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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED MARCH 31, 1998
[ ] 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)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value per share
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K. ____
The aggregate market value of the voting stock held by nonaffiliates of the
registrant at June 23, 1998 was approximately $72.6 million.
The number of shares of the registrant's common stock, $0.01 par value per
share, outstanding at June 23, 1998 was 5,048,655
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement prepared for use in
connection with the registrant's 1998 annual meeting of shareholders to be held
August 28, 1998 have been incorporated by reference into Part III of this Form
10-K.
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UNIFAB INTERNATIONAL, INC.
ANNUAL REPORT ON FORM 10-K FOR
THE FISCAL YEAR ENDED MARCH 31, 1998
TABLE OF CONTENTS
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PAGE
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PART I
Items 1. and 2. Business and Properties............................................... 1
Item 3. Legal Proceedings..................................................... 11
Item 4. Submission of Matters to a Vote of Security Holders................... 11
Executive Officers of the Registrant.................................. 11
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder
Matters............................................................ 12
Item 6. Selected Financial Data............................................... 13
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................... 14
Item 7A. Quantitative and Qualitative Disclosure About Market Risk............. 18
Item 8. Financial Statements and Supplementary Data........................... 18
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure........................................... 18
PART III
Item 10. Directors and Executive Officers of the Registrant.................... 18
Item 11. Executive Compensation................................................ 18
Item 12. Security Ownership of Certain Beneficial Owners and Management........ 18
Item 13. Certain Relationships and Related Transactions........................ 19
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K...... 19
GLOSSARY OF CERTAIN TECHNICAL TERMS.............................................................. G-1
FINANCIAL STATEMENTS............................................................................. F-1
SIGNATURES....................................................................................... S-1
EXHIBIT INDEX.................................................................................... E-1
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PART I
ITEMS 1. AND 2. BUSINESS AND PROPERTIES
Certain technical terms are defined in the "Glossary of Certain Technical
Terms" appearing at the end of this Report.
GENERAL
UNIFAB International, Inc. (together with its subsidiaries "the Company")
is an industry leader in the custom fabrication of decks and modules of
drilling and production equipment weighing up to 3,500 tons for offshore oil
and gas platforms, and has special expertise in the fabrication of decks with
complex piping requirements. Decks and modules fabricated by the Company can be
installed on fixed and floating platforms regardless of water depth. The
Company also fabricates jackets for fixed platforms; pilings and other rolled
tubular steel sections; compressor and generator packages; platform living
quarters; subsea templates; bridges for connecting offshore platforms; wellhead
protectors; and modules for the onshore petrochemical and refining industries.
In addition, the Company refurbishes and retrofits existing jackets and decks
and performs offshore piping hook-up and platform maintenance services. Through
a wholly owned subsidiary, PIM, LLC, the Company provides industrial
maintenance services and repair, refurbishment and conversion services for oil
and gas drilling rigs. Structures fabricated by the Company are installed in
oil and gas producing waters around the world, primarily the U.S. Gulf of
Mexico (the "Gulf of Mexico") and offshore West Africa. The Company's ability
to provide high quality fabrication services and maintain control over costs
has enabled it to be profitable since its founding in 1980.
Demand for the Company's services is primarily a function of worldwide
offshore oil and gas activity. Over the past five years, improvements in
production techniques and seismic and drilling technology, together with
relatively stable oil and gas prices, have resulted in accelerated drilling
activity in the Gulf of Mexico and continued strong activity levels worldwide.
Although oil prices, and to a lesser extent, gas prices have declined
significantly since the last quarter of 1997, the number of active offshore
drilling rigs worldwide has remained strong. The Company's revenue increased
146% from $27.9 million in its fiscal year ended March 31, 1995 to $68.6
million in the fiscal year ended March 31, 1998. During the same period, the
Company's workforce and direct labor hours worked increased by approximately
182% and 176%, respectively.
Due to the time required to drill an exploratory offshore well, formulate a
development plan and design offshore platforms, the fabrication and
installation of such platforms usually lag exploratory drilling by one to three
years. As a result, high levels of drilling activity worldwide, particularly in
the Gulf of Mexico, have only recently impacted the demand for the Company's
custom fabrication services. The Company believes its strong presence in both
overseas markets and the Gulf of Mexico market, coupled with continued strong
oil and gas activity in these markets, has enabled it to selectively obtain
high margin fabrication work and benefit from increased pricing levels.
1992 EXPANSION TRANSACTION. The Company's predecessor, Universal Partners,
Inc. ("Universal Partners"), was organized in 1980 by its founder, Dailey J.
Berard. In 1992, in order to expand its capabilities at the Port of Iberia and
meet increasing demand for its services, Universal Partners entered into an
agreement with McDermott Incorporated, a subsidiary of McDermott International,
Inc. Universal Partners contributed as a going concern to the then newly formed
Universal Fabricators Incorporated ("Universal Fabricators") approximately 50
acres of leased land, its buildings and fabrication equipment, and $2.4 million
in cash. McDermott contributed an inactive fabrication yard directly across a
canal from the land leased by Universal Partners, which included approximately
85 acres of land, 200,000 square feet of covered fabrication space and various
equipment. This transaction (the "Expansion Transaction") substantially
enlarged the Company's yard space and increased covered fabrication area from
25,000 square feet to approximately 225,000 square feet. In exchange for those
assets, Universal Partners received 51% of the outstanding stock of Universal
Fabricators and McDermott received 49% of the outstanding stock of Universal
Fabricators.
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1997 PUBLIC OFFERING. The Company was formed in July 1997 to serve as the
parent corporation for Universal Fabricators. Prior to the completion of the
initial public offering of the Company (the "Initial Public Offering") in
September 1997, Universal Partners exchanged its shares of Universal
Fabricators common stock for 1,785,000 shares of Company Common Stock and
distributed those shares of Company Common Stock to its stockholders upon its
dissolution. McDermott also exchanged its shares of Universal Fabricators
common stock for 1,715,000 shares of Company Common Stock, which it sold in the
Initial Public Offering at the initial public offering price.
1998 ACQUISITION. The Company expanded its operations through the
acquisition of the assets and business of Professional Industrial Maintenance,
LLC effective January 1, 1998, which provides industrial plant maintenance and
construction services to the southwest Louisiana area. As part of this
acquisition, the Company also acquired lease rights to a 60-acre fabrication
yard on an industrial canal, 12 miles southwest of Lake Charles, Louisiana.
This facility has 40-foot water depth and access to the Gulf of Mexico through
the Calcasieu Ship Channel, which is maintained by the U.S. Army Corp of
Engineers.
ALLEN TANK ACQUISITION. On February 5, 1998, the Company announced that it
had signed a letter of intent with the shareholders of Allen Tank, Inc. ("Allen
Tank"). Allen Tank designs and manufactures oil and gas processing systems at
its facility located in New Iberia, Louisiana for sale world wide. Completion
of the transaction is subject to various conditions, including the satisfactory
completion of due diligence by the Company. No assurance is given that the
acquisition will be successfully completed.
DESCRIPTION OF OPERATIONS
The Company's primary activity is the fabrication of decks and modules for
offshore oil and gas drilling and production platforms. The Company has
extensive experience in the fabrication of decks and modules with complex
piping requirements and believes that its reputation for efficient, timely and
high quality production of these structures gives it a competitive advantage in
obtaining projects of this type. Using its recently completed slip, bulkhead
and load out facilities, the Company can build and load out decks and modules
weighing up to 6,000 tons. The Company also fabricates jackets for fixed
production platforms for use in up to 300 feet of water. Other structures
fabricated by the Company include pilings and other rolled tubular steel
sections; modules of drilling and production equipment; compressor and
generator packages; platform living quarters; subsea templates; bridges for
connecting offshore platforms; wellhead protectors; other structures used in
production and development activities; and modules for the onshore
petrochemical and refining industries. The Company can construct and has in the
past constructed platform drilling rigs, posted drilling rigs and barges.
FABRICATION OF DECKS AND OTHER OFFSHORE PLATFORM COMPONENTS. The Company
fabricates decks and modules for fixed and floating offshore platforms as well
as jackets for fixed offshore platforms. A fixed platform is the traditional
type of platform used for the offshore drilling and production of oil and gas.
Most fixed platforms currently in use are of the traditional jacket-type
design. Recently there has been an increase in the use of floating platforms as
a result of increased drilling and production activities in deeper waters.
Floating platforms are of three basic types: tension-leg platforms, spar
platforms and floating production facilities. See "Glossary of Certain
Technical Terms." Fixed platforms are generally better suited for shallower
water depths, whereas floating platforms, although they can be used in any
water depth, are primarily used in water depths greater than 1,000 feet.
Because they are mobile (and can therefore be reused), floating platforms are
sometimes used in water depths that could accommodate fixed platforms,
particularly where the petroleum reservoir has a relatively short production
life.
The Company also fabricates subsea templates which often form a part of a
subsea production system. Subsea production systems, which are systems that
contain primary well control equipment and rest directly on the ocean floor,
are becoming more prevalent in very deep water, in areas subject to severe
weather conditions and in smaller fields with relatively short production lives
that are located near existing pipelines and infrastructures. These systems are
generally connected to existing surface facilities, which augment subsea
hydrocarbon processing and transportation operations.
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The most common type of fixed platform consists of a deck structure located
above the level of the storm waves and supported by a jacket. A jacket is a
tubular steel, braced structure extending from the mudline on the seabed to a
point above the water surface which is in turn supported on tubular steel
pilings driven deep into the seabed. The deck structure is designed to
accommodate multiple functions, including drilling, production, separating,
gathering, piping, compression, well support and crew quartering. Most fixed
platforms built today can accommodate both drilling and production operations.
These combination platforms are generally larger and more costly than
single-purpose structures. However, because directional drilling techniques
permit a number of wells to be drilled from a single platform and because
drilling and production can take place simultaneously, combination platforms
are often more cost effective.
Decks are built as either a single structure or in modular units. The
composition and quantity of petroleum in the well stream generally determine
the design of the production deck on a processing platform. Typical deck
production equipment includes crude oil pumps, gas and oil separators, gas
compressors and electricity generators. Much of this equipment involves the use
of complex piping and electrical components. The equipment, piping and controls
associated with major process subsystems are often joined together in modules
which can then be installed on the deck as a unit either on land or offshore.
Platforms can be joined by bridges to form complexes of platforms to service
very large projects and to improve safety by dividing functions among
specialized platforms. Floating platforms, like fixed platforms, support decks
or modules with equipment to perform oil and gas processing and may support
drilling operations as well.
Most of the structural steel used in the Company's operations arrives at
the Company's fabrication yards as standard steel shapes and steel plate. The
standard shapes and plate are cut to appropriate sizes or shapes and, in some
cases, rolled into tubular sections by the Company's rolling mill. These
sections are welded together into structures that become part of decks,
modules, jackets and other platform structures.
While the structural portion of a deck or module is being assembled,
process piping is fabricated in the Company's pipe shop. Piping is made into
spools by fitting and welding together pipe and pipe fittings. To the extent
possible, pipe supports and pipe spools are installed onto the various
structural subassemblies of a deck or module before final assembly. The
completed structural subassemblies are then lifted, positioned and welded
together. Finally, the oil and gas process equipment along with the remaining
pipe supports and pipe spools, valves and electrical and instrumentation
components are installed and connected. The Company has installed both carbon
and alloy steel piping in accordance with accepted industry codes and has also
installed process piping for sour gas service, which requires adherence to more
stringent industry code requirements.
The Company typically performs a wide range of testing and commissioning
activities. Virtually every contract requires as a minimum nondestructive
testing of structural and piping welds, piping hydrostatic pressure testing,
and loop testing of instrumentation and electrical systems. Commissioning of
certain process subsystems is also commonly performed by the Company. A series
of protective coatings is applied to the critical areas of the deck or module
to resist the extremely corrosive conditions in an offshore environment. The
Company generally subcontracts certain parts of the work to qualified
subcontractors, particularly electrical, instrumentation and painting.
The Company generally purchases equipment and pressure vessels to customer
specifications from qualified vendors. However, some or all of the equipment
and pressure vessels may be supplied by the customer. The Company typically
procures most of the piping, pipe fittings, valves, instrumentation and
electrical materials in accordance with the customer's specifications as part
of its contract.
Jackets are generally built in sections so that, to the extent possible,
much of their fabrication is done on the ground. As each section of legs and
bracing is completed, it is lifted by a crawler crane and then joined to
another uprighted section. When a deck, module or jacket is complete and ready
for load out, it is moved along a skidway and loaded onto a cargo barge. Using
ocean-going tugs, the barge and its cargo are transported to the offshore site
for installation by a marine construction contractor.
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PLATFORM REFURBISHMENT. The Company is also active in the market for the
refurbishment of existing jackets and decks. Platform operators occasionally
remove platforms previously installed in the Gulf of Mexico and return the
platforms to a fabricator for refurbishment, which usually consists of general
repairs and maintenance work and, in some cases, modification. There are a
substantial number of structures stored by customers on Company premises,
pending instructions from the customer to commence refurbishment. Because
refurbishment is generally not time-critical, the Company is able to use this
work as a means of keeping employees productively occupied between other more
time-critical projects. Refurbishment work is most often conducted on a time
and materials basis.
DRILLING RIG REFURBISHMENT. The Company performs maintenance, refurbishment
and upgrade services on deep water drilling rigs and jack ups at its deep water
facility near Lake Charles, Louisiana. The Company intends to further develop
the capabilities of this facility to support refurbishment upgrades of jack up
and semisubmersible drilling rigs for deep water use and, as required by
customer demand, to support new construction of drilling rigs, platforms and
platform components.
PLANT MAINTENANCE. The Company has a number of employees providing
maintenance, construction and fabrication services to industrial plants in the
southwest Louisiana area. These services are performed under fixed price, time
and material, and maintenance agreement contracts, generally pursuant to
competitive bids. The number of employees providing these services varies from
time to time with the size and duration of the projects.
OFFSHORE SERVICES. The Company also has a number of employees (ranging from
approximately 25 to 50) whom it contracts to send offshore in crews to perform
piping interconnect and general maintenance and repair services on offshore
platforms. Oil and gas companies, which have traditionally performed this type
of work using their own employees, have recently been outsourcing this work and
the Company believes that this trend is likely to continue.
FACILITIES AND EQUIPMENT
FACILITIES. The Company's corporate headquarters and main fabrication yard
are located at the Port of Iberia in New Iberia, Louisiana, approximately 20
miles southeast of Lafayette, Louisiana and 30 miles north of the Gulf of
Mexico. This facility includes approximately 150 acres developed for
fabrication, one 12,000 square-foot office building that houses administrative
staff, approximately 225,000 square feet of covered fabrication area, and
approximately 25,000 square feet of warehouse storage area. The yard also has
approximately 8,000 linear feet of water frontage, of which 1,600 feet is steel
bulkhead which permits outloading of heavy structures.
The structures that the Company fabricates are transported from the New
Iberia facilities by barge to the Gulf of Mexico by offshore construction
companies. Due to the water depths of these waterways (9 to 11 feet), these
barges are currently unable to transport structures weighing over 3,500 tons.
One main route to the Gulf of Mexico, the Freshwater Bayou Channel, provides 12
feet of water depth to the Gulf of Mexico, but the dimensions of locks on this
channel prevent the transport of structures more than 80 feet in width. There
is a by-pass channel around these locks that, if usable, would permit
continuous passage to the Gulf of Mexico with at least 12 feet of water depth
at all points and without any material width restrictions. This water depth
would generally permit the transportation of structures weighing up to 6,000
tons. Due to the silt that has built up on both sides of the by-pass, the
by-pass is currently impassable without extensive dredging. On the basis of
amounts spent in the past by contractors other than the Company in order to
facilitate the transportation of certain structures, it is estimated that the
cost of dredging the silt from the by-pass and opening the by-pass channel
would be $400,000 to $500,000. Recently, the Abbeville Port Commission has
proposed that the State of Louisiana fund the reopening and dredging of the
by-pass, a project that would open the by-pass for at least one year and
possibly longer, depending upon the extent of future traffic through the
by-pass. The Company believes that there is widespread support for this
proposal and that the by-pass may be reopened within the next two years. There
can be no assurance however as to whether or when such project will be
completed or whether the increased channel depth will be maintained. If this
project is not completed by the State, the Company
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would remain unable to deliver structures weighing over 3,500 tons unless it
determined to incur the additional costs described above.
The Company's facility in Lake Charles, Louisiana is located on an
industrial canal at the intersection of the Intracoastal Canal and the
Calcasieu Ship Channel, 12 miles south of Lake Charles and 20 miles from the
Gulf of Mexico. The industrial canal is dredged to a 40-foot water depth with a
bottom width of 400 feet. The facility is currently being leased from the Lake
Charles Harbor & Terminal District under a 12-year lease, including option
periods, and with options to lease up to 69 acres. The Company currently plans
to develop the facility with slip and bulkheading and covered fabrication and
warehousing facilities to support the drilling rig refurbishment operations and
develop new construction capabilities.
EQUIPMENT. The Company's main yard houses its two-inch plate roll, a
Wheelabrator grit blast system, a hydraulic press brake, and various other
equipment needed to build offshore structures and fabricate steel components.
The Company also has an automatic plate cutting machine used for cutting steel
in complex geometric sections and various other equipment used in the Company's
fabrication business. The Company also currently uses nine crawler cranes,
which range in tonnage capacity from 50 to 230 tons. Of these cranes, five are
owned by the Company and four are leased. The Company performs routine
maintenance on all of its equipment.
The Company has completed foundation and other preparatory construction for
its four-inch plate rolling mill, installation of which is expected to be
complete in July 1998. The Company's current rolling mill satisfies
approximately 80% of the Company's current needs, with the Company using
outside suppliers or other fabricators for the rest of its rolled goods. Once
completed, the new four-inch rolling mill should enable the Company to do all
of its plate rolling at its fabrication facility. This should enable the
Company to coordinate all aspects of platform construction, which can reduce
the risk of cost overruns, delays in project completion and labor costs. In
addition, the four-inch rolling mill may also be used to roll steel for other
fabricators on a subcontracting basis. The Company's grit blast system can
blast steel at a rate approximately 10 times faster than conventional
sandblasting. This greatly reduces labor costs and also decreases the Company's
use of conventional sandblasting, which is considered to be a more hazardous
and slower method of preparing steel for painting.
MATERIALS
The principal materials used by the Company in its fabrication business --
standard steel shapes, steel plate, piping, pipe fittings, valves, welding
gases, fuel oil, gasoline and paint -- are currently available in adequate
supply from many sources. The Company does not depend upon any single supplier
or source.
SAFETY AND QUALITY ASSURANCE
Management is concerned with the safety and health of the Company's
employees and maintains a safety assurance program to reduce the possibility of
costly accidents. The Company's safety department establishes guidelines to
ensure compliance with all applicable state and federal safety regulations. The
Company provides training and safety education through orientations for new
employees and subcontractors, daily crew safety meetings and first aid and CPR
training. The Company also employs several safety engineers. The Company has a
comprehensive drug testing program and conducts periodic employee health
screenings. A safety committee, whose members consist of management
representatives and peer-elected field representatives, meets monthly to
discuss safety concerns and suggestions that could prevent future accidents.
The Company has at times contracted with a third-party safety consultant to
provide training and suggestions and a licensed emergency medical technician in
its ongoing commitment to a safe and healthy work environment. The Company
believes that its safety program and commitment to quality are vital to
attracting and retaining customers and employees.
The Company fabricates to the standards of the American Petroleum
Institute, the American Welding Society, the American Society of Mechanical
Engineers and specific customer specifications. The Company uses welding and
fabrication procedures in accordance with the latest technology and industry
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requirements. Training programs are conducted to upgrade skilled personnel and
maintain high quality standards. In addition, the Company maintains on-site
facilities for the x-ray of all pipe welds, which process is performed by an
independent contractor. Management believes that these programs generally
enhance the quality of its products and reduce their repair rate.
CUSTOMERS AND CONTRACTING
The Company's customers are primarily major and independent oil and gas
companies and offshore marine construction contractors. The Company's
structures are used primarily offshore West Africa and in the Gulf of Mexico.
A large portion of the Company's revenue has historically been generated by
a few customers, although not necessarily the same customers from year-to-year.
At March 31, 1998, 65% of the Company's backlog was attributable to two
projects. The following table provides information with respect to customers
who accounted for more than 10% of the Company's revenue for each of the three
fiscal years ending March 31, 1998:
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YEAR ENDED MARCH 31, CUSTOMER % OF REVENUE
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1998 Shell Offshore, Inc., Bouygues Offshore 44
1997 Bouygues Offshore, McDermott-ETPM West, Inc.* 61
1996 Mobil Producing Nigeria Unlimited, Shell
Offshore, Inc. 64
</TABLE>
* McDermott-ETPM West, Inc. was a joint venture between an affiliate of
McDermott and a third party.
Although the Company's direct customers on many projects are installation
contractors, each project is ultimately fabricated for use by an oil and gas
company. The Company, from time to time, contracts with multiple installation
contractors who may be supplying structures to the same oil and gas company
and, in some instances, contracts directly with the oil and gas companies.
Thus, concentration among the Company's customers may be greater when the
customer is viewed as the oil and gas company rather than the installation
contractor.
Because the level of fabrication that the Company may provide, directly or
indirectly, to any particular oil and gas company depends, among other things,
on the size of that company's capital expenditure budget devoted to platform
construction in a particular year and the Company's ability to meet the
customer's delivery schedule, companies that account for a significant portion
of the Company's revenue in one fiscal year may represent an immaterial portion
of revenue in subsequent years. The level of fabrication that the Company may
provide as a subcontractor to an offshore construction company depends, among
other things, on the ability of that company to successfully obtain prime
contracts with oil and gas companies and the ability of the Company to meet the
delivery schedule of the prime contractor. Thus, the prime contractors who
account for a significant portion of revenue in one fiscal year may represent
an immaterial portion of revenue in subsequent years. However, the loss of any
significant customer (whether an oil and gas company with which the Company
directly contracts or a prime contractor for which the Company has provided
services on a subcontract basis) for any reason, including a sustained decline
in an oil and gas company's capital expenditure budget or the prime
contractor's inability to successfully obtain contracts, or other competitive
factors, could result in a substantial loss of revenue and have a material
adverse effect on the Company's operating performance.
Most of the Company's projects are awarded on a fixed-price basis, and
while customers may consider other factors, including the availability,
capability, reputation and safety record of a contractor, price and the ability
to meet a customer's delivery schedule are the principal factors on which the
Company is
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awarded contracts. The Company's contracts generally vary in length from one
month to 18 months depending on the size and complexity of the project.
Under fixed-price contracts, the Company receives the price fixed in the
contract, subject to adjustment only for change orders placed by the customer.
As a result, with respect to fixed-price contracts, the Company retains all
cost savings but is also responsible for all cost overruns. Under time and
materials arrangements, the Company receives a specified hourly rate for direct
labor hours worked (which exceeds its direct labor costs) and a specified
percentage mark-up over its cost for materials. As a result, under time and
materials contracts, the Company is protected against cost overruns but does
not benefit directly from cost savings. As the Company is typically able to
obtain prices for materials in excess of its costs, the cost and productivity
of the Company's labor force are the key factors affecting the Company's
operating profits. Consequently, it is essential that the Company control its
costs and maximize the productivity of its workforce. Each project is reviewed
on at least a weekly basis by the Company's top management to insure that
difficulties and cost overruns can be identified early in the project and
corrected. Although no assurance can be given that the Company will realize
profits on its current or future contracts, the Company believes that the
active involvement of its top management reduces the likelihood of significant
cost overruns.
COMPETITION
The offshore platform fabrication industry is highly competitive and
influenced by events largely outside of the control of offshore platform
fabrication companies. Since 1992, there has been a consolidation in the
industry as several marine construction companies have combined with other
companies or ceased operations altogether. As a result of this consolidation,
there are approximately eight remaining domestic competitors for custom
fabrication projects, several of which are substantially larger and have
greater resources and capabilities than the Company. These companies compete
intensely for available projects, which are generally awarded on a competitive
bid basis with customers usually requesting bids on projects one to three
months prior to commencement. For international projects, the Company competes
with many of the same domestic fabricators, as well as with several foreign
fabricators, some of which are substantially larger and have greater financial
resources and capabilities than the Company.
The Company's marketing staff contacts offshore construction contractors
and oil and gas companies to obtain information as to upcoming projects so that
the Company will be well positioned to bid for the projects. Although price and
the contractor's ability to meet a customer's delivery schedule are the
principal factors in determining which qualified fabricator is awarded a
contract for a project, customers also consider, among other things, the
availability of technically capable personnel and facility space, a
fabricator's efficiency, condition of equipment, reputation, safety record and
customer relations. The Company believes that the limited availability of
experienced supervisory and management personnel, as well as skilled laborers,
presents the greatest barrier to entry to new companies trying to enter the
fabrication industry.
The Company believes that its competitive pricing, expertise in fabricating
offshore marine structures and its long-term relationships with international
customers will enable it to continue to compete effectively for projects
destined for international waters. The Company recognizes, however, that
foreign governments often use subsidies and incentives to create jobs where oil
and gas production is being developed. The additional transportation costs that
will be incurred when exporting structures from the U.S. to foreign locations
may hinder the Company's ability to successfully bid for projects against
foreign competitors. Because of subsidies, import duties and fees, taxes on
foreign operators and lower wage rates in foreign countries along with
fluctuations in the value of the U.S. dollar and other factors, the Company may
find it increasingly difficult to remain competitive with foreign contractors
for projects designed for use in international waters.
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BACKLOG
As of March 31, 1998, the Company's backlog was approximately $26.4
million, all of which management expects to be performed by April 1999. Of the
Company's backlog at March 31, 1998, 65% was attributable to two projects.
The Company's backlog is based on management's estimate of the remaining
labor, material and subcontracting costs to be incurred with respect to those
projects as to which a customer has authorized the Company to begin work or
purchase materials pursuant to written contracts, letters of intent or other
forms of authorization. Often, however, original contract prices are based on
incomplete engineering and design specifications. As engineering and design
plans are finalized or changes to existing plans are made, the total contract
price to complete such projects is likely to change. In addition, most projects
currently included in the Company's backlog are subject to termination at the
option of the customer, although the customer in that case is generally
required to pay the Company for work performed and materials purchased through
the date of termination and, in some instances, pay the Company termination
fees.
GOVERNMENT AND ENVIRONMENTAL REGULATION
Many aspects of the Company's operations and properties are materially
affected by federal, state and local regulation, as well as certain
international conventions and private industry organizations. The exploration
and development of oil and gas properties located on the outer continental
shelf of the United States is regulated primarily by the MMS. The MMS has
promulgated federal regulations under the Outer Continental Shelf Lands Act
requiring the construction of offshore structures located on the outer
continental shelf to meet stringent engineering and construction
specifications. The Company is not directly affected by regulations applicable
to offshore construction operations as are its customers which install and
operate the structures fabricated by the Company, but the Company is required
to construct these structures in accordance with customer design which must
comply with applicable regulations; to the extent such regulations
detrimentally affect customer activities, the operations of the Company may be
adversely affected. Violations of the laws and related regulations directly
affecting the Company's operations can result in substantial civil and criminal
penalties as well as injunctions curtailing operations. The Company believes
that its operations are in compliance with these and all other laws and related
regulations affecting the fabrication of structures for delivery to the outer
continental shelf of the United States and the laws and related regulations
governing other areas of the world. In addition, the Company depends on the
demand for its services from the oil and gas industry and, therefore, is
affected by changing taxes, price controls and other laws and regulations
relating to the oil and gas industry. In addition, offshore construction and
drilling in certain areas have been opposed by environmental groups and, in
certain areas, have been restricted or prohibited. To the extent laws or
regulations are enacted or other governmental actions are taken that prohibit
or restrict offshore construction and drilling or impose environmental
protection requirements that result in increased costs to the oil and gas
industry in general and the offshore construction industry in particular, the
business and prospects of the Company could be adversely affected, although
such restrictions in the areas where the Company's products are used have not
been substantial. The Company cannot determine to what extent future operations
and earnings of the Company may be affected by new legislation, new regulations
or changes in existing laws or regulations.
The Company's operations and properties are subject to a wide variety of
increasingly complex and stringent federal, state and local environmental laws
and regulations, including those governing discharges into the air and water,
the handling and disposal of solid and hazardous wastes, the remediation of
soil and groundwater contaminated by hazardous substances, and the health and
safety of employees. These laws may provide for "strict liability" for damages
to natural resources and threats to public health and safety, rendering a party
liable for environmental damage without regard to negligence or fault on the
part of such party. Sanctions for noncompliance may include revocation of
permits, corrective action orders, cease and desist orders, administrative or
civil penalties and criminal prosecution. Certain environmental laws provide
for strict joint and several liability, without regard to fault or negligence,
for remediation of spills and other releases of hazardous substances. In
addition, the Company may be subject to claims alleging personal injury,
property damage or natural resource damage as a result of the handling of
hazardous
8
<PAGE> 12
substances. Such laws and regulations may also expose the Company to liability
for the conduct of or conditions caused by others, or for acts of the Company
that were in compliance with all applicable laws at the time such acts were
performed.
The Comprehensive Environmental Response, Compensation, and Liability Act
of 1980, as amended, and similar laws provide for responses to and liability
for releases of hazardous substances into the environment. Additionally, the
Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act,
the Safe Drinking Water Act, the Emergency Planning and Community Right to Know
Act, each as amended, and similar state or local counterparts to these federal
laws, regulate air emissions, water discharges, hazardous substances and
wastes, and require public disclosure related to the use of various hazardous
substances. Compliance with such environmental laws and regulations requires
the acquisition of permits and other authorizations for certain activities and
compliance with various standards and procedural requirements.
The Company is currently in the process of applying for certain permits
from the Louisiana Department of Environmental Quality for its facilities and
upgrading its general environmental compliance. These permits are necessary for
the operation of certain facilities in accordance with environmental
requirements. While there can be no assurance that the permits will be issued,
management believes that the Company will be able to obtain the required
permits and bring its facilities into substantial compliance with current
regulatory standards without material effect to its operations. The Company has
budgeted $150,000 for the costs of completing the necessary environmental
permitting and compliance matters.
In addition to the Company's operations, in the past other industrial
operations have been conducted by other entities on the properties now utilized
by the Company. Although the Company does not believe that there are any
material remediation requirements on its properties, it is possible that these
past operations may have caused unknown environmental conditions to exist that
might in the future require remediation.
The Company's operations are also governed by laws and regulations relating
to workplace safety and worker health, primarily the Occupational Safety and
Health Act and regulations promulgated thereunder. In addition, various other
governmental and quasi-governmental agencies require the Company to obtain
certain miscellaneous permits, licenses and certificates with respect to its
operations. The kind of permits, licenses and certificates required in the
Company's operations depend upon a number of factors. The Company believes that
it has all such miscellaneous permits, licenses and certificates that are
material to the conduct of its existing business.
The Company's efforts to comply with the laws and regulations discussed in
this section have entailed certain additional expenses and changes in operating
procedures. These expenses have not been substantial over the past ten years,
and the Company believes that, except for the amount budgeted for permitting
matters as discussed above, compliance with these laws and regulations will not
have a material adverse effect on the Company's business or financial condition
for the foreseeable future. However, future events, such as changes in existing
laws and regulations or their interpretation, more vigorous enforcement
policies of regulatory agencies, stricter or different interpretations of
existing laws and regulations or adoption of new laws and regulations, may
require additional expenditures by the Company, which expenditures may be
material.
The Company also has employees engaged in offshore operations which are
covered by provisions of the Jones Act, the Death on the High Seas Act and
general maritime law, which laws operate to make the liability limits
established under state workers' compensation laws (which are applicable to the
Company's other employees) inapplicable to these employees and, instead, permit
them or their representatives to pursue actions against the Company for damages
or job related injuries, with generally no limitations on the Company's
potential liability.
In addition to government regulation, various private industry
organizations, such as the American Petroleum Institute, the American Society
of Mechanical Engineers and the American Welding Society, promulgate technical
standards that must be adhered to in the fabrication process.
9
<PAGE> 13
INSURANCE
The Company maintains insurance against property damage caused by fire,
flood, explosion and similar catastrophic events that may result in physical
damage or destruction to the Company's facilities. The Company also maintains
general liability insurance, workers' compensation liability and maritime
employer's liability insurance. All policies are subject to deductibles and
other coverage limitations. Although management believes that the Company's
insurance is adequate, there can be no assurance that the Company will be able
to maintain adequate insurance at rates which management considers commercially
reasonable, nor can there be any assurance such coverage will be adequate to
cover all claims that may arise.
EMPLOYEES
During the fiscal year ended March 31, 1998, the number of Company
employees increased by 164 full-time production employees to 578 at year end,
which includes 139 at the PIM, LLC facility. The Company also engages the
services of subcontractors. Management estimates that these subcontractors
provide from time to time approximately 50 to 125 workers to perform certain
tasks in connection with the Company's projects. None of the Company's
employees is employed pursuant to a collective bargaining agreement, and the
Company believes that its relationship with its employees is good.
The Company's ability to remain productive and profitable depends
substantially on its ability to attract and retain skilled construction
workers, primarily welders, fitters and equipment operators. In addition, the
Company's ability to expand its operations depends primarily on its ability to
increase its workforce. The demand for such workers is high, and the supply is
extremely limited. While the Company believes its relationship with its skilled
labor force is good, a significant increase in the wages paid by competing
employers could result in a reduction in the Company's skilled labor force,
increases in the wage rates paid by the Company, or both. If either of these
occurs, in the near-term, the profits expected by the Company from work in
progress could be reduced or eliminated and, in the long-term, to the extent
such wage increases could not be passed on to the Company's customers, the
production capacity of the Company could be diminished and the growth potential
of the Company could be impaired.
The Company has taken an active role in the movement to create a more
business-oriented educational system in Louisiana. For example, Dailey J.
Berard, the Company's President, Chief Executive Officer and Chairman of the
Board, has been appointed by Louisiana Governor Mike Foster to the Louisiana
Workforce Commission, a group consisting of 25 members, 11 of whom are
representatives of business and industry. This Commission, which was
established by recent Louisiana legislation, will oversee the spending of $400
million in job training funds appropriated by the legislature. The Commission
will coordinate federal worker training programs, exercise authority over
policy and funding decisions for worker training programs, oversee an
occupational information system, and create regional employer-oriented
workforce boards. Although there can be no assurance that such initiatives will
enable the Company to meet its hiring needs, management believes that, in the
long-term, initiatives like these are the best methods for increasing the pool
of skilled workers from which it can draw employees.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
Certain statements included in this report and in oral statements made from
time to time by management of the Company that are not statements of historical
fact are forward-looking statements. In this report, forward-looking statements
are included primarily in the sections entitled "Business and Properties,"
"Legal Proceedings," and "Management's Discussion and Analysis of Financial
Condition and Results of Operation." The words "expect," "believe,"
"anticipate," "project," "plan," "estimate," "predict," and similar expressions
often identify forward-looking statements. All such statements are subject to
factors that could cause actual results and outcomes to differ materially from
the results and outcomes predicted in the statements and investors are
cautioned not to place undue reliance upon them.
10
<PAGE> 14
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to various routine legal proceedings primarily
involving commercial claims, workers' compensation claims, and claims for
personal injury under the General Maritime Laws of the United States and the
Jones Act. While the outcome of these lawsuits, legal proceedings and claims
cannot be predicted with certainty, management believes that the outcome of all
such proceedings, even if determined adversely, would not have a material
adverse effect on the Company's business or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
Listed below are the names, ages and offices of each of the executive
officers of the Company as of June 1, 1998:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Dailey J. Berard..... 68 President, Chief Executive Officer and
Chairman of the Board
David J. Berard...... 51 Vice President-Operations
Peter J. Roman....... 47 Vice President and Chief Financial
Officer
</TABLE>
Dailey J. Berard has served as President, Chief Executive Officer and
Chairman of the Board of the Company since its founding in 1980. He was trained
as a civil engineer and has over 45 years of experience in the oil service
industry, working with several different companies, including Houston-New
Orleans, Inc., Houston Systems Manufacturing Company and Norman Offshore
Pipelines, Inc. Mr. Berard and David J. Berard are brothers.
David J. Berard has been employed by the Company since 1981. Prior to his
appointment to Vice President - Operations in May 1998, he served as the
Company's Vice President - Domestic Sales. Mr. Berard held various positions
with the Company since he joined the Company in 1981, including Corporate
Secretary from 1992 to 1995. From 1978 to 1981, he served as the district
manager for the fabrication yard of Waukesha Pearce Industries, and from 1973
to 1978 served as the General Superintendent of Fabrication for Houston Systems
Manufacturing Company. Mr. Berard and Dailey J. Berard are brothers.
Peter J. Roman was appointed Vice President and Chief Financial Officer on
June 30, 1997. Since June 1984, Mr. Roman has been a certified public
accountant with the international accounting firm of Ernst & Young LLP, most
recently as a senior manager. Mr. Roman graduated from Louisiana State
University in 1984 with a B.S. in Accounting and is a member of the Louisiana
State Society of Certified Public Accountants and the American Institute of
Certified Public Accountants.
11
<PAGE> 15
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Company's Common Stock, $.01 par value per share (the "Common Stock"),
is traded on the Nasdaq National Market under the symbol "UFAB." At June 1,
1998, the Company had approximately 3,600 holders of its Common Stock of record
and individual participants in security position listings.
The following table sets forth the high and low bid prices per share of the
Common Stock, as reported by the Nasdaq National Market, for each fiscal
quarter since trading in the Common Stock began of September 19, 1998.
<TABLE>
<CAPTION>
Fiscal Year 1998 HIGH LOW
---------------- ---- ---
<S> <C> <C>
Second Quarter (commencing September 19, 1997) $41.00 $28.88
Third Quarter $43.88 $15.88
Fourth Quarter $20.88 $13.38
</TABLE>
The Company intends to retain earnings, if any, to meet its working capital
requirements and to finance the future operations and growth of its business
and, therefore, does not plan to pay any cash dividends to holders of its
Common Stock in the foreseeable future.
12
<PAGE> 16
ITEM 6. SELECTED FINANCIAL DATA
The selected financial and other data set forth below should be read in
conjunction with the consolidated financial statements of the Company and the
notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------------------------------------------------------------------
1994 1995 1996 1997 1998
------------- ------------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Revenue ................................... $ 29,926 $ 27,883 $ 51,807 $ 66,724 $ 68,564
Cost of revenue ........................... 27,211 23,174 40,362 58,589 57,789
------------- ------------- ------------- ------------- -------------
Gross profit .............................. 2,715 4,709 11,445 8,135 10,775
General and administrative expense ........ 1,228 1,326 1,419 1,637 2,967
------------- ------------- ------------- ------------- -------------
Operating income .......................... 1,487 3,383 10,026 6,498 7,808
Other income (expense), net ............... 21 38 315 82 467
------------- ------------- ------------- ------------- -------------
Income before income taxes ................ 1,508 3,421 10,341 6,580 8,275
Income tax expense ........................ 555 1,286 3,888 2,555 2,896
------------- ------------- ------------- ------------- -------------
Net income ................................ $ 953 $ 2,135 $ 6,453 $ 4,025 $ 5,379
============= ============= ============= ============= =============
Basic and diluted earnings per share ...... $ 0.27 $ 0.61 $ 1.84 $ 1.15 $ 1.25
============= ============= ============= ============= =============
Diluted earnings per share weighted average
shares (1) .............................. 3,500 3,500 3,500 3,500 4,313
Cash dividends declared per common share(2) -- $ 0.25 $ 0.55 $ 1.66 $ 1.03
Other Financial Data:
Depreciation and amortization ............. $ 381 $ 424 $ 390 $ 471 $ 735
Capital expenditures ...................... 110 179 402 821 5,008
Net cash provided by(used in)operating
activities .............................. (480) 3,392 4,285 2,328 5,310
Net cash provided by (used in)investing
activities .............................. (110) (170) (394) (803) (9,792)
Net cash provided by (used in)financing
activities .............................. $ 531 $ (1,389) $ (1,921) $ (5,807) $ 12,201
Operating Data:
Direct labor hours worked ................. N/A (3) 436,000 656,000 902,000 1,173,000
Number of employees (at end of period) .... 215 205 319 414 578
Backlog (at end of period) ................ $ 8,917 $ 31,994 $ 42,311 $ 30,221 $ 26,377
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31,
-----------------------------------------------
1994 1995 1996 1997 1998
------ ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital....................... $4,187 $ 5,877 $10,333 $ 8,192 $16,403
Property, plant and equipment, net.... 5,243 4,986 4,999 5,341 10,802
Total assets.......................... 14,318 16,173 23,714 26,154 44,410
Debt.................................. 531 -- -- -- --
Shareholders' equity.................. 8,175 9,452 13,984 12,201 33,022
</TABLE>
- ----------
(1) All amounts have been presented under FASB Statement No. 128, Earnings Per
Share, which the Company was required to adopt in December 1997.
(2) Under the provisions of a shareholders' agreement, unless otherwise
approved by the board of directors, the Company was to distribute to the
shareholders 90% of its net income for the prior fiscal year. This
agreement was terminated upon completion of the Initial Public Offering.
The Company intends to retain earnings, if any, to meet its working
capital requirements and to finance the future operation and growth of its
business and, therefore, does not plan to pay cash dividends to holders of
its common stock in the foreseeable future.
(3) Information is not available.
13
<PAGE> 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company's results of operations depend primarily on (i) the level of
oil and gas exploration and development activity of oil and gas companies in
the Gulf of Mexico and offshore West Africa; (ii) the Company's ability to win
contracts through competitive bidding; and (iii) the Company's ability to
manage those contracts to successful completion. The level of exploration and
development activity is related to several factors, including trends of oil and
gas prices, exploration and production companies' expectations of future oil
and gas prices and changes in technology which reduce costs and improve
expected returns on investment. Over the past five years, favorable trends in
these factors have led to increased offshore exploration and development
activity. In addition to more stable oil and gas prices, improvements in
three-dimensional seismic, directional drilling, production techniques and
other advances in technology have increased drilling success rates and reduced
costs. The number of active offshore drilling rigs worldwide is at its highest
point since 1986. In addition, the number of leases of exploratory tracts in
the Gulf of Mexico sold to oil and gas companies by the MMS also has been at
record levels.
Lease sales and awards of offshore concessions generally serve as
precursors to drilling and exploration activity and, in turn, increased levels
of offshore drilling and exploration activity generally serve as precursors to
increased demand for platform construction. Due to the time required to drill
an exploratory offshore well, formulate a comprehensive development plan and
design offshore platforms, the fabrication and installation of such platforms
usually lag exploratory drilling by one to three years. As a result, the high
levels of drilling activity worldwide, particularly in the Gulf of Mexico, have
only recently impacted the demand for the Company's custom fabrication
services, with revenue increasing annually. There can be no assurance, however,
that drilling activity will continue at such levels or that oil and gas
companies will actively explore and develop the fields recently leased. Whether
these trends continue and the resulting increase in demand for the Company's
services actually occurs is dependent in large part on the factors listed
above.
During the fiscal years ended March 31, 1996, 1997 and 1998, 58%, 64% and
23%, respectively, of the Company's revenue was derived from structures
fabricated for installation in international areas, with the remainder designed
for installation in the Gulf of Mexico. The Company believes that its strong
presence in both overseas markets and the Gulf of Mexico market, coupled with
continued strong oil and gas activity in these markets, has enabled it to
selectively obtain high-margin fabrication work and to benefit from increased
pricing levels. The Company further believes that the increased activity level
in the Gulf of Mexico will lead to an increasing percentage of the Company's
revenue coming from projects intended for installation in the Gulf of Mexico.
The Company has historically attempted to manage its backlog in order to
benefit from pricing trends. In periods of rising prices, the Company
intentionally avoids building high levels of backlog in order to maximize its
ability to pursue higher margin projects. The Company believes that, as a
low-cost fabricator, it is well positioned to benefit from this strategy.
Barges loaded with completed structures weighing up to 3,500 tons can
travel through any of several currently available water routes from the
Company's facilities at the Port of Iberia to the Gulf of Mexico. Although
recent improvements to the Company's slip, bulkhead and loadout facilities
enable the Company to produce decks and deck components exceeding 3,500 tons,
special efforts, including dredging, would be needed to permit barges carrying
structures from 3,500 to 6,000 tons to travel from the Port of Iberia facility
to the Gulf of Mexico, and this would add costs to the project that the
customer may not be willing to bear. Although the Company does not produce
jackets designed for water depths over 300 feet as they are too heavy or too
wide to be transported from the Company's facilities, the increased activity in
the deepwater areas of the Gulf of Mexico has benefited the Company's
operations as the Company is able to fabricate decks and modules weighing up to
3,500 tons for installation on platforms regardless of water depth.
Most of the Company's fabrication work is performed pursuant to fixed-price
contracts, although some projects are performed on a time and materials basis.
Under fixed-price contracts, the Company receives
14
<PAGE> 18
the price fixed in the contract, subject to adjustment only for change orders
placed by the customer. As a result, with respect to fixed-price contracts, the
Company retains all cost savings but is also responsible for all cost overruns.
Under time and materials arrangements, the Company receives a specified hourly
rate for direct labor hours worked (which exceeds its direct labor costs) and a
specified percentage mark-up over its cost for materials. As a result, under
time and materials contracts, the Company is protected against cost overruns but
does not benefit directly from cost savings. As the Company is typically able to
obtain prices for materials in excess of its costs, the cost and productivity of
the Company's labor force are the key factors affecting the Company's operating
profits. Consequently, it is essential that the Company control its costs and
maximize the productivity of its workforce.
The following table sets forth for the periods presented the percentage of
the Company's revenue derived from each type of contract used by the Company:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
TYPE OF CONTRACT(1) 1996 1997 1998
- ---------------------------- ----- ----- -----
<S> <C> <C> <C>
Fixed-Price................. 76.2% 81.0% 69.9%
Time and Materials.......... 23.7% 18.9% 30.0%
</TABLE>
- ----------
(1) Remaining revenues were derived from storage fees.
The ability of the Company to operate profitably and to expand its
operations depends substantially on its ability to attract skilled production
workers, primarily welders, fitters and equipment operators. While the supply
of production workers is limited, the demand for their services has increased
as oil and gas development and production activity has increased. As a result,
the Company has increased the average hourly wages of its employees, instituted
a 401(k) plan and improved several other benefit packages available to its
employees. The Company has also been very active in the movement to create a
more business-oriented educational system in Louisiana, which lead to the
passage of a recent bill that aims to give industry more input in the teaching
at vocational-technical schools. Although there can be no assurance that such
initiatives will be carried out to successful completion, management believes
that, in the long-term, initiatives like these are the best methods for
increasing the pool of well-trained workers in Louisiana.
The Company's operations are subject to seasonal variations in weather
conditions and daylight hours. Because most of the Company's construction
activities take place outdoors, the number of direct labor hours worked
generally declines in winter months due to an increase in rainy and cold
conditions and a decrease in daylight hours. Operations may also be affected by
the rainy weather, hurricanes and other storms prevalent along the U.S. Gulf
Coast throughout the year. As a result, the Company's revenue, gross profit and
net income during the fourth quarter of each fiscal year are subject to being
disproportionately low as compared to the first and second quarters, and full
year results may not in all cases be a direct multiple of any particular
quarter or combination of quarters. The Company's results for the last three
years do not dramatically reflect this effect due to (i) the large amount of
revenue and income recognized in the third and fourth quarters of 1996 on one
particular project, (ii) the substantial increase in production volume that
began in the third quarter of 1996, and (iii) the acquisition of PIM, LLC in
the fourth quarter of 1998. The table below indicates for each quarter of the
Company's last three fiscal years the percentage of annual revenue and net
income earned and the number of direct labor hours worked in each quarter.
15
<PAGE> 19
<TABLE>
<CAPTION>
1996 1997 1998
------------------------- ------------------------ ------------------------
1ST. 2ND 3RD 4TH 1ST. 2ND 3RD 4TH 1ST. 2ND 3RD 4TH
QTR. QTR. QTR. QTR. QTR. QTR. QTR. QTR. QTR. QTR. QTR. QTR.
--- --- --- --- --- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue ................. 17% 26% 27% 30% 28% 27% 22% 23% 23% 26% 20% 31%
Net income .............. 6% 15% 32% 47% 27% 28% 21% 24% 21% 24% 23% 32%
Direct labor hours worked
(in thousands) ........ 126 143 194 193 218 242 206 236 260 265 231 417
</TABLE>
Most of the Company's revenue and expenses are recognized on a
percentage-of-completion basis determined by the ratio that labor and
subcontracting costs incurred bear to the total estimated labor and
subcontracting costs required for completion. Accordingly, expected labor and
subcontracting costs are reviewed monthly as the work progresses, and
adjustments proportionate to the percentage of completion are reflected in
revenue for the period when such estimates are revised. To the extent that
these adjustments result in a reduction of previously reported profits, the
Company would have to recognize a charge against current earnings, which may be
significant depending on the size of the project or the adjustment. 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.
RESULTS OF OPERATIONS
Comparison of the Years Ended March 31, 1998 and 1997
During the year ended March 31, 1998, the Company's revenue was $68.6
million, a 2.8% increase from the $66.7 million generated in the year ended
March 31, 1997. This increase was primarily caused by prices realized under
fixed-price contracts, an increase in direct labor hours worked and revenues in
the fourth quarter generated from PIM, LLC. Although direct labor hours worked
increased 30% in fiscal 1998 over fiscal 1997, this increase did not result in a
proportionate increase in revenue due to the reduction in procurement revenue in
fiscal 1998 compared to procurement revenue in fiscal 1997.
Cost of revenue was $57.8 million in fiscal 1998 compared to $58.6 million
in fiscal 1997. These costs decreased as a percentage of revenues to 84.3% in
1998 from 87.8% in fiscal 1997. This relative decrease is mainly due to the
reduced procurement revenue in 1998 compared to 1997, as described above, which
carried lower margin.
General and administrative expense was $3.0 million in fiscal 1998 compared
to $1.6 million in fiscal 1997. The Company's general and administrative
expense as a percentage of revenue increased to 4.3% in 1998 as compared to
2.5% in fiscal 1997. This increase is mainly due to regulatory, reporting and
other costs associated with being a corporation with publicly traded securities
and the additional general and administrative costs in the fourth quarter of
fiscal 1998 associated with PIM, LLC.
Interest income increased to $522,000 in fiscal 1998 from $145,000 in
fiscal 1997, as the weighted average of invested funds was higher in fiscal
1998 as compared to fiscal 1997, mainly from investment of the net proceeds of
the Company's initial public offering.
Comparison of the Years Ended March 31, 1997 and 1996
During the year ended March 31, 1997, the Company's revenue was $66.7
million, a 28.8% increase from the $51.8 million generated in the year ended
March 31, 1996. This increase was primarily caused by an increase in direct
labor hours worked and, to a lesser extent, prices realized under fixed-price
contracts. Although direct labor hours worked increased 37.5% in fiscal 1997
over fiscal 1996, this increase did not result in a proportionate increase in
revenue due to the lower productivity of employees newly hired in fiscal 1997
compared to the productivity of the Company's longer term employees.
Cost of revenue was $58.6 million in fiscal 1997 compared to $40.4 million
in fiscal 1996. These costs increased as a percentage of revenues to 87.8% in
1997 from 77.9% in fiscal 1996. In fiscal 1996, a major contract obtained on a
fixed-price basis was completed at a materials cost substantially lower than
that
16
<PAGE> 20
estimated in connection with the bid, which the Company had prepared on the
basis of the customer's designs. Had the contract been completed at the
materials cost originally estimated, cost of revenue during fiscal 1996 would
have been increased by approximately $5.5 million.
General and administrative expense was $1.6 million in fiscal 1997 compared
to $1.4 million in fiscal 1996. The Company's general and administrative
expense as a percentage of revenue decreased to 2.5% in 1997 as compared to
2.7% in fiscal 1996 as the increase in the Company's revenue did not require a
proportionate increase in such expenses.
Interest income decreased to $145,000 in fiscal 1997 from $318,000 in
fiscal 1996, as the weighted average of invested funds was lower in fiscal 1997
as compared to fiscal 1996, due to longer than average delays in collecting
some international receivables in 1997.
Receivables increased in fiscal 1997 primarily because of delays in
collection of receivables from contractors on projects installed in overseas
locations.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has funded its business activities through funds
generated from its operations. Net cash provided by operations was $4.3
million, $2.3 million and $5.3 million for the years ended March 31, 1996, 1997
and 1998, respectively. The Company's capital requirements historically have
been for improvements to its facilities and equipment to increase the
productivity of its labor force. During fiscal 1997 and fiscal 1998, the
Company had capital expenditures of $821,000 and $5,008,000, respectively.
Capital expenditures for fiscal 1998 primarily included the dredging and
construction of a new slip and loadout facilities for the slip, the purchase of
the Company's administrative office and surrounding land from McDermott, the
expansion of the Company's pipe shop, and the purchase from Universal Partners
of 10 acres of land adjacent to the Company's facility.
On September 22, 1997, the Company 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 March 31, 1998, 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 nonrevolving
letter of credit facility. These letters of credit, which aggregate $4.8
million, were previously provided by McDermott (the "McDermott Letters of
Credit"). The nonrevolving 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.
On February 5, 1998, the Company announced that it had signed a letter of
intent with the shareholders of Allen Tank, Inc. ("Allen Tank") to acquire
Allen Tank. The transaction is expected to be accounted for by the pooling of
interests method of accounting for business combinations and is expected to be
tax-free to the shareholders of the Company and of Allen Tank. Allen Tank
designs and manufactures oil and gas processing systems at its facility located
in New Iberia, Louisiana for sale world wide. Completion of the transaction is
subject to various conditions, including the satisfactory completion of due
diligence by the Company. No assurance is given that the acquisition will be
successfully completed.
Management believes that its available funds, cash generated by operating
activities and funds available under the Credit Facility will be sufficient to
fund these acquisition, capital expenditures and its working capital needs;
however, any expansion of the Company's operations through future acquisitions
may require additional equity or debt financing.
17
<PAGE> 21
IMPACT OF THE YEAR 2000
The Company has assessed and continues to assess the impact of the year
2000 on its reporting systems and operations. The year 2000 issue is the result
of computer programs being written using two digits rather than four to define
the applicable year. Any of the Company's computer programs that have
date-sensitive software may recognize a date using "00" as the year 1900 rather
than 2000. This could potentially result in a system failure or miscalculations
causing disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices, or engage in other similar
normal business operations. Although the Company is still assessing the impact
of the year 2000 issue on its information technology systems, at this time the
Company believes the impact will not be material to the Company's financial
position or results of operations.
The Company has not yet communicated with all of its significant customers,
suppliers and vendors to ensure that they have appropriate plans to address
year 2000 issues where they may otherwise impact the operations of the Company.
However, the Company does not have any significant customers, suppliers or
vendors that directly interface with the Company's information technology
systems. There is no guarantee that the systems of other companies on which the
Company relies will be converted timely and will not have an adverse effect on
the Company.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
In this report, the consolidated financial statements and supplementary
data of the Company appear on pages F-1 through F-16 and are incorporated
herein by reference. See Index to Consolidated Financial Statements on page 19.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the Company's directors and executive officers
called for by Item 10. will be included in the Company's definitive Proxy
Statement prepared in connection with the 1998 Annual Meeting of Shareholders
and is incorporated herein by reference. For additional information regarding
executive officers of the Company, see "Executive Officers of the Registrant"
in Part I of this report.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning the compensation of the Company's executives called
for by Item 11. will be included in the Company's definitive Proxy Statement
prepared in connection with the 1998 Annual Meeting of Shareholders and is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning security ownership of certain beneficial owners and
management called for by Item 12. will be included in the Company's definitive
Proxy Statement prepared in connection with the 1998 Annual Meeting of
Shareholders and is incorporated herein by reference.
18
<PAGE> 22
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning the certain relationships and related transactions
called for by Item 13. will be included in the Company's definitive Proxy
Statement prepared in connection with the 1998 Annual Meeting of Shareholders
and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following financial statements, financial statement schedules and
exhibits are filed as part of this report:
(i) Financial Statements
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors F-1
Consolidated Balance Sheets F-2
Consolidated Statements of Income for the Years Ended March 31,
1996, 1997 and 1998 F-3
Consolidated Statements of Shareholders' Equity for the Years Ended
March 31, 1996, 1997 and 1998 F-4
Consolidated Statements of Cash Flows for the Years Ended March 31,
1996, 1997, and 1998 F-5
Notes to Consolidated Financial Statements F-6
</TABLE>
(ii) Financial Statement Schedules
Other schedules have not been included because they are not required,
not applicable, immaterial or the information required has been included
elsewhere.
(iii) Exhibits
See Index on page E-1. The Company will furnish to any eligible
stockholder, upon written request, a copy of any exhibit listed upon payment of
a reasonable fee equal to the Company's expenses in furnishing such exhibit.
Such requests should be addressed to Mr. Peter Roman, UNIFAB International,
Inc., P.O. Box 11308, New Iberia, LA 70562.
(b) Reports on Form 8-K.
The Company filed a current report on Form 8-K under Items 2. and 7.
dated as of February 5, 1998. Pursuant to Item 7., the Company included pro
forma statements of operations for the year ended March, 31, 1997 and for the
nine-month period ended December 31, 1997 and a pro forma balance sheet as of
December 31, 1997.
19
<PAGE> 23
GLOSSARY OF CERTAIN TECHNICAL TERMS
COMMISSIONING: Functional testing of equipment and systems without the
introduction of hydrocarbons.
DECK: The component of a platform on which development
drilling, production, separating, gathering, piping,
compression, well support, crew quartering and other
functions related to offshore oil and gas development
are conducted.
DIRECT LABOR HOURS: Direct labor hours are hours worked by employees
directly involved in the production of the Company's
products. These hours do not include contractor labor
hours and support personnel hours such as maintenance,
warehousing and drafting.
FIXED PLATFORM: A platform consisting of a rigid jacket which rests on
tubular steel pilings driven into the seabed and which
supports a deck structure above the water surface.
FLOATING PRODUCTION Floating structure (e.g., ship or semisubmersible
FACILITY: vessel) upon which drilling and production equipment
is mounted.
GRIT BLAST SYSTEM: System of preparing steel for coating by using steel
grit rather than sand as a blasting medium.
JACKET: A component of a fixed platform consisting of a tubular
steel, braced structure extending from the mudline of
the seabed to a point above the water surface. The
jacket is supported on tubular steel pilings driven
into the seabed.
MODULES: Packaged equipment usually consisting of major
production, utility or compression equipment with
associated piping and control system.
OFFSHORE: In unprotected waters outside coastlines.
PILES: Rigid tubular pipes that are driven into the seabed to
support platforms.
PLATFORM: A structure from which offshore oil and gas drilling
and production are conducted.
PLATFORM DRILLING RIG: A drilling rig designed to be mounted atop a fixed
platform.
POSTED DRILLING RIG: A drilling rig mounted on steel columns fixed to a
barge that is sunk upon reaching a desired drilling
location.
SPAR PLATFORM: Vertically floating, large-diameter cylindrical
platform supporting a relatively conventional offshore
drilling and production deck and positioned on site
with lateral mooring systems connected to piling or
anchors.
SUBSEA TEMPLATES: Tubular frames which are placed on the seabed and
anchored with piles. Usually a series of oil and gas
wells are drilled through these underwater structures.
TENSION-LEG PLATFORM A platform consisting of a deck situated atop four or
(TLP): more separated column-shaped semi-submersible hulls,
which are positioned on-site by vertical tendons
(pipes) that run from the columns to the sea floor.
G-1
<PAGE> 24
Report of Independent Auditors
The Board of Directors and Shareholders
UNIFAB International, Inc.
We have audited the accompanying consolidated balance sheets of UNIFAB
International, Inc. as of March 31, 1997 and 1998 and the related consolidated
statements of income, shareholders' equity and cash flows for each of the three
years in the period ended March 31, 1998. 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 audits.
We conducted our audits 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 audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of UNIFAB
International, Inc. at March 31, 1997 and 1998, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended March 31, 1998 in conformity with generally accepted accounting
principles.
Ernst & Young LLP
New Orleans, Louisiana
April 28, 1998
F-1
<PAGE> 25
UNIFAB International, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
MARCH 31
1997 1998
---------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 659,626 $ 8,379,131
Accounts receivable 19,368,473 16,396,255
Costs and estimated earnings in excess of billings on uncompleted
contracts 239,097 292,284
Prepaid expenses 444,045 770,611
Other assets 102,062 237,426
---------------- -------------
Total current assets 20,813,303 26,075,707
Property, plant and equipment, net 5,341,122 10,802,324
Cost in excess of net assets acquired, net of accumulated amortization
of $144,128 - 6,774,019
Other assets - 757,884
---------------- -------------
Total assets $ 26,154,425 $ 44,409,934
================ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank overdraft $ 763,010 $ -
Accounts payable 6,210,166 4,934,939
Billings in excess of costs and estimated earnings on uncompleted
contracts 4,317,837 1,192,701
Accrued liabilities 480,311 874,421
Payroll and related liabilities 333,451 1,761,780
Income tax payable 516,462 754,971
Notes payable - 154,005
---------------- -------------
Total current liabilities 12,621,237 9,672,817
Deferred income taxes 1,332,168 991,725
Other noncurrent liabilities - 723,353
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,
5,048,655 and 3,500,000 shares outstanding, respectively 35,000 50,487
Additional paid-in capital 6,483,664 25,532,678
Retained earnings 5,682,356 7,438,874
---------------- -------------
Total shareholders' equity 12,201,020 33,022,039
---------------- -------------
Total liabilities and shareholders' equity $ 26,154,425 $ 44,409,934
================ =============
</TABLE>
See accompanying notes.
F-2
<PAGE> 26
UNIFAB International, Inc.
Consolidated Statements of Income
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31
1996 1997 1998
---------------- ---------------- --------------
<S> <C> <C> <C>
Revenue $ 51,807,144 $ 66,724,504 $ 68,563,987
Cost of revenue 40,361,724 58,589,197 57,789,474
---------------- ---------------- --------------
Gross profit 11,445,420 8,135,307 10,774,513
General and administrative expense 1,419,668 1,637,563 2,967,282
---------------- ---------------- --------------
Income from operations 10,025,752 6,497,744 7,807,231
Other income (expense):
Interest expense (3,092) (63,304) (53,830)
Interest income 318,185 145,155 521,534
---------------- ---------------- --------------
Income before income taxes 10,340,845 6,579,595 8,274,935
Income tax provision 3,888,158 2,554,941 2,896,228
---------------- ---------------- --------------
Net income $ 6,452,687 $ 4,024,654 $ 5,378,707
================ ================ ==============
Basic earnings per share $ 1.84 $ 1.15 $ 1.25
================ ================ ==============
Basic earnings per share weighted average shares 3,500,000 3,500,000 4,292,212
================ ================ ==============
Diluted earnings per share $ 1.84 $ 1.15 $ 1.25
================ ================ ==============
Diluted earnings per share weighted average shares 3,500,000 3,500,000 4,313,054
================ ================ ==============
</TABLE>
F-3
See accompanying notes.
<PAGE> 27
UNIFAB International, Inc.
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------------ PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
--------- ------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C>
Balance at April 1, 1995 3,500,000 $35,000 $ 6,483,664 $ 2,933,801 $ 9,452,465
Dividends paid - - - (1,921,368) (1,921,368)
Net income - - - 6,452,687 6,452,687
--------- ------- ---------------- ---------------- -----------------
Balance at March 31, 1996 3,500,000 35,000 6,483,664 7,465,120 13,983,784
Dividends paid - - - (5,807,418) (5,807,418)
Net income - - - 4,024,654 4,024,654
--------- ------- ---------------- ---------------- -----------------
Balance at March 31, 1997 3,500,000 35,000 6,483,664 5,682,356 12,201,020
Initial public offering of common
stock 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)
Acquisition of PIM 26,405 264 499,736 - 500,000
Net income - - - 5,378,707 5,378,707
--------- ------- ---------------- ---------------- -----------------
Balance at March 31, 1998 5,048,655 $50,487 $ 25,532,678 $ 7,438,874 $ 33,022,039
========= ======= ================ ================ =================
</TABLE>
See accompanying notes.
F-4
<PAGE> 28
UNIFAB International Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31
1996 1997 1998
---------------- ------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 6,452,687 $ 4,024,654 $ 5,378,707
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 389,711 471,305 590,540
Amortization - - 144,128
(Gain) loss from sale of equipment (8,000) (10,125) -
Deferred income taxes (72,919) (20,208) (368,731)
Changes in operating assets and liabilities, net of effects from
acquisition of business:
Accounts receivable (2,871,872) (9,398,965) 6,001,421
Net costs and estimated earnings in excess of billings and
billings in excess of costs and estimated earnings on
uncompleted contracts (2,530,466) 4,061,441 (3,108,157)
Prepaid expenses and other assets 658,534 (95,435) (885,541)
Bank overdraft 715,576 47,434 (763,010)
Accounts payable and accrued liabilities 792,983 3,489,936 (1,920,887)
Income taxes payable 758,786 (242,324) 241,873
---------------- ------------- --------------
Net cash provided by operating activities 4,285,020 2,327,713 5,310,343
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of business, net of cash acquired - - (4,783,841)
Purchases of equipment (402,405) (820,619) (5,008,190)
Proceeds from sale of equipment 8,000 17,175 -
---------------- ------------- --------------
Net cash used in investing activities (394,405) (803,444) (9,792,031)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from initial public offering of stock - - 24,864,501
Payment for surrender of shareholder rights - - (6,300,000)
Dividends paid (1,921,368) (5,807,418) (3,622,189)
Net change in borrowings - - (2,741,119)
---------------- ------------- --------------
Net cash provided by (used in) financing activities (1,921,368) (5,807,418) 12,201,193
---------------- ------------- --------------
Net change in cash and cash equivalents 1,969,247 (4,283,149) 7,719,505
Cash and cash equivalents at beginning of year 2,973,528 4,942,775 659,626
---------------- ------------- --------------
Cash and cash equivalents at end of year $ 4,942,775 $ 659,626 $ 8,379,131
================ ============= ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Income taxes $ 3,173,014 $ 2,817,473 $ 2,917,583
================ ============= ==============
</TABLE>
See accompanying notes.
F-5
<PAGE> 29
UNIFAB International, Inc.
Notes to Consolidated Financial Statements
March 31, 1998
1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND INITIAL PUBLIC OFFERING
UNIFAB International, Inc. (the "Company") 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 the Company'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 the Company's common stock. The shareholders of Universal Partners
received 1,785,000 shares of common stock of the Company and McDermott received
1,715,000 shares of common stock of the Company in this share exchange. All
share related amounts have been adjusted to reflect the effect of this
exchange. In the Offering, 1,522,250 shares were sold by the Company 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.
DESCRIPTION OF BUSINESS
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
Company's main fabrication yard is located in the Port of Iberia at New Iberia,
Louisiana. Through a wholly owned subsidiary, PIM, LLC, the Company provides
industrial maintenance services and repair, refurbishment and conversion
services for oil and gas drilling rigs.
The operating cycle of the Company's contracts is typically less than one
year, although some large contracts may exceed one year's duration. Assets and
liabilities have been classified as current and noncurrent under the operating
cycle concept, whereby all contract-related items are regarded as current
regardless of whether cash will be received within a 12-month period. At March
31, 1998, it was anticipated that substantially all contracts in progress, and
receivables associated therewith, would be completed and collected within a
12-month period.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly owned. Significant intercompany
accounts and transactions have been eliminated in consolidation.
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.
F-6
<PAGE> 30
UNIFAB International, Inc.
Notes to Consolidated Financial Statements (continued)
1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONCENTRATION OF CREDIT RISK
The Company's customers are principally major and large independent oil and
gas companies. The Company's management believes that the portfolio of
receivables is diversified and that such diversification minimizes any
potential credit risk. Receivables are generally not collateralized. Credit
losses have been insignificant.
REVENUE AND COST RECOGNITION
Revenue from fixed-price and modified fixed-price contracts are recognized
on the percentage-of-completion method, measured by the ratio which labor and
subcontract costs incurred to date bear to total estimated labor and
subcontract costs. 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 that
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 bonus payments under fixed price contracts are
included in revenue when their realization is reasonably assured. Revenue from
cost-plus-fee contracts is recognized on the basis of costs incurred during the
period plus the fee earned.
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 computed
principally by the straight-line and declining-balance methods over the
estimated lives of the assets, which range from 19 to 31 years for building and
bulkhead and 3 to 12 years for yard and other equipment for financial statement
purposes and by accelerated methods for income tax purposes.
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
COST IN EXCESS OF NET ASSETS ACQUIRED
Cost in excess of net assets acquired is amortized on a straight line basis
over 12 years for financial statement purposes and over 15 years for income tax
purposes. Management periodically reviews cost in excess of net assets acquired
to assess recoverability and impairment would be recognized in operating
results if a permanent diminution in value were to occur.
F-7
<PAGE> 31
UNIFAB International, Inc.
Notes to Consolidated Financial Statements (continued)
1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
Income taxes have been provided using the liability method in accordance
with Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the Company's financial instruments at March 31,
1998, including cash and cash equivalents and accounts receivable, closely
approximates fair value.
STOCK BASED COMPENSATION
The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at the date of the
grant. The Company accounts for the stock option grants in accordance with APB
Opinion No. 25, Accounting for Stock Issued to Employees, and, accordingly,
recognized no compensation expense for the stock option grants.
RECLASSIFICATIONS
Certain amounts previously reported have been reclassified to conform with
the presentation at March 31, 1998.
2. MERGERS AND ACQUISITIONS
On February 5, 1998, the Company completed its acquisition of the assets
and business of Professional Industrial Maintenance, LLC ("PIM") for $6.0
million ($4.8 million in cash and $500,000 in shares of the Company's common
stock at closing (26,405 shares) and $337,500 per year for two years payable in
shares of the Company's common stock). In conjunction with the acquisition, the
Company acquired assets with a fair value of $4.5 million and assumed
liabilities of $5.4 million. The allocation of purchase price of the PIM
acquisition was based on the information available and is tentative pending
completion of that information. The transaction was accounted for as a purchase
and the excess cost over estimated fair value of the net assets acquired is
being amortized over 12 years on a straight-line basis. The acquisition was
effective as of January 1, 1998, and the operating results of the acquired
assets are included in the consolidated statement of income from that date.
The pro forma unaudited results of operations for the years ended March 31,
1997 and 1998, assuming the purchase of the assets and business of PIM had been
consummated April 1, 1996, are as follows (in thousands, except per share
data):
<TABLE>
<CAPTION>
1997 1998
---------------------
<S> <C> <C>
Revenues $ 75,552 $ 83,191
Net income 2,634 4,816
Basic and diluted earnings per share 0.75 1.12
</TABLE>
F-8
<PAGE> 32
UNIFAB International, Inc.
Notes to Consolidated Financial Statements (continued)
3. CONTRACTS IN PROGRESS
Information pertaining to contracts in progress at March 31 follows:
<TABLE>
<CAPTION>
1997 1998
---------------- ----------------
<S> <C> <C>
Costs incurred on uncompleted contracts $ 37,077,023 $ 9,682,446
Estimated earnings 4,488,532 1,834,614
---------------- ----------------
41,565,555 11,517,060
Less billings to date (45,644,295) (12,417,477)
---------------- ----------------
$ (4,078,740) $ (900,417)
================ ================
Included in the accompanying balance sheets under
the following captions:
Costs and estimated earnings in excess of
billings on uncompleted contracts $ 239,097 $ 292,284
Billings in excess of costs and estimated
earnings on uncompleted contracts (4,317,837) (1,192,701)
---------------- ----------------
$ (4,078,740) $ (900,417)
================ ================
</TABLE>
Accounts receivable includes retainages and unbilled receivables,
respectively, of $10,000 and $478,000 at March 31, 1997 and $598,000 and
$1,901,000 at March 31, 1998.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following at March 31, 1997
and 1998:
<TABLE>
<CAPTION>
1997 1998
---------------- ----------------
<S> <C> <C>
Land $ 756,000 $ 1,048,970
Building and bulkhead, including leasehold
improvements 3,780,243 4,581,315
Yard equipment 3,319,830 4,799,793
Vehicles and other equipment 505,545 1,097,013
Construction in progress - 2,886,269
---------------- ----------------
8,361,618 14,413,360
Less accumulated depreciation 3,020,496 3,611,036
---------------- ----------------
$ 5,341,122 $ 10,802,324
================ ================
</TABLE>
F-9
<PAGE> 33
UNIFAB International, Inc.
Notes to Consolidated Financial Statements (continued)
4. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
The Company leases land upon which a portion of its facilities in New
Iberia are located under noncancelable operating leases. The leases expire in
fiscal year 2004 and have two ten-year renewal options. The Company also leases
its facility in Lake Charles under a noncancelable operating lease. The lease
expires in fiscal year 2000 and has two five-year renewal options. Future
minimum payments under these leases are as follows:
<TABLE>
<S> <C> <C>
1999 $ 319,000
2000 283,000
2001 175,000
2002 153,000
2003 123,000
2004 and after 72,000
-----------------
$ 1,125,000
=================
</TABLE>
Rent expense during the years ended March 31, 1996, 1997 and 1998 was
$921,000, $1,456,000 and $2,238,000, respectively, which includes rent on
cancelable equipment leases.
5. INCOME TAXES
Deferred income taxes reflect the net effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax liabilities and assets as of March 31 were as
follows:
<TABLE>
<CAPTION>
1997 1998
----------- ------------
<S> <C> <C>
Deferred tax liabilities - excess of financial
statement basis over income tax basis of property,
plant and equipment $ 1,332,168 $ 991,725
Deferred tax assets - primarily excess of income tax
basis over financial statement basis of contracts 33,462 61,750
----------- ------------
Net deferred tax liabilities $ 1,298,706 $ 929,975
=========== ============
</TABLE>
The income tax provision is comprised of the following:
<TABLE>
<CAPTION>
1996 1997 1998
---------------- ------------- -------------
<S> <C> <C> <C>
Current $ 3,961,077 $ 2,575,149 $ 3,264,959
Deferred (72,919) (20,208) (368,731)
---------------- ------------- -------------
$ 3,888,158 $ 2,554,941 $ 2,896,228
================ ============= =============
</TABLE>
F-10
<PAGE> 34
UNIFAB International, Inc.
Notes to Consolidated Financial Statements (continued)
5. INCOME TAXES (CONTINUED)
The reconciliation of income tax computed at the federal statutory rates to
income tax expense is:
<TABLE>
<CAPTION>
1996 1997 1998
---------------- ------------- -------------
<S> <C> <C> <C>
Tax at federal statutory rates $ 3,519,296 $ 2,237,062 $ 2,813,478
Other, primarily state income taxes 368,862 317,879 82,750
---------------- ------------- -------------
$ 3,888,158 $ 2,554,941 $ 2,896,228
================ ============= =============
</TABLE>
6. CREDIT ARRANGEMENT
On September 22, 1997, the Company 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 March 31, 1998, 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 nonrevolving
letter of credit facility. These letters of credit, which aggregate $4.8
million, were previously provided by McDermott (the "McDermott Letters of
Credit"). The nonrevolving 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.
7. EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
Earnings Per Share. Statement No. 128 replaced APB Opinion No. 15 for the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share exclude any diluted effects of options, warrants and convertible
securities. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share. All earnings per share amounts for
all periods have been presented, and where appropriate, restated to conform to
the Statement No. 128 requirements.
F-11
<PAGE> 35
UNIFAB International, Inc.
Notes to Consolidated Financial Statements (continued)
7. EARNINGS PER SHARE (CONTINUED)
The following table sets forth the computation of basic and diluted
earnings per share (in thousands, except per share date):
<TABLE>
<CAPTION>
1996 1997 1998
----------- ---------- ----------
<S> <C> <C> <C>
Numerator for basic and diluted earnings per
share $ 6,453 $ 4,025 $ 5,379
=========== ========== ==========
Denominator:
Denominator for basic earnings per share -
weighted average shares 3,500 3,500 4,292
Effect of dilutive employee stock options - - 21
----------- ---------- ----------
Denominator for diluted earnings per share -
adjusted weighted average shares 3,500 3,500 4,313
=========== ========== ==========
Basic earnings per share $ 1.84 $ 1.15 $ 1.25
Diluted earnings per share $ 1.84 $ 1.15 $ 1.25
</TABLE>
8. DIVIDENDS
Under the provisions of a shareholders' agreement, unless otherwise
approved by the board of directors, the Company distributed 90% of its net
income for the prior fiscal year. The shareholders' agreement was terminated
upon completion of the Offering.
9. RELATED PARTY TRANSACTIONS
In September 1997, the Company acquired approximately 18 acres of land and
an administrative office building formerly leased by the Company from McDermott
for $700,000 and paid $6,300,000 to McDermott for the surrender of certain
contractual rights, including the cancellation of an option held by McDermott
that allowed McDermott to acquire the other 51% of outstanding common stock of
Universal Fabricators Incorporated. The Company also acquired 10 acres of land
adjacent to its facilities from Universal Partners for $100,500. Additionally,
the Company performed subcontract work for McDermott or companies affiliated
with McDermott in the amount of $563,000, $16,810,000 and $4,000 in fiscal
years 1996, 1997 and 1998, respectively. Included in accounts receivable is
$2,104,653 and $0 from McDermott or companies affiliated with McDermott at
March 31, 1997 and 1998, respectively.
10. LONG-TERM INCENTIVE PLAN
The Company has elected to follow Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees (APB 25), and related
interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided under FASB
Statement No. 123, Accounting for Stock-Based Compensation (Statement No. 123),
requires use of option valuation models that were not developed for use in
valuing employee stock options. Under APB 25, no compensation expense is
recognized because the exercise price of the Company's employee stock options
equals the market price of the underlying stock on the date of grant.
F-12
<PAGE> 36
UNIFAB International, Inc.
Notes to Consolidated Financial Statements (continued)
10. LONG-TERM INCENTIVE PLAN (CONTINUED)
In July 1997, the Company adopted and its shareholders approved the
Long-Term Incentive Plan (the "1997 Plan") to provide long-term incentives to
its key employees, including officers and directors who are employees of the
Company (the "Eligible Employees"). Under the 1997 Plan, which is administered
by the Compensation Committee of the Board of Directors, the Company may grant
incentive stock options, nonqualified stock options, restricted stock, other
stock-based awards or any combination thereof (the "Incentives") to Eligible
Employees. The Compensation Committee will determine who will receive
Incentives and will establish the exercise price of any stock options granted
under the Incentive Plan, provided that the exercise price may not be less than
the fair market value of the Common Stock on the date of grant. A maximum total
of 460,000 shares of Common Stock are available for issuance under the 1997
Plan.
As of March 31, 1998, options to purchase 133,500 shares of Common Stock
have been granted under the 1997 Plan to directors and key employees of the
Company. All of the options granted under the 1997 Plan have a 10-year term and
vest over a 2-year period. The optionee will not realize any income for federal
income tax purposes, nor will the Company be entitled to any deduction, upon
the grant of a nonqualified stock option. Upon exercise, the optionee will
realize ordinary income measured by the difference between the aggregate fair
market value of the shares of Common Stock on the exercise date and the
aggregate exercise price, and the Company will be entitled to a deduction in
the same amount.
Pro forma information regarding net income and earnings per share is
required by Statement No. 123 and has been determined as if the Company had
accounted for its employee stock options under the fair value method of that
statement. The fair value for these options was estimated at the date of the
grant using the Black-Scholes option pricing model with the following weighted
average assumptions for fiscal 1998: a risk-free interest rate of 5.75%;
dividend yield of zero; volatility factor of the expected market price of the
Company's common stock of .737; and a weighted average expected life of the
options of 2 years.
The Black-Scholes valuation model was developed for use in estimating the
fair value of trade options, which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimated, in
management's opinion the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
F-13
<PAGE> 37
UNIFAB International, Inc.
Notes to Consolidated Financial Statements (continued)
10. LONG-TERM INCENTIVE PLAN (CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. Since the
options vest over a two-year period, the pro forma disclosures are not
indicative of future amounts until Statement 123 is applied to all outstanding
nonvested options. The Company's pro forma information for fiscal year 1998 is
as follows (in thousands, except for per share data):
<TABLE>
<S> <C>
Net income:
As reported $ 5,379
Pro forma including the effect of options $ 4,986
Basic earnings per share:
As reported $ 1.25
Pro forma including the effect of options $ 1.16
Diluted earnings per share:
As reported $ 1.25
Pro forma including the effect of options $ 1.16
</TABLE>
A summary of the Company's stock options activity and the related
information for the year ended March 31, 1998 is as follows (in thousands,
except for per share data):
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
OPTIONS EXERCISE PRICE
------- --------------
<S> <C> <C>
Outstanding - beginning of year - -
Granted 134 $18.00
Exercised - -
Expired - -
Forfeited - -
----- --------
Options outstanding at end of year 134 $ 18.00
===== ========
Options exercisable at end of year 46 $ 18.00
===== ========
Weighted-average fair value of options granted
during year
$7.77
=====
</TABLE>
11. EMPLOYEE BENEFIT PLAN
Effective April 1, 1996, the Company began sponsoring an employees'
incentive savings plan that allows participants to make contributions by salary
reduction pursuant to Section 401(k) of the Internal Revenue Code. Under this
plan, employees with one year of service with the Company are eligible to
contribute up to 25% of their compensation into the plan, subject to a
specified maximum.
The Company contributes an amount equal to 50% of employee contributions up
to 3% of their base compensation. Matching contributions made by the Company
were approximately $136,000 and $167,000 in fiscal years 1997 and 1998,
respectively.
F-14
<PAGE> 38
UNIFAB International, Inc.
Notes to Consolidated Financial Statements (continued)
12. 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 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Customer A $ 27,417 $ - $ -
Customer B 5,937 - 16,326
Customer C - 23,066 13,725
Customer D - 17,402 -
</TABLE>
13. 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.
14. QUARTERLY OPERATING RESULTS (UNAUDITED)
A summary of quarterly results of operations for the years ended March 31,
1997 and 1998 were as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
JUNE 30, 1996 SEPTEMBER 30, 1996 DECEMBER 31, 1996 MARCH 31, 1997
----------------- ------------------ ----------------- --------------
<S> <C> <C> <C> <C>
Revenue $18,419 $18,238 $14,515 $15,553
Gross profit 2,124 2,175 1,707 2,129
Net income 1,099 1,107 838 981
Basic earnings per share 0.31 0.32 0.24 0.28
Diluted earnings per share 0.31 0.32 0.24 0.28
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1997 SEPTEMBER 30, 1997 DECEMBER 31, 1997 MARCH 31, 1998
------------- ------------------ ----------------- --------------
<S> <C> <C> <C> <C>
Revenue $15,503 $17,948 $13,470 $21,643
Gross profit 2,189 2,386 2,413 3,786
Net income 1,144 1,298 1,237 1,700
Basic earnings per share 0.33 0.36 0.25 0.34
Diluted earnings per share 0.33 0.36 0.25 0.34
</TABLE>
F-15
<PAGE> 39
UNIFAB International, Inc.
Notes to Consolidated Financial Statements (continued)
14. SUBSEQUENT EVENT
On February 5, 1998, the Company announced that it had signed a letter of
intent with the shareholders of Allen Tank, Inc. ("Allen Tank"). The
transaction is expected to be accounted for by the pooling of interests method
of accounting for business combinations and is expected to be tax-free to the
shareholders of the Company and of Allen Tank. Allen Tank designs and
manufactures oil and gas processing systems at its facility located in New
Iberia, Louisiana for sale worldwide. Completion of the transaction is subject
to various conditions, including the satisfactory completion of due diligence
by the Company. No assurance is given that the acquisition will be successfully
completed.
F-16
<PAGE> 40
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on June 26, 1998.
UNIFAB International, Inc.
(Registrant)
By: /s/ Dailey J Berard
---------------------------------------
Dailey J. Berard
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE
/s/ Dailey J Berard Chairman of the Board, President and
- --------------------------------------- Chief Executive Officer (Principal
Dailey J. Berard Executive Officer)
/s/ Peter J. Roman Vice President and Chief Financial
- --------------------------------------- Officer (Principal Financial and
Peter J. Roman Accounting Officer)
/s/ Charles E. Broussard Director
- ---------------------------------------
Charles E. Broussard
/s/ Richard E. Roberson, Jr. Director
- ---------------------------------------
Richard E. Roberson, Jr.
/s/ Perry Segura Director
- ---------------------------------------
Perry Segura
/s/ George C. Yax Director
- ---------------------------------------
George C. Yax
S-1
<PAGE> 41
UNIFAB INTERNATIONAL, INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Page
------ ----
<S> <C>
2.1 Transition Agreement among the Company, McDermott, Universal
Partners, Universal Fabricators and Dailey J. Berard. *
2.2 Form of Agreement and Plan of Share Exchange between the Company
and Universal Partners *
2.3 Form of Share Exchange Agreement between the Company and
McDermott *
2.4 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. **
2.5 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. **
3.1 Articles of Incorporation of the Company *
3.2 By-laws of the Company *
4.1 See Exhibits 3.1 and 3.2 for provisions of the Company's
Articles of Incorporation and By-laws defining the rights of
holders of Common Stock *
4.2 Specimen Common Stock Certificate *
10.1 Form of Indemnity Agreement by and between the Company and each
of its directors and executive officers *
10.2 First Amended and Restated Credit Agreement between the Company
and Hibernia National Bank, dated as of April 1, 1998.
10.3 The Company's Long-Term Incentive Plan * f
10.4 Form of Stock Option Agreement under the Company's Long-Term
Incentive Plan * f
10.9 Form of Employment Agreement between the Company and Dailey J.
Berard * f
21.1 Subsidiaries of the Company
23.1 Consent of Ernst & Young LLP
27.1 Financial Data Schedule
</TABLE>
- ------------
* Incorporated by reference to the Company's Registration Statement
on Form S-1 filed with the Commission of September 18, 1997
(Registration No. 333-31609)
** Incorporated by reference to the Company's Current Report on Form
8-K dated February 5, 1998.
f Management Contract or Compensatory Plan
E-1
<PAGE> 1
EXHIBIT 10.2
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
BETWEEN
UNIFAB INTERNATIONAL, INC.
UNIVERSAL FABRICATORS, L.L.C.
AND
PIM, L.L.C.
AS "BORROWERS"
AND
HIBERNIA NATIONAL BANK,
AS "BANK"
DATED APRIL 1, 1998
<PAGE> 2
<TABLE>
<S> <C> <C>
ARTICLE I
DEFINITIONS............................................................................................................. 1
Section 1.1 Terms Defined Above............................................................................... 1
Section 1.2 Defined Terms..................................................................................... 1
Section 1.3 Other Definitional Provisions..................................................................... 7
ARTICLE II
AMOUNT AND TERMS OF CREDIT.............................................................................................. 8
Section 2.1 Loans............................................................................................. 8
Section 2.2 Revolving Credit Facility......................................................................... 8
(a) Revolving Credit Facility Terms................................................................... 8
(b) Borrowing Procedure Under the Revolving Credit Facility........................................... 8
(c) Terms and Conditions Governing Letters of Credit.................................................. 8
(d) Note Evidencing Borrowings........................................................................ 9
(e) Revolving Credit Facility Maturity Date........................................................... 9
Section 2.3 Non-Revolving LC Facility......................................................................... 9
(a) Non-Revolving LC Facility Terms................................................................... 9
(b) Non-Revolving LC Facility Maturity Date........................................................... 9
Section 2.4 Interest and Fees................................................................................. 9
(a) Interest.......................................................................................... 9
(b) Letter of Credit Fee.............................................................................. 9
(c) Undisbursed Commitment Fee........................................................................ 9
(d) Default Rate...................................................................................... 10
(e) Method of Calculating Interest and Fees........................................................... 10
(f) Interest Rate Options............................................................................. 10
(g) Conversion of LIBO Rate due to change of laws or impossibility. .................................. 11
(h) LIBO Rate indemnity............................................................................... 11
Section 2.5 Payments, Prepayments, and Reduction or Termination of the Revolving Credit Facility.............. 12
(a) Method of Payment................................................................................. 12
(b) Payments Without Deduction........................................................................ 12
(c) Reduction of Credit............................................................................... 12
Section 2.6 Indemnity......................................................................................... 12
Section 2.7 Access............................................................................................ 12
ARTICLE III
CONDITIONS PRECEDENT.................................................................................................... 12
Section 3.1 Conditions to Loans............................................................................... 12
(a) Completion of Initial Public Offering of UNIFAB International..................................... 12
(b) Loan Documentation................................................................................ 13
(c) Note.............................................................................................. 13
(d) Resolutions....................................................................................... 13
(e) Governmental Certificates......................................................................... 13
(f) Financial Statement Certification................................................................. 13
(g) Certification of Chief Financial Officer.......................................................... 13
(h) Certificate of Chief Executive Officer............................................................ 13
(i) Certificate of Incumbency and Signatures.......................................................... 13
(j) Attorney Opinion.................................................................................. 13
(k) Payment of Fees and Expenses...................................................................... 13
(l) Additional Information............................................................................ 13
Section 3.2 Conditions to Each Advance and/or Letter of Credit................................................ 14
(a) Continuation of Representations and Warranties.................................................... 14
(b) No Event of Default............................................................................... 14
(c) Maximum Advances.................................................................................. 14
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BORROWERS............................................................................. 14
Section 4.1 Corporate Existence; Compliance With Law.......................................................... 14
Section 4.2 Executive Offices................................................................................. 14
Section 4.3 Subsidiaries...................................................................................... 14
Section 4.4 Corporate Power; Authorization; Enforceable Obligations........................................... 14
Section 4.5 Financials and Projections........................................................................ 15
(a) Borrowers' Financials............................................................................. 15
(b) UNIFAB International's Financials................................................................. 15
Section 4.6 Litigation........................................................................................ 15
Section 4.7 Liens............................................................................................. 15
Section 4.8 Purpose........................................................................................... 15
Section 4.9 Use of Proceeds; Margin Securities................................................................ 15
Section 4.10 Compliance with ERISA............................................................................. 15
Section 4.11 Consents.......................................................................................... 15
Section 4.12 Taxes............................................................................................. 15
Section 4.13 Operation of Business............................................................................. 16
Section 4.14 Rights in Properties; Liens....................................................................... 16
Section 4.15 Debt.............................................................................................. 16
Section 4.16 Disclosure........................................................................................ 16
Section 4.17 Registered Office; Principal Place of Business;................................................... 16
Section 4.18 Investment Company Act............................................................................ 16
Section 4.19 Other Agreements.................................................................................. 16
Section 4.20 Compliance with Law............................................................................... 16
(a) Employment Matters................................................................................ 16
(b) Environmental Matters............................................................................. 16
Section 4.21 Corporate Name.................................................................................... 17
Section 4.22 Taxpayer I.D. Numbers............................................................................. 17
Section 4.23 Continuing Representations and Warranties......................................................... 17
ARTICLE V
AFFIRMATIVE COVENANTS................................................................................................... 17
Section 5.1 Financial Statements and Records.................................................................. 17
Section 5.2 Maintenance of, Existence and Conduct of Business................................................. 18
Section 5.3 Payment of Obligations............................................................................ 18
Section 5.4 Financial Covenants............................................................................... 18
Section 5.5 Fees.............................................................................................. 19
Section 5.6 Books and Records................................................................................. 19
Section 5.7 Litigation........................................................................................ 19
Section 5.8 Insurance......................................................................................... 19
Section 5.9 Compliance with Law............................................................................... 19
Section 5.10 Agreements........................................................................................ 19
Section 5.11 Supplemental Disclosure........................................................................... 19
Section 5.12 Employee Plans.................................................................................... 19
Section 5.13 SEC Filings; Certain Other Notices................................................................ 19
Section 5.14 Compliance with Leases; Additional Mortgages...................................................... 19
Section 5.15 Borrowers Funding................................................................................. 19
Section 5.16 Deposit Accounts.................................................................................. 19
ARTICLE VI
NEGATIVE COVENANTS...................................................................................................... 20
Section 6.1 Mergers, Etc...................................................................................... 20
Section 6.2 Investments; Loans and Advances................................................................... 20
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 6.3 Indebtedness...................................................................................... 20
Section 6.4 Employee Loans.................................................................................... 20
Section 6.5 Capital Structure................................................................................. 20
Section 6.6 Maintenance of Business........................................................................... 20
Section 6.7 Transactions with Affiliates...................................................................... 20
Section 6.8 Guaranties........................................................................................ 20
Section 6.9 Liens............................................................................................. 20
Section 6.10 Sales of Assets................................................................................... 21
Section 6.11 Cancellation of Indebtedness...................................................................... 21
Section 6.12 Hedging Transactions.............................................................................. 21
Section 6.13 Restricted Payments............................................................................... 21
Section 6.14 Ownership of Borrowers............................................................................ 21
ARTICLE VII
EVENTS OF DEFAULT; RIGHTS AND REMEDIES.................................................................................. 21
Section 7.1 Payment........................................................................................... 21
Section 7.2 Other Indebtedness................................................................................ 21
Section 7.3 Other Default..................................................................................... 21
Section 7.4 Insolvency........................................................................................ 21
Section 7.5 ERISA............................................................................................. 21
Section 7.6 Agreements........................................................................................ 22
Section 7.7 Representation or Warranty........................................................................ 22
ARTICLE VIII
MISCELLANEOUS........................................................................................................... 22
Section 8.1 Bank's Reliance, Etc.............................................................................. 22
Section 8.2 Financial Terms................................................................................... 22
Section 8.3 Delay............................................................................................. 22
Section 8.4 Notices........................................................................................... 22
Section 8.5 Expenses.......................................................................................... 23
Section 8.6 Severability...................................................................................... 23
Section 8.7 Counterparts...................................................................................... 23
Section 8.8 Law............................................................................................... 23
Section 8.9 Successors........................................................................................ 23
Section 8.10 Amendments........................................................................................ 24
Section 8.11 Execution in Counterparts......................................................................... 24
Section 8.12 Entire Agreement.................................................................................. 24
Section 8.13 Conflicts......................................................................................... 24
</TABLE>
iii
<PAGE> 5
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
THIS FIRST AMENDED AND RESTATED CREDIT AGREEMENT ("FIRST RESTATED
AGREEMENT"), is dated effective as of April 1, 1998, between UNIFAB
INTERNATIONAL, INC., a Louisiana corporation ("UNIFAB INTERNATIONAL"),
UNIVERSAL FABRICATORS, L.L.C., a Louisiana limited liability company
("UNIFAB"), and PIM, L.L.C., a Louisiana limited liability company ("PIM"),
(collectively "BORROWERS"), and HIBERNIA NATIONAL BANK, a national banking
association ("BANK").
W I T N E S E T H:
WHEREAS, Pursuant to a Credit Agreement dated September 22, 1997 by and
between UNIVERSAL FABRICATORS INCORPORATED, a Delaware corporation, UNIFAB
International, as a guarantor, and Bank ("Agreement"), Bank extended credit to
UNIVERSAL FABRICATORS INCORPORATED as Borrower in the form of a revolving
credit facility in the maximum principal amount of Twenty Million and no/100
($20,000,000.00) Dollars to provide for (i) Ten Million and no/100
($10,000,000.00) Dollars for general corporate purposes, and (ii) Ten Million
and no/100 ($10,000,000.00) Dollars for the issuance of certain standby letters
of credit, including performance and retainage letters of credit ("Revolving
Credit Facility"), and
WHEREAS, Bank issued certain performance and retainage letters of credit
for the benefit of Universal Fabricators Incorporated in the form of a
non-revolving letter of credit facility, not to exceed the aggregate principal
amount of Seven Million Twenty Four Thousand Four Hundred Twenty Eight and
50/100 ($7,024,428.50) Dollars ("Non-Revolving LC Facility"), and
WHEREAS, UNIFAB International formed UNIFAB. UNIVERSAL FABRICATORS
INCORPORATED, as a wholly owned subsidiary of UNIFAB International, was
thereafter merged into UNIFAB with UNIVERSAL FABRICATORS INCORPORATED
transferring its assets to UNIFAB, and
WHEREAS, UNIFAB International acquired PIM as a wholly owned subsidiary
and in connection therewith desires to restructure the Agreement to add PIM as
a borrower, convert UNIFAB International from a guarantor to a borrower, and
substitute UNIFAB as a borrower in lieu of UNIVERSAL FABRICATORS INCORPORATED.
WHEREAS, Borrowers and Bank desire to amend and supplement the Agreement
in order to revise various financial reporting and compliance requirements and
to reflect the changes in the identity of Borrower.
NOW THEREFORE, for and in consideration of the premises and the mutual
undertakings herein expressed, and upon the mutual promises and benefits
received or to be received by each of them, Borrowers and Bank do consent and
agree that the respective obligations of Bank and Borrowers pursuant to this
First Restated Agreement and any commitments previously issued are set forth
herein in their entirety and any obligations by Bank to extend funds to
Borrowers are set forth in their entirety herein, and Borrowers and Bank hereby
agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 TERMS DEFINED ABOVE. As used in this First Restated
Agreement, the terms "First Restated Agreement", "Agreement", "Borrowers",
"Bank", "Revolving Credit Facility" and "Non-Revolving LC Facility" shall have
the meanings indicated above.
SECTION 1.2 DEFINED TERMS. As used in this First Restated Agreement,
the following terms shall have the following meanings, unless the context
otherwise requires:
"ACQUISITION" means any transaction or series of transactions by which a
Person acquires, either directly or through an Affiliate, subsidiary or
otherwise, (a) any or all of the stock or other securities of any class, or
ownership interest, of any other Person other than Affiliates of Borrowers or
(b) a substantial portion of the assets, or a division or line of business of
any other Person other than Affiliates of Borrowers.
i
<PAGE> 6
"ADVANCE(S)" shall mean any disbursement to Borrowers of the loan proceeds
under the Note, any disbursement by Bank to any beneficiary under any Letter of
Credit, as a result of any draw by such beneficiary under such Letter of
Credit, and all or any portion of such disbursement so long as same remains
outstanding and unpaid.
"AFFILIATE" means, as to any Person, any other Person (a) that directly or
indirectly, through one or more intermediaries, controls or is controlled by,
or is under common control with such Person; (b) that directly or indirectly
beneficially owns or holds twenty percent (20%) or more of any class of voting
stock of or of partnership interests of such person. The term "control" means
the possession, directly or indirectly, of the power to direct or cause
direction of the management and policies of a Person, whether through the
ownership of voting securities, of partnership interests, by contract, or
otherwise.
"AVAILABLE COMMITMENT" shall mean, at any particular time, an amount equal
to the excess, if any, of (a) the amount of the Commitment over (b) the sum of
(i) the aggregate unpaid principal amount at such time of the Advances plus
(ii) the aggregate undrawn, available amount at such time of all Letters of
Credit then outstanding, plus (iii) the then aggregate amount of all unpaid
outstanding obligations of Borrowers to reimburse Bank with respect to any
drawing under a Letter of Credit.
"AVAILABLE NON-REVOLVING LC FUNDS" means, at any particular time, the
remaining undrawn aggregate principal amount available for draw or draft by
beneficiaries on all Letters of Credit issued by Bank.
"BORROWING DATE" means any Business Day specified in a notice pursuant to
Section 2.2(b) as a date on which Borrowers request Bank to make Advances
hereunder.
"BUSINESS DAY" means any day other than a Saturday or Sunday or other day
when national banks located in the City of New Orleans are required or
permitted to be closed.
"CAPITALIZED LEASES" means capital leases and subleases, as defined in the
Financial Accounting Standards Board Statement of Financial Accounting Standard
No. 13, dated November 1976, as amended.
"CAPITAL EXPENDITURES" has the definition attributed to it under GAAP.
"CASH EQUIVALENTS" shall mean (i) securities issued or directly and fully
guaranteed or insured by the United States Government or any agency or
instrumentality thereof having maturities of not more than one year from the
date of acquisition, (ii) time deposits and certificates of deposits, having
maturities of not more than one years from the date of acquisition, of Bank or
any other domestic commercial bank which has, or the holding company of which
has, a commercial paper rating meeting the requirements specified in clause
(iv) below, (iii) repurchase obligations with a term of not more than 270 days
for underlying securities of the types described in clauses (i) and (ii)
entered into with any bank meeting the qualifications specified in clause (ii)
above, (iv) commercial paper rated at least A-1 or the equivalent thereof by
Standard Poor's Corporation or P-1 or the equivalent thereof by Moody's
Investors Service, Inc. and in either case maturing within one year after the
date of acquisition and (v) investments in money market funds registered under
the Investment Company Act of 1940, as amended, which have net assets of at
least $200,000,000 and at least eighty-five percent (85%) of whose assets
consist of securities and other obligations of the type described in clauses
(i) through (iv) above.
"CHARGES" shall mean all Federal, state, county, city, municipal, local,
foreign or other governmental (including, without limitation, PBGC) taxes at
the time due and payable or levies, assessments, charges, liens, claims or
encumbrances upon or relating to (i) the Loan Documents, (ii) the Obligations,
(iii) Borrowers' employees, payroll, income or gross receipts, (iv) Borrowers'
ownership or use of any of their assets, or (v) any other aspect of Borrowers'
business.
"CLOSING DATE" means the date as of which this First Restated Agreement is
executed by the parties hereto.
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"CODE" means the Internal Revenue Code of 1986, as amended from time to
time.
"CODE AFFILIATE" means each trade or business (whether or not
incorporated) which together with any Borrower is treated as a "single
employer" under subsection (b), (c), (m) or (o) of Section 414 of the Code.
"COMMITMENT" means, for the period from the Effective Date hereof to and
including the Termination Date, Bank's commitment to extend Loans to Borrowers
pursuant to the terms of this First Restated Agreement.
"DEBT" means: (a) all obligations of Borrowers for borrowed money, (b) all
obligations of Borrowers evidenced by bonds, notes, debentures or other similar
instruments, (c) all obligations of Borrowers to pay the deferred purchase
price of property or services, except trade accounts payable by Borrowers
arising in the ordinary course of business which are not past due by more than
sixty (60) days unless such trade accounts payable are being contested in good
faith by appropriate proceedings, (d) all obligations of Borrowers under any
Capitalized Leases, (e) all obligations of Borrowers under guaranties,
endorsements (other than for collection or deposit in the ordinary course of
business), assumptions or other contingent obligations, in respect of, or to
purchase or otherwise acquire, any obligation or indebtedness of Borrowers or
any other obligations, contingent or otherwise, (f) all obligations secured by
a Lien (except trade accounts payable by Borrowers arising in the ordinary
course of business which are not past due by more than sixty (60) days unless
such trade accounts payable are being contested in good faith by appropriate
proceedings secured by a vendor's lien) existing on property owned by Borrowers
whether or not the obligations secured thereby have been assumed by Borrowers
or are non-recourse to the credit of Borrowers, (g) all reimbursement
obligations of Borrowers relating to letters of credit, bankers' acceptances
and similar instruments but excluding performance bonds, and (h) all
liabilities of Borrowers in respect of unfunded vested benefits under any Plan;
provided, however, the term "Debt" shall not include money borrowed by
Borrowers to pay premiums on insurance policies obtained by Borrowers in the
ordinary course of Borrowers' business.
"DEFAULT" means any of the events specified in Article VII of this First
Restated Agreement, provided that any requirement for the giving of notice, the
lapse of time, or both, or any other condition, has been satisfied.
"DEFAULT RATE" means the per annum rate of interest equal to three percent
(3%) in excess of the LIBO Rate or the Prime Rate in effect on the date an
Event of Default occurs.
"EBIT" means, with respect to any Person for any period, consolidated net
income of such Person for such period, plus (i) Interest Expense for such
Person for such period, and (ii) tax expense for such period for taxes which
have been provided for by such Person for such period, to the extent that any
of the same are deducted from net revenues in determining such Person's
consolidated net income for such period.
"EFFECTIVE DATE OF AGREEMENT" shall mean September 24, 1997, the day of
the completion of the Initial Public Offering ("IPO") of UNIFAB International,
at which time a minimum net proceeds to UNIFAB International of $12,000,000.00
was contributed to Universal Fabricators Incorporated.
"ENVIRONMENTAL LAWS" means any and all federal, state and local laws,
regulations, ordinances, orders and requirements pertaining to health, safety
or the environment, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.
Section 9601 et seq., the Resource Conservation and Recovery Act of 1976, 42
U.S.C. Section 6901 et seq., the Clean Air Act, 42 U.S.C. Section 7401 et seq.,
the Clean Water ct. 33 U.S.C. Section 1251 et seq., the Toxic Substances
Control Act, 15 U.S.C. Section 2601 et seq., the Louisiana Environmental
Quality Act, La. R.S. 30:2001, et seq., and all similar laws, regulations and
requirements of any governmental authority or agency having jurisdiction over
Borrowers, or any of the property or assets of Borrowers, as such laws,
regulations and requirements may be amended or supplemented from time to time.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and all rules, regulations, rulings, and
interpretations adopted by the Internal Revenue Service or the Department of
Labor thereunder.
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<PAGE> 8
"ERISA AFFILIATE" means each trade or business (whether or not
incorporated) which together with any Borrower would be deemed to be a "single
employer" within the meaning of Section 4001 of ERISA.
"EVENT OF DEFAULT" means the occurrence of any event described in Article
VII hereof or the occurrence of any other event which with the lapse of time,
or lapse of time and notice to Borrowers would constitute an Event of Default.
"FUNDED INDEBTEDNESS" means principal plus accrued but unpaid interest for
borrowed money.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting Principles Board
of the American Institute of Certified Public Accountants and/or in statements
of the Financial Accounting Standards Board and/or their respective successors
and which are applicable in the circumstances as of the date in question.
Accounting principles are applied on a "consistent basis" when the accounting
principles observed in a current period are comparable in all material respects
to those accounting principles applied in a preceding period.
"GOVERNMENTAL AUTHORITY" means any state, nation or government or any
political subdivision thereof or any agency, department or branch thereof.
"HAZARDOUS SUBSTANCE" has the meaning specified in any applicable
Environmental Law and means any substance, product, waste, pollutant, material,
chemical, contaminant, constituent or other material which is or becomes
listed, regulated or addressed under any Environmental Law, including, without
limitation, asbestos, petroleum and polychlorinated biphenyls.
"INDEBTEDNESS" shall mean as to Borrowers all liabilities, obligations and
indebtedness of any and every kind and nature, including, without limitation,
all liabilities and all obligations to trade creditors, whether now or
hereafter owing, arising, due or payable, and howsoever evidenced, created,
incurred, acquired or owing, whether primary, secondary, direct, contingent,
fixed or otherwise excluding any minority interest in Borrowers and deferred
taxes of Borrowers. Without in any way limiting the generality of the
foregoing, Indebtedness shall specifically include the following without
duplication:
(a) amounts outstanding under this First Restated Agreement,
including, without limitation, amounts outstanding under the Note, any
Letter of Credit Agreement, and/or the Non-Revolving LC Facility;
(b) all obligations or liabilities of any Person that are secured
by any Lien upon property owned by Borrowers or any of their Subsidiaries,
even though Borrowers shall not have assumed or become liable for the
payment thereof;
(c) all obligations or liabilities created or arising under any
lease or conditional sale or other title retention agreement with respect
to property used or acquired by Borrowers, even though the rights and
remedies of the lessor, seller or Bank thereunder are limited to
repossession of such property;
(d) all Charges.
"INITIAL CLOSING DATE" means the date as of which the Agreement was
executed by the parties thereto.
"INTEREST COVERAGE" means the ratio of EBIT to Interest Expense.
"INTEREST EXPENSE" means with respect to any Person for any period,
interest expense for such Person for such period, determined in accordance with
GAAP.
"INTEREST PERIOD" means with respect to any LIBO Rate Advance:
(i) initially, the period commencing on the borrowing or
conversion date, as the case may be, with
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<PAGE> 9
respect to such LIBO Rate Advance and ending one, two, or
three months thereafter, as selected by Borrowers in its
notice to Bank of borrowing or notice of conversion, as
the case may be, given with respect thereto; and
(ii) thereafter, each period commencing on the day immediately
following the last day of the preceding interest Period
applicable to such LIBO Rate Advance and ending one, two
or three months thereafter, as selected by Borrowers by
notice to Bank not less than two (2) Business Days prior
to the last day of the then current Interest Period with
respect thereto; and provided, that:
(x) if any Interest Period would otherwise end on a day which
is not a Business Day, that Interest Period shall be
extended to the next succeeding Business Day unless the
result of such extension would be to carry such Interest
Period into another calendar month in which event such
Interest Period shall end on the immediately preceding
Business Day;
(y) any Interest Period which, with respect to a LIBO Rate
Advance under the Revolving Credit Facility, would
otherwise extend beyond the Termination Date shall end on
the Termination Date; and
(z) any Interest Period that begins on the last Business Day
of a calendar month (or on day for which there is no
numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last
Business Day of a calendar month.
"LETTERS OF CREDIT" shall mean the irrevocable stand-by letters of credit,
including performance and retainage letters of credit issued by Bank under
either the Revolving Credit Facility or the Non-Revolving LC Facility, to
support payment and performance obligations of Borrowers incurred by Borrowers
in the ordinary course of business, each in such form as may be approved by
Bank.
"LIBOR" means with respect to each Interest Period pertaining to a LIBO
Rate Advance, the rate per annum at which Dollar deposits are offered to prime
banks in the London interbank market on telerate, at approximately 11:00 a.m.,
London time, two (2) Business Days before the first day of such Interest
Period, in an amount comparable to the principal amount of the Advance which
shall be made by Bank during such Interest Period, for a period equal to such
Interest Period.
"LIBO RATE" means with respect to each day during an Interest Period for a
LIBO Rate Advance, an interest rate per annum equal to the sum of (a) two
percent (2%) plus (b) LIBOR.
"LIBO RATE ADVANCE" means an Advance which bears interest at the LIBO
Rate.
"LIEN" means any lien, judgment, mortgage, deed of trust, security
interest, tax lien, financing statement, pledge, charge, hypothecation,
assignment, preference, priority or other encumbrance of any kind or nature
whatsoever (including, without limitation, any conditional sale or title
retention agreement), whether arising by contract, operation of law or
otherwise; provided, however, that the term "Lien" shall exclude any statutory
mechanic's or laborer's lien arising in the ordinary course of the business of
Borrowers and its Subsidiaries which is cancelled or bonded within sixty (60)
days of its recordation.
"LOANS" mean collectively the Revolving Credit Facility and the
Non-Revolving LC Facility.
"LOAN DOCUMENTS" means, collectively, the Agreement, the First Restated
Agreement, the Note and any and all other documents, instruments and agreements
executed in connection with the Advances, and the Non-Revolving LC Facility as
the foregoing may be modified, supplemented and/or amended from time to time.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the business,
operations, property or financial or
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<PAGE> 10
other condition of Borrowers, or on the ability of Borrowers to perform its
obligations under the Loan Documents.
"MAXIMUM NON-REVOLVING LC FACILITY LOAN AMOUNT" shall mean, at any
particular time, an amount equal to $7,024,428.50.
"MAXIMUM REVOLVING CREDIT FACILITY LOAN AMOUNT" shall mean, at any
particular time, an amount equal to $20,000,000.00.
"NET WORTH" means the sum of the common stock, additional paid-in capital
and retained earnings accounts of Borrowers as shown, in conformity with GAAP,
on its balance sheet at the time of such determination, less the amount of any
treasury stock shown thereon, less any dividends paid, and less the amount of
any intangible assets (such as patents, trademarks, copyrights or goodwill)
shown thereon.
"NON-REVOLVING LC FACILITY TERMINATION DATE" shall be January 3, 2000.
"NOTE(S)" has the meaning ascribed to the term in Section 2.2(d) of this
First Restated Agreement.
"OBLIGATIONS" means all obligations, indebtedness and liabilities of
Borrowers to Bank, now existing or hereafter arising, whether direct, indirect,
related, unrelated, fixed, contingent, liquidated, unliquidated, joint,
several, or joint and several, including, without limitation, the obligations,
indebtedness, and liabilities of Borrowers under this First Restated Agreement,
the Agreement, the Note and the other Loan Documents, and all interest accruing
thereon and all attorneys' fees and other expenses incurred in the enforcement
or collection thereof.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to all or any of its functions under ERISA.
"PERMITTED INVESTMENT" means:
(a) Acquisitions;
(b) Capital Expenditures;
(c) the acquisition of current assets or liabilities arising from the
sale or lease of goods, the rendition of services or the extension of
credit in the ordinary course of business of the Borrowers including,
without limitation, investments in accounts, contract rights, chattel
paper (as defined in the UCC) and notes receivable;
(d) Cash Equivalent Investments;
(e) advances to officers, shareholders, and employees of Borrowers;
provided that such advances shall not exceed the aggregate amount of
$100,000 at any one time outstanding for all such officers, shareholders
and employees;
(f) Investments, loans, or advances by each Borrower to another
Borrower,
(g) joint ventures; and
(h) other investments, loans or advances permitted by the Loan
Documents.
"PERMITTED LIENS" shall mean (a) Liens for taxes, assessments or
governmental charges or levies of the same shall not at the time be delinquent
or thereafter can be paid without penalty, or are being contested in good faith
and by appropriate proceedings; (b) Liens imposed by law, such as carriers',
warehousemen's and mechanics' liens and other similar liens arising in the
ordinary course of business which secure payment of obligations not more than
sixty (60) days past due; (c) Liens arising out of pledges or deposits under
workmen's compensation laws, unemployment insurance, old age pensions, or other
social security or retirement benefits, or similar legislation; (d) utility
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<PAGE> 11
easements, building restrictions and such other encumbrances or charges against
real property as are of a nature generally existing with respect to properties
of a similar character and which do not in any material way affect the
marketability of the same or interfere with the use thereof in the business of
Borrowers; (e) lessors' interests under financing leases; (f) Liens on assets
of Borrowers not covered by the Loan Documents which liens secure obligations
of Borrowers in the ordinary course of business which in the aggregate for all
such obligations of Borrowers do not exceed $250,000; and (g) the Liens created
pursuant to the Loan Documents or other Liens in favor of Bank.
"PERSON" means an individual, partnership, limited liability company,
corporation, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of whatever
nature.
"PLAN" shall mean an employee pension benefit plan as defined in Section
3(2) and 3(37) of ERISA, maintained by Borrowers maintained by, or to which
contributions are made by, Borrowers, or for Borrowers' employees.
"PRIME RATE" means that rate of interest announced publicly by Chase
Manhattan Bank, N.A., in New York, New York from time to time as its prime or
base rate. Each change in the interest rate shall take effect on the effective
date of the change in the Prime Rate.
"PRIME RATE ADVANCES" shall mean an Advance which has interest at Prime
Rate.
"RESTRICTED PAYMENT" shall mean any payment on account of the purchase,
redemption or other retirement of a Borrower's Stock.
"REVOLVING CREDIT ADVANCE" shall have the meaning ascribed to it in Section
2.2(a).
"REVOLVING CREDIT FACILITY TERMINATION DATE" shall be August 31, 2000.
"SOLID WASTE" has the meaning specified in any applicable Environmental
Law.
"SUBSIDIARY" means, as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having ordinary
voting power (other than stock or such other ownership interests having such
power only by reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such corporation, partnership or
other entity, or the management of which is otherwise controlled, directly or
indirectly through one or more intermediaries, or both, by such Person.
"TANGIBLE NET WORTH" means, at a particular time, the amount, if any, by
which (a) the sum of all amounts which would be included under shareholders' or
members' equity on a consolidated basis of any Person, determined in accordance
with GAAP as of such date, less receivables of loans made to Affiliates,
exceeds (b) intangibles.
"TERMINATION DATE" means (i) with respect to the Revolving Credit Facility
August 31, 2000, (ii) with respect to the Non-Revolving LC Facility January 3,
2000.
"TOTAL DEBT" means the sum of Funded Indebtedness of Borrowers plus all
obligations of Borrowers under any Capital Leases.
"UNUSED COMMITMENT" shall be have the meaning ascribed to it in
Section 2.2(a).
"UNUSED COMMITMENT FEE" shall be 3/8% of one (1%) percent per annum of the
Unused Commitment.
SECTION 1.3 OTHER DEFINITIONAL PROVISIONS.
(a) All terms defined in this First Restated Agreement shall have the
defined meanings set forth in Section 1.2 hereof or the preamble of this First
Restated Agreement when used in any certificate or other documents made or
delivered pursuant hereto, unless otherwise specified therein.
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<PAGE> 12
(b) As used herein and in any certificate or other documents made or
delivered pursuant hereto, accounting terms not defined in Section 1.1 and
accounting terms partly defined in Section 1.2 relating to Borrowers or their
Subsidiaries, to the extent not defined, shall have the respective meanings
given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this First Restated Agreement shall refer to this First
Restated Agreement as a whole and not to any particular provision of this First
Restated Agreement, and "section," "Section," "Exhibit" and "Schedule"
references are to this First Restated Agreement and the Sections, Exhibits and
Schedules to this Agreement unless otherwise specified.
(d) The terms "Accounts," "Chattel Paper," "Contract Rights,"
"Deposit Accounts," "Documents," "General Intangibles," "Instruments,"
"Inventory," "Equipment," and "Fixtures" shall have the meanings as defined in
Article 9 of the Louisiana Commercial Laws (La. R.S. 10:9-101, et seq.).
ARTICLE II
AMOUNT AND TERMS OF CREDIT
SECTION 2.1 LOANS. Subject to the terms and conditions of this First
Restated Agreement, and relying on the representations and warranties contained
in this First Restated Agreement, and provided no Event of Default exists, Bank
agrees to make, and Borrowers agree to accept the Revolving Credit Facility and
the Non-Revolving LC Facility, (collectively the "Loans"), in the aggregate
principal amount at any one time outstanding not to exceed Twenty Million and
no/100 ($20,000,000.00) with respect to the Revolving Credit Facility, and Seven
Million Twenty Four Thousand Four Hundred Twenty Eight and 50/100
($7,024,428.50) Dollars with respect to the Non-Revolving LC Facility. Prior to
the Termination Date, Borrowers may utilize the Revolving Credit Facility by
borrowing, repaying or prepaying, and re-borrowing such Revolving Credit
Facility in whole or in part, all in accordance with the terms and conditions
hereof.
SECTION 2.2 REVOLVING CREDIT FACILITY.
(a) REVOLVING CREDIT FACILITY TERMS. Upon and subject to the terms and
conditions hereof, Bank agrees to make available, at any time from time to time,
on any Business Day until the Revolving Credit Facility Termination Date, and
upon the request of Borrowers therefor, advances (each, a "Revolving Credit
Advance"), and Letters of Credit in an aggregate principal amount which shall
not at any given time exceed the Maximum Revolving Credit Facility Loan Amount.
Borrowers may (i) borrow, repay and reborrow under the Revolving Credit
Facility, a principal amount not to exceed Ten Million and No/100
($10,000,000.00) Dollars for general corporate purposes, and (ii) may request
the issuance of up to Ten Million and No/100 ($10,000,000.00) Dollars of Letters
of Credit, including performance and retainage letters of credit. Borrowers may
only use a maximum of $5,000,000 of the Available Commitment under the Revolving
Credit Facility for acquisitions and capital expenditures. Each Revolving Credit
Advance may be drawn upon by Borrowers on any Business Day during the period
from the Effective Date until August 31, 2000, or such earlier date as may be
fixed by Borrowers. The amount of the Revolving Credit Facility available to
Borrowers from time to time under the Revolving Credit Facility shall be reduced
by the aggregate of the face amount of any outstanding undrawn Letters of Credit
issued under the Revolving Credit Facility and by all unpaid Advances made by
Bank to Borrowers pursuant to this First Restated Agreement and the remaining
amount of the Revolving Credit Facility shall constitute the "Unused
Commitment." Any draws made under the Letters of Credit by the beneficiaries
thereof shall constitute Advances as defined in this First Restated Agreement.
The Unused Commitment available under the Revolving Credit Facility shall be
restored but simultaneously reduced by the amount of any Advances which are made
to Borrowers to reimburse Bank for draws under the Letters of Credit.
(b) BORROWING PROCEDURE UNDER THE REVOLVING CREDIT FACILITY. Borrowers
shall give at least two (2) Business Day's prior telephonic notice (to be
confirmed in writing) of each proposed Letter of Credit and of each Advance to
be issued under the Revolving Credit Facility. If all conditions precedent to
the issuance of any such Letter of Credit or any such Advance have been met,
Bank will on the date requested ("Borrowing Date") make each Letter of Credit or
Advance available to Borrowers at Bank's office at 313 Carondelet Street, New
Orleans, Louisiana 70130.
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(c) TERMS AND CONDITIONS GOVERNING LETTERS OF CREDIT. The terms and
conditions governing the issuance of Letters of Credit by Bank on behalf of and
for the account of Borrowers shall be provided for by Bank in its standard form
of Application for Stand-By Letter of Credit, a copy of which is attached hereto
as Exhibit "A", with appropriate insertions and such additional terms and
conditions governing the issuance of specific Letters of Credit as may be agreed
upon by Borrowers and Bank at the time of a Borrower's request to Bank for the
issuance thereof. Letters of Credit may be issued at any time prior to the
Revolving Credit Facility Termination Date. Each such Letter of Credit shall
have a term not to exceed a period of four years from Effective Date of this
Agreement.
(d) NOTE EVIDENCING BORROWINGS. The Revolving Credit Facility shall be
evidenced by a promissory note of Borrowers payable to the order of Bank in the
original principal amount of TWENTY MILLION AND NO/100 DOLLARS ($20,000,000.00)
in the form set forth as Exhibit "B" to this First Restated Agreement (the note,
together with any and all renewals, modifications, extensions, amendments,
supplements and/or substitutions therefor being referred to as the "Note"), with
appropriate insertions, shall be dated the date hereof and shall be payable in
full on August 31, 2000. All Advances made by Bank to Borrowers pursuant to this
First Restated Agreement and all payments of principal shall be recorded by Bank
on the schedule attached to the Note, and shall constitute prime facie evidence
of the accuracy of the information therein recorded. Bank's failure to record or
to record correctly such Advances shall in no way affect Borrowers' obligation
to repay same.
(e) REVOLVING CREDIT FACILITY MATURITY DATE. The Revolving Credit
Facility Maturity Date shall be August 31, 2000 at which time the entire
principal balance and all accrued interest owed under the Revolving Credit
Facility shall be due and payable in full.
SECTION 2.3 NON-REVOLVING LC FACILITY.
(a) NON-REVOLVING LC FACILITY TERMS. Upon and subject to the terms and
conditions hereof, and upon completion of the Stand-by Letter of Credit
Application containing the same terms and conditions as the McDermott
International, Inc. Letters of Credit, Bank issued for the account of Universal
Fabricators Incorporated, performance and retainage Letters of Credit to
substitute and replace Letters of Credit which were issued for the account of
McDermott International, Inc. on behalf of Universal Fabricators Incorporated
(the "MII Letters of Credit"), not to exceed the Maximum Non-Revolving LC
Facility Loan Amount. The amount of the Non-Revolving LC Facility shall be
permanently reduced by the amount of each of the Letters of Credit upon the
existing maturity of each such Letter of Credit as set forth below:
(i) Letters of Credit maturing July 31, 1998 shall reduce the
Non-Revolving LC Facility by $1,655,383.60,
(ii) Letter of Credit maturing November 20, 1998 shall reduce the
Non-Revolving LC Facility by $532,164.00,
(iii) Letter of Credit maturing January 3, 2000 shall reduce the
non-revolving LC Facility by $2,415,704.00.
(b) NON-REVOLVING LC FACILITY MATURITY DATE. The Non-Revolving LC
Facility Maturity Date shall be January 3, 2000 at which time Borrowers shall
reimburse Bank for all principal amounts drawn under each outstanding Letter of
Credit, including interest thereon, owed under the Non-Revolving LC Facility,
shall be due and payable in full.
SECTION 2.4 INTEREST AND FEES.
(a) INTEREST. In the absence of an Event of Default, the unpaid
principal of the Loans shall bear interest on all funds advanced from the date
of disbursement by Bank to the date repaid by Borrowers, at a floating rate
equal to either the Prime Rate, adjusted daily, or the LIBO Rate, or some
combination thereof, as specified in Section 2.4(f) below. Accrued interest
under Prime Rate Advances will be due and payable quarterly in arrears on the
last day of each March, June, September and December commencing September 30,
1997. Accrued interest under the LIBO Rate Advances will be due and payable at
the end of each Interest Period. Interest after the Termination Date of the
Loans, for any reason whatsoever, shall be increased to the Default Rate and
shall be payable on demand.
(b) LETTER OF CREDIT FEE. Upon the issuance of a Letter of Credit by
Bank on behalf of and for the account of Borrowers, a fee of seven-eighths (7/8)
of one percent (1%) per annum on the principal amount of such Letter
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of Credit shall be payable annually by Borrowers for the number of days such
Letter of Credit is to remain outstanding. The first payment shall be due on the
date of issuance and subsequent payments shall be due on the anniversary date of
the issuance of the Letter of Credit for as long as the Letter of Credit remains
outstanding.
(c) UNDISBURSED COMMITMENT FEE. A fee on the average daily amount of
the Unused Commitment, during the period for which payment is made, of
three-eighths (3/8) of one percent (1%) per annum shall be payable by Borrowers
quarterly in arrears on the last day of each March, June, September and December
commencing December 31, 1997, and continuing until maturity.
(d) DEFAULT RATE. If an Event of Default shall occur in the payment on
or before the due date of any principal or interest due hereunder or under any
of the other Loan Documents, including, without limitation, the Note, Borrowers
will pay interest then (retroactively) from the date of the Event of Default on
such payment up to the date of the actual payment (as well after as before
judgment) at the Default Rate, without regard to whether there has been an
acceleration of the payment of principal. Such interest at the Default Rate
shall be payable on demand.
(e) METHOD OF CALCULATING INTEREST AND FEES. Interest at the Prime
Rate and any fee shall be computed on the basis of a year consisting of 365 days
and paid for actual days elapsed, and interest at the LIBO Rate shall be
computed on the basis of a year consisting of 360 days.
(f) INTEREST RATE OPTIONS. Until an Event of Default occurs, Borrowers
shall have the following interest rate options:
(i) Revolving Credit Advances to Borrowers may from time to time be
(i) LIBO Rate Advances, (ii) Prime Rate Advances, or (iii) any
combination thereof, as requested by Borrowers, with respect to
Advances and notices to Bank in accordance with paragraphs (ii),
(iii), and (iv) below; provided that no Advance shall be made to
Borrowers as a LIBO Rate Advance under the Revolving Credit
Facility after the day that is one month prior to the Revolving
Credit Facility Termination Date. For purposes of this paragraph,
(i), an Advance shall be deemed "made" upon an initial borrowing
by Borrowers under paragraph (ii) below, any conversion of such
Advance under paragraph (iii) below, and upon any continuation of
such Advance under paragraph (iv) below.
(ii) With respect to any new Advance, Borrowers shall provide Bank
with telephonic notice of its intended borrowing, which notice
must be received by Bank prior to 10:00 a.m., New Orleans time,
at least two (2) Business Days prior to the requested Borrowing
Date, which notice shall specify (x) the amount to be borrowed,
(y) the requested Borrowing Date, (z) whether the borrowing is to
be of LIBO Rate Advances or Prime Rate Advances or a combination
thereof, (aa) the respective amounts of each such type of
Advance, and (bb) if the borrowing is to be entirely or partly of
LIBO Rate Advances, the respective lengths of the Interest
Periods therefor.
(iii) Borrowers may elect from time to time to convert any of its LIBO
Rate Advances to Prime Rate Advances by giving Bank telephonic
notice of such election, which notice must be received by Bank
prior to 10:00 a.m., New Orleans time, at least two (2) Business
Days prior to the requested conversion; provided that any such
conversion, of LIBO Rate Advances shall only be made on the last
day of an Interest Period with respect thereto. Borrowers may
elect from time to time to convert any of its Prime Rate Advances
to LIBO Rate Advances by giving Bank telephonic notice of such
election, which notice must be received by Bank prior to 10:00
a.m., New Orleans time, at least two (2) Business Days prior to
the requested conversion. Any such notice of conversion to LIBO
Rate Advances shall specify the length of the initial Interest
Period thereof and the amount of the Prime Rate Advance to be
converted. All or any part of Borrowers' outstanding LIBO Rate
Advances or Prime Rate Advances may be converted as provided
herein; provided that (i) no Prime Rate Advance may be converted
into a LIBO Rate Advance when any Event of Default has occurred
and is continuing, (ii) partial conversions of Prime Rate
Advances to LIBO Rate Advances shall be in an aggregate principal
amount of $500,000 or a whole multiple of $100,00 in excess
thereof, (iii) partial conversions of LIBO Rate Advances to Prime
Rate Advances shall be in an aggregate principal amount of
$500,000 or a whole multiple of $100,000 in excess thereof, and
(iv) no Prime Rate Advance under the Revolving Credit Facility
may be converted into a LIBO Rate Advance after the date that is
one month prior to the Revolving Credit Facility Termination
Date.
(iv) Any LIBO Rate Advances may be continued as such upon the
expiration of an Interest Period with respect thereto by
Borrowers giving Bank telephonic notice, which notice must be
received by Bank
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prior to 10:00 a.m., New Orleans time, at least two (2) Business
Days prior to the requested continuation; provided, that (a) no
LIBO Rate Advance may be continued as such when any Event of
Default has occurred and is continuing, (b) no LIBO Rate Advances
under the Revolving Credit Facility may be continued as such
after the date which is one month prior to the Revolving Credit
Facility Termination Date, and (c) any such continuation shall be
made only if, after giving effect thereto, paragraph (v) shall
not be contravened. If Borrowers shall fail to give such notice
or if such continuation is not permitted, then Borrowers shall be
deemed to have requested that the LIBO Rate Advance be converted
automatically to a Prime Rate Advance on the last day of the then
current Interest Period with respect thereto.
(v) All borrowings, conversions and continuations of Advances
thereunder by Borrowers and all selections of Interest Periods
hereunder by Borrowers shall be in such amounts and be made
pursuant to such elections so that, after giving effect thereto,
the aggregate principal amount of the Advances to Borrowers
constituting each LIBO Rate tranche (i.e., LIBO Rate Advances
made on the same day and having the same Interest Period) shall
be equal to $500,000 or a whole multiple of $100,000 in excess
thereof. If Borrowers have no Prime Rate Advances outstanding,
Borrowers may have a maximum of five (5) LIBO Rate tranches in
aggregate in effect at any one time, and, if Borrowers have Prime
Rate Advances outstanding, Borrowers may have a maximum of four
(4) LIBO Rate tranches in aggregate in effect at any one time.
(vi) Each determination of an interest rate by Bank pursuant to any
provision of this First Restated Agreement shall be conclusive
and binding on Borrowers in the absence of manifest error. Bank
shall, at the request of Borrowers, deliver to Borrowers a
statement showing the quotations used by Bank in determining the
LIBO Rate.
(vii) If prior to the first day of any Interest Period, Bank shall have
determined (which determination shall be conclusive and binding
upon Borrowers) that either:
(a) adequate and reasonable means do not exist for
ascertaining the LIBO Rate for such Interest Period; or
(b) the interest rate determined for such Interest Period does
not adequately and fairly reflect the cost to Bank of making,
maintaining or funding its LIBO Rate Advances during such
Interest Period, in either case with respect to (i) proposed
Advances that Borrowers have requested be made as LIBO Rate
Advances, (ii) LIBO Rate Advances that will result from the
requested conversion of Prime Rate Advances into LIBO Rate
Advances, or (iii) the continuation of LIBO Rate Advances beyond
the expiration of the then current Interest Period with respect
thereto; then Bank shall give telephonic notice thereof to
Borrowers as soon as practicable thereafter. Unless Borrowers
notify Bank upon receipt of such notice that it wishes to rescind
or modify its request, Bank shall arrange that (x) any affected
LIBO Rate Advances requested by Borrowers shall be made as Prime
Rate Advances, (y) any Prime Rate Advances to Borrowers that were
to have been converted to LIBO Rate Advances shall be continued
as, or converted to, Prime Rate Advances, and (z) all outstanding
LIBO Rate Advances to Borrowers shall be converted, on the last
day of the then current Interest Period with respect thereto, to
Prime Rate Advances. Until such notice has been withdrawn by
Bank, no further LIBO Rate Advances shall be made to Borrowers,
nor shall Borrowers have the right to convert Prime Rate Advances
to LIBO Rate Advances.
(g) CONVERSION OF LIBO RATE DUE TO CHANGE OF LWAS OR IMPOSSIBILITY.
Notwithstanding any other provision in this First Restated Agreement, if the
adoption of or any change in any law or regulation or in the interpretation or
application thereof (whether or not having the force of law) shall make it
unlawful or impossible for Bank to make, maintain or fund LIBO Rate Advances as
contemplated by this First Restated Agreement: (a) the commitment of Bank
hereunder to make LIBO Rate Advances, continue LIBO Rate Advances as such and
convert Prime Rate Advances to LIBO Rate Advances shall forthwith be canceled;
(b) the Advances then outstanding as LIBO Rate Advances, if any, shall be
converted automatically to Prime Rate Advances on the respective last days of
the then current Interest Periods with respect to such Advances or within such
earlier period as required by law; and (c) Borrowers shall pay Bank such
amounts, if any, as may be required pursuant to paragraph (h) below.
(h) LIBO RATE INDEMNITY. Borrowers agree to indemnify Bank and to hold
Bank harmless from any loss or expense which Bank may sustain or incur as a
consequence of (a) the making by Borrowers of a prepayment (whether mandatory or
optional) or any other payment of a LIBO Rate Advance on a day which is not the
last day of
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the Interest Period with respect thereto, and/or (b) the conversion, whether
voluntary or involuntary, of a LIBO Rate Advance into a Prime Rate Advance
pursuant to this Section, 2.4(f), or otherwise on a day which is not the last
day of an Interest Period with respect thereto, including, without limitation,
in each case any such loss or expense arising from the reemployment of funds
obtained by it to maintain its LIBO Rate Advances hereunder or from fees payable
to terminate the deposits from which such funds were obtained. This covenant
shall survive the termination of this First Restated Agreement and the payment
of the Advances and all other obligations hereunder.
SECTION 2.5 PAYMENTS, PREPAYMENTS, AND REDUCTION OR TERMINATION OF THE
REVOLVING CREDIT FACILITY.
(a) METHOD OF PAYMENT. All payments of principal, interest and other
amounts to be made by Borrowers under the this First Restated Agreement, or the
Note or other Loan Documents shall be made to Bank, for the account of Bank, at
313 Carondelet Street, New Orleans, Louisiana 70130 (or at such other address as
Bank may notify Borrowers in writing), in immediately available funds, without
setoff, deduction or counterclaim, not later than 2:00 p.m. (New Orleans,
Louisiana time) on the date on which such payment shall become due (each such
payment made after such time on such due date to be deemed to have been made on
the next succeeding Business Day) and, in the case of payments of principal
under the Revolving Credit Facility, in an amount of at least $100,000.00, or an
integral multiple thereof. Borrowers shall, at the time of making each such
payment, specify to Bank the sums payable by Borrowers under this First Restated
Agreement, the Notes or other Loan Documents to which such payment is to be
applied. Notwithstanding the foregoing sentence, unless and until an Event of
Default shall have occurred and be continuing (in which event such payments
shall be applied by Bank in their sole discretion), all payments received by
Bank shall be applied first to the payment of all amounts (except principal and
interest) at the time due and unpaid hereunder or under any of the other Loan
Documents, then to interest hereon or thereon accrued to the date of payment and
finally to the unpaid principal hereunder or thereunder. Whenever any payment
under this First Restated Agreement, the Notes or any other Loan Document shall
be stated to be due on a day that is not a Business Day, such payment may be
made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of the payment of interest.
(b) PAYMENTS WITHOUT DEDUCTION. Borrowers shall pay principal,
interest and other amounts under, and in accordance with the terms of, this
First Restated Agreement, the Note and the other Loan Documents free and clear
of and without deduction for any and all present and future taxes, levies,
imposts, deductions, charges, withholdings and all other liabilities whatsoever.
(c) REDUCTION OF CREDIT. Borrowers may from time to time, upon at least
three (3) Business Day's prior telephonic notice (confirmed in writing) to Bank,
permanently reduce the amount of the Commitment, provided that at no time may
the Commitment be reduced by Borrowers to an amount less than the sum of the
outstanding principal of all Advances and the undrawn amount of Letters of
Credit. Any such reduction of the Commitment shall be in an amount of
$100,000.00 or an integral multiple thereof.
SECTION 2.6 INDEMNITY. Borrowers shall indemnify and hold Bank harmless
from and against any and all suits, actions, proceedings, claims, damages,
losses, liabilities and expenses (including, without limitation, reasonable
attorneys' fees and disbursements, including those incurred upon any appeal)
which may be instituted or asserted against or incurred by Bank as the result of
its having entered into any of the Loan Documents or extended credit hereunder;
provided, however, that Borrowers shall not be liable for such indemnification
to such indemnified Person to the extent that any such suit, action, proceeding,
claim, damage, loss, liability or expense results from such indemnified Person's
gross negligence or willful misconduct.
SECTION 2.7 ACCESS. Bank and any of its officers, employees and/or agents
shall have the right, exercisable as frequently as Bank reasonably determines to
be appropriate, during normal business hours (or at such other times as may
reasonably be requested by Bank), to inspect the properties and facilities of
Borrowers and to inspect, audit and make extracts from all of Borrowers'
records, files and books of account. Borrowers shall deliver any document or
instrument reasonably necessary for Bank to obtain records from any service
bureau maintaining records for Borrowers, and shall maintain duplicate records
or supporting documentation on media, including, without limitation, computer
tapes and discs owned by Borrowers. Borrowers shall instruct their banking and
other financial institutions to make available to Bank such information and
records as Bank may reasonably request.
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ARTICLE III
CONDITIONS PRECEDENT
SECTION 3.1 CONDITIONS TO LOANS. Notwithstanding any other provision of
this First Restated Agreement and without affecting in any manner the rights of
Bank hereunder, unless and until the hereinbelow set forth conditions are
satisfied and there shall have been delivered to Bank, evidence in form and
substance satisfactory to Bank, Borrowers shall have no rights to obtain any
Advances or Letters of Credit pursuant to this First Restated Agreement, and
Bank shall not be obligated to make the funding of the Loans hereunder, the
conditions being the receipt by Bank of the following:
(a) COMPLETION OF INITIAL PUBLIC OFFERING OF UNIFAB INTERNATIONAL. The
Effective Date of the Agreement was September 24, 1997 which was the day of the
completion of the Initial Public Offering ("IPO") of UNIFAB International, and
the receipt by UNIFAB International of the of minimum net proceeds of
$12,000,000.00 by UNIFAB International.
(b) LOAN DOCUMENTS. The Loan Documents (and all documents related
thereto), each prepared to the satisfaction of counsel for Bank, duly executed
by authorized officers of Borrowers;
(c) NOTE. Borrowers' duly executed Note payable to the order of Bank.
(d) RESOLUTIONS. Resolutions of the boards of directors of Borrowers,
certified by the Secretaries or Assistant Secretaries of Borrowers, as of the
Initial Closing Date and the Closing Date, to be duly adopted and in full force
and effect on such date, authorizing (i) the consummation of each of the
transactions contemplated by the Loan Documents and (ii) specific officers to
execute and deliver this First Restated Agreement and the other Loan Documents.
(e) GOVERNMENTAL CERTIFICATES. Governmental certificates, dated the
most recent practicable date prior to the date hereof, showing that each
Borrower is organized and in good standing in the jurisdiction of their
organization and are qualified as a foreign corporation and in good standing in
all other jurisdictions in which they are qualified to transact business.
(f) FINANCIAL STATEMENT CERTIFICATION. The financial statements
referred to in Section 4.5, each certified by the chief financial officer of
each Borrower.
(g) CERTIFICATION OF CHIEF FINANCIAL OFFICER. Certificates of either
the chief financial officer or the chief executive officer of each Borrower,
satisfactory in form and substance to Bank, stating that, as of the Closing Date
and the date hereof, to the best of their knowledge, no Material Adverse Effect
has occurred to the business, operations, prospects, properties or financial or
other condition of Borrowers taken as a whole since June 30, 1997.
(h) CERTIFICATE OF CHIEF EXECUTIVE OFFICER. A certificate of either the
chief executive officer or chief financial officer of each Borrower,
satisfactory in form and substance to Bank, stating (i) that all of the
representations and warranties contained herein or in any of the Loan Documents
are correct on and as of the Closing Date and the date hereof, as though made on
and-as of such date, and no event has occurred and is continuing, or would
result from the Revolving Credit Advance if made on the Closing Date to date
hereof, which constitutes or would constitute a Default or an Event of Default,
(ii) that Bank has a copy of each agreement or plan or, if not available, a
summary thereof, providing for employment, severance, deferred payments, bonus
payments or accruals, profit sharing arrangements, stock option or stock
appreciation rights, incentive payments, pension or employment benefit
contributions or similar payments or arrangements for the benefit of Borrowers'
management personnel, which has been approved by Bank.
(i) CERTIFICATE OF INCUMBENCY AND SIGNATURES. Certificates of the
Secretary or an Assistant Secretary of each Borrower, dated the Closing Date and
the date hereof, as to the incumbency and signatures of the officers of each
Borrower executing this First Restated Agreement, the Note, any of the Loan
Documents and other ancillary agreements and any other certificate or other
document to be delivered pursuant hereto or thereto, together with evidence of
the incumbency of such Secretary or Assistant Secretary.
(j) ATTORNEY OPINION. The opinion of Jones, Walker, Waechter,
Poitevent, Carrere & Denegre, L.L.P., counsel to Borrowers, addressed to Bank,
that (a) the status of each Borrower is as set forth in the preamble and that
they are duly organized, validly existing and in good standing under the laws of
the State of their creation and qualified and in good standing in the State of
Louisiana; (b) Borrowers have full power to execute, deliver and
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perform its obligations under this First Restated Agreement, the Note and the
Loan Documents to which it is a party; (c) such actions have been duly
authorized by all necessary required action, and are not in conflict with any
provision of law or of the charter, by-laws or operating agreement of each
Borrower, as may be the case, nor to the best of counsel's knowledge, in
conflict with any agreement binding upon Borrowers; and (e) this First Restated
Agreement, the Notes, and the Loan Documents are the legal and binding
obligations of Borrowers enforceable in accordance with their respective terms,
except as enforcement may be limited by applicable bankruptcy, reorganization,
moratorium or similar laws.
(k) PAYMENT OF FEES AND EXPENSES. Payment by Borrowers of all
reasonable fees and expenses of Bank's counsel.
(l) ADDITIONAL INFORMATION. Such additional information and materials
as Bank may reasonably request, including, without limitation, copies of any
debt agreements, security agreements and other material contracts.
SECTION 3.2 CONDITIONS TO EACH ADVANCE AND/OR LETTER OF CREDIT. It shall be
a further condition to and funding of an Advance and/or issuance of a Letter of
Credit that the following statements shall be true on the date of each such
funding or issuance:
(a) CONTINUATION OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of Borrowers contained herein or in any of the
Loan Documents shall be correct on and as of the date of each such Advance
and/or issuance of a Letter of Credit as though made on and as of such date,
except to the extent that any such representation or warranty expressly relates
to an earlier date and for changes therein permitted and contemplated by this
First Restated Agreement.
(b) NO EVENT OF DEFAULT. No event shall have occurred and be
continuing, or would result from the funding of any Advance and/or issuance of a
Letter of Credit, which constitutes or would constitute a Default or an Event of
Default.
(c) MAXIMUM ADVANCES. The aggregate unpaid principal amount of the
Revolving Credit Facility after giving effect to funding such Advance or the
issuance of such Letter of Credit, shall not exceed the Maximum Revolving Credit
Facility Loan Amount.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BORROWERS
Borrowers represents and warrants to Bank that:
SECTION 4.1 CORPORATE EXISTENCE: COMPLIANCE WITH LAW. Each Borrower (i) is
duly organized, validly existing and in good standing under the laws of the
state of their creation; (ii) if organized in corporate form (x) are duly
qualified as foreign corporations and in good standing under the laws of each
jurisdiction where the failure to be so qualified would have a Material Adverse
Effect, (y) have the requisite corporate power and authority and the legal right
to own, pledge, mortgage or otherwise encumber and operate their properties, to
lease the property they operate under lease, and to conduct their business as
now, heretofore and proposed to be conducted, (z) are in compliance with their
certificate or articles of incorporation and by-laws, (z) are in compliance with
their certificate or articles of incorporation and by-laws ; (iii) if organized
as a limited liability company, (x) have the requisite corporate power and
authority and the legal right to own, pledge, mortgage or otherwise encumber and
operate their properties, to lease the property they operate under lease, and to
conduct their business as now, heretofore and proposed to be conducted, (z) are
in compliance with their certificate or articles of incorporation and operating
agreements; (iv) have all licenses, permits, consents or approvals from or by,
and have made all filings with, and have given all notices to, all governmental
authorities having jurisdiction, to the extent required for such ownership,
operation and conduct; (v) are in compliance with all applicable provisions of
law where the failure to comply would have a Materially Adverse Effect on the
business, operations, prospects, assets or financial or other condition of
Borrowers, and each Borrower's ability to pay the obligations in accordance with
the terms thereof.
SECTION 4.2 EXECUTIVE OFFICES. The current locations of Borrowers'
executive offices and principal place of business are set forth on Schedule 4.2
hereto.
SECTION 4.3 SUBSIDIARIES. No Borrower has Subsidiaries other than UNIFAB
International, which has as its only subsidiaries, UNIFAB and PIM.
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SECTION 4.4 CORPORATE POWER: AUTHORIZATION: ENFORCEABLE OBLIGATIONS. The
execution, delivery and performance by Borrowers of the Loan Documents, and all
instruments and documents to be delivered by Borrowers, to the extent they are
parties thereto, hereunder and thereunder: (i) are within Borrowers' powers;
(ii) have been duly authorized by all necessary or proper corporate action;
(iii) are not in contravention of any provision of Borrowers' respective
certificates or articles of incorporation, by-Laws, or operating agreement; (iv)
will not violate any material law or regulation, or any order or decree of any
court or governmental instrumentality; (v) will not conflict with or result in
the breach or termination of, constitute a default under or accelerate any
performance required by, any indenture, mortgage, deed of trust, lease,
agreement or other instrument to which Borrowers are a party or by which
Borrowers or any of their property are bound which conflict, breach,
termination, default or acceleration would have a Material Adverse Effect; (vi)
will not result in the creation or imposition of any Lien upon any of the
property of Borrowers, and (vii) do not require the consent or approval of any
governmental body, agency, authority or any other Person. At or prior to the
Closing Date, and as of even date hereof, and the date hereof as the case may
require, each of the Loan Documents shall have been duly executed and delivered
for the benefit of or on behalf of each Borrower, as the case may be, and upon
the Effective Date each shall then constitute a legal, valid and binding
obligation of each Borrower, to the extent they are parties thereto, enforceable
against them in accordance with its terms except as may be limited by applicable
bankruptcy laws and general principles of equity.
SECTION 4.5 FINANCIALS AND PROJECTIONS.
(a) BORROWERS' FINANCIALS Universal Fabricators Incorporated audited
financial statement as of March 31, 1997, a copy of which was furnished to Bank,
was prepared in conformity with GAAP applied on a basis consistent with that of
the preceding fiscal year and period, presented fairly the financial condition
of Universal Fabricators Incorporated as of such date and the results of its
operations for the periods then ended. Universal Fabricators Incorporated's
unaudited financial statement as of June 30, 1997, a copy of which was furnished
to Bank, except for the absence of footnotes normally associated with financial
statements prepared in accordance with GAAP, was prepared in conformity with
GAAP and presented fairly the financial condition of Universal Fabricators
Incorporated as of such date and the results of its operations for the periods
then ended. Since March 31, 1997 to the date hereof, there has been no material
adverse change in Universal Fabricators Incorporated's financial condition.
(b) UNIFAB INTERNATIONAL'S FINANCIALS Audited financials of UNIFAB
International as of March 31, 1997, a copy of which has been furnished to Bank
prior to the date of this Agreement, have been prepared in accordance with GAAP.
SECTION 4.6 LITIGATION. To the best of Borrowers' knowledge, after due
inquiry, no litigation or governmental proceedings are pending or threatened
against Borrowers, the results of which might materially affect Borrowers'
financial condition or operations, except those referred to in a schedule
furnished contemporaneously herewith and attached hereto as Schedule 4.6.
SECTION 4.7 LIENS. None of the assets of Borrowers are subject to any Lien
except the Permitted Liens.
SECTION 4.8 PURPOSE. (a) The proceeds of the Revolving Credit Facility
shall be used by Borrowers for general corporate purposes including acquisitions
and capital expenditures and for the issuance of certain Standby Letters of
Credit, including performance and retainage letters of credit, and (b) the
proceeds of Non-Revolving LC Facility were used for the reissuance for the
account of Universal Fabricators Incorporated of certain performance and
retainage Letters of Credit issued for the account of McDermott International,
Inc. on behalf of Universal Fabricators Incorporated.
SECTION 4.9 USE OF PROCEEDS: MARGIN SECURITIES. Borrowers are not engaged
in the business of purchasing or selling margin stock (as defined in Regulation
U of the Board of Governors of the Federal Reserve System) or extending credit
to others for the purpose of purchasing or carrying margin stock and no part of
the proceeds of any borrowing hereunder will be used to purchase or carry any
margin stock or for any other purpose which would violate any of the margin
regulations of such Board of Governors.
SECTION 4.10 COMPLIANCE THE ERISA. Borrowers are in compliance with all
statutes and governmental rules and regulations applicable to it, including,
without limitation, ERISA. No condition exists or event or transaction has
occurred in connection with any Plan, which could result in Borrowers' incurring
any material liability, fine or penalty. No Reportable Event (as defined in
ERISA) has occurred with respect to any such Plan. Borrowers has not withdrawn
from any such Plan or initiated steps to do so and no steps have been taken to
terminate any such Plan.
SECTION 4.11 CONSENTS. No consent, approval or authorization of, or
registration or declaration with, any
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federal or state governmental authority or other regulatory agent for the
validity of the execution and delivery or for the performance by Borrowers of
the Loan Documents is required.
SECTION 4.12 TAXES. All Federal, state, local, foreign, and franchise tax
returns, reports and statements required to be filed by each Borrower have been
filed with the appropriate governmental agencies in all jurisdictions in which
such returns, reports and statements are required to be filed, and all Charges
and other impositions shown thereon to be due and payable have been timely paid
prior to the date on which any fine, penalty, interest, late charge or loss may
be added thereto for nonpayment thereof, or any such fine, penalty, interest,
late charge or loss has been paid, or has reserved reasonable amounts for such
Charges, fines, interest, loss, late charges and/or interest upon the books of
such company as the case may be. Each Borrower has paid when due and payable all
requisite Charges on its income, business, property or operations, including
income taxes, franchise taxes, real and personal property taxes, inventory and
merchandise taxes, capital stock taxes, sales and use taxes, value added taxes,
excise taxes, transfer taxes, employee income withholding, social security and
unemployment taxes, and interest and penalties thereon, or has reserved
reasonable amounts for such taxes, interest and/or penalties upon the books of
such company, as the case may be. Proper and accurate amounts have been withheld
by each Borrower from its employees for all periods in full and complete
compliance with the tax, social security and unemployment withholding provisions
of applicable Federal, state, local and foreign law and such withholdings have
been paid to the respective governmental agencies.
SECTION 4.13 OPERATION OF BUSINESS. Each Borrower possesses all licenses,
permits, franchises, patents, copyrights, trademarks and trade names, or rights
thereto, to conduct its business substantially as now conducted and as presently
proposed to be conducted, and each Borrower is not in violation of any valid
rights of others with respect to any of the foregoing.
SECTION 4.14 RIGHTS IN PROPERTIES: LIENS. Borrowers have good and
indefeasible title to its properties and assets, real and personal, including
the properties and assets reflected in the financial statements, and none of the
properties, assets or leasehold interests of Borrowers are subject to any Lien,
except for Permitted Liens.
SECTION 4.15 DEBT. Borrowers have no Debt, except as disclosed in the
financial statements described in Section 4.5 hereof and as otherwise permitted
by this First Restated Agreement.
SECTION 4.16 DISCLOSURE No statement, information, report, representation
or warranty made by Borrowers in this First Restated Agreement or in any of the
other Loan Documents or furnished by Borrowers to Bank in connection with the
negotiation or preparation of this First Restated Agreement, or any amendment
hereto, contains any untrue statement of a material fact or omits to state any
material fact necessary to make the statements herein or therein not misleading.
There is no fact known to Borrowers that has not been disclosed in writing to
Bank which has a Material Adverse Effect, or which might in the future have a
Material Adverse Effect, on the business, assets, financial condition or
operations of Borrowers.
SECTION 4.17 REGISTERED OFFICE: PRINCIPAL PLAC OF BUSINESS. The principal
place of business, chief executive office and registered office of each Borrower
and the place where each Borrower keeps its books and records are set forth on
Schedule 4.17. Borrowers have never done any business from any location other
than as set forth on Schedule 4.17.
SECTION 4.18 INVESTMENT COMPANY ACT. Borrowers are not an "Investment
Company" within the meaning of the Investment Company Act of 1940, as amended.
SECTION 4.19 OTHER AGREEMENTS. Borrowers are not parties to any indenture,
loan or credit agreement, or to any lease or other agreement or instrument, or
subject to any charter of corporate restriction which would violate the terms of
this First Restated Agreement. Borrowers are not in default in any respect in
the performance, observance or fulfillment of any of the obligations, covenants
or conditions contained in any agreement or instrument which would reasonably
have a Material Adverse Effect.
SECTION 4.20 COMPLIANCE WITH LAW. Borrowers are in compliance with all
laws, rules, regulations, orders and decrees which are applicable to Borrowers,
or any of their respective properties. Without limiting the generality of the
foregoing:
(a) EMPLOYMENT MATTERS Borrowers are in full compliance with all
applicable laws, rules, regulations and governmental standards regarding
employment, including, without limitation, the minimum wage and overtime
provisions of the Fair Labor Standards Act, as amended (29 U.S.C. Sections
201-219), and the regulations
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promulgated thereunder, the non-compliance of which would reasonably have had a
Material Adverse Effect.
(a) ENVIRONMENTAL MATTERS.
(i) Borrowers and all of their respective properties, assets
and operations are in compliance with all Environmental Laws, the non-compliance
of which would reasonably have had a Material Adverse Effect. Borrowers are not
aware of or has not received notice of, any past, present or future conditions,
events, activities, practices or incidents which may interfere with or prevent
the compliance or continued compliance of Borrowers with all Environmental Laws.
(ii) Borrowers have obtained, or are in the process of
obtaining, all permits, licenses and authorizations and have filed all plans
which are required under Environmental Laws in order to conduct their business
and/or own their properties and assets including, without limitation, all
Louisiana air emission permits required under any Environmental Law in order to
conduct Borrowers' business and/or own their assets or properties.
(iii) No Hazardous Substances or Solid Wastes exist on, about or
within or have been used, generated, stored, transported, disposed of on, or
released from any of the properties or assets of Borrowers except in substantial
compliance with Environmental Laws.
SECTION 4.21 CORPORATE NAME. The exact corporate name of each Borrower as
it appears in its articles of incorporation is as set forth in the introduction
of this First Restated Agreement.
SECTION 4.22 TAXPAYER I.D. NUMBERS. The Federal Taxpayer Identification
Number of each Borrower is: (x) UNIFAB International, Inc., 72-1382998,(y)
Universal Fabricators, L.L.C., ___________________, and (z) PIM, L.L.C.,
72-1411461.
SECTION 4.23 CONTINUING REPRESENTATIONS AND RECORDS. Each request by
Borrowers for an Advance shall constitute a representation and warranty by
Borrowers as of the date of such request for an Advance that all representations
and warranties made herein are correct on and as of such Borrowing Date as if
made on and as of such date, except to the extent that any such representation
or warranty expressly relates to an earlier date and for changes therein
permitted and contemplated by this First Restated Agreement.
ARTICLE V
AFFIRMATIVE COVENANTS
From the Effective Date of the Agreement and thereafter until the
Termination Date, and until the Note and other liabilities of Borrowers
hereunder are paid in full and all other obligations and liabilities under the
Loan Documents are performed and paid in full, Borrowers agree that they will:
SECTION 5.1 FINANCIAL STATEMENTS AND RECORDS. Borrowers shall furnish to
Bank:
(a) promptly after the sending or filing thereof, copies of all reports
which each Borrower, as the case may require, sends to any of its public
security holders, and copies of all Forms 10-K, 10-Q and 8-K, Schedules 13E-4
(including all exhibits filed therewith) and registration statements, and any
other filings or statements that a Borrower files with the Securities and
Exchange Commission or any national securities exchange;
(b) within ninety-five (95) days after the end of each fiscal year, a
copy of UNIFAB International's annual audited consolidated financial statements,
audited by independent certified public accountants of nationally recognized
standing selected by the Borrowers and reasonably satisfactory to Bank, prepared
in conformity with GAAP, and unaudited consolidating financial statements, to
include financial statements of each Borrower (describing assets, liabilities,
and results of operations for each Borrower);
(c) as soon as available, but in any event within fifty (50) days after
the end of each fiscal quarter, a copy of the unaudited consolidated and
consolidating quarterly financial statements of UNIFAB International to include
each Borrower's financial statements, prepared in reasonable detail and in
accordance with GAAP applied consistently throughout the period reflected
therein;
(d) as soon as available, but in any event within thirty (30) days after
the end of each month a monthly aging of accounts receivable certified by the
chief executive officer or the chief financial officer of UNIFAB
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International, reflecting accounts receivable according to payor mix in the
following categories: 0-30 days; 31-60 days; 61-90 days; 91 days and over of
Borrowers' accounts receivable;
(e) as soon as available, but in any event within fifty (50) days after
the end of each fiscal quarter for the first three quarterly periods of each
fiscal year, a compliance certificate, in form acceptable to Bank, setting
forth the calculations of all financial covenants and certifying as to the
accuracy of all calculations and each Borrower's compliance with all financial
covenants, which certificate is to be submitted with copies of any 10-Q filing
of a Borrower, and within ninety-five (95) days after the end of each fiscal
year, a compliance certificate with the 10-K filing of UNIFAB International, as
required;
(f) Borrowers shall provide to Bank, within 14 Business Days after
request, such other information respecting Borrowers' business, financial
condition or prospects as Bank may, from time to time, reasonably request.
(g) Each Borrower authorizes Bank to communicate directly with its
independent certified public accountants, with notice to such Borrower, and
authorize those accountants to disclose to Bank any and all financial
statements and other supporting financial documents and schedules including
copies of any management letter with respect to the business, financial
condition and other affairs of such Borrower.
(h) Each Borrower shall permit access by Bank to the books and records
and other property of such Borrower during normal business hours and upon
reasonable notice and permit Bank to make copies of said books and records.
SECTION 5.3 MAINTENANCE OF, EXISTENCE AND CONDUCT OF BUSINESS. Borrowers
shall:
(a) do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence, rights and franchises; Borrowers
shall notify Bank immediately if there is a change in any Borrowers' structure;
(b) continue to conduct its business substantially as now conducted or
as otherwise permitted hereunder,
(c) at all times maintain, preserve and protect all of its trademarks
and trade names, and preserve all the remainder of its property in use or useful
in the conduct of its business and keep the same in good repair, working order
and condition (taking into consideration ordinary wear and tear) and from time
to time make or cause to be made, all needful and proper repairs, renewals and
replacements, betterments and improvements thereto consistent with industry
practices, so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; and
(d) transact business and invoice all accounts in such names as Borrowers
may from time use in conducting its businesses.
SECTION 5.3 PAYMENT OF OBLIGATIONS.
(a) Borrowers shall (i) pay and discharge or cause to be paid and
discharged all its Indebtedness, including, without limitation, all the
Obligations, as and when due and payable, subject to the restrictions set forth
in this First Restated Agreement, and (ii) pay and discharge or cause to be
paid and discharged promptly all (x) Charges imposed upon it, its income and
profits, or any of its property (real, personal or mixed), and (y) lawful
claims for labor, materials, supplies and services or otherwise before any
thereof shall become in default.
(b) Borrowers may in good faith contest, by proper legal actions or
proceedings, the validity or amount of any contested Indebtedness, Charges or
claims, provided that at the time of commencement of any such action or
proceeding, and during the pendency thereof (i) no Default or Event of Default
shall have occurred; (ii) adequate reserves with respect thereto are maintained
on the books of Borrowers, in accordance with GAAP; (iii) such contest operates
to suspend collection of the contested Charges or claims and is maintained and
prosecuted with diligence;(iv) Borrowers shall promptly pay or discharge such
contested Charges and all additional charges, interest, penalties and expenses,
if any, and shall deliver to Bank evidence acceptable to Bank of such
compliance, payment or discharge, if such contest is terminated or discontinued
adversely to Borrowers; and (v) Bank has not advised Borrowers in writing that
Bank reasonably believes that nonpayment or non-discharge thereof would have a
Material Adverse Effect.
(c) Notwithstanding anything to the contrary contained in Section 5.3(b)
above, Borrowers shall have the
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right to pay the Charges or claims described in Section 5.3(a)(ii) and in good
faith contest by proper legal actions or proceedings, the validity or amount of
such Charges or claims.
SECTION 5.4 FINANCIAL COVENANTS. Borrowers agree as follows:
(a) Borrowers on a consolidated basis shall maintain at all times, such
maintenance to be evidenced at the end of any fiscal quarter of Borrowers;
(i) a ratio of current assets to current liabilities of
no less than 1.5 to 1.0.
(ii) a Tangible Net Worth of not less than $24,500,000.00
plus (x) 70% of the cumulative net income of Borrowers for all
quarters ending after December 31, 1997 in which net income for such
quarter was positive, and (y) 100% of the proceeds to any Borrower of
any future public equity offering by the Borrower, net of any related
fees, commissions, expenses and other costs.
(iii) a ratio of Total Debt to Tangible Net Worth no greater
than 0.5 to 1.0.
(iv) an Interest Coverage ratio of no less than 4.0 to
1.0, such ratio to be determined at the end of each fiscal quarter
based on such fiscal quarter and the three immediately preceding
fiscal quarters.
(b) Notwithstanding that Borrowers will be filing and reporting financial
statements on a consolidated basis, each Borrower shall separately maintain a
positive Net Worth which positive Net Worth shall be set forth in the Compliance
Certificate required in Section 5.1 (e).
SECTION 5.5 FEES. Borrowers shall pay to Bank, on demand, any and all fees,
costs or expenses arising out of or in connection with the forwarding to
Borrowers or any other Person on behalf of Borrowers by Bank of proceeds of the
Advances.
SECTION 5.6 BOOKS AND RECORDS. Borrowers shall keep adequate records and
books of account with respect to its business activities, in which proper
entries, reflecting all of their financial transactions, are made in accordance
with GAAP and on a basis consistent with the Financials referred to in Section 4
hereof.
SECTION 5.7 LITIGATION. Borrowers shall notify Bank in writing, promptly
upon learning thereof, of any litigation commenced against Borrowers, and of the
institution against either of them of any suit or administrative proceeding that
could be expected to have a Material Adverse Effect.
SECTION 5.8 INSURANCE. Schedule 5.8 lists all insurance of any nature
maintained by Borrowers as well as a summary of the terms of such insurance.
Borrowers shall maintain insurance coverages, without limitation, fire, theft,
burglary, public liability, property damage, product liability, workers'
compensation, and insurance on all property and assets, all in amounts customary
for the industry and under policies issued by insurers reasonably satisfactory
to Bank. Borrowers shall pay all insurance premiums payable by it.
SECTION 5.9 COMPLIANCE WITH LAW. Borrowers shall comply with all federal,
state and local laws and regulations applicable to it, including, without
limitation, ERISA, those regarding the collection, payment and deposit of
employees, income, unemployment and Social Security Taxes and those relating to
environmental matters where the failure to comply could be expected to have a
Material Adverse Effect.
SECTION 5.10 AGREEMENTS. Borrowers shall perform, within all required time
periods (after giving effect to any applicable grace periods), all of their
obligations and enforce all of their rights under each agreement to which they
are a party, including, without limitation, any leases to which any such company
is a party, where the failure to perform and enforce would have a Material
Adverse Effect. Borrowers shall not terminate or modify, in any manner adverse
to any such company any provision of any agreement to which it is a party which
termination or modification could have a Material Adverse Effect.
SECTION 5.11 SUPPLEMENTAL DISCLOSURE. From time to time as may be necessary
(in the event that such information is not otherwise delivered by Borrowers to
Bank pursuant to this First Restated Agreement), so long as there are
obligations outstanding hereunder, Borrowers will supplement or amend each
Schedule with respect to any matter hereafter arising which, if existing or
occurring at the date of this First Restated Agreement, would have been required
to be set forth or described in such Schedule or which is necessary to correct
any information in such Schedule which has been rendered inaccurate thereby.
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SECTION 5.12 EMPLOYEE PLANS. Borrowers shall fulfill its obligations under
the minimum funding standards of ERISA and the Code, with respect to each Plan,
and Borrowers shall not take any action that would result in the termination of
a Plan by the PBGC.
SECTION 5.13 SEC FILINGS: CERTAIN OTHER NOTICES. Borrowers shall furnish to
Bank (i) promptly after the filing thereof with the Securities and Exchange
Commission, a copy of each report, notice or other filing, if any, by Borrowers
with the Securities and Exchange Commission, and (ii) a copy of each written
communication received by Borrowers from or delivered by Borrowers to the
Securities and Exchange Commission.
SECTION 5.14 COMPLIANCE WITH LEASES: ADDITIONAL MORTGAGES. Borrowers shall
comply with all of their obligations under all leases for, or hereafter entered
into by it with respect to, real property.
SECTION 5.15 BORROWERS FUNDING. In the event a Borrower receives notice
from Bank that there are insufficient funds in a Borrower's account to (i) make
required principal and interest payments due under the Loans, or (ii) pay checks
presented for payment, one of the other Borrowers shall immediately advance on
the date of said notice, sufficient funds to Bank to remedy each and every
shortage or reduce the Revolving Credit Facility to the Maximum Revolving Credit
Facility Loan Amount. Funds advanced by a Borrower to another Borrower shall be
considered a contribution of capital to that Borrower.
SECTION 5.16 DEPOSIT ACCOUNTS. Borrowers shall maintain all of its deposit
accounts with Bank. Borrowers shall direct their account debtors to make their
payments to deposit accounts with Bank, and shall deposit the proceeds of all of
their accounts receivables and all funds advanced in connection with the
Agreement in accordance with this First Restated Agreement. Commencing with or
on the Effective Date, Borrowers will immediately, upon receipt, deposit all
monies, checks, notes, drafts and all other payments which come into the
possession or under the control of Borrowers (or any of its shareholders,
directors, officers, employees, agents or those Persons acting for or in concert
with Borrowers), (a) to Bank or (b) in the account designated by Bank.
ARTICLE VI
NEGATIVE COVENANTS
Borrowers covenant and agree that, without the Bank's prior written
consent, from and after the date hereof and until the Termination Date:
SECTION 6.1 MERGERS, ETC. Borrowers shall not directly or indirectly, by
operation of law or otherwise, merge with, consolidate with, or otherwise
combine with, any Person nor form any Subsidiary.
SECTION 6.2 INVESTMENTS: LOANS AND ADVANCES. Except for Permitted
Investments and as otherwise permitted by Section 6.3 or 6.4 hereof, Borrowers
shall not make any investment in, or make or accrue loans or advances of money
to any Person, through the direct or indirect holding of securities or
otherwise.
SECTION 6.3 INDEBTEDNESS. Except as otherwise expressly permitted by this
First Restated Agreement, Borrowers shall not create, incur, assume or permit to
exist any Debt, whether recourse or nonrecourse, and whether superior or junior,
resulting from borrowings, loans, advances or the granting of credit, whether
secured or unsecured, except (a) Indebtedness secured by Liens permitted under
Section 6.9 hereof, (b) trade credit or other contractual obligations incurred
to acquire goods, supplies, services, including, without limitation, obligations
incurred to employees for compensation for services rendered in the ordinary
course of business, or merchandise on terms similar to those granted to
purchasers in similar lines of business as Borrowers as of the date hereof and
incurred in the ordinary and normal course of business, (d) lease payment
obligations under leases which Borrowers is not prohibited from entering into
under the Loan Documents, (e) all deferred taxes, (f) all unfunded, pension fund
and other employee benefit plan obligations and liabilities but only to the
extent they are permitted to remain unfunded under applicable law, and (g)
indebtedness existing on the date hereof listed on Schedule 6.3 hereof or
consented to by Bank. Notwithstanding the above, Borrowers shall not incur any
additional Debt subsequent to the Closing Date, other than (i) the Obligations
and (ii) Debt not to exceed $1,000,000.
SECTION 6.4 EMPLOYEE LOANS. Borrowers shall not make or accrue any loans or
other advances of money to any employee of Borrowers in excess at any time of
$100,000 in the aggregate for all such loans.
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<PAGE> 25
SECTION 6.5 CAPITAL STRUCTURE. Borrowers, exclusive of UNIFAB
International, shall not issue or agree to issue any of their respective
authorized but not outstanding shares of Stock (including treasury shares).
SECTION 6.6 MAINTENANCE OF BUSINESS. Borrowers shall not engage in any
business other than the business currently engaged in by Borrowers or a business
incidental thereto or reasonably related thereto.
SECTION 6.7 TRANSACTIONS WITH AFFILIATES.
(a) Borrowers shall not enter into or be a party to any transaction with
any Affiliate of Borrowers, except as otherwise provided herein or in the
ordinary course of and pursuant to the reasonable requirements of Borrowers' or
Affiliate's business and upon fair and reasonable terms that are fully
disclosed to Bank and are no less favorable to Borrowers than would obtain in a
comparable arm's length transaction with a Person not an Affiliate of
Borrowers.
SECTION 6.8 GUARANTIES. Borrowers shall not make, issue, or become liable
on any guaranty, except (a) guaranties in favor of Bank, (b) endorsements of
instruments for deposit, and (c) other guaranties of Debt, incurred in the
ordinary course of business, not exceeding $1,000,000 at any time in the
aggregate for Borrowers.
SECTION 6.9 LIENS. Borrowers shall not create or permit any Lien on any of
its properties or assets except:
(a) presently existing or hereinafter created Liens which have been
disclosed to Bank on Schedule 6.9; and
(b) Permitted Liens.
SECTION 6.10 SALES OF ASSETS. Borrowers shall not sell, transfer, convey or
otherwise dispose of any assets or properties or engage in any sale-leaseback or
similar transaction involving any of such assets; provided, however, that the
foregoing shall not prohibit:
(a) the sale of surplus or obsolete equipment and fixtures;
(b) transfers resulting from any casualty or condemnation of assets or
properties; and
(c) sales in the ordinary course of business not to exceed $250,000.00 in
any 12 month period.
SECTION 6.11 CANCELLATION OF INDEBTEDNESS. Borrowers shall not cancel any
claim or debt owing to it, except for reasonable consideration or in the
ordinary course of business.
SECTION 6.12 HEDGING TRANSACTIONS. Borrowers shall not engage in any
speculative transactions involving commodity options or futures contracts,
including, without limitation, any speculative interest rate hedging or similar
transaction.
SECTION 6.13 RESTRICTED PAYMENTS. Borrowers shall not make any Restricted
Payments during the existence of the Loans without the consent of the Bank.
SECTION 6.14 OWNERSHIP OF BORROWERS. No Borrower shall not sell, transfer,
convey or assign any of its interest in another Borrower, without prior written
consent of Bank.
ARTICLE VII
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
The following events shall constitute Events of Default hereunder and
under the Loans, individually and collectively, and under all other Loan
Documents:
SECTION 7.1 PAYMENT. Default in the payment of principal on the Note when
due, or default in the payment of any interest on the Note or any expense or fee
hereunder or under any of the other Loan Documents, which default shall continue
for a period of five (5) days following written notice thereof to Borrowers from
Bank;
SECTION 7.2 OTHER INDEBTEDNESS. Any other Indebtedness of Borrowers is not
paid at maturity or becomes due and payable prior to its expressed maturity by
reason of any default by Borrowers in the performance or observance of any
Obligation or condition thereunder which default shall continue for a period of
thirty (30) days following written notice thereof to Borrowers from Bank;
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<PAGE> 26
SECTION 7.3 OTHER DEFAULT. Any default of any other obligation of Borrowers
under the terms of any note or notes, mortgage, indenture, loan agreement or
security document of Borrowers, including, without limitation, any of the Loan
Documents, which default shall continue for a period of thirty (30) days
following written notice thereof to Borrowers from Bank, it being expressly
understood and agreed that a default under any note, mortgage, indenture, loan
agreement or security document of Borrowers, including, without limitation, any
of the Loan Documents, shall constitute a default under all other notes,
mortgages, indentures, loan agreements and security documents held by Bank,
including, without limitation, the Loan Documents;
SECTION 7.4 INSOLVENCY. Borrowers become insolvent or admits in writing its
inability to pay its debts as they mature or applies for, consents to, or
acquiesces in the appointment of a trustee or receiver for Borrowers, or any
property of Borrowers or, in the absence of such application, consent or
acquiescence, a trustee or receiver is appointed for Borrowers, or for a
substantial part of any property of any Borrower and is not discharged within
thirty (30) days; or any bankruptcy, reorganization, debt arrangement, or other
proceeding under any bankruptcy or insolvency law, or any dissolution or
liquidation proceeding is instituted by or against a Borrower and if instituted
against a Borrower, it is consented to or acquiesced in by Borrowers, or remains
for thirty (30) days undismissed; or any warrant of attachment is issued against
any substantial portion of the property of Borrowers which is not released
within thirty (30) days of service;
SECTION 7.5 ERISA. The PBGC applies to a United States District Court for
the appointment of a trustee to administer any Plan adopted, established or
maintained by Borrowers, or for a decree adjudicating that any such Plan must be
terminated; a trustee is appointed pursuant to ERISA to administer any such
Plan; any action is taken to terminate any such Plan or any such Plan is
permitted or caused to be terminated if, at the time such action is taken or
such termination of such Plan occurs, the Plan's "vested liabilities," as
defined in Section 3 (25) of ERISA, exceed the then value of its assets at the
time of such termination;
SECTION 7.6 AGREEMENTS. Default in the performance of any of Borrowers'
covenants and/or agreements set forth in this First Restated Agreement and/or
any of the other Loan Documents (and not constituting an Event of Default under
any of the preceding subsections of this Section 7, which default shall continue
for a period of thirty (30) days after written notice thereof to Borrowers from
Bank;
SECTION 7.7 REPRESENTATION OR WARRANTY. Any representation or warranty made
by Borrowers is untrue in any material respect, or any schedule, statement,
report, notice or writing furnished by Borrowers to Bank is untrue in any
material respect on the date as of which the facts set forth are stated or
certified which default shall continue for a period of thirty (30) days after
written notice thereof to Borrowers from Bank.
Upon the occurrence of any Event of Default, Bank, in addition to all of
the remedies conferred upon Bank under law, in equity or under any of the Loan
Documents, may declare the First Restated Agreement and the Loans to be
terminated and the Note to be due and payable, whereupon the Revolving Credit
Facility and the Non-Revolving LC Facility shall immediately terminate, and the
Notes shall become immediately due and payable, without notice of any kind,
except that if an event described in Section 7.4 occurs, the Revolving Credit
Facility shall immediately terminate, and the Notes shall become immediately
due and payable without declaration or notice of any kind.
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ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 BANK'S RELIANCE, ETC. Neither Bank nor any of its directors,
officers, agents or employees shall be liable for any action taken or omitted to
be taken by it or them under or in connection with any of the Loan Documents
except for its or their own gross negligence or willful misconduct. Without
limitation of the generality of the foregoing, Bank: (i) may treat the payee of
any Note as the holder thereof until Bank receives written notice of the
assignment or transfer thereof signed by such payee and in form satisfactory to
Bank; (ii) may consult with legal counsel (including counsel for Borrowers),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (iii) makes
no warranty or representation to any Bank and shall not be responsible to any
Bank for any statements, warranties or representations made in or in connection
with any of the Loan Documents; (iv) shall not have any duty to ascertain or to
inquire as to the performance or observance of any of the terms, covenants or
conditions of any of the Loan Documents on the part of Borrowers or to inspect
the property (including the books and records) of Borrowers; (v) shall not be
responsible to any Bank for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of any of the Loan Documents
or any other instruments or document furnished pursuant hereto; and (vi) shall
incur no liability under or in respect of any of the Loan Documents by acting
upon any notice, consent, certificate or other instrument or writing (which may
be by telegram, cable or telex) believed by it to be genuine and signed by the
proper party or parties.
SECTION 8.2 FINANCIAL TERMS. Unless otherwise defined or the context
otherwise requires, all financial and accounting terms shall be defined under
GAAP.
SECTION 8.3 DELAY. No delay on the part of Bank in the exercise of any
power or right shall operate as a waiver thereof, nor shall any single or
partial exercise of any power or right preclude other or further exercise
thereof, or the exercise of any other power or right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
SECTION 8.4 NOTICES. All notices, statements, requests and demands given to
or made under any party hereto in accordance with the provisions of this First
Restated Agreement shall be deemed to have been given or made when deposited in
the mail, postage prepaid, registered or certified mail return receipt requested
addressed:
If to Bank:
Hibernia National Bank
313 Carondelet Street, Suite 1300
New Orleans, LA 70130
Attention: Byron Kives or Bruce Ross
with a copy to
Chaffe, McCall, Phillips, Toler & Sarpy, L.L.P.
1100 Poydras Street, Suite 2300
New Orleans, LA 70163-2300
Attention: Kathleen S. Plemer, Esq.
If to Borrowers:
Universal Fabricators, L.L.C.
P.O. Box 11308
New Iberia, LA 70562
Attention: Pete Roman, Chief Financial Officer
UNIFAB International, Inc.
5007 Port Road
New Iberia, LA 70562
Attention: Dailey J. Berard
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<PAGE> 28
PIM, L.L.C.
5007 Port Road
New Iberia, LA 70562
Attention: Dailey J. Berard
with a copy to:
Jones, Walker, Waechter, Poitevent, Carrere & Denegre
201 St. Charles Ave.
New Orleans, Louisiana 70170-5100
Attention: Carl C. Hanemann, Esq.
SECTION 8.5 EXPENSES. Whether or not Advances are made, Borrowers agrees to
reimburse Bank upon demand, for all expenses (including reasonable attorneys'
fees and legal expenses incurred by Bank) incurred by Bank in the preparation,
negotiation and /or execution of the Loan Documents, and in enforcing the
obligations of Borrowers hereunder or under any of the other Loan Documents, and
to pay, and save Bank harmless from all liability for, any stamp or other taxes
which may be payable with respect to the execution or delivery of this First
Restated Agreement, the execution, delivery or issuance of the Notes, and/or the
execution, delivery and recordation of the other Loan Documents, which
obligations of Borrowers shall survive any termination of this First Restated
Agreement.
SECTION 8.6 SEVERABILITY. Any provision of this First Restated Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining portions hereof or affecting
the validity or enforceability of such provision in any other jurisdiction.
SECTION 8.7 COUNTERPARTS. This First Restated Agreement may be executed in
an many counterparts as may be deemed necessary or convenient, and by the
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed an original but all such counterparts shall constitute
but one and the same instrument.
SECTION 8.8 LAW. The Loan Documents, and each of them, shall be contracts
made under and governed by the laws of the State of Louisiana.
SECTION 8.9 SUCCESSORS. This First Restated Agreement shall be binding upon
Borrowers, Bank, and their respective successors and assigns, and shall inure to
the benefit of Borrowers, Bank and their successors and assigns. Borrowers shall
not assign its rights, obligations or duties hereunder or under any of the Loan
Documents without the prior written consent of Bank. Bank shall give Borrowers
written notice of any assignment of its interests hereunder to any other Person,
upon which assignment Borrowers shall perform all of its respective obligations
under the Loan Documents in favor of Bank' assignee(s) as though such
assignee(s) were originally a party or parties to this First Restated Agreement.
SECTION 8.10 AMENDMENTS. No amendment or waiver of any provision of this
First Restated Agreement or consent to any departure therefrom by Borrowers or
Bank shall be effective unless the same shall be in writing and signed by
Borrowers or Bank, and, in the case of a waiver or consent, such waiver or
consent shall be effective only in the specific instance and or the specific
purpose for which given.
SECTION 8.11 EXECUTION IN COUNTERPARTS. This Credit First Restated
Agreement may be executed in any number of counterparts with the same effect as
if the signatures thereto and hereto were upon the same instrument.
SECTION 8.12 ENTIRE AGREEMENT. This First Restated Agreement constitutes
the entire agreement between the parties and supersedes any and all prior
agreements with respect to the transactions contemplated hereby.
SECTION 8.13 CONFLICTS This First Restated Agreement is in addition to and
supplements the provisions of the other Loan Documents. To the extent that the
provisions of this First Restated Agreement are in conflict with, and not merely
in addition to, the provisions of the other Loan Documents, the provisions of
this First Restated Agreements shall govern.
Except as hereinabove stated, the terms and conditions of the First
Restated Agreement shall remain unchanged and in full force and effect and be
binding upon the Borrowers and Bank as though set forth herein at
xxiv
<PAGE> 29
length, and nothing herein contained shall be construed as a novation of the
debt.
IN WITNESS WHEREOF, the parties hereto and intervenors herein have caused
this First Restated Agreement to be executed by their respective officers
thereunto duly authorized effective as of the date first written above.
BORROWERS:
UNIFAB INTERNATIONAL, INC.
BY: PETER J. ROMAN
ITS: CHIEF FINANCIAL OFFICER
DATE: APRIL 1, 1998
UNIVERSAL FABRICATORS, L.L.C
BY: UNIFAB INTERNATIONAL, INC.,
BY: /s/ PETER J. ROMAN
------------------------------------
PETER J. ROMAN
ITS: CHIEF FINANCIAL OFFICER
DATE: APRIL 1, 1998
PIM, L.L.C.
BY: UNIFAB INTERNATIONAL, INC.,
BY: /s/ PETER J. ROMAN
------------------------------------
PETER J. ROMAN
ITS: CHIEF FINANCIAL OFFICER
DATE:APRIL 1, 1998
BANK:
HIBERNIA NATIONAL BANK
BY: BYRON KIVES
ITS:
------------------------------------
DATE: APRIL 1, 1998
xxv
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
Subsidiary State of Incorporation
-------------------------- ----------------------
Universal Fabricators, LLC Louisiana
PIM, LLC Louisiana
<PAGE> 1
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 333-49239) pertaining to the UNIFAB International, Inc. Long-Term
Incentive Plan and Restricted Stock Agreements with Certain Employees of our
report dated April 28, 1998, with respect to the consolidated financial
statements of UNIFAB International, Inc., included in the Annual Report (Form
10-K) for the year ended March 31, 1998.
Ernst & Young LLP
New Orleans, Louisiana
June 26, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNIFAB
INTERNATIONAL, INC.'S MARCH 31,1998 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 8,379,131
<SECURITIES> 0
<RECEIVABLES> 16,396,255
<ALLOWANCES> 0
<INVENTORY> 292,284
<CURRENT-ASSETS> 26,075,707
<PP&E> 14,413,360
<DEPRECIATION> 3,611,036
<TOTAL-ASSETS> 44,409,934
<CURRENT-LIABILITIES> 9,672,817
<BONDS> 0
0
0
<COMMON> 50,487
<OTHER-SE> 32,971,552
<TOTAL-LIABILITY-AND-EQUITY> 44,409,934
<SALES> 68,563,987
<TOTAL-REVENUES> 68,563,987
<CGS> 57,789,474
<TOTAL-COSTS> 60,756,757
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 53,830
<INCOME-PRETAX> 8,274,935
<INCOME-TAX> 2,896,228
<INCOME-CONTINUING> 5,378,707
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,378,707
<EPS-PRIMARY> 1.25
<EPS-DILUTED> 1.25
</TABLE>
