Subsequent Event - In November, 1997 the Company settled the
previously disclosed lawsuit of Aker Gulf Marine relating to the
construction of the Pioneer. The settlement costs will be
included in the cost of the vessel with no current charge to
earnings. The additional cost of the vessel is not expected to
have a significant impact on future results.
5. Recent Accounting Pronouncements - In February 1997, the
Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share"
("SFAS 128"), which changes the method of calculating earnings
per share ("EPS"). SFAS 128 requires the presentation of "basic"
EPS and "diluted" EPS on the face of the statement of operations.
Basic EPS is computed by dividing the net income available to
common shareholders by the weighted-average shares of common
stock outstanding. The calculation of diluted EPS is similar to
basic EPS except that the denominator includes dilutive common
stock equivalents such as stock options and warrants. The
statement is effective for financial statements for periods
ending after December 15, 1997. The Company will adopt SFAS 128
in the third quarter of fiscal 1998, as early adoption is not
permitted. When adopted, it will require restatement of prior
years' EPS. Had the provisions of SFAS 128 been in effect as of
September 30, 1997, the Company would have reported basic EPS of
$0.21 and diluted EPS of $0.21 for the three months ended
September 30, 1997.
In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130").
SFAS 130 requires that all items that are required to be
recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements.
This statement does not require a specific format for that
financial statement but requires that an entity display an amount
representing total comprehensive income for the period in that
financial statement. SFAS 130 requires that an entity classify
items of other comprehensive income by their nature in a
financial statement. For example, other comprehensive income may
include foreign currency items and unrealized gains and losses on
certain investments in debt and equity securities. In addition,
the accumulated balance of other comprehensive income must be
displayed separately from retained earnings and additional paid-
in capital in the equity section of a statement of financial
position. Reclassification of financial statements for earlier
periods, provided for comparative purposes, is required. The
Company has not determined the impact that the adoption of this
new accounting standard will have on its consolidated financial
statements. The Company will adopt this accounting standard
effective April 1, 1998, as required.
In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise
and Related Information" ("SFAS 131"), which will be effective
for the Company beginning April 1, 1998. SFAS 131 redefines how
operating segments are determined and requires disclosure of
certain financial and descriptive information about a Company's
operating segments. The Company has not yet completed its
analysis of which operating segments it will report on.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
General
The following commentary presents management's discussion and
analysis of the Company's financial condition and results of
operations. Certain of the statements included below, including
those regarding future financial performance or results or that
are not historical facts, are or contain "forward-looking"
information as that term is defined in the Securities Act of
1933, as amended. The words "expect," "believe," "anticipate,"
"project," "estimate," and similar expressions are intended to
identify forward-looking statements. The Company cautions
readers that any such statements are not guarantees of future
performance or events and such statements involve risks,
uncertainties and assumptions, including but not limited to
industry conditions, general economic conditions, competition,
ability of the Company to successfully manage its growth,
operating risks, risks of international operations, risks of
vessel construction and other factors discussed below and in the
Company's Annual Report on Form 10-K for the year ended March 31,
1997. Should one or more of these risks or uncertainties
materialize or should the underlying assumptions prove incorrect,
actual results and outcomes may differ materially from those
indicated in the forward-looking statements.
The following discussion should be read in conjunction with the
Company's unaudited consolidated financial statements for the
periods ended September 30, 1997 and 1996, included elsewhere in
this report and the Company's audited consolidated financial
statements and Management's Discussion and Analysis of Financial
Condition and Results of Operations included in the Company's
Annual Report on Form 10-K for the fiscal year ended March 31,
1997.
During fiscal 1997 the Company completed the following
acquisitions: Norman Offshore Pipelines, Inc., ("Norman"), a
pipeline construction company operating in the United States,
which included two shallow water pipelay vessels; Divcon
International Pty Ltd.'s ("Divcon") diving and remotely operated
vehicles ("ROVs") assets in Southeast Asia; and a 49% ownership
interest in a Mexican marine construction contractor, CCC
Fabricaciones y Construcciones, S.A. de C.V. ("CCC"), as well as
two 400 foot combination pipelay derrick barges, the Comanche and
the Shawnee (formerly the DB-21 and DB-l5), operating in West
Africa and in Mexico (under charter to CCC), respectively. The
Company's investment in CCC is accounted for under the equity
method.
During the first quarter of fiscal 1998, the Company acquired the
Seminole (formerly the GAL 900), a 440 foot long self-propelled
combination pipelay derrick barge, currently located in Sharjah,
United Arab Emirates. The purchase price of the Seminole, plus a
launch barge, was $21 million.
During the second quarter of fiscal 1998, the Company completed
the acquisition of certain business operations and assets of Sub
Sea International, Inc. and certain of its subsidiaries. The
$102 million purchase price was funded from available cash and
borrowings under the Company's existing credit line. The major
assets acquired in the transaction include three construction
barges, four liftboats and one dive support vessel based in the
United States, four support vessels based in the Middle East, and
support vessels and ROVs based in the Far East and Asia Pacific.
Although the Company has been expanding its international
operations, 73% of the Company's revenues in fiscal 1997 and 80%
of revenues in the first six months of fiscal 1998 were derived
from work performed in the Gulf of Mexico. The offshore marine
construction industry in the Gulf of Mexico is highly seasonal as
a result of weather conditions and the timing of capital
expenditures by oil and gas companies. Historically, a
substantial portion of the Company's services has been performed
during the period from June through November. As a result, a
disproportionate portion of the Company's revenues, gross profit
and net income is generally earned during the second (July
through September) and third (October through December) quarters
of its fiscal year. Because of seasonality, full year results
are not likely to be a direct multiple of any particular quarter
or combination of quarters. The following table documents the
seasonal nature of the Company's operations by presenting the
percentage of revenues, gross profit and net income contributed
by each fiscal quarter for the past three fiscal years.
Quarter Ended
June 30, Sept. 30, Dec. 31, March 31,
Revenues, three year average 22% 32% 25% 21%
Gross profit, three year average 21 38 25 16
Net income, three year average 20 40 25 15
The Company expanded its operations offshore West Africa during
the first half of fiscal 1996. Strong demand in this market
during the fourth quarters of fiscal 1996 and fiscal 1997
resulted in the fourth quarters of fiscal 1996 and fiscal 1997
making a significantly greater contribution to the year's
revenues, gross profit and net income than historically, which
has a significant impact on the three year averages shown above.
Results of Operations
The following table sets forth for the periods indicated the
Company's statements of operations expressed as a percentage of
revenues.
Quarter Ended Six Months Ended
September 30, September 30,
1997 1996 1997 1996
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of revenues (65.2) (69.9) (65.9) (72.2)
Gross profit 34.8 30.1 34.1 27.8
Equity in net
earnings (loss) of
unconsolidated affilite (0.5) -- (1.2) --
Selling, general and
administrative expenses (5.9) (5.0) (6.2) (5.3)
Interest expense (0.3) (0.5) (0.3) (0.4)
Other income 0.5 0.1 1.2 0.2
(expense), net
Income before income 28.7 24.7 27.6 22.3
taxes
Provision for income 10.9 (7.4) 10.5 (6.7)
taxes
Net income 17.8% 17.3% 17.1% 15.6%
The Company's results of operations reflect the level of offshore
construction activity in the Gulf of Mexico and West Africa for
the first half of fiscal 1997 and 1998, and in Asia Pacific for
the first half of fiscal 1998, and the Company's ability to win
jobs through competitive bidding and manage projects to
successful completion. The level of offshore construction
activity is principally determined by three factors: first, the
oil and gas industry's ability to economically justify placing
discoveries of oil and gas reserves on production; second, the
oil and gas industry's need to clear all structures from the
lease once the oil and gas reserves have been depleted; and
third, weather events such as major hurricanes.
Second Quarter Fiscal 1998 Compared to Second Quarter Fiscal 1997
Revenues. Revenues for the second quarter of fiscal 1998 of
$108.8 million were 50% higher than the $72.4 million recorded in
the second quarter of fiscal 1997, with strong contributions from
Gulf of Mexico pipelay, derrick, liftboat and diving services in
the second quarter as compared to the same period a year earlier,
and the addition of assets and operations from the Sub Sea
acquisition during the current quarter. These increases were
partially offset by the absence of the Hercules (which was
undergoing a major upgrade) during most of the second quarter of
fiscal 1998. Barge days employed were 924 in the second quarter
of fiscal 1998 compared with 575 days in the 1997 period, with
increases largely from increased activity in the Gulf of Mexico
and the charter of the Shawnee and Mohawk to CCC in Mexico.
Liftboat and DSV days of 2,608 in the most recent period were
higher than the 1,352 days during the year earlier period. Diver
days totaled 11,831 in the second quarter of fiscal 1998
compared with 4, 945 a year earlier. Increases in Liftboats and
DSV and Diver days were largely from increased Gulf of Mexico
activity and the addition of assets and operations from the Sub
Sea acquisition during the second quarter of fiscal 1998, as
compared to the same period a year earlier.
Depreciation and Amortization. Depreciation and amortization
expenses, including amortization of dry-docking costs, were $8.4
million in the second quarter of fiscal 1998 compared to $4.6
million a year earlier. The increase was principally
attributable to depreciation expense resulting from increased
utilization of the Company's larger construction barges (which
are depreciated on a units-of-production basis), increases in the
fleet through upgrades and acquisitions, and higher dry-dock
amortization amounts.
Gross Profit. Gross profit for the second quarter of fiscal 1998
of $37.9 million was 74% higher than the $21.8 million for the
same quarter a year earlier. The gross profit increase was
primarily attributable to increases in Gulf of Mexico pipelay,
derrick, liftboat and diving services, partially offset by
reduced gross profit from diving, ROV, and vessel services in the
Middle East and Asia Pacific. Gross profit as a percent of
contract revenues increased for the current period to 34.8% as
compared to 30.1% for the same quarter a year earlier, primarily
due to higher activity in the Gulf of Mexico. Gross profit for
the current quarter was reduced by the effect of a $1.4 million
accrual for retirement and incentive compensation expense, as
compared to a $1.1 million provision in the same quarter last
year.
Selling, General and Administrative Expenses. Selling, general
and administrative expenses for the second quarter of fiscal 1998
were $6.4 million, 79% higher than the $3.6 million for the same
quarter a year earlier. The increase was primarily due to
selling, general and administrative expenses relating to the
operations in Southeast Asia and the Middle East acquired in
December 1996 and July 1997. A provision for retirement and
incentive compensation plan expense of $2.0 million was recorded
in the second quarter of fiscal 1998, of which $0.6 million was
included in selling, general and administrative expenses and $1.4
million was included in cost of revenues. In the year earlier
comparable period a $1.6 million provision for such expense was
recorded, with $0.5 million included in selling, general and
administrative expenses and $1.1 million included in cost of
revenues.
Other Income (Expense). Interest expense, net of $1.0 million
of capitalized interest cost, was $0.4 million in the second
quarter compared to $0.4 million in the same quarter a year
earlier. Other income in the second quarter of fiscal 1998 of
$0.6 million was higher than the $0.1 million reported a year
earlier largely because the Company had more funds available for
investment.
Net Income. Net income for the second quarter of fiscal 1998 was
$19.3 million, an increase of 54% from $12.5 million in the same
quarter a year earlier. The Company's effective income tax rate
increased from 30% in the second quarter of fiscal 1997 to 38% in
the current quarter, reflecting the absence of the benefit of a
lower effective tax rate for the Company's international
operations which provided a smaller percentage of revenues during
the second quarter of fiscal 1998.
First Six Months of Fiscal 1998 Compared to First Six Months of
Fiscal 1997
Revenues. Revenues for the first six months of fiscal 1998 of
$171.9 million were 40% higher than the $122.8 million reported
for the same period a year earlier. The increase in revenues for
the six months largely resulted from strong contributions from
domestic pipelay, derrick, liftboat and diving services and the
addition of assets and operations from the Sub Sea acquisition
during the second quarter of fiscal 1998, partially offset by
lower revenues from West Africa as compared to the same period a
year earlier and the absence of the Hercules (which was
undergoing a major upgrade) during the first six months of fiscal
1998. Barge days employed during the first six months of fiscal
1998 improved to 1,368, compared to the 907 days employed in the
same period last year. This increase was largely due to the
increased Gulf of Mexico pipelay activity, and the charter of the
Shawnee and Mohawk to CCC in Mexico. Liftboat and DSV days
employed during the first six months of fiscal 1998 of 4,171
were significantly higher than the 2,672 days worked during the
same period last year. Diver days employed totaled 20,612 for the
first six months of fiscal 1998, up from 8,490 a year earlier.
Increases in Liftboat and DSV and Diver days were largely from
increased Gulf of Mexico activity and the addition of assets and
operations from the Sub Sea acquisition during the second quarter
of fiscal 1998, as compared to the same period a year earlier.
Depreciation and Amortization. Depreciation and amortization,
including amortization of dry-docking costs, for the first six
months of fiscal 1998 was $13.2 million compared with $8.1
million for the year earlier comparable period. The increase was
principally attributable to higher depreciation expense resulting
from increased utilization of the Company's larger construction
barges (which are depreciated on a units-of-production basis),
increases in the fleet through upgrades and acquisitions, and
higher dry-dock amortization amounts.
Gross Profit. For the first six months of fiscal 1998 the
Company had gross profit of $58.7 million compared with $34.1
million for the first six months of fiscal 1997. Gross profit as
a percent of revenues increased for the current six month period
to 34.1% as compared to 27.8% for the same period a year earlier,
primarily due to higher activity in the Gulf of Mexico. Gross
profit for the first six months of fiscal 1998 was reduced by the
effect of a $2.3 million accrual for retirement and incentive
compensation expense, as compared to a $1.3 million provision in
the same period last year.
Selling, General and Administrative Expenses. Selling, general
and administrative expenses for the first six months of fiscal
1998 totaled $10.7 million compared with $6.6 million for the
same period a year earlier. The increase was primarily due to
Selling, general and administrative expenses relating to the
operations in Southeast Asia and the Middle East acquired in
December 1996 and July 1997. A provision for retirement and
incentive compensation plan expense of $3.2 million recorded for
the fiscal 1998 six-month period compared with $1.9 million for
the same period in the prior comparable fiscal year. Of the
provisions, $0.9 million in the fiscal 1998 six-month period and
$0.6 million for the prior period were included in the selling,
general, and administrative expenses and $2.3 million and $1.3
million, respectively, were included in cost of revenues.
Other Income (Expense). Interest expense, net of $1.6 million
of capitalized interest cost, was $0.5 million in the fiscal 1998
six-month period compared to $0.5 million in the same period a
year earlier. Other income in the fiscal 1998 six-month period
of $2.1 million was higher than the $0.2 million reported a year
earlier largely because the Company had more funds available for
investment.
Net Income. Net income for the first six months of fiscal 1998
was $29.5 million, up 54% from $19.2 million in the same period a
year earlier. The Company's effective income tax rate for the
current period was 38%, compared to 30% for the same period a
year earlier, reflecting the loss of a benefit of a lower
effective tax rate for the Company's international operations.
Liquidity and Capital Resources
The Company's operations generated cash flow of $25.7 million
during the first six months of fiscal 1998. Cash from operations,
together with available cash and funds provided by financing
activities, funded net investing activities of $135.7 million.
Investing activities consisted principally of the Sub Sea
acquisition, capital expenditures, dry-docking costs and
reimbursement of funds advanced to CCC. Working capital decreased
$44.7 million during the first six months of fiscal 1998 from
$103.7 million at March 31, 1997 to $59.0 million at September
30, 1997.
Capital expenditures during the first six months aggregated
$168.0 million and included the acquisition of the Seminole
(previously the DLB 900) and the Sea Tiger (previously the Bulan
Malai), and continued construction of the upgrade of the
Hercules. In July 1997 the Company completed the acquisition of
certain assets and operations from Sub Sea International, Inc.
for a purchase price of $102.0 million. The cost of these
acquisitions was primarily funded by cash generated from
operations and borrowings of $63.0 million under the Company's
Credit Facility.
The Company estimates that the cost to complete capital
expenditure projects in progress at September 30, 1997
approximates $83.0 million.
Long-term debt outstanding at September 30, 1997 (including
current maturities), consists primarily of $40.9 million of Title
XI bonds and $57.0 drawn against the Company's revolving line of
credit. Included in this amount are $20.3 million of bonds which
the Company issued during August 1996 to finance the construction
of two liftboats, a launch barge and a cargo barge. The
Company's outstanding Title XI bonds mature in 2003, 2005, 2020
and 2022, carry interest rates of 9.15%, 8.75% , 8.30% , and
7.25% per annum, respectively, and require aggregate semi-annual
payments of $0.5 million (until January 1998, when aggregate semi-
annual payments will be $0.9 million), plus interest. The
agreements pursuant to which the Title XI bonds were issued
contain certain covenants, including the maintenance of minimum
working capital and net worth requirements, which, if not met,
result in additional covenants that restrict the operations of
the Company and its ability to pay cash dividends. The Company
is currently in compliance with these covenants. The proceeds of
the 1996 Title XI bonds were placed in escrow pending completion
and delivery of the four vessels. During August 1997 the final
vessel was completed and delivered and the funds were released
from escrow.
The Company maintains an $85.0 million revolving line of credit
("Loan Agreement") with a syndicate of commercial banks. The
revolving credit facility of the Loan Agreement is available
until June 30, 2000, at which time the amount available is
reduced to zero over two years. Borrowings under the facility
are unsecured, bear interest at fluctuating rates, and are
payable on July 30, 2002. Continuing access to the revolving
line of credit is conditioned upon the Company remaining in
compliance with the covenants of the Loan Agreement, including
the maintenance of certain financial ratios. At September 30,
1997, $57.0 million was outstanding under the Loan Agreement and
the Company was in compliance with the covenants contained
therein. The Company is currently negotiating to increase its
line of credit by $40 million but there can be no assurance that
such additional amount will become available.
The Company is constructing a deepwater support facility and
pipebase near Carlyss, Louisiana. The deepwater facility is
expected to replace the Company's existing facilities in Houma
and Amelia, Louisiana. The facility is expected to take two years
to complete and cost approximately $36 million, approximately $28
million of which is expected to be financed with 30-year, tax-
exempt revenue bonds issued by the Lake Charles Harbor and
Terminal District.
Funds available under the Company's credit facility, combined
with available cash, and cash generated from operations, are
expected to provide sufficient funds for the Company's
operations, scheduled debt retirement, planned capital
expenditures, and working capital needs for the foreseeable
future.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in various routine legal proceedings
primarily involving claims for personal injury under the General
Maritime Laws of the United States and Jones Act as a result of
alleged negligence. The Company believes that the outcome of all
such proceedings, even if determined adversely, would not have a
material adverse effect on its consolidated financial statements.
In November, 1997 the Company settled the previously disclosed
lawsuit of Aker Gulf Marine in the U.S. District Court, Western
District of Louisiana, Lafayette Division relating to the
construction of the Pioneer. The settlement costs will be
included in the cost of the vessel with no current charge to
earnings. The additional cost of the vessel is not expected to
have a significant impact on future results.
Item 4. Submission of Matters to a Vote of Security Holders
The 1997 Annual Meeting of Shareholders of the Company was held
on August 6, 1997. At such meeting, each of the following
persons listed below, all of whom were incumbent directors, were
elected to the Board of Directors of the Company for a term
ending at the Company's 1998 Annual Meeting of Shareholders. The
number of votes cast with respect to the election of each such
person is set forth opposite such person's name.
Name of Director Number of Votes Cast
Broker
For Withhold Non-Vote Abstain
---------- -------- -------- -------
William J. Dore' 41,471,682 58,538 0 0
Michael J. 41,519,856 10,364 0 0
Pollock
James C. Day 41,519,856 10,364 0 0
Edward P. 41,519,556 10,664 0 0
Djerejian
Myron J. 41,519,588 10,632 0 0
Moreau
At the 1997 Annual Meeting of Shareholders, the Company's
shareholders voted for (1) an amendment to the Company's Employee
Stock Purchase Plan which added a second enrollment period each
year. The number of votes cast with respect to the amendment is
set forth below:
Number of Votes Cast
Broker
For Against Abstain Withhold Non-Vote
---------- ------- ------- -------- --------
Amendment to 40,435,037 104,402 40,047 0 950,734
Employee
Stock
Purchase
Plan
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
No. 15.1, Letter re: unaudited interim financial
information.
No. 27.1, Financial Data Schedules.
(b) Reports on Form 8-K -
Current report on Form 8-K filed August 8, 1997, and
amended by current report on
form 8-K/A filed October 13, 1997 relating to Acquisition
of Assets from Sub Sea International, Inc.
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 INDUSTRIES, LTD.
By: /s/ MICHAEL J. POLLOCK
___________________________________________
Michael J. Pollock
Vice President, Chief Financial Officer
(Principal Financial and Accounting Officer)
November 13, 1997
EXHIBIT 15
November 10, 1997
Global Industries, Ltd.
107 Global Circle
Lafayette, Louisiana 70503
We have made a review, in accordance with standards established
by the American Institute of Certified Public Accountants, of the
unaudited interim financial information of Global Industries,
Ltd. and subsidiaries for the periods ended September 30, 1997
and 1996, as indicated in our report dated October 31, 1997;
because we did not perform an audit, we expressed no opinion on
that information.
We are aware that our report referred to above, which is included
in your Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997, is incorporated by reference in Registration
Statement Nos. 33-58048 and 33-89778 on Form S-8.
We also are aware that the aforementioned report, pursuant to
Rule 436(c) under the Securities Act of 1933, is not considered a
part of the Registration Statement prepared or certified by an
accountant or a report prepared or certified by an accountant
within the meaning of Sections 7 and 11 of that Act.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
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This schedule contains summary financial information extracted from Global
Industries, Ltd.'s financial statements for the six-months ended September 30,
1997 and is qualified in its entirety by reference to such 10-Q.
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