<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A-1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 5, 1998
----------------------------
UNIFAB International, Inc.
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Louisiana 0-29416 72-1382998
- - ----------------------------- ---------------------- -------------------
(State or other jurisdiction Commission file number (I.R.S. Employer
of incorporation) Identification No.)
</TABLE>
5007 Port Road
New Iberia, LA 70562
- - --------------------------------------- -------------
(Address of principal executive offices) (Zip Code)
(318) 367-8291
- - --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not applicable
- - --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
<PAGE> 2
On February 20, 1998, UNIFAB International, Inc. ("UNIFAB") filed a Form 8-K
dated February 5, 1998 containing a description of the acquisition of the assets
and business of Professional Industrial Maintenance, LLC ("PIM"). This Form
8-K/A-1 amends and restates the disclosure in Item 7(a) and 7(b) of the Form 8-K
dated February 5, 1998 to include the audited financial statements of PIM and
proforma financial information.
Item 2. Acquisition or Disposition of Assets.
On February 5, 1998, UNIFAB International, Inc., the Registrant
("UNIFAB") completed its acquisition of the assets and business of Professional
Industrial Maintenance, LLC ("PIM") pursuant to the Agreement to Issue Stock in
UNIFAB International, Inc. dated February 5, 1998 among UNIFAB, PIM and Don E.
Spano, Jr., as amended by Amendment No. 1 to Agreement to Issue Stock in UNIFAB
International, Inc. dated March 31, 1998, a copy of which documents are filed
herewith as Exhibits 2.1 and 2.2, respectively, (collectively, the "Purchase
Agreement"). The purchase price was $6.0 million ($4.8 million in cash and
$500,000 in shares of UNIFAB common stock at closing and $337,000 per year for
two years payable in shares of UNIFAB common stock) plus $1.0 million payment
contingent upon UNIFAB obtaining $12.0 million backlog for the acquired
fabrication facility before May 8, 1998. This contingent amount is payable in
three equal annual payments of $222,000 cash and $111,000 shares of UNIFAB
common stock, the price of which shares shall be the average closing price of
the Company's stock as published in the Wall Street Journal for the five (5)
business days preceding the date for issuance of the shares. The terms of the
acquisition were determined by arm's length negotiation between UNIFAB and PIM.
Cash at closing was paid from available funds. Contingent payments, if they
become due, are expected to be paid from working capital or additional
borrowings. The acquisition was effective as of January 1, 1998, and the
operating results of the acquired assets and business from that date will be
consolidated with the operating results of UNIFAB.
PIM provides industrial plant maintenance services and, at its fabrication
facility located twelve miles south of Lake Charles, Louisiana, with 40-foot
water depth to the Gulf of Mexico, PIM provides repair, refurbishment and
conversion services for oil and gas drilling rigs. UNIFAB intends to continue
PIM's existing maintenance service business and to expand the existing repair,
refurbishment and conversion services for deep water drilling rigs and jack ups.
UNIFAB also intends to further develop the deep water fabrication facility to
support the drilling industry's needs in both refurbishment upgrades of jack up
and semi-submersible drilling rigs for deep water use, as well as new
construction of deep water drilling rigs, platforms, and platform components.
UNIFAB intends to operate these businesses through a new wholly-owned
subsidiary.
The acquisition was announced in the press release, dated February 5,
1998, which was filed as an exhibit to the Form 8-K dated February 5, 1998.
Additional information related to the acquisition is set forth in the Purchase
Agreement.
<PAGE> 3
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired.
(1) Audited balance sheet of PIM as of December 31, 1997 and the
related statement of operations and statement of cash flows
for the year ended December 31, 1997, including the notes
thereto, and the related report of Ernst & Young LLP.
(b) Pro forma Financial Information
(1) Unaudited Pro Forma Condensed Combined Balance Sheet of UNIFAB
as of December 31, 1997, including the notes thereto.
(2) Unaudited Pro Forma Condensed Combined Statement of Income of
UNIFAB for the nine months ended December 31, 1997, including
the notes thereto.
(3) Unaudited Pro Forma Condensed Combined Statement of Income of
UNIFAB for the year ended March 31, 1997, including the notes
thereto.
(a) Exhibits
Exhibit
Number Description
------- -----------
2.1 Agreement to issue stock in UNIFAB International,
Inc. dated as of February 5, 1998 between UNIFAB
International, Inc. and Professional Industrial
Maintenance, LLC. This exhibit includes a list
briefly identifying the contents of all omitted
schedules and exhibits. The Company will furnish a
copy of any omitted schedule or exhibit to the
Commission upon request.
2.2 Amendment No. 1 to Agreement to Issue Stock in UNIFAB
International, Inc. dated as of March 31, 1998 among
UNIFAB International, Inc., Professional Industrial
Maintenance, LLC and Don E. Spano, Jr.
99.1 Press release issued by the Company on February 5,
1998, incorporated herein by reference to Exhibit
99.1 to the Company's report on Form 8-K dated
February 5, 1998.
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.
UNIFAB International, Inc.
--------------------------------------
Date April 21, 1998 /s/ Peter J. Roman
--------------------- --------------------------------------
Peter J. Roman
Vice President and Chief
Financial Officer
(Principal Financial and Accounting
Officer)
<PAGE> 4
INDEX TO FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL INFORMATION
FINANCIAL STATEMENTS
(1) Audited balance sheet of PIM as of December 31, 1997 and the
related statements of operations and cash flows for the year ended
December 31, 1997, including notes thereto and the related report
of Ernst & Young LLC.
PRO FORMA FINANCIAL INFORMATION
(1) Unaudited Pro Forma Condensed Combined Balance Sheet of
UNIFAB as of December 31, 1997, including the notes thereto.
(2) Unaudited Pro Forma Condensed Combined Income Statement of
UNIFAB for the nine months ended December 31, 1997, including the
notes thereto.
(3) Unaudited Pro Forma Condensed Combined Income Statement of
UNIFAB for the year ended December 31, 1997, including the notes
thereto.
<PAGE> 5
(INSERT PIM AUDITED FINANCIAL STATEMENTS)
UNIFAB INTERNATIONAL, INC.
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)
BASIS OF PRESENTATION
The accompanying pro forma condensed combined balance sheet as of December
31, 1997 and the related pro forma condensed combined statements of income for
the nine months ended December 31, 1997 and for the year ended March 31, 1997
give effect to the January 1, 1998 acquisition of the assets and business of
Professional Industrial Maintenance, LLC ("PIM") pursuant to the Agreement to
Issue Stock in UNIFAB International, Inc. (the "Purchase Agreement") between
UNIFAB International, Inc. and PIM.
The pro forma condensed combined balance sheet combines the unaudited
December 31, 1997 condensed balance sheet of UNIFAB International, Inc.
("UNIFAB") with the December 31, 1997 audited balance sheet of PIM. The pro
forma condensed combined statements of income combine the unaudited results of
operations of UNIFAB for the nine months ended December 31, 1997 with the
unaudited results of operations of PIM for the nine months ended December 31,
1997; and the audited results of operations of UNIFAB for the year ended March
31, 1997 (UNIFAB's fiscal year end) with the unaudited results of operations of
PIM for the year ended December 31, 1996, (PIM's fiscal year end), respectively.
The pro forma condensed combined financial statements are based on the
historical financial statements of UNIFAB and PIM, giving effect to the
assumptions and adjustments in the accompanying notes to the pro forma condensed
combined financial statements.
The pro forma condensed combined financial statements have been prepared by
UNIFAB's management and include such adjustments to reflect the pro forma
financial results as if the acquisition described above had occurred as of
December 31, 1997 for the pro forma balance sheet. The pro forma condensed
combined statement of income for the year ended March 31, 1997 assumes the
acquisition was effected April 1, 1996. The pro forma condensed combined
statement of income for the nine months ended December 31, 1997 assumes the
acquisition was effected April 1, 1997.
The pro forma financial statements should be read in conjunction with the
historical financial statements and notes thereto of UNIFAB and PIM, which are
included elsewhere in this Form 8-K/A-1. The pro forma financial statements may
not be indicative of the results that would have occurred if the events
described above had taken place on the dates indicated or which may be obtained
in the future.
<PAGE> 6
Report of Independent Auditors
The Board of Directors
Professional Industrial Maintenance, LLC
We have audited the accompanying balance sheet of Professional Industrial
Maintenance, LLC as of December 31, 1997, and the related statements of
operations and cash flows for the year then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Professional Industrial
Maintenance, LLC at December 31, 1997, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
New Orleans, Louisiana
April 13, 1998
1
<PAGE> 7
Professional Industrial Maintenance, LLC
Balance Sheet
December 31, 1997
<TABLE>
ASSETS
<S> <C>
Current assets:
Cash $ 41,159
Accounts receivable, trade 3,026,334
Costs and estimated earnings in excess of billings
on uncompleted contracts 70,166
Accounts receivable, other 158,949
Prepaid expenses 176,208
Other current assets 32,000
-----------
Total current assets 3,504,816
Property, plant and equipment, net 720,689
Other noncurrent assets 43,334
-----------
Total assets $ 4,268,839
===========
LIABILITIES AND MEMBERS' DEFICIT Current liabilities:
Bank overdraft $ 740,646
Accounts payable 1,171,214
Borrowings under line of credit 1,961,186
Accrued liabilities 241,640
Payroll and related liabilities 585,635
Current portion of long-term debt and capital lease obligations 254,414
-----------
Total current liabilities 4,954,735
Long-term debt and capital lease obligations, less current portion 1,023,006
Members' deficit (1,708,902)
-----------
Total liabilities and members' deficit $ 4,268,839
===========
</TABLE>
See accompanying notes.
2
<PAGE> 8
Professional Industrial Maintenance, LLC
Statement of Operations
Year ended December 31, 1997
<TABLE>
<S> <C>
Operating revenue $ 14,626,628
Cost of revenue 11,950,955
------------
Gross profit 2,675,673
General and administrative expense 2,323,964
------------
Income from operations 351,709
Other income (expense):
Interest expense (359,192)
Other income 6,634
------------
(352,558)
------------
Net loss $ (849)
============
</TABLE>
See accompanying notes.
3
<PAGE> 9
Professional Industrial Maintenance, LLC
Statement of Cash Flows
Year ended December 31, 1997
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net loss $ (849)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 203,920
Loss on disposal of assets 17,686
Changes in operating assets and liabilities:
Accounts receivable (2,155,164)
Net costs and estimated earnings in excess of billings on
uncompleted contracts
(70,166)
Prepaid expenses and other assets (201,157)
Bank overdraft 577,936
Accounts payable and accrued liabilities 1,060,469
-----------
Net cash used in operating activities (567,325)
INVESTING ACTIVITIES
Purchases of equipment (357,040)
-----------
Net cash used in investing activities (357,040)
FINANCING ACTIVITIES
Distributions to members (692,430)
Net borrowings under line of credit 763,193
Proceeds from borrowings of long-term debt 1,050,801
Payments on long-term debt and capital lease obligations (457,245)
-----------
Net cash provided by financing activities 664,319
-----------
Net change in cash (260,046)
Cash at beginning of period 301,205
-----------
Cash at end of period $ 41,159
===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ 360,847
===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Acquisition of fixed assets through capital lease obligations $ 102,975
===========
</TABLE>
See accompanying notes.
4
<PAGE> 10
Professional Industrial Maintenance, LLC
Notes to Financial Statements
December 31, 1997
1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Professional Industrial Maintenance, LLC (the Company) provides industrial plant
maintenance services and, at its fabrication facility located 12 miles south of
Lake Charles, Louisiana, provides repair, refurbishment and conversion services
for oil and gas drilling rigs. The Company shall continue in existence until
June 29, 2024, unless sooner terminated in accordance with the Articles of
Incorporation or by operation of law. Profits and losses of the Company are
allocated to members based on their ownership interest.
The Company's customers are principally in the petrochemical and the oil and gas
industries. Receivables are generally not collateralized. Receivables are
written off in the period in which they are deemed to be uncollectible. Credit
losses for the year ended December 31,1997 were approximately $271,000.
Effective January 1, 1998, UNIFAB International, Inc. (UNIFAB) acquired the
assets and business of the Company for $6.0 million ($4.8 million in cash and
$500,000 in shares of UNIFAB common stock at closing and $337,000 per year for
two years payable in shares of UNIFAB common stock) plus a $1.0 million payment
contingent upon UNIFAB obtaining $12.0 million backlog for the acquired
fabrication facility before May 8, 1998. This contingent amount is payable in
three equal annual payments of $222,000 in cash and $111,000 in shares of UNIFAB
common stock. Upon acquisition, UNIFAB terminated the Company's line of credit
by paying the balance then outstanding, and paid the Company's commercial loan
to a bank in the amount of approximately $842,000. UNIFAB also assumed debt of
approximately $450,000, secured by certain equipment and vehicles acquired in
the transaction.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
5
<PAGE> 11
Professional Industrial Maintenance, LLC
Notes to Financial Statements (continued)
1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE AND COST RECOGNITION
Revenue from time and materials contracts is recognized on the basis of direct
labor hours worked at fixed hourly rates and the cost of materials or
subcontract costs incurred plus mark-up. Revenue from long-term, fixed-price
contracts is recognized on the percentage-of-completion method, measured by the
ratio which labor hours incurred to date bear to total estimated labor hours. In
the case of long-term contracts extending over one or more fiscal years,
revisions of the cost and profit estimated during the course of the work are
reflected in the accounting period in which the facts which require revision
become known. At the time a loss on a contract becomes known, the entire amount
of the ultimate loss is accrued. Variations from estimated contract performance
could result in a material adjustment to operating results for any fiscal year.
Contract costs include direct labor, material, subcontract costs and allocated
indirect costs related to contract performance. General and administrative costs
are charged to expense as incurred.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Depreciation is provided by the
straight-line method over the estimated lives of the assets, which are five
years for equipment, vehicles, and computers and seven years for buildings and
furniture and fixtures.
INCOME TAXES
The Company is a limited liability company and has elected to be taxed as a
partnership. Under this election, taxable income or loss of the Company is the
responsibility of the individual owners and is, therefore, included in the
members' tax returns.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the Company's financial instruments at MarchE31, 1997,
including cash and cash equivalents and accounts receivable, closely
approximates fair value.
6
<PAGE> 12
Professional Industrial Maintenance, LLC
Notes to Financial Statements (continued)
2. CONTRACTS IN PROGRESS
The following information pertains to contracts in progress at December 31,
1997:
<TABLE>
<S> <C>
Costs incurred on uncompleted contracts $ 243,166
Estimated earnings 227,741
------------------
470,907
Less billings to date (400,741)
------------------
Billings in excess of costs and estimated earnings
on uncompleted contracts $ 70,166
==================
</TABLE>
Accounts receivable includes unbilled receivables of $410,000 at December 31,
1997.
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following at December 31, 1997:
<TABLE>
<S> <C>
Equipment $ 326,170
Vehicles 316,006
Leasehold improvements 195,230
Computer equipment and software 127,851
Other assets 66,842
------------------
1,032,099
Less accumulated depreciation 311,410
------------------
$ 720,689
==================
</TABLE>
4. LONG-TERM DEBT AND CREDIT ARRANGEMENT
The Company has a line of credit with a bank with interest due monthly at a
prime rate plus .5% (9% at December 31, 1997). Substantially all of the
Company's accounts receivable are pledged as collateral on this line. Credit
available under the line is limited by the amount of eligible receivables
recorded by the Company. At December 31, 1997, the Company had no available
credit under this line.
7
<PAGE> 13
Professional Industrial Maintenance, LLC
Notes to Financial Statements (continued)
4. LONG-TERM DEBT AND CREDIT ARRANGEMENT (CONTINUED)
Long-term debt at December 31, 1997 included the following:
<TABLE>
<S> <C>
Commercial loan to a bank, due in monthly installments of $10,832, including
interest at prime plus .5% (9% at December 31, 1997), due September 2002;
secured by personal guarantees of the members $ 841,724
Note payable to a bank, due in monthly installments of $9,011, including
interest at 7.65% with final payment of $87,843 including interest due
January 1998; secured by personal assets of the members 95,687
Note payable to a bank, interest at prime (8.5% at December 31, 1997) due monthly,
principal due September 2000; secured by equipment (book value $44,650 at
December 31, 1997) 80,030
Note payable to a bank, due in monthly installments of $1,348, including
interest at prime plus .5% (9% at December 31, 1997), due October 2001;
secured by equipment (book value $36,703 at December 31, 1997) 52,107
Various notes payable to finance vehicles, interest at rates 8.5% to 12%, monthly
installments totaling $4,685, including interest; secured by vehicles (book
value $86,822 at December 31, 1997) 105,214
Capital lease obligations 102,658
----------
1,277,420
Less current portion 254,414
----------
$1,023,006
==========
</TABLE>
8
<PAGE> 14
Professional Industrial Maintenance, LLC
Notes to Financial Statements (continued)
4. LONG-TERM DEBT AND CREDIT ARRANGEMENT (CONTINUED)
The aggregate maturities of long-term debt and capital lease obligations,
excluding borrowings under the credit arrangement, over the next five years are
as follows:
<TABLE>
<S> <C>
1998 $ 254,414
1999 139,418
2000 200,705
2001 103,873
2002 579,010
</TABLE>
5. RELATED PARTY TRANSACTIONS
During the year ended December 31, 1997, the Company provided services to
corporations owned by one of the members of the Company. Included in revenue and
cost of sales were approximately $698,000 and $570,000, respectively, associated
with these services.
6. MAJOR CUSTOMERS
The Company is not dependent on any one customer, and the contract revenue
earned from each customer varies from year to year based on the contracts
awarded. Contract revenue earned comprising 10% or more of the Company's total
contract revenue earned for the year ended December 31, 1997, along with the
respective accounts receivable balance at December 31, 1997, are summarized as
follows:
<TABLE>
<CAPTION>
CONTRACT ACCOUNTS
REVENUE RECEIVABLE
----------------- ------------------
<S> <C> <C>
Customer A $ 3,414,000 $ 480,000
================= ==================
Customer B $ 2,586,000 $ 719,000
================= ==================
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
The Company is party to legal proceedings arising in the normal course of
business. It is the opinion of management that the outcome of these matters will
not have a material adverse effect on the Company's financial position or
results of operations.
9
<PAGE> 15
Professional Industrial Maintenance, LLC
Notes to Financial Statements (continued)
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company leases land upon which a portion of its facilities is located under
a noncancelable operating lease. The lease expires September 1999 and has two
five-year renewal options. The Company also leases computer equipment, temporary
buildings, and other equipment used in operations under noncancelable operating
leases.
Future minimum payments under the leases are as follows:
<TABLE>
<S> <C>
1998 $ 185,425
1999 130,279
2000 21,433
2001 12,895
2002 4,017
--------------
$ 354,049
==============
</TABLE>
Rent expense during the year ended December 31, 1997 was $414,000 which includes
rent on cancelable equipment leases.
10
<PAGE> 16
UNIFAB INTERNATIONAL, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET (UNAUDITED)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
UNIFAB
INTERNATIONAL, PRO FORMA PRO FORMA
INC. PIM ADJUSTMENTS COMBINED
----------------- ------------ ------------- ------------
ASSETS
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents.......... $ 17,929,316 $ 41,159 $ (4,825,000)(1) $ 10,307,739
(2,837,736)(2)
Accounts receivable................ 10,546,635 3,026,334 -- 13,572,969
Costs and estimated earnings in
excess of billings on uncompleted 908,491 70,166 -- 978,657
contracts.......................
Prepaid expenses................... 759,317 176,208 -- 935,525
Other current assets............... 152,298 190,949 -- 343,247
----------------- ------------ ------------- ------------
Total current assets............ 30,296,057 3,504,816 (7,662,736) 26,138,137
Property, plant and equipment, net... 7,382,223 720,689 183,193 (1) 8,286,105
Goodwill............................. -- -- 6,785,709 (1) 6,785,709
Other assets......................... 739,558 43,334 65,000 (1) 847,892
----------------- ------------ ------------- ------------
Total assets.................... $ 38,417,838 $ 4,268,839 $ (628,834) $ 42,057,843
================= ============ ============== ============
LIABILITIES AND EQUITY
Current liabilities:
Bank overdraft...................... $ -- $ 740,646 $ -- $ 740,646
Accounts payable.................... 3,685,013 1,171,214 -- 4,856,227
Borrowings under line of credit..... -- 1,961,186 (1,961,186)(2) --
Billings in excess of costs and
Estimated earnings on uncompleted
contracts.................... 523,469 -- -- 523,469
Accrued liabilities................. 1,181,822 827,275 -- 2,009,097
Current portion of long term debt
and capital lease obligations.... -- 254,414 -- 254,414
Income tax payable.................. 925,371 -- -- 925,371
----------------- ------------ ------------- ------------
Total current liabilities........ 6,315,675 4,954,735 (1,961,186) 9,309,224
Long term debt and capital lease
obligations, less current
portion.......................... 40,273 1,023,006 (876,550)(2) 186,729
Deferred income taxes................. 1,239,830 -- -- 1,239,830
Equity................................ 30,822,060 (1,708,902) 1,708,902 (1) 31,322,060
500,000 (1)
----------------- ------------ ------------- ------------
Total liabilities and equity..... $ 38,417,838 $ 4,268,839 $ (628,834) $ 42,057,843
================= ============ ============== ============
See accompanying notes to pro forma condensed combined financial statements (unaudited).
</TABLE>
<PAGE> 17
UNIFAB INTERNATIONAL, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME (UNAUDITED)
NINE MONTHS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
UNIFAB
INTERNATIONAL, PRO FORMA PRO FORMA
INC. PIM ADJUSTMENTS COMBINED
----------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Revenue.............................. $ 46,920,823 $ 11,862,147 $ -- $ 58,782,970
Cost of revenue...................... 39,932,246 10,083,842 19,628 (5) 50,035,716
----------------- ------------ ------------- ------------
Gross profit......................... 6,988,577 1,778,305 (19,628) 8,747,254
General and administrative expense... 1,572,085 1,595,865 424,107 (6) 3,592,057
----------------- ------------ ------------- ------------
Income from operations............... 5,416,492 182,440 (443,735) 5,155,197
Other income (expense):
Interest expense................... (20,837) (280,674) 179,370 (3) (412,142)
(290,001)(4)
Interest income.................... 313,862 -- (106,334)(4) 207,528
----------------- ------------ -------------- ------------
Income before income taxes........... 5,709,517 (98,234) (660,700) 4,950,583
Income tax provision (benefit)....... 2,030,789 -- (270,180)(7) 1,760,609
----------------- ------------ -------------- ------------
Net income (loss).................... $ 3,678,728 $ (98,234) $ (390,520) $ 3,189,974
================= ============= ============== ============
Basic and diluted earnings per share. $ 0.78
============
Diluted earnings per share adjusted
weighted average shares........... 4,080,409
============
See accompanying notes to pro forma condensed combined financial statements (unaudited).
</TABLE>
<PAGE> 18
UNIFAB INTERNATIONAL, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
UNIFAB
INTERNATIONAL, INC. PIM
YEAR ENDED YEAR ENDED PRO FORMA PRO FORMA
MARCH 31, 1997 DECEMBER 31, 1997 ADJUSTMENTS COMBINED
----------------- ----------------- ------------- ------------
<S> <C> <C> <C> <C>
Revenue............................... $ 66,724,504 $ 8,827,641 $ -- $75,552,145
Cost of revenue....................... 58,589,197 7,644,515 26,170 (5) 66,259,882
--------------- --------------- ------------- -----------
Gross profit.......................... 8,135,307 1,183,126 (26,170) 9,292,263
General and administrative expense.... 1,637,563 2,473,405 565,476 (6) 4,676,444
--------------- --------------- ------------- -----------
Income from operations................ 6,497,744 (1,290,279) (591,646) 4,615,819
Other income (expense):
Interest expense.................... (63,304) (325,087) 77,350 (3) (322,438)
(11,397)(4)
Interest income..................... 145,155 -- (18,132)(4) 127,023
--------------- --------------- -------------- -----------
Income before income taxes............ 6,579,595 (1,615,366) (543,825) 4,420,404
Income tax provision (benefit)........ 2,554,941 -- (768,672)(7) 1,786,269
--------------- --------------- -------------- -----------
Net income (loss)..................... $ 4,024,654 $ (1,615,366) $ 224,847 $ 2,634,135
=============== ================ ============= ===========
Basic and diluted earnings per share.. $ 0.75
============
Diluted earnings per share adjusted
weighted average shares............. 3,526,405
===========
See accompanying notes to pro forma condensed combined financial statements (unaudited).
</TABLE>
<PAGE> 19
UNIFAB INTERNATIONAL, INC.
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
UNIFAB International, Inc. ("UNIFAB") was formed on July 16, 1997 to serve
as the parent corporation of Universal Fabricators Incorporated ("Fabricators"),
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"). UNIFAB had no operations prior to the date of formation. On
September 24, 1997, immediately prior to the completion of an initial public
offering of 3,237,250 shares of UNIFAB's $.01 par value common stock, Universal
Partners and McDermott exchanged their respective shares of common stock of
Fabricators for shares of UNIFAB's common stock. The shareholders of Universal
Partners received 1,785,000 shares of common stock of UNIFAB and McDermott
received 1,715,000 shares of common stock of UNIFAB in this share exchange. The
accompanying pro forma condensed combined statement of income gives effect to
this exchange of shares which resulted in Fabricators being a 100%-owned
subsidiary of UNIFAB. The column titled "UNIFAB International, Inc." in the
accompanying pro forma condensed combined statement of income includes the
results of operations of Fabricators for the period prior to formation of
UNIFAB.
NOTE 2. ACQUISITION OF PIM
Effective January 1, 1998, UNIFAB International, Inc. ("UNIFAB") acquired
the assets and business of Professional Industrial Maintenance, LLC ("PIM"). The
purchase price was $6.0 million ($4.8 million in cash and $500,000 in shares of
UNIFAB common stock at closing and $337,000 per year for two years payable in
shares of UNIFAB common stock) plus $1.0 million payment contingent upon UNIFAB
obtaining $12.0 million backlog for the acquired fabrication facility before May
8, 1998. This contingent amount is payable in three equal annual payments of
$222,000 cash and $111,000 in shares of UNIFAB common stock, the price of which
shares shall be the average closing price of the Company's stock as published in
the Wall Street Journal for the five (5) business days preceeding the date for
issuance of the shares. In addition to the purchase price, UNIFAB paid
approximately $30,000 of direct expenses. The acquisition cost exceeds the book
value of assets acquired and liabilities assumed by $6.8 million. The purchase
price was allocated to acquired assets and liabilities based on their estimated
fair values.
The pro forma adjustments to record the acquisition of the PIM assets and
business are as follows:
(1) To allocate purchase price based on the estimated fair values of
the assets acquired and liabilities assumed, eliminate the PIM
members' deficit, record the excess of acquisition cost over fair
value of net assets acquired (goodwill), and record the cash and
stock payments to acquire the assets and business of PIM.
(2) To record the payment to retire the outstanding debt on
PIM's line of credit and a certain note payable.
(3) To record the adjustment to interest expense to reflect the
retirement of the outstanding debt on PIM's line of credit and a
certain note payable as of the beginning of the period.
(4) To record the adjustment to interest income or expense for cash
used on the acquisition as of the beginning of the period.
(5) To record additional depreciation expense on the new basis of
property and equipment acquired in the acquisition.
<PAGE> 20
(6) To record amortization of cost in excess of net assets acquired
of $6.8 million in the acquisition as of the beginning of the
period. The amortization period is 12 years.
(7) To record the income tax provision related to the pro forma
adjustments and PIM's operating results for the period using
UNIFAB's effective tax rate. Prior to this acquisition, PIM was a
limited liability company and had elected to be taxed as a
partnership. Under this election, taxable income or loss is the
responsibility of the individual owners and is, therefore included
in their tax returns.
NOTE 3. PRO FORMA NET INCOME PER SHARE
Pro forma net income per share is calculated by dividing the pro forma net
income for the period by the average common stock outstanding, which reflects
the exchange described in Note 1, above, and gives effect to the shares issued
in the acquisition described in Note 2, above, as if the shares were issued at
the beginning of the period.
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- - ------- -----------
<S> <C>
2.1 Agreement to issue stock in UNIFAB International,
Inc. dated as of February 5, 1998 between UNIFAB
International, Inc. and Professional Industrial
Maintenance, LLC. This exhibit includes a list
briefly identifying the contents of all omitted
schedules and exhibits. The Company will furnish a
copy of any omitted schedule or exhibit to the
Commission upon request.
2.2 Amendment No. 1 to Agreement to Issue Stock in UNIFAB
International, Inc. dated as of March 31, 1998 among
UNIFAB International, Inc., Professional Industrial
Maintenance, LLC and Don E. Spano, Jr.
99.1 Press release issued by the Company on February 5,
1998, incorporated herein by reference to Exhibit
99.1 to the Company's report on Form 8-K dated
February 5, 1998.
</TABLE>
<PAGE> 1
EXHIBIT 2.1
AGREEMENT TO ISSUE STOCK IN
UNIFAB INTERNATIONAL, INC.
This Agreement is entered into and effective as of February 5, l998 by
and between UNIFAB INTERNATIONAL, INC., a Louisiana Corporation (the "Company or
UNIFAB"), and PROFESSIONAL INDUSTRIAL MAINTENANCE, LLC, ("LLC").
WHEREAS, LLC sold and conveyed its assets to PIM, LLC, a wholly owned
subsidiary of the Company and in consideration thereof the Company, through its
subsidiary, has paid to LLC, $4,825,000.00 in cash and issued shares of the
Company's stock having a value of $500,000.00, said shares being valued at the
average closing price which was reported in the Wall Street Journal for the five
(5) business days immediately preceeding January 8, l998. The Company will
further pay LLC $674,000.00 in two (2) annual installments of $337,000.00
beginning one year after the date hereof, and has further agreed in the event
that DON E. SPANO, JR., as an Employee of LLC and of PIM, LLC books business for
LLC to be transferred to PIM, LLC and books for PIM, LLC business which together
have an estimated time and material value of $l2,000,000.00 or more within l20
days after January 8, l998, to pay LLC an additional sum of $l,000,000.00 in two
(2) increments of $333,333.33 with a final increment of $333,333.34 the first
installment of which will be payable one year after the parties have agreed that
Spano has booked the business required to be booked by LLC and assigned to PIM,
LLC or for PIM, LLC after the employment of Don E. Spano, Jr. by PIM, LLC
payable in two installments of $222,222.00 in cash and $lll,lll.00 in shares of
the Company's stock and in a final installment of $222,223.00 in cash and
$lll,lll.00 in shares, the price of which shares shall be the average closing
price of the Company's stock as published in the Wall Street Journal for the
five (5) business days preceeding the date for issuance of shares.
NOW THEREFORE, in the consideration of the premises, it is agreed by
and between the parties as follows:
1. The Company warrants that it will issue its stock to LLC in
accordance with its obligations as set forth above.
2. LLC acknowledges that its acquisition of stock pursuant to the terms
of this Agreement shall be subject to registration rights with the restrictions
that each share as issued shall not be sold on the open market until it has been
issued to LLC for one full year and further subject to the following agreements
and restrictions:
(a) LLC and its sole member, Don E. Spano, Jr. (the "Member"),
acknowledge and agree that LLC may, in connection with its liquidation and
dissolution, distribute the shares of UNIFAB common stock to be received by LLC
pursuant to this Agreement (the "UNIFAB Shares") only to Member.
(b) Each of LLC and Member acknowledges and agrees that, except as set
forth in subsection (a) of this Section 2, (i) it is so acquiring the UNIFAB
Shares for investment for its own account and has no present intention of
reselling or otherwise distributing or participating in a distribution of such
stock; (ii) it understands that the UNIFAB Shares will not be registered under
the Securities Act of l933, as amended (the "Securities Act"), that such shares
will be "restricted securities" as that term is defined in Rule l44 of the
Securities and Exchange Commission under the Securities Act, and that such
shares may not be transferred unless they are subsequently registered under the
Securities Act ("Rule l44") and under any applicable state securities law or are
transferred in a
<PAGE> 2
transfer that is exempt from such registration; (iii) UNIFAB is not obligated by
this Agreement to register such shares under the Securities Act or under any
such state laws and UNIFAB will, as a condition to the transfer of any such
shares, require that the request for transfer be accompanied by an opinion of
counsel, in form and substance satisfactory to UNIFAB, to the effect that the
proposed transfer does not result in a violation of the Securities Act or any
applicable state securities law, unless such transfer is covered by an effective
registration statement; and (iv) the UNIFAB Shares may not be sold publicly in
reliance on the exemption from registration under the Securities Act afforded by
Rule l44 unless and until the minimum holding period (currently one year) and
other requirements of Rule l44 have been satisfied.
(c) LLC and Member have been represented by competent and experienced
legal counsel in connection with the negotiation and execution of this
Agreement, have been granted the opportunity to make a thorough investigation of
and to obtain information with respect to the affairs of UNIFAB and its
acquisition of the UNIFAB Shares, and have availed themselves of such
opportunity either directly or through legal counsel and other authorized
representatives. LLC and Member acknowledge that they have received from UNIFAB
and have reviewed with their representatives a copy of each of the following
documents (the "UNIFAB Disclosure Documents"); UNIFAB's prospectus dated
September l8, l997 relating to 2,8l5,000 shares of UNIFAB International, Inc.
common stock; UNIFAB's report to the Securities and Exchange Commission on Form
l0-Q for the second quarter ended September 30, l997; and UNIFAB's press release
dated January 23, l998 relating to UNIFAB's earnings for the third quarter ended
December 3l, l997.
(d) LLC and Member understand and that UNIFAB in issuing the UNIFAB
Shares is relying upon, among other things, the representations and warranties
of LCC and Member contained in this Section in concluding that such issuance
does not require compliance with the registration provisions of the Securities
Act.
(e) LLC and Member each understands and agrees that all certificates
evidencing the UNIFAB Shares issued hereunder will bear restrictive legends in
substantially the following form:
The securities represented by this Certificate have not been registered
under the Securities Act of l933, as amended (the "Act"), or any
applicable state law, and may not be transferred without registration
under the Act and any such state law or an opinion of counsel
satisfactory to the issuer of such securities that registration is not
required.
(f) LLC and Member each acknowledge that (i) it has received and has
reviewed to its satisfaction this Agreement, the UNIFAB Disclosure Documents,
and such additional information with respect to UNIFAB and the transactions
contemplated by this Agreement as it has requested and (ii) such information is
sufficient for it to determine whether to approve such transactions and enter
into this Agreement.
3. As used in this Agreement, the following terms shall have the
meanings indicated below:
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trust, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof.
"Register," "registered" and "registration" refer to a registration
effected by preparing and filing a Registration Statement with the SEC in
compliance with the Securities Act for the purpose of effecting a public sale of
securities.
"Registrable Securities" means (a) all shares of common stock, $0.0l
par value per share (the "Common Stock"), of UNIFAB beneficially owned by LLC
and (b) any other securities issued by UNIFAB after the date hereof with respect
to such shares (and with respect to the Common Stock generally) by means of
exchange, reclassification, dividend, distribution, split up, combination,
subdivision, recapitalization, merger, spin-off, reorganization or otherwise;
provided, however, that as to any Registrable Securities, such securities shall
cease to
<PAGE> 3
constitute Registrable Securities for the purposes of this Agreement if and when
(i) a Registration Statement with respect to the sale of such securities shall
have been declared effective by the SEC and such securities shall have been sold
pursuant thereto in accordance with the intended plan and method of distribution
thereof set for in the final prospectus forming a part of such Registration
Statement; (ii) such securities shall have been sold in satisfaction of all
applicable resale provisions of Rule l44 under the Securities Act; (iii) such
securities cease to be beneficially owned by the Employee, or (iv) such
securities cease to be issued and outstanding for any reason.
"Registration Statement" means a registration statement filed by
UNIFAB with the SEC pursuant to Section 6(a) hereof.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of l933, as amended.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on this 5th day of February, l998, at Lake Charles, Louisiana.
UNIFAB INTERNATIONAL, INC.
BY: /s/ Dennis Lafleur
----------------------
DENNIS LAFLEUR
VICE PRESIDENT
PROFESSIONAL INDUSTRIAL
MAINTENANCE, LLC
BY:/s/ Don E. Spano, Jr.
---------------------
DON E. SPANO, JR.
MANAGING MEMBER
/s/ Don E. Spano, Jr.
----------------------
DON E. SPANO, JR.
<PAGE> 1
EXHIBIT 2.2
AMENDMENT NO. 1 TO
AGREEMENT TO ISSUE STOCK IN
UNIFAB INTERNATIONAL, INC.
This agreement is entered into on the date set forth below by and among
UNIFAB International, Inc., a Louisiana corporation, Professional Industrial
Maintenance, LLC (ALLC@), and Don E. Spano, Jr. (ASpano@).
WHEREAS, the Company and Spano are parties to that certain Agreement to
Issue Stock in UNIFAB International, Inc. dated as of February 5, 1998 (the
AOriginal Agreement@); and
WHEREAS, pursuant to the Original Agreement 26,405 shares (the A26,405
Shares@) of the Company=s common stock (having a value of $500,000, as
determined in the Original Agreement) were to be issued to LLC in partial
consideration of the rights and assets transferred on February 5, 1998 by LLC to
the Company=s wholly owned subsidiary, PIM, LLC (the ASubsidiary@); and
WHEREAS, the parties desire to amend and reaffirm in certain respects
the provisions of the Original Agreement, as provided for herein;
NOW, THEREFORE, in consideration of the premises and of the agreements
set forth below, the parties hereto agree as follows:
1. The parties hereto acknowledge and agree that Spano is a party to
the Original Agreement and has the rights and is bound by the obligations
provided for therein with respect to him.
2. The parties hereto agree that 3,000 of the 26,405 Shares, in lieu of
being delivered by Subsidiary to LLC, will instead be issued directly by the
Company to not more than six former employees of LLC, each of whom has become an
employee of the Company, which shares will be subject to such reasonable
restrictions as shall be determined by the board of directors of the Company and
will be registered with the Securities and Exchange Commission on Form S-8.
3. The parties hereto agree that 23,405 of the 26,405 Shares and any
additional shares that become issuable under the Original Agreement to LLC upon
the meeting of the conditions expressed therein will instead be issued directly
to Spano.
4. The parties hereto agree that paragraph 3 of the Original
Agreement is deleted and shall have no force or effect whatsoever.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on this 31st day of March, 1998.
UNIFAB INTERNATIONAL, INC.
<PAGE> 2
By: /s/ Peter J. Roman
---------------------------
Name: Peter J. Roman
Title: Vice President
PROFESSIONAL INDUSTRIAL
MAINTENANCE, LLC
By: /s/ Don E, Spano, Jr.
----------------------------
Don E. Spano, Jr.
Managing Member
/s/ Don E. Spano, Jr.
----------------------------
Don E. Spano, Jr.,
individually
