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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
X
(Mark One)
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
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.)
1105 Peters Road
Harvey,Louisiana 70058
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (504) 362-4321
1503 Engineers Road
Belle Chasse, Louisiana 70037
(Former name, former address and former fiscal year, if
changed since last report)
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 May 1, 1998 was 29,247,023.
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PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
March 31, 1998 and December 31, 1997
(in thousands)
3/31/98 12/31/97
(Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents $ 2,282 $ 1,902
Accounts receivable - net 23,549 24,054
Inventories 1,788 1,778
Other 1,731 1,513
--------- ---------
Total current assets 29,350 29,247
Property, plant and equipment - net 59,484 51,797
Goodwill - net 35,186 35,989
Patent - net 1,002 1,027
--------- ---------
Total assets $ 125,022 $ 118,060
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,203 $ 5,976
Accrued expenses 3,630 3,872
Income taxes payable 2,704 893
--------- ---------
Total current liabilities 12,537 10,741
--------- ---------
Deferred income taxes 6,930 7,127
Long-term debt 12,165 11,339
Stockholders' equity:
Preferred stock of $.01 par value
Authorized, 5,000,000; none issued - -
Common stock of $.001 par value.
Authorized, 40,000,000 shares;
issued, 29,211,623 29 29
Additional paid-in capital 78,646 78,590
Retained earnings 14,715 10,234
--------- ---------
Total stockholders' equity 93,390 88,853
--------- ---------
Total liabilities and
stockholders' equity $ 125,022 $ 118,060
========= =========
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 1998 and 1997
(in thousands, except per share data)
(unaudited)
1998 1997
--------- ---------
Revenues $ 22,702 $ 9,180
--------- ---------
Costs and expenses:
Costs of services 9,562 4,298
Depreciation and amortization 1,661 491
General and administrative 5,197 2,034
--------- ---------
Total costs and expenses 16,420 6,823
--------- ---------
Income from operations 6,282 2,357
Other income (expense):
Interest expense (230) (85)
Gain on sale of subsidiary 1,176 -
--------- ---------
Income before income taxes 7,228 2,272
Provision for income taxes 2,747 750
--------- ---------
Net income $ 4,481 $ 1,522
========= =========
Earnings Per Share:
Basic $ 0.15 $ 0.08
========= =========
Diluted $ 0.15 $ 0.08
========= =========
Weighted average common shares used in
computing earnings per share:
Basic 29,182 18,743
========= =========
Diluted 29,531 20,046
========= =========
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1998 and 1997
(in thousands)
(unaudited)
1998 1997
------- -------
Cash flows from operating activities:
Net income $ 4,481 $ 1,522
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 1,661 491
Unearned income - 126
Gain on sale of subsidiary (1,176) -
Changes in operating assets
and liabilities, net of acquisition:
Accounts receivable 85 (1,364)
Inventories (10) (18)
Other - net 163 205
Accounts payable 307 388
Due to shareholders - (268)
Accrued expenses (381) (338)
Income taxes payable 1,885 (21)
--------- ---------
Net cash provided by operating activities 7,015 723
--------- ---------
Cash flows from investing activities:
Payments for purchases of property and
property and equipment (11,015) (1,258)
Additional payment for business acquired (750) -
Proceeds from sale of subsidiary 4,247 -
Acquisition of business, net of cash acquired - (3,917)
--------- ---------
Net cash used in investing activities (7,518) (5,175)
--------- ---------
Cash flows from financing activities:
Notes payable - bank 826 4,745
Proceeds from exercise of stock options 57 -
--------- ---------
Net cash provided by financing activities 883 4,745
--------- ---------
Net increase in cash and cash equivalents 380 293
Cash and cash equivalents at beginning of period 1,902 433
--------- ---------
Cash and cash equivalents at end of period $ 2,282 $ 726
========= =========
SUPERIOR ENERGY SERVICES, INC.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Three Months Ended March 31, 1998 and 1997
(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, 1997 and the accompanying notes and
Management's Discussion and Analysis or Plan of Operation.
The financial information for the three months ended March
31, 1998 and 1997, 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 three months of the year are not necessarily
indicative of the results of operations which might be
expected for the entire year.
(2) Business Combinations
In 1997, the Company acquired all of the outstanding common
stock of six companies for a combined $50,210,000 cash,
1,520,000 shares of the Company's common stock and
promissory notes totaling $20,655,000. The amounts payable
under the promissory notes are subject to certain
contingencies and are not reflected in the respective
company's purchase price. Each of the acquisitions were
accounted for as a purchase and the results of operations of
the acquired companies have been included from their
respective acquisition dates.
The following unaudited pro forma information for the three
months ended March 31, 1997, presents a summary of
consolidated results of operations as if the acquisitions
had occurred on January 1, 1997 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):
Revenues $19,387
=======
Net earnings $ 2,465
=======
Basic earnings per share $ 0.12
=======
Diluted earnings per share $ 0.12
=======
The above pro forma information is not necessarily
indicative of the results of operations as they would have
been had the acquisitions been effected on January 1, 1997.
(3) Earnings Per Share
In 1997 the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128,
Earnings Per Share ("FAS No. 128"). FAS No. 128 requires the
replacement of previously reported primary and fully diluted
earnings per share required by Accounting Principles Board
Opinion No. 15 with earnings per share and diluted earnings
per share. The calculation of earnings per share excludes
any dilutive effect of stock options, while diluted earnings
per share includes the dilutive effect of stock options.
Per share amounts for the three month period ended March 31,
1997 have been restated to conform to the requirements of
FAS No. 128. The number of dilutive stock options and
warrants used in computing diluted earnings per share were
349,000 in 1998 and 1,303,000 in 1997.
Item 2. Management's Discussion and Analysis or Plan of Operation
Comparison of the Results of Operations for the Quarters
Ended March 31, 1998 and 1997
The Company experienced significant growth in revenue and
net income in the first quarter of 1998 as compared to the
same period in 1997. The Company has continued to focus on
the rental tool business and as a result, 60% of revenues in
the first quarter of 1998 are from the rental tool area as
compared with 16% in 1997.
The Company's revenue increased 147% to $22.7 million for
the three months ended March 31, 1998, as compared to $9.2
million for the same period in 1997. The majority of the
increase is attributable to the acquisitions, primarily of
rental tool businesses, that the Company has completed in
1997.
The Company's gross margin increased to 57.9% for the three
months ended March 31, 1998, from 53.2% for the three months
ended March 31, 1997. This increase was primarily due to the
increase in the percentage of the Company's revenue that was
generated by its rental tool operations, which generally has
higher gross margins than the Company's other areas of
operations.
Depreciation and amortization increased 238%, to $1.7
million for the three months ended March 31, 1998, from
$491,000 for three months ended March 31, 1997. Most of the
increase resulted from the larger asset base that has
resulted from the Company's acquisitions. General and
administrative expenses as a percentage of revenue remained
relatively constant at 22.9% of revenue for the three months
ended March 31, 1998, as compared to 22.2% of revenue for
the three months ended March 31, 1997. In the first quarter
of 1998, the Company sold Baytron, Inc. for a gain of
approximately $1.2 million.
Net income for the three months ended March 31, 1998
increased 194% to $4.5 million from $1.5 million for the
comparable period last year. Earnings per diluted share
increased 87.5% to $0.15 from $0.08 despite the diluted
weighted average of common stock increasing by 47% and an
effective income tax rate increase of 15%. The strong net
income and earnings increases were the result of increased
revenue, higher profit margins and the gain on sale of
subsidiary.
Capital Resources and Liquidity
For the three months ended March 31, 1998, the Company had
net income of $4.5 million and net cash provided by
operating activities of $7.0 million, compared to $1.5
million and $723,000, respectively, for the same period in
1997. The Company's EBITDA (earnings before interest,
taxes, depreciation and amortization) increased to $7.9
million, exclusive of the gain on sale of subsidiary, for
the three months ended March 31, 1998, as compared to $2.8
million for the same period in 1997. The increase in net
income, cash flow and EBITDA was primarily the result of the
acquisitions completed in 1997.
In the first three months of 1998, the Company made capital
expenditures of $11.0 million primarily for rental equipment
inventory, P&A equipment spreads and renovation of the
Company's new operating facility. The Company, as of the
end of the first quarter, consolidated all of its New
Orleans area sales and administrative functions in this
facility. The Company, in the first quarter of 1998, made a
final payment of $750,000 in connection with the acquisition
of Dimensional Oil Field Services, Inc. In the first
quarter of 1998, the Company received cash proceeds of $4.2
million for the sale of Baytron, Inc.
The Company maintains a Bank Credit Facility which provides
for a revolving line of credit up to $45.0 million, matures
on April 30, 2000, and bears interest at an annual rate of
LIBOR plus a margin that depends on the Company's debt
coverage ratio. As of May 6, 1998 there was $14.2 million
outstanding under the Bank Credit Facility at an interest
rate of approximately 7.4% per annum. Borrowings under the
Bank Credit Facility are available for acquisitions, working
capital, letters of credit and general corporate purposes.
Indebtedness under the Bank Credit Facility is guaranteed by
the Company's subsidiaries, collateralized by substantially
all of the assets of the Company and its subsidiaries, and a
pledge of all the common stock of the Company's
subsidiaries. Pursuant to the Bank Credit Facility, the
Company has agreed to maintain certain financial ratios.
The Bank Credit Facility also imposes certain limitations on
the ability of the Company to make capital expenditures, pay
dividends or other distributions to shareholders, make
acquisitions or incur indebtedness outside of the Bank
Credit Facility.
Management currently believes that the Company will have
additional capital expenditures, excluding acquisitions, of
approximately $12 million in 1998 primarily to further
expand its rental tool inventory. The Company believes that
cash generated from operations and availability under the
Bank Credit Facility will provide sufficient funds for the
Company's identified capital projects and working capital
requirements. However, part of the Company's strategy
involves the acquisition of companies, which have products
and services complementary to the Company's existing base of
operations. Depending on the size of any future
acquisitions, the Company may require additional debt
financing possibly in excess of the limits of the Bank
Credit Facility or additional equity financing.
The Company has considered the impact of the year 2000
issues on its computer systems and has determined that it is
year 2000 compliant.
In June 1997, the FASB issued Statement of Financial
Accounting Standards No. 131, Disclosures about Segments of
an Enterprise and Related Information ("FAS No. 131"). FAS
No. 131 establishes standards for the way public enterprises
are to report information about operating segments in annual
financial statements and requires the reporting of selected
information about operating segments in interim financial
reports issued to shareholders. It also establishes
standards for related disclosures about products and
services, geographic areas, and major customers. The
Company plans to adopt FAS No. 131 for the year ended
December 31, 1998.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) The following exhibit is filed with this Form 10-QSB
27.1 Financial Data Schedule
b) The Company did not file any reports on Form 8-K during
the quarter ended March 31, 1998.
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: May 14, 1998 By: /s/ Terence E. Hall
Terence E. Hall
Chairman of the Board,
Chief Executive Officer and President
(Principal Executive Officer)
Date: May 14, 1998 By: /s/ Robert S. Taylor
Robert S. Taylor
Chief Financial Officer
(Principal Financial and Accounting Officer)
5
1,000
3-MOS
DEC-31-1998
MAR-31-1998
2,282
0
24,114
(565)
1,788
29,350
64,004
(4,520)
125,022
12,537
0
0
0
29
93,361
125,022
22,702
22,702
9,562
16,420
0
0
230
7,228
2,747
4,481
0
0
0
4,481
0.15
0.15
