FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended 07/05/98
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ___________
Commission file number: 0-22595
Friede Goldman International Inc.
(Exact name of Registrant as specified in its charter)
Delaware 72-1362492
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
525 East Capitol Street
Jackson, Mississippi 39201
(Address of principal executive offices) (Zip code)
(601) 352-1107
(Registrant's telephone number including area code)
Not applicable (Former name, former address, and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ____
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Title Outstanding
Common Stock, $.01 par value 24,492,797
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Friede Goldman International Inc.
Table of Contents
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Page No.
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Part I. Financial Information
Item 1. Financial Statements 1
Consolidated Balance Sheets as of December 31, 1997 and
July 5, 1998 1
Consolidated Statements of Operations for the three-month and six-month
periods ended June 30, 1997 and July 5, 1998 2
Consolidated Statements of Cash Flows for the six-month periods
ended June 30, 1997 and July 5, 1998 3
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Part II. Other Information
Item 1. Legal Proceedings 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 17
Signatures
</TABLE>
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FRIEDE GOLDMAN INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, July 5,
1997 1998
-------------- --------------
ASSETS
------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 57,038,036 $ 37,012,992
Accounts receivable 20,568,194 72,714,878
Inventory and stockpiled materials 5,216,651 20,504,529
Costs and estimated earnings in excess of billings on uncompleted
contracts - 10,000
Restricted escrowed funds 14,383,929 6,552,331
Prepaid expenses and other 607,448 5,604,728
-------------- --------------
Total current assets 97,814,258 142,399,458
Property, plant and equipment, net of accumulated depreciation 11,816,664 108,939,505
Restricted escrowed funds 10,433,071 165,843
Construction in progress 17,934,877 16,662,768
Investment in unconsolidated subsidiary 907,957 12,825,000
Intangibles and other assets 3,648,585 13,068,157
-------------- --------------
Total assets $ 142,555,412 $ 294,060,731
============== ==============
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities:
Short-term debt, including current portion of long-term debt $ 493,829 $ 12,490,363
Accounts payable, trade 11,507,108 59,357,550
Accrued expenses 3,803,587 14,722,372
Billing in excess of costs and estimated earnings on uncompleted
contracts 36,487,735 49,093,058
-------------- --------------
Total current liabilities 52,292,259 135,663,343
Deferred income tax liability 691,000 691,000
Long-term debt, less current maturities 25,766,929 31,203,628
-------------- --------------
Total liabilities 78,750,188 167,557,971
-------------- --------------
Deferred government subsidy, net of accumulated amortization - 47,382,584
Commitments and contingencies
Stockholders' equity:
Preferred stock;$0.01 par value; 5,000,000 shares authorized; no
shares issued and outstanding - -
Common stock; par value $0.01; 125,000,000 shares authorized;
24,405,042 and 24,492,797 shares issued and outstanding at
December 31, 1997 and July 5, 1998 244,050 244,927
Additional paid-in capital 49,501,707 50,235,676
Retained earnings 14,059,467 28,444,377
Foreign currency translation adjustment - 195,196
-------------- --------------
Total stockholders' equity 63,805,224 79,120,176
-------------- --------------
Total liabilities and stockholders' equity $ 142,555,412 $ 294,060,731
============== ==============
</TABLE>
The accompanying notes are
an integral part of these financial statements.
1
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FRIEDE GOLDMAN INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended Six months ended
------------------------------ -------------------------------
June 30, July 5, June 30, July 5,
1997 1998 1997 1998
------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
Revenue $ 26,868,560 $ 88,596,854 $ 45,523,196 $ 157,348,139
Cost of revenue 16,623,990 67,692,347 29,423,887 117,821,309
------------- ------------- ------------- ---------------
Gross profit 10,244,570 20,904,507 16,099,309 39,526,830
------------- ------------- ------------- ---------------
Selling, general and administrative expenses 3,497,754 8,205,530 6,120,055 15,823,964
------------- ------------- ------------- ---------------
Operating income 6,746,816 12,698,977 9,979,254 23,702,866
------------- ------------- ------------- ---------------
Other income (expense):
Interest expense (168,774) (571,993) (370,134) (738,788)
Interest income 3,592 856,870 85,119 1,374,675
Gain on sale or distribution of assets 2,543,131 - 3,921,973 -
Litigation settlement 611,310 - 611,310 -
Other (13,961) (339,749) 52,288 (543,007)
------------- ------------- ------------- ---------------
Total other income (expense) 2,975,298 (54,872) 4,300,556 92,880
------------- ------------- ------------- ---------------
Income before tax 9,722,114 12,644,105 14,279,810 23,795,746
Income tax provision 1,250,000 4,997,210 1,250,000 9,410,836
------------- ------------- ------------- ---------------
Net income 8,472,114 7,646,895 13,029,810 14,384,910
Pro forma income tax provision 2,295,000 - 3,980,000 -
------------- ------------- ------------- ---------------
Pro forma net income $ 6,177,114 $ 7,646,895 $ 9,049,810 $ 14,384,910
============= ============= ============= ===============
Earnings per share:
Basic $ 0.46 $ 0.31 $ 0.71 $ 0.59
============= ============= ============= ===============
Diluted $ 0.46 $ 0.31 $ 0.71 $ 0.58
============= ============= ============= ===============
Pro forma earnings per share:
Basic $ 0.34 $ 0.49
============= =============
Diluted $ 0.34 $ 0.49
============= =============
Weighted average shares:
Basic 18,400,000 24,492,793 18,400,000 24,471,213
============= ============= ============= ===============
Diluted 18,400,000 24,895,389 18,400,000 24,863,856
============= ============= ============= ===============
</TABLE>
The accompanying notes are
an integral part of these financial statements.
2
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FRIEDE GOLDMAN INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
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<CAPTION>
Six Months Ended
----------------------------------
June 30, July 5,
1997 1998
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Cash flows from operating activities:
Net income $ 13,029,810 $ 14,384,910
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 567,023 1,851,966
Compensation expense related to stock issued to employees 475,000 304,180
(Gain) loss on sale of assets (3,921,973) 310,687
Deferred income tax provision 800,000 -
Net increase (decrease) in billings related to costs and
estimated earnings on uncompleted contracts: 1,422,497 (2,454,922)
Net effect of changes in assets and liabilities:
Restricted certificates of deposit 4,651,964 -
Accounts receivable (11,774,886) (31,758,942)
Inventory and stockpiled materials (1,384,000) (874,690)
Prepaid expenses and other assets (621,195) (4,285,774)
Accounts payable and accrued expenses 6,935,582 34,556,957
-------------- --------------
Net cash provided by operating activities 10,179,822 12,034,372
-------------- --------------
Cash flows from investing activities:
Capital expenditures for plant and equipment (4,492,166) (45,371,512)
Acquisition of French subsidiary - (25,065,000)
Cash acquired upon acquisition of French subsidiary - 20,553,300
Proceeds from sale of property, plant and equipment 395,521 -
Investment in unconsolidated subsidiary - (11,917,043)
Payments received on sales-type lease 300,047 76,067
-------------- --------------
Net cash used in investing activities $ (3,796,598) $ (61,724,188)
-------------- --------------
</TABLE>
The accompanying notes are
an integral part of these financial statements.
3
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FRIEDE GOLDMAN INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS --(Continued)
<TABLE>
<CAPTION>
Six Months Ended
-----------------------------------
June 30, July 5,
1997 1998
-------------- -------------
<S> <C> <C>
Cash flows from financing activities:
Proceeds from exercise of stock options $ - $ 430,666
Net borrowings under lines of credit 3,170,855 7,680,813
Proceeds from borrowings under debt facilities 468,203 28,544,610
Repayments on borrowings under debt facilities (6,446,853) (7,186,513)
Distributions to stockholders (4,821,248) -
-------------- -------------
Net cash provided by (used in) financing activities (7,629,043) 29,469,576
-------------- -------------
Effect of currency translation adjustments - 195,196
-------------- -------------
Net decrease in cash and cash equivalents (1,245,819) (20,025,044)
Cash and cash equivalents at beginning of year 1,509,876 57,038,036
-------------- -------------
Cash and cash equivalents at end of period $ 264,057 $ 37,012,992
============== =============
Supplemental disclosure of cash flow information--
Cash paid during the period for interest $ 430,000 $ 346,489
============== =============
Issuance of common stock as compensation $ 475,000 $ -
============== =============
Non-cash distributions of property to stockholders $ 1,641,000 $ -
============== =============
Assumption of note payable by stockholder $ 198,000 $ -
============== =============
Distribution of marketable securities to stockholder to satisfy note payable $ 1,400,000 $ -
============== =============
Distribution of marketable securities to stockholders $ 6,391,000 $ -
============== =============
Assumption of margin account debt by stockholders $ 2,749,000 $ -
============== =============
Estimated fair value of non-cash assets acquired in acquisition
of Canadian company $ - $ 49,462,096
============== =============
</TABLE>
The accompanying notes are
an integral part of these financial statements.
4
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FRIEDE GOLDMAN INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION, INITIAL PUBLIC OFFERING AND STOCK SPLIT
The consolidated financial statements include the accounts of Friede Goldman
International Inc. and its wholly-owned subsidiaries, HAM Marine, Inc. ("HAM"),
Friede & Goldman, Ltd. ("Friede & Goldman"), Friede Goldman Offshore Inc.
("FGO"), Friede Goldman Newfoundland Limited ("FGN"), Friede Goldman France
S.A.S. ("FGF") and World Rig Leasing, Inc. ("WRL")(collectively referred to as
the "Company").
In July 1997, the Company completed an initial public offering (the "Offering")
of its common stock. In connection with the Offering, the Company sold 3,002,521
(6,005,042 after the 2 for 1 stock split discussed below) shares of its common
stock for net proceeds of approximately $46.7 million.
In September 1997, the Company declared a 2 for 1 stock split, effective October
10, 1997 for stockholders of record as of October 1, 1997. Unless otherwise
indicated, all share and per share data have been restated to reflect the
effects of the 2 for 1 split.
2. CHANGE IN INTERIM REPORTING PERIODS
Effective January 1, 1998, the Company adopted a 13-week quarterly reporting
period by which the fiscal year is divided into four 13-week periods ending on
the last Sunday in each period. The fiscal year-end will continue to be December
31. Accordingly, for calendar year 1998, quarterly periods will end on April 5,
July 5, October 4 and December 31. This change in reporting periods was made to
allow the close of interim financial reporting periods to coincide with the
close of direct labor reporting periods. The change will have no impact on
annual results of operations and will have an immaterial impact on interim
results.
3. QUARTERLY FINANCIAL INFORMATION
The information presented as of July 5, 1998 and for the three-month and
six-month periods ended July 5, 1998 and June 30, 1997 is unaudited. In the
opinion of the Company's management, the accompanying unaudited financial
statements contain all adjustments (consisting of normal recurring adjustments)
which the Company considers necessary for the fair presentation of the Company's
financial position as of July 5, 1998 and the results of its operations for the
three-month and six-month periods ending July 5, 1998 and June 30, 1997 and
its cash flows for the six-month periods ending July 5, 1998 and June 30, 1997.
In the opinion of management, the financial statements included herein have been
prepared in accordance with generally accepted accounting principles and the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain
information and disclosures normally included in financial statements have been
condensed or omitted.
The results of operations for the three-month and six-month periods ended July
5, 1998 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1998.
4. SIGNIFICANT ACCOUNTING POLICIES
Income Taxes
Prior to June 15, 1997, the Company was an S Corporation for federal and state
income tax purposes, and as a result, was not subject to income taxes. On June
15, 1997, such S Corporation status was terminated.
5
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FRIEDE GOLDMAN INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
The pro forma income tax provision is the result of the application of a
combined federal and state rate (37%) to income before income taxes for periods
prior to termination of S Corporation status.
Earnings Per Share
In February 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 128, "Earnings Per Share," which simplifies the computation of earnings per
share ("EPS"). SFAS No. 128 is effective for financial statements issued for
periods ending after December 15, 1997, and requires restatement of all prior
period EPS data presented. Under SFAS No. 128, the Company computes two earnings
per share amounts--basic EPS and diluted EPS. Basic EPS is calculated based on
the weighted average number of shares of common stock outstanding for the
periods presented. Diluted EPS is based on the weighted average number of shares
of common stock outstanding for the periods, including dilutive potential common
shares which reflect the dilutive effect of the Company's stock options.
Dilutive common equivalent shares for the three-month and six-month periods
ended June 5, 1998 were 402,596 and 392,643 respectively, all attributable to
stock options. There were no common equivalent shares outstanding during the
three-month and six-month periods ended June 30, 1997.
Foreign Currency Translation
The financial statements of subsidiaries outside the United States, (Canada and
France, see Note 5), are measured using the local currency as the functional
currency. Assets and liabilities of these subsidiaries are translated at the
rates of exchange at the balance sheet date. The resultant translation
adjustments are included as a separate component of stockholders' equity. Income
and expense items are translated at average monthly rates of exchange during the
period.
5. ACQUISITIONS
In January 1998, the Company purchased the assets of Newfoundland Ocean
Enterprises Ltd. of Marystown, Newfoundland ("Marystown"), a steel fabrication
and marine construction concern with operations similar to those of the Company.
The acquisition was effected pursuant to a Share Purchase Agreement, dated
January 1, 1998 (the "Share Purchase Agreement"). Under the terms of the Share
Purchase Agreement, the Company paid a purchase price of US $1 (one dollar).
However, the Share Purchase Agreement also provides that, among other things,
the Company (i) maintain a minimum of 1.2 million man-hours (management, labor,
salaried and hourly) for each of the 1998, 1999 and 2000 calendar years, (ii)
undertake certain capital improvements at the acquired shipyards and (iii) pay
to the sellers fifty percent (50%) of net after tax profit of Marystown for the
twelve-month period ending March 31, 1998 (which amount was not material). The
Company has also indicated its intent to invest C$5 million to C$15 million
(approximately US $3 million to US $10 million) to maintain and expand the
business. The Share Purchase Agreement provides that the Company will pay to the
Seller liquidated damages of C$10 million (approximately US$7 million) in 1998
and C$5 million (approximately US$3 million) in 1999 and 2000 in any of such
years in which the minimum number of man-hours described above is not attained.
The assets acquired have been recorded at their estimated fair values of
approximately US $49.5 million. The difference between the fair value of the
acquired assets and the $1 consideration was recorded as a deferred government
subsidy which is being amortized over the lives of the assets acquired. In
addition the sellers guaranteed that at the time of acquisition working capital
of Marystown would be at least C$2.5 million (approximately US$1.7 million). At
the purchase date the Company recorded an additional deferred subsidy of US$1.8
million for the contribution by Marystown to bring working capital to its
contractually required amount.
6
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FRIEDE GOLDMAN INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Effective February 5, 1998, the Company, through its wholly-owned subsidiary,
Friede Goldman France, S.A.S., ("FGF") a French par actions simplifee, acquired
all of the issued and outstanding shares of a French holding company and its
French subsidiaries, for a cash payment of approximately $25 million. The
operating subsidiaries of the holding company operate facilities in Carquefou
and Lanveoc, France. The subsidiaries primarily design and manufacture deck
machinery that includes mooring, anchoring and cargo handling equipment;
rack-and-pinion jacking systems used on offshore drilling platforms; trawl and
draw net winches for fishing vessels; and hydraulic power and rack-and-pinion
steering systems used in all types of vessels. The purchase price has been
preliminarily allocated to net current assets of $9.6 million and land, building
and machinery in the amount of $6.6 million and goodwill of $8.8 million.
Goodwill is being amortized over 25 years.
The following summarized income statement data reflects the impact which the
acquisitions would have had on the Company's results of operations had the
transactions taken place as of the beginning of the periods presented:
<TABLE>
<CAPTION>
Pro Forma Results For
The Six Months Ended
(In thousands, except per share amount)
---------------------------------------
June 30, 1997 July 5, 1998
------------- ------------
<S> <C> <C>
Revenues $ 88,741 $ 160,797
Operating income 10,731 23,920
Net income 13,818 14,470
Earning per common share - Basic 0.75 0.59
Earnings per common share - Diluted 0.75 0.58
</TABLE>
The initial purchase allocations for both of the acquisitions were based on
preliminary appraisals of the fair values of assets and liabilities acquired
pending development of more detailed appraisals and assessments by management.
As a result, final purchase price allocations may differ from current
allocations.
6. INVESTMENT IN UNCONSOLIDATED SUBSIDIARY
At July 5, 1998, the Company had invested approximately $12.8 million in an
unconsolidated subsidiary ("Ilion LLC") in which the Company currently owns a
50% equity interest. The Company's ownership interest in the Ilion LLC may be
reduced to 30% if the other member (who is also the Company's largest customer)
of the LLC exercises its option to convert a note receivable from Illion LLC
into equity interest . Ilion LLC owns a hull for a semi-submersible drilling rig
that requires substantial completion and outfitting. The Company and the other
member of Ilion LLC are considering various options for formal arrangements
related to the hull, including financing of its completion, securing a contract
7
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FRIEDE GOLDMAN INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
for utilization or sale of the rig, or other options. Other than the initial
purchase of the drilling rig hull, Ilion LLC has had no significant activity as
of July 5, 1998. The Company's investment in Ilion LLC is accounted for using
the equity method.
7. NEW ACCOUNTING PRONOUNCEMENTS
During 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income."
This statement is effective for fiscal years beginning after December 15, 1997.
Reconciliation of net income to comprehensive income for the six-month period
ended July 5, 1998 is as follows:
<TABLE>
<CAPTION>
<S> <C>
Net income $14,384,910
Other comprehensive income, net of tax
Foreign currency translation 195,196
-----------
Comprehensive income $14,580,106
===========
</TABLE>
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities". The Statement establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. The Statement
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Special accounting
for qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement, and requires that a company
must formally document, designate, and assess the effectiveness of transactions
that receive hedge accounting. Given the Company's historically minimal use of
these types of instruments, the Company does not expect a material impact on its
statements from adoption of SFAF No. 133.
8
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Introduction
The Company's results of operations are affected primarily by conditions
affecting offshore drilling contractors, including the level of offshore
drilling activity by oil and gas companies. The level of offshore drilling
activity is affected by a number of factors, including prevailing and expected
oil and natural gas prices, the cost of exploring for, producing and delivering
oil and gas, the sale and expiration dates of offshore leases in the United
States and overseas, the discovery rate of new oil and gas reserves in offshore
areas, local and international political and economic conditions and the ability
of oil and gas companies to access or generate capital sufficient to fund
capital expenditures for offshore exploration, development and production
activities. Despite recent declines in oil and natural gas prices, drilling
activity in the Gulf of Mexico has generally increased over the past few years.
This increase in drilling activity is generally attributable to a number of
recent industry trends, including three-dimensional seismic mapping, directional
drilling and other advances in technology that have increased drilling success
rates and efficiency and have led to the discoveries of oil and gas in subsalt
geological formations (which generally are located in depths of 300 to 800 feet
of water) and deepwater areas of the Gulf of Mexico. In the deepwater areas
where larger and more technically advanced drilling rigs are needed, increased
drilling activity has increased demand for newly constructed semi-submersible
drilling rigs and for retrofitting offshore drilling rigs.
Due to increased demand for its services, the Company's backlog has increased
from $65 million at June 30, 1997 to $509 million at July 5, 1998. To
accommodate this increased demand, the Company has leased additional acreage
adjacent to HAM's existing shipyard in Pascagoula, Mississippi, that provides it
with additional dock space and covered fabrication capacity. In addition, the
Company has substantially completed construction of a state-of-the-art shipyard,
also in Pascagoula, Mississippi, that is capable of constructing new offshore
drilling rigs and production units as well as converting, retrofitting and
repairing existing offshore drilling rigs and production units. The new facility
(the "Greenwood Island Facility") began generating revenue in the first quarter
of 1998. Further, the Company has increased its Pascagoula based workforce from
approximately 300 employees at December 1, 1996 to approximately 2,400 employees
at July 5, 1998.
In January 1998 the Company acquired substantially all of the operating assets
of a shipyard and fabrication facility in Marystown, Newfoundland (the
"Marystown Facility"). The Marystown Facility expanded the Company's capacity
for new construction as well as retrofit and repair of offshore drilling rigs
and production units. Also, in February 1998, the Company acquired a company
located near Nantes, France, that designs and manufactures mooring, anchoring,
rack-and-pinion jacking systems and cargo handling equipment. This additional
capacity is expected to help the Company in meeting the anticipated increase in
demand for such equipment as components of new and modified offshore drilling
rigs.
Due to general declines in oil and gas prices during the first half of 1998,
demand for shallow water offshore drilling rigs has declined. Demand for deep
water drilling rigs remains high; however, it is possible that continued low oil
and gas prices could result in a decline in demand for such rigs. Substantially
all of the contracts included in the Company's backlog at July 5, 1998, relate
to deep water drilling rigs. Some of these contracts are subject to cancellation
by the customers; however, the Company has had no indication that any of its
contracts might be cancelled.
At July 5, 1998, the Company had paid approximately $3.8 million for the
manufacture of certain jackup rig components in anticipation of being awarded a
contract to build one or more new jackup rigs. The Company has plans to build
such components with a total estimated cost of approximately $11 million. As of
July 5, 1998, the Company had not been awarded any contracts for construction of
new jackup rigs; however, management of the Company believes that contracts will
be secured that will utilize these components or that these components could be
9
<PAGE>
sold to third parties at an amount not less than costs.
The Company generally performs conversion, retrofit and repair services pursuant
to contracts that provide for a portion of the work to be performed on a
fixed-price basis and a portion of the work to be performed on a cost-plus
basis. In addition, the scope of the services to be performed with respect to a
particular drilling rig often increases as the project progresses due to
additional retrofits or modifications requested by the customer or additional
repair work necessary to meet the safety or environmental standards established
by the Coast Guard or other regulatory authorities. With respect to the
fixed-price portions of a project, the Company receives the negotiated contract
price, subject to adjustment only for change orders placed by the customer. As a
result, under fixed price arrangements, the Company retains all cost savings but
is also responsible for all cost over-runs. Under cost-plus arrangements, the
Company receives specified amounts in excess of its direct labor and materials
cost so that it is protected against cost overruns but does not benefit from
cost savings. The cost and productivity of the Company's labor force are primary
factors affecting the Company's operating profits. Accordingly, control by the
Company of the cost and productivity of direct labor hours worked on its
projects is essential. The Company believes that the access to information
provided by its project management systems allows it to effectively manage its
current projects as well as to negotiate contracts on new projects on a
profitable basis.
The Company's operations are subject to variations from quarter to quarter and
year to year resulting from fluctuations in demand for the Company's services
and, due to the large amounts of revenue that are typically derived from a small
quantity of projects, the timing of the receipt of awards for new projects. In
addition, the Company schedules projects based on the timing of available
capacity to perform the services requested and, to the extent that there are
delays in the arrival of a drilling rig or production unit into the shipyard,
the Company generally is not able to utilize the excess capacity created by such
delays. Although the Company may be able to offset the effect of such delays
through adjustments to the size of its skilled labor force on a temporary basis,
such delays may adversely affect the Company's results of operations in any
period in which such delays occur.
The Company's revenue on contracts is earned on the percentage-of-completion
method which is based upon the percentage that incurred costs to date, excluding
the costs of any purchased but uninstalled materials, bear to total estimated
costs. Accordingly, contract price and costs estimates are reviewed periodically
as the work progresses, and adjustments proportionate to the percentage of
completion are reflected in the accounting period in which the facts that
require such adjustments become known. Provisions for estimated losses on
uncompleted contracts are made in the period in which such losses are
identified. Other changes, including those arising from contract penalty
provisions and final contract settlements, are recognized in the period in which
the revisions are determined. To the extent that these adjustments result in a
reduction or elimination of previously reported profits, the Company would
report such a change by recognizing a charge against current earnings, which
might be significant depending on the size of the project or the adjustment.
Cost of revenue includes costs associated with the fabrication process and can
be further broken down between direct costs (such as direct labor hours and raw
materials) allocated to specific projects and indirect costs (such as
supervisory labor, utilities, welding supplies and equipment costs) that are
associated with production but are not directly related to a specific project.
Prior to June 15, 1997, HAM and Friede & Goldman (collectively referred to as
the "Predecessors" of the Company) had operated as S Corporations for federal
and state income tax purposes. As a result, the Predecessors paid no federal or
state income tax, and their earnings were subject to tax directly at the
stockholder level. On June 15, 1997, the stockholders of the Company and the
Predecessors terminated the S Corporation status of such entities. As a result,
the Company and each of the Predecessors became subject to corporate level
income taxation following such termination, and the Company recorded a net
deferred income tax liability through a charge to earnings of approximately $0.8
million in the second quarter of 1997 attributable primarily to the difference
in financial reporting and tax reporting methods of accounting for depreciation
and sales-type leases.
10
<PAGE>
Results of Operations
Comparison of the Three Month Periods Ended July 5, 1998 and June 30, 1997
During the three months ended July 5, 1998, the Company generated revenue of
$88.6 million, an increase of 229%, compared to the $26.9 million generated for
three months ended June 30, 1997. This increase was caused primarily by an
increase in demand for conversion and retrofit services related to deep water
offshore drilling rigs and services related to the completion and outfitting of
an existing semi-submersible drilling rig hull. Also, results for the three
months ended July 5, 1998 include revenues from both the Marystown Facility and
the Company's French subsidiary for a full quarter.
Cost of revenue was $67.7 million for the three months ended July 5, 1998
compared to $16.6 million for the three months ended June 30, 1997, resulting in
an increase in gross profit from $10.2 million for the three months ended June
30, 1997 to $20.9 million in the three months ended July 5, 1998. A portion of
the decrease in gross profit as a percentage of revenues can be attributed
primarily to smaller margin percentages earned by the Company on contracts
assumed upon the acquisition of the Marystown Facility. Commitments under such
contracts are expected to be substantially complete by the end of 1998. In
addition, management anticipates that gross margins, as a percentage of
revenues, may be lower on significantly larger projects such as the completion
or new construction of semi-submersible drilling rigs than margins currently
being achieved on the major retrofit and conversion projects. Such lower gross
margin percentages result from a higher dollar volume of lower margin material
and subcontract costs included in contract costs, and from a greater portion of
the total project being performed on a fixed price basis. Gross margins on
repair and retrofit projects also vary based on, among other things, the size of
the project undertaken. Of the Company's $509 million backlog at July 5, 1998,
approximately $322 million is attributable to fixed price contracts for
completion or construction of new rigs.
Selling, general and administrative expenses (SG&A expenses) were $8.2 million
in the three months ended July 5, 1998 compared to $3.5 million for the three
months ended June 30, 1997. The increase in SG&A expenses reflects an increase
in sales and administrative workforce and facilities due to overall growth of
the Company's business, the additional administrative costs associated with
international activities and costs associated with being a publicly held
corporation.
Operating income increased by $5.9 million from the three months ended June 30,
1997 to $12.7 million for the three months ended July 5, 1998 primarily as a
result of increased revenue and gross profit discussed in the preceding
paragraphs.
Interest expense increased to $0.6 million for the three months ended July 5,
1998 due to borrowings for capital expenditures, primarily the Greenwood Island
facility and other equipment. Interest income increased due to the higher
interest bearing cash balances.
During the three months ended June 30, 1997, the Company realized gains of
approximately $2.5 million as a result of the distribution of certain
appreciated assets not used in the business to the stockholders of one of the
Predecessors. In addition, the settlement of litigation resulted in other income
of $0.6 million in the quarter ended June 30, 1997. There were no similar items
of other income in the quarter ended July 5, 1998.
The provision for income taxes for the three months ended July 5, 1998 reflects
a combined Federal and State income tax rate of approximately 39.5%. Foreign
taxes for the period are not material. The pro forma provision for income taxes
for the three months ended June 30, 1997 is the result of the application of a
combined federal and state tax rate of 37% to estimated taxable income for the
period prior to termination of S Corporation status during which the Company was
not subject to Federal Income Tax.
11
<PAGE>
Comparison of the Six Month Periods Ended July 5, 1998 and June 30, 1997
During the six months ended July 5, 1998, the Company generated revenue of
$157.3 million, an increase of 246%, compared to the $45.5 million generated for
six months ended June 30, 1997. This increase was caused primarily by an
increase in demand for conversion and retrofit services related to deep water
offshore drilling rigs and services related to the completion and outfitting of
an existing semi-submersible drilling rig hull. Also, results for the six months
ended July 5, 1998 include revenues from the Marystown Facility for the full six
months and the Company's French subsidiary for approximately five months.
Cost of revenue was $117.8 million for the six months ended July 5, 1998
compared to $29.4 million for the six months ended June 30, 1997, resulting in
an increase in gross profit from $16.1 million for the six months ended June 30,
1997 to $39.5 million for the six months ended July 5, 1998. A portion of the
decrease in gross profit as a percentage of revenues can be attributed primarily
to smaller margin percentages earned by the Company on contracts assumed upon
the acquisition of the Marystown Facility. Commitments under such contracts are
expected to be substantially complete by to the end of 1998. In addition,
management anticipates that gross margins, as a percentage of revenues, may be
lower on significantly larger projects such as the completion or new
construction of semi-submersible drilling rigs than margins currently being
achieved on the major retrofit and conversion projects. Such lower gross margin
percentages result from a higher dollar volume of lower margin material and
subcontract costs included in contract costs, and from a greater portion of the
total project being performed on a fixed price basis. Gross margins on repair
and retrofit projects also vary based on, among other things, the size of the
project undertaken.
SG&A expenses were $15.8 million in the six months ended July 5, 1998 compared
to $6.1 million for the six months ended June 30, 1997. The increase in SG&A
expenses reflects an increase in sales and administrative workforce and
facilities due to overall growth of the Company's business, the additional
administrative costs associated with international activities and costs
associated with being a publicly held corporation.
Operating income increased by $13.7 million from the six months ended June 30,
1997 to $23.7 million for the six months ended July 5, 1998 primarily as a
result of increased revenue and gross profit discussed in the preceding
paragraphs.
Interest expense increased to $0.7 million for the six months ended July 5, 1998
as a result of borrowings for capital expenditures. Interest income increased
due to higher interest bearing cash balances.
During the six months ended June 30, 1997, the Company realized gains of
approximately $3.9 million as a result of the distribution of certain
appreciated assets not used in the business to the stockholders of one of the
Predecessors. In addition, the settlement of litigation resulted in other income
of $0.6 million in the six months ended June 30, 1997. There were no similar
items of other income in the six ended July 5, 1998.
The provision for income taxes for the six months ended July 5, 1998 reflects a
combined Federal and State income tax rate of approximately 39.5%. Foreign taxes
for the period are not material. The pro forma provision for income taxes for
the six months ended June 30, 1997 is the result of the application of a
combined federal and state tax rate of 37% to estimated taxable income for the
period prior to termination of S Corporation status during which the Company was
not subject to Federal Income Tax.
Liquidity and Capital Resources
Historically, the Company has financed its business activities through funds
generated from operations, a credit facility secured by accounts receivable, and
long-term borrowings secured by assets purchased with proceeds from such
borrowings. Net cash provided by operations was $10.2 million for the six months
12
<PAGE>
ended June 30, 1997 compared to $12.0 million for the six months ended July 5,
1998.
During the three months and six months ended July 5, 1998, the Company incurred
approximately $19.1 million and $45.4 million, respectively, in capital
expenditures primarily related to the overall expansion of the Company's
business activities. Of the $45.4 million total for the six months ended July 5,
1998, approximately $27.8 million was expended for facilities and related
equipment for the new Greenwood Island Facility. Additionally, $16.9 million and
$0.7 million were expended for other equipment and furniture/fixtures,
respectively. In addition, in February 1998, approximately $25.1 million was
expended for the acquisition of the Company's French subsidiary. These capital
expenditures were funded from operating cash flow, proceeds from the initial
public offering, the MARAD arrangement and an additional $8 million debt
facility discussed below.
During the three months ended July 5, 1998, the Company invested approximately
$12.8 million in an unconsolidated subsidiary ("Ilion LLC") in which the Company
currently owns a 50% equity interest. The Company's ownership interest in Ilion
LLC may be reduced to 30% if the other member of the LLC exercises an option to
convert a note receivable from Ilion LLC into equity interest. Ilion LLC owns a
hull for a semi-submersible drilling rig that requires substantial completion
and outfitting. The Company and the other member of Ilion LLC are considering
various options for formal arrangements related to the hull, including financing
of its completion, securing a contract for utilization or sale of the rig, or
other options. The Company's investment in Ilion LLC was financed through cash
flow from operations. Other than the initial purchase of the drilling rig hull,
Ilion LLC has had no significant activity as of July 5, 1998. The Company's
investment in Ilion LLC is accounted for using the equity method.
In March 1997, HAM entered into a credit facility (the "Credit Facility") which
provided for borrowings of up to $10.0 million, subject to a borrowing base
limitation equal to 80% of eligible receivables. The Credit Facility is secured
by contract-related receivables. In connection with obtaining the Credit
Facility, HAM Marine repaid all outstanding indebtedness under the provisions of
the existing Credit Facility and such facility was terminated. In November 1997,
the borrowing capacity under the Credit Facility was increased to $20.0 million.
The Credit Facility expired on June 30, 1998 but was extended until August 31,
1998. At July 5, 1998, $7.7 million was outstanding balance under the Credit
Facility and $ 12.3 million was available. Borrowings under the Credit Facility
bear interest equal to the lender's prime lending rate plus 1/2% per annum. At
July 5, 1998, the interest rate under the Credit Facility was 8.16 % per annum.
The Credit Facility contains a number of restrictions, including a provision
that would prohibit the payment of dividends by HAM to the Company in the event
that HAM defaults under the terms of the facility. In addition, the Company must
maintain certain minimum net worth and working capital levels and ratios and
debt to equity ratios. The Company was not in compliance with one of the working
capital ratio provisions of the Credit Facility debt agreement; however, the
Bank waived the compliance requirement for this working capital ratio.
As an additional source of borrowing capacity, the United States Maritime
Administration ("MARAD") has provided its guarantee for $24.8 million of bonds
issued by the Company. The proceeds from the sale of MARAD guaranteed bonds must
be used only for capital expenditures relating to the costs of constructing and
equipping the Company's new Greenwood Island Facility. In November 1997, $24.8
million of proceeds from the MARAD arrangement were placed in escrow for use by
the Company upon completion of documentation that qualifying expenditures had
been made. As of July 5, 1998, the Company had received reimbursement from the
escrow in the amount of $18.0 million and had incurred costs sufficient to
obtain reimbursements for the remaining $6.8 million in escrow.
During the six months ended July 5, 1998, the Company entered into an $8 million
equipment financing arrangement for the purchase of a floating dry dock. Amounts
borrowed bear interest at 7.05% and are to be repaid in quarterly installments
of $500,000 plus interest through March 2002.
Net borrowings from all credit arrangements, excluding the MARAD arrangement
discussed above, were $18.1 million for the six months ended July 5, 1998.
In July 1997, the Company completed an initial public offering (the "Offering")
of 6,005,042 (after the 2 for 1 stock split) shares of its common stock for net
proceeds of approximately $46.7 million. Proceeds from the Offering have been
used to finance a portion of the Company's expansion of its Pascagoula shipyard,
the new Greenwood Island facility, the acquisition of the French subsidiary and
for working capital.
13
<PAGE>
Management believes that cash generated by operating activities, and funds
available under its various credit facilities will be sufficient to fund the
completion of the new shipyard, its other capital expenditure requirements, and
its working capital needs at current levels of activity. While management of the
Company has historically been able to manage cash flow from construction
contracts in such a manner as to minimize the need for short-term contract
related borrowings, additional debt financing or equity financing may be
required in the future if the Company significantly increases its conversion,
retrofit and repair business or obtains significant additional orders to
construct new drilling rigs or production units. Although the Company believes
that, under such circumstances, it would be able to obtain additional financing,
there can be no assurance that any additional debt or equity financing will be
available to the Company for these purposes or, if available, will be available
on terms satisfactory to the Company.
As noted above, the Company has experienced rapid growth during the past 18
months. During this period, construction was begun and substantially completed
on the Greenwood Island Facility; the MARAD financing arrangement was
consummated; an initial public offering of common stock was completed and the
Company's backlog increased significantly. The Company has also invested in an
equity ownership in an unconsolidated subsidiary that owns a semi-submersible
drilling rig, and, unlike prior operations, the Company has incurred costs
related to construction or fabrication of rig components for which no specific
customer has committed. In addition, in early 1998, the Company completed the
acquisition of foreign entities in Canada and France. These changes in and
significant expansion of the Company's operation, expose the Company to
additional business and operating risks and uncertainties.
Year 2000 Compliance
In connection with the rapid expansion of the Company's business activities, the
Company is reassessing the computer and information system needs of the overall
organization and management anticipates that an expansion and upgrade of such
systems will be necessary. Along with this reassessment, the Company is also
reviewing its current computer-based systems and applications to ensure that its
computer and information systems will function properly at Year 2000. At this
time, management of the Company believes that, while the overall costs of its
information systems expansion and upgrade may be significant, the specific costs
of achieving Year 2000 compliance for its current systems will not have a
material effect on the Company's consolidated financial statements. The Company
is in the process of evaluating its Year 2000 exposure on non-critical computer
systems and Year 2000 compliance of its suppliers and customers. In the event
that any of the Company's significant suppliers or customers fail to achieve
Year 2000 compliance, the Company does not believe its business or operations
would be adversely affected.
Recently Issued Accounting Pronouncements
In March 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128 ("SFAS No. 128"), "Earnings
Per Share," which adopts a revised methodology for computing earnings per share
for publicly owned companies. The Company adopted the new methodology in the
fourth quarter of 1997. The adoption of SFAS No. 128 did not change the
Company's previously reported historical earnings per share.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131 ("SFAS No. 131"), "Disclosures about Segments of an Enterprise and Related
Information," which is effective for periods beginning after December 15, 1997.
SFAS No. 131 will require the Company to report financial and descriptive
information about its operating segments in its annual financial statements for
the year ending December 31, 1998.
14
<PAGE>
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities". The Statement establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. The Statement
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Special accounting
for qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement, and requires that a company
must formally document, designate, and assess the effectiveness of transactions
that receive hedge accounting. Given the Company's historically minimal use of
these types of instruments, the Company does not expect a material impact on its
statements from adoption of SFAF No. 133.
Forward Looking Statements
This Report on Form 10-Q contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. All statements, other
than statements of historical facts, included in this Form 10-Q, are
forward-looking statements. Such forward-looking statements are subject to
certain risks, uncertainties and assumptions, including (i) risks of reduced
levels of demand for the Company's products and services resulting from reduced
levels of capital expenditures of oil and gas companies relating to offshore
drilling and exploration activity and reduced levels of capital expenditures of
offshore drilling contractors, which levels of capital expenditures may be
affected by prevailing oil and natural gas prices, expectations about future oil
and natural gas prices, the cost of exploring for, producing and delivering oil
and gas, the sale and expiration dates of offshore leases in the United States
and overseas, the discovery rate of new oil and gas reserves in offshore areas,
local and international political and economic conditions, the ability of oil
and gas companies to access or generate capital sufficient to fund capital
expenditures for offshore exploration, development and production activities,
and other factors, (ii) risks related to expansion of operations, either at its
shipyards or one or more other locations, (iii) operating risks relating to
conversion, retrofit and repair of drilling rigs, new construction of drilling
rigs and production units and the design of new drilling rigs, (iv) contract
bidding risks, (v) risks related to dependence on significant customers, (vi)
risks related to the failure to realize the level of backlog estimated by the
Company due to determinations by one or more customers to change or terminate
all or portions of projects included in such estimation of backlog and (vii)
risks related to regulatory and environmental matters. Should one or more of
these risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those anticipated, estimated
or projected. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, no assurance can be given that
such expectations will prove to have been correct.
Part II. Other Information
Item 1. Legal Proceedings
The Company is a party to various routine legal proceedings primarily involving
commercial claims and workers' compensation claims. While the outcome of these
claims and legal proceedings 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
The 1998 Annual Meeting of Stockholders of Friede Goldman International Inc. was
held on May 15, 1998. The following matters were submitted for vote:
1. The election of two Class I directors of the Company to hold office until
the third succeeding annual meeting of stockholders after their election
(the 2001 Annual Meeting) and until their respective successors shall have
been elected and qualified.
2. Ratification of the selection of Arthur Andersen LLP as the Company's
independent certified public accountants to audit the Company's
consolidated financial statements for the fiscal year ending December 31,
1998.
15
<PAGE>
John G. Corlew and Raymond E. Mabus, Jr. were elected as Class I directors under
one proposal. The following votes were cast:
22,160,266 For
9,070 Against
0 Abstained
2,323,461 Not voted
Arthur Andersen was elected as the continuing independent CPA with the following
votes:
22,159,062 For
1,664 Against
8,610 Abstained
2,323,461 Not voted
The following list includes each director whose term of office as director
continued after the meeting:
J.L. Holloway
Jerome Goldman
Al Baker
Jay Collins
Howell Todd
Item 5. Other Information
Change in Interim Reporting Periods
Effective January 1, 1998, the Company adopted a 13-week quarterly reporting
period by which the fiscal year is divided into four 13-week periods ending at
the last Sunday in each period. See Note 2 to consolidated Financial Statements.
Proposals of Stockholders
Pursuant to the Company's Bylaws, proposals of stockholders submitted for
consideration at the Company's 1999 Annual Meeting of Stockholders (the "1999
Annual Meeting") must be delivered to the Secretary of the Company no later than
March 16, 1999 but no earlier than February 14, 1999, unless the date of the
1999 Annual Meeting has changed by more than 30 days from May 15, 1999 (the
aniversary of the date of the 1998 Annual Meeting of Stockholders (the "1998
Annual Meeting"), in which case the notice must be received at least 45 days
prior to the distribution by the Company of proxies relating to the 1999 Annual
Meeting of Stockholders. If such timely notice of a stockholder proposal is not
given, the proposal may not be brought before the 1999 Annual Meeting. If timely
notice is given but is not accompanied by a written statement to the extent
required by applicable securities laws, the Company may exercise discretionary
voting authority over proxies with respect to such proposal if presented at the
1999 Annual Meeting.
The above deadlines do not apply to stockholder proposals to be included in the
proxy statement relating to the 1999 Annual Meeting pursuant to Rule 14a-8 of
the Securities Act of 1934, as amended ("Rule 14a-8"). As set forth in the proxy
materials relating to the 1998 Annual Meeting, such proposals must be received
by the Secretary of the Company no later than December 16, 1998 and must
otherwise comply with the requirements of Rule 14a-8.
16
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11.1 Computation of Earnings per Share
27 Financial Data Schedule
(b) Report of Form 8-K.
--Current Report on Form 8-K/A, dated as of April 21, 1998, amending Form
8-K,dated as of February 18, 1998.
17
<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, thereunto duly authorized, in the City of Jackson, State of
Mississippi, on the 14th day of August, 1998.
FRIEDE GOLDMAN INTERNATIONAL INC.
By:___________________________________________
Jobie T. Melton, Jr., Chief Financial Officer
18
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Exhibit 11.1
Exhibit 27
</TABLE>
<PAGE>
EXHIBIT 11.1
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, JULY 5,
1997 1998
---------------- --------------
<S> <C> <C>
Net Income $ 13,029,810 $ 14,384,910
Basic:
Weighted average number of shares outstanding 18,400,000 24,471,213
---------------- --------------
Basic earnings per share $ 0.71 $ 0.59
================ ==============
Diluted:
Weighted average number of shares outstanding 18,400,000 24,471,213
Dilutive effects of stock options using the treasury
stock method - 392,643
---------------- ---------------
18,400,000 24,863,856
---------------- ---------------
Diluted earnings per share $ 0.71 $ 0.58
================ ===============
Proforma net income $ 9,049,810
Weighted average number of shares outstanding 18,400,000
----------------
Basic and diluted earnings per share $ 0.49
================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Jul-05-1998
<EXCHANGE-RATE> 1.000
<CASH> 37,012,992
<SECURITIES> 0
<RECEIVABLES> 72,714,878
<ALLOWANCES> 0
<INVENTORY> 20,504,529
<CURRENT-ASSETS> 142,399,458
<PP&E> 108,939,505
<DEPRECIATION> 7,111,291
<TOTAL-ASSETS> 294,060,731
<CURRENT-LIABILITIES> 135,663,343
<BONDS> 31,203,628
0
0
<COMMON> 244,927
<OTHER-SE> 78,875,249
<TOTAL-LIABILITY-AND-EQUITY> 294,060,731
<SALES> 157,348,139
<TOTAL-REVENUES> 157,348,139
<CGS> 117,821,309
<TOTAL-COSTS> 133,645,273
<OTHER-EXPENSES> 543,007
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 738,788
<INCOME-PRETAX> 23,795,746
<INCOME-TAX> 9,410,836
<INCOME-CONTINUING> 14,384,910
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,384,910
<EPS-PRIMARY> 0.59
<EPS-DILUTED> 0.58
</TABLE>
