Conrad Rides the (Expansion) Tide

Thursday, October 10, 2002
The business of predicting the course of financial markets has led many companies - good and bad, large and small - to ruin. Perhaps, then, it is better to rely on tenets of nature, such as "Only the Strong Survive" when laying out business plans. Conrad Industries of Morgan City, La., has obviously ascribed to the latter, building a formidable fortress of a marine company with a wide geographic scope, including the recent news of its pending acquisition of Swiftships, an apparent $12.5 million deal which is still under negotiation. — by Greg Trauthwein Visitors unfamiliar with Conrad Industries would be immediately struck by the modernity of its facilities in Morgan City, La. In continuous operation since 1948, Conrad Shipyard, based here, specializes in offshore and inland vessel and barge repair. The facility is a literal beehive of activity, though this busy atmosphere is well managed based on the clean organization and flow of work through the yard. The Morgan City shipyard boasts a number of modern covered facilities, doubtless a key enabling the company to deliver its hallmark quality products on time, on budget.

While many businesses in the region are quick to bemoan the level of business activity, if there is a recession, it is not quickly evident following a quick tour of Conrad Shipyard. First, the level of investment is proven with a new $800,000, 15,000 sq. ft. production hall, to be used as a roll on/roll off area for conversions.

The company also recently added a new 10,000 ton drydock, bringing its drydock total to six. In addition to the new additions to the yard, the most striking feature of the shipyard is simply the diversity of the products being built. From the "bread and butter" 120 x 30 x 7 ft. deck barge - which Steve Berthold, sales manager, said the company builds in six weeks, completely by hand, with constant production on spec for sale immediately - to the 175 Class Lift Boat to the Well Stimulation Barge, an impressive 180 x 60 x 10 ft. unit for operation on Lake Maracaibo, Conrad ensures that it is trained and outfitted to accomplish most any job that comes its way. Conrad's Orange Shipbuilding Co. facility in Orange, Texas is equally busy, with construction progressing on three 60-ft. Army tugboats, a 180-ft. North Carolina Ferry, a 94-ft. Z-drive tug and four, 72-ft. fully ABS-classed towboats. Adding Swiftships? On August 12, 2002, Conrad announced that it had executed a letter of intent for the purchase of the assets of Swiftships Shipbuilders, LLC and Swiftships Technologies, LLC for approximately $12.5 million in cash. At press time, negotiations for the sale were still pending, as the letter of intent is non-binding and subject to the execution and closing of a definitive agreement. It stipulates that before October 31, 2002 Swiftships will negotiate exclusively with Conrad.

Swiftships designs, builds, overhauls and repairs aluminum crew/supply boats, aluminum patrol boats and other marine vessels at two shipyards in Morgan City, La., and employs approximately 130. In 30 years, Swiftships and its predecessors have designed and built more than 530 vessels, ranging in size from 30 to 225 ft. for domestic and foreign, commercial and government customers.

In pursuing the Swiftship acquisition, Conrad's management views Swiftships as the market leader in the key Gulf of Mexico region. "We believe Swiftships' aluminum crew/supply boats set the design and operational standards in the Gulf of Mexico against which others are measures," said Kenneth G. "Jerry" Myers, Conrad president and CEO.

Conrad will be able to significantly enhance and expand its products, services and customer base with the acquisition of Swiftships' assets and experienced and dedicated workforce along with its designs and marketing expertise. Conrad will also gain entrance into the international commercial and government markets as Swiftships has successfully marketed and delivered products to over 75 countries over the past 30 years. The acquisition affords Conrad the opportunity for sustained growth in a different market segment than it currently operates. Conrad is working with the Swiftships companies to complete the acquisition process. From the Beginning The company was incorporated in March 1998 to serve as the holding company for Conrad Shipyard, Inc. and Orange Shipbuilding Company, Inc. Conrad has operated since 1948 at its shipyard in Morgan City, La., and specializes in the construction, conversion and repair of large and small deck barges, single and double hull tank barges, lift boats, push boats, tow boats, offshore tug boats, ferries and offshore supply vessels. In December 1997, it acquired Orange Shipbuilding to increase its capacity to serve Conrad's existing markets and to expand its product capability into the construction of additional types of marine vessels, including tug boats for the U.S. Army, offshore tug boats, push boats and double hull barges, and the fabrication of modular components for offshore drilling rigs and FPSOs. In February 1998, Conrad commenced operations at a conversion and repair facility in Amelia, La., expanding its capacity to provide conversion and repair services for marine vessels.

Despite a downturn in 2001 due to a slowdown in the Gulf of Mexico, Conrad experienced an increase in demand for repair and conversion services in the first quarter of 2002 due to seasonal workload patterns. Bid activity in the vessel construction segment has improved since the fourth quarter of 2001, and as a result the company's backlog has jumped from $11.3 million at March 31, 2002 to $22.6 million at June 30, 2002.

In late 2000 the company bought 52 acres of land in Amelia, La., for $1.3 million. The land is strategically located on the Intracoastal Waterway approximately 30 miles from the Gulf of Mexico and is within one mile of the other existing Amelia facility. Work is currently in progress to develop approximately 16 acres of the property as a repair and conversion facility.

The initial development included clearing land, grubbing and dredging at a total cost of $0.9 million. The next phase of development will include additional site preparation, installation of steel sheet-pile bulkhead system, dry excavation and dredging, other infrastructure improvements and outfitting with tools and equipment at an anticipated cost of approximately $6.7 million.

Current plans are to move three of the company's drydocks (including its largest drydock) to the facility which is estimated to be in service during the fourth quarter of 2002.

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