SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
Annual Report Pursuant To Section 13 or 15(d) of The Securities Exchange Act
of 1934
For the fiscal year ended _____________
X Transition Report Pursuant to Section 13 or 15(d) of the Securities Ex
change Act of 1934
For the Transition period from April 1, 1998 to December 31, 1998
Commission File Number 2-56600
Global Industries, Ltd.
(Exact name of registrant as specified in its Charter)
LOUISIANA 72-1212563
(State or other jurisdiction (I.R.S. Employer
of incorporation of Identification Number)
organization)
107 Global Circle 70596-1936
P.O. Box 61936, Lafayette, (Zip Code)
Louisiana
(Address of principal
executive offices)
Registrant's telephone number, including area code: (318) 989-0000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
None registered
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock ($0.01 par value)
(Title of Class)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES x NO
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
The aggregate market value of the voting stock held by non-
affiliates of the registrant as of March 5, 1999, was
$354,570,950 based on the last reported sales price of the Common
Stock on March 5, 1999, as reported on the NASDAQ\NMS.
The number of shares of the registrant's Common Stock
outstanding as of March 5, 1999, was 90,710,609.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement for the Annual
Meeting of Shareholders to be held on May 12, 1999, are
incorporated by reference into Part III hereof.
GLOBAL INDUSTRIES, LTD.
INDEX - FORM 10-K
PART I
Item 1. Business 3
Item 2. Properties 9
Item 3. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item (Unnumbered). Executive Officers of the Registrant 13
PART II
Item 5. Market for the Registrant's Common Equity and
Related Shareholder Matters 15
Item 6. Selected Financial Data 16
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 17
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk 29
Item 8. Financial Statements and Supplementary Data 30
Global Industries, Ltd. and Consolidated
Subsidiaries:
Independent Auditors' Report 30
Consolidated Balance Sheets - December 31,
1998 and March 31, 1998 31
Consolidated Statements of Operations - Nine
Months Ended December 31,1998 and Years Ended
March 31, 1998 and 1997 33
Consolidated Statements of Shareholders'
Equity - Nine Months Ended December 31, 1998
and Years Ended March 31, 1998 and 1997 33
Consolidated Statements of Cash Flows - Nine
Months Ended December 31,1998 and Years
Ended March 31, 1998 and 1997 34
Consolidated Statements of Comprehensive
Income - Nine Months Ended December 31,1998
and Years Ended March 31, 1998 and 1997 35
Notes to Consolidated Financial Statements 36
Item 9. Changes In and Disagreements With Accountants
on Accounting and Financial Disclosure 55
PART III
Item 10. Directors and Executive Officers of the
Registrant 55
Item 11. Executive Compensation 55
Item 12. Security Ownership of Certain Beneficial
Owners and Management 55
Item 13. Certain Relationships and Related Transactions 55
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 56
Signatures 61
PART I
ITEM 1. BUSINESS
Global Industries, Ltd. provides construction services,
including pipeline construction, platform installation and
removal, diving services, and construction support to the
offshore oil and gas industry in the United States Gulf of Mexico
(the "Gulf of Mexico") and in select international areas. Unless
the context indicates otherwise, all references to the "Company"
or "Global" refer to Global Industries, Ltd. and its
subsidiaries. Effective December 31, 1998, the Company changed
its fiscal year-end to December 31 of each year. As a result,
this report covers the transition period of April 1, 1998 though
December 31, 1998.
The Company began as a provider of diving services to the
offshore oil and gas industry 25 years ago and has used selective
acquisitions, new construction, and upgrades to expand its
operations and assets. The Company has the largest number of
offshore construction vessels currently available in the Gulf of
Mexico and its worldwide fleet includes 23 barges that have
various combinations of pipelay, pipebury, and derrick
capabilities. The Company's fleet currently includes 67 manned
vessels that were available for service at the beginning of the
fiscal nine months ended December 31, 1998 and two vessels
purchased during the nine months ended December 31, 1998.
In April 1998, the Company added to its fleet with the
acquisition of the pipelay/derrick barges DLB 332 (Teknik
Perdana) and DLB 264 (Teknik Padu) from TL Marine Sdn. Bhd.
These two vessels are currently based in Asia Pacific. The
purchase price was $47.3 million and was funded from the
Company's bank line of credit. The DLB 332 is 352 feet by 100
feet, has an 800 ton lift capacity, and can be outfitted to lay
up to 60-inch diameter pipe. The DLB 264 is 400 feet by 100
feet, has an 1,100 ton lift capacity, and is capable of laying up
to 60-inch diameter pipe.
In July 1998, the Company's barge Hercules completed its
conversion to a dynamically positioned pipelay/heavy-lift barge
and returned to service to begin its first conventional pipelay
project. The Company has delayed the second phase of the upgrade
of the Hercules, the installation of a reel on the barge to
enable it to install offshore pipelines using the reel method,
until the fourth quarter of year ending December 31, 1999. The
estimated total cost of the Hercules upgrades is expected to be
approximately $119 million of which $113 million has been spent.
During the nine months ended December 31, 1998 the Company
continued construction of a deepwater support facility and
pipebase on 625 acres near Carlyss, Louisiana and adjacent to the
Calcasieu Ship Channel ("Carlyss Facility"). The Company plans
to replace its existing facilities in Houma and Amelia, Louisiana
with the Carlyss facility. Certain of the Company's
administrative functions will also relocate from its Lafayette,
Louisiana and Houston, Texas offices. When completed, the
Carlyss Facility will include a pipe assembly rack used for
welding and assembly of pipe for spooling onto the Chickasaw and
the Hercules, a barge slip dedicated to pipe spooling operations,
and a large general purpose barge slip. The facility will also
include office buildings, mechanics' shops, and storage
facilities. Estimated completion is in the third quarter of the
year ending December 31, 1999, at a total cost of approximately
$37 million, $28 million of which has been financed with Port
Improvement Revenue Bonds.
Global has a 49% ownership interest in CCC Fabricaciones y
Construcciones, S.A. de C.V. ("CCC") and charters vessels and other
equipment to CCC.
DESCRIPTION OF OPERATIONS
The Company is a leading offshore construction company
offering a comprehensive and integrated range of marine
construction and support services in the Gulf of Mexico, West
Africa, Asia Pacific, Latin America, and the Middle East. These
services include pipeline construction, platform installation and
removal, subsea construction, diving services, and deep-water
remote intervention.
The Company is equipped to provide services from shallow
water depths to over 8,000 feet of water. As exploration
companies have made considerable commitments and expenditures for
production in water depths over 1,000 feet, the Company has
invested in vessels, equipment, technology, and skills to
increase its abilities to provide services in the growing
deepwater market.
For financial information regarding the Company's operating
segments and the geographic areas in which they operate, see Note
8 of the Notes to Consolidated Financial Statements included
elsewhere in this Annual Report.
Offshore Construction
Offshore construction services performed by the Company
include pipelay, derrick, and related services. The Company is
capable of installing pipe by either the conventional or the reel
method of pipelaying. With the conventional method, 40-foot
segments of up to 60-inch diameter pipe are welded together,
coated, and tested on the deck of the pipelay barge. Each
segment is then connected to the prior segment and is submerged
in the water as the barge is moved forward 40 feet by its anchor
winches or tug boats. The process is then repeated. Using the
conventional pipelay method, the Company's barges can install
approximately 200 feet per hour of small diameter pipe in shallow
water under good weather conditions. Larger diameter pipe,
deeper water, and less favorable weather conditions all reduce
the speed of pipeline installation. The Company has vessels
located in each of the regions in which it currently operates
that are capable of installing pipe using the conventional
method.
With the reel method, the Company performs the welding,
testing, and coating onshore, and then spools the pipe onto a
pipe reel in one continuous length. Once the reel barge is in
position, the pipe is unspooled onto the ocean floor as the barge
is moved forward. The Company's dedicated reel pipelay barge,
the Chickasaw, is capable of spooling as much as 45 miles of 4.5-
inch diameter pipe or 3.8 miles of 12.75-inch diameter pipe in
one continuous length. Concrete coated pipe or pipe with a
diameter greater than 12.75 inches cannot be installed using the
Chickasaw's reel. Global has successfully operated the Chickasaw
since 1987. The Company believes that its reel method pipelay
capability often provides it with a competitive advantage because
of its faster installation rates and reduced labor expense when
compared to the conventional pipelay method. The Chickasaw can
install small diameter pipe in shallow water at rates averaging
2,000 feet per hour. The Chickasaw's faster lay rate is even
more significant during the winter months, when pipelay
operations frequently must be suspended because of adverse
weather conditions. The Chickasaw's faster installation rate
allows much more progress, or even completion of a project, with
fewer costly weather delays. The reel method reduces labor costs
by permitting much of the welding, x-raying, coating, and testing
to be accomplished onshore, where labor costs are generally lower
than comparable labor costs offshore. This method also enables
the Company to perform a substantial portion of its work onshore,
a more stable and safer work environment.
The planned second phase of the upgrade of the Hercules
includes addition of a reel system similar in design to the
Chickasaw's, but with much greater capacity. Current engineering
indicates that when completed (currently expected in the fourth
quarter of 1999), the Hercules reel will be capable of spooling
98 miles of 6.625-inch diameter pipe, 26 miles of 12.75-inch
diameter pipe, or 10 miles of 18-inch diameter pipe. The
Hercules is capable of providing conventional pipelay services in
water depths up to 8,000 feet.
For the Gulf of Mexico, The United States Department of
Interior Minerals Management Service ("MMS") requires the burial
of all offshore oil and gas pipelines greater than 8.75-inches in
diameter and located in water depths of 200 feet or less. The
Company believes it has the equipment and expertise necessary for
its customers to comply with MMS regulations. With the
acquisition of Norman Offshore Pipelines, Inc. in fiscal 1997,
the Company obtained the Mudbug technology and patents. The
Mudbug is used to simultaneously lay and bury pipelines, a
significant competitive advantage over the conventional method,
which requires a second trip over the pipeline with the barge to
bury the pipe. Regulations also require that these pipelines be
periodically inspected, repaired, and, if necessary, reburied.
Inspection requires extensive diving or ROV (remotely operated
vehicles) services, and rebury requires either hand-jetting by
divers or use of one of the Company's large jet sleds and a bury
barge.
All 23 of the Company's barges are equipped with cranes
designed to lift and place platforms, structures, or equipment
into position for installation. In addition, they can be used to
disassemble and remove platforms and prepare them for salvage or
refurbishment. The Hercules is equipped to make lifts up to
2,000 tons. The Company expects demand for Gulf of Mexico
abandonment services to increase as more platforms are removed
due to MMS regulations relating to the abandonment of wells and
removal of platforms. MMS regulations require platforms to be
promptly removed once production ceases and that the site be
restored to meet stringent standards. According to MMS, in March
1999 there were 3,991 platforms in U.S. waters of the Gulf of
Mexico.
Since 1995, Global and Halliburton Energy Services have had
an alliance to offer a total package of abandonment services to
oil and gas operators in the Gulf of Mexico. The alliance, named
Total Abandonment Services ("TAS"), performs all facets of the
abandonment process, including engineering, project management,
wellbore plug and abandonment, structure removal, and site
clearance.
Diving and Other Underwater Services
The Company performs diving operations in the Gulf of
Mexico, West Africa, Asia Pacific, Latin America, and the Middle
East. Demand for diving services covers the full life of an
offshore oil and gas property, including supporting exploration
and drilling, installing pipelines for production and
transportation, periodic inspection, repair and maintenance of
fixed platforms and pipelines and, ultimately, salvage and site
clearance. The Company's pipelay and derrick operations create
large captive demand for deepwater diving services, for which
divers are more highly compensated, and which enables the Company
to attract and retain qualified and experienced divers. To sup
port its diving operations in the Gulf of Mexico, the Company
operates a fleet of seven dive support vessels ("DSV"s).
For the Gulf of Mexico, the MMS requires that all offshore
structures have extensive and detailed inspections for corrosion,
metal thickness, and structural damage every five years. As the
age of the offshore infrastructure increases, the Company
anticipates that demand for inspections and repairs will
increase.
For diving projects involving long-duration deepwater and
ultra deep dives to 1,500 feet, the Company uses saturation
diving systems that maintain an environment for the divers at the
subsea water pressure at which they are working until the job is
completed. Saturation diving permits divers to make repeated
dives without decompressing, which reduces the time necessary to
complete the job and reduces the diver exposure to the risks
associated with frequent decompression. Two of the Company's
largest saturation diving systems are capable of maintaining an
environment simulating subsea water pressures to 1,500 feet. The
Company has recorded the deepest wet working dive in the Gulf of
Mexico at 1,075 feet.
The Company believes it has been a leader in the development
of many underwater welding techniques and has more qualified
diver/welders in the Gulf of Mexico than any of its competitors.
Welded repairs are made by two methods, dry hyperbaric welding
and wet welding. In dry hyperbaric welding, a customized,
watertight enclosure is engineered and fabricated to fit the
specific requirements of the structural joint or pipeline
requiring repairs. The enclosure is lowered into the water,
attached to the structure, and then the water is evacuated,
allowing divers to enter the chamber and to perform dry welding
repairs. Wet welding is accomplished while divers are in the
water, using specialized welding rods. Wet welding is less
costly because it eliminates the need to construct an expensive,
customized, single-use enclosure, but historically often resulted
in repairs of unacceptable quality. The Company believes it has
been a leader in improving wet welding techniques and it has
satisfied the technical specifications for customers' wet welded
repairs in water depths to 325 feet. The Company Research and
Development Center is an important part of a research and
development consortium led by the Company and the Colorado School
of Mines that conducts research on underwater welding techniques
for major offshore oil and gas operators. The Research and
Development Center includes a hyperbaric facility capable of
simulating wet or dry welding environments for water depths of up
to 1,200 feet so that welds can be performed and tested to assure
compliance with the customer's technical specifications.
The Company also owns and operates remotely operated
vehicles ("ROV"s) and performs these services in the Gulf of
Mexico, Asia Pacific, and the Middle East. In the Gulf of
Mexico, the Company owns and operates a Triton XL11 ROV that is
depth-rated to 8,250 feet.
Liftboats and other Offshore Support Vessels
Liftboats, also called "jackup boats", are self-propelled,
self-elevating work platforms complete with legs, cranes, and
living accommodations. Once on location, a liftboat
hydraulically lowers its legs until they are seated on the ocean
floor and then "jacks up" until the work platform is elevated
above the wave action. Once positioned, the stability, open deck
area, crane capacity, and relatively low costs of operation make
liftboats ideal work platforms for a wide range of offshore
support services. In addition, the capability to reposition at a
work site, or to move to another location within a short time
adds to their versatility. While the Company continues to time
charter the liftboats to the offshore service industry, it is
also using the liftboats in its pipeline construction and repair,
platform installation, inspection, maintenance, removal, and
diving services. Currently, the Company operates liftboats only
in the Gulf of Mexico. The Company has temporarily postponed the
previously announced plans for the construction of a new liftboat
until the economics of the industry improve.
In the fourth quarter of the year ended March 31, 1998,
Global's liftboat Kingfish became partially submerged during
rough weather in the Gulf of Mexico. The Company salvaged and
repaired the vessel and it returned to service in October 1998.
Global's Pioneer is a SWATH (Small Waterplane Area Twin
Hull) vessel that provides support services in water depths to
8,000 feet. Use of the Pioneer design reduces weather
sensitivity, allowing the vessel to continue operating in up to
12-foot seas and remain on site in up to 20-foot seas. The
vessel is able to install, maintain, and service subsea
completions, has saturation diving capabilities, and is equipped
for abandonment operations, pipeline installation support, and
other services beyond the capabilities of conventional DSVs. The
Pioneer's current base is the Gulf of Mexico.
The Company also operates other offshore support vessels
("OSV"s) internationally to support its offshore construction
services and also time charters them to the offshore service
industry.
Customers
The Company's customers are primarily oil and gas producers
and pipeline companies. During the nine months ended December
31, 1998, the Company provided offshore marine construction
services to approximately 156 customers. The Company's revenues
are not dependent on any one customer. Its largest single
customer in any one of the last three fiscal periods accounted
for 21% of revenues. However, the level of construction services
required by any particular customer depends on the size of that
customer's capital expenditure budget devoted to construction
plans in a particular year. Consequently, customers that account
for a significant portion of revenues in one fiscal year may
represent an immaterial portion of revenues in subsequent fiscal
years. The Company's contracts are typically of short duration,
being completed in one to five months.
Contracts for work in the Gulf of Mexico are typically
awarded on a competitive bid basis with customers usually
requesting bids on projects one to three months prior to
commencement. However, for projects in water depths greater than
1,000 feet, particularly subsea development projects and
"turnkey" projects (where the Company is responsible for the
project from engineering through hook-up), and for projects in
international areas, the elapsed time from bid request to
commencement of work may exceed one year. The Company's
marketing staff contacts offshore operators known to have
projects scheduled to insure that the Company has an opportunity
to bid for the projects. Most contracts are awarded on a fixed-
price basis, but the Company also performs work on a cost-plus or
day-rate basis, or on a combination of such bases. The Company
attempts to qualify its contracts so it can recover the costs of
certain unexpected difficulties and the costs of weather related
delays during the winter months.
Competition
In each region of the world that the Company operates, the
offshore marine construction industry is highly competitive with
many and different competitors. As the number of jobs available
declines because of decreased capital expenditures of the oil and
gas companies due to decreased oil and gas prices, the impact of
competition on the Company increases. Price competition and
contract terms are the primary factors in determining which
qualified contractor is awarded a job. However, the ability to
deploy improved equipment and techniques, to attract and retain
skilled personnel, and to demonstrate a good safety record have
also been important competitive factors.
Competition for deepwater and ultra-deep water projects in
the Gulf of Mexico is limited primarily to the Company, J. Ray
McDermott, S.A., Heerema, and Allseas Marine Contractors, S.A.,
International. With increasing frequency, international
competitors bid and compete for projects in the Gulf of Mexico.
The Company's competitors for shallow water projects include many
smaller companies including Horizon Ofshore, Inc., Transcoastal
Marine Services and Torch, Inc. Some shallow water competitors
operate only one barge and compete based on price.
Backlog
As of February 28, 1999, the Company's backlog of
construction contracts supported by written agreements amounted
to approximately $105.8 million ($28.9 million for the U. S. Gulf
of Mexico and $76.9 million for international operations), compared to
the Company's backlog at March 31, 1998, of $158.3 million ($38.5
million for the U. S. Gulf of Mexico and $119.8 million for
international operations). The Company does not include in its
backlog amounts relating to vessel charter agreements, primarily
the charters to CCC (the Company's Mexican joint venture), or any
portion of contracts to be performed by CCC, an unconsolidated
subsidiary. Management expects substantially all of its backlog
to be performed within twelve months. The Company does not
consider its relative backlog amounts to be a reliable indicator
of future revenues.
Patents
The Company owns or is the licensee of a number of patents
in the United States and Great Britain. The Company relies on a
combination of patents and trade secrets to protect its
proprietary technologies. In the 1987 acquisition of Sea-Con
Services, Inc. pipelaying assets, the Company acquired the
patents to certain pipe burying technology and an exclusive
license to certain wet welding technology. Patents under which
the Company is a non-exclusive licensee protect certain features
of the Chickasaw, and the Company's portable reels. In the
fiscal 1997 acquisition of Norman Offshore Pipelines, Inc. the
Company acquired the patents to certain pipe burying technology,
called the Mudbug, which permits pipelay and bury completion in a
single pass. The licenses continue until the expiration of the
underlying patents, which will occur at various times to 2007.
In addition, the Company has developed certain proprietary
underwater welding techniques and materials.
The Company believes that its customer relationships,
reputation, technical knowledge, experience, and quality
equipment are more important to its competitive position than its
patents and licenses. The Company's business is not materially
dependent on any one or more of its licenses or patents, although
the loss of license or patent protection for the Company's reel
barge, its seaplow, or its pipeburying technology could have a
material adverse effect on the Company's competitive position.
Employees
The Company's work force varies based on the Company's
workload at any particular time. During the nine months ended
December 31, 1998, the number of Company employees ranged from a
low of 1,755 to a high of 2,006, and as of February 28, 1999, the
Company had 2,192 employees. None of the Company's employees are
covered by a collective bargaining agreement. The Company
believes that its relationship with its employees is
satisfactory. In addition, many workers are hired on a contract
basis and are available to the Company on short notice.
Seasonality
Each of the geographic areas in which the Company operates
have seasonal patterns that affect the Company's operating
patterns. The seasonal patterns are the results of weather
conditions and the timing of capital expenditures by oil and gas
companies. In the Gulf of Mexico, where the Company derived over
50% of its revenues in the last three fiscal periods, a
disproportionate amount of the Company's revenues, gross profit,
and net income has been earned in the interim periods that
include July through December.
Government Regulation and Environmental Matters
Many aspects of the offshore marine construction industry
are subject to extensive governmental regulation. In the United
States, the Company is subject to the jurisdiction of the United
States Coast Guard, the National Transportation Safety Board and
the Customs Service, as well as private industry organizations
such as the American Bureau of Shipping. The Coast Guard and the
National Transportation Safety Board set safety standards and are
authorized to investigate vessel accidents and recommend improved
safety standards, and the Customs Service is authorized to
inspect vessels at will.
The Company is required by various governmental and quasi-
governmental agencies to obtain certain permits, licenses, and
certificates with respect to its operations. The kinds of
permits, licenses, and certificates required in the operations of
the Company depend upon a number of factors. The Company
believes that it has obtained or can obtain all permits,
licenses, and certificates necessary to the conduct of its
business.
In addition, the Company depends on the demand for its
services from the oil and gas industry and, therefore, laws and
regulations, as well as changing taxes and policies relating to
the oil and gas industry affect the Company's business. In
particular, the exploration and development of oil and gas
properties located on the Outer Continental Shelf of the United
States is regulated primarily by the MMS.
The operations of the Company also are affected by numerous
federal, state, and local laws and regulations relating to
protection of the environment including, in the United States,
the Outer Continental Shelf Lands Act, the Federal Water
Pollution Control Act of 1972, and the Oil Pollution Act of 1990.
The technical requirements of these laws and regulations are
becoming increasingly complex and stringent, and compliance is
becoming increasingly difficult and expensive. However, the
Company does not believe that compliance with current
environmental laws and regulations is likely to have a material
adverse effect on the Company's business or financial statements.
Certain environmental laws provide for "strict liability" for
remediation of spills and releases of hazardous substances and
some provide liability for damages to natural resources or
threats to public health and safety. Sanctions for noncompliance
may include revocation of permits, corrective action orders,
administrative or civil penalties, and criminal prosecution. The
Company's compliance with these laws and regulations has entailed
certain changes in operating procedures and approximately
$200,000 in expenditures during the nine months ended December
31, 1998. It is possible that changes in the environmental laws
and enforcement policies thereunder, or claims for damages to
persons, property, natural resources, or the environment could
result in substantial costs and liabilities to the Company. The
Company's insurance policies provide liability coverage for
sudden and accidental occurrences of pollution and/or clean-up
and containment of the foregoing in amounts which the Company
believes are comparable to policy limits carried in the marine
construction industry.
Because the Company engages in certain activities that may
constitute "coastwise trade" within the meaning of federal
maritime regulations, it is also subject to regulation by the
United States Maritime Administration (MARAD), Coast Guard, and
Customs Services. Under these regulations, only vessels owned by
United States citizens that are built and registered under the
laws of the United States may engage in "coastwise trade."
Furthermore, the foregoing citizenship requirements must be met
in order for the Company to continue to qualify for financing
guaranteed by MARAD, which currently exists with respect to
certain of its vessels. Certain provisions of the Company's
Articles of Incorporation are intended to aid in compliance with
the foregoing requirements regarding ownership by persons other
than United States citizens.
ITEM 2. PROPERTIES
The Company owns a fleet of 23 construction barges, 22
liftboats, 24 DSVs and OSVs, and five other support vessels.
Twenty-two of the Company's construction barges are designed to
perform more than one type of construction project which enables
these combination barges to sustain a higher utilization rate. A
listing of the Company's significant vessels along with a brief
description of the capabilities of each is presented on page 12.
The Company's Hercules is a 400-foot barge with a 2,000-ton
crane capable of performing revolving lifts up to approximately
1,600 tons. In July 1998, the Hercules completed its conversion
to a dynamically-positioned pipelay/heavy-lift barge and returned
to service to begin its first conventional pipelay project. The
second phase of the upgrade of the Hercules, installation of a
reel on the barge to enable it to install offshore pipelines
using the reel method, is expected to begin in the fourth quarter
of the year ending December 31, 1999.
In addition to the dedicated pipelay reel on the Chickasaw,
which has a capacity ranging from 45 miles of 4.5-inch diameter
pipe to 3.8 miles of 12.75-inch diameter pipe, the Company owns
four portable pipelay reels, which can be mounted on the deck of
its barges for pipelay by the reel method or used as additional
capacity on the Chickasaw. The planned Hercules reel system is
similar in design to the Chickasaw's, but with much greater
capacity. Based upon current engineering, when completed, the
Hercules reel will be capable of spooling up to 98 miles of 6.625-
inch diameter pipe, 26 miles of 12.75-inch diameter pipe, or 10
miles of 18-inch pipe. The Company owns and operates two bury
plows, which are capable of burying pipe up to 18-inches in
diameter, and four jetting sleds, which are capable of burying
pipe up to 36 inches in diameter, and three Mudbugs, for burying
pipe simultaneous with the pipeline installation.
Global's Pioneer is a SWATH (Small Waterplane Area Twin
Hull) vessel that provides support services in water depths to
8,000 feet. Use of the Pioneer design reduces weather
sensitivity, allowing the vessel to continue operating in up to
12-foot seas and remain on site in up to 20-foot seas. The
vessel is able to install, maintain, and service subsea
completions, has saturation diving capabilities, and is equipped
for abandonment operations, pipeline installation support, and
other services beyond the capabilities of conventional DSVs. The
Pioneer's current base is the Gulf of Mexico.
The Company operates 22 liftboats. Liftboats are self-pro
pelled, self-elevating vessels, which can efficiently support
offshore construction and other services, including dive support
and salvage operations in water depths up to 180 feet.
The Company owns all of its barges and vessels, and seven
are subject to ship mortgages. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources." Under governmental
regulations, the Company's insurance policies, and certain of the
Company's financing arrangements, the Company is required to
maintain its barges and vessels in accordance with standards of
seaworthiness and safety set by government regulations or
classification organizations. The Company maintains its fleet to
the standards for seaworthiness, safety, and health set by the
American Bureau of Shipping.
The Company also owns 11 operational saturation diving
systems. One of the units is installed in the New Iberia
Research and Development Center and used to support welding
research as well as offshore operations. The Company's
saturation systems range in capacity from four to fourteen
divers. Two of the saturation systems are capable of supporting
dives as deep as 1,500 feet. Each saturation system consists of
a diving bell for transporting the divers to the sea floor and
pressurized living quarters. The systems have surface controls
for measuring and mixing the specialized gasses that the divers
breathe and connecting hatches for entering the diving bell and
providing meals and supplies to the divers.
In the normal course of its operations, the Company also
leases or charters other vessels, such as tugboats, cargo barges,
utility boats, and dive support vessels.
The Company owns 625 acres near Carlyss, Louisiana and is
constructing a deepwater support facility and pipebase. When
completed, the location will serve as the headquarters of the
Company's offshore construction operations. The facility will be
capable of accommodating the Company's deep-waterdraft vessels
and pipe spooling for the Chickasaw and the Hercules. The
Company plans to replace the existing facilities in Houma and
Amelia, Louisiana with the Carlyss Facility. Completion is
expected in the third quarter of the year ending December 31,
1999 at a total cost of approximately $37 million, $28 million of
which has been financed with Port Improvement Revenue Bonds.
The following table summarizes the Company's significant
existing facilities as of December 31, 1998:
LOCATION Principal Use Approximate
Vessel Type Square Feet Owned/Leased
or Acreage (Lease Expiration)
- -----------------------------------------------------------------------------
Lafayette LA Office/Corporate Hdqtrs 27,800 sq ft Owned
Lafayette LA (1) Office/Training/Storage 21,000 sq ft Leased (Dec. 2001)
Houston TX Office 26,113 sq ft Leased (Aug. 2003)
New Orleans LA Office 4,635 sq ft Leased (Aug. 2001)
Singapore Office/Workshop/Storage 46,920 sq ft Leased (Feb. 2000)
Sharjah, United Office/Shore base 42,475 sq ft Leased (2)
Arab Emirates
Western Australia Office/Workshop 15,048 sq ft Owned
Lagos, Nigeria Office 7,500 sq ft Leased (Jan. 2000)
Malaysia Office/Warehouse/Supply 4,474 sq ft Leased (Feb. 2000)
base
Carlyss LA Shore base (under 625 acres Owned
construction)
Houma LA Shore base 65 acres Owned
Port of Iberia LA Shore base 39 acres Owned
Amelia LA Shore base 33 acres Leased (Sep. 1999)
Batam Island, Shore base (under 42 acres Leased (2028)
Indonesia construction)
(1) Leased from the Company's principal shareholder, Mr.
William J. Dore'.
(2) Renewable annually.
Global Industries, Ltd.
Listing of Construction Barges and Swath Vessel
PIPELAY
DERRICK MAX MAX
MAX. PIPE WATER LIVING
LENGTH LIFT DIAMETER DEPTH YEAR QUARTER
VESSEL TYPE (FT) (TONS) (INCHES) (FT) ACQ- CAP-
UIRED ACITY
Construction Barges:
Seminole Pipelay/derrick 424 800 48.00 1,500 1997 220
Comanche Pipelay/derrick 400 1,000 48.00 1,500 1996 223
Shawnee(1) Pipelay/derrick 400 860 48.00 1,500 1996 272
Hercules(2) Pipelay/derrick 400 2,000 60.00 8,000 1995 191
Iroquois(1) Pipelay/derrick 400 250 60.00 1,000 1997 259
DLB 264 Pipelay/derrick 397 1,000 60.00 1,000 1998 220
DLB 332 Pipelay/derrick 351 750 60.00 1,000 1998 208
Cheyenne Pipelay/bury/ 350 800 36.00 1,500 1992 190
derrick
Arapaho(4) Derrick 350 800 -- -- 1992 100
Cherokee Pipelay/derrick 350 925 36.00 1,500 1990 183
Sara Maria(3) Derrick/accom- 350 550 -- -- 1996 100
modation
Mohawk(1) Pipelay/bury/ 320 600 48.00 700 1996 200
Seneca(1) Pipelay/bury 290 150 42.00 1,000 1997 126
Chickasaw Pipelay reel/ 275 160 12.75 6,000 1990 70
derrick
Delta I Pipelay/bury/ 270 25 14.00 200 1996 70
derrick
Tonkawa Derrick/bury 250 175 -- 400 1990 73
Sea Constructor Pipelay/bury/ 250 200 24.00 400 1987 75
derrick
Navajo Pipelay/derrick 240 150 10.00 600 1992 129
Sub Sea Pipelay/bury 240 150 16.00 150 1997 64
Constructor
G/P 37 Pipelay/bury/ 188 140 16.00 300 1981 58
derrick
Pipeliner 5 Pipelay/bury/ 180 25 14.00 200 1996 60
derrick
G/P 35 Pipelay/bury/ 164 100 16.00 200 1978 46
derrick
Mad II Pipelay/bury 135 45 22.00 50 1975 33
SWATH VESSELL:
Pioneer Multi-task 200 50 -- -- 1996 57
(1) Currently chartered to CCC.
(2) Currently being equipped for reel method pipelay.
Completion for reel method pipelay scheduled for the fourth
quarter of year ending December 31, 1999.
(3) Owned and operated by CCC.
(4) Formally the DB3.
ITEM 3. LEGAL PROCEEDINGS
The Company's operations are subject to the inherent risks
of offshore marine activity including accidents resulting in the
loss of life or property, environmental mishaps, mechanical
failures, and collisions. The Company insures against these
risks at levels consistent with industry standards. The Company
believes its insurance should protect it against, among other
things, the cost of replacing the total or constructive total
loss of its vessels. The Company also carries workers'
compensation, maritime employer's liability, general liability,
and other insurance customary in its business. All insurance is
carried at levels of coverage and deductibles that the Company
considers financially prudent.
The Company's services are provided in hazardous
environments where accidents involving catastrophic damage or
loss of life could result, and litigation arising from such an
event may result in the Company being named a defendant in
lawsuits asserting large claims. To date, the Company has only
been involved in one such catastrophic occurrence when a platform
owned by a customer exploded while the Company was doing
underwater construction work. The settlements related to the
accident totaled more than $23.0 million, but the Company's
uninsured expenditure on the settlements was insignificant.
Although there can be no assurance that the amount of insurance
carried by Global is sufficient to protect it fully in all
events, management believes that its insurance protection is
adequate for the Company's business operations. A successful
liability claim for which the Company is underinsured or
uninsured could have a material adverse effect on the Company.
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 business or financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM (Unnumbered). EXECUTIVE OFFICERS OF THE REGISTRANT
(Provided pursuant to General Instruction G)
All executive officers named below, in accordance with the
By-Laws, are elected annually and hold office until a successor
has been duly elected and qualified. The executive officers of
the Company as of March 1, 1999 follow:
Name Age Position
William J. Dore' 56 Chairman of the Board of Directors,
President and Chief Executive Officer
Peter S. Atkinson 51 Vice President, Chief Financial Officer
Robert P. Brenham 57 Vice President, Chief Administrative Officer
Wilmer J. Buckley 49 Vice President, Global Industries
Offshore, Human Resources
James J. Dore' 44 Vice President, Global Industries
Offshore, Diving and Special Services
R. Clay Etheridge 44 Vice President, Global Offshore
International, Operations
Lawrence C. McClure 43 Vice President, Global Industries
Offshore, Operations
Andrew L. Michel 56 Vice President, Global Industries
Offshore, Deepwater Technology
Mr. William J. Dore', the Company's founder, has been
Chairman of the Board of Directors, President, and Chief
Executive Officer since 1973. Mr. Dore' has over twenty-five
years of experience in the diving and marine construction
industry, is a past President of the Association of Diving
Contractors, and serves on the executive committee of the Board
of Directors of the National Ocean Industry Association. Mr.
Dore' also serves as a director for Noble Drilling Corporation.
Mr. Atkinson was named Vice President, Chief Financial
Officer when he joined the Company in September 1998. He
previously had been Director - Financial Planning with J. Ray
McDermott, S.A. Mr. Atkinson also served in various other
capacities at McDermott International, Inc. and J. Ray McDermott,
S.A. for 23 years. He has 32 years of experience in financial
and management accounting.
Mr. Brenham was named Vice President, Chief Administrative
Officer in January 1999. He joined the Company in July 1996, as
a result of the acquisition of Norman Offshore Pipelines, Inc.
and previously held the title of Director of Administrative
Services. Prior to joining Global, Mr. Brenham served as General
Manager with Norman Offshore for more than three years.
Mr. Buckley joined Global in February 1995 as Director of
Human Resources. He was promoted to Vice President of Human
Resources in April 1997. Prior to joining Global, Mr. Buckley
was Director of Human Resources for Offshore Pipelines, Inc.
(OPI). He has more than 20 years experience in human resources
and worked for nearly a decade in the Middle East and Southeast
Asia.
Mr. James Dore', with over eighteen years of service with the
Company, is Vice President, Global Industries Offshore - Diving
and Special Services. He has held a number of managerial
positions with responsibility for marketing, contracts and
estimating, and diving operations. Mr. Dore' was named Vice
President, Marketing in March 1993, Vice President, Special
Services in November 1994 and Vice President, Diving and Special
Services in February 1996. Mr. Dore' is the brother of Mr.
William J. Dore'.
Mr. Etheridge joined the Company in March of 1997 as Vice
President, Global Offshore International, Operations. He was
employed as Vice President of Marine Operations for Offshore
Pipelines, Inc. from July 1987 until OPI was purchased by J. Ray
McDermott S.A. at which time he became Vice President and General
Manager - Far East Division.
Mr. McClure joined the Company in January 1989 as Assistant
Operations Manager and was promoted to Manager of Estimating and
Engineering in February 1992. In February 1995 he was named Vice
President, Estimating and Engineering. Mr. McClure was named
Vice President, Offshore Construction, in February 1996. Mr.
McClure has over eighteen years of experience in the offshore
construction business.
Mr. Michel joined the Company as Vice President, Global
Industries Offshore, Deepwater Technology in December 1995 in
connection with the Company's acquisition of ROV Technologies,
Inc. Mr. Michel founded ROV Technologies in 1986 and served as
its President. Mr. Michel has 30 years of experience in
underwater electronics and remote intervention services.
PART II
ITEM 5.MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
The Company's Common Stock is traded on the Nasdaq National
Market System under the symbol "GLBL." The following table
presents for the periods indicated the high and low sales prices
per share of the Company's Common Stock (adjusted to give
retroactive effect for the two-for-one common stock split
effective August 28, 1996 and October 27, 1997).
Period High Low
April 1, 1996 - June 30, 1996 $ 8.500 $ 5.250
July 1, 1996 - September 30,1996 9.125 6.125
October 1, 1996 - December 31, 1996 10.375 7.625
January 1, 1997 - March 31, 1997 12.938 8.625
April 1, 1997 - June 30, 1997 $ 11.688 $ 8.938
July 1, 1997 - September 30, 1997 20.688 11.563
October 1, 1997 - December 31, 1997 23.500 13.000
January 1, 1998 - March 31, 1998 21.438 11.375
April 1, 1998 - June 30, 1998 $ 25.750 $ 15.375
July 1, 1998 - September 30, 1998 17.625 9.375
October 1, 1998 - December 31, 1998 11.875 4.719
As of March 5, 1999, there were approximately 1,042 holders
of record of Common Stock.
The Company has never paid cash dividends on its Common
Stock and does not intend to pay cash dividends in the
foreseeable future. The Company currently intends to retain
earnings, if any, for the future operation and growth of its
business. Certain of the Company's financing arrangements
restrict the payment of cash dividends under certain
circumstances. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and
Capital Resources."
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below for each of the
past five fiscal periods should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and
Results of Operations and the Consolidated Financial Statements
and Notes to Consolidated Financial Statements included elsewhere
in this Annual Report. In October 1998, the Company's Board of
Directors voted to change the Company's fiscal accounting year to
end on December 31. As a result, Global is reporting the nine-
month transition period ended December 31, 1998.
<TABLE>
<CAPTION>
Nine Months
Ended
December 31, Year Ended March 31,
------------------- ----------------------------------------
1998 1997(1) 1998(2) 1997 1996 1995
---- ------- ------- ---- ---- ----
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Revenues $342,201 $292,383 $379,901 $229,142 $148,376 $122,704
Gross profit 95,973 90,913 114,656 63,253 41,015 38,072
Net income 38,971 46,321 57,303 33,932 20,993 19,355
Net income per
share (3)(4)
Basic 0.43 0.50 0.63 0.44 0.28 0.28
Diluted 0.42 0.49 0.61 0.42 0.27 0.27
Weighted
average common
shares
outstanding (3)(4)
Basic 91,498 90,981 91,110 77,746 75,624 70,343
Diluted 93,808 93,682 93,872 80,747 76,751 70,923
Total assets(5) 730,871 611,110 625,367 422,687 202,526 160,228
Working
capital(5) 78,637 66,820 77,472 103,727 34,264 54,557
Long-term debt,
total(5) 210,797 137,889 146,993 43,213 22,192 22,822
</TABLE>
________________
(1) Unaudited.
(2) On July 31, 1997, the Company acquired certain business
operations and assets of Sub Sea International, Inc. and
certain of its subsidiaries. The results of operations of
the Sub Sea acquisition are included from the date of the
acquisition. See Note 13 of the Notes to Consolidated
Financial Statements.
(3) All amounts have been adjusted for all stock splits.
(4) The Company adopted SFAS 128 and restated prior years' net
income per share amounts as required. See Notes 1 and 7 of
the Notes to Consolidated Financial Statements.
(5) As of the end of the period.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion presents management's discussion
and analysis of the Company's financial condition and results of
operations and should be read in conjunction with the
Consolidated Financial Statements.
Certain of the statements included below and in other
portions of this Report, 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.
Factors that could cause actual results to differ from those
expected include, but are not limited to, dependence on the oil
and gas industry and industry conditions, general economic
conditions including interest rates and inflation, competition,
the ability of the Company to continue its acquisition strategy,
successfully manage its growth, and obtain funds to finance its
growth, operating risks, contract bidding risks, the use of
estimates for revenue recognition, risks of international
operations, risks of vessel construction such as cost overruns,
changes in government regulations, and disputes with construction
contractors, dependence on key personnel and the availability of
skilled workers during periods of strong demand, the impact of
regulatory and environmental laws, the ability to obtain
insurance, and other factors discussed below. Operating risks
include hazards such as vessel capsizing, sinking, grounding,
colliding, and sustaining damage in severe whether conditions.
These hazards can also cause personal injury, loss of life,
severe damage to and destruction of property and equipment,
pollution and environmental damage, and suspension of operations.
The risks inherent with international operations include
political, social, and economic instability, exchange rate
fluctuations, currency restrictions, nullification, modification,
or renegotiations of contracts, potential vessel seizure,
nationalization of assets, import-export quotas, and other forms
of public and governmental regulation. 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.
As a result of the Company's expansion into international
areas over the last five years and the timing of oil companies'
capital expenditures in those areas, revenues generated from each
of the Company's international areas increased during the nine
months ended December 31, 1998 compared to the same period of the
prior year. However, as a result of the prolonged worldwide oil
price weakness that began in mid-1997, the Company began
experiencing an overall decline in the demand for its services
and increased competition during the nine months ended December
31, 1998, as oil and gas companies began cutting back their
capital expenditures. Increased competition for available
projects, which resulted from the lower oil price conditions, the
greater contribution from international operations, which have
historically had lower margins, and increased interest expense as
a result of the Company's higher debt levels resulted in overall
lower net income in the same period.
Results of Operations
The following table sets forth, for the periods indicated,
statement of operations data expressed as a percentage of
revenues.
Nine Months Ended Year Ended
December 31, March 31,
----------------- -----------------
1998 1997 1998 1997
---- ---- ---- ----
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of revenues (72.0) (68.9) (69.8) (72.4)
------ ------ ------- ------
Gross profit 28.0 31.1 30.2 27.6
Equity in net earnings
(loss) of unconsolidated
affiliate (2.0) (0.3) (0.4) --
Selling, general and
administrative expenses (6.3) (5.8) (5.9) (6.6)
------ ------ ------- ------
Operating income 19.7 25.0 23.9 21.0
Interest expense (2.0) (0.5) (0.6) (0.6)
Other income, net (0.2) 1.0 0.9 0.7
Income before income
taxes 17.5 25.5 24.2 21.1
Provision for income (6.1) (9.7) (9.1) (6.3)
------- ------ ------- -------
Net income 11.4% 15.8% 15.1% 14.8%
======= ====== ======= =======
The Company's results of operations reflect the level of
offshore construction activity in the Gulf of Mexico and West
Africa, for all periods presented above, and the Company's
expansion through acquisitions in Asia Pacific and Latin America
in December 1996. In addition, the Company's results for periods ending
after July 1997 include the results of additional business
acquired in July 1997 from Subsea International, Inc. in the Gulf
of Mexico, Asia Pacific, and the Middle East. The results also
reflect the Company's ability to win jobs through competitive
bidding and manage awarded jobs 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.
Nine Months Ended December 31, 1998 Compared to Nine Months Ended
December 31, 1997 (see Note 1 of the Notes to Consolidated
Financial Statements included elsewhere in this annual report)
Revenues. Revenues for the nine months ended December 31, 1998
of $342.2 million were 17% higher than revenues for the nine
months ended December 31, 1997 of $292.4 million. The increase
in revenues resulted largely from increased international
activity and the Company's expansion in those areas, through
acquisitions. Recent acquisitions that contributed to increased
international revenues included (i) certain business operations
and assets of Sub Sea International, Inc. in the Gulf of Mexico,
Asia Pacific, and the Middle East in July 1997, (ii) the
construction barge Seminole acquired in June 1997, and (iii) the
construction barges DLB 332 and DLB 264 acquired in April 1998.
The West Africa region produced greater revenues during the nine
months ended December 31, 1998 compared to the same period a year
earlier as offshore construction projects resumed after a cycle
of low construction activity in the earlier period. The overall
increase in revenues was partially offset by decreased revenues
from operations in the Gulf of Mexico.
Gross Profit. For the nine months ended December 31, 1998, the
Company had gross profit of $96.0 million compared with $90.9
million for the nine months ended December 31, 1997. The 6%
increase was largely the result of increased West Africa and Asia
Pacific activity, and was partially offset by lower gross profit
from the Gulf of Mexico. Gross profit as a percentage of
revenues for the nine months ended December 31, 1998, was 28%
compared to the gross profit percentage earned for the nine
months ended December 31, 1997 of 31%. Lower margins in the Gulf
of Mexico, combined with the lower margins for work in Asia
Pacific and Middle East, contributed to the decline. Margins as
a percent of revenue in West Africa for the nine months ended
December 31, 1998, were higher than the nine months ended
December 31, 1997. Cost of revenues for the nine months ended
December 31, 1997 includes an accrual of $3.5 million for
retirement and incentive compensation expense. The Company did
not record a provision for retirement and incentive compensation
during the nine months ended December 31, 1998.
Selling, General, and Administrative Expenses. For the nine
months ended December 31, 1998, selling, general, and
administrative expenses of $21.7 million were 28% higher than the
$16.9 million reported during the nine months ended December 31,
1997. The increase was attributable to the expansion of the
Company's business and accrued severance costs and was partially
offset by salary reductions effected in October 1998. As a
percentage of revenues they remained at approximately 6%. During
the nine months ended December 31, 1997, the Company provided for
$5.0 million of retirement and incentive compensation plan
expenses with $1.6 million included in selling, general, and
administrative expenses. The Company did not record a provision
for retirement and incentive compensation during the nine months
ended December 31, 1998 because it does not anticipate making
such payments to employees for services during that period.
Depreciation and Amortization. Depreciation and amortization,
including amortization of drydocking costs, for the nine months
ended December 31, 1998 was $35.6 million compared to the $21.9
million recorded in the nine months ended December 31, 1997. The
63% increase was principally attributable to increased employment
of the upgraded Hercules in the Gulf of Mexico and employment of
the Seminole, DLB 332, and DLB 264 in Asia Pacific, each of which
are depreciated on a units-of-production basis. A full nine
months of depreciation on assets acquired from Subsea in July
1997 and higher amounts of drydock amortization also contributed
to the increase. Lower employment of other vessels that are also
depreciated on a units-of-production basis partially offset the
increase.
Effective April 1, 1998, the Company changed its estimate of
the useful lives of certain marine barges that are depreciated on
the units-of-production method. The Company increased total
estimated operating days for such barges to better reflect the
estimated periods during which the assets will remain in service.
For the nine months ended December 31, 1998, the change had the
effect of reducing depreciation expense by $3.7 million and
increasing net income by $2.4 million ($0.03 per basic and
diluted share).
Interest Expense. Interest expense was $6.7 million net of
capitalized interest for the nine months ended December 31, 1998,
compared to $1.5 million for the nine months ended December 31,
1997 principally due to higher average long-term debt
outstanding.
Net Income. Net income for the nine months ended December 31,
1998 declined 16% to $39.0 million as compared to $46.3 million
recorded for the nine months ended December 31, 1997. Included
in net income for the nine months ended December 31, 1998 is a
$6.9 million loss associated with the Company's 49% ownership
interest in CCC. The loss associated with the CCC ownership for
the nine months ended December 31, 1997 was $0.9 million.
Increased operating losses, currency exchange rate losses, and an
adjustment to prior years' taxes contributed in the increase in
CCC's losses. The Company's effective tax rate for the nine
months ended December 31, 1998 was 35%, compared to 38% for the
nine months ended December 31, 1997, reflecting changes in
taxable income in differing taxable jurisdictions.
Segment Information. The Company has identified six reportable
segments as required by SFAS 131 (see Note 8 of the Notes to
Consolidated Financial Statements included elsewhere in this
Report). The following discusses the results of operations for
each of those reportable segments.
Gulf of Mexico Offshore Construction - Overall decreased demand
for offshore construction services in the Gulf of Mexico and
resulting pricing decreases caused this segment's gross revenues
to decline 25% to $135.9 million (including $3.5 million
intersegment revenues) for the nine months ended December 31,
1998 compared to $180.9 million (including $0.8 million
intersegment revenues) for the nine months ended December 31,
1997. The lower activity levels also caused profits before taxes
to decline to $26.2 million during the nine months ended December
31, 1998 compared to $44.1 million for the nine months ended
December 31, 1997. The Hercules returned to service in July
1998, and helped partially offset the decline.
Gulf of Mexico Diving - Revenues and profits before taxes from
diving-related services in the Gulf of Mexico declined due to
decreased demand from the Gulf of Mexico Offshore Construction
Segment. Gross revenues for the nine months ended December 31,
1998 declined 9% to $42.1 million (including $13.0 million
intersegment revenues) compared to $46.5 million (including $24.1
million intersegment revenues) for the same period ended December
31, 1997. Revenue from external customers increased by $6.7
million, but was partially offset by pricing decreases. The
overall lower activity levels caused profits before taxes to
decline to $13.5 million during the nine months ended December
31, 1998 compared to $18.8 million for the nine months ended
December 31, 1997.
Gulf of Mexico Marine Support - Decreased demand and resulting
pricing decreases also affected the Gulf of Mexico Marine Support
services. Gross revenues from Gulf of Mexico Marine Support
services declined 21% to $31.5 million (including $8.0 million
intersegment revenues) for the nine months ended December 31,
1998, compared to $39.8 million (including $5.4 million
intersegment revenues) for the same period ended December 31,
1997. Profits before taxes also declined to $10.2 million during
the nine months ended December 31, 1998 compared to $15.3 million
for the nine months ended December 31, 1997. The overall
declines were partially offset by increased activity and
resulting gross revenues and profits from the SWATH Pioneer.
West Africa Construction - During 1998, the West Africa
Construction market recovered from a down cycle in 1997. For the
nine months ended December 31, 1998, gross revenues increased
470% to $70.7 million (including $1.8 million intersegment
revenues) compared to $12.4 million (including $1.0 million
intersegment revenues) for the nine months ended December 31,
1997. Profits before taxes increased to $11.9 million during the
nine months ended December 31, 1998 compared to a $2.4 million
loss for the nine months ended December 31, 1997. For the first
time since entering the West Africa market, the Company employed
two barges simultaneously during the nine months ended December
31, 1998.
Asia Pacific Construction - Asia Pacific Construction results
benefited from the acquisition and placement of construction
barges in that region. For the nine months ended December 31,
1998, gross revenues increased 50% to $38.0 million compared to
$25.3 million for the nine months ended December 31, 1997. The
Asia Pacific segment did not generate any intersegment revenues.
Profits before taxes increased to $3.4 million during the nine
months ended December 31, 1998 compared to a $0.4 million loss
for the nine months ended December 31, 1997. In April 1998, the
Company acquired the DLB 332 and DLB 264 in that region. Each of
the acquired barges were employed under a short-term bare boat
charter agreement with Hydro Marine Services, Inc., an affiliate
of J. Ray McDermott S.A., to allow for completion of certain
contractual commitments. The DLB 332 completed its commitment in
August 1998, and the DLB 264 completed its commitment in October
1998. In September 1998, the Seminole began working in Asia
Pacific after the Company relocated it from the Middle East.
Latin America Construction - For the nine months ended December
31, 1998, revenue from services and equipment provided to CCC
increased 287% to $26.3 million compared to $6.8 million for the
nine months ended December 31, 1997. The increase was
attributable to CCC's increase in offshore construction activity.
Profits before taxes and equity in CCC losses increased to $7.0
million during the nine months ended December 31, 1998 compared
to $1.2 million for the nine months ended December 31, 1997.
However, both profit amounts were offset by equity in CCC losses
of $6.9 million and $0.9 million, respectively. The increase in
CCC's loss was largely the result of increased operating losses,
currency exchange rate losses, and an adjustment to prior years'
taxes.
Year Ended March 31, 1998 Compared to Year Ended March 31, 1997
Revenues. Revenues for the year ended March 31, 1998 of $379.9
million were 66% higher than year ended March 31, 1997 revenues
of $229.1 million. The increase in revenues largely resulted
from stronger domestic activity and pricing and the Company's
expansion through acquisitions, and was partially offset by lower
revenues from West Africa. Recent acquisitions that contributed
to increased fiscal 1998 revenues included (i) Norman Offshore
Pipelines, Inc. in June 1996, (ii) the assets and business of
Divcon in Asia Pacific in December 1996, (iii) two large
combination pipelay and derrick barges from J. Ray McDermott, S.
A. in December 1996, and (iv) certain business operations and
assets of Sub Sea International, Inc. in the Gulf of Mexico, Asia
Pacific, and the Middle East in July 1997.
Gross Profit. For the year ended March 31, 1998, the Company had
gross profit of $114.7 million compared with $63.3 million for
the year ended March 31, 1997. The increase was largely the
result of increased domestic activity and higher pricing and the
Company's expansion through acquisitions, and was partially
offset by lower gross profit from West Africa. Gross profit as a
percentage of revenues in the year ended March 31, 1998 was 30%
compared to the gross profit percentage earned during the year
ended March 31, 1997 of 28%. Higher year ended March 31, 1998
margins in the Gulf of Mexico were partially offset by lower
gross profit margins earned in Asia Pacific and the Middle East.
Cost of revenues for the year ended March 31, 1998 includes an
accrual of $3.5 million for retirement and incentive compensation
expense, as compared to a provision of $2.5 million a year
earlier.
Selling, General, and Administrative Expenses. While selling,
general, and administrative expenses for the year ended March 31,
1998 of $22.5 million were 49% higher than the $15.1 million
reported in the year ended March 31, 1997, as a percentage of
revenues they decreased to approximately 6% from approximately
7%. The increase was primarily due to the Company's business
expansion including expansion to the Asia Pacific and Middle East
regions. The year ended March 31, 1998 expense provision for
retirement and incentive compensation plan was $5.0 million, of
which $1.5 million was included in selling, general, and
administrative expenses. In the prior year, the Company provided
for $3.6 million of such expenses with $1.1 million included in
selling, general, and administrative expenses.
Depreciation and Amortization. Depreciation and amortization,
including amortization of drydocking costs, for the year ended
March 31, 1998 was $29.6 million compared to the $17.7 million
recorded in the year ended March 31, 1997. The 67% increase was
principally attributable to increased employment of the Company's
larger construction barges (depreciated on a units-of-production
basis) and increases in the Company's fleet through construction,
upgrades, and acquisitions, and was partially offset by lower
employment of the Cheyenne and the Hercules (both depreciated on
a units-of-production basis).
Interest Expense. Interest expense was $2.2 million net of
capitalized interest in the year ended March 31, 1998 compared to
$1.4 million in the year ended March 31, 1997 principally due to
higher average long-term debt.
Net Income. Net income for the year ended March 31, 1998 of
$57.3 million was 69% higher than the $33.9 million recorded for
the year ended March 31, 1997. Included in net income for the
year ended March 31, 1998 is a $1.7 million loss associated with
the Company's 49% ownership interest in CCC.
The Company's effective tax rate for the year ended
March 31, 1998 was 38%, compared to 30% for the year ended March
31, 1997, reflecting lower profits from low-tax international
areas, and thus, a higher effective tax rate.
Segment Information. The Company has identified six reportable
segments as required by SFAS 131 (see Note 8 of the Notes to
Consolidated Financial Statements included elsewhere in this
annual report). The following discusses the results of
operations for each of those reportable segments.
Gulf of Mexico Offshore Construction - Overall increased demand
for offshore construction services in the Gulf of Mexico and
resulting increased margins helped this segment's gross revenues
to increase 78% to $221.7 million (including $0.8 million
intersegment revenues) for the year ended March 31, 1998 compared
to $124.9 million (including $0.8 million intersegment revenues)
for the year ended March 31, 1997. The higher activity levels
also helped profits before taxes to increase to $44.2 million
during the year ended March 31, 1998 compared to $17.4 million
for the year ended March 31, 1997. The segment also benefited
from the July 1997 acquisition of certain Subsea International
Inc. Gulf of Mexico assets and the June 1996 acquisition of
Norman Offshore Pipelines, Inc. The increase in revenues was
partially offset by lower revenues and profits from the Hercules,
which did not work most of the year because of its construction
to upgrade the vessel to a dynamically positioned and pipelay
vessel.
Gulf of Mexico Diving - Revenues and profits before taxes from
diving-related services in the Gulf of Mexico also increased due
to increased demand and resulting increased margins. Gross
revenues for the year ended March 31, 1998 increased 97% to $62.5
million (including $34.7 million intersegment revenues) compared
to $31.8 million (including $15.8 million intersegment revenues)
for the year ended March 31, 1997. The increased activity levels
also caused profits before taxes to increase to $24.4 million
during the year ended March 31, 1998 compared to $8.7 million for
the year ended March 31, 1997. This segment also benefited from
the acquisition of certain Subsea International Inc. Gulf of
Mexico assets in July 1997.
Gulf of Mexico Marine Support - Increased demand and resulting
pricing increases also benefited the Gulf of Mexico Marine
Support services. Gross revenues from Gulf of Mexico Marine
Support services increased 83% to $51.5 million (including $7.3
million intersegment revenues) for year ended March 31, 1998,
compared to $28.1 million (including $3.2 million intersegment
revenues) for the year ended March 31, 1997. Profits before
taxes also increased to $19.4 million during the year ended March
31, 1998 compared to $10.0 million for the year ended March 31,
1997. The overall increase in revenues was also aided by
increased activity by the SWATH Pioneer. However, the Pioneer
did not contribute any significant profits.
West Africa Construction - The West Africa Construction market
experienced a down cycle in calendar year 1997. For the year
ended March 31, 1998, gross revenues for this segment decreased
52% to $29.0 million (including $1.6 million intersegment
revenues) compared to $60.5 million (including $3.1 million
intersegment revenues) for the year ended March 31, 1997.
Profits before taxes decreased to $3.7 million during the year
ended March 31, 1998 compared to $13.8 million year ended March
31, 1997.
Asia Pacific Construction - Asia Pacific Construction results
benefited from the acquisitions of certain Divcon Ltd. Pty assets
in December 1996, and certain Subsea International, Inc. assets
in July 1997. For the year ended March 31, 1998, gross revenues
increased 573% to $30.3 million compared to $4.5 million for the
year ended March 31, 1997. The Asia Pacific segment did not
generate any intersegment revenues. Profits before taxes
increased slightly to $0.2 million during the year ended March
31, 1998 compared to a $0.7 million loss year ended March 31,
1997.
Latin America Construction - For the year ended March 31, 1998,
revenue from services and equipment provided to CCC increased
764% to $9.5 million compared to $1.1 million for the year ended
March 31, 1997. Revenues included in the year ended March 31,
1997 occurred after the December 1996 equity investment in CCC.
Profits before taxes and equity in CCC losses increased to $1.6
million during the year ended March 31, 1998 compared to a
negligible loss year ended March 31, 1997. However, the profit
for the year ended March 31, 1998 was offset by equity in CCC
loss of $1.7 million. The Company did not record an equity gain
or loss during the year ended March 31, 1997.
Liquidity and Capital Resources
The Company's operations generated cash flow of $74.9
million during the nine months ended December 31, 1998. Cash
from operations, together with $51.5 million provided by
financing activities, funded investing activities of $119.4
million. Investing activities consisted principally of (i)
capital expenditures, (ii) net receipts on advances to CCC, (iii)
dry-docking costs, and (iv) the release from escrow of Lake
Charles Harbor and Terminal District Port Improvement Revenue
Bonds proceeds. Funds provided by financing activities
principally represent net borrowings under the Company's credit
agreement with a syndicate of commercial banks partially offset
by purchases of the Company's Common Stock. Working capital
increased $1.1 million during the nine months ended December 31,
1998 from $77.5 million at March 31, 1998 to $78.6 million at
December 31, 1998.
Capital expenditures during the nine months ended December
31, 1998 aggregated $132.9 million. These expenditures included a
$42.5 million final payment to acquire the DLB 332 and DLB 264,
$34.5 million for continued conversion and upgrade of the
Hercules, $15.2 million for continued construction of the
Carlyss, Louisiana, deepwater support facility and pipebase, and
$5.1 million for the construction of a shorebase facility in
Batam, Indonesia. Also during the nine months ended December 31,
1998, the Company settled the previously disclosed arbitration
with a shipyard relating to the construction contract terms for
the conversion and upgrade of the Hercules. The Company included
the settlement costs in the conversion and upgrade cost with no
current charge to earnings. The additional cost will not have a
significant impact on future results.
The Company estimates that the cost to complete capital
expenditure projects in progress at December 31, 1998, will be
approximately $22 million all of which is expected to be incurred
during the year ending December 31, 1999. The scheduled
completion of the addition of reel pipelay capability to the
Hercules is during the fourth quarter of the year ending December
31, 1999. The estimated remaining costs to complete the Hercules
upgrades are approximately $6 million, which is in addition to
the approximately $113.1 million incurred through December 31,
1998.
The Company is constructing a deepwater support facility and
pipebase near Carlyss, Louisiana. The Company plans to replace
its existing facilities in Houma and Amelia, Louisiana with the
Carlyss Facility. Estimated completion is in the third quarter
of the year ending December 31, 1999 at a cost of approximately
$37 million, including approximately $30.1 million (including
land purchased in December 1997) incurred through December 31,
1998. Tax exempt revenue bonds issued by the Lake Charles Harbor
and Terminal District financed approximately $28 million of the
construction. The bonds bear interest at a variable rate, which
was 4.1% at December 31, 1998, and mature on November 1, 2027.
In the normal course of business, the Company is in the
initial phase of replacing its accounting and procurement systems
and has established a target date in the fourth quarter for its
installations at all locations. While the Company's growth is
driving the Company's efforts to replace its accounting and
procurement systems, the Company does expect the implementation
of the new accounting and procurement system to mitigate any
potential Year 2000 issues related to the existing accounting and
procurement systems. The Company expects the corporate-wide
accounting and procurement system replacement to cost
approximately $3 million.
In August 1998, the Board of Directors authorized the
expenditure of up to $30.0 million to purchase shares of the
Company's outstanding common stock. The Board of Directors
placed no limit on the duration of the program. As of December
31, 1998, the Company had purchased 1,429,500 shares since the
authorization at a total cost of $15.0 million.
Long-term debt outstanding at December 31, 1998, (including
current maturities), includes $39.0 million of Title XI bonds, the $28.0
million of Lake Charles Harbor and Terminal District bonds, and
$143.0 million drawn against the Company's revolving line of
credit.
The Company's Title XI bonds mature in 2003, 2005, 2020, and
2022. The bonds carry interest rates of 9.15%, 8.75%, 8.30% and
7.25% per annum, respectively, and require aggregate semi-annual
payments of $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. If not met, additional covenants
result that restrict the operations of the Company and its
ability to pay cash dividends. The Company is currently in
compliance with these covenants.
The Company maintains a revolving line of credit under a
loan agreement ("Restated Credit Agreement") with a syndicate of
commercial banks. Effective September 16, 1998, an amendment to
the Restated Credit Agreement increased the line of credit from
$200.0 million to $250.0 million. The revolving credit facility
reduces to $150.0 million on July 1, 2000, and to $100.0 million
on July 1, 2001. Borrowings under the facility bear interest at
fluctuating rates, are payable on June 30, 2002, and have
subsidiary guarantees and stock pledges as collateral. The
amount of available credit decreases by (i) borrowings
outstanding ($143.0 million at December 31, 1998), (ii)
outstanding letters of credit issued under the Restated Credit
Agreement ($33.4 million at December 31, 1998), and (iii) amounts
outstanding under a separate credit agreement between the banks
and CCC ($21.1 million at December 31, 1998). Effective March 30,
1999, an additional amendment to the Restated Credit Agreement,
among other things, removed the above provision that reduced the
amount available by amounts outstanding under a separate credit
agreement between the banks and CCC. For continuing access to
the revolving line of credit, the Company must remain in
compliance with the covenants of the Restated Credit Agreement,
including covenants relating to the maintenance of certain
financial ratios.
The Company also has short-term credit facilities at its
foreign locations that aggregate $2.8 million and are secured by
parent company guarantees. Additionally, in the normal course of
business, the Company provides guarantees and performance, bid,
and payment bonds pursuant to agreements or obtaining such
agreements to perform construction services. Some of these
guarantees are secured by parent guarantees. The aggregate of
these guarantees and bonds at December 31, 1998 was $6.0 million.
The Company has guaranteed certain indebtedness and
commitments of CCC approximating $21.1 million at December 31,
1998 ($20.0 million at March 30, 1999). In April 1998, the
Company gave a contingent guarantee to a financial institution
whereby the guarantee becomes effective if certain vessel
contracts of CCC are canceled or not renewed. The principal
amount subject to the contingent guaranty at December 31, 1998
was $14.9 million. The Company has also given performance and
currency guarantees to banks for CCC debt totaling $28.6 million
at December 31, 1998, related to project financings. Under the
terms of the performance and currency guarantees, the banks may
enforce the guarantees (i) if the customer does not pay CCC
because neither CCC nor the guarantors performed the contracts
that define the projects or (ii) if, after converting contract
payments from Mexican Pesos to United States Dollars, funds from
the project are insufficient to pay the sums due.
In February 1999, Global reached agreement in principal with
its partner to restructure its joint venture in Mexico, CCC
Fabricaciones y Construcciones, S.A. de C.C. ("CCC"). The
agreement replaced all prior pending restructuring agreements.
Under the restructuring agreement, its partner, through the
assumption of CCC debt, will contribute additional capital of
approximately $16.5 million to CCC. Global, through the
forgiveness of advances and receivables due from CCC, will
contribute additional capital of approximately $15.8 million to
CCC. Among other provisions, CCC will also dispose of its
industrial construction division and subject to due diligence,
enter into a fabrication contract that will be contributed by an
affiliate of its partner. The Company expects to complete the
restructuring in the near future. After the restructuring, CCC's
primary business will be offshore marine construction and marine
fabrication. Global has a 49% ownership interest in CCC and
charters vessels and other equipment to CCC.
The Company expects funds available under the Restated
Credit Agreement, proceeds from the tax exempt revenue bonds
issued by the Lake Charles Harbor and Terminal District,
available cash, and cash generated from operations to be
sufficient to fund the Company's operations, scheduled debt
retirement, and planned capital expenditures for the next twelve
months.
In the normal course of business, the company is currently
evaluating its debt structure and considering alternatives to
refinance a portion of its credit facility debt to extend the
payment terms beyond the current expiration.
Facilities Relocation
The Company is constructing a deepwater support facility and
pipebase near Carlyss, Louisiana, to accommodate deeper draft
vessels such as the Hercules and the Pioneer. To gain
anticipated efficiencies, the Company plans to replace the
existing facilities in Houma and Amelia, Louisiana with the
Carlyss Facility. Certain of the Company's administrative
functions will also relocate from its Lafayette, Louisiana and
Houston, Texas offices.
As a result of the relocation, the Company expects to incur
certain employment costs, equipment and material relocation
costs, and costs to close the replaced facilities. Certain of
these anticipated costs were included in the results for the nine
months ended December 31, 1998. The Company expects the
remainder of these costs to be included in the results for the
year ending December 31, 1999. The results for the nine months
ended December 31, 1998, include the following charges (in
thousands):
Employee severance pay and transition bonuses $ 622
Asset write-down 640
------
Total charge related to facilities relocation $1,262
======
Employee severance pay and transition bonuses are amounts
payable to certain employees that will not relocate to the new
facilities. The severance pay is payable upon the employees'
termination by the Company. The transition bonuses are payable
to those employees that remain with the Company to assist in the
continuation of operations and administration, train new
employees, and wind down functions at the replaced facilities.
The transition bonuses are payable upon the earlier of
termination by the Company or the passage of certain time periods
while still employed. None of the employee severance pay and
transition bonuses were paid in the nine months ended December
31, 1998. The Company expects to pay all such amounts in the
year ending December 31, 1999.
The asset write-down included in the results for the nine
months ended December 31, 1998, relates to the estimated
impairment in value of certain facilities at the Houma,
Louisiana, location attributable to the relocation from there.
The total employment costs, equipment and material
relocation costs, and costs to close the replaced facilities,
including those described above, expended during the nine months
ended December 31, 1998, and expected to be expended are as
follows:
Nine
Months Year
Ended Ending
December 31, December 31,
------------ ------------
1998 1999 Totals
---- ---- ------
Employee severance pay and
transition bonuses $ -- $ 761 $ 761
Employee relocation assistance 2 1,869 1,871
Equipment and material relocation 122 1,028 1,150
Closing of replaced facilitie -- 439 439
----- ------- ------
Total cash expenditures 124 4,097 4,221
Asset write-down 640 -- 640
----- ------- ------
Total costs related to
facilities relocation $ 764 $ 4,097 $4,861
===== ======= ======
In addition to the above estimated costs, the Company has
issued options for 191,000 shares of Common Stock to certain
employees who will relocate. The options are exercisable over a
five-year vesting period subject to the employees' relocation to
the new facility. As a result, $0.2 million unearned stock
compensation will be amortized over the vesting period.
Although the Company expects to benefit from the
consolidation of its Houma, Amelia, and Lafayette, Louisiana,
facilities, it cannot reasonably estimate any potential cost
savings.
Industry Outlook
Given the current industry outlook in the lower oil price
environment, the Company expects that its trends of increasing
revenues will be difficult to maintain in the next fiscal year
and for as long as oil and gas companies maintain their curb on
capital expenditures. The Company anticipates the impact will be
greater on margins and profits as it adjusts its pricing to bid
competitively for available projects and as the proportion of
lower margin international work to Gulf of Mexico work becomes
greater. Thus, if this situation continues, the Company's
results of operations for the next fiscal year could be
materially lower than the results of the last twelve months. The
Company believes that the financial results of its Gulf of
Mexico, Asia Pacific, and Middle East segments will be most
affected by industry conditions.
Ultimately, the Company feels that the industry will "bounce
back" from the current economic environment because eventual
economic recovery of developing nations, which will spur demand
growth, and depletion of petroleum reserves currently in
production will result in more favorable prices for petroleum
resources. Favorable prices for petroleum resources will result
in oil and gas companies increasing their capital
expenditures. However, the Company cannot predict when such
recovery might occur.
The Company projects that considering the industry
expectations, its capital expenditures will be smaller than
recent fiscal periods. However, the Company is committed to
completing the conversion of the Hercules, the construction of
the Carlyss, Louisiana, deepwater support facility and pipebase,
and the construction of a shorebase facility in Batam, Indonesia.
Also, as the Company has historically done, it will continue to
evaluate the merits of any opportunities that may arise for
acquisitions of equipment or businesses.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative and Hedging Activities" ("SFAS
133"). SFAS 133 establishes accounting and reporting standards
for derivative instruments and hedging activities and requires,
among other things, that an entity recognize all derivatives as
either assets or liabilities in the statement of financial
position and measure the instruments at fair value. The Company
does not believe that the adoption of this new accounting
standard will have a material effect on its consolidated
financial statements. The Company will adopt this accounting
standard, if applicable, effective January 1, 2000, as required.
Year 2000
The Year 2000 problem results from the use in computer
hardware and software of two digits rather than four digits to
define the applicable year. The use of two digits was a common
practice for decades when computer storage and processing was
much more expensive than today. When computer systems must
process dates both before and after January 1, 2000, two-digit
year "fields" may create processing ambiguities that can cause
errors and system failures. For example, computer programs that
have date-sensitive features may recognize a date represented by
"00" as the year 1900, instead of 2000. These errors or failures
may have limited effects, or the effects may be widespread,
depending on the computer chip, system or software, and its
location and function.
The effects of the Year 2000 problem are exacerbated because
of the interdependence of computer and telecommunications systems
in the United States and throughout the world. This
interdependence certainly is true for Global and Global's
suppliers, and customers, as well as for governments of
countries around the world where Global does business.
The Company makes use of computers in its gathering,
manipulating, calculating, and reporting of accounting,
financial, administrative, and management information. We also
rely on computers to undertake certain operational procedures and
to more efficiently produce documents and financial instruments.
Additionally, the Company uses computers as a communication tool
for its employees to communicate among themselves and with other
persons outside the organization. Finally, certain of the
Company's equipment (including the dynamic positioning systems on
certain of the Company's vessels,) makes use of embedded computer
technology.
Readiness. The Company has prepared a Year 2000 Project
Plan (the "Y2K Plan") to identify and assess its risks associated
with Year 2000 issues and to take reasonable steps to prevent
Global's critical functions from being impaired. Global is
currently implementing its Y2K Plan, which will be modified as
events require. Under the plan, the Company continues to
(i) assess its critical information and computing systems and
(ii) inventory its systems using embedded technology, including
our fleet of offshore vessels and related systems; assess the
effects of Year 2000 problems on the critical functions of
Global's business units; remedy systems, software and embedded
chips in an effort to avoid material disruptions or other
material adverse effects on critical functions, processes and
systems; verify and test the critical systems to which
remediation efforts have been applied; and attempt to mitigate
those critical aspects of the Year 2000 problem that are not
remediated by January 1, 2000, including the development of
contingency plans to cope with the mission critical consequences
of Year 2000 problems that have not been identified or remediated
by that date. Implementation of our Y2K Plan is supervised by a
Vice President and the Company has contracted with firms
specializing in the assessment and remediation of embedded
technology for additional assistance. As a result of the
assessments, non-compliant embedded technology has been found on
certain of the Company's vessels. The Company plans to complete
the identification and remediation of mission critical systems
that require modification or replacement by mid-1999.
The Y2K Plan recognizes that the computer,
telecommunications, and other systems ("Outside Systems") of
outside entities ("Outside Entities") have the potential for
major, mission critical, adverse effects on the conduct of
Global's business. Global does not have control of these Outside
Entities or Outside Systems. In some cases, Outside Entities are
foreign governments or businesses located in foreign countries.
However, Global's Y2K Plan includes an ongoing process of
identifying and contacting Outside Entities whose systems, in
Global's judgment, have or may have a substantial effect on our
ability to continue to conduct the mission critical aspects of
our business without disruption from Year 2000 problems. The
Company has contacted its key vendors and customers to assess
their progress with their own Year 2000 issues and to anticipate
potential risks associated with its key vendors and customers.
Global will work prudently with Outside Entities in a reasonable
attempt to inventory, assess, analyze, convert (where necessary),
test, and develop contingency plans for Global's connections to
these mission critical Outside Systems and to ascertain the
extent to which they are, or can be made to be, Year 2000 ready
and compatible with Global's mission critical systems.
Despite efforts to address all material Year 2000 issues in
advance, the Company could potentially experience disruptions to
some aspects of its activities or operations. Thus, the Company
is developing business contingency plans for mitigating the
effect of potential disruptions.
Costs. Total amounts spent to date on Year 2000 awareness,
inventory, assessment, analysis, conversion, testing or
contingency planning efforts were approximately $110,000.
Additional costs to carry out the Y2K Plan, including
implementation of Year 2000 contingency plan, based on
assessments to date, are not expected to be material to the
Company's financial condition. Although management believes that
its estimates are reasonable, there can be no assurance that the
actual costs of implementing the Y2K Plan will not differ
materially from the estimated costs or that Global will not be
materially adversely affected by Year 2000 issues. Moreover, the
estimated costs of implementing the Y2K Plan do not take into
account the costs, if any, that might be incurred as a result of
Year 2000-related failures that occur despite Global's
implementation of the Y2K Plan.
Worst Case Scenario. The Securities and Exchange Commission
requires that public companies forecast the most reasonably
likely worst case Year 2000 scenario. In doing so, Global is
assuming that the Company's Y2K Plan will not be effective.
Analysis of the most reasonably likely worst case Year 2000
scenarios Global may face leads to contemplation of the following
possibilities which, though unlikely in some or many cases, must
be included in any consideration of worst cases: widespread
failure of electrical, gas, and similar supplies by utilities
serving Global domestically and internationally; widespread
disruption of the services of communications common carriers
domestically and internationally; similar disruption to means and
modes of transportation for Global and its employees,
contractors, suppliers, and customers; significant disruption to
Global's ability to gain access to, and remain working in, office
buildings and other facilities; the failure of substantial
numbers of Global's critical information (computer) hardware and
software systems; and the failure, domestically and
internationally, of Outside Systems, the effects of which would
have a cumulative material adverse impact on Global's critical
systems. Among other things, Global could face substantial
claims by customers or loss of revenues due to inability to
fulfill contractual obligations, inability to account for certain
revenues or obligations or to bill customers accurately and on a
timely basis, and increased expenses associated with litigation,
stabilization of operations following critical failures, and the
execution of contingency plans. Global could also experience an
inability by customers to pay, on a timely basis or at all,
obligations owed to Global. Under these circumstances, the
adverse effect on Global, and the diminution of Global's
revenues, would be material, although not quantifiable at this
time.
Summary. Global has a plan to deal with the Year 2000
challenge and believes that it will be able to achieve
substantial Year 2000 readiness with respect to the mission
critical systems that it controls. However, from a forward-
looking perspective, the extent and magnitude of the Year 2000
problem as it will affect Global, both before and for some period
after January 1, 2000, are difficult to predict or quantify for a
number of reasons. Among these are: the difficulty of locating
"embedded" chips that may be in a great variety of mission
critical systems; the difficulty of inventorying, assessing,
remediating, verifying and testing Outside Systems; the
difficulty in locating all mission critical software (computer
code) internal to Global that is not Year 2000 compatible; and
the unavailability of certain necessary internal or external
resources, including but not limited to trained hardware and
software engineers, technicians, and other personnel to perform
adequate remediation, verification and testing of mission
critical Global systems or Outside Systems. Accordingly, there
can be no assurance that all of Global's Systems and all Outside
Systems will be adequately remediated so that they are Year 2000
ready by January 1, 2000, or by some earlier date, so as not to
create a material disruption to Global's business. If despite
Global's efforts, there are mission critical Year 2000-related
failures that create substantial disruptions to our business, the
adverse impact on Global's business could be material.
Additionally, Year 2000 costs are difficult to estimate
accurately because of unanticipated vendor delays, technical
difficulties, the impact of tests of Outside Systems and similar
events.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
The Company is exposed to the risk of changing interest
rates and foreign currency exchange rate risks. The Company
currently does not use derivative financial instruments to hedge
the interest or currency risks. Interest on approximately $171.0
million, or 81% of the Company's long-term debt with a weighted
average interest rate of 6.2% at December 31, 1998, was variable,
based on short-term market rates. Thus, a general increase of
1.0% short-term market interest rates would result in additional
interest cost of $1.7 million per year if the Company were to
maintain the same debt level and structure.
Also, the Company has approximately $39.8 million fixed
interest rate long-term debt outstanding with a weighted-average
interest rate of approximately 7.8% and a market value of
approximately $45.1 million on December 31, 1998. A general
increase of 1.0% in overall market interest rates would result in
a decline in market value of the debt to approximately $42.0
million.
The Company uses natural hedging techniques to hedge against
foreign currency exchange losses by contracting, to the extent
possible, international construction jobs to be payable in U. S.
dollars. The Company also, to the extent possible, maintains
cash balances at foreign locations in U. S. dollar accounts. The
Company does not believe that a change in currency rates in the
regions that it operates would have a significant effect on its
results of operation.
While the Company does not currently use derivative
financial instruments, it may use them in the future if deemed
appropriate.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
of Global Industries, Ltd.
We have audited the accompanying consolidated balance sheets of
Global Industries, Ltd. and subsidiaries as of December 31, 1998,
and March 31, 1998, and the related consolidated statements of
operations, shareholders' equity, cash flows, and comprehensive
income for the nine months ended December 31, 1998, and the years
ended March 31, 1998, and March 31, 1997. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of
Global Industries, Ltd. and subsidiaries at December 31, 1998,
and March 31, 1998, and the results of their operations and their
cash flows for the nine months ended December 31, 1998, and the
years ended March 31, 1998, and March 31, 1997, in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 12, 1999
Global Industries, Ltd.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
December 31, March 31,
1998 1998
---- ----
ASSETS
Current Assets:
Cash $ 25,368 $ 18,693
Escrowed funds (Notes 1 and 3) 2,447 6,907
Receivables 107,992 97,156
Advances to unconsolidated affiliate 8,190 22,852
(Note 12)
Prepaid expenses and other 9,874 7,002
-------- -------
Total current assets 153,871 152,610
-------- -------
Escrowed Funds (Notes 1 and 3) 9,143 22,478
-------- -------
Property and Equipment, net (Notes 2,
3 and 6) 535,386 432,224
-------- -------
Other Assets:
Deferred charges, net (Note 1) 18,467 12,139
Investment in and advances to
unconsolidated
affiliate (Note 12) 10,655 1,878
Other 3,349 4,038
-------- -------
Total other assets 32,471 18,055
-------- --------
Total $730,871 $625,367
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt
(Note 3) $ 2,190 $ 2,168
Accounts payable 53,005 55,016
Employee-related liabilities (Note 5) 8,086 10,948
Other accrued liabilities 11,953 7,006
-------- --------
Total current liabilities 75,234 75,138
-------- --------
Long-Term Debt (Note 3) 208,607 144,825
-------- --------
Deferred Income Taxes (Note 4) 49,502 36,471
-------- --------
Commitments and Contingencies (Note 6)
Shareholders' Equity (Note 7):
Preferred stock -- --
Common stock, issued, 92,110,929
and 91,597,114 shares, respectively 921 915
Additional paid-in capital 213,518 208,911
Treasury stock at cost (1,429,500
shares at Dec. 31, 1998) (15,012) --
Accumulated other comprehensive income (8,155) (8,178)
Retained earnings 206,256 167,285
--------- ---------
Total shareholders' equity 397,528 368,933
--------- ---------
Total $730,871 $625,367
========= =========
See notes to consolidated financial statements.
Global Industries, Ltd.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, except Per Share Data)
Nine Months Year Ended
Ended
December 31, March 31,
---------------------------
1998 1998 1997
---- ---- ----
Revenues (Note 9) $ 342,201 $ 379,901 $ 229,142
Cost of Revenues 246,228 265,245 165,889
--------- --------- ---------
Gross Profit 95,973 114,656 63,253
Equity in Net Earnings
(Loss) of
Unconsolidated Affiliate (6,890) (1,654) --
Selling, General and
Administrative
Expenses 21,720 22,492 15,080
--------- --------- ---------
Operating Income 67,363 90,510 48,173
--------- --------- ---------
Other Income (Expense):
Interest Expense (6,744) (2,245) (1,358)
Other (665) 3,420 1,660
--------- --------- ---------
(7,409) 1,175 302
--------- --------- ---------
Income before Income Taxes 59,954 91,685 48,475
Provision for Income Taxes 20,983 34,382 14,543
(Note 4)
--------- --------- ----------
Net Income $ 38,971 $ 57,303 $ 33,932
========== ========= ==========
Net Income Per Share (Note
7)
Basic $ 0.43 $ 0.63 $ 0.44
Diluted $ 0.42 $ 0.61 $ 0.42
========== ========= ===========
See notes to consolidated financial statements.
Global Industries, Ltd.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in Thousands)
<TABLE>
<CAPTION>
Additi- Accumulated
Common Stock onal Other
------------ Paid-In Treasury Compre- Retained
Shares Amount Capital Stock sive Earnings Total
------ ------ -------- -------- --------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
April 1,
1996 75,744,156 $758 $58,806 $ -- $ -- $ 76,130 $135,694
Net income -- -- -- -- -- 33,932 33,932
Amortization
of unearned
stock
compensation -- -- 281 -- -- -- 281
Restricted
stock issues,
net 6,956 -- -- -- -- -- --
Exercise of
stock
options 798,882 8 1,446 -- -- (2) 1,452
Tax effect of
exercise of
stock
options -- -- 1,300 -- -- -- 1,300
Sale of common
stock net of
underwriting
discounts and
commissions
of
$7,350 14,000,000 140 139,580 -- -- (70) 139,650
Other 6,756 -- (82) -- -- -- (82)
---------- --- -------- ---- ---- ---- --------
Balance at
March 31,
1997 90,556,750 906 201,331 -- -- 109,990 312,227
Net income -- -- -- -- 57,303 57,303
Amortization
of unearned
stock
compensation -- -- 179 -- -- -- 179
Restricted
stock issues,
net 94,340 -- -- -- -- -- --
Exercise of
stock options 903,328 9 2,581 -- -- (8) 2,582
Tax effect of
exercise of
stock options -- -- 4,474 -- -- -- 4,474
Common stock
issued 39,088 -- 428 -- -- -- 428
Foreign
currency
translation
adjustments -- -- -- -- (8,178) -- (8,178)
Other 3,608 -- (82) -- -- -- (82)
-------- ---- -------- ---- -------- ------ -------
91,597,114 915 208,911 -- (8,178) 167,285 368,933
Net income -- -- -- -- -- 38,971 38,971
Amortization
of unearned
stock
compensation -- -- 604 -- -- -- 604
Restricted
stock
issues, net 5,464 -- -- -- -- -- --
Exercise of
stock
options 318,531 3 805 -- -- -- 808
Tax effect
of exercise
of stock
options -- -- 1,318 -- -- -- 1,318
Common stock
issued 184,065 2 1,880 -- -- -- 1,882
Foreign
currency
translation
adjustments -- -- -- -- 23 -- 23
Common stock
repurchased -- -- -- (15,012) -- -- (15,012)
Other 5,755 1 -- -- -- -- 1
--------- ---- ----- -------- ------ -- ----- --------
Balance at
Dec. 31,
1998 92,110,929 $921 $213,518 $(15,012) $(8,155) $206,256 $397,528
========== ==== ======== ========= ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
Global Industries, Ltd.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Nine Months Year Ended
Ended
December 31, March 31,
-------------------------
1998 1998 1997
---- ---- ----
Cash Flows From Operating
Activities:
Net income $ 38,971 $ 57,303 $ 33,932
Adjustments to reconcile net
income to net
cash provided by operating
activities:
Depreciation and amortization 35,602 29,576 18,003
(Gain) loss on sale, disposal,
or impairment
of property and equipment 926 (72) (11)
Deferred income taxes 13,044 14,873 6,700
Equity in net (earnings) loss
of unconsolidated affiliate 6,890 1,654 --
Other (355) (989) 69
Changes in operating assets
and liabilities (net
of acquisitions):
Receivables (10,836) (30,256) (7,800)
Receivables from
unconsolidated affiliate (7,840) -- --
Prepaid expenses and other (2,839) (3,242) 1,549
Accounts payable, employee-
related liabilities,
and other accrued
liabilities 1,341 22,493 11,854
-------- --------- -------
Net cash provided by 74,904 91,340 64,296
operating activities -------- --------- -------
Cash Flows From Investing
Activities:
Proceeds from sale of
equipment 317 349 16
Decrease (increase) in
escrowed funds, net 17,795 (8,826) 398
Acquisition of businesses,
net of cash acquired -- (103,805) (5,990)
Acquisition of equity
interest in and (net
advances to) repayment
of advances to
unconsolidated affiliate 6,835 2,593 (25,784)
Additions to property and
equipment (132,881) (122,320) (124,868)
Additions to deferred charges (11,998) (10,076) (4,277)
Other 540 (54) (1,146)
--------- --------- --------
Net cash used in investing (119,392) (242,139) (161,651)
activities
Cash Flows From Financing
Activities:
Repayment of long-term debt (23,196) (27,220) (2,193)
Proceeds from long-term debt 87,000 131,000 20,328
Payment of short-term borrowings -- -- (3,200)
Proceeds from sale of common
stock, net 2,691 2,445 140,971
Purchase of treasury stock (15,012) -- --
-------- -------- --------
Net cash provided by (used
in)financing activities 51,483 106,225 155,906
-------- -------- --------
Effect of Exchange Rate Change
on Cash (320) (714) --
Cash:
Increase (decrease) 6,675 (45,288) 58,551
Beginning of period 18,693 63,981 5,430
-------- --------- --------
End of period $ 25,368 $ 18,693 $ 63,981
========== ========== ========
See notes to consolidated financial statements.
Global Industries, Ltd.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands)
Nine Months Year Ended
Ended
December 31, March 31,
-------------------------
1998 1998 1997
---- ---- ----
Net Income $ 38,971 $ 57,303 $ 33,932
Other Comprehensive Income
(Loss):
Foreign currency translation
adjustments 23 (8,178) --
---------- ---------- ----------
Comprehensive Income $ 38,994 $ 49,125 $ 33,932
========== ========== ===========
See notes to consolidated financial statements.
Global Industries, Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies
Organization - Global Industries, Ltd. (the "Company")
provides construction services, including pipeline construction,
platform installation and removal, construction support and
diving services, primarily to the offshore oil and gas industry
in the United States Gulf of Mexico and in selected international
areas. Most work is performed on a fixed-price basis, but the
Company also performs services on a cost-plus or day-rate basis,
or on a combination of such bases. The Company's contracts are
typically of short duration, being completed in one to five
months.
Principles of Consolidation - The consolidated financial
statements include the accounts of the Company and its wholly
owned subsidiaries. All significant intercompany balances and
transactions have been eliminated. Effective December 23, 1996,
the Company acquired a 49% ownership interest in CCC
Fabricaciones y Construcciones, S.A. de C.V. ("CCC") (see Note
12) which is accounted for by the equity method.
Fiscal Year - Effective December 31, 1998, the Company
changed its fiscal year-end to December 31 of each year. The
consolidated statements of operations, shareholders' equity, cash
flows, and comprehensive income for the period from April 1, 1998
to December 31, 1998 represent a transition period of nine months
which is referred to as the nine months ended December 31, 1998.
The following is a comparative summary of the operating
results for the nine-month periods ending December 31, 1998 and
December 31, 1997:
Nine Months Ended December 31,
1998 1997
---- ----
(Unaudited)
(in thousands, except per share amounts)
Revenues $ 342,201 $ 292,383
Cost of Revenues 246,228 201,470
--------- ---------
Gross Profit 95,973 90,913
Equity in Net Earnings (Loss) of
Unconsolidated Affiliate (6,890) (854)
Selling, General and Administrative
Expenses 21,720 16,907
--------- ---------
Operating Income 67,363 73,152
Other Income (Expense):
Interest Expense (6,744) (1,459)
Other (665) 3,018
--------- ---------
(7,409) 1,559
--------- ---------
Income before Income Taxes 59,954 74,711
Provision for Income Taxes 20,983 28,390
--------- ---------
Net Income $ 38,971 $ 46,321
========= =========
Net Income Per Share
Basic $ 0.43 $ 0.50
Diluted $ 0.42 $ 0.49
========= =========
Cash - Cash includes cash on hand, demand deposits,
repurchase agreements having maturities less than three months,
and money market funds with banks.
Escrowed Funds - Escrowed funds totaled $11.6 million and
$29.4 million at December 31, 1998 and March 31, 1998,
respectively. These amounts represent funds available for
reimbursement to the Company for amounts expended or the Company
expects to expend on certain capital construction projects. Under
the terms of the financing agreement with the Lake Charles Harbor
and Terminal District, proceeds from the issuance of $28.0
million Port Improvement Revenue Bonds were deposited into a
Construction Fund for payment of related bond issuance costs and
certain costs of construction and improvement of a deepwater
support facility and pipebase in Carlyss, Louisiana (see Note 3).
The Company also has unreimbursed funds from the sale of U. S.
Government Guaranteed Financing Bonds deposited into an escrow
account with MARAD. The funds on deposit with MARAD are
available for reimbursement to the Company for certain vessel
construction costs. Substantially all of the escrowed funds are
invested in U. S. Treasury Bills and a money market account
invested in U. S. government and government agency securities.
At December 31, 1998, and March 31, 1998, the Company estimated
$2.4 million and $6.9 million, respectively, were currently
reimbursable from the escrowed funds for amounts expended on the
related construction projects.
Property and Equipment - Property and equipment is generally
stated at cost. Expenditures for property and equipment and
items that substantially increase the useful lives of existing
assets are capitalized at cost and depreciated. Routine
expenditures for repairs and maintenance are expensed as
incurred. Except for certain barges that are depreciated on the
units-of-production method over estimated barge operating days,
depreciation is provided utilizing the straight-line method over
the estimated useful lives of the assets. Amortization of
leasehold improvements is provided utilizing the straight-line
method over the estimated useful lives of the assets or over the
lives of the leases, whichever is shorter. Leasehold
improvements relating to leases from the Company's principal
shareholder are amortized over their expected useful lives (and
beyond the term of lease) because it is expected that the leases
will be renewed.
The periods used in determining straight-line depreciation
and amortization follow:
Marine barges, vessels and related equipment 5 - 25 years
Machinery and equipment 5 - 18 years
Transportation equipment 3 - 10 years
Furniture and fixtures 2 - 12 years
Buildings and leasehold improvements 3 - 40 years
Effective April 1, 1998, the Company changed its estimate of
the useful lives of certain marine barges that are depreciated on
the units-of-production method. The Company increased total
estimated operating days for such barges to better reflect the
estimated periods during which the assets will remain in service.
For the nine months ended December 31, 1998, the change had the
effect of reducing depreciation expense by $3.7 million and
increasing net income by $2.4 million ($0.03 per both basic and
diluted share).
Depreciation and amortization expense of property and
equipment approximated $29.2 million, $24.9 million, and $14.4
million for the nine months ended December 31, 1998, and the
years ended March 31, 1998, and March 31, 1997, respectively.
Interest Capitalization - Interest costs for the
construction of certain long-term assets are capitalized and
amortized over the related assets' estimated useful lives.
During the nine months ended December 31, 1998, and the years
ended March 31, 1998 and 1997, interest costs of $2.6 million,
$4.0 million, and $2.6 million, respectively, were capitalized.
Deferred Charges - Deferred charges consist principally of
drydocking costs which are capitalized at cost and amortized on
the straight-line method through the date of the next scheduled
drydocking. Amortization expense approximated $5.8 million, $4.4
million, and $3.3 million for the nine months ended December 31,
1998, and the years ended March 31, 1998, and March 31, 1997,
respectively.
Impairment of Long-Lived Assets - Long-lived assets held and
used by the Company are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. The Company assesses the
recoverability of long-lived assets by determining whether the
carrying values can be recovered through projected cash flows and
operating results over their remaining lives. Any impairment of
the asset is recognized when it is probable that such future
undiscounted cash flows will be less than the carrying value of
the asset. During the nine months ended December 31, 1998, the
Company recorded an estimated impairment in value of certain
facilities at the Houma, Louisiana, location attributable to a
planned relocation from there. The write-down was $0.6 million.
Contracts in Progress and Revenue Recognition - Revenues
from construction contracts, which are typically of short
duration, are recognized on the percentage-of-completion method,
measured by relating the actual cost of work performed to date to
the current estimated total cost of the respective contract.
Contract costs include all direct material and labor costs and
those indirect costs related to contract performance, such as
indirect labor, supplies, and repairs. Provisions for estimated
losses, if any, on uncompleted contracts are made in the period
in which such losses are determined. Selling, general, and
administrative costs are charged to expense as incurred.
Stock-Based Compensation - Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation",
("SFAS 123") encourages, but does not require, companies to
record compensation cost for stock-based employee compensation
plans at fair value. The Company has chosen to continue to
account for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," ("APB 25") and
related interpretations and has adopted the disclosure-only
provisions of SFAS 123. Accordingly, compensation cost for
restricted stock awards and stock options is measured as the
excess, if any, of the quoted market price of the Company's stock
at the date of the grant over the amount an employee must pay to
acquire the stock. See Note 7.
Income Taxes - Income taxes are recognized during the year
in which transactions enter into the determination of net income,
with deferred taxes being provided for temporary differences
between assets and liabilities for financial reporting and such
amounts as measured by tax laws.
Fair Value of Financial Instruments - The carrying value of
the Company's financial instruments, including cash, escrowed
funds, receivables, advances to unconsolidated affiliate,
accounts payable, and certain accrued liabilities approximate
fair market value due to their short-term nature. The fair value
of the Company's long-term debt at December 31, 1998 and March
31, 1998 based upon available market information, approximated
$216.1 million and $150.0 million, respectively.
Concentration of Credit Risk - The Company's customers are
primarily major oil companies, independent oil and gas producers,
and transportation companies operating in the Gulf of Mexico and
selected international areas. The Company performs ongoing
credit evaluation of its customers and requires posting of
collateral when deemed appropriate. The Company provides
allowances for possible credit losses when necessary.
Use of Estimates - The preparation of financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
Reclassifications - Certain prior year balances have been
reclassified to conform to the current year presentation.
Foreign Currency Translation - The financial statements of
subsidiaries in which United States Dollars are not the
functional currency use the local currency as the functional
currency. The translation calculation for the income statement
uses the average exchange rates during the period. The
translation calculation for assets and liabilities uses the
current exchange rate as of the last day of the fiscal year.
Equity amounts translate using historical rates. The resulting
balancing translation adjustment is a separate component of
shareholders' equity. Gains and losses resulting from foreign
currency transactions are included in other income (expense) and
were not material for the periods presented in the statement of
operations.
Basic and Diluted Net Income Per Share - In accordance with
Statement of Financial Accounting Standards No. 128, "Earnings
Per Share" ("SFAS 128"), the Company changed its method of
calculating net income per share during the third quarter of its
fiscal year ended March 31, 1998. All prior period net income
per share amounts have been restated to give effect of this
requirement. The diluted net income per share calculation uses
the weighted-average number of shares outstanding adjusted for
the incremental shares attributed to dilutive outstanding options
to purchase common stock and non-vested restricted stock awards.
Recent Accounting Pronouncements - During 1997, the
Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 130 "Reporting Comprehensive
Income" ("SFAS 130") and Statement of Financial Accounting
Standards No. 131 "Disclosures about Segments of an Enterprise
and Related Information" (SFAS 131"). SFAS 130 provides guidance
for the presentation and display of comprehensive income. SFAS
131 establishes standards for disclosure of operating segments,
products, services, geographic areas, and major customers. The
Company has adopted the new standards, and accordingly, has (1)
presented all items required to be recognized as components of
comprehensive income (which for the Company consists solely of
foreign currency translation adjustments) in the accompanying
statements of comprehensive income, and (2) revised its
disclosure of industry segment and geographic information as set
forth in Note 8.
In June 1998, the FASB issued Statement of Financial
Accounting Standards No. 133 "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133
establishes accounting and reporting standards for derivative
instruments and hedging activities and requires, among other
things, that an entity recognize all derivatives as either assets
or liabilities in the balance sheet and measure those instruments
at fair value. The Company has considered the implications of
SFAS 133 and concluded that implementation of the new standard
will not have a material effect on the consolidated financial
statements.
2. Property and Equipment
Property and equipment at December 31, 1998 and March 31,
1998 is summarized as follows:
December 31, March 31,
1998 1998
------------ ---------
(in thousands)
Marine barges, vessels, and
related equipment $503,894 $330,673
Machinery and equipment 45,380 43,491
Transportation equipment 3,625 2,978
Furniture and fixtures 5,371 4,724
Buildings and leasehold
improvements 9,438 9,073
Land 11,145 8,809
Construction in progress 61,914 109,522
-------- ---------
640,767 509,270
Less accumulated depreciation and
amortization (105,381) ( 77,046)
-------- ---------
Property and equipment - net $535,386 $432,224
======== =========
3. Financing Arrangements
Long-term debt at December 31, 1998 and March 31, 1998
consisted of the following:
December 31, March 31,
1998 1998
------------ ---------
(in thousands)
United States Government
Guaranteed Ship
Financing Bonds, 1994 Series
dated September
27, 1994, payable in semi-annual
installments of
$418,000 with final installment
of $370,000, plus
interest at 8.30%, maturing July
15, 2020,
collateralized by the Pioneer
vessel and related
equipment with a net book value
of $36.9 million
at December 31, 1998 $18,344 $18,762
United States Government
Guaranteed Ship
Financing Bonds, 1996 Series
dated August
15, 1996, payable in 49 semi-
annual installments
commencing January 15, 1998, of
$407,000 with
final installment of $385,000,
plus interest at
7.25%, maturing July 15, 2022,
collateralized by
escrowed funds and four vessels
and related
equipment with a net book value
of $23.4 million
at December 31, 1998 19,514 19,921
Obligation to service Lake Charles
Harbor and
Terminal District Port
Improvement Revenue Bonds,
dated November 1, 1998, interest
payable monthly at
prevailing market rates, maturing
November 1, 2027,
collateralized by $28.4 million
irrevocable letter of
credit 28,000 28,000
Revolving line of credit with a
syndicate of commercial
banks, interest payable at
variable rates 143,000 78,000
Other obligations 1,939 2,310
-------- -------
Total long-term debt 210,797 146,993
Less current maturities 2,190 2,168
-------- -------
Long-term debt, less current
maturities $208,607 $144,825
======== ========
Annual maturities of long-term debt for each of the five
fiscal years following December 31, 1998 and in total thereafter
follow (in thousands):
1999 $ 2,190
2000 2,223
2001 44,990
2002 101,862
2003 1,862
Thereafter 57,670
--------
Total $210,797
========
In accordance with the United States Government Guaranteed
Ship Financing Bond agreements, the Company is required to comply
with certain covenants, including the maintenance of minimum
working capital and net worth requirements, which if not met,
result in additional covenants including restrictions on the
payment of dividends. The Company is currently in compliance
with these covenants.
The Lake Charles Harbor and Terminal District's Port
Improvement Revenue Bonds (the "Bonds") are subject to optional
redemption, generally without premium, in whole or in part on any
business day prior to maturity at the direction of the Company.
Interest accrues at varying rates as determined from time to time
by the remarketing agent based on (i) specified interest rate
options available to the Company over the life of the Bonds and
(ii) prevailing market conditions at the date of such
determination. The interest rate on borrowings outstanding at
December 31, 1998 was 4.1%. Under the terms of the financing,
proceeds from the issuance of the Bonds were placed in a
Construction Fund for the payment of issuance related costs and
the costs of acquisition, construction, and improvement of a
deepwater support facility and pipebase in Carlyss, Louisiana.
The unexpended funds are included in the accompanying balance
sheets under the caption "Escrowed Funds."
On April 17, 1997, the Company entered into a loan agreement
("Restated Credit Agreement") with a syndicate of commercial
banks, which replaced the Company's previous credit facility.
Effective September 16, 1998, an amendment to the Restated Credit
Agreement increased the credit facility from $200.0 million to
$250.0 million. The revolving credit facility reduces to $150.0
million on July 1, 2000, and to $100.0 million on July 1, 2001.
Borrowings under the facility bear interest at fluctuating rates
(weighted average of 6.5% at December 31, 1998), are payable on
June 30, 2002, and have subsidiary guarantees and stock pledges
as collateral. The amount of available credit decreases by (i)
borrowings outstanding ($143.0 million at December 31, 1998),
(ii) outstanding letters of credit issued under the Restated
Credit Agreement ($33.4 million at December 31, 1998), and (iii)
amounts outstanding under a separate credit agreement between the
banks and CCC ($21.1 million at December 31, 1998). For
continuing access to the revolving line of credit, the Company
must not be in default under the Restated Credit Agreement and
remain in compliance with its covenants, including covenants
relating to the maintenance of certain financial ratios,
limitations on the incurrence of new indebtedness, and the
payment of dividends. Additionally, the Restated Credit
Agreement contains cross-default provisions that specify that a
default by CCC (see Note 12) under a separate loan agreement
constitutes a default under the
Company's Restated Credit Agreement. At December 31, 1998, the
amount available under the credit agreement approximated $52.5
million.
The Company has short-term credit facilities available at
its foreign locations that aggregate $2.8 million and are secured
by parent company guarantees.
4. Income Taxes
The Company has provided for income taxes as follows:
Nine Months Year Ended
Ended
December 31 March 31,
--------------
1998 1998 1997
---- ---- ----
(in thousands)
U.S. Federal and State:
Current $4,726 $18,465 $6,189
Deferred 13,031 14,873 6,700
Foreign:
Current 3,226 1,044 1,654
------- ------- -------
Total $20,983 $34,382 $14,543
======= ======= =======
State income taxes included above are not significant for
any of the periods presented.
Income before income taxes consisted of the following:
Nine Months Year Ended
Ended
December 31, March 31,
-----------------
1998 1998 1997
---- ---- ----
(in thousands)
United States $46,151 $87,839 $34,417
Foreign 13,803 3,846 14,058
------- ------- -------
Total $59,954 $91,685 $48,475
======= ======= =======
The provision for income taxes varies from the Federal
statutory income tax rate due to the following:
Nine Months Year Ended
Ended
December 31, March 31,
--------------
1998 1998 1997
---- ---- ----
(in thousands)
Taxes at Federal
statutory rate of 35% $20,984 $32,090 $16,966
Foreign income taxes at
different rates (1,605) 1,044 (3,266)
Other 1,604 1,248 843
------- ------- -------
Total $20,983 $34,382 $14,543
======= ======= =======
Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used
for income tax purposes. The tax effects of significant items
comprising the Company's net deferred tax balance as of December
31, 1998 and March 31, 1998 are as follows:
December 31, March 31,
1998 1998
---- ----
(in thousands)
Deferred Tax
Liabilities:
Excess book over tax
basis of property and equipment $44,853 $33,091
Deferred charges 4,574 3,447
Other 1,390 1,384
Deferred Tax Assets:
Reserves not currently deductible (1,315) (1,451)
-------- --------
Net deferred tax liability $49,502 $36,471
======== ========
A substantial portion of the undistributed earnings of
foreign subsidiaries has been reinvested and the Company does not
expect to remit the earnings to the parent company. Accordingly,
no Federal income tax has been provided on such earnings and, at
December 31, 1998, the cumulative amount of such undistributed
earnings and related tax effects approximated $46.6 million and
$12.8 million, respectively.
5. Employee Benefits
The Company sponsors a defined contribution profit-sharing
and 401(k) retirement plan that covers all employees who meet
certain eligibility requirements. Company contributions to the
profit-sharing plan are made at the discretion of the Board of
Directors and may not exceed 15% of the annual compensation of
each participant. The Company does not expect to make a
contribution to the profit-sharing portion of the plan for
employee services rendered during the nine months ended December
31, 1998, and thus, recorded no profit-sharing plan expense
during that period. Profit-sharing plan expense was $2.5 million
and $2.1 million for the years ended March 31, 1998 and 1997,
respectively.
Under the 401(k) section of the retirement plan, the Company
began matching employee 401(k) plan contributions during the nine
months ended December 31, 1998. The Company now makes
contributions equal to 100% of the first $1,000 each
participating employee contributes to the plan. 401(k) matching
expense during the nine months ended December 31, 1998, was $0.7
million.
In addition, the Company has an incentive compensation plan,
which rewards employees when the Company's financial results meet
or exceed budgets. The Company does not expect to make incentive
compensation plan payments for employee services rendered during
the nine months ended December 31, 1998, and thus, recorded no
incentive compensation expense during that period. For the years
ended March 31, 1998 and 1997, the Company recorded incentive
compensation expense of $2.5 million (distributed to 1,150
employees) and $1.5 million (distributed to 918 employees),
respectively.
6. Commitments and Contingencies
Leases - The Company leases real property and equipment in
the normal course of business under varying operating leases,
including leases with its principal shareholder and chief
executive officer. Rent expense for the nine months ended
December 31, 1998, and the years ended March 31, 1998 and 1997,
was $1,177,000, $1,224,000, and $723,000, respectively, (of which
$35,250, $47,000, and 47,000, respectively, was related party
rental expense). The lease agreements, which include both non-
cancelable and month-to-month terms, generally provide for fixed
monthly rentals and, for certain real estate leases, renewal
options.
Minimum rental commitments under leases having an initial or
remaining non-cancelable term in excess of one year for each of
the five years following December 31, 1998 and in total
thereafter follow (in thousands):
1999 $1,342
2000 1,162
2001 943
2002 694
2003 460
Thereafter 18
------
Total $4,619
======
Legal Proceedings - The Company is a party in legal
proceedings and potential claims arising in the ordinary course
of its business. Management does not believe these matters will
materially effect the Company's consolidated financial
statements.
Construction and Purchases in Progress - The Company
estimates that the cost to complete capital expenditure projects
in progress at December 31, 1998 approximated $22 million.
Guarantees - The Company has guaranteed certain indebtedness
of CCC approximating $21.1 million at December 31, 1998. In
April 1998, the Company gave a contingent guarantee to a
financial institution whereby the guarantee becomes effective if
certain vessel contracts of CCC are canceled or not renewed. The
principal amount subject to the contingent guaranty at December
31, 1998 was $14.9 million. The Company has also given
performance and currency guarantees totaling $28.6 million at
December 31, 1998, to banks for CCC debt related to project
financings. Under the terms of the performance and currency
guarantees, the banks may enforce the guarantees (i) if the
customer does not pay CCC because neither CCC nor the guarantors
performed the contracts that define the projects or (ii) if,
after converting contract payments from Mexican Pesos to United
States Dollars, funds from the project are insufficient to pay
the sums due.
In the normal course of its business activities, the Company
provides guarantees and performance, bid, and payment bonds
pursuant to agreements or obtaining such agreements to perform
construction services. Some of these financial instruments are
secured by parent guarantees. The aggregate of these guarantees
and bonds at December 31, 1998 was $6.0 million.
Letters of Credit - In the normal course of its business
activities, the Company is required to provide letters of credit
to secure the performance and/or payment of obligations,
including the payment of worker's compensation obligations.
Additionally, the Company has issued a letter of credit as
collateral for $28.0 million of Port Improvement Revenue Bonds.
Outstanding letters of credit at December 31, 1998 approximated
$33.4 million.
7. Shareholders' Equity
Authorized Stock - The Company has authorized 30,000,000
shares of $0.01 par value preferred stock and 150,000,000 shares
of $0.01 par value common stock.
Treasury Stock - During August 1998, the Board of Directors
authorized the expenditure of up to $30.0 million to purchase
shares of the Company's outstanding common stock. Subject to
market conditions, the purchases may be effected from time to
time through solicited or unsolicited transactions in the market
or in privately negotiated transactions. No limit was placed on
the duration of the purchase program. Subject to applicable
securities laws, management will make purchases based upon market
conditions and other factors. As of December 31, 1998, the
Company had purchased 1,429,500 shares since the authorization at
a total cost of $15.0 million.
Restricted Stock Awards and Stock Option Plans - The Company
has three stock-based compensation plans that provide for the
granting of restricted stock, stock options, or a combination of
both to officers and employees. Unearned stock compensation cost
for restricted stock awards and stock options is measured as the
excess, if any, of the quoted market price of the Company's stock
at the date of the grant over the amount an employee must pay to
acquire the stock and is included in the accompanying financial
statements as a charge against Additional Paid-in Capital. The
unearned stock compensation is amortized over the vesting period
of the awards and amounted to approximately $604,000, $179,000
and $261,000 for the nine months ended December 31, 1998, and the
years ended March 31, 1998, and 1997, respectively. The
balance of Unearned Stock Compensation to be amortized in future
periods was $1.3 million and $2.2 million at December 31, 1998,
and March 31, 1998, respectively.
The Company's 1992 Restricted Stock Plan provides for awards
of shares of restricted stock to employees approved by a
committee of the Board of Directors. Under the plan, 712,000
shares of Common Stock have been reserved for issuance, of which
121,076 were available for grant at December 31, 1998. Shares
granted under the plan vest 33 1/3% on the third, fourth, and
fifth anniversary date of grant. During the nine months ended
December 31, 1998, no awards were made under the plan, while
5,000 awards with a weighted average value at the time of issue
of $13.444 per share and 31,000 awards with a weighted average
value at the time of issue of $7.679 per share were made during
the years ended March 31, 1998 and 1997, respectively. During
the nine months ended December 31, 1998, restrictions on 12,804
shares expired. On December 31, 1998, restrictions remained on
182,500 shares.
The 1992 Stock Option Plan provides for grants of incentive
and nonqualified options to employees approved by a committee of
the Board of Directors. Options granted under the plan have a
maximum term of ten years and are exercisable, subject to
continued employment, under terms and conditions set forth by the
committee. As of December 31, 1998, the number of shares
reserved for issuance under the plan was 9,600,000 of which
2,586,344 were available for grant.
The Company does not expect to issue any additional awards
under its 1992 Restricted Stock Plan and its 1992 Stock Option
Plan.
In 1998, the Company amended its 1998 Restricted Stock Plan
to become the 1998 Equity Incentive Plan and permit the granting
of both restricted stock awards and stock option awards under the
plan to employees approved by a committee of the Board of
Directors. The plan also authorizes the Chief Executive Officer
to grant stock options and restricted stock awards to non-officer
employees. As of December 31, 1998, 3,200,000 shares of Common
Stock have been reserved for issuance under the plan, of which
2,698,500 were available for grant. Restricted shares granted
under the plan vest 33 1/3% on the third, fourth and fifth
anniversary date of the grant. During the nine months ended
December 31, 1998 and the year ended March 31, 1998, the Company
issued 11,000 restricted stock awards with a weighted average
value at the time of issue of $17.341 per share and 97,500
restricted stock awards with a weighted average value at the time
of issue of $16.500 per share, respectively. On December 31,
1998, restrictions remained on all of those restricted stock
awards.
The following table shows the changes in options outstanding
under all plans for the nine months ended December 31, 1998, and
the years ended March 31, 1998, and March 31, 1997:
At 85% of Market At or Above Market
----------------- ---------------------
Weighted Weighted
Shares Avg. Shares Avg.
Price Price
------ -------- ------ --------
Outstanding on April
1, 1996 1,496,812 $ 1.741 3,052,800 $ 2.653
Granted 64,000 6.481 625,000 7.654
Surrendered (84,628) 1.970 (363,960) 3.001
Exercised (169,802) 1.805 (469,280) 2.090
---------- ------- ---------- -------
Outstanding on March
31, 1997 1,306,382 1.950 2,844,560 3.800
Granted 28,000 14.602 2,244,900 16.124
Surrendered (32,460) 2.319 (264,900) 10.019
Exercised (335,060) 1.658 (412,980) 3.177
---------- ------ ---------- -------
Outstanding on March
31, 1998 966,862 2.405 4,411,580 9.756
Granted 241,000 7.823 324,500 9.271
Surrendered (6,560) 1.847 (365,100) 12.911
Exercised (154,602) 1.572 (164,905) 3.513
---------- ----- ---------- --------
Outstanding on
December 31, 1998 1,046,700 $3.779 4,206,075 $ 9.690
========== ====== ========== ========
Exercisable at December
31, 1998 672,340 $2.199 1,358,555 $ 6.553
========== ====== ========== ========
In October 1998, the Company repriced the exercise price on
665,000 incentive options. The table above has been restated for
the nine months ended December 31, 1998 and the year ended March
31, 1998 to reflect the repriced amounts. The repricing had the
effect of changing the weighted average exercise price per share
of the "at or above market" options from $13.633 to $9.271 for
options granted during the nine months ended December 31, 1998
and from $17.943 to $16.124 for options granted during the year
ended March 31, 1998.
The following table summarizes information about stock
options outstanding at December 31, 1998:
OPTIONS OUTSTANDING OPTIONS
EXERCISABLE
- -------------------------------------------------- ------------------
Weighted
Average
Remaining Weighted Weighted
Range of Number Contractual Average Number Average
Exercise Outstan Life Exercise Exercis Exercise
Prices ding (Years) Price able Price
- ---------- ------- ----------- -------- ------- ---------
$1.5413-2.2188 726,420 4.62 $1.6621 651,380 $1.6217
2.2344-3.2813 1,479,310 6.27 2.7494 870,190 2.6833
3.3125-4.6250 110,225 7.05 3.8011 39,825 3.7346
4.7188-7.2500 440,620 8.66 6.0788 87,500 6.6099
7.5781-11.3125 1,020,200 8.78 8.1553 107,000 8.6638
12.3750-16.6250 288,500 7.22 14.2296 36,500 15.1865
17.1593-20.1875 1,187,500 8.75 20.0808 229,780 20.0772
- --------------- --------- --------- -------- -------- ---------
$1.5413-20.1875 5,252,775 7.36 $8.4990 2,022,175 $5.0505
=============== ========= ========== ======== ========= =========
Non-Employee Director Compensation - Effective September 1,
1998, the Board of Directors terminated the Non-employee Director
Stock Plan and adopted the Global Industries, Ltd. Non-Employee
Directors Compensation Plan (the "Directors Compensation Plan").
Under the Directors Compensation Plan, each non-employee director
may elect to defer receipt of all or part of his or her annual
retainer and meeting fees. In lieu of cash and accrued interest,
each non-employee director may elect to base the deferred fees on
Stock Units which have the same value as Common Stock and
increase and decrease in value to the full extent of any increase
or decrease in the value of the Common Stock. Also, each non-
employee director may receive up to $20,000 of his or her annual
retainer and meeting fees in shares of Common Stock. With
respect to annual retainer fees and meeting fees earned after
December 31, 1998, each non-employee director must elect to
receive at least $20,000 in Common Stock or Stock Units. The
maximum number of shares of Common Stock that may be issued under
the plan is 25,000. As of December 31, 1998, no shares have been
issued under the plan.
Prior to the effective date of the Directors Compensation
Plan, the Non-Employee Director Stock Plan provided that each
director of the Company who is not an employee receive 4,000
shares of Common Stock on August 1 of each year, subject to an
annual limitation that the aggregate fair market value of shares
transferred may not exceed 75% of such director's cash
compensation for services rendered with respect to the
immediately preceding twelve-month period. The plan specified
that a maximum of 80,000 shares of Common Stock may be issued
under the plan. During the nine months ended December 31, 1998
and the years ended March 31, 1998 and 1997, 5,755, 3,608, and
6,756 shares, respectively, were issued under the plan. Non-
employee director stock compensation expense was $69,000,
$55,000, and $50,000 for the nine months ended December 31, 1998
and the years ended March 31, 1998, and March 31, 1997,
respectively.
1995 Employee Stock Purchase Plan - The Global Industries,
Ltd. 1995 Employee Stock Purchase Plan ("Purchase Plan") provides
a method for substantially all employees to voluntarily purchase
a maximum of 2,400,000 shares of the Company's Common Stock at
favorable terms. Under the Purchase Plan, eligible employees may
authorize payroll deductions that are used at the end of the
Option Period to acquire shares of Common Stock at 85% of the
fair market value on the first or last day of the Option Period,
whichever is lower. In August 1997, shareholders approved an
amendment to the plan whereby the plan has a twelve month and a
six month Option Period. In October 1998, the Board of Directors
further amended the plan effective December 31, 1998, to, among
other items, change the twelve-month Option Period to begin
January 1 of each year and the six-month Option Period to begin
July 1 of each year. For the twelve months ending March 31,
1999, 320 employees are expected to purchase 68,000 shares at a
cost to be determined by the closing market price on that date.
For the year ended March 31, 1998, 662 employees purchased
184,065 shares at a weighted average cost of $10.225 per share.
For the year ended March 31, 1997, 213 employees purchased
153,720 shares at a weighted average cost of $4.582 per share.
Proforma Disclosure - In accordance with APB 25,
compensation cost has been recorded in the Company's financial
statements based on the intrinsic value (i.e., the excess of the
market price of stock to be issued over the exercise price) of
restricted stock awards and shares subject to options.
Additionally, under APB 25, the Company's employee stock purchase
plan is considered noncompensatory and, accordingly, no
compensation cost has been recognized in the financial
statements. Had compensation cost for the Company's grants under
stock-based compensation arrangements for the nine months ended
December 31, 1998, and the years ended March 31, 1998, and March
31, 1997, been determined consistent with SFAS 123, the Company's
net income and net income per share amounts for the respective
periods would approximate the following proforma amounts (in
thousands, except per share data):
Nine Months Ended Year Ended March 31,
December 31,
------------------- -------------------------------------
1998 1998 1997
---- ---- ----
As As
Reported Proforma Reported Proforma Reported Proforma
-------- -------- -------- -------- -------- --------
Net income $38,971 $36,341 $57,303 $55,474 $33,932 $32,950
======== ======== ======== ======== ======== ========
Net income
per share
Basic $ 0.43 $ 0.40 $0.63 $ 0.61 $ 0.44 $ 0.42
Diluted $ 0.42 $ 0.39 $0.61 $ 0.59 $ 0.42 $ 0.41
======== ======== ======== ======== ======== =======
The weighted-average fair value of options that were granted
during the nine months ended December 31, 1998 was $5.02. The
fair value of each option granted is estimated on the date of the
grant using the Black-Scholes option pricing model with the
following assumptions: (i) dividend yield of 0%, (ii) expected
volatility of 56.06%, (iii) risk-free interest rate of 5.31%, and
(iv) expected life of 7.00 years.
The weighted-average fair value of options granted during
the year ended March 31, 1998 was $10.26. The fair value of each
option granted is estimated on the date of the grant using the
Black-Scholes option pricing model with the following
assumptions: (i) dividend yield of 0%, (ii) expected volatility
of 48.5%, (iii) risk-free interest rate of 6.30%, and (iv)
expected life of 6.50 years.
The weighted-average fair value of options granted during
the year ended March 31, 1997 was $7.81. The fair value of each
option granted is estimated on the date of grant using the Black-
Scholes option pricing model with the following assumptions: (i)
dividend yield of 0%, (ii) expected volatility of 18.94%, (iii)
risk-free interest rate of 6.89%, and (iv) expected life of 7.75
years.
Basic and Diluted Net Income Per Share - The following table
presents the reconciliation between basic shares and diluted
shares (in thousands, except per share data):
Weighted- Earnings
Average Shares Per Share
---------------------------- --------------
Net Income Basic Incremental Diluted Basic Diluted
---------- ----- ----------- ------- ----- -------
Nine months ended $38,971 91,498 2,310 93,808 $0.43 $0.42
December 31, 1998
Year ended
March 31, 1998 57,303 91,110 2,762 93,872 0.63 0.61
Year ended
March 31,1997 33,932 77,746 3,001 80,747 0.44 0.42
Options to purchase 1,356,000 shares of common stock, at an
exercise price range of $14.625 to $20.188 per share, were
outstanding during the nine months ended December 31, 1998, but
were not included in the computation of diluted EPS because the
options' exercise prices were greater than the average market
price of the common shares.
Options to purchase 1,859,100 shares of common stock, at an
exercise price range of $15.3750 to $21.9375 per share, were
outstanding during the year ended March 31, 1998, but were not
included in the computation of diluted EPS because the options'
exercise prices were greater than the average market price of the
common shares.
Options to purchase 56,500 shares of common stock, at an
exercise price range of $8.8125 to $11.1875 per share were
outstanding during the year ended March 31, 1997, but were not
included in the computation of diluted EPS because the options'
exercise prices were greater than the average market price of the
common shares.
8. Industry Segment and Geographic Information
The Company operates primarily in the offshore oil and gas
construction industry. However, the Company has used a
combination of factors to identify its reportable segments as
required by Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related
Information" ("SFAS 131"). The overriding determination of the
Company's segments is based on how the chief operating decision-
maker of the Company evaluates the Company's results of
operations. The underlying factors include types of service and
type of assets used to perform such services, operational
management, physical locations, degree of integration, and
underlying economic characteristics of the various types of work
the Company performs. The Company has identified eight segments
of which six meet the quantitative thresholds as required by SFAS
131 for disclosure. The reportable segments are Gulf of Mexico
Offshore Construction, Gulf of Mexico Diving, Gulf of Mexico
Marine Support, West Africa Construction, Asia Pacific
Construction, and Latin America Construction. Operating segments
that did not meet the quantitative thresholds for disclosure
include the Company's Middle East Construction and Gulf of Mexico
ROV/other offshore construction services.
Gulf of Mexico Offshore Construction is principally related
services performed using the Company's construction barges in the
Gulf of Mexico, including pipelay and derrick services. Gulf of
Mexico Diving is all diving services including those performed
using dive support vessels. Gulf of Mexico Marine Support
includes services performed using the Company's SWATH vessel,
Pioneer, liftboat services, crewboat services, and transportation
services. West Africa Construction is principally related
services performed using construction barges offshore West
Africa. Asia Pacific Construction includes a broad range of
offshore construction services, including pipelay and derrick,
diving, offshore support vessels, and ROV services. Latin
America Construction is primarily services and equipment provided
to CCC and the 49% equity in CCC's results (see Note 12). Many
of the Company's services are integrated, and thus, are performed
for other of the Company's segments, typically at rates charged
to external customers.
The following tables present information about the profit or
loss and assets of each of the Company's reportable segments for
the nine months ended December 31, 1998, and the years ended
March 31, 1998 and March 31, 1997. The information contains
certain allocations of corporate expenses that the Company deems
reasonable and appropriate for the evaluation of results of
operations. Segment assets do not include intersegment
receivable balances as the Company feels that such inclusion
would be misleading or not meaningful. Segment assets are
determined by where they are situated at period-end. Because the
Company offers an integrated range of services, some assets are
used by more than one segment. However, the Company feels that
allocating the value of those assets among segments is
impractical.
Gulf of Mexico
-------------------------
Offshore Marine West Asia Latin
Constr Support Africa Pacific American
uction Diving
-------- ------ ------- ------ ------- --------
(in thousands)
Nine Months Ended December 31, 1998
-----------------------------------
Revenues from
external
customers $132,299 $29,032 $23,425 $68,860 $38,015 $26,312
Intersegment
revenues 3,472 13,049 8,039 1,839 -- --
Interest
expense 1,982 590 440 994 533 368
Depreciation
and amortization 11,032 3,665 3,867 3,226 6,745 4,539
Profit before
tax 26,195 13,498 10,235 11,923 3,427 107
Segment assets
at period-end 249,424 44,370 88,150 69,972 149,998 34,461
Expenditures
for long-
lived assets 54,406 272 2,295 1,491 67,704 4
Year Ended March 31, 1998
-------------------------
Revenues from
external
customers $220,867 $27,795 $44,256 $27,348 $30,289 $9,506
Intersegment
revenues 843 34,700 7,286 1,635 -- --
Interest
expense 230 36 9 1,227 199 1,130
Depreciation
& amortization 12,368 4,012 4,060 2,462 1,945 3,384
Profit before
tax 44,230 24,404 19,443 3,712 197 (37)
Segment assets
at period-end 227,887 35,474 94,268 53,175 60,635 50,004
Expenditures
for long-
lived assets 95,705 8,323 19,584 4,258 48,905 20,366
Year Ended March 31, 1997
-------------------------
Revenues from
external
customers $124,088 $15,968 $24,934 $57,419 $4,460 $1,137
Intersegment
revenues 795 15,843 3,171 3,120 -- --
Interest
expense 257 -- 1 1,158 181 404
Depreciation
& amortization 9,123 2,142 2,260 3,114 167 712
Profit before
tax 17,379 8,736 10,003 13,821 (650) (36)
Segment assets
at period-end 120,207 23,803 81,263 48,801 11,032 46,325
Expenditures
for long-
lived assets 46,990 2,192 34,499 17,996 6,168 2,150
The following table reconciles the reportable segments'
revenues, profit or loss, assets, and other items presented
above, to the Company's consolidated totals.
Nine Months Year Ended
Ended
December 31, March 31,
------------------
1998 1998 1997
---- ---- ----
(in thousands)
Revenues
Total for reportable segments $344,436 $404,525 $250,935
Total for other segments 24,568 20,552 1,254
Elimination of
intersegment revenues (26,803) (45,176) (23,047)
--------- --------- ---------
Total consolidated revenues $342,201 $379,901 $229,142
========= ========= =========
Profit or loss before
income tax
Total for reportable
segments $ 65,385 $ 91,949 $ 49,253
Total for other segments (1,616) (501) 85
Unallocated corporate
(expenses) income (3,815) 237 (863)
--------- --------- ---------
Total consolidated
profit before tax $ 59,954 $ 91,685 $ 48,475
========= ========= =========
Assets at period-end
Total for reportable
segments $636,375 $521,443 $331,431
Total for other segments 45,153 51,838 4,367
Corporate assets 49,343 52,086 86,889
--------- --------- ---------
Total consolidated
assets $730,871 $625,367 $422,687
========= ========= =========
Other items:
Interest expense
Total for reportable
segments $ 4,907 $ 2,831 $ 2,001
Total for other segments 373 857 --
Unallocated corporate
interest expense 1,464 -- --
Interest allocated to
segments in excess
of consolidated interest
expense -- (1,443) (643)
-------- -------- --------
Total consolidated
interest expense $ 6,744 $ 2,245 $ 1,358
======== ======== ========
Depreciation and amortization
Total for reportable
segments $ 33,074 $ 28,231 $ 17,518
Total for other segments 1,549 779 12
Unallocated corporate
depreciation 979 566 473
-------- -------- --------
Total consolidated
depreciation and
amortization $ 35,602 $ 29,576 $ 18,003
======== ======== ========
Expenditures for segment
assets
Total for reportable
segments $126,172 $197,141 $109,995
Total for other segments 4,915 21,480 20,926
Corporate expenditures 1,794 866 675
-------- -------- --------
Total consolidated
expenditures $132,881 $219,487 $131,596
======== ======== ========
The following table presents the Company's revenues from
external customers attributed to operations in the United States
and foreign areas and long-lived assets in the United States and
foreign areas.
Nine Months Year Ended
Ended
December 31, March 31,
------------------
1998 1998 1997
---- ---- ----
(in thousands)
Revenues from external
customers
United States $186,022 $294,209 $166,126
Foreign areas 156,179 85,692 63,016
Long-lived assets at
period-end
United States 336,146 288,636 192,079
Foreign areas 199,240 143,588 51,836
9. Major Customers
Sales to various customers for the nine months ended
December 31, 1998, and the years ended March 31, 1998, and March
31, 1997, that amount to 10% or more of the Company's revenues,
follows:
Nine Months Year Ended March 31,
Ended
December 31, 1998 1998 1997
------------------ -------------------------------
Amt. % Amt. % Amt. %
------ ---- ------ ---- ------ ----
(dollars in thousands)
Customer A $35,310 10% $77,945 21% $44,773 20%
Customer B -- -- -- -- 26,766 12%
Customer C 68,968 20% 44,557 12% -- --
Sales to Customer A for all periods presented in the table were
reported by each of the Company's Gulf of Mexico segments and its
Asia Pacific Segment. Sales to Customer B were reported by the
Company's West Africa segment. Sales to Customer C were reported
by each of the Company's Gulf of Mexico segments and its West
Africa segment.
10. Supplemental Disclosures of Cash Flow Information
Supplemental cash flow information for the nine months ended
December 31, 1998 and years ended March 31, 1998 and 1997
follows:
Nine Months
Ended Year Ended
December 31, March 31,
-------------------
1998 1998 1997
---- ---- ----
(in thousands)
Cash paid for:
Interest, net of amount
capitalized $ 4,679 $ 2,252 $ 1,267
Income taxes 6,258 15,948 4,400
Non-cash investing and
financing activities:
In connection with
acquisitions,
liabilities assumed were
as follows:
Fair value of assets
acquired, net of
cash acquired $ -- $114,931 $13,829
Cash paid for net assets -- (103,805) (5,990)
Note payable issued to
seller in
connection with acquisition -- -- (1,100)
------- -------- --------
Fair value of
liabilities assumed $ -- $ 11,126 $ 6,739
======= ======== ========
Short-term debt issued
for acquisitions -- -- $ 4,700
Other Non-Cash Transactions:
During the nine months ended December 31, 1998 and the years
ended March 31, 1998, and March 31, 1997, the tax effect of the
exercise of stock options resulted in an increase in additional
paid-in capital and reductions to income taxes payable of $1.3
million, $4.5 million, and $1.3 million, respectively.
11. Interim Financial Information (Unaudited)
The following is a summary of consolidated interim financial
information for the nine months ended December 31, 1998, and the
twelve months ended March 31, 1998:
Three Months Ended
-------------------------------
June 30 Sept. 30 Dec. 31
------- -------- -------
(in thousands, except per share amounts)
Nine months ended December
31, 1998
Revenues $92,158 $120,575 $129,468
Gross profit 30,587 30,901 34,485
Net income 14,829 12,297 11,845
Net income per share
Basic 0.16 0.13 0.13
Diluted 0.16 0.13 0.13
Three Months Ended
-------------------------------------------
June 30 Sept. 30 Dec. 31 March 31
------- -------- ------- --------
(in thousands, except per share amounts)
Year Ended March 31, 1998
Revenues $63,176 $108,772 $120,435 $87,518
Gross profit 20,839 37,857 32,217 23,743
Net income 10,119 19,335 16,867 10,982
Net income per share
Basic 0.11 0.21 0.18 0.12
Diluted 0.11 0.21 0.18 0.12
12. Investment in and Advances to Unconsolidated Affiliate
On December 23, 1996, the Company acquired from a subsidiary
of J. Ray McDermott, S.A. a 49% ownership interest in CCC
Fabricaciones y Construcciones, S.A. de C.V., a leading provider
of offshore construction services in Mexico. The Company's
investment in CCC is accounted for under the equity method. In
the year ended March 31, 1997, the Company's equity in the
operating results of CCC from the date of acquisition was not
material.
Pro forma net income for the year ended March 31, 1997
assuming the acquisition of the 49% ownership interest in CCC had
occurred as of April 1, 1996, amounted to $32.4 million ($.40
diluted net income per share).
Following is a summary of the financial position of CCC as
of September 30, 1998 and December 31, 1997 and its results of
operations for the nine months ended September 30, 1998 and the
years ended December 31, 1997 and 1996 (in thousands):
September 30, December 31,
1998 1997
---- ----
Current assets $110,352 $63,819
Noncurrent assets, net 28,174 28,900
-------- -------
Total $138,527 $92,719
======== =======
Current liabilities $127,512 $65,681
Noncurrent liabilities 28,082 21,788
-------- -------
Total $155,594 $87,469
======== =======
Nine Months
Ended
September 30, Year Ended December 31,
-----------------------
1998 1997 1996
---- ---- ----
Revenues $177,799 $150,482 $156,854
Gross profit 12,411 24,595 24,560
Net income (loss) (14,061) (3,375) (2,129)
During the nine months ended December 31, 1998, and the
years ended March 31, 1998 and 1997, the Company advanced funds
to CCC (under interest bearing and non-interest bearing
arrangements), provided barge charters, diving and other
construction support services to CCC and was reimbursed for
expenditures paid on behalf of CCC. Included in the accompanying
December 31, 1998, and March 31, 1998 balance sheets are
receivables from CCC totaling $18.8 million and $22.9 million,
respectively. Revenues and expense reimbursements relating to
transactions with CCC approximated $26.3 million and $0.6
million, respectively, for the nine months ended December 31,
1998 ($9.5 million and $15.1 million, respectively, for the year
ended March 31, 1998, and $1.1 million and $23.6 million,
respectively, for the year ended March 31, 1997). No interest
income related to advances to CCC was recognized during the nine
months ended December 31, 1998. For the years ended March 31,
1998 and 1997, interest income related to advances to CCC
approximated $0.4 million and $0.7 million, respectively.
Additionally, the Company is a guarantor of certain indebtedness
and other obligations of CCC as described in Note 6.
Subsequent to December 31, 1998, Global reached agreement in
principal with its partner to restructure CCC.
Under the restructuring agreement, its partner, through the
assumption of CCC debt, will contribute additional capital of
approximately $16.5 million to CCC. Global, through the
forgiveness of advances and receivables due from CCC, will
contribute additional capital of approximately $15.8 million to
CCC. Among other provisions, CCC will also dispose of its
industrial construction division and subject to due diligence,
enter into a certain fabrication contract that will be
contributed by an affiliate of its partner.
13. 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 included 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 $103.8 million (consisting
of the purchase price of $102.0 million, and directly related
acquisition costs of $1.8 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 1998 financial statements
since the date of acquisition.
The following unaudited pro forma income statement data for
the years ended March 31, 1998 and 1997 reflects the effect of
the acquisition assuming it occurred effective as of the
beginning of each year presented:
Year Ended
March 31,
1998 1997
---- ----
(in thousands, except per share data)
Revenues $415,257 $337,790
Net income 55,533 27,265
Net income per
share:
Basic $ 0.61 $ 0.35
Diluted 0.59 0.34
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this Item is incorporated by
reference to the Company's definitive Proxy Statement to be filed
pursuant to Regulation 14A under the Securities Act of 1934 in
connection with the Company's 1999 Annual Meeting of
Shareholders. See also "Item (Unnumbered). Executive Officers of
the Registrant" appearing in Part I of this Annual Report.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item is incorporated by
reference to the Company's definitive Proxy Statement to be filed
pursuant to Regulation 14A under the Securities Act of 1934 in
connection with the Company's 1999 Annual Meeting of
Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information required by this Item is incorporated by
reference to the Company's definitive Proxy Statement to be filed
pursuant to Regulation 14A under the Securities Act of 1934 in
connection with the Company's 1999 Annual Meeting of
Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item is incorporated by
reference to the Company's definitive Proxy Statement to be filed
pursuant to Regulation 14A under the Securities Act of 1934 in
connection with the Company's 1999 Annual Meeting of
Shareholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
(a) 1. Financial Statements
The following financial statements included on pages
31 through 35 in this Annual Report are for the fiscal
period ended December 31, 1998.
Independent Auditors' Report.
Consolidated Balance Sheets as of December 31, 1998,
and March 31, 1998.
Consolidated Statements of Operations for the nine
months ended December 31, 1998, and the years ended
March 31, 1998, and March 31, 1997.
Consolidated Statements of Shareholders' Equity for
the nine months ended December 31, 1998, and the years
ended March 31, 1998, and March 31, 1997.
Consolidated Statements of Cash Flows for the nine
months ended December 31, 1998, and the years ended
March 31, 1998, and March 31, 1997.
Consolidated Statements of Comprehensive Income for
the nine months ended December 31, 1998, and the years
ended March 31, 1998, and March 31, 1997.
Notes to Consolidated Financial Statements.
2. Financial Statement Schedules
All financial statement schedules are omitted because
the information is not required or because the
information required is in the financial statements or
notes thereto.
3. Exhibits.
Pursuant to Item 601(B)(4)(iii), the Registrant agrees
to forward to the commission, upon request, a copy of
any instrument with respect to long-term debt not
exceeding 10% of the total assets of the Registrant and
its consolidated subsidiaries.
The following exhibits are filed as part of this
Annual Report:
Exhibit
Number
3.1 - Amended and
Restated Articles of Incorporation
of Registrant as amended,
incorporated by reference to
Exhibits 3.1 and 3.3 to the Form S-
1 Registration Statement filed by
the Registrant (Reg. No 33-56600
3.2 - Bylaws of
Registrant, incorporated by
reference to Exhibit 3.2 to the
Form S-1 filed by Registrant (Reg.
No. 33-56600).
4.1 - Form of Common
Stock certificate, incorporated by
reference to Exhibit 4.1 to the
Form S-1 filed by Registrant (Reg.
No. 33-56600).
10.1 - Global
Industries, Ltd. 1992 Stock Option
Plan, incorporated by reference to
Exhibit 10.1 to the Form S-1 filed
by Registrant (Reg. No. 33-56600).
10.2 - Global
Industries, Ltd. Profit Sharing and
Retirement Plan, as amended,
incorporated by reference to
Exhibit 10.2 to the Form S-1 filed
by Registrant (Reg. No. 33-56600).
10.3 - Global
Industries, Ltd. Non-Employee
Director Stock Plan, as amended
incorporated by reference to
Exhibit 10.3 to the Registrant's
Annual Report on Form 10-K for the
fiscal year ended March 31, 1996.
10.4 - Agreement of
Lease dated May 1, 1992, between
SFIC Gulf Coast Properties, Inc.
and Global Pipelines PLUS, Inc.,
incorporated by reference to
Exhibit 10.6 to the Form S-1 filed
by Registrant (Reg. No. 33-56600).
10.7 - Lease Extension
and Amendment Agreement dated
January 1, 1996, between Global
Industries, Ltd. and William J.
Dore' relating to the Lafayette
office and adjacent land
incorporated by reference to
Exhibit 10.7 to the Registrant's
Annual Report on Form 10-K for the
fiscal year ended March 31, 1996.
10.11 - Agreement
between Global Divers and
Contractors, Inc. and Colorado
School of Mines, dated October 15,
1991, incorporated by reference to
Exhibit 10.20 to the Form S-1 filed
by Registrant (Reg. No. 33-56600).
10.12 - Sublicense
Agreement between Santa Fe
International Corporation and
Global Pipelines PLUS, Inc. dated
May 24, 1990, relating to the
Chickasaw's reel pipelaying
technology, incorporated by
reference to Exhibit 10.21 to the
Form S-1 filed by Registrant (Reg.
No. 33-56600).
10.13 - Non-
Competition Agreement and
Registration Rights Agreement
between the Registrant and William
J. Dore', incorporated by reference
to Exhibit 10.23 to the Form S-1
filed by Registrant (Reg. No.
33-56600).
10.14 - Global
Industries, Ltd. Restricted Stock
Plan, incorporated by reference to
Exhibit 10.25 to the Form S-1 filed
by Registrant (Reg. No. 33-56600).
10.15 - Capital
Construction Fund Agreement by and
between the United States of
America, represented by the
Secretary of Transportation, acting
by and through the Maritime
Administrator and Global
Industries, Ltd., incorporated by
reference to Exhibit 10.18 to the
Registrant's Annual Report on Form
10-K for the fiscal year ended
March 31, 1994.
10.16 - Second
Amendment to the Global Industries,
Ltd. Profit Sharing Plan,
incorporated by reference to
Exhibit 10.19 to the Registrant's
Registration Statement on Form S-1
(Reg. No. 33-81322).
10.17 - Global
Industries, Ltd. 1995 Employee
Stock Purchase Plan incorporated by
reference to Exhibit 10.20 to the
Registrant's Annual Report on Form
10-K for the fiscal year ended
March 31, 1995.
10.18 - Trust
Indenture relating to United States
Government Guaranteed Ship
Financing Obligations between
Global Industries, Ltd., shipowner,
and Hibernia National Bank,
Indenture Trustee, dated as of
September 27, 1994 incorporated by
reference to Exhibit 10.22 to the
Registrant's Annual Report on Form
10-K for the fiscal year ended
March 31, 1995.
10.19 - Amendment
to Global Industries, Ltd. 1992
Stock Option Plan incorporated by
reference to Exhibit 10.23 to the
Registrant's Annual Report on Form
10-K for the fiscal year ended
March 31, 1996.
10.20 - Restated Credit Agreement dated as
of April 17, 1997 by, and Among
Bank One, National Association, as
agent for lenders Global
Industries, Ltd. and its
Subsidiaries, incorporated by
reference to Exhibit 10.20 to the
Registrant's Annual Report on Form
10-K for the fiscal year ended
March 31, 1997.
10.21 - Trust
Indenture relating to United States
Government Guaranteed Ship
Financing Obligations between
Global Industries, Ltd., shipowner,
and First National Bank of
Commerce, Indenture Trustee, dated
as of August 15, 1996,
incorporated by reference to
Exhibit 10.21 to the Registrant's
Annual Report on Form 10-K for the
fiscal year ended March 31, 1997.
10.22 - Form of
Indemnification Agreement between
the Registrant and each of the
Registrant's directors,
incorporated by reference to
Exhibit 10.22 to the Registrant's
Annual Report on Form 10-K for the
fiscal year ended March 31, 1997.
10.23 - Asset
Purchase Agreement between Global
Industries, Ltd. and J. Ray
McDermott, Inc. dated as of
December 23, 1996 incorporated by
reference to Exhibit 2.1 to the
Registrant's Current Report on Form
8-K dated February 12, 1997.
10.24 - Barge and
Crane Purchase Agreement between
Global Industries, Ltd. and Hydro
Marine Services, Inc. dated as of
December 23, 1996 incorporated by
reference to Exhibit 2.2 to the
Registrant's Current Report on Form
8-K dated February 12, 1997.
10.25 - Barge
Purchase Option Agreement between
Global Industries Ltd. and Hydro
Marine Services, Inc. dated as of
December 23, 1996 incorporated by
reference to Exhibit 2.3 to the
Registrant's Current Report on Form
8-K dated February 12, 1997.
10.26 - 1996
Amendment to Global Industries,
Ltd. 1995 Employee Stock Purchase
Plan, incorporated by reference to
Exhibit 10.26 to the Registrant's
Annual Report on Form 10-K for the
fiscal year ended March 31, 1997.
10.27 - Amendment
Assignment and Assumption of
Authorization Agreement relating to
United States Government Ship
Financing obligations between
Global Industries, Ltd., shipowner,
and First National Bank of
Commerce, Indenture Trustee, dated
as of October 23, 1996,
incorporated by reference to
Exhibit 10.27 to the Registrant's
Annual Report on Form 10-K for the
fiscal year ended March 31, 1997.
10.28 - Global Industries, Ltd. 1998 Equity
Incentive Plan incorporated by
reference to exhibit 10.28 to the
Registrant's Annual Report on Form
10K for the fiscal year ended March
31, 1998.
10.29 - First Amendment
to Restated Credit Agreement dated
as of June 23, 1997 by and among
the Registrant, certain of its
subsidiaries, Bank One, Louisiana,
National Association and the other
lenders named therein; Second
Amendment to Restated Credit
Agreement dated as of November 18,
1997 by and among the Registrant,
certain of its subsidiaries, Bank
One, Louisiana, National
Association and the other lenders
named therein; and Third Amendment
to Restated Credit Agreement dated
as of April 8, 1998 by and among
the Registrant, certain of its
subsidiaries, Bank One, Louisiana,
National Association and the other
lenders named therein incorporated
by reference to exhibit 10.29 to
the Registrant's Annual Report on
Form 10K for the fiscal year ended
March 31, 1998.
10.31 - Acquisition
Agreement among the Registrant Sub
Sea International and Dresser
Industries, dated, June 24, 1997,
incorporated by reference to
Exhibit 21 to the Registrant's
current report on Form 8-K dated
August 8, 1997.
10.32 - Facilities Agreement (related to
Carlyss Facility) by and between
the Registrant and Lake Charles
Harbor and Terminal District dated
as of November 1, 1997,
incorporated by reference to
Exhibit 10.2 to Registrant's
Quarterly Report on Form 10-Q for
the quarterly period ended December
31, 1997.
10.33 - Ground Lease and Lease-Back
Agreement (related to Carlyss
Facility) by and between the
Registrant and Lake Charles Harbor
and Terminal District dated as of
November 1, 1997, incorporated by
reference to Exhibit 10.3 to
Registrant's Quarterly Report on
Form 10-Q for the quarterly period
ended December 31, 1997.
10.34 - Trust
Indenture (related to Carlyss
Facility) by and between Lake
Charles Harbor and Terminal
District and First National Bank of
Commerce, as Trustee, dated as of
November 1, 1997, incorporated by
reference to Exhibit 10.4 to
Registrant's Quarterly Report on
Form 10-Q for the quarterly period
ended December 31, 1997.
10.35 - Pledge and Security Agreement
(related to Carlyss Facility) by
and between Registrant and Bank
One, Louisiana, National
Association, dated as of November
1, 1997, incorporated by reference
to Exhibit 10.5 to Registrant's
Quarterly Report on Form 10-Q for
the quarterly period ended December
31, 1997.
10.36 - Fourth Amendment
to Restated Credit Agreement dated
September 16, 1998 by and among the
Registrant, certain of its
subsidiaries, Bank One, Louisiana,
National Association and the other
lenders named therein, incorporated
by reference to Exhibit 10.1 to
Registrant's Quarterly Report on
Form 10-Q for the Quarterly period
ended September 30, 1998.
10.37# - Global
Industries, Ltd. Non-Employee
Directors Compensation Plan
incorporated by reference to
Exhibit 4.1 to Registrant's
Registration Statement on Form S-8
(Reg. No. 333-69949).
* 10.38 - Fifth Amendment
to Restated Credit Agreement dated
March 30, 1999 by and among the
Registrant, certain of its
subsidiaries, Bank One, Louisiana,
National Association, and the
lenders named therein.
* 21.1 - Subsidiaries of the Registrant.
* 23.1 - Consent of Deloitte & Touche LLP.
* 27.1 - Financial Data Schedule
*Filed herewith.
#Management Compensation Plan or Agreement.
(a) Reports on Form 8-K.
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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/ PETER S. ATKINSON
___________________________________
Peter S. Atkinson
Vice President, Chief Financial Officer
(Principal Financial and Accounting Officer)
March 31 , 1999
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
/s/ WILLIAM J. DORE'
- ---------------------
William J. Dore' Chairman of the Board,
President, March 31, 1999
Chief Executive Officer and
Director
/s/ JAMES C. DAY
- --------------------- Director March 31, 1999
James C. Day
/s/ MYRON J. MOREAU
- --------------------- Director March 31, 1999
Myron J. Moreau
/s/ EDWARD P. DJEREJIAN
- ------------------------ Director March 31, 1999
Edward P. Djerejian
/s/ MICHAEL J. POLLOCK
- ------------------------ Director March 31, 1999
Michael J. Pollock
/s/ PETER S. ATKINSON
- ------------------------ Vice President, Chief March 31, 1999
Peter S. Atkinson Officer (Principal Financial
and Accounting Officer)
EXHIBIT 10.38
FIFTH AMENDMENT TO RESTATED CREDIT AGREEMENT
THIS FIFTH AMENDMENT TO RESTATED CREDIT AGREEMENT
(hereinafter referred to as the "Fifth Amendment") dated as of
the 30th day of March, 1999 by and among GLOBAL INDUSTRIES, LTD.,
a Louisiana corporation (the "Borrower"), GLOBAL PIPELINES PLUS,
INC., a Louisiana corporation ("Plus"), GLOBAL DIVERS AND
CONTRACTORS, INC., a Louisiana corporation ("Divers"), GLOBAL
MOVIBLE OFFSHORE, INC., a Louisiana corporation ("Movible"),
PIPELINES, INCORPORATED, a Louisiana corporation ("Pipelines"),
GLOBAL INDUSTRIES OFFSHORE, INC., a Delaware corporation
("Industries Offshore") and GLOBAL INTERNATIONAL VESSELS, LTD., a
Cayman Islands corporation ("International Vessels") (Plus,
Divers, Movible, Pipelines, Industries Offshore and International
Vessels are collectively called the "Guarantors"), BANK ONE,
LOUISIANA, NATIONAL ASSOCIATION, a national banking association
("Bank One"), ABN AMRO BANK N.V. ("ABN"), CREDIT LYONNAIS NEW
YORK BRANCH ("CL"), THE FUJI BANK, LIMITED, HOUSTON AGENCY
("Fuji"), HIBERNIA NATIONAL BANK ("Hibernia"), PARIBAS
("Paribas"), WHITNEY NATIONAL BANK ("Whitney") and WELLS FARGO
BANK NATIONAL ASSOCIATION ("Wells Fargo") (Bank One, ABN, CL,
Fuji, Hibernia, Paribas, Whitney and Wells Fargo are hereinafter
referred to collectively as "Banks", and individually as "Bank")
and Bank One, as Agent (in such capacity, the "Agent") , ABN as
Syndication Agent (in such capacity, the "Syndication Agent") and
CL as Documentation Agent (in such capacity, the "Documentation
Agent").
WHEREAS, Borrower, the Guarantors and the Bank One entered
into a Restated Credit Agreement dated as of April 17, 1997 (the
"Credit Agreement") under the terms of which Bank One agreed to
provide Borrower with a revolving loan facility in amounts of up
to $85,000,000.00; and
WHEREAS, Bank One subsequently assigned interest in the
Credit Agreement and the revolving commitment described therein
to ABN AMRO Bank N.V., Credit Lyonnais New York Branch, The Fuji
Bank, Limited, Houston Agency and Hibernia National Bank, (with
Bank One, the "Original Bank Group"); and
WHEREAS, Borrower, the Guarantors and the Original Bank
Group entered into a First Amendment to Restated Credit Agreement
dated as of June 23, 1997 (the "First Amendment"); and
WHEREAS, Borrower, the Guarantors and the Original Bank
Group entered into a Second Amendment to Restated Credit
Agreement dated as of November 18, 1997 (the "Second Amendment");
and
WHEREAS, as of April 8, 1998, Paribas and Whitney acquired
interests in the Credit Agreement and the Revolving Commitment
described therein (Paribas and Whitney, together with the
Original Bank Group are hereinafter called the "Second Bank
Group"); and
WHEREAS, Borrower, the Guarantors, and the Second Bank Group
entered into a Third Amendment to Restated Credit Agreement
dated as of April 9, 1998; and
WHEREAS, as of September 16, 1998, Wells Fargo acquired an
interest in the Credit Agreement and the Revolving Commitment
(Wells Fargo, together with the Second Bank Group are hereinafter
called the "Existing Bank Group"); and
WHEREAS, as of September 16, 1998, the Borrower, the
Guarantors and the Existing Bank Group entered into a Fourth
Amendment to Restated Credit Agreement; and
WHEREAS, the Agent, the Banks, the Borrower and the
Guarantors have agreed to further amend the Credit Agreement to
make certain additional changes thereto.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained the parties agree to amend the Credit
Agreement in the following respects:
1. Section 1 of the Credit Agreement is hereby amended in the
following respects:
(1) By deleting the definition of "Eurodollar Margin" and
inserting the following new definition in lieu thereof:
"Eurodollar Margin" shall mean, with respect
to each Eurodollar Loan:
(i) two and three-fourths percent
(2.75%) per annum whenever Borrower's ratio
of Funded Debt to EBITDA is greater than 2.50
to 1.0;
(ii) two and one-quarter percent (2.25%)
per annum whenever Borrower's ratio of Funded
Debt to EBITDA is greater than 2.25 to 1.0
but less than or equal to 2.50 to 1.0;
(iii) two percent (2%) per annum
whenever Borrower's ratio of Funded Debt to
EBITDA is greater than 2.0 to 1.0 but less
than or equal to 2.25 to 1.0;
(iv) one and three-fourths percent
(1.75%) per annum whenever Borrower's ratio
of Funded Debt to EBITDA is greater than 1.75
to 1.0 but less than or equal to 2.0 to 1.0;
(v) one and one-half percent (1.50%)
per annum whenever Borrower's ratio of Funded
Debt to EBITDA is greater than 1.25 to 1.0
but less than or equal to 1.75 to 1.0; or
(iv) one and one-quarter percent (1.25%)
per annum whenever Borrower's ratio of Funded
Debt to EBITDA is less than or equal to 1.25
to 1.0.
For the purposes of calculating the Eurodollar
Margin, Borrower's ratio of Funded Debt to EBITDA
shall be calculated as of the end of each fiscal
quarter, using information furnished on the
Borrower's Compliance Certificate, for the
preceding fiscal quarter with the first such
calculation to be made as of March 31, 1999 for
the fiscal quarter ended December 31, 1998.
(2) By deleting the definition of "Revolving Commitment" and
inserting the following new definition in lieu thereof:
""Revolving Commitment" shall mean (A) for
all Banks, (i) $250,000,000 from the Fifth
Amendment Effective Date through June 30, 2000;
(ii) $150,000,000 from July 1, 2000 through
June 30, 2001; and (iii) $100,000,000 from July 1,
2001 through June 30, 2002; and (B) as to any
Bank, its obligation to make Advances hereunder on
the Revolving Loan and purchase its Pro Rata Part
of participations in Letters of Credit issued
hereunder by the Agent in amounts not exceeding an
amount equal to its Revolving Commitment
Percentage times the Revolving Commitment in
existence at the time of determination."
(3) By deleting the definition of "Revolving Commitment
Percentage" and inserting the following new definition in lieu
thereof:
""Revolving Commitment Percentage" shall mean
for each Bank the percentage derived by dividing
its Revolving Commitment at the time of
determination by the Revolving Commitments of all
Banks at the time of determination. At the
Effective Date, the Revolving Commitment
Percentage of each Bank is as follows:
Bank One 16%
ABN 16%
Hibernia 16%
CL 15%
Fuji 12%
Whitney 12%
Paribas 6%
Wells Fargo 7%
(4) By deleting the definition of "Unused Fee Rate" and
inserting the following new definition in lieu thereof:
""Unused Fee Rate" shall mean the percentage
used to calculate the Unused Fee, which percentage
shall be:
(i) one-half of one percent (.50%) per
annum whenever Borrower's ratio of Funded
Debt to EBITDA is greater than 2.0 to 1.0;
(ii) three-eighths of one percent
(.375%) per annum whenever Borrower's ratio
of Funded Debt to EBITDA is greater than 1.75
to 1.0 but less than or equal to 2.0 to 1.0;
(iii) one-quarter of one percent
(.25%) per annum whenever Borrower's ratio of
Funded Debt to EBITDA is greater than 1.25 to
1.0 but less than or equal to 1.75 to 1.0;
and
(iv) one-fifth of one percent (.20%) per
annum whenever Borrower's ratio of Funded
Debt to EBITDA is less than or equal to 1.25
to 1.0.
For the purposes of calculating the Unused Fee
Rate, Borrower's ratio of Funded Debt to EBITDA
shall be calculated as of the end of each fiscal
quarter, using information furnished on the
Borrower's Compliance Certificate, for the
preceding fiscal quarter with the first such
calculation to be made as of March 31, 1999 for
the fiscal quarter ended December 31, 1998.
(5) By deleting the definition of "CCC Credit Agreement" and
inserting the following new definition in lieu thereof:
""CCC Credit Agreement" shall mean that
certain Restated Credit Agreement dated as of
March 30, 1999 among CCC Fabricaciones y
Construcciones S.A. de C.V., Bank One, as Agent,
and the other financial institutions parties
thereto."
2. Section 2 of the Credit Agreement is hereby amended in the
following respects:
(1) Subsection 2(c) is hereby deleted in its entirety and the
following inserted in lieu thereof:
(c) Letters of Credit. On the terms and
conditions hereinafter set forth, the Agent shall
from time to time during the period beginning on
the Effective Date and ending on the Maturity Date
upon request of Borrower issue (i) standby and/or
commercial letters of credit for the account of
Borrower for job performance and general corporate
purposes in such amounts as Borrower may request
but not to exceed in the aggregate face amount at
any time outstanding the sum of $100,000,000.00
inclusive of, as of any date, the face amount of
the Credit Enhancement Letter of Credit and all
Evergreen Letters of Credit. The term "Credit
Enhancement Letter of Credit" when used herein
shall mean that certain letter of credit dated
November 20, 1997, in the amount of $28,350,000
with an expiry date of June 30, 2002. The term
"Evergreen Letters of Credit" when used herein
shall mean letters of credit with an expiry date
of not more than one (1) year from issuance,
subject to automatic renewal but provided that the
final maturity of any such Letter of Credit shall
not extend beyond the Revolving Maturity Date. The
expiry date of the Credit Enhancement Letter of
Credit is subject to extension for additional
periods of one year or more ending on June 30 of
such year if, on or before 180 days prior to an
expiry date the Agent notifies Borrower in writing
that the Credit Enhancement Letter of Credit will
be extended. In the event the Banks decide not to
extend the Credit Enhancement Letter of Credit,
the Agent will notify Borrower on or before 180
days prior to the expiry date of the Banks"
intention not to extend such Credit Enhancement
Letter of Credit. The Evergreen Letters of Credit
shall automatically renew upon each such expiry
date unless the Agent notifies the Borrower in
writing on or before a date concurrent with the
expiry period notice required in any such issued
Letter of Credit that the Banks will not renew
such Evergreen Letter of Credit at the next expiry
date. The face amount of all Letters of Credit
(other than Letters of Credit issued in foreign
currency which are provided for hereinbelow)
issued and outstanding hereunder shall be
considered as non-interest bearing Advances under
the Revolving Commitment. From time to time one
or more of the Letters of Credit issued hereunder
may be issued in foreign currency (i.e., non-US
dollar) denominations (i.e., non-U.S. dollar
denominations), which Letters of Credit shall be
(i) treated as non-interest bearing Advances under
the Revolving Commitment in amounts equal to 120%
of the face amount of such Letters of Credit or
the U.S. dollar equivalent thereof as of any date,
and (ii) subject to the provisions of the Agent's
application and agreement for Letters of Credit,
including, but not limited to, the provisions of
such application and agreement regarding letters
of credit issued in foreign currencies. Each Bank
agrees that, upon issuance of any Letter of Credit
hereunder, it shall automatically acquire a
participation in the Agent's liability under such
Letter of Credit in an amount equal to such Bank's
Revolving Commitment Percentage of such liability,
and each Bank (other than Agent) thereby shall
absolutely, unconditionally and irrevocably
assume, as primary obligor and not as surety, and
shall be unconditionally obligated to Agent to pay
and discharge when due, its Revolving Commitment
Percentage of Agent's liability under such Letter
of Credit. Borrower hereby unconditionally agrees
to pay and reimburse the Agent for the amount of
each payment under any Letter of Credit at or
prior to the date on which payment is made by the
Agent to the beneficiary thereunder, without
presentment, demand, protest or other formalities
of any kind. Upon receipt from any beneficiary of
any Letter of Credit of any demand for payment
under such Letter of Credit, the Agent shall
promptly notify Borrower of the demand and the
date upon which such payment is to be made by the
Agent to such beneficiary in respect of such
demand. Forthwith upon receipt of such notice
from the Agent, Borrower shall advise the Agent
whether or not it intends to borrow hereunder to
finance its obligations to reimburse the Agent,
and if so, submit a Notice of Borrowing as
provided in Section 2(b) hereof."
(2) Subsection 2(d) is hereby deleted in its entirety and the
following inserted in lieu thereof:
(d) Procedure for Obtaining Letters of
Credit. The amount and date of issuance, renewal,
extension or reissuance of a Letter of Credit
pursuant to the Banks' commitment above in
Section 2(c) shall be designated by Borrower's
written request delivered to Agent at least three
(3) Business Days prior to the date of such
issuance, renewal, extension or reissuance.
Concurrently with or promptly following the
delivery of the request for a Letter of Credit
(other than the Credit Enhancement Letter of
Credit), Borrower shall execute and deliver to the
Agent an application and agreement with respect to
the Letters of Credit, said application and
agreement to be in the form used by the Agent.
The Agent shall not be obligated to issue, renew,
extend or reissue such Letters of Credit if (i)
the amount thereon when added to the amount of the
outstanding Letters of Credit exceeds an amount
equal to $100,000,000 inclusive of, the face
amount of all Credit Enhancement Letters of Credit
and Evergreen Letters of Credit, or (ii) the
amount thereof when added to the Total
Outstandings would exceed the Revolving
Commitment. Once issued, the Agent shall have the
authority to renew and extend from time to time
the expiry date of any Letter of Credit without
the requirement of the joinder of any of the
Banks, except that the Agent shall not renew or
extend the expiry date beyond the Revolving
Maturity Date. Borrower agrees to pay the Agent
for the benefit of the Banks commissions for
issuing the Letters of Credit (calculated
separately for each Letter of Credit) in an amount
equal to the face amount of each such Letter of
Credit times the then effective Eurodollar Margin
minus one-eighth of one percent (.125%) per annum,
to be reduced pro rata if the expiry date is less
than twelve (12) months. Borrower agrees to pay
to Agent an additional fee equal to one-eighth of
one percent (.125%) per annum on the maximum face
amount of each Letter of Credit. For all new
Letters of Credit issued after the Fifth Amendment
Effective Date, such commissions shall be paid
quarterly in advance with the first such fee being
payable prior to the issuance of each Letter of
Credit and thereafter at the end of each three (3)
month period while such Letter of Credit is
outstanding. For all Letters of Credit issued and
outstanding as of the Fifth Amendment Effective
Date, such new commission rate shall not apply
until the next anniversary date of such Letter of
Credit. Borrower further agrees to pay to the
Agent an amendment fee for any amendment to
letters of credit issued hereunder, said fee to be
in the amount of $50.00 per amendment and shall be
due upon the issuance of such amendment."
(3) By deleting Subsection 2(h) therefrom in its entirety.
3. Section 3 of the Credit Agreement is hereby amended by
deleting the first sentence of Subsection 3(b) thereof in its
entirety and substituting the following in lieu thereof:
"From and after the date of the Fourth Amendment
to Restated Credit Agreement, there shall be
outstanding eight notes: (i) one Revolving Note in the
aggregate face amount of $40,000,000 payable to the
order of Bank One, (ii) one Revolving Note in the
aggregate face amount of $40,000,000 payable to ABN,
(iii) one Revolving Note in the aggregate face amount
of $37,500,000 payable to the order of CL, (iv) one
Revolving Note in the aggregate face amount of
$30,000,000 payable to the order of Fuji, and (v) one
Revolving Note in the aggregate face amount of
$40,000,000 payable to the order of Hibernia, (vi) one
Revolving Note in the aggregate face amount of
$15,000,000 payable to the order of Paribas, (vii) one
Revolving Note in the aggregate face amount of
$30,000,000 payable to the order of Whitney and
(viii) one Revolving Note in the aggregate amount of
$17,500,000 payable to the order of Wells Fargo."
4. Section 9 of the Credit Agreement is hereby amended in the
following respects:
(1) By deleting Subsection 9(t) in its entirety and by inserting
the following in lieu thereof:
"(t) Fiscal Year. Borrowers fiscal year
ends December 31."
(2) By adding a new Subsection 9(v) thereto as follows:
"(v) Year 2000 Compliance. The Borrower has
(i) initiated a review and assessment of all areas
within its and each of its Subsidiaries' business
and operations that could be adversely affected by
the "Year 2000 Problem" (that is, the risk that
computer applications used by the Borrower or any
of its Subsidiaries may be unable to recognize and
perform properly date-sensitive functions
involving certain dates prior to and any date
after December 31, 1999), (ii) developed a plan
and timeline for addressing the Year 2000 Problem
on a timely basis, and (iii) to date, implemented
that plan in accordance with that timetable. The
Borrower reasonably believes that all of its
computer applications that are material to its or
any of its Subsidiaries' business and operations
will be able to perform adequately all
date-sensitive functions for all dates before and
after January 1, 2000 (that is, be "Year 2000
Compliant") prior to December 31, 1999, except to
the extent that a failure to do so could not
reasonably be expected to have Material Adverse
Effect."
5. Section 11 of the Credit Agreement is hereby amended by the
addition of a new Subsection 11(t) thereto as follows:
"(t) Year 2000 Compliance. The Borrower will
promptly notify the Agent in the event the Borrower
discovers or determines that any computer applications
that are material to its or any of its Subsidiaries'
business and operations will not be Year 2000 Compliant
prior to December 31, 1999, except to the extent that
such failure could not reasonably be expected to have a
Material Adverse Effect."
6. Section 12 of the Credit Agreement is hereby amended in the
following respects:
(1) By amending Subsection 12(g) thereof in the following
respects:
(i) By deleting Subsection 12(g)(viii)
thereof in its entirety and substituting the
following in lieu thereof:
"viii) guaranties of obligations
of CCC to Bank One, Texas, N.A. as Agent
for itself and other financial
institutions pursuant to that certain
Credit Agreement dated March 30, 1999
among CCC and Bank One, Texas, N.A., et
al. in an aggregate amount not to exceed
$21,000,000; or"
(ii) By deleting Subsection 12(g)(xi) in its
entirety and substituting the following two
Subsections in lieu thereof:
"(xi) indebtedness not in
excess of $150,000,000 in the form of
either a financing provided by the
Maritime Administration, United States
of America ("MARAD") or, a public or
private placement of a debt, provided,
that in connection therewith (i) there
is no principal amortization within the
first five (5) years of the closing of
such financing, (ii) such financing
shall rate pari passu with the Revolving
Commitment and (iii) providing that the
covenants and other obligations of any
such financing shall be no more
restrictive than the covenants and
agreements contained in the Credit
Agreement ; or
(xii) any renewals or
extensions, but not increases, of any or
all of the foregoing."
(2) By the addition of a new Subsection 12(p) thereto as
follows:
"(p) Maximum Funded Debt. Borrower will not
allow its ratio of Funded Debt to EBITDA to be
exceed 2.75 to 1.0, as of the end of any fiscal
quarter."
(3) Subsection 12(n) of the Credit Agreement is hereby deleted
in its entirety and the following inserted in lieu thereof:
(n) Sale of Assets. Neither Borrower nor
any Consolidated Subsidiary shall sell, transfer
or otherwise dispose of any assets in excess of
$5,000,000 in any fiscal year other than
(i) assets sold in the ordinary course of their
respective businesses and (ii) sales of notes
receivable or accounts receivable in amounts of up
to $50,000,000 at any one time to facilitate
contracts with deferred payments; provided,
however, that each such sale of notes receivable
or accounts receivable shall first be consented to
by Agent after review of the provisions of any
agreements with respect thereto, including but not
limited to, the amount of the discount involved."
7. Section 14 of the Credit Agreement is hereby amended by
deleting Subsections (h) and (i) thereof and substituting the
following in lieu thereof:
"(h) Indemnification. Banks agree to indemnify
the Agent, the Syndication Agent and the Documentation
Agent, ratably according to their respective Revolving
Commitments on a Pro Rata basis, from and against any
and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses
or disbursements of any proper and reasonable kind or
nature whatsoever which may be imposed on, incurred by
or asserted against the Agent, the Syndication Agent or
the Documentation Agent in any way relating to or
arising out of the Loan Documents or any action taken
or omitted by the Agent, the Syndication Agent or the
Documentation Agent under the Loan Documents, provided
that no Bank shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or
disbursements resulting from the Agent's, the
Syndication Agent's or the Documentation Agent's gross
negligence or willful misconduct. Each Bank shall be
entitled to be reimbursed by the Agent, the Syndication
Agent or the Documentation Agent for any amount such
Bank paid to either the Agent, the Syndication Agent or
the Documentation Agent under this Section 14(h) to the
extent either the Agent, the Syndication Agent or the
Documentation Agent has been reimbursed for such
payments by Borrower or any other Person. The parties
intend for the provisions of this Section to apply to
and protect the Agent, the Syndication Agent and the
Documentation Agent from the consequences of any
liability including strict liability imposed or
threatened to be imposed on Agent, the Syndication
Agent or the Documentation Agent as well as from the
consequences of its own negligence, whether or not that
negligence is the sole, contributing or concurring
cause of any such liability.
(i) Benefit of Section 14. The agreements
contained in this Section 14 are solely for the benefit
of the Agent, the Syndication Agent, the Documentation
Agent and the Banks and are not for the benefit of, or
to be relied upon by, Borrower, any affiliate of
Borrower or any other person."
8. Borrower agrees to pay to the Agent for the ratable benefit
of the Banks in consideration for this Fifth Amendment to
Restated Credit Agreement, an amendment fee equal to $625,000.00.
9. This Fifth Amendment shall be effective as of the date first
above written, but only upon satisfaction of the conditions
precedent set forth hereinbelow (the "Fifth Amendment Effective
Date").
10. The Banks hereby agree to waive the Event of Default that
occurred pursuant to Section 13(j) of the Credit Agreement as a
result of defaults under the CCC Credit Agreement prior to the
date hereof. The waiver contained herein is a waiver specific to
the provisions of Section 13(j) of the Credit Agreement and is
not a waiver of any other provision nor is it a waiver of any
other Default or Event of Default that may have occurred under
the provisions of the Credit Agreement as amended.
11. The obligation of the Banks hereunder shall be subject to
the following conditions precedent:
(1) Borrower's Execution and Delivery. Borrower and each
Guarantor shall have executed and delivered to the Agent for the
benefit of the Banks, this Fifth Amendment and other required
documents, all in form and substance satisfactory to Agent;
(2) Legal Opinion. The Agent shall have received from
Borrower's legal counsel a favorable legal opinion in form and
substance reasonably satisfactory to Agent and its counsel;
(3) Corporate Resolutions. The Agent shall have received
appropriate certified corporate resolutions of Borrower;
(4) Good Standing. The Agent shall have received evidence of
existence and good standing for Borrower;
(5) Amendments to Articles of Incorporation and Bylaws. The
Agent shall have received copies of all amendments to the
Articles of Incorporation of Borrower and each Guarantor made
since the Effective Date of the Credit Agreement, certified by
the Secretary of State of the State or Country of its
incorporation, and a copy of any amendments to the Bylaws of
Borrower and each Guarantor, made since the Effective Date of the
Credit Agreement, certified by Borrower and each Guarantor as
being true, correct and complete;
(6) Payment of Fees. The Agent shall have received payment in
full of all fees due on the date of execution of this Fifth
Amendment;
(7) Representation and Warranties. The representations and
warranties of Borrower and each Consolidated Subsidiary under
this Fifth Amendment are true and correct in all material
respects as of such date, as if then made (except to the extent
that such representations and warranties related solely to an
earlier date or the Majority Banks shall have consented to the
contrary);
(8) No Event of Default. No Event of Default shall have
occurred and be continuing nor shall any event have occurred or
failed to occur which, with the passage of time or service of
notice, or both, would constitute an Event of Default;
(9) Other Documents. Agent shall have received such other
instruments and documents incidental and appropriate to the
transaction provided for herein as Bank or its counsel may
reasonably request, and all such documents shall be in form and
substance reasonably satisfactory to the Agent; and
(10) Legal Matters Satisfactory. All legal matters incident to
the consummation of the transactions contemplated hereby shall be
reasonably satisfactory to special counsel for Agent retained at
the expense of Borrower.
12. Except to the extent its provisions are specifically
amended, modified or superseded by this Fifth Amendment, the
representations, warranties and affirmative and negative
covenants of the Borrower contained in the Credit Agreement are
incorporated herein by reference for all purposes as if copied
herein in full. The Borrower hereby restates and reaffirms each
and every term and provision of the Credit Agreement, as amended,
including, without limitation, all representations, warranties
and affirmative and negative covenants. Except to the extent its
provisions are specifically amended, modified or superseded by
this Fifth Amendment, the Credit Agreement, as amended, and all
terms and provisions thereof shall remain in full force and
effect, and the same in all respects are confirmed and approved
by the Borrower and the Banks.
13. Unless otherwise defined herein, all defined terms used
herein shall have the same meaning ascribed to such terms in the
Credit Agreement.
14. This Fifth Amendment may be executed in any number of
identical separate counterparts, each of which for all purposes
to be deemed an original, but all of which shall constitute,
collectively, one Agreement.
15. The Guarantors are executing this Fifth Amendment to both
indicate their consent to the execution hereof by the Borrower
and to reaffirm their obligations under their Guaranties.
16. WRITTEN CREDIT AGREEMENT. THE CREDIT AGREEMENT, AS AMENDED
BY THE FIRST AMENDMENT, THE SECOND AMENDMENT, THE THIRD
AMENDMENT, THE FOURTH AMENDMENT AND THIS FIFTH AMENDMENT,
REPRESENTS THE FINAL AGREEMENT BETWEEN AND AMONG THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN AND AMONG THE PARTIES.
IN WITNESS WHEREOF, the parties have caused this Fifth
Amendment to Restated Credit Agreement to be duly executed as of
the date first above written.
BORROWER:
GLOBAL INDUSTRIES, LTD.
a Louisiana corporation
By:
Name:
Title:
GUARANTORS:
GLOBAL PIPELINES PLUS, INC.;
GLOBAL DIVERS AND CONTRACTORS, INC.;
GLOBAL MOVIBLE OFFSHORE, INC.;
PIPELINES, INCORPORATED;
GLOBAL INDUSTRIES OFFSHORE, INC.; AND
GLOBAL INTERNATIONAL VESSELS, LTD.
By:
Name:
Title:
BANKS:
BANK ONE, LOUISIANA, NATIONAL
ASSOCIATION, a national banking association
By:
Rose M. Miller, Vice President
ABN AMRO BANK N.V.
By:
Name:
Title:
By:
Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH
By:
Name:
Title:
THE FUJI BANK, LIMITED
By:
Name:
Title:
HIBERNIA NATIONAL BANK
By:
Name:
Title:
PARIBAS
By:
Name:
Title:
By:
Name:
Title:
WHITNEY NATIONAL BANK
By:
Name:
Title:
WELLS FARGO BANK NATIONAL
ASSOCIATION
By:
Name:
Title:
AGENT:
BANK ONE, LOUISIANA, NATIONAL
ASSOCIATION, a national banking association
By:
Rose M. Miller, Vice President
SYNDICATION AGENT:
ABN AMRO BANK N.V.
By:
Name:
Title:
By:
Name:
Title:
DOCUMENTATION AGENT:
CREDIT LYONNAIS NEW YORK BRANCH
By:
Name:
Title:
EXHIBIT 21.1
Subsidiaries of the Registrant
(Global Industries, Ltd.)
NAME INCORPORATION
---- -------------
Global Divers and Contractors, Inc. Louisiana
Global Pipelines PLUS, Inc. Louisiana
Pipelines, Incorporated Louisiana
Global Movible Offshore, Inc. Louisiana
Pelican Transportation, Inc. Louisiana
The Red Adair Company, Inc. Louisiana
Global Industries Offshore, Inc. Delaware
Global Offshore International, Ltd. Cayman Islands
Global International Vessels, Inc. Cayman Islands
Norman Offshore Pipelines, Inc. Louisiana
Global Pipelines PLUS Nigeria, Ltd. Nigeria
Global Offshore Pty., Ltd. Australia
Global Industries Asia Pacific Pte. Ltd. Singapore
Yamado Enterprise, Sdn. Bhd. Brunei
PT Global Industries Asia-Pacific Indonesia
Global Asia Pacific Industries Sdn. Bhd. Malaysia
Subtec Asia, Ltd. Isle of Mann
Subtec Marine Services, Ltd. Cyprus
Subtec Laut Sdn. Bhd. Brunei
Subtec Offshore Support, Ltd. Cyprus
Subtec Middle East, Ltd. Delaware
Subtec National Company, LLC United Arab Emirates
CCC Fabricaciones y Construcciones, Mexico
S.A. de C.V. (1)
(1) CCC Fabricaciones y Construcciones, S.A. de C.V. is a 49%
owned, unconsolidated subsidiary.
All other subsidiaries are 100% owned.
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statement Nos. 33-58048, 33-89778 and 333-69949 of Global
Industries, Ltd. on Form S-8 of our report dated February 12,
1999 appearing in this Annual Report on Form 10-K of Global
Industries, Ltd. for the nine months ended December 31, 1998.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
March 26, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GLOBAL
INDUSTRIES, LTD.'S FINANCIAL STATEMENTS FOR THE NINE-MONTH TRANSITION PERIOD
ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
10-K.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 25,368
<SECURITIES> 0
<RECEIVABLES> 107,992
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 153,871
<PP&E> 535,386
<DEPRECIATION> 0
<TOTAL-ASSETS> 730,871
<CURRENT-LIABILITIES> 75,234
<BONDS> 208,607
0
0
<COMMON> 921
<OTHER-SE> 396,607
<TOTAL-LIABILITY-AND-EQUITY> 730,871
<SALES> 0
<TOTAL-REVENUES> 342,201
<CGS> 0
<TOTAL-COSTS> 246,228
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,744
<INCOME-PRETAX> 59,954
<INCOME-TAX> 20,983
<INCOME-CONTINUING> 38,971
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 38,971
<EPS-PRIMARY> .43
<EPS-DILUTED> .42
</TABLE>
