<PAGE>
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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): APRIL 21, 1998
FRIEDE GOLDMAN INTERNATIONAL INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 0-22595 72-1362492
(STATE OR OTHER JURISDICTION OF (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
</TABLE>
525 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)
-----------------------
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<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(A) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
The audited consolidated financial statements of Achere S.A. as of and for
the year ended December 31, 1997 are attached as Exhibits 99.4 and are included
herein.
(B) PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma financial information for Friede Goldman
International Inc. as of and for the year ended December 31, 1997 is attached as
Exhibit 99.5 and is included herein.
(C) EXHIBITS
*Exhibit 99.1 -- Press Release issued by Friede Goldman International
Inc. on February 9, 1998.
*Exhibit 99.2 -- Sale and Purchase Agreement, dated February 5, 1998, by
and among Friede Goldman France S.A.S., Mr. Jean-
Francois Queru, Mr. Arnaud Queru, Ms. Helene Queru, Mrs.
Regine Queru, Mr. Jean-Michel Gandreuil, Mrs. Dominique
Gandreuil and MGLV.
*Exhibit 99.3 -- Amendment No. 1 to Sale and Purchase Agreement, dated
February 5, 1998, by and among Friede Goldman France
S.A.S., Friede Goldman International Inc., Mr. Jean-
Francois Queru, Mr. Arnaud Queru, Ms. Helene Queru, Mrs.
Regine Queru, Mr. Jean-Michel Gandreuil, Mrs. Dominique
Gandreuil and MGLV.
Exhibit 99.4 -- Audited consolidated financial statements of Achere S.A.
as of and for the year ended December 31, 1997.
Exhibit 99.5 -- Unaudited pro forma financial information for Friede
Goldman International Inc. as of and for the year ended
December 31, 1997.
- -----------------------
* Filed with the initial Current Report on Form 8-K, dated as of
February 5, 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: April 21, 1998
By: /s/ MARSHALL D. LYNCH
---------------------------------
Marshall D. Lynch
Chief Financial Officer
-3-
<PAGE>
EXHIBIT INDEX
Exhibit No. Page No.
----------- --------
*Exhibit 99.1 -- Press Release issued by Friede Goldman International Inc. on
February 9, 1998.
*Exhibit 99.2 -- Sale and Purchase Agreement, dated February 5, 1998, by and
among Friede Goldman France S.A.S., Mr. Jean-Francois Queru,
Mr. Arnaud Queru, Ms. Helene Queru, Mrs. Regine Queru, Mr.
Jean-Michel Gandreuil, Mrs. Dominique Gandreuil and MGLV.
*Exhibit 99.3 -- Amendment No. 1 to Sale and Purchase Agreement, dated
February 5, 1998, by and among Friede Goldman France S.A.S.,
Friede Goldman International Inc., Mr. Jean-Francois Queru,
Mr. Arnaud Queru, Ms. Helene Queru, Mrs. Regine Queru, Mr.
Jean-Michel Gandreuil, Mrs. Dominique Gandreuil and MGLV.
Exhibit 99.4 -- Audited consolidated financial statements of Achere S.A. as
of and for the year ended December 31, 1997.
Exhibit 99.5 -- Unaudited pro forma financial information for Friede Goldman
International Inc. as of and for the year ended December 31,
1997.
- ----------------------
* Filed with the initial Current Report on Form 8-K, dated as of
January 1, 1998.
-4-
<PAGE>
EXHIBIT 99.4
REPORT OF INDEPENDENT AUDITORS
The Directors and Shareholders
Achere, S.A.
We have audited the accompanying consolidated balance sheet of Achere S.A. as of
December 31, 1997 and the related consolidated statements of income and cash
flows for the year ended December 31, 1997, which have been prepared on the
basis of accounting principles generally accepted in France. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in France and the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Achere,
S.A. at December 31, 1997 and the consolidated results of their operations and
their cash flows for the year ended December 31, 1997, in conformity with
accounting principles generally accepted in France.
Accounting practices used by the Company in preparing the accompanying financial
statements conform with generally accepted accounting principles in France, but
do not conform with accounting principles generally accepted in the United
States. A description of these differences and a complete reconciliation of
consolidated net income for the year ended December 31, 1997 to United States
generally accepted accounting principles are set forth in Note 7 of the Notes to
Consolidated Financial Statements.
Nantes, France
April 17, 1998
/s/ ERNST & YOUNG
Ernst & Young Audit
Represented by Patrick Foin
<PAGE>
ACHERE, S.A.
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1997
(IN THOUSANDS OF FRENCH FRANCS)
ASSETS
COST DEPRECIATION NET
CURRENT ASSETS
Cash 134,008 0 134,008
Trade notes and accounts receivables 41,888 4,210 37,678
Inventories 100,517 25,402 75,115
Prepaid expenses and deposits 5,641 0 5,641
--------------------------------
TOTAL CURRENT ASSETS 282,054 29,612 252,442
---------------------------------
INVESTMENTS
Investment in shares 644 56 588
Loans receivable and other assets 4,173 0 4,173
---------------------------------
TOTAL INVESTMENTS 4,817 56 4,761
---------------------------------
PROPERTY, PLANT AND EQUIPMENT
Land and improvements 1,958 564 1,394
Buildings and improvements 23,671 18,241 5,430
Machinery and equipment 42,652 39,553 3,099
Furniture and fixtures 13,262 12,189 1,073
---------------------------------
TOTAL PROPERTY, PLANT AND EQUIPMENT 81,543 70,547 10,996
---------------------------------
INTANGIBLE ASSETS 6,914 6,637 277
---------------------------------
TOTAL ASSETS 375,328 106,852 268,476
=================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade notes and accounts payable 62,063
Provisions for risks and charges 7,838
Taxes payable 9,578
Deferred revenues and other liabilities 98,597
-------
TOTAL CURRENT LIABILITIES 178,076
-------
DEBT 34,237
SHAREHOLDERS' EQUITY
Capital at par 10,000
Additional paid in capital 1,600
Retained earnings
Appropriated 1,000
Unappropriated 32,153
Current Year Profit 11,410
-------
TOTAL SHAREHOLDERS' EQUITY 56,163
-------
-------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY 268,476
=======
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<PAGE>
ACHERE, S.A.
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS OF FRENCH FRANCS)
OPERATING INCOME
Net sales 202,552
Inventory production costs capitalized 20,626
Fixed asset production costs capitalized 19
Release of provisions 10,350
Transfer of expenses 2,167
Other income 315
--------
TOTAL OPERATING INCOME 236,029
OPERATING EXPENSES
Purchases 104,193
External expenses other than purchases 47,058
Taxes 5,159
Personnel costs 54,025
Depreciation, amortization and provisions 5,504
Other expenses 2,103
--------
TOTAL OPERATING EXPENSES 218,042
FINANCIAL INCOME
Dividend income 87
Interest income 3,587
--------
TOTAL FINANCIAL INCOME 3,674
FINANCIAL EXPENSES
Interest expenses 1,442
Exchange losses 473
--------
TOTAL FINANCIAL EXPENSES 1,916
NON-RECURRING INCOME
Forfeited customer deposits 232
Proceeds of assets sold 18
Transfer of expenses 80
Release of provisions 824
--------
TOTAL NON-RECURRING INCOME 1,154
NON-RECURRING EXPENSES
Book value of assets sold 847
--------
TOTAL NON-RECURRING EXPENSES 847
EMPLOYEE PROFIT SHARING 860
INCOME TAXES 7,781
--------
NET INCOME 11,410
========
-3-
<PAGE>
ACHERE, S.A.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS OF FRENCH FRANCS)
CASH FLOW FROM OPERATING ACTIVITIES
Net income 11,410
Depreciation and amortization 3,438
Net loss on disposal of assets 16
Decrease in non-current provisions (4,959)
Other non cash items (1,276)
Net change in operating assets and liabilities :
Increase in inventories and work in progress (22,941)
Increase in trade and note receivables (2,480)
Increase in prepaid expenses and other current assets (7,686)
Increase in trade and other payables 29,116
Increase in other current liabilities 60,009
--------
NET CASH PROVIDED BY OPERATING ACTIVITIES 64,647
CASH FLOW FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (2,311)
Proceeds from sale of assets 18
Reimbursement of loans receivable and other investments 195
Increase in loans receivable and other investments (99)
--------
NET CASH USED IN INVESTING ACTIVITIES (2,197)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long term debt (17,921)
Proceeds from issuance of long term debt 8,755
Decrease in bank overdraft facilities (526)
Payment of cash dividends (109)
--------
NET CASH USED IN FINANCING ACTIVITIES (9,801)
Net increase (decrease) in cash 52,649
Cash at the beginning of the year 81,359
--------
CASH AT END OF YEAR 134,008
========
-4-
<PAGE>
ACHERE, S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997
1. SIGNIFICANT EVENTS OF THE FINANCIAL YEAR
The reporting period is for the twelve months ended December 31, 1997. The
prior year represents a period of 2 1/2 months from October 16 to December
31, 1996.
2. PRINCIPLES OF CONSOLIDATION
The Consolidated Financial Statements of the Group were established in
conformity with the French Law n 85-11 of January 3, 1985 and with the
Decree of application n86-221 of February 17, 1986.
2.1 CONSOLIDATION METHOD USED
The full consolidation method is used to account for all subsidiaries.
2.2. OTHER INFORMATION
To ensure comparability, all financial statements are adjusted to
ensure that accounting principles are applied consistently by all
group companies. Intercompany transactions and accounts are
eliminated.
The list of companies included in the consolidation are listed in (S)
6 of the Notes.
3. SIGNIFICANT ACCOUNTING POLICIES
3.1. FIXED ASSETS
The fixed assets are included in the balance sheet at their historical
cost, increased for certain operating assets which were legally
revalued in 1978.
Depreciation is calculated using the accelerated method. Second-hand
assets are depreciated on a straight-line basis.
The average useful lives used in depreciation for the principal assets
are as follows:
Buildings 12 - 20 years
Machinery & equipment 3 - 10 years
Other assets 5 - 10 years
-5-
<PAGE>
3.2. INVENTORY AND WORK-IN-PROGRESS
Finished goods are valued at their production cost which includes the
cost of raw materials, direct and indirect production expenses, and
the depreciation recorded on production equipment. Merchandise is
valued using the weighted average cost method.
3.3. ACCOUNTS RECEIVABLE
Accounts receivable are provided for on a specific identification
basis.
3.4. DEFERRED INCOME TAXES
Deferred taxes within each company in the Group were calculated using
the balance sheet liability method, focusing on temporary differences
arising from restatements in the consolidation as well as from
differences existing between accounting and taxable income.
3.5. OFF BALANCE SHEET COMMITMENTS
The Group's commitments regarding pension and retirement benefits are
not provided for in the Consolidated Financial Statements.
The commitments calculated individually for persons employed at
December 31 are included in off balance sheet commitments.
-6-
<PAGE>
NOTES ON BALANCE SHEET AND INCOME STATEMENT
All amounts are reported in thousands of French francs.
4.1 FIXED ASSETS AND INVESTMENTS
GROSS VALUE ACQUISITIONS DISPOSALS GROSS VALUE
31/12/96 31/12/97
Start-up and research and 410 410
development costs
Other intangibles 6,470 50 16 6,504
TOTAL INTANGIBLE ASSETS 6,880 50 16 6,914
Land and improvements 1,958 1,958
Buildings 23,572 98 23,671
Technical equipment and tools 41,011 1,640 42,651
General installations 167 167
Transportation equipment 5,764 141 18 5,887
Office and computer equipment 6,176 392 717 5,850
Tangible fixed assets in 1,368 11 1,357
progress
TOTAL TANGIBLE FIXED ASSETS 80,019 2,272 747 81,544
Investment in shares 1,485 840 644
Loans receivable and other 4,251 99 177 4,173
investments
TOTAL INVESTMENTS 5,736 99 1,018 4,817
TOTAL GROSS VALUE 92,636 2,422 1,782 93,276
-7-
<PAGE>
ACCUMULATED ACCUMULATED
AMORTIZATION AMORTIZATION
& PROVISIONS EXPENSE RECOVERY & PROVISIONS
31/12/96 31/12/97
Start-up and research and 410 410
development costs
Other intangibles 6,075 352 200 6,227
TOTAL INTANGIBLE ASSETS 6,485 352 200 6,637
Land and improvements 557 5 563
Buildings 17,492 749 18,241
Technical equipment and tools 37,926 1,626 39,552
General installations 136 10 147
Transportation equipment 5,151 216 16 5,351
Office and computer equipment 5,383 678 713 5,348
Tangible fixed assets in 1,343 1,343
progress
TOTAL TANGIBLE FIXED ASSETS 67,992 3,286 729 70,548
Investment in shares 879 823 56
TOTAL INVESTMENTS 879 823 56
TOTAL 75,357 3,638 1,753 77,242
4.2 CASH
Cash consists of the following :
Cash in banks 3,760
Money market funds 130,048
Petty cash 200
TOTAL 134,008
-8-
<PAGE>
4.3. CHANGE IN SHAREHOLDERS' EQUITY
Shareholders' equity at 46,126
Dividend distribution (109)
Dividend withholding tax (1,184)
Investment grants allocated to (79)
Net income 1997 11,410
SHAREHOLDERS' EQUITY AT 56,163
4.4. PROVISION FOR RISKS AND CHARGES
The provision for risk concerns mainly the risk involved with the sale
warranties, estimated using the inherent risk and statistical
information, and the risk of litigation.
The provision for charges relates to the cost of significant repairs
and personnel expenses. It also includes provisions for loss on
contracts in progress.
Provisions for risks and charges consist of the following:
Litigation 950
Customer guarantees 3,545
Anticipated contract losses 275
Other risks 19
Major repairs 2,460
Pre-retirement indemnities 589
TOTAL 7,838
4.5. LOANS AND FINANCIAL DEBT
Loans and financial debt based on due dates can be broken down as
follows:
<TABLE>
<CAPTION>
LESS THAN 1 YEAR 1 - 5 YEARS GREATER THAN 5 YEARS Total
<S> <C> <C> <C> <C>
Bank loans 33,322 773 - 34,085
Other loans and debt 50 - 91 141
Bank overdrafts and accrued 1 - - 1
TOTAL 33,373 773 91 34,237
</TABLE>
-9-
<PAGE>
4.6. NET SALES
Sales by geographical zone are as follows:
% 1997
France 24.0 50,235
European Union and other 76.0 152,316
TOTAL 100.0 202,552
4.7. DEFERRED INCOME TAXES
The deferred income tax asset recorded under "Trade notes and accounts
receivables" is 2,162 KF and has been limited to only the amount
expected to be recovered.
The estimation of the deferred tax asset at the end of the period is
based on the following :
Provision for vacation pay 3,113
Accrued social charges (Organic) 338
Other 1,737
TOTAL BASE FOR DEFERRED TAX 5,188
DEFERRED TAX ASSET 2,162
4.8. AVERAGE NUMBER OF EMPLOYEES DURING THE PERIOD
The average number of employees, by category, of all the consolidated
companies is as follows :
Executives and supervisors 25
Employees and technicians 74
Laborers 140
TOTAL 239
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<PAGE>
4.9. OFF BALANCE SHEET COMMITMENTS
4.9.1. LUMP SUM RETIREMENT INDEMNITIES
Obligation 6,096
4.9.2. FINANCIAL GUARANTEES OUTSTANDING
Note and security guarantees 35,950
Foreign currency hedging contracts 111,782
TOTAL 147,732
5. SUBSEQUENT EVENT
In February 1998, the Group was acquired by FRIEDE GOLDMAN INTERNATIONAL
INC., a company with headquarters located in Jackson, Mississippi (USA).
The Purchaser's main activity is the design, engineering and building of
offshore drilling rigs and vessels.
-11-
<PAGE>
6. LIST OF PRINCIPAL CONSOLIDATED SUBSIDIARIES
-------------------------------------------------------------------
COMPANY HEAD OFFICE SIREN N %
-------------------------------------------------------------------
SA BOPP TREUILS JEB LA MAISON 377,280 99.99
29160 LANVEOC
BLM OFFSHORE 5 RUE DE 402,861 99.99
44470 CARQUEFOU
BRISSONNEAU & LOTZ MARINE S.A 15 RUE DE LAE 712,008 99.99
44470 CARQUEFOU
FRANCE MARINE S.A. 5 RUE DE 390,859 99.99
44470 CARQUEFOU
SCI DU PORT DE LORIENT LA MAISON 377,522 100,00
29160 LANVEOC
SCI TY GWENN LA MAISON 320,610 96,00
29160 LANVEOC
SCI DU CROISSANT LA MAISON 377,924 100,00
29160 LANVEOC
SCI DE LESVENEZ ZAC DE LESVENEZ 352,299 100,00
29780 PLOUHINEC
SARL KERDRANVAT LA MAISON 353,099 100,00
29160 LANVEOC
-------------------------------------------------------------------
-12-
<PAGE>
7. SUMMARY OF DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES APPLIED BY THE GROUP
AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The consolidated financial statements of the Achere Group have been
prepared in accordance with the accounting principles described in Notes 2
and 3 (French GAAP) which differ in certain significant respects from
generally accepted accounting principles in the United States (U.S. GAAP).
The principal differences between French GAAP and U.S. GAAP as they relate
to the Achere Group are discussed in further detail below. Paragraph (e)
presents tables reconciling the Group's reported net income and
shareholders' equity to give effect to the application of U.S. GAAP.
(a) Revenue recognition
The Group recognizes revenues and reports profit from long-term contracts
under the completed-contract method. Under this method, revenue and gross
profit are recognized only upon final delivery to the customer. Costs of
long-term contracts in process and current billings are accumulated, but
there are no interim charges or credits to the income statement accounts
for revenues, costs and gross profit.
The Group meets the conditions to use the percentage-of-completion method
under U.S. GAAP. Under this method, revenues and gross profit are
recognized each period based upon the progress of construction, that is,
the percentage of completion.
(b) Valuation of inventories
Products in progress and finished products include general and
administrative expenses not directly related to the acquisition or
production of goods while freight and hauling charges related to purchases
are excluded from the valuation.
Under U.S. GAAP, these general and administrative expenses would not be
allocated to inventories. Freight and hauling charges on purchases are
considered as product costs.
(c) Loans receivable
The Group entered into long term loan agreements to comply with French
social regulations. Under these agreements, the loans are to be repaid over
20 years and bear no interest. These loans are recognized at cost.
Under U.S. GAAP, the carrying value of the loans would be discounted to
present value.
-13-
<PAGE>
(d) Retirement indemnities
The Group does not record provisions for lump sum retirement indemnities
required by French law to be paid to employees. Pre-retirement indemnities
are provided for.
Under U.S. GAAP, the projected benefit obligation for this unfunded defined
benefit plan is recorded as a liability in accordance with the provision of
SFAS 87. Under U.S. GAAP, the transition obligation would have been
determined as of January 1, 1988 and amortized using the greater of 15
years and the average remaining service lives of employees. The effect on
net income and shareholders' equity is not material.
(e) Reconciliation of reported net income and shareholders' equity to U.S.
GAAP
(in thousands of French francs) December 31,
1997
Net income as reported in the consolidated income
statement................................. 11,410
Adjustments to conform to U.S. GAAP
Revenue recognition....................... 9,704
Valuation of inventories.................. (3,672)
Loans receivable.......................... (192)
Retirement indemnities.................... 297
Deferred tax effects of adjustments....... (2 533)
------
Net income as adjusted for U.S. 15,014
======
(in thousands of French francs) December 31,
1997
Shareholders' equity as reported in the consolidated
balance sheet............................. 56,163
Adjustments to conform to U.S. GAAP
Revenue recognition....................... 11,067
Valuation of inventories.................. (5,722)
Loans receivable.......................... (1,292)
Retirement indemnities.................... (2,390)
Deferred tax effects of adjustments....... (892)
------
Shareholders' equity as adjusted for U.S. 56,934
======
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<PAGE>
(f) Presentation of the Consolidated Financial Statements
The classification of certain items in, and the format of, the consolidated
financial statements vary to some extent from U.S. GAAP. The significant
reporting and presentation practices followed by the Group which differ
from U.S. GAAP are described below.
. Under French GAAP, non-recurring income (loss), which include primarily
asset write-downs and gains and losses on the sale of assets, is presented
as a separate line item after operating income. Under U.S. GAAP, such items
are classified according to their nature and origin and are included in the
determination of operating income.
. In accordance with French GAAP, the Group excludes the cost of employee
profit sharing plans from the determination of operating income. Under U.S.
GAAP, these costs are included in operating income.
. Based on the U.S. GAAP reconciling adjustments described above, the
following balance sheet caption under U.S. GAAP would approximately amount
to:
(in thousands of French francs) December 31,
1997
Total assets................... 271,638
-15-
<PAGE>
EXHIBIT 99.5
UNAUDITED PRO FORMA COMBINING FINANCIAL STATEMENTS
The accompanying unaudited Pro Forma Combining Balance Sheet as of December 31,
1997 illustrates the effect of Friede Goldman International Inc.'s (the Company)
acquisition of Achere, S.A., a French societe anonyme (Achere), and the
Company's acquisition of Friede Goldman Newfoundland Limited, a Newfoundland
corporation (Friede Goldman Newfoundland), as if each acquisition had occurred
on December 31, 1997. The accompanying unaudited Pro Forma Combining Income
Statement for the year ended December 31, 1997 illustrates the effect of such
acquisitions as if each acquisition occurred at the beginning of the period
presented.
Effective February 5, 1998, the Company, through its wholly-owned subsidiary,
Friede Goldman France, S.A.S., a French societe par actions simplifee, acquired
all of the issued and outstanding shares of capital stock of Achere, and the
equity interests in its subsidiaries, for a cash payment of FF147,760,200
(approximately US$25,311,000). The Acquiree is a French holding company whose
holdings include 100% of the outstanding shares of France Marine S.A. (France
Marine). France Marine is a French holding company whose holdings include 99.9%
of the outstanding shares of capital stock of each of Brissoneau & Lotz Marine
S.A., Brissoneau & Lotz Marine Offshore, S.A., BOPP S.A. and 74% of the
outstanding equity interests of Kerdranvant S.A.R.L.
The operating subsidiaries of Achere 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.
Achere will be referred to as "France Marine" throughout the unaudited Pro Forma
Combining Financial Statements and the Notes to Pro Forma Combining Financial
Statements.
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 Friede Goldman Newfoundland 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 Friede Goldman Newfoundland. In
addition, the Sellers also transferred working capital of C$2.5 million to
Friede Goldman Newfoundland.
The Company paid a purchase price of US$1 (one dollar) for the capital stock of
Friede Goldman Newfoundland. 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-
<PAGE>
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.
Friede Goldman Newfoundland will be referred to as "NOEL" throughout the
unaudited Pro Forma Combining Financial Statements and the Notes to Pro Forma
Combining Financial Statements.
These unaudited Pro Forma Combining Financial Statements should be read in
conjunction with the historical financial statements of the Company, France
Marine and NOEL.
The unaudited 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.
-2-
<PAGE>
FRIEDE GOLDMAN INTERNATIONAL INC.
PRO FORMA COMBINING BALANCE SHEET(1)
AS OF DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
FRIEDE GOLDMAN/
FRIEDE GOLDMAN/ NOEL/
NOEL FRANCE MARINE/
FRIEDE GOLDMAN NOEL PRO FORMA PRO FORMA FRANCE MARINE PRO FORMA PRO FORMA
HISTORICAL HISTORICAL(2) ADJUSTMENTS COMBINED HISTORICAL (4) ADJUSTMENTS COMBINED
-------------- ------------- ----------- --------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash $ 57,038 $ 1,762 $ -- $ 58,800 $22,286 $(25,311) (5) $ 55,775
Other current assets 40,776 8,193 (1,700) (3) 47,269 21,459 (2,000) (6) 66,728
Property and equipment, net 11,817 47,710 -- 59,527 1,829 15,372 (7) 76,728
Construction in progress 17,935 -- -- 17,935 -- -- 17,935
Other assets 14,989 -- -- 14,989 45 -- 15,034
-------- ------- ------- -------- ------- -------- --------
Total assets $142,555 $57,665 $(1,700) $198,520 $45,619 $(11,939) $232,200
======== ======= ======= ======== ======= ======== ========
Current liabilities $ 52,292 $ 8,207 $(1,700) (3) $ 58,799 $29,986 $ (2,000) (6) $ 86,785
Deferred income tax 691 -- -- 691 -- -- 691
Long-term debt 25,767 192 -- 25,959 5,694 -- 31,653
Deferred government assistance -- 49,266 -- 49,266 -- -- 49,266
Stockholders' equity:
Preferred stock -- -- -- -- -- -- --
Common stock 244 -- -- 244 1,663 (1,663) (8) 244
Additional paid-in capital 49,502 -- -- 49,502 266 (266) (8) 49,502
Retained earnings 14,059 -- -- 14,059 8,086 (8,086) (8) 14,059
Foreign exchange adjustment -- -- -- -- (76) 76 (8) --
-------- ------- ------- -------- ------- -------- --------
Total stockholders' equity 63,805 -- -- 63,805 9,939 (9,939) 63,805
-------- ------- ------- -------- ------- -------- --------
Total liabilities and
stockholders' equity $142,555 $57,665 $(1,700) $198,520 $45,619 $(11,939) $232,200
======== ======= ======= ======== ======= ======== ========
</TABLE>
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<PAGE>
FRIEDE GOLDMAN INTERNATIONAL INC.
PRO FORMA COMBINING INCOME STATEMENT(1)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FRIEDE GOLDMAN/
FRIEDE GOLDMAN/ NOEL/
NOEL FRANCE MARINE/
FRIEDE GOLDMAN NOEL PRO FORMA PRO FORMA FRANCE MARINE PRO FORMA PRO FORMA
HISTORICAL HISTORICAL(2) ADJUSTMENTS COMBINED HISTORICAL (4) ADJUSTMENTS COMBINED
-------------- ------------- ----------- --------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue $ 113,172 $54,790 $(14,458) (10) $ 153,504 $42,052 $ -- $ 195,556
Cost of revenue 75,236 49,553 (14,458) (10) 110,331 33,400 -- 143,731
---------- ------- -------- ----------- ------- ------- -----------
Gross profit 37,936 5,237 -- 43,173 8,652 -- 51,825
Selling, general and
administrative expenses 12,097 6,724 (688) (11) 18,133 4,720 2,200 (15) 25,053
---------- ------- -------- ----------- ------- ------- -----------
Operating income (loss) 25,839 (1,487) 688 25,040 3,932 (2,200) 26,772
Other income (expense):
Interest expense (563) (2,387) 2,387 (12) (563) (328) -- (891)
Interest income 1,236 -- -- 1,236 630 -- 1,866
Interest subsidy -- 1,986 (1,986) (13) -- -- -- --
Gain on sale or distribution
of assets 3,922 -- -- 3,922 (145) -- 3,777
Litigation settlement 611 -- -- 611 -- -- 611
Other 165 38 -- 203 252 -- 455
---------- ------- -------- ----------- ------- ------- -----------
Total other income (expense) 5,371 (363) 401 5,409 409 -- 5,818
---------- ------- -------- ----------- ------- ------- -----------
Income (loss) before provision 31,210 (1,850) 1,089 30,449 4,341 (2,200) 32,590
for income taxes
Provision for income taxes 7,941 -- -- 7,941 1,767 (990) (16) 8,718
---------- ------- -------- ----------- ------- ------- -----------
Net Income (loss) $ 23,269 $(1,850) $ 1,089 $ 22,508 $ 2,574 $(1,210) $ 23,872
========== ======= ======== =========== ======= ======= ===========
Unaudited pro forma data:
Net income, reported above $ 23,269 $ 22,508 $ 23,872
Pro forma provision for income
tax related to operations as a
S Corporation (17) 3,980 3,980 3,980
---------- ----------- -----------
Pro forma net income $ 19,289 $ 18,528 $ 19,892
========== =========== ===========
Earnings per common share:
Basic $ 1.10 $ 1.07 $ 1.13
========== =========== ===========
Diluted $ 1.09 $ 1.06 $ 1.12
========== =========== ===========
Unaudited pro forma earnings
per common share:
Basic $ 0.92 $ 0.88 $ 0.94
========== =========== ===========
Diluted $ 0.91 $ 0.87 $ 0.93
========== =========== ===========
Weighted-average common
shares outstanding:
Basic 21,065,252 21,065,252 21,065,252
========== =========== ===========
Diluted 21,297,006 21,297,006 21,297,006
=========== =========== ===========
</TABLE>
-4-
<PAGE>
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 France Marine
or the NOEL acquisitions nor do these statements give effect to any
potential cost savings and synergies that could result from the France
Marine or NOEL acquisitions. The unaudited Pro Forma Combining Financial
Statements are not necessarily indicative of the operating results or
financial position that would have occurred had the France Marine or NOEL
acquisitions been consummated at the dates indicated nor necessarily
indicative of future operating results or financial position.
2. This column represents the Company's allocation of purchase price of NOEL
based on the estimated fair value of assets acquired as stated in US
Dollars based on the exchange rate of US$0.699 to each C$1 at December 31,
1997. Because the Company paid only US$1 for the net assets of NOEL, the
estimated fair value of the assets is considered, for accounting purposes,
to be deferred government assistance. See Note 11.
3. 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 December 31, 1997.
4. This column represents historical financial position of France Marine as of
December 31, 1997. Historical balances have been translated from French
Francs based on the December 31, 1997 exchange rate of US$0.166 per each
one French Franc.
5. The Company paid approximately US$25,311,000 to acquire all of the issued
and outstanding capital stock of France Marine. The Company financed the
France Marine acquisition with net proceeds remaining from the Company's
initial public stock offering in July 1997.
6. At December 31, 1997, the Company had paid France Marine US$2.0 million
representing an advance payment for the manufacture of certain jackup rig
components. As of that date, no significant work had been performed by
France Marine on the components. This adjustment eliminates the deposit
from both the Company's and France Marine's balance sheet.
7. Based on a preliminary estimate of the fair value of the property, plant
and equipment acquired, the Company believes the fair value of the
property, plant and equipment acquired will be such that the fair value of
the net assets acquired by the Company will exceed the purchase price paid.
As a result, the Company expects that no goodwill will be recorded related
to the France Marine acquisition. This adjustment allocates the purchase
price paid in the France Marine acquisition to the carrying value of the
property, plant and equipment acquired. An appraisal of the acquired
assets is in progress, and upon receipt, the Company will revise its
carrying value of the net assets acquired.
8. This adjustment reflects the elimination of the equity in France Marine
prior to the France Marine acquisition.
-5-
<PAGE>
9. This column represents historical results of operations for NOEL for the
52-week period ended December 31, 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.
Canadian dollars have been translated to US Dollars based on the average
exchange rate during the year.
10. During the year ended Deember 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.
11. The deferred government subsidy recorded in the NOEL acquisition will be
amortized over the estimated useful lives of assets acquired. Such
amortization will substantially offset depreciation expense related to the
acquired assets. 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 2.
12. This adjustment represents the elimination of interest expense related to
debt facilities of NOEL that were not acquired by the Company.
13. This adjustment represents the elimination of interest subsidies made by
the Province of Newfoundland.
14. This column represents the historical results of operations for France
Marine for the year ended December 31, 1997. French Francs have been
translated to US Dollars based on the average exchange rate during the
year.
15. This adjustment represents additional depreciation expense recorded on
property, plant and equipment as a result of the allocation of purchase
price. The Company has assumed a weighted average useful life
approximating 7 years for the property, plant and equipment acquired from
France Marine.
16. This adjustment represents tax benefit to be received from additional
depreciation expense recorded on property, plant and equipment at an
estimated French rate of approximately 45%.
17. Prior to the Company's initial public stock 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.
-6-
