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

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

For the quarterly period ended September 30, 2017

OR 

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

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

Delaware
 
30-0513080
(Jurisdiction
of incorporation)
 
(I.R.S. Employer
Identification Number)
4400 Post Oak Parkway
Suite 1000
Houston, TX 77027
Telephone No.: 713-403-8000
(Address, including zip code, and telephone number, including area code, of principal executive offices of registrant)
 
NOT APPLICABLE
 
 
(Former name, former address and former fiscal year, if changed since last report)
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.  
Large accelerated filer
¨
Accelerated filer
ý
Non-accelerated filer
¨ (Do not check if a smaller reporting company)
Smaller reporting company
¨
Emerging growth company
¨
 
 



Table of Contents

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý
The number of shares of the registrant’s Common Stock, $.05 par value, outstanding as of November 6, 2017 was 63,229,036.


Table of Contents

WILLBROS GROUP, INC.
FORM 10-Q
FOR QUARTER ENDED SEPTEMBER 30, 2017
 
 
Page
 
 
 



Table of Contents

PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WILLBROS GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
 
 
September 30,
2017
 
December 31,
2016
ASSETS
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
31,294

 
$
41,420

Accounts receivable, net
 
156,589

 
112,037

Contract cost and recognized income not yet billed
 
26,466

 
11,938

Prepaid expenses and other current assets
 
19,031

 
18,416

Parts and supplies inventories
 
908

 
800

Assets held for sale
 
12,235

 
9,050

Current assets associated with discontinued operations
 
69

 
505

Total current assets
 
246,592

 
194,166

Property, plant and equipment, net
 
31,915

 
38,123

Intangible assets, net
 
69,598

 
76,848

Restricted cash
 
40,333

 
40,206

Deferred income taxes
 
409

 
315

Other long-term assets
 
11,706

 
13,378

Total assets
 
$
400,553

 
$
363,036

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
 
 
 
 
Accounts payable and accrued liabilities
 
$
147,327

 
$
83,488

Contract billings in excess of cost and recognized income
 
13,067

 
4,938

Short-term borrowings under revolving credit facility
 
12,000

 

Accrued income taxes
 
310

 
311

Other current liabilities
 
6,002

 
6,253

Liabilities held for sale
 
9,712

 
8,275

Current liabilities associated with discontinued operations
 
1,554

 
1,578

Total current liabilities
 
189,972

 
104,843

Long-term debt obligations
 
88,927

 
89,189

Other long-term liabilities
 
34,324

 
32,872

Long-term liabilities associated with discontinued operations
 
1,035

 
995

Total liabilities
 
314,258

 
227,899

Contingencies and commitments (Note 13)
 

 

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

 

Common stock, par value $.05 per share, 105,000,000 shares authorized and 65,531,300 shares issued at September 30, 2017 (64,679,896 at December 31, 2016)
 
3,268

 
3,226

Additional paid-in capital
 
751,382

 
749,303

Accumulated deficit
 
(651,095
)
 
(598,021
)
Treasury stock at cost, 2,304,670 shares at September 30, 2017 (2,025,208 at December 31, 2016)
 
(15,679
)
 
(15,137
)
Accumulated other comprehensive loss
 
(1,581
)
 
(4,234
)
Total stockholders’ equity
 
86,295

 
135,137

Total liabilities and stockholders’ equity
 
$
400,553

 
$
363,036

See accompanying notes to condensed consolidated financial statements.

4

Table of Contents

WILLBROS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
 
2017
 
2016
 
2017
 
2016
Contract revenue
 
$
240,773

 
$
174,821

 
$
632,120

 
$
567,293

Contract costs
 
252,961

 
162,806

 
625,548


526,322

Contract income (loss)
 
(12,188
)
 
12,015

 
6,572

 
40,971

Amortization of intangibles
 
2,416

 
2,438

 
7,250


7,315

General and administrative
 
13,036

 
15,377

 
40,260


47,031

Other charges
 
149

 
519

 
1,346


5,146

Operating loss
 
(27,789
)
 
(6,319
)
 
(42,284
)
 
(18,521
)
Interest expense
 
(3,817
)
 
(3,564
)
 
(10,972
)
 
(10,433
)
Interest income
 
8

 
12

 
23


443

Debt covenant suspension and extinguishment charges
 

 

 

 
(63
)
Other, net
 
21

 
2

 
2

 

Loss from continuing operations before income taxes
 
(31,577
)
 
(9,869
)
 
(53,231
)
 
(28,574
)
Provision (benefit) for income taxes
 
1,132

 
792

 
(1,665
)
 
1,146

Loss from continuing operations
 
(32,709
)
 
(10,661
)
 
(51,566
)
 
(29,720
)
Loss from discontinued operations net of provision for income taxes
 
(1,496
)
 
(1,325
)
 
(1,508
)
 
(3,836
)
Net loss
 
$
(34,205
)
 
$
(11,986
)
 
$
(53,074
)
 
$
(33,556
)
Basic loss per share attributable to Company shareholders:
 
 
 
 
 
 
 
 
Loss from continuing operations
 
$
(0.52
)
 
$
(0.17
)
 
$
(0.83
)
 
$
(0.49
)
Loss from discontinued operations
 
(0.02
)
 
(0.02
)
 
(0.02
)
 
(0.06
)
Net loss
 
$
(0.54
)
 
$
(0.19
)
 
$
(0.85
)
 
$
(0.55
)
Diluted loss per share attributable to Company shareholders:
 
 
 
 
 
 
 
 
Loss from continuing operations
 
$
(0.52
)
 
$
(0.17
)
 
$
(0.83
)
 
$
(0.49
)
Loss from discontinued operations
 
(0.02
)
 
(0.02
)
 
(0.02
)
 
(0.06
)
Net loss
 
$
(0.54
)
 
$
(0.19
)
 
$
(0.85
)
 
$
(0.55
)
Weighted average number of common shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
62,310,191

 
61,639,590

 
62,105,282

 
61,257,851

Diluted
 
62,310,191

 
61,639,590

 
62,105,282

 
61,257,851

See accompanying notes to condensed consolidated financial statements.

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Table of Contents

WILLBROS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
 
2017
 
2016
 
2017
 
2016
Net loss
 
$
(34,205
)
 
$
(11,986
)
 
$
(53,074
)
 
$
(33,556
)
Other comprehensive income (loss), net of tax
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
 
1,054

 
(495
)
 
1,842

 
1,273

Changes in derivative financial instruments
 
273

 
273

 
811

 
949

Total other comprehensive income (loss) net of tax
 
1,327

 
(222
)
 
2,653

 
2,222

Total comprehensive loss
 
$
(32,878
)
 
$
(12,208
)
 
$
(50,421
)
 
$
(31,334
)
See accompanying notes to condensed consolidated financial statements.

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WILLBROS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
 
Nine Months Ended 
 September 30,
 
 
2017
 
2016
Cash flows from operating activities:
 
 
 
 
Net loss
 
$
(53,074
)
 
$
(33,556
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
 
Loss from discontinued operations
 
1,508

 
3,836

Depreciation and amortization
 
14,600

 
16,694

Debt covenant suspension and extinguishment charges
 

 
63

Stock-based compensation
 
2,121

 
3,269

Amortization of debt issuance costs
 
1,503

 
704

Non-cash interest expense
 
1,582

 
1,665

Provision (benefit) for deferred income taxes
 
(67
)
 
487

Gain on disposal of property and equipment
 
(2,545
)
 
(2,851
)
Provision for bad debt
 
178

 
106

Changes in operating assets and liabilities:
 
 
 
 
Accounts receivable, net
 
(43,969
)
 
16,466

Contract cost and recognized income not yet billed
 
(14,416
)
 
3,648

Prepaid expenses and other current assets
 
(492
)
 
177

Accounts payable and accrued liabilities
 
62,502

 
(14,105
)
Accrued income taxes
 
(1
)
 
(665
)
Contract billings in excess of cost and recognized income
 
8,108

 
(3,438
)
Assets held for sale
 
(3,185
)
 

Liabilities held for sale
 
1,437

 

Other assets and liabilities, net
 
2,653

 
(732
)
Cash used in operating activities from continuing operations
 
(21,557
)
 
(8,232
)
Cash used in operating activities from discontinued operations
 
(1,056
)
 
(7,030
)
Cash used in operating activities
 
(22,613
)
 
(15,262
)
Cash flows from investing activities:
 
 
 
 
Proceeds from sales of property, plant and equipment
 
3,589

 
5,311

Proceeds from sale of subsidiaries
 
950

 
9,963

Purchases of property, plant and equipment
 
(2,132
)
 
(2,528
)
Changes in restricted cash
 
(127
)
 
(6,107
)
Cash provided by investing activities from continuing operations
 
2,280

 
6,639

Cash provided by (used in) investing activities from discontinued operations
 

 

Cash provided by investing activities
 
2,280

 
6,639

Cash flows from financing activities:
 
 
 
 
Proceeds from revolving credit facility
 
12,000

 

Payments on capital leases
 

 
(469
)
Payments on term loan facility
 

 
(3,128
)
Cost of debt issuance
 
(2,306
)
 
(4,612
)
Payments to reacquire common stock
 
(542
)
 
(361
)
Cash provided by (used in) financing activities from continuing operations
 
9,152

 
(8,570
)
Cash provided by (used in) financing activities from discontinued operations
 

 

Cash provided by (used in) financing activities
 
9,152

 
(8,570
)
Effect of exchange rate changes on cash and cash equivalents
 
1,055

 
620

Net decrease in cash and cash equivalents
 
(10,126
)
 
(16,573
)
Cash and cash equivalents at beginning of period
 
41,420

 
58,832

Cash and cash equivalents at end of period
 
$
31,294

 
$
42,259

Supplemental disclosures of cash flow information:
 
 
 
 
Cash paid for interest (including discontinued operations)
 
$
7,780

 
$
6,320

Cash paid for income taxes (including discontinued operations)
 
$
446

 
$
1,501

See accompanying notes to condensed consolidated financial statements.

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

 
1. Company and Organization
Company Information
Willbros Group, Inc., a Delaware corporation, and its subsidiaries (the “Company,” “Willbros” or “WGI”), is a specialty energy infrastructure contractor serving the oil and gas and power industries with offerings that primarily include construction, maintenance and facilities development services. The Company’s principal markets for continuing operations are the United States and Canada. The Company obtains its work through competitive bidding and negotiations with prospective clients. Contract values range from several thousand dollars to several hundred million dollars, and contract durations range from a few weeks to more than two years. The Company has three reportable segments: Oil & Gas, Utility T&D and Canada.
The Company's Oil & Gas segment provides construction, maintenance and lifecycle extension services to the midstream markets. These services include pipeline construction to support the transportation and storage of hydrocarbons, including gathering, lateral and main-line pipeline systems, as well as, facilities construction such as pump stations, flow stations, gas compressor stations and metering stations. In addition, the Oil & Gas segment provides integrity construction and pipeline systems maintenance to a number of different customers. See Additional Sources and Uses of Capital below for more information related to the Company's future plans regarding the Oil & Gas segment.
The Oil & Gas segment's tank services business is classified as held for sale at September 30, 2017. See Note 5 - Assets Held for Sale for more information.
The Company's Utility T&D segment provides a wide range of services in electric and natural gas transmission and distribution, including comprehensive engineering, procurement, maintenance and construction, repair and restoration of utility infrastructure. These services include engineering, design, installation, maintenance, procurement and repair of electrical transmission, distribution, substation, wireless and gas distribution systems. The Company's Utility T&D segment conducts projects ranging from small engineering and consulting projects to multi-million dollar turnkey distribution, substation and transmission line projects, including those required for renewable energy facilities.
The Company's Canada segment provides construction, maintenance and fabrication services, including integrity and supporting civil work, pipeline construction, general mechanical and facility construction, API storage tanks, general and modular fabrication, along with electrical and instrumentation projects serving the Canadian energy and water industries.
Additional Sources and Uses of Capital
Due to significant operating losses during the third quarter of 2017 primarily driven by losses on two mainline pipeline construction projects and a small-diameter pipeline construction project in its Oil & Gas segment, an increased volume discount associated with its alliance agreement with a major customer and losses on two discrete projects in its Utility T&D segment, the Company was not in compliance with the Maximum Total Leverage Ratio and Minimum Interest Coverage Ratio for the quarterly period ended September 30, 2017. In addition, in combination with its current forecast, the Company did not expect to be in compliance with the Maximum Total Leverage Ratio and Minimum Interest Coverage Ratio for the period from December 31, 2017 through December 31, 2018. The Company also generated negative operating cash flow of approximately $22.6 million in the third quarter of 2017.
In response to the above, the Company performed the following mitigating actions to ensure it has sufficient liquidity and capital resources to meet its obligations for the next twelve months:
Announced plans to de-risk the Company by exiting the U.S. mainline pipeline construction business in the Oil & Gas segment. The Company plans to continue to perform facilities and integrity construction services as well as small-diameter pipeline construction services in the Northeast;
Obtained additional liquidity of $15.0 million in the form of a commitment for an additional term loan pursuant to a Sixth Amendment to the Company's 2014 Term Loan Facility (the “Sixth Amendment”);
Borrowed an additional $17.0 million under the 2013 ABL Credit Facility; and
Obtained covenant relief pursuant to the Sixth Amendment as follows.
The Sixth Amendment suspends compliance with the Maximum Total Leverage Ratio and the Minimum Interest Coverage Ratio covenants through December 31, 2017. In addition, under the Sixth Amendment, the Maximum Total Leverage Ratio will be 5.50 to 1.00 as of March 31, 2018 and will decrease to 4.50 to 1.00 as of June 30, 2018, 4.25 to 1.00 as of September 30, 2018 and 3.00 to 1.00 as of March 31, 2019, and thereafter. The Minimum Interest Coverage Ratio will be 1.75 to 1.00 as of March 31, 2018, will increase to 2.00 to 1.00 as of June 30, 2018, decrease to 1.50 to 1.00 as of December 31,

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

1. Company and Organization (continued)

2018 and increase to 2.75 to 1.00 as of March 31, 2019, and thereafter. The Sixth Amendment also provides that, for the four-quarter period ending March 31, 2018, Consolidated EBITDA shall be equal to the sum of Consolidated EBITDA for the quarterly periods ending December 31, 2017 and March 31, 2018 multiplied by two, and, for the four-quarter period ending June 30, 2018, Consolidated EBITDA shall be equal to the annualized sum of Consolidated EBITDA for the quarterly periods ending December 31, 2017, March 31, 2018 and June 30, 2018.
In addition to the decision to exit the U.S. mainline pipeline construction business in the Oil & Gas segment, obtain additional liquidity pursuant to the Sixth Amendment and increase its revolver borrowings, the Company is evaluating options to extend, modify or refinance the 2013 ABL Credit Facility.
Concurrent with the effectiveness of the Sixth Amendment, the decision to exit the U.S. mainline pipeline construction business in the Oil & Gas segment and the expected ability to extend, modify or refinance the 2013 ABL Credit Facility, coupled with its cash on hand, including recent and additional anticipated borrowings under the 2013 ABL Credit Facility and the 2014 Term Loan Facility, its current forecasts and its projected cash flow from operations, the Company expects to meet its required financial covenants and have sufficient liquidity and capital resources to meet its obligations for at least the next twelve months. However, the Company's results of operations must improve in the fourth quarter of 2017 and into 2018 in order to meet its forecasts and required financial covenants. In addition, while the Company expects to extend, modify or refinance the 2013 ABL Credit Facility, there can be no assurance that the Company will be able to extend, modify or negotiate agreeable refinancing terms prior to the expiration of the 2013 ABL Credit Facility.
See Note 8 - Debt Obligations for more information on the Sixth Amendment.
2. Basis of Presentation
Condensed Consolidated Financial Information
The accompanying Condensed Consolidated Balance Sheet as of December 31, 2016, which has been derived from audited Consolidated Financial Statements, and the unaudited Condensed Consolidated Financial Statements as of September 30, 2017 and 2016, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to those rules and regulations. However, the Company believes the presentations and disclosures herein are adequate to make the information not misleading. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Company’s December 31, 2016 audited Consolidated Financial Statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.
In the opinion of management, the unaudited Condensed Consolidated Financial Statements reflect all recurring adjustments necessary to fairly state the financial position as of September 30, 2017, and the results of operations and cash flows of the Company for all interim periods presented. The results of operations and cash flows for the nine months ended September 30, 2017 are not necessarily indicative of the operating results and cash flows to be achieved for the full year.
Use of Estimates and Assumptions
The Condensed Consolidated Financial Statements include certain estimates and assumptions made by management. These estimates and assumptions relate to the reported amounts of assets and liabilities at the dates of the Condensed Consolidated Financial Statements and the reported amounts of revenue and expense during those periods. Significant items subject to such estimates and assumptions include revenue recognition under the percentage-of-completion method of accounting, including estimates of progress towards completion and estimates of gross profit or loss accrual on contracts in progress; tax accruals and certain other accrued liabilities; quantification of amounts recorded for contingencies; valuation allowances for accounts receivable and deferred income tax assets; and the carrying amount of property, plant and equipment, goodwill and intangible assets. The Company bases its estimates on historical experience and other assumptions it believes to be relevant under the circumstances. Actual results could differ from those estimates.
The Company's contract income (loss) was negatively impacted by $0.1 million for the three months ended September 30, 2017, and positively impacted by $1.6 million for the nine months ended September 30, 2017, as a result of changes in contract estimates related to projects that were in progress at December 31, 2016. Included in these changes in contract estimates for the nine months ended September 30, 2017 is a $2.0 million income recovery associated with a claim on a cross-country pipeline project in the Canada segment. The remainder of these changes in contract estimates are primarily attributed to, among other things, changes in estimated costs for certain individually immaterial projects as they progress to completion;

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

2. Basis of Presentation (continued)

the realization of change orders related to work previously performed; and other changes in events, facts and circumstances during the period in which the estimate was revised.
The Company's contract income was positively impacted by $3.3 million and $7.1 million for the three and nine months ended September 30, 2016, respectively, as a result of changes in contract estimates related to projects that were in progress at December 31, 2015. These changes in contract estimates are primarily attributed to, among other things, changes in estimated costs for certain individually immaterial projects as they progress to completion; the realization of change orders related to work previously performed; and other changes in events, facts and circumstances during the period in which the estimate was revised.
Change in Presentation
In the second quarter of 2017, the Company adopted a change in presentation on its Condensed Consolidated Statements of Operations in order to present a “Contract income (loss)” line item that is consistent with its peers. “Contract income (loss)” is defined as contract revenue less contract costs (which is inclusive of both direct and indirect costs). Previously reported information has been modified to conform to this new presentation.
3. New Accounting Standards
Recently Adopted Accounting Standards
In March 2016, the FASB issued ASU 2016-09, which changes how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The standard is effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods with early adoption permitted. The Company adopted ASU 2016-09 in the first quarter with an effective date of January 1, 2017. The recognition of previously unrecognized windfall tax benefits increased the Company's deferred tax assets by $1.8 million offset by a related valuation allowance which resulted in a $0 cumulative-effect adjustment, net of tax, on the Company's Condensed Consolidated Balance Sheet as of the beginning of 2017. The amendments within ASU 2016-09 related to the recognition of excess tax benefits and tax shortfalls in the Condensed Consolidated Statement of Operations and presentation within the operating section of the Condensed Consolidated Statement of Cash Flows were adopted prospectively with no adjustments to prior periods. The Company has elected to account for forfeitures as they occur. The remaining provisions of ASU 2016-09 did not have a material effect on the Company's Condensed Consolidated Financial Statements.
Accounting Standards Not Yet Adopted
In May 2017, the FASB issued ASU 2017-09, which clarifies when a change to the terms or conditions of a share-based payment award should be accounted for as a modification. An entity should account for the effects of a modification unless the fair value, vesting conditions and classification, as an equity instrument or a liability instrument, of the modified award are the same before and after a change to the terms or conditions of the share-based payment award. The standard is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual reporting periods. The Company does not expect the new standard to have a material impact on its Condensed Consolidated Financial Statements.
In November 2016, the FASB issued ASU 2016-18, which requires a reporting entity to include restricted cash and restricted cash equivalents in its cash and cash-equivalent balances presented in the entity's statement of cash flows. A reconciliation between the statement of financial position and the statement of cash flows must be disclosed when the balance sheet includes more than one line item for cash, cash equivalents, restricted cash and restricted cash equivalents. Transfers between non-restricted and restricted cash should not be presented as cash flow activities in the statement of cash flows. Furthermore, an entity with a material restricted cash balance must disclose information regarding the nature of the restrictions. The standard is effective for annual periods beginning after December 15, 2017, including interim periods within those annual reporting periods. At September 30, 2017 and December 31, 2016, approximately $40.3 million and $40.2 million, respectively, is recorded as “Restricted cash” on the Company's Condensed Consolidated Balance Sheets. These amounts are primarily composed of eligible pledged cash in the Company's September 30, 2017 and December 31, 2016 borrowing base calculation. The Company will adopt this standard in the first quarter of 2018.
In October 2016, the FASB issued ASU 2016-16, which requires a reporting entity to recognize the tax expense from the sale of an asset in the seller's tax jurisdiction when the transfer occurs, even though the pre-tax effects of that transaction are eliminated in consolidation. The new guidance does not apply to intra-entity transfers of inventory, and the income tax

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

3. New Accounting Standards (continued)

consequences from the sale of inventory from one member of a consolidated entity to another will continue to be deferred until the inventory is sold to a third party. The standard is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual reporting periods. The Company is currently evaluating the impact of the standard on its Condensed Consolidated Financial Statements.
In August 2016, the FASB issued ASU 2016-15, which provides specific guidance for cash flow classifications of cash payments and receipts to reduce the diversity of treatment of such items. The standard is effective for annual periods beginning after December 15, 2017 and interim periods within those annual periods with early adoption permitted. The Company does not expect the new standard to have a material impact on its Condensed Consolidated Financial Statements.
In February 2016, the FASB issued ASU 2016-02, which requires companies that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those assets. The standard is effective for interim and annual periods beginning after December 15, 2018. Early adoption is permitted for financial statements of fiscal years or interim periods that have not been previously issued. The Company is currently evaluating the impact of the standard on its Condensed Consolidated Financial Statements. Based on initial evaluation, the Company expects to include operating leases with durations greater than twelve months on its Condensed Consolidated Balance Sheets. The Company will provide additional information about the expected financial impact as it progresses through the evaluation and implementation of the standard.
In May 2014, the FASB issued ASU 2014-09 governing the recognition of revenue from contracts with customers. Under the new standard, a company will recognize revenue when it satisfies a performance obligation by transferring a promised good or service to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods and services. The standard also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB deferred the effective date of the standard to December 15, 2017 with early adoption permitted. The standard can be applied on a full retrospective or modified retrospective basis whereby the entity records a cumulative effect of initially applying this update at the date of initial application. Furthermore, in March, April, and May of 2016, the FASB issued ASUs 2016-08, 2016-10, and 2016-12, respectively, which provide practical expedients and clarification in regards to ASU 2014-09. ASU 2016-08 amends and clarifies the principal versus agent considerations under the new revenue recognition standard, which requires determination of whether the nature of a promise is to provide the specified good or service to the customer (that is, the entity is a principal) or to arrange for the good or service to be provided to the customer by another party (that is, the entity is an agent); this determination affects the timing and amount of revenue recognition. ASU 2016-10 clarifies issues related to identifying performance obligations. ASU 2016-12 provides practical expedients and clarification pertaining to the exclusion of sales tax from the measurement of a transaction price, the measurement of non-cash consideration, allocation of a transaction price on the basis of all satisfied and unsatisfied performance obligations in a modified contract at transition, and the definition of a completed contract. The effective date of ASUs 2016-08, 2016-10, and 2016-12 is December 15, 2017 with early adoption permitted. The Company will adopt the standards using a modified retrospective approach with the cumulative effect recognized in retained earnings at the date of initial application. As part of its ongoing evaluation of the impact of the standards, the Company is holding regular meetings with key stakeholders from across the organization to discuss the impact of the standards on its existing contracts. The Company is analyzing the impact of the standards on its portfolio of contracts by reviewing its current accounting policies and practices to identify potential differences that would result from applying the requirements of the new standards to its existing revenue contracts. In addition, the Company is currently evaluating the related quantitative and qualitative disclosures arising from the standards. The Company will adopt the standards effective January 1, 2018.

11

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

4. Contracts in Progress
Contract cost and recognized income not yet billed on uncompleted contracts arise when recorded revenues for a contract exceed the amounts billed under the terms of the contracts. Contract billings in excess of cost and recognized income arise when billed amounts exceed revenues recorded. Amounts are billable to customers upon various measures of performance, including achievement of certain milestones, completion of specified units or completion of the contract.
Contract cost and recognized income not yet billed and related amounts billed as of September 30, 2017 and December 31, 2016 was as follows (in thousands):
 
 
September 30,
2017
 
December 31,
2016
Cost incurred on contracts in progress
 
$
309,315

 
$
234,544

Recognized income
 
20,052

 
28,702

 
 
329,367

 
263,246

Progress billings and advance payments
 
(315,968
)
 
(256,246
)
 
 
$
13,399

 
$
7,000

Contract cost and recognized income not yet billed
 
$
26,466

 
$
11,938

Contract billings in excess of cost and recognized income
 
(13,067
)
 
(4,938
)
 
 
$
13,399

 
$
7,000

Contract cost and recognized income not yet billed includes $0.9 million and $0.5 million at September 30, 2017 and December 31, 2016, respectively, on completed contracts.
The balances billed but not paid by customers pursuant to retainage provisions in certain contracts are generally due upon completion of the contracts and acceptance by the customer. Based on the Company’s contract terms in recent years, the majority of the retainage balances at each balance sheet date are expected to be collected within the next 12 months. Current retainage balances at September 30, 2017 and December 31, 2016, were approximately $18.9 million and $12.2 million, respectively, and are included in “Accounts receivable, net” in the Condensed Consolidated Balance Sheets. There were no retainage balances with settlement dates beyond the next 12 months at September 30, 2017 and December 31, 2016.
5. Assets Held for Sale
Components of assets held for sale as of September 30, 2017 and December 31, 2016 were as follows (in thousands):
 
 
September 30,
2017
 
December 31,
2016
Accounts receivable, net
 
$
10,534

 
$
7,806

Contract cost and recognized income not yet billed
 
575

 
136

Prepaid expenses and other assets
 
36

 
61

Parts and supplies inventories
 
455

 
468

Property, plant and equipment, net
 
375

 
318

Intangible assets, net
 
260

 
260

Other long-term assets
 

 
1

Total assets held for sale
 
$
12,235

 
$
9,050

 
 
 
 
 
Accounts payable and accrued liabilities
 
$
5,794

 
$
3,789

Contract billings in excess of cost and recognized income
 
3,918

 
4,480

Other current liabilities
 

 
3

Other long-term liabilities
 

 
3

Total liabilities held for sale
 
$
9,712

 
$
8,275

The above balances are comprised of the Company's tank services business, which is included in the Company's Oil & Gas segment. The tank services business is currently being actively marketed to outside parties, is expected to sell within the

12

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

5. Assets Held for Sale (continued)

year and is measured at the lower of its carrying value or fair value less costs to sell. Depreciation and amortization related to property, plant and equipment and intangible assets ceased upon held for sale classification.
6. Intangible Assets
The Company's intangible assets with finite lives include customer relationships and trade names and are predominantly within the Utility T&D segment. The changes in the carrying amounts of intangible assets for the nine months ended September 30, 2017 are detailed below (in thousands):
 
 
Customer
Relationships
 
Trademark /
Tradename
 
Total
Balance as of December 31, 2016
 
$
73,100

 
$
3,748

 
$
76,848

Amortization
 
(6,447
)
 
(803
)
 
(7,250
)
Balance as of September 30, 2017
 
$
66,653

 
$
2,945

 
$
69,598

Weighted average remaining amortization period
 
7.8 years

 
2.8 years

 
 
Intangible assets are amortized on a straight-line basis over their estimated useful lives, which range from 5 to 15 years.
Estimated amortization expense for the remainder of 2017 and each of the subsequent five years and thereafter is as follows (in thousands):
Fiscal year:
 
 
Remainder of 2017
 
$
2,418

2018
 
9,667

2019
 
9,667

2020
 
9,135

2021
 
8,597

2022
 
8,597

Thereafter
 
21,517

Total amortization
 
$
69,598

7. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities as of September 30, 2017 and December 31, 2016 were as follows (in thousands):
 
 
September 30,
2017
 
December 31,
2016
Trade accounts payable
 
$
64,243

 
$
34,770

Payroll and payroll liabilities
 
17,424

 
10,377

Accrued contract costs
 
42,656

 
15,840

Self-insurance accrual
 
6,903

 
11,210

Other accrued liabilities
 
16,101

 
11,291

Total accounts payable and accrued liabilities
 
$
147,327

 
$
83,488


Accrued contract costs includes $4.2 million and $3.7 million at September 30, 2017 and December 31, 2016, respectively, related to provisions on loss projects.

13

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

8. Debt Obligations
The Company's debt obligations as of September 30, 2017 and December 31, 2016 were as follows (in thousands):
 
 
September 30,
2017
 
December 31,
2016
Aggregate outstanding principal balance, 2014 Term Loan Facility
 
$
92,224

 
$
92,224

Repayment fee, 2014 Term Loan Facility
 
4,611

 
4,611

Unamortized discount - repayment fee, 2014 Term Loan Facility
 
(2,821
)
 
(3,592
)
Unamortized debt issuance costs, 2014 Term Loan Facility
 
(5,087
)
 
(4,054
)
Revolver borrowings, 2013 ABL Credit Facility
 
12,000

 

Total debt obligations, net of unamortized discount and debt issuance costs
 
100,927

 
89,189

Less: short-term borrowings
 
(12,000
)
 

Long-term debt obligations, net
 
$
88,927

 
$
89,189

2014 Term Loan Facility
On December 15, 2014, the Company entered into a credit agreement (the “2014 Term Credit Agreement”) among the Company, certain of its subsidiaries, as guarantors, the lenders from time to time party thereto, and JPMorgan Chase Bank, N.A., as administrative agent. Cortland Capital Market Services LLC currently serves as administrative agent under the 2014 Term Credit Agreement.
Principal, Interest and Maturity
The 2014 Term Credit Agreement initially provided for a five-year $270.0 million term loan facility (the “2014 Term Loan Facility”), which the Company drew in full on the effective date of the 2014 Term Credit Agreement. At September 30, 2017, the aggregate outstanding principal balance of the 2014 Term Loan Facility was $92.2 million. Effective November 6, 2017, the Company amended the 2014 Term Credit Agreement pursuant to the Sixth Amendment. The Sixth Amendment, among other things, provides for an additional term loan in an amount equal to $15.0 million, which will be pari passu in right of payment with, and secured on a pari passu basis with the aggregate outstanding principal balance of the Company's 2014 Term Loan Facility. The additional term loan is expected to be drawn in full during November 2017 and will bear the same maturity date as the aggregate outstanding principal balance of the Company's 2014 Term Loan Facility.
The 2014 Term Loan Facility initially bore interest at the “Adjusted Base Rate” plus an applicable margin of 8.75 percent, or the “Eurodollar Rate” plus an applicable margin of 9.75 percent. The interest rate in effect at September 30, 2017 and December 31, 2016 was 11 percent, which consisted of an applicable margin of 9.75 percent for Eurodollar Rate loans plus a LIBOR floor of 1.25 percent. Beginning with the date on which the additional term loan is funded, (the “Sixth Amendment Funding Date”), the interest rate will increase to 13 percent, consisting of an applicable margin of 11.75 percent for Eurodollar Rate loans plus a LIBOR floor of 1.25 percent. Beginning September 30, 2018, the applicable margin will increase an additional 100 basis points each quarterly period until maturity.
Makewhole
Under the 2014 Term Credit Agreement, with respect to prepayments made from inception of the Term Loan through September 30, 2017, the Company has not been required to pay prepayment premiums in respect of the “makewhole amount.” However, future prepayments or refinancing of the balance of the 2014 Term Loan Facility will require the Company to pay a prepayment premium equal to the makewhole amount and the repayment fee described below. Pursuant to the Sixth Amendment and beginning with the Sixth Amendment Funding Date, if a prepayment is made on or before September 30, 2018, the makewhole amount will be calculated as the present value of all interest payments that would have been made on the amount prepaid from the date of the prepayment to June 15, 2019 at a rate per annum equal to the sum of the applicable margin on the date of the prepayment plus the greater of 1.25 percent and the Eurodollar rate in effect on the date of the repayment. If a prepayment is made after September 30, 2018, the makewhole amount will be calculated as the present value of all interest payments that would have been made on the amount prepaid from the date of the prepayment to December 15, 2019 at a rate per annum equal to the sum of the applicable margin on the date of the prepayment plus the greater of 1.25 percent and the Eurodollar rate in effect on the date of the repayment.

14

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

8. Debt Obligations (continued)

Should a prepayment occur in full under the Sixth Amendment, the estimated makewhole amount due at future prepayment dates would be as follows (in thousands):
 
 
December 31,
2017
 
March 31,
2018
 
June 30,
2018
 
September 30,
2018
 
December 31,
2018
 
March 31,
2019
 
June 30,
2019
 
September 30,
2019
Makewhole
 
$
20,328

 
$
16,843

 
$
13,358

 
$
9,874

 
$
16,888

 
$
12,331

 
$
7,595

 
$
3,350

Prior to the Sixth Amendment Funding Date, the makewhole amount was calculated as the present value of all interest payments that would have been made on the amount prepaid from the date of the prepayment to December 15, 2019 (or June 15, 2019 if the prepayment is made on or after June 15, 2018) at a rate per annum equal to the sum of 9.75 percent plus the greater of 1.25 percent and the Eurodollar rate in effect on the date of the repayment.
Repayment Fee
The Company was also required to pay a repayment fee on the date of any prepayment and on the maturity date of the 2014 Term Loan Facility equal to a total of $4.6 million, which was 5.0 percent of the amount prepaid or 5.0 percent of the aggregate remaining outstanding principal balance on the maturity date. The Company is amortizing the repayment fee as a discount, from that date through the maturity date of the 2014 Term Loan Facility, using the effective interest method. The unamortized amount of the repayment fee was $2.8 million and $3.6 million at September 30, 2017 and December 31, 2016, respectively, based on the 5.0 percent repayment fee in effect as of those dates.
Pursuant to the Sixth Amendment and beginning with the Sixth Amendment Funding Date, the repayment fee will increase to a total of $9.7 million, which is 9.0 percent of the amount prepaid or 9.0 percent of the aggregate remaining outstanding principal balance on the maturity date.
Other
The Company is the borrower under the 2014 Term Credit Agreement, with all of its obligations guaranteed by its material U.S. subsidiaries, other than excluded subsidiaries. Obligations under the 2014 Term Loan Facility are secured by a first priority security interest in, among other things, the borrower’s and the guarantors’ equipment, subsidiary capital stock and intellectual property (the “2014 Term Loan Priority Collateral”) and a second priority security interest in, among other things, the borrower’s and the guarantors’ inventory, accounts receivable, deposit accounts and similar assets.
Unamortized debt issuance costs, primarily related to amendment fees associated with the 2014 Term Loan Facility, were $5.1 million and $4.1 million at September 30, 2017 and December 31, 2016, respectively. These costs are being amortized through the maturity date of the 2014 Term Loan Facility using the effective interest method.
The Company made no early payments during the nine months ended September 30, 2017 and $3.1 million of early payments during the nine months ended September 30, 2016 against its 2014 Term Loan Facility. As a result of these early payments, the Company recorded no debt extinguishment charges during the nine months ended September 30, 2017 and $0.1 million of debt extinguishment charges, which consisted of the write-off of debt issuance costs, during the nine months ended September 30, 2016.
On March 31, 2015 (the “First Amendment Closing Date”), March 1, 2016, July 26, 2016 and March 3, 2017, the Company amended the 2014 Term Credit Agreement pursuant to a First Amendment (the “First Amendment”), a Third Amendment (the “Third Amendment”), a Fourth Amendment (the “Fourth Amendment”) and a Fifth Amendment (the “Fifth Amendment”). These amendments, among other things, suspended the calculation of the Maximum Total Leverage Ratio and Minimum Interest Coverage Ratio for the period from December 31, 2014 through June 30, 2017 (the “Covenant Suspension Periods”) so that any failure by the Company to comply with the Maximum Total Leverage Ratio or Minimum Interest Coverage Ratio during the Covenant Suspension Periods shall not be deemed to result in a default or event of default.
In consideration of the initial suspension of the calculation of the Maximum Total Leverage Ratio and Minimum Interest Coverage Ratio under the First Amendment, the Company issued 10.1 million shares, which was equivalent to 19.9 percent of the outstanding shares of common stock immediately prior to the First Amendment Closing Date, to KKR Lending Partners II L.P. and other entities indirectly advised by KKR Credit Advisers (US) LLC, which made them a related party. In connection with this transaction, the Company recorded debt covenant suspension charges of approximately $33.5 million which represented the fair value of the 10.1 million outstanding shares of common stock issued, multiplied by the closing stock price

15

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

8. Debt Obligations (continued)

on the First Amendment Closing Date. In addition, the Company recorded debt extinguishment charges of approximately $0.8 million related to the write-off of debt issuance costs associated with the Company's 2014 Term Credit Agreement.
In consideration for the Third Amendment, Fourth Amendment and Fifth Amendment, the Company paid a total of $4.6 million in amendment fees in 2016 and $2.3 million in amendment fees during the nine months ended September 30, 2017. The amendment fees are recorded as direct deductions from the carrying amount of the 2014 Term Loan Facility and are being amortized through the maturity date of the 2014 Term Loan Facility using the effective interest method.
2013 ABL Credit Facility
On August 7, 2013, the Company entered into a five-year asset based senior revolving credit facility maturing on August 7, 2018 with Bank of America, N.A. serving as sole administrative agent for the lenders thereunder, collateral agent, issuing bank and swingline lender (as amended, the “2013 ABL Credit Facility”).
The aggregate amount of commitments for the 2013 ABL Credit Facility is $100.0 million, which is comprised of $90.0 million for the U.S. facility (the “U.S. Facility”) and $10.0 million for the Canadian facility (the “Canadian Facility”). In the third quarter of 2017, the Company borrowed $12.0 million under the 2013 ABL Credit Facility for working capital purposes and to fund revenue growth and operating losses. On November 6, 2017, the Company borrowed an additional $17.0 million under the 2013 ABL Credit Facility.
The 2013 ABL Credit Facility includes a sublimit of $80.0 million for letters of credit. The borrowers under the U.S. Facility consist of all of the Company’s U.S. operating subsidiaries with assets included in the borrowing base, and the U.S. Facility is guaranteed by Willbros Group, Inc. and its material U.S. subsidiaries, other than excluded subsidiaries. The borrower under the Canadian Facility is Willbros Construction Services (Canada) LP, and the Canadian Facility is guaranteed by Willbros Group, Inc. and all of its material U.S. and Canadian subsidiaries, other than excluded subsidiaries.
Advances under the U.S. and Canadian Facilities are limited to a borrowing base consisting of the sum of the following, less applicable reserves:
85 percent of the value of “eligible accounts” (as defined in the 2013 ABL Credit Facility);
the lesser of (i) 75 percent of the value of “eligible unbilled accounts” (as defined in the 2013 ABL Credit Facility) and (ii) $33.0 million minus the amount of eligible unbilled accounts then included in the borrowing base; and
“eligible pledged cash”.
The Company is also required, as part of its borrowing base calculation, to include a minimum of $25.0 million of the net proceeds of the sale of Bemis, LLC and the balance of the Professional Services segment as eligible pledged cash. The Company has included $40.0 million as eligible pledged cash in its September 30, 2017 borrowing base calculation, which is included in “Restricted cash” on its Condensed Consolidated Balance Sheets.
The aggregate amount of the borrowing base attributable to eligible accounts and eligible unbilled accounts constituting certain progress or milestone billings, retainage and other performance-based benchmarks may not exceed $23.0 million.
Advances in U.S. dollars bear interest at a rate equal to LIBOR or the U.S. or Canadian base rate plus an additional margin. Advances in Canadian dollars bear interest at the Bankers Acceptance (“BA”) Equivalent Rate or the Canadian prime rate plus an additional margin.
The interest rate margins will be adjusted each quarter based on the Company’s fixed charge coverage ratio as of the end of the previous quarter as follows:
Fixed Charge Coverage Ratio
 
U.S. Base Rate, Canadian
Base Rate and Canadian
Prime Rate Loans
 
LIBOR Loans, BA Rate Loans and
Letter of Credit Fees
>1.25 to 1
 
1.25%
 
2.25%
<1.25 to 1 and >1.15 to 1
 
1.50%
 
2.50%
<1.15 to 1
 
1.75%
 
2.75%

16

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

8. Debt Obligations (continued)

The Company will also pay an unused line fee on each of the U.S. and Canadian Facilities equal to 50 basis points when usage under the applicable facility during the preceding calendar month is less than 50 percent of the commitments or 37.5 basis points when usage under the applicable facility equals or exceeds 50 percent of the commitments for such period. With respect to the letters of credit, the Company will pay a letter of credit fee equal to the applicable LIBOR margin, shown in the table above, on all letters of credit and a 0.125 percent fronting fee to the issuing bank, in each case, payable monthly in arrears.
Obligations under the 2013 ABL Credit Facility are secured by a first priority security interest in the borrowers’ and guarantors’ accounts receivable, deposit accounts and similar assets (the “ABL Priority Collateral”) and a second priority security interest in the 2014 Term Loan Priority Collateral.
As of September 30, 2017, the Company's unused availability was $32.5 million, net of outstanding letters of credit of $55.5 million and outstanding revolver borrowings of $12.0 million. On November 6, 2017, the Company borrowed an additional $17.0 million under the 2013 ABL Credit Facility. If the Company’s unused availability under the 2013 ABL Credit Facility is less than the greater of (i) 15.0 percent of the revolving commitments or $15.0 million for five consecutive days, or (ii) 12.5 percent of the revolving commitments or $12.5 million at any time, or upon the occurrence of certain events of default under the 2013 ABL Credit Facility, the Company is subject to increased reporting requirements, the administrative agent shall have exclusive control over any deposit account, the Company will not have any right of access to, or withdrawal from, any deposit account, or any right to direct the disposition of funds in any deposit account, and amounts in any deposit account will be applied to reduce the outstanding amounts under the 2013 ABL Credit Facility. In addition, if the Company's unused availability under the 2013 ABL Credit Facility is less than the amounts described above, the Company would be required to comply with a Minimum Fixed Charge Coverage Ratio of 1.15 to 1.00. Based on its current forecasts, the Company does not expect its unused availability under the 2013 ABL Credit Facility to be less than the amounts described above and therefore does not expect the Minimum Fixed Charge Coverage Ratio to be applicable over the next twelve months. If the Minimum Fixed Charge Coverage Ratio were to become applicable, the Company would not expect to be in compliance over the next twelve months and would therefore be in default under its credit agreements.
Events of Default
A default under the 2014 Term Loan Facility and the 2013 ABL Credit Facility may be triggered by events such as a failure to comply with financial covenants or other covenants under the 2014 Term Loan Facility and the 2013 ABL Credit Facility, a failure to make payments when due under the 2014 Term Loan Facility and the 2013 ABL Credit Facility, a failure to make payments when due in respect of, or a failure to perform obligations relating to, debt obligations in excess of $15.0 million, a change of control of the Company and certain insolvency proceedings. A default under the 2013 ABL Credit Facility would permit the lenders to terminate their commitment to make cash advances or issue letters of credit, require the immediate repayment of any outstanding cash advances with interest and require the cash collateralization of outstanding letter of credit obligations. A default under the 2014 Term Loan Facility would permit the lenders to require immediate repayment of all principal, interest, fees and other amounts payable thereunder.
The 2014 Term Credit Agreement and the 2013 ABL Credit Facility also include customary representations and warranties and affirmative and negative covenants, including:
the preparation of financial statements in accordance with GAAP;
the identification of any events or circumstances, either individually or in the aggregate, that has had or could reasonably be expected to have a material adverse effect on the business, results of operations, properties or financial condition of the Company;
limitations on liens and indebtedness;
limitations on dividends and other payments in respect of capital stock;
limitations on capital expenditures; and
limitations on modifications of the documentation of the 2013 ABL Credit Facility.

17

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

8. Debt Obligations (continued)

Fair Value of Debt
The estimated fair value of the Company’s debt instruments as of September 30, 2017 and December 31, 2016 was as follows (in thousands):
 
 
September 30,
2017
 
December 31,
2016
2014 Term Loan Facility
 
$
98,685

 
$
95,577

Revolver borrowings, 2013 ABL Credit Facility
 
12,000

 

Total fair value of debt instruments
 
$
110,685

 
$
95,577

The 2014 Term Loan Facility and revolver borrowings under the 2013 ABL Credit Facility are classified within Level 2 of the fair value hierarchy. The fair value of the debt instruments have been estimated using discounted cash flow analyses based on the Company’s incremental borrowing rate for similar borrowing arrangements.
9. Income Taxes
The Company's interim tax provision (benefit) has been estimated using the discrete method, which is based on statutory tax rates applied to pre-tax income as adjusted for permanent differences such as transfer pricing differences between generally accepted accounting principles and local country tax. The Company believes this method yields a more reliable income tax calculation for interim periods.
The effective tax rate on continuing operations is 3.1 percent for the nine months ended September 30, 2017 and a negative 4.0 percent for the nine months ended September 30, 2016. The tax benefit for discrete items for the nine months ended September 30, 2017 is $0.1 million and is primarily composed of a refund on the Company's 2010 and 2011 Texas Margins Tax audit and a refundable alternative minimum tax credit carry-forward, partially offset by a settlement of a transfer pricing audit in Canada. The tax provision for discrete items for the nine months ended September 30, 2016 is $0.9 million and is primarily composed of an alternative minimum tax credit.
The tax benefit for the nine months ended September 30, 2017 is $1.7 million and is primarily composed of a benefit on a loss in the Company's Canada segment, a refundable alternative minimum tax credit carry-forward and a refund on the Company's 2010 and 2011 Texas Margins Tax audit. The tax benefit is partially offset by a settlement of a transfer pricing audit in Canada. The tax provision for the nine months ended September 30, 2016 is $1.1 million and is primarily composed of an alternative minimum tax credit and Texas Margins Tax.
The effective tax rate on continuing operations is a negative 3.6 percent for the three months ended September 30, 2017 and a negative 8.0 percent for the three months ended September 30, 2016. The tax provision for the three months ended September 30, 2017 is $1.1 million and is primarily composed of a settlement of a transfer pricing audit in Canada, a reduction of a benefit on a loss in the Company's Canada segment and a reduction in a refundable alternative minimum tax credit carry-forward.
The Company has reserved for the benefit of current year losses in the United States. As of September 30, 2017, U.S. federal and state deferred tax assets continue to be covered by valuation allowances. In evaluating whether deferred tax assets are more likely than not to be realized, the Company considers the impact of reversing taxable temporary differences, future forecasted income and available tax planning strategies.
It is reasonably possible the unrecognized tax benefits may change between $0.0 million and $3.2 million within the next twelve months as a result of settling tax examinations related to 2008-2011.

18

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

10. Stockholders' Equity
Changes in Accumulated Other Comprehensive Income (Loss) by Component 
 
 
Three Months Ended September 30, 2017 (in thousands)
 
 
Foreign currency
translation
adjustments
 
Changes in
derivative
financial
instruments
 
Total
accumulated
comprehensive
income (loss)
Balance as of June 30, 2017
 
$
(624
)
 
$
(2,284
)
 
$
(2,908
)
Other comprehensive income before reclassifications
 
1,054

 

 
1,054

Amounts reclassified from accumulated other comprehensive income (loss)
 

 
273

 
273

Net current-period other comprehensive income
 
1,054

 
273

 
1,327

Balance as of September 30, 2017
 
$
430

 
$
(2,011
)
 
$
(1,581
)
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2017 (in thousands)
 
 
Foreign currency
translation
adjustments
 
Changes in
derivative
financial
instruments
 
Total
accumulated
comprehensive
income (loss)
Balance as of December 31, 2016
 
$
(1,412
)
 
$
(2,822
)
 
$
(4,234
)
Other comprehensive income before reclassifications
 
1,842

 

 
1,842

Amounts reclassified from accumulated other comprehensive income (loss)
 

 
811

 
811

Net current-period other comprehensive income
 
1,842

 
811

 
2,653

Balance as of September 30, 2017
 
$
430

 
$
(2,011
)
 
$
(1,581
)
 
 
Three Months Ended September 30, 2016 (in thousands)
 
 
Foreign currency
translation
adjustments
 
Changes in
derivative
financial
instruments
 
Total
accumulated
comprehensive
income (loss)
Balance as of June 30, 2016
 
$
(197
)
 
$
(3,368
)
 
$
(3,565
)
Other comprehensive loss before reclassifications
 
(495
)
 

 
(495
)
Amounts reclassified from accumulated other comprehensive income (loss)
 

 
273

 
273

Net current-period other comprehensive income (loss)
 
(495
)
 
273

 
(222
)
Balance as of September 30, 2016
 
$
(692
)
 
$
(3,095
)
 
$
(3,787
)
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2016 (in thousands)
 
 
Foreign currency
translation
adjustments
 
Changes in
derivative
financial
instruments
 
Total
accumulated
comprehensive
income (loss)
Balance as of December 31, 2015
 
$
(1,965
)
 
$
(4,044
)
 
$
(6,009
)
Other comprehensive income before reclassifications
 
1,273

 

 
1,273

Amounts reclassified from accumulated other comprehensive income (loss)
 

 
949

 
949

Net current-period other comprehensive income
 
1,273

 
949

 
2,222

Balance as of September 30, 2016
 
$
(692
)
 
$
(3,095
)
 
$
(3,787
)

19

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

10. Stockholders' Equity (continued)

Reclassifications From Accumulated Other Comprehensive Income (Loss)
Three Months Ended September 30, 2017 (in thousands)
Details about Accumulated Other
Comprehensive Income Components
 
Amount Reclassified from Accumulated Other Comprehensive Income (Loss)
 
Details about Accumulated Other Comprehensive Income Components
Interest rate contracts
 
$
273

 
Interest expense
Total
 
$
273

 
 
 
 
 
 
 
Nine Months Ended September 30, 2017 (in thousands)
Details about Accumulated Other
Comprehensive Income Components
 
Amount Reclassified from Accumulated Other Comprehensive Income (Loss)
 
Details about Accumulated Other Comprehensive Income Components
Interest rate contracts
 
$
811

 
Interest expense
Total
 
$
811

 
 
Three Months Ended September 30, 2016 (in thousands)
Details about Accumulated Other
Comprehensive Income Components
 
Amount Reclassified from Accumulated Other Comprehensive Income (Loss)
 
Details about Accumulated Other Comprehensive Income Components
Interest rate contracts
 
$
273

 
Interest expense
Total
 
$
273

 
 
 
 
 
 
 
Nine Months Ended September 30, 2016 (in thousands)
Details about Accumulated Other
Comprehensive Income Components
 
Amount Reclassified from Accumulated Other Comprehensive Income (Loss)
 
Details about Accumulated Other Comprehensive Income Components
Interest rate contracts
 
$
949

 
Interest expense
Total
 
$
949

 
 

20

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

11. Income (Loss) Per Share
Basic income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted income (loss) per share is based on the weighted average number of shares outstanding during each period and the assumed exercise of potentially dilutive stock options and vesting of restricted stock units less the number of treasury shares assumed to be purchased from the proceeds using the average market price of the Company’s stock for each of the periods presented.
Basic and diluted income (loss) per common share from continuing operations is computed as follows (in thousands, except share and per share amounts):
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
 
2017
 
2016
 
2017
 
2016
Net loss from continuing operations applicable to common shares (numerator for basic and diluted calculation)
 
$
(32,709
)
 
$
(10,661
)
 
$
(51,566
)
 
$
(29,720
)
Weighted average number of common shares outstanding for basic loss per share
 
62,310,191

 
61,639,590

 
62,105,282

 
61,257,851

Weighted average number of potentially dilutive common shares outstanding
 

 

 

 

Weighted average number of common shares outstanding for diluted loss per share
 
62,310,191

 
61,639,590

 
62,105,282

 
61,257,851

Loss per common share from continuing operations:
 
 
 
 
 
 
 
 
Basic
 
$
(0.52
)
 
$
(0.17
)
 
$
(0.83
)
 
$
(0.49
)
Diluted
 
$
(0.52
)
 
$
(0.17
)
 
$
(0.83
)
 
$
(0.49
)
The Company has excluded shares potentially issuable under the terms of use of the securities listed below from the computation of diluted income per share, as the effect would be anti-dilutive:
 
 
Three Months Ended 
 September 30,
 
 
2017
 
2016
Stock options
 

 
31,522

Restricted stock and restricted stock units
 
324,428

 
52,677

 
 
324,428

 
84,199

12. Segment Information
The Company has three reportable segments: Oil & Gas, Utility T&D and Canada. These segments are comprised of strategic businesses that are defined by the industries or geographic regions they serve. Each segment is managed as an operation with well-established strategic directions and performance requirements. Each segment is led by a separate segment President who reports directly to the Company's Chief Operating Decision Maker (“CODM”). For additional information regarding the Company's reportable segments, see Note 1 - Company and Organization for more information.
The CODM evaluates segment performance using operating income which is defined as contract revenue less contract costs and segment overhead, such as amortization related to intangible assets and general and administrative expenses that are directly attributable to the segment. In 2016, the Company implemented a change to its organizational structure such that corporate overhead costs, such as executive management, public company, accounting, tax and professional services, human resources and treasury, are no longer allocated to each segment. These costs are classified as “Corporate” in the tables below. Previously reported segment information has been modified to conform to this new presentation.

21

Table of Contents
WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
12. Segment Information (continued)

The following tables reflect the Company’s operations by reportable segment for the three and nine months ended September 30, 2017 and 2016 (in thousands):
 
 
Three Months Ended September 30, 2017
 
 
Oil & Gas
 
Utility T&D
 
Canada
 
Corporate
 
Eliminations
 
Consolidated
Contract revenue
 
$
75,284

 
$
129,906

 
$
35,583

 
$

 
$

 
$
240,773

Contract costs
 
88,114

 
131,142

 
33,705

 

 

 
252,961

Contract income (loss)
 
(12,830
)
 
(1,236
)
 
1,878

 

 

 
(12,188
)
Amortization of intangibles
 
27

 
2,389

 

 

 

 
2,416

General and administrative
 
1,962

 
3,850

 
1,910

 
5,314

 

 
13,036

Other charges (income)
 
(53
)
 

 
264

 
(62
)
 

 
149

Operating loss
 
$
(14,766
)
 
$
(7,475
)
 
$
(296
)

$
(5,252
)
 
$

 
(27,789
)
Non-operating expenses
 
(3,788
)
Provision for income taxes
 
1,132

Loss from continuing operations
 
(32,709
)
Loss from discontinued operations net of provision for income taxes
 
(1,496
)
Net loss
 
$
(34,205
)
 
 
Three Months Ended September 30, 2016
 
 
Oil & Gas
 
Utility T&D
 
Canada
 
Corporate
 
Eliminations
 
Consolidated
Contract revenue
 
$
33,100

 
$
106,422

 
$
35,355

 
$

 
$
(56
)
 
$
174,821

Contract costs
 
34,192

 
95,461

 
33,209

 

 
(56
)
 
162,806

Contract income (loss)
 
(1,092
)
 
10,961

 
2,146

 

 

 
12,015

Amortization of intangibles
 
48

 
2,390

 

 

 

 
2,438

General and administrative
 
2,998

 
4,324

 
2,174

 
5,881

 

 
15,377

Other charges (income)
 
245

 
(15
)
 
313

 
(24
)
 

 
519

Operating income (loss)
 
$
(4,383
)
 
$
4,262

 
$
(341
)
 
$
(5,857
)
 
$

 
(6,319
)
Non-operating expenses
 
(3,550
)
Provision for income taxes
 
792

Loss from continuing operations
 
(10,661
)
Loss from discontinued operations net of provision for income taxes
 
(1,325
)
Net loss
 
$
(11,986
)

22

Table of Contents
WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
12. Segment Information (continued)

 
 
Nine Months Ended September 30, 2017
 
 
Oil & Gas
 
Utility T&D
 
Canada
 
Corporate
 
Eliminations
 
Consolidated
Contract revenue
 
$
146,748

 
$
397,097

 
$
88,275

 
$

 
$

 
$
632,120

Contract costs
 
165,297

 
373,564

 
86,687

 

 

 
625,548

Contract income (loss)
 
(18,549
)
 
23,533

 
1,588

 

 

 
6,572

Amortization of intangibles
 
81

 
7,169

 

 

 

 
7,250

General and administrative
 
6,872

 
12,071

 
5,967

 
15,350

 

 
40,260

Other charges
 
34

 

 
971

 
341

 

 
1,346

Operating income (loss)
 
$
(25,536
)
 
$
4,293

 
$
(5,350
)
 
$
(15,691
)
 
$

 
(42,284
)
Non-operating expenses
 
(10,947
)
Benefit for income taxes
 
(1,665
)
Loss from continuing operations
 
(51,566
)
Loss from discontinued operations net of provision for income taxes
 
(1,508
)
Net loss
 
$
(53,074
)
 
 
Nine Months Ended September 30, 2016
 
 
Oil & Gas
 
Utility T&D
 
Canada
 
Corporate
 
Eliminations
 
Consolidated
Contract revenue
 
$
147,174

 
$
313,066

 
$
107,343

 
$

 
$
(290
)
 
$
567,293

Contract costs
 
147,022

 
281,025

 
98,565

 

 
(290
)
 
526,322

Contract income
 
152

 
32,041

 
8,778

 

 

 
40,971

Amortization of intangibles
 
146

 
7,169

 

 

 

 
7,315

General and administrative
 
9,450

 
11,393

 
6,691

 
19,497

 

 
47,031

Other charges (income)
 
1,575

 
(3
)
 
973

 
2,601

 

 
5,146

Operating income (loss)
 
$
(11,019
)
 
$
13,482

 
$
1,114

 
$
(22,098
)
 
$

 
(18,521
)
Non-operating expenses
 
(10,053
)
Provision for income taxes
 
1,146

Loss from continuing operations
 
(29,720
)
Loss from discontinued operations net of provision for income taxes
 
(3,836
)
Net loss
 
$
(33,556
)
Total assets by segment at September 30, 2017 and December 31, 2016 are presented below (in thousands):
 
 
September 30,
2017
 
December 31,
2016
Oil & Gas
 
$
78,981

 
$
42,887

Utility T&D
 
214,176

 
201,339

Canada
 
44,504

 
47,704

Corporate
 
62,823

 
70,601

Total assets, continuing operations
 
$
400,484

 
$
362,531


23

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

13. Contingencies, Commitments and Other Circumstances
Contingencies
Litigation and Regulatory Matters Related to the Company’s October 21, 2014 Press Release Announcing the Restatement of Condensed Consolidated Financial Statements for the Quarterly Period Ended June 30, 2014
After the Company announced it would be restating its Condensed Consolidated Financial Statements for the quarterly period ended June 30, 2014, a complaint was filed in the United States District Court for the Southern District of Texas (“USDC”) on October 28, 2014 seeking class action status on behalf of purchasers of the Company’s stock and alleging damages on their behalf arising from the matters that led to the restatement. The original defendants in the case were the Company, its former chief executive officer, Robert R. Harl, and its former chief financial officer, Van A. Welch. On January 30, 2015, the court named two employee retirement systems as Lead Plaintiffs. Lead Plaintiffs filed their consolidated complaint, captioned In re Willbros Group, Inc. Securities Litigation, on March 31, 2015, adding as a defendant John T. McNabb, II, the former chief executive officer who had succeeded Mr. Harl, and claims regarding the restatement of the Company's Condensed Consolidated Financial Statements for the quarterly period ended March 31, 2014. On June 15, 2015, Lead Plaintiffs filed a second amended consolidated complaint, seeking unspecified damages and asserting violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Act”), based on alleged misrepresentations and omissions in the SEC filings and other public disclosures in 2014, primarily regarding internal controls, the performance of the Oil & Gas segment, compliance with debt covenants and liquidity, certain financial results and the circumstances surrounding Mr. Harl's departure. On July 27, 2015, the Company filed a motion to dismiss the case. At a hearing on May 24, 2016, the court granted the motion to dismiss in part and denied it in part. On July 22, 2016, the Company filed an answer to the suit denying the remaining allegations in the case, which complain of alleged misrepresentations and omissions in violation of the Act regarding internal controls, the performance of the Oil & Gas segment and Mr. Harl's departure. On June 28, 2017, Lead Plaintiffs filed a motion asking the Court to reconsider its order in 2016 dismissing certain claims and allow Lead Plaintiffs to replead two of the claims the Court has dismissed; the Company opposes the motion; the Court has heard oral argument but has not ruled. The Company continues to vigorously defend against the Lead Plaintiffs' allegations, which the Company believes are without merit. The Company is not able at this time to determine the likelihood of loss, if any, arising from this matter.
In addition, two shareholder derivative lawsuits were filed purportedly on behalf of the Company in connection with the restatement. The first, Markovich v. Harl et al, was filed on November 6, 2014 in the District Court of Harris County, Texas. The second, Kumararatne v. McNabb et al, was filed on March 4, 2015 in the USDC, but was voluntarily dismissed by the plaintiff on April 23, 2015. The Markovich lawsuit named certain former officers and current and former members of the Company's board of directors as defendants and the Company as a nominal defendant. The lawsuit alleged that the officer and board member defendants breached their fiduciary duties by permitting the Company’s internal controls to be inadequate, failing to prevent the restatements, and wasting corporate assets, and that the defendants were unjustly enriched. The defendants sought dismissal of the lawsuit on the grounds that the plaintiff failed to make demand upon the Company’s board to bring the lawsuit, and, on February 23, 2016, the court sustained the defendants’ motion and dismissed the lawsuit with prejudice. On March 10, 2016, the plaintiff filed a motion for reconsideration and asked the court for leave to amend its lawsuit. The court granted the plaintiff’s motion in part, allowing an amended petition, which was filed on April 18, 2016. The Plaintiff’s Second Amended Petition added Ravi Kumararatne as a plaintiff and added claims for breach of fiduciary duty against the former officers and officer and board of director defendants related to the departure of former Company executives, financial controls, and compliance with the Company’s debt covenants. The Company sought dismissal of the amended petition on the grounds the plaintiffs failed to make a demand upon the Company’s board to bring the lawsuit. In response, plaintiffs filed a Third Amended Petition on June 24, 2016, purporting to add additional facts to support their allegations, including their allegation that they were excused from making a demand upon the board because, they claimed, such demand would be futile. Believing the claims added by plaintiffs were without merit, the Company sought to dismiss this latest pleading. After hearing argument on the motion, the court issued an order on October 24, 2016, sustaining the Company's objections to plaintiffs' latest pleading and again dismissed the lawsuit with prejudice. Plaintiffs' motion for reconsideration was denied on December 21, 2016. Plaintiffs filed a Notice of Appeal on January 20, 2017. The appeal is assigned to the 14th Court of Appeals, Houston, Texas; the court has set the appeal for oral argument.
Other
The SEC issued an order of investigation on January 29, 2015 and a subpoena on February 3, 2015, requesting information regarding the restatement of the Company's previously issued Condensed Consolidated Financial Statements for

24

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

13. Contingencies, Commitments and Other Circumstances (continued)

the quarterly periods ended March 31, 2014 and June 30, 2014. The Company provided its full cooperation to the SEC, who on January 25, 2016, sent the Company a letter stating it had concluded its investigation and, based on the information it had, did not intend to recommend an enforcement action against the Company.
In addition to the matters discussed above, the Company is party to a number of other legal proceedings. Management believes that the nature and number of these proceedings are typical for a firm of similar size engaged in a similar type of business and that none of these proceedings is material to the Company’s consolidated results of operations, financial position or cash flows.
Commitments
From time to time, the Company enters into commercial commitments, usually in the form of commercial and standby letters of credit, surety bonds and financial guarantees. Contracts with the Company’s customers may require the Company to secure letters of credit or surety bonds to secure the Company’s performance of contracted services. In such cases, the letters of credit or bond commitments can be called upon in the event of the Company's failure to perform contracted services. Likewise, contracts may allow the Company to issue letters of credit or surety bonds in lieu of contract retention provisions, where the client otherwise withholds a percentage of the contract value until project completion or expiration of a warranty period. Retention letters of credit or bond commitments can be called upon in the event of warranty or project completion issues, as prescribed in the contracts. The Company also issues letters of credit from time to time to secure deductible obligations under its workers compensation, automobile and general liability policies. At September 30, 2017, the Company had approximately $55.5 million of outstanding letters of credit. This amount represents the maximum amount of payments the Company could be required to make if these letters of credit are drawn upon. Additionally, the Company issues surety bonds (primarily performance in nature) that are customarily required by commercial terms on construction projects. At September 30, 2017, these bonds outstanding had a face value of $145.4 million. This amount represents the bond penalty amount of future payments the Company could be required to make if the Company fails to perform its obligations under such contracts. The performance bonds do not have a stated expiration date; rather, each is released when the Company's performance of the contract is accepted by the customer. The Company’s maximum exposure as it relates to the value of the bonds outstanding is lowered on each bonded project as the cost to complete is reduced. As of September 30, 2017, no liability has been recognized for letters of credit or surety bonds.
Other Circumstances
The Company has the usual liability of contractors for the completion of contracts and the warranty of its work. In addition, the Company acts as prime contractor on a majority of the projects it undertakes and is normally responsible for the performance of the entire project, including subcontract work. Management is not aware of any material exposure related thereto which has not been provided for in the accompanying Condensed Consolidated Financial Statements.

25

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

14. Fair Value Measurements
The FASB’s standard on fair value measurements defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions and risk of nonperformance.
Fair Value Hierarchy
The FASB’s standard on fair value measurements establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. This standard establishes three levels of inputs that may be used to measure fair value:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities.
Level 3 – Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.
There were no transfers between levels in the third quarter of 2017 and 2016.
The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable and debt obligations. The fair value estimates of the Company’s financial instruments have been determined using available market information and appropriate valuation methodologies and approximate carrying value.
Hedging Arrangements
The Company is exposed to market risk associated with changes in non-U.S. currency exchange rates. To mitigate its risk, the Company may borrow in Canadian dollars under its Canadian Facility to settle U.S. dollar account balances.
The Company attempts to negotiate contracts that provide for payment in U.S. dollars, but it may be required to take all or a portion of payment under a contract in another currency. To mitigate non-U.S. currency exchange risk, the Company seeks to match anticipated non-U.S. currency revenue with expenses in the same currency whenever possible. To the extent it is unable to match non-U.S. currency revenue with expenses in the same currency, the Company may use forward contracts, options or other common hedging techniques in the same non-U.S. currencies. The Company had no forward contracts or options at September 30, 2017 or December 31, 2016.
The Company is subject to interest rate risk on its debt and investment of cash and cash equivalents arising in the normal course of business and had previously entered into hedging arrangements to fix or otherwise limit the interest cost of its variable interest rate borrowings.
Termination of Interest Rate Swap Agreement
In August 2013, the Company entered into an interest rate swap agreement (the “Swap Agreement”) for a notional amount of $124.1 million to hedge changes in the variable rate interest expense on $124.1 million of its existing or replacement LIBOR indexed debt. The Swap Agreement was designated and qualified as a cash flow hedging instrument with the effective portion of the Swap Agreement's change in fair value recorded in Other Comprehensive Income (“OCI”). The Swap Agreement was highly effective in offsetting changes in interest expense and no hedge ineffectiveness was recorded in the Consolidated Statements of Operations. The Swap Agreement was terminated in the third quarter of 2015 for $5.7 million, which was recorded in OCI as fair value. In the fourth quarter of 2015, the Company made an early payment of $93.6 million against its 2014 Term Loan Facility and therefore reclassified approximately $1.2 million of the fair value of the Swap Agreement from OCI to interest expense. In the first quarter of 2016, the Company made an early payment of $3.1 million against its 2014 Term Loan Facility and therefore reclassified approximately $0.1 million of the fair value of the Swap Agreement from OCI to interest expense. The remaining fair value of the Swap Agreement included in OCI will be reclassified to interest expense over the remaining life of the underlying debt with approximately $1.1 million expected to be recognized in the coming twelve months.

26

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

15. Other Charges
The following table reflects the Company's other charges for the three and nine months ended September 30, 2017 and 2016 (in thousands):
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
 
2017
 
2016
 
2017
 
2016
Equipment and facility lease abandonment
 
$
(345
)
 
$
217

 
$
(251
)
 
$
3,338

Loss on sale of subsidiary (1)
 

 
207

 

 
330

Employee severance charges
 
254

 
91

 
786

 
1,249

Restatement costs (2)
 
240

 
4

 
617

 
(42
)
Accelerated stock vesting
 

 

 
194

 
271

Total
 
$
149

 
$
519

 
$
1,346

 
$
5,146

(1) Resulted from the 2016 sale of the Oil & Gas segment's fabrication business.
(2) Includes legal fees associated with the restatements of the Company's Condensed Consolidated Financial Statements for the quarterly periods ended March 31, 2014 and June 30, 2014. See Note 13 - Contingencies, Commitments and Other Circumstances for more information.
Activity in the accrual related to the equipment and facility lease abandonment charges during the nine months ended September 30, 2017 is as follows (in thousands):
 
 
Oil & Gas
 
Canada
 
Utility T&D
 
Corporate
 
Total
Accrued cost at December 31, 2016
 
$
793

 
$
290

 
$
348

 
$
4,048

 
$
5,479

Cash payments
 
(225
)
 
(102
)
 
(136
)
 
(930
)
 
(1,393
)
Non-cash charges (1)
 

 

 

 
247

 
247

Change in estimates
 
22

 
41

 

 
(314
)
 
(251
)
Accrued cost at September 30, 2017
 
$
590

 
$
229

 
$
212

 
$
3,051

 
$
4,082

(1) Non-cash charges consist of accretion expense.
The Company will continue to evaluate the need for additional equipment and facility lease abandonment charges, including the adequacy of its existing accrual, as conditions warrant.

27

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

16. Discontinued Operations
The following disposals qualify for discontinued operations treatment under ASU 2014-08, which the Company adopted on January 1, 2015.
Professional Services
On November 30, 2015, the Company sold the balance of its Professional Services segment to TRC for $130.0 million in cash, subject to working capital and other adjustments. At closing, TRC held back $7.5 million from the purchase price (the “Holdback Amount”) until the Company effects the novation of a customer contract from one of the subsidiaries sold in the transaction to the Company (or obtains written approval of a subcontract of all the work that is the subject of such contract) and obtains certain consents. If such novation, subcontract or consents were not approved by March 15, 2016, TRC would pay the Holdback Amount to the Company. In connection with this transaction, the Company recorded a net gain on sale of $97.0 million during the year ended December 31, 2015.
During the year ended December 31, 2016, the Company reached an agreement with TRC on substantially all of the outstanding items related to the sale of the Professional Services segment. As a result, the Company received $4.6 million during the year ended December 31, 2016 in relation to the sale and inclusive of the final settlement of working capital and the Holdback Amount and recorded $2.5 million in charges against the net gain on sale in relation to working capital and other post-closing adjustments.
Certain assets and liabilities associated with one Professional Services contract were retained by the Company and have been excluded from the transaction.
In 2015, and prior to the sale of the balance of the Professional Services segment, the Company sold the following three subsidiaries that were historically part of the Professional Services segment.
Downstream Professional Services
On June 12, 2015, the Company sold all of its issued and outstanding equity of Downstream Professional Services to BR Engineers, LLC for approximately $10.0 million in cash. In connection with this transaction, the Company recorded a net loss on sale of $2.2 million during the year ended December 31, 2015.
Premier
On March 31, 2015, the Company sold all of its membership units in Premier to USIC Locating Services, LLC for approximately $51.0 million in cash, of which $4.0 million was deposited into an escrow account for a period of up to eighteen months to cover post-closing adjustments and any indemnification obligations of the Company. In connection with this transaction, the Company recorded a net gain on sale of $37.1 million during the year ended December 31, 2015. The Company received $3.7 million as full and final settlement of the outstanding escrow amount during the year ended December 31, 2016.
UtilX
On March 17, 2015, the Company sold all of its equity interests of UtilX to Novinium, Inc. for approximately $40.0 million in cash, of which $0.5 million was deposited into an escrow account for a period of six months to cover post-closing adjustments and any indemnification obligations of the Company. In the third quarter of 2015, the Company cleared the $0.5 million amount recorded in the escrow account as a post-closing adjustment. As a result of this transaction, the Company recorded a net gain on sale of $20.3 million during the year ended December 31, 2015.
Hawkeye
In the fourth quarter of 2013, the Company sold certain assets comprising its Hawkeye business to Elecnor Hawkeye,
LLC, a subsidiary of Elecnor, Inc. The Maine Power Reliability Program Project was retained by the Company and subsequently completed in 2015.

28

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

16. Discontinued Operations (continued)

Results of Discontinued Operations
Condensed Statements of Operations with respect to discontinued operations are as follows (in thousands) and are primarily related to the Professional Services segment:
 
 
Three Months Ended September 30, 2017
 
 
Professional Services
 
Hawkeye
 
Total
Contract revenue
 
$
24

 
$

 
$
24

Contract costs
 
154

 

 
154

General and administrative
 
501

 
340

 
841

Other charges
 
525

 

 
525

Operating loss
 
(1,156
)
 
(340
)
 
(1,496
)
Non-operating expenses
 

 

 

Pre-tax loss
 
(1,156
)
 
(340
)
 
(1,496
)
Provision for income taxes
 

 

 

Loss from discontinued operations
 
$
(1,156
)
 
$
(340
)
 
$
(1,496
)
 
 
Three Months Ended September 30, 2016
 
 
Professional Services
 
Hawkeye
 
Total
Contract revenue
 
$

 
$

 
$

Contract costs
 
276

 

 
276

General and administrative
 
651

 
296

 
947

Other charges
 
102

 

 
102

Operating loss
 
(1,029
)
 
(296
)
 
(1,325
)
Non-operating expenses
 

 

 

Pre-tax loss
 
(1,029
)
 
(296
)
 
(1,325
)
Provision for income taxes
 

 

 

Loss from discontinued operations
 
$
(1,029
)
 
$
(296
)
 
$
(1,325
)
 
 
Nine Months Ended September 30, 2017
 
 
Professional Services
 
Hawkeye
 
Total
Contract revenue
 
$
707

 
$

 
$
707

Contract costs
 
415

 

 
415

Loss on sale of subsidiary
 

 

 

General and administrative
 
1,246

 
20

 
1,266

Other charges
 
525

 

 
525

Operating loss
 
(1,479
)
 
(20
)
 
(1,499
)
Non-operating expenses
 

 

 

Pre-tax loss
 
(1,479
)
 
(20
)
 
(1,499
)
Provision for income taxes
 
9

 

 
9

Loss from discontinued operations
 
$
(1,488
)
 
$
(20
)
 
$
(1,508
)

29

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

16. Discontinued Operations (continued)

 
 
Nine Months Ended September 30, 2016
 
 
Professional Services
 
Hawkeye
 
Total
Contract revenue
 
$
1,869

 
$

 
$
1,869

Contract costs
 
2,293

 

 
2,293

Loss on sale of subsidiary
 
2,456

 

 
2,456

General and administrative
 
1,949

 
67

 
2,016

Other income
 
(1,060
)
 

 
(1,060
)
Operating loss
 
(3,769
)
 
(67
)
 
(3,836
)
Non-operating expenses
 

 

 

Pre-tax loss
 
(3,769
)
 
(67
)
 
(3,836
)
Provision for income taxes
 

 

 
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