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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, 2001
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)
PLAZA 2000 BUILDING
50TH STREET, 8TH FLOOR
APARTADO 6307
PANAMA 5, REPUBLIC OF PANAMA
TELEPHONE NO.: (507) 213-0947
(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
Preferred Share Purchase Rights 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 February 1, 2002, 14,803,113 shares of the Registrant's Common Stock
were outstanding, and the aggregate market value of the Common Stock held by
non-affiliates was approximately $197,360,651.
1
WILLBROS GROUP, INC.
FORM 10-K
YEAR ENDED DECEMBER 31, 2001
TABLE OF CONTENTS
Page
PART I
Items 1.
and 2. Business and Properties .................................... 4
Item 3. Legal Proceedings........................................... 25
Item 4. Submission of Matters to a Vote of
Security Holders............................................ 25
PART II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters............................. 25
Item 6. Selected Financial Data..................................... 26
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations............... 27
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.. 36
Item 8. Financial Statements and Supplementary Data................. 38
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure...................... 60
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 61
Item 11. Executive Compensation...................................... 63
Item 12. Security Ownership of Certain Beneficial
Owners and Management....................................... 68
Item 13. Certain Relationships and Related Transactions.............. 71
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K..................................... 71
Signatures............................................................ 74
2
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 IN THIS FORM 10-K WHICH ADDRESS
ACTIVITIES, EVENTS OR DEVELOPMENTS WHICH WE EXPECT OR ANTICIPATE WILL OR MAY
OCCUR IN THE FUTURE, INCLUDING SUCH THINGS AS FUTURE CAPITAL EXPENDITURES
(INCLUDING THE AMOUNT AND NATURE THEREOF), OIL, GAS AND POWER PRICES, DEMAND FOR
OUR SERVICES, THE AMOUNT AND NATURE OF FUTURE INVESTMENTS BY FOREIGN AND
DOMESTIC GOVERNMENTS, EXPANSION AND OTHER DEVELOPMENT TRENDS OF THE OIL, GAS AND
POWER INDUSTRIES, BUSINESS STRATEGY, EXPANSION AND GROWTH OF OUR BUSINESS AND
OPERATIONS, AND OTHER SUCH MATTERS ARE FORWARD-LOOKING STATEMENTS. THESE
STATEMENTS ARE BASED ON CERTAIN ASSUMPTIONS AND ANALYSES WE MADE IN LIGHT OF OUR
EXPERIENCE AND OUR PERCEPTION OF HISTORICAL TRENDS, CURRENT CONDITIONS AND
EXPECTED FUTURE DEVELOPMENTS AS WELL AS OTHER FACTORS WE BELIEVE ARE APPROPRIATE
IN THE CIRCUMSTANCES. HOWEVER, WHETHER ACTUAL RESULTS AND DEVELOPMENTS WILL
CONFORM WITH OUR EXPECTATIONS AND PREDICTIONS IS SUBJECT TO A NUMBER OF RISKS
AND UNCERTAINTIES, WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
OUR EXPECTATIONS INCLUDING:
- - THE TIMELY AWARD OF ONE OR MORE PROJECTS
- - CANCELLATION OF PROJECTS
- - INCLEMENT WEATHER
- - PROJECT COST OVERRUNS AND UNFORESEEN SCHEDULE DELAYS
- - 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
- - OBTAINING ADEQUATE FINANCING
- - THE DEMAND FOR ENERGY DIMINISHING
- - CURTAILMENT OF CAPITAL EXPENDITURES IN THE OIL, GAS, AND POWER INDUSTRIES
- - POLITICAL CIRCUMSTANCES IMPEDING THE PROGRESS OF WORK
- - DOWNTURNS IN GENERAL ECONOMIC, MARKET OR BUSINESS CONDITIONS IN OUR TARGET
MARKETS
- - CHANGES IN LAWS OR REGULATIONS
- - THE RISK FACTORS LISTED IN THIS FORM 10-K AND LISTED FROM TIME TO TIME IN
OUR FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION
- - OTHER FACTORS, MOST OF WHICH ARE BEYOND OUR CONTROL.
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 WE ANTICIPATED WILL BE REALIZED OR, EVEN IF
SUBSTANTIALLY REALIZED, THAT THEY WILL HAVE THE EXPECTED CONSEQUENCES TO OR
EFFECTS ON OUR BUSINESS OR OPERATIONS. WE ASSUME NO OBLIGATION TO UPDATE
PUBLICLY ANY SUCH FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW
INFORMATION, FUTURE EVENTS OR OTHERWISE.
---------
UNLESS THE CONTEXT OTHERWISE REQUIRES, ALL REFERENCES IN THIS FORM 10-K TO
"WILLBROS", THE "COMPANY", "WE", "US" AND "OUR" REFER TO WILLBROS GROUP, INC.,
ITS CONSOLIDATED SUBSIDIARIES AND THEIR PREDECESSORS.
3
PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
GENERAL
We are one of the leading independent contractors serving the oil, gas and
power industries, providing construction, engineering and specialty services to
industry and government entities worldwide. We place particular emphasis on
projects in countries where we believe our experience gives us a competitive
advantage, including several developing countries. Our 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.
Our engineering services include:
- - Feasibility studies
- - Conceptual and detailed design
- - Field services, material procurement and overall project management.
Our 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
- - Transport of oilfield equipment, rigs and vessels
- - Facility operations.
Our contract backlog at December 31, 2001, was a record $407.6 million as
compared to the previous year-end record backlog amount of $373.9 million at
December 31, 2000.
We provide our services utilizing a large fleet of company-owned and leased
equipment that includes marine vessels, barges, dredges, pipelaying equipment,
heavy construction equipment, transportation equipment and camp equipment. Our
equipment fleet is supported by an extensive inventory of spare parts and tools,
which we strategically locate and maintain throughout the world to maximize
availability and minimize cost.
We trace our roots to the construction business of Williams Brothers
Company, founded in 1908. Through successors to that business, we have 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). In September 2000, through a joint venture led by a subsidiary of
ours, we were awarded yet another landmark project, the scope of which includes
the engineering, procurement and construction, or "EPC" of a 665-mile (1,070-
kilometer), 30-inch crude oil pipeline from the Doba Fields in Chad to an export
terminal on the coast of Cameroon in Africa, which we refer to as the
"Chad-Cameroon Pipeline Project".
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Over the years, we have been employed by more than 400 clients to carry out
work in 55 countries. Within the past 10 years, we have worked in Africa, Asia,
Australia, the Middle East, North America and South America. We have
historically had a steady base of operations in Nigeria, Oman, the United States
and Venezuela, which has been enhanced by major projects in Australia, Bolivia,
Cameroon, Chad, Egypt, Gabon, Indonesia, Ivory Coast, Kuwait, and Pakistan.
Our representative clients (or affiliates of clients) include Royal Dutch
Shell; Asamera (Overseas) Limited; Apache Cote d'lvoire; Pecten Cameroon;
Bilfinger + Berger; Conoco; ChevronTexaco; ExxonMobil; Kuwait Oil Company; Abu
Dhabi National Oil Company; U.S. Army; U.S. Navy; Pacific Gas & Electric;
Petroleum Development Oman; El Paso Energy; Transredes; Occidental Petroleum;
Duke Energy; Great Lakes Gas Transmission Company; E.N.I.; The Williams
Companies; Nigerian National Petroleum Corporation, or "NNPC"; and the Pak-Arab
Refinery, Ltd., or "PARCO". Private sector clients such as Royal Dutch Shell and
ExxonMobil have historically accounted for the majority of our revenue.
Government entities and agencies, such as Kuwait Oil Company, U.S. Army, U.S.
Navy, NNPC, Petrobras and PDVSA, have accounted for the remainder. Ten clients
were responsible for 81% of our total revenue in 2001 (86% in 2000 and 78% in
1999). Operating units of ExxonMobil, Centennial Pipeline, Royal Dutch Shell,
Duke Energy, and Trans Union Power accounted for 18%, 17%, 14%, 10% and 10% of
our total revenue in 2001, respectively.
We are incorporated in the Republic of Panama and maintain our headquarters
at Plaza 2000 Building, 50th Street, 8th Floor, Apartado 6307, Panama 5,
Republic of Panama; our telephone number is (507) 213-0947. Administrative
services are provided by Willbros USA, Inc., whose administrative headquarters
are located at 4400 Post Oak Parkway, Suite 1000, Houston, Texas 77027 and
telephone number is (713) 403-8000.
CURRENT MARKET CONDITIONS
The global recession has dampened industrial demand for energy, which has
affected short-term energy prices and resulted in a re-evaluation of future
projects both in the primary pipeline sector and the power generation sector.
However, we are not experiencing any significant slowdown in the regions in
which we compete from this reassessment of proposed projects by our customers
and potential customers. Further, we have a high level of confidence in the work
under contract for all of 2002 and into 2003. We believe several factors
influencing the global energy market have led to and will continue to result in
increased activity across our primary lines of business. The factors leading to
higher levels of energy-related capital expenditures include:
- - Rising global energy demand resulting from economic growth in developing
countries
- - The need for larger oil and gas transportation infrastructures in a number
of developing countries
- - Certain state-controlled oil and gas companies seeking foreign investment
- - The increasing role of natural gas as a fuel for power generation and other
uses in producing countries
- - Initiatives to reduce natural gas flaring
- - Efforts to bring stranded natural gas reserves to market
- - Aging of energy infrastructure.
Industry reports indicate that planned worldwide pipeline construction will
increase significantly over the next several years. These forecasts indicate in
excess of $25 billion to be spent worldwide in 2002 on pipeline construction and
related infrastructure as compared to approximately $17 billion of planned
expenditures for 2001. We expect to aggressively pursue and capture a portion of
the approximately $1.5 billion in business opportunities that we estimate will
meet our bidding criteria over the next 12 months.
We currently have a number of significant bids outstanding with respect to
potential contract awards in Bolivia, Cameroon, Canada, Ecuador, Nigeria, Oman,
Saudi Arabia, the United States and Venezuela. We are currently preparing bids
with respect to potential contract awards in Nigeria, Oman, Saudi Arabia, the
United States and Venezuela. Finally, we expect to prepare and submit bids with
respect to certain
5
other potential construction and engineering projects in Africa, Asia, the
Middle East, North America and South America during 2002.
BUSINESS STRATEGY
We seek to maximize stockholder value through our business strategy. The
core elements of this strategy are to:
- - Concentrate on projects and prospects in areas where we can be most
competitive and obtain the highest profit margins
- - Pursue engineer-procure-construct contracts with a renewed vigor because
they can often yield higher profit margins on the engineering and
construction components of the contract than stand alone contracts for
similar services
- - Focus on performance and project execution in order to maximize the profit
potential on each contract awarded
- - Maintain our commitment to safety and quality
- - Develop alliances with companies who will enhance our capabilities and
competitiveness in markets throughout the world
- - Pursue growth through expansion, acquisitions and equity investments while
maintaining a strong balance sheet.
In pursuing this strategy, we rely on the competitive advantage gained from
our experience in completing logistically complex and technically difficult
projects in remote areas with difficult terrain and harsh climatic conditions,
and our experienced multinational work force of approximately 3,790 employees
(including those of our joint ventures), of whom more than 81 percent are
citizens of the respective countries in which they work. Recognizing them as our
most sustainable competitive advantage, we continue to invest in our employees
to ensure that they have the training and tools needed to be successful in
today's challenging environment.
One of our short-term objectives over the past three years has been to
reduce operating and overhead costs to a level that is justified by expected
revenue. To accomplish this objective, we downsized operations or offices in
work countries where expected returns have not materialized and identified and
sold surplus equipment. In addition, we terminated certain employee benefit
plans which management felt were not competitive in today's market and in some
cases replaced them with other benefits which enhanced our competitive position
in recruiting experienced personnel. Our long-term strategies remain unchanged.
In carrying out the core elements of our long-term strategies, we build from
the following:
Geographic Area. Our objective is to maintain and enhance our presence in
regions where we have developed a strong base of operations, such as Africa, the
Middle East, North America and South America, by capitalizing on our local
experience, established contacts with local customers and suppliers, and
familiarity with local working conditions. In pursuing this strategy, we seek to
identify a limited number of long-term niche markets in which we can outperform
the competition and establish an advantageous position. In 2001, to establish
our presence in Canada, we acquired MSI Energy Services Inc., a Canadian
contractor active in the oil sands producing area of Northern Alberta. In
addition, we seek to establish or enhance our presence in other strategically
important areas, such as Algeria, Bolivia, Cameroon, Chad, Ecuador and Saudi
Arabia as well as other selected areas.
Pursue EPC Contracts. We will continue to pursue engineering, procurement
and construction (EPC) contracts because they can often yield higher profit
margins on the engineering and construction components of the contract than
stand alone contracts for similar services. We intend to capitalize on being one
of the few companies worldwide with the ability to provide the full range of EPC
services in order to position ourselves to capture more of this business.
6
Focus on Superior Project Execution. We will continue to focus on
performance and project execution in order to maximize the profit potential on
each contract awarded. By doing so, we also enhance our potential for repeat
business and/or add-on engineering or specialty service contracts.
Quality Improvements. Our quality program enhances our ability to meet the
specific requirements of our customers through continuous improvement of all our
business processes, while at the same time improving competitiveness and
profitability. ISO 9000, an internationally recognized verification system for
quality management, has in recent years been made a criterion for
prequalification of contractors by various clients and potential clients, and
this trend is expected to continue. The certification process involves a
rigorous review and audit of our management processes and quality control
procedures. Currently, four of our key operating subsidiaries have ISO 9000
certification.
Strategic Alliances. We seek to establish strategic alliances with companies
whose resources, skills and strategies are complementary to and are likely to
enhance our business opportunities, including the formation of joint ventures
and consortia to achieve a competitive advantage and share risks. Such alliances
have already been established in a number of countries and we currently have
alliances to pursue or perform work in Bolivia, Cameroon, Chad, Dominican
Republic, Ecuador, Saudi Arabia, the United States, and Venezuela. As a related
strategy, we may decide to make an equity investment in a project in order to
enhance our competitive position and/or maximize project returns. This strategy
led in 1998 to our Venezuelan subsidiary taking a 10 percent equity interest in
a joint venture which was awarded a 16-year contract to operate, maintain and
refurbish water injection facilities in Lake Maracaibo, Venezuela.
Acquisitions. We seek to identify, evaluate and acquire companies that offer
growth opportunities and that complement our resources and capabilities.
Consistent with this strategy, in January 2000, we acquired Rogers & Phillips,
Inc., or "RPI," a closely held pipeline construction company in Houston, Texas
with an experienced management team and a strong market position in the U.S.
Gulf Coast area, and in 2001, MSI Energy Services Inc., or "MSI," a closely held
facility maintenance and pipeline construction company based in Alberta, Canada.
Conservative Financial Management. We emphasize the maintenance of a strong
balance sheet in the financing of the development and growth of our business. We
also seek to obtain contracts that are likely to result in recurring revenue in
order to partially mitigate the cyclical nature of our construction and
engineering businesses. For example, we generally seek to obtain specialty
services contracts of more than one year in duration. Additionally, we act to
minimize our 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. We continue to
exercise a disciplined approach to controlling cost at both project and
administrative levels.
WILLBROS BACKGROUND
We are 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 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 international 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 percent equity interest to Heerema
Holding Construction, Inc. In 1986, Heerema acquired the balance of Willbros
Group, Inc., which then operated as a wholly owned subsidiary of Heerema until
April 1992.
7
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 at the time, certain other investors, and Heerema. Subsequently, the
original Willbros Group, Inc. was dissolved into the acquiring corporation which
was renamed "Willbros Group, Inc." In August 1996, we completed an initial
public offering of common stock in which Heerema sold all of its shares of
common stock; and in October 1997 we completed a secondary offering in which the
other investors sold substantially all of their shares of common stock.
WILLBROS MILESTONES
The following are selected milestones which we have 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 liquefied 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.
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, crossing the Andes Mountains,
consisting of 315 miles (505 kilometers) of 20- and 26-inch pipeline,
seven pump stations, four pressure-reducing stations
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and six storage tanks. Considered the most logistically difficult
pipeline project ever completed at the time.
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 difficult to access western
Amazon basin of Peru. Another logistics challenge which required
lightering from shipping on the Amazon River.
1974-79 Designed and engineered the 500-mile (795-kilometer) Sarakhs-Neka gas
transmission line in northeastern Iran.
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, another Andean challenge.
1987 Rebuilt 25 miles (40 kilometers) of the Trans-Ecuadorian crude oil
pipeline mobilizing to Ecuador in two weeks and completing work within
six months after major portions were destroyed by an earthquake.
1988-92 Performed 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.
1989-92 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.
1996 Listed shares in an initial public offering of Common Stock on the
NYSE under the symbol "WG."
1996-97 Achieved ISO Certification for seven operating companies.
1996-98 Performed an EPC contract with Asamera (Overseas) Limited to design
and construct pipelines, flowlines and related facilities for the
Corridor Block Gas Project located in southern Sumatra, Indonesia.
1997-98 Carried out 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.
1997-98 Completed 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.
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1999-00 Carried out a contract through a joint venture to construct a 492-mile
(792-kilometer), 18-inch gas pipeline in Australia.
2000 Acquired Rogers & Phillips, Inc., a United States pipeline
construction company.
2000 Awarded an EPC contract for the 665-mile (1,070-kilometer), 30-inch
crude oil Chad - Cameroon Pipeline Project, through a joint venture
with another international contractor.
2000 Relocated the Willbros USA, Inc. administrative headquarters from
Tulsa, Oklahoma to Houston, Texas.
2000 Ended year with record backlog of $373.9 million.
2001 Acquired MSI Energy Services Inc., Alberta, Canada based contractor,
working in the oilsands area and establishing a presence in Canada.
2001 Ended year with new record backlog of $407.6 million.
SERVICES PROVIDED
We operate in a single operating segment providing contract construction,
engineering and specialty services to the oil, gas and power industries. The
following table reflects our contract revenue by type of service for 2001, 2000
and 1999.
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
2001 2000 1999
---- ---- ----
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------ -------
(DOLLAR AMOUNTS IN THOUSANDS)
Construction services $214,456 55% $192,270 61% $ 67,690 38%
Engineering services 120,321 31 58,709 19 70,500 40
Specialty services .. 55,357 14 63,311 20 38,374 22
-------- --- -------- --- -------- ---
Total ............ $390,134 100% $314,290 100% $176,564 100%
======== ==== ======== ==== ======== ====
CONSTRUCTION SERVICES
We are one of the most experienced contractors serving the oil, gas and
power industries. Our construction capabilities include the expertise to
construct and replace large-diameter cross-country and offshore 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 offshore platforms, piers, docks and bridges.
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 we own, lease, operate and
maintain a fleet of specialized equipment necessary for us to engage in the
pipeline construction business. We focus on pipeline construction activity in
remote areas and harsh climates where we believe our experience gives us a
competitive advantage. We believe that we have 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
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number and size of river crossings, terrain considerations, extent of rock
formations, density of heavy timber and amount of swamp.
Onshore 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
- - Perform final clean up.
Special equipment and techniques are required to construct pipelines across
wetlands and offshore. The "Willbros 318" is a combination derrick/lay barge
which performs pipelay and marine construction services in offshore West Africa.
We use swamp pipelaying methods extensively in Nigeria, where most of our
construction operations are carried out in the Niger River delta. In addition to
our primary offshore and swamp equipment such as laybarges, dredges and swamp
backhoes, we have a substantial investment in support vessels, including
tugboats, barges, supply boats and houseboats, which are required in order to
maintain our capabilities in offshore and swamp pipeline construction.
Station Construction. Oil and gas companies require various facilities in
the course of producing, processing, storing and moving oil and gas. We are
experienced in and capable of constructing facilities such as pump stations,
flow stations, gas processing facilities, gas compressor stations and metering
stations. We are capable of building such facilities onshore, offshore in
shallow water 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. Our capabilities have been
enhanced by our experience in dealing with such challenges in numerous countries
around the world.
Marine Construction. Our marine fleet includes lay barges, pile driving
barges, derrick barges and other vessels, which support marine construction
operations, and the "Willbros 318" combination derrick/lay barge to perform
shallow water pipelay and maintenance projects in offshore West Africa. This
300-foot (91-meter) barge is capable of laying up to 24-inch diameter pipe in up
to 200-foot water depths. During 2001, we purchased the "WB82" work/derrick
barge to complement our West Africa marine construction operations. In
Venezuela, we construct and install fixed drilling and production platforms,
primarily in Lake Maracaibo, and we are also capable of building bridges, docks,
jetties and mooring or breasting dolphins.
11
ENGINEERING SERVICES
We provide project management, engineering, and material procurement
services to the oil, gas and power industries and government agencies. We
specialize 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,
we have developed expertise in addressing the unique engineering issues involved
with pipeline systems and associated facilities to be installed where climatic
conditions are extreme, areas of environmental sensitivity must be crossed,
fluids which present extreme health hazards must be transported, and fluids
which present technical challenges regarding material selection are to be
transported.
To complement our engineering services, we also provide a full range of
field services, including:
- - Surveying
- - Right-of-way acquisition
- - Material receiving and control
- - Construction inspection
- - Facilities startup assistance.
Such services are furnished to a number of oil, gas, power and government
clients on a stand-alone basis; and are provided as part of EPC contracts
undertaken by our company.
The buying process of our customers includes close scrutiny of our
experience and capabilities with respect to project requirements. Some of those
requirements are:
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. We are experienced in
designing pipelines for arctic conditions, where permafrost and extremely low
temperatures are prevalent, desert conditions, mountainous terrain, swamps
and offshore.
Environmental Impact of River Crossings/Wetlands. We have considerable
capability in designing pipeline crossings of rivers, streams and wetlands in
such a way as to minimize environmental impact. We possess expertise to
determine the optimal crossing techniques, such as 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. Our 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. Our 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 since hydrogen sulfide leaks can be extremely hazardous, but
also requires that material be specified to withstand highly corrosive
conditions. Our engineers have extensive natural gas experience which includes
design of sour gas systems.
Hydraulics Analysis for Fluid Flow in Piping Systems. We employ 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, including 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 our engineering business. We believe we
12
have established a strong position as a leading supplier of project management
and engineering services to natural gas pipeline transmission companies in the
United States. Since 1988, we have provided, or are providing, engineering
services for 19 major natural gas pipeline projects in the United States,
totaling more than 7,000 miles (11,200 kilometers) of large diameter pipe for
new systems and expansions of existing systems. During this same period, we were
also the engineering contractor for 80 compressor stations, including new
stations and additions to existing stations for 17 clients.
Liquids Pipelines and Storage Facility Design. We have engineered a number
of crude oil and refined petroleum products systems throughout the world, and
have become recognized for our expertise in the engineering of systems for the
storage and transportation of petroleum products and crude oil. In recent years,
we have 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. In 2001, we provided engineering and field
services for conversion of a natural gas system in the Midwest United States,
involving over 794 miles (1,279 kilometers) of 24 to 26-inch diameter pipeline
to serve the upper Midwest with refined petroleum products. Currently we are
providing EPC services for the expansion of another petroleum products pipeline
to the Midwest involving 12 new pump stations, modifications to another 12 pump
stations and additional storage.
U.S. Government Services. Since 1981, we have established our 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 largely on
contractor experience and personnel qualifications. In the past three years,
we have won four of five so-called "Build, Own, Operate, Transfer" or "BOOT"
projects to provide fueling facilities for the U.S. Defense Energy Support
Center.
Design of Peripheral Systems. Our 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, we maintain 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.
Material procurement is especially critical to the timely completion of
construction on the EPC contracts we undertake. We maintain a computer-based
material procurement, tracking and control system, which utilizes software
enhanced to meet our specific requirements.
SPECIALTY SERVICES
We provide 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 client companies contract with us for the use
of such specialized equipment and experienced personnel. We own and operate 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. We conduct dredging operations on our own projects and as a
subcontractor to 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
watercraft. This maintenance dredging is often performed under annual or
multi-year contracts. We own 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. We own and operate 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.
13
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
over the anti-corrosion coating to a calculated thickness. We own and operate 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, or 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 percent, 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.
We own two transportable self-contained double-joint plants, which can handle
24- to 48-inch diameter pipe and are used worldwide.
Piling. Our 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.
We also own barges and pile driving equipment to install piles in Venezuela and
Nigeria.
Marine Heavy Lift Services. The primary equipment used for offshore 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. We own 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. We own and operate 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, tanks
and storage vessels between well locations. We own a fleet of heavy trucks and
trailers, and provide transportation services to our clients in Oman and
Venezuela.
Maintenance and Repair Services. We provide 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. With
the acquisition of MSI Energy Services, we have expanded our maintenance and
repair services to include multi-year maintenance contracts servicing the oil
sands and tailings slurry pipelines in Northern Alberta.
Facility Operations. Subsequent to the design, commissioning and start-up
phases of contracts, we provide facility operations services to those clients
desiring third party operations of facilities.
14
GEOGRAPHIC REGIONS
We operate in the following geographic regions: Africa, North America, South
America, the Middle East, and Asia and Australia. The following table reflects
our contract revenue by geographic region for 2001, 2000 and 1999.
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
2001 2000 1999
---- ---- ----
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------ -------
(DOLLAR AMOUNTS IN THOUSANDS)
Africa ........... $146,200 37% $161,556 51% $ 79,777 45%
North America .... 208,626 54 92,998 30 42,981 24
South America .... 16,968 4 26,141 8 23,801 14
Middle East ...... 14,303 4 12,908 4 8,026 5
Asia and Australia 4,037 1 20,687 7 21,979 12
-------- --- -------- --- -------- ---
Total ......... $390,134 100% $314,290 100% $176,564 100%
======== === ======== === ======== ===
See Note 13 to the Consolidated Financial Statements included in Item 8 of this
report for additional information about operations in our work countries.
Africa
Africa has been and will continue to be an important strategic market for
us. We believe that there will be opportunities to expand our 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. We intend to maintain our presence in Africa and seek to increase
our share of available work. We currently are monitoring or bidding major work
prospects in Algeria, Cameroon, Chad, Gabon, Ghana, Mozambique, Nigeria, South
Africa, and Tanzania.
Over the past 50 years, we have completed major projects in a number of
African countries including Algeria, Cameroon, Egypt, Gabon, Ivory Coast, Libya,
Morocco and Nigeria. We have 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 us to satisfy the varied needs of our clientele in the region.
We have had a continuous presence in Nigeria since 1962. Our activities in
Nigeria are directed from a fully staffed operational base near Port Harcourt.
This 150-acre site includes office and living facilities, equipment and vehicle
repair shops, a marine jetty, warehouses and fabrication and lay-down areas for
both the client's and our materials and spare parts. We have diversified our
range of services by adding dredging and pipe coating expertise and drydock
facilities. Having diverse yet complementary capabilities has often given us a
competitive advantage on projects that contain several distinct work elements
within the project's scope of work. For example, we believe that we are
currently the only contractor operating in the Nigerian oil and gas sector
capable, with our own resources, of executing engineering, procurement and
construction projects for pipelines and related facilities for onshore, swamp,
and offshore locations.
Our current activities in Nigeria include maintenance and improvement of
offshore structures for ExxonMobil. Other ongoing activities in Nigeria are
multi-year contracts to provide dredging services and swamp flowline maintenance
services.
Since our purchase of the "Willbros 318" in 1998, we have successfully
completed several offshore projects including the installation of decks and
other production facilities on two offshore platforms, five
15
miles (7.5 kilometers) of 8-inch and 10-inch pipelines, a single-point mooring
system and a 2-mile, 20-inch offshore pipeline, and performed various other
services for ChevronTexaco and ExxonMobil.
In 2001, we purchased the "WB82" work barge to complement the "Willbros 318"
and the "EROS" support vessel. Since the third quarter of 2001, the "Willbros
318" and "WB82" have been engaged to provide riser and platform repair and
improvements for ExxonMobil in offshore West Africa.
In September 2000, through a joint venture with another international
contractor, we were awarded a contract to construct the Chad-Cameroon Pipeline
Project. The project scope includes engineering, procurement, and construction
of a 665-mile (1,070-kilometer), 30-inch crude oil pipeline and fiber optic
cable from the Doba fields in Chad to an export terminal on the coast of
Cameroon. Engineering and procurement activities began in 2000. The mobilization
of the construction and the project management team to West Africa began in the
second quarter of 2001. Pipelay activities commenced in the fourth quarter of
2001.
Our backlog in Africa was $204.7 million at December 31, 2001, compared to
$230.8 million at December 31, 2000.
North America
We have provided services to the U.S. oil and gas industry for more than 80
years. We believe that the United States will continue to be an important market
for our 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 we expect will result in continued demand for
our services. The demand for natural gas for industrial and power usage in the
United States should increase 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, gas and power sectors. 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.
We are recognized as an industry leader in the United States for providing
state-of-the-art project management, engineering, procurement and construction
services. We maintain a staff of experienced management, construction,
engineering and support personnel in the United States. Currently, we are
providing project management and engineering services for the following
projects: the Gulfstream Natural Gas System to transport natural gas from
southern Alabama and Mississippi to markets throughout central and south
Florida; and the Blue Atlantic Pipeline Project envisioned to bring natural gas
from offshore northeast Canada to Nova Scotia and New York and New Jersey via
submarine pipeline. We are also under contract to provide project management,
engineering, procurement and construction services for the Explorer Pipeline
Mainline Expansion Project, to increase annual throughput to over 47 million
barrels, transporting refined products from the Texas Gulf Coast to the Chicago
area; CMS Gas Transmission's Guardian Pipeline Project to transport natural gas
from the Chicago area into Wisconsin; and Southern Natural Gas Company's
Southern Company Expansion Project to increase the capacity to transport natural
gas in their existing system in Mississippi, Alabama and Georgia. Our MSI Energy
Services Inc. subsidiary in Canada has maintenance contracts with producers in
the oil sands area of Northern Alberta.
We have 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. Currently, we own and
operate two fueling facilities at Ft. Bragg, North Carolina, which were
constructed by us in 1998 and a similar facility completed in 2000 at
Twenty-nine Palms Marine Corps Base in California. In 2001, we won contracts for
similar facilities at Ft. Stewart, Georgia and Ft. Gordon, Georgia.
On January 24, 2000, we acquired Rogers & Phillips, Inc., a closely held
pipeline construction company in Houston, Texas, with an experienced management
team and a strong market position in the
16
U.S. Gulf Coast area. Since our acquisition of "RPI", it has experienced revenue
growth from $22 million in the year before the acquisition to $85.9 million in
2001. This growth is primarily the result of synergies developed with our
engineering subsidiary in the acquisition and performance of EPC contracts. On
October 12, 2001, we acquired MSI Energy Services Inc., a Canadian contractor
with a strong position in the oil sands area of northern Alberta; an area in
which production is projected to expand from 600,000 barrels per day in 2000 to
more than 1.8 million barrels per day by 2010. Both acquisitions add
construction and management capabilities to their respective markets.
Our backlog in North America was $171.8 million at December 31, 2001,
compared to $106.7 million at December 31, 2000.
South America
We have been active in South America since 1939. Recent developments
involving political changes and privatization efforts in many of the South
American countries make this region attractive to us. 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, Peru and Venezuela, 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. We are aggressively pursuing business opportunities throughout South
America and currently bidding work or monitoring prospects in Bolivia, Brazil,
Ecuador, Peru and Venezuela.
We have performed numerous major projects in South America, where our
accomplishments include the construction of five major pipeline crossings of the
Andes Mountains and setting a world altitude record for constructing a pipeline.
Our largest project in South America was a turnkey project for the procurement
and construction of the Alto Magdalena Crude Oil Pipeline System in Colombia,
awarded to us in 1989 and completed in 1990.
Venezuela is the largest oil producer in South America and conservative
estimates place proven reserves at more than 77 billion barrels of oil and 146
trillion cubic feet of natural gas. Venezuela has redirected its energy
initiatives to include development of its significant natural gas reserves. The
government of Presidente Hugo Chavez has separated the natural gas initiative
from the oil interests of Petroleos de Venezuela, S. A., the government owned
oil company, to place natural gas projects on an equal footing with oil
projects. This new emphasis on natural gas projects should translate into more
demand for our natural gas capabilities. However, the Chavez government has also
introduced a new national hydrocarbons law which is viewed by both international
and national petroleum industry leaders as unfriendly to future investment in
this sector. The outcome of negotiations between the government and private
industry to revise this law is uncertain, and significant new foreign investment
is unlikely until these negotiations are satisfactorily completed.
In Venezuela, we maintain a fully staffed facility including offices,
equipment, yard and dock facilities on a 15-acre waterfront site on Lake
Maracaibo and a representation office Caracas. Resident personnel provide
services for both onshore and offshore projects. Services include pipeline
construction, repair and maintenance services, fabrication and installation of
concrete piles and platforms, marine related services, engineering support and
other needed services. Major clients include international oil companies such as
Shell, Conoco, Occidental Petroleum, ChevronTexaco and PDVSA. In 1998, a
consortium in which we hold a 10 percent equity interest was awarded a 16-year
contract valued at $785.0 million to operate, maintain and refurbish the Lake
Maracaibo water injection program for PDVSA Gas. In 2000, we completed the
construction of a major crude oil pumping station for Petrozuata. Current
activities include operating, maintenance and refurbishment services for the
above-mentioned consortium and recurring service and maintenance work for
various clients.
Subsequent to December 31, 2001, we were selected, in an alliance with
another international contractor, to construct a 144-mile (230-kilometer)
32-inch natural gas pipeline in Bolivia for the Transierra consortium.
17
Our backlog in South America was $27.0 million at December 31, 2001,
compared to $29.7 million at December 31, 2000.
Middle East
We believe 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 in that region. The majority of future
transportation projects in the region are expected to be centered around natural
gas due to increased regional demand, governments' recognition of gas as an
important asset and an underdeveloped gas transportation infrastructure
throughout the region. We are aggressively pursuing business opportunities
throughout the Middle East and are currently bidding work or monitoring
prospects in Abu Dhabi, Jordan, Kuwait, Oman, Qatar, Saudi Arabia and Yemen.
Our operations in the Middle East date back to 1948. We have worked in most
of the countries in the region, with particularly heavy involvement in Iran,
Kuwait, Oman and Saudi Arabia. Currently, we have ongoing operations in Oman,
where we have been active for more than 35 years. We maintain a fully staffed
facility in Oman with equipment repair facilities and spare parts on site and
offer construction expertise, repair and maintenance services, engineering
support, oil field transport services, materials procurement and a variety of
related services to our clients. In November 1999, we were awarded a five-year
contract by Oman LNG for general maintenance services. Other current operations
in Oman include a general oilfield services contract for Occidental of Oman and
an ad hoc service contract for Petroleum Development Oman. Work carried out in
Oman during 2001 and 2000 includes pipeline construction, pipeline maintenance,
mechanical services and flowline work.
Our backlog in the Middle East was $4.1 million at December 31, 2001,
compared to $6.7 million at December 31, 2000.
Australia and Asia
Australia and Asia continue to exhibit stability and to be a geographic
market of focus due to the relative abundance of undeveloped natural gas
resources. That abundance, and environmental concerns, favor the use of natural
gas for power generation and industrial and residential usage in Australia and
Asia. However, economic and political difficulties in certain countries in the
region have caused us to downsize our Jakarta, Indonesia office in 2000 to a
minimum level. We are currently conducting marketing and business development
activities in this market.
In June 1999, Duke Energy International awarded a gas pipeline construction
contract in Australia to a consortium in which one of our operating subsidiaries
had a 35 percent interest. The 492-mile (792-kilometer), 18-inch pipeline,
completed in 2000, transports natural gas from Longford, Victoria to Sydney.
In 1999, we 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 the
design of a future pump station.
We had no backlog in Australia or Asia at December 31, 2001 or 2000.
18
BACKLOG
Our backlog (anticipated revenue from the uncompleted portions of existing
contracts and contracts whose award is reasonably assured) was $407.6 million at
December 31, 2001, compared to $373.9 million at December 31, 2000. We believe
the backlog figures are firm, subject only to the cancellation and modification
provisions contained in various contracts. We expect that approximately $337.2
million (82.7%) of our backlog existing at December 31, 2001, will be recognized
in revenue during 2002. Historically, a substantial amount of our revenue in a
given year has not been reflected in our backlog at the beginning of that year.
We generate revenue from numerous sources, including 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 is assured.
The following is a breakdown of our backlog by geographic region as of
December 31, 2001 and 2000:
2001 2000
---- ----
AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ -------
(DOLLAR AMOUNTS IN THOUSANDS)
Africa ......... $204,653 50% $230,838 62%
North America .. 171,750 42 106,728 28
South America .. 27,047 7 29,670 8
Middle East .... 4,103 1 6,711 2
-------- --- -------- ---
Total .......... $407,553 100% $373,947 100%
======== === ======== ===
The $33.7 million (9%) increase in backlog is due mainly to the addition of
the Explorer Pipeline Mainline Expansion Project and other U.S. engineering and
construction contracts.
A substantial percentage of our revenue in past years resulted from
contracts entered into during that year or the immediately preceding year. The
following table sets forth revenue for each of the last five years as a
percentage of backlog at the beginning of each such year:
REVENUE FOR
BACKLOG AT YEAR ENDED
JANUARY 1 DECEMBER 31 PERCENT
--------- ----------- -------
(DOLLAR AMOUNTS IN THOUSANDS)
1997................................ $108,751 $251,877 231%
1998................................ 135,797 281,618 207
1999................................ 286,473 176,564 61
2000................................ 253,080 314,290 124
2001................................ 373,947 390,134 104
No assurance can be given that our future experience will be similar to
our historical results in this respect.
COMPETITION
We operate in a highly competitive environment. We compete against
government-owned or supported companies and other companies that have financial
and other resources substantially in excess of those available to us. In certain
markets, there is competition from national and regional firms against which we
may not be price competitive.
Our primary competitors for international onshore construction projects in
developing countries include Entrepose (France), Technip (France), CCC
(Lebanon), Nippon Kokan (Japan), Saipem (Italy),
19
Spie-Capag (France), Techint (Argentina), Bechtel (U.S.), Stroytransgaz
(Russia), Tekfen (Turkey), and Nacap (Netherlands). We believe that we are one
of the few companies among our competitors possessing the ability to carry out
large projects in developing countries on a turnkey basis (engineering,
procurement and construction), without subcontracting major elements of the
work. As a result, we may be more cost effective than our competitors in certain
instances.
We have different competitors in different markets. In Nigeria, we compete
for pipe coating work with Bredero Price (Netherlands), while our dredging
competitors include Bos Kalis Westminster (Netherlands), Dredging International
(Belgium), Bilfinger + Berger (Germany), Nigerian Dredging & Marine
(Netherlands) and Ham Dredging (Netherlands). In offshore West Africa, we
compete with SaiBos, Stolt Offshore, Global Industries, Inc., and Adamac Group.
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, we compete 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, and Siemogas, all Venezuelan
companies. In the Southern Cone of South America, major competitors include
Techint (Argentina), Conduto (Brazil), Odebrecht (Brazil), and Contreras
Hermanos (Argentina).
In the United States, our primary construction competitors on a national
basis include Associated Pipeline Contractors, Gregory & Cook, Murphy Brothers,
H. C. Price, Sheehan Pipeline Construction and Welded Construction. In addition,
there are a number of regional competitors, such as Sunland, Dyess, Flint, and
Jomax.
Primary competitors for engineering services include:
- - ABB
- - Bechtel
- - Fluor
- - Gulf Interstate
- - Jacobs Engineering
- - Kellogg Brown and Root
- - Mustang Engineering
- - Paragon Engineering
- - Snamprogetti
- - Technip
- - Trigon Engineering
- - Universal Ensco
- - Worley Engineering
CONTRACT PROVISIONS AND SUBCONTRACTING
Most of our revenues are derived from construction, engineering and
specialty services contracts. We enter into four basic types of construction
contracts:
- - 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
- - Unit-price contracts which specify a price for each unit of work performed
- - Time and materials contracts under which personnel and equipment are
provided under an agreed schedule of daily rates with other direct costs
being reimbursable
- - A combination of the above (such as lump sums for certain items and unit
rates for others).
We enter into three types of engineering contracts:
- - Firm fixed-price or lump sum fixed-price contracts
20
- - 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
- - 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 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.
Changes in scope of work are defined by change orders agreed to by both
parties. These changes can impact our contract revenue either positively or
negatively.
We usually obtain contracts through competitive bidding or through
negotiations with long-standing clients. We are typically invited to bid on
projects undertaken by our 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, we consider such factors as the client, the
geographic location, the difficulty of the work, our current and projected
workload, the likelihood of additional work, the project's cost and
profitability estimates, and our competitive advantage relative to other likely
bidders. For international projects, we give careful thought and consideration
to the political and financial stability of the country or region where the work
is to be performed. We use a computer-based estimating system. The bid estimate
forms the basis of a project budget against which performance is tracked through
a project control 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 our 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 that include
liquidated damages in the event schedules are not met as the result of
circumstances within our control.
We act as prime contractor on a majority of the construction projects we
undertake. In our capacity as prime contractor and when acting as a
subcontractor, we perform most of the work on our projects with our own
resources and typically subcontract 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, we are subject to the risk
associated with the failure of one or more subcontractors to perform as
anticipated.
EMPLOYEES
We believe our employees are our 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 we have achieved on
numerous projects in remote, logistically challenging locations around the
world.
At December 31, 2001, we employed directly or through our joint ventures, a
multi-national work force of approximately 3,790 persons, of which 81% are
citizens of the respective countries in which they work. Although the level of
activity varies from year to year, we have maintained an average work force of
approximately 3,370 over the past five years. The minimum employment during that
period has been 2,010 and the maximum 4,750. At December 31, 2001, approximately
32% of our employees were covered by collective bargaining agreements. We
believe our relations with our employees are satisfactory.
21
The following table sets forth the location of employees by work countries
as of December 31, 2001:
NUMBER OF
EMPLOYEES(1) PERCENT
------------ -------
Nigeria........................................... 1,180 31%
Cameroon.......................................... 1,280 34
Oman.............................................. 420 11
Venezuela......................................... 220 6
Canada ........................................... 110 3
U.S. Engineering.................................. 360 9
U.S. Construction................................. 150 4
U.S. Administration............................... 70 2
----- ---
Total............................................. 3,790 100%
===== ===
(1) Includes joint ventures
EQUIPMENT
We own, lease and maintain a fleet of generally standardized construction,
transportation and support equipment and spare parts. In 2001 and 2000,
expenditures for capital equipment and spare parts were $28.8 million and $15.4
million, respectively. At December 31, 2001, our net book value of property,
plant, equipment and spare parts was $74.3 million. During 2001, surplus
equipment with a net book value of $0.6 million was sold or retired for
approximately $0.2 million.
Historically, we have preferred to own rather than lease equipment to ensure
that standardized equipment is available as needed. We believe the
standardization of equipment has resulted in lower equipment costs. We are
constantly evaluating the availability of equipment and may from time to time
pursue the leasing of equipment to support projects. In recent years the leasing
market for heavy construction equipment in international locales has become much
more competitive. As a result, we have made more significant use of leasing to
support our project equipment requirements. We continue to evaluate expected
equipment utilization, given anticipated market conditions, and may dispose of
underutilized equipment from time to time. All equipment is subject to scheduled
maintenance to maximize fleet readiness. We have maintenance facilities at Port
Harcourt, Nigeria; Azaiba, Oman; Maracaibo, Venezuela; and Houston, Texas; as
well as temporary site facilities on major jobs to minimize downtime.
FACILITIES
We own a 14-acre equipment yard/maintenance facility and an adjoining
29-acre undeveloped industrial site (that is under lease to a third party) at
Broken Arrow, Oklahoma, a short distance from Tulsa, Oklahoma and a similar
facility in Channelview, Texas, near Houston, that is comprised of 19 acres. In
Canada, we own a 10,000 square foot fabrication shop on 3 acres of land in Ft.
McMurray, Alberta. In Venezuela, our offices and construction facilities are
located on 15 acres of land, which we own, on the shores of Lake Maracaibo. We
lease all other facilities used in our 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 the United States, Canada, England, Nigeria, Oman, and
Venezuela. Rent expense for these facilities was $2.6 million in 2001 and $3.2
million in 2000.
22
INSURANCE AND BONDING
We maintain 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 us 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. We also maintain physical damage
insurance covering loss of or damage to our property on a worldwide basis, with
special insurance covering loss or damage caused by political or terrorist risks
in 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. We believe our risk management, safety and insurance programs are
adequate to meet our needs.
We often are required to provide surety bonds guaranteeing our performance
and/or financial obligations. The amount of bonding available to us depends upon
our experience and reputation in the industry, financial condition, backlog and
management expertise, among other factors. We maintain relationships with two
top-rated surety companies to provide surety bonds. We also use letters of
credit in lieu of bonds to satisfy performance and financial guarantees on some
international projects.
POLITICAL AND ECONOMIC RISKS; OPERATIONAL RISKS
We currently have substantial operations and assets in developing countries
in Africa, the Middle East and South America. Accordingly, we are subject to
risks which ordinarily would not be expected to exist in the United States,
Canada, Japan or western Europe.
Some of these risks include:
- - Foreign currency restrictions (such as those which existed in Venezuela
until 1996)
- - Extreme exchange rate fluctuations (for example, in Venezuela and Nigeria)
- - Expropriation of assets
- - Civil uprisings and riots
- - War
- - Terrorist acts
- - Availability of suitable personnel and equipment
- - Government instability
- - Legal systems of decrees, laws, regulations, interpretations and court
decisions which are not always fully developed and which may be
retroactively applied.
Our operations in developing countries may be adversely affected in the
event any governmental agencies in these countries 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. We may be
subject to unanticipated taxes including income taxes, excise duties, import
taxes, export taxes, sales taxes, or other governmental assessments, which could
have a material adverse effect on our results of operations for any quarter or
year.
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 our results of
operations. We have attempted to mitigate the risks of doing business in
developing countries by separately incorporating our 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 our
capital investment in each country. We retain local advisors to assist us in
interpreting the laws, practices and customs of the countries in which we
operate.
In 1999, local protesters looted and vandalized one of our facilities near
Port Harcourt, Nigeria, and interfered with the operations and progress on some
ongoing projects. The Nigerian government
23
intervened and restored order in the area. In 2000, there were periodic
interruptions on some projects. We have successfully operated in Nigeria for the
past 39 years with very favorable relationships with the local communities, and
believe that we can continue to operate in the area.
Due to the limited number of major projects worldwide, we may, at any one
time, have a substantial portion of our resources dedicated to projects located
in a few countries. Our results of operations are, therefore, susceptible to
adverse events beyond our control, which may occur in a particular country in
which one of our businesses may be concentrated.
Our operations include pipeline construction, dredging, pipeline
rehabilitation services, marine support services and the operation of vessels
and heavy equipment. These operations involve a high degree of operational risk.
Natural disasters, adverse weather conditions, collisions, and operator or
navigational error could cause personal injury or loss of life, severe damage to
and destruction of property, equipment and the environment and suspension of
operations. In locations where we perform work with equipment that is owned by
others, our continued use of the equipment can be subject to unexpected or
arbitrary interruption or termination. The occurrence of any of these events
could result in work stoppage, loss of revenue, casualty loss, increased costs
and significant liability to third parties. Litigation arising from the
occurrence of any of these events could result in our being named as a defendant
in lawsuits asserting substantial claims.
We maintain risk management and safety programs to mitigate the effects of
loss or damage. While we maintain such insurance protection as we deem prudent,
there can be no assurance that any such insurance will be sufficient or
effective under all circumstances or against all hazards to which we may be
subject. An enforceable claim for which we are not fully insured could have a
material adverse effect on our financial condition and results of operations.
Moreover, no assurance can be given that we will be able to maintain adequate
insurance in the future at rates that we consider reasonable.
GOVERNMENT REGULATIONS
General
Many aspects of our operations are subject to government regulations in the
countries in which we operate, including those relating to currency conversion
and repatriation, taxation of our earnings and earnings of our personnel, and
our use of local employees and suppliers. In addition, we depend on the demand
for our services from the oil, gas and power industries and, therefore, our
business is affected by changing taxes, price controls and laws and regulations
relating to the oil, gas and power industries generally. The ability of the
Organization of Petroleum Exporting Countries to meet and maintain production
targets also influences the demand for our services. The adoption of laws and
regulations by the countries or the states in which we operate for the purpose
of curtailing exploration and development drilling for oil and gas or the
development of power generation facilities for economic and other policy
reasons, could adversely affect our operations by limiting demand for our
services. Our operations are also subject to the risk of changes in foreign and
U.S. laws and policies which may impose restrictions on our business, including
trade restrictions, which could have a material adverse effect on our
operations.
Other types of government regulation which could, if enacted or implemented,
adversely affect our 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
- - Unrealistically high labor rate and fuel price regulation.
24
We cannot determine to what extent our future operations and earnings may be
affected by new legislation, new regulations or changes in, or new
interpretations of, existing regulations.
Environmental
Our operations are subject to numerous environmental protection laws and
regulations, which are complex and stringent. We regularly perform work 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, we 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
us to liability arising out of the conduct of operations or conditions caused by
others, or for our acts which were in compliance with all applicable laws at the
time such acts were performed. We are not aware of any non-compliance with or
liability under any environmental law that could have a material adverse effect
on our business or operations.
ITEM 3. LEGAL PROCEEDINGS
We are a party to a number of legal proceedings. We believe that the nature
and number of these proceedings are typical for a firm of our size engaged in
our type of business and that none of these proceedings is material to our
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 2001 through the solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock commenced trading on the New York Stock Exchange on August
15, 1996, under the symbol "WG." The following table sets forth the high and low
sale prices per share of our common stock, as reported in the New York Stock
Exchange composite transactions, for the periods indicated:
High Low
---- ---
2000:
First Quarter $ 7.19 $ 4.13
Second Quarter 7.63 4.50
Third Quarter 8.06 5.13
Fourth Quarter 6.94 4.38
2001:
First Quarter 15.00 6.19
Second Quarter 17.00 11.40
Third Quarter 14.05 10.25
Fourth Quarter 16.44 12.40
2002:
First Quarter 16.85 14.10
(through February 19, 2002)
25
Substantially all of our stockholders maintain their shares in "street name"
accounts and are not, individually, stockholders of record. As of February 6,
2002, our common stock was held by 101 holders of record and an estimated 1,621
beneficial owners.
In order to fund the development and growth of our business, we intend to
retain our earnings rather than pay dividends in the foreseeable future. Since
1991, we have not paid any dividends, except dividends in 1996 on our
outstanding shares of preferred stock, which were converted into shares of
common stock on July 15, 1996. Subject to restrictions under credit
arrangements, the payment of any future dividends will be at the discretion of
our board of directors and will depend upon, among other things, our financial
condition, funds from operations, the level of our capital expenditures and our
future business prospects. Our present credit agreement prohibits us from paying
cash dividends on our common stock.
PART II
ITEM 6. SELECTED FINANCIAL DATA
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------
2001(1) 2000(2) 1999 1998 1997
--------- --------- --------- --------- ---------
STATEMENT OF OPERATIONS DATA:
Contract revenue $ 390,134 $ 314,290 $ 176,564 $ 281,618 $ 251,877
Operating expenses:
Contract cost 315,685 266,969 145,498 220,360 182,435
Termination of benefit plans (9,204) -- -- -- --
Depreciation and amortization 19,522 22,408 21,313 25,552 18,936
General and administrative 29,975 30,218 27,548 32,383 29,118
--------- --------- --------- --------- ---------
Operating income (loss) 34,156 (5,305) (17,795) 3,323 21,388
Net interest income (expense) (2,084) (1,865) 587 (484) 304
Minority interest (1,501) (2,449) (1,541) (1,132) (1,911)
Other income (expense) (1,107) (716) 2,031 (1,502) 58
--------- --------- --------- --------- ---------
Income (loss) before income taxes 29,464 (10,335) (16,718) 205 19,839
Provision for income taxes 10,384 5,257 3,300 4,567 5,723
--------- --------- --------- --------- ---------
Net income (loss) $ 19,080 $ (15,592) $ (20,018) $ (4,362) $ 14,116
========= ========= ========= ========= =========
Net income (loss) per share:
Basic $ 1.32 $ (1.11) $ (1.54) $ (.30) $ .97
Diluted 1.27 (1.11) (1.54) (.30) .96
CASH FLOW DATA:
Cash provided by (used in):
Operating activities $ 24,756 $ 3,040 $ (14,041) $ 15,199 $ 45,788
Investing activities (36,066) (10,035) 4,866 (34,684) (46,386)
Financing activities 18,373 10,442 8,641 (14,545) 19,747
Effect of exchange rate changes 287 686 93 (961) (29)
OTHER DATA:
EBITDA (3) $ 51,070 $ 13,938 $ 4,008 $ 26,241 $ 38,471
Capital expenditures, excluding
acquisitions 28,818 15,351 12,245 36,112 47,272
Backlog (at period end) (4) 407,553 373,947 253,080 286,473 135,797
Number of employees (at
period end) (5) 3,790 2,194 2,030 2,280 4,230
Cash dividends per common share -- -- -- -- --
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents $ 19,289 $ 11,939 $ 7,806 $ 8,247 $ 43,238
Working capital 46,222 32,079 25,801 13,495 39,563
Total assets 224,135 176,125 153,153 159,939 201,202
Total debt 39,284 26,298 15,981 758 8,574
Stockholders' equity 96,557 71,746 80,427 106,934 118,986
(1) The Company acquired MSI Energy Services Inc., a general contractor in
Alberta, Canada, on October 12, 2001. Accordingly, its results of
operations since that date are consolidated with the Company's results of
26
operations. Refer to Management's Discussion and Analysis of Financial
Condition and Results of Operations - General and the Company's Consolidated
Financial Statements included elsewhere herein.
(2) The Company acquired Rogers & Phillips, Inc., a U.S. pipeline construction
company, on January 24, 2000. Accordingly, its results of operations since
that date are consolidated with the Company's results of operations. Refer
to Management's Discussion and Analysis of Financial Condition and Results
of Operations - General and the Company's Consolidated Financial Statements
included elsewhere herein.
(3) EBITDA represents earnings before net interest, income taxes, depreciation
and amortization. EBITDA is not intended to represent cash flows for the
respective 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 accounting principles generally accepted in the United
States. 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 Form 10-K because it is one of the
measures through which the Company assesses its financial performance.
(4) Backlog is anticipated contract revenue from contracts for which award is
either in hand or reasonably assured.
(5) Includes joint ventures in 2001.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the consolidated
financial statements for the years ended December 31, 2001 and 2000, included in
Item 8 of this Form 10-K.
GENERAL
We derive our revenue from providing construction, engineering and specialty
services to the oil, gas and power industries and government entities worldwide.
We obtain contracts for our work primarily by competitive bidding or through
negotiations with long-standing or prospective clients. Bidding activity,
backlog and revenue resulting from the award of contracts to us may vary
significantly from period to period. Contracts have durations from a few weeks
to several months or in some cases more than a year.
Operations outside the United States may be subject to certain risks which
ordinarily would not exist in the United States, including foreign currency
restrictions, extreme exchange rate fluctuations, expropriation of assets, civil
uprising and riots, availability of personnel and government audit. In 1999,
local protesters looted and vandalized our facility near Port Harcourt, Nigeria,
and interfered with our operations and progress on some ongoing projects. The
Nigerian government intervened and restored order in the area. In 2000 there
were periodic interruptions on some projects. We have successfully operated in
Nigeria for the past 39 years with very favorable relationships with the local
communities, and believe that we can continue to operate in the area. We have
been active in South America since 1939. Venezuela is the largest oil producer
in South America and has redirected its energy initiative to include development
of its significant natural gas reserves. This new initiative should translate
into more demand for our natural gas pipeline capabilities. However, the
Venezuelan economy is highly inflationary and the government has introduced a
new hydrocarbon law, which is viewed by both international and national
petroleum industry leaders as unfriendly to future investment in this sector.
The outcome of negotiations between the government and private industry to
revise the law is uncertain, and significant new foreign investment is unlikely
until the negotiations are complete.
CRITICAL ACCOUNTING POLICIES
Revenue Recognition: Percentage-of-Completion Method - A number of factors
relating to our business affect the recognition of contract revenue. Revenue
from fixed-price construction and engineering contracts is recognized on the
percentage-of-completion method. Under this method, estimated contract income
and resulting revenue is generally accrued based on costs incurred to date as a
percentage of total estimated costs, taking into consideration physical
completion. Total estimated costs, and thus contract income, are impacted by
changes in productivity, scheduling, and the unit cost of labor, subcontracts,
materials and equipment. Additionally, external factors such as weather, client
needs, client delays in providing approvals, labor availability, governmental
regulation and politics, may also affect the progress and estimated cost of a
project's completion and thus the timing of income and revenue
27
recognition. Generally, we do not recognize income on a fixed-price contract
until the contract is approximately 5% to 10% complete, depending upon the
nature of the contract. Costs which are considered to be reimbursable are
excluded from the percentage-of-completion calculation. Accrued revenue
pertaining to reimbursables is 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. Revenue from change
orders, extra work, variations in the scope of work and claims is recognized
when realization is reasonably assured. Revenue from unit-price contracts is
recognized as earned. We believe that our operating results should be evaluated
over a relatively long time horizon during which major contracts are completed
and change orders, extra work, variations in the scope of work and cost
recoveries and other claims are negotiated and realized.
All U.S. government contracts and many of our other contracts provide for
termination of the contract for the convenience of the client. In the event a
contract would be terminated at the convenience of the client prior to
completion, we will typically be compensated for progress up to the time of
termination and any termination costs. 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 that are within our
control.
An example of a project involving many of the above factors is our project in
Australia. The project in Australia was completed after July 1, 2000, the date
on which liquidated damages were scheduled to commence under the contract. Due
primarily to productivity and other labor issues, and anticipated liquidated
damages, we recognized a contract loss of $14.5 million in 2000. However, during
2001, the client accepted claims for extension of the scheduled completion date,
accepted other claims and requested additional services, resulting in contract
amendments and the realization in 2001 of $4.2 million of contract income on the
project.
Income Taxes - The determination of our tax provision is complex due to
operations in several tax jurisdictions outside the United States which may be
subject to certain risks which ordinarily would not be expected in the United
States. Tax regimes in certain jurisdictions are subject to significant changes
which may be applied on a retroactive basis. If this were to occur, our tax
expense could be materially different than the amounts reported. Furthermore, in
determining the valuation allowance related to deferred tax assets, we estimate
taxable income into the future and determine the magnitude of deferred tax
assets which are more likely than not to be realized. Future taxable income
could be materially different than amounts estimated, in which case the
valuation allowance would need to be adjusted.
Joint Venture Accounting - We have investments, ranging from 10 percent to 50
percent, in joint ventures that operate in similar lines of business as ours.
Investments consist of a 10 percent interest in a consortium for work in
Venezuela, a 35 percent interest in a joint venture for work in Australia and a
50 percent interest in a joint venture for work in Africa. Interests in these
unconsolidated ventures are accounted for under the equity-method in the
consolidated balance sheets and on a proportionate consolidation basis in the
consolidated statements of operations. This presentation is consistent with
construction industry practice. Alternatively, if we were to account for these
interests using the equity-method in the consolidated statement of operations,
revenue and contract cost would be materially lower; however, net income would
not change.
SIGNIFICANT BUSINESS DEVELOPMENTS
On January 24, 2000, we acquired Rogers & Phillips, Inc. ("RPI"), a closely
held pipeline construction company in Houston, Texas with an experienced
management team and a strong market position in the U.S. Gulf Coast area.
Founded in 1992, RPI provides a full range of construction services for pipeline
operating companies, including station and piping projects in congested urban
areas and inside plants, as well as cross-country pipelines. The consideration
included 1,035,000 shares of our common stock and approximately $1.7 million in
cash and acquisition costs. The transaction was accounted for as a purchase. RPI
contributed $85.9 million of revenue during 2001 and $39.4 million in 2000.
In September 2000, through a joint venture led by a subsidiary of ours, we
were awarded a significant project, the scope of which includes the engineering,
procurement and construction ("EPC") of a 665-mile
28
(1,070-kilometer), 30-inch crude oil pipeline from the Doba Fields in Chad to an
export terminal on the coast of Cameroon in Africa (the "Chad-Cameroon Pipeline
Project"). Engineering and procurement activities began in late 2000. Pipeline
construction began in November 2001 and is expected to be completed in 2003.
During 2000, our activities in Nigeria included work on two major EPC
contracts for Shell: (a) the Nembe Creek gas gathering pipeline system, and (b)
four concrete barge-mounted gas compressor facilities for Shell's Nembe Creek
Associated Gas project (collectively, the "Nembe Creek Projects"). At the end of
2001, both projects were nearing completion.
During 2000, Willbros USA, Inc. relocated its administrative headquarters and
some construction support services from Tulsa, Oklahoma, to Houston, Texas. The
cost of the move, termination benefits, and office lease termination costs
totaled approximately $4.5 million.
On October 12, 2001, we completed the purchase of MSI Energy Services Inc.
("MSI"), a Canadian general contractor whose common shares were listed on The
Canadian Venture Exchange. MSI provides pipeline construction, pipeline
integrity and maintenance services in addition to pipe storage and handling
services, specialty metal fabrication services, pipeline equipment rentals and
concrete construction products in the oil sands region of Northern Alberta,
Canada. The aggregate purchase price, including transaction costs, was $8.3
million. In conjunction with the acquisition the Company sold 144,175 common
shares from treasury for $1.9 million to certain MSI shareholders and the net
cash paid of $6.4 million to purchase MSI was funded through borrowings under
our principal credit agreement. The transaction was accounted for as a purchase.
MSI contributed $3.3 million of revenue during 2001.
During 2001, our engineering group executed an alliance agreement with
Explorer Pipeline Company to provide project management, engineering,
procurement and construction services for their Mainline Expansion Project in
Texas, Oklahoma, Missouri, Illinois, and Indiana (the "Explorer Pipeline
Project"). This project includes construction of 12 grassroots pump stations,
modifications at 12 existing pump stations, the addition of 500,000 barrels of
storage at the Wood River, Illinois terminal and modifications at two other
terminals. The project is scheduled for completion in 2002.
OTHER FINANCIAL MEASURES
We use EBITDA (earnings before net interest, income taxes, depreciation and
amortization) as part of our overall assessment of financial performance by
comparing EBITDA between accounting periods. We believe that EBITDA is used by
the financial community as a method of measuring our performance and of
evaluating the market value of companies considered to be in businesses similar
to ours. EBITDA for the year 2001 was $51.1 million, up $37.2 million from $13.9
million for 2000.
We define anticipated contract revenue as backlog when the award of a
contract is reasonably assured, generally upon the execution of a definitive
agreement or contract. Anticipated revenue 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, is not added to backlog
until realization is reasonably assured. New contract awards totaled $423.8
million during the year ended December 31, 2001. Additions to backlog during the
year were as follows: construction, $147.4 million; engineering, $219.9 million;
and specialty services, $56.5 million. Backlog decreases by type of service as a
result of services performed during the period were as follows: construction,
$214.5 million; engineering, $120.3 million; and specialty services, $55.3
million. Backlog at the end of the year increased $33.7 million (9%) from the
previous year end to $407.6 million and consisted of the following: (a)
construction, $207.7 million, down $67.1 million (24%); (b) engineering, $154.6
million, up $99.6 million (181%); and (c) specialty services, $45.3 million, up
$1.2 million (3%). Construction backlog consists primarily of the Chad-Cameroon
Pipeline Project and construction projects in Offshore West Africa. Engineering
backlog consists primarily of the Explorer Pipeline Project and other
engineering and procurement projects in the United States. Specialty services
backlog is largely attributable to a 16-year water injection contract awarded in
1998 to a consortium in which we have a 10 percent interest in Venezuela,
contracts to build, own and operate four fueling facilities for the United
States government, and service contracts in Oman and Canada.
29
RESULTS OF OPERATIONS
Our contract revenue and contract costs are primarily related to the timing
and location of development projects in the oil, gas and power industries
worldwide. Contract revenue and cost variations by country from year to year are
the result of (a) entering and exiting work countries; (b) the execution of new
contract awards; (c) the completion of contracts; and (d) the overall level of
activity in our services.
Our ability to be successful in obtaining and executing contracts can be
affected by the relative strength or weakness of the U.S. dollar compared to the
currencies of our competitors, our clients and our work locations. We do not
believe that our revenue or results of operations were adversely affected in
this regard during the years ended December 31, 2001 or 2000.
FISCAL YEAR ENDED DECEMBER 31, 2001, COMPARED TO FISCAL YEAR
ENDED DECEMBER 31, 2000
CONTRACT REVENUE
Contract revenue increased $75.8 million (24%) to $390.1 million as a result
of (a) increased engineering revenue of $61.6 million due to an increase in
engineering and procurement services in the United States; and (b) increased
construction revenue of $22.1 million due primarily to increased construction
activity in the United States, Offshore West Africa and Cameroon partially
offset by reduced activities on the Nembe Creek Projects in Nigeria as they
neared completion in 2001 and the completion in the third quarter of 2000 of the
construction contract in Australia. These increases in engineering and
construction revenue were partially offset by a decrease of $7.9 million in
specialty services revenue. Revenue in the United States increased $112.3
million (121%) due to an increase in engineering, procurement and construction
services. Cameroon revenue increased $34.0 million as work on the Chad-Cameroon
Pipeline Project moved from the engineering, procurement and mobilization phases
into the construction phase in November 2001. Offshore West Africa revenue
increased $26.3 million (149%) due to higher utilization of the combination
barge "Willbros 318" as well as utilization of the derrick barge "WB82" acquired
in 2001. Revenue in Oman increased $1.4 million (11%). Canada revenue, from the
MSI acquisition on October 12, 2001, was $3.3 million. Nigeria revenue decreased
$75.6 million (53%) due to reduced activity on the Nembe Creek Projects.
Australia revenue decreased $16.7 million (81%) due to the construction contract
that was completed in 2000, net of $4.0 million from contract amendments and
settled claims during 2001. Revenue in Venezuela decreased $9.2 million (35%).
CONTRACT COSTS
Contract costs increased $48.7 million (18%) to $315.7 million due to an
increase of $51.9 million in engineering services cost and an increase in
construction services cost of $8.1 million, partially offset by a decrease of
$11.3 million in specialty services cost. Variations in contract cost by country
were closely related to the variations in contract revenue, with the exception
of Australia. Contract costs in Australia decreased by $35.4 million or $18.7
million more than the decrease in revenue primarily as a result of a $14.5
million loss recognized during 2000, offset by $4.2 million of settled claims in
2001.
TERMINATION OF BENEFIT PLANS
During 2001 we terminated two employee benefit plans which resulted in
one-time, non-taxable gains of $9.2 million. These plans were costly to maintain
and had become ineffective in the recruitment and retention of an experienced
and qualified workforce.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization decreased $2.9 million to $19.5 million due
primarily to the sale in 2000 of excess equipment in Venezuela, Indonesia, the
United States and Oman, accelerated amortization of excess spare parts in
Indonesia in 2000 and accelerated amortization of leasehold improvements of $0.8
million related to termination of our administrative office space in Tulsa,
Oklahoma as a result of relocation of those offices to Houston, Texas.
30
GENERAL AND ADMINISTRATIVE
General and administrative expense, as a percentage of revenue, decreased to
7.7% in 2001 from 9.6% in 2000. On a dollar basis, general and administrative
expenses decreased $0.2 million to $30.0 million in 2001. This reduction is the
result of the non-recurrence of the $3.6 million in expenses that were incurred
in 2000 that were associated with the relocation of the administrative office to
Houston, Texas. This reduction was offset by increased general and
administrative expenses in 2001 as expansion in staffing and support services
were necessary to support the 24% increase in revenue during the year.
OPERATING INCOME
Operating income increased $39.4 million from an operating loss of $5.3
million in 2000 to operating income of $34.1 million in 2001. For the reasons
described above, operating income increased in Australia by $19.4 million (from
an operating loss of $15.4 million in 2000), the United States by $14.8 million,
Offshore West Africa by $9.2 million and Cameroon by $5.0 million. Additionally,
we recognized $9.2 million of gains related to the termination of certain
employee benefit plans. These improvements were offset by reduced operating
income in Nigeria and Venezuela totaling $18.7 million. All other areas combined
accounted for an increase of $0.5 million.
NET INTEREST INCOME (EXPENSE)
Net interest income (expense) decreased $0.2 million to $2.1 million net
interest expense due primarily to lower interest rates during the period offset
by higher average debt levels.
MINORITY INTEREST
Minority interest expense decreased $0.9 million to $1.5 million due to a
decrease in activity in Nigeria where minority interest partners were involved.
FOREIGN EXCHANGE GAIN (LOSS)
Foreign exchange loss decreased $1.0 million to $0.1 million primarily due to
the write-off during 2000 of cumulative translation adjustments associated with
substantially reduced operations in Indonesia and other work countries.
OTHER INCOME (EXPENSE)
Other income (expense) decreased $1.4 million to $1.0 million expense
primarily due a full year of amortization of debt issue cost and losses on
equipment disposals.
PROVISION FOR INCOME TAXES
The provision for income taxes increased $5.1 million while pretax income
increased $39.8 million. This is the result of increased taxes on higher taxable
income in the United States offset by lower income taxes in Nigeria due to a
decrease in taxable revenue in that country, an adjustment to the deferred tax
assets valuation allowance in the United States by $2.3 million and settlement
of $0.9 million of prior year taxes in Nigeria. In addition, we had $9.2 million
of non-taxable gains in 2001 associated with the termination of benefit plans.
The provision for income taxes is impacted by income taxes in certain countries,
primarily Nigeria, being based on deemed profit rather than taxable income and
the fact that losses in one country cannot be used to offset taxable income in
another country.
31
FISCAL YEAR ENDED DECEMBER 31, 2000, COMPARED TO FISCAL YEAR
ENDED DECEMBER 31, 1999
CONTRACT REVENUE
Contract revenue increased $137.7 million (78%) to $314.3 million due to (a)
$124.6 million of increased construction revenue resulting primarily from new
construction contracts in Nigeria, the United States and Offshore West Africa;
and (b) an increase of $24.9 million in specialty services revenue, principally
from operations in Nigeria, Oman and Venezuela; net of decreased engineering
revenue of $11.8 million due to completion in early 2000 of the engineering
portion of engineering, procurement and construction contracts in Nigeria.
Nigeria revenue increased $67.1 million (88%) due to revenue from work performed
on engineering, procurement and construction projects and increased specialty
services work. Revenue in the United States increased $50.0 million (117%)
primarily due to construction projects in Indiana, Illinois and Louisiana
performed by RPI and increased engineering work. Offshore West Africa revenue
increased $16.4 million due primarily to work performed on an engineering,
procurement and construction project to install offshore pipelines and
facilities. Oman revenue increased $4.9 million (61%) due to increased
construction and service revenues. Venezuela revenue increased $2.6 million
(11%) due to work performed on a water injection platform construction contract
and several new service contracts. Australia revenue increased $1.9 million due
to a construction contract started in the second half of 1999 and completed in
July 2000. Indonesia revenue decreased $3.2 million (100%) and Ivory Coast
revenue decreased $2.6 million (100%) due to the completion of work in 1999 on
pipeline projects in those countries. Revenue in all other areas increased $0.6
million.
CONTRACT COSTS
Contract costs increased $121.5 million (84%) to $267.0 million due to an
increase of $114.2 million in construction services cost, an increase of $15.8
million in specialty services costs and a decrease of $8.5 million in
engineering services cost. Variations in contract costs by country were closely
related to the variations in contract revenue, with the exception of Australia.
Contract costs in Australia exceeded contract revenue by approximately $14.5
million.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased $1.1 million to $22.4 million due to
$0.8 million of accelerated amortization of leasehold improvements related to
the Company's vacated office space in Tulsa, Oklahoma, and $0.9 of increased
amortization resulting from higher levels of spare parts purchases, offset by a
reduction in depreciation expense as a result of the sale of excess equipment in
Venezuela, Indonesia, the United States and Oman.
GENERAL AND ADMINISTRATIVE
General and administrative expense increased $2.6 million (9%) to $30.2
million. This increase included $3.0 of general and administrative expense from
RPI, which was acquired in January 2000, and $3.6 million in office relocation
costs that were partially offset by a $4.0 million reduction in general and
administrative expense as a result of personnel reductions and scaling back or
eliminating activities.
OPERATING LOSS
Operating loss declined $12.5 million (70%) to an operating loss of $5.3
million. Increased operating income in Nigeria, Offshore West Africa, Oman, and
the United States in the aggregate was $26.8 million. This improvement is
primarily attributable to a 78 percent increase in revenue in 2000 over 1999.
Offsetting the improvements in the above work countries was the increased
operating loss in Australia of $14.3 million. This loss is primarily
attributable to unanticipated labor difficulties and delays caused by weather
and a subcontractor.
NET INTEREST INCOME (EXPENSE)
Net interest income decreased $2.5 million to $1.9 million net interest
expense due to an increase in borrowings and higher interest rates during the
period.
32
MINORITY INTEREST
Minority interest expense increased $0.9 million to $2.4 million due to an
increase in activity in countries where minority interest partners were
involved.
FOREIGN EXCHANGE GAIN (LOSS)
Foreign exchange loss increased $0.6 million to $1.1 million primarily due to
the write-off of cumulative translation adjustments associated with
substantially reduced operations in certain work countries.
OTHER INCOME (EXPENSE)
Other income decreased $2.1 million to $0.4 million primarily due to gains on
disposals of equipment in 1999 exceeding gains on disposals of equipment in
2000.
PROVISION FOR INCOME TAXES
The provision for income taxes increased $2.0 million (61%) primarily due to
the increase in taxable revenue in Nigeria, offset by a $1.2 million deferred
tax benefit resulting from recognition in 2000 of a portion of the future tax
benefit of operating loss carryforwards in the United States that were
previously fully reserved through a valuation allowance against deferred tax
assets. Although we had a loss before income taxes, a provision for income taxes
was required due to income taxes in certain countries being based on deemed
profit rather than taxable income and the fact that losses in one country cannot
be used to offset taxable income in another country.
EFFECT OF INFLATION AND CHANGING PRICES
Our operations are affected by increases in prices, whether caused by
inflation, government mandates or other economic factors, in the countries in
which we operate. We attempt to recover anticipated increases in the cost of
labor, fuel and materials through price escalation provisions in certain of our
major contracts or by considering the estimated effect of such increases when
bidding or pricing new work.
LIQUIDITY AND CAPITAL RESOURCES
Our primary requirements for capital are to acquire, upgrade and maintain
equipment, provide working capital for current projects, finance the
mobilization of employees and equipment to new projects, establish a presence in
countries where we perceive growth opportunities and finance the possible
acquisition of new businesses and equity investments. Historically, we have met
these capital requirements primarily from operating cash flows, and more
recently from borrowings under our credit facility.
Cash and cash equivalents increased $7.4 million (62%) to $19.3 million at
December 31, 2001, from $11.9 million at December 31, 2000. The increase was due
to cash flows of $24.8 million from operations, $18.4 million from financing
activities resulting from net borrowings, issuance of treasury stock and the
exercise of employee stock options and $0.3 million from the effect of exchange
rate changes on cash and cash equivalents. These increases were offset by $36.1
million of investing activities primarily for the purchase of $28.8 million of
equipment and spare parts and $7.4 million for the acquisition of MSI (net of
cash acquired). Working capital increased $14.1 million during 2001 to $46.2
million at December 31, 2001. Our debt, net of cash balances, at December 31,
2001 was $20.0 million as compared to $14.4 million at December 31, 2000.
Stockholders' equity increased $24.8 million to $96.6 million at December 31,
2001. As a result, our debt (net of cash) to equity ratio was basically
unchanged from 20% at the end of 2000 to 21% at December 31, 2001.
33
CONTRACTUAL OBLIGATIONS
We have a $150 million credit agreement with a syndicated bank group, which
was amended effective June 30, 2000. The credit agreement subjects the $100
million revolving portion of the credit facility to borrowing base requirements.
The entire facility, less amounts used under the revolving portion of the
facility, may be used for standby and commercial letters of credit. Borrowings
are payable at termination on February 20, 2003. Interest is payable quarterly
at a Base Rate plus a margin ranging from 0.75% to 2.25% or a Eurodollar Rate
plus a margin ranging from 2.00% to 3.50%, depending upon our performance. A
commitment fee on the unused portion of the credit agreement is payable
quarterly ranging from 0.475% to 0.75%, depending upon our performance. The
credit agreement is collateralized by substantially all of our assets, including
stock of our principal subsidiaries. The credit agreement restricts the payment
of cash dividends and requires us to maintain certain financial ratios,
including among others, indebtedness to EBITDA, leverage, and interest coverage.
The borrowing base is calculated using varying percentages of cash, accounts
receivable, accrued revenue, contract cost and recognized income not yet billed,
property, plant and equipment, and spare parts.
As of December 31, 2001, there was $39.0 million borrowed under the credit
agreement at an average interest rate of 4.5% and $54.4 million of letters of
credit outstanding, leaving $56.6 million available for a combination of
borrowings and letters of credit.
At December 31, 2001, there were $0.1 million of notes payable issued by
RPI to a bank, collateralized by vehicles and machinery, and payable in monthly
installments of principal plus interest ranging from 6.7% to 9.0% per annum. The
notes mature in 2002.
At December 31, 2001, MSI borrowed $0.1 million under a $1.5 million
revolving credit facility with a bank. The credit facility is collateralized by
a fabrication facility and some real estate and equipment. The facility matures
in 2002.
In addition we have 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 $9.3 million at December 31, 2001. There were no outstanding
borrowings at December 31, 2001.
We have certain operating leases for office and camp facilities. Minimum
lease commitments under operating leases as of December 31, 2001, totaled $4.5
million and are payable as follows: 2002, $1.3 million; 2003, $0.9 million;
2004, $0.8 million; 2005, $0.8 million; 2006, $0.6 million and later years, $0.1
million.
Based upon the above, our total cash obligations are payable as follows:
2002, $1.5 million; 2003, $39.9 million and later years, $2.3 million.
COMMERCIAL COMMITMENTS
From time to time we enter into commercial commitments, usually in the form
of commercial and standby letters of credit, insurance bonds and financial
guarantees. Contracts with our customers may require us to provide letters of
credit or insurance bonds with regard to our performance of contracted services.
In such cases, the commitments can be called upon in the event of our failure to
perform contracted services. Likewise, contracts may allow us to issue letters
of credit or insurance bonds in lieu of contract retention provisions, in which
the client withholds a percentage of the contract value until project completion
or expiration of a warranty period. Retention commitments can be called upon in
the event of warranty or project completion issues, as prescribed in the
contracts. In connection with the Chad-Cameroon Pipeline Project joint venture,
we issued a letter of credit to an equipment leasing company equal to 50% of
total lease payments, our share of the joint venture. The letter of credit
reduces
34
as lease payments are made and expires in October 2002. The commitment can be
called upon as a result of failure to make lease payments.
In connection with our 10% interest in a joint venture in Venezuela, we
issued a corporate guarantee equal to 10% of the joint venture's outstanding
borrowings with two banks. The guarantee reduces as borrowings are repaid, and
expires in March 2003. The commitment as of December 31, 2001 totals $3.8
million.
In 1997 we entered into lease agreements with a special-purpose leasing
partnership for land and an office building for our engineering group in Tulsa,
Oklahoma. The leases are treated for accounting purposes as operating leases.
The initial terms of the leases were for five years with 30 one-year renewal
options, and end in August 2002. At the end of the initial terms of the leases,
we can extend the leases with the agreement of the lessor, purchase the leased
assets for $5.5 million or terminate the leases and cause the assets to be
sold. If the assets are sold, the cash proceeds from the sale in excess of $5.5
million will be paid to us by the landlord. In the event cash proceeds are less
than $5.5 million, we will make up the shortfall up to a maximum of $4.7
million. Currently, we believe the fair market value of the property is equal to
or greater than $5.5 million.
A summary of our off-balance sheet commercial commitments as of December 31,
2001 is as follows:
AMOUNT OF COMMITMENT
EXPIRATION PER PERIOD
---------------------
TOTAL LESS THAN OVER 2
COMMITMENT 2 YEARS YEARS
Letters of Credit:
Chad-Cameroon Pipeline Project - performance $31.9 $31.9 $ --
Chad-Cameroon Pipeline Project - equipment lease 12.9 12.9 --
Other - performance and retention 9.6 9.6 --
----- ----- -----
Total letters of credit 54.4 54.4 --
----- ----- -----
Insurance Bonds - primarily performance related:
Expiring 6.7 6.7 --
Non-expiring 2.5 -- 2.5
----- ----- -----
Total insurance bonds 9.2 6.7 2.5
----- ----- -----
Corporate guarantee 3.8 3.8 --
Lease residual value guarantee 4.7 4.7 --
----- ----- -----
Total commercial commitments $72.1 $69.6 $ 2.5
===== ===== =====
We do not anticipate any significant collection problems with our customers,
including those in countries that may be experiencing economic and/or currency
difficulties. Since our customers generally are major oil companies and
government entities, and the terms for billing and collecting for work performed
are generally established by contracts, we historically have a very low
incidence of collectability problems.
We believe that cash flows from operations and borrowing capacity under
existing credit facilities will be sufficient to finance working capital and
capital expenditures for ongoing operations. We estimate capital expenditures
for equipment and spare parts to be approximately $25.0 to $35.0 million in
2002. In analyzing our cash flow from operations, we believe that while there
are numerous factors that could and will have an impact on our cash flow, both
positively and negatively; there is not one or two events that should they occur
could not be funded from our operations or borrowing capacity. For a list of
risk factors that could impact cash flow, please refer to the sections titled
"Forward-Looking Statements" and "Political and Economic Risks; Operational
Risks" contained in this Form 10-K.
35
During 1998 and 1999, we repurchased and held in treasury 2,175,371 shares
of Common Stock for $16.1 million. We did not repurchase any shares in 2000 or
2001. In January 2000, 1,035,000 shares of treasury stock were issued in
connection with the acquisition of RPI. In October 2001, 144,175 shares of
treasury stock were issued in connection with the acquisition of MSI. As of
December 31, 2001, a total of 996,196 shares remain in treasury stock at an
average price of $7.43 per share.
NEW ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No.
141 requires, among other things, that the purchase method of accounting be used
for all business combinations after June 30, 2001. SFAS No. 142 requires, among
other things, that goodwill and intangible assets with indefinite useful lives
acquired after June 30, 2001 no longer be amortized, but instead be tested for
impairment at least annually. Goodwill and intangible assets acquired before
July 1, 2001 will continue to be amortized until adoption of SFAS No. 142.
We are required to fully adopt the provisions of SFAS No. 142 on January 1,
2002. Amortization expense related to goodwill was $38 thousand for the year
ended December 31, 2000, and $47 thousand for the year ended December 31, 2001.
We do not expect the adoption of SFAS No. 142 to have a material impact on the
consolidated results of operations.
In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. SFAS No. 143 requires that an asset retirement cost should be
capitalized as part of the cost of the related long-lived asset and subsequently
allocated to expense using a systematic and rational method. We will adopt SFAS
No. 143 effective January 1, 2003. The transition adjustment, if any, will be
reported as a cumulative effect of a change in accounting principle. At this
time, we cannot reasonably estimate the effect of the adoption of this statement
on either our financial position or results of operations.
In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets. SFAS No. 144 supersedes SFAS No. 121,
Accounting for Long-Lived Assets and for Long-Lived Assets to be Disposed Of,
but retains its fundamental provisions for recognizing and measuring impairment
losses on long-lived assets held for use and long-lived assets to be disposed of
by sale. We are required to adopt SFAS No. 144 on January 1, 2002. The
provisions of SFAS No. 144 generally are required to be applied prospectively.
We do not expect the adoption of SFAS 144 to have a material impact on our
financial position or results of operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our primary market risk is our exposure to changes in non-U.S. currency
exchange rates. We attempt to negotiate contracts which provide for payment in
U.S. dollars, but we 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, we
seek to match anticipated non-U.S. currency revenue with expenses in the same
currency whenever possible. To the extent we are unable to match non-U.S.
currency revenue with expenses in the same currency, we may use forward
contracts, options or other common hedging techniques in the same non-U.S.
currencies. We had no forward contracts or options at December 31, 2001 and
2000.
The carrying amounts for cash and cash equivalents, accounts receivable,
notes payable and accounts payable and accrued liabilities shown in the
consolidated balance sheets approximate fair value at December 31, 2001 due to
the generally short maturities of these items. We invest primarily in short-term
dollar denominated bank deposits, and at December 31, 2001 did not have any
investment in instruments with a maturity of more than a few days or in any
equity securities. We have the ability and expect to hold our investments to
maturity.
Our exposure to market risk for changes in interest rates relates primarily
to our long-term debt. At December 31, 2001, $39.0 million of indebtedness was
subject to variable interest rates. The weighted
36
average effective interest rate on the variable rate debt for the twelve months
ended December 31, 2001 was 7.6%. The detrimental effect of a hypothetical 100
basis point increase in interest rates would be to reduce income before income
taxes by $0.3 million for the twelve-month period.
37
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Audited Financial Statements of Willbros Group, Inc. and Subsidiaries
Independent Auditors' Report...................................................................... 39
Consolidated Balance Sheets as of December 31, 2001 and 2000...................................... 40
Consolidated Statements of Operations for the years ended
December 31, 2001, 2000 and 1999.......................................................... 41
Consolidated Statements of Stockholders' Equity and Comprehensive Income for the years ended
December 31, 2001, 2000 and 1999.......................................................... 42
Consolidated Statements of Cash Flows for the years ended
December 31, 2001, 2000 and 1999.......................................................... 43
Notes to Consolidated Financial Statements for the years ended
December 31, 2001, 2000 and 1999.......................................................... 44
38
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
Willbros Group, Inc.:
We have audited the accompanying consolidated balance sheets of Willbros Group,
Inc. as of December 31, 2001 and 2000, and the related consolidated statements
of operations, stockholders' equity and comprehensive income and cash flows for
each of the years in the three-year period ended December 31, 2001. 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 auditing standards generally accepted
in the United States of America. 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Willbros Group, Inc.
as of December 31, 2001 and 2000, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 2001, in
conformity with accounting principles generally accepted in the United States of
America.
As discussed in Note 1 to the consolidated financial statements, the Company
adopted Statement of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations" and certain provisions of SFAS No. 142, "Goodwill and Other
Intangible Assets" in 2001.
KPMG LLP
Houston, Texas
February 5, 2002
39
WILLBROS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
December 31,
------------
2001 2000
---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 19,289 $ 11,939
Accounts receivable, net 94,604 66,663
Contract cost and recognized income not yet billed 17,006 22,765
Prepaid expenses 3,664 2,666
--------- ---------
Total current assets 134,563 104,033
Spare parts, net 5,965 5,495
Property, plant and equipment, net 68,349 57,070
Other assets 15,258 9,527
--------- ---------
Total assets $ 224,135 $ 176,125
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of long-term debt $ 284 $ 217
Accounts payable and accrued liabilities 60,125 61,960
Accrued income taxes 7,871 4,952
Contract billings in excess of cost and recognized income 20,061 4,825
--------- ---------
Total current liabilities 88,341 71,954
Long-term debt 39,000 26,081
Other liabilities 237 6,344
--------- ---------
Total liabilities 127,578 104,379
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 15,728,191 shares issued at December 31,
2001 (15,206,495 at December 31, 2000) 786 760
Capital in excess of par value 72,915 68,373
Retained earnings 31,205 12,125
Treasury stock at cost, 996,196 shares at December 31, 2001
(1,140,371 shares at December 31, 2000) (7,403) (8,474)
Notes receivable for stock purchases (8) (43)
Accumulated other comprehensive income (loss) (938) (995)
--------- ---------
Total stockholders' equity 96,557 71,746
--------- ---------
Total liabilities and stockholders' equity $ 224,135 $ 176,125
========= =========
See accompanying notes to consolidated financial statements.
40
WILLBROS GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
Year Ended December 31,
-----------------------
2001 2000 1999
---- ---- ----
Contract revenue $ 390,134 $ 314,290 $ 176,564
Operating expenses (income):
Contract 315,685 266,969 145,498
Termination of benefit plans (9,204) -- --
Depreciation and amortization 19,522 22,408 21,313
General and administrative 29,975 30,218 27,548
------------ ------------ ------------
355,978 319,595 194,359
------------ ------------ ------------
Operating income (loss) 34,156 (5,305) (17,795)
Other income (expense):
Interest income 377 677 801
Interest expense (2,461) (2,542) (214)
Foreign exchange loss (117) (1,101) (501)
Minority interest (1,501) (2,449) (1,541)
Other - net (990) 385 2,532
------------ ------------ ------------
(4,692) (5,030) 1,077
------------ ------------ ------------
Income (loss) before income taxes 29,464 (10,335) (16,718)
Provision for income taxes 10,384 5,257 3,300
------------ ------------ ------------
Net income (loss) $ 19,080 $ (15,592) $ (20,018)
============ ============ ============
Income (loss) per common share:
Basic $ 1.32 $ (1.11) $ (1.54)
============ ============ ============
Diluted $ 1.27 $ (1.11) $ (1.54)
============ ============ ============
Weighted average number of common shares outstanding:
Basic 14,442,035 14,017,857 13,029,665
============ ============ ============
Diluted 15,074,166 14,017,857 13,029,665
============ ============ ============
See accompanying notes to consolidated financial statements.
41
WILLBROS GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
(In thousands, except share amounts)
Accumulated
Capital Notes Other
Common Stock in Receivable Compre- Total
------------------- Excess For hensive Stock-
Par of Par Retained Treasury Stock Income holders'
Shares Value Value Earnings Stock Purchases (Loss) Equity
------ ----- ------ -------- ------ --------- ------- -------
Balance, January 1, 1999 15,071,715 $753 $67,613 $ 49,914 $ (8,590) $(982) $(1,774) $106,934
Comprehensive income (loss):
Net loss -- -- -- (20,018) -- -- -- (20,018)
Foreign currency translation
adjustments -- -- -- -- -- -- 93 93
--------
Total comprehensive
loss (19,925)
Payment of notes receivable -- -- -- -- -- 675 -- 675
Purchase of treasury stock -- -- -- -- (7,574) -- -- (7,574)
Issuance of common stock
under employee benefit plan 51,238 3 311 -- -- -- -- 314
Exercise of stock options 500 -- 3 -- -- -- -- 3
----------- ---- ------- -------- -------- ----- ------- --------
Balance, December 31, 1999 15,123,453 756 67,927 29,896 (16,164) (307) (1,681) 80,427
Comprehensive income (loss):
Net loss -- -- -- (15,592) -- -- -- (15,592)
Foreign currency translation
adjustments -- -- -- -- -- -- 686 686
--------
Total comprehensive
loss (14,906)
Payment of notes receivable -- -- -- -- -- 264 -- 264
Issuance of treasury stock -- -- -- (2,179) 7,690 -- -- 5,511
Issuance of common stock
under employee benefit plan 42,542 2 241 -- -- -- -- 243
Exercise of stock options 40,500 2 205 -- -- -- -- 207
----------- ---- ------- -------- -------- ----- ------- --------
Balance, December 31, 2000 15,206,495 760 68,373 12,125 (8,474) (43) (995) 71,746
Comprehensive income (loss):
Net income -- -- -- 19,080 -- -- -- 19,080
Foreign currency translation
adjustments -- -- -- -- -- -- 57 57
--------
Total comprehensive
income 19,137
Payment of notes receivable -- -- -- -- -- 35 -- 35
Issuance of treasury stock -- -- 779 -- 1,071 -- -- 1,850
Issuance of common stock
under employee benefit plan 25,446 1 305 -- -- -- -- 306
Exercise of stock options 496,250 25 3,458 -- -- -- -- 3,483
----------- ---- ------- -------- -------- ----- ------- --------
Balance, December 31, 2001 15,728,191 $786 $72,915 $ 31,205 $ (7,403) $ (8) $ (938) $ 96,557
=========== ==== ======= ======== ======== ===== ======= ========
See accompanying notes to consolidated financial statements.
42
WILLBROS GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended December 31,
-----------------------
2001 2000 1999
---- ---- ----
Cash flows from operating activities:
Net income (loss) $ 19,080 $(15,592) $(20,018)
Reconciliation of net income (loss) to cash provided
by (used in) operating activities:
Termination of benefit plans (9,204) -- --
Depreciation and amortization 19,522 22,408 21,313
Loss (gain) on sales and retirements
of property and equipment 402 (4) (2,897)
Deferred income tax benefit (1,466) (1,193) --
Changes in operating assets and liabilities:
Accounts receivable (25,333) (11,900) (10,551)
Contract cost and recognized
income not yet billed 5,759 (9,305) (5,060)
Prepaid expenses and other assets (2,363) 73 (1,326)
Accounts payable and accrued liabilities 772 23,984 (98)
Accrued income taxes 2,351 (596) (971)
Contract billings in excess of cost
and recognized income 15,236 (4,414) 4,436
Other liabilities -- (421) 1,131
-------- -------- --------
Cash provided by (used in) operating activities 24,756 3,040 (14,041)
Cash flows from investing activities:
Acquisitions, net of cash acquired (7,410) (14) --
Proceeds from sales of property and equipment 162 5,330 17,111
Purchase of property and equipment (22,223) (8,792) (7,983)
Purchase of spare parts (6,595) (6,559) (4,262)
-------- -------- --------
Cash provided by (used in) investing activities (36,066) (10,035) 4,866
Cash flows from financing activities:
Proceeds from long-term debt 75,000 55,000 15,500
Proceeds from notes payable to banks 1,674 979 481
Proceeds from common stock 3,789 450 317
Collection of notes receivable for stock purchases 35 264 675
Repayment of long-term debt (62,000) (44,791) --
Repayment of notes payable to banks (2,104) (1,460) (525)
Sale (purchase) of treasury stock 1,979 -- (7,574)
Repayment of notes payable to former shareholders -- -- (233)
-------- -------- --------
Cash provided by financing activities 18,373 10,442 8,641
Effect of exchange rate changes on cash and
cash equivalents 287 686 93
-------- -------- --------
Cash provided by (used in) all activities 7,350 4,133 (441)
Cash and cash equivalents, beginning of year 11,939 7,806 8,247
-------- -------- --------
Cash and cash equivalents, end of year $ 19,289 $ 11,939 $ 7,806
======== ======== ========
See accompanying notes to consolidated financial statements.
43
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Company - Willbros Group, Inc. ("WGI"), a Republic of Panama corporation,
and all of its majority-owned subsidiaries (the "Company") provide construction,
engineering and specialty services to the oil, gas and power industries. The
Company's principal markets are Africa, Asia, Australia, the Middle East, South
America, Canada and the United States.
Principles of Consolidation - The consolidated financial statements of
the Company include the accounts of WGI and all of its majority-owned
subsidiaries. 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. Interests in unconsolidated joint ventures are accounted for on the
equity method in the consolidated balance sheets and on a proportionate
consolidation basis in the consolidated statements of operations.
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 revenue and expenses. Actual results could differ
significantly from those estimates.
Reclassifications - Certain reclassifications have been made to the 2000
balances in order to conform with the 2001 presentation.
Accounts Receivable - Accounts receivable include retainage, all due
within one year, of $1,819 in 2001 and $858 in 2000 and are stated net of
allowances for bad debts of $734 in 2001 and $508 in 2000. The provision
(credit) for bad debts was $(290) in 2001, $(154) in 2000 and $573 in 1999.
Spare Parts - Spare parts (excluding expendables), stated net of
accumulated depreciation of $10,882 in 2001 and $13,509 in 2000, are depreciated
over three years on the straight-line method.
Property, Plant and Equipment - Depreciation is provided on the
straight-line method using estimated lives as follows:
Construction equipment 4-6 years
Marine equipment 10 years
Transportation equipment 3-4 years
Buildings, furniture and equipment 3-20 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.
Long-lived assets are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of the asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell.
Goodwill - Goodwill represents the excess of purchase price over fair
value of net assets acquired. Goodwill acquired prior to July 1, 2001 is being
amortized on a straight-line basis over twenty years, until adoption of the
non-amortization of goodwill provision of Statement of Financial Accounting
Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets" in 2002. The
Company adopted SFAS No. 141, "Business Combinations" and certain provisions of
SFAS No. 142 as of July 1, 2001. Goodwill acquired
44
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
after July 1, 2001 of $3,406 is not amortized, but instead is tested for
impairment at least annually. At December 31, 2001, goodwill of $4,383, less
accumulated amortization of $85, is included in other assets. Prior to January
1, 2002, the Company assessed the recoverability of goodwill using estimates of
undiscounted future cash flows.
Revenue - Construction and engineering fixed-price contracts are
accounted for using the percentage-of-completion method. Under this method,
estimated contract revenue is generally accrued based on the percentage the
costs to date bear to total estimated costs, taking into consideration physical
completion. Estimated contract losses are recognized in full when determined.
Revenue from unit-price contracts is recognized as earned. Revenue from change
orders, extra work, variations in the scope of work and claims is recognized
when realization is reasonably assured. Costs incurred for bidding and obtaining
contracts are expensed as incurred.
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 temporary differences between the financial statement carrying values of
assets and liabilities and their respective tax bases. The provision for income
taxes is impacted by income taxes in certain countries, primarily Nigeria, being
based on deemed profit rather than taxable income.
Retirement Plans and Benefits - During 2001, the Company terminated its
defined benefit retirement plans and postretirement medical benefits plan that
provided retirement benefits to substantially all regular employees. Pension
costs were funded in accordance with annual actuarial valuations. The Company
recorded the cost of postretirement medical benefits, which were funded on the
pay-as-you-go basis, over the employees' working lives. The Company has a
voluntary defined contribution retirement plan that is qualified, and is
contributory on the part of the employees.
Common Stock Options - The Company measures stock-based compensation
using the intrinsic value method of accounting prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and
related interpretations, and provides pro-forma disclosure as required by
Statement of Financial Accounting Standards No. 123, "Accounting for Stock -
Based Compensation". As such, compensation cost for stock options is measured as
the excess, if any, of the quoted market price of the Company's stock at the
date of grant over the exercise price.
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 for countries in which the
local currency is the functional currency. Non-monetary assets and liabilities
in highly inflationary economies are translated into United States dollars at
historical exchange rates. Translation adjustments are accumulated in other
comprehensive income (loss). 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. During 2000, $854 was transferred from cumulative translation
adjustments in stockholders' equity to foreign exchange loss due to the
substantial reduction of operations in certain countries.
Concentration of Credit Risk - The Company has a concentration of
customers in the oil, gas and power industries which exposes the Company to a
concentration of credit risks 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.
Fair Value of Financial Instruments - The carrying value of financial
instruments does not materially differ from fair value.
45
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash Flows - In the determination of cash flows, all highly liquid
investments with maturities of less than three months are considered to be cash
equivalents. The Company paid interest of $2,858 in 2001, $2,216 in 2000 and $76
in 1999 and income taxes of $8,650 in 2001, $7,249 in 2000, and $3,474 in 1999.
Earnings (Loss) per Share - Basic earnings (loss) 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 (loss) per share is calculated by including the weighted-average number
of all potentially dilutive common shares with the weighted-average number of
common shares outstanding.
Derivative Financial Instruments - The Company may use derivative
financial instruments 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 revenue with expenses in the same
currency. The Company had no derivative financial instruments as of December 31,
2001 or 2000.
2. ACQUISITIONS
On October 12, 2001, the Company successfully completed its tender offer
for all outstanding shares of MSI Energy Services Inc. ("MSI"), a general
contractor in Alberta, Canada. The acquisition establishes the Company's
presence in Canada. The aggregate purchase price, including transaction costs,
was $8,295. Concurrently, the Company sold to certain MSI shareholders 144,175
common shares of treasury stock with an assigned value of $1,850, the market
price at the date the transaction was announced. The net cash of $6,445 paid to
purchase MSI was funded through borrowings under the Company's principal credit
agreement. The transaction was accounted for as a purchase.
On January 24, 2000, the Company acquired Rogers & Phillips, Inc.
("RPI"), a closely held United States pipeline construction company. The
consideration included 1,035,000 shares of treasury stock valued at $5,511 and
approximately $1,710 in cash and transaction costs. The transaction was
accounted for as a purchase.
The fair value of the net assets acquired from these acquisitions was as
follows:
MSI RPI
--- ---
Current assets $ 3,549 $ 6,615
Property, plant and equipment 3,318 3,523
Current liabilities (1,080) (3,044)
Deferred income taxes (482) (515)
Term debt (416) (335)
------- -------
4,889 6,244
Goodwill, included in other assets 3,406 977
------- -------
$ 8,295 $ 7,221
======= =======
46
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
2. ACQUISITIONS (CONTINUED)
The unaudited pro forma results of operation for the MSI acquisition, had
the acquisition occurred at January 1, 2000, would have been:
Year Ended December 31,
-----------------------
2001 2000
---- ----
Revenue $ 397,202 $ 327,411
Net income (loss) 19,465 (14,825)
Income (loss) per common share:
Basic 1.34 (1.05)
Diluted 1.28 (1.05)
The unaudited pro forma results of operations for the RPI acquisition,
had the acquisition occurred at January 1, 1999, for revenue would have been
$314,290 in 2000 and $198,179 in 1999. Pro forma results of net loss and net
loss per share would not have been materially different from reported results.
3. CONTRACTS IN PROGRESS
Most contracts allow for progress billings to be made during the
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:
December 31,
------------
2001 2000
---- ----
Costs incurred on contracts in progress $ 310,926 $ 198,369
Recognized income 65,473 58,686
--------- ---------
376,399 257,055
Progress billings and advance payments 379,454 239,115
--------- ---------
$ (3,055) $ 17,940
========= =========
Contract cost and recognized income not yet billed $ 17,006 $ 22,765
Contract billings in excess of cost and
recognized income (20,061) (4,825)
--------- ---------
$ (3,055) $ 17,940
========= =========
47
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, which are used to secure debt or are
subject to lien, at cost, consist of:
December 31,
------------
2001 2000
---- ----
Construction equipment $ 49,201 $ 39,907
Marine equipment 51,154 46,874
Transportation equipment 20,795 17,324
Land, buildings, furniture and equipment 26,658 24,251
----------- -----------
147,808 128,356
Less accumulated depreciation and amortization 79,459 71,286
----------- -----------
$ 68,349 $ 57,070
=========== ===========
5. JOINT VENTURES
The Company has investments, ranging from 10 percent to 50 percent, in
joint ventures that operate in similar lines of business as the Company.
Investments consist of a 10 percent interest in a consortium for work in
Venezuela, a 35 percent interest in a joint venture for work in Australia and a
50 percent interest in a joint venture for work in Africa. Interests in these
unconsolidated ventures are accounted for under the equity-method in the
consolidated balance sheets and on a proportionate consolidation basis in the
consolidated statements of operations.
The Company's proportionate share of revenue and contract cost included
in the consolidated statements of operations from these ventures consist of:
Year Ended December 31,
-----------------------
2001 2000 1999
---- ---- ----
Contract revenue $42,483 $25,546 $21,633
Contract cost 31,637 39,913 22,164
The Company's investments in and advances to and from these ventures
consist of:
December 31,
------------
2001 2000
---- ----
Due from joint ventures, included in accounts receivable $5,313 $ 662
Equity in and advances to joint ventures, included in other assets 7,686 4,434
Payable to joint ventures, included in accounts payable -- 1,845
48
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
5. JOINT VENTURES (CONTINUED)
Summarized balance sheet information for the significant joint venture in
Africa (accounted for under the equity-method in the consolidated balance
sheets) is as follows:
December 31,
------------
2001 2000
---- ----
Current assets $31,221 $12,406
Non-current assets 16,257 --
------- -------
Total $47,478 $12,406
======= =======
Liabilities, current $44,471 $12,406
Equity 3,007 --
------- -------
Total $47,478 $12,406
======= =======
6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of:
December 31,
------------
2001 2000
---- ----
Trade payables $48,075 $45,736
Payrolls and payroll liabilities 9,914 12,894
Equipment reconditioning and overhaul reserves 2,136 3,330
------- -------
$60,125 $61,960
======= =======
7. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long-term debt consist of the following:
December 31,
------------
2001 2000
---- ----
$150,000 revolving credit agreement with a syndicated bank group $39,000 $26,000
Revolving credit agreement for MSI 112 --
Notes payable issued by RPI to a bank 131 298
Other obligations 41 --
------- -------
Total long-term debt 39,284 26,298
Less current portion 284 217
------- -------
Long-term debt, less current portion $39,000 $26,081
======= =======
49
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
7. NOTES PAYABLE AND LONG-TERM DEBT (CONTINUED)
The Company and certain affiliated companies have a $150,000 credit
agreement with a syndicated bank group that was amended effective June 30, 2000.
The credit agreement subjects the $100,000 revolving portion of the credit
facility to borrowing base requirements. The entire facility, less amounts used
under the revolving portion of the facility, may be used for standby and
commercial letters of credit. Borrowings are payable at termination on February
20, 2003. Interest is payable quarterly at a Base Rate plus a margin ranging
from 0.75% to 2.25% or a Eurodollar Rate plus a margin ranging from 2.00% to
3.50%, depending on Company performance. A commitment fee on the unused portion
of the credit agreement is payable quarterly ranging from 0.475% to 0.75%,
depending on Company performance. The credit agreement is collateralized by
substantially all of the Company's assets, including stock of the principal
subsidiaries of the Company. The credit agreement restricts the payment of cash
dividends and requires the Company to maintain certain financial ratios. The
borrowing base is calculated using varying percentages of cash, accounts
receivable, accrued revenue, contract cost and recognized income not yet billed,
property, plant and equipment, and spare parts. Debt issue costs of $1,048, less
accumulated amortization of $943, are included in other assets at December 31,
2001.
As of December 31, 2001, there was $39,000 borrowed under the credit
agreement at an average interest rate of 4.5% and $54,375 of letters of credit
outstanding leaving $56,625 available for a combination of borrowings and
letters of credit.
At December 31, 2001, there was $131 of notes payable issued by RPI to a
bank, collateralized by vehicles and machinery, and payable in monthly
installments of principal plus interest ranging from 6.7% to 9.0% per annum.
The notes mature in 2002.
At December 31, 2001, MSI borrowed $112 under a $1,500 revolving credit
facility with a bank and is collateralized by a fabrication facility and certain
real estate and pieces of equipment. The facility matures in 2002.
The Company has unsecured credit facilities with banks in certain
countries outside the United States. Borrowings 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 $9,289 at
December 31, 2001. There were no outstanding borrowings at December 31, 2001 or
2000.
8. RETIREMENT BENEFITS
The Company had two defined benefit plans (pension plans) covering
substantially all regular employees which were funded by employee and Company
contributions. The Company's funding policy was 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 were
determined by employee earnings and credited service. The Company had a
post-retirement medical benefits plan that covered substantially all regular
employees and was funded by Company and retiree contributions based on estimated
cost. The defined benefit plans and the post-retirement medical benefit plan
were terminated during 2001.
Plan assets of the pension plans consisted primarily of listed stocks and
bonds. Pension plan assets totaling $35,985 were distributed to plan
participants during the year. At December 31, 2001, assets totaling $494
remained in the pension plan, pending distribution to plan participants. The
post-retirement medical benefit plan had no assets. Upon termination of these
plans, all benefits ceased and the liabilities relating to the accrued cost of
future benefits were reversed resulting in non-cash, non-taxable gains of
$9,204, which are reflected as a reduction of operating expenses in the 2001
consolidated statements of operations.
50
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
8. RETIREMENT BENEFITS (CONTINUED)
Benefit expense for these plans included the following components:
Pension Benefits Postretirement Medical Benefits
Year Ended December 31, Year Ended December 31,
----------------------- -----------------------
2001 2000 1999 2001 2000 1999
---- ---- ---- ---- ---- ----
Service cost $ 714 $ 1,084 $ 1,692 $ 56 $ 119 $ 157
Interest cost 2,260 2,347 2,244 215 365 274
Expected return on plan assets (2,418) (3,155) (2,914) -- -- --
Recognized net actuarial loss (gain) (323) (960) (188) (27) (93) (108)
Amortization of transition asset (29) (29) (29) -- -- --
Amortization of prior service cost 45 133 95 (12) (22) (22)
Curtailment 73 -- -- -- -- --
Amendments (220) 170 -- -- -- --
------- ------- ------- ------- ----- -----
102 (410) 900 232 369 301
Settlement gain (3,170) -- -- (6,034) -- --
------- ------- ------- ------- ----- -----
$(3,068) $ (410) $ 900 $(5,802) $ 369 $ 301
======= ======= ======= ======= ===== =====
The retirement benefit obligations were determined using a
weighted-average discount rate 7.75 percent at December 31, 2000, and 8.0
percent at December 31, 1999. For pension benefits the rate of increase in
future pay increases was 5.5 percent at December 31, 2000 and 1999, and assets
were expected to have a long-term rate of return of 8.5 percent. The transition
asset was being amortized over 15 years.
51
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
8. RETIREMENT BENEFITS (CONTINUED)
The following table sets forth the changes in benefit obligations and
plan assets and the reconciliation of the funded status of the plans to the
accrued benefit cost:
Pension Benefits Postretirement Medical Benefits
Year Ended December 31, Year Ended December 31,
----------------------- -----------------------
2001 2000 1999 2001 2000 1999
---- ---- ---- ---- ---- ----
Change in benefit obligations:
Benefit obligations, beginning
of year $ 32,289 $ 30,107 $ 34,278 $ 5,540 $ 4,557 $ 4,057
Service cost 714 1,084 1,692 56 119 157
Interest cost 2,260 2,347 2,244 215 364 274
Plan participants' contribution 295 390 407 60 121 110
Amendments 326 170 -- -- -- --
Actuarial loss (gain) 595 92 (6,416) -- 778 243
Curtailment -- -- -- (5,381) -- --
Benefits paid (35,985) (1,901) (2,098) (490) (399) (284)
-------- -------- -------- ------- ------- -------
Benefit obligations, end of year 494 32,289 30,107 -- 5,540 4,557
-------- -------- -------- ------- ------- -------
Change in plan assets:
Plan assets at fair value,
beginning of year 35,444 37,709 34,699 -- -- --
Actual return on plan assets (858) (754) 4,468 -- -- --
Employer contribution 1,598 -- -- 430 278 174
Plan participants' contribution 295 390 407 60 121 110
Benefits paid (35,985) (1,901) (1,865) (490) (399) (284)
-------- -------- -------- ------- ------- -------
Plan assets at fair value,
end of year 494 35,444 37,709 -- -- --
-------- -------- -------- ------- ------- -------
Reconciliation:
Funded status, plan assets over
(under) benefit obligations -- 3,155 7,602 -- (5,540) (4,557)
Unrecognized net actuarial gain -- (8,466) (13,427) -- (514) (1,384)
Transition asset at
January 1, 1987 -- (29) (57) -- -- --
Unrecognized prior service cost -- 844 976 -- (177) (199)
Adjustment for minimum liability -- -- -- -- -- --
-------- -------- -------- ------- ------- -------
Accrued benefit cost $ -- $ (4,496) $ (4,906) $ -- $(6,231) $(6,140)
======== ======== ======== ======= ======= =======
The non-current portion of the postretirement medical benefit liability
of $6,133 at December 31, 2000 is included in other liabilities.
The Company has a defined contribution plan that is funded by
participating employee contributions and the Company. The Company matches
employee contributions, up to a maximum of 4 percent of salary, as follows: 100
percent in the form of cash or 125 percent in the form of WGI common stock, as
elected by the employee. Company contributions for this plan were $905
(including $306 of WGI common stock) in 2001, $616 (including $243 of WGI common
stock) in 2000, and $636 (including $314 of WGI common stock) in 1999.
52
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
9. INCOME TAXES
The provision for income taxes represents income taxes arising as a
result of operations, credits for revision of previous estimates of income taxes
payable in a number of countries and a credit recognizing the tax benefit of a
portion of the Company's tax losses carried forward. The Company is not subject
to income tax in Panama on income earned outside of Panama. All income has been
earned outside of Panama. The relationship between income (loss) before income
taxes and the provision for income taxes is affected by the method of
determining income taxes in the countries in which the Company operates. The
effective consolidated tax rate differs from a statutory tax rate as 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 for income taxes in
the consolidated statements of operations consist of:
Year Ended December 31,
-----------------------
2001 2000 1999
---- ---- ----
Income (loss) before income taxes:
Other countries $ 8,935 $(12,240) $(19,197)
United States 20,529 1,905 2,479
-------- -------- --------
$ 29,464 $(10,335) $(16,718)
======== ======== ========
Provision for income taxes:
Current provision:
Other countries $ 5,563 $ 5,818 $ 2,851
United States:
Federal 4,991 365 190
State 1,296 267 259
-------- -------- --------
11,850 6,450 3,300
Deferred tax expense (benefit):
United States (1,497) (1,193) --
Canada 31 -- --
-------- -------- --------
Total provision for income taxes $ 10,384 $ 5,257 $ 3,300
======== ======== ========
The Company's provision for income taxes differed from the United States
statutory federal income tax rate of 34% due to the following:
Year Ended December 31,
-----------------------
2001 2000 1999
---- ---- ----
Tax at U.S. statutory rate $ 10,018 $ (3,514) $ (5,684)
Non-U.S. (income) loss taxed at other
than U.S. rates (3,038) 4,161 6,527
Non-U.S. income tax 5,563 5,818 2,851
State tax, net of federal benefit 855 176 171
Non-U.S. income taxed in U.S. 784 -- --
Other, net 973 (191) (565)
Termination of benefit plans (2,433) -- --
Adjustment to valuation allowance (2,338) (1,193) --
-------- -------- --------
$ 10,384 $ 5,257 $ 3,330
======== ======== ========
53
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
9. INCOME TAXES (CONTINUED)
The principal components of the Company's net deferred tax assets are:
December 31,
------------
2001 2000
---- ----
Deferred income tax assets:
General business credit carryforwards $ 425 $ 506
Self insured medical accrual 229 216
Post retirement medical benefits -- 1,169
Accrued pension benefits -- 1,594
Accrued vacation 354 362
Non-U.S. tax net operating loss carryforwards 12,724 10,746
U.S. tax net operating loss carryforwards 5,375 6,198
Other 52 76
-------- --------
19,159 20,867
Valuation allowance (16,033) (19,192)
-------- --------
Deferred income tax assets, net of valuation allowance 3,126 1,675
Deferred income tax liabilities:
Property and equipment (1,458) (997)
-------- --------
Net deferred income tax assets, included in other assets $ 1,668 $ 678
======== ========
The net deferred income tax assets (liabilities) by country is as follows:
December 31,
------------
2001 2000
---- ----
United States $ 2,175 $ 678
Canada (507) --
-------- --------
Net deferred income tax assets $ 1,668 $ 678
======== ========
The Company has $15,809 in United States net operating loss carryforwards
and $425 of United States investment tax credit carryforwards at December 31,
2001. The United States net operating loss carryforwards will expire, unless
utilized, beginning in 2002 and ending December 31, 2012. The carryforwards
available on an annual basis are limited. The Company has assessed its United
States operations including past earnings history and projected future earnings,
and the limitations and expiration dates of the U.S. net operating loss and
investment tax credit carryforwards and other tax assets, and has determined
that it is more likely than not that $2,175 of net deferred tax assets at
December 31, 2001, will be realized.
At December 31, 2001, the Company has nonexpiring operating loss
carryforwards in the United Kingdom of $27,845 (L19,072), and a net operating
loss carryforward expiring over three years in Venezuela of $6,344 (Bolivars
4,808,744). The deferred tax assets applicable to these operating loss
carryforwards at December 31, 2001 and 2000 are fully reserved by a valuation
allowance.
In connection with the acquisitions of MSI in 2001 and RPI in 2000, the
Company recorded $482 and $515, respectively, of deferred tax liabilities
relating primarily to differences between the financial statement carrying
values of the assets acquired and their tax bases.
54
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
10. STOCKHOLDER RIGHTS PLAN
On April 1, 1999, the Company adopted a Stockholder Rights Plan and
declared a distribution of one Preferred Share Purchase Right ("Right") on each
outstanding share of the Company's common stock. The distribution was made on
April 15, 1999 to stockholders of record on that date. The Rights expire on
April 14, 2009.
The Rights are exercisable only if a person or group acquires 15 percent
or more of the Company's common stock or announces a tender offer the
consummation of which would result in ownership by a person or group of 15
percent or more of the common stock. Each Right entitles stockholders to buy one
one-thousandth of a share of a series of junior participating preferred stock at
an exercise price of $30.00 per share.
If the Company is acquired in a merger or other business combination
transaction after a person or group has acquired 15 percent or more of the
Company's outstanding common stock, each Right entitles its holder to purchase,
at the Right's then-current exercise price, a number of acquiring company's
common shares having a market value of twice such price. In addition, if a
person or group acquires 15 percent or more of the Company's outstanding common
stock, each Right entitles its holder (other than such person or members of such
group) to purchase, at the Right's then-current exercise price, a number of the
Company's common shares having a market value of twice such price.
Prior to the acquisition by a person or group of beneficial ownership of
15 percent or more of the Company's common stock, the Rights are redeemable for
one-half cent per Right at the option of the Company's Board of Directors.
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. The number of shares authorized for issuance
under the 1996 Plan was increased to 3,125,000 by shareholder approval.
Options granted under the 1996 Plan vest over a three to four year
period. Options granted under the Director Plan vest six months after the date
of grant. At December 31, 2001, the 1996 Plan has 748,000 shares and the
Director Plan has 65,000 shares available for grant. Certain provisions allow
for accelerated vesting based on increases of share prices.
The per share weighted-average fair value of options granted was
calculated using the Black Scholes option-pricing model, assuming the options
have a life of three years, the weighted-average risk-free interest rate at the
dates of grant was 3.91 percent in 2001 (6.45 percent in 2000 and 5.86 percent
in 1999) and the weighted-average volatility was 61.03 percent in 2001 (59.14
percent in 2000 and 52.78 percent in 1999).
55
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
11. STOCK OWNERSHIP PLANS (CONTINUED)
The Company's stock option activity and related information consist of:
Year Ended December 31,
-------------------------------------------------------------------------------------------
2001 2000 1999
---- ---- ----
Weighted- Weighted- Weighted-
Average Average Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
------ -------------- ------ -------------- ------ --------------
Outstanding, beginning
of year 1,859,550 $ 7.62 1,479,550 $ 8.20 1,093,050 $ 9.37
Granted 559,500 13.54 651,500 5.70 416,000 5.28
Exercised 496,250 7.02 40,500 5.12 500 6.63
Forfeited 71,000 6.12 231,000 6.34 29,000 10.51
--------- --------- --------- --------- --------- ---------
Outstanding, end of year 1,851,800 $ 9.64 1,859,550 $ 7.62 1,479,550 $ 8.20
========= ========= ========= ========= ========= =========
Exercisable at end of year 975,500 $ 9.00 1,186,425 $ 8.42 904,800 $ 8.84
========= ========= ========= ========= ========= =========
The weighted-average fair value of options granted during the year was
$6.47 in 2001 ($2.56 in 2000, $2.17 in 1999). Exercise prices for options
outstanding, weighted-average remaining life and weighted-average exercise price
by ranges of exercise prices at December 31, 2001 are:
Weighted Weighted
Range of Options Average Average
Exercise Prices Outstanding Remaining Life Exercise Price
--------------- ----------- -------------- --------------
$ 5.06 - $ 6.94 832,500 7.9 Years $ 5.84
$ 8.67 - $ 11.75 388,050 6.0 Years 9.21
$ 12.70 - $ 19.44 631,250 8.7 Years 14.91
--------- --------- ------
$ 5.06 - $ 19.44 1,851,800 7.8 Years $ 9.64
========= ========= ======
The number of vested options and weighted-average exercise price by
ranges of exercise prices at December 31, 2001 are:
Weighted
Range of Vested Average
Exercise Prices Options Exercise Price
--------------- ------- --------------
$ 5.06 - $ 6.94 447,750 $ 6.02
$ 8.67 - $ 11.75 309,300 9.13
$ 12.70 - $ 19.44 218,500 14.91
------- -------
$ 5.06 - $19.44 975,550 $ 9.00
======= =======
56
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
11. STOCK OWNERSHIP PLANS (CONTINUED)
No compensation expense for the options granted under the 1996 Plan and
the Director Plan has been recorded because the options exercise prices are
equal to the fair value of the stock at the date of the grant. Had compensation
expense for vested options been recorded, in accordance with the method provided
in SFAS 123, the Company's net income (loss) would have been $18,268 in 2001
$(16,397) in 2000 and $(21,232) in 1999, and basic and diluted earnings (loss)
per share would have been $1.26 and $1.21, respectively, in 2001, $(1.17) in
2000 and $(1.63) in 1999.
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 90 percent of the option price
with three-year non-interest bearing recourse notes.
12. EARNINGS (LOSS) PER SHARE
Basic and diluted earnings (loss) per share are computed as follows:
Year Ended December 31,
-----------------------
2001 2000 1999
---- ---- ----
Net income (loss) applicable to common shares $ 19,080 $ (15,592) $ (20,018)
============ ============ ============
Weighted average number of common shares
outstanding for basic earnings per share 14,442,035 14,017,857 13,029,665
Weighted average number of dilutive potential
common shares outstanding 632,131 -- --
------------ ------------ ------------
Weighted average number of common shares
outstanding for diluted earnings per share 15,074,166 14,017,857 13,029,665
============ ============ ============
Earnings (loss) per common share:
Basic $ 1.32 $ (1.11) $ (1.54)
============ ============ ============
Diluted $ 1.27 $ (1.11) $ (1.54)
============ ============ ============
At December 31, 2001, there were 449,750 potential common shares
(1,859,550 at December 31, 2000, and 1,479,550 at December 31, 1999) excluded
from the computation of diluted earnings (loss) per share because of their
anti-dilutive effect.
13. SEGMENT INFORMATION
The Company operates in a single operating segment providing
construction, engineering and specialty services to the oil, gas and power
industries. 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.
57
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
13. SEGMENT INFORMATION (CONTINUED)
Customers representing more than 10 percent of total contract revenue are
as follows:
Year Ended December 31,
-----------------------
2001 2000 1999
---- ---- ----
Customer A 18% --% --%
Customer B 17 -- --
Customer C 14 44 36
Customer D 10 11 11
Customer E 10 -- --
-------- -------- --------
69% 55% 47%
======== ======== ========
Information about the Company's operations in its significant work
countries is shown below:
Year Ended December 31,
-----------------------
2001 2000 1999
---- ---- ----
Contract revenue:
United States (1) $205,292 $ 92,998 $ 42,981
Nigeria 67,365 143,023 75,928
Offshore West Africa 44,027 17,727 1,282
Cameroon 34,808 806 --
Venezuela 16,968 26,111 23,501
Oman 14,303 12,908 8,026
Australia 4,037 20,687 18,774
Canada 3,334 -- --
Indonesia -- -- 3,205
Ivory Coast -- -- 2,567
Other -- 30 300
-------- -------- --------
$390,134 $314,290 $176,564
======== ======== ========
Long-lived assets:
Nigeria $ 21,305 $ 24,541 $ 24,158
United States 17,346 15,404 11,680
Offshore West Africa 11,399 7,411 8,100
Cameroon 9,709 -- --
Venezuela 6,640 9,699 14,724
Oman 4,464 4,298 4,665
Canada 3,258 -- --
Indonesia -- -- 3,929
Ivory Coast -- 57 2,953
Other 193 1,155 1,185
-------- -------- --------
$ 74,314 $ 62,565 $ 71,394
======== ======== ========
- ----------
(1) Net of intercountry revenue of $59,284 in 2001, $6,481 in 2000 and $3,176
in 1999.
58
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
14. CONTINGENCIES, COMMITMENTS AND OTHER CIRCUMSTANCES
The Company provides construction, engineering and specialty services
to the oil, gas and power industries. The Company's principal markets are
currently Africa, the Middle East, South America, Canada 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, war, terrorist acts, unanticipated taxes
including income taxes, excise duties, import taxes, export taxes, sales taxes
or other governmental assessments, availability of suitable personnel and
equipment, termination of existing contracts and leases, 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.
Certain postcontract 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.
In connection with the Company's 10% interest in a joint venture in
Venezuela, the Company issued a corporate guarantee equal to 10% of the joint
venture's outstanding borrowings with two banks. The guarantee reduces as
borrowings are repaid, and expires in March 2003. The commitment as of December
31, 2001 totals approximately $3,800.
In 1997 the Company entered into lease agreements with a special-purpose
leasing partnership for land and an office building for the engineering group in
Tulsa, Oklahoma. The leases are treated for accounting purposes as operating
leases. The initial terms of the leases were for five years with 30 one-year
renewal options, and end in 2002. At the end of the initial terms of the leases,
we can extend the leases with the agreement of the lessor, purchase the leased
assets for $5,500 or terminate the leases and cause the assets to be sold. If
the assets are sold, the cash proceeds from the sale in excess of $5,500 will be
paid to the Company by the landlord. In the event cash proceeds are less than
$5,500, the Company will make up the shortfall up to a maximum of $4,700.
The Company has certain operating leases for office and camp facilities.
Rental expense, excluding daily rentals and reimbursable rentals under cost plus
contracts, was $2,596 in 2001, $3,166 in 2000, and $2,257 in 1999. Minimum lease
commitments under operating leases as of December 31, 2001, totaled $4,479 and
are payable as follows: 2002, $1,346; 2003, $862; 2004, $847; 2005, $787; 2006,
$577 and later years, $60.
59
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
15. QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected unaudited quarterly financial data for the years ended December
31, 2001 and 2000, is as follows:
First Second Third Fourth
Quarter Quarter Quarter Quarter(a) Total
------- ------- ------- ------- ---------
December 31, 2001:
Contract revenue $ 65,732 $ 78,839 $ 113,343 $ 132,220 $ 390,134
Operating income 3,345 8,320 8,574 13,917 34,156
Income before
income taxes 2,496 7,399 6,908 12,661 29,464
Net income 780 7,093 2,642 8,565 19,080
Earnings per share:
Basic .06 .49 .18 .58 1.32
Diluted .05 .47 .17 .56 1.27
December 31, 2000:
Contract revenue $ 78,773 $ 81,772 $ 74,934 $ 78,811 $ 314,290
Operating income (loss) (4,389) (263) (3,738) 3,085 (5,305)
Income (loss) before
income taxes (4,623) (1,270) (3,782) (660) (10,335)
Net income (loss) (5,914) (4,344) (5,742) 408 (15,592)
Earnings (loss) per share,
basic and diluted (.42) (.31) (.41) .03 (1.11)
(a) Included in Fourth Quarter 2001 are non-taxable gains of $3,626 on
termination of benefit plans.
The Company derives its revenue 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 revenue is recognized.
ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Not applicable.
60
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
On November 28, 2001, we announced that our Chief Executive Officer, Larry
J. Bump, will retire on May 1, 2002, but will continue to serve as Chairman of
the Board. We also announced that Michael F. Curran will succeed Mr. Bump as our
Chief Executive Officer. Mr. Curran will continue in his current roles as our
President and Chief Operating Officer.
The following table sets forth information regarding our directors,
executive officers and key personnel. Officers are elected annually by, and
serve at the discretion of, our Board of Directors.
Name Age Position
- ---- --- --------
Larry J. Bump............................... 62 Director, Chairman of the Board of Directors and Chief
Executive Officer
Michael F. Curran........................... 61 Director, Vice Chairman of the Board of Directors,
President and Chief Operating Officer
John K. Allcorn............................. 40 Executive Vice President of Willbros Group, Inc. and
Willbros USA, Inc.
Warren L. Williams.......................... 46 Vice President, Chief Financial Officer and Treasurer
James R. Beasley............................ 59 Senior Vice President of Willbros USA, Inc. and President
of Willbros Engineers, Inc.
J. K. Tillery............................... 43 Senior Vice President - Operations of Willbros
International, Inc. and Senior Vice President of Willbros
USA, Inc.
Peter A. Leidel............................. 45 Director
Rodney B. Mitchell.......................... 66 Director
Michael J. Pink............................. 64 Director
James B. Taylor, Jr......................... 63 Director
Guy E. Waldvogel............................ 65 Director
John H. Williams............................ 83 Director
Larry J. Bump joined Willbros in 1977 as President and Chief Operating
Officer. Mr. Bump was named Chief Executive Officer in 1980 and elected Chairman
of the Board of Directors in 1981. His 42 year career includes significant U.S.
and international pipeline construction management experience. Prior to joining
Willbros, he managed major international projects in North Africa and the Middle
East, and was Chief Executive Officer of a major international pipeline
construction company. Mr. Bump served two terms as President of the
International Pipeline & Offshore Contractors Association. He also serves as a
Director of 3TEC Energy Corporation.
Michael F. Curran joined Willbros in 2000 as Vice Chairman of the Board of
Directors, President and Chief Operating Officer. Mr. Curran served from
1972 to 2000 as Chairman and CEO of Michael Curran & Associates, a mainline
pipeline constructor in North America and West Africa, prior to joining
Willbros. He has over 40 years of diversified experience in pipeline
construction around the world, including 31 years as President and Chief
Executive Officer of various domestic and international pipeline construction
firms. Mr. Curran also served as President of the Pipe Line Contractors
Association.
John K. Allcorn joined Willbros in 2000 as Senior Vice President of
Willbros International, Inc. and was elected Executive Vice President of
Willbros Group, Inc. and Willbros USA, Inc. in 2001. Mr. Allcorn was employed at
U.S. Pipeline, Inc., a North American pipeline construction company, as Senior
Vice President, from 1997 until joining Willbros in 2000. Mr. Allcorn has over
15 years of pipeline industry experience including an established record in
operations management, finance, and business development.
61
Warren L. Williams joined Willbros in 2000 as Vice President, Finance and
Accounting, for Willbros USA, Inc. He was elected Vice President, Chief
Financial Officer and Treasurer of Willbros Group, Inc. in 2001. Prior to
joining Willbros, Mr. Williams was employed at TransCoastal Marine Services,
Inc., a marine construction company, from 1998 to 2000. Mr. Williams served as
Vice President during the entire period of his employment at TransCoastal and
was named Chief Financial Officer in early 2000. TransCoastal declared
bankruptcy under Chapter 7 of the U.S. Bankruptcy Code in June 2000. Mr.
Williams worked as an independent financial consultant from 1994 to 1998. Prior
to 1994, Mr. Williams worked at the public accounting firm of Ernst & Young, the
last four years as a partner.
James R. Beasley joined Willbros in 1981 when Willbros Engineers, Inc. was
acquired. He was elected Vice President of Willbros Engineers, Inc. in 1981,
Senior Vice President and General Manager in 1982, President in 1986 and Senior
Vice President of Willbros USA, Inc. in 2001. Mr. Beasley has more than 30 years
of experience in pipeline engineering and operations.
J. K. Tillery joined Willbros in 1983 as a field engineer. He has over 20
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 and in 2001, he was named Senior Vice President -
Operations of Willbros International, Inc. and Senior Vice President of Willbros
USA, Inc.
Peter A. Leidel was elected to the Board of Directors in 1992. Since 1997,
Mr. Leidel has been a founder and partner in Yorktown Partners, L.L.C., an
investment management company. From 1983 to 1997, he was employed by Dillon,
Read & Co., Inc., an investment banking firm, serving most recently as a Senior
Vice President. He also serves as a Director of Cornell Companies, Inc. and
Carbon Energy Corporation.
Rodney B. Mitchell was elected to the Board of Directors in 2001. Mr.
Mitchell has over 30 years of experience in the investment management business.
He is President and Chief Executive Officer of The Mitchell Group, Inc., an
investment advisory firm he founded in 1989. Previously, Mr. Mitchell formed in
1970 an investment advisory organization, Talassi Management Company, and served
as President and Chief Executive Officer.
Michael J. Pink was elected to the Board of Directors in 1996. Mr. Pink is
currently a consultant to oil and gas industry investors. He served as First
Vice President of Sidanco, a major Russian integrated oil company, from August
1997 to March 1998. From May 1994 through December 1996, Mr. Pink served as
Group Managing Director of Enterprise Oil plc, an independent oil exploration
and production company. Prior to that time, Mr. Pink was employed for 30 years
with the Royal Dutch/Shell Group at various locations in Europe, the United
States, Africa, and the Middle East. He also serves as a Director of ROXAR ASA,
a Norwegian oil and gas technology company.
James B. Taylor, Jr. was elected to the Board of Directors in 1999. He
served for 28 years with Occidental Petroleum Corporation in various worldwide
exploration and operations management positions before retiring in 1996 as
Executive Vice President. From 1996 to 1998, he was a Director and consultant
for Arakis Energy, a Canadian public company with operations in North Africa and
the Middle East. Mr. Taylor also co-founded Solana Petroleum in 1997 and served
as Chairman of the Board of Directors until December, 2000. Mr. Taylor is
currently a Director of TMBR Sharp Drilling, Inc.
Guy E. Waldvogel was elected to the Board of Directors in 1990. Mr.
Waldvogel recently retired from Heerema Holding Construction, Inc., a major
marine engineering, fabrication and installation contractor, where he had served
as Director and Chief Financial Officer for more than five years. Previously he
was Senior Executive Vice President of Societe Generale de Surveillance, a
leading international cargo inspection firm. Mr. Waldvogel also serves as a
Director for Bank Julius Baer and Julius Baer Holding, AG.
John H. Williams was elected to the Board of Directors in 1996. Prior to
his retirement at the end of 1978, Mr. Williams was Chairman of the Board and
Chief Executive Officer of The Williams Companies, Inc. He also serves as a
Director for Apco Argentina, Inc., Unit Corporation and Westwood Corp., and is
an honorary member of the Board of Directors of The Williams Companies, Inc.
62
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
our directors and executive officers, and persons who own more than 10% of our
common stock, to report their initial ownership of the common stock and any
subsequent changes in that ownership to the SEC and the New York Stock Exchange,
and to furnish us with a copy of each such report. SEC regulations impose
specific due dates for such reports, and we are required to disclose in this
Form 10-K any failure to file by these dates during and with respect to fiscal
2001.
To our knowledge, based solely on review of our copies of such reports
furnished to us and written representations that no other reports were required,
during and with respect to fiscal 2001, all Section 16(a) filing requirements
applicable to our officers, directors and more than 10% stockholders were
complied with, except that Mr. Waldvogel, a director, inadvertently reported
late one transaction covering the purchase of shares of common stock.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information with respect to the
compensation of the Company's Chief Executive Officer and each of the Company's
other executive officers whose compensation, based on salary and bonus earned
during fiscal 2001, exceeded $100,000, for services in all capacities to the
Company and its subsidiaries during each of the Company's last three fiscal
years.
63
LONG-TERM COMPENSATION
--------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------- --------------------------- ---------
SECURITIES
RESTRICTED UNDERLYING LONG-TERM
OTHER ANNUAL STOCK OPTIONS/ INCENTIVE ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARD(S) SARS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($)(1) ($)(2) ($) (#)(3) ($) ($)
- --------------------------------- ---- ------- ------- ------------ ---------- ---------- --------- ------------
Larry J. Bump .............. 2001 310,000 500,000 -0- -0- -0- -0- 9,043(4)
Chairman and Chief 2000 319,333 -0- -0- -0- -0- -0- 87,619
Executive Officer 1999 366,000 -0- -0- -0- -0- -0- 8,000
Michael F. Curran (5) ...... 2001 305,000 500,000 -0- -0- 100,000 -0- 4,765(4)
Vice Chairman, President 2000 257,008 -0- -0- -0- 100,000 -0- -0-
and Chief Operating
Officer
Melvin F. Spreitzer ........ 2001 217,500 100,000 -0- -0- -0- -0- 606,292(4)
Executive Vice President 2000 217,500 -0- -0- -0- -0- -0- 48,125
1999 217,500 -0- -0- -0- 25,000 -0- 8,000
John K. Allcorn (6) ........ 2001 240,000 260,000 -0- -0- 50,000 -0- 7,570(4)
Executive Vice President 2000 146,667 -0- -0- -0- 100,000 -0- 304
Warren L Williams (7) ...... 2001 189,129 180,000 -0- -0- 70,000 -0- 11,748(4)
Vice President and 2000 82,500 -0- -0- -0- 30,000 -0- -0-
Chief Financial Officer
James R. Beasley ........... 2001 172,812 150,000 -0- -0- 32,000 -0- 10,334(4)
President of Willbros 2000 152,500 75,000 -0- -0- -0- -0- 9,213
Engineers, Inc. 1999 152,500 -0- -0- -0- 10,000 -0- 9,767
- --------------------
(1) Consists of compensation paid as discretionary bonuses.
(2) Does not include the value of perquisites and other personal benefits
because the aggregate amount of such compensation, if any, does not
exceed the lesser of $50,000 or 10% of the total amount of annual
salary and bonus for any named individual.
(3) Consists solely of options to acquire shares of Common Stock.
(4) Consists of Company contributions to the Company's (a) 401(k) Plan in
the amount of $9,043 for Mr. Bump, $4,765 for Mr. Curran, $7,250 for
Mr. Spreitzer, $5,500 for Mr. Allcorn, $5,248 for Mr. Williams, and
$6,967 for Mr. Beasley, and (b) Executive Life Plan in the amount of
$3,500 for Mr. Spreitzer, $2,070 for Mr. Allcorn, $6,500 for Mr.
Williams, and $3,367 for Mr. Beasley. Mr. Spreitzer's amount also
consists of (a) relocation benefits in the amount of $26,542, (b)
payments made under a Separation Agreement in conjunction with his
retirement from the Company in the amount of $530,500, and (c) payment
for accrued vacation time in the amount of $38,500. See "Employment
Agreements, Termination of Employment and Change in Control
Arrangements."
(5) Mr. Curran joined the Company in March 2000.
(6) Mr. Allcorn joined the Company in May 2000.
(7) Mr. Williams joined the Company in July 2000.
64
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information with respect to options
granted to the named executive officers of the Company during fiscal 2001. The
Company has never granted any stock appreciation rights.
INDIVIDUAL GRANTS
- ------------------------------------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/ POTENTIAL REALIZABLE VALUE
UNDERLYING SARS MARKET AT ASSUMED ANNUAL RATES
OPTIONS/ GRANTED TO PRICE OF STOCK PRICE APPRECIATION
SARS EMPLOYEES EXERCISE OR ON DATE FOR OPTION TERM(4)
GRANTED IN FISCAL BASE PRICE OF GRANT EXPIRATION ---------------------------
NAME (#)(1) YEAR ($/SH) ($/SH) DATE 5%($) 10%($)
- ------------------- ------------- ---------- ----------- -------- ---------- --------- ---------
Larry J. Bump ..... -0- -0- -0- -0- -0- -0- -0-
Michael F. Curran . 100,000(2)(3) 18.2 15.00 15.00 11/27/11 945,000 2,385,000
Melvin F. Spreitzer -0- -0- -0- -0- -0- -0- -0-
John K. Allcorn ... 50,000(2)(3) 9.1 15.00 15.00 11/27/11 472,500 1,192,500
Warren L Williams.. 50,000(2)(3) 9.1 14.11 14.11 5/09/11 444,500 1,121,500
20,000(2)(3) 3.6 15.00 15.00 11/27/11 189,000 477,000
James R. Beasley .. 32,000(2)(3) 5.8 15.00 15.00 11/27/11 302,400 763,200
- -------------------------
(1) Consists solely of options to acquire shares of Common Stock.
(2) The options were granted for a term of 10 years, subject to earlier
termination in certain events related to termination of employment. The
options (in the case of Mr. Williams, options for only 20,000 shares)
become exercisable in 25% increments on the anniversary date of grant,
beginning on November 27, 2002. Mr. Williams' options for 50,000 shares
become exercisable in 25% increments on the date of grant, January 1, 2002,
January 1, 2003, and January 1, 2004. The option exercise price may be paid
in cash, by delivery of already-owned shares, in some instances by offset
of underlying shares or pursuant to certain other cashless exercise
procedures, or a combination thereof. Tax withholding obligations, if any,
related to exercise may be paid by delivery of already-owned shares or by
offset of the underlying shares, subject to certain conditions. Under the
terms of the Company's 1996 Stock Plan, the Stock Plan Committee retains
discretion, subject to plan limits, to modify the terms of the options and
to reprice the options. In the event of a Change of Control, as defined in
the Company's 1996 Stock Plan, the options become fully exercisable
immediately.
(3) Each vesting date of the options (in the case of Mr. Williams, options for
only 55,000 shares) shall be accelerated one year for each incremental
$2.00 that the average of the daily closing sales prices of a share of
Common Stock on the New York Stock Exchange over a period of 60 consecutive
trading days exceeds the exercise price of the options, as the case may be,
during the term of the options. The options are transferable under certain
circumstances.
(4) Potential realizable value illustrates the value that might be realized
upon exercise of the options immediately prior to the expiration of their
term, assuming that the market price of the underlying shares appreciates
in value from the date of grant to the end of the option term at rates of
5% and 10%, respectively, compounded annually.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
The following table sets forth certain information with respect to options
exercised by the named executive officers of the Company during fiscal 2001, and
the number and value of unexercised options
65
held by such executive officers at the end of the fiscal year. The Company has
never granted any stock appreciation rights.
SHARES VALUE OF UNEXERCISED
ACQUIRED NUMBER OF SECURITIES IN-THE-MONEY
ON VALUE UNDERLYING UNEXERCISED OPTIONS/SARS AT FY-END
EXERCISE REALIZED OPTIONS/SARS AT FY-END(#) ($)(1)(2)
--------------------------- -----------
NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------- ---- ------ ----------- ------------- ----------- -------------
Larry J. Bump ..... -0- -0- 185,000 -0- 1,146,550 -0-
Michael F. Curran . -0- -0- 67,000 133,000 659,500 428,000
Melvin F. Spreitzer -0- -0- 158,000 -0- 1,125,080 -0-
John K. Allcorn ... -0- -0- 100,000 50,000 1,062,000 50,000
Warren L. Williams -0- -0- 27,500 72,500 169,876 237,126
James R. Beasley .. -0- -0- 118,000 32,000 726,730 32,000
- --------------------
(1) Market value of the underlying securities at exercise date or fiscal
year-end, as the case may be, minus the option exercise price.
(2) The closing price for the Common Stock on the New York Stock Exchange on
December 31, 2001, the last trading day of the fiscal year, was $16.00.
PENSION PLAN
The Company maintained a qualified defined benefit pension plan (the
"Plan") that was terminated as of October 15, 2001. The accrued benefit of each
participant was frozen as of August 31, 2001, and no new participants were
admitted into the Plan after that date. In connection with the Plan freeze, each
active participant as of August 31, 2001, became fully vested in his or her
accrued benefit under the Plan. In connection with the Plan's termination, each
other participant whose termination of employment occurred within five years of
the termination date and whose benefit service was not previously forfeited
under the Plan's provisions became fully vested in his or her accrued benefit
under the Plan.
Distributions of all accrued benefits under the Plan incident to the
Plan's termination were made on December 19, 2001, and shortly thereafter with
respect to a substantial majority of the Plan's participants and beneficiaries.
These distributions followed a favorable determination from the Internal Revenue
Service on October 26, 2001, with respect to the effect of termination on the
Plan's qualified status under the Internal Revenue Code and required filings
with, and non-action by, the Pension Benefit Guaranty Corporation with respect
to the sufficiency of the funds held in the Plan to discharge the Plan's
liability for benefits to participants. Benefit distributions were either made
in the form of a lump sum distribution or provided by the purchase of single
premium commercial annuity contracts, in accordance with participants' benefit
elections. Messrs. Bump, Spreitzer and Beasley received lump sum distributions
in the amounts of $612,062, $738,578 and $391,797, respectively. Messrs. Curran,
Allcorn and Williams were not participants in the Plan.
All Plan assets (net of Plan administration expenses) will be utilized to
provide benefits to participants in the Plan. The Company is conducting a
diligent search in accordance with Pension Benefit Guaranty Corporation
guidelines with respect to participants and beneficiaries who cannot be located.
The Company will complete distribution of all benefits under the Plan by June
15, 2002, and submit final filings with respect to the Plan to the Pension
Benefit Guaranty Corporation.
66
In addition to the Plan, the Company previously maintained an Executive
Benefit Restoration Plan ("EBRP") to partially restore retirement benefits to
three officers, Messrs. Bump, Spreitzer and Beasley. The EBRP was amended and
terminated on January 22, 2001. Upon termination, all EBRP assets were
distributed in accordance with the terms of the EBRP to Messrs. Bump, Spreitzer
and Beasley in the amounts of $1,035,524, $505,204 and $73,394, respectively.
Messrs. Curran, Allcorn and Williams were not participants in the EBRP.
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT
AND CHANGE IN CONTROL ARRANGEMENTS
None of the executive officers of the Company have an employment agreement
with the Company.
In October 1998, the Compensation Committee approved and recommended, and
the Board of Directors adopted, the Willbros Group, Inc. Severance Plan (the
"Severance Plan"), effective January 1, 1999. The Board of Directors adopted the
Severance Plan in lieu of entering into new employment agreements with the
executive officers. Each of the executive officers of the Company is a
participant in the Severance Plan. The Severance Plan, which will remain in
effect until December 31, 2004, provides that a participant whose employment is
terminated other than for cause or who resigns due to a material reduction of
compensation or other benefits when a change in control of the Company is
imminent or within three years after a change in control of the Company has
occurred, shall be entitled to a severance payment equal to three times his
average annual compensation for the past five years (pro-rated to reflect
assumed retirement at age 65 if the participant is age 62 or older at the time
of termination). The Severance Plan also provides that a participant who
voluntarily terminates his employment for reasons other than a material
reduction of compensation or other benefits within one year after a change in
control of the Company has occurred shall be entitled to a severance payment
equal to two times his average annual compensation for the past five years
(pro-rated to reflect assumed retirement at age 65 if the participant is age 63
or older at the time of termination). Finally, the Severance Plan provides that
a participant whose employment is terminated other than for cause prior to a
change in control of the Company shall be entitled to a severance payment equal
to 100% of his base salary then in effect. A participant who receives a
severance payment under the Severance Plan will be subject to either a one year
or two year competition restriction depending on the basis for the termination.
All taxes on severance payments made under the Severance Plan are the
participant's responsibility. Mr. Spreitzer did not receive any severance
payment under the Severance Plan as a result of his retirement from the Company.
On December 22, 2001, Willbros USA, Inc. ("Willbros USA") entered into a
Separation Agreement with Melvin F. Spreitzer under which Mr. Spreitzer retired
from employment with Willbros USA and all affiliated companies effective
December 31, 2001. Pursuant to such Separation Agreement, Willbros USA made a
lump sum payment to Mr. Spreitzer in the amount of $530,500.
All outstanding awards under the Company's 1996 Stock Plan, regardless of
any limitations or restrictions, become fully exercisable and free of all
restrictions, in the event of a change in control of the Company, as defined in
such Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2001, Melvin F. Spreitzer, an executive officer of the Company
until his retirement from the Company on December 31, 2001, was a member of the
Compensation Committee and participated in deliberations concerning executive
officer compensation. The other four members of the Compensation Committee, Guy
E. Waldvogel, John H. Williams, Rodney B. Mitchell and James B. Taylor, Jr., are
non-employee directors of the Company.
67
COMPENSATION OF DIRECTORS
Employee directors receive no additional compensation for service on the
Board of Directors or any committee thereof. Non-employee directors receive an
annual retainer of $25,000 plus a fee of $1,000 per meeting for attending
meetings of the Board of Directors and any committee thereof. Non-employee
directors also automatically receive non-qualified stock options under the
Willbros Group, Inc. Director Stock Plan (the "Director Stock Plan"). Under the
Director Stock Plan, an initial option to purchase 5,000 shares of Common Stock
is granted to each new non-employee director on the date such director is
elected or appointed to the Board of Directors. Each non-employee director also
receives annually an option to purchase 1,000 shares of Common Stock on the
annual anniversary of the date on which such director received an initial option
and on each succeeding annual anniversary of such date during the period of such
director's incumbency. At its annual meeting of stockholders in April 2002, the
Company will be seeking approval of an amendment to the Director Stock Plan to
increase the annual stock option grant to 5,000 shares of Common Stock. The
option exercise price of each option granted under the Director Stock Plan is
equal to the fair market value of the Common Stock on the date of grant. A total
of 125,000 shares of Common Stock is available for issuance under the Director
Stock Plan. At its annual meeting of stockholders in April 2002, the Company
will also be seeking approval of an amendment to the Director Stock Plan to
increase the amount available for issuance under the Director Stock Plan to
225,000 shares of Common Stock. During fiscal 2001, Mr. Taylor was granted an
option to purchase 1,000 shares of Common Stock at an exercise price of $9.10
per share, Messrs. Leidel and Waldvogel were each granted an option to purchase
1,000 shares of Common Stock at an exercise price of $13.65 per share, Messrs.
Pink and Williams were each granted an option to purchase 1,000 shares of Common
Stock at an exercise price of $15.12 per share, and Mr. Mitchell was granted an
option to purchase 5,000 shares of Common Stock at an exercise price of $12.70
per share. No options have been exercised under the Director Stock Plan. All
directors are reimbursed by the Company for out-of-pocket expenses incurred by
them in connection with their service on the Board of Directors and any
committee thereof.
During 2001, the Company also paid Mr. Taylor $8,625 for consulting
services rendered in connection with a bid by the Company for a project in a
country where he has extensive business experience.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of February 1, 2002 by (a)
each person who is known by the Company to own beneficially more than five
percent of the outstanding shares of Common Stock, (b) each director and nominee
for director of the Company, (c) each of the executive officers of the Company
named in the Summary Compensation Table above, and (d) all executive officers
and directors of the Company as a group. Except as otherwise indicated, the
Company believes that the beneficial owners of the Common Stock listed in the
table, based on information furnished by such owners, have sole investment and
voting power with respect to such shares.
68
SHARES
BENEFICIALLY PERCENTAGE
NAME OF OWNER OR IDENTITY OF GROUP OWNED OF CLASS (1)
- ---------------------------------- ----- ------------
Larry J. Bump (2) ......................................... 1,301,390 (3) 8.7
The Mitchell Group, Inc. (4) .............................. 995,153 6.7
Royce & Associates, Inc. (5) .............................. 917,050 6.2
Sage Asset Management, L.L.C. (6) ......................... 845,180 5.7
Michael F. Curran ......................................... 837,302 (7) 5.6
Husic Capital Management (8) .............................. 784,000 5.3
Melvin F. Spreitzer ....................................... 377,897 (9) 2.5
James R. Beasley .......................................... 185,500 (10) 1.2
John K. Allcorn ........................................... 150,745 (11) 1.0
Warren L. Williams ........................................ 47,512 (12) *
Peter A. Leidel ........................................... 42,872 (13) *
John H. Williams .......................................... 25,000 (14) *
Guy E. Waldvogel .......................................... 19,000 (15) *
Michael J. Pink ........................................... 10,000 (16) *
James B. Taylor, Jr ....................................... 8,000 (17) *
Rodney B. Mitchell ........................................ 5,000 (18) *
All executive officers and directors as a group (11 people) 2,632,321 (19) 17.1
- ---------------------
* Less than 1%
(1) Shares of Common Stock which were not outstanding but which could be
acquired by a person upon exercise of an option within 60 days of February
1, 2002, are deemed outstanding for the purpose of computing the
percentage of outstanding shares beneficially owned by such person. Such
shares, however, are not deemed to be outstanding for the purpose of
computing the percentage of outstanding shares beneficially owned by any
other person.
(2) Mr. Bump's address is 4400 Post Oak Parkway, Suite 1000, Houston, Texas
77027.
(3) Includes (a) 420,000 shares held in a family limited partnership in which
Mr. Bump is the sole general partner, (b) 185,000 shares subject to stock
options which are currently exercisable at an average exercise price of
$9.80 per share, and (c) 108,800 shares held in the Willbros Employees'
401(k) Investment Plan (the "401(k) Plan") for the account of Mr. Bump.
(4) Information is as of December 31, 2001, and is based on the Schedule 13G
dated February 5, 2002, which was filed by The Mitchell Group, Inc. Its
address is 1100 Louisiana, Suite 4810, Houston, Texas 77002. The Mitchell
Group is a registered investment adviser and the shares shown are held in
investment advisory accounts managed by it for numerous clients. The
Mitchell Group has full investment discretion with respect to such
accounts.
(5) Information is as of December 31, 2001, and is based on the Schedule 13G
dated February 13, 2002, which was filed on behalf of Royce & Associates,
Inc. Its address is 1414 Avenue of the Americas, New York, New York 10019.
(6) Information is as of December 31, 2001, and is based on the Schedule 13G
dated February 13, 2002, which was filed by Sage Opportunity Fund, L.P.
("Sage"), Sage Master Investments Ltd ("Sage Master"), Sage Asset
Management, L.L.C. ("SAM"), Barry Haimes ("Haimes") and Katherine Hensel
("Hensel"). The address for Sage, SAM, Haimes and Hensel is 153 East 53rd
Street, 48th Floor, New York, New York 10022. The address for Sage Master
is c/o Huntlaw Corporate Services Ltd., P.O. Box 1350GT, The Huntlaw
Building, Grand Cayman, Cayman Islands. SAM is investment manager of Sage
Master and a general partner of Sage. Haimes and Hensel are co-portfolio
managers of SAM. Of the shares shown, (a) Sage has shared voting and
dispositive power with SAM, Haimes and Hensel over 94,000 shares, (b) Sage
Master has shared voting and
69
dispositive power with SAM, Haimes and Hensel over 751,180 shares, and (c)
SAM, Haimes and Hensel have shared voting and dispositive power over
845,180 shares.
(7) Represents (a) 753,155 shares held in a corporation controlled by Mr.
Curran, (b) 83,500 shares subject to stock options which are currently
exercisable at an average exercise price of $6.14 per share, and (c) 647
shares held in the 401(k) Plan for the account of Mr. Curran. Mr. Curran's
address is 4400 Post Oak Parkway, Suite 1000, Houston, Texas 77027.
(8) Information is as of December 31, 2001, and is based on the Schedule 13G
dated February 11, 2002, which was filed on behalf of Husic Capital
Management ("Husic Capital"), Frank J. Husic and Co. ("Husic Co.") and
Frank J. Husic ("Husic"). Their address is 555 California Street, Suite
2900, San Francisco, California 94104. Husic Capital is a registered
investment adviser and the shares shown are held for its investment
advisory clients. Husic Co. is the sole general partner of Husic Capital
and Husic is the sole stockholder of Husic Co.
(9) Includes (a) 25,000 shares held in a trust, of which Mr. Spreitzer's wife
is trustee, (b) 158,000 shares subject to stock options which are
currently exercisable at an average exercise price of $8.88 per share, and
(c) 1,797 shares held in the 401(K) Plan for the account of Mr. Spreitzer.
Mr. Spreitzer disclaims beneficial ownership over the shares held by his
wife.
(10) Includes (a) 67,490 shares held in a trust, of which Mr. Beasley's wife is
trustee, and (b) 118,000 shares subject to stock options which are
currently exercisable at an average exercise price of $9.84 per share. Mr.
Beasley disclaims beneficial ownership over the shares held by his wife.
(11) Includes (a) 100,000 shares subject to stock options which are currently
exercisable at an exercise price of $5.38 per share, and (b) 745 shares
held in the 401(k) plan for the account of Mr. Allcorn.
(12) Represents (a) 47,500 shares subject to stock options which are currently
exercisable at an average exercise price of $10.39 per share, and (b) 12
shares held in the 401(k) Plan for the account of Mr. Williams.
(13) Includes 14,000 shares subject to stock options which are currently
exercisable or exercisable within 60 days of February 1, 2002, at an
average exercise price of $10.48 per share.
(14) Includes 10,000 shares subject to stock options which are currently
exercisable or exercisable within 60 days of February 1, 2002, at an
average exercise price of $9.90 per share.
(15) Includes 14,000 shares subject to stock options which are currently
exercisable or exercisable within 60 days of February 1, 2002, at an
average exercise price of $10.48 per share.
(16) Represents 10,000 shares subject to stock options which are currently
exercisable or exercisable within 60 days of February 1, 2002, at an
average exercise price of $9.90 per share.
(17) Represents (a) 1,000 shares held by the James and Sarah Taylor Trust, and
(b) 7,000 shares subject to stock options which are currently exercisable
at an average exercise price of $5.82 per share.
(18) Represents 5,000 shares subject to stock options which are currently
exercisable at an exercise price of $12.70 per share. Does not include the
995,153 shares held by The Mitchell Group, Inc. Mr. Mitchell is a director
and executive officer of The Mitchell Group. Mr. Mitchell disclaims
beneficial ownership of these shares.
(19) For specific information regarding each of the individuals, see footnotes
(3), (7) and (10) through (18) above.
70
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since January 1, 2001, (a) there has not been any transaction or series
of similar transactions to which the Company was a party in which the amount
involved exceeds $60,000 and in which any director, executive officer, holder of
more than five percent of the Common Stock of the Company or any member of the
immediate family of any of the foregoing persons had a direct or indirect
material interest, and (b) none of the executive officers, directors or any
member of their immediate family have been indebted to the Company in amounts in
excess of $60,000.
The Board of Directors has approved an Employee Stock Purchase Program
(the "Program"). Under the Program, selected executives of the Company will be
given the opportunity to borrow funds on an interest free basis for the purpose
of exercising vested stock options granted to the executives under the Company's
1996 Stock Plan. All such loans will be full recourse and will be secured by
Company stock. At the present time, no loans have been made to any Executive
Officer of the Company. However, it is anticipated that loans will be made under
the Program to certain Executive Officers and that such Executive Officers will
be indebted to the Company in amounts exceeding $60,000 during 2002. The maximum
amount that can be loaned to individual executives under the Program is
$250,000.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) Financial Statements:
Our financial statements and those of our subsidiaries and independent
auditors' report are listed in Item 8 of this Form 10-K.
2001
Form 10-K
Page(s)
---------
(2) Financial Statement Schedule:
Independent Auditors' Report ................................. 75
Schedule II - Consolidated Valuation and Qualifying Accounts . 76
All other schedules are omitted as inapplicable or because the required
information is contained in the financial statements or included in the
footnotes thereto.
(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 Amended and Restated Articles of Incorporation (Filed as Exhibit 3.2 to
our report on Form 10-Q for the quarter ended September 30, 1998, filed
November 16, 1998).
3.2 Restated By-laws (Filed as Exhibit 3.2 to our Registration Statement on
Form S-1, Registration No. 333-5413 (the "S-1 Registration
Statement")).
71
4.1 Form of stock certificate for our Common Stock, par value $.05 per
share (Filed as Exhibit 4 to the S-1 Registration Statement).
4.2 Rights Agreement, dated April 1, 1999, between us and ChaseMellon
Shareholder Services, L.L.C., as Rights Agent (Filed as an Exhibit to
our Registration Statement on Form 8-A, dated April 9, 1999).
4.3 Certificate of Designation of Series A Junior Participating Preferred
Stock (Filed as Exhibit 3 to our report on Form 10-Q for the quarter
ended March 31, 1999, filed May 17, 1999).
10.1 Credit Agreement dated February 20, 1997, by and among us, 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 our 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, 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* Form of Indemnification Agreement between our officers and us (Filed as
Exhibit 10.7 to the S-1 Registration Statement).
10.6* Form of Indemnification Agreement between our directors and us (Filed
as Exhibit 10.16 to the S-1 Registration Statement).
10.7* Willbros Group, Inc. 1996 Stock Plan (Filed as Exhibit 10.8 to the S-1
Registration Statement).
10.8* Amendment Number 1 to Willbros Group, Inc. 1996 Stock Plan dated
February 24, 1999 (Filed as Exhibit A to the Company's Proxy Statement
for Annual Meeting of Stockholders dated March 31, 1999).
10.9* Amendment Number 2 to Willbros Group, Inc. 1996 Stock Plan dated March
7, 2001 (Filed as Exhibit B to our Proxy Statement for Annual Meeting
of Stockholders dated April 2, 2001).
10.10* 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).
10.11* 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).
10.12* Willbros Group, Inc. Director Stock Plan (Filed as Exhibit 10.9 to the
S-1 Registration Statement).
10.13* Amendment Number 1 to Willbros Group, Inc. Director Stock Plan dated
January 1, 2002.
10.14* Willbros USA, Inc. Executive Benefit Restoration Plan (Filed as Exhibit
10.10 to the S-1 Registration Statement).
10.15 Registration Rights Agreement dated April 9, 1992, between us 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).
10.16* Willbros Group, Inc. Severance Plan dated January 1, 1999 (Filed as
Exhibit 10.22 to our report on Form 10-K for the year ended December
31, 1998, filed March 31, 1999 (the "1998 Form 10-K")).
72
10.17 First Amendment to Credit Agreement dated April 2, 1998, by and among
us, 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 10.25 to the 1998 Form 10-K).
10.18 Second Amendment to Credit Agreement dated October 1, 1998, by and
among us, 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 10.26 to the 1998 Form 10-K).
10.19 Third Amendment to Credit Agreement effective June 30, 2000, by and
among us, 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 our report on Form 10-Q for
the quarter ended June 30, 2000, filed August 14, 2000).
10.20 Security Agreement effective July 27, 2000, by and among us, certain
designated subsidiaries, and ABN AMRO Bank N.V., as agent (Filed as
Exhibit 10.2 to our report on Form 10-Q for the quarter ended June 30,
2000, filed August 14, 2000).
10.21 Fourth Amendment to Credit Agreement effective June 30, 2000, by and
among us, 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 10.3 to our report on Form 10-Q for
the quarter ended June 30, 2000, filed August 14, 2000).
10.22* Separation Agreement and Release dated December 22, 2001, between
Willbros USA, Inc. and Melvin F. Spreitzer.
21. Subsidiaries.
23. Consent of KPMG LLP, included on page 75 of this Form 10-K.
- ----------
* Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K.
Form 8-K dated October 12, 2001, was filed on October 12, 2001, to report
under Item 5 our sale of 144,175 shares of our common stock.
73
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: February 19, 2002 By: /s/ Larry J. Bump
----------------------------------
Larry J. Bump
Chairman of the Board 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 Board and February 19, 2002
- -------------------------------------- Chief Executive Officer
Larry J. Bump (Principal Executive Officer)
/s/ Michael F. Curran Director, Vice Chairman of the Board, February 19, 2002
- -------------------------------------- President and Chief Operating Officer
Michael F. Curran
/s/ Warren L. Williams Chief Financial Officer and Treasurer February 19, 2002
- -------------------------------------- (Principal Financial Officer and Principal
Warren L. Williams Accounting Officer)
/s/ Guy E. Waldvogel Director February 19, 2002
- --------------------------------------
Guy E. Waldvogel
/s/ Peter A. Leidel Director February 19, 2002
- --------------------------------------
Peter A. Leidel
/s/ John H. Williams Director February 19, 2002
- --------------------------------------
John H. Williams
/s/ Michael J. Pink Director February 19, 2002
- --------------------------------------
Michael J. Pink
/s/ James B. Taylor, Jr. Director February 19, 2002
- --------------------------------------
James B. Taylor, Jr.
/s/ Rodney Mitchell Director February 19, 2002
- --------------------------------------
Rodney Mitchell
74
INDEPENDENT AUDITORS' REPORT ON CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
AND CONSENT
The Stockholders and Board of Directors
Willbros Group, Inc.:
The audits referred to in our report dated February 5, 2002 included the related
consolidated financial statement schedule as of December 31, 2001 and for each
of the years in the three-year period ended December 31, 2001. 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.
We consent to the incorporation by reference in the registration statements
(Nos. 333-18421, 333-21399, 333-53748 and 333-74290) on Form S-8 and (Nos.
333-96201 and 333-63096) on Form S-3 of Willbros Group, Inc. of our reports
dated February 5, 2002, relating to the consolidated balance sheets of Willbros
Group, Inc. and subsidiaries as of December 31, 2001 and 2000, and the related
consolidated statement of operations, stockholders' equity and comprehensive
income and cash flows for each of the years in the three-year period ended
December 31, 2001 and the related financial statement schedule, which reports
appear in the December 31, 2001 annual report on Form 10-K of Willbros Group,
Inc. Our report on the consolidated financial statements refers to the adoption
of Statement of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations" and certain provisions of SFAS No. 142, "Goodwill and Other
Intangible Assets" in 2001.
/s/ KPMG LLP
Houston, Texas
February 20, 2002
75
WILLBROS GROUP, INC.
SCHEDULE II - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Charged
(Credited)
Balance at to Costs Charge Balance
Beginning and Offs and at End
Year Ended Description of Year Expenses Other of Year
---------- ------------------------- ---------- ----------- -------- ----------
December 31, 1999 Allowance for bad debts $ 988 $ 573 $ (294) $ 1,267
December 31, 2000 Allowance for bad debts $ 1,267 $ (154) $ (605) $ 508
December 31, 2001 Allowance for bad debts $ 508 $ (290) $ 516 $ 734
76
Exhibit Index
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 Amended and Restated Articles of Incorporation (Filed as Exhibit 3.2 to
our report on Form 10-Q for the quarter ended September 30, 1998, filed
November 16, 1998).
3.2 Restated By-laws (Filed as Exhibit 3.2 to our Registration Statement on
Form S-1, Registration No. 333-5413 (the "S-1 Registration
Statement")).
4.1 Form of stock certificate for our Common Stock, par value $.05 per
share (Filed as Exhibit 4 to the S-1 Registration Statement).
4.2 Rights Agreement, dated April 1, 1999, between us and ChaseMellon
Shareholder Services, L.L.C., as Rights Agent (Filed as an Exhibit to
our Registration Statement on Form 8-A, dated April 9, 1999).
4.3 Certificate of Designation of Series A Junior Participating Preferred
Stock (Filed as Exhibit 3 to our report on Form 10-Q for the quarter
ended March 31, 1999, filed May 17, 1999).
10.1 Credit Agreement dated February 20, 1997, by and among us, 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 our 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, 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* Form of Indemnification Agreement between our officers and us (Filed as
Exhibit 10.7 to the S-1 Registration Statement).
10.6* Form of Indemnification Agreement between our directors and us (Filed
as Exhibit 10.16 to the S-1 Registration Statement).
10.7* Willbros Group, Inc. 1996 Stock Plan (Filed as Exhibit 10.8 to the S-1
Registration Statement).
10.8* Amendment Number 1 to Willbros Group, Inc. 1996 Stock Plan dated
February 24, 1999 (Filed as Exhibit A to the Company's Proxy Statement
for Annual Meeting of Stockholders dated March 31, 1999).
10.9* Amendment Number 2 to Willbros Group, Inc. 1996 Stock Plan dated March
7, 2001 (Filed as Exhibit B to our Proxy Statement for Annual Meeting
of Stockholders dated April 2, 2001).
10.10* 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).
10.11* 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).
10.12* Willbros Group, Inc. Director Stock Plan (Filed as Exhibit 10.9 to the
S-1 Registration Statement).
10.13* Amendment Number 1 to Willbros Group, Inc. Director Stock Plan dated
January 1, 2002.
10.14* Willbros USA, Inc. Executive Benefit Restoration Plan (Filed as Exhibit
10.10 to the S-1 Registration Statement).
10.15 Registration Rights Agreement dated April 9, 1992, between us 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).
10.16* Willbros Group, Inc. Severance Plan dated January 1, 1999 (Filed as
Exhibit 10.22 to our report on Form 10-K for the year ended December
31, 1998, filed March 31, 1999 (the "1998 Form 10-K")).
10.17 First Amendment to Credit Agreement dated April 2, 1998, by and among
us, 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 10.25 to the 1998 Form 10-K).
10.18 Second Amendment to Credit Agreement dated October 1, 1998, by and
among us, 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 10.26 to the 1998 Form 10-K).
10.19 Third Amendment to Credit Agreement effective June 30, 2000, by and
among us, 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 our report on Form 10-Q for
the quarter ended June 30, 2000, filed August 14, 2000).
10.20 Security Agreement effective July 27, 2000, by and among us, certain
designated subsidiaries, and ABN AMRO Bank N.V., as agent (Filed as
Exhibit 10.2 to our report on Form 10-Q for the quarter ended June 30,
2000, filed August 14, 2000).
10.21 Fourth Amendment to Credit Agreement effective June 30, 2000, by and
among us, 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 10.3 to our report on Form 10-Q for
the quarter ended June 30, 2000, filed August 14, 2000).
10.22* Separation Agreement and Release dated December 22, 2001, between
Willbros USA, Inc. and Melvin F. Spreitzer.
21. Subsidiaries.
23. Consent of KPMG LLP, included on page 75 of this Form 10-K.
- ----------
* Management contract or compensatory plan or arrangement.