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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995
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 NUMBER 1-10570
BJ SERVICES COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 63-0084140
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
5500 NORTHWEST CENTRAL DRIVE, HOUSTON, TEXAS 77092
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 462-4239
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
----- -----
There were 27,942,154 shares of the registrant's common stock, $.10 par value,
outstanding as of August 14, 1995.
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BJ SERVICES COMPANY
INDEX
PART I - FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Condensed Statement of Operations (Unaudited) - Three
and nine months ended June 30, 1995 and 1994 3
Consolidated Condensed Statement of Financial Position -
June 30, 1995 (Unaudited) and September 30, 1994 4
Consolidated Condensed Statement of Cash Flows (Unaudited) -
Nine months ended June 30, 1995 and 1994 5
Notes to Unaudited Consolidated Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
PART II - OTHER INFORMATION 15
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BJ SERVICES COMPANY
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
1995 1994 1995 1994
----------- ----------- ----------- ----------
Revenue $ 199,542 $ 106,318 $ 425,625 $ 309,526
Operating expense:
Cost of sales and services 167,106 90,574 357,202 264,125
Research and engineering 3,822 2,166 8,100 6,678
Marketing 9,271 3,669 17,219 10,272
General and administrative 7,864 5,363 20,317 16,540
Goodwill amortization 1,236 289 1,814 896
Unusual charge 16,000 16,000
----------- ----------- ---------- ----------
Total operating expense 205,299 102,061 420,652 298,511
----------- ----------- ----------- ----------
Operating income (loss) (5,757) 4,257 4,973 11,015
Interest expense (4,884) (1,736) (9,502 ) (4,792)
Interest income 322 138 656 449
Other income (expense) - net 648 (227) 1,998 726
----------- ----------- ---------- ----------
Income (loss) before income taxes and
cumulative effect of accounting change (9,671) 2,432 (1,875 ) 7,398
Income taxes (3,823) 365 (2,149 ) 1,314
----------- ----------- ---------- ----------
Income (loss) before cumulative effect of
accounting change (5,848) 2,067 274 6,084
Cumulative effect of change in
accounting principle, net of tax (10,400)
----------- ----------- ----------- ----------
Net income (loss) $ (5,848) $ 2,067 $ 274 $ (4,316)
=========== =========== ========== ==========
Net income (loss) per share:
Income (loss) per share before cumulative
effect of accounting change $ (.23) $ .13 $ .01 $ .39
Cumulative effect of change in
accounting principle, net of tax (.66)
----------- ----------- ----------- ----------
Net income (loss) per share $ (.23) $ .13 $ .01 $ (.27)
=========== =========== ========== ==========
Average shares outstanding 26,115 15,667 19,170 15,663
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SEE NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
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BJ SERVICES COMPANY
CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL POSITION
(IN THOUSANDS)
JUNE 30, SEPTEMBER 30,
1995 1994
------------ -----------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 1,383 $ 3,218
Receivables - net 167,186 103,754
Inventories:
Finished goods 51,251 30,970
Work in process 4,014 1,118
Raw materials 7,869 6,591
------------ ------------
Total inventories 63,134 38,679
Deferred income taxes 10,973 4,478
Other current assets 11,763 8,230
------------ ------------
Total current assets 254,439 158,359
Property - net 427,437 198,844
Deferred income taxes 96,324 16,365
Goodwill and other assets 200,073 36,498
------------ ------------
$ 978,273 $ 410,066
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 76,688 $ 54,609
Short-term borrowings and current
portion of long-term debt 28,942 33,450
Accrued employee compensation and benefits 20,787 10,521
Income and other taxes 11,170 10,678
Accrued insurance 13,355 2,637
Other accrued liabilities 41,181 9,162
------------ ------------
Total current liabilities 192,123 121,057
Long-term debt 274,666 74,700
Deferred income taxes 9,830 6,986
Accrued postretirement benefits and other 44,345 17,396
Stockholders' equity 457,309 189,927
------------ ------------
$ 978,273 $ 410,066
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SEE NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
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BJ SERVICES COMPANY
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
NINE MONTHS ENDED
JUNE 30,
1995 1994
------------ ------------
Cash flows from operating activities:
Net income (loss) $ 274 $ (4,316)
Adjustments to reconcile net income (loss) to cash
provided by operating activities:
Cumulative effect of accounting change 10,400
Unusual charge, non cash 3,646
Depreciation and amortization 25,178 19,080
Deferred income taxes (benefit) (8,637) (2,486)
Gain on disposal of property (740) (381)
Amortization of unearned compensation 660 117
Changes in assets and liabilities, net of effects from
acquisition of business:
Receivables 494 258
Inventories (4,361) (1,426)
Accounts payable (1,280) (2,115)
Other current assets and liabilities 8,131 (7,379)
Other, net 838 (1,240)
------------ ------------
Net cash provided by operating activities 24,203 10,512
Cash flows from investing activities:
Property additions (24,346) (32,149)
Proceeds from disposal of assets 5,121 1,164
Acquisition of business, net of cash acquired (202,858) (2,000)
------------ ------------
Net cash used for investing activities (222,083) (32,985)
Cash flows from financing activities:
Proceeds from borrowings, net 193,293 22,119
Proceeds from issuance of stock 2,752 780
------------ ------------
Net cash provided by financing activities 196,045 22,899
Increase (decrease) in cash and cash equivalents (1,835) 426
Cash and cash equivalents at beginning of period 3,218 1,620
------------ ------------
Cash and cash equivalents at end of period $ 1,383 $ 2,046
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SEE NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
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BJ SERVICES COMPANY
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 1 GENERAL
In the opinion of management, the unaudited consolidated condensed financial
statements for BJ Services Company (the "Company") include all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation of the financial position as of June 30, 1995, the results of
operations for each of the three and nine month periods ended June 30, 1995
and 1994 and the cash flows for each of the nine month periods then ended. The
consolidated condensed statement of financial position at September 30, 1994 is
derived from the September 30, 1994 audited consolidated financial statements.
Although management believes the disclosures in these financial statements are
adequate to make the information presented not misleading, certain information
and footnote disclosures normally included in annual 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. The results of operations for the three and nine
month periods ended June 30, 1995 are not necessarily indicative of the results
to be expected for the full year.
Certain amounts for fiscal 1994 have been reclassified in the accompanying
consolidated condensed financial statements to conform to the current year
presentation.
NOTE 2 ACQUISITION
In April 1995, the Company acquired The Western Company of North America
("Western") for total consideration, including transaction costs, of $511.4
million in cash, Company common stock and warrants to purchase common stock.
The total transaction may be summarized as follows:
(in thousands)
Cash $ 247,425
Stock issued (12,036,393 shares) 240,006
Warrants issued (4,800,037 warrants) 24,000
-----------
Total consideration 511,431
Net assets acquired 343,496(1)
-----------
Goodwill $ 167,935
===========
----------------------
(1) Includes cash acquired of $44.5 million.
This acquisition was accounted for using the purchase method of accounting.
Accordingly, the results of Western are included in the financial statements
beginning April 1, 1995. The assets and liabilities of Western have been
recorded on the Company's books at estimated fair market value on April 1, 1995
with the remaining purchase price reflected as goodwill, which will be
amortized on a straight line basis over 40 years. The allocation of the
purchase price is preliminary, as valuation and other studies have not been
finalized. It is not expected that the final allocation of purchase price will
produce materially different results from those presented herein. The
following unaudited pro forma summary presents the consolidated results of
operations of the Company as if the acquisition had occurred at the beginning
of fiscal year 1994.
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NINE MONTHS ENDED
JUNE 30,
1995 1994
------------ ------------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNT)
Revenue $ 599,547 $ 546,611
Net income (loss) from continuing operations
before cumulative effect of accounting change 4,325 (1,103)
Net income (loss) from continuing operations 4,325 (11,503)
Net income (loss) per share from continuing operations
before cumulative effect of accounting change .16 (.04)
Net income (loss) per share from continuing operations .16 (.41)
NOTE 3 LONG TERM DEBT
Long term debt consisted of the following:
JUNE 30, SEPTEMBER 30,
1995 1994
------------- -----------------
(in thousands)
Notes payable, banks $ 275,000 $ 81,900
9.2% notes due August 1998 24,000 24,000
Other 2,166
------------- ------------
301,166 105,900
Less current maturities of long term debt 26,500 31,200
------------- ------------
Long term debt $ 274,666 $ 74,700
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During the quarter ended June 30, 1995, the Company established a committed
unsecured credit facility with Bank of America as agent ("Bank Credit
Facility") and repaid and canceled its credit facility with the First National
Bank of Chicago. The Bank Credit Facility, which was executed on April 14,
1995 to accommodate the acquisition of Western, consists of a five-year $175.0
million revolver and a six-year $225.0 million term loan, providing an
aggregate of $400.0 million in available principal borrowings to the Company.
The Company is charged various fees in connection with this Bank Credit
Facility, including a commitment fee based on the average daily unused portion
of the commitment. Borrowings outstanding under the Bank Credit Facility at
June 30, 1995 amounted to $275.0 million, which is comprised of $225.0 million
under the term loan and $50.0 million under the revolver. The weighted average
interest rate for such outstanding borrowings was 6.74% at June 30, 1995.
The Bank Credit Facility incorporates a swingline facility allowing the Company
to borrow up to $20.0 million for up to seven days in minimum advances of $1.0
million. In addition, standby
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letters of credit are available in an amount not to exceed $20.0 million. No
such borrowings were outstanding at June 30, 1995.
The Company's debt agreements contain various customary covenants including
maintenance of certain profitability and solvency ratios and restrictions on
dividend payments, as defined in the Bank Credit Facility. The Company is also
required to make mandatory prepayments from free cash flow (as defined in the
Bank Credit Facility) subject to certain ratios as calculated at the end of
each fiscal year. Such prepayments shall be applied to reduce the term loan
installments on a pro rata basis.
At June 30, 1995, long term debt was due in aggregate annual installments of
$26,500,000, $35,500,000, $47,000,000, $53,900,000 and $99,200,000 in the
quarters ending June 30, 1996, 1997, 1998, 1999 and 2000, respectively, and an
aggregate of $39,066,000 thereafter.
Waivers have been obtained with respect to the Company's 9.2% Notes (the
"Notes") regarding covenant violations which would have occurred as a result of
the consummation of the Bank Credit Facility, in respect of certain restrictive
covenants included in the note agreements. Such waivers are effective until
September 12, 1995, subject to earlier termination upon occurrence of any event
of default under the Bank Credit Facility. The Company is currently involved
in negotiations to modify such restrictive covenants and other provisions of
the note agreement. If an amended note agreement is not consummated, the
Company intends to prepay the Notes using borrowings under the Bank Credit
Facility.
NOTE 4 UNUSUAL CHARGE
During the third quarter of 1995, the Company recorded an unusual charge of
$16.0 million ($.40 per share after-tax) in connection with a consolidation
program that is designed to improve efficiencies and reduce costs in connection
with the acquisition of Western.
The components of the unusual charge are as follows:
1995 1995 BALANCE AT
PROVISION EXPENDITURES JUNE 30, 1995
----------------- --------------- -----------------
Facility closings $ 5,643 $ (4,250)(1) $ 1,393
Change in control costs 5,381 (4,081) 1,300
Legal and other 3,342 (1,842) 1,500
Severance costs 1,634 (1,134) 500
------------- ------------- ------------
Total $ 16,000 $ (11,307) $ 4,693
============= ============= ============
(1) Includes $3,646 non cash impairment of facilities.
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The Company and Western both operated facilities in many of the same locations.
Management has made the decision to close the duplicate facilities previously
operated by BJ Services and retain those operated by Western. A provision was
recorded to adjust the carrying value of these duplicate facilities to
estimated net realizable value and accruals were recorded for the estimated
costs associated with their closings, including maintenance of the facilities
until their ultimate sale and relocation of assets. Substantially all of the
duplicate facilities were closed as of June 30, 1995.
Upon consummation of the Western acquisition, the change in control provision
under the Company's executive officers' severance agreement was triggered. As
a result, approximately 168,000 performance units previously granted to the
Company's executive officers became fully vested and were subsequently issued.
The unusual charge includes an amount for the excess of the value of the
performance units on the date of issuance over the estimated amount which
otherwise was earned had the acquisition not occurred.
The unusual charge also includes an estimate of legal, severance and other
costs that would not have been incurred had the acquisition of Western not
occurred.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company's operations are primarily driven by the number of oil and gas
wells being drilled, the depth and drilling conditions of such wells, the
number of well completions and the level of workover activity worldwide.
Drilling activity, in turn, is largely dependent on the price of oil and
natural gas. This is especially true in the United States, where the Company
generates approximately half of its revenues (approximately two-thirds after
giving effect to the acquisition of Western).
Due to weak energy prices and declining production, drilling activity in the
United States has declined more than 75% from its peak in 1981, and record low
drilling activity levels were experienced in 1986 and 1992. These events have
led to the withdrawal by the Company from several low activity areas in recent
years. In addition, pumping service companies have been unable to recapitalize
their aging United States fleets due to the inability, under current market
conditions, to generate adequate returns on new capital investments.
The U.S. averaged 677 and 737 active drilling rigs for the respective three and
nine month periods ended June 30, 1995. This represents a decline of 8% and
6%, respectively compared with the same periods in 1994. For the most recent
quarters, most of the activity decline occurred from reduced drilling for
natural gas. It is anticipated that natural gas drilling activity will continue
to show unfavorable comparisons over at least the next two quarters due to
currently weak natural gas prices.
While international (excluding Canada) drilling activity has historically been
less volatile than domestic activity, the international active rig count had
declined in each of the last four years prior to fiscal 1995 due to weaker oil
prices and economic and political instability in certain overseas countries.
The most significant declines in international drilling activity occurred in
the North Sea, Italy, Nigeria and Mexico. The activity decline has leveled off
somewhat with the active rig count for the first nine months of fiscal 1995
remaining flat with 1994.
In both the U.S. and internationally, there has been an increasing trend by oil
and gas companies toward "alliances" with the service companies. These
alliances take various forms including packaged or integrated services, single
source suppliers and turnkey agreements. For the first nine months of the
fiscal year, approximately $68 million of the Company's U.S. revenue and $9
million of its international revenue were generated under such alliances.
EXPANSIONS AND ACQUISITIONS
Despite the recent declines in international drilling activity, management
believes the primary opportunities for geographic and product expansion remain
in international markets. As a result,
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other than the acquisition of Western, the Company's capital spending and
expansion efforts have been primarily focused outside of the U.S. Most of the
Company's expansion efforts during the past year have been focused on expanding
the tubular services and commissioning and leak detection products, acquired in
1992, into geographic regions outside the North Sea.
On April 13, 1995 the Company completed its transaction to acquire Western for
$511.4 million ( including transaction costs of $7.2 million) in cash, shares
of Company common stock and warrants to purchase common stock. Both the
Company and Western are leading providers of oilfield services. The acquisition
gives the Company a greater "critical mass" with which to compete in U.S. and
international markets and the opportunity to realize significant consolidation
benefits. While merger and consolidation related costs will continue to depress
earnings for the next quarter, the acquisition is expected to add revenues of
up to 70 - 80% to the Company's previous revenue base and more than double the
Company's U.S. revenue base beginning in the June quarter. In addition, it is
estimated that at least $35 million of overhead and redundant operating costs
will be eliminated annually by combining the two companies. Approximately $3
to 4 million of consolidation benefits were realized during this most recent
quarter of combined operations and a total of approximately $7 to 8 million is
expected to be realized during the fourth fiscal quarter. The remainder of
the consolidation efforts and resulting benefits are expected to be in place
by the beginning of fiscal 1996. The realization of consolidation benefits
depends upon a number of factors, including factors relating to general
industry conditions and other factors outside the Company's control and the
amount and timing of consolidation costs and benefits that are ultimately
realized are subject to all such factors affecting the combined business.
RESULTS OF OPERATIONS
Revenue: Revenue for the quarter ended June 30, 1995 was $199.5 million,
compared with $106.3 million in the prior year's third quarter. Most of the
$93.2 million year over year increase was due to the current quarter results
including the operations of Western, which were acquired in April 1995, and from
increased activity in Latin America. For the nine months ended June 30, 1995,
revenue was $425.6 million, a $116.1 million increase over revenue for the
same period of the previous year.
U.S. revenues for the quarter ended June 30, 1995 were $121.5 million compared
to $51.1 million in the same period in 1994. For the nine month period, U.S.
revenues were $225.4 million, a $76.0 million increase over the prior year.
Such increases were due primarily to the acquisition of Western in April 1995.
On a combined basis, revenues in the U.S. declined 3% for the quarter while
overall drilling activity declined 8%. Natural gas drilling activity declined
by 14% compared with the previous year leading to revenue declines in the major
gas areas. Outside the major gas areas, the Company's U.S. operations showed
strong year to year gains due primarily to increased cement unit placements in
the Gulf of Mexico, the addition of a stimulation vessel introduced in mid 1994
and slightly improved pricing. Also contributing to the year over year increase
were alliances with major operators.
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International revenue for the three and nine month periods was $78.0 million
and $200.2 million, respectively. Such revenue represented increases of 41% and
25%, respectively, over the same periods of 1994. Much of the revenue growth
occurred in Latin America as a result of increased stimulation activity with
both private and governmental oil companies in Argentina, and the addition of a
stimulation vessel in 1994 and a coiled tubing barge in 1995 to service the
Lake Maracaibo, Venezuela market. Also contributing to the revenue increases
were revenues from the Company's operations in Egypt, which were accounted for
as an equity investment until the Company acquired the remaining ownership from
its joint venture partner in April 1994, and from the acquisition of Western in
April 1995. In addition, geographic expansion of the Company's tubular
services and casing and leak detection products generated increased revenues as
these products have now been expanded into a total of 13 countries, including
parts of the Middle East, Africa, South America, the Far East and Australia. A
recovery in drilling activity in the United Kingdom and Nigeria, the Company's
recent expansion into Viet Nam, and resumed stimulation activity in the North
Sea also contributed to the revenue growth for the most recent quarter. For the
nine month comparison, these gains were partially offset by declines in revenue
from the Company's North Sea operations as a result of a decline in stimulation
vessel activity and the loss of a major cementing contract in Norway.
Operating Income: For the quarter ended June 30, 1995, the Company recorded an
operating loss of $5.8 million, including a pre-tax $16.0 million ($.40 per
share after-tax) unusual charge. The unusual charge was taken in connection
with a consolidation program that is designed to improve efficiencies and
reduce costs resulting from the acquisition of Western. Included in the
unusual charge is an adjustment to the carrying value of duplicate operating
facilities, severance and related benefit costs, benefits due under agreements
covering the Company's executives which were triggered as a result of the
acquisition of Western, and legal and other costs that would not have been
incurred had the acquisition not occurred. Operating income for the nine
months ended June 30, 1995 was $5.0 million, including the $16.0 million
unusual charge, compared to $11.0 million for the year earlier period.
Exclusive of the unusual charge, this represents a $10.0 million improvement
over the same period of 1994, due primarily to revenue increases as a result
of the acquisition of Western and revenue growth internationally through
activity increases and expansions of products. For the quarter and nine month
periods, the cost of sales and services as a percentage of revenue was 1.5%
lower than that of the same periods of the previous year. The improvement in
the quarter was primarily as a result of cost reduction efforts implemented
after the acquisition of Western. Also contributing to the improvement for
the nine month period was approximately $1.5 million in nonrecurring expenses
which were incurred in the second quarter of fiscal 1994. Such expenses
included startup costs associated with the Company's new stimulation vessels
in the Gulf of Mexico and Venezuela, mobilization costs for geographic
expansions and offshore skid placements, and severance and other costs
associated with the downsizing of selected international locations. Other
operating expenses, excluding the unusual charge, increased by $10.7 million
and $13.1 million, respectively, for the three and nine month periods as
compared to the same periods of the prior year primarily as a result of the
acquisition of Western. Also contributing to the operating expense increase
were marketing expenses related to international expansions.
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Net interest expense increased by $3.0 million and $4.5 million, respectively,
over the same three and nine month periods of the previous year as a result of
borrowings to finance the acquisition of Western and increased interest rates
on the Company's floating rate debt obligations. The net other income of $2.0
million for the nine months ended June 30, 1995 resulted from royalty income
from certain of the Company's proprietary products, a nonrecurring gain on the
sale of a duplicate facility in Scotland during the first quarter and a gain
in the second quarter on the sale of certain nonrevenue generating assets in
the Far East region.
Exclusive of the unusual charge, the effective tax rate increased from 18% in
the prior year's first nine month period to 24% in the current year due to the
higher profitability being taxed at marginal rates of 30 to 35% during the
current year.
The prior year's results also reflect the cumulative effect of an accounting
change for retiree health benefits which resulted in a net loss for the nine
month period.
FINANCIAL CONDITION
Capital Resources and Liquidity: Net cash provided by operating activities
during the first nine months of 1995 was $24.2 million compared to $10.5
million in the same prior year period. The improvement was due to higher
profitability and a smaller increase in working capital compared with the year
earlier period.
Management strives to maintain low cash balances while utilizing available
credit facilities to meet the Company's capital needs. Any excess cash
generated is used to pay down outstanding borrowings.
On April 14, 1995 the Company canceled its committed unsecured credit facility
with the First National Bank of Chicago and the outstanding borrowings were
repaid with funds from the Company's committed unsecured credit facility with
Bank of America ("Bank Credit Facility"), executed to accommodate the
acquisition of Western. The Bank Credit Facility consists of a five-year
$175.0 million revolving credit facility and a six-year $225.0 million term
loan, providing an aggregate of $400.0 million in available principal
borrowings to the Company. Borrowings outstanding under the Bank Credit
Facility at June 30, 1995 amounted to $275.0 million which is comprised of
$225.0 million on the term loan and $50.0 million on the revolver.
The Company's interest bearing debt represented 39.9% of its total
capitalization at June 30, 1995, compared to 36.3% at the previous fiscal year
end. The increase reflects borrowings used to acquire Western.
Management believes that the credit facilities described above, combined with
other discretionary credit facilities and cash flows from operations, will
provide the Company with sufficient capital resources and liquidity to manage
its routine operations and fund projected capital expenditures.
The Company's debt agreements contain various customary covenants, including
the maintenance of certain profitability and solvency ratios. Waivers have been
obtained with respect to the
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Company's 9.2% Notes regarding the covenant violations which would have
occurred as a result of the consummation of the Bank Credit Facility, in
respect of certain restrictive covenants included in the note agreements. Such
waivers are effective until September 12, 1995, subject to earlier termination
upon the occurrence of any event of default under the Bank Credit Facility.
The Company is currently engaged in negotiations to modify such restrictive
covenants and other provisions of the note agreements. If an amended note
agreement is not consummated, the Company intends to prepay the 9.2% Notes with
funds available under its Bank Credit Facility.
At September 30, 1994, the Company had approximately $112 million of U.S. tax
net operating loss carryforwards expiring between 2004 and 2009. In connection
with the Western acquisition, the Company has acquired approximately $374
million of tax net operating loss carryforwards, subject to certain
limitations, expiring between 2001 and 2005. In the preliminary allocation of
purchase price, management has estimated that the Company will utilize
approximately $251 million of these carryforwards, the benefit of which has
been included in the $75 million net deferred tax asset recognized in the
acquisition. This estimate gives effect to the projected consolidation benefits
to be achieved by combining the two companies and eliminating certain redundant
overhead and operating costs.
Requirements for Capital: Capital expenditures for the nine months ended June
30, 1995 were $24.3 million, or $7.8 million below the spending in the same
period of the previous year. The current year's spending relates primarily to
offshore operations both in the U.S. and abroad. The prior year's spending
included approximately $12 million for the construction of two offshore
stimulation vessels completed during the Company's second fiscal quarter of
1994. Fiscal 1995 capital expenditures, which are expected to be approximately
$26 million (excluding the Western acquisition), will be focused primarily on
international growth opportunities, including product and geographic
expansions. The first nine months' investing activities included $5.1 million
of proceeds from the sale of a duplicate facility and other disposals of
assets. The cash generated from such sales is not of a recurring nature, and
the disposal of these assets will not have a material effect on future revenue
or operating profits.
The actual amount of 1995 capital expenditures will be primarily dependent upon
the availability of expansion opportunities and will be funded by cash flows
from operating activities and available credit facilities. Management believes
cash flows from operating activities and available lines of credit, if
necessary, will be sufficient to fund projected capital expenditures.
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PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
Waivers have been obtained with respect to the Company's 9.2%
Notes (the "Notes"), regarding the covenant violations which
would have occurred as a result of the consummation of the
Company's credit agreement (the "Bank Credit Facility"), in
respect of certain restrictive covenants included in the note
agreements. Such waivers are effective until September 12,
1995, subject to earlier termination upon the occurrence of
any event of default under the Bank Credit Facility. The
Company is currently engaged in negotiations to modify such
restrictive covenants and other provisions of the note
agreement. If an amended note agreement is not consummated,
the Company intends to prepay the Notes with funds available
under its Bank Credit Facility.
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
3.1 Bylaws as amended effective April 13, 1995.
27.1 Financial Data Schedule
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(b) Reports on Form 8-K.
A current report on Form 8-K was filed by the Company
on April 14, 1995, attaching as an exhibit the press release
of BJ Services announcing the approval of the merger with
Western.
A current report on Form 8-K was filed by the Company on April
19, 1995, attaching as an exhibit the certificate of
incorporation of the Company, as amended (including the
certificate of merger with Western).
A current report on Form 8-K was filed by the Company on April
28, 1995, reporting under Item 2 the merger of Western with
and into the Company, and attaching as exhibits the press
releases regarding the redemption of the 7-1/4% Convertible
Subordinated Debentures due January 15, 2015, the Company's
second quarter earnings, and the determination of the merger
consideration.
A current report on Form 8-K/A was filed by the Company on May
31, 1995, including in Item 7 the financial statements of
Western and pro forma financial statements based upon the
historical financial information of the Company and Western,
and attaching as an exhibit the credit agreement of the
Company and certain of its subsidiaries with certain financial
institutions, including Bank of America National Trust and
Savings Association, as agent.
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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.
BJ Services Company
(Registrant)
Date: August 14, 1995 BY /s/ Michael McShane
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Michael McShane
Vice President - Finance and
Chief Financial Officer
Date: August 14, 1995 BY /s/ Matthew D. Fitzgerald
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Matthew D. Fitzgerald
Controller and Chief
Accounting Officer
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
3.1 Bylaws as amended effective April 13, 1995.
27.1 Financial Data Schedule