ITEM 3: LEGAL PROCEEDINGS
The Company is involved in various claims and lawsuits incidental to its business. In the opinion of management, these claims and suits in the aggregate will not have a material adverse effect on the Company's business, financial condition, results of operations or liquidity.
ITEM 4:
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the fourth quarter of fiscal 1998.
ITEM 4A: EXECUTIVE OFFICERS OF THE REGISTRANT
Executive Officers of the Company
The executive officers of the Company are as follows:
- -------- (1) Employment includes employment with Trinity Marine Group, the predecessor of the Company.
There are no family relationships among the officers of the Company. The Company's officers are elected annually by the Board of Directors and serve one-year terms or until their successors are elected.
PART II
ITEM 5:
ITEM 5: MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The approximate number of holders of the Company's common stock as of a recent date is incorporated herein by reference from "Voting Securities and Stockholders" in the definitive proxy statement for the Company's 1998 Annual Meeting of Stockholders. The following table sets forth the high and low closing sales price of the Company's common stock (after adjustment for a three-for-two stock split in October 1997) as reported on the American Stock Exchange Composite Tape. The first day of trading for the Company's stock was September 26, 1996.
Fiscal Year 1997
The Company has paid no dividends and does not expect to pay dividends in the foreseeable future.
RECENT SALES OF UNREGISTERED SECURITIES
The following information relates to all securities issued or sold by the Company during its most recently completed fiscal year and not registered under the Securities Act. Each of the transactions described below was conducted in reliance upon the exemption from registration provided in Section 4(2) of the Securities Act and the rules and regulations promulgated thereunder. Furthermore, each of the certificates representing the Registrant's securities issued in connection with such transaction contained a restrictive legend.
On September 15, 1997, the Company privately sold, pursuant to a Rule 144A transaction, an aggregate principal amount of $185 million of 4 1/2% Convertible Subordinated Notes (the "Notes") which mature on September 15, 2004. The Notes were issued under an Indenture (the "Indenture") which provides that the Notes are convertible at the option of the holder into shares of common stock of the Company at any time at a conversion rate of $31.50 per share. The Company subsequently filed a shelf registration statement covering such Notes.
In October 1997, the Company issued an aggregate of 835,484 shares of its common stock in connection with the acquisition of the assets of AmClyde Engineered Products, Inc. and Utility Steel Fabrication, Inc. The Company subsequently filed a shelf registration statement covering such common stock.
In February 1998, the Company issued an aggregate of 299,997 shares of its common stock in connection with the acquisition of all of the outstanding capital stock of three companies comprising the operations of Calcasieu Shipyard of Sulphur, Louisiana.
ITEM 6:
ITEM 6: SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data for the Company as of the dates and for the periods indicated. The selected consolidated balance sheet data as of March 31, 1998, 1997, 1996 and 1995 and consolidated income statement data for the fiscal years ended March 31, 1998, 1997, 1996, 1995 and 1994 have been derived from the audited consolidated financial statements of the Company. The selected consolidated balance sheet data as of March 31, 1994 was derived from unaudited financial information of the Company but in the opinion of management includes all adjustments necessary for a fair presentation of the financial information. The selected consolidated financial data set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements and related notes included elsewhere in this report.
------------------------------------------------- YEAR ENDED MARCH 31, ------------------------------------------------- 1998 1997 1996 1995 1994 --------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA)
INCOME STATEMENT DATA: (5) Contract revenue earned..... $ 670,238 $406,797 $254,294 $250,586 $275,310 Cost of revenue earned...... 589,579 355,209 214,559 207,398 228,833 --------- -------- -------- -------- -------- Gross profit................ 80,659 51,588 39,735 43,188 46,477 Selling, general and administrative expenses.... 38,613 21,361 15,911 13,471 12,874 Amortization of excess of cost over net assets acquired................... 2,801 -- -- -- -- --------- -------- -------- -------- -------- Operating income............ 39,245 30,227 23,824 29,717 33,603 Interest expense............ 6,600 3,232 3,268 3,844 1,902 Other, net.................. 932 (8) (11) (5) (33) --------- -------- -------- -------- -------- Income before income taxes.. 31,713 27,003 20,567 25,878 31,734 Provision for income taxes.. 9,197 10,887 8,102 10,170 12,227 --------- -------- -------- -------- -------- Net income.................. $ 22,516 $ 16,116 $ 12,465 $ 15,708 $ 19,507 ========= ======== ======== ======== ======== Net income per share (pro forma for 1996)(1)......... $ 0.80 $ 0.59 $ 0.46 ========= ======== ======== Net income per share, diluted (pro forma for 1996)(1)................... $ 0.78 $ 0.59 $ 0.46 ========= ======== ======== NET CASH PROVIDED (REQUIRED) BY: (5) Operating activities........ $ 38,324 $ 12,488 $ 23,742 $ 14,803 $(28,175) Investing activities........ $(107,697) $(14,491) $(15,687) $(10,443) $ (3,440) Financing activities........ $ 113,440 $ 8,410 $ (7,907) $ (4,057) $ 31,300 OTHER DATA: (5) EBITDA (2).................. $ 53,106 $ 38,134 $ 30,579 $ 35,136 $ 38,266 Depreciation and amortization............... $ 15,217 $ 7,899 $ 6,744 $ 5,414 $ 4,630 Capital expenditures (3).... $ 40,988 $ 14,491 $ 5,568 $ 6,337 $ 3,529
-------------------------------------------- MARCH 31, -------------------------------------------- 1998 1997 1996 1995 1994 -------- -------- -------- -------- --------
BALANCE SHEET DATA: (5) Working capital.................... $151,057 $ 88,431 $ 36,601 $ 40,855 $ 31,296 Total assets....................... $499,601 $209,411 $141,374 $124,271 $120,784 Long-term debt (4)................. $218,215 $ 52,000 $ 25,000 $ 25,000 $ 25,000 Total equity....................... $151,103 $ 93,301 $ 66,743 $ 54,278 $ 38,570 Backlog data....................... $817,102 $478,803 $431,292 $244,229 $256,965
- -------- (1) Shares outstanding for 1996 have been assumed to be 27,000,000 (the total number of shares issued to Trinity and the public as a result of the initial public offering, exclusive of the underwriters' overallotment option of 675,000 shares and adjusted for the three-for-two stock split) for purposes of calculating pro forma net income per share. (2) EBITDA (earnings before interest, taxes, depreciation and amortization expense) is presented here not as a measure of operating results, but rather as a measure of the Company's operating performance and ability to service debt. EBITDA should not be construed as an alternative to operating income (determined in accordance with GAAP), as an indicator of the Company's operating performance or as an alternative to cash flows from operating activities (determined in accordance with GAAP) as a measure of liquidity. EBITDA measures presented herein may not be comparable to similarly titled measures of other companies. (3) Excludes payments for business acquisitions. (4) Prior to March 31, 1997, long-term debt represented intercompany notes due to Trinity. (5) Consolidated financial data for fiscal 1998 reflects the impact of companies acquired during the year from the dates of acquisition.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
See, Part I, Items 1 and 2: Business, "Forward Looking Statements and Factors Affecting Future Performance" for a discussion of forward looking statements and factors affecting future performance contained in this report, including but not limited to those contained in this Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations."
GENERAL
The Company is a leading provider of design, construction, conversion and repair services for ocean-going vessels, offshore rigs and engineered products servicing the offshore energy, government and commercial markets. The Company classifies its business into three segments: Vessels, Rigs, and Engineered Products. Operations within the Vessels segment include the new construction and repair of a wide variety of vessels for the government, energy and commercial markets. Products in this segment include offshore support vessels and offshore double hull tank barges for energy markets; offshore and inland tug boats, ocean going barges and oil spill recovery vessels for commercial markets; and oceanographic survey and research ships, high-speed patrol boats and ferries for government markets. Operations within the Rigs segment include construction, conversion and repair of mobile offshore drilling rigs. Operations within the Engineered Products segment include the design, manufacture and marketing of cranes, derricks, winches, hoists, windlasses, jacks, linear winches, fairleads, capstans, tuggers, locking devices, turret bearings, control systems, and other related products used in the marine, offshore and construction industries.
At March 31, 1998, the Company had 21 shipyards which are strategically located along the Gulf Coast from Florida to Texas. Additionally, the Company had four Gulf Coast manufacturing facilities dedicated to its Engineered Products segment. On May 29, 1998, the Company acquired all of the shares of common stock of Trinity Marine Orange, Inc., a shipyard based in Orange, Texas. The shipyard will be utilized in the construction of new offshore rigs as well as components for rigs under construction at other shipyards owned by the Company.
As of March 31, 1998, the Company had firm contracts with an aggregate remaining value of approximately $817 million (excluding unexercised options held by customers), covering construction of a total of 102 vessels, the new construction of six drill barges and one jackup drilling rig; the conversion of two rigs into deepwater semi-submersible rigs and the repair or conversion of eight jackup drilling rigs. The Company anticipates that approximately $726 million of the aggregate remaining value of the firm contracts as of March 31, 1998 will be filled during fiscal 1999.
Contracts for the construction of vessels, the construction, conversion and repair of mobile offshore rigs, and the design and manufacture of engineered products are usually awarded on a competitive bid basis. Although the Company believes customers consider, among other things, the availability and technical capabilities of equipment and personnel, efficiency, condition of equipment, safety record and reputation, price competition is currently a primary factor in determining which qualified bidder is awarded a contract. Accordingly, the Company's strategy is to remain a leader in cost effective marine construction.
The Company expects that substantial orders for new offshore support vessels and mobile offshore rigs may be made in the next several years due to the demand for larger vessels and rigs to support deep water oil and gas exploration and production activities, as well as the substantial worldwide fleet attrition over the past ten years and the aging of the remaining fleets. At March 31, 1998, the Company had 30 offshore support vessels, three rigs and six drill barges under contract. Although the Company believes there will be an increase in demand for offshore support vessels and mobile offshore rigs, the Company cannot predict future levels of activity in offshore oil and gas exploration, development and production. Although the demand for vessels and rigs may temporarily decrease as a result of short-term declines in oil prices, the Company believes that the overall demand will increase in the long-term.
The Company also expects to capitalize on the anticipated increase in offshore tank barge construction and conversion resulting from OPA '90 and the aging of the worldwide fleet. The Company currently has one offshore double hull tank barge under construction. In addition, the Company is bidding on a number of other offshore barge construction projects.
Pursuant to the provisions of a separation agreement with Trinity, the Company will be prohibited, for four years plus an additional period under certain circumstances after the separation from Trinity, from engaging in Trinity businesses, which include the construction of inland hopper barges and inland tank barges. Under special arrangements with Trinity, the Company has built a relatively small number of such vessels. Revenue related to this business was $23.1 million, $19.9 million and $26.2 million for fiscal years 1998, 1997 and 1996, respectively. The Company's gross profit from such activities was $2.0 million, $2.2 million and $3.1 million for fiscal years 1998, 1997 and 1996, respectively. The Company's management does not believe that the restrictions imposed pursuant to the Separation Agreement will have a material adverse effect on the Company's business, financial condition, results of operations or liquidity.
The Company believes its current production labor force is at near optimum levels and that its multiple yard strategy and aggressive recruiting of personnel will protect it from labor shortfalls in any one market. The Company has experienced a shift in the production labor force over the past year from contract to permanently employed labor which it expects to result in lower labor costs and production efficiencies which should improve gross margins. The production labor force grew from 2,087 employees at March 31, 1997 to 5,604 employees at March 31, 1998, partially as a result of employees added through the Company's business acquisitions.
RESULTS OF OPERATIONS
The following tables set forth certain statement of income information as a percentage of the Company's revenue for the periods indicated:
-------------------------------------------- YEAR ENDED MARCH 31, -------------------------------------------- 1998 1997 1996 -------------- -------------- -------------- AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT ------ ------- ------ ------- ------ ------- (IN MILLIONS)
Contract revenue earned by business segment: Vessels........................ $476.3 71.1% $406.8 100.0% $254.3 100.0% Rigs........................... 159.9 23.9 -- -- -- -- Engineered Products............ 34.0 5.0 -- -- -- -- ------ ----- ------ ----- ------ ----- $670.2 100.0% $406.8 100.0% $254.3 100.0% ====== ===== ====== ===== ====== =====
-------------------------------------------- YEAR ENDED MARCH 31, -------------------------------------------- 1998 1997 1996 -------------- -------------- -------------- AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT ------ ------- ------ ------- ------ ------- (IN MILLIONS)
Contract revenue earned by customer type: Government: (1) Vessels...................... $171.9 25.6% $215.8 53.1% $135.7 53.4% Energy: (2) Vessels...................... 180.1 26.9 86.1 21.1 54.4 21.4 Rigs......................... 159.9 23.9 -- -- -- -- ------ ----- ------ ----- ------ ----- 340.0 50.8 86.1 21.1 54.4 21.4 Commercial: (3) Vessels...................... 62.8 9.4 81.4 20.0 49.4 19.4 Other: (4) Vessels...................... 61.5 9.2 23.5 5.8 14.8 5.8 Engineered Products.......... 34.0 5.0 -- -- -- -- ------ ----- ------ ----- ------ ----- 95.5 14.2 23.5 5.8 14.8 5.8 ------ ----- ------ ----- ------ ----- $670.2 100.0% $406.8 100.0% $254.3 100.0% ====== ===== ====== ===== ====== =====
- -------- (1)Consists of revenue from the Company's government customers, including the U.S. Navy, state and local governments and foreign governments. (2)Consists of revenue from the construction or conversion of vessels and the construction, conversion and repair of mobile offshore drilling rigs. Vessels include offshore support vessels, offshore double-hull barges and tank barges. (3)Consists of revenue from the Company's commercial customers and includes vessels such as tugboats, hopper barges, inland tow boats and other vessels. (4)Consists of revenue from customers for the construction of yachts, vessel repairs and assorted marine products and the design and manufacture of engineered products.
Fiscal 1998 Compared with Fiscal 1997
Contract revenue increased 64.8% to $670.2 million in the fiscal year ended March 31, 1998 compared with $406.8 million in the fiscal year ended March 31, 1997. The increase was primarily attributable to $203.6 million in revenue generated by companies acquired during fiscal 1998. The majority of this increase in revenue is reflected within the Rigs and Engineered Products segments of the Company. Growth was also experienced within the energy customer group of the Vessels segment as a result of increased construction of offshore support vessels and within the other customer group resulting from increased vessel repair and yacht activity. The decline in government revenue within the Vessels segment occurred as fiscal 1997 included revenue from a major contract that was not replaced in fiscal 1998.
The gross profit margin decreased to 12.0% in fiscal 1998 compared to 12.7% in fiscal 1997. Excluding newly acquired companies, the gross margin was 7.5%. The decrease in gross margin was due to cost overruns on a ferry being constructed for the State of Alaska and certain yachts and certain double hull tank barges; increased costs on other contracts resulting from delays in the production of engineering drawings; inefficiencies resulting from the rapid buildup of the Company's labor force; use of more expensive contract labor; and adverse weather conditions during the fourth quarter.
Gross profit margins, by segment, for fiscal 1998 were: Vessels, 8.2%; Rigs, 22.9%; and Engineered Products, 14.9%. The gross margin of the Company's Vessels segment was also adversely impacted by the Company's construction of a large number of new designs for the offshore supply vessel market during fiscal 1998 which strained internal capacity and caused delays in the production of engineering drawings, resulting in out of sequence work performed at sub-optimal efficiencies. The Company has now developed a broad range of industry and regulatory accepted designs that it will be able to use to fill future orders in the Vessels segment which the Company believes will contribute to higher margins in the future. During the year, the Company initiated a project to review, evaluate, and improve all of its business processes in the Vessels segment.
Selling, general and administrative expenses increased $17.2 million to $38.6 million in fiscal 1998, or 5.8% of revenue, compared to $21.4 million or 5.3% of revenue in fiscal 1997. The increase is a result of the overall growth of the Company during the current year. Newly acquired companies added approximately $11.9 million in expenses. Other major increases in expenses included: salaries and employee related expenses, $2.2 million; general fees and services, including auditing, accounting, management and consulting, $1.7 million; and property and casualty insurance, $1.2 million. These increases were offset by decreases in legal fees, $0.5 million, and research and development expenses, $0.7 million. During fiscal 1998, the Company initiated a project to review, evaluate and improve all of its business processes in the Vessels segment committing approximately $2 million to the project during the year, and it expects to commit additional resources during fiscal 1999. The Company believes that it will realize cost savings from the project in future periods.
The Company's construction backlog increased 70.7% to $817.1 million at March 31, 1998 compared to $478.8 million at March 31, 1997 and consisted of the following as of March 31:
-------------------------------------- 1998 1997 ------------------------------ ------- ENGIN. VESSELS RIGS PRODUCTS TOTAL VESSELS ------- ------ -------- ------ ------- (IN MILLIONS) Backlog by customer type: Government............................. $179.3 $ -- $ -- $179.3 $251.3 Commercial............................. 29.6 -- -- 29.6 49.4 Energy................................. 285.8 228.7 -- 514.5 155.9 Other.................................. 34.0 -- 59.7 93.7 22.2 ------ ------ ----- ------ ------ $528.7 $228.7 $59.7 $817.1 $478.8 ====== ====== ===== ====== ======
Interest expense, net of interest income, increased $3.4 million to $6.6 million for fiscal 1998 compared to $3.2 million for fiscal 1997 due to the issuance, by the Company, of $185 million in 4 1/2% Convertible Subordinated Notes in September 1997 and $30 million in Taxable Revenue Bonds in January 1998.
As a result of its acquisitions during fiscal 1998, the Company recorded amortization of excess of cost over net assets acquired of $2.8 million.
The effective tax rate for fiscal 1998 was 29% compared to 40% for fiscal 1997 as the Company lowered its estimated annual effective tax rate to reflect the anticipated benefit of research and experimentation credits.
Fiscal 1997 Compared with Fiscal 1996
Contract revenue increased 60.0% to $406.8 million in the fiscal year ended March 31, 1997 compared with $254.3 million, all of which was in the Vessels segment, in the fiscal year ended March 31, 1996. An increase in revenue from all customer groups was experienced. Specifically, government revenue increased by $80.1 million or 59.0%; energy revenue increased by $31.6 million or 58.1%; commercial revenue increased by $32.0 million or 64.8%; and other revenue increased by $8.7 million or 58.8%. Major new government contracts added in fiscal 1997 included a large ferry for a state government and a U.S. Navy oceanographic research vessel. The increase in energy revenue was principally a result of increased construction of offshore support vessels. The increase in other commercial revenue occurred in part from the construction of five casino barges. The increase in other revenue was a result of a $9.2 million increase in revenue from yacht construction as well as increased repair and conversion business.
The gross profit margin decreased to 12.7% in fiscal 1997 compared to 15.6% in fiscal 1996. This decrease is attributable, in part, to the favorable margin received on a major contract in fiscal 1996. The Company did not replace that contract with a similarly performing contract in 1997. Further, fiscal 1997 gross profit was favorably impacted by a reduction in the workers compensation reserve. This benefit was substantially offset by specific writedowns in work in process inventory. In addition, in fiscal 1997, contracts with energy customers had lower than normal margins reflecting the Company's efforts to regain entry into a previously dormant market.
Selling, general and administrative expenses increased to $21.4 million in fiscal 1997, an increase of $5.5 million over fiscal 1996. These expenses amounted to 5.3% of revenue in fiscal 1997 compared to 6.3% of revenue in fiscal 1996. The increase in dollar costs was attributed to the general overall growth of the Company and the new and additional costs the Company incurred as a result of becoming a stand alone enterprise. Specifically, salaries and employee benefit costs increased by $2.6 million, primarily as a result of increased personnel, and research and development costs increased by $1.2 million resulting from lower billings to the U.S. Government for such costs as compared to fiscal 1996.
The Company's construction backlog increased 11% to $478.8 million at March 31, 1997 compared to $431.3 million at March 31, 1996. Energy related backlog increased by $108.6 million and other backlog increased by $9.0 million. The increase in energy backlog was attributable to new contracts to build offshore support vessels. The increase in other backlog was attributable to new contracts to build megayachts. The above increases were offset by a decrease in government related backlog of $59.0 million and
commercial related backlog of $11.2 million. The decrease in government backlog was primarily due to revenue recognition during fiscal 1997 on a U.S. Navy contract to build two barracks barges and the State of Alaska contract to build a 383-foot ferry. The decrease in commercial backlog was due primarily to completion of a large coal barge in fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal needs for capital are the funding of ongoing operations, capital expenditures and acquisitions. The Company's principal sources of liquidity during fiscal 1998 were cash provided by operating activities, borrowings from the Company's existing credit facility and the issuance of convertible subordinated notes and taxable revenue bonds. Cash flows during fiscal 1998 from these sources were $38 million from operating activities, $185 million from the issuance of 4 1/2% Convertible Subordinated Notes, and $30 million from the issuance of Taxable Revenue Bonds. These sources were used primarily to fund the Company's working capital requirements, capital expenditures, and acquisitions.
On September 15, 1997, the Company issued an aggregate principal amount of $185 million of 4 1/2% Convertible Subordinated Notes (the "Notes") which mature on September 15, 2004. The Notes were issued under an Indenture (the "Indenture") which provided that the Notes are convertible at the option of the holder into shares of common stock of the Company at a conversion rate equivalent to $31.50 per share, subject to adjustment for certain events (as defined in the Indenture). Interest on the Notes is payable semi-annually, in arrears, on March 15 and September 15 of each year, commencing March 15, 1998, with principal due at maturity. The Notes are unsecured. The Notes are redeemable, in whole or in part, at the option of the Company, at any time on or after September 15, 2000, at certain redemption prices (as defined), plus accrued and unpaid interest and liquidated damages, if any, to, but excluding, the redemption date. Holders of the Notes may, at their option, require that the Company repurchase all or a portion of the Notes upon the occurrence of a "change of control" (as defined in the Indenture) at a cash price equal to 100% of the principal amount, together with accrued and unpaid interest and liquidated damages, if any, to the date of purchase.
On January 1, 1998, the Company issued an aggregate principal amount of $30 million of Mississippi Business Finance Corporation Taxable Revenue Bonds, Series 1998 (the "Bonds") which mature on December 31, 2013. Interest on the bonds is payable semi-annually, in arrears, on June 30 and December 31 of each year, commencing June 30, 1998, at an annual interest rate of 6.39%. Principal is due at maturity. The Bonds are subject to mandatory sinking fund redemption requirements of $3 million annually. These payments, together with accrued interest to the date of redemption and without premium or penalty, are due on December 31 of each year commencing December 31, 2004 and continuing through December 31, 2013. The Company has the option to redeem the Bonds, in whole at any time, or in part on any payment date, in the inverse order of their maturities at an amount equal to the principal amount together with accrued interest through the redemption date.
During fiscal year 1998, the Company renegotiated its revolving credit agreement ("the Credit Facility") with a group of banks, increasing the maximum loan amount from $135 million to $150 million, to be used for general corporate purposes and working capital. All amounts outstanding under the Credit Facility will become payable on September 30, 2002. Letters of credit are limited to $50 million. The interest rate is 0.75% to 1.75% over the London Interbank Offering Rate ("LIBOR"), or the base rate (as defined), depending on the Company's choice. The range of rates over LIBOR is set quarterly, depending on the ratio of the Company's borrowed debt to EBITDA (as defined). Under the Credit Facility, the Company is obligated to pay certain fees, including an annual commitment fee in an amount of .2% to .5% of the unused portion of the commitment. The loan agreement contains certain restrictive covenants, including minimum net worth requirements and the encumbering of assets. In addition, the Company, among other things, is required to maintain certain financial ratios, including an interest coverage ratio (as defined), a debt service coverage ratio (as defined) and a current ratio (as defined). At March 31, 1998, the Company had no amounts outstanding and $44 million available under the line of credit.
Prior to the separation from Trinity, a significant portion of the Company's existing contracts for the construction, repair or conversion of vessels required that the Company's performance be guaranteed by Trinity, by a surety company or other third party pursuant to a contract bid or performance bond, letter of credit or similar obligation. These guarantees, bonds, letters of credit and similar obligations will remain in effect until they expire and Trinity will remain liable for the obligations on the same basis as any other guarantor. The Company has indemnified Trinity against any liability under these obligations. For the protection of Trinity in the event Trinity is called upon to satisfy any such obligations, Trinity has been granted security interests in certain assets of the Company which relate to the Company's contracts from which such obligations arise and possesses the rights to complete performance of any such contract on behalf of the Company in the event of nonperformance by the Company. Such rights and
remedies are similar to the rights possessed by surety companies that have issued performance bonds on behalf of the Company. The Company has arranged its own contract bid and performance bonds, letters of credit and similar obligations in connection with its business since September 26, 1996. The Company believes that amounts available under the Credit Facility and bonding commitment will be adequate to meet these obligations as they are required. As of March 31, 1998, the total of all of the Company's outstanding performance obligations was approximately $38 million.
The Company made capital expenditures, including construction-in-process, of $41 million and $14 million in fiscal 1998 and 1997, respectively. During fiscal 1998, the Company made extensive improvements at its Pascagoula facility which were funded through the issuance of taxable revenue bonds. The Company currently has budgeted, for fiscal 1999, approximately $70 million for planned capital projects, which included the acquisition, on May 29, 1998, for $15 million in cash, of a shipyard located in Orange, Texas which will be used for the construction of new offshore rigs.
The Company believes that cash flow from operations, together with funds available under the existing credit facility, and excess cash generated from the issuance of the 4 1/2% Convertible Subordinated Notes and Taxable Revenue Bonds will be sufficient to fund its requirements for working capital, capital expenditures, acquisitions and other capital needs for at least the next 12 months.
INFLATION AND CHANGING PRICES
The Company does not believe that general price inflation has had a significant impact on the Company's results of operations during the periods presented. To the extent that the effects of inflation are not offset by improvements in manufacturing and purchasing efficiency and labor productivity, the Company generally has been able to take such effects into account in pricing its contracts with customers. There can be no assurance, however, that inflation will not have a material effect on the Company's business in the future.
YEAR 2000 TECHNOLOGICAL ISSUES
The Company is currently working to assess the potential impact of the year 2000 on the processing of time-sensitive information by its computerized information systems and equipment. Year 2000 issues may arise if computer programs have been written using two digits (rather than four) to define the applicable year. In such case, programs that have time-sensitive logic may recognize a date using "00" as the year 1900 rather than the year 2000, which could result in miscalculations or system failures. Management is in the process of completing a review of significant software used in the Company's operations, and, to the extent practicable, in the operations of its key business relationships such as vendors, suppliers, and financial institutions, in order to determine if any year 2000 risks exist that may be material to the Company as a whole.
The Company has already begun implementing certain measures to alter, validate or replace time-sensitive software prior to any anticipated material impact on its computerized information systems and equipment. Costs of addressing potential problems have not been material to date and, based on preliminary information, are not currently expected to have a material adverse impact on the Company's financial position, results of operations or cash flows in future periods.
ITEM 8:
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders Halter Marine Group, Inc.
We have audited the accompanying consolidated balance sheets of Halter Marine Group, Inc. and Subsidiaries as of March 31, 1998 and 1997, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended March 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Halter Marine Group, Inc. and Subsidiaries at March 31, 1998 and 1997, and the consolidated results of their operations and their cash flows for each of the three years in the period ended March 31, 1998 in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
New Orleans, Louisiana April 28, 1998
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
See accompanying notes to consolidated financial statements.
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
---------------------------- MARCH 31, ---------------------------- 1998 1997 1996 -------- -------- -------- Contract revenue earned......................... $670,238 $406,797 $254,294 Cost of revenue earned ......................... 589,579 355,209 214,559 -------- -------- -------- Gross profit.................................. 80,659 51,588 39,735 Selling, general and administrative expenses.... 38,613 21,361 15,911 Amortization of excess of cost over net assets acquired....................................... 2,801 -- -- -------- -------- -------- Operating income.............................. 39,245 30,227 23,824 Other (income) expenses: Interest expense, net......................... 6,600 3,232 3,268 Other, net.................................... 932 (8) (11) -------- -------- -------- 7,532 3,224 3,257 -------- -------- -------- Income before income taxes...................... 31,713 27,003 20,567 Provision (benefit) for income taxes: Current ...................................... 10,253 5,125 15,785 Deferred...................................... (1,056) 5,762 (7,683) -------- -------- -------- 9,197 10,887 8,102 -------- -------- -------- Net income ..................................... $ 22,516 $ 16,116 $ 12,465 ======== ======== ======== Net income per share (pro forma for 1996)....... $ 0.80 $ 0.59 $ 0.46 ======== ======== ======== Net income per share, diluted (pro forma for 1996) ......................................... $ 0.78 $ 0.59 $ 0.46 ======== ======== ======== Weighted average shares outstanding (pro forma for 1996): Basic......................................... 28,052 27,281 27,000 Diluted....................................... 29,008 27,339 27,000
See accompanying notes to consolidated financial statements.
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (IN THOUSANDS)
------------------------------------------------- ADDITIONAL STOCKHOLDER'S COMMON PAID-IN RETAINED NET STOCK CAPITAL EARNINGS INVESTMENT TOTAL ------ ---------- -------- ------------- -------- Balance at March 31, 1995... $ 54,278 $ 54,278 Net income................ 12,465 12,465 -------- -------- Balance at March 31, 1996... 66,743 66,743 Net income prior to initial public offering.. 7,213 7,213 Debt assumed from former parent................... (25,000) (25,000) Proceeds from initial public offering.......... $185 $ 35,257 -- 35,442 Transfer to additional paid-in capital.......... -- 48,956 (48,956) -- Net income subsequent to initial public offering.. -- -- $ 8,903 -- 8,903 ---- -------- ------- -------- -------- Balances at March 31, 1997.. 185 84,213 8,903 -- 93,301 Issuances of common stock: Stock split............. 92 (110) -- -- (18) Employee stock options.. -- 90 -- -- 90 Acquired companies...... 11 35,203 -- -- 35,214 Net income................ -- -- 22,516 -- 22,516 ---- -------- ------- -------- -------- Balances at March 31, 1998.. $288 $119,396 $31,419 $ -- $151,103 ==== ======== ======= ======== ========
See accompanying notes to consolidated financial statements.
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
----------------------------- YEAR ENDED MARCH 31, ----------------------------- 1998 1997 1996 --------- -------- -------- Operating activities: Net income.................................... $ 22,516 $ 16,116 $ 12,465 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization............... 15,217 7,899 6,744 Deferred provision (benefit) for income taxes...................................... (1,056) 5,762 (7,683) Equipment transfers from former parent, net. -- -- (7,776) Changes in operating assets and liabilities: Increase in contract receivables.......... (42,255) (27,713) (1,053) Decrease in due from former parent........ 11,513 -- -- (Increase) decrease in costs and estimated earnings in excess of billings on uncompleted contracts.................... 984 (9,799) 3,120 (Increase) decrease in inventories........ (771) (4,764) 455 (Increase) decrease in other current assets................................... (105) (4,114) 107 Decrease in other assets.................. 707 -- -- Increase (decrease) in accounts payable and accrued liabilities.................. (8,463) 35,491 420 Increase (decrease) in income taxes payable to affiliate..................... -- (15,785) 5,949 Increase in billings in excess of costs and estimated Earnings on uncompleted contracts........ 40,269 7,428 10,994 Increase (decrease) in other noncurrent liabilities.............................. (232) 1,967 -- --------- -------- -------- Total adjustments....................... 15,808 (3,628) 11,277 --------- -------- -------- Net cash provided by operating activities... 38,324 12,488 23,742 --------- -------- -------- Investing activities: Capital expenditures.......................... (40,988) (14,491) (5,568) Business acquistions, net of cash acquired.... (66,709) -- (10,119) --------- -------- -------- Net cash required by investing activities... (107,697) (14,491) (15,687) --------- -------- -------- Financing activities: Net proceeds from sale and issuance of stock.. 72 35,442 -- Net borrowings from former parent............. -- (79,032) (7,907) Issuance of long-term convertible subordinated notes........................................ 185,000 -- -- Issuance of taxable revenue bonds............. 30,000 -- -- Debt issuance costs........................... (6,013) -- -- Principal payments on debt.................... (43,619) -- -- Net borrowings (repayments) under line of credit....................................... (52,000) 52,000 -- --------- -------- -------- Net cash provided (required) by financing activities................................. 113,440 8,410 (7,907) --------- -------- -------- Net increase in cash and cash equivalents....... 44,067 6,407 148 Cash at beginning of year....................... 7,079 672 524 --------- -------- -------- Cash and cash equivalents at end of year........ $ 51,146 $ 7,079 $ 672 ========= ======== ======== Supplemental disclosures: Cash paid for: Interest...................................... $ 8,519 $ 1,586 $ -- ========= ======== ======== Income taxes.................................. $ 5,455 $ -- $ -- ========= ======== ======== Purchase of subsidiaries...................... $ 66,928 $ -- $ 10,119 ========= ======== ======== Non-cash investing activities: Acquisitions: Fair value of assets acquired................. $ 90,748 $ -- $ 10,119 ========= ======== ======== Fair value of liabilities assumed............. $ 56,511 $ -- $ -- ========= ======== ========
See accompanying notes to consolidated financial statements.
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
1. GENERAL INFORMATION
Halter Marine Group, Inc. is a Delaware corporation incorporated on June 24, 1996 to serve as the parent of a new consolidated group. The Company formerly conducted the business of construction, repair and conversion of primarily ocean-going vessels for the governmental and commercial markets as a division of Trinity Industries, Inc. ("Trinity"). On September 26, 1996, Halter Marine Group, Inc. and subsidiaries (collectively, the "Company") completed an initial public offering of 18.7% of its stock. On March 31, 1997, Trinity distributed all of the remaining stock of the Company to its stockholders. As part of the transactions related to the spin-off, the Company assumed $25 million of indebtedness of Trinity associated with the Company's businesses.
2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of Halter Marine Group, Inc. and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The consolidated financial statements reflect the results of operations, financial condition and cash flows of the Company as a component of Trinity prior to October 1, 1996 and those results may not be indicative of actual results of operations and financial position of the Company under other ownership. Management believes that the consolidated income statements include a reasonable allocation of the administrative costs incurred by Trinity on the Company's behalf prior to October 1, 1996. These costs include payroll services, benefits administration, and cash management. The allocations of such costs to the Company were approximately $1.8 million in 1996 and approximately $1.2 million for the six months ended September 30, 1996.
Additionally, prior to the initial public offering, the Company provided administrative services for Trinity's Inland Marine division in the areas of accounting, human resources, marketing and public relations. The allocation of such costs to the Inland Marine division was approximately $2.6 million in 1996, and approximately $1.6 million for the six months ended September 30, 1996.
Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash, interest-bearing deposits in domestic banks, and highly liquid investments with original maturities of three months or less when purchased.
Construction Contracts
The Company uses the percentage of completion method to account for substantially all of its contracts in process. Under this method, revenues of construction contracts are measured by the percentage of labor hours incurred to date to estimated total labor hours for each contract. Management considers expended labor hours to be the best available measure of progress on these contracts. Changes in estimated profitability may result in revisions to income and costs and are recognized in the period in which the revisions are determined. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Other changes, including those arising from contract penalty provisions, and final contract settlements are recognized in the period in which the revisions are determined.
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, repairs and depreciation costs. Indirect manufacturing costs are allocated on the basis of labor hours incurred on the respective contracts. Selling, general and administrative costs are charged to expense as incurred.
The asset, "Costs and estimated earnings in excess of billings on uncompleted contracts," represents revenue recognized in excess of amounts billed. The liability, "Billings in excess of costs and estimated earnings on uncompleted contracts," represents billings in excess of revenue recognized.
Inventories
Inventories, which consist primarily of steel and other marine vessel components, are valued at the lower of cost or market. Inventory cost is determined principally on the specific identification method. Market is replacement cost or net realizable value.
Depreciation
Additions to property, plant and equipment are recorded at cost. Depreciation and amortization are generally computed using the straight-line method over the estimated useful lives of the assets which range from 3 to 30 years for buildings and improvements and 2 to 28 years for machinery and equipment. The costs of ordinary maintenance and repairs are charged to expense, while renewals and major replacements are capitalized.
Excess of Cost Over Net Assets Acquired
The excess of cost over the value of net assets acquired is amortized using the straight-line basis over 20 years. Accumulated amortization of the excess of cost over net assets acquired was $2.8 million at March 31, 1998.
Other Assets
Other assets includes $6 million of debt issuance costs capitalized in conjunction with the issuance of the $185 million of 4 1/2% Convertible Subordinated Notes and the $30 million of Taxable Revenue Bonds. These costs are being amortized over the life of the related debt. Accumulated amortization of debt issuance costs was $0.4 million at March 31, 1998.
Income Taxes
The Company accounts for income taxes using the liability method under Statement of Financial Accounting Standards No.109, "Accounting for Income Taxes". Under this method, deferred tax assets and liabilities are recorded for temporary differences that occur between the financial reporting and tax bases of assets and liabilities based on enacted tax rates and laws that will be in effect when the differences are expected to reverse.
Net Income Per Share
In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 128, "Earnings Per Share" (SFAS 128) which was required to be adopted for the quarter ended December 31, 1997. This Statement replaced the previously reported primary and fully diluted net income per share with basic and diluted net income per share. Unlike primary net income per share, basic net income per share excludes the dilutive effects of stock options and convertible securities. Diluted net income per share is very similar to the previously reported fully diluted net income per share. All net income per share amounts for all periods have been presented, and where necessary, restated, to conform to SFAS 128 requirements.
On September 29, 1997, the Board of Directors declared a three-for-two split of the Company's common stock, effectuated in the form of a stock dividend paid October 31, 1997 to shareholders of record as of October 15, 1997. As a result, net income per share computations and related weighted average shares outstanding for all periods presented in the foregoing financial statements and accompanying footnotes have been adjusted to reflect the stock split.
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Shares outstanding for 1996 have been assumed to be 27,000,000 (the total number of shares issued to Trinity and the public as a result of the initial public offering, exclusive of the underwriters' overallotment option of 675,000 shares, and adjusted for the three-for-two stock split) for purposes of calculating pro forma net income per share. Pro forma net income for the year ended March 31, 1996 was $12.7 million as adjusted for a reduction in interest expense, net of tax, resulting from the use of the net proceeds of the offering to retire outstanding debt to Trinity as of the beginning of the period.
Stock-based Compensation
The Company accounts for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related Interpretations. Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of the grant over the amount an employee must pay to acquire the stock. See Note 11 for stock option information.
Long-lived Assets
The Company periodically evaluates the carrying value of long-lived assets to be held and used, including excess of cost over net assets acquired in accordance with Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" (SFAS 121). SFAS 121 requires impairment losses to be recorded on long-lived assets used in operations, including related excess of cost over net assets acquired, when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived asset. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal.
Segment Information
On March 31, 1998, the Company adopted Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" (SFAS 131) which established revised standards for public companies relating to the reporting of financial and descriptive information about operating segments in financial statements. The adoption of SFAS 131 did not affect the Company's results of operations or financial position. See Note 8 for segment information.
Reclassifications
Certain items included in the consolidated financial statements for 1997 have been reclassified to conform with the 1998 presentation.
3. BUSINESS ACQUISITIONS
The Company completed certain business acquisitions during fiscal 1998 and 1996, each of which was considered a purchase for accounting purposes. The operations of these companies have been included in the consolidated financial statements from the effective dates of the acquisitions.
On April 4, 1997, the Company acquired a 51% interest in and obtained an option to acquire the remaining 49% of Texas Drydock, Inc. (TDI), a company engaged principally in the construction, conversion and repair of offshore oil drilling rigs. On May 16, 1997, the Company acquired the remaining 49% of TDI. The aggregate purchase price amounted to approximately $47 million which consisted of $20 million in cash and $27 million of short-term notes payable which were paid in fiscal 1998. In addition, the Company advanced TDI $4.5 million for working capital and a fixed asset acquisition. A substantial portion of the total purchase price was allocated to cost in excess of net assets acquired.
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
During August 1997, the Company acquired the assets of Bludworth Bond Shipyard, Inc., Houston, Texas. During the third quarter of fiscal 1998, the Company completed the acquisitions of four additional companies, including AmClyde Engineered Products, Inc., and formed the Engineered Products Group. The aggregate purchase price for these five companies was $75 million, of which approximately $45 million was paid in cash and the balance in 835,484 shares of the Company's common stock. A substantial portion of the total purchase price was allocated to cost in excess of net assets acquired.
The following unaudited pro forma financial information presents the combined results of operations for the 12 months ended March 31, 1998 and 1997, assuming consummation of the purchase of TDI and the Engineered Products Group as of April 1, 1996 and, after giving effect to the shares issued and certain adjustments, including amortization of excess of cost over net assets acquired and increased interest expense on debt related to the acquisitions, and related income tax expenses. This pro forma information does not necessarily reflect the results of operations that would have occurred had the Company, along with TDI and the Engineered Products Group, constituted a single entity during these periods.
--------------
In March 1998, the Company also acquired the stock of three companies comprising the operations of Calcasieu Shipyard, Inc., located in Sulphur, Louisiana. The aggregate purchase price of these companies was approximately $10 million of which approximately $4 million was paid in cash and the balance in approximately 300,000 shares of the Company's common stock. The operating results of these acquisitions would not have materially affected the Company's consolidated revenue, net income, or net income per share for fiscal 1998 and 1997.
In fiscal 1996, the Company acquired the assets of American Marine Corporation (now known as Halter Gulf Repair) and CBI-Con, Inc. (now known as Halter Pascagoula). The assets of these businesses are utilized in the manufacture and repair of marine products. The aggregate purchase price of approximately $10.1 million was allocated entirely to the assets acquired. The results of these acquisitions would not have materially affected consolidated revenue, net income, or net income per share for fiscal 1996.
In conjunction with the acquisitions of AmClyde Engineered Products, Inc. and Bludworth Bond Shipyard, contingent payment agreements based upon operating results over the next three years were negotiated with the respective former owners. The additional payments, which are not expected to be material, will be paid in cash and accounted for as additonal excess of cost over net assets acquired.
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
------------------- MARCH 31, ------------------- 1998 1997 ---------- -------- (IN THOUSANDS)
Costs incurred on uncompleted contracts..................... $1,064,026 $555,918 Estimated earnings.......................................... 130,607 103,565 ---------- -------- 1,194,633 659,483 Less billings to date....................................... 1,181,576 601,735 ---------- -------- $ 13,057 $ 57,748 ========== ======== Included in the following balance sheet captions: Costs and estimated earnings in excess of billings on uncompleted contracts.................................... $ 81,229 $ 77,704 Billings in excess of costs and estimated earnings on uncompleted contracts.................................... 68,172 19,956 ---------- -------- $ 13,057 $ 57,748 ========== ========
5. PROPERTY, PLANT AND EQUIPMENT
---------------- MARCH 31, ---------------- 1998 1997 -------- ------- (IN THOUSANDS)
Land.......................................................... $ 13,676 $ 8,427 Buildings and improvements.................................... 64,849 26,929 Machinery and equipment....................................... 104,448 53,118 Construction in progress ..................................... 16,418 12,696 -------- ------- 199,391 101,170 Less accumulated depreciation................................. 73,429 39,721 -------- ------- Property, plant and equipment, net............................ $125,962 $61,449 ======== =======
6. NOTES PAYABLE AND LONG-TERM DEBT
---------------- MARCH 31, ---------------- 1998 1997 -------- ------- (IN THOUSANDS)
4 1/2% Convertible Subordinated Notes......................... $185,000 $ -- Taxable Revenue Bonds, Series 1998............................ 30,000 -- Revolving Credit Agreement.................................... -- 52,000 Other......................................................... 5,133 8,696 -------- ------- 220,133 60,696 Less current portion.......................................... 1,918 8,696 -------- ------- $218,215 $52,000 ======== =======
4 1/2% Convertible Subordinated Notes
On September 15, 1997, the Company issued an aggregate principal amount of $185 million of 4 1/2% Convertible Subordinated Notes (the "Notes") which mature on September 15, 2004. The Notes were issued under an Indenture (the "Indenture") which provides that the Notes are convertible at the option of the holder into shares of common stock of the
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Company at a conversion rate equivalent to $31.50 per share, subject to adjustment for certain events (as defined in the Indenture). Interest on the Notes is payable semi-annually, in arrears, on March 15 and September 15 of each year, commencing March 15, 1998, with principal due at maturity. The Notes are unsecured.
The Notes are redeemable, in whole or in part, at the option of the Company, at any time on or after September 15, 2000, at the redemption prices (expressed as percentages of the principal amount) set forth below, plus accrued and unpaid interest and liquidated damages, if any, to, but excluding, the redemption date.
Holders of the Notes may, at their option, require that the Company repurchase all or a portion of the Notes upon the occurrence of a "change of control" (as defined in the Indenture) at a cash price equal to 100% of the principal amount, together with accrued and unpaid interest and liquidated damages, if any, to the date of purchase.
Taxable Revenue Bonds, Series 1998
On January 1, 1998, the Company issued an aggregate principal amount of $30 million of Mississippi Business Finance Corporation Taxable Revenue Bonds, Series 1998 (the "Bonds") which mature on December 31, 2013. Interest on the Bonds is payable semi-annually, in arrears, on June 30 and December 31 of each year, commencing June 30, 1998, at an annual interest rate of 6.39%. Principal is due at maturity.
The Bonds are subject to mandatory sinking fund redemption requirements of $3 million annually. These payments, together with accrued interest to the date of redemption and without premium or penalty, are due on December 31 of each year commencing December 31, 2004 and continuing through December 31, 2013. The Company has the option to redeem the Bonds, in whole at any time, or in part on any payment date, in the inverse order of their maturities at an amount equal to the principal amount together with accrued interest through the redemption date. As of March 31, 1998, of the $30 million funded, approximately $23 million had been applied to qualified construction expenditures while approximately $7 million remained invested in an escrow which will be utilized by the Company as it incurs qualified expenditures. The balance remaining in escrow is expected to be expended during fiscal 1999.
Revolving Credit Agreement
During fiscal 1998, the Company renegotiated its revolving credit agreement with a group of banks, increasing the maximum loan amount from $135 million to $150 million. Any amounts outstanding under this revolving credit agreement will become payable on September 30, 2002. Letters of credit are limited to an aggregate of $50 million. The interest rate is 0.75% to 1.75% over the London Interbank Offered Rate (LIBOR), or the base rate (as defined), depending on the Company's choice. The range of rates over LIBOR is set quarterly, depending on the ratio of the Company's borrowed debt to EBITDA (as defined).
Under the new credit agreement, the Company is obligated to pay certain fees, including an annual commitment fee in an amount ranging from 0.2% to 0.5% of the unused portion of the commitment. The loan agreement contains certain restrictive covenants, including minimum net worth requirements and the encumbering of assets. In addition, the Company, among other things, is required to maintain certain financial ratios, including an interest coverage ratio (as defined), a debt service coverage ratio (as defined), and a current ratio (as defined).
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
At March 31, 1998, the Company had no amounts outstanding under the line of credit. The amount available under the line of credit at March 31, 1998 was $44 million.
Other Debt
Other long-term debt of $5.1 million at March 31, 1998 consists principally of promissory notes due in monthly installments. The notes have fixed interest rates ranging from 7% to 10% and variable rates of prime plus 1%. The notes are secured by land, building, docking facilities, and improvements and machinery and equipment with a net book value approximating $6.0 million. The notes have final maturities ranging from the year 2000 through 2013.
Scheduled maturities of long-term debt for the next five years are as follows:
The fair value of the Company's 4 1/2% convertible subordinated notes at March 31, 1998 was $156.9 million. The fair value of the Company's remaining long-term debt approximates its recorded value.
7. LEASES
The Company leases certain machinery and equipment under non-cancelable operating leases which expire at various dates through the year 2016. Total lease expense recorded by the Company was $900,577, $280,902, and $247,848 for fiscal 1998, 1997, and 1996, respectively.
Future minimum lease commitments are as follows:
8. SEGMENT INFORMATION
The Company classifies its business into three segments: Vessels, which includes the new construction and repair of a wide variety of vessels for the government, energy and commercial markets; Rigs, which includes the construction, conversion and repair of mobile offshore drilling rigs; and Engineered Products, which includes the design, manufacture and marketing of cranes, derricks, winches, hoists, windlasses, jacks, linear winches, fairleads, capstans, tuggers, locking devices, turret bearings, control systems, and other related products used in the marine, offshore and construction industries. The Company evaluates the performance of its
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
segments based upon income before interest and income taxes as these expenses are not allocated to the segments. Accounting policies are the same as those described in Note 2, "Basis of Presentation and Significant Accounting Policies."
Selected information as to the operations of the Company by segment is set forth below.
-------------------------------------- YEAR ENDED MARCH 31, 1998 -------------------------------------- ENGINEERED VESSELS RIGS PRODUCTS TOTAL -------- -------- ---------- -------- (IN THOUSANDS) Operations: Contract revenue earned................. $476,258 $159,934 $34,046 $670,238 Cost of revenue earned.................. 437,239 123,363 28,977 589,579 -------- -------- ------- -------- Gross profit.......................... 39,019 36,571 5,069 80,659 Selling, general and administrative expenses............................... 26,733 8,516 3,364 38,613 Amortization of excess of cost over net assets acquired........................ 58 1,645 1,098 2,801 Other, net.............................. (75) 953 54 932 -------- -------- ------- -------- Income before interest and income taxes................................ $ 12,303 $ 25,457 $ 553 $ 38,313 ======== ======== ======= ========
Certain other financial information of the Company by segment is set forth below:
--------------------------------------------- YEAR ENDED MARCH 31, 1998 --------------------------------------------- ENGINEERED VESSELS RIGS PRODUCTS ADJUSTMENTS TOTAL ------- ------ ---------- ----------- ------- (IN THOUSANDS) Other financial information: Depreciation and amortization ex- pense: Included in cost of revenue earned........................ $9,529 $1,761 $ 186 $ -- $11,476 Included in selling, general and administrative expenses... 413 1,790 1,114 424 3,741 ------ ------ ------ ---- ------- $9,942 $3,551 $1,300 $424 $15,217 ====== ====== ====== ==== =======
For consolidation purposes, all interest, amortization of debt issuance costs and income taxes are allocated to corporate operations. Operations for fiscal 1997 and 1996 were attributable to the Vessels segment. Intersegment revenues are not material to the consolidated revenue of the Company.
Fiscal 1998 revenue from one customer of the Vessels segment totaled $114.6 million and from another customer of the Vessels segment totaled $73.6 million. Fiscal 1997 and 1996 included revenue from one customer of the Vessels segment of $152.1 million and $120.3 million, respectively.
Total assets and capital expenditures of the Company by segment are set forth below.
------------------------------------------------- AS OF MARCH 31, 1998 ------------------------------------------------- ENGINEERED VESSELS RIGS PRODUCTS ADJUSTMENTS TOTAL -------- -------- ---------- ----------- -------- (IN THOUSANDS)
Total assets.................. $263,820 $102,029 $85,247 $48,505 $499,601 ======== ======== ======= ======= ======== Capital expenditures.......... $ 26,453 $ 8,840 $ 383 $ 5,312 $ 40,988 ======== ======== ======= ======= ========
For consolidation purposes, certain cash and cash equivalent balances and certain capital expenditures are allocated to corporate and are included along with other accounting eliminations and adjustments in the Adjustments column.
Revenues included in the consolidated financial statements of the Company are primarily derived from customers domiciled in the United States. Substantially all of the Company's long-lived assets are located in the United States.
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. RECONCILIATION OF NET INCOME PER SHARE
The following table sets forth the computation of basic and diluted net income per share:
-------------------------------------- YEAR ENDED MARCH 31, -------------------------------------- 1998 1997 1996 ------------ ------------ ------------ (IN THOUSANDS, EXCEPT PER SHARE DATA)
Numerator: Net Income.......................... $ 22,516 $ 16,116 $ 12,465 ============ ============ ============ Numerator for net income per share, diluted ........................... $ 22,516 $ 16,116 $ 12,465 ============ ============ ============ Denominator: Denominator for net income per share--weighted average shares outstanding*....................... 28,052 27,281 27,000 Effect of dilutive securities: Stock Options..................... 956 58 -- ------------ ------------ ------------ Denominator for net income per share, diluted*.................... 29,008 27,339 27,000 ============ ============ ============ Net income per share*............... $ 0.80 $ 0.59 $ 0.46 ============ ============ ============ Net income per share, diluted*...... $ 0.78 $ 0.59 $ 0.46 ============ ============ ============
- -------- *Pro forma for 1996.
The effect on net income per share, diluted, would be anti-dilutive if the conversion of the 4 1/2% convertible subordinated notes had been assumed in the computation. For additional information regarding the 4 1/2% convertible subordinated notes and stock options, refer to Notes 6 and 11, respectively.
10. RELATED PARTY TRANSACTIONS
John Dane III, Chief Executive Officer and Chairman of the Company, acquired 25% of the stock of United States Marine, Inc. ("USMI") in June 1996 and an additional 10% in July 1997, Mr. Dane has committed to acquire an additional 40% of the stock of USMI over the next four years. USMI manufactures custom composite marine products for various customers and performs services for the Company as a subcontractor with respect to the production of high-speed composite vessels for the U.S. Navy. During fiscal 1998, 1997 and 1996, the Company paid USMI approximately $4.8 million, $7.2 million and $5.5 million, respectively, for subcontractor services.
Prior to his association with the Company, Rick S. Rees, Executive Vice President and Chief Financial Officer, was a stockholder of Maritime Holdings, Inc. ("MHI") and its President. MHI owned 80% of the outstanding capital stock of Texas Drydock, Inc. ("TDI"). On February 14, 1997, the Company contracted to acquire 51% of the outstanding capital stock of MHI; 51% of the remaining 20% of the capital stock of TDI not owned by MHI; and options to acquire the other 49%. At the closing in April 1997, at which time Mr. Rees was a director of the Company, he received $2.8 million. On May 16, 1997, the Company purchased the other 49% of the outstanding stock of MHI. At the second closing, Mr. Rees received a note from the Company in the principal sum of $4.1 million, bearing interest at the rate of 7.1% per annum, payable in full, principal and interest, on January 15, 1998 (the "Purchase Price Note"), and a 15.18% interest in a $1.0 million note, payable by the Company and delivered in escrow, providing a similar interest rate (the "Escrow Note"). During fiscal 1998, the Company pre-paid the Purchase Price Note, principal and interest, in the amount of $4.2 million and, under the Escrow Note, interest earned under the Escrow Note of $4,576.
In fiscal 1997, subsequent to its initial public offering, the Company repaid to Trinity its intercompany balance, including $21.6 million for income taxes and $25.0 million in debt assumed by the Company from Trinity. Such amounts aggregated approximately $79.0 million.
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
As of March 31, 1997, the Company had a receivable from Trinity of $11.5 million, representing the year-end settlement of excess amounts of income tax estimates paid to Trinity during the year, the settlement of the Company's portion of assets in Trinity's captive insurance subsidiary, and various other intercompany charges and credits.
Upon completion of the initial public offering, the Company and Trinity entered into various agreements for the purpose of establishing the terms governing their on-going arrangements and relationships. These agreements contained various provisions including a non-compete provision, a provision regarding the settlement of income tax matters and a provision related to the settlement of other transactions between the Company and Trinity. The agreements are not expected to have a significant impact on the Company's business, financial position, results of operations or liquidity.
11. STOCK OPTIONS
On September 24, 1996, the Company established the 1996 Stock Option and Incentive Plan which was amended and restated on July 15, 1997 (the "1996 Plan"). The 1996 Plan provides for awards to employees and directors in the form of grants of stock options, stock appreciation rights, restricted or non- restricted stock or units denominated in stock (collectively referred to as "Awards"). All stock options granted under the 1996 Plan vest in equal annual amounts over a five-year period and expire 10 years from the date of grant. The 1996 Plan also provides that shares of common stock which are the subject of awards that are forfeited or terminated, expire unexercised, are settled in cash in lieu of common stock or in a manner such that all or some of the shares covered thereby are not issued or are exchanged for Awards that do not involve common stock will again immediately become available for Awards under the 1996 Plan. A total of 3,600,000 shares are authorized to be issued under the Plan.
Following is a summary of the option activity for the years ended March 31, 1998 and 1997:
-------------------- WEIGHTED- AVERAGE SHARES PRICE --------- ---------
Outstanding at April 1, 1996............................ -- $ -- Granted............................................... 375,000 7.33 --------- Outstanding at March 31, 1997........................... 375,000 7.33 Granted............................................... 2,656,000 15.35 Cancelled............................................. (16,500) 8.15 Exercised............................................. (12,300) 7.33 --------- Outstanding at March 31, 1998........................... 3,002,200 $14.42 ========= ====== Exercisable at March 31, 1998........................... 60,300 $ 7.33 ========= ====== Exercisable at March 31, 1997........................... -- $ -- ========= ======
The following table summarizes information about stock options outstanding at March 31, 1998:
The Company accounts for options granted under the 1996 Plan as prescribed by the provisions of APB 25 and, accordingly, no compensation expense has been recognized for stock options granted. Had compensation expense for the 1996 Plan been
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
determined based on the fair value at the grant dates consistent with the method of SFAS 123, the Company's net income and net income per share would have been reduced to the pro forma amounts indicated below. For purposes of these pro forma disclosures, the estimated fair value of the options granted in fiscal 1998 and 1997 are amortized to expense over the options' vesting period.
--------------------------------- YEAR ENDED MARCH 31, --------------------------------- 1998 1997 ---------------- ---------------- AS PRO AS PRO REPORTED FORMA REPORTED FORMA -------- ------- -------- ------- (IN THOUSANDS, EXCEPT NET INCOME PER SHARE)
Net income................................ $22,516 $19,343 $16,116 $15,912 Net income per share, diluted............. $ 0.78 $ 0.67 $ 0.59 $ 0.58
The weighted-average grant date fair value of options granted during the year ended March 31, 1998 was $9.23. The fair value of options was calculated using the Black-Scholes option pricing model using the following weighted- average assumptions for fiscal year activity: risk-free interest rate of 5.70%, expected life of 7 years, expected volatility of .519 and no dividend yield.
The weighted-average grant date fair value of options granted during the year ended March 31, 1997 was $4.54. The fair value of options was calculated using the Black-Scholes option pricing model using the following weighted- average assumptions for fiscal year activity: risk-free interest rate of 5.98%, expected life of 7 years, expected volatility of .801 and no dividend yield.
Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing model does not necessarily provide a reliable single measure of the fair value of its employee stock options.
12. EMPLOYEE BENEFIT PLANS
The Company maintains a pension plan which was curtailed effective March 31, 1998. The plan provides income and death benefits for eligible employees who were members of the plan at the time of curtailment. The Company's policy is to fund retirement costs accrued but only to the extent such amounts are deductible for income tax purposes. Plan assets include cash, short-term debt securities, and other investments. Benefits are based on years of credited service and compensation. The curtailment of plan benefits, which had an immaterial effect on operating results, has been recognized in all actuarial calculations.
Net periodic pension expense includes the following components:
-------------------- YEAR ENDED MARCH 31, -------------------- 1998 1997 1996 ------ ---- ------ (IN THOUSANDS)
Service cost-benefits earned during the period......... $1,035 $807 $ 598 Interest cost on projected benefit obligation.......... 572 501 386 Actual return on assets................................ (2,248) 143 (1,112) Net amortization and deferral ......................... 1,400 (603) 699 ------ ---- ------ Net periodic pension expense........................... $ 759 $848 $ 571 ====== ==== ======
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Amounts recognized in the Company's consolidated balance sheets follow:
-------------- MARCH 31, -------------- 1998 1997 ------ ------ (IN THOUSANDS)
Actuarial present value of benefit obligation: Vested benefit obligation.................................. $6,683 $3,946 ====== ====== Accumulated benefit obligation............................. $7,789 $4,875 ====== ====== Projected benefit obligation................................. $7,789 $6,644 Plan assets at fair value.................................... 7,683 5,437 ------ ------ Projected benefit obligation in excess of plan assets........ (106) (1,207) Unrecognized net asset at April 1, 1997...................... -- (42) Unrecognized net loss........................................ -- 1,903 ------ ------ (Accrued) prepaid pension expense............................ $ (106) $ 654 ====== ======
A discount rate of 7.00% was assumed for the valuation of the projected benefit obligation for 1998. Assumptions used for the valuation of the projected benefit obligation for 1997 and 1996 were a discount rate of 7.75%, an increase in compensation levels of 4.75% and an expected long-term rate of return on assets of 9.00%.
The Company has a contributory 401(k) plan in which employees of the Company may participate. Under the plan, eligible employees are allowed to make voluntary pre-tax contributions which are matched, up to certain limits, by the Company. Expenses related to this plan approximated $1,957,000, $896,000 and $614,000 in 1998, 1997 and 1996, respectively.
13. INCOME TAXES
For the years ended March 31, 1997 and 1996, the Company was included in the consolidated federal income tax return of Trinity. Trinity allocated income taxes to the Company in amounts approximating income taxes that the Company would have been obligated to pay on a separate tax return basis. The Company and Trinity entered into a tax allocation agreement under which the Company and Trinity have agreed upon the allocation of certain tax liabilities and related matters for those periods. The Company will file its own consolidated federal income tax return for the fiscal year ended March 31, 1998.
The significant components of the provision (benefit) for income taxes follow:
----------------------- YEAR ENDED MARCH 31, ----------------------- 1998 1997 1996 ------ ------- ------- (IN THOUSANDS) Current: Federal........................................... $9,167 $ 3,440 $13,475 State............................................. 1,086 1,685 2,310 ------ ------- ------- 10,253 5,125 15,785 Deferred: Federal........................................... (970) 4,771 (6,692) State............................................. (86) 991 (991) ------ ------- ------- (1,056) 5,762 (7,683) ------ ------- ------- Total........................................... $9,197 $10,887 $ 8,102 ====== ======= =======
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Deferred income taxes are provided for temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the carrying amount for income tax purposes. The components of deferred tax liabilities and assets follow:
------------- MARCH 31, ------------- 1998 1997 ------ ------ (IN THOUSANDS)
Deferred tax liabilities: Depreciation and amortization............................... $8,517 $3,555 Long-term contracts......................................... -- 257 Pensions and other benefits................................. 757 640 Other ...................................................... 26 62 ------ ------ Total deferred tax liabilities............................ 9,300 4,514 ------ ------ Deferred tax assets: Long-term contracts......................................... 1,439 -- Reserve for unpaid insurance claims......................... 836 1,617 ------ ------ Total deferred tax assets................................. 2,275 1,617 ------ ------ Net deferred tax liability.................................... $7,025 $2,897 ====== ======
A reconciliation between the effective tax rate and the statutory tax rate is as follows:
----------------- YEAR ENDED MARCH 31, ----------------- 1998 1997 1996 ----- ---- ----
Statutory rate............................................ 35.0% 35.0% 35.0% Research and experimentation tax credits.................. (11.0) -- -- Non-deductible goodwill amortization...................... 6.3 -- -- State taxes, net of federal benefit....................... 2.2 4.1 4.2 Other..................................................... (3.5) 1.2 0.2 ----- ---- ---- Effective tax rate........................................ 29.0% 40.3% 39.4% ===== ==== ====
14. STOCKHOLDER RIGHTS PLAN
The Company has adopted a stockholder rights plan under which one right is assigned to each share of common stock. Each right entitles the stockholder to purchase from the Company one one-hundredth of a share of Series A Preferred Stock at an exercise price to be determined by the Board when the rights are issued. The rights are not exercisable or detachable from the common stock until ten business days after a person acquires beneficial ownership of 15% or more of the common stock or if a person or group commences a tender or exchange offer upon consummation of which that person or group would beneficially own 15% or more of the common stock.
If any person becomes a beneficial owner of 15% or more of the common stock other than pursuant to an offer, as defined, for all shares determined by certain directors to be fair to the stockholders and otherwise in the best interests of both the Company and its stockholders (other than by reason of share purchases by the Company), each right not owned by that person or related parties enables its holder to purchase, at the right's then current exercise price, shares of the Company's common stock having a calculated value of twice the right's exercise price.
The rights, which are subject to adjustment, may be redeemed by the Company at a price of one cent per right at any time prior to their expiration ten years from issuance or the point at which they become exercisable.
HALTER MARINE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
15. COMMITMENTS AND CONTINGENCIES
The Company is involved in various claims and lawsuits incidental to its business. In the opinion of management, these claims and suits in the aggregate will not have a material adverse effect on the Company's financial position, results of operations or liquidity.
Prior to September 30, 1996, Trinity had guaranteed certain contract performance obligations of the Company. These guarantees, bonds, letters of credit and similar obligations will remain in effect until they expire and Trinity will remain liable until that time as any other guarantor. The Company has indemnified Trinity for any losses incurred by Trinity under this arrangement.
Subsequent to September 30, 1996, the Company obtained its own contract bid and performance bonds, letters of credit and similar obligations in connection with its business. As of March 31, 1998 the total of all outstanding performance obligations was approximately $38 million.
16. SUPPLEMENTARY UNAUDITED QUARTERLY DATA
----------------------------------- FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER -------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Year ended March 31, 1998: Contract revenue earned.................. $149,069 $151,198 $180,569 $189,402 Gross profit............................. $ 18,565 $ 21,653 $ 26,559 $ 13,882 Net income............................... $ 5,411 $ 7,812 $ 8,755 $ 538 Net income per share..................... $ 0.20 $ 0.28 $ 0.31 $ 0.02 Net income per share, diluted............ $ 0.19 $ 0.27 $ 0.29 $ 0.02 Year ended March 31, 1997: Contract revenue earned.................. $ 85,981 $ 94,457 $112,496 $113,863 Gross profit............................. $ 11,286 $ 12,779 $ 12,558 $ 14,965 Net income............................... $ 3,342 $ 3,871 $ 4,192 $ 4,711 Net income per share..................... $ 0.12 $ 0.14 $ 0.15 $ 0.17 Net income per share, diluted............ $ 0.12 $ 0.14 $ 0.15 $ 0.17
Results for the fourth quarter of fiscal 1998 were adversely impacted by increased production costs in the Company's marine vessel product line within the Vessels segment. The Company's growing backlog resulted in increased demands on engineering support and production resulting in some inefficiencies. Costs on certain new projects rose beyond original estimates, in part, because of the recent addition of many new, less experienced shipbuilders. Additionally, unprecedented inclement weather during the quarter caused production delays and a subsequent increase in the amount of planned overtime.
ITEM 9:
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANT ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None
PART III
ITEM 10:
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS
Information concerning Directors and Executive Officers is incorporated by reference from the Proxy Statement for the Annual Meeting of Stockholders to be held July 28, 1998.
ITEM 11:
ITEM 11: EXECUTIVE COMPENSATION
Information concerning executive compensation is incorporated by reference from the proxy statement described in Item 10 of this report.
ITEM 12:
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning security ownership of certain beneficial owners and management is incorporated by reference from the proxy statement described in Item 10 of this report.
ITEM 13:
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning certain relationships and related transactions is incorporated by reference from the proxy statement described in Item 10 of this report.
PART IV
ITEM 14:
ITEM 14: EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K
(a) Exhibits
- -------- * Filed herewith ** Incorporated by reference to exhibits to Form 8-K filed April 17, 1997 with the Securities and Exchange Commission. *** Incorporated by reference to exhibits to Form 8-K/A filed on June 2, 1997 with the Securities and Exchange Commission. **** Incorporated by reference to exhibits in Amendment No. 1 to the Registration Statement (Registration No. 333-38491) filed on December 29, 1997 with the Securities and Exchange Commission. ***** Incorporated by reference to exhibits in Amendment No. 1 to the Registration Statement (Registration No. 333-39379) filed on November 26, 1997 with the Securities and Exchange Commission. ****** Incorporated by reference to exhibits to Form 8-K filed November 12, 1997 with the Securities and Exchange Commission.
(b) Financial Statement Schedules
Copies of Consolidated Financial Statements are included within Form 10-K and are incorporated herein by reference (See Index To Consolidated Financial Statements at page 22 of Form 10-K).
Financial Statement Schedules other than the Financial Statements have been omitted because the required information is contained in the consolidated financial statements and notes thereto or because such schedules are not required or applicable.
(c) Reports on Form 8-K
The following Forms 8-K were filed with the Securities and Exchange Commission during the fourth quarter of fiscal 1998 on the dates indicated:
1. Announcement regarding expected earnings for the fourth quarter of fiscal 1998 filed on March 13, 1998.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934. The registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
HALTER MARINE GROUP, INC.
By: /s/ John Dane III ----------------------------------- John Dane III Chairman, President and Chief Executive Officer
Date: June 29, 1998
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ John Dane III Chairman, President, June 29, 1998 - ----------------------------------- Chief Executive JOHN DANE III Officer and Chairman
/s/ Rick S. Rees Executive Vice June 29, 1998 - ----------------------------------- President, Chief RICK S. REES Financial Officer, and Director
/s/ Keith L. Voigts Senior Vice June 29, 1998 - ----------------------------------- President and Chief KEITH L. VOIGTS Accounting Officer
/s/ Daniel J. Mortimer Executive Vice June 29, 1998 - ----------------------------------- President, Chief DANIEL J. MORTIMER Operating Officer, and Director
/s/ Kenneth W. Lewis Director June 29, 1998 - ----------------------------------- KENNETH W. LEWIS