<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
----------------------------------
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- --- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- --- SECURITIES EXCHANGE ACT OF 1934
For the transition period from -------- to ---------
Commission file number 1-11953
Willbros Group, Inc.
(Exact name of registrant as specified in its charter)
Republic of Panama 98-0160660
(Jurisdiction of incorporation)(I.R.S. Employer Identification Number)
Dresdner Bank Building
50th Street, 8th Floor
P. O. Box 850048
Panama 5, Republic of Panama
Telephone No.: (50-7) 263-9282
(Address, including zip code, and telephone number, including
area code, of principal executive offices of registrant)
NOT APPLICABLE
- -------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
--- ---
The number of shares of the registrant's Common Stock, $.05 par
value, outstanding as of August 10, 1998 was 15,006,978.
===============================================================================
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
WILLBROS GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
June December
30, 31,
1998 1997
---------- ----------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 10,430 $ 43,238
Accounts receivable 62,143 57,005
Contract cost and recognized income
not yet billed 17,377 8,159
Prepaid expenses 4,318 4,022
---------- ----------
Total current assets 94,268 112,424
Spare parts, net 9,368 7,385
Property, plant and equipment, net 76,755 78,420
Other assets 5,972 2,973
---------- ----------
Total assets $ 186,363 $ 201,202
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 2,592 $ 5,341
Accounts payable and accrued liabilities 39,276 41,287
Accrued income taxes 5,281 5,171
Contract billings in excess of cost and
recognized income 6,120 21,062
---------- ----------
Total current liabilities 53,269 72,861
Deferred income taxes 200 200
Long-term debt - 3,233
Other liabilities 5,976 5,922
---------- ----------
Total liabilities 59,445 82,216
Stockholders' equity:
Class A Preferred Stock, par value $.01 per
share, 1,000,000 shares authorized, none issued - -
Common stock, par value $.05 per share,
35,000,000 shares authorized; 15,049,640
shares issued at June 30, 1998 (14,992,320
at December 31, 1997) 752 750
Capital in excess of par value 67,453 66,857
Retained earnings 61,104 54,276
Notes receivable for stock purchases (1,814) (2,084)
Accumulated other comprehensive income (loss) (577) (813)
---------- ----------
Total stockholders' equity 126,918 118,986
---------- ----------
Total liabilities and stockholders' equity $ 186,363 $ 201,202
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
WILLBROS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share amounts)
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
---------------------- ----------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Contract revenues $ 78,752 $ 57,280 $ 140,587 $ 108,445
Operating expenses:
Contract 57,472 41,155 101,766 76,930
Depreciation and
amortization 6,342 4,291 12,312 8,195
General and
administrative 8,320 7,219 16,762 13,905
---------- ---------- ---------- ----------
72,134 52,665 130,840 99,030
---------- ---------- ----------- ----------
Operating income 6,618 4,615 9,747 9,415
Other income (expense):
Interest - net (255) 10 (203) 68
Minority interest (476) (487) (869) (939)
Other - net (785) 36 183 133
---------- ---------- ---------- ----------
(1,516) (441) (889) (738)
---------- ---------- ---------- ----------
Income before income
taxes 5,102 4,174 8,858 8,677
Provision for income taxes 1,314 1,149 2,030 3,198
---------- ---------- ---------- ----------
Net income $ 3,788 $ 3,025 $ 6,828 $ 5,479
========== ========== ========== ==========
Earnings per common share:
Basic $ .25 $ .21 $ .45 $ .38
========== ========== ========== ==========
Diluted $ .25 $ .21 $ .45 $ .38
========== ========== ========== ==========
Weighted average number of
common shares outstanding:
Basic 15,042,669 14,389,572 15,021,808 14,387,776
========== ========== ========== ==========
Diluted 15,276,982 14,484,333 15,240,198 14,445,869
========== ========== ========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
WILLBROS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share amounts)
(Unaudited)
Capital
Common Stock in Excess
---------------------- of Par Retained
Shares Par Value Value Earnings
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Balance, January 1, 1998 14,992,320 $ 750 $ 66,857 $ 54,276
Net income - - - 6,828
Collection of notes
receivable - - - -
Issuance of common stock
under employee benefit
plan 10,870 - 172 -
Exercise of stock options 46,450 2 424 -
Other comprehensive income -
foreign currency
translation adjustments - - - -
---------- ---------- ---------- ----------
Balance, June 30, 1998 15,049,640 $ 752 $ 67,453 $ 61,104
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
CONTINUED-
Accumulated
Notes Other
Receivable Compre- Total
for hensive Stock-
Stock Income holders'
Purchases (Loss) Equity
---------- ---------- ----------
<S> <C> <C> <C>
Balance, January 1, 1998 $ (2,084) $ (813) $ 118,986
Net income - - 6,828
Collection of notes
receivable 270 - 270
Issuance of common stock
under employee benefit
plan - - 172
Exercise of stock options - - 426
Other comprehensive income -
foreign currency
translation adjustments - 236 236
---------- ---------- ----------
Balance, June 30, 1998 $ (1,814) $ (577) $ 126,918
========== ========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
WILLBROS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months
Ended June 30,
----------------------
1998 1997
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 6,828 $ 5,479
Reconciliation of net income to cash
provided by (used in) operating activities:
Depreciation and amortization 12,312 8,195
(Gain) loss on sales and retirements (167) 29
Changes in operating assets and liabilities:
Accounts receivable (5,138) (9,801)
Contract cost and recognized income
not yet billed (9,218) 108
Prepaid expenses and other assets (3,295) (2,698)
Accounts payable and accrued liabilities (2,011) 2,135
Accrued income taxes 110 933
Contract billings in excess of cost and
recognized income (14,942) (1,848)
Other liabilities 54 209
---------- ----------
Cash provided by (used in) operating
activities (15,467) 2,741
Cash flows from investing activities:
Proceeds from sales of property and equipment 1,183 62
Purchase of property and equipment (7,292) (11,904)
Purchase of spare parts (6,354) (2,936)
---------- ----------
Cash used in investing activities (12,463) (14,778)
Cash flows from financing activities:
Proceeds from common stock 598 65
Proceeds from notes payable to banks 2,003 1,682
Repayments of long-term debt (3,000) -
Collection of notes receivable for stock
purchases 270 754
Repayment of notes payable to banks (4,752) (259)
Repayment of notes payable to former
shareholders (233) (233)
---------- ----------
Cash provided by (used in)
financing activities (5,114) 2,009
Effect of exchange rate changes on cash and
cash equivalents 236 -
---------- ----------
Cash used in all activities (32,808) (10,028)
Cash and cash equivalents, beginning of period 43,238 24,118
---------- ----------
Cash and cash equivalents, end of period $ 10,430 $ 14,090
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
1. Basis of Presentation
The condensed consolidated financial statements of Willbros
Group, Inc. and its majority-owned subsidiaries (the "Company")
reflect all adjustments which are, in the opinion of management,
necessary to present fairly the financial position, results of
operations and cash flows of the Company as of June 30, 1998, and
for all interim periods presented. All adjustments are normal
recurring accruals.
Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted.
These condensed consolidated financial statements should be read in
conjunction with the Company's December 31, 1997 audited
consolidated financial statements and notes thereto contained in
the Company's Annual Report to Stockholders for the year ended
December 31, 1997. The results of operations for the period ended
June 30, 1998, are not necessarily indicative of the operating
results to be achieved for the full year.
2. Foreign Exchange Risk
The Company attempts to negotiate contracts which provide for
payment in U. S. dollars, but it may be required to take all or a
portion of payment under a contract in another currency. To
mitigate non-U.S. currency exchange risk, the Company seeks to
match anticipated non-U.S. currency revenues with expenses in the
same currency whenever possible. To the extent it is unable to
match non-U.S. currency revenues with expenses in the same
currency, the Company may use forward contracts, options or other
common hedging techniques in the same non-U.S. currencies. The
unrealized gains or losses on financial instruments used to hedge
currency risk are deferred and recognized when realized as an
adjustment to contract revenue.
3. Earnings Per Share
Basic and diluted earnings are computed as follows:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
---------------------- ----------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income applicable
to common shares $ 3,788 $ 3,025 $ 6,828 $ 5,479
========== ========== ========== ==========
Weighted average
number of common
shares outstanding for
basic earnings per
share 15,042,669 14,389,572 15,021,808 14,387,776
Effect of dilutive
potential common
shares from stock
options 234,313 94,761 218,390 58,093
---------- ---------- ---------- ----------
Weighted average
number of
common shares
outstanding
for diluted
earnings per share 15,276,982 14,484,333 15,240,198 14,445,869
========== ========== ========== ==========
Earnings per common
share:
Basic $ .25 $ .21 $ .45 $ .38
========== ========== ========== ==========
Diluted $ .25 $ .21 $ .45 $ .38
========== ========== ========== ==========
</TABLE>
6
<PAGE>
WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
4. Comprehensive Income
In the first quarter of 1998, the Company adopted Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive
Income." The standard requires reporting of comprehensive income,
which includes all changes in stockholders' equity other than
additional investments by stockholders or distributions to
stockholders. Comprehensive income for the Company includes net
income and foreign currency translation adjustments which are
charged or credited to the cumulative foreign currency translation
adjustment account within stockholders' equity. There were no
related tax effects associated with the Company's calculation of
comprehensive income. Comprehensive income for the periods ended
June 30, 1998 and 1997, consists of:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
---------------------- ----------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income $ 3,788 $ 3,025 $ 6,828 $ 5,479
Other comprehensive
income - foreign
currency translation
adjustments 124 - 236 -
---------- ---------- ---------- ----------
Comprehensive
income $ 3,912 $ 3,025 $ 7,064 $ 5,479
========== ========== ========== ==========
</TABLE>
5. Contingencies, Commitments and Other Circumstances
The Company provides construction, engineering and specialty
services to the oil and gas industry. The Company's principal
markets are currently Africa, Asia, the Middle East, South America
and the United States. Operations outside the United States may be
subject to certain risks which ordinarily would not be expected to
exist in the United States, including foreign currency
restrictions, extreme exchange rate fluctuations, expropriation of
assets, civil uprisings and riots, government instability and legal
systems of decrees, laws, regulations, interpretations and court
decisions which are not always fully developed and which may be
retroactively applied. Management is not presently aware of any
events of the type described in the countries in which it operates
that have not been provided for in the accompanying condensed
consolidated financial statements. Based upon the advice of local
advisors in the various work countries concerning the
interpretation of the laws, practices and customs of the countries
in which it operates, management believes the Company has followed
the current practices in those countries; however, because of the
nature of these potential risks, there can be no assurance that the
Company may not be adversely affected by them in the future. The
Company insures substantially all of its equipment in countries
outside the United States against certain political risks and
terrorism.
The Company has the usual liability of contractors for the
completion of contracts and the warranty of its work. Where work
is performed through a joint venture, the Company also has possible
liability for the contract completion and warranty responsibilities
of its joint venturers. Management is not aware of any material
exposure related thereto, which has not been provided for in the
accompanying condensed consolidated financial statements.
7
<PAGE>
WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
5. Contingencies, Commitments and Other Circumstances
(continued)
Certain post contract completion audits and reviews are being
conducted by clients and/or government entities. While there can be
no assurance that claims will not be received as a result of such
audits and reviews, management does not believe a legitimate basis
for any material claims exists. At the present time it is not
possible for management to estimate the likelihood of such claims
being asserted or, if asserted, the amount or nature thereof.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The Company derives its revenues from providing construction,
engineering and specialty services to the oil and gas industry and
government entities worldwide. The Company obtains contracts for
its work primarily by competitive bidding or through negotiations
with long-standing clients. Bidding activity, backlog and revenues
resulting from the award of contracts to the Company may vary
significantly from period to period.
A number of factors relating to the Company's business affect
the Company's recognition of contract revenues. Revenues from fixed-
price construction and engineering contracts are recognized on the
percentage-of-completion method. Under this method, estimated
contract revenues are accrued based generally on the percentage
that costs to date bear to total estimated costs, taking into
consideration physical completion. Generally, the Company does not
recognize income on a fixed-price contract until the contract is
approximately 10% complete. Costs which are considered to be
reimbursable are excluded before the percentage-of-completion
calculation is made. Accrued revenues pertaining to reimbursables
are limited to the cost of the reimbursables. If a current estimate
of total contract cost indicates a loss on a contract, the
projected loss is recognized in full when determined. Revenues from
unit-price contracts are recognized as earned. Revenues from change
orders, extra work, variations in the scope of work and claims are
recognized when realization is assured.
The Company derives its revenues from contracts with durations
from a few weeks to several months or in some cases, more than a
year. Unit-price contracts provide relatively even quarterly
results; however, major projects are usually fixed-price contracts
that may result in uneven quarterly financial results due to the
nature of the work and the method by which revenues are recognized.
These financial factors, as well as external factors such as
weather, client needs, client delays in providing approvals, labor
availability, governmental regulation and politics may affect the
progress of a project's completion and thus the timing of revenue
recognition. The Company believes that its operating results should
be evaluated over a relatively long time horizon during which major
contracts in progress are completed and change orders, extra work,
variations in the scope of work and cost recoveries and other
claims are negotiated and realized.
Lower oil prices, the continuing economic slowdown in Asia and
unusual weather in several places where the Company operates have had
some affect on the Company's operations. The current low oil prices
and the uncertainty as to when prices will improve have had a negative
influence on the Company's clients' capital spending plans. As a
direct result, the Company is experiencing reduced demand for its
specialty services, especially in Nigeria and Oman. While the longer term
effect of lower oil prices on future construction activity is unclear,
the Company does not anticipate that any of the projects in its
current backlog will be deferred or cancelled. However, a number of
projects the Company has been following in Asia have been delayed.
9
<PAGE>
The Company recognizes anticipated contract revenues as backlog
when the award of a contract is reasonably assured. Anticipated
revenues from post-contract award processes, including change
orders, extra work, variations in the scope of work and the effect
of escalation or currency fluctuation formulas, are not added to
backlog until their realization is reasonably assured. Backlog increased
$38.7 million (27%) to $183.2 million during the quarter ended
June 30, 1998. Total backlog consists of (a) construction backlog of
$73.5 million down $38.8 million (35%) from March 31, 1998; (b)
engineering backlog of $25.7 million, down $4.1 million (14%) from
March 31, 1998; and (c) specialty services backlog of
$84.0 million, up $81.6 million from March 31, 1998. The increase
in backlog consists of increases of $34.3 million in Nigeria and
$21.4 million in Venezuela, offset by decreases in backlog of
$8.5 million in Indonesia, $3.3 million in the United States,
$2.9 million in Oman, $1.1 million in Pakistan, $.8 million in
Mexico, and $.4 million in the Ivory Coast. New contract awards
totaled $117.9 million during the quarter ended June 30, 1998. New
contract awards consist of $15.8 million in construction backlog,
$13.4 million in engineering backlog and $88.7 million in specialty
services backlog. The increase in specialty services backlog is
primarily attributable to two major contract awards in the quarter
ended June 30, 1998: a sixteen year water injection contract awarded
to a consortium in which the Company has a 10% interest in Venezuela
and a three year dredging contract in Nigeria.
Results of Operations
The Company's contract revenues and contract costs are
primarily related to the timing and location of development
projects in the oil and gas industry worldwide. Contract revenues
and cost variations by country from year to year are the result of
(a) entering new countries as part of the Company's strategy for
geographical diversification, (b) the execution of new contract
awards, (c) the completion of contracts, and (d) the overall level
of activity in the Company's lines of business.
Three Months Ended June 30, 1998, Compared to Three Months Ended
June 30, 1997
Contract revenues increased $21.6 million (38%) to $78.8 million
due to (a) $31.7 million of additional construction revenues
resulting primarily from construction contracts in Venezuela, the
United States, Oman and Indonesia; offset by (b) a decrease of
$3.8 million in specialty services revenues, principally in
Nigeria; and (c) a decrease in engineering revenues of
$6.3 million. Venezuela revenues increased $20.4 million (580%)
primarily due to work on a pipeline contract that includes the
construction of 120 miles (200 kilometers) each of 36 inch and
20 inch pipelines. Indonesia revenues increased $3.2 million (60%)
due to work on a 35 mile (55 kilometer) 42 inch pipeline in
Kalimantan. Revenues in the United States increased $3.0 million
principally due to work performed on a 94 mile (150 kilometer)
36 inch natural gas pipeline in Iowa. Revenues in Oman increased
$1.7 million primarily because of work performed on two pipeline
construction contracts and a pressure reducing terminal.
Nigeria revenues decreased $4.6 million (25%) primarily as a result
of a reduction in specialty services work attributable to delays in
funding from the Nigerian government which has caused a slowdown in
the award of specialty services projects. Although the Company has
seen early indications that the Nigerian government is taking steps
toward resolving these funding issues, it is unclear as to when
specialty services activity in that country will return to
historical levels. Revenues from Pakistan decreased $2.4 million
(58%) due to the completion of an Engineering, Procurement, and
Construction contract.
Contract costs increased $16.4 million (40%) to $57.5 million
due to an increase of $30.5 million in construction services cost,
offset by a decrease of $11.5 million in engineering services cost
and a decrease of $2.6 million in specialty services cost.
Variations in contract cost by country were closely related to the
variations in contract revenues.
Depreciation and amortization increased $2.0 million to
$6.3 million primarily due to additions made to the equipment fleet
in 1997 to prepare for new contracts in Indonesia and Venezuela.
General and administrative expense increased $1.2 million to
$8.4 million to support the growth in worldwide activities and to
promote expansion into new work countries, such as Mexico.
10
<PAGE>
Operating income increased $2.0 million (43%) to $6.6 million.
The increase was attributable to (a) an increase of $3.0 million in
construction and specialty services primarily from construction
work in Venezuela, Oman and Indonesia; offset by (b) a decrease of
$1.0 million in engineering operating income due to the decrease in
engineering services activity.
Interest - net decreased to expense of $.3 million due to
increased borrowing outside the United States to meet local working
capital requirements.
Other - net decreased $.7 million to $.7 million expense
primarily as a result of foreign exchange losses in Nigeria and
Venezuela.
The provision for income taxes increased $.2 million (18%) to
$1.3 million primarily due to increased activity in Indonesia.
Six Months Ended June 30, 1998, Compared to Six Months Ended
June 30, 1997
Contract revenues increased $32.2 million (30%) to $140.6
million due to (a) $55.9 million of additional construction
revenues resulting primarily from construction contracts in
Venezuela, Indonesia and Oman; offset by (b) a decrease of $16.5
million in specialty services revenues, principally in Nigeria; and
(c) a decrease in engineering revenues of $7.2 million due to less
engineering services work in the United States. Venezuela revenues
increased $41.0 million (560%) primarily due to work on a pipeline
contract that includes the construction of 120 miles (200
kilometers) each of 36 inch and 20 inch pipelines, revenue from a
transport services contract and recognition of revenue upon
substantial completion of an offshore loading and storage terminal.
Indonesia revenues increased $8.7 million (130%) primarily due to
work on a 35 mile (55 kilometer) 42 inch pipeline in Kalimantan.
United States revenues increased $3.2 million (10%) primarily due
to work performed on a 94 mile (150 kilometer) 36 inch natural gas
pipeline in Iowa. Oman revenues increased $1.9 million (17%) due
to construction work on three pipeline construction contracts and a
pressure reducing terminal. Nigeria revenues decreased
$15.3 million (38%) primarily as a result of a reduction in
specialty services work attributable to delays in funding from the
Nigerian government which has caused a slowdown in the award of
specialty services projects and the realization of certain cost
recoveries in 1997 which were not repeated in 1998. Although the
Company has seen early indications that the Nigerian government is
taking steps toward resolving these funding issues, it is unclear
as to when specialty services activity in that country will return
to historical levels. Revenues from Pakistan decreased $7.3 million
(71%) due to the completion of an Engineering, Procurement, and
Construction contract.
Contract costs increased $24.9 million (32%) to $101.8 million
due to an increase of $45.8 million in construction services cost,
offset by a decrease of $14.6 million in engineering services cost
and a decrease of $6.3 million in specialty services cost.
Variations in contract cost by country were closely related to the
variations in contract revenues.
Depreciation and amortization increased $4.1 million to
$12.3 million primarily due to additions made to the equipment fleet
to prepare for new contracts in Venezuela, Indonesia and the United
States.
General and administrative expense increased $2.9 million to
$16.8 million to support the growth in worldwide activities.
Operating income increased $.3 million (3%) to $9.7 million.
The increase was attributable to (a) an increase of $1.4 million in
construction and specialty services, primarily from construction
services in Venezuela, Indonesia and Oman; offset by (b) a decrease
of $1.1 million in engineering operating income due to the
decrease in engineering services activity.
Interest - net decreased $.3 million to $.2 million expense due
to increased borrowing outside the United States to meet local
working capital requirements.
Other - net increased $.1 million to $.2 million income primarily
as a result of gains from the sale of land in the United States.
11
<PAGE>
The provision for income taxes decreased $1.2 million (38%) to
$2.0 million primarily due to decreased activity in Nigeria and
Pakistan.
Liquidity and Capital Resources
The Company's primary requirements for capital are to fund the
acquisition, upgrade and maintenance of its equipment, provide
working capital for current projects, finance the mobilization of
employees and equipment to new projects, establish a presence in
countries where the Company perceives growth opportunities and
finance the 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 decreased $32.8 million (76%) to
$10.4 million at June 30, 1998, from $43.2 million at December 31,
1997. The decrease was due to negative cash flows of $15.5 million
from operations (including a $34.4 million increase in working
capital required to support construction projects), $12.4 million
from net capital expenditures for the purchase of equipment and
spare parts and $4.9 million from financing activities.
The Company has a $150.0 million credit agreement that matures
on February 20, 2003 and may be extended annually in one year
increments, subject to certain approvals, for up to two additional
years, with a syndicated bank group including ABN AMRO Bank N.V.,
as agent, and Credit Lyonnais, New York Branch, as co-agent. The
credit agreement provides for a $100.0 million revolving credit
facility, part of which can be used for acquisitions and equity
investments. The entire facility, less amounts used under the
revolving portions of the facility, may be used for standby and
commercial letters of credit. Principal is payable at termination
on all revolving loans except qualifying acquisition and equity
investment loans which are payable quarterly over the remaining
life of the credit agreement. Interest is payable quarterly at
prime or other alternative interest rates. A commitment fee is
payable quarterly based on an annual rate of 1/4% of the unused
portion of the credit facility. The Company's obligations under
the credit agreement are secured by the stock of the principal
subsidiaries of the Company. The credit agreement requires the
Company to maintain certain financial ratios, restricts the amount
of annual dividend payments to the greater of 25 cents per share or
25% of net income and limits the Company's ability to purchase its
own stock. At June 30, 1998, outstanding letters of credit totaled
$32.7 million, leaving $117.3 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
$10.2 million at June 30, 1998.
The Company believes that cash flows from operations and
borrowing under existing credit facilities will be sufficient to
finance working capital and capital expenditures for ongoing
operations at least through the end of 1998. The Company estimates
capital expenditures for equipment and spare parts of approximately
$20 to $30 million during 1998.
In February 1998, the Company's Board of Directors approved a
plan to buy back up to approximately 750,000 shares of its
Common Stock from time to time in the open market or through
negotiated transactions. No shares were purchased under this plan
during the quarter ended June 30, 1998. Subsequent to June 30,
1998, the Company purchased 45,000 shares of its Common Stock at
an average price of $10.53 per share.
12
<PAGE>
New Accounting Standards
In May 1998, the American Institute of Certified Public
Accountants issued Statement of Position 98-5, "Reporting
on the Costs of Start-Up Activities," which is effective
for fiscal years beginning after December 15, 1998. This
statement requires that start-up costs and organization
costs be expensed as they are incurred. The Company does not
believe this statement will have a material impact on its
consolidated financial statements.
In June 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities,"
which is effective for fiscal years beginning after June 15, 1999.
This standard requires that all derivatives be recognized on the
balance sheet at fair value. Derivatives that are not hedges must
be adjusted to fair value through earnings. Derivatives that are
hedges must be adjusted to fair value, depending on the nature of
the hedge, either through earnings as an offset against the change
in fair value of the hedged assets, liabilities, or firm commitments
or recognized in other comprehensive income until the hedged item is
recognized in earnings. The Company does not believe adoption of
this standard will have a material impact on its consolidated
financial statements.
Forward-Looking Statements
This Form 10-Q includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as
amended. All statements, other than statements of historical facts,
included in this Form 10-Q which address activities, events or
developments which the Company expects or anticipates will or may
occur in the future, including such things as future capital
expenditures (including the amount and nature thereof), oil and gas
prices and demand, expansion and other development trends of the
oil and gas industry, business strategy, expansion and growth of
the Company's business and operations, and other such matters are
forward-looking statements. These statements are based on certain
assumptions and analyses made by the Company in light of its
experience and its perception of historical trends, current conditions
and expected future developments as well as other factors it believes
are appropriate in the circumstances. However, whether actual results
and developments will conform with the Company's expectations and
predictions is subject to a number of risks and uncertainties which
could cause actual results to differ materially from the Company's
expectations including the timely award of one or more projects;
cancellation of projects; weather; exceeding project cost and
scheduled targets; failing to realize cost recoveries from projects
completed or in progress within a reasonable period after completion
of the relevant project; identifying and acquiring suitable
acquisition targets on reasonable terms; the demand for energy
diminishing; political circumstances impeding the progress of work;
general economic, market or business conditions; changes in laws
or regulations; the risk factors listed from time to time in the
Company's reports filed with the Securities and Exchange Commission;
and other factors, most of which are beyond the control of the
Company. Consequently, all of the forward-looking statements made
in this Form 10-Q are qualified by these cautionary statements and
there can be no assurance that the actual results or developments
anticipated by the Company will be realized or, even if
substantially realized, that they will have the expected
consequences 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable
13
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
- ------- -----------------
Not applicable
Item 2. Changes in Securities and Use of Proceeds
- ------- -----------------------------------------
Not applicable
Item 3. Defaults upon Senior Securities
- ------- -------------------------------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
The Annual Meeting of Stockholders of the Company (the "Annual
Meeting") was held on May 4, 1998, in Panama City, Panama. At
the Annual Meeting, the stockholders of the Company elected
Michael J. Pink and John H. Williams as Class II directors of
the Company for three-year terms. The stockholders also
considered and approved (a) the adoption of Republic of Panama
Decree Law No. 5 and an amendment to the Company's charter to
effect certain provisions of the decree and (b) the appointment of
KPMG Peat Marwick as the independent auditors of the Company for
the fiscal year ending December 31, 1998.
There were present at the Annual Meeting, in person or by proxy,
stockholders holding 13,598,335 shares of the common stock of
the Company, or 90.62% of the total stock outstanding and
entitled to vote at the Annual Meeting. The table below
describes the results of voting at the Annual Meeting.
<TABLE>
<CAPTION>
Votes
Votes Against or Broker
For Withheld Abstentions Non-Votes
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1. Election of Directors:
Michael J. Pink 13,397,261 201,074 -0- -0-
John H. Williams 13,396,661 201,674 -0- -0-
2. Adoption of Republic of
Panama Decree Law No. 5
and an amendment to the
Company's charter to
effect certain
provisions of the decree 11,376,456 11,949 49,629 2,160,301
3. Ratification of
KPMG Peat Marwick
as independent auditors
of the Company for
fiscal 1998 13,085,589 509,889 2,857 -0-
</TABLE>
14
<PAGE>
Item 5. Other Information
- ------- -----------------
As set forth in the Company's Proxy Statement for its 1998 Annual
Meeting of Stockholders, stockholder proposals submitted pursuant
to Rule 14a-8 under the Securities Exchange Act of 1934 for
inclusion in the Company's proxy materials for its 1999 Annual
Meeting of Stockholders must be received by the Company no later
than December 1, 1998.
If a stockholder, who intends to present a proposal at the
Company's 1999 Annual Meeting of Stockholders and has not sought
inclusion of the proposal in the Company's proxy materials pursuant
to Rule 14a-8, fails to provide the Company with notice of such
proposal by February 14, 1999, then the persons named in the
proxies solicited by the Company's Board of Directors for its 1999
Annual Meeting of Stockholders may exercise discretionary voting
power with respect to such proposal.
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits:
The following document is included as an exhibit to this
Form 10-Q.
27 Financial Data Schedule.
(b) Reports on Form 8-K
There were no current reports on Form 8-K filed during the three
months ended June 30, 1998.
15
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
WILLBROS GROUP, INC.
Date: August 13, 1998 By: /s/ Melvin F. Spreitzer
-----------------------------
Melvin F. Spreitzer
Executive Vice President,
Chief Financial Officer and Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
16
<PAGE>
EXHIBIT INDEX
The following document is included as an exhibit to this
Form 10-Q.
Exhibit
Number Description
- --------- ----------------------------------------------------------------
27 Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S JUNE 30, 1998 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 10,430
<SECURITIES> 0
<RECEIVABLES> 63,481
<ALLOWANCES> 1,338
<INVENTORY> 0
<CURRENT-ASSETS> 94,268
<PP&E> 138,270
<DEPRECIATION> 61,515
<TOTAL-ASSETS> 186,363
<CURRENT-LIABILITIES> 53,269
<BONDS> 0
0
0
<COMMON> 752
<OTHER-SE> 126,166
<TOTAL-LIABILITY-AND-EQUITY> 186,363
<SALES> 140,587
<TOTAL-REVENUES> 140,587
<CGS> 101,766
<TOTAL-COSTS> 130,480
<OTHER-EXPENSES> 889
<LOSS-PROVISION> 462
<INTEREST-EXPENSE> 745
<INCOME-PRETAX> 8,858
<INCOME-TAX> 2,030
<INCOME-CONTINUING> 6,828
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,828
<EPS-PRIMARY> .45
<EPS-DILUTED> .45
</TABLE>
