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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
X OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
or
TRANSITION REPORT UNDER 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 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
Belle Chasse, New Orleans, LA 70037
(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, 1997 was 20,650,757
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PART 1. FINANCIAL INFORMATION
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Item 1. Financial Statements
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SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
June 30, 1997 and December 31, 1996
(in thousands)
6/30/97 12/31/96
(Unaudited) (Audited)
----------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 898 $ 433
Accounts receivable - net 11,518 6,966
Inventories 1,309 1,197
Deferred income taxes 137 137
Other 668 345
------- -------
Total current assets 14,530 9,078
Property, plant and equipment - net 21,158 9,894
Goodwill - net 17,559 8,239
Patent - net 1,077 1,126
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Total assets $ 54,324 $ 28,337
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable - bank $ 3,183 $ 351
Accounts payable 2,639 1,800
Notes payable - other 572 1,171
Unearned income 346 392
Accrued expenses 1,508 1,362
Income taxes payable 976 1,208
Other - 200
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Total current liabilities 9,224 6,484
------- -------
Deferred income taxes 3,570 1,254
Long-term debt 10,310 250
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, 20,215,200 20 19
Additional paid-in capital 27,136 19,551
Retained earnings 4,064 779
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Total stockholders' equity 31,220 20,349
------- -------
Total liabilities and
stockholders' equity $ 54,324 $ 28,337
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SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three and Six Months Ended June 30, 1997 and 1996
(in thousands)
(unaudited)
Three Months Six Months
1997 1996 1997 1996
------- ------- ------- -------
Revenues $ 10,909 $ 4,690 $ 20,089 $ 9,330
------- ------- ------- -------
Costs and expenses:
Costs of services 4,995 2,142 9,293 4,413
Depreciation and amortization 672 297 1,163 590
General and administrative 2,459 1,007 4,493 2,189
------- ------- ------- -------
Total costs and expenses 8,126 3,446 14,949 7,192
------- ------- ------- -------
Income from operations 2,783 1,244 5,140 2,138
Other income(expense):
Interest expense (152) (18) (237) (48)
Other - 15 - 180
------- ------- ------- -------
Income before income taxes 2,631 1,241 4,903 2,270
Provision for income taxes 868 372 1,618 681
------- ------- ------- -------
Net income $ 1,763 $ 869 $ 3,285 $ 1,589
======= ======= ======= =======
Net income per common share
and common share equivalent $ 0.08 $ 0.05 $ 0.16 $ 0.09
======= ======= ======= =======
Weighted average shares
outstanding 22,241 17,087 21,912 17,080
======= ======= ======= =======
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 1997 and 1996
(in thousands)
(unaudited)
1997 1996
---- ----
Cash flows from operating activities:
Net income $ 3,285 $ 1,589
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 1,163 590
Unearned income (46) (346)
Changes in operating assets and liabilities,
net of acquisitions:
Accounts receivable (2,721) (336)
Inventories (104) (232)
Other - net 24 (68)
Accounts payable 332 (1,611)
Due to shareholders (862) (26)
Accrued expenses 11 185
Income taxes payable (610) 670
-------- --------
Net cash provided by operating activities 472 415
-------- --------
Cash flows from investing activities:
Acquisitions of businesses,
net of cash acquired (9,241) -
Payments for purchases of property
and equipment (2,324) (572)
Proceeds from sale of property
and equipment - 357
-------- --------
Net cash used in investing activities (11,565) (215)
-------- --------
Cash flows from financing activities:
Notes payable - bank 11,558 (1,154)
Deferred payment for acquisition of
Oil Stop,Inc. - (2,000)
-------- --------
Net cash provided by (used in) 11,558 (3,154)
-------- --------
Net increase (decrease) in cash 465 (2,954)
Cash and cash equivalents at
beginning of period 433 5,068
-------- --------
Cash and cash equivalents at
end of period $ 898 $ 2,114
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SUPERIOR ENERGY SERVICES, INC.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Six Months Ended June 30, 1997 and 1996
(1) 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 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 the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1996 and
the accompanying notes and Management's Discussion and Analysis or
Plan of Operation.
The financial information for the six months ended June 30, 1997 and
1996, 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.
Certain previously reported amounts have been reclassified to conform
to the 1997 presentation.
(2) Business Combinations
---------------------
The Company, pursuant to a stock purchase agreement dated February 28,
1997, acquired all of the outstanding common stock of Nautilus Pipe &
Tool Rental, Inc. and Superior Bearing & Machine Works, Inc.
(collectively doing business as "Concentric Pipe & Tool Rentals") for
$4,000,000 cash, 420,000 restricted shares of the Company's common
stock and a promissory note in the principal amount of $2,150,000.
The amount payable under the promissory note is subject to certain
contingencies and is not reflected in the purchase price which
approximated $5,838,000. Concentric Pipe & Rental Tools is engaged in
the business of renting specialized equipment used in the exploration,
development and production of oil and gas and has operating facilities
in Houma and Lafayette, Louisiana.
The Company, pursuant to a stock purchase agreement dated April 30,
1997, acquired all of the outstanding common stock of F & F Wireline
Service, Inc. for $900,000 cash and a promissory note in the principal
amount of $600,000. The amount payable under the promissory note is
subject to certain contingencies and is not reflected in the purchase
price of $900,000. F & F Wireline Service, Inc. is located in Lake
Charles, Louisiana and provides production wireline services on land
and throughout the western Gulf of Mexico.
The Company, pursuant to an agreement and plan of merger dated May 31,
1997, acquired Tong Rentals and Supply Company, Inc. for $5,500,000
cash and 1,100,000 shares of the Company's common stock. Tong Rentals
and Supply Company, Inc. rents power swivels, power tongs and related
equipment. It operates offices in Lafayette, Louisiana and Houston
and Alice, Texas.
(3) New Accounting Pronouncement
----------------------------
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards Statement No. 128,
"Earnings Per Share " ("FAS No. 128"). SFAS No. 128 supersedes
Opinion No. 15, will be effective for the Company's year ended
December 31, 1997, and cannot be adopted earlier. After adoption, all
prior period earnings per share must be restated to conform with SFAS
No. 128. SFAS No. 128 will not have a material impact on the Company's
earnings per share.
Item 2. Management's Discussion and Analysis or Plan of Operation
- -----------------------------------------------------------------
Comparison of the Results of Operations for the Quarter Ended June 30,
1997 and 1996
Net income for the quarter ended June 30, 1997 increased 103% to
$1,763,000 from $869,000 for the quarter ended June 30, 1996.
Earnings per share increased to $.08 per share from $.05 per share in
the prior year period.
The Company's revenues increased 133% to $10,909,000 for the quarter
ended June 30, 1997 as compared to $4,690,000 for the quarter ended
June 30, 1996. Thirty-five percent of the increase in revenues is the
result of increased levels of activity in plug and abandonment and the
continuing expansion of the Company's oilfield rental tool business.
The remainder of the increase is the result of the acquisitions the
Company has made in the last year.
The gross margin for the quarters ended June 30, 1997 and 1996 were
54.2% and 54.3%, respectively. Increases in the gross margins in the
second quarter of 1997 attributable to the oilfield rental and data
acquisition businesses were largely offset by an increase in the use
of rented marine equipment in the company plug and abandonment
business.
Depreciation and amortization increased 126% in the quarter ended June
30, 1997 over the quarter ended June 30, 1996. Most of this increase
is associated with the acquisitions made over the last year. General
and administrative expenses increased 144% in the quarter ended June
30, 1997 over the quarter ended June 30, 1996. Of this increase, 66%
is related to the acquisitions made in the last year while the
remainder is the result of supporting the increased levels of
revenues.
Comparison of the Results of Operations for the Six Months Ended June
30, 1997 and June 30, 1996
Net income for the six months ended June 30, 1997 increased 107% to
$3,285,000 from $1,589,000 for the six month period ended June 30,
1996. Earnings per share increased to $.16 per share from $.09 in the
six months ended June 30, 1996.
The Company's revenues increased 115% to $20,089,000 for the six
months ended June 30, 1997 as compared to $9,330,000 for the six
months ended June 30, 1996. Thirty-eight percent of the increase in
revenues is the result of increased levels of activity in plug and
abandonment and the continuing expansion of the Company's oilfield
rental tool business. The remainder of the increase is the result of
the acquisitions the Company has made in the last year.
Gross margins increased to 53.7% for the six months ended June 30,
1997 from 52.7% for the six months ended June 30, 1996. The increase
in gross margin is the result of an increase in the gross margin
attributable to the rental tool and data acquisition businesses, which
tend to have higher gross margins than the plug and abandonment
business. These increases were slightly offset by an increase in the
use of rented marine equipment, primarily in the second quarter of
1997.
Depreciation and amortization increased 97% for the six months ended
June 30, 1997 over the six months ended June 30, 1996. Most of the
increase is the result of the acquisitions the Company has made in the
past year. General and administrative expenses were 22.4% of revenue
for the six months ended June 30, 1997 as compared to 23.5% of
revenues for the six months ended June 30, 1996.
Capital Resources and Liquidity
- -------------------------------
The Company's net cash generated from operations was $472,000 for the
six months ended June 30, 1997 as compared to $415,000 for the six
months ended June 30, 1996. The company's working capital position
improved to $5,306,000 at June 30, 1997 as compared to $2,594,000 at
December 31, 1996. The Company's current ratio also improved from 1.4
at December 31, 1996 to 1.6 at June 30, 1997.
The Company's earnings before interest, taxes, depreciation and
amortization (EBITDA) increased to $6,303,000 for the six months ended
as compared to $2,728,000 for the six months ended June 30, 1996. The
increase in EBITDA is the result of the Company's internal growth as
well as the impact of the Company's acquisitions in last year.
In February 1997, the Company acquired all of the outstanding common
stock of Nautilus Pipe & Tool Rental, Inc. and Superior Bearing &
Machine Works, Inc. (collectively doing business as "Concentric Pipe &
Tool Rentals") for $4,000,000 cash, a promissory note in the principal
amount of $2,150,000 and 420,000 shares of the Company's restricted
common stock. The amount payable under the promissory note is subject
to certain minimum earnings requirements through December 31, 1999.
On April 30, 1997, the Company acquired all of the outstanding common
stock of F & F Wireline Service, Inc. for $900,000 and a promissory
note in the amount of $600,000. The amount payable under the
promissory note is subject to certain minimum earnings requirements
through December 31, 1999.
On May 31, 1997, the Company acquired, pursuant to a statutory merger,
Tong Rentals and Supply Company, Inc. for $5,500,000 and 1,100,000
shares of the Company's restricted common stock.
In February 1997, in connection with the Company's acquisition of
Concentric Pipe & Tool Rentals, the Company borrowed $4,000,000, which
bears interest at the lender's prime rate and requires no principal
payments through December 31, 1997 at which time it will convert to a
five or seven year term loan (at the Company's option) with principal
and interest payable monthly at an interest rate of 8.25%. In May
1997, in connection with the Company's acquisition of Tong Rentals and
Supply Company, Inc., the Company borrowed $5,500,000, which bears
interest at the lender's prime rate and requires no principal payments
through December 31, 1997 at which time it will convert to a five or
seven year term loan with interest payable monthly at an interest rate
of 8.25%.
The Company also maintains a revolving credit facility of $4.0
million. At June 30, 1997 there was approximately $2,665,000
outstanding under this facility. Management believes the combination
of working capital, the revolving credit facility and cash flow from
operations provide the Company with sufficient resources and liquidity
to manage its routine operations. Any strategic acquisitions will be
funded with internally generated funds, borrowed funds, newly issued
common stock or a combination of cash, borrowings and common stock.
Inflation has not had a significant effect on the Company's financial
condition or operations in recent years.
PART II. OTHER INFORMATION
===========================
Item 2. Changes in Securities
- ------------------------------
On May 31, 1997, the Company acquired Tong Rentals and Supply Company,
Inc. for, among other things, 1,100,000 shares of the Company's
Common Stock. These shares were issued in a transaction that did not
involve a public offering within the meaning of Section 4(2) of the
Securities Act of 1933 and were also issued solely to an accredited
investor pursuant to Section 4(6) thereunder.
Item 6. Exhibits and Reports on Form 8-K
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a) The following exhibits are filed with this form 10-QSB:
10.1 Agreement and Plan of Merger dated May 31, 1997 by and among the
Company, Tong Rentals and Supply Acquisition, Inc., Tong Rentals and
Supply Company, Inc. and Rufus L. Patin, incorporated by reference to
the Company's Form 8-K dated June 13, 1997.
27.1 Financial Data Schedule
b) Reports on Form 8-K. The Company filed a current report on Form
8-K under items 2 and 7 dated June 13, 1997 reporting the acquisition,
pursuant to a merger, of Tong Rentals and Supply Company, 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 12, 1997 By: /s/ Terence E. Hall
-------------------
Terence E. Hall
Chairman of the Board,
Chief Executive Officer and President
(Principal Executive Officer)
Date: August 12, 1997 By: /s/ Robert S. Taylor
--------------------
Robert S. Taylor
Chief Financial Officer
(Principal Financial and Accounting
Officer)
5
6-MOS
DEC-31-1997
JUN-30-1997
898,000
0
11,903,000
(385,000)
1,309,000
14,530,000
23,598,000
(2,440,000)
54,324,000
9,224,000
0
0
0
20,000
31,200,000
54,324,000
20,089,000
20,089,000
9,293,000
14,949,000
0
0
237,000
4,903,000
1,618,000
3,285,000
0
0
0
3,285,000
0.16
0.16
