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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D. C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 0-21086
 Global Industries, Ltd.
  Louisiana
    
    72-1212563(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)8000 Global DriveCarlyss, Louisiana
    
    70665(Address of principal executive offices)
    
    (Zip Code)
 (337) 583-5000
 None
  þ o
  Large Accelerated Filer þ
    
    Accelerated Filer o
    
    Non-Accelerated Filer o
    
    Smaller reporting Company o(Do not check if a smaller reporting company)
  o þ




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##### 



PART I   FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    3Report of Independent Registered Public Accounting Firm
    
    
    3Condensed Consolidated Balance Sheets
    
    
    4Condensed Consolidated Statements of Operations
    
    
    5Condensed Consolidated Statements of Cash Flows
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    19Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    30Item 4. Controls and Procedures
    
    
    31PART II   OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    32Item 1A. Risk Factors
    
    
    32Item 1B. Unresolved Staff Comments
    
    
    32Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    32Purchases of Equity Securities
    
    
    32Item 5. Other
    
    
    33Item 6. Exhibits
    
    
    35Signature
    
    
    36EX-10.2EX-10.3EX-10.4EX-15.1EX-31.1EX-31.2EX-32.1EX-32.2
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PART
I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 
 Report of Independent Registered Public Accounting Firm
     Share-Based Payment,
  
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GLOBAL INDUSTRIES, LTD.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (In thousands)
 September 30
    
    
    December 312008
    
    
    2007(Unaudited)ASSETSCurrent AssetsCash and cash equivalents
    
    $
    406,248
    
    
    $
    723,450Restricted cash
    
    
    1,137
    
    
    
    1,121Marketable securities
    
    
    300
    
    
    
    99,935Accounts receivable  net of allowance of
$6,141 for 2008 and $1,278 for 2007
    
    
    159,162
    
    
    
    167,469Unbilled work on uncompleted contracts
    
    
    128,676
    
    
    
    106,716Contract costs incurred not yet recognized
    
    
    4,139
    
    
    
    10,821Deferred income taxes
    
    
    31,147
    
    
    
    3,827Assets held for sale
    
    
    2,133
    
    
    
    1,002Prepaid expenses and other
    
    
    49,061
    
    
    
    27,875Total current assets
    
    
    782,003
    
    
    
    1,142,216Property and Equipment, net
    
    
    570,077
    
    
    
    349,549Other AssetsMarketable securities
    
    
    41,468
    
    
    
    Accounts receivable  long-term
    
    
    21,308
    
    
    
    9,315Deferred charges, net
    
    
    78,541
    
    
    
    43,045Goodwill
    
    
    37,388
    
    
    
    37,388Other
    
    
    4,579
    
    
    
    8,285Total other assets
    
    
    183,284
    
    
    
    98,033Total
    
    $
    1,535,364
    
    
    $
    1,589,798LIABILITIES AND SHAREHOLDERS EQUITYCurrent LiabilitiesCurrent maturities of long-term debt
    
    $
    3,960
    
    
    $
    3,960Accounts payable
    
    
    203,335
    
    
    
    169,034Employee-related liabilities
    
    
    27,181
    
    
    
    28,366Income taxes payable
    
    
    38,950
    
    
    
    39,683Accrued interest payable
    
    
    2,119
    
    
    
    5,827Advance billings on uncompleted contracts
    
    
    11,447
    
    
    
    36,691Accrued anticipated contract losses
    
    
    51,370
    
    
    
    Other accrued liabilities
    
    
    14,944
    
    
    
    15,638Total current liabilities
    
    
    353,306
    
    
    
    299,199Long-Term Debt
    
    
    386,380
    
    
    
    390,340Deferred Income Taxes
    
    
    27,205
    
    
    
    35,617Other Liabilities
    
    
    13,822
    
    
    
    11,050Commitments and Contingencies
    
    
    
    
    
    
    Shareholders EquityCommon stock, $0.01 par value, authorized 150,000 shares and issued
119,251 and 118,001 shares, respectively
    
    
    1,193
    
    
    
    1,180Additional paid-in capital
    
    
    441,158
    
    
    
    418,366Retained earnings
    
    
    425,769
    
    
    
    515,206Treasury stock at cost, 6,129 in 2008 and 2,904 in 2007
    
    
    (105,027
    )
    
    
    (77,257
    )Accumulated other comprehensive loss
    
    
    (8,442
    )
    
    
    (3,903
    )Total shareholders equity
    
    
    754,651
    
    
    
    853,592Total
    
    $
    1,535,364
    
    
    $
    1,589,798
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GLOBAL INDUSTRIES, LTD.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share data)
 (Unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30
    
    
    September 302008
    
    
    2007
    
    
    2008
    
    
    2007Revenues
    
    $
    218,551
    
    
    $
    203,536
    
    
    $
    820,559
    
    
    $
    729,485Cost of operations
    
    
    258,736
    
    
    
    146,714
    
    
    
    795,881
    
    
    
    505,056Anticipated contract losses
    
    
    48,673
    
    
    
    
    
    
    
    51,370
    
    
    
    Gross profit (loss)
    
    
    (88,858
    )
    
    
    56,822
    
    
    
    (26,692
    )
    
    
    224,429Loss (gain) on asset disposals and impairments
    
    
    1,640
    
    
    
    (9
    )
    
    
    (372
    )
    
    
    (1,317
    )Selling, general and administrative expenses
    
    
    25,439
    
    
    
    20,749
    
    
    
    73,439
    
    
    
    58,777Operating income (loss)
    
    
    (115,937
    )
    
    
    36,082
    
    
    
    (99,759
    )
    
    
    166,969Interest income
    
    
    2,476
    
    
    
    8,450
    
    
    
    12,709
    
    
    
    19,260Interest expense
    
    
    (4,148
    )
    
    
    (3,718
    )
    
    
    (9,974
    )
    
    
    (8,491
    )Other income (expense), net
    
    
    (234
    )
    
    
    2,327
    
    
    
    (1,866
    )
    
    
    2,933Income (loss) before taxes
    
    
    (117,843
    )
    
    
    43,141
    
    
    
    (98,890
    )
    
    
    180,671Income tax expense (benefits)
    
    
    (15,056
    )
    
    
    11,666
    
    
    
    (9,453
    )
    
    
    53,611Net income (loss)
    
    $
    (102,787
    )
    
    $
    31,475
    
    
    $
    (89,437
    )
    
    $
    127,060Earnings (Loss) Per Common ShareBasic
    
    $
    (0.90
    )
    
    $
    0.27
    
    
    $
    (0.78
    )
    
    $
    1.09Diluted
    
    $
    (0.90
    )
    
    $
    0.27
    
    
    $
    (0.78
    )
    
    $
    1.08Weighted Average Common Shares OutstandingBasic
    
    
    114,493
    
    
    
    115,715
    
    
    
    114,135
    
    
    
    116,503Diluted
    
    
    114,493
    
    
    
    117,292
    
    
    
    114,135
    
    
    
    118,108
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GLOBAL INDUSTRIES, LTD.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 (Unaudited)
 Nine Months EndedSeptember 302008
    
    
    2007Cash Flows From Operating ActivitiesNet income (loss)
    
    $
    (89,437
    )
    
    $
    127,060Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:Depreciation and non-stock-based amortization
    
    
    37,941
    
    
    
    32,100Stock-based compensation expense
    
    
    10,179
    
    
    
    13,081Provision for doubtful accounts
    
    
    5,368
    
    
    
    (2,668
    )Loss on asset impairment
    
    
    1,557
    
    
    
    Gain on sale or disposal of property and equipment
    
    
    (1,929
    )
    
    
    (1,317
    )Derivative (gain) loss
    
    
    613
    
    
    
    (612
    )Deferred income taxes
    
    
    (33,842
    )
    
    
    (6,253
    )Excess tax benefits from stock-based compensation
    
    
    (4,019
    )
    
    
    (3,499
    )Changes in operating assets and liabilitiesReceivables, unbilled work, and contract costs
    
    
    (27,795
    )
    
    
    52,286Prepaid expenses and other
    
    
    (23,389
    )
    
    
    3,337Accounts payable, employee-related liabilities and other accrued liabilities
    
    
    50,306
    
    
    
    15,720Deferred dry dock costs incurred
    
    
    (47,419
    )
    
    
    (18,371
    )Net cash provided by (used in) operating activities
    
    
    (121,866
    )
    
    
    210,864Cash Flows From Investing ActivitiesProceeds from sale of assets
    
    
    6,476
    
    
    
    3,665Additions to property and equipment
    
    
    (240,113
    )
    
    
    (48,568
    )Sale of marketable securities
    
    
    106,804
    
    
    
    135,720Purchase of marketable securities
    
    
    (49,296
    )
    
    
    (236,525
    )Additions to restricted cash
    
    
    (16
    )
    
    
    (38
    )Net cash used in investing activities
    
    
    (176,145
    )
    
    
    (145,746
    )Cash Flows From Financing ActivitiesRepayment of long-term debt
    
    
    (3,960
    )
    
    
    (3,960
    )Proceeds from long-term debt
    
    
    
    
    
    
    325,000Proceeds from sale of common stock, net
    
    
    8,607
    
    
    
    15,932Repurchase of common stock
    
    
    (27,770
    )
    
    
    (76,214
    )Additions to deferred charges
    
    
    (87
    )
    
    
    (6,928
    )Excess tax benefits from stock-based compensation
    
    
    4,019
    
    
    
    3,499Net cash provided by (used in) financing activities
    
    
    (19,191
    )
    
    
    257,329Cash and cash equivalentsIncrease (decrease)
    
    
    (317,202
    )
    
    
    322,447Beginning of period
    
    
    723,450
    
    
    
    352,178End of period
    
    $
    406,248
    
    
    $
    674,625Supplemental DisclosuresInterest Paid
    
    $
    10,203
    
    
    $
    5,676Income Taxes Paid
    
    $
    37,865
    
    
    $
    61,149
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Notes to Condensed Consolidated Financial Statements (Unaudited)
 1.
    GeneralBasis of PresentationThe accompanying unaudited Condensed Consolidated Financial Statements include the accounts
of Global Industries, Ltd. and its subsidiaries (Company, we, us, or our).In the opinion of management of the Company, all adjustments (such adjustments consisting of
a normal and recurring nature) necessary for a fair presentation of the operating results
for the interim periods presented have been included in the unaudited Condensed Consolidated
Financial Statements. Operating results for the period ended September 30, 2008, are not
necessarily indicative of the results that may be expected for the year ending December 31,
2008. These financial statements should be read in conjunction with our audited
Consolidated Financial Statements and related notes thereto included in our Annual Report on
Form 10-K for the year ended December 31, 2007.ReclassificationsDuring the second quarter of 2008, we began separately disclosing interest income on the
accompanying Condensed Consolidated Statement of Operations. This reclassification had no
impact on net income for these periods.During the third quarter of 2008, we began separately disclosing accrued anticipated
contract losses on our Condensed Consolidated Balance Sheets and Condensed Consolidated Statement of Operations.Recent Accounting PronouncementsSFAS 157.In September 2006, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements(SFAS
157), which defines fair value, establishes a framework for measuring fair value and
enhances disclosures about instruments carried at fair value, but does not change existing
guidance as to whether or not an instrument is carried at fair value. In February 2008, the
FASB issued FASB Staff Positions (FSP) SFAS 157-2, Effective Date for FASB Statement 157.
This FSP permits the delayed application of SFAS 157 for all non-recurring fair value
measurements of non-financial assets and non-financial liabilities until fiscal years
beginning after November 15, 2008. In October 2008, the FASB issued FSP FAS 157-3,
Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active
(FSP FAS 157-3). This FSP clarifies the application of SFAS 157 when the market for a
financial asset is not active. FSP FAS 157-3 was effective on issuance and used to evaluate
the fair value of auction rate securities as of September 30, 2008. The Company adopted
SFAS 157, as amended, on a prospective basis beginning January 1, 2008, for its financial
assets and liabilities and will adopt this statement for its non-financial assets and
liabilities, which consists of goodwill and assets held for sale, on January 1, 2009. We do
not believe the adoption of SFAS No. 157 for our nonfinancial assets and liabilities will
have a material impact on our consolidated financial statements. See further discussion
about the implementation of SFAS 157 in Note 5.SFAS 161.In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities(SFAS 161). SFAS 161 requires specific disclosures
regarding the location and amounts of derivative instruments in the Companys financial
statements, how derivative instruments and related hedged items are accounted for, and how
derivative instruments and related hedged items affect the Companys financial position,
financial performance, and cash flows. SFAS 161 is effective for financial statements
issued, and for fiscal years and interim periods, beginning after November 15, 2008. We will
adopt the new disclosure requirements of SFAS 161 in the first quarter 2009.FSP FAS 142-3. In April 2008, the FASB issued FSP FAS 142-3, Determination of the Useful
Life of Intangible Assets(FSP FAS 142-3). FSP FAS 142-3 requires companies estimating the
useful life of a recognized intangible asset to consider their historical experience in
renewing or extending similar arrangements or, in the absence of historical experience, to
consider assumptions that market participants would use about renewal or extension as
adjusted for the entity-specific factors in SFAS No. 142, Goodwill and Other Intangible
Assets. FSP FAS 142-3 will be effective for the Company beginning January 1, 2009.
Management is currently assessing the effect of this pronouncement on the Companys
consolidated financial statements.
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FSP APB 14-1. In May 2008, the FASB issued FSP APB No. 14-1, Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement),
(FSP APB 14-1) which will change the accounting for our 2.75% Senior Convertible
Debentures due 2027. The FSP will require cash settled convertible debt to be separated
into debt and equity components at issuance and a value to be assigned to each. The value
assigned to the debt component will be the estimated fair value of similar bonds without the
conversion feature. The difference between the bond cash proceeds and this estimated fair
value will be recorded as a debt discount and amortized to interest expense over the life of
the bond. Although FSP APB 14-1 will have no impact on the Companys actual past or future
cash flows, it will require the Company to record a material increase in non-cash interest
expense as the debt discount is amortized. FSP APB 14-1 will become effective for the
Company beginning January 1, 2009 and applied retrospectively to all periods presented. The
Company is continuing to evaluate the impact of adopting FSP APB 14-1 on the consolidated
financial statements, but expects that the implementation of this FSP will have a
significant effect on previously reported and future non-cash interest expense.FSP EITF 03-6-1.In June 2008, the FASB issued FSP EITF 03-6-1, Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating Securities, (FSP
EITF 03-6-1). This FSP addresses whether instruments granted in share-based payment
transactions are participating securities prior to vesting and, therefore, need to be
included in computing earnings per share under the two-class method described in SFAS No.
128, Earnings Per Share. This FSP shall be applied retrospectively for financial statements
issued for fiscal years beginning after December 15, 2008. The Company is currently
evaluating the impact, if any, of adopting FSP EITF 03-6-1.2.
    
    Restricted CashRestricted cash represents cash deposits for the purpose of providing a banking institution
cash collateral for ongoing short-term foreign exchange contracts. There is no contractual
obligation or agreement to have the cash restricted for a period longer than one to five
days; therefore, restricted cash is classified as a current asset on the accompanying
Condensed Consolidated Balance Sheets. See also Note 9.3.
    
    Marketable SecuritiesAs of September 30, 2008, the Company held $42.7 million at par value in auction rate
securities which are variable rate bonds tied to short-term interest rates with maturities
up to 31 years. Auction rate securities have interest rate resets through a Dutch auction at
predetermined short intervals. Interest rates generally reset every 7-35 days. The coupon
interest rate for these securities ranged from 3.2% to 13.9%, on a tax exempt basis, for the
quarter ended September 30, 2008.The Companys investments in auction rate securities were issued by municipalities and state
education agencies. The auction rate securities issued by state education agencies represent
pools of student loans for which repayment is substantially guaranteed by the U.S.
government under the Federal Family Education Loan Program (FFELP). All of the Companys
investments in auction rate securities have at least a double A rating. As of September 30,
2008, the par value of auction rate securities issued by state education agencies was $30.0
million and the par value of auction rate securities issued by municipalities was $12.7
million.Recent auctions for the Companys auction rate securities have failed. An auction failure,
which is not a default in the underlying debt instrument, occurs when there are more sellers
than buyers at a scheduled interest rate auction date. This results in a lack of liquidity
for these securities, even though debt service continued to occur. When auctions fail, the
interest rate is adjusted according to the provisions of the related security agreement,
which generally results in an interest rate higher than the interest rate the issuer pays in
connection with successful auctions. During the nine months ended September 30, 2008, the
Company continued to earn and receive scheduled interest on these securities.Based on a lack of current market liquidity and the Companys ability and intent to continue
holding its auction rate securities until they can be sold or redeemed at par value or
mature, the Company classifies these securities as non-current.The Companys investments in auction rate securities are classified as available for sale
and are carried at fair value with any unrealized gains and losses recorded in other
comprehensive income. The Company concluded the fair value of the auction rate securities
classified as non-current at September 30, 2008 was $41.5 million, a decline of $0.9 million
from par value. The decline in fair value has been assessed by the Company as temporary and
has been
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recorded as an unrealized loss in accumulated other comprehensive income, net of tax of $0.2
million. The Company will continue to monitor the market for auction rate securities and
consider its impact, if any, on fair value of the remaining investment through disposition.Subsequent to September 30, 2008, the Company received a settlement offer from UBS Financial
Services, Inc. (UBS) related to the $30.0 million in par value of auction rate securities
issued by state education agencies. UBS is offering the Company nontransferable rights to
sell these auction rate securities at par value to UBS at any time during the period of June
30, 2010 through July 2, 2012. The Company is currently evaluating the merits and terms of
this proposed agreement.
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4.
    
    DerivativesThe Company uses forward contracts to manage its exposure in foreign currency rates. The
Companys outstanding forward foreign currency contracts are used to hedge cash flows for
forecasted purchase commitments denominated in Norwegian Kroners. The Norwegian Kroner
forward contracts are accounted as cash flow hedges with unrealized gains and losses
recorded in other comprehensive income. As of September 30, 2008 and December 31, 2007,
there was $1.2 million and $5.1 million of unrealized gains, net of tax, in accumulated
other comprehensive income. As of September 30, 2008, approximately $0.9 million of the
unrealized gains are expected to be realized in earnings during the next twelve months.5.
    
    Fair Value of Financial InstrumentsUnder SFAS 157, fair value is defined as the price that would be received to sell an asset
or paid to transfer a liability (i.e. exit price) in an orderly transaction between market
participants at the measurement date. SFAS 157 establishes a hierarchy for inputs used in
measuring fair value that maximizes the use of observable inputs and minimizes the use of
unobservable inputs by requiring that the most observable inputs be used when available.
The hierarchy for inputs is categorized into three levels based on the reliability of inputs
as follows:
    Assets measured at fair value on a recurring basis are categorized in the table below based
upon the lowest level of significant input to the valuations.
 Fair Value Measurements at September 30, 2008  (In thousands)
 Description
    
    Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Cash equivalents
    
    $
    290,018
    
    
    $
    290,018
    
    
    $
    
    
    
    $
    Marketable securities
    
    
    41,768
    
    
    
    
    
    
    
    
    
    
    
    41,768Derivative contracts
    
    
    1,838
    
    
    
    
    
    
    
    1,838
    
    
    
    Total
    
    $
    333,624
    
    
    $
    290,018
    
    
    $
    1,838
    
    
    $
    41,768
 Financial instruments classified as Level 3 in the fair value hierarchy represent auction
rate securities in which management has used at least one significant unobservable input in
the valuation model. The following tables present a reconciliation of activity for such
securities:
 Changes in Level 3 Financial Instruments
 Three Months 
Ended
    
    
    Nine Months EndedSeptember 30
    
    
    September 30(In thousands)Beginning Balance
    
    $
    41,968
    
    
    $
    48,800Purchases, issuances, and settlements
    
    
    (200
    )
    
    
    (13,250
    )Unrealized gain (loss)
    
    
    
    
    
    
    (907
    )Transfers in and/or (out) of Level 3
    
    
    
    
    
    
    7,125Balance at September 30, 2008
    
    $
    41,768
    
    
    $
    41,768
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6.
    
    ReceivablesReceivables are presented in the following balance sheet accounts: (1) accounts receivable,
(2) accounts receivable  long-term, (3) unbilled work on uncompleted contracts, and
(4) contract costs incurred not yet recognized. The balance of accounts receivable -
long-term at September 30, 2008 and December 31, 2007 represents amounts related to
retainage which were not expected to be collected within the next twelve months. The
balance of unbilled work on uncompleted contracts includes (a) amounts receivable from
customers for work that has not yet been billed pursuant to contractually specified
milestone billing requirements and (b) revenue accruals.The claims and unapproved change orders included in our receivables amounted to $44.4
million at September 30, 2008 and $46.0 million at December 31, 2007.
 Costs and Estimated Earnings on Uncompleted Contracts
 September 30
    
    
    December 312008
    
    
    2007(In thousands)Costs incurred on uncompleted contracts
    
    $
    704,052
    
    
    $
    838,856Estimated earnings
    
    
    2,658
    
    
    
    322,089Costs and estimated earnings on uncompleted contracts
    
    
    706,710
    
    
    
    1,160,945Less: Billings to date
    
    
    (603,888
    )
    
    
    (1,091,255
    )102,822
    
    
    
    69,690Plus: Accrued revenue
    
    
    24,296
    
    
    
    8,371Less: Advance billings on uncompleted contracts
    
    
    (9,889
    )
    
    
    (8,036
    )$
    117,229
    
    
    $
    70,025Included in accompanying balance sheets under the
following captions:Unbilled work on uncompleted contracts
    
    $
    128,676
    
    
    $
    106,716Advance billings on uncompleted contracts
    
    
    (11,447
    )
    
    
    (36,691
    )$
    117,229
    
    
    $
    70,025
 7.
    
    Property and EquipmentThe components of property and equipment, at cost, and the related accumulated depreciation
are as follows:
 September 30
    
    
    December 312008
    
    
    2007(In thousands)Land
    
    $
    6,322
    
    
    $
    6,322Facilities and equipment
    
    
    181,223
    
    
    
    155,676Marine vessels
    
    
    539,455
    
    
    
    428,021Construction in progress
    
    
    172,882
    
    
    
    68,757Total property and equipment
    
    
    899,882
    
    
    
    658,776Less: Accumulated depreciation
    
    
    (329,805
    )
    
    
    (309,227
    )Property and equipment, net
    
    $
    570,077
    
    
    $
    349,549
 Expenditures for property and equipment that substantially increase the useful lives of
existing assets are capitalized at cost and depreciated. Routine expenditures for repairs
and maintenance are expensed as incurred. Except for major construction vessels that are
depreciated on the units-of-production (UOP) method over estimated vessel operating days,
depreciation is provided utilizing the straight-line method over the estimated useful lives
of the assets. The UOP method is based on vessel utilization days and more closely
correlates depreciation expense to vessel revenue. In addition, the UOP method provides for
a minimum depreciation floor in periods with nominal vessel use. In general, if we applied
only a straight-line depreciation method instead of the UOP method, less depreciation
expense would be recorded in periods of high utilization and revenues, and more depreciation
expense would be recorded in periods of low vessel utilization and revenues.
 11




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8.
    
    Deferred Dry Docking CostsThe Company utilizes the deferral method to capitalize vessel dry docking costs and to
amortize the costs to the next dry docking. Such capitalized costs include regulatory
required steel replacement, direct costs for vessel mobilization and demobilization and
rental of dry docking facilities and services. Crew costs may also be capitalized when
employees perform all or a part of the required dry docking. Any repair and maintenance
costs incurred during the dry docking period are expensed as incurred.The below table presents a roll forward of dry docking costs incurred and amortization for
all periods presented:
 Three Months Ended
    
    
    Nine Months EndedSeptember 30
    
    
    September 302008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands)Net book value at beginning of period
    
    $
    66,940
    
    
    $
    17,715
    
    
    $
    30,735
    
    
    $
    13,673Additions for the period
    
    
    5,310
    
    
    
    9,009
    
    
    
    47,419
    
    
    
    18,371Amortization expense for the period
    
    
    (4,741
    )
    
    
    (2,892
    )
    
    
    (10,645
    )
    
    
    (8,212
    )Net book value at end of period
    
    $
    67,509
    
    
    $
    23,832
    
    
    $
    67,509
    
    
    $
    23,832
 9.
    
    Long-Term DebtThe components of long-term debt are as follows:
 September 30
    
    
    December 312008
    
    
    2007(In thousands)Senior Convertible Debentures due 2027, 2.75%
    
    $
    325,000
    
    
    $
    325,000Title XI Bonds due 2025, 7.71%
    
    
    65,340
    
    
    
    69,300Revolving Credit Facility
    
    
    
    
    
    
    Total long-term debt
    
    
    390,340
    
    
    
    394,300Less: Current maturities
    
    
    (3,960
    )
    
    
    (3,960
    )Long-term debt less current maturities
    
    $
    386,380
    
    
    $
    390,340
 The Company may redeem all or a part of the debentures any time on or after August 1, 2014,
for cash at a price equal to 100% of the principal amount of the debentures being redeemed
plus accrued and unpaid interest. The holders of the debentures may require the Company to
repurchase all or a part of their debentures for cash on August 1, 2017 and August 1, 2022
at a price equal to 100% of the principal amount of the debentures being redeemed plus
accrued or unpaid interest, or upon the occurrence of certain types of fundamental changes.As a result of operating performance, the Company did not meet the existing minimum fixed
charge coverage ratio covenant in the Third Amended and Restated Credit Agreement (the
Revolving Credit Facility) as of September 30, 2008. As of October 31, 2008, the Company
had no borrowing against the facility and $100.2 million in
letters of credit outstanding thereunder.
On November 7, 2008, the financial institutions participating in the Revolving Credit
Facility waived compliance with the covenant condition. In consideration of this waiver, the Company and
the participating financial institutions have amended the Revolving Credit Facility to:
 
    
    temporarily cash-collateralize letters of credit and bank guarantees;
    
    temporarily waive compliance with certain financial covenants;
    
    temporarily prohibit share repurchases; and
    
    temporarily maintain unencumbered liquidity of $100 million.
 The length of the interim cash-collateralization period will depend on the Companys future
financial performance. For the remaining duration of the Revolving Credit Facility after the
cash-collateralization period, this facility has been further amended to:
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
    
    allow for a new starting point in measuring financial performance; and
    
    permit borrowings and/or the issuance of letters of credit and bank guarantees
based on a rate premium over prime rate ranging from 1.50% to 3.00% or London
Interbank Offered Rate (LIBOR) ranging from 2.00% to 3.50% based upon certain
financial ratios.
 While the interim cash-collateralization requirement is in effect, no borrowings, letters of
credit or bank guarantees unsecured by cash are available to the Company under the Revolving
Credit Facility. All cash collateral will be classified in the Condensed Consolidated
Balance Sheet as Restricted Cash. The Company also has a $16.0 million short-term credit
facility at one of its foreign locations. At September 30, 2008, the available borrowing
under this facility was $6.5 million.10.
    
    Commitments and ContingenciesCommitmentsConstruction and Purchases in Progress The estimated cost to complete capital expenditure
projects in progress at September 30, 2008 was approximately $388.2 million, which primarily
represents expenditures for construction of new generation derrick/pipelay vessels, the
Global 1200 and Global 1201. This amount includes an aggregate commitment of 149.9 million
Singapore Dollars (or $101.3 million as of September 30, 2008) and 24.0 million (or $32.9
million as of September 30, 2008).Lease ExtensionOn August 8, 2008, the Company entered into a contractual addendum to
extend the Titan II cancelable lease an additional 57 months from August 2013 to May 2018,
thereby increasing the contractual obligation by $34.1 million.Off Balance Sheet Arrangements In the normal course of our business activities, and
pursuant to agreements to perform construction services, we provide bonds, letters of credit
and guarantees to customers, vendors, and other parties. At September 30, 2008, the
aggregate amount of outstanding bonds was $93.9 million, which are scheduled to expire
between October 2008 and July 2009, and the aggregate amount of outstanding letters of
credit and bank guarantees was $109.8 million, which are due to expire between October 2008
and October 2009.ContingenciesDuring the fourth quarter of 2007, we received a payroll tax assessment for the years 2005
through 2007 from the Nigerian tax authorities in the amount of $23.2 million. The
assessment alleges that certain expatriate employees, working on projects in Nigeria, were
subject to personal income taxes, which were not paid to the government. We filed a formal
objection to the assessment on November 12, 2007. We do not believe these employees are
subject to the personal income tax assessed; however, we believe this matter will ultimately
have to be resolved by litigation. We do not expect the ultimate resolution to have a
material adverse effect on the Company.On February 21, 2007, we received a $29.7 million tax assessment from Algeria for income
tax, business tax and value added tax for the years 2005 and 2004. We are indemnified by
our client for the value added tax portion of the assessment, which is approximately $10.4
million. We accrued income taxes for the Algerian tax liability in conjunction with the
project in 2005 and 2004. We have engaged an outside tax counsel to assist us in resolving
the tax assessment. During the fourth quarter of 2007, we reached a final resolution with
the Algerian tax authority for the income and the business tax portions of the assessment
for approximately $2.5 million, including penalties. This amount was paid during the first
quarter of 2008.In June 2007, the Company announced that it was conducting an internal investigation of its
West Africa operations, focusing on the legality, under the U.S. Foreign Corrupt Practices
Act (FCPA) and local laws, of one of its subsidiarys reimbursement of certain expenses
incurred by a customs agent in connection with shipments of materials and the temporary
importation of vessels into West African waters. The Audit Committee has engaged Andrews
Kurth LLP to lead the investigation. Andrews Kurth LLP is an international firm with
significant experience in investigating and advising on FCPA matters.At this stage of the internal investigation, the Company is unable to predict what
conclusions, if any, the Securities and Exchange Commission (SEC) will reach, whether the
Department of Justice will open a separate investigation to investigate this matter, or what
potential remedies these agencies may seek. If the SEC or Department of Justice determines
that violations of the FCPA have occurred, they could seek civil and criminal sanctions,
including
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monetary penalties, against us and/or certain of our employees, as well as changes to our
business practices and compliance programs, any of which could have a material adverse
effect on our business and financial condition. In addition, such actions, whether actual
or alleged, could damage our reputation and ability to do business. Further detecting,
investigating, and resolving these matters is expensive and consumes significant time and
attention of our senior management.We continue to use alternative procedures adopted after the commencement of the
investigation to obtain Nigerian temporary import permits. These procedures are designed to
ensure FCPA compliance. Although we are still working and pursuing additional work in West
Africa, we have declined or terminated available projects and delayed the start of certain
projects in Nigeria in order to ensure FCPA compliance and appropriate security for our
personnel and assets. The possibility exists that we may have to curtail or cease our
operations in Nigeria if appropriate long-term solutions cannot be identified and
implemented. We have worldwide customer relationships and a mobile fleet, and we are
prepared to redeploy vessels to other areas as necessary to ensure the vessels are utilized
to the fullest extent possible.Notwithstanding the ongoing internal investigation, we have concluded that certain changes
to our compliance program would provide us with greater assurance that we are in compliance
with the FCPA and its record-keeping requirements. We have a long-time published policy
requiring compliance with the FCPA and broadly prohibiting any improper payments by us to
foreign or domestic officials as well as training programs for our employees. Since the
commencement of the internal investigation, we have adopted, and may adopt additional,
measures intended to enhance our compliance procedures and ability to audit and confirm our
compliance. Additional measures also may be required once the investigation concludes.The Company has concluded that it is premature for it to determine whether it needs to make
any financial reserve for any potential liabilities that may result from these activities
given the status of the internal investigation.We are a party to legal proceedings and potential claims arising in the ordinary course of
business. We do not believe that these matters arising in the ordinary course of business
will have a material impact on our financial statements in future periods.11.
    
    Comprehensive Income (Loss)Other Comprehensive Income (Loss) The differences between net income (loss) and
comprehensive income (loss) for each of the comparable periods is presented in the table
below.
 Three Months Ended
    
    
    Nine Months EndedSeptember 30
    
    
    September 302008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands)Net Income (Loss)
    
    $
    (102,787
    )
    
    $
    31,475
    
    
    $
    (89,437
    )
    
    $
    127,060Unrealized gain (loss) on derivatives
    
    
    (7,005
    )
    
    
    4,958
    
    
    
    (5,969
    )
    
    
    8,435Unrealized gain (loss) on auction rate securities
    
    
    
    
    
    
    
    
    
    
    (907
    )
    
    
    Deferred tax benefit (expense)
    
    
    2,452
    
    
    
    (1,735
    )
    
    
    2,337
    
    
    
    (2,953
    )Comprehensive Income (Loss)
    
    $
    (107,340
    )
    
    $
    34,698
    
    
    $
    (93,976
    )
    
    $
    132,542
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Accumulated Other Comprehensive Income (Loss)A roll-forward of the amounts included in
accumulated other comprehensive income (loss), net of taxes, is shown below.
 Forward
    
    
    
    
    
    
    AccumulatedAccumulated
    
    
    Foreign
    
    
    
    
    
    
    OtherTranslation
    
    
    Currency
    
    
    Auction Rate
    
    
    ComprehensiveAdjustment
    
    
    Contracts
    
    
    Securities
    
    
    Income/(Loss)(In thousands)Balance at December 31, 2007
    
    $
    (8,978
    )
    
    $
    5,075
    
    
    $
    
    
    
    $
    (3,903
    )Change in value
    
    
    
    
    
    
    (3,880
    )
    
    
    (659
    )
    
    
    (4,539
    )Balance at September 30, 2008
    
    $
    (8,978
    )
    
    $
    1,195
    
    
    $
    (659
    )
    
    $
    (8,442
    )
 The amount of accumulated translation adjustment included in accumulated other comprehensive
income (loss) relates to prior translations of subsidiaries whose functional currency was
not the U.S. dollar. The amount of gain on forward foreign currency contracts included in
accumulated other comprehensive income (loss) hedges the Companys exposure to changes in
Norwegian Kroners for commitments of long-term vessel charters.12.
    
    Stock-Based CompensationPursuant to Statement of Financial Accounting Standards No. 123(R), Share-Based Payment,
(SFAS 123(R)) companies must recognize the cost of employee services received in exchange
for awards of equity instruments based on the grant-date fair value of those awards.The table below sets forth the total amount of stock-based compensation expense for the
three and nine months ended September 30, 2008 and 2007.
 Three Months Ended
    
    
    Nine Months EndedSeptember 30
    
    
    September 302008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands)Stock-based compensation expenseStock options
    
    $
    784
    
    
    $
    1,015
    
    
    $
    2,342
    
    
    $
    3,432Restricted stock
    
    
    2,020
    
    
    
    2,037
    
    
    
    6,040
    
    
    
    7,205Performance shares and units
    
    
    727
    
    
    
    854
    
    
    
    1,797
    
    
    
    2,444Total stock-based compensation expense
    
    $
    3,531
    
    
    $
    3,906
    
    
    $
    10,179
    
    
    $
    13,081
 13.
    
    Other Income (Expense), netComponents of other income (expense), net are as follows:
 Three Months Ended
    
    
    Nine Months EndedSeptember 30
    
    
    September 302008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands)Foreign exchange rate gain (loss)
    
    $
    (222
    )
    
    $
    (969
    )
    
    $
    (2,457
    )
    
    $
    (1,843
    )Derivative contract gain (loss)
    
    
    (186
    )
    
    
    921
    
    
    
    403
    
    
    
    1,479Reversal of allowance for doubtful accounts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    787Settlement (1)
    
    
    
    
    
    
    1,395
    
    
    
    
    
    
    
    1,395Other
    
    
    174
    
    
    
    980
    
    
    
    188
    
    
    
    1,115Total
    
    $
    (234
    )
    
    $
    2,327
    
    
    $
    (1,866
    )
    
    $
    2,933
 
 (1)
    
    Gain from settlement of a claim for interrupted operations as a result of a 2006 oil
spill by a refinery adjacent to our property in Louisiana. 
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14.
    
    Income TaxesThe Companys effective tax rate for the three and nine months ended September 30, 2008 was
12.8% and 9.6%, respectively, compared to 27.0% and 29.7% for the three and nine months
ended September 30, 2007. The primary difference in the effective tax rate between the
three and nine months ended September 30, 2008 and 2007 was due to losses that could not be
tax effected and lower margins in tax jurisdictions with a deemed profit tax regime where
tax is calculated based as a percentage of revenue. This resulted in an income tax benefit
on the loss before taxes for the three and nine months ended September 30, 2008 that was
lower than if these conditions had not occurred during those periods. In the second quarter
of 2008, a tax liability totaling $1.5 million in taxes and $0.3 million in penalties for
late filing related to uncertain tax positions taken in prior years was settled. The
liability related to filing requirements in West Africa. Taxes and penalties associated
with years 1997 through 2006 were paid with a corresponding reduction in the reserve for
uncertain tax positions for the amount of $1.5 million.15.
    
    Earnings Per ShareBasic earnings per share (EPS) is computed by dividing net income (loss) during the period
by the weighted average number of common shares outstanding during each period. Diluted EPS
is computed by dividing net income (loss) during the period by the weighted average number
of shares that would have been outstanding assuming the issuance of dilutive potential
common shares as if outstanding during the reporting period, net of shares assumed to be
repurchased using the treasury stock method.The following table presents the reconciliation between basic shares and diluted shares.
 Three Months Ended
    
    
    Nine Months EndedSeptember 30
    
    
    September 302008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands, except per share data)Net income (loss)
    
    $
    (102,787
    )
    
    $
    31,475
    
    
    $
    (89,437
    )
    
    $
    127,060Common shares dilutionWeighted-average shares outstanding  basic
    
    
    114,493
    
    
    
    115,715
    
    
    
    114,135
    
    
    
    116,503Effect of dilutive securitiesStock options
    
    
    
    
    
    
    1,166
    
    
    
    
    
    
    
    1,194Performance shares and units
    
    
    
    
    
    
    411
    
    
    
    
    
    
    
    411Restricted stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted-average shares outstanding  diluted
    
    
    114,493
    
    
    
    117,292
    
    
    
    114,135
    
    
    
    118,108Earnings (loss) per shareBasic
    
    $
    (0.90
    )
    
    $
    0.27
    
    
    $
    (0.78
    )
    
    $
    1.09Diluted
    
    $
    (0.90
    )
    
    $
    0.27
    
    
    $
    (0.78
    )
    
    $
    1.08
 Excluded anti-dilutive shares totaled approximately
3.6 million and 0.1 million potential shares of common stock for the three months ended September 30, 2008 and 2007, respectively.
Approximately 3.6 million and 0.7 million potential shares of common stock were excluded
from the diluted EPS for the nine months ended September 30, 2008 and 2007, respectively,
because they were anti-dilutive.16.
    
    Segment InformationThe following table presents information about the profit (or loss) for the three and nine
months ended September 30, 2008 and 2007 of each of the Companys six reportable segments:
North America Offshore Construction Division (OCD), North America Subsea, Latin America,
West Africa, Middle East (including the Mediterranean), and Asia Pacific/India. In the
third quarter of 2008, we renamed our Gulf of Mexico segments to North America segments to
better reflect our strategic direction to expand our marketing efforts into Canada,
Newfoundland, and
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other regions in North America. The information below contains an allocation of all
corporate expense to the reportable segments, with the exception of interest expense and
interest income.
 Three Months Ended
    
    
    Nine Months EndedSeptember 30
    
    
    September 302008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands)Total segment revenuesNorth America OCD
    
    $
    28,868
    
    
    $
    32,037
    
    
    $
    58,440
    
    
    $
    80,075North America Subsea
    
    
    43,422
    
    
    
    45,620
    
    
    
    103,122
    
    
    
    117,724Latin America
    
    
    59,509
    
    
    
    39,404
    
    
    
    185,259
    
    
    
    174,269West Africa
    
    
    22,924
    
    
    
    44,626
    
    
    
    140,664
    
    
    
    153,876Middle East
    
    
    35,638
    
    
    
    41,530
    
    
    
    188,085
    
    
    
    84,955Asia Pacific/India
    
    
    40,423
    
    
    
    8,977
    
    
    
    172,317
    
    
    
    156,934Subtotal
    
    
    230,784
    
    
    
    212,194
    
    
    
    847,887
    
    
    
    767,833Intersegment eliminationsNorth America OCD
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,726
    )North America Subsea
    
    
    (10,159
    )
    
    
    (8,225
    )
    
    
    (23,187
    )
    
    
    (13,511
    )Latin America
    
    
    (2,074
    )
    
    
    
    
    
    
    (2,074
    )
    
    
    Middle East
    
    
    
    
    
    
    (401
    )
    
    
    (2,067
    )
    
    
    (16,966
    )Asia Pacific/India
    
    
    
    
    
    
    (32
    )
    
    
    
    
    
    
    (145
    )Subtotal
    
    
    (12,233
    )
    
    
    (8,658
    )
    
    
    (27,328
    )
    
    
    (38,348
    )Consolidated revenues
    
    $
    218,551
    
    
    $
    203,536
    
    
    $
    820,559
    
    
    $
    729,485Income (loss) before taxesNorth America OCD
    
    $
    (6,666
    )
    
    $
    4,888
    
    
    $
    (13,946
    )
    
    $
    10,115North America Subsea
    
    
    (459
    )
    
    
    21,974
    
    
    
    4,012
    
    
    
    48,395Latin America
    
    
    (21,858
    )
    
    
    10,282
    
    
    
    (18,622
    )
    
    
    75,101West Africa
    
    
    (12,270
    )
    
    
    2,924
    
    
    
    (25,764
    )
    
    
    (4,857
    )Middle East
    
    
    (84,893
    )
    
    
    2,489
    
    
    
    (78,455
    )
    
    
    15,027Asia Pacific/India
    
    
    9,463
    
    
    
    (6,145
    )
    
    
    31,269
    
    
    
    25,192Corporate
    
    
    (1,160
    )
    
    
    6,729
    
    
    
    2,616
    
    
    
    11,698Consolidated income (loss) before taxes
    
    $
    (117,843
    )
    
    $
    43,141
    
    
    $
    (98,890
    )
    
    $
    180,671
 17.
    
    Subsequent EventsOn October 16, 2008, the Company announced that B.K. Chin resigned all of his positions with
the Company, including Chairman of the Board and Chief Executive Officer, effective
immediately. Current board member John A. Clerico was appointed Chairman of the Board and
interim Chief Executive Officer. Mr. Clerico will serve as interim Chief Executive Officer
until the Board completes its search for a permanent replacement. In connection with
Mr. Clericos appointment as interim Chief Executive Officer, Mr. Clerico was awarded a
restricted stock grant for 143,885 shares of the Companys common stock (valued at $600,000
based upon the closing price of the common stock on October 17, 2008).Pursuant to the Resignation and Release agreement between the Company and Mr. Chin, the
Company expects to report net pretax charges of approximately $2.7 million and $0.2 million
in the fourth quarter of 2008 and first quarter of 2009, respectively.As a result of operating performance, the Company did not meet the existing minimum fixed
charge coverage ratio covenant in the Third Amended and Restated Credit Agreement (the
Revolving Credit Facility) as of September 30, 2008. As of October 31, 2008, the Company
had no borrowing against the facility and $100.2 million in letters of credit outstanding
thereunder. On November 7, 2008, the financial institutions participating in the Revolving
Credit Facility waived compliance with the covenant condition. In consideration of this
waiver, the Company and the participating financial institutions have amended the Revolving
Credit Facility to:
 
    
    temporarily cash-collateralize letters of credit and bank guarantees;
    
    temporarily waive compliance with certain financial covenants;
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##### Table of Contents




    
    temporarily prohibit share repurchases and the buyback of convertible securities;
and
    
    temporarily maintain unencumbered liquidity of $100 million.
 The length of the interim cash-collateralization period will depend on the Companys future
financial performance. For the remaining duration of the Revolving Credit Facility after the
cash-collateralization period, this facility has been further amended to:
 
    
    allow for a new starting point in measuring financial performance; and
    
    permit borrowings and/or the issuance of letters of credit and bank guarantees
based on a rate premium over prime rate ranging from 1.50% to 3.00% or London
Interbank Offered Rate (LIBOR) ranging from 2.00% to 3.50% based upon certain
financial ratios.
 While the interim cash-collateralization requirement is in effect, no borrowings, letters of
credit or bank guarantees unsecured by cash are available to the Company under the Revolving
Credit Facility. All cash collateral will be classified in the Condensed Consolidated
Balance Sheet as Restricted Cash. The Company also has a $16.0 million short-term credit
facility at one of its foreign locations. At September 30, 2008, the available borrowing
under this facility was $6.5 million.
 18




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Forward-Looking Statements
    
    
    the level of capital expenditures in the oil and gas industry;
    
    risks inherent in doing business abroad;
    
    operating hazards related to working offshore;
    
    dependence on significant customers;
    
    ability to attract and retain skilled workers;
    
    general industry conditions;
    
    environmental matters;
    
    changes in laws and regulations;
    
    the effects of resolving claims and variation orders;
    
    availability of capital resources;
    
    delays or cancellation of projects included in backlog;
    
    fluctuations in the prices or demand for oil and gas;
    
    changes in vessel construction costs and delays in completion of vessels;
    
    the level of offshore drilling activity; and
    
    foreign exchange and currency fluctuations.
   Results of Operations
 General
  19




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##### Table of Contents




    
    Offshore Construction Services, which include pipeline construction and platform
installation and removal services; and
    
    Subsea Services, which include diving, diverless intervention, SURF, IRM, salvage, and
site clearance services.
 Offshore Construction Services
   Subsea Services
  20




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##### Table of Contents



Quarter Ended September 30, 2008 Compared to Quarter Ended September 30, 2007
 2008
    
    
    2007% of
    
    
    
    
    
    
    % of
    
    
    % Change(Thousands)
    
    
    Revenue
    
    
    (Thousands)
    
    
    Revenue
    
    
    (Unfavorable)Revenues
    
    $
    218,551
    
    
    
    100.0
    %
    
    $
    203,536
    
    
    
    100.0
    %
    
    
    7.4
    %Cost of operations
    
    
    258,736
    
    
    
    118.4
    
    
    
    146,714
    
    
    
    72.1
    
    
    
    (109.5
    )Anticipated contract losses
    
    
    48,673
    
    
    
    22.3
    
    
    
    
    
    
    
    
    
    
    
    n/mGross profit (loss)
    
    
    (88,858
    )
    
    
    40.7
    
    
    
    56,822
    
    
    
    27.9
    
    
    
    (256.4
    )Loss (gain) on asset disposals and impairments
    
    
    1,640
    
    
    
    0.7
    
    
    
    (9
    )
    
    
    
    
    
    
    n/mSelling, general and administrative expenses
    
    
    25,439
    
    
    
    11.6
    
    
    
    20,749
    
    
    
    10.2
    
    
    
    (22.6
    )Operating income (loss)
    
    
    (115,937
    )
    
    
    53.0
    
    
    
    36,082
    
    
    
    17.7
    
    
    
    (421.3
    )Interest income
    
    
    2,476
    
    
    
    1.1
    
    
    
    8,450
    
    
    
    4.2
    
    
    
    (70.7
    )Interest expense
    
    
    (4,148
    )
    
    
    1.9
    
    
    
    (3,718
    )
    
    
    1.8
    
    
    
    (11.6
    )Other income (expense), net
    
    
    (234
    )
    
    
    0.1
    
    
    
    2,327
    
    
    
    1.1
    
    
    
    (110.1
    )Income (loss) before taxes
    
    
    (117,843
    )
    
    
    53.9
    
    
    
    43,141
    
    
    
    21.2
    
    
    
    (373.2
    )Income tax expense (benefit)
    
    
    (15,056
    )
    
    
    6.9
    
    
    
    11,666
    
    
    
    5.7
    
    
    
    (229.1
    )Net income (loss)
    
    $
    (102,787
    )
    
    
    47.0
    %
    
    $
    31,475
    
    
    
    15.5
    %
    
    
    (426.6
    %)
 Overview
 Revenues
  Gross Profit
 Loss
(gain) on asset disposals and impairments Sea Puma
 Selling,
General and Administrative Expenses
 Interest
Income
 Interest
Expense
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##### Table of Contents



Other
income (expense), net
 Income
Taxes
 Segment Information
 North America Offshore Construction Division
 Cherokee Gustav Ike,
 North America Subsea
 REM
Commander Global Orion Olympic Challenger
 Latin America
  West Africa
 Hercules Cheyenne Sea Constructor Sea Puma Hercules Sea Constructor
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##### Table of Contents



Middle East
  Asia Pacific/India
 Seminole
 Nine Months Ended September 30, 2008 Compared to Nine Months Ended September 30, 2007
 2008
    
    
    2007% of
    
    
    
    
    
    
    % of
    
    
    % Change(Thousands)
    
    
    Revenue
    
    
    (Thousands)
    
    
    Revenue
    
    
    (Unfavorable)Revenues
    
    $
    820,559
    
    
    
    100.0
    %
    
    $
    729,485
    
    
    
    100.0
    %
    
    
    12.5
    %Cost of operations
    
    
    795,881
    
    
    
    97.0
    
    
    
    505,056
    
    
    
    69.2
    
    
    
    (67.8
    )Anticipated contract losses
    
    
    51,370
    
    
    
    6.3
    
    
    
    
    
    
    
    
    
    
    
    n/mGross profit (loss)
    
    
    (26,692
    )
    
    
    3.3
    
    
    
    224,429
    
    
    
    30.8
    
    
    
    (111.9
    )Loss (gain) on asset disposals and impairments
    
    
    (372
    )
    
    
    
    
    
    
    (1,317
    )
    
    
    0.2
    
    
    
    (71.8
    )Selling, general and administrative expenses
    
    
    73,439
    
    
    
    8.9
    
    
    
    58,777
    
    
    
    8.1
    
    
    
    (24.9
    )Operating income (loss)
    
    
    (99,759
    )
    
    
    12.2
    
    
    
    166,969
    
    
    
    22.9
    
    
    
    (159.7
    )Interest income
    
    
    12,709
    
    
    
    1.5
    
    
    
    19,260
    
    
    
    2.6
    
    
    
    (34.0
    )Interest expense
    
    
    (9,974
    )
    
    
    1.2
    
    
    
    (8,491
    )
    
    
    1.2
    
    
    
    (17.5
    )Other income (expense), net
    
    
    (1,866
    )
    
    
    0.2
    
    
    
    2,933
    
    
    
    0.4
    
    
    
    (163.6
    )Income (loss) before taxes
    
    
    (98,890
    )
    
    
    12.1
    
    
    
    180,671
    
    
    
    24.7
    
    
    
    (20.4
    )Income tax expense (benefit)
    
    
    (9,453
    )
    
    
    1.2
    
    
    
    53,611
    
    
    
    7.3
    
    
    
    (117.6
    )Net income (loss)
    
    $
    (89,437
    )
    
    
    10.9
    %
    
    $
    127,060
    
    
    
    17.4
    %
    
    
    (170.4
    %)
 Overview
 Revenues

 23




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##### Table of Contents



Gross Profit 
 Selling, General and Administrative Expenses 
 Interest Income 
 Interest Expense 
 Other income (expense), net 
 Income
Taxes 
 Segment Information 
 North America Offshore Construction Division
 Cherokee
 North America Subsea
 REM Commander
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Latin America
  25




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##### Table of Contents



West Africa
  Middle East
  Asia Pacific/India
  Utilization of Major Construction Vessels
 Industry and Business Outlook
    26




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##### Table of Contents



Liquidity and Capital Resources
 Cash Flows
   Global
Orion
  Contractual Obligations
  (In millions)Less than 1 year
    
    $
    178.01 to 3 years
    
    
    156.8Total
    
    $
    334.8
 27




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##### Table of Contents



Titan II
 Liquidity Risk
   
    
    temporarily cash-collateralize letters of credit and bank guarantees;
    
    temporarily waive compliance with certain financial covenants;
    
    temporarily prohibit share repurchases; and
    
    temporarily maintain unencumbered liquidity of $100 million.
  
    
    allow for a new starting point in measuring financial performance; and
    
    permit borrowings and/or the issuance of letters of credit and bank guarantees based on
a rate premium over prime rate ranging from 1.50% to 3.00% or London Interbank Offered Rate
(LIBOR) ranging from 2.00% to 3.50% based upon certain financial ratios.
  Liquidity Outlook
  28




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##### Table of Contents



29




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  Interest Rate Risk
 AA-/Aa3
 Foreign Currency Risk
  
   30




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##### Table of Contents



Item 4. Controls and Procedures.
   31




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PART
II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
     
 Item 1A. Risk Factors.
 Form
10-K
 
 Item 1B. Unresolved Staff Comments.
 Form 10-K
 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Purchases of Equity Securities.
  Total Number
    
    Maximumof Shares
    
    Number ofPurchased as
    
    Shares thatPart of Publicly
    
    May Yet BeTotal Number
    
    Average
    
    Announced
    
    Purchasedof Shares
    
    Price Paid
    
    Plans or
    
    Under the PlansPeriod
    
    Purchased(1)
    
    per Share
    
    Programs
    
    or ProgramsJuly 1, 2008 - July 31, 2008
    
    
    89
    
    
    $
    17.89
    
    
    
    
    
    
    
    August 1, 2008 - August 31, 2008
    
    
    619,755
    
    
    
    8.90
    
    
    
    619,200
    
    
    
    September 1, 2008 - September 30, 2008
    
    
    2,488,072
    
    
    
    8.06
    
    
    
    2,488,072
    
    
    
    Total
    
    
    3,107,916
    
    
    $
    8.23
    
    
    
    3,107,272
    
    
    
    
 
 (1)
    
    On July 17, 2007, the Board of Directors authorized the Company to withhold shares of
restricted stock to satisfy payments for withholding taxes. 32




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##### Table of Contents



Item 5. Other Information.
  Item 1.01 Entry Into a Material Definitive Agreement.
  
    
    temporarily cash-collateralize letters of credit and bank guarantees;
    
    temporarily waive compliance with certain financial covenants;
    
    temporarily prohibit share repurchases; and
    
    temporarily maintain unencumbered liquidity of $100 million.
  
    
    allow for a new starting point in measuring financial performance; and
    
    permit borrowings and/or the issuance of letters of credit and bank guarantees based
on a rate premium over prime rate ranging from 1.50% to 3.00% or London Interbank
Offered Rate (LIBOR) ranging from 2.00% to 3.50% based upon certain financial ratios.
   Item 5.02
    
    Departure of Directors, or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
   33




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##### Table of Contents




    
    A lump sum cash payment equal to (x) three times (y) base salary and bonus. Calculation
of the bonus amount used in determination of the lump sum payment is based on the largest
actual bonus paid in the last five years or, if higher, the target bonus in the year of
termination of employment.
    
    A cash payment for unvested contributions under the Companys retirement plan as of the
date of termination.
    
    Two years of continued healthcare and dependent healthcare coverage at no additional
cost.
    
    Reimbursement of legal fees incurred as a result of the termination and certain
relocation expenses, if applicable.
    
    A gross-up payment, in the event that any payments made in connection with a change in
control would be subjected to the excise tax imposed by Section 4999 of the Internal
Revenue Code, equal to the excise tax imposed plus any additional taxes imposed on the
gross-up payment itself (except for Mr. Byron Baker, whose agreement calls for severance
payments to be cut back in order to avoid triggering any excise tax implications).
   34




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##### Table of Contents



Item 6. Exhibits.
 3.1 -
    
    Amended and Restated Articles of Incorporation of
Registrant as amended, incorporated by reference to
Exhibits 3.1 and 3.3 to the Form S-1 Registration
Statement filed by the Registrant (Reg. No 33-56600).3.2 -
    
    Bylaws of Registrant as amended through October 31,
2007, incorporated by reference to Exhibit 3.1 of the
Registrants Form 8-K filed November 2, 2007.10.1 -
    
    Change-In-Control Agreement, dated as of August 14, 2008
between Global Industries, Ltd. and Jeffrey B. Levos,
incorporated by reference to Exhibit 10.1 of the
Registrants Form 8-K filed on August 20, 2008* 10.2 -
    
    Amendment No. 4 and Waiver to the Third Amended and
Restated Credit Agreement dated November 7, 2008 among
Global Industries, Ltd., Global Offshore Mexico, S. de
R.L. de C.V., Global Industries International, L.L.C.,
in its capacity as general partner of Global Industries
International, L.P., the Lenders and Calyon New York
Branch, as administrative agent for the Lenders.* 10.3 -
    
    Form of Change-In-Control Agreement Form of
Change-In-Control Agreement (with tax gross-up) entered
into on November 7, 2008 by each of Peter Atkinson,
Russell Robicheaux and James Doré* 10.4 -
    
    Form of Change-In-Control Agreement (without tax
gross-up) entered into on November 7, 2008 by Bryon
Baker* 15.1 -
    
    Letter regarding unaudited interim financial information.* 31.1 -
    
    Section 302 Certification of CEO, John A. Clerico* 31.2 -
    
    Section 302 Certification of CFO, Jeffrey B. Levos* 32.1 -
    
    Section 906 Certification of CEO, John A. Clerico* 32.2 -
    
    Section 906 Certification of CFO, Jeffrey B. Levos
 
 * Included with this filing 35




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Signature
  GLOBAL INDUSTRIES, LTD.By:
    
    /s/ Jeffrey B. LevosJeffrey B. LevosSenior Vice President andChief Financial Officer(Principal Financial Officer)By:
    
    /s/ Trudy P. McConnaughhayTrudy P. McConnaughhayCorporate Controller(Principal Accounting Officer)
  36