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EX-3.2 - EXHIBIT 3.2 - Willbros Group, Inc.\NEW\a6302015-exhibit32.htm
EX-31.1 - EXHIBIT 31.1 - Willbros Group, Inc.\NEW\a6302015-exhibit311.htm
EX-31.2 - EXHIBIT 31.2 - Willbros Group, Inc.\NEW\a6302015-exhibit312.htm
EX-32.2 - EXHIBIT 32.2 - Willbros Group, Inc.\NEW\a6302015-exhibit322.htm
EX-32.1 - EXHIBIT 32.1 - Willbros Group, Inc.\NEW\a6302015-exhibit321.htm
XML - IDEA: XBRL DOCUMENT - Willbros Group, Inc.\NEW\R9999.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
 
FORM 10-Q
 

(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015

OR 

¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     
Commission file number 1-34259
 
Willbros Group, Inc.
 
 
(Exact name of registrant as specified in its charter) 
 

Delaware
 
30-0513080
(Jurisdiction
of incorporation)
 
(I.R.S. Employer
Identification Number)
4400 Post Oak Parkway
Suite 1000
Houston, TX 77027
Telephone No.: 713-403-8000
(Address, including zip code, and telephone number, including area code, of principal executive offices of registrant)
 
NOT APPLICABLE
 
 
(Former name, former address and former fiscal year, if changed since last report)
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): 
Large Accelerated Filer
¨
Accelerated Filer
ý
Non-Accelerated Filer
¨
Smaller reporting company
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý
The number of shares of the registrant’s Common Stock, $.05 par value, outstanding as of July 31, 2015 was 62,108,063.



WILLBROS GROUP, INC.
FORM 10-Q
FOR QUARTER ENDED JUNE 30, 2015
 
 
Page
 
 
 




PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WILLBROS GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
 
 
June 30,
2015
 
December 31,
2014
ASSETS
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
68,233

 
$
23,273

Accounts receivable, net
 
228,960

 
347,137

Contract cost and recognized income not yet billed
 
20,147

 
39,781

Prepaid expenses and other current assets
 
30,184

 
25,432

Parts and supplies inventories
 
1,507

 
3,555

Deferred income taxes
 
5,052

 
6,621

Assets associated with discontinued operations
 
2,222

 
7,057

Total current assets
 
356,305

 
452,856

Property, plant and equipment, net
 
72,316

 
94,432

Intangible assets, net
 
92,713

 
116,130

Deferred income taxes
 
787

 
711

Other assets
 
35,085

 
28,078

Total assets
 
$
557,206

 
$
692,207

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
 
 
 
 
Accounts payable and accrued liabilities
 
$
149,322

 
$
207,313

Contract billings in excess of cost and recognized income
 
13,979

 
16,371

Current portion of capital lease obligations
 
909

 
917

Notes payable and current portion of long-term debt
 
8,576

 
7,476

Accrued income taxes
 

 
2,430

Other current liabilities
 
9,947

 
7,462

Liabilities associated with discontinued operations
 
1,859

 
5,185

Total current liabilities
 
184,592

 
247,154

Long-term debt
 
205,597

 
280,170

Capital lease obligations
 
33

 
467

Long-term liabilities for unrecognized tax benefits
 

 
117

Deferred income taxes
 
5,326

 
6,895

Other long-term liabilities
 
42,689

 
43,579

Total liabilities
 
438,237

 
578,382

Contingencies and commitments (Note 13)
 

 

Stockholders’ equity:
 
 
 
 
Preferred stock, par value $.01 per share, 1,000,000 shares authorized, none issued
 

 

Common stock, par value $.05 per share, 105,000,000 shares authorized and 63,695,099 shares issued at June 30, 2015 (70,000,000 shares authorized and 52,094,931 shares issued at December 31, 2014)
 
3,177

 
2,597

Additional paid-in capital
 
740,697

 
703,728

Accumulated deficit
 
(610,455
)
 
(581,745
)
Treasury stock at cost, 1,584,824 shares at June 30, 2015 (1,430,690 at December 31, 2014)
 
(14,190
)
 
(13,832
)
Accumulated other comprehensive income (loss)
 
(549
)
 
2,788

Total Willbros Group, Inc. stockholders’ equity
 
118,680

 
113,536

Noncontrolling interest
 
289

 
289

Total stockholders’ equity
 
118,969

 
113,825

Total liabilities and stockholders’ equity
 
$
557,206

 
$
692,207

See accompanying notes to condensed consolidated financial statements.

3


WILLBROS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
 
2015
 
2014
 
2015
 
2014
Contract revenue
 
$
286,923

 
$
539,790

 
$
633,855

 
$
1,016,328

Operating expenses:
 
 
 
 
 
 
 
 
Contract costs
 
263,167

 
493,420

 
590,810

 
935,416

Amortization of intangibles
 
2,619

 
3,119

 
5,714

 
6,238

General and administrative
 
26,510

 
36,691

 
62,142

 
73,763

Loss (gain) on sale of subsidiaries
 
2,177

 

 
(56,372
)
 

       Other charges
 
4,735

 

 
8,685

 

 
 
299,208

 
533,230

 
610,979

 
1,015,417

Operating income (loss)
 
(12,285
)
 
6,560

 
22,876

 
911

Non-operating expenses:
 
 
 
 
 
 
 
 
Interest expense, net
 
(6,532
)
 
(7,477
)
 
(14,828
)
 
(15,195
)
Debt covenant suspension and extinguishment charges
 
(312
)
 
(948
)
 
(36,181
)
 
(948
)
Other, net
 
(103
)
 
(151
)
 
(213
)
 
(111
)
 
 
(6,947
)
 
(8,576
)
 
(51,222
)
 
(16,254
)
Loss from continuing operations before income taxes
 
(19,232
)
 
(2,016
)
 
(28,346
)
 
(15,343
)
Provision (benefit) for income taxes
 
(209
)
 
2,875

 
108

 
6,544

Loss from continuing operations
 
(19,023
)
 
(4,891
)
 
(28,454
)
 
(21,887
)
Income (loss) from discontinued operations net of provision for income taxes
 
137

 
(10,620
)
 
(256
)
 
(18,614
)
Net loss
 
$
(18,886
)
 
$
(15,511
)
 
$
(28,710
)
 
$
(40,501
)
Basic loss per share attributable to Company shareholders:
 
 
 
 
 
 
 
 
Loss from continuing operations
 
$
(0.32
)
 
$
(0.10
)
 
$
(0.52
)
 
$
(0.45
)
Loss from discontinued operations
 

 
(0.22
)
 

 
(0.38
)
Net loss
 
$
(0.32
)
 
$
(0.32
)
 
$
(0.52
)
 
$
(0.83
)
Diluted loss per share attributable to Company shareholders:
 
 
 
 
 
 
 
 
Loss from continuing operations
 
$
(0.32
)
 
$
(0.10
)
 
$
(0.52
)
 
$
(0.45
)
Loss from discontinued operations
 

 
(0.22
)
 

 
(0.38
)
Net loss
 
$
(0.32
)
 
$
(0.32
)
 
$
(0.52
)
 
$
(0.83
)
Weighted average number of common shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
60,227,495

 
49,336,581

 
55,052,192

 
49,093,356

Diluted
 
60,227,495

 
49,336,581

 
55,052,192

 
49,093,356

See accompanying notes to condensed consolidated financial statements.

4


WILLBROS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
 
2015
 
2014
 
2015
 
2014
Net loss
 
$
(18,886
)
 
$
(15,511
)
 
$
(28,710
)
 
$
(40,501
)
Other comprehensive income (loss), net of tax
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
 
1,447

 
2,076

 
(3,204
)
 
13

Changes in derivative financial instruments
 
357

 
(845
)
 
(133
)
 
(1,630
)
Total other comprehensive income (loss), net of tax
 
1,804

 
1,231

 
(3,337
)
 
(1,617
)
Total comprehensive loss
 
$
(17,082
)
 
$
(14,280
)
 
$
(32,047
)
 
$
(42,118
)
See accompanying notes to condensed consolidated financial statements.

5


WILLBROS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited) 
 
 
Six Months Ended 
 June 30,
 
 
2015
 
2014
Cash flows from operating activities:
 
 
 
 
Net loss
 
$
(28,710
)
 
$
(40,501
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
 
Loss from discontinued operations
 
256

 
18,614

Depreciation and amortization
 
16,269

 
18,559

Loss on sale of long-lived asset
 
2,226

 

Debt covenant suspension and extinguishment charges
 
36,181

 
948

Stock-based compensation
 
3,568

 
4,509

Amortization of debt issuance costs
 
311

 
491

Non-cash interest expense
 

 
724

Deferred income tax expense (benefit)
 
(114
)
 
3,234

Gain on disposal of property and equipment
 
(3,044
)
 
(2,721
)
Gain on sale of subsidiaries
 
(56,372
)
 

Provision for (recovery of) bad debts
 
(39
)
 
412

Changes in operating assets and liabilities:
 
 
 
 
Accounts receivable
 
84,212

 
(49,941
)
Contract cost and recognized income not yet billed
 
17,225

 
(10,673
)
Prepaid expenses and other current assets
 
(5,851
)
 
(9,057
)
Accounts payable and accrued liabilities
 
(38,817
)
 
20,609

Accrued income taxes
 
(2,441
)
 
(5,977
)
Contract billings in excess of cost and recognized income
 
(1,476
)
 
5,676

Other assets and liabilities, net
 
(9,173
)
 
(2,990
)
Cash provided by (used in) operating activities of continuing operations
 
14,211

 
(48,084
)
Cash provided by operating activities of discontinued operations
 
805

 
10,622

Cash provided by (used in) operating activities
 
15,016

 
(37,462
)
Cash flows from investing activities:
 
 
 
 
Proceeds from sales of property, plant and equipment
 
6,670

 
3,827

Proceeds from sale of subsidiaries
 
97,344

 
46,152

Purchases of property, plant and equipment
 
(1,641
)
 
(8,353
)
Cash provided by investing activities of continuing operations
 
102,373

 
41,626

Cash provided by investing activities of discontinued operations
 
448

 
289

Cash provided by investing activities
 
102,821

 
41,915

Cash flows from financing activities:
 
 
 
 
Proceeds from revolver and notes payable
 
39,030

 
30,000

Payments on capital leases
 
(442
)
 
(479
)
Payments of revolver and notes payable
 
(30,466
)
 
(19,336
)
Payments on term loan facility
 
(79,674
)
 
(28,527
)
Cost of debt issuance
 
(556
)
 

Payments to reacquire common stock
 
(358
)
 
(1,241
)
Cash used in financing activities of continuing operations
 
(72,466
)
 
(19,583
)
Cash used in financing activities of discontinued operations
 

 
(100
)
Cash used in financing activities
 
(72,466
)
 
(19,683
)
Effect of exchange rate changes on cash and cash equivalents
 
(411
)
 
(106
)
Net increase (decrease) in cash and cash equivalents
 
44,960

 
(15,336
)
Cash and cash equivalents of continuing operations at beginning of period
 
23,273

 
42,569

Cash and cash equivalents of discontinued operations at beginning of period
 

 
1,041

Cash and cash equivalents at beginning of period
 
23,273

 
43,610

Cash and cash equivalents at end of period
 
68,233

 
28,274

Less: cash and cash equivalents of discontinued operations at end of period
 

 

Cash and cash equivalents of continuing operations at end of period
 
$
68,233

 
$
28,274

Supplemental disclosures of cash flow information:
 
 
 
 
Cash paid for interest (including discontinued operations)
 
$
15,078

 
$
13,823

Cash paid for income taxes (including discontinued operations)
 
$
2,951

 
$
13,390

See accompanying notes to condensed consolidated financial statements.

6

WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)



1. The Company and Basis of Presentation
Willbros Group, Inc., a Delaware corporation, and its subsidiaries (the “Company,” “Willbros” or “WGI”), is a specialty energy infrastructure contractor serving the oil, gas, refinery, petrochemical and power industries. The Company’s offerings include engineering, procurement and construction (either individually or as an integrated “EPC” service offering), turnarounds, maintenance, facilities development and operations services. The Company’s principal markets for continuing operations are the United States and Canada. The Company obtains its work through competitive bidding and through negotiations with prospective clients. Contract values range from several thousand dollars to several hundred million dollars and contract durations range from a few weeks to more than two years.
The accompanying Condensed Consolidated Balance Sheet as of December 31, 2014, which has been derived from audited consolidated financial statements, and the unaudited Condensed Consolidated Financial Statements as of June 30, 2015 and 2014, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to those rules and regulations. However, the Company believes the presentations and disclosures herein are adequate to make the information not misleading. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Company’s December 31, 2014 audited Consolidated Financial Statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.
In the opinion of management, the unaudited Condensed Consolidated Financial Statements reflect all adjustments necessary to fairly state the financial position as of June 30, 2015, and the results of operations and cash flows of the Company for all interim periods presented. The results of operations and cash flows for the six months ended June 30, 2015 are not necessarily indicative of the operating results and cash flows to be achieved for the full year.
The Condensed Consolidated Financial Statements include certain estimates and assumptions made by management. These estimates and assumptions relate to the reported amounts of assets and liabilities at the dates of the Condensed Consolidated Financial Statements and the reported amounts of revenue and expense during those periods. Significant items subject to such estimates and assumptions include the carrying amount of property, plant and equipment, and parts and supplies inventories; quantification of amounts recorded for contingencies, tax accruals and certain other accrued liabilities; valuation allowances for accounts receivable and deferred income tax assets; and revenue recognition under the percentage-of-completion method of accounting, including estimates of progress toward completion and estimates of gross profit or loss accrual on contracts in progress. The Company bases its estimates on historical experience and other assumptions that it believes to be relevant under the circumstances. Actual results could differ from those estimates.
2. New Accounting Pronouncements
In April 2015, the FASB issued guidance that simplifies the presentation of debt issuance costs with the requirement that debt issuance costs related to a debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The standard is effective for fiscal years beginning after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016. The Company does not believe the guidance will have a material effect on its condensed consolidated financial statements.
In May 2014, the FASB and the IASB issued common guidance surrounding the recognition of revenue from contracts with customers. Under the new guidance, a company will recognize revenue when it satisfies a performance obligation by transferring a promised good or service to a customer. Revenue will be recognized at an amount that reflects the consideration it expects to receive in exchange for those goods and services. This guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. This standard is effective, on either a full retrospective or a modified retrospective basis, for interim and annual periods beginning on or after December 15, 2017. The Company is still assessing the impact of this guidance on its consolidated financial statements.



7

WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

3. Business Disposals


Downstream Professional Services
On June 12, 2015, the Company sold all of its issued and outstanding equity of Willbros Engineers, LLC and Willbros Heater Services, LLC (collectively "Downstream Professional Services") to BR Engineers, LLC for approximately $10.0 million in cash. The closing consideration is subject to working capital and other typical post-closing adjustments. The Company recorded a loss of $2.2 million in connection with this sale during the second quarter of 2015.
Premier
On March 31, 2015, the Company sold all of its membership units in Premier Utility Services, LLC ("Premier") to USIC Locating Services, LLC for approximately $51.0 million in cash, of which $4.0 million was deposited into an escrow account for a period of up to eighteen months to cover post-closing adjustments and any indemnification obligations of the Company. The closing consideration is subject to typical post-closing adjustments. The Company recorded a gain of $37.1 million in connection with this sale during the first quarter of 2015.
UtilX
On March 17, 2015, the Company sold all of its equity interests of UtilX Corporation ("UtilX") to Novinium, Inc. for approximately $40.0 million in cash, of which $0.5 million was deposited into an escrow account for a period of six months to cover post-closing adjustments and any indemnification obligations of the Company. The closing consideration is subject to working capital and other typical post-closing adjustments. The Company recorded a gain of $21.4 million in connection with this sale during the first quarter of 2015.
The three business disposals discussed above do not qualify as discontinued operations at June 30, 2015 in accordance with Accounting Standards Update ("ASU") 2014-08, which the Company adopted on January 1, 2015.
4. Other Charges
For the six months ended June 30, 2015, approximately $4.4 million in equipment and facility lease abandonment charges, $1.1 million in employee severance charges and $0.5 million in the accelerated vesting of stock awards related to management changes and headcount reductions across the Company are included in the line item "Other charges" on the Condensed Consolidated Statement of Operations. Also included in this line item is a $2.2 million loss on the sale of a long-lived asset and $0.4 million in legal and accounting costs associated with the investigation of the root cause behind the deterioration of certain construction projects within the Oil & Gas segment which led to the restatements of the Company's Condensed Consolidated Financial Statements for the quarterly periods ended March 31, 2014 and June 30, 2014.

Activity in the accrual related to other charges for the six months ended June 30, 2015 is as follows (in thousands):
 
 
Employee Termination and Other Benefits
 
Equipment and facility lease abandonment
 
Loss on sale of long-lived asset
 
Accounting and legal fees associated with restatement
 
Total
Accrued cost at December 31, 2014
 
$
397

 
$

 
$

 
$
3,413

 
$
3,810

Costs recognized during the six months ended June 30, 2015
 
1,637

 
4,376

 
2,226

 
446

 
8,685

Cash payments
 
(1,569
)
 

 

 
(3,045
)
 
(4,614
)
Non-cash charges (1)
 
(465
)
 
(4,376
)
 
(2,226
)
 

 
(7,067
)
Accrued cost at June 30, 2015
 
$

 
$

 
$

 
$
814

 
$
814


(1)
Non-cash charges consist of $0.5 million of accelerated stock-based compensation, $4.4 million in equipment and lease impairment charges and a $2.2 million loss on the sale of a long-lived asset.


8

WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

5. Contracts in Progress

Contract cost and recognized income not yet billed on uncompleted contracts arise when recorded revenues for a contract exceed the amounts billed under the terms of the contracts. Contract billings in excess of cost and recognized income arise when billed amounts exceed revenues recorded. Amounts are billable to customers upon various measures of performance, including achievement of certain milestones, completion of specified units, or completion of the contract. Also included in contract cost and recognized income not yet billed on uncompleted contracts are amounts the Company seeks to collect from customers for change orders approved in scope but not for price associated with that scope change (unapproved change orders). Revenue for these amounts is recorded equal to the lesser of the expected revenue or cost incurred when realization of price approval is probable. Estimating revenues from unapproved change orders involves the use of estimates, and it is reasonably possible that revisions to the estimated recoverable amounts of recorded unapproved change orders may be made in the near-term. If the Company does not successfully resolve these matters, a reduction in revenues may be required to amounts that have been previously recorded.
Contract cost and recognized income not yet billed and related amounts billed as of June 30, 2015 and December 31, 2014 was as follows (in thousands):
 
 
June 30,
2015
 
December 31,
2014
Cost incurred on contracts in progress
 
$
812,634

 
$
981,518

Recognized income
 
68,703

 
90,994

 
 
881,337

 
1,072,512

Progress billings and advance payments
 
(875,169
)
 
(1,049,102
)
 
 
$
6,168

 
$
23,410

Contract cost and recognized income not yet billed
 
$
20,147

 
$
39,781

Contract billings in excess of cost and recognized income
 
(13,979
)
 
(16,371
)
 
 
$
6,168

 
$
23,410

Contract cost and recognized income not yet billed includes $3.0 million and $2.8 million at June 30, 2015 and December 31, 2014, respectively, on completed contracts.
The balances billed but not paid by customers pursuant to retainage provisions in certain contracts are generally due upon completion of the contracts and acceptance by the customer. Based on the Company’s experience with similar contracts in recent years, the majority of the retainage balances at each balance sheet date are expected to be collected within the next 12 months. Current retainage balances at June 30, 2015 and December 31, 2014, were approximately $28.7 million and $43.4 million, respectively, and are included in “Accounts receivable” in the Condensed Consolidated Balance Sheets. There were no retainage balances with settlement dates beyond the next 12 months at June 30, 2015 and December 31, 2014.
6. Intangible Assets
The changes in the carrying amounts of intangible assets for the six months ended June 30, 2015 are detailed below (in thousands):
 
 
Customer
Relationships
 
Trademark /
Tradename
 
Technology
 
Total
Balance as of December 31, 2014
 
$
105,604

 
$
7,505

 
$
3,021

 
$
116,130

Amortization
 
(4,950
)
 
(636
)
 
(128
)
 
(5,714
)
Additions
 

 
300

 
120

 
420

Disposals
 
(13,681
)
 
(1,539
)
 
(2,903
)
 
(18,123
)
Balance as of June 30, 2015
 
$
86,973

 
$
5,630

 
$
110

 
$
92,713

Weighted Average Remaining Amortization Period
 
9.9 years

 
5.0 years

 
4.5 years

 
 
Disposals relate to the intangible assets sold as part of the sales of Downstream Professional Services, Premier and UtilX during the first six months of 2015. See Note 3 – Business Disposals for additional information associated with these disposals.
Intangible assets are amortized on a straight-line basis over their estimated useful lives, which range from 5 to 15 years.

9

WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

6. Intangible Assets (continued)


Estimated amortization expense for the remainder of 2015 and each of the subsequent five years and thereafter is as follows (in thousands):
Fiscal year:
 
 
Remainder of 2015
 
$
4,984

2016
 
9,969

2017
 
9,969

2018
 
9,969

2019
 
9,969

2020
 
9,142

Thereafter
 
38,711

 
 
 
Total amortization
 
$
92,713

 
 
 
7. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities as of June 30, 2015 and December 31, 2014 were as follows (in thousands):
 
 
June 30,
2015
 
December 31,
2014
Trade accounts payable
 
$
58,180

 
$
82,557

Payroll and payroll liabilities
 
33,610

 
44,483

Accrued contract costs
 
22,390

 
34,791

Self-insurance accrual
 
15,972

 
15,915

Other accrued liabilities
 
19,170

 
29,567

Total accounts payable and accrued liabilities
 
$
149,322

 
$
207,313

8. Long-Term Debt

Long-term debt as of June 30, 2015 and December 31, 2014 was as follows (in thousands):
 
 
June 30,
2015
 
December 31,
2014
2014 Term Loan Facility
 
$
190,326

 
$
270,000

Revolver borrowings under the 2013 ABL Credit Facility
 

 

Capital lease obligations
 
942

 
1,384

Other obligations
 
23,847

 
17,646

Total debt
 
215,115

 
289,030

Less: current portion
 
(9,485
)
 
(8,393
)
Long-term debt, net
 
$
205,630

 
$
280,637

2014 Term Loan Facility
On December 15, 2014, the Company entered into a new credit agreement dated as of December 15, 2014 (the “2014 Term Credit Agreement”) among the Company, certain of its subsidiaries, as guarantors, the lenders from time to time party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and KKR Credit Advisors (US) LLC, as sole lead arranger and sole bookrunner.

10

WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

8. Long-term Debt (continued)

The 2014 Term Credit Agreement provides for a $270.0 million term loan facility (the “2014 Term Loan Facility”), which the Company drew in full on the effective date of the 2014 Term Credit Agreement. Willbros Group, Inc. is the borrower under the 2014 Term Credit Agreement, with all of its obligations guaranteed by its material U.S. subsidiaries, other than excluded subsidiaries. Obligations under the 2014 Term Loan Facility are secured by a first priority security interest in, among other things, the borrower’s and the guarantors’ equipment, subsidiary capital stock and intellectual property (the “2014 Term Loan Priority Collateral”) and a second priority security interest in, among other things, the borrower’s and the guarantors’ inventory, accounts receivable, deposit accounts and similar assets.
The term loans bear interest at the “Adjusted Base Rate” plus an applicable margin of 8.75 percent, or the “Eurodollar Rate” plus an applicable margin of 9.75 percent. The interest rate in effect at June 30, 2015 and 2014 was 11 percent, comprised of an applicable margin of 9.75 percent for Eurodollar rate loans plus a LIBOR floor of 1.25 percent.
During the first six months of 2015, the Company made early payments of approximately $78.3 million against its 2014 Term Loan Facility. As a result of these early payments, the Company recorded debt extinguishment charges of approximately $1.9 million, which consisted of prepayment premiums of 2 percent and the write-off of debt issuance costs.
2013 ABL Credit Facility
On August 7, 2013 the Company entered into a five-year $150.0 million asset based senior revolving credit facility maturing on August 7, 2018 with Bank of America, N.A. serving as sole administrative agent for the lenders thereunder, collateral agent, issuing bank and swingline lender (as amended, the “2013 ABL Credit Facility”).
The initial aggregate amount of commitments for the 2013 ABL Credit Facility is comprised of $125.0 million for the U.S. facility (the “U.S. Facility”) and $25.0 million for the Canadian facility (the “Canadian Facility”). The 2013 ABL Credit Facility includes a sublimit of $100.0 million for letters of credit and an accordion feature permitting the borrowers, under certain conditions, to increase the aggregate amount by an incremental $75.0 million, with additional commitments from existing lenders or new commitments from lenders reasonably acceptable to the administrative agent. The borrowers under the U.S. Facility consist of all of the Company’s U.S. operating subsidiaries with assets included in the borrowing base, and the U.S. Facility is guaranteed by Willbros Group, Inc. and its material U.S. subsidiaries, other than excluded subsidiaries. The borrower under the Canadian Facility is Willbros Construction Services (Canada) LP, and the Canadian Facility is guaranteed by Willbros Group, Inc. and all of its material U.S. and Canadian subsidiaries, other than excluded subsidiaries.
Advances under the U.S. and Canadian Facility are limited to a borrowing base consisting of the sum of 85 percent of the value of “eligible accounts” and 60 percent of the value of “eligible unbilled accounts” less applicable reserves, which the administrative agent may establish from time to time in its permitted discretion. Eligible unbilled accounts may not exceed $50.0 million in the aggregate. Advances in U.S. dollars bear interest at a rate equal to LIBOR or the U.S. or Canadian base rate plus an additional margin. Advances in Canadian dollars bear interest at the Bankers Acceptance (“BA”) Equivalent Rate or the Canadian prime rate plus an additional margin.
The interest rate margins will be adjusted each quarter based on the Company’s fixed charge coverage ratio as of the end of the previous quarter as follows:

Fixed Charge Coverage Ratio
 
U.S. Base Rate, Canadian
Base Rate and Canadian
Prime Rate Loans
 
LIBOR Loans, BA Rate Loans and
Letter of Credit Fees
>1.25 to 1
 
1.25%
 
2.25%
<1.25 to 1 and 1.15 to 1
 
1.50%
 
2.50%
<1.15 to 1
 
1.75%
 
2.75%

11

WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

8. Long-term Debt (continued)

The borrowers will also pay an unused line fee on each of the U.S. and Canadian Facilities equal to 50 basis points when usage under the applicable facility during the preceding calendar month is less than 50 percent of the commitments or 37.5 basis points when usage under the applicable facility equals or exceeds 50 percent of the commitments for such period. With respect to the letters of credit, the borrowers will pay a letter of credit fee equal to the applicable LIBOR margin, shown in the table above, on all letters of credit and a 0.125 percent fronting fee to the issuing bank, in each case, payable monthly in arrears.
Obligations under the 2013 ABL Credit Facility are secured by a first priority security interest in the borrowers’ and guarantors’ accounts receivable, deposit accounts and similar assets (the “ABL Priority Collateral”) and a second priority security interest in the 2014 Term Loan Priority Collateral.
Debt Covenants and Events of Default
A default under the 2014 Term Loan Facility and the 2013 ABL Credit Facility may be triggered by events such as a failure to comply with financial covenants or other covenants under the 2014 Term Loan Facility and the 2013 ABL Credit Facility, a failure to make payments when due under the 2014 Term Loan Facility and the 2013 ABL Credit Facility, a failure to make payments when due in respect of, or a failure to perform obligations relating to, debt obligations in excess of $15.0 million, a change of control of the Company and certain insolvency proceedings. A default under the 2013 ABL Credit Facility would permit the lenders to terminate their commitment to make cash advances or issue letters of credit, require the immediate repayment of any outstanding cash advances with interest and require the cash collateralization of outstanding letter of credit obligations. A default under the 2014 Term Loan Facility would permit the lenders to require immediate repayment of all principal, interest, fees and other amounts payable thereunder.
On March 31, 2015, (the "Closing Date"), the Company amended the 2014 Term Credit Agreement pursuant to a First Amendment (the "First Amendment"). The First Amendment, among other things, suspends the calculation of the Maximum Total Leverage Ratio and Minimum Interest Coverage Ratio covenants for the period from December 31, 2014 through March 31, 2016 (the "Covenant Suspension Period") and provides that any failure by the Company to comply with the Maximum Total Leverage Ratio or Minimum Interest Coverage Ratio during the Covenant Suspension Period shall not be deemed to result in a default or event of default. Prior to obtaining the First Amendment, the Company would not have complied with the Maximum Total Leverage Ratio and Minimum Interest Coverage Ratio at June 30, 2015.
In consideration of the suspension of the calculation of the Maximum Total Leverage Ratio and Minimum Interest Coverage Ratio for the Covenant Suspension Period, the Company entered into a subscription agreement pursuant to which it issued approximately 10.1 million shares, which was equivalent to 19.9 percent of the outstanding shares of common stock immediately prior to the Closing Date of the First Amendment, to KKR Lending Partners II L.P. and other entities indirectly advised by KKR Credit Advisers (US), LLC. In connection with this transaction, the Company recorded debt covenant suspension charges of approximately $33.5 million which represented the fair value of the 10.1 million outstanding shares of common stock issued, multiplied by the closing stock price on the Closing Date. In addition, the Company recorded debt extinguishment charges of approximately $0.8 million related to the write-off of debt issuance costs associated with the Company's 2014 Term Loan Facility.
The Company’s primary sources of capital are its cash on hand, proceeds from asset sales, operating cash flows and borrowings under the 2013 ABL Credit Facility.
The Company anticipates selling its Professional Services segment in the fourth quarter of 2015 and a discrete asset in the third quarter of 2015. Once the sales are completed, the Company expects to use the proceeds to make payments against its 2014 Term Loan Facility and for working capital purposes. In conjunction with these sales, and based on its current forecasts, the Company is seeking from the lenders under the 2013 ABL Credit Facility and the 2014 Term Loan Facility the approval of the sales, amendments under its 2014 Term Loan Facility to use a portion of the sales proceeds for working capital purposes, and reduced covenant compliance requirements beginning in the second quarter of 2016.
The Company expects to have sufficient liquidity and capital resources to meet its obligations for at least the next twelve months based on its current forecasts, the anticipated sales of its Professional Services segment and other discrete assets, cash on hand, operating cash flows, borrowings under the 2013 ABL Credit Facility and the anticipated amendments under the 2013 ABL Credit Facility and 2014 Term Loan Facility, which include the approval of the Professional Services and other discrete asset sales, amendments to use a portion of the sales proceeds for working capital purposes and reduced covenant compliance requirements beginning in the second quarter of 2016. The Company can make no assurance regarding its ability to achieve its

12

WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

8. Long-term Debt (continued)

forecasts, complete the sales of its Professional Services segment and other discrete assets, or obtain additional amendments to its 2013 ABL Credit Facility and 2014 Term Loan Facility.
As of June 30, 2015, the Company did not have any outstanding revolver borrowings. The Company’s unused availability under its June 30, 2015 borrowing base certificate was $48.3 million on a borrowing base of $104.1 million and outstanding letters of credit of $55.8 million. If the Company’s unused availability under the 2013 ABL Credit Facility is less than the greater of (i) 15 percent of the revolving commitments or $22.5 million for five consecutive days, or (ii) 12.5 percent of the revolving commitments or $18.8 million at any time, or upon the occurrence of certain events of default under the 2013 ABL Credit Facility, the Company is subject to increased reporting requirements, the administrative agent shall have exclusive control over any deposit account, the Company will not have any right of access to, or withdrawal from, any deposit account, or any right to direct the disposition of funds in any deposit account, and amounts in any deposit account will be applied to reduce the outstanding amounts under the 2013 ABL Credit Facility. In addition, if the Company's unused availability under the 2013 ABL Credit Facility is less than the amounts described above, the Company would be required to comply with a Minimum Fixed Charge Coverage Ratio of 1.15 to 1. Based on its current forecasts, the Company does not expect its unused availability under the 2013 ABL Credit Facility to be less than the amounts described above and therefore does not expect the Minimum Fixed Charge Coverage Ratio to be applicable over the next twelve months. If the Minimum Fixed Charge Coverage Ratio were to become applicable, the Company would not expect to be in compliance over the next twelve months and would therefore be in default under its credit agreements.
The 2014 Term Credit Agreement and the 2013 ABL Credit Facility also include customary representations and warranties and affirmative and negative covenants, including:
 
the preparation of financial statements in accordance with GAAP;
the identification of any events or circumstances, either individually or in the aggregate, that has had or could reasonably be expected to have a material adverse effect on the business, results of operations, properties or condition of the Company;
limitations on liens and indebtedness;
limitations on dividends and other payments in respect of capital stock;
limitations on capital expenditures; and
limitations on modifications of the documentation of the 2013 ABL Credit Facility.

Fair Value of Debt
The estimated fair value of the Company’s debt instruments as of June 30, 2015 and December 31, 2014 was as follows (in thousands):
 
 
June 30,
2015
 
December 31,
2014
2014 Term Loan Facility
 
$
190,326

 
$
270,000

Revolver borrowings under the 2013 ABL Credit Facility
 

 

Capital lease obligations
 
942

 
1,384

Other obligations
 
23,847

 
17,646

Total fair value of debt instruments
 
$
215,115

 
$
289,030

The 2014 Term Loan Facility, revolver borrowings under the 2013 ABL Credit Facility, capital lease obligations and other obligations are classified within Level 2 of the fair value hierarchy. The fair values of the 2014 Term Loan Facility have been estimated using discounted cash flow analyses based on the Company’s incremental borrowing rate for similar borrowing arrangements. A significant increase or decrease in the inputs could result in a directionally opposite change in the fair value of the 2014 Term Loan Facility.

13

WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

9. Income Taxes


The effective tax rate on continuing operations was negative 0.4 percent and negative 42.7 percent for the six months ended June 30, 2015 and 2014, respectively. Tax benefit for discrete items for the six months ended June 30, 2015 was approximately $0.1 million. This amount is composed primarily of Canadian income tax, a state tax refund and the release of an uncertain tax position due to a statute expiration. Tax expense for the six months ended June 30, 2015 was $0.1 million, mainly due to Canadian Tax and Texas Margins Tax offset by the tax benefit from a tax refund and release of an uncertain tax position. The Company has reserved for the benefit of current year losses in the United States. As of June 30, 2015, U.S. federal and state deferred tax assets continue to be covered by valuation allowances. The ultimate realization of deferred tax assets is dependent upon the generation of future U.S. taxable income. The Company considers the impacts of reversing taxable temporary differences, future forecasted income and available tax planning strategies when forecasting future taxable income and in evaluating whether deferred tax assets are more likely than not to be realized.
The effective tax rate on continuing operations was 1.1 percent and negative 142.6 percent for the three months ended June 30, 2015 and 2014, respectively. Tax benefit for the three months ended June 30, 2015 was $0.2 million, which primarily relates to Canadian Tax, release of an uncertain tax position and Texas Margins Tax.
The Company's interim tax provision has been estimated using the discrete method, which was based on statutory tax rates applied to pre-tax income as adjusted for permanent differences such as transfer pricing differences between generally accepted accounting principles and local country tax. The Company believes that this method yields a more reliable income tax calculation for interim periods. An annualized projected effective tax rate has not been applied because of the inability to develop a reliable estimate of the Company's pre-tax income, which is subject to variability due to change in in quarterly operational results.
10. Stockholders' Equity
Changes in Accumulated Other Comprehensive Income (Loss) by Component 
 
 
Three Months Ended June 30, 2015 (in thousands)
 
 
Foreign currency
translation
adjustments
 
Changes in
derivative
financial
instruments
 
Total
accumulated
comprehensive
income (loss)
Balance as of March 31, 2015
 
$
2,212

 
$
(4,565
)
 
$
(2,353
)
Other comprehensive income (loss) before reclassifications
 
1,447

 
(136
)
 
1,311

Amounts reclassified from accumulated other comprehensive income (loss)
 

 
493

 
493

Net current-period other comprehensive income
 
1,447

 
357

 
1,804

Balance as of June 30, 2015
 
$
3,659

 
$
(4,208
)
 
$
(549
)
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2015 (in thousands)
 
 
Foreign currency
translation
adjustments
 
Changes in
derivative
financial
instruments
 
Total
accumulated
comprehensive
income (loss)
Balance as of December 31, 2014
 
$
6,863

 
$
(4,075
)
 
$
2,788

Other comprehensive loss before reclassifications
 
(3,204
)
 
(1,115
)
 
(4,319
)
Amounts reclassified from accumulated other comprehensive income (loss)
 

 
982

 
982

Net current-period other comprehensive loss
 
(3,204
)
 
(133
)
 
(3,337
)
Balance as of June 30, 2015
 
$
3,659

 
$
(4,208
)
 
$
(549
)


14

WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

10. Stockholders' Equity (continued)




 
 
Three Months Ended June 30, 2014 (in thousands)
 
 
Foreign currency
translation
adjustments
 
Changes in
derivative
financial
instruments
 
Total
accumulated
comprehensive
income
Balance as of March 31, 2014
 
$
9,217

 
$
(3,258
)
 
$
5,959

Other comprehensive income (loss) before reclassifications
 
2,076

 
(1,098
)
 
978

Amounts reclassified from accumulated other comprehensive income (loss)
 

 
253

 
253

Net current-period other comprehensive income (loss)
 
2,076

 
(845
)
 
1,231

Balance as of June 30, 2014
 
$
11,293

 
$
(4,103
)
 
$
7,190

 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2014 (in thousands)
 
 
Foreign currency
translation
adjustments
 
Changes in
derivative
financial
instruments
 
Total
accumulated
comprehensive
income (loss)
Balance as of December 31, 2013
 
$
11,280

 
$
(2,473
)
 
$
8,807

Other comprehensive income (loss) before reclassifications
 
13

 
(2,133
)
 
(2,120
)
Amounts reclassified from accumulated other comprehensive income (loss)
 

 
503

 
503

Net current-period other comprehensive income (loss)
 
13

 
(1,630
)
 
(1,617
)
Balance as of June 30, 2014
 
$
11,293

 
$
(4,103
)
 
$
7,190


Reclassifications out of Accumulated Other Comprehensive Income
Three Months Ended June 30, 2015 (in thousands)
Details about Accumulated Other
Comprehensive Income Components
 
Amount Reclassified from Accumulated Other  Comprehensive Income
 
Details about Accumulated Other Comprehensive Income Components
Interest rate contracts
 
$
493

 
Interest expense, net
Total
 
$
493

 
 
 
 
 
 
 
Six Months Ended June 30, 2015 (in thousands)
Details about Accumulated Other
Comprehensive Income Components
 
Amount Reclassified from Accumulated Other  Comprehensive Income
 
Details about Accumulated Other Comprehensive Income Components
Interest rate contracts
 
$
982

 
Interest expense, net
Total
 
$
982

 
 
Three Months Ended June 30, 2014 (in thousands)
Details about Accumulated Other
Comprehensive Income Components
 
Amount Reclassified from Accumulated Other  Comprehensive Income
 
Details about Accumulated Other Comprehensive Income Components
Interest rate contracts
 
$
253

 
Interest expense, net
Total
 
$
253

 
 
 
 
 
 
 
Six Months Ended June 30, 2014 (in thousands)
Details about Accumulated Other
Comprehensive Income Components
 
Amount Reclassified from Accumulated Other  Comprehensive Income
 
Details about Accumulated Other Comprehensive Income Components
Interest rate contracts
 
$
503

 
Interest expense, net
Total
 
$
503

 
 

15

WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

11. Income (Loss) Per Share

Basic income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted income (loss) per share is based on the weighted average number of shares outstanding during each period and the assumed exercise of potentially dilutive stock options and vesting of restricted stock units less the number of treasury shares assumed to be purchased from the proceeds using the average market price of the Company’s stock for each of the periods presented.
Basic and diluted income (loss) per common share from continuing operations is computed as follows (in thousands, except share and per share amounts):
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
 
2015
 
2014
 
2015
 
2014
Net loss from continuing operations applicable to common shares (numerator for basic and diluted calculation)
 
$
(19,023
)
 
$
(4,891
)
 
$
(28,454
)
 
$
(21,887
)
Weighted average number of common shares outstanding for basic loss per share
 
60,227,495

 
49,336,581

 
55,052,192

 
49,093,356

Weighted average number of potentially dilutive common shares outstanding
 

 

 

 

Weighted average number of common shares outstanding for diluted loss per share
 
60,227,495

 
49,336,581

 
55,052,192

 
49,093,356

Loss per common share from continuing operations:
 
 
 
 
 
 
 
 
Basic
 
$
(0.32
)
 
$
(0.10
)
 
$
(0.52
)
 
$
(0.45
)
Diluted
 
$
(0.32
)
 
$
(0.10
)
 
$
(0.52
)
 
$
(0.45
)
 
The Company has excluded shares potentially issuable under the terms of use of the securities listed below from the computation of diluted income per share, as the effect would be anti-dilutive:
 
 
Three Months Ended 
 June 30,
 
 
2015
 
2014
Stock options
 
227,750

 
189,973

Restricted stock and restricted stock rights
 
431,687

 
430,298

 
 
659,437

 
620,271

12. Segment Information
The Company’s segments are comprised of strategic businesses that are defined by the industries or geographic regions they serve. Each is managed as an operation with well-established strategic directions and performance requirements.
Management evaluates the performance of each operating segment based on operating income. To support the segments, the Company has a focused corporate operation led by the executive management team, which, in addition to oversight and leadership, provides general, administrative and financing functions for the organization. The costs to provide these services are allocated, as are certain other corporate costs, to the four operating segments.

16

WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

12. Segment Information (continued)


The following tables reflect the Company’s operations by reportable segment for the three months ended June 30, 2015 and 2014 (in thousands):
 
 
Three Months Ended June 30, 2015
 
 
Oil & Gas
 
Utility T&D
 
Professional
Services
 
Canada
 
Eliminations
 
Consolidated
Contract revenue
 
$
61,778

 
$
106,439

 
$
70,687

 
$
50,645

 
$
(2,626
)
 
$
286,923

Contract costs
 
68,439

 
92,883

 
58,509

 
45,962

 
(2,626
)
 
263,167

Amortization of intangibles
 
82

 
2,389

 
148

 

 

 
2,619

General and administrative
 
6,259

 
6,211

 
9,946

 
4,094

 

 
26,510

Loss on sale of subsidiary
 

 

 

 

 

 
2,177

Other charges
 
2,749

 
290

 
1,488

 
208

 

 
4,735

Operating income (loss)
 
$
(15,751
)
 
$
4,666

 
$
596

 
$
381

 
$

 
(12,285
)
Non-operating expenses
 
(6,947
)
Benefit for income taxes
 
(209
)
Loss from continuing operations
 
(19,023
)
Income from discontinued operations net of provision for income taxes
 
137

Net loss
 
$
(18,886
)
 
Other charges incurred during the second quarter of 2015 include $0.5 million related to the Company's corporate operations and have been allocated to each segment based on a percentage of total revenue.
 
 
Three Months Ended June 30, 2014
 
 
Oil & Gas
 
Utility T&D
 
Professional
Services
 
Canada
 
Eliminations
 
Consolidated
Contract revenue
 
$
234,010

 
$
93,867

 
$
118,670

 
$
95,277

 
$
(2,034
)
 
$
539,790

Contract costs
 
243,853

 
80,699

 
93,748

 
77,154

 
(2,034
)
 
493,420

Amortization of intangibles
 
81

 
2,389

 
649

 

 

 
3,119

General and administrative
 
12,681

 
3,394

 
13,952

 
6,664

 

 
36,691

Operating income (loss)
 
$
(22,605
)
 
$
7,385

 
$
10,321

 
$
11,459

 
$

 
6,560

Non-operating expenses
 
(8,576
)
Provision for income taxes
 
2,875

Loss from continuing operations
 
(4,891
)
Loss from discontinued operations net of provision for income taxes
 
(10,620
)
Net loss
 
$
(15,511
)


17

WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

12. Segment Information (continued)


The following tables reflect the Company’s operations by reportable segment for the six months ended June 30, 2015 and 2014 (in thousands):
 
 
Six Months Ended June 30, 2015
 
 
Oil & Gas
 
Utility T&D
 
Professional
Services
 
Canada
 
Eliminations
 
Consolidated
Contract revenue
 
$
138,218

 
$
193,425

 
$
170,828

 
$
137,654

 
$
(6,270
)
 
$
633,855

Contract costs
 
145,825

 
176,050

 
147,211

 
127,994

 
(6,270
)
 
590,810

Amortization of intangibles
 
163

 
4,779

 
772

 

 

 
5,714

General and administrative
 
15,378

 
11,808

 
25,062

 
9,894

 

 
62,142

Gain on sale of subsidiaries
 

 

 

 

 

 
(56,372
)
Other charges
 
3,578

 
982

 
3,225

 
900

 

 
8,685

Operating income (loss)
 
$
(26,726
)
 
$
(194
)
 
$
(5,442
)
 
$
(1,134
)
 
$

 
22,876

Non-operating expenses
 
(51,222
)
Provision for income taxes
 
108

Loss from continuing operations
 
(28,454
)
Loss from discontinued operations net of provision for income taxes
 
(256
)
Net loss
 
$
(28,710
)
Other charges incurred during the first six months of 2015 include $3.3 million related to the Company's corporate operations and have been allocated to each segment based on a percentage of total revenue.
 
 
Six Months Ended June 30, 2014
 
 
Oil & Gas
 
Utility T&D
 
Professional
Services
 
Canada
 
Eliminations
 
Consolidated
Contract revenue
 
$
411,539

 
$
177,388

 
$
218,765

 
$
212,356

 
$
(3,720
)
 
$
1,016,328

Contract costs
 
430,191

 
157,476

 
177,362

 
174,107

 
(3,720
)
 
935,416

Amortization of intangibles
 
163

 
4,779

 
1,296

 

 

 
6,238

General and administrative
 
24,802

 
7,334

 
28,108

 
13,519

 

 
73,763

Operating income (loss)
 
$
(43,617
)
 
$
7,799

 
$
11,999

 
$
24,730

 
$

 
911

Non-operating expenses
 
(16,254
)
Provision for income taxes
 
6,544

Loss from continuing operations
 
(21,887
)
Loss from discontinued operations net of provision for income taxes
 
(18,614
)
Net loss
 
$
(40,501
)
Total assets by segment as of June 30, 2015 and December 31, 2014 are presented below (in thousands):
 
 
June 30,
2015
 
December 31,
2014
Oil & Gas
 
$
96,973

 
$
179,305

Utility T&D
 
234,114

 
228,094

Professional Services
 
80,412

 
137,784

Canada
 
72,745

 
95,270

Corporate
 
70,740

 
44,697

Total assets, continuing operations
 
$
554,984

 
$
685,150


18

WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

13. Contingencies, Commitments and Other Circumstances


Contingencies

Litigation and Regulatory Matters Related to the Company’s October 21, 2014 Press Release Announcing the Restatement of Condensed Consolidated Financial Statements for the Quarterly Period Ended June 30, 2014

After the Company announced it would be restating its Condensed Consolidated Financial Statements for the quarterly period ended June 30, 2014, a complaint was filed in the United States District Court for the Southern District of Texas on October 28, 2014 seeking class action status on behalf of purchasers of the Company’s stock and alleging damages on their behalf arising from the matters that led to the restatement. The original defendants in the case are the Company and its former chief executive officer and current chief financial officer. On January 31, 2015, the court named two employee retirement systems as Lead Plaintiffs. On March 31, 2015, a consolidated complaint was filed in which the current chief executive officer of the Company was added as a defendant. On June 15, 2015, a second amended consolidated complaint was filed. The complaint in the case, now entitled In re Willbros Group, Inc. Securities Litigation, alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, arising out of the restatements of the Company’s first and second quarter 2014 financial statements, its statements regarding debt compliance and liquidity, the decision to shut down the regional business, the delay in filing the 2014 10-K, and the determination that a material weakness existed as of December 31, 2014, and seeks undisclosed damages. On July 27, 2015, the Company filed a motion to dismiss the case. As this matter is at a very early stage, the Company is not able at this time to determine the likelihood of loss, if any, arising from this matter. The Company believes the claims are without merit and intends to defend against them vigorously.
In addition, two shareholder derivative complaints have been filed, one of which is now dismissed. The first, Markovich v. Harl et al, was filed on November 6, 2014 in the District Court of Harris County, Texas. The second, Kumararatne v. McNabb et al, was filed on March 4, 2015 in the United States District Court for the Southern District of Texas, but was voluntarily dismissed by the complainant on April 23, 2015. The remaining lawsuit is filed on behalf of the Company naming certain current and former officers and members of the Company's board of directors as defendants and the Company as a nominal defendant. The complaint alleges that the officer and board member defendants breached their fiduciary duties by permitting the Company's internal controls to be inadequate, wasted corporate assets, and were unjustly enriched. The defendants have sought dismissal on the grounds that the plaintiff failed to make demand upon the Company’s board to bring the suit. As this matter is at a very early stage, the Company is not able at this time to determine the likely outcome.
Other

The Securities and Exchange Commission ("SEC") issued an order of investigation on January 29, 2015 and a subpoena on February 3, 2015, requesting information regarding the restatement of the Company's previously issued condensed consolidated financial statements for the quarterly periods ended March 31, 2014 and June 30, 2014. The Company has been fully cooperating and intends to continue providing full cooperation with the SEC.
At June 30, 2015, the Company's days sales outstanding (“DSO”) was 77 days. Included in the DSO calculation are seven customer receivables in the Oil & Gas segment of $12.5 million, net of a $1.3 million reserve and three customer receivables in the Canada segment of $19.3 million, net of a $1.3 million reserve. Although payment is reasonably assured on these receivables, timing of ultimate receipt of payments may extend past the Company's normal collection cycle.
In addition to the matters discussed above and in Note 15 - Discontinued Operations, the Company is party to a number of other legal proceedings. Management believes that the nature and number of these proceedings are typical for a firm of similar size engaged in a similar type of business and that none of these proceedings is material to the Company’s consolidated results of operations, financial position or cash flows.


19

WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

13. Contingencies, Commitments and Other Circumstances (continued)


Commitments
From time to time, the Company enters into commercial commitments, usually in the form of commercial and standby letters of credit, surety bonds and financial guarantees. Contracts with the Company’s customers may require the Company to secure letters of credit or surety bonds with regard to the Company’s performance of contracted services. In such cases, the commitments can be called upon in the event of failure to perform contracted services. Likewise, contracts may allow the Company to issue letters of credit or surety bonds in lieu of contract retention provisions, where the client withholds a percentage of the contract value until project completion or expiration of a warranty period. Retention commitments can be called upon in the event of warranty or project completion issues, as prescribed in the contracts. At June 30, 2015, the Company had approximately $55.8 million of outstanding letters of credit, all of which related to continuing operations. This amount represents the maximum amount of payments the Company could be required to make if these letters of credit are drawn upon. Additionally, the Company issues surety bonds customarily required by commercial terms on construction projects. At June 30, 2015, the Company had bonds outstanding, primarily performance bonds, with a face value at $424.4 million related to continuing operations. This amount represents the bond penalty amount of future payments the Company could be required to make if the Company fails to perform its obligations under such contracts. The performance bonds do not have a stated expiration date; rather, each is released when the contract is accepted by the owner. The Company’s maximum exposure as it relates to the value of the bonds outstanding is lowered on each bonded project as the cost to complete is reduced. As of June 30, 2015, no liability has been recognized for letters of credit or surety bonds.

Other Circumstances
The Company has the usual liability of contractors for the completion of contracts and the warranty of its work. In addition, the Company acts as prime contractor on a majority of the projects it undertakes and is normally responsible for the performance of the entire project, including subcontract work. Management is not aware of any material exposure related thereto which has not been provided for in the accompanying Condensed Consolidated Financial Statements.
14. Fair Value Measurements
The FASB’s standard on fair value measurements defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance.
Fair Value Hierarchy
The FASB’s standard on fair value measurements establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. This standard establishes three levels of inputs that may be used to measure fair value:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities.
Level 3 – Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.
The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, notes payable, long-term debt and interest rate contracts. The fair value estimates of the Company’s financial instruments have been determined using available market information and appropriate valuation methodologies and approximate carrying value.
 

20

WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

14. Fair Value Measurements (continued)


Financial Instruments Measured at Fair Value on a Recurring Basis

The Company measures certain financial instruments at fair value on a recurring basis. The fair value of these financial instruments (in thousands) was determined using the following inputs as of June 30, 2015 and December 31, 2014:
 
 
June 30, 2015
 
 
Total
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs (Level 2)
 
Significant
Other
Unobservable
Inputs (Level 3)
Liabilities:
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
4,208

 
$

 
$
4,208

 
$

 
 
December 31, 2014
 
 
Total
 
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
 
Significant
Other
Observable
Inputs (Level 2)
 
Significant
Other
Unobservable
Inputs (Level 3)
Liabilities:
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
4,075

 
$

 
$
4,075

 
$

Hedging Arrangements
The Company attempts to negotiate contracts that provide for payment in U.S. dollars, but it may be required to take all or a portion of payment under a contract in another currency. To mitigate non-U.S. currency exchange risk, the Company seeks to match anticipated non-U.S. currency revenue with expenses in the same currency whenever possible. To the extent it is unable to match non-U.S. currency revenue with expenses in the same currency, the Company may use forward contracts, options or other common hedging techniques in the same non-U.S. currencies. The Company had no derivative financial instruments to hedge currency risk at June 30, 2015 or December 31, 2014.

Interest Rate Swaps
The Company is subject to hedging arrangements to fix or otherwise limit the interest cost of its variable interest rate borrowings. The Company is subject to interest rate risk on its debt and investment of cash and cash equivalents arising in the normal course of business. The Company does not engage in speculative trading strategies.
In August 2013, the Company entered into an interest rate swap agreement for a notional amount of $124.1 million to hedge changes in the variable rate interest expense on $124.1 million of its existing or replacement LIBOR indexed debt. Under the swap agreement, which is effective June 30, 2014 through August 7, 2019, the Company receives interest at either one-month LIBOR or 1.25 percent (whichever is greater) and pays interest at a fixed rate of 2.84 percent. The swap is designated and qualifies as a cash flow hedging instrument with the effective portion of the swap’s change in fair value recorded in Other Comprehensive Income (“OCI”). The swap is highly effective in offsetting changes in interest expense and no hedge ineffectiveness has been recorded in the Condensed Consolidated Statements of Operations. Amounts in OCI will be reclassified to interest expense when the hedged interest payments on the underlying debt are recognized.
 
The carrying amount and fair value of these swap agreements are equivalent since the Company accounts for these instruments at fair value. The values, as identified below (in thousands), are derived from pricing models using inputs based upon market information, including contractual terms, market prices and yield curves. The inputs to the valuation pricing models are observable in the market, and as such are generally classified as Level 2 in the fair value hierarchy. For validation purposes, the swap valuations are periodically compared to those produced by swap counterparties. Amounts of OCI relating to the interest rate swaps expected to be recognized in interest expense in the coming twelve months totaled $1.9 million.

21

WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

14. Fair Value Measurements (continued)


 
 
Liability Derivatives
 
 
June 30, 2015
 
December 31, 2014
 
 
Balance Sheet
Location
 
Fair
Value
 
Balance Sheet
Location
 
Fair Value
Interest rate contracts- swaps
 
Other current
liabilities
 
$
1,859

 
Other current
liabilities
 
$
1,865

Interest rate contracts- swaps
 
Other long-term
liabilities
 
2,349

 
Other long-term
liabilities
 
2,210

Total derivatives
 
 
 
$
4,208

 
 
 
$
4,075


Three Months Ended June 30,
Derivatives in ASC 815 Cash Flow
Hedging Relationships
 
Amount of Gain Recognized in OCI on Derivative (Effective Portion)
 
Location of Gain or (Loss)
Reclassified from
Accumulated OCI into Income (Effective Portion)
 
Amount of Loss Reclassified
from Accumulated OCI into
Income (Effective Portion)
 
 
2015
 
2014
 
 
 
2015
 
2014
Interest rate contracts
 
$
(136
)
 
$
(1,098
)
 
Interest expense, net
 
$
493

 
$
253

Total
 
$
(136
)
 
$
(1,098
)
 
 
 
$
493

 
$
253

Six Months Ended June 30,
Derivatives in ASC 815 Cash Flow
Hedging Relationships
 
Amount of Gain Recognized in OCI on Derivative (Effective Portion)
 
Location of Gain or (Loss)
Reclassified from
Accumulated OCI into Income (Effective Portion)
 
Amount of Loss Reclassified
from Accumulated OCI into
Income (Effective Portion)
 
 
2015
 
2014
 
 
 
2015
 
2014
Interest rate contracts
 
$
(1,115
)
 
$
(2,133
)
 
Interest expense, net
 
$
982

 
$
503

 
 
$
(1,115
)
 
$
(2,133
)
 
 
 
$
982

 
$
503

15. Discontinued Operations

Business Disposals
The following business disposals qualify as discontinued operations as they were sold prior to the Company's adoption of ASU 2014-08 on January 1, 2015.
CTS
In the second quarter of 2014, the Company sold its CTS business to a private buyer. In connection with the disposition, the Company recorded total proceeds of $25.0 million and recognized a net loss on sale of $8.2 million. The net loss is inclusive of a non-cash charge of $15.0 million related to intangible assets associated with the sold business.
Hawkeye
In the fourth quarter of 2013, the Company sold certain assets comprising its Hawkeye business to Elecnor Hawkeye, LLC, a subsidiary of Elecnor, Inc. (“Elecnor”). In connection with the sale, the Company recorded total consideration of $27.7 million, subject to a post-closing working capital adjustment. At the closing, Elecnor delivered two letters of credit, one to the Company for $16.2 million and the other to the escrow agent for $8.0 million. The Company recognized a net loss on the sale of $2.7 million in the fourth quarter of 2013.
In the first quarter of 2014, the Company received $21.2 million in cash consisting of full payment against the $16.2 million letter of credit and $5.0 million of the $8.0 million in escrow. The Company received $1.5 million of additional proceeds in 2014. In the second quarter of 2015, the Company entered into a settlement agreement under which the Company received $3.7 million in full and final settlement of the outstanding amount.

22

WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

15. Discontinued Operations (continued)

Former Nigeria-Based Operations
Litigation and Settlement
On March 29, 2012, the Company and Willbros Global Holdings, Inc., formerly known as Willbros Group, Inc., a Panama corporation (“WGHI”), which is now a subsidiary of the Company, entered into a settlement agreement (the “Settlement Agreement”) with WAPCo to settle a lawsuit filed against WGHI by WAPCo in 2010 under English law in the London High Court in which WAPCo was seeking $273.7 million plus costs and interest. The lawsuit was based upon a parent company guarantee issued by WGHI to WAPCo in connection with a Nigerian project undertaken by a WGHI subsidiary that was later sold to a third party. WAPCo alleged that the third party defaulted in the performance of the project and thereafter brought the lawsuit against WGHI under the parent company guarantee for its claimed losses.
The Settlement Agreement required that WGHI make payments to WAPCo totaling $55.5 million. Payments made to WAPCo during 2012, 2013 and the second quarter of 2014 totaled $22.8 million. On December 30, 2014, the Company made a final payment to WAPCo of $32.7 million. The Company and WGHI have now fulfilled all of the terms of the Settlement Agreement.
The Company currently has no employees working in Nigeria and does not intend to return to Nigeria.
Results of Discontinued Operations
Condensed Statements of Operations with respect to discontinued operations are as follows (in thousands):
 
 
Three Months Ended June 30, 2015
 
 
Hawkeye
 
CTS
 
Total
Contract revenue
 
$
303

 
$

 
$
303

Operating income
 
141

 

 
141

Pre-tax income
 
137

 

 
137

Net income
 
137

 

 
137

 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2014
 
 
Hawkeye
 
CTS
 
Total
Contract revenue
 
$
4,992

 
$

 
$
4,992

Operating loss
 
(2,324
)
 
(8,161
)
 
(10,485
)
Pre-tax loss
 
(2,459
)
 
(8,161
)
 
(10,620
)
Net loss
 
(2,459
)
 
(8,161
)
 
(10,620
)

23

WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

15. Discontinued Operations (continued)

 
 
Six Months Ended June 30, 2015
 
 
Hawkeye
 
CTS
 
Total
Contract revenue
 
$
1,224

 
$

 
$
1,224

Operating loss
 
(269
)
 

 
(269
)
Pre-tax loss
 
(256
)
 

 
(256
)
Net loss
 
(256
)
 

 
(256
)
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2014
 
 
Hawkeye
 
CTS
 
Total
Contract revenue
 
$
11,072

 
$
24,361

 
$
35,433

Operating loss
 
(8,823
)
 
(9,538
)
 
(18,361
)
Pre-tax loss
 
(9,076
)
 
(9,538
)
 
(18,614
)
Net loss
 
(9,076
)
 
(9,538
)
 
(18,614
)
Condensed Balance Sheets with respect to discontinued operations are as follows (in thousands):
 
 
June 30, 2015
 
 
Hawkeye
Accounts receivable, net
 
$
2,091

Contract cost and recognized income not yet billed
 
66

Prepaid expenses and other current assets
 
4

Property, plant and equipment, net
 
61

Total assets
 
2,222

Accounts payable and accrued liabilities
 
$
1,759

Other liabilities
 
100

Total liabilities
 
1,859

Net assets of discontinued operations
 
363

 
 
 
December 31, 2014
 
 
Hawkeye
Accounts receivable, net
 
$
5,564

Contract cost and recognized income not yet billed
 
66

Prepaid expenses and other current assets
 
16

Property, plant and equipment, net
 
511

Other assets
 
900

Total assets
 
7,057

Accounts payable and accrued liabilities
 
$
3,970

Other liabilities
 
1,215

Total liabilities
 
5,185

Net assets of discontinued operations
 
1,872


24


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the unaudited Condensed Consolidated Financial Statements for the three and six months ended June 30, 2015 and 2014, included in Item 1 of Part I of this Form 10-Q, and the Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations, including Critical Accounting Policies, included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

OVERVIEW
Willbros is a specialty energy infrastructure contractor serving the oil, gas, refinery, petrochemical and power industries. Our offerings include engineering, procurement and construction (either individually or as an integrated “EPC” service offering), turnarounds, maintenance, facilities development and operations services.

Second Quarter of 2015
In the second quarter of 2015, we reported contract revenue of $286.9 million, a decrease of approximately $252.9 million from the second quarter of 2014. The decrease is attributed primarily to a decrease of $172.2 million in our Oil & Gas segment as well as a decrease of $44.6 million in our Canada segment. Contract revenue also decreased $48.0 million in our Professional Services segment, primarily as a result of the first quarter of 2015 sales of UtilX Corporation ("UtilX") and Premier Utility Services, LLC ("Premier"). The Utility T&D segment reported revenue of $106.4 million, an increase of $12.6 million compared to 2014 driven primarily by growth in its Atlantic seaboard operations. The award of work to Willbros, and especially to our Oil & Gas segment, has been affected by customer confidence issues related to our financial performance. To mitigate this confidence gap, we have signed non-disclosure agreements with key customers and conducted meetings to improve their understanding of our capital structure and outlook as well as the actions we are taking to improve our operational and financial profile. We have received significant long term awards from certain key customers and believe that we can overcome this confidence issue.
The operating loss of $12.3 million during the second quarter of 2015 was a decrease of $18.8 million compared to operating income of $6.5 million in the second quarter of 2014. The decline in operating income reflects the net effect of the downturn in the energy sector coupled with the re-sizing of our Oil & Gas segment. Operating results reflect other charges, including employee severance and equipment and facility lease abandonment, totaling approximately $4.7 million, incurred as we continue to reduce overhead and indirect charges, exit the regional delivery model and streamline operations. Our Canada, Oil & Gas and Professional Services segments were all impacted negatively by the reduced capital budgets and delays in projects driven by lower oil prices.
Contract revenue of $61.8 million generated by our Oil & Gas segment was a decline of $172.2 million from the second quarter of 2014 primarily driven by decreased workload in our cross-country pipeline construction services and the exit from our regional delivery model. Oil & Gas recorded an operating loss of $15.8 million in the second quarter of 2015, a $6.9 million improvement from the second quarter of 2014 primarily due to the fact that the losses from a significant pipeline construction project in the second quarter of 2014 did not reoccur in the second quarter of 2015. Oil & Gas operating results included $2.7 million of the other charges discussed above as well as trailing costs associated with the exit from the regional delivery model and losses on certain projects in the downstream market.
Contract revenue of $106.4 million generated by our Utility T&D segment increased $12.6 million from the second quarter of 2014. Operating income of $4.7 million decreased $2.7 million over the same period in 2014. The decrease in operating income is primarily attributed to a worker's compensation refund in 2014 that did not reoccur in 2015, as well as an increase in allocated corporate overhead due to this segment's increased percentage of total company revenue. This segment, with maintenance operations in ten states, is expecting continued growth in its Atlantic seaboard operations relative to 2014 and is now pursuing electric transmission construction opportunities with a new management team in place within its Chapman subsidiary.
Our Canada segment reported contract revenue of $50.6 million, down $44.6 million from the same period last year. Second quarter of 2014 results included the close-out of a large capital project which was not replaced with similar work for 2015. Operating income for the second quarter of 2015 of $0.4 million was down $11.1 million from the same period last year due to the project close-out and lower volume as delays in project starts and budget curtailments by customers negatively impacted revenue. In addition to the normal slow-down due to Spring break-up, delays in the negotiation of project change orders have also impacted Canada results in the second quarter. Work acquisition in Canada has not been impacted as heavily as in our Oil & Gas segment and new project awards include certain long-term assignments up to three years.
Our Professional Services segment generated revenue of $70.7 million compared to $118.7 million in the second quarter

25


of 2014. The decrease in revenue is primarily attributable to the sale of the UtilX and Premier businesses in the first quarter of 2015 as these businesses generated $42.7 million in revenue in the second quarter of 2014. Operating income of $0.6 million in the second quarter of 2015 was a $9.7 million decrease from the second quarter of last year. The decrease in operating income was driven by lower margins in our engineering service offerings, which were impacted by the general downturn in the oil and gas sector, and the absence of $6.3 million in operating income, exclusive of allocated segment and corporate general and administrative costs, from the two businesses which were sold earlier this year. Professional Services operating results included $1.5 million of the other charges discussed above.
Looking Forward
We believe world events have made it more probable that oil prices will remain in a range of fifty to sixty dollars, with some possible downside. This scenario implies that customers will be more disciplined and carefully scrutinize additional investment in oil and gas infrastructure projects beyond those that are already announced. We continue to believe that our electric transmission and distribution services are minimally impacted by oil prices. During the second quarter of 2015, we continued to streamline our business operations. The exit from the regional delivery model impacted second quarter results, but is largely complete and is not expected to have a material effect on operations going forward. An agreement for the planned sale of the Professional Services segment is expected in the third quarter and upon completion, we expect to apply proceeds from the sale to reduce term loan debt. These actions are expected to improve our risk profile and enhance relationships with our customer base. We continue to expect increased opportunities for our Canada, Oil & Gas and Utility T&D segments. In Canada, we expect continued long term opportunities in the oil sands providing construction and maintenance services to the mine sites, and have recently booked additional backlog including a three-year assignment with a key customer. We believe the expanding opportunity set for cross-country pipeline construction in Canada offers some upside for this segment in the next two years. Oil & Gas prospects appear strong for opportunities through 2016 and our proactive efforts to repair customer relationships impacted by our financial stress are yielding positive results. Our Utility T&D segment is active in ten states and, with new management in our transmission construction unit, is targeting projects to expand its transmission construction activity eastward from its current Southwest market presence. With completion of the sale of our Professional Services segment, we believe Willbros, going forward, will be a more nimble infrastructure construction provider with presence in the North American markets for oil sands, pipelines and facilities and electric utility construction and maintenance.
Other Financial Measures
Adjusted EBITDA from Continuing Operations
We define Adjusted EBITDA from continuing operations as income (loss) from continuing operations before interest expense, income tax expense (benefit) and depreciation and amortization, adjusted for items broadly consisting of selected items which management does not consider representative of our ongoing operations and certain non-cash items of the Company. These adjustments are itemized in the following table. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted EBITDA from continuing operations, you should be aware that in the future we may incur expenses that are the same as, or similar to, some of the adjustments in this presentation. Our presentation of Adjusted EBITDA from continuing operations should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.
Management uses Adjusted EBITDA from continuing operations as a supplemental performance measure for:
 
Comparing normalized operating results with corresponding historical periods and with the operational performance of other companies in our industry; and
Presentations made to analysts, investment banks and other members of the financial community who use this information in order to make investment decisions about us.
Adjusted EBITDA from continuing operations is not a financial measurement recognized under U.S. generally accepted accounting principles, or U.S. GAAP. When analyzing our operating performance, investors should use Adjusted EBITDA from continuing operations in addition to, and not as an alternative for, net income, operating income, or any other performance measure derived in accordance with U.S. GAAP, or as an alternative to cash flow from operating activities as a measure of our liquidity. Because not all companies use identical calculations, our presentation of Adjusted EBITDA from continuing operations may be different from similarly titled measures of other companies.

26


A reconciliation of Adjusted EBITDA from continuing operations to U.S. GAAP financial information follows (in thousands): 
 
 
Six Months Ended
 
 
June 30, 2015
 
June 30, 2014
Loss from continuing operations
 
$
(28,454
)
 
$
(21,887
)
Interest expense, net
 
14,828

 
15,195

Provision for income taxes