<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): MARCH 17, 1998
FRIEDE GOLDMAN INTERNATIONAL INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 0-22595 72-1362492
(STATE OR OTHER JURISDICTION OF (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
502 EAST CAPITOL STREET, SUITE 402
JACKSON, MISSISSIPPI 39201
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
(601) 352-1107
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
================================================================================
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(A) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
The audited consolidated financial statements of Newfoundland Ocean
Enterprises Ltd. ("NOEL") for the year ended March 29, 1997 and the unaudited
interim consolidated financial statements of NOEL for the period ended November
8, 1997 are attached as Exhibits 99.3 and 99.4, respectively, and are included
herein.
(B) PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma financial information for Friede Goldman
International Inc. as of October 31, 1997 and for the ten month period ended
October 31, 1997 and the year ended December 31, 1996 is attached as Exhibit
99.5 and is included herein.
(C) EXHIBITS
Exhibit 23.1 -- Consent of Doane Raymond, Chartered Accountants
*Exhibit 99.1 -- Press Release issued by Friede Goldman International
Inc. on January 5, 1998.
*Exhibit 99.2 -- Stock Purchase Agreement, dated January 1, 1998, by and
among Marystown Shipyard Limited, Newfoundland Ocean
Enterprises Ltd., Friede Goldman Canada Inc., Friede
Goldman International Inc. and Friede Goldman Marystown
Ltd.
Exhibit 99.3 -- Audited Consolidated Financial Statements of NOEL for
the year ended March 29, 1997.
Exhibit 99.4 -- Unaudited Interim Consolidated Financial Statements of
NOEL for the period ended November 8, 1997.
Exhibit 99.5 -- Unaudited Pro Forma Combining Financial Statements of
Friede Goldman International Inc. as of October 31,
1998 and for the ten-month period ended October 31,
1997 and the year ended December 31, 1996.
- ----------------------------------------------
* Filed with the initial Current Report on Form 8-K, dated as of
January 1, 1998.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FRIEDE GOLDMAN INTERNATIONAL INC.
Date: March 17, 1998
By: /s/ Marshall D. Lynch
---------------------
Marshall D. Lynch
Chief Financial Officer
3
<PAGE>
EXHIBIT INDEX
Exhibit No. Page No.
----------- --------
Exhibit 23.1 -- Consent of Doane Raymond, Chartered Accountants
*Exhibit 99.1 -- Press Release issued by Friede Goldman International
Inc. on January 5, 1998.
*Exhibit 99.2 -- Stock Purchase Agreement, dated January 1, 1998, by and
among Marystown Shipyard Limited, Newfoundland Ocean
Enterprises Ltd., Friede Goldman Canada Inc., Friede
Goldman International Inc. and Friede Goldman Marystown
Ltd.
Exhibit 99.3 -- Audited Consolidated Financial Statements of NOEL for
the year ended March 29, 1997.
Exhibit 99.4 -- Unaudited Interim Consolidated Financial Statements of
NOEL for the period ended November 8, 1997.
Exhibit 99.5 -- Unaudited Pro Forma Combining Financial Statements of
Friede Goldman International Inc. as of October 31,
1998 and for the ten-month period ended October 31,
1997 and the year ended December 31, 1996.
- -----------------------
* Filed with the initial Current Report on Form 8-K, dated as of
January 1, 1998.
1
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Form 8-K/A of Friede Goldman International
Inc. of our report on the financial statements of Newfoundland Ocean Enterprises
Limited, dated May 12, 1997.
DOANE RAYMOND
Chartered Accountants
St. John's, Newfoundland, Canada
March 13, 1998
<PAGE>
EXHIBIT 99.3
AUDITORS' REPORT
To the Shareholders of
Newfoundland Ocean Enterprises Limited
We have audited the consolidated balance sheet of Newfoundland Ocean Enterprises
Limited as at March 29, 1997 and March 30, 1996 and the consolidated statements
of loss and deficit and cash flow for the fifty-two week periods (1996 -fifty-
three week period) ended March 29, 1997, March 30, 1996 and March 25, 1995.
These consolidated financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance whether the consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated 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.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the company as at March 29, 1997
and March 30, 1996 and the results of its operations and cash flow for the
fifty-two week periods (1996 - fifty-three week period) ended March 29, 1997,
March 30, 1996 and March 25, 1995 in accordance with generally accepted
accounting principles.
Marystown, Newfoundland DOANE RAYMOND
May 12, 1997 Chartered Accountants
<PAGE>
NEWFOUNDLAND OCEAN ENTERPRISES LIMITED
Consolidated Statements of Loss and Deficit
for the Fifty-two Weeks Ended (1996 - Fifty-Three Weeks Ended)
<TABLE>
<CAPTION>
March 29, 1997 March 30, 1996 March 25, 1995
-------------- -------------- --------------
(in thousands of U.S. dollars)
<S> <C> <C> <C>
Revenue $ 15,492 $ 31,401 $ 53,822
-------- -------- --------
Expenses
Production costs 13,203 26,903 58,285
Selling, general and administrative 4,823 10,842 6,459
Depreciation and amortization 1,002 1,076 927
-------- -------- --------
19,028 38,821 65,671
-------- -------- --------
Operating loss (3,536) (7,420) (11,849)
Interest expense 2,971 3,053 1,857
Interest subsidy (2,562) (2,759) (1,591)
-------- -------- --------
Net loss $ (3,945) $ (7,714) $(12,115)
-------- -------- --------
Deficit, beginning of year $(39,450) $(31,736) $(19,621)
Net loss (3,945) (7,714) (12,115)
-------- -------- --------
Deficit, end of year $(43,395) $(39,450) $(31,736)
-------- -------- --------
</TABLE>
See accompanying notes to the consolidated financial statements.
2
<PAGE>
NEWFOUNDLAND OCEAN ENTERPRISES LIMITED
Consolidated Balance Sheet
<TABLE>
<CAPTION>
March 29, 1997 March 30, 1996
-------------- --------------
(in thousands of U.S. dollars)
<S> <C> <C>
Assets
Current
Receivables (Note 4) $ 6,584 $ 2,029
Inventories 539 656
Prepaids 358 201
-------- --------
7,481 2,886
Property and equipment (Note 5) 45,710 48,094
-------- --------
$ 53,191 $ 50,980
-------- --------
Liabilities
Current
Bank indebtedness $ 48,531 $ 40,940
Payables and accruals (Note 7) 5,811 4,659
Current portion of long term debt 136 436
-------- --------
54,574 46,035
Long term debt (Note 8) 96 --
-------- --------
54,478 46,035
-------- --------
Deferred government assistance 31,153 33,795
-------- --------
Shareholders' Deficiency
Capital stock (Note 9) 2 2
Contributed surplus 10,456 10,456
Foreign exchange adjustment (Note 10) 401 142
Deficit (43,395) (39,450)
-------- --------
(32,536) (28,850)
-------- --------
$ 53,191 $ 50,980
-------- --------
Contingent liabilities (Note 15)
On behalf of the Board
</TABLE>
- ------------------------------------- Director -------------------------Director
See accompanying notes to the consolidated financial statements.
3
<PAGE>
NEWFOUNDLAND OCEAN ENTERPRISES LIMITED
CONSOLIDATED STATEMENT OF CASH FLOW (Note 11)
For The Fifty-Two Weeks Ended (1996 - Fifty-Three Weeks Ended)
<TABLE>
<CAPTION>
MARCH 29, MARCH 30, MARCH 25,
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
(in thousands of U.S. dollars)
Cash derived from (applied to)
OPERATING ACTIVITIES
Net loss $ (3,945) $ (7,714) $(12,115)
Depreciation and amortization 1,002 1,076 927
-------- -------- --------
(2,943) (6,638) (11,188)
Change in non-cash operating
working capital (Note 12) (3,496) (6,181) (1,070)
-------- -------- --------
(6,439) (12,819) (12,258)
-------- -------- --------
FINANCING ACTIVITIES
New long term debt 283 -- --
Repayment of long term debt (487) (440) (440)
Government assistance 310 1,269
-------- -------- --------
(204) (130) 829
-------- -------- --------
INVESTING ACTIVITIES
Acquisition of fixed assets (1,374) (264) (2,143)
Proceeds from sale of fixed assets 15 -- --
-------- -------- --------
(1,359) (264) (2,143)
-------- -------- --------
-- --
EFFECT OF EXCHANGE RATE CHANGES 411 (718) 896
-------- -------- --------
Net decrease in cash (7,591) (13,931) (12,676)
Bank indebtedness
Beginning of year (40,940) (27,009) (14,333)
-------- -------- --------
End of year $(48,531) $(40,940) $(27,009)
======== ======== ========
</TABLE>
4
<PAGE>
Newfoundland Ocean Enterprises Limited
Notes to the Consolidated Financial Statements
March 29, 1997
(in thousands of U.S. Dollars)
1. Basis of financial statement presentation
These financial statements have been prepared on the basis of accounting
principles applicable to a "going concern", which assume that the Company will
continue in operation for the foreseeable future and will be able to realize its
assets and discharge its liabilities in the normal course of operations. The
Company has incurred significant operating losses during the current and prior
fiscal years and has a substantial working capital deficiency.
The Company's continued existence is dependent upon its ability to restore and
maintain profitable operations. The Government of Newfoundland and Labrador as
the owner of the Company has provided a loan guarantee to finance the losses and
working capital deficiency. The government has also provided a performance
guarantee for a major contract.
Management believes that the financial support of government will provide for
the continuing of the Company as a going concern. Accordingly, these financial
statements do not reflect adjustments to the carrying value of assets and
liabilities that could be necessary if the going concern assumptions were not
appropriate.
2. Nature of operations
The Company's principal business is to provide ship, offshore drilling rig and
industrial fabrication and repair services. Its market is worldwide with a
concentration in North America. The Company's services are conducted at its
facilities located in Marystown, Newfoundland, Canada.
3. Summary of significant accounting policies
Basis of presentation
The consolidated financial statements include the accounts of Newfoundland Ocean
Enterprises Limited, its wholly-owned subsidiaries Marystown Shipyard Limited
and Vinland Industries Limited, and Vinland Industries, A Limited Partnership.
They have been prepared in accordance with accounting principles generally
accepted in the United States and are also in accordance, in all material
respects, with generally accepted accounting principles in Canada. All
significant intercompany transactions and accounts have been eliminated.
These consolidated financial statements are presented on the basis of a fifty-
two week fiscal period, except for the 1996 fiscal year which is a fifty-three
week fiscal period.
5
<PAGE>
Newfoundland Ocean Enterprises Limited
Notes to the Consolidated Financial Statements
March 29, 1997
(in thousands of U.S. dollars)
3. Summary of significant accounting policies (cont'd)
Income recognition
Revenue from contracts is recognized on the percentage-of-completion method.
Under this method, the percentage-of-completion is determined by relating the
actual production costs incurred to date on a component basis to the current
estimated total production costs for each contract. Until progress on a
contract reaches a point where management can determine with reasonable accuracy
the estimated final results, revenues are recognized only to the extent of costs
incurred. The performance of such contracts may extend over several years and
therefore periodic reviews of estimated final revenues and costs are necessary
during the term of the contracts. Final contract settlements and periodic
reviews may result in revisions to estimated final contract profits or losses
which have the effect of including cumulative adjustments to income in the year
the revisions are made. Anticipated losses on uncompleted contracts are
provided for in full in the year in which the losses become evident.
Production costs
The cost components charged to production are direct labour, material associated
with production and overhead costs. Materials purchased specifically for
production are charged to production costs when purchase orders are issued.
Inventories
Inventories consist primarily of materials purchased for ship and industrial
repair and shipbuilding contracts and are valued at the lower of cost or market
(replacement cost or net realizable value).
Depreciation
Depreciation is recorded on a straight-line basis over the estimated useful life
of the assets commencing in year following acquisition. The estimated useful
life of each major class of asset is as follows:
Land improvements 28 years
Buildings 50 years
Wharves 50 years
Equipment 5 - 50 years
6
<PAGE>
Newfoundland Ocean Enterprises Limited
Notes to the Consolidated Financial Statements
March 29, 1997
(in thousands of U.S. dollars)
3. Summary of significant accounting policies (cont'd.)
Government assistance
FIXED ASSETS
Government grants relating to the acquisition of fixed assets are recorded
as deferred credits and amortized on the same basis as the related assets
are depreciated. During the year grants of Nil (1996 - $310,000; 1995 -
$1,269,000) received under various government assistance programs were
recorded as deferred government assistance.
During the year amortization of $2,469,000 (1996 - $2,403,000; 1995 -
$380,000) was recorded as an offset to depreciation expense.
OPERATIONS
Government assistance provided for operations is recorded as income.
During the year grants totaling $2,562,000 (1996 - $2,759,000; 1995 -
$1,591,000) were received and recorded as interest subsidy.
Warranty
The estimated cost of warranty is recognized as a component of cost during the
performance of the contracts. Adjustments to these estimated costs are
recognized in the year in which they become evident.
Use of estimates
In preparing the financial statements, the Company is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities as of
the balance sheet dates and the revenues and expenses for the years then ended.
Actual results could differ materially from those estimates.
Fair value of financial instruments
The carrying amount of the Company's financial instruments at March 29, 1997 and
March 30, 1996, including accounts receivable, accounts payable and debt,
approximate their fair value.
Income taxes
The Company is a crown corporation, wholly owned by the Province of
Newfoundland, and as such is exempt from federal and provincial income taxes in
accordance with Section 149(1) of the Canadian Income Tax Act.
7
<PAGE>
Newfoundland Ocean Enterprises Limited
Notes to the Consolidated Financial Statements
March 29, 1997
(in thousands of U.S. dollars)
3. Summary of significant accounting policies (cont'd.)
Foreign currency translation
The Company's operations, which are located in Canada, are considered to be
financially and operationally self-sustaining. These operations are translated
into United States currency using the current rate method. Under this method
assets and liabilities have been translated at exchange rates in effect at the
balance sheet dates and revenue and expenses are translated at average exchange
rates for the year. Adjustments arising from the translation of the balance
sheet are deferred and included as a separate component of shareholders'
deficiency.
Recently issued accounting pronouncements
In June 1997, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard (SFAS) No. 130, "Reporting Comprehensive
Income." This statement establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general purpose financial statements. This statement requires
that all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. This
statement is effective for fiscal years beginning after December 15, 1997.
Management intends to comply with this standard.
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information". This statement establishes standards for
the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.
This statement is effective for fiscal years beginning after December 15, 1997.
Management intends to comply with this standard.
4. Receivables
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Trade $4,197 $1,266
Allowance for doubtful accounts 174 134
------ ------
4,023 1,132
Cost and earnings in excess of billings
on uncompleted contracts 2,561 897
------ ------
$6,584 $2,029
====== ======
</TABLE>
8
<PAGE>
Newfoundland Ocean Enterprises Limited
Notes to the Consolidated Financial Statements
March 29, 1997
(in thousands of U.S. dollars)
5. Property and equipment
1997 1996
---------- ----------
ACCUMULATED NET NET
COST DEPRECIATION BOOK VALUE BOOK VALUE
---- ------------ ---------- ----------
Land and land
improvements $ 5,042 $ 252 $ 4,790 $ 4,854
Buildings 26,356 3,475 22,881 23,718
Wharves 13,756 3,595 10,161 10,652
Equipment 16,357 8,479 7,878 8,870
------- ------- ------- -------
$61,511 $15,801 $45,710 $48,094
======= ======= ======= =======
The cost of property and equipment includes assets acquired from MSL Limited, a
predecessor company, in 1989 and recorded in the accounts at $29,610,000 being
the adjusted carrying value in MSL Limited at the date of acquisition, supported
by an appraisal prepared by Seashore Engineering and Associates Limited in
November, 1988.
6. Bank indebtedness
1997 1996
-------- --------
Bank operating credit facility $47,893 $40,653
Bank overdraft 638 287
------- -------
$48,531 $40,940
======= =======
The Company has in place a bank operating credit facility totaling $48.6 million
which was available for borrowing at a year-end interest rate of 4.75% (1996 -
6.75%). The outstanding borrowings at March 29, 1997 totaled $47.9 million,
leaving $0.7 million available on the facility at that date. As security for
the bank operating credit facility the Company has provided a guarantee of the
Government of Newfoundland and Labrador.
7. Payables and accruals
1997 1996
------- -------
Trade payables $4,127 $3,405
Accruals 1,505 1,249
Interest accrual 179 5
------ ------
$5,811 $4,659
====== ======
9
<PAGE>
Newfoundland Ocean Enterprises Limited
Notes to the Consolidated Financial Statements
March 29, 1997
(in thousands of U.S. dollars)
8. Long term debt
1997 1996
----- -----
Obligation under capital lease $ 232 --
Bank of Montreal, demand loan repaid
during the year. -- $ 436
----- -----
232 436
Less: current portion 136 436
----- -----
$ 96 $Nil
===== ====
Principal repayments required in each of the next two years are as follows:
1998 - $136
1999 - $ 96
9. Capital stock
1997 1996
----- -----
Authorized:
An unlimited number of common shares of
no par value
Issued:
3 shares $ 2 $ 2
----- -----
10. Foreign exchange adjustment
1997 1996
----- ------
Balance, beginning of year $ 142 $ 711
Translation adjustments for the year arising
from change in foreign exchange rates 259 (569)
----- -----
Balance, end of year $ 401 $ 142
----- -----
11. Consolidated statement of cash flow
The Company's cash management process involves drawing on its bank operating
credit facility to meet working capital requirements and cash needs,
consequently cash balances are not normally maintained. As such, reconciliation
of cash flow to the change in bank indebtedness is considered more appropriate
in this circumstance.
10
<PAGE>
Newfoundland Ocean Enterprises Limited
Notes to the Consolidated Financial Statements
March 29, 1997
(in thousands of U.S. dollars)
Because the indirect method of preparing the consolidated statement of cash flow
has been used, FASB Statement No. 95 requires the following additional
disclosure:
1997 1996 1995
------- ------- -------
Interest paid during the year $2,381 $3,219 $1,754
Interest subsidy received during the year $2,547 $2,775 $1,317
12. Change in non-cash operating working capital
1997 1996 1995
--------- --------- ----------
Receivables $(4,654) $ 15,768 $(13,150)
Inventories 115 (200) (263)
Prepaids (161) 409 260
Payables and accruals 1,204 (22,158) 12,083
------- -------- --------
$(3,496) $ (6,181) $ (1,070)
------- -------- --------
13. Significant customers and collective bargaining agreements
The nature of the fabrication and repair services undertaken by the Company can
result in an individual contract representing a large percentage of a fiscal
year's revenue. Similarly, total services performed for an individual customer
may also comprise a significant portion of a fiscal year's revenue. During the
year ended March 29, 1997, the largest individual contract represented 42% of
total revenue. During this same fiscal year services performed for three
separate customers comprised 45%, 26% and 14% of total revenue.
The non-management employees of the Company are covered under collective
bargaining agreements. The current status of these agreements is as follows:
. International Union of Marine Workers - Local 20 - during 1997 a new
five year collective agreement was signed effective from April 1, 1997
to March 31, 2002;
. Marine Office and Technical Employees Union - Local 29 - during 1997
a new five year collective agreement was signed effective from
September 3, 1997 to December 31, 2002; and
. International Union of Operating Engineers - Local 904 - the
collective agreement expired as at March 31, 1997 and has not been
renegotiated to date.
14. Employee benefit plans
The Company provides retirement benefits to employees under two separate group
registered retirement savings plan (RRSP) arrangements. These arrangements are
effectively defined contribution plans and therefore the Company does not have
any obligation with respect to future retirement benefits for employees other
than the required annual contribution to the plans.
11
<PAGE>
Newfoundland Ocean Enterprises Limited
Notes to the Consolidated Financial Statements
March 29, 1997
(in thousands of U.S. dollars)
Under these group plans the unionized employees are required to contribute 2% of
gross earnings and the non-union employees are required to contribute 3.5% of
gross earnings. Both groups may voluntarily contribute any additional amount
with no restrictions. For both groups, the Company is required to contribute 4%
of the employee's gross earnings plus an additional 1% with respect to any
voluntary employee contribution to a total maximum of 5% of gross earnings. For
the year ended March 29, 1997 the Company's contributions under both plans
totaled $317,000 (1996 - $756,000; 1995 - $731,000).
15. Contingent liabilities
As of March 29, 1997, there are a number of claims against the Company in
varying amounts for which no provision has been made. It is not possible to
determine the amounts that may ultimately be assessed against the Company with
respect to these claims, but management believes that any such amounts would not
have a material impact on the business or financial position of the Company.
12
<PAGE>
EXHIBIT 99.4
Newfoundland Ocean Enterprises Limited
Interim Consolidated Statements of Loss and Deficit (Unaudited)
For the Thirty-Two Weeks Ended
(in thousands of U.S. dollars)
November 8, November 9
1997 1996
----------- ----------
Revenue $ 40,341 $ 6,294
-------- --------
Expenses
Production costs 36,600 5,012
Selling, general and administrative 3,631 2,846
Depreciation and amortization 600 652
-------- --------
40,831 8,510
-------- --------
Operating loss (490) (2,216)
Interest expense 1,745 1,935
Interest subsidy (1,462) (1,697)
-------- --------
Net loss $ (773) $ (2,454)
======== ========
Deficit, beginning of period $(43,395) $(39,450)
Net loss (773) (2,454)
-------- --------
Deficit, end of period $(44,168) $(41,904)
======== ========
See accompanying notes to the interim consolidated financial statements.
<PAGE>
Newfoundland Ocean Enterprises Limited
Interim Consolidated Balance Sheet (Unaudited)
November 8, 1997
(in thousands of U.S. dollars)
ASSETS
Current
Receivables (Note 4) $ 18,837
Inventories 745
Prepaids 60
--------
19,642
Property and equipment (Note 5) 43,109
--------
$ 62,751
========
LIABILITIES
Current
Bank indebtedness (Note 6) $ 46,833
Payables and accruals (Note 7) 19,277
Current portion of long term debt 158
--------
66,268
Long term debt (Note 8) 37
--------
66,305
--------
Deferred government assistance 28,889
--------
SHAREHOLDERS' DEFICIENCY
Capital stock (Note 9) 2
Contributed surplus 10,456
Foreign exchange adjustment (Note 10) 1,267
Deficit (44,168)
--------
(32,443)
--------
$ 62,751
========
Contingent liabilities (Note 15)
See accompanying notes to the interim consolidated financial statements.
2
<PAGE>
Newfoundland Ocean Enterprises Limited
Interim Consolidated Statement of Cash Flow (Note 11) (Unaudited)
For The Thirty-Two Weeks Ended
(in thousands of U.S. dollars)
NOVEMBER 8, November 9,
1997 1996
Cash derived from (applied to)
OPERATING ACTIVITIES
Net loss $ (773) $ (2,454)
Depreciation and amortization 600 652
-------- --------
(173) (1,802)
Change in non-cash operating
working capital (Note 12) 1,291 (2,967)
-------- --------
1,118 (4,769)
-------- --------
FINANCING ACTIVITIES
New long term debt 50
Repayment of long term debt (81) (441)
-------- --------
(31) (441)
-------- --------
INVESTING ACTIVITIES
Acquisition of fixed assets (643) (899)
Proceeds from sale of fixed assets 15
-------- --------
(643) (884)
-------- --------
EFFECT OF EXCHANGE RATE CHANGES 1,254 (1,258)
-------- --------
Net increase (decrease) in cash 1,698 (7,352)
Bank indebtedness
Beginning of period (48,531) (40,940)
-------- --------
End of period $(46,833) $(48,292)
======== ========
See accompanying notes to the interim consolidated financial statements.
3
<PAGE>
Newfoundland Ocean Enterprises Limited
Notes to the Interim Consolidated Financial Statements (Unaudited)
November 8, 1997
(in thousands of U.S. dollars)
1. BASIS OF FINANCIAL STATEMENT PRESENTATION
These financial statements have been prepared on the basis of accounting
principles applicable to a "going concern", which assume that the Company will
continue in operation for the foreseeable future and will be able to realize its
assets and discharge its liabilities in the normal course of operations. The
Company has incurred significant operating losses during the current and prior
fiscal years and has a substantial working capital deficiency.
The Company's continued existence is dependent upon its ability to restore and
maintain profitable operations. The Government of Newfoundland and Labrador as
the owner of the Company has provided a loan guarantee to finance the losses and
working capital deficiency. The government has also provided a performance
guarantee for a major contract.
Management believes that the financial support of government will provide for
the continuing of the Company as a going concern. Accordingly, these financial
statements do not reflect adjustments to the carrying value of assets and
liabilities that could be necessary if the going concern assumptions were not
appropriate.
2. NATURE OF OPERATIONS
The Company's principal business is to provide ship, offshore drilling rig and
industrial fabrication and repair services. Its market is worldwide with a
concentration in North America. The Company's services are conducted at its
facilities located in Marystown, Newfoundland, Canada.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Newfoundland Ocean
Enterprises Limited, its wholly-owned subsidiaries Marystown Shipyard Limited
and Vinland Industries Limited, and Vinland Industries, A Limited Partnership.
They have been prepared in accordance with accounting principles generally
accepted in the United States and are also in accordance, in all material
respects, with generally accepted accounting principles in Canada. All
significant intercompany transactions and accounts have been eliminated.
These interim consolidated financial statements are presented on the basis of a
thirty-two week period.
4
<PAGE>
Newfoundland Ocean Enterprises Limited
Notes to the Interim Consolidated Financial Statements (Unaudited)
November 8, 1997
(in thousands of U.S. dollars)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
INCOME RECOGNITION
Revenue from contracts is recognized on the percentage-of-completion method.
Under this method, the percentage-of-completion is determined by relating the
actual production costs incurred to date on a component basis to the current
estimated total production costs for each contract. Until progress on a
contract reaches a point where management can determine with reasonable accuracy
the estimated final results, revenues are recognized only to the extent of costs
incurred. The performance of such contracts may extend over several years and
therefore periodic reviews of estimated final revenues and costs are necessary
during the term of the contracts. Final contract settlements and periodic
reviews may result in revisions to estimated final contract profits or losses
which have the effect of including cumulative adjustments to income in the year
the revisions are made. Anticipated losses on uncompleted contracts are
provided for in full in the year in which the losses become evident.
PRODUCTION COSTS
The cost components charged to production are direct labour, material associated
with production and overhead costs. Materials purchased specifically for
production are charged to production costs when purchase orders are issued.
INVENTORIES
Inventories consist primarily of materials purchased for ship and industrial
repair and shipbuilding contracts and are valued at the lower of cost or market
(replacement cost or net realizable value).
DEPRECIATION
Depreciation is recorded on a straight-line basis over the estimated useful life
of the assets commencing in year following acquisition. The estimated useful
life of each major class of asset is as follows:
Land improvements 28 years
Buildings 50 years
Wharves 50 years
Equipment 5 - 50 years
-5-
<PAGE>
Newfoundland Ocean Enterprises Limited
Notes to the Interim Consolidated Financial Statements (Unaudited)
November 8, 1997
(in thousands of U.S. dollars)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D.)
GOVERNMENT ASSISTANCE
FIXED ASSETS
Government grants relating to the acquisition of fixed assets are recorded
as deferred credits and amortized on the same basis as the related assets
are depreciated.
During the period amortization of $1,519,000 (1996 - $1,517,000) was
recorded as an offset to depreciation expense.
OPERATIONS
Government assistance provided for operations is recorded as income.
During the period grants totalling $1,462,000 (1996 - $1,697,000) were
received and recorded as interest subsidy.
WARRANTY
The estimated cost of warranty is recognized as a component of cost during the
performance of the contracts. Adjustments to these estimated costs are
recognized in the year in which they become evident.
USE OF ESTIMATES
In preparing the financial statements, the Company is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities as of
the balance sheet dates and the revenues and expenses for the years then ended.
Actual results could differ materially from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the Company's financial instruments at November 8, 1997,
including accounts receivable, accounts payable and debt, approximate their fair
value.
INCOME TAXES
The Company is a crown corporation, wholly owned by the Province of
Newfoundland, and as such is exempt from federal and provincial income taxes in
accordance with Section 149(1) of the Canadian Income Tax Act.
-6-
<PAGE>
Newfoundland Ocean Enterprises Limited
Notes to the Interim Consolidated Financial Statements (Unaudited)
November 8, 1997
(in thousands of U.S. dollars)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D.)
FOREIGN CURRENCY TRANSLATION
The Company's operations, which are located in Canada, are considered to be
financially and operationally self-sustaining. These operations are translated
into United States currency using the current rate method. Under this method
assets and liabilities have been translated at exchange rates in effect at the
balance sheet dates and revenue and expenses are translated at average exchange
rates for the year. Adjustments arising from the translation of the balance
sheet are deferred and included as a separate component of shareholders'
deficiency.
RECENTLY ISSUED ACCOUNTING PRENOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard (SFAS) No. 130, "Reporting Comprehensive
Income." This statement establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general purpose financial statements. This statement requires
that all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. This
statement is effective for fiscal years beginning after December 15, 1997.
Management intends to comply with this standard.
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information". This statement establishes standards for
the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.
This statement is effective for fiscal years beginning after December 15, 1997.
Management intends to comply with this standard.
4. RECEIVABLES
Trade $ 6,846
Allowance for doubtful accounts 114
-------
6,732
Cost and earnings in excess of billings
on uncompleted contracts 12,105
-------
$18,837
=======
-7-
<PAGE>
Newfoundland Ocean Enterprises Limited
Notes to the Interim Consolidated Financial Statements (Unaudited)
November 8, 1997
(in thousands of U.S. dollars)
5. PROPERTY AND EQUIPMENT
Accumulated Net
Cost Depreciation Book Value
------- ------------ ----------
Land and land improvements $ 4,910 $ 262 $ 4,648
Buildings 25,802 3,808 21,994
Wharves 13,498 3,753 9,745
Equipment 16,315 9,593 6,722
------- ------- -------
$60,525 $17,416 $43,109
======= ======= =======
The cost of property and equipment includes assets acquired from MSL Limited, a
predecessor company, in 1989 and recorded in the accounts at $29,610,000 being
the adjusted carrying value in MSL Limited at the date of acquisition, supported
by an appraisal prepared by Seashore Engineering and Associates Limited in
November, 1988.
6. BANK INDEBTEDNESS
Bank operating credit facility $46,575
Bank overdraft 258
-------
$46,833
=======
The Company has in place a bank operating credit facility totalling $47.3
million which was available for borrowing at a period-end interest rate of
5.25%. The outstanding borrowings at November 8, 1997 totalled $46.6 million,
leaving $0.7 million available on the facility at that date. As security for the
bank operating credit facility the Company has provided a guarantee of the
Government of Newfoundland and Labrador.
7. PAYABLES AND ACCRUALS
Trade payables $17,343
Accruals 1,900
Interest accrual 34
-------
$19,277
=======
-8-
<PAGE>
Newfoundland Ocean Enterprises Limited
Notes to the Interim Consolidated Financial Statements (Unaudited)
November 8, 1997
(in thousands of U.S. dollars)
8. LONG TERM DEBT
Obligation under capital lease $195
Less: current portion 158
----
$ 37
====
Principal repayments required in each of the next two years are as follows:
1998 - $158
1999 - $ 37
9. CAPITAL STOCK
Authorized:
An unlimited number of common shares of no par value
Issued:
3 shares $2
==
10. FOREIGN EXCHANGE ADJUSTMENT
Balance, beginning of period $ 401
Translation adjustments for the period arising from
change in foreign exchange rates 844
------
Balance, end of period $1,245
======
-9-
<PAGE>
Newfoundland Ocean Enterprises Limited
Notes to the Interim Consolidated Financial Statements (Unaudited)
November 8, 1997
(in thousands of U.S. dollars)
11. CONSOLIDATED STATEMENT OF CASH FLOW
The Company's cash management process involves drawing on its bank operating
credit facility to meet working capital requirements and cash needs,
consequently cash balances are not normally maintained. As such, reconciliation
of cash flow to the change in bank indebtedness is considered more appropriate
in this circumstance.
Because the indirect method of preparing the consolidated statement of cash flow
has been used, FASB Statement No. 95 requires the following additional
disclosure:
1997 1996
------ ------
Interest paid during the period $1,608 $1,620
Interest subsidy received during the period $1,446 $1,553
12. CHANGE IN NON-CASH OPERATING WORKING CAPITAL
1997 1996
-------- -------
Receivables $(12,733) $(1,683)
Inventories (225) 220
Prepaids 295 201
Payables and accruals 13,954 (1,705)
-------- -------
$ 1,291 $(2,967)
======== =======
13. SIGNIFICANT CUSTOMERS AND COLLECTIVE BARGAINING AGREEMENTS
The nature of the fabrication and repair services undertaken by the Company can
result in an individual contract representing a large percentage of a fiscal
year's revenue. Similarly, total services performed for an individual customer
may also comprise a significant portion of a fiscal year's revenue. During the
period ended November 8, 1997, the largest individual contract represented 35%
of total revenue. During this same fiscal period services performed for three
separate customers comprised 37%, 29% and 13% of total revenue.
-10-
<PAGE>
Newfoundland Ocean Enterprises Limited
Notes to the Interim Consolidated Financial Statements (Unaudited)
November 8, 1997
(in thousands of U.S. dollars)
13. SIGNIFICANT CUSTOMERS AND COLLECTIVE BARGAINING AGREEMENTS (CONT'D.)
The non-management employees of the Company are covered under collective
bargaining agreements. The current status of these agreements are as follows:
. International Union of Marine Workers - Local 20 - during 1997 a
new five year collective agreement was signed effective from
April 1, 1997 to March 31, 2002;
. Marine Office and Technical Employees Union - Local 29 - during
1997 a new five year collective agreement was signed effective
from September 3, 1997 to December 31, 2002; and
. International Union of Operating Engineers - Local 904 - the
collective agreement expired as at March 31, 1997 and has not
been renegotiated to date.
14. EMPLOYEE BENEFIT PLANS
The Company provides retirement benefits to employees under two separate group
registered retirement savings plan (RRSP) arrangements. These arrangements are
effectively defined contribution plans and therefore the Company does not have
any obligation with respect to future retirement benefits for employees other
than the required annual contribution to the plans.
Under these group plans the unionized employees are required to contribute 2% of
gross earnings and the non-union employees are required to contribute 3.5% of
gross earnings. Both groups may voluntarily contribute any additional amount
with no restrictions. For both groups, the Company is required to contribute 4%
of the employee's gross earnings plus an additional 1% with respect to any
voluntary employee contribution to a total maximum of 5% of gross earnings. For
the period ended November 8, 1997 the Company's contributions under both plans
totalled $402,000 (1996 - $152,000).
15. CONTINGENT LIABILITIES
As of November 8, 1997, there are a number of claims against the Company in
varying amounts for which no provision has been made. It is not possible to
determine the amounts that may ultimately be assessed against the Company with
respect to these claims, but management believes that any such amounts would not
have a material impact on the business or financial position of the Company.
-11-
<PAGE>
EXHIBIT 99.5
UNAUDITED PRO FORMA COMBINING FINANCIAL STATEMENTS
The accompanying unaudited Pro Forma Combining Balance Sheet as of October 31,
1997 illustrates the effect of Friede Goldman International Inc.'s (the Company
or Friede Goldman) acquisition of Friede Goldman Newfoundland Limited, a
Newfoundland corporation (Acquiree) as if such acquisition had occurred on
October 31,1997. The accompanying unaudited Pro Forma Combining Income
Statements for the ten month period ended October 31, 1997 and the year ended
December 31, 1996 illustrate the effect of such acquisition as if it had
occurred at the beginning of each period presented.
Effective January 1, 1998, the Company, through its wholly-owned subsidiary,
Friede Goldman Canada Inc., a Newfoundland corporation, acquired all of the
issued and outstanding capital stock of Acquiree from (i) Newfoundland Ocean
Enterprises Ltd., (NOEL) a Newfoundland corporation wholly-owned by Her Majesty
the Queen in right of the Province of Newfoundland and (ii) NOEL's wholly-owned
subsidiary, Marystown Shipyard Limited (Marystown) (NOEL and Marystown are
collectively referred to as "Sellers."). In anticipation of the acquisition,
Sellers transferred all of their property, plant and equipment, consisting of
two deepwater, ice-free shipyard and fabrication facilities located in
Marystown, Newfoundland, Canada, to Acquiree. In addition, the Sellers also
transferred working capital of US$2.5 million to Acquiree.
The Company paid a purchase price of US$1 (one dollar) for the capital stock of
Acquiree. However, in connection with the acquisition, the Company has (i)
committed to maintain 1.2 million man-hours with respect to the shipyard
operations acquired by the Company for each of the 1998, 1999 and 2000 calendar
years and (ii) agreed to pay to the Sellers 50% of net after-tax profit of
Marystown and Acquiree for the twelve-month period ending March 31,1998. If the
Company does not meet the man-hour commitment described above, the Company will
be required to pay the Sellers liquidated damages of C$10 million in 1998 and
C$5 million in 1999 and 2000. The Company has indicated its intent to make
certain capital improvements at the shipyards and to invest US$3 million to
US$10 million to maintain and expand the business.
The transaction described above will be referred to as the "NOEL Acquisition"
throughout the Notes to Pro Forma Combining Financial Statements.
These Pro Forma Combining Financial Statements should be read in conjunction
with the historical financial statements of the Company and NOEL.
The Pro Forma Combining Financial Statements are presented for comparative
purposes only and are not intended to be indicative of actual results had the
transaction occurred as of the dates indicated above nor do they purport to
indicate results which may be attained in the future.
<PAGE>
Friede Goldman International Inc.
Pro Forma Combining Balance Sheet (1)
As of October 31, 1997
(In thousands)
<TABLE>
<CAPTION>
Friede Goldman/
NOEL
Friede Goldman NOEL Pro Forma Pro Forma
Historical Historical (2) Adjustments Combined
-------------- -------------- ------------ ---------------
<S> <C> <C> <C> <C>
Cash $39,397 $ - $ - $ 39,397
Other current assets 30,068 19,642 (4,200) (3) 45,510
Property and equipment, net 11,020 43,109 - 54,129
Construction in progress 9,635 - - 9,635
Other assets 2,179 - - 2,179
------- -------- -------- --------
Total assets $92,299 $ 62,751 $ (4,200) $150,850
======= ======== ======== ========
Current liabilities $30,181 $ 66,268 $(49,126) (4) $ 43,123
(4,200) (3)
Deferred income tax 636 - - 636
Long-term debt 1,049 37 (37) (4) 1,049
Deferred government assistance - 28,889 (28,889) (4) 45,609
45,609 (5)
Stockholders' equity:
Preferred stock - - - -
Common stock 244 2 (2) (4) 244
Additional paid-in capital 49,030 10,456 (10,456) (4) 49,030
Retained earnings (deficit) 11,159 (44,168) 44,168 (4) 11,159
Foreign exchange adjustment - 1,267 (1,267) (4) -
------- -------- -------- --------
Total stockholders' equity 60,433 (32,443) 32,443 60,433
------- -------- -------- --------
Total liabilities and $92,299 $ 62,751 $ (4,200) $150,850
stockholders' equity ======= ======== ======== ========
-2-
</TABLE>
<PAGE>
Friede Goldman International Inc.
Pro Forma Combining Income Statement (1)
For the ten months ended October 31, 1997
(In thousands, except per share data)
<TABLE>
<CAPTION>
Friede Goldman/
NOEL
Friede Goldman NOEL Pro Forma Pro Forma
Historical Historical (6) Adjustments Combined
--------------- -------------- ------------ ----------------
<S> <C> <C> <C> <C>
Revenue $ 93,467 $48,052 $(11,577) (7) $ 129,942
Cost of revenue 62,018 43,447 (11,577) (7) 93,888
----------- ------- -------- -----------
Gross profit 31,449 4,605 - 36,054
Selling, general and administrative expenses 10,443 5,637 (671) (8) 15,409
----------- ------- -------- -----------
Operating income (loss) 21,006 (1,032) 671 20,645
Other income (expense): (510) (2,372) 2,372 (9) (510)
Interest expense
Interest income 762 - - 762
Interest subsidy - 1,986 (1,986) (10) -
Gain on sale or distribution of assets 3,922 - - 3,922
Litigation settlement 611 - - 611
Other (84) - - (84)
----------- ------- -------- -----------
Total other income (expense) 4,701 (386) 386 4,701
----------- ------- -------- -----------
Income (loss) before provision for income taxes 25,707 (1,418) 1,057 25,346
Provision for income taxes 5,337 - - 5,337
----------- ------- -------- -----------
Net income (loss) $ 20,370 $(1,418) $ 1,057 $ 20,009
=========== ======= ======== ===========
Unaudited pro forma data: $ 20,370 $ 20,009
Net income, reported above
Pro forma provision for income tax related to
operations as a S Corporation (11) 3,980 3,980
----------- -----------
Pro forma net income $ 16,390 $ 16,029
=========== ===========
Earnings per common share: $ 1.00 $ 0.98
Basic =========== ===========
Diluted $ 0.99 $ 0.97
=========== ===========
Unaudited pro forma earnings per common share:
Basic $ 0.80 $ 0.79
=========== ===========
Diluted $ 0.80 $ 0.78
=========== ===========
Weighted-average common share outstanding:
Basic 20,401,680 20,401,680
=========== ===========
Diluted 20,558,896 20,558,896
=========== ===========
-3-
</TABLE>
<PAGE>
Friede Goldman International Inc.
Pro Forma Combining Income Statement (1)
For the year ended December 31, 1996
(In thousands, except per share data)
<TABLE>
<CAPTION>
Friede Goldman/
NOEL
Friede Goldman NOEL Pro Forma Pro Forma
Historical Historical (12) Adjustments Combined
--------------- --------------- ------------ ----------------
<S> <C> <C> <C> <C>
Revenue $ 21,759 $15,492 $ - $ 37,251
Cost of revenue 15,769 13,203 - 28,972
----------- ------- ----------- -----------
Gross profit 5,990 2,289 - 8,279
Selling, general and administrative 6,674 5,825 (1,002) (8) 11,497
expenses ----------- ------- ----------- -----------
Operating income (loss) (684) (3,536) 1,002 (3,218)
Other income (expense): (891) (2,971) 2,971 (9) (891)
Interest expense
Interest income 443 - - 443
Interest subsidy - 2,562 (2,562) (10) -
Gain on sale or distribution of 349 - - 349
assets
Litigation settlement 3,467 - - 3,467
Other 104 - - 104
----------- ------- ----------- -----------
Total other income (expense) 3,472 (409) 409 3,472
----------- ------- ----------- -----------
Net income (loss) $ 2,788 $(3,945) $ 1,411 $ 254
=========== ======= =========== ===========
Unaudited pro forma data: $ 2,788 $ 254
Net income, reported above
Pro forma provision for income
tax related to operations as a
S Corporation (11) 1,032 1,032
----------- -----------
Pro forma net income (loss) $ 1,756 $ (778)
=========== ===========
Earnings per common share:
Basic $ 0.15 $ 0.01
=========== ===========
Diluted $ 0.15 $ 0.01
=========== ===========
Unaudited pro forma earnings (loss)
per common share:
Basic $ 0.10 $ (0.04)
=========== ===========
Diluted $ 0.10 $ (0.04)
=========== ===========
-4-
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Weighted-average common shares
outstanding:
Basic 18,400,000 18,400,000
=========== ===========
Diluted 18,400,000 18,400,000
=========== ===========
</TABLE>
NOTES TO UNAUDITED PRO FORMA COMBINING FINANCIAL STATEMENTS
1. The adjustments to the unaudited Pro Forma Combining Financial Statements
do not give effect to direct transaction costs or any resulting
restructuring costs associated with the consummation of the NOEL
Acquisition nor do these statements give effect to any potential cost
savings and synergies that could result from the NOEL Acquisition. The
unaudited Pro Forma Combining Financial Statements are not necessarily
indicative of the operating results or financial position that would have
occurred had the NOEL Acquisition been consummated at the dates indicated
nor necessarily indicative of future operating results or financial
position.
2. This column represents historical financial position of NOEL as of November
8, 1997. See Note 6.
3. During the ten months ended October 31, 1997, the Company utilized NOEL as
a subcontractor for certain conversion and modification contracts. This
adjustment represents the elimination of accounts receivable and accounts
payable at October 31, 1997 attributable to such contracts.
4. In connection with the NOEL Acquisition, the Company acquired the property,
plant and equipment of NOEL and $2.5 million of working capital. This
adjustment reflects the elimination of assets and liabilities along with
the equity of NOEL that were not acquired by the Company.
5 Because the Company paid only $1 for the net assets acquired, the estimated
fair value of the assets is considered, for accounting purposes, to be
deferred government assistance. This adjustment reflects the deferred
government subsidy attributable to the acquired assets. For purposes of
this pro forma financial statement, the Company has considered the carrying
value of the acquired assets to approximate their estimated fair value. An
appraisal of the acquired assets is in progress, and upon receipt, the
Company will revise its carrying value of the assets acquired and the
related deferred government assistance to reflect the approximate
appraised value. Deferred government assistance will be amortized over the
estimated useful lives of assets acquired in the NOEL Acquisition. Such
amortization will substantially offset depreciation expense related to the
acquired assets.
6. This column represents historical results of operations for NOEL for the
44-week period ended November 8, 1997. Prior to the NOEL Acquisition, NOEL
utilized a 52-week fiscal year. Upon consummation of the NOEL Acquisition,
NOEL conformed its fiscal year end to that of the Company.
7. During the ten months ended October 31, 1997, the Company utilized NOEL as
a subcontractor for certain conversion and modification contracts. This
adjustment represents the elimination of revenue and related cost of
revenue attributable to such contracts.
8. This adjustment represents the elimination of historical depreciation
expense that had been recorded by NOEL on assets acquired by the Company,
together with the recording of depreciation expense and amortization of
deferred government assistance based on the Company's carrying value. See
Note 5.
9. This adjustment represents the elimination of interest expense related to
debt facilities of NOEL that were not acquired by the Company.
-5-
<PAGE>
10. This adjustment represents the elimination of interest subsidies made by
the Province of Newfoundland.
11. Prior to the Company's initial public store offering in July 1997, the
Company's predecessors elected to be taxed as an S Corporation for federal
and state income tax purposes. On June 15, 1997, the stockholders of the
predecessor entities elected to terminate the status of each predecessor
entity as an S Corporation, and the Company and the predecessor entities
became subject to federal and state income taxes. The pro forma provision
for income taxes is the result of the application of a combined federal and
state rate of 37% to income before income taxes for periods prior to June
15, 1997.
12. This column represents historical results of operations for NOEL for the
52-week period ended March 29,1997. Prior to the NOEL Acquisition, NOEL
utilized a 52-week fiscal year ending around March 31. Upon consummation
of the NOEL Acquisition, NOEL conformed its fiscal year end to that of the
Company.
-6-
