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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
----------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2004
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 0816-01098
PANAMA, REPUBLIC OF PANAMA
TELEPHONE NO.: (507) 213-0947
(Address, including zip code, and telephone number, including
area code, of principal executive offices of registrant)
NOT APPLICABLE
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [X] No [ ]
The number of shares of the registrant's Common Stock, $.05 par value,
outstanding as of August 2, 2004 was 21,119,798.
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WILLBROS GROUP, INC.
FORM 10-Q
FOR QUARTER ENDED JUNE 30, 2004
Page
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets for June 30, 2004 (unaudited) and
December 31, 2003 3
Condensed Consolidated Statements of Operations (unaudited) for the three
month and six month periods ended June 30, 2004 and 2003 4
Condensed Consolidated Statement of Stockholders' Equity and Comprehensive
Income (unaudited) for the six months ended June 30, 2004 5
Condensed Consolidated Statements of Cash Flows (unaudited) for the six
months ended June 30, 2004 and 2003 6
Notes to Condensed Consolidated Financial Statements 7
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations 14
Item 3 - Quantitative and Qualitative Disclosures About Market Risk 24
Item 4 - Controls and Procedures 24
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 24
Item 2 - Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities 24
Item 3 - Defaults upon Senior Securities 25
Item 4 - Submission of Matters to a Vote of Security Holders 25
Item 5 - Other Information 26
Item 6 - Exhibits and Reports on Form 8-K 26
SIGNATURE 27
EXHIBIT INDEX 28
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WILLBROS GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
JUNE 30, DECEMBER 31,
2004 2003
------------ ------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents.................................................. $ 46,528 $ 20,969
Accounts receivable, net................................................... 128,169 101,654
Contract cost and recognized income not yet billed......................... 32,579 40,109
Prepaid expenses........................................................... 19,848 11,531
------------ ------------
Total current assets................................................. 227,124 174,263
Spare parts, net................................................................. 5,666 6,363
Property, plant and equipment, net............................................... 103,756 95,528
Investments in joint ventures.................................................... 6,305 14,086
Goodwill......................................................................... 9,234 9,360
Other assets..................................................................... 14,442 11,822
------------ ------------
Total assets......................................................... $ 366,527 $ 311,422
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of long-term debt........................ $ 1,207 $ 1,315
Accounts payable and accrued liabilities................................... 71,445 75,377
Contract billings in excess of cost and recognized income.................. 3,530 7,205
Accrued income taxes....................................................... 4,251 -
------------ ------------
Total current liabilities............................................ 80,433 83,897
2.75% Convertible senior notes................................................... 70,000 -
Long-term debt................................................................... 2,881 17,007
Other liabilities................................................................ 853 237
------------ ------------
Total liabilities.................................................... 154,167 101,141
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; 21,162,609 shares issued at June 30, 2004
(20,748,498 at December 31, 2003)........................................ 1,058 1,037
Capital in excess of par value............................................. 156,840 152,630
Retained earnings.......................................................... 57,016 57,741
Treasury stock at cost, 46,196 shares...................................... (345) (345)
Deferred compensation...................................................... (1,691) -
Notes receivable for stock purchases....................................... (890) (1,240)
Accumulated other comprehensive income..................................... 372 458
------------ ------------
Total stockholders' equity........................................... 212,360 210,281
------------ ------------
Total liabilities and stockholders' equity........................... $ 366,527 $ 311,422
============ ============
See accompanying notes to condensed consolidated financial statements.
3
WILLBROS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------------------------- --------------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
Contract revenue..................................... $ 116,003 $ 122,864 $ 218,341 $ 221,800
Operating expenses:
Contract....................................... 95,928 106,185 182,632 195,324
Depreciation and amortization.................. 5,759 5,524 11,074 11,192
General and administrative..................... 11,216 8,645 21,618 17,625
------------ ------------ ------------ ------------
112,903 120,354 215,324 224,141
------------ ------------ ------------ ------------
Operating income (loss).................. 3,100 2,510 3,017 (2,341)
Other income (expense):
Interest - net................................. (842) (387) (1,228) (786)
Other - net.................................... 160 66 522 (288)
------------ ------------ ------------ ------------
(682) (321) (706) (1,074)
------------ ------------ ------------ ------------
Income (loss) before income
taxes.................................... 2,418 2,189 2,311 (3,415)
Provision (benefit) for income taxes................. 2,911 (1,936) 3,036 (2,967)
------------ ------------ ------------ ------------
Net income (loss)........................ $ (493) $ 4,125 $ (725) $ (448)
============ ============ ============ ============
Earnings (loss) per common share:
Basic.......................................... $ (.02) $ .20 $ (.03) $ (.02)
============ ============ ============ ============
Diluted........................................ $ (.02) $ .20 $ (.03) $ (.02)
============ ============ ============ ============
Weighted average number of common shares outstanding:
Basic.......................................... 20,887,493 20,654,760 20,814,398 20,633,959
============ ============ ============ ============
Diluted........................................ 20,887,493 20,844,918 20,814,398 20,633,959
============ ============ ============ ============
See accompanying notes to condensed consolidated financial statements.
4
WILLBROS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
ACCUMULATED
NOTES OTHER
CAPITAL RECEIVABLE COMPRE- TOTAL
COMMON STOCK IN EXCESS DEFERRED FOR HENSIVE STOCK-
--------------------- OF PAR RETAINED TREASURY COMPEN- STOCK INCOME HOLDERS'
SHARES PAR VALUE VALUE EARNINGS STOCK SATION PURCHASES (LOSS) EQUITY
---------- --------- --------- -------- -------- -------- ---------- ----------- --------
Balance,
January 1, 2004 20,748,498 $ 1,037 $ 152,630 $ 57,741 $ (345) $ - $ (1,240) $ 458 $210,281
Comprehensive
Loss:
Net loss - - - (725) - - - - (725)
Foreign currency
translation
adjustment - - - - - - - (86) (86)
--------
Total
comprehensive
loss (811)
Collection of notes
receivable for
stock purchases - - - - - - 350 - 350
Restricted stock
awards 162,500 8 2004 - - (2,012) - - -
Amortization of
deferred compensation - - - - - 321 - - 321
Issuance of common
stock under
employee
benefit plan 8,340 - 114 - - - - - 114
Exercise of stock
options 243,271 13 2,092 - - - - - 2,105
---------- --------- --------- -------- -------- -------- ---------- ----------- --------
Balance,
June 30, 2004 21,162,609 $ 1,058 $ 156,840 $ 57,016 $ (345) $ (1,691) $ (890) $ 372 $212,360
========== ========= ========= ======== ======== ======== ========== =========== ========
See accompanying notes to condensed consolidated financial statements.
5
WILLBROS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
SIX MONTHS
ENDED JUNE 30,
------------------------------
2004 2003
------------ ------------
Cash flows from operating activities:
Net loss................................................................... $ (725) $ (448)
Reconciliation of net loss to net cash
used in operating activities:
Depreciation and amortization.......................................... 11,074 11,192
Change in equity in joint ventures, net................................ 7,781 (1,008)
Deferred income tax expense (benefit).................................. 2,403 (1,540)
Amortization of debt issue cost........................................ 959 773
Amortization of deferred compensation.................................. 321 -
Loss (gain) on disposal of property, plant and equipment............... (138) (241)
Changes in operating assets and liabilities:
Accounts receivable................................................ (26,258) 27,728
Contract cost and recognized income not yet billed................. 7,530 (20,034)
Prepaid expenses and other assets.................................. (8,435) (5,468)
Accounts payable and accrued liabilities........................... (4,444) 776
Contract billings in excess of cost and recognized income.......... (3,675) (4,793)
Accrued income taxes............................................... 4,227 (8,636)
Other liabilities.................................................. 701 -
------------ ------------
Cash used in operating activities............................. (8,679) (2,814)
Cash flows from investing activities:
Proceeds from sales of property, plant and equipment....................... 292 714
Purchase of property, plant and equipment.................................. (16,169) (11,047)
Purchase of spare parts.................................................... (2,650) (2,955)
------------ ------------
Cash used in investing activities............................. (18,527) (13,288)
Cash flows from financing activities:
Proceeds from issuance of 2.75% convertible senior notes................... 70,000 -
Proceeds from issuance of common stock..................................... 2,219 644
Proceeds from notes payable................................................ 535 1,901
Collection of notes for stock purchases.................................... 350 -
Repayment of long-term debt................................................ (14,000) -
Costs of debt issues....................................................... (5,423) -
Repayment of notes payable................................................. (764) (1,882)
------------ ------------
Cash provided by financing activities......................... 52,917 663
Effect of exchange rate changes on cash and cash equivalents..................... (152) 114
------------ ------------
Cash provided by (used in) all activities........................................ 25,559 (15,325)
Cash and cash equivalents, beginning of period................................... 20,969 49,457
------------ ------------
Cash and cash equivalents, end of period......................................... $ 46,528 $ 34,132
============ ============
Cash payments made during the period:
Income taxes............................................................... $ 2,316 $ 7,139
Interest................................................................... $ 500 $ 171
See accompanying notes to condensed consolidated financial statements.
6
WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
1. BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements of Willbros
Group, Inc. and its majority-owned subsidiaries (the "Company") reflect all
adjustments (consisting of normal recurring adjustments) which are, in the
opinion of management, necessary to present fairly the financial position as of
June 30, 2004, and the results of operations and cash flows of the Company for
all interim periods presented.
Certain information and disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These condensed consolidated financial
statements should be read in conjunction with the Company's December 31, 2003
audited consolidated financial statements and notes thereto contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 2003. The
results of operations and cash flows for the six-month period ended June 30,
2004 are not necessarily indicative of the operating results to be achieved for
the full year.
Certain reclassifications have been made to the 2003 balances in order to
conform to 2004 presentations.
2. STOCK-BASED COMPENSATION
The Company measures stock-based employee 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 and SFAS 148, "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. Compensation cost related to restricted stock and restricted
stock rights awards is measured as the market price of the Company's common
stock at the date of the award, and compensation cost is recognized over the
vesting period, typically four years.
If compensation cost for the Company's stock compensation plans had been
determined using the fair value method in SFAS No. 123 and SFAS 148, the
Company's net loss and loss per share for the three- month and six-month period
ended June 30, 2004 and 2003 would have been as shown in the pro forma amounts
below:
7
WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
2. STOCK-BASED COMPENSATION (CONTINUED)
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------------------------ ------------------------------------
2004 2003 2004 2003
-------------- -------------- -------------- --------------
Net income (loss) as reported... $ (493) $ 4,125 $ (725) $ (448)
Add stock-based employee
compensation included in net
income, after tax............. 160 - 321 -
Less stock-based employee
compensation determined under
fair value method, after tax (243) (263) (446) (520)
-------------- -------------- -------------- --------------
Pro forma net income (loss)..... $ (576) $ 3,862 $ (850) $ (968)
============== ============== ============== ==============
Income (loss) per share:
Basic, as reported............ $ (.02) $ 0.20 $ (.03) $ (0.02)
============== ============== ============== ==============
Basic, pro forma.............. $ (.03) $ 0.19 $ (.04) $ (0.05)
============== ============== ============== ==============
Diluted, as reported.......... $ (.02) $ 0.20 $ (.03) $ (0.02)
============== ============== ============== ==============
Diluted, pro forma............ $ (.03) $ 0.19 $ (.04) $ (0.05)
============== ============== ============== ==============
3. NEW ACCOUNTING PRONOUNCEMENTS
During 2003 the Financial Accounting Standards Board ("FASB") issued the
following statement of Financial Accounting Standards which were reviewed by the
Company to determine the potential impact on the financial statements upon
adoption.
Financial Accounting Standards Board ("FASB") Interpretation No. 46,
Consolidation of Variable Interest Entities, an Interpretation of Accounting
Research Bulletin No. 51 ("FIN 46") and its amendment entitled FASB
Interpretation No. 46 (revised December 2003), Consolidation of Variable
Interest Entities ("FIN 46R") were first issued by the FASB in January 2003 and
revised in December 2003. FIN 46R requires certain variable interest entities to
be consolidated by the primary beneficiary of the entity if (a) the equity
investors in the entity do not have the characteristics of a controlling
financial interest or (b) do not have sufficient equity at risk for the entity
to finance its activities without additional subordinated financial support from
other parties. The adoption of FIN 46R did not have a material impact on our
financial position or results of operations.
4. FOREIGN EXCHANGE RISK
The Company attempts to negotiate contracts which provide for payment in
U.S. dollars, but it may be required to take all or a portion of payment under a
contract in another currency. To mitigate non-U.S. currency exchange risk, the
Company seeks to match anticipated non-U.S. currency revenue with expenses in
the same currency whenever possible. To the extent it is unable to match
non-U.S. currency revenue with expenses in the same currency, the Company may
use forward contracts, options or other common hedging techniques in the same
non-U.S. currencies. The Company had no derivative financial instruments to
hedge currency risk at June 30, 2004 or June 30, 2003, or during the six-month
periods then ended.
8
WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
5. INCOME TAXES
During the quarter ended June 30, 2004, the Company recorded net income
taxes of $2,911 on income before income taxes of $2,418, resulting in an
effective income tax rate in excess of 100% for the period. During the quarter
ended June 30, 2003, the Company recorded a net income tax benefit of $1,936 on
income before income taxes of $2,189, resulting in an effective income tax rate
of approximately (88)% for the period. These effective rates differ from the
United States statutory federal income tax rate of 34% primarily as a result of
income taxes in certain countries being based on deemed profit rather than
taxable income, losses in one country cannot be used to offset taxable income in
another country, and some income is earned under foreign contracts which provide
tax concessions that eliminate the payment of income tax.
6. 2.75% CONVERTIBLE SENIOR NOTES
On March 12, 2004, the Company completed a primary offering of $60,000 of
2.75% Convertible Senior Notes (the "Convertible Notes"). On April 13, 2004, the
initial purchasers of the Convertible Notes exercised their option to purchase
an additional $10,000 aggregate principal amount of the notes. Collectively, the
primary offering and purchase option of the Convertible Notes total $70,000. The
Convertible Notes are general senior unsecured obligations. Interest is paid
semi-annually on March 15 and September 15, beginning on September 15, 2004. The
Convertible Notes mature on March 15, 2024 unless the notes are repurchased,
redeemed or converted earlier. The Company may redeem the Convertible Notes for
cash on or after March 15, 2011, at 100% of the principal amount of the notes
plus accrued interest. The holders of the Convertible Notes have the right to
require the Company to purchase the Convertible Notes, including unpaid
interest, on March 15, 2011, 2014, and 2019 or upon a change of control related
event. On March 15, 2011 and upon a change in control event, the Company must
pay the purchase price in cash. On March 15, 2014 and 2019, the Company has the
option of providing its common stock in lieu of cash or a combination of common
stock and cash to fund purchases. The holders of the Convertible Notes may
convert, under certain circumstances, the notes into shares of the Company's
common stock at an initial conversion ratio of 51.3611 shares of common stock
per $1,000.00 principal amount of notes (representing a conversion price of
approximately $19.47 per share). The notes will be convertible only upon the
occurrence of certain specified events including, but not limited to, if, at
certain times, the closing sale price of the Company's Common Stock exceeds 120%
of the then current conversion price, or $23.36 per share based on the initial
conversion price. Debt issue costs of $2,976, net of accumulated amortization of
$142, associated with the Convertible Notes are included in other assets at June
30, 2004 and are being amortized over the seven-year period ending March 2011.
In the event of a default of $10,000 or more on any credit agreement, including
the 2004 Credit Facility, a corresponding event of default would result under
the Convertible Notes.
7. 2004 CREDIT FACILITY
On March 12, 2004, the existing June 2002 credit agreement was amended and
restated (the "2004 Credit Facility"). The 2004 Credit Facility matures on March
12, 2007. The 2004 Credit Facility may be used for standby and commercial
letters of credit, borrowings or a combination thereof. Borrowings are limited
to the lesser of 40% of the borrowing base or $30,000 and are payable at
termination on March 12, 2007. Interest is payable quarterly at a base rate plus
a margin ranging from 0.75% to 2.00% or a Eurodollar Rate plus a margin ranging
from 1.75% to 3.00%. A commitment fee on the unused portion of the 2004 Credit
Facility is payable quarterly ranging from 0.375% to 0.625%. The 2004 Credit
Facility is collateralized by substantially all of the Company's assets,
including stock of the principal subsidiaries, restricts the payment of
9
WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
7. 2004 CREDIT FACILITY (CONTINUED)
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 $2,918, net
of accumulated amortization of $486, associated with the 2004 Credit Facility
are included in other assets at June 30, 2004 and are being amortized over a
24-month period ending March 2006.
For the quarter ended June 30, 2004, due to the Company's operating
results and EBITDA levels, an Amendment and Waiver Agreement (the "Agreement")
was obtained from the syndicated bank group to waive non-compliance with a
financial covenant to the credit agreement at June 30, 2004 and to amend certain
financial covenants. The Agreement provides for an amendment of certain
quarterly financial covenants and the multiple of EBITDA calculation with
respect to the borrowing base determination through June 30, 2005. In the
future, an acceleration of debt under the 2004 Credit Facility could occur if
the credit agreement's covenants are not met and the Company is not successful
in obtaining waivers of compliance at that time.
8. EARNINGS PER SHARE
Basic and diluted earnings per common share for the three-month and
six-month periods ended June 30, 2004 and 2003, are computed as follows:
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
---------------------------------- ----------------------------------
2004 2003 2004 2003
-------------- ------------ -------------- ------------
Net income (loss) applicable to
common shares.................... $ (493) $ 4,125 $ (725) $ (448)
============== ============ ============== ============
Weighted average number of
common shares outstanding
for basic earnings per share..... 20,887,493 20,654,760 20,814,398 20,633,959
Effect of dilutive potential common
shares from stock options........ - 190,158 - -
-------------- ------------ -------------- ------------
Weighted average number of
common shares outstanding
for diluted earnings per share... 20,887,493 20,844,918 20,814,398 20,633,959
============== ============ ============== ============
Earnings per common share:
Basic............................ $ (.02) $ .20 $ (.03) $ (.02)
============== ============ ============== ============
Diluted.......................... $ (.02) $ .20 $ (.03) $ (.02)
============== ============ ============== ============
10
WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
8. EARNINGS PER SHARE (CONTINUED)
At June 30, 2004, there were 1,200,128 potential common shares (710,225 at
June 30, 2003) excluded from the computation of diluted earnings per share
because of their anti-dilutive effect.
The Emerging Issues Task Force ("EITF"), in its abstract for Issue No.
04-08 "The Effect of Contingently Convertible Debt on Diluted Earnings per
Share", reached a tentative conclusion that contingently convertible debt
instruments should be included in diluted earnings per share computation (if
dilutive), regardless of whether the market price trigger has been met. The
Company's $70,000 of Convertible Notes qualify as contingently convertible debt
under EITF 04-08.
If consensus is reached, the EITF No. 04-08 would become effective in the
fourth quarter of 2004 and prior period amounts presented for comparative
purposes would be restated to conform to this conclusion.
9. INFORMATION ON BUSINESS SEGMENTS
Beginning in the second quarter of 2004, the Company restructured its
business into two operating segments: Engineering and Construction, and
Facilities Development and Operations. This organization reflects the way
management now assesses the performance of the businesses and makes decisions
about allocating resources. Formerly, the Company reported in one operating
segment offering three integrated services, engineering, construction, and
specialty.
All prior period segment results have been restated to reflect this
change.
Facilities Development and Operations segment will consist of the
development, ownership and operation of assets such as the Opal Gas Plant. It
will also include the four fueling facilities constructed and operated for the
Defense Energy Supply Corporation, an agency of the U.S. government, and the
Lake Maracaibo water injection program in Venezuela, operated and maintained by
a consortium in which we hold a 10% equity interest, for PDVSA Gas.
Engineering and Construction segment will consist of construction of
pipelines, stations and other facilities, engineering, procurement, project
management, and other oilfield services including maintenance, transportation,
dredging, and coating. Specialty services revenue, with the exception of the
fueling facilities and the Venezuela water injection activities, will be
included in the Engineering and Construction segment.
Revenue, contract income (contract revenue less contract costs) and total
assets by operating segment on a comparable basis for the three-month and
six-month periods ended June 30, 2004 and 2003, are as follows:
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
----------------------- -----------------------
2004 2003 2004 2003
-------- -------- -------- --------
Revenue:
Engineering and construction........................ $108,654 $121,895 $210,091 $219,318
Facilities development and operations ........... 7,349 969 8,250 2,482
-------- -------- -------- --------
$116,003 $122,864 $218,341 $221,800
======== ======== ======== ========
Reconciliation of segment income to
income (loss) before income taxes:
Contract income by operating segment:
Engineering and construction................. $ 17,852 $ 16,008 $ 32,700 $ 24,775
Facilities development and operations ....... 2,223 671 3,009 1,701
-------- -------- -------- --------
Contract income.......................... 20,075 16,679 35,709 26,476
11
WILLBROS GROUP, INC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
9. INFORMATION ON BUSINESS SEGMENTS (CONTINUED)
Other operating costs and expenses:
Depreciation and amortization.... $ 5,759 $ 5,524 $ 11,074 $ 11,192
General and administrative....... 11,216 8,645 21,618 17,625
-------- -------- -------- --------
Operating income (loss)...... 3,100 2,510 3,017 (2,341)
Other income (expense)............. (682) (321) (706) (1,074)
-------- -------- -------- --------
Income (loss) before income taxes....... $ 2,418 $ 2,189 $ 2,311 $ (3,415)
======== ======== ======== ========
JUNE 30, 2004 DECEMBER 31, 2003
------------- -----------------
Total assets:
Engineering and construction............ $270,519 $248,975
Facilities Development and operations... 26,647 23,338
General corporate....................... 69,361 39,109
-------- --------
$366,527 $311,422
======== ========
10. CONTINGENCIES, COMMITMENTS AND OTHER CIRCUMSTANCES
The Company provides engineering and construction services to the oil, gas
and power industries, and develops, owns and operates assets developed under
"Build, Own and Operate" contracts. The Company's principal markets are
currently Africa, the Middle East, South America and North America. 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, 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 through political risk insurance coverage that contains a 20%
co-insurance provision.
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 venture partners. In addition, the
Company acts as prime contractor on a majority of the projects it undertakes and
is normally responsible for the performance of the entire project, including
subcontract work. Management is not aware of any material exposure related
thereto which has not been provided for in the accompanying consolidated
financial statements.
Certain post-contract completion audits and reviews are being conducted by
clients and/or government entities. While there can be no assurance that claims
will not be received as a result of such audits and reviews, management does not
believe a legitimate basis for any material claims exists. At the present time
it
12
WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
10. CONTINGENCIES, COMMITMENTS AND OTHER CIRCUMSTANCES (CONTINUED)
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 borrowing with two banks. The guarantee reduces as
borrowings are repaid. The commitment as of June 30, 2004 totals approximately
$3,606, which is the maximum amount of future payments the Company could be
required to make.
From time to time the Company enters into commercial commitments, usually
in the form of commercial and standby letters of credit, insurance bonds and
financial guarantees. Contracts with the Company's customers may require the
Company to provide letters of credit or insurance bonds with regard to the
Company's performance of contracted services. In such cases, the commitments can
be called upon in the event of failure to perform contracted services. Likewise,
contracts may allow the Company 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. At June
30, 2004, the Company had approximately $33,835 of letters of credit and $48,202
of insurance bonds outstanding, representing the maximum amount of future
payments the Company could be required to make. The Company had no liability
recorded as of June 30, 2004, related to these commitments.
The Company is a party to a number of legal proceedings. Management
believes that the nature and number of these proceedings are typical for a firm
of similar size engaged in a similar type of business and that none of these
proceedings is material to the Company's financial position.
13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The following discussion should be read in conjunction with the unaudited
condensed consolidated financial statements for the three-month interim periods
ended June 30, 2004 and 2003, included in Item 1 of this report, and the
consolidated financial statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations, including Critical Accounting
Policies, included in our Annual Report on Form 10-K for the year ended December
31, 2003.
OVERVIEW
We derive our revenue from providing engineering and construction services
and developing and operating facilities for the oil, gas and power industries
and government entities worldwide. In 2004, our revenue was primarily generated
from operations in Canada, Iraq, Nigeria, Oman, the United States, and
Venezuela. We obtain contracts for our work mainly by competitive bidding or
through negotiations with long-standing clients. Contracts have durations from a
few weeks to several months or in some cases more than a year.
We believe the fundamentals supporting the demand for engineering and
construction services for the oil, gas and power industries indicate the market
for our services will be strong in the mid to long-term. This is evidenced by a
new record backlog of $415,349 at the end of the second quarter that is $7,749
greater than our previous record achieved on December 31, 2001. We are also
encouraged by many positive developments in the markets that we serve. In
addition to increased bid activity in several of our markets, we are optimistic
about new oil and gas production developments in both Canada and Mexico, both of
which are attractive markets for our engineering and construction services.
Additionally, Libya represents a promising new market as many of our long-time
clients pursue development opportunities with this major energy producing
country.
The move towards Liquefied Natural Gas ("LNG") is also expected to bring
more opportunities to Willbros, both in North America and in the
producing/exporting countries. The recently awarded Eastern Gas Gathering System
("EGGS") Project in Nigeria provides confirmation of the potential new business
surrounding the movement towards LNG. The EGGS project, with an estimated
contract value in excess of $225,000, is to build an 83-kilometer pipeline to
supply gas to the Nigeria Liquefied Natural Gas terminal on Bonny Island. For
additional information, see the related discussion under "Significant Business
Developments."
We are expecting to commence significant additional work in West Africa
and Nigeria later this year and expect that market to remain strong through
2006. In addition to the EGGS contract, we have recently been awarded several
smaller contracts in Nigeria primarily for concrete weight coating of pipe for
new pipelines. Expanded concrete weight coating and new offshore fabrication
services are two service capabilities that are expected to provide additional
revenue as the Nigerian government continues to push for more Nigeria content in
construction projects.
We now expect the demand in North America for our services to improve in
early 2005. The engineering market in North America is becoming more active. We
are currently performing engineering and project management services in the
early stages of two projects which could result in contract awards that exceed
$500,000. We are further encouraged by the recent award of the Trunkline Gas
Company EPC contract for expansion of the interconnections to their
regasification facility near Lake Charles, Louisiana. This is our first United
States EPC contract since October 2001 and we believe it to be tangible evidence
of the improving North America market. Other new assignments have been smaller,
but they have the earmarks of preliminary work associated with larger
assignments. Additionally, we are involved in numerous discussions and contract
negotiations regarding pipeline and station construction projects in North
America. The nature of these recent discussions and the increase in engineering
assignments support our belief that we will see an increase in activity in North
America early in 2005.
In late March 2004, the Opal Gas Plant began commercial operation. Its
financial performance in the current quarter was below expectations due to lower
volumes of gas being processed and refinements to its operations as it came on
line. This new facility adds a new source of long-term revenue to complement our
14
revenue stream from our project work. During the second quarter of 2004, the
daily inlet volume averaged just over 261,000 thousand cubic feet ("MCF") of gas
per day. Natural gas liquid ("NGL") production for this same period averaged
262,000 gallons per day at an average price of $0.594 per gallon. We receive
approximately 38.8% of the NGL production. Our gross margin was 22.6% for the
quarter. Looking forward, we expect to see improvement in both throughput and
margins such that by the end of 2004, it will be operating within the parameters
on which it was modeled. For additional information, see the related discussion
under "Significant Business Developments."
Concurrent with the commercial start-up of the Opal Gas Plant, we have
elected to restructure our business into two operating segments: Engineering and
Construction ("E&C"), and Facilities Development and Operations ("Facilities").
We believe this organization more accurately reflects the way our management now
assesses the performance of our businesses and makes decisions about allocating
resources. Formerly, we reported in one operating segment offering three
integrated services, construction, engineering and specialty services. For
additional information, see the related discussion under "Significant Business
Developments."
For the quarter ended June 30, 2004, we had a net loss of $493 or $0.02
per share on revenue of $116,003. This compares to revenue of $122,864 in the
same quarter in 2003, when we reported net income of $4,125 or $0.20 per share.
Revenue and earnings per share for the second quarter of 2004 were positively
impacted by the final resolution of our outstanding contract variations in Latin
America by $6,307 and $0.23 per share, respectively.
Revenue of $116,003 for the second quarter of 2004 represents a 5.6%
decrease over revenue for the second quarter of 2003. In the second quarter of
this year, revenue increased $27,744 in the Middle East primarily as a result of
our contract in Iraq. This increase was more than offset by the reduction in
revenue in West Africa of $42,272. The decrease in West Africa revenue was the
result of the completion of the Chad-Cameroon Pipeline project in mid-2003 and
delays in new project awards related to reduced Nigerian government budget
allocations and work stoppages due to community disturbances in Nigeria. In
Latin America, revenue was up $1,957 as a result of the above-mentioned
settlement offset by lower revenue in Venezuela as work on a significant project
nears completion. In North America, revenue was virtually flat in 2004 as
compared to the same period a year ago.
Overall contract income and margin in the second quarter of 2004 of
$20,075 and 17.3% compares favorably to contract income and margin in the second
quarter of 2003 of $16,679 and 13.6%. However, 2004 contract income and margin
were positively impacted as a result of the settlement of the contract
variations mentioned previously by $6,307 and 4.7%, respectively.
General & Administrative ("G&A") expenses increased $2,571 from $8,645 in
the second quarter of 2003 to $11,216 in the second quarter of 2004. We
continued to experience a high level of G&A expenses relative to our revenue
levels due to costs associated with negotiations and settlement on outstanding
contract variations, negotiating, bidding and estimating new work, initial
staffing to support the anticipated major project awards, and increased levels
of activity in Oman and Iraq.
In the current quarter, we recognized $2,911 in income tax expense on
$2,418 of pre-tax income. Income tax expense on the settlement of the Latin
America contract variation accounted for $2,401 of the total income tax expense
for the second quarter of 2004. The balance of the income tax provision is the
result of accruing income taxes in those countries where taxes are calculated
and paid based upon revenue versus pre-tax income. This is partially offset by
income earned under foreign contracts which provide tax concessions that
eliminate the payment of income taxes and the utilization of net operating loss
carryforwards in Venezuela.
Recently, we completed two financing transactions which we believe
improved our liquidity and, combined with cash flows from operations, will be
sufficient to finance our working capital and capital expenditure requirements
for forecasted operations. In March and April 2004, $70,000 of 2.75% Convertible
Notes were sold and our credit facility was amended and expanded. (For
additional information, see the related discussions under "Liquidity and Capital
Resources") We believe this new capital structure positions us to take on a
substantial amount of additional new work and provides a better matching of our
capital asset investment with the long-term revenue and cash flows to be
generated from capital assets in our Facilities segment. Willbros remains in a
strong financial position. We believe these financing transactions provide the
15
Company with the funds to grow as we move into a period of improving markets
during this strengthening business cycle.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
In our report on Form 10-K for the year ended December 31, 2003, we
identified and disclosed three critical accounting policies: (a) Revenue
Recognition: Percentage-of-Completion Method; (b) Income Taxes; and (c) Joint
Venture Accounting. There have been no changes to our critical accounting
policies during the six-month period ended June 30, 2004.
SIGNIFICANT BUSINESS DEVELOPMENTS
OPAL GAS PLANT
In late March 2004, we commenced commercial production from our newly
constructed Opal Gas Plant, located near Opal, Wyoming. In 2003, we completed
agreements with Williams Gas Processing Company ("Williams") that allowed us to
design and construct our Opal Gas Plant. The plant is designed to process
approximately 350,000 MCF per day of natural gas, producing 294,000 to 462,000
gallons per day of natural gas liquids at various operating conditions. We
receive a $0.0175 per MCF processing fee under a 10-year contract through March
2014, and net approximately 38.8% of the liquids sales after payment to Williams
for the contracted operations of the Opal Gas Plant.
NEW OPERATING SEGMENT
Beginning in the second quarter of 2004, we restructured our business into
two operating segments. The Facilities Development and Operations segment will
consist of the development, ownership and operation of assets such as the Opal
Gas Plant. It will also include the four fueling facilities constructed and
operated for the Defense Energy Supply Corporation, an agency of the U.S.
government, and the Lake Maracaibo water injection program in Venezuela,
operated and maintained by a consortium in which we hold a 10% equity interest,
for PDVSA Gas.
The Engineering and Construction segment provides construction of
pipelines, stations and other facilities, engineering, procurement, project
management, and other oilfield services including maintenance, transportation,
dredging, and coating. Specialty services revenue, with the exception of the
fueling facilities and the Venezuela water injection activities, will be
included in the Engineering and Construction segment.
NIGERIA EASTERN GAS GATHERING SYSTEM ("EGGS") PROJECT
At the end of the second quarter of 2004, Willbros Nigeria Ltd., with
operations based in Port Harcourt, Nigeria, was awarded an EPC contract for a
new gas transmission pipeline for Shell Petroleum Development Company. The
40-inch diameter, high pressure natural gas pipeline will be routed between the
Soku gas plant and the Nigeria Liquefied Natural Gas terminal on Bonny Island in
Nigeria, a distance of approximately 83 kilometers. The pipeline is part of the
EGGS Project, and the contract is valued at approximately $225,000. Engineering
and procurement activities are planned to commence in the third quarter of 2004,
with the project moving to the field for construction in late 2004 or early
2005. Completion is scheduled for the fourth quarter of 2005.
OTHER FINANCIAL MEASURES
EBITDA
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 six-month period ended June 30, 2004 was $14,613 as
compared to $8,563 for the same period in 2003. The $6,050 (70.7%)
16
increase in EBITDA is primarily the result of favorable year-to-year contract
variations partially offset by higher G&A costs and reduced E&C margins.
A reconciliation of EBITDA to GAAP financial information follows:
SIX MONTHS ENDED JUNE 30,
---------------------------
2004 2003
--------- ---------
Net loss $ (725) $ (448)
Interest expense, net 1,228 786
Provision (benefit) for income taxes 3,036 (2,967)
Depreciation and amortization 11,074 11,192
--------- --------
EBITDA $ 14,613 $ 8,563
========= ========
BACKLOG
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. Backlog as of June 30, 2004 was
$415,349 with an estimated embedded margin of 24.6% compared to $224,712 at
December 31, 2003 with an estimated embedded margin of 29.6%. The $190,637
increase in backlog as compared to the end of 2003 is primarily the result of
the $326,900 of contract awards in the second quarter of which the EGGS project
is the most significant. Included in the backlog total at June 30 is $21,497 of
gas processing fee revenue with an estimated embedded margin of 100%. The gas
processing revenue is associated with the 10-year gas processing contract for
our Opal Gas Plant. If backlog amounts were reduced by eliminating the effects
of the Opal gas processing contract, the adjusted estimated embedded margin
would be 20.5% and 22.0% as of June 30, 2004 and December 31, 2003,
respectively. An estimated $110,000 (26.0%) of the current backlog is scheduled
to be worked off during the remainder of 2004.
RESULTS OF OPERATIONS
During the second quarter of 2004, Willbros changed the way the business
is managed by establishing two separate operating segments: (1) Engineering &
Construction ("E&C"), and (2) Facilities Development and Operations
("Facilities"). Facilities is comprised of the recently constructed Opal Gas
Plant, fuel depot facilities and a 10% equity interest in a Venezuela joint
venture to provide water injection services. The bulk of the Company's activity
continues to be focused in the E&C segment. Specialty services revenue, with the
exception of the fueling facilities and the Venezuela water injection
activities, will be included in the E&C segment.
Our E&C 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.
Facilities revenue is heavily concentrated in the operations of our Opal
Gas Plant. Revenues and contract income are dependent on the volume of gas
furnished to the plant and the relative price differential between equivalent
heating value contained in natural gas and natural gas liquids ("NGL"). During
the second quarter of 2004, the gas plant averaged slightly over 261,000 MCF of
processed gas per day and produced an average of 262,000 gallons of NGLs per
day. We receive approximately 38.8% of the NGL production. The processed volumes
represent approximately 75% of the 350,000 MCF per day design capacity.
17
THREE MONTHS ENDED JUNE 30, 2004, COMPARED TO THREE MONTHS ENDED JUNE 30, 2003
CONTRACT REVENUE
Contract revenue decreased $6,861 (5.6%) to $116,003 in the second quarter
of 2004 as detailed in the table below:
CONTRACT REVENUE - THREE MONTHS ENDED JUNE 30,
------------------------------------------------------------
INCREASE PERCENT
2004 2003 (DECREASE) CHANGE
------------ ----------- ------------ -------
E & C $ 108,654 $ 121,895 $ (13,241) (10.9%)
Facilities 7,349 969 6,380 658.4%
------------ ----------- ------------ -------
Total Contract Revenue $ 116,003 $ 122,864 $ (6,861) (5.6%)
============ =========== ============= =======
The second quarter 2004 E&C revenue decreased $13,241 after giving effect
to the recent contract variation settlement related to work on the Bolivia
Transierra Pipeline project that resulted in additional revenue of $6,307.
Excluding this settlement, E&C revenue decreased $19,548 (15.9%)
quarter-to-quarter primarily as a result of a $47,174 decrease in construction
revenue related to project delays and temporary suspension of projects in
Nigeria, the completion of the large Chad-Cameroon Pipeline project in 2003 and
reduced activity on the Venezuelan Ameriven Terminal project (as compared to the
second quarter of 2003). These decreases in E&C revenue were partially offset by
$27,744 of additional revenue from increased activity in the Middle East.
Opal Gas Plant revenue of $6,390 represents 87.0% of the second quarter of
2004 Facilities segment revenue. The second quarter of 2004 was the first full
quarter of commercial production following its late March 2004 start-up.
CONTRACT INCOME
Contract income increased $3,396 (20.4%) to $20,075 in the second quarter
of 2004 as detailed in the table below:
CONTRACT INCOME - THREE MONTHS ENDED JUNE 30,
------------------------------------------------------------
INCREASE PERCENT
2004 2003 (DECREASE) CHANGE
------------ ----------- ------------ -------
E & C $ 17,852 $ 16,008 $ 1,844 11.5%
Facilities 2,223 671 1,552 231.3%
------------ ----------- ------------ -------
Contract Income $ 20,075 $ 16,679 $ 3,396 20.4%
============ =========== ============ =======
E&C contract income increased $1,844 (11.5%) to $17,852 in the second
quarter of 2004 as compared to $16,008 in the same period in the prior year.
Second quarter 2004 margins increased to 16.4% from 13.1% in the same period of
the prior year. If the favorable effects of the $6,307 Bolivia Transierra
Pipeline contract settlement were excluded, a contract income decrease of $4,463
(27.9%) and margin reduction of 1.9% would have occurred in the second quarter
of 2004.
Facilities contract income increased $1,552 (231.3%) to $2,223 in the
second quarter of 2004 as compared to $671 in the same period in the prior year.
Opal's 22.6% contract income margin lowered the overall margin to 30.2% in the
second quarter of 2004 versus 69.2% in the same period in the prior year.
OTHER OPERATING ITEMS
Depreciation and amortization increased by $235 (4.3%) because of
depreciation recorded on the Opal Gas Plant.
18
G&A expenses increased from $8,645 in the second quarter of 2003 to
$11,216 in the second quarter of this year, an increase of $2,571 (22.9%). We
continued to experience a high level of G&A expenses relative to our revenue
levels due to costs associated with negotiations and settlement on outstanding
contract variations, negotiating, bidding and estimating new work, initial
staffing to support the anticipated major project awards, and increased levels
of activity in Oman and Iraq.
Operating income increased $590 (23.5%) from $2,510 in 2003 to $3,100 in
2004. The improvement was primarily the result of the second quarter Bolivia
Transierra Pipeline settlement partially offset by higher G&A costs and reduced
E&C margins on current activities.
NON-OPERATING ITEMS
Net interest expense increased $455 to $842 in the second quarter of 2004
as compared to the same period in the prior year. The increased interest expense
reflects the addition of the $70,000 of Convertible Notes and amortization of
debt issue costs.
The provision for income taxes was $2,911 (120.4%) on pre-tax income of
$2,418 for the second quarter of 2004. When compared to the $1,936 tax benefit
recognized for the second quarter of 2003, a tax expense increase of $4,847
results in 2004. The $4,847 income tax expense increase includes the recognition
of $2,401 of tax expense related to the Bolivia Transierra Pipeline contract
variation settlement. The remainder of the increase results mainly from accruing
income taxes in Nigeria where taxes are calculated and paid based upon deemed
profits rather than pre-tax income. This is partially offset by income earned
under foreign contracts which provide tax concessions that eliminate the payment
of income taxes, and utilization of net operating loss carryforwards in
Venezuela.
SIX MONTHS ENDED JUNE 30, 2004, COMPARED TO SIX MONTHS ENDED JUNE 30, 2003
CONTRACT REVENUE
Contract revenue decreased $3,459 (1.6%) to $218,341 in the first six
months of 2004 as detailed in the table below:
CONTRACT REVENUE - SIX MONTHS ENDED JUNE 30,
------------------------------------------------------------
INCREASE PERCENT
2004 2003 (DECREASE) CHANGE
------------ ----------- ------------ --------
E & C $ 210,091 $ 219,318 $ (9,227) (4.2%)
Facilities 8,250 2,482 5,768 232.4%
------------ ----------- ------------ --------
Total Contract Revenue $ 218,341 $ 221,800 $ (3,459) (1.6%)
============ =========== ============= =========
The E&C revenue decrease of $9,227 for the first six months was primarily
the result of an $11,525 engineering revenue decrease related to the loss of
revenue from the Explorer Pipeline project that was completed in 2003.
Construction revenue increased $2,298 primarily because of a recent contract
variation settlement related to work on the Bolivia Transierra Pipeline project
that resulted in a $6,307 revenue increase. Excluding this settlement,
construction revenue decreased $4,009 (2.1%) primarily as a result of a $66,472
decrease in revenue related to project delays and temporary suspension of
projects in Nigeria and the completion of the large Chad-Cameroon Pipeline
project in 2003, offset by additional revenue from increased activity in Iraq
($41,101) and Oman ($10,582).
Opal Gas Plant revenue of $6,447 represents 78.1% of the first six months
of 2004 Facilities segment revenue. The second quarter of 2004 was the first
full quarter of commercial production following its late March 2004 start-up.
19
CONTRACT INCOME
Contract income increased $9,233 (34.9%) to $35,709 in the first six
months of 2004 as detailed in the table below:
CONTRACT INCOME - SIX MONTHS ENDED JUNE 30,
------------------------------------------------------------
INCREASE PERCENT
2004 2003 (DECREASE) CHANGE
------------ ----------- ------------ --------
E & C $ 32,700 $ 24,775 $ 7,925 32.0%
Facilities 3,009 1,701 1,308 76.9%
------------ ----------- ------------ --------
Contract Income $ 35,709 $ 26,476 $ 9,233 34.9%
============ =========== ============ ========
E&C contract income increased $7,925 (32.0%) to $32,700 in the first six
months of 2004 as compared to $24,775 in the same period in the prior year. The
E&C margin increased to 15.6% from 11.3% in the same period of the prior year.
The first six months of 2004 includes $6,307 in revenue from the recent Bolivia
Transierra Pipeline project settlement. The first six months of the prior year
included approximately $8,700 of contract costs for unapproved contract
variations, including a portion directly related to the recent Transierra
settlement. Excluding favorable year-to-year contract variations, margins
declined 2.3% during the first six months of 2004.
Facilities contract income increased $1,308 (76.9%) to $3,009 in the first
six months of 2004 as compared to $1,701 in the same period in the prior year as
a result of the Opal Gas Plant operations in the current year. Opal's 23.3%
contract income margin lowered the overall Facilities margin to 36.5% in the
first six months of 2004 versus 68.5% in the same period in the prior year.
OTHER OPERATING ITEMS
Depreciation and amortization decreased $118 (1.1%) primarily due to the
elimination of depreciation expense or assets for the Chad-Cameroon Pipeline
project that was completed in early 2003, partially offset by the commencement
of Opal Gas Plant depreciation expense in the second quarter of 2004.
G&A expenses increased from $17,625 in the first half of 2003 to $21,618
in the first half of this year, an increase of $3,993 (22.7%). We continued to
experience a high level of G&A expenses relative to our revenue levels due to
costs associated with negotiations and settlement on outstanding contract
variations, negotiating, bidding and estimating new work, initial staffing to
support the anticipated major project awards, and increased levels of activity
in Oman and Iraq.
Operating income increased $5,358 to $3,017 for the first six months of
2004 from an operating loss of $2,341 in the same period in 2003. Favorable
year-to-year contract variations partially offset by higher G&A costs and
reduced E&C margins resulted in this improvement.
NON-OPERATING ITEMS
Net interest expense increased $442 to $1,228 during the first six months
of 2004 as compared to the same period in the prior year. The increased interest
expense reflects the addition of the $70,000 of Convertible Notes and
amortization of debt issue costs.
Other income (expense) improved from $288 of expense in the first six
months of 2003 to $522 of income in the same period of 2004. The $810
improvement this year is mainly attributable to Venezuela Bolivar currency
devaluations in 2003.
We recognized a $3,036 tax expense on a $2,311 pre-tax income for the
first six months of 2004, an increase of $6,003 when compared to the $2,967 tax
benefit recognized for the first six months of 2003. The $6,003 income tax
expense increase includes the recognition of $2,401 of tax expense related to
the Bolivia Transierra Pipeline contract variation settlement. The remainder of
the increase results mainly from accruing income taxes in Nigeria where taxes
are calculated and paid based upon deemed profits rather than pre-tax
20
income. This is partially offset by income earned under foreign contracts which
provide tax concessions that eliminate the payment of income taxes, and
utilization of net operating loss carryforwards in Venezuela.
LIQUIDITY AND CAPITAL RESOURCES
CAPITAL REQUIREMENTS
Our primary requirements for capital are to acquire, upgrade and maintain
equipment, provide working capital for 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. We have met these capital requirements
primarily from operating cash flows, a 2002 equity offering, borrowings under
our credit facility and the March and April 2004 Convertible Notes offering.
WORKING CAPITAL
Cash and cash equivalents increased $25,559 (121.9%) to $46,528 at June
30, 2004 from $20,969 at December 31, 2003. The increase consists mainly of
$70,000 from the sale of the Convertible Notes less the $14,000 repayment of the
outstanding balance on the June 2002 credit agreement and $5,423 of debt issue
cost related to the Convertible Notes and the 2004 Credit Facility. This
increase was partially offset by $8,679 used in operating activities, primarily
due to increases in accounts receivable and contract cost and recognized income
not yet billed associated with increased North American and Middle East
construction activities, and $18,527 of investing activities related to the
acquisition of equipment and spare parts, implementation of a new information
system and the final costs to make the Opal Gas Plant fully operational.
Working capital increased $56,325 (62.3%) to $146,691 at June 30, 2004
from $90,366 at December 31, 2003. The increase was primarily attributable to
increased cash of $25,559, increased receivables and unbilled revenue of
$18,985, and prepaid expenses of $8,317. The majority of the receivable and
unbilled revenue increase is related to the timing of billings under current
contracts which have milestone billing arrangements.
Stockholders' equity was $212,360 as of June 30, 2004, an increase of 1.0%
above the $210,281 December 31, 2003.
We believe the anticipated increase in revenue, improvement in contract
margins and a focus on reducing the working capital requirements
internationally, will return the Company to positive cash flow from operations
in 2004.
2.75% CONVERTIBLE SENIOR NOTES
On March 12, 2004, the Company completed a primary offering of $60,000 of
2.75% Convertible Senior Notes (the "Convertible Notes"). On April 13, 2004, the
initial purchasers of the Convertible Notes exercised their option to purchase
an additional $10,000 aggregate principal amount of the notes. Collectively, the
primary offering and purchase option of the Convertible Notes total $70,000.
Completion of the Convertible Notes offering enhances our competitive position
in the marketplace and provides a better matching of the funding of capital
assets with the revenue and cash flow streams they are generating.
The Convertible Notes are general senior unsecured obligations. Interest
is paid semi-annually on March 15 and September 15, beginning on September 15,
2004. The Convertible Notes mature on March 15, 2024, unless the notes are
purchased, redeemed or converted earlier. We may redeem the Convertible Notes
for cash on or after March 15, 2011, at 100% of the principal amount of the
notes plus accrued interest. The holders of the Convertible Notes have the right
to require us to purchase the Convertible Notes, including unpaid interest, on
March 15, 2011, 2014, and 2019, or upon a change of control related event. On
March 15, 2011 and upon a change in control event, we must pay the purchase
price in cash. On March 15, 2014 and 2019, we have the option of purchasing the
notes with common stock in lieu of cash or a combination of common stock and
cash. The holders of the Convertible Notes may convert, under certain
circumstances, the notes into shares of our common stock at an initial
conversion ratio of 51.3611 shares of common stock per $1,000.00 principal
amount of notes (representing a conversion price of approximately $19.47 per
share). The notes will be convertible only upon the occurrence of certain
specified events including, but not limited to, if, at certain times, the
closing sale price of the Company's Common Stock exceeds 120% of the then
current conversion price, or $23.36 per share based on the initial conversion
price. Upon conversion, we will have the right to
21
deliver in lieu of shares of our common stock, cash or a combination of cash and
shares of our common stock. In the event of a default of $10,000 or more on any
credit agreement, including the 2004 Credit Facility, a corresponding event of
default would result under the Convertible Notes. $14,000 of the net proceeds of
approximately $67,024 from the March and April 2004 sale of Convertible Notes
were used to repay all outstanding indebtedness under the $125,000 June 2002
credit agreement. The remainder will be used for working capital and for general
corporate purposes.
RESTATED AND EXTENDED CREDIT FACILITY
On March 12, 2004, the existing June 2002 credit agreement was amended and
restated (the "2004 Credit Facility"). The 2004 Credit Facility will mature on
March 12, 2007. The 2004 Credit Facility may be used for standby and commercial
letters of credit, borrowings or a combination thereof. Borrowings are limited
to the lesser of 40% of the borrowing base or $30,000 and are payable at
termination on March 12, 2007. Interest is payable quarterly at a base rate plus
a margin ranging from 0.75% to 2.00% or a Eurodollar Rate plus a margin ranging
from 1.75% to 3.00%. A commitment fee on the unused portion of the 2004 Credit
Facility is payable quarterly ranging from 0.375% to 0.625%. The 2004 Credit
Facility is collateralized by substantially all of our assets, including stock
of the principal subsidiaries, restricts the payment of cash dividends and
requires us 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.
For the quarter ended June 30, 2004, due to the Company's operating
results and EBITDA levels, an Amendment and Waiver Agreement (the "Agreement")
was obtained from the syndicated bank group to waive non-compliance with a
financial covenant to the credit agreement at June 30, 2004 and to amend certain
financial covenants. The Agreement provides for an amendment of certain
quarterly financial covenants and the multiple of EBITDA calculation with
respect to the borrowing base determination through June 30, 2005. In the
future, an acceleration of debt under the 2004 Credit Facility could occur if
the credit agreement's covenants are not met and the Company is not successful
in obtaining waivers of compliance at that time.
As of June 30, 2004, the 2004 Credit Facility had no outstanding
borrowings and $33,835 in letters of credit outstanding. Under the borrowing
base that is applicable to June 30, 2004 (based on May 31, 2004 financial
statements), a total of $60,450 was available for the issuance of letters of
credit and cash borrowings. Cash borrowings were restricted to $30,000.
LIQUIDITY
We believe that cash flows from operations, borrowing capacity under the
2004 Credit Facility and the net proceeds from the Convertible Notes offering
will be sufficient to finance working capital and capital expenditures for
ongoing operations at our present level of activity and will provide capacity
for expected growth. Capital expenditures for equipment and spare parts for the
remainder of 2004 are estimated at $15,000 and $2,500, respectively. Also, we
may be required to make additional payments during 2004 related to the Mt. West
Group acquisition based on a net income earn-out provision of 25% covering the
two-year period following the acquisition date. We believe that while there are
numerous factors that could and will have an impact on our cash flow, both
positively and negatively, there are not one or two events that, should they
occur, could not be funded from our operations or borrowing capacity. For a list
of events which could cause actual results to differ from our expectations and a
discussion of risk factors that could impact cash flow, please refer to the
section entitled "Political, Economic and Operational Risks" contained in Items
1 & 2 in the Company's Annual Report on Form 10-K for the year ended December
31, 2003.
Although payments may be delayed beyond their anticipated payment date, 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.
22
CONTRACTUAL OBLIGATIONS
As of June 30, 2004, we had $70,000 of outstanding debt related to the
Convertible Notes. All of the outstanding debt under the $125,000 June 2002
credit agreement was repaid from the proceeds of the Convertible Notes offering.
Other contractual obligations and commercial commitments, as detailed in
the Company's annual report on Form 10-K for the year ended December 31, 2003,
did not materially change outside of payments made in the normal course of
business.
NEW ACCOUNTING PRONOUNCEMENTS
See Note 3 of the Notes to the Condensed Consolidated Financial Statements
included in this report for a summary of recently issued accounting standards.
FORWARD-LOOKING STATEMENTS
This Form 10-Q includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements, other than
statements of historical facts, included in this Form 10-Q which address
activities, events or developments which 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, gas liquids and power
prices, demand for our services, the amount and nature of future investments by
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 to 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:
- curtailment of capital expenditures in the oil, gas, and power
industries;
- political or social circumstances impeding the progress of our work;
- the timely award of one or more projects;
- cancellation of projects;
- inclement weather;
- project cost overruns, unforeseen schedule delays, and liquidated
damages;
- 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;
- downturns in general economic, market or business conditions in our
target markets;
- changes in the effective tax rate in countries where the work will
be performed;
- changes in laws or regulations;
- the risk factors listed in our annual report on Form 10-K for 2003
and in our other filings with the Securities and Exchange Commission
from time to time;
- ability to manage insurable risk at an affordable cost; and
- other factors, most of which are beyond our control.
Consequently, all of the forward-looking statements made in this Form 10-Q
are qualified by these cautionary statements and there can be no assurance that
the actual results or developments we anticipate will be realized or, even if
substantially realized, that they will have the consequences for, or effects on,
our business or operations that we anticipate today. We assume no obligation to
update publicly any such forward-looking statements, whether as a result of new
information, future events or otherwise.
23
ITEM 3. 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 June 30, 2004 and 2003 or
during the six-month periods then ended.
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 June 30, 2004 due to the
generally short maturities of these items. At June 30, 2004, our investments
were primarily in short-term dollar denominated bank deposits with maturities of
a few days, or in longer term deposits where funds can be withdrawn on demand
without penalty. 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 June 30, 2004, none of our indebtedness was
subject to variable interest rates.
ITEM 4. CONTROLS AND PROCEDURES
Our management, with the participation of our Chief Executive Officer and
Chief Financial Officer, evaluated the effectiveness of our disclosure controls
and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act
of 1934) as of June 30, 2004. Based on this evaluation, our management,
including our Chief Executive Officer and Chief Financial Officer, concluded
that, as of June 30, 2004, the disclosure controls and procedures are effective
in alerting them on a timely basis to material information required to be
included in our periodic filings with the Securities and Exchange Commission.
No change in our internal control over financial reporting (as defined in
Rule 13a-15(f) under the Securities Exchange Act of 1934) occurred during the
fiscal quarter ended June 30, 2004 that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEDINGS
Not applicable
ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY
SECURITIES
On March 12, 2004 and April 13, 2004 we issued $60 million and $10
million, respectively, of 2.75% Convertible Senior Notes due 2024 ("Notes") in a
private placement to Bear Stearns & Co. Inc., CIBC World Markets Corp. and
Credit Lyonnais Securities (USA) Inc., as initial purchasers. The Notes were
offered only to "qualified institutional buyers," in accordance with Rule 144A
under the Securities Act of 1933. The initial purchasers' aggregate discount was
$2.8 million. A portion of the net proceeds from the Notes was used to repay $14
million of outstanding indebtedness under our senior secured credit facility,
and the remainder will be used to provide capital to support expansion of our
current operations and to fund possible acquisitions of assets and businesses.
Interest on the Notes is payable semi-annually on March 15 and September 15 of
each year, beginning on September 15, 2004. The Notes will mature on March 15,
2024. However, we may redeem all or a portion of the notes for cash on or after
March 15, 2011, at 100% of the principal amount of the notes plus accrued and
unpaid interest. In addition, holders may require us to purchase all or part of
the Notes at a purchase price of 100% of the principal amount per Note plus
accrued and unpaid interest on
24
March 15, 2011, March 15, 2014 and March 15, 2019, or upon the occurrence of a
fundamental change. On March 15, 2011, we must pay the purchase price in cash.
On March 15, 2014 and March 15, 2019, we may pay the purchase price in cash, in
shares of our common stock, or in any combination of cash and common stock.
During certain periods, the Notes are convertible by holders into shares
of our common stock initially at a conversion rate of 51.3611 shares of common
stock per $1,000.00 principal amount of Notes, which is equivalent to an initial
conversion price of $19.47 per share of common stock (subject to adjustment in
certain events), under the following circumstances: (1) if the closing sale
price of our common stock issuable upon conversion exceeds 120% of the
conversion price under specified conditions; (2) if we call the Notes for
redemption; or (3) upon the occurrence of specified corporate transactions. Upon
conversion of the Notes, in lieu of delivering common stock we may, at our
election, deliver cash or a combination of cash and common stock. The Notes are
general senior unsecured obligations, ranking on a parity in right of payment
with all our existing and future unsecured senior indebtedness and our other
general unsecured obligations, and senior in right of payment to all our future
subordinated indebtedness. The Notes are effectively subordinated to all of our
existing and future secured senior indebtedness to the extent of the assets
securing such indebtedness, and to the claims of all creditors of our
subsidiaries.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Our Annual Meeting of Stockholders (the "Annual Meeting") was held on May
20, 2004, in Panama City, Panama. At the Annual Meeting, the stockholders
elected Rodney B. Mitchell and S. Miller Williams as Class II directors for
three-year terms. The stockholders also considered and approved an amendment to
the Willbros Group, Inc. 1996 Stock Plan to increase the number of shares of our
common stock authorized for issuance thereunder from 3,125,000 to 4,075,000
shares, and approved the appointment of KPMG LLP as our independent auditors for
the fiscal year ending December 31, 2004.
There were present at the Annual Meeting, in person or by proxy,
stockholders holding 18,523,575 shares of our common stock , or 88.14 percent of
the total stock outstanding and entitled to vote at the Annual Meeting. The
table below describes the results of voting at the Annual Meeting:
Votes
Votes Against or Broker
For Withheld Abstentions Non-Votes
---------- ---------- ----------- ---------
1. Election of Directors:
Rodney B. Mitchell 18,380,593 142,982 -0- -0-
S. Miller Williams 18,381,722 141,853 -0- -0-
2. Approval to amend Willbros
Group, Inc. 1996 Stock Plan
to increase authorized shares
from 3,125,000 to 4,075,000. 8,437,685 3,224,532 274,349 6,587,009
3. Ratification of KPMG LLP
as our independent auditors
for fiscal 2004. 18,463,759 11,415 48,401 -0-
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ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
The following documents are included as exhibits to this Form 10-Q. 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 or furnished herewith.
10.1 First Amendment and Waiver dated August 6, 2004 to the Amended
and Restated Credit Agreement dated March 12, 2004, among us,
certain designated subsidiaries, certain financial
institutions, Calyon New York Branch, as administrative agent,
and CIBC Inc., as syndication agent.
10.2 Amendment Number 4 to Willbros Group, Inc. 1996 Stock Plan
dated as of March 10, 2004. (Filed as Exhibit B to our Proxy
Statement for Annual Meeting of Stockholders dated April 23,
2004.)
31.1 Certification of Chief Executive Officer pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K:
Form 8-K dated April 13, 2004, filed on April 14, 2004, to
report under Item 5 our press release dated April 13, 2004,
announcing that the initial purchasers of our convertible
senior notes due 2024, exercised their option to purchase an
additional $10 million aggregate principal amount of such
notes.
26
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WILLBROS GROUP, INC.
Date: August 9, 2004 By: /s/ Warren L. Williams
-----------------------------------
Warren L. Williams
Senior Vice President, Chief Financial Officer
and Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
27
EXHIBIT INDEX
The following documents are included as exhibits to this Form 10-Q.
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 or furnished herewith.
Exhibit
Number Description
- ---------------- --------------------------------------------------------------
10.1 First Amendment and Waiver dated August 6, 2004 to the Amended
and Restated Credit Agreement dated March 12, 2004, among us,
certain designated subsidiaries, certain financial
institutions, Calyon New York Branch, as administrative agent,
and CIBC Inc., as syndication agent.
10.2 Amendment Number 4 to Willbros Group, Inc. 1996 Stock Plan
dated as of March 10, 2004. (Filed as Exhibit B to our Proxy
Statement for Annual Meeting of Stockholders dated April 23,
2004.)
31.1 Certification of Chief Executive Officer pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934, as adopted
pursuant to Section 302 of the Sarbanes- Oxley Act of 2002.
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
28