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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
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)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------------- -------------------------
Common stock, $.05 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of the Registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
-----
As of March 18, 1998, 15,005,280 shares of the Registrant's
Common Stock were outstanding, and the aggregate market value of
the Common Stock held by non-affiliates was approximately
$214,408,480.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Stockholders
for the fiscal year ended December 31, 1997, are incorporated by
reference into Parts I and II of this Form 10-K.
Portions of the Registrant's Proxy Statement for the Annual
Meeting of Stockholders to be held May 4, 1998, are incorporated
by reference into Part III of this Form 10-K.
=================================================================
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WILLBROS GROUP, INC.
FORM 10-K
YEAR ENDED DECEMBER 31, 1997
TABLE OF CONTENTS
Page
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PART I
Items 1
and 2. Business and Properties 4
Item 3. Legal Proceedings 24
Item 4. Submission of Matters to a Vote of
Security Holders 24
Item 4A. Executive Officers of the Registrant 24
PART II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters 27
Item 6. Selected Financial Data 27
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 27
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk 27
Item 8. Financial Statements and Supplementary Data 27
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 27
PART III
Item 10. Directors and Executive Officers of the
Registrant 27
Item 11. Executive Compensation 28
Item 12. Security Ownership of Certain Beneficial
Owners and Management 28
Item 13. Certain Relationships and Related Transactions 28
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K. 28
Signatures 31
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Forward-Looking Statements
This Form 10-K 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 or incorporated by reference in this Form 10-K
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 and uncertainties which could cause actual
results to differ materially from the Company's expectations
including the timely award of one or more projects; 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 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-K 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 to 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.
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PART I
Items 1 and 2. Business and Properties
General
Willbros Group, Inc. ("the Company") is one of the leading
independent contractors serving the oil and gas industry,
providing construction, engineering and specialty services to
industry and government entities worldwide. The Company places
particular emphasis on projects in developing countries where the
Company believes its experience gives it a competitive advantage.
The Company's construction services include the building and
replacement of major pipelines and gathering systems, flow
stations, pump stations, gas compressor stations, gas processing
facilities, oil and gas production facilities, piers, dock
facilities and bridges. The Company's engineering services
include feasibility studies, conceptual and detailed design,
field services, material procurement and overall project
management. The Company's specialty services include dredging,
pipe coating, pipe double jointing, removal and installation of
flowlines, fabrication of piles and platforms, maintenance and
repair of pipelines, stations and other facilities, pipeline
rehabilitation, general oilfield services and transport of
oilfield equipment, rigs and vessels. The Company's backlog was
$135.8 million at December 31, 1997, compared to $108.8 million
at December 31, 1996.
The Company provides its services utilizing a large fleet of
Company-owned equipment comprised of, among other things, marine
vessels, barges, dredges, pipelaying equipment, heavy
construction equipment, transportation equipment and camp
equipment. At December 31, 1997, the Company had approximately
785 units of heavy construction equipment, 1,146 units of
transportation equipment and 5,207 units of support equipment.
The Company's equipment fleet is supported by warehouses of spare
parts and tools which are located to maximize availability and
minimize cost.
The Company traces its roots to the construction business of
Williams Brothers Company, founded in 1908. Through successors to
that business, Willbros has completed many landmark projects
around the world, including the "Big Inch" and "Little Big Inch"
War Emergency Pipelines (1942-44), the Mid-America Pipeline
(1960), the TransNiger Pipeline (1962-64), the Trans-Ecuadorian
Pipeline (1970-72), the northernmost portion of the Trans-Alaskan
Pipeline System (1974-76), the All American Pipeline System (1984-
86), Colombia's Alto Magdalena Pipeline System (1989-90) and a
portion of the Pacific Gas Transmission System expansion (1992-
93).
Over the years, Willbros has been employed by more than 400
clients to carry out work in over 50 countries. Within the past
10 years, Willbros has worked in Africa, Asia, the Middle East,
North America and South America. Willbros' relatively steady base
of ongoing construction, engineering and specialty services
operations in Nigeria, Oman, the United States and Venezuela has
been enhanced by major construction and engineering projects in
Abu Dhabi, Colombia, Egypt, Gabon, Indonesia, Kuwait, Morocco,
Nigeria, Oman, Pakistan, the United States and Venezuela.
Representative clients (or affiliates of clients) of the
Company include Royal Dutch Shell; Asamera (Overseas) Limited;
Bilfinger & Berger; Conoco; Chevron; Kuwait Oil Company; Abu
Dhabi National Oil Company; U.S. Army; U.S. Navy; Pacific Gas &
Electric; Petroleum Development Oman; Enron; El Paso Energy;
Petroleos de Venezuela S.A. ("PDVSA"); Occidental Petroleum; Duke
Energy; Great Lakes Gas Transmission Company; E.N.I.; The
Williams Companies; Nigerian National Petroleum Corporation
("NNPC"); and the Pak-Arab Refinery, Ltd. ("PARCO"). Private
sector clients such as Royal Dutch Shell have historically
accounted for the majority of the Company's revenues. Government
entities and agencies, such as Kuwait Oil Company, U.S. Army,
U.S. Navy, NNPC and PDVSA, have accounted for the remainder. Ten
clients were responsible for 74% of the Company's total revenues
in 1997 (82% in 1996 and 78% in 1995). Operating units of Royal
Dutch Shell accounted for 13% of the Company's total revenues in
1997 (33% in 1996 and 32% in 1995).
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The Company is incorporated in the Republic of Panama and
maintains its headquarters at Dresdner Bank Building, 50th
Street, 8th Floor, Panama 5, Republic of Panama; its telephone
number is (50-7) 263-9282. Administrative services for the
Company are provided by Willbros USA, Inc., which is located at
2431 East 61st Street, Suite 700, Tulsa, Oklahoma 74136-1267; its
telephone number is (918) 748-7000.
Current Market Conditions
The Company believes several factors influencing the global
energy market have led to and will continue to result in
increased activity across its primary lines of business. The
factors leading to higher levels of energy related capital
expenditures include (a) rising global energy demand resulting
from economic growth in developing countries, (b) the
privatization of certain state-controlled oil and gas companies,
and (c) the need for larger oil and gas transportation
infrastructures in a number of developing countries.
Accordingly, many significant projects are being undertaken,
particularly in developing countries or regions where energy
infrastructure spending has lagged. These include natural gas,
crude oil and petroleum products pipeline projects, LNG projects
and ancillary projects. Industry sources estimate that total
worldwide pipeline construction expenditures will be
approximately $75.0 billion for projects to be completed in 1998
and beyond.
The Company believes that certain of these projects will meet
its bidding criteria, and that the Company's worldwide pipeline
construction, engineering and specialty services experience place
it in an advantageous position to compete for such projects. The
Company currently has a number of significant bids outstanding
with respect to potential contract awards in Cameroon, Chad,
Egypt, Indonesia, Ivory Coast, Kazakstan, Mexico, Nigeria, Oman,
the United States and Venezuela. The Company is currently
preparing bids with respect to potential contract awards in
Bolivia, Indonesia, Nigeria, Oman, the United States and
Venezuela. Finally, the Company expects to prepare and submit
bids with respect to certain other potential construction and
engineering projects in Africa, Asia, the Middle East, North
America and South America during 1998.
Business Strategy
The Company seeks to maximize stockholder value through its
growth strategy which encompasses geographic expansion, strategic
alliances, acquisitions and quality improvement, while
maintaining a strong balance sheet. In pursuing this strategy,
the Company relies on (a) the competitive advantage gained from
its experience in completing logistically complex and technically
difficult projects in remote areas with difficult terrain and
harsh climatic conditions and (b) its experienced multinational
work force of approximately 4,230 employees, of whom more than
80% are citizens of the respective countries in which they work.
Geographic Expansion. The Company's objective is to maintain
and enhance its presence in regions where it has developed a
strong base of operations, such as Africa, Asia, the Middle East,
North America and South America, by capitalizing on its local
experience, established contacts with local customers and
suppliers and familiarity with local working conditions. In
addition, the Company seeks to establish a presence in other
strategically important areas, such as Bolivia, Cameroon, Canada,
Chad, the Commonwealth of Independent States ("C.I.S.") and
Mexico, as well as certain other selected areas in South America
and Asia. In pursuing this strategy, the Company seeks to
identify a limited number of long-term niche markets in which the
Company can outperform the competition and establish an
advantageous position.
Strategic Alliances. The Company seeks to establish strategic
alliances with companies whose resources, skills and strategies
are complementary to and are likely to enhance the Company's
business opportunities, including the formation of joint ventures
and consortia to achieve competitive advantage
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and share risks. Such alliances have already been established in
Argentina, Australia, Cameroon, Chad, Indonesia, Malaysia,
Mexico, Russia, Thailand, the United States and Venezuela. As an
example of this strategy, the Company has entered into a Joint
Development Agreement with a unit of British Gas plc to promote
the utilization of an epoxy-filled pipeline repair sleeve
developed by British Gas and offer a full range of pipeline
rehabilitation services to the oil and gas industry, including
assessment and rehabilitation construction services. As a related
strategy, the Company may decide to make an equity investment in
a project in order to enhance its competitive position and/or
maximize project returns.
Acquisitions. The Company seeks to identify, evaluate and
acquire companies that offer growth opportunities and the ability
to complement the Company's resources and capabilities.
Consistent with this strategy, in 1994 the Company acquired
Construcciones Acuaticas Mundiales, S.A. ("CAMSA"). CAMSA
operates in Venezuela and, in addition to performing onshore
construction and specialty services, possesses expertise in
marine construction and the fabrication and installation of
concrete piles and platforms for offshore projects. Further to
this strategy, in 1997 the Company entered into a new credit
agreement, a substantial portion of which can be used for
acquisitions.
Quality Improvements. The Company's quality program enhances
the Company's ability to meet the specific requirements of its
customers through continuous improvement of all its business
processes, while at the same time improving competitiveness and
profitability. One important goal of the quality program is to
obtain ISO 9000 certification for the quality system employed by
the Company as a whole. ISO 9000, an internationally recognized
verification system for quality management, has in recent years
been made a criterion for prequalification of contractors by
certain clients and potential clients, and this trend is expected
to continue. The certification process involves a rigorous review
and audit of the Company's management processes and quality
control procedures. As of December 31, 1997, seven of the
Company's subsidiaries had achieved ISO 9000 certification.
Conservative Financial Management. The Company emphasizes the
maintenance of a conservative balance sheet in order to finance
the development and growth of its business. The Company also
seeks to obtain contracts that are likely to result in recurring
revenues in order to partially mitigate the cyclical nature of
its construction and engineering businesses. For example, the
Company generally seeks to obtain specialty services contracts of
more than one year in duration. Additionally, the Company acts to
minimize its exposure to currency fluctuations through the use of
U.S. dollar-denominated contracts whenever possible, by limiting
payments in local currency to approximately the amount of local
currency expenses, and otherwise by engaging in hedging
activities such as purchasing foreign currency forward contracts.
Willbros Background
The Company is the successor to the pipeline construction
business of Williams Brothers Company which was started in 1908
by Miller and David Williams. In 1949, the business was
reconstituted and acquired by the next generation of the Williams
family. The resulting enterprise eventually became The Williams
Companies, Inc., a major U.S. energy, communications and
interstate natural gas and petroleum products transportation
company ("Williams").
In 1975, Williams elected to discontinue its pipeline
construction activities and, in December 1975, sold substantially
all of the non-U.S. assets and entities comprising its pipeline
construction division to a newly formed Panama corporation
(eventually renamed "Willbros Group, Inc.") owned by employees of
the division. In 1979, Willbros Group, Inc. retired its debt
incurred in the acquisition by selling a 60% equity stake to
Heerema Holding Construction, Inc. ("Heerema"). In 1986, Heerema
acquired the balance of Willbros Group, Inc., which then operated
as a wholly owned subsidiary of Heerema until April 1992.
In April 1992, Heerema sold Willbros Group, Inc. to a
corporation formed December 31, 1991, in the Republic of Panama
by members of the Company's management, certain other investors,
and Heerema. Subsequently, the original Willbros Group, Inc. was
dissolved into the acquiring corporation which was
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renamed "Willbros Group, Inc." In August 1996, the Company
completed an initial public offering of Common Stock in which
Heerema sold all of its shares of Common Stock, and in October
1997, the Company completed a secondary offering in which such
other investors sold substantially all their shares of Common
Stock.
The term "Willbros," as used in this Form 10-K, includes the
Company, the original Willbros Group, Inc. and their predecessors
in the pipeline construction business, as described above. All
references in this Form 10-K to the "Company" refer to Willbros
Group, Inc. ("WGI") and its consolidated subsidiaries.
Willbros Milestones
The following are selected milestones which Willbros has
achieved:
1915 Began pipeline work in the United States.
1939 Began international pipeline work in Venezuela.
1942-44 Served as principal contractor on the "Big Inch" and
"Little Big Inch" War Emergency Pipelines in the United
States which delivered Gulf Coast crude oil to the
Eastern Seaboard.
1947-48 Built the 370 mile (600 kilometer) Camiri to Sucre and
Cochabamba crude oil pipeline in Bolivia.
1951 Completed the 400 mile (645 kilometer) western segment of
the Trans-Arabian Pipeline System in Jordan, Syria and
Lebanon.
1954-55 Built Alaska's first major pipeline system, consisting of
625 miles (1,000 kilometers) of petroleum products
pipeline, housing, communications, two tank farms, five
pump stations and marine dock and loading facilities.
1956-57 Led a joint venture which constructed the 335 mile (535
kilometer) southern section of the Trans-Iranian
Pipeline, a products pipeline system extending from
Abadan to Tehran.
1958 Constructed pipelines and related facilities for the
world's largest oil export terminal at Kharg Island,
Iran.
1960 Built the first major liquified petroleum gas pipeline
system, the 2,175 mile (3,480 kilometer) Mid-America
Pipeline in the United States, including six delivery
terminals, two operating terminals, 13 pump stations,
communications and cavern storage.
1962 Began operations in Nigeria with the commencement of
construction of the TransNiger Pipeline, a 170 mile (275
kilometer) crude oil pipeline.
1964-65 Built the 390 mile (625 kilometer) Santa Cruz to Sica
Sica crude oil pipeline in Bolivia. The highest altitude
reached by this line is 14,760 feet (4,500 meters) above
sea level, which management believes is higher than the
altitude of any other pipeline in the world.
1965 Began operations in Oman with the commencement of
construction of the 175 mile (280 kilometer) Fahud to
Muscat crude oil pipeline system.
1967-68 Built the 190 mile (310 kilometer) Orito to Tumaco crude
oil pipeline in Colombia, one of five Willbros crossings
of the Andes Mountains, a project notable for the use of
helicopters in high altitude construction.
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1969 Completed a gas gathering system and 105 miles (170
kilometers) of 42 inch trunkline for the Iranian Gas
Trunkline Project (IGAT) in Iran to supply gas to the
USSR.
1970-72 Built the Trans-Ecuadorian Pipeline, consisting of 315
miles (505 kilometers) of 20 and 26 inch pipeline, seven
pump stations, four pressure reducing stations and six
storage tanks.
1974-76 Led a joint venture which built the northernmost 225
miles (365 kilometers) of the Trans- Alaskan Pipeline
System.
1974-76 Led a joint venture which constructed 290 miles (465
kilometers) of pipeline and two pump stations in the
inaccessible western Amazon basin of Peru.
1974-79 Designed and engineered the 500 mile (795 kilometer)
Sarakhs-Neka gas transmission line in northeastern Iran.
1976-79 Acted as technical leader of a consortium which designed
and supplied six modularized gas compressor stations
totaling 726,000 horsepower for the 56 inch Urengoy to
Chelyabinsk gas pipeline system in western Siberia.
1982-83 Built the Cortez carbon dioxide pipeline system in the
southwestern United States, consisting of 505 miles (815
kilometers) of 30 inch pipe.
1984-86 Constructed, through a joint venture, the All American
Pipeline System, a 1,240 mile (1,995 kilometer), 30 inch
heated pipeline, including 23 pump stations, in the
United States.
1984-95 Developed and furnished a rapid deployment fuel pipeline
distribution and storage system for the U.S. Army which
was used extensively and successfully in Saudi Arabia
during Operation Desert Shield/Desert Storm in 1990/1991
and in Somalia during 1993.
1985-86 Built a 185 mile (300 kilometer) 24 inch crude oil
pipeline from Ayacucho to Covenas in Colombia.
1987 Rebuilt 25 miles (40 kilometers) of the Trans-Ecuadorian
crude oil pipeline within six months after major portions
were destroyed by an earthquake.
1988-92 Performed the project management, engineering,
procurement and field support services to expand the
Great Lakes Gas Transmission System in the northern
United States. The expansion involved modifications to 13
compressor stations and the addition of 660 miles (1,060
kilometers) of 36 inch pipeline in 50 separate loops.
1989-90 Built the Alto Magdalena Pipeline System in Colombia,
consisting of 250 miles (400 kilometers) of 20 inch crude
oil pipeline, one pump station and a tank farm.
1989-92 Provided pipeline engineering and field support services
for the Kern River Gas Transmission System, a 36 inch
pipeline project extending over 685 miles (1,100
kilometers) of desert and mountains from Wyoming to
California in the United States.
1992-93 Rebuilt oil field gathering systems in Kuwait as part of
the post-war reconstruction effort.
1992-93 Built 150 miles (240 kilometers) of 42 inch pipeline in
Oregon to expand the Pacific Gas Transmission System.
1992-94 Resumed activities in the C.I.S. Selected to develop
export pipeline system for Caspian Pipeline Consortium
from Tengiz field in Kazakstan to Black Sea oil terminal
at Novorossiysk, Russia, and established a representative
office and joint stock company in Russia.
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1994 Re-entered Venezuela oil service market through the
acquisition of CAMSA.
1995 Entered into an agreement with a Japanese trading company
providing for the joint development of projects in
selected markets in Southeast Asia and established an
office in Jakarta, Indonesia, to pursue major projects in
the region.
1995-97 Carrying out two contracts in Pakistan for construction,
material procurement and engineering of the MFM Pipeline
Extension Project, which consists of 225 miles (365
kilometers) of 18 and 16 inch multi-product pipeline and
related facilities.
1996 Listed shares in an initial public offering of Common
Stock on the NYSE under the symbol "WG."
1996 Began design work on an EPC contract with Asamera
(Overseas) Limited to construct pipelines, flowlines and
related facilities for the Corridor Block Gas Project
located in southern Sumatra, Indonesia.
1996-97 Achieved ISO Certification for seven operating companies.
1997 Began work on a contract for the construction of 120
miles (200 kilometers) each of 36 and 20 inch pipelines
in the Zuata Region of the Orinoco Belt in Venezuela.
1997 Began work on a contract with an MW Kellogg joint venture
for the construction of a 35 mile (55 kilometer) gas
pipeline for an LNG plant in Kalimantan, Indonesia,
furthering the Company's efforts to establish Indonesia
as an ongoing work country.
1997 Entered the Mexican market by beginning work on an EPC
contract for El Paso Natural Gas Company and Gasoductos
de Chihuahua, a joint venture between El Paso and PEMEX,
to construct a 45 mile (75 kilometer) gas pipeline system
in Texas and Mexico.
Lines of Business
The Company operates in a single industry segment, primarily
providing contract services to the oil and gas industry. The main
lines of business within this segment include construction,
engineering and specialty services. The following table reflects
the Company's contract revenues by line of business for 1997,
1996 and 1995.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1997 1996 1995
---- ---- ----
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Construction services $118,277 47% $ 41,090 21% $ 69,262 31%
Engineering services 75,674 30 58,841 30 31,414 15
Specialty services 57,926 23 97,757 49 119,830 54
-------- --- -------- --- -------- ---
Total $251,877 100% $197,688 100% $220,506 100%
======== === ======== === ======== ===
</TABLE>
Construction Services
The Company is one of the most experienced contractors serving
the oil and gas industry. The Company's construction capabilities
include the expertise to construct and replace large diameter
cross-country pipelines; to construct oil and gas production
facilities, pump stations, flow stations, gas compressor
stations, gas processing facilities and other related facilities;
and to construct piers, docks and bridges.
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Pipeline Construction. World demand for pipelines results
from the need to move millions of barrels of crude oil and
petroleum products and billions of cubic feet of natural gas to
refiners, processors and consumers each day. Pipeline
construction is capital intensive, and the Company owns, operates
and maintains a fleet of specialized equipment necessary for it
to engage in the pipeline construction business. The Company
focuses on pipeline construction activity in remote areas and
harsh climates where it believes its experience gives it a
competitive advantage. Willbros believes that it has constructed
more miles of pipeline than any other private sector company.
The construction of a cross-country pipeline involves a number
of sequential operations along the designated pipeline right-of-
way. These operations are virtually the same for all overland
pipelines, but personnel and equipment may vary widely depending
upon such factors as the time required for completion, general
climatic conditions, seasonal weather patterns, the number of
road crossings, the number and size of river crossings, terrain
considerations, extent of rock formations, density of heavy
timber and amount of swamp. Construction often involves separate
crews to perform the following different functions: clear the
right-of-way; grade the right-of-way; excavate a trench in which
to bury the pipe; haul pipe to intermediate stockpiles from which
stringing trucks carry pipe and place individual lengths (joints)
of pipe alongside the ditch; bend pipe joints to conform to
changes of direction and elevation; clean pipe ends and line up
the succeeding joint; perform various welding operations; non-
destructively inspect welds; clean pipe and apply anti-corrosion
coatings; lower pipe into the ditch; backfill the ditch; bore and
install highway and railroad crossings; drill, excavate or dredge
and install pipeline river crossings; tie in all crossings to the
pipeline; install mainline valve stations; conduct pressure
testing; install cathodic protection system; and perform final
clean up.
Special equipment and techniques are required to construct
pipelines across wetlands. From a launching station on dry land,
a section of several joints of pipe which have been welded
together may be pushed into a flooded ditch. By securing floaters
to the pipe, it is possible to float the pipe. The next section
is then welded to the end of the previous section, after which it
is pushed into the flooded ditch. The same method can be used
from a properly secured and anchored barge. Another specialized
swamp pipe laying technique is to lay the pipe from a lay barge
which moves along the right-of-way, laying one joint at a time;
each joint is aligned and welded, and the weld non-destructively
inspected and coated before being lowered in. The Company uses
swamp pipelaying methods extensively in Nigeria, where most of
its construction operations are carried out in the Niger River
delta. In addition to primary equipment such as laybarges,
dredges and swamp backhoes, the Company has a substantial
investment in support vessels, including tugboats, barges, supply
boats, and houseboats, which are required in order to maintain a
capability in swamp pipeline construction.
Station Construction. Oil and gas companies require various
facilities in the course of producing, processing, storing and
moving oil and gas. The Company is experienced in and capable of
constructing facilities such as pump stations, flow stations, gas
processing facilities, gas compressor stations and metering
stations. The Company is capable of building such facilities
onshore, offshore or in swamp locations. The construction of
station facilities, while not nearly as capital intensive as
pipeline construction, is generally characterized by complex
logistics and scheduling, particularly on projects in locations
where seasonal weather patterns limit construction options, and
in countries where the importation process is difficult.
Willbros' capabilities have been enhanced by its experience in
dealing with such challenges in numerous countries around the
world.
Marine Construction. The Company constructs and installs
fixed drilling and production platforms in Venezuela, primarily
in Lake Maracaibo. Because of the extremely corrosive conditions,
concrete, rather than steel, piling is driven deep into the
lakebed to support such platforms. The Company is also capable of
building bridges, docks, jetties and mooring or breasting
dolphins. The Company's marine fleet includes pile driving
barges, derrick barges and other vessels which support marine
construction operations.
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Engineering Services
The Company provides engineering, project management and
material procurement services to the oil and gas industry and
government agencies. The Company specializes in providing
engineering services to assist clients in constructing or
expanding pipeline systems, compressor stations, pump stations,
fuel storage facilities and field gathering and production
facilities. Through experience, the Company has developed
expertise in addressing the unique engineering issues involved
with pipeline systems and associated facilities to be installed
where climatic conditions are extreme, where areas of
environmental sensitivity must be crossed, where fluids which
present extreme health hazards must be transported, and where
fluids which present technical challenges regarding material
selection are transported.
To complement its engineering services, the Company also
provides a full range of field services, including surveying,
right-of-way acquisition, material receiving and control,
construction inspection and facilities startup assistance. Such
services are furnished to a number of oil and gas industry and
government clients on a stand-alone basis; and, in addition, are
provided as part of engineering, procurement and construction
contracts undertaken by the Company.
Climatic Constraints. In the design of pipelines and
associated facilities to be installed in harsh environments,
special provisions for metallurgy of materials and foundation
design must be addressed. The Company is experienced in designing
pipelines for arctic conditions, where permafrost and extremely
low temperatures are prevalent, and for desert conditions,
mountainous terrain and swamps.
Environmental Impact of River Crossings. The Company has
considerable capability in designing pipeline crossings of rivers
and streams in such a way as to minimize environmental impact.
The Company possesses expertise to determine the optimal crossing
techniques (e.g., open cut, directionally drilled or overhead)
and to develop site specific construction methods to minimize
bank erosion, sedimentation and other environmental impacts.
Seismic Design and Stress Analysis. Company engineers are
experienced in seismic design of pipeline crossings of active
faults and areas where liquefaction or slope instability may
occur due to seismic events. Company engineers also carry out
specialized stress analyses of piping systems that are subjected
to expansion and contraction due to temperature changes, as well
as loads from equipment and other sources.
Hazardous Materials. Special care must be taken in the design
of pipeline systems transporting sour gas. Sour gas not only
presents challenges regarding personnel safety (hydrogen sulfide
leaks can be extremely hazardous), but also requires that
material be specified to withstand highly corrosive conditions.
Hydraulics Analysis for Fluid Flow in Piping Systems. The
Company employs engineers with the specialized knowledge
necessary to address properly the effects of both steady state
and transient flow conditions for a wide variety of fluids
transported by pipelines (natural gas, crude oil, refined
petroleum products, natural gas liquids, carbon dioxide and
water). This expertise is important in optimizing the capital
costs of pipeline projects where pipe material costs typically
represent a significant portion of total project capital costs.
Natural Gas Transmission Systems. The expansion of the
natural gas transportation network in the United States in recent
years has been a major contributor to the engineering business of
the Company. The Company believes it has established a strong
position as a leading supplier of engineering services to natural
gas pipeline transmission companies in the United States. Since
1988, Willbros has provided, or is providing, engineering
services for seven major natural gas pipeline projects in the
United States, totaling more than 3,300 miles (5,400 kilometers)
of large diameter pipe for new systems and expansions of existing
systems. During this same period, Willbros was also the
engineering contractor for 15 compressor stations (or additions
to existing stations) for six clients.
11
<PAGE>
Liquids Pipelines and Storage Facility Design. Willbros has
engineered a number of crude oil and refined petroleum products
systems throughout the world, and has become recognized for its
expertise in the engineering of systems for the storage and
transportation of petroleum products and crude oil. In recent
years, the Company has been responsible for the engineering of a
major expansion of a products pipeline system in the United
States, involving 395 miles (640 kilometers) of pipeline in New
Mexico and Texas. Currently, the Company is providing engineering
and field services for a major expansion of a crude oil system in
Wisconsin and Illinois, involving over 450 miles (725 kilometers)
of large diameter pipeline to serve the upper midwest refineries
with Canadian crude oil.
U.S. Government Services. Since 1981, Willbros has
established its position with U.S. government agencies as a
leading engineering contractor for jet fuel storage and aircraft
fueling facilities, having performed the engineering for major
projects at seven U.S. military bases including three air bases
outside the U.S. The award of these projects was based on
contractor experience and personnel qualifications.
Design of Peripheral Systems. The Company's expertise extends
to the engineering of a wide range of project peripherals,
including various types of support buildings and utility systems,
power generation and electrical transmission, communications
systems, fire protection, water and sewage treatment, water
transmission, roads and railroad sidings.
Material Procurement. Because material procurement plays such
a critical part in the success of any project, the Company
maintains an experienced staff to carry out material procurement
activities. Material procurement services are provided to clients
as a complement to the engineering services performed for a
project. On engineering, procurement and construction contracts
undertaken by the Company, material procurement is especially
critical to the timely completion of construction. The Company
maintains a computer-based material procurement, tracking and
control system, which utilizes software enhanced to meet the
Company's specific requirements.
Specialty Services
The Company provides a wide range of support and ancillary
services related to the construction, operation, repair and
rehabilitation of pipelines. Frequently, such services require
the utilization of specialized equipment which is costly and
requires operating expertise. Due to the initial equipment cost
and operating expertise required, many companies contract for the
use of such specialized equipment and experienced personnel. The
Company owns and operates a variety of specialized equipment that
is used to support construction projects and to provide a wide
range of oilfield services. The following is a description of the
primary types of specialty services.
Dredging. The Company conducts dredging operations on its own
projects and as a subcontractor for other companies. Dredging
equipment is required to pump sand to establish a land location
in a swamp and to excavate trenches for pipelines in swamps or
offshore locations and for river crossings. Dredging equipment is
also used to maintain required depth of navigation channels for
barges and other water craft. This maintenance dredging is often
performed on annual or multi-year contracts. The Company owns a
fleet of dredges, including cutter suction dredges and grab
dredges, which are routinely used in Nigeria and can be readily
deployed to other projects in the region.
Pipe Coating. The Company owns and operates coating equipment
which applies a variety of protective anti-corrosion coatings to
the external surface of line pipe. The external coating is
required to protect buried pipe in order to mitigate external
corrosion.
Concrete Weight Coating. Pipelines installed in wetlands or
marine environments must be heavy enough to offset the buoyancy
forces on the buried pipeline to keep the pipeline from floating
out of the ditch. The most effective method of achieving the
required negative buoyancy is concrete coating applied
12
<PAGE>
over the anti-corrosion coating to a calculated thickness. The
Company owns and operates a facility in Nigeria to apply concrete
weight coating to line pipe.
Pipe Double Jointing. Large diameter pipe for onshore
pipeline projects is normally manufactured in 40 foot (12 meter)
nominal lengths (joints) to facilitate ocean transportation. On
long distance, large diameter pipeline projects, it is usually
economical to weld two joints into an 80 foot (24 meter) double
joint at a location or locations along the pipeline route. This
technique reduces the amount of field welding by 50%, and,
because welding is often the critical operation, it may
accelerate construction of the pipeline. The double joint welds
are made with a semi-automatic submerged arc welding process
which produces high quality, consistent welds at lower costs than
field welding. The Company owns two transportable self-contained
double joint plants which can handle 24 to 48 inch diameter pipe
and are used on both domestic and international projects.
Piling. The Company's subsidiary in Venezuela specializes in
the fabrication and installation of 36 inch concrete piles up to
220 feet (67 meters) in length. These piles are used to construct
marine facilities such as drilling platforms, production
platforms, bridges, docks, jetties and mooring or breasting
dolphins. The Company also owns barges and pile driving equipment
to install piles in Venezuela and Nigeria.
Marine Heavy Lift Services. The primary equipment used for
oil and gas production facilities is usually manufactured on
skids at the vendor's shop and transported to the production site
by ocean-going water craft. The Company owns a variety of heavy
lift barges and tugs to transport such equipment from the
receiving country port to the production location and to install
the equipment on the platforms. Other services include marine
salvage and dry-dock facilities for inland water barges.
Transport of Dry and Liquid Cargo. Exploration and production
operations in marine environments require logistical support
services to transport a variety of liquid and dry cargo to the
work sites. The Company owns and operates a diversified fleet of
marine equipment to provide transportation services to support
these operations in Nigeria and Venezuela.
Rig Moves. Derricks used for drilling oil and gas wells and
for well work-overs require heavy transportation equipment to
move such equipment and tanks and storage vessels between well
locations. The Company owns a fleet of heavy trucks and trailers
and provides transportation services to move rigs for clients in
Oman and Venezuela.
Pipeline Rehabilitation Services. The Company and BG
Inspection Services, Inc., the U.S. pipeline inspection unit of
British Gas plc, have executed a Joint Development Agreement to
pursue pipeline repair and rehabilitation projects in North,
Central and South America. The joint effort will promote the
utilization of the British Gas developed "epoxy-filled repair
sleeve" and will offer a full range of related pipeline
rehabilitation services related to the oil and gas industry,
including inspection, assessment and rehabilitation construction
services. This repair technique permits permanent repairs to be
made to a pipeline without cutting sections of pipe from the
pipeline and without interruption of service. The Company and
British Gas have also used this rehabilitation procedure for a
client in Oman on approximately 790 miles (1,275 kilometers) of 6
through 38 inch crude oil and natural gas pipelines.
Maintenance and Repair Services. The Company provides a wide
range of other services including mechanical, electrical,
instrumentation, civil works, road maintenance and provision of
camp services for operating personnel associated with operation
and maintenance of oil and gas gathering systems and production
equipment.
13
<PAGE>
Geographic Regions
The Company currently operates in the following geographic
regions: Africa, Asia, the Middle East, North America and South
America. The following table reflects the Company's contract
revenues by geographic region for 1997, 1996 and 1995.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1997 1996 1995
---- ---- ----
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Africa $ 75,982 30% $ 87,283 44% $ 95,972 43%
Asia 42,098 17 35,077 17 31,011 14
Middle East 22,846 9 3,513 12 21,870 10
North America 79,121 31 32,918 17 52,100 24
South America 31,830 13 18,897 10 19,553 9
Total $251,877 100% $197,688 100% $220,506 100%
======== === ======== === ======== ===
</TABLE>
See Note 12 to the Consolidated Financial Statements on pages 35
and 36 of the Company's 1997 Annual Report to Stockholders (which
is incorporated by reference herein) for additional information
about the Company's operations in its work countries.
Africa
Africa has been and will continue to be an important strategic
market for the Company. The Company believes that there will be
opportunities to expand its business in Africa, particularly
through the development of natural gas projects. There are large,
potentially exploitable reserves of natural gas in West Africa,
extending from the Ivory Coast to Angola. Depending upon the
world market for natural gas and the availability of financing,
the amount of potential new work could be substantial. The
Company intends to maintain its presence in the region and seeks
to increase its share of available work. Willbros is currently
monitoring or bidding major work prospects in Cameroon, Chad,
Egypt, Ivory Coast, Nigeria and Tanzania.
Over the past 50 years, Willbros has completed major projects
in a number of African countries including Algeria, Egypt, Gabon,
Libya, Morocco and Nigeria. The Company has management staff
resident in Africa, assisted by engineers, managers and craftsmen
with extensive African experience, capable of providing
construction expertise, repair and maintenance services, dredging
operations, pipe coating and engineering support. Strong local
relationships have enabled Willbros to satisfy the varied needs
of its clientele in the region.
Willbros has had a continuous presence in Nigeria since 1962.
The Company's activities in Nigeria are directed from a fully
staffed operational base near Port Harcourt. This 60 acre
compound includes office and living facilities, equipment and
vehicle repair shops, a marine jetty and warehouses for both
Company and client materials and spare parts. The Company has
diversified its range of services by adding dredging and pipe
coating expertise. Having diverse yet complementary capabilities
has often given the Company a competitive advantage on projects
which contain several distinct work elements within the project's
scope of work. For example, the Company believes that it is
currently the only contractor operating in the Nigerian oil and
gas sector capable, on its own, of executing a pipeline
construction project, which requires yard coating of line pipe,
installation of major water crossings and both swamp and cross-
country segments of pipeline. The Company's current activities in
Nigeria include the construction of 20 miles (30 kilometers) of
36 inch gas pipeline, including a river crossing, for the Bonny
LNG project for Saipem and contracts with Shell to provide
dredging services and swamp flowline maintenance services.
The Company's backlog in Africa was $21.7 million at December
31, 1997, compared to $18.5 million at December 31, 1996.
14
<PAGE>
Asia
In an effort to take advantage of the rapidly growing economies
and increasing demand for energy infrastructures in Asia, the
Company has made Asia a priority target market for geographic
expansion. Despite the present economic crisis in certain
countries in the region, the Company believes that Asia will
continue to develop and distribute more energy resources to fuel
ongoing modernization programs. The relative abundance of
undeveloped natural gas resources, along with environmental
concerns, favor the use of natural gas for power generation and
industrial and residential usage in the region.
To capitalize on these trends, in March 1995, the Company
established an office in Jakarta, Indonesia, to pursue potential
major projects in Asia. In October 1995, the Company entered into
a cooperation agreement with a major Japanese trading company
providing for the joint development of projects in Indonesia,
Malaysia and Thailand. In November 1996, the Company was awarded
a $33 million contract by Asamera (Overseas) Limited to construct
pipelines, flowlines and related facilities for the Corridor
Block Gas Project in southern Sumatra, Indonesia. In June 1997,
the Company was awarded a $22 million contract by an MW Kellogg
joint venture for the construction of a gas pipeline for an LNG
plant in Kalimantan, Indonesia. The Company is currently
monitoring or bidding work prospects in Australia, India,
Indonesia, Malaysia, Pakistan and Papua New Guinea.
The Company recently completed contracts for Pak-Arab Refinery,
Ltd. relating to the MFM Pipeline Extension Project in Pakistan.
The contracts included the supply of project materials, the
engineering and construction of 225 miles (365 kilometers) of 18
and 16 inch petroleum products pipeline, the expansion of an
existing terminal (including 267,000 barrels of storage
capacity), the addition of a new terminal and pump station
(including 270,000 barrels of storage), the addition of a storage
terminal (including 443,000 barrels of storage) and design of a
future pump station. A small team is currently managing close-
out activities from the Company's project office in Lahore,
Pakistan.
Willbros' activities in the C.I.S. date back to 1976. The
C.I.S. continues to be an area of interest to the Company because
it contains vast reserves of oil and gas and many of the
Company's clients are major oil and gas companies who are
candidates to participate in the development of energy resources
in the C.I.S. The oil reserves contained in the Tengiz Field, the
largest field to be served by the planned Caspian Crude Oil
Export Pipeline System, and the gas reserves contained in the
Bovanenkovskoye Field, the anchor field on the gas-rich Yamal
peninsula, are each generally recognized to be among the largest
in the world. These are but two of many fields which are
candidates for significant exploration and production
investments. The Company is prepared to offer its support
services to such clients. To compete in the Russian market, the
Company has an Accredited Representative Office in Moscow, as
well as a Russian joint stock company licensed to perform a broad
range of engineering and construction services. The Company is
in the process of establishing a branch office in Kazakstan, from
which it intends to carry out business development activities.
The Company's backlog in Asia was $30.2 million at December 31,
1997, compared to $44.6 million at December 31, 1996.
Middle East
The Company believes that increased exploration and production
activity in the Middle East will continue to be the primary
factor influencing the construction of new energy transportation
systems. The majority of future transportation projects in the
region are expected to be centered around natural gas due to
increased regional demand, governments' realization of gas as an
important asset and an underdeveloped gas transportation
infrastructure throughout the region. The Company is aggressively
pursuing business opportunities throughout the Middle East and is
currently bidding work or monitoring prospects in Abu Dhabi,
Kuwait, Oman, Qatar, Saudi Arabia and Yemen.
15
<PAGE>
Willbros operations in the Middle East date back to 1948. It
has worked in most of the countries in the region, with
particularly heavy involvement in Iran, Kuwait, Oman and Saudi
Arabia. In Iran, Willbros designed or constructed a substantial
portion of the pipelines and related facilities that exist today.
During 1992 and 1993, following the Gulf War, the Company carried
out a significant program of gathering line replacement in Kuwait
to help Kuwait Oil Company restore its production capacity.
Currently, the Company has ongoing operations in Oman, where
Willbros has been active for more than 30 years. The Company
maintains a fully staffed facility in Oman with equipment repair
facilities and spare parts on site and offers construction
expertise, repair and maintenance services, engineering support,
oil field transport services, materials procurement and a variety
of related services to its clients. Current operations in Oman
include a general oilfield services contract for Occidental of
Oman, a pipeline construction contract and a crane supply and
operation program for Petroleum Development Oman ("PDO"). Work
carried out in Oman during 1997 includes pipeline construction,
pipeline maintenance, mechanical services and flowline work for
Occidental of Oman and PDO.
The Company's backlog in the Middle East was $6.9 million at
December 31, 1997, compared to $8.0 million at December 31, 1996.
North America
Willbros has provided services to the U.S. oil and gas industry
for more than 80 years. The Company believes that the United
States will continue to be an important market for its services.
Recent deregulation of the electric power and natural gas
pipeline industries in the United States has led to the
consolidation and reconfiguration of existing pipeline
infrastructure and the establishment of new energy transport
systems, which the Company expects will result in continued
demand for its services. The demand for natural gas for
industrial and power usage in the Upper Midwest and Northeastern
United States will also fuel the requirement to build new natural
gas transportation infrastructure in the region. Supply to
satisfy such market demand for natural gas will come from
existing and new production in Western Canada, the Gulf of Mexico
and the Canadian Atlantic offshore region. Environmental concerns
will likely continue to require careful, thorough and specialized
professional engineering and planning for all new facilities
within the oil and gas sector. Furthermore, the demand for
replacement and rehabilitation of pipelines is expected to
increase as pipeline systems in the United States approach the
end of their design lives and population trends influence overall
energy needs.
Willbros is recognized as an industry leader in the United
States for providing state-of-the-art engineering and
construction services. The Company maintains a staff of
experienced management, construction, engineering and support
personnel in the United States. Among Willbros' significant
achievements in the United States are (a) the construction of the
two northernmost segments of the Trans-Alaskan Pipeline System
(1974-76), which consisted of a 225 mile (365 kilometer) crude
oil pipeline and a 140 mile (225 kilometer) fuel gas pipeline and
(b) a joint venture to build the All American Pipeline System
(1984-86), a 1,240 mile (1,995 kilometer) heated crude oil
pipeline with 23 pumping and heating stations. The Company was a
construction contractor on the Pacific Gas & Electric-PGT
pipeline expansion project in Oregon and the Tuscarora Gas
Transmission project in Nevada and California. Since 1988,
Willbros has provided engineering services for the Great Lakes
Gas Transmission Company's system expansion, the Kern River Gas
Transmission System, the Northwest Pipeline System expansion, the
NorAm Line AC pipeline project and the Florida Gas pipeline
project. During the same period, Willbros was the engineering
contractor for 15 compressor stations or station expansions on
behalf of six different clients in the United States. Currently,
the Company is providing engineering services for the Northern
Border Natural Gas pipeline extension, the Portland Natural Gas
Transmission project in New England, the KN Energy "Pony Express"
natural gas pipeline from Wyoming to Missouri, and the Lakehead
Pipe Line Company crude oil pipeline expansion project in
Wisconsin and Illinois. Recently, the Company completed a
contract to engineer and construct a 45 mile (75 kilometer) 24
inch gas pipeline system in Texas and Mexico for El Paso Natural
Gas Company and Gasoductos de Chihuahua.
16
<PAGE>
Willbros has also provided significant engineering services to
the U.S. Government during the past 15 years, particularly in
fuel storage and distribution systems and aircraft fueling
facilities. Willbros performed the engineering for major projects
on seven U.S. military bases, four of which were located within
the United States. In 1984, Willbros was selected by the U.S.
Army to act as the systems integration contractor for the
Southwest Asia Petroleum Distribution Operational Project.
Willbros was responsible for developing and procuring a tactical
fuel distribution and storage system to support military
operations worldwide. The system was successfully deployed in
Saudi Arabia during Operation Desert Storm. Willbros acted as the
systems integrator for this project until 1996. Currently, the
Company is performing two multi-year contracts with the U.S.
government to (a) prepare operating and maintenance manuals for
fuel storage depots worldwide and (b) conduct integrity
assessments and carry out repair of pipeline and fueling
facilities at military installations worldwide.
The Company's backlog in North America was $31.8 million at
December 31, 1997, compared to $25.4 million at December 31,
1996.
South America
Willbros' first entry into South America was in Venezuela in
1939. Recent developments involving political changes and
privatization efforts in many of the South American countries
make this region especially attractive to the Company. In
particular, privatization and deregulation in this region are
allowing more foreign and domestic private investment in the
energy sector which, until recently, had traditionally been
controlled by state-owned energy companies. In Argentina,
Bolivia, Brazil, Chile and Peru, gas transportation projects will
continue to evolve to meet increasing demand for gas for
industrial and power usage in the rapidly growing urban areas. In
Venezuela, Colombia and Ecuador, crude oil transportation systems
will need to be built and upgraded so that the vast crude
reserves in these countries can be efficiently exported to the
world market. The Company is aggressively pursuing business
opportunities throughout South America and currently bidding work
or monitoring prospects in Argentina, Bolivia, Brazil, Peru and
Venezuela.
Willbros has performed numerous major projects in South
America, where its accomplishments include the construction of
five major pipeline crossings of the Andes Mountains and setting
a world altitude record for constructing a pipeline. Willbros'
largest project in South America was a $134.0 million turn-key
project for the procurement and construction of the Alto
Magdalena Crude Oil Pipeline System in Colombia, awarded to
Willbros in 1989 and completed in 1990.
Venezuela, the largest oil producer in South America, is a
particularly important market for the Company. With conservative
estimates of proven reserves of more than 72 billion barrels of
oil, PDVSA's plans for the future include an increase in oil
production from its current level of approximately 3.0 million
barrels per day to approximately 6.0 million barrels per day by
2006. In addition, the opening of Venezuela's previously
nationalized oil and gas industry to foreign energy company
participation has attracted the interest of most of the world's
major oil and gas companies.
In order to take advantage of perceived opportunities in
Venezuela, the Company acquired CAMSA, a Venezuelan company
located in the city of Maracaibo, in May 1994. When acquired,
CAMSA's primary expertise was marine construction and the
fabrication and installation of cylindrical concrete piles and
platforms for offshore projects. Since the acquisition, the
Company has added onshore construction equipment to complement
the marine fleet, enabling CAMSA to compete for both onshore and
offshore construction projects, as well as specialty services
contracts.
The Company maintains a fully staffed facility including
offices, equipment yard and dock facilities on a 15 acre
waterfront site on Lake Maracaibo, with resident management
personnel assigned who are responsible for estimating and
tendering bids, providing construction expertise, repair and
maintenance services, marine related services, engineering
support and other needed services. Major clients include
international oil companies such as Shell, Occidental Petroleum,
Chevron and operating subsidiaries of PDVSA, including Maraven,
Corpoven and Lagoven. In 1997, the Company was awarded a
contract to
17
<PAGE>
construct 120 miles (200 kilometers) each of 36 and 20 inch
pipelines originating from the Zuata region of the Orinoco Belt
for Petrozuata, a joint venture between Conoco and Maraven. This
award is deemed significant because it will position the Company
with the resources and experience to compete more effectively for
additional onshore work in Venezuela.
The Company's backlog in South America was $45.2 million at
December 31, 1997, compared to $12.3 million at December 31,
1996.
Backlog
The Company's backlog (anticipated revenue from the uncompleted
portions of existing contracts and contracts whose award is
reasonably assured) was $135.8 million at December 31, 1997,
compared to $108.8 million at December 31, 1996. The Company
believes the backlog figures are firm, subject only to the
cancellation and modification provisions contained in various
contracts. It is expected that substantially all the backlog
existing at December 31, 1997, will be recognized in revenues
during 1998. Historically, a substantial amount of the Company's
revenues in a given year have not been reflected in its backlog
at the beginning of that year; such revenues may result from
contracts of long or short duration entered into during a year as
well as from various contractual processes, including change
orders, extra work, variations in the scope of work and the
effect of escalation or currency fluctuation formulas. These
revenue sources are not added to backlog until realization of
revenue is assured.
The following is a breakdown of the Company's backlog by
geographic region as of December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
---- ----
Amount Percent Amount Percent
------ ------- ------ -------
(Dollar amounts in thousands)
<S> <C> <C> <C> <C>
Africa $ 21,686 16% $ 18,455 17%
Asia 30,201 22 44,612 41
Middle East 6,925 5 7,968 7
North America 31,826 24 25,374 23
South America 45,159 33 12,342 12
-------- --- -------- ---
Total $135,797 100% $108,751 100%
======== === ======== ===
</TABLE>
The $27.0 million (25%) increase in backlog is due mainly to
the addition of contracts for the construction of 120 miles (200
kilometers) each of 36 and 20 inch pipelines in Venezuela, a 35
mile (55 kilometer) 42 inch pipeline in Kalimantan, Indonesia, a
20 mile (30 kilometer) 36 inch gas pipeline, including a river
crossing in Nigeria, and engineering services in the United
States, offset by work completed on an 85 mile (135 kilometer)
gas gathering system and station in Sumatra, Indonesia, and work
performed on an offshore loading and storage terminal in
Venezuela.
A substantial percentage of the Company's revenues in past
years resulted from contracts entered into during that year or
the immediately preceding year. The following table sets forth
revenues for each of the last five years as a percentage of
backlog at the beginning of each such year:
<TABLE>
<CAPTION>
Revenues for
Backlog at Year Ended
January 1 December 31 Percent
---------- ------------ -------
(Dollar amounts in thousands)
<S> <C> <C> <C>
1993 $160,565 $210,011 131%
1994 76,066 145,716 191
1995 97,493 220,506 2264
1996 139,359 197,688 142
1997 108,751 251,877 231
</TABLE>
No assurance can be given that future experience will be similar
to historical results in this respect.
18
<PAGE>
Competition
The Company operates in a highly competitive environment. The
Company competes against government-owned or supported companies
and other companies that have financial and other resources
substantially in excess of those available to the Company. In
certain markets, there is competition from national and regional
firms against which the Company may not be price competitive.
The Company's primary competitors on construction projects in
developing countries include Entrepose (France), Mannesmann
(Germany), CCC (Lebanon), Nippon Kokan (Japan), Saipem (Italy),
Spie-Capag (France), Techint (Argentina) and Bechtel (U.S.). The
Company believes that it is one of the few companies among its
competitors possessing the ability to carry out large projects in
developing countries on a turn-key basis (engineering,
procurement and construction), without subcontracting major
elements of the work. As a result, the Company may be more cost
effective than its competitors in certain instances.
The Company has different competitors in different markets. In
Nigeria, the Company competes for pipe coating work with Bredero
Price (Netherlands), while its dredging competitors include Bos
Kalis Westminster (Netherlands), Dredging International
(Belgium), Bilfinger & Berger (Germany), Nigerian Dredging &
Marine (Netherlands) and Ham Dredging (Netherlands). In Oman,
competitors in oil field transport services include Desert Line,
Al Ahram, Hamdam and TruckOman, all Omani companies; and in
construction and the installation of flowlines and mechanical
services, the Company competes with Taylor Woodrow Towell
(Britain), CCC (Lebanon), Dodsal (India), Saipem (Italy), Desert
Line (Oman) and Galfar (Oman). In Venezuela, competitors in
marine support services include Raymond de Venezuela, Petrolago,
Flag Instalaciones and Siemogas, all Venezuelan companies. In
Pakistan, major competitors include Saipem (Italy) and Tekfen
(Turkey).
In the United States, the Company's primary construction
competitors on a national basis include Associated, Gregory &
Cook, Henkels & McCoy, Murphy Brothers, H. C. Price, Sheehan, and
Welded. In addition, there are a number of regional competitors.
Primary competitors for engineering services include Bechtel,
Brown and Root, Gulf Interstate, Marmac, Fluor Daniel Williams
Brothers, Mustang Engineering, Stone & Webster, Paragon
Engineering, Trigon Engineering and Universal Ensco.
Contract Provisions and Subcontracting
Most of the Company's revenues are derived from construction,
engineering and specialty services contracts. The Company enters
into four basic types of construction contracts: (a) firm fixed-
price or lump sum fixed-price contracts providing for a single
price for the total amount of work or for a number of fixed lump
sums for the various work elements comprising the total price;
(b) unit-price contracts which specify a price for each unit of
work performed; (c) time and materials contracts under which
personnel and equipment are provided under an agreed schedule of
daily rates with other direct costs being reimbursable; and (d) a
combination of the above (for example, lump sums for certain
items and unit rates for others).
The Company enters into three types of engineering contracts:
firm fixed-price or lump sum fixed-price contracts; time and
materials contracts pursuant to which engineering services are
provided under an agreed schedule of hourly rates for different
categories of personnel, and materials and other direct costs are
reimbursable; and cost-plus-fee contracts, common with U.S.
government clients under which income is earned solely from the
fee received. Cost-plus-fee contracts are often used for material
procurement services.
Specialty services contracts generally are unit-price contracts
which specify a price payable per unit of work performed (e.g.,
per cubic meter, per lineal meter, etc.). Such contracts usually
include hourly rates for various categories of personnel and
equipment to be applied in cases where no unit price exists for a
particular work element. Under a services contract, the client is
typically responsible for supplying all
19
<PAGE>
materials; a cost-plus-percentage-fee provision is generally
included in the contract to enable the client to direct the
contractor to furnish certain materials.
The Company usually obtains contracts through competitive
bidding or through negotiations with long-standing clients. The
Company is typically invited to bid on projects undertaken by its
clients who maintain approved bidder lists. Bidders are pre-
qualified by virtue of their prior performance for such clients,
as well as their experience, reputation for quality, safety
record, financial strength and bonding capacity.
In evaluating bid opportunities, the Company considers such
factors as the client, the geographic location and the difficulty
of the work, the Company's current and projected workload, the
likelihood of additional work, the project's cost and
profitability estimates, and the Company's competitive advantage
relative to other likely bidders. The Company uses a computer-
based estimating system. The bid estimate forms the basis of a
project budget against which performance is tracked through a
project cost system, enabling management to monitor projects
effectively. Project costs are accumulated weekly and monitored
against billings and payments to facilitate cash flow management
on the project.
All U.S. government contracts and many of the Company's other
contracts provide for termination of the contract for the
convenience of the client. In addition, many contracts are
subject to certain completion schedule requirements with
liquidated damages in the event schedules are not met as the
result of circumstances within the control of Willbros. The
Company has not been materially adversely affected by these
provisions in the past.
The Company acts as prime contractor on a majority of the
construction projects it undertakes. In its capacity as prime
contractor and when acting as a subcontractor, the Company
performs most of the work on its projects with its own resources
and typically subcontracts only such specialized activities as
hazardous waste removal, non-destructive inspection, tank
erection, catering and security. In the construction industry,
the prime contractor is normally responsible for the performance
of the entire contract, including subcontract work. Thus, when
acting as a prime contractor, the Company is subject to the risk
associated with the failure of one or more subcontractors to
perform as anticipated. The Company has not incurred any
significant loss or liability on work performed by subcontractors
to date.
Employees
The Company believes its employees are its most valuable asset
and that their loyalty, productivity, pioneering spirit, work
ethic and strong commitment in providing quality services have
been crucial elements in the successes Willbros has achieved on
numerous projects in remote, logistically challenging locations
around the world.
At December 31, 1997, the Company employed a multi-national
work force of approximately 4,230 persons, over 80% of whom are
citizens of the respective countries in which they work. Although
the level of activity varies from year to year, Willbros has
maintained an average work force of approximately 3,100 over the
past five years. The minimum employment during that period has
been 1,770 and the maximum 4,750. At December 31, 1997,
approximately 1,610 of the Company's employees were covered by
collective bargaining agreements. The Company believes its
relations with its employees are good.
The following table sets forth an approximate breakdown of the
Company's employees as of December 31, 1997:
20
<PAGE>
<TABLE>
<CAPTION>
Number of
Employees Percent
----------- -------
<S> <C> <C>
Venezuela 1,280 30%
Nigeria 1,240 29
Oman 530 13
Pakistan 310 7
Indonesia 220 5
U.S. Engineering 500 12
U.S. Administration 120 3
U.S. Construction 20 1
Other Countries 10 -
----- ---
4,230 100%
===== ===
</TABLE>
Equipment
The Company owns and maintains a fleet of generally
standardized construction, transportation and support equipment
and spare parts. In 1997 and 1996, expenditures for capital
equipment and spare parts were $47.3 million and $25.0 million,
respectively. At December 31, 1997, the Company's net book value
of property, plant, equipment and spare parts was $85.8 million.
An estimated breakdown of the Company's major capital equipment
at March 1, 1998, is as follows: heavy construction equipment,
785 units; transportation equipment, 1,146 units; and support
equipment, 5,207 units.
Historically, the Company has preferred to own rather than
lease equipment to ensure that equipment is available as needed.
The Company believes that such ownership has resulted in lower
equipment costs. However, depending on market conditions, the
availability of equipment and other considerations, the Company
may from time to time pursue the leasing of equipment to support
projects. The Company attempts to obtain projects that will keep
its equipment fully utilized in order to increase profitability.
All equipment is subject to scheduled maintenance to maximize
fleet readiness. The Company has maintenance facilities at Port
Harcourt, Nigeria; Azaiba, Oman; Maracaibo, Venezuela; and Broken
Arrow, Oklahoma; as well as temporary site facilities on major
jobs to minimize downtime.
Facilities
The Company owns a 14 acre equipment yard/maintenance facility
and an adjoining 29 acre undeveloped industrial site at Broken
Arrow, Oklahoma, a short distance from Tulsa, Oklahoma. In
Venezuela, the Company's offices and construction facilities are
located on 15 acres of land, which it owns, on the shores of Lake
Maracaibo. The Company leases all other facilities used in its
operations, including corporate offices in Panama; administrative
and engineering offices in Tulsa, Oklahoma, and Houston, Texas;
and various office facilities, equipment sites and expatriate
housing units in England, Nigeria, Oman, Pakistan, Russia, Egypt,
Kuwait, Saudi Arabia and Indonesia. The aggregate lease payments
made by the Company for its facilities were $3.0 million in 1997
and $2.1 million in 1996.
Insurance and Bonding
The Company maintains workers' compensation, employers'
liability, general liability, directors' and officers' liability,
automobile liability, aircraft liability, marine liability and
excess liability insurance to provide benefits to employees and
to protect the Company against claims by third parties. Such
insurance is underwritten by A+ or better rated insurance
companies (AM Best rating as to claims paying ability) and, when
possible, in loss-sensitive plans with return premiums for
favorable loss experience. The Company also maintains physical
damage insurance covering loss of or damage to Company property
on a worldwide basis, with special insurance covering loss or
damage caused by political or terrorist risks in
21
<PAGE>
locations where such coverage is deemed prudent. Formal risk
management and safety programs are maintained, which have
resulted in favorable loss ratios and cost savings. The Company
believes its risk management, safety and insurance programs are
adequate to meet its needs.
The Company is often required to provide surety bonds
guaranteeing its performance and/or financial obligations. The
amounts of bonding available depend upon experience and
reputation in the industry, financial condition, backlog and
management expertise, among other factors. The Company maintains
relationships with two top-rated surety companies to provide
surety bonds.
Political and Economic Risks; Operational Risks
The Company has substantial operations and assets in developing
countries in Africa, Asia, the Middle East and South America, and
is seeking to increase its level of activity in the C.I.S.
Accordingly, the Company is subject to risks which ordinarily
would not be expected to exist in the United States, Canada,
Japan or western Europe, including foreign currency restrictions
(such as those which existed in Venezuela until 1996), extreme
exchange rate fluctuations (for example, in Russia, Venezuela and
Nigeria), 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.
The Company's operations in developing countries may be adversely
affected in that certain government agencies in such countries
may interpret laws, regulations or court decisions in a manner
which might be considered inconsistent or inequitable in the
United States, Canada, Japan or western Europe. The Company may
be subject to unanticipated income taxes, excise duties, import
taxes, export taxes or other governmental assessments which could
have a material adverse effect on the Company's results of
operations for any quarter or year.
The Company has attempted to mitigate the risks of doing
business in developing countries by separately incorporating its
operations in many such countries; working with local partners in
certain countries; contracting whenever possible with major
international oil and gas companies; obtaining sizeable down
payments or securing payment guarantees; entering into contracts
providing for payment in U.S. dollars instead of the local
currency whenever possible; maintaining reserves for credit
losses; maintaining insurance on equipment against certain
political risks and terrorism; and limiting its capital
investment in each country. The Company retains local advisors
to assist it in interpreting the laws, practices and customs of
the countries in which the Company operates. Given the
unpredictable nature of the risks described in the preceding
paragraph, there can be no assurance that such risks will not
result in a loss of business which could have a material adverse
effect on the Company's results of operations for any quarter or
year.
From time to time, international oil companies operating in
Nigeria, including Royal Dutch Shell, have expressed concern over
the Nigerian government's tardiness in meeting its payment
obligations and have threatened to reduce their planned
investments, and or cut production, in Nigeria. In addition,
indecision by the Nigerian government over agreeing to 1997
budget expenditure plans for oil companies involved in joint
ventures with the Nigerian National Petroleum Corporation may
also lead such companies to curtail their planned investments in
Nigeria. Any such reduction in the level of investment or
production could reduce the amount of contract work awarded in
Nigeria which could materially adversely affect the Company and
its results of operations. The Company cannot predict whether
any such actions will be taken in the future and, if taken, the
extent to which such actions would impact current or future
prospects of the Company in Nigeria.
Due to the limited number of major projects worldwide, the
Company may, at any one time, have a substantial portion of its
resources dedicated to one country. The Company's results of
operations are, therefore, susceptible to adverse events beyond
its control which may occur in a particular country in which the
Company's business may be concentrated.
22
<PAGE>
Pipeline construction, dredging, pipeline rehabilitation
services, marine support services and operation of vessels and
heavy equipment involve a high degree of operational risk.
Natural disasters, adverse weather conditions, collisions, and
operator or navigational error can cause personal injury or loss
of life, severe damage to and destruction of property, equipment
and the environment and suspension of operations. The occurrence
of any such event could result in loss of revenue, casualty loss,
increased costs and significant liability to third parties.
Litigation arising from such an occurrence may result in the
Company being named as a defendant in lawsuits asserting
substantial claims.
The Company maintains risk management and safety programs to
mitigate the effects of loss or damage. While the Company
maintains such insurance protection as it deems prudent, there
can be no assurance that any such insurance will be sufficient or
effective under all circumstances or against all hazards to which
the Company may be subject. An enforceable claim for which the
Company is not fully insured could have a material adverse effect
on the Company. Moreover, no assurance can be given that the
Company will be able to maintain adequate insurance in the future
at rates that it considers reasonable.
Government Regulations
General
Many aspects of the Company's operations are subject to
government regulations in the countries in which the Company
operates, including those relating to currency conversion and
repatriation, taxation of its earnings and earnings of its
personnel, and its use of local employees and suppliers. In
addition, the Company depends on the demand for its services from
the oil and gas industry and, therefore, is affected by changing
taxes, price controls and laws and regulations relating to the
oil and gas industry generally. The ability of the Organization
of Petroleum Exporting Countries to meet and maintain production
targets also influences the demand for the Company's services.
The adoption of laws and regulations by countries in which the
Company operates, curtailing exploration and development drilling
for oil and gas for economic and other policy reasons, could
adversely affect the Company's operations by limiting demand for
its services. The Company's operations are also subject to the
risk of changes in foreign and domestic laws and policies which
may impose restrictions on the Company, including trade
restrictions, which could have a material adverse effect on the
Company's operations. Other types of government regulation which
could, if enacted or implemented, adversely affect the Company's
operations include expropriation or nationalization decrees,
confiscatory tax systems, primary or secondary boycotts directed
at specific countries or companies, embargoes, extensive import
restrictions or other trade barriers, mandatory sourcing rules
and unrealistically high labor rate and fuel price regulation.
The Company cannot determine to what extent future operations and
earnings of the Company may be affected by new legislation, new
regulations or changes in, or new interpretations of, existing
regulations.
Environmental
The Company's operations are subject to numerous environmental
protection laws and regulations which are complex and stringent.
The Company regularly works in and around sensitive environmental
areas such as rivers, lakes and wetlands. Significant fines and
penalties may be imposed for non-compliance with environmental
laws and regulations, and certain environmental laws provide for
joint and several strict liability for remediation of releases of
hazardous substances, rendering a person liable for environmental
damage without regard to negligence or fault on the part of such
person. In addition to potential liabilities that may be incurred
in satisfying these requirements, the Company may be subject to
claims alleging personal injury or property damage as a result of
alleged exposure to hazardous substances. Such laws and
regulations may expose the Company to liability arising out of
the conduct of operations or conditions caused by others, or for
the acts of the Company which were in compliance with all
applicable laws at the time such acts were performed. The Company
is not aware of any non-compliance with or liability under any
environmental law that could have a material adverse effect on
the Company's business or operations.
23
<PAGE>
Item 3. Legal Proceedings
The Company is a party to a number of legal proceedings. The
Company believes that the nature and number of these proceedings
are typical for a firm of its size engaged in the Company's type
of business and that none of these proceedings is material to the
Company's financial position.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders during
the fourth quarter of 1997 through the solicitation of proxies or
otherwise.
Item 4A. Executive Officers of the Registrant
The following table sets forth certain information regarding
the executive officers and key personnel of the Company.
Officers are elected annually by, and serve at the discretion of,
the Board of Directors.
Name Age Position
- ---- --- --------
Larry J. Bump 58 Director, Chairman of the Board of
Directors, President, Chief Executive
Officer, and Chief Operating Officer
Melvin F. Spreitzer 59 Director, Executive Vice President,
Chief Financial Officer and Treasurer
M. Kieth Phillips 55 Director and Vice President; President
of Willbros International, Inc.
James R. Beasley 55 President of Willbros Engineers, Inc.
John N. Hove 50 General Counsel and Secretary
David L.Kavanaugh 50 Senior Vice President of Willbros
International, Inc.
Steve W. Shores 48 Senior Vice President of Willbros
Engineers, Inc.
Joel M. Gall 49 Vice President of Willbros International,
Inc.
Arthur J. West 54 Vice President of Willbros International,
Inc.
Adrian P. Wright 51 Vice President of Willbros International,
Inc.
Lance H. Foster 39 Vice President of Willbros Energy Services
Company
Harold A. Weller 61 Vice President of Willbros Engineering &
Construction Limited
Carlos A. Atik 34 General Manager of Willbros Construction &
Engineering-Egypt, L.L.C.
Monica M. Bagguley 57 Director of Willbros (Overseas) Limited
24
<PAGE>
Gordon D.M. Bishop 46 General Manager of Willbros Middle East,
Inc. - Pakistan Branch
Jack F. Furrh, Jr. 57 General Manager of The Oman Construction
Company, LLC
G. Patrick Riga 42 General Manager of Constructora CAMSA,
C.A.
James K. Tillery 39 Managing Director of Willbros (Nigeria)
Limited
Larry J. Bump joined Willbros in 1977 as President and Chief
Operating Officer and was elected to the Board of Directors. He
was named Chief Executive Officer in 1980 and elected Chairman of
the Board of Directors in 1981. He has over 34 years of
international experience in pipeline construction and contracting
industries, all of which were in management positions.
Melvin F. Spreitzer joined Willbros in 1974 as Controller and
was elected Vice President of Finance in 1978. He was elected
Executive Vice President, Chief Financial Officer and Treasurer
in 1987, and a Director in 1992. He was also Secretary from 1987
to 1996. He has over 22 years of corporate finance experience and
is responsible for all aspects of financial management of the
Company.
M. Kieth Phillips joined Willbros in 1978 as Vice President. He
was elected Vice President of Willbros International, Inc.
("WII") in 1979 and was promoted to Senior Vice President of WII
in 1980, Executive Vice President of WII in 1983 and President of
WII in 1988. Most of his more than 30 years of experience in the
pipeline construction industry has been international and in
management positions. Mr. Phillips has been a Director of the
Company since May 1997.
James R. Beasley joined Willbros in 1981 when Willbros
Engineers, Inc. ("WEI") was acquired. He was elected Vice
President of WEI in 1981, Senior Vice President and General
Manager of WEI in 1982 and President of WEI in 1986. Mr. Beasley
has more than 27 years of experience in pipeline engineering and
operations.
John N. Hove became General Counsel of Willbros in 1991. He was
elected Secretary of Willbros in 1996. He has more than 26 years
of experience as a lawyer and has provided legal assistance to
Willbros since 1973. Prior to 1991, he was a shareholder in a law
firm in Tulsa, Oklahoma, where he concentrated his practice on
international business transactions.
David L. Kavanaugh joined Willbros in 1977 as an engineer
assigned to Saudi Arabia. From 1979 until 1988, he served as
Project Engineer and Project Manager in Nigeria. From 1988 to
1991, he managed construction projects in Gabon and Colombia. In
1991, he was elected Vice President of WII, and in 1995 he was
promoted to Senior Vice President of operations and business
development for WII. Mr. Kavanaugh has over 27 years of pipeline
construction experience.
Steve W. Shores joined Willbros in 1981 when WEI was acquired.
He was elected Vice President of WEI in 1986 and Senior Vice
President of WEI in 1991. Mr. Shores has over 22 years of
pipeline engineering experience.
Joel M. Gall joined Willbros in 1978 as an Office Manager in
the Middle East. He was transferred to Nigeria in 1979 where he
served as Administrative Manager, General Manager and Managing
Director until 1991 when he was elected Vice President of WII.
Since 1994, he has been responsible for business development
activities in Southeast Asia. Mr. Gall has over 27 years of
experience in the international pipeline construction industry.
Arthur J. West joined Willbros in 1962 in North Africa. In
1988, he became Vice President of Willbros Middle East, Inc.
("WMEI") and, in 1992, he was elected Vice President of WII and
became responsible
25
<PAGE>
for business development and operations for WMEI in the Middle
East. Mr. West has over 32 years of experience in pipeline
construction in the areas of administrative and project
management.
Adrian P. Wright joined Willbros in 1973 as an engineer
assigned to Algeria. From 1974 until 1982, he served as Project
Engineer and Project Manager in Nigeria. From 1982 to 1992, he
served as Project Manager in Oman, Colombia and the United
States. In 1992, Mr. Wright was elected Vice President of WII,
and he is currently responsible for WII's estimating and
technical services. Mr. Wright has over 31 years of experience in
the construction industry.
Lance H. Foster was employed by Willbros Engineers, Inc. ("WEI")
from 1990 to 1992 as a Design Engineer and Project Engineer. He
was Manager of Engineering for EVI Cherrington Environmental from
1992 to 1993, Project Manager for WEI from 1993 to 1994 and Manager
of Pipeline Construction for ARB, Incorporated from 1994 to 1996.
He subsequently joined Willbros USA, Inc. as an estimator/project
manager in 1996 and was promoted to Vice President for Willbros
Energy Services Company in January 1998. Mr. Foster has over 20
years of experience in pipeline construction in the areas of
estimating, planning, administration, and management.
Harold A. Weller joined Willbros in 1975. From 1976 to 1979, he
was Project Director on a project to design and supply gas
compressor stations for a gas pipeline system in western Siberia.
In 1979, he left Willbros to join a major gas compressor
manufacturer until 1984. Following that he operated a private
consulting business until 1991. In 1991, he returned to Willbros
as Director of Business Development for Willbros (Overseas)
Limited ("WOL"). In 1994, he was elected Vice President of
Willbros Engineering & Construction Limited. Mr. Weller has over
37 years of experience in the engineering and management of
petrochemical, oil refinery and pipeline projects in the oil and
gas industry.
Carlos A. Atik joined Willbros in 1991 as an assistant Project
Manager in Egypt. He assumed the duties of Project Manager in
1992 and continued in that role until 1995 when he was named
General Manager of Willbros Construction & Engineering-Egypt,
L.L.C. Mr. Atik has over 13 years of engineering and construction
experience in Africa and the Middle East.
Monica M. Bagguley joined WOL in 1974. Since 1985, she has
served as Director of Personnel and Purchasing for WOL. Ms.
Bagguley has over 22 years of experience in international
personnel management and project procurement.
Gordon D.M. Bishop joined Willbros in 1976 as Senior Surveyor.
He has 20 years of experience in pipeline construction at various
levels of engineering and project management capacities in Iran,
Nigeria and Oman. He is currently General Manager of Willbros
Middle East, Inc. - Pakistan Branch.
Jack F. Furrh, Jr. joined Willbros in 1981 as Administrative
Manager. He left Willbros in 1986 to operate his own business. In
1990, he rejoined the Company as Project Manager and in 1991 he
was promoted to General Manager of The Oman Construction Company,
LLC. He has over 27 years of experience in the energy-related
industry in contracts, safety and administrative management.
G. Patrick Riga joined Willbros in 1981 in Oman as a
warehouseman. From 1985 to 1988, he served in administrative
capacities in Colombia and Ecuador. From 1989 until 1994, he was
employed by HDI, a horizontal drilling company. He rejoined the
Company in 1994 as Assistant General Manager in Venezuela and, in
1995, was promoted to General Manager of Constructora CAMSA, C.A.
Mr. Riga has over 19 years of experience in the pipeline
industry, including operations, quality control and
administrative management.
James K. Tillery joined Willbros in 1983 as a field engineer.
He has over 17 years of experience as an Engineer and Project
Manager working in both U.S. and international pipeline
construction. In 1995, he was named Managing Director of Willbros
(Nigeria) Limited.
26
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
The information required by this Item is incorporated by
reference from (a) the section on page 38 of the Company's 1997
Annual Report to Stockholders entitled "Common Stock Information
and Dividend Policy" and (b) the section on page 24 of the
Company's 1997 Annual Report to Stockholders entitled
"Management's Discussion and Analysis of Financial Condition and
Results of Operations - Capital Structure, Liquidity and Capital
Resources."
Item 6. Selected Financial Data
The information required by this Item is incorporated by
reference from page 20 of the Company's 1997 Annual Report to
Stockholders.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The information required by this Item is incorporated by
reference from pages 21 through 24 of the Company's 1997 Annual
Report to Stockholders.
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data
The information required by this Item is incorporated by
reference from pages 25 through 37 of the Company's 1997 Annual
Report to Stockholders.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this Item with respect to the
Company's directors is incorporated by reference from the
sections of the Company's definitive Proxy Statement for its 1998
Annual Meeting of Stockholders (the "Proxy Statement") entitled
"Election of Directors" and "Section 16(a) Beneficial Ownership
Reporting Compliance." The information required by this Item
with respect to the Company's executive officers appears at Item
4A of Part I of this Form 10-K.
27
<PAGE>
Item 11. Executive Compensation
The information required by this Item is incorporated by
reference from the section of the Proxy Statement entitled
"Executive Compensation."
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The information required by this Item is incorporated by
reference from the section of the Proxy Statement entitled
"Principal Stockholders and Security Ownership of Management."
Item 13. Certain Relationships and Related Transactions
The information required by this Item is incorporated by
reference from the section of the Proxy Statement entitled
"Certain Transactions."
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a) (1) Financial Statements:
The financial statements of the Company and its subsidiaries
and report of independent auditors listed below are incorporated
by reference from the following pages of the Company's 1997
Annual Report to Stockholders:
1997
Annual Report
Page(s)
-----------
Report of Independent Auditors 25
Consolidated Balance Sheets as of
December 31, 1997 and 1996 26
Consolidated Statements of Income for the years
ended December 31, 1997, 1996 and 1995 27
Consolidated Statements of Stockholders Equity for
the years ended December 31, 1997, 1996 and 1995 28
Consolidated Statements of Cash Flows for the
years ended December 31, 1997, 1996 and 1995 29
Notes to Consolidated Financial Statements 30 - 37
1997
Form 10-K
Page(s)
---------
(2) Financial Statement Schedule:
Independent Auditors' Report 32
Schedule II - Consolidated Valuation and
Qualifying Accounts 33
All other schedules are omitted as inapplicable or because the
required information is contained in the financial statements or
included in the footnotes thereto.
28
<PAGE>
(3) Exhibits:
The following documents are included as exhibits to this Form
10-K. Those exhibits below incorporated by reference herein are
indicated as such by the information supplied in the
parenthetical thereafter. If no parenthetical appears after an
exhibit, such exhibit is filed herewith.
3.1 Restated Articles of Incorporation of the Company (Filed as
Exhibit 3.1 to the Company's Registration Statement on Form
S-1, Registration No. 333-5413 (the "S-1 Registration
Statement")).
3.2 Restated By-laws of the Company (Filed as Exhibit 3.2 to the
S-1 Registration Statement).
4 Form of stock certificate for the Company's Common Stock,
par value $.05 per share (Filed as Exhibit 4 to the S-1
Registration Statement).
10.1 Credit Agreement dated February 20, 1997, by and among the
Company, certain designated subsidiaries, Credit Lyonnais
New York Branch, as co-agent, certain financial
institutions, and ABN AMRO Bank N.V., as agent (Filed as
Exhibit 10.1 to the Company's report on Form 10-K for the
year ended December 31, 1996, filed March 31, 1997 (the
"1996 Form 10-K")).
10.2 Parent Pledge Agreement dated February 20, 1997, by the
Company, in favor of ABN AMRO Bank N.V., as agent (Filed as
Exhibit 10.2 to the 1996 Form 10-K).
10.3 Pledge Agreement dated February 20, 1997, by Musketeer Oil
B.V., in favor of ABN AMRO Bank N.V., as agent (Filed as
Exhibit 10.3 to the 1996 Form 10-K).
10.4 Pledge Agreement dated February 20, 1997, by Willbros USA,
Inc., in favor of ABN AMRO Bank N.V., as agent (Filed as
Exhibit 10.4 to the 1996 Form 10-K).
10.5* Employment Agreement dated January 1, 1996, by and
among Willbros USA, Inc., Larry J. Bump and the Company
(Filed as Exhibit 10.3 to the S-1 Registration Statement).
10.6* Employment Agreement dated January 1, 1996, by and
among Willbros USA, Inc., Melvin F. Spreitzer and the
Company (Filed as Exhibit 10.4 to the S-1 Registration
Statement).
10.7* Employment Agreement dated January 1, 1996, by and
among Willbros USA, Inc., M. Kieth Phillips and the
Company (Filed as Exhibit 10.6 to the S-1 Registration
Statement).
10.8* Employment Agreement dated January 1, 1997, by and
among Willbros Engineers, Inc., James R. Beasley and the
Company (Filed as Exhibit 10.9 to the 1996 Form 10-K).
10.9* Form of Indemnification Agreement between the Company
and its officers (Filed as Exhibit 10.7 to the S-1
Registration Statement).
10.10* Form of Indemnification Agreement between the Company
and its directors (Filed as Exhibit 10.16 to the S-1
Registration Statement).
10.11* Willbros Group, Inc. 1996 Stock Plan (Filed as Exhibit
10.8 to the S-1 Registration Statement).
10.12* Form of Incentive Stock Option Agreement under the
Willbros Group, Inc. 1996 Stock Plan (Filed as Exhibit 10.13
to the 1996 Form 10-K).
10.13* Form of Non-Qualified Stock Option Agreement under the
Willbros Group, Inc. 1996 Stock Plan (Filed as Exhibit 10.14
to the 1996 Form 10-K).
10.14* Willbros Group, Inc. Director Stock Plan (Filed as
Exhibit 10.9 to the S-1 Registration Statement).
29
<PAGE>
10.15* Willbros USA, Inc. Executive Benefit Restoration Plan
(Filed as Exhibit 10.10 to the S-1 Registration Statement).
10.16* Willbros Engineers, Inc. Management Incentive Plan
dated January 1, 1996 (Filed as Exhibit 10.17 to the S-1
Registration Statement).
10.17* Willbros USA, Inc. Management Incentive Plan dated
January 1, 1996 (Filed as Exhibit 10.18 to the S-1
Registration Statement).
10.18* Form of Secured Promissory Note under the Willbros
International, Inc. and Willbros USA, Inc. 1995 Management
Personnel Non-Qualified Stock Ownership Plans (Filed as
Exhibit 10.11 to the S-1 Registration Statement).
10.19* Form of Secured Promissory Note under the Willbros
International, Inc. and Willbros USA, Inc. 1992 Employee Non-
Qualified Stock Ownership Plans (Filed as Exhibit 10.12 to
the S-1 Registration Statement).
10.20 Registration Rights Agreement dated April 9, 1992,
between the Company and Heerema Holding Construction, Inc.,
Yorktown Energy Partners, L.P., Concord Partners II, L.P.,
Concord Partners Japan Limited and certain other
stockholders of the Company (Filed as Exhibit 10.13 to the
S-1 Registration Statement).
10.21* Separation Agreement dated February 20, 1998, by and
between Willbros USA, Inc. and Gary L. Bracken.
11 Computation of Income (Loss) Per Common and Common Equivalent
Share.
13 Portions of the Company's 1997 Annual Report to
Stockholders.
21 Subsidiaries of the Company.
23 Consent of KPMG Peat Marwick.
27 Financial Data Schedule.
- --------------------------------
* Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the fourth quarter of
1997.
30
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
WILLBROS GROUP, INC.
Date: March 27, 1998 By: /s/ Larry J. Bump
--------------------------------
Larry J. Bump
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated:
Signature Title Date
- --------- ----- ----
/s/ Larry J. Bump Director, Chairman of the March 27, 1998
- ------------------------ Board, President and
Larry J. Bump Chief Executive Officer
(Principal Executive Officer)
/s/ Melvin F. Spreitzer Director, Executive Vice March 27, 1998
- ------------------------- President, Chief Financial
Melvin F. Spreitzer Officer and Treasurer
(Principal Financial Officer
and Principal Accounting Officer)
/s/ M. Kieth Phillips Director and Vice March 27, 1998
- ------------------------ President
M. Kieth Phillips
/s/ Guy E. Waldvogel Director March 27, 1998
- ------------------------
Guy E. Waldvogel
/s/ Bryan H. Lawrence Director March 27, 1998
- ------------------------
Bryan H. Lawrence
/s/ Peter A. Leidel Director March 27, 1998
- ------------------------
Peter A. Leidel
/s/ John H. Williams Director March 27, 1998
- ------------------------
John H. Williams
/s/ Michael J. Pink Director March 27, 1998
- ------------------------
Michael J. Pink
31
<PAGE>
INDEPENDENT AUDITORS' REPORT ON CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
The Stockholders and Board of Directors
Willbros Group, Inc.:
The audits referred to in our report dated January 31, 1998
included the related consolidated financial statement schedule
for each of the years in the three-year period ended December 31,
1997. This consolidated financial statement schedule is the
responsibility of the Company's management. Our responsibility
is to express an opinion on the consolidated financial statement
schedule based on our audits. In our opinion, such consolidated
financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set
forth therein.
KPMG PEAT MARWICK
Panama City, Panama
January 31, 1998
32
<PAGE>
WILLBROS GROUP, INC.
SCHEDULE II - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
<TABLE>
<CAPTION>
Charged
(Credited) Charge
Balance at to Costs Offs Balance
Beginning and and at End
Year Ended Description of Year Expenses Other of Year
- ------------ ------------- ---------- -------- ------ -------
<S> <C> <C> <C> <C> <C>
December 31, 1995 Allowance for bad debts $2,442 $ 694 $(144) $2,992
December 31, 1996 Allowance for bad debts $2,992 $(1,024) $(849) $1,119
December 31, 1997 Allowance for bad debts $1,119 $ (8) $(110) $1,001
33
<PAGE>
INDEX TO EXHIBITS
The following documents are included as exhibits to this Form
10-K. Those exhibits below incorporated by reference herein are
indicated as such by the information supplied in the
parenthetical thereafter. If no parenthetical appears after an
exhibit, such exhibit is filed herewith.
Exhibit
Number Description
3.1 Restated Articles of Incorporation of the Company (Filed as
Exhibit 3.1 to the Company's Registration Statement on Form
S-1, Registration No. 333-5413 (the "S-1 Registration
Statement")).
3.2 Restated By-laws of the Company (Filed as Exhibit 3.2 to the
S-1 Registration Statement).
4 Form of stock certificate for the Company's Common Stock,
par value $.05 per share (Filed as Exhibit 4 to the S-1
Registration Statement).
10.1 Credit Agreement dated February 20, 1997, by and among the
Company, certain designated subsidiaries, Credit Lyonnais
New York Branch, as co-agent, certain financial
institutions, and ABN AMRO Bank N.V., as agent (Filed as
Exhibit 10.1 to the Company's report on Form 10-K for the
year ended December 31, 1996, filed March 31, 1997 (the
"1996 Form 10-K")).
10.2 Parent Pledge Agreement dated February 20, 1997, by the
Company, in favor of ABN AMRO Bank N.V., as agent (Filed as
Exhibit 10.2 to the 1996 Form 10-K).
10.3 Pledge Agreement dated February 20, 1997, by Musketeer Oil
B.V., in favor of ABN AMRO Bank N.V., as agent (Filed as
Exhibit 10.3 to the 1996 Form 10-K).
10.4 Pledge Agreement dated February 20, 1997, by Willbros USA,
Inc., in favor of ABN AMRO Bank N.V., as agent (Filed as
Exhibit 10.4 o the 1996 Form 10-K).
10.5* Employment Agreement dated January 1, 1996, by and
among Willbros USA, Inc., Larry J. Bump and the Company
(Filed as Exhibit 10.3 to the S-1 Registration Statement).
10.6* Employment Agreement dated January 1, 1996, by and
among Willbros USA, Inc., Melvin F. Spreitzer and the
Company (Filed as Exhibit 10.4 to the S-1 Registration
Statement).
10.7* Employment Agreement dated January 1, 1996, by and
among Willbros USA, Inc., M. Kieth Phillips and the
Company (Filed as Exhibit 10.6 to the S-1 Registration
Statement).
10.8* Employment Agreement dated January 1, 1997, by and
among Willbros Engineers, Inc., James R. Beasley and the
Company (Filed as Exhibit 10.9 to the 1996 Form 10-K).
10.9* Form of Indemnification Agreement between the Company
and its officers (Filed as Exhibit 10.7 to the S-1
Registration Statement).
10.10* Form of Indemnification Agreement between the Company
and its directors (Filed as Exhibit 10.16 to the S-1
Registration Statement).
10.11* Willbros Group, Inc. 1996 Stock Plan (Filed as Exhibit
10.8 to the S-1 Registration Statement).
10.12* Form of Incentive Stock Option Agreement under the
Willbros Group, Inc. 1996 Stock Plan (Filed as Exhibit 10.13
to the 1996 Form 10-K).
<PAGE>
10.13* Form of Non-Qualified Stock Option Agreement under the
Willbros Group, Inc. 1996 Stock Plan (Filed as Exhibit 10.14
to the 1996 Form 10-K).
10.14* Willbros Group, Inc. Director Stock Plan (Filed as
Exhibit 10.9 to the S-1 Registration Statement).
10.15* Willbros USA, Inc. Executive Benefit Restoration Plan
(Filed as Exhibit 10.10 to the S-1 Registration Statement).
10.16* Willbros Engineers, Inc. Management Incentive Plan
dated January 1, 1996 (Filed as Exhibit 10.17 to the S-1
Registration Statement).
10.17* Willbros USA, Inc. Management Incentive Plan dated
January 1, 1996 (Filed as Exhibit 10.18 to the S-1
Registration Statement).
10.18* Form of Secured Promissory Note under the Willbros
International, Inc. and Willbros USA, Inc. 1995 Management
Personnel Non-Qualified Stock Ownership Plans (Filed as
Exhibit 10.11 to the S-1 Registration Statement).
10.19* Form of Secured Promissory Note under the Willbros
International, Inc. and Willbros USA, Inc. 1992 Employee Non-
Qualified Stock Ownership Plans (Filed as Exhibit 10.12 to
the S-1 Registration Statement).
10.20 Registration Rights Agreement dated April 9, 1992,
between the Company and Heerema Holding Construction, Inc.,
Yorktown Energy Partners, L.P., Concord Partners II, L.P.,
Concord Partners Japan Limited and certain other
stockholders of the Company (Filed as Exhibit 10.13 to the
S-1 Registration Statement).
10.21* Separation Agreement dated February 20, 1998, by and
between Willbros USA, Inc. and Gary L. Bracken.
11 Computation of Income (Loss) Per Common and Common
Equivalent Share.
13 Portions of the Company's 1997 Annual Report to
Stockholders.
21 Subsidiaries of the Company.
23 Consent of KPMG Peat Marwick.
27 Financial Data Schedule.
</TABLE>
<PAGE>
EXHIBIT 10.21
SEPARATION AGREEMENT AND RELEASE
-------------------------------------------------------------
THIS SEPARATION AGREEMENT AND RELEASE (the "Agreement") is
made and entered into on the 20th day of February, 1998, by and
between WILLBROS USA, INC. ("Employer") and GARY L. BRACKEN
("Employee").
WITNESSETH:
--------------------
WHEREAS, Employee is currently employed by Employer; and
WHEREAS, Employee's active service with Employer ceased
effective November 5, 1997 ("Cessation Date"); and
WHEREAS, Employer and Employee have agreed that the
employment relationship between them will terminate effective
February 20, 1998 (the "Termination Date"); and
WHEREAS, Employer and Employee wish to achieve a final and
amicable resolution of all issues related to their employment
relationship;
NOW, THEREFORE, for and in consideration of the mutual
covenants and promises set forth below, as well as other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
1. Termination of Employment. Employee and Employer confirm
and agree that Employee is retiring from employment with
Employer as of the Termination Date and that the employment
relationship which existed between Employee and Employer
and/or any of Employer's affiliated companies shall cease as
of the Termination Date. All of Employer's obligations to
Employee on or after the Termination Date are set forth
herein. Accordingly, except as otherwise provided herein,
Employer shall have no further obligations whatsoever to
Employee after the Termination Date. Similarly, all of
Employee's obligations to Employer on or after the
Termination Date are set forth herein. Accordingly, except
as otherwise provided herein, Employee shall have no further
obligations to Employer after the Termination Date.
Employer shall cause its
<PAGE>
personnel records to reflect that Employee retired from
employment with Employer effective on the Termination Date.
2. Prior Agreements Superseded. Except as otherwise
specifically provided herein, this Agreement supersedes and
replaces all prior agreements, written or oral, relating to
Employee's employment with Employer and/or any of Employer's
affiliated companies, including specifically that certain
Employment Agreement entered into by Employer, Employee and
Willbros Group, Inc. ("WGI") as of January 1, 1996, and as
amended effective February 25, 1997, which shall terminate
in all respects as of the Termination Date.
3. Lump Sum Payment. On the Termination Date, Employer
shall pay to Employee a lump sum amount of Seven Hundred
Nineteen Thousand Seventy U.S. Dollars (U.S. $719,070), less
standard payroll deductions for federal and Oklahoma state
income taxes, FICA and Medicare tax.
4. Management Incentive Plan. Prior to the Termination
Date, Employee participated in the Willbros USA, Inc.
Management Incentive Plan dated January 1, 1996 (the
"Incentive Plan"). Employee will no longer be eligible to
participate in the Incentive Plan after the Termination
Date. However, Employer agrees to pay to Employee an amount
equal to the incentive bonus, if any, which would have been
payable to Employee under the Incentive Plan had Employee
continued as an Incentive Plan participant through the end
of calendar year 1998. Employee's entitlement to such
further payment, if any, shall be determined by applying the
terms of the Incentive Plan to Employee's annual base salary
in effect on the Termination Date. Employer and Employee
agree that Employee's annual base salary in effect on the
Termination Date is Two Hundred Thirty Five Thousand One
Hundred U.S. Dollars (U.S.$235,100) per year. Any payment
due Employee under this Section 4 shall be paid to Employee
on or before April 1, 1999.
5. Medical Insurance Continuation. After the Termination
Date, Employee and Employee's spouse will be entitled to
continue group medical insurance coverage under
2
<PAGE>
Employer's Retiree Medical Plan. Premiums for such coverage
will be approximately equal to those paid by Employee for
participation in Employer's Medical Plan prior to the
Termination Date. Employer reserves the right, pursuant to
the terms of its Retiree Medical Plan, to amend or eliminate
provision of retiree group medical insurance in the future.
If Employee is not entitled to Medicare benefits and does
not elect coverage under the Retiree Medical Plan, Employee
will be entitled to continue participation for a limited
period of time in Employer's Group Medical Plan, Group
Dental Plan and/or Executive Medical Plan under the
Consolidated Omnibus Budget Reconciliation Act of 1985.
Detailed information concerning the costs and procedures
applicable to such alternate insurance coverage will be
provided separately by Employer.
6. Life Insurance Conversion. Employee has the right to
convert Employee's life insurance coverage under Employer's
Group Life Plan and dependent life insurance coverage
obtained by the Employee under Employer's Dependent Life
Plan to individual life insurance policies. Conversion
forms and premium rates applicable to such conversion
programs will be provided separately by the Employer or the
relevant insurer.
7. Pension Plan. As a vested participant in the Willbros
USA, Inc. Pension Plan (the "Pension Plan") maintained by
Employer for the benefit of eligible employees, Employee is
or will become entitled to certain retirement benefits.
Nothing contained in this Agreement shall affect Employee's
rights to such benefits as provided by the terms of the
Pension Plan. Employee acknowledges that Employer has
separately provided Employee a specific description of
Employee's payment options under the Pension Plan.
8. Executive Benefit Restoration Plan. In addition to the
Pension Plan, Employee also participated prior to the
Termination Date in the Willbros USA, Inc. Executive Benefit
Restoration Plan (the "Restoration Plan"). On the
Termination Date, Employee shall receive Three Hundred Forty
Thousand Two Hundred Fifty Eight and 79/100 U.S. Dollars
(U.S.$340,258.79), less applicable tax withholding, under
the Restoration Plan as a lump sum payment of all
accumulated benefits due Employee under the Restoration Plan
as of the Termination Date. Effective upon receipt of such
payment, Employee
3
<PAGE>
releases the Employer, the Restoration Plan Trust, the
Restoration Plan Trustee, and the Restoration Plan
administrators from any further claims for benefits under
the Restoration Plan.
9. Incentive Stock Options. Employee is vested in certain
incentive stock options and certain non-qualified stock
options provided by WGI pursuant to the Willbros Group, Inc.
1996 Stock Plan (the "Stock Plan"). Nothing in this
Agreement shall affect any rights or obligations of Employee
or WGI under the Incentive Stock Option Agreement or the Non-
Qualified Stock Option Agreement between Employee and WGI
pursuant to the Stock Plan. Employee acknowledges, however,
that any of Employee's incentive stock options which are
exercised more than three (3) months after the Termination
Date will be treated as non-qualified stock options for
federal income tax purposes.
10. Employer Stock Ownership Plans. Employee is indebted to
Employer pursuant to certain secured promissory notes issued
to Employer by Employee in connection with Employee's
purchase of stock pursuant to the Willbros USA, Inc. 1992
Employee Non-Qualified Stock Ownership Plan and the Willbros
USA, Inc. 1996 Management Personnel Non-Qualified Stock
Ownership Plan. Employee's obligations and Employer's
rights under such promissory notes shall not be affected by
this Agreement, except that Employer waives its rights to
accelerate the due dates of such promissory notes on account
of Employee's retirement.
11. Employer Investment Plan. Employee is fully vested in
Employer's 401(k) Investment Plan the ("Investment Plan").
Employee has the option of receiving a lump-sum distribution
of Employee's total account balance, transferring such
account balance to another tax-qualified plan or to an
Individual Retirement Account or leaving such account
balance in the Investment Plan. Election forms and detailed
information concerning Employee's options with respect to
Employee's account balance in the Investment Plan will be
provided separately by Employer.
12. Director and Officer Matters. Nothing in this Agreement
shall affect any of Employee's rights or obligations with
respect to indemnification or director and officer li-
4
<PAGE>
ability insurance coverage to which Employee is now entitled
or subject in his capacity as a former director and officer
of Employer, WGI and certain of their affiliates, whether
under that certain Indemnification Agreement between
Employer and Employee dated January 1, 1988, that certain
Indemnification Agreement dated between WGI (formerly
Willbros Acquisition Corp.) and Employee dated December 31,
1991, or otherwise.
13. Other Benefits. Except as specifically set forth herein,
all employee benefits previously made available to Employee
by Employer or any of its affiliates, including, without
limitation, those made available under Employer's Executive
Compensation Program, shall cease to be available to
Employee as of the Termination Date.
14. Mutual Releases. (a) Release by Employee: Except
for the future obligations of Employer specifically set
forth or referenced in this Agreement, Employee fully and
forever releases and discharges Employer, WGI, and all of
their respective representatives, officers, directors,
shareholders, predecessors, successors, subsidiaries,
operating units, affiliates, divisions, employees and
attorneys from any and all claims, debts, liabilities,
demands, obligations, promises, acts, agreements, costs,
expenses, damages, actions, and causes of action, whether in
law or in equity, whether known or unknown, suspected or
unsuspected, arising from Employee's employment with and
termination from Employer, including but not limited to any
and all claims pursuant to Title VII of the Civil Rights Act
of 1964, 42 U.S.C. Section 2000e, et seq., as amended by the
Civil Rights Act of 1991, which prohibits discrimination in
employment based on race, color, national origin, religion
or sex; the Civil Rights Act of 1966, 42 U.S.C. Section
1981, 1983 and 1985, which prohibits violations of civil
rights; the Age Discrimination in Employment Act of 1967, as
amended, and as further amended by the Older Workers Benefit
Protection Act, 29 U.S.C. Section 621, et seq., which
prohibits age discrimination in employment; the Employment
Retirement Income Security Act of 1974, as amended, 29
U.S.C. Section 1001, et seq., which protects certain
employee benefits; the Americans with Disabilities Act of
1990, as amended, 42 U.S.C. Section 12101, et seq., which
prohibits discrimination against the disabled; the Family
and Medical Leave Act of 1993, 29
5
<PAGE>
U.S.C. Section 2601, et seq., which provides medical and
family leave; the Fair Labor Standards Act, 42 U.S.C.
Section 201, et seq., including the Wage and Hour Laws
relating to payment of wages; 85 O.S. 1991 Sections 5, 6 and
7, which prohibits discharge in retaliation for exercising
rights under Oklahoma's Workers' Compensation Act; and all
other federal, state or local laws or regulations
prohibiting employment discrimination. This release also
includes, but is not limited to, a release by Employee of
any claims for breach of contract, mental pain, suffering
and anguish, emotional upset, impairment of economic
opportunities, unlawful interference with employment rights,
defamation, intentional or negligent infliction of emotional
distress, fraud, wrongful termination, wrongful discharge in
violation of public policy, breach of any express or implied
covenant of good faith and fair dealing, that Employer has
dealt with Employee unfairly or in bad faith, and all other
common law contract and tort claims. Employee is not
waiving any rights or claims that may arise after the
Termination Date.
(b) Release by Employer: Employer and WGI for
themselves and their directors (in their capacities as such)
with respect to any claims they might have against him,
hereby release and forever discharge Employee and agree not
to assert against him any and all claims, rights, actions,
causes of action, suits, judgments, liabilities,
obligations, damages, debts, losses, indemnities, costs,
expenses, contract rights, promises, trespasses and demands,
of any kind or any nature whatsoever whether direct or
indirect, accrued, inchoate, contingent, potential, known or
unknown, or otherwise, in statutory or common law or in
equity, including without limitation by reason of any tort
or contract claim, which against Employee it ever had, now
has or which it can, shall or may have for, upon or by
reason of any matter whatsoever existing on the Termination
Date or based on matters occurring prior to the Termination
Date; provided, however, that this release shall not release
Employee from any of his obligations under or referenced in
this Agreement.
15. Covenant Not-To-Compete. Employee, until December 31,
1998, will not compete, directly or indirectly, with
businesses being conducted by Employer or its
6
<PAGE>
affiliates on the Termination Date in the countries where
the Employer or its affiliates were then conducting
business.
16. Confidentiality. From and after the Cessation Date and
for a period of two (2) years thereafter, Employee shall not
furnish, disclose or make accessible to any person, entity
or governmental authority, any knowledge or information,
trade secrets, customer information or lists, supplier
information or lists, plans, devices, material or financial
other information with respect to the business of Employer
or its affiliates or any secret, confidential or sensitive
research or development work, promotions, ideas,
opportunities, business plans or designs relating to the
business of Employer or its affiliates, except as may
otherwise be required by law. The prohibitions of this
Paragraph 16 shall not apply, however, to information in the
public domain (but only if the same becomes part of the
public domain through a means other than a disclosure
prohibited hereunder).
17. Continuing Cooperation. For a period of two (2) years
from the Termination Date, Employee will provide such
information and assistance as Employer may reasonably
require relating to services provided to Employer by
Employee during his employment. Employee will cooperate
with Employer's legal counsel in the defense of claims and
litigation in which Employer or Employer's affiliates are or
may become involved. All reasonable documented expenses
incurred by Employee, including a per diem of $1,200.00 in
the provision of requested consultation with Employer or its
legal representatives shall be reimbursed by Employer upon
submission of an itemized statement of such expenses. The
per diem shall not be applicable to consultation of a minor
nature.
18. Independent Legal Advice. Employee acknowledges that he
has been represented by independent legal counsel of his
choice with respect to the advisability of signing this
Agreement and the release provided herein, and with respect
to his rights and obligations under the terms of this
Agreement.
7
<PAGE>
19. Knowledge of Contents. Both parties acknowledge that
they have carefully read this Agreement and that the
contents hereof are known and understood by them. This
Agreement is signed freely by each party hereto.
20. Review and Revocation Period. Employee acknowledges that
he has been extended a period of twenty one (21) days within
which to consider this Agreement. For a period of seven (7)
days following Employee's execution of the Agreement,
Employee may revoke this Agreement by notifying Employer, in
writing, of his desire to do so. After the seven (7) day
period has elapsed, this Agreement shall be binding and
enforceable.
21. Obligation to Return Funds. In the event Employee
exercises his right to revocation set forth in Section 20
above, Employee shall immediately return to Employer all
amounts paid to Employee as consideration under this
Agreement. The duty to return funds under this Agreement
shall survive the revocation of the Agreement and shall
constitute a separately enforceable obligation between
Employee and Employer.
22. No Admission of Liability. This Agreement and compliance
with this Agreement shall not be construed as an admission
by Employer or Employee of any liability whatsoever, or as
an admission by Employer of any violation of the rights of
Employee or any other person, or any violation of any order,
law, statute, duty or contract.
23. Severability. In the event that any provision of this
Agreement should be held to be void, voidable, or
unenforceable, the remaining portions hereof shall remain in
full force and effect.
24. Governing Law. This Agreement will be interpreted and
enforced in accordance with the laws of the State of
Oklahoma.
25. Entirety and Integration. Upon the execution hereof by
both parties, this Agreement shall constitute a single,
integrated contract expressing the entire agreement of the
parties relative to the subject matter hereof and supersedes
all prior negotiations, understandings and/or agreements, if
any, of the parties. No covenants, agreements, rep-
8
<PAGE>
resentations, or warranties of any kind whatsoever have been
made by any party hereto, except as specifically set forth
in this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first mentioned above.
EMPLOYER EMPLOYEE
Willbros USA, Inc.
By: /s/ Melvin F. Spreitzer /s/ Gary L. Bracken
------------------------- --------------------------
Melvin F. Spreitzer Gary L. Bracken
Executive Vice President
9
<PAGE>
EXHIBIT 11
WILLBROS GROUP, INC.
COMPUTATION OF INCOME (LOSS) PER COMMON
AND
COMMON EQUIVALENT SHARE
(In thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Year ended
December 31,
----------------------------------
1997 1996 1995
---------- --------- ---------
<S> <C> <C> <C>
Net income $ 14,116 $ 2,724 $ 11,941
Preferred dividends - (1,448) -
---------- ---------- ----------
Net income applicable to common
shares $ 14,116 $ 1,276 $ 11,941
========== ========== ==========
Weighted average number of common
shares outstanding 14,540,137 14,015,178 13,642,750
Adjustment to reflect common shares
issued during the twelve months
prior to the initial public offering
as outstanding for all periods
presented using the "treasury stock"
method - 136,354 572,431
---------- ---------- ----------
Weighted average number of common
shares outstanding for basic
earnings per share 14,540,137 14,151,532 14,215,181
Weighted average number of dilutive
potential common shares outstanding 148,235 10,958 -
---------- ---------- ----------
Weighted average number of common
shares outstanding for diluted
earnings per share 14,688,372 14,162,490 14,215,181
========== ========== ==========
Earnings per common share:
Basic $ .97 $ .09 $ .84
========== ========== ==========
Diluted $ .96 $ .09 $ .84
========== ========== ==========
</TABLE>
<PAGE>
EXHIBIT 13
WILLBROS GROUP, INC.
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
<TABLE>
<CAPTION>
Year Ended December 31,
- ------------------------------------------------------------------------
1997 1996 1995
- ------------------------------------------------------------------------
(Dollar amounts in thousands, except per share data)
<S> <C> <C> <C>
Statement of Income Data:
Contract revenues $ 251,877 $ 197,688 $ 220,506
Operating expenses:
Contract cost 182,435 145,812 161,584
Depreciation and amortization 18,936 13,932 15,193
General and administrative 29,118 25,803 27,937
Compensation from changes
in redemption value of
common stock (1) - 6,122 2,100
- ------------------------------------------------------------------------
Operating income 21,388 6,019 13,692
Net interest income (expense) 304 (215) 144
Minority interest (1,911) (2,220) (1,589)
Other income (expense) 58 1,472 (381)
- ------------------------------------------------------------------------
Income before income taxes 19,839 5,056 11,866
Provision (credit) for income
taxes 5,723 2,332 (75)
- ------------------------------------------------------------------------
Net income $ 14,116 $ 2,724 $ 11,941
========================================================================
Earnings per share (2):
Basic $ .97 $ .09 $ .84
Diluted $ .96 $ .09 $ .84
Cash Flow Data:
Cash provided by (used in):
Operating activities $ 45,788 $ 29,961 $ (8,396)
Investing activities (46,386) (24,072) (18,558)
Financing activities 19,747 (1,630) (2,321)
Other Data:
EBITDA (3) $ 38,471 $ 19,203 $ 26,915
Capital expenditures $ 47,272 $ 24,957 $ 18,946
Backlog (at period end) $ 135,797 $ 108,751 $ 139,359
Number of employees (at
period end) 4,230 3,700 3,110
Balance Sheet Data (at period end):
Cash and cash equivalents $ 43,238 $ 24,118 $ 19,859
Working capital 39,563 36,723 38,767
Total assets 201,202 147,465 149,954
Total debt 8,574 1,340 3,119
Redemption value of common
stock held by plan participants - - 7,918
Redeemable preferred stock - - 36,200
Stockholders' equity 118,986 92,386 39,273
</TABLE>
WILLBROS GROUP, INC.
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
<TABLE>
<CAPTION>
Year Ended December 31,
- ------------------------------------------------------------------------
1994 1993
- ------------------------------------------------------------------------
(Dollar amounts in thousands, except per share data)
<S> <C> <C>
Statement of Income Data:
Contract revenues $ 145,716 $ 210,011
Operating expenses:
Contract cost 98,700 147,991
Depreciation and amortization 14,598 16,672
General and administrative 24,261 24,145
Compensation from changes
in redemption value of
common stock (1) 1,681 1,256
- ------------------------------------------------------------------------
Operating income 6,476 19,947
Net interest income (expense) 835 (785)
Minority interest (1,758) (3,615)
Other income (expense) 113 5,567
- ------------------------------------------------------------------------
Income before income taxes 5,666 21,114
Provision (credit) for income taxes (4,146) 8,405
- ------------------------------------------------------------------------
Net income $ 9,812 $ 12,709
========================================================================
Earnings per share (2):
Basic $ .70 $ .92
Diluted $ .70 $ .92
Cash Flow Data:
Cash provided by (used in):
Operating activities $ (3,771) $ 66,460
Investing activities (13,169) (14,621)
Financing activities (1,271) (8,175)
Other Data:
EBITDA (3) $ 19,429 $ 38,571
Capital expenditures $ 7,171 $ 16,534
Backlog (at period end) $ 97,493 $ 76,066
Number of employees (at
period end) 2,030 1,870
Balance Sheet Data (at period end):
Cash and cash equivalents $ 49,142 $ 67,346
Working capital 28,390 20,663
Total assets 131,188 152,059
Total debt 5,828 6,639
Redemption value of common
stock held by plan participants 5,430 3,279
Redeemable preferred stock 36,200 36,200
Stockholders' equity 27,340 20,295
</TABLE>
- -------------------------
(1) Under the Company's stock ownership plans established in
1992 and 1995, the Company had an obligation to purchase, under
certain conditions and at a formula price, Common Stock held by
retiring or terminating employees. The Company recorded as non-
cash compensation expense the change in the redemption value at
the end of each period using the maximum formula price. In
addition, in the third quarter of 1996, the Company recognized a
non-cash compensation expense of $4,695 for the difference
between the maximum redemption value of the shares subject to
redemption and the initial public offering price. The Company's
stock redemption obligations terminated in the fourth quarter of
1996.
(2) Earnings per share for the year ended December 31, 1996 is
calculated after deducting $1,448 ($.10 per common share) of
dividends on the Company's Preferred Stock.
(3) EBITDA represents earnings (net income) before interest,
income taxes, depreciation and amortization. Non-cash
compensation expenses have not been added back in calculating
EBITDA. EBITDA is not intended to represent cash flows for the
period, nor has it been presented as an alternative to operating
income as an indicator of operating performance. It should not
be considered in isolation or as a substitute for measures of
performance prepared in accordance with generally accepted
accounting principles. See the Company's Consolidated
Statements of Cash Flows in the Company's Consolidated Financial
Statements included elsewhere in this Annual Report. EBITDA is
included in this Annual Report because it is a basis upon which
the Company assesses its financial performance.
20
<PAGE>
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.
Under the Company's stock ownership plans established in 1992 and
1995, the Company had an obligation to purchase, under certain
conditions and at a formula price, Common Stock held by retiring or
terminating employees. The Company recorded as non-cash
compensation expense the change in the redemption value at the end
of each period using the maximum formula price. In addition, in
the third quarter of 1996, the Company recognized a non-cash
compensation expense of $4.7 million for the difference between the
maximum redemption value of the shares subject to redemption and
the initial public offering price. These non-cash compensation
expenses have not been added back in calculating EBITDA. The
Company's stock redemption obligations terminated in the fourth
quarter of 1996.
During 1997, the Company initiated a program to evaluate the
capability of all its computer systems and applications to handle
Year 2000 dates. Certain key systems and applications were found
which cannot properly handle Year 2000. These systems will be
modified or replaced before the year 2000. The cost of systems
modification is expensed; the cost of replacement systems is
capitalized. The Company does not expect to incur significant Year
2000 modification expense over the next two years. The Company is
not aware of any Year 2000 compliance issues of its vendors or
customers which could have a material adverse impact on its
business, but cannot be certain that such issues will not arise.
As previously noted, the Company uses EBITDA as part of its
overall assessment of financial performance by comparing EBITDA
between accounting periods. Management believes that EBITDA is used
by the financial community as a method of measuring performance and
of evaluating the market value of companies considered to be in
similar businesses to those of the Company.
The Company recognizes anticipated contract revenue 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 assured. Backlog increased
$27.0 million (25%) to $135.8 million at December 31, 1997,
compared to $108.8 million at December 31, 1996. The increase
consists of increases in backlog of $32.9 million in Venezuela,
$5.6 million in the United States, $3.2 million in Nigeria, and
$0.8 million in Mexico, offset by decreases in backlog of $9.8
million in Pakistan, $4.3 million in Indonesia, $1.1 million in
Oman and $.3 million in the C.I.S.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
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 revenue 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.
Year Ended December 31, 1997, Compared to Year Ended December 31,
1996
CONTRACT REVENUES. Contract revenues increased $54.2 million
(27%) to $251.9 million due to (a) $77.2 million of additional
construction revenues, reflecting a pickup in worldwide pipeline
construction activity; and (b) $16.8 million of additional
engineering services related to execution of Engineering,
Procurement, Construction (EPC) contracts and strong demand for
engineering services, especially in the United States; offset by
(c) a $39.8 million decrease in specialty services revenues due
primarily to a lack of funding by certain clients. United States
revenue increased $45.9 million (140%) primarily due to engineering
services associated with a proposed major gas pipeline project and
for work performed under an EPC contract for a 45 mile (75
kilometer) 24 inch gas pipeline. Nigeria revenue decreased $11.3
million (13%) primarily due to a reduction of specialty services
work attributable to delays in funding from the Nigerian government
which has caused a slowdown in the award of specialty services
projects, offset by an increase in construction services revenue
primarily resulting from work on a 20 mile (30 kilometer) 36 inch
gas pipeline and river crossing. Venezuela revenue increased $12.9
million (68%) primarily due to increased construction services,
including work on an offshore loading and storage terminal and work
begun on 120 miles (200 kilometers) each of 36 inch and 20 inch
pipelines, offset by a decrease in specialty services due to the
completion of two contracts in 1996. Indonesia revenue increased
$26.5 million (1,790%) due to work on an 85 mile (135 kilometer)
gas gathering system and station in Sumatra. Oman contract revenue
decreased $0.7 million (3%) as a result of a reduction of specialty
services, offset by an increase in construction work. Pakistan
revenue decreased $18.8 million (58%) primarily due to the
substantial completion of the engineering and procurement portion
of an EPC contract.
CONTRACT COST. Contract cost increased $36.6 million (25%) to
$182.4 million due to an increase of $47.4 million in construction
services cost and an increase of $18.9 million in engineering
services cost, offset by a decrease of $29.7 million in specialty
services cost. Variations in contract cost by country were closely
related to the variations in contract revenue.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization
increased $5.0 million to $18.9 million in 1997 due to additions
made to the equipment fleet to prepare for new contracts in
Indonesia and Venezuela.
GENERAL AND ADMINISTRATIVE. General and administrative expense
increased $3.3 million to $29.1 million in 1997 to support the
growth in worldwide activities.
COMPENSATION FROM CHANGES IN REDEMPTION VALUE OF COMMON STOCK.
Compensation from changes in redemption value of common stock
decreased $6.1 million to zero in 1997 because the Company's stock
redemption obligations terminated in the fourth quarter of 1996.
OPERATING INCOME. Operating income increased $15.4 million
(255%) to $21.4 million. The increase was primarily attributable
to (a) a $7.2 million increase in Indonesia primarily resulting
from work performed on a project in Sumatra; (b) a $6.9 million
increase in Oman due to increased construction services work and a
favorable winding up of a specialty services contract; (c) a $5.9
million increase in Nigeria from the realization of certain cost
recoveries related to services associated with activities already
completed; and (d) a $4.1 million increase in the United States due
to increased engineering services and elimination of compensation
from changes in the redemption value of common stock; offset by (e)
a $10.9 million decrease in Venezuela due to decreased specialty
services.
NET INTEREST INCOME (EXPENSE). Net interest income (expense)
increased $0.5 million to income of $0.3 million due to reduced
interest expense on borrowings under foreign credit lines to
mitigate exchange risk.
MINORITY INTEREST EXPENSE. Minority interest expense decreased
$0.3 million to $1.9 million due to a reduction of activity in
countries where minority interest partners are involved.
OTHER INCOME (EXPENSE). Other income (expense) decreased $1.4
million to $0.1 million due primarily to a reduction in foreign
exchange gains and an increase in loss on retirements of equipment.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
PROVISION FOR INCOME TAXES. Provision for income taxes
increased $3.4 million to $5.7 million due primarily to an increase
in taxable income in certain work countries and a lesser reduction
in 1997 than in 1996 in previous estimates of income taxes in
certain work countries.
Year Ended December 31, 1996, Compared to Year Ended December 31,
1995
CONTRACT REVENUES. Contract revenues decreased $22.8 million
(10%) to $197.7 million due to (a) a decrease in construction
services revenue of $28.1 million related to completion of a number
of worldwide projects, (b) a decrease in specialty services revenue
of $22.1 million associated with a reduction of specialty services
work, offset by (c) an increase in engineering services of $27.4
million due to increased engineering and material procurement.
United States revenue decreased $19.2 million (37%) due to a
reduction in construction services revenue offset by an increase in
engineering and material procurement. Nigeria revenue decreased
$8.7 million (9%) due to a decrease in specialty services revenue
associated with the construction of swamp flowlines, flowline
repair, dredging, pipe coating and material procurement, offset by
an increase in construction services related to construction of a
24 inch gas pipeline river crossing. Pakistan revenue increased
$3.0 million (10%) due to an EPC contract related to a 16-18 inch,
225 mile (365 kilometer) pipeline and two pump stations and two
wading terminals. Oman revenue increased $2.6 million (13%) due to
increased mechanical services and pipeline maintenance work.
CONTRACT COST. Contract cost decreased $15.8 million (10%) to
$145.8 million due to a decrease of $20.7 million in construction
services cost and a decrease of $18.5 million in specialty services
cost, offset by an increase of $23.4 million in engineering
services cost. Variations in contract cost by country were closely
related to the variations in contract revenue.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization
expense decreased $1.3 million to $13.9 million for 1996, due
primarily to certain assets becoming fully depreciated.
GENERAL AND ADMINISTRATIVE. General and administrative expense
decreased $2.1 million to $25.8 million for 1996, primarily due to
reduced incentive compensation expense.
OPERATING INCOME. Operating income decreased $7.7 million (56%)
to $6.0 million for 1996. The decrease was primarily attributable
to (a) an $8.9 million reduction associated with cost overruns and
delay in settlement of cost recoveries on a project in Pakistan;
and (b) a $1.9 million decrease due to less construction services
and a charge for compensation expense for the difference between
the maximum redemption value of common stock subject to redemption
and the initial public offering price in the United States; offset
by (c) a $2.1 million increase because of high margin specialty
services activity in Venezuela, which was substantially completed
in 1996.
NET INTEREST INCOME (EXPENSE). Net interest income decreased
$0.3 million to a net expense of $0.2 million for 1996, primarily
due to a decrease in interest income on short-term investments.
MINORITY INTEREST EXPENSE. Minority interest expense increased
$0.6 million to $2.2 million for 1996, due to the increased level
of operations in jointly owned companies in certain work countries.
OTHER INCOME (EXPENSE). Other income increased $1.9 million to
$1.5 million for 1996. The increase was primarily due to (a) a
$1.0 million increase in net foreign exchange gains arising from
remeasuring assets and liabilities in countries with highly
inflationary economies and (b) a $0.7 million increase in net gains
on sales and retirements of equipment.
PROVISION FOR INCOME TAXES. Provision for income tax expense
increased $2.4 million to $2.3 million for 1996, due to increased
taxable income and tax rates in certain work countries in 1996, and
a lesser reduction in 1996 than in 1995 in previous estimates of
income taxes in certain work countries.
Effect of Inflation and Changing Prices; Foreign Exchange Risk
Management
The Company's operations are affected by increases in prices,
whether caused by inflation, government mandates or other economic
factors, in the countries in which it operates. The Company
attempts to recover anticipated increases in the cost of labor,
fuel and materials through price escalation provisions in certain
of its major contracts or by considering the estimated effect of
such increases when bidding or pricing new work.
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
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
currency, the Company may use forward contracts, options or other
common hedging techniques in the same non-U.S. currencies. As a
result of the Company's foreign exchange risk management measures,
aggregate foreign exchange gains during the last five years have
exceeded aggregate foreign exchange losses during the same period.
There can be no assurance that this strategy will continue to be
successful in the future.
Capital Structure, 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 possible acquisition of new businesses and equity
investments. Historically the Company has met its capital
requirements primarily from operating cash flows.
Cash and cash equivalents increased $19.1 million (79%) to $43.2
million at December 31, 1997, from $24.1 million at December 31,
1996. The increase is due to positive cash flows of $45.8 million
from operations (including $12.7 million from changes in operating
assets and liabilities) and $19.7 million from financing activities
(including $11.4 million from issuance of common stock), offset by
$46.4 million in net capital expenditures for the purchase of
equipment and spare parts.
In February 1997, the Company entered into a five-year $150.0
million credit agreement, that may be extended annually in one year
increments, subject to certain approvals, for up to an additional
three 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 percent 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 percent of net income and limits the Company's ability to purchase
its own stock. At December 31, 1997, outstanding letters of credit
totaled $35.2 million and there were borrowings of $3.0 million,
leaving $111.8 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
$7.8 million at December 31, 1997.
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
$30 to $40 million during 1998.
Recently Issued Accounting Standards
Earnings per share for all periods presented has been determined
in accordance with the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 128, Earnings Per Share, which
established new standards for computing and presenting earnings per
share. Previously reported earnings per share were not affected by
adoption of this standard.
The Company adopted SFAS No. 131, Disclosures about Segments of
an Enterprise and Related Information, which requires disclosure of
revenues and long-lived assets by significant country. Previously
reported information by geographic region has been restated to
conform to the requirements of SFAS 131.
24
<PAGE>
WILLBROS GROUP, INC.
REPORT OF INDEPENDENT AUDITORS
The Stockholders and Board of Directors
Willbros Group, Inc.:
We have audited the accompanying consolidated balance
sheets of Willbros Group, Inc. and subsidiaries (the "Company") as
of December 31, 1997 and 1996 and the related consolidated
statements of income, stockholders' equity, and cash flows for each
of the years in the three-year period ended December 31, 1997.
These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally
accepted auditing standards in the United States. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the aforementioned consolidated financial
statements present fairly, in all material respects, the financial
position of Willbros Group, Inc. and subsidiaries as of December
31, 1997 and 1996 and the results of their operations and their
cash flows for each of the years in the three-year period ended
December 31, 1997, in conformity with generally accepted accounting
principles in the United States.
KPMG PEAT MARWICK
Panama City, Panama
January 31, 1998
25
<PAGE>
WILLBROS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
- ------------------------------------------------------------------------
1997 1996
- ------------------------------------------------------------------------
(In thousands, except share and per share amounts)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 43,238 $ 24,118
Accounts receivable 57,005 53,756
Contract cost and recognized income
not yet billed 8,159 3,643
Prepaid expenses 4,022 3,866
- ------------------------------------------------------------------------
Total current assets 112,424 85,383
Spare parts, net 7,385 5,724
Property, plant and equipment, net 78,420 53,445
Other assets 2,973 2,913
- ------------------------------------------------------------------------
Total assets $ 201,202 $ 147,465
========================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 5,341 $ 640
Accounts payable and accrued liabilities 41,287 32,868
Accrued income taxes 5,171 4,050
Contract billings in excess of cost and
recognized income 21,062 11,102
- ------------------------------------------------------------------------
Total current liabilities 72,861 48,660
Deferred income taxes 200 200
Long-term debt 3,233 700
Other liabilities 5,922 5,519
- ------------------------------------------------------------------------
Total liabilities 82,216 55,079
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 and
14,992,320 shares issued at December 31,
1997 (14,385,980 at December 31, 1996) 750 719
Capital in excess of par value 66,857 55,475
Cumulative foreign currency translation
adjustment (813) (784)
Retained earnings 54,276 40,160
Notes receivable for stock purchases (2,084) (3,184)
- ------------------------------------------------------------------------
Total stockholders' equity 118,986 92,386
- ------------------------------------------------------------------------
Total liabilities and stockholders'
equity $ 201,202 $ 147,465
========================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
26
<PAGE>
WILLBROS GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
- ------------------------------------------------------------------------
1997 1996 1995
- ------------------------------------------------------------------------
(In thousands, except share and per share amounts)
<S> <C> <C> <C>
Contract revenues $ 251,877 $ 197,688 $ 220,506
Operating expenses:
Contract 182,435 145,812 161,584
Depreciation and amortization 18,936 13,932 15,193
General and administrative 29,118 25,803 27,937
Compensation from changes in
redemption value of common stock - 6,122 2,100
- ------------------------------------------------------------------------
230,489 191,669 206,814
- ------------------------------------------------------------------------
Operating income 21,388 6,019 13,692
Other income (expense):
Interest income 1,118 1,063 1,863
Foreign exchange gain (loss) 257 705 (331)
Minority interest (1,911) (2,220) (1,589)
Interest expense (814) (1,278) (1,719)
Other - net (199) 767 (50)
- ------------------------------------------------------------------------
(1,549) (963) (1,826)
- ------------------------------------------------------------------------
Income before income taxes 19,839 5,056 11,866
Provision (credit) for income taxes 5,723 2,332 (75)
- ------------------------------------------------------------------------
Net income $ 14,116 $ 2,724 $ 11,941
========================================================================
Earnings per common share:
Basic $ .97 $ .09 $ .84
========================================================================
Diluted $ .96 $ .09 $ .84
========================================================================
Weighted average number of common
shares outstanding:
Basic 14,540,137 14,151,532 14,215,181
=========================================================================
Diluted 14,688,372 14,162,490 14,215,181
=========================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
27
<PAGE>
WILLBROS GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Capital
Common Stock In Excess
--------------------- of Par
Shares Par Value Value
- --------------------------------------------------------------------------
(In thousands, except share amounts)
<S> <C> <C> <C>
Balance, January 1, 1995 2,847,000 $ 142 $ 8,107
Net income - - -
Purchase of treasury stock - - -
Payment of notes receivable - - -
Exercise of stock options 153,000 8 524
Increase in redemption value
of common stock - - 2,100
Translation adjustments - - -
- ------------------------------------------------------------------------
Balance, December 31, 1995 3,000,000 150 10,731
- ------------------------------------------------------------------------
Net income - - -
Preferred dividends - - -
Purchase of treasury stock - - -
Exercise of stock options - - -
Sale of common stock, net of
offering cost 525,980 26 2,965
Conversion of preferred stock 10,860,000 543 35,657
Payment of notes receivable - - -
Increase in redemption value
of common stock - - 1,427
Compensation expense at
initial public offering date - - 4,695
Termination of redemption
obligation - - -
- ------------------------------------------------------------------------
Balance, December 31, 1996 14,385,980 719 55,475
- ------------------------------------------------------------------------
Net income - - -
Payment of notes receivable - - -
Sale of common stock, net of
offering cost 590,641 31 11,168
Issuance of common stock
under employee benefit plan 14,199 - 200
Exercise of stock options 1,500 - 14
Translation adjustments - - -
- ------------------------------------------------------------------------
Balance, December 31, 1997 14,992,320 $ 750 $ 66,857
========================================================================
</TABLE>
<TABLE>
<CAPTION>
Cumulative Notes
Foreign Receivable
Currency for
Translation Retained Stock
Adjustment Earnings Purchases
- -------------------------------------------------------------------------
(In thousands, except share amounts)
<S> <C> <C> <C>
Balance, January 1, 1995 $ (776) $ 28,015 $ (2,395)
Net income - 11,941 -
Purchase of treasury stock - - -
Payment of notes receivable - - 663
Exercise of stock options - - (645)
Increase in redemption value
of common stock - - -
Translation adjustments (8) - -
- ------------------------------------------------------------------------
Balance, December 31, 1995 (784) 39,956 (2,377)
- ------------------------------------------------------------------------
Net income - 2,724 -
Preferred dividends - (1,448) -
Purchase of treasury stock - - -
Exercise of stock options - (1,072) (1,715)
Sale of common stock, net of
offering cost - - -
Conversion of preferred stock - - -
Payment of notes receivable - - 908
Increase in redemption value
of common stock - - -
Compensation expense at
initial public offering date - - -
Termination of redemption
obligation - - -
- ------------------------------------------------------------------------
Balance, December 31, 1996 (784) 40,160 (3,184)
- ------------------------------------------------------------------------
Net income - 14,116 -
Payment of notes receivable - - 1,100
Sale of common stock, net of
offering cost - - -
Issuance of common stock
under employee benefit plan - - -
Exercise of stock options - - -
Translation adjustments (29) - -
- ------------------------------------------------------------------------
Balance, December 31, 1997 $ (813) $ 54,276 $ (2,084)
========================================================================
</TABLE>
<TABLE>
<CAPTION>
Redemption
Value of
Common Total
Stock Held Stock-
Treasury by Plan holders'
Stock Participants Equity
- -------------------------------------------------------------------------
(In thousands, except share amounts)
<S> <C> <C> <C>
Balance, January 1, 1995 $ (323) $ (5,430) $ 27,340
Net income - - 11,941
Purchase of treasury stock (376) 166 (210)
Payment of notes receivable - (554) 109
Exercise of stock options 214 - 101
Increase in redemption value
of common stock - (2,100) -
Translation adjustments - - (8)
- ------------------------------------------------------------------------
Balance, December 31, 1995 (485) (7,918) 39,273
- ------------------------------------------------------------------------
Net income - - 2,724
Preferred dividends - - (1,448)
Purchase of treasury stock (2,531) 63 (2,468)
Exercise of stock options 3,016 - 229
Sale of common stock, net of
offering cost - - 2,991
Conversion of preferred stock - - 36,200
Payment of notes receivable - (897) 11
Increase in redemption value
of common stock - (1,427) -
Compensation expense at
initial public offering date - - 4,695
Termination of redemption
obligation - 10,179 10,179
- ------------------------------------------------------------------------
Balance, December 31, 1996 - - 92,386
- ------------------------------------------------------------------------
Net income - - 14,116
Payment of notes receivable - - 1,100
Sale of common stock, net of - - 11,199
Issuance of common stock
under employee benefit plan - - 200
Exercise of stock options - - 14
Translation adjustments - - (29)
- ------------------------------------------------------------------------
Balance, December 31, 1997 $ - $ - $ 118,986
========================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
28
<PAGE>
WILLBROS GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
- ------------------------------------------------------------------------
1997 1996 1995
- ------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 14,116 $ 2,724 $ 11,941
Reconciliation of net income to
cash provided by (used in)
operating activities:
Depreciation and amortization 18,936 13,932 15,193
Compensation from changes in
redemption value of common stock - 6,122 2,100
Loss (gain) on sales and
retirements 814 (96) 592
Changes in operating assets and
liabilities:
Accounts receivable (3,249) 11,896 (33,923)
Contract cost and recognized
income not yet billed (4,516) 7,872 (10,797)
Prepaid expenses and other
assets (216) (2,784) (556)
Accounts payable and accrued
liabilities 8,419 (8,147) 8,930
Accrued income taxes 1,121 (868) (1,541)
Contract billings in excess of
cost and recognized income 9,960 (97) 97
Deferred income taxes - (1,158) (976)
Other liabilities 403 565 544
- ------------------------------------------------------------------------
Cash provided by (used in)
operating activities 45,788 29,961 (8,396)
Cash flows from investing activities:
Proceeds from sales of property
and equipment 886 885 388
Purchase of property and equipment (38,932) (18,474) (13,179)
Purchase of spare parts (8,340) (6,483) (5,767)
- ------------------------------------------------------------------------
Cash used in investing
activities (46,386) (24,072) (18,558)
Cash flows from financing activities:
Proceeds from common stock 11,413 3,220 101
Proceeds from notes payable to banks 6,858 13,291 6,530
Proceeds from long-term debt 3,000 - -
Collection of notes receivable for
stock purchases 1,100 908 663
Proceeds from notes payable to
former shareholders - 1,401 -
Repayment of notes payable to banks (2,157) (16,237) (9,239)
Repayment of notes payable to former
shareholders (467) (234) -
Purchase of treasury stock - (2,531) (376)
Payment of dividends on preferred
stock - (1,448) -
- ------------------------------------------------------------------------
Cash provided by (used in)
financing activities 19,747 (1,630) (2,321)
Effect of exchange rate changes on
cash and cash equivalents (29) - (8)
- ------------------------------------------------------------------------
Cash provided by (used in) all
activities 19,120 4,259 (29,283)
Cash and cash equivalents,
beginning of year 24,118 19,859 49,142
- ------------------------------------------------------------------------
Cash and cash equivalents, end
of year $ 43,238 $ 24,118 $ 19,859
========================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
29
<PAGE>
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
1. Summary of Significant Accounting Policies
Principles of Consolidation - The consolidated financial
statements include the accounts of Willbros Group, Inc. ("WGI"), a
Republic of Panama corporation, and all of its majority-owned
subsidiaries (the "Company"). All material intercompany accounts
and transactions are eliminated in consolidation. The ownership
interest of minority participants in subsidiaries that are not
wholly owned (principally in Nigeria and Oman) is included in
accounts payable and accrued liabilities and is not material. The
minority participants' share of the net income of those
subsidiaries is included in other expense.
The consolidated financial statements are prepared in accordance
with generally accepted accounting principles in the United States
and include certain estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities and the reported amounts of
revenues and expenses. Actual results could differ from those
estimates.
Accounts Receivable - Accounts receivable include retainage, all
due within one year, of $1,620 in 1997 and $1,437 in 1996 and are
stated net of allowances for bad debts of $1,001 in 1997 and $1,119
in 1996. The provision (credit) for bad debts was $(8) in 1997,
$(1,024) in 1996 and $694 in 1995.
Spare Parts - Spare parts (excluding expendables), stated net of
accumulated depreciation of $12,874 in 1997 and $9,750 in 1996, are
depreciated over three years on the straight-line method.
Property, Plant and Equipment - Depreciation is provided on the
straight-line method using principally estimated lives of four to
six years. When assets are retired or otherwise disposed of, the
cost and related accumulated depreciation are removed from the
accounts and any resulting gain or loss is recognized in income for
the period. Normal repair and maintenance costs are charged to
expense as incurred. Major overhaul costs are accrued and allocated
to contracts based on estimates of equipment condition.
Significant renewals and betterments are capitalized.
Revenues - Construction and engineering fixed-price contracts
are accounted for using 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.
Estimated contract losses are 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.
Income Taxes - The Company accounts for income taxes by the
asset and liability method under which deferred tax assets and
liabilities are recognized for the future tax consequences of
operating loss and tax credit carryforwards and differences between
the financial carrying values of assets and liabilities and their
tax bases.
Retirement Plans and Benefits - The Company has defined benefit
and defined contribution retirement plans and a postretirement
medical benefits plan that provide retirement benefits to
substantially all regular employees. Qualified plans are
contributory on the part of employees. Pension costs are funded in
accordance with annual actuarial valuations. The Company records
the cost of postretirement medical benefits, which are funded on
the pay-as-you-go basis, over the employees' working lives.
Common Stock Options - The Company follows the intrinsic value
method of accounting for common stock options granted to employees.
Foreign Currency Translation - All significant asset and
liability accounts stated in currencies other than United States
dollars are translated into United States dollars at current
exchange rates. Translation adjustments are accumulated in a
separate component of stockholders' equity. Revenue and expense
accounts are converted at prevailing rates throughout the year.
Foreign currency transaction adjustments and translation
adjustments in highly inflationary economies are recorded in
income.
Cash Flows - In the determination of cash flows, all highly
liquid debt instruments with maturities of less than three months
are considered to be cash equivalents. The Company paid interest
of $817 in 1997, $1,280 in 1996 and $1,712 in 1995 and income taxes
of $4,685 in 1997, $3,676 in 1996 and $2,426 in 1995.
30
<PAGE>
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Earnings per Share - Basic earnings per share is calculated by
dividing net income, less any preferred dividend requirements, by
the weighted-average number of common shares outstanding during the
year. Diluted earnings per share is calculated assuming all
dilutive potential common shares are issued and are outstanding as
of the beginning of the year. The weighted-average number of
common shares assumes that all common shares issued in the twelve
months prior to the initial public offering were outstanding for
all periods presented.
Derivative Financial Instruments - The Company may use
derivatives such as forward contracts, options or other financial
instruments as hedges to mitigate non-U.S. currency exchange risk
when the Company is unable to match non-U.S. currency revenues with
expenses in the same currency. The unrealized gains or losses on
such financial instruments are deferred and recognized when
realized as an adjustment to contract revenue. The Company had no
significant derivative financial instruments as of December 31,
1997 and 1996.
New Accounting Standards - Earnings per share for all periods
presented has been determined in accordance with the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 128,
Earnings Per Share, which established new standards for computing
and presenting earnings per share. Previously reported earnings
per share were not affected by adoption of this standard.
The Company also adopted SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information, which requires
disclosure of revenues and long-lived assets by significant
country. Previously reported information by geographic region has
been restated to conform to the requirements of SFAS 131.
Reclassifications - Certain previously reported amounts have
been reclassified to be consistent with amounts as reported herein.
2. Concentration of Credit Risk
The Company has a concentration of customers in the oil and gas
industry which exposes the Company to a concentration of credit
risk within an industry. The Company seeks to obtain advance and
progress payments for contract work performed on major contracts.
Receivables are generally not collateralized. The Company believes
that its allowance for bad debts is adequate.
3. Contracts in Progress
Most contracts allow for progress billings to be made during
performance of the work. These billings may be made on a basis
different from that used for recognizing revenue. Contracts in
progress for which cost and recognized income exceed billings or
billings exceed cost and recognized income consist of:
<TABLE>
<CAPTION>
December 31,
- ------------------------------------------------------------------------
1997 1996
- ------------------------------------------------------------------------
<S> <C> <C>
Costs incurred on contracts in progress $ 197,700 $ 67,296
Recognized income 2,301 8,763
- ------------------------------------------------------------------------
200,001 76,059
Progress billings and advance payments 212,904 83,518
- ------------------------------------------------------------------------
$ (12,903) $ (7,459)
========================================================================
Contract cost and recognized income not
yet billed $ 8,159 $ 3,643
Contract billings in excess of cost and
recognized income (21,062) (11,102)
- ------------------------------------------------------------------------
$ (12,903) $ (7,459)
========================================================================
</TABLE>
4. Property, Plant and Equipment
Property, plant and equipment, at cost, consist of:
<TABLE>
<CAPTION>
December 31,
- ------------------------------------------------------------------------
1997 1996
- ------------------------------------------------------------------------
<S> <C> <C>
Construction equipment $ 55,495 $ 38,475
Marine equipment 34,484 32,355
Transportation equipment 29,134 16,318
Land, buildings, furniture and equipment 13,112 9,663
- ------------------------------------------------------------------------
132,225 96,811
Less accumulated depreciation and amortization 53,805 43,366
- ------------------------------------------------------------------------
$ 78,420 $ 53,445
========================================================================
</TABLE>
31
<PAGE>
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
5. Notes Payable
The Company has unsecured credit facilities with banks in
certain countries outside the United States. Borrowings under
these lines of $4,874, 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 $7,800 at December 31, 1997.
6. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consist of:
<TABLE>
<CAPTION>
December 31,
- ------------------------------------------------------------------------
1997 1996
<S> <C> <C>
Trade payables $ 22,850 $ 18,471
Payrolls and payroll liabilities 14,832 10,793
Equipment reconditioning and
overhaul reserves 3,605 3,604
- ------------------------------------------------------------------------
$ 41,287 $ 32,868
========================================================================
</TABLE>
7. Long-term Debt
In February 1997, the Company entered into a five-year $150,000
credit agreement, that may be extended annually in one year
increments, subject to certain approvals, for up to an additional
three 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 $100,000 revolving credit
facility, part of which can be used for acquisitions and equity
investments. The entire facility, less amounts used under the
revolving portion 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 percent 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 percent of net income and limits the
Company's ability to purchase its own stock. At December 31, 1997,
outstanding letters of credit totaled $35,210 and there were
borrowings of $3,000, leaving $111,790 available under this
facility.
The Company has notes payable to two former shareholders
requiring quarterly payments of $117 plus interest at the Company's
rate for senior debt to be made through April 15, 1999. The current
portion of these notes, included in notes payable, is $467 and the
long-term portion is $233 at December 31, 1997 and $700 at December
31, 1996.
8. Retirement Plans
The Company has defined benefit plans (pension plans) covering
substantially all regular employees which are funded by employee
and Company contributions. The Company's funding policy is to
contribute at least the minimum required by the Employee Retirement
Income Security Act of 1974 in accordance with annual actuarial
valuations. Benefits under the plans are determined by employee
earnings and credited service. Pension expense includes the
following components:
<TABLE>
<CAPTION>
Year Ended December 31,
- ------------------------------------------------------------------------
1997 1996 1995
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost for benefits
earned during the period $ 1,080 $ 1,136 $ 915
Interest cost on projected
benefit obligation 1,892 1,725 1,608
Actual loss (gain) on plan
assets (4,159) (3,325) (4,855)
Deferred gain on plan assets 1,912 1,301 3,285
Amortization (15) (2) -
- ------------------------------------------------------------------------
$ 710 $ 835 $ 953
========================================================================
</TABLE>
32
<PAGE>
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Accrued pension liability includes the following components:
<TABLE>
<CAPTION>
December 31,
- ------------------------------------------------------------------------
1997 1996 1995
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Projected benefit obligation
over(under) plan assets:
Projected benefit obligation:
Vested benefits $ 23,679 $ 20,963 $ 20,477
Nonvested benefits 898 383 505
- ------------------------------------------------------------------------
Accumulated benefits 24,577 21,346 20,982
Related to future pay
increases 6,343 4,437 4,180
- ------------------------------------------------------------------------
30,920 25,783 25,162
Plan assets at fair value
(primarily listed stocks
and bonds) (30,514) (26,995) (23,660)
- ------------------------------------------------------------------------
406 (1,212) 1,502
Unrecognized net gain (loss) 1,550 2,456 (499)
Unrecognized prior service cost (203) (228) (253)
Transition asset at January 1, 1987 115 143 172
- ------------------------------------------------------------------------
$ 1,868 $ 1,159 $ 922
========================================================================
</TABLE>
The projected benefit obligation is determined using a weighted
average discount rate of 7.0 percent at December 31, 1997, 7.5
percent at December 31, 1996, and 7.0 percent at December 31, 1995.
The rate of increase in future pay increases is 6.0 percent and
assets are expected to have a long-term rate of return of 8.5
percent. The transition asset is amortized over 15 years.
The Company has a defined contribution plan which is funded by
participating employee contributions and the Company. The Company
matches employee contributions up to a maximum of 4 percent of
salary in cash or beginning in 1997, if the participant so elects,
up to 5 percent of salary in WGI common stock. Company
contributions for this plan were $636 (including $200 of WGI common
stock) in 1997, $569 in 1996 and $506 in 1995.
The Company's Executive Benefit Restoration Plan partially
restores benefits to certain executives whose benefits under the
defined benefit pension plans are reduced as a result of
limitations imposed by the U. S. Internal Revenue Code. Plan
expense is $357 in 1997, $325 in 1996 and $303 in 1995 and plan
liability, included in accounts payable and accrued liabilities, is
$1,369 at December 31, 1997 and $1,061 at December 31, 1996. The
Company established a trust to fund benefit payments.
Contributions of assets to the trust by the Company are irrevocable
but are subject to creditor claims under certain conditions.
Assets held in trust, included in other assets, are $1,367 at
December 31, 1997, and $974 at December 31, 1996.
9. Postretirement Medical Benefits
Postretirement medical benefit expense is $511 in 1997, $589 in
1996 and $690 in 1995 and includes service cost of $237 in 1997,
$242 in 1996 and $262 in 1995 and interest cost of $326 in 1997,
$347 in 1996 and $405 in 1995 and amortization of $(52) in 1997 and
$23 in 1995.
Accrued postretirement medical benefit liability includes the
following components:
<TABLE>
<CAPTION>
December 31,
- ------------------------------------------------------------------------
1997 1996
- ------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit
obligation:
Retirees $ 1,568 $ 1,734
Fully eligible active plan participants 670 528
Other active plan participants 1,998 2,093
- ------------------------------------------------------------------------
Accumulated postretirement benefits 4,236 4,355
Unrecognized net gain 1,322 1,027
Prior service cost 243 -
- ------------------------------------------------------------------------
$ 5,801 $ 5,382
========================================================================
</TABLE>
The non-current portion of the liability, $5,703 at December 31,
1997, and $5,282 at December 31, 1996, is included in other
liabilities.
The weighted average annual assumed rate of increase in the per
capita cost of covered benefits is 7.0 percent for 1997 and is
assumed to decrease to 5.5 percent by the year 2006 and to remain
at that level. The discount rate used in determining the liability
is 7.0 percent at December 31, 1997, 7.5 percent at December 31,
1996, and 7.0 percent at December 31, 1995. Increasing the assumed
health care cost trend rates by one percentage point in each year
would increase the postretirement medical liability at December 31,
1997 by $453 and expense for 1997 by $97.
33
<PAGE>
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
10. Income Taxes
The provision (credit) for income taxes represents income taxes
arising as a result of operations and credits for revision of
previous estimates of income taxes payable in a number of
countries. The Company is not subject to income tax in Panama on
income earned outside of Panama. All income has been earned
outside of Panama; therefore, there is no expected relationship
between income (loss) before income taxes and the provision
(credit) for income taxes. The effective consolidated tax rate
differs from the statutory tax rate in each country because taxable
income and operating losses from different countries cannot be
offset and tax rates and methods of determining taxes payable are
different in each country.
Income (loss) before income taxes and the provision (credit) for
income taxes in the Consolidated Statements of Income consist of:
<TABLE>
<CAPTION>
Year Ended December 31,
- ------------------------------------------------------------------------
1997 1996 1995
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Income (loss) before income
taxes:
Other countris $ 20,038 $ 12,888 $ 16,044
United States (199) (7,832) (4,178)
- ------------------------------------------------------------------------
$ 19,839 $ 5,056 $ 11,866
========================================================================
Provision (credit) for income taxes:
Currently payable:
Other countries $ 5,723 $ 3,696 $ 893
United States:
Federal - - -
State - (206) 8
- ------------------------------------------------------------------------
5,723 3,490 901
Deferred, other countries - (1,158) (976)
- ------------------------------------------------------------------------
$ 5,723 $ 2,332 $ (75)
========================================================================
</TABLE>
The Company has a deferred tax asset in the United States of
$18,635 at December 31, 1997, and $20,329 at December 31, 1996,
relating to United States net operating loss and credit
carryforwards and employee benefit expense, and a deferred tax
liability of $1,584 at December 31, 1997, and $1,565 at December
31, 1996, relating to excess tax depreciation. The net deferred
tax asset is reduced to zero by a valuation allowance. The Company
has a deferred tax liability in other countries of $200 at December
31, 1997 and 1996, related to temporary differences, principally in
contract revenues and expenses.
The Company has $41,020 in United States net operating loss
carryforwards and $972 of United States investment tax credit
carryforwards at December 31, 1997. The United States net
operating loss carryforwards will expire, unless utilized,
beginning in 1998 and ending December 31, 2011. The carryforwards
available on an annual basis are limited. At December 31, 1997,
the Company has nonexpiring operating loss carryforwards in the
United Kingdom of $30,100 (Pounds 18,400) and in Kuwait of $1,400
(KD429), and a net operating loss carryforward expiring over three
years in Venezuela of $2,000 (Bolivars 1,000,000).
11. Stock Ownership Plans
During May 1996, the Company established the Willbros Group,
Inc. 1996 Stock Plan (the "1996 Plan") with 1,125,000 shares of
common stock authorized for issuance to provide for awards to key
employees of the Company, and the Willbros Group, Inc. Director
Stock Plan (the "Director Plan") with 125,000 shares of common
stock authorized for issuance to provide for the grant of stock
options to non-employee directors.
Options granted under the 1996 Plan vest 25 percent at the
date of grant and 25 percent each January 1 thereafter. Options
granted under the Director Plan vest immediately. At December 31,
1997, the 1996 Plan has 681,000 shares and the Director Plan has
83,000 shares available for grant.
The per share weighted-average fair value of options granted
is calculated using the Black Scholes option-pricing model,
assuming the options have a life of three years, the average risk-
free interest rate at the dates of grant is 5.84 percent in 1997
(6.01 percent in 1996) and volatility is 36.37 percent in 1997
(35.15 percent in 1996).
34
<PAGE>
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
The Company's stock option activity and related information
consists of:
<TABLE>
<CAPTION>
Year Ended December 31,
- ------------------------------------------------------------------------
1997 1996
- ------------------------------------------------------------------------
Weighted- Weighted-
Average Average
Exercise Exercise
Shares Price Shares Price
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding, beginning
of year 481,000 $ 9.08 - $ -
Granted 5,000 18.95 481,000 9.08
Exercised 1,500 9.13 - -
- ------------------------------------------------------------------------
Outstanding, end of
year 484,500 9.19 481,000 9.08
========================================================================
Exercisable at end
of year 310,750 9.22 148,000 9.21
========================================================================
</TABLE>
The weighted-average fair value of options granted during the
year was $5.98 in 1997 ($2.85 in 1996). Exercise prices for
options outstanding as of December 31, 1997 ranged from $8.67 to
$19.44. The weighted-average remaining contractual life of those
options is 8.8 years.
No compensation expense for the options granted under the 1996
Plan and the Director Plan is recorded. Had compensation expense
for vested options been recorded, the Company's net income would
have been reduced to $13,624 in 1997 ($2,310 in 1996), basic
earnings per share would have been reduced to $.94 in 1997 ($.06 in
1996), and diluted earnings per share would have been reduced to
$.93 in 1997 ($.06 in 1996).
Under employee stock ownership plans established in 1992 and
1995, certain key employees were issued options to purchase common
stock at a discount from fair value and were allowed to finance up
to 9 percent of the option price with three-year non-interest
bearing recourse notes. Options were issued to purchase 195,000
shares (including 42,000 treasury shares) of common stock at $3.83
per share in 1995. During May 1996, options were issued to
purchase 273,000 shares of common stock, all from treasury stock,
at $4.53 per share and 5,192 shares of preferred stock, all from
treasury, at $136 per share. All options were exercised shortly
after issuance. The Company had an obligation to purchase, under
certain conditions and at a formula price, stock held by retiring
or terminating employees, and recorded as compensation expense the
change in the redemption value at the end of each period using the
maximum formula price. The Company recognized a non-cash
compensation expense of $4,695 for the difference between the
maximum redemption value of the shares subject to redemption and
the initial public offering price upon the effectiveness of the
initial public offering. The maximum redemption amount was
classified outside of stockholders' equity in the consolidated
balance sheets. The Company's redemption obligation terminated in
the fourth quarter of 1996.
12. Segment Information
The Company operates in a single industry segment. The main
lines of business include construction, engineering and specialty
services to the oil and gas industry. Due to a limited number of
major projects and clients, the Company may at any one time have a
substantial part of its operations dedicated to one project, client
and country.
Customers with more than 10% of contract revenue are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
- ----------------------------------------------------------------------
1997 1996 1995
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Customer A 13 % 33 % 32 %
Customer B - 16 13
Customer C 10 - -
Customer D 10 - -
- ----------------------------------------------------------------------
33 % 49 % 45 %
======================================================================
</TABLE>
35
<PAGE>
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Information about the Company's operations in its significant
work countries is shown below:
<TABLE>
<CAPTION>
Year Ended December 31,
- ------------------------------------------------------------------------
1997 1996 1995
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Contract revenues:
United States (1) $ 78,849 $ 32,918 $ 52,100
Nigeria 75,982 87,283 95,972
Venezuela 31,830 18,897 19,553
Indonesia 27,951 1,477 -
Oman 22,846 23,513 20,873
Pakistan 13,889 32,732 29,728
Other 530 868 2,280
- ------------------------------------------------------------------------
$ 251,877 $ 197,688 $ 220,506
========================================================================
Long-lived assets:
United States $ 10,882 $ 9,891 $ 9,503
Nigeria 27,106 27,325 19,700
Venezuela 30,433 10,451 8,902
Indonesia 8,077 985 -
Oman 8,382 9,148 8,317
Other 925 1,369 2,511
- ------------------------------------------------------------------------
$ 85,805 $ 59,169 $ 48,933
========================================================================
</TABLE>
- -------------------------
(1) Net of inter-country revenues of $4,365 in 1997, $3,052 in
1996 and $4,986 in 1995.
13. Fair Value of Financial Instruments
The carrying value of financial instruments does not materially
differ from fair value.
14. Public Offerings
A secondary offering of the Company's common stock was
completed in October 1997, with the sale of 4,528,250 shares of
common stock, consisting of 590,641 newly issued shares resulting
in net proceeds to the Company of $11,699 before offering costs and
3,937,609 shares sold by certain stockholders of the Company for
which the Company did not receive any proceeds.
An initial public offering of the Company's common stock was
completed in August 1996, with the sale of 5,490,500 shares of
common stock, consisting of 525,980 newly issued shares resulting
in net proceeds to the Company of $4,892 before offering costs and
4,964,520 shares sold by a stockholder of the Company for which the
Company did not receive any proceeds.
In July 1996, prior to the initial public offering, all 362,000
shares of $100 redeemable preferred stock of the Company then
outstanding were converted into common stock of the Company at a
conversion rate of 30 shares of common stock for each share of
preferred stock.
15. 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 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 consolidated financial statements.
36
<PAGE>
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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.
The Company has certain operating leases for office and camp
facilities. Rental expense, excluding daily rentals and
reimbursable rentals under cost plus contracts, was $2,962 in 1997,
$2,112 in 1996, and $1,896 in 1995. Minimum lease commitments
under operating leases as of December 31, 1997, total $12,085 and
are payable as follows: 1998, $3,315; 1999, $2,346; 2000, $1,935;
2001, $1,756; 2002, $1,682; and later years, $1,051.
16. Quarterly Financial Data (Unaudited)
Selected unaudited quarterly financial data for the years ended
December 31, 1997 and 1996:
<TABLE>
<CAPTION>
First Second Third
Quarter Quarter Quarter
- ------------------------------------------------------------------------
<S> <C> <C> <C>
December 31, 1997:
Contract revenues $ 51,165 $ 57,280 $ 72,815
Operating income 4,800 4,615 5,244
Income before income
taxes 4,503 4,174 4,995
Net income 2,454 3,025 3,883
Earnings per share:
Basic .17 .21 .27
Diluted .17 .21 .27
December 31, 1996:
Contract revenues $ 53,479 $ 48,977 $ 47,407
Compensation from
changes in redemption
value 142 1,285 4,695
Operating income (loss) 2,387 2,308 (1,499)
Income (loss) before
income taxes 2,327 2,277 (2,486)
Net income (loss) 2,044 1,386 (2,841)
Earnings (loss) per share,
basic and diluted .09 .05 (.20)
</TABLE>
<TABLE>
<CAPTION>
Fourth
Quarter Total
- ------------------------------------------------------------------------
<S> <C> <C>
December 31, 1997:
Contract revenues $ 70,617 $ 251,877
Operating income 6,729 21,388
Income before income
taxes 6,167 19,839
Net income 4,754 14,116
Earnings per share:
Basic .32 .97
Diluted .31 .96
December 31, 1996:
Contract revenues $ 47,825 $ 197,688
Compensation from
changes in redemption
value - 6,122
Operating income (loss) 2,823 6,019
Income (loss) before
income taxes 2,938 5,056
Net income (loss) 2,135 2,724
Earnings (loss) per share,
basic and diluted .15 .09
</TABLE>
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
method by which revenues are recognized.
There were favorable variances in the fourth quarter of 1997
compared to the fourth quarter of 1996. Contract revenues
increased due to projects in Indonesia, Venezuela and the United
States. Operating income and net income increased due to favorable
progress on a project in Indonesia and less cost being incurred on
a project in Pakistan.
During the first three quarters of 1996, the Company incurred
compensation from changes in redemption value of shares. These non-
cash charges resulted in an operating and net loss in the third
quarter of 1996.
37
<PAGE>
COMMON STOCK INFORMATION AND DIVIDEND POLICY
The Company's Common stock commenced trading on August 15, 1996, on
the New York Stock Exchange under the symbol WG. As of December
31, 1997, there were 180 stockholders of record. The table below
sets forth the common stock trading price for the subsequent
quarterly periods.
<TABLE>
<CAPTION>
1996 1997
- -----------------------------------------------------------------------
High Low High Low
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
First Quarter NA NA $10-5/8 $8-7/8
Second Quarter NA NA $16 $9
Third Quarter $11-7/8 $9-5/8 $21-3/4 $14-5/8
Fourth Quarter $11 $9 $24-7/16 $14-3/8
</TABLE>
The Company does not presently pay a common stock dividend and
presently intends to retain its earnings to fund the development
and future growth of its business.
38
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
Jurisdiction
Company Name of
and Incorporation
Name Under Which it is Doing Business or
(if applicable) Organization
- ------------------------------------- --------------
<S> <C>
Arctic Constructors Limited Canada
Associated Contractors Equipment Corporation Panama
Construcciones Acuaticas Mundiales, S.A. Venezuela
Constructora CAMSA, C.A. Venezuela
Contratistas Transandinos, S.A. d/b/a/ COTRA Colombia
Cruzamientos Direccionales Orizzon, S.A. de C.V. Mexico
"ESCA" Equipment Service Compania Anonima Venezuela
International Pipeline Equipment, Inc. Panama
Interproject Engineers Limited Cayman Islands
Inversiones CAMSA, C.A. Venezuela
Inversiones Willbros del Ecuador, S.A. Panama
Kompaniya Willbros A/O Russia
Monastere Inc. Delaware, USA
Musketeer Oil B.V. Netherlands
Osage Oilfield Services, Inc. Oklahoma, USA
Pipeline Contractors Inc. Panama
Pipelines & Logistics, Inc. Delaware, USA
Pretensado S.A. Venezuela
Servicios Petroleros Willbros, S.A. de C.V. Mexico
Shield Constructors, Inc. Panama
Shield International Engineering, Inc. Panama
The Oman Construction Company, LLC Oman
Vessel MWB 403, Inc. Delaware, USA
Vintondale Corporation N.V. Netherlands Antilles
Willbros Al-Rushaid Limited Saudi Arabia
Willbros Alaska, Inc. Delaware, USA
Willbros Andina Pipeline Investments, L.L.C. Delaware, USA
Willbros Azerbaijan Limited Cayman Islands
Willbros Bolivia, S.A. Panama
Willbros Butler International, Inc. Panama
Willbros Chile, S.A. Chile
Willbros Construction & Engineering - Egypt, LLC Egypt
Willbros Constructors, Inc. Cayman Islands
Willbros Constructors, Inc. Panama
Willbros Contracting Limited Cyprus
Willbros Energy Services Company Delaware, USA
Willbros Engineering & Construction Limited Canada
Willbros Engineers, Inc. Delaware, USA
1
<PAGE>
<CAPTION>
Jurisdiction
Company Name of
and Incorporation
Name Under Which it is Doing Business or
(if applicable) Organization
- ------------------------------------- --------------
<S> <C>
Willbros Far East, Inc. Vanuatu
Willbros Far East (PNG) Pty Ltd Papua New Guinea
Willbros Far East Sdn. Bhd. Malaysia
Willbros Gabon, S.A. Panama
Willbros, Inc. Delaware, USA
Willbros International (Germany) G.m.b.H. Germany
Willbros International, Inc. Panama
Willbros International Pty Limited Australia
Willbros Iran, Inc. Panama
Willbros Kuwait Gas & Oil Field Services Co. (K.C.S.C.) Kuwait
Willbros Latina, S.A. Panama
Willbros (Malaysia) Sdn. Bhd. Malaysia
Willbros Middle East, Inc. Panama
Willbros (Nigeria) Limited Nigeria
Willbros (Overseas) Limited United Kingdom
Willbros Suramerica, S.A. Panama
Willbros (U.K.) Limited United Kingdom
Willbros USA, Inc. Delaware, USA
Willbros West Africa, Inc. Panama
Willgrande, L.L.C. Oklahoma, USA
Willsip, L.L.C. Oklahoma, USA
</TABLE>
2
<PAGE>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Willbros Group, Inc.:
We consent to incorporation by reference in the registration
statements Nos. 333-18421 and 333-21399 on Form S-8 of Willbros
Group, Inc. of our report dated January 31, 1998, relating to the
consolidated balance sheets of Willbros Group, Inc. and
subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of income, stockholders' equity, and cash
flows for each of the years in the three-year period ended December
31, 1997, and the related schedule, which reports are incorporated
by reference in the December 31, 1997 annual report on Form 10-K
of Willbros Group, Inc.
KPMG PEAT MARWICK
Panama City, Panama
March 27, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S DECEMBER 31, 1997 FORM 10-K AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 43,238
<SECURITIES> 0
<RECEIVABLES> 58,625
<ALLOWANCES> 1,620
<INVENTORY> 0
<CURRENT-ASSETS> 112,424
<PP&E> 132,225
<DEPRECIATION> 53,805
<TOTAL-ASSETS> 201,202
<CURRENT-LIABILITIES> 72,861
<BONDS> 0
0
0
<COMMON> 750
<OTHER-SE> 118,236
<TOTAL-LIABILITY-AND-EQUITY> 201,202
<SALES> 251,877
<TOTAL-REVENUES> 251,877
<CGS> 182,435
<TOTAL-COSTS> 230,489
<OTHER-EXPENSES> 1,549
<LOSS-PROVISION> (8)
<INTEREST-EXPENSE> 814
<INCOME-PRETAX> 19,839
<INCOME-TAX> 5,723
<INCOME-CONTINUING> 14,116
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,116
<EPS-PRIMARY> .97
<EPS-DILUTED> .96
</TABLE>
