Global Industries announced revenues of $218.6 million in the third quarter of 2008, an increase of 7 percent, compared to $203.5 million in the third quarter of 2007. Net loss was $102.8 million, or $0.90 diluted loss per share, for the third quarter 2008. This compares to net income of $31.5 million, or $0.27 diluted income per share, for the third quarter of 2007.
Commenting on the third quarter results, Chairman and Chief Executive Officer John A. Clerico stated, "We are most disappointed to report such a large operating loss for the quarter, but a thorough review and analysis of the conditions we have been and are continuing to experience on our Saudi Arabian and Brazilian projects requires us to do so.
"In order to rapidly address our major operating challenges, we are developing a comprehensive plan to restore Global to profitability as soon as possible. This plan will emphasize improving our bidding and project execution processes, controlling costs and maximizing our cash resources. Our first priority remains serving our customers by executing the work they entrust to us efficiently and professionally. As we stated in our last call, we are determined to improve Global’s performance for the benefit of our shareholders, customers and employees."
Revenues increased by $15.1 million in the 2008 third quarter from the 2007 third quarter, reflecting growth in the international regions of Asia Pacific/India and Latin America. Lower North America, Middle East, and West Africa revenues partially offset that growth.
Gross profit decreased by $145.7 million (or $1.11 per diluted share) to a gross loss of $88.9 million in the 2008 third quarter from a gross profit of $56.8 million in the 2007 third quarter. During the third quarter of 2008, the Company eliminated the previously recorded profit estimate and recorded an estimated loss on the Berri and Qatif project in Saudi Arabia which total approximately $83.3 million (or $0.63 per diluted share) due to continued productivity and logistical issues, which resulted in further risk to the Company’s previously scheduled project completion date. In response to these conditions, the Company executed a comprehensive rechallenge of all aspects of this project and modified various areas of the plan to complete, including work vessel configuration, previously scheduled dry docking activities and team member composition and retention.
The updated cost estimate for the project includes the estimated effects of these modifications. The project is currently scheduled to complete in the 2009 third quarter. Gross loss on the Camarupim project in Brazil increased by approximately $17.5 million (or $0.13 per diluted share) during the 2008 third quarter primarily due to lower than projected productivity and delays caused by weather.
Both of these projects are now in a loss position. Compared to the third quarter of 2007, West Africa gross profit decreased $14.0 million (or $0.11 per diluted share) due primarily to idle vessel costs as there was low project activity in this segment during the 2008 third quarter. Gross profit in North America decreased $31.6 million (or $0.24 per diluted share), comparatively, primarily due to delays caused by Hurricanes Ike and Gustav, as well as the nonrecurrence in the 2008 third quarter of profitable day rate projects executed by REM Commander in the 2007 third quarter and delivery and setup costs related to recent additions to our fleet, the Global Orion and Olympic Challenger. During the third quarter of 2008, Asia Pacific/India successfully executed a major project and increased utilization to improve gross profit by $15.6 million (or $0.12 per diluted share) over the same quarter last year.
Selling, general and administrative expenses of $25.4 million for the third quarter of 2008 increased by $4.7 million (or $0.04 per diluted share) over the same quarter last year, primarily due to increased labor and infrastructure support costs related to geographical expansion into Brazil and the Middle East.
Interest income of $2.5 million for the third quarter of 2008 decreased by $6.0 million (or $0.05 per diluted share) over the same quarter last year primarily due to decreased cash balances and lower interest rates.
During the third quarter of 2008, the Company booked $200.2 million of net new work resulting in a backlog of $397.2 million as of September 30, 2008.
The Company also announced today developments regarding its $150 million Revolving Credit Facility. As of October 29, 2008, the Company had no borrowings against the facility and $100.2 million in letters of credit outstanding. As a result of the Company’s recent operating performance, a financial covenant of the facility was not met. The Company commenced discussions and negotiations with the bank group who provide the facility.
The Company believes it will reach an agreement in principle on the primary terms of an amendment, and expects to have a final agreement in place within a reasonable period. The Company anticipates that the final agreement will contain a provision that will require temporary cash collateralization of the letters of credit and guarantees previously supported by the facility.
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