InfrastruX Group, Inc.
Index to Historical
Consolidated Financial Statements
|
|
|
|
|
|
|
Page |
Report of Independent Registered Public Accounting Firm |
|
|
3 |
|
Consolidated Balance Sheets as of March 31, 2010 and 2009 (unaudited) and as of December
31, 2009 and 2008 |
|
|
4 |
|
Consolidated Statements of Operations for the three months ended March 31, 2010 and 2009
(unaudited) and the years ended December 31, 2009, 2008 and 2007 |
|
|
5 |
|
Consolidated Statements of Shareholders Equity and Comprehensive Income (Loss) for the three
months ended March 31, 2010 (unaudited) and the years ended December 31, 2009, 2008 and
2007 |
|
|
6 |
|
Consolidated Statements of Cash of Flows for the three months ended March 31, 2010 and 2009
(unaudited) and the years ended December 31, 2009, 2008 and 2007 |
|
|
7 |
|
Notes to Consolidated Financial Statements for the three months ended March 31, 2010 and
2009 (unaudited) and the years ended December 31, 2009, 2008 and 2007 |
|
|
8 |
|
1
Willbros Group, Inc.
Index to Unaudited Pro Forma
Condensed Financial Statements
|
|
|
|
|
|
|
Page |
|
Unaudited Pro Forma Condensed Financial Statements Introductory Information |
|
|
38 |
|
Unaudited Pro Forma Condensed Consolidated Statements of Income for the quarter
ended March 31, 2010 |
|
|
40 |
|
Unaudited Pro Forma Condensed Consolidated Statements of Income for the year
ended December 31, 2009 |
|
|
41 |
|
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2010 |
|
|
42 |
|
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements |
|
|
|
|
2
InfrastruX Group,
Inc.
Report of
independent registered public accounting firm
The Board of Directors and Shareholders
InfrastruX Group, Inc.:
We have audited the accompanying consolidated balance sheets of
InfrastruX Group, Inc. and subsidiaries (the Company) as of
December 31, 2008 and 2009, and the related consolidated
statements of operations, shareholders equity and
comprehensive income (loss), and cash flows for each of the
years in the three-year period ended December 31, 2009.
These consolidated financial statements are the responsibility
of the Companys management. Our responsibility is to
express an opinion on these consolidated financial statements
based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of InfrastruX Group, Inc. and subsidiaries as of
December 31, 2008 and 2009, and the results of their
operations and their cash flows for each of the years in the
three-year period ended December 31, 2009, in conformity
with U.S. generally accepted accounting principles.
/s/ KPMG LLP
Seattle, Washington
April 23, 2010
3
InfrastruX Group,
Inc.
Consolidated balance
sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
|
(in thousands of
dollars, except par value and shares)
|
|
|
(unaudited)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
20,580
|
|
|
|
19,742
|
|
|
|
4,605
|
|
Accounts receivable, net
|
|
|
172,148
|
|
|
|
95,589
|
|
|
|
117,212
|
|
Inventories
|
|
|
23,479
|
|
|
|
22,877
|
|
|
|
22,384
|
|
Prepaid expenses and other current assets, net
|
|
|
23,383
|
|
|
|
24,540
|
|
|
|
29,378
|
|
Income taxes receivable
|
|
|
|
|
|
|
11,461
|
|
|
|
9,792
|
|
Deferred tax assets
|
|
|
12,787
|
|
|
|
4,463
|
|
|
|
3,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
252,377
|
|
|
|
178,672
|
|
|
|
186,698
|
|
Property and equipment, net
|
|
|
133,347
|
|
|
|
132,127
|
|
|
|
132,513
|
|
Goodwill
|
|
|
57,426
|
|
|
|
57,426
|
|
|
|
57,426
|
|
Intangibles, net
|
|
|
95,260
|
|
|
|
86,993
|
|
|
|
84,904
|
|
Other assets
|
|
|
19,463
|
|
|
|
25,170
|
|
|
|
24,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
557,873
|
|
|
|
480,388
|
|
|
|
486,018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
20,264
|
|
|
|
10,641
|
|
|
|
12,883
|
|
Other current liabilities
|
|
|
118,954
|
|
|
|
66,464
|
|
|
|
72,141
|
|
Current portion of capital lease obligations
|
|
|
6,363
|
|
|
|
3,840
|
|
|
|
3,297
|
|
Current portion of long-term debt
|
|
|
4,578
|
|
|
|
4,306
|
|
|
|
4,196
|
|
Income taxes payable
|
|
|
263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
150,422
|
|
|
|
85,251
|
|
|
|
92,517
|
|
Capital lease obligations, less current portion
|
|
|
6,800
|
|
|
|
3,157
|
|
|
|
2,569
|
|
Deferred tax liabilities
|
|
|
24,731
|
|
|
|
14,702
|
|
|
|
9,489
|
|
Long-term debt, less current portion
|
|
|
253,362
|
|
|
|
255,374
|
|
|
|
275,747
|
|
Other long-term liabilities
|
|
|
16,945
|
|
|
|
25,013
|
|
|
|
25,906
|
|
Preferred stock subject to mandatory redemption, net
|
|
|
|
|
|
|
20,537
|
|
|
|
21,319
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
452,260
|
|
|
|
404,034
|
|
|
|
427,547
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (note 16)
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.01 par value. Authorized,
300,000,000 shares; issued and outstanding, 48,950,360,
48,968,161 and 49,021,653 shares at December 31, 2008
and 2009, and March 31, 2010 (unaudited), respectively
|
|
|
490
|
|
|
|
490
|
|
|
|
490
|
|
Additional paid-in capital
|
|
|
185,352
|
|
|
|
187,286
|
|
|
|
187,526
|
|
Accumulated deficit
|
|
|
(80,313
|
)
|
|
|
(110,898
|
)
|
|
|
(129,313
|
)
|
Accumulated other comprehensive income (loss)
|
|
|
84
|
|
|
|
(524
|
)
|
|
|
(232
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
105,613
|
|
|
|
76,354
|
|
|
|
58,471
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
$
|
557,873
|
|
|
|
480,388
|
|
|
|
486,018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
4
InfrastruX Group,
Inc.
Consolidated
statements of operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
December 31,
|
|
|
Three months
ended March 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
|
(in thousands of
dollars, except per share amounts and shares)
|
|
|
(unaudited)
|
|
|
Revenues
|
|
$
|
657,180
|
|
|
|
826,962
|
|
|
|
598,776
|
|
|
|
152,741
|
|
|
|
130,228
|
|
Cost of revenues
|
|
|
581,666
|
|
|
|
701,035
|
|
|
|
548,378
|
|
|
|
143,046
|
|
|
|
124,298
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
75,514
|
|
|
|
125,927
|
|
|
|
50,398
|
|
|
|
9,695
|
|
|
|
5,930
|
|
Selling, general and administrative expenses
|
|
|
51,122
|
|
|
|
85,882
|
|
|
|
65,859
|
|
|
|
15,912
|
|
|
|
16,433
|
|
Amortization of intangibles
|
|
|
7,818
|
|
|
|
7,445
|
|
|
|
7,219
|
|
|
|
1,803
|
|
|
|
1,805
|
|
Goodwill impairment
|
|
|
35,484
|
|
|
|
45,268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible asset impairment
|
|
|
|
|
|
|
7,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(18,910
|
)
|
|
|
(20,288
|
)
|
|
|
(22,680
|
)
|
|
|
(8,020
|
)
|
|
|
(12,308
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (income) expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
33,565
|
|
|
|
27,719
|
|
|
|
18,895
|
|
|
|
3,793
|
|
|
|
8,659
|
|
Interest income
|
|
|
(536
|
)
|
|
|
(251
|
)
|
|
|
(43
|
)
|
|
|
(23
|
)
|
|
|
(5
|
)
|
Other, net
|
|
|
2,865
|
|
|
|
2,840
|
|
|
|
60
|
|
|
|
685
|
|
|
|
595
|
|
Loss on modification of debt
|
|
|
1,373
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense
|
|
|
37,267
|
|
|
|
30,308
|
|
|
|
18,912
|
|
|
|
4,455
|
|
|
|
9,249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(56,177
|
)
|
|
|
(50,596
|
)
|
|
|
(41,592
|
)
|
|
|
(12,475
|
)
|
|
|
(21,557
|
)
|
Income tax benefit
|
|
|
14,376
|
|
|
|
14,028
|
|
|
|
11,007
|
|
|
|
6,100
|
|
|
|
3,142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(41,801
|
)
|
|
|
(36,568
|
)
|
|
|
(30,585
|
)
|
|
|
(6,375
|
)
|
|
|
(18,415
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per sharebasic and diluted
|
|
$
|
(0.85
|
)
|
|
|
(0.75
|
)
|
|
|
(0.62
|
)
|
|
|
(0.13
|
)
|
|
|
(0.37
|
)
|
Weighted average shares outstandingbasic and diluted
|
|
|
48,950,360
|
|
|
|
48,950,360
|
|
|
|
49,125,922
|
|
|
|
49,081,200
|
|
|
|
49,184,094
|
|
See accompanying notes to consolidated financial statements.
5
InfrastruX Group,
Inc.
Consolidated
statements of shareholders equity and comprehensive income
(loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
other
|
|
|
|
|
|
|
Common
stock
|
|
|
paid-in
|
|
|
Accumulated
|
|
|
comprehensive
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
capital
|
|
|
deficit
|
|
|
income
(loss)
|
|
|
Total
|
|
|
|
(in thousands of
dollars, except par values and shares)
|
|
|
|
|
|
|
|
|
Balances at January 1, 2007
|
|
|
48,950,360
|
|
|
$
|
490
|
|
|
|
131,044
|
|
|
|
(1,944
|
)
|
|
|
40
|
|
|
|
129,630
|
|
Contribution from InfrastruX Holdings, LLC in September 2007
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(41,801
|
)
|
|
|
|
|
|
|
(41,801
|
)
|
Foreign currency translation adjustment, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
142
|
|
|
|
142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(41,659
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2007
|
|
|
48,950,360
|
|
|
|
490
|
|
|
|
181,044
|
|
|
|
(43,745
|
)
|
|
|
182
|
|
|
|
137,971
|
|
Share-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
4,308
|
|
|
|
|
|
|
|
|
|
|
|
4,308
|
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(36,568
|
)
|
|
|
|
|
|
|
(36,568
|
)
|
Foreign currency translation adjustment, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(98
|
)
|
|
|
(98
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(36,666
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2008
|
|
|
48,950,360
|
|
|
|
490
|
|
|
|
185,352
|
|
|
|
(80,313
|
)
|
|
|
84
|
|
|
|
105,613
|
|
Share-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
1,966
|
|
|
|
|
|
|
|
|
|
|
|
1,966
|
|
Issuance under the equity incentive plan, net of tax detriment
of $32
|
|
|
17,801
|
|
|
|
|
|
|
|
(32
|
)
|
|
|
|
|
|
|
|
|
|
|
(32
|
)
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(30,585
|
)
|
|
|
|
|
|
|
(30,585
|
)
|
Interest rate swap agreement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(626
|
)
|
|
|
(626
|
)
|
Foreign currency translation adjustment, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(31,193
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2009
|
|
|
48,968,161
|
|
|
|
490
|
|
|
|
187,286
|
|
|
|
(110,898
|
)
|
|
|
(524
|
)
|
|
|
76,354
|
|
Share-based compensation expense*
|
|
|
|
|
|
|
|
|
|
|
363
|
|
|
|
|
|
|
|
|
|
|
|
363
|
|
Issuance under the equity incentive plan, net of tax detriment
of $123*
|
|
|
53,492
|
|
|
|
|
|
|
|
(123
|
)
|
|
|
|
|
|
|
|
|
|
|
(123
|
)
|
Comprehensive loss:*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18,415
|
)
|
|
|
|
|
|
|
(18,415
|
)
|
Interest rate swap agreement*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
478
|
|
|
|
478
|
|
Foreign currency translation adjustment, net of tax*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(186
|
)
|
|
|
(186
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18,123
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at March 31, 2010*
|
|
|
49,021,653
|
|
|
$
|
490
|
|
|
|
187,526
|
|
|
|
(129,313
|
)
|
|
|
(232
|
)
|
|
|
58,471
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
6
InfrastruX Group,
Inc.
Consolidated
statements of cash flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
December 31,
|
|
|
Three months
ended March 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
|
(in thousands of
dollars)
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(41,801
|
)
|
|
|
(36,568
|
)
|
|
|
(30,585
|
)
|
|
|
(6,375
|
)
|
|
|
(18,415
|
)
|
Adjustments to reconcile net loss to net cash provided (used in)
by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
42,469
|
|
|
|
41,582
|
|
|
|
39,918
|
|
|
|
10,155
|
|
|
|
9,859
|
|
Amortization of financing costs
|
|
|
1,656
|
|
|
|
1,746
|
|
|
|
2,050
|
|
|
|
401
|
|
|
|
693
|
|
Amortization of preferred stock issuance costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
|
|
Share-based compensation expense
|
|
|
|
|
|
|
4,308
|
|
|
|
1,966
|
|
|
|
394
|
|
|
|
363
|
|
Goodwill impairment
|
|
|
35,484
|
|
|
|
45,268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible asset impairment
|
|
|
|
|
|
|
7,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bad debt expense
|
|
|
12
|
|
|
|
1,475
|
|
|
|
(1,500
|
)
|
|
|
183
|
|
|
|
(47
|
)
|
Deferred rent
|
|
|
|
|
|
|
|
|
|
|
730
|
|
|
|
|
|
|
|
(50
|
)
|
Deferred income taxes
|
|
|
(11,923
|
)
|
|
|
(25,226
|
)
|
|
|
(1,705
|
)
|
|
|
(1,554
|
)
|
|
|
(4,077
|
)
|
Loss on modification of debt
|
|
|
1,373
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on derivative
|
|
|
3,555
|
|
|
|
1,842
|
|
|
|
1,446
|
|
|
|
1,323
|
|
|
|
1,334
|
|
(Gain) loss on sale of equipment
|
|
|
257
|
|
|
|
(8
|
)
|
|
|
(575
|
)
|
|
|
(50
|
)
|
|
|
(225
|
)
|
Preferred stock subject to mandatory redemption interest not
currently payable
|
|
|
|
|
|
|
|
|
|
|
650
|
|
|
|
|
|
|
|
774
|
|
Term loan interest not currently payable
|
|
|
335
|
|
|
|
1,293
|
|
|
|
1,258
|
|
|
|
314
|
|
|
|
299
|
|
Changes in assets and liabilities, net of effects of
acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
|
3,156
|
|
|
|
(30,748
|
)
|
|
|
78,059
|
|
|
|
33,516
|
|
|
|
(21,576
|
)
|
Inventories
|
|
|
(2,394
|
)
|
|
|
(6,771
|
)
|
|
|
602
|
|
|
|
(1,101
|
)
|
|
|
493
|
|
Prepaid expenses and other current assets, net
|
|
|
(11,463
|
)
|
|
|
(3,818
|
)
|
|
|
(124
|
)
|
|
|
(5,068
|
)
|
|
|
(4,838
|
)
|
Other long-term assets
|
|
|
(910
|
)
|
|
|
2,065
|
|
|
|
(5,820
|
)
|
|
|
13
|
|
|
|
|
|
Accounts payable
|
|
|
1,305
|
|
|
|
(572
|
)
|
|
|
(9,204
|
)
|
|
|
(1,825
|
)
|
|
|
2,089
|
|
Income taxes receivable
|
|
|
|
|
|
|
|
|
|
|
(11,461
|
)
|
|
|
(4,881
|
)
|
|
|
1,669
|
|
Other current liabilities
|
|
|
18,787
|
|
|
|
51,731
|
|
|
|
(53,529
|
)
|
|
|
(11,183
|
)
|
|
|
5,621
|
|
Other liabilities
|
|
|
(208
|
)
|
|
|
99
|
|
|
|
5,996
|
|
|
|
13
|
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
39,690
|
|
|
|
55,318
|
|
|
|
18,172
|
|
|
|
14,275
|
|
|
|
(25,989
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(24,502
|
)
|
|
|
(34,521
|
)
|
|
|
(27,978
|
)
|
|
|
(10,525
|
)
|
|
|
(8,021
|
)
|
Acquisition of businesses
|
|
|
(2,676
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment for patents and trademarks
|
|
|
(274
|
)
|
|
|
(140
|
)
|
|
|
(285
|
)
|
|
|
(52
|
)
|
|
|
(49
|
)
|
Proceeds from sale of equipment
|
|
|
1,496
|
|
|
|
1,729
|
|
|
|
1,708
|
|
|
|
50
|
|
|
|
275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(25,956
|
)
|
|
|
(32,932
|
)
|
|
|
(26,555
|
)
|
|
|
(10,527
|
)
|
|
|
(7,795
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from revolving line of credit
|
|
|
25,000
|
|
|
|
43,000
|
|
|
|
39,000
|
|
|
|
3,000
|
|
|
|
21,000
|
|
Payments of debt modification/issuance costs
|
|
|
(1,125
|
)
|
|
|
(228
|
)
|
|
|
(2,970
|
)
|
|
|
|
|
|
|
|
|
Payments on term loan
|
|
|
(51,905
|
)
|
|
|
(6,824
|
)
|
|
|
(13,274
|
)
|
|
|
(638
|
)
|
|
|
(611
|
)
|
Payments on revolving line of credit
|
|
|
(21,000
|
)
|
|
|
(42,000
|
)
|
|
|
(27,000
|
)
|
|
|
(5,000
|
)
|
|
|
|
|
Payments on long-term debtequipment financing
|
|
|
(2,483
|
)
|
|
|
(2,594
|
)
|
|
|
(1,707
|
)
|
|
|
(414
|
)
|
|
|
(425
|
)
|
Payments on capital lease obligations
|
|
|
(7,528
|
)
|
|
|
(8,179
|
)
|
|
|
(6,409
|
)
|
|
|
(1,592
|
)
|
|
|
(1,131
|
)
|
Payment on deferred purchase price obligation
|
|
|
(4,666
|
)
|
|
|
(2,333
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from the issuance of preferred stock subject to
mandatory redemption, net
|
|
|
|
|
|
|
|
|
|
|
19,887
|
|
|
|
|
|
|
|
|
|
Contribution from InfrastruX Holdings, LLC
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(13,707
|
)
|
|
|
(19,158
|
)
|
|
|
7,527
|
|
|
|
(4,644
|
)
|
|
|
18,833
|
|
Effect on cash flow of foreign currency transactions
|
|
|
142
|
|
|
|
(98
|
)
|
|
|
18
|
|
|
|
6
|
|
|
|
(186
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
169
|
|
|
|
3,130
|
|
|
|
(838
|
)
|
|
|
(890
|
)
|
|
|
(15,137
|
)
|
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
|
17,281
|
|
|
|
17,450
|
|
|
|
20,580
|
|
|
|
20,580
|
|
|
|
19,742
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of year
|
|
$
|
17,450
|
|
|
|
20,580
|
|
|
|
19,742
|
|
|
|
19,690
|
|
|
|
4,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of noncash investing and financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets acquired with capital lease obligations
|
|
$
|
4,267
|
|
|
|
3,479
|
|
|
|
243
|
|
|
|
|
|
|
|
|
|
Assets acquired with vendor debt
|
|
|
1,734
|
|
|
|
490
|
|
|
|
3,463
|
|
|
|
611
|
|
|
|
|
|
Accrued capital expenditures
|
|
|
1,305
|
|
|
|
463
|
|
|
|
57
|
|
|
|
817
|
|
|
|
194
|
|
Issuance under the equity incentive plan, net of tax detriment
|
|
|
|
|
|
|
|
|
|
|
87
|
|
|
|
|
|
|
|
263
|
|
Income taxes paid (refund)
|
|
|
542
|
|
|
|
5,793
|
|
|
|
2,150
|
|
|
|
716
|
|
|
|
(466
|
)
|
Cash paid for interest
|
|
|
29,790
|
|
|
|
24,278
|
|
|
|
22,370
|
|
|
|
4,693
|
|
|
|
5,110
|
|
See accompanying notes to consolidated financial statements.
7
InfrastruX Group,
Inc.
Notes to
consolidated financial statements
December 31,
2007, 2008 and 2009
and the three months ended March 31, 2009 and 2010
(unaudited)
(In thousands of dollars, except par values, per share amounts
and shares)
(1) The
company and summary of significant accounting policies
InfrastruX Group, Inc. (the Company or InfrastruX) is an
approximately 99.9% owned subsidiary of InfrastruX Holdings,
LLC, which is an approximately 95.3% owned subsidiary of TPF
InfrastruX Holdings, LLC, a wholly owned subsidiary of Tenaska
Power Fund, L.P. (TPF). InfrastruX was incorporated in the state
of Washington on April 28, 2006. All significant operations
for the Company commenced on May 8, 2006 upon the
acquisition of the Company by TPF.
InfrastruX provides design, construction, maintenance,
engineering and other infrastructure services to the utility
industry. The Company also has subsidiaries that perform work in
the United Kingdom, Germany and India.
(a) Consolidation
and basis of presentation
The consolidated financial statements include the accounts of
the Company and its subsidiaries. All intercompany accounts and
transactions have been eliminated in consolidation.
(b) Unaudited
interim financial information
The accompanying consolidated balance sheet as of March 31,
2010, the consolidated statements of operations and cash flows
for the three months ended March 31, 2009 and 2010 and the
consolidated statement of shareholders equity and
comprehensive loss for the three months ended March 31,
2010 are unaudited. The unaudited interim condensed financial
statements have been prepared on the same basis as the annual
consolidated financial statements and, in the opinion of
management, reflect all adjustments, which include only normal
recurring adjustments, necessary to present fairly the
Companys financial position and results of operations and
cash flows for the three months ended March 31, 2009 and
2010. The financial data and other information disclosed in
these notes to the consolidated financial statements related to
the three-month periods are unaudited. The results of the three
months ended March 31, 2010 are not necessarily indicative
of the results to be expected for the year ending
December 31, 2010 or for any other interim period for any
other future years.
(c) Immaterial
adjustment
The Company has included an adjustment to correct the
supplemental disclosure of cash paid for interest in its
previously issued statement of cash flows for the year ended
December 31, 2009. The Company had previously disclosed
$15,500 as cash paid in interest; the correct amount is $22,370.
(d) Revenue
and cost recognition
For the majority of its revenues, the Company recognizes
revenues as the services have been rendered or performed.
Revenues generated from short-term projects (often with
durations of less than one month) are performed under Master
Service Agreements (MSA), which typically are billed on a unit
price basis and, less commonly, on a time and materials basis.
The Company recognizes revenues for unit-based services on an
output basis as units are completed. Revenues for the services
performed on a time and materials basis are recognized as labor
hours are incurred and services are performed. Storm restoration
work is generally billed on a time and materials basis at
contract rates for customers with which the Company has MSAs and
at negotiated rates for off-system (non-MSA) customers.
8
InfrastruX Group,
Inc.
Revenues for certain larger and longer duration projects, which
tend to be performed on a fixed price basis, are recognized
based on percentage-of-completion accounting, using the
cost-to-cost method. Under this method, revenue is recognized
based on the ratio of estimated costs incurred to total
estimated costs to complete the project. These costs include,
but are not limited to, all direct material, labor, and
subcontract costs and indirect costs related to contract
performance such as indirect labor, supplies, tools, repairs and
depreciation. The Company records changes in its percent
complete computations in the period in which the revisions are
determined. Periodically, the Company performs work outside the
specific requirements of a contract at the request of a
customer. Generally, the revenue associated with such work is
not recognized until a change order reflecting the scope and
price for such work is executed. Occasionally we recognize costs
of contract performance in the period in which they are incurred
and contract revenue up to the amount of the costs incurred in
the absence of an executed change order if we determine it is
probable that the revenue is realizable and collectible.
Provisions for the total estimated losses on uncompleted
projects are recorded in the period in which such losses are
determined to be probable and can be reasonably estimated. If
actual results significantly differ from estimates used for
revenue recognition, the Companys financial condition and
results of operations could be materially impacted.
The Company also generates some revenues from providing certain
services that do not result in the construction of a tangible
asset and are accounted for as service transactions. These
revenues are recognized as the services are performed and
amounts are earned. The Company considers amounts to be earned
once evidence of an arrangement has been obtained, services are
delivered, fees are fixed or determinable and collectibility is
reasonably assured.
Unbilled revenues represent amounts earned and recognized in the
period for which billings are issued in a subsequent period and
are included in unbilled receivables. Unearned revenues
represent amounts billed in excess of costs and estimated
earnings and are included in other liabilities.
(e) Accounts
receivable and allowance for doubtful accounts
The Company records accounts receivable for all amounts billed
and not collected. Also included in accounts receivable are
unbilled revenues discussed in note 1(d). The balances
billed but not paid by customers pursuant to retainage
provisions in construction contracts are due upon completion of
the contracts and acceptance by the customer. The retention
balances are generally due within one year of the initial
billing.
The Company provides an allowance for doubtful accounts when
collection of an account receivable is considered doubtful, and
receivables are written off against the allowance when deemed
uncollectible. The Company reviews the adequacy of the reserves
on a regular basis. Inherent in the assessment of the allowance
for doubtful accounts are certain judgments and estimates
including, among others, the customers willingness or
ability to pay, the customers access to capital, general
economic conditions and the ongoing relationship with the
customer.
(f) Concentration
of risk
Financial instruments that potentially subject the Company to
concentrations of credit risk include accounts receivable. The
Company maintains accounts receivable balances, in the normal
course of business, from companies primarily in the utility
industry or supporting the energy industry. The
9
InfrastruX Group,
Inc.
percentage of accounts receivables from customers representing
more than 5% of consolidated accounts receivable consisted of
the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
March 31
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Customer A
|
|
|
20.3
|
%
|
|
|
22.2
|
%
|
|
|
36.5
|
%
|
Customer B
|
|
|
9.0
|
|
|
|
7.4
|
|
|
|
|
|
Customer C
|
|
|
|
|
|
|
10.0
|
|
|
|
6.1
|
|
Customer D
|
|
|
|
|
|
|
5.4
|
|
|
|
7.9
|
|
Customer E
|
|
|
|
|
|
|
6.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29.3
|
%
|
|
|
51.4
|
%
|
|
|
50.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The percentage of revenues earned from customers representing
more than 5% of consolidated revenues consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
|
|
Year ended
December 31
|
|
|
March 31
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Customer A
|
|
|
15.9
|
%
|
|
|
16.7
|
%
|
|
|
30.9
|
%
|
|
|
29.6
|
%
|
|
|
37.4
|
%
|
Customer B
|
|
|
7.4
|
|
|
|
11.8
|
|
|
|
8.1
|
|
|
|
12.2
|
|
|
|
|
|
Customer C
|
|
|
|
|
|
|
|
|
|
|
7.3
|
|
|
|
|
|
|
|
|
|
Customer D
|
|
|
|
|
|
|
|
|
|
|
5.5
|
|
|
|
|
|
|
|
7.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23.3
|
%
|
|
|
28.5
|
%
|
|
|
51.8
|
%
|
|
|
41.8
|
%
|
|
|
44.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company also maintains a cash collateral and receivable
balance for its comprehensive insurance coverage with a major
insurer to support its obligations under its deductibles. As of
December 31, 2008 and 2009, and March 31, 2010
(unaudited), cash collateral and receivables due from the
insurance company of $28,461, $32,137 and $35,207, respectively,
are recorded in prepaid expense and other current assets, net
and other assets on the consolidated balance sheets.
As of March 31, 2010 (unaudited), approximately 17.5% of
the Companys hourly employees were represented by various
unions and collective bargaining agreements. The Company does
not directly negotiate with unions, but instead is represented
by assorted contractor associations. Current collective
bargaining agreements have varying terms depending on the union
and have been renewed as necessary.
(g) Cash
equivalents
The Company considers all highly liquid investments purchased
with maturities of three months or less at the date of purchase
to be cash equivalents. As of December 31, 2008 and 2009,
and March 31, 2010 (unaudited), the Company had cash
equivalents of $11,863, $16,144 and $1,402, respectively. Cash
equivalents represent money market funds and certificates of
deposit. At times, bank balances may exceed federally insured
limits.
(h) Inventories
Inventories are stated at the lower of cost, determined on the
moving average basis, or replacement cost. Inventories primarily
consist of pipe, small tools and other construction-related
materials that are charged to a contract upon delivery and
installation at the construction site. Other inventory items
10
InfrastruX Group,
Inc.
include maintenance parts, spare component parts, and parts
related to the Companys cable restoration line of service.
The Company evaluates inventory regularly and writes down
obsolete inventory based on a detailed review of inventory
quantities, aging, and expected usage.
(i) Derivative
instruments and hedging activities
The Companys two interest rate swaps agreements that
matured in 2009 were accounted for as either assets or
liabilities on the consolidated balance sheets at their
respective fair values. Changes in fair value were recorded to
interest expense in the consolidated statements of operations.
In April 2009, the Company entered into an interest rate swap,
which was designated as an effective cash flow hedge at
inception. The gain or loss on the interest rate swap was
reported as a component of other comprehensive income (loss) on
the consolidated statements of shareholders equity and
comprehensive income (loss) and reclassified into earnings in
the same period or periods during which the hedged transaction
affects earnings. This cash flow hedge was evaluated for hedge
effectiveness on a quarterly basis. In connection with the
amendment to the InfrastruX Credit Facility in October 2009
(note 9), the Company dedesignated this interest rate swap.
All subsequent changes in fair value of the interest rate swap
were recorded to interest expense in the consolidated statements
of operations. As of December 31, 2009, amounts recorded in
other comprehensive income on the consolidated statements of
shareholders equity and comprehensive income (loss) are
the result of cash flow hedge treatment of this interest rate
swap from April 2009 to September 2009.
(j) Property
and equipment
Property and equipment are stated at cost. Depreciation of
property and equipment is provided using the straight-line
method for financial reporting purposes at rates based on the
following estimated useful lives:
|
|
|
Machinery and equipment:
|
|
|
Light trucks, autos, light drills, equipment
|
|
5.0-7.0 years
|
Medium/heavy drills, trenching equipment, field electronics
|
|
8.0-10.0 years
|
Heavy trucks, aerial, and earth moving equipment, misc.
|
|
10.0-20.0 years
|
Office furniture and equipment
|
|
3.0-7.0 years
|
Buildings
|
|
50.0 years
|
Leasehold improvements
|
|
Lesser of lease term or useful life
|
Equipment under capital lease
|
|
Lesser of lease term or useful life
|
Equipment under capital leases is stated at the lower of the
present value of minimum lease payments or fair value and is
depreciated on a straight-line basis over the estimated useful
life of the asset or the lease term. Expenditures for
refurbishment and improvements that extend the useful life of an
asset are capitalized. Expenditures for normal repairs and
maintenance are charged to expense as incurred. The cost and
accumulated depreciation of assets sold or otherwise disposed of
are removed from the accounts, and the related gains and losses
are included in other, net in the consolidated statements of
operations.
(k) Goodwill
Goodwill represents the excess of cost over net tangible and
identifiable intangible assets of the business acquired.
Goodwill is reviewed and tested for impairment annually during
the fourth quarter of each year. For goodwill, the Company
performs a two-step impairment test. In the first step, the
Company compares the fair value of a reporting unit to its
carrying amount, including goodwill. If the carrying amount of a
reporting unit exceeds its fair value, the second step is then
performed. The second step
11
InfrastruX Group,
Inc.
compares the carrying amount of the reporting units
goodwill to the implied fair value of the goodwill. If the
implied fair value of the goodwill is less than the carrying
amount, an impairment loss would be recorded in operating income
or loss in the consolidated statements of operations. The
Companys goodwill is included in three reporting units for
goodwill valuation and impairment testing purposes. The three
reporting units for which goodwill impairment is assessed are as
follows: West/Midwest/National region, Eastern region and
Texas/Southwest/South Central region.
(l) Long-lived
assets and amortizable intangible assets
The Company reviews its long-lived assets, including intangible
assets with finite useful lives, for impairment if events or
changes in circumstances indicate that the carrying value of
such asset or asset groups may not be recoverable. The Company
assesses these assets for impairment based on estimated future
cash flows from these assets. If an evaluation is required, the
estimated future undiscounted cash flows associated with the
asset or asset groups are compared to its carrying amount to
determine if impairment in value has occurred. In 2008, the
Company recorded an impairment charge of $7,620 related to
certain customer relationship intangible assets.
In addition, the Company consolidated the asset groups that roll
up into the Eastern reporting unit into a single asset group for
the April 2009 evaluation. This change in estimate was
incorporated into the April 2009 valuation in response to
operational changes the Company made in its efforts to
streamline operations and recognize available synergies within
the region.
The Company estimates the useful life and fair value of
purchased intangible assets at the time of acquisition and
periodically reviews these estimates to determine whether these
lives are appropriate. The Companys intangible assets,
which primarily consist of customer relationships, trade names,
and developed technology, are amortized over their estimated
useful lives using the straight-line method.
In addition, the Companys cable remediation operating unit
has patents and trademarks that have been issued and patents and
trademarks that are pending. The Company capitalizes these
costs, as they are considered probable of being issued, until
such time as the patent or trademark is issued, and then
amortizes those costs over its estimated useful life. The
Company capitalized $274, $140, $285 and $49 of patents and
trademarks pending as of December 31, 2007, 2008 and 2009,
and March 31, 2010 (unaudited), respectively.
(m) Other
assets
Other current assets and other assets consist primarily of
prepaid insurance costs and deferred financing costs.
(n) Income
taxes
The Company records income taxes using the asset and liability
method, which requires the recognition of deferred tax assets
and liabilities for the expected future tax consequences
attributed to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases and tax credits and loss carryforwards.
Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in
which the temporary differences and carryforwards are expected
to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income
in the period that includes the enactment date. Valuation
allowances are provided when necessary to reduce deferred tax
assets to the amount expected to be realized.
12
InfrastruX Group,
Inc.
(o) Insurance
The Company is insured for workers compensation,
employers liability and general liability claims, subject
to a deductible of $750 per occurrence. The Company is also
insured for auto liability claims, subject to a deductible of
$500 per occurrence. Additionally, the Companys nonunion
employee-related healthcare benefit plan is subject to a
deductible of $250 per claimant per year.
Losses with respect to claims, including deductibles, are
accrued based upon the Companys estimates of the ultimate
liability for claims incurred (including an estimate of claims
incurred but not reported), using actuarially calculated claims
liability data based on the Companys claims experience.
For these claims, to the extent the Company has insurance
coverage above the deductible amounts, the Company has recorded
a receivable reflected in other current assets and other assets
on the consolidated balance sheets. These insurance liabilities
are difficult to assess and estimate due to unknown factors,
including the severity of an injury, the determination of the
Companys liability in proportion to other parties and the
number of incidents not reported. The accruals are estimated
based upon known facts and historical trends.
(p) Retirement
plans
The Company has defined contribution plans qualifying under
Section 401(k) of the Internal Revenue Code benefiting eligible
full-time nonunionized employees who elect to participate.
Subject to the applicable plan and its respective design, the
plans allow eligible employees to make pretax compensation
contributions and each plan provides matching Company
contributions for which employees vest in accordance with the
applicable plans vesting schedule. The Companys
contribution expense consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
|
|
Year ended
December 31
|
|
|
March 31
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Contribution expense
|
|
$
|
2,948
|
|
|
|
3,316
|
|
|
|
3,451
|
|
|
|
982
|
|
|
|
691
|
|
In connection with its collective bargaining agreements with
various unions, InfrastruX participates with other companies in
the unions multi-employer pension and other postretirement
benefit plans. These plans cover all of InfrastruXs
employees who are members of such unions. The Employee
Retirement Income Act of 1974, as amended by the Multi-Employer
Pension Plan Amendments Act of 1980, imposes certain liabilities
upon employers who are contributors to a multi-employer plan in
the event of the employers withdrawal from, or upon
termination of, such plan. InfrastruX has no intention to
withdraw from these plans. The plans do not maintain information
on the net assets and actuarial present value of the plans
unfunded vested benefits allocable to InfrastruX, and the
amounts, if any, for which InfrastruX may be contingently
liable, are not ascertainable at this time. Contributions to all
union multi-employer pension and other postretirement plans by
InfrastruX consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
|
|
Year ended
December 31
|
|
|
March 31
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Other contribution expense
|
|
$
|
11,360
|
|
|
|
16,229
|
|
|
|
10,552
|
|
|
|
2,349
|
|
|
|
2,011
|
|
13
InfrastruX Group,
Inc.
(q) Segment
reporting
The Companys chief operating decision makers are the Chief
Executive Officer and other senior executive officers of the
Company. The chief operating decision makers manage the business
primarily on a geographic basis, as the Companys
subsidiaries are generally grouped within discrete regions of
the country and all offer similar maintenance and construction
services to the electric power and natural gas transmission and
distribution infrastructure markets. Based on information
available to the chief operating decision makers and the manner
in which they review operating results and allocate resources,
the Company has determined that it has three operating segments
based on these geographic areas. Due to the similarities in
economic characteristics, service offerings, types of customers,
methods of distribution and regulatory environments in which
they operate in these geographic areas, management believes that
the financial information is properly aggregated into one
reportable segment.
(r) Foreign
currency translation
The Companys foreign subsidiaries assets and
liabilities are denominated in the local currency (British
pounds, euros and rupees), and these currencies represent the
functional currency of the respective subsidiaries. As such, the
Companys foreign subsidiaries assets and liabilities
are translated at current exchange rates at the end of each
reporting period, while income and expense are translated at
average rates for the period. Translation gains and losses are
reported as a component of accumulated other comprehensive
income (loss).
(s) Warranty
costs
The Company does not have a general warranty program for the
majority of its work. For certain contracts, the Company
warrants labor for new installations and construction and
servicing of existing infrastructure. The anticipated costs are
not considered significant, and no reserve has been provided.
One of the subsidiary companies maintains a warranty program,
which specifically covers its cable remediation services. A
warranty reserve of $1,897, $2,040 and $2,078 for cable
remediation services is recorded in other long-term liabilities
on the consolidated balance sheets as of December 31, 2008
and 2009, and March 31, 2010 (unaudited), respectively.
Warranty activity for this service consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
|
|
Year ended
December 31
|
|
|
March 31
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Balance at the beginning of the period
|
|
$
|
900
|
|
|
|
1,350
|
|
|
|
1,897
|
|
|
|
1,897
|
|
|
|
2,040
|
|
Warranty expense
|
|
|
1,771
|
|
|
|
1,662
|
|
|
|
1,401
|
|
|
|
277
|
|
|
|
255
|
|
Warranty claims
|
|
|
(1,321
|
)
|
|
|
(1,115
|
)
|
|
|
(1,258
|
)
|
|
|
(265
|
)
|
|
|
(217
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the end of the period
|
|
$
|
1,350
|
|
|
|
1,897
|
|
|
|
2,040
|
|
|
|
1,909
|
|
|
|
2,078
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(t) Deferred
financing costs
The current portion of deferred financing costs is included in
prepaid expenses and other current assets, net, and the
long-term portion of the deferred financing costs is included in
other assets on the
14
InfrastruX Group,
Inc.
consolidated balance sheets. Deferred financing costs are
amortized in other, net, in the consolidated statements of
operations and consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
|
|
Year ended
December 31
|
|
|
March 31
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Amortization of financing costs
|
|
$
|
1,656
|
|
|
|
1,746
|
|
|
|
2,050
|
|
|
|
401
|
|
|
|
693
|
|
(u) Fair
value of financial instruments
Fair value
measurements
The Company follows a fair value hierarchy, which requires an
entity to maximize the use of observable inputs when measuring
fair value. The fair value hierarchy describes three levels of
inputs:
Level 1: Quoted market prices in active markets
for identical assets or liabilities.
Level 2: Observable market based inputs or
unobservable inputs that are corroborated by market data or
quoted prices for similar instruments in active markets.
Level 3: Significant inputs to the valuation
model are unobservable.
Financial
liabilities measured at fair value on a recurring
basis
The following table presents information about the
Companys financial liabilities that are measured at fair
value on a recurring basis and indicates the level in the fair
value hierarchy of the valuation techniques utilized to
determine such fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 2
|
|
|
|
December 31
|
|
|
March 31
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term interest rate swap
|
|
$
|
6,450
|
|
|
|
|
|
|
|
|
|
Long-term interest rate swap
|
|
|
|
|
|
|
2,072
|
|
|
|
2,928
|
|
The valuation techniques used to measure the fair value of the
Companys Level 2 liabilities include quoted prices
for similar liabilities or other inputs that are observable or
can be corroborated by observable market data for substantially
the full term of the liabilities. All data is observable in the
market or can be derived principally from, or corroborated by,
observable market data for which the Company typically receives
external valuation information.
Other financial
instruments
The Companys other financial instruments include cash and
cash equivalents, receivables, accounts payable and accrued
expenses, and certain short-term and long-term borrowings. The
Company believes that the fair value of these financial
instruments approximates their carrying amounts based on current
15
InfrastruX Group,
Inc.
market indicators, such as prevailing interest rates and market
pricing models, with the exception of its term loan. The
estimated fair value of the term loan, based on the quoted offer
price is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
March 31
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Term loan:
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value
|
|
$
|
251,127
|
|
|
|
239,110
|
|
|
|
238,799
|
|
Fair value
|
|
|
200,902
|
|
|
|
219,982
|
|
|
|
238,799
|
|
(v) Share-based
compensation expense
The Companys share-based compensation expense is
recognized over the period the recipient is required to perform
the services in exchange for the award (the vesting period). The
Company values awards with graded vesting as single awards and
recognizes the related compensation expense using a
straight-line attribution method. Excess tax benefits are
reported as financing cash inflows, rather than as a reduction
of taxes paid, which is included within operating cash flows in
the consolidated statements of cash flows.
(w) Common
shares
During 2008, the Board of Directors approved a 45,748:1 stock
split, which was retroactively applied to all shares in the
consolidated financial statements and the notes to the
consolidated financial statements. The stock split was effected
to increase the number of shares available for grant under the
InfrastruX 2007 Equity Incentive Plan.
(x) Net
loss per share
Basic net loss per share is computed by dividing net loss by the
weighted average number of common stock shares outstanding
during the period. Diluted net loss per share is computed by
dividing net loss by the weighted average number of common stock
shares outstanding during the period and potentially dilutive
common stock equivalents, except in cases where the effect of
the common stock equivalent would be antidilutive. As the
Company is in a loss position, basic and diluted net loss per
share are the same. The amounts and shares used to compute basic
and diluted net loss per shares are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
|
|
|
|
|
|
|
ended
|
|
|
|
Year ended
December 31
|
|
|
March 31
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Net loss
|
|
$
|
(41,801
|
)
|
|
|
(36,568
|
)
|
|
|
(30,585
|
)
|
|
|
(6,375
|
)
|
|
|
(18,415
|
)
|
Net loss per share, basic and diluted
|
|
|
(0.85
|
)
|
|
|
(0.75
|
)
|
|
|
(0.62
|
)
|
|
|
(0.13
|
)
|
|
|
(0.37
|
)
|
Weighted average common shares outstanding basic and diluted
|
|
|
48,950,360
|
|
|
|
48,950,360
|
|
|
|
49,125,922
|
|
|
|
49,081,200
|
|
|
|
49,184,094
|
|
Potential common stock equivalents that have been issued by the
Company are stock appreciation rights, restricted stock units,
and Senior Redeemable Convertible Cumulative Preferred Stock
plus accrued dividends. Using the treasury stock method,
potential common stock shares for outstanding stock appreciation
rights and restricted stock units to purchase approximately
4,370,660, 4,381,740,
16
InfrastruX Group,
Inc.
4,320,660 and 4,100,600 shares of common stock were
excluded from the calculation of diluted net loss per share for
the years ended December 31, 2008 and 2009, and the three
months ended March 31, 2009 (unaudited) and 2010
(unaudited), respectively, because they were antidilutive. The
Company had no outstanding stock appreciation rights or
restricted stock units prior to January 2008. Using the
if-converted method for the Senior Redeemable Convertible
Cumulative Preferred Stock issued in 2009, the potential common
stock shares for the outstanding Senior Redeemable Convertible
Cumulative Preferred Stock and accrued dividends to purchase
approximately 4,048,582 and 4,180,162 shares of common
stock were excluded from the calculation of diluted net loss per
share for the year ended December 31, 2009 and the three
months ended March 31, 2010 (unaudited), respectively,
because they were antidilutive.
(y) Accounting
pronouncements issued not yet adopted
New accounting standards on Revenue Arrangements with
Multiple Deliverables were issued in September 2009 and
updated the current guidance pertaining to multiple-elements
revenue arrangements. This new guidance will be effective for
our annual reporting period beginning January 1, 2011. We
are currently evaluating the impact of this new standard on our
financial position, results of operations, cash flows, and
disclosures.
(2) Use
of estimates in the preparation of financial
statements
The preparation of the consolidated financial statements in
conformity with accounting principles generally accepted in the
United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the date of the consolidated financial statements and
reported amounts of revenues and expenses during the reporting
period. Material estimates that are particularly susceptible to
significant change include percentage complete and estimated
earnings or losses on construction projects, the allocation of
the purchase price of acquired companies, the allowance for
doubtful accounts, the fair value of goodwill, asset
impairments, the fair value of derivatives, the net realizable
value of inventories, the useful lives of long-lived assets, the
valuation of deferred tax assets, warranty reserves related to
restoration service and insurance reserves. Actual results could
differ from those estimates.
During 2008, the Company entered into a new agreement with a
significant customer to provide certain transmission and
distribution maintenance and construction services over a
10.5-year term that became effective on August 1, 2008 and
superseded all previous contracts with this customer. The
arrangement provides for certain volume-based thresholds, which
correspond with volume-based and other customer incentives.
Additionally, the contract requires the Company to maintain
certain service levels which, if not achieved, could result in
payments to the customer by the Company. The Companys
revenue recognition includes estimates for the volume-based
customer incentives based on current and projected performance
relative to the thresholds, and includes estimated payments that
could result to the customer if service levels are not achieved
based on actual and projected performance relative to the
service levels. Future changes in these estimates, or divergence
in actual incentives or payments from these estimates, could
have a material impact on revenue recognized in future periods.
(3) Acquisitions
InfrastruX
On May 8, 2006, through InfrastruX Holdings, LLC, TPF
acquired 100.0% of the outstanding shares of the former company.
The total consideration, net of cash acquired, paid for by
InfrastruX Holdings, LLC was $269,976. Included in the
consideration was $7 purchase price adjustment to goodwill
during 2007.
17
InfrastruX Group,
Inc.
As part of the acquisition of InfrastruX, the Company entered
into employment agreements with certain members of senior
management that call for future issuances of share-based
instruments, the terms of which were finalized in 2008
(note 13).
Hawkeye
On November 3, 2006, the Company acquired 100.0% of
Hawkeye, LLC and its affiliates, Bemis, Halpin and Premier
(Hawkeye Acquisition). The results of Hawkeyes operations
have been included in the consolidated financial statements
since the date of acquisition. Hawkeye is an electrical and gas
contractor servicing the utility industry primarily in the
Eastern United States. Hawkeye, through its affiliates, also
provides telecommunications/fiber-optic installation, utility
locating and mapping services, and an array of general
contracting services, including civil/structural, electrical,
and mechanical projects.
The total consideration, net of cash acquired of $4,249, paid
for Hawkeye and its affiliates was $139,296. The total cash
consideration paid by the Company, net of cash acquired was
$90,774 in 2006 and $99 in 2007. The Company paid an additional
cash amount of $7,000 in equal installments every six months
through May 2008, with interest accruing at the three-month
LIBOR fixed as of November 3, 2006 (5.4%). TPF, through
InfrastruX Holdings, LLC, paid for a portion of the acquisition
on the Companys behalf in the form of $41,423 in cash and
equity interest in InfrastruX Holdings, LLC, plus the Company
issued 3,202,360 common shares to InfrastruX Holdings, LLC for
consideration of the transfer of interest in Hawkeye and one of
its affiliates. In connection with the Hawkeye Acquisition, the
Company issued notes payable in the amount of $309,000
(note 9).
The purchase agreement contained a provision allowing the
sellers to realize additional consideration in 2008 based on
certain earnings performance measures of the acquired Hawkeye
companies in 2007 and 2008. The provision required the seller to
maintain employment through December 31, 2008 in order to
be eligible to receive the full amount of any potential payout.
No amounts were earned under this agreement in 2007 and amounts
earned in 2008 of $17,500 were expensed in 2008 and are included
in selling, general and administrative expenses in the
consolidated statements of operations. The outstanding accrued
payable as of December 31, 2008 for the earned payout was
$17,500, which was paid in full in May 2009.
The allocation of the purchase price was subject to refinement
as of December 31, 2006 as the Company was waiting for
certain information related to the determination of fair values.
Specifically, additional equipment appraisal information and
revisions to inventory valuation, taxes, cash, contracts
acquired, union related accruals, certain lease values and
customer relationship values were not finalized until 2007.
18
InfrastruX Group,
Inc.
The following table summarizes the estimated fair value of the
assets acquired, excluding cash acquired of $4,249, and
liabilities assumed at the date of the acquisition of Hawkeye
and upon final allocation of the purchase price:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preliminary
|
|
|
|
|
|
|
|
|
|
purchase price
|
|
|
|
|
|
|
|
|
|
allocation
|
|
|
Purchase
|
|
|
|
|
|
|
as of
|
|
|
price
|
|
|
Final
|
|
|
|
December 31,
|
|
|
adjustments
|
|
|
purchase price
|
|
|
|
2006
|
|
|
during
2007
|
|
|
allocation
|
|
|
|
|
Current assets
|
|
$
|
5,457
|
|
|
|
|
|
|
|
5,457
|
|
Accounts receivable, net
|
|
|
45,316
|
|
|
|
(8,866
|
)
|
|
|
36,450
|
|
Property and equipment
|
|
|
14,187
|
|
|
|
12,076
|
|
|
|
26,263
|
|
Other assets
|
|
|
145
|
|
|
|
2,586
|
|
|
|
2,731
|
|
Intangible assets
|
|
|
57,251
|
|
|
|
|
|
|
|
57,251
|
|
Goodwill
|
|
|
46,915
|
|
|
|
9,004
|
|
|
|
55,919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets acquired
|
|
|
169,271
|
|
|
|
14,800
|
|
|
|
184,071
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
27,071
|
|
|
|
(1,497
|
)
|
|
|
25,574
|
|
Capital leases
|
|
|
|
|
|
|
14,020
|
|
|
|
14,020
|
|
Deferred tax liability
|
|
|
|
|
|
|
2,178
|
|
|
|
2,178
|
|
Long-term liabilities
|
|
|
3,003
|
|
|
|
|
|
|
|
3,003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities assumed
|
|
|
30,074
|
|
|
|
14,701
|
|
|
|
44,775
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets acquired
|
|
$
|
139,197
|
|
|
|
99
|
|
|
|
139,296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The acquired intangible assets, all of which are being
amortized, consist of customer relationships and have a weighted
average useful life of approximately 13.0 years as of the
acquisition date of November 3, 2006. At the date of
acquisition, tax deductible goodwill acquired was $48,281.
CableWISE
On January 29, 2007, the Company acquired the operating
assets and other rights related to the CableWISE operations. The
results of CableWISEs operations have been included in the
consolidated financial statements since that date. CableWISE
utilizes an online, passive technique that utilizes radio
frequency pulses emitted by a cable system while it is in
service, to assess the remaining life of the cable, splices,
terminations and other electrical equipment connected to the
circuit. The aggregate purchase price of $100 was paid in cash.
The purchase agreement contains a provision requiring future
payments, which are contingent upon the amount of testing
performed using the CableWISE technology, not to exceed $2,000.
The Company charged amounts due under this provision as royalty
expense beginning in 2007.
The estimated fair value of assets acquired was $50, which
consisted of vehicles and testing equipment; no liabilities were
assumed. The $50 of goodwill is fully deductible for tax
purposes.
RTS Construction
Company
On August 10, 2007, the Company acquired the operating
assets and other rights related to RTSs operations. The
results of RTS have been included in the consolidated financial
statements since that date. The aggregate purchase price of
$2,470 was paid in cash.
19
InfrastruX Group,
Inc.
The following table summarizes the estimated fair value of
assets acquired and liabilities assumed at the date of
acquisition:
|
|
|
|
|
|
|
Final
|
|
|
|
purchase price
|
|
|
|
allocation
|
|
|
|
|
Property and equipment
|
|
$
|
2,386
|
|
Prepaid taxes
|
|
|
16
|
|
Intangible assets
|
|
|
95
|
|
|
|
|
|
|
Total assets acquired
|
|
|
2,497
|
|
Accrued liabilities
|
|
|
27
|
|
|
|
|
|
|
Net assets acquired
|
|
$
|
2,470
|
|
|
|
|
|
|
(4) Goodwill
and intangible assets
Goodwill
The Company completed its annual evaluations for impairment of
goodwill as of April 30, 2007 and 2008 and performed an
additional evaluation for impairment of goodwill as of
December 31, 2008 due to a triggering event that indicated
additional impairment may have occurred in one of its regions.
To estimate the fair value of each reporting unit for the 2007
and 2008 goodwill impairment evaluations, the Company utilized
the income valuation approach based on Level 3
inputs in the fair value hierarchy. Under the income
approach, the Company estimated the fair value of the
reporting units using the invested capital method, which
discounts projected cash flows using a calculated weighted
average cost of capital. The Company considered the following
assumptions, among others, in performing this analysis:
forecasted revenues, expense ratios and profit margins, working
capital cash flow, attrition/retention rates, tax rates, and
long-term discount rates. All of these assumptions require
significant judgments by the Company.
The 2007 impairment analysis indicated impairment in two of the
Companys reporting units of $35,484, which is recognized
as operating expense presented as goodwill impairment in the
consolidated statements of operations for the year ended
December 31, 2007. The primary factor contributing to the
impairment charge was the reduction in current and forecasted
future performance levels for the Eastern reporting unit, and
for the Midwest/National reporting unit as of April 30,
2007, the testing date. The 2008 impairment analyses indicated
goodwill impairment of $26,484 in the Companys Eastern
reporting unit. The primary factor contributing to the
impairment charge was the reduction in current and forecasted
performance levels for that reporting unit. In the fourth
quarter of 2008, there was an additional change in current and
forecasted future performance levels for the Companys
Eastern reporting unit and the departure of a key executive and
former owner of one of the Companys smaller subsidiaries
in the Eastern reporting unit that indicated additional
impairment may have occurred. As a result, the Company performed
an additional impairment test, which considered the elimination
of that subsidiary and current and forecasted future performance
levels under then-existing economic conditions and resulted in
an additional $18,784 in goodwill impairment in the Eastern
reporting unit. Accordingly, the Company recognized total
goodwill impairment of $45,268 in 2008.
For the year ended December 31, 2009, the Company performed
an evaluation of impairment of goodwill at April 30, 2009.
For the April 30, 2009 evaluation, the Company used a
combination of income and market
approaches to determine fair value. These valuation approaches
were weighted 10% and 90% for the income and
market approaches, respectively. Under the
market approach, the Company estimated the fair
value of each reporting unit based on earnings multiples of
comparable
20
InfrastruX Group,
Inc.
public companies as well as indicators from interested acquirers
based on Level 2 inputs in the fair value hierarchy. Under
the income approach, the Company used the same
valuation method as used in its 2008 impairment test. No
impairment charges were required as a result of this evaluation.
In May 2009, the Company changed its annual test date to
November 30 to better align impairment testing with year-end
procedures. Thus, another evaluation of impairment of goodwill
was performed as of November 30, 2009. At the
November 30, 2009 evaluation date, the Company used a
combination of income and market
approaches that were weighted 20% and 80%, respectively.
A summary of changes in the Companys goodwill consisted of
the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
March 31
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Goodwill:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
$
|
129,117
|
|
|
|
102,694
|
|
|
|
57,426
|
|
|
|
57,426
|
|
Additions
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
|
|
|
9,011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment
|
|
|
(35,484
|
)
|
|
|
(45,268
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
102,694
|
|
|
|
57,426
|
|
|
|
57,426
|
|
|
|
57,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible
assets
Intangible assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
March 31
|
|
|
|
Useful
life
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
|
13.0 yrs
|
|
|
$
|
90,453
|
|
|
|
90,453
|
|
|
|
90,453
|
|
Trade name valuation
|
|
|
20.0 yrs
|
|
|
|
4,909
|
|
|
|
4,909
|
|
|
|
4,909
|
|
Developed technology
|
|
|
15.0 yrs
|
|
|
|
20,004
|
|
|
|
20,004
|
|
|
|
20,004
|
|
Patents issued
|
|
|
12.0 yrs
|
|
|
|
57
|
|
|
|
128
|
|
|
|
128
|
|
Patents pending
|
|
|
|
|
|
|
360
|
|
|
|
554
|
|
|
|
601
|
|
Trademarks issued and pending
|
|
|
|
|
|
|
43
|
|
|
|
63
|
|
|
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115,826
|
|
|
|
116,111
|
|
|
|
116,160
|
|
Less accumulated amortization
|
|
|
|
|
|
|
(20,566
|
)
|
|
|
(29,118
|
)
|
|
|
(31,256
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
95,260
|
|
|
|
86,993
|
|
|
|
84,904
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a result of the departure of a key executive and former owner
of one of the Companys smaller subsidiaries, deterioration
of business, and the sale of the tangible assets of that
subsidiary, an impairment charge to customer relationship
intangibles in the amount of $7,620 was recognized in 2008. The
impairment charge was calculated using an income approach based
on Level 3 inputs in the fair value hierarchy. The
impairment charge is reflected as intangible asset impairment in
the consolidated statements of operations and consolidated
statements of cash flows.
21
InfrastruX Group,
Inc.
Intangible assets are amortized straight-line over the periods
noted above. Amortization expense, including developed
technology intangible amortization recorded in cost of revenues,
for amortizing intangible assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
|
|
Year ended
December 31
|
|
|
March 31
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Cost of revenuesdevelopment technology
|
|
$
|
1,333
|
|
|
|
1,333
|
|
|
|
1,333
|
|
|
|
333
|
|
|
|
333
|
|
Selling, general and administrative expenses
|
|
|
7,818
|
|
|
|
7,445
|
|
|
|
7,219
|
|
|
|
1,803
|
|
|
|
1,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amortization expense
|
|
$
|
9,151
|
|
|
|
8,778
|
|
|
|
8,552
|
|
|
|
2,136
|
|
|
|
2,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The remaining weighted average amortization period for all
intangible assets as of March 31, 2010 is 9.9 years.
Estimated amortization charges for the next five years,
20102014, from intangible assets as of December 31,
2009 are $8,554 per year.
(5) Accounts
receivable, net
Accounts receivable, net, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
March 31
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Trade receivablesbilled
|
|
$
|
131,904
|
|
|
|
68,099
|
|
|
|
80,069
|
|
Unbilled receivables
|
|
|
33,363
|
|
|
|
25,876
|
|
|
|
35,783
|
|
Retainage
|
|
|
10,287
|
|
|
|
2,799
|
|
|
|
2,433
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
175,554
|
|
|
|
96,774
|
|
|
|
118,285
|
|
Less allowance for doubtful accounts
|
|
|
(3,406
|
)
|
|
|
(1,185
|
)
|
|
|
(1,073
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
172,148
|
|
|
|
95,589
|
|
|
|
117,212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company generally expects all accounts receivable to be
collected within one year. The unbilled receivables include work
that has been performed and is billable, but not yet billed, as
well as work that has been performed but is not yet allowed to
be billed due to contractual terms. Retainage represents amounts
held by customers for work performed pending completion of a
project or the passage of an
agreed-upon
date pursuant to contractual provisions.
The Companys allowance for doubtful accounts activity
consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
|
|
Year ended
December 31
|
|
|
March 31
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Balance at the beginning of the period
|
|
$
|
1,978
|
|
|
|
2,341
|
|
|
|
3,406
|
|
|
|
3,406
|
|
|
|
1,185
|
|
Provision for bad debts
|
|
|
12
|
|
|
|
1,475
|
|
|
|
722
|
|
|
|
183
|
|
|
|
148
|
|
Deductions for write-offs, net of recoveries
|
|
|
351
|
|
|
|
(410
|
)
|
|
|
(2,943
|
)
|
|
|
(468
|
)
|
|
|
(260
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the end of the period
|
|
$
|
2,341
|
|
|
|
3,406
|
|
|
|
1,185
|
|
|
|
3,121
|
|
|
|
1,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
InfrastruX Group,
Inc.
The provision for bad debts is included in selling, general and
administrative expenses in the consolidated statements of
operations.
(6) Derivative
instruments
In June 2006 and December 2006, the Company entered into
interest rate swap agreements for notional amounts of $102,500
and $62,500, respectively, to partially offset interest rate
exposure with respect to its term loans. The commencement date
of the June 2006 swap transaction was June 26, 2006, and it
expired on June 26, 2009. The commencement date of the
December 2006 swap transaction was December 31, 2006, with
$62,500 maturing June 25, 2009, at which time the notional
amount increased to $165,000 with a final maturity date of
December 31, 2009.
The fair values of the June 2006 and December 2006 swap
agreements are included in other current liabilities on the
consolidated balance sheets in the amount of $6,450 and $0 as of
December 31, 2008 and 2009, respectively.
In April 2009, the Company entered into an interest rate swap
for a notional amount of $187,027 declining quarterly with a
fixed rate of 1.889% in exchange for floating rates until
December 31, 2011. This interest rate swaps term
commences December 31, 2009. The fair value of this
interest rate swap is included in other long-term liabilities in
the amount of $2,072 and $2,928 as of December 31, 2009 and
March 31, 2010 (unaudited), respectively.
(7) Property
and equipment, net
Property and equipment, net, all of which secures debt of the
Company, at cost, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
March 31
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Machinery and equipment
|
|
$
|
200,564
|
|
|
|
222,421
|
|
|
|
229,221
|
|
Office furniture and equipment
|
|
|
10,294
|
|
|
|
12,743
|
|
|
|
12,765
|
|
Land
|
|
|
1,488
|
|
|
|
1,488
|
|
|
|
1,488
|
|
Building
|
|
|
1,425
|
|
|
|
2,078
|
|
|
|
2,102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
213,771
|
|
|
|
238,730
|
|
|
|
245,576
|
|
Less accumulated depreciation
|
|
|
(80,424
|
)
|
|
|
(106,603
|
)
|
|
|
(113,063
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
133,347
|
|
|
|
132,127
|
|
|
|
132,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in machinery and equipment is $27,438, $16,567 and
$15,393, and included in office furniture and equipment is $867,
$79 and $79, at cost as of December 31, 2008 and 2009, and
March 31, 2010 (unaudited), respectively, for the cost of
property that has been capitalized under capital leases.
Depreciation expense, including amortization for assets under
capital leases, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
|
|
Year ended
December 31
|
|
|
March 31
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Depreciation expense
|
|
$
|
33,318
|
|
|
|
32,804
|
|
|
|
31,366
|
|
|
|
8,019
|
|
|
|
7,721
|
|
23
InfrastruX Group,
Inc.
(8) Other
current liabilities
Other current liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
March 31
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Accrued payroll, bonuses and related costs
|
|
$
|
37,332
|
|
|
|
20,296
|
|
|
|
23,170
|
|
Accrued insurance
|
|
|
23,718
|
|
|
|
21,578
|
|
|
|
21,040
|
|
Accrued earnout
|
|
|
17,500
|
|
|
|
|
|
|
|
|
|
Accrued job costs
|
|
|
14,064
|
|
|
|
6,060
|
|
|
|
7,699
|
|
Billings in excess of earnings
|
|
|
9,621
|
|
|
|
5,153
|
|
|
|
5,535
|
|
Derivative interest rate swap
|
|
|
6,450
|
|
|
|
|
|
|
|
|
|
Accrued management fee
|
|
|
4,592
|
|
|
|
6,773
|
|
|
|
7,337
|
|
Other
|
|
|
5,677
|
|
|
|
6,604
|
|
|
|
7,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
118,954
|
|
|
|
66,464
|
|
|
|
72,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9) Long-term
debt
Long-term debt consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
March 31
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
InfrastruX credit facility:
|
|
|
|
|
|
|
|
|
|
|
|
|
$309,000 term loan
|
|
$
|
251,127
|
|
|
|
239,111
|
|
|
|
238,799
|
|
$100,000 revolving line of credit
|
|
|
5,000
|
|
|
|
17,000
|
|
|
|
38,000
|
|
Other obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Various equipment financing
|
|
|
1,813
|
|
|
|
3,569
|
|
|
|
3,144
|
|
Total debt
|
|
|
257,940
|
|
|
|
259,680
|
|
|
|
279,943
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less current portion
|
|
|
(4,578
|
)
|
|
|
(4,306
|
)
|
|
|
(4,196
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
$
|
253,362
|
|
|
|
255,374
|
|
|
|
275,747
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
InfrastruX Credit
Facility (originated 2006, amended in 2007 and 2009)
In November 2006, the Company and InfrastruX Holdings, LLC
entered into a credit agreement with a group of banks
(InfrastruX Credit Facility), providing a six-year term loan B
of up to $309,000, a $21,000 delayed draw loan subject to
unutilized fees, and a five-year revolving line of credit of
$100,000 with an interest rate of an Alternate Borrowing Base
(ABR) or Eurodollar rate at the Companys option. ABR is a
fluctuating interest rate equal to the higher of (a) the
prime rate or (b) the sum of the Federal Funds Effective
Rate most recently determined plus 0.5% per annum. Eurodollar
rate means the applicable London interbank-offered rate (LIBOR)
plus a margin of 3.3%. The term loan was established to
refinance the debt used to fund the purchase of InfrastruX by
TPF and to fund InfrastruXs purchase of Hawkeye and
its affiliates. Per the InfrastruX Credit Facility, InfrastruX
Holdings, LLC is a guarantor of this credit agreement and has
pledged its equity interest as collateral. The InfrastruX Credit
Facility was amended in September 2007 and October 2009 when the
Company secured changes to certain covenants.
The InfrastruX Credit Facility, as amended in October 2009,
contains restrictive covenants, including financial covenants to
maintain an interest coverage ratio of not less than 2.00 to
1.00 based on
24
InfrastruX Group,
Inc.
information from the trailing four quarters beginning the
quarter ending September 30, 2010 and increasing up to 3.90
to 1.00 by June 30, 2011 and a maximum total leverage ratio
of 5.50 to 1.00 based on information from the trailing four
quarters beginning the quarter ending September 30, 2010
and decreasing to 2.60 to 1.00 by December 31, 2011. In
connection with an amendment to the InfrastruX Credit facility
in October 2009, which became effective as of September 30,
2009, a minimum consolidated earnings before interest, taxes,
depreciation and amortization (EBITDA) covenant, and a minimum
liquidity covenant was added to the financial covenants,
requiring the Company to maintain a minimum level of
consolidated EBITDA ranging from $31,000 to $48,000 for the
trailing four fiscal quarters beginning with the quarter ended
September 30, 2009 until the quarter ending June 30,
2010 and at least $20.0 million in available liquidity as
of any month ending on or prior to June 30, 2010. The
Company is required to be in compliance with the consolidated
EBITDA covenant on a quarterly basis and the minimum liquidity
covenant on a monthly basis. The Companys ability to
maintain compliance with these financial covenants depends on
the Companys operating performance, which could be
impacted by the current economic downturn and the impact of that
downturn upon the industries and customers the Company serves.
In addition, the InfrastruX Credit Facility includes other
customary restrictions including requirements to furnish audited
financial statements, changes in the business, other
indebtedness, liens, disposition of property, capital
expenditures, use of proceeds, restricted payments and
investments.
The term loan matures in November 2012 and requires monthly
interest payments at a rate per annum at either (i) the
base rate, generally the applicable prime lending rate, plus a
margin of 3.50% (subject to a base rate floor of 3.50% or LIBOR
plus 1.00%) or (ii) LIBOR plus a margin of 4.50% (subject
to a LIBOR floor of 2.50%). The October 2009 amendment requires
the Company to pay a supplemental cash amount of 0.50% per annum
on the term loan and 1.00% per annum on the revolving line of
credit plus an additional 0.50% per annum in the event of a
ratings downgrade or the total leverage ratio is less than 3.50
to 1.00. Additionally, with respect to the term loan, the
amendment in September 2007 and in October 2009 requires
InfrastruX to increase the outstanding principal balance by 0.5%
per annum of the principal amount of the term loan by
capitalizing this supplemental term loan deferred fee amount
(payment in kindPIK) at the time that the supplemental
term loan cash amount is paid. The interest rate was 4.7%, 8.0%
and 8.0% as of December 31, 2008 and 2009, and
March 31, 2010 (unaudited), respectively. The total amount
capitalized for the supplemental term loan deferred fee was
$1,628, $2,886 and $3,185 as of December 31, 2008 and 2009,
and March 31, 2010 (unaudited), respectively.
The term loan requires quarterly principal payments. Excess cash
flow payments, if required under the InfrastruX Credit Facility,
are due within 120 days of year end. The term loan is
secured by substantially all of the assets of the Company. The
revolving line of credit matures in November 2011 and requires
monthly interest payments at the same rate as the term loan with
any outstanding principal balance due upon maturity, and is also
secured by substantially all of the assets of the Company. The
revolving line of credit was established to provide working
capital flexibility and is available for loans and letters of
credit. The letters of credit outstanding at any time shall not
exceed $60,000. There was an outstanding balance of $5,000,
$17,000 and $38,000 on the revolving line of credit as of
December 31, 2008, and 2009, and March 31, 2010
(unaudited), respectively. Additionally, there were letters of
credit outstanding of $14,246, $13,771 and $13,754 as of
December 31, 2008 and 2009, and March 31, 2010
(unaudited), respectively. The total amount available for
borrowing under the revolving line of credit was $80,754,
$69,229 and $48,246 as of December 31, 2008, and 2009, and
March 31, 2010 (unaudited), respectively. The Company had
reclassified $753 and $310 from long-term debt to current
portion of long-term debt for the required excess cash flow
payment in 2008 and 2009, respectively. The revolving line of
credit is subject to commitment fees, which are paid on the
unutilized portion of this line.
25
InfrastruX Group,
Inc.
As part of the September 2007 amendment process, a $50,000
equity contribution was made to InfrastruX and those proceeds,
net of expenses, were immediately used to pay down the term loan
principal balance, which resulted in the write-off of $1,373 of
unamortized deferred financing costs and third-party fees,
included in loss on modification of debt in the consolidated
statements of operations.
On May 8, 2009, the Company executed a consent and waiver
agreement for the InfrastruX Credit Facility related to its
failure to provide audited financial statements issued within
120 days of year end. In exchange for the consent and
waiver agreement, the Company paid a fee of $1,164. A portion of
the fee in the amount of $236 that related to the term loan was
expensed as incurred.
As part of the October 2009 amendment process, the Company
issued, and InfrastruX Holdings, LLC acquired,
20,000 shares of 15% Senior Redeemable Convertible
Cumulative Preferred Stock for an aggregate purchase price of
$20,000, from which the Company made a $10,000 mandatory
prepayment on the term loan principal balance. The
15% Senior Redeemable Convertible Cumulative Preferred
Stock is pledged as collateral under the InfrastruX Credit
Facility. In addition, the October 2009 amendment requires the
Company to repay quarterly outstanding amounts under the
revolving line of credit with cash on hand in excess of $15,000
plus the sum of all payment obligations, if any, due and to be
paid within five business days of the quarter end until the
earlier of September 30, 2011 and the date the Company
meets leverage and interest coverage ratios in effect prior to
the October 2009 amendment. Beginning with the fiscal quarter
ending September 30, 2010, the amendment also requires the
Company to increase the principal amount of the term loan at a
rate of 1.00% per annum if consolidated EBITDA is less than a
specified amount for the previous four fiscal quarters. In
addition, the Company capitalized an arrangement and amendment
fee, as well as legal fees and expenses incurred by
lenders counsel, in the aggregate amount of $2,782 related
to the October 2009 amendment.
In connection with the amendment to the InfrastruX Credit
Facility in October 2009, the Company determined that a
convertible note that was issued in September 2007 held by
InfrastruX Holdings, LLC with TPF had constituted a default
under the InfrastruX Credit Facility. Thus, the $50,000
convertible note, along with $17,840 accrued interest, was
converted into preferred equity interests in InfrastruX
Holdings, LLC, and the default was waived by the lenders.
The unamortized deferred financing costs related to the
InfrastruX Credit Facility for the September 2007 and October
2009 amendments and the May 2009 waiver fee were $6,055, $6,975
and $6,282 as of December 31, 2008 and 2009, and
March 31, 2010 (unaudited), respectively.
The principal amounts of long-term debt maturities for the next
five years at December 31, 2009 are as follows:
|
|
|
|
|
Year ending December 31:
|
|
|
|
|
2010
|
|
$
|
3,996
|
|
2011
|
|
|
20,702
|
|
2012
|
|
|
234,982
|
|
|
|
|
|
|
|
|
$
|
259,680
|
|
|
|
|
|
|
Various equipment
financing
The Companys subsidiaries have entered into various
long-term equipment financing agreements requiring monthly
payments at interest rates ranging from 0.0% to 8.0%, which
mature at various dates through May 2012. These loans are
collateralized by the equipment and some are guaranteed by
InfrastruX.
26
InfrastruX Group,
Inc.
(10) Preferred
stock subject to mandatory redemption
In October 2009, the Company authorized and issued
20,000 shares of 15% Senior Redeemable Convertible
Cumulative Preferred Stock (senior preferred stock) to
InfrastruX Holdings, LLC for a purchase price of $19,887, net of
issuance costs of $113. As of December 31, 2009 and
March 31, 2010 (unaudited), 20,000 shares of the
senior preferred stock are outstanding.
The senior preferred stock ranks senior to all other classes of
common stock and preferred stock, if and when authorized or
issued. However, the holders of the senior preferred stock are
not entitled to vote together with the holders of common stock
and are not considered equal in regards to rights and privileges.
The holders of the senior preferred stock are entitled to
receive cumulative dividends at a rate of 15% per year on the
issuance price of $1,000 (the liquidation preference) per share.
These dividends are compounded quarterly and become payable on a
quarterly basis. Such dividends accrue whether or not they have
been declared by the Company. To the extent that dividends are
not paid on a quarterly basis, accumulated dividends will be
added to the liquidation preference. As of December 31,
2009 and March 31, 2010 (unaudited), dividends accrued were
$650 and $1,424, respectively.
In the event of any liquidation, dissolution, or winding up of
the Company, the holders of the senior preferred stock shall be
entitled to receive, prior and in preference to any distribution
to the holders of the common stock, an amount equal to the
issuance price of $1,000 per share plus all accrued and unpaid
dividends. As of March 31, 2010 (unaudited), the total
senior preferred stock liquidation preference was $21,424. Upon
payment of the liquidation preference, the remaining assets of
the Company would be distributed to the holders of the common
stock and the holders of the senior preferred stock based on the
number of shares of the common stock held by each (assuming
conversion into stock of all outstanding senior preferred
stock). Neither the consolidation nor the merger of the Company
is deemed to be a liquidation, dissolution or winding up event.
Each share of the senior preferred stock is convertible into
common stock at any time at the option of the holder. The
conversion into common stock is calculated by dividing the
liquidation preference by the conversion price to determine the
number of shares of common stock to be issued. The conversion
price is based on either a
10-day
average trading price should the Companys common stock be
listed on a public exchange or the fair value as determined by
the Board of Directors if the Companys common stock is not
publicly listed. In either case, the conversion price is subject
to a mandatory floor of $0.50 per share. As of March 31,
2010 (unaudited), the maximum number of shares of common stock
that would be issued upon conversion of the senior preferred
stock using the $0.50 per share minimum floor price would be
42,848,750 shares. If the conversion were to occur at the
current fair value of the Companys common stock of $3.12
per share, a total of 6,866,787 shares of common stock
would be issued. As of March 31, 2010 (unaudited), the
Company had 300,000,000 shares of common stock authorized
for issuance and 49,021,653 shares of common stock
outstanding.
The senior preferred stock is subject to mandatory redemption on
the earlier of the first date certain conditions contained in
the InfrastruX Credit Facility have been satisfied or six months
after the date there are no obligations or commitments
outstanding under the InfrastruX Credit Facility. The InfrastruX
Credit Facility term loan matures in November 2012. The
redemption amount is equal to the liquidation preference amount.
Redemption of the senior preferred stock can only be completed
for cash.
There are no provisions related to the senior preferred stock
that allow for adjustment to the liquidation preference in
connection with a conversion or redemption event. The Company
has classified the senior preferred stock as a liability, and
has separately disclosed the senior preferred stock on the
consolidated financial statements as Preferred Stock
Subject to Mandatory Redemption net. All associated
27
InfrastruX Group,
Inc.
dividends, whether paid or accrued, are recorded as interest
expense in the consolidated statements of operations.
(11) Lease
commitments
The Company has operating lease agreements for premises and
equipment that expire on various dates, including building
leases from related-parties as discussed in note 15. The
terms of these agreements vary from lease to lease, including
some that are subject to escalation clauses. The Company
recognizes rent expense on a straight-line basis over the lease
period. Rent expense related to operating leases consisted of
the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
|
|
Year ended
December 31
|
|
|
March 31
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Rent expensecost of revenue
|
|
$
|
36,800
|
|
|
|
37,277
|
|
|
|
27,594
|
|
|
|
7,175
|
|
|
|
6,022
|
|
Rent expenseselling, general and administrative
|
|
|
2,329
|
|
|
|
2,677
|
|
|
|
3,688
|
|
|
|
1,220
|
|
|
|
736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total rent expense
|
|
$
|
39,129
|
|
|
|
39,954
|
|
|
|
31,282
|
|
|
|
8,395
|
|
|
|
6,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rent expense related to operating leases with terms greater than
one year in duration was $8.2 million, $11.6 million
and $15.1 million for the years ended December 31,
2007, 2008 and 2009, respectively, and $3.8 million and
$4.0 million for the three months ended March 31, 2009
(unaudited) and 2010 (unaudited), respectively. Rent expense
related to operating leases with terms less than one year in
duration was $30.9 million, $28.4 million and
$16.2 million for the years ended December 31, 2007,
2008 and 2009, respectively, and $4.6 million and
$2.8 million for the three months ended March 31, 2009
(unaudited) and 2010 (unaudited), respectively.
The Company also has capital lease agreements for equipment with
terms that vary from lease to lease.
Minimum future lease commitments under noncancelable operating
leases with terms greater than one year in duration, including
the effect of certain renewal options and escalation clauses,
and future minimum lease payments for capital leases in effect
at December 31, 2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
Operating
|
|
|
Capital
|
|
|
|
leases
|
|
|
leases
|
|
|
|
|
Year ending December 31:
|
|
|
|
|
|
|
|
|
2010
|
|
$
|
14,663
|
|
|
|
6,033
|
|
2011
|
|
|
10,965
|
|
|
|
769
|
|
2012
|
|
|
9,495
|
|
|
|
830
|
|
2013
|
|
|
6,844
|
|
|
|
38
|
|
2014
|
|
|
5,396
|
|
|
|
|
|
Thereafter
|
|
|
7,136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total future minimum lease payments
|
|
$
|
54,499
|
|
|
|
7,670
|
|
|
|
|
|
|
|
|
|
|
Less interest included in minimum capital lease payments
|
|
|
|
|
|
|
(673
|
)
|
|
|
|
|
|
|
|
|
|
Capital lease obligations
|
|
|
|
|
|
|
6,997
|
|
Less current portion
|
|
|
|
|
|
|
(3,840
|
)
|
|
|
|
|
|
|
|
|
|
Long-term portion of capital lease obligations
|
|
|
|
|
|
$
|
3,157
|
|
|
|
|
|
|
|
|
|
|
28
InfrastruX Group,
Inc.
InfrastruX has guaranteed the residual value on certain of its
equipment leases. InfrastruX guarantees the difference between
this residual value and the fair value of the underlying asset
at the date of termination of the leases. The maximum aggregate
guaranteed residual value was approximately $9,025, $5,192 and
$5,065 as of December 31, 2008 and 2009, and March 31,
2010 (unaudited), respectively. InfrastruX believes that no
significant payments will be made as a result of the difference
between the fair value of the leased equipment and the
guaranteed residual value. However, there can be no assurance
that future significant payments will not be required.
(12) Income
taxes
The income tax benefit consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
December 31
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
|
Current provision (benefit):
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
(3,230
|
)
|
|
|
8,495
|
|
|
|
(9,286
|
)
|
State
|
|
|
777
|
|
|
|
2,703
|
|
|
|
(353
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current provision (benefit)
|
|
|
(2,453
|
)
|
|
|
11,198
|
|
|
|
(9,639
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred provision (benefit):
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(12,639
|
)
|
|
|
(21,887
|
)
|
|
|
(1,438
|
)
|
State
|
|
|
716
|
|
|
|
(3,339
|
)
|
|
|
70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred benefit
|
|
|
(11,923
|
)
|
|
|
(25,226
|
)
|
|
|
(1,368
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax benefit
|
|
$
|
(14,376
|
)
|
|
|
(14,028
|
)
|
|
|
(11,007
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following is a reconciliation of the difference between the
amount of federal income tax benefit computed by multiplying
pretax book income by the statutory rate and the amount of
federal income tax benefit in the consolidated statements of
operations. The most significant reconciling items are state
income taxes and nondeductible expenses, comprised of
nondeductible goodwill impairment charges, initial public
offering expenses and the cost to provide meals to the
Companys work crews. Reconciliations between the statutory
federal income tax rate and the Companys effective income
tax rate were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
December 31
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
|
Income tax at statutory rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
State income, net of federal benefit
|
|
|
3.8
|
|
|
|
3.7
|
|
|
|
5.0
|
|
Non deductible goodwill impairment
|
|
|
(5.0
|
)
|
|
|
(6.1
|
)
|
|
|
|
|
Nondeductible permanent differences:
|
|
|
|
|
|
|
|
|
|
|
|
|
Meals and entertainment
|
|
|
(2.9
|
)
|
|
|
(3.1
|
)
|
|
|
(2.6
|
)
|
Initial public offering expenses
|
|
|
|
|
|
|
|
|
|
|
(4.5
|
)
|
State net operating loss valuation allowance
|
|
|
(6.5
|
)
|
|
|
(0.6
|
)
|
|
|
(4.6
|
)
|
Other
|
|
|
1.2
|
|
|
|
(1.2
|
)
|
|
|
(1.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25.6
|
%
|
|
|
27.7
|
%
|
|
|
26.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amount of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes,
29
InfrastruX Group,
Inc.
net operating losses (NOLs), and tax credit carryforwards. The
tax effects of significant items comprising the Companys
deferred tax assets and liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
2008
|
|
|
2009
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Goodwill
|
|
$
|
17,261
|
|
|
|
20,671
|
|
Net operating lossfederal, state and foreign
|
|
|
5,612
|
|
|
|
12,417
|
|
Bonuses
|
|
|
7,308
|
|
|
|
379
|
|
Capital lease obligations
|
|
|
3,965
|
|
|
|
2,381
|
|
Self insurance
|
|
|
440
|
|
|
|
2,447
|
|
Derivatives
|
|
|
2,501
|
|
|
|
1,125
|
|
Other
|
|
|
7,688
|
|
|
|
6,888
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
44,775
|
|
|
|
46,308
|
|
Less valuation allowance state and foreign net operating losses
|
|
|
(5,588
|
)
|
|
|
(7,544
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
|
39,187
|
|
|
|
38,764
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Property, plant, and equipment
|
|
|
(29,900
|
)
|
|
|
(30,496
|
)
|
Intangibles
|
|
|
(17,353
|
)
|
|
|
(15,688
|
)
|
Capital leases
|
|
|
(3,875
|
)
|
|
|
(2,321
|
)
|
Other
|
|
|
(3
|
)
|
|
|
(498
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(51,131
|
)
|
|
|
(49,003
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax liabilities
|
|
$
|
(11,944
|
)
|
|
|
(10,239
|
)
|
|
|
|
|
|
|
|
|
|
In assessing the valuation of deferred tax assets, the Company
considers whether it is more likely than not that some portion
or all of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent upon
the generation of future taxable income through operations and
reversal of taxable temporary differences during the periods in
which those temporary differences become deductible.
The Company analyzed its deferred tax assets and liabilities by
significant jurisdiction and considered a number of factors,
including both positive and negative evidence, in determining
the realizability of its deferred tax assets. The Companys
taxable temporary differences are expected to reverse in the
same periods as the Companys deductible temporary
differences. Based upon weighing the evidence available, the
Company believes that, other than the state and foreign net
operating loss (NOL) carryforwards discussed below, it is more
likely than not that the deferred tax assets will be realized.
The Company had federal, state and foreign NOL carryforwards as
of December 31, 2008 and 2009 of $5,612 and $12,394,
respectively, for federal, state and foreign income tax
purposes. Federal and state losses expire in 2010 through 2029.
Foreign losses do not expire. A valuation allowance has been
established due to the uncertainty of realizing these state and
foreign NOL carryforwards. A valuation allowance of
approximately $5,588 and $7,544 as of December 31, 2008 and
2009, respectively, was established for losses that may not be
realizable due to uncertainty in future business operations in
individual jurisdictions. Additionally, restrictions imposed as
a result of ownership changes may limit the amount of state NOL
carryforwards available to offset future taxable income in a
given state. For the years ended December 31, 2008 and
2009, the valuation allowance increased by $345 and $1,956,
respectively.
30
InfrastruX Group,
Inc.
Effective January 1, 2007, the Company applied the minimum
recognition threshold for a tax position, which it is required
to meet before being recognized in the consolidated financial
statements. The change in the liability for unrecognized tax
benefits during 2008 consisted of the following:
|
|
|
|
|
Unrecognized tax benefits at January 1, 2008
|
|
$
|
5,126
|
|
Gross decreasessettlement of uncertain tax positions
|
|
|
(5,126
|
)
|
|
|
|
|
|
Unrecognized tax benefits as of December 31, 2008
|
|
$
|
|
|
|
|
|
|
|
There are no significant unrecognized tax benefits as of
December 31, 2008 and 2009 that, if recognized, would
affect the effective tax rate. The Companys policy is to
classify interest accrued or penalties related to unrecognized
tax benefits as a component of income tax expense in the
consolidated statements of operations.
All federal and state tax years since inception remain open to
examination by major taxing jurisdictions to which the Company
is subject. The Company is indemnified by the former
companys parent for tax liabilities incurred and unsettled
prior to the acquisition date in 2006. As of December 31,
2009, the Company does not anticipate a significant increase or
decrease with respect to its unrecognized tax benefits within
the next 12 months.
(13) Shareholders
equity
Share-based
compensation expense
(a) Overview
On December 12, 2007, the InfrastruX Board of Directors and
Shareholder approved the adoption of the InfrastruX 2007 Equity
Incentive Plan, which reserved 5,400,000 shares for
issuance. In January 2008, the Company granted 4,179,500 stock
appreciation rights and restricted stock units to a number of
employees within the organization as approved by the Board of
Directors. In December 2008 and October 2009, the Company
granted 582,500 and 525,000, respectively, of stock appreciation
rights and restricted stock units to a number of employees
within the organization as approved by the Board of Directors.
Stock appreciation rights have a term of 10.0 years from
the date of grant. The restricted stock units have a term of six
months and one day following termination of service or a change
in control of the Company as defined in the Equity Incentive
Plan. All stock appreciation rights and restricted stock units
fully vest upon a change in control, or if the cumulative
proceeds to TPF upon an exit event, including an initial public
offering, equal or exceed two times its investment if such exit
event is prior to May 8, 2010.
For the stock appreciation rights and restricted stock units
issued in January 2008, 20.0% vested on the date of grant, 20.0%
vested in May 2008 and 20.0% vest annually thereafter over the
next three-year period commencing one year after May 2008. For
the stock appreciation rights of 42,500 issued in December 2008
and for the stock appreciation rights and restricted stock units
of 525,000 issued in October 2009, 20.0% vested on the date of
grant and 20.0% vest annually thereafter over the next four-year
period commencing one year after the grant date. The remaining
stock appreciation rights and restricted stock units of 540,000
issued in December 2008 follow the vesting schedule of the
grants issued in January 2008, except 40.0% vested upon issuance.
Once vested, each holder of a stock appreciation right is
entitled to the positive difference, or spread, if any, between
the base price and the fair market value of a share of common
stock of the Company on the date of exercise. Upon exercise, the
spread will be paid in whole shares of the Companys common
stock with a fair market value equal to the spread.
31
InfrastruX Group,
Inc.
The holders of restricted stock units are not entitled to
receive dividends nor share the same rights and privileges as
the holders of common stock. Once vested, each holder of a
restricted stock unit is entitled to receive the same number of
common shares of the Company.
The Company recorded expense related to its share-based
compensation plans of $4,308 and $1,966 for the years ended
December 31, 2008 and 2009, respectively, and $394 and $363
for the three months ended March 31, 2009 (unaudited) and
2010 (unaudited), respectively. As of December 31, 2008 and
2009, March 31, 2010 (unaudited), there were 898,500,
802,699 and 1,228,107, respectively, shares available for future
issuance under the Companys share-based compensation plan.
(b) Stock
appreciation rights
For purposes of determining compensation expense for stock
appreciation right awards, the fair value of each stock
appreciation right award is estimated on the date of grant using
the Black-Scholes option pricing model. The key assumptions used
in the Black-Scholes model for stock appreciation rights granted
were as follows:
|
|
|
|
|
Year ended
December 31
|
|
2008
|
|
2009
|
|
|
Dividend yield
|
|
|
|
|
Risk-free interest rate
|
|
1.7% - 3.1%
|
|
2.7%
|
Expected volatility
|
|
48.0% - 56.0%
|
|
59.0%
|
Expected term
|
|
5.8 - 6.0 years
|
|
5.8 - 6.0 years
|
The dividend yield assumption is based on the Companys
current intent not to declare or issue dividends. The risk-free
interest rate is based on the U.S. Treasury rate for the
expected term of the award at the time of grant. The
Companys expected volatility is based on the average
volatilities of peer companies. The Company is using the
simplified method to calculate expected terms of the
awards, which represents the period of time that stock
appreciation rights granted are expected to be outstanding.
32
InfrastruX Group,
Inc.
A summary of stock appreciation rights activity consisted of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
average
|
|
|
|
|
|
|
Stock
|
|
|
average
|
|
|
remaining
|
|
|
Aggregate
|
|
|
|
appreciation
|
|
|
base
|
|
|
life
|
|
|
intrinsic
|
|
|
|
rights
|
|
|
price
|
|
|
(years)
|
|
|
value
|
|
|
|
|
Stock appreciation rights outstanding, December 31, 2007
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
4,434,900
|
|
|
|
3.53
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(150,000
|
)
|
|
|
3.53
|
|
|
|
|
|
|
|
|
|
Expired unexercised
|
|
|
(100,000
|
)
|
|
|
3.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock appreciation rights outstanding, December 31, 2008
|
|
|
4,184,900
|
|
|
|
3.53
|
|
|
|
9.0
|
|
|
$
|
7,160
|
|
Granted
|
|
|
525,000
|
|
|
|
4.94
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(362,400
|
)
|
|
|
4.54
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(84,800
|
)
|
|
|
3.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock appreciation rights outstanding, December 31, 2009
|
|
|
4,262,700
|
|
|
|
3.62
|
|
|
|
8.2
|
|
|
|
5,637
|
|
Forfeited*
|
|
|
(197,600
|
)
|
|
|
3.62
|
|
|
|
|
|
|
|
|
|
Expired unexercised*
|
|
|
(500
|
)
|
|
|
3.53
|
|
|
|
|
|
|
|
|
|
Exercised*
|
|
|
(280,800
|
)
|
|
|
3.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock appreciation rights outstanding, March 31, 2010*
|
|
|
3,783,800
|
|
|
|
3.62
|
|
|
|
7.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock appreciation rights vested and exercisable
December 31, 2008
|
|
|
1,665,460
|
|
|
|
3.53
|
|
|
|
9.0
|
|
|
|
2,849
|
|
Stock appreciation rights vested and exercisable
December 31, 2009
|
|
|
2,596,940
|
|
|
|
3.59
|
|
|
|
8.2
|
|
|
|
3,514
|
|
Stock appreciation rights vested and exercisable March 31,
2010 (unaudited)
|
|
|
2,230,840
|
|
|
|
3.60
|
|
|
|
7.9
|
|
|
|
|
|
The weighted average grant-date fair value of stock appreciation
rights granted during 2008 and 2009 was $1.71 and $2.78,
respectively. As of December 31, 2008 and 2009, and
March 31, 2010 (unaudited), there was $3,217, $2,091 and
$1,531, respectively, of unrecognized compensation expense
related to outstanding stock appreciation rights, which is
expected to be recognized over a weighted average period of
2.4 years,1.6 years and 1.3 years, respectively.
33
InfrastruX Group,
Inc.
(c) Other
share-based compensation
A summary of nonvested restricted stock units activity
consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
Restricted
|
|
|
average
|
|
|
|
stock
|
|
|
grant-date
|
|
|
|
units
|
|
|
fair
value
|
|
|
|
|
Nonvested shares, December 31, 2007
|
|
|
|
|
|
$
|
|
|
Granted
|
|
|
327,100
|
|
|
|
3.52
|
|
Vested
|
|
|
(130,840
|
)
|
|
|
3.52
|
|
Forfeited
|
|
|
(10,500
|
)
|
|
|
3.53
|
|
|
|
|
|
|
|
|
|
|
Nonvested shares, December 31, 2008
|
|
|
185,760
|
|
|
|
3.52
|
|
Granted
|
|
|
25,000
|
|
|
|
4.94
|
|
Vested
|
|
|
(66,920
|
)
|
|
|
3.62
|
|
Forfeited
|
|
|
(24,800
|
)
|
|
|
4.67
|
|
|
|
|
|
|
|
|
|
|
Nonvested shares, December 31, 2009
|
|
|
119,040
|
|
|
|
3.51
|
|
|
|
|
|
|
|
|
|
|
Nonvested shares, March 31, 2010 (unaudited)
|
|
|
119,040
|
|
|
|
3.51
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2008 and 2009, and March 31, 2010
(unaudited), there was $484, $258 and $211, respectively, of
unrecognized compensation expense related to nonvested
restricted stock, which is expected to be recognized over a
weighted average period of 2.4 years, 1.4 years and
1.2 years, respectively. The total grant-date fair value of
shares vested during the years ended December 31, 2008 and
2009 was $460 and $242, respectively.
(14) Other,
net
Other, net in other (income) expense consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
|
|
Year ended
December 31
|
|
|
March 31
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Financing costs (note 9) and bank fees
|
|
$
|
2,569
|
|
|
|
2,839
|
|
|
|
3,972
|
|
|
|
659
|
|
|
|
862
|
|
Legal settlement (note 16)
|
|
|
|
|
|
|
|
|
|
|
(3,225
|
)
|
|
|
|
|
|
|
|
|
Other (income) expense
|
|
|
296
|
|
|
|
1
|
|
|
|
(687
|
)
|
|
|
26
|
|
|
|
(267
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other, net
|
|
$
|
2,865
|
|
|
|
2,840
|
|
|
|
60
|
|
|
|
685
|
|
|
|
595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15) Related-party
transactions
The Company leases a number of facilities from certain of its
subsidiaries former owners, many of whom continue to be
employed by the Company in senior management positions of
operating units.
34
InfrastruX Group,
Inc.
Related-party rent expense was recorded in selling, general and
administrative expenses in the consolidated statements of
operations and consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
|
|
|
|
|
|
|
ended
|
|
|
|
Year ended
December 31
|
|
|
March 31
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Related-party rent expense
|
|
$
|
1,811
|
|
|
|
2,117
|
|
|
|
2,190
|
|
|
|
536
|
|
|
|
585
|
|
The Company on occasion provides services to companies owned or
operated by certain of its subsidiaries former owner, whom
continues to be employed by the Company in a senior management
position of operating units. Related-party service income was
recorded in revenues in the consolidated statements of
operations and consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
|
|
|
|
|
|
|
ended
|
|
|
|
Year ended
December 31
|
|
|
March 31
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Related-party service income
|
|
$
|
726
|
|
|
|
766
|
|
|
|
1,172
|
|
|
|
709
|
|
|
|
30
|
|
From time to time, the Company employs the services of a related
parties subcontractor who performs services the Company
itself cannot perform. These services fees were expensed in cost
of revenues in the consolidated statements of operations and
consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
|
|
|
|
|
|
|
ended
|
|
|
|
Year ended
December 31
|
|
|
March 31
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Related-party service fee expense
|
|
$
|
1,202
|
|
|
|
1,162
|
|
|
|
278
|
|
|
|
45
|
|
|
|
17
|
|
The Company also accrued fees payable to Tenaska Capital
Management LLC pursuant to a Management Agreement for assistance
it provides in banking relationships, customer relationships,
and industry knowledge. These management fees, reflecting a
$2,000 annual fee plus interest, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
|
|
|
|
|
|
|
ended
|
|
|
|
Year ended
December 31
|
|
|
March 31
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Management fees
|
|
$
|
2,422
|
|
|
|
2,170
|
|
|
|
2,181
|
|
|
|
538
|
|
|
|
564
|
|
These management fees are recorded in selling, general and
administrative expenses, and the interest is recorded in
interest expense in the consolidated statements of operations.
Pursuant to the InfrastruX Credit Facility, as amended
(note 9), payment of these fees and accrued interest is
deferred. The total amount due, including accrued interest, to
Tenaska Capital Management
35
InfrastruX Group,
Inc.
LLC as of December 31, 2008 and 2009, and March 31,
2010 (unaudited) was $4,592, $6,773 and $7,337, respectively,
and is included in the other current liabilities
(note 8) on the consolidated balance sheets.
(16) Commitments
and contingencies
Litigation
The Company is from time to time a party to legal proceedings
and claims that arise in the ordinary course of business. With
respect to all such lawsuits, claims, and proceedings,
management records reserves when it is probable that a liability
has been incurred and the amount of the loss can be reasonably
estimated. Management does not believe that any of these
proceedings, individually or in the aggregate, would be expected
to have a material adverse effect on the Companys
consolidated financial results.
In March 2007, InfrastruXs subsidiary, B&H, and two
of its employees, were indicted by a federal grand jury for
alleged bid-rigging related to alleged incidents prior to the
acquisition of the Company on May 8, 2006. The former
company sellers had provided the Company indemnification up to
an aggregate amount of $15,000 to cover legal costs and certain
other costs and other adverse financial impacts the
Companys B&H subsidiary could incur as a result of
this matter. In April 2008, the former company sellers
renegotiated the terms of the indemnification agreement with the
Company. The Company agreed to receive a settlement payment from
the former company sellers in the amount of $6,812 in exchange
for terminating the indemnification agreement and for the
Company assuming full responsibility for these matters.
On June 19, 2008, the jury, sitting in the Federal District
Court for Colorado, returned unanimous verdicts of not guilty as
to B&H and both individuals on all counts. In November
2008, the Company received a letter from the Department of
Justice confirming this case was closed for these matters. Upon
the receipt of the letter, the Company determined these matters
closed. Upon the Companys assessments, the Company
recognized a total reduction of legal expenses in selling,
general and administrative expenses in the consolidated
statements of operations of $4,253, which was the settlement
payment of $6,812 less the specified legal costs of $2,559.
In September 2009, the Company received a cash settlement of
$3,225 from a dispute regarding a contract between one of the
Companys subsidiaries and a customer that had arisen in
2003. The Company recognized the $3,225 as a reduction in other,
net (note 14) in the consolidated statements of
operations.
Performance
bonds
In certain circumstances, the Company is required to provide
performance bonds in connection with its contractual
commitments. The Company has a surety bond program that is
supported by letters of credit, and the total surety amount of
outstanding performance bonds was $74,527, $60,857 and $58,791
at December 31, 2008 and 2009, and March 31, 2010
(unaudited), respectively. InfrastruX estimates that the actual
amount of work still to be completed on jobs covered by these
performance bonds was $26,130, $20,001 and $28,086 as of
December 31, 2008 and 2009, and March 31, 2010
(unaudited), respectively.
(17) Compliance
with debt covenants and amendment to InfrastruX credit
facility
The Company failed to satisfy certain financial covenants of the
InfrastruX Credit Facility as of September 30, 2009 and
March 31, 2010. Waivers of these breaches and amendments to
the InfrastruX Credit Facility were obtained from its lenders.
The last amendment, effective April 14, 2010, modified
36
InfrastruX Group,
Inc.
certain financial covenants regarding minimum EBITDA total
leverage and interest expense coverage levels through
June 30, 2011.
Management believes the Company will satisfy the revised
covenants during 2010; however, this cannot be guaranteed. If
the Company is unable to satisfy its covenant requirements or
negotiate a waiver or amendment, the lenders could demand
repayment of all amounts then outstanding under the InfrastruX
Credit Facility. If the Company were unable to repay its
obligations as demanded under the terms of the InfrastruX Credit
Facility, the lenders could foreclose on the collateral which
secures the borrowings under the InfrastruX Credit Facility.
The Companys ability to satisfy the covenants of the
InfrastruX Credit Facility will depend on its operating
performance, which is impacted by current and future economic
conditions that affect the industries and customers it serves.
(18) Acquisition
of the Company
On March 11, 2010, the Company entered into an agreement to
be acquired by Willbros Group, Inc. The anticipated close of the
acquisition is May 31, 2010 for approximately $480,000,
$360,000 in cash and approximately $120,000 in common stock of Willbros Group,
Inc. In addition, the InfrastruX shareholders will be eligible
for contingent earn-out payments of up to $125,000 in cash.
Those earn-out payments begin as adjusted EBITDA, as defined, for the InfrastruX
business exceeds $69,800 in 2010 and $80,000 in 2011.
(19) Subsequent events (unaudited)
The Company has evaluated subsequent events from the balance sheet date through May 17, 2010, the
date which the financial statements were available to be issued, and determined there are no other
items to disclose except that on May 17, 2010, all parties to the Agreement and Plan of Merger
dated March 11, 2010, entered into an Amendment to Agreement and Plan of Merger to extend the
closing date and dates respecting certain termination rights by approximately one month.
37
Unaudited pro forma
condensed financial statements
On March 11, 2010, Willbros entered into a definitive Agreement and Plan of Merger
(the Merger Agreement), with InfrastruX. Pursuant to the terms and conditions of the
Merger Agreement, Willbros will acquire InfrastruX.
Immediately prior to the effective time of the acquisition of InfrastruX (the Acquisition), each
share of InfrastruX preferred stock will be converted into
shares of InfrastruX common stock and at the effective time of
the Acquisition, each share of InfrastruX common stock will be
converted into the right to receive merger consideration
consisting of a combination of cash and Willbros common and
(possibly) preferred stock. The shareholders of InfrastruX will
initially receive in the aggregate 7,923,308 shares of
Willbros common stock, representing approximately
$119.7 million at time of announcement, and approximately
$360 million in cash (less the amount of InfrastruXs
net debt at closing and subject to a working capital
adjustment). Upon completion of the Acquisition,
InfrastruXs shareholders will own approximately 17% of the
total number of shares of Willbros common stock outstanding.
InfrastruX shareholders who do not qualify as Accredited
Investors will receive merger consideration consisting
solely of cash.
InfrastruX shareholders will also be eligible to receive earnout
payments in an aggregate of up to $125 million if certain
targets are met. The earnout amounts are paid linearly between
the below defined ranges:
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
|
|
|
|
|
(as defined in
|
|
|
|
|
Period
|
|
the Merger
Agreement)
|
|
|
Earnout
payment
|
|
|
|
|
2010
|
|
|
³69.8
up to 80.0 million
|
|
|
$
|
10-40 million
|
|
2011
|
|
|
³80.0
up to 95.0 million
|
|
|
$
|
10-60 million
|
|
Combined
|
|
|
³175.0
up to 190.0 million
|
|
|
$
|
0-25 million
|
|
If earned, the earnout payments will be made in cash and, under
certain circumstances, InfrastruX shareholders who qualify as
Accredited Investors will receive non-convertible, non-voting
preferred stock.
In connection with the Merger Agreement, the Company entered
into a commitment letter for new senior secured credit
facilities.
Consistent with the terms of the Merger Agreement and related
financing documents, the following events will occur, which we
collectively refer to as the Transactions:
|
|
Ø
|
the entering into by Willbros of the new senior secured credit
facilities, consisting of a $50 million senior secured term
loan and a $175 million senior secured revolving credit
facility;
|
|
Ø
|
the offering by Willbros of up to $250 million of senior
notes;
|
|
Ø
|
our acquisition of InfrastruX and the issuance of
7,923,308 shares of Willbros common stock, representing
approximately $119.7 million of stock consideration at time
of announcement, and approximately $360 million in cash, a
portion of which will be used to repay InfrastruXs
outstanding debt and pay InfrastruXs fees and expenses
related to the foregoing transactions; and
|
|
Ø
|
the payment of approximately $12.9 million of
Willbros estimated fees to be paid at closing related to the
foregoing transactions which is net of original issue discount estimated to be
$3.25 million.
|
The following unaudited pro forma condensed financial statements
are based on the historical financial statements of the Company
and InfrastruX after giving effect to the Transactions. The
effects of the
38
Unaudited pro
forma condensed financial statements
Acquisition have been prepared using the purchase method of
accounting and applying the assumptions and adjustments
described in the accompanying notes.
We derived the following unaudited pro forma condensed financial
statements by applying pro forma adjustments to our historical
consolidated financial statements and InfrastruX historical consolidated financial
statements.
The unaudited pro forma condensed statements of operations data
for the periods presented give effect to the Transactions as if
they had been consummated on January 1, 2009. The unaudited
pro forma condensed balance sheet data gives effect to the
Transactions as if they had occurred on March 31, 2010. We
describe the assumptions underlying the pro forma adjustments in
the accompanying notes, which should also be read in conjunction
with these unaudited pro forma condensed financial statements.
You should also read this information in conjunction with the:
|
|
Ø
|
separate unaudited historical financial statements of Willbros
as of and for the three-month period ended March 31, 2010,
included in
Willbros Form 10-Q for the quarterly period ended March 31, 2010;
|
|
Ø
|
separate historical financial statements of Willbros as of and
for the fiscal year ended December 31, 2009, included in
Willbros Form 10-K for the fiscal year ended December 31, 2009;
|
|
Ø
|
separate unaudited historical financial statements of InfrastruX
as of and for the three-month period ended March 31, 2010,
included in this Current Report on Form 8-K; and
|
|
Ø
|
separate historical financial statements of InfrastruX as of and
for the fiscal year ended December 31, 2009, included in
this Current Report on Form 8-K.
|
The pro forma adjustments related to the purchase price
allocation and financing of the Transactions are preliminary and
based on information obtained to date by management and are
subject to revision as additional information becomes available.
The actual adjustments described in the accompanying notes will
be made as of the closing date of the Transactions and may
differ from those reflected in these unaudited pro forma
condensed financial statements. Revisions to the preliminary
purchase price allocation and financing of the Transactions may
have a significant impact on the pro forma amounts of total
assets, total liabilities and stockholders equity,
operating expense and costs, depreciation and amortization and
interest expense.
The unaudited pro forma condensed financial statements do not include the
effect of future acquisition related costs, currently estimated
to be approximately $11,000. These costs primarily relate to
legal, accounting and advisory services provided in connection
with the Transactions.
The unaudited pro forma condensed financial statements do not
reflect nonrecurring charges that may be incurred in connection
with certain merger costs such as cash expenditures for
restructuring and integration activities, and retention bonuses,
which cannot be reasonably estimated at this time.
The unaudited pro forma condensed financial statements do not
purport to be indicative of actual results that would have been
achieved had the Transactions been consummated on the date or
for the periods indicated and do not purport to indicate
consolidated balance sheet data or results of operations as of
any future date of any future period.
39
Unaudited pro
forma condensed financial statements
Pro forma condensed
consolidated statements of
income
Unaudited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Willbros
|
|
|
InfrastruX
|
|
|
|
|
|
Pro forma
|
|
|
|
as reported
|
|
|
as reported
|
|
|
|
|
|
results
|
|
|
|
for the
quarter
|
|
|
for the
quarter
|
|
|
|
|
|
for the
quarter
|
|
|
|
ended
|
|
|
ended
|
|
|
|
|
|
ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
Pro forma
|
|
|
March 31,
|
|
|
|
2010
|
|
|
2010
|
|
|
adjustments
|
|
|
2010
|
|
|
|
|
|
(in
thousands, except share and per share data)
|
|
|
Contract revenue
|
|
$
|
136,996
|
|
|
$
|
130,228
|
|
|
$
|
|
|
|
$
|
267,224
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract
|
|
|
132,017
|
|
|
|
124,298
|
|
|
|
209
|
a
|
|
|
256,524
|
|
Amortization of intangibles
|
|
|
952
|
|
|
|
1,805
|
|
|
|
1,218
|
b
|
|
|
3,975
|
|
General and administrative
|
|
|
24,990
|
|
|
|
16,433
|
|
|
|
(500
|
)c
|
|
|
40,923
|
|
Other charges
|
|
|
(181
|
)
|
|
|
|
|
|
|
|
|
|
|
(181
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
157,778
|
|
|
|
142,536
|
|
|
|
927
|
|
|
|
301,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
(20,782
|
)
|
|
|
(12,308
|
)
|
|
|
(927
|
)
|
|
|
(34,017
|
)
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
236
|
|
|
|
5
|
|
|
|
|
|
|
|
241
|
|
Interest expense
|
|
|
(2,343
|
)
|
|
|
(8,659
|
)
|
|
|
951
|
d
|
|
|
(10,051
|
)
|
Other, net
|
|
|
1,971
|
|
|
|
(595
|
)
|
|
|
900
|
e
|
|
|
2,276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(136
|
)
|
|
|
(9,249
|
)
|
|
|
1,851
|
|
|
|
(7,534
|
)
|
Income (loss) from continuing operations before income taxes
|
|
|
(20,918
|
)
|
|
|
(21,557
|
)
|
|
|
924
|
|
|
|
(41,551
|
)
|
Provision (benefit) for income taxes
|
|
|
(8,140
|
)
|
|
|
(3,142
|
)
|
|
|
323
|
f
|
|
|
(10,959
|
)
|
Income (loss) from continuing operations
|
|
|
(12,778
|
)
|
|
|
(18,415
|
)
|
|
|
601
|
|
|
|
(30,592
|
)
|
Income (loss) from discontinued operations net of provision for
income taxes
|
|
|
(270
|
)
|
|
|
|
|
|
|
|
|
|
|
(270
|
)
|
Net income (loss)
|
|
|
(13,048
|
)
|
|
|
|
|
|
|
|
|
|
|
(30,862
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Income attributable to noncontrolling interest
|
|
|
(256
|
)
|
|
|
|
|
|
|
|
|
|
|
(256
|
)
|
Net income (loss) attributable to Willbros Group, Inc. and
InfrastruX
|
|
$
|
(13,304
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(31,118
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of net income attributable to
Willbros Group, Inc. and InfrastruX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
$ |
(13,034 |
) |
|
|
|
|
|
|
|
|
|
$ |
(30,848 |
) |
Loss from discontinued operations |
|
|
(270 |
) |
|
|
|
|
|
|
|
|
|
|
(270 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
attributable to
Willbros Group,
Inc. and InfrastruX |
|
$ |
(13,304 |
) |
|
|
|
|
|
|
|
|
|
$ |
(31,118 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss per share attributable to Company
Shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
$ |
(0.33 |
) |
|
|
|
|
|
|
|
|
|
$ |
(0.66 |
) |
Loss from discontinued operations |
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
|
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(0.34 |
) |
|
|
|
|
|
|
|
|
|
$ |
(0.67 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted loss per share attributable to
Company Shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
$ |
(0.33 |
) |
|
|
|
|
|
|
|
|
|
$ |
(0.66 |
) |
Loss from discontinued operations |
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
|
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(0.34 |
) |
|
|
|
|
|
|
|
|
|
$ |
(0.67 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares
outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
38,942,133 |
|
|
|
|
|
|
|
7,923,308 |
s |
|
|
46,865,441 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
38,942,133 |
|
|
|
|
|
|
|
7,923,308 |
s |
|
|
46,865,441 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40
Unaudited pro
forma condensed financial statements
Pro forma condensed
consolidated statements of
income
Unaudited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Willbros
|
|
|
InfrastruX
|
|
|
|
|
|
Pro forma
|
|
|
|
as reported
|
|
|
as reported
|
|
|
|
|
|
results
|
|
|
|
for the year
|
|
|
for the year
|
|
|
|
|
|
for the year
|
|
|
|
ended
|
|
|
ended
|
|
|
|
|
|
ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
Pro forma
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2009
|
|
|
adjustments
|
|
|
2009
|
|
|
|
|
|
(in thousands,
except share and per share data)
|
|
|
Contract revenue
|
|
$
|
1,259,818
|
|
|
$
|
598,776
|
|
|
$
|
0
|
|
|
$
|
1,858,594
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract
|
|
|
1,115,094
|
|
|
|
548,378
|
|
|
|
834
|
a
|
|
|
1,664,306
|
|
Amortization of intangibles
|
|
|
6,515
|
|
|
|
7,219
|
|
|
|
4,873
|
b
|
|
|
18,607
|
|
General and administrative
|
|
|
88,133
|
|
|
|
65,859
|
|
|
|
(2,000
|
)c
|
|
|
151,992
|
|
Other charges
|
|
|
12,694
|
|
|
|
0
|
|
|
|
0
|
|
|
|
12,694
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,222,436
|
|
|
|
621,456
|
|
|
|
3,707
|
|
|
|
1,847,599
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
37,382
|
|
|
|
(22,680
|
)
|
|
|
(3,707
|
)
|
|
|
10,995
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
1,966
|
|
|
|
43
|
|
|
|
0
|
|
|
|
2,009
|
|
Interest expense
|
|
|
(10,294
|
)
|
|
|
(18,895
|
)
|
|
|
(11,938
|
)d
|
|
|
(41,127
|
)
|
Other, net
|
|
|
820
|
|
|
|
(60
|
)
|
|
|
3,972
|
e
|
|
|
4,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,508
|
)
|
|
|
(18,912
|
)
|
|
|
(7,966
|
)
|
|
|
(34,386
|
)
|
Income (loss) from continuing operations before income taxes
|
|
|
29,874
|
|
|
|
(41,592
|
)
|
|
|
(11,673
|
)
|
|
|
(23,391
|
)
|
Provision (benefit) for income taxes
|
|
|
8,737
|
|
|
|
(11,007
|
)
|
|
|
(4,086
|
)f
|
|
|
(6,356
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
21,137
|
|
|
|
(30,585
|
)
|
|
|
(7,587
|
)
|
|
|
(17,035
|
)
|
Income (loss) from discontinued operations net of provision for
income taxes
|
|
|
(1,497
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,497
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
19,640
|
|
|
|
|
|
|
|
|
|
|
|
(18,532
|
)
|
Less: Income attributable to noncontrolling interest
|
|
|
(1,817
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,817
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Willbros Group, Inc. and
InfrastruX
|
|
$
|
17,823
|
|
|
|
|
|
|
|
|
|
|
$
|
(20,349
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of net income attributable to Willbros Group,
Inc. and InfrastruX
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
19,320
|
|
|
|
|
|
|
|
|
|
|
$
|
(18,852
|
)
|
Loss from discontinued operations
|
|
|
(1,497
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,497
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Willbros Group, Inc. and InfrastruX
|
|
$
|
17,823
|
|
|
|
|
|
|
|
|
|
|
$
|
(20,349
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per share attributable to Company
Shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
0.50
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.40
|
)
|
Loss from discontinued operations
|
|
$
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
0.46
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.43
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted loss per share attributable to Company Shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
0.50
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.40
|
)
|
Loss from discontinued operations
|
|
$
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
0.46
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.43
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
38,687,594
|
|
|
|
|
|
|
|
7,923,308
|
s
|
|
|
46,610,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
38,883,077
|
|
|
|
|
|
|
|
7,923,308
|
s
|
|
|
46,806,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41
Unaudited pro
forma condensed financial statements
Pro forma condensed
consolidated balance sheet
Unaudited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Willbros
|
|
|
InfrastruX
|
|
|
|
|
|
Pro forma
|
|
|
|
as reported
|
|
|
as reported
|
|
|
|
|
|
results
|
|
|
|
as of
|
|
|
as of
|
|
|
|
|
|
as of
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
Pro forma
|
|
|
March 31,
|
|
|
|
2010
|
|
|
2010
|
|
|
adjustments
|
|
|
2010
|
|
|
|
|
|
(in thousands,
except share and per share data)
|
|
|
Cash and cash equivalents
|
|
$
|
190,839
|
|
|
$
|
4,605
|
|
|
$
|
(81,025
|
) g
|
|
$
|
114,419
|
|
ST Investments
|
|
|
15,550
|
|
|
|
|
|
|
|
|
|
|
|
15,550
|
|
Accounts receivable, net
|
|
|
171,532
|
|
|
|
117,212
|
|
|
|
|
|
|
|
288,744
|
|
Contract cost and income not yet billed
|
|
|
21,442
|
|
|
|
|
|
|
|
|
|
|
|
21,442
|
|
Inventories
|
|
|
5,156
|
|
|
|
22,384
|
|
|
|
|
|
|
|
27,540
|
|
Prepaid expenses and other current assets
|
|
|
25,446
|
|
|
|
39,170
|
|
|
|
(2,700
|
) h
|
|
|
61,916
|
|
Deferred tax assets
|
|
|
9,431
|
|
|
|
3,327
|
|
|
|
|
|
|
|
12,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
439,396
|
|
|
|
186,698
|
|
|
|
(83,725
|
)
|
|
|
542,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
132,245
|
|
|
|
132,513
|
|
|
|
13,000
|
i
|
|
|
277,758
|
|
Goodwill
|
|
|
86,719
|
|
|
|
57,426
|
|
|
|
(57,426
|
) i
|
|
|
86,719
|
|
GoodwillInfrastruX Acquisition
|
|
|
|
|
|
|
|
|
|
|
219,462
|
i
|
|
|
219,462
|
|
IntangiblesInfrastruX Acquisition
|
|
|
|
|
|
|
|
|
|
|
170,400
|
i
|
|
|
170,400
|
|
Other intangible assets, net
|
|
|
35,820
|
|
|
|
84,904
|
|
|
|
(84,904
|
) i
|
|
|
35,820
|
|
Debt issuance costs
|
|
|
|
|
|
|
|
|
|
|
12,875
|
j
|
|
|
12,875
|
|
Other assets
|
|
|
26,137
|
|
|
|
24,477
|
|
|
|
(3,500
|
) h
|
|
|
47,114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
720,317
|
|
|
|
486,018
|
|
|
|
186,182
|
|
|
|
1,392,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
75,597
|
|
|
|
12,883
|
|
|
|
|
|
|
|
88,480
|
|
Contract billings in excess of cost
|
|
|
13,921
|
|
|
|
|
|
|
|
|
|
|
|
13,921
|
|
Liabilities from discontinued operations
|
|
|
237
|
|
|
|
|
|
|
|
|
|
|
|
237
|
|
Other current liabilities
|
|
|
8,136
|
|
|
|
72,141
|
|
|
|
(8,070
|
) k
|
|
|
72,207
|
|
Other notes payable
|
|
|
6,575
|
|
|
|
|
|
|
|
|
|
|
|
6,575
|
|
Current portion of capital lease obligations
|
|
|
5,292
|
|
|
|
3,297
|
|
|
|
|
|
|
|
8,589
|
|
Current debt
|
|
|
98,023
|
|
|
|
4,196
|
|
|
|
(2,753
|
) l
|
|
|
99,466
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
207,781
|
|
|
|
92,517
|
|
|
|
(10,823
|
)
|
|
|
289,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long term capital lease obligations
|
|
|
9,454
|
|
|
|
2,569
|
|
|
|
|
|
|
|
12,023
|
|
Deferred tax liability
|
|
|
11,951
|
|
|
|
9,489
|
|
|
|
85,295
|
m
|
|
|
106,735
|
|
Long-term debt, net of original issue discount
|
|
|
|
|
|
|
275,747
|
|
|
|
(274,046
|
) l
|
|
|
1,701
|
|
Term DebtInfrastruX Acquisition
|
|
|
|
|
|
|
|
|
|
|
296,750
|
n
|
|
|
296,750
|
|
Long term DOJ fines/penalties
|
|
|
6,575
|
|
|
|
|
|
|
|
|
|
|
|
6,575
|
|
Contingent earn-out
|
|
|
|
|
|
|
|
|
|
|
52,000
|
o
|
|
|
52,000
|
|
Other long-term liabilities
|
|
|
5,943
|
|
|
|
47,225
|
|
|
|
(24,228
|
) p
|
|
|
28,940
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
241,704
|
|
|
|
427,547
|
|
|
|
124,948
|
|
|
|
794,199
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equitypre acquisition
|
|
|
477,808
|
|
|
|
58,471
|
|
|
|
(58,471
|
) q
|
|
|
477,808
|
|
Noncontrolling interest
|
|
|
805
|
|
|
|
|
|
|
|
|
|
|
|
805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equityLegacy
|
|
|
478,613
|
|
|
|
58,471
|
|
|
|
(58,471
|
)
|
|
|
478,613
|
|
Post acquisition equity - InfrastruX
|
|
|
|
|
|
|
|
|
|
|
119,705
|
r
|
|
|
119,705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders Equity
|
|
$
|
720,317
|
|
|
$
|
486,018
|
|
|
$
|
186,182
|
|
|
$
|
1,392,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
a) |
|
Elimination of historical amortization related to certain
InfrastruX intangible assets, which were previously reported
within contract costs based on their nature. This reduction is
offset by an increase in depreciation and amortization expense
due to the revaluation of InfrastruXs assets to fair
value. |
42
Unaudited pro
forma condensed financial statements
|
|
|
b) |
|
Elimination of historical amortization related to all
remaining intangible assets, which were previously separately
reported on the statement of income. This reduction is offset by
an increase in amortization expense due to the revaluation of
InfrastruXs assets to fair value. |
|
c) |
|
Elimination of management fees ($2,000 annual) paid by InfrastruX to Tenaska
Capital Management LLC. |
|
d) |
|
Elimination of InfrastruXs historical interest expense,
offset by the incremental interest expense for the
term loan facility and the Second Senior Lien Notes
assumed with the Transactions, as well as amortization of debt issuance costs. |
|
e) |
|
Elimination of bank fees incurred by InfrastruX from their
previous lender. |
|
f) |
|
Represents the application of a 35% statutory rate to all
adjustments except transaction costs, which were considered to
be non-deductible for tax purposes. |
|
g) |
|
Represents the pro forma adjustment to cash based on the
elimination of the InfrastruX cash balance ($4,605), which is
excluded from the transaction; cash paid for financing fees
($16,125); and purchase consideration ($60,295) paid by
Willbros. |
|
h) |
|
Elimination of unamortized debt issuance costs associated
with InfrastruXs existing debt. |
|
i) |
|
Elimination of InfrastruX goodwill ($57,426) and intangibles
assets ($89,904). |
|
|
|
Recognition of the Acquisitions estimated purchase
allocation to intangible assets ($170,400), fair value
adjustment of property and equipment ($13,000) and goodwill
($219,462.) The estimated intangible assets are comprised of
customer relationships, trade name, patents and technology. A
significant portion of the fair value of estimated intangible
assets relates to InfrastruXs business relationship with a
major electric transmission and distribution customer, with
projected significant future cash flows. |
|
j) |
|
Recognition of capitalized debt issuance costs incurred with the
transaction including bond, term loan and revolving credit
facility issuance fees and original issue discounts. |
|
k) |
|
Elimination of accrued deferred rent to related parties
($733) and accrued management fees ($7,337) payable to Tenaska
Capital Management LLC. |
|
l) |
|
Elimination of InfrastruX third-party current ($2,753) and
long-term ($274,046) debt that will be retired upon execution of
the transaction. |
|
m) |
|
Recognition of deferred tax liability of $91,457 attributable
to the timing difference between the net book value of acquired
tangible and intangible assets adjusted to fair value and the
corresponding tax basis, which we have adjusted by $85,295 in
addition to the net deferred tax position of the company at
March 31, 2010. |
|
n) |
|
Recognition of the assumed term loan facility ($50,000) and Second
Senior Lien Notes ($250,000), net of original issue discount estimated to be approximately
$3,250. Interest rates associated with the term loan facility and the
Second Senior Lien Notes have been estimated to be 7% and 9.5%, respectively. |
|
o) |
|
Preliminary estimate of contingent consideration associated
with the transaction. InfrastruX shareholders are eligible to
receive earnout payments of up to $125,000 based on the level of
InfrastruXs Adjusted EBITDA during 2010 and 2011, as
defined in the Acquisition agreements, and as recapped below: |
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
|
|
|
|
(as defined in
|
|
|
|
Period
|
|
the Merger
Agreement)
|
|
Earnout
payment
|
|
|
|
|
2010
|
|
³69.8
up to 80.0 million
|
|
$
|
10-40 million
|
|
2011
|
|
³80.0
up to 95.0 million
|
|
$
|
10-60 million
|
|
Combined
|
|
³175.0
up to 190.0 million
|
|
$
|
0-25 million
|
|
43
Unaudited pro
forma condensed financial statements
|
|
|
|
|
Based on the current forecasts for 2010 and 2011, a $52,000
contingent liability for estimated earnout payments has been
included in the preliminary purchase price allocation and
reflected in the pro forma balance sheet. |
|
p) |
|
Elimination of the fair value liability for interest rate
swap derivatives ($2,928), which will be terminated by
InfrastruX and accrued long term liability (approximately
$21,300) for the mandatory
redemption of senior redeemable convertible cumulative preferred
stock issued to InfrastruX Holdings, LLC in October 2009. |
|
q) |
|
Elimination of InfrastruX stockholders equity
($58,471). |
|
r) |
|
Recognition of the issuance of 7,923,308 shares of Willbros
common stock as part of the Acquisition price. The value of the
shares are estimated at $119,705 based on the average closing
price for the preceding 10 trading days ended March 10, 2010
which equaled $15.108 per share. This
10-day
trading period fixed the number of shares such that the total
value was approximately $120 million. While the number of
shares are fixed, the actual value will depend on the share
price at the time of the Acquisition closing. |
44