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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
------------ ------------
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)
PLAZA BANCOMER BUILDING
50TH STREET, 8TH FLOOR
APARTADO 6307
PANAMA 5, REPUBLIC OF PANAMA
TELEPHONE NO.: (507) 213-0947
(Address, including zip code, and telephone number, including
area code, of principal executive offices of registrant)
NOT APPLICABLE
- --------------------------------------------------------------------------------
(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
----- -----
The number of shares of the registrant's Common Stock, $.05 par value,
outstanding as of May 11, 2001 was 14,324,984.
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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)
MARCH 31, DECEMBER 31,
2001 2000
--------- -----------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents ............................... $ 10,558 $ 11,939
Accounts receivable, net ................................ 56,282 66,663
Contract cost and recognized income not yet billed ...... 26,372 22,765
Prepaid expenses ........................................ 4,877 2,666
--------- ---------
Total current assets ................................. 98,089 104,033
Spare parts, net ........................................... 5,587 5,495
Property, plant and equipment, net ......................... 58,957 57,070
Other assets ............................................... 7,132 8,849
--------- ---------
Total assets ......................................... $ 169,765 $ 175,447
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of long-term debt ..... $ 1,527 $ 217
Accounts payable and accrued liabilities ................ 61,039 61,960
Accrued income taxes .................................... 4,008 4,087
Contract billings in excess of cost and recognized income 10,013 4,825
--------- ---------
Total current liabilities ............................ 76,587 71,089
Long-term debt ............................................. 13,000 26,081
Other liabilities .......................................... 6,535 6,531
--------- ---------
Total liabilities .................................... 96,122 103,701
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; 15,366,097 shares issued at March 31, 2001
(15,206,495 at December 31, 2000) ..................... 768 760
Capital in excess of par value .......................... 69,372 68,373
Retained earnings ....................................... 12,905 12,125
Treasury stock at cost, 1,140,371 shares ................ (8,474) (8,474)
Notes receivable for stock purchases .................... (8) (43)
Accumulated other comprehensive income (loss) ........... (920) (995)
--------- ---------
Total stockholders' equity ........................... 73,643 71,746
--------- ---------
Total liabilities and stockholders' equity ........... $ 169,765 $ 175,447
========= =========
See accompanying notes to condensed consolidated financial statements.
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WILLBROS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS
ENDED MARCH 31,
2001 2000
------------ ------------
Contract revenue .................................... $ 65,732 $ 78,773
Operating expenses:
Contract ......................................... 51,677 70,318
Depreciation and amortization .................... 4,814 5,289
General and administrative ....................... 5,896 7,555
------------ ------------
62,387 83,162
------------ ------------
Operating income (loss) ....................... 3,345 (4,389)
Other income (expense):
Interest - net .................................... (255) (58)
Minority interest ................................. (373) (332)
Other - net ....................................... (221) 156
------------ ------------
(849) (234)
------------ ------------
Income (loss) before income taxes ............. 2,496 (4,623)
Provision for income taxes .......................... 1,716 1,291
------------ ------------
Net income (loss) ............................. $ 780 $ (5,914)
============ ============
Earnings (loss) per common share:
Basic ............................................ $ .06 $ (.42)
============ ============
Diluted .......................................... $ .05 $ (.42)
============ ============
Weighted average number of common shares outstanding:
Basic ............................................ 14,128,558 13,990,054
============ ============
Diluted .......................................... 14,589,695 13,990,054
============ ============
See accompanying notes to condensed consolidated financial statements.
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WILLBROS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
ACCUMULATED
NOTES OTHER
COMMON STOCK CAPITAL RECEIVABLE COMPRE- TOTAL
IN EXCESS FOR HENSIVE STOCK-
PAR OF PAR RETAINED TREASURY STOCK INCOME HOLDERS'
SHARES VALUE VALUE EARNINGS STOCK PURCHASES (LOSS) EQUITY
------ ----- ----- -------- ----- --------- ------ ------
Balance,
January 1, 2001 ......... 15,206,495 $760 $68,373 $12,125 $(8,474) $(43) $(995) $71,746
Comprehensive
income (loss):
Net income .......... -- -- -- 780 -- -- -- 780
Foreign currency
translation adjust . -- -- -- -- -- -- 75 75
-------
Total
comprehensive
income .......... 855
Collection of notes
receivable ............ -- -- -- -- -- 35 -- 35
Issuance of common
stock under
employee
benefit plan .......... 6,602 -- 52 -- -- -- -- 52
Exercise of stock
options ............... 153,000 8 947 -- -- -- -- 955
---------- ---- ------- ------- ------- ---- ----- -------
Balance,
March 31, 2001 .......... 15,366,097 $768 $69,372 $12,905 $(8,474) $ (8) $(920) $73,643
========== ==== ======= ======= ======= ==== ===== =======
See accompanying notes to condensed consolidated financial statements.
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WILLBROS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS
ENDED MARCH 31,
2001 2000
-------- --------
Cash flows from operating activities:
Net income (loss) ............................................. $ 780 $ (5,914)
Reconciliation of net loss to cash provided
by (used in) operating activities:
Depreciation and amortization .............................. 4,814 5,289
Loss (gain) on sales and retirements of
property and equipment .................................... -- 134
Changes in operating assets and liabilities:
Accounts receivable ..................................... 10,381 (14,686)
Contract cost and recognized income not yet billed ...... (3,607) (3,327)
Prepaid expenses and other assets ....................... (505) (2,524)
Accounts payable and accrued liabilities ................ (921) 21,147
Accrued income taxes .................................... (79) (76)
Contract billings in excess of cost and recognized income 5,188 (6,450)
Other liabilities ....................................... 17 63
-------- --------
Cash provided by (used in) operating activities ...... 16,068 (6,344)
Cash flows from investing activities:
Purchase of Rogers and Phillips, Inc.,
net of cash acquired ......................................... -- 179
Purchase of property and equipment ............................ (5,099) (1,130)
Purchase of spare parts ....................................... (1,696) (1,699)
-------- --------
Cash used in investing activities .................... (6,795) (2,650)
Cash flows from financing activities:
Proceeds from long-term debt .................................. 3,000 11,000
Proceeds from notes payable ................................... 1,283 979
Proceeds from common stock .................................... 1,007 62
Collection of notes receivable for stock purchases ............ 35 --
Repayments of long-term debt .................................. (16,000) (5,582)
Repayment of notes payable to banks ........................... (54) (481)
-------- --------
Cash provided by (used in) financing activities .... (10,729) 5,978
Effect of exchange rate changes on cash & cash equivalents ....... 75 --
-------- --------
Cash provided by (used in) all activities ........................ (1,381) (3,016)
Cash and cash equivalents, beginning of period ................... 11,939 7,806
-------- --------
Cash and cash equivalents, end of period ......................... $ 10,558 $ 4,790
======== ========
See accompanying notes to condensed consolidated financial statements.
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WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(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, 2001, and for all interim periods presented. All adjustments are
normal recurring accruals.
Certain information and 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, 2000
audited consolidated financial statements and notes thereto contained in the
Company's Annual Report to Stockholders for the year ended December 31, 2000.
The results of operations for the period ended March 31, 2001, are not
necessarily indicative of the operating results to be achieved for the full
year.
2. FOREIGN EXCHANGE RISK
The Company attempts to negotiate contracts which provide for payment in
U.S. dollars, but it may be required to take all or a portion of payment under a
contract in another currency. To mitigate non-U.S. currency exchange risk, the
Company seeks to match anticipated non-U.S. currency revenue with expenses in
the same currency whenever possible. To the extent it is unable to match
non-U.S. currency revenue with expenses in the same currency, the Company may
use forward contracts, options or other common hedging techniques in the same
non-U.S. currencies. The Company had no derivative financial instruments to
hedge currency risk at March 31, 2001, or December 31, 2000.
3. EARNINGS PER SHARE
Basic and diluted earnings (loss) per common share for the three months
ended March 31, 2001 and 2000, are computed as follows:
2001 2000
----------- ------------
Net income (loss) applicable to common shares . $ 780 $ (5,914)
=========== ============
Weighted average number of common shares out-
standing for basic earnings per share ....... 14,128,558 13,990,054
Effect of dilutive potential common shares from
stock options ............................... 461,137 --
----------- ------------
Weighted average number of common shares out-
standing for diluted earnings per share ..... 14,589,695 13,990,054
=========== ============
Earnings (loss) per common share:
Basic .................................... $ .06 (.42)
=========== ============
Diluted .................................. $ .05 $ (.42)
=========== ============
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WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
3. EARNINGS PER SHARE (CONTINUED)
At March 31, 2001, there were 230,750 potential common shares excluded
from the computation of diluted earnings per share because of their
anti-dilutive effect.
4. CONTINGENCIES, COMMITMENTS AND OTHER CIRCUMSTANCES
The Company provides construction, engineering and specialty services to
the oil, gas and power industries. The Company's principal markets are currently
Africa, 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 restrictions,
extreme exchange rate fluctuations, expropriation of assets, civil uprisings and
riots, unanticipated taxes including income taxes, excise duties, import taxes,
export taxes, sales taxes or other governmental assessments, availability of
suitable personnel and equipment, termination of existing contracts and leases,
government instability 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 consolidated financial statements. Based
upon the advice of local advisors 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 consolidated financial statements.
Certain post contract completion audits and reviews are being conducted
by clients and/or 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.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the
unaudited consolidated financial statements for the periods ended March 31, 2001
and 2000, included in Item 1 of this report, and the consolidated financial
statements and Management's Discussion and Analysis of Financial Condition and
Results of Operations included in the Company's Annual Report to Stockholders
for the year ended December 31, 2000.
GENERAL
The Company derives its revenue from providing construction, engineering
and specialty services to the oil, gas and power industries 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 revenue resulting from the award of contracts to the
Company may vary significantly from period to period. Contracts have durations
from a few weeks to several months or in some cases more than a year.
A number of factors relating to the Company's business affect the
Company's recognition of contract revenue. Revenue from fixed-price construction
and engineering contracts is recognized on the percentage-of-completion method.
Under this method, estimated contract revenue is 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 5% to 10%
complete, depending upon the nature of the contract. Costs which are considered
to be reimbursable are excluded before the percentage-of-completion calculation
is made. Accrued revenue pertaining to reimbursables is 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. Revenue
from unit-price contracts is recognized as earned. Revenue from change orders,
extra work, variations in the scope of work and claims is recognized when
realization is reasonably assured. External factors such as weather, client
needs, client delays in providing approvals, labor availability, governmental
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 cost recoveries and other claims are
negotiated and realized.
All U.S. government contracts and many of the Company's other contracts
provide for termination of the contract for the convenience of the client. In
addition, many contracts are subject to certain completion schedule requirements
with liquidated damages in the event schedules are not met as the result of
circumstances within the control of the Company. A project in Australia was
completed after July 1, 2000, the date on which liquidated damages were
scheduled to commence under the contract. However, the Company has submitted
claims for extension of the scheduled completion date and believes these claims
are valid. The Company believes it has adequately provided for any liquidated
damages that could apply. Recovery of some of the cost overruns on this project
may also be possible; but until realization is reasonably assured, no recoveries
will be recognized.
The oil and gas industry is continuing its recovery following the
downturn of 1997-98. This fact, along with current oil and gas prices, suggest
that many significant development projects and energy infrastructure projects
will now likely proceed, including a number of projects in emerging markets
which were put on hold over the past two to three years. Activity in the
Company's key markets appears to be improving and management believes the
Chad-Cameroon Pipeline Project (see below) awarded in September 2000 to a joint
venture led by the Company is the first of several major projects which will
characterize this cycle in the industry.
The Company uses EBITDA as part of its overall assessment of financial
performance by comparing EBITDA between accounting periods. Management believes
that EBITDA is used by the financial community as a method of measuring
performance and of evaluating the market value of companies considered to be in
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similar businesses to those of the Company. EBITDA increased to $7.6 million for
the three month period ended March 31, 2001, an increase of $6.8 million
compared to the three month period ended March 31, 2000.
The Company recognizes anticipated contract revenue as backlog when the
award of a contract is reasonably assured. Anticipated revenue from
post-contract award processes, including change orders, extra work, variations
in the scope of work and the effect of escalation or currency fluctuation
formulas, is not added to backlog until realization is reasonably assured. New
contract awards totaled $82.4 million during the quarter ended March 31, 2001.
Additions to backlog during the period were as follows: construction, $37.5
million; engineering, $32.3 million; and specialty services, $12.6 million.
Backlog decreases by type of service during the period were as follows:
construction, $26.7 million; engineering, $24.0 million; and specialty services,
$15.0 million. Backlog at the end of the quarter was up $16.7 million (4%) to
$390.6 million and consisted of the following: (a) construction, $285.5 million,
up $10.8 million; (b) engineering, $63.4 million, up $8.3 million; and (c)
specialty services, $41.7 million, down $2.4 million. Construction backlog
consists primarily of engineering, procurement and construction for the
Chad-Cameroon Pipeline Project (see below) as well as construction projects in
the United States. Engineering backlog consists primarily of engineering
projects in the United States. Specialty services backlog is primarily
attributable to a 16-year water injection contract awarded in 1998 to a
consortium in which the Company has a 10 percent interest in Venezuela and
service contracts in the United States and Oman.
On January 24, 2000, the Company acquired Rogers & Phillips, Inc., a
closely held pipeline construction company in Houston, Texas with an experienced
management team and a strong market position in the United States Gulf Coast
area. Founded in 1992, RPI provides a full range of construction services for
pipeline operating companies, including station and piping projects in congested
urban areas and inside plants, as well as cross-country pipelines. The
consideration included 1,035,000 shares of the Company's common stock and
approximately $1.5 million in cash. The transaction was accounted for as a
purchase.
In September 2000, the Company, though a joint venture led by a
subsidiary of the Company, was awarded a significant project, the scope of which
includes the engineering, procurement and construction ("EPC") of a 665-mile
(1,070 kilometer), 30-inch crude oil pipeline from the Doba Fields in Chad to an
export terminal on the coast of Cameroon in Africa (the "Chad-Cameroon Pipeline
Project"). Engineering and procurement activities began in late 2000. Pipeline
construction is anticipated to begin in late 2001 and end in 2003.
During 2000, the Company's activities in Nigeria included work on two
major EPC contracts for Shell: (a) the Nembe Creek gas gathering pipeline
system, and (b) four concrete barge-mounted gas compressor facilities for
Shell's Nembe Creek Associated Gas project (collectively, the "Nembe Creek
Projects"). In 2001, both projects are nearing completion and it is anticipated
that all work will be completed mid-2001.
Also during 2000, Willbros USA, Inc. relocated its administrative
headquarters and some construction support services from Tulsa, Oklahoma, to
Houston, Texas. The cost of the move, termination benefits, and office lease
termination costs totaled approximately $4.5 million, substantially all of which
was incurred from April 2000 to December 2000.
RESULTS OF OPERATIONS
The Company's contract revenue and contract costs are primarily related
to the timing and location of development projects in the oil, gas and power
industries worldwide. Contract revenue and cost variations by country from year
to year are the result of (a) entering and exiting work countries; (b) the
execution of new contract awards; (c) the completion of contracts; and (d) the
overall level of activity in the Company's services.
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The Company's ability to be successful in obtaining and executing
contracts can be affected by the relative strength or weakness of the U.S.
dollar compared to the currencies of its competitors, its clients and its work
locations. The Company does not believe that its revenue or results of
operations were adversely affected in this regard during the three month periods
ended March 31, 2001 or 2000.
Three Months Ended March 31, 2001, Compared to Three Months Ended March 31,
2000
Contract revenue decreased $13.1 million (17%) to $65.7 million due to
(a) $24.8 million of decreased construction revenue due primarily to reduced
activities on the Nembe Creek Projects in Nigeria as they near completion and
the completion in the third quarter of 2000 of the construction contract in
Australia; offset by (b) increased engineering revenue of $10.2 million due to
an increase of engineering services in the United States; and (c) an increase of
$1.5 million in specialty services revenue principally from operations in
Nigeria. Nigeria revenue decreased $16.1 million (37%) due to reduced activity
on the Nembe Creek Projects that are nearing completion in 2001. Australia
revenue decreased $12.0 million (100%) due to the construction contract that was
completed in 2000. Revenue in the United States increased $14.7 million (92%)
primarily due to an increase in engineering and procurement services.
Chad-Cameroon revenue was $1.1 million resulting from work begun on the pipeline
project in that area. Revenue in all other areas combined decreased $0.8 million
(10%).
Contract costs decreased $18.6 million (26%) to $51.7 million due to a
decrease of $27.3 million in construction services cost and $0.1 million in
specialty services cost, offset by an increase of $8.8 million in engineering
services cost. Variations in contract cost by country were closely related to
the variations in contract revenue, with the exception of Australia. Contract
costs in Australia decreased by $20.2 million, or $8.2 million more than the
decrease in revenue as a result of a loss recognized during the three month
period ended March 31, 2000 on the project in Australia.
Depreciation and amortization decreased $0.5 million due to the sale in
2000 of excess equipment in Venezuela, Indonesia, the United States and Oman.
General and administrative expense decreased $1.7 million to $5.9
million. This decrease is due primarily to a reduction in costs related to
personnel reductions and scaling back or eliminating activities.
Operating income increased $7.7 million from an operating loss of $4.4
million in 2000 to operating income of $3.3 million in 2001, primarily as a
result of recognizing in 2000 an operating loss on the pipeline construction
project in Australia.
Interest expense increased $0.2 million to $0.3 million expense due to
higher interest rates during the period.
Minority interest expense increased $.01 million to $0.4 million due to
an increase in activity in countries where minority interest partners were
involved.
Other - net decreased $0.4 million to a $0.2 million expense due
primarily to gains on currency exchanges in 2000 not repeated in 2001.
The provision for income taxes increased $0.4 million (33%) due to the
increase in taxable revenue in Nigeria and taxable income in Oman. The provision
for income taxes is impacted by income taxes in certain countries being based on
deemed profit rather than taxable income and the fact that losses in one country
cannot be used to offset taxable income in another country.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary requirements for capital are to acquire, upgrade
and maintain 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.
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Cash and cash equivalents decreased $1.3 million (11%) to $10.6 million
at March 31, 2001, from $11.9 million at December 31, 2000. The decrease was due
to cash flows of $16.1 million from operations, offset by $6.8 million used for
investing activities (the purchase of equipment and spare parts) and $10.7
million used for financing activities (principally the repayment of borrowings).
The effect of exchange rates on cash and cash equivalents totaled $0.1 million.
The Company and certain affiliated companies have a $150.0 million credit
agreement with a syndicated bank group which was amended effective June 30,
2000. The credit agreement subjects the $100.0 million revolving portion of the
credit facility to borrowing base requirements. The entire facility, less
amounts used under the revolving portion of the facility, may be used for
standby and commercial letters of credit. Borrowings are payable at termination
on February 20, 2003. Interest is payable quarterly at a Base Rate plus a margin
of 2.25% or a Eurodollar Rate plus a margin of 3.5%. A commitment fee on the
unused portion of the credit agreement is payable quarterly at 0.75%. The credit
agreement is collateralized by substantially all of the Company's assets,
including stock of the principal subsidiaries of the Company. The credit
agreement restricts the payment of cash dividends and requires the Company to
maintain certain financial ratios. The borrowing base is calculated using
varying percentages of cash, accounts receivable, accrued revenue, contract cost
and recognized income not yet billed, property, plant and equipment, and spare
parts.
As of March 31, 2001, there was $13.0 million borrowed under the credit
agreement at an average interest rate of 9.3% and $38.4 million of letters of
credit outstanding leaving $52.0 million available for borrowings and $98.6
million available for standby and commercial letters of credit.
At March 31, 2001, there were $1.5 million of notes payable issued by
RPI, collateralized by vehicles and machinery, and payable in monthly
installments including interest from 6.7% to 9.7% per annum. The notes mature
prior to March 31, 2002.
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 $9.8 million at March 31, 2001. There were no outstanding
borrowings at March 31, 2001.
The Company does not anticipate any significant collection problems with
its customers, including those in countries that may be experiencing economic
and/or currency difficulties. Since the Company's customers generally are major
oil companies and government entities, and the terms for billing and collecting
for work performed are generally established by contracts, the Company
historically has a very low incidence of collectability problems.
The Company believes that cash flows from operations and borrowing
capacity under existing credit facilities will be sufficient to finance working
capital and capital expenditures for ongoing operations through March 31, 2002.
The Company estimates capital expenditures for equipment and spare parts to be
approximately $25.0 to $35.0 million in 2001.
NEW ACCOUNTING PRONOUNCEMENTS
Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standards No. 133 ("SFAS No. 133") "Accounting for Derivative
Instruments and Hedging Activities", as amended by SFAS No. 138. The adoption of
SFAS No. 133 did not affect the Company. During the three month period ended
March 31, 2001, the Company was not a party to any derivative contracts.
FORWARD-LOOKING STATEMENTS
This Form 10-Q includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements, other than
statements of historical facts, included in this Form 10-Q which address
activities,
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events or developments which the Company expects or anticipates will or may
occur in the future, including such things as future capital expenditures
(including the amount and nature thereof), oil, gas and power prices and demand,
expansion and other development trends of the oil, gas and power industries,
business strategy, expansion and growth of the Company's business and
operations, and other such matters are forward-looking statements. These
statements are based on certain assumptions and analyses made by the Company in
light of its experience and its perception of historical trends, current
conditions and expected future developments as well as other factors it believes
are appropriate in the circumstances. However, whether actual results and
developments will conform with the Company's expectations and predictions is
subject to a number of risks and uncertainties which could cause actual results
to differ materially from the Company's expectations including the timely award
of one or more projects; cancellation of projects; weather; exceeding project
cost and scheduled targets; failing to realize cost recoveries from projects
completed or in progress within a reasonable period after completion of the
relevant project; identifying and acquiring suitable acquisition targets on
reasonable terms; obtaining adequate financing; the demand for energy
diminishing; political circumstances impeding the progress of work; general
economic, market or business conditions; changes in laws or regulations; the
risk factors listed from time to time in the Company's filings with the
Securities and Exchange Commission; and other factors, most of which are beyond
the control of the Company. Consequently, all of the forward-looking statements
made in this Form 10-Q are qualified by these cautionary statements and there
can be no assurance that the actual results or developments anticipated by the
Company will be realized or, even if substantially realized, that they will have
the expected consequences or effects on the Company or its business or
operations. The Company assumes no obligation to update publicly any such
forward-looking statements, whether as a result of new information, future
events or otherwise.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
FINANCIAL RISK MANAGEMENT
The Company's primary market risk is its exposure to changes in non-U.S.
currency exchange rates. The Company attempts to negotiate contracts which
provide for payment in U.S. dollars, but it may be required to take all or a
portion of payment under a contract in another currency. To mitigate non-U.S.
currency exchange risk, the Company seeks to match anticipated non-U.S. currency
revenue with expenses in the same currency whenever possible. To the extent it
is unable to match non-U.S. currency revenue with expenses in the same currency,
the Company may use forward contracts, options or other common hedging
techniques in the same non-U.S. currencies. The Company had no forward contracts
or options at March 31, 2001.
The carrying amounts for cash and cash equivalents, accounts receivable,
notes payable and accounts payable and accrued liabilities shown in the
consolidated balance sheets approximate fair value at March 31, 2001 due to the
generally short maturities of these items. The Company invests primarily in
short-term dollar denominated bank deposits, and at March 31, 2001 did not have
any investment in instruments with a maturity of more than a few days or in any
equity securities. The Company has the ability and expects to hold its
investments to maturity.
The Company's exposure to market risk for changes in interest rates
relates primarily to the Company's long-term debt. At March 31, 2001, $13.0
million of the Company's indebtedness was subject to variable interest rates.
The weighted average effective interest rate on the variable rate debt for the
three months ended March 31, 2001 was 9.2%. The detrimental effect of a
hypothetical 100 basis point increase in interest rates would be to reduce
income before income taxes by less than $0.1 million for the three-month period.
At March 31, 2001, the Company's fixed rate debt approximated fair value based
upon discounted future cash flows using current market prices.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities and Use of Proceeds
Not applicable
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
None
(b) Reports on Form 8-K
There were no current reports on Form 8-K filed during the three months
ended March 31, 2001.
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SIGNATURE
Pursuant to the requirements 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 14, 2001 By: /s/ Warren L. Williams
---------------------------------------
Warren L. Williams
Vice President, Chief Financial Officer
And Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
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