<PAGE>
- -------------------------------------------------------------------------------
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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 June 30, 1999
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 33-6967
HALTER MARINE GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2656828
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
13085 Industrial Seaway Road, 39503
Gulfport, Mississippi 39503 (Zip Code)
(Address of principal executive
offices)
Registrant's Telephone Number, Including Area Code: (228)896-0029
Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report
Not Applicable
Indicate by check mark whether the registrant:(1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or 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 [_]
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date. 28,856,661 as of July 31, 1999
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<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June 30, March 31,
1999 1999
ASSETS ----------- ---------
(Unaudited) (Audited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents.............................. $ 1,552 $ 3,927
Contract receivables .................................. 151,372 117,376
Costs and estimated earnings in excess of billings on
uncompleted contracts................................. 138,520 146,313
Inventories............................................ 26,299 33,501
Other current assets................................... 11,315 11,408
-------- --------
Total current assets................................. 329,058 312,525
Property, plant and equipment, net....................... 168,509 170,972
Excess of cost over net assets acquired, net............. 98,619 99,977
Other assets ............................................ 8,078 8,306
-------- --------
$604,264 $591,780
======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Accounts payable and accrued liabilities............... $ 83,374 $ 85,529
Billings in excess of costs and estimated earnings on
uncompleted contracts................................. 80,412 89,243
Notes payable and current portion of long-term debt.... 1,818 2,839
-------- --------
Total current liabilities............................ 165,604 177,611
Long-term debt, less current portion..................... 260,258 239,727
Deferred income taxes ................................... 11,482 9,445
Other noncurrent liabilities............................. 48 48
-------- --------
Total liabilities.................................... 437,392 426,831
Stockholders' equity:
Common stock........................................... 288 288
Additional paid-in capital ............................ 119,910 119,910
Retained earnings...................................... 46,674 44,751
-------- --------
Total stockholders' equity........................... 166,872 164,949
-------- --------
$604,264 $591,780
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months
Ended June 30,
------------------
1999 1998
-------- --------
<S> <C> <C>
Contract revenue earned.................................... $192,127 $209,775
Cost of revenue earned .................................... 172,002 184,036
-------- --------
Gross profit............................................. 20,125 25,739
Selling, general and administrative expenses............... 13,340 13,960
Amortization of excess of cost over net assets acquired.... 1,358 1,371
-------- --------
Operating income......................................... 5,427 10,408
Other (income) expenses:
Interest expense, net.................................... 2,972 1,688
Other, net............................................... (292) (34)
-------- --------
2,680 1,654
-------- --------
Income before income taxes................................. 2,747 8,754
Provision for income taxes................................. 824 2,626
-------- --------
Net income ................................................ $ 1,923 $ 6,128
======== ========
Net income per share....................................... $ 0.07 $ 0.21
======== ========
Net income per share, diluted.............................. $ 0.07 $ 0.21
======== ========
Weighted average shares outstanding:
Basic.................................................... 28,857 28,823
Diluted.................................................. 28,860 29,527
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three months
Ended June 30,
------------------
1999 1998
-------- --------
<S> <C> <C>
Net cash provided (required) by operating activities........ $(18,123) $ 18,272
Investing activities:
Capital expenditures...................................... (3,762) (30,866)
-------- --------
Net cash required by investing activities............... (3,762) (30,866)
-------- --------
Financing activities:
Net proceeds from sale and issuance of stock.............. -- 22
Principal payments on debt................................ (1,040) --
Net borrowings (repayments) under line of credit.......... 20,550 (722)
-------- --------
Net cash provided (required) by financing activities.... 19,510 (700)
-------- --------
Net decrease in cash and cash equivalents................... (2,375) (13,294)
Cash and cash equivalents at beginning of year.............. 3,927 51,146
-------- --------
Cash and cash equivalents at end of period ................. $ 1,552 $ 37,852
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
JUNE 30, 1999
1. Basis of Presentation
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 of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three months
ended June 30, 1999 are not necessarily indicative of the results that may be
expected for the fiscal year ended March 31, 2000. The balance sheet at March
31, 1999 has been derived from the audited financial statements at that date
but does not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
For further information, refer to the audited consolidated financial
statements and footnotes thereto included in the Halter Marine Group, Inc. and
Subsidiaries' Form 10-K for the year ended March 31, 1999.
2. Segment Information
The Company classifies its business into three segments: Vessels, Rigs, and
Engineered Products. Operations within the Vessels segment include the new
construction and repair of a wide variety of vessels for the government,
offshore energy and commercial markets. Products in this segment include
offshore support vessels and offshore double hull tank barges for energy
markets; offshore and inland tug boats, ocean-going barges and oil spill
recovery vessels for commercial markets; and, oceanographic survey and
research ships, high-speed patrol boats and ferries for government markets.
Operations within the Rigs segment include the new construction, conversion
and repair of mobile offshore drilling rigs and production platforms.
Operations within the Engineered Products segment include the design,
manufacture and marketing of cranes, derricks, hoists, windlasses, jacks,
linear winches, fairleads, capstans, tuggers, locking devices, turret
bearings, control systems, winches and other related products used in the
marine and offshore construction industries. The Company evaluates the
performance of its segments based upon income before interest and income taxes
as these expenses are not allocated to the segments.
Selected information as to the operations of the Company by segment is set
forth below.
<TABLE>
<CAPTION>
Three Months Ended June 30, 1999
-------------------------------------
Engineered
Vessels Rigs Products Total
-------- ------- ---------- --------
(in thousands)
<S> <C> <C> <C> <C>
Operations:
Contract revenue earned................ $107,674 $60,729 $23,724 $192,127
Cost of revenue earned................. 97,711 54,347 19,944 172,002
-------- ------- ------- --------
Gross profit......................... 9,963 6,382 3,780 20,125
Selling, general and administrative
expenses.............................. 8,674 2,683 1,983 13,340
Amortization of excess of cost over net
assets acquired....................... 108 450 800 1,358
Other, net............................. (277) -- (15) (292)
-------- ------- ------- --------
Income before interest and income
taxes............................... $ 1,458 $ 3,249 $ 1,012 $ 5,719
======== ======= ======= ========
</TABLE>
5
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
JUNE 30, 1999
<TABLE>
<CAPTION>
Three Months Ended June 30, 1998
-------------------------------------
Engineered
Vessels Rigs Products Total
-------- ------- ---------- --------
(in thousands)
<S> <C> <C> <C> <C>
Operations:
Contract revenue earned................ $127,750 $49,755 $32,270 $209,775
Cost of revenue earned................. 118,914 38,164 26,958 184,036
-------- ------- ------- --------
Gross profit......................... 8,836 11,591 5,312 25,739
Selling, general and administrative
expenses.............................. 8,824 2,658 2,478 13,960
Amortization of excess of cost over net
assets acquired....................... 201 618 552 1,371
Other, net............................. (14) -- (20) (34)
-------- ------- ------- --------
Income (loss) before interest and
income taxes........................ $ (175) $ 8,315 $ 2,302 $ 10,442
======== ======= ======= ========
</TABLE>
Certain other financial information of the Company by segment is set forth
below.
<TABLE>
<CAPTION>
Three Months Ended June 30, 1999
------------------------------------------
Engineered
Vessels Rigs Products Corporate Total
------- ------ ---------- --------- ------
(in thousands)
<S> <C> <C> <C> <C> <C>
Other financial Information:
Depreciation and amortization
expense:
Included in cost of revenue
earned........................... $3,413 $1,004 $176 $ -- $4,593
Included in selling, general and
administrative expenses.......... 376 510 811 -- 1,697
Included in interest expense...... -- -- -- 210 210
------ ------ ---- ---- ------
$3,789 $1,514 $987 $210 $6,500
====== ====== ==== ==== ======
<CAPTION>
Three Months Ended June 30, 1998
------------------------------------------
Engineered
Vessels Rigs Products Corporate Total
------- ------ ---------- --------- ------
(in thousands)
<S> <C> <C> <C> <C> <C>
Other financial Information:
Depreciation and amortization
expense:
Included in cost of revenue
earned........................... $3,056 $ 577 $182 $ -- $3,815
Included in selling, general and
administrative expenses.......... 440 664 569 -- 1,673
Included in interest expense...... -- -- -- 212 212
------ ------ ---- ---- ------
$3,496 $1,241 $751 $212 $5,700
====== ====== ==== ==== ======
</TABLE>
For consolidation purposes, all interest and income taxes are allocated to
corporate operations. Intersegment revenues are not material to the
consolidated revenue of the Company.
6
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
JUNE 30, 1999
Total assets and capital expenditures of the Company by segment are set
forth below.
<TABLE>
<CAPTION>
Engineered
Vessels Rigs Products Adjustments Total
-------- -------- ---------- ----------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Total assets:
As of June 30, 1999......... $359,261 $114,558 $109,921 $20,524 $604,264
======== ======== ======== ======= ========
As of March 31, 1999........ $347,328 $120,797 $109,724 $ 2,622 $591,780
======== ======== ======== ======= ========
Capital expenditures for
three months ended:
June 30, 1999............... $ 3,004 $ 653 $ 105 $ -- $ 3,762
======== ======== ======== ======= ========
June 30, 1998............... $ 10,276 $ 18,719 $ 1,871 $ -- $ 30,866
======== ======== ======== ======= ========
</TABLE>
For consolidation purposes, certain cash and cash equivalent balances are
allocated to corporate and are included along with other accounting
eliminations and adjustments in the Adjustments column.
3. Reconciliation of Net Income Per Share
The following table sets forth the computation of basic and diluted net
income per share:
<TABLE>
<CAPTION>
Three Months
Ended
June 30,
-------------
1999 1998
------ ------
(in
thousands,
except per
share data)
<S> <C> <C>
Numerator:
Net income...................................................... $1,923 $6,128
====== ======
Numerator for net income per share, diluted .................... $1,923 $6,128
====== ======
Denominator:
Denominator for net income per share--weighted average shares
outstanding.................................................... 28,857 28,823
Effect of dilutive securities:
Stock Options................................................. 3 704
------ ------
Denominator for net income per share, diluted................... 28,860 29,527
====== ======
Net income per share............................................ $ 0.07 $ 0.21
====== ======
Net income per share, diluted................................... $ 0.07 $ 0.21
====== ======
</TABLE>
7
<PAGE>
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
JUNE 30, 1999
4. Proposed Merger
On June 1, 1999, the Company and Friede Goldman International Inc., a
Mississippi corporation ("Friede Goldman"), entered into an Agreement and Plan
of Merger (the "Merger Agreement"). Pursuant to the Merger Agreement, the
Company will merge with and into Friede Goldman (the "Merger") and upon
consummation of the Merger, Friede Goldman will be the surviving corporation.
As of the effective date of the Merger, each outstanding share of common
stock, par value $0.01 per share, of the Company, other than shares held in
the Company's treasury or owned by Friede Goldman or any wholly owned
subsidiary of Friede Goldman, will be converted into the right to receive
0.4614 of a share of common stock, par value $0.01 per share, of Friede
Goldman ("Friede Goldman Common Stock").
Consummation of the Merger is subject to various conditions, including the
expiration or termination of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the approval of the Merger
by the stockholders of the Company and of Friede Goldman.
Concurrently with the execution and delivery of the Merger Agreement, the
Company entered into a Voting and Proxy Agreement (the "Voting and Proxy
Agreement") with J.L. Holloway, the Chairman and Chief Executive Officer of
Friede Goldman. Under the Voting and Proxy Agreement, Mr. Holloway agreed to
vote the shares of Friede Goldman Common Stock owned (beneficially or
otherwise) by him in favor of the Merger. Mr. Holloway owns approximately 42%
of the outstanding Friede Goldman Common Stock. In addition, Mr. Holloway
entered into a Stockholder's Agreement with Friede Goldman (the "Stockholder's
Agreement") pursuant to which Mr. Holloway agreed to certain limits following
the Merger on (i) his acquisition or disposition of shares of Friede Goldman
Common Stock and (ii) the voting of such shares. Mr. Holloway also agreed to
resign as Chairman and Chief Executive Officer of Friede Goldman on the second
anniversary of completion of the Merger and to support the election of John
Dane III, the current Chairman and Chief Executive Officer of the Company, as
his successor.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
All statements (other than statements of historical fact) contained in this
document concerning the Company's financial position and liquidity; results of
operations; prospects for commercial or government contracts; ability to take
advantage of new vessel construction and conversion opportunities; labor
supply and costs; selling, general and administrative costs; and other
matters, are forward-looking statements. Forward-looking statements in this
document generally are accompanied by words such as "anticipate," believe,"
"estimate," or "expect" or similar words or phrases. Although the Company
believes that the expectations reflected in such forward-looking statements
are reasonable, no assurance can be given that such expectations will prove
correct. Certain of the factors that could cause the Company's results to
differ materially from the results discussed in such forward-looking
statements are discussed below. All forward-looking statements in this
document are expressly qualified in their entirety by the cautionary
statements in this paragraph.
Financial Condition
The increase in balance sheet accounts at June 30, 1999 compared to March
31, 1999 was primarily attributable to an increase in contract receivables.
Available cash balances and cash flow from borrowings under the Company's
revolving credit facility were used to support this increase. For further
information, refer to the discussion in the "Liquidity and Sources of Capital"
section on page 11.
Results of Operations
The following tables set forth certain statement of income information as a
percentage of the Company's revenue for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended June 30,
-----------------------------
1999 1998
-------------- --------------
Amount Percent Amount Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
Contract revenue earned by business
segment:
Vessels................................ $107.7 56.1% $127.8 60.9%
Rigs................................... 60.7 31.6 49.7 23.7
Engineered Products.................... 23.7 12.3 32.3 15.4
------ ----- ------ -----
$192.1 100.0% $209.8 100.0%
====== ===== ====== =====
<CAPTION>
Three Months Ended June 30,
-----------------------------
1999 1998
-------------- --------------
Amount Percent Amount Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
Contract revenue earned by customer type:
Government: (1)
Vessels................................ $ 27.8 14.5% $ 38.2 18.2%
Energy: (2)
Vessels................................ 46.1 24.0 57.7 27.4
Rigs................................... 60.7 31.6 49.7 23.7
------ ----- ------ -----
106.8 55.6 107.4 51.1
Commercial: (3)
Vessels................................ 11.9 6.2 12.3 5.9
Other (4)
Vessels................................ 21.9 11.4 19.6 9.4
Engineered Products.................... 23.7 12.3 32.3 15.4
------ ----- ------ -----
45.6 23.7 51.9 24.8
------ ----- ------ -----
$192.1 100.0% $209.8 100.0%
====== ===== ====== =====
</TABLE>
9
<PAGE>
- --------
(1) Consists of revenue from the Company's government customers, including the
U.S. Navy, state and local governments and foreign governments.
(2) Consists of revenue from the construction or conversion of vessels and the
construction, conversion and repair of mobile offshore drilling rigs.
Vessels include offshore support vessels, offshore double-hull barges and
tank barges.
(3) Consists of revenue from the Company's commercial customers and includes
vessels such as tugboats, hopper barges, inland towboats and other
vessels.
(4) Consists of revenue from customers for the construction of yachts, vessel
repairs and assorted marine products and the design and manufacture of
engineered products.
Three Months Ended June 30, 1999 vs. Three Months Ended June 30, 1998
Contract revenue decreased 8.4% to $192.1 million for the quarter ended June
30, 1999 compared with $209.8 million for the quarter ended June 30, 1998. Of
the $17.7 million decrease, $20.1 million was attributable to the Vessels
segment and $8.6 was attributable to the Engineered Products segment. These
decreases were offset by a $11.0 million increase in revenue generated by the
Rigs segment. The decline in revenue in the Vessels and Engineered Products
segments occurred as fiscal 1999 included several contracts which were
reaching final stages of completion and were not replaced in fiscal 2000.
Revenue generated by the Rigs segment increased as fiscal 2000 included
revenue from new contracts for the construction of two semi-submersible
drilling rigs and one jack-up drilling rig.
The decline in government revenue within the Vessels segment occurred as
fiscal 1999 included revenue from a contract for a ferry that was being
constructed for the State of Alaska. Revenue generated from the energy
customer group remained flat as the increase in energy revenue generated by
the Rigs segment, as described above, was offset by a decrease in revenue
generated by the Vessels segment as fiscal 1999 included revenue from several
offshore support vessels which were completed during that fiscal year. Growth
in revenue within the "other" customer group was attributable to increased
vessel repair activity.
The gross profit margin decreased to 10.5% for the first quarter of fiscal
2000 compared to 12.3% for the first quarter of fiscal 1999 primarily as a
result of a decline in the gross margin experienced in the Rigs segment. The
Rigs segment gross margin declined principally because the current quarter
includes approximately $25.1 million in revenue associated with contracts for
two semi-submersible rigs and one jack-up drilling rig on which no gross
profit was recognized.
Gross profit margins, by segment , for the first quarter of fiscal 2000
were: Vessels, 9.3%; Rigs, 10.5%; and Engineered Products, 15.9% Gross profit
margins, by segment, for the first quarter of fiscal 1999 were: Vessels, 6.9%;
Rigs, 23.3%; and Engineered Products, 16.5%.
Selling, general and administrative expenses decreased $0.6 million to $13.3
million in the first quarter of fiscal 2000, or 6.9% of revenue compared to
$13.9 million or 6.7% of revenue for the same quarter last year. The decrease
is a result of steps taken by management to reduce levels of selling, general
and administrative spending. Decreases were experienced throughout most
expense categories, none of which were individually significant.
Amortization of excess of cost over net assets acquired of $1.4 million for
the first quarter of fiscal 2000 remained flat compared to $1.4 million for
the same period last year.
Interest expense, net of interest income, increased $1.3 million to $3.0
million for the first quarter of fiscal 2000 compared to $1.7 million for the
first quarter of fiscal 1999 primarily as a result of increased borrowings
under the Company's revolving credit agreement.
10
<PAGE>
Income before income taxes decreased $6.1 million or 69.0% to $2.7 million
for the three months ended June 30, 1999 compared to $8.8 million for the same
period last year. The decrease was a result of a decline in gross profit
margin as well as an increase in interest expense. The Company does not expect
its gross margin to improve significantly during fiscal 2000, principally
because its Rigs segment contains several contracts on which it expects to
earn minimal gross profit. The Company expects the increase in interest
expense to continue during fiscal 2000 as compared to the prior fiscal year
principally due to increased borrowings under the Company's revolving credit
facility.
The effective tax rate for the first quarter of fiscal 2000 was 30% compared
to 30% for the same period last year as the Company. The effective tax rate
continues to reflect the anticipated benefit of tax credits for the Company's
research and development activities.
The Company's construction backlog of $535.4 million at June 30, 1999
decreased 18.4% compared to $656.0 million at March 31, 1999 and 45.8%
compared to $987.8 million at June 30, 1998.
Backlog consisted of the following as of June 30, 1999:
<TABLE>
<CAPTION>
Engineered
Vessels Rigs Products Total
------- ------ ---------- ------
<S> <C> <C> <C> <C>
Backlog by customer type:
Energy................................ $ 80.6 $239.9 $ -- $320.5
Government............................ 103.4 -- -- 103.4
Commercial............................ 37.1 -- -- 37.1
Other................................. 17.3 -- 57.1 74.4
------ ------ ----- ------
$238.4 $239.9 $57.1 $535.4
====== ====== ===== ======
</TABLE>
Liquidity and Sources of Capital
The Company's principal needs for capital for the three month period ended
June 30,1999 resulted primarily from the funding of the Company's ongoing
operations and capital expenditures. The Company's principal sources of
liquidity during the current quarter were cash balances and borrowings from
the Company's revolving credit facility. Cash flows from these sources were
$3.9 million from cash and cash equivalent balances at the beginning of the
period and $20.1 million from the revolving credit facility. The Company
believes that cash flows from operations, cash on hand, and funds available
under the revolving credit facility will be sufficient to fund its
requirements for working capital, capital expenditures, acquisitions and other
capital needs for at least the next twelve months. As of June 30, 1999,
availability under the revolving credit facility was $25.5 million.
Inflation and Changing Prices
The Company does not believe that general price inflation has had a
significant impact on the Company's results of operations during the periods
presented. To the extent that the effects of inflation are not offset by
improvements in manufacturing and purchasing efficiency and labor
productivity, the Company generally has been able to take such effects into
account in pricing its contracts with customers. There can be no assurance,
however, that inflation will not have a material effect on the Company's
business in the future.
Year 2000 Technological Issues
The Company is currently working to assess the potential impact of the Year
2000 on the processing of time-sensitive information by its computerized
information systems and equipment. Year 2000 issues may arise if computer
programs have been written using two digits (rather than four) to define the
applicable year. In such case, programs that have time-sensitive logic may
recognize a date using "00" as the year 1900 rather than the Year 2000, which
could result in miscalculations or system failures.
11
<PAGE>
Management has formed a Year 2000 Project team ("Project 2000") responsible
for identifying the functions affected by Year 2000 and has developed a plan
to reduce the potentially harmful impact of year 2000 issues on its
operations. The focus of Project 2000 is segregated into three areas:
information technology, which primarily includes the Company's financial
applications and voice communication equipment; production processes and
systems, which primarily includes machinery and equipment with embedded
technology and software used in the design and production of its products; and
external agents, which includes key business relationships with vendors,
customers, and other third parties including, but not limited to, financial
institutions. An evaluation of each of these areas has been or is being
performed according to the following four phases: assessment, remediation,
testing and implementation.
Project 2000 has completed its assessment of significant software used in
the information technology area and is currently in the remediation, testing
and implementation phases of this area. Each of these phases is expected to be
completed by September 1999. The Company has determined that its financial
software is Year 2000 compliant and expects to be able to continue to take
customer orders, invoice customers, collect payments and process payments to
vendors. Project 2000 has substantially completed its assessment of the
production processes and systems area and has begun the remediation, testing,
and implementation phases which it expects to complete by September 1999.
Assessment, remediation, testing and implementation measures are currently
underway in the area of external agents. These phases are expected to be
completed by September 1999. Beginning in August 1998, the Company developed
purchasing guidelines designed to limit the Company's liability for Year 2000
non-compliant products provided by suppliers that are either used by the
Company or installed in its products. The Company has circulated Year 2000
questionnaires among its major vendors giving them the opportunity to inform
the Company of their efforts to become Year 2000 compliant. As of this report
date, the Company has experienced a response rate from its major vendors of
approximately 41%, none of which have indicated situations of Year 2000 non-
compliance which the Company believes would materially affect its operations
In the event of non-responses, the Company has developed a list of Year 2000
compliant strategic vendors that it expects to be available to replace the
vendors that do not offer an adequate level of assurance that they will be
Year 2000 compliant. The Company has substantially completed an assessment of
its exposure to failure to deliver products or services to its customers by
reviewing components and systems of products scheduled for delivery through
the year 2000. This assessment includes evaluation of the terms and conditions
of purchases of equipment and supplies necessary to deliver its products and
services to determine if they are compliant with the previously mentioned
purchasing guidelines. Remediation, testing, and implementation in this area
is expected to be completed in September 1999. Based upon its procedures to
date, the Company does not anticipate significant exposure related to its
vendors, customers, or other third parties.
The Company has already begun implementing certain measures to alter,
validate or replace time-sensitive software prior to any anticipated material
impact on its computerized information systems and equipment. Costs of
addressing potential problems have not been material to date and are not
currently expected to have a material adverse impact on the Company's
financial position, results of operations or cash flows in future periods.
Management believes it has an effective program in place to resolve Year
2000 issues in a timely manner. The Company expects to complete all phases of
its Year 2000 review by September 1999; although the Company will continuously
take steps to reaffirm Year 2000 compliance in the areas of information
technology, production processes and systems, and external agents. The Company
is still in the process of reviewing machinery and equipment used to
manufacture products. In the unlikely event that the Company is unable to
remediate potential problems, if any, with this equipment, the Company may be
unable to manufacture products on a timely basis. Disruptions in the economy
generally resulting from Year 2000 issues could materially adversely affect
the Company. The Company could be subject to litigation for computer systems
installed in its products. The amount of potential liability and lost revenue
cannot be reasonably estimated at this time.
The Company is in the process of developing a contingency plan in the
unlikely event that material Year 2000 situations arise. The Company expects
to have completed this plan by September 1999.
12
<PAGE>
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company is exposed to market risks, primarily changes in interest rates
in the United States. The Company has not used derivative financial
instruments to manage its interest rate risk or engage in speculative
transactions. The fair value of the Company's outstanding debt instruments has
not changed materially since March 31, 1999.
PART II
FINANCIAL INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting of Stockholders, held on August 10, 1999,
Messrs. Angus R. Cooper, II and Burt H. Keenan were elected as directors of
the Company to hold office until the Annual Meeting of Stockholders in the
year 2002.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
<TABLE>
<C> <S>
27.1 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K. The Company filed the following reports on Form 8-K
during the quarter ended June 30, 1999.
<TABLE>
<CAPTION>
Date of
Report Item Number and Subject Matter
------- ------------------------------
<C> <S>
May 28, 1999 Item 5 reporting a press release confirming that the Company is
engaged in discussions with a company involved in the oilfield
service industry regarding a possible stock-for-stock business
combination.
June 2, 1999 Item 5 reporting a joint press release with Friede Goldman
International, Inc. announcing that the two companies have signed
a definitive agreement to enter into a strategic combination.
June 3, 1999 Item 5 reporting a press release announcing that the Company and
Friede Goldman International, Inc., entered into an Agreement and
Plan of Merger pursuant to which the Company will merge with and
into Friede Goldman, and, upon consummation of the merger, Friede
Goldman will be the surviving corporation.
</TABLE>
13
<PAGE>
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.
HALTER MARINE GROUP, INC.
/s/ Rick S. Rees
By:__________________________________
Rick S. Rees
Executive Vice-President
As a Duly Authorized Officer and
Chief Financial Officer
Date: August 13, 1999
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM HALTER
MARINE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AS OF AND
FOR THE THREE MONTHS ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> JUN-30-1999
<CASH> 2
<SECURITIES> 0
<RECEIVABLES> 151
<ALLOWANCES> 0
<INVENTORY> 26
<CURRENT-ASSETS> 329
<PP&E> 263
<DEPRECIATION> 94
<TOTAL-ASSETS> 604
<CURRENT-LIABILITIES> 166
<BONDS> 215
0
0
<COMMON> 0
<OTHER-SE> 167
<TOTAL-LIABILITY-AND-EQUITY> 604
<SALES> 192
<TOTAL-REVENUES> 192
<CGS> 172
<TOTAL-COSTS> 13
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3
<INCOME-PRETAX> 3
<INCOME-TAX> 1
<INCOME-CONTINUING> 2
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2
<EPS-BASIC> .07
<EPS-DILUTED> .07
</TABLE>
