UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

FORM 10-Q

(Mark One)

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

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

Commission file number 1-11953

Willbros Group, Inc.

(Exact name of registrant as specified in its charter)

Delaware (Jurisdiction of incorporation)		30-0513080 (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

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 þ No o

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer o		Accelerated Filer þ		Non-Accelerated Filer o		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

     The number of shares of the registrant’s Common Stock, $.05 par value, outstanding as of October 28, 2011 was 48,547,302.

 

 

WILLBROS GROUP, INC.
FORM 10-Q
FOR QUARTER ENDED SEPTEMBER 30, 2011

		Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements Page
Condensed Consolidated Balance Sheets as of September 30, 2011 (Unaudited) and December 31, 2010			3
Condensed Consolidated Statements of Operations (Unaudited) for the three months and nine months ended September 30, 2011 and 2010			4
Condensed Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2011 and 2010			5
Notes to Condensed Consolidated Financial Statements (Unaudited)			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			41
Item 3. Quantitative and Qualitative Disclosures About Market Risk			60
Item 4. Controls and Procedures			61
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			62
Item 1A. Risk Factors			62
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			63
Item 3. Defaults Upon Senior Securities			63
Item 4. Reserved			63
Item 5. Other Information			63
Item 6. Exhibits			64
SIGNATURE			65
EXHIBIT INDEX			66
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT

WILLBROS GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

		September 30,				December 31,
		2011				2010
ASSETS
Current assets:
Cash and cash equivalents		$	68,333			$	134,150
Accounts receivable, net			345,441				305,293
Contract cost and recognized income not yet billed			36,266				23,757
Prepaid expenses and other assets			37,944				54,753
Parts and supplies inventories			9,366				10,108
Deferred income taxes			9,146				11,004
Assets held for sale			48,995				61,320
Total current assets			555,491				600,385
Property, plant and equipment, net			180,653				219,878
Goodwill			67,632				211,753
Other intangible assets, net			183,848				195,457
Deferred income taxes			3,457				16,570
Other assets			44,929				41,759
Total Assets		$	1,036,010			$	1,285,802
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	253,884			$	188,386
Contract billings in excess of cost and recognized income			21,147				14,927
Short-term borrowings under revolving credit facility			59,357				—
Current portion of capital lease obligations			3,033				5,366
Notes payable and current portion of long-term debt			521				71,594
Current portion of government obligations			—				6,575
Accrued income taxes			3,498				2,356
Liabilities held for sale			32,526				27,548
Other current liabilities			1,893				4,832
Total current liabilities			375,859				321,584
Long-term debt			230,569				305,227
Capital lease obligations			3,617				5,741
Contingent earnout			—				10,000
Long-term liabilities for unrecognized tax benefits			4,645				4,866
Deferred income taxes			15,226				76,020
Other long-term liabilities			43,346				38,824
Total liabilities			673,262				762,262
Contingencies and commitments (Note 14)
Stockholders’ equity:
Preferred stock, par value $.01 per share, 1,000,000 shares authorized, none issued			—				—
Common stock, par value $.05 per share, 70,000,000 shares authorized and 49,356,665 shares issued at September 30, 2011 (48,546,817 at December 31, 2010)			2,467				2,427
Capital in excess of par value			678,304				674,173
Accumulated deficit			(321,596	)			(161,824	)
Treasury stock at cost, 789,693 shares at September 30, 2011 (629,320 at December 31, 2010)			(10,799	)			(10,045	)
Accumulated other comprehensive income			13,471				17,938
Total Willbros Group, Inc. stockholders’ equity			361,847				522,669
Noncontrolling interest			901				871
Total stockholders’ equity			362,748				523,540
Total liabilities and stockholders’ equity		$	1,036,010			$	1,285,802

See accompanying notes to condensed consolidated financial statements.

WILLBROS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2011				2010				2011				2010
Contract revenue		$	466,103			$	403,959			$	1,253,325			$	789,255
Operating expenses:
Contract			415,695				343,898				1,139,311				678,894
Amortization of intangibles			3,918				3,921				11,752				5,826
General and administrative			32,668				34,009				102,162				78,455
Settlement of project dispute			—				—				8,236				—
Changes in fair value of contingent earnout			(4,000	)			(45,340	)			(10,000	)			(45,340	)
Goodwill impairment			134,263				12,000				134,263				12,000
Acquisition costs			—				7,947				—				9,912
			582,544				356,435				1,385,724				739,747
Operating income (loss)			(116,441	)			47,524				(132,399	)			49,508
Other income (expense):
Interest expense, net			(11,029	)			(11,875	)			(36,275	)			(16,084	)
Loss on early extinguishment of debt			—				—				(4,124	)			—
Other, net			(261	)			624				(284	)			1,465
			(11,290	)			(11,251	)			(40,683	)			(14,619	)
Income (loss) from continuing operations before income taxes			(127,731	)			36,273				(173,082	)			34,889
Provision (benefit) for income taxes			(28,321	)			(2,138	)			(41,759	)			(3,813	)
Income (loss) from continuing operations			(99,410	)			38,411				(131,323	)			38,702
Loss from discontinued operations net of provision (benefit) for income taxes			(11,563	)			(2,710	)			(27,571	)			(7,067	)
Net income (loss)			(110,973	)			35,701				(158,894	)			31,635
Less: Income attributable to noncontrolling interest			(296	)			(293	)			(878	)			(902	)
Net income (loss) attributable to Willbros Group, Inc.		$	(111,269	)		$	35,408			$	(159,772	)		$	30,733
Reconciliation of net income attributable to Willbros Group, Inc.
Income (loss) from continuing operations		$	(99,706	)		$	38,118			$	(132,201	)		$	37,800
Loss from discontinued operations			(11,563	)			(2,710	)			(27,571	)			(7,067	)
Net income (loss) attributable to Willbros Group, Inc.		$	(111,269	)		$	35,408			$	(159,772	)		$	30,733
Basic income (loss) per share attributable to Company shareholders:
Income (loss) from continuing operations		$	(2.10	)		$	0.81			$	(2.79	)		$	0.91
Loss from discontinued operations			(0.24	)			(0.06	)			(0.58	)			(0.17	)
Net income (loss)		$	(2.34	)		$	0.75			$	(3.37	)		$	0.74
Diluted income (loss) per share attributable to Company Shareholders:
Income (loss) from continuing operations		$	(2.10	)		$	0.75			$	(2.79	)		$	0.89
Loss from discontinued operations			(0.24	)			(0.05	)			(0.58	)			(0.16	)
Net income (loss)		$	(2.34	)		$	0.70			$	(3.37	)		$	0.73
Weighted average number of common shares outstanding:
Basic			47,533,967				46,997,431				47,429,059				41,651,994
Diluted			47,533,967				52,154,029				47,429,059				44,890,005

See accompanying notes to condensed consolidated financial statements.

WILLBROS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except share and per share amounts)
(Unaudited)

		Nine Months
		Ended September 30,
		2011				2010
Cash flows from operating activities:
Net income (loss)		$	(158,894	)		$	31,635
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Loss from discontinued operations			27,571				7,067
Depreciation and amortization			50,629				33,150
Goodwill impairment			134,263				12,000
Loss on early extinguishment of debt			4,124				—
Changes in fair value of contingent earnout liability			(10,000	)			(45,340	)
Stock-based compensation			7,103				6,489
Deferred income tax benefit			(49,384	)			(7,437	)
Settlement of project dispute			8,236				—
Provision for bad debts			998				630
Other non-cash			7,053				5,801
Changes in operating assets and liabilities:
Accounts receivable, net			(51,229	)			(93,768	)
Payments on government fines			(6,575	)			(6,575	)
Contract cost and recognized income not yet billed			(12,535	)			7,054
Prepaid expenses and other assets			18,302				15,682
Accounts payable and accrued liabilities			62,694				13,373
Accrued income taxes			1,099				8,911
Contract billings in excess of cost and recognized income			6,218				5,339
Other liabilities			(3,915	)			(228	)
Cash provided by (used in) operating activities of continuing operations			35,758				(6,217	)
Cash provided by (used in) operating activities of discontinued operations			(27,493	)			16,749
Cash provided by operating activities			8,265				10,532
Cash flows from investing activities:
Acquisition of subsidiaries, net of cash acquired and earnout			9,402				(421,182	)
Proceeds from sales of property, plant and equipment			33,045				390
Purchase of property, plant and equipment			(9,302	)			(13,070	)
Maturities of short-term investments			—				16,755
Purchase of short-term investments			—				(255	)
Cash provided by (used in) investing activities of continuing operations			33,145				(417,362	)
Cash provided by investing activities of discontinued operations			7,739				1,277
Cash provided by (used in) investing activities			40,884				(416,085	)
Cash flows from financing activities:
Proceeds from term loan issuance			—				282,000
Proceeds from stock issuance			—				58,078
Proceeds from revolving credit facility			59,357				—
Payments on capital leases			(8,204	)			(5,579	)
Repayment of notes payable			(65,725	)			(8,326	)
Payments on term loan			(94,679	)			—
Payments to reacquire common stock			(754	)			(894	)
Costs of debt issues			(4,935	)			(16,384	)
Stock-based compensation tax deficiency			—				(956	)
Dividend distribution to noncontrolling interest			(848	)			(942	)
Cash provided by (used in) financing activities of continuing operations			(115,788	)			306,997
Cash used in financing activities of discontinued operations			(5	)			(111	)
Cash provided by (used) in financing activities			(115,793	)			306,886
Effect of exchange rate changes on cash and cash equivalents			(253	)			780
Net decrease in cash and cash equivalents			(66,897	)			(97,887	)
Cash and cash equivalents of continuing operations at beginning of period			134,150				196,903
Cash and cash equivalents of discontinued operations at beginning of period			6,951				1,781
Cash and cash equivalents at beginning of period			141,101				198,684
Cash and cash equivalents at end of period			74,204				100,797
Less: cash and cash equivalents of discontinued operations at end of period			(5,871	)			(21,840	)
Cash and cash equivalents of continuing operations at end of period		$	68,333			$	78,957
Supplemental disclosures of cash flow information:
Cash paid for interest (including discontinued operations)		$	23,955			$	9,007
Cash paid for income taxes (including discontinued operations)		$	4,249			$	3,180
Supplemental non-cash investing and financing transactions:
Initial contingent earnout liability		$	—			$	55,340
Prepaid insurance obtained by note payable		$	6,829			$	11,687
Equipment received through like-kind exchange		$	—			$	3,355
Equipment surrendered through like-kind exchange		$	—			$	2,550

See accompanying notes to condensed consolidated financial statements.

WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)

1. The Company and Basis of Presentation

     Willbros Group, Inc., a Delaware corporation, and its subsidiaries (the “Company,” “Willbros” or “WGI”), is a global contractor specializing in energy infrastructure, serving the oil, gas, petrochemical and power industries. The Company’s offerings include: engineering, procurement and construction (either individually or as an integrated “EPC” service offering); ongoing maintenance; and other specialty services. The Company’s principal markets for continuing operations are the United States, Canada, and Oman. The Company obtains its work through competitive bidding and through 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 accompanying Condensed Consolidated Balance Sheet as of December 31, 2010, which has been derived from audited consolidated financial statements, and the unaudited Condensed Consolidated Financial Statements as of September 30, 2010 and 2011, 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 generally accepted accounting principles 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, 2010 audited Consolidated Financial Statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

     In the opinion of management, the unaudited Condensed Consolidated Financial Statements reflect all adjustments necessary to fairly state the financial position as of September 30, 2011, 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, 2011 are not necessarily indicative of the operating results and cash flows to be achieved for the full year.

     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 the carrying amount of property, plant and equipment, goodwill and parts and supplies inventories; quantification of amounts recorded for contingencies, tax accruals and certain other accrued liabilities; valuation allowances for accounts receivable and deferred income tax assets; and revenue recognition under the percentage-of-completion method of accounting, including estimates of progress toward completion and estimates of gross profit or loss accrual on contracts in progress. The Company bases its estimates on historical experience and other assumptions that it believes to be relevant under the circumstances. Actual results could differ from those estimates.

     As discussed in Note 17 — Discontinuance of Operations, Asset Disposals, and Transition Services Agreement, the Company has disposed of certain assets and operations and intends to dispose of others that are together classified as discontinued operations (collectively the “Discontinued Operations”). Accordingly, these Condensed Consolidated Financial Statements reflect these operations as Discontinued Operations in all periods presented. The disclosures in the Notes to the Condensed Consolidated Financial Statements relate to continuing operations except as otherwise indicated.

     The carrying value of financial instruments does not materially differ from fair value.

     Reclassifications — Certain reclassifications have been made to prior period amounts to conform to the current period financial statement presentation. These reclassifications relate primarily to the classification of the Company’s Libya operations and the Company’s Canadian cross-country pipeline construction operations as discontinued operations as determined during the fourth quarter of 2010, and the second quarter of 2011, respectively.

     Historically, the Company classified cash flows associated with government obligations, specifically the United States Department of Justice (“DOJ”) and the SEC, as cash flows from financing activities based on the presence of financing elements in the final settlement agreements with these entities. However, as these obligations also possess elements of operating activities, the Company has determined that it will classify the related cash flows as cash flows from operating activities. Accordingly, prior period amounts were reclassified in the Consolidated Statements of Cash Flows to conform to the current year presentation. See Note 7 — Government Obligations for additional information pertaining to these obligations.

WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)

1. The Company and Basis of Presentation (continued)

     Out-of-Period Adjustments — The Company recorded out-of-period adjustments during the three months and nine months ended September 30, 2011 to correct errors primarily related to income taxes and revenue. The tax adjustments related to an error in the calculation of the income tax provision and over-accrual of interest associated with estimated tax contingencies. Revenue was overstated as a result of the use of incorrect data for two contracts in the Company’s Downstream Oil & Gas segment. The net impact of these adjustments had no impact to pre-tax loss and was a decrease to net loss in the amount of $600 for the three months ended September 30, 2011. The net impact of these adjustments was an increase to pre-tax loss in the amount of $1,208 and a decrease to net loss in the amount of $85, for the nine months ended September 30, 2011. The Company does not believe these adjustments are material to its unaudited Condensed Consolidated Financial Statements for the three months or nine months ended September 30, 2011 after considering its expected 2011 annual financial results, nor does it believe such items are material to any of its prior annual or quarterly financial statements.

2. New Accounting Pronouncements

     In May 2011, the Financial Accounting Standards Board (“FASB”) issued amendments to disclosure requirements for common fair value measurements. These amendments, effective for the interim and annual periods beginning on or after December 15, 2011 (early adoption is prohibited), result in a common definition of fair value and common requirements for measurement and disclosure between U.S. GAAP and International Financial Reporting Standards (IFRS). Consequently, the amendments change some fair value measurement principles and disclosure requirements. The implementation of this amended accounting guidance is not expected to have a material impact on the Company’s consolidated financial position or results of operations.

     In September 2011, the FASB issued a revised standard on goodwill impairment, which is intended to reduce the cost and complexity of the annual goodwill impairment test by providing both public and nonpublic entities with the option of performing a “qualitative” assessment to determine whether further impairment testing is necessary. The revised standard is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. However, an entity can choose to early adopt the revised standard even if its annual test date is before September 15, 2011 (the date on which the revised standard was issued), provided that the entity has not yet issued its financial statements for the period that includes its annual test date. The implementation of this revised standard is not expected to have a material impact on the Company’s consolidated financial position or results of operations.

     In September 2011, the FASB issued an update that requires employers that participate in multiemployer pension plans to provide additional quantitative and qualitative disclosures. The amended disclosures provide users with more detailed information about an employer’s involvement in multiemployer pension plans and are effective for annual periods ending after December 15, 2011. The Company is currently evaluating the disclosure requirements of this update.

3. Acquisition

     On July 1, 2010, the Company completed the acquisition of 100 percent of the outstanding stock of InfrastruX Group, Inc. (“InfrastruX”) for a purchase price of $476,398, inclusive of certain working capital adjustments. The Company paid $362,980 in cash, a portion of which was used to retire InfrastruX indebtedness and pay InfrastruX transaction expenses, and issued 7,923,308 shares of the Company’s common stock to the shareholders of InfrastruX. Cash paid was comprised of $62,980 in cash on hand and $300,000 from a new term loan facility. The acquisition was completed pursuant to an Agreement and Plan of Merger (the “Merger Agreement”), dated March 11, 2010.

     InfrastruX was a privately held firm based in Seattle, Washington and provided design, construction, maintenance, engineering and other infrastructure services to the utility industry across the U.S. market.

WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)

3. Acquisition (continued)

Consideration

     Total consideration transferred in acquiring InfrastruX is summarized as follows:

Proceeds from newly issued term loan facility		$	300,000
Cash on hand			62,980
Total cash consideration			362,980
Issuance of WGI common stock			58,078	(1)
Contingent consideration			55,340	(2)
Total Consideration		$	476,398

     This transaction has been accounted for using the acquisition method of accounting which requires that, among other things, assets acquired and liabilities assumed be recorded at their fair values as of the acquisition date. The excess of the consideration transferred over those fair values is recorded as goodwill. The allocation of purchase price to acquired assets and liabilities is as follows:

Assets acquired:
Cash and cash equivalents		$	9,278
Accounts receivable			124,856
Inventories			4,501
Prepaid expenses and other current assets			39,565
Property, plant and equipment			156,160
Intangible assets			168,409
Goodwill			175,420	(3)
Other long-term assets			21,924
Liabilities assumed:
Accounts payable and other accrued liabilities			(97,985	)
Capital lease obligations			(4,977	)
Vendor related debt			(2,761	)
Deferred income taxes and other tax liabilities			(95,902	)
Other long-term liabilities			(22,090	)
Net Assets Acquired		$	476,398

     The Company has consolidated InfrastruX in its financial results as the Utility T&D segment from the date of the acquisition.

Pro Forma Impact of the Acquisition

     The following unaudited supplemental pro forma results present consolidated information as if the acquisition had been completed as of January 1, 2010. The pro forma results include: (i) the amortization associated with an estimate of the acquired intangible assets, (ii) interest expense associated with debt used to fund a portion of the acquisition and reduced interest income associated with cash used to fund a portion of the acquisition, (iii) the impact of certain fair value adjustments such as additional depreciation expense for adjustments to property, plant and equipment and reduction to interest expense for adjustments to debt, and (iv) costs directly related to acquiring InfrastruX. The pro forma results do not include any potential synergies, cost savings or other expected benefits of the acquisition. Accordingly, the pro forma results should not be considered indicative of the results that would have occurred if the acquisition and related borrowings had been consummated as of January 1, 2010, nor are they indicative of future results.

		Nine Months Ended
		September 30, 2010
Revenues		$	1,102,333
Net income attributable to Company shareholders		$	12,008
Basic net income per share		$	0.29
Diluted net income per share		$	0.29

4. Contracts in Progress

     Contract costs and recognized income not yet billed on uncompleted contracts arise when revenues have been recorded, but the amounts cannot be 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. Also included in contract cost and recognized income not yet billed on uncompleted contracts are amounts the Company seeks to collect from customers for change orders approved in scope but not for price associated with that scope change (unapproved change orders). Revenue for these amounts is recorded equal to cost incurred when realization of price approval is probable and the estimated amount is equal to or greater than the Company’s cost related to the unapproved change order. Unapproved change orders involve the use of estimates, and it is reasonably possible that revisions to the estimated recoverable amounts of recorded unapproved change orders may be made in the near-term. If the Company does not successfully resolve these matters, revenues that have been previously recorded may be required to be reduced.

WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)

4. Contracts in Progress (continued)

     Contract cost and recognized income not yet billed and related amounts billed as of September 30, 2011 and December 31, 2010 was as follows:

		September 30,				December 31,
		2011				2010
Cost incurred on contracts in progress		$	689,537			$	701,974
Recognized income			68,475				139,921
			758,012				841,895
Progress billings and advance payments			(742,893	)			(833,065	)
		$	15,119			$	8,830
Contract cost and recognized income not yet billed		$	36,266			$	23,757
Contract billings in excess of cost and recognized income			(21,147	)			(14,927	)
		$	15,119			$	8,830

     Contract cost and recognized income not yet billed includes $2,493 and $3,216 at September 30, 2011 and December 31, 2010, respectively, on completed contracts.

     The balances billed but not paid by customers pursuant to retainage provisions in certain contracts will be due upon completion of the contracts and acceptance by the customer. Based on the Company’s experience with similar contracts in recent years, the majority of the retention balances at each balance sheet date will be collected within the next twelve months. Retainage balances at September 30, 2011 and December 31, 2010, were approximately $26,149 and $14,674, respectively, and are included in accounts receivable.

5. Goodwill and Other Intangible Assets

     The changes in the carrying amount of goodwill for the nine months ended September 30, 2011, by business segment, are detailed below:

WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)

5. Goodwill and Other Intangible Assets (continued)

Upstream Oil & Gas		Goodwill				Impairment Reserves				Total, Net
Balance as of December 31, 2010		$	13,177				—			$	13,177
Reorganization of reporting structure			8,353				—				8,353
Impairment losses			—				—				—
Translation adjustments and other			(456	)			—				(456	)
Balance as of September 30, 2011		$	21,074				—			$	21,074

Downstream Oil & Gas		Goodwill				Impairment Reserves				Total, Net
Balance as of December 31, 2010		$	136,049				(122,295	)		$	13,754
Impairment losses			—				—				—
Translation adjustments and other			—				—				—
Balance as of September 30, 2011		$	136,049				(122,295	)		$	13,754

Utility T&D		Goodwill				Impairment Reserves				Total, Net
Balance as of December 31, 2010		$	184,822				—			$	184,822
Purchase price adjustments			(9,402	)			—				(9,402	)
Reorganization of reporting structure			(8,353	)			—				(8,353	)
Impairment losses			—				(134,263	)			(134,263	)
Translation adjustments and other			—				—				—
Balance as of September 30, 2011		$	167,067				(134,263	)		$	32,804

     Under U.S. GAAP, a company has up to one year subsequent to closing an acquisition to perform its annual testing for goodwill impairment, unless events occur or circumstances change at an earlier date that would more likely than not reduce the fair value of a reporting unit below its carrying value. On March 11, 2010, the Company entered into the Merger Agreement to acquire InfrastruX. The Company closed on the acquisition, which created its Utility T&D segment, on July 1, 2010. As such, the Company performed its annual testing for goodwill impairment for the Utility T&D segment in the third quarter of 2011. The impairment test consists of company estimates of the current fair value of the segment, compared to the segment’s carrying amount.

     During the third quarter of 2011, the Company recorded an estimated impairment charge of $134,263 related to its Utility T&D segment which reduced its consolidated goodwill to $67,632 at September 30, 2011. Given that the Company’s step two analysis for the segment has not been finalized, the $134,263 impairment charge represents the Company’s best estimate at September 30, 2011. The Company’s original March 2010 growth projections in the electric transmission and distribution business have not materialized. The continued slow economic recovery, exacerbated by the recent recurrence of instability in the world financial markets, and the hard-hit U.S. housing sector, have resulted in a reassessment of future growth rates and led to a reduction in the outlook for expected future cash flows in this segment.

     The initial purchase price allocation to acquired assets and liabilities for the InfrastruX acquisition included a $55,340 liability for the estimated fair value of the 2010, 2011 and combined two-year earnout provisions in the Merger Agreement. At the time of the purchase price allocation, recognition of this $55,340 liability resulted in goodwill increasing by a corresponding amount. No payments have occurred or are expected to occur; and accordingly, the liability was reduced to zero as of September 30, 2011. Reductions to the liability resulted in corresponding increases in operating income and net income of $4,000 and $10,000 during the three and nine months ended September 30, 2011, respectively, and $45,340 during the three and nine months ended September 30, 2010.

     The Company’s weighted average cost of capital used for the original purchase price valuation has increased 1.6 percentage points from 14.4 percent at the time of the InfrastruX acquisition to 16.0 percent on July 1, 2011. The primary driver of the percentage increase was related to higher levels of risk associated with increased leverage. The Company’s fair value analysis is heavily (65 percent) weighted on discounted cash flows.

     The Company’s fair value analysis is supported by a weighting of the following three generally accepted valuation approaches:

     •  Income Approach – discounted cash flows of future benefit streams;

     •  Market Approach – public comparable company multiples of sales and earnings before interest, taxes, depreciation and amortization (“EBITDA”); and

     •  Market Approach – multiples generated from recent transactions comparable in size, nature and industry.

     These approaches include numerous assumptions with respect to future circumstances, such as industry and/or local market conditions that might directly impact operations in the future, and are, therefore, uncertain. These approaches are utilized to develop a range of fair values and a weighted average of these approaches are utilized to determine the best fair value estimate within that range.

     Income Approach – Discounted Cash Flows. This valuation approach derives a present value of the reporting unit’s projected future annual cash flows over the next 8 years and the present residual value of the segment. The Company uses a variety of underlying assumptions to estimate these future cash flows, including assumptions relating to future economic market conditions, sales volumes, costs and expenses and capital expenditures. These assumptions are dependent on regional market conditions, including competitive position, degree of vertical integration, supply and demand for materials and other industry conditions. The discount rate used in the Income Approach, specifically, the weighted average cost of capital, used in the Company’s analysis during the third quarter was 16 percent. The revenue compounded annual growth rates used in the Income Approach varied from 3 percent to 20 percent. The Company’s EBITDA margins derived from these underlying assumptions varied between approximately 9 percent and 13 percent. The terminal growth rate used was 3 percent.

     Market Approach – Multiples of Sales and EBITDA. This valuation approach utilizes publicly traded construction companies’ enterprise values, as compared to their recent sales and EBITDA information. The Company used an average EBITDA multiple of 5.5 times in determining this market approach metric. This multiple is used as a valuation metric to its most recent financial performance. The Company used EBITDA as an indicator of demand because it is a widely used key indicator of the cash generating capacity of similar companies.

     Market Approach – Comparisons of Recent Transactions. This valuation approach uses publicly available information regarding recent third-party sales transactions in our industry to derive a valuation metric of the target’s respective enterprise values over their EBITDA amounts. The Company utilizes this valuation metric with its most recent financial performance to derive a “what if” sales transaction comparable fair value estimate.

     The Company selected these valuation approaches because it believes the combination of these approaches, along with its best judgment regarding underlying assumptions and estimates, provides the Company with the best estimate of fair value. The Company believes these valuation approaches are proven and appropriate for its industry and widely accepted by investors. The estimated fair value would change if the Company’s weighting assumptions under the three valuation approaches were materially modified. The Company weighted the Income Approach at 65 percent, the Market Approach – Multiples of Sales and EBITDA at 25 percent and the Market Approach – Comparison of Recent Transactions at 10 percent. This weighting was utilized to reflect fair value in current market conditions.

     The Company’s valuation model utilizes assumptions, which represent its best estimate of future events, but would be sensitive to positive or negative changes in each of the underlying assumptions as well as an alternative weighting of valuation methods, which would result in a potentially higher or lower goodwill impairment charge. The Company can provide no assurance that future goodwill impairments will not occur.

     During the third quarter of 2010, in connection with the completion of the preliminary forecast for 2011, it became evident that a goodwill impairment at Downstream Oil & Gas was probable. As a result, a preliminary step one analysis for that segment was performed. Using a discounted cash flow analysis supported by comparative market multiples to determine the fair value of the segment versus its carrying value, a range of likely impairment was generated. The low end of this range was approximately $12,000. Accordingly, the Company recorded an impairment charge of $12,000 during the third quarter of 2010.

WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)

     The changes in the carrying amounts of intangible assets for the nine months ended September 30, 2011 are detailed below:

		Customer				Trademark /				Non-compete
		Relationships				Tradename				Agreements				Technology				Total
Balance as of December 31, 2010		$	176,213			$	13,249			$	770			$	5,225			$	195,457
Additions			—				143				—				—				143
Amortization			(10,121	)			(1,054	)			(165	)			(412	)			(11,752	)
Balance as of September 30, 2011		$	166,092			$	12,338			$	605			$	4,813			$	183,848
Weighted Average Remaining Amortization Period		12.6 yrs				8.6 yrs				2.8 yrs				8.8 yrs

     Intangible assets are amortized on a straight-line basis over their estimated useful lives, which range from 5 to 15 years.

     Amortization expense included in net income for the nine months ended September 30, 2011 was $11,752. Estimated amortization expense for the remainder of 2011 and each of the subsequent five years and thereafter is as follows:

Fiscal year:
2011		$	3,910
2012			15,638
2013			15,638
2014			15,528
2015			15,418
2016			15,418
Thereafter			102,298
Total amortization		$	183,848

WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)

6. Accounts Payable and Accrued Liabilities

     Accounts payable and accrued liabilities as of September 30, 2011 and December 31, 2010 were as follows:

		September 30,				December 31,
		2011				2010
Trade accounts payable		$	149,197			$	90,617
Payroll and payroll liabilities			42,796				40,945
Provision for loss contract costs			466				1,603
Accrued insurance			29,225				27,524
Other accrued liabilities			32,200				27,697
Total accounts payable and accrued liabilities		$	253,884			$	188,386

7. Government Obligations

     Government obligations represent amounts due to government entities, specifically the DOJ and the SEC, in final settlement of the investigations involving violations of the Foreign Corrupt Practices Act (the “FCPA”) and violations of the Securities Act of 1933 (the “Securities Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”). These investigations stemmed primarily from the Company’s former operations in Bolivia, Ecuador and Nigeria. In May 2008, the Company reached final settlement agreements with the DOJ and the SEC to settle their investigations. As previously disclosed, the agreements provided for an aggregate payment of $32,300, including $22,000 in fines to the DOJ related to the FCPA violations, consisting of $10,000 paid on signing and $4,000 annually for three years thereafter, with no interest due on unpaid amounts, and $10,300 to the SEC, consisting of $8,900 of profit disgorgement and $1,400 of pre-judgment interest, payable in four equal annual installments of $2,575 with the first installment paid on signing and annually for three years thereafter. Post-judgment interest was payable on the outstanding $7,725.

     In May 2008, the Company paid $12,575 of the aggregate obligation, which consisted of the initial $10,000 payment to the DOJ, and the first installment of $2,575 to the SEC, inclusive of all pre-judgment interest. In 2009 and 2010, the Company paid $6,575 of the aggregated obligation each year, which consisted of the $4,000 annual installment to the DOJ and the $2,575 annual installment to the SEC, inclusive of all pre-judgment interest.

     In May 2011, the Company paid the remaining related aggregated obligation of $6,575, consisting of $4,000 and $2,575 to the DOJ and SEC, respectively, and in October 2011 paid $118, which completed payment of the post-judgment interest owed under the settlement agreements. All sums due under the settlement agreements have now been paid in full.

8. Long-term Debt

     Long-term debt as of September 30, 2011 and December 31, 2010 was as follows:

		September 30,				December 31,
		2011				2010
Term loan, net of unamortized discount of $9,012 and $16,126		$	195,559			$	283,124
Borrowings under credit facility			59,357				—
2.75% convertible senior notes, net			—				58,675
6.5% senior convertible notes, net			32,050				32,050
Capital lease obligations			6,650				11,107
Other obligations			3,481				2,972
Total debt			297,097				387,928
Less: current portion			(62,911	)			(76,960	)
Long-term debt, net		$	234,186			$	310,968

2010 Credit Facility

     The Company entered into a new credit agreement dated June 30, 2010 (the “2010 Credit Agreement”), among Willbros United States Holdings, Inc. (“WUSH”), a subsidiary of the Company (formerly known as Willbros USA, Inc.) as borrower, the Company and certain of its subsidiaries, as Guarantors, the lenders from time to time party thereto (the “Lenders”), Crédit Agricole Corporate and Investment Bank (“Crédit Agricole”), as Administrative Agent, Collateral Agent, Issuing Bank, Revolving Credit Facility Sole Lead Arranger, Sole Bookrunner and Participating Lender, UBS Securities LLC (“UBS”), as Syndication Agent, Natixis, The Bank of Nova Scotia and

WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)

8. Long-term Debt (continued)

Capital One, N.A., as Co-Documentation Agents, and Crédit Agricole and UBS as Term Loan Facility Joint Lead Arrangers and Joint Bookrunners. The 2010 Credit Agreement consists of a four year, $300,000 term loan facility (“Term Loan”) maturing in July 2014 and a three year revolving credit facility of $175,000 maturing in July 2013 (the “Revolving Credit Facility” or the “2010 Credit Facility”) and replaced the Company’s existing three-year $150,000 senior secured credit facility, which was scheduled to expire in November 2010. The proceeds from the Term Loan were used to pay part of the cash portion of the merger consideration payable in connection with the Company’s acquisition of InfrastruX.

     The initial aggregate amount of commitments for the Revolving Credit Facility totaled $175,000, including an accordion feature enabling the Company to increase the size of the facility by an incremental $75,000 if it is in compliance with certain terms of the Revolving Credit Facility. The Revolving Credit Facility is available for letters of credit and for revolving loans, which may be used for working capital and general corporate purposes. The Company is able to utilize 100 percent of the Revolving Credit Facility to obtain letters of credit and will have a sublimit of $150,000 for revolving loans.

     On March 4, 2011, the 2010 Credit Agreement was amended to allow the Company to make certain dispositions of equipment, real estate and business units. In most cases, proceeds from these dispositions would be required to pay down the existing Term Loan made pursuant to the 2010 Credit Agreement. Financial covenants and associated definitions, such as Consolidated EBITDA, were also amended to permit the Company to carry out its business plan and to clarify the treatment of certain items. Further, the Company has agreed to limit its revolver borrowings to $25,000, with the exception of proceeds from revolving borrowings used to make any payments in respect of both the 2.75% Convertible Senior Notes (the “2.75% Notes”) and the 6.5% Senior Convertible Notes (the “6.5% Notes”), until its maximum total leverage ratio is 3.00 to 1.00 or less. This amendment does not change the limit on obtaining letters of credit. The amendment also modifies the definition of Excess Cash Flow to include proceeds from the TransCanada Pipeline Arbitration, which required the Company to use a portion of such proceeds to further pay down the existing Term Loan. For prepayments made with Net Debt Proceeds or Equity Issuance Proceeds (as those terms are defined in the 2010 Credit Agreement), the amendment requires a prepayment premium of 4% of the principal amount of the Term Loans to be paid before December 31, 2011 and 1% of the principal amount of the Term Loans to be paid on or after December 31, 2011 but before December 31, 2012. Premiums for prepayments made with proceeds other than Net Debt Proceeds or Equity Issuance Proceeds remain the same as set forth under the 2010 Credit Agreement.

     Subsequent to this amendment, on March 15, 2011, the Company borrowed $59,357 under the Revolving Credit Facility to fund the purchase of its 2.75% Notes. These borrowings are included in “Short-term borrowings under revolving credit facility” at September 30, 2011.

     During the nine months ended September 30, 2011, the Company made accelerated payments of $94,679 against its Term Loan. Certain of these payments resulted in the recognition of a $4,124 loss on early extinguishment of debt for the nine months ended September 30, 2011. These losses represent the write-off of unamortized Original Issue Discount and financing costs inclusive of early payment fees.

     Interest payable under the 2010 Credit Agreement is determined by the loan type. Base rate loans require annual interest payments equal to the adjusted base rate plus the applicable margin for base rate loans. The adjusted base rate is equal to the highest of (a) the Prime Rate in effect for such day, (b) the sum of the Federal Funds Effective Rate in effect for such day plus 1/2 of 1.0% per annum, (c) the sum of the Prime, London Inter-Bank Offered Rate (“LIBOR”) or Eurocurrency Rate in effect for such day with a maturity of one month plus 1.0% per annum and (d) with respect to Term Loans only is 3.0% per annum. The applicable margin for base rate loans is 6.50% per annum for Term Loans and a fixed margin based on the Company’s leverage ratio for revolving advances. Eurocurrency rate loans require annual interest payments equal to the Eurocurrency Rate plus the applicable margin for Eurocurrency rate loans. The Eurocurrency Rate is equal to the LIBOR rate in effect for such day, subject to a 2.0% floor for Term Loans only. The applicable margin for Eurocurrency rate loans is 7.50% per annum for Term Loans and a fixed margin based on the Company’s leverage ratio for revolving advances. As of September 30, 2011, the interest rate on the Term Loan (currently a Eurocurrency rate loan) was 9.5%. Interest payments on the Eurocurrency rate loans are payable in arrears on the last day of such interest period, and, in the case of interest periods of greater than three months, on each business day which occurs at three month intervals from the first day of such interest period. Interest payments on base rate loans are

WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)

8. Long-term Debt (continued)

payable quarterly in arrears on the last business day of each calendar quarter. Additionally, the Company is required under the terms of the 2010 Credit Agreement to maintain in effect one or more hedging arrangements to fix or otherwise limit the interest cost with respect to at least 50 percent of the aggregate outstanding principal amount of the Term Loan.

     The Term Loan was issued at a discount such that the funded portion was equal to 94 percent of the principal amount of the Term Loan. Accordingly, the Company recognized an $18,000 discount on the Term Loan that is being amortized over the four-year term of the Term Loan.

     The 2010 Credit Facility is secured by substantially all of the assets of WUSH, the Company and the other Guarantors. The 2010 Credit Agreement prohibits the Company from paying cash dividends on its common stock.

     The 2010 Credit Agreement includes customary affirmative and negative covenants, including:

	•		Maintenance of a minimum interest coverage ratio, as defined in the 2010 Credit Agreement, of at least 2.00 to 1.00.
	•		Maintenance of a maximum total leverage ratio, as defined under the 2010 Credit Agreement, not to exceed 5.00 to 1.00.
	•		Maintenance of a minimum tangible net worth requirement of $240,000, as defined under the 2010 Credit Agreement, plus 50% of consolidated net income plus 75% of equity issuance proceeds plus 75% of the increase in stockholder’s equity after the conversion of the 2.75% Notes and the 6.5% Notes.
	•		Limitations on capital expenditures (greater of $70,000 or 25% of EBITDA).
	•		Limitations on indebtedness.
	•		Limitations on liens.
	•		Limitations on certain asset sales and dispositions.
	•		Limitations on certain acquisitions and asset purchases if certain liquidity levels are not maintained.

     A default under the 2010 Credit Agreement may be triggered by events such as a failure to comply with financial covenants or other covenants under the 2010 Credit Agreement; a failure to make payments when due under the 2010 Credit Agreement; a failure to make payments when due in respect of, or a failure to perform obligations relating to, debt obligations in excess of $15,000; a change of control of the Company; and certain insolvency proceedings. A default under the 2010 Credit Agreement would permit Crédit Agricole and 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. As of September 30, 2011, the Company was in compliance with all covenants under the 2010 Credit Agreement.

     In addition, any “material adverse change” could restrict the Company’s ability to borrow under the 2010 Credit Agreement and could also be deemed an event of default under the 2010 Credit Agreement. A “material adverse change” is defined as a change in the Company’s business, results of operations, properties or condition that could reasonably be expected to have a material adverse effect, as defined in the 2010 Credit Agreement.

     Incurred unamortized debt issue costs associated with the 2010 Credit Agreement are $11,491 as of September 30, 2011. These debt issue costs are included in “Other assets” at September 30, 2011. These costs will be amortized to interest expense over the three and four-year terms of the Revolving Credit Facility and Term Loan, respectively.

6.5% Senior Convertible Notes

     In December 2005, the Company completed a private placement of $65,000 aggregate principal amount of its 6.5% Notes, pursuant to a purchase agreement (the “Purchase Agreement”). During the first quarter of 2006, the initial purchasers of the 6.5% Notes exercised their options to purchase an additional $19,500 aggregate principal amount of the 6.5% Notes. The primary offering and the purchase option of the 6.5% Notes totaled $84,500.

     The 6.5% Notes are governed by an indenture by and among the Company, as issuer, WUSH, as guarantor, and Bank of Texas, N.A. (as successor to the original trustee), as Trustee (the “Indenture”), and were issued under the Purchase Agreement by and among the Company and the initial purchasers of the 6.5% Notes (the “Purchasers”), in a transaction exempt from the registration requirements of the Securities Act. The 6.5% Notes are convertible into shares of the Company’s common stock at a conversion rate of 56.9606 shares of common stock per $1,000 principal amount of notes representing a conversion price of approximately $17.56 per share. If

WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)

8. Long-term Debt (continued)

all notes had been converted to common stock at September 30, 2011, 1,825,587 shares would have been issuable based on the principal amount of the 6.5% Notes that remain outstanding, subject to adjustment in certain circumstances. The 6.5% Notes are general senior unsecured obligations. Interest is due semi-annually on June 15 and December 15.

     The 6.5% Notes mature on December 15, 2012 unless the notes are repurchased or converted earlier. The Company does not have the right to redeem the 6.5% Notes prior to maturity. Upon maturity, the principal amount plus the accrued interest through the day prior to the maturity date is payable only in cash. The 6.5% Notes remain outstanding as of September 30, 2011 and continue to be subject to the terms and conditions of the Indenture governing the 6.5% Notes. An aggregate principal amount of $32,050 remains outstanding (net of $0 discount) and has been classified as long-term and included within “Long-term debt” on the Consolidated Balance Sheet at September 30, 2011. The holders of the 6.5% Notes have the right to require the Company to purchase the 6.5% Notes for cash upon the occurrence of a Fundamental Change, as defined in the Indenture. In addition to the amounts described above, the Company will be required to pay a “make-whole premium” to the holders of the 6.5% Notes who elect to convert their notes into the Company’s common stock in connection with a Fundamental Change. The make-whole premium is payable in additional shares of common stock and is calculated based on a formula with the premium ranging from 0.0 percent to 28.0 percent depending on when the Fundamental Change occurs and the price of the Company’s stock at the time the Fundamental Change occurs.

     Upon conversion of the 6.5% Notes, the Company has the right to deliver, in lieu of shares of its common stock, cash or a combination of cash and shares of its common stock. Under the Indenture, the Company is required to notify holders of the 6.5% Notes of its method for settling the principal amount of the 6.5% Notes upon conversion. This notification, once provided, is irrevocable and legally binding upon the Company with regard to any conversion of the 6.5% Notes. On March 21, 2006, the Company notified holders of the 6.5% Notes of its election to satisfy its conversion obligation with respect to the principal amount of any 6.5% Notes surrendered for conversion by paying the holders of such surrendered 6.5% Notes 100 percent of the principal conversion obligation in the form of common stock of the Company. Until the 6.5% Notes are surrendered for conversion, the Company will not be required to notify holders of its method for settling the excess amount of the conversion obligation relating to the amount of the conversion value above the principal amount, if any. In the event of a default of $10,000 or more on any credit agreement, including the 2010 Credit Facility, a corresponding event of default would result under the 6.5% Notes.

     On March 10, 2010, the Company entered into Consent Agreements (the “Consent Agreements”) with Highbridge International LLC, Whitebox Combined Partners, LP, Whitebox Convertible Arbitrage Partners, LP, IAM Mini-Fund 14 Limited, HFR Combined Master Trust and Wolverine Convertible Arbitrage Trading Limited (the “Consenting Holders”), who collectively held a majority of the $32,050 in aggregate principal amount outstanding of the 6.5% Notes. Pursuant to the Consent Agreements, the Consenting Holders consented to modifications and amendments to the Indenture substantially in the form and substance set forth in a third supplemental indenture (the “Third Supplemental Indenture”) to the indenture for the 6.5% Notes. The Third Supplemental Indenture initially provided, among other things, for an amendment to Section 6.13 of the Indenture so that certain restrictions on the Company’s ability to incur indebtedness would not be applicable to the borrowing by the Company of an amount not to exceed $300,000 under a new credit facility to be entered into in connection with the acquisition of InfrastruX.

     On May 10, 2010, the Company entered into an Amendment to Consent Agreement (the “Amendment”) with the Consenting Holders. Pursuant to the Amendment, the Consenting Holders consented to modifications to the Third Supplemental Indenture to clarify that certain restrictions on the Company’s ability to incur indebtedness would not be applicable to certain borrowings by the Company to acquire InfrastruX regardless of whether the borrowing consisted of a term loan under a new credit agreement, a new series of notes or bonds or a combination thereof.

     On September 16, 2011, following receipt of the requisite consents of the holders of the 6.5% Notes, the Company entered into a fourth supplemental indenture (the “Fourth Supplemental Indenture”) to the Indenture for the 6.5% Notes. The Fourth Supplemental Indenture amends Section 6.13 of the Indenture to change the maximum consolidated leverage ratio from 4.00 to 1.00 to 6.00 to 1.00 during the fiscal quarters ending September 30, 2011 and December 31, 2011, 5.50 to 1.00 during the fiscal quarter ending March 31, 2012, 3.75 to 1.00 during the fiscal quarter ending June 30, 2012 and 3.50 to 1.00 during the fiscal quarters ending September 30, 2012 and December 31, 2012. In addition, the Fourth Supplemental Indenture conforms the definition of Consolidated EBITDA in the Indenture to the definition of Consolidated EBITDA in the 2010 Credit Agreement.

WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)

8. Long-term Debt (continued)

     The Company is required to separately account for the debt and equity components of the 6.5% Notes in a manner that reflects its nonconvertible debt-borrowing rate at the time of issuance. The difference between the fair value and the principal amount was recorded as a debt discount and as a component of equity. The debt discount was fully amortized in 2010 and as such, the carrying amount of the 6.5% Notes was $32,050 at both September 30, 2011 and December 31, 2010.

     The amount of interest expense recognized and effective interest rate related to this debt for the three and nine months ended September 30, 2011 and 2010 were as follows:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2011				2010				2011				2010
Contractual coupon interest		$	521			$	521			$	1,563			$	1,562
Amortization of discount			—				151				—				445
Interest expense		$	521			$	672			$	1,563			$	2,007
Effective interest rate			8.46	%			8.46	%			8.46	%			8.46	%

2.75% Convertible Senior Notes

     In 2004, the Company completed a primary offering of $60,000 of the 2.75% Notes. In addition, the initial purchasers of the 2.75% Notes exercised their option to purchase an additional $10,000 aggregate principal amount of the 2.75% Notes. The primary offering and purchase option of the 2.75% Notes totaled $70,000. The holders of the 2.75% Notes had the right to require the Company to purchase the 2.75% Notes, including unpaid interest, on March 15, 2011, 2014, and 2019 or upon a change of control related event. On March 15, 2011, the holders exercised their right and the Company made a cash payment of $59,357 to the holders, which included $332 of unpaid interest. In order to fund the purchase, the Company borrowed $59,357 under the Revolving Credit Facility. The 2.75% Notes were general senior unsecured obligations. Interest was paid semi-annually on March 15 and September 15. The 2.75% Notes would have matured on March 15, 2024 if the notes had not been repurchased earlier. Upon maturity, the principal amount plus the accrued interest through the day prior to the maturity date was payable only in cash.

     The amount of interest expense recognized and the effective interest rate for the three and nine months ended September 30, 2011 and 2010 were as follows:

WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)

8. Long-term Debt (continued)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2011				2010				2011				2010
Contractual coupon interest		$	—			$	408			$	332			$	1,224
Amortization of discount			—				657				682				1,935
Interest expense		$	—			$	1,065			$	1,014			$	3,159
Effective interest rate			N/A				7.40	%			7.40	%			7.40	%

Capital Leases

     The Company has entered into multiple capital lease agreements to acquire various units of construction equipment, which have a weighted average interest rate of 6.8 percent. Assets held under capital leases at September 30, 2011 and December 31, 2010 is summarized below:

		September 30,				December 31,
		2011				2010
Construction equipment		$	3,806			$	13,706
Transportation equipment			5,085				9,630
Furniture and equipment			2,685				1,885
Total assets held under capital lease			11,576				25,221
Less: accumulated depreciation			(3,192	)			(10,733	)
Net assets under capital lease		$	8,384			$	14,488

9. Retirement Benefits

     The Company has defined contribution plans that are funded by participating employee contributions and the Company. The Company matches employee contributions, up to a maximum of five percent of salary, in the form of cash. The Company match was suspended in March 2011. Company contributions for the nine months ended September 30, 2011 and 2010 were $2,317 and $2,420, respectively.

     In connection with the Company’s acquisition of InfrastruX, the Company is subject to additional collective bargaining agreements with various unions. As a result, the Company participates with other companies in the unions’ multi-employer pension and other postretirement benefit plans. These plans cover all employees who are members of such unions. The Employee Retirement Income Security Act of 1974, as amended by the Multi-Employer Pension Plan Amendments Act of 1980, imposes certain liabilities upon employers who are contributors to a multi-employer plan in the event of the employer’s withdrawal from, or upon termination of, such plan. The Company has no intention to withdraw from these plans. The plans do not maintain information on the net assets and actuarial present value of the plans’ unfunded vested benefits allocable to the Company, and the amounts, if any, for which the Company may be contingently liable, are not ascertainable at this time. Contributions to all union multi-employer pension and other postretirement plans by the Company for the nine months ended September 30, 2011 and 2010 were $36,622 and $13,046, respectively.

10. Income Taxes

     For the nine months ended September 30, 2011, the Company’s effective tax rate from continuing operations was approximately 24.1 percent. For the same nine-month period in 2010, the Company’s effective tax rate was (10.9) percent. Tax benefit recorded in the third quarter of 2011 for discrete items totals $27,603. The discrete items are comprised primarily of $25,671 deferred tax benefit associated with the estimated impairment of goodwill related to the Utility T&D segment, $1,955 of additional tax expense associated with the provision for the repatriation of foreign earnings and profits, and $3,250 associated with the $10,000 reduction of contingent earnout liability in connection with the acquisition of InfrastruX that has no tax benefit.

     In April 2011, the Company discontinued its strategy of reinvesting non-U.S. earnings in foreign operations. As of September 30, 2011, the Company has repatriated $37,500 of cash from its principal foreign holding company and used the cash to repay the Term Loan. The provision for taxes was $1,955 expense in the first nine months of 2011 associated with the repatriation of foreign earnings and profits. Subsequently, actual and projected foreign earnings and profits were reduced as a result of increased losses in Canada and WAPCo litigation costs; such losses resulted in a third quarter tax benefit of $2,186 and a net first nine months of 2011 tax expense of $1,955. The Company may repatriate available foreign cash throughout the year to further reduce Term Loan debt and fund U.S. working capital needs and use its available U.S. net operating losses to offset dividend income recognized in the U.S. Additionally, the Company does not anticipate recording additional tax expense related to additional repatriations of previously recognized non-U.S. earnings to the U.S.

WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)

10. Income Taxes (continued)

     For the three months ended September 30, 2011, the Company’s effective tax rate was 22.0 percent resulting primarily from certain discrete items representing an aggregate benefit of $30,209, comprised of deferred tax benefit of $25,671 recorded on the estimated goodwill impairment loss of $134,263 on the Utility T&D segment, and a significant reduction in the provision for taxes of $2,186 on repatriation of foreign earnings and profits. Other discrete items impacting the effective tax rate include $676 tax benefit from the true-up of taxes following completion of the year 2010 tax filings and $600 tax benefit recorded on out-of-period items. For the same three-month period in 2010, the Company’s effective tax rate from continuing operations was (5.9) percent, primarily due to deal costs and release of contingent earnout liability in connection with the acquisition of InfrastruX. There was no tax expense required to be recorded in connection with the $45,340 release of contingent earnout liability, and the $3,453 deal costs received no tax benefit.

11. Stockholders’ Equity

     The information contained in this note pertains to continuing and discontinued operations.

     Comprehensive Income

     The Company’s foreign operations are translated into U.S. dollars and a translation adjustment is recorded in other comprehensive income (loss), net of tax, as a result. Additionally, changes in fair value on cash flow hedges are recorded in other comprehensive income (loss), net of tax, until the hedged transactions occur. The following table presents the components of comprehensive loss for the periods presented:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2011				2010				2011				2010
Net income (loss)		$	(110,973	)		$	35,701			$	(158,894	)		$	31,635
Foreign currency translation adjustment, net of tax			(5,726	)			3,146				(2,617	)			2,407
Change in fair value on cash flow hedges, net of tax			(731	)			(711	)			(1,850	)			(711	)
Comprehensive income/(loss)			(117,430	)			38,136				(163,361	)			33,331
Less: income attributable to noncontrolling interest			(296	)			(293	)			(878	)			(902	)
Comprehensive income (loss) attributable to Willbros Group, Inc.		$	(117,726	)		$	37,843			$	(164,239	)		$	32,429

Stock Ownership Plans

     In May 1996, the Company established the Willbros Group, Inc. 1996 Stock Plan (the “1996 Plan”) with 1,125,000 shares of common stock authorized for issuance to provide for awards to key employees of the Company, and the Willbros Group, Inc. Director Stock Plan (the “Director Plan”) with 125,000 shares of common stock authorized for issuance to provide for the grant of stock options to non-employee directors. The number of shares authorized for issuance under the 1996 Plan, and the Director Plan, was increased to 4,825,000 and 225,000, respectively, by stockholder approval. The Director Plan expired August 16, 2006.

WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)

11. Stockholders’ Equity (continued)

     In 2006, the Company established the 2006 Director Restricted Stock Plan (the “2006 Director Plan”) with 50,000 shares authorized for issuance to grant shares of restricted stock and restricted stock rights to non-employee directors. The number of shares authorized for issuance under the 2006 Director Plan was increased in 2008 to 250,000 by stockholder approval.

     On May 26, 2010, the Company established the Willbros Group, Inc. 2010 Stock and Incentive Compensation Plan (the “2010 Plan”) with 2,100,000 shares of common stock authorized for issuance to provide for awards to key employees of the Company. All future grants of stock awards to key employees will be made through the 2010 Plan. As a result, the 1996 Plan was frozen, with the exception of normal vesting, forfeiture and other activity associated with awards previously granted under the 1996 Plan. At September 30, 2011, the 2010 Plan had 1,196,807 shares available for grant.

     Restricted stock and restricted stock units or rights, also described collectively as restricted stock units (“RSUs”), and options granted to employees vest generally over a three to four year period. Options granted under the 2010 Plan expire 10 years subsequent to the grant date. Upon stock option exercise, common shares are issued from treasury stock. Options granted under the Director Plan are fully vested. Restricted stock and restricted stock rights granted under the 2006 Director Plan vest one year after the date of grant. At September 30, 2011, the 2006 Director Plan had 46,373 shares available for grant. For RSUs granted prior to March of 2009, certain provisions allow for accelerated vesting upon eligible retirement. Additionally, certain provisions allow for accelerated vesting in the event of involuntary termination not for cause or a change of control of the Company. During the three months ended September 30, 2011 and 2010, $97 and $223, respectively, of compensation expense was recognized due to accelerated vesting of RSUs due to retirement and separation from the Company.

     Share-based compensation related to RSUs is recorded based on the Company’s stock price as of the grant date. Expense from both stock options and RSUs totaled $5,155 and $1,911, respectively, for the nine months ended September 30, 2011 and 2010.

     The Company determines fair value of stock options as of its grant date using the Black-Scholes valuation method. No options were granted during the nine months ended September 30, 2011 and 2010.

     The Company’s stock option activity and related information consist of:

						Weighted-
						Average
		Shares				Exercise Price
Outstanding, January 1, 2011			227,750			$	15.28
Granted			—				—
Exercised			—				—
Forfeited or expired			—				—
Outstanding, September 30, 2011			227,750			$	15.28
Exercisable, September 30, 2011			227,750			$	15.28

     As of September 30, 2011, the aggregate intrinsic value of stock options outstanding and stock options exercisable was $0 and $0, respectively. The weighted average remaining contractual term of outstanding options and exercisable options is 3.54 years and 3.54 years, respectively, at September 30, 2011. The total intrinsic value of options exercised was $0 and $0 during the nine months ended September 30, 2011 and 2010, respectively. The total fair value of options vested during the nine months ended September 30, 2011 and 2010 was $135 and $0, respectively.

WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)

11. Stockholders’ Equity (continued)

     The Company’s non-vested options at September 30, 2011 and the changes in non-vested options during the nine months ended September 30, 2011 are as follows:

						Weighted-
						Average Grant-
		Shares				Date Fair Value
Non-vested, January 1, 2011			20,000			$	6.77
Granted			—				—
Vested			(20,000	)			6.77
Forfeited or expired			—				—
Non-vested, September 30, 2011			—			$	—

     The Company’s RSU activity and related information for the nine months ended September 30, 2011 consist of:

						Weighted-
						Average Grant-
		Shares				Date Fair Value
Outstanding, January 1, 2011			888,853			$	13.54
Granted			814,963				10.34
Vested			(426,142	)			14.00
Forfeited			(119,794	)			13.12
Outstanding, September 30, 2011			1,157,880			$	11.20

     The total fair value of RSU’s vested during the nine months ended September 30, 2011 and 2010 was $5,970 and $7,406, respectively.

     As of September 30, 2011, there was a total of $9,991 of unrecognized compensation cost, net of estimated forfeitures, related to all non-vested share-based compensation arrangements granted under the Company’s stock ownership plans. That cost is expected to be recognized over a weighted-average period of 2.59 years.

Warrants to Purchase Common Stock

     In 2006, the Company completed a private placement of equity to certain accredited investors pursuant to which the Company issued and sold 3,722,360 shares of the Company’s common stock resulting in net proceeds of $48,748. In conjunction with the private placement, the Company also issued warrants to purchase an additional 558,354 shares of the Company’s common stock. Each warrant was exercisable, in whole or in part, until 60 months from the date of issuance at an exercise price of $19.03 per share. The fair value of the warrants was $3,423 on the date of the grant, as calculated using the Black-Scholes option-pricing model. There were 536,925 warrants outstanding at September 30, 2011 and 2010, respectively. These warrants expired, unexercised, on October 27, 2011.

12. 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 warrants and vesting of RSUs 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. The Company’s convertible notes are included in the calculation of diluted income per share under the “if-converted” method. Additionally, diluted income (loss) per share for continuing operations is calculated excluding the after-tax interest expense associated with the convertible notes since these notes are treated as if converted into common stock.

     Basic and diluted income (loss) per common share from continuing operations for the three and nine months ended September 30, 2011 and 2010 are computed as follows:

WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)

12. Income (Loss) Per Share (continued)

		Three Months								Nine Months
		Ended September 30,								Ended September 30,
		2011				2010				2011				2010
Income (loss) from continuing operations		$	(99,410	)		$	38,411			$	(131,323	)		$	38,702
Less: Income attributable to noncontrolling interest			(296	)			(293	)			(878	)			(902	)
Net income (loss) from continuing operations attributable to Willbros Group, Inc. (numerator for basic calculation)			(99,706	)			38,118				(132,201	)			37,800
Add: Interest and debt issuance costs associated with convertible notes			—				1,246				—				2,108
Net income (loss) from continuing operations applicable to common shares (numerator for diluted calculation)		$	(99,706	)		$	39,364			$	(132,201	)		$	39,908
Weighted average number of common shares outstanding for basic income (loss) per share			47,533,967				46,997,431				47,429,059				41,651,994
Weighted average number of potentially dilutive common shares outstanding			—				5,156,598				—				3,238,011
Weighted average number of common shares outstanding for diluted income per share			47,533,967				52,154,029				47,429,059				44,890,005
Income (loss) per common share from continuing operations:
Basic		$	(2.10	)		$	0.81			$	(2.79	)		$	0.91
Diluted		$	(2.10	)		$	0.75			$	(2.79	)		$	0.89

     The Company has excluded shares potentially issuable under the terms of use of the securities listed below from the computation of diluted income (loss) per share, as the effect would be anti-dilutive:

		Three Months
		Ended September 30,
		2011				2010
6.5% Senior Convertible Notes			1,825,587				—
Stock options			227,750				187,860
Warrants to purchase common stock			536,925				536,925
Restricted stock and restricted stock rights			183,581				—
			2,773,843				724,785

     In accordance with the FASB’s standard on income (loss) per share — contingently convertible instruments, the shares issuable upon conversion of the 6.5% Notes, would have been included in diluted income (loss) per share, if those securities were dilutive, regardless of whether the Company’s stock price was greater than or equal to the conversion price of $17.56. However, these securities are only dilutive to the extent that interest per weighted average convertible share does not exceed basic income (loss) per share. For the three months ended September 30, 2011, the related interest per convertible share associated with the 6.5% Notes did exceed basic income (loss) per share for the current period. As such, those shares have not been included in the computation of diluted income (loss) per share.

13. Segment Information

     The Company’s segments are comprised of strategic businesses that are defined by the industries they serve. Each is managed as an operation with well established strategic directions and performance requirements. Prior to the InfrastruX acquisition, the Company operated through two business segments: Upstream Oil & Gas

WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)

13. Segment Information (continued)

and Downstream Oil & Gas. These segments operate primarily in the United States, Canada, and Oman. On July 1, 2010, the Company closed on the acquisition of InfrastruX, which diversified the Company’s capabilities and expanded its geographic footprint. InfrastruX provided maintenance and construction solutions to customers in the electric power and natural gas transmission and distribution markets. Post acquisition, the Company established a third business segment, Utility Transmission & Distribution “Utility T&D”, which includes electric power transmission and distribution and low-pressure, inside the gate natural gas distribution. The natural gas transmission division of InfrastruX, which is similar to Willbros’ legacy U.S. pipeline construction business unit, was incorporated into the Company’s Upstream Oil & Gas segment effective January 1, 2011. Management evaluates the performance of each operating segment based on operating income. Corporate operations include the executive management, general, administrative, and financing functions of the organization. The costs to provide these services are allocated, as are certain other corporate assets, among the three operating segments. There were no material inter-segment revenues in the periods presented.

     The following tables reflect the Company’s reconciliation of segment operating results to net income (loss) in the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2011 and 2010:

     For the three months ended September 30, 2011:

		Upstream				Downstream
		Oil & Gas				Oil & Gas				Utility T&D				Consolidated
Revenue		$	226,372			$	53,680			$	186,051			$	466,103
Operating expenses			212,791				57,553				181,937				452,281
Goodwill impairment			—				—				134,263				134,263
Changes in fair value of contingent earnout			—				—				—				(4,000	)
Operating income (loss)		$	13,581			$	(3,873	)		$	(130,149	)			(116,441	)
Other expense															(11,290	)
Benefit for income taxes															(28,321	)
Income from continuing operations															(99,410	)
Loss from discontinued operations net of benefit for income taxes															(11,563	)
Net loss															(110,973	)
Less: Income attributable to noncontrolling interest															(296	)
Net loss attributable to Willbros Group, Inc.														$	(111,269	)

     For the three months ended September 30, 2010:

		Upstream				Downstream
		Oil & Gas				Oil & Gas				Utility T&D				Consolidated
Revenue		$	189,359			$	80,870			$	133,730			$	403,959
Operating expenses			159,674				80,486				149,615				389,775
Goodwill impairment			—				12,000				—				12,000
Changes in fair value of contingent earnout			—				—				—				(45,340	)
Operating income (loss)		$	29,685			$	(11,616	)		$	(15,885	)			47,524
Other expense															(11,251	)
Benefit for income taxes															(2,138	)
Income from continuing operations															38,411
Loss from discontinued operations net of benefit for income taxes															(2,710	)
Net income															35,701
Less: Income attributable to noncontrolling interest															(293	)
Net income attributable to Willbros Group, Inc.														$	35,408

WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)

13. Segment Information (continued)

     For the nine months ended September 30, 2011:

		Upstream				Downstream
		Oil & Gas				Oil & Gas				Utility T&D				Consolidated
Revenue		$	579,375			$	165,376			$	508,574			$	1,253,325
Operating expenses			562,954				178,024				512,247				1,253,225
Settlement of project termination			8,236				—				—				8,236
Goodwill impairment			—				—				134,263				134,263
Changes in fair value of contingent earnout			—				—				—				(10,000	)
Operating income (loss)		$	8,185			$	(12,648	)		$	(137,936	)			(132,399	)
Other expense															(40,683	)
Benefit for income taxes															(41,759	)
Loss from continuing operations															(131,323	)
Loss from discontinued operations net of benefit for income taxes															(27,571	)
Net loss															(158,894	)
Less: Income attributable to noncontrolling interest															(878	)
Net loss attributable to Willbros Group, Inc.														$	(159,772	)

     For the nine months ended September 30, 2010:

		Upstream				Downstream
		Oil & Gas				Oil & Gas				Utility T&D				Consolidated
Revenue		$	452,630			$	202,895			$	133,730			$	789,255
Operating expenses			405,510				217,962				149,615				773,087
Goodwill impairment			—				12,000				—				12,000
Changes in fair value of contingent earnout			—				—				—				(45,340	)
Operating income (loss)		$	47,120			$	(27,067	)		$	(15,885	)			49,508
Other expense															(14,619	)
Benefit for income taxes															(3,813	)
Income from continuing operations															38,702
Loss from discontinued operations net of benefit for income taxes															(7,067	)
Net income															31,635
Less: Income attributable to noncontrolling interest															(902	)
Net income attributable to Willbros Group, Inc.														$	30,733