Magma Design Automation CEO Discusses Q4 2010 Results - Earnings Call Transcript

Magma Design Automation, Inc. ( GLBL)

Q4 2010 Earnings Conference Call

February 24, 2011, 10:00 am ET

Executives

Andy Smith – CFO

John Reed – CEO

Ashit Jain – COO

Analysts

Marshall Atkins [ph]

Joe Gibney – Capital One

Craig Gilbert – Linden Advisors

Graham Mattison – Lazard Capital Markets

Presentation

Operator

Welcome to Global Industries fourth 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's conference is being recorded, any objections; 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 like to now turn the meeting over to Mr. Andy Smith. Sir, please begin.

Andy Smith

Thank you and good morning. I would like to welcome everyone to the Global Industries fourth 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 the Securities and Exchange Commission. Interested parties are directed to our website for access to our SEC filings.

Now, I'll turn it over to our Chief Executive Officer, Mr. John Reed. John.

John Reed

Thanks Andy. Good morning and welcome to our call. Before, I turn it back over to Andy for our financial results and AJ to go through our operating results; I want to update our progress against strategic initiatives. As reported last quarter, our core team of executives is in place and our personnel efforts are now focusing on filling positions in project management engineering and supply chain to further strengthen our project execution.

Our vessel divestiture program is essentially complete and any further divestitures will be on a case-by-case basis as the character of our project transitions towards deep water. With respect to project execution we have taken remedial steps to stem the losses we have soared [ph] in the third quarter on our PEMEX Line 59 and 58 projects, and those efforts have been successful with no further deterioration noted. In addition our strong effort on another projects particularly in The Gulf of Mexico and Asia-Pacific resulted in our best quarter of EBITDA performance.

To improve business acquisition; we have added some senior personnel with broad experience in pipelay installation and a good customer contact base to enhance our targeting of projects and increase our WAM percentages. Looking forward, we have segregated our dollar bid volume statistics into bids in house and outstanding and bids expected in next 90 days to give a clear picture of the future market situation.

Bids in house and outstanding have increased from $1.7 billion in November last year to $2.6 billion in January this year. Bids expected in the next 90 days stand at $3.9 billion indicating a growing bid volume to come. The most active region continues to be Asia-Pacific followed by the Middle East.

Turning to The Gulf of Mexico; activity continues to remain low although some permits have been approved. However in our North American subsea and offshore construction segments, we have delivered positive operating results, thanks to high utilization of some of our MSVs primarily on work not driven by buffer [ph] meeting. We continue to believe the upturn in the Gulf will be slow but increasing over the course of 2011.

Lastly, we have successfully completed the mission equipment trials on the G1200 and are prepared and mobilized to our first project on April 1, this year. Our first project is for Dubai Petroleum establishments and we will utilize both the pipelay capability and structural capability as the scope of work also includes the design, fabrication and installation of small fixed 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 both the G1200 and G1201 worldwide including now projects in Australia where we (inaudible) have been establishing our presence. Finally we are also looking towards West Africa to develop future opportunities for these vessels primarily in Engova, Ghana and Equatorial Guinea.

With that, I will turn it back over to Andy.

Andy Smith

Thanks John. Before I begin I want to direct anyone who has not seen the corrected press release which we issued late last night. Subsequent to the issuance of our earnings release an adjustment was proposed by our auditor’s national office which took a narrow view of the need for evaluation allowance to be recorded against the deferred tax assets arising out of our Mexican operation.

The company still believes the company will open that we realize the benefits of this deferred tax assets. However, the adjustment was proposed by our auditor, we felt obligated to make a change and re-issue the press release.

Note that this entry which effectively increased income tax expense in the period and reduced the carrying value of our deferred tax assets, is a non-cash item which should reverse of our Mexican operation return to profitability before the net operating loss carry forward period of 10 years expires. I apologize for any confusion this may have caused.

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