UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
Commission File Number: 2-56600
Global Industries, Ltd.
(Exact name of registrant as specified in its charter)
Louisiana 72-1212563
(State or other jurisdiction of incorporation or organization)(I.R.S.
Employer Identification No.)
107 Global Circle
P.O. Box 31936, Lafayette, LA 70593-1936
(Address of principal executive offices) (Zip Code)
(318) 989-0000
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. x Yes o No
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares of the Registrant's Common Stock
outstanding as of February 6, 1998 was 91,380,310.
Global Industries, Ltd.
Index - Form 10-Q
Part I
Item 1. Financial Statements - Unaudited
Independent Accountants' Report 3
Consolidated Statements of Operations 4
Consolidated Balance Sheets 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Part II
Item 1. Legal Proceedings 16
Item 6. Exhibits and Reports on Form 8-K 16
Signature 17
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Shareholders of
Global Industries, Ltd.
We have reviewed the condensed consolidated financial statements
of Global Industries, Ltd. and subsidiaries, as listed in the
accompanying index, as of December 31, 1997 and for the three-
month and nine-month periods ended December 31, 1997 and 1996.
These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical procedures to financial data and of making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to such condensed consolidated
financial statements for them to be in conformity with generally
accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Global
Industries, Ltd. and subsidiaries as of March 31, 1997, and the
related consolidated statements of operations, shareholders'
equity, and cash flows for the year then ended (not presented
herein); and in our report dated June 6, 1997 (June 24, 1997 as
to Note 13), we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated
balance sheet as of March 31, 1997 is fairly stated, in all
material respects, in relation to the consolidated balance sheet
from which it has been derived.
DELOITTE & TOUCHE LLP
February 6, 1998
New Orleans, Louisiana
Global Industries, Ltd.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
Quarter Ended Nine Months Ended
December 31, December 31,
1997 1996 1997 1996
Revenues $120,435 $ 56,776 $292,383 $179,539
Cost of Revenues 88,218 41,496 201,470 130,122
-------- -------- ------- -------
Gross Profit 32,217 15,280 90,913 49,417
Equity in Net Earnings
(Loss) of
Unconsolidated Affiliate 1,273 -- (854) --
Selling, General and
Administrative
Expenses 6,212 4,033 16,907 10,597
-------- ------- ------- -------
Operating Income 27,278 11,247 73,152 38,820
-------- ------- ------- -------
Other Income (Expense):
Interest Expense (965) (121) (1,459) (574)
Other 892 395 3,018 601
-------- ------- ------- -------
(73) 274 1,559 27
-------- ------- ------- -------
Income Before Income Taxes 27,205 11,521 74,711 38,847
Provision for Income Taxes 10,338 3,449 28,390 11,615
-------- ------- ------- --------
Net Income $ 16,867 $ 8,072 $ 46,321 $ 27,232
======== ======== ======== ========
Net Income Per Share:
Basic $ 0.18 $ 0.11 $ 0.50 $ 0.36
Diluted $ 0.18 $ 0.10 $ 0.49 $ 0.34
See Notes to Consolidated Financial Statements.
Global Industries, Ltd.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
December 31, March 31,
1997 1997
ASSETS
Current Assets:
Cash $ 27,115 $ 63,981
Escrowed funds, bond proceeds 1,404 19,112
Receivables 100,855 51,762
Advances to unconsolidated affiliate 23,740 13,913
Prepaid expenses and other 6,680 2,874
-------- --------
Total current assets 159,794 151,642
-------- --------
Escrowed Funds, Bond Proceeds 28,000 1,447
Property and Equipment, net 409,638 243,915
Other Assets:
Deferred charges, net 7,754 6,469
Investment in and advances to
unconsolidated affiliate 2,678 15,071
Other 3,246 4,143
-------- --------
Total other assets 13,678 25,683
-------- --------
Total $611,110 $422,687
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $ 2,159 $ 2,266
Accounts payable 63,623 29,828
Accrued liabilities 20,042 9,453
Accrued profit-sharing 4,689 3,566
Insurance payable 2,461 2,802
-------- --------
Total current liabilities 92,474 47,915
-------- --------
Long-Term Debt 135,730 40,947
Deferred Income Taxes 29,599 21,598
Commitments and Contingencies
Shareholders' Equity:
Preferred stock -- --
Common stock, issued and outstanding,
91,320,640 and 90,556,750 shares,
respectively 913 906
Additional paid-in capital 203,918 201,331
Translation adjustments (8,328) --
Retained earnings 156,304 109,990
-------- --------
Total shareholders' equity 353,307 312,227
-------- --------
Total $611,110 $422,687
======== ========
See Notes to Consolidated Financial Statements.
Global Industries, Ltd.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Nine Months Ended December 31,
1997 1996
Cash Flows From Operating Activities:
Net income $ 46,321 $ 27,232
Adjustments to reconcile net income
to net cash provided
by (used in) operating activities:
Depreciation and amortization 21,941 12,602
Deferred income taxes 8,000 4,500
Equity in net (earnings) loss of
unconsolidated affiliate 854 --
Other 94 12
Changes in operating assets and
liabilities
(net of acquisitions):
Receivables (34,014) (11,499)
Prepaid expenses and other (2,922) 985
Accounts payable and accrued
liabilities 35,980 12,119
--------- ---------
Net cash provided by (used in)
operating activities 76,254 45,951
--------- ---------
Cash Flows From Investing Activities:
Additions to property and equipment (94,384) (72,919)
Escrowed funds, bond proceeds (8,845) 226
Acquisition of business, net of cash
acquired (103,805) (5,990)
Acquisition of equity interest in
unconsolidated affiliate -- (201)
Net (advances to) repayment of
advances to unconsolidated affiliate 1,705 (23,231)
Additions to deferred charges (4,290) (3,464)
Other 791 (7,850)
---------- ---------
Net cash (used in) investing
activities (208,828) (113,429)
---------- ---------
Cash Flows From Financing Activities:
Proceeds from exercise of employee
stock plans 1,957 1,028
Net proceeds of long-term debt 94,676 67,315
--------- ---------
Net cash provided by financing
activities 96,633 68,343
--------- ---------
Effect of Exchange Rate Changes on Cash (925) --
--------- ---------
Cash:
Increase (Decrease) (36,866) 865
Beginning of period 63,981 5,430
--------- ----------
End of period $ 27,115 $ 6,295
========= ==========
Supplemental Cash Flow Information:
Interest paid, net of amount
capitalized $ 601 $ 721
Income taxes paid 10,703 3,093
Global Industries, Ltd.
Notes To Consolidated Financial Statements (Unaudited)
1. Basis of Presentation - The accompanying unaudited consolidated
financial statements include the accounts of Global Industries,
Ltd. and its wholly owned subsidiaries (the "Company").
Effective December 23, 1996, the Company acquired a 49% ownership
interest in CCC Fabricaciones y Construcciones, S.A. de C.V.
("CCC"), which is accounted for by the equity method.
In the opinion of management of the Company, all adjustments
(such adjustments consisting only of a normal recurring nature)
necessary for a fair presentation of the operating results for
the interim periods presented have been included in the unaudited
consolidated financial statements. Operating results for the
period ended December 31, 1997, are not necessarily indicative of
the results that may be expected for the year ending March 31,
1998. These financial statements should be read in conjunction
with the Company's audited consolidated financial statements and
related notes thereto included in the Company's Annual Report on
Form 10-K for the fiscal year ended March 31, 1997.
The accompanying consolidated financial statements have been
adjusted to reflect the two-for-one common stock split effected
in October 1997.
The financial statements required by Rule 10-01 of Regulation S-X
have been reviewed by independent public accountants as stated in
their report included herein.
2. 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 $104
million (consisting of the purchase price of $102 million, and
directly related acquisition costs of $2 million) was allocated
to the net assets acquired based on their estimated fair market
value. The results of operations of the acquired business
operations and assets are included in the accompanying 1997
financial statements since the date of acquisition.
The following unaudited pro forma income statement data for the
nine months ended December 31, 1997 and 1996 reflects the effect
of the acquisition assuming it occurred effective as of the
beginning of each period presented:
Nine Months Ended
December 31,
1997 1996
(in thousands, except per share data)
Revenues $327,739 $258,180
Net income 44,551 26,097
Net income per share:
Basic 0.49 0.34
Diluted 0.48 0.33
3. Financing Arrangements - During November 1997, the Lake Charles
Harbor and Terminal District issued Port Improvement Revenue
Bonds aggregating $28 million (the "Bonds") for the benefit of
the Company to finance the acquisition and construction of a
deepwater support facility and pipebase near Carlyss, Louisiana
(the "Facilities"). The Bonds are collateralized by an
irrevocable letter of credit in the amount of $28.4 million and
mature on November 1, 2027. 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, 1997 was 3.75%.
Under the terms of the financing, proceeds from the issuance of
the Bonds were placed into a Construction Fund for the payment of
related issuance costs and the costs of acquisition, construction
and improvement of the Facilities and are included in the
accompanying 1997 balance sheet under the caption "Escrowed
Funds, Bond Proceeds."
During November 1997, the Company amended the terms of its
existing credit agreement with a syndicate of commercial banks
to, among other things, (i) increase the available line of credit
to $160 million, and (ii) provide for a reduction in the amount
available under the credit agreement by the principal balance of
borrowings outstanding as of any date under a separate credit
agreement between the banks and CCC. At December 31, 1997, the
amount available under the credit agreement approximated $29
million.
4. Basic and Diluted Earnings Per Share - In February 1997, the
Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share"
("SFAS 128"), which changed the method of calculating earnings
per share ("EPS"). SFAS 128 requires the presentation of "basic"
EPS and "diluted" EPS on the face of the statement of operations.
Basic EPS is computed by dividing net income available to common
shareholders by the weighted average shares of common stock
outstanding. The calculation of diluted EPS is similar to basic
EPS, except that the denominator includes dilutive common stock
equivalents such as stock options and warrants.
The Company adopted SFAS 128 effective for the quarterly period
ended December 31, 1997 and restated prior years' EPS amounts as
required. Weighted average common shares used for purposes of
computing basic and diluted earnings per share for the quarters
and nine months ended December 31, 1997 and 1996 follow (in
thousands):
Quarter Ended Nine Months Ended
December 31, December 31,
1997 1996 1997 1996
Weighted average
common shares
outstanding 91,237 76,294 90,981 76,155
Effect of dilutive
stock options
and shares issuable
under employee
stock purchase plan 2,805 2,974 2,701 2,877
------ ------ ------ ------
Weighted average
common shares and
potential dilutive
shares outstanding 94,042 79,268 93,682 79,032
====== ====== ====== ======
Options to purchase 1,348,000 shares of common stock (prices
ranging from $18.28 to $21.94 per share) were outstanding during
the quarter ended December 31, 1997 (none during the quarter
ended December 31, 1996), but were not included in the
computations of diluted EPS because the options' exercise prices
exceeded the average market prices for the common shares during
such period. Corresponding amounts for the nine months ended
December 31, 1997 and 1996 amounted to 1,521,000 shares (prices
ranging from $15.00 to $21.94 per share) and 254,000 shares
(prices ranging from $7.88 to $8.88 per share), respectively.
5. Commitments and Contingencies - The Company is a party in legal
proceedings and potential claims arising in the ordinary course
of business. Management does not believe these matters will
materially effect the Company's consolidated financial
statements.
The Company has guaranteed certain indebtedness and commitments
of CCC approximating $30.1 million at December 31, 1997. In the
normal course of its business activities, the Company is required
to provide letters of credit for various corporate purposes. At
December 31, 1997, outstanding letters of credit approximated $44
million, including $28.4 million related to the Carlyss Facility
bonds and $10.6 million related to the Hercules arbitration.
The Company estimates that the cost to complete capital
expenditure projects in progress at December 31, 1997
approximates $70 million.
The Company has instituted an arbitration proceeding against a
shipyard under the terms of the construction contract for the
conversion and upgrade of the Hercules. The Company and the
shipyard disagree over the stage of completion of the project
when the vessel was removed from the shipyard. In addition, the
Company is seeking damages for late delivery and the shipbuilder
seeks damages for change orders, extras,
construction delays and disruption. Under an interim agreement,
pending resolution of the arbitration proceeding, the Company
took possession of the vessel in exchange for posting a $10.6
million letter of credit in favor of the shipyard. The Company
is vigorously pursuing its claims and defending against the
shipyard's claims through the arbitration proceeding and does not
believe that the ultimate resolution of this matter will have a
material adverse effect on its consolidated financial statements.
6. Subsequent Event - During February 1998, the Company signed an
agreement with TL Marine Sdn. Bhd., to acquire for cash the
pipelay/derrick barges DLB 332 (Teknik Perdana) and DLB 264
(Teknik Padu) along with auxiliary pipelay/construction and
diving equipment. Closing of the purchase is subject to approval
of the shareholders of the seller and certain of its partners.
Total costs related to the acquisition of the vessels and
equipment are approximately $50 million and are expected to be
funded through available cash and bank borrowings.
7. Recent Accounting Pronouncements - In June 1997, the FASB issued
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("SFAS 130"). SFAS 130 requires that all
items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as
other financial statements. This statement does not require a
specific format for that financial statement but requires that an
entity display an amount representing total comprehensive income
for the period in that financial statement. SFAS 130 requires
that an entity classify items of other comprehensive income by
their nature in a financial statement. For example, other
comprehensive income may include foreign currency items and
unrealized gains and losses on certain investments in debt and
equity securities. In addition, the accumulated balance of other
comprehensive income must be displayed separately from retained
earnings and additional paid-in capital in the equity section of
a statement of financial position. Reclassification of financial
statements for earlier periods, provided for comparative
purposes, is required. The Company 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 effective April 1, 1998, as
required.
In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise
and Related Information" ("SFAS 131"), which will be effective
for the Company beginning April 1, 1998. SFAS 131 redefines how
operating segments are determined and requires disclosure of
certain financial and descriptive information about a Company's
operating segments. The Company has not yet completed its
analysis of which operating segments it will report.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The following commentary presents management's discussion and
analysis of the Company's financial condition and results of
operations. Certain of the statements included below, including
those regarding future financial performance or results or that
are not historical facts, are or contain "forward-looking"
information as that term is defined in the Securities Act of
1933, as amended. The words "expect," "believe," "anticipate,"
"project," "estimate," and similar expressions are intended to
identify forward-looking statements. The Company cautions
readers that any such statements are not guarantees of future
performance or events and such statements involve risks,
uncertainties and assumptions, including but not limited to
industry conditions, general economic conditions, competition,
ability of the Company to successfully manage its growth,
operating risks, risks of international operations, risks of
vessel construction and other factors discussed below and in the
Company's Annual Report on Form 10-K for the year ended March 31,
1997. Should one or more of these risks or uncertainties
materialize or should the underlying assumptions prove incorrect,
actual results and outcomes may differ materially from those
indicated in the forward-looking statements.
The following discussion should be read in conjunction with the
Company's unaudited consolidated financial statements for the
periods ended December 31, 1997 and 1996, included elsewhere in
this report and the Company's audited consolidated financial
statements and Management's Discussion and Analysis of Financial
Condition and Results of Operations included in the Company's
Annual Report on Form 10-K for the fiscal year ended March 31,
1997.
During fiscal 1997 the Company completed the following
acquisitions: Norman Offshore Pipelines, Inc., ("Norman"), a
pipeline construction company operating in the United States,
which included two shallow water pipelay vessels; Divcon
International Pty Ltd.'s ("Divcon") diving and remotely operated
vehicles ("ROVs") assets in Southeast Asia; and a 49% ownership
interest in a Mexican marine construction contractor, CCC
Fabricaciones y Construcciones, S.A. de C.V. ("CCC"), as well as
two 400 foot combination pipelay derrick barges, the Comanche and
the Shawnee (formerly the DB-21 and DB-l5), operating in West
Africa and in Mexico (under charter to CCC), respectively. The
Company's investment in CCC is accounted for under the equity
method.
During the first quarter of fiscal 1998, the Company acquired the
Seminole (formerly the GAL 900), a 440 foot long self-propelled
combination pipelay derrick barge, currently located in Sharjah,
United Arab Emirates. The purchase price of the Seminole, plus a
launch barge, was $21 million.
During the second quarter of fiscal 1998, the Company completed
the acquisition of certain business operations and assets of Sub
Sea International, Inc. and certain of its subsidiaries. The
$104 million acquisition costs (including $2.0 million at
directly related acquisition costs) was funded from available
cash and borrowings under the Company's existing credit line. The
major assets acquired in the transaction include three
construction barges, four liftboats and one dive support vessel
based in the United States, four support vessels based in the
Middle East, and support vessels and ROVs based in the Far East
and Asia Pacific.
Although the Company has been expanding its international
operations, 73% of the Company's revenues in fiscal 1997 and 81%
of its revenues in the first nine months of fiscal 1998 were
derived from work performed in the Gulf of Mexico. The offshore
marine construction industry in the Gulf of Mexico is highly
seasonal as a result of weather conditions and the timing of
capital expenditures by oil and gas companies. Historically, a
substantial portion of the Company's services has been performed
during the period from June through November. As a result, a
disproportionate portion of the Company's revenues, gross profit
and net income is generally earned during the second (July
through September) and third (October through December) quarters
of its fiscal year. Because of seasonality, full year results
are not likely to be a direct multiple of any particular quarter
or combination of quarters. The following table documents the
seasonal nature of the Company's operations by presenting the
percentage of revenues, gross profit and net income contributed
by each fiscal quarter for the past three fiscal years.
Quarter Ended
June 30, Sept. 30, Dec. 31, March 31,
Revenues, three year average 22% 32% 25% 21%
Gross profit, three year average 21 38 25 16
Net income, three year average 20 40 25 15
The Company expanded its operations offshore West Africa during
the first half of fiscal 1996. Strong demand in this market
during the fourth quarters of fiscal 1996 and fiscal 1997
resulted in the fourth quarters of fiscal 1996 and fiscal 1997
making a significantly greater contribution to the years'
revenues, gross profit and net income than historically, which
has a significant impact on the three year averages shown above.
Results of Operations
The following table sets forth, for the periods indicated,
statement of operations data expressed as a percentage of
contract revenues.
Quarter Ended Nine Months Ended
December 31, December 31,
1997 1996 1997 1996
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of revenues (73.2) (73.1) (68.9) (72.5)
Gross profit 26.8 26.9 31.1 27.5
Equity in net earnings
(loss) of unconsolidated
affiliate 1.1 -- (0.3) --
Selling, general and
administrative expenses (5.2) (7.1) (5.8) (5.9)
Interest expense (0.8) (0.3) (0.5) (0.2)
Other income
(expense), net 0.7 0.8 1.0 0.3
Income before income taxes 22.6 20.3 25.5 21.7
Provision for income taxes (8.6) (6.1) (9.7) (6.5)
Net income 14.0% 14.2% 15.8% 15.2%
The Company's results of operations reflect the level of offshore
construction activity in the Gulf of Mexico and West Africa for
the first nine months of fiscal 1997 and 1998, and in Asia
Pacific and the Middle East for the first nine months of fiscal
1998, and the Company's ability to win jobs through competitive
bidding and manage projects to successful completion. The level
of offshore construction activity is principally determined by
three factors: first, the oil and gas industry's ability to
economically justify placing discoveries of oil and gas reserves
on production; second, the oil and gas industry's need to clear
all structures from the lease once the oil and gas reserves have
been depleted; and third, weather events such as major storms and
hurricanes.
Third Quarter of Fiscal 1998 Compared to Third Quarter of Fiscal
1997
Revenues. Revenues for the third quarter of fiscal 1998 of $120.4
million were 112% higher than the $56.8 million reported for the
same period a year earlier. The increase in revenues for the
quarter largely resulted from revenues generated by domestic
pipelay operations, improved utilization and dayrates on dive
support vessels and liftboats, and the addition of international
operations and assets acquired from Sub Sea in Asia Pacific and
the Middle East, offset by lower revenues from West Africa.
Barge days employed improved to 953, compared to the 467 days
employed in the same period last year. This increase was largely
due to an increased number of domestic pipelay barge days, plus
barge days added from charters to CCC in Mexico and barge days in
the Middle East. Liftboat and dive support vessel days employed
of 2,801 were higher than the 1,351 days worked during the same
period last year. Diver days employed totaled 12,291 for the
quarter, up from 4,410 a year earlier.
Depreciation and Amortization. Depreciation and amortization,
including amortization of drydocking costs, for the third quarter
of fiscal 1998 was $8.7 million compared with $4.3 million for
the same period in fiscal 1997. The increase was principally
attributable to increased utilization of the Company's larger
construction barges (which are depreciated on a units-of-
production basis) and increases in the Company's fleet through
upgrades and acquisitions, offset partially by lower depreciation
on the Cheyenne which is also depreciated on a units-of-
production basis.
Gross Profit. For the third quarter of fiscal 1998, the Company
had gross profit (the excess of revenues over the cost of
revenues, which includes depreciation and amortization charges)
of $32.2 million compared with $15.3 million for the same quarter
of fiscal 1997. The increase was largely the result of increased
domestic pipelay, dive support vessels and liftboats activities,
partially offset by lower gross profit from West Africa. Gross
profit as a percent of revenues for the current quarter was 27%,
the same as the gross profit percentage earned during the same
quarter of fiscal 1997. Cost of revenues for the quarter includes
a $1.2 million accrual for retirement and incentive compensation
expense, as compared to an $0.8 million provision in the same
period last year.
Selling, General and Administrative Expenses. Selling, general
and administrative expenses for the third quarter of fiscal 1998
totaled $6.2 million compared with $4.0 million for the same
period a year earlier. The increase was primarily due to the
expansion of business to the Asia Pacific and Middle East
regions. A provision for retirement and incentive compensation
plan expense of $1.8 million was recorded in the third quarter of
fiscal 1998, of which $0.6 million was included in selling,
general, and administrative expenses and $1.2 million was
included in cost of revenues. In the year earlier comparable
period a $1.1 million provision for such expense was recorded
with $0.3 million included in selling, general, and
administrative expenses and $0.8 million included in cost of
revenues.
Other Income (Expense). Interest expense, net of $1.1 million of
capitalized interest cost, was $1.0 million in the third quarter
of fiscal 1998 compared to $0.1 million in the same period a year
earlier. Other income in the current quarter was $0.9 million
compared to $0.4 million reported in the same period a year
earlier.
Net Income. Net income for the third quarter of fiscal 1998 was
$16.9 million, up 109% from $8.1 million in the same period a
year earlier. The Company's effective income tax rate for the
current period was 38%, compared to 30% for the same period a
year earlier, reflecting the loss of the benefit of a lower
effective tax rate for certain of the Company's international
operations.
First Nine Months of Fiscal 1998 Compared to First Nine Months of
Fiscal 1997
Revenues. Revenues for the first nine months of fiscal 1998 of
$292.4 million were 63% higher than the $179.5 million reported
for the same period a year earlier. The increase in revenues for
the nine months largely resulted from revenues generated by
strong domestic activity, improved utilization and dayrates on
dive support vessels and liftboats, and in part, the addition of
international operations and assets acquired from Sub Sea in Asia
Pacific and the Middle East, partially offset by lower revenues
contributed by the Company's operations in West Africa. Barge
days employed improved to 2,321, compared to the 1,374 days
employed in the same period last year. This increase was largely
due to increased number of barge days for domestic pipelay
operations, and barge days relating to charters to CCC and to
operations in the Middle East. Liftboat and dive support vessel
days employed of 6,972 were significantly higher than the 4,023
days worked during the same period last year. Diver days employed
totaled 32,903 for the nine months of fiscal 1998, up
significantly from 12,900 a year earlier.
Depreciation and Amortization. Depreciation and amortization,
including amortization of drydocking costs, for the first nine
months of fiscal 1998 was $21.9 million compared with $12.6
million for the same period in fiscal 1997. The increase was
principally attributable to increased utilization of the
Company's larger construction barges (which are depreciated on a
units-of-production basis) and increases in the Company's fleet
through upgrades and acquisitions, offset partially by lower
depreciation on the Cheyenne and the Hercules which are also
depreciated on a units-of-production basis.
Gross Profit. For the first nine months of fiscal 1998, the
Company had gross profit (the excess of revenues over the cost
of revenues, which includes depreciation and amortization
charges) of $90.9 million compared with $49.4 million for the
first nine months of fiscal 1997. The increase was largely the
result of increased domestic activity, improved dayrates on dive
support vessels and liftboats, partially offset by lower gross
profit from West Africa. Gross profit as a percent of revenues
for the current nine-month period was 31%, compared to the gross
profit percentage earned during the first nine months of fiscal
1997 of 28%. The increased gross profit margin was primarily
attributable to higher gross profit margins in the Gulf of Mexico
pipelay, derrick, liftboat, and diving services, partially offset
by lower gross profit margins from diving, ROV, and vessel
services in the Middle East and South East Asia and also lower
contributions from West Africa operations in the current fiscal
year. Cost of revenues for the first nine months of fiscal year
1998 includes a $3.5 million accrual for retirement and incentive
compensation expense, as compared to a $2.1 million provision in
the same period last year.
Selling, General and Administrative Expenses. Selling, general
and administrative expenses for the first nine months of fiscal
1998 totaled $16.9 million compared with $10.6 million for the
same period a year earlier. The increase was primarily due to
the expansion of the Company's business including expansion to
the Asia Pacific and Middle East regions. A provision for
retirement and incentive compensation plan expense of $5.0
million was recorded for the first nine months of fiscal 1998, of
which $1.5 million was included in selling, general, and
administrative expenses and $3.5 million was included in cost of
revenues. In the year earlier comparable period, a $3.0 million
provision for such expense was recorded with $0.9 million
included in selling, general, and administrative expenses and
$2.1 million included in cost of revenues.
Other Income (Expense). Interest expense, net of $2.7 million of
capitalized interest cost, was $1.5 million in the current nine-
month period compared to $0.6 million in the same period a year
earlier. Other income in the current nine-month period was $3.0
million compared to $0.6 million reported a year earlier.
Net Income. Net income for the first nine months of fiscal 1998
was $46.3 million, up 70% from $27.2 million in the same period a
year earlier. The Company's effective income tax rate for the
current period was 38%, compared to 30% for the same period a
year earlier, reflecting the loss of a benefit of a lower
effective tax rate for certain of the Company's international
operations.
Liquidity and Capital Resources
The Company's operations generated cash flow of $76.3 million
during the first nine months of fiscal 1998. Cash from
operations, together with available cash and funds provided by
financing activities, funded net investing activities of $208.8
million. Investing activities consisted principally of the Sub
Sea acquisition, capital expenditures, and dry-docking costs.
Working capital decreased $36.4 million during the first nine
months of fiscal 1998 from $103.7 million at March 31, 1997 to
$66.8 million at December 31, 1997.
Capital expenditures during the first nine months aggregated
$198.2 million and included the acquisition of the Seminole
(previously the DLB 900) and the Sea Tiger (previously the Bulan
Malai), and continued construction of the upgrade of the
Hercules. In July 1997 the Company completed the acquisition of
certain assets and operations from Sub Sea International, Inc.
for a purchase price of $102.0 million. The cost of these
acquisitions was primarily funded by cash generated from
operations and borrowings of $63.0 million under the Company's
Credit Facility.
The Company estimates that the cost to complete capital
expenditure projects in progress at December 31, 1997
approximates $70 million.
Long-term debt outstanding at December 31, 1997 (including
current maturities), consists primarily of $40.8 million of Title
XI bonds, a $28.0 million obligation to service Lake Charles
Harbor and Terminal District bonds, and $68.0 drawn against the
Company's revolving line of credit.
The Company's outstanding Title XI bonds mature in 2003, 2005,
2020 and 2022, carry interest rates of 9.15%, 8.75%, 8.30%,
and 7.25% per annum, respectively, and require aggregate semi-
annual payments of $0.5 million (until January 1998, when
aggregate semi-annual payments will be $0.9 million), plus
interest. The agreements pursuant to which the Title XI bonds
were issued contain certain covenants, including the maintenance
of minimum working capital and net worth requirements, which, if
not met, result in additional covenants that restrict the
operations of the Company and its ability to pay cash dividends.
The Company is currently in compliance with these covenants.
The Company maintains a $160.0 million revolving line of credit
("Loan Agreement") with a syndicate of commercial banks. The
revolving credit facility of the Loan Agreement is available
until June 30, 2000, at which time the amount available is
reduced to zero over two years. Borrowings under the facility
are unsecured, bear interest at fluctuating rates, and are
payable on July 30, 2002. The amount of available credit is
reduced by (i) outstanding letters of credit secured by the Loan
Agreement ($33 million at December 31, 1997) and (ii) amounts
outstanding under a separate credit agreement between the banks and
CCC, limited to a maximum of $35 million ($30 million outstanding
at December 31, 1997). Continuing access to the revolving line of
credit is conditioned upon the Company remaining in compliance
with the covenants of the Loan Agreement, including the
maintenance of certain financial ratios. At December 31, 1997,
$68.0 million was outstanding under the Loan Agreement and the
Company was in compliance with the covenants contained therein.
The Company is currently in negotiations with the banks to
increase its revolving line of credit to $200 million.
The Company is constructing a deepwater support facility and
pipebase near Carlyss, Louisiana. The deepwater facility is
expected to replace the Company's existing facilities in Houma
and Amelia, Louisiana. The facility is expected to take two years
to complete and cost approximately $36 million, of which
approximately $28 million is financed with 30-year, tax-exempt
revenue bonds issued by the Lake Charles Harbor and Terminal
District. The bonds bear interest at a variable rate, which was
3.75% at December 31, 1997.
During February 1998, the Company signed an agreement with TL
Marine Sdn. Bhd., to acquire for cash the pipelay/derrick barges
DLB 332 (Teknik Perdana) and DLB 264 (Teknik Padu) along with
auxiliary pipelay/construction and diving equipment. Closing of
the purchase is subject to approval of the shareholders of the
seller and certain of its partners. Total costs related to the
acquisition of the vessels and equipment are approximately $50
million and are expected to be funded through available cash and
bank borrowings.
Funds available under the Company's Credit Facility (including
the proposed increase in the line of credit) combined with
available cash, and cash generated from operations, are expected
to be sufficient to fund the Company's operations, scheduled debt
retirement, planned capital expenditures and acquisitions for at
least the next twelve months.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is involved in various routine legal proceedings
primarily involving claims for personal injury under the General
Maritime Laws of the United States and Jones Act as a result of
alleged negligence. The Company believes that the outcome of all
such proceedings, even if determined adversely, would not have a
material adverse effect on its consolidated financial statements.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.1 Second Amendment to Restated Credit Agreement
10.2 Facilities Agreement
10.3 Ground Lease and Lease-Back Agreement
10.4 Trust Indenture
10.5 Pledge and Security Agreement
15.1 Letter re: unaudited interim financial information.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K - None.
Signature
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
GLOBAL INDUSTRIES, LTD.
By:MICHAEL J. MCCANN
Michael J. McCann
Vice President, Chief
Financial Officer
(Principal Financial and Accounting Officer)
February 17, 1998
EXHIBIT 15.1
February 12, 1998
Global Industries, Ltd.
107 Global Circle
Lafayette, Louisiana 70503
We have made a review, in accordance with standards established
by the American Institute of Certified Public Accountants, of the
unaudited interim financial information of Global Industries,
Ltd. and subsidiaries for the periods ended December 31, 1997 and
1996, as indicated in our report dated February 6, 1998; because
we did not perform an audit, we expressed no opinion on that
information.
We are aware that our report referred to above, which is included
in your Quarterly Report on Form 10-Q for the quarter ended
December 31, 1997, is incorporated by reference in Registration
Statement Nos. 33-58048 and 33-89778 on Form S-8.
We also are aware that the aforementioned report, pursuant to
Rule 436(c) under the Securities Act of 1933, is not considered a
part of the Registration Statement prepared or certified by an
accountant or a report prepared or certified by an accountant
within the meaning of Sections 7 and 11 of that Act.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana