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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
X SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-11953
Willbros Group, Inc.
(Exact name of registrant as specified in its charter)
Republic of Panama 98-0160660
(Jurisdiction of incorporation)(I.R.S. Employer Identification Number)
Edificio Torre Banco Germanico
Calle 50 y 55 Este, Apartado 850048
Panama 5, Republic of Panama
Telephone No.: (50-7) 263-9282
(Address, including zip code, and telephone number, including
area code, of principal executive offices of registrant)
NOT APPLICABLE
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(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes X No
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The number of shares of the registrant's Common Stock, $.05 par
value, outstanding as of May 12, 1997, was 14,385,980.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WILLBROS GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
March 31, December 31,
1997 1996
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ASSETS
Current assets:
Cash and cash equivalents $ 18,965 $ 24,118
Accounts receivable 52,780 53,756
Contract cost and recognized income not
yet billed 4,864 3,643
Prepaid expenses 4,399 3,866
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Total current assets 81,008 85,383
Spare parts, net 5,714 5,724
Property, plant and equipment, net 56,847 53,445
Other assets 2,987 2,913
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Total assets $ 146,556 $ 147,465
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 1,000 $ 640
Accounts payable and accrued liabilities 31,184 32,868
Accrued income taxes 4,633 4,050
Contract billings in excess of cost and
recognized income 8,463 11,102
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Total current liabilities 45,280 48,660
Deferred income taxes 200 200
Other liabilities 6,187 6,219
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Total liabilities 51,667 55,079
Stockholders' equity:
Class A Preferred Stock, par value, $.01
per share, 1,000,000 shares authorized,
none issued - -
Common stock, par value $.05 per share,
35,000,000 shares authorized; 14,385,980
shares issued at March 31, 1997 and
December 31, 1996 719 719
Capital in excess of par value 55,475 55,475
Cumulative foreign currency translation
adjustment (784) (784)
Retained earnings 42,614 40,160
Notes receivable for stock purchases (3,135) (3,184)
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Total stockholders' equity 94,889 92,386
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Total liabilities and stockholders'
equity $ 146,556 $ 147,465
========= =========
See accompanying condensed notes to consolidated financial statements.
2
WILLBROS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share amounts)
(Unaudited)
Three Months
Ended March 31,
-------------------
1997 1996
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Contract revenues $ 51,165 $ 53,479
Operating expenses:
Contract 35,775 41,204
Depreciation and amortization 3,904 3,190
General and administrative 6,686 6,556
Compensation from changes in redemption
value of common stock - 142
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46,365 51,092
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Operating income 4,800 2,387
Other income (expense):
Interest - net 58 (140)
Minority interest (452) (490)
Other - net 97 570
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(297) (60)
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Income before income taxes 4,503 2,327
Provision for income taxes 2,049 283
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Net income $ 2,454 $ 2,044
========= =========
Net income per common and common
equivalent share $ .17 $ .09
========= =========
Weighted average number of common and
common equivalent shares outstanding 14,385,980 14,156,062
========== ==========
See accompanying condensed notes to consolidated financial statements.
3
WILLBROS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share amounts)
(Unaudited)
Cumulative
Capital Foreign
in Excess Currency
Common Stock of Par Translation
Shares Par Value Value Adjustment
------ --------- ------- -----------
Balance, January 1, 1997 14,385,980 $ 719 $55,475 $ (784)
Net income - - - -
Collection of notes
receivable - - - -
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Balance, March 31, 1997 14,385,980 $ 719 $55,475 $ (784)
========== ===== ======= ========
Notes
Receivable Total
for Stock-
Retained Stock holders'
Earnings Purchases Equity
---------- --------- ---------
Balance, January 1, 1997 $ 40,160 $ (3,184) $ 92,386
Net income 2,454 - 2,454
Collection of notes
receivable - 49 49
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Balance, March 31, 1997 $ 42,614 $ (3,135) $ 94,889
=========== ========= =========
See accompanying condensed notes to consolidated financial statements.
4
WILLBROS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months
Ended March 31,
--------------------
1997 1996
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Cash flows from operating activities:
Net income $ 2,454 $ 2,044
Reconciliation of net income to cash
provided by operating activities:
Depreciation and amortization 3,904 3,190
Compensation from changes in
redemption value of common stock - 142
Loss on sales and retirements 32 7
Changes in operating assets and
liabilities:
Accounts receivable 976 5,259
Contract cost and recognized
income not yet billed (1,221) 3,156
Prepaid expenses and other assets (607) (958)
Accounts payable and accrued
liabilities (1,684) (7,588)
Accrued income taxes 583 (560)
Contract billings in excess of
cost and recognized income (2,639) 1,091
Other liabilities 84 186
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Cash provided by operating
activities 1,882 5,969
Cash flows from investing activities:
Proceeds from sales of property and
equipment 52 177
Purchase of property and equipment (6,048) (858)
Purchase of spare parts (1,332) (1,302)
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Cash used in investing
activities (7,328) (1,983)
Cash flows from financing activities:
Proceeds from notes payable to banks 499 7,843
Collection of notes receivable for
stock purchases 49 14
Repayment of notes payable to banks (139) (8,388)
Purchase of treasury stock - (302)
Payment of dividends on preferred stock - (724)
Repayment of notes payable to former
shareholders (116) -
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Cash provided by (used in)
financing activities 293 (1,557)
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Cash provided (used) in all activities (5,153) 2,429
Cash and cash equivalents, beginning of period 24,118 19,859
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Cash and cash equivalents, end of period $ 18,965 $ 22,288
========= =========
See accompanying condensed notes to consolidated financial statements.
5
WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The condensed consolidated financial statements of Willbros Group,
Inc. and its majority-owned subsidiaries (the "Company") reflect all
adjustments which are, in the opinion of management, necessary to
present fairly the financial position, results of operations and cash
flows of the Company as of March 31, 1997, and for all interim periods
presented. All adjustments are normal recurring accruals.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These condensed
consolidated financial statements should be read in conjunction with
the Company's December 31, 1996 audited consolidated financial
statements and notes thereto contained in the Company's Annual Report
to Stockholders for the year ended December 31, 1996. The results of
operations for the period ended March 31, 1997, are not necessarily
indicative of the operating results to be achieved for the full year.
2. Recent Pronouncement
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings Per Share ("SFAS No. 128"), which
establishes new standards for computing and presenting earnings per
share. SFAS No. 128 is effective for earnings per share calculations
for periods ending after December 15, 1997. At that time, the Company
will be required to change the method currently used to compute
earnings per share and to restate all prior periods. If the provision
of SFAS No. 128 had been adopted in the first quarter of 1997 and 1996,
earnings per share for those periods would not have changed.
3. Contingencies, Commitments and Other Circumstances
The Company provides construction, engineering and specialty
services to the oil and gas industry. The Company's principal markets
are currently Africa, Asia, the Middle East, South America and the
United States. Operations outside the United States may be subject to
certain risks which ordinarily would not be expected to exist in the
United States, including foreign currency fluctuations, expropriation
of assets, civil uprisings and riots, instability of government and
legal systems of decrees, laws, regulations, interpretations and court
decisions which are not always fully developed and which may be
retroactively applied. Management is not presently aware of any
events of the type described in the countries in which it operates
that have not been provided for in the accompanying condensed
consolidated financial statements. Based upon the advice of
6
WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. Contingencies, Commitments and Other Circumstances (continued)
knowledgeable professionals in the various work countries concerning
the interpretation of the laws, practices and customs of the countries
in which it operates, management believes the Company has followed the
current practices in those countries; however, because of the nature
of these potential risks, there can be no assurance that the Company
may not be adversely affected by them in the future. The Company
insures substantially all of its equipment in countries outside the
United States against certain political risks and terrorism.
The Company has the usual liability of contractors for the
completion of contracts and the warranty of its work. Where work is
performed through a joint venture, the Company also has possible
liability for the contract completion and warranty responsibilities of
its joint venturers. Management is not aware of any material exposure
related thereto which has not been provided for in the accompanying
condensed consolidated financial statements.
Certain post contract completion audits and reviews are being
conducted by clients andor government entities. While there can be no
assurance that claims will not be received as a result of such audits
and reviews, management does not believe a legitimate basis for any
material claims exists. At the present time it is not possible for
management to estimate the likelihood of such claims being asserted
or, if asserted, the amount or nature thereof.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
The Company derives its revenues from providing construction,
engineering and specialty services to the oil and gas
industry and government entities worldwide. The Company obtains
contracts for its work primarily by competitive bidding or through
negotiations with long standing clients. Bidding activity, backlog
and revenues resulting from the award of contracts to the Company may
vary significantly from period to period.
A number of factors relating to the Company's business affect the
Company's recognition of contract revenues. Revenues from fixed-price
construction and engineering contracts are recognized on the
percentage-of-completion method. Under this method, estimated
contract revenues are accrued based generally on the percentage that
costs to date bear to total estimated costs, taking into consideration
physical completion. Generally, the Company does not recognize income
on a fixed-price contract until the contract is approximately 10%
complete. Costs which are considered to be reimbursable are excluded
before the percentage-of-completion calculation is made. Accrued
revenues pertaining to reimbursables are limited to the cost of the
reimbursables. If a current estimate of total contract cost indicates
a loss on a contract, the projected loss is recognized in full when
determined. Revenues from unit-price contracts are recognized as
earned. Revenues from change orders, extra work, variations in the
scope of work and claims are recognized when realization is assured.
The Company derives its revenues from contracts with durations from
a few weeks to several months or in some cases, more than a year.
Unit-price contracts provide relatively even quarterly results;
however, major projects are usually fixed-price contracts that may
result in uneven quarterly financial results due to the method by
which revenues are recognized. These financial factors, as well as
external factors such as weather, client needs, client delays in
approving change orders, labor availability, government regulation and
politics may affect the progress of a project's completion and thus
the timing of revenue recognition. The Company believes that its
operating results should be evaluated over a relatively long time
horizon during which major contracts in progress are completed and
change orders, extra work, variations in the scope of work and claims
are negotiated and realized.
Backlog
The Company recognizes anticipated revenue as backlog when the
award of a contract is reasonably assured. Anticipated revenues from
contractual processes, including change orders, extra work, variations
in the scope of work and the effect of escalation or currency
fluctuation formulas, are not added to backlog until realization is
assured.
Company backlog increased $37.9 million (35%) to $146.7 million
during the quarter ending March 31, 1997. The increase in backlog
included $33.6 million in North America due to additions in engineering
services and the Samalayuca award in Mexico/United States, $5.9 million
in South America, $3.1 million in Africa and $.5 million in the Middle
East, offset by reductions of $4.9 million in Asia and $.3 million in
the C.I.S. Additions to backlog during the period consisted of $89.1
million of new contract awards in Africa, the Middle East, North
America, and South America, representing $42.3 million in engineering
services, $33.8 million in construction services and $13.0 million in
specialty services. The increase in backlog included $33.6 million
in North America due to additions in engineering services and the
Samalayuca award in Mexico/United States, $5.9 million in South
America, $3.1 million in Africa and $.5 million in the Middle East,
offset by reductions of $4.9 million in Asia and $.3 million in the
C.I.S.
8
Results of Operations
Three Months Ended March 31, 1997, Compared to Three Months Ended
March 31, 1996
Contract revenues decreased $2.3 million (4%) to $51.2 million.
The decrease was primarily attributable to (a) a $6.3 million decrease
in Africa as a result of reduced construction and specialty services
activity in Nigeria; (b) a $1.5 million decrease in Asia due to
reduced activity associated with engineering and construction services
on the 16-18 inch, 225 mile (365 kilometer) pipeline and four pump
stations in Pakistan; and (c) a $.5 million decrease in South America
due to decreased specialty services in Venezuela; offset by (d) an
increase in North American revenues of $6.1 million as a result of an
increase in engineering services in the United States.
Contract cost decreased $5.4 million (13%) to $35.8 million. The
decrease was primarily attributable to (a) a $9.6 million decrease in
Africa as a result of reduced construction and specialty services
activity in Nigeria; and (b) a $1.6 million decrease in the Middle
East as a result of reduced specialty services in Oman; offset by (c)
an increase in North American contract cost of $5.2 million as a
result of an increase in engineering services in the United States.
Depreciation and amortization expense increased $.7 million to $3.9
million due to the addition of equipment and spare parts of $7.4
million during the three months ended March 31, 1997.
General and administrative expenses increased $.1 million to $6.7
million. The increase is primarily a result of an increase in
engineering services in the United States offset by a decrease in
general and administrative expenses in Africa as a result of reduced
construction and specialty services activity in Nigeria.
Operating income increased $2.4 million (101%) to $4.8 million.
The increase was primarily attributable to (a) a $3.9 million increase
in Africa primarily resulting from the realization of certain cost
recoveries related to services associated with activities already
completed; and (b) a $1.6 million increase in the Middle East
primarily due to cost efficiencies realized in the latter stages of a
major specialty services contract in Oman; offset by (c) a $1.1
million decrease in South America due to decreased specialty services
in Venezuela; and (d) a $1.7 million decrease in Asia primarily due to
unrecovered costs associated with delays on the project in Pakistan.
Interest - net increased to income of approximately $.1 million for
the three months ended March 31, 1997, from expense of approximately
$.1 million for the comparable period in 1996 due to a decrease in
interest expense as a result of a reduction in the amount of
borrowings under credit facilities outside the United States.
Other - net decreased $.5 million to income of $.1 million,
primarily due to a decrease in foreign exchange gains.
The provision for income taxes increased $1.7 million to $2.0
million due to an increase in income tax rates in certain countries
and a lesser reduction in 1997 than in 1996 in previous estimates of
income taxes in certain countries.
9
Liquidity and Capital Resources
The Company's primary requirements for capital are to fund the
acquisition, upgrade and maintenance of its equipment, provide working
capital for current projects, finance the mobilization of employees
and equipment to new projects, establish a presence in countries where
the Company perceives growth opportunities and finance the possible
acquisition of new businesses and equity investments. Historically
the Company has met its capital requirements primarily from operating
cash flows.
Cash and cash equivalents decreased $5.1 million (21%) to $19.0
million at March 31, 1997, from $24.1 million at December 31, 1996.
The decrease is due to $7.3 million in net capital expenditures for
the purchase of equipment and spare parts, offset by positive cash
flows of $1.9 million from operations (net of $4.5 million used by
changes in operating assets and liabilities) and $.3 million from
financing activities.
In February 1997, the Company entered into a new five-year $150
million credit agreement, that may be extended annually in one year
increments, subject to certain approvals, for up to three years, with
a syndicated bank group including ABN AMRO Bank N.V. as agent and
Credit Lyonnais as co-agent. The new credit agreement provides for a
$100 million revolving credit facility, part of which can be used for
acquisitions and equity investments. The entire facility, less
amounts used under the revolving portion of the facility, may be used
for standby and commercial letters of credit. Principal is payable at
termination on all revolving loans except qualifying acquisition and
equity investment loans which are payable quarterly over the remaining
life of the new credit agreement. Interest is payable quarterly at
prime or other alternative interest rates. A commitment fee is
payable quarterly based on an annual rate of 1/4% of the unused
portion of the credit facility. The Company's obligations under the
new credit agreement are secured by the stock of the principal
subsidiaries of the Company. The new credit agreement requires the
Company to maintain certain financial ratios, restricts the amount of
annual dividend payments to the greater of 25 cents per share or 25%
of net income and limits the Company's ability to purchase its own
stock.
The Company has unsecured credit facilities with banks in certain
countries outside the United States. Borrowings under these lines, in
the form of short-term notes and overdrafts, are made at competitive
local interest rates. Generally, each line is available only for
borrowings related to operations in a specific country. Credit
available under these facilities is approximately $10.4 million at
March 31, 1997.
The Company believes that cash flow from operations and borrowing
under existing credit facilities will be sufficient to finance working
capital and capital expenditures for ongoing operations at least
through the end of 1997. The Company estimates capital expenditures
for equipment and spare parts of approximately $23 million during
1997.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable
10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
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Not applicable
Item 2. Changes in Securities
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Not applicable
Item 3. Defaults upon Senior Securities
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Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
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Not applicable
Item 5. Other Information
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Not applicable
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits:
The following documents are included as exhibits to this Form 10-Q.
Those exhibits below incorporated by reference herein are indicated as
such by the information supplied in the parenthetical thereafter. If
no parenthetical appears after an exhibit, such exhibit is filed
herewith.
10.1 Credit Agreement dated February 20, 1997, by and among
the Company, certain designated subsidiaries, Credit
Lyonnais New York Branch, as co-agent, certain financial
institutions, and ABN AMRO Bank N.V., as agent (Filed
as Exhibit 10.1 to the Company's report on Form 10-K for
the year ended December 31, 1996, filed March 31, 1997
(the "1996 Form 10-K")).
10.2 Parent Pledge Agreement dated February 20, 1997, by the
Company, in favor of ABN AMRO Bank N.V., as agent (Filed
as Exhibit 10.2 to the 1996 Form 10-K).
10.3 Pledge Agreement dated February 20, 1997, by Musketeer
Oil B.V., in favor of ABN AMRO Bank N.V., as agent (Filed
as Exhibit 10.3 to the 1996 Form 10-K).
10.4 Pledge Agreement dated February 20, 1997, by Willbros USA,
Inc., in favor of ABN AMRO Bank N.V., as agent (Filed as
Exhibit 10.4 to the 1996 Form 10-K).
10.5 Employment Agreement dated January 1, 1997, by and among
Willbros Engineers, Inc., James R. Beasley and the
Company (Filed as Exhibit 10.9 to the 1996 Form 10-K).
11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K (continued)
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11 Calculation of Income Per Common and Common
Equivalent Share.
27 Financial Data Schedule.
(b) Reports on Form 8-K
There were no current reports on Form 8-K filed during the
three months ended March 31, 1997.
12
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
WILLBROS GROUP, INC.
Date: May 12, 1997 By: /s/ Melvin S. Spreitzer
--------------------------------
Melvin F. Spreitzer
Executive Vice President,
Chief Financial Officer,
and Treasurer
13
EXHIBIT INDEX
The following documents are included as exhibits to this Form 10-Q.
Those exhibits below incorporated by reference herein are indicated
as such by the information supplied in the parenthetical thereafter.
If no parenthetical appears after an exhibit, such exhibit is filed
herewith.
Exhibit
Number Description
- ------------- ------------------------------------------------------
10.1 Credit Agreement dated February 20, 1997, by and among
the Company, certain designated subsidiaries, Credit
Lyonnais New York Branch, as co-agent, certain financial
institutions, and ABN AMRO Bank N.V., as agent (Filed
as Exhibit 10.1 to the Company's report on Form 10-K for
the year ended December 31, 1996, filed March 31, 1997
(the "1996 Form 10-K")).
10.2 Parent Pledge Agreement dated February 20, 1997, by the
Company, in favor of ABN AMRO Bank N.V., as agent (Filed
as Exhibit 10.2 to the 1996 Form 10-K).
10.3 Pledge Agreement dated February 20, 1997, by Musketeer
Oil B.V., in favor of ABN AMRO Bank N.V., as agent (Filed
as Exhibit 10.3 to the 1996 Form 10-K).
10.4 Pledge Agreement dated February 20, 1997, by Willbros USA,
Inc., in favor of ABN AMRO Bank N.V., as agent (Filed as
Exhibit 10.4 to the 1996 Form 10-K).
10.5 Employment Agreement dated January 1, 1997, by and among
Willbros Engineers, Inc., James R. Beasley and the
Company (Filed as Exhibit 10.9 to the 1996 Form 10-K).
11 Computation of Income Per Common and Common Equivalent
Share.
27 Financial Data Schedule.