ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the Company's security holders during the fourth quarter of the fiscal year ended December 31, 1993.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock, $.10 par value per share (the "Common Stock"), is listed on the New York Stock Exchange under the symbol "GLM." At January 31, 1994, there were 10,775 stockholders of record of the Common Stock. The high and low sales prices of the Common Stock as reported on the New York Stock Exchange Composite Transactions Tape for each full quarterly period within the past two years appear under "Consolidated Selected Quarterly Financial Data" on page 49 of this Annual Report on Form 10-K.
The Company has not declared any dividends on Common Stock since February 1985. Subject to the preferential dividend rights of holders of the Company's preferred stock, if any, the holders of the Common Stock will be entitled to receive when, as and if declared by the Board of Directors out of funds legally available therefor, all other dividends payable in cash, in property, or in shares of Common Stock. The indenture governing the Senior Secured Notes contains certain restrictions with respect to the payment of dividends on the Common Stock (other than stock dividends). (See Note 6 of Notes to Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K.) It is not expected that dividends will be declared or paid on the Common Stock in the foreseeable future.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA GLOBAL MARINE INC. AND SUBSIDIARIES FIVE-YEAR REVIEW (Dollars in millions, except per share data)
(1) Deferral of turnkey profit on oil and gas wells drilled on properties in which the Company had an economic interest and was the operator. (2) Contract drilling operating income for 1992 includes a net gain of $10.9 million relating to the sale of two offshore drilling rigs. (3) The indenture governing the Senior Secured Notes contains certain restrictions with respect to the payment of dividends on the Common Stock (other than stock dividends). See Note 6 of Notes to Consolidated Financial Statements. (4) Barrels of oil equivalent, in thousands, applying a BTU conversion factor of six MCF of gas per barrel of oil. (5) The average utilization rate for a period is based on the ratio of days in the period during which the rigs were under contract to the total days in the period during which the rigs were available to work.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Operating Results
Summary
For 1993, the Company reported operating income of $3.2 million, compared to operating income of $15.7 million for 1992. The prior-year period includes an $11.0 million gain on the sale of one of the Company's offshore drilling rigs, the Glomar High Island VI. Aside from the sale of the High Island VI, the decline in operating results is attributable to lower contract drilling dayrates and utilization in the North Sea and higher expense associated with rig relocations, partially offset by higher contract drilling dayrates and utilization in the Gulf of Mexico, and by improvements in turnkey drilling and oil and gas. The turnkey drilling operating income increased to $9.8 million for 1993 from $0.2 million in 1992, primarily due to completing 18 turnkey wells in 1993 compared to 10 turnkey wells in 1992. The 1993 turnkey wells also had, on average, higher gross margins. Oil and gas operating income increased from $3.2 million in 1992 to $5.3 million in 1993, despite lower revenues, primarily due to a lower depletion rate as a result of property sales.
The Company's operating income of $15.7 million in 1992 decreased from $49.1 million in 1991. Excluding the gain on the sale of the rig noted above, the decrease in operating income was attributable to lower average dayrates and rig utilization, lower volumes of oil and gas produced, lower oil prices and decreased turnkey drilling.
Data relating to the Company's operations by business segment follows:
(1) Deferral of turnkey profit on oil and gas wells drilled on properties in which the Company had an economic interest and was the operator. (2) The percentage change results in a figure which, because of its magnitude, is not meaningful.
Although certain drilling markets have shown marked improvement over the past year, most notably the U.S. Gulf of Mexico, the offshore drilling industry overall has been characterized by an oversupply of and low demand for rigs, resulting in low dayrates and operating margins. As a result, the Company reported a net loss of $26.5 million for 1993, as compared with a net loss of $37.1 million for 1992, excluding nonrecurring gains and income, and net income of $1.0 million for 1991.
Marine Drilling Operations
Contract drilling. Data with respect to the Company's contract drilling operations follows:
Revenues from the Gulf of Mexico increased to $76.4 million in 1993 from $15.6 million in 1992, as indicated in the table above. The increase resulted from the redeployment to the Gulf of (i) one rig from the Mediterranean in November 1992, (ii) two rigs from West Africa in April 1993, (iii) three rigs from the North Sea, one in April 1993, one in June 1993 and another in November 1993, and (iv) two rigs acquired in September 1993 from Transocean Drilling AS, as more fully described below, as well as from higher dayrates and higher rig utilization in the Gulf of Mexico. The decrease in revenues attributable to the North Sea was due to the decline in North Sea dayrates, the redeployment of the three rigs from the North Sea to the Gulf of Mexico, and the completion of a management contract with respect to another company's rig. The decrease in revenues attributable to offshore West Africa was primarily the result of the sale of the Glomar Biscay II in the first quarter of 1993 and the redeployment of the two rigs from offshore West Africa to the Gulf of Mexico in April 1993. The decline in revenues in the "Other" category for 1993 compared to 1992 was due to the sale of the Glomar Biscay I and the Glomar Atlantic in the fourth quarter of 1992 and the first quarter of 1993, respectively.
Revenues from the Gulf of Mexico decreased during 1992 compared to 1991 due to the sale of the Glomar High Island VI in the first quarter of 1992 and to lower dayrates and utilization resulting from the decline in domestic natural gas prices during 1991 and the first quarter of 1992. The decrease in 1992 revenues attributable to the North Sea as compared to 1991 was due to the redeployment of one rig from the North Sea to the Gulf of Mexico in November 1991 and to lower dayrates and utilization.
As of December 31, 1993, the worldwide industry utilization rate for competitive offshore rigs was 83 percent, with 98 of the 577 worldwide rigs unemployed. The offshore drilling markets in which the Company participates continue to be characterized by contracts that are, generally, of a short-term or well-to-well nature, as they have been for the past several years. The Company anticipates that contracts on 13 of the Company's 23 rigs under contract as of February 22, 1994, will expire at varying times on or prior to April 30, 1994. No assurance can be made that the Company will obtain drilling contracts for the two rigs that are currently available or for its other rigs upon the completion of existing contracts. Short-term contracts have been typical in the industry for the past decade, and the Company considers its upcoming contract expirations typical of prevailing market conditions in the normal course of business.
Drilling activity in the U.S. Gulf of Mexico increased in 1993, coinciding with the increase in domestic natural gas prices. This increase in drilling activity has resulted in an average industry utilization rate for this area of 77 percent for 1993 compared to 51 percent for 1992. Given the historic volatility in gas prices, no assurance can be made that current prices will be sustained. In 1993 the spot market price of domestic offshore natural gas at the wellhead ranged from a low of $1.49 per thousand cubic feet in January to a high of $2.54 in April. As of January 31, 1994, the price was $2.18 per thousand cubic feet. The Company has twelve rigs in the Gulf of Mexico, all of which were employed as of February 22, 1994.
In the North Sea, the average industry utilization rate for 1993 decreased to 80 percent from 82 percent in 1992. As of February 22, 1994, the Company had three rigs in the North Sea, two of which were under contract.
In the United Kingdom, a reduction in tax relief for exploration and appraisal expenditures has further depressed the outlook for a market already weakened by reduced exploration activity. The U.K. currently levies a petroleum revenue tax ("PRT") on revenue derived from the extraction of oil and natural gas from the U.K. sector of the North Sea. A company is permitted to reduce the amount of PRT it owes by taking as a credit against its revenues certain of its expenditures used to explore for oil and natural gas in the U.K. On March 16, 1993, the Chancellor of the Exchequer announced certain proposed changes in the PRT. These changes, which were implemented in 1993, among other things, (i) reduced the rate of PRT from 75 percent to 50 percent on revenues derived from existing fields; (ii) abolished the PRT for new fields, defined as those for which development consent is received after March 15, 1993; and (iii) eliminated the credit attributable to exploration costs. The Company cannot predict what effect, if any, these changes in the PRT might have on the demand for offshore drilling rigs in the U.K. sector of the North Sea or on the Company.
As a result of the market conditions and the legislation discussed above, the outlook for North Sea activity remains uncertain.
In West Africa, a renewal of the civil war in Angola and a reduction of the Nigerian national oil company's participation in ongoing projects have caused a reduction in the demand for offshore drilling rigs. Average industry utilization rates offshore West Africa declined to 72 percent for 1993 from 83 percent for the prior year. All three of the Company's rigs in this area were employed as of February 22, 1994.
The Company has recently taken a number of steps to strengthen its position within its markets. In September 1993, the Company acquired from Transocean Drilling AS, a Norwegian drilling contractor ("Transocean"), a 100 percent ownership interest in three 300-foot jackup drilling rigs, the Transocean No. 5, the Transocean No. 6 and the Transocean No. 7, in exchange for a 100 percent ownership interest in the Company's heavy-weather jackup drilling rig, the Glomar Moray Firth I, plus $17.0 million in cash. Under the terms of the transaction, hereafter referred to as the "Transocean Transaction," the parties will share in the aggregate cash flow of the four rigs with approximately 57 percent going to the Company and approximately 43 percent to Transocean (see Note 13 of Notes to Consolidated Financial Statements). The Transocean No. 6 and Transocean No. 7, which were redeployed by the Company from the North Sea to the Gulf of Mexico in August 1993 under a prior management agreement with Transocean, have been renamed the Glomar Adriatic VI and the Glomar Adriatic VII, respectively, and are currently being marketed and managed by the Company in the Gulf of Mexico. The Transocean No. 5 is operating under Transocean's management in Abu Dhabi pursuant to a pre-existing contract expected to continue through January 1995; thereafter, the customer has options which may extend the contract through the first quarter of 1996. The Glomar Moray Firth I, which has been renamed the Transocean No. 9, is under contract through March 1994 in the North Sea. The revenue sharing arrangement with Transocean improves the Company's access to the Norwegian North Sea market, where Transocean has a strong presence, and provides the Company with additional exposure in the strengthening U.S. Gulf of Mexico market.
Additionally, in April 1993 the Company redeployed three jackup rigs, one from the North Sea and two from offshore West Africa, to the Gulf of Mexico. These three rigs are currently under contract. In May 1993 the Company redeployed another rig, the Glomar Adriatic IV, which had been drilling in the Gulf of Mexico, to Trinidad under a multi-well contract that the Company expects will continue through September 1994. In June and November 1993, the Company redeployed the Glomar Baltic I and the Glomar Adriatic III, respectively, from the North Sea to the Gulf of Mexico, where they are currently under contract. Although the costs of the various redeployments described above have negatively affected operating results for 1993, the Company expects these rigs to generate higher net operating cash flows as a result of their deployment to stronger markets. The Company will consider additional redeployments as market conditions warrant. Since December 1992, the Company also has sold its three oldest drilling rigs, the Glomar Biscay I, the Glomar Biscay II, and the Glomar Atlantic.
Turnkey Drilling. Turnkey drilling operations reported a $32.0 million increase in revenues and a $9.6 million increase in operating income in 1993 as compared to 1992. This increase resulted from the completion of 18 wells in 1993 compared to 10 in 1992, higher average gross margins on the 1993 wells and a $1.8 million loss incurred on one of the 1992 well completions due to mechanical problems.
Turnkey drilling operations reported a $9.5 million decrease in revenues and a $4.6 million decrease in operating income in 1992 as compared to 1991. This decrease resulted from the completion of 10 wells in 1992 compared to 16 in 1991 and the $1.8 million loss incurred on one of the 1992 well completions, as noted above.
Oil and Gas Operations
Data related to the Company's oil and gas production follows:
Revenues from gas production decreased significantly in 1993 as compared with 1992 despite higher gas prices, primarily due to overproduction in 1992 from one of the Company's primary offshore gas producing properties, Matagorda Island Block 668, in order to make up a prior gas production imbalance between the Company and its working interest partner. Revenues from oil production in 1993 also decreased as compared with 1992 due to lower oil prices, the 1993 sale of an oil producing property, and normal production decline. Despite the decrease in revenues, operating income increased in 1993 as compared with 1992 due to a lower depletion rate resulting from property sales and the attendant reduction in the depletable base, lower overhead expenses and lower lease operating expenses resulting from property sales.
Oil and gas revenues and operating income for 1992 were lower than for 1991 due to lower volumes of gas and oil produced and lower oil prices, offset in part by slightly higher 1992 gas prices. The decrease in gas volume was primarily attributable to the Company reaching production balance in 1992 with respect to its interest in Matagorda Island Block 668 and to a 1991 lump sum settlement of a gas imbalance on another one of the Company's properties, High Island Block A-567. The decrease in the volume of oil production was due primarily to normal decline.
Other Income and Expense
Interest expense for 1993 declined by $11.5 million from 1992 due to the reduction in long-term debt resulting from the Company's recapitalization in December 1992 and the retirement of the rig mortgage note for the Glomar Baltic I in August 1993. Interest expense for 1992 declined from 1991 by $6.3 million due to the reduction in long-term debt resulting from debt service payments and from the Company's receipt of Units (as defined in Note 9 of Notes to Consolidated Financial Statements) in connection with the exercise of outstanding warrants to purchase the Company's common stock.
Interest income in 1993 was approximately equal to interest income in 1992. Interest income in 1992 fell by $0.7 million from 1991 primarily due to lower interest rates earned on the Company's cash and marketable securities balances.
During 1992, the Company settled its take-or-pay litigation with Transcontinental Gas Pipe Line Corporation, resulting in a gain of $55.0 million.
Income tax expense of $0.3 million for 1993 consists of $0.8 million in current foreign income tax expense offset by a gain of $0.5 million related to an adjustment to a state income tax liability. Income tax expense of $3.1 million for 1992 consists of $2.8 million and $0.3 million in current foreign and U.S. federal income tax expense, respectively. Income tax expense of $2.5 million for 1991 consists of foreign and state income taxes.
During 1992, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," and SFAS No. 109, "Accounting for Income Taxes." The effect of SFAS No. 106 was to decrease 1992 net income by $1.9 million, and the effect of SFAS No. 109 was to increase 1992 net income by $3.3 million, each representing the cumulative effect of the change as of January 1, 1992.
During 1992, the Company recognized an extraordinary gain of $28.3 million on the early retirement of debt in connection with the Company's recapitalization.
The Company's net loss for 1993 was $26.5 million compared to net income of $57.2 million for 1992 and net income of $1.0 million for 1991. The Company would have reported a net loss of $37.1 million for 1992 absent the settlement of the Transco litigation, the extraordinary gain on extinguishment of debt and the sale of one of the Company's High Island class jackup rigs.
Liquidity and Capital Resources
The Company completed a recapitalization (the "Recapitalization") in December 1992 in order to reduce the amount and extend the maturity of its outstanding debt and to reduce its debt service requirements. The Recapitalization was comprised of (i) the offering and sale of 26,000,000 shares of common stock and a concurrent offering and sale of 12-3/4% Senior Secured Notes due 1999 in an aggregate principal amount of $225.0 million and (ii) the application of the aggregate net proceeds from the offerings, plus a portion of the Company's available funds, to retire long- term debt in the amount of $342.7 million, including interest, at a total reacquisition cost of $314.4 million. In January 1993, the Company sold an additional 3,900,000 shares of common stock pursuant to the exercise of the underwriters' over-allotment option and received cash in the amount of $7.8 million, net of expenses.
In August 1993, the Company completed the sale of 17,250,000 shares of common stock in a public offering and received cash proceeds of $66.4 million, net of expenses. The Company used $17.0 million of the proceeds to complete the Transocean Transaction and $26.0 million to retire the rig mortgage note for the Glomar Baltic I.
As of December 31, 1993, the Company's long-term debt totaled $225.0 million, as compared to total shareholders' equity of $205.4 million.
The indenture under which the Senior Secured Notes are issued imposes significant operating and financial restrictions on the Company and provides for the granting of a first lien in favor of the trustee, for the benefit of the holders of Senior Secured Notes, on a significant portion of the Company's material assets. Such restrictions affect, and in many respects limit or prohibit, among other things, the ability of the Company to incur additional indebtedness, make certain investments, create liens, sell assets, engage in mergers or acquisitions and make dividends or other payments. The highly leveraged position of the Company and the restrictive covenants contained in and liens provided for under the indenture could significantly limit the ability of the Company to respond to changing business or economic conditions or to respond to substantial declines in operating results.
The Senior Secured Notes do not require any payments of principal prior to the stated maturity thereof in December 1999, except that the Company is required to make offers to purchase Senior Secured Notes with the proceeds of certain asset sales, upon a change of control, or if the Company's excess cash flow, as defined in the indenture, exceeds certain specified levels. The annual interest on the Senior Secured Notes is $28.7 million, payable semiannually, each June and December.
Net cash flow from operating activities for the year ended December 31, 1993 was a net use of $0.7 million as compared to a positive $66.0 million in the prior year. Operating cash flow for 1992 included $20.0 million in cash received in the settlement of the Transco litigation. Furthermore, operating cash flow for 1993 included, among other things, the cost of redeploying eight rigs during 1993 as compared with one in 1992 and higher interest payments required under the Company's Senior Secured Notes.
In February 1994, the Company purchased two jackup drilling rigs for $26.0 million in cash, $1.0 million in notes payable from the rigs' net cash flow, and up to 900,000 shares of Global Marine common stock. The Company anticipates spending an additional $15 million to refurbish and upgrade the rigs over approximately the next 12 months.
Other capital expenditures for the Company's drilling fleet in 1994 are estimated to be $26 million for capital additions and improvements to the Company's existing drilling fleet and for the possible purchase of another drilling rig. Capital expenditures for the Company's oil and gas operations are estimated to be $6 million in 1994, principally for exploratory drilling, development drilling of producing properties, the purchase of equipment used in connection with the producing properties, and workovers and recompletions.
As of December 31, 1993, the Company had $44.6 million in available liquidity, including $31.2 million in cash and cash equivalents and $13.4 million in marketable securities, net of restricted amounts of $6.8 million.
The Company regards the consideration received under the previously reported settlement of the Transco litigation as an additional source of liquidity (see Note 14 of Notes to Consolidated Financial Statements). In particular, the Company received the Transco Note, in the principal amount of $20.0 million, which has been defeased with U.S. government securities. Payments under the Transco Note are due in eight equal quarterly installments of $2.5 million each, plus interest, the first of which was received in October 1993. In addition, on February 1, 1994, the Company received 1,017,771 previously escrowed shares of Transco common stock plus $0.9 million in dividends declared and paid on the escrowed shares. The Transco shares received by the Company will not be available for sale by the Company in the public market prior to May 1994. Furthermore, the number of shares of Transco common stock which the Company may sell during any single three-month period will be limited; as a result, the Company may not be able to complete the sale of all of the Transco shares until late 1994. Consequently, the Company will be subject to the risk of any decline in value resulting from any decrease in the market value of the Transco common stock during the period from February 1, 1994 until such time as the shares are sold. As of February 11, 1994, the market value of the Transco shares held by the Company exceeded the carrying value of $15.0 million.
An additional source of liquidity is the cash flow from the Company's oil and gas properties and turnkey drilling operations, both of which are available to service the Company's debt and to fund its working capital requirements. Cash flow from the Company's oil and gas operations (other than the proceeds from the Transco Litigation) and turnkey drilling may be limited by certain factors. In particular, the anticipated capital expenditures during 1994 for oil and gas activities are expected to equal approximately two-thirds of the net cash flow from the Company's oil and gas properties. Cash flow from turnkey drilling operations is dependent on the ability of the Company to obtain and perform successfully turnkey contracts based on competitive bids and on the number of such contracts available for bid. Accordingly, results of the Company's turnkey drilling operations may vary widely from year to year.
In June 1993, the Company entered into a revolving credit agreement with a major international bank to provide a three-year revolving credit and letter of credit facility for up to $25 million to be collateralized by accounts receivable due under drilling contracts. The amount the Company is able to borrow under the facility is subject to a borrowing base consisting of 80 percent of eligible accounts receivable. There were no amounts outstanding under this credit line as of December 31, 1993. The Company estimates that, as of December 31, 1993, it would have been able to borrow the full $25 million under the revolving credit agreement.
The Company believes that it will be able to meet all of its current obligations, including capital expenditures and debt service, from its cash flow from operations, proceeds from the Transco litigation, and its cash, cash equivalents and marketable securities. The Company's ability, however, to pay the principal amount of the Senior Secured Notes upon maturity in December 1999 would require a substantial improvement in current industry conditions. The Company estimates that the average dayrate earned by the Company's contract drilling fleet would have to increase from $25,400 per rig earned for 1993 to approximately $29,000 per rig during the period from January 1, 1994, through the date of maturity of the Senior Secured Notes in order to cover all cash operating, capital and financing costs, including principal payments, during the period up to and including the maturity of the Senior Secured Notes. This estimate assumes the continuation of rig utilization and operating expenses at current levels and does not include sources of liquidity other than cash flow from the Company's contract drilling fleet.
In the first quarter of 1994, the Company will adopt Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits." SFAS No. 112 requires the recognition of expense for postemployment benefits on an accrual basis, rather than the pay-as-you-go approach used previously. Postemployment benefits include severance pay, disability-related benefits and continuation of health care costs during the period after employment but before retirement. The cumulative impact of this change as of January 1, 1994, will be a charge to earnings in the first quarter of 1994 in the amount of $3.5 million. Other than the cumulative effect, the effect of the change on earnings is not expected to be material.
In addition, in the first quarter of 1994, the Company will adopt the provisions of SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." The new standard expands the use of fair value accounting for certain investments in debt and equity securities but retains the use of the amortized cost method for investments in debt securities that the Company has the intent and ability to hold to maturity. The adoption of the new standard will have no effect on the accounting for the Company's investments in marketable securities, which consisted entirely of debt securities as of December 31, 1993, because the Company holds such securities to maturity. Adoption of the new standard also will have no effect on the accounting for the Company's investment in common stock, which had both a carrying value and a fair value of $15.0 million as of December 31, 1993.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Global Marine Inc.
We have audited the consolidated balance sheet of Global Marine Inc. and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1993. 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, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Global Marine Inc. and subsidiaries as of December 31, 1993 and 1992, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1993 in conformity with generally accepted accounting principles.
As discussed in Notes 1, 8 and 11 to the consolidated financial statements, in 1992 the Company adopted the new methods of accounting for income taxes and for postretirement benefits other than pensions as prescribed by applicable statements of the Financial Accounting Standards Board.
\s\ Coopers & Lybrand
Houston, Texas February 11, 1994
GLOBAL MARINE INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS (In millions, except per share data)
GLOBAL MARINE INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (Dollars in millions)
ASSETS
See notes to consolidated financial statements.
GLOBAL MARINE INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (Dollars in millions)
LIABILITIES AND SHAREHOLDERS' EQUITY
See notes to consolidated financial statements.
GLOBAL MARINE INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (In millions)
See notes to consolidated financial statements.
GLOBAL MARINE INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Dollars in millions)
See notes to consolidated financial statements.
GLOBAL MARINE INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies
Principles of Consolidation. The consolidated financial statements include the accounts of Global Marine Inc. and its majority-owned subsidiaries. Unless the context otherwise requires, the term "Company" refers to Global Marine Inc. and its consolidated subsidiaries. Intercompany accounts and transactions are eliminated.
Reclassifications. Certain previously reported amounts have been reclassified to conform to the 1993 presentation.
Cash Equivalents. Cash equivalents consist of all highly liquid debt instruments with remaining maturities of three months or less at the time of purchase.
Marketable Securities. Marketable securities are debt securities consisting of commercial paper, Eurodollar time deposits and certificates of deposit which are purchased with remaining maturities greater than three months and are carried at cost.
In the first quarter of 1994, the Company will adopt the provisions of SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." The new standard expands the use of fair value accounting for certain investments in debt and equity securities but retains the use of the amortized cost method for investments in debt securities that the Company has the intent and ability to hold to maturity. The adoption of the new standard will have no effect on the accounting for the Company's investments in marketable securities, which consisted entirely of debt securities as of December 31, 1993, because the Company holds such securities to maturity. Adoption of the new standard also will have no effect on the accounting for the Company's investment in common stock, which had both a carrying value and a fair value of $15.0 million as of December 31, 1993.
Rigs and Drilling Equipment. The carrying values for rigs and drilling equipment were reduced to their estimated fair market values as of December 31, 1988, the date of accounting recognition of the Company's 1989 plan of reorganization. Depreciation of rigs and drilling equipment is computed using the straight-line method over their estimated service lives, which range from four to fourteen years, assuming a salvage value of ten percent. Expenditures for maintenance and repairs are charged to expense as incurred, while expenditures for betterments are capitalized. Costs of property sold or retired and the related accumulated depreciation are removed from the accounts; resulting gains or losses are included in income.
Oil and Gas Properties. The Company capitalizes all costs attributable to the acquisition, exploration and development of oil and gas reserves under the full cost method of accounting. The depreciation, depletion and amortization provision is computed using the units of production method. The depletable base consists of capitalized costs, estimated future costs to develop proved reserves, and estimated future dismantlement costs. The costs of unproved properties and major development projects are not subject to depreciation, depletion and amortization until they are fully evaluated. All unproved properties are reviewed periodically to ascertain if impairment has occurred. Costs of proved oil and gas properties which exceed the present value of estimated future net revenues are charged to expense. Proceeds from sales of oil and gas properties are applied to reduce the depletable base unless the sale involves a significant quantity of reserves in relation to total reserves, in which case a gain or loss would be recognized.
Accounting for Drilling Contracts on Properties in which the Company has a Working Interest. From time to time, the Company may obtain a service contract to drill a well on an oil and gas property in which the Company has a working interest and in which the Company is the operator of the property. In such instances, any profit on the drilling contract attributable to the Company's working interest is eliminated, and any profit attributable to non- affiliates is deferred to future periods. Drilling profit is deferred by charging income and reducing the carrying value of oil and gas properties. Such deferred profit is recognized over the life of the Company's oil and gas properties through lower depletion charges as a result of reducing the depletable base.
Gas Balancing. The Company uses the sales method to account for its undertaken positions subject to gas balancing agreements. Under the sales method, the Company postpones revenue recognition of its proportionate share in production delivered to another producer's customer, and postpones recognition of the related lease operating expense until such time as (i) the Company's customer begins taking delivery of the product and/or (ii) the cessation of production, in which case the Company's related gas balancing agreements require monetary settlement.
Foreign Currency Translation. The U.S. dollar is the functional currency for all of the Company's operations. Foreign currency transaction gains and losses are included in income during the period in which they arise. Such amounts for 1993, 1992 and 1991 were not material.
Postretirement Health Care and Life Insurance Benefits. The Company adopted SFAS No. 106, "Employers' Accounting for
GLOBAL MARINE INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Postretirement Benefits Other than Pensions," effective January 1, 1992. SFAS No. 106 requires that an employer account for the estimated cost of an employee's postretirement health care and life insurance benefits on an accrual basis over the period of time that the employee renders the required service (see Note 11).
Postemployment Benefits. In the first quarter of 1994, the Company will adopt Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits." SFAS No. 112 requires the recognition of expense for postemployment benefits on an accrual basis, rather than the pay-as-you-go approach used previously. Postemployment benefits include severance pay, disability-related benefits and continuation of health care costs during the period after employment but before retirement. The cumulative impact of this change as of January 1, 1994, will be a charge to earnings in the first quarter of 1994 in the amount of $3.5 million. Other than the cumulative effect, the effect of the change on earnings is not expected to be material.
Note 2 - Long-term Debt
Long-term debt as of December 31 consisted of the following:
1993 1992 (In millions) [S] [C] [C] Senior Secured Notes, 12-3/4%, due December 15, 1999 $225.0 $225.0 Petdrill Note, 8%, maturing quarterly through December 31, 1993 (the note had an effective interest rate of 12% and was recorded net of an unamortized discount of $0.9 million as of December 31, 1992) - 24.0 Total long-term debt including current maturities 225.0 249.0 Less current maturities - 24.0 Long-term debt $225.0 $225.0
Interest on the Senior Secured Notes is payable semi-annually each June and December. The Senior Secured Notes do not require any payments of principal prior to the stated maturity thereof on December 15, 1999, except that the Company is required to make offers to purchase Senior Secured Notes upon the occurrence of certain events, which are defined in the indenture governing the Senior Secured Notes, such as asset sales or a change of control or if the excess cash flow of the Company exceeds certain specified levels.
The Senior Secured Notes are not redeemable at the option of the Company prior to December 15, 1997. On or after December 15,
GLOBAL MARINE INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1997, the Senior Secured Notes are redeemable at the option of the Company, in whole at any time or in part from time to time, at a price of 102 percent of principal if redeemed during the twelve months beginning December 15, 1997, or at a price of 100 percent of principal if redeemed on or after December 15, 1998, in each case together with interest accrued to the redemption date.
The Senior Secured Notes are collateralized by 23 rigs and all of the capital stock of the Company's direct or indirect subsidiaries, excluding the stock of Petdrill, Inc., and certain other subsidiaries as defined in the indenture. The indenture under which the Senior Secured Notes are issued imposes significant operating and financial restrictions on the Company. Such restrictions affect, and in many respects limit or prohibit, among other things, the ability of the Company to incur additional indebtedness, make capital expenditures, create liens, sell assets, engage in mergers or acquisitions and make dividends or other payments.
In August 1993, the Company used $26.0 million of the proceeds from a public offering of common stock to retire the rig mortgage note for the Glomar Baltic I (the "Petdrill Note"), including interest.
In June 1993, the Company entered into a revolving credit agreement with a major international bank to provide a three-year revolving credit and letter of credit facility for up to $25 million to be collateralized by accounts receivable due under drilling contracts. The amount the Company is able to borrow under the facility is subject to a borrowing base consisting of 80 percent of eligible accounts receivable. Borrowings under the facility would accrue interest at the lowest of one of three market-based interest rates, one of which is the prime rate plus 1- 1/2 percent. The unused portion of the line of credit is subject to an annual commitment fee of one-half of one percent. There were no amounts outstanding under this credit line as of December 31, 1993. The Company estimates that, as of December 31, 1993, it would have been able to borrow the full $25 million under the revolving credit agreement.
Note 3 - Accrued Liabilities
Accrued liabilities as of December 31 consisted of the following:
GLOBAL MARINE INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 - Commitments and Contingencies
The Company operates its Concrete Island Drilling System (the "CIDS"), also known as the Glomar Beaufort Sea I, under a noncancelable operating lease. Also, the Company has numerous noncancelable operating leases for office facilities and equipment. The leases have remaining terms ranging of up to eight years, some of which may be renewed at the Company's option. Certain leases are subject to rent revisions based on changes in interest rates, the Consumer Price Index and/or escalations due to increases in building operating costs. Rent expense for 1993, 1992, and 1991 was $6.1 million, $6.8 million and $5.9 million, respectively.
Future minimum rental payments for the Company's lease obligations as of December 31, 1993, net of payments which were previously deposited into escrow, were as follows:
As of December 31, 1993, $6.8 million of the Company's marketable securities was restricted from general use, including $5.0 million in proceeds from sales of oil and gas properties and $1.8 million collateralizing outstanding operating letters of credit. The use of the proceeds from sales of oil and gas properties and other assets is limited under the terms of the indenture governing the Senior Secured Notes.
The lease for the CIDS expires in December 1994. Prior to expiration, the Company may make arrangements with the lessor to extend the term of the lease beyond the current expiration date or to purchase the CIDS at a price to be negotiated between the two parties. If such an agreement cannot be reached, the Company may be required to redeliver the CIDS to the lessor at the nearest ice- free port.
The Company is involved in various lawsuits resulting from personal injury and, from time to time, performance of services and property damage. The Company believes that resolution of these matters will not have a material adverse effect on its financial position.
Note 5 - Financial Instruments
Concentrations of Credit Risk
As indicated in the industry segment information which appears in Note 10, the market for the Company's services and products is the offshore oil and gas industry, and the Company's customers consist primarily of major integrated international oil companies and independent oil and gas producers. The Company performs ongoing credit evaluations of its customers and generally does not require material collateral. The Company maintains reserves for potential credit losses, and such losses have been within management's expectations.
At December 31, 1993 and 1992, the Company had cash deposits concentrated primarily in four major banks. In addition, the Company had certificates of deposits, commercial paper and Eurodollar time deposits with a variety of companies and financial institutions with strong credit ratings. As a result of the foregoing, the Company believes that credit risk in such instruments is minimal.
Fair Values of Financial Instruments
As of December 31, 1993 and 1992, the estimated fair value of the Company's investment in common stock approximated its carrying value of $15.0 million. The estimated fair value of the Company's $225.0 million carrying value of long-term debt approximated $249.2 million and $225.0 million as of December 31, 1993 and 1992, respectively. The estimates of fair values were based on quoted market prices. The carrying values of the Company's cash and cash equivalents, marketable securities, trade receivables and payables, note receivable and current maturities of long-term debt approximate their fair values due to the short-term maturities of these instruments.
Note 6 - Capital Stock
The Company is authorized to issue 200,000,000 shares of common stock, $0.10 par value per share, and 10,000,000 shares of preferred stock, $0.01 par value per share. As of December 31, 1993, 37,167,201 shares of common stock were unissued, including 15,404,391 shares reserved for issuance under stock option plans. None of the preferred stock was issued or outstanding as of December 31, 1993.
In February 1994, the Company's board of directors approved an increase in the number of authorized shares of the Company's common stock, from 200,000,000 shares to 300,000,000 shares. This increase is subject to stockholder approval, which the Company intends to seek at its annual meeting of stockholders to be held in May 1994. The additional shares, if authorized by the stockholders, would have the same rights and privileges as shares of the common stock presently outstanding and could be used in the future for any proper corporate purpose.
The indenture governing the Senior Secured Notes contains certain restrictions with respect to the payment of dividends on the common stock (other than stock dividends). Specifically, the indenture restricts the payment of dividends based on (i) availability of funds under a formula based on previously unapplied cumulative net income since September 30, 1992 plus certain stock sale proceeds after December 23, 1992 and (ii) satisfaction of the then applicable minimum interest coverage ratio for debt incurrence. Cumulative net income for purposes of the test excludes gains or losses on asset sales and certain other nonrecurring charges or credits specified in the indenture. Based on the above restrictions, the Company was prohibited from paying dividends on the common stock as of December 31, 1993.
The Company has two stock option plans, the Global Marine Inc. 1989 Stock Option and Incentive Plan and the 1990 Non-Employee Director Stock Option Plan (the "Stock Option Plans"). Under the Stock Option Plans, options to purchase shares of common stock may be granted to key employees and directors, and shares of common stock may be sold to employees at incentive prices below the market price at the time of the sale. One-half of each option grant is exercisable beginning one year after the date of grant with the remainder exercisable after two years. Options expire ten years after the date of grant. Options become exercisable in full if more than 50 percent of the Company's outstanding common stock is acquired by a person or a single group of persons. Shares of common stock available for future option grants and stock sales under the Stock Option Plans totaled 7,041,691 and 2,787,488 at December 31, 1993 and 1992, respectively.
The following is a summary of stock option transactions:
Note 7 - Net Income (Loss) per Common Share
Net income per common share is based on the weighted average number of common shares outstanding and, for those periods in which they have a dilutive effect, shares contingently issuable due to outstanding options. The net loss per share is based on the weighted average number of common shares outstanding. The number of shares used were 151,984,669 for 1993, 116,337,978 for 1992, and 109,156,271 for 1991. Shares for 1992 include 1,703,048 share equivalents attributable to outstanding options. Shares for 1993 and 1991 exclude the effect of outstanding options because their effect was either immaterial or antidilutive.
Assuming the Company paid off the Petdrill Note (see Note 2) on January 1, 1993, the net loss for 1993 would have decreased from $26.5 million ($0.17 per share) to $24.3 million ($0.16 per share). The pro forma amounts give effect to a reduction in interest expense and assume that 6,698,985 of the 17,250,000 shares issued in connection with the Company's August 1993 public offering and utilized to repay the Petdrill Note were outstanding for all of 1993.
Note 8 - Income Taxes
The provision for income taxes consisted of the following:
Effective January 1, 1992, the Company adopted the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Under SFAS No. 109, deferred income taxes are recorded to reflect the tax consequences on future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end. The new standard replaced SFAS No. 96, which the Company adopted in 1988. The cumulative effect of the accounting change on years prior to 1992 was a $3.3 million reduction in the Company's deferred tax liability as of January 1, 1992. The Company reported the cumulative effect of the change in the 1992 statement of operations and, as a result, increased 1992 net income by $3.3 million ($0.03 per share). The effect of the change on 1992 net income, excluding the cumulative effect upon adoption, was not material. Assuming the accounting change was applied retroactively to 1991, the effect on net income and on net income per share for 1991 would not have been material.
A reconciliation of the differences between income taxes computed at the U.S. federal statutory rate of 35 percent for 1993 and 34 percent for 1992 and 1991, and the Company's reported provision for income taxes follows:
As of December 31, 1993, the Company had deferred tax assets totaling $441.4 million, deferred tax liabilities totaling $46.5 million, and a valuation allowance in the amount of $394.9 million. The valuation allowance is based on the likelihood that the net deferred tax asset in the amount of $394.9 million will not be realized. The net change in the valuation allowance during 1993 was an increase of $9.3 million. The components of the deferred tax amounts as of December 31 were as follows:
As of December 31, 1993, the Company had $1,120.9 million in net operating loss carryforwards ("NOLs") expiring from 1999 to 2008 and $29.8 million in investment tax credit carryforwards ("Credits") expiring from 1994 to 2000.
The NOLs and Credits are subject to review and potential disallowance by the Internal Revenue Service ("IRS") upon audit of the federal income tax returns of the Company. For example, the IRS might assert that the NOLs and the Credits were adversely affected by the implementation of the Company's 1989 plan of reorganization (the "Plan"). Section 382 of the Internal Revenue Code of 1986, as amended, may impair the future availability of the NOLs and the Credits if there is a change in ownership of more than 50 percent of the Company's common stock since the effective date of the Plan, including future changes in the ownership of the common stock. This limitation, if it applied, would limit the utilization of the NOLs and the Credits in each taxable year to an amount equal to the product of the federal long-term tax-exempt bond rate prescribed monthly by the IRS and the fair market value of all the Company's stock at the time of the ownership change. The interpretation of Section 382 is subject to numerous uncertainties. Accordingly, while the Company believes its loss carryforwards are available to it without limitation, such availability is not certain, nor is it certain that such carryforwards, if presently available without limitation, will continue to be available without limitation.
Note 9 - Other Income (Expense)
Other income for 1992 consisted of a $0.5 million gain resulting from an adjustment to the remaining accrual for the costs of debt restructuring relating to the Company's 1989 plan of reorganization and a $0.2 million gain on the sale of an investment in common stock. For 1991, other income included a $0.9 million gain recognized on the extinguishment of debt resulting from the Company's receipt of previously outstanding units of beneficial interest in the Global Marine Drilling Company Series B Trust ("Units") in connection with the exercise of outstanding warrants to purchase the Company's common stock.
Note 10 - Industry Segment Information
The principal industry segments of the Company are marine drilling and oil and gas exploration, development and production. Marine drilling includes offshore contract drilling and turnkey drilling management services. Contract drilling services are performed generally on a daily rate basis under individual contracts for either a stated period of time or the time required to drill a well or number of wells. Revenues from turnkey drilling services are derived from the design and execution of a specific offshore drilling program at a fixed price to the oil and gas operator and are recognized under the completed contract method of accounting. In the industry segment data which follows, intrasegment revenues are recorded at transfer prices which approximate the prices charged to unaffiliated customers and have been eliminated from consolidated revenues. Operating income consists of revenues less the related operating costs and expenses, excluding interest and unallocated corporate expenses. Adjustments and eliminations as they relate to operating income include the reduction to turnkey drilling operating income attributable to service contracts on oil and gas properties in which the Company had an economic interest and was the operator. In that regard, operating income for turnkey drilling for 1992 and 1991 has been restated to conform to the 1993 presentation. Such restatement had no effect on the consolidated operating income for either 1992 or 1991.
__________________________________ (1) Includes a $10.9 million net gain on the sale of two offshore drilling rigs.
In 1993 one customer provided $29.2 million of marine drilling revenues. In 1992 one customer provided $37.8 million and another customer provided $34.0 million of marine drilling revenues. No single customer provided more than ten percent of revenues for 1991.
A breakdown of export sales by geographic area follows:
The Company may be exposed to the risk of foreign currency exchange losses in connection with its foreign operations. Such losses are the result of holding net monetary assets (cash and receivables in excess of payables) denominated in foreign currencies during periods of a strengthening U.S. dollar. The Company's foreign exchange gains and losses, which are primarily attributable to the British pound, have not been and are not expected to be material. This is because the Company's revenues are primarily denominated in U.S. dollars; revenues in each foreign currency are approximately equal to the Company's local expenses in that currency; and the Company does not speculate in foreign currencies or maintain significant foreign currency cash balances.
Note 11 - Retirement Plans
Pensions
The Company has defined benefit pension plans covering substantially all of its employees. For the most part, benefits are based on the employee's length of service and average earnings for the five highest consecutive calendar years of compensation during the last fifteen years of service. Substantially all benefits are paid from funds previously provided to trustees. The Company is the sole contributor to the plans, and its funding objective is to fund participants' benefits under the plans as they would accrue, taking into consideration future salary increases. The components of net pension cost were as follows:
The following table sets forth the funded status of the plans and the amounts recognized in the Company's consolidated balance sheet as of December 31:
Plan assets consist primarily of listed stocks and bonds, fixed-income investments and real estate. The increase in the projected benefit obligation during 1993 was attributable in part to the decrease in the discount rate for 1993 noted below.
The expected long-term rate of return on plan assets used to compute pension cost was 9.0 percent for 1993, 1992, and 1991. The assumed rate of increase in future compensation levels ranged from 5.5 percent to 6.5 percent for 1993 and 1992, and was 6.5 percent for 1991. The discount rate used to calculate the actuarial present value of the projected benefit obligation was 7.5 percent for 1993, 8.5 percent for 1992, and 7.25 percent for 1991.
The Company has a defined contribution savings plan in which substantially all of the Company's domestic employees are eligible to participate. Company contributions to this plan are based on the amount of employee contributions. Charges to expense with respect to this plan totaled $0.5 million for each of 1993, 1992 and 1991.
Other Postretirement Benefits
The Company provides life insurance and health care benefits to substantially all retired employees, their covered dependents and beneficiaries. Generally, employees who have reached the age of 55 and have rendered a minimum of five years of service are eligible for these benefits. For the most part, health care benefits are contributory while life insurance benefits are noncontributory.
Effective January 1, 1992, the Company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," with respect to retiree life insurance and health care benefits. Under SFAS No. 106, the Company is required to accrue the estimated cost of such benefits during the employees' active service period. The Company previously expensed the cost of these benefits as benefits were paid. The cumulative effect on prior years of adopting SFAS No. 106 was a $1.9 million increase to a liability for retiree life insurance and health care benefits as of January 1, 1992. The Company elected to recognize immediately in income the cumulative effect of the change and charged 1992 earnings in the amount of $1.9 million ($.02 per share). The effect of the adoption of SFAS No. 106 on 1992 net income excluding the cumulative effect of the change was not material. Assuming the accounting change was applied retroactively to 1991, the effect on net income and on net income per share would not have been material.
Net postretirement life insurance and health care cost consisted of the following components:
Benefits under the Company's postretirement life insurance and health care plans are not funded. The status of the plans as of December 31 was as follows:
The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation was 9.0 percent for 1994, gradually declining to 6.0 percent by the year 2015 and remaining at that level thereafter. The effect of a one-percentage point increase in the assumed health care cost trend rate for each future year on (i) the portion of the accumulated postretirement benefit obligation applicable to health care benefits as of December 31, 1993 and (ii) the net postretirement health care cost for the year then ended would be immaterial. The assumed discount rate used in determining the accumulated postretirement benefit obligation was 7.0 percent for 1993 and 7.75 percent for 1992.
Note 12 - Supplemental Cash Flow Information
Cash interest payments during 1993, 1992, and 1991 totaled $28.9 million, $23.5 million and $20.8 million, respectively. Cash payments for income taxes totaled $5.4 million in 1993, $1.4 million in 1992, and $0.9 million in 1991.
In September 1993, the Company acquired a 100 percent ownership interest in three offshore drilling rigs in exchange for a 100 percent ownership interest in its offshore drilling rig, the Glomar Moray Firth I, plus $17.0 million in cash (see Note 13).
During 1992, in accordance with provisions of its debt agreements, the Company deferred the payment of interest totaling $18.3 million. This amount was added to outstanding principal prior to payment.
During 1991, the Company reduced long-term debt by $14.4 million as a result of the receipt of Units in connection with the exercise of warrants to purchase common stock of the Company.
Note 13 - Transocean Transaction
On September 10, 1993, the Company acquired from Transocean Drilling AS, a Norwegian drilling contractor ("Transocean"), a 100 percent ownership interest in three 300-foot jackup drilling rigs, the Transocean No. 5, the Transocean No. 6 and the Transocean No. 7, in exchange for a 100 percent ownership interest in one of the Company's heavy-weather jackup rigs, the Glomar Moray Firth I, plus a cash payment of $17.0 million. Under the terms of the transaction, the aggregate cash flow generated by all four rigs will be shared in proportion to the relative fair market values of the four rigs, with 56.59 percent going to the Company and 43.41 percent to Transocean.
The purchase and sale were accounted for as an exchange of similar productive assets. The cost of the three rigs acquired was based on (i) the recorded value of the asset surrendered, the Glomar Moray Firth I, which totaled $23.2 million, plus (ii) the $17.0 million cash payment. No gain or loss was recorded.
The Transocean No. 6 and Transocean No. 7, which have been renamed the Glomar Adriatic VI and the Glomar Adriatic VII, respectively, are currently being marketed and managed by the Company in the Gulf of Mexico. The name of the Transocean No. 5 will remain unchanged as long as it is operating under Transocean's management pursuant to a pre-existing contract in Abu Dhabi.
Note 14 - Litigation Settlement
On May 27, 1992, the Company settled its take-or-pay litigation (the "Transco Litigation") with Transcontinental Gas Pipe Line Corporation ("TGPL"), a subsidiary of Transco Energy Company ("Transco"), which had been filed in the United States District Court for the Southern District of Texas, Houston Division. Under the settlement, the Company received $20.0 million in cash and $20.0 million in the form of a note of TGPL (the "Transco Note"). In late 1992 Transco deposited U.S. government securities into a trust account in an amount sufficient to satisfy the required principal and interest payments due under the Transco Note. The Transco Note bears interest at the annual rate of 4.937 percent and is payable in eight quarterly principal installments of $2.5 million each, the first of which was received in October 1993.
In addition, on February 1, 1994, the Company received 1,017,771 previously escrowed shares of Transco common stock plus $0.9 million in dividends declared and paid on the escrowed shares. The Transco shares received by the Company will not be available for sale by the Company in the public market prior to May 1994. Furthermore, the number of shares of Transco common stock which the Company may sell during any single three-month period will be limited; as a result, the Company may not be able to complete the sale of all of the Transco shares until late 1994. Consequently, the Company will be subject to the risk of any decline in value resulting from any decrease in the market value of the Transco common stock during the period from February 1, 1994 until such time as the shares are sold. As of February 11, 1994, the market value of the Transco shares held by the Company exceeded the carrying value of $15.0 million. No assurance can be made that the Company will be able to sell the Transco shares on favorable terms.
Note 15 - Subsequent Event
In February 1994, the Company purchased two jackup drilling rigs for $26.0 million in cash, $1.0 million in notes payable from the rigs' net cash flow, and up to 900,000 shares of Global Marine common stock. The Company anticipates spending an additional $15 million to refurbish and upgrade the rigs over approximately the next 12 months.
SUPPLEMENTAL OIL AND GAS DISCLOSURE (Unaudited)
The Company's estimated net proved reserves and proved developed reserves of crude oil, natural gas and natural gas liquids are shown in the table below:
Proved reserves are estimated quantities of crude oil, natural gas and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. All of the Company's proved reserves are located in the United States. Proved developed reserves are those proved reserves that can be expected to be recovered through existing wells with existing equipment and operating methods.
The estimates of the Company's proved oil and gas reserves were prepared by Ryder Scott Company Petroleum Engineers and were based on data supplied to them by the Company. Ryder Scott Company Petroleum Engineers has issued reports that include descriptions of the bases used in preparing the reserve estimates. These reports are filed as exhibits to this Annual Report on Form 10-K.
SUPPLEMENTAL OIL AND GAS DISCLOSURE (Unaudited)
Capitalized costs of oil and gas properties excluded from the full cost amortization pool as of December 31, 1993 were not material. Costs incurred related to oil and gas activities consisted of the following:
The 1992 exploration costs were negative as a result of the deferral of profit attributable to drilling contracts on oil and gas properties in which the Company had working interests and was the operator.
The calculation of estimated future net cash flows in the following table assumed the continuation of existing economic conditions. Future net cash inflows were computed by applying year-end prices (except for future price changes as allowed by contract) of oil and gas to the expected future production of proved reserves, less estimated future expenditures (based on year-end costs) expected to be incurred in developing and producing such reserves.
The standardized measure of discounted future net cash flows relating to proved oil and gas reserves as of December 31 follows:
SUPPLEMENTAL OIL AND GAS DISCLOSURE (Unaudited)
Principal sources of changes in the standardized measure of discounted future net cash flows follow:
CONSOLIDATED SELECTED QUARTERLY FINANCIAL DATA (Unaudited) (In millions, except per share data)
Net income for the fourth quarter of 1993 includes a gain of $1.0 million related to a favorable settlement of a foreign income tax liability.
During the fourth quarter of 1992, the Company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," with respect to retiree life insurance and health care benefits. The Company elected to recognize immediately in income the cumulative effect of the change, which amounted to $1.9 million as of January 1, 1992, and reduced 1992 net income by that amount. Net income for the first quarter of 1992 has been restated to reflect the cumulative effect of this change on prior years. As a result, first quarter net income for 1992 decreased from $2.8 million, as previously reported, to $0.9 million. The effect of the adoption of this statement on subsequent quarters of 1992 was not material. Net income for the first quarter of 1992 also includes a gain of $3.3 million, representing the cumulative effect on prior years of adopting the change in accounting for income taxes.
Operating income for the first quarter of 1992 includes a gain of $11.0 million on the sale of an offshore drilling rig.
Income before extraordinary item for the second quarter of 1992 includes income of $55.0 million received in the Transco settlement.
The Company did not declare any dividends on its common stock in either 1993 or 1992.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Global Marine Inc.
Our report on the consolidated financial statements of Global Marine Inc. and subsidiaries is included on page 25 of this Form 10-K. In connection with our audits of such financial statements, we have also audited the related financial statement schedules listed in the index on page 56 of this Form 10-K.
In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein.
/s/ Coopers & Lybrand
Houston, Texas February 11, 1994
GLOBAL MARINE INC. AND SUBSIDIARIES SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT (In millions)
The methods of depreciation of property, plant and equipment are described in Note 1 of Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.
Additions for 1993 include the acquisition of three offshore drilling rigs at a recorded cost of $40.2 million, $23.2 million of which was noncash (see Note 13 of Notes to Consolidated Financial Statements in this Annual Report on Form 10-K).
GLOBAL MARINE INC. AND SUBSIDIARIES SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT (In millions)
GLOBAL MARINE INC. AND SUBSIDIARIES SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS (In millions)
(a) Represents unearned interest income which was charged to an escrow account for the lease of the Glomar Beaufort Sea I and which is classified as a noncurrent asset.
(b) Represents lease payments for the Glomar Beaufort Sea I which were made from the escrow account described in (a) above.
GLOBAL MARINE INC. AND SUBSIDIARIES SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION (In millions)
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
As permitted by General Instruction G, the information called for by this item with respect to the Company's directors is incorporated by reference from the Company's definitive proxy statement to be filed pursuant to Regulation 14A within 120 days after the end of the last fiscal year. Information with respect to the Company's executive officers is set forth in Part I of this Annual Report on Form 10-K under the caption "Executive Officers of the Registrant."
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
As permitted by General Instruction G, the information called for by this item is incorporated by reference from the Company's definitive proxy statement to be filed pursuant to Regulation 14A within 120 days after the end of the last fiscal year.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As permitted by General Instruction G, the information called for by this item is incorporated by reference from the Company's definitive proxy statement to be filed pursuant to Regulation 14A within 120 days after the end of the last fiscal year.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As permitted by General Instruction G, the information called for by this item is incorporated by reference from the Company's definitive proxy statement to be filed pursuant to Regulation 14A within 120 days after the end of the last fiscal year.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
Page (a) Financial Statements, Schedules and Exhibits
(1) Financial Statements Report of Independent Accountants 25 Consolidated Statement of Operations 26 Consolidated Balance Sheet 27 Consolidated Statement of Cash Flows 29 Consolidated Statement of Shareholders' Equity 30 Notes to Consolidated Financial Statements 31 (2) Financial Statement Schedules Report of Independent Accountants 50 Schedule V - Property, Plant and Equipment 51 Schedule VI - Accumulated Depreciation, Depletion and Amortization of Property, Plant and Equipment 52 Schedule VIII - Valuation and Qualifying Accounts 53 Schedule X - Supplementary Income Statement Information 54
Schedules other than those listed above are omitted for the reason that they are not required or are not applicable or the required information is included in the financial statements or related notes.
(3) Exhibits
The following instruments are included as exhibits to this Annual Report on Form 10-K and are filed herewith unless otherwise indicated. Exhibits incorporated by reference are so indicated by parenthetical information.
3(i).1 Restated Certificate of Incorporation of the Company as filed with the Secretary of State of Delaware on March 15, 1989, effective March 16, 1989.
3(i).2 Certificate of Amendment of the Restated Certificate of Incorporation of the Company as filed with the Secretary of State of Delaware on May 11, 1990.
3(i).3 Certificate of Correction of the Restated Certificate of Incorporation of the Company as filed with the Secretary of State of Delaware on September 25, 1990.
3(i).4 Certificate of Amendment of the Restated Certificate of Incorporation of the Company as filed with the Secretary of State of Delaware on May 11, 1992.
3(ii).1 By-laws of the Company as amended on May 10, 1989.
4.1 Indenture, dated as of December 23, 1992, between the Company and Wilmington Trust Company, as Trustee, with respect to the Senior Secured Notes. (Incorporated herein by this reference to Exhibit 4.5 of Post-Effective Amendment No. 2 to the Registrant's Registration Statement on Form S-3 (No. 33-34013) filed with the Commission on January 22, 1993.)
4.2 First Priority Naval Mortgage, dated April 29, 1993, from Global Marine Drilling Company to Wilmington Trust Company, as Trustee. (Incorporated herein by this reference to Exhibit 4.6 of the Registrant's Registration Statement on Form S-3 (No. 33-65272) filed with the Commission on June 30, 1993.)
4.3 First Preferred Fleet Mortgage, dated December 23, 1992, from Global Marine Drilling Company to Wilmington Trust Company, as Trustee. (Incorporated herein by this reference to Exhibit 4.7 of Post-Effective Amendment No. 2 to the Registrant's Registration Statement on Form S-3 (No. 33-34013) filed with the Commission on January 22, 1993.)
4.4 Release of Vessel from Lien of First Preferred Fleet Mortgage, dated April 30, 1993, by Wilmington Trust Company, as Trustee. (Incorporated herein by this reference to Exhibit 4.8 of the Registrant's Registration Statement on Form S-3 (No. 33-65272) filed with the Commission on June 30, 1993.)
4.5 First Preferred Fleet Mortgage, dated December 23, 1992, from Global Marine Deepwater Drilling Inc. to Wilmington Trust Company, as Trustee. (Incorporated herein by this reference to Exhibit 4.8 of Post-Effective Amendment No. 2 to the Registrant's Registration Statement on Form S-3 (No. 33-34013) filed with the Commission on January 22, 1993.)
4.6 Release of Vessel from Lien of Mortgage, dated January 27, 1993, by Wilmington Trust Company, as Trustee.
4.7 First Priority Naval Mortgage, dated March 17, 1993, from Global Marine Nautilus Inc. to Wilmington Trust Company, as Trustee. (Incorporated herein by this reference to Exhibit 4.10 of the Registrant's Registration Statement on Form S-3 (No. 33-65272) filed with the Commission on June 30, 1993.)
4.8 Release of Vessel from Lien of First Priority Naval Fleet Mortgage, dated September 8, 1993, by Wilmington Trust Company, as Trustee.
4.9 Supplement No. 1, dated September 8, 1993, to First Priority Naval Fleet Mortgage from Global Marine Nautilus Inc. to Wilmington Trust Company, as Trustee.
4.10 Assumption Agreement and Supplement No. 2, dated December 16, 1993, to First Priority Naval Fleet Mortgage among Global Marine Drilling Company and Wilmington Trust Company, as Trustee.
4.11 First Preferred Fleet Mortgage, dated December 23, 1992, from Global Marine West Africa Inc. to Wilmington Trust Company, as Trustee. (Incorporated herein by this reference to Exhibit 4.10 of Post-Effective Amendment No. 2 to the Registrant's Registration Statement on Form S-3 (No. 33-34013) filed with the Commission on January 22, 1993.)
4.12 First Preferred Ship Mortgage, dated December 23, 1992, from Global Marine Adriatic Inc. to Wilmington Trust Company, as Trustee. (Incorporated herein by this reference to Exhibit 4.11 of Post-Effective Amendment No. 2 to the Registrant's Registration Statement on Form S-3 (No. 33-34013) filed with the Commission on January 22, 1993.)
4.13 Assumption Agreement and Supplement No.1, dated March 4, 1993, to First Preferred Ship Mortgage among Global Marine Adriatic Inc., as Original Mortgagor, Global Marine Drilling Company, as Assuming Mortgagor, and Wilmington Trust Company, as Trustee. (Incorporated herein by this reference to Exhibit 4.13 of the Registrant's Registration Statement on Form S-3 (No. 33-65272) filed with the Commission on June 30, 1993.)
4.14 First Preferred Ship Mortgage, dated December 23, 1992, from Global Marine Australia Inc. to Wilmington Trust Company, as Trustee. (Incorporated herein by this reference to Exhibit 4.12 of Post-Effective Amendment No. 2 to the Registrant's Registration Statement on Form S-3 (No. 33-34013) filed with the Commission on January 22, 1993.)
4.15 First Preferred Ship Mortgage, dated December 23, 1992, from Global Marine Bismarck Sea Inc. to Wilmington Trust Company, as Trustee. (Incorporated herein by this reference to Exhibit 4.13 of Post-Effective Amendment No. 2 to the Registrant's Registration Statement on Form S-3 (No. 33-34013) filed with the Commission on January 22, 1993.)
4.16 First Priority Naval Mortgage, dated March 17, 1993, from Global Marine North Sea Inc. to Wilmington Trust Company, as Trustee. (Incorporated herein by this reference to Exhibit 4.16 of the Registrant's Registration Statement on Form S-3 (No. 33-65272 ) filed with the Commission on June 30, 1993.)
4.17 Subsidiary Pledge Agreement, dated December 23, 1992, between Global Marine Adriatic Inc. and Wilmington Trust Company, as Trustee. (Incorporated herein by this reference to Exhibit 4.15 of Post-Effective Amendment No. 2 to the Registrant's Registration Statement on Form S-3 (No. 33-34013) filed with the Commission on January 22, 1993.)
4.18 Subsidiary Pledge Agreement, dated December 23, 1992, between Global Marine Australia Inc. and Wilmington Trust Company, as Trustee. (Incorporated herein by this reference to Exhibit 4.16 of Post-Effective Amendment No. 2 to the Registrant's Registration Statement on Form S-3 (No. 33-34013) filed with the Commission on January 22, 1993.)
4.19 Subsidiary Pledge Agreement, dated December 23, 1992, between Global Marine Bismarck Sea Inc. and Wilmington Trust Company, as Trustee. (Incorporated herein by this reference to Exhibit 4.17 of Post-Effective Amendment No. 2 to the Registrant's Registration Statement on Form S-3 (No. 33-34013) filed with the Commission on January 22, 1993.)
4.20 Subsidiary Pledge Agreement, dated December 23, 1992, between Global Marine Deepwater Drilling Inc. and Wilmington Trust Company, as Trustee. (Incorporated herein by this reference to Exhibit 4.18 of Post-Effective Amendment No. 2 to the Registrant's Registration Statement on Form S-3 (No. 33-34013) filed with the Commission on January 22, 1993.)
4.21 Subsidiary Pledge Agreement, dated December 23, 1992, between Global Marine Drilling Company Inc. and Wilmington Trust Company, as Trustee. (Incorporated herein by this reference to Exhibit 4.19 of Post-Effective Amendment No. 2 to the Registrant's Registration Statement on Form S-3 (No. 33-34013) filed with the Commission on January 22, 1993.)
4.22 Subsidiary Pledge Agreement, dated December 23, 1992, between Global Marine Nautilus Inc. and Wilmington Trust Company, as Trustee. (Incorporated herein by this reference to Exhibit 4.20 of Post-Effective Amendment No. 2 to the Registrant's Registration Statement on Form S-3 (No. 33-34013) filed with the Commission on January 22, 1993.)
4.23 Subsidiary Pledge Agreement, dated December 23, 1992, between Global Marine North Sea Inc. and Wilmington Trust Company, as Trustee. (Incorporated herein by this reference to Exhibit 4.21 of Post-Effective Amendment No. 2 to the Registrant's Registration Statement on Form S-3 (No. 33-34013) filed with the Commission on January 22, 1993.)
4.24 Subsidiary Pledge Agreement, dated December 23, 1992, between Global Marine West Africa Inc. and Wilmington Trust Company, as Trustee. (Incorporated herein by this reference to Exhibit 4.22 of Post-Effective Amendment No. 2 to the Registrant's Registration Statement on Form S-3 (No. 33-34013) filed with the Commission on January 22, 1993.)
10.1 Credit Agreement, dated June 24, 1993, among Global Marine Inc., Global Marine Drilling Company, Global Marine Australia Inc., Global Marine Baltic Inc., Global Marine Deepwater Drilling Inc. and Societe Generale, New York Branch. (Incorporated herein by this reference to Exhibit 10.1 of the Registrant's Registration Statement on Form S-3 (No. 33-65272) filed with the Commission on June 30, 1993.)
10.2 Memorandum of Agreement, dated June 6, 1993, between Global Marine Inc. and Transocean Drilling AS, and Amendment No. 1 thereto dated June 16, 1993. (Incorporated herein by this reference to Exhibit 99.1 of the Registrant's Registration Statement on Form S-3 (No. 33-65272) filed with the Commission on June 30, 1993.)
10.3 Letter of Intent in Order to Form a Joint Venture, dated June 6, 1993, between Global Marine Inc. and Transocean Drilling AS. (Incorporated herein by this reference to Exhibit 99.2 of the Registrant's Registration Statement on Form S-3 (No. 33-65272) filed with the Commission on June 30, 1993.)
10.4 Purchase and Sale Agreement, dated August 24, 1993, between Global Marine Inc. and Transocean Drilling AS. (Incorporated herein by this reference to Exhibit 10.3 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993.)
10.5 Management Agreement (relating to Glomar Moray Firth I), dated September 10, 1993, between Global Marine Nautilus Inc. and Transocean Drilling AS. (Incorporated herein by this reference to Exhibit 10.4 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993.)
10.6 Management Agreement (relating to Transocean No. 5), dated September 10, 1993, between Global Marine Nautilus Inc. and Transocean Drilling AS. (Incorporated herein by this reference to Exhibit to 10.5 of the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993.)
10.7 Purchase and Sale Agreement (relating to the Uxmal, subsequently renamed the Glomar Adriatic IX), dated as of December 13, 1993, and Amendment No. 1 thereto, dated as of February 10, 1994, each between Global Marine Inc. and Aban Loyd Chiles Offshore Limited.
10.8 Purchase and Sale Agreement (Supplementary) (relating to the Uxmal, subsequently renamed the Glomar Adriatic IX), dated as of December 13, 1993, and Amendment No. 1 thereto, dated as of February 10, 1994, each between Global Marine Inc. and Aban Loyd Chiles Offshore Limited.
10.9 Purchase and Sale Agreement (relating to the Chichen Itza, subsequently renamed the Glomar Adriatic X), dated as of December 13, 1993, and Amendment No. 1 thereto, dated as of February 11, 1994, each between Global Marine Inc. and Aban Loyd Chiles Offshore Limited.
10.10 Purchase and Sale Agreement (Supplementary) (relating to the Chichen Itza, subsequently renamed the Glomar Adriatic X), dated as of December 13, 1993, and Amendment No. 1 thereto, dated as of February 11, 1994, each between Global Marine Inc. and Aban Loyd Chiles Offshore Limited.
10.11 Letter Employment Agreement dated as of February 28, 1992, between the Company and C. Russell Luigs. (Incorporated herein by this reference to Exhibit 10.1 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1991.)
10.12 Consulting Agreement dated as of February 18, 1986, between Challenger Minerals Inc. and Donald B. Brown. (Incorporated herein by this reference to Exhibit 10.2 of the Company's Annual Report on Form 10-K for the year ended December 31, 1987.)
10.13 Consulting Agreement dated as of February 18, 1986, between Challenger Minerals Inc. and William C. Walker. (Incorporated herein by this reference to Exhibit 10.3 of the Company's Annual Report on Form 10-K for the year ended December 31, 1987.)
10.14 Six Letter Severance Agreements dated February 7, 1989, between the Company and six executive officers, respectively. (Incorporated herein by this reference to Exhibit 10.5 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1988.)
10.15 Letter Severance Agreement dated May 7, 1992, between the Company and Jon A. Marshall. (Incorporated herein by this reference to Exhibit 10.5 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992.)
10.16 Global Marine Inc. 1989 Stock Option and Incentive Plan. (Incorporated herein by this reference to Exhibit 10.6 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1988.)
10.17 First Amendment to Global Marine Inc. 1989 Stock Option and Incentive Plan. (Incorporated herein by this reference to Exhibit 10.6 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1990.)
10.18 Second Amendment to Global Marine Inc. 1989 Stock Option and Incentive Plan. (Incorporated herein by this reference to Exhibit 10.7 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1991.)
10.19 Third Amendment to Global Marine Inc. 1989 Stock Option and Incentive Plan.
10.20 Eight Incentive Stock Sale Agreements dated February 9, 1993, between the Company and eight executive officers, respectively. (Incorporated herein by this reference to Exhibit 10.10 of the Company's Annual Report on Form 10-K for the year ended December 31, 1992.)
10.21 Nine Incentive Stock Sale Agreements dated February 8, 1994, between the Company and nine executive officers, respectively.
10.22 Executive Life Insurance Plan. (Incorporated herein by this reference to Exhibit 10.5 of the Company's Annual Report on Form 10-K for the year ended December 31, 1988.)
10.23 Global Marine Inc. Executive Supplemental Retirement Plan of 1990. (Incorporated herein by this reference to Exhibit 10.8 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1990.)
10.24 Global Marine Benefit Equalization Retirement Plan effective January 1, 1990. (Incorporated herein by this reference to Exhibit 10.8 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1989.)
10.25 Global Marine Benefit Equalization Retirement Trust as established effective January 1, 1990. (Incorporated herein by this reference to Exhibit 10.9 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1989.)
10.26 Form of Indemnification Agreement entered into between the Company and each of its directors and officers. (Incorporated herein by this reference to Exhibit 10.12 of the Company's Annual Report on Form 10-K for the year ended December 31, 1986.)
10.27 Amended and Restated Retirement Plan for Outside Directors. (Incorporated herein by this reference to Exhibit 10.12 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1990.)
10.28 Global Marine Inc. 1990 Non-Employee Director Stock Option Plan (Incorporated herein by this reference to Exhibit 10.18 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1991.)
10.29 Global Marine Inc. 1993 Management Incentive Award Plan. (Incorporated herein by this reference to Exhibit 10.18 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992.)
10.30 Global Marine Inc. 1994 Management Incentive Award Plan.
11.1 Computation of Earnings Per Common Share.
21.1 List of Subsidiaries.
23.1 Consent of Coopers & Lybrand, Independent Accountants.
23.2 Consent of Independent Petroleum Engineers (Ryder Scott Company Petroleum Engineers).
27.1 Financial Data Schedule. (Exhibit 27.1 is being submitted as an exhibit only in the electronic format of this Annual Report on Form 10-K being submitted to the Securities and Exchange Commission. Exhibit 27.1 shall not be deemed filed for purposes of Section 11 of the Securities Act of 1933, Section 18 of the Securities Exchange Act of 1934 or Section 323 of the Trust Indenture Act, or otherwise be subject to the liabilities of such sections, nor shall it be deemed a part of any registration statement to which it relates.)
99.1 Report of Independent Petroleum Engineers dated February 7, 1994.
99.2 Reports of Independent Petroleum Engineers dated January 29, 1993. (Incorporated herein by this reference to Exhibit 28.1 of the Company's Annual Report on Form 10-K for the year ended December 31, 1992.)
99.3 Reports of Independent Petroleum Engineers dated January 29, 1992. (Incorporated herein by this reference to Exhibit 28.1 of the Company's Annual Report on Form 10-K for the year ended December 31, 1991.)
99.4 Fourth Proposed Plan of Reorganization Under Chapter 11 of the United States Bankruptcy Code for Global Marine Inc. and its Affiliated Debtors, as filed by the Registrant on October 5, 1988, in the United States Bankruptcy Court for the Southern District of Texas, Houston Division (Incorporated herein by this reference to Exhibit 2.2 of the Registrant's Current Report on Form 8-K dated October 5, 1988.)
99.5 Modifications to Plan of Reorganization Under Chapter 11 of the United States Bankruptcy Code for Global Marine Inc. and its Affiliated Debtors, as filed by the Registrant on February 1, 1989, in the United States Bankruptcy Court for the Southern District of Texas, Houston Division. (Incorporated herein by this reference to Exhibit 2.2 of the Registrant's Current Report on Form 8-K dated February 2, 1989.)
99.6 Order Confirming Plan of Reorganization Under Chapter 11 of the United States Bankruptcy Code for Global Marine Inc. and its Affiliated Debtors, as Modified by Modifications to Plan of Reorganization Under Chapter 11 of the United States Bankruptcy Code for Global Marine Inc. and its Affiliated Debtors. (Incorporated herein by this reference to Exhibit 28.1 of the Registrant's Current Report on Form 8-K dated February 2, 1989.)
99.7 Additional Modifications to Plan of Reorganization Under Chapter 11 of the United States Bankruptcy Code for Global Marine Inc. and its Affiliated Debtors, as filed by the Registrant on March 2, 1989, in the United States Bankruptcy Court for the Southern District of Texas, Houston Division. (Incorporated herein by this reference to Exhibit 2.3 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1988.)
99.8 Order Allowing Modification of Confirmed Plan of Reorganization dated March 14, 1989. (Incorporated herein by this reference to Exhibit 28.5 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1988.)
99.9 Order Modifying Provisions of Plan of Reorganization dated May 5, 1989. (Incorporated herein by this reference to Exhibit 28.6 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1989.)
99.10 Order Extending Delivery Deadline with Respect to Documents Evidencing Long-Term Debt Obligations Created Under Confirmed Plan, dated June 29, 1989; Order Further Extending Delivery Deadline with Respect to Documents Evidencing Long-Term Debt Obligations Created Under Confirmed Plan, dated July 11, 1989; Order Granting Additional 30-day Extension of Delivery Deadline with Respect to Documents Evidencing Long-Term Debt Obligations Created by Confirmed Plan, dated November 7, 1989; and Order Granting Additional Time to Execute and Deliver Plan Documents Evidencing Obligations to Unsecured Creditors, dated January 3, 1990. (Incorporated herein by this reference to Exhibit 28.7 of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1989.)
The Company hereby undertakes, pursuant to Regulation S-K, Item 601(b), paragraph (4) (iii), to furnish to the Securities and Exchange Commission on request agreements defining the rights of holders of long-term debt of the Company and its consolidated subsidiaries not filed herewith in accordance with said Item.
Management Contracts, Compensatory Plans and Arrangements:
The following management contracts, compensatory plans and arrangements, which are required to be filed as exhibits to this Annual Report on Form 10-K, are included in the immediately preceding list as Exhibits 10.11 through 10.30. The parenthetical information in the following list specifies, for each such contract, plan or arrangement, its exhibit number in the immediately preceding list, which list includes information regarding the filing with which it can be found.
Employment Agreement:
Letter Employment Agreement dated as of February 28, 1992, between the Company and C. Russell Luigs (Exhibit 10.11).
Consulting Agreements:
Consulting Agreement, dated as of February 18, 1986, between Challenger Minerals Inc. and Donald B. Brown (Exhibit 10.12); Consulting Agreement, dated as of February 18, 1986, between Challenger Minerals Inc. and William C. Walker (Exhibit 10.13)
Severance Agreements:
Six Letter Severance Agreements dated February 7, 1989, between the Company and six executive officers, respectively (Exhibit 10.14); Letter Severance Agreement dated May 7, 1992, between the Company and one executive officer (Exhibit 10.15).
Stock Option Plans and Agreements Thereunder:
Global Marine Inc. 1989 Stock Option and Incentive Plan (Exhibit 10.16); First Amendment thereto (Exhibit 10.17); Second Amendment thereto (Exhibit 10.18); Third Amendment thereto (Exhibit 10.19).
Eight Incentive Stock Sale Agreements dated February 9, 1993, between the Company and eight executive officers, respectively (Exhibit 10.20); Nine Incentive Stock Sale Agreements dated February 8, 1994, between the Company and nine executive officers, respectively (Exhibit 10.21).
Global Marine Inc. 1990 Non-Employee Director Stock Option Plan (Exhibit 10.28).
Life Insurance Plan:
Executive Life Insurance Plan (Exhibit 10.22).
Retirement Plans:
Global Marine Inc. Executive Supplemental Retirement Plan of 1990 (Exhibit 10.23).
Global Marine Benefit Equalization Retirement Plan effective January 1, 1990 (Exhibit 10.24).
Global Marine Benefit Equalization Retirement Trust as established effective January 1, 1990 (Exhibit 10.25).
Amended and Restated Retirement Plan for Outside Directors (Exhibit 10.27).
Indemnification Agreements:
Form of Indemnification Agreement entered into between the Company and each of its directors and officers (Exhibit 10.26).
Incentive Award Plans:
Global Marine Inc. 1993 Management Incentive Award Plan (Exhibit 10.29); Global Marine Inc. 1994 Management Incentive Award Plan (Exhibit 10.30).
(b) Reports on Form 8-K
The Company did not file any Current Reports on Form 8-K during the last quarter of 1993.
SIGNATURES REQUIRED FOR FORM 10-K
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 MARINE INC. (REGISTRANT)
Date: February 28, 1994 By: J. C. MARTIN (J. C. Martin) Senior Vice President and Chief Financial Officer
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.
EXHIBIT INDEX
A. Copies of exhibits listed below are submitted with this Annual Report on Form 10-K, immediately following this index.
3(i).1 Restated Certificate of Incorporation of the Company as filed with the Secretary of State of Delaware on March 15, 1989, effective March 16, 1989.
3(i).2 Certificate of Amendment of the Restated Certificate of Incorporation of the Company as filed with the Secretary of State of Delaware on May 11, 1990.
3(i).3 Certificate of Correction of the Restated Certificate of Incorporation of the Company as filed with the Secretary of State of Delaware on September 25, 1990.
3(i).4 Certificate of Amendment of the Restated Certificate of Incorporation of the Company as filed with the Secretary of State of Delaware on May 11, 1992.
3(ii).1 By-laws of the Company as amended on May 10, 1989.
4.6 Release of Vessel from Lien of Mortgage, dated January 27, 1993, by Wilmington Trust Company, as Trustee.
4.8 Release of Vessel from Lien of First Priority Naval Fleet Mortgage, dated September 8, 1993, by Wilmington Trust Company, as Trustee.
4.9 Supplement No. 1, dated September 8, 1993, to First Priority Naval Fleet Mortgage from Global Marine Nautilus Inc. to Wilmington Trust Company, as Trustee.
4.10 Assumption Agreement and Supplement No. 2, dated December 16, 1993, to First Priority Naval Fleet Mortgage among Global Marine Drilling Company and Wilmington Trust Company, as Trustee.
10.7 Purchase and Sale Agreement (relating to the Uxmal, subsequently renamed the Glomar Adriatic IX), dated as of December 13, 1993, and Amendment No. 1 thereto, dated as of February 10, 1994, each between Global Marine Inc. and Aban Loyd Chiles Offshore Limited.
10.8 Purchase and Sale Agreement (Supplementary) (relating to the Uxmal, subsequently renamed the Glomar Adriatic IX), dated as of December 13, 1993, and Amendment No. 1 thereto, dated as of February 10, 1994, each between Global Marine Inc. and Aban Loyd Chiles Offshore Limited.
10.9 Purchase and Sale Agreement (relating to the Chichen Itza, subsequently renamed the Glomar Adriatic X), dated as of December 13, 1993, and Amendment No. 1 thereto, dated as of February 11, 1994, each between Global Marine Inc. and Aban Loyd Chiles Offshore Limited.
10.10 Purchase and Sale Agreement (Supplementary) (relating to the Chichen Itza, subsequently renamed the Glomar Adriatic X), dated as of December 13, 1993, and Amendment No. 1 thereto, dated as of February 11, 1994, each between Global Marine Inc. and Aban Loyd Chiles Offshore Limited.
II-1
10.19 Third Amendment to Global Marine Inc. 1989 Stock Option and Incentive Plan.
10.21 Nine Incentive Stock Sale Agreements dated February 8, 1994, between the Company and nine executive officers, respectively.
10.30 Global Marine Inc. 1994 Management Incentive Award Plan.
11.1 Computation of Earnings Per Common Share.
21.1 List of Subsidiaries.
23.1 Consent of Coopers & Lybrand, Independent Accountants.
23.2 Consent of Independent Petroleum Engineers (Ryder Scott Company Petroleum Engineers).
27.1 Financial Data Schedule. (Exhibit 27.1 is being submitted as an exhibit only in the electronic format of this Annual Report on Form 10-K being submitted to the Securities and Exchange Commission. Exhibit 27.1 shall not be deemed filed for purposes of Section 11 of the Securities Act of 1933, Section 18 of the Securities Exchange Act of 1934 or Section 323 of the Trust Indenture Act, or otherwise be subject to the liabilities of such sections, nor shall it be deemed a part of any registration statement to which it relates.)
99.1 Report of Independent Petroleum Engineers dated February 7, 1994.
B. The following exhibits are incorporated by reference in this Annual Report on Form 10-K, as stated in Item 14(a)(2). Descriptions of such exhibits are incorporated herein by this reference to Item 14(a)(2) of this Report.
4.1, 4.2, 4.3, 4.4, 4.5, 4.7, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16, 4.17, 4.18, 4.19, 4.20, 4.21, 4.22, 4.23, 4.24, 10.1, 10.2, 10.3, 10.4, 10.5, 10.6, 10.11, 10.12, 10.13, 10.14, 10.15, 10.16, 10.17, 10.18, 10.20, 10.22, 10.23, 10.24, 10.25, 10.26, 10.27, 10.28, 10.29, 99.2, 99.3, 99.4, 99.5, 99.6, 99.7, 99.8, 99.9, and 99.10.
II-2
EXHIBIT 11.1 GLOBAL MARINE INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER COMMON SHARE (Dollars in millions, except per share amounts)