nanitem 14 exhibits financial statement schedules reports form 8k 1 financial statements financial statements company subsidiaries report independent auditors listed incorporated reference following pages companys 1997 annual report stockholders annual report pages report independent auditors 25 consolidated balance sheets december 31 1997 1996 26 consolidated statements income years ended december 31 1997 1996 1995 27 consolidated statements stockholders equity years ended december 31 1997 1996 1995 28 consolidated statements cash flows years ended december 31 1997 1996 1995 29 notes consolidated financial statements 30 37 form 10k pages 2 financial statement schedule independent auditors report 32 schedule ii consolidated valuation qualifying accounts 33 schedules omitted inapplicable required information contained financial statements included footnotes thereto 3 exhibits following documents included exhibits form 10k exhibits incorporated reference herein indicated information supplied parenthetical thereafter parenthetical appears exhibit filed herewith 31 restated articles incorporation company filed exhibit 31 companys registration statement form s1 registration 3335413 s1 registration statement 32 restated bylaws company filed exhibit 32 s1 registration statement 4 form stock certificate companys common stock par value 05 per share filed exhibit 4 s1 registration statement 101 credit agreement dated february 20 1997 among company certain designated subsidiaries credit lyonnais new york branch coagent certain financial institutions abn amro bank nv agent filed exhibit 101 companys report form 10k year ended december 31 1996 filed march 31 1997 1996 form 10k 102 parent pledge agreement dated february 20 1997 company favor abn amro bank nv agent filed exhibit 102 1996 form 10k 103 pledge agreement dated february 20 1997 musketeer oil bv favor abn amro bank nv agent filed exhibit 103 1996 form 10k 104 pledge agreement dated february 20 1997 willbros usa inc favor abn amro bank nv agent filed exhibit 104 1996 form 10k 105 employment agreement dated january 1 1996 among willbros usa inc larry j bump company filed exhibit 103 s1 registration statement 106 employment agreement dated january 1 1996 among willbros usa inc melvin f spreitzer company filed exhibit 104 s1 registration statement 107 employment agreement dated january 1 1996 among willbros usa inc kieth phillips company filed exhibit 106 s1 registration statement 108 employment agreement dated january 1 1997 among willbros engineers inc james r beasley company filed exhibit 109 1996 form 10k 109 form indemnification agreement company officers filed exhibit 107 s1 registration statement 1010 form indemnification agreement company directors filed exhibit 1016 s1 registration statement 1011 willbros group inc 1996 stock plan filed exhibit 108 s1 registration statement 1012 form incentive stock option agreement willbros group inc 1996 stock plan filed exhibit 1013 1996 form 10k 1013 form nonqualified stock option agreement willbros group inc 1996 stock plan filed exhibit 1014 1996 form 10k 1014 willbros group inc director stock plan filed exhibit 109 s1 registration statement 1015 willbros usa inc executive benefit restoration plan filed exhibit 1010 s1 registration statement 1016 willbros engineers inc management incentive plan dated january 1 1996 filed exhibit 1017 s1 registration statement 1017 willbros usa inc management incentive plan dated january 1 1996 filed exhibit 1018 s1 registration statement 1018 form secured promissory note willbros international inc willbros usa inc 1995 management personnel nonqualified stock ownership plans filed exhibit 1011 s1 registration statement 1019 form secured promissory note willbros international inc willbros usa inc 1992 employee non qualified stock ownership plans filed exhibit 1012 s1 registration statement 1020 registration rights agreement dated april 9 1992 company heerema holding construction inc yorktown energy partners lp concord partners ii lp concord partners japan limited certain stockholders company filed exhibit 1013 s1 registration statement 1021 separation agreement dated february 20 1998 willbros usa inc gary l bracken 11 computation income loss per common equivalent share 13 portions companys 1997 annual report stockholders 21 subsidiaries company 23 consent kpmg peat marwick 27 financial data schedule management contract compensatory plan arrangement b reports form 8k reports form 8k filed fourth quarter 1997 signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized willbros group inc date march 27 1998 larry j bump larry j bump chairman board president chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated signature title date larry j bump director chairman march 27 1998 board president larry j bump chief executive officer principal executive officer melvin f spreitzer director executive vice march 27 1998 president chief financial melvin f spreitzer officer treasurer principal financial officer principal accounting officer kieth phillips director vice march 27 1998 president kieth phillips guy e waldvogel director march 27 1998 guy e waldvogel bryan h lawrence director march 27 1998 bryan h lawrence peter leidel director march 27 1998 peter leidel john h williams director march 27 1998 john h williams michael j pink director march 27 1998 michael j pink independent auditors report consolidated financial statement schedule stockholders board directors willbros group inc audits referred report dated january 31 1998 included related consolidated financial statement schedule years threeyear period ended december 31 1997 consolidated financial statement schedule responsibility companys management responsibility express opinion consolidated financial statement schedule based audits opinion consolidated financial statement schedule considered relation basic consolidated financial statements taken whole presents fairly material respects information set forth therein kpmg peat marwick panama city panama january 31 1998 willbros group inc schedule ii consolidated valuation qualifying accounts thousandsitem 14 exhibits financial statement schedules reports form 8k 1 financial statements financial statements company subsidiaries report independent auditors listed incorporated reference following pages companys 1998 annual report stockholders annual report pages report independent auditors 26 consolidated balance sheets december 31 1998 1997 27 consolidated statements income years ended december 31 1998 1997 1996 28 consolidated statements stockholders equity years ended december 31 1998 1997 1996 29 consolidated statements cash flows years ended december 31 1998 1997 1996 30 notes consolidated financial statements 3143 form 10k pages 2 financial statement schedule independent auditors report 33 schedule ii consolidated valuation qualifying accounts 34 schedules omitted inapplicable required information contained financial statements included footnotes thereto 3 exhibits following documents included exhibits form 10k exhibits incorporated reference herein indicated information supplied parenthetical thereafter parenthetical appears exhibit filed herewith 31 amended restated articles incorporation company filed exhibit 32 companys report form 10q quarter ended september 30 1998 filed november 16 1998 32 restated bylaws company filed exhibit 32 companys registration statement form s1 registration 3335413 s1 registration statement 4 form stock certificate companys common stock par value 05 per share filed exhibit 4 s1 registration statement 101 credit agreement dated february 20 1997 among company certain designated subsidiaries credit lyonnais new york branch coagent certain financial institutions abn amro bank nv agent filed exhibit 101 companys report form 10k year ended december 31 1996 filed march 31 1997 1996 form 10k 102 parent pledge agreement dated february 20 1997 company favor abn amro bank nv agent filed exhibit 102 1996 form 10k 103 pledge agreement dated february 20 1997 musketeer oil bv favor abn amro bank nv agent filed exhibit 103 1996 form 10k 104 pledge agreement dated february 20 1997 willbros usa inc favor abn amro bank nv agent filed exhibit 104 1996 form 10k 105 employment agreement dated january 1 1996 among willbros usa inc larry j bump company filed exhibit 103 s1 registration statement 106 employment agreement dated january 1 1996 among willbros usa inc melvin f spreitzer company filed exhibit 104 s1 registration statement 107 employment agreement dated january 1 1996 among willbros usa inc kieth phillips company filed exhibit 106 s1 registration statement 108 employment agreement dated january 1 1997 among willbros engineers inc james r beasley company filed exhibit 109 1996 form 10k 109 form indemnification agreement company officers filed exhibit 107 s1 registration statement 1010 form indemnification agreement company directors filed exhibit 1016 s1 registration statement 1011 willbros group inc 1996 stock plan filed exhibit 108 s1 registration statement 1012 form incentive stock option agreement willbros group inc 1996 stock plan filed exhibit 1013 1996 form 10k 1013 form nonqualified stock option agreement willbros group inc 1996 stock plan filed exhibit 1014 1996 form 10k 1014 willbros group inc director stock plan filed exhibit 109 s1 registration statement 1015 willbros usa inc executive benefit restoration plan filed exhibit 1010 s1 registration statement 1016 willbros engineers inc management incentive plan dated january 1 1996 filed exhibit 1017 s1 registration statement 1017 willbros usa inc management incentive plan dated january 1 1996 filed exhibit 1018 s1 registration statement 1018 form secured promissory note willbros international inc willbros usa inc 1995 management personnel nonqualified stock ownership plans filed exhibit 1011 s1 registration statement 1019 form secured promissory note willbros international inc willbros usa inc 1992 employee non qualified stock ownership plans filed exhibit 1012 s1 registration statement 1020 registration rights agreement dated april 9 1992 company heerema holding construction inc yorktown energy partners lp concord partners ii lp concord partners japan limited certain stockholders company filed exhibit 1013 s1 registration statement 1021 separation agreement dated february 20 1998 willbros usa inc gary l bracken filed exhibit 1021 companys report form 10k year ended december 31 1997 filed march 27 1998 1022 willbros group inc severance plan dated january 1 1999 1023 separation agreement release dated march 31 1999 willbros usa inc kieth phillips 1024 consulting services agreement dated april 1 1999 willbros international inc kieth phillips 1025 first amendment credit agreement dated april 2 1998 among company certain designated subsidiaries credit lyonnais new york branch coagent certain financial institutions abn amro bank nv agent 1026 second amendment credit agreement dated october 1 1998 among company certain designated subsidiaries credit lyonnais new york branch coagent certain financial institutions abn amro bank nv agent 13 portions companys 1998 annual report stockholders 21 subsidiaries company 23 consent kpmg 27 financial data schedule management contract compensatory plan arrangement b reports form 8k reports form 8k filed fourth quarter 1998 signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized willbros group inc date march 29 1999 larry j bump larry j bump chairman board chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated signature title date larry j bump director chairman board march 29 1999 chief executive officer larry j bump principal executive officer paul huber director president march 29 1999 chief operating officer paul huber melvin f spreitzer director executive vice march 29 1999 president chief financial melvin f spreitzer officer treasurer principal financial officer principal accounting officer guy e waldvogel director march 29 1999 guy e waldvogel peter leidel director march 29 1999 peter leidel john h williams director march 29 1999 john h williams michael j pink director march 29 1999 michael j pink james b taylor jr director march 29 1999 james b taylor jr independent auditors report consolidated financial statement schedule stockholders board directors willbros group inc audits referred report dated february 5 1999 included related consolidated financial statement schedule years threeyear period ended december 31 1998 consolidated financial statement schedule responsibility companys management responsibility express opinion consolidated financial statement schedule based audits opinion consolidated financial statement schedule considered relation basic consolidated financial statements taken whole presents fairly material respects information set forth therein kpmg panama city panama february 5 1999 willbros group inc schedule ii consolidated valuation qualifying accounts thousands index exhibits following documents included exhibits form 10k exhibits incorporated reference herein indicated information supplied parenthetical thereafter parenthetical appears exhibit filed herewith exhibit number description 31 amended restated articles incorporation company filed exhibit 32 companys report form 10q quarter ended september 30 1998 filed november 16 1998 32 restated bylaws company filed exhibit 32 companys registration statement form s1 registration 3335413 s1 registration statement 4 form stock certificate companys common stock par value 05 per share filed exhibit 4 s1 registration statement 101 credit agreement dated february 20 1997 among company certain designated subsidiaries credit lyonnais new york branch coagent certain financial institutions abn amro bank nv agent filed exhibit 101 companys report form 10k year ended december 31 1996 filed march 31 1997 1996 form 10k 102 parent pledge agreement dated february 20 1997 company favor abn amro bank nv agent filed exhibit 102 1996 form 10k 103 pledge agreement dated february 20 1997 musketeer oil bv favor abn amro bank nv agent filed exhibit 103 1996 form 10k 104 pledge agreement dated february 20 1997 willbros usa inc favor abn amro bank nv agent filed exhibit 104 1996 form 10k 105 employment agreement dated january 1 1996 among willbros usa inc larry j bump company filed exhibit 103 s1 registration statement 106 employment agreement dated january 1 1996 among willbros usa inc melvin f spreitzer company filed exhibit 104 s1 registration statement 107 employment agreement dated january 1 1996 among willbros usa inc kieth phillips company filed exhibit 106 s1 registration statement 108 employment agreement dated january 1 1997 among willbros engineers inc james r beasley company filed exhibit 109 1996 form 10k 109 form indemnification agreement company officers filed exhibit 107 s1 registration statement 1010 form indemnification agreement company directors filed exhibit 1016 s1 registration statement 1011 willbros group inc 1996 stock plan filed exhibit 108 s1 registration statement 1012 form incentive stock option agreement willbros group inc 1996 stock plan filed exhibit 1013 1996 form 10k 1013 form nonqualified stock option agreement willbros group inc 1996 stock plan filed exhibit 1014 1996 form 10k 1014 willbros group inc director stock plan filed exhibit 109 s1 registration statement 1015 willbros usa inc executive benefit restoration plan filed exhibit 1010 s1 registration statement 1016 willbros engineers inc management incentive plan dated january 1 1996 filed exhibit 1017 s1 registration statement 1017 willbros usa inc management incentive plan dated january 1 1996 filed exhibit 1018 s1 registration statement 1018 form secured promissory note willbros international inc willbros usa inc 1995 management personnel nonqualified stock ownership plans filed exhibit 1011 s1 registration statement 1019 form secured promissory note willbros international inc willbros usa inc 1992 employee non qualified stock ownership plans filed exhibit 1012 s1 registration statement 1020 registration rights agreement dated april 9 1992 company heerema holding construction inc yorktown energy partners lp concord partners ii lp concord partners japan limited certain stockholders company filed exhibit 1013 s1 registration statement 1021 separation agreement dated february 20 1998 willbros usa inc gary l bracken filed exhibit 1021 companys report form 10k year ended december 31 1997 filed march 27 1998 1022 willbros group inc severance plan dated january 1 1999 1023 separation agreement release dated march 31 1999 willbros usa inc kieth phillips 1024 consulting services agreement dated april 1 1999 willbros international inc kieth phillips 1025 first amendment credit agreement dated april 2 1998 among company certain designated subsidiaries credit lyonnais new york branch coagent certain financial institutions abn amro bank nv agent 1026 second amendment credit agreement dated october 1 1998 among company certain designated subsidiaries credit lyonnais new york branch coagent certain financial institutions abn amro bank nv agent 13 portions companys 1998 annual report stockholders 21 subsidiaries company 23 consent kpmg 27 financial data scheduleitem 14 exhibits financial statement schedules reports form 8k 1 financial statements financial statements company subsidiaries report independent auditors listed incorporated reference following pages companys 1999 annual report stockholders annual report pages report independent auditors 29 consolidated balance sheets december 31 1999 1998 30 consolidated statements operations years ended december 31 1999 1998 1997 31 consolidated statements stockholders equity years ended december 31 1999 1998 1997 32 consolidated statements cash flows years ended december 31 1999 1998 1997 33 notes consolidated financial statements 3447 form 10k pages 2 financial statement schedule independent auditors report 33 schedule ii consolidated valuation qualifying accounts 34 schedules omitted inapplicable required information contained financial statements included footnotes thereto 3 exhibits following documents included exhibits form 10k exhibits incorporated reference herein indicated information supplied parenthetical thereafter parenthetical appears exhibit filed herewith 31 amended restated articles incorporation company filed exhibit 32 companys report form 10q quarter ended september 30 1998 filed november 16 1998 32 restated bylaws company filed exhibit 32 companys registration statement form s1 registration 3335413 s1 registration statement 41 form stock certificate companys common stock par value 05 per share filed exhibit 4 s1 registration statement 42 rights agreement dated april 1 1999 company chasemellon shareholder services llc rights agent filed exhibit companys registration statement form 8a dated april 9 1999 43 certificate designation series junior participating preferred stock company filed exhibit 3 companys report form 10q quarter ended march 31 1999 filed may 17 1999 101 credit agreement dated february 20 1997 among company certain designated subsidiaries credit lyonnais new york branch coagent certain financial institutions abn amro bank nv agent filed exhibit 101 companys report form 10k year ended december 31 1996 filed march 31 1997 1996 form 10k 102 parent pledge agreement dated february 20 1997 company favor abn amro bank nv agent filed exhibit 102 1996 form 10k 103 pledge agreement dated february 20 1997 musketeer oil bv favor abn amro bank nv agent filed exhibit 103 1996 form 10k 104 pledge agreement dated february 20 1997 willbros usa inc favor abn amro bank nv agent filed exhibit 104 1996 form 10k 105 form indemnification agreement company officers filed exhibit 107 s1 registration statement 106 form indemnification agreement company directors filed exhibit 1016 s1 registration statement 107 willbros group inc 1996 stock plan filed exhibit 108 s1 registration statement 108 amendment number 1 willbros group inc 1996 stock plan dated february 24 1999 filed exhibit companys proxy statement annual meeting stockholders dated march 31 1999 109 form incentive stock option agreement willbros group inc 1996 stock plan filed exhibit 1013 1996 form 10k 1010 form nonqualified stock option agreement willbros group inc 1996 stock plan filed exhibit 1014 1996 form 10k 1011 willbros group inc director stock plan filed exhibit 109 s1 registration statement 1012 willbros usa inc executive benefit restoration plan filed exhibit 1010 s1 registration statement 1013 form secured promissory note willbros international inc willbros usa inc 1995 management personnel nonqualified stock ownership plans filed exhibit 1011 s1 registration statement 1014 form secured promissory note willbros international inc willbros usa inc 1992 employee non qualified stock ownership plans filed exhibit 1012 s1 registration statement 1015 registration rights agreement dated april 9 1992 company heerema holding construction inc yorktown energy partners lp concord partners ii lp concord partners japan limited certain stockholders company filed exhibit 1013 s1 registration statement 1016 willbros group inc severance plan dated january 1 1999 filed exhibit 1022 companys report form 10k year ended december 31 1998 filed march 31 1999 1998 form 10k 1017 separation agreement release dated march 31 1999 willbros usa inc kieth phillips filed exhibit 1023 1998 form 10k 1018 consulting services agreement dated april 1 1999 willbros international inc kieth phillips filed exhibit 1024 1998 form 10k 1019 first amendment credit agreement dated april 2 1998 among company certain designated subsidiaries credit lyonnais new york branch coagent certain financial institutions abn amro bank nv agent filed exhibit 1025 1998 form 10k 1020 second amendment credit agreement dated october 1 1998 among company certain designated subsidiaries credit lyonnais new york branch coagent certain financial institutions abn amro bank nv agent filed exhibit 1026 1998 form 10k 13 portions companys 1999 annual report stockholders 21 subsidiaries company 23 consent kpmg peat marwick 27 financial data schedule management contract compensatory plan arrangement b reports form 8k reports form 8k filed fourth quarter 1999 signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized willbros group inc date march 30 2000 larry j bump larry j bump chairman board chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated signature title date larry j bump director chairman march 30 2000 board chief larry j bump executive officer principal executive officer michael f curran director vice chairman march 30 2000 board president michael f curran chief operating officer melvin f spreitzer director executive march 30 2000 vice president melvin f spreitzer chief financial officer treasurer principal financial officer principal accounting officer guy e waldvogel director march 30 2000 guy e waldvogel peter leidel director march 30 2000 peter leidel john h williams director march 30 2000 john h williams michael j pink director march 30 2000 michael j pink james b taylor jr director march 30 2000 james b taylor jr independent auditors report consolidated financial statement schedule stockholders board directors willbros group inc audits referred report dated february 11 2000 included related consolidated financial statement schedule years threeyear period ended december 31 1999 consolidated financial statement schedule responsibility companys management responsibility express opinion consolidated financial statement schedule based audits opinion consolidated financial statement schedule considered relation basic consolidated financial statements taken whole presents fairly material respects information set forth therein kpmg panama city panama february 11 2000 willbros group inc schedule ii consolidated valuation qualifying accounts thousandsitem 14 exhibits financial statement schedules reports form 8k 1 financial statements financial statements company subsidiaries report independent auditors listed incorporated reference following pages companys 2000 annual report stockholders schedules omitted inapplicable required information contained financial statements included footnotes thereto 3 exhibits following documents included exhibits form 10k exhibits incorporated reference herein indicated information supplied parenthetical thereafter parenthetical appears exhibit filed herewith 31 amended restated articles incorporation company filed exhibit 32 companys report form 10q quarter ended september 30 1998 filed november 16 1998 32 restated bylaws company filed exhibit 32 companys registration statement form s1 registration 3335413 s1 registration statement 41 form stock certificate companys common stock par value 05 per share filed exhibit 4 s1 registration statement 42 rights agreement dated april 1 1999 company chasemellon shareholder services llc rights agent filed exhibit companys registration statement form 8a dated april 9 1999 43 certificate designation series junior participating preferred stock company filed exhibit 3 companys report form 10q quarter ended march 31 1999 filed may 17 1999 101 credit agreement dated february 20 1997 among company certain designated subsidiaries credit lyonnais new york branch coagent certain financial institutions abn amro bank nv agent filed exhibit 101 companys report form 10k year ended december 31 1996 filed march 31 1997 1996 form 10k 102 parent pledge agreement dated february 20 1997 company favor abn amro bank nv agent filed exhibit 102 1996 form 10k 103 pledge agreement dated february 20 1997 musketeer oil bv favor abn amro bank nv agent filed exhibit 103 1996 form 10k 104 pledge agreement dated february 20 1997 willbros usa inc favor abn amro bank nv agent filed exhibit 104 1996 form 10k 105 form indemnification agreement company officers filed exhibit 107 s1 registration statement 106 form indemnification agreement company directors filed exhibit 1016 s1 registration statement 107 willbros group inc 1996 stock plan filed exhibit 108 s1 registration statement 108 amendment number 1 willbros group inc 1996 stock plan dated february 24 1999 filed exhibit companys proxy statement annual meeting stockholders dated march 31 1999 109 form incentive stock option agreement willbros group inc 1996 stock plan filed exhibit 1013 1996 form 10k 1010 form nonqualified stock option agreement willbros group inc 1996 stock plan filed exhibit 1014 1996 form 10k 1011 willbros group inc director stock plan filed exhibit 109 s1 registration statement 1012 willbros usa inc executive benefit restoration plan filed exhibit 1010 s1 registration statement 1013 registration rights agreement dated april 9 1992 company heerema holding construction inc yorktown energy partners lp concord partners ii lp concord partners japan limited certain stockholders company filed exhibit 1013 s1 registration statement 1014 willbros group inc severance plan dated january 1 1999 filed exhibit 1022 companys report form 10k year ended december 31 1998 filed march 31 1999 1998 form 10k 1015 first amendment credit agreement dated april 2 1998 among company certain designated subsidiaries credit lyonnais new york branch coagent certain financial institutions abn amro bank nv agent filed exhibit 1025 1998 form 10k 1016 second amendment credit agreement dated october 1 1998 among company certain designated subsidiaries credit lyonnais new york branch coagent certain financial institutions abn amro bank nv agent filed exhibit 1026 1998 form 10k 1017 third amendment credit agreement effective june 30 2000 among company certain designated subsidiaries credit lyonnais new york branch coagent certain financial institutions abn amro bank nv agent filed exhibit 101 companys report form 10q quarter ended june 30 2000 filed august 14 2000 1018 security agreement effective july 27 2000 among company certain designated subsidiaries abn amro bank nv agent filed exhibit 102 companys report form 10q quarter ended june 30 2000 filed august 14 2000 1019 fourth amendment credit agreement effective june 30 2000 among company certain designated subsidiaries credit lyonnais new york branch coagent certain financial institutions abn amro bank nv agent filed exhibit 103 companys report form 10q quarter ended june 30 2000 filed august 14 2000 13 portions companys 2000 annual report stockholders 21 subsidiaries company 23 consent kpmg llp included page 31 form 10k management contract compensatory plan arrangement b reports form 8k reports form 8k filed fourth quarter 2000 signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized willbros group inc date march 29 2001 larry j bump larry j bump chairman board chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated independent auditors report consolidated financial statement schedule consent stockholders board directors willbros group inc audits referred report dated february 9 2001 included related consolidated financial statement schedule years threeyear period ended december 31 2000 consolidated financial statement schedule responsibility companys management responsibility express opinion consolidated financial statement schedule based audits opinion consolidated financial statement schedule considered relation basic consolidated financial statements taken whole presents fairly material respects information set forth therein consent incorporation reference registration statements nos 33318421 33321399 33353748 form s8 33396201 form s3 willbros group inc reports dated february 9 2001 relating consolidated balance sheets willbros group inc subsidiaries december 31 2000 1999 related consolidated statement operations stockholders equity comprehensive income cash flows years threeyear period ended december 31 2000 related financial statement schedule reports appear december 31 2000 annual report form 10k willbros group inc kpmg llp houston texas march 29 2001 willbros group inc schedule ii consolidated valuation qualifying accounts thousands index exhibits following documents included exhibits form 10k exhibits incorporated reference herein indicated information supplied parenthetical thereafter parenthetical appears exhibit filed herewith exhibit number description 31 amended restated articles incorporation company filed exhibit 32 companys report form 10q quarter ended september 30 1998 filed november 16 1998 32 restated bylaws company filed exhibit 32 companys registration statement form s1 registration 3335413 s1 registration statement 41 form stock certificate companys common stock par value 05 per share filed exhibit 4 s1 registration statement 42 rights agreement dated april 1 1999 company chasemellon shareholder services llc rights agent filed exhibit companys registration statement form 8a dated april 9 1999 43 certificate designation series junior participating preferred stock company filed exhibit 3 companys report form 10q quarter ended march 31 1999 filed may 17 1999 101 credit agreement dated february 20 1997 among company certain designated subsidiaries credit lyonnais new york branch coagent certain financial institutions abn amro bank nv agent filed exhibit 101 companys report form 10k year ended december 31 1996 filed march 31 1997 1996 form 10k 102 parent pledge agreement dated february 20 1997 company favor abn amro bank nv agent filed exhibit 102 1996 form 10k 103 pledge agreement dated february 20 1997 musketeer oil bv favor abn amro bank nv agent filed exhibit 103 1996 form 10k 104 pledge agreement dated february 20 1997 willbros usa inc favor abn amro bank nv agent filed exhibit 104 1996 form 10k 105 form indemnification agreement company officers filed exhibit 107 s1 registration statement 106 form indemnification agreement company directors filed exhibit 1016 s1 registration statement 107 willbros group inc 1996 stock plan filed exhibit 108 s1 registration statement 108 amendment number 1 willbros group inc 1996 stock plan dated february 24 1999 filed exhibit companys proxy statement annual meeting stockholders dated march 31 1999 109 form incentive stock option agreement willbros group inc 1996 stock plan filed exhibit 1013 1996 form 10k 1010 form nonqualified stock option agreement willbros group inc 1996 stock plan filed exhibit 1014 1996 form 10k 1011 willbros group inc director stock plan filed exhibit 109 s1 registration statement 1012 willbros usa inc executive benefit restoration plan filed exhibit 1010 s1 registration statement 1013 registration rights agreement dated april 9 1992 company heerema holding construction inc yorktown energy partners lp concord partners ii lp concord partners japan limited certain stockholders company filed exhibit 1013 s1 registration statement 1014 willbros group inc severance plan dated january 1 1999 filed exhibit 1022 companys report form 10k year ended december 31 1998 filed march 31 1999 1998 form 10k 1015 first amendment credit agreement dated april 2 1998 among company certain designated subsidiaries credit lyonnais new york branch coagent certain financial institutions abn amro bank nv agent filed exhibit 1025 1998 form 10k 1016 second amendment credit agreement dated october 1 1998 among company certain designated subsidiaries credit lyonnais new york branch coagent certain financial institutions abn amro bank nv agent filed exhibit 1026 1998 form 10k 1017 third amendment credit agreement effective june 30 2000 among company certain designated subsidiaries credit lyonnais new york branch coagent certain financial institutions abn amro bank nv agent filed exhibit 101 companys report form 10q quarter ended june 30 2000 filed august 14 2000 1018 security agreement effective july 27 2000 among company certain designated subsidiaries abn amro bank nv agent filed exhibit 102 companys report form 10q quarter ended june 30 2000 filed august 14 2000 1019 fourth amendment credit agreement effective june 30 2000 among company certain designated subsidiaries credit lyonnais new york branch coagent certain financial institutions abn amro bank nv agent filed exhibit 103 companys report form 10q quarter ended june 30 2000 filed august 14 2000 13 portions companys 2000 annual report stockholders 21 subsidiaries company 23 consent kpmg llp included page 31 10kitem 14 exhibits financial statement schedules reports form 8k 1 financial statements financial statements subsidiaries independent auditors report listed item 8 form 10k schedules omitted inapplicable required information contained financial statements included footnotes thereto 3 exhibits following documents included exhibits form 10k exhibits incorporated reference herein indicated information supplied parenthetical thereafter parenthetical appears exhibit filed herewith 31 amended restated articles incorporation filed exhibit 32 report form 10q quarter ended september 30 1998 filed november 16 1998 32 restated bylaws filed exhibit 32 registration statement form s1 registration 3335413 s1 registration statement 41 form stock certificate common stock par value 05 per share filed exhibit 4 s1 registration statement 42 rights agreement dated april 1 1999 us chasemellon shareholder services llc rights agent filed exhibit registration statement form 8a dated april 9 1999 43 certificate designation series junior participating preferred stock filed exhibit 3 report form 10q quarter ended march 31 1999 filed may 17 1999 101 credit agreement dated february 20 1997 among us certain designated subsidiaries credit lyonnais new york branch coagent certain financial institutions abn amro bank nv agent filed exhibit 101 report form 10k year ended december 31 1996 filed march 31 1997 1996 form 10k 102 parent pledge agreement dated february 20 1997 favor abn amro bank nv agent filed exhibit 102 1996 form 10k 103 pledge agreement dated february 20 1997 musketeer oil bv favor abn amro bank nv agent filed exhibit 103 1996 form 10k 104 pledge agreement dated february 20 1997 willbros usa inc favor abn amro bank nv agent filed exhibit 104 1996 form 10k 105 form indemnification agreement officers us filed exhibit 107 s1 registration statement 106 form indemnification agreement directors us filed exhibit 1016 s1 registration statement 107 willbros group inc 1996 stock plan filed exhibit 108 s1 registration statement 108 amendment number 1 willbros group inc 1996 stock plan dated february 24 1999 filed exhibit companys proxy statement annual meeting stockholders dated march 31 1999 109 amendment number 2 willbros group inc 1996 stock plan dated march 7 2001 filed exhibit b proxy statement annual meeting stockholders dated april 2 2001 1010 form incentive stock option agreement willbros group inc 1996 stock plan filed exhibit 1013 1996 form 10k 1011 form nonqualified stock option agreement willbros group inc 1996 stock plan filed exhibit 1014 1996 form 10k 1012 willbros group inc director stock plan filed exhibit 109 s1 registration statement 1013 amendment number 1 willbros group inc director stock plan dated january 1 2002 1014 willbros usa inc executive benefit restoration plan filed exhibit 1010 s1 registration statement 1015 registration rights agreement dated april 9 1992 us heerema holding construction inc yorktown energy partners lp concord partners ii lp concord partners japan limited certain stockholders company filed exhibit 1013 s1 registration statement 1016 willbros group inc severance plan dated january 1 1999 filed exhibit 1022 report form 10k year ended december 31 1998 filed march 31 1999 1998 form 10k 1017 first amendment credit agreement dated april 2 1998 among us certain designated subsidiaries credit lyonnais new york branch coagent certain financial institutions abn amro bank nv agent filed exhibit 1025 1998 form 10k 1018 second amendment credit agreement dated october 1 1998 among us certain designated subsidiaries credit lyonnais new york branch coagent certain financial institutions abn amro bank nv agent filed exhibit 1026 1998 form 10k 1019 third amendment credit agreement effective june 30 2000 among us certain designated subsidiaries credit lyonnais new york branch coagent certain financial institutions abn amro bank nv agent filed exhibit 101 report form 10q quarter ended june 30 2000 filed august 14 2000 1020 security agreement effective july 27 2000 among us certain designated subsidiaries abn amro bank nv agent filed exhibit 102 report form 10q quarter ended june 30 2000 filed august 14 2000 1021 fourth amendment credit agreement effective june 30 2000 among us certain designated subsidiaries credit lyonnais new york branch coagent certain financial institutions abn amro bank nv agent filed exhibit 103 report form 10q quarter ended june 30 2000 filed august 14 2000 1022 separation agreement release dated december 22 2001 willbros usa inc melvin f spreitzer 21 subsidiaries 23 consent kpmg llp included page 75 form 10k management contract compensatory plan arrangement b reports form 8k form 8k dated october 12 2001 filed october 12 2001 report item 5 sale 144175 shares common stock signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized willbros group inc date february 19 2002 larry j bump larry j bump chairman board chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated independent auditors report consolidated financial statement schedule consent stockholders board directors willbros group inc audits referred report dated february 5 2002 included related consolidated financial statement schedule december 31 2001 years threeyear period ended december 31 2001 consolidated financial statement schedule responsibility companys management responsibility express opinion consolidated financial statement schedule based audits opinion consolidated financial statement schedule considered relation basic consolidated financial statements taken whole presents fairly material respects information set forth therein consent incorporation reference registration statements nos 33318421 33321399 33353748 33374290 form s8 nos 33396201 33363096 form s3 willbros group inc reports dated february 5 2002 relating consolidated balance sheets willbros group inc subsidiaries december 31 2001 2000 related consolidated statement operations stockholders equity comprehensive income cash flows years threeyear period ended december 31 2001 related financial statement schedule reports appear december 31 2001 annual report form 10k willbros group inc report consolidated financial statements refers adoption statement financial accounting standards sfas 141 business combinations certain provisions sfas 142 goodwill intangible assets 2001 kpmg llp houston texas february 20 2002 willbros group inc schedule ii consolidated valuation qualifying accounts thousands exhibit index following documents included exhibits form 10k exhibits incorporated reference herein indicated information supplied parenthetical thereafter parenthetical appears exhibit filed herewith 31 amended restated articles incorporation filed exhibit 32 report form 10q quarter ended september 30 1998 filed november 16 1998 32 restated bylaws filed exhibit 32 registration statement form s1 registration 3335413 s1 registration statement 41 form stock certificate common stock par value 05 per share filed exhibit 4 s1 registration statement 42 rights agreement dated april 1 1999 us chasemellon shareholder services llc rights agent filed exhibit registration statement form 8a dated april 9 1999 43 certificate designation series junior participating preferred stock filed exhibit 3 report form 10q quarter ended march 31 1999 filed may 17 1999 101 credit agreement dated february 20 1997 among us certain designated subsidiaries credit lyonnais new york branch coagent certain financial institutions abn amro bank nv agent filed exhibit 101 report form 10k year ended december 31 1996 filed march 31 1997 1996 form 10k 102 parent pledge agreement dated february 20 1997 favor abn amro bank nv agent filed exhibit 102 1996 form 10k 103 pledge agreement dated february 20 1997 musketeer oil bv favor abn amro bank nv agent filed exhibit 103 1996 form 10k 104 pledge agreement dated february 20 1997 willbros usa inc favor abn amro bank nv agent filed exhibit 104 1996 form 10k 105 form indemnification agreement officers us filed exhibit 107 s1 registration statement 106 form indemnification agreement directors us filed exhibit 1016 s1 registration statement 107 willbros group inc 1996 stock plan filed exhibit 108 s1 registration statement 108 amendment number 1 willbros group inc 1996 stock plan dated february 24 1999 filed exhibit companys proxy statement annual meeting stockholders dated march 31 1999 109 amendment number 2 willbros group inc 1996 stock plan dated march 7 2001 filed exhibit b proxy statement annual meeting stockholders dated april 2 2001 1010 form incentive stock option agreement willbros group inc 1996 stock plan filed exhibit 1013 1996 form 10k 1011 form nonqualified stock option agreement willbros group inc 1996 stock plan filed exhibit 1014 1996 form 10k 1012 willbros group inc director stock plan filed exhibit 109 s1 registration statement 1013 amendment number 1 willbros group inc director stock plan dated january 1 2002 1014 willbros usa inc executive benefit restoration plan filed exhibit 1010 s1 registration statement 1015 registration rights agreement dated april 9 1992 us heerema holding construction inc yorktown energy partners lp concord partners ii lp concord partners japan limited certain stockholders company filed exhibit 1013 s1 registration statement 1016 willbros group inc severance plan dated january 1 1999 filed exhibit 1022 report form 10k year ended december 31 1998 filed march 31 1999 1998 form 10k 1017 first amendment credit agreement dated april 2 1998 among us certain designated subsidiaries credit lyonnais new york branch coagent certain financial institutions abn amro bank nv agent filed exhibit 1025 1998 form 10k 1018 second amendment credit agreement dated october 1 1998 among us certain designated subsidiaries credit lyonnais new york branch coagent certain financial institutions abn amro bank nv agent filed exhibit 1026 1998 form 10k 1019 third amendment credit agreement effective june 30 2000 among us certain designated subsidiaries credit lyonnais new york branch coagent certain financial institutions abn amro bank nv agent filed exhibit 101 report form 10q quarter ended june 30 2000 filed august 14 2000 1020 security agreement effective july 27 2000 among us certain designated subsidiaries abn amro bank nv agent filed exhibit 102 report form 10q quarter ended june 30 2000 filed august 14 2000 1021 fourth amendment credit agreement effective june 30 2000 among us certain designated subsidiaries credit lyonnais new york branch coagent certain financial institutions abn amro bank nv agent filed exhibit 103 report form 10q quarter ended june 30 2000 filed august 14 2000 1022 separation agreement release dated december 22 2001 willbros usa inc melvin f spreitzer 21 subsidiaries 23 consent kpmg llp included page 75 form 10k management contract compensatory plan arrangementitem 14 principal accountant fees services information required item incorporated reference section proxy statement entitled audit fees paid independent auditors part iv item 15item 14 principal accountant fees services audit fees paid independent auditors audit fees aggregate fees billed years ended december 31 2004 2003 kpmg llp companys independent auditors professional services rendered audit companys annual financial statements reviews financial statements included companys quarterly reports form 10q services normally provided accountants connection statutory regulatory filings engagements years 763500 433000 respectively auditrelated fees aggregate fees billed years ended december 31 2004 2003 assurance related services kpmg reasonably related performance audit review companys financial statements reported audit fees 0 23000 respectively services consisted principally audits financial statements certain employee benefit plans review registration statements issuance consents acquisition advisory services tax fees aggregate fees billed years ended december 31 2004 2003 professional services kpmg tax compliance tax advice tax planning 0 respectively fees aggregate fees billed years ended december 31 2004 2003 kpmg products services rendered company services described 69000 0 respectively fees related work associated sarbanesoxley requirements unpriced change orders companys opal gas plant audit committee preapproval policy audit committee preapprove audit auditrelated tax services specifically described audit committee periodic basis specified dollar amount permitted services well proposed services exceeding specified dollar amount separately preapproved audit committee part iv item 15item 14 principal accountant fees services november 10 2005 company notified kpmg llp “kpmg” effective upon completion audit company’s consolidated financial statements year ended december 31 2004 issuance report thereon filing company’s form 10q’s threemonth period ended march 31 2005 sixmonth period ended june 30 2005 resigning company’s independent auditors company filed form 10k year ended december 31 2004 form 10q’s threemonth period ended march 31 2005 sixmonth period ended june 30 2005 november 22 2005 february 8 2006 audit committee board directors company appointed glo cpas llp “glo” independent auditors company fiscal year ended december 31 2005 audit fees paid independent auditors audit fees aggregate fees billed years ended december 31 2005 2004 kpmg professional services rendered audit company’s annual financial statements reviews financial statements included company’s quarterly reports form 10q services normally provided accountants connection statutory regulatory filings engagements years 3605393 763500 respectively aggregate fees billed year ended december 31 2005 glo professional services rendered audit company’s annual financial statements reviews financial statements included company’s quarterly reports form 10q services normally provided accountants connection statutory regulatory filings engagements 2005 0 due fact engaged perform 2005 audit february 2006 auditrelated fees aggregate fees billed years ended december 31 2005 2004 assurance related services kpmg reasonably related performance audit review company’s financial statements reported “audit fees” 122182 0 respectively services consisted principally audits financial statements certain employee benefit plans review registration statements issuance consents acquisition advisory services aggregate fees billed year ended december 31 2005 assurance related services glo reasonably related performance audit review company’s financial statements reported “audit fees” 0 yet engaged tax fees aggregate fees billed years ended december 31 2005 2004 professional services kpmg tax compliance tax advice tax planning 0 two years glo provide services company 2005 fees aggregate fees billed years ended december 31 2005 2004 kpmg products services rendered company services described 0 69000 respectively fees related work associated sarbanesoxley requirements unpriced change orders company’s opal gas plant glo provide services company 2005 audit committee preapproval policy audit committee preapprove audit auditrelated tax services specifically described audit committee periodic basis specified dollar amount permitted services well proposed services exceeding specified dollar amount separately preapproved audit committee part iv item 15item 14 principal accounting fees services information required item incorporated herein reference sections entitled “audit fees paid independent auditors” “audit committee preapproval policy” proxy statement part iv item 15item 14 principal accounting fees services information required item incorporated herein reference sections entitled “audit fees paid independent auditors” “audit committee preapproval policy” proxy statement part iv item 15item 14 controls procedures within 90 days prior filing date report carried evaluation supervision participation management including chief executive officer chief financial officer effectiveness design operation disclosure controls procedures based upon evaluation chief executive officer chief financial officer concluded disclosure controls procedures effective disclosure controls procedures designed ensure information required disclosed reports filed submitted securities exchange act 1934 recorded processed summarized reported within time periods specified securities exchange commission rules forms subsequent date evaluation significant changes internal controls factors could significantly affect controls part iv item 15item 14 principal accountant fees services audit fees paid independent auditors audit fees aggregate fees billed years ended december 31 2006 2005 glo cpa’s “glo” professional services rendered audit company’s annual financial statements reviews financial statements included company’s quarterly reports form 10q services normally provided accountants connection statutory regulatory filings engagements years 2785315 0 respectively due fact engaged perform 2005 audit february 2006 aggregate fees billed year ended december 31 2005 kpmg llp “kpmg” company’s former independent auditors professional services rendered audit company’s annual financial statements reviews financial statements included company’s quarterly reports form 10q services normally provided accountants connection statutory regulatory filings engagements 2005 3605393 auditrelated fees aggregate fees billed years ended december 31 2006 2005 assurance related services glo reasonably related performance audit review company’s financial statements reported “audit fees” 280466 0 respectively services consisted principally review registration statements issuance consents aggregate fees billed year ended december 31 2006 2005 assurance related services kpmg reasonably related performance audit review company’s financial statements reported “audit fees” 95000 122182 respectively 95000 2006 consisted issuing consents sec filings 122182 2005 related sec filings subsidiary audits tax fees aggregate fees billed years ended december 31 2006 2005 professional services glo tax compliance tax advice tax planning 0 two years kpmg provide services company 2006 2005 fees aggregate fees billed years ended december 31 2006 2005 glo products services rendered company services described 0 two years kpmg provide services company 2006 2005 audit committee preapproval policy audit committee preapprove audit auditrelated tax services specifically described audit committee periodic basis specified dollar amount permitted services well proposed services exceeding specified dollar amount separately preapproved audit committee index financial statements part iv item 15 nanitem 7 managements discussion analysis financial condition results operations information required item incorporated reference pages 21 24 companys 1997 annual report stockholders item 7aitem 7 managements discussion analysis financial condition results operations information required item incorporated reference pages 19 25 companys 1998 annual report stockholders item 7aitem 7 managements discussion analysis financial condition results operations information required item incorporated reference pages 22 28 companys 1999 annual report stockholders item 7aitem 7 managements discussion analysis financial condition results operations information required item incorporated reference pages 17 23 companys 2000 annual report stockholders item 7aitem 7 managements discussion analysis financial condition results operations following discussion read conjunction consolidated financial statements years ended december 31 2001 2000 included item 8 form 10k general derive revenue providing construction engineering specialty services oil gas power industries government entities worldwide obtain contracts work primarily competitive bidding negotiations longstanding prospective clients bidding activity backlog revenue resulting award contracts us may vary significantly period contracts durations weeks several months cases year operations outside united states may subject certain risks ordinarily would exist united states including foreign currency restrictions extreme exchange rate fluctuations expropriation assets civil uprising riots availability personnel government audit 1999 local protesters looted vandalized facility near port harcourt nigeria interfered operations progress ongoing projects nigerian government intervened restored order area 2000 periodic interruptions projects successfully operated nigeria past 39 years favorable relationships local communities believe continue operate area active south america since 1939 venezuela largest oil producer south america redirected energy initiative include development significant natural gas reserves new initiative translate demand natural gas pipeline capabilities however venezuelan economy highly inflationary government introduced new hydrocarbon law viewed international national petroleum industry leaders unfriendly future investment sector outcome negotiations government private industry revise law uncertain significant new foreign investment unlikely negotiations complete critical accounting policies revenue recognition percentageofcompletion method number factors relating business affect recognition contract revenue fixedprice construction engineering contracts recognized percentageofcompletion method estimated contract income resulting revenue generally accrued based costs incurred date percentage total estimated costs taking consideration physical completion total estimated costs thus contract income impacted changes productivity scheduling unit cost labor subcontracts materials equipment additionally external factors weather client needs client delays providing approvals labor availability governmental regulation politics may also affect progress estimated cost projects completion thus timing income revenue recognition generally recognize income fixedprice contract approximately 5 10 complete depending upon nature contract costs considered reimbursable excluded percentageofcompletion calculation accrued revenue pertaining reimbursables limited cost reimbursables current estimate total contract cost indicates loss contract projected loss recognized full determined revenue change orders extra work variations scope work claims recognized realization reasonably assured revenue unitprice contracts recognized earned believe operating results evaluated relatively long time horizon major contracts completed change orders extra work variations scope work cost recoveries claims negotiated realized us government contracts many contracts provide termination contract convenience client event contract would terminated convenience client prior completion typically compensated progress time termination costs addition many contracts subject certain completion schedule requirements liquidated damages event schedules met result circumstances within control example project involving many factors project australia project australia completed july 1 2000 date liquidated damages scheduled commence contract due primarily productivity labor issues anticipated liquidated damages recognized contract loss 145 million 2000 however 2001 client accepted claims extension scheduled completion date accepted claims requested additional services resulting contract amendments realization 2001 42 million contract income project income taxes determination tax provision complex due operations several tax jurisdictions outside united states may subject certain risks ordinarily would expected united states tax regimes certain jurisdictions subject significant changes may applied retroactive basis occur tax expense could materially different amounts reported furthermore determining valuation allowance related deferred tax assets estimate taxable income future determine magnitude deferred tax assets likely realized future taxable income could materially different amounts estimated case valuation allowance would need adjusted joint venture accounting investments ranging 10 percent 50 percent joint ventures operate similar lines business investments consist 10 percent interest consortium work venezuela 35 percent interest joint venture work australia 50 percent interest joint venture work africa interests unconsolidated ventures accounted equitymethod consolidated balance sheets proportionate consolidation basis consolidated statements operations presentation consistent construction industry practice alternatively account interests using equitymethod consolidated statement operations revenue contract cost would materially lower however net income would change significant business developments january 24 2000 acquired rogers phillips inc rpi closely held pipeline construction company houston texas experienced management team strong market position us gulf coast area founded 1992 rpi provides full range construction services pipeline operating companies including station piping projects congested urban areas inside plants well crosscountry pipelines consideration included 1035000 shares common stock approximately 17 million cash acquisition costs transaction accounted purchase rpi contributed 859 million revenue 2001 394 million 2000 september 2000 joint venture led subsidiary awarded significant project scope includes engineering procurement construction epc 665mile 1070kilometer 30inch crude oil pipeline doba fields chad export terminal coast cameroon africa chadcameroon pipeline project engineering procurement activities began late 2000 pipeline construction began november 2001 expected completed 2003 2000 activities nigeria included work two major epc contracts shell nembe creek gas gathering pipeline system b four concrete bargemounted gas compressor facilities shells nembe creek associated gas project collectively nembe creek projects end 2001 projects nearing completion 2000 willbros usa inc relocated administrative headquarters construction support services tulsa oklahoma houston texas cost move termination benefits office lease termination costs totaled approximately 45 million october 12 2001 completed purchase msi energy services inc msi canadian general contractor whose common shares listed canadian venture exchange msi provides pipeline construction pipeline integrity maintenance services addition pipe storage handling services specialty metal fabrication services pipeline equipment rentals concrete construction products oil sands region northern alberta canada aggregate purchase price including transaction costs 83 million conjunction acquisition company sold 144175 common shares treasury 19 million certain msi shareholders net cash paid 64 million purchase msi funded borrowings principal credit agreement transaction accounted purchase msi contributed 33 million revenue 2001 engineering group executed alliance agreement explorer pipeline company provide project management engineering procurement construction services mainline expansion project texas oklahoma missouri illinois indiana explorer pipeline project includes construction 12 grassroots pump stations modifications 12 existing pump stations addition 500000 barrels storage wood river illinois terminal modifications two terminals project scheduled completion 2002 financial measures use ebitda earnings net interest income taxes depreciation amortization part overall assessment financial performance comparing ebitda accounting periods believe ebitda used financial community method measuring performance evaluating market value companies considered businesses similar ebitda year 2001 511 million 372 million 139 million 2000 define anticipated contract revenue backlog award contract reasonably assured generally upon execution definitive agreement contract anticipated revenue postcontract award processes including change orders extra work variations scope work effect escalation currency fluctuation formulas added backlog realization reasonably assured new contract awards totaled 4238 million year ended december 31 2001 additions backlog year follows construction 1474 million engineering 2199 million specialty services 565 million backlog decreases type service result services performed period follows construction 2145 million engineering 1203 million specialty services 553 million backlog end year increased 337 million 9 previous year end 4076 million consisted following construction 2077 million 671 million 24 b engineering 1546 million 996 million 181 c specialty services 453 million 12 million 3 construction backlog consists primarily chadcameroon pipeline project construction projects offshore west africa engineering backlog consists primarily explorer pipeline project engineering procurement projects united states specialty services backlog largely attributable 16year water injection contract awarded 1998 consortium 10 percent interest venezuela contracts build operate four fueling facilities united states government service contracts oman canada results operations contract revenue contract costs primarily related timing location development projects oil gas power industries worldwide contract revenue cost variations country year result entering exiting work countries b execution new contract awards c completion contracts overall level activity services ability successful obtaining executing contracts affected relative strength weakness us dollar compared currencies competitors clients work locations believe revenue results operations adversely affected regard years ended december 31 2001 2000 fiscal year ended december 31 2001 compared fiscal year ended december 31 2000 contract revenue contract revenue increased 758 million 24 3901 million result increased engineering revenue 616 million due increase engineering procurement services united states b increased construction revenue 221 million due primarily increased construction activity united states offshore west africa cameroon partially offset reduced activities nembe creek projects nigeria neared completion 2001 completion third quarter 2000 construction contract australia increases engineering construction revenue partially offset decrease 79 million specialty services revenue united states increased 1123 million 121 due increase engineering procurement construction services cameroon revenue increased 340 million work chadcameroon pipeline project moved engineering procurement mobilization phases construction phase november 2001 offshore west africa revenue increased 263 million 149 due higher utilization combination barge willbros 318 well utilization derrick barge wb82 acquired 2001 revenue oman increased 14 million 11 canada revenue msi acquisition october 12 2001 33 million nigeria revenue decreased 756 million 53 due reduced activity nembe creek projects australia revenue decreased 167 million 81 due construction contract completed 2000 net 40 million contract amendments settled claims 2001 revenue venezuela decreased 92 million 35 contract costs contract costs increased 487 million 18 3157 million due increase 519 million engineering services cost increase construction services cost 81 million partially offset decrease 113 million specialty services cost variations contract cost country closely related variations contract revenue exception australia contract costs australia decreased 354 million 187 million decrease revenue primarily result 145 million loss recognized 2000 offset 42 million settled claims 2001 termination benefit plans 2001 terminated two employee benefit plans resulted onetime nontaxable gains 92 million plans costly maintain become ineffective recruitment retention experienced qualified workforce depreciation amortization depreciation amortization decreased 29 million 195 million due primarily sale 2000 excess equipment venezuela indonesia united states oman accelerated amortization excess spare parts indonesia 2000 accelerated amortization leasehold improvements 08 million related termination administrative office space tulsa oklahoma result relocation offices houston texas general administrative general administrative expense percentage revenue decreased 77 2001 96 2000 dollar basis general administrative expenses decreased 02 million 300 million 2001 reduction result nonrecurrence 36 million expenses incurred 2000 associated relocation administrative office houston texas reduction offset increased general administrative expenses 2001 expansion staffing support services necessary support 24 increase revenue year operating income operating income increased 394 million operating loss 53 million 2000 operating income 341 million 2001 reasons described operating income increased australia 194 million operating loss 154 million 2000 united states 148 million offshore west africa 92 million cameroon 50 million additionally recognized 92 million gains related termination certain employee benefit plans improvements offset reduced operating income nigeria venezuela totaling 187 million areas combined accounted increase 05 million net interest income expense net interest income expense decreased 02 million 21 million net interest expense due primarily lower interest rates period offset higher average debt levels minority interest minority interest expense decreased 09 million 15 million due decrease activity nigeria minority interest partners involved foreign exchange gain loss foreign exchange loss decreased 10 million 01 million primarily due writeoff 2000 cumulative translation adjustments associated substantially reduced operations indonesia work countries income expense income expense decreased 14 million 10 million expense primarily due full year amortization debt issue cost losses equipment disposals provision income taxes provision income taxes increased 51 million pretax income increased 398 million result increased taxes higher taxable income united states offset lower income taxes nigeria due decrease taxable revenue country adjustment deferred tax assets valuation allowance united states 23 million settlement 09 million prior year taxes nigeria addition 92 million nontaxable gains 2001 associated termination benefit plans provision income taxes impacted income taxes certain countries primarily nigeria based deemed profit rather taxable income fact losses one country cannot used offset taxable income another country fiscal year ended december 31 2000 compared fiscal year ended december 31 1999 contract revenue contract revenue increased 1377 million 78 3143 million due 1246 million increased construction revenue resulting primarily new construction contracts nigeria united states offshore west africa b increase 249 million specialty services revenue principally operations nigeria oman venezuela net decreased engineering revenue 118 million due completion early 2000 engineering portion engineering procurement construction contracts nigeria revenue increased 671 million 88 due revenue work performed engineering procurement construction projects increased specialty services work revenue united states increased 500 million 117 primarily due construction projects indiana illinois louisiana performed rpi increased engineering work offshore west africa revenue increased 164 million due primarily work performed engineering procurement construction project install offshore pipelines facilities oman revenue increased 49 million 61 due increased construction service revenues venezuela revenue increased 26 million 11 due work performed water injection platform construction contract several new service contracts australia revenue increased 19 million due construction contract started second half 1999 completed july 2000 indonesia revenue decreased 32 million 100 ivory coast revenue decreased 26 million 100 due completion work 1999 pipeline projects countries revenue areas increased 06 million contract costs contract costs increased 1215 million 84 2670 million due increase 1142 million construction services cost increase 158 million specialty services costs decrease 85 million engineering services cost variations contract costs country closely related variations contract revenue exception australia contract costs australia exceeded contract revenue approximately 145 million depreciation amortization depreciation amortization increased 11 million 224 million due 08 million accelerated amortization leasehold improvements related companys vacated office space tulsa oklahoma 09 increased amortization resulting higher levels spare parts purchases offset reduction depreciation expense result sale excess equipment venezuela indonesia united states oman general administrative general administrative expense increased 26 million 9 302 million increase included 30 general administrative expense rpi acquired january 2000 36 million office relocation costs partially offset 40 million reduction general administrative expense result personnel reductions scaling back eliminating activities operating loss operating loss declined 125 million 70 operating loss 53 million increased operating income nigeria offshore west africa oman united states aggregate 268 million improvement primarily attributable 78 percent increase revenue 2000 1999 offsetting improvements work countries increased operating loss australia 143 million loss primarily attributable unanticipated labor difficulties delays caused weather subcontractor net interest income expense net interest income decreased 25 million 19 million net interest expense due increase borrowings higher interest rates period minority interest minority interest expense increased 09 million 24 million due increase activity countries minority interest partners involved foreign exchange gain loss foreign exchange loss increased 06 million 11 million primarily due writeoff cumulative translation adjustments associated substantially reduced operations certain work countries income expense income decreased 21 million 04 million primarily due gains disposals equipment 1999 exceeding gains disposals equipment 2000 provision income taxes provision income taxes increased 20 million 61 primarily due increase taxable revenue nigeria offset 12 million deferred tax benefit resulting recognition 2000 portion future tax benefit operating loss carryforwards united states previously fully reserved valuation allowance deferred tax assets although loss income taxes provision income taxes required due income taxes certain countries based deemed profit rather taxable income fact losses one country cannot used offset taxable income another country effect inflation changing prices operations affected increases prices whether caused inflation government mandates economic factors countries operate attempt recover anticipated increases cost labor fuel materials price escalation provisions certain major contracts considering estimated effect increases bidding pricing new work liquidity capital resources primary requirements capital acquire upgrade maintain equipment provide working capital current projects finance mobilization employees equipment new projects establish presence countries perceive growth opportunities finance possible acquisition new businesses equity investments historically met capital requirements primarily operating cash flows recently borrowings credit facility cash equivalents increased 74 million 62 193 million december 31 2001 119 million december 31 2000 increase due cash flows 248 million operations 184 million financing activities resulting net borrowings issuance treasury stock exercise employee stock options 03 million effect exchange rate changes cash equivalents increases offset 361 million investing activities primarily purchase 288 million equipment spare parts 74 million acquisition msi net cash acquired working capital increased 141 million 2001 462 million december 31 2001 debt net cash balances december 31 2001 200 million compared 144 million december 31 2000 stockholders equity increased 248 million 966 million december 31 2001 result debt net cash equity ratio basically unchanged 20 end 2000 21 december 31 2001 contractual obligations 150 million credit agreement syndicated bank group amended effective june 30 2000 credit agreement subjects 100 million revolving portion credit facility borrowing base requirements entire facility less amounts used revolving portion facility may used standby commercial letters credit borrowings payable termination february 20 2003 interest payable quarterly base rate plus margin ranging 075 225 eurodollar rate plus margin ranging 200 350 depending upon performance commitment fee unused portion credit agreement payable quarterly ranging 0475 075 depending upon performance credit agreement collateralized substantially assets including stock principal subsidiaries credit agreement restricts payment cash dividends requires us maintain certain financial ratios including among others indebtedness ebitda leverage interest coverage borrowing base calculated using varying percentages cash accounts receivable accrued revenue contract cost recognized income yet billed property plant equipment spare parts december 31 2001 390 million borrowed credit agreement average interest rate 45 544 million letters credit outstanding leaving 566 million available combination borrowings letters credit december 31 2001 01 million notes payable issued rpi bank collateralized vehicles machinery payable monthly installments principal plus interest ranging 67 90 per annum notes mature 2002 december 31 2001 msi borrowed 01 million 15 million revolving credit facility bank credit facility collateralized fabrication facility real estate equipment facility matures 2002 addition unsecured credit facilities banks certain countries outside united states borrowings lines form shortterm notes overdrafts made competitive local interest rates generally line available borrowings related operations specific country credit available facilities approximately 93 million december 31 2001 outstanding borrowings december 31 2001 certain operating leases office camp facilities minimum lease commitments operating leases december 31 2001 totaled 45 million payable follows 2002 13 million 2003 09 million 2004 08 million 2005 08 million 2006 06 million later years 01 million based upon total cash obligations payable follows 2002 15 million 2003 399 million later years 23 million commercial commitments time enter commercial commitments usually form commercial standby letters credit insurance bonds financial guarantees contracts customers may require us provide letters credit insurance bonds regard performance contracted services cases commitments called upon event failure perform contracted services likewise contracts may allow us issue letters credit insurance bonds lieu contract retention provisions client withholds percentage contract value project completion expiration warranty period retention commitments called upon event warranty project completion issues prescribed contracts connection chadcameroon pipeline project joint venture issued letter credit equipment leasing company equal 50 total lease payments share joint venture letter credit reduces lease payments made expires october 2002 commitment called upon result failure make lease payments connection 10 interest joint venture venezuela issued corporate guarantee equal 10 joint ventures outstanding borrowings two banks guarantee reduces borrowings repaid expires march 2003 commitment december 31 2001 totals 38 million 1997 entered lease agreements specialpurpose leasing partnership land office building engineering group tulsa oklahoma leases treated accounting purposes operating leases initial terms leases five years 30 oneyear renewal options end august 2002 end initial terms leases extend leases agreement lessor purchase leased assets 55 million terminate leases cause assets sold assets sold cash proceeds sale excess 55 million paid us landlord event cash proceeds less 55 million make shortfall maximum 47 million currently believe fair market value property equal greater 55 million summary offbalance sheet commercial commitments december 31 2001 follows anticipate significant collection problems customers including countries may experiencing economic andor currency difficulties since customers generally major oil companies government entities terms billing collecting work performed generally established contracts historically low incidence collectability problems believe cash flows operations borrowing capacity existing credit facilities sufficient finance working capital expenditures ongoing operations estimate capital expenditures equipment spare parts approximately 250 350 million 2002 analyzing cash flow operations believe numerous factors could impact cash flow positively negatively one two events occur could funded operations borrowing capacity list risk factors could impact cash flow please refer sections titled forwardlooking statements political economic risks operational risks contained form 10k 1998 1999 repurchased held treasury 2175371 shares common stock 161 million repurchase shares 2000 2001 january 2000 1035000 shares treasury stock issued connection acquisition rpi october 2001 144175 shares treasury stock issued connection acquisition msi december 31 2001 total 996196 shares remain treasury stock average price 743 per share new accounting pronouncements june 2001 financial accounting standards board fasb issued statement financial accounting standards sfas 141 business combinations sfas 142 goodwill intangible assets sfas 141 requires among things purchase method accounting used business combinations june 30 2001 sfas 142 requires among things goodwill intangible assets indefinite useful lives acquired june 30 2001 longer amortized instead tested impairment least annually goodwill intangible assets acquired july 1 2001 continue amortized adoption sfas 142 required fully adopt provisions sfas 142 january 1 2002 amortization expense related goodwill 38 thousand year ended december 31 2000 47 thousand year ended december 31 2001 expect adoption sfas 142 material impact consolidated results operations june 2001 fasb issued sfas 143 accounting asset retirement obligations sfas 143 requires asset retirement cost capitalized part cost related longlived asset subsequently allocated expense using systematic rational method adopt sfas 143 effective january 1 2003 transition adjustment reported cumulative effect change accounting principle time cannot reasonably estimate effect adoption statement either financial position results operations august 2001 fasb issued sfas 144 accounting impairment disposal longlived assets sfas 144 supersedes sfas 121 accounting longlived assets longlived assets disposed retains fundamental provisions recognizing measuring impairment losses longlived assets held use longlived assets disposed sale required adopt sfas 144 january 1 2002 provisions sfas 144 generally required applied prospectively expect adoption sfas 144 material impact financial position results operations item 7aitem 7 managements discussion analysis financial condition results operations following discussion read conjunction consolidated financial statements years ended december 31 2003 2002 2001 included item 8 form 10k overview derive revenue providing construction engineering specialty services oil gas power industries government entities worldwide 2003 revenue primarily generated operations canada chad cameroon iraq nigeria oman united states venezuela obtain contracts work primarily competitive bidding negotiations longstanding prospective clients contracts durations weeks several months cases year believe fundamentals supporting demand engineering construction services oil gas power industries indicate market services strong mid longterm expect markets outside north america lead improvements demand services expect demand north america services improve late 2004 industry survey appears substantiate outlook suggesting planned worldwide pipeline construction higher 2004 2003 survey indicates increase planned miles pipeline construction approximately 38000 miles 2003 beyond approximately 59000 miles 2004 beyond bidding activity also substantiates outlook nearterm seen increase prospects believe fit capabilities qualifications approximately 2 billion end 2002 approximately 5 billion december 2003 year ended december 31 2003 loss 32 million 016 per share revenue 4187 million compares revenue 5837 million 2002 willbros record reported net income 297 million 159 per diluted share operating results fourth quarter year ended december 31 2003 positively impacted resolution portion contract variations resolution positively impacted revenue contract income net income ebitda 69 million timing amount potential future resolution remaining claims contract variations 30 million uncertain 2003 revenue 2002 primarily driven weak market conditions north america resulted 80 decline engineering group revenue weakness north american market attributable following contraction amount credit available traditional customers stagnant economic growth transfer pipeline assets major pipeline transportation companies new nontraditional owners resulted delays expansion plans existing pipeline systems delays capital expenditures result concern related hostilities middle east overbuilding natural gas fired generation capacity outside north america experienced intermittent political social unrest iraq nigeria venezuela reduced revenue negatively impacted contract margins 2003 revenue 2003 also lower due completion first half year three major projects replaced projects similar magnitude contract margin year decreased 127 revenue 164 2002 decline contract margin result following overall decline contract margins united states due competitiveness market services persistent heavy rain major project southeastern united states negative impact contract costs without offsetting revenue associated unresolved contract variations less revenue cover fixed semivariable indirect contract costs delays performance work due intermittent political social unrest iraq nigeria venezuela year general administrative ga expenses percentage revenue increased due primarily lower 2003 revenue 22 million increase ga expenses 2003 2002 increase ga expenses due large part inclusion mt west group companies entire year 2003 versus fourth quarter 2002 accounted 33 million additional ga expenses 2003 also incurred increased ga expenses 2003 2002 levels due marked increase bid activity primarily international markets increased insurance costs legal consulting support costs contract variation resolution effective income tax rate year exceeded united states statutory income tax rate primarily result income earned contracts provide tax concessions eliminate payment income taxes utilization previously unrecognized net operating loss nol carryforwards offset current income tax expenses countries outside united states benefits partially offset requirement certain countries outside united states provide income taxes deemed profit resulted effective tax rate substantially higher united states statutory income tax rate 2003 cash equivalents decreased 495 million 210 million longterm debt increased 0 170 million changes primarily due following investment 406 million capital assets significant amount total capital expenditures related gas processing plant opal wyoming opal gas plant opal gas plant began operations first quarter 2004 tenyear gas processing contract subsidiary williams companies see related discussion significant business developments 78 million used operating activities primarily attributable increases nigerias accounts receivable contract cost recognized income yet billed cash outflows partially funded increased borrowings 140 million line credit increased capital lease obligations 43 million first quarter 2004 completed two financing transactions believe improve liquidity combined cash flows operations sufficient finance working capital expenditure requirements future operations march 12 2004 completed 600 million 275 convertible senior notes convertible notes offering also march 12 2004 amended restated 1250 million senior secured credit facility threeyear amended restated credit facility 2004 credit facility provides 1500 million available credit capacity used letters credit cash borrowing see related discussion liquidity capital resources believe new capital structure positions us take substantial amount additional new work well provide better matching capital asset investment longterm revenue cash flows generated capital assets opal gas plant critical accounting policies estimates revenue recognition percentageofcompletion method number factors relating business affect recognition contract revenue fixedprice construction engineering contracts recognized percentageofcompletion method estimated contract income resulting revenue generally accrued based costs incurred date percentage total estimated costs taking consideration physical completion total estimated costs thus contract income impacted changes productivity scheduling unit cost labor subcontracts materials equipment additionally external factors weather client needs client delays providing permits approvals labor availability governmental regulation politics may affect progress projects completion thus timing revenue recognition recognize income fixedprice contract approximately 5 10 complete depending upon nature contract costs considered reimbursable excluded percentageofcompletion calculation accrued revenue pertaining reimbursables limited cost reimbursables current estimate total contract cost indicates loss contract projected loss recognized full determined revenue change orders extra work variations scope work recognized agreement reached clients scope work probable cost work recovered change contract price profit change orders extra work variations scope work recognized realization assured beyond reasonable doubt revenue claims recognized agreement reached clients value claims instances may occur completion work contract revenue unitprice contracts recognized earned believe operating results evaluated relatively long time horizon major contracts progress completed change orders extra work variations scope work cost recoveries claims negotiated realized us government contracts many contracts provide termination contract convenience client event contract would terminated convenience client prior completion typically compensated progress time termination costs many contracts subject certain completion schedule requirements liquidated damages event schedules met result circumstances within control addition contracts provide bonus payments us early completion project andor obtainment specified safety goals income taxes determination tax provision complex due operations several tax jurisdictions outside united states may subject certain risks ordinarily would expected united states tax regimes certain jurisdictions subject significant changes may applied retroactive basis occur tax expense could materially different amounts reported furthermore determining valuation allowance related deferred tax assets estimate taxable income future determine magnitude deferred tax assets likely realized future taxable income could materially different amounts estimated case valuation allowance would need adjusted joint venture accounting time seek one joint venture partners project requires local content equipment manpower resources beyond available complete work timely efficient manner wish share risk particularly large project investments ranging 10 percent 50 percent joint ventures operate similar lines business investments consist 10 percent interest consortium work venezuela 50 percent interest joint venture work africa interests unconsolidated ventures accounted equitymethod consolidated balance sheets proportionate consolidation basis consolidated statements operations presentation consistent construction industry practice alternatively account interests using equitymethod consolidated statement operations revenue contract cost would materially lower however net income would change significant business developments recently reached agreement customer settle portion contract variations positively impacted net income 2003 69 million currently 30 million outstanding contract variation claims timing amount potential future revenue recoveries associated unresolved contract variations remains uncertain claims primarily related large projects completed 2003 company currently beginning stages arbitration largest unresolved contract variation relating bolivia transierra pipeline project 2003 completed agreements williams gas processing company design construct gas processing plant near opal wyoming process gas production nearby fields opal gas plant recently completed began operations first quarter 2004 plant designed process volumes excess 350 million standard cubic feet per day natural gas producing 7000 11000 barrels per day natural gas liquids various operating conditions receive annual processing fee 10 year contract april 2014 share proceeds sales natural gas liquids extracted late third quarter 2003 willbros middle east inc awarded project iraq construction installation 15 pipelines ranging size 8inch 40inch diameter river northern iraq horizontal directional drilling contract currently valued 50plus million october 23 2002 acquired outstanding shares mt west group mt west group provides designbuild services including engineering procurement construction services energy industry primarily western united states purchase price 137 million consisted 46 million cash acquisition costs 950000 shares common stock valued 91 million addition purchase price adjusted earnout amount equal 25 percent combined net income mt west group 24month period following date acquisition earnout amounts due shall payable cash upon completion earnout period december 31 2003 mt west group cumulative net income 10 million since acquisition date transaction accounted purchase may 14 2002 completed public offering common shares 1775 per share 4356750 shares sold us underwriters exercised options purchase shares available overallotments received 719 million proceeds underwriting discount offering costs used repay indebtedness prior credit agreement working capital general corporate purposes financial measures ebitda use ebitda earnings net interest income taxes depreciation amortization part overall assessment financial performance comparing ebitda accounting periods believe ebitda used financial community method measuring performance evaluating market value companies considered businesses similar ebitda 2003 169 million compared 601 million 2002 432 million decrease ebitda primarily result 1650 million decrease revenue 2002s contract margin 164 accounts 271 million decrease 37 decrease contract margin 2003 4187 million revenue accounts another 155 million decrease reconciliation ebitda gaap financial information found item 6 selected financial data form 10k backlog define anticipated contract revenue backlog award contract reasonably assured generally upon execution definitive agreement contract anticipated revenue postcontract award processes including change orders extra work variations scope work effect escalation currency fluctuation formulas added backlog realization reasonably assured backlog december 31 2003 2247 million estimated embedded margin 296 compared 2160 million december 31 2002 estimated embedded margin 221 included december 31 2003 backlog 220 million gas processing revenue estimated embedded margin 100 gas processing revenue associated 10 year gas processing contract opal gas plant entered year reduce 2003 backlog revenue estimated contract income opal gas processing contract estimated embedded margin work backlog would 220 estimated 1700 million current backlog 74 scheduled worked 2004 results operations contract revenue contract costs primarily related timing location development projects oil gas power industries worldwide contract revenue cost variations country year result entering exiting work countries b execution new contract awards c completion contracts overall level activity services ability successful obtaining executing contracts affected relative strength weakness us dollar compared currencies competitors clients work locations 2003 2002 result economic political events venezuela venezuelan bolivar experienced significant devaluation relative us dollar included foreign exchange loss 2003 2002 foreign exchange losses 05 million 09 million respectively resulting translation bolivar denominated monetary assets liabilities us dollars believe revenue results operations areas adversely affected regard years ended december 31 2003 2002 expect adverse impact recent february 2004 devaluation venezuelan bolivar fiscal year ended december 31 2003 compared fiscal year ended december 31 2002 contract revenue contract revenue decreased 1650 million 28 4187 million 2003 5837 million 2002 engineering revenue declined 1410 million 80 2003 362 million 1772 million 2002 explorer pipeline project completed early 2003 replaced another comparably sized project revenue 208 million 2003 compared 909 million 2002 construction revenue also declined 511 million 15 result completing two large projects first half 2003 construction revenue 2003 2937 million versus 3448 million 2002 2003 completion chadcameroon pipeline project resulted yeartoyear construction revenue decline 745 million completion bolivia transierra pipeline early 2003 resulted additional 444 million yeartoyear construction revenue decline combined 1189 million reduction construction revenue two projects partially offset increased revenue related venezuela ameriven project 221 million increased work oman 237 million full year mt west group revenue 231 million combined 1921 million engineering construction revenue decline partially offset 271 million 44 increase specialty services revenue specialty services revenue 2003 888 million versus 617 million 2002 increase attributable new expanded work nigeria canada contract costs contract costs declined 1226 million 25 3656 million 2003 4882 million 2002 variations contract costs country closely related variations contract revenue 25 yeartoyear contract cost decline versus equivalent 28 contract revenue decline reflects declining margins accompanying declining revenue contract margin 2003 2002 levels 37 percentage points 127 versus 164 however fourth quarter 2003 margins adjusted remove effect contract variation settlement comparable period prior year 2003 engineering contract costs 446 million exceeded revenue 84 million margins declined slightly construction mainly result completing several large projects contract variations remain settled revenue contract claims recognized agreement reached customers specialty services margin increased slightly depreciation amortization depreciation amortization decreased 10 million 4 2003 primarily due change mix assets depreciable lines property plant equipment general administrative ga expenses increased 22 million 6 361 million 2003 versus 339 million 2002 increase resulted full year ga expenses mt west group acquired october 23 2002 partially offset reductions venezuela us engineering ga expenses excluding mt west groups 33 million yeartoyear increase ga expenses declined 11 million primarily result lower staff compensation incur higher ga expenses 2003 2002 following areas bidding estimating insurance legal consulting net interest income expense net interest expense decreased 04 million 12 million 2003 16 million 2002 interest expense 02 million less 2002 reduced debt capitalized interest related construction opal gas plant interest income increased 02 million 2003 compared 2002 income expense expenses decreased 13 million 02 million 2003 15 million 2002 13 million decrease result 06 million gain disposal equipment 2003 03 million reduction foreign currency translation losses 2003 versus 2002 occurrence 2002 04 million miscellaneous expenses repeated 2003 provision income taxes provision income taxes 2003 decreased 89 million compared 2002 mainly result 418 million decrease pretax income additionally tax provision 2002 received benefit 33 million reduction deferred tax valuation allowance primarily based assessment united states operations including past earnings history projected future earnings scheduled expiration tax net operating losses although 2003 provide levels taxable revenue contemplated one year ago believe deferred tax attributes fully utilized future years effective income tax rate year exceeded united states statutory income tax rate primarily result income earned contracts provide tax concessions eliminate payment income taxes utilization previously nol carryforwards offset current income tax expenses countries outside united states benefits partially offset requirement certain countries outside united states provide income taxes deemed profit resulted effective tax rate substantially higher united states statutory income tax rate fiscal year ended december 31 2002 compared fiscal year ended december 31 2001 contract revenue contract revenue increased 1936 million 50 5837 million due 1304 million 60 increased construction revenue due primarily construction chadcameroon pipeline project work project bolivia increased activity offshore west africa net reduced activities nembe creek projects nigeria neared completion reduced construction activity united states b increased engineering revenue 569 million 47 due increase engineering procurement services united states primarily related explorer pipeline project c increase 63 million 11 specialty services revenue principally revenue generated msi canada acquired october 2001 offset reduced activity venezuela revenue united states increased 263 million 13 due primarily increase engineering procurement services acquisition mt west group october 2002 offset decrease construction activity chadcameroon revenue increased 1013 million resulting construction work begun fourth quarter 2001 chadcameroon pipeline project revenue offshore west africa increased 153 million result increased vessel utilization several projects first six months 2002 work began 2002 project bolivia resulted 474 million revenue country project dominican republic 2002 produced 177 million revenue canada increased 104 million resulting acquisition msi october 2001 nigeria revenue decreased 195 million 29 due primarily reduced activity nembe creek projects combined revenue areas decreased 53 million 15 contract costs contract costs increased 1711 million 54 4883 million due increase 1077 million 62 construction services cost 549 million 56 engineering services cost 85 million 19 specialty services cost variations contract costs country closely related variations contract revenue depreciation amortization depreciation amortization increased 38 million 19 due primarily addition equipment chadcameroon pipeline project bolivia general administrative general administrative expenses increased 39 million 13 339 million increase due higher staff compensation administrative services necessary support 50 increase revenue percent revenue general administrative expenses decreased 77 2001 58 2002 operating income operating income increased 56 million 17 327 million 2001 383 million 2002 excluding gain 92 million 2001 associated termination certain benefit plans operating income increased 148 million 63 excluding gain 2001 operating income increased largely result higher revenue resulting greater activity north america construction activity chadcameroon pipeline project marine maintenance construction offshore west africa partially offset reduced income nigeria resulting 29 decrease revenue area increased income 50 increase revenue offset higher depreciation amortization general administrative costs net interest income expense net interest expense decreased 10 million 40 16 million may 2002 completed common stock offering received 719 million net proceeds borrowings prior credit agreement paid full interest expense 2002 includes amortization debt issue costs 09 million compared 05 million 2001 foreign exchange loss foreign exchange loss increased 09 million 10 million due primarily effect devaluation venezuelan bolivar 2002 venezuelan bolivar denominated monetary assets liabilities provision income taxes provision income taxes decreased 49 million 47 due primarily difference 66 million changes estimated income tax liabilities deferred tax assets 2002 compared 32 million similar changes 2001 addition 2002 recorded 11 million deferred income tax benefit associated operating losses outside united states changes 2002 income tax liabilities include 12 million reduction due annual settlements income tax liabilities outside united states 10 million reduction resulting changes current year estimated tax liabilities outside united states result settlements addition reduced income taxes united states 11 million result refinement allocation expenses among operating entities items affecting estimated tax liabilities united states 33 million reduction deferred tax assets valuation allowance reduced us valuation allowance result assessment united states operations including past earnings history projected future earnings considering scheduled expiration tax net operating losses changes 2001 resulted 23 million reduction deferred assets valuation allowance united states 09 million reduction annual settlements income taxes outside united states provision income taxes also impacted differing income tax rates various countries operate including example nigeria income taxes largely based deemed profit rather taxable income well tax holiday cameroon income earned chadcameroon pipeline project liquidity capital resources capital requirements primary requirements capital acquire upgrade maintain equipment provide working capital current projects finance mobilization employees equipment new projects establish presence countries perceive growth opportunities finance possible acquisition new businesses equity investments historically met capital requirements primarily operating cash flows recently 2002 equity offering borrowings credit facility working capital cash equivalents decreased 285 million 58 210 million december 31 2003 495 million december 31 2002 decrease consists 392 million used investing activities including design construction opal gas plant acquisition equipment spare parts 78 million used operating activities primarily due increases accounts receivable contract cost recognized income yet billed principally nigeria negative cash flows partially offset 185 million cash provided financing activities including 140 million borrowings line credit 43 million capital lease obligations entered 2003 working capital stockholders equity remained fairly constant yeartoyear decreasing less 1 believe anticipated increase revenue improvement contract margins focus reducing working capital requirements nigeria return company positive cash flow operations 2004 275 convertible senior notes march 12 2004 completed 600 million 275 convertible senior notes convertible notes offering enhance competitive position market place provide better matching funding capital assets revenue cash flow streams generating convertible notes general senior unsecured obligations interest paid semiannually march 15th september 15th beginning september 15 2004 convertible notes mature march 15 2024 unless notes repurchased redeemed converted earlier may redeem convertible notes cash march 15 2011 100 principal amount notes plus accrued interest holders convertible notes right require us repurchase convertible notes including unpaid interest march 15 2011 2014 2019 upon change control related event march 15 2011 upon change control event must pay purchase price cash march 15 2014 2019 option providing common stock lieu cash combination common stock cash fund repurchases holders convertible notes may convert certain circumstances notes shares common stock initial conversion ratio 513611 shares common stock per 1000 principal amount notes representing conversion price approximately 1947 per share net proceeds approximately 572 million used working capital repay 140 million indebtedness 1250 million june 2002 credit agreement general corporate purposes restated extended credit facility march 12 2004 existing june 2002 credit agreement amended restated 2004 credit facility 2004 credit facility mature march 12 2007 2004 credit facility may used standby commercial letters credit borrowings combination thereof borrowings limited lesser 40 borrowing base 300 million payable termination march 12 2007 interest payable quarterly base rate plus margin ranging 075 200 eurodollar rate plus margin ranging 175 300 commitment fee unused portion 2004 credit facility payable quarterly ranging 0375 0625 2004 credit facility collateralized substantially assets including stock principal subsidiaries restricts payment cash dividends requires us maintain certain financial ratios borrowing base calculated using varying percentages cash accounts receivable accrued revenue contract cost recognized income yet billed property plant equipment spare parts debt issue costs 26 million associated 2004 credit facility remaining 06 million unamortized debt issue costs related june 2002 credit agreement amortized 24 month period december 31 2003 140 million borrowed june 2002 credit agreement repaid proceeds sale convertible notes 410 million letters credit outstanding leaving total 403 million available issuance letters credit 60 million borrowings combination thereof based covenant waiver agreement discussed total cash borrowings may exceed 200 million december 31 2003 2002 unamortized debt issue cost 08 million 21 million respectively covenant waiver october 31 2003 obtained consent waiver agreement syndicated bank group waive noncompliance certain financial covenants credit june 2002 agreement agree method calculating borrowing base eliminates multiple ebitda calculation filing february 2004 borrowing base certificate agreement provided waivers certain quarterly financial covenants december 31 2003 obtained agreement would default june 2002 credit agreement limits cash borrowings june 2002 credit agreement 200 million total borrowing base available cash borrowing issuance standby letters credit may exceed 750 million liquidity believe cash flows operations borrowing capacity 2004 credit facility net proceeds convertible notes offering sufficient finance working capital expenditures ongoing operations present level activity provide capacity expected growth capital expenditures equipment spare parts 2004 estimated 300 million 60 million respectively also may required make additional payments 2004 related mt west group acquisition based 25 net income earnout provision covering twoyear period following acquisition date believe numerous factors could impact cash flow positively negatively one two events occur could funded operations borrowing capacity list events could cause actual results differ expectations discussion risk factors could impact cash flow please refer section entitled political economic risks operational risks contained items 1 2 form 10k contractual obligations december 31 2003 140 million borrowed june 2002 credit agreement repaid proceeds sale convertible notes 410 million letters credit outstanding leaving 403 million available letters credit 60 million borrowings capital lease obligations include approximately 39 million leasing company fouryear capital lease connection ongoing acquisition installation new corporate information systems infrastructure lease amount increases quarterly based costs incurred maximum value 70 million certain operating leases equipment office camp facilities minimum lease commitments operating leases december 31 2003 totaled 79 million payable follows 2004 23 million 2005 20 million 2006 15 million 2007 09 million 2008 08 million later years 04 million based upon total cash obligations payable follows 2004 37 million 20052006 198 million 20072008 27 million later years 04 million additionally various notes leases payable generally related equipment financing local revolving credit facilities notes leases market interest rates collateralized certain vehicles equipment andor real estate unsecured credit facilities banks certain countries outside united states borrowings lines form shortterm notes overdrafts made competitive local interest rates generally line available borrowings related operations specific country credit available facilities approximately 58 million december 31 2003 outstanding borrowings december 31 2003 anticipate significant collection problems customers including countries may experiencing economic andor currency difficulties since customers generally major oil companies government entities terms billing collecting work performed generally established contracts historically low incidence collectability problems offbalance sheet arrangements commercial commitments time enter commercial commitments usually form commercial standby letters credit insurance bonds financial guarantees contracts customers may require us provide letters credit insurance bonds regard performance contracted services cases commitments called upon event failure perform contracted services likewise contracts may allow us issue letters credit insurance bonds lieu contract retention provisions client withholds percentage contract value project completion expiration warranty period connection 10 interest joint venture venezuela issued corporate guarantee equal 10 joint ventures outstanding borrowings two banks guarantee reduces borrowings repaid expires march 2004 commitment december 31 2003 totals 36 million maximum amount future payments could required make summary offbalance sheet commercial commitments december 31 2003 follows commercial commitments totaling 478 million represent maximum amount future payments could required make liability recorded december 31 2003 related commitments new accounting pronouncements january 2003 fasb issued interpretation 46 consolidation variable interest entities interpretation accounting research bulletin 51 fin 46 interpretation states certain variable interest entities may required consolidated results operations financial position entity primary beneficiary fin 46 applies immediately variable interest entities created january 31 2003 variable interest entities enterprise obtains interest date applies first fiscal year interim period beginning december 15 2003 revised effective date variable entities enterprise holds variable interest acquired february 1 2003 fin 46 applies public enterprises beginning applicable interim annual period expect adoption fin 46 material impact financial position results operations december 2002 fasb issued sfas 148 accounting stockbased compensation transition disclosure amendment fasb statement 123 statement amends fasb statement 123 accounting stockbased compensation provide alternative methods transition voluntary change fair value method accounting stockbased employee compensation addition statement amends disclosure requirements statement 123 require prominent disclosures annual interim financial statements certain disclosure modifications required fiscal years ending december 15 2002 included notes consolidated financial statements included item 8 form 10k november 2002 fasb issued interpretation 45 guarantors accounting disclosure requirements guarantees including indirect guarantees indebtedness others interpretation fasb statements 5 57 107 rescission fasb interpretation 34 interpretation elaborates disclosures made guarantor interim annual financial statements obligations guarantees issued interpretation also clarifies guarantor required recognize inception guarantee liability fair value obligation undertaken initial recognition measurement provisions interpretation applicable guarantees issued modified december 31 2002 expected material effect financial statements disclosure requirements effective financial statements interim annual periods ending december 15 2002 june 2002 fasb issued sfas 146 accounting costs associated exit disposal activities addresses accounting restructuring similar costs sfas 146 supersedes previous accounting guidance principally emerging issues task force issue 943 adopt provisions sfas 146 restructuring activities initiated december 31 2002 sfas 146 requires liability costs associated exit disposal activity recognized liability incurred issue 943 liability exit cost recognized date commitment exit plan sfas 146 also establishes liability initially measured recorded fair value accordingly sfas 146 may affect timing recognizing future restructuring costs well amounts recognized april 2002 fasb issued sfas 145 rescission sfas 4 44 64 amendment sfas 13 technical corrections sfas 145 provides guidance income statement classification gains losses extinguishment debt accounting certain lease modifications economic effects similar saleleaseback transactions adopted sfas 145 january 2003 adoption materially affect consolidated financial statements effects inflation changing prices operations affected increases prices whether caused inflation government mandates economic factors countries operate attempt recover anticipated increases cost labor fuel materials price escalation provisions certain major contracts considering estimated effect increases bidding pricing new work item 7ananitem 7 management’s discussion analysis financial condition results operations thousands except share per share amounts unless noted otherwise following discussion read conjunction consolidated financial statements years ended december 31 2005 2004 2003 included item 8 form 10k overview restatement late december 2004 company became aware improprieties company’s bolivian subsidiary related assessment certain bolivian taxes allegations subsidiary filed improper tax returns upon learning tax assessment alleged improprieties company commenced initial investigation matter notified audit committee board directors retained independent counsel turn retained forensic accountants began independent investigation concurrent audit committee’s investigation company initiated review company’s accounting review focused primarily company’s international activities supervised former president willbros international inc “wii” primary international subsidiary company also included areas company’s accounting activities result investigations company’s accounting review company determined several members senior management wii subsidiaries collaborated misappropriate assets company cover activity determined bolivian subsidiary fact filed improper tax returns failed file returns direction mr tillery former president wii investigation also determined mr tillery collusion several members management international subsidiaries involved pattern improper activities primarily company’s nigerian subsidiaries specifically contrary established company policies internal controls possibly laws several countries including united states improper activities significantly impacted company’s previously issued consolidated financial statements resulting restatement consolidated financial statements december 31 2003 years ended december 31 2003 2002 first second third fiscal quarters 2004 2003 restated financial statements included company’s consolidated financial statements filed annual report form 10k 2004 financial statement adjustments resulting misconduct certain members international subsidiaries management negative impact company’s consolidated cumulative earnings loss december 31 2003 approximately 13307 impact company’s consolidated cumulative earnings loss december 31 2003 accounting errors noted decreased earnings approximately 5 total impact company’s consolidated cumulative earnings loss financial statement adjustments december 31 2003 approximately 13312 total impact company’s consolidated earnings loss first three fiscal quarters 2004 approximately 6077 impact attributable misconduct international operations approximately 6629 total 2005 general derive revenue providing engineering construction specialty services development activities oil gas power industries government entities worldwide 2005 revenue primarily generated operations canada nigeria oman united states obtain contracts work primarily competitive bidding negotiations longstanding prospective clients contracts durations weeks several months cases year continue believe fundamentals supporting demand engineering construction services oil gas power industries indicate market services strong next two five years many positive developments reinforce view capital spending exploration production sector energy industry expected exceed 235 billion 2006 15 percent increase comparable expenditures 2005 oil sands region western canada forecast capital expenditures new bitumen production processing facilities expected exceed c100 billion 2015 production levels increased approximately one million barrels per day presently three million barrels per day 2015 also believe new initiatives announced mexican government increase production expand pipeline infrastructure make market attractive engineering construction services 2006 national elections completed united states new gas production rocky mountain region generated new plans gas pipelines west midwest east coast move towards lng also expected bring opportunities willbros north america producingexporting countries engineering market north america become capacity constrained selective accepting assignments offer higher margins position us epc assignments believe heightened engineering activity precursor higher levels construction activity north america discussions potential customers regarding pipeline station construction projects north america coupled increase engineering assignments support belief activity north america increase 2006 2007 nigeria attacks oil installations kidnapping oil workers niger delta escalated emergence group calling mend crux niger delta conflict escalation longstanding troubled relationship federal government nigeria oil producing communities niger delta region latter asserting historically inequitable sharing niger delta oil revenues production operations western delta area shut combined effect elevating oil prices interrupting delaying projects underway market negotiations clients nigeria address heightened security concerns mitigate commercial impacts us recent events nigeria clients demonstrated appreciation problems willingness work us combination security concerns commercial issues outcome negotiations still uncertain ultimate effect revenue operating results cash flow however date events negative impact revenue operating results cash flow likely negative impact continue near term given risk profiles major markets latin america west africa combined expanding opportunities many markets increased capital requirements company believes required participate major expansion us international pipeline grid company continues engage investment bankers assist evaluation company’s strategic alternatives could include equity debt financings well transactions could result strategic acquisitions andor sale portion company financial summary year ended december 31 2005 net loss 38780 182 per share revenue 706522 compares revenue 483318 2004 net loss 20815 099 per share 2005 revenue 462 percent 2004 primarily driven improving market conditions international united states canada business segments see note 14 “notes consolidated financial statements” included item 8 form 10k additional information regarding segment reporting increase revenue attributable following • increased construction activity nigeria four large epc contracts major oil companies partially offset work completed 2004 iraq venezuela oman bolivia ecuador • commencement work new engineering pipeline construction projects united states • continuation work relating maintenance fabrication contracts canadian oil sands contract income 2005 increased 16319 81966 65647 2004 however contract margin decreased 116 percent 2005 136 percent 2004 contract income increased due primarily increased revenue discussed operations 2005 generated lower contract margin expected due unresolved change orders expected resolved future periods low margin projects nigeria startup costs cost overruns canada interruptions work progress united states hurricanes katrina rita lower contract margins partially offset higher contract margins certain engineering pipeline construction projects united states general administrative “ga” expense increased 28816 75430 2005 46614 2004 increase ga included increases external legal accounting costs related primarily ongoing support class action lawsuits doj sec investigations audit 2004 financial statements including restatement first three quarters 2004 prior years ga expense also higher nigeria canada due increased activity markets provision income taxes 2005 18308 primarily result • income tax benefit foreign losses 1469 • income tax expense foreign deemed income 15297 • income tax expense income united states 4480 2005 cash equivalents decreased 13139 65581 78720 longterm debt increased 138020 2005 73495 2004 changes primarily due following • proceeds issuance 65000 65 senior convertible notes due 2012 • 33022 cash used operating activities primarily attributable low contract margin increased ga expense • investment 38888 capital assets associated expansion operations fabrication facilities nigeria canada expansion housing office facilities nigeria normal replacement equipment december 2005 issued 65000 65 senior convertible notes “65 notes” private placement first quarter 2006 initial purchasers 65 notes exercised option purchase additional 19500 65 notes bringing aggregate principal amount private placement 84500 net proceeds offering used retire existing indebtedness provide additional liquidity support working capital needs current level operations 2004 period ended june 14 2006 company entered various amendments waivers 2004 credit facility syndicated bank group regarding noncompliance certain financial nonfinancial covenants 2004 credit facility among things amendments provided 1 certain financial covenants reporting obligations waived andor modified reflect company’s current anticipated future operating performance 2 ultimate reduction facility 70000 issuance letter credit obligations 3 requirement company maintain minimum cash balance 15000 see related discussion item 7 “liquidity capital resources” critical accounting policies estimates revenue recognition percentageofcompletion method number factors relating business affect recognition contract revenue fixedprice construction engineering contracts recognized percentageofcompletion method estimated contract income resulting revenue generally accrued based costs incurred date percentage total estimated costs taking consideration physical completion total estimated costs thus contract income impacted changes productivity scheduling unit cost labor subcontracts materials equipment additionally external factors weather client needs client delays providing permits approvals labor availability governmental regulation politics may affect progress project’s completion thus timing revenue recognition recognize income fixedprice contract approximately 5 percent 10 percent complete depending upon nature contract current estimate total contract cost indicates loss contract projected loss recognized full determined also included contract costs recognized income yet billed uncompleted contracts amounts company seeks seek collect customers others errors changes contract specifications design contract change orders dispute unapproved scope price customerrelated causes unanticipated additional contract costs unapproved change orders amounts recorded estimated net realizable value realization probable reasonably estimated unapproved change orders claims also involve use estimates reasonably possible revisions estimated recoverable amounts recorded unapproved change orders may made nearterm company successfully resolve matters net expense recorded reduction revenues may required addition amounts previously provided revenue unitprice time material contracts recognized earned revenue operations opal gas plant recognized upon delivery product customer believe operating results evaluated time horizon major contracts progress completed change orders extra work variations scope work cost recoveries claims negotiated realized us government contracts many contracts provide termination contract convenience client event contract would terminated convenience client prior completion typically compensated progress time termination costs many contracts subject certain completion schedule requirements require us pay liquidated damages event schedules met result circumstances within control addition contracts provide bonus payments us early completion project andor attainment specified safety goals income taxes determination tax provision complex due operations several tax jurisdictions outside united states may subject certain risks ordinarily would expected united states tax regimes certain jurisdictions subject significant changes may applied retroactive basis occur tax expense could materially different amounts reported furthermore determining valuation allowance related deferred tax assets estimate taxable income future determine magnitude deferred tax assets likely realized future taxable income could materially different amounts estimated case valuation allowance would need adjusted joint venture accounting time seek one joint venture partners project requires local content equipment manpower resources beyond available complete work timely efficient manner wish share risk particularly large project investments ranging 10 percent 50 percent joint ventures operate similar lines business investments consist 10 percent interest consortium work venezuela 50 percent interest joint venture work africa 2003 interests unconsolidated ventures accounted equity method consolidated balance sheets proportionate consolidation basis consolidated statements operations presentation consistent construction industry practice alternatively account interests using equity method consolidated statement operations revenue contract cost would materially lower however net income would change significant business developments february 18 2006 willbros 318 combination derricklay barge working forcados river nigeria attacked militants allegedly affiliated group calling mend nine personnel taken hostage result heightened security risk niger delta three projects area interrupted security protocols company’s work nigeria reviewed adjusted meet escalating threat march 1 2006 six hostages released unharmed repatriated home countries march 27 remaining three hostages released unharmed likewise repatriated home countries negotiations release hostages large measure result extensive dialogue nigerian federal state government representatives mend willbros paid ransom release hostages willbros 318 remains anchored forcados river company cease work certain projects niger delta region nigeria result militant activities area projects outside niger delta also negatively impacted militant activities currently discussions clients nigeria address changed working environment security commercial perspective discussions still ongoing accordingly cannot estimate time effect escalating hostilities current future project activities nigeria 2005 company awarded multiple projects valued 861945 significant project awards announced year company follows • willbros west africa inc awarded engineering procurement construction “epc” contract design fabricate install provide additional services necessary furnish new pipeline system chevron nigeria limited escravos producing area nigeria scope project includes installation 24inch infield export pipelines 20inch infield pipeline 10inch infield line power cable pipelines interconnect platforms escravos gas plant 24inch export pipeline includes installation pipeline end manifold catenary anchor leg export mooring “calm” engineering procurement activities begun project expected move field late 2005 completion scheduled first quarter 2007 west africa willbros units also awarded new module fabrication work support offshore deep water project additional plant work bonny island projects achieved completion early 2006 willbros also awarded offshore project comprising fabrication installation hookup work project began fourth quarter 2005 completion scheduled second quarter 2007 • willbros mt west offices fruita colorado awarded epc contract cheyenne plains gas pipeline co sand dune amine gas processing plant located kiowa county kansas plant designed process 110 mmscfd natural gas carried cheyenne plains gas pipeline completed fourth quarter 2005 willbros mt west also awarded contract kinder morgan works associated east line expansion project contract construction services encompasses civil electrical mechanical works supporting installation nine tanks 50000 bbl 80000 bbl ancillary equipment grassroots breakout tank farm near el paso texas additions improvements two existing terminals near phoenix tucson arizona additional capacity one existing pump station demolition two others located texas new mexico arizona project scheduled completion 2006 additionally willbros mt west awarded contract rocky mountain region encana gas gathering middle fork compressor station field booster station include three field boosters liquid collection facilities ancillary equipment project completed late 2005 • willbros rpi inc “willbros rpi” houston texas awarded contract enterprise products construction 22 miles liquids pipeline bp refinery texas city texas interconnection near friendswood texas existing enterprise pipeline transport natural gas liquids mont belvieu fractionation project commenced may completed august 2005 energy transfer awarded willbros rpi contract construction grass roots compressor station texas • willbros msi canada inc “willbros canada” awarded followon fiveyear maintenance contract removal replacement slurry pipelines bitumen operations mildred lake aurora projects syncrude canada ltd contract run june 2009 willbros canada also awarded fouryear contract canadian natural resources limited “cnrl” provide procurement construction services pipelines facilities associated cnrl’s horizon oil sands project contract calls services provided june 2005 june 2009 willbros canada also awarded site services contract piping utilities installation project • willbros government services inc awarded contract defense energy support center desc design build operate automated fuel dispensing facility fort campbell kentucky fiveyear contract contains options three additional fiveyear periods facility provide petroleum products services government vehicles award willbros’ fifth contract first quarter 2006 company awarded multiple significant projects valued excess 175000 follows • willbros canada awarded contract fabrication process modules cnrl modules fabricated edmonton alberta willbros canada’s new 90000 square foot fabrication facility readied service 2005 contract run third quarter 2006 anticipates followon services erect install commission modules cnrl’s horizon oil sands project • willbros rpi awarded project installation 22 miles 42inch natural gas pipeline texas energy transfer corporation willbros rpi also awarded contract installation 74 miles 24inch products pipeline southeastern united states relocation two natural gas processing plants north texas oklahoma • willbros engineers inc “wei” tulsa oklahoma awarded several significant engineering contracts confidential projects • oman construction company “toco” muscat oman awarded engineering procurement construction project design installation 104 kilometer 18inch natural gas condensate pipeline 80 kilometer 36inch natural gas pipeline kauther area oman project initial stage completion anticipated third quarter 2007 • west africa willbros units awarded new assignment installation pipeline plant facilities bonny island total subsidiary elf petroleum nigeria limited project expected completed second quarter 2006 january 2006 willbros sold txp4 plant complex opal wyoming unit williams companies designed constructed owned willbros agreement williams txp4 plant innovative solution developed completed within short timeframe respond need additional gas processing capacity handle growing natural gas production volumes whereby williams operated facility companies participated revenue stream generated unit commercially successful company consider plant core asset proceeds sale redeployed core business opportunities company received cash payments approximately 325 million sale processing train matters associated related projects financial measures backlog industry backlog considered indicator potential future performance represents portion future revenue stream strategy focused solely backlog additions rather capturing quality backlog margins commensurate risks associated given project backlog consists anticipated revenue uncompleted portions existing contracts whose award reasonably assured december 31 2005 backlog 816355 estimated embedded margin 155 compared 660932 estimated embedded margin 216 december 31 2004 december 31 2004 backlog data reduced backlog associated txp4 plant backlog would 640245 embedded margin 191 believe backlog figures firm subject cancellation modification provisions contained various contracts expect approximately 673000 82 existing backlog december 31 2005 recognized revenue 2006 historically substantial amount revenue given year backlog beginning year additionally due short duration many jobs revenue associated jobs performed within reporting period reflected backlog generate revenue numerous sources including contracts long short duration entered year well various contractual processes including change orders extra work variations scope work effect escalation currency fluctuation formulas revenue sources added backlog realization assured following table shows backlog operating segment geographic region december 31 2005 2004 ebitda use ebitda earnings net interest income taxes depreciation amortization part overall assessment financial performance comparing ebitda accounting periods believe ebitda used financial community method measuring performance evaluating market value companies considered businesses similar ebitda 2005 4970 compared 8530 2004 3560 decrease ebitda primarily result • increased ga expense 28816 2005 2004 offset • increased contract income 16319 due increase revenue 2005 2004 • improved income expense 6450 due reduction bad debts expense reconciliation ebitda gaap financial information found item 6 “selected financial data” form 10k results operations contract revenue contract costs significantly impacted capital budgets clients timing location development projects oil gas power industries worldwide contract revenue cost variations country yeartoyear result entering exiting work countries execution new contract awards completion contracts overall level activity related services fiscal year ended december 31 2005 compared fiscal year ended december 31 2004 contract revenue contract revenue increased 223204 462 706522 2005 483318 2004 international revenue increased 122237 421 percent primarily result increased construction activity nigeria four large epc contracts increased levels work nigeria partially offset declines iraq venezuela oman bolivia ecuador projects completed closed 2004 united states canada revenue increased 100967 524 percent 2005 293761 192794 2004 primarily result work new engineering pipeline construction projects united states continuation work relating maintenance fabrication contracts canadian oil sands contract income contract income increased 16319 249 81966 2005 65647 2004 variations contract costs country closely related variations contract revenue international contract income increased 9570 primarily due increased revenue nigeria partially offset declines contract income iraq bolivia venezuela ecuador projects completed closed 2004 decline contract margin percent resulted contract margin associated work nigeria 2005 lower contract margin compared margin recognized completed 2004 iraq project 2004 benefit bolivia transierra settlement united states canada contract income increased 6749 primarily due increased revenue segment contract margin percent declined 22 percentage points decline contract margin percent due lower contract margin realized gas processing txp4 plant canada due startup costs associated new fabrication facility costs overruns certain construction projects declines contract margin partially offset higher contract margins engineering pipeline constructions projects united states contract income contract margin percentage segments negatively impacted 2005 unresolved change orders expected resolved future periods operating expense depreciation amortization increased 4839 289 21586 2005 due 2005 acquisition 38888 assets used primarily nigeria full year’s depreciation new worldwide information technology system international depreciation increased 11575 9135 267 percent united states canada depreciation amortization increased 10011 7612 315 percent ga expense increased 28816 618 75430 2005 compared 46614 2004 increase ga included increases external legal accounting costs related primarily ongoing support class action lawsuits doj sec investigations audit 2004 financial statements including restatement first three quarters 2004 prior years ga expense also higher nigeria canada due increased activity markets international ga increased 54920 2005 compared 22600 2004 united states canada ga decreased 20510 2005 24014 2004 operating costs representing fraudulent expenses identified investigation described note 1 consolidated financial statements item 8 “financial statements supplementary data” form 10k decreased 1084 2005 3571 2004 subsequent first quarter 2005 fraudulent costs identified net interest income expense interest expense including amortization debt issue cost increased 2112 5525 2005 3413 2004 due primarily writeoff debt restructuring cost 1203 interest expense expected increase 2006 due higher debt levels interest income increased 790 1669 2005 compared 879 2004 result overall increase invested funds 2005 compared 2004 income expense decreased 6828 352 2005 7180 2004 primarily result 6737 bad debt expense 2004 foreign exchange loss 130 2005 compares unfavorably foreign exchange gain 248 2004 provision income taxes provision income taxes 2005 increased 8244 18308 compared 2004 increase provision income taxes primarily due significant increase revenue earned nigeria company’s subsidiaries taxed based deemed income provision income taxes also increased 2005 due improved operating results us company’s subsidiaries subject federal income tax 35 percent state income tax varying tax rates fiscal year ended december 31 2004 compared fiscal year ended december 31 2003 contract revenue contract revenue increased 66745 160 483318 2004 416573 2003 international revenue increased 28283 108 percent increased revenue 2004 resulted start eggs project nigeria 62313 continued work related rebuilding iraq 43972 completed 2004 increases offset 2003 completion chadcameroon pipeline project resulted yeartoyear construction revenue decline 61269 completion several nigerian projects also contributed revenue reductions 2003 venezuela oman revenue also decreased 2003 united states canada revenue increased 38462 249 percent 2004 192794 154332 2003 primary reasons increase 2004 startup operations new opal gas plant wyoming approximately 21216 expanded albian sands maintenance contract canada approximately 8766 contract income contract income increased 23516 558 65647 2004 42131 2003 variations contract costs country closely related variations contract revenue international contract income increased 2295 primarily result increased revenue segment’s contract margin dropped 06 147 2003 141 decrease contract margin despite settlement claim transierra project bolivia positively impacted contract income 2004 6308 based findings related investigation company’s former president wii’s activities contract income 2004 2003 negatively impacted approximately 4265 360 respectively margins 2004 2003 reduced approximately 15 01 respectively united states canada contract income increased 21221 margins greatly improved last year engineering construction activity three factors resulted improvement margins first construction projects united states negatively impacted weather 2004 2003 second revenue 2003 resulted increased contract income finally new opal gas plant commenced operations first quarter 2004 contributed 5464 contract income operating expense depreciation amortization increased 1177 76 2004 due acquisition 38479 assets 2004 change mix assets depreciable lines property plant equipment international depreciation increased 8727 9135 47 percent united states canada depreciation amortization increased 6843 7612 112 percent ga expense increased 10314 284 percent 46614 2004 compared 36300 2003 increase result resources dedicated bidding estimating supporting existing projects regulatory compliance litigation costs implementation new accounting system international ga increased 16321 22600 united states canada ga increased 19979 24014 operating costs representing fraudulent expenses identified investigation described note 1 consolidated financial statements item 8 “financial statements supplementary data” form 10k increased 2314 3571 2004 net interest income expense net interest expense including amortization debt issue cost increased 1813 2534 2004 721 2003 increase direct result interest 70000 275 convertible senior notes issued first quarter 2004 interest income increased 270 2004 compared 2003 result overall increase invested funds 2004 compared 2003 income expense increased 6525 7180 2004 655 2003 primarily result 6737 increase bad debt expense foreign exchange gain 248 2004 favorable variance foreign exchange loss 789 2003 provision income taxes provision income taxes 2004 increased 13365 compared 2003 increase provision income taxes due improved operating results countries income taxes calculated actual pretax earnings increase revenue nigeria taxes based upon deemed income increase allowance deferred tax assets bolivia liquidity capital resources capital requirements primary requirements capital acquire upgrade maintain equipment provide working capital current projects finance mobilization employees equipment new projects establish presence countries perceive growth opportunities finance possible acquisition new businesses equity investments historically met capital requirements primarily operating cash flows borrowings credit facility debt equity financings working capital cash equivalents decreased 13139 65581 december 31 2005 78720 december 31 2004 decrease primarily net result investment 38888 capital assets associated expansion fabrication facilities nigeria canada expansion housing office facilities nigeria implementation new information technology system united states canada normal replacement equipment cash used operations 33022 6405 paid capital lease offset 65000 received sale 65 notes working capital increased 8070 74 116713 december 31 2005 108643 december 31 2004 increase primarily attributable increase accounts receivable contract cost recognized income yet billed 49359 increases parts supplies inventories prepaid expenses 24824 offset overall increase current liabilities 52974 reduction cash 13139 believe anticipated increase revenue focus reducing working capital requirements stringent criteria analysis area capital asset additions improve cash flow operations 2006 275 convertible senior notes march 12 2004 company completed primary offering 60000 275 convertible senior notes “275 notes” april 13 2004 initial purchasers 275 notes exercised option purchase additional 10000 aggregate principal amount notes collectively primary offering purchase option 275 notes totaled 70000 275 notes general senior unsecured obligations interest paid semiannually march 15 september 15 payments began september 15 2004 275 notes mature march 15 2024 unless notes repurchased redeemed converted earlier company may redeem 275 notes cash march 15 2011 100 percent principal amount notes plus accrued interest holders 275 notes right require company purchase 275 notes including unpaid interest march 15 2011 2014 2019 upon change control related event march 15 2011 upon change control event company must pay purchase price cash march 15 2014 2019 company option providing common stock lieu cash combination common stock cash fund purchases holders 275 notes may certain circumstances convert notes shares company’s common stock initial conversion ratio 513611 shares common stock per 100000 principal amount notes representing conversion price approximately 1947 per share resulting 3595277 shares december 31 2005 notes convertible upon occurrence certain specified events including limited certain times closing sale price company’s common stock exceeds 120 percent current conversion price 2336 per share based initial conversion price june 10 2005 company received letter law firm representing investor claiming owner excess 25 percent 275 notes asserting result company’s failure timely file sec 2004 form 10k quarterly report form 10q quarter ended march 31 2005 placing company notice event default indenture dated march 12 2004 company issuer jpmorgan chase bank na trustee “indenture” governs 275 notes company indicated believe failed perform obligations relevant provisions indenture referenced letter august 19 2005 company entered settlement agreement beneficial owner 275 notes behalf notice default sent pursuant company agreed use commercially reasonable efforts solicit requisite vote approve amendment indenture “indenture amendment” company obtained requisite vote september 22 2005 indenture amendment became effective indenture amendment extends initial date 275 notes may redeemed company march 15 2013 march 15 2011 addition new provision added indenture requires company event “fundamental change” change control event 10 percent consideration transaction consists “cash” make “coupon makewhole payment” equal present value discounted us treasury rate lesser two years scheduled payments interest 275 notes b scheduled interest 275 notes date transaction march 15 2013 65 senior convertible notes december 22 2005 company entered purchase agreement “purchase agreement” private placement 65000 aggregate principal amount 65 senior convertible notes due 2012 private placement closed december 23 2005 net proceeds offering used retire existing indebtedness provide additional liquidity support working capital needs current level operations first quarter 2006 initial purchasers 65 notes exercised option purchase additional 19500 65 notes bringing aggregate principal amount private placement 84500 65 notes general senior unsecured obligations interest paid semiannually june 15 december 15 beginning june 15 2006 65 notes convertible shares company’s common stock conversion rate 569606 shares common stock per 100000 principal amount notes representing conversion price approximately 1756 per share resulting 3702439 shares december 31 2005 subject adjustment certain circumstances 2004 credit facility march 12 2004 existing 125000 june 2002 credit agreement amended restated increased 150000 “2004 credit facility” 2004 credit facility matures march 12 2007 2004 credit facility may used standby commercial letters credit borrowings combination thereof borrowings limited lesser 40 percent borrowing base 30000 payable termination march 12 2007 interest payable quarterly base rate plus margin ranging 075 percent 200 percent eurodollar rate plus margin ranging 175 percent 300 percent 2004 credit facility collateralized substantially company’s assets including stock company’s principal subsidiaries prohibits payment cash dividends requires company maintain certain financial ratios borrowing base calculated using varying percentages cash accounts receivable accrued revenue contract cost recognized income yet billed property plant equipment spare parts december 31 2005 borrowings 2004 credit facility 54928 outstanding letters credit letters credit reduce availability facility 75 percent amount outstanding however total value letters credit outstanding may exceed 70000 see “2004 credit facility waivers” 2004 credit facility waivers quarter ended june 30 2004 due company’s operating results ebitda earnings net interest income taxes depreciation amortization levels amendment waiver agreement “waiver agreement” obtained syndicated bank group waive noncompliance financial covenant 2004 credit agreement june 30 2004 amend certain financial covenants waiver agreement provides amendment certain quarterly financial covenants multiple ebitda calculation respect borrowing base determination september 30 2005 january 2005 company obtained consent waiver syndicated bank group covering period june 29 2005 waiving certain defaults covenants related filing tax returns payment taxes due tax liens legal proceedings company related tax assessment bolivia additional consent waivers obtained syndicated bank group april 8 june 13 2005 respect defaults noncompliance certain financial covenants july 19 2005 company entered second amendment waiver agreement “waiver amendment” 2004 credit facility bank group obtain continuing waivers regarding noncompliance certain financial nonfinancial covenants 2004 credit facility terms waiver amendment total credit availability 2004 credit facility reduced 100000 effective date waiver amendment subject certain conditions bank group agreed permanently waive existing probable technical defaults 2004 credit facility long company submitted yearend 2004 financial statements interim financial statements quarters ended march 31 june 30 2005 september 30 2005 conditions relate primarily submissions various financial statements financial borrowing base related information waiver amendment also modified certain ongoing financial covenants 2004 credit facility established requirement company maintain minimum cash balance 15000 time waiver became permanent company certain additional reporting requirements including periodic cash balance reporting addition waiver amendment prohibited company borrowing cash 2004 credit facility waiver became permanent company able submit referenced statements september 30 2005 therefore waiver become permanent period november 23 2005 june 14 2006 company entered four additional amendments waivers 2004 credit facility syndicated bank group waive noncompliance certain financial nonfinancial covenants among things amendments provided 1 certain financial covenants reporting obligations waived andor modified reflect company’s current anticipated future operating performance 2 ultimate reduction facility 70000 issuance letter credit obligations 3 requirement company maintain minimum cash balance 15000 liquidity believe cash flows operations net proceeds 65 notes offering sale txp4 plant sufficient finance working capital expenditures normal ongoing operations present level activity capital expenditures equipment 2006 estimated 25000 believe numerous factors could impact cash flow positively negatively vast majority occur could funded future operations existing cash balances net proceeds 65 notes offering sale txp4 plant process obtaining new credit facility replace 2004 credit facility expires march 12 2007 however since february 18 2006 attacks oil installations kidnapping oil workers niger delta escalated emergence group calling mend production operations western delta area shut combined effect elevating oil prices interrupting delaying projects underway market negotiations clients nigeria address heightened security concerns mitigate commercial impacts us recent events nigeria clients demonstrated appreciation problems willingness work us combination security concerns commercial issues outcome negotiations still uncertain ultimate effect revenue operating results cash flow however date events negative impact revenue operating results cash flow likely negative impact continue near term addition doj sec ofac result investigation criminally charge company otherwise levy material civil andor criminal fines penalties company unable obtain new credit facility replace 2004 credit facility events could material adverse effect company’s liquidity operations discussion events could cause actual results differ expectations discussion risk factors could impact cash flow please refer section entitled “risk factors” contained item 1a form 10k contractual obligations 1 include 19500 65 notes issued first quarter 2006 maturity five years december 31 2005 borrowings 2004 credit facility 54928 outstanding letters credit letters credit reduce availability facility 75 percent amount outstanding however total value letters credit outstanding may exceed 70000 certain operating leases equipment office camp facilities minimum lease commitments operating leases december 31 2005 totaled 12330 payable follows 2006 8502 2007 2630 2008 634 2009 174 2010 86 later years 304 additionally various notes leases payable generally related equipment financing local revolving credit facilities notes leases market interest rates collateralized certain vehicles equipment andor real estate unsecured credit facilities banks certain countries outside united states borrowings lines form shortterm notes overdrafts made competitive local interest rates generally line available borrowings related operations specific country credit available facilities approximately 4283 december 31 2005 outstanding borrowings december 31 2005 2004 2005 allowance doubtful accounts decreased 7598 6672 decrease allowance due additional provision 1372 net writeoffs uncollectible accounts 2298 anticipate significant collection problems customers beyond already recognized allowance including countries may experiencing economic andor currency difficulties since customers generally major oil companies government entities terms billing collecting work performed generally established contracts historically low incidence collectability problems offbalance sheet arrangements commercial commitments time enter commercial commitments usually form commercial standby letters credit insurance bonds financial guarantees contracts customers may require us provide letters credit insurance bonds regard performance contracted services cases commitments called upon event failure perform contracted services likewise contracts may allow us issue letters credit insurance bonds lieu contract retention provisions client withholds percentage contract value project completion expiration warranty period connection 10 percent interest joint venture venezuela issued corporate guarantee equal 10 percent joint venture’s outstanding borrowings two banks guarantee reduces borrowings repaid commitment december 31 2005 totaled 2106 maximum amount future payments could required make summary offbalance sheet commercial commitments december 31 2005 follows commercial commitments totaling 123544 represent maximum amount future payments could required make liability recorded december 31 2005 related commitments new accounting pronouncements december 2004 fasb issued sfas 153 “exchanges nonmonetary assets” amends apb opinion 29 guidance apb 29 “accounting nonmonetary transactions” based principle exchanges nonmonetary assets measured based fair value assets exchanged amendment made sfas 153 eliminates exception exchanges similar productive assets replaces broader exception exchanges nonmonetary assets commercial substance provisions statement effective exchanges taking place fiscal periods beginning june 15 2005 company adopted standard january 1 2006 believes material impact consolidated financial statements december 2004 fasb issued sfas 123r “sharebased payment” standard requires expensing stock options sharebased payments supersedes sfas 123 allowed companies choose expensing stock options showing pro forma disclosure sfas 123r eliminates alternative applying intrinsic value measurement provisions apb opinion 25 stock compensation awards issued employees rather new standard requires company measure cost employee services received exchange award equity instruments based grantdate fair value award standard effective annual reporting periods beginning june 30 2005 apply awards granted modified cancelled repurchased date well unvested portion prior awards march 2005 staff sec issued staff accounting bulletin 107 “sharebased payment” “sab 107” addresses interaction sfas 123r certain sec rules regulations well providing staff views regarding valuation sharebased payment arrangements sab 107 also provides guidance relating initial implementation sfas 123r sharebased payments transactions nonemployees valuation methods disclosures management’s discussion analysis subsequent adoption safs 123r sfas 123r requires use modified prospective application method required effective date method • provision sfas 123r applied new awards modified repurchased cancelled effective date • compensation expense recognized portion awards outstanding date adoption requisite services rendered unvested options based rendering remaining requisite services adopted sfas 123r january 1 2006 modified prospective basis require recognition compensation expense stock options equitybased awards vest become exercisable effective date december 31 2005 unamortized compensation expense related outstanding unvested options restricted stock grants equitybased awards determined accordance sfas 123r expect record 2006 2007 approximately 82 6 respectively provisions income taxes forfeitures process determining guidance regarding valuing sharebased compensation prescribed sfas 123r applied valuing sharebased awards granted effective date impact recognition compensation expenses related awards consolidated financial statements november 2004 fasb issued sfas 151 “inventory costs” amendment accounting research bulletin 43 chapter 4 statement clarifies types costs expensed rather capitalized inventory statement also clarifies circumstances fixed overhead costs associated operating facilities involved inventory processing capitalized provisions sfas 151 effective fiscal years beginning june 15 2005 adopted company effective january 1 2006 adoption sfas 151 expected significant impact consolidated financial position results operation company may 2005 fasb issued sfas 154 “accounting changes error corrections” replace apb opinion 20 sfas 3 statement requires retroactive application change accounting principle prior years’ financial statements unless impracticable determine periodspecific effects cumulative effect change provisions sfas 154 effective accounting changes corrections errors made fiscal years beginning december 15 2005 adoption standard expected materially impact company effects inflation changing prices operations affected increases prices whether caused inflation government mandates economic factors countries operate attempt recover anticipated increases cost labor fuel materials price escalation provisions certain major contracts considering estimated effect increases bidding pricing new work item 7aitem 7 management’s discussion analysis financial condition results operations thousands except share per share amounts unless otherwise noted following discussion read conjunction consolidated financial statements years ended december 31 2007 2006 2005 included item 8 form 10k overview business independent international contractor serving oil gas power industries government entities november 2007 acquisition integrated services company llc “inserv” refinery petrochemical industries provide engineering construction engineering procurement construction “epc” specialty services industry governmental entities worldwide specializing pipelines associated facilities onshore coastal locations provide turnaround services tank services heater services construction services safety services downstream oil gas markets primarily refineries also manufacture specialty items refinery petrochemical process units provide time asset development participate ownership operations extension portfolio industry services place particular emphasis achieving best riskadjusted returns depending upon market conditions may work developing countries believe experience gives us competitive advantage frontier areas experience dealing project logistics important consideration project award execution also believe engineering planning project management expertise relates optimizing structure execution project provides us competitive advantage markets address particular leading service provider hydrocarbon pipeline market performed work 59 countries constructed 200000 kilometers pipelines history believe positions us top tier pipeline contractors world complement pipeline construction expertise service offering downstream market providing integrated solutions turnaround maintenance capital projects hydrocarbon processing petrochemical industries performed downstream services 60 149 refineries united states together business lines allow us offer wide range services customers including engineering project management construction services specialty services operations maintenance offer discretely combination fully integrated offering refer epc segments result acquisition inserv november 2007 expanded service offering include refinery petrochemical markets business reorganized three new segments upstream oil gas “og” downstream og engineering support clients’ needs related epc projects segments upstream og provide construction expertise including systems personnel equipment construct replace largediameter crosscountry pipelines fabricate engineered structures process modules facilities construct oil gas production facilities pump stations flow stations gas compressor stations gas processing facilities related facilities also provide certain specialty services increase equipment personnel utilization currently provide services united states canada oman upstream og segment international experience enter reenter individual country markets conditions attractive us downstream og provide turnkey project execution program management epc services one four major contractors united states provides services overhaul highutilization fluid catalytic cracking units primary gasolineproducing unit refineries catalytic cracking units operate continuously long periods time typically overhauled three fiveyear cycle also provide similar turnaround services refinery process units well specialty services associated welding piping process heaters provide services primarily united states experience includes international projects exploring opportunities expand offering attractive riskadjusted locations downstream og segment engineering specialize providing engineering services feasibility studies detailed design work assist clients conceptualizing evaluating designing managing construction expansion pipelines compressor stations pump stations fuel storage facilities field gathering facilities production facilities provide services primarily united states engineering segment strategy work diligently increase stockholder value leveraging competitive strengths take advantage current opportunities global energy infrastructure market position sustained longterm growth core tenets strategy described focus managing risk implemented core set business conduct practices policies fundamentally improved risk profile implemented risk management policy exiting higher risk countries increasing activity levels lower risk countries diversifying service offerings end markets practicing rigorous financial management limiting contract execution risk management emphasized throughout levels organization covers aspects project strategic planning bidding contract management financial reporting • focus resources markets highest riskadjusted return believe north america currently offers us highest riskadjusted returns majority resources focused region 2007 earned 90 percent revenue north america however continue seek international opportunities provide superior riskadjusted returns believe extensive international experience competitive advantage believe markets north africa middle east also substantial experience may offer attractive opportunities us future given mid longterm industry trends • maintain conservative contract portfolio current contract portfolio composed 749 percent costreimbursable work provides equitable allocation risk us customers strong current market conditions beneficial transitioning backlog away higherrisk fixedprice contracts intend maintain balanced risktoreward portfolio • ethical business practices demand employees representatives conduct business accordance highest ethical standardsin compliance applicable laws rules regulations honesty integrity manner demonstrates respect others leverage core capabilities industry reputation broader service offering believe global energy infrastructure market remains capacity constrained focused new opportunities within market additionally believe core capabilities expanded beyond global energy infrastructure market selectively evaluating prospects november 2007 completed acquisition inserv allowed us enter downstream energy infrastructure market potential customers invoking contract award criteria price safety performance schedule certainty specialty expertise established platform track record strongly position us capitalize trend leveraging expertise broader range related service offerings currently provide number discrete services core endmarkets believe additional opportunities exist expand core capabilities acquisitions internal growth initiatives strive leverage project management engineering construction skills establish additional service offerings instrumentation electrical services turbo machinery services environmental services pipeline system integrity services expect approach enable us attract critical service resources tight market qualified personnel critical equipment resources establish maintain financial flexibility address increasingly larger projects complex interaction multiple projects simultaneously underway must possess financial flexibility meet material equipment personnel needs support project commitments 2007 increased working capital position excluding discontinued operations 140390 2391 percent 199115 58725 december 31 2006 improved financial position conjunction enhanced credit facility significantly improves financial flexibility intend use credit facility performance letters credit financial letters credit cash borrowings continued emphasis maintenance strong balance sheet maximize flexibility liquidity development growth business leverage core service expertise additional full epc contracts core expertise service offerings allow us provide customers single source epc solution creates greater efficiencies benefit customers company performing integrated epc contracts establish overall project managers earliest stages project inception therefore better able efficiently determine design permitting procurement construction sequence project connection making engineering decisions customers benefit seamless execution us contracts often yield higher profit margins engineering construction components contract compared standalone contracts similar services additionally contract structure allows us deploy resources efficiently capture engineering construction components projects significant business developments 2007 made significant progress reestablishing willbros group inc industry leader positive events included • sold interests nigeria february 2007 • achieved profitability continuing operations third fourth quarters 2007 recorded combined net income 16168 operations believe result new processes vision company steps taken achieve vision • strategic transformation company completing two acquisitions 2007 midwest inserv significantly expanded capabilities canada gave us entry downstream oil gas market • added new directors bring industry experience diversified expertise lead organization forward new strategic plan • significantly improved financial position public offering common shares delivering improved operational performance improved financial position enabled us put place new 150000 revolving bank credit facility led calyon new york branch administrative agent new facility provides cash borrowings onethird facility general corporate purposes financial letters credit well performance letters credit option lenders’ consent increase size facility 200000 within next two years significant project awards 2007 awarded multiple projects valued approximately 1495680 described awarded installation contract construction three segments midcontinent express pipeline midcontinent express pipeline llc joint venture kinder morgan energy partners energy transfer partners “etp” three segments traverse oklahoma texas louisiana comprised approximately 257 miles 42inch pipeline projected start date project third quarter 2008 also executed contract southeast supply header llc “sesh” joint venture subsidiaries spectra energy corp centerpoint energy inc construct approximately 190 miles sesh project consisting 42inch diameter 36inch diameter pipeline sesh begin near perryville hub northeast louisiana interconnect gulfstream natural gas system llc pipeline mobile county alabama construction project began fourth quarter 2007 expected completed summer 2008 awarded contract construction two sections natural gas pipeline looping sections west fort mcmurray transcanada corporation two continuous segments total 115 kilometers 36inch diameter pipeline include installation prefabricated valve assemblies horizontal directional drilling three significant water crossings construction project began november 2007 final project cleanup scheduled 20082009 winter work session also awarded contract construct install pipeline alley tiein connections kinder morgan also canada awarded construction contract suncor pipeline civil works associated steepbank extraction plant sep new extraction facility allow mining new area suncor lease fort mcmurray region award includes interconnecting pipelines ranging 4inch 42inch diameter new extraction facility project began july 2007 awarded epc contract new pump station modification four existing stations support expansion marathon oil company’s garyville louisiana refinery construction associated pipeline portion garyville major expansion began november 2007 completion expected first quarter 2009 willbros us construction awarded contract trunkline gas company unit southern union company construct two pipelines part trunkline’s field zone expansion project one pipeline 45mile 36inch diameter pipeline along existing right way kountze texas compressor station longville louisiana compressor station gives customers increased access additional texas supply pipeline 135 mile 36inch diameter pipeline extends kaplan louisiana directly henry hub willbros us construction also awarded large diameter pipeline project construction 80 miles 42inch diameter pipeline farrar kountze texas etp project nearly complete december 31 2007 also united states willbros engineering awarded contracts front end engineering colonial pipeline additional capital project engineering activities bp pipelines north america inc financial summary results financial position year ended december 31 2007 incurred net loss continuing operations 27550 094 per share revenue 947691 compares net loss continuing operations 22035 098 per share revenue 543259 year ended december 31 2006 revenue 2007 increased 404432 744 percent 947691 543259 2006 following key components increase revenue • commencement work new engineering pipeline construction projects united states • expansion work relating maintenance fabrication contracts canadian oil sands operating income 2007 increased 20939 1740 percent 8908 operating loss 12031 2006 operating margin increased 31 percent 09 percent 2007 negative operating margin 22 percent 2006 operating income increase result increase contract income 53750 1168 percent 2006 partially offset increase general administrative “ga” expenses 10017 22000 government fines 2007 nonoperating net expense 2007 increased 14259 1853 percent 21955 7696 2006 nonoperating net expense increase primarily driven loss early extinguishment debt 15375 related induced conversion 52450 65 convertible notes provision income taxes 2007 increased 12195 5284 percent 14503 loss continuing operations income taxes 13047 compared provision income taxes 2308 loss continuing operations income taxes 19727 2006 increase provision income taxes due improved operating results us canada thereby generating taxable income 2007 compared 2006 company incurred income tax expense loss continuing operations result approximately 50000 losses incurred panama company domiciled unable offset taxable income generated us canada thus received tax benefit working capital december 31 2007 excluding discontinued operations increased 140390 2391 percent 199115 58725 december 31 2006 increase working capital primarily driven increase accounts receivable 114642 contract cost recognized income yet billed 38206 partially offset increase accounts payable accrued liabilities 33990 debt equity ratio december 31 2007 decreased 0391 1711 december 31 2006 primarily result conversion 54450 aggregate principal senior convertible notes completion public offering november 2007 resulting 253707 net capital events partially offset increase capital lease obligations 39621 51222 december 31 2007 consolidated cash flows provided 2007 including discontinued operations increased 73533 4020 percent 55243 cash consumed 18290 2006 cash used operating activities 2007 decreased 85540 828 percent 17812 103352 2006 cash used investing activities 2007 increased 183974 5513 percent 150601 cash provided 33373 2006 cash provided financing activities 2007 increased 169809 3294 percent 221359 51550 2006 cash provided effect exchange rates cash 2007 increased 2158 2297 139 2006 financial measures backlog industry backlog considered indicator potential future performance represents portion future revenue stream strategy focused solely backlog additions capturing quality backlog margins commensurate risks associated given project backlog consists anticipated revenue uncompleted portions existing contracts whose award reasonably assured december 31 2007 total backlog continuing operations increased 703169 1168 percent 1305441 602272 december 31 2006 backlog discontinued operations 0 406780 december 31 2007 2006 respectively important overall growth backlog composition backlog fixedprice cost reimbursable contracts cost reimbursable contracts comprised 749 percent backlog december 31 2007 versus 448 percent backlog december 31 2006 expect approximately 1089801 835 percent existing total backlog december 31 2007 recognized revenue 2008 believe backlog figures firm subject cancellation modification provisions contained various contracts historically substantial amount revenue given year backlog beginning year additionally due short duration many jobs revenue associated jobs performed within reporting period reflected quarterly backlog reports generate revenue numerous sources including contracts long short duration entered year well various contractual processes including change orders extra work variations scope work effect escalation currency fluctuation formulas revenue sources added backlog realization assured following table shows backlog operating segment december 31 2007 2006 ebitda continuing operations use ebitda earnings net interest income taxes depreciation amortization part overall assessment financial performance comparing ebitda accounting periods believe ebitda used financial community method measuring performance evaluating market value companies considered businesses similar ebitda continuing operations 2007 increased 9763 10008 percent 10731 968 2006 increase ebitda primarily result increased contract income 61919 excluding depreciation partially offset increase ga 10735 excluding depreciation government fines 22000 loss early extinguishment debt 15375 reconciliation ebitda gaap financial information found item 6 “selected financial data” form 10k discontinued operations 2006 announced intention sell txp4 plant assets operations venezuela nigeria led classification discontinued operations “discontinued operations” 2006 completed sale txp4 plant assets operations venezuela furthermore sold nigeria assets operations february 7 2007 ascot offshore nigeria limited “ascot” pursuant share purchase agreement us ascot “agreement” year ended december 31 2007 loss discontinued operations 21414 073 per basic share compares loss discontinued operations 83402 372 per basic share year ended december 31 2006 2007 net loss discontinued operations comprised primarily accrual settlement amount 10300 due sec agreement principle consisting 8900 profit disgorgement plus 1400 prejudgment interest thereon results nigeria operations 38 days prior sale profit disgorgement specifically attributable one nigerian projects therefore classified discontinued operations additionally results discontinued operations include small gain sale nigeria assets operations 327 days income services provided transition services agreement “tsa” 2007 discontinued operations provided cash 1651 operating activities transition services agreement concurrent sale nigeria assets nigeriabased operations entered twoyear tsa ascot tsa primarily providing equipment labor form seconded employees work direction ascot agreed reimburse us seconded employee transition services costs december 31 2007 four employees remain seconded ascot remain unresolved issues related use equipment described working toward resolving december 31 2007 total reimbursable costs totaled approximately 23966 working ascot shift transition services provided us direct services secured ascot previously discussed made available certain equipment ascot use equipment sold ascot agreement due business legal conditions nigeria took impairment charge 1542 related equipment fourth quarter 2007 remaining net book value equipment december 31 2007 1205 equipment comprised construction equipment rolling stock generator sets working ascot resolve issue rental equipment either cash settlement though exchange equipment global settlement agreement ”gsa” september 7 2007 finalized gsa ascot significant components agreement include • reduction purchase price 25000 resolution working capital adjustments provided agreement • ascot agreed provide supplemental backstop letters credit amount 20322 issued nonnigerian bank approved company • ascot provided specific indemnities related two ongoing projects acquired part agreement • except provided gsa ascot company waived respective rights obligations relating indemnifications provided agreement concerning breach covenant representation warranty finalizing gsa ascot reduced risk profile reduction purchase price offset amounts owed us ascot 11299 tsa 2625 note payable resulted net payment ascot 11076 result ascot providing nonnigerian backstop bank letters credit ready access believe risk incurring losses calls made outstanding letters credit minimized however transition us ascot operations nigeria continued impacted difficulties led exit nigeria well additional challenges ascot’s continued willingness ability perform former projects west africa important ingredients reducing risk profile nigeria elsewhere west africa important receive additional assurances ascot related ongoing projects continuing parent guarantees projects recently received first notification asserting rights one outstanding parent guarantees february 1 2008 wwai ascot company performing west african gas pipeline “wagp” contract received letter west african gas pipeline company limited “wapco” owner wagp wherein wapco gave written notice alleging wwai default wagp contract amended giving wwai brief cure period remedy alleged default understand wwai responded denying breach wagp contract obligations apparently also advised wapco wwai “requires 55 million without able complete work previously undertaken perform” understand february 27 2008 wapco terminated wagp contract alleged continuing nonperformance wwai simultaneously expressed wapco willing reengage wwai new contract finish remaining wagp contract work otherwise provide transition services facilitate handover unfinished wagp contract work alternative contractors yet identified also february 1 2008 received letter wapco reminding us parent guarantee wagp contract requesting remedy wwai’s default contract amended previous occasions advised wapco variety legal contractual reasons consider prior wagp contract parent guarantee continued application reiterated position wapco response february 1 2008 letter wapco disputes position longer bound terms prior parent guarantee wagp contract reserved rights regard anticipate developing dispute wapco could result lengthy arbitration proceeding wapco wwai london court international arbitration determine validity alleged default notice issued wapco wwai including resulting damage award combination lawsuit wapco us english courts english law determine enforceability whole part parent guarantee expect lengthy process intention returning nigeria ultimately determined english court liable whole part damages wapco may establish wwai’s alleged nonperformance wagp contract wapco able establish liability us directly parent company guarantee either case unable enforce rights indemnity agreement entered ascot connection wagp contract may experience substantial losses however management cannot time predict outcome arbitration litigation may ensue developing wagp contract dispute certain degree indemnity agreement given favor ascot protect us based upon current knowledge relevant facts circumstances expect outcome dispute material adverse effect financial condition results operations gsa also resolves working capital adjustment issues us ascot resolving working capital adjustment able relieve assets liabilities books felt would components working capital adjustment completion gsa allows us recognize gain transaction 183 also allows us move even closer putting ascot transaction exit nigeria behind us focus better riskadjusted opportunities additional financial disclosures discontinued operations provided note 18 discontinuance operations asset disposals transition services agreement notes consolidated financial statements form 10k critical accounting policies estimates revenue number factors relating company’s business affect recognition contract revenue company typically structures contracts unitprice time material fixedprice cost plus fixed fee revenue unitprice time material contracts recognized earned company believes operating results evaluated time horizon major contracts progress completed change orders extra work variations scope work cost recoveries claims negotiated realized revenue fixedprice cost plus fixed fee contracts recognized percentageofcompletion method estimated contract income resulting revenue generally accrued based costs incurred date percentage total estimated costs taking consideration physical completion total estimated costs thus contract income impacted changes productivity scheduling unit cost labor subcontracts materials equipment additionally external factors weather client needs client delays providing permits approvals labor availability governmental regulation politics may affect progress project’s completion thus timing revenue recognition company recognize income fixedprice contract approximately 5 10 percent complete depending upon nature contract current estimate total contract cost indicates loss contract projected loss recognized full determined company considers unapproved change orders contract variations company customer approval scope change price associated scope change costs associated unapproved change orders included estimated cost complete contracts expensed incurred company recognizes revenue equal cost incurred unapproved changed orders realization price approval probable estimated amount equal greater company’s cost related unapproved change order revenue recognized unapproved change orders included “contract costs recognized income yet billed” consolidated balance sheets unapproved change orders involve use estimates reasonably possible revisions estimated costs recoverable amounts may required future reporting periods reflect changes estimates final agreement customers company considers claims amounts company seeks seek collect customers others customercaused changes contract specifications design customerrelated causes unanticipated additional contract costs agreement customers scope price changes revenue claims recognized agreement reached customers value claims instances may occur completion work contract costs associated claims included estimated costs complete contracts expensed incurred income taxes company accounts income taxes asset liability method deferred tax assets liabilities recognized future tax consequences operating loss tax credit carry forwards temporary differences financial statement carrying values assets liabilities respective tax basis provision benefit income taxes annual effective tax rate impacted income taxes certain countries computed based deemed income rather taxable income tax holidays certain international projects results operations contract revenue contract costs significantly impacted capital budgets clients timing location development projects oil gas power industries worldwide contract revenue cost vary country yeartoyear result entering exiting work countries b execution new contract awards c completion contracts overall level demand services ability successful obtaining executing contracts affected relative strength weakness us dollar compared currencies competitors clients work locations fiscal year ended december 31 2007 compared fiscal year ended december 31 2006 contract revenue contract revenue increased 404432 744 percent 947691 543259 due increases across segments yeartoyear comparison revenue follows upstream og revenue increased 319991 754 percent 744308 424317 2006 increase revenue primarily result increased 2007 business activity united states 211042 210375 approximately 99 percent attributable three major projects started 2007 along increase facility work 40025 offset decreases 39363 related projects completed 2006 early 2007 canada revenue increased 87925 2007 due increase 50163 major projects increase 17624 pipeline construction project attributable midwest acquisition made third quarter 2007 increase 16798 fabrication field services oman revenue increased 21024 2007 primarily attributable increase oilfield construction services downstream og revenue increased 23821 result revenues earned 41 day period november 20 2007 december 31 2007 subsequent acquisition inserv engineering revenue increased 60620 510 percent 179562 118942 2006 increase revenue result increased demand pipeline facility engineering services volume size projects performed 2007 significantly greater 2006 increased activity level reflected engineering yearend headcount 611 465 percent overyear end 2006 maintaining high utilization operating income segment operating income increased 42939 3569 percent 30908 operating loss 12031 2006 yeartoyear comparison operating income follows upstream og operating income increased 37356 2413 percent 21875 operating loss 15481 2006 increase operating income result previously discussed revenue increases increasing margins segment higher margins united states partially offset lower margins canada margins oman consistent prior year also impacting operating income year increase depreciation expense reflecting additional capital investment heavy equipment towards end 2006 throughout 2007 increase ga necessary support increased level business activity segment downstream og operating income increased 670 operating income result 41 days operating results inserv subsequent acquisition november 2007 results include charge 794 amortization intangibles acquired engineering operating income increased 4913 1424 percent 8363 3450 2006 increase operating income primarily result increased mix direct labor versus third party subcontractor services higher mix inhouse labor improved utilization higher headcount characteristics strong demand engineering work success hiring retaining inhouse engineers nonoperating items interest net expense decreased 5162 625 percent 3103 8265 2006 decrease interest expense due reduced interest expense result conversion 54450 aggregate principal amount 275 65 senior convertible notes partially offset increased interest expense associated capital lease additions 48454 2007 interest income increased result cash proceeds received sale nigeria assets operations 105568 excess proceeds public offering completed november 2007 used acquisition inserv net income decreased 4046 7111 percent expense 3477 income 569 2006 decrease net primarily result 1071 related settlement vendor lawsuit originated 2003 997 registration delay payments associated registration rights agreement 65 senior convertible notes 750 commitment fees related potential term loan executed increase foreign exchange losses 532 loss early extinguishment debt expense 15375 result inducing conversion 52450 aggregate principal 65 senior convertible notes may 2007 loss early extinguishment consisted 12720 cash payments made note holders inducement convert 273 transaction costs writeoff 2382 debt issuance costs provision income taxes increased 12195 5284 percent 14503 2308 2006 recognized 14503 income tax expense loss continuing operations income taxes 13047 2007 compared income tax expense 2308 loss continuing operations income taxes 19727 2006 increase provision income taxes due improved operating results us canada thereby generating taxable income 2007 compared 2006 company incurred income tax expense loss continuing operations result approximately 50000 losses incurred panama company domiciled unable offset taxable income generated us canada thus received tax benefit loss discontinued operations net taxes loss discontinued operations net taxes decreased 61988 743 percent 21414 83402 2006 2007 net loss discontinued operations comprised primarily charge settlement amount due sec agreement principle 10300 consisting 8900 profit disgorgement plus 1400 prejudgment interest thereon results nigeria operations 38 days prior sale profit disgorgement specifically attributable one nigerian projects therefore classified discontinued operations additionally results discontinued operations include gain sale nigeria assets operations 327 days income services provided tsa fiscal year ended december 31 2006 compared fiscal year ended december 31 2005 contract revenue contract revenue increased 248780 845 percent 543249 294479 2005 primarily result increases upstream og yeartoyear comparison revenue follows upstream og revenue increased 210297 983 percent 424317 214020 2005 increase revenue result increased work canada us increase canada revenue 102127 largely attributable 57011 new major projects increased fabrication maintenance revenue 29555 new edmonton modular fabrication facility opened fourth quarter 2005 generated revenue approximately 13828 2006 compared 87 2005 well increases approximately 1820 additionally united states revenue increased 64427 due higher level activity major construction projects oman revenue increased 43922 due new pipeline construction contracts oilfield services contracts decreases revenue 179 engineering revenue increased 38483 478 percent 118942 80459 2005 increase revenue primarily due increase 23260 single large engineering project us approximately 13696 new epc projects operating income operating losses decreased 13600 531 percent 12031 25631 2005 yeartoyear comparison revenue follows upstream og operating loss decreased 11002 415 percent 15481 26483 2005 decrease operating loss partially attributed previously discussed revenue increases increasing contract margins segment higher margins attained yearoveryear united states canada oman also impacting operating income yearoveryear increase depreciation reflecting additional capital investment heavy equipment towards end 2006 increase ga necessary support increased level business activity segment engineering operating income increased 2598 3049 percent 3450 852 2005 increase operating income result increased staffing within engineering group driven increased demand engineering services nonoperating items interest net expense increased 4361 1117 percent 8265 2006 3904 2005 increase interest expense due additional interest expense related 65 senior convertible notes 4871 net income decreased 173 233 percent 569 742 2005 decrease net income primarily due 429 reduction gains sale property plant equipment increase foreign exchange loss 164 reductions income offset increase miscellaneous income 420 mainly related participation plaintiff settlement class action suit provision income taxes expense increased 640 384 percent 2308 1668 2005 recognized 2308 income tax expense loss continuing operation 19727 2006 compared income tax expense 1668 loss continuing operations 28793 2005 increase tax expense 2006 primarily due loss continuing operations resulting expenses 28311 occurring 2006 panama tax benefit obtained permanent timing differences us also contributed higher effective tax rate loss discontinued operations net taxes loss discontinued operations net taxes increased 75083 9025 percent 83402 8319 2005 increase loss discontinued operations primarily due operating results nigeria operations accounted 83773 2006 loss 971 venezuela recognized net gain 1342 sale opal txp4 account remainder 2006 loss discontinued operations liquidity capital resources objective financing business maintain adequate financial resources access additional liquidity twelve months ended december 31 2007 proceeds public offering common stock sale nigeria assets operations principal sources funding anticipate cash hand future cash flows operations availability revolving credit facility sufficient fund working capital needs near term however reviewing opportunities including accessing public markets extent market conditions factors permit provide working capital fund growing backlog strengthen balance sheet meet current capital equipment requirements pursue business expansion opportunities including potential acquisitions capital planning process focused utilizing cash ways enhance value company twelve months ended december 31 2007 used cash variety activities including working capital needs capital expenditures acquisitions additional sources uses capital public offering acquisition inserv november 20 2007 completed public offering common shares received approximately 253707 net proceeds used 208925 proceeds fund cash portion purchase price acquisition inserv remaining 44782 net proceeds represents additional source capital 2007 credit facility concurrent public offering inserv acquisition replaced synthetic credit facility 150000 senior secured revolving credit facility “2007 credit facility” increased 200000 approval administrative agent entire facility available performance letters credit 33 percent facility available cash borrowings financial letters credit see item 8 financial statements supplementary data note 9 longterm debt discussion 2007 credit facility cash flows cash flows provided used continuing operations type activity follows twelve months ended december 31 2007 2006 statements cash flows entities international operations use local currency functional currency exclude effects changes foreign currency exchange rates occur given period noncash charges result changes reflected certain accounts consolidated condensed statements cash flows may reflect changes corresponding accounts consolidated condensed balance sheets operating activities operating activities continuing operations used 19463 cash twelve months ended december 31 2007 compared use 5429 twelve months ended december 31 2006 cash used operating activities increased 14034 primarily due investing activities investing activities continuing operations used 150601 cash twelve months ended december 31 2007 compared providing 40804 twelve months ended december 31 2006 cash flows investing activities decreased 191405 primarily due financing activities financing activities continuing operations provided 221359 cash twelve months ended december 31 2007 compared 51550 twelve months ended december 31 2006 significant transactions impacting cash flows financing activities included capital requirements 2007 used 19463 cash continuing operations believe improved financial results second half 2007 combined rigorous financial management ensure sufficient cash meet capital requirements continuing operations however continue utilize capital leases acquire equipment whenever favorable rates available focused following significant capital requirements • providing working capital projects process scheduled begin • procurement additional construction equipment light capital budget 2008 approximately 60000 • pursuing additional acquisitions allow us expand service offering • installment payments due government related fines profit disgorgement believe able support ongoing working capital needs cash hand operating cash flows availability 2007 credit facility although may required access capital markets event complete significant acquisitions contractual obligations december 31 2007 100050 outstanding debt related convertible notes addition 2007 2006 entered various capital leases construction equipment property value 59116 december 31 2007 uncertain tax positions ultimately could result tax payment amount ultimate tax payment contingent tax authorities’ assessment practical present annual payment information december 31 2007 borrowings 2007 credit facility 78711 outstanding letters credit consisting 58829 issued projects continuing operations 19882 issued projects related discontinued operations additionally various notes leases payable generally related equipment financing local revolving credit facilities notes leases market interest rates collateralized certain vehicles equipment andor real estate unsecured credit facilities banks certain countries outside united states borrowings lines form shortterm notes overdrafts made competitive local interest rates generally line available borrowings related operations specific country credit available facilities approximately 2459 december 31 2007 outstanding borrowings december 31 2007 2006 2007 allowance doubtful accounts including discontinued operations decreased 9281 893 percent 1108 10389 2006 increase 510 allowance continuing operations 1108 598 2006 decrease 0 9791 2006 discontinued operations increase 510 continuing operations due additional allowance provided 2007 net writeoffs decrease allowance doubtful accounts discontinued operations due sale nigeria assets operations february 2007 anticipate significant collection problems customers beyond already recognized allowance since customers generally major oil companies government entities terms billing collecting work performed generally established contracts historically low incidence collectability problems offbalance sheet arrangements commercial commitments time enter commercial commitments usually form commercial standby letters credit insurance bonds financial guarantees contracts customers may require us provide letters credit insurance bonds regard performance contracted services cases commitments called upon event failure perform contracted services likewise contracts may allow us issue letters credit insurance bonds lieu contract retention provisions client withholds percentage contract value project completion expiration warranty period summary offbalance sheet commercial commitments continuing discontinued operations december 31 2007 follows commercial commitments totaling 297405 represent maximum amount future payments could required make liability recorded december 31 2007 related commitments recently issued accounting pronouncements sfas 157 september 2006 financial accounting standards board “fasb” released statements financial accounting standards 157 “fair value measurements” “sfas 157” effective fiscal years beginning november 15 2007 sfas 157 defines fair value establishes framework measuring fair value gaap expands disclosures fair value measurements november 2007 fasb agreed oneyear deferral effective date nonfinancial assets liabilities recognized disclosed fair value nonrecurring basis sfas 157 effective company’s fiscal year ending december 31 2008 company currently assessing impact adoption pronouncement financial statements sfas 159 february 2007 fasb released statements financial accounting standards 159 “the fair value option financial assets financial liabilities” sfas 159” effective fiscal years beginning november 15 2007 sfas 159 permits entities choose measure many financial instruments certain items fair value objective improve financial reporting providing entities opportunity mitigate volatility reported earnings caused measuring related assets liabilities differently without apply complex hedge accounting provisions sfas 159 effective company’s fiscal year ending december 31 2008 company elect use fair value option financial assets financial liabilities currently recorded fair value sfas 141r december 2007 fasb released statements financial accounting standards 141r “business combinations” “sfas 141r” sfas 141r applies prospectively business combinations acquisition date beginning first annual reporting period beginning december 15 2008 business combinations year ending december 31 2009 company objective improve relevance representational faithfulness comparability information reporting entity provides financial reports business combination effects sfas 160 december 2007 fasb released statements financial accounting standards 160 “noncontrolling interests consolidated financial statements amendment arb 51” “sfas 160” sfas 160 effective fiscal years interim periods within fiscal years beginning december 15 2008 objective improve relevance comparability transparency financial information reporting entity provides consolidated financial statements sfas 160 effective company’s fiscal year ending december 31 2009 interim periods within year company currently assessing impact adoption pronouncement financial statements effects inflation changing prices operations affected increases prices whether caused inflation government mandates economic factors countries operate attempt recover anticipated increases cost labor equipment fuel materials price escalation provisions certain major contracts considering estimated effect increases bidding pricing new work item 7aitem 7 management’s discussion analysis financial condition results operations thousands except share per share amounts unless otherwise noted following discussion read conjunction consolidated financial statements years ended december 31 2008 2007 2006 included item 8 form 10k overview summary year 2008 record year us many ways financial results highlighted · 1912704 revenue · 46487 net income earnings per share 121 giving effect pretax 62295 goodwill impairment see note 6 goodwill intangible assets · yearend 2008 cash balance 207864 contributed 186959 cash provided continuing operating activities achieved successes result building new management team past two years leveraging 2007 acquisitions successfully executing two large diameter cross country pipeline construction projects one significant epc project us past two years created 348093 stockholder’s equity accomplishments reinforce commitment deliver value stockholders well customers ceo randy harl joined willbros january 2006 followed shortly thereafter august 2006 cfo van welch starting point enhancing management team make scalable company grew revenue 543259 2006 1912704 2008 3 ½ times 2006 level strengthening company’s financial position late 2006 private equity offering 48748 amending existing credit facility 2007 became year transition noteworthy 2007 transition events include sale nigeria assets operations february completing negotiations leading final may 2008 settlement doj sec acquisitions midwest july inserv november creation robust less expensive credit facility november new management team successful removing uncertainties associated past irregularities nigeria building scalable foundation growth 2008 end 2007 backlog record level 1305341 july 2007 acquired midwest provide entry point canada large diameter pipeline construction market 2008 canada pipeline operations provided 182037 revenue positioned take advantage additional work 2009 november 2007 acquired inserv formed new downstream oil gas business segment downstream oil gas’ 2008 revenues 367075 downstream oil gas continues perform expected catalyst shift company focused providing services legacy business three significant projects 2008 two cost reimbursable plus fixed fee contract types one lump sum epc project southeast supply header “sesh” project commenced late 2007 december 31 2008 total project revenue 423604 358830 recognized 2008 another large diameter pipeline project midcontinent express project “mep” contributed 145820 revenue 2008 guardian expansion extension project “guardian” largest lump sum epc contract 2008 generating 137780 revenue appropriate riskadjusted margin current challenge continuing deliver value stockholders customers 2009 challenging find midst significant economic dislocation impacts already observable severe commodity price declines oil traded 13711 time high july 2008 february 2009 oil 3894 716 decline 2008 high point result rapid decline north american rig counts capital budget reductions many ep midstream downstream oil gas companies shrinking market present new challenges opportunities us positioned capitalize opportunities organizational process changes made past two years early fourth quarter 2008 engineering business segment began experience effects reduction market demand engineering generally leading indicator engineering construction market changes result engineering’s fourth quarter decline took steps rightsize business segments develop strategy realign cost structure could responsive customers’ needs downcycle market reduced annual engineering segment corporate ga costs 6337 2414 respectively charge approximately 1700 recorded cost making changes continue monitor identify take action nonproductive costs would adversely impact liquidity ability execute development strategies however primary objective develop cost structure compatible customers’ needs continue develop business different economic environment compared past two years completed process completing following · internally shifting people assets among business segments address shifting customer demands · working primary material suppliers subcontractors jointly develop lower cost structure · identifying reducing labor cost escalations occurred result previous energy construction market imbalance demand exceeding supply · continuing pursue business strategy leverage strong balance sheet cash position december 31 2008 207864 cash equivalents 50000 capacity revolving loan facility liquidity allow us continue pursuit growing pipeline manage maintain service area expanding downstream oil gas service offering canada targeting riskadjusted opportunities middle east north africa increasing government contracting focus believe opportunities today’s market companies respond quickly customers’ needs price point consistent price oil gas today’s market strategy apply core value system everything values provide foundation strategy execution core values · safety · honesty integrity · people · customers · superior financial performance · vision innovation · effective communication work diligently apply values everyday use guide us execution strategy believe allowing values drive achievement strategic goals increase stockholder value leveraging competitive strengths focus positioning sustained longterm earnings growth key elements strategy follows focus managing risk implemented core set business conduct practices policies fundamentally improved risk profile examples risk management execution include increasing activity levels lower risk countries diversifying service offerings end markets practicing rigorous financial management limiting contract execution risk management emphasized throughout levels organization covers aspects project strategic planning bidding contract management financial reporting · focus resources markets highest riskadjusted return believe north america continues offer us highly attractive riskadjusted returns majority resources focused north america spite current economic dislocation believe targeted areas north america provide significant opportunities specifically monetization previously developed oil gas reserves requires connectivity end markets ongoing development unconventional shale gas plays expected provide new work 2009 beyond even though heavily concentrated north america continue seek international opportunities provide superior diversified riskadjusted returns believe extensive international experience competitive advantage relocated president international operations muscat oman expand middle east operations uae saudi arabia additionally opened office libya believe markets north africa middle east may offer attractive opportunities us future given mid longterm industry trends · maintain conservative contract portfolio continue pursue balanced contract portfolio current market dynamics suggest may entering period increased fixed price contracting opportunities believe fixed price execution experience current efforts realign cost structure rapidly changing market improved systems focus risk management provide us competitive advantage versus many competitors leverage industry position reputation broader service offering believe global energy infrastructure market continue provide opportunities challenge identify focus critical projects high probability moving forward near term believe core capabilities expanded beyond current offerings markets selectively evaluating prospects established platform track record position us expand expertise broader range related service offerings intend leverage project management engineering construction skills establish additional service offerings instrumentation electrical services turbomachinery services environmental services pipeline system integrity services believe time balanced mix recurring services program management maintenance services capital projects enhance earnings profile business additionally intend pursue selective strategic acquisitions complement organic expansion strategies minimize dependence cyclical largediameter crosscountry pipeline construction market began process 2007 inserv midwest acquisitions expanded service offerings well geographies deliver services november 2007 acquisition inserv complemented service offerings midstream market july 2007 acquisition midwest significantly enhanced presence mainline pipeline construction western canada believe companies strong balance sheets liquidity positions opportunities acquire assets companies today’s uncertain market maintain financial flexibility maintaining financial flexibility meet material equipment personnel needs support project commitments well ability pursue expansion diversification objectives critical growth view financial strength flexibility fundamental requirement fulfilling strategy december 31 2008 cash equivalents borrowing capacity 257864 comprised cash equivalents 207864 unutilized cash borrowing capacity 50000 revolving credit facility address current capital requirements shortterm borrowings commercial paper outstanding year ended december 31 2008 increased working capital position continuing operations 82944 417 percent 282059 199115 december 31 2007 addition 150000 senior secured revolving credit facility “credit facility” provides us additional financial flexibility form 50000 cash borrowing capacity pursue growth strategy combination strong cash position borrowing availability existing credit facility future cash flow operations allow us focus highest return projects available uncertain economic times well pursue strategy diversification opportunities present limited availability credit market affected credit facility believe impact ability access surety bonding future leverage core service expertise additional full epc contracts core expertise service offerings allow us provide customers single source epc solution creates greater efficiencies benefit customers company one pipeline constructors engineering capabilities believe uniquely positioned provide integrated service customers performing integrated epc contracts establish overall project managers earliest stages project inception therefore better able efficiently determine design permitting procurement construction sequence project connection making engineering decisions customers benefit seamless execution us contracts often yield higher profit margins engineering construction components contract compared standalone contracts similar services additionally contract structure allows us deploy resources efficiently capture engineering procurement construction components projects significant business developments 2008 made significant progress position willbros leader engineering construction industry continue recap recent initiatives include following · quality execution one largest pipeline construction projects canada positioned us negotiate potential additional work customer · additionally canada leveraging strong incountry presence combination downstream oil gas capabilities actively pursue downstream oil gas opportunities including ground storage tanks process heaters · added experienced senior operating business development resources pipeline manage maintain business restructured group increase coordination amongst engineering program management construction capabilities provide customers integrated service solution · efforts pursue new business middle east north africa expected result award first contract libya · significantly increased ability pursue execute government contracts addition operating level leadership greater cross utilization existing construction program management capabilities individually business initiatives relatively modest contributors 2008 results believe groundwork place expanded service lines enhance future performance addition putting place important capabilities expand support growth also made substantial progress towards operational financial improvements business model preparing us challenges current market environment worked diligently stay ahead curve staying focused important process system improvements designed keep business best positioned prevailing market conditions actions include · improving strategic planning process better align resources current opportunities long term growth objectives · redirecting sales process efficiently target right customers right opportunities willbros deliver integrated solutions believe offer customers superior value · investing system process improvements increase value deliver customers including delivering lower costs improved procurement processes procedures reinforcing project execution skills particularly begin see shift toward fixed price contracts · reduced effective tax rate 372 · initiating reorganization company panama holding company structure delaware holding company structure approved stockholders february 2 2009 significant subsequent project awards first quarter 2009 awarded two significant projects add approximately 180600 backlog texas independence pipeline “tips” approximately 143 miles 42” pipeline construction commence early march addition tips verbal commitment final negotiations ncra extend current contract program management services associated portions planned heavy crude expansion project related major capital projects ncra mcpherson kansas goodwill impairment fourth quarter 2008 recorded noncash charge totaling 62295 downstream oil gas segment impairment goodwill accordance sfas 142 goodwill intangible assets performed required annual impairment test goodwill using discounted cash flow analysis supported comparative market multiples determine fair values businesses versus book values test indicated book value downstream oil gas goodwill exceeded fair value impairment charge primarily driven sustained adverse conditions equity markets negatively impacted market capitalization almost public companies including turn regarded indicator adverse change business climate stock reached low 538 per share fourth quarter 2008 compared high 4430 preceding quarter 3892 decrease 88 charge reduces goodwill recorded connection acquisition inserv november 2007 impact company’s business operations believe impairment represent decrease operational value downstream oil gas segment excluding goodwill impairment downstream oil gas’s operational financial performance met exceeded preacquisition expectations expect case 2009 beyond downstream oil gas continues allow us provide diverse service offering reduces dependence large diameter cross country pipeline construction activity financial summary results financial position 2008 completed profitable year history delivered net income continuing operations 43730 114 per basic 111 per diluted share revenue 1912704 compares net loss continuing operations 27550 094 per share revenue 947691 year ended december 31 2007 revenue 2008 increased 965013 1018 percent 1912704 947691 2007 following key components increase revenue · commencement work new engineering pipeline construction projects united states addition carryover existing projects commencing late 2007 first quarter 2008 · revenue 367075 2008 downstream oil gas segment operating income 2008 increased 59228 6649 percent 68136 8908 2007 operating margin increased 26 percent 36 percent 2008 operating margin 09 percent 2007 operating income increase result increase contract income 161109 1615 percent compared 2007 partially offset increase general administrative “ga” expenses 92205 including goodwill impairment charge increase amortization intangibles 9626 net improved 23491 1070 percent 2008 compared 2007 net change expense 2007 income 2008 primarily driven 7694 gain recognized result selling one fabrication facilities canada 2008 loss early extinguishment debt 15375 related induced conversion 52450 65 convertible notes 2007 provision income taxes 2008 increased 11439 789 percent 25942 income continuing operations income taxes 69672 compared provision income taxes 14503 loss continuing operations income taxes 13047 2007 increase provision income taxes due improved operating results globally thereby generating taxable income 2008 compared 2007 increase partially offset noncash goodwill impairment charge 62295 working capital december 31 2008 excluding discontinued operations increased 82944 417 percent 282059 199115 december 31 2007 increase working capital primarily driven increase cash equivalents 114978 increase contract cost recognized income yet billed 15266 offset decrease accounts receivable 61778 debt equity ratio december 31 2008 decreased 0291 0381 december 31 2007 aggregate outstanding debt decreased 24975 127371 december 31 2008 152346 december 31 2007 increased stockholders’ equity 43554 439655 december 31 2008 396101 december 31 2007 consolidated cash flows provided 2008 including discontinued operations increased 59735 1081 percent 114978 cash provided 55243 2007 cash operating activities increased 2008 207976 11676 percent 190164 compared cash provided 17812 cash used 2007 cash used investing activities 2008 decreased 138876 922 percent 11725 cash used 150601 2007 cash flows financing activities 2008 decreased 279819 1264 percent cash used 58460 cash provided 221359 2007 cash decreased effect canadian exchange rates 2008 7298 changing 2297 cash provided 2007 5001 cash used 2008 financial measures backlog industry backlog considered indicator potential future performance represents portion future revenue stream strategy focused capturing quality backlog margins commensurate risks associated given project backlog consists anticipated revenue uncompleted portions existing contracts whose award reasonably assured december 31 2008 total backlog continuing operations decreased 649947 498 percent 655494 1305441 december 31 2007 three primary reasons lower backlog december 31 2008 cancellation 159846 backlog related midcontinent express project “mep” caused significant onetime decrease partial termination scope work project fee associated cancelled portion project contractually due remains backlog additional information regarding mep backlog reduction see note 15 contingencies commitments circumstances item 8 form 10k financial statements supplemental data two reasons backlog reduction relate changing business environment pipeline construction services contracting experienced return historical north america contracting model characterized competitive fixed price bids short time periods project bid execution exception would large epc contracts span one year last two years somewhat anomaly period seen substantial increase backlog shift costreimbursable type contracts customers sought ensure capacity advance commencing scheduled projects record backlog december 31 2007 benefitted north america customers locking construction capacity well advance example mep contract negotiated july 2007 included third quarter 2007 backlog work mep actually started one year later return normalcy contracting environment expect experience lower backlog numbers partially result eliminating much longer lead times bidding executing project third reason relates decline demand engineering services preliminary engineering work customers resulted obtaining several significant epc projects past two years activity dramatically slowed past five months several new epc projects actively developed engineering business segment delayed customers allow additional time evaluate changes market cost reimbursable contracts comprised 840 percent backlog december 31 2008 versus 749 percent backlog december 31 2007 expect approximately 599785 915 percent existing total backlog december 31 2008 recognized revenue 2009 backlog discontinued operations december 31 2008 december 31 2007 respectively believe backlog figures firm subject cancellation modification provisions contained various contracts additionally due short duration many jobs revenue associated jobs performed within reporting period reflected quarterly backlog reports generate revenue numerous sources including contracts long short duration entered year well various contractual processes including change orders extra work variations scope work effect escalation currency fluctuation formulas revenue sources added backlog realization assured following table shows backlog operating segment december 31 2008 2007 ebitda continuing operations updated definition ebitda earnings net interest income taxes depreciation amortization impairment intangible assets include impairment intangible assets part overall assessment financial performance comparing ebitda reporting periods believe ebitda used financial community method measuring performance evaluating market value companies considered businesses similar ebitda continuing operations 2008 increased 172486 183217 10731 2007 increase ebitda 2008 primarily result increased net income primary factor driving increased net income increased contract income 173416 excluding depreciation resulting growth project activity level execution projects increase contract income excluding depreciation reflects increase contract margin 29 percentage points 151 percent december 31 2008 122 percent december 31 2007 11439 increase provision income taxes primarily due improved operating results us thereby resulting taxable income 2008 increase depreciation amortization primarily result capital additions capital expenditures late 2007 2008 support growth business project activity levels additionally 2008 includes 10420 amortization intangible assets 62295 goodwill impairment charge related acquisition inserv fourth quarter 2007 reconciliation ebitda gaap financial information found item 6 “selected financial data” form 10k discontinued operations year ended december 31 2008 income discontinued operations 2757 006 per diluted share compares loss discontinued operations 21414 073 per basic share year ended december 31 2007 time february 7 2007 sale nigeria assets operations four letters credit outstanding totaling 20322 associated discontinued operations “discontinued lc’s” third quarter 2008 substantially letters credit related former operations nigeria expired one 123 letter credit remaining outstanding transition services agreement tsa expired february 7 2009 ended obligation provide support services ascot west africa otherwise insurance recovery twelve months ended december 31 2008 income discontinued operations included two prenigeria sale insurance claim recoveries 850 2154 events loss suffered prior sale nigeria operations additional financial disclosures discontinued operations provided note 17 discontinuance operations asset disposals transition services agreement critical accounting policies estimates revenue number factors relating business affect recognition contract revenue typically structure contracts unitprice time materials fixedprice cost plus fixed fee believe operating results evaluated time horizon major contracts progress completed change orders extra work variations scope work cost recoveries claims negotiated realized revenue unitprice time materials contracts recognized earned revenue fixedprice cost plus fixed fee contracts recognized using percentageofcompletion method estimated contract income resulting revenue generally accrued based costs incurred date percentage total estimated costs taking consideration physical completion total estimated costs thus contract income impacted changes productivity scheduling unit cost labor subcontracts materials equipment additionally external factors weather client needs client delays providing permits approvals labor availability governmental regulation politics may affect progress projects completion thus timing revenue recognition certain fixedprice cost plus fixed fee contracts include amended include incentive bonus amounts contingent accomplishing stated milestone revenue attributable incentive bonus amounts recognized risk uncertainty surrounding achievement milestone removed recognize income fixedprice contract approximately five ten percent complete depending upon nature contract current estimate total contract cost indicates loss contract projected loss recognized full determined consider unapproved change orders contract variations customer approval scope change price associated scope change costs associated unapproved change orders included estimated cost complete contracts expensed incurred recognize revenue equal cost incurred unapproved changed orders realization price approval probable estimated amount equal greater cost related unapproved change order revenue recognized unapproved change orders included contract costs recognized income yet billed balance sheet revenue recognized unapproved change orders subject adjustment subsequent periods reflect changes estimates final agreements customers consider claims amounts seek collect customers others customercaused changes contract specifications design customerrelated causes unanticipated additional contract costs agreement customers scope price changes revenue claims recognized agreement reached customers value claims instances may occur completion work contract costs associated claims included estimated costs complete contracts expensed incurred income taxes account income taxes accordance statements financial accounting standards 109 “accounting income taxes” “sfas 109” standard takes account differences financial statement treatment tax treatment certain transactions deferred tax assets liabilities recognized future tax consequences attributable differences financial statement carrying amounts existing assets liabilities respective tax bases deferred tax assets liabilities measured using enacted tax rates expected apply taxable income years temporary differences expected recovered settled effect change tax rates recognized income expense period includes enactment date provision benefit income taxes annual effective tax rate impacted income taxes certain countries computed based deemed profit rather taxable income tax holidays certain international projects goodwill intangible assets apply statements financial accounting standards 141 “business combinations” “sfas 141” statements financial accounting standards 142 “accounting goodwill intangible assets” “sfas 142” sfas 141 requires use purchase accounting method business combinations broadens criteria recording intangible assets separate goodwill sfas 142 stipulates nonamortization approach account purchased goodwill certain intangible assets indefinite useful lives also requires least annual impairment test applying fairvaluebased test intangible assets finite lives continue amortized useful lives useful life intangible asset entity period asset expected contribute directly indirectly future cash flows entity goodwill represents excess purchase price fair value net assets acquired perform annual test impairment fourth quarter fiscal year frequently event circumstance indicates impairment may occurred perform required annual impairment test goodwill using discounted cash flow analysis supported comparative market multiples determine fair values businesses versus book values possible impairment operating segment indicated implied fair value goodwill tested comparing carrying amount net assets operating segment excluding goodwill total fair value carrying amount goodwill exceeds implied fair value impairment charge recorded sustained adverse conditions equity markets negatively impacted market capitalization almost public companies including led goodwill impairment charge totaling 62295 downstream oil gas segment turn regarded indicator adverse change business climate continue monitor carrying value goodwill principal factors used discounted cash flow analysis requiring judgment projected results operations weighted average cost capital wacc terminal value assumptions wacc takes account relative weights component consolidated capital structure equity debt represents expected cost new capital adjusted appropriate consider lower risk profiles associated longer term contracts barriers market entry terminal value assumptions applied final year discounted cash flow model due many variables inherent estimation business’s fair value relative size recorded goodwill differences assumptions may material effect results impairment analysis intangible assets intangible assets indefinite useful lives intangible assets finite lives intangible assets consist customer relationships backlog recorded connection acquisition inserv november 2007 value existing customer relationships recorded estimated fair value determined using discounted cash flow method acquired customer relationships finite useful life therefore amortized estimated useful life relationships additionally able assign value backlog purchased acquisition existing backlog time acquisition recorded fair value amortized useful life contracts results operations contract revenue contract costs significantly impacted capital budgets clients timing location development projects oil gas power industries worldwide contract revenue cost vary country yeartoyear result entering exiting work countries b execution new contract awards c completion contracts overall level demand services ability successful obtaining executing contracts affected relative strength weakness us dollar compared currencies competitors clients work locations fiscal year ended december 31 2008 compared fiscal year ended december 31 contract revenue contract revenue increased 965013 1018 percent 1912704 947691 due increases across segments yeartoyear comparison revenue follows upstream oil gas revenue increased 568762 764 percent 1313070 744308 2007 increase revenue primarily result increased 2008 business activity united states 436914 comprised 445728 attributable two major projects started 2008 one major epc project continued 2007 provided 129723 revenue 2008 along increase facility work 16809 offset decreases 155346 related projects completed 2007 early 2008 canada revenue increased 142692 2008 due increase 163273 pipeline construction related july 2007 acquisition midwest increase 19818 fabrication field services decrease 40399 facilities construction major facilities project completed early 2008 oman revenue decreased 5272 2008 primarily attributable decrease oilfield services downstream oil gas revenue increased 343254 14410 percent result 2008 representing full 12 months activity 2007 represented 41 day period november 20 2007 december 31 2007 subsequent acquisition inserv engineering revenue increased 52997 295 percent 232559 179562 2007 increase revenue result increased demand pipeline facility engineering services volume size projects performed 2008 significantly greater 2007 operating income segment operating income increased 37228 1204 percent 68136 30908 2007 yeartoyear comparison operating income follows 1 table reflect government fines 22000 2007 included consolidated operating results government fines characterized corporate expense allocated reporting segments upstream oil gas operating income increased 60030 2744 percent 81905 operating income 21875 2007 increase operating income result previously discussed revenue increases increasing margins segment slightly higher margins united states combined significant increase revenue accounted majority increase operating income due increase volume pipeline work related acquisition midwest margins canada improved 2008 margins oman higher compared prior year also impacting operating income yearoveryear increase depreciation expense reflecting additional capital investment heavy equipment increase ga necessary support increased level business activity segment overall contract margin increased 19 115 2008 compared 96 2007 ga percentage revenue decreased 13 53 2008 compared 66 2007 downstream oil gas operating income decreased 39749 59327 percent result goodwill impairment charge 62295 additionally 2008 results represent full 12 months activity 2007 represented 41 days operating results inserv subsequent acquisition november 2007 results also include charges 10420 794 2008 2007 respectively amortization intangibles acquired excluding effects goodwill impairment charge downstream oil gas’ operating income exceeded expectations engineering operating income increased 16947 2026 percent 25310 8363 2007 increase operating income primarily result increased mix direct labor versus third party subcontractor services higher volume higher mix inhouse labor improved utilization higher headcount characteristics strong demand engineering work success hiring retaining inhouse engineers well strong beginning backlog comprised several epc projects 2008 favorable mix variance higher margin epc projects well overall increased activity strong beginning backlog epc projects marathon cnyog inergy settlement cheniere change orders 2008 along additional booking execution epc work double eagle cnyog 2008 contributed improved epc mix percentage total engineering segment nonoperating items interest net expense increased 3244 1045 percent 6347 3103 2007 increase net expense primarily result 2008 decreased interest income earned cash equivalents additionally interest expense increased 1236 primarily due increased capital lease obligations due significant additions capital equipment obtained capital leases throughout late 2007 2008 partially offset reduced interest expense result conversion 63093 aggregate principal amount 275 65 senior convertible notes 2007 2008 net increased 11360 3267 percent net income 7883 net expense 3477 2007 increase primarily result selling one fabrication facilities located edmonton alberta canada resulted gain sale 7694 loss early extinguishment debt decreased 15375 1000 0 2008 loss early extinguishment debt 2007 directly attributable induced conversion 52450 aggregate principal 65 senior convertible notes entire loss recognized second quarter 2007 provision income taxes increased 11439 789 percent 25942 14503 2007 2008 recognized 25942 income tax expense income continuing operations income taxes 69672 effective tax rate 372 percent compared income tax expense 14503 loss continuing operations income taxes 13047 2007 increase provision income taxes due improved operating results thereby generating taxable income 2008 compared 2007 circumstances resulted recording tax provision losses 2007 primarily due expenses panama received tax benefit charges include 22000 government fines 15375 loss early extinguishment debt income loss discontinued operations net taxes income loss discontinued operations net taxes increased 24171 1129 percent income 2757 loss 21414 2007 income 2008 consists two prenigeria sale insurance claim recoveries totaling 3004 events loss suffered prior sale nigeria operations additionally recognized 1543 additional cumulative gain sale nigeria assets operations 2008 additional gain result aggregate amount 19759 letters credit expiring fair value 1543 letters credit reserved gain sale date income insurance recovery additional gain sale partially offset net expenses tsa loss incurred period 2007 primarily 38 days nigeria operations prior sale february 7 2007 government fine 10300 related profit disgorgement recognized third quarter 2007 2008 cash provided operating activities discontinued operations increased 1554 941 percent cash provided 3205 1651 period 2007 fiscal year ended december 31 2007 compared fiscal year ended december 31 contract revenue contract revenue increased 404432 744 percent 947691 543259 due increases across segments yeartoyear comparison revenue follows upstream oil gas revenue increased 319991 754 percent 744308 424317 2006 increase revenue primarily result increased 2007 business activity united states 211042 210375 approximately 99 percent attributable three major projects started 2007 along increase facility work 39025 offset decreases 40363 related projects completed 2006 early 2007 canadian revenue increased 87925 2007 due increase 50163 major projects increase 17624 pipeline construction project attributable midwest acquisition made third quarter 2007 increase 16798 fabrication field services oman revenue increased 21024 2007 primarily attributable increase oilfield construction services downstream oil gas revenue increased 23821 result revenues earned 41 day period november 20 2007 december 31 2007 subsequent acquisition inserv engineering revenue increased 60620 510 percent 179562 118942 2006 increase revenue result increased demand pipeline facility engineering services volume size projects performed 2007 significantly greater 2006 increased activity level reflected engineering yearend headcount 611 465 percent overyear end 2006 maintaining high utilization operating income segment operating income increased 42939 3569 percent 30908 operating loss 12031 2006 yeartoyear comparison operating income follows 1 table reflect government fines 22000 2007 included consolidated operating results government fines characterized corporate expense allocated reporting segments upstream oil gas operating income increased 37356 2413 percent 21875 operating loss 15481 2006 increase operating income result previously discussed revenue increases increasing margins segment higher margins united states partially offset lower margins canada margins oman consistent prior year also impacting operating income year increase depreciation expense reflecting additional capital investment heavy equipment towards end 2006 throughout 2007 increase ga necessary support increased level business activity segment downstream oil gas operating income increased 670 operating income result 41 days operating results inserv subsequent acquisition november 2007 results include charge 794 amortization intangibles acquired engineering operating income increased 4913 1424 percent 8363 3450 2006 increase operating income primarily result increased mix direct labor versus third party subcontractor services higher mix inhouse labor improved utilization higher headcount characteristics strong demand engineering work success hiring retaining inhouse engineers nonoperating items interest net expense decreased 5162 625 percent 3103 8265 2006 decrease interest expense due reduced interest expense result conversion 54450 aggregate principal amount 275 65 senior convertible notes partially offset increased interest expense associated capital lease additions 48454 2007 interest income increased result cash proceeds received sale nigeria assets operations 105568 excess proceeds public offering completed november 2007 used acquisition inserv net income expense decreased 4046 7111 percent expense 3477 income 569 2006 decrease net primarily result 1071 related settlement vendor lawsuit originated 2003 997 registration delay payments associated registration rights agreement 65 senior convertible notes 750 commitment fees related potential term loan executed increase foreign exchange losses 532 loss early extinguishment debt expense 15375 result inducing conversion 52450 aggregate principal 65 senior convertible notes may 2007 loss early extinguishment consisted 12720 cash payments made note holders inducement convert 273 transaction costs writeoff 2382 debt issuance costs provision income taxes increased 12195 5284 percent 14503 2308 2006 recognized 14503 income tax expense loss continuing operations income taxes 13047 2007 compared income tax expense 2308 loss continuing operations income taxes 19727 2006 increase provision income taxes due improved operating results us canada thereby generating taxable income 2007 compared 2006 company incurred income tax expense loss continuing operations result approximately 50000 losses incurred panama company domiciled unable offset taxable income generated us canada thus received tax benefit loss discontinued operations net taxes loss discontinued operations net taxes decreased 61988 743 percent 21414 83402 2006 2007 net loss discontinued operations comprised primarily charge settlement amount due sec agreement principle 10300 consisting 8900 profit disgorgement plus 1400 prejudgment interest thereon results nigeria operations 38 days prior sale profit disgorgement specifically attributable one nigerian projects therefore classified discontinued operations additionally results discontinued operations include gain sale nigeria assets operations 327 days income services provided tsa liquidity capital resources objective financing business maintain financial flexibility meet material equipment personnel needs support project commitments well ability pursue expansion diversification objectives december 31 2008 liquidity 257864 comprised 207864 cash 50000 unutilized borrowing capacity 2007 credit facility anticipate future cash flows operations sufficient fund working capital expenditures needs 2009 twelve months ended december 31 2008 used cash variety ways including working capital expenditures additional sources uses capital public offering acquisition inserv november 20 2007 completed public offering common shares received approximately 253707 net proceeds used 208925 proceeds fund cash portion purchase price acquisition inserv remaining 44782 net proceeds represents additional source capital credit facility concurrent public offering inserv acquisition replaced synthetic credit facility 150000 senior secured revolving credit facility “2007 credit facility” increased 200000 approval administrative agent anticipate requesting increase 2009 entire facility available performance letters credit 33 percent facility available cash borrowings financial letters credit see item 8 “financial statements supplementary data” note 9 longterm debt discussion 2007 credit facility cash flows cash flows provided used continuing operations type activity follows twelve months ended december 31 2008 2007 statements cash flows entities international operations use local currency functional currency exclude effects changes foreign currency exchange rates occur given period noncash charges result changes reflected certain accounts consolidated condensed statements cash flows may reflect changes corresponding accounts consolidated condensed balance sheets operating activities operating activities continuing operations provided 186959 cash twelve months ended december 31 2008 compared use 19463 twelve months ended december 31 2007 cash provided operating activities increased 206422 primarily due · cash provided net earnings adjusted noncash charges 37781 increase cash flow change working capital accounts 97361 primarily attributable decrease accounts receivable prepaid expenses assets increase working capital accounts directly related increased revenue project activity 2008 · partially offset increase cash consumed continuing operations 71280 investing activities investing activities continuing operations used 11725 cash twelve months ended december 31 2008 compared use 150601 twelve months ended december 31 2007 cash flows used investing activities decreased 138876 primarily due · acquisitions inserv midwest twelve months ended december 31 2007 united states canada used 232670 cash compared acquisitions 2008 · increase proceeds sale purchases property plant equipment 18617 primarily due disposition one fabrication facilities canada 2008 · offset decrease cash proceeds 105568 related sale nigeriabased assets operations 2007 financing activities financing activities continuing operations used 58460 cash twelve months ended december 31 2008 compared 221359 provided twelve months ended december 31 2007 significant transactions impacting cash flows financing activities included · 253707 cash provided public offering common shares 2007 compared none 2008 partially offset · 12575 cash used pay government fines compared 0 2007 · cash used payments capital leases 31402 inclusive 18374 capital lease buyouts completed 2008 compared 9540 2007 capital requirements 2008 186959 cash provided continuing operations activities capital budget 2008 approximately 63000 capital expenditures segment amounted 38266 spent upstream oil gas 3613 downstream oil gas 225 engineering 10944 corporate total 53048 approximately 10000 less budget surplus approximately 7400 deferred 2009 remaining 2600 postponed indefinitely continue adjust current economic environment believe improved financial results combined financial flexibility financial management ensure sufficient cash meet capital requirements continuing operations focused following significant capital requirements · providing working capital projects process scheduled begin · funding 2009 capital budget approximately 38300 inclusive 7400 carryforward 2008 15100 contingent expenditures triggered based selective events occurring · pursuing additional acquisitions allow us expand service offering · making installment payments government related fines profit disgorgement believe able support ongoing working capital needs cash hand future operating cash flows availability cash borrowing 2007 credit facility although may required access capital markets event complete significant acquisitions contractual obligations december 31 2008 91407 outstanding debt related convertible notes addition 2008 2007 entered various capital leases construction equipment property value 66317 december 31 2008 uncertain tax positions ultimately could result tax payment amount ultimate tax payment contingent tax authorities’ assessment practical present annual payment information december 31 2008 borrowings 2007 credit facility 8010 outstanding letters credit consisting 7887 issued projects continuing operations 123 issued projects related discontinued operations unsecured credit facilities banks certain countries outside united states borrowings lines form shortterm notes overdrafts made competitive local interest rates generally line available borrowings related operations specific country credit available facilities approximately 6656 december 31 2008 outstanding borrowings december 31 2008 2007 offbalance sheet arrangements commercial commitments time enter commercial commitments usually form commercial standby letters credit surety bonds financial guarantees contracts customers may require us provide letters credit surety bonds regard performance contracted services cases commitments called upon event failure perform contracted services likewise contracts may allow us issue letters credit surety bonds lieu contract retention provisions client withholds percentage contract value project completion expiration warranty period letters credit represent maximum amount payments could required make letters credit drawn upon additionally issue surety bonds customarily required commercial terms construction projects us surety bonds represent bond penalty amount future payments could required make fail perform obligations contracts surety bonds stated expiration date rather released contract accepted owner maximum exposure relates value bonds outstanding lowered bonded project cost complete reduced december 31 2008 liability recognized letters credit surety bonds 13 recorded fair value letters credit outstanding nigeria operations summary offbalance sheet commercial commitments continuing discontinued operations december 31 2008 follows recently issued accounting pronouncements sfas 141r december 2007 fasb released statements financial accounting standards 141r “business combinations” “sfas 141r” sfas 141r applies prospectively business combinations acquisition date beginning first annual reporting period beginning december 15 2008 business combinations year ending december 31 2009 company early adoption prohibited sfas 141r establishes principles requirements acquirer recognizes measures financial statements identifiable assets acquired liabilities assumed noncontrolling interest goodwill acquired additionally transaction costs currently capitalized current accounting guidance required expensed incurred sfas 141r sfas 141r also establishes disclosure requirements enable users evaluate nature financial effects business combination provisions sfas 141r impact company party business combination pronouncement adopted sfas 157 september 2006 financial accounting standards board “fasb” issued statements financial accounting standards 157 “fair value measurements” “sfas 157” sfas 157 applies accounting pronouncements require permit fair value measurements effective financial statements issued fiscal years beginning november 15 2007 interim periods within fiscal years january 1 2008 adopted provisions sfas 157 related financial assets liabilities nonfinancial assets liabilities measured fair value recurring basis adoption accounting pronouncement result material impact consolidated financial statements february 2008 fasb issued fasb staff position “fsp” financial accounting standard 1571 “application fasb statement 157 fasb statement 13 accounting pronouncements address fair value measurements purposes lease classification measurement statement 13” removes certain leasing transactions scope sfas 157 fsp financial accounting standard 1572 “effective date fasb statement 157” defers effective date sfas 157 one year certain nonfinancial assets nonfinancial liabilities except recognized disclosed fair value financial statements recurring basis october 2008 fasb also issued fsp sfas 1573 “determining fair value financial asset market asset active” clarifies application sfas 157 inactive market illustrates entity would determine fair value market financial asset active beginning january 1 2009 adopt provisions nonfinancial assets nonfinancial liabilities required permitted measured fair value recurring basis include measured fair value goodwill impairment testing indefinitelived intangible assets measured fair value impairment assessment nonfinancial longlived assets measured fair value impairment assessment asset retirement obligations initially measured fair value initially measured fair value business combination adoption sfas 157 material impact consolidated financial statements sfas 159 february 2007 fasb released statements financial accounting standards 159 “the fair value option financial assets financial liabilities” “sfas 159” effective fiscal years beginning november 15 2007 sfas 159 permits entities choose measure many financial instruments certain items fair value sfas 159 effective company’s fiscal year ending december 31 2008 company elect use fair value option financial assets financial liabilities currently recorded fair value sfas 160 december 2007 fasb released statements financial accounting standards 160 “noncontrolling interests consolidated financial statements amendment arb 51” “sfas 160” sfas 160 effective fiscal years interim periods within fiscal years beginning december 15 2008 early adoption prohibited sfas 160 establishes reporting requirements provide sufficient disclosure clearly identify distinguish interests noncontrolling owners interest parent adoption standard impact company’s presentation minority interest oman december 31 2008 minority interest included accounts payable accrued liabilities see note 7 accounts payable accrued liabilities minority participants’ share net income subsidiaries included contract costs upon adoption noncontrolling interest recognized equity consolidated balance sheet minority participants’ share net income presented face consolidated statement operations fsp apb 141 may 2008 fasb issued fsp apb 141 “accounting convertible debt instruments may settled cash upon conversion including partial cash settlement” fsp clarifies convertible debt instruments may settled cash upon conversion including partial cash settlement addressed apb opinion 14 additionally fsp specifies issuers instruments separately account liability equity components manner reflect entity’s nonconvertible debt borrowing rate interest cost recognized subsequent periods statement effective financial statements issued fiscal years beginning december 15 2008 interim periods within fiscal years early adoption prohibited company currently assessing impact adoption pronouncement financial statements fsp fas 1423 april 2008 fasb issued fsp fas 1423 “determination useful life intangible assets” fsp amends factors considered developing renewal extension assumptions used determine useful life recognized intangible asset fasb statement financial accounting standards 142 “sfas 142” intent fsp improve consistency useful life recognized intangible asset sfas 142 period expected cash flows used measure fair value asset sfas 141r us generally accepted accounting principles statement effective financial statements issued fiscal years beginning december 15 2008 interim periods within fiscal years early adoption prohibited company expect adoption fsp material impact consolidated financial statements effects inflation changing prices operations affected increases prices whether caused inflation government mandates economic factors countries operate attempt recover anticipated increases cost labor equipment fuel materials price escalation provisions certain major contracts considering estimated effect increases bidding pricing new work item 7aitem 7 managements discussion analysis financial condition results operations following discussion read conjunction consolidated financial statements years ended december 31 2002 2001 2000 included item 8 form 10k general derive revenue providing construction engineering specialty services oil gas power industries government entities worldwide obtain contracts work primarily competitive bidding negotiations longstanding prospective clients bidding activity backlog revenue resulting award contracts us may vary significantly period contracts durations weeks several months cases year operations outside united states may subject certain risks ordinarily would exist united states including foreign currency restrictions extreme exchange rate fluctuations expropriation assets civil uprising riots availability personnel government audit however successfully operated nigeria past 40 years favorable relationships local communities believe continue operate area active south america since 1939 venezuela largest oil producer south america redirected energy initiative include development significant natural gas reserves new initiative translate demand natural gas pipeline capabilities however venezuelan economy highly inflationary government venezuela presidente hugo chavez experiended extreme civil unrest culminating national labor strike beginning december 2002 suspended work venezuela december 2002 resumed work february 2003 impact strike moderated although business commercial activity yet returned prestrike levels critical accounting policies revenue recognition percentageofcompletion method number factors relating business affect recognition contract revenue fixedprice construction engineering contracts recognized percentageofcompletion method estimated contract income resulting revenue generally accrued based costs incurred date percentage total estimated costs taking consideration physical completion total estimated costs thus contract income impacted changes productivity scheduling unit cost labor subcontracts materials equipment additionally external factors weather client needs client delays providing permits approvals labor availability governmental regulation politics may affect progress projects completion thus timing revenue recognition generally recognize income fixedprice contract approximately 5 10 complete depending upon nature contract costs considered reimbursable excluded percentageofcompletion calculation accrued revenue pertaining reimbursables limited cost reimbursables current estimate total contract cost indicates loss contract projected loss recognized full determined revenue change orders extra work variations scope work recognized agreement reached clients scope work price revenue claims recognized agreement reached clients value claims instances may occur completion work contract revenue unitprice contracts recognized earned believe operating results evaluated relatively long time horizon major contracts progress completed change orders extra work variations scope work cost recoveries claims negotiated realized us government contracts many contracts provide termination contract convenience client event contract would terminated convenience client prior completion typically compensated progress time termination costs addition many contracts subject certain completion schedule requirements liquidated damages event schedules met result circumstances within control example project involving many factors project australia project australia completed july 1 2000 date liquidated damages scheduled commence contract due primarily productivity labor issues anticipated liquidated damages recognized contract loss 145 million 2000 however 2001 client accepted claims extension scheduled completion date accepted claims requested additional services resulting contract amendments realization 2001 42 million contract income project income taxes determination tax provision complex due operations several tax jurisdictions outside united states may subject certain risks ordinarily would expected united states tax regimes certain jurisdictions subject significant changes may applied retroactive basis occur tax expense could materially different amounts reported furthermore determining valuation allowance related deferred tax assets estimate taxable income future determine magnitude deferred tax assets likely realized future taxable income could materially different amounts estimated case valuation allowance would need adjusted joint venture accounting time seek one joint venture partners project requires local content equipment manpower resources beyond available complete work timely efficient manner wish share risk particularly large project investments ranging 10 percent 50 percent joint ventures operate similar lines business investments consist 10 percent interest consortium work venezuela 35 percent interest joint venture work australia 50 percent interest joint venture work africa interests unconsolidated ventures accounted equitymethod consolidated balance sheets proportionate consolidation basis consolidated statements operations presentation consistent construction industry practice alternatively account interests using equitymethod consolidated statement operations revenue contract cost would materially lower however net income would change significant business developments january 24 2000 acquired rogers phillips inc closely held pipeline construction company houston texas experienced management team strong market position us gulf coast area founded 1992 rpi provides full range construction services pipeline operating companies including station piping projects congested urban areas inside plants well crosscountry pipelines consideration included 1035000 shares common stock approximately 17 million cash acquisition costs transaction accounted purchase september 2000 joint venture led subsidiary awarded significant project scope includes engineering procurement construction 665mile 1070kilometer 30inch crude oil pipeline doba fields chad export terminal coast cameroon africa engineering procurement activities began late 2000 pipeline construction began november 2001 expected completed 2003 2000 activities nigeria included work two major epc contracts shell nembe creek gas gathering pipeline system b four concrete bargemounted gas compressor facilities shells nembe creek associated gas project collectively nembe creek projects end 2001 projects nearing completion 2000 willbros usa inc relocated administrative headquarters construction support services tulsa oklahoma houston texas cost move termination benefits office lease termination costs totaled approximately 45 million october 12 2001 completed purchase msi energy services inc canadian general contractor whose common shares listed canadian venture exchange msi provides pipeline construction pipeline integrity maintenance services addition pipe storage handling services specialty metal fabrication services pipeline equipment rentals concrete construction products oil sands region northern alberta canada aggregate purchase price including transaction costs 83 million conjunction acquisition company sold 144175 common shares treasury 19 million certain msi shareholders net cash paid 64 million purchase msi funded borrowings principal credit agreement transaction accounted purchase 2001 engineering group executed alliance agreement explorer pipeline company provide project management engineering procurement construction services mainline expansion project texas oklahoma missouri illinois indiana explorer pipeline project includes construction 12 grassroots pump stations modifications 13 existing pump stations addition 500000 barrels storage wood river illinois terminal modifications two terminals project scheduled completion 2003 may 14 2002 completed public offering common shares 1775 per share 4356750 shares sold us underwriters exercised options purchase shares available overallotments received 719 million proceeds underwriting discount offering costs used repay indebtedness prior credit agreement working capital general corporate purposes june 2002 completed new 1250 million credit agreement syndicated bank group replacing existing facility due expire february 2003 new facility terms similar prior facility expire june 2005 october 23 2002 completed acquisition mt west fabrication plants stations inc process electric control inc process engineering design inc pacific industrial electric inc collectively mt west group mt west group provides designbuild services including engineering procurement construction services energy industry primarily western united states purchase price 137 million consisted 46 million cash acquisition costs 950000 shares common stock valued 91 million addition purchase price adjusted earnout amount equal 25 percent combined net income mt west group 24month period following date acquisition earnout amounts due shall payable cash upon completion earnout period transaction accounted purchase financial measures use ebitda earnings net interest income taxes depreciation amortization part overall assessment financial performance comparing ebitda accounting periods believe ebitda used financial community method measuring performance evaluating market value companies considered businesses similar ebitda year 2002 601 million 85 million 516 million 2001 define anticipated contract revenue backlog award contract reasonably assured generally upon execution definitive agreement contract anticipated revenue postcontract award processes including change orders extra work variations scope work effect escalation currency fluctuation formulas added backlog realization reasonably assured new contract awards totaled 3921 million year ended december 31 2002 additions backlog year follows construction 2695 million engineering 462 million specialty services 764 million backlog decreases type service result services performed period follows construction 3448 million engineering 1772 million specialty services 617 million backlog end 2002 decreased 1916 million 47 previous year end 2160 million consisted following construction 1324 million 753 million 36 b engineering 237 million 1310 million 85 c specialty services 599 million 147 million 33 construction backlog consists primarily chadcameroon pipeline project construction projects offshore west africa engineering backlog consists primarily explorer pipeline project engineering procurement projects united states specialty services backlog largely attributable 16year water injection contract awarded 1998 consortium 10 percent interest venezuela contracts build operate four fueling facilities united states government service contracts oman canada results operations contract revenue contract costs primarily related timing location development projects oil gas power industries worldwide contract revenue cost variations country year result entering exiting work countries b execution new contract awards c completion contracts overall level activity services ability successful obtaining executing contracts affected relative strength weakness us dollar compared currencies competitors clients work locations 2002 result economic political events venezuela venezuelan bolivar experienced significant devaluation relative us dollar included foreign exchange loss 2002 09 million loss resulting translation venezuelan bolivar denominated monetary assets liabilities us dollars believe revenue results operations areas adversely affected regard years ended december 31 2002 2001 fiscal year ended december 31 2002 compared fiscal year ended december 31 2001 contract revenue contract revenue increased 1936 million 50 5837 million due 1304 million 60 increased construction revenue due primarily construction chadcameroon pipeline project work project bolivia increased activity offshore west africa net reduced activities nembe creek projects nigeria neared completion reduced construction activity united states b increased engineering revenue 569 million 47 due increase engineering procurement services united states primarily related explorer pipeline project c increase 63 million 11 specialty services revenue principally revenue generated msi canada acquired october 2001 offset reduced activity venezuela revenue united states increased 263 million 13 due primarily increase engineering procurement services acquisition mt west group october 2002 offset decrease construction activity chadcameroon revenue increased 1013 million resulting construction work begun fourth quarter 2001 chadcameroon pipeline project revenue offshore west africa increased 153 million result increased vessel utilization several projects first six months 2002 work began 2002 project bolivia resulted 474 million revenue country project dominican republic 2002 produced 177 million revenue canada increased 104 million resulting acquisition msi october 2001 nigeria revenue decreased 195 million 29 due primarily reduced activity nembe creek projects combined revenue areas decreased 53 million 15 contract costs contract costs increased 1711 million 54 4883 million due increase 1077 million 62 construction services cost 549 million 56 engineering services cost 85 million 19 specialty services cost variations contract cost country closely related variations contract revenue depreciation amortization depreciation amortization increased 38 million 19 due primarily addition equipment chadcameroon pipeline project bolivia general administrative general administrative expense increased 39 million 13 339 million increase due higher staff compensation administrative services necessary support 50 increase revenue percent revenue general administrative expense decreased 77 2001 58 2002 operating income operating income increased 56 million 17 327 million 2001 383 million 2002 excluding gain 92 million 2001 associated termination benefit plans operating income increased 148 million 63 excluding gain 2001 operating income increased largely result higher revenue resulting greater activity north america construction activity chadcameroon pipeline project marine maintenance construction offshore west africa partially offset reduced income nigeria resulting 29 decrease revenue area increased income 50 increase revenue offset higher depreciation amortization general administrative costs net interest income expense net interest expense decreased 10 million 40 16 million expense may 2002 completed common stock offering received 719 million net proceeds borrowings prior credit agreement paid full interest expense 2002 includes amortization debt issue costs 09 million compared 05 million 2001 foreign exchange loss foreign exchange loss increased 09 million 10 million due primarily effect devaluation venezuelan bolivar 2002 venezuelan bolivar denominated monetary assets liabilities provision income taxes provision income taxes decreased 49 million 47 due primarily difference 66 million changes estimated income tax liabilities deferred tax assets 2002 compared 32 million similar changes 2001 addition 2002 recorded 11 million deferred income tax benefit associated operating losses outside united states changes 2002 income tax liabilities include 12 million reduction due annual settlements income tax liabilities outside united states 10 million reduction resulting changes current year estimated tax liabilities outside united states result settlements addition reduced income taxes united states 11 million result refinement allocation expenses among operating entities items affecting estimated tax liabilities united states 33 million reduction deferred tax assets valuation allowance reduced us valuation allowance result assessment united states operations including past earnings history projected future earnings considering scheduled expiration tax net operating losses changes 2001 resulted 23 million reduction deferred assets valuation allowance united states 09 million reduction annual settlements income taxes outside united states provision income taxes also impacted differing income tax rates various countries operate including example nigeria income taxes largely based deemed profit rather taxable income well tax holiday cameroon income earned chadcameroon pipeline project fiscal year ended december 31 2001 compared fiscal year ended december 31 2000 contract revenue contract revenue increased 758 million 24 3901 million result increased engineering revenue 616 million due increase engineering procurement services united states b increased construction revenue 221 million due primarily increased construction activity united states offshore west africa cameroon partially offset reduced activities nembe creek projects nigeria neared completion 2001 completion third quarter 2000 construction contract australia increases engineering construction revenue partially offset decrease 79 million specialty services revenue united states increased 1123 million 121 due increase engineering procurement construction services cameroon revenue increased 340 million work chadcameroon pipeline project moved engineering procurement mobilization phases construction phase november 2001 offshore west africa revenue increased 263 million 149 due higher utilization combination barge willbros 318 well utilization derrick barge wb82 acquired 2001 revenue oman increased 14 million 11 canada revenue msi acquisition october 12 2001 33 million nigeria revenue decreased 756 million 53 due reduced activity nembe creek projects australia revenue decreased 167 million 81 due construction contract completed 2000 net 40 million contract amendments settled claims 2001 revenue venezuela decreased 92 million 35 contract costs contract costs increased 478 million 18 3172 million due increase 519 million engineering services cost increase construction services cost 72 million partially offset decrease 113 million specialty services cost variations contract cost country closely related variations contract revenue exception australia contract costs australia decreased 354 million 187 million decrease revenue primarily result 145 million loss recognized 2000 offset 42 million settled claims 2001 termination benefit plans 2001 terminated two employee benefit plans resulted nontaxable gains 92 million plans costly maintain become ineffective recruitment retention experienced qualified workforce depreciation amortization depreciation amortization decreased 29 million 195 million due primarily sale 2000 excess equipment venezuela indonesia united states oman accelerated amortization excess spare parts indonesia 2000 accelerated amortization leasehold improvements 08 million related termination administrative office space tulsa oklahoma result relocation offices houston texas general administrative general administrative expense percentage revenue decreased 77 2001 96 2000 dollar basis general administrative expenses decreased 02 million 300 million 2001 reduction result nonrecurrence 36 million expenses incurred 2000 associated relocation administrative office houston texas reduction offset increased general administrative expenses 2001 expansion staffing support services necessary support 24 increase revenue year operating income operating income increased 405 million operating loss 78 million 2000 operating income 327 million 2001 reasons described operating income increased australia 194 million operating loss 154 million 2000 united states 148 million offshore west africa 92 million cameroon 50 million additionally recognized 92 million gains related termination certain employee benefit plans improvements offset reduced operating income nigeria venezuela totaling 187 million areas combined accounted increase 16 million net interest income expense net interest income expense decreased 07 million 26 million net interest expense due primarily lower interest rates period offset higher average debt levels foreign exchange loss foreign exchange loss decreased 10 million 01 million primarily due writeoff 2000 cumulative translation adjustments associated substantially reduced operations certain work countries income expense income decreased 09 million 04 million expense primarily due gains disposals equipment 2000 compared losses disposals equipment 2001 provision income taxes provision income taxes increased 51 million pretax income increased 398 million result increased taxes higher taxable income united states offset lower income taxes nigeria due decrease taxable revenue country adjustment deferred tax assets valuation allowance united states 23 million settlement 09 million prior year taxes nigeria valuation allowance deferred tax assets reduced 2000 2001 result significant increases revenue earnings contract awards backlog forecasted earnings us entities addition 92 million nontaxable gains 2001 associated termination benefit plans provision income taxes impacted income taxes certain countries primarily nigeria based deemed profit rather taxable income fact losses one country cannot used offset taxable income another country effect inflation changing prices operations affected increases prices whether caused inflation government mandates economic factors countries operate attempt recover anticipated increases cost labor fuel materials price escalation provisions certain major contracts considering estimated effect increases bidding pricing new work liquidity capital resources primary requirements capital acquire upgrade maintain equipment provide working capital current projects finance mobilization employees equipment new projects establish presence countries perceive growth opportunities finance possible acquisition new businesses equity investments historically met capital requirements primarily operating cash flows recently borrowings credit facility cash equivalents increased 302 million 156 495 million december 31 2002 193 million december 31 2001 increase due cash flows 289 million operations 331 million financing activities resulting net proceeds sale common stock 752 million reduced net repayments debt 421 million increases offset 316 million investing activities primarily purchase 302 million equipment spare parts 20 million acquisition mt west group net cash acquired 02 million effect exchange rate changes cash equivalents working capital increased 449 million 2002 909 million december 31 2002 stockholders equity increased 1142 million 2108 million december 31 2002 contractual obligations june 14 2002 completed new 1250 million credit agreement syndicated bank group replacing existing facility due expire february 2003 facility may used standby commercial letters credit borrowings combination thereof borrowings limited lesser 40 borrowing base 500 million payable termination june 14 2005 interest payable quarterly base rate plus margin ranging 075 200 eurodollar rate plus margin ranging 175 300 commitment fee unused portion credit agreement payable quarterly ranging 050 075 credit agreement collateralized substantially assets including stock principal subsidiaries restricts payment cash dividends requires us maintain certain financial ratios borrowing base calculated using varying percentages cash accounts receivable accrued revenue contract cost recognized income yet billed property plant equipment spare parts debt issue costs 30 million net accumulated amortization 09 million associated new credit agreement included assets december 31 2002 amortized 24 months december 31 2002 amounts borrowed credit agreement 528 million letters credit outstanding leaving 722 million available letters credit 440 million borrowings combination thereof various obligations totalling 12 million including notes payable generally related equipment insurance financing local revolving credit facilities market rates collateralized certain vehicles equipment andor real estate mature 2003 addition unsecured credit facilities banks certain countries outside united states borrowings lines form shortterm notes overdrafts made competitive local interest rates generally line available borrowings related operations specific country credit available facilities approximately 63 million december 31 2002 outstanding borrowings december 31 2002 certain operating leases office camp facilities minimum lease commitments operating leases december 31 2002 totaled 47 million payable follows 2003 13 million 2004 11 million 2005 10 million 2006 06 million 2007 02 million later years 05 million based upon total cash obligations payable follows 2003 25 million 2004 11 million later years 23 million commercial commitments time enter commercial commitments usually form commercial standby letters credit insurance bonds financial guarantees contracts customers may require us provide letters credit insurance bonds regard performance contracted services cases commitments called upon event failure perform contracted services likewise contracts may allow us issue letters credit insurance bonds lieu contract retention provisions client withholds percentage contract value project completion expiration warranty period retention commitments called upon event warranty project completion issues prescribed contracts connection chadcameroon pipeline project joint venture issued letter credit equipment leasing company equal 50 total lease payments share joint venture letter credit reduces lease payments made expires june 2003 commitment called upon result failure make lease payments connection 10 interest joint venture venezuela issued corporate guarantee equal 10 joint ventures outstanding borrowings two banks guarantee reduces borrowings repaid expires march 2004 commitment december 31 2002 totals 33 million maximum amount future payments could required make 1997 entered lease agreements specialpurpose leasing partnership land office building engineering group tulsa oklahoma july 2002 acquired assets 55 million thereby eliminating lease agreements related commercial commitments summary offbalance sheet commercial commitments december 31 2002 follows commercial commitments totaling 623 million represent maximum amount future payments could required make liability recorded december 31 2002 related commitments connection 50 interest joint venture related chadcameroon pipeline project joint severally liable performance joint venturer event joint venturer unable fulfill responsibilities associated project would required fulfill duties would recognize income losses associated fulfilling duties joint venturer december 31 2002 project approximately 80 complete estimated produce contract income however limitation maximum future potential payments could required make event project result contract losses liability recorded december 31 2002 related commitment anticipate significant collection problems customers including countries may experiencing economic andor currency difficulties since customers generally major oil companies government entities terms billing collecting work performed generally established contracts historically low incidence collectability problems believe cash flows operations borrowing capacity existing credit facilities sufficient finance working capital expenditures ongoing operations estimate capital expenditures equipment spare parts approximately 350 400 million 2003 analyzing cash flow operations believe numerous factors could impact cash flow positively negatively one two events occur could funded operations borrowing capacity list events could cause actual results differ expectations discussion risk factors could impact cash flow please refer section entitled political economic risks operational risks contained items 1 2 form 10k 1998 1999 repurchased held treasury 2175371 shares common stock 161 million repurchase shares 2000 2001 2002 january 2000 1035000 shares treasury stock issued connection acquisition rpi october 2001 144175 shares treasury stock issued connection acquisition msi october 2002 950000 shares treasury stock issued connection acquisition mt west group december 31 2002 total 46196 shares remain treasury stock average price 743 per share new accounting pronouncements june 2001 fasb issued sfas 143 accounting asset retirement obligations sfas 143 requires asset retirement cost capitalized part cost related longlived asset subsequently allocated expense using systematic rational method adopt sfas 143 effective january 1 2003 transition adjustment reported cumulative effect change accounting principle time anticipate effect adoption statement material either financial position results operations april 2002 fasb issued sfas 145 rescission sfas 4 44 64 amendment sfas 13 technical corrections sfas 145 provides guidance income statement classification gains losses extinguishment debt accounting certain lease modifications economic effects similar saleleaseback transactions adopt sfas 145 january 2003 expect adoption materially affect consolidated financial statements june 2002 fasb issued sfas 146 accounting costs associated exit disposal activities addresses accounting restructuring similar costs sfas 146 supersedes previous accounting guidance principally emerging issues task force issue 943 adopt provisions sfas 146 restructuring activities initiated december 31 2002 sfas 146 requires liability costs associated exit disposal activity recognized liability incurred issue 943 liability exit cost recognized date companys commitment exit plan sfas 146 also establishes liability initially measured recorded fair value accordingly sfas 146 may affect timing recognizing future restructuring costs well amounts recognized november 2002 fasb issued interpretation 45 guarantors accounting disclosure requirements guarantees including indirect guarantees indebtedness others interpretation fasb statements 5 57 107 rescission fasb interpretation 34 interpretation elaborates disclosures made guarantor interim annual financial statements obligations guarantees issued interpretation also clarifies guarantor required recognize inception guarantee liability fair value obligation undertaken initial recognition measurement provisions interpretation applicable guarantees issued modified december 31 2002 expected material effect companys financial statements disclosure requirements effective financial statements interim annual periods ending december 15 2002 december 2002 fasb issued sfas 148 accounting stockbased compensation transition disclosure amendment fasb statement 123 statement amends fasb statement 123 accounting stockbased compensation provide alternative methods transition voluntary change fair value method accounting stockbased employee compensation addition statement amends disclosure requirements statement 123 require prominent disclosures annual interim financial statements certain disclosure modifications required fiscal years ending december 15 2002 included notes consolidated financial statements included item 8 form 10k item 7aitem 7 management’s discussion analysis financial condition results operations thousands except share per share amounts unless otherwise noted following discussion read conjunction consolidated financial statements years ended december 31 2006 2005 2004 included item 8 form 10k overview 2006 general derive revenue engineering construction engineering procurement construction “epc” services provided oil gas power industries government entities company predecessors provided services customers 55 countries almost 100 years 2006 generated revenue continuing operations primarily united states canada oman obtain work competitive bidding negotiations prospective clients contract values may range thousand dollars several hundred million dollars contract durations range weeks two years strategy deploy resources markets engineering construction epc services provide highest risk adjusted return maintaining balanced backlog respect commercial political risks market presence overall strategy changed however fundamental drivers different markets around world change tactical approach continuously adjusted refined ongoing evaluation company’s operations markets employing new set tactics optimize risk adjusted returns seek late june 2006 evaluation process resulted decision sell operations nigeria joining venezuela txp4 plant company’s discontinued operations “discontinued operations” concluded operating commercial risks associated business nigeria exceeded acceptable risk levels february 7 2007 sold nigeria operations share purchase agreement total consideration 155250 terms share purchase agreement ascot offshore nigeria limited “ascot” nigerian energy services company received 150000 cash 5250 note balance purchase price shares wg nigeria holdings limited holding company owns operating equipment companies supporting activities nigeria february 12 2007 received 2625 partial payment note due payable later august 1 2007 final net proceeds company subject postclosing working capital adjustments due many variables affecting company’s contracts commercial negotiations nigeria final adjustments may determined several months adjustments may substantial expected result recognition loss sale conjunction transaction purchased certain minority interests total cost 10500 sale venezuela operations completed fourth quarter 2006 sale txp4 plant opal wyoming completed first quarter 2006 therefore included discontinued operations financial results operations txp4 plant nigeria venezuela operations collectively “discontinued operations” see note 2discontinuance operations asset disposal notes consolidated financial statements included item 8 form 10k additional information discontinued operations exit nigeria latin america refocus attention resources north america selected international markets also expect benefit additional cost savings realize opportunistic approach international business currently operating base oman well positioned project work middle east north africa believe fundamentals supporting demand engineering construction epc services energy industry particularly pipeline services north america continue strong next two index financial statements five years many positive developments reinforce view capital spending exploration production sector energy industry expected exceed 300 billion 2007 9 percent increase 2006 even lower forecasted crude oil prices oil sands region western canada forecasted capital expenditures new bitumen production processing facilities expected exceed c100 billion 2015 production levels increased approximately one million barrels per day presently three million barrels per day 2015 united states new gas production rocky mountain region generated plans gas pipelines west midwest east coast liquefied natural gas also expected bring opportunities willbros north america producingexporting countries engineering market north america continues capacity constrained selecting accepting assignments offer higher margins better contract terms position us epc assignments engineering operations currently capacity constrained availability qualified personnel believe locations tulsa oklahoma salt lake city utah protect us degree high turnover technical employees characteristic energy centers houston texas believe high level engineering activity precursor higher levels construction activity north america backlog december 31 2006 6023 million continuing operations reflects growth work contract 2404 million december 31 2005 discussions potential customers recent awards regarding pipeline station construction projects north america coupled increase engineering assignments reinforce belief ability obtain improved terms conditions better pricing continue 2007 2008 believe customers recognize imbalance supply demand pipeline engineering construction offer better terms conditions resulting lower risk us control pricing increases services demand united states canada market led improvement backlog continuing operations 2006 believe demand continue strong also expect international market continue expand exhibit strengthening demand new energy infrastructure developments contemplated north africa middle east markets focus us financing transactions also october 27 2006 concluded two financing transactions required support expected growth willbros usa inc whollyowned subsidiary company entered new 100000 threeyear senior secured synthetic credit facility “2006 credit facility” group lenders led calyon new york branch “calyon” concurrent creation 2006 credit facility predecessor 2004 credit facility terminated total 38708 outstanding letters credit reissued 2006 credit facility december 31 2006 credit facility availability 35455 scheduled expire october 2009 company may elect increase total capacity 2006 credit facility 150000 consent calyon borrowings taken place company’s intent use 2006 credit facility future borrowings 2006 credit facility established provide source letters credit also october 27 2006 company sold 3722360 shares common stock private placement “private placement” selling price 1400 pershare discount approximately 10 percent based company’s closing stock price 1550 october 24 2006 net proceeds estimated transaction costs 48748 net proceeds used general corporate purposes primarily support startup several new projects united states canada see liquidity capital resources additional information 2006 credit facility private placement index financial statements significant business developments 2006 february 2007 awarded multiple projects valued approximately 900000 significant project awards announced follows • willbros engineers inc “wei” executed epc contract guardian pipeline llc provide services guardian expansion extension project guardian expansion extension project involve constructing 106 miles 30inch 20inch natural gas pipeline terminus existing guardian pipeline near ixonia wisconsin green bay area eight associated meter stations two 39000 horsepower compressor stations one located dekalb county illinois walworth county wisconsin also constructed wei’s scope work currently includes pipeline meter stations • wei also awarded epc contract cheniere sabine pass pipeline company “cheniere” whollyowned subsidiary cheniere energy inc epc agreement effective february 1 2006 willbros provide cheniere services management engineering material procurement construction management 16mile 42inch pipeline related facilities constructed cheniere’s liquefied natural gas terminal constructed sabine pass pipeline interconnect johnson’s bayou located cameron parish louisiana wei cheniere entering epc agreement sufficiently advance commencement physical construction pipeline order perform detailed engineering procure materials construction scheduled commence april 2007 completed september 2007 • willbros rpi inc awarded installation 71 miles 42inch natural gas pipeline north louisiana centerpoint energy work consists eastern two loops centerpoint’s planned 172mile 42inch pipeline carthage texas perryville hub northeast louisiana project commenced fourth quarter 2006 completion scheduled second quarter 2007 • oman construction company “toco” received contract perform additional maintenance activities small capital projects occidental oman inc duration assignment expected span next 3 5 years option renew additional 1 2 years • willbros rpi inc february 2007 awarded contract southeast supply header llc “sesh” joint venture subsidiaries spectra energy corp centerpoint energy inc nyse cnp construct approximately 190 miles sesh project consisting 42inch 36inch diameter pipeline sesh begin near perryville hub northeast louisiana interconnect gulfstream natural gas system llc pipeline mobile county alabama construction project anticipated begin fourth quarter 2007 completed summer 2008 financial summary year ended december 31 2006 incurred net loss continuing operations 22035 098 per share revenue 543259 compares net loss continuing operations 30461 143 per share revenue 294479 2005 2006 revenue 845 percent 2005 primarily driven improving market conditions united states canada business segment see note 12segment information notes consolidated financial statements included item 8 form 10k additional information regarding segment reporting following key components increase revenue • commencement work new engineering pipeline construction projects united states • expansion work relating maintenance fabrication contracts canadian oil sands index financial statements contract income 2006 increased 25358 53765 28407 2005 contract margin increased 99 percent 2006 96 percent 2005 contract income increase driven primarily increase revenue margins remained relatively consistent general administrative “ga” expense increased 11016 53366 2006 42350 2005 increase ga reflected higher levels business activity united states canada also included severance costs 63 million related executive management changes 34 million associated increased costs outside legal accounting auditing consulting fees company recognized 2308 income tax expense loss continuing operations 19727 increase 640 compared 2005 due expenses 28311 occurring panama tax benefit obtained company incurred tax expense loss continuing operations permanent timing differences us also contributed higher effective tax rate cash equivalents decreased 18290 37643 december 31 2006 55933 december 31 2005 decrease resulted primarily cash consumed discontinued operations 105354 capital expenditures 12264 decrease partially offset cash generated continuing operations investing activities 40804 financing activities 51550 longterm debt increased 166152 2006 138020 2005 primarily due proceeds issuance 19500 65 notes increase capital lease obligations 11217 discontinued operations discussed “2006 general” sold nigeria operations february 7 2007 decision sell nigeria operations result following nigeria continued see spread escalation hostilities oil gas installations work forces charged construction maintenance operation installations attacks militants directly indirectly affected company continuous basis since hostage taking incident february 18 2006 however since midjune situation nigeria worsened attacks increasing throughout country additional production operations delta area remain shut disruptions combined effect supporting higher oil prices either frustrating projects creating force majeure event ongoing projects nigeria current work environment nigeria government local operating companies unable provide security necessary us conduct project operations project activities frustrated could expose personnel ongoing basis real escalating threat posed militant hostile community disturbances existed ongoing possibility labor unrest could escalate violence choba facility due continuing labor dispute new may 2006 labor agreement late september 2006 violence port harcourt area escalated point elected transfer employees area ensure continued safety subsequently reduced choba facility staff minimum number required support caretaker status critical ongoing support functions shifted lagos locations outside port harcourt area discontinued operations reported 83402 net loss 372 loss per share year ended december 31 2006 net loss discontinued operations almost entirely attributable nigeria operations reported 83773 net loss 2006 operating results nigeria 2006 negatively impacted schedule delays increasing costs related labor equipment materials security disputes clients related change orders lack revenue certain projects due force majeure additionally process selling nigeria operations incurred costs protect value franchise nigeria continuing qualify future projects maintaining certain level workforce 2006 discontinued operations consumed 105354 cash operating investing activities primarily due net loss generated company’s nigeria operations index financial statements additional financial disclosures discontinued operations provided note 2discontinuance operations asset disposal notes consolidated financial statements form 10k remainder management’s discussion analysis financial conditions results operations pertains continuing operations unless noted otherwise critical accounting policies estimates revenue number factors relating company’s business affect recognition contract revenue company typically structures contracts fixedprice unitprice time material cost plus fixed fee revenue unitprice time material contracts recognized earned company believes operating results evaluated time horizon major contracts progress completed change orders extra work variations scope work cost recoveries claims negotiated realized revenue fixedprice cost plus fixed fee contracts recognized percentageofcompletion method estimated contract income resulting revenue generally accrued based costs incurred date percentage total estimated costs taking consideration physical completion total estimated costs thus contract income impacted changes productivity scheduling unit cost labor subcontracts materials equipment additionally external factors weather client needs client delays providing permits approvals labor availability governmental regulation politics may affect progress project’s completion thus timing revenue recognition company recognize income fixedprice contract approximately 5 percent 10 percent complete depending upon nature contract current estimate total contract cost indicates loss contract projected loss recognized full determined company considers unapproved change orders contract variations company customer approval scope change price associated scope change costs associated unapproved change orders included estimated cost complete contracts expensed incurred company recognizes revenue equal cost incurred unapproved changed orders realization price approval probable estimated amount equal greater company’s cost related unapproved change order revenue recognized unapproved change orders included “contract costs recognized income yet billed” balance sheet unapproved change orders involve use estimates reasonably possible revisions estimated costs recoverable amounts may required future reporting periods reflect changes estimates final agreement customers company considers claims amounts company seeks seek collect customers others customercaused changes contract specifications design customerrelated causes unanticipated additional contract costs agreement customers scope price changes revenue claims recognized agreement reached customers value claims instances may occur completion work contract costs associated claims included estimated costs complete contracts expensed incurred income taxes company accounts income taxes asset liability method deferred tax assets liabilities recognized future tax consequences operating loss tax credit carry forwards temporary differences financial statement carrying values assets liabilities respective tax basis provision benefit income taxes annual effective tax rate impacted income index financial statements taxes certain countries computed based deemed income rather taxable income tax holidays certain international projects financial measures backlog industry backlog considered indicator potential future performance represents portion future revenue stream strategy focused solely backlog additions capturing quality backlog margins commensurate risks associated given project backlog consists anticipated revenue uncompleted portions existing contracts whose award reasonably assured december 31 2006 total backlog continuing discontinued operations 1009052 compared 816355 december 31 2005 backlog continuing operations december 31 2006 2005 602272 240373 respectively 151 percent increase believe backlog figures firm subject cancellation modification provisions contained various contracts expect approximately 4618 million 77 percent existing total backlog december 31 2006 recognized revenue 2007 historically substantial amount revenue given year backlog beginning year additionally due short duration many jobs revenue associated jobs performed within reporting period reflected backlog generate revenue numerous sources including contracts long short duration entered year well various contractual processes including change orders extra work variations scope work effect escalation currency fluctuation formulas revenue sources added backlog realization assured following table shows backlog operating segment geographic region december 31 2006 2005 ebitda continuing operations use ebitda earnings net interest income taxes depreciation amortization part overall assessment financial performance comparing ebitda accounting periods believe ebitda used financial community method measuring performance evaluating market value companies considered businesses similar ebitda continuing operations 2006 968 compared 13201 2005 14169 increase ebitda primarily result increased contract income 25358 partially offset increased ga expense 11016 including severance costs 6254 reconciliation ebitda gaap financial information found item 6 “selected financial data” form 10k index financial statements results operations contract revenue contract costs significantly impacted capital budgets clients timing location development projects oil gas power industries worldwide contract revenue cost vary country year result entering exiting work countries b execution new contract awards c completion contracts overall level demand services ability successful obtaining executing contracts affected relative strength weakness us dollar compared currencies competitors clients work locations fiscal year ended december 31 2006 compared fiscal year ended december 31 2005 contract revenue contract revenue increased 248780 845 percent 543259 due increases international united states canada segments yeartoyear comparison revenue follows united states canada revenue increased 205039 primarily result increased 2006 business activity us construction 61382 us engineering 41530 canada 102127 increase canada revenue attributable 57011 new major projects increased fabrication maintenance revenue 29555 new edmonton modular fabrication facility opened fourth quarter 2005 generated revenue approximately 13828 2006 compared 87 2005 international revenue increased 43741 primarily due significant new project oman 2006 generated approximately 32685 revenue additional net revenue increases 11056 primarily result additional time material work contract income contract income increased 25358 893 percent 53765 2006 compared 2005 yeartoyear comparison contract income follows united states canada contract income increased 18059 2006 compared 2005 income primarily result previously discussed revenue increases higher margins canada partially offset lower margins us construction related increased cost due tight labor market project startup delays inclement weather several large construction projects international contract income increased 7299 2006 compared 2005 primarily due previously discussed oman revenue increases result additional projects index financial statements operating expenses depreciation amortizationincreased 742 64 percent 12430 2006 11688 2005 due 2006 equipment purchases 11373 property acquired capital leases valued 12108 united states canada depreciation amortization increased 10552 8973 176 percent international depreciation decreased 1878 2715 308 percent decrease general administrative “ga” expense increased 11016 53366 2006 42350 2005 increase ga reflected higher levels business activity united states canada also included severance costs 63 million related executive management changes 34 million associated increased costs outside legal accounting auditing consulting fees nonoperating items interestnet expense increased 8265 2006 3904 2005 due primarily additional interest expense related 65 notes 4871 othernet income decreased 569 2006 742 2005 unfavorable variance 173 variance caused primarily 429 reduction gains sale property plant equipment increase foreign exchange loss 164 reductions income offset increase miscellaneous income 420 mainly related settlement class action suit relating 2001 income taxthe company recognized 2308 income tax expense loss continuing operations 19727 increase 640 compared 2005 due expenses 28311 occurring panama tax benefit obtained company incurred tax expense loss continuing operations permanent timing differences us also contributed higher effective tax rate loss discontinued operations net taxes company recognized net loss discontinued operations 83402 2006 compared net loss 8319 2005 increase loss 75083 nigeria operations accounted 83773 2006 loss 971 venezuela recognized net gain 1342 sale opal txp4 account remainder 2006 loss discontinued operations fiscal year ended december 31 2005 compared fiscal year ended december 31 2004 contract revenue contract revenue increased 21685 79 percent 294479 2005 272794 2004 united states canada revenue increased 97428 568 percent 2005 269006 171578 2004 primarily result work new engineering pipeline construction projects united states continuation work relating maintenance fabrication contracts canadian oil sands international revenue decreased 75743 748 percent 2005 2004 primarily due 2004 completion project iraq representing 54029 decrease lower level activity oman 2005 compared 2004 representing additional 11554 decline index financial statements contract income contract income decreased 22030 437 percent 28407 2005 50437 2004 variations contract costs country closely related variations contract revenue united states canada contract income increased 7216 primarily due increased revenue segment contract margin percent declined 14 percentage points decline contract margin percent due lower contract margin canada due startup costs associated new fabrication facility costs overruns certain construction projects declines contract margin partially offset higher contract margins engineering pipeline construction projects united states international contract income decreased 29246 primarily due declines contract income iraq bolivia ecuador projects countries completed closed 2004 decline contract margin percent resulted high margin recognized completed 2004 iraq project 2004 benefit bolivia transierra project claim settlement operating expense depreciation amortization increased 1912 196 percent 11688 2005 due 2005 capital expenditures 25111 full year’s depreciation new worldwide information technology system united states canada depreciation amortization increased 8973 6911 298 percent international depreciation decreased 2715 2865 52 percent ga expense increase 9825 302 percent 42350 2005 compared 32525 2004 increase ga result increased activity united states canada business well increased spending office facilities information technology approximately 5 million nonoperating items interest including amortization debt issue cost increased 2133 expense 5481 2005 expense 3348 2004 due primarily writeoff debt restructuring cost 1203 higher debt levels 2005 versus 2004 interest income increased 709 1577 2005 compared 868 2004 result overall increase invested funds 2005 compared 2004 income tax provision income taxes 2005 1668 increase 2695 2004 benefit 1027 company’s net income 2004 included nontaxable revenue iraq 55 million allowing net benefit 2005 company expenses 20 million panama tax benefit obtained loss discontinued operations net taxes loss discontinued operations decreased 18792 loss 27111 2004 loss 8319 2005 reduction loss discontinued operations due 212791 increase revenue attributable entirely nigeria operations 68 percent increase contract margin index financial statements liquidity capital resources liquidity 2006 operating activities continuing operations used 5429 cash compared use 34631 2005 represents improvement operating cash flows 29202 2006 2005 believe proceeds sale nigeria operations proceeds private sale equity improved cash flows continuing operations sufficient finance working capital expenditures continuing operations give us liquidity flexibility perform increasing volume projects currently pursuing backlog capital expenditures 2007 estimated exceed 2006 levels capital requirements primary requirements capital acquire upgrade maintain equipment provide working capital current projects finance mobilization employees equipment new projects establish presence countries perceive growth opportunities finance possible acquisition new businesses equity investments historically met capital requirements primarily operating cash flows borrowings credit facility debt equity financings working capital cash equivalents decreased 18290 37643 december 31 2006 55933 december 31 2005 decrease resulted primarily cash consumed discontinued operations 105354 capital expenditures 12264 decrease partially offset cash generated continuing operations investing activities 40804 financing activities 51550 working capital excluding net assets liabilities discontinued operations decreased 29221 332 percent 58725 december 31 2006 87946 december 31 2005 decrease primarily attributable increase accounts payable contract billings excess cost recognized income yet billed 68358 decrease cash 18290 partially offset increase accounts receivable prepaid expenses 58529 2006 financing activities 2006 credit facilityon october 27 2006 concluded two financing transactions required support expected growth willbros usa inc whollyowned subsidiary company entered new 100000 threeyear senior secured synthetic credit facility “2006 credit facility” group lenders led calyon new york branch “calyon” concurrent creation 2006 credit facility predecessor 2004 credit facility terminated total 38708 outstanding letters credit reissued 2006 credit facility december 31 2006 credit facility availability 35455 scheduled expire october 2009 company may elect increase total capacity 2006 credit facility 150000 consent calyon company currently commitment calyon underwrite increase 2006 credit facility 25000 subject certain terms conditions company increase 2006 credit facility requirements issue letters credit excess 100000 2006 credit agreement includes customary affirmative negative covenants limitations creation certain new indebtedness liens restrictions certain transactions payments maintenance maximum senior leverage ratio minimum fixed charge coverage ratio minimum tangible net worth requirement borrowings taken place company’s present intent use 2006 credit facility future borrowings 2006 credit facility established primarily provide source letters credit unamortized debt issue costs associated 2006 credit facility 1986 included assets december 31 2006 amortized threeyear term credit facility ending october 2009 index financial statements december 31 2006 borrowings outstanding 2006 credit facility 64545 outstanding letters credit 41920 issued projects continuing operations 22625 issued projects related discontinued operations borrowings taken place company’s intent use 2006 credit facility future borrowings 2006 credit facility established provide source letters credit private placementon october 27 2006 company also sold 3722360 shares common stock private placement “private placement” selling price 1400 per share discount approximately 10 percent based company’s closing stock price 1550 october 24 2006 net proceeds estimated transaction costs 48748 net proceeds used general corporate purposes primarily support startup several new projects united states canada buyers private placement common stock also acquired warrants purchase additional 558354 shares exercise price 1903 per share warrant exercisable whole part period 60 months date issuance additional information private placement 2006 credit facility available note 10stockholders’ equity note 7longterm debt respectively notes consolidated financial statements form 10k 65 senior convertible notes december 22 2005 company entered purchase agreement private placement 65000 aggregate principal amount 65 senior convertible notes due 2012 “65 notes” private placement closed december 23 2005 net proceeds offering used retire existing indebtedness provide additional liquidity support working capital needs current level operations first quarter 2006 initial purchasers 65 notes exercised options purchase additional 19500 65 notes bringing aggregate principal amount private placement 84500 65 notes general senior unsecured obligations interest payable semiannually june 15 december 15 payments began june 15 2006 65 notes convertible shares company’s common stock conversion rate 569606 shares common stock per 100000 principal amount notes representing conversion price approximately 1756 per share resulting 4813171 shares issuable december 31 2006 subject adjustment certain circumstances 275 convertible senior notes 2004 company completed offering 70000 275 convertible senior notes “275 notes” 275 notes general senior unsecured obligations interest paid semiannually march 15 september 15 payments began september 15 2004 275 notes mature march 15 2024 unless notes repurchased redeemed converted earlier holders 275 notes may certain circumstances convert notes shares company’s common stock initial conversion ratio 513611 shares common stock per 100000 principal amount notes representing conversion price approximately 1947 per share resulting 3595277 shares issuable december 31 2006 subject adjustment certain circumstances notes convertible upon occurrence certain specified events including limited certain times closing sale price company’s common stock exceeds 120 percent current conversion price 2336 per share based initial conversion price september 22 2005 company entered amendment indenture holders 275 notes “indenture amendment” indenture amendment extended initial date 275 notes may redeemed company march 15 2013 march 15 2011 index financial statements 2004 credit facility march 12 2004 existing 125000 june 2002 credit agreement calyon amended restated increased 150000 “2004 credit facility” 2004 credit facility would matured march 12 2007 replaced october 27 2006 credit facility see financing transactions 2004 credit facility available standby commercial letters credit borrowings combination thereof borrowings limited lesser 40 percent borrowing base 30000 interest payable quarterly base rate plus margin ranging 075 percent 200 percent eurodollar rate plus margin ranging 175 percent 300 percent 2004 credit facility collateralized substantially company’s assets including stock company’s principal subsidiaries prohibited payment cash dividends required company maintain certain financial ratios borrowing base calculated using varying percentages cash accounts receivable accrued revenue contract cost recognized income yet billed property plant equipment spare parts period august 6 2004 august 18 2006 company entered various amendments waivers 2004 credit facility syndicated bank group waive noncompliance certain financial nonfinancial covenants among things amendments provided 1 certain financial covenants reporting obligations waived andor modified reflect company’s current anticipated future operating performance 2 ultimate reduction facility 50000 provided letter credit limit 50000 less face amount letters credit issued prior august 18 2006 provided new letter credit must fully cash collateralized letter credit fee 25 percent paid cash collateralized letter credit 3 requirement company maintain minimum cash balance 15000 sixth amendment expired september 30 2006 availability 2004 credit facility reduced zero october 27 2006 2004 credit facility replaced 2006 credit facility additional information 2004 credit facility 65 notes 275 notes available note 7longterm debt notes consolidated financial statements form 10k contractual obligations december 31 2006 borrowings 2006 credit facility 64545 outstanding letters credit 41920 issued projects continuing operations 22625 issued projects related discontinued operations additionally various notes leases payable generally related equipment financing local revolving credit facilities notes leases market interest rates collateralized certain vehicles equipment andor real estate index financial statements unsecured credit facilities banks certain countries outside united states borrowings lines form shortterm notes overdrafts made competitive local interest rates generally line available borrowings related operations specific country credit available facilities approximately 4582 december 31 2006 outstanding borrowings december 31 2006 2005 2006 allowance doubtful accounts including discontinued operations increased 6672 10389 increase allowance continuing operations 516 598 6156 9791 discontinued operations increase allowance due additional provision 4512 primarily related discontinued operations net writeoffs uncollectible accounts 795 anticipate significant collection problems customers beyond already recognized allowance including countries may experiencing economic andor currency difficulties since customers generally major oil companies government entities terms billing collecting work performed generally established contracts historically low incidence collectability problems offbalance sheet arrangements commercial commitments time enter commercial commitments usually form commercial standby letters credit insurance bonds financial guarantees contracts customers may require us provide letters credit insurance bonds regard performance contracted services cases commitments called upon event failure perform contracted services likewise contracts may allow us issue letters credit insurance bonds lieu contract retention provisions client withholds percentage contract value project completion expiration warranty period summary offbalance sheet commercial commitments continuing discontinued operations december 31 2006 follows commercial commitments totaling 168776 represent maximum amount future payments could required make liability recorded december 31 2006 related commitments new accounting pronouncements fin 48in june 2006 financial accounting standards board “fasb” issued fasb interpretation 48 “accounting uncertainty income taxes” “fin 48” interpretation statement financial accounting standards “sfas” 109 “accounting income taxes” interpretation clarifies accounting uncertainty income taxes recognized enterprise’s financial statements accordance sfas 109 interpretation prescribes recognition threshold measurement attribute tax position taken expected taken tax return also provides guidance derecognition index financial statements classification interest penalties accounting interim periods disclosure transition provisions fin 48 effective fiscal years beginning december 31 2006 company currently evaluating impact statement financial statements sfas 157in september 2006 fasb issued sfas 157 “fair value measurements” “sfas 157” sfas 157 clarifies principle fair value based assumptions market participants would use pricing asset liability establishes fair value hierarchy prioritizes information used develop assumptions sfas 157 effective company’s fiscal year beginning january 1 2007 company currently evaluating impact statement financial statements fasb staff position “fsp” aug air1on september 7 2006 fasb issued amendment certain provisions american institute certified public accountants “aicpa” industry guide audits airlines accounting principles board “apb” opinion 28 “interim financial reporting” fsp prohibits use accrueinadvance method accounting planned major maintenance activities annual interim financial reporting periods guidance fsp shall applied first fiscal year beginning december 15 2006 company intends adopt standard fiscal year beginning january 1 2007 company currently evaluating impact amendment financial statements including potential impact retrospective periods effects inflation changing prices operations affected increases prices whether caused inflation government mandates economic factors countries operate attempt recover anticipated increases cost labor equipment fuel materials price escalation provisions certain major contracts considering estimated effect increases bidding pricing new work item 7a nanitem 7a quantitative qualitative disclosures market risk applicable item 8item 7a quantitative qualitative disclosures market risk information required item incorporated reference page 24 companys 1998 annual report stockholders entitled managements discussion analysis financial condition results operations financial risk management item 8item 7a quantitative qualitative disclosures market risk information required item incorporated reference page 28 companys 1999 annual report stockholders entitled managements discussion analysis financial condition results operations financial risk management item 8item 7a quantitative qualitative disclosures market risk information required item incorporated reference page 23 companys 2000 annual report stockholders entitled managements discussion analysis financial condition results operations financial risk management item 8item 7a quantitative qualitative disclosures market risk primary market risk exposure changes nonus currency exchange rates attempt negotiate contracts provide payment us dollars may required take portion payment contract another currency mitigate nonus currency exchange risk seek match anticipated nonus currency revenue expenses currency whenever possible extent unable match nonus currency revenue expenses currency may use forward contracts options common hedging techniques nonus currencies forward contracts options december 31 2001 2000 carrying amounts cash equivalents accounts receivable notes payable accounts payable accrued liabilities shown consolidated balance sheets approximate fair value december 31 2001 due generally short maturities items invest primarily shortterm dollar denominated bank deposits december 31 2001 investment instruments maturity days equity securities ability expect hold investments maturity exposure market risk changes interest rates relates primarily longterm debt december 31 2001 390 million indebtedness subject variable interest rates weighted average effective interest rate variable rate debt twelve months ended december 31 2001 76 detrimental effect hypothetical 100 basis point increase interest rates would reduce income taxes 03 million twelvemonth period item 8item 7a quantitative qualitative disclosures market risk primary market risk exposure changes nonus currency exchange rates attempt negotiate contracts provide payment us dollars may required take portion payment contract another currency mitigate nonus currency exchange risk seek match anticipated nonus currency revenue expenses currency whenever possible extent unable match nonus currency revenue expenses currency may use forward contracts options common hedging techniques nonus currencies forward contracts options december 31 2003 2002 carrying amounts cash equivalents accounts receivable notes payable accounts payable accrued liabilities shown consolidated balance sheets approximate fair value december 31 2003 due generally short maturities items invest primarily shortterm dollar denominated bank deposits december 31 2003 investment instruments maturity days equity securities ability expect hold investments maturity exposure market risk changes interest rates relates primarily longterm debt december 31 2003 140 million indebtedness subject variable interest rates weighted average effective interest rate variable rate debt twelve months ended december 31 2003 50 detrimental effect hypothetical 100 basis point increase interest rates year would less 01 million december 31 2003 fixed rate debt approximated fair value based upon discounted future cash flows using current market rates item 8nanitem 7a quantitative qualitative disclosures market risk primary market risk exposure changes nonus currency exchange rates attempt negotiate contracts provide payment us dollars may required take portion payment contract another currency mitigate nonus currency exchange risk seek match anticipated nonus currency revenue expense currency whenever possible extent unable match nonus currency revenue expense currency may use forward contracts options common hedging techniques nonus currencies forward contracts options december 31 2005 2004 carrying amounts cash equivalents accounts receivable notes payable accounts payable accrued liabilities shown consolidated balance sheets approximate fair value december 31 2005 due generally short maturities items december 31 2005 invested primarily shortterm dollar denominated bank deposits ability expect hold investments maturity exposure market risk changes interest rates relates primarily borrowings 2004 credit facility december 31 2005 borrowings subject variable interest rates december 31 2005 fixed rate debt approximated fair value based upon discounted future cash flows using current market rates item 8item 7a quantitative qualitative disclosures market risk primary market risk exposure changes nonus currency exchange rates attempt negotiate contracts provide payment us dollars may required take portion payment contract another currency mitigate nonus currency exchange risk seek match anticipated nonus currency revenue expense currency whenever possible extent unable match nonus currency revenue expense currency may use forward contracts options common hedging techniques nonus currencies forward contracts options december 31 2007 2006 carrying amounts cash equivalents accounts receivable notes payable accounts payable accrued liabilities shown consolidated balance sheets approximate fair value december 31 2007 due generally short maturities items december 31 2007 invested primarily shortterm dollar denominated bank deposits ability expect hold investments maturity exposure market risk changes interest rates relates primarily borrowings 2007 credit facility december 31 2007 borrowings 2007 credit facility subject variable interest rates december 31 2007 fixed rate debt approximated fair value based upon discounted future cash flows using current market rates item 8item 7a quantitative qualitative disclosures market risk primary market risk exposure changes nonus currency exchange rates attempt negotiate contracts provide payment us dollars may required take portion payment contract another currency mitigate nonus currency exchange risk seek match anticipated nonus currency revenue expense currency whenever possible extent unable match nonus currency revenue expense currency may use forward contracts options common hedging techniques nonus currencies forward contracts options december 31 2008 2007 carrying amounts cash equivalents accounts receivable notes payable accounts payable accrued liabilities shown consolidated balance sheets approximate fair value december 31 2008 due generally short maturities items december 31 2008 invested primarily shortterm dollar denominated bank deposits ability expect hold investments maturity exposure market risk changes interest rates relates primarily borrowings 2007 credit facility december 31 2008 borrowings 2007 credit facility subject variable interest rates item 8item 7a quantitative qualitative disclosures market risk primary market risk exposure changes nonus currency exchange rates attempt negotiate contracts provide payment us dollars may required take portion payment contract another currency mitigate nonus currency exchange risk seek match anticipated nonus currency revenue expenses currency whenever possible extent unable match nonus currency revenue expenses currency may use forward contracts options common hedging techniques nonus currencies forward contracts options december 31 2002 2001 carrying amounts cash equivalents accounts receivable notes payable accounts payable accrued liabilities shown consolidated balance sheets approximate fair value december 31 2002 due generally short maturities items invest primarily shortterm dollar denominated bank deposits december 31 2002 investment instruments maturity days equity securities ability expect hold investments maturity exposure market risk changes interest rates relates primarily longterm debt may 2002 subsequent completing public offering common shares paid borrowings credit facility december 31 2002 none indebtedness subject variable interest rates december 31 2002 fixed rate debt approximated fair value based upon discounted future cash flows using current market rates item 8item 7a quantitative qualitative disclosures market risk primary market risk exposure changes nonus currency exchange rates attempt negotiate contracts provide payment us dollars may required take portion payment contract another currency mitigate nonus currency exchange risk seek match anticipated nonus currency revenue expense currency whenever possible extent unable match nonus currency revenue expense currency may use forward contracts options common hedging techniques nonus currencies forward contracts options december 31 2006 2005 carrying amounts cash equivalents accounts receivable notes payable accounts payable accrued liabilities shown consolidated balance sheets approximate fair value december 31 2006 due generally short maturities items december 31 2006 invested primarily shortterm dollar denominated bank deposits ability expect hold investments maturity exposure market risk changes interest rates relates primarily borrowings 2006 credit facility december 31 2006 borrowings 2006 credit facility subject variable interest rates december 31 2006 fixed rate debt approximated fair value based upon discounted future cash flows using current market rates index financial statements item 8 nanitem 8 financial statements supplementary data information required item incorporated reference pages 25 37 companys 1997 annual report stockholders item 9item 8 financial statements supplementary data information required item incorporated reference pages 26 43 companys 1998 annual report stockholders item 9item 8 financial statements supplementary data information required item incorporated reference pages 29 47 companys 1999 annual report stockholders item 9item 8 financial statements supplementary data information required item incorporated reference pages 24 42 companys 2000 annual report stockholders item 9item 8 financial statements supplementary data index consolidated financial statements independent auditors report stockholders board directors willbros group inc audited accompanying consolidated balance sheets willbros group inc december 31 2001 2000 related consolidated statements operations stockholders equity comprehensive income cash flows years threeyear period ended december 31 2001 consolidated financial statements responsibility companys management responsibility express opinion consolidated financial statements based audits conducted audits accordance auditing standards generally accepted united states america standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements referred present fairly material respects financial position willbros group inc december 31 2001 2000 results operations cash flows years threeyear period ended december 31 2001 conformity accounting principles generally accepted united states america discussed note 1 consolidated financial statements company adopted statement financial accounting standards sfas 141 business combinations certain provisions sfas 142 goodwill intangible assets 2001 kpmg llp houston texas february 5 2002 willbros group inc consolidated balance sheets thousands except share per share amounts see accompanying notes consolidated financial statements willbros group inc consolidated statements operations thousands except share per share amounts see accompanying notes consolidated financial statements willbros group inc consolidated statements stockholders equity comprehensive income thousands except share amounts see accompanying notes consolidated financial statements willbros group inc consolidated statements cash flows thousands see accompanying notes consolidated financial statements willbros group inc notes consolidated financial statements thousands except share per share amounts 1 summary significant accounting policies company willbros group inc wgi republic panama corporation majorityowned subsidiaries company provide construction engineering specialty services oil gas power industries companys principal markets africa asia australia middle east south america canada united states principles consolidation consolidated financial statements company include accounts wgi majorityowned subsidiaries intercompany accounts transactions eliminated consolidation ownership interest minority participants subsidiaries wholly owned principally nigeria oman included accounts payable accrued liabilities material minority participants share net income subsidiaries included expense interests unconsolidated joint ventures accounted equity method consolidated balance sheets proportionate consolidation basis consolidated statements operations consolidated financial statements prepared accordance generally accepted accounting principles united states include certain estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities reported amounts revenue expenses actual results could differ significantly estimates reclassifications certain reclassifications made 2000 balances order conform 2001 presentation accounts receivable accounts receivable include retainage due within one year 1819 2001 858 2000 stated net allowances bad debts 734 2001 508 2000 provision credit bad debts 290 2001 154 2000 573 1999 spare parts spare parts excluding expendables stated net accumulated depreciation 10882 2001 13509 2000 depreciated three years straightline method property plant equipment depreciation provided straightline method using estimated lives follows construction equipment 46 years marine equipment 10 years transportation equipment 34 years buildings furniture equipment 320 years assets retired otherwise disposed cost related accumulated depreciation removed accounts resulting gain loss recognized income period normal repair maintenance costs charged expense incurred major overhaul costs accrued allocated contracts based estimates equipment condition significant renewals betterments capitalized longlived assets reviewed impairment whenever events changes circumstances indicate carrying amount asset may recoverable recoverability assets held used measured comparison carrying amount asset future net cash flows expected generated asset assets considered impaired impairment recognized measured amount carrying amount assets exceeds fair value assets disposed reported lower carrying amount fair value less costs sell goodwill represents excess purchase price fair value net assets acquired goodwill acquired prior july 1 2001 amortized straightline basis twenty years adoption nonamortization goodwill provision statement financial accounting standards sfas 142 goodwill intangible assets 2002 company adopted sfas 141 business combinations certain provisions sfas 142 july 1 2001 goodwill acquired willbros group inc notes consolidated financial statements thousands except share per share amounts 1 summary significant accounting policies continued july 1 2001 3406 amortized instead tested impairment least annually december 31 2001 goodwill 4383 less accumulated amortization 85 included assets prior january 1 2002 company assessed recoverability goodwill using estimates undiscounted future cash flows revenue construction engineering fixedprice contracts accounted using percentageofcompletion method estimated contract revenue generally accrued based percentage costs date bear total estimated costs taking consideration physical completion estimated contract losses recognized full determined revenue unitprice contracts recognized earned revenue change orders extra work variations scope work claims recognized realization reasonably assured costs incurred bidding obtaining contracts expensed incurred income taxes company accounts income taxes asset liability method deferred tax assets liabilities recognized future tax consequences operating loss tax credit carryforwards temporary differences financial statement carrying values assets liabilities respective tax bases provision income taxes impacted income taxes certain countries primarily nigeria based deemed profit rather taxable income retirement plans benefits 2001 company terminated defined benefit retirement plans postretirement medical benefits plan provided retirement benefits substantially regular employees pension costs funded accordance annual actuarial valuations company recorded cost postretirement medical benefits funded payasyougo basis employees working lives company voluntary defined contribution retirement plan qualified contributory part employees common stock options company measures stockbased compensation using intrinsic value method accounting prescribed accounting principles board opinion 25 accounting stock issued employees related interpretations provides proforma disclosure required statement financial accounting standards 123 accounting stock based compensation cost stock options measured excess quoted market price companys stock date grant exercise price foreign currency translation significant asset liability accounts stated currencies united states dollars translated united states dollars current exchange rates countries local currency functional currency nonmonetary assets liabilities highly inflationary economies translated united states dollars historical exchange rates translation adjustments accumulated comprehensive income loss revenue expense accounts converted prevailing rates throughout year foreign currency transaction adjustments translation adjustments highly inflationary economies recorded income 2000 854 transferred cumulative translation adjustments stockholders equity foreign exchange loss due substantial reduction operations certain countries concentration credit risk company concentration customers oil gas power industries exposes company concentration credit risks within industry company seeks obtain advance progress payments contract work performed major contracts receivables generally collateralized company believes allowance bad debts adequate fair value financial instruments carrying value financial instruments materially differ fair value willbros group inc notes consolidated financial statements thousands except share per share amounts 1 summary significant accounting policies continued cash flows determination cash flows highly liquid investments maturities less three months considered cash equivalents company paid interest 2858 2001 2216 2000 76 1999 income taxes 8650 2001 7249 2000 3474 1999 earnings loss per share basic earnings loss per share calculated dividing net income less preferred dividend requirements weightedaverage number common shares outstanding year diluted earnings loss per share calculated including weightedaverage number potentially dilutive common shares weightedaverage number common shares outstanding derivative financial instruments company may use derivative financial instruments forward contracts options financial instruments hedges mitigate nonus currency exchange risk company unable match nonus currency revenue expenses currency company derivative financial instruments december 31 2001 2000 2 acquisitions october 12 2001 company successfully completed tender offer outstanding shares msi energy services inc msi general contractor alberta canada acquisition establishes companys presence canada aggregate purchase price including transaction costs 8295 concurrently company sold certain msi shareholders 144175 common shares treasury stock assigned value 1850 market price date transaction announced net cash 6445 paid purchase msi funded borrowings companys principal credit agreement transaction accounted purchase january 24 2000 company acquired rogers phillips inc rpi closely held united states pipeline construction company consideration included 1035000 shares treasury stock valued 5511 approximately 1710 cash transaction costs transaction accounted purchase fair value net assets acquired acquisitions follows willbros group inc notes consolidated financial statements thousands except share per share amounts 2 acquisitions continued unaudited pro forma results operation msi acquisition occurred january 1 2000 would unaudited pro forma results operations rpi acquisition occurred january 1 1999 revenue would 314290 2000 198179 1999 pro forma results net loss net loss per share would materially different reported results 3 contracts progress contracts allow progress billings made performance work billings may made basis different used recognizing revenue contracts progress cost recognized income exceed billings exceed cost recognized income consist willbros group inc notes consolidated financial statements thousands except share per share amounts 4 property plant equipment property plant equipment used secure debt subject lien cost consist 5 joint ventures company investments ranging 10 percent 50 percent joint ventures operate similar lines business company investments consist 10 percent interest consortium work venezuela 35 percent interest joint venture work australia 50 percent interest joint venture work africa interests unconsolidated ventures accounted equitymethod consolidated balance sheets proportionate consolidation basis consolidated statements operations companys proportionate share revenue contract cost included consolidated statements operations ventures consist companys investments advances ventures consist willbros group inc notes consolidated financial statements thousands except share per share amounts 5 joint ventures continued summarized balance sheet information significant joint venture africa accounted equitymethod consolidated balance sheets follows 6 accounts payable accrued liabilities accounts payable accrued liabilities consist 7 notes payable longterm debt notes payable longterm debt consist following willbros group inc notes consolidated financial statements thousands except share per share amounts 7 notes payable longterm debt continued company certain affiliated companies 150000 credit agreement syndicated bank group amended effective june 30 2000 credit agreement subjects 100000 revolving portion credit facility borrowing base requirements entire facility less amounts used revolving portion facility may used standby commercial letters credit borrowings payable termination february 20 2003 interest payable quarterly base rate plus margin ranging 075 225 eurodollar rate plus margin ranging 200 350 depending company performance commitment fee unused portion credit agreement payable quarterly ranging 0475 075 depending company performance credit agreement collateralized substantially companys assets including stock principal subsidiaries company credit agreement restricts payment cash dividends requires company maintain certain financial ratios borrowing base calculated using varying percentages cash accounts receivable accrued revenue contract cost recognized income yet billed property plant equipment spare parts debt issue costs 1048 less accumulated amortization 943 included assets december 31 2001 december 31 2001 39000 borrowed credit agreement average interest rate 45 54375 letters credit outstanding leaving 56625 available combination borrowings letters credit december 31 2001 131 notes payable issued rpi bank collateralized vehicles machinery payable monthly installments principal plus interest ranging 67 90 per annum notes mature 2002 december 31 2001 msi borrowed 112 1500 revolving credit facility bank collateralized fabrication facility certain real estate pieces equipment facility matures 2002 company unsecured credit facilities banks certain countries outside united states borrowings form shortterm notes overdrafts made competitive local interest rates generally line available borrowings related operations specific country credit available facilities approximately 9289 december 31 2001 outstanding borrowings december 31 2001 2000 8 retirement benefits company two defined benefit plans pension plans covering substantially regular employees funded employee company contributions companys funding policy contribute least minimum required employee retirement income security act 1974 accordance annual actuarial valuations benefits plans determined employee earnings credited service company postretirement medical benefits plan covered substantially regular employees funded company retiree contributions based estimated cost defined benefit plans postretirement medical benefit plan terminated 2001 plan assets pension plans consisted primarily listed stocks bonds pension plan assets totaling 35985 distributed plan participants year december 31 2001 assets totaling 494 remained pension plan pending distribution plan participants postretirement medical benefit plan assets upon termination plans benefits ceased liabilities relating accrued cost future benefits reversed resulting noncash nontaxable gains 9204 reflected reduction operating expenses 2001 consolidated statements operations willbros group inc notes consolidated financial statements thousands except share per share amounts 8 retirement benefits continued benefit expense plans included following components retirement benefit obligations determined using weightedaverage discount rate 775 percent december 31 2000 80 percent december 31 1999 pension benefits rate increase future pay increases 55 percent december 31 2000 1999 assets expected longterm rate return 85 percent transition asset amortized 15 years willbros group inc notes consolidated financial statements thousands except share per share amounts 8 retirement benefits continued following table sets forth changes benefit obligations plan assets reconciliation funded status plans accrued benefit cost noncurrent portion postretirement medical benefit liability 6133 december 31 2000 included liabilities company defined contribution plan funded participating employee contributions company matches employee contributions maximum 4 percent salary follows 100 percent form cash 125 percent form wgi common stock elected employee company contributions plan 905 including 306 wgi common stock 2001 616 including 243 wgi common stock 2000 636 including 314 wgi common stock 1999 willbros group inc notes consolidated financial statements thousands except share per share amounts 9 income taxes provision income taxes represents income taxes arising result operations credits revision previous estimates income taxes payable number countries credit recognizing tax benefit portion companys tax losses carried forward company subject income tax panama income earned outside panama income earned outside panama relationship income loss income taxes provision income taxes affected method determining income taxes countries company operates effective consolidated tax rate differs statutory tax rate taxable income operating losses different countries cannot offset tax rates methods determining taxes payable different country income loss income taxes provision income taxes consolidated statements operations consist companys provision income taxes differed united states statutory federal income tax rate 34 due following willbros group inc notes consolidated financial statements thousands except share per share amounts 9 income taxes continued principal components companys net deferred tax assets net deferred income tax assets liabilities country follows company 15809 united states net operating loss carryforwards 425 united states investment tax credit carryforwards december 31 2001 united states net operating loss carryforwards expire unless utilized beginning 2002 ending december 31 2012 carryforwards available annual basis limited company assessed united states operations including past earnings history projected future earnings limitations expiration dates us net operating loss investment tax credit carryforwards tax assets determined likely 2175 net deferred tax assets december 31 2001 realized december 31 2001 company nonexpiring operating loss carryforwards united kingdom 27845 l19072 net operating loss carryforward expiring three years venezuela 6344 bolivars 4808744 deferred tax assets applicable operating loss carryforwards december 31 2001 2000 fully reserved valuation allowance connection acquisitions msi 2001 rpi 2000 company recorded 482 515 respectively deferred tax liabilities relating primarily differences financial statement carrying values assets acquired tax bases willbros group inc notes consolidated financial statements thousands except share per share amounts 10 stockholder rights plan april 1 1999 company adopted stockholder rights plan declared distribution one preferred share purchase right outstanding share companys common stock distribution made april 15 1999 stockholders record date rights expire april 14 2009 rights exercisable person group acquires 15 percent companys common stock announces tender offer consummation would result ownership person group 15 percent common stock right entitles stockholders buy one onethousandth share series junior participating preferred stock exercise price 3000 per share company acquired merger business combination transaction person group acquired 15 percent companys outstanding common stock right entitles holder purchase rights thencurrent exercise price number acquiring companys common shares market value twice price addition person group acquires 15 percent companys outstanding common stock right entitles holder person members group purchase rights thencurrent exercise price number companys common shares market value twice price prior acquisition person group beneficial ownership 15 percent companys common stock rights redeemable onehalf cent per right option companys board directors 11 stock ownership plans may 1996 company established willbros group inc 1996 stock plan 1996 plan 1125000 shares common stock authorized issuance provide awards key employees company willbros group inc director stock plan director plan 125000 shares common stock authorized issuance provide grant stock options nonemployee directors number shares authorized issuance 1996 plan increased 3125000 shareholder approval options granted 1996 plan vest three four year period options granted director plan vest six months date grant december 31 2001 1996 plan 748000 shares director plan 65000 shares available grant certain provisions allow accelerated vesting based increases share prices per share weightedaverage fair value options granted calculated using black scholes optionpricing model assuming options life three years weightedaverage riskfree interest rate dates grant 391 percent 2001 645 percent 2000 586 percent 1999 weightedaverage volatility 6103 percent 2001 5914 percent 2000 5278 percent 1999 willbros group inc notes consolidated financial statements thousands except share per share amounts 11 stock ownership plans continued companys stock option activity related information consist weightedaverage fair value options granted year 647 2001 256 2000 217 1999 exercise prices options outstanding weightedaverage remaining life weightedaverage exercise price ranges exercise prices december 31 2001 number vested options weightedaverage exercise price ranges exercise prices december 31 2001 willbros group inc notes consolidated financial statements thousands except share per share amounts 11 stock ownership plans continued compensation expense options granted 1996 plan director plan recorded options exercise prices equal fair value stock date grant compensation expense vested options recorded accordance method provided sfas 123 companys net income loss would 18268 2001 16397 2000 21232 1999 basic diluted earnings loss per share would 126 121 respectively 2001 117 2000 163 1999 employee stock ownership plans established 1992 1995 certain key employees issued options purchase common stock discount fair value allowed finance 90 percent option price threeyear noninterest bearing recourse notes 12 earnings loss per share basic diluted earnings loss per share computed follows december 31 2001 449750 potential common shares 1859550 december 31 2000 1479550 december 31 1999 excluded computation diluted earnings loss per share antidilutive effect 13 segment information company operates single operating segment providing construction engineering specialty services oil gas power industries due limited number major projects clients company may one time substantial part operations dedicated one project client country willbros group inc notes consolidated financial statements thousands except share per share amounts 13 segment information continued customers representing 10 percent total contract revenue follows information companys operations significant work countries shown 1 net intercountry revenue 59284 2001 6481 2000 3176 1999 willbros group inc notes consolidated financial statements thousands except share per share amounts 14 contingencies commitments circumstances company provides construction engineering specialty services oil gas power industries companys principal markets currently africa middle east south america canada united states operations outside united states may subject certain risks ordinarily would expected exist united states including foreign currency restrictions extreme exchange rate fluctuations expropriation assets civil uprisings riots war terrorist acts unanticipated taxes including income taxes excise duties import taxes export taxes sales taxes governmental assessments availability suitable personnel equipment termination existing contracts leases government instability legal systems decrees laws regulations interpretations court decisions always fully developed may retroactively applied management presently aware events type described countries operates provided accompanying consolidated financial statements based upon advice local advisors various work countries concerning interpretation laws practices customs countries operates management believes company followed current practices countries however nature potential risks assurance company may adversely affected future company insures substantially equipment countries outside united states certain political risks terrorism company usual liability contractors completion contracts warranty work performed joint venture company also possible liability contract completion warranty responsibilities joint venturers management aware material exposure related thereto provided accompanying consolidated financial statements certain postcontract completion audits reviews conducted clients andor government entities assurance claims received result audits reviews management believe legitimate basis material claims exists present time possible management estimate likelihood claims asserted amount nature thereof connection companys 10 interest joint venture venezuela company issued corporate guarantee equal 10 joint ventures outstanding borrowings two banks guarantee reduces borrowings repaid expires march 2003 commitment december 31 2001 totals approximately 3800 1997 company entered lease agreements specialpurpose leasing partnership land office building engineering group tulsa oklahoma leases treated accounting purposes operating leases initial terms leases five years 30 oneyear renewal options end 2002 end initial terms leases extend leases agreement lessor purchase leased assets 5500 terminate leases cause assets sold assets sold cash proceeds sale excess 5500 paid company landlord event cash proceeds less 5500 company make shortfall maximum 4700 company certain operating leases office camp facilities rental expense excluding daily rentals reimbursable rentals cost plus contracts 2596 2001 3166 2000 2257 1999 minimum lease commitments operating leases december 31 2001 totaled 4479 payable follows 2002 1346 2003 862 2004 847 2005 787 2006 577 later years 60 willbros group inc notes consolidated financial statements thousands except share per share amounts 15 quarterly financial data unaudited selected unaudited quarterly financial data years ended december 31 2001 2000 follows included fourth quarter 2001 nontaxable gains 3626 termination benefit plans company derives revenue contracts durations weeks several months cases year unitprice contracts provide relatively even quarterly results however major projects usually fixedprice contracts may result uneven quarterly financial results due method revenue recognized item 9item 8 financial statements supplementary data index consolidated financial statements independent auditors report stockholders board directors willbros group inc audited accompanying consolidated balance sheets willbros group inc december 31 2003 2002 related consolidated statements operations stockholders equity comprehensive income cash flows years threeyear period ended december 31 2003 consolidated financial statements responsibility companys management responsibility express opinion consolidated financial statements based audits conducted audits accordance auditing standards generally accepted united states america standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements referred present fairly material respects financial position willbros group inc december 31 2003 2002 results operations cash flows years threeyear period ended december 31 2003 conformity accounting principles generally accepted united states america discussed note 1 consolidated financial statements july 1 2001 company adopted statement financial accounting standards sfas 141 business combinations certain provisions sfas 142 goodwill intangible assets effective january 1 2002 adopted remaining provisions sfas 142 kpmg llp houston texas february 20 2004 except note 7 march 12 2004 willbros group inc consolidated balance sheets thousands except share per share amounts see accompanying notes consolidated financial statements willbros group inc consolidated statements operations thousands except share per share amounts see accompanying notes consolidated financial statements willbros group inc consolidated statements stockholders equity comprehensive income thousands except share amounts see accompanying notes consolidated financial statements willbros group inc consolidated statements cash flows thousands see accompanying notes consolidated financial statements willbros group inc notes consolidated financial statements thousands except share per share amounts 1 summary significant accounting policies company willbros group inc wgi republic panama corporation majorityowned subsidiaries company provide construction engineering specialty services oil gas power industries companys principal markets africa asia australia middle east south america canada united states principles consolidation consolidated financial statements company include accounts wgi majorityowned subsidiaries intercompany accounts transactions eliminated consolidation ownership interest minority participants subsidiaries wholly owned principally nigeria oman included accounts payable accrued liabilities material minority participants share net income subsidiaries included contract expenses interests unconsolidated joint ventures accounted equity method consolidated balance sheets proportionate consolidation basis consolidated statements operations consolidated financial statements prepared accordance generally accepted accounting principles united states include certain estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities reported amounts revenue expenses actual results could differ significantly estimates reclassifications minority owners certain non us subsidiaries operating principally nigeria oman earn percentage net contract receipts rather sharing net income losses subsidiaries operations due nature minority interests basis entitlement earned amounts attributable minority interests included contract costs prior march 31 2002 minority interest amounts presented separate line item expenses accordingly reclassifications made 2001 balances conform 2003 presentation amounts due minority participants continue included accounts payable accrued liabilities accounts receivable accounts receivable include retainage due within one year 8812 2003 5470 2002 stated net allowances bad debts 915 2003 725 2002 provision credit bad debts 199 2003 58 2002 290 2001 spare parts spare parts excluding expendables stated net accumulated depreciation 13915 2003 13826 2002 depreciated three years straightline method property plant equipment depreciation provided straightline method using estimated lives follows assets retired otherwise disposed cost related accumulated depreciation removed accounts resulting gain loss recognized income period normal repair maintenance costs charged expense incurred major overhaul costs accrued advance actual overhaul activities allocated contracts based estimates equipment condition significant renewals betterments capitalized longlived assets reviewed impairment whenever events changes circumstances indicate carrying amount asset may recoverable recoverability assets held used willbros group inc notes consolidated financial statements thousands except share per share amounts 1 summary significant accounting policies continued measured comparison carrying amount asset future net cash flows expected generated asset assets considered impaired impairment recognized measured amount carrying amount assets exceeds fair value assets disposed reported lower carrying amount fair value less costs sell goodwill represents excess purchase price fair value net assets acquired goodwill acquired prior july 1 2001 amortized straightline basis twenty years adoption nonamortization goodwill provision statement financial accounting standards sfas 142 goodwill intangible assets 2002 sfas 142 addresses method identifying measuring goodwill intangible assets acquired business combination eliminates amortization goodwill requires periodic evaluations impairment goodwill balances company performs goodwill impairment tests annually fourth quarter fiscal year frequently event circumstance indicates impairment occurred tests involved determining fair market value reporting units goodwill associated comparing estimated fair market value reporting units carrying amount company completed annual evaluation impairment goodwill december 31 2003 determined impairment goodwill existed date company adopted sfas 141 business combinations certain provisions sfas 142 july 1 2001 remaining provisions regarding nonamortization goodwill acquired prior july 1 2001 effective january 1 2002 effect elimination amortization goodwill companys net income sfas 142 effect prior periods would increase net income 54 2001 revenue construction engineering fixedprice contracts cost plus fixedfee contracts accounted using percentageofcompletion method estimated contract revenue generally accrued based percentage costs date bear total estimated costs taking consideration physical completion estimated contract losses recognized full determined revenue unitprice contracts time material contracts recognized earned revenue change orders extra work variations scope work recognized agreement reached clients scope work probable cost work recovered change contract price profit change orders extra work variations scope work recognized realization assured beyond reasonable doubt revenue claims recognized agreement reached clients value claims instances may occur completion work contract costs incurred bidding obtaining contracts expensed incurred income taxes company accounts income taxes asset liability method deferred tax assets liabilities recognized future tax consequences operating loss tax credit carryforwards temporary differences financial statement carrying values assets liabilities respective tax bases provision income taxes impacted income taxes certain countries primarily nigeria based deemed profit rather taxable income well tax holidays certain projects willbros group inc notes consolidated financial statements thousands except share per share amounts 1 summary significant accounting policies continued retirement plans benefits 2001 company terminated defined benefit retirement plans postretirement medical benefits plan provided retirement benefits substantially regular employees pension costs funded accordance annual actuarial valuations company recorded cost postretirement medical benefits funded payasyougo basis employees working lives company voluntary defined contribution retirement plan us based employee qualified contributory part employees voluntary savings plan certain international employees nonqualified contributory part employee common stock options company measures stockbased compensation using intrinsic value method accounting prescribed accounting principles board opinion 25 accounting stock issued employees related interpretations provides proforma disclosure required statement financial accounting standards 123 accounting stockbased compensation cost stock options measured excess quoted market price companys stock date grant exercise price compensation cost companys stock options plans determined using fair value method sfas 123 sfas 148 companys net income per share would shown pro forma amounts fair value granted options estimated date grant using blacksholes option pricing model following assumptions foreign currency translation significant monetary asset liability accounts stated currencies united states dollars translated united states dollars current exchange rates countries local currency functional currency translation adjustments accumulated comprehensive income loss nonmonetary assets liabilities highly inflationary economies translated united states dollars historical exchange rates revenue expense accounts willbros group inc notes consolidated financial statements thousands except share per share amounts 1 summary significant accounting policies continued converted prevailing rates throughout year foreign currency transaction adjustments translation adjustments highly inflationary economies recorded income concentration credit risk company concentration customers oil gas power industries exposes company concentration credit risks within industry company seeks obtain advance progress payments contract work performed major contracts receivables generally collateralized company believes allowance bad debts adequate fair value financial instruments carrying value financial instruments materially differ fair value cash flows determination cash flows highly liquid investments maturities less three months considered cash equivalents company paid interest 300 2003 1132 2002 2858 2001 income taxes 11265 2003 11315 2002 8650 2001 capitalized interest company capitalizes interest part cost significant assets constructed developed companys use 2003 386 interest capitalized primarily attributable design construction opal gas plant interest capitalized 2002 2001 income loss per share basic income loss per share calculated dividing net income less preferred dividend requirements weightedaverage number common shares outstanding year diluted income loss per share calculated including weightedaverage number potentially dilutive common shares weightedaverage number common shares outstanding derivative financial instruments company may use derivative financial instruments forward contracts options financial instruments hedges mitigate nonus currency exchange risk company unable match nonus currency revenue expenses currency company derivative financial instruments december 31 2003 2002 2 acquisitions october 23 2002 company acquired outstanding shares mt west fabrication plants stations inc process electric control inc process engineering design inc pacific industrial electric inc collectively mt west group mt west group provides designbuild services including engineering procurement construction services energy industry primarily western united states thereby expanding companys services united states purchase price 13711 based multiple cash flow consisted 4591 cash acquisition costs 950000 shares common stock valued 9120 based average market price companys common shares twoday periods date definitive purchase agreement signed addition purchase price adjusted earnout amount equal 25 percent combined adjusted net income defined definitive purchase agreement mt west group 24month period following date acquisition earnout amounts due shall payable cash upon completion earnout period transaction accounted purchase october 12 2001 company successfully completed tender offer outstanding shares msi energy services inc msi general contractor alberta canada acquisition established companys presence canada aggregate purchase price including transaction costs 8295 concurrently company sold certain msi shareholders 144175 common shares treasury stock assigned value 1850 market price date transaction announced net cash 6445 paid purchase msi funded borrowings companys principal credit agreement transaction accounted purchase willbros group inc notes consolidated financial statements thousands except share per share amounts 2 acquisitions continued none goodwill created result acquisitions expected deductible tax purposes fair value net assets acquired acquisitions follows unaudited pro forma results operations including mt west group msi acquisitions occurred january 1 2001 would 3 contracts progress contracts allow progress billings made performance work billings may made basis different used recognizing revenue achievement contract milestones contracts progress cost recognized income exceed billings exceed cost recognized income consist company expects amounts billed within one year willbros group inc notes consolidated financial statements thousands except share per share amounts 4 property plant equipment property plant equipment used secure debt subject lien cost consist included land buildings furniture equipment 3871 cost new information system presently installation stage capitalized connection capital lease could maximum lease value 7000 began december 31 2003 requires monthly payments four years increases quarterly based expenditures made implicit interest rate 514 contains bargain purchase provision end lease term 5 joint ventures company investments past three years ranging 10 percent 50 percent joint ventures operate similar lines business company investments consist 10 percent interest consortium work venezuela 35 percent interest joint venture work australia 50 percent interest joint venture work africa interests unconsolidated ventures accounted equitymethod consolidated balance sheets proportionate consolidation basis consolidated statements operations companys proportionate share revenue contract cost included consolidated statements operations ventures consists companys investments advances ventures consist willbros group inc notes consolidated financial statements thousands except share per share amounts 5 joint ventures continued summarized balance sheet information significant joint venture africa accounted equitymethod consolidated balance sheets follows 6 accounts payable accrued liabilities accounts payable accrued liabilities consist 7 notes payable longterm debt notes payable longterm debt consist following june 14 2002 company completed 125000 credit agreement syndicated bank group facility may used standby commercial letters credit borrowings combination thereof borrowings limited lesser 40 borrowing base 50000 payable termination june 14 2005 interest payable quarterly base rate plus margin ranging 075 200 eurodollar rate plus margin ranging 175 300 commitment fee unused portion credit agreement payable quarterly ranging 050 075 credit agreement collateralized substantially companys assets including stock principal subsidiaries restricts payment cash dividends requires company maintain certain financial willbros group inc notes consolidated financial statements thousands except share per share amounts 7 notes payable longterm debt continued ratios borrowing base calculated using lesser 1 varying percentages cash accounts receivable accrued revenue contract cost recognized income yet billed property plant equipment spare parts 2 multiple ebitda debt issue costs 3257 net accumulated amortization 2455 associated new credit agreement included assets december 31 2003 amortized 24 months ending june 2004 december 31 2003 borrowings 14000 june 2002 credit agreement company 41047 letters credit outstanding leaving 40287 available issuance letters credit 6000 borrowings combination thereof quarters ended september 30 2003 december 31 2003 due companys operating results ebitda levels consent waiver agreement obtained syndicated bank group waive noncompliance certain financial covenants credit agreement agree method calculating borrowing base eliminates multiple ebitda calculation filing february 2004 borrowing base certificate agreement provides waivers certain quarterly financial covenants december 31 2003 result agreement cash borrowings credit agreement limited 20000 total borrowing base available cash borrowing issuance standby letters credit may exceed 75000 borrowings credit facility classified longterm due stated maturity date future expected compliance covenants credit facility effective march 31 2004 calculation covenants borrowing base revert original calculations contained june 14 2002 credit agreement additionally date maximum borrowings facility return 125000 cash borrowings limited 40 borrowing base 50000 future acceleration debt credit facility could occur credit agreements covenants met company successful obtaining waivers compliance time march 12 2004 company completed 60000 275 convertible senior notes convertible notes offering convertible notes general senior unsecured obligations interest paid semiannually march 15th september 15th beginning september 15 2004 convertible notes mature march 15 2024 unless notes repurchased redeemed converted earlier company may redeem convertible notes cash march 15 2011 100 principal amount notes plus accrued interest holders convertible notes right require company repurchase convertible notes including unpaid interest march 15 2011 2014 2019 upon change control related event march 15 2011 upon change control event company must pay purchase price cash march 15 2014 2019 company option providing common stock lieu cash combination common stock cash fund repurchases holders convertible notes may convert certain circumstances notes shares common stock initial conversion ratio 513611 shares common stock per 100000 principal amount notes representing conversion price approximately 1947 per share march 12 2004 existing june 2002 credit agreement amended restated 2004 credit facility 2004 credit facility mature march 12 2007 2004 credit facility may used standby commercial letters credit borrowings combination thereof borrowings limited lesser 40 borrowing base 30000 payable termination march 12 2007 interest payable quarterly base rate plus margin ranging 075 200 eurodollar rate plus margin ranging 175 300 commitment fee unused portion 2004 credit facility payable quarterly ranging 0375 0625 2004 credit facility collateralized substantially companys assets including stock principal subsidiaries restricts payment cash dividends requires company maintain certain financial ratios borrowing base calculated using varying percentages cash accounts receivable accrued revenue willbros group inc notes consolidated financial statements thousands except share per share amounts 7 notes payable longterm debt continued contract cost recognized income yet billed property plant equipment spare parts obligations include approximately 3871 leasing company fouryear capital lease connection ongoing acquisition installation new corporate information systems infrastructure additionally company various notes payable generally related equipment financing local revolving credit facilities market interest rates collateralized certain vehicles equipment andor real estate company unsecured credit facilities banks certain countries outside united states borrowings form shortterm notes overdrafts made competitive local interest rates generally line available borrowings related operations specific country credit available facilities approximately 5841 december 31 2003 outstanding borrowings made facilities december 31 2003 2002 8 retirement benefits company two defined benefit plans pension plans one covering substantially regular employees funded employee company contributions covering certain executive officers funded company contributions companys funding policy contribute least minimum required employee retirement income security act 1974 accordance annual actuarial valuations benefits plans determined employee earnings credited service company postretirement medical benefits plan covered substantially regular employees funded company retiree contributions based estimated cost defined benefit plans postretirement medical benefit plan terminated 2001 plan assets pension plans consisted primarily listed stocks bonds pension plan assets totaling 494 2002 35985 2001 distributed plan participants december 31 2002 assets distributed plan participants postretirement medical benefit plan assets upon termination plans 2001 benefits ceased liabilities relating accrued cost future benefits reversed resulting noncash nontaxable gains 9204 reflected reduction operating expenses 2001 consolidated statements operations benefit expense year ended december 31 2001 plans included following components willbros group inc notes consolidated financial statements thousands except share per share amounts 8 retirement benefits continued following table sets forth changes benefit obligations plan assets reconciliation funded status plans accrued benefit cost company defined contribution plan funded participating employee contributions company matches employee contributions maximum 4 percent salary form cash wgi common stock elected employee company contributions plan 1094 including 245 wgi common stock 2003 1038 including 422 wgi common stock 2002 905 including 306 wgi common stock 2001 willbros group inc notes consolidated financial statements thousands except share per share amounts 9 income taxes provision benefit income taxes represents income taxes arising result operations credits revision previous estimates income taxes payable number countries company subject income tax panama income earned outside panama income earned outside panama relationship income loss income taxes provision income taxes affected method determining income taxes countries company operates effective consolidated tax rate differs us federal statutory tax rate taxable income operating losses different countries cannot offset tax rates methods determining taxes payable different country income loss income taxes provision benefit income taxes consolidated statements operations consist companys provision benefit income taxes differed united states statutory federal income tax rate 34 due following willbros group inc notes consolidated financial statements thousands except share per share amounts 9 income taxes continued principal components companys net deferred tax assets net deferred income tax assets liabilities follows united states federal income tax benefit recognized 2003 result companys ability carry significant portion 2003 united states loss back years 2002 2001 offset united states income certain subsidiaries years company 14290 united states net operating loss carryforwards december 31 2003 united states net operating loss carryforwards expire unless utilized beginning 391 2005 2617 2007 11282 subsequent years december 31 2013 carryforwards available annual basis limited company assessed united states operations including past earnings history projected future earnings limitations expiration dates us net operating loss carryforwards tax assets determined likely 4698 us net deferred tax assets december 31 2003 realized december 31 2003 company nonexpiring operating loss carryforwards united kingdom 34602 pound19331 net operating loss carryforward expiring three years venezuela 1713 bolivars 2740034 deferred tax assets applicable operating loss carryforwards december 31 2003 2002 fully reserved valuation allowance 14423 december 31 2003 company nonexpiring operating loss carryforwards bolivia 10289 bolivianos 82406 company assessed bolivia operations determined likely 2401 deferred tax asset related net operating loss carryforwards december 31 2003 realized remainder reserved valuation allowance 172 overall valuation allowance increased 2003 additional losses bolivia partially offset income venezuela willbros group inc notes consolidated financial statements thousands except share per share amounts 9 income taxes continued connection acquisitions mt west group 2002 msi 2001 company recorded 808 482 respectively deferred tax liabilities relating primarily differences financial statement carrying values assets acquired tax bases 10 stockholder rights plan april 1 1999 company adopted stockholder rights plan declared distribution one preferred share purchase right outstanding share companys common stock distribution made april 15 1999 stockholders record date rights expire april 14 2009 rights exercisable person group acquires 15 percent companys common stock announces tender offer consummation would result ownership person group 15 percent common stock right entitles stockholders buy one onethousandth share series junior participating preferred stock exercise price 3000 per share company acquired merger business combination transaction person group acquired 15 percent companys outstanding common stock right entitles holder purchase rights thencurrent exercise price number acquiring companys common shares market value twice price addition person group acquires 15 percent companys outstanding common stock right entitles holder person members group purchase rights thencurrent exercise price number companys common shares market value twice price prior acquisition person group beneficial ownership 15 percent companys common stock rights redeemable onehalf cent per right option companys board directors 11 stock ownership plans may 1996 company established willbros group inc 1996 stock plan 1996 plan 1125000 shares common stock authorized issuance provide awards key employees company willbros group inc director stock plan director plan 125000 shares common stock authorized issuance provide grant stock options nonemployee directors number shares authorized issuance 1996 plan director plan increased 3125000 225000 respectively shareholder approval options granted 1996 plan vest three four year period options granted director plan vest six months date grant december 31 2003 1996 plan 610588 shares director plan 104000 shares available grant certain provisions allow accelerated vesting based increases share prices willbros group inc notes consolidated financial statements thousands except share per share amounts 11 stock ownership plans continued companys stock option activity related information consist weightedaverage fair value options granted year 252 2003 405 2002 647 2001 exercise prices options outstanding weightedaverage remaining life weightedaverage exercise price ranges exercise prices december 31 2003 number vested options weightedaverage exercise price ranges exercise prices december 31 2003 march 2002 certain officers company borrowed total 1307 employee stock purchase program permitted selected executives officers exclusive chief executive officer borrow company 100 funds required exercise vested stock options loans full recourse noninterest bearing period 5 years collateralized related stock difference 553 discounted value loans fair market value stock date exercise recorded compensation expense loans receivable presented reduction stockholders equity maximum loan amount one officer may outstanding employee stock purchase program 250 willbros group inc notes consolidated financial statements thousands except share per share amounts 12 common stock offering may 14 2002 company completed public offering common shares 1775 per share 4356750 shares sold company underwriters exercised options purchase shares available overallotments company received 71902 proceeds underwriting discount offering costs used repay indebtedness prior credit agreement working capital general corporate purposes 13 earnings loss per share basic diluted earnings loss per share computed follows weighted average number potential common shares excluded computation diluted earnings loss per share antidilutive effect 1444066 december 31 2003 405092 december 31 2002 449750 december 31 2001 willbros group inc notes consolidated financial statements thousands except share per share amounts 14 segment information company operates single operating segment providing construction engineering specialty services oil gas power industries due limited number major projects clients company may one time substantial part operations dedicated one project client country customers representing 10 percent total contract revenue follows information companys operations significant work countries shown 1 net intercountry revenue 9009 2003 25849 2002 59284 2001 willbros group inc notes consolidated financial statements thousands except share per share amounts 15 contingencies commitments circumstances company provides construction engineering specialty services oil gas power industries companys principal markets currently africa middle east south america north america operations outside united states may subject certain risks ordinarily would expected exist united states including foreign currency restrictions extreme exchange rate fluctuations expropriation assets civil uprisings riots war unanticipated taxes including income taxes excise duties import taxes export taxes sales taxes governmental assessments availability suitable personnel equipment termination existing contracts leases government instability legal systems decrees laws regulations interpretations court decisions always fully developed may retroactively applied management presently aware events type described countries operates provided accompanying consolidated financial statements based upon advice local advisors various work countries concerning interpretation laws practices customs countries operates management believes company followed current practices countries however nature potential risks assurance company may adversely affected future company insures substantially equipment countries outside united states certain political risks terrorism political risk insurance coverage contains 20 coinsurance provision company usual liability contractors completion contracts warranty work performed joint venture company also possible liability contract completion warranty responsibilities joint venture partners management aware material exposure related thereto provided accompanying consolidated financial statements certain postcontract completion audits reviews conducted clients andor government entities assurance claims received result audits reviews management believe legitimate basis material claims exists present time possible management estimate likelihood claims asserted amount nature thereof connection companys 10 interest joint venture venezuela company issued corporate guarantee equal 10 joint ventures outstanding borrowings two banks guarantee reduces borrowings repaid expires march 2004 commitment december 31 2003 totals approximately 3582 maximum amount future payments company could required make time company enters commercial commitments usually form commercial standby letters credit insurance bonds financial guarantees contracts companys customers may require company provide letters credit insurance bonds regard companys performance contracted services cases commitments called upon event failure perform contracted services likewise contracts may allow company issue letters credit insurance bonds lieu contract retention provisions client withholds percentage contract value project completion expiration warranty period retention commitments called upon event warranty project completion issues prescribed contracts december 31 2003 company approximately 44200 letters credit insurance bonds outstanding representing maximum amount future payments company could required make company liability recorded december 31 2003 related commitments willbros group inc notes consolidated financial statements thousands except share per share amounts 15 contingencies commitments circumstances continued 1997 company entered lease agreements specialpurpose leasing partnership land office building engineering group tulsa oklahoma july 2002 company acquired assets 5500 thereby eliminating lease agreements related commercial commitments company party number legal proceedings management believes nature number proceedings typical firm similar size engaged similar type business none proceedings material companys financial position company certain operating leases office camp facilities rental expense excluding daily rentals reimbursable rentals cost plus contracts 2127 2003 1782 2002 2596 2001 minimum lease commitments operating leases december 31 2003 totaled 7909 payable follows 2004 2282 2005 1985 2006 1491 2007 905 2008 783 later years 463 16 quarterly financial data unaudited selected unaudited quarterly financial data years ended december 31 2003 2002 follows included revenue operating income net income fourth quarter 2003 6892 settlement contract variation settlement added 33 earnings per share included fourth quarter 2002 3309 deferred income tax benefit resulting reduction deferred tax valuation allowance company derives revenue contracts durations weeks several months cases year unitprice contracts provide relatively even quarterly results however willbros group inc notes consolidated financial statements thousands except share per share amounts 16 quarterly financial data unaudited continued major projects usually fixedprice contracts may result uneven quarterly financial results due method revenue recognized item 9nanitem 8 financial statements supplementary data index consolidated financial statements report independent registered public accounting firm stockholders board directors willbros group inc audited accompanying consolidated balance sheet willbros group inc december 31 2005 related consolidated statements operations stockholders’ equity comprehensive income loss cash flows year ended consolidated financial statements responsibility company’s management responsibility express opinion consolidated financial statements based audits conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audit provides reasonable basis opinion consolidated financial statements referred present fairly material respects financial position willbros group inc december 31 2005 results operations cash flows year ended conformity us generally accepted accounting principles also audited accordance standards public company accounting oversight board united states effectiveness willbros group inc’s internal control financial reporting december 31 2005 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission coso report dated june 14 2006 expressed unqualified opinion management’s assessment adverse opinion effective operation internal control financial reporting glo cpas llp houston texas june 14 2006 report independent registered public accounting firm stockholders board directors willbros group inc audited accompanying consolidated balance sheet willbros group inc december 31 2004 related consolidated statements operations stockholders’ equity comprehensive income loss cash flows years twoyear period ended december 31 2004 consolidated financial statements responsibility company’s management responsibility express opinion consolidated financial statements based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements referred present fairly material respects financial position willbros group inc december 31 2004 results operations cash flows years twoyear period ended december 31 2004 conformity us generally accepted accounting principles kpmg llp houston texas november 21 2005 report independent registered public accounting firm board directors stockholders willbros group inc audited management’s assessment included accompanying management’s report internal control financial reporting item 9ab willbros group inc “the company” maintain effective internal control financial reporting december 31 2005 effect material weaknesses identified management’s assessment based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission coso company’s management responsible maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting responsibility express opinion management’s assessment opinion effectiveness company’s internal control financial reporting based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether effective internal control financial reporting maintained material respects audit included obtaining understanding internal control financial reporting evaluating management’s assessment testing evaluating design operating effectiveness internal control performing procedures considered necessary circumstances believe audit provides reasonable basis opinion company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate material weakness control deficiency combination control deficiencies results remote likelihood material misstatement annual interim financial statements prevented detected following material weaknesses identified included management’s assessment december 31 2005 companylevel controls company finalized preparation 2005 financial statements management determined material weakness company’s internal control financial reporting exists related company’s financial statement close process material weakness resulted delays management’s ability timely close company’s books records 2005 delays closing books records least part contributing factor delays management experienced filing company’s quarterly annual financial statements sec material weakness resulted primarily insufficient staffing qualified accounting personnel management believes material weakness due unique combination factors including larger normal turnover international corporate accounting personnel significant increase workload accounting staff supported audit committee’s independent investigation well investigations sec doj substantial increase volume accounting transactions associated 46 percent annual increase company’s revenue construction contract management material weakness existed related controls project reporting used accounting process certain nigerian projects cost estimates updated reflect current information insufficient measures taken independently verify uniform reliable cost estimates material weakness affect project related accounts specifically resulted adjustments revenue cost sales certain contracts preparation company’s preliminary financial statements material weaknesses considered determining nature timing extent audit tests applied audit 2005 consolidated financial statements report affect report dated june 14 2006 expressed unqualified opinion consolidated financial statements opinion management’s assessment company maintain effective internal control financial reporting december 31 2005 fairly stated material respects based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission coso also opinion effect material weaknesses described achievement objectives control criteria company maintained effective internal control financial reporting december 31 2005 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission coso glo cpas llp houston texas june 14 2006 willbros group inc consolidated balance sheets thousands except share per share amounts see accompanying notes consolidated financial statements willbros group inc consolidated statements operations thousands except share per share amounts see accompanying notes consolidated financial statements willbros group inc consolidated statements stockholders’ equity comprehensive income loss thousands except share amounts see accompanying notes consolidated financial statements willbros group inc consolidated statements cash flows thousands except share amounts see accompanying notes consolidated financial statements willbros group inc notes consolidated financial statements thousands except share per share amounts 1 summary significant accounting policies company willbros group inc “wgi” republic panama corporation majorityowned subsidiaries “company” provide construction engineering specialty services development activities oil gas power industries government entities company’s principal markets africa middle east south america canada united states principles consolidation consolidated financial statements company include accounts wgi majorityowned subsidiaries intercompany accounts transactions eliminated consolidation ownership interest minority participants subsidiaries wholly owned principally nigeria oman included accounts payable accrued liabilities material minority participants’ share net income subsidiaries included contract costs interest company’s unconsolidated joint ventures accounted using equity method consolidated balance sheet company’s equity earnings 10 joint venture recognized contract revenue share operations 50 joint venture reflected statements operations based proportionate consolidation restatement consolidated financial statements late december 2004 company became aware improprieties company’s bolivian subsidiary related assessment certain bolivian taxes allegations subsidiary filed improper tax returns upon learning tax assessment alleged improprieties company commenced initial investigation matter notified audit committee board directors retained independent counsel turn retained forensic accountants began independent investigation concurrent audit committee’s investigation company initiated review company’s accounting review focused primarily company’s international activities supervised former president willbros international inc “wii” primary international subsidiary company also included areas company’s accounting activities result investigations company’s accounting review company determined several members senior management wii subsidiaries collaborated misappropriate assets company cover activity determined bolivian subsidiary fact filed improper tax returns failed file returns direction mr tillery former president wii investigation also determined mr tillery collusion several members management international subsidiaries involved pattern improper activities primarily company’s nigerian subsidiaries specifically contrary established company policies internal controls possibly laws several countries including united states improper activities significantly impacted company’s previously issued consolidated financial statements resulting restatement consolidated financial statements december 31 2003 years ended december 31 2003 2002 first second third fiscal quarters 2004 2003 restated financial statements included company’s consolidated financial statements filed annual report form 10k 2004 financial statement adjustments resulting misconduct certain members international subsidiaries management negative impact company’s consolidated cumulative earnings loss december 31 2003 approximately 13307 impact company’s consolidated cumulative earnings loss december 31 2003 accounting errors noted decreased earnings approximately 5 total impact company’s consolidated cumulative earnings loss financial statement adjustments december 31 2003 approximately 13312 total impact company’s consolidated earnings loss first three fiscal quarters 2004 approximately 6077 impact attributable misconduct international operations approximately 6629 total reclassification certain reclassifications made conform current year presentations willbros group inc notes consolidated financial statements thousands except share per share amounts 1 summary significant accounting policies continued use estimates consolidated financial statements prepared accordance generally accepted accounting principles united states include certain estimates assumptions management company preparation consolidated financial statements estimates assumptions relate reported amounts assets liabilities date consolidated financial statements reported amounts revenue expense period significant items subject estimates assumptions include carrying amount property plant equipment goodwill parts inventory quantification amounts recorded contingencies tax accruals certain accrued liabilities valuation allowances accounts receivable deferred income tax assets revenue recognition percentageofcompletion method accounting including estimates progress toward completion estimates gross profit loss accrual contracts progress company bases estimates historical experience assumptions believes relevant circumstances actual results could differ estimates commitments contingencies liabilities loss contingencies arising claims assessments litigation fines penalties sources recorded management assesses probable liability incurred amount reasonably estimated recoveries costs third parties management assesses probable realization separately recorded assets legal costs incurred connection matters relating contingencies expensed period incurred accounts receivable trade accounts receivable recorded invoiced amount bear interest allowance doubtful accounts company’s best estimate amount probable credit losses company’s existing accounts receivable considerable amount judgment required assessing realization receivables relevant assessment factors include creditworthiness customers prior collection history customer related aging past due balances past due balances 90 days specified amount reviewed individually collectability account balances charged allowance means collection exhausted potential recovery considered remote allowance requirements based current facts available reevaluated adjusted regular basis additional information received company offbalancesheet credit exposure related customers inventories consisting generally supplies materials transit construction sites nigeria stated lower cost market cost determined using firstin firstout “fifo” method parts inventories stated lower average cost market parts inventories evaluated least annually adjusted excess obsolescence operating costs operating costs consist expenses incurred company associated fraudulent invoices fictitious supplies services property plant equipment property plant equipment stated cost depreciation including amortization capital leases provided straightline method using estimated lives follows willbros group inc notes consolidated financial statements thousands except share per share amounts 1 summary significant accounting policies continued assets held capital leases leasehold improvements amortized straightline basis shorter lease term estimated useful life asset assets retired otherwise disposed cost related accumulated depreciation removed accounts resulting gain loss recognized income period normal repair maintenance costs charged expense incurred major overhaul costs accrued advance actual overhaul activities allocated contracts based estimates equipment condition significant renewals betterments capitalized longlived assets reviewed impairment whenever events changes circumstances indicate carrying amount asset may recoverable recoverability assets held used measured comparison carrying amount asset future net cash flows expected generated asset assets considered impaired impairment recognized measured amount carrying amount assets exceeds fair value assets disposed reported lower carrying amount fair value less costs sell goodwill represents excess purchase price fair value net assets acquired goodwill amortized instead annually tested impairment accordance provisions statement financial accounting standards “sfas” 142 “goodwill intangible assets” fourth quarter fiscal year frequently event circumstance indicates impairment occurred impairment test involves determining fair market value reporting units goodwill associated comparing estimated fair market value reporting units carrying amount company completed annual evaluation impairment goodwill december 31 2005 determined impairment goodwill existed date revenue number factors relating company’s business affect recognition contract revenue fixedprice construction engineering contracts recognized percentageofcompletion method estimated contract income resulting revenue generally accrued based costs incurred date percentage total estimated costs taking consideration physical completion total estimated costs thus contract income impacted changes productivity scheduling unit cost labor subcontracts materials equipment additionally external factors weather client needs client delays providing permits approvals labor availability governmental regulation politics may affect progress project’s completion thus timing revenue recognition company recognize income fixedprice contract approximately 5 percent 10 percent complete depending upon nature contract current estimate total contract cost indicates loss contract projected loss recognized full determined also included contract costs recognized income yet billed uncompleted contracts amounts company seeks seek collect customers others errors changes contract specifications design contract change orders dispute unapproved scope price customerrelated causes unanticipated additional contract costs unapproved change orders amounts recorded estimated net realizable value realization probable reasonably estimated unapproved change orders claims also involve use estimates reasonably possible revisions estimated recoverable amounts recorded unapproved change orders may made nearterm company successfully resolve matters net expense recorded reduction revenues may required addition amounts previously provided however costs associated revenue claims expensed incurred revenue unitprice time material contracts recognized earned revenue operations opal gas plant recognized upon delivery product customer company believes operating results evaluated time horizon major contracts progress completed change orders extra work variations scope work cost recoveries claims negotiated realized willbros group inc notes consolidated financial statements thousands except share per share amounts 1 summary significant accounting policies continued income taxes company accounts income taxes asset liability method deferred tax assets liabilities recognized future tax consequences operating loss tax credit carry forwards temporary differences financial statement carrying values assets liabilities respective tax bases provision income taxes annual effective tax rate impacted income taxes certain countries primarily nigeria computed based deemed income rather taxable income tax holidays certain international projects retirement plans benefits company voluntary defined contribution retirement plan us based employees qualified contributory part employees voluntary savings plan certain international employees nonqualified contributory part employees common stock options company applies intrinsicvaluebased method accounting prescribed accounting principles board apb opinion 25 “accounting stock issued employees” related interpretations including fasb interpretation 44 “accounting certain transactions involving stock compensation interpretation apb opinion 25” account fixedplan stock options method compensation cost recorded date grant current market price underlying common stock exceeded exercise price sfas 123 “accounting stockbased compensation” sfas statement 148 “accounting stockbased compensation transition disclosure amendment sfas statement 123” established accounting disclosure requirements using fairvaluebased method accounting stockbased employee compensation plans permitted existing standards company elected continue apply intrinsicvaluebased method accounting described adopted disclosure requirements statement 123 amended compensation cost related restricted stock awards restricted stock rights awards measured market price company’s common stock date award compensation cost recognized vesting period typically four years following table illustrates effect net income loss fairvaluebased method applied outstanding unvested awards period fair value granted options estimated date grant using blackscholes option pricing model following weightedaverage assumptions willbros group inc notes consolidated financial statements thousands except share per share amounts 1 summary significant accounting policies continued company adopt provisions sfas statement 123r “sharebased payment” regarding sharebased compensation effective january 1 2006 discussed foreign currency translation significant monetary asset liability accounts denominated currencies united states dollars translated united states dollars current exchange rates countries local currency functional currency translation adjustments accumulated comprehensive income loss nonmonetary assets liabilities highly inflationary economies translated united states dollars historical exchange rates revenue expense accounts converted prevailing rates throughout year foreign currency transaction adjustments translation adjustments highly inflationary economies recorded income concentration credit risk company concentration customers oil gas power industries exposes company concentration credit risks within industry company seeks obtain advance progress payments contract work performed major contracts receivables generally collateralized allowance doubtful accounts decreased 2005 6672 7598 2004 company believes allowance doubtful accounts adequate fair value financial instruments carrying value financial instruments materially differ fair value cash flows determination cash flows highly liquid investments maturities less three months considered cash equivalents cash equivalents 61025 63756 december 31 2005 2004 respectively company paid interest 2421 2005 1514 2004 300 2003 income taxes 15887 2005 2393 2004 11265 2003 2004 company’s property plant equipment increased 737 noncash transactions result distributions property joint venture noncash financing activities 2004 include addition 17000 shares treasury stock resulting forfeitures restricted stock grants valued 210 based market price company’s common stock date grant capitalized interest company capitalizes interest part cost significant assets constructed developed company’s use capitalized interest 168 349 386 2005 2004 2003 respectively income loss per common share basic income loss per share calculated dividing net income loss less preferred dividend requirements weightedaverage number common shares outstanding year diluted income loss per share calculated including weightedaverage number potentially dilutive common shares weightedaverage number common shares outstanding derivative financial instruments company may use derivative financial instruments forward contracts options financial instruments hedges mitigate nonus currency exchange risk company unable match nonus currency revenue expense currency company derivative financial instruments december 31 2005 2004 recently issued accounting standards december 2004 fasb issued sfas 153 “exchanges nonmonetary assets” amends apb opinion 29 guidance apb 29 “accounting nonmonetary transactions” based principle exchanges nonmonetary assets measured based fair value assets exchanged amendment made sfas 153 eliminates exception exchanges similar productive assets replaces broader exception exchanges nonmonetary assets commercial substance provisions statement effective exchanges taking place fiscal periods beginning june 15 2005 company adopted standard july 1 2005 company believes material impact consolidated financial statements willbros group inc notes consolidated financial statements thousands except share per share amounts 1 summary significant accounting policies continued december 2004 fasb issued sfas 123r “sharebased payment” standard requires expensing stock options sharebased payments supersedes sfas 123 allowed companies choose expensing stock options showing pro forma disclosure sfas 123r eliminates alternative applying intrinsic value measurement provisions apb opinion 25 stock compensation awards issued employees rather new standard requires company measure cost employee services received exchange award equity instruments based grantdate fair value award standard effective annual reporting periods beginning june 30 2005 apply awards granted modified cancelled repurchased date well unvested portion prior awards march 2005 staff sec issued staff accounting bulletin 107 “sharebased payment” “sab 107” addresses interaction sfas 123r certain sec rules regulations well providing staff views regarding valuation sharebased payment arrangements sab 107 also provides guidance relating initial implementation sfas 123r sharebased payments transactions nonemployees valuation methods disclosures management’s discussion analysis subsequent adoption sfas 123r sfas 123r requires use modified prospective application method required effective date method • provisions sfas 123r applied new awards modified repurchased cancelled effective date • compensation expense recognized portion awards outstanding date adoption requisite services rendered unvested options based rendering remaining requisite services company adopt sfas 123r january 1 2006 modified prospective basis require recognition compensation expense stock options equitybased awards vest become exercisable effective date december 31 2005 unamortized compensation expense related outstanding unvested options restricted stock grants equitybased awards determined accordance sfas 123r company expects record 2006 2007 approximately 82 6 respectively provisions income taxes forfeitures company process determining guidance regarding valuing sharebased compensation prescribed sfas 123r applied valuing sharebased awards granted effective date impact recognition compensation expenses related awards consolidated financial statements november 2004 fasb issued sfas 151 “inventory costs” amendment accounting research bulletin 43 chapter 4 statement clarifies types costs expensed rather capitalized inventory statement also clarifies circumstances fixed overhead costs associated operating facilities involved inventory processing capitalized provisions sfas 151 effective fiscal years beginning june 15 2005 adopted company effective january 1 2006 adoption sfas 151 expected significant impact consolidated financial position results operation company may 2005 fasb issued sfas 154 “accounting changes error corrections” replace apb opinion 20 sfas 3 statement requires retroactive application change accounting principle prior years’ financial statements unless impracticable determine periodspecific effects cumulative effect change provisions sfas 154 effective accounting changes corrections errors made fiscal years beginning december 15 2005 adoption standard expected materially impact company willbros group inc notes consolidated financial statements thousands except share per share amounts 2 accounts receivable accounts receivable net december 31 2005 2004 comprised following company expects accounts receivable collected within one year provision bad debts included othernet 1372 6737 199 years ended december 31 2005 2004 2003 respectively allowance bad debts increased significantly 2004 result improprieties management certain company’s international subsidiaries resulted accounts receivable delinquencies decreased probability ultimate collection 2000 advances joint ventures december 31 2004 made connection startup mexican joint venture december 2004 joint venture terminated may 27 2005 2000 advance subsequent advances made 2005 remitted company may 2005 3 contracts progress contract costs recognized income yet billed uncompleted contracts arise revenues recorded amounts cannot billed terms contracts amounts recoverable customers upon various measures performance including achievement certain milestones completion specified units completion contract also included contract costs recognized income yet billed uncompleted contracts amounts company seeks seek collect customers others errors changes contract specifications design contract change orders dispute unapproved scope price customerrelated causes unanticipated additional contract costs unapproved change orders amounts recorded estimated net realizable value realization probable reasonably estimated unapproved change orders claims also involve use estimates reasonably possible revisions estimated recoverable amounts recorded unapproved change orders may made nearterm company successfully resolve matters net expense recorded reduction revenues may required addition amounts previously provided contract cost recognized income yet billed related amounts billed december 31 2005 2004 follows willbros group inc notes consolidated financial statements thousands except share per share amounts 3 contracts progress continued contract cost recognized income yet billed includes 11082 7836 december 31 2005 2004 respectively completed contracts december 31 2005 2004 contract costs recognized income yet billed included unbilled revenues unapproved change orders approximately 2190 6520 respectively 4 property plant equipment property plant equipment used secure debt subject lien cost consist included furniture equipment 535 4217 december 31 2005 2004 respectively cost new information system capitalized capital leases 5 joint ventures investment joint ventures december 31 2005 2004 consist 10 interest consortium build operate water injection facilities venezuela 50 interest pipeline construction joint venture africa interest unconsolidated joint ventures accounted using equity method consolidated balance sheet company’s equity earnings 10 joint venture recognized contract revenue share operations 50 joint venture reflected statements operations based proportionate consolidation company’s share revenue contract cost included consolidated statements operations ventures consists 2004 activity 50 percent owned joint venture chadcameroon pipeline project africa limited warranty work final settlement among parties summarized balance sheet information december 31 2005 2004 reflects decreased level activity willbros group inc notes consolidated financial statements thousands except share per share amounts 6 accounts payable accrued liabilities accounts payable accrued liabilities consist 7 longterm debt longterm debt consists following 275 convertible senior notes march 12 2004 company completed primary offering 60000 275 convertible senior notes “275 notes” april 13 2004 initial purchasers 275 notes exercised option purchase additional 10000 aggregate principal amount notes collectively primary offering purchase option 275 notes totaled 70000 275 notes general senior unsecured obligations interest paid semiannually march 15 september 15 payments began september 15 2004 275 notes mature march 15 2024 unless notes repurchased redeemed converted earlier company may redeem 275 notes cash march 15 2011 100 percent principal amount notes plus accrued interest holders 275 notes right require company purchase 275 notes including unpaid interest march 15 2011 2014 2019 upon change control related event march 15 2011 upon change control event company must pay purchase price cash march 15 2014 2019 company option providing common stock lieu cash combination common stock cash fund purchases holders 275 notes may certain circumstances convert notes shares company’s common stock initial conversion ratio 513611 shares common stock per 100000 principal amount notes representing conversion price approximately 1947 per share resulting 3595277 shares december 31 2005 notes convertible upon occurrence certain specified events including limited certain times closing sale price company’s common stock exceeds 120 percent current conversion price 2336 per share based initial conversion price event default company credit agreement indenture covering 275 notes 1 company fails pay principal interest indebtedness aggregate principal balance 10000 2 indebtedness principal balance 10000 accelerated event default would result 275 notes willbros group inc notes consolidated financial statements thousands except share per share amounts 7 longterm debt continued since noncompliance issues 2004 credit facility discussed involve payment defaults result acceleration indebtedness company defaults create event default 275 notes june 10 2005 company received letter law firm representing investor claiming owner excess 25 percent 275 notes asserting result company’s failure timely file sec 2004 form 10k quarterly report form 10q quarter ended march 31 2005 placing company notice event default indenture dated march 12 2004 company issuer jpmorgan chase bank na trustee “indenture” governs 275 notes company indicated believe failed perform obligations relevant provisions indenture referenced letter august 19 2005 company entered settlement agreement beneficial owner 275 notes behalf notice default sent pursuant company agreed use commercially reasonable efforts solicit requisite vote approve amendment indenture “indenture amendment” company obtained requisite vote september 22 2005 indenture amendment became effective indenture amendment extended initial date 275 notes may redeemed company march 15 2013 march 15 2011 addition new provision added indenture requires company event “fundamental change” change control event 10 percent consideration transaction consists “cash” make “coupon makewhole payment” equal present value discounted us treasury rate lesser two years scheduled payments interest 275 notes b scheduled interest 275 notes date transaction march 15 2013 unamortized debt issue costs 2714 2908 associated 275 notes included assets december 31 2005 2004 respectively amortized sevenyear period ending march 2011 65 senior convertible notes december 22 2005 company entered purchase agreement “purchase agreement” private placement 65000 aggregate principal amount 65 senior convertible notes due 2012 “65 notes” private placement closed december 23 2005 net proceeds offering used retire existing indebtedness provide additional liquidity support working capital needs 65 notes governed indenture dated december 23 2005 entered among company issuer willbros usa inc guarantor “wusai” bank new york trustee “indenture” issued purchase agreement among company initial purchasers 65 notes “purchasers” transaction exempt registration requirements securities act 1933 amended “securities act” 65 notes convertible shares company’s common stock conversion rate 569606 shares common stock per 100000 principal amount notes representing conversion price approximately 1756 per share resulting 3702439 sharers december 31 2005 subject adjustment certain circumstances pursuant purchase agreement company wusai agreed indemnify purchasers affiliates agents certain liabilities including liabilities securities act first quarter 2006 initial purchasers 65 notes exercised options purchase additional 19500 aggregate principal amount 65 notes collectively primary offering purchase option 65 notes total 84500 65 notes general senior unsecured obligations interest paid semiannually june 15 december 15 beginning june 15 2006 65 notes mature december 15 2012 unless notes repurchased converted earlier company right redeem 65 notes holders 65 notes right require company purchase 65 notes cash including unpaid interest december willbros group inc notes consolidated financial statements thousands except share per share amounts 7 longterm debt continued 15 2010 holders 65 notes also right require company purchase 65 notes cash upon occurrence fundamental change defined indenture 110 percent principal amount fundamental change occurs prior december 31 2006 100 percent principal amount fundamental change occurs date addition amounts described company required pay “makewhole premium” holders 65 notes elect convert notes company’s common stock connection fundamental change makewhole premium payable addition shares common stock calculated based formula premium ranging 0 314 depending fundamental change occurs price company’s stock time fundamental change occurs upon conversion 65 notes company right deliver lieu shares common stock cash combination cash shares common stock indenture company required notify holders 65 notes method settling principal amount 65 notes upon conversion notification provided irrevocable legally binding upon company regard conversion 65 notes march 21 2006 company notified holders 65 notes election satisfy conversion obligation respect principal amount 65 notes surrendered conversion paying holders surrendered 65 notes 100 percent principal conversion obligation form common stock company 65 notes surrendered conversion company required notify holders method settling excess amount conversion obligation relating amount conversion value principal amount event default 10000 credit agreement including 2004 credit facility 275 notes corresponding event default would result 65 notes unamortized debt issue costs 698 associated 65 notes included assets december 31 2005 amortized sevenyear period ending december 2012 2004 credit facility march 12 2004 existing 125000 june 2002 credit agreement amended restated increased 150000 “2004 credit facility” 2004 credit facility matures march 12 2007 2004 credit facility may used standby commercial letters credit borrowings combination thereof borrowings limited lesser 40 percent borrowing base 30000 payable termination march 12 2007 interest payable quarterly base rate plus margin ranging 075 percent 200 percent eurodollar rate plus margin ranging 175 percent 300 percent 2004 credit facility collateralized substantially company’s assets including stock company’s principal subsidiaries prohibits payment cash dividends requires company maintain certain financial ratios borrowing base calculated using varying percentages cash accounts receivable accrued revenue contract cost recognized income yet billed property plant equipment spare parts unamortized debt issue costs 982 2933 associated 2004 credit facility included assets december 31 2005 2004 respectively amortized term 2004 credit facility ending march 2007 december 31 2005 borrowings 2004 credit facility 54928 outstanding letters credit letters credit reduce availability facility 75 percent amount outstanding however total value letters credit outstanding may exceed 70000 see “2004 credit facility waivers” 2004 credit facility waivers quarter ended june 30 2004 due company’s operating results ebitda earnings net interest income taxes depreciation amortization levels amendment waiver agreement “waiver agreement” obtained syndicated bank group waive noncompliance financial covenant 2004 credit agreement june 30 2004 amend certain financial covenants waiver agreement provides amendment certain quarterly financial covenants multiple ebitda calculation respect borrowing base determination september 30 2005 willbros group inc notes consolidated financial statements thousands except share per share amounts 7 longterm debt continued january 2005 company obtained consent waiver syndicated bank group covering period june 29 2005 waiving certain defaults covenants related filing tax returns payment taxes due tax liens legal proceedings company related tax assessment bolivia additional consent waivers obtained syndicated bank group april 8 june 13 2005 respect defaults noncompliance certain financial covenants june 13 2005 july 19 2005 company entered second amendment waiver agreement “waiver amendment” 2004 credit facility bank group obtain continuing waivers regarding noncompliance certain financial nonfinancial covenants 2004 credit facility terms waiver amendment total credit availability 2004 credit facility reduced 100000 effective date waiver amendment subject certain conditions bank group agreed permanently waive existing probable technical defaults 2004 credit facility long company submitted yearend 2004 financial statements interim financial statements quarters ended march 31 june 30 2005 september 30 2005 conditions relate primarily submissions various financial statements financial borrowing base related information waiver amendment also modified certain ongoing financial covenants 2004 credit facility established requirement company maintain minimum cash balance 15000 time waiver became permanent company certain additional reporting requirements including periodic cash balance reporting addition waiver amendment prohibited company borrowing cash 2004 credit facility waiver became permanent company able submit referenced statements september 30 2005 therefore waiver become permanent period november 23 2005 june 14 2006 company entered four additional amendments waivers 2004 credit facility syndicated bank group waive noncompliance certain financial nonfinancial covenants among things amendments provided 1 certain financial covenants reporting obligations waived andor modified reflect company’s current anticipated future operating performance 2 ultimate reduction facility 70000 issuance letter credit obligations 3 requirement company maintain minimum cash balance 15000 obligations include approximately 312 3259 december 31 2005 2004 respectively leasing company fouryear capital lease connection ongoing acquisition installation new corporate information systems infrastructure additionally company various notes payable generally related equipment financing local revolving credit facilities market interest rates collateralized certain vehicles equipment andor real estate company unsecured credit facilities banks certain countries outside united states borrowings form shortterm notes overdrafts made competitive local interest rates generally line available borrowings related operations specific country credit available facilities approximately 4283 december 31 2005 outstanding borrowings made facilities december 31 2005 2004 8 parent guarantor nonguarantor condensed consolidating financial statements set forth condensed consolidating financial statements wgi b willbros usa inc subsidiaries “wusai” guarantor 65 notes c direct indirect subsidiaries guarantors 65 notes currently restrictions ability wusai transfer funds wgi form cash dividends advances terms indenture 65 notes wusai may sell otherwise dispose substantially assets willbros group inc notes consolidated financial statements thousands except share per share amounts 8 parent guarantor nonguarantor condensed consolidating financial statements continued merge another entity company unless default exists indenture acquirer assumes obligations wusai indenture wgi holding company significant operations subsidiaries condensed consolidating financial statements presented december 31 2005 2004 years threeyear period ended december 31 2005 condensed consolidating financial statements present investments consolidated subsidiaries using equity method accounting condensed consolidating balance sheets december 31 2005 2004 willbros group inc notes consolidated financial statements thousands except share per share amounts 8 parent guarantor nonguarantor condensed consolidating financial statements continued condensed consolidating balance sheets december 31 2005 2004 willbros group inc notes consolidated financial statements thousands except share per share amounts 8 parent guarantor nonguarantor condensed consolidating financial statements continued condensed consolidating statement operations years ended december 31 2005 2004 willbros group inc notes consolidated financial statements thousands except share per share amounts 8 parent guarantor nonguarantor condensed consolidating financial statements continued condensed consolidating statements operations years ended december 31 2005 2004 2003 willbros group inc notes consolidated financial statements thousands except share per share amounts 8 parent guarantor nonguarantor condensed consolidating financial statements continued condensed consolidating statements cash flows years ended december 31 2005 2004 2003 willbros group inc notes consolidated financial statements thousands except share per share amounts 8 parent guarantor nonguarantor condensed consolidating financial statements continued condensed consolidating statements cash flows years ended december 31 2005 2004 2003 willbros group inc notes consolidated financial statements thousands except share per share amounts 9 retirement benefits company defined contribution plans funded participating employee contributions company matches employee contributions maximum four percent salary form cash contributions form wgi common stock suspended 2005 removed option january 9 2006 company contributions plans 1909 1423 1094 including wgi common stock valued 80 221 245 2005 2004 2003 respectively 10 income taxes tax regimes countries company operates affects consolidated income tax provision company effective tax rate effective consolidated tax rate differs united states “us” federal statutory rate tax rates methods determining taxes payable different country moreover losses one country generally cannot used offset taxable income another country income loss income taxes provision benefit income taxes consolidated statements operations consist willbros group inc notes consolidated financial statements thousands except share per share amounts 10 income taxes continued provision income taxes determined based upon tax laws rates countries operations conducted income earned willbros group inc many subsidiaries panamanian companies panamanian tax law based territorial principles impose income tax income earned outside panama company’s principal international operations nigeria oman venezuela nigeria company’s nonresident subsidiary taxed deemed profit basis equal 6 percent gross receipts company’s resident subsidiaries operating nigeria subject corporate income tax rate 30 percent five percent gross receipts paid subsidiaries withheld applied present future income tax liabilities company’s subsidiaries operating venezuela oman subject corporate income tax rates 34 percent 12 percent respectively 2004 2003 company foreign earnings nontaxable due exemptions tax holidays certain countries nontaxable foreign earnings taxable years 2004 2003 5066 10862 respectively company nontaxable foreign earnings taxable year 2005 company’s subsidiaries operating united states subject federal income tax rates 35 percent varying state income tax rates methods computing tax liabilities 2005 company’s subsidiaries operating canada subject federal tax rate 221 percent provincial income tax 115 percent reconciliation differences provision income tax computed appropriate statutory rates reported provision income taxes follows company net tax assets equal 2645 2005 company owed tax refunds 4027 included company’s prepaid expenses refunds primarily result company’s ability carry significant portion losses recognized 2004 back 2002 order offset taxable income recognized year willbros group inc notes consolidated financial statements thousands except share per share amounts 10 income taxes continued company net deferred tax asset 4290 december 31 2005 principal components company’s net deferred tax asset ultimate realization deferred tax assets related us net operating loss carry forwards including state net operating loss carry forwards dependent upon generation future taxable income us periods use net operating losses allowed management considers scheduled reversal deferred tax liabilities projected future taxable income tax planning strategies making assessment 2005 company utilized 12000 federal net operating losses federal income tax purposes 2703 state net operating losses december 31 2005 company remaining us net operating loss carry forwards 14244 state net operating loss carry forwards 11100 company’s net operating losses expire various years federal net operating losses 8259 expire 2006 2012 1751 net operating losses expire 2023 4234 net operating losses expire 2024 state net operating loss generally expires five years net operating loss incurred based upon level historical taxable income projections future taxable income periods net operating losses utilized offset taxable income management believes company realize tax benefits 5162 loss carry forwards company deferred tax assets include accrued selfinsured medical expense 211 accrued vacation 637 us alternative minimum tax 239 deferred compensation 753 debt issue cost amortization 297 company’s deferred tax liability 4826 primarily consists accelerated depreciation expense reported company’s us tax return 2004 connection txp4 plant opal wyoming txp4 plant sold january 1 2006 therefore significant portion deferred tax liability reverse 2006 willbros group inc notes consolidated financial statements thousands except share per share amounts 10 income taxes continued company also tax credits net operating loss carry forwards derived foreign jurisdictions venezuela company earned tax credits prior years totaling 924 bolivars 1986600 could utilized reduce tax liability sold approximately 85 value company evaluated ability utilize credits recorded valuation allowance 450 bolivars 967500 credits company also withholding tax credits 319 naira 41000 nigeria credits used offset future taxable income nigeria five years date taxable period taxes withheld company however believes likely withholding tax credits cannot utilized offset future tax liability therefore tax credits fully reserved december 31 2005 company federal provincial net operating loss carry forwards derived canada totaling 3636 c4240 losses set expire 2012 management believes realize tax benefits net operating loss carry forwards amount 1222 c1425 company also net operating loss carry forwards derived united kingdom bolivia nigeria venezuela ecuador pakistan totaling 56509 set forth tax benefit net operating losses fully reserved total valuation allowance december 31 2005 20222 overall increase 4346 11 stockholder rights plan april 1 1999 company adopted stockholder rights plan declared distribution one preferred share purchase right “right” outstanding share company’s common stock distribution made april 15 1999 stockholders record date rights expire april 14 2009 rights exercisable person group acquires 15 percent company’s common stock announces tender offer consummation would result ownership person group 15 percent common stock right entitles stockholders buy one onethousandth share series junior participating preferred stock exercise price 3000 per share company acquired merger business combination transaction person group acquired 15 percent company’s outstanding common stock right entitles holder purchase right’s thencurrent exercise price number acquiring company’s common shares market value twice price addition person group acquires 15 percent company’s outstanding common stock right entitles holder person members group purchase right’s thencurrent exercise price number company’s common shares market value twice price prior acquisition person group beneficial ownership 15 percent company’s common stock rights redeemable onehalf cent per right option company’s board directors willbros group inc notes consolidated financial statements thousands except share per share amounts 12 stock ownership plans continued may 1996 company established willbros group inc 1996 stock plan “1996 plan” 1125000 shares common stock authorized issuance provide awards key employees company willbros group inc director stock plan “director plan” 125000 shares common stock authorized issuance provide grant stock options nonemployee directors number shares authorized issuance 1996 plan director plan increased 4075000 225000 respectively shareholder approval options granted 1996 plan vest three four year period options granted director plan vest six months date grant december 31 2005 1996 plan 1198255 shares director plan 35000 shares available grant certain provisions allow accelerated vesting based increases share prices company’s stock option activity related information consist weightedaverage fair value options granted year 675 2005 402 2004 252 2003 exercise prices options outstanding weightedaverage remaining life weightedaverage exercise price ranges exercise prices december 31 2005 willbros group inc notes consolidated financial statements thousands except share per share amounts 12 stock ownership plans continued number vested options weightedaverage exercise price ranges exercise prices december 31 2005 march 2002 certain officers company borrowed total 1307 employee stock purchase program permitted selected executives officers exclusive chief executive officer borrow company 100 percent funds required exercise vested stock options loans full recourse noninterest bearing period five years collateralized related stock difference 434 discounted value loans fair market value stock date exercise 119 representing difference exercise price certain options fair market value stock recorded compensation expense date exercise notes recorded discounted value discount amortized interest income periods notes outstanding net loans receivable presented reduction stockholders’ equity maximum loan amount one officer may outstanding employee stock purchase program 250 accordance sarbanesoxley act 2002 company future longer make loans executive officers company 2005 2004 company granted 175000 183000 shares respectively restricted stock restricted stock rights 168000 43500 shares respectively certain employees deferred compensation 3831 2321 recorded restricted stock 2005 2004 respectively amortized four year vesting period compensation expense 2558 606 recognized 2005 2004 respectively amortization deferred compensation accrual compensation related restricted stock rights december 31 2005 275000 shares restricted stock 162625 restricted stock rights outstanding 41666 vested december 31 2005 13 income loss per share basic diluted income loss per share computed follows willbros group inc notes consolidated financial statements thousands except share per share amounts 13 income loss per share continued company incurred net losses years ended december 31 2005 2004 2003 therefore excluded securities listed computation diluted income loss per share effect would antidilutive accordance emerging issues task force “eitf” issue 048 “the effect contingently convertible instruments diluted earnings per share” 7297716 shares issuable upon conversion convertible notes included diluted income loss per share securities dilutive regardless whether market trigger prices 2336 1756 respectively met first quarter 2006 additional 19500 65 notes sold adding 1110732 additional shares issuable upon conversion 14 segment information company’s segments strategic business units managed separately segment different operational requirements marketing strategies management believes due composition current work potential work opportunities nuances geographic markets company serves organization viewed geographic basis consequently businesses restructured reporting basis two operating segments international united states canada international segment consists construction engineering facilities development operations countries united states canada currently operations africa middle east south america united states canada segment consists construction engineering facilities development operations united states canada company’s corporate operations include general administrative financing functions organization costs functions allocated two operating segments company’s corporate operations also include various assets allocated two operating segments intersegment revenue geographic areas material tables reflect company’s business segments years ended december 31 2005 2004 2003 willbros group inc notes consolidated financial statements thousands except share per share amounts 14 segment information continued capital expenditures segment presented total assets segment presented due limited number major projects clients company may one time substantial part operations dedicated one project client country willbros group inc notes consolidated financial statements thousands except share per share amounts 14 segment information continued customers representing 10 percent total contract revenue follows information company’s operations work countries shown 1 net intercountry revenue 39937 2005 11845 2004 9009 2003 willbros group inc notes consolidated financial statements thousands except share per share amounts 15 contingencies commitments circumstances january 6 2005 j kenneth tillery president willbros international inc “wii” principally responsible international operations including bolivian operations resigned company following mr tillery’s resignation audit committee working independent outside legal counsel forensic accountants retained legal counsel commenced independent investigation circumstances surrounding bolivian tax assessment actions mr tillery international locations audit committee’s investigation identified payments made direction mr tillery bolivia nigeria ecuador may violations united states foreign corrupt practices act “fcpa” united states laws investigation also revealed mr tillery authorized numerous transactions company subsidiaries entities apparently held ownership interest exercised significant control see note 17 addition company learned certain acts carried mr tillery others acting direction respect bid work sudan may constitute facilitation efforts prohibited us law violation us trade sanctions unauthorized export technical information united states securities exchange commission “sec” currently conducting investigation whether company others may violated various provisions securities act 1933 “securities act” securities exchange act 1934 “exchange act” united states department justice “doj” currently conducting investigation concerning possible violations fcpa applicable laws addition united states department treasury’s office foreign assets control “ofac” commencing investigation potentially improper facilitation export activities company cooperating fully investigations company one subsidiaries found violated fcpa entity could subject civil penalties 650 per violation criminal penalties greater 2000 per violation twice gross pecuniary gain resulting improper conduct company one subsidiaries found violated trade sanctions us export restrictions entity could subject civil penalties 11 per violation criminal penalties 250 per violation company subsidiaries could also barred participating future us government contracts participating certain us export transactions may penalties could apply us laws foreign jurisdictions company cannot predict outcome investigations conducted sec doj ofac including company’s exposure civil criminal fines penalties regulatory action could material adverse effect company’s business financial condition results operations addition company’s ability obtain retain business collect outstanding receivables current future operating locations including nigeria could negatively affected may 18 2005 securities classaction lawsuit captioned legion partners llp v willbros group inc et al filed united states district court southern district texas company certain present former officers directors thereafter three nearly identical lawsuits filed plaintiffs purport represent class composed persons purchased otherwise acquired willbros group inc common stock andor securities may 6 2002 may 16 2005 inclusive complaints generally allege violations defendants section 10b exchange act rule 10b5 exchange act section 20a exchange act allege among things defendants made false misleading statements material fact company’s financial statements plaintiffs seek unspecified monetary damages relief october 17 2005 court ordered actions consolidated appointed adar investments llc lead plaintiff bernstein liebhard lifshitz new york lead plaintiff’s counsel ordered court plaintiff filed consolidated amended complaint january 9 2006 consolidated amended complaint alleges wgi certain present former officers directors including michael curran warren williams j kenneth tillery violated securities exchange act 1934 series false misleading statements “scheme defraud” alleged misrepresentations scheme defraud relate activities mr tillery nigeria bolivia certain alleged accounting errors restatement past finance results alleged foreign corrupt practices act violations willbros group inc notes consolidated financial statements thousands except share per share amounts 15 contingencies commitments circumstances continued plaintiffs seek recover damages behalf purchasers wgi common stock purported class period complaint seeks unspecified monetary damages relief wgi filed motion dismiss complaint march 9 2006 briefing motion completed june 14 2006 court indicated whether hear oral argument motion andor decide motion outcome lawsuits cannot predicted certainty company believes meritorious defenses defending vigorously company provides engineering construction services oil gas power industries government entities develops owns operates assets developed “build operate” contracts company’s principal markets currently africa middle east south america north america operations outside united states may subject certain risks ordinarily would expected exist united states including foreign currency restrictions extreme exchange rate fluctuations expropriation assets civil uprisings riots war unanticipated taxes including income taxes excise duties import taxes export taxes sales taxes governmental assessments availability suitable personnel equipment termination existing contracts leases government instability legal systems decrees laws regulations interpretations court decisions always fully developed may retroactively applied management presently aware events type described countries operates provided accompanying consolidated financial statements based upon advice local advisors various work countries concerning interpretation laws practices customs countries operates management believes company follows current practices countries however nature potential risks assurance company may adversely affected future company insures substantially equipment countries outside united states certain political risks terrorism political risk insurance coverage contains 20 percent coinsurance provision company usual liability contractors completion contracts warranty work performed joint venture company also possible liability contract completion warranty responsibilities joint venture partners addition company acts prime contractor majority projects undertakes normally responsible performance entire project including subcontract work management aware material exposure related thereto provided accompanying consolidated financial statements certain postcontract completion audits reviews periodically conducted clients andor government entities assurance claims received result audits reviews management believe legitimate basis material claims exists present time possible management estimate likelihood claims asserted amount nature thereof connection company’s 10 percent interest joint venture venezuela company issued corporate guarantee equal 10 percent joint venture’s outstanding borrowings two banks guarantee reduces borrowings repaid december 31 2005 maximum amount future payments company could required make guarantee approximately 2106 time company enters commercial commitments usually form commercial standby letters credit insurance bonds financial guarantees contracts company’s customers may require company provide letters credit insurance bonds regard company’s performance contracted services cases commitments called upon event failure perform contracted services likewise contracts may allow company issue letters credit insurance bonds lieu contract retention provisions client withholds percentage contract value project completion expiration warranty period retention commitments called upon event warranty project completion issues prescribed willbros group inc notes consolidated financial statements thousands except share per share amounts 15 contingencies commitments circumstances continued contracts december 31 2005 company approximately 121438 letters credit insurance bonds outstanding representing maximum amount future payments company could required make company liability recorded december 31 2005 related commitments first quarter 2005 company entered capital lease agreement 90000 square foot building 10 acres land edmonton alberta option purchase building total 6514 c8000 company purchased building december 2005 lump sum payment approximately 6250 c7250 december 31 2005 approximately 4443 c5154 costs incurred equipping preparing building use company began depreciating building components facility operations commenced september 2005 2004 2003 company incurred contract costs totaling 8260 related repairs pipelines two construction projects company believes recovery certain costs insurance parties probable december 31 2005 2004 assets include anticipated recoveries insurance third parties 4656 4445 respectively actual recoveries may vary estimates connection private placement 65 notes see note 7 december 23 2005 company entered registration rights agreement purchasers registration rights agreement requires company file registration statement respect resale shares company’s common stock issuable upon conversion 65 notes later june 30 2006 use best efforts cause registration statement declared effective later december 31 2006 event company unable satisfy obligations registration rights agreement company owe additional interest holders 65 notes rate per annum equal 5 principal amount 65 notes first 90 days 10 per annum 91st day following event addition matters discussed company party number legal proceedings management believes nature number proceedings typical firm similar size engaged similar type business none proceedings material company’s financial position company certain operating leases office camp facilities rental expense excluding daily rentals reimbursable rentals cost plus contracts 3177 2005 3181 2004 2127 2003 minimum lease commitments operating leases december 31 2005 totaled 12330 payable follows 2006 8502 2007 2630 2008 634 2009 174 2010 86 later years 304 16 quarterly financial data unaudited selected unaudited quarterly financial data years ended december 31 2005 2004 presented total quarterly income loss per share amounts may equal per share amounts full year due manner earnings loss per share calculated willbros group inc notes consolidated financial statements thousands except share per share amounts 16 quarterly financial data unaudited continued additional notes included contract revenue operating income net income fourth quarter 2005 following • increased revenue 60837 north america adding 4920 contract income • increased revenue 43506 international adding 6780 contract income • increased ga expense 6156 due increased activity continuing costs investigation • increased income tax expense 3501 due higher levels activity b included fourth quarter 2004 following adjustments related restatement corrections • writedown accrued liabilities trade payables totaling approximately 3845 associated invalid related party “consulting” agreements primarily nigeria majority liabilities related fourth quarter 2004 activity however 2122 accrued liabilities originated prior periods offsetting reductions made contract costs former president wii entered arranged subordinates enter “consulting” agreements companies former president wii economic interest exerted significant influence • recognition 6662 bad debt expense related collectability receivables several nigeria projects previously managed former president wii subordinates longer company new international management completed assessment collectability receivables including direct communications clients matters concluded contrary information provided previous wii management team increase allowance doubtful accounts appropriate • reduced contract revenue 3847 resulting downward adjustment previously overstated contract margin estimates several significant nigeria contracts • reserve 1400 inventory obsolescence parts inventory nigeria company derives revenue contracts durations weeks several months cases year unitprice contracts provide relatively even quarterly results however major projects usually fixedprice contracts may result uneven quarterly financial results due method revenue recognized willbros group inc notes consolidated financial statements thousands except share per share amounts 17 related party transactions past several years certain company’s subsidiaries entered commercial agreements companies former president willbros international inc j kenneth tillery apparently ownership interest ownership interests previously disclosed company companies included arbastro trading ltd windfall energy services oco industrial services ltd hydrodive offshore services international inc hydrodive nigeria ltd hydrodive international ltd companies chartered sold marine vessels company’s subsidiaries hydrodive offshore services international inc hydrodive international ltd also provided diving services company’s subsidiaries payment terms vendors range due receipt net 30 days settlement method cash mr tillery also appears exercised significant influence activities symoil petroleum ltd fusion petroleum services ltd provided consulting services projects nigeria kaplan associates provided consulting services projects bolivia certain foreign locations mr tillery resigned position company january 6 2005 accordingly none companies identified considered related parties date payments made companies mr tillery appears undisclosed ownership interest varying 13 percent 40 percent appears exercised significant influence threeyear period ended december 31 2005 totaling 24587 recorded contract cost nigerian bolivian projects operating costs consolidated financial statements detailed outstanding amounts owed related parties mr tillery appears undisclosed ownership interest appears exercised significant influence included accounts payable accrued liabilities follows willbros group inc notes consolidated financial statements thousands except share per share amounts 17 related party transactions continued addition appears mr tillery equity interest addax petroleum nigeria “addax” unknown period prior april 2003 period subsidiaries company paid various services performed addax first three months 2003 company recognized revenue addax 311 subsequent march 2003 mr tillery purportedly sold equity interest addax subsidiaries company continued perform services addax andor successor company “new addax” 2005 2004 last nine months 2003 company recorded revenue 1866 21404 5465 respectively services provided new addax new addax revenue accounted less five percent company’s consolidated revenue 2005 2004 2003 company outstanding accounts receivable new addax contract cost recognized income yet billed new addax 9845 december 31 2004 2005 company entered global settlement new addax outstanding receivables change orders claims 10000 settlement recovered full may 2005 18 subsequent events sale opal gas processing plant operations january 12 2006 company entered purchase agreement release “purchase agreement” williams field services company “williams” wholly owned subsidiary williams companies inc “twc” pursuant company sold williams effective 1201 central standard time january 1 2006 membership interests opal txp4 company llc wholly owned subsidiary company “llc” llc owns gas processing plant known txp4 plant “txp4 plant” opal lincoln county wyoming addition certain facilities equipment supplies related txp4 plant concurrently sale membership interests company williams agreed resolve certain issues disputes connection operation txp4 plant company received cash payments 27944 conveyance llc 4044 reimbursement expenditures made company txp4 plant related jonah dehydration facility “jonah dehy” 423 funds held williams retainage separate agreement relating jonah dehy tax gain sale txp4 plant recognized first quarter 2006 estimated 1714 addition cash payments described williams agreed pay company portion recovery williams may obtain future third parties based damages loss injury related txp4 plant jonah dehy 3400 total additional payments company pro forma consolidated financial position results operations year ended december 31 2005 derived consolidated financial statements contained form 10k following pro forma consolidated statement operations year ended december 31 2005 prepared assuming disposition txp4 plant consummated beginning fiscal year proceeds used reduce outstanding borrowings 2004 credit facility general corporate purposes following pro forma consolidated balance sheet december 31 2005 prepared assuming disposition txp4 plant consummated december 31 2005 proceeds shown cash used working capital expenditure requirements pro forma adjustments based available information certain assumptions believed reasonable pro forma consolidated financial statements purport represent financial position results operations company actually would transactions fact occurred dates indicated project company’s financial position results operations future date period pro forma consolidated statement operations year ended december 31 2005 follows willbros group inc notes consolidated financial statements thousands except share per share amounts 18 subsequent events continued following pro forma adjustments made consolidated statement operations pro forma revenue expenses adjusted reflect deletion company’s txp4 plant operations revenue expenses previously reported year ended december 31 2005 b pro forma income tax expense adjusted delete historical income tax expense related txp4 plant operations adjustment reduction tax provision 1346 year ended december 31 2005 willbros group inc notes consolidated financial statements thousands except share per share amounts 18 subsequent events continued pro forma consolidated balance sheet december 31 2005 follows willbros group inc notes consolidated financial statements thousands except share per share amounts 18 subsequent events continued following pro forma adjustments made consolidated balance sheet pro forma cash balance increased 27453 estimated net proceeds received company sale txp4 plant amount consists following b pro forma balance prepaid expenses reduced pro forma balance deferred tax assets increased recognize changes accounts due tax effects sale c pro forma balance asset held sale reduced reflect sale txp4 plant pro forma balance accounts payable accrued liabilities increased reflect liability buyout operating lease solar gas turbine set included sale txp4 plant e pro forma balance liabilities reduced reflect writeoff asset retirement obligation associated txp4 plant f pro forma retained earnings deficit balance increased reflect company’s estimated net gain income expenses related sale txp4 plant adjustment consists following hostage incident nigeria february 18 2006 willbros 318 combination derricklay barge working forcados river nigeria attacked militants allegedly affiliated group calling mend nine personnel taken hostage result heightened security risk niger delta three projects area interrupted security protocols company’s work nigeria reviewed adjusted meet escalating threat march 1 2006 six hostages released unharmed repatriated home countries march 27 remaining three hostages released unharmed likewise repatriated home countries negotiations release hostages large measure result extensive dialogue nigerian federal state government representatives mend willbros paid ransom release hostages willbros 318 remains anchored forcados river company cease work certain projects niger delta region nigeria result militant activities area projects outside niger delta also negatively impacted militant activities currently discussions clients nigeria address changed working environment security commercial perspective discussions still ongoing accordingly cannot estimate time effect escalating hostilities current future project activities nigeria however date events negative impact revenue operating results cash flow likely negative impact continue near term item 9item 8 financial statements supplementary data index consolidated financial statements report independent registered public accounting firm board directors stockholders willbros group inc audited accompanying balance sheet willbros group inc panama corporation december 31 2007 related statements operations stockholders’ equity comprehensive income cash flows year ended financial statements responsibility company’s management responsibility express opinion financial statements based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audit provides reasonable basis opinion financial statements referred present fairly material respects financial position willbros group inc december 31 2007 results operations cash flows year ended conformity accounting principles generally accepted united states america also audited accordance standards public company accounting oversight board united states willbros group inc’s internal control financial reporting december 31 2007 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission coso report dated february 28 2008 expressed adverse opinion grant thornton llp houston texas february 28 2008 report independent registered public accounting firm board directors stockholders willbros group inc audited accompanying consolidated balance sheet willbros group inc december 31 2006 related consolidated statements operations stockholders’ equity comprehensive income loss cash flows years twoyear period ended december 31 2006 financial statements responsibility company’s management responsibility express opinion financial statements based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements referred present fairly material respects financial position willbros group inc december 31 2006 2005 results operations cash flows years twoyear period ended december 31 2006 conformity accounting principles generally accepted united states america also audited adjustments retrospectively apply change presentation depreciation indicated note 1 change reportable segments reported note 14 consolidated financial statements years 2006 2005 opinion adjustments appropriate properly applied glo cpas lllp houston texas march 12 2007 except change presentation depreciation note 14 february 21 2008 report independent registered public accounting firm board directors stockholders willbros group inc audited willbros group inc’s panama corporation internal control financial reporting december 31 2007 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission coso willbros group inc’s management responsible maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included management’s report internal control financial reporting included item 9a responsibility express opinion willbros group incs’ internal control financial reporting based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether effective internal control financial reporting maintained material respects audit included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk performing procedures considered necessary circumstances believe audit provides reasonable basis opinion company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate material weakness deficiency combination control deficiencies internal control financial reporting reasonable possibility material misstatement company’s annual interim financial statements prevented detected timely basis following material weaknesses identified included management’s assessment project controls canada company identified material weakness related inadequate management review subcontract cost calculations fixedprice contract subsidiary canada management determined report manually prepared project canada omitted line item subcontractor costs previously included company’s estimates result clerical error subcontractor costs included project costs review processes place identify error proper period worker’s compensation insurance rate material weakness identified related lack proper control update review worker’s compensation insurance rate master file result error update worker’s compensation insurance rate master file prevented detected point origin detected accounting review processes material weakness resulted due lack adequate worker’s compensation insurance rate master file control process documentation opinion effects material weaknesses described achievement objectives control criteria willbros group inc maintained effective internal control financial reporting december 31 2007 based criteria established internal controlintegrated framework issued coso also audited accordance standards public company accounting oversight board united states willbros group inc’s consolidated balance sheet december 31 2007 related statements operations stockholders’ equity comprehensive income cash flows year ended material weaknesses identified considered determining nature timing extent audit tests applied audit 2007 financial statements report affect report dated february 28 2008 expressed unqualified opinion financial statements grant thornton llp houston texas february 28 2008 willbros group inc consolidated balance sheets thousands except share per share amounts see accompanying notes consolidated financial statements willbros group inc consolidated statements operations thousands except share per share amounts see accompanying notes consolidated financial statements willbros group inc consolidated statements stockholders’ equity comprehensive income loss thousands except share per share amounts willbros group inc consolidated statements stockholders’ equity comprehensive income loss thousands except share per share amounts 1 removal previously recorded foreign currency translation adjustments associated company’s nigeria assets operations 2 private placement completed october 26 2006 see accompanying notes consolidated financial statements willbros group inc consolidated statements cash flows thousands except share per share amounts willbros group inc consolidated statements cash flows thousands except share per share amounts see accompanying notes consolidated financial statements willbros group inc notes consolidated financial statements thousands except share per share amounts 1 summary significant accounting policies company willbros group inc “wgi” republic panama corporation majorityowned subsidiaries “company” provide construction engineering project management operations maintenance specialty services development activities oil gas power refinery industries government entities company’s principal markets continuing operations united states canada oman disclosures notes consolidated financial statements relate continuing operations except otherwise indicated basis presentation discontinuance operations asset disposals 2006 company chose exit following businesses nigeria venezuela txp4 plant collectively “discontinued operations” accordingly businesses presented discontinued operations preceding consolidated financial statements net assets net liabilities related discontinued operations shown consolidated balance sheets “assets discontinued operations” “liabilities discontinued operations” respectively results discontinued operations shown consolidated statements operations “loss discontinued operations net provision income taxes” periods shown discussion discontinued operations see note 18 discontinuance operations asset disposals transition services agreement cash equivalents december 31 2007 company 2578 cash equivalents committed fund escrow account related settlement principle sec escrow account funded company january 2008 addition 2686 cash equivalents committed specific project uses principles consolidation consolidated financial statements company include accounts wgi majorityowned subsidiaries whollycontrolled entities intercompany accounts transactions eliminated consolidation ownership interest minority participants subsidiaries whollyowned principally oman included accounts payable accrued liabilities material minority participants’ share net income subsidiaries included contract costs interests company’s unconsolidated joint ventures accounted using equity method consolidated balance sheets use estimates consolidated financial statements prepared accordance generally accepted accounting principles united states include certain estimates assumptions made management company preparation consolidated financial statements estimates assumptions relate reported amounts assets liabilities date consolidated financial statements reported amounts revenue expense period significant items subject estimates assumptions include carrying amount property plant equipment goodwill parts supplies inventories quantification amounts recorded contingencies tax accruals certain accrued liabilities valuation allowances accounts receivable deferred income tax assets revenue recognition percentageofcompletion method accounting including estimates progress toward completion estimates gross profit loss accrual contracts progress company bases estimates historical experience assumptions believes relevant circumstances actual results could differ estimates commitments contingencies liabilities loss contingencies arising claims assessments litigation fines penalties sources recorded management assesses probable liability incurred amount reasonably estimated recoveries costs third parties management assesses probable realization separately recorded assets legal costs incurred connection matters relating contingencies expensed period incurred see note 15 contingencies commitments circumstances discussion company’s commitments contingencies accounts receivable trade accounts receivable recorded invoiced amount bear interest allowance doubtful accounts company’s best estimate probable amount credit losses company’s existing accounts receivable considerable amount judgment required assessing realization receivables relevant assessment factors include creditworthiness customers prior collection history balances 90 days past due specified minimum amount reviewed individually collectability account balances charged allowance willbros group inc notes consolidated financial statements thousands except share per share amounts 1 summary significant accounting policies continued reasonable means collection exhausted potential recovery considered remote allowance requirements based current facts available reevaluated adjusted regular basis additional information received company offbalancesheet credit exposure related customers inventories consisting primarily parts supplies stated lower cost market cost determined using firstin firstout “fifo” method parts supplies evaluated least annually adjusted excess obsolescence parts supplies related continuing operations valued 2902 2069 december 31 2007 2006 respectively excess obsolescence allowances existed december 31 2007 2006 property plant equipment property plant equipment stated cost depreciation including amortization capital leases provided straightline method using estimated lives follows assets held capital leases leasehold improvements amortized straightline basis assets retired otherwise disposed cost related accumulated depreciation removed accounts resulting gain loss recognized income period normal repair maintenance costs charged expense incurred significant renewals betterments capitalized longlived assets reviewed impairment annually whenever events changes circumstances indicate carrying amount asset may recoverable recoverability assets held used measured comparison carrying amount asset future net cash flows expected generated asset assets considered impaired impairment recognized measured amount carrying amount assets exceeds fair value assets disposed reported lower carrying amount fair value less costs sell goodwill intangible assets company applies statements financial accounting standards 141 “business combinations” “sfas 141” statements financial accounting standards 142 “accounting goodwill intangible assets” “sfas 142” sfas 141 requires use purchase accounting method business combinations broadens criteria recording intangible assets separate goodwill sfas 142 stipulates nonamortization approach account purchased goodwill certain intangible assets indefinite useful lives also requires least annual impairment test applying fairvaluebased test intangible assets finite lives continue amortized useful lives useful life intangible asset entity period asset expected contribute directly indirectly future cash flows entity goodwill represents excess purchase price fair value net assets acquired company performs annual test impairment fourth quarter fiscal year frequently event circumstance indicates impairment may occurred testing based discounted cash flow approach operating segment determine fair value possible impairment operating segment indicated implied fair value goodwill tested comparing carrying amount net assets operating segment excluding goodwill total fair value carrying amount goodwill exceeds implied fair value impairment charge recorded company completed annual evaluation impairment goodwill december 31 2007 2006 concluded impairment goodwill existed dates intangible assets company intangible assets indefinite useful lives company intangible assets finite lives intangible assets consist customer relationships backlog recorded connection acquisition integrated service company llc “inserv” november 2007 value existing customer relationships recorded estimated fair value determined using discounted cash flow method acquired customer relationships finite useful life therefore amortized estimated useful life relationships additionally company able assign value backlog purchased acquisition existing backlog existing time acquisition recorded fair value amortized useful life contracts willbros group inc notes consolidated financial statements thousands except share per share amounts 1 summary significant accounting policies continued revenue number factors relating company’s business affect recognition contract revenue company typically structures contracts unitprice time materials fixedprice cost plus fixed fee company believes operating results evaluated time horizon major contracts progress completed change orders extra work variations scope work cost recoveries claims negotiated realized revenue unitprice time materials contracts recognized earned revenue fixedprice cost plus fixed fee contracts recognized using percentageofcompletion method estimated contract income resulting revenue generally accrued based costs incurred date percentage total estimated costs taking consideration physical completion total estimated costs thus contract income impacted changes productivity scheduling unit cost labor subcontracts materials equipment additionally external factors weather client needs client delays providing permits approvals labor availability governmental regulation politics may affect progress project’s completion thus timing revenue recognition company recognize income fixedprice contract approximately 5 10 percent complete depending upon nature contract current estimate total contract cost indicates loss contract projected loss recognized full determined company considers unapproved change orders contract variations company customer approval scope change price associated scope change costs associated unapproved change orders included estimated cost complete contracts expensed incurred company recognizes revenue equal cost incurred unapproved changed orders realization price approval probable estimated amount equal greater company’s cost related unapproved change order revenue recognized unapproved change orders included contract costs recognized income yet billed balance sheet unapproved change orders involve use estimates reasonably possible revisions estimated costs recoverable amounts may required future reporting periods reflect changes estimates final agreements customers company considers claims amounts company seeks seek collect customers others customercaused changes contract specifications design customerrelated causes unanticipated additional contract costs agreement customers scope price changes revenue claims recognized agreement reached customers value claims instances may occur completion work contract costs associated claims included estimated costs complete contracts expensed incurred depreciation company depreciates assets based estimated useful lives time acquisition using straightline method effective fiscal year ended december 31 2007 depreciation amortization related operating activities included contract costs depreciation amortization related general administrative activities included general administrative “ga” expense consolidated statements operations contract costs ga expenses included within operating expenses consolidated statements operations company previously reported depreciation amortization separate line item consolidated statements operations change presentation made bring company’s presentation financial results line peers provide greater comparability results within industry change presentation impact current historical reported profitability income taxes company accounts income taxes asset liability method deferred tax assets liabilities recognized future tax consequences operating loss tax credit carry forwards temporary differences financial statement carrying values assets liabilities respective tax bases provision benefit income taxes annual effective tax rate impacted income taxes certain countries discontinued operations computed based deemed profit rather taxable income tax holidays certain international projects retirement plans benefits company voluntary defined contribution retirement plan us based employees qualified contributory part employees voluntary savings plan certain international employees nonqualified contributory part employees willbros group inc notes consolidated financial statements thousands except share per share amounts 1 summary significant accounting policies continued stockbased compensation effective january 1 2006 company adopted fair value recognition provisions statement financial accounting standards 123r “sharebased payment” “sfas 123r” using modified prospective application method compensation cost recognized applicable amounts compensation expense sharebased payments granted prior yet vested january 1 2006 based grantdate fair value estimated accordance original provisions sfas 123 “accounting stockbased compensation” previously presented pro forma footnote disclosures company’s securities exchange commission “sec” reports b compensation cost sharebased payments granted subsequent january 1 2006 based grantdate fair value estimated accordance provisions sfas 123r company uses blackscholes valuation method determine fair value stock options granted grant date sharebased compensation related restricted stock restricted stock rights also described collectively restricted stock units “rsu’s” recorded based company’s stock price grant date recognition sharebased compensation related rsu’s impacted adoption sfas 123r foreign currency translation significant monetary asset liability accounts denominated currencies united states dollars translated united states dollars current exchange rates countries local currency functional currency translation adjustments accumulated comprehensive income loss nonmonetary assets liabilities highly inflationary economies translated united states dollars historical exchange rates revenue expense accounts converted prevailing rates throughout year gains losses foreign currency transactions translation adjustments highly inflationary economies recorded income period incurred concentration credit risk company concentration customers oil gas power refinery industries exposes company concentration credit risk within single industry company seeks obtain advance progress payments contract work performed major contracts receivables generally collateralized allowance doubtful accounts including discontinued operations 1108 10389 december 31 2007 2006 respectively fair value financial instruments carrying value financial instruments materially differ fair value income loss per common share basic income loss per share calculated dividing net income loss less preferred dividend requirements weightedaverage number common shares outstanding year diluted income loss per share calculated including weightedaverage number potentially dilutive common shares weightedaverage number common shares outstanding company’s convertible notes included calculation diluted income per share using “ifconverted” method therefore numerator diluted income per share calculated excluding aftertax interest expense associated convertible notes since notes treated converted common stock derivative financial instruments company may use derivative financial instruments forward contracts options financial instruments hedges mitigate nonus currency exchange risk company unable match nonus currency revenue expense currency company derivative financial instruments december 31 2007 2006 cash equivalents company considers highly liquid investments original maturity three months less cash equivalents cash flows investing activities proceeds sale discontinued operations year ended december 31 2006 includes 16532 nonrefundable payments applied sale nigeria assets operations recently issued accounting standards fin 48 june 2006 financial accounting standards board “fasb” issued fasb interpretation 48 “accounting uncertainty income taxes interpretation fasb statement 109” “fin 48” company adopted fin 48 january 1 2007 fin 48 establishes single model address accounting uncertain tax positions fin 48 clarifies accounting income taxes prescribing minimum recognition threshold tax position required meet willbros group inc notes consolidated financial statements thousands except share per share amounts 1 summary significant accounting policies continued recognized financial statements fin 48 also provides guidance derecognition measurement classification interest penalties accounting interim periods disclosure transition company one subsidiaries files income tax returns us federal jurisdiction various state foreign jurisdictions exceptions company longer subject us income tax examination tax authorities years 2003 longer subject canadian income tax years 2001 oman years 2005 result implementation fin 48 company recognized 6369 increase liability unrecognized tax benefits accounted increase january 1 2007 accumulated deficit 2007 company received new documentation support regarding existing uncertain tax positions adjusted fin 48 liability accordingly management identified additional uncertain tax positions based information previously available year reconciliation beginning ending amount unrecognized tax benefits follows 6612 unrecognized tax benefits would impact company’s effective tax rate ultimately recognized amount unrecognized tax benefits reasonably possible recognized 2008 significant company recognizes interest penalties accrued related unrecognized tax benefits income tax expense company recognized interest penalties cumulative adjustment beginning accumulated deficit amount 568 twelve months ended december 31 2007 company recognized 169 interest expense interest penalties included table sfas 157 september 2006 fasb released statements financial accounting standards 157 “fair value measurements” “sfas 157” effective fiscal years beginning november 15 2007 sfas 157 defines fair value establishes framework measuring fair value gaap expands disclosures fair value measurements november 2007 fasb agreed oneyear deferral effective date nonfinancial assets liabilities recognized disclosed fair value nonrecurring basis sfas 157 effective company’s fiscal year ending december 31 2008 company elect use fair value option financial assets financial liabilities currently recorded fair value sfas 159 february 2007 fasb released statements financial accounting standards 159 “the fair value option financial assets financial liabilities” “sfas 159” effective fiscal years beginning november 15 2007 sfas 159 permits entities choose measure many financial instruments certain items fair value objective improve financial reporting providing entities opportunity mitigate volatility reported earnings caused measuring related assets liabilities differently without apply complex hedge accounting provisions sfas 159 effective company’s fiscal year ending december 31 2008 company expect use fair value option financial assets financial liabilities currently recorded fair value sfas 141r december 2007 fasb released statements financial accounting standards 141r “business combinations” “sfas 141r” sfas 141r applies prospectively business combinations acquisition date beginning first annual reporting period beginning december 15 2008 business combinations year ending december 31 2009 company objective statement improve relevance representational faithfulness comparability information reporting entity provides financial reports business combination effects company intends apply provision sfas 141r business combinations effective date sfas 160 december 2007 fasb released statements financial accounting standards 160 “noncontrolling interests consolidated financial statements amendment arb 51” “sfas 160” sfas 160 effective fiscal years interim periods within fiscal years beginning december 15 2008 objective statement improve relevance comparability willbros group inc notes consolidated financial statements thousands except share per share amounts 1 summary significant accounting policies continued transparency financial information reporting entity provides consolidated financial statements sfas 160 effective company’s fiscal year ending december 31 2009 interim periods within year company currently assessing impact adoption pronouncement financial statements reclassification certain reclassifications made prior year balances conform current year presentations 2 acquisitions following acquisitions accounted using purchase method accounting prescribed sfas 141 excess purchase price assets acquired liabilities assumed allocated goodwill integrated service company llc effective november 20 2007 company acquired issued outstanding equity interests inserv oklahoma limited liability company headquartered tulsa oklahoma inserv fully integrated solutions provider turnaround maintenance capital projects hydrocarbon processing petrochemical industries inserv’s core competencies include providing turnkey project services program management engineering procurement construction “epc” project services overhauling fluid catalytic cracking units main gasoline producing units refineries run continuously three five years shutdowns overhauling process units installing refractory specialty welding piping projects erecting modifying process heaters plants building modifying repairing oil storage tanks typically located pipeline terminals refineries manufacturing process heaters heater coils alloy piping specialty components equipment installation oil refineries addition inserv provides several secondary lines service including safety services safety personnel equipment projects inserv primarily serves downstream petroleum industry including major integrated oil companies independent refineries marketers marketing pipeline terminals petrochemical companies inserv also provides services select epc firms independent power producers specialty process facilities ammonia fertilizer manufacturing plants facilities connection closing company paid approximately 208925 satisfaction cash portion purchase price consisting 202500 less approximately 1511 shareholder loans deemed paid closing plus approximately 7936 representing estimated working capital adjustment cash portion closing price subject postclosing adjustment reflect differences inserv’s estimated working capital actual working capital closing date company paid additional consideration consisting 637475 shares willbros group inc common stock value 22500 accordance acquisition agreement shares 1 issued sec rule 506 regulation restricted 2 registered 3 may sold period one year closing date acquisition thereafter may sold accordance applicable securities laws total 20000 cash portion purchase price placed escrow period eighteen months released escrow onethird increments sixmonth twelvemonth eighteenmonth anniversaries closing date escrowed cash secures performance sellers’ obligations definitive agreement including working capital adjustments indemnification obligations breaches sellers’ representations warranties covenants included definitive agreement summary initial purchase price allocation december 31 2007 follows total purchase price amount 232085 consisting 231425 purchase price approximately 660 transaction costs company acquired 639 cash part transaction final purchase price subject finalization working capital adjustment goodwill related transaction deductible tax purposes united states 2 acquisitions continued following unaudited pro forma combined results operations company years ended december 31 2007 2006 give effect acquisition inserv completed november 20 2007 occurred january 1 2006 unaudited pro forma combined results operations presented informational purposes necessarily indicative results operations would occurred beginning periods presented necessarily indicative future results willbros group inc unaudited pro forma condensed combined statements operations 2 acquisitions continued willbros group inc unaudited pro forma condensed combined statements operations record additional depreciation expense associated writeup property plant equipment b record amortization intangible assets goodwill acquired purchase assets comprised customer relationships backlog estimated useful lives 121 15 years respectively c record estimated tax provision inserv’s pretax income net tax benefit increased depreciation amortization expense recognize increase weightedaverage shares outstanding due stock issued satisfy cash portion purchase amount 208925 market price 3400 per common share remaining purchase price 22500 satisfied issuance 637475 shares restricted stock willbros group inc notes consolidated financial statements thousands except share per share amounts 2 acquisitions continued midwest management 1987 ltd effective july 1 2007 company acquired assets operations midwest management 1987 ltd “midwest” pursuant share purchase agreement midwest provides pipeline construction rehabilitation maintenance water crossing installations replacements facilities fabrication oil gas industry predominantly western canada summary initial purchase price allocation december 31 2007 follows total purchase price amount 23724 consisting 22230 purchase price approximately 1494 transaction costs final purchase price subject finalization working capital adjustment goodwill related transaction deductible tax purposes canada 3 accounts receivable accounts receivable net december 31 2007 2006 comprised following company expects accounts receivable collected within one year provision credit bad debts included net consolidated statements operations 387 517 586 years ended december 31 2007 2006 2005 respectively 4 contracts progress contract costs recognized income yet billed uncompleted contracts arise revenues recorded amounts cannot billed terms contracts amounts recoverable customers upon various measures performance including achievement certain milestones completion specified units completion contract also included contract cost recognized income yet billed uncompleted contracts amounts company seeks collect customers change orders approved scope price associated scope change unapproved change orders revenue amounts recorded equal cost incurred realization price approval probable estimated amount equal greater company’s cost related unapproved change order unapproved change orders involve use estimates reasonably possible revisions estimated recoverable amounts recorded unapproved change orders may made nearterm company successfully resolve matters net expense recorded reduction revenues may required addition amounts previously recorded willbros group inc notes consolidated financial statements thousands except share per share amounts 4 contracts progress continued contract cost recognized income yet billed related amounts billed december 31 2007 2006 follows contract cost recognized income yet billed includes 86 1191 december 31 2007 2006 respectively completed contracts 5 property plant equipment property plant equipment used secure debt subject lien cost december 31 2007 2006 follows 6 goodwill intangible assets changes carrying amount goodwill detailed segment company performs annual impairment test goodwill fourth quarter year annual impairment test result recording impairment 2007 2006 historically willbros group inc notes consolidated financial statements thousands except share per share amounts 6 goodwill intangible assets continued company’s intangible assets december 31 2007 follows intangible assets amortized straightline basis estimated useful lives range 15 121 years amortization expense included net income years ended december 31 2007 794 estimated amortization expense subsequent five years thereafter follows 7 accounts payable accrued liabilities accounts payable accrued liabilities december 31 2007 2006 follows december 31 2006 advances account included 16532 nonrefundable payments applied sale nigeria assets operations see note 18 discontinuance operations asset disposals transition services agreement discussion sale 8 government obligations government obligations represent amounts expected become due government entities specifically department justice “doj” sec final settlement investigations involving possible violations foreign corrupt practices act “fcpa” possible violations securities act 1933 securities exchange act 1934 investigations stem primarily company’s former operations bolivia ecuador nigeria october 2007 company reached agreements principle subject approval doj sec settle investigations agreements principle provide anticipated aggregate payment 32300 consisting 22000 fines payable doj related fcpa violations 10300 profit disgorgement payable sec willbros group inc notes consolidated financial statements thousands except share per share amounts 8 government obligations continued profit disgorgement related single nigeria project included february 7 2007 sale company’s nigeria assets operations disgorged profit previously recognized results discontinued operations accordingly full amount 10300 recorded charge discontinued operations third quarter 2007 aggregate obligation 32300 classified consolidated balance sheets 8075 “current portion government obligations” remaining 24225 “longterm portion government obligations” division based payment terms agreements principle provide four equal installments first signing final settlements annually approximately three years thereafter agreements principle contingent upon parties’ agreement terms final settlement agreement approval doj sec confirmation federal district court assurance settlement finalized see note 15 contingencies commitments circumstances discussion agreements principle 9 longterm debt longterm debt december 31 2007 2006 follows 2007 credit facility november 20 2007 company entered new credit agreement “credit agreement” among willbros usa inc subsidiary company “wusa” borrower company certain subsidiaries guarantors collectively “loan parties” group lenders led calyon new york branch “calyon” credit agreement includes new threeyear senior secured 150000 revolving credit facility due 2010 “2007 credit facility” company option subject calyon’s consent increase size 2007 credit facility 200000 within first two years closing date 2007 credit facility company able utilize 100 percent 2007 credit facility obtain performance letters credit 333 percent facility cash advances general corporate purposes financial letters credit 2007 credit facility secured substantially assets company including loan parties well pledge 100 percent stock company’s principal subsidiaries 2007 credit facility replaces company’s existing threeyear 100000 senior secured synthetic credit facility scheduled expire october 2009 fees payable 2007 credit facility include 1 excess facility fee rate per annum equal 050 percent unused 2007 credit facility capacity payable quarterly arrears 2 commission face amount outstanding performance letters credit equal applicable margin effect performance letters credit payable quarterly arrears 3 commission face amount outstanding financial letters credit equal applicable libor margin effect payable quarterly arrears 4 letter credit fee equal 0125 percent per annum aggregate commitments interest cash borrowings payable quarterly arrears floating rate based base rate defined credit agreement company’s option rate equal one two three sixmonth eurodollar rate libor plus case applicable margin determined using performancebased grid described credit agreement credit agreement includes customary affirmative negative covenants including certain financial covenants described limitations capital expenditures triggered liquidity levels lower 35000 limitations foreign willbros group inc notes consolidated financial statements thousands except share per share amounts 9 longterm debt continued cash investments total indebtedness liens limitations certain asset sales dispositions well certain acquisitions asset purchases default credit agreement may triggered events failure comply financial covenants credit agreement failure make payments due credit agreement failure make payments due respect failure perform obligations relating debt obligations excess 5000 change control company certain insolvency proceedings default credit agreement would permit calyon lenders restrict company’s ability access 2007 credit facility cash advances letters credit require immediate repayment outstanding cash advances interest require cash collateralization outstanding letter credit obligations unamortized debt issue costs associated creation 2007 credit facility total 1302 included assets december 31 2007 costs amortized interest expense threeyear term credit facility ending october 2010 2007 credit facility also includes covenants relating maintenance following financial covenants violated would considered event default entitling lenders terminate remaining commitment call outstanding letters credit accelerate payment principal interest outstanding december 31 2007 company compliance covenants december 31 2007 borrowings outstanding 2007 credit facility 78711 outstanding letters credit consisting 58829 issued projects continuing operations 19882 issued projects related discontinued operations 65 senior convertible notes december 22 2005 company entered purchase agreement “purchase agreement” private placement 65000 aggregate principal amount 65 senior convertible notes due 2012 “65 notes” private placement closed december 23 2005 first quarter 2006 initial purchasers 65 notes exercised options purchase additional 19500 aggregate principal amount 65 notes collectively primary offering purchase option 65 notes total 84500 net proceeds offering used retire existing indebtedness provide additional liquidity support working capital needs 65 notes governed indenture dated december 23 2005 entered among company issuer willbros usa inc guarantor “wusai” bank new york mellon corporation trustee “indenture” issued purchase agreement among company initial purchasers 65 notes “purchasers” transaction exempt registration requirements securities act 1933 amended “securities act” 65 notes convertible shares company’s stock underlying shares registered sec 65 notes however registered sec willbros group inc notes consolidated financial statements thousands except share per share amounts 9 longterm debt continued pursuant purchase agreement company wusai agreed indemnify purchasers affiliates agents certain liabilities including liabilities securities act 65 notes convertible shares company’s common stock conversion rate 569606 shares common stock per 100000 principal amount notes representing conversion price approximately 1756 per share resulting 1825587 shares december 31 2007 subject adjustment certain circumstances 65 notes general senior unsecured obligations interest due semiannually june 15 december 15 began june 15 2006 65 notes mature december 15 2012 unless notes repurchased converted earlier company right redeem 65 notes holders 65 notes right require company purchase 65 notes cash including unpaid interest december 15 2010 holders 65 notes also right require company purchase 65 notes cash upon occurrence fundamental change defined indenture addition amounts described company required pay “makewhole premium” holders 65 notes elect convert notes company’s common stock connection fundamental change makewhole premium payable additional shares common stock calculated based formula premium ranging 0 percent 280 percent depending fundamental change occurs price company’s stock time fundamental change occurs upon conversion 65 notes company right deliver lieu shares common stock cash combination cash shares common stock indenture company required notify holders 65 notes method settling principal amount 65 notes upon conversion notification provided irrevocable legally binding upon company regard conversion 65 notes march 21 2006 company notified holders 65 notes election satisfy conversion obligation respect principal amount 65 notes surrendered conversion paying holders surrendered 65 notes 100 percent principal conversion obligation form common stock company 65 notes surrendered conversion company required notify holders method settling excess amount conversion obligation relating amount conversion value principal amount event default 10000 credit agreement including 2007 credit facility 275 notes corresponding event default would result 65 notes may 18 2007 company completed two transactions induce conversion two purchasers 65 notes conversion agreements purchasers converted 36250 aggregate principal amount 65 notes 2064821 shares company’s 005 par value common stock inducement purchasers convert company made aggregate cash payments purchasers 8972 plus 1001 accrued interest current interest period connection induced conversion company recorded loss early extinguishment debt 10894 loss early extinguishment debt inclusive cash premium paid induce conversion 1922 unamortized debt issue costs may 29 may 30 2007 company completed two additional transactions induce conversion two purchasers 65 notes conversion agreements purchasers converted 16200 aggregate principal amount 65 notes 922761 shares company’s common stock inducement purchasers convert company made aggregate cash payments purchasers 3748 plus 480 accrued interest current interest period connection induced conversion company recorded loss early extinguishment debt 4481 loss early extinguishment debt inclusive cash premium paid induce conversion writeoff 733 unamortized debt issue costs december 31 2007 32050 aggregate principal amount 65 notes remains outstanding unamortized debt issue costs 1819 4103 associated 65 notes included assets december 31 2007 2006 respectively amortized sevenyear period ending december 2012 covenant indenture 65 notes prohibits company incurring additional indebtedness consolidated leverage ratio exceeds 400 100 december 31 2007 covenant would precluded company borrowing 2007 credit facility november 2 2007 company entered agreement holder majority principal amount outstanding 65 willbros group inc notes consolidated financial statements thousands except share per share amounts 9 longterm debt continued notes waives debt incurrence covenant june 30 2008 capital leases considered indebtedness provision except extent exceed 50000 275 convertible senior notes march 12 2004 company completed primary offering 60000 275 convertible senior notes “275 notes” april 13 2004 initial purchasers 275 notes exercised option purchase additional 10000 aggregate principal amount notes collectively primary offering purchase option 275 notes totaled 70000 275 notes general senior unsecured obligations interest paid semiannually march 15 september 15 payments began september 15 2004 275 notes mature march 15 2024 unless notes repurchased redeemed converted earlier company may redeem 275 notes cash march 15 2011 100 percent principal amount notes plus accrued interest holders 275 notes right require company purchase 275 notes including unpaid interest march 15 2011 2014 2019 upon change control related event march 15 2011 upon change control event company must pay purchase price cash march 15 2014 2019 company option providing common stock lieu cash combination common stock cash fund purchases holders 275 notes may certain circumstances convert notes shares company’s common stock initial conversion ratio 513611 shares common stock per 100000 principal amount notes representing conversion price approximately 1947 per share resulting 3492555 shares december 31 2007 subject adjustment certain circumstances notes convertible upon occurrence certain specified events including limited certain times closing sale price company’s common stock exceeds 120 percent current conversion price 2336 per share based initial conversion price event default company credit agreement indenture covering 275 notes 1 company fails pay principal interest indebtedness aggregate principal balance 10000 2 indebtedness principal balance 10000 accelerated event default would result 275 notes june 10 2005 company received letter law firm representing investor claiming owner excess 25 percent 275 notes asserting result company’s failure timely file sec 2004 form 10k quarterly report form 10q quarter ended march 31 2005 placing company notice event default indenture dated march 12 2004 company issuer jpmorgan chase bank na trustee “indenture” governs 275 notes company indicated believe failed perform obligations relevant provisions indenture referenced letter august 19 2005 company entered settlement agreement beneficial owner 275 notes behalf notice default sent pursuant company agreed use commercially reasonable efforts solicit requisite vote approve amendment indenture “indenture amendment” company obtained requisite vote september 22 2005 indenture amendment became effective indenture amendment extended initial date 275 notes may redeemed company march 15 2013 march 15 2011 addition new provision added indenture requires company event “fundamental change” change control event 10 percent consideration transaction consists cash make coupon makewhole payment equal present value discounted us treasury rate lesser two years scheduled payments interest 275 notes b scheduled interest 275 notes date transaction march 15 2013 november 29 2007 holder exercised right convert converting 2000 aggregate principal amount 275 notes 102720 shares company’s common stock connection conversion company expensed proportionate amount debt issue costs resulting additional period interest expense 47 december 31 2007 68000 aggregate principal amount 275 notes remains outstanding unamortized debt issue costs 1610 2175 associated 275 notes included assets december 31 2007 2006 respectively amortized sevenyear period ending march 2011 willbros group inc notes consolidated financial statements thousands except share per share amounts 9 longterm debt continued 2006 credit facility october 27 2006 willbros usa inc whollyowned subsidiary company entered new 100000 threeyear senior secured synthetic credit facility “2006 credit facility” group lenders led calyon new york branch “calyon”the 2006 credit facility replaced company’s 2004 credit facility 2006 credit facility used standby commercial letters credit fees payable 2006 credit facility included facility fee rate per annum equal 50 percent 2006 credit facility capacity payable quarterly arrears letter credit fee equal 0125 percent per annum aggregate commitments 2006 credit facility collateralized substantially company’s assets including stock company’s principal subsidiaries 2006 credit facility contained requirement maintenance 10000 minimum cash balance prohibited payment cash dividends included customary affirmative negative covenants limitations creation certain new indebtedness liens restrictions certain transactions payments maintenance maximum senior leverage ratio minimum fixed charge coverage ratio minimum tangible net worth requirement december 31 2006 borrowings outstanding 2006 credit facility 64545 outstanding letters credit consisting 41920 issued projects continuing operations 22625 issued projects related discontinued operations unamortized debt issue costs associated creation 2006 credit facility total 1986 included assets december 31 2006 november 20 2007 2006 credit facility replaced 2007 credit facility accordingly december 2007 remaining unamortized costs 1346 related 2006 credit facility written general administrative expense capital leases assets held capital leases summarized following minimum lease payments assets financed capital lease arrangements december 31 2007 willbros group inc notes consolidated financial statements thousands except share per share amounts 9 longterm debt continued obligations company various notes payable generally related equipment financing local revolving credit facilities market interest rates collateralized certain vehicles equipment andor real estate company unsecured credit facilities banks certain countries outside united states borrowings form shortterm notes overdrafts made competitive local interest rates generally line available borrowings related operations specific country credit available facilities approximately 2459 december 31 2007 outstanding borrowings made facilities december 31 2007 2006 10 retirement benefits company defined contribution plans funded participating employee contributions company matches employee contributions maximum four percent salary form cash contributions form wgi common stock suspended 2005 removed option january 9 2006 company contributions plans including employees working discontinued operations 2265 1761 1909 including wgi common stock valued 0 80 2007 2006 2005 respectively 11 income taxes company operates primarily us canada oman domiciled panama countries substantially different tax regimes tax rates affect consolidated income tax provision company effective tax rate moreover losses one country generally cannot used offset taxable income another country expenses incurred certain tax jurisdictions receive tax benefit thereby affecting effective tax rate income loss income taxes provision income taxes consolidated statements operations consist willbros group inc notes consolidated financial statements thousands except share per share amounts 11 income taxes continued total provision income taxes excludes 2007 net fin 48 adjustment recorded subsequent adoption accounting pronouncement january 2007 see note 1 significant accounting policies 2007 net fin 48 income tax benefit 60 provision income taxes determined based upon tax laws rates countries operations conducted income earned company’s subsidiaries operating united states subject federal income tax rates 35 percent varying state income tax rates methods computing tax liabilities company’s principal international operations canada oman company’s subsidiaries canada oman subject corporate income tax rates 3212 percent 12 percent respectively company nontaxable foreign earnings tax holidays taxable years 2005 2007 company international holding companies panamanian corporations panamanian tax law based territorial principles impose income tax income earned outside panama 2007 company’s parent loss approximately 50000 unable offset income earned tax jurisdictions receive tax benefit loss primarily related profits disgorgement penalties levied doj sec connection management incident costs incurred connection induced conversion 65 notes required accounting principles board opinion 23 “accounting income taxes special areas” “apb 23” management analyzed operations us canada oman company’s current operating strategy reinvest earnings operations mentioned jurisdictions rather distribute dividends intermediate holding companies parent company reconciliation differences provision income tax computed appropriate statutory rates reported provision income taxes follows company total net tax liability equal 2639 increase company’s net tax liability result collection tax refunds various tax authorities us acquisition shares canadian company midwest whereby fair market value assets substantially greater tax bases assets entering several equipment leases treated capital assets book tax purposes whereby tax depreciation recognized faster rate book depreciation early years leases company owed tax refunds 1221 included company’s prepaid expenses 2007 company owes 4749 various federal stateprovincial tax authorities amount included accrued income taxes willbros group inc notes consolidated financial statements thousands except share per share amounts 11 income taxes continued company net deferred tax liability 890 december 31 2007 principal components company’s net deferred tax assets net deferred tax assets geographical location follows ultimate realization deferred tax assets related net operating loss carry forwards including state net operating loss carry forwards dependent upon generation future taxable income particular tax jurisdiction periods use net operating losses allowed management considers scheduled reversal deferred tax liabilities projected future taxable income making assessment 2007 company expects utilize united states federal net operating losses 1519 utilize state net operating losses 3049 company also expects realize tax deductions approximate amount 4090 related deferred compensation tax effect timing differences approximately 699 december 31 2007 company remaining us federal net operating loss carry forwards 5222 state net operating loss carry forwards 7165 company’s us federal net operating losses expire 2013 state net operating loss generally expires five years period net operating loss willbros group inc notes consolidated financial statements thousands except share per share amounts 11 income taxes continued incurred based upon level historical taxable income projections future taxable income periods net operating losses utilized offset taxable income management believes company realize tax benefits 2017 loss carry forwards company previously disclosed fully reserved net operating loss carry forwards derived united kingdom bolivia pakistan 43154 company written previously recorded tax assets associated valuation allowances either net operating loss carry forwards expired company anticipate projects countries future utilize net operating loss carry forwards 12 stockholders’ equity public offering november 20 2007 company completed public offering 7906250 common shares 3400 per share underwriters exercised option purchase shares available overallotments company received approximately 253707 net proceeds underwriting discount offering costs net proceeds used fund cash portion acquisition inserv approximately 208925 including working capital closing adjustments see note 2 acquisitions capital expenditures working capital private sale equity october 27 2006 company completed private placement equity certain accredited investors pursuant company issued sold 3722360 shares company’s common stock resulting net proceeds 48748 selling price 1400 per share discount approximately 10 percent based company’s closing stock price 1550 october 24 2006 net proceeds used general corporate purposes primarily support start several new projects united states canada conjunction private placement company also issued warrants purchase additional 558354 shares company’s common stock warrant exercisable whole part 60 months date issuance warrant holder may elect exercise warrant delivery payment company exercise price 1903 per share pursuant cashless exercise provided warrant agreement fair value warrants 3423 date grant calculated using blackscholes option pricing model 2007 warrants purchase 21429 shares common stock exercised december 31 2007 536925 warrants outstanding stockholder rights plan april 1 1999 company adopted stockholder rights plan declared distribution one preferred share purchase right “right” outstanding share company’s common stock distribution made april 15 1999 stockholders record date rights expire april 14 2009 rights exercisable person group acquires 15 percent company’s common stock announces tender offer consummation would result ownership person group 15 percent common stock right entitles stockholders buy one onethousandth share series junior participating preferred stock exercise price 3000 per share company acquired merger business combination transaction person group acquired 15 percent company’s outstanding common stock right entitles holder purchase right’s thencurrent exercise price number acquiring company’s common shares market value twice price addition person group acquires 15 percent company’s outstanding common stock right entitles holder person members group purchase right’s thencurrent exercise price number company’s common shares market value twice price prior acquisition person group beneficial ownership 15 percent company’s common stock rights redeemable onehalf cent per right option company’s board directors willbros group inc notes consolidated financial statements thousands except share per share amounts 12 stockholders’ equity continued stock ownership plans information contained note pertains continuing discontinued operations may 1996 company established willbros group inc 1996 stock plan “1996 plan” 1125000 shares common stock authorized issuance provide awards key employees company willbros group inc director stock plan “director plan” 125000 shares common stock authorized issuance provide grant stock options nonemployee directors number shares authorized issuance 1996 plan director plan increased 4075000 225000 respectively stockholder approval options may granted director plan april 16 2006 company established 2006 director restricted stock plan “2006 director plan” 50000 shares authorized issuance grant shares restricted stock restricted stock rights nonemployee directors restricted stock restricted stock rights also described collectively restricted stock units “rsu’s” options granted 1996 plan vest generally three four year period options granted director plan fully vested restricted stock restricted stock rights granted 2006 director plan vest one year date grant december 31 2007 1996 plan 441711 shares 2006 director plan 34419 shares available grant shares available december 31 2007 1996 plan 225000 shares reserved future grants required employment agreements certain provisions allow accelerated vesting based increases share prices eligible retirement years ended december 31 2007 2006 37 3247 respectively compensation expense recognized due accelerated vesting rsu’s due retirements separation company effective january 1 2006 company adopted fair value recognition provisions sfas 123r using modified prospective application method compensation cost recognized year ended december 31 2006 includes applicable amounts compensation expense sharebased payments granted prior yet vested january 1 2006 based grantdate fair value estimated accordance original provisions sfas 123 previously presented pro forma footnote disclosures company’s sec reports b compensation cost sharebased payments granted subsequent january 1 2006 based grantdate fair value estimated accordance provisions sfas 123r company uses blackscholes valuation method determine fair value stock options granted grant date prior january 1 2006 company accounted awards granted stock ownership plans following recognition measurement principles accounting principles board opinion 25 “accounting stock issued employees” related interpretations permitted sfas 123 company’s policy grant stock options market price date grant intrinsic value grants zero therefore compensation expense recorded sharebased compensation related rsu’s recorded based company’s stock price grant date recognition sharebased compensation related rsu’s impacted adoption sfas 123r expense stock options rsu’s totaled 4087 7240 respectively years ended december 31 2007 2006 fair value granted options estimated date grant using blackscholes option pricing model following weightedaverage assumptions willbros group inc notes consolidated financial statements thousands except share per share amounts 12 stockholders’ equity continued volatility calculated using analysis historical volatility company believes historical volatility company’s stock best method estimating future volatility expected lives options determined based company’s historical share option exercise experience company believes historical experience method best estimate future exercise patterns currently available riskfree interest rates determined using implied yield currently available zerocoupon us government issues remaining term equal expected life options company’s stock option activity related information consist december 31 2007 aggregate intrinsic value stock options outstanding stock options exercisable 9768 7159 respectively weighted average remaining contractual term outstanding options 651 years weighted average remaining contractual term exercisable options 561 years december 31 2007 total intrinsic value options exercised 9712 2639 298 years ended december 31 2007 2006 2005 respectively tax benefit realized related exercises total fair value options vested years ended december 31 2007 2006 2005 496 357 829 respectively company’s nonvested options december 31 2007 changes nonvested options year ended december 31 2007 follows company’s rsu activity related information consist willbros group inc notes consolidated financial statements thousands except share per share amounts 12 stockholders’ equity continued rsu’s outstanding december 31 2007 2006 include 225000 rsu’s vested deferred share issuance date total fair value rsu’s vested years ended december 31 2007 2006 2005 2981 6990 1583 respectively december 31 2007 total 9287 unrecognized compensation cost net estimated forfeitures related nonvested sharebased compensation arrangements granted company’s stock ownership plans cost expected recognized weightedaverage period 226 years march 2002 certain officers company borrowed total 1307 employee stock purchase program permitted selected executives officers exclusive chief executive officer borrow company 100 percent funds required exercise vested stock options loans full recourse noninterest bearing period five years collateralized related stock difference 434 discounted value loans fair market value stock date exercise 119 representing difference exercise price certain options fair market value stock recorded compensation expense date exercise notes recorded discounted value discount amortized interest income periods notes outstanding net loans receivable presented reduction stockholders’ equity maximum loan amount one officer could outstanding employee stock purchase program 250 accordance sarbanesoxley act 2002 company longer makes loans executive officers company loans settled 2006 13 loss per common share basic diluted loss per common share computed follows company incurred net losses years ended december 31 2007 2006 2005 therefore excluded securities listed computation diluted income loss per share effect would antidilutive willbros group inc notes consolidated financial statements thousands except share per share amounts 13 loss per common share continued accordance emerging issues task force “eitf” issue 048 “the effect contingently convertible instruments diluted earnings per share” 5318142 shares issuable upon conversion convertible notes included diluted income loss per share securities dilutive regardless whether market trigger prices 1947 1756 respectively met 2007 3090302 shares issued upon conversion convertible notes 14 segment information company’s segments strategic business units managed separately different operational requirements strategies acquisition inserv november 20 2007 see note 2 acquisitions company redefined operating segments based industry segments served operating segments company manages reports upstream og downstream og engineering segments operate primarily united states canada oman previously beginning first quarter 2007 company defined operating segments based company’s core lines business defined construction engineering procurement construction “epc” prior period balances reclassified reflect change management evaluates performance operating segment based operating income company’s corporate operations include general administrative financing functions organization costs functions allocated three operating segments material intersegment revenues periods presented tables reflect company’s reportable segments years ended december 31 2007 2006 2005 willbros group inc notes consolidated financial statements thousands except share per share amounts 14 segment information continued capital expenditures segment presented total assets segment december 31 2007 2006 presented willbros group inc notes consolidated financial statements thousands except share per share amounts 14 segment information continued due limited number major projects clients company may one time substantial part operations dedicated one project client country customers representing 10 percent total contract revenue follows information company’s operations work countries shown 15 contingencies commitments circumstances contingencies resolution criminal regulatory matters company subsidiary wii reached agreement principle representatives doj subject approval doj settle previously disclosed investigation possible violations fcpa addition company reached agreement principle staff sec resolve previously disclosed investigation possible violations fcpa possible violations securities act 1933 securities exchange act 1934 investigations stem primarily company’s former operations bolivia ecuador nigeria described fully accepted doj sec approved court settlements together require company pay approximately three years total 32300 penalties disgorgement plus postjudgment interest 7725 amount addition wgi wii period approximately three years subject willbros group inc notes consolidated financial statements thousands except share per share amounts 15 contingencies commitments circumstances continued deferred prosecution agreements “dpas” doj finally subject permanent injunction barring future violations certain provisions federal securities laws terms agreement principle doj include following • sixcount criminal information filed wgi wii part execution dpas doj wgi wii six counts include substantive violations antibribery provisions fcpa violations fcpa’s booksandrecords provisions six counts relate operations nigeria ecuador bolivia period 1996 2005 • provided wgi wii fully comply dpas period approximately three years doj agree continue criminal prosecution conclusion time move dismiss criminal information • dpas require three year terms among things full cooperation government compliance federal criminal law including limited fcpa three year monitor wgi subsidiary companies primarily focused international operations outside north america costs payable wgi • company subject 22000 fines related fcpa violations fines payable four equal installments 5500 first signing annually approximately three years thereafter interest payable unpaid amounts respect agreement principle staff sec • company consent filing federal district court complaint sec “complaint” without admitting denying allegations complaint imposition court final judgment permanent injunction us complaint allege civil violations antifraud provisions securities act securities exchange act fcpa’s antibribery provisions reporting booksandrecords internal controls provisions securities exchange act final judgment take effect confirmed court permanently enjoin us future violations provisions • final judgment order company pay 10300 consisting 8900 disgorgement profits approximately 1400 prejudgment interest disgorgement prejudgment interest payable four equal installments 2575 first signing annually approximately three years thereafter postjudgment interest payable outstanding balance january 2008 company submitted signed consent decree agreed final judgment sec required sec deposited first installment payment 2575 escrow account failure company comply terms conditions either settlement could result resumed prosecution regulatory sanctions agreements principle contingent upon parties’ agreement terms final settlement agreements approval doj sec confirmation federal district court assurance settlements finalized result agreements principle accrued total 32300 related investigations 10300 profit disgorgement including 1400 prejudgment interest related single nigeria project included february 7 2007 sale company’s nigeria assets operations disgorged profit previously recognized results discontinued operations accordingly full amount 10300 recorded charge discontinued operations third quarter 2007 aggregate reserves reflect estimate expected probable loss respect matters proposed settlements finalized amount reserved may reflect eventual losses final agreements doj sec approved company’s liquidity position financial results could materially adversely affected additional settlement amount discussion risks associated settlements principle sec doj united states department treasury’s office foreign assets control “ofac” see part item 1a risk factors specifically risk factor entitled “we reached agreements principle settle investigations involving willbros group inc notes consolidated financial statements thousands except share per share amounts 15 contingencies commitments circumstances continued possible violations fcpa possible violations securities act 1933 securities exchange act 1934” addition company previously disclosed ofac investigating allegations violations sudanese sanctions regulations occurring october 2003 company voluntarily reported matter ofac also reported ofac corrective measures improvements company’s ofac compliance program ofac willbros usa inc agreed principle settle allegations pursuant company pay total 66 civil penalty classaction lawsuit may 18 2005 securities classaction lawsuit captioned legion partners llp v willbros group inc et al filed united states district court southern district texas company certain present former officers directors thereafter three nearly identical lawsuits filed plaintiffs purported represent class composed persons purchased otherwise acquired willbros group inc common stock andor securities may 6 2002 may 16 2005 inclusive complaint sought unspecified monetary damages relief company filed motion dismiss complaint march 9 2006 briefing motion completed june 14 2006 motion dismiss pending company reached settlement principle lead plaintiff parties signed memorandum understanding “settlement” settlement provides payment 10500 resolve claims defendants february 15 2007 us district court southern district texas issued order approving settlement order dismissed prejudice claims defendants addition matters discussed company party number legal proceedings management believes nature number proceedings typical firm similar size engaged similar type business none proceedings material company’s financial position see note 18 discontinuance operations asset disposals transition services agreement discussion commitments contingencies associated discontinued operations commitments time company enters commercial commitments usually form commercial standby letters credit surety bonds financial guarantees contracts company’s customers may require company provide letters credit surety bonds regard company’s performance contracted services cases commitments called upon event failure perform contracted services likewise contracts may allow company issue letters credit surety bonds lieu contract retention provisions client withholds percentage contract value project completion expiration warranty period retention commitments called upon event warranty project completion issues prescribed contracts december 31 2007 company approximately 63231 letters credit related continuing operations 19882 letters credit related discontinued operations nigeria additionally company 214292 surety bonds outstanding related continuing operations amounts represent maximum amount future payments company could required make december 31 2007 liability recognized letters credit surety bonds 1556 recorded fair value letters credit outstanding nigeria operations see note 18 discontinuance operations asset disposals transition services agreement discussion letters credit connection private placement 65 notes december 23 2005 company entered registration rights agreement purchasers registration rights agreement required company file registration statement respect resale shares company’s common stock issuable upon conversion 65 notes later june 30 2006 use best efforts cause registration statement declared effective later december 31 2006 company also required keep registration statement effective december 31 2006 event company unable satisfy obligations registration rights agreement company owe additional interest holders 65 notes rate per annum equal 05 per cent principal amount 65 notes first 90 days 10 percent per annum 91st day following event additional penalty interest incurred payable conjunction scheduled semiannual interest willbros group inc notes consolidated financial statements thousands except share per share amounts 15 contingencies commitments circumstances continued payments june 15 december 15 set forth registration rights agreement company filed registration statement june 30 2006 declared effective january 18 2007 sec company paid additional 22 penalty interest holders 65 notes result registration declared effective december 31 2006 connection private placement common stock warrants october 27 2006 company entered registration rights agreement buyers “2006 registration rights agreement” 2006 registration rights agreement requires company file registration statement respect resale common stock including common stock underlying warrants later 60 days closing private placement use reasonable best efforts cause registration statement declared effective later 120 days closing private placement event delay filing effectiveness registration statement period effectiveness registration statement maintained suspended company permitted 2006 registration rights agreement company required pay buyer monthly amount cash equal 125 percent buyer’s aggregate purchase price common stock warrants company shall required pay buyer aggregate amount exceeds 10 percent buyer’s aggregate purchase price march 14 2007 connection filing company’s annual report form 10k fiscal year ended december 31 2006 company suspended use registration statement march 30 2007 company filed posteffective amendment registration statement incorporate reference 2006 form 10k posteffective amendment declared effective may 4 2007 company required make registration delay payments equal 125 percent purchase price shares warrants sold private placement first payment owed april 3 2007 paid april 30 2007 thereafter penalty continued accrue based 125 percent purchase price beginning april 3 2007 day date 20day grace period expired 30day period thereafter prorated partial 30day period ending effective date posteffective amendment company paid 997 registration delay payments subsequent march 31 2007 period use registration statement suspended suspension lifted may 4 2007 operating leases company certain operating leases office camp facilities rental expense continuing operations excluding daily rentals reimbursable rentals cost plus contracts 2773 2007 2079 2006 2216 2005 minimum lease commitments operating leases december 31 2007 totaled 17963 payable follows 2008 9280 2009 4947 2010 2242 2011 1320 2012 174 thereafter 0 joint ventures company 50 percent interest pipeline construction joint venture chadcameroon pipeline project africa project completed 2003 company adjusted investment joint venture zero since 2004 activity 50 percent owned joint venture limited warranty work accrued prior years company also owns 40 percent common stock global process services inc provider foreignsourced labor company investments entities accounted equity method carried consolidated balance sheets within assets combined balance investments joint ventures included balance sheet 133 0 december 31 2007 2006 respectively summarized combined balance sheet information investments accounted equity method based investee balance sheet december 31 2007 2006 set forth table willbros group inc notes consolidated financial statements thousands except share per share amounts 15 contingencies commitments circumstances continued losses 34 investments accounted equity method recorded year ended december 31 2007 income loss investments accounted equity method recorded years ended december 31 2006 2005 circumstances operations outside united states may subject certain risks ordinarily would expected exist united states including foreign currency restrictions extreme exchange rate fluctuations expropriation assets civil uprisings riots war unanticipated taxes including income taxes excise duties import taxes export taxes sales taxes governmental assessments availability suitable personnel equipment termination existing contracts leases government instability legal systems decrees laws regulations interpretations court decisions always fully developed may retroactively applied management presently aware events type described countries operates would material effect financial statements provided accompanying consolidated financial statements based upon advice local advisors various work countries concerning interpretation laws practices customs countries operates management believes company follows current practices countries however nature potential risks assurance company may adversely affected future company insures substantially equipment countries outside united states certain political risks terrorism political risk insurance coverage contains 20 percent coinsurance provision company usual liability contractors completion contracts warranty work performed joint venture company also possible liability contract completion warranty responsibilities joint venture partners addition company acts prime contractor majority projects undertakes normally responsible performance entire project including subcontract work management aware material exposure related thereto provided accompanying consolidated financial statements certain postcontract completion audits reviews periodically conducted clients andor government entities assurance claims received result audits reviews management believe legitimate basis exists material claims present possible management estimate likelihood claims asserted amount nature ultimate disposition thereof willbros group inc notes consolidated financial statements thousands except share per share amounts 16 quarterly financial data selected unaudited quarterly financial data years ended december 31 2007 2006 presented total quarterly income loss per share amounts may equal per share amounts full year due manner earnings loss per share calculated willbros group inc notes consolidated financial statements thousands except share per share amounts 16 quarterly financial data continued additional notes willbros group inc notes consolidated financial statements thousands except share per share amounts 16 quarterly financial data continued company derives revenue contracts durations weeks several months cases year unitprice contracts provide relatively even quarterly results however major projects usually fixedprice contracts may result uneven quarterly financial results due method revenue recognized 17 related party transactions inserv acquisition early 2007 inserv retained growth capital partners lp investment banking firm assist inserv possible sale company john mcnabb ii company’s chairman board directors founder chairman board directors growth capital partners received customary fee inserv upon sale inserv mr mcnabb randy r harl company’s president chief executive officer one company’s directors served inserv board directors 2005 september 18 2007 messrs mcnabb harl resigned board directors inserv prior commencement discussions company inserv respect possible acquisition inserv mr mcnabb recused providing advice inserv principal growth capital partners messrs mcnabb harl owned 3000 shares inserv individually less 04 percent outstanding equity interests inserv company formed special committee board directors consisting independent directors mr mcnabb consider evaluate approve acquisition inserv addition special committee obtained opinion dated october 30 2007 nationally recognized investment banking valuation firm consideration paid company proposed acquisition fair company financial point view nigeria past certain company’s subsidiaries entered commercial agreements companies former president willbros international inc j kenneth tillery apparently ownership interest companies included arbastro trading ltd hydrodive international ltd hydrodive offshore services international inc hydrodive nigeria ltd oco industrial services ltd windfall energy services ltd companies chartered sold marine vessels company’s subsidiaries hydrodive offshore services international inc hydrodive international ltd also provided diving services company’s subsidiaries payment terms vendors ranged due receipt net 30 days settlement method cash mr tillery also appears exercised significant influence activities symoil petroleum ltd fusion petroleum services ltd provided consulting services projects nigeria kaplan associates provided consulting services projects bolivia certain foreign locations mr tillery resigned position company january 6 2005 accordingly none companies identified considered related parties subsequent date additionally since sale nigerian operations february 2007 company entirely discontinued engaging services companies mr tillery ownership interest exerted significant influence period since departure mr tillery prior sale nigerian operations february 2007 limited alternative service providers company continue utilizing services provided windfall energy services hydrodive international ltd however fourth quarter 2005 company settled outstanding claims companies entered new contracts governing services provided vendors new contracts company made payments 1671 0 years ended december 31 2006 2005 respectively related nigeria projects included condensed consolidated statements operations discontinued operations note 18 discontinuance operations asset disposals transition services agreement december 31 2006 outstanding amounts owed formerly related parties included current liabilities discontinued operations 1800 liabilities included february 7 2007 sale nigeria assets operations payments made companies mr tillery appears undisclosed ownership interest appears exercised significant influence threeyear period ended december 31 2007 totaling 7213 recorded contract cost operating expenses nigeria projects willbros group inc notes consolidated financial statements thousands except share per share amounts 17 related party transactions continued amounts detailed 18 discontinuance operations asset disposals transition services agreement strategic decisions 2006 company announced intended sell txp4 plant assets operations venezuela nigeria led classification discontinued operations “discontinued operations” net assets net liabilities related discontinued operations shown consolidated balance sheets “assets discontinued operations” “liabilities discontinued operations” respectively results discontinued operations shown consolidated statements operations “loss discontinued operations net provision income taxes” periods presented nigeria assets nigeriabased operations share purchase agreement february 7 2007 company sold nigeria assets nigeriabased operations west africa ascot offshore nigeria limited “ascot” nigerian oilfield services company total consideration 155250 “purchase price” sale pursuant share purchase agreement company ascot dated february 7 2007 “agreement” providing purchase ascot share capital wg nigeria holdings limited “wgnhl” holding company willbros west africa inc “wwai” willbros nigeria limited willbros offshore nigeria limited wg nigeria equipment limited connection sale nigeria assets operations company subsidiary willbros international inc “wii” entered indemnity agreement ascot berkeley group plc “berkeley” “indemnity agreement” pursuant ascot berkeley indemnify company wii obligations incurred company wii connection parent company performance guarantees “guarantees” company wii previously issued maintained behalf certain former subsidiaries owned ascot certain working contracts subsidiaries customers either company wii may contractually obligated varying degrees guarantees perform cause performed work related several ongoing projects among guarantees covered indemnity agreement five contracts company estimates february 7 2007 aggregate remaining contract revenue excluding additional claim revenue 352107 aggregate estimated cost complete 293562 february 7 2007 sale date one contracts covered guarantees estimated loss position accrual loss 33157 associated liability included liabilities acquired ascot recently received first notification asserting rights one outstanding parent guarantees february 1 2008 wwai ascot company performing west african gas pipeline “wagp” contract received letter west african gas pipeline company limited “wapco” owner wagp wherein wapco gave written notice alleging wwai default wagp contract amended giving wwai brief cure period remedy alleged default understand wwai responded denying breach wagp contract obligations apparently also advised wapco wwai “requires 55 million without able complete work previously undertaken perform” understand february 27 2008 wapco terminated wagp contract alleged continuing nonperformance wwai simultaneously expressed wapco willing reengage wwai new contract finish remaining wagp contract work otherwise provide transition services facilitate handover unfinished wagp contract work alternative contractors yet identified willbros group inc notes consolidated financial statements thousands except share per share amounts 18 discontinuance operations asset disposals transition services agreement continued also february 1 2008 received letter wapco reminding us parent guarantee wagp contract requesting remedy wwai’s default contract amended previous occasions advised wapco variety legal contractual reasons consider prior wagp contract parent guarantee continued application reiterated position wapco response february 1 2008 letter wapco disputes position longer bound terms prior parent guarantee wagp contract reserved rights regard anticipate developing dispute wapco could result lengthy arbitration proceeding wapco wwai london court international arbitration determine validity alleged default notice issued wapco wwai including resulting damage award combination lawsuit wapco us english courts english law determine enforceability whole part parent guarantee expect lengthy process intention returning nigeria ultimately determined english court liable whole part damages wapco may establish wwai’s alleged nonperformance wagp contract wapco able establish liability us directly parent company guarantee either case unable enforce rights indemnity agreement entered ascot connection wagp contract may experience substantial losses however management cannot time predict outcome arbitration litigation may ensue developing wagp contract dispute certain degree indemnity agreement given favor ascot protect us based upon current knowledge relevant facts circumstances expect outcome dispute material adverse effect financial condition results operations global settlement agreement “gsa” september 7 2007 company finalized gsa ascot significant components agreement include • reduction purchase price 25000 • ascot agreed provide supplemental backstop letters credit amount 20322 issued nonnigerian bank approved company • ascot provided specific indemnities related two ongoing projects ascot acquired part agreement • ascot company agreed working capital adjustments provided agreement resolved • except provided gsa ascot company waived respective rights obligations relating indemnifications provided february 7 2007 share purchase agreement concerning breach covenant representation warranty result gsa company recognized cumulative gain sale nigeria assets operations 183 gsa settled payment ascot company amount 11076 amount represents agreed upon reduction purchase price due ascot 25000 reduced amounts owed ascot company 11299 services rendered transition services agreement “tsa” 2625 due ascot form note closing agreement gsa ascot’s account company current december 31 2007 letters credit time february 7 2007 sale nigeria assets operations company four letters credit outstanding totaling 20322 associated discontinued operations “discontinued lc’s” accordance fasb interpretation 45 “guarantors accounting disclosure requirements guarantees including guarantees indebtedness others” “fin 45” liability recognized 1575 related letters credit liability released discontinued lc’s released expire company relieved risk related discontinued lc’s one discontinued lc’s expired december 2007 amount 440 resulting release fair value lc leaving remaining fin 45 liability 1556 december 31 2007 three remaining discontinued lc’s scheduled expire amount 19759 august 31 2008 123 february 28 2009 accordance agreement discontinued lc’s backstopped us dollar denominated letters credit issued intercontinental bank plc nigerian bank additionally accordance gsa discontinued lc’s supplementally backstopped letters credit issued international bank based paris france standard poor’s rating aastable february 20 2008 management believes backstop letters credit provide loss security company event company’s outstanding discontinued lc’s called transition services agreement concurrent nigeria sale company entered twoyear tsa ascot agreement company primarily providing labor form seconded employees work direction ascot along specifically defined work orders services generally covered tsa ascot agreed reimburse company services december 31 2007 reimbursable contract costs totaled approximately 23966 company ascot working shift transition willbros group inc notes consolidated financial statements thousands except share per share amounts 18 discontinuance operations asset disposals transition services agreement continued services provided company direct services secured ascot december 31 2007 company four employees still seconded ascot although services provided tsa generate transactions company ascot amounts considered significant additionally company’s level support decreased term tsa date employees services provided company shift direct employees services company ability significantly influence operating financial policies ascot provisions emerging issues task force issue 0313 “applying conditions paragraph 42 fasb statement 144 determining whether report discontinued operations” “eitf 0313” company significant continuing involvement operations former assets operations owned nigeria accordingly income generated tsa shown net costs incurred component “loss discontinued operations net provision income taxes” consolidated statement operations assets liabilities shown “assets discontinued operations” “liabilities discontinued operations” respectively consolidated balance sheets residual equipment nigeria conjunction tsa company made available certain equipment ascot use nigeria times benin togo ghana equipment sold ascot agreement resolved ascot rental rates equipment period february 8 2007 december 31 2007 therefore recorded receivable related use equipment incurred recorded necessary depreciation holding costs agreed gsa september 14 2007 company received appraisal equipment fairvalue equipment 8477 due business legal conditions nigeria taken impairment charge 1542 related equipment located nigeria fourth quarter 2007 company’s net book value equipment outside nigeria december 31 2007 1205 equipment comprised construction equipment rolling stock generator sets company ascot working resolve issue rental equipment either cash settlement though exchange equipment relocation equipment company location outside west africa venezuela business disposal november 28 2006 company completed sale assets operations venezuela company received total compensation 7000 cash 3300 form commitment buyer paid december 4 2013 repayment commitment secured 10 percent interest venezuelan financing joint venture december 31 2007 payment commitment made company estimates gain loss sale assets operations venezuela txp4 plant asset disposal january 12 2006 company completed sale txp4 plant company received cash payments 27944 sale realized gain 1342 net taxes 691 addition cash payments described williams field services company “williams” agreed pay company portion recovery williams may obtain based damages loss injury related txp4 plant 3400 settlement contingent upon williams’ recovery various third parties ongoing potential source cash flows subsequent sale date timing amount resolution claims cannot estimated additional payments received willbros group inc notes consolidated financial statements thousands except share per share amounts 18 discontinuance operations asset disposals transition services agreement continued results discontinued operations condensed statements operations discontinued operations follows willbros group inc notes consolidated financial statements thousands except share per share amounts 18 discontinuance operations asset disposals transition services agreement continued balance sheets discontinued operations condensed balance sheets discontinued operations follows willbrosgroup inc notes consolidated financial statements thousands except share per share amounts 18 discontinuance operations asset disposals transition services agreement continued profit disgorgement company reached agreement principle staff sec resolve investigation possible violations foreign corrupt practices act us securities laws related projects bolivia ecuador nigeria result agreement principle subject approval sec commissioners company recorded 10300 charge discontinued operations 10300 profit disgorgement inclusive accrued interest disgorged profit related single nigeria project included february 7 2007 sale company’s nigeria assets operations disgorged profit previously recognized results discontinued operations accordingly full amount 10300 recorded charge discontinued operations third quarter 2007 classification consistent provisions sfas 144 see note 15 contingencies commitments circumstances discussion agreement principle cash equivalents nigeria restricted cash 36683 december 31 2006 december 31 2006 balance consortium bank account required approval company consortium partner disburse funds additionally cash equivalents nigeria contained 9482 december 31 2006 appropriated use specific projects parts supplies inventories nigeria parts supplies inventories 21645 net reserves 12159 december 31 2006 loss provision contracts company recognized 33957 estimated losses related two projects nigeria december 31 2006 contingencies commitments circumstances december 31 2006 assets accounts receivable discontinued operations include anticipated recoveries insurance third parties 1191 primarily related repair pipelines item 9item 8 financial statements supplementary data index consolidated financial statements report independent registered public accounting firm board directors stockholders willbros group inc audited accompanying balance sheets willbros group inc panama corporation december 31 2008 2007 related statements operations stockholders’ equity comprehensive income cash flows two years period ended december 31 2008 financial statements responsibility company’s management responsibility express opinion financial statements based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements referred present fairly material respects financial position willbros group inc december 31 2008 2007 results operations cash flows two years period ended december 31 2008 conformity accounting principles generally accepted united states america also audited accordance standards public company accounting oversight board united states willbros group inc’s internal control financial reporting december 31 2008 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission coso report dated february 25 2009 expressed unqualified opinion grant thornton llp houston texas february 25 2009 report independent registered public accounting firm board directors stockholders willbros group inc audited accompanying consolidated statements operations stockholders’ equity comprehensive income loss cash flows year ended december 31 2006 financial statements responsibility company’s management responsibility express opinion financial statements based audit conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements referred present fairly material respects results operations cash flows year ended december 31 2006 willbros group inc conformity accounting principles generally accepted united states america also audited adjustments retrospectively apply change presentation depreciation indicated note 1 change reportable segments reported note 14 consolidated financial statements year 2006 opinion adjustments appropriate properly applied glo cpas lllp houston texas march 12 2007 except change presentation depreciation note 14 february 21 2008 report independent registered public accounting firm board directors stockholders willbros group inc audited willbros group inc’s panama corporation internal control financial reporting december 31 2008 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission coso willbros group inc’s management responsible maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included management’s report internal control financial reporting included item 9a responsibility express opinion willbros group incs’ internal control financial reporting based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether effective internal control financial reporting maintained material respects audit included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk performing procedures considered necessary circumstances believe audit provides reasonable basis opinion company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate opinion willbros group inc maintained material respects effective internal control financial reporting december 31 2008 based criteria established internal controlintegrated framework issued coso also audited accordance standards public company accounting oversight board united states willbros group inc’s consolidated balance sheets december 31 2008 2007 related statements operations stockholders’ equity comprehensive income cash flows two years period ended december 31 2008 report dated february 25 2009 expressed unqualified opinion financial statements grant thornton llp houston texas february 25 2009 willbros group inc consolidated balance sheets thousands except share per share amounts see accompanying notes consolidated financial statements willbros group inc consolidated statements operations thousands except share per share amounts see accompanying notes consolidated financial statements willbros group inc consolidated statements stockholders’ equity comprehensive income loss thousands except share per share amounts willbros group inc consolidated statements stockholders’ equity comprehensive income loss thousands except share per share amounts 1 realization previously recorded foreign currency translation adjustments associated company’s nigeria assets operations 2 private placement completed october 26 2006 see accompanying notes consolidated financial statements willbros group inc consolidated statements cash flows thousands except share per share amounts willbros group inc consolidated statements cash flows thousands except share per share amounts see accompanying notes consolidated financial statements 1 summary significant accounting policies company willbros group inc “wgi” republic panama corporation majorityowned subsidiaries “company” independent international contractor serving oil gas power industries governmental entities refinery petrochemical industries company’s principal markets continuing operations united states canada oman company obtains work competitive bidding negotiations prospective clients contract values may range several thousand dollars several hundred million dollars contract durations range weeks year disclosures notes consolidated financial statements relate continuing operations except otherwise indicated basis presentation discontinuance operations asset disposals 2006 company chose exit following businesses nigeria venezuela txp4 plant collectively “discontinued operations” accordingly businesses presented discontinued operations preceding consolidated financial statements net assets net liabilities related discontinued operations shown consolidated balance sheets “assets discontinued operations” “liabilities discontinued operations” respectively results discontinued operations shown consolidated statements operations income loss discontinued operations net provision income taxes” periods shown discussion discontinued operations see note 17 discontinuance operations asset disposals transition services agreement cash equivalents december 31 2007 company 2575 cash equivalents committed fund escrow account related settlement principle sec escrow account funded company january 2008 escrow account closed november 2008 company made scheduled payments sec doj see note 8 government obligations principles consolidation consolidated financial statements company include accounts wgi majorityowned subsidiaries whollycontrolled entities intercompany accounts transactions eliminated consolidation ownership interest minority participants subsidiaries whollyowned principally oman included accounts payable accrued liabilities material minority participants’ share net income subsidiaries included contract costs interests company’s unconsolidated joint ventures accounted using equity method consolidated balance sheets use estimates consolidated financial statements prepared accordance generally accepted accounting principles united states include certain estimates assumptions made management company preparation consolidated financial statements estimates assumptions relate reported amounts assets liabilities date consolidated financial statements reported amounts revenue expense period significant items subject estimates assumptions include revenue recognition percentageofcompletion method accounting including estimates progress toward completion estimates gross profit loss accrual contracts progress tax accruals certain accrued liabilities quantification amounts recorded contingencies valuation allowances accounts receivable deferred income tax assets liabilities carrying amount parts supplies property plant equipment goodwill company bases estimates historical experience assumptions believes relevant circumstances actual results could differ estimates commitments contingencies liabilities loss contingencies arising claims assessments litigation fines penalties sources recorded management assesses probable liability incurred amount reasonably estimated recoveries costs third parties management assesses probable realization separately recorded assets legal costs incurred connection matters relating contingencies expensed period incurred see note 15 contingencies commitments circumstances discussion company’s commitments contingencies 1 summary significant accounting policies continued accounts receivable trade accounts receivable recorded invoiced amount bear interest allowance doubtful accounts company’s best estimate probable amount credit losses company’s existing accounts receivable considerable amount judgment required assessing realization receivables relevant assessment factors include creditworthiness customers prior collection history balances 90 days past due specified minimum amount reviewed individually collectability account balances charged allowance reasonable means collection exhausted potential recovery considered remote allowance requirements based current facts available reevaluated adjusted regular basis additional information received inventories consisting primarily parts supplies stated lower actual cost market parts supplies evaluated least annually adjusted excess obsolescence excess obsolescence allowances existed december 31 2008 2007 property plant equipment property plant equipment stated cost depreciation including amortization capital leases provided straightline method using estimated lives follows construction equipment 46 years marine equipment years transportation equipment 34 years buildings years furniture equipment 310 years assets held capital leases leasehold improvements amortized straightline basis assets retired otherwise disposed cost related accumulated depreciation removed accounts resulting gain loss recognized net consolidated statements operations period normal repair maintenance costs charged expense incurred significant renewals betterments capitalized longlived assets reviewed impairment annually whenever events changes circumstances indicate carrying amount asset may recoverable recoverability assets held used measured comparison carrying amount asset fair value asset assets considered impaired impairment recognized measured amount carrying amount assets exceeds fair value assets disposed reported lower carrying amount fair value less costs sell goodwill intangible assets company applies statements financial accounting standards 141 “business combinations” “sfas 141” statements financial accounting standards 142 “accounting goodwill intangible assets” “sfas 142” sfas 141 requires use purchase accounting method business combinations broadens criteria recording intangible assets separate goodwill sfas 142 stipulates nonamortization approach account purchased goodwill certain intangible assets indefinite useful lives also requires least annual impairment test applying fairvaluebased test intangible assets finite lives continue amortized useful lives useful life intangible asset entity period asset expected contribute directly indirectly future cash flows entity goodwill represents excess purchase price fair value net assets acquired company performs annual test impairment fourth quarter fiscal year frequently event circumstance indicates impairment may occurred company performs required annual impairment test goodwill using discounted cash flow analysis supported comparative market multiples determine fair values businesses versus book values possible impairment operating segment indicated implied fair value goodwill tested comparing carrying amount net assets operating segment excluding goodwill total fair value carrying amount goodwill exceeds implied fair value impairment charge recorded sustained adverse conditions equity market negatively impacted market capitalization almost public companies including led goodwill impairment charge totaling 62295 downstream oil gas segment turn regarded indicator adverse change business climate company continue monitor carrying value goodwill principal factors used discounted cash flow analysis requiring judgment projected results operations weighted average cost capital wacc terminal value assumptions wacc takes account relative weights component company’s consolidated capital structure equity debt represents expected cost new capital adjusted appropriate consider lower risk profiles associated longer term contracts barriers market entry terminal value assumptions applied final year discounted cash flow model due many variables inherent estimation business’s fair value relative size company’s recorded goodwill differences assumptions may material effect results company’s impairment analysis 1 summary significant accounting policies continued intangible assets company intangible assets indefinite useful lives company intangible assets finite lives intangible assets consist customer relationships backlog recorded connection acquisition inserv november 2007 value existing customer relationships recorded estimated fair value determined using discounted cash flow method acquired customer relationships finite useful life therefore amortized estimated useful life relationships additionally company able assign value backlog purchased acquisition existing backlog time acquisition recorded fair value amortized useful life contracts see note 6 goodwill intangibles assets revenue number factors relating company’s business affect recognition contract revenue company typically structures contracts unitprice time materials fixedprice cost plus fixed fee company believes operating results evaluated time horizon major contracts progress completed change orders extra work variations scope work cost recoveries claims negotiated realized revenue unitprice time materials contracts recognized earned revenue fixedprice cost plus fixed fee contracts recognized using percentageofcompletion method estimated contract income resulting revenue generally accrued based costs incurred date percentage total estimated costs taking consideration physical completion total estimated costs thus contract income impacted changes productivity scheduling unit cost labor subcontracts materials equipment additionally external factors weather client needs client delays providing permits approvals labor availability governmental regulation politics may affect progress projects completion thus timing revenue recognition certain fixedprice cost plus fixed fee contracts include amended include incentive bonus amounts contingent company accomplishing stated milestone revenue attributable incentive bonus amounts recognized risk uncertainty surrounding achievement milestone removed company recognize income fixedprice contract approximately five ten percent complete depending upon nature contract current estimate total contract cost indicates loss contract projected loss recognized full determined company considers unapproved change orders contract variations company customer approval scope change price associated scope change costs associated unapproved change orders included estimated cost complete contracts expensed incurred company recognizes revenue equal cost incurred unapproved change orders realization price approval probable estimated amount equal greater company’s cost related unapproved change order revenue recognized unapproved change orders included contract costs recognized income yet billed balance sheet revenue recognized unapproved change orders subject adjustment subsequent periods reflect changes estimates final agreements customers company considers claims amounts company seeks seek collect customers others customercaused changes contract specifications design customerrelated causes unanticipated additional contract costs agreement customers scope price changes revenue claims recognized agreement reached customers value claims instances may occur completion work contract costs associated claims included estimated costs complete contracts expensed incurred 1 summary significant accounting policies continued depreciation company depreciates assets based estimated useful lives time acquisition using straightline method effective fiscal year ended december 31 2007 depreciation amortization related operating activities included contract costs depreciation amortization related general administrative activities included general administrative “ga” expense consolidated statements operations contract costs ga expenses included within operating expenses consolidated statements operations company previously reported depreciation amortization separate line item consolidated statements operations change presentation made bring company’s presentation financial results line peers provide greater comparability results within industry change presentation impact current historical reported profitability income taxes company accounts income taxes accordance statements financial accounting standards 109 “accounting income taxes” “sfas 109” standard takes account differences financial statement treatment tax treatment certain transactions deferred tax assets liabilities recognized future tax consequences attributable differences financial statement carrying amounts existing assets liabilities respective tax bases deferred tax assets liabilities measured using enacted tax rates expected apply taxable income years temporary differences expected recovered settled effect change tax rates recognized income expense period includes enactment date provision benefit income taxes annual effective tax rate impacted income taxes certain countries discontinued operations computed based deemed profit rather taxable income tax holidays certain international projects company adopted fasb interpretation 48 “accounting uncertainty income taxes interpretation fasb statement 109” “fin 48” january 1 2007 fin 48 establishes single model address accounting uncertain tax positions fin 48 clarifies accounting income taxes prescribing minimum recognition threshold tax position required meet recognized financial statements fin 48 also provides guidance derecognition measurement classification interest penalties accounting interim periods disclosure transition company one subsidiaries files income tax returns us federal jurisdiction various state foreign jurisdictions exceptions company longer subject us income tax examination tax authorities years 2004 longer subject canadian income tax years 2001 oman years 2006 retirement plans benefits company voluntary defined contribution retirement plan us based employees qualified contributory part employees voluntary savings plan certain international employees nonqualified contributory part employees stockbased compensation effective january 1 2006 company adopted fair value recognition provisions statement financial accounting standards 123r “sharebased payment” “sfas 123r” using modified prospective application method compensation cost resulting sharebased payment transactions recognized financial statements statement establishes fair value method measurement requires entities apply fair value method accounting sharebased payment transactions amount compensation cost measured based grantdate fair value instrument issued recognized vesting period company uses blackscholes valuation method determine fair value stock options granted grant date sharebased compensation related restricted stock restricted stock rights also described collectively restricted stock units “rsu’s” recorded based company’s stock price grant date awards granted expensed ratably vesting period award unless retirement age reached case expense accelerated foreign currency translation significant monetary asset liability accounts denominated currencies united states dollars translated united states dollars current exchange rates translation adjustments accumulated comprehensive income loss nonmonetary assets liabilities highly inflationary economies translated united states dollars historical exchange rates revenue expense accounts converted prevailing rates throughout year gains losses foreign currency transactions translation adjustments highly inflationary economies recorded income period incurred concentration credit risk company concentration customers oil gas power refinery industries expose company concentration credit risk within single industry 1 summary significant accounting policies continued company seeks obtain advance progress payments contract work performed major contracts receivables generally collateralized allowance doubtful accounts 1551 1108 december 31 2008 2007 respectively december 31 2008 51844 cash equivalents 249 percent federally insured bank accounts fair value financial instruments carrying value financial instruments materially differ fair value income loss per common share basic income loss per share calculated dividing net income loss less preferred dividend requirements weightedaverage number common shares outstanding year diluted income loss per share calculated including weightedaverage number potentially dilutive common shares weightedaverage number common shares outstanding shares common stock underlying company’s convertible notes included calculation diluted income per share using “ifconverted” method therefore numerator diluted income per share calculated excluding aftertax interest expense associated convertible notes since notes treated converted common stock derivative financial instruments company may use derivative financial instruments forward contracts options financial instruments hedges mitigate nonus currency exchange risk company unable match nonus currency revenue expense currency company derivative financial instruments december 31 2008 2007 cash equivalents company considers highly liquid investments original maturity three months less cash equivalents cash flows investing activities proceeds sale discontinued operations year ended december 31 2006 includes 16532 nonrefundable payments applied sale nigeria assets operations recently issued accounting standards sfas 141r december 2007 financial accounting standards board “fasb” released statements financial accounting standards 141r “business combinations” “sfas 141r” sfas 141r applies prospectively business combinations acquisition date beginning first annual reporting period beginning december 15 2008 business combinations year ending december 31 2009 company early adoption prohibited sfas 141r establishes principles requirements acquirer recognizes measures financial statements identifiable assets acquired liabilities assumed noncontrolling interest goodwill acquired additionally transaction costs capitalized current accounting guidance required expensed incurred sfas 141r sfas 141r also establishes disclosure requirements enable users evaluate nature financial effects business combination provisions sfas 141r impact company party business combination pronouncement adopted sfas 157 september 2006 fasb issued statements financial accounting standards 157 “fair value measurements” “sfas 157” sfas 157 applies accounting pronouncements require permit fair value measurements effective financial statements issued fiscal years beginning november 15 2007 interim periods within fiscal years january 1 2008 company adopted provisions sfas 157 related financial assets liabilities nonfinancial assets liabilities measured fair value recurring basis adoption accounting pronouncement result material impact consolidated financial statements february 2008 fasb issued fasb staff position “fsp” financial accounting standard 1571 “application fasb statement 157 fasb statement 13 accounting pronouncements address fair value measurements purposes lease classification measurement statement 13” removes certain leasing transactions scope sfas 157 fsp financial accounting standard 1572 “effective date fasb statement 157” defers effective date sfas 157 one year certain nonfinancial assets nonfinancial liabilities except recognized disclosed fair value financial statements recurring basis october 2008 fasb also issued fsp sfas 1573 “determining fair value financial asset market asset active” clarifies application sfas 157 inactive market illustrates entity would determine fair value market financial asset active beginning january 1 2009 company adopt provisions nonfinancial assets nonfinancial liabilities required permitted measured fair value recurring basis include measured fair value goodwill impairment testing indefinitelived intangible assets measured fair value impairment assessment nonfinancial longlived assets measured fair value impairment assessment asset retirement obligations initially measured fair value initially measured fair value business combination company currently assessing impact adoption pronouncement financial statements company expect provisions sfas 157 related items material impact consolidated financial statements 1 summary significant accounting policies continued sfas 159 february 2007 fasb released statements financial accounting standards 159 “the fair value option financial assets financial liabilities” “sfas 159” effective fiscal years beginning november 15 2007 sfas 159 permits entities choose measure many financial instruments certain items fair value sfas 159 effective company’s fiscal year ending december 31 2008 company elect use fair value option financial assets financial liabilities currently recorded fair value sfas 160 december 2007 fasb released statements financial accounting standards 160 “noncontrolling interests consolidated financial statements amendment arb 51” “sfas 160” sfas 160 effective fiscal years interim periods within fiscal years beginning december 15 2008 early adoption prohibited sfas 160 establishes reporting requirements provide sufficient disclosure clearly identify distinguish interests noncontrolling owners interest parent adoption standard impact company’s presentation minority interest oman december 31 2008 minority interest included accounts payable accrued liabilities see note 7 accounts payable accrued liabilities minority participants’ share net income subsidiaries included contract costs upon adoption noncontrolling interest recognized equity consolidated balance sheet minority participants’ share net income presented face consolidated statement operations fsp apb 141 may 2008 fasb issued fsp apb 141 “accounting convertible debt instruments may settled cash upon conversion including partial cash settlement” fsp clarifies convertible debt instruments may settled cash upon conversion including partial cash settlement addressed apb opinion 14 additionally fsp specifies issuers instruments separately account liability equity components manner reflect entity’s nonconvertible debt borrowing rate interest cost recognized subsequent periods statement effective financial statements issued fiscal years beginning december 15 2008 interim periods within fiscal years early adoption prohibited company currently assessing impact adoption pronouncement financial statements fsp fas 1423 april 2008 fasb issued fsp fas 1423 “determination useful life intangible assets” fsp amends factors considered developing renewal extension assumptions used determine useful life recognized intangible asset fasb statement financial accounting standards 142 “sfas 142” intent fsp improve consistency useful life recognized intangible asset sfas 142 period expected cash flows used measure fair value asset sfas 141r us generally accepted accounting principles statement effective financial statements issued fiscal years beginning december 15 2008 interim periods within fiscal years early adoption prohibited company expect adoption fsp material impact consolidated financial statements reclassification certain reclassifications made prior year balances conform current year presentations 2 acquisitions integrated service company llc effective november 20 2007 company acquired issued outstanding equity interests integrated service company llc “inserv” oklahoma limited liability company headquartered tulsa oklahoma inserv fully integrated solutions provider turnaround maintenance capital projects hydrocarbon processing petrochemical industries inserv’s core competencies include providing turnkey project services program management engineering procurement construction “epc” project services overhauling fluid catalytic cracking units main gasoline producing units refineries run continuously three five years shutdowns overhauling process units installing refractory specialty welding piping projects erecting modifying process heaters plants building modifying repairing oil storage tanks typically located pipeline terminals refineries manufacturing process heaters heater coils alloy piping specialty components equipment installation oil refineries 2 acquisitions continued connection closing company paid approximately 208925 satisfaction cash portion purchase price consisting 202500 less approximately 1511 shareholder loans deemed paid closing plus approximately 7936 representing estimated working capital adjustment working capital adjustment finalized 2008 6880 company paid additional consideration consisting 637475 shares willbros group inc common stock value 22500 accordance acquisition agreement shares 1 issued sec rule 506 regulation restricted 2 registered 3 may sold period one year closing date acquisition thereafter may sold accordance applicable securities laws total 20000 cash portion purchase price placed escrow period eighteen months released escrow onethird increments sixmonth twelvemonth eighteenmonth anniversaries closing date escrowed cash secures performance sellers’ obligations definitive agreement including working capital adjustments indemnification obligations breaches sellers’ representations warranties covenants included definitive agreement company released sixmonth twelvemonth escrow payments 2008 total purchase price amount 233180 consisting 231425 purchase price approximately 660 transaction costs 1095 related post closing adjustments settlement working capital adjustment goodwill related transaction deductible tax purposes united states summary purchase price allocation follows inserv related party transaction early 2007 inserv retained growth capital partners lp investment banking firm assist inserv possible sale company john mcnabb ii company’s chairman board directors founder chairman board directors growth capital partners received customary fee inserv upon sale inserv mr mcnabb randy r harl company’s president chief executive officer one company’s directors served inserv board directors 2005 september 18 2007 messrs mcnabb harl resigned board directors inserv prior commencement discussions company inserv respect possible acquisition inserv mr mcnabb recused providing advice inserv principal growth capital partners messrs mcnabb harl owned 3000 shares inserv individually less 04 percent outstanding equity interests inserv company formed special committee board directors consisting independent directors mr mcnabb consider evaluate approve acquisition inserv addition special committee obtained opinion dated october 30 2007 nationally recognized investment banking valuation firm consideration paid company proposed acquisition fair company financial point view 2 acquisitions continued midwest management 1987 ltd effective july 1 2007 company acquired assets operations midwest management 1987 ltd “midwest” pursuant share purchase agreement midwest provides pipeline construction rehabilitation maintenance water crossing installations replacements facilities fabrication oil gas industry predominantly western canada total purchase price amount 23724 consisting 22230 purchase price approximately 1494 transaction costs goodwill related transaction deductible tax purposes canada summary purchase price allocation follows 3 accounts receivable accounts receivable net december 31 2008 2007 comprised following company expects accounts receivable collected within one year provision credit bad debts included ga expenses consolidated statements operations 2403 387 517 years ended december 31 2008 2007 2006 respectively 4 contracts progress contract cost recognized income yet billed uncompleted contracts arise recorded revenues contract exceed amounts billed terms contracts contract billings excess cost recognized income arise billed amounts exceed revenues recorded amounts billable customers upon various measures performance including achievement certain milestones completion specified units completion contract also included contract cost recognized income yet billed uncompleted contracts amounts company seeks collect customers change orders approved scope price associated scope change unapproved change orders revenue amounts recorded equal lesser expected revenue cost incurred realization price approval probable estimating revenues unapproved change orders involve use estimates reasonably possible revisions estimated recoverable amounts recorded unapproved change orders may made nearterm company successfully resolve matters reduction revenues may required amounts previously recorded 4 contracts progress continued contract cost recognized income yet billed related amounts billed december 31 2008 2007 follows contract cost recognized income yet billed includes 218 86 december 31 2008 2007 respectively completed contracts 5 property plant equipment property plant equipment used secure debt subject lien cost december 31 2008 2007 follows 6 goodwill intangible assets company performs annual impairment test goodwill fourth quarter year goodwill purchased intangible assets included identifiable assets segment assigned impairment tests performed least annually often circumstances require goodwill impairment well amortization purchased intangible assets charged respective segment’s operating income annual impairment test segments performed fourth quarter 2008 performing goodwill impairment tests company uses discounted cash flow approach corroborated comparative market multiples determine fair value businesses conducting 2008 test company determined goodwill downstream oil gas impaired 62295 goodwill impairment charge primarily driven sustained adverse conditions equity markets negatively impacted market capitalization almost public companies including turn regarded indicator adverse change business climate company’s intangible assets december 31 2008 follows intangible assets amortized straightline basis estimated remaining useful lives range 04 110 years amortization expense included operating expense years ended december 31 2008 2007 10420 794 respectively estimated amortization expense subsequent five years thereafter follows 7 accounts payable accrued liabilities accounts payable accrued liabilities december 31 2008 2007 follows 8 government obligations government obligations represent amounts due government entities specifically united states department justice “doj” sec final settlement investigations involving violations foreign corrupt practices act “fcpa” violations securities act 1933 securities exchange act 1934 investigations stem primarily company’s former operations bolivia ecuador nigeria may 2008 company reached final agreements doj sec settle investigations previously disclosed agreements provided aggregate payment 32300 company pay 22000 fines doj related fcpa violations consisting 10000 paid signing 4000 annually three years thereafter interest due unpaid amounts company pay 10300 sec consisting 8900 profit disgorgement 1400 prejudgment interest payable four equal installments 2575 first installment paid signing annually three years thereafter postjudgment interest payable outstanding 7725 8 government obligations continued twelve months ended december 31 2008 12575 aggregate obligation satisfied consisted initial 10000 payment doj first installment 2575 sec inclusive prejudgment interest remaining aggregate obligation 19725 classified consolidated balance sheets 6575 “current portion government obligations” 13150 “longterm portion government obligations” division based payment terms provide three remaining equal installments 2575 4000 sec doj respectively 9 longterm debt longterm debt december 31 2008 2007 follows credit facility november 20 2007 company entered credit agreement “credit agreement” among willbros usa inc subsidiary company “wusa” borrower company certain subsidiaries guarantors collectively “loan parties” group lenders “lenders” led calyon new york branch “calyon” credit agreement provides threeyear senior secured 150000 revolving credit facility due november 2010 “2007 credit facility” company option subject obtaining commitments one lenders calyon’s consent increase size 2007 credit facility 200000 within first two years closing date 2007 credit facility company anticipate requesting increase 2009 company able utilize 100 percent 2007 credit facility obtain performance letters credit 333 percent facility cash advances general corporate purposes financial letters credit 2007 credit facility secured substantially assets loan parties well pledge 100 percent equity interests wusa company’s material subsidiaries fees payable 2007 credit facility include 1 excess facility fee rate per annum equal 050 percent unused 2007 credit facility capacity payable quarterly arrears 2 commission face amount outstanding performance letters credit equal applicable margin effect performance letters credit payable quarterly arrears 3 commission face amount outstanding financial letters credit equal applicable libor margin effect payable quarterly arrears 4 letter credit fee equal 0125 percent per annum aggregate commitments interest cash borrowings payable quarterly arrears floating rate based base rate defined credit agreement company’s option rate equal one two three sixmonth eurodollar rate libor plus case applicable margin determined using performancebased grid described credit agreement credit agreement includes customary affirmative negative covenants including certain financial covenants described limitations capital expenditures triggered liquidity levels lower 35000 limitations foreign cash investments total indebtedness liens limitations certain asset sales dispositions well certain acquisitions asset purchases 9 longterm debt continued default credit agreement may triggered events failure comply financial covenants credit agreement failure make payments due credit agreement failure make payments due respect failure perform obligations relating debt obligations excess 5000 change control company certain insolvency proceedings default credit agreement would permit calyon lenders restrict company’s ability access 2007 credit facility cash advances letters credit require immediate repayment outstanding cash advances interest require cash collateralization outstanding letter credit obligations unamortized debt issue costs associated creation 2007 credit facility total 960 1302 included assets december 31 2008 december 31 2007 respectively costs amortized interest expense threeyear term credit facility ending november 2010 2007 credit facility also includes financial covenants relating maintenance following · minimum net worth amount less sum 197354 plus 50 percent consolidated net income earned fiscal quarter ended december 31 2008 plus adjustments certain equity transactions · maximum leverage ratio 225 100 fiscal quarters ending december 31 2008 maximum leverage ratio 200 100 fiscal quarter ending december 31 2008 · minimum fixed charge coverage ratio less 325 100 fiscal quarter ending december 31 2008 fixed charge coverage ratio less 350 100 fiscal quarter thereafter · company’s liquidity fiscal quarter falls 35000 maximum capital expenditure ratio 150 100 cost assets added purchase capital lease fiscal quarter three quarters thereafter covenants violated would considered event default entitling lenders terminate remaining commitment call outstanding letters credit accelerate payment principal interest outstanding december 31 2008 company compliance covenants december 31 2008 borrowings outstanding 2007 credit facility 8010 outstanding letters credit consisting 7887 issued projects continuing operations 123 issued projects related discontinued operations 65 senior convertible notes december 22 2005 company entered purchase agreement “purchase agreement” private placement 65000 aggregate principal amount 65 senior convertible notes due 2012 “65 notes” private placement closed december 23 2005 first quarter 2006 initial purchasers 65 notes exercised options purchase additional 19500 aggregate principal amount 65 notes collectively primary offering purchase option 65 notes total 84500 net proceeds offering used retire existing indebtedness provide additional liquidity support working capital needs 65 notes governed indenture dated december 23 2005 entered among company issuer willbros usa inc guarantor “wusai” bank new york mellon corporation trustee “indenture” issued purchase agreement among company initial purchasers 65 notes “purchasers” transaction exempt registration requirements securities act 1933 amended 65 notes convertible shares company’s stock underlying shares registered resale sec 65 notes however registered resale sec pursuant purchase agreement company wusai agreed indemnify purchasers affiliates agents certain liabilities including liabilities securities act 9 longterm debt continued 65 notes convertible shares company’s common stock conversion rate 569606 shares common stock per 1000 principal amount notes representing conversion price approximately 1756 per share resulting 1825587 shares december 31 2008 based principal amount 65 notes remain outstanding subject adjustment certain circumstances 65 notes general senior unsecured obligations interest due semiannually june 15 december 15 began june 15 2006 65 notes mature december 15 2012 unless notes repurchased converted earlier company right redeem 65 notes upon maturity principal amount plus accrued interest day prior maturity date payable cash holders 65 notes right require company purchase 65 notes cash including unpaid interest december 15 2010 holders 65 notes also right require company purchase 65 notes cash upon occurrence fundamental change defined indenture addition amounts described company required pay “makewhole premium” holders 65 notes elect convert notes company’s common stock connection fundamental change makewhole premium payable additional shares common stock calculated based formula premium ranging 0 percent 280 percent depending fundamental change occurs price company’s stock time fundamental change occurs upon conversion 65 notes company right deliver lieu shares common stock cash combination cash shares common stock indenture company required notify holders 65 notes method settling principal amount 65 notes upon conversion notification provided irrevocable legally binding upon company regard conversion 65 notes march 21 2006 company notified holders 65 notes election satisfy conversion obligation respect principal amount 65 notes surrendered conversion paying holders surrendered 65 notes 100 percent principal conversion obligation form common stock company 65 notes surrendered conversion company required notify holders method settling excess amount conversion obligation relating amount conversion value principal amount event default 10000 credit agreement including 2007 credit facility 275 notes corresponding event default would result 65 notes may 18 2007 company completed two transactions induce conversion two purchasers 65 notes conversion agreements purchasers converted 36250 aggregate principal amount 65 notes 2064821 shares company’s 005 par value common stock inducement purchasers convert company made aggregate cash payments purchasers 8972 plus 1001 accrued interest current interest period connection induced conversion company recorded loss early extinguishment debt 10894 loss early extinguishment debt inclusive cash premium paid induce conversion 1922 unamortized debt issue costs may 29 may 30 2007 company completed two additional transactions induce conversion two purchasers 65 notes conversion agreements purchasers converted 16200 aggregate principal amount 65 notes 922761 shares company’s common stock inducement purchasers convert company made aggregate cash payments purchasers 3748 plus 480 accrued interest current interest period connection induced conversion company recorded loss early extinguishment debt 4481 loss early extinguishment debt inclusive cash premium paid induce conversion writeoff 733 unamortized debt issue costs december 31 2008 32050 aggregate principal amount 65 notes remains outstanding unamortized debt issue costs 1455 1819 associated 65 notes included assets december 31 2008 2007 respectively amortized sevenyear period ending december 2012 covenant indenture 65 notes prohibits company incurring additional indebtedness consolidated leverage ratio exceeds 400 100 december 31 2008 covenant would precluded company borrowing 2007 credit facility 9 longterm debt continued 275 convertible senior notes march 12 2004 company completed primary offering 60000 275 convertible senior notes “275 notes” april 13 2004 initial purchasers 275 notes exercised option purchase additional 10000 aggregate principal amount notes collectively primary offering purchase option 275 notes totaled 70000 275 notes general senior unsecured obligations interest paid semiannually march 15 september 15 payments began september 15 2004 275 notes mature march 15 2024 unless notes repurchased redeemed converted earlier upon maturity principal amount plus accrued interest day prior maturity date payable cash indenture 275 notes originally provided company could redeem 275 notes cash march 15 2011 100 percent principal amount notes plus accrued interest holders 275 notes right require company purchase 275 notes including unpaid interest march 15 2011 2014 2019 upon change control related event march 15 2014 2019 company option providing common stock lieu cash combination common stock cash fund purchases accrued interest notes three put dates paid cash upon occurrence fundamental change defined indenture holders 275 notes right require company purchase 275 notes cash addition “makewhole premium” payable cash additional shares common stock holders 275 notes may certain circumstances convert notes shares company’s common stock initial conversion ratio 513611 shares common stock per 100000 principal amount notes representing conversion price approximately 1947 per share resulting 3048641 shares december 31 2008 based principal amount 275 notes remain outstanding subject adjustment certain circumstances notes convertible upon occurrence certain specified events including limited certain times closing sale price company’s common stock exceeds 120 percent current conversion price 2336 per share based initial conversion price event default company credit agreement indenture covering 275 notes 1 company fails pay principal interest indebtedness aggregate principal balance 10000 2 indebtedness principal balance 10000 accelerated event default would result 275 notes indenture amendment extended initial date 275 notes may redeemed company march 15 2013 march 15 2011 cash 100 percent principal amount notes plus accrued interest addition new provision added indenture requires company event “fundamental change” change control event 10 percent consideration transaction consists cash make coupon makewhole payment equal present value discounted us treasury rate lesser two years scheduled payments interest 275 notes b scheduled interest 275 notes date transaction march 15 2013 november 29 2007 holder exercised right convert converting 2000 aggregate principal amount 275 notes 102720 shares company’s common stock connection conversion company expensed proportionate amount debt issue costs resulting additional period interest expense 47 march 20 2008 holder exercised right convert converting 8643 aggregate principal amount 275 notes 443913 shares company’s common stock connection conversion company expensed proportionate amount debt issuance costs resulting additional period interest 187 december 31 2008 59357 aggregate principal amount 275 notes remains outstanding unamortized debt issue costs 965 1610 associated 275 notes included assets december 31 2008 2007 respectively amortized sevenyear period ending march 2011 9 longterm debt continued capital leases assets held capital leases summarized following minimum lease payments assets financed capital lease arrangements december 31 2008 obligations company unsecured credit facilities banks certain countries outside united states borrowings form shortterm notes overdrafts made competitive local interest rates generally line available borrowings related operations specific country credit available facilities approximately 6656 december 31 2008 outstanding borrowings made facilities december 31 2008 2007 10 retirement benefits company defined contribution plans funded participating employee contributions company matches employee contributions maximum four percent salary form cash contributions form wgi common stock suspended 2005 removed option january 9 2006 company contributions plans including employees working discontinued operations 3069 2265 1761 2008 2007 2006 respectively 11 income taxes company operates primarily us canada oman domiciled panama countries substantially different tax regimes tax rates affect consolidated income tax provision company effective tax rate moreover losses one country generally cannot used offset taxable income another country expenses incurred certain tax jurisdictions receive tax benefit thereby affecting effective tax rate income loss income taxes provision income taxes consolidated statements operations consist 11 income taxes continued 1 total provision income taxes excludes net fin 48 adjustments 150 60 2008 2007 respectively result adoption fin 48 provision income taxes determined based upon tax laws rates countries operations conducted income earned company’s subsidiaries operating united states subject federal income tax rates 35 percent varying state income tax rates methods computing tax liabilities company’s principal international operations canada oman 2008 company’s subsidiaries canada oman subject corporate income tax rates 295 percent 12 percent respectively company nontaxable foreign earnings tax holidays taxable years 2006 2008 company panamanian corporation panamanian tax law based territorial principles impose income tax income earned outside panama 2008 company’s parent loss approximately 14213 could used offset income earned tax jurisdictions therefore generates tax benefit loss primarily related interest company’s convertible notes stewardship expenses required accounting principles board opinion 23 “accounting income taxes special areas” “apb 23” management analyzed operations us canada oman company’s current operating strategy reinvest earnings operations mentioned jurisdictions rather distribute dividends intermediate holding companies parent company however 2008 company’s operation oman distribute dividend amount 12000 free withholding income taxes direct indirect shareholders also distributed dividend shareholders 2009 purpose repatriation earnings oman facilitate payment certain intercompany liabilities foreign us subsidiaries necessary company reorganizes delaware holding company’s current future operating strategy continues reinvesting earnings foreign operations therefore deferred income tax liability recorded determinations amounts unrecognized deferred tax liabilities related undistributed earnings disposition shares foreign subsidiaries made company’s reorganization panama delaware holding company may yield significantly different result 2009 would rendered 2008 different corporate structure tax regime 11 income taxes continued reconciliation differences provision income tax computed appropriate statutory rates reported provision income taxes follows upon adoption fin 48 company recorded 6369 charge beginning stockholders’ equity unrecognized tax positions 2008 company recognized 725 previously recorded unrecognized tax benefits due expiration statute limitations purposes assessment resolution certain audits accrued new uncertain tax positions amount 533 reconciliation beginning ending amount unrecognized tax benefits follows company total net tax asset equal 14735 excluding tax liabilities accrued fin 48 comprises tax refunds amount 4424 recorded company’s prepaid expenses accrued income taxes 5090 currently owed various federal stateprovincial tax authorities net deferred income tax asset 15401 represents amounts owed various tax authorities future 6232 unrecognized tax benefits would impact company’s effective tax rate ultimately recognized amount unrecognized tax benefits reasonably possible recognized 2009 approximately 1698 company recognizes interest penalties accrued related unrecognized tax benefits income tax expense twelve months ended december 31 2008 company recognized 429 interest expense interest penalties included table increase company’s deferred tax liability primarily result partnership income deferred future tax years tax depreciation recognized faster rate book depreciation certain classes capital assets construction vehicles equipment increase company’s deferred tax asset primarily attributable goodwill impairment charge 62295 principal components company’s net deferred tax liability 11 income taxes continued net deferred tax assets geographical location follows ultimate realization deferred tax assets related net operating loss carry forwards including state net operating loss carry forwards dependent upon generation future taxable income particular tax jurisdiction periods use net operating losses allowed management considers scheduled reversal deferred tax liabilities projected future taxable income making assessment company expects utilize united statescanadian federal net operating losses 2347 utilize state net operating losses 8208 company also expects realize tax deductions approximate amount 14872 related equity compensation tax effect timing differences approximately 7293 11 income taxes continued december 31 2008 company remaining us federal net operating loss carry forwards 3703 state net operating loss carry forwards 3160 company’s us federal net operating losses expire 2013 state net operating loss generally expires five years period net operating loss incurred company also net operating loss carry forward canada 177 based upon level historical taxable income projections future taxable income periods net operating losses utilized offset taxable income management believes company realize tax benefits 1530 loss carry forwards company also 22927 deferred tax asset related goodwill company expects fully realize tax ability fully deduct tax amortization company deferred taxable income approximately 28544 related canadian operations future years company expects pay tax related deferred liability 6580 2009 1760 2010 company 713 tax losses operations libya management expect receive tax benefit future therefore company recorded full valuation allowance tax losses amount 301 12 stockholders’ equity information contained note pertains continuing discontinued operations public offering november 20 2007 company completed public offering 7906250 common shares 3400 per share underwriters exercised option purchase shares available overallotments company received 253456 net proceeds underwriting discount offering costs net proceeds used fund cash portion purchase price acquisition inserv capital expenditures working capital stockholder rights plan april 1 1999 company adopted stockholder rights plan declared distribution one preferred share purchase right “right” outstanding share company’s common stock distribution made april 15 1999 stockholders record date rights expire april 14 2009 rights exercisable person group acquires 15 percent company’s common stock announces tender offer consummation would result ownership person group 15 percent common stock right entitles stockholders buy one onethousandth share series junior participating preferred stock exercise price 3000 per share company acquired merger business combination transaction person group acquired 15 percent companys outstanding common stock right entitles holder purchase rights thencurrent exercise price number acquiring companys common shares market value twice price addition person group acquires 15 percent companys outstanding common stock right entitles holder person members group purchase rights thencurrent exercise price number company’s common shares market value twice price prior acquisition person group beneficial ownership 15 percent companys common stock rights redeemable onehalf cent per right option companys board directors stock ownership plans may 1996 company established willbros group inc 1996 stock plan “1996 plan” 1125000 shares common stock authorized issuance provide awards key employees company willbros group inc director stock plan “director plan” 125000 shares common stock authorized issuance provide grant stock options nonemployee directors number shares authorized issuance 1996 plan director plan increased 4075000 225000 respectively stockholder approval options may granted director plan april 16 2006 company established 2006 director restricted stock plan “2006 director plan” 50000 shares restricted stock restricted stock rights authorized issuance nonemployee directors number shares authorized issuance 2006 director’s plan increased 2008 250000 stockholder approval 12 stockholders’ equity continued restricted stock restricted stock rights also described collectively restricted stock units “rsu’s” options granted 1996 plan vest generally three four year period options granted director plan fully vested rsus granted 2006 director plan vest one year date grant december 31 2008 1996 plan 799363 shares 2006 director plan 217875 shares available grant shares available december 31 2008 1996 plan 150000 shares reserved future grants required employment agreements certain provisions allow accelerated vesting based increases share prices eligible retirement years ended december 31 2008 2007 2006 1001 37 3247 respectively compensation expense recognized due accelerated vesting rsu’s due retirements separation company effective january 1 2006 company adopted fair value recognition provisions sfas 123r using modified prospective application method compensation cost recognized year ended december 31 2006 includes applicable amounts compensation expense sharebased payments granted prior yet vested january 1 2006 based grantdate fair value estimated accordance original provisions sfas 123 previously presented pro forma footnote disclosures company’s sec reports b compensation cost sharebased payments granted subsequent january 1 2006 based grantdate fair value estimated accordance provisions sfas 123r company uses blackscholes valuation method determine fair value stock options granted grant date sharebased compensation related rsu’s recorded based company’s stock price grant date recognition sharebased compensation related rsu’s impacted adoption sfas 123r expense stock options rsu’s totaled 11652 4087 7240 respectively years ended december 31 2008 2007 2006 fair value granted options estimated date grant using blackscholes option pricing model following weightedaverage assumptions options granted year ended december 31 2008 volatility calculated using analysis historical volatility company believes historical volatility company’s stock best method estimating future volatility expected lives options determined based company’s historical share option exercise experience company believes historical experience method best estimate future exercise patterns currently available riskfree interest rates determined using implied yield currently available zerocoupon us government issues remaining term equal expected life options 12 stockholders’ equity continued company’s stock option activity related information consist december 31 2008 aggregate intrinsic value stock options outstanding stock options exercisable 94 respectively weighted average remaining contractual term outstanding options 574 years weighted average remaining contractual term exercisable options 527 years december 31 2008 total intrinsic value options exercised 1284 9712 2639 years ended december 31 2008 2007 2006 respectively material tax benefit realized related exercises total fair value options vested years ended december 31 2008 2007 2006 322 496 357 respectively company’s nonvested options december 31 2008 changes nonvested options year ended december 31 2008 follows company’s rsu activity related information consist rsu’s outstanding december 31 2007 2006 include 225000 rsu’s vested deferred share issuance date rsus released year ended december 31 2008 total fair value rsu’s vested years ended december 31 2008 2007 2006 5367 2981 6990 respectively 12 stockholders’ equity continued december 31 2008 total 19697 unrecognized compensation cost net estimated forfeitures related nonvested sharebased compensation arrangements granted company’s stock ownership plans cost expected recognized weightedaverage period 196 years march 2002 certain officers company borrowed total 1307 employee stock purchase program permitted selected executives officers exclusive chief executive officer borrow company 100 percent funds required exercise vested stock options loans full recourse noninterest bearing period five years collateralized related stock difference 434 discounted value loans fair market value stock date exercise 119 representing difference exercise price certain options fair market value stock recorded compensation expense date exercise notes recorded discounted value discount amortized interest income periods notes outstanding net loans receivable presented reduction stockholders’ equity maximum loan amount one officer could outstanding employee stock purchase program 250 accordance sarbanesoxley act 2002 company longer makes loans executive officers company loans settled 2006 warrants purchase common stock october 27 2006 company completed private placement equity certain accredited investors pursuant company issued sold 3722360 shares company’s common stock resulting net proceeds 48748 conjunction private placement company also issued warrants purchase additional 558354 shares company’s common stock warrant exercisable whole part 60 months date issuance warrant holder may elect exercise warrant delivery payment company exercise price 1903 per share pursuant cashless exercise provided warrant agreement fair value warrants 3423 date grant calculated using blackscholes optionpricing model 536925 warrants outstanding december 31 2008 2007 13 income loss per common share basic diluted income loss per common share computed follows 13 income loss per common share continued company excluded securities listed number potentially dilutive shares outstanding effect would antidilutive accordance emerging issues task force “eitf” issue 048 “the effect contingently convertible instruments diluted earnings per share” 5318142 8408448 shares issuable upon conversion convertible notes would included diluted income loss per share year end december 31 2007 2006 respectively securities dilutive regardless whether conversion prices 1756 1947 respectively met 2008 443913 shares issued upon conversion convertible notes 14 segment information company’s segments strategic business units defined industry segments served managed separately different operational requirements strategies operate three business segments upstream oil gas downstream oil gas engineering segments currently operate primarily united states canada oman management evaluates performance operating segment based operating income corporate operations include executive management general administrative financing functions organization costs provide services allocated certain corporate assets three operating segments tables reflect company’s reportable segments years ended december 31 2008 2007 2006 14 segment information continued capital expenditures segment presented total assets segment december 31 2008 2007 presented 14 segment information continued due limited number major projects clients company may one time substantial part operations dedicated one project client country customers representing 10 percent total contract revenue follows information company’s operations work countries shown 15 contingencies commitments circumstances contingencies resolution criminal regulatory matters may 2008 previously disclosed agreement principle united states department justice “doj” willbros group inc “wgi” subsidiary willbros international inc “wii” settle doj’s investigation violations foreign corrupt practices act 1977 amended “fcpa” received final approval doj terms final agreement included deferred prosecution agreement “dpa” fully described along six count criminal information “information” filed united states district court southern district texas houston division “court” requirements dpa satisfied doj dismiss information also may 2008 final agreement reached wgi securities exchange commission “sec” resolve sec’s investigation violations fcpa securities act 1933 amended “securities act” securities exchange act 1934 amended “exchange act” final settlement sec entered approved court investigations stemmed primarily company’s former operations bolivia ecuador nigeria 15 contingencies commitments circumstances continued described fully settlements together require company pay approximately three years total 32300 penalties disgorgement profits plus postjudgment interest 7725 amount addition wgi wii period approximately three years subject dpa doj finally wgi subject permanent injunction barring future violations certain provisions federal securities laws specifically terms final settlement agreement concluded wgi wii may 14 2008 doj include following · six counts include conspiracy violate fcpa violations fcpa’s antibribery provisions violations fcpa’s booksandrecords provisions wgi wii face prosecution doj charges contained information possibly charges well fail comply dpa · dpa requires threeyear term dpa continued full cooperation doj investigation continued implementation compliance ethics program prevent detect violations fcpa anticorruption laws continued review existing internal controls policies procedures order ensure wgi wii maintain adequate controls rigorous anticorruption compliance code · dpa also requires wgi wii expense engage independent monitor three years assess make recommendations compliance dpa independent monitor selection process underway doj taken consideration candidate proposed company · provided wgi wii comply dpa doj agreed prosecute wgi wii based conduct described dpa move dismiss information three years · part dpa company pay 22000 fines four installments consisting 10000 payment made signing may 14 2008 4000 annually three years thereafter interest due unpaid amounts respect final settlement agreement concluded wgi may 14 2008 sec · sec filed court complaint “sec complaint” proposed agreed final judgment wgi “judgment” without admitting denying allegations sec complaint wgi consented filing sec complaint entry judgment resolve sec’s investigation sec complaint alleges civil violations fcpa’s antibribery provisions fcpa’s booksandrecords internal control provisions various antifraud provisions securities act exchange act judgment approved court permanently enjoins company violating fcpa’s antibribery booksandrecords internal control provisions certain antifraud provisions securities act exchange act · judgment requires wgi pay 8900 disgorgement profits 1400 prejudgment interest disgorgement prejudgment interest payable four equal installments 2575 first signing annually three years thereafter first payment made signing may 14 2008 postjudgment interest payable outstanding balance 7725 15 contingencies commitments circumstances continued failure company comply terms conditions either doj sec settlement could result resumed prosecution regulatory sanctions addition company previously disclosed office foreign assets control “ofac” investigating allegations violations sudanese sanctions regulations occurring october 2003 company voluntarily reported matter ofac also reported ofac corrective measures improvements company’s ofac compliance program ofac willbros usa inc agreed principle settle allegations pursuant company pay total civil penalty exceed 30 pipeline construction project issues july 2007 company announced award installation contract “42” contract” construction three segments midcontinent express pipeline project “mep project” midcontinent express pipeline llc “mep” contract structured cost reimbursable contract fixed fee company september 2008 company mep signed amendment finalized scope work 42” contract construction 179 miles 42” pipeline amendment also included award company additional installation contract “36” contract” construction 136 miles 36” pipeline anticipated start march 2009 company mobilized mep project fourth quarter 2008 december 31 2008 company employing three spreads pipeline construction equipment mep project conjunction award execution project company obtained performance bond mep project stated value 151476 january 2009 company notified mep approximately 20 miles scope work 42” contract terminated cause terminated 42” work company challenged validity sustainability partial termination cause mep asserting among points mep implementing partial termination cause pretext avoid paying fee due payable company termination convenience context company currently involved negotiations mep resolve contractual differences mep 42” contract company vigorously defend rights 42” pipeline contract mep december 31 2008 liability recorded related termination partial termination cause notice mep company ultimately determined court law valid enforceable company could held responsible costs incurred mep thirdparty contractor perform terminated 42” work excess cost company performing addition valid enforceable partial termination cause mep 42” pipeline contract would support mep’s termination 36” pipeline contract convenience without mep pay termination fee company february 2009 mep terminated 36” contract convenience company believes entitled contractual termination fee stated 36” contract vigorously enforce rights regard addition matters discussed company party number legal proceedings management believes nature number proceedings typical firm similar size engaged similar type business none proceedings material company’s financial position commitments time company enters commercial commitments usually form commercial standby letters credit surety bonds financial guarantees contracts company’s customers may require company secure letters credit surety bonds regard company’s performance contracted services cases commitments called upon event failure perform contracted services likewise contracts may allow company issue letters credit surety bonds lieu contract retention provisions client withholds percentage contract value project completion expiration warranty period retention commitments called upon event warranty project completion issues prescribed contracts december 31 2008 company approximately 7887 letters credit related continuing operations 123 letters credit related discontinued operations nigeria amounts represent maximum amount payments company could required make letters credit drawn upon additionally company issues surety bonds customarily required commercial terms construction projects december 31 2008 company bonds outstanding primarily performance bonds face value 456631 related continuing operations amounts represent bond penalty amount future payments company could required make company fails perform obligations contracts performance bonds stated expiration date rather released contract accepted owner company’s maximum exposure relates value bonds outstanding lowered bonded project cost complete reduced december 31 2008 liability recognized letters credit surety bonds 13 recorded fair value letters credit outstanding nigeria operations see note 17 discontinuance operations asset disposals transition services agreement discussion letters credit operating leases company certain operating leases office camp facilities rental expense continuing operations excluding daily rentals reimbursable rentals cost plus contracts 8720 2008 2773 2007 2079 2006 minimum lease commitments operating leases december 31 2008 totaled 14294 payable follows 2009 8090 2010 4454 2011 1461 2012 257 2013 32 thereafter 0 joint ventures company 50 percent interest pipeline construction joint venture chadcameroon pipeline project africa project completed 2003 company adjusted investment joint venture zero since 2004 activity 50 percent owned joint venture limited warranty work accrued prior years company also owns 40 percent common stock global process services inc provider foreignsourced labor company investments entities accounted equity method carried consolidated balance sheets within assets combined balance investments joint ventures included balance sheet 0 133 december 31 2008 2007 respectively losses 0 34 investments accounted equity method recorded year ended december 31 2008 2007 income loss investments accounted equity method recorded year ended december 31 2006 circumstances operations outside united states may subject certain risks ordinarily would expected exist united states including foreign currency restrictions extreme exchange rate fluctuations expropriation assets civil uprisings riots war unanticipated taxes including income taxes excise duties import taxes export taxes sales taxes governmental assessments availability suitable personnel equipment termination existing contracts leases government instability legal systems decrees laws regulations interpretations court decisions always fully developed may retroactively applied management presently aware events type described countries operates would material effect financial statements provided accompanying consolidated financial statements based upon advice local advisors various work countries concerning interpretation laws practices customs countries operates management believes company follows current practices countries applicable fcpa however nature potential risks assurance company may adversely affected future company insures substantially equipment countries outside united states certain political risks terrorism political risk insurance coverage contains 20 percent coinsurance provision company usual liability contractors completion contracts warranty work performed joint venture company also possible liability contract completion warranty responsibilities joint venture partners addition company acts prime contractor majority projects undertakes normally responsible performance entire project including subcontract work management aware material exposure related thereto provided accompanying consolidated financial statements 15 contingencies commitments circumstances continued certain postcontract completion audits reviews periodically conducted clients andor government entities assurance claims received result audits reviews management believe legitimate basis exists material claims present possible management estimate likelihood claims asserted amount nature ultimate disposition thereof see note 17 discontinuance operations asset disposals transition services agreement discussion commitments contingencies associated discontinued operations 16 quarterly financial data selected unaudited quarterly financial data years ended december 31 2008 2007 presented total quarterly income loss per share amounts may equal per share amounts full year due manner earnings loss per share calculated additional notes · quarter ended december 31 2008 company decided sell one fabrication facilities located edmonton alberta canada comprised manufacturing office space approximately 130000 square feet facility various related assets time sale net book value 11899 company received 19593 net proceeds resulted gain sale 7694 included net see note 17 discontinuance operations asset disposals transition services agreement · quarter ended december 31 2008 company recorded noncash beforetax charge 62295 impairment goodwill · quarter ended june 30 2008 12575 aggregate obligation government fines paid consisted initial 10000 payment doj first installment 2575 sec inclusive prejudgment interest see note 8 government obligations note 15 contingencies commitments circumstances discussion government fines 16 quarterly financial data continued additional notes · quarter ended march 31 2007 company completed sale nigeria assets operations result company recognized gain 2345 disposition included net loss discontinued operations · quarter ended june 30 2007 company recognized charge 24000 government fines representing company’s estimated final resolution doj investigation · quarter ended june 30 2007 company incurred 15375 loss early extinguishment debt early extinguishment related induced conversion approximately 52450 company’s 65 senior convertible notes see note 9 longterm debt discussion induced conversion · included third quarter 2007 results financial impact agreement principle staff sec resolve investigation result agreement principle company recorded charge 10300 discontinued operations third quarter 2007 10300 comprised profit disgorgement plus accrued interest related single nigeria project included february 7 2007 sale company’s nigeria assets operations conjunction agreement principle company estimated 2000 reduction doj fine therefore reduced charge government fines continuing operations 22000 17 discontinuance operations asset disposals transition services agreement strategic decisions 2006 company announced intended sell assets operations nigeria classified operations discontinued operations net assets net liabilities related discontinued operations shown consolidated balance sheets “assets discontinued operations” “liabilities discontinued operations” respectively results discontinued operations shown consolidated statements operations “income loss discontinued operations net provision income taxes” periods presented 17 discontinuance operations asset disposals transition services agreement continued nigeria assets nigeriabased operations share purchase agreement february 7 2007 company sold nigeria assets nigeriabased operations west africa ascot offshore nigeria limited “ascot” nigerian oilfield services company total consideration 155250 “purchase price” sale pursuant share purchase agreement company ascot dated february 7 2007 “agreement” providing purchase ascot share capital wg nigeria holdings limited “wgnhl” holding company willbros west africa inc “wwai” willbros nigeria limited willbros offshore nigeria limited wg nigeria equipment limited connection sale nigeria assets operations company subsidiary wii entered indemnity agreement ascot berkeley group plc “berkeley” parent company ascot “indemnity agreement” pursuant ascot berkeley indemnify company wii obligations incurred company wii connection parent company guarantees “guarantees” company wii previously issued maintained behalf certain former subsidiaries owned ascot certain working contracts subsidiaries customers either company wii may contractually obligated varying degrees guarantees perform cause performed work related several ongoing projects among guarantees covered indemnity agreement five contracts company estimates february 7 2007 aggregate remaining contract revenue excluding additional claim revenue 352107 aggregate estimated cost complete 293562 february 7 2007 sale date one contracts covered guarantees estimated loss position accrual loss 33157 associated liability included liabilities acquired ascot berkeley early 2008 company received first notification asserting various rights one outstanding parent guarantees february 1 2008 wwai ascot company performing west african gas pipeline “wagp” contract received letter west african gas pipeline company limited “wapco” owner wagp wherein wapco gave written notice alleging wwai default wagp contract amended giving wwai brief cure period remedy alleged default company understands wwai responded denying breach wagp contract obligations apparently also advised wapco wwai “requires 55 million without able complete work previously undertaken perform” company understands february 27 2008 wapco terminated wagp contract alleged continuing nonperformance wwai also february 1 2008 company received letter wapco reminding company parent guarantee wagp contract requesting remedy wwai’s default contract amended almost one year later february 17 2009 received another letter wapco formally demanding pay sums payable consequence nonperformance ascot wapco stating quantification amount would provided sometime future work completed previous occasions company advised wapco variety legal contractual reasons consider prior wagp contract parent guarantee continued application company reiterated position wapco company’s response february 1 2008 letter reiterate position response february 17 2009 letter wapco disputes company’s position longer bound terms company’s prior parent guarantee wagp contract reserved rights regard currently wagp project yet completed variety technical commercial issues unrelated wapco’s termination wagp contract february 17 2009 letter wapco still unquantified claim change company’s stance accounting related wagp parent guarantee company anticipates potential dispute wapco may result arbitration proceeding wapco wwai london court international arbitration determine validity alleged default notice issued wapco wwai including resulting damage award combination lawsuit wapco company english courts english law determine enforceability whole part company’s parent guarantee company expects lengthy process 17 discontinuance operations asset disposals transition services agreement continued company currently employees working nigeria intention returning nigeria ultimately determined english court company liable whole part damages wapco may establish wwai’s alleged nonperformance wagp contract wapco able establish liability company directly parent company guarantee either case unable enforce rights indemnity agreement entered ascot berkeley connection wagp contract company may experience substantial losses however time company cannot predict outcome arbitration litigation may ensue developing wagp contract dispute certain degree indemnity agreement given favor ascot berkeley protect company based upon current knowledge relevant facts circumstances company expect outcome potential dispute material adverse effect financial condition results operations letters credit time february 7 2007 sale nigeria assets operations company four letters credit outstanding totaling 20322 associated discontinued operations “discontinued lc’s” accordance fasb interpretation 45 “guarantors accounting disclosure requirements guarantees including guarantees indebtedness others” “fin 45” liability recognized 1575 related letters credit liability released discontinued lc’s released expires company relieved risk related discontinued lc’s december 31 2008 one discontinued lcs remains issued outstanding discontinued lc amount 123 scheduled expire february 28 2009 twelve months ended december 31 2008 two discontinued lc’s aggregate amount 19759 expired resulting release associated liability recognition 1543 additional cumulative gain sale nigeria assets operations fair value remaining discontinued lc 13 also result positive impact cumulative gain sale released transition services agreement concurrent nigeria sale company entered twoyear transition services agreement “tsa” ascot agreement company primarily providing labor form seconded employees work direction ascot along specifically defined work orders services generally covered tsa ascot agreed reimburse company services years ended december 31 2008 2007 reimbursable contract costs totaled approximately 3822 23966 respectively company ascot working eliminate transition services provided company december 31 2008 effort substantially complete company employees still seconded ascot working west africa generally nigeria specifically conclusion transition services agreement february 7 2009 tsa expired according terms ended company’s obligation provide support services ascot west africa otherwise company recognized known costs associated concluding tsa including writeoff residual accounts receivable equipment west africa total expense recognized accordance conclusion tsa 357 residual equipment nigeria conjunction tsa company made available certain equipment ascot use nigeria times benin togo ghana equipment sold ascot agreement company’s net book value equipment west africa december 31 2008 2007 442 1205 respectively majority equipment comprised primarily construction equipment rolling stock generator sets redeployed company’s operations oman remainder used exchange equipment owned ascot needed company’s north american operations february 7 2009 company reached final settlement ascot equipment exchange company longer owns equipment west africa 17 discontinuance operations asset disposals transition services agreement continued global settlement agreement ”gsa” september 7 2007 finalized gsa ascot significant components agreement include · reduction purchase price 25000 resolution working capital adjustments provided original share purchase agreement · ascot agreed provide supplemental backstop letters credit amount 20322 issued nonnigerian bank approved company · ascot provided specific indemnities related two ongoing projects acquired part agreement · except provided gsa ascot company waived respective rights obligations relating indemnifications provided share purchase agreement concerning breach covenant representation warranty result gsa company recognized cumulative gain sale nigeria assets operations 183 gsa settled payment ascot company amount 11076 amount represents agreed upon reduction purchase price due ascot 25000 reduced amounts owed ascot company 11299 services rendered tsa 2625 due ascot form note closing share purchase agreement gsa ascot’s account company current december 31 2007 insurance recovery twelve months ended december 31 2008 income discontinued operations consisted two prenigeria sale insurance claim recoveries 3004 events loss company suffered prior sale nigeria operations venezuela business disposal november 28 2006 company completed sale assets operations venezuela company received total compensation 7000 cash 3300 form commitment buyer paid december 4 2013 repayment commitment secured 10 percent interest venezuelan financing joint venture march 31 2008 payment commitment made company estimates gain loss sale assets operations venezuela asset disposal sale canada fabrication facility fourth quarter 2008 company decided sell one fabrication facilities located edmonton alberta canada comprised manufacturing office space approximately 130000 square feet company determined capital employed facility would efficiently applied another fabrication location well support company’s crosscountry pipeline business canada facility various related assets time sale net book value 11899 company received 19593 net proceeds resulted gain sale 7694 included net results discontinued operations condensed statements operations discontinued operations years ended december 31 2008 2007 2006 follows 17 discontinuance operations asset disposals transition services agreement continued 17 discontinuance operations asset disposals transition services agreement continued financial position discontinued operations condensed balance sheets discontinued operations follows item 9item 8 financial statements supplementary data index consolidated financial statements independent auditors report stockholders board directors willbros group inc audited accompanying consolidated balance sheets willbros group inc december 31 2002 2001 related consolidated statements operations stockholders equity comprehensive income cash flows years threeyear period ended december 31 2002 consolidated financial statements responsibility companys management responsibility express opinion consolidated financial statements based audits conducted audits accordance auditing standards generally accepted united states america standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements referred present fairly material respects financial position willbros group inc december 31 2002 2001 results operations cash flows years threeyear period ended december 31 2002 conformity accounting principles generally accepted united states america discussed note 1 consolidated financial statements july 1 2001 company adopted statement financial accounting standards sfas 141 business combinations certain provisions sfas 142 goodwill intangible assets effective january 1 2002 adopted remaining provisions sfas 142 kpmg llp houston texas february 12 2003 willbros group inc consolidated balance sheets thousands except share per share amounts see accompanying notes consolidated financial statements willbros group inc consolidated statements operations thousands except share per share amounts see accompanying notes consolidated financial statements willbros group inc consolidated statements stockholders equity comprehensive income thousands except share amounts see accompanying notes consolidated financial statements willbros group inc consolidated statements cash flows thousands see accompanying notes consolidated financial statements willbros group inc notes consolidated financial statements thousands except share per share amounts 1 summary significant accounting policies company willbros group inc wgi republic panama corporation majorityowned subsidiaries company provide construction engineering specialty services oil gas power industries companys principal markets africa asia australia middle east south america canada united states principles consolidation consolidated financial statements company include accounts wgi majorityowned subsidiaries intercompany accounts transactions eliminated consolidation ownership interest minority participants subsidiaries wholly owned principally nigeria oman included accounts payable accrued liabilities material minority participants share net income subsidiaries included contract expenses interests unconsolidated joint ventures accounted equity method consolidated balance sheets proportionate consolidation basis consolidated statements operations consolidated financial statements prepared accordance generally accepted accounting principles united states include certain estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities reported amounts revenue expenses actual results could differ significantly estimates reclassifications minority owners certain non us subsidiaries operating principally nigeria oman earn percentage net contract receipts rather sharing net income losses subsidiaries operations due nature minority interests basis entitlement earned amounts attributable minority interests included contract costs prior march 31 2002 minority interest amounts presented separate line item expenses accordingly reclassifications made 2001 2000 balances conform 2002 presentation amounts due minority participants continue included accounts payable accrued liabilities addition certain reclassifications made 2001 2000 balances order conform 2002 presentation accounts receivable accounts receivable include retainage due within one year 5470 2002 1819 2001 stated net allowances bad debts 725 2002 734 2001 provision credit bad debts 58 2002 290 2001 154 2000 spare parts spare parts excluding expendables stated net accumulated depreciation 13826 2002 10882 2001 depreciated three years straightline method property plant equipment depreciation provided straightline method using estimated lives follows assets retired otherwise disposed cost related accumulated depreciation removed accounts resulting gain loss recognized income period normal repair maintenance costs charged expense incurred major overhaul costs accrued advance actual overhaul activities allocated contracts based estimates equipment condition significant renewals betterments capitalized longlived assets reviewed impairment whenever events changes circumstances indicate carrying amount asset may recoverable recoverability assets held willbros group inc notes consolidated financial statements thousands except share per share amounts 1 summary significant accounting policies continued used measured comparison carrying amount asset future net cash flows expected generated asset assets considered impaired impairment recognized measured amount carrying amount assets exceeds fair value assets disposed reported lower carrying amount fair value less costs sell goodwill represents excess purchase price fair value net assets acquired goodwill acquired prior july 1 2001 amortized straightline basis twenty years adoption nonamortization goodwill provision statement financial accounting standards sfas 142 goodwill intangible assets 2002 company adopted sfas 141 business combinations certain provisions sfas 142 july 1 2001 remaining provisions regarding nonamortization goodwill acquired prior july 1 2001 effective january 1 2002 december 31 2002 goodwill 8689 included assets accordance sfas 142 company assesses carrying amount goodwill testing goodwill impairment test requires allocating goodwill assets liabilities reporting units fair value reporting unit determined compared book value reporting unit fair value reporting unit less book value including goodwill reduced implied fair value goodwill charge expense companys transitional goodwill impairment test january 1 2002 performed goodwill impairment indicated annual goodwill impairment test performed december 31 2002 goodwill impairment indicated effect elimination amortization goodwill companys net income sfas 142 effect prior periods would increase net income 54 2001 31 2000 revenue construction engineering fixedprice contracts cost plus fixedfee contracts accounted using percentageofcompletion method estimated contract revenue generally accrued based percentage costs date bear total estimated costs taking consideration physical completion estimated contract losses recognized full determined revenue unitprice contracts time material contracts recognized earned revenue change orders extra work variations scope work recognized agreement reached clients scope work price revenue claims recognized agreement reached clients value claims instances may occur completion work contract costs incurred bidding obtaining contracts expensed incurred income taxes company accounts income taxes asset liability method deferred tax assets liabilities recognized future tax consequences operating loss tax credit carryforwards temporary differences financial statement carrying values assets liabilities respective tax bases provision income taxes impacted income taxes certain countries primarily nigeria based deemed profit rather taxable income well tax holiday cameroon income earned chadcameroon pipeline project retirement plans benefits 2001 company terminated defined benefit retirement plans postretirement medical benefits plan provided retirement benefits substantially regular employees pension costs funded accordance annual actuarial valuations company recorded cost postretirement medical benefits funded payasyougo basis employees working lives company voluntary defined contribution retirement plan qualified contributory part employees common stock options company measures stockbased compensation using intrinsic value method accounting prescribed accounting principles board opinion 25 accounting stock issued employees related interpretations provides proforma disclosure required statement financial accounting standards 123 accounting stockbased compensation willbros group inc notes consolidated financial statements thousands except share per share amounts 1 summary significant accounting policies continued compensation cost stock options measured excess quoted market price companys stock date grant exercise price compensation cost companys stock options plans determined using fair value method sfas 123 companys net income per share would shown pro forma amounts fair value granted options estimated date grant using blacksholes option pricing model following exemptions foreign currency translation significant monetary asset liability accounts stated currencies united states dollars translated united states dollars current exchange rates countries local currency functional currency translation adjustments accumulated comprehensive income loss nonmonetary assets liabilities highly inflationary economies translated united states dollars historical exchange rates revenue expense accounts converted prevailing rates throughout year foreign currency transaction adjustments translation adjustments highly inflationary economies recorded income 2000 854 transferred cumulative translation adjustments stockholders equity foreign exchange loss due substantial reduction operations certain countries concentration credit risk company concentration customers oil gas power industries exposes company concentration credit risks within industry company seeks obtain advance progress payments contract work performed major contracts receivables generally collateralized company believes allowance bad debts adequate fair value financial instruments carrying value financial instruments materially differ fair value willbros group inc notes consolidated financial statements thousands except share per share amounts 1 summary significant accounting policies continued cash flows determination cash flows highly liquid investments maturities less three months considered cash equivalents company paid interest 1132 2002 2858 2001 2216 2000 income taxes 11315 2002 8650 2001 7249 2000 income loss per share basic income loss per share calculated dividing net income less preferred dividend requirements weightedaverage number common shares outstanding year diluted income loss per share calculated including weightedaverage number potentially dilutive common shares weightedaverage number common shares outstanding derivative financial instruments company may use derivative financial instruments forward contracts options financial instruments hedges mitigate nonus currency exchange risk company unable match nonus currency revenue expenses currency company derivative financial instruments december 31 2002 2001 2 acquisitions october 23 2002 company acquired outstanding shares mt west fabrication plants stations inc process electric control inc process engineering design inc pacific industrial electric inc collectively mt west group mt west group provides designbuild services including engineering procurement construction services energy industry primarily western united states thereby expanding companys services united states purchase price 13711 based multiple cash flow consisted 4591 cash acquisition costs 950000 shares common stock valued 9120 based average market price companys common shares twoday period date definitive purchase agreement signed addition purchase price adjusted earnout amount equal 25 percent combined net income mt west group 24month period following date acquisition earnout amounts due shall payable cash upon completion earnout period transaction accounted purchase october 12 2001 company successfully completed tender offer outstanding shares msi energy services inc msi general contractor alberta canada acquisition establishes companys presence canada aggregate purchase price including transaction costs 8295 concurrently company sold certain msi shareholders 144175 common shares treasury stock assigned value 1850 market price date transaction announced net cash 6445 paid purchase msi funded borrowings companys principal credit agreement transaction accounted purchase january 24 2000 company acquired rogers phillips inc rpi closely held united states pipeline construction company consideration included 1035000 shares treasury stock valued 5511 approximately 1710 cash transaction costs transaction accounted purchase none goodwill created result acquisitions expected deductible tax purposes willbros group inc notes consolidated financial statements thousands except share per share amounts 1 acquisitions continued fair value net assets acquired acquisitions follows unaudited pro forma results operations rpi acquisition occurred january 1 2000 would materially different reported results unaudited pro forma results operations including mt west group acquisition occurred january 1 2001 msi acquisition occurred january 1 2000 would 3 contracts progress contracts allow progress billings made performance work billings may made basis different used recognizing revenue contracts progress cost recognized income exceed billings exceed cost recognized income consist year ended december 31 2000 costs complete project australia exceeded cost complete estimate december 31 1999 14500 resulted loss project 2000 amount willbros group inc notes consolidated financial statements thousands except share per share amounts 4 property plant equipment property plant equipment used secure debt subject lien cost consist 5 joint ventures company investments past three years ranging 10 percent 50 percent joint ventures operate similar lines business company investments consist 10 percent interest consortium work venezuela 35 percent interest joint venture work australia 50 percent interest joint venture work africa interests unconsolidated ventures accounted equitymethod consolidated balance sheets proportionate consolidation basis consolidated statements operations companys proportionate share revenue contract cost included consolidated statements operations ventures consist companys investments advances ventures consist willbros group inc notes consolidated financial statements thousands except share per share amounts 5 joint ventures continued summarized balance sheet information significant joint venture africa accounted equitymethod consolidated balance sheets follows 6 accounts payable accrued liabilities accounts payable accrued liabilities consist 7 notes payable longterm debt notes payable longterm debt consist following june 14 2002 company completed new 125000 credit agreement syndicated bank group replacing existing facility due expire february 2003 facility may used standby commercial letters credit borrowings combination thereof borrowings limited lesser 40 borrowing base 50000 payable termination june 14 2005 interest payable quarterly base rate plus margin ranging 075 200 eurodollar rate plus margin ranging 175 300 commitment fee unused portion credit agreement payable quarterly ranging 050 075 credit agreement collateralized substantially companys assets including stock principal subsidiaries restricts payment cash dividends requires company maintain certain financial ratios borrowing base calculated using willbros group inc notes consolidated financial statements thousands except share per share amounts 7 notes payable longterm debt continued varying percentages cash accounts receivable accrued revenue contract cost recognized income yet billed property plant equipment spare parts debt issue costs 3019 net accumulated amortization 881 associated new credit agreement included assets december 31 2002 amortized 24 months december 31 2002 amounts borrowed credit agreement 52838 letters credit outstanding leaving 72162 available letters credit 43984 borrowings combination thereof obligations include various notes payable generally related equipment insurance financing local revolving credit facilities market interest rates collateralized certain vehicles equipment andor real estate company unsecured credit facilities banks certain countries outside united states borrowings form shortterm notes overdrafts made competitive local interest rates generally line available borrowings related operations specific country credit available facilities approximately 6307 december 31 2002 outstanding borrowings december 31 2002 2001 8 retirement benefits company two defined benefit plans pension plans covering substantially regular employees funded employee company contributions companys funding policy contribute least minimum required employee retirement income security act 1974 accordance annual actuarial valuations benefits plans determined employee earnings credited service company postretirement medical benefits plan covered substantially regular employees funded company retiree contributions based estimated cost defined benefit plans postretirement medical benefit plan terminated 2001 plan assets pension plans consisted primarily listed stocks bonds pension plan assets totaling 494 2002 35985 2001 distributed plan participants december 31 2002 assets distributed plan participants postretirement medical benefit plan assets upon termination plans 2001 benefits ceased liabilities relating accrued cost future benefits reversed resulting noncash nontaxable gains 9204 reflected reduction operating expenses 2001 consolidated statements operations willbros group inc notes consolidated financial statements thousands except share per share amounts 8 retirement benefits continued benefit expense plans included following components retirement benefit obligations determined using weightedaverage discount rate 775 percent december 31 2000 pension benefits rate increase future pay increases 55 percent december 31 2000 assets expected longterm rate return 85 percent transition asset amortized 15 years willbros group inc notes consolidated financial statements thousands except share per share amounts 8 retirement benefits continued following table sets forth changes benefit obligations plan assets reconciliation funded status plans accrued benefit cost company defined contribution plan funded participating employee contributions company matches employee contributions maximum 4 percent salary form cash wgi common stock elected employee company contributions plan 1038 including 422 wgi common stock 2002 905 including 306 wgi common stock 2001 616 including 243 wgi common stock 2000 willbros group inc notes consolidated financial statements thousands except share per share amounts 9 income taxes provision income taxes represents income taxes arising result operations credits revision previous estimates income taxes payable number countries credit recognizing tax benefit portion companys tax losses carried forward company subject income tax panama income earned outside panama income earned outside panama relationship income loss income taxes provision income taxes affected method determining income taxes countries company operates effective consolidated tax rate differs us federal statutory tax rate taxable income operating losses different countries cannot offset tax rates methods determining taxes payable different country income loss income taxes provision income taxes consolidated statements operations consist companys provision income taxes differed united states statutory federal income tax rate 34 due following willbros group inc notes consolidated financial statements thousands except share per share amounts 9 income taxes continued principal components companys net deferred tax assets net deferred income tax assets liabilities follows company 14405 united states net operating loss carryforwards december 31 2002 united states net operating loss carryforwards expire unless utilized beginning 2005 ending december 31 2013 carryforwards available annual basis limited company assessed united states operations including past earnings history projected future earnings limitations expiration dates us net operating loss carryforwards tax assets determined likely 4019 us net deferred tax assets december 31 2002 realized december 31 2002 company nonexpiring operating loss carryforwards united kingdom 31105 pound sterling19320 net operating loss carryforward expiring three years venezuela 3392 bolivars 4752000 deferred tax assets applicable operating loss carryforwards december 31 2002 2001 fully reserved valuation allowance december 31 2002 company nonexpiring operating loss carryforwards bolivia 4441 bolivars 33532 company assessed bolivia operations determined likely 1110 deferred tax asset related net operating loss carryforwards december 31 2002 realized connection acquisitions mt west group 2002 msi 2001 company recorded 808 482 respectively deferred tax liabilities relating primarily differences financial statement carrying values assets acquired tax bases willbros group inc notes consolidated financial statements thousands except share per share amounts 10 stockholder rights plan april 1 1999 company adopted stockholder rights plan declared distribution one preferred share purchase right outstanding share companys common stock distribution made april 15 1999 stockholders record date rights expire april 14 2009 rights exercisable person group acquires 15 percent companys common stock announces tender offer consummation would result ownership person group 15 percent common stock right entitles stockholders buy one onethousandth share series junior participating preferred stock exercise price 3000 per share company acquired merger business combination transaction person group acquired 15 percent companys outstanding common stock right entitles holder purchase rights thencurrent exercise price number acquiring companys common shares market value twice price addition person group acquires 15 percent companys outstanding common stock right entitles holder person members group purchase rights thencurrent exercise price number companys common shares market value twice price prior acquisition person group beneficial ownership 15 percent companys common stock rights redeemable onehalf cent per right option companys board directors 11 stock ownership plans may 1996 company established willbros group inc 1996 stock plan 1996 plan 1125000 shares common stock authorized issuance provide awards key employees company willbros group inc director stock plan director plan 125000 shares common stock authorized issuance provide grant stock options nonemployee directors number shares authorized issuance 1996 plan director plan increased 3125000 225000 respectively shareholder approval options granted 1996 plan vest three four year period options granted director plan vest six months date grant december 31 2002 1996 plan 567088 shares director plan 139000 shares available grant certain provisions allow accelerated vesting based increases share prices companys stock option activity related information consist willbros group inc notes consolidated financial statements thousands except share per share amounts 11 stock ownership plans continued weightedaverage fair value options granted year 405 2002 647 2001 256 2000 exercise prices options outstanding weightedaverage remaining life weightedaverage exercise price ranges exercise prices december 31 2002 number vested options weightedaverage exercise price ranges exercise prices december 31 2002 march 2002 certain officers company borrowed total 1307 employee stock purchase program permitted selected executives officers exclusive chief executive officer borrow company 100 funds required exercise vested stock options loans full recourse noninterestbearing period 5 years collateralized related stock difference 553 discounted value loans fair market value stock date exercise recorded compensation expense loans receivable presented reduction stockholders equity maximum loan amount one officer may outstanding employee stock purchase program 250 12 common stock offering may 14 2002 company completed public offering common shares 1775 per share 4356750 shares sold company underwriters exercised options purchase shares available overallotments company received 71902 proceeds underwriting discount offering costs used repay indebtedness prior credit agreement working capital general corporate purposes willbros group inc notes consolidated financial statements thousands except share per share amounts 13 earnings loss per share basic diluted earnings loss per share computed follows december 31 2002 405092 potential common shares 449750 december 31 2001 1859550 december 31 2000 excluded computation diluted earnings loss per share antidilutive effect 14 segment information company operates single operating segment providing construction engineering specialty services oil gas power industries due limited number major projects clients company may one time substantial part operations dedicated one project client country customers representing 10 percent total contract revenue follows willbros group inc notes consolidated financial statements thousands except share per share amounts 14 segment information continued information companys operations significant work countries shown 1 net intercountry revenue 25849 2002 59284 2001 6481 2000 willbros group inc notes consolidated financial statements thousands except share per share amounts 15 contingencies commitments circumstances company provides construction engineering specialty services oil gas power industries companys principal markets currently africa middle east south america north america operations outside united states may subject certain risks ordinarily would expected exist united states including foreign currency restrictions extreme exchange rate fluctuations expropriation assets civil uprisings riots war unanticipated taxes including income taxes excise duties import taxes export taxes sales taxes governmental assessments availability suitable personnel equipment termination existing contracts leases government instability legal systems decrees laws regulations interpretations court decisions always fully developed may retroactively applied management presently aware events type described countries operates provided accompanying consolidated financial statements based upon advice local advisors various work countries concerning interpretation laws practices customs countries operates management believes company followed current practices countries however nature potential risks assurance company may adversely affected future company insures substantially equipment countries outside united states certain political risks terrorism company usual liability contractors completion contracts warranty work performed joint venture company also possible liability contract completion warranty responsibilities joint venturers management aware material exposure related thereto provided accompanying consolidated financial statements certain postcontract completion audits reviews conducted clients andor government entities assurance claims received result audits reviews management believe legitimate basis material claims exists present time possible management estimate likelihood claims asserted amount nature thereof connection companys 10 interest joint venture venezuela company issued corporate guarantee equal 10 joint ventures outstanding borrowings two banks guarantee reduces borrowings repaid expires march 2004 commitment december 31 2002 totals approximately 3300 maximum amount future payments company could required make time company enters commercial commitments usually form commercial standby letters credit insurance bonds financial guarantees contracts companys customers may require company provide letters credit insurance bonds regard companys performance contracted services cases commitments called upon event failure perform contracted services likewise contracts may allow company issue letters credit insurance bonds lieu contract retention provisions client withholds percentage contract value project completion expiration warranty period retention commitments called upon event warranty project completion issues prescribed contracts connection chadcameroon pipeline project joint venture company issued letter credit equipment leasing company equal 50 total lease payments companys share joint venture letter credit reduces lease payments made expires june 2003 commitment called upon result failure make lease payments december 31 2002 company 62301 letters credit insurance bonds outstanding representing maximum amount future payments company could required make company liability recorded december 31 2002 related commitments willbros group inc notes consolidated financial statements thousands except share per share amounts 15 contingencies commitments circumstances connection 50 interest joint venture related chadcameroon pipeline project joint severally liable performance joint venturer event joint venturer unable fulfill responsibilities associated project would required fulfill duties would recognize income losses associated fulfilling duties joint venturer december 31 2002 project approximately 80 complete estimated produce contract income however limitation maximum future potential payments could required make event project result contract losses liability recorded december 31 2002 related commitment 1997 company entered lease agreements specialpurpose leasing partnership land office building engineering group tulsa oklahoma july 2002 company acquired assets 5500 thereby eliminating lease agreements related commercial commitments company party number legal proceedings management believes nature number proceedings typical firm similar size engaged similar type business none proceedings material companys financial position company certain operating leases office camp facilities rental expense excluding daily rentals reimbursable rentals cost plus contracts 1782 2002 2596 2001 3166 2000 minimum lease commitments operating leases december 31 2002 totaled 4727 payable follows 2003 1288 2004 1088 2005 1051 2006 566 2007 187 later years 555 willbros group inc notes consolidated financial statements thousands except share per share amounts 16 quarterly financial data unaudited selected unaudited quarterly financial data years ended december 31 2002 2001 follows included fourth quarter 2002 3309 deferred income tax benefit resulting reduction deferred tax valuation allowance included fourth quarter 2001 nontaxable gains 3626 termination benefit plans company derives revenue contracts durations weeks several months cases year unitprice contracts provide relatively even quarterly results however major projects usually fixedprice contracts may result uneven quarterly financial results due method revenue recognized item 9item 8 financial statements supplementary data index consolidated financial statements index financial statements report independent registered public accounting firm board directors stockholders willbros group inc audited accompanying consolidated balance sheets willbros group inc december 31 2006 2005 related consolidated statements operations stockholders’ equity comprehensive income loss cash flows years twoyear period ended december 31 2006 financial statements responsibility company’s management responsibility express opinion financial statements based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion consolidated financial statements referred present fairly material respects financial position willbros group inc december 31 2006 2005 results operations cash flows years twoyear period ended december 31 2006 conformity accounting principles generally accepted united states america also audited accordance standards public company accounting oversight board united states effectiveness willbros group inc’s internal control financial reporting december 31 2006 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission coso report dated march 12 2007 expressed unqualified opinion management’s assessment internal control financial reporting adverse opinion effectiveness internal control financial reporting also audited adjustments 2004 consolidated financial statements retrospectively apply change accounting described note 2 opinion adjustments appropriate properly applied engaged audit review apply procedures 2004 financial statements company respect adjustments accordingly express opinion form assurance 2004 financial statements taken whole glo cpas llp houston texas march 12 2007 index financial statements report independent registered public accounting firm stockholders board directors willbros group inc audited effects adjustments retrospectively apply change accounting described note 2 consolidated statements operations stockholders’ equity comprehensive income loss cash flows willbros group inc year ended december 31 2004 consolidated financial statements responsibility company’s management responsibility express opinion consolidated financial statements based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audit provide reasonable basis opinion consolidated financial statements effects adjustments retrospectively apply change accounting described note 2 present fairly material respects results operations cash flows year ended december 31 2004 conformity us generally accepted accounting principles engaged audit review apply procedures adjustments retrospectively apply change accounting described note 2 accordingly express opinion form assurance whether adjustments appropriate properly applied adjustments audited glo cpas llp kpmg llp houston texas november 21 2005 index financial statements report independent registered public accounting firm board directors stockholders willbros group inc audited management’s assessment included accompanying management’s report internal control financial reporting item 9ab willbros group inc “the company” maintain effective internal control financial reporting december 31 2006 effect material weaknesses identified management’s assessment based criteria established internal controlintegrated framework issued committee sponsoring organization treadway commission coso company’s management responsible maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting responsibility express opinion management’s assessment opinion effectiveness company’s internal control financial reporting based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether effective internal control financial reporting maintained material respects audit included obtaining understanding internal control financial reporting evaluating management’s assessment testing evaluating design operating effectiveness internal control performing procedures considered necessary circumstances believe audit provides reasonable basis opinion company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate material weakness control deficiency combination control deficiencies results remote likelihood material misstatement annual interim financial statements prevented detected following material weaknesses identified included management’s assessment december 31 2006 nigeria accountingduring fourth quarter 2006 company determined material weakness internal control financial reporting exists related company’s management control environment accounting nigeria operations weakness management control led inability adequately perform various control functions including supervision consistency inventory management petty cash disbursement accounts payable disbursement approvals account reconciliation review time keeping records weakness resulted primarily due company unable maintain consistent stable internal control environment nigeria operations fourth quarter 2006 index financial statements nigeria project controls estimate completea material weakness exists related controls nigeria project reporting weakness existed throughout 2006 continuation material weakness reported 2005 form 10k weakness primarily impacted one large nigeria project total contract value approximately 165 million cost estimates updated timely fourth quarter 2006 due insufficient measures taken independently verify update reliable cost estimates material weakness specifically resulted material changes revenue cost sales preparation year end financial statements accounting staff prior issuance form 10k material weaknesses considered determining nature timing extent audit tests applied audit 2006 consolidated financial statements report affect report dated march 12 2007 expressed unqualified opinion financial statements opinion management’s assessment company maintain effective internal control financial reporting december 31 2006 fairly stated material respects based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission coso also opinion effect material weakness described achievement objectives control criteria company maintained effective internal control financial reporting december 31 2006 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission coso glo cpas llp houston texas march 12 2007 index financial statements willbros group inc consolidated balance sheets thousands except share per share amounts see accompanying notes consolidated financial statements index financial statements willbros group inc consolidated statements operations thousands except share per share amounts see accompanying notes consolidated financial statements index financial statements willbros group inc consolidated statements stockholders’ equity comprehensive income loss thousands except share amounts see accompanying notes consolidated financial statements index financial statements willbros group inc consolidated statements cash flows thousands except share amounts see accompanying notes consolidated financial statements index financial statements willbros group inc notes consolidated financial statements thousands except share per share amounts 1 summary significant accounting policies companywillbros group inc “wgi” republic panama corporation majorityowned subsidiaries “company” provide construction engineering specialty services development activities oil gas power industries government entities company’s principal markets continuing operations united states canada middle east disclosures notes consolidated financial statements relate continuing operations except otherwise indicated basis presentation discontinuance operations asset disposalduring 2006 company chose exit following businesses nigeria venezuela txp4 plant collectively “discontinued operations” accordingly businesses presented discontinued operations preceding consolidated financial statements net assets net liabilities related discontinued operations shown consolidated balance sheets components “assets discontinued operations” “liabilities discontinued operations” respectively results discontinued operations shown consolidated statements operations component “loss discontinued operations net provision income taxes” periods shown principles consolidationthe consolidated financial statements company include accounts wgi majorityowned subsidiaries intercompany accounts transactions eliminated consolidation ownership interest minority participants subsidiaries whollyowned principally oman included accounts payable accrued liabilities material minority participants’ share net income subsidiaries included contract costs interest company’s unconsolidated joint ventures accounted using equity method consolidated balance sheet restatement consolidated financial statementsin late december 2004 company became aware improprieties company’s bolivian subsidiary related assessment certain bolivian taxes allegations subsidiary filed improper tax returns upon learning tax assessment alleged improprieties company commenced initial investigation matter notified audit committee board directors retained independent counsel turn retained forensic accountants began independent investigation concurrent audit committee’s investigation company initiated review company’s accounting review focused primarily company’s international activities supervised j kenneth tillery former president willbros international inc “wii” primary international subsidiary company also included areas company’s accounting activities result investigations company’s accounting review company determined several members senior management wii subsidiaries collaborated misappropriate assets company cover activity determined bolivian subsidiary fact filed improper tax returns failed file returns direction mr tillery investigation also determined mr tillery collusion several members management international subsidiaries involved pattern improper activities primarily company’s nigeria subsidiaries specifically contrary established company policies internal controls possibly laws several countries including united states use estimatesthe consolidated financial statements prepared accordance generally accepted accounting principles united states include certain estimates assumptions management company preparation consolidated financial statements estimates assumptions relate reported amounts assets liabilities date consolidated financial index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 1 summary significant accounting policies continued statements reported amounts revenue expense period significant items subject estimates assumptions include carrying amount property plant equipment goodwill parts supplies inventories quantification amounts recorded contingencies tax accruals certain accrued liabilities valuation allowances accounts receivable deferred income tax assets revenue recognition percentageofcompletion method accounting including estimates progress toward completion estimates gross profit loss accrual contracts progress company bases estimates historical experience assumptions believes relevant circumstances actual results could differ estimates commitments contingenciesliabilities loss contingencies arising claims assessments litigation fines penalties sources recorded management assesses probable liability incurred amount reasonably estimated recoveries costs third parties management assesses probable realization separately recorded assets legal costs incurred connection matters relating contingencies expensed period incurred accounts receivabletrade accounts receivable recorded invoiced amount bear interest allowance doubtful accounts company’s best estimate probable amount credit losses company’s existing accounts receivable considerable amount judgement required assessing realization receivables relevant assessment factors include creditworthiness customer prior collection history balances 90 days past due specified minimum amount reviewed individually collectibility account balances charged allowance means collection exhausted potential recovery considered remote allowance requirements based current facts available reevaluated adjusted regular basis additional information received company offbalancesheet credit exposure related customers inventoriesinventories consisting primarily parts supplies stated lower cost market cost determined using firstin firstout “fifo” method parts supplies evaluated least annually adjusted excess obsolescence parts supplies related continuing operations valued 2069 2509 december 31 2006 december 31 2005 respectively excess obsolescence allowances existed december 31 2006 2005 operating expenseother operating expense consists costs incurred company associated fraudulent invoices fictitious supplies services see note 2restatement company’s 2004 annual report form 10k property plant equipmentproperty plant equipment stated cost depreciation including amortization capital leases provided straightline method using estimated lives follows construction equipment 46 years marine equipment 10 years transportation equipment 34 years buildings 20 years furniture equipment 310 years index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 1 summary significant accounting policies continued assets held capital leases leasehold improvements amortized straightline basis assets retired otherwise disposed cost related accumulated depreciation removed accounts resulting gain loss recognized income period normal repair maintenance costs charged expense incurred significant renewals betterments capitalized longlived assets reviewed impairment annually whenever events changes circumstances indicate carrying amount asset may recoverable recoverability assets held used measured comparison carrying amount asset future net cash flows expected generated asset assets considered impaired impairment recognized measured amount carrying amount assets exceeds fair value assets disposed reported lower carrying amount fair value less costs sell goodwillgoodwill represents excess purchase price fair value net assets acquired goodwill amortized instead annually tested impairment annual testing impairment occurs fourth quarter fiscal year frequently event circumstance indicates impairment occurred impairment test involves determining fair market value reporting units goodwill associated comparing estimated fair market value reporting units carrying amount company completed annual evaluation impairment goodwill december 31 2006 determined impairment goodwill existed date revenuea number factors relating company’s business affect recognition contract revenue company typically structures contracts fixedprice unitprice material time cost plus fixed fee revenue unitprice time material contracts recognized earned company believes operating results evaluated time horizon major contracts progress completed change orders extra work variations scope work cost recoveries claims negotiated realized revenue fixedprice cost plus fixed fee contracts recognized percentageofcompletion method estimated contract income resulting revenue generally accrued based costs incurred date percentage total estimated costs taking consideration physical completion total estimated costs thus contract income impacted changes productivity scheduling unit cost labor subcontracts materials equipment additionally external factors weather client needs client delays providing permits approvals labor availability governmental regulation politics may affect progress project’s completion thus timing revenue recognition company recognize income fixedprice contract approximately 5 percent 10 percent complete depending upon nature contract current estimate total contract cost indicates loss contract projected loss recognized full determined company considers unapproved change orders contract variations company customer approval scope change price associated scope change costs associated unapproved change orders included estimated cost complete contracts expensed incurred company recognizes revenue equal cost incurred unapproved changed orders realization price approval probable estimated amount equal greater company’s cost related unapproved change order revenue recognized unapproved change orders included contract costs recognized income yet billed balance sheet index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 1 summary significant accounting policies continued unapproved change orders involve use estimates reasonably possible revisions estimated costs recoverable amounts may required future reporting periods reflect changes estimates final agreement customers company considers claims amounts company seeks seek collect customers others customercaused changes contract specifications design customerrelated causes unanticipated additional contract costs agreement customers scope price changes revenue claims recognized agreement reached customers value claims instances may occur completion work contract costs associated claims included estimated costs complete contracts expensed incurred income taxesthe company accounts income taxes asset liability method deferred tax assets liabilities recognized future tax consequences operating loss tax credit carry forwards temporary differences financial statement carrying values assets liabilities respective tax bases provision benefit income taxes annual effective tax rate impacted income taxes certain countries discontinued operations computed based deemed profit rather taxable income tax holidays certain international projects retirement plans benefitsthe company voluntary defined contribution retirement plan us based employees qualified contributory part employees voluntary savings plan certain international employees nonqualified contributory part employees stockbased compensationeffective january 1 2006 company adopted fair value recognition provisions statement financial accounting standards “sfas” 123r “sharebased payment” using modified prospective application method compensation cost recognized applicable amounts compensation expense sharebased payments granted prior yet vested january 1 2006 based grantdate fair value estimated accordance original provisions sfas 123 “accounting stockbased compensation” previously presented pro forma footnote disclosures company’s sec reports b compensation cost sharebased payments granted subsequent january 1 2006 based grantdate fair value estimated accordance provisions sfas 123r company uses blackscholes valuation method determine fair value stock options granted grant date foreign currency translationall significant monetary asset liability accounts denominated currencies united states dollars translated united states dollars current exchange rates countries local currency functional currency translation adjustments accumulated comprehensive income loss nonmonetary assets liabilities highly inflationary economies translated united states dollars historical exchange rates revenue expense accounts converted prevailing rates throughout year foreign currency translation adjustments translation adjustments highly inflationary economies recorded income concentration credit riskthe company concentration customers oil gas power industries exposes company concentration credit risk within single industry company seeks obtain advance progress payments contract work performed major contracts receivables index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 1 summary significant accounting policies continued generally collateralized allowance doubtful accounts including discontinued operations increased 2006 10389 6672 2005 company believes allowance doubtful accounts adequate fair value financial instrumentsthe carrying value financial instruments materially differ fair value capitalized interestthe company capitalizes interest part cost significant assets constructed developed use capitalized interest 57 168 349 2006 2005 2004 respectively income loss per common sharebasic income loss per share calculated dividing net income loss less preferred dividend requirements weightedaverage number common shares outstanding year diluted income loss per share calculated including weightedaverage number potentially dilutive common shares weightedaverage number common shares outstanding derivative financial instrumentsthe company may use derivative financial instruments forward contracts options financial instruments hedges mitigate nonus currency exchange risk company unable match nonus currency revenue expense currency company derivative financial instruments december 31 2006 2005 cash equivalentsthe company considers highly liquid investments original maturity three months less cash equivalents cash flows investing activitiesthe proceeds sale discontinued operations year ended december 31 2006 includes 16532 nonrefundable payments applied sale nigeria assets operations recently issued accounting standardsfin 48in june 2006 financial accounting standards board “fasb” issued fasb interpretation 48 “accounting uncertainty income taxes” “fin 48” interpretation sfas 109 “accounting income taxes” “sfas 109” interpretation clarifies accounting uncertainty income taxes recognized enterprise’s financial statements accordance sfas 109 interpretation prescribes recognition threshold measurement attribute tax position taken expected taken tax return also provides guidance derecognition classification interest penalties accounting interim periods disclosure transition provisions fin 48 effective fiscal years beginning december 31 2006 company currently evaluating impact statement financial statements sfas 157in september 2006 fasb issued sfas 157 “fair value measurements” “sfas 157” sfas 157 clarifies principle fair value based assumptions market participants would use pricing asset liability establishes fair value hierarchy prioritizes information used develop assumptions sfas 157 effective company’s fiscal year beginning january 1 2007 company currently evaluating impact statement financial statements fasb staff position “fsp” aug air1on september 7 2006 fasb issued amendment certain provisions american institute certified public accountants “aicpa” industry guide audits index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 1 summary significant accounting policies continued airlines accounting principles board “apb” opinion 28 “interim financial reporting” fsp prohibits use accrueinadvance method accounting planned major maintenance activities annual interim financial reporting periods guidance fsp shall applied first fiscal year beginning december 15 2006 company intends adopt standard fiscal year beginning january 1 2007 company currently evaluating impact amendment financial statements including potential impact retrospective periods reclassificationcertain reclassifications made prior year balances conform current year presentations 2 discontinuance operations asset disposal strategic decisions part company’s ongoing strategic evaluation operations following businesses discontinued nigeria venezuela txp4 plant collectively “discontinued operations” accordingly businesses presented discontinued operations preceding consolidated financial statements net assets net liabilities related discontinued operations shown consolidated balance sheets “assets discontinued operations” “liabilities discontinued operations” respectively results discontinued operations shown consolidated statements operations “loss discontinued operations net provision income taxes” periods shown separate results discontinued operations well breakdown major classes assets liabilities included part discontinued operations detailed subsequent tables nigeria february 7 2007 company sold nigeria operations share purchase agreement total consideration 155250 conjunction transaction company bought certain minority interests total cost 10500 see note 17subsequent events information sale nigeria operations assets previously included company’s international segment retrospectively presented discontinued operations company’s form 8k filed december 8 2006 part sales process company continues evaluate carrying value nigeria assets operations respect estimated market value december 31 2006 company recognize impairment nigeria assets based upon analysis impairment would included “loss discontinued operations net provision income taxes” pipe coating joint venture kanssen international pipe coating services limited “kanssen” willbros west africa inc “wwai” subsidiary company entered agreement upgrade facilities wwai choba pipe coating facility agreement signed june 2006 included installation new concrete weight coating equipment furnished kanssen wwai kanssen participate venture 50 percent interest party wwai paid management fee contract exceed 9 percent index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 2 discontinuance operations asset disposal continued contract revenue currently pipe coating transactions included revenues expenses related wwai projects 2006 pipe coating facility approximately 165 million contract revenue venezuela asset disposalon august 17 2006 company entered share purchase agreement venezuelan company “venezuelan buyer” pursuant company sold membership interests willbros barbados limited inc “wbl” whollyowned subsidiary company wbl owns assets operations company venezuela exception jointventure interest harwat international finance corporation nv “harwat” company received cash payments 7000 conveyance wbl gain recognized subject pending sale discussed venezuela operations assets previously component company’s international segment retrospectively presented discontinued operations company’s form 8k filed december 8 2006 jointventure interest disposalas part share purchase agreement venezuelan buyer agreed purchase company’s 10 percent interest harwat well assume guarantees company related 10 percent interest harwat sale harwat interest completed november 28 2006 company received commitment venezuelan buyer pay 3300 december 4 2013 present value commitment 1775 company estimates gain loss sale wbl 10 percent interest harwat txp4 plant asset disposalon january 12 2006 company entered purchase agreement release williams field services company “williams” whollyowned subsidiary williams companies inc pursuant company sold williams membership interest opal txp4 company llc whollyowned subsidiary company “llc” llc owns gas processing plant known txp4 plant “txp4 plant” opal lincoln county wyoming addition certain facilities equipment supplies related txp4 plant prior sale txp4 plant component us canada segment retrospectively presented discontinued operations company’s form 8k filed december 8 2006 company received cash payments 27944 conveyance llc realized gain 1342 net taxes 691 reflected component “loss discontinued operations net provision income taxes” addition cash payments described williams agreed pay company portion recovery williams may obtain based damages loss injury related txp4 plant 3400 settlement contingent upon williams’ recovery various third parties ongoing potential source cash flows subsequent purchase agreement date timing amount resolution claims cannot estimated index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 2 discontinuance operations asset disposal continued results discontinued operations condensed statements operations discontinued operations follows index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 2 discontinuance operations asset disposal continued nigeria income taxes nigeria company subject deemed profit tax creates tax provisions based gross revenue rather pretax income nigeria federal tax audit company’s operations nigeria audit federal inland revenue service “firs” taxable years 1998 2004 primary issues investigated related transfer pricing unsubstantiated expenses time company estimates possible additional tax liability range 1200 5000 based current financial information better estimate tax liability associated firs audit better estimate time company expect resolve audit within one year company recorded deferred income tax liability 1200 nigeria national labor contract previous nigerian national labor contract covering approximately 1600 national laborers company’s choba site 1 facility expired march 2006 replacement agreement executed may 2006 mistakenly included labor rate increases ranging 300 percent 350 percent labor union claims binding upon company notwithstanding obvious mistake fact legal deficiencies form substance replacement agreement “the may agreement” however based upon opinions legal counsel nigeria variety reasons company believes may agreement unenforceable current form company legal counsel pursuing measures rectify mistake related deficiencies purported agreement including without limitation negotiation mediation judicial actions provided labor laws nigeria rectification process however company voluntarily increased labor rate 20 percent accrued liability 5514 recorded december 31 2006 reflect company’s current estimate additional endofservice costs attributable reaching mutually acceptable final form labor agreement although company currently anticipate may agreement determined enforceable current mistaken form rectification agreement unsuccessful labor relations related legal processes underway substantially greater monthly labor expense would incurred company estimated additional 26000 endofservice liability would result also rectification process underway company incited protests strikes rank file workers covered may agreement labor union complained national local regional politicians matter heard labor board resolved index financial statements 2 discontinuance operations asset disposal continued willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts balance sheets discontinued operations condensed balance sheets discontinued operations follows index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 2 discontinuance operations asset disposal continued cash discontinued operations nigeria 36683 restricted cash december 31 2006 amount consortium bank account requires approval company consortium partner disburse funds additionally cash equivalents nigeria contained 9482 designated specific project uses inventory discontinued operations nigeria parts supplies inventories 21645 16818 net reserves 12159 5052 december 31 2006 december 31 2005 respectively loss provision contracts company recognized 33957 estimated losses related two projects nigeria december 31 2006 contingencies commitments circumstances december 31 2006 assets accounts receivable discontinued operations include anticipated recoveries insurance third parties 1191 primarily related repair pipelines company believes recovery costs insurance parties probable actual recoveries may vary estimates december 31 2006 company approximately 22625 letters credit outstanding associated discontinued operations representing maximum amount future payments company could required make see note 13contingencies commitments circumstances additional information letters credit insurance bonds company liability recorded december 31 2006 related commitments 3 accounts receivable accounts receivable net december 31 2006 2005 comprised following company expects accounts receivable collected within one year provision credit bad debts included “other net” consolidated statement operations 517 586 262 years ended december 31 2006 2005 2004 respectively index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 4 contracts progress contract costs recognized income yet billed uncompleted contracts arise revenues recorded amounts cannot billed terms contracts amounts recoverable customers upon various measures performance including achievement certain milestones completion specified units completion contract also included contract cost recognized income yet billed uncompleted contracts amounts company seeks collect customers change orders approved scope price associated scope change unapproved change orders revenue amounts recorded equal cost incurred realization price approval probable estimated amount equal greater company’s cost related unapproved change order unapproved change orders involve use estimates reasonably possible revisions estimated recoverable amounts recorded unapproved change orders may made nearterm company successfully resolve matters net expense recorded reduction revenues may required addition amounts previously provided contract cost recognized income yet billed related amounts billed december 31 2006 2005 follows contract cost recognized income yet billed includes 1191 1470 december 31 2006 2005 respectively completed contracts 5 property plant equipment property plant equipment used secure debt subject lien cost december 31 2006 2005 follows index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 5 property plant equipment continued included land buildings 1446 0 december 31 2006 2005 respectively cost property capitalized capital leases additionally included construction equipment 10662 0 december 31 2006 2005 respectively cost new construction equipment capitalized capital leases 6 accounts payable accrued liabilities accounts payable accrued liabilities december 31 2006 2005 follows december 31 2006 advances account included 16532 nonrefundable payments applied sale nigeria assets operations see note 17subsequent events discussion sale 7 longterm debt longterm debt december 31 2006 2005 follows 2006 credit facility october 27 2006 willbros usa inc whollyowned subsidiary company entered new 100000 threeyear senior secured synthetic credit facility “2006 credit facility” group lenders led calyon new york branch “calyon” 2006 credit facility replaces company’s 2004 credit facility company may elect increase total capacity 2006 credit facility 150000 consent calyon company currently commitment calyon expires august 7 2007 underwrite increase 2006 credit facility 25000 subject certain terms conditions index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 7 longterm debt continued company increase 2006 credit facility requirements issue letters credit excess 100000 2006 credit facility may used standby commercial letters credit borrowings combination thereof borrowings may made 25000 less amount letter credit advances financial letters credit must repaid least year new revolving advances made period 10 consecutive business days thereafter fees payable 2006 credit facility include facility fee rate per annum equal 50 percent 2006 credit facility capacity payable quarterly arrears facility fee reduced 275 percent company obtains rating sp moody’s greater b b2 respectively letter credit fee equal 0125 percent per annum aggregate commitments interest borrowings payable quarterly arrears adjusted base rate minus 100 percent eurodollar rate company’s option 2006 credit facility collateralized substantially company’s assets including stock company’s principal subsidiaries 2006 credit facility contains requirement maintenance 10000 minimum cash balance prohibits payment cash dividends includes customary affirmative negative covenants limitations creation certain new indebtedness liens restrictions certain transactions payments maintenance maximum senior leverage ratio minimum fixed charge coverage ratio minimum tangible net worth requirement default may triggered events failure comply financial covenants failure make payments due failure make payments due respect failure perform obligations relating debt obligations excess 5000 change control company certain insolvency proceedings defined 2006 credit facility 2006 credit facility guaranteed company certain subsidiaries unamortized costs associated creation 2006 credit facility total 1986 included assets december 31 2006 costs amortized general administrative expense threeyear term credit facility ending october 2009 december 31 2006 borrowings outstanding 2006 credit facility 64545 outstanding letters credit consisting 41920 issued projects continuing operations 22625 issued projects related discontinued operations 65 senior convertible notes december 22 2005 company entered purchase agreement “purchase agreement” private placement 65000 aggregate principal amount 65 senior convertible notes due 2012 “65 notes” private placement closed december 23 2005 first quarter 2006 initial purchasers 65 notes exercised options purchase additional 19500 aggregate principal amount 65 notes collectively primary offering purchase option 65 notes total 84500 net proceeds offering used retire existing indebtedness provide additional liquidity support working capital needs 65 notes governed indenture dated december 23 2005 entered among company issuer willbros usa inc guarantor “wusai” bank new york trustee “indenture” issued purchase agreement among company initial purchasers 65 notes “purchasers” transaction exempt registration requirements securities act 1933 amended “securities act” pursuant purchase agreement company wusai agreed indemnify purchasers affiliates agents certain liabilities including liabilities securities act index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 7 longterm debt continued 65 notes convertible shares company’s common stock conversion rate 569606 shares common stock per 100000 principal amount notes representing conversion price approximately 1756 per share resulting 4813171 shares december 31 2006 subject adjustment certain circumstances 65 notes general senior unsecured obligations interest paid semiannually june 15 december 15 beginning june 15 2006 65 notes mature december 15 2012 unless notes repurchased converted earlier company right redeem 65 notes holders 65 notes right require company purchase 65 notes cash including unpaid interest december 15 2010 holders 65 notes also right require company purchase 65 notes cash upon occurrence fundamental change defined indenture addition amounts described company required pay “makewhole premium” holders 65 notes elect convert notes company’s common stock connection fundamental change makewhole premium payable addition shares common stock calculated based formula premium ranging 0 percent 314 percent depending fundamental change occurs price company’s stock time fundamental change occurs upon conversion 65 notes company right deliver lieu shares common stock cash combination cash shares common stock indenture company required notify holders 65 notes method settling principal amount 65 notes upon conversion notification provided irrevocable legally binding upon company regard conversion 65 notes march 21 2006 company notified holders 65 notes election satisfy conversion obligation respect principal amount 65 notes surrendered conversion paying holders surrendered 65 notes 100 percent principal conversion obligation form common stock company 65 notes surrendered conversion company required notify holders method settling excess amount conversion obligation relating amount conversion value principal amount event default 10000 credit agreement including 2004 credit facility 275 notes corresponding event default would result 65 notes unamortized debt issuance costs 4103 698 associated 65 notes included assets december 31 2006 2005 respectively amortized sevenyear period ending december 2012 275 convertible senior notes march 12 2004 company completed primary offering 60000 275 convertible senior notes “275 notes” april 13 2004 initial purchasers 275 notes exercised option purchase additional 10000 aggregate principal amount notes collectively primary offering purchase option 275 notes totaled 70000 275 notes general senior unsecured obligations interest paid semiannually march 15 september 15 payments began september 15 2004 275 notes mature march 15 2024 unless notes repurchased redeemed converted earlier company may redeem 275 notes cash march 15 2011 100 percent principal amount notes plus accrued interest holders 275 notes right require company purchase 275 notes including unpaid interest march 15 2011 2014 2019 upon change control related event march 15 2011 upon change control event company must pay purchase price cash march 15 2014 2019 company option providing common stock lieu cash combination common stock cash fund purchases holders 275 notes may index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 7 longterm debt continued certain circumstances convert notes shares company’s common stock initial conversion ratio 513611 shares common stock per 100000 principal amount notes representing conversion price approximately 1947 per share resulting 3595277 shares december 31 2006 subject adjustment certain circumstances notes convertible upon occurrence certain specified events including limited certain times closing sale price company’s common stock exceeds 120 percent current conversion price 2336 per share based initial conversion price event default company credit agreement indenture covering 275 notes 1 company fails pay principal interest indebtedness aggregate principal balance 10000 2 indebtedness principal balance 10000 accelerated event default would result 275 notes june 10 2005 company received letter law firm representing investor claiming owner excess 25 percent 275 notes asserting result company’s failure timely file sec 2004 form 10k quarterly report form 10q quarter ended march 31 2005 placing company notice event default indenture dated march 12 2004 company issuer jpmorgan chase bank na trustee “indenture” governs 275 notes company indicated believe failed perform obligations relevant provisions indenture referenced letter august 19 2005 company entered settlement agreement beneficial owner 275 notes behalf notice default sent pursuant company agreed use commercially reasonable efforts solicit requisite vote approve amendment indenture “indenture amendment” company obtained requisite vote september 22 2005 indenture amendment became effective indenture amendment extended initial date 275 notes may redeemed company march 15 2013 march 15 2011 addition new provision added indenture requires company event “fundamental change” change control event 10 percent consideration transaction consists cash make coupon makewhole payment equal present value discounted us treasury rate lesser two years scheduled payments interest 275 notes b scheduled interest 275 notes date transaction march 15 2013 unamortized debt issue costs 2175 2714 associated 275 notes included assets december 31 2006 2005 respectively amortized sevenyear period ending march 2011 2004 credit facility march 12 2004 existing 125000 june 2002 credit agreement amended restated increased 150000 “2004 credit facility” although 2004 credit facility scheduled mature march 12 2007 replaced october 2006 company secured 2006 credit facility see “2006 credit facility” 2004 credit facility could used standby commercial letters credit borrowings combination thereof borrowings limited lesser 40 percent borrowing base 30000 interest payable quarterly base rate plus margin ranging 075 percent 200 percent eurodollar rate plus margin ranging 175 percent 300 percent 2004 credit facility collateralized substantially company’s assets including stock company’s principal subsidiaries prohibited payment cash dividends required company maintain certain financial ratios borrowing base calculated using varying percentages cash accounts receivable accrued revenue contract cost recognized index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 7 longterm debt continued income yet billed property plant equipment spare parts unamortized debt issue costs 982 associated 2004 credit facility included assets december 31 2005 october 27 2006 company terminated 2004 credit facility borrowings outstanding reissued letters credit outstanding 2006 credit facility 54928 letters credit outstanding december 31 2005 2004 credit facility waivers january 2005 company obtained consent waiver syndicated bank group covering period june 29 2005 waiving certain defaults covenants related filing tax returns payment taxes due tax liens legal proceedings company related tax assessment bolivia additional consent waivers obtained syndicated bank group april 8 june 13 2005 respect defaults noncompliance certain financial covenants june 13 2005 july 19 2005 company entered second amendment waiver agreement “waiver amendment” 2004 credit facility bank group obtain continuing waivers regarding noncompliance certain financial nonfinancial covenants 2004 credit facility terms waiver amendment total credit availability 2004 credit facility reduced 100000 effective date waiver amendment subject certain conditions bank group agreed permanently waive existing probable technical defaults 2004 credit facility long company submitted yearend 2004 financial statements interim financial statements quarters ended march 31 june 30 2005 september 30 2005 conditions relate primarily submissions various financial statements financial borrowing base related information waiver amendment also modified certain ongoing financial covenants 2004 credit facility established requirement company maintain minimum cash balance 15000 time waiver became permanent company certain additional reporting requirements including periodic cash balance reporting addition waiver amendment prohibited company borrowing cash 2004 credit facility waiver became permanent company able submit referenced statements september 30 2005 therefore waiver become permanent period november 23 2005 june 14 2006 company entered four additional amendments waivers 2004 credit facility syndicated bank group waive noncompliance certain financial nonfinancial covenants among things amendments provided 1 certain financial covenants reporting obligations waived andor modified reflect company’s current anticipated future operating performance 2 ultimate reduction facility 70000 issuance letter credit obligations 3 requirement company maintain minimum cash balance 15000 august 18 2006 company entered sixth amendment temporary waiver agreement “sixth amendment” waived company’s failure comply certain financial covenants 2004 credit facility fiscal quarter ended june 30 2006 earlier september 30 2006 ii occurrence “waiver default” breach company covenant material breach representation warranty occurrence default event default 2004 credit facility defaults temporarily waived sixth amendment sixth amendment index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 7 longterm debt continued amended 2004 credit facility reduce total commitment 50000 provided letter credit limit 50000 less face amount letters credit issued prior august 18 2006 provided new letter credit must fully cash collateralized letter credit fee 025 percent paid cash collateralized letter credit sixth amendment expired september 30 2006 availability 2004 credit facility reduced zero october 27 2006 company entered new 100000 synthetic credit facility reissued facility outstanding letters credit see “2006 credit facility” capital leases assets held capital leases summarized following minimum lease payments assets financed capital lease arrangements december 31 2006 obligations company various notes payable generally related equipment financing local revolving credit facilities market interest rates collateralized certain vehicles equipment andor real estate index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 7 longterm debt continued company unsecured credit facilities banks certain countries outside united states borrowings form shortterm notes overdrafts made competitive local interest rates generally line available borrowings related operations specific country credit available facilities approximately 4582 december 31 2006 outstanding borrowings made facilities december 31 2006 2005 8 retirement benefits company defined contribution plans funded participating employee contributions company matches employee contributions maximum four percent salary form cash contributions form wgi common stock suspended 2005 removed option january 9 2006 company contributions plans 1761 1909 1423 including wgi common stock valued 0 80 221 2006 2005 2004 respectively 9 income taxes tax regimes countries company operates affect consolidated income tax provision company effective tax rate effective consolidated tax rate differs united states “us” federal statutory rate tax rates methods determining taxes payable different country moreover losses one country generally cannot used offset taxable income another country cases certain expenses deductible tax purposes income loss income taxes provision benefit income taxes consolidated statements operations consist index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 9 income taxes continued provision income taxes determined based upon tax laws rates countries operations conducted income earned company many subsidiaries panamanian companies panamanian tax law based territorial principles impose income tax income earned outside panama company’s principal international operations oman company’s subsidiary oman subject corporate income tax rate 12 percent 2004 company foreign earnings nontaxable due exemptions tax holidays certain countries nontaxable foreign earnings taxable year 2004 5066 company nontaxable foreign earnings taxable years 2005 2006 company’s subsidiaries operating united states subject federal income tax rates 35 percent varying state income tax rates methods computing tax liabilities 2006 company’s subsidiaries operating canada subject federal income tax rate 2212 percent provincial income tax 1037 percent reconciliation differences provision income tax computed appropriate statutory rates reported provision income taxes follows company total net tax assets equal 6173 company owed tax refunds 3436 included company’s prepaid expenses refunds primarily result company’s ability carry significant portion losses recognized 2004 back 2002 order offset taxable income recognized year 2006 company owes various federal stateprovincial tax authorities 1669 amount included accrued income taxes index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 9 income taxes continued company net deferred tax assets 5064 december 31 2006 principal components company’s net deferred tax assets net deferred tax assets geographical location follows ultimate realization deferred tax assets related net operating loss carry forwards including state net operating loss carry forwards dependent upon generation future taxable income particular tax jurisdiction periods use net operating losses allowed management considers scheduled reversal deferred tax liabilities projected future taxable income making assessment 2006 company utilized united states canada federal net operating losses 14854 utilized stateprovincial net operating losses 4236 december 31 2006 company remaining us net operating loss carry forwards 6741 state net operating loss carry forwards 7769 company’s federal net operating losses expire 2013 state net operating loss generally expires five years net operating loss incurred based index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 9 income taxes continued upon level historical taxable income projections future taxable income periods net operating losses utilized offset taxable income management believes company realize tax benefits 2564 loss carry forwards note company’s us subsidiaries report taxable income consolidated tax return includes income discontinued operations net operating losses consolidated group shared subsidiary consolidated group including willbros mt west subsidiary portion operations discontinued table deferred tax assets set forth 2005 reflected portion federal net operating loss could used company’s us subsidiaries continuing operations net operating losses amount 10269 2005 allocated discontinued operations order offset taxable gain derived sale opal txp4 gas production facility however based company’s tax position net operating losses previously allocated discontinued operations allocated instead continuing operations thereby increasing company’s net operating loss deferred tax asset company also net operating loss carry forwards derived united kingdom bolivia pakistan 43154 set forth tax benefit net operating losses fully reserved total valuation allowance december 31 2006 43154 company also written previously recorded tax assets fully reserved company work planned countries future risk future taxable event andor net operating loss carry forwards expired 10 stockholders’ equity private sale equity october 27 2006 company completed private placement equity certain accredited investors pursuant company issued sold 3722360 shares company’s common stock resulting net proceeds 48748 selling price 1400 per share discount approximately 10 percent based company’s closing stock price 1550 october 24 2006 net proceeds used general corporate purposes primarily support start several new projects united states canada conjunction private placement company also issued warrants purchase additional 558354 shares company’s common stock warrant exercisable whole part 60 months date issuance warrant holder may elect exercise warrant delivery payment company exercise price 1903 per share pursuant cashless exercise provided warrant agreement fair value warrants 3423 date grant calculated using blackscholes option pricing model december 31 2006 warrants purchase common stock remained outstanding stockholder rights plan april 1 1999 company adopted stockholder rights plan declared distribution one preferred share purchase right “right” outstanding share company’s common stock index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 10 stockholders’ equity continued distribution made april 15 1999 stockholders record date rights expire april 14 2009 rights exercisable person group acquires 15 percent company’s common stock announces tender offer consummation would result ownership person group 15 percent common stock right entitles stockholders buy one onethousandth share series junior participating preferred stock exercise price 3000 per share company acquired merger business combination transaction person group acquired 15 percent company’s outstanding common stock right entitles holder purchase right’s thencurrent exercise price number acquiring company’s common shares market value twice price addition person group acquires 15 percent company’s outstanding common stock right entitles holder person members group purchase right’s thencurrent exercise price number company’s common shares market value twice price prior acquisition person group beneficial ownership 15 percent company’s common stock rights redeemable onehalf cent per right option company’s board directors stock ownership plans information contained note pertains continuing discontinued operations may 1996 company established willbros group inc 1996 stock plan “1996 plan” 1125000 shares common stock authorized issuance provide awards key employees company willbros group inc director stock plan “director plan” 125000 shares common stock authorized issuance provide grant stock options nonemployee directors number shares authorized issuance 1996 plan director plan increased 4075000 225000 respectively stockholder approval director plan expired august 14 2006 company established 2006 director restricted stock plan 2006 director plan 50000 shares authorized issuance grant shares restricted stock nonemployee directors restricted stock restricted stock rights also described collectively restricted stock units “rsu’s” options granted 1996 plan vest generally three four year period options granted director plan vest six months date grant restricted stock granted 2006 director plan vests one year date grant december 31 2006 1996 plan 791236 shares 2006 director plan 46884 shares available grant additional 356000 shares 2006 stock plan reserved future grants required employment agreements certain provisions allow accelerated vesting based increases share prices eligible retirement year ended december 31 2006 3247 compensation expense recognized due accelerated vesting rsu’s due retirements separation company effective january 1 2006 company adopted fair value recognition provisions sfas 123r using modified prospective application method compensation cost recognized index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 10 stockholders’ equity continued year ended december 31 2006 includes applicable amounts compensation expense sharebased payments granted prior yet vested january 1 2006 based grantdate fair value estimated accordance original provisions sfas 123 previously presented pro forma footnote disclosures company’s sec reports b compensation cost sharebased payments granted subsequent january 1 2006 based grantdate fair value estimated accordance provisions sfas 123r company uses blackscholes valuation method determine fair value stock options granted grant date results prior periods adjusted result adopting sfas 123r loss continuing operations income taxes net loss year ended december 31 2006 increased 518 due additional compensation expense recorded year ended december 31 2006 basic diluted earnings per share negatively impacted 02 due implementation sfas 123r sharebased compensation related rsu’s recorded based company’s stock price grant date recognition sharebased compensation related rsu’s impacted adoption sfas 123r expense stock options rsu’s totaled 7240 year ended december 31 2006 company tax benefits related either stock options rsu’s year ended december 31 2006 prior january 1 2006 company accounted awards granted stock ownership plans following recognition measurement principles accounting principles board opinion 25 “accounting stock issued employees” related interpretations permitted sfas 123 company’s policy grant stock options market price date grant intrinsic value grants zero therefore compensation expense recorded modified prospective application method results prior periods adjusted reflect effects implementing sfas 123r following pro forma information presented comparative purposes illustrates pro forma effect net loss net loss per share company applied fair value recognition provisions sfas 123 sharebased compensation prior january 1 2006 index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 10 stockholders’ equity continued fair value granted options estimated date grant using blackscholes option pricing model following weightedaverage assumptions volatility calculated using analysis historical volatility company believes historical volatility company’s stock best method estimating future volatility expected lives options determined based company’s historical share option exercise experience company believes historical experience method best estimate future exercise patterns currently available riskfree interest rates determined using implied yield currently available zerocoupon us government issues remaining term equal expected life options company’s stock option activity related information consist december 31 2006 aggregate intrinsic value stock options outstanding stock options exercisable 4450 4106 respectively weighted average remaining contractual term outstanding options 600 years weighted average remaining contractual term exercisable options 484 years december 31 2006 total intrinsic value options exercised 2639 298 3689 years ended december 31 2006 2005 2004 respectively tax benefit realized related exercises total fair value options vested years ended december 31 2006 2005 2004 357 829 1059 respectively index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 10 stockholders’ equity continued company’s nonvested options december 31 2006 changes nonvested options year ended december 31 2006 follows company’s rsu activity related information consist rsu’s outstanding december 31 2006 include 225000 rsu’s vested deferred share issuance date total fair value rsu’s vested years ended december 31 2006 2005 6990 1583 respectively december 31 2006 total 4151 unrecognized compensation cost net estimated forfeitures related nonvested sharebased compensation arrangements granted company’s stock ownership plans cost expected recognized weightedaverage period 164 years march 2002 certain officers company borrowed total 1307 employee stock purchase program permitted selected executives officers exclusive chief executive officer borrow company 100 percent funds required exercise vested stock options loans full recourse noninterest bearing period five years collateralized related stock difference 434 discounted value loans fair market value stock date exercise 119 representing difference exercise price certain options fair market value stock recorded compensation expense date exercise notes recorded discounted value discount amortized interest income periods notes outstanding net loans receivable presented reduction stockholders’ equity maximum loan amount one officer may outstanding employee stock purchase program 250 accordance sarbanesoxley act 2002 company longer makes loans executive officers company loans settled 2006 index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 11 income loss per common share basic diluted income loss per common share computed follows company incurred net losses years ended december 31 2006 2005 therefore excluded securities listed computation diluted income loss per share effect would antidilutive accordance emerging issues task force “eitf” issue 048 “the effect contingently convertible instruments diluted earnings per share” 8408448 shares issuable upon conversion convertible notes included diluted income loss per share securities dilutive regardless whether market trigger prices 1947 1756 respectively met 12 segment information company’s segments strategic business units managed separately different operational requirements marketing strategies composition work nuances geographic markets company serves company managed reported operating results geographic basis consisting two operating segments united states canada international segment consists construction engineering facilities development operations countries united states canada currently operations primarily middle east united states canada segment consists construction engineering facilities development operations index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 12 segment information continued united states canada company’s corporate operations include general administrative financing functions organization costs functions allocated two operating segments company’s corporate operations also include various assets allocated two operating segments intersegment revenue geographic areas material tables reflect company’s business segments years ended december 31 2006 2005 2004 index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 12 segment information continued capital expenditures segment presented total assets segment presented due limited number major projects clients company may one time substantial part operations dedicated one project client country customers representing 10 percent total contract revenue follows information company’s operations work countries shown index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 12 segment information continued 1 net intercountry revenue 20922 2006 27980 2005 11160 2004 13 contingencies commitments circumstances january 6 2005 j kenneth tillery president willbros international inc “wii” principally responsible international operations including bolivian operations resigned company following mr tillery’s resignation audit committee working independent outside legal counsel forensic accountants retained legal counsel commenced independent investigation circumstances surrounding bolivian tax assessment actions mr tillery international locations audit committee’s investigation identified payments made direction mr tillery bolivia nigeria ecuador may violation united states foreign corrupt practices act “fcpa” united states laws investigation also revealed mr tillery authorized numerous transactions company subsidiaries entities apparently held ownership interest exercised significant control see note 16related party transactions addition company learned certain acts carried mr tillery others acting direction respect bid work sudan may constitute facilitation efforts prohibited us law violation us trade sanctions unauthorized export technical information united states securities exchange commission “sec” currently conducting investigation whether company others may violated various provisions securities act 1933 “securities act” securities exchange act 1934 “exchange act” united states department justice “doj” investigating violations fcpa applicable laws addition united states department treasury’s office foreign assets control “ofac” commencing investigation potentially improper facilitation export activities company cooperating fully investigations company one subsidiaries found violated fcpa entity could subject civil penalties 650 per violation criminal penalties greater 2000 per violation twice gross pecuniary gain resulting improper conduct company one subsidiaries found violated trade sanctions us export restrictions entity could subject civil penalties 11 per violation criminal penalties 250 per violation may penalties could apply us laws foreign jurisdictions consequences investigations company subsidiaries uncertain possible consequences includebut limited todebarment participating future us government contracts participating certain us export transactions index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 13 contingencies commitments circumstances continued default existing credit facilities restricted access capital markets insurance harm existing future commercial relationships company cannot predict outcome investigations conducted sec doj ofac including company’s exposure civil criminal fines penalties regulatory action could material adverse effect company’s business financial condition results operations addition company’s ability obtain retain business collect outstanding receivables current future operating locations could negatively affected may 18 2005 securities classaction lawsuit captioned legion partners llp v willbros group inc et al filed united states district court southern district texas company certain present former officers directors thereafter three nearly identical lawsuits filed plaintiffs purport represent class composed persons purchased otherwise acquired willbros group inc common stock andor securities may 6 2002 may 16 2005 inclusive complaint seeks unspecified monetary damages relief wgi filed motion dismiss complaint march 9 2006 briefing motion completed june 14 2006 motion dismiss pending wgi reached settlement principle lead plaintiff parties signed memorandum understanding “settlement” settlement provides payment 10500 resolve claims defendants february 15 2007 us district court southern district texas issued order approving settlement order dismissed prejudice claims defendants members settlement class exercised right excluded object final settlement funded company’s insurance carrier court’s order ends class action litigation operations outside united states may subject certain risks ordinarily would expected exist united states including foreign currency restrictions extreme exchange rate fluctuations expropriation assets civil uprisings riots war unanticipated taxes including income taxes excise duties import taxes export taxes sales taxes governmental assessments availability suitable personnel equipment termination existing contracts leases government instability legal systems decrees laws regulations interpretations court decisions always fully developed may retroactively applied management presently aware events type described countries operates provided accompanying consolidated financial statements based upon advice local advisors various work countries concerning interpretation laws practices customs countries operates management believes company follows current practices countries however nature potential risks assurance company may adversely affected future company insures substantially equipment countries outside united states certain political risks terrorism political risk insurance coverage contains 20 percent coinsurance provision company usual liability contractors completion contracts warranty work performed joint venture company also possible liability contract completion warranty responsibilities joint venture partners addition company acts prime contractor majority projects undertakes normally responsible performance entire project including subcontract work management aware material exposure related thereto provided accompanying consolidated financial statements december 31 2006 2005 assets accounts receivable discontinued operations include anticipated recoveries insurance third parties 1191 4656 respectively primarily index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 13 contingencies commitments circumstances continued related repair pipelines company believes recovery costs insurance parties probable actual recoveries may vary estimates certain postcontract completion audits reviews periodically conducted clients andor government entities assurance claims received result audits reviews management believe legitimate basis exists material claims present time possible management estimate likelihood claims asserted amount nature thereof time company enters commercial commitments usually form commercial standby letters credit insurance bonds financial guarantees contracts company’s customers may require company provide letters credit insurance bonds regard company’s performance contracted services cases commitments called upon event failure perform contracted services likewise contracts may allow company issue letters credit insurance bonds lieu contract retention provisions client withholds percentage contract value project completion expiration warranty period retention commitments called upon event warranty project completion issues prescribed contracts december 31 2006 company approximately 41920 letters credit related continuing operations 22625 letters credit related discontinued operations nigeria additionally company 99050 insurance bonds outstanding related continuing operations amounts represent maximum amount future payments company could required make company liability recorded december 31 2006 related commitments connection private placement 65 notes december 23 2005 company entered registration rights agreement purchasers registration rights agreement requires company file registration statement respect resale shares company’s common stock issuable upon conversion 65 notes later june 30 2006 use best efforts cause registration statement declared effective later december 31 2006 company also required keep registration statement effective december 31 2006 event company unable satisfy obligations registration rights agreement company owe additional interest holders 65 notes rate per annum equal 05 percent principal amount 65 notes first 90 days 10 percent per annum 91st day following event company filed registration statement june 30 2006 declared effective january 18 2007 sec company pay additional 22 penalty interest holders 65 notes result registration statement declared effective december 31 2006 connection private placement common stock warrants october 27 2006 company entered registration rights agreement buyers “2006 registration rights agreement” 2006 registration rights agreement requires company file registration statement respect resale common stock including common stock underlying warrants later 60 days closing private placement use reasonable best efforts cause registration statement declared effective later 120 days closing private placement event delay filing effectiveness registration statement period effectiveness registration statement maintained suspended company permitted 2006 registration rights agreement company required pay buyer amount cash equal 125 percent buyer’s aggregate purchase price common stock warrants company shall required pay buyer aggregate amount exceeds 10 percent buyer’s aggregate purchase price index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 13 contingencies commitments circumstances continued addition matters discussed company party number legal proceedings management believes nature number proceedings typical firm similar size engaged similar type business none proceedings material company’s financial position company certain operating leases office camp facilities rental expense continuing operations excluding daily rentals reimbursable rentals cost plus contracts 2079 2006 2216 2005 2938 2004 minimum lease commitments operating leases december 31 2006 totaled 17650 payable follows 2007 7755 2008 5270 2009 2701 2010 1062 2011 862 thereafter 0 company 50 percent interest pipeline construction joint venture chadcameroon pipeline project africa project completed 2003 company adjusted investment joint venture zero since 2004 activity 50 percent owned joint venture limited warranty work accrued prior years summarized balance sheet information december 31 2006 2005 reflects decreased level activity index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 14 quarterly financial data unaudited selected unaudited quarterly financial data years ended december 31 2006 2005 presented total quarterly income loss per share amounts may equal per share amounts full year due manner earnings loss per share calculated index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 14 quarterly financial data unaudited continued additional notes • decision sell business operations assets nigeria venezuela txp4 plant opal wyoming 2006 resulted reclassification discontinued operations periods presented • quarters ended 2005 march 31 2006 restated reflect reclassification form 8k filed december 8 2006 see note 2discontinuance operations asset disposal consolidated financial statements discussion discontinued operations • income discontinued operations quarter ended march 31 2006 includes gain sale txp4 plant opal wyoming 1342 net tax • november 28 2006 company completed sale operations assets venezuela recognizing gain • fourth quarter 2006 company recognized loss provision nigeria project 26657 contributed 2006 loss discontinued operations company derives revenue contracts durations weeks several months cases year unitprice contracts provide relatively even quarterly results however major projects usually fixedprice contracts may result uneven quarterly financial results due method revenue recognized 15 parent guarantor nonguarantor condensed consolidating financial statements set forth condensed consolidating financial statements wgi b wusai guarantor 65 notes c direct indirect subsidiaries guarantors 65 notes currently restrictions ability wusai transfer funds wgi form cash dividends advances terms indenture 65 notes wusai may sell otherwise dispose substantially assets merge another entity company unless default exists indenture acquirer assumes obligations wusai indenture wgi holding company significant operations subsidiaries index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 15 parent guarantor nonguarantor condensed consolidating financial statements continued condensed consolidating financial statements presented december 31 2006 2005 years threeyear period ended december 31 2006 condensed consolidating financial statements present investments consolidated subsidiaries using equity method accounting condensed consolidating balance sheets index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 15 parent guarantor nonguarantor condensed consolidating financial statements continued condensed consolidating balance sheetscontinued 1 certain amounts reclassified conform current classification costs guarantor nonguarantor index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 15 parent guarantor nonguarantor condensed consolidating financial statements continued condensed consolidating statements operations index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 15 parent guarantor nonguarantor condensed consolidating financial statements continued condensed consolidating statements operationscontinued index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 15 parent guarantor nonguarantor condensed consolidating financial statements continued condensed consolidating statements cash flows index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 15 parent guarantor nonguarantor condensed consolidating financial statements continued condensed consolidating statements cash flowscontinued index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 15 parent guarantor nonguarantor condensed consolidating financial statements continued condensed consolidating statements cash flowscontinued index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 16 related party transactions past certain company’s subsidiaries entered commercial agreements companies former president willbros international inc j kenneth tillery apparently ownership interest companies included arbastro trading ltd hydrodive international ltd hydrodive offshore services international inc hydrodive nigeria ltd oco industrial services ltd windfall energy services ltd companies chartered sold marine vessels company’s subsidiaries hydrodive offshore services international inc hydrodive international ltd also provided diving services company’s subsidiaries payment terms vendors ranged due receipt net 30 days settlement method cash mr tillery also appears exercised significant influence activities symoil petroleum ltd fusion petroleum services ltd provided consulting services projects nigeria kaplan associates provided consulting services projects bolivia certain foreign locations mr tillery resigned position company january 6 2005 accordingly none companies identified considered related parties subsequent date additionally company significantly discontinued engaging services companies mr tillery ownership interest exerted significant influence period since departure mr tillery company continued services provided windfall energy services hydrodive international ltd however fourth quarter 2005 company settled outstanding claims companies entered new contracts governing services provided vendors new contracts company made payments 1671 year ended december 31 2006 related nigeria projects included condensed consolidated statements operations discontinued operations note 2discontinuance operations asset disposal outstanding amounts owed formerly related parties included “current liabilities” discontinued operations equal 1800 payments made companies mr tillery appears undisclosed ownership interest appears exercised significant influence threeyear period ended december 31 2006 totaling 16629 recorded contract cost operating expenses nigeria bolivia projects included amount 16105 related nigeria projects included condensed consolidated statements operations discontinued operations note 2discontinuance operations asset disposal remaining 524 related bolivia included consolidated statements operations amounts detailed index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 16 related party transactions continued outstanding amounts owed related parties mr tillery appears undisclosed ownership interest appears exercised significant influence included accounts payable accrued liabilities follows 17 subsequent events february 7 2007 company announced completed sale nigeria assets operations ascot offshore nigeria limited “ascot” nigerian energy services company total consideration 155250 sale pursuant share purchase agreement company ascot dated february 7 2007 “agreement” providing purchase ascot share capital wg nigeria holdings limited “wgnhl” holding company willbros west africa inc willbros nigeria limited willbros offshore nigeria limited wg nigeria equipment limited terms agreement ascot paid purchase price form 150000 cash plus interestbearing promissory note principal amount 5250 “ascot note” note secured guarantee ascot’s parent company berkeley group plc “berkeley” company organized laws federal republic nigeria along pledge share capital company pursuant collateral pledge security agreement february 12 2007 company received 2625 payment ascot note remaining balance 2625 due payable later august 1 2007 march 1 2007 collateral pledge security agreement expired final net proceeds company subject certain postclosing working capital adjustments claims provided agreement company’s obligation claims ascot previously disclosed ascot limited 10 percent purchase price claim must made within one year date agreement except claim may arise united states related sec doj ofac investigations described note 13contingencies commitments circumstances due many variables affecting company’s contracts commercial negotiations nigeria final adjustments may determined several months adjustments may substantial expected result recognition loss sale conjunction transaction company bought certain minority interests total cost 10500 date pursuant agreement company ascot entered intellectual property license agreement allows ascot use willbros brand trademark nigeria specified period time additionally date company willbros international services nigeria limited subsidiary company “wisnl” entered transition services agreement ascot “tsa” pursuant tsa wisnl agreed provide wisnl company cause subsidiaries company provide certain support services ascot two years tsa may immediately terminated election company wisnl certain circumstances index financial statements willbros group inc notes consolidated financial statementscontinued thousands except share per share amounts 17 subsequent events continued date connection sale shares company subsidiary wii entered indemnity agreement ascot berkeley “indemnity agreement” pursuant ascot berkeley indemnify company wii obligations incurred company wii connection parent company performance guarantees “guarantees” company wii previously issued maintained behalf certain subsidiaries wgnhl certain working contracts subsidiaries customers company contractually obligated guarantees perform cause performed work related several ongoing projects nigeria among guarantees covered indemnity agreement included five contracts estimate december 31 2006 aggregate remaining contract revenue excluding additional claim revenue 374761 aggregate cost complete 315951 december 31 2006 one contracts covered guarantees estimated loss position accrual loss amount 33157 reflected balance sheet nigeria portion discontinued operations included note 2discontinuance operations asset disposal pursuant agreement intercontinental bank plc issued five irrevocable unconditional backstop standby letters credit totaling approximately 22625 provide indemnification company affiliates relative performance certain subsidiaries wgnhl certain contracts backed performance letters credit currently issued behalf company affiliates benefit wgnhl andor subsidiaries remain effect february 28 2007 one letters credit amount 2303 expired remaining letters credit scheduled expire amount 440 december 19 2007 123 february 28 2008 19759 august 31 2008 index financial statements item 9 nannannannannannanitem 15 exhibits financial statement schedules reports form 8k 1 financial statements financial statements subsidiaries independent auditors report listed item 8 form 10k schedules omitted inapplicable required information contained financial statements included footnotes thereto 3 exhibits following documents included exhibits form 10k exhibits incorporated reference herein indicated information supplied parenthetical thereafter parenthetical appears exhibit filed herewith 31 amended restated articles incorporation willbros group inc filed exhibit 31 report form 10q quarter ended september 30 2002 filed november 14 2002 32 restated bylaws willbros group inc filed exhibit 32 registration statement form s1 registration 3335413 s1 registration statement 41 form stock certificate common stock par value 05 per share filed exhibit 4 s1 registration statement 42 rights agreement dated april 1 1999 us chasemellon shareholder services llc rights agent filed exhibit registration statement form 8a dated april 9 1999 43 certificate designation series junior participating preferred stock filed exhibit 3 report form 10q quarter ended march 31 1999 filed may 17 1999 101 credit agreement dated june 14 2002 among us certain designated subsidiaries credit lyonnais new york branch administrative agent certain financial institutions canadian imperial bank commerce syndication agent filed exhibit 101 report form 10q quarter ended june 30 2002 filed august 14 2002 102 form indemnification agreement officers us filed exhibit 107 s1 registration statement 103 form indemnification agreement directors us filed exhibit 1016 s1 registration statement 104 willbros group inc 1996 stock plan filed exhibit 108 s1 registration statement 105 amendment number 1 willbros group inc 1996 stock plan dated february 24 1999 filed exhibit companys proxy statement annual meeting stockholders dated march 31 1999 106 amendment number 2 willbros group inc 1996 stock plan dated march 7 2001 filed exhibit b proxy statement annual meeting stockholders dated april 2 2001 107 form incentive stock option agreement willbros group inc 1996 stock plan filed exhibit 1013 report form 10k year ended december 31 1996 filed march 31 1997 1996 form 10k 108 form nonqualified stock option agreement willbros group inc 1996 stock plan filed exhibit 1014 1996 form 10k 109 willbros group inc director stock plan filed exhibit 109 s1 registration statement 1010 amendment number 1 willbros group inc director stock plan dated january 1 2002 filed exhibit 1013 report form 10k year ended december 31 2001 filed february 20 2002 1011 amendment number 2 willbros group inc director stock plan dated february 18 2002 filed exhibit 102 report form 10q quarter ended june 30 2002 filed august 14 2002 1012 form secured promissory note willbros group inc employee stock purchase program filed exhibit 105 report form 10q quarter ended june 30 2002 filed august 14 2002 1013 willbros group inc severance plan amended restated effective september 25 2003 filed exhibit 101 report form 10q quarter ended september 30 2003 filed november 13 2003 1014 registration rights agreement dated april 9 1992 us heerema holding construction inc yorktown energy partners lp concord partners ii lp concord partners japan limited certain stockholders company filed exhibit 1013 s1 registration statement 1015 consulting services agreement dated june 1 2002 willbros usa inc larry j bump filed exhibit 104 report form 10q quarter ended june 30 2002 filed august 14 2002 21 subsidiaries 23 consent kpmg llp included page 77 form 10k 311 certification chief executive officer pursuant rule 13a14a securities exchange act 1934 adopted pursuant section 302 sarbanesoxley act 2002 312 certification chief financial officer pursuant rule 13a14a securities exchange act 1934 adopted pursuant section 302 sarbanesoxley act 2002 321 certification chief executive officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 322 certification chief financial officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 management contract compensatory plan arrangement reports form 8k b reports form 8k filed fourth quarter 2003 signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized willbros group inc date march 12 2004 michael f curran michael f curran president chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated independent auditors report consolidated financial statement schedule consent stockholders board directors willbros group inc audits referred report dated february 20 2004 except note 7 march 12 2004 included related consolidated financial statement schedule december 31 2003 years threeyear period ended december 31 2003 consolidated financial statement schedule responsibility companys management responsibility express opinion consolidated financial statement schedule based audits opinion consolidated financial statement schedule considered relation basic consolidated financial statements taken whole presents fairly material respects information set forth therein consent incorporation reference registration statements nos 33318421 33321399 33353748 33374290 form s8 nos 33396201 33363096 333101448 form s3 willbros group inc reports dated february 20 2004 except note 7 march 12 2004 relating consolidated balance sheets willbros group inc subsidiaries december 31 2003 2002 related consolidated statements operations stockholders equity comprehensive income cash flows years threeyear period ended december 31 2003 related financial statement schedule reports appear december 31 2003 annual report form 10k willbros group inc report consolidated financial statements refers adoption statement financial accounting standards sfas 141 business combinations certain provisions sfas 142 goodwill intangible assets 2001 remaining provisions sfas 142 2002 kpmg llp houston texas march 12 2004 willbros group inc schedule ii consolidated valuation qualifying accounts thousands index exhibits following documents included exhibits form 10k exhibits incorporated reference herein indicated information supplied parenthetical thereafter parenthetical appears exhibit filed herewith exhibit number description 31 amended restated articles incorporation willbros group inc filed exhibit 31 report form 10q quarter ended september 30 2002 filed november 14 2002 32 restated bylaws willbros group inc filed exhibit 32 registration statement form s1 registration 3335413 s1 registration statement 41 form stock certificate common stock par value 05 per share filed exhibit 4 s1 registration statement 42 rights agreement dated april 1 1999 us chasemellon shareholder services llc rights agent filed exhibit registration statement form 8a dated april 9 1999 43 certificate designation series junior participating preferred stock filed exhibit 3 report form 10q quarter ended march 31 1999 filed may 17 1999 101 credit agreement dated june 14 2002 among us certain designated subsidiaries credit lyonnais new york branch administrative agent certain financial institutions canadian imperial bank commerce syndication agent filed exhibit 101 report form 10q quarter ended june 30 2002 filed august 14 2002 102 form indemnification agreement officers us filed exhibit 107 s1 registration statement 103 form indemnification agreement directors us filed exhibit 1016 s1 registration statement 104 willbros group inc 1996 stock plan filed exhibit 108 s1 registration statement 105 amendment number 1 willbros group inc 1996 stock plan dated february 24 1999 filed exhibit companys proxy statement annual meeting stockholders dated march 31 1999 106 amendment number 2 willbros group inc 1996 stock plan dated march 7 2001 filed exhibit b proxy statement annual meeting stockholders dated april 2 2001 107 form incentive stock option agreement willbros group inc 1996 stock plan filed exhibit 1013 report form 10k year ended december 31 1996 filed march 31 1997 1996 form 10k 108 form nonqualified stock option agreement willbros group inc 1996 stock plan filed exhibit 1014 1996 form 10k 109 willbros group inc director stock plan filed exhibit 109 s1 registration statement 1010 amendment number 1 willbros group inc director stock plan dated january 1 2002 filed exhibit 1013 report form 10k year ended december 31 2001 filed february 20 2002 1011 amendment number 2 willbros group inc director stock plan dated february 18 2002 filed exhibit 102 report form 10q quarter ended june 30 2002 filed august 14 2002 1012 form secured promissory note willbros group inc employee stock purchase program filed exhibit 105 report form 10q quarter ended june 30 2002 filed august 14 2002 1013 willbros group inc severance amended restated effective september 25 2003 filed exhibit 101 report form 10q quarter ended september 30 2003 filed november 13 2003 1014 registration rights agreement dated april 9 1992 us heerema holding construction inc yorktown energy partners lp concord partners ii lp concord partners japan limited certain stockholders company filed exhibit 1013 s1 registration statement 1015 consulting services agreement dated june 1 2002 willbros usa inc larry j bump us filed exhibit 104 report form 10q quarter ended june 30 2002 filed august 14 2002 21 subsidiaries 23 consent kpmg llp included page 77 form 10k 311 certification chief executive officer pursuant rule 13a14a securities exchange act 1934 adopted pursuant section 302 sarbanesoxley act 2002 312 certification chief financial officer pursuant rule 13a14a securities exchange act 1934 adopted pursuant section 302 sarbanesoxley act 2002 321 certification chief executive officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 322 certification chief financial officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 management contract compensatory plan arrangementitem 15 exhibits financial statement schedules 1 financial statements financial statements subsidiaries independent registered public accounting firms reports listed item 8 form 10k schedules omitted inapplicable required information contained financial statements included footnotes thereto 3 exhibits following documents included exhibits form 10k exhibits incorporated reference herein indicated information supplied parenthetical thereafter parenthetical appears exhibit filed herewith 31 amended restated articles incorporation willbros group inc filed exhibit 31 report form 10q quarter ended september 30 2002 filed november 14 2002 32 restated bylaws willbros group inc filed exhibit 32 registration statement form s1 registration 3335413 s1 registration statement 41 form stock certificate common stock par value 05 per share filed exhibit 4 s1 registration statement 42 rights agreement dated april 1 1999 us chasemellon shareholder services llc rights agent filed exhibit registration statement form 8a dated april 9 1999 43 certificate designation series junior participating preferred stock filed exhibit 3 report form 10q quarter ended march 31 1999 filed may 17 1999 44 indenture dated march 12 2004 us jpmorganchase bank trustee filed exhibit 102 report form 10q quarter ended march 31 2004 filed may 7 2004 45 first supplemental indenture dated september 22 2005 us jpmorgan chase bank na successor jpmorgan chase bank trustee indenture dated march 12 2004 us jpmorgan chase bank trustee filed exhibit 41 current report form 8k dated september 22 2005 filed september 28 2005 46 registration rights agreement dated march 12 2004 among bear stearns co inc cibc world markets corp credit lyonnais securities usa inc us filed exhibit 103 report form 10q quarter ended march 31 2004 filed may 7 2004 101 amended restated credit agreement dated march 12 2004 among us certain designated subsidiaries certain financial institutions credit lyonnais new york branch administrative agent cibc inc syndication agent filed exhibit 101 report form 10q quarter ended march 31 2004 filed may 7 2004 102 first amendment waiver dated august 6 2004 amended restated credit agreement dated march 12 2004 among us certain designated subsidiaries certain financial institutions calyon new york branch administrative agent cibc inc syndication agent filed exhibit 101 report form 10q quarter ended june 30 2004 filed august 9 2004 103 second amendment waiver dated july 19 2005 amended restated credit agreement dated march 12 2004 among us certain designated subsidiaries certain financial institutions calyon new york branch administrative agent cibc inc syndication agent filed exhibit 10 current report form 8k dated july 19 2005 filed july 25 2005 104 form indemnification agreement officers us filed exhibit 107 s1 registration statement 105 form indemnification agreement directors us filed exhibit 1016 s1 registration statement 106 willbros group inc 1996 stock plan filed exhibit 108 s1 registration statement 107 amendment number 1 willbros group inc 1996 stock plan dated february 24 1999 filed exhibit companys proxy statement annual meeting stockholders dated march 31 1999 108 amendment number 2 willbros group inc 1996 stock plan dated march 7 2001 filed exhibit b proxy statement annual meeting stockholders dated april 2 2001 109 amendment number 3 willbros group inc 1996 stock plan dated january 1 2004 filed exhibit 104 report form 10q quarter ended march 31 2004 filed may 7 2004 1010 amendment number 4 willbros group inc 1996 stock plan dated march 10 2004 filed exhibit b proxy statement annual meeting stockholders dated april 23 2004 1011 form incentive stock option agreement willbros group inc 1996 stock plan filed exhibit 1013 report form 10k year ended december 31 1996 filed march 31 1997 1996 form 10k 1012 form nonqualified stock option agreement willbros group inc 1996 stock plan filed exhibit 1014 1996 form 10k 1013 form restricted stock award agreement willbros group inc 1996 stock plan filed exhibit 106 report form 10q quarter ended march 31 2004 filed may 7 2004 1014 form restricted stock award agreement willbros group inc 1996 stock plan 1015 form restricted stock rights award agreement willbros group inc 1996 stock plan 1016 willbros group inc director stock plan filed exhibit 109 s1 registration statement 1017 amendment number 1 willbros group inc director stock plan dated january 1 2002 filed exhibit 1013 report form 10k year ended december 31 2001 filed february 20 2002 1018 amendment number 2 willbros group inc director stock plan dated february 18 2002 filed exhibit 102 report form 10q quarter ended june 30 2002 filed august 14 2002 1019 amendment number 3 willbros group inc director stock plan dated january 1 2004 filed exhibit 105 report form 10q quarter ended march 31 2004 filed may 7 2004 1020 form secured promissory note willbros group inc employee stock purchase program filed exhibit 105 report form 10q quarter ended june 30 2002 filed august 14 2002 1021 willbros group inc severance plan amended restated effective september 25 2003 filed exhibit 101 report form 10q quarter ended september 30 2003 filed november 13 2003 1022 employment agreement dated december 31 2004 willbros usa inc michael f curran including form restricted stock rights award agreement attached exhibit thereto filed exhibit 10 current report form 8k dated december 31 2004 filed january 6 2005 1023 registration rights agreement dated april 9 1992 us heerema holding construction inc yorktown energy partners lp concord partners ii lp concord partners japan limited certain stockholders company filed exhibit 1013 s1 registration statement 1024 consulting services agreement dated june 1 2002 willbros usa inc larry j bump filed exhibit 104 report form 10q quarter ended june 30 2002 filed august 14 2002 21 subsidiaries 23 consent kpmg llp 311 certification chief executive officer pursuant rule 13a14a securities exchange act 1934 adopted pursuant section 302 sarbanesoxley act 2002 312 certification chief financial officer pursuant rule 13a14a securities exchange act 1934 adopted pursuant section 302 sarbanesoxley act 2002 321 certification chief executive officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 322 certification chief financial officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 management contract compensatory plan arrangement signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized willbros group inc date november 21 2005 michael f curran michael f curran president chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated report consent independent registered public accounting firm board directors willbros group inc audits referred report dated november 21 2005 included related consolidated financial statement schedule december 31 2004 years threeyear period ended december 31 2004 consolidated financial statement schedule responsibility companys management responsibility express opinion consolidated financial statement schedule based audits opinion consolidated financial statement schedule considered relation basic consolidated financial statements taken whole present fairly material respects information set forth therein report dated november 21 2005 respect consolidated balance sheets willbros group inc december 31 2004 2003 related consolidated statements operations stockholders equity comprehensive income loss cash flows years threeyear period ended december 31 2004 contains separate paragraph states discussed note 2 consolidated financial statements company restated consolidated balance sheet december 31 2003 related consolidated statements operations stockholders equity comprehensive income loss cash flows years ended december 31 2003 2002 kpmg llp houston texas november 21 2005 willbros group inc schedule ii consolidated valuation qualifying accounts thousands index exhibits following documents included exhibits form 10k exhibits incorporated reference herein indicated information supplied parenthetical thereafter parenthetical appears exhibit filed herewith management contract compensatory plan arrangementitem 15 exhibits financial statement schedules 1 financial statements financial statements subsidiaries independent registered public accounting firms’ reports listed item 8 form 10k 2 financial statement schedule schedules omitted inapplicable required information contained financial statements included footnotes thereto 3 exhibits following documents included exhibits form 10k exhibits incorporated reference herein indicated information supplied parenthetical thereafter parenthetical appears exhibit filed herewith management contract compensatory plan arrangement signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated report independent registered public accounting firm board directors willbros group inc audit referred report dated june 14 2006 included related consolidated financial statement schedule december 31 2005 year ended consolidated financial statement schedule responsibility company’s management responsibility express opinion consolidated financial statement schedule based audits opinion consolidated financial statement schedule considered relation basic consolidated financial statements taken whole present fairly material respects information set forth therein glo cpas llp houston texas june 14 2006 report consent independent registered public accounting firm board directors willbros group inc audits referred report dated november 21 2005 included related consolidated financial statement schedule december 31 2004 years twoyear period ended december 31 2004 consolidated financial statement schedule responsibility company’s management responsibility express opinion consolidated financial statement schedule based audits opinion consolidated financial statement schedule considered relation basic consolidated financial statements taken whole present fairly material respects information set forth therein report dated november 21 2005 respect consolidated balance sheets willbros group inc december 31 2004 2003 related consolidated statements operations stockholders’ equity comprehensive income loss cash flows years threeyear period ended december 31 2004 contains separate paragraph states discussed note 2 consolidated financial statements company restated consolidated balance sheet december 31 2003 related consolidated statements operations stockholders’ equity comprehensive income loss cash flows years ended december 31 2003 2002 kpmg llp houston texas november 21 2005 willbros group inc schedule ii consolidated valuation qualifying accounts thousands index exhibits following documents included exhibits form 10k exhibits incorporated reference herein indicated information supplied parenthetical thereafter parenthetical appears exhibit filed herewith management contract compensatory plan arrangementitem 15 exhibits financial statement schedules 1 financial statements financial statements subsidiaries independent registered public accounting firms’ reports listed item 8 form 10k 2 financial statement schedule schedules omitted inapplicable required information contained financial statements included footnotes thereto 3 exhibits following documents included exhibits form 10k exhibits incorporated reference herein indicated information supplied parenthetical thereafter parenthetical appears exhibit filed herewith 31 amended restated articles incorporation willbros group inc filed exhibit 32 report form 10q quarter ended september 30 2006 filed november 9 2006 32 restated bylaws willbros group inc filed exhibit 32 registration statement form s1 registration 3335413 “s1 registration statement” 41 form stock certificate common stock par value 05 per share filed exhibit 4 s1 registration statement 42 rights agreement dated april 1 1999 us chasemellon shareholder services llc rights agent filed exhibit registration statement form 8a dated april 9 1999 43 certificate designation series junior participating preferred stock filed exhibit 3 report form 10q quarter ended march 31 1999 filed may 17 1999 44 indenture including form note dated march 12 2004 us jpmorganchase bank trustee filed exhibit 102 report form 10q quarter ended march 31 2004 filed may 7 2004 45 first supplemental indenture dated september 22 2005 us jpmorgan chase bank na successor jpmorgan chase bank trustee indenture dated march 12 2004 us jpmorgan chase bank trustee filed exhibit 41 current report form 8k dated september 22 2005 filed september 28 2005 46 indenture including form note dated december 23 2005 among us willbros usa inc guarantor bank new york trustee filed exhibit 101 current report form 8k dated december 21 2005 filed december 23 2005 47 first supplemental indenture dated november 2 2007 among us willbros usa inc guarantor bank new york trustee indenture dated december 23 2005 among us willbros usa inc guarantor bank new york trustee filed exhibit 42 current report form 8k dated november 2 2007 filed november 5 2007 48 waiver agreement dated november 2 2007 us portside growth opportunity fund respect first supplemental indenture listed exhibit 47 filed exhibit 41 current report form 8k dated november 2 2007 filed november 5 2007 49 form warrant dated october 27 2006 filed exhibit 102 current report form 8k dated october 26 2006 filed october 27 2006 101 credit agreement dated november 20 2007 among willbros usa inc borrower us certain subsidiaries affiliates guarantors lenders time party thereto calyon new york branch administrative agent collateral agent issuing bank filed exhibit 10 current report form 8k dated november 20 2007 filed november 27 2007 102 form indemnification agreement officers us filed exhibit 107 s1 registration statement 103 form indemnification agreement directors us filed exhibit 1016 s1 registration statement 104 willbros group inc 1996 stock plan filed exhibit 108 s1 registration statement 105 amendment number 1 willbros group inc 1996 stock plan dated february 24 1999 filed exhibit proxy statement annual meeting stockholders dated march 31 1999 106 amendment number 2 willbros group inc 1996 stock plan dated march 7 2001 filed exhibit b proxy statement annual meeting stockholders dated april 2 2001 107 amendment number 3 willbros group inc 1996 stock plan dated january 1 2004 filed exhibit 104 report form 10q quarter ended march 31 2004 filed may 7 2004 108 amendment number 4 willbros group inc 1996 stock plan dated march 10 2004 filed exhibit b proxy statement annual meeting stockholders dated april 23 2004 109 amendment number 5 willbros group inc 1996 stock plan filed exhibit c proxy statement annual meeting stockholders dated july 5 2006 1010 form incentive stock option agreement willbros group inc 1996 stock plan filed exhibit 1013 report form 10k year ended december 31 1996 filed march 31 1997 “1996 form 10k” 1011 form nonqualified stock option agreement willbros group inc 1996 stock plan filed exhibit 1014 1996 form 10k 1012 form restricted stock award agreement willbros group inc 1996 stock plan filed exhibit 106 report form 10q quarter ended march 31 2004 filed may 7 2004 1013 form restricted stock award agreement willbros group inc 1996 stock plan filed exhibit 1014 report form 10k year ended december 31 2004 filed november 22 2005 “2004 form 10k” 1014 form restricted stock rights award agreement willbros group inc 1996 stock plan filed exhibit 1015 2004 form 10k 1015 willbros group inc director stock plan filed exhibit 109 s1 registration statement 1016 amendment number 1 willbros group inc director stock plan dated january 1 2002 filed exhibit 1013 report form 10k year ended december 31 2001 filed february 20 2002 1017 amendment number 2 willbros group inc director stock plan dated february 18 2002 filed exhibit 102 report form 10q quarter ended june 30 2002 filed august 14 2002 1018 amendment number 3 willbros group inc director stock plan dated january 1 2004 filed exhibit 105 report form 10q quarter ended march 31 2004 filed may 7 2004 1019 willbros group inc amended restated 2006 director restricted stock plan 1020 willbros group inc severance plan amended restated effective september 25 2003 filed exhibit 101 report form 10q quarter ended september 30 2003 filed november 13 2003 1021 employment agreement dated december 31 2004 willbros usa inc michael f curran including form restricted stock rights award agreement attached exhibit thereto filed exhibit 10 current report form 8k dated december 31 2004 filed january 6 2005 1022 separation agreement release dated december 29 2006 willbros usa inc michael f curran filed exhibit 101 current report form 8k dated december 29 2006 filed january 8 2007 1023 consulting services agreement dated december 29 2006 willbros usa inc michael f curran filed exhibit 102 current report form 8k dated december 29 2006 filed january 8 2007 1024 agreement terminate consulting services agreement dated september 11 2007 willbros usa inc michael f curran filed exhibit 102 report form 10q quarter ended september 30 2007 filed november 1 2007 1025 employment agreement dated january 20 2006 willbros usa inc robert r randy harl filed exhibit 1026 report form 10k year ended december 31 2005 filed june 16 2006 1026 amendment number 1 dated june 16 2006 employment agreement dated january 20 2006 willbros usa inc robert r randy harl filed exhibit 101 current report form 8k dated june 16 2006 filed june 22 2006 1027 amendment number 2 dated january 15 2008 employment agreement dated january 20 2006 willbros usa inc robert r randy harl 1028 employment agreement dated august 28 2006 willbros usa inc van welch filed exhibit 104 report form 10q quarter ended september 30 2006 filed november 8 2006 1029 separation agreement release dated august 29 2006 willbros usa inc warren l williams filed exhibit 105 report form 10q quarter ended september 30 2006 filed november 8 2006 1030 consulting services agreement dated august 10 2006 willbros usa inc warren l williams filed exhibit 106 report form 10q quarter ended september 30 2006 filed november 8 2006 1031 employment agreement dated november 1 2006 willbros usa inc john “jay” dalton filed exhibit 1034 registration statement form s1 registration 33315540 filed december 13 2006 1032 employment agreement dated november 20 2007 integrated service company llc arlo b dekraai 1033 separation agreement release dated december 8 2006 willbros usa inc r clay etheridge filed exhibit 1035 registration statement form s1 registration 33315540 filed december 13 2006 1034 form key employee special bonus agreement filed exhibit 1031 registration statement form s1 registration 33315540 filed june 30 2006 1035 amended restated management incentive compensation program 1036 registration rights agreement dated april 9 1992 us heerema holding construction inc yorktown energy partners lp concord partners ii lp concord partners japan limited certain stockholders company filed exhibit 1013 s1 registration statement 1037 purchase agreement dated december 22 2005 us willbros usa inc purchasers set forth schedule thereto “purchase agreement” filed exhibit 102 current report form 8k dated december 21 2005 filed december 23 2005 1038 registration rights agreement dated december 23 2005 us initial purchasers set forth schedule purchase agreement filed exhibit 103 current report form 8k dated december 21 2005 filed december 23 2005 1039 securities purchase agreement dated october 26 2006 among us buyers listed signature pages thereto “buyers” filed exhibit 101 current report form 8k dated october 26 2006 filed october 27 2006 1040 registration rights agreement dated october 27 2006 among us buyers filed exhibit 103 current report form 8k dated october 26 2006 filed october 27 2006 1041 purchase agreement release dated january 12 2006 willbros mt west inc williams field services company filed exhibit 21 current report form 8k dated january 12 2006 filed january 19 2006 1042 share purchase agreement dated february 7 2007 us ascot offshore nigeria limited filed exhibit 1040 report form 10k year ended december 31 2006 filed march 14 2007 1043 indemnity agreement dated february 7 2007 among us willbros international inc ascot offshore nigeria limited berkeley group plc filed exhibit 1041 report form 10k year ended december 31 2006 filed march 14 2007 1044 global settlement agreement dated august 15 2007 among ascot offshore nigeria limited us willbros international services nigeria limited berkeley group plc filed exhibit 101 report form 10q quarter ended september 30 2007 filed november 1 2007 1045 conversion agreement dated may 16 2007 us holder 145 million aggregate principal amount 65 senior convertible notes due 2012 “65 notes”filed exhibit 101 current report form 8k dated may 16 2007 filed may 17 2007 1046 conversion agreement dated may 16 2007 us holder 2175 million aggregate principal amount 65 notes filed exhibit 102 current report form 8k dated may 16 2007 filed may 17 2007 1047 form conversion agreement us holders 65 notes filed exhibit 101 current report form 8k dated may 23 2007 filed may 24 2007 1048 share purchase agreement dated june 5 2007 willbros acquisition canada limited amec inc amec americas limited filed exhibit 104 report form 10q quarter ended june 30 2007 filed august 9 2007 1049 share purchase agreement dated october 31 2007 among willbros usa inc us integrated service company llc persons listed shareholders schedule attached thereto “shareholders” shareholders’ representative filed exhibit 21 current report form 8k dated november 20 2007 filed november 27 2007 1050 amendment 1 share purchase agreement dated november 20 2007 among willbros usa inc integrated service company llc arlo b dekraai shareholders’ representative filed exhibit 22 current report form 8k dated november 20 2007 filed november 27 2007 subsidiaries 231 consent grant thornton llp 232 consent glo cpas lllp 311 certification chief executive officer pursuant rule 13a14a securities exchange act 1934 adopted pursuant section 302 sarbanesoxley act 2002 312 certification chief financial officer pursuant rule 13a14a securities exchange act 1934 adopted pursuant section 302 sarbanesoxley act 2002 321 certification chief executive officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 322 certification chief financial officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 management contract compensatory plan arrangement signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated report independent registered public accounting firm board directors stockholders willbros group inc audited accordance standards public company accounting oversight board united states consolidated financial statements willbros group inc subsidiaries referred report dated february 28 2008 included annual report form 10k audit basic financial statements included financial statement schedule listed index appearing item 15 a2 responsibility company’s management opinion financial statement schedule considered relation basic financial statements taken whole present fairly material respects information set forth therein grant thornton llp houston texas february 28 2008 report independent registered public accounting firm board directors willbros group inc audits referred report dated march 12 2007 included related consolidated financial statement schedule december 31 2006 years two year period ended december 31 2006 consolidated financial statement schedule responsibility company’s management responsibility express opinion consolidated financial statement schedule based audits opinion consolidated financial statement schedule considered relation basic consolidated financial statements taken whole present fairly material respects information set forth therein glo cpas lllp houston texas march 12 2007 willbros group inc schedule ii consolidated valuation qualifying accounts thousands index exhibits following documents included exhibits form 10k exhibits incorporated reference herein indicated information supplied parenthetical thereafter parenthetical appears exhibit filed herewith management contract compensatory plan arrangementitem 15 exhibits financial statement schedules 1 financial statements financial statements subsidiaries independent registered public accounting firms’ reports listed item 8 form 10k 2 financial statement schedule schedules omitted inapplicable required information contained financial statements included footnotes thereto 3 exhibits following documents included exhibits form 10k exhibits incorporated reference herein indicated information supplied parenthetical thereafter parenthetical appears exhibit filed herewith management contract compensatory plan arrangement signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated signature title date robert r harl director president february 25 2009 robert r harl chief executive officer principal executive officer van welch senior vice president february 25 2009 van welch chief financial officer principal financial officer principal accounting officer john mcnabb ii director chairman board february 25 2009 john mcnabb ii william b berry director february 25 2009 william b berry michael j bayer director february 25 2009 michael j bayer arlo b dekraai director february 25 2009 arlo b dekraai gerald j maier director february 25 2009 gerald j maier robert l sluder director february 25 2009 robert l sluder james b taylor jr director february 25 2009 james b taylor jr miller williams director february 25 2009 miller williams report independent registered public accounting firm board directors stockholders willbros group inc audited accordance standards public company accounting oversight board united states consolidated financial statements willbros group inc subsidiaries referred report dated february 25 2009 included annual report form 10k audits basic financial statements included financial statement schedule listed index appearing item 15 a2 responsibility company’s management opinion financial statement schedule considered relation basic financial statements taken whole presents fairly material respects information set forth therein grant thornton llp houston texas february 25 2009 report independent registered public accounting firm board directors willbros group inc audits referred report dated march 12 2007 included related consolidated financial statement schedule december 31 2006 year ended december 31 2006 consolidated financial statement schedule responsibility company’s management responsibility express opinion consolidated financial statement schedule based audits opinion consolidated financial statement schedule considered relation basic consolidated financial statements taken whole present fairly material respects information set forth therein glo cpas lllp houston texas march 12 willbros group inc schedule ii consolidated valuation qualifying accounts thousands index exhibits following documents included exhibits form 10k exhibits incorporated reference herein indicated information supplied parenthetical thereafter parenthetical appears exhibit filed herewith exhibit number description 2 agreement plan merger dated december 10 2008 among willbros group inc delaware corporation “willbros delaware” willbros group inc republic panama corporation willbros merger inc delaware corporation filed annex proxy statementprospectus included willbros delaware’s registration statement form s4 registration 333155281 31 amended restated articles incorporation willbros group inc filed exhibit 32 report form 10q quarter ended september 30 2006 filed november 9 2006 32 restated bylaws willbros group inc filed exhibit 32 registration statement form s1 registration 3335413 “s1 registration statement” 41 form stock certificate common stock par value 05 per share filed exhibit 4 s1 registration statement 42 rights agreement dated april 1 1999 us chasemellon shareholder services llc rights agent filed exhibit registration statement form 8a dated april 9 1999 43 first amendment rights agreement dated february 20 2009 us mellon investor services llc formerly known chasemellon shareholder services llc rights agent filed exhibit amendment 1 registration statement form 8aa dated february 23 2009 44 certificate designation series junior participating preferred stock filed exhibit 3 report form 10q quarter ended june 30 1999 filed august 16 1999 45 indenture including form note dated march 12 2004 us jpmorganchase bank trustee filed exhibit 102 report form 10q quarter ended march 31 2004 filed may 7 2004 46 first supplemental indenture dated september 22 2005 us jpmorgan chase bank na successor jpmorgan chase bank trustee indenture dated march 12 2004 us jpmorgan chase bank trustee filed exhibit 41 current report form 8k dated september 22 2005 filed september 28 2005 47 indenture including form note dated december 23 2005 among us willbros usa inc guarantor bank new york trustee filed exhibit 101 current report form 8k dated december 21 2005 filed december 23 2005 48 first supplemental indenture dated november 2 2007 among us willbros usa inc guarantor bank new york trustee indenture dated december 23 2005 among us willbros usa inc guarantor bank new york trustee filed exhibit 42 current report form 8k dated november 2 2007 filed november 5 2007 49 waiver agreement dated november 2 2007 us portside growth opportunity fund respect first supplemental indenture listed exhibit 48 filed exhibit 41 current report form 8k dated november 2 2007 filed november 5 2007 410 form warrant dated october 27 2006 filed exhibit 102 current report form 8k dated october 26 2006 filed october 27 2006 101 credit agreement dated november 20 2007 among willbros usa inc borrower us certain subsidiaries affiliates guarantors lenders time party thereto calyon new york branch administrative agent collateral agent issuing bank filed exhibit 10 current report form 8k dated november 20 2007 filed november 27 2007 102 form indemnification agreement officers us filed exhibit 107 s1 registration statement 103 form indemnification agreement directors us filed exhibit 1016 s1 registration statement exhibit number description 104 form first amendment indemnification agreement officers directors us 105 willbros group inc 1996 stock plan filed exhibit 108 s1 registration statement 106 amendment number 1 willbros group inc 1996 stock plan dated february 24 1999 filed exhibit proxy statement annual meeting stockholders dated march 31 1999 107 amendment number 2 willbros group inc 1996 stock plan dated march 7 2001 filed exhibit b proxy statement annual meeting stockholders dated april 2 2001 108 amendment number 3 willbros group inc 1996 stock plan dated january 1 2004 filed exhibit 104 report form 10q quarter ended march 31 2004 filed may 7 2004 109 amendment number 4 willbros group inc 1996 stock plan dated march 10 2004 filed exhibit b proxy statement annual meeting stockholders dated april 23 2004 1010 amendment number 5 willbros group inc 1996 stock plan filed exhibit c proxy statement annual meeting stockholders dated july 5 2006 1011 amendment number 6 willbros group inc 1996 stock plan dated march 27 2008 filed exhibit b proxy statement annual meeting stockholders dated april 23 2008 1012 amendment number 7 willbros group inc 1996 stock plan dated december 31 2008 1013 form incentive stock option agreement willbros group inc 1996 stock plan filed exhibit 1013 report form 10k year ended december 31 1996 filed march 31 1997 “1996 form 10k” 1014 form nonqualified stock option agreement willbros group inc 1996 stock plan filed exhibit 1014 1996 form 10k 1015 form restricted stock award agreement willbros group inc 1996 stock plan filed exhibit 106 report form 10q quarter ended march 31 2004 filed may 7 2004 1016 form restricted stock award agreement willbros group inc 1996 stock plan filed exhibit 1014 report form 10k year ended december 31 2004 filed november 22 2005 “2004 form 10k” 1017 form restricted stock rights award agreement willbros group inc 1996 stock plan filed exhibit 1015 2004 form 10k 1018 willbros group inc director stock plan filed exhibit 109 s1 registration statement 1019 amendment number 1 willbros group inc director stock plan dated january 1 2002 filed exhibit 1013 report form 10k year ended december 31 2001 filed february 20 2002 1020 amendment number 2 willbros group inc director stock plan dated february 18 2002 filed exhibit b proxy statement annual meeting stockholders dated april 30 2002 1021 amendment number 3 willbros group inc director stock plan dated january 1 2004 filed exhibit 105 report form 10q quarter ended march 31 2004 filed may 7 2004 1022 willbros group inc amended restated 2006 director restricted stock plan filed exhibit 1019 report form 10k year ended december 31 2007 filed february 29 2008 1023 amendment number 1 willbros group inc amended restated 2006 director restricted stock plan dated march 27 2008 filed exhibit c proxy statement annual meeting stockholders dated april 23 2008 1024 willbros group inc severance plan amended restated effective september 25 2003 filed exhibit 101 report form 10q quarter ended september 30 2003 filed november 13 2003 1025 amendment number 1 willbros group inc severance plan dated december 31 2008 1026 separation agreement release dated december 29 2006 willbros usa inc michael f curran filed exhibit 101 current report form 8k dated december 29 2006 filed january 8 2007 exhibit number description 1027 consulting services agreement dated december 29 2006 willbros usa inc michael f curran filed exhibit 102 current report form 8k dated december 29 2006 filed january 8 2007 1028 agreement terminate consulting services agreement dated september 11 2007 willbros usa inc michael f curran filed exhibit 102 report form 10q quarter ended september 30 2007 filed november 1 2007 1029 amended restated employment agreement dated december 31 2008 willbros usa inc robert r randy harl 1030 amended restated employment agreement dated december 31 2008 willbros usa inc van welch 1031 amended restated employment agreement dated december 31 2008 willbros usa inc john “jay” dalton 1032 employment agreement dated november 20 2007 integrated service company llc arlo b dekraai filed exhibit 1032 report form 10k year ended december 31 2007 filed february 29 2008 1033 amendment no1 employment agreement dated december 30 2008 integrated service company llc arlo dekraai 1034 separation agreement release dated november 29 2008 willbros usa inc john k allcorn 1035 form key employee special bonus agreement filed exhibit 1031 registration statement form s1 registration 33315540 filed june 30 2006 1036 amended restated management incentive compensation program effective february 26 2008 filed exhibit 10 report form 10q quarter ended march 31 2008 filed may 8 2008 1037 registration rights agreement dated april 9 1992 us heerema holding construction inc yorktown energy partners lp concord partners ii lp concord partners japan limited certain stockholders company filed exhibit 1013 s1 registration statement 1038 purchase agreement dated december 22 2005 us willbros usa inc purchasers set forth schedule thereto “purchase agreement” filed exhibit 102 current report form 8k dated december 21 2005 filed december 23 2005 1039 registration rights agreement dated december 23 2005 us initial purchasers set forth schedule purchase agreement filed exhibit 103 current report form 8k dated december 21 2005 filed december 23 2005 1040 securities purchase agreement dated october 26 2006 among us buyers listed signature pages thereto “buyers” filed exhibit 101 current report form 8k dated october 26 2006 filed october 27 2006 1041 registration rights agreement dated october 27 2006 among us buyers filed exhibit 103 current report form 8k dated october 26 2006 filed october 27 2006 1042 share purchase agreement dated february 7 2007 us ascot offshore nigeria limited filed exhibit 1040 report form 10k year ended december 31 2006 filed march 14 2007 1043 indemnity agreement dated february 7 2007 among us willbros international inc ascot offshore nigeria limited berkeley group plc filed exhibit 1041 report form 10k year ended december 31 2006 filed march 14 2007 1044 global settlement agreement dated august 15 2007 among ascot offshore nigeria limited us willbros international services nigeria limited berkeley group plc filed exhibit 101 report form 10q quarter ended september 30 2007 filed november 1 2007 1045 conversion agreement dated may 16 2007 us holder 145 million aggregate principal amount 65 senior convertible notes due 2012 “65 notes”filed exhibit 101 current report form 8k dated may 16 2007 filed may 17 2007 exhibit number description 1046 conversion agreement dated may 16 2007 us holder 2175 million aggregate principal amount 65 notes filed exhibit 102 current report form 8k dated may 16 2007 filed may 17 2007 1047 form conversion agreement us holders 65 notes filed exhibit 101 current report form 8k dated may 23 2007 filed may 24 2007 1048 share purchase agreement dated june 5 2007 willbros acquisition canada limited amec inc amec americas limited filed exhibit 104 report form 10q quarter ended june 30 2007 filed august 9 2007 1049 share purchase agreement dated october 31 2007 among willbros usa inc us integrated service company llc persons listed shareholders schedule attached thereto “shareholders” shareholders’ representative filed exhibit 21 current report form 8k dated november 20 2007 filed november 27 2007 1050 amendment 1 share purchase agreement dated november 20 2007 among willbros usa inc integrated service company llc arlo b dekraai shareholders’ representative filed exhibit 22 current report form 8k dated november 20 2007 filed november 27 2007 1051 deferred prosecution agreement among us willbros international inc department justice filed may 14 2008 united states district court southern district texas houston division filed exhibit 10 current report form 8k dated may 14 2008 filed may 15 2008 subsidiaries 231 consent grant thornton llp 232 consent glo cpas lllp 311 certification chief executive officer pursuant rule 13a14a securities exchange act 1934 adopted pursuant section 302 sarbanesoxley act 2002 312 certification chief financial officer pursuant rule 13a14a securities exchange act 1934 adopted pursuant section 302 sarbanesoxley act 2002 321 certification chief executive officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 322 certification chief financial officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 991 willbros group inc willbros international inc information document filed may 14 2008 united states attorney’s office southern district texas united states department justice filed exhibit 991 current report form 8k dated may 14 2008 filed may 15 2008 992 complaint securities exchange commission v company filed may 14 2008 united states district court southern district texas houston division filed exhibit 992 current report form 8k dated may 14 2008 filed may 15 2008 993 consent company filed exhibit 993 current report form 8k dated may 14 2008 filed may 15 2008 994 agreed judgment company filed exhibit 994 current report form 8k dated may 14 2008 filed may 15 2008 management contract compensatory plan arrangementitem 15 exhibits financial statement schedules reports form 8k 1 financial statements financial statements subsidiaries independent auditors report listed item 8 form 10k schedules omitted inapplicable required information contained financial statements included footnotes thereto 3 exhibits following documents included exhibits form 10k exhibits incorporated reference herein indicated information supplied parenthetical thereafter parenthetical appears exhibit filed herewith 31 amended restated articles incorporation willbros group inc filed exhibit 31 report form 10q quarter ended september 30 2002 filed november 14 2002 32 restated bylaws willbros group inc filed exhibit 32 registration statement form s1 registration 3335413 s1 registration statement 41 form stock certificate common stock par value 05 per share filed exhibit 4 s1 registration statement 42 rights agreement dated april 1 1999 us chasemellon shareholder services llc rights agent filed exhibit registration statement form 8a dated april 9 1999 43 certificate designation series junior participating preferred stock filed exhibit 3 report form 10q quarter ended march 31 1999 filed may 17 1999 101 credit agreement dated june 14 2002 among us certain designated subsidiaries credit lyonnais new york branch administrative agent certain financial institutions canadian imperial bank commerce syndication agent filed exhibit 101 report form 10q quarter ended june 30 2002 filed august 14 2002 102 form indemnification agreement officers us filed exhibit 107 s1 registration statement 103 form indemnification agreement directors us filed exhibit 1016 s1 registration statement 104 willbros group inc 1996 stock plan filed exhibit 108 s1 registration statement 105 amendment number 1 willbros group inc 1996 stock plan dated february 24 1999 filed exhibit companys proxy statement annual meeting stockholders dated march 31 1999 106 amendment number 2 willbros group inc 1996 stock plan dated march 7 2001 filed exhibit b proxy statement annual meeting stockholders dated april 2 2001 107 form incentive stock option agreement willbros group inc 1996 stock plan filed exhibit 1013 report form 10k year ended december 31 1996 filed march 31 1997 1996 form 10k 108 form nonqualified stock option agreement willbros group inc 1996 stock plan filed exhibit 1014 1996 form 10k 109 willbros group inc director stock plan filed exhibit 109 s1 registration statement 1010 amendment number 1 willbros group inc director stock plan dated january 1 2002 filed exhibit 1013 report form 10k year ended december 31 2001 filed february 20 2002 2001 form 10k 1011 amendment number 2 willbros group inc director stock plan dated february 18 2002 filed exhibit 102 report form 10q quarter ended june 30 2002 filed august 14 2002 1012 form secured promissory note willbros group inc employee stock purchase program filed exhibit 105 report form 10q quarter ended june 30 2002 filed august 14 2002 1013 willbros group inc severance plan dated january 1 1999 filed exhibit 1022 report form 10k year ended december 31 1998 filed march 31 1999 1014 registration rights agreement dated april 9 1992 us heerema holding construction inc yorktown energy partners lp concord partners ii lp concord partners japan limited certain stockholders company filed exhibit 1013 s1 registration statement 1015 separation agreement release dated may 30 2002 willbros usa inc larry j bump filed exhibit 103 report form 10q quarter ended june 30 2002 filed august 14 2002 1016 consulting services agreement dated june 1 2002 larry j bump us filed exhibit 104 report form 10q quarter ended june 30 2002 filed august 14 2002 21 subsidiaries 23 consent kpmg llp included page 73 form 10k 991 certificate pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 992 certificate pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 management contract compensatory plan arrangement reports form 8k b reports form 8k filed fourth quarter 2002 signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized willbros group inc date march 24 2003 michael f curran michael f curran president chief executive officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated certifications michael f curran certify 1 reviewed annual report form 10k willbros group inc 2 based knowledge annual report contain untrue statement material fact omit state material fact necessary make statements made light circumstances statements made misleading respect period covered annual report 3 based knowledge financial statements financial information included annual report fairly present material respects financial condition results operations cash flows registrant periods presented annual report 4 registrants certifying officers responsible establishing maintaining disclosure controls procedures defined exchange act rules 13a14 15d14 registrant designed disclosure controls procedures ensure material information relating registrant including consolidated subsidiaries made known us others within entities particularly period annual report prepared b evaluated effectiveness registrants disclosure controls procedures date within 90 days prior filing date annual report evaluation date c presented annual report conclusions effectiveness disclosure controls procedures based evaluation date 5 registrants certifying officers disclosed based recent evaluation registrants auditors audit committee registrants board directors persons performing equivalent functions significant deficiencies design operation internal controls could adversely affect registrants ability record process summarize report financial data identified registrants auditors material weaknesses internal controls b fraud whether material involves management employees significant role registrants internal controls 6 registrants certifying officers indicated annual report whether significant changes internal controls factors could significantly affect internal controls subsequent date recent evaluation including corrective actions regard significant deficiencies material weaknesses date march 24 2003 michael f curran chief executive officer warren l williams certify 1 reviewed annual report form 10k willbros group inc 2 based knowledge annual report contain untrue statement material fact omit state material fact necessary make statements made light circumstances statements made misleading respect period covered annual report 3 based knowledge financial statements financial information included annual report fairly present material respects financial condition results operations cash flows registrant periods presented annual report 4 registrants certifying officers responsible establishing maintaining disclosure controls procedures defined exchange act rules 13a14 15d14 registrant designed disclosure controls procedures ensure material information relating registrant including consolidated subsidiaries made known us others within entities particularly period annual report prepared b evaluated effectiveness registrants disclosure controls procedures date within 90 days prior filing date annual report evaluation date c presented annual report conclusions effectiveness disclosure controls procedures based evaluation date 5 registrants certifying officers disclosed based recent evaluation registrants auditors audit committee registrants board directors persons performing equivalent functions significant deficiencies design operation internal controls could adversely affect registrants ability record process summarize report financial data identified registrants auditors material weaknesses internal controls b fraud whether material involves management employees significant role registrants internal controls 6 registrants certifying officers indicated annual report whether significant changes internal controls factors could significantly affect internal controls subsequent date recent evaluation including corrective actions regard significant deficiencies material weaknesses date march 24 2003 warren l williams chief financial officer independent auditors report consolidated financial statement schedule consent stockholders board directors willbros group inc audits referred report dated february 12 2003 included related consolidated financial statement schedule december 31 2002 years threeyear period ended december 31 2002 consolidated financial statement schedule responsibility companys management responsibility express opinion consolidated financial statement schedule based audits opinion consolidated financial statement schedule considered relation basic consolidated financial statements taken whole presents fairly material respects information set forth therein consent incorporation reference registration statements nos 33318421 33321399 33353748 33374290 form s8 nos 33396201 33363096 333101448 form s3 willbros group inc reports dated february 12 2003 relating consolidated balance sheets willbros group inc subsidiaries december 31 2002 2001 related consolidated statements operations stockholders equity comprehensive income cash flows years threeyear period ended december 31 2002 related financial statement schedule reports appear december 31 2002 annual report form 10k willbros group inc report consolidated financial statements refers adoption statement financial accounting standards sfas 141 business combinations certain provisions sfas 142 goodwill intangible assets 2001 remaining provisions sfas 142 2002 kpmg llp houston texas march 21 2003 willbros group inc schedule ii consolidated valuation qualifying accounts thousands index exhibits following documents included exhibits form 10k exhibits incorporated reference herein indicated information supplied parenthetical thereafter parenthetical appears exhibit filed herewithitem 15 exhibits financial statement schedules a1 financial statements financial statements subsidiaries independent registered public accounting firms’ reports listed item 8 form 10k 2 financial statement schedule schedules omitted inapplicable required information contained financial statements included footnotes thereto 3 exhibits following documents included exhibits form 10k exhibits incorporated reference herein indicated information supplied parenthetical thereafter parenthetical appears exhibit filed herewith index financial statements index financial statements index financial statements management contract compensatory plan arrangement index financial statements signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated index financial statements report independent registered public accounting firm board directors willbros group inc audits referred report dated march 12 2007 included related consolidated financial statement schedule december 31 2006 years two year period ended december 31 2006 consolidated financial statement schedule responsibility company’s management responsibility express opinion consolidated financial statement schedule based audits opinion consolidated financial statement schedule considered relation basic consolidated financial statements taken whole present fairly material respects information set forth therein glo cpas llp houston texas march 12 2007 index financial statements report independent registered public accounting firm board directors willbros group inc audit referred report dated november 21 2005 included related consolidated financial statement schedule december 31 2004 year ended december 31 2004 consolidated financial statement schedule responsibility company’s management responsibility express opinion consolidated financial statement schedule based audit opinion consolidated financial statement schedule considered relation basic consolidated financial statements taken whole present fairly material respects information set forth therein kpmg llp houston texas november 21 2005 index financial statements willbros group inc schedule iiconsolidated valuation qualifying accounts thousands index financial statements index exhibits following documents included exhibits form 10k exhibits incorporated reference herein indicated information supplied parenthetical thereafter parenthetical appears exhibit filed herewith index financial statements index financial statements index financial statements management contract compensatory plan arrangement