hi Larry, i currently have no position in FGI and certainly do not claim to follow the company (or the industry) as closely as i used to. However, as you pointed out, i do have a reputation, that i take pride in upholding and, i believe, a certain moral obligation to all my friends on this thread that have provided information that has given us all a chance to profit in the past.
i couldn't find a specific reason (yet, but i'm not done) but i think the general mid term view is that (i state no opinion on whether this is right or wrong) even with the recent rise in oil prices, offshore drilling activity and day rates have not improved, so it is at least reasonable to expect (again, i state no opinion on whether this is right or wrong) that in three or six months FGI's earning and back log could contract significantly.
Recent items that are interesting:
Friede Goldman CEO Says Rig Maker Seeks Purchases, CNBC Reports
New York, May 21 (Bloomberg) -- Friede Goldman International
Inc. a maker of offshore drilling rigs, plans to acquire
companies, Chief Executive J.L. Holloway told financial news
network CNBC. ''You'll continue to see our company be aggressive
in its acquisitions,'' said Holloway. Friede Goldman plans to
increase its market share, Holloway told CNBC.
[Teddy's note: The Market doesn't care about the long term benefits of any acquisition, it hates it the day it is announced. Or, sometimes, even before it is announced.)
Now, take a look at the most resent 10Q. I'm not suggesting that "something in going on," but here's a few snips that (to me at least) should be considered in light of the EPS growth that has been reported:
(obviously, the majority of the document is not included in this post)
10Q For the quarterly period ended 3/31/99
December 31,1989 March 31,1999
Total current assets 149,124,101 149,563,397
Total assets $ 314,560,103 $ 314,963,971
Short-term debt, including current portion of
long-term debt $ 16,129,380 $ 19,973,386
Accounts payable 62,968,178 55,934,976
Accrued expenses 16,640,068 20,375,403
Net income $ 6,738,015 $ 10,007,326
FGO has a credit facility (the "Credit Facility") with a bank that provides for
accounts receivable and contract related inventory based borrowings of up to $25
million at prime plus 1/2% (7.44% at March 31, 1999). These borrowings are
secured by accounts receivable and inventory. A balance of $12.6 million was
outstanding at March 31, 1999, and an additional $12.4 million was available.
The Credit Facility expired on May 3, 1999, however, the bank has agreed to
extend the Credit Facility until August, 1999. The Credit Facility contains a
number of restrictions, including a provision that would prohibit the payment of
dividends by FGO to the Company in the event that FGO defaults under the terms
of the facility. The Credit Facility requires that the Company maintain certain
minimum net worth and working capital levels and ratios and debt to equity
ratios. At March 31, 1999, the bank waived certain of the working capital ratio
covenants.
At March 31, 1999, the Company had invested approximately $12.8 million in an
unconsolidated subsidiary ("Ilion LLC") in which the Company currently owns a
50% equity interest. The Company's ownership interest in Ilion LLC is expected
to be reduced to 30%. Ilion LLC owns a hull for a semi-submersible drilling rig
that requires substantial completion and outfitting. The Company and the other
member [Teddy's note, the other member is Noble Drilling] of Ilion LLC (who is also a
significant customer of the Company) are
considering various options for formal arrangements related to the hull,
including financing of the completion, securing a contract for utilization or
sale of the rig, or other options. The Company's investment in Ilion LLC was
financed through cash flow from operations. Other than the initial purchase of
the drilling rig hull Ilion LLC has had no significant activity as of March 31,
1998.
The Company has also invested in an equity ownership in
an unconsolidated subsidiary that owns a semi-submersible drilling rig, and,
unlike prior operations, the Company has incurred costs related to construction
or fabrication of rig components for which no specific customer has committed.
In addition, in early 1998, the Company completed the acquisition of foreign
entities in Canada and France. These changes in and significant expansion of the
Company's operation, expose the Company to additional business and operating
risks and uncertainties.
|
