<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-----------------------------------------------------------
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- --- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
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 1-11953
Willbros Group, Inc.
(Exact name of registrant as specified in its charter)
Republic of Panama 98-0160660
(Jurisdiction of incorporation) (I.R.S. Employer Identification Number)
Dresdner Bank Building
50th Street, 8th Floor
P. O. Box 850048
Panama 5, Republic of Panama
Telephone No.: (50-7) 263-9282
(Address, including zip code, and telephone number, including
area code, of principal executive offices of registrant)
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
--- ---
The number of shares of the registrant's Common Stock, $ .05
par value, outstanding as of November 10, 1998 was 14,313,468.
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
WILLBROS GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
September December
30, 31,
1998 1997
---------- ----------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,939 $ 43,238
Accounts receivable 58,619 57,005
Contract cost and recognized income
not yet billed 6,362 8,159
Prepaid expenses 3,487 4,022
---------- ----------
Total current assets 72,407 112,424
Spare parts, net 9,457 7,385
Property, plant and equipment, net 78,662 78,420
Other assets 4,670 2,973
---------- ----------
Total assets $ 165,196 $ 201,202
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 2,244 $ 5,341
Accounts payable and accrued liabilities 36,275 41,287
Accrued income taxes 6,094 5,171
Contract billings in excess of cost and
recognized income 6,869 21,062
---------- ----------
Total current liabilities 51,482 72,861
Deferred income taxes 200 200
Long-term debt - 3,233
Other liabilities 6,009 5,922
---------- ----------
Total liabilities 57,691 82,216
Stockholders' equity:
Class A Preferred Stock, par value $.01 per
share, 1,000,000 shares authorized, none issued - -
Common stock, par value $.05 per share,
35,000,000 shares authorized; 14,312,551 shares
issued at September 30, 1998 (14,992,320 at
December 31, 1997) 753 750
Capital in excess of par value 67,537 66,857
Retained earnings 49,626 54,276
Treasury stock (745,000 shares at
September 30, 1998) (7,560) -
Notes receivable for stock purchases (1,793) (2,084)
Accumulated other comprehensive income (loss) (1,058) (813)
---------- ----------
Total stockholders' equity 107,505 118,986
---------- ----------
Total liabilities and stockholders' equity $ 165,196 $ 201,202
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
WILLBROS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In thousands, except share and per share amounts)
(Unaudited)
Three Months Nine Months
Ended September 30, Ended September 30,
---------------------- ----------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Contract revenues $ 65,962 $ 72,815 $ 206,549 $ 181,260
Operating expenses:
Contract 62,123 55,469 163,889 132,399
Depreciation and
amortization 6,635 4,807 18,947 13,002
General and administrative 6,877 7,295 23,639 21,200
---------- ---------- ---------- ----------
75,635 67,571 206,475 166,601
---------- ---------- ---------- ----------
Operating income (loss) (9,673) 5,244 74 14,659
Other income (expense):
Interest - net (184) 197 (387) 265
Minority interest (384) (479) (1,253) (1,418)
Other - net (656) 33 (473) 166
---------- ---------- ---------- ----------
(1,224) (249) (2,113) (987)
---------- ---------- ---------- ----------
Income (loss) before
income taxes (10,897) 4,995 (2,039) 13,672
---------- ---------- ---------- ----------
Provision for income taxes 581 1,112 2,611 4,310
---------- ---------- ---------- ----------
Net income (loss) $ (11,478) $ 3,883 $ (4,650) $ 9,362
========== ========== ========== ==========
Earnings (loss) per common
share:
Basic $ (.78) $ .27 $ (.31) $ .65
========== ========== ========== ==========
Diluted $ (.78) $ .27 $ (.31) $ .65
========== ========== ========== ==========
Weighted average number of
common shares outstanding:
Basic 14,675,887 14,394,633 14,906,501 14,390,062
========== ========== ========== ==========
Diluted 14,675,887 14,621,413 14,906,501 14,504,384
========== ========== ========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
WILLBROS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share amounts)
(Unaudited)
Capital
Common Stock in Excess
---------------------- of Par Retained
Shares Par Value Value Earnings
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Balance, January 1, 1998 14,992,320 $ 750 $ 66,857 $ 54,276
Net income (loss) - - - (4,650)
Collection of notes
receivable - - - -
Issuance of common stock
under employee benefit plan 18,781 1 256 -
Exercise of stock options 46,450 2 424 -
Treasury stock purchases (745,000) - - -
Other comprehensive income
(loss) - foreign currency
translation adjustments - - - -
---------- ---------- ---------- ----------
Balance, September 30, 1998 14,312,551 $ 753 $ 67,537 $ 49,626
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
CONTINUED-
Accumulated
Notes Other
Receivable Compre- Total
for hensive Stock-
Treasury Stock Income holders'
Stock Purchases (Loss) Equity
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Balance, January 1, 1998 $ - $ (2,084) $ (813) $ 118,986
Net income (loss) - - - (4,650)
Collection of notes receivable - 291 - 291
Issuance of common stock
under employee benefit plan - - - 257
Exercise of stock options - - - 426
Treasury stock purchases (7,560) - - (7,560)
Other comprehensive income
(loss) - foreign currency
translation adjustments - - (245) (245)
---------- ---------- ---------- ----------
Balance, September 30, 1998 $ (7,560) $ (1,793) $ (1,058) $ 107,505
========== ========== ========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
WILLBROS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months
Ended September 30,
----------------------
1998 1997
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (4,650) $ 9,362
Reconciliation of net income (loss) to cash
provided by (used in) operating activities:
Depreciation and amortization 18,947 13,002
(Gain) loss on sales and retirements (247) 243
Changes in operating assets and liabilities:
Accounts receivable (1,614) (14,449)
Contract cost and recognized income
not yet billed 1,797 (3,689)
Prepaid expenses and other assets (1,162) (3,925)
Accounts payable and accrued liabilities (5,012) 6,131
Accrued income taxes 923 429
Contract billings in excess of cost and
recognized income (14,193) 17,773
Other liabilities 87 291
---------- ----------
Cash provided by (used in) operating
activities (5,124) 25,168
Cash flows from investing activities:
Proceeds from sales of property and equipment 1,351 65
Purchase of property and equipment (13,516) (23,902)
Purchase of spare parts (8,849) (5,410)
---------- ----------
Cash used in investing activities (21,014) (29,247)
Cash flows from financing activities:
Proceeds from common stock 683 124
Proceeds from notes payable to banks 7,160 2,482
Proceeds from long-term debt 14,000 -
Repayments of long-term debt (17,000) -
Collection of notes receivable for
stock purchases 291 864
Repayment of notes payable to banks (10,140) (1,242)
Purchase of treasury shares (7,560) -
Repayment of notes payable to former shareholders (350) (350)
---------- ----------
Cash provided by (used in)
financing activities (12,916) 1,878
Effect of exchange rate changes on cash and
cash equivalents (245) (244)
---------- ----------
Cash used in all activities (39,299) (2,445)
Cash and cash equivalents, beginning of period 43,238 24,118
---------- ----------
Cash and cash equivalents, end of period $ 3,939 $ 21,673
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
1. Basis of Presentation
The condensed consolidated financial statements of Willbros
Group, Inc. and its majority-owned subsidiaries (the "Company")
reflect all adjustments which are, in the opinion of management,
necessary to present fairly the financial position, results of
operations and cash flows of the Company as of September 30, 1998,
and for all interim periods presented. All adjustments are normal
recurring accruals.
Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted.
These condensed consolidated financial statements should be read in
conjunction with the Company's December 31, 1997 audited
consolidated financial statements and notes thereto contained in
the Company's Annual Report to Stockholders for the year ended
December 31, 1997. The results of operations for the period ended
September 30, 1998, are not necessarily indicative of the operating
results to be achieved for the full year.
2. Foreign Exchange Risk
The Company attempts to negotiate contracts which provide for
payment in U. S. dollars, but it may be required to take all or a
portion of payment under a contract in another currency. To
mitigate non-U.S. currency exchange risk, the Company seeks to
match anticipated non-U.S. currency revenues with expenses in the
same currency whenever possible. To the extent it is unable to
match non-U.S. currency revenues with expenses in the same
currency, the Company may use forward contracts, options or other
common hedging techniques in the same non-U.S. currencies. The
unrealized gains or losses on financial instruments used to hedge
currency risk are deferred and recognized when realized as an
adjustment to contract revenue. The Company had no significant
financial instruments to hedge currency risk at September 30, 1998.
3. Earnings Per Share
Basic and diluted earnings are computed as follows:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
---------------------- ----------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income (loss)
applicable to
common shares $ (11,478) $ 3,883 $ (4,650) $ 9,362
========== ========== ========== ==========
Weighted average
number of common
shares outstanding for
basic earnings per share 14,675,887 14,394,633 14,906,501 14,390,062
Effect of dilutive
potential common shares
from stock options - 226,780 - 114,322
---------- ---------- ---------- ----------
Weighted average number
of common shares
outstanding for diluted
earnings per share 14,675,887 14,621,413 14,906,501 14,504,384
========== ========== ========== ==========
Earnings (loss) per
common share:
Basic $ (.78) $ .27 $ (.31) $ .65
========== ========== ========== ==========
Diluted $ (.78) $ .27 $ (.31) $ .65
========== ========== ========== ==========
</TABLE>
6
<PAGE>
WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
4. Comprehensive Income
In the first quarter of 1998, the Company adopted Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive
Income." The standard requires reporting of comprehensive income,
which includes all changes in stockholders' equity other than
additional investments by stockholders or distributions to
stockholders. Comprehensive income for the Company includes net
income and foreign currency translation adjustments which are
charged or credited to the cumulative foreign currency translation
adjustment account within stockholders' equity. There were no
related tax effects associated with the Company's calculation of
comprehensive income. Comprehensive income for the periods ended
September 30, 1998 and 1997, consists of:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
---------------------- ----------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income (loss) $ (11,478) $ 3,883 $ (4,650) $ 9,362
Other comprehensive
income (loss) -
foreign currency
translation adjustments (481) 540 (245) (244)
---------- ---------- ---------- ----------
Comprehensive income
(loss) $ (11,959) $ 4,423 $ (4,895) $ 9,118
========== ========== ========== ==========
</TABLE>
5. Contingencies, Commitments and Other Circumstances
The Company provides construction, engineering and specialty
services to the oil and gas industry. The Company's principal
markets are currently Africa, Asia, the Middle East, South America
and the United States. Operations outside the United States may be
subject to certain risks which ordinarily would not be expected to
exist in the United States, including foreign currency
restrictions, extreme exchange rate fluctuations, expropriation of
assets, civil uprisings and riots, government instability and legal
systems of decrees, laws, regulations, interpretations and court
decisions which are not always fully developed and which may be
retroactively applied. Management is not presently aware of any
events of the type described in the countries in which it operates
that have not been provided for in the accompanying condensed
consolidated financial statements. Based upon the advice of local
advisors in the various work countries concerning the
interpretation of the laws, practices and customs of the countries
in which it operates, management believes the Company has followed
the current practices in those countries; however, because of the
nature of these potential risks, there can be no assurance that the
Company may not be adversely affected by them in the future. The
Company insures substantially all of its equipment in countries
outside the United States against certain political risks and
terrorism.
The Company has the usual liability of contractors for the
completion of contracts and the warranty of its work. Where work
is performed through a joint venture, the Company also has possible
liability for the contract completion and warranty responsibilities
of its joint venturers. Management is not aware of any material
exposure related thereto, which has not been provided for in the
accompanying condensed consolidated financial statements.
7
<PAGE>
WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
5. Contingencies, Commitments and Other Circumstances
(continued)
Certain post contract completion audits and reviews are being
conducted by clients and/or government entities. While there can
be no assurance that claims will not be received as a result of
such audits and reviews, management does not believe a legitimate
basis for any material claims exists. At the present time, it is
not possible for management to estimate the likelihood of such
claims being asserted or, if asserted, the amount or nature
thereof.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The Company derives its revenues from providing construction,
engineering and specialty services to the oil and gas industry and
government entities worldwide. The Company obtains contracts for
its work primarily by competitive bidding or through negotiations
with long-standing clients. Bidding activity, backlog and revenues
resulting from the award of contracts to the Company may vary
significantly from period to period.
A number of factors relating to the Company's business affect
the Company's recognition of contract revenues. Revenues from fixed-
price construction and engineering contracts are recognized on the
percentage-of-completion method. Under this method, estimated
contract revenues are accrued based generally on the percentage
that costs to date bear to total estimated costs, taking into
consideration physical completion. Generally, the Company does not
recognize income on a fixed-price contract until the contract is
approximately 10% complete. Costs which are considered to be
reimbursable are excluded before the percentage-of-completion
calculation is made. Accrued revenues pertaining to reimbursables
are limited to the cost of the reimbursables. If a current estimate
of total contract cost indicates a loss on a contract, the
projected loss is recognized in full when determined. Revenues from
unit-price contracts are recognized as earned. Revenues from change
orders, extra work, variations in the scope of work and claims are
recognized when realization is assured.
The Company derives its revenues from contracts with durations
from a few weeks to several months or in some cases, more than a
year. Unit-price contracts provide relatively even quarterly
results; however, major projects are usually fixed-price contracts
that may result in uneven quarterly financial results due to the
nature of the work and the method by which revenues are recognized.
These financial factors, as well as external factors such as
weather, client needs, client delays in providing approvals, labor
availability, governmental regulation and politics, may affect the
progress of a project's completion and thus the timing of revenue
recognition. The Company believes that its operating results should
be evaluated over a relatively long time horizon during which major
contracts in progress are completed and change orders, extra work,
variations in the scope of work and cost recoveries and other
claims are negotiated and realized.
Low oil prices and the uncertainty as to when prices will
improve have recently had and continue to have a negative influence
on the Company's clients' capital spending plans. As a direct
result, the Company is experiencing reduced demand for its
services, especially specialty services. While the longer term
effect of lower oil prices on future construction activity is
unclear, the Company does not anticipate that any of the projects
in its current backlog will be deferred or cancelled. However, a
number of projects the Company has been following in Asia have been
delayed. Adverse weather and start-up costs have also impacted
operations during the quarter ended September 30, 1998.
The Company recognizes anticipated contract revenues as backlog
when the award of a contract is reasonably assured. Anticipated
revenues from post-contract award processes, including change
orders, extra work, variations in the scope of work and the effect
of escalation or currency fluctuation formulas, are not added to
backlog until their realization is reasonably assured. New contract
awards totaled $29.6 million during the quarter ended September 30,
1998. Additions to backlog during the third quarter are as
follows: construction, $10.9 million; engineering, $9.3 million;
and specialty services, $9.4 million. Backlog decreases by line of
business are as follows: construction, $40.1 million; engineering,
$21.1 million; and specialty services, $6.9 million. Backlog at
the end of the third quarter stood at $144.7 million, down
$38.5 million (21%) from the second quarter, and consisted of the
following: (a) construction, $44.3 million, down $29.2 million
(40%); (b) engineering, $13.9 million, down $11.8 million (46%);
and (c) specialty services, $86.5 million, up $2.5 million (3%).
Specialty services backlog is primarily attributable to two major
contracts:
9
<PAGE>
a sixteen year water injection contract awarded to a consortium in
which the Company has a 10% interest in Venezuela and a three year
dredging contract in Nigeria.
Results of Operations
The Company's contract revenues and contract costs are
primarily related to the timing and location of development
projects in the oil and gas industry worldwide. Contract revenues
and cost variations by country from year to year are the result of
(a) entering new countries as part of the Company's strategy for
geographical diversification, (b) the execution of new contract
awards, (c) the completion of contracts, and (d) the overall level
of activity in the Company's lines of business.
The Company anticipates that market conditions in its
businesses will remain constricted for some time due to low oil
prices and other factors. The Company's goal is to report
breakeven financial results for the fourth quarter of 1998, but
achieving that objective is by no means certain. In anticipation
of continuing unfavorable market conditions and a possible
reduction in its 1999 revenues, the Company is taking steps to
bring its 1999 cost structure in line with the level of its
expected business activity.
Three Months Ended September 30, 1998, Compared to Three Months
Ended September 30, 1997
Contract revenues decreased $6.9 million (9%) to $65.9 million
due to (a) a decrease of $8.4 million in engineering revenues
resulting primarily from reduced activity in the United States; and
(b) a decrease in specialty services revenues of $7.3 million,
primarily in Nigeria; offset by (c) an increase of $8.8 million in
construction revenues, principally in the United States. Nigeria
revenues decreased $8.6 million (46%), primarily in specialty
services work as a result of delays in funding from the Nigerian
government and low oil prices which have caused the Company's
clients to defer maintenance activities. The Company has seen
early indications that the Nigerian government is taking steps
toward resolving the funding issues; but if low oil prices persist,
it is unclear as to when specialty services activities in Nigeria
will return to historical levels. Indonesian revenues decreased
$3.9 million (33%) due to substantial completion of a project.
Revenues in Oman decreased $2.5 million primarily because of
reduced construction work. Pakistan revenues decreased
$1.1 million (141%) due to completion of an Engineering,
Procurement, and Construction contract. Revenues in the Ivory
Coast increased $4.9 million due to beginning work on 46 miles
(74 kilometers) of dual 4-inch and 12-inch pipelines and an 8-mile
(13-kilometer) 12-inch pipeline. Revenues from Venezuela increased
$2.0 million (21%) due to work on the construction of 120 miles
(200 kilometers) each of 36-inch and 20-inch pipelines. Revenues
in the United States increased $2.0 million principally due to work
performed on a 94-mile (150-kilometer) 36-inch natural gas pipeline
in Iowa.
Contract costs increased $6.6 million (12%) to $62.1 million due
to an increase of $13.4 million in construction services cost,
resulting from an increase in costs on construction projects in the
United States and Venezuela and start-up costs associated with an
offshore construction project in Cameroon, offset by a decrease of
$5.5 million in engineering services cost and a decrease of
$1.3 million in specialty services cost. Variations in contract
cost by country were closely related to the variations in contract
revenues.
Depreciation and amortization increased $1.8 million to
$6.6 million primarily due to additions made to the equipment fleet
in 1997 to prepare for new contracts in Indonesia and Venezuela,
and additions in 1998 to prepare for a new contract in the Ivory
Coast.
General and administrative expense decreased $ .5 million to
$6.8 million primarily as a result of reduced incentive
compensation costs.
Operating income (loss) decreased $14.9 million to a loss of
$9.6 million from operating income of $5.3 million in 1997. The net
loss for the quarter ended September 30, 1998 is primarily due to a
significant decrease in specialty service activity, an increase in
costs on construction projects in the United States and Venezuela
and start-up costs associated with an offshore construction project
in Cameroon.
Interest - net decreased to expense of $ .2 million due to
increased borrowings to meet working capital requirements.
Other - net decreased $ .6 million to $ .6 million expense
primarily as a result of foreign exchange losses in Venezuela.
10
<PAGE>
The provision for income taxes decreased $ .5 million (45%) to
$ .6 million primarily due to decreased activity in certain work
countries and a tax refund.
Nine Months Ended September 30, 1998, Compared to Nine Months
Ended September 30, 1997
Contract revenues increased $25.2 million (14%) to
$206.5 million due to (a) $64.8 million of additional construction
revenues resulting primarily from construction contracts in
Venezuela, the United States, the Ivory Coast and Indonesia; offset
by (b) a decrease of $23.8 million in specialty services revenues,
principally in Nigeria; and (c) a decrease in engineering revenues
of $15.8 million due to less engineering services work in the
United States and Pakistan. Venezuela revenues increased
$43.0 million (262%), primarily due to work on a pipeline contract
that includes the construction of 120 miles (200 kilometers) each
of 36-inch and 20-inch pipelines and revenue from a transport
services contract. United States revenues increased $6.1 million
(10%), primarily due to work performed on a 94-mile (150-kilometer)
36-inch natural gas pipeline in Iowa. Ivory Coast revenues
increased $5.3 million due to work on 46 miles (74 kilometers) of
dual 4-inch and 12-inch pipelines and an 8-mile (13-kilometer)
12-inch pipeline. Indonesia revenues increased $4.8 million (26%),
primarily due to work on a 35-mile (55-kilometer) 42-inch pipeline
in Kalimantan. Nigeria revenues decreased $23.9 million (40%), most
of which was specialty services work, primarily as a result of
delays in funding from the Nigerian government, low oil prices
which have caused the Company's clients to slow down the award of
specialty services maintenance projects and the realization of
certain cost recoveries in 1997 which were not repeated in 1998.
The Company has seen early indications that the Nigerian government
is taking steps toward resolving the funding issues; but if low oil
prices persist, it is unclear as to when specialty services
activities in Nigeria will return to historical levels. Revenues
from Pakistan decreased $9.3 million (85%) due to the completion of
an Engineering, Procurement, and Construction contract. Oman
revenues decreased $ .6 million (3%) due to reduced specialty
services work.
Contract costs increased $31.5 million (24%) to $163.9 million
due to an increase of $59.5 million in construction services cost,
offset by a decrease of $20.4 million in engineering services cost
and a decrease of $7.6 million in specialty services cost.
Variations in contract cost by country were closely related to the
variations in contract revenues.
Depreciation and amortization increased $5.9 million to
$18.9 million, primarily due to additions made to the equipment
fleet to prepare for new contracts in Venezuela, Indonesia, the
Ivory Coast and the United States.
General and administrative expense increased $2.4 million to
$23.6 million to support prospective growth in worldwide
activities.
Operating income decreased $14.6 million (99%) to $ .1 million.
The decrease was primarily attributable to a decrease in specialty
services revenues, principally in Nigeria.
Interest - net decreased $ .7 million to $ .4 million expense
due to increased borrowings to meet working capital requirements.
Other - net decreased $ .5 million to $ .4 million expense,
primarily as a result of foreign exchange losses in Venezuela.
The provision for income taxes decreased $1.7 million (39%) to
$2.6 million, primarily due to decreased activity in Nigeria and
Pakistan.
Liquidity and Capital Resources
The Company's primary requirements for capital are to fund the
acquisition, upgrade and maintenance of its equipment, provide
working capital for current projects, finance the mobilization of
employees and equipment to new projects, establish a presence in
countries where the Company perceives growth opportunities and
finance the acquisition of new businesses and equity investments.
Historically, the Company has met its capital requirements
primarily from operating cash flows.
Cash and cash equivalents decreased $39.3 million (91%) to
$3.9 million at September 30, 1998, from $43.2 million at December
31, 1997. The decrease was due to negative cash flows of
$5.1 million from
11
<PAGE>
operations (including a $19.4 million increase in working capital
required to support construction projects), $21.0 million from net
capital expenditures for the purchase of equipment and spare parts
and $13.2 million from financing activities, including $7.6 million
used to repurchase 745,000 shares of common stock.
The Company has a $150.0 million credit agreement that matures
on February 20, 2003 and may be extended annually in one year
increments, subject to certain approvals, for up to two additional
years, with a syndicated bank group including ABN AMRO Bank N.V.,
as agent, and Credit Lyonnais, New York Branch, as co-agent. The
credit agreement provides for a $100.0 million revolving credit
facility, part of which can be used for acquisitions and equity
investments. The entire facility, less amounts used under the
revolving portions of the facility, may be used for standby and
commercial letters of credit. Principal is payable at termination
on all revolving loans except qualifying acquisition and equity
investment loans which are payable quarterly over the remaining
life of the credit agreement. Interest is payable quarterly at
prime or other alternative interest rates. A commitment fee is
payable quarterly based on an annual rate of 1/4% of the unused
portion of the credit facility. The Company's obligations under
the credit agreement are secured by the stock of the principal
subsidiaries of the Company. The credit agreement requires the
Company to maintain certain financial ratios, restricts the amount
of annual dividend payments to the greater of 25 cents per share or
25% of net income and limits the Company's ability to purchase its
own stock. At September 30, 1998, outstanding letters of credit
totaled $13.6 million, leaving $136.4 million available under this
facility.
The Company has unsecured credit facilities with banks in
certain countries outside the United States. Borrowings under
these lines, in the form of short-term notes and overdrafts, are
made at competitive local interest rates. Generally, each line is
available only for borrowings related to operations in a specific
country. Credit available under these facilities is approximately
$11.1 million at September 30, 1998.
The Company believes that cash flows from operations and
borrowing under existing credit facilities will be sufficient to
finance working capital and capital expenditures for ongoing
operations at least through the end of 1998. The Company estimates
capital expenditures for equipment and spare parts of approximately
$20 to $30 million during 1998.
In February 1998, the Company's Board of Directors approved a
plan to buy back approximately 750,000 shares of its Common Stock
from time to time in the open market or through negotiated
transactions. As of September 30, 1998, 745,000 shares had been
purchased at an average price of $10.15 per share. Subsequent to
September 30, 1998, the Company's Board of Directors approved to
include, and the Company's credit agreement was amended to permit
the buy back of an additional $8.8 million of its Common Stock.
New Accounting Standards
In May 1998, the American Institute of Certified Public
Accountants issued Statement of Position 98-5, "Reporting on the
Costs of Start-Up Activities," which is effective for fiscal years
beginning after December 15, 1998. This statement requires that
start-up costs and organization costs be expensed as they are
incurred. The Company does not believe this statement will have a
material impact on its consolidated financial statements.
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities," which is
effective for fiscal years beginning after June 15, 1999. This
standard requires that all derivatives be recognized on the balance
sheet at fair value. Derivatives that are not hedges must be
adjusted to fair value through earnings. Derivatives that are
hedges must be adjusted to fair value, depending on the nature of
the hedge, either through earnings as an offset against the change
in fair value of the hedged assets, liabilities, or firm
commitments or recognized in other comprehensive income until the
hedged item is recognized in earnings. The Company does not believe
adoption of this standard will have a material impact on its
consolidated financial statements.
12
<PAGE>
Year 2000 Compliance
During 1997, the Company initiated an enterprise-wide program to
prepare its computer systems and applications for the year 2000.
Certain critical systems and applications have been identified
which are unable to accurately process information containing dates
beginning in the year 2000. The Company plans to modify, replace
or outsource these systems and applications before the year 2000.
The cost of modification or outsourcing is expensed; the cost of
replacement systems is capitalized.
The Company is utilizing both internal and external resources to
identify, correct, and test its systems for Year 2000 compliance.
The Company anticipates that the majority of its reprogramming and
testing will be substantially completed by September 30, 1999, and
all critical systems are expected to be Year 2000 compliant prior
to the end of the 1999 calendar year.
Because third party failures could impact the Company's ability
to conduct business, the Company is making every reasonable effort
to assess the Year 2000 readiness of its suppliers and customers
and creating action plans to address the identified risks. The
Company is obtaining certifications from substantially all of its
suppliers and customers providing evidence of their readiness to
handle Year 2000 issues. These certifications are being assessed
by the Company, and are being categorized based on Year 2000
compliance and prioritized in order of significance to the business
of the Company. To the extent possible, contingency plans will be
developed for business-critical suppliers and customers.
The Company anticipates that it will have substantially
completed an assessment of the Year 2000 compliance status of all
its information technology and non-information technology equipment
by December 31, 1998, and will then address the need, if any, to
upgrade or replace equipment.
Testing and remediation of all of the Company's critical systems
and applications are expected to cost approximately $2.7 million
from inception in calendar year 1997 through substantial completion
in calendar year 1999, of which approximately $2.0 million is
expected to be capitalized. Of these costs, approximately
$ .5 million was incurred through September 30, 1998.
Approximately $ .3 million is expected to be incurred in the fourth
quarter of 1998, and the remaining $1.9 million is expected to be
incurred in 1999. All estimated costs have been budgeted and are
expected to be funded by cash flows from operations.
The cost of the Year 2000 compliance project and the date on
which the Company plans to complete the Year 2000 modifications are
based on management's best estimates, which were derived utilizing
numerous assumptions of future events including the availability of
internal and external resources, finalization of modification
plans, and other factors, some of which are outside the control of
the Company. Unanticipated failures by critical suppliers and
customers, as well as the failure by the Company to timely execute
its own remediation efforts or outsourcing, could have an adverse
effect on the cost of the Year 2000 project and its completion
date. Because of these uncertainties, there can be no assurance
that these forward-looking estimates will be achieved.
Forward-Looking Statements
This Form 10-Q includes "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 which address activities, events or developments
which the Company expects or anticipates will or may occur in the
future, including such things as future capital expenditures
(including the amount and nature thereof), oil and gas prices and
demand, expansion and other development trends of the oil and gas
industry, business strategy, expansion and growth of the Company's
business and operations, and other such matters are forward-looking
statements. These statements are based on certain assumptions and
analyses made by the Company in light of its experience and its
perception of historical trends, current conditions and expected
future developments as well as other factors it believes are
appropriate in the circumstances. However, whether actual results
and developments will conform with the Company's expectations and
predictions is subject to a number of risks
13
<PAGE>
and uncertainties which could cause actual results to differ
materially from the Company's expectations including the timely
award of one or more projects; cancellation of projects; weather;
exceeding project cost and scheduled targets; failing to realize
cost recoveries from projects completed or in progress within a
reasonable period after completion of the relevant project;
identifying and acquiring suitable acquisition targets on
reasonable terms; the demand for energy diminishing; political
circumstances impeding the progress of work; general economic,
market or business conditions; changes in laws or regulations; the
availability of internal and external resources; the timely
execution of remediation, outsourcing or replacement of systems and
applications; the risk factors listed from time to time in the
Company's reports filed with the Securities and Exchange
Commission; and other factors, most of which are beyond the control
of the Company. Consequently, all of the forward-looking
statements made in this Form 10-Q are qualified by these cautionary
statements and there can be no assurance that the actual results or
developments anticipated by the Company will be realized or, even
if substantially realized, that they will have the expected
consequences or effects on the Company or its business or
operations. The Company assumes no obligation to update publicly
any such forward-looking statements, whether as a result of new
information, future events or otherwise.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable
14
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- ------- -----------------
Not applicable
Item 2. Changes in Securities and Use of Proceeds
- ------- -----------------------------------------
Not applicable
Item 3. Defaults upon Senior Securities
- ------- -------------------------------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
Not applicable
Item 5. Other Information
- ------- -----------------
Not applicable
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits:
The following documents are included as exhibits to this Form 10-Q.
3.1 Certificate of Amendment to the Articles of Incorporation of
the Company.
3.2 Amended and Restated Articles of Incorporation of
the Company.
27 Financial Data Schedule.
(b) Reports on Form 8-K
There were no current reports on Form 8-K filed during the three
months ended September 30, 1998.
15
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
WILLBROS GROUP, INC.
Date: November 16, 1998 By: /s/ Melvin F. Spreitzer
-------------------------------
Melvin F. Spreitzer
Executive Vice President,
Chief Financial Officer and Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
16
<PAGE>
EXHIBIT INDEX
The following documents are included as exhibits to this Form 10-Q.
Exhibit
Number Description
- ------------ ------------------------------------------------------------
3.1 Certificate of Amendment to the Articles of Incorporation of
the Company.
3.2 Amended and Restated Articles of Incorporation of
the Company.
27 Financial Data Schedule.
<PAGE>
EXHIBIT 3.1
-----------
CERTIFICATE OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
The undersigned, Larry J. Bump and John N. Hove, President
and Secretary, respectively, of WILLBROS GROUP, INC., a
corporation duly organized and existing under and by virtue
of the laws of the Republic of Panama, do hereby amend the
Articles of Incorporation of WILLBROS GROUP, INC. as
follows:
1. By substituting and replacing ARTICLE FIFTH so
that henceforth said ARTICLE FIFTH of said Articles shall
read in its entirety as follows:
"FIFTH: Domicile. The domicile of
the Corporation is in the Republic of
Panama, and the name of its Resident Agent
is the law firm ARIAS, FABREGA & FABREGA,
whose domicile is at Edificio Plaza
Bancomer, 50th Street, Panama 5, Republic
of Panama. The Corporation may, as
provided for by the Board of Directors,
engage in business and establish branches
and keep its files and assets anywhere in
the world. The Corporation may change its
domicile of incorporation and continue to
exist under the laws or jurisdiction of
another country, if authorized by a
resolution of the Board of Directors or
the stockholders of the Corporation."
2. By amending ARTICLE SEVENTH by adding
subparagraph (q) so that henceforth said ARTICLE SEVENTH,
subparagraph (q) of said Articles shall read in its entirety
as follows:
"(q) The Board of Directors may,
without stockholder approval, sell, lease,
exchange or otherwise dispose of any part
of the assets, rights, property or
undertakings of the Corporation, including
its goodwill and its corporate franchise,
upon such terms and conditions and for
such consideration, which may consist in
whole or in part of money or other
property, including shares of stock in,
and/or other securities of, any other
corporation or corporations, as the Board
of Directors deems expedient and for the
best interests of the
<PAGE>
Corporation; provided, however, any such sale,
lease, exchange or other disposal that
constitutes all or substantially all of
the assets, rights, property and
undertakings of the Corporation, including
its goodwill and its corporate franchise,
shall require the affirmative vote of the
holders of a majority of the outstanding
shares of stock of the Corporation
entitled to vote on such matter."
Signed in Panama City, Panama, on the 4th day of May, 1998.
WILLBROS GROUP, INC.
By: /s/ Larry J. Bump
---------------------------
Larry J. Bump
President
By: /s/ John N. Hove
---------------------------
John N. Hove
Secretary
<PAGE>
CERTIFICATION
The undersigned, Larry J. Bump and John N. Hove, President
and Secretary, respectively, of WILLBROS GROUP, INC., hereby
certify that we have been duly authorized to execute the
foregoing Certificate of Amendment to the Articles of
Incorporation of WILLBROS GROUP, INC. by resolution adopted
by the holders, or their proxies, of the majority of the
issued and outstanding shares of the Common Stock of
WILLBROS GROUP, INC. with the right to vote, at a meeting of
the Stockholders duly held in Panama City, Panama, at 9:00
a.m., local time, on the 4th day of the month of May, 1998,
pursuant to proper notice thereof.
Signed in Panama City, Panama, on the 4th day of May, 1998.
WILLBROS GROUP, INC.
By: /s/ Larry J. Bump
------------------------------
Larry J. Bump
President
By: /s/ John N. Hove
------------------------------
John N. Hove
Secretary
<PAGE>
EXHIBIT 3.2
-----------
The following Amended and Restated Articles of Incorporation
are compiled from the most recent official Restated Articles
of Incorporation and subsequent Amendment.
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
WILLBROS GROUP, INC.
FIRST: Name. The name of the Corporation is
----- ----
WILLBROS GROUP, INC.
SECOND: Purposes. The general purpose of the
------ --------
Corporation is to do any and all of the things and to exercise
any and all of the powers hereinafter set forth, in any part
of the world, namely:
(a) To carry on and conduct a general
contracting, engineering and petroleum services and
construction business; to engineer, design, operate, plan,
maintain, erect, construct, improve, enlarge, repair, alter,
renovate, decorate, furnish and engage in work upon
pipelines and related facilities, refineries, buildings,
streets, roads, highways, bridges, viaducts, railroads,
railway structures, piers, docks, mines, shafts, waterworks,
reservoirs, dams, canals, sewer systems, electrical
transmission systems, excavations, and telephone and
telegraph systems, and other structures and works; to employ
mechanics, laborers, artisans, and workmen; to make
contracts and sub-contracts for work and materials; and to
purchase, manufacture, sell and otherwise deal in and with
building and construction materials, machinery, equipment
and supplies of every kind and description.
To construct, engineer, design, purchase,
plan or otherwise acquire, improve, enlarge, repair, alter,
renovate, lease as lessee, maintain, operate, sell or
otherwise dispose of, lease as lessor, mortgage and deal in
and with pipelines, gathering lines, lateral lines, pumping
stations, tanks, compressors, bridges, structures, tunnels,
buildings, plants and communication equipment used for the
transmission,
<PAGE>
- 2 -
storage, processing and distributing of gas, oil, petroleum
products and by-products, dairy products, water,
fertilizers, coal slurries and any and all other products,
commodities and materials, whether of a similar or different
nature.
To explore for, mine, refine, develop,
improve, conduct experimentation on, process, generate,
retrieve, transport, transmit or gather any form of energy
and to design, construct or provide any facilities,
machinery or equipment necessary or convenient to the
conduct of such activities.
(b) To establish, transact and carry on
generally a financial, investment holding, brokerage,
guaranty, consultancy, underwriting, mercantile, trading,
manufacturing, exporting, importing, freight forwarding,
design, engineering, architectural, construction,
installation, maintenance, repair, purchasing, inspection,
shipping, transportation, chartering, leasing, agricultural,
auditing, hostelry, food, beverage, clothing, fishing,
mining, exploration, development, communication,
advertising, and warehousing business and, in general, to
engage in any other lawful business, trade or activity
related to such activities, including without limitation
marine services such as the design, engineering,
construction, fabrication or installation of onshore and
offshore structures, pilings, pipelines, piers, dock
facilities and bridges, the operation of vessels, the
transportation of rigs and offshore facilities, whether or
not such business, trade or activity is similar to the
aforementioned purposes.
(c) To invest the capital of the Corporation,
accretions to capital and the income of the Corporation or
any part thereof, as the Board of Directors may determine,
in real property, including the construction and alteration
of buildings, and in personal property of any description
whatsoever, including mortgages, bonds, shares and other
securities, and from time to time to change said investments
by sale, exchange or otherwise, and to invest the proceeds
of any sale or sales in other investments of a like nature.
(d) To establish, transact and carry on the
business of a manufacturing, merchandising and trading
company; to manufacture, purchase, lease, sublease and
acquire by contract, license or otherwise; to hold, own,
mortgage, pledge, hypothecate, exchange, sell, assign, and
transfer, or otherwise dispose of; and to manage, invest,
trade and deal in and with, both for its own account and for
the account
<PAGE>
- 3 -
of others, raw materials, goods, wares, merchandise,
commodities and other property of every kind, nature and
description.
(e) To establish, transact and carry on the
business of exporters, importers and forwarders as
principal, factor, agent, broker, commission merchant or
otherwise, in the Republic of Panama, and in any and all
colonies, dependencies, dominions, possessions, states,
territories and countries foreign thereto; to export from
and import into the Republic of Panama and from and into any
and all colonies, dependencies, dominions, possessions,
states, territories and countries foreign thereto, as
principal, factor, agent, broker, commission merchant or
otherwise, raw materials, goods, wares, merchandise,
commodities and other property of every kind, nature and
description; to deal in bills of lading, warehouse receipts
and any and all other documents necessary or incidental to
the conduct of such business; to act as factor, agent,
broker, representative, trustee or commission merchant for
any person or company and as trustee without conducting
trust businesses in the Republic of Panama.
(f) To purchase, build, hire, charter, or
otherwise own, hold, use and dispose of steam and other
ships and vessels and their appurtenances; to establish,
operate and maintain steam and other ships and vessels
between any cities, towns and ports in the Republic of
Panama or in any part of the world; and generally to
transport passengers, raw materials, goods, wares,
merchandise, commodities, animals and other property of
every kind, nature and description.
(g) To apply for, purchase, register or in any
manner to acquire, hold, own, use, operate, introduce, sell,
lease, assign, pledge or in any manner dispose of, and in
any manner deal with, patents, patent rights, licenses,
copyrights, trade marks, trade names, formulae, secret
processes, inventions, improvements and processes used in
connection with or secured under leases, patents or similar
rights granted by the Republic of Panama or by any other
country or government or otherwise; to acquire, own, use,
deal in or with, and in any manner dispose of any and all
inventions, improvements, and processes, labels, designs,
brands and other rights; and to work operate, exercise or
develop the same and to carry on any business which the
Corporation may deem advantageous to effectuate, directly or
indirectly, these purposes or any of them.
<PAGE>
- 4 -
(h) To guarantee or become liable for the
payment of money or for the performance of any obligations,
and generally to transact all kinds of guarantee business,
and also to transact all kinds of agency business.
(i) To acquire by original subscription,
syndicate participation, tender, purchase, or otherwise, and
to hold, sell, exchange, surrender, lease, assign, transfer,
mortgage, charge, convert, turn to account, deal in, pledge
or otherwise dispose of shares, stocks, debenture stocks,
scrip, debentures, bonds, mortgages, notes, warrants,
coupons, drafts, obligations, securities, produce,
concessions, options, patents, annuities, licenses,
policies, debts, business concerns and goodwill, claims,
privileges, choses in action, commercial instruments,
evidences of indebtedness and contracts, of every nature and
kind, issued, created or guaranteed by any other person or
company and irrespective of the business which it may be
carrying on or be authorized to carry on, and irrespective
of the locality in which it operates, or issued, created or
guaranteed by any government, public body or authority,
municipal, local or otherwise, and whether of the Republic
of Panama or elsewhere, and while the owner thereof to
receive, collect and dispose of interest and dividends
thereon and income therefrom, and to exercise all the
rights, powers and privileges of ownership, including the
right to vote thereon.
(j) To acquire and undertake the whole or any
part of the business, property and liabilities of any person
or company carrying on any business or possessed of property
suitable for the purposes of the Corporation, and to carry
on, conduct, assist, subsidize, contribute to, dissolve or
liquidate any business so acquired, or any other business
which can be advantageously carried on by the Corporation;
to organize, incorporate, reorganize, aid, assist
(financially or otherwise), amalgamate, consolidate or merge
with any subsidiary or affiliated company, or any other
company and to do any and all things necessary or convenient
to carry such purposes into effect.
(k) To draw, make, accept, indorse, discount,
execute, issue and deal in promissory notes, bills of
exchange, bills of lading, warrants, debentures and other
negotiable or transferable instruments.
(l) To purchase, take on lease or in exchange,
hire or otherwise acquire, hold, sell, mortgage or pledge,
transfer or otherwise dispose of any real and personal
property and any rights and privileges which the Corporation
may think
<PAGE>
- 5 -
necessary or convenient for the purposes of its business;
and to pay for any such property and any rights, interests
or privileges acquired by the Corporation in exchange for
money or other property, rights or interests held by the
Corporation, or for the issuance or assignment and delivery
in exchange therefor (in any manner permitted by law) its
own shares, bonds, debentures, notes, certificates of
indebtedness or other obligations, or any of them, however
evidenced.
(m) To purchase or otherwise acquire, hold,
sell, pledge, transfer or otherwise dispose of, and to
reissue its own capital stock, bonds, debentures, notes or
other securities, obligations or evidences of indebtedness
of the Corporation from time to time to such extent and in
such manner and upon such terms and conditions as the Board
of Directors shall determine; provided, however, that shares
of its own capital stock belonging to the Corporation shall
not be voted upon directly or indirectly.
(n) To borrow money, to issue bonds, promissory
notes, bills of exchange, debentures, and other obligations,
securities and evidences of indebtedness, whether secured by
mortgage, pledge, deed of trust or otherwise, or unsecured,
for money borrowed or in payment of property, real or
personal, purchased or acquired, for labor done or for any
other lawful object; and to mortgage or pledge all or any
part of its properties, rights, interests, easements and
franchises, including after-acquired property or rights, and
any and all shares of stock, bonds, debentures or other
securities, obligations or evidences of indebtedness at any
time owned or held by it.
(o) To insure with any other person or company
against losses, damages, risks and liabilities of all kinds
which may affect the Corporation.
(p) To establish and support or aid in the
establishment and support of associations, institutions,
funds and services calculated to benefit employees or ex-
employees of the Corporation or the dependents or relatives
of such persons, to grant pensions and allowances, to make
payments towards insurance, and to subscribe or guarantee
money for charitable or benevolent objects or for any
exhibition or for any public, general or useful objects.
(q) To make and carry into effect any agreement
or contract for sharing profits, union of interests,
cooperation, joint adventure, reciprocal concession or
otherwise with, and to manage or supervise any person or
company, carrying on or engaged in, or about to carry on or
engage in, any business or transaction which the
<PAGE>
- 6 -
Corporation is authorized to carry on or engage in, or any
business or transaction capable of being conducted so as to
benefit the Corporation directly or indirectly; and to
accept by way of consideration for any such agreement or
contract or for management services, cash or any stock,
debentures or securities of any person or company.
(r) To establish or promote and to cause to be
incorporated any company for the purpose of acquiring all or
any part of the property and liabilities of the Corporation,
or for any other purpose which may seem calculated to
benefit the Corporation directly or indirectly.
(s) To enter into, make, perform and carry out
contracts of every kind for any lawful purpose; to enter
into any arrangements with any governments or authorities,
municipal, local or otherwise and to obtain from any such
government or authority, any rights, privileges and
concessions which the Corporation may consider desirable to
obtain; and to carry out, exercise, and comply with any such
arrangements, rights, privileges and concessions.
(t) To sell, lease or otherwise dispose of the
whole or any part of the assets, rights, property or
undertakings of the Corporation for cash, shares,
debentures, bonds, mortgages or other securities of any
other company, or for such consideration as the Board of
Directors may think fit; and to improve, manage, develop,
exchange, mortgage, turn to account or otherwise deal with
all or any part of the assets, rights and property of the
Corporation.
(u) To lend or advance money or give credit to,
or give guarantee or become security for, stockholders,
officers or directors of the Corporation, to any person,
firm or corporation in which the Corporation has any direct
or indirect beneficial interest, wherever located, any
customers or others having dealings with the Corporation, on
such terms as the Board of Directors may deem expedient.
(v) To have one or more offices and to carry on
and conduct any or all of its operations and business and to
do all such things as are conducive or incidental to the
attainment of its corporate purposes in the Republic of
Panama and in any and all colonies, dependencies, dominions,
possessions, states, territories and counties foreign
thereto; to keep the books and accounts of the Corporation,
including the Stock Register, at any place or places, either
within or without the Republic of Panama; and to procure
<PAGE>
- 7 -
the registration or qualification or recognition of the
Corporation in or under the laws of any colony, dependency,
dominion, possession, state, territory or country in the
world.
(w) To provide for the management of the affairs
of the Corporation abroad in such manner and by such means
as the Board of Directors may from time to time deem
suitable and appropriate and for the delegation to an
attorney or attorneys of the Corporation, who may be any
person or persons, of such powers, authorities and
discretions as the directors may think fit.
(x) To issue shares of the capital stock of the
Corporation for cash, for labor done, for property, real or
personal, or for leases thereof, or for any combination of
any of the foregoing, or in exchange for the stock,
debentures, debenture stock, bonds, securities or
obligations of any person, firm, association, corporation or
other organization.
(y) To accept and vote a proxy or proxies from
individuals, partnerships, persons, firms, associations or
corporations.
(z) To distribute in specie, by way of dividend
or otherwise, among the stockholders, customers or employees
of the Corporation, any shares of stock or securities
belonging to the Corporation or any property or assets of
the Corporation.
(aa) To do any and all of the above acts and
things and to have and exercise any and all of the above
powers in any part of the world and either as principal,
attorney, factor, broker, commission merchant, trustee
(without conducting trust businesses in the Republic of
Panama), agent, contractor or otherwise and either alone or
in conjunction with others and either by or through agents,
trustees or otherwise.
(bb) To do all things necessary for the
accomplishment of the objects and purposes enumerated in
these Articles of Incorporation or any amendment thereto or
necessary or incidental to the protection or benefit of the
Corporation.
(cc) In general, to carry on any lawful business not
prohibited to corporations in any part of the world whether
or not such business is similar in nature to the objects set
forth in these Articles of Incorporation or any amendment
thereto, including without limitation to have and exercise
all the powers conferred by the laws of the Republic of
Panama upon corporations formed under the Act hereinafter
referred to, and to do any or all of the things hereinbefore
set forth to the same extent as natural persons might or
could do.
<PAGE>
- 8 -
It is hereby declared that the word "company" wherever
used in this Article SECOND shall be deemed to include any
partnership or other body of persons, whether incorporated
or not incorporated, and whether organized or domiciled in
the Republic of Panama or elsewhere. The purposes specified
in each paragraph of this Article SECOND shall, except where
otherwise expressed in such paragraph, be in no wise limited
or restricted by reference or inference, from the terms of
any other paragraph and that in the event of any ambiguity
this Article SECOND shall be construed in such a way as to
widen and not to restrict the powers of the Corporation.
With these purposes the Corporation shall have all the
powers outlined in Article 19 of Law 32 of 1927 of the
Republic of Panama as well as any other powers which may be
granted to the Corporation by any other laws in force.
THIRD: Capital. The authorized capital of the
----- -------
Corporation shall consist of THIRTY-SEVEN MILLION NINE HUNDRED
SIXTY THOUSAND U.S. DOLLARS (U.S. $37,960,000), consisting of:
THIRTY-FIVE MILLION (35,000,000) shares of common stock, par value
FIVE U.S. CENTS (U.S. $.05) per share ("Common Stock"); THREE
HUNDRED SIXTY-TWO THOUSAND (362,000) shares of preferred
stock, par value ONE HUNDRED U.S. DOLLARS (U.S. $100.00) per
share ("Preferred Stock"); and ONE MILLION (1,000,000)
shares of class A preferred stock, par value ONE U.S. CENT
(U.S. $.01) per share ("Class A Preferred Stock"). Shares
shall all be in nominative form and may not be issued to
bearer.
A. The powers, designations and preferences and
the relative, participating, optional and other special
rights of Common Stock and Preferred Stock, and the
qualifications, limitations and restrictions of such
preferences and/or rights, are as follows:
(a) Dividends. The holders of Preferred
Stock, in preference to the holders of Common Stock, shall
be entitled to receive, when and as declared by the Board of
Directors out of any funds legally available therefore,
cumulative dividends in cash, payable quarterly on the last
day of each of the months of March, June, September and December
in each year commencing with 1996 to holders of Preferred Stock
of record on the first day of the calendar month in which such
dividends
<PAGE>
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are payable, of EIGHT U.S. DOLLARS (U.S. $8.00) per share
per annum. Dividends on shares of Preferred Stock shall
first begin to accrue on January 1, 1996, shall be
cumulative, and shall be paid pro rata to the holders of
Preferred Stock. Accrued but unpaid dividends shall not
bear interest.
Commencing January 1, 1996, and for so
long thereafter as any shares of Preferred Stock are
outstanding, no dividend or other distribution shall be
declared or paid on shares of Common Stock with respect to
any calendar year, unless the cumulative dividends on all
outstanding shares of Preferred Stock shall have been paid
in full or contemporaneously are declared and paid through
December 31st of such calendar year. At any time after such
cumulative dividends have been paid in full or
contemporaneously declared and paid through December 31st of
such calendar year, a dividend or other distribution may be
declared or paid on shares of Common Stock; provided that,
after the holders of Common Stock shall have received in any
calendar year commencing January 1, 1996, dividends or other
distributions, in the aggregate, in an amount per share of
Common Stock held by such holders equal to the quotient
obtained by dividing EIGHT U.S. DOLLARS (U.S. $8.00) by the
Conversion Ratio then in effect pursuant to paragraph (d)
below, no further dividends or other distributions shall be
declared or paid on shares of Common Stock during such
calendar year, unless an equivalent dividend or distribution
on the outstanding shares of Preferred Stock shall have been
paid or declared and a sum sufficient for the payment
thereof set apart. For purposes of the declaration or
payment of dividends or other distributions, a dividend or
distribution on shares of Preferred Stock shall be deemed
"equivalent" to a dividend or distribution on shares of
Common Stock if the dividend or distribution declared or
paid on each outstanding share of Preferred Stock entitles
the holder thereof to the same money or other property to
which such holder would have been entitled if such holder
held the number of full and fractional shares of Common
Stock into which such share of Preferred Stock is then
convertible.
(b) Liquidation. Upon any voluntary or
involuntary liquidation, dissolution or winding up of the
Corporation: (i) each holder of record of shares of Preferred
Stock shall be entitled, before any distribution is made on
shares of
<PAGE>
- 10 -
Common Stock, to be paid ONE HUNDRED U.S. DOLLARS
(U.S. $100.00) per share of Preferred Stock held by such
holder, plus, in each case, an amount equal to all accrued
and unpaid dividends thereon, if any; (ii) thereafter, each
holder of record of shares of Common Stock shall be
entitled, before any further distribution is made on shares
of Preferred Stock, to be paid an amount per share of Common
Stock held by such holder equal to the quotient obtained by
dividing ONE HUNDRED U.S. DOLLARS (U.S. $100.00) by the
Conversion Ratio then in effect pursuant to paragraph (d)
below; and (iii) thereafter, the holders of Common Stock and
Preferred Stock shall be entitled to participate in the net
assets of the Corporation remaining after such dissolution,
liquidation or winding up and after payment or provision for
the payment of the debts and liabilities of the Corporation,
distributing such proceeds pro rata among the holders of
Common Stock and Preferred Stock without priority between
such classes, and for purposes of liquidating distributions
each share of Preferred Stock shall be treated as the number
of full and fractional shares of Common Stock into which
such share of Preferred Stock is then convertible.
The foregoing provisions of this
paragraph (b) shall not, however, be deemed to require the
distribution of assets among the holders of Common Stock and
Preferred Stock in the event of a merger, consolidation, or
sale, transfer or lease of all or substantially all of the
Corporation's assets if such transaction does not in fact
result in the dissolution, liquidation or winding up of the
Corporation.
(c) Voting. Each share of Common Stock
shall entitle the registered holder thereof to one vote on
all matters brought before the stockholders of the
Corporation for a vote. The registered holders of shares of
Preferred Stock shall also be entitled to vote on all
matters brought before the stockholders of the Corporation
for a vote, with each share of Preferred Stock entitling the
registered holder thereof to one vote for each whole share
of Common Stock into which such share of Preferred Stock is
then convertible. Except as set forth below or as otherwise
required by law, the holders of Preferred Stock and the
holders of Common Stock shall vote together as one class on
all matters brought before the stockholders of the
Corporation for a vote.
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The holders of the Preferred Stock
shall be entitled to vote as a class upon any proposed
amendment to the Corporation's Articles of Incorporation, if
and to the extent such amendment would increase or decrease
the aggregate number of authorized shares of Preferred
Stock, increase or decrease the par value of the shares of
Preferred Stock, alter or change the powers, preferences or
special rights of the Preferred Stock so as to affect them
adversely, or authorize a class of equity security of the
Corporation senior to the Preferred Stock.
(d) Conversion. Each share of Preferred Stock
shall be convertible, at the option of the holder thereof, at any
time, into that number of full shares of Common Stock equal to the
Conversion Ratio (as hereinafter defined and as the same may be
adjusted as set forth below). Conversion of a share of Preferred
Stock shall be effected by surrender of the holder's certificate
representing such share of Preferred Stock, accompanied by a written
notice from such holder addressed to the Corporation requesting
conversion. Upon voluntary conversion, holders of converted shares
of Preferred Stock will be issued certificates representing the full
shares of Common Stock (and cash with respect to any fractional interest
in a share of Common Stock as provided below) to which they are entitled.
Upon the effectiveness of the
Corporation's first registration statement covering Common
Stock filed under the United States Securities Act of 1933,
as amended, or any successor to such statute, each share of
Preferred Stock shall immediately and automatically become
converted into that number of full shares of Common Stock
equal to the Conversion Ratio, as the same may be adjusted
as set forth below. Upon automatic conversion, holders of
converted shares of Preferred Stock shall promptly surrender
their certificates representing such shares to the
Corporation, whereupon such holders will be issued
certificates representing the full shares of Common Stock
(and cash with respect to any fractional interest in a share
of Common Stock as provided below) to which they are
entitled.
<PAGE>
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The Conversion Ratio at the time of the
first issuance of shares of Preferred Stock shall equal one
(1.0). Thereafter, the Conversion Ratio shall be subject to
the following adjustments:
(i) If the Corporation shall declare a
dividend or distribution of its capital stock or of
evidences of the Corporation's indebtedness or assets
(excluding cash dividends or distributions) on Common Stock,
or effect a stock split or reverse stock split with respect
to Common Stock, or issue shares of its capital stock by
reclassification of shares of Common Stock, the Conversion
Ratio in effect on the record date, for any such stock
dividend or distribution, or the effective date of any such
other event, shall be adjusted proportionately so that the
holder of a share of Preferred Stock thereafter shall be
entitled to receive upon conversion the aggregate number of
shares of Common Stock or other capital stock that such
holder would own or be entitled to receive after the
happening of any of the events mentioned above if such share
of Preferred Stock had been converted immediately prior to
the close of business on such record date or effective date,
as applicable.
(ii) If the Corporation shall effect
any reclassification or similar change of outstanding shares
of Common Stock (other than as set forth in clause (i) of
this paragraph (d)) or a consolidation or merger of the
Corporation with another corporation or a conveyance of all
or substantially all of the assets of the Corporation, a
share of Preferred Stock shall, after such capital
reorganization, reclassification, change, consolidation,
merger or conveyance, be convertible only into the number of
shares of stock or other properties, including cash, to
which a holder of the number of shares of Common Stock
deliverable upon conversion of a share of Preferred Stock
would have been entitled upon such capital reorganization,
reclassification, change, consolidation, merger or
conveyance if such share of Preferred Stock had been
converted immediately prior to the effective date of such
event; and, in any such case, appropriate adjustments (as
determined by the Board of Directors) shall be made in the
application of the provisions set forth in this Article
THIRD with respect to the rights and interests thereafter of
the holders of Preferred Stock to the end that the
provisions set forth in this Article THIRD (including
provisions with respect to changes in
<PAGE>
- 13 -
and other adjustments of the conversion rights in this
paragraph (d)) shall thereafter be applicable, as nearly as
may be reasonable, in relation to any shares of stock or
other securities thereafter deliverable upon the conversion
of a share of Preferred Stock.
(iii) The Corporation shall give
written notice to the holders of Preferred Stock of any
proposed transaction within the scope of clause (i) or (ii)
of this paragraph (d) not less than ten (10) days prior to
the anticipated record date or effective date, as the case
may be, therefor and provide in such written notice a brief
description of the terms and conditions of such transaction.
In connection with the conversion of
any shares of Preferred Stock, no fractions of shares of
Common Stock shall be issued, but the Corporation shall pay
a cash adjustment in respect of such fractional interest in
an amount equal to the fair market value of such fractional
interest as determined by the Board of Directors. If more
than one share of Preferred Stock shall be surrendered for
conversion at any one time by the same holder, the number of
full shares of Common Stock issuable upon conversion thereof
shall be computed on the basis of the aggregate number of
shares of Preferred Stock so surrendered.
Upon conversion of any shares of
Preferred Stock the holder thereof shall be entitled to
receive from the Corporation, in respect of the shares so
converted, payment in cash of any dividends which have
become payable in accordance with paragraph (a) of this
Article THIRD but remain unpaid. In the event the
Corporation is prevented by applicable corporate law, in
whole or in part, from making such dividend payment, the
Corporation shall have a continuing obligation to make such
payment, which shall survive such conversion, until the same
is paid.
(e) Redemption. On March 31, 2001, the
Corporation, upon notice given as provided below, shall redeem
all then outstanding shares of Preferred Stock by paying
therefor in cash, as provided below, the sum of ONE HUNDRED
U.S. DOLLARS (U.S. $100.00) per share, plus, in each case,
a cash amount equal to all accrued and unpaid dividends thereon,
if any (the "Redemption Price").
<PAGE>
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At least ten (10) and not more than
thirty (30) days' previous notice of such redemption of
Preferred Stock shall be mailed to the holders of record of
such Preferred Stock at their respective addresses as the
same shall appear on the books of the Corporation.
On or before March 31, 2001, the
Corporation may provide for the payment of an amount
sufficient to redeem the shares of Preferred Stock called
for redemption by either (i) setting aside the amount,
separate from its other funds, in trust for the benefit of
the holders of the shares to be redeemed, or (ii) depositing
such amount in a bank or trust company as a trust fund, with
irrevocable instructions and authority to the bank or trust
company to give or complete the notice of redemption and to
pay to the holders of the shares of Preferred Stock to be
redeemed, on or after March 31, 2001, the Redemption Price
upon surrender of their respective share certificates. If
the Corporation so provides for payment of the Redemption
Price by either method, then, from and after March 31, 2001,
(i) the shares of Preferred Stock shall be deemed to be
redeemed, (ii) dividends thereon shall cease to accrue,
(iii) such setting aside or deposit shall be deemed to
constitute full payment for the shares, (iv) the shares no
longer shall be deemed to be outstanding, (v) the holders
thereof shall cease to be stockholders with respect to such
shares, and (vi) the holders shall have no rights with
respect thereto, except the right to receive (without
interest) the Redemption Price upon surrender of their stock
certificates. Any interest accruing on funds so set aside
or deposited shall belong to the Corporation. If funds are
deposited with a bank or trust company as provided herein,
and the holders of the shares of Preferred Stock do not,
within three (3) years after such deposit, claim any amount
so deposited for the redemption thereof, the bank or trust
company shall pay over to the Corporation upon demand the
balance of the funds so deposited, and the bank or trust
company thereupon shall be relieved of all responsibility to
such holders.
In the event the Corporation is
prevented by applicable corporate law, in whole or in part,
from making any redemption payments at the time called for
under this paragraph (e), the Corporation shall make such
redemption at the
<PAGE>
- 15 -
appointed time, only to the extent permitted by applicable
corporate law, and shall then complete such redemption (in
one or more later transactions) at such time or times as the
same is permitted by applicable corporate law.
(f) Identical Rights and Privileges.
Except as otherwise expressly provided above in this Article
THIRD, the holders of Common Stock and the holders of
Preferred Stock shall be entitled to the same rights and
privileges.
(g) Restrictions on Transfer to Preserve
Tax Status. It is in the best interests of the
Corporation and its stockholders that the Corporation's
status as a non-controlled foreign corporation ("Non-CFC")
under the United States Internal Revenue Code of 1986, as
amended from time to time (the "Code"), be preserved.
Therefore, any purported Transfer (as hereinafter defined)
of any shares of Common Stock to any person or entity, which
would result in such person or entity, together with any
other person or entity whose shares of Common Stock would be
aggregated with such person or entity for purposes of
Section 957 of the Code, being the beneficial owner of ten
percent (10%) or more of the issued and outstanding shares
of Common Stock, will be subject to a determination by the
Board of Directors in good faith, in its sole discretion,
that such Transfer would not in any way, directly or
indirectly, affect the Corporation's Non-CFC status. The
transferee or transferor proposed to be involved in such
Transfer shall give to the Secretary of the Corporation not
less than thirty (30) days prior written notice of such
proposed Transfer. In the event of an attempted Transfer in
violation of this paragraph (g), the purported transferee
shall acquire no rights whatsoever in such shares of Common
Stock. If the Board of Directors shall at any time
determine in good faith that a Transfer has taken place in
violation of this paragraph (g) or that a person intends to
acquire, has attempted to acquire or may acquire ownership
of any shares of Common Stock in violation of this paragraph
(g), the Board of Directors shall take such action as it
deems advisable to refuse to give effect to or to prevent
such Transfer, including without limitation instituting
proceedings to enjoin such Transfer. In the case of an
ambiguity in the application of any of the provisions of
this paragraph (g), the Board of Directors shall have the
power to determine the application of the provisions of this
paragraph (g) with respect to any situation based on the
facts known to it. For
<PAGE>
- 16 -
purposes of this paragraph (g), the term "Transfer" shall
mean any sale, transfer, gift, assignment, devise or other
disposition of Common Stock, including without limitation
(1) the granting of any option or entering into of any
agreement for the sale, transfer or other disposition of
Common Stock, or (2) the sale, transfer, assignment or other
disposition of any securities or rights convertible into or
exchangeable for Common Stock, whether voluntary or
involuntary, whether of record or beneficially, and whether
by operation of law or otherwise. Nothing in this paragraph
(g) precludes the settlement of any transaction entered into
through the facilities of the New York Stock Exchange.
B. Class A Preferred Stock may be issued from
time to time in one or more series, each of such series to
have such voting powers, full or limited, or no voting
powers, and such designations, preferences and relative,
participating, optional or other special rights, and
qualifications, limitations or restrictions thereon or
thereof, as are stated and expressed herein and in the
resolution or resolutions providing for the issue of such
series adopted by the Board of Directors as hereinafter
provided. Authority is hereby expressly granted to the
Board of Directors, subject to the provisions of this
Part B, to authorize the issue of one or more series of Class A
Preferred Stock and, with respect to each series, to fix by
resolution or resolutions providing for the issue of such
series:
(a) The number of shares to constitute such
series and the distinctive designation thereof, provided
that unless otherwise stated in any resolution or
resolutions relating to such series, such number of shares
may be increased or decreased by the Board of Directors in
connection with any classification or reclassification of
unissued shares of Class A Preferred Stock;
(b) The annual dividend rate on the shares
of such series and the date or dates from which dividends
shall accumulate;
(c) Whether the holders of such series are
or are not entitled to participate in earnings of the
Corporation through dividends in excess of (or in lieu of)
dividends at an annual rate and the terms of any such right
to participate;
<PAGE>
- 17 -
(d) Whether or not the shares of such
series shall be subject to redemption, the limitations and
restrictions with respect to such redemption, if any, and
the times of redemption of the shares of such series and the
amounts (or methods of calculating such amounts) which the
holders of such series shall be entitled to receive upon the
redemption thereof, which amounts (or method of calculating
such amounts) may vary at different redemption dates and may
also, with respect to shares redeemed through the operation
of any retirement or sinking fund, be different from the
amounts (or method of calculating such amounts) with respect
to shares otherwise redeemed;
(e) The amount (or method of calculating
such amount) which the holders of such series shall be
entitled to receive upon the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation;
(f) Whether or not the shares of such
series shall be subject to the operation of a retirement or
sinking fund and, if so, the extent to and manner in which
it shall be applied to the purchase or redemption of the
shares of such series for retirement or to other corporate
purposes and the terms and provisions relative to the
operation thereof;
(g) Whether or not the shares of such
series shall be convertible into, or exchangeable for,
shares of stock of any other class or classes, or of any
other series of the same class, and if so convertible or
exchangeable, the price or prices or the rate or rates of
conversion or exchange and the method, if any, of adjusting
the same, and the other terms and conditions of such
conversion or exchange;
(h) The voting rights, if any, of holders
of shares of such series in addition to the voting rights
provided for by applicable law;
(i) The limitations and restrictions, if
any, to be effective while any shares of such series are
outstanding upon the payment of dividends or making of other
distributions on, and upon the purchase, redemption or other
acquisition
<PAGE>
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by the Corporation of Common Stock or any other class or
classes of stock of the Corporation ranking junior to the
shares of such series;
(j) The conditions or restrictions, if any,
upon the creation of indebtedness of the Corporation or upon
the issue of any additional stock (including additional
shares of such series or of any other series or class)
ranking on a parity with or prior to the shares of such
series as to dividends or upon liquidation; and
(k) Any other preference and relative,
participating, optional, or other special rights, and
qualifications, limitations or restrictions thereon or
thereof, as shall not be inconsistent with this Part B.
All shares of any one series of Class A
Preferred Stock shall be identical with each other in all
respects, except that shares of any one series issued at
different times may differ as to the dates from which
dividends thereon shall be cumulative if dividends on such
series accumulate; and all series shall rank equally and be
identical in all respects, except as permitted by the
foregoing provisions of this Part B.
For purpose hereof and of any resolution of
the Board of Directors providing for the classification or
reclassification of any shares of Class A Preferred Stock or
for the purpose of any certificate filed with the Republic
of Panama (unless otherwise provided in any such resolution
or certificate):
(i) The term "outstanding," when used in
reference to shares of stock, shall mean issued shares,
excluding shares held by the Corporation and shares called
for redemption, funds for the redemption of which shall have
been deposited in trust; and
(ii) The amount of dividends "accrued" on
any share of Class A Preferred Stock of any series providing
for cumulative dividends as at any dividend date shall be
deemed to be the amount of any unpaid dividends accumulated
thereon to and including such dividend date, whether or not
earned or declared, and the
<PAGE>
- 19 -
amount of dividends "accrued" on any share of Class A
Preferred Stock of any series as at any date other than a
dividend date shall be calculated thereon to and including
the last preceding dividend date, whether or not earned or
declared, plus an amount equivalent to the pro rata portion
of the periodic dividend with respect thereto at the annual
dividend rate fixed for the shares of such series for the
period after such last preceding dividend date to and
including the date as of which the calculation is made.
FOURTH: Limited Liability. The liability of each
------ -----------------
stockholder is limited to the amount, if any, unpaid on his shares.
FIFTH: Domicile. The domicile of the
----- --------
Corporation is in the Republic of Panama, and the name of its
Resident Agent is the law firm ARIAS, FABREGA & FABREGA, whose
domicile is at Edificio Plaza Bancomer, 50th Street, Panama 5,
Republic of Panama. The Corporation may, as provided for by the
Board of Directors, engage in business and establish branches and
keep its files and assets anywhere in the world. The
Corporation may change its domicile of incorporation and
continue to exist under the laws or jurisdiction of another
country, if authorized by resolution of the Board of
Directors or the stockholders of the Corporation.
SIXTH: Duration. The duration of the
----- --------
Corporation's existence is to be perpetual.
SEVENTH: Board of Directors. The business of the
------- ------------------
Corporation shall be managed under the direction of a Board
of Directors in accordance with the following:
(a) The Board of Directors may exercise all
of the powers of the Corporation except such as are by law,
by these Articles of Incorporation or by the Bylaws
conferred upon or reserved to the stockholders.
(b) The number of directors constituting
the entire Board of Directors shall be not less than three
(3) directors nor more than fifteen (15) directors, the
exact number within such limits to be determined from time
to time by resolution
<PAGE>
- 20 -
adopted by the affirmative vote of a majority of the
directors present at a meeting of the Board of Directors at
which a quorum is present; provided, however, that the
number of directors shall not be reduced so as to shorten
the term of any director at that time in office; and
provided further, that the number of directors constituting
the entire Board of Directors shall be six (6) until
otherwise fixed by a majority of the entire Board of
Directors.
(c) The Board of Directors shall be divided
into three classes, designated Class I, Class II and Class III.
All classes shall be as nearly equal in number as
possible, and no class shall include less than one (1)
director. The terms of office of the directors initially
classified shall be as follows: at the 1996 annual meeting
of stockholders, Class I directors shall be elected for a
one-year term expiring at the next annual meeting of
stockholders; Class II directors shall be elected for a two-
year term expiring at the second succeeding annual meeting
of stockholders; and Class III directors shall be elected
for a three-year term expiring at the third succeeding
annual meeting of stockholders. At each annual meeting of
stockholders after such initial classification, directors to
replace those whose terms expire at such annual meeting
shall be elected to hold office until the third succeeding
annual meeting. Each director shall hold office until the
expiration of that director's term and until that director's
successor is elected and qualifies, unless that director
earlier dies, resigns or is removed. If the number of
directors is changed in accordance with the terms of these
Articles of Incorporation, any increase or decrease shall be
apportioned among the classes so as to maintain the number
of directors in each class as nearly equal in number as
possible.
(d) Nominations of candidates for election
as directors of the Corporation at any meeting of the
stockholders at which election of one or more directors
shall be held (an "Election Meeting") may be made by or at
the direction of the Board of Directors or by any
stockholder entitled to vote at such Election Meeting, in
accordance with the following procedures. Nominations made
by or at the direction of the Board of Directors may be made
at any time. At the request of the Secretary of the
Corporation, each proposed nominee shall provide the
Corporation with such information concerning the proposed
nominee as is required, under the rules of the U.S.
Securities and
<PAGE>
- 21 -
Exchange Commission, to be included in the Corporation's
proxy statement soliciting proxies for the nominee's
election as a director. Nominations, other than those made
by or at the direction of the Board of Directors, shall be
made pursuant to timely notice in writing to the Secretary
of the Corporation. Not less than forty-five (45) days nor
more than ninety (90) days prior to the date of the Election
Meeting, any stockholder who intends to make a nomination at
the Election Meeting shall deliver a notice to the Secretary
of the Corporation setting forth (i) the name, age, business
address and residence address of each nominee proposed in
such notice, (ii) the principal address of each nominee
proposed in such notice; (iii) the number and type of shares
of stock of the Corporation which are beneficially owned by
each such nominee, and (iv) such other information
concerning each such nominee as would be required, under the
rules of the U.S. Securities and Exchange Commission, in a
proxy statement soliciting proxies for the election of such
nominees. Such notice shall include a signed consent of
each such nominee to serve as a director of the Corporation,
if elected. In the event that a person who is validly
designated as a nominee in accordance with this paragraph
shall thereafter become unable or unwilling to stand for
election to the Board of Directors, the Board of Directors
may designate a substitute nominee. If the Chairman of the
Election Meeting determines that a nomination was not made
in accordance with the foregoing procedures, such nomination
shall be void.
(e) Any vacancies in the Board of Directors
for any reason, and any directorships resulting from any
increase in the number of directors, may be filled by the
Board of Directors, acting by a majority of the directors
then in office, although less than a quorum, and any
director so chosen shall hold office until the next election
of the class for which such director shall have been chosen
and until such director's successor shall be elected and
shall qualify.
(f) There shall be no cumulative voting in
the election of directors. Election of directors need not
be by written ballot unless the Bylaws of the Corporation so
provide.
<PAGE>
- 22 -
(g) No director may be removed from office
by the stockholders except for cause with the affirmative
vote of the holders of not less than a majority of the total
voting power of all outstanding securities of the
Corporation then entitled to vote generally in the election
of directors, voting together as a single class.
(h) Notwithstanding the foregoing, whenever
the holders of any one or more classes or series of
preferred stock issued by the Corporation shall have the
right, voting separately by class or series, to elect
directors at an annual or special meeting of stockholders,
the election, term of office, filling of vacancies and other
features of such directorships shall be governed by the
terms of these Articles of Incorporation applicable thereto
(including the resolutions adopted by the Board of Directors
pursuant to Article THIRD), and such directors so elected
shall not be divided into classes pursuant to paragraph (c)
of this Article SEVENTH unless expressly provided by such
terms.
(i) Meetings of directors may be held in
the Republic of Panama or in any other country. A majority
of the directors then in office shall constitute a quorum
for the transaction of business at any meeting of the Board
of Directors.
(j) At any meeting of the directors, any
director may be represented and vote by proxy or proxies
(who need not be directors) appointed by an instrument in
writing, public or private, with or without power of
substitution. One or more directors may participate in a
meeting of the Board of Directors, or of a committee of the
Board of Directors, by means of conference telephone or
similar communications equipment by means of which all
persons participating in the meeting can hear each other.
Participation in a meeting by such means shall constitute
presence in person at such meeting.
(k) A director may hold any remunerative
office of profit with the Corporation in addition to the
office of director. No director shall be disqualified from
entering into contracts, arrangements or dealings with the
Corporation and no such contracts, arrangements or dealings
shall be voided, whether they be with the director or
<PAGE>
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with a corporation in which he is interested as member or
director or officer or otherwise, and no director shall be
liable to account to the Corporation for any profit arising
out of any such contract, arrangement or dealing, provided
that such director discloses to the directors of the
Corporation his interest in such contract, arrangement or
dealing at or before the time such contract, arrangement or
dealing is determined upon or entered into and such
contract, arrangement or dealing is approved by the Board of
Directors.
(l) The Board of Directors may appoint two
or more of their number to constitute an Executive Committee
or any other committee or committees, who shall have and
exercise the powers of the Board of Directors in the
management of the business and affairs of the Corporation to
the extent and subject to the restrictions expressed in
these Articles of Incorporation, the Bylaws or the
resolution appointing such committee or committees.
(m) The Board of Directors may make, alter,
amend and repeal the Bylaws.
(n) The Board of Directors may, without
stockholder approval, cause the Corporation to guaranty
debts and obligations of its wholly- or partly-owned
subsidiaries or entities within the common control of the
stockholders of the Corporation, and pledge, encumber,
hypothecate, or otherwise grant as security, assets of the
Corporation as guaranty or security for said debts.
(o) Notwithstanding any other provisions of
these Articles of Incorporation or the Bylaws of the
Corporation (and notwithstanding the fact that a lesser
percentage may be specified by law, these Articles of
Incorporation or the Bylaws of the Corporation), any
proposal to amend or repeal, or adopt any provision
inconsistent with, this Article SEVENTH or any provision of
this Article SEVENTH shall require the affirmative vote of
the holders of seventy-five percent (75%) or more of the
outstanding shares of stock of the Corporation entitled to
vote on such matter.
<PAGE>
- 24 -
(p) To the fullest extent permitted by the
General Corporation Law of the Republic of Panama, as the
same exists or may hereafter be amended, a director of the
Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director. The Board of
Directors may (i) cause the Corporation to enter into
contracts with directors providing for the limitation of
liability set forth in this paragraph (p) to the fullest
extent permitted by law, and (ii) adopt Bylaws or
resolutions or cause the Corporation to enter into contracts
providing for indemnification of directors and officers of
the Corporation and other persons. No amendment to or
repeal of this paragraph (p) shall apply to, or have any
effect on, the liability or alleged liability of any
director of the Corporation for or with respect to any acts
or omissions of such director occurring prior to such
amendment or repeal.
(q) The Board of Directors may, without
stockholder approval, sell, lease, exchange or otherwise
dispose of any part of the assets, rights, property or
undertakings of the Corporation, including its goodwill and
its corporate franchise, upon such terms and conditions and
for such consideration, which may consist in whole or in
part of money or other property, including shares of stock
in, and/or other securities of, any other corporation or
corporations as the Board of Directors deems expedient and
for the best interests of the Corporation; provided,
however, any such sale, lease, exchange or other disposal
that constitutes all or substantially all of the assets,
rights, property and undertakings of the Corporation,
including its goodwill and its corporate franchise, shall
require the affirmative vote of the holders of a majority of
the outstanding shares of stock of the Corporation entitled
to vote on such matter.
EIGHTH: Meetings. All the meetings of the
------ --------
stockholders and of the Board of Directors shall be held at
the office of the Corporation in the Republic of Panama or
at any other place or places, within or without the Republic
of Panama, as may be determined from time to time by the
Board of Directors.
NINTH: Amendment. The Corporation reserves the
----- ---------
right to amend these Articles of Incorporation as from time
to time amended, in the manner now or
<PAGE>
- 25 -
hereafter prescribed by law, and all rights conferred on
officers, directors and stockholders herein are granted
subject to this reservation.
TENTH: No Preemptive Right. No stockholder
----- -------------------
shall have a preferential or preemptive right to purchase
or subscribe for any shares of the Corporation, whether
now or hereafter authorized or issued, including any shares
issued pursuant to an increase in authorized capital stock,
or pursuant to the issuance of stock which has previously
been authorized but remains unissued or from a prior issue
that has remained unsold, or in respect of stock that the
Corporation has purchased and which remains outstanding as
treasury stock.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S SEPTEMBER 30, 1998 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 3,939
<SECURITIES> 0
<RECEIVABLES> 59,862
<ALLOWANCES> 1,243
<INVENTORY> 0
<CURRENT-ASSETS> 72,407
<PP&E> 144,100
<DEPRECIATION> 65,438
<TOTAL-ASSETS> 165,196
<CURRENT-LIABILITIES> 50,413
<BONDS> 0
0
0
<COMMON> 753
<OTHER-SE> 106,752
<TOTAL-LIABILITY-AND-EQUITY> 165,196
<SALES> 206,549
<TOTAL-REVENUES> 206,549
<CGS> 163,889
<TOTAL-COSTS> 206,475
<OTHER-EXPENSES> 2,113
<LOSS-PROVISION> 390
<INTEREST-EXPENSE> 1,175
<INCOME-PRETAX> (2,039)
<INCOME-TAX> 2,611
<INCOME-CONTINUING> (4,650)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,650)
<EPS-PRIMARY> (.31)
<EPS-DILUTED> (.31)
</TABLE>
