Form 10-K/A
(Amendment No. 1)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2003
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-29416
UNIFAB International, Inc.
--------------------------
(Exact name of registrant as specified in its charter)
Louisiana 72-1382998
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5007 Port Road, New Iberia, La. 70560
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (337) 367-8291
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common stock, $0.01 par value per share
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes (X) No ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. ____
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act)
Yes ( ) No (X)
The aggregate market value of the voting common equity held by nonaffiliates of
the registrant as of June 30, 2003 was approximately $2.7 million based on the
closing price of the registrant's common stock on the Nasdaq SmallCap Market on
such date of $0.35 per share.
The number of shares outstanding of the registrant's common stock, $0.01 par
value per share, as of April 20, 2004 was 8,201,913.
This Form 10-K/A is being filed by the Registrant solely for the purpose of
completing Items 10, 11, 12, 13 and 14 in Part III of the Registrant's Annual
Report on Form 10-K. At the time that the Registrant filed its Annual Report,
the Registrant intended to incorporate by reference the information required by
these Items of Part III from its proxy statement for its 2004 annual meeting of
shareholders, which the Registrant intended to file with the Securities and
Exchange Commission prior to April 29, 2004. In view of the fact that the
Registrant will not file its 2004 proxy statement on or before April 29, 2004,
the Registrant is required to file this amendment supplementing its Annual
Report on Form 10-K by including the information required by Items 10, 11, 12,
13 and 14. This Form 10-K/A does not reflect events occurring after the March
30, 2004 filing of our Annual Report or modify or update the disclosure
contained in the Annual Report in any way other than as required to reflect the
amendments discussed above and reflected below.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
DIRECTORS
The following table sets forth for each director of our Company, his
age, position, principal occupation and employment during the past five years
and his directorships in other public corporations, as of December 31, 2003, and
the year that he was first elected a director of our Company or its predecessor.
Each director has been elected to serve until the 2004 annual meeting of
shareholders or until such other time as his successor is elected and qualified.
PRINCIPAL OCCUPATION AND DIRECTORSHIPS IN DIRECTOR
NAME AND AGE OTHER PUBLIC CORPORATION SINCE
------------ ------------------------ -----
Frank J. Cangelosi, Jr., 50........ Mr. Cangelosi, a certified public accountant, has served as 2002
the Vice President of Finance of Nassau
Holding Corporation, the parent company
of several oilfield-related companies,
including Midland, since June 1985.
PRINCIPAL OCCUPATION AND DIRECTORSHIPS IN DIRECTOR
NAME AND AGE OTHER PUBLIC CORPORATION SINCE
------------ ------------------------ -----
William A. Downey, 57.............. Mr. Downey served as our Executive Vice President and Chief 2002
Operating Officer from August 2002 through August 2003.
During that time, Mr. Downey was also the President of
Universal Fabricators, LLC, a wholly owned subsidiary of our
company. Mr. Downey previously served as Vice President of
Operations for Gulf Island Fabrication, Inc., a publicly
traded company engaged in the fabrication of platforms and
structures used in the development and production of oil and
gas, from May 1985 through January 2000. Mr. Downey was also
the President of Gulf Island, LLC, a subsidiary of Gulf
Island Fabrication, Inc., from January 2000 through June 2000.
Daniel R. Gaubert, 55.............. Mr. Gaubert was appointed Vice President of Finance and Chief 2002
Accounting Officer of Kellogg Brown & Root, Inc. (a wholly
owned subsidiary of the Halliburton Company) in May 2003, and
served as a consultant to Kellogg Brown & Root, Inc. from
October 2002 through April 2003. Mr. Gaubert previously
served as the Chief Financial Officer of McDermott
International, Inc. from 1996 until his retirement in 2001,
and served as a consultant to McDermott International, Inc.
from 2001 through December 2002. In February 2000, The
Babcock & Wilcox Company, a subsidiary of McDermott
International, Inc., filed a petition to reorganize under
Chapter 11 of the U.S. Bankruptcy Code in order to determine
and resolve its asbestos-related liabilities; at the time
this petition was filed, Mr. Gaubert was serving as the Chief
Financial Officer of The Babcock & Wilcox Company.
PRINCIPAL OCCUPATION AND DIRECTORSHIPS IN DIRECTOR
NAME AND AGE OTHER PUBLIC CORPORATION SINCE
------------ ------------------------ -----
William A. Hines, 67............... Mr. Hines serves as our Chairman of the Board and is also the 2002
Chairman of the Board and President of Nassau Holding
Corporation, the parent company of several oilfield-related
companies, including Midland. Mr. Hines is also a director
of Whitney Holding Corporation, a publicly traded regional
bank holding company. Mr. Hines previously served as a
director of our company from July 1998 through March 2001.
Donald L. Moore, 65................ Mr. Moore, a certified public accountant, was the managing 2002
partner of the New Orleans office of the national accounting
firm of Ernst & Young LLP for over 20 years prior to his
retirement in September 1998. Mr. Moore serves on the boards
of directors of several charitable organizations, including
the Louisiana Chapter of the Salvation Army and the New
Orleans Opera Association.
Allen C. Porter, Jr., 71........... Mr. Porter served as our President and Chief Executive 2002
Officer from August 2002 through October 2003. During that
time, Mr. Porter was also the President of Allen Process
Systems, LLC, a wholly owned subsidiary of our company, and
was the founder and President of Allen Tank, Inc., the
predecessor of Allen Process Systems, LLC. Mr. Porter served
as a member of our board of directors from August 2002
through January 2004, at which time he resigned from service
to the board. From 1998 to 2000, Mr. Porter was a
construction manager for Versatruss Americas LLC, a designer
and manufacturer of offshore heavy lift systems. From 2000
through his joining our company in August 2002, Mr. Porter
was the Executive Vice President of Yarbrough Cable Co., a
Versabar company.
PRINCIPAL OCCUPATION AND DIRECTORSHIPS IN DIRECTOR
NAME AND AGE OTHER PUBLIC CORPORATION SINCE
------------ ------------------------ -----
Perry Segura, 74................... Mr. Segura served as our Chairman of the Board from April 1980
2002 through August 2002. Mr. Segura is an architect and
real estate developer. Mr. Segura is a member of the Board
of Supervisors of Louisiana State University and was its
Chairman from 1997 to 1998 and its Vice Chairman from 1996 to
1997.
George C. Yax, 63.................. Mr. Yax is currently a rancher and was a co-founder of Ceanic 1997
Corporation (formerly, American Oilfield Divers, Inc.), a
publicly traded provider of sub-sea products and services to
the offshore oil and gas industry. Mr. Yax served as
Chairman of the Board of Ceanic Corporation until its sale in
August 1998.
AUDIT COMMITTEE FINANCIAL EXPERT
Our board of directors has determined that Donald L. Moore is an "audit
committee financial expert" as defined under the applicable SEC rules. Mr. Moore
is an independent director as defined in NASD Marketplace Rule 4200(a)(15).
EXECUTIVE OFFICERS
For information regarding executive officers of the Company, see
"Executive Officers of the Registrant" in Part I of the Company's annual report
on Form 10-K filed with the Commission on March 30, 2004.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Executive officers and directors, as well as certain persons who own
more than 10% of our common stock, are required by Section 16(a) of the
Securities Exchange Act of 1934, as amended, to file reports of their ownership
of our common stock with the SEC and to furnish us with copies of the reports.
Based solely on our review of the reports, we believe that all required
Section 16(a) reports concerning transactions completed by our executive
officers and directors during fiscal 2003 were timely filed, except that Daniel
R. Gaubert, Donald L. Moore, Perry Segura and George C. Yax were late reporting
on Form 4 the grant of exercisable stock options granted to each of them on the
date of our 2002 Annual Meeting of Shareholders, which was held on January 2,
2003. The late reports were due to a miscalculation of the then newly enacted
filing requirements applicable to stock option grants, which were removed from
the annual report on Form 5 to the more current report on Form 4.
CODE OF ETHICS
Our Board of Directors has adopted a Code of Ethics for Principal/Chief
Executive Officer and Senior Financial Executives, which we will provide to you
at no cost by written request to Martin K. Bech, Secretary, 5007 Port Road, New
Iberia, Louisiana 70560. Our code of ethics constitutes a code of ethics as
defined in Section 406(c) of the Sarbanes-Oxley Act of 2002 and applies to the
Principal/Chief Executive Officer, Chief Financial Officer, Controller and other
individuals performing similar accounting or financial reporting functions for
the Company. A copy of our Code of Ethics is attached to this report on Form
10-K/A as Exhibit 14.
Item 11. EXECUTIVE COMPENSATION.
DIRECTOR COMPENSATION
Each director who is not also an employee of the company receives an
annual fee of $12,000 for his services as a director. We reimburse all directors
for reasonable out-of-pocket expenses incurred in attending board and committee
meetings.
In addition, in each year during which our long-term incentive plan is
in effect and a sufficient number of shares are available under the plan, on the
day of each annual meeting of shareholders, each non-employee director will
receive an option to purchase up to 2,500 shares of common stock at an exercise
price equal to the fair market value of our common stock on such date. The
compensation committee determines the exact date of the grant and the number of
shares subject to the option. Each stock option shall be fully exercisable on
the date of its grant and will expire ten years from the date of grant, unless
the non-employee director ceases to be a director. In that case, the exercise
period will be shortened. In accordance with this arrangement, on August 1,
2003, we granted each non-employee director an option to buy 2,500 shares of our
common stock at an exercise price of $0.33, the fair market value of our common
stock on that date.
SUMMARY COMPENSATION TABLE
The following table provides you with information about the
compensation we paid in 2003, 2002 and 2001 to our chief executive officers and
each of our other executive officers whose individual salary and bonus for the
calendar year 2003 exceeded $100,000 in the aggregate (collectively, the "Named
Executive Officers"). The information below does not include the amount of
perquisites provided to the Named Executive Officers because the threshold for
disclosure under the SEC rules was not met.
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
ANNUAL ------------
COMPENSATION RESTRICTED SECURITIES
FISCAL ----------------- STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARD OPTIONS(#) COMPENSATION
--------------------------- ---- ------ ----- ----- ---------- ------------
Allen C. Porter, Jr. 2003 $ 166,153 $ 0 $ 0 0 $ 0
President and Chief Executive Officer (1) 2002 95,139 0 0 25,000 64,800(3)
William A. Downey 2003 203,076 0 0 0 0
Executive Vice President (2) 2002 75,323 0 0 25,000 62,200(3)
Larry J. Verzwyvelt 2003 54,523 0 0 0 0
President(4)
Peter J. Roman 2003 140,229 0 0 0 0
Vice President, Chief Financial Officer 2002 140,000 0 0 0 0
2001 104,770 0 0 0 0
Martin K. Bech 2003 123,008 0 0 0 0
Vice President, Secretary and General
Counsel(5) 2002 118,739 0 0 0 0
2001 77,917 0 0 1,000 0
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(1) Mr. Porter rejoined our company in April 2002 as a consultant and in
August 2002 he was named President and Chief Executive Officer. Mr.
Porter was the founder of Allen Tank, Inc., which was acquired by our
company in June 1998. Mr. Porter was not involved with the company
after the acquisition until his return in April 2002.
(2) Mr. Downey joined our company in April 2002 as a consultant and in
August 2002 he was named Executive Vice President and Chief Operating
Officer.
(3) Represents consulting fees paid to Mr. Porter and Mr. Downey prior to
their appointments as Chief Executive Officer and Chief Operating
Officer, respectively.
(4) Mr. Verzwyvelt joined our Company in September 2003 as the President of
Universal Fabricators, LLC. Our Board of Directors appointed Mr.
Verzwyvelt the President of our Company in March 2004.
(5) Mr. Bech joined our company in April 2001.
STOCK OPTION GRANTS
We did not grant stock options to any of our Named Executive Officers
in 2003.
OUTSTANDING STOCK OPTIONS
The following table provides you with information about all outstanding
stock options held by each of the Named Executive Officers as of December 31,
2003. None of our Named Executive Officers exercised stock options in 2003.
AGGREGATED OPTIONS AS OF DECEMBER 31, 2003
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT 12/31/03 12/31/03(1)
------------------- -----------
EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
------------------------- -------------------------
Allen C. Porter, Jr.................................. 25,000/0 0/0
William A. Downey.................................... 25,000/0 0/0
Peter J. Roman....................................... 5,200/0 0/0
Larry J. Verzwyvelt.................................. 0/0 0/0
Martin K. Bech....................................... 1,000/0 0/0
--------------
(1) On December 31, 2003, the closing sales price of our common stock on
the Nasdaq SmallCap Market was $1.18 per share.
AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
Agreement with Mr. Downey
On August 19, 2002, the Company entered into a four-year agreement with
William A. Downey pursuant to which Mr. Downey will serve as a full-time
consultant to the Company for one year, and will consult with the Company on a
project-by-project basis for the remaining three years. Under the agreement, Mr.
Downey receives a monthly salary of $5,000 and all benefits to which executive
officers of the Company are entitled, and he received immediately exercisable
options to acquire 25,000 shares of common stock of the Company for $3.90 per
share. If Midland Fabricators and Process Systems, L.L.C. and/or William A.
Hines and his family cease to own a controlling interest in the Company, then
Mr. Downey would be relieved of his obligations to perform services for the
Company and would have the option to continue to receive $5,000 per month during
the remaining term of the agreement or to receive all amounts due under the
agreement in one lump sum.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2003, Messrs. Cangelosi, Gaubert, Moore and Yax comprised our
compensation committee. Other than Mr. Cangelosi, none of the members of our
compensation committee have ever served as an officer or employee of our company
or any of our subsidiaries or affiliates. Because Mr. Cangelosi is the Vice
President of Finance of Nassau Holding Corporation, the parent company of
Midland, which is the beneficial owner of approximately 93% of the company's
outstanding common stock (see "Stock Ownership"), he does not meet independence
requirements. Mr. Cangelosi is a certified public accountant with over 17 years
of experience in the oilfield services industry, and the company's board of
directors determined, in accordance with The Nasdaq Stock Market's listing
standards, that his membership on our compensation committee was required by the
best interests of the Company and its shareholders. In 2003, none of our
executive officers served as a director or member of the compensation committee
of any other entity of whom an executive officer served on our board of
directors or on our compensation committee.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Our compensation committee has the authority, among other things, to
review, analyze, and recommend compensation programs to the Company's board of
directors and to administer and grant awards under the Company's employee
benefit plans.
The Company's executive compensation consists primarily of (1)
salaries, (2) annual cash incentive bonuses and (3) long-term incentive
compensation in the form of stock options granted under the company's long-term
incentive plan. In May 2003, our compensation committee approved an extension of
Mr. Downey's active participation as a consultant to the Company through January
2004 and along with the extension, additional salary of approximately $130,000
for the five-month extension. The salaries of the Company's other executive
officers are based on their levels of responsibility and the board of directors
and our committee's subjective assessments of their performance.
The Company has adopted an executive compensation program for its other
executive officers that ties a portion of executive compensation to its
short-term performance. Under this program, executive officers and other key
employees of the Company are entitled to receive, as an annual incentive bonus,
a percentage of their respective annual salary ranging from 22.5% to 70%,
depending on the percentage net income return on the Company's capital. The
Company must achieve a minimum 10% net income return on its capital for any of
these officers and employees to receive a minimum bonus of 22.5% of their
respective annual salary, and each of them may receive the maximum bonus of 70%
of their respective annual salary if the Company achieves a 30% or greater net
income return on its capital. The Company did not achieve a minimum 10% net
income return on its capital in 2003; accordingly, the Company did not pay a
bonus for that period to any of its executive officers or key employees.
The Company also provides long-term incentives to its executive
officers in the form of stock options granted under the Company's long-term
incentive plan. The stock option awards are intended to reinforce the
relationship between compensation and increases in the market price of the
Company's common stock and to align the executive officers' financial interests
with that of the Company's shareholders. Generally, we base the size of these
awards on the position of each participating officer and a subjective assessment
of the officer's individual performance. None of our named executive officers
received a stock option grant in 2003. Included in the "Summary Compensation
Table" in Item 11. of this amendment to annual report on Form 10-K/A entitled
"Executive Compensation" are the number of securities underlying stock options
granted to certain of our executive officers in 2002.
Section 162(m) of the Internal Revenue Code limits the tax deduction to
$1 million for compensation paid to certain highly compensated executive
officers. Qualified performance-based compensation is excluded from this
deduction limitation if certain requirements are met. None of the Company's
executive officers reached the deductibility limitation for 2003. Our
compensation committee anticipates that the remaining components of individual
executive compensation that do not qualify for an
exclusion from Section 162(m) should not exceed $1 million in any year and
therefore will continue to qualify for deductibility.
The Compensation Committee
Frank J. Cangelosi, Jr.
Daniel R. Gaubert
Donald L. Moore
George C. Yax
------------
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on
our common stock from March 31, 1999, through December 31, 2003, with the
cumulative total return of the Standard & Poor's 500 Stock Index and the
Standard & Poor's Oil & Gas Industry Group for the same period. The returns are
based on an assumed investment of $100 March 31, 1999 in our common stock and in
each of the indices, and on the assumption that dividends were reinvested. The
assumed $100.00 investment in our common stock was made at $8.12 per share, the
closing price on March 31, 1999.
COMPARISON OF CUMULATIVE TOTAL RETURN*
UNIFAB INTERNATIONAL, INC., S&P 500 INDEX &
S&P OIL & GAS INDUSTRY GROUP
[LINE GRAPH]
March 31, March 31, December 31, December 31, December 31, December 31,
1999 2000 2000 2001 2002 2003
---- ---- ---- ---- ---- ----
UNIFAB International, Inc. $ 100.00 $ 98.46 $ 116.92 $ 8.00 $ 2.71 $ 1.45
S&P 500 100.00 117.94 104.80 92.35 71.94 92.57
S&P Oil & Gas Industry Group 100.00 130.46 138.26 92.03 81.46 101.61
Assumes $100 invested on March 31, 1999 in UNIFAB International, Inc. common
stock, S&P 500 Index and S&P Oil & Gas Industry Group.
* Cumulative Total Return assumes reinvestment of dividends.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
STOCK OWNERSHIP
The following table sets forth, as of December 31, 2003 and, to the
extent known by our Company, certain information regarding beneficial ownership
of our common stock by (1) each of our directors, (2) each of our Named
Executive Officers for whom compensation information is disclosed in this annual
report, (3) all of our directors and executive officers as a group, and (4)
persons having beneficial ownership of more than 5% of our outstanding common
stock. The information below reflects the one-for-ten reverse stock split
effected on August 4, 2003. Unless otherwise indicated, we believe that the
shareholders listed below have sole investment and voting power with respect to
their shares based on information furnished to us by them. Except as otherwise
noted, the address for the beneficial owners listed below is c/o UNIFAB
International, Inc., 5007 Port Road, New Iberia, Louisiana 70560.
NUMBER OF COMMON PERCENT OF
SHARES OUTSTANDING
BENEFICIALLY COMMON
NAME OF BENEFICIAL OWNER OWNED(1) STOCK(2)
------------------------ -------- --------
Martin K. Bech....................................... 1,140(3) *
Frank J. Cangelosi, Jr............................... 0 -
William A. Downey.................................... 25,000 *
Daniel R. Gaubert.................................... 500 *
William A. Hines (4)................................. 10,424,401 92.7
Donald L. Moore...................................... 500 *
Allen C. Porter, Jr.................................. 25,002 *
Peter J. Roman....................................... 5,805 *
Perry Segura......................................... 46,698(5) *
Larry J. Verzwyvelt.................................. 0 -
George C. Yax........................................ 2,750 *
Midland Fabricators and Process Systems, L.L.C....... 10,423,304(6) 92.7
All directors and executive officers
as a group (11 persons)(7)...................... 10,485,098 93.2
--------------
* Ownership is less than 1%
(1) Includes shares that could be acquired within sixty days after December
31, 2003, upon the exercise of options granted pursuant to our
long-term incentive plan, as follows: Mr. Bech, 1,000 shares; Mr.
Downey, 25,000 shares; Mr. Gaubert, 500 shares; Mr. Moore, 500 shares;
Mr. Porter, 25,000 shares; Mr. Roman, 5,400 shares; Mr. Segura, 1,750
shares; Mr. Yax, 1,750 shares; and all directors and executive officers
as a group, 60,900 shares.
(2) Based on 8,201,913 shares of our common stock outstanding as of April
20, 2004, except that the percentage ownership of William A. Hines and
Midland Fabricators and Process Systems, L.L.C. and the directors and
executive officers as a group has been calculated
assuming the conversion of Midland Fabricators and Process Systems,
L.L.C.'s convertible debenture into 3,043,304 shares of common stock.
(3) Shares shown as beneficially owned by Mr. Bech include 40 shares held
by the custodian of an individual retirement account for the benefit of
Mr. Bech's spouse.
(4) Mr. Hines is a manager and the owner of a 45.5% membership interest in
Midland and, accordingly, is deemed to be a beneficial owner of the
shares of our common stock beneficially owned by Midland. Mr. Hines is
also the direct owner of 1,097 shares of our common stock.
(5) Includes 37,360 shares owned by a company controlled by Mr. Segura.
(6) Represents 7,380,000 shares of our common stock held by Midland, and
3,043,304 shares of our common stock issuable upon conversion of the
convertible debenture issued by our Company in the principal amount of
$10,651,564.
(7) Includes only those persons who were directors and executive officers
of our Company as of December 31, 2003.
Equity Compensation Plan Information
The following table provides information about shares of our common
stock that may be issued upon the exercise of options, warrants and rights under
all of our existing equity compensation plans as of December 31, 2003.
Number of securities
remaining available for future
Number of securities to be Weighted-average exercise issuance under equity
issued upon exercise of price of outstanding compensation plans
outstanding options, options, warrants and (excluding securities reflected
warrants and rights rights in column (a))
Plan Category (a) (b) (c)
------------------------- -------------------------- ------------------------- -------------------------------
Equity compensation plans
approved by
security holders(1)....... 43,233 $34.24 2,456,767(3)
Equity compensation plans
not approved by
security holders(2)...... 6,740 $71.20 558,260(3)
------ ------ ---------
Total.............. 49,973 $34.24 3,015,027
====== ====== =========
-----------------
(1) Reflects options granted under our company's long-term incentive plan.
(2) Reflects options granted under our company's employee long-term
incentive plan.
(2) All of the referenced shares may be issued to participants through
incentive stock options, nonqualified stock options, restricted stock
or "other stock-based awards" (which are based in whole or in part on
the value of our Common Stock).
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In April 2002, we entered into a preferred stock purchase, debt
exchange and modification agreement with Midland (the "Midland agreement").
William A. Hines, who is Chairman of our board of directors, is a manager of,
and the owner of a 45.5% membership interest in, Midland. The remaining
membership interest in Midland is owned by Mr. Hines' former spouse and his
children. The terms of the Midland agreement were determined by arm's length
negotiation between our senior management team and its representatives, and Mr.
Hines and his representatives. Mr. Hines was previously the principal
shareholder of Allen Tank, Inc., which we purchased in 1998. From the time of
that acquisition in 1998 until March 2001, Mr. Hines served as a director of our
Company. At the time of entering into the Midland agreement, Mr. Hines held no
position with our Company and his only relationship with our Company was his
ownership of 1,097 (adjusted to reflect the one-for-ten reverse stock split
effected on August 4, 2003) shares of our common stock, which he continues to
own. Upon consummating the Midland agreement in August 2002, Mr. Hines re-joined
our board of directors and became its chairman.
Pursuant to the Midland agreement and prior to its consummation on
August 13, 2002:
- We consented to Midland's acquisition of the rights of the
lenders under our credit agreement dated November 30, 1999, as
amended, with Bank One, Louisiana, N.A. and three other
commercial banks. On May 1, 2002, Midland acquired the rights
of those lenders under the credit agreement for $13,870,000 in
cash, the source of which was capital contributions from its
members. On that date, the total amount of principal, accrued
interest and penalties owing under the credit agreement was
$21,331,564. Thereafter, and prior to the consummation of the
Midland agreement, Midland advanced to us $2,814,500, which we
used to meet our working capital needs and establish a cash
collateral account with Bank One to secure our obligations
under outstanding letters of credit.
- Midland acquired claims against us in the amount of $5,622,881
held by our unsecured creditors. Midland's acquisition cost
for these claims was an aggregate of $2,851,373, including
payments made to the unsecured creditors, fees paid to a
collection agent and attorneys' fees. Midland's source of
these payments was capital contributions from its members.
- Midland agreed to assist us in obtaining a $7 million line of
credit, and we and Midland subsequently agreed that this line
of credit would be in the amount of $8 million. We
subsequently established the line of credit with the Whitney
National Bank; an affiliate of Midland has guaranteed our
obligations under the line.
- Midland agreed to take all steps necessary to continue the
listing of our common stock on the Nasdaq SmallCap Market for
a period of at least two years following consummation of the
Midland agreement.
Upon consummation of the Midland agreement on August 13, 2002:
- $10,000,000 of the amount we owed Midland under the credit
agreement was cancelled in exchange for 738 shares of our
series A preferred stock, which was converted into 7,380,000
(adjusted to reflect the one-for-ten reverse stock split
effected on August 4, 2003) shares of our common stock upon
authorization at the 2003 Annual Meeting of Shareholders.
- $12,791,024 of the amount we owed Midland under the credit
agreement was converted into the following, which continue to
constitute secured indebtedness under the credit agreement:
(i) a convertible debenture in the principal amount of
$10,651,564 payable in five equal annual installments, bearing
interest at Wall Street Journal Prime (that is, the prime rate
of interest reported in the Wall Street Journal in its daily
table of "Money Rates") plus 2.5 percentage points and
convertible into shares of our common stock at $0.35 per share
(the closing price of our common stock on the Nasdaq National
Market on March 6, 2002, the date we concluded negotiations on
the terms of the convertible debenture); and (ii) a promissory
note in the principal amount of $2,139,500 (the amount of the
advances made to us by Midland after we entered into the
Midland agreement), which is payable August 13, 2005 and bears
interest at the rate of Wall Street Journal Prime plus 3.0
percentage points.
- Midland transferred to us the claims it had acquired from our
unsecured creditors in the amount of $5,622,881. In exchange
for these claims, we delivered to Midland a promissory note in
the principal amount of $4,708,936, payable August 13, 2006,
and bearing interest at the rate of Wall Street Journal Prime
plus 3.0 percentage points. This promissory note also
constitutes secured indebtedness under our credit agreement
with Midland.
- $675,000 of the amount we owed Midland under the credit
agreement was cancelled in exchange for the assignment to
Midland of accounts receivable of our subsidiary, Superior
Derrick Services of Texas, L.L.C., in the amount of
$1,191,405, against which we had established reserves of
$516,405.
- $680,000 of the amount we owed Midland under the credit
agreement (substantially all of which consisted of penalties)
was forgiven by Midland, and Midland waived all of our
defaults under the credit agreement.
Under an informal arrangement with the Company, Midland has agreed to
provide financial support and funding for working capital or other needs at
Midland's discretion, from time to time. At December 31, 2003, Midland had
provided a standby letter of credit to a customer of the Company in support of a
contract included in the Company's backlog at December 31, 2003. The letter of
credit was in the amount of $3.1 million and expired on March 31, 2004. The
Company reimbursed Midland $12,600 for the cost of the letter of credit. During
the year ended December 31, 2003, Midland advanced amounts to the Company for
working capital, which were repaid and readvanced from time to time as needed.
At December 31, 2003, $5,900,000 was outstanding and owed to Midland for such
advances. The liquidity afforded by these advances from Midland was
necessary for the Company to meet its obligations and fund operations. However,
the Company has no control over whether Midland will provide additional funding
in the future and does not know whether such additional funding will be
available from Midland as the Company requires it. If Midland does not make
available such additional funding to the Company when needed in the future, the
Company could be unable to meet its obligations, including obligations under the
credit agreement with Whitney, in the ordinary course of business. The Company
requires the continued support from Midland until such time as it has sustained
profitable operations and its financial condition is stable and no longer
requires this support.
The Company provides health care benefits to its employees under a plan
that covers the employees of companies owned by Nassau, including the employees
of Nassau. This insurance coverage began on November 1, 2002. In the year ended
December 31, 2003, the Company incurred costs of approximately $1,979,000 for
coverage under this plan.
Further, Midland provides accounting information system and reporting
services to the Company, including maintaining computer hardware and software to
process financial information and produce management reports, processing data
associated with those reports, assisting in report design and preparation,
processing operating and payroll checks, consulting assistance with the design
and implementation of financial reporting systems, and other related services.
Included in general and administrative expenses for the year ended December 31,
2003 is $180,000 related to these services, which had been paid in full at
December 31, 2003.
At December 31, 2003, accrued and unpaid interest owed to Midland
related to the secured, subordinated notes payable, the convertible debenture
and working capital advances was $310,000.
In the year ended December 31, 2003, the Company executed several
contracts with Ridgelake Energy, Inc. to fabricate a platform and design and
manufacture process equipment. Ridgelake is owned and controlled by Mr. William
A. Hines, Chairman of our Board of Directors, and his family. The total value of
these contracts was $6.9 million; these contracts were completed at December 31,
2003. Included in revenue and gross profit for the year ended December 31, 2003
are $6,872,000 and $922,000, respectively, related to these contracts. At
December 31, 2003, the Company had $41,000 receivable from Ridgelake related to
these contracts.
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees. Deloitte & Touche LLP billed our Company approximately
$156,100 for the audit of our financial statements for 2003 and for reviews of
the unaudited interim financial statements included in our Forms 10-Q for the
quarters ended March 31, June 30 and September 30, 2003. Deloitte & Touche
billed our Company approximately $113,200 for the audit of our financial
statements for 2002 and for a review of the
unaudited interim financial statements included in our Form 10-Q for the quarter
ended September 30, 2002. Our prior independent auditors, Ernst & Young LLP,
billed our company approximately $22,405 for reviews of the unaudited interim
financial statements included in our Forms 10-Q for the quarters ended March 31
and June 30, 2002.
Audit Related Fees. The Company did not incur any fees for audit
related services in 2003. In 2002, Deloitte & Touche billed our Company
approximately $32,000 for audit related services. These services included
assistance in responding to comments received from the staff of the Securities
and Exchange Commission related to previous filings under the Securities
Exchange Act of 1934 (the "Exchange Act") and accounting complexities associated
with the Midland transaction.
Tax Fees. Deloitte & Touche did not perform any tax related services
for our Company in 2003 or 2002.
All Other Fees. We did not incur any other fees for 2003 or 2002.
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 3. Exhibits. See Exhibit Index below.
INDEX TO EXHIBITS
Exhibit
Number Description
------ -----------
14 Code of Ethics for Principal/Chief Executive Officer and Senior
Financial Executives dated April 9, 2004.
31.1 Certification of Principal Executive Officer pursuant to Exchange
Act 13a-15 and 15d-15(e) accompanying and furnished with this
Amendment No. 1 to the Annual Report on Form 10-K/A for the fiscal
year ended December 31, 2003.
31.2 Certification of Chief Financial Officer pursuant to Exchange Act
13a-15 and 15d-15(e) accompanying and furnished with this Amendment
No. 1 to the Annual Report on Form 10-K/A for the fiscal year ended
December 31, 2003.
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.
UNIFAB INTERNATIONAL, INC.
By: /s/William A. Hines,
Principal Executive Officer
Date: April 29, 2004
INDEX TO EXHIBITS
Exhibit
Number Description
------ -----------
14 Code of Ethics for Principal/Chief Executive Officer and Senior
Financial Executives dated April 9, 2004.
31.1 Certification of Principal Executive Officer pursuant to Exchange
Act 13a-15 and 15d-15(e) accompanying and furnished with this
Amendment No. 1 to the Annual Report on Form 10-K/A for the fiscal
year ended December 31, 2003.
31.2 Certification of Chief Financial Officer pursuant to Exchange Act
13a-15 and 15d-15(e) accompanying and furnished with this Amendment
No. 1 to the Annual Report on Form 10-K/A for the fiscal year ended
December 31, 2003.