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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.
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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
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Income (loss) before
income taxes $ 1,728 $ 357 $ 1,701 $ 4,729 $ 754 $ (175) $ (41) $(2,427) $ 6,626
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THREE MONTHS ENDED JUNE 30, 1999
Well Unallocated Consolidated
Services Wireline Marine Amount Total
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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)
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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
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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)
=======================================================
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