- Company put operations in Nigeria and Venezuela up for sale resulting
in classification as discontinued operations
- Net loss from continuing operations of $5.1 million for second quarter
2006
- Company takes $39 million charge in discontinued operations
- Net loss from discontinued operations of $33.0 million for second
quarter 2006
- Agreement in principle reached on settlement of class action lawsuit
- June 30, 2006 backlog was $1.17 billion for continuing operations
- Conference Call scheduled for Thursday, August 10, 2006 at 9:00 a.m.
Eastern Time
HOUSTON, Aug. 9 /PRNewswire-FirstCall/ -- Willbros Group, Inc. (NYSE: WG)
announced today that it has filed its results for the second quarter of 2006.
The Form 10-Q is available on the Company's web site at
http://www.willbros.com . The Company has been evaluating its strategic
options since late last year. The Company's strategy is to deploy its
resources in markets for its engineering and construction services which can
provide the highest risk adjusted return, while maintaining a balanced backlog
with respect to commercial and political risks and market presence. The
Company's overall strategy has not changed. However, as the fundamental
drivers in different markets around the world change, the Company's tactical
approach is continuously adjusted and refined. As a result, Willbros is in
the process of employing a new set of tactics to optimize its risk adjusted
returns. Since June 19, events in Nigeria have caused the Company to
accelerate the implementation of certain tactics to support its strategy.
Mike Curran, Chairman and Chief Executive Officer, commented, "This
evaluation, which considered the risk adjusted returns available in markets of
interest to Willbros, has led the Company to make the strategic decision to
sell both the Nigeria and Venezuela assets and operations, to drastically
reduce our level of operations in Nigeria and to focus on markets which offer
better opportunities and returns, including North America.
"The attacks of militants have directly and indirectly affected Willbros
on a continuous basis since the hostage taking incident of February 18, 2006.
However, since mid-June, the situation in Nigeria has worsened, with attacks
increasing throughout the country. Additional production operations in the
Delta area have been, and remain, shut in. These disruptions have had the
combined effect of elevating oil prices and frustrating projects we have in
progress in Nigeria. The spread and escalation of hostilities against oil and
gas facilities and the work forces charged with the construction, maintenance
and operation of these facilities have led us to conclude that the commercial
and operating risks associated with doing business in Nigeria exceed our
acceptable risk levels."
As a result of these strategic decisions, the Company reported the Nigeria
and Venezuela assets and operations as Discontinued Operations. The Company
has engaged an investment bank to assist in the sale of all or part of
Willbros' interests in Nigeria. Willbros reached a preliminary agreement to
sell the Venezuela businesses in late June 2006. This transaction is expected
to close in October 2006. The Discontinued Operations also include the sale
of the TXP-4 Plant in Opal, Wyoming, which was completed earlier in 2006. The
Company reported a net loss of $38.2 million, consisting of $5.1 million from
continuing operations and $33.1 million from discontinued operations.
Financial results are presented as a table to this press release.
Backlog(1)
Willbros reported record backlog(1) for continuing operations at
June 30, 2006 of approximately $1.17 billion with an embedded margin of
15.1 percent as compared to $344 million with an embedded margin of
11.5 percent for continuing operations at March 31, 2006. Backlog for
continuing operations has increased by more than 240 percent since the end of
the first quarter of 2006 and represents projects primarily in North America.
Backlog for discontinued operations was $466 million at June 30, 2006, with an
embedded margin of 11.7 percent.
Randy Harl, President and Chief Operating Officer, commented, "We do not
take the decision to sell our interests in Nigeria lightly, and we believe the
Nigeria operation and assets will be attractive to others with interest in
that market and that our Nigeria resources, both equipment and personnel, will
continue to provide services to that market under new ownership. However, the
rapid growth in continuing operations is driven by the strong demand in North
America for pipeline engineering and construction services as well as the
substantial investments flowing into the oil sands region of Canada and
provides us the opportunity to improve our risk adjusted returns. We believe
the increase in backlog in North America and the high level of prospects there
validate our decision to increase our focus on this market. Our ability to
offer a total project solution is attractive to our customers and is enabling
us to expand quality backlog in the more stable North America markets. Our
EPC approach makes it possible for us to leverage our resources to increase
our market share in what is becoming a capacity constrained market for energy
services."
Class Action Suit
Willbros has reached an agreement in principle to settle the consolidated
securities class action lawsuit filed in 2005 against the Company and certain
of its current officers and a former officer of its international subsidiary.
Under the terms of the agreement in principle, Willbros and the plaintiffs
will negotiate and seek court approval of the definitive settlement. The
settlement will be funded by Willbros' insurance carrier, and will include the
dismissal of all claims against all defendants.
Continuing Operations Second Quarter 2006
The Company posted a loss from continuing operations of $5.1 million on
revenue of $119.1 million for the quarter ended June 30, 2006. Contract costs
were $105.7 million, resulting in a gross margin of 11.2 percent. General and
Administrative costs were $11.6 million, or 9.8 percent of revenue. The tax
provision was $1.7 million primarily due to incurring losses in one country
that cannot be offset by taxable income in another country. Net loss was
$5.1 million, or $0.24 per share, compared to a net loss of $6.2 million, or
$0.29 per share, in the second quarter of 2005.
In the United States & Canada, revenue of $102.3 million was up
$41.8 million as compared to results for the same period in 2005, primarily as
a result of increased business activity for Willbros MSI and Willbros RPI.
International revenue of $16.9 million increased by $9.3 million over the same
period in 2005, due to increased work in Oman.
The increase in contract income of $5.6 million to $13.4 million in the
second quarter of 2006 compared to the same quarter last year was primarily
the result of increased revenue in the United States & Canada business
segment. However, contract margin in the second quarter 2006 remained roughly
the same as in 2005 at 11.2 percent. Second quarter 2006 margin of
11.2 percent was up 97 percent from 5.7 percent in the first quarter 2006.
General and Administrative ("G&A") costs were $11.6 million for the second
quarter of 2006. This was an increase of $0.8 million, or eight percent,
compared to the same quarter of 2005. This increase in G&A costs included
increased insurance and additional staffing and legal costs totaling
approximately $2.4 million, offset by reductions from the use of consultants
and the exit from Bolivia of approximately $1.5 million.
Depreciation and amortization costs for the period ended June 30, 2006,
were approximately $2.9 million, compared to $2.7 million for the same period
in 2005.
Discontinued Operations Second Quarter 2006
The Company posted a loss from discontinued operations of $33.0 million on
revenue of $132.3 million for the quarter ended June 30, 2006. Contract costs
were $134.8 million, resulting in a negative gross margin of 1.9 percent.
General and Administrative costs were $8.2 million, or 6.2 percent of revenue.
The tax provision was $5.9 million, primarily due to taxes payable on a deemed
profit basis in Nigeria. Net loss was $33.0 million, or $1.53 per share,
compared to a net loss of $3.8 million, or $0.18 per share, in the second
quarter of 2005.
In order to address the increasingly difficult operating conditions in
Nigeria, Willbros took a charge of $39 million during the second quarter.
Estimated contract income on current projects in Nigeria was reduced by
approximately $37.0 million as a result of schedule delays, disputed change
orders, heightened security issues and increased costs related to labor,
equipment, and materials. Of the $37 million reduction in estimated contract
income, approximately $25 million was charged against discontinued operations
in the second quarter. Should our estimated costs to complete our projects
remain unchanged in future periods; the remaining $12 million will be charged
against discontinued operations in future quarters. Furthermore, the
allowance for doubtful accounts was increased by approximately $7.7 million
and net book value of assets for discontinued operations was reduced by
approximately $7.0 million. While the Company has taken appropriate measures
to identify and record costs associated with the implementation of its
Nigerian strategy, it may incur additional costs in the future and those costs
may be material. The Company continues to employ all available remedies under
the contracts including negotiations, mediation and arbitration as
appropriate. Any resolutions in the Company's favor would have a positive
impact on its revenue, operating income and cash flow from discontinued
operations.
2006 Year to date Continuing Operations
The Company posted a loss from continuing operations of $13.6 million on
revenue of $226.7 million for the six month period ended June 30, 2006.
Contract costs were $207.2 million, resulting in a gross margin of
8.6 percent. General and Administrative costs were $22.0 million, or
9.7 percent of revenue. The tax provision was $1.4 million primarily due to
incurring losses in one country that cannot be offset by taxable income in
another country. Net loss was $13.6 million, or $0.63 per share, compared to
a net loss of $14.9 million, or $0.70 per share, in the comparable period in
2005.
In the United States & Canada, revenue of $200.9 million was up
$103.2 million, 105.6 percent, as compared to the same period in 2005, as a
result of increased levels of project activity for Willbros MSI, Willbros RPI
and Willbros Engineers, Inc. International revenue of $25.9 million increased
by $12.0 million over the same period in 2005, due to increased work in Oman.
The increase in contract income of $10.0 million to $19.5 million in the
first six months of 2006 compared to the same period last year was primarily
the result of increased revenue in the United States & Canada business
segment. However, contract margin remained roughly the same between periods
at 8.6 per cent.
G&A costs were $22.0 million for the first six months of 2006. This was
an increase of $2.2 million, or 10.8 percent, compared to the same period in
2005. This increase in G&A costs included increased insurance and additional
staffing costs totaling approximately $4.6 million, offset by reductions from
accounting, legal, audit expenses and various other cost reductions of
approximately $2.7 million.
Depreciation and amortization costs for the six month period ended
June 30, 2006, were approximately $5.9 million, compared to $5.6 million for
the same period in 2005.
2006 Year to date Discontinued Operations
The Company posted a loss from discontinued operations of $29.1 million on
revenue of $273.2 million for the six month period ended June 30, 2006.
Contract costs were $260.5 million, resulting in a gross margin of
4.6 percent. General and Administrative costs were $13.4 million, or
4.9 percent of revenue. The tax provision was $12.1 million, primarily due to
taxes payable on a deemed profit basis in Nigeria. Net loss was
$29.1 million, or $1.36 per share, compared to a net loss of $4.9 million, or
$0.23 per share, in the comparable period in 2005.
The Company continues to negotiate with its clients in Nigeria to address
schedule delays, heightened security concerns, disputed change orders and
increased costs related to labor, equipment, and materials to mitigate the
commercial impacts on it. Willbros has made substantial progress on these
negotiations but resolution with all clients has not been finalized and the
outcome of the remaining negotiations is still uncertain; as is their ultimate
effect on our revenue, operating results and cash flow from discontinued
operations. Willbros believes these negotiations and other factors could have
an impact on its future revenue, operating results and cash flow.
Detailed explanations of the results for the reported periods and factors
which impacted them are provided in the Company's quarterly report on
Form 10-Q, which was filed today.
CONFERENCE CALL
In conjunction with this release, Willbros has scheduled a conference
call, which will be broadcast live over the Internet, on Thursday,
August 10, 2006, at 9:00 a.m. Eastern Time (8:00 a.m. Central).
What: Willbros Earnings Conference Call
When: Thursday, August 10, 2006 - 9:00 a.m. Eastern Time
How: Live via phone - By dialing (303) 262-2075 and asking for the
Willbros call 10 minutes prior to the start time. Or live over
the Internet by logging on to the web address below.
Where: http://www.willbros.com . The webcast can be accessed from the
home page.
For those who cannot listen to the live call, a replay will be available
through August 24, 2006, and may be accessed by calling (303) 590-3000 using
pass code 11068106. Also, an archive of the webcast will be available shortly
after the call on http://www.willbros.com for a period of 12 months.
Willbros Group, Inc. is an independent contractor serving the oil, gas and
power industries, providing engineering and construction, and facilities
development and operations services to industry and government entities
worldwide. For more information on Willbros, please visit our web site at
http://www.willbros.com .
This announcement contains forward-looking statements. All statements,
other than statements of historical facts, which address activities, events or
developments the Company expects or anticipates will or may occur in the
future, are forward-looking statements. A number of risks and uncertainties
could cause actual results to differ materially from these statements,
including those discussed above and such things as the potential for
additional investigations, the possible losses arising from the
discontinuation of operations and the sale of the Nigeria assets, fines and
penalties by government agencies, the financial impact of the internal
investigation, litigation that may arise from the investigation, the outcome
of the current Securities and Exchange Commission, Office of Foreign Assets
Control and Department of Justice investigations; the identification of one or
more other issues that require restatement of one or more prior period
financial statements; the existence of material weaknesses in internal
controls over financial reporting; availability of quality management;
availability and terms of capital; changes in, or the failure to comply with,
government regulations; ability to remain in compliance with, or obtain
waivers under, the Company's loan agreements and indentures; the promulgation,
application, and interpretation of environmental laws and regulations; future
E&P capital expenditures, oil, gas, gas liquids and power prices and demand,
the amount and location of planned pipelines, the effective tax rate of the
different countries where the work is being conducted, development trends of
the oil, gas and power industries, changes in the political and economic
environment of the countries in which the Company has operations, as well as
other risk factors described from time to time in the Company's documents and
reports filed with the SEC. The Company assumes no obligation to update
publicly such forward-looking statements, whether as a result of new
information, future events or otherwise.
TABLE TO FOLLOW
WILLBROS GROUP, INC.
(In Thousands, Except Per Share Amounts)
Three Months Ended Six Months Ended
June 30 June 30
2006 2005 2006 2005
Statement of Operations Data
Contract revenue
International $16,864 $7,558 $25,856 $13,809
United States & Canada 102,264 60,492 200,859 97,684
119,128 68,050 226,715 111,493
Contract cost
International 15,689 6,874 23,265 12,747
United States & Canada 90,058 53,378 183,945 89,191
105,747 60,252 207,210 101,938
Contract income
International 1,175 684 2,591 1,062
United States & Canada 12,206 7,114 16,914 8,493
13,381 7,798 19,505 9,555
Depreciation and amortization 2,924 2,714 5,915 5,550
General and administrative 11,636 10,800 22,041 19,885
Operating income (loss) (1,179) (5,716) (8,451) (15,880)
Other income (expense):
Interest - net (1,787) (487) (3,423) (1,035)
Other - net (452) 1,038 (327) 1,156
(2,239) 551 (3,750) 121
Income (loss) before income taxes (3,418) (5,165) (12,201) (15,759)
Provision (benefit) for income
taxes 1,686 988 1,432 (874)
Loss from continuing operations (5,104) (6,153) (13,633) (14,885)
Loss from discontinued operations (33,048) (3,766) (29,113) (4,932)
Net income (loss) $(38,152) $(9,919) $(42,746) $(19,817)
Basic loss per share
Continuing operations $(.24) $(.29) $(.63) $(.70)
Discontinued operations (1.53) (.18) (1.36) (.23)
$(1.77) $(.47) $(1.99) $(.93)
Diluted loss per share
Continuing operations $(.24) $(.29) $(.63) $(.70)
Discontinued operations (1.53) (.18) (1.36) (.23)
$(1.77) $(.47) $(1.99) $(.93)
Cash Flow Data
Continuing operations:
Cash provided by (used in):
Operating activities $(18,459) $(1,188) $(10,426) $(20,018)
Investing activities 3,652 (5,798) (3,770) (8,450)
Financing activities (3,400) (642) 11,181 (3,052)
Foreign exchange effects (158) (382) (118) (102)
Discontinued operations (6,668) (10,567) (20,784) 5,760
Other Data (Continuing Operations)
Weighted average shares
outstanding:
Basic 21,539 21,254 21,442 21,252
Diluted 21,539 21,254 21,442 21,252
EBITDA (2) $1,293 $(1,964) $(2,863) $(9,174)
Capital expenditures (4,996) (9,988) (4,996) (9,988)
Reconciliation of Non-GAAP
Financial Measure
Net loss, continuing operations $(5,104) $(6,153) $(13,633) $(14,885)
Interest - net 1,787 487 3,423 1,035
Income taxes 1,686 988 1,432 (874)
Depreciation and amortization 2,924 2,714 5,915 5,550
EBITDA $1,293 $(1,964) $(2,863) $(9,174)
Balance Sheet Data 6/30/2006 3/31/2006 12/31/2005
Cash and cash equivalents $32,016 $61,099 $55,933
Working capital 181,840 208,147 204,960
Total assets 496,130 513,620 498,981
Total debt 160,740 165,193 138,020
Stockholders' equity 107,874 141,184 145,234
Backlog Data
By Geographic Area:
Middle East $34,323 $46,653 $47,196
North America 1,137,637 297,462 193,177
$1,171,960 $344,115 $240,373
By Reporting Segment:
International 34,323 46,653 47,196
United States & Canada 1,137,637 297,462 193,177
$1,171,960 $344,115 $240,373
Discontinued operations
West Africa $466,425 $475,618 $564,343
Latin America --- --- 11,639
$466,425 $475,618 $575,982
(1) Backlog is anticipated contract revenue from projects for which
award is either in hand or assured.
(2) EBITDA is earnings before net interest, income taxes and
depreciation and amortization. EBITDA as presented may not be
comparable to other similarly titled measures reported by other
companies. The Company believes EBITDA is a useful measure of
evaluating its financial performance because of its focus on the
Company's results from operations before net interest, income taxes,
depreciation and amortization. EBITDA is not a measure of financial
performance under generally accepted accounting principles.
However, EBITDA is a common alternative measure of operating
performance used by investors, financial analysts and rating
agencies. A reconciliation of EBITDA to net income is included in
the exhibit to this release.
CONTACT: Michael W. Collier
Vice President Investor Relations
Willbros USA, Inc.
(713) 403-8016
Jack Lascar / Partner
DRG&E
(713) 529-6600
SOURCE Willbros Group, Inc. |
