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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
or
TRANSITION REPORT UNDER SECTION 13 OR15(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 small business issuer as specified in its charter)
Delaware 75-2379388
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1503 Engineers Road
P.O. Box 6220,
New Orleans, LA 70174
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (504) 393-7774
Check whether the issuer: (1) filed all reports
required to be filed by Section 13 or 15 (d) of the Exchange
Act during the past 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 Registrants' common stock
outstanding on July 31, 1996 was 17,597,045
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PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Superior Energy Services, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
June 30, 1996 and December 31, 1995
(in thousands)
6/30/96 12/31/95
(Unaudited) (Audited)
___________ ____________
ASSETS
Current assets:
Cash and cash equivalents $ 2,114 $ 5,068
Accounts receivable - net 4,050 3,759
Inventories 1,200 968
Deferred income taxes 256 256
Other 195 227
____________ ____________
Total current assets 7,815 10,278
Property, plant and equipment - net 6,693 6,904
Goodwill - net 4,461 4,576
Patent - net 1,176 1,226
____________ ____________
Total assets $ 20,145 $ 22,984
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable - bank $ 94 $ 1,249
Accounts payable 734 2,345
Notes payable - other 1,396 3,422
Unearned income 738 1,085
Accrued expenses 642 456
Income taxes payable 1,215 545
Other 200 200
____________ ____________
Total current liabilities 5,019 9,302
____________ ____________
Deferred income taxes 408 408
Other - 180
Stockholders' equity:
Preferred stock of $.01 par value.
Authorized,
5,000,000 shares; none issued - -
Common stock of $.001 par value.
Authorized,
40,000,000 shares; issued,
17,047,045 17 17
Additional paid-in capital 16,265 16,230
Accumulated deficit (1,564) (3,153)
____________ _____________
Total stockholders' equity 14,718 13,094
____________ _____________
Total liabilities and
stockholders' equity $20,145 $22,984
============= ==============
Superior Energy Services, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
Three and Six Months Ended June 30, 1996 and 1995
(in thousands, except per share data)
(unaudited)
Three Months Six Months
_____________________ ____________________
1996 1995 1996 1995
____ _____ ____ _____
REVENUES $ 4,690 $ 3,211 $ 9,330 $ 6,147
Costs and expenses:
Costs of services 2,142 1,934 4,413 3,713
Depreciation and amortization 297 47 590 88
General and administrative 1,007 733 2,189 1,449
__________ __________ _________ _________
Total costs and expenses 3,446 2,714 7,192 5,250
__________ __________ _________ _________
Income from operations 1,244 497 2,138 897
Other income (expense):
Interest expense (18) (29) (48) (48)
Other 15 (3) 180 56
__________ __________ __________ __________
Income before income taxes 1,241 465 2,270 905
Provision for income taxes 372 - 681 -
__________ __________ __________ __________
Net income $ 869 $ 465 $ 1,589 $ 905
========== ========== ========== ==========
Income before income taxes Pro forma(1) Pro forma(1)
as per above $ 465 905
Pro forma income taxes 172 335
______________ _____________
Net income as adjusted for pro
forma income taxes $ 293 570
============== =============
Net income per common share and
common share equivalent $ 0.05 $ 0.03 $ 0.09 $ 0.06
======== ======== ======== ========
Weighted average
shares outstanding 17,086,611 8,400,000 17,079,763 8,400,000
========== ========= ========== =========
(1) Net income as adjusted for pro forma income taxes
Superior Energy Services, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 1996 and 1995
(in thousands)
(unaudited)
1996 1995
_____ _____
Cash flows from operating
activities:
Net income $ 1,589 $ 905
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 590 88
Unearned income (347) -
Changes in operating assets and liabilities:
Accounts receivable (336) (626)
Notes receivable - 110
Inventories (232) (46)
Other - net (68) (7)
Accounts payable (1,611) 203
Due to shareholders (26) 49
Accrued expenses 186 -
Income taxes payable 670 -
_____________ _____________
Net cash provided by operating activities 415 676
_____________ _____________
Cash flows from investing activities:
Proceeds from sale of property and equipment 357 -
Payments for purchases of property and equipment (572) (342)
______________ ______________
Net cash provided by (used in)
investing activities (215) (342)
______________ ______________
Cash flows from financing activities:
Notes payable - bank (1,154) 462
Deferred payment for acquisition of
Oil Stop, Inc. (2,000) -
Shareholder distributions - (691)
_____________ ______________
Net cash provided by (used in)
financing activities (3,154) (229)
_____________ _____________
Net increase (decrease) in cash (2,954) 105
Cash and cash equivalents at beginning of period 5,068 207
_____________ _____________
Cash and cash equivalents at end of period $ 2,114 $ 312
============= =============
SUPERIOR ENERGY SERVICES, INC.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Six Months Ended June 30, 1996 and 1995
(1) Reorganization
On December 13, 1995, the Company consummated a share exchange
(the "Reorganization") whereby it (i) acquired all of the
outstanding capital stock of Superior Well Service, Inc.,
Connection Technology, Ltd. and Superior Tubular Services, Inc.
(collectively, "Superior") in exchange for 8,400,000 Common
Shares and (ii) acquired all of the outstanding capital stock of
Oil Stop, Inc. ("Oil Stop") in exchange for 1,800,000 Common
Shares and $2.0 million cash.
As used in the consolidated financial statements, the term
"Small's" refers to the Company as of dates and periods prior to
the Reorganization and the term "Company" refers to the combined
operations of Small's, Oil Stop and Superior after the
consummation of the Reorganization.
As a result of the controlling interest the Superior shareholders
have in the Company following the Reorganization, among other
factors, the Reorganization has been accounted for as a reverse
acquisition (i.e., a purchase of Small's by Superior) under the
"purchase" method of accounting. As such, the Company's
consolidated financial statements and other financial information
reflect the historical operations of Superior for periods and
dates prior to the Reorganization. The net assets of Small's and
Oil Stop, at the time of the Reorganization, were reflected at
their estimated fair value pursuant to purchase accounting at the
date of the Reorganization. The net assets of Superior have been
reflected at their historical book values.
(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 rules and regulations of the Securities and Exchange
Commission; however, management believes that this information is
fairly presented. These financial statements and footnotes
should be read in conjunction with the financial statements and
notes thereto included in the Company's Annual Report on Form 10-
KSB for the year ended December 31, 1995 and the accompanying
notes and Management's Discussion and Analysis or Plan of
Operation.
(Continued)
SUPERIOR ENERGY SERVICES, INC.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
The financial information for the six months ended June 30, 1996
and 1995, 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 which
might be expected for the entire year.
(3) Pro Forma Income Taxes and Earnings per Share
Prior to the Reorganization, the Superior Companies, with the
exception of Superior Tubular Services, Inc., which was a sub-
chapter C corporation, were sub-chapter S corporations for income
tax reporting purposes. Therefore, through June 30, 1995, no
provision for federal and state income taxes had been made. Pro
forma income tax expense and net income as adjusted for income
taxes is presented for the three and six months ended June 30,
1995 on the Statement of Operations in order to reflect the
impact on income taxes as if Superior had been a taxable entity
during those periods. In computing weighted average share
outstanding, 8,400,000 shares issued in exchange for Superior's
capital stock is assumed to be outstanding as of January 1, 1995.
All other common shares issued or sold are included in the
weighted average shares outstanding calculation from the date of
issuance or sale.
(4) Joint Venture
On January 15, 1996, the Company entered into a joint venture
with G&L Tool Company ("G&L"), an unrelated party, which extends
through January 31, 2001. The Company has contributed assets of
Superior Fishing with a book value of approximately $4.5 million
to the joint venture which is engaged in the business of renting
specialized oil well equipment and fishing tools to the oil and
gas industry in connection with the drilling, development and
production of oil, gas and related hydrocarbons.
Superior Fishing receives as its share of distributions from
operations $110,000 a month commencing February 1996 through
January 1998 and $80,000 a month for the period February 1998
through January 2001. The Company's share of distributions is
personally guaranteed by a principal of G&L. In connection with
the joint venture, Superior Fishing also sold G&L land for
$300,000.
(Continued)
SUPERIOR ENERGY SERVICES, INC.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
The responsibility and authority for establishing policies
relating to the strategic direction of the joint venture
operations and ensuring that such policies are implemented have
been vested in a policy committee consisting of three members,
one of which is a Company employee. G&L will be responsible for
the maintenance and repair, insurance and licenses and permits
for all joint venture assets.
At the end of the joint venture term, G&L will have at its
election, the option to purchase all of the Superior Fishing
assets contributed to the joint venture for $2 million.
(5) Stockholder's Equity
At a special meeting of stockholders on February 23, 1996, the
shareholders approved increasing the authorized number of shares
of common stock to 40,000,000.
(6) Subsequent Event
Subsequent to June 30, 1996, the Company purchased Baytron, Inc.
for $1,100,000 cash and 550,000 Common Shares. Baytron, Inc.
designs, manufactures, sells and rents oil and gas drilling
instrumentation and computerized rig data acquisitions systems
used to monitor, display and record drill site functions. For
the nine months ended June 30, 1996, Baytron recorded revenues of
$2.0 million.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Reorganization
For purposes of this presentation, the term "Small's" refers to
the Company as of dates and periods prior to the Reorganization
and the term "Company" refers to the combined operations of
Small's, Oil Stop and Superior after the consummation of the
Reorganization.
On December 13, 1995, the Company consummated a share exchange
(the "Reorganization") whereby it (i) acquired all of the
outstanding capital stock of Superior Well Service, Inc.,
Connection Technology, Ltd. and Superior Tubular Services, Inc.
(collectively "Superior") in exchange for 8,400,000 Common Shares
and (ii) acquired all of the outstanding capital stock of Oil
Stop, Inc. ("Oil Stop") in exchange for 1,800,000 Common Shares
and $2.0 million cash.
Due to the controlling interest the Superior shareholders have in
the Company as a result of the Reorganization, the Reorganization
has been accounted for as a reverse acquisition (i.e., a purchase
of Small's by Superior) under the "purchase" method of
accounting. As such, the Company's financial statements and
other financial information now reflect the historical operations
of Superior for periods and dates prior to the Reorganization.
The net assets of Small's and Oil Stop have been reflected at
their estimated fair value pursuant to purchase accounting at the
date of the Reorganization. The net assets of Superior have been
reflected at the historical book values.
Comparison of the Results of Operations for the Quarters Ended
June 30, 1996 and 1995
Revenues increased 46% in the second quarter ended June 30, 1996
as compared to the quarter ended June 30, 1995. Of this
increase, 27% is a result of increased levels of activity and 73%
is the result of the acquisitions mentioned above.
Cost of services for the quarter ended June 30, 1996 increased
11% from the quarter ended June 30, 1995. This increase was
primarily as a result of the acquisitions. Depreciation
increased $250,000 in the quarter ended June 30, 1996 as compared
to the quarter ended June 30, 1995. This increase was primarily
as a result of the acquisitions. General and administrative
expenses increased 37% in the second quarter of 1996 as compared
to the second quarter of 1995. The majority of this increase is
a result of legal and professional expenses related to the
acquisitions.
Comparison of the Results of Operations for the Six Months ended
June 30, 1996 and 1995.
Revenues increased 52% for the six months ended June 30, 1996 as
compared to the six months ended June 30, 1995. Of this
increase, 30% is a result of increased levels of activity and 70%
is the result of the acquisitions mentioned above.
Cost of services for the six months ended June 30, 1996 increased
19% over the six months ended June 30, 1995. Of this increase,
26% is as a result of increased levels of activity and 74% is the
result of the acquisitions. Depreciation increased $502,000 in
the six months ended June 30, 1996 as compared to the six months
ended June 30, 1995. This increase is primarily the result of
the acquisitions. General and administrative expenses increased
51% for the six months ended June 30, 1996 over the same period
in 1995. Of this increase, 64% is the result of the acquisitions
and 36% is the result of increased levels of activity.
For the year ended August 31, 1995, Small's incurred a loss of
$1,586,000 followed by a loss of $378,000 for the quarter ended
November 30, 1995. The Company, in an effort to eliminate these
continued losses, entered into a joint venture for its West Texas
rental tool and fishing operations on January 15, 1996. As a
result of the joint venture, the Company will have no liability
for any operating losses that may be incurred in the joint
venture. The Company's share of distributions will be $110,000 a
month for the first 24 months and $80,000 a month for the
remaining 36 months of the term of the joint venture.
Capital Resources and Liquidity
Net cash provided by operating activities was $415,000 for the
six months ended June 30, 1996. This is a decrease of $261,000
as compared to the six months ended June 30, 1995. This is
primarily the result of a $1.6 million reduction in the Company's
accounts payable. Of the $1.6 million, $1.2 million is a result
of a permanent reduction of Small's remaining obligations.
The Company's working capital position improved to $2,796,000 at
June 30, 1996 as compared to $976,000 at December 31, 1995. This
was primarily the result of a $2,000,000 final payment made in
connection with the acquisition of all the capital stock of Oil
Stop as well as a reduction of debt of approximately $1.2
million. The Company's current ratio also improved from 1.10 at
December 31, 1995 to 1.56 at June 30, 1996.
The Company, in connection with the joint venture for its West
Texas fishing and rental tool operation, sold land for $300,000.
During the first six months of 1996 it also sold various
equipment for approximately $57,000. Both these sales resulted
in no gain or loss. In the first six months of 1996, the Company
purchased approximately $572,000 of machinery and equipment.
These purchases were funded primarily from cash generated from
operations.
On July 31, 1996, the company consummated its purchase of
Baytron, Inc. for $1,100,000 of cash and 550,000 Common Shares.
The cash portion of the purchase was made with available funds.
The Company maintains a revolving credit facility which was
increased in June 1996 from $1.4 million to $4.0 million. As of
June 30, 1996, there were no amounts outstanding under this
facility. The Company believes that its available funds,
together with cash generated from operations and available
borrowing capacity should be sufficient to support the Company's
strategic and capital spending initiatives.
Inflation has not had a significant effect on the Company's
financial condition or operations in recent years.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) The following exhibits are filed with this Form 10-QSB
10.1 Commercial Business Loan Agreement dated June 6, 1996
by and among Whitney National Bank and Superior Energy
Services, Inc.
b) The Company did not file any reports on Form 8-K during the
quarter ended June 30, 1996.
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 12, 1996 By: /s/ Terence E. Hall
_____________________
Terence E. Hall
Chairman of the Board,
Chief Executive Officer
and President
(Principal Executive Officer)
Date: August 12, 1996 By: /s/ Robert S. Taylor
______________________
Robert S. Taylor
Chief Financial Officer
(Principal Financial and Accounting Officer)
Commercial Business Loan Agreement
This Agreement is dated June 6, 1996, and is by, between and
among Whitney National Bank ("Whitney"); Superior Energy Services,
Inc., a corporation organized under the laws of the State of
Delaware (the "Borrower"); and Oil Stop, Inc., a Louisiana
corporation, and Superior Well Service, Inc., a Louisiana
corporation (each a "Guarantor" and collectively, the
"Guarantors"); and provides for all present and future loans
(including advances on loans) to Borrower (collectively, the
"Loans", with each separate advance of funds being a "Loan").
Borrower, together with endorsers and guarantors of the Loan, if
any, are collectively referred to as "Obligor".
A. The Loan. Provided each Obligor performs all obligations in
favor of Whitney contained in this Agreement and in any other
agreement related to the Loans, whether now existing or hereafter
arising, Whitney will make or has made available a line of credit
Loan to Borrower in the total aggregate principal amount of up to
Four Million and no/100 ($4,000,000.00) Dollars. This Loan is
evidenced by Whitney's form of master note containing additional
terms and conditions, including the interest rate and repayment
schedule.
B. Use of Proceeds. The proceeds from the Loans will be used
for intercompany loans and working capital purposes, which
includes funds to generate accounts receivable and to acquire
inventory, and for capital expenditures by Borrower to one or more
of its subsidiaries.
C. Representations, Warranties and Covenants. Each Obligor
represents, warrants and covenants to Whitney that:
(1) Organization and Authorization. Borrower is a Delaware
corporation that is duly organized, validly existing
and in good standing under Delaware law. Each
Obligor's execution, delivery and performance of this
Agreement and all other documents delivered to Whitney
have been duly authorized and do not violate such
Obligor's articles of incorporation (or other governing
documents), material contracts or any applicable law or
regulations.
(2) Collateral. Borrower shall furnish, or cause others to
furnish, all collateral documents, continuing
guaranties and endorsements as may be required by
Whitney (the "Collateral"). In addition to the
collateral set forth in any note evidencing a Loan,
Collateral includes but is not limited to the
following:
(i) A first valid and enforceable security interest in
and to the Accounts and Inventory, in each case as
such terms are defined in the Commercial Laws--
Secured Transactions of the Louisiana Revised
Statutes. La.R.S.10:9-101 et seq., of the
Borrower. Such security interest shall be granted
by execution and delivery by Borrower of a
security agreement using Whitney's standard form.
(ii) Continuing guaranties of each of the
following entities of the principal amount
set forth in such guaranties, plus interest,
expenses, and costs, in each case using
Whitney's standard form:
a. Oil Stop, Inc., a Louisiana corporation;
b. Superior Well Service, Inc., a Louisiana
corporation.
Notwithstanding the foregoing, it is understood that the
Collateral specifically described herein shall be all of the
Collateral required by Whitney so long as the Borrower is in
compliance with the terms and conditions of this Agreement and
while the maximum amount of the Loan does not exceed the principal
amount of $4,000,000.00.
(3) Compliance with Tax and other Laws. Each Obligor shall
comply with all laws that are applicable to the
Obligor's business activities, including, without
limitation, all laws regarding (i) the collection,
payment and deposit of employees' income, unemployment,
Social Security, sales and excise taxes; (ii) the
filing of returns and payment of taxes; (iii) pension
liabilities including ERISA requirements; (iv)
environmental protection; and (v) occupational safety
and health. Should any Obligor be out of compliance
with any law, as contemplated in the preceding
sentence, there shall be no default hereunder unless
such non-compliance has not been cured within 30 days
of the date non-compliance occurs. Except as disclosed
on Schedule A to this Agreement, there is no material
pending and threatened litigation against any Obligor.
(4) Financial Information. From the date of this Agreement
and so long as any Loan shall be outstanding, unless
compliance shall have been waived in writing by
Whitney, Borrower (which for purposes of this covenant
refers to Borrower and its subsidiaries on a
consolidated basis) shall furnish to Whitney:
(i) within 90 days after the close of Borrower's
fiscal year, a copy of the annual financial
statements of Borrower, prepared in
conformity with Generally Accepted
Accounting Principles ("GAAP") applied on a
basis consistent with that of the preceding
fiscal year, including a balance sheet as of
the end of each such fiscal year, a
statement of earnings and surplus of
Borrower (statement of operations) for such
fiscal year, and a statement of cash flows
for such fiscal year. Borrower's Chief
Financial Officer shall certify the annual
financial statements as true and correct.
Borrower's annual financial statements shall
be audited by an independent certified
public accounting firm acceptable to
Whitney; and
(ii) within 45 days after the close of each
quarter of the fiscal year of Borrower (y)
unaudited financial statements consisting of
a balance sheet as of the end of each such
quarter and a statement of earnings and
surplus of Borrower for such quarter, and
(z) statement of changes in cash flow for
such quarter, all certified true and correct
by the Chief Financial Officer of Borrower;
and
(iii) within 30 days after the close of each
quarter of the fiscal year of Borrower
a report on the aging of Accounts, in
form and substance acceptable to
Whitney.
(5) Financial Covenants and Ratios.
During the term of this Agreement, Borrower shall
maintain the following financial ratios and/or
covenants (and in the case of covenants pertaining to
fiscal quarters, such ratios and/or covenants apply
beginning with the fiscal quarter ending June 30,
1996):
(a) Current Ratio. Borrower and its subsidiaries on a
consolidated basis shall maintain a Current Ratio of at
least 1 to 1 as of the last day of each fiscal quarter
up to and through December 31, 1996. Prior to December
31, 1996, Borrower shall provide to Whitney a written
schedule projecting the Current Ratio of Borrower and
its subsidiaries for each fiscal quarter of 1997 and
1998; after Whitney's examination and acceptance
thereof, maintaining such Current Ratios shall
automatically become a covenant of Borrower hereunder.
"Current Ratio" shall mean the ratio of Current Assets
to Current Liabilities, as current assets and current
liabilities are defined and treated in accordance with
GAAP, but excluding from Current Liabilities the
amounts outstanding under the line of credit by Whitney
provided for hereunder as the Loan.
(b) Working Capital. Borrower and its subsidiaries on
a consolidated basis shall maintain Working Capital of
at least Seven Hundred Fifty Thousand and No/100
($750,000.00) Dollars as of the last day of each fiscal
quarter. "Working Capital" shall mean current assets
less current liabilities as such terms are defined and
treated in accordance with GAAP, but excluding from the
Working Capital computation amounts outstanding under
the line of credit by Whitney provided for hereunder as
the Loan.
(c) Maximum Debt to Worth Ratio. Borrower and its
subsidiaries on a consolidated basis shall maintain a
Debt to Worth Ratio of not more than 2 to 1 as of the
last day of each fiscal quarter. "Debt" refers to long
term debt as understood under GAAP and shall further
mean
(i) any indebtedness or liability for borrowed
money or for the deferred purchase price of
property or services (including accounts payable),
(ii) any obligations as lessee under any leases
(but excluding leases of motor vehicles, leases of
office equipment, and the lease in effect on the
date hereof for office space),
(iii) current liabilities in respect of unfunded
vested benefits under anyemployee benefits plan, if
any,
(iv) all guaranties (except for guaranties by any
one or more of the Guarantorswith regard to
guarantying the Loan), endorsements (other than
for collection or deposit in the ordinary course
of business), and other contingent obligations,
which includes any off balance sheet item for
which the Borrower or either Guarantor hereunder
obligates itself),
(v) obligations secured by any lien on property
owned by any one or more of the Borrower and the
Guarantors whether or not the obligations have
been assumed.
Notwithstanding the foregoing, for purposes of the Debt
to Worth Ratio, Debt shall not include:
(a) any loans due to stockholders of Borrower, but
only if the Loan is not in default hereunder, and
(b) unearned income, deferred income taxes,
accrued expenses and other similar amounts, but
only to the extent that the items enumerated in
this subparagraph (b) do not exceed 40% of total
current liabilities, as set forth on the balance
sheet of the Borrower and subsidiaries as
submitted to the Securities and Exchange
Commission, it being understood that the balance
sheet will be audited at fiscal year end only.
"Worth" shall mean the sum of common stock, preferred
stock, capital surplus, and retained earnings.
(d) Cash Flow Coverage Ratio. Borrower and its
subsidiaries on a consolidated basis shall maintain a
Cash Flow Coverage Ratio of at least 1 to 1 as of the
last day of each fiscal quarter of Borrower and its
subsidiaries starting as of December 31, 1996 and
calculated on a trailing 12-month basis. "Cash Flow
Coverage Ratio" shall mean the ratio of earnings before
depreciation, amortization; interest, taxes and all
other noncash items, as used in applying GAAP, to total
debt service. For purposes of this Agreement "debt
service" means all amounts required to retire all debt
obligations of Borrower in accordance with their terms
during the following 12-month period, including
principal and interest, according to the terms of the
respective agreements creating such debt obligations.
(e) Capital Expenditures. The Borrower will not incur
Capital Expenditures during any fiscal year (on a
cumulative basis) in excess of $1,000,000, it being
understood that such limitation shall apply to
expenditures other than mergers and acquisitions, which
are governed by the provisions of No. (7) hereinbelow.
"Capital Expenditures" shall mean expenditures for
capital assets that are subject to depreciation,
depletion or amortization under GAAP.
(6) Notice of Default. Each Obligor shall notify Whitney
immediately upon becoming aware of the occurrence of
any event constituting, or which with the passage of
time or the giving of notice, could constitute, a
Default, as defined hereinbelow.
(7) Mergers. Without the prior written consent of Whitney,
which consent shall not be unreasonably withheld or
delayed, no Obligor shall (i) be a party to a merger or
consolidation, (ii) sell or lease all or substantially
all of its, his or her assets; or (iii) acquire all or
substantially all of the assets of another entity,
whether by acquisition of stock or tangible property.
Notwithstanding the foregoing, Borrower may enter into
one or more acquisitions as contemplated in this No. 7
aggregating not more than $3,000,000 without the prior
written consent on Whitney as long as such acquisitions
do not result in the violation of any other term of
this Agreement, which would include causing the
Borrower to be out of compliance with any financial
covenant hereof.
(8) Indebtedness and Liens. Other than with respect to
Permitted Encumbrances, as described on Schedule B,
annexed hereto and made a part hereof, Borrower shall
not create any additional obligations for borrowed
money nor shall it mortgage or encumber any of its
assets or suffer any liens to exist on any of its
assets without the prior written consent of Whitney.
(9) Other Liabilities. No Obligor shall lend to or
guarantee (other than guaranties of the obligations of
Borrower or Guarantors entered into in the ordinary
course of business and not involving the incurrence of
indebtedness for borrowed money), endorse (except for
collection or deposit of negotiable instruments in the
ordinary course of business) or otherwise become
contingently liable in connection with the obligations,
stock or dividends of any person, firm or corporation,
except as currently existing and reflected in the
financial statements of such Obligor as previously
submitted to Whitney. Advances to employees of the
Borrower or any Guarantor in the ordinary course of
business for business purposes shall not be considered
a loan prohibited pursuant to this No. 9.
(10) Additional Documentation. Upon the written request of
Whitney, each Obligor shall promptly and duly execute
and deliver all such further instruments and documents
and take such further action as Whitney may deem
necessary to obtain the full benefits of this Agreement
and of the rights and powers granted in this Agreement.
(11) Redemption, Dividends and Distributions. Borrower
shall not, without the prior express written
approval of Whitney, which approval may be
withheld at Whitney's sole discretion: (a)
purchase, redeem, retire or otherwise acquire,
directly or indirectly, for consideration any
shares of its capital stock or any warrant or
option to purchase any such shares; (b) pay any
dividends; (c) make any distribution, payment or
delivery of any property or cash to stockholders,
except that salaries and bonuses may be paid to
stockholder-employees in the ordinary course of
business; or (d) set aside any funds or other
property or assets for any such purposes.
Notwithstanding the provisions of this
subparagraph (11), Borrower shall have no
obligation to comply herewith as long as Borrower
maintains its status as a corporation that trades
its stock publicly.
(12) Other Agreements. No Obligor will permit any material
changes to be made in the character of its business as
conducted on the date of this Agreement. Except as
provided in No. (11) hereinabove with respect to
Borrower, no Obligor will retire or redeem any shares
of the capital stock of Borrower without the prior
written consent of Whitney.
D. Each Extension of Credit. Each request by Borrower for a
Loan shall constitute a warranty and representation by Borrower to
Whitney that there exists no Default or any condition, event or
act which constitutes, or with notice or lapse of time (or both)
would constitute a Default as defined by this Agreement.
E. Conditions Precedent to Loans. Whitney shall have no
obligation to advance funds under this Agreement until and unless
the following conditions have been satisfied:
(1) Whitney shall have received the loan and collateral
documents contemplated by this Agreement in form and
substance satisfactory to Whitney;
(2) Whitney shall have received satisfactory opinions of
counsel relating to due authorization and
enforceability of this Agreement and all collateral
documents and the perfection of Whitney's security
interests in all Collateral;
(3) All representations and warranties made by each Obligor
to Whitney shall be true and correct as of the date of
the Loan's funding;
(4) Each Obligor's business must be in a condition
satisfactory to Whitney, the management and ownership
of Borrower must not have changed and no material
adverse change (from that reflected in the last
financial statements delivered to, and accepted by,
Whitney prior to execution of this Agreement) has
occurred in the financial condition of the Borrower or
any Obligor (it being understood that pursuant to this
provision and with regard to any other provision of
this Agreement in which the creditworthiness of the
Obligors is addressed, Whitney agrees that it will
consider the Borrower, Oil Stop, Inc., and Superior
Well Service, Inc. on a consolidated financial basis so
long as, during the term of this Agreement, their
financial statements are prepared on a consolidated
basis) ; and
(5) There exists no Default (or event which with notice or
lapse of time or both could constitute a Default) under
(a) this Agreement or (b) any other agreement if with
regard to such other agreement such default is not
cured in 30 days, between any Obligor and Whitney.
F. Default. The occurrence of (i) a default under a note
evidencing a Loan, (ii) the failure of any Obligor to observe or
perform promptly when due any covenant, agreement or obligation
due to the Whitney under this Agreement or otherwise, or (iii) the
inaccuracy at any time of any warranty, representation or
statement made to Whitney by any Obligor under this Agreement or
otherwise, shall constitute a default under this Agreement (in the
case of (i), (ii) and (iii), each a "Default").
G. Miscellaneous Provisions. Borrower agrees to pay all of the
costs, expenses and fees incurred in connection with the Loans,
including attorneys fees, and appraisal fees, if any. This
Agreement is not assignable by Borrower and may be relied upon
only by the undersigned. In no event shall any Obligor or Whitney
be liable to the other for indirect, special or consequential
damages, including the loss of anticipated profits that may arise
out of or are in any way connected with the issuance of this
Agreement. No condition or other term of this Agreement may be
waived or modified except by a writing signed by the Borrower and
Whitney. This Agreement, all promissory notes evidencing Loans
under this Agreement and all documents creating security interests
in Louisiana-based assets of any Obligor shall be governed by
Louisiana law. Each Obligor acknowledges that Borrower presently
maintains and shall in the future maintain a lock box account with
Whitney with regard to collection of Accounts, all as more fully
provided for in a security agreement between Borrower and Whitney.
H. Other Conditions.
The undersigned guarantors intervene herein to evidence their
agreement with and consent to the provisions hereof.
BORROWER GUARANTORS:
Superior Energy Services, Inc., Oil Stop, Inc.
a Delaware corporation
BY: ___________________________ BY: __________________________
Terence Hall
Its: President Its:
WHITNEY NATIONAL BANK Superior Well Service, Inc.
By: _______________________________ By: _______________________________
Johnny L. Kidder
Its: Vice President Its:
Schedule A
Description of Material Pending and Threatened
Litigation
None
Schedule B
5
6-MOS
DEC-31-1996
JUN-30-1996
2,114,000
0
4,050,000
0
1,200,000
7,815,000
7,897,000
(1,204,000)
20,145,000
5,019,000
94,000
0
0
17,000
14,701,000
20,145,000
0
9,330,000
0
4,413,000
2,779,000
0
48,000
2,270,000
681,000
0
0
0
0
1,589,000
.09
.09
