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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 MARCH 31, 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
Harvey, Louisiana 70058
(Address of principal executive offices) (Zip Code)
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 May 5,
2000 was 67,353,089.
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SUPERIOR ENERGY SERVICES, INC.
Quarterly Report on Form 10-Q for
the Quarterly Period Ended March 31, 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 9
Item 3. Quantitative and Qualitative Disclosures about Market Risk 12
PART II OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 12
Item 6. Exhibits and Reports on Form 8-K 12
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 quarter
ended March 31, 2000 reflect three months of operations of Cardinal,
Superior and Production Management Companies, Inc., which we acquired
effective November 1, 1999. The results for the quarter ended March 31,
1999 reflect three months 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
March 31, 2000 and December 31, 1999
(in thousands, except share data)
3/31/00 12/31/99
(Unaudited) (Audited)
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 3,275 $ 8,018
Accounts receivable - net 40,210 41,878
Income tax receivable - 224
Deferred tax asset 1,437 1,437
Prepaid insurance and other 4,146 4,565
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Total current assets 49,068 56,122
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Property, plant and equipment - net 138,594 134,723
Goodwill - net 78,116 78,641
Note receivable 8,898 8,898
Other assets - net 3,839 3,871
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Total assets $ 278,515 $ 282,255
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,742 $ 9,196
Accrued expenses 11,758 15,473
Income taxes payable 972 -
Current maturities of long-term debt 2,782 2,579
Notes payable - other - 3,669
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Total current liabilities 25,254 30,917
----------- -----------
Deferred income taxes 12,392 12,392
Long-term debt 117,380 117,459
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, 59,968,789 60 60
Additional paid-in capital 249,348 248,934
Accumulated deficit (125,919) (127,507)
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Total stockholders' equity 123,489 121,487
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Total liabilities and stockholders' equity $ 278,515 $ 282,255
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See accompanying notes to consolidated financial statements
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Three Months Ended March 31, 2000 and 1999
(in thousands, except per share data)
(unaudited)
2000 1999
---- ----
Revenues $ 47,274 $ 18,978
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Costs and expenses:
Cost of services 27,762 10,506
Depreciation and amortization 4,737 1,940
General and administrative 9,311 3,677
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Total costs and expenses 41,810 16,123
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Income from operations 5,464 2,855
Other income (expense):
Interest expense (2,920) (3,406)
Interest income 193 -
---------- ----------
Income (loss) before income taxes 2,737 (551)
Income taxes 1,149 (98)
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Net income (loss) $ 1,588 $ (453)
========== ==========
Basic earnings (loss) per share $ 0.03 $ (0.18)
========== ==========
Diluted earnings (loss) per share $ 0.03 $ (0.18)
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Weighted average common shares used
in computing earnings (loss) per share:
Basic 59,856 6,087
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Diluted 60,301 6,087
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See accompanying notes to consolidated financial statements
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three Months Ended March 31, 2000 and 1999
(in thousands)
(unaudited)
2000 1999
---- ----
Cash flows from operating activities:
Net income (loss) $ 1,588 $ (453)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Deferred income taxes - (102)
Depreciation and amortization 4,737 1,940
Changes in operating assets and liabilities:
Accounts receivable 1,668 4,145
Other - net 999 650
Accounts payable 546 (2,958)
Accrued expenses (3,715) (1,417)
Income taxes 1,196 -
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Net cash provided by operating activities 7,019 1,805
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Cash flows from investing activities:
Payments for purchases of property and equipment (8,587) (1,144)
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Net cash used in investing activities (8,587) (1,144)
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Cash flows from financing activities:
Net payments on notes payable (3,713) (4,440)
Proceeds from long-term debt 643 -
Principal payments on long-term debt (519) (1,376)
Proceeds from issuance of common and preferred stock - 5,000
Proceeds from exercise of stock options 414 -
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Net cash used in financing activities (3,175) (816)
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Net decrease in cash and cash equivalents (4,743) (155)
Cash and cash equivalents at beginning of period 8,018 421
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Cash and cash equivalents at end of period $ 3,275 $ 266
========= ========
See accompanying notes to consolidated financial statements
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
Three Months Ended March 31, 2000 and 1999
(1) MERGER
On July 15, 1999, Superior consummated a subsidiary 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 the accompanying notes
and Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The financial information for the three months ended March 31, 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 three
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 on arriving at the
income available to common stockholders was $623,000 for the first quarter
of 1999.
(4) BUSINESS COMBINATIONS
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 $54.1 million. The revaluation
reflected excess purchase price of $54.9 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 November 1, 1999, the Company acquired Production Management
Companies, Inc. ("PMI") for aggregate consideration consisting of $3.0
million in cash, 610,000 shares of the Company's common stock at an
approximate trading price of $5.66 and additional consideration, if any,
based upon a multiple of four times PMI's EBITDA (earnings before interest,
income taxes, depreciation and amortization expense) less certain
adjustments. The acquisition was accounted for as a purchase, and PMI's
assets and liabilities have been revalued 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.
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. These two subsidiaries were originally
acquired in the second quarter of 1998. 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 months ended
March 31, 1999 presents a summary of the consolidated results of operations
of Superior, Cardinal, and PMI as if the Merger, the acquisition and the
sales of 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
March 31, 1999
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Revenues $47,349
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Net income $1,177
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Basic earnings per share $0.02
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Diluted earnings per share $0.02
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The above pro forma information is not necessarily indicative of the
results of operations as they would have been had the Merger, acquisition
and sales of subsidiaries been effected on January 1, 1999.
(5) SEGMENT INFORMATION
The Company's reportable segments, subsequent to the Merger, 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 months ended March 31, 2000 and 1999 is shown in the following tables
(in thousands):
THREE MONTHS ENDED MARCH 31, 2000
Well Rental Field Unallocated Consolidated
Services Wireline Marine Tools Environ. Mgmt. Other Amount Total
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Revenues $ 9,674 $ 7,621 $ 5,255 $13,433 $ 3,605 $ 6,083 $ 1,603 $ - $ 47,274
Cost of services 6,329 5,128 3,541 4,076 2,180 5,661 847 - 27,762
Depreciation and amortization 799 552 811 2,099 217 225 34 - 4,737
General and administrative 1,935 1,341 863 2,997 909 913 353 - 9,311
Operating income (loss) 611 600 40 4,261 299 (716) 369 - 5,464
Interest expense - - - - - - - (2,920) (2,920)
Interest income - - - - - - - 193 193
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Income (loss) before income taxes $ 611 $ 600 $ 40 $ 4,261 $ 299 $ (716) $ 369 $(2,727) $ 2,737
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THREE MONTHS ENDED MARCH 31, 1999
Well Unallocated Consolidated
Services Wireline Marine Amount Total
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Revenues $ 5,621 $ 7,533 $ 5,824 $ - $ 18,978
Cost of services 2,933 4,240 3,333 - 10,506
Depreciation and amortization 489 498 953 - 1,940
General and administrative 1,152 1,545 980 - 3,677
Operating income 1,047 1,250 558 - 2,855
Interest expense - - - (3,406) (3,406)
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Income (loss) before income taxes $ 1,047 $ 1,250 $ 558 $(3,406) $ (551)
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(6) COMMITMENTS AND CONTINGENCIES
In September 1999, one of the Company's two hundred foot class liftboats
was damaged in the Gulf of Mexico. The vessel was fully insured and
management does not believe any related unasserted claims will have a
material effect on the financial position, results of operations or
liquidity of the Company.
From time to time, the Company is involved in litigation arising out of
operations in the normal course of business. In management's opinion, the
Company is not involved in any litigation, the outcome of which would have
a material effect on the financial position, results of operations or
liquidity of the Company.
(7) ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (FAS) No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES. FAS No. 133, as amended, is effective
for all fiscal quarters of fiscal years beginning after June 15, 2000 and
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and
for hedging activities. FAS No. 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes
in the fair value of derivatives are to be recorded each period in current
earnings or other comprehensive income, depending on whether a derivative
is designated as part of a hedge transaction and, if it is, the type of
hedge transaction. Earlier application of the provisions of the Statement
is encouraged and is permitted as of the beginning of any fiscal quarter
that begins after the issuance of the Statement. The Company has not yet
assessed the financial impact of adopting this statement.
(8) SUBSEQUENT EVENTS
On May 5, 2000, the Company completed the sale of 7.3 million shares of
common stock, including 950,000 shares sold pursuant to the underwriter's
over-allotment option. The offering generated net proceeds to the Company
of approximately $63.2 million. Of the $63.2 million, the Company intends
to use approximately $4.1 million of the proceeds to repay existing
borrowings under the Company's $20 million revolving credit facility and
$23.2 million in aggregate to purchase liftboats and to make an investment
in an oilfield services company. The balance of the proceeds may be used
for acquisitions and general working capital purposes.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward-Looking Statements
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" contains forward-looking statements which involve risks and
uncertainties. All statements other than statements of historical fact
included in this section regarding our financial position and liquidity,
strategic alternatives, future capital needs, business strategies and other
plans and objectives of our management for future operations and
activities, are forward-looking statements. These statements are based on
certain assumptions and analyses made by the our management in light of its
experience and its perception of historical trends, current conditions,
expected future developments and other factors it believes are appropriate
under the circumstances. Such forward-looking statements are subject to
uncertainties that could cause our actual results to differ materially from
such statements. Such uncertainties include but are not limited to: the
volatility of the oil and gas industry, including the level of offshore
exploration, production and development activity; risks of our growth
strategy, including the risks of rapid growth and the risks inherent in
acquiring businesses; changes in competitive factors affecting our
operations; operating hazards, including the significant possibility of
accidents resulting in personal injury, property damage or environmental
damage; the effect on our performance of regulatory programs and
environmental matters; seasonality of the offshore industry in the Gulf of
Mexico and our dependence on certain customers. These and other
uncertainties related to our business are described in detail in our Annual
Report on Form 10-K for the year ended December 31, 1999. Although we
believe that the expectations reflected in such forward-looking statements
are reasonable, we can give no assurance that such expectations will prove
to be correct. You are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. We
undertake no obligation to update any of our forward-looking statements for
any reason.
ACQUISITION OF CARDINAL HOLDING CORP.
On July 15, 1999, we acquired Cardinal Holding Corp. through its merger
with one of our wholly-owned subsidiaries. The merger was treated for
accounting purposes as if we were acquired by Cardinal in a purchase
business transaction. The purchase method of accounting required that we
carry forward Cardinal's net assets at their historical book value and
reflect our net assets at their estimated fair value at the date of the
merger. Accordingly, all historical financial information presented in the
consolidated financial statements included in this Quarterly Report for
periods prior to July 15, 1999 reflect Cardinal's results on a stand-alone
basis. Cardinal's historical operating results were substantially
different than ours for the same periods. Our results for the quarter ended
March 31, 2000 reflect three months of operations of Cardinal, Superior and
Production Management Companies, Inc., which we acquired effective November
1, 1999. The results for the quarter ended March 31, 1999 reflect three
months of operations of Cardinal only. Consequently, analyzing prior
period results to determine or estimate our future operating potential will
be difficult.
OVERVIEW
We provide a broad range of specialized oilfield services and equipment to
oil and gas companies in the Gulf of Mexico and throughout the Gulf Coast
region. These services and equipment include:
* well services including plug and abandonment ("P&A") services, coiled
tubing services, well pumping and stimulation services, data acquisition
services, gas lift services and electric wireline services,
* mechanical wireline services,
* the rental of liftboats,
* the rental of specialized oilfield equipment,
* environmental cleaning services,
* field management services, and
* the manufacture and sale of drilling instrumentation and oil spill
containment equipment.
Over the past few years, we have significantly expanded the geographic
scope of our operations and the range of production related services that
we provide through both internal growth and strategic acquisitions. In
July 1999, we completed the Cardinal acquisition, and in November 1999, we
completed the Production Management acquisition thereby making these
companies two of our wholly-owned subsidiaries. These acquisitions firmly
established us as a market leader in providing most offshore production
related services using liftboats as work platforms and allowed us to expand
our scope of operations to include offshore platform and property
management services.
Our financial performance is impacted by the broader economic trends
affecting our customers. The demand for our services and equipment is
cyclical due to the nature of the energy industry. Our first quarter 2000
operating results were, and future results may be, adversely affected by
relatively low levels of industry demand for our equipment and services.
Our operating results are directly tied to industry demand for our
services, most of which are performed in the Gulf of Mexico. While we have
focused on providing production related services where, historically,
demand has not been as volatile as for exploration related services, we
expect our operating results to be highly leveraged to industry activity
levels in the Gulf of Mexico.
COMPARISON OF THE RESULTS OF OPERATIONS FOR THE QUARTERS ENDED MARCH 31,
2000 AND 1999
In the three months ended March 31, 2000, overall demand for certain of
our services was affected by low activity levels as well as poor weather
conditions. Activity levels gradually improved throughout the quarter
with March being the best month of the quarter.
Our revenues were $47.3 million for the three months ended March 31, 2000
as compared to $19.0 million for the same period in 1999. Due to the
accounting treatment required for the Cardinal merger, our first
quarter of 2000 operating results reflected three months of operations of
Cardinal, Superior and Production Management, while the first quarter of
1999 operating results reflected only Cardinal's operations on a stand-
alone basis.
Our gross margin was $19.5 million in the first quarter of 2000 compared to
$8.5 million in the first quarter of 1999. The increase is the result of
the Cardinal merger and the Production Management acquisition. In the
first quarter of 2000, our rental tools segment contributed the highest
gross margin, while our field management segment contributed the lowest
gross margin. Of all our production related services, field management
is expected to produce the lowest gross margin since its largest cost of
services component is providing contract labor.
Depreciation and amortization increased to $4.7 million in three months
ended March 31, 2000 from $1.9 million in the same period in 1999. Most of
the increase resulted from the larger asset base following the Cardinal
merger and the Production Management acquisition. Depreciation also
increased as a result of our $8.6 million and $9.2 million of capital
expenditures in the first quarter of 2000 and the year 1999, respectively.
General and administrative expenses increased to $9.3 million in the first
quarter of 2000 from $3.7 million in the same period in 1999. The increase
is the result of the Cardinal merger and the Production Management
acquisition.
In the quarter ended March 31, 2000, we recorded net income of $1.6
million, or $0.03 earnings per diluted share, compared to a net loss of
$0.5 million, or $0.18 loss per diluted share, in the same period in 1999.
LIQUIDITY AND CAPITAL RESOURCES
Our primary liquidity needs are for working capital, acquisitions, capital
expenditures and debt service. Our primary sources of liquidity are cash
flow from operations and borrowings under our revolving credit facility.
We had cash and cash equivalents of $3.3 million at March 31, 2000 compared
to $8.0 million at December 31, 1999. Included in the $8.0 million balance
at December 31, 1999 was a $6.6 million insurance settlement, which was
received in late December 1999, for the damages associated with one of our
two hundred foot vessels.
Net cash provided by operating activities was $7.1 million for the three
months ended March 31, 2000 as compared to $1.8 million for the same period
in 1999. In the first quarter of 2000, we used approximately $3.2 million
of the $6.6 million insurance settlement to refurbish the damaged vessel.
This $3.2 million decreased the net cash provided by operating activities
for the first quarter of 2000. The overall increase in net cash provided
by operating activities was due primarily to the merger with Cardinal and
the Production Management acquisition.
On May 5, 2000, we completed the sale of 7.3 million shares of common
stock, including 950,000 shares sold pursuant to the underwriter's over-
allotment option. The offering generated net proceeds of approximately
$63.2 million. Of the $63.2 million, we intend to use approximately $4.1
million of the net proceeds to repay existing borrowings under our $20
million revolving credit facility and $23.2 million in aggregate to
purchase liftboats and to make an investment in an oilfield services
company. The balance of the proceeds may be used for acquisitions and
general working capital purposes.
We have a term loan and revolving credit facility that was implemented in
July 1999 to provide $110 million term loan to refinance our long-term debt
after the Cardinal merger, provide a $20 million revolving credit
facility and $22 million that we can use to pay additional contingent
consideration from our prior acquisitions. We amended the credit facility
in November 1999 to increase the term loan by $10 million to refinance
Production Management's existing indebtedness and to pay the cash portion
of the acquisition price. Under the credit facility, the term loan
requires quarterly principal installments that commenced December 31, 1999
in the amount of $519,000 and then increasing up to an aggregate of
approximately $1.6 million a quarter until 2006 when $92 million will be
due and payable. The credit facility bears interest at a LIBOR rate plus
margins that depend on our leverage ratio. As of May 5, 2000, the amount
outstanding under the term loan was $119.0 million, and there were no
borrowings outstanding under the revolving credit facility. As of May 5,
2000, the weighted average interest rate on the credit facility was 9.28%.
Indebtedness under the credit facility is secured by substantially all of
our assets, including the pledge of the stock of our subsidiaries. The
credit facility contains customary events of default and requires that we
maintain debt coverage and leverage ratios. It also limits our ability to
make capital expenditures, pay dividends or make other distributions, make
acquisitions, make changes to our capital structure, create liens or incur
additional indebtedness.
In the first quarter of 2000, we made capital expenditures of $8.6 million
primarily to further expand our rental tool equipment. Other capital
expenditures included capital improvements to our liftboats and the
purchase of a new coiled tubing unit. We currently believe that we will
make additional capital expenditures, excluding acquisitions and targeted
asset purchases, of approximately $16 to $17 million in 2000 primarily to
further expand our marine vessel and rental tool inventory. We believe
that our current working capital, cash generated from our operations and
availability under our revolving credit facility will provide sufficient
funds for our identified capital projects.
We expect to pay approximately $21.4 million in the fourth quarter of 2000
for additional consideration related to our 1997 acquisitions. The
consideration will be capitalized as additional purchase price of the
acquired companies, and we expect to use the $22 million portion of the
credit facility, which was designed to fund these payments, to the extent
that we do not pay them from working capital.
We intend to continue implementing our acquisition strategy to increase our
scope of services. Depending on the size of any future acquisitions, we
may require additional equity or debt financing in excess of our current
working capital and amounts available under our revolving credit facility.
ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (FAS) No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES. FAS No. 133, as amended, is effective
for all fiscal quarters of fiscal years beginning after June 15, 2000 and
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and
for hedging activities. FAS No. 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes
in the fair value of derivatives are to be recorded each period in current
earnings or other comprehensive income, depending on whether a derivative
is designated as part of a hedge transaction and, if it is, the type of
hedge transaction. Earlier application of the provisions of the Statement
is encouraged and is permitted as of the beginning of any fiscal quarter
that begins after the issuance of the Statement. We have not yet assessed
the financial impact of adopting this Statement.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no significant changes in our market risks since the year
ended December 31, 1999. For more information, please read the
consolidated financial statements and notes thereto included in our Annual
Report on Form 10-K for the year ended December 31, 1999.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In March 2000, pursuant to a stock option, we issued 10,000 shares of
common stock for $3.60 per share in reliance upon Sections 4(2) and 4(6)
under the Securities Act of 1933. Proceeds were used to provide additional
working capital.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) The following exhibits are filed with this Form 10-Q:
2.1 Agreement and Plan of Merger (incorporated herein by
reference to the Company's Current Report on Form 8-K dated
April 20, 1999).
2.2 Amendment No. 1 to Agreement and Plan of Merger
(incorporated herein by reference to the Company's Current
Report on Form 8-K dated June 30, 1999).
3.1 Certificate of Incorporation of the Company (incorporated herein
by reference to the Company's Quarterly Report on Form 10-QSB for
the quarter ended March 31, 1996).
3.2 Certificate of Amendment to the Company's Certificate of
Incorporation (incorporated herein by reference to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1999).
3.3 Amended and Restated Bylaws (incorporated herein by reference to the
Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1999).
4.1 Specimen Stock Certificate (incorporated herein by reference to
Amendment No. 1 to the Company's Form S-4 on SB-2 (Registration
Statement No. 33-94454)).
4.2 Registration Rights Agreement dated as of July 15, 1999 by and
among the Company, First Reserve Fund VII, Limited Partnership
and First Reserve Fund VIII, Limited Partnership (incorporated
herein by reference to the Company's Quarterly Report on Form 10-
Q for the quarter ended June 30, 1999).
4.3 Registration Rights Agreement dated of July 15, 1999 by and among
the Company and certain stockholders named therein (incorporated
herein by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1999).
4.4 Stockholders' Agreement dated as of July 15, 1999 by and among
the Company, First Reserve Fund VII, Limited Partnership and
First Reserve Fund VIII, Limited Partnership (incorporated herein
by reference to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1999).
27.1 Financial Data Schedule.
b) Reports on Form 8-K. The following report on Form 8-K was filed
during the quarter ended March 31, 2000:
On March 22, 2000, the Company filed a Current Report on Form 8-K
reporting, under Items 5 and 7, the results for the fourth quarter and
year 1999.
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 12, 2000 BY: /S/ TERENCE E. HALL
-------------------------------------
Terence E. Hall
Chairman of the Board,
Chief Executive Officer and President
(Principal Executive Officer)
Date: MAY 12, 2000 BY: /S/ ROBERT S. TAYLOR
-------------------------------------
Robert S. Taylor
Chief Financial Officer
(Principal Financial and Accounting
Officer)