-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BZ0lNEeQkgz2ZmS6gWVWPPCI491gSa5pD3ZQRWt+m9bs8gJbE0yf7lILnbxvmS50 B+5FkrmyYDsRMQUU2MfCnQ== /in/edgar/work/20000811/0000906280-00-000203/0000906280-00-000203.txt : 20000921 0000906280-00-000203.hdr.sgml : 20000921 ACCESSION NUMBER: 0000906280-00-000203 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUPERIOR ENERGY SERVICES INC CENTRAL INDEX KEY: 0000886835 STANDARD INDUSTRIAL CLASSIFICATION: [1389 ] IRS NUMBER: 113039286 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-22603 FILM NUMBER: 694162 BUSINESS ADDRESS: STREET 1: 1105 PETERS ROAD CITY: HARVEY STATE: LA ZIP: 70058 BUSINESS PHONE: 5043624321 MAIL ADDRESS: STREET 1: 1105 PETERS ROAD CITY: HARVEY STATE: LA ZIP: 70058 FORMER COMPANY: FORMER CONFORMED NAME: SMALLS OILFIELD SERVICES CORP DATE OF NAME CHANGE: 19930328 10-Q 1 0001.txt =========================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000 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 NO. 0-20310 SUPERIOR ENERGY SERVICES, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) Delaware 75-2379388 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1105 Peters Road 70058 Harvey, Louisiana (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code: (504) 362-4321 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] The number of shares of the Registrant's common stock outstanding on August 4, 2000 was 67,537,234. =========================================================================== SUPERIOR ENERGY SERVICES, INC. Quarterly Report on Form 10-Q for the Quarterly Period Ended June 30, 2000 TABLE OF CONTENTS PAGE PART I FINANCIAL INFORMATION Item 1. Financial Statements 3 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3. Quantitative and Qualitative Disclosures about Market Risk 14 PART II OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 14 Item 6. Exhibits and Reports on Form 8-K 14 EXPLANATORY NOTE On July 15, 1999, we acquired Cardinal Holding Corp. through its merger with one of our wholly-owned subsidiaries. The merger was treated for accounting purposes as if Superior was acquired by Cardinal in a purchase business transaction. The purchase method of accounting required that we carry forward Cardinal's net assets at their historical book value and reflect Superior's net assets at their estimated fair value at the date of the merger. Accordingly, all historical financial results presented in the consolidated financial statements included in this Quarterly Report for periods prior to July 15, 1999 reflect Cardinal's results on a stand-alone basis. Cardinal's historical operating results were substantially different than ours for the same periods. The results for the three and six months ended June 30, 2000 reflect three and six months, respectively, of operations of Cardinal, Superior and Production Management Companies, Inc., which we acquired effective November 1, 1999. The results for the three and six months ended June 30, 1999 reflect three and six months, respectively, of operations of Cardinal only. Consequently, analyzing prior period results to determine or estimate our future operating potential will be difficult. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES Consolidated Balance Sheets June 30, 2000 and December 31, 1999 (in thousands, except share data) 6/30/00 12/31/99 (Unaudited) (Audited) ----------- ----------- ASSETS Current assets: Cash and cash equivalents $ 16,480 $ 8,018 Accounts receivable - net 53,398 41,878 Income tax receivable - 224 Deferred tax asset 1,437 1,437 Prepaid insurance and other 5,691 4,565 ----------- ----------- Total current assets 77,006 56,122 ----------- ----------- Property, plant and equipment - net 164,725 134,723 Goodwill - net 85,754 78,641 Notes receivable 18,598 8,898 Other assets - net 3,801 3,871 ----------- ----------- Total assets $ 349,884 $ 282,255 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 12,226 $ 9,196 Accrued expenses 10,701 15,473 Income tax payable 3,475 - Current maturities of long-term debt 3,011 2,579 Notes payable - other - 3,669 ----------- ----------- Total current liabilities 29,413 30,917 ----------- ----------- Deferred income taxes 13,236 12,392 Long-term debt 115,890 117,459 Stockholders' equity: Preferred stock of $.01 par value. Authorized, 5,000,000 shares; none issued - - Common stock of $.001 par value. Authorized, 125,000,000 shares; issued and outstanding 67,453,589 at June 30, 2000, 59,810,789 at December 31, 1999 67 60 Additional paid-in capital 313,354 248,934 Accumulated deficit (122,076) (127,507) ----------- ----------- Total stockholders' equity 191,345 121,487 ----------- ----------- Total liabilities and stockholders' equity $ 349,884 $ 282,255 =========== =========== See accompanying notes to consolidated financial statements.
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES Consolidated Statements of Operations Three and Six Months Ended June 30, 2000 and 1999 (in thousands, except per share data) (unaudited) Three Months Six Months 2000 1999 2000 1999 -------- -------- --------- -------- Revenues $ 57,592 $ 16,267 $ 104,866 $ 35,245 -------- -------- --------- -------- Costs and expenses: Cost of services 33,931 13,429 61,693 23,935 Depreciation and amortization 4,935 2,187 9,672 4,127 General and administrative 9,673 3,671 18,984 7,348 -------- -------- --------- -------- Total costs and expenses 48,539 19,287 90,349 35,410 -------- -------- --------- -------- Income (loss) from operations 9,053 (3,020) 14,517 (165) Other income (expense): Interest expense (3,068) (3,508) (5,988) (6,914) Interest income 641 - 834 - -------- -------- --------- -------- Income (loss) before income taxes 6,626 (6,528) 9,363 (7,079) Income taxes 2,783 (2,167) 3,932 (2,265) -------- -------- --------- -------- Net income (loss) $ 3,843 $ (4,361) $ 5,431 $ (4,814) ======== ======== ========= ========= Basic earnings (loss) per share $ 0.06 $ (0.75) $ 0.09 $ (0.96) ======== ======== ========= ========= Diluted earnings (loss) per share $ 0.06 $ (0.75) $ 0.09 $ (0.96) ======== ======== ========= ========= Weighted average common shares used in computing earnings (loss) per share: Basic 64,643 6,728 62,250 6,409 Incremental common shares from stock options 562 - 154 - -------- -------- --------- -------- Diluted 65,205 6,728 62,404 6,409 ======== ======== ========= ========= See accompanying notes to consolidated financial statements.
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Six Months Ended June 30, 2000 and 1999 (in thousands) (unaudited) 2000 1999 --------- ---------- Cash flows from operating activities: Net income (loss) $ 5,431 $ (4,814) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Deferred income taxes - (102) Depreciation and amortization 9,672 4,127 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable (7,745) 5,906 Other - net 207 561 Accounts payable 1,055 (2,791) Accrued expenses (4,772) (1,568) Income taxes 3,699 (2,540) --------- ---------- Net cash provided by (used in) operating activities 7,547 (1,221) --------- ---------- Cash flows from investing activities: Payments for purchases of property and equipment (31,200) (2,320) Acquisitions of businesses, net of cash acquired (8,958) - Increase in notes receivable (9,700) - --------- ---------- Net cash used in investing activities (49,858) (2,320) --------- ---------- Cash flows from financing activities: Net payments on notes payable (3,713) 1,387 Proceeds from long-term debt 4,100 - Principal payments on long-term debt (14,042) (3,235) Proceeds from issuance of stock 63,263 5,000 Proceeds from exercise of stock options 1,165 - --------- ---------- Net cash provided by financing activities 50,773 3,152 --------- ---------- Net increase (decrease) in cash and cash equivalents 8,462 (389) Cash and cash equivalents at beginning of period 8,018 421 --------- ---------- Cash and cash equivalents at end of period $ 16,480 $ 32 ========= ========== See accompanying notes to consolidated financial statements
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES Notes to Unaudited Consolidated Financial Statements Six Months Ended June 30, 2000 and 1999 (1) MERGER On July 15, 1999, Superior consummated a merger (the "Merger") whereby it acquired all of the outstanding capital stock of Cardinal Holding Corp. ("Cardinal") from the stockholders of Cardinal in exchange for an aggregate of 30,239,568 shares of Superior's common stock (or 51% of the then outstanding common stock). The acquisition was effected through the merger of a wholly-owned subsidiary of Superior, formed for this purpose, with and into Cardinal, with the effect that Cardinal became a wholly-owned subsidiary of Superior. As used in the consolidated financial statements for Superior Energy Services, Inc., the term "Superior" refers to the Company as of dates and periods prior to the Merger and the term "Company" refers to the combined operations of Superior and Cardinal after the consummation of the Merger. Due to the fact that the former Cardinal shareholders received 51% of the outstanding common stock at the date of the Merger, among other factors, the Merger has been accounted for as a reverse acquisition (i.e., a purchase of Superior by Cardinal) under the purchase method of accounting. As such, the Company's consolidated financial statements and other financial information reflect the historical operations of Cardinal for periods and dates prior to the Merger. The net assets of Superior, at the time of the Merger, have been reflected at their estimated fair value pursuant to the purchase method of accounting at the date of the Merger. (2) BASIS OF PRESENTATION Certain information and footnote disclosures normally in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission; however, management believes the disclosures which are made are adequate to make the information presented not misleading. These financial statements and footnotes should be read in conjunction with the financial statements and notes thereto included in Superior Energy Services, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1999 and Management's Discussion and Analysis of Financial Condition and Results of Operations. The financial information for the three and six months ended June 30, 2000 and 1999 has not been audited. However, in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the results of operations for the periods presented have been included therein. The results of operations for the first six months of the year are not necessarily indicative of the results of operations that might be expected for the entire year. Certain previously reported amounts have been reclassified to conform to the 2000 presentation. (3) EARNINGS PER SHARE On July 15, 1999, the Company effected an approximate 364 to 1 stock issuance as a result of the Merger. All earnings per common share amounts, references to common stock, and stockholders' equity amounts have been restated as if the stock issuance had occurred as of the earliest period presented. The effect of preferred dividends distributed prior to the Merger on arriving at the income available to common stockholders was $707,000 and $1,330,000 for the three and six months ended June 30, 1999, respectively. (4) BUSINESS COMBINATIONS On June 21, 2000, the Company acquired H.B. Rentals, L.C. and its subsidiary Eagle Rentals, Inc. ("HB") for $7.0 million in cash consideration. Additional consideration, if any, will be based upon HB's average eighteen-month and three-year period EBITDA (earnings before interest, income taxes, depreciation and amortization expense) less certain adjustments. The total additional consideration, if any, will not exceed $5.2 million. The acquisition was accounted for as a purchase, and HB's assets and liabilities have been valued at their estimated fair market value. The purchase price allocated to net assets was approximately $1.2 million, and the excess purchase price over the fair value of the net assets of HB of approximately $5.8 million was allocated to goodwill. The results of operations of HB have been included from June 21, 2000. Effective November 1, 1999, the Company acquired Production Management Companies, Inc. ("PMI") for aggregate consideration consisting of $3.0 million in cash, and 610,000 shares of the Company's common stock at an approximate trading price of $5.66. Additional consideration, if any, will be based upon a multiple of four times PMI's EBITDA less certain adjustments. The acquisition was accounted for as a purchase, and PMI's assets and liabilities have been valued at their estimated fair market value. The purchase price allocated to net assets was $3.5 million, and the excess purchase price of $3.0 million over the fair value of net assets was recorded as goodwill. The results of operations of PMI have been included from November 1, 1999. On July 15, 1999, the Company acquired Cardinal through a merger by issuing 30,239,568 shares of the Company's common stock (see note 1). The valuation of Superior's net assets is based upon the 28,849,523 common shares outstanding prior to the Merger at the approximate trading price of $3.78 at the time of the negotiation of the Merger on April 21, 1999. The purchase price allocated to net assets was $53.7 million. The revaluation reflected excess purchase price of $55.3 million over the fair value of net assets, which was recorded as goodwill. The results of operations of Superior have been included from July 15, 1999. Effective July 1, 1999, Superior sold two subsidiaries for a promissory note having an aggregate principal amount of $8.9 million, which bears interest of 7.5% per annum. As part of the sale, the purchasers were granted the right to resell the capital stock of the two companies to the Company in 2002 subject to certain terms and conditions. The following unaudited pro forma information for the three and six months ended June 30, 2000 and 1999 presents a summary of the consolidated results of operations as if the Merger, the acquisitions and the sale of the subsidiaries had occurred on January 1, 1999, with pro forma adjustments to give effect to amortization of goodwill, depreciation and certain other adjustments, together with related income tax effects (in thousands, except per share amounts):
Three Months Ended Six Months Ended June 30, June 30, 2000 1999 2000 1999 -------- -------- --------- -------- Revenues $ 60,531 $ 48,259 $ 111,663 $ 98,586 ======== ======== ========= ======== Net income (loss) $ 3,684 $ (2,148) $ 4,888 $ (869) ======== ======== ========= ======== Basic earnings (loss) per share $ 0.06 $ (0.04) $ 0.08 $ (0.01) ======== ======== ========= ======== Diluted earnings (loss) per share $ 0.06 $ (0.04) $ 0.08 $ (0.01) ======== ======== ========= ========
The above pro forma information is not necessarily indicative of the results of operations that would have been achieved had the Merger, acquisitions and the sale of the subsidiaries been effected on January 1, 1999. Most of Superior's acquisitions have involved additional contingent consideration based upon a multiple of the acquired companies' respective average EBITDA over a three year period from the respective dates of acquisition. In no event will the maximum aggregate consideration exceed $54.6 million for all acquisitions inclusive of the HB and PMI acquisitions. If performance continues at current levels for certain acquired companies, the additional consideration actually paid will be materially less than the maximum consideration. The additional consideration is not currently reflected in the respective companies' purchase price. The additional consideration, if any, will be capitalized as additional purchase price. In the fourth quarter of 2000, additional consideration related to three of our 1997 acquisitions will be determined. In no event will this amount exceed $21.4 million. We expect to use the $22 million portion of the credit facility, which was designed to fund these payments, to the extent that we do not pay them from working capital. (5) SEGMENT INFORMATION The Company's reportable segments, subsequent to the Merger and recent acquisitions, are as follows: well services, wireline, marine, rental tools, environmental, field management and other. Each segment offers products and services within the oilfield services industry. The well services segment provides plug and abandonment services, coiled tubing services, well pumping and stimulation services, data acquisition services, gas lift services and electric wireline services. The wireline segment provides mechanical wireline services that perform a variety of ongoing maintenance and repairs to producing wells, as well as modifications to enhance the production capacity and life span of the well. The marine segment operates liftboats for oil and gas production facility maintenance and construction operations as well as production service activities. The rental tools segment rents and sells specialized equipment for use with onshore and offshore oil and gas well drilling, completion, production and workover activities. The environmental segment provides offshore oil and gas cleaning services, as well as dockside cleaning of items including supply boats, cutting boxes, and process equipment. The field management segment provides contract operations and maintenance services, interconnect piping services, sandblasting and painting maintenance services, and transportation and logistics services. The other segment manufactures and sells drilling instrumentation and oil spill containment equipment. All the segments operate primarily in the Gulf Coast Region. Summarized financial information concerning the Company's segments for the three and six months ended June 30, 2000 and 1999 is shown in the following tables (in thousands):
THREE MONTHS ENDED JUNE 30, 2000 Well Rental Field Unallocated Consolidated Services Wireline Marine Tools Environ. Mgmt. Other Amount Total ----------------------------------------------------------------------------------------------- Revenues $ 12,629 $ 7,870 $ 7,792 $ 15,370 $ 4,536 $ 8,733 $ 662 $ - $ 57,592 Cost of services 8,089 5,662 4,494 4,972 2,654 7,703 357 - 33,931 Depreciation and amortization 777 533 906 2,226 222 235 36 - 4,935 General and administrative 2,035 1,318 691 3,443 906 970 310 - 9,673 Operating income (loss) 1,728 357 1,701 4,729 754 (175) (41) - 9,053 Interest expense - - - - - - - (3,068) (3,068) Interest income - - - - - - - 641 641 ----------------------------------------------------------------------------------------------- Income (loss) before income taxes $ 1,728 $ 357 $ 1,701 $ 4,729 $ 754 $ (175) $ (41) $(2,427) $ 6,626 ===============================================================================================
THREE MONTHS ENDED JUNE 30, 1999 Well Unallocated Consolidated Services Wireline Marine Amount Total ------------------------------------------------------------ Revenues $ 4,882 $ 6,287 $ 5,098 $ - $ 16,267 Cost of services 4,223 5,065 4,141 - 13,429 Depreciation and amortization 434 893 860 - 2,187 General and administrative 1,110 1,333 1,228 - 3,671 Operating loss (885) (1,004) (1,131) - (3,020) Interest expense - - - (3,508) (3,508) ------------------------------------------------------------ Loss before income taxes $ (885) $ (1,004) $ (1,131) $ (3,508) $ (6,528) ============================================================
SIX MONTHS ENDED JUNE 30, 2000 Well Rental Field Unallocated Consolidated Services Wireline Marine Tools Enviro Mgmt. Other Amount Total -------------------------------------------------------------------------------------------------- Revenues $ 22,303 $ 15,491 $ 13,047 $ 28,803 $ 8,141 $ 14,816 $ 2,265 $ - $ 104,866 Cost of services 14,418 10,790 8,035 9,048 4,834 13,364 1,204 - 61,693 Depreciation and amortization 1,576 1,085 1,717 4,325 439 460 70 - 9,672 General and administrative 3,970 2,659 1,554 6,440 1,815 1,883 663 - 18,984 Operating income (loss) 2,339 957 1,741 8,990 1,053 (891) 328 - 14,517 Interest expense - - - - - - - (5,988) (5,988) Interest income - - - - - - - 834 834 -------------------------------------------------------------------------------------------------- Income (loss) before income taxes $ 2,339 $ 957 $ 1,741 $ 8,990 $ 1,053 $ (891) $ 328 $ (5,154) $ 9,363 ==================================================================================================
SIX MONTHS ENDED JUNE 30, 1999 Well Unallocated Consolidated Services Wireline Marine Amount Total ------------------------------------------------------- Revenues $ 10,503 $ 13,820 $ 10,922 $ - $ 35,245 Cost of services 7,156 9,305 7,474 - 23,935 Depreciation and amortization 923 1,391 1,813 - 4,127 General and administrative 2,262 2,878 2,208 - 7,348 Operating income (loss) 162 246 (573) - (165) Interest expense - - - (6,914) (6,914) ------------------------------------------------------- Income (loss) before income taxes $ 162 $ 246 $ (573) $ (6,914) $ (7,079) =======================================================
IDENTIFIABLE ASSETS Unallo- Consoli- Well Rental Field cated dated Services Wireline Marine Tools Environ. Mgmt. Other Amount Total ------------------------------------------------------------------------------------------------ June 30, 2000 $ 48,514 $ 30,985 $ 65,593 $ 163,104 $ 19,763 $ 15,527 $ 3,898 $ 2,500 $ 349,884 ================================================================================================ December 31, 1999 $ 39,878 $ 30,961 $ 48,655 $ 134,287 $ 8,525 $ 12,768 $ 4,533 $ 2,648 $ 282,255 ================================================================================================
(6) EQUITY On May 5, 2000, the Company completed the sale of 7.3 million shares of common stock, including 950,000 shares sold pursuant to the underwriter's over-allotment option. The offering generated net proceeds to the Company of approximately $63.3 million. (7) COMMITMENTS AND CONTINGENCIES From time to time, the Company is involved in litigation arising out of operations in the normal course of business. In management's opinion, the Company is not involved in any litigation, the outcome of which would have a material effect on the financial position, results of operations or liquidity of the Company. (8) ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (FAS) No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. FAS No. 133, as amended, is effective for all fiscal quarters of fiscal years beginning after June 15, 2000 and establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. FAS No. 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are to be recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. Earlier application of the provisions of the Statement is encouraged and is permitted as of the beginning of any fiscal quarter that begins after the issuance of the Statement. The Company has not yet assessed the financial impact of adopting this statement. (9) SUBSEQUENT EVENT On July 26, 2000, the Company acquired substantially all of the assets of AMBAR, Inc.'s Production Services Division for $9.5 million in cash. The Production Services Division provides coiled tubing, pumping, stimulation, nitrogen, pipeline remediation and related services to restore lost production from oil and gas wells in the Gulf of Mexico. This acquisition expands the Company's existing coiled tubing and pumping and stimulation services within its well services segment. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS "Management's Discussion and Analysis of Financial Condition and Results of Operations" contains forward-looking statements which involve risks and uncertainties. All statements other than statements of historical fact included in this section regarding our financial position and liquidity, strategic alternatives, future capital needs, business strategies and other plans and objectives of our management for future operations and activities, are forward-looking statements. These statements are based on certain assumptions and analyses made by our management in light of its experience and its perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate under the circumstances. Such forward-looking statements are subject to uncertainties that could cause our actual results to differ materially from such statements. Such uncertainties include but are not limited to: the volatility of the oil and gas industry, including the level of offshore exploration, production and development activity; risks of our growth strategy, including the risks of rapid growth and the risks inherent in acquiring businesses; changes in competitive factors affecting our operations; operating hazards, including the significant possibility of accidents resulting in personal injury, property damage or environmental damage; the effect on our performance of regulatory programs and environmental matters; seasonality of the offshore industry in the Gulf of Mexico and our dependence on certain customers. These and other uncertainties related to our business are described in detail in our Annual Report on Form 10-K for the year ended December 31, 1999. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to update any of our forward-looking statements for any reason. ACQUISITION OF CARDINAL HOLDING CORP. On July 15, 1999, we acquired Cardinal Holding Corp. through its merger with one of our wholly-owned subsidiaries. The merger was treated for accounting purposes as if we were acquired by Cardinal in a purchase business transaction. The purchase method of accounting required that we carry forward Cardinal's net assets at their historical book value and reflect our net assets at their estimated fair value at the date of the merger. Accordingly, all historical financial information presented in the consolidated financial statements included in this Quarterly Report for periods prior to July 15, 1999 reflect Cardinal's results on a stand-alone basis. Cardinal's historical operating results were substantially different than ours for the same periods. Our results for the three and six months ended June 30, 2000 reflect three and six months, respectively, of operations of Cardinal, Superior and Production Management Companies, Inc., which we acquired effective November 1, 1999. The results for the three and six months ended June 30, 1999 reflect three and six months, respectively, of operations of Cardinal only. Consequently, analyzing prior period results to determine or estimate our future operating potential will be difficult. OVERVIEW We provide a broad range of specialized oilfield services and equipment to oil and gas companies in the Gulf of Mexico and throughout the Gulf Coast region. These services and equipment include: * well services including plug and abandonment ("P&A") services, coiled tubing services, well pumping and stimulation services, data acquisition services, gas lift services and electric wireline services, * mechanical wireline services, * the rental of liftboats, * the rental of specialized oilfield equipment, * environmental cleaning services, * field management services, and * the manufacture and sale of drilling instrumentation and oil spill containment equipment. Over the past few years, we have significantly expanded the geographic scope of our operations and the range of production related services that we provide through both internal growth and strategic acquisitions. In July 1999, we completed the Cardinal merger, in November 1999, we completed the Production Management acquisition, and in June 2000, we completed the acquisition of H.B. Rentals L.C. and its subsidiary Eagle Rentals, Inc., thereby making these companies our wholly-owned subsidiaries. These acquisitions firmly established us as a market leader in providing most offshore production related services using liftboats as work platforms and allowed us to expand our scope of operations to include offshore platform and property management services. In the second quarter of 2000, our financial performance was favorably impacted by increased demand for our services as compared to the first quarter of 2000. In the quarter ended June 30, 2000, revenue increased 22% to $57.6 million and net income increased 142% to $3.8 million over the quarter ended March 31, 2000. The primary factors driving our improved performance include increased day rates and utilization for, as well as expansion of, our liftboat fleet and increased demand for our well services segment. Our marine segment's revenue increased 48% in the second quarter of 2000 over the first quarter of 2000. This increase is attributable to higher average day rates and utilization as well as the addition of six liftboats near the end of May. Weighted average day rates for our liftboat fleet increased from approximately $2,850 in the first quarter of 2000 to approximately $3,340 in the second quarter of 2000. The fleet's average utilization increased from approximately 67% in the first quarter to approximatley 78% in the second quarter. Our well services segment's revenue increased 31% in the second quarter of 2000 as compared to the first quarter of 2000 due primarily to an increase in revenue from our core business of P&A, temporary P&A and recompletion. We also experienced greater demand for our production-enhancement services, such as coiled tubing, pumping and stimulation, electric line and data acquisition, as our customers are focused on enhancing recovery from existing shallow water reservoirs. Our financial performance is impacted by the broader economic trends affecting our customers. The demand for our services and equipment is cyclical due to the nature of the energy industry. Our operating results are directly tied to industry demand for our services, most of which are performed in the Gulf of Mexico. While we have focused on providing production related services where, historically, demand has not been as volatile as for exploration related services, we expect our operating results to be highly leveraged to industry activity levels in the Gulf of Mexico. COMPARISON OF THE RESULTS OF OPERATIONS FOR THE QUARTERS ENDED JUNE 30, 2000 AND 1999 Our revenues were $57.6 million for the three months ended June 30, 2000 as compared to $16.3 million for the same period in 1999. Due to the accounting treatment required for the Cardinal merger, our second quarter of 2000 operating results reflected three months of operations of Cardinal, Superior and Production Management, while the second quarter of 1999 operating results reflected only Cardinal's operations on a stand- alone basis. Our gross margin was $23.7 million in the second quarter of 2000 compared to $2.8 million in the second quarter of 1999. The increase is primarily the result of the Cardinal merger and the Production Management acquisition, as well as the addition of six liftboats to our fleet in May 2000. In the second quarter of 2000, our rental tools segment contributed the highest gross margin percentage, while our field management segment contributed the lowest gross margin percentage. Of all our production related services, field management is expected to produce the lowest gross margin percentage since its largest cost of services component is providing contract labor. Depreciation and amortization increased to $4.9 million in the three months ended June 30, 2000 from $2.2 million in the same period in 1999. Most of the increase resulted from the larger asset base following the Cardinal merger and the Production Management acquisition. Depreciation also increased as a result of our $31.2 million of capital expenditures in the first six months of 2000 combined with our 1999 capital expenditures of $9.2 million. General and administrative expenses increased to $9.7 million in the second quarter of 2000 from $3.7 million in the same period in 1999. The increase is the result of the Cardinal merger and the Production Management acquisition. General and administrative expenses have decreased from 23% of revenue for the quarter ended June 30, 1999 to 17% of revenue for the quarter ended June 30, 2000. In the quarter ended June 30, 2000, we recorded net income of $3.8 million, or $0.06 earnings per diluted share, compared to a net loss of $4.4 million, or $0.75 loss per diluted share, in the same period in 1999. COMPARISON OF THE RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 Our revenues were $104.9 million for the six months ended June 30, 2000 as compared to $35.2 million for the same period in 1999. Due to the accounting treatment required for the Cardinal merger, our first six months of 2000 operating results reflected six months of operations of Cardinal, Superior and Production Management, while the first six months of 1999 operating results reflected only Cardinal's operations on a stand- alone basis. Our gross margin was $43.2 million in the six months ended June 30, 2000 compared to $11.3 million for the same period in 1999. The increase is primarily the result of the Cardinal merger and the Production Management acquisition, as well as the addition of six liftboats to our fleet in May 2000. In the six months ended June 30, 2000, our rental tools segment contributed the highest gross margin percentage, while our field management segment contributed the lowest gross margin percentage. Of all our production related services, field management is expected to produce the lowest gross margin percentage since its largest cost of services component is providing contract labor. Depreciation and amortization increased to $9.7 million in the six months ended June 30, 2000 from $4.1 million in the same period in 1999. Most of the increase resulted from the larger asset base following the Cardinal merger and the Production Management acquisition. Depreciation also increased as a result of our $31.2 million of capital expenditures in the first six months of 2000 combined with our 1999 capital expenditures of $9.2 million. General and administrative expenses increased to $19.0 million in the second quarter of 2000 from $7.3 million in the same period in 1999. The increase is the result of the Cardinal merger and the Production Management acquisition. General and administrative expenses have decreased from 21% of revenue for the six months ended June 30, 1999 to 18% of revenue for the six months ended June 30, 2000. In the six months ended June 30, 2000, we recorded net income of $5.4 million, or $0.09 earnings per diluted share, compared to a net loss of $4.8 million, or $0.96 loss per diluted share, in the same period in 1999. LIQUIDITY AND CAPITAL RESOURCES Our primary liquidity needs are for working capital, acquisitions, capital expenditures and debt service. Our primary sources of liquidity are cash flows from operations and borrowings under our revolving credit facility. We had cash and cash equivalents of $16.5 million at June 30, 2000 compared to $8.0 million at December 31, 1999. Included in the $8.0 million balance at December 31, 1999 was a $6.6 million insurance settlement, which was received in late December 1999, for the damages associated with one of our two hundred foot vessels. Net cash provided by operating activities was $7.5 million for the six months ended June 30, 2000 as compared to cash used of $1.2 million for the same period in 1999. In the first six months of 2000, we used approximately $5.6 million of the $6.6 million insurance settlement to refurbish the damaged vessel. This $5.6 million decreased the net cash provided by operating activities for the six months ended June 30, 2000. In addition, increased sales have led to increased accounts receivables thereby lowering our operating cash flow. The overall increase in net cash provided by operating activities was due primarily to the merger with Cardinal and the Production Management acquisition. On May 5, 2000, we completed the sale of 7.3 million shares of common stock, including 950,000 shares sold pursuant to the underwriter's over- allotment option. The offering generated net proceeds of approximately $63.3 million. The proceeds were used to repay $4.1 million of borrowings under our $20 million revolving credit facility, purchase six liftboats from Trico Marine Services, Inc. for $14 million, make a $9.7 million investment in an oilfield services company, purchase HB Rentals for $14.4 million (including the repayment of its debt of $7.4 million) and on July 26, 2000, purchase AMBAR Inc.'s Production Services Division for $9.5 million. The remaining proceeds of the offering will be used for capital expenditures and general working capital purposes. We have a term loan and revolving credit facility that was implemented in July 1999 to provide a $110 million term loan to refinance our long-term debt after the Cardinal merger, provide a $20 million revolving credit facility and $22 million that we can use to pay additional contingent consideration from our prior acquisitions. We amended the credit facility in November 1999 to increase the term loan by $10 million to refinance Production Management's existing indebtedness and to pay the cash portion of the acquisition price. Under the credit facility, the term loan requires quarterly principal installments that commenced December 31, 1999 in the amount of $519,000 and then increasing up to an aggregate of approximately $1.6 million a quarter until 2006 when $92 million will be due and payable. The credit facility bears interest at a LIBOR rate plus margins that depend on our leverage ratio. As of August 4, 2000, the amount outstanding under the term loan was $118.4 million, and there were no borrowings outstanding under the revolving credit facility. As of August 4, 2000, the weighted average interest rate on the credit facility was 10.0%. Indebtedness under the credit facility is secured by substantially all of our assets, including the pledge of the stock of our subsidiaries. The credit facility contains customary events of default and requires that we maintain debt coverage and leverage ratios. It also limits our ability to make capital expenditures, pay dividends or make other distributions, make acquisitions, make changes to our capital structure, create liens or incur additional indebtedness. In the six months ended June 30, 2000, we made capital expenditures of $31.2 million, which included the purchase of six liftboats from Trico Marine Services, Inc. for $14 million. Approximately $12.6 million was used to further expand our rental tool equipment, and other capital expenditures included capital improvements to our liftboats and the purchase of a new coiled tubing unit. We currently believe that we will make additional capital expenditures, excluding acquisitions and targeted asset purchases, of approximately $11 to $13 million in 2000 primarily to further expand our marine vessel and rental tool inventory. We believe that our current working capital, cash generated from our operations and availability under our revolving credit facility will provide sufficient funds for our identified capital projects. In the fourth quarter of 2000, additional consideration related to three of our 1997 acquisitions will be determined. In no event will this amount exceed $21.4 million. We expect to use the $22 million portion of the credit facility, which was designed to fund these payments, to the extent that we do not pay them from working capital. We intend to continue implementing our acquisition strategy to increase our scope of services. Depending on the size of any future acquisitions, we may require additional equity or debt financing in excess of our current working capital and amounts available under our revolving credit facility. NEW ACCOUNTING PRONOUNCEMENT In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (FAS) No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. FAS No. 133, as amended, is effective for all fiscal quarters of fiscal years beginning after June 15, 2000 and establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. FAS No. 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are to be recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. Earlier application of the provisions of the Statement is encouraged and is permitted as of the beginning of any fiscal quarter that begins after the issuance of the Statement. We have not yet assessed the financial impact of adopting this Statement. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no significant changes in our market risks since the year ended December 31, 1999. For more information, please read the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 1999. PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO THE VOTE OF SECURITY HOLDERS (a) The annual meeting of the stockholders of the Company was held on May 18, 2000 (the "Annual Meeting"). (b) At the Annual Meeting, the stockholders of the Company elected Terence E. Hall, Justin L. Sullivan, Richard A. Bachmann, William E. Macaulay, Ben A. Guill, and Robert E. Rose to serve as directors until the next annual meeting of stockholders. (c) The voting tabulation for the election of the six directors is as follows: DIRECTOR FOR WITHHELD -------------------------------------------------- Terence E. Hall 45,133,989 169,874 Justin L. Sullivan 45,133,989 169,874 Richard A. Bachmann 45,133,989 169,874 William E. Macaulay 45,132,189 171,674 Ben A. Guill 45,132,189 171,674 Robert E. Rose 43,879,179 1,424,684 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The following exhibits are filed with this Form 10-Q: 3.1 Certificate of Incorporation of the Company (incorporated herein by reference to the Company's Quarterly Report on Form 10-QSB for the quarter ended March 31, 1996). 3.2 Certificate of Amendment to the Company's Certificate of Incorporation (incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999). 3.3 Amended and Restated Bylaws (incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999). 27.1 Financial Data Schedule. (b) Reports on Form 8-K. The following reports on Form 8-K were filed during the quarter ended June 30, 2000: On April 4, 2000, the Company filed a Current Report on Form 8-K reporting, under Items 5 and 7, the filing of its Form 10-K for the fiscal year ended December 31, 1999. On April 20, 2000, the Company filed a Current Report on Form 8-K reporting, under Item 7, financial statements and pro forma financial information regarding Cardinal Holding Corp. and Production Management Companies, Inc. On May 3, 2000, the Company filed a Current Report on Form 8-K reporting, under Items 5 and 7, the Underwriting Agreement with Johnson Rice & Company L.L.C. for the sale of 6,350,000 shares of its common stock. On May 5, 2000, the Company filed a Current Report on Form 8-K reporting, under Items 5 and 7, the results for the first quarter 2000. On May 8, 2000, the Company filed a Current Report on Form 8-K reporting, under Items 5 and 7, that it sold 7,300,000 shares at $9 per share, including 950,000 shares sold pursuant to the underwriter's over allotment option. On May 15, 2000, the Company filed a Current Report on Form 8-K reporting, under Items 5 and 7, the purchase of six liftboats from Trico Marine Services, Inc. On June 22, 2000, the Company filed a Current Report on Form 8-K reporting, under Items 5 and 7, the acquisition of HB Rentals, L.C., and its subsidiary Eagle Rentals Co., Inc. On July 5, 2000, the Company filed a Current Report on Form 8-K reporting, under Item 7, financial statements and pro forma financial information regarding the acquisition of HB Rentals, L.C., and its subsidiary Eagle Rentals Co., Inc. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SUPERIOR ENERGY SERVICES, INC. Date: AUGUST 11, 2000 BY: /S/ TERENCE E. HALL ------------------ ----------------------- Terence E. Hall Chairman of the Board, Chief Executive Officer and President (Principal Executive Officer) Date: AUGUST 11, 2000 BY: /S/ ROBERT S. TAYLOR ------------------ ----------------------- Robert S. Taylor Chief Financial Officer (Principal Financial and Accounting Officer) EX-27.1 2 0002.txt
5 6-MOS DEC-30-2000 JUN-30-2000 16480000 0 55663000 (2265000) 785000 77006000 204795000 (40070000) 349884000 29413000 0 67000 0 0 191278000 191345000 104866000 104866000 61693000 90349000 0 0 5988000 9363000 3932000 5431000 0 0 0 5431000 0.09 0.09
-----END PRIVACY-ENHANCED MESSAGE-----