Global Industries CEO Discusses Q3 2010 Results - Earnings Call Transcript
Global Industries Ltd. (
)
Q3 2010 Earnings Call
November 05, 2010 10:00 am ET
Executives
Andy Smith - SVP & CFO
John Reed - CEO
Ashit Jain - COO
Analysts
Joe Gibney - Capital One Southcoast
Martin Malloy - Johnson Rice & Company
Graham Mattison - Lazard Capital Markets
Brad Handler - Credit Suisse
Michael Marino - Stephens Incorporated
Brad Handler - Credit Suisse
David Griffiths - Copia Capital
Presentation
Operator
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Global Industries, Ltd. Q2 2009 Earnings Call Transcript
Welcome to the Global Industries third quarter earnings conference call. At this time, all participants are in a listen-only mode. After the presentation, we will conduct a question-and-answer session. (Operator Instructions). Today
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s conference is being recorded. If you have any instructions, you may disconnect at this time. On the call this morning are John Reed, Chief Executive Officer; Andy Smith, Chief Financial Officer and Ashit Jain, Chief Operations officer. I would now like to turn the meting over to Mr. Andy Smith. Sir, please begin.
Andy Smith
Thank you and good morning. I would like to welcome everyone to Global Industries third quarter 2010 earnings conference call. The call is being recorded and will be available on our website at globalind.com. Before we begin, I would like to remind everyone that certain of our comments and responses to questions reflect our current views and assumptions and are considered forward-looking statements as defined in securities, laws and regulations and may include risks and uncertainties which are more fully described in our filings with Securities and Exchange Commission. Interested parties are directed to our website for access to our SEC filings.
Now I
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ll turn it over to our Chief Executive Officer, Mr. John Reed. John.
John Reed
Thanks Andy and good morning and welcome to the call. Before I turn it over to Andy for the financial results and AJ to go through the operating results, I want to update you on our progress to get a strategic initiatives. As you know, we
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ve been focused on building a top tiered management organization with deepwater experience. I am happy to report that we
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re essentially completing this effort. Second, we reviewed and analyzed our existing fleet and set about a plan to divest of assets which no longer meet our strategic needs. Since we start going Global, we have divested six vessels including four this quarter. Additionally, subsequent to the quarters then, we have reached agreements to sell the DOB 332 and the Cherokee. As such as we are substantially complete in our fleet rationalization effort.
Finally we recognize that our project execution needed to be flawless in order for us to be successful. I am very disappointed that our efforts in this area haven
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t developed sooner as poor project execution on our L59 and L58 project for PEMEX resulted in project losses for the quarter. However I am confident that number one, our team is fully engaged ensuring that this project has no further deterioration and two, the centralization of our bidding; estimating and project management functions will reduce the likelihood of future issues and result in more consistent performance. Our efforts to improve business acquisition and execution efficiencies via centralization continue and will incorporate other functions as we move forward. This effort will result in better targeting of projects and improved cost control by allowing us to focus resources on the most promising opportunities to give us the greater opportunity for success. On a positive note, our bid dollar volume in house and outstanding bids on a rolling 12 month basis has increased by approximately 30%. This is primarily driven by activity in Asia Pacific region. As expected, our backlog has continued to grow and our expectation is that they will continue to grow modestly for the remainder of the year.
Turning to our operating regions. North America OCD activity remains low in spite of the now lifted drilling moratorium. However in our North American subsea segment we delivered positive operating results thanks to high utilization of some of our MSVs on the Macondo spill side. Permitting for gulf activities remains low and we would expect a very slow return to normal levels over the next year. The recent directive to operate is regarding the acceleration of PMA and salvage activity could provide a boost in that area and we
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ll be ready to partake of the opportunities as they present themselves. However, our long-term strategic shift towards deepwater installation projects remains unchanged.
Finally as you may know, we christened the G1200 on September 18, and she is currently completing her final handover from the [KSM Yarn in Singapore] to us. Having successfully completed her seat trials we will shortly begin this and equipment trials. We recently announced our first project for the vessel for Dubai Petroleum establishments scheduled to begin offshore operations in April of next year. The project will utilize pipelay and structural capability as scope of work includes the design and fabrication and installation of a small big structure. The G1201 remains on schedule and on budget and will be delivered in the third quarter of 2011. We continue to actively target and bid projects for the G1200 and G1201 worldwide.
With that I
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ll turn it back over to Andy.
Andy Smith
Thanks John. For the third quarter of 2010, consolidated revenues were 189.5 million compared to 203.7 million for the same quarter last year. Gross profit was 9.8 million for the third quarter compared to 39.9 million for the same quarter last year. Net loss attributable to common share holders was 27.9 million or $0.24 per diluted share for the third quarter of 2010 compared to net income of 14 million or $0.12 per diluted share for the third quarter of 2009. Included in the third quarter results are several items that deserve special explanation. First as John previously noted, the quarter was negatively impacted by poor execution on the Line 59, Line 58 projects in Mexico. As these execution issues resulted in the overall expectation for the projects to produce a loss, we are required by percentage of completion accounting rules to recognize the full loss in this quarter. The total loss recognized on these projects in the third quarter is $18.2 million. As a result of the loss in Mexico and the industry downturn, we were obligated during this quarter to review our balance sheet goodwill for impairment. As a result of this reveal, we have written off all remaining goodwill on the company
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s books. This impairment resulted in the $37 million after-tax loss nearing the quarter.
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