FGH -- Info for newcomers
In case you missed the significance of the previous accounting questions with regard to the Ocean Rig and Petrodrill disputes, it is this.
IF, FGH can recapture charges taken in FY/99 and if Mr. Holloway was accurate when he stated ALL contracts w/losses have NOW been recognized -- THEN this year's EARNINGS will absolutely BLOW AWAY analysts' estimates for this year. It remains to be seen if a Petrodrill settlement will be as successful as that of Ocean Rig; but, in the WORSE CASE scenario the losses have already been recorded and reserves established LEAVING US with the BEST CASE scenario of recapturing those losses in earnings this year and next, as work progresses. The timing and circumstances of the disputed contracts are remarkedly similar. FWIW
FGH Snap-Shot Review (previously posted)
Shares Outstanding: 39,972,844 (As of March 20, 2000)
Stockholders' equity (SE)... $248,121,000.00 @ 12/31/99
BOOK VALUE: $6.21 ($248,121,000.00 SE/39,972,844 outstanding shares)
BACKLOG:
"As of December 31, 1999, the Company's backlog was approximately $689.1 million, approximately 73% of which management expects to be performed within the 12 months ending December 31, 2000."
Note: $242.0 million in new & revised contracts have been announced this quarter. Since the Company expects to work off approximately $125.76 million per quarter ($689.1*73%/4); current backlog (@3/31/00) can be guesstimated as $805.34 million PLUS the approximate $100 million in maintenance & repair business NOT counted in the backlog.
$905 million divided by 39.97 million shares = $22.64 of WORK per share of common stock.
CASH FLOW & WORKING CAPITAL:
"The Company believes that cash generated from operations, including the collection of recoverable income taxes, ($38.7 million at December 31, 1999), the settlement of certain recoverable contract claims, and funds available under the New Credit Facility will be sufficient to fund its requirements for working capital (including contract losses), capital expenditures, and other capital needs for at least the next 12 months and to remain in compliance with the new loan covenants."
Comment: The foregoing suggests there is plenty of work under contract to support the company UNTIL orders for newbuilds begin to emerge and the liquidity to satisfy requirements until none-strategic assets can be liquidated, resulting in a gradual reduction of debt and an increase in working capital.
PROBLEM CONTRACTS:
Ocean Rig, - The agreement reached in January extends delivery dates to Oct 31, 2000 & Dec 31, 2000.
Petrodrill ? The agreement (subject to approval by MARAD & the respective boards) reached this month,
extends delivery dates for these two units until August 1, 2001 & Nov 1, 2001.
Comment: With these major disputes laid to rest and with the controversial Millennium S.A. contract removed from backlog, it appears answers have now been provided for the major PROBLEMS clouding the Company in recent months."
COMMENT: It appears the market views the comprehensive information revealed in the 10-K as VERY positive. If you think that's good, wait until you HEAR Mr. Holloway on Thursday. I saw him interviewed by Mark Haines over a year ago, AND his presence is awesome.
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