1
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 Period Ended September 30, 1997
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[ ] 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 0-29416
UNIFAB International, Inc.
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(Exact name of registrant as specified in its charter)
Louisiana 72-1382998
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(State or other jurisdiction (I.R.S. Employer
or incorporation or organization) Identification No.)
5007 Port Road
New Iberia, LA 70562
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(Address of principal executive offices) (Zip Code)
(318) 367-8291
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(Registrant's telephone number, including area code)
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 periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes No X
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Common Stock, $0.01 Par Value ---- 5,022,250 shares as of November 12 , 1997.
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UNIFAB INTERNATIONAL, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Condensed Consolidated Balance Sheets-- September 30,
1997 and March 31, 1997...................................... 1
Condensed Consolidated Statements of Income -- Three
Months Ended September 30, 1997 and 1996; Six Months
Ended September 30, 1997 and 1996............................ 2
Condensed Consolidated Statement of Shareholders' Equity
-- Six Months Ended September 30, 1997....................... 3
Condensed Consolidated Statements of Cash Flows -- Six
Months Ended September 30, 1997 and 1996..................... 4
Notes to Consolidated Financial Statements -- September
30, 1997..................................................... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................... 6
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds....................... 8
Item 5. Other Information............................................... 8
Item 6. Exhibits and Reports on Form 8-K................................ 8
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UNIFAB INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
SEPTEMBER 30 MARCH 31
1997 1997
-----------------------------
Current assets:
Cash and cash equivalents ................................ $20,941,201 $ 659,626
Accounts receivable ...................................... 14,878,482 19,368,473
Costs and estimated earnings in excess of billings on
uncompleted contracts ................................. 111,602 239,097
Prepaid expenses ......................................... 127,578 444,045
Other assets ............................................. 101,644 102,062
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Total current assets ............................. 36,160,507 20,813,303
Property, plant and equipment, net ......................... 6,357,543 5,341,122
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Total assets ..................................... $42,518,050 $26,154,425
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank overdraft ........................................... $ 2,276,508 $ 763,010
Accounts payable ......................................... 5,476,437 6,210,166
Billings in excess of costs and estimated earnings on
uncompleted contracts ................................. 1,635,310 4,317,837
Accrued liabilities ...................................... 1,807,494 813,762
Income tax payable ....................................... 484,569 516,462
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Total current liabilities ........................ 11,680,318 12,621,237
Deferred income taxes ...................................... 1,252,811 1,332,168
Shareholders' equity:
Preferred stock, no par value, 5,000,000 shares
authorized, no shares outstanding ...................... -- --
Common stock, $0.01 par value, 20,000,000 shares
authorized, 5,022,250 and 3,500,000 shares outstanding .. 50,223 35,000
Additional paid-in capital ............................... 25,032,942 6,483,664
Retained earnings ........................................ 4,501,756 5,682,356
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Total shareholders' equity ....................... 29,584,921 12,201,020
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Total liabilities and shareholders' equity ....... $42,518,050 $26,154,425
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See notes to condensed consolidated financial statements.
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UNIFAB INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED SEPTEMBER 30 SIX MONTHS ENDED SEPTEMBER 30
-------------------------------- --------------------------------
1997 1996 1997 1996
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Revenue...................................... $ 17,947,922 $ 18,237,747 $ 33,451,074 $ 36,656,985
Cost of revenue ............................. 15,561,574 16,062,436 28,875,516 32,357,920
------------ ------------ ------------ ------------
Gross profit ................................ 2,386,348 2,175,311 4,575,558 4,299,065
General and administrative expense .......... 447,014 384,645 855,916 726,782
------------ ------------ ------------ ------------
Income from operations ...................... 1,939,334 1,790,666 3,719,642 3,572,283
Other income (expense):
Interest expense .......................... (5,537) (36,937) (8,895) (58,633)
Interest income ........................... 61,115 38,499 88,131 86,097
------------ ------------ ------------ ------------
Income before income taxes .................. 1,994,912 1,792,228 3,798,878 3,599,747
Income tax provisions ....................... 697,371 685,443 1,357,289 1,394,351
------------ ------------ ------------ ------------
Net income................................... $ 1,297,541 $ 1,106,785 $ 2,441,589 $ 2,205,396
============ ============ ============ ============
Earnings per share of common stock .......... $ 0.36 $ 0.32 $ 0.69 $ 0.63
============ ============ ============ ============
Average common stock outstanding ............ 3,615,823 3,500,000 3,557,912 3,500,000
============ ============ ============ ============
See notes to condensed consolidated financial statements.
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UNIFAB INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
COMMON STOCK
------------------------------- ADDITIONAL
PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
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Balance at March 31, 1997 ........... 3,500,000 $ 35,000 $ 6,483,664 $ 5,682,356 $ 12,201,020
Proceeds to the Company from
public offering of common
stock, net of underwriting
discount and offering expenses
1,522,250 15,223 24,849,278 -- 24,864,501
Payment for surrender of
shareholder rights ............... -- -- (6,300,000) -- (6,300,000)
Dividends paid .................... -- -- -- (3,622,189) (3,622,189)
Net income ........................ -- -- -- 2,441,589 2,441,589
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Balance at September 30, 1997 ....... 5,022,250 $ 50,223 $ 25,032,942 $ 4,501,756 $ 29,584,921
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See notes to condensed consolidated financial statements.
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UNIFAB INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED SEPTEMBER 30
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1997 1996
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Cash from operations ........................ $ 6,428,438 $ 6,935,929
Investing activities:
Proceeds from sale of equipment ........... -- 7,375
Purchases of equipment .................... (1,261,675) (526,359)
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(1,261,675) (518,984)
Financing activities:
Net proceeds from initial public offering . 25,037,001 --
Payment for surrender of shareholder ...... (6,300,000) --
rights ......................................
Dividends paid ............................ (3,622,189) (5,807,418)
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15,114,812 (5,807,418)
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Net change in cash and cash equivalents ... $ 20,281,575 $ 609,527
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See notes to condensed consolidated financial statements.
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UNIFAB INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
1. ORGANIZATION AND INITIAL PUBLIC OFFERING
UNIFAB International, Inc. (International) was formed on July 16, 1997 to
serve as the parent corporation of Universal Fabricators Incorporated, 51% of
the outstanding common stock of which was owned by Universal Partners, Inc.
(Universal Partners) and 49% of which was owned by McDermott Incorporated
(McDermott). On September 24, 1997 immediately prior to the completion of an
initial public offering of 3,237,250 shares of International's $.01 par value
common stock (the Offering), Universal Partners and McDermott exchanged their
respective shares of common stock of Universal Fabricators Incorporated for
shares of International's common stock. The shareholders of Universal Partners
received 1,785,000 shares of common stock of International and McDermott
received 1,715,000 shares of common stock of International in this share
exchange. In the Offering, 1,522,250 shares were sold by International (422,250
of which represents Underwriters' overallotment) and the balance of the shares
were sold by McDermott.
Also on September 24, 1997, Universal Fabricators Incorporated paid
$6,300,000 to McDermott for the surrender of certain contractual rights,
including the cancellation of an option held by McDermott which allowed it to
acquire the other 51% of outstanding common stock of Universal Fabricators
Incorporated.
2. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
include the accounts of International and its wholly-owned subsidiary,
Universal Fabricators Incorporated, (collectively referred hereinafter as the
"Company"). The Company fabricates and assembles jackets, decks, topside
facilities, quarters buildings, drilling rigs and equipment for installation
and use offshore in the production, processing and storage of oil and gas.
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, considered
necessary for a fair presentation have been included. Operating results for the
three- and six-month periods ended September 30, 1997 are not necessarily
indicative of the results that may be expected for the fiscal year ending March
31, 1998.
These financial statements should be read in conjunction with the
financial statements and footnotes thereto for the year ended March 31, 1997
included in the Company's Registration Statement on Form S-1 (Registration No.
333-31609), as declared effective by the Securities and Exchange Commission on
September 18, 1997.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis of financial condition and results of
operations should be read in conjunction with the unaudited condensed
consolidated financial statements and the related disclosures included
elsewhere herein and Management's Discussion and Analysis of Financial
Condition and Results of Operations included as part of the Company's
Registration Statement on Form S-1 (Registration No. 333-31609), as declared
effective by the Securities and Exchange Commission on September 19, 1997.
RESULTS OF OPERATIONS
Revenue for the three months ended September 30, 1997 decreased 1.58% to
$17.9 million from the $18.2 million generated in the three months ended
September 30, 1996. For the six-month period ended September 30, 1997, revenue
of $33.5 million was $3.2 million, or 8.7% lower than the same period in 1996.
This decrease was primarily due to revenue recognized as a result of the large
amount of contract materials purchased in the 1996 period as compared to the
1997 period. Although the Company's direct labor hours worked during the three
months ended September 30, 1997 period increased 9.8% from the number worked in
the same period in 1996 and prices realized under fixed-price contracts were
slightly higher in the 1997 period, the decreases in the amount of revenue
recognized as a result of contract materials purchased offset these increases.
Cost of revenue for the three months ended September 30, 1997 decreased
3.1% or $0.5 million to $15.6 million from $16.1 million in the three months
ended September 30, 1996. For the six-month period ended September 30, 1997,
cost of revenue of $28.9 million was $3.5 million or 10.8% lower than for the
same period in 1996. Cost of revenue consists of costs associated with the
fabrication process, including direct costs (such as direct labor costs and raw
materials) and indirect costs (such as supervisory labor, utilities, welding
supplies and equipment costs) that can be specifically allocated to projects.
These costs decreased as a percentage of revenues to 86.7% and 86.3% in the
three and six-month periods ended September 30, 1997 from 88.1% and 88.3% for
the same periods in 1996.
Gross profit for the three months ended September 30, 1997 increased to
$2.4 million and for the six months ended September 30, 1997 increased to $4.6
million from $2.2 million and $4.3 million in the corresponding periods in 1996
mainly due to improved margins on fixed price contracts and a favorable mix of
services and materials on the Company's time and materials contracts which
offset the decrease in revenue.
General and administrative expense was $0.4 million in the three months
ended September 30, 1997 and 1996, and was $0.9 million in the six months ended
September 30, 1997 compared to $.7 million in the same period in 1996. This
increase is due to increases in employee costs, primarily salaries and
benefits.
Interest income increased in the three and six-month periods ended
September 30, 1997 compared to the same periods in 1996 as the weighted average
of invested funds increased in 1997, due mainly to the investment of funds from
the Company's sale of common stock and from the collection of international
receivables near the end of the June 30, 1997 quarter.
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LIQUIDITY AND CAPITAL RESOURCES
The company completed its initial public offering on September 24, 1997 in
which it sold 1.5 million shares of common stock for net proceeds of $18.6
million after underwriting discount and other offering expenses of $2.5 million
and a $6.3 million payment to McDermott for the surrender of certain
contractual rights. The balance of the proceeds was invested in money market
funds and short-term, interest-bearing securities.
Historically, the company has funded its business activities through funds
generated from its operations. Net cash provided by operations was $6.5 million
for the six months ended September 30, 1997. During the same period the Company
had capital expenditures of $1.3 million, including $700,000 to purchase
approximately 18 acres of land from McDermott, where the Company's 12,000
square foot main office building is located, and $100,500 for an additional 10
acres from Universal Partners. The remaining capital expenditures were for
improvements to facilities and equipment to increase the productivity of the
labor force.
On September 22, 1997, the Company has entered into an unsecured credit
facility (the "Credit Facility") with a commercial lender, which provides for
up to $10.0 million in borrowings for general corporate purposes and for
letters of credit up to $10.0 million under a revolving credit facility.
Borrowings under the revolving credit facility bear interest at the prime
lending rate established by Chase Manhattan Bank, N.A. or LIBOR plus 2.0%, at
the Company's option. The fee for issued letters of credit is 7/8 of 1% per
annum on the principal amount of the letter of credit. The unused commitment
fee is 3/8 of 1% per annum. The revolving credit facility matures August 31,
2000. At September 30, 1997, the Company had no letters of credit and no
borrowings outstanding under the revolving credit facility. The Credit Facility
also provides for replacement of several letters of credit under a
non-revolving letter of credit facility. These letters of credit, which
aggregate $7.0 million, were previously provided by McDermott (the "McDermott
Letters of Credit"). The non-revolving letter of credit facility will be
reduced upon the respective expiration dates of the letters of credit issued to
replace the McDermott Letters of Credit, the last of which is scheduled to
expire in January, 2000.
Capital expenditures for the remaining six months of fiscal year ended
March 31, 1998 are estimated to be approximately $7.0 million, including
purchase and installation of a four-inch rolling mill, the dredging and
construction of a new slip and loadout facilities for the slip and the
expansion of the Company's pipe shop. Management believes that its available
funds, cash generated by operating activities and funds available under its
revolving credit facility will be sufficient to fund these capital expenditures,
ongoing capital expenditures and working capital needs. The Company may expand
its operations through acquisitions in the future, which may require additional
equity or debt financing.
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PART II
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c ) In connection with the Share Exchange described in note 1 to the
notes to the Condensed Consolidated Financial Statements included in Part I of
this report, the Company issued 1,785,000 shares of its common stock to
Universal Partners and 1,715,000 shares of such stock to McDermott
International immediately prior to the completion of the Company's initial
public offering on September 24, 1997. The shares received by Universal
Partners were distributed as a dividend to its shareholders also on September
24, 1997. All such shares were sold without registration under the Securities
Act of 1933 in reliance upon the exemption provided by Section 4(2) as
securities sold in transactions not involving any public offering.
(d) In connection with the initial public offering of stock described in
note 1 to the notes to the Condensed Consolidated Financial Statements included
in Part I of this report and in the Company's Registration Statement on Form
S-1 (Registration No. 333-31609), as declared effective by the Securities and
Exchange Commission on September 18, 1997 (the IPO), the Company registered
3,237,250 shares of its $.01 par value common stock (422,250 of which
represents Underwriters' overallotment). The IPO was completed on September 24,
1997, with 3,237,250 shares sold at $18 per share for an aggregate offering
price of $58,270,500. The managing underwriters for the IPO were Morgan Keegan
& Company, Inc. and Stephens Inc., who received in the aggregate $4,078,935
(the underwriting discount). McDermott, the selling shareholder, sold 1,715,000
shares of stock and received $28,709,100 net of underwriting discount. The
Company sold 1,522,250 shares of stock and received $25,482,465 net of
underwriting discount. Other expenses incurred in the IPO and paid directly to
others by the Company total approximately $618,000, which amount includes an
estimate of expenses incurred but not paid through September 30, 1997. Net
proceeds to the Company after deducting these expenses is $24,864,465.
Through September 30, 1997, the Company has paid $6.3 million to McDermott
for the surrender of certain contractual rights, $700,000 to purchase
approximately 18 acres of land from McDermott, where the Company's 12,000
square foot main office building is located, and $100,500 for an additional 10
acres from Universal Partners. The balance of the proceeds has been invested in
money market funds and short-term, interest-bearing securities. This use of
proceeds is consistent with the use of proceeds described in the Company's
prospectus included in the Company's Registration Statement on Form S-1
(Registration No. 333-31609).
ITEM 5. OTHER INFORMATION
On October 28, 1997 The Company announced its second quarter fiscal 1998
earnings and related matters. The press release making this announcement is
attached hereto as Exhibit 99.1.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description
27.1 Financial Data Schedule
99.1 Press release issued by the Company on
October 28, 1997 announcing its earnings and
related matters for the second quarter
fiscal year ending March 31, 1998.
(b) The Company filed no reports on Form 8-K during the quarter for
which this report is filed.
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SIGNATURES
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.
UNIFAB International, Inc.
Date November 13, 1997 /s/ Peter J. Roman
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Peter J. Roman
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
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EXHIBIT INDEX
Exhibit
Number Description
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27.1 Financial Data Schedule
99.1 Press release issued by the Company on October 28, 1997
announcing its earnings and related matters for the
second quarter fiscal year ending March 31, 1998.