1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
to Current Report on
Form 8-K
on
Form 8-K/A
Current Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: August 28, 1996
UTI ENERGY CORP.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-12542 23-2037823
------------------------ --------------------- --------------------
(State or other juris- (Commission File No.) (I.R.S. Employer
diction of incorporation) Identification No.)
Suite 112, 485 Devon Park Drive, Wayne, Pennsylvania 19087
---------------------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (610) 971-9600
-----------------
Not applicable
--------------------------------------------------------------
(Former name or former address, if changes since last report.)
2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
As reported in the Company's Current Report on Form 8-K dated August
28, 1996, on August 14, 1996 (the "Closing Date"), UTI Energy Corp., a
Delaware corporation (the "Company"), entered into a Stock Purchase
Agreement (the "Stock Purchase Agreement") with The Sam K. Viersen Jr.
Trust dated September 9, 1986 as Amended and Restated on May 11, 1994
(the "Seller"), pursuant to which a subsidiary of the Company
purchased all of the outstanding shares (the "Shares") of capital
stock of the Viersen & Cochran Drilling Company, an Oklahoma
corporation ("Viersen"). Viersen owns a fleet of 13 drilling rigs
with related spare equipment and approximately 600,000 feet of drill
pipe. Viersen had suspended its operations prior to the Closing Date.
The Company intends to use Viersen's assets in its operations and may
dispose of certain of the acquired assets to the extent such assets
are determined to be surplus to the future operations of the Company.
Under the terms of the Stock Purchase Agreement, the consideration
paid by the Company for the Shares, which was arrived at through arms-
length negotiations between the parties, consisted of (i) $6,000,000
in cash paid on August 14, 1996 (a portion of which the Company
borrowed under its existing credit agreement); (ii) a two-year
$8,000,000 promissory note (the "Promissory Note") executed by the
Company in favor of the Seller; and (iii) stock warrants (the
"Warrants") to purchase 200,000 shares of the Company's common stock,
$.001 par value, at $15 per share.
The Promissory Note bears interest at the rate of 6% per annum and is
payable in full on or before August 14, 1998. The terms of the
Promissory Note require the Company to make a principal payment of
$1,500,000 on or before August 14, 1997 and an additional principal
payment of $1,500,000 on or before February 14, 1998. The Company has
the option under the Promissory Note to pay Seller $7,650,000 plus
accrued interest on or before February 14, 1997 in full satisfaction
of the Promissory Note. The Company's obligations under the
Promissory Note are guaranteed by Viersen and are secured by a pledge
of the assets of Viersen pursuant to a security agreement.
ITEM 7. FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL INFORMATION
a. Financial Statements of Business Acquired
The following financial statements of Viersen & Cochran Drilling
Company are included in Appendix A hereto and incorporated herein by
reference:
Viersen & Cochran Drilling Company Financial Statements,
December 31, 1995, 1994 and 1993.
Viersen & Cochran Drilling Company Financial Statements,
June 30, 1996 and June 30, 1995 (unaudited).
b. Pro Forma Financial Information
The pro forma financial information is included in Appendix B hereto
and incorporated by reference.
c. Exhibits
* 2.1 Stock Purchase Agreement dated August 14, 1996, by and between
The Sam K. Viersen, Jr. Trust dated September 9, 1986 as
Amended and Restated on May 11, 1994 and UTI Energy Corp.
Pursuant to Item 601(b)(2) of Regulation S-K, schedules and
similar attachments (other than Attachment A) to the Stock
Purchase Agreement have not been filed with this exhibit.
Attachments B, D and E to the Stock Purchase Agreement have
been filed as Exhibits 4.1, 4.2 and 4.3 to this Form 8-K,
respectively. Exhibits C (form of Guaranty Agreement), F
(form of Lease Agreement) and G (form of Escrow Agreement) as
well as the Disclosure Schedule, which contains a list of
Viersen's assets and liabilities and Viersen's financial
statements, will be filed supplementally with the Commission
upon request.
3
* 4.1 Promissory Note of UTI Energy Corp. dated August 14, 1996, in
the principal amount of $8,000,000 in favor of The Sam K.
Viersen, Jr. Trust dated September 9, 1986 as Amended and
Restated on May 11, 1994.
* 4.2 Hypothecation/Security Agreement dated August 14, 1996, by
Viersen & Cochran Drilling Company in favor of The Sam K.
Viersen, Jr. Trust dated September 9, 1986 as Amended and
Restated on May 11, 1994.
* 4.3 Stock Purchase Warrant dated August 14, 1996, between The Sam
K. Viersen, Jr. Trust dated September 9, 1986 as Amended and
Restated on May 11, 1994 and UTI Energy Corp.
23.1 Consent of Ernst & Young LLP.
* Previously filed with the Company's Current Report on Form 8-K dated
August 28, 1996.
4
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, hereunto duly authorized.
UTI ENERGY CORP.
-----------------------------------
(REGISTRANT)
Date: October 28, 1996 /s/ P. Blake Dupuis
-----------------------------------
P. Blake Dupuis, Vice President,
Chief Financial Officer and
Chief Accounting Officer
Signing on behalf of the registrant
and as principal financial officer
5
APPENDIX A
FINANCIAL STATEMENTS
OF
BUSINESS ACQUIRED
6
VIERSEN & COCHRAN DRILLING COMPANY
Financial Statements
Years ended December 31, 1995, 1994 and 1993
with Report of Independent Auditors
7
Viersen & Cochran Drilling Company
Financial Statements
Years ended December 31, 1995, 1994 and 1993
CONTENTS
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . 1
Financial Statements
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . 3
Statements of Stockholders' Equity . . . . . . . . . . . . . . . . . . . . 4
Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . 6
8
Report of Independent Auditors
The Board of Directors
Viersen & Cochran Drilling Company
We have audited the accompanying balance sheets of Viersen & Cochran Drilling
Company (the "Company") as of December 31, 1995 and 1994, and the related
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Viersen & Cochran Drilling
Company at December 31, 1995 and 1994, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1995, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Tulsa, Oklahoma
September 27, 1996
1
9
Viersen & Cochran Drilling Company
Balance Sheets
DECEMBER 31,
1995 1994
------------------------------
ASSETS
Current assets:
Cash (Note 2) $ 472,282 $ 263,915
Accounts receivable:
Affiliate (Note 6) 8,101 98,517
Other 763,007 1,270,461
Materials and supplies inventories, at lower of average
cost or market 59,153 31,155
------------------------------
Total current assets 1,302,543 1,664,048
Properties and equipment, at cost:
Drilling equipment 33,588,399 42,975,057
Automobiles and trucks 1,008,029 990,013
Aircraft 1,772,055 1,772,055
Buildings 848,740 848,740
Other properties and equipment 53,937 53,937
------------------------------
37,271,160 46,639,802
Less accumulated depreciation 32,350,020 40,646,484
------------------------------
Net properties and equipment 4,921,140 5,993,318
Deposits 116,224 101,954
------------------------------
Total assets $ 6,339,907 $ 7,759,320
==============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable:
Affiliate (Note 6) $ 210,191 $ 7,729
Other 452,780 572,038
Accrued liabilities 92,319 113,115
------------------------------
Total current liabilities 755,290 692,882
Stockholders' equity:
Common stock, $100 par value, 20,000 shares authorized, 11,300
shares issued and outstanding 1,130,000 1,130,000
Paid-in capital 53,700,000 54,950,000
Accumulated deficit (49,245,383) (49,013,562)
------------------------------
Total stockholders' equity 5,584,617 7,066,438
------------------------------
Total liabilities and stockholders' equity $ 6,339,907 $ 7,759,320
==============================
See accompanying notes.
2
10
Viersen & Cochran Drilling Company
Statements of Operations
YEAR ENDED DECEMBER 31,
1995 1994 1993
--------------------------------------------------
Revenues:
Contract drilling operations:
Affiliate (Note 6) $ - $ 235,527 $ 251,035
Other (Note 4) 3,461,115 4,326,932 4,691,312
Gains from sales of assets 1,447,882 162,674 15,088
Other income 9,260 125,354 11,178
--------------------------------------------------
4,918,257 4,850,487 4,968,613
Costs and expenses (Note 6):
Contract drilling operations 3,030,358 4,099,961 4,148,041
Repairs and maintenance 912,217 882,216 1,165,914
General and administrative 880,515 951,054 964,405
Ad valorem taxes and other 26,809 27,733 35,468
Depreciation 300,179 350,010 904,605
--------------------------------------------------
5,150,078 6,310,974 7,218,483
--------------------------------------------------
Net loss $ (231,821) $ (1,460,487) $ (2,249,870)
==================================================
See accompanying notes.
3
11
Viersen & Cochran Drilling Company
Statements of Stockholders' Equity
COMMON PAID-IN ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
-------------------------------------------------------------
Balance at December 31, 1992 $1,129,400 $51,550,000 $(45,303,205) $7,376,195
Common stock issued 600 - - 600
Cash contributions - 1,500,000 - 1,500,000
Net loss - - (2,249,870) (2,249,870)
-------------------------------------------------------------
Balance at December 31, 1993 1,130,000 53,050,000 (47,553,075) 6,626,925
Cash contributions - 1,900,000 - 1,900,000
Net loss - - (1,460,487) (1,460,487)
-------------------------------------------------------------
Balance at December 31, 1994 1,130,000 54,950,000 (49,013,562) 7,066,438
Cash contributions - 950,000 - 950,000
Cash distributions - (2,200,000) - (2,200,000)
Net loss - - (231,821) (231,821)
-------------------------------------------------------------
Balance at December 31, 1995 $1,130,000 $53,700,000 $(49,245,383) $5,584,617
=============================================================
See accompanying notes.
4
12
Viersen & Cochran Drilling Company
Statements of Cash Flows
YEAR ENDED DECEMBER 31,
1995 1994 1993
--------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (231,821) $(1,460,487) $(2,249,870)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation 300,179 350,010 904,605
Gains from sales of assets (1,447,882) (162,674) (15,088)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 597,870 (831,453) 710,488
Decrease (increase) in materials and supplies
inventories (27,998) 23,743 11,325
Decrease (increase) in deposits (14,270) 37,279 (79,668)
Increase (decrease) in accounts payable 83,204 244,550 (288,285)
Increase (decrease) in accrued liabilities (20,796) (19,355) (53,793)
--------------------------------------------
Total adjustments (529,693) (357,900) 1,189,584
--------------------------------------------
Net cash used in operating activities (761,514) (1,818,387) (1,060,286)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of assets 2,403,063 217,939 29,707
Capital expenditures (183,182) (440,064) (324,587)
--------------------------------------------
Net cash provided by (used in) investing activities 2,219,881 (222,125) (294,880)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash contributions 950,000 1,900,000 1,500,000
Cash distributions (2,200,000) - -
--------------------------------------------
Net cash provided by (used in) financing activities (1,250,000) 1,900,000 1,500,000
--------------------------------------------
Net change in cash 208,367 (140,512) 144,834
Cash at beginning of year 263,915 404,427 259,593
--------------------------------------------
Cash at end of year $ 472,282 $ 263,915 $ 404,427
============================================
See accompanying notes.
5
13
Viersen & Cochran Drilling Company
Notes to Financial Statements
December 31, 1995, 1994 and 1993
1. BASIS OF FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES
Viersen & Cochran Drilling Company (the "Company"), a Subchapter S Corporation,
owns and operates fourteen drilling rigs. The Company drills wells for oil and
gas exploration companies primarily in Oklahoma and Texas.
CONTRACT DRILLING OPERATIONS
Revenue earned from footage and turnkey drilling contracts is recognized by the
completed contract method, while revenue earned from daywork contracts is
recognized when the drilling service is provided. Provision is made for the
entire amount of expected losses on contracts, if any, in the period in which
such losses are first determined.
VALUATION OF PROPERTIES AND EQUIPMENT
Properties and equipment are stated at historical cost. Additions and
improvements which add to the productive capacity or extend the useful life of
the asset are capitalized. Expenditures for maintenance and repairs are charged
to expense when incurred.
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." Under the new
rules, long-lived assets must be reviewed for impairment at the lowest level
for which there are identifiable cash flows for the Company's asset base and
any impairment would be measured based on the fair value of the assets and
would be reported in the year in which the statement is initially adopted. The
statement is required to be adopted by the Company in 1996. The impact of
adopting this statement has not been determined.
DEPRECIATION
Depreciation of properties and equipment is computed using the straight-line
method over the estimated useful lives of the assets.
6
14
Viersen & Cochran Drilling Company
Notes to Financial Statements (continued)
1. BASIS OF FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CREDIT RISK
The Company operates 14 drilling rigs in the states of Oklahoma and Texas and
grants credit, which is generally unsecured, to its customers (Note 4). At
December 31, 1995, approximately 98% of the Company's accounts receivable were
from two customers. The Company has not experienced any significant credit
losses in 1995, 1994 or 1993 and is not aware of any significant uncollectible
accounts at December 31, 1995.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management of the Company to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
INCOME TAXES
The Company has elected to be treated as a small business corporation under
Subchapter S of the Internal Revenue Code and, therefore, is not subject to
income taxes. The Company's net loss is reported by its stockholders in their
individual income tax returns.
2. RESTRICTED CASH BALANCES
The Company maintains a group insurance plan for its employees and other
affiliated companies' employees. As of December 31, 1995 and 1994, the Company
has cash balances of $132,257 and $158,937, respectively, which were restricted
to meet plan costs and claims.
3. SELF-INSURANCE CONTINGENCIES
The Company has a guaranteed cost plan for workers' compensation and general
liability insurance costs for its employees under which the Company is
responsible for claims over $1,000,000 per incident. No workers' compensation
or general liability costs, other than premiums for workers' compensation
insurance covering claims up to $1,000,000, were incurred by the Company during
1995, 1994, and 1993.
7
15
Viersen & Cochran Drilling Company
Notes to Financial Statements (continued)
3. SELF-INSURANCE CONTINGENCIES (CONTINUED)
The Company's group insurance plan provides life and health insurance benefits
to the Company's and its affiliated companies' hourly and salaried employees.
Each affiliate pays premiums to the Company and the Company pays claims made by
participants covered by the group insurance plan. The Company had accrued
liabilities for claims payable at December 31, 1995 and 1994 of $86,383 and
$113,115, respectively.
4. MAJOR CUSTOMERS
Contract drilling operations revenues include revenues from certain customers
which individually account for 10% or more of these contract drilling
operations revenues as follows:
1995 1994 1993
---------------------------------------------
CUSTOMER
A $1,820,397 $1,105,803 $ 205,892
B 216,220 1,557,736 3,759,652
C 532,226 991,505 -
D 382,717 193,566 -
---------------------------------------------
$2,951,560 $3,848,610 $3,965,544
=============================================
5. EMPLOYEE DEFINED CONTRIBUTION PLAN
The Company has a defined contribution plan which is qualified under Section
401(k) of the Internal Revenue Code. Salaried employees who have completed two
years of service with the Company are eligible to participate in the plan. The
plan allows eligible employees to contribute up to a maximum amount, not to
exceed approximately $9,000 in 1995. The Company matches employee contributions
up to 3% of eligible compensation. The Company's annual matching contributions
related to this plan were $19,070, $17,174 and $18,011 in 1995, 1994 and 1993,
respectively.
6. TRANSACTIONS WITH AFFILIATES
The Company provides contract drilling services to an affiliated entity. During
1994 and 1993, revenues from contract drilling operations include $235,527 and
$251,035, respectively, from this affiliate (none in 1995).
8
16
Viersen & Cochran Drilling Company
Notes to Financial Statements (continued)
6. TRANSACTIONS WITH AFFILIATES (CONTINUED)
The Company maintains a group insurance plan in which various affiliated
companies' employees participate (see Note 3). The Company has various other
related party transactions which are further described below:
o General and administrative expenses relating to the Company's Oklahoma
City district office, where the Company and an affiliated company
share office space, are shared by the Company and the affiliated
company.
o The Company and an affiliate share all expenditures related to the
Company's aircraft including salaries and certain related benefits.
The Company charges the affiliate for the affiliated company's share
of the cost for the affiliate's aircraft usage.
o Certain general and administrative expenses at the Company's corporate
offices are paid by an affiliated company and are allocated to the
Company. These items include accounting services, office rent, office
supplies, telephone usage and postage.
The Company believes shared expenses are allocated to and from the affiliated
company on a reasonable basis. General and Administrative expenses in the
accompanying statements of operations include net amounts allocated from the
affiliate of $15,000 and $22,000 in 1995 and 1994, respectively, and a net
amount allocated to the affiliate of $1,000 in 1993.
In connection with these transactions, the Company has certain payables and
receivables with the affiliated company. The payables were $210,191 and $7,729,
as of December 31, 1995 and 1994, respectively. The receivables were $8,101 and
$98,517 at December 31, 1995 and 1994, respectively.
9
17
Viersen & Cochran Drilling Company
Notes to Financial Statements (continued)
7. SUBSEQUENT EVENTS
On January 25, 1996, the Company adopted a severance pay plan which provides
various severance benefits to certain employees of the Company who are
involuntarily terminated by the Company during 1996, provided that the employee
meets certain eligibility requirements. The Company made severance payments in
1996 of $536,413 related to this plan.
In August 1996, all of the Company's outstanding common stock was sold to UTI
Energy Corp. for approximately $14 million. The sales agreement provided that
certain assets of the Company would either be sold or transferred to an
affiliated company prior to the closing of the sale transaction. Assets sold,
for which the net proceeds were transferred to the affiliated company, included
certain properties and equipment at the Company's Utah facility, including
salvage items (assets previously written off), and automobiles. The Company's
aircraft, aircraft hanger and Oklahoma City building and yard facilities were
transferred to the affiliated company. The assets and liabilities, related to
the Company's group insurance plan described in Note 3 also were transferred to
an affiliated company prior to the closing of the sale transaction.
10
18
VIERSEN & COCHRAN DRILLING COMPANY
UNAUDITED FINANCIAL STATEMENTS
Six Months Ended June 30, 1996 and June 30, 1995
CONTENTS
Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . A-2
Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . A-3
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . A-4
19
Viersen & Cochran Drilling Company
Balance Sheet (Unaudited)
June 30, 1996
Assets
Current assets:
Cash $ 322,114
Acounts receivable 267,311
Materials and supplies inventories, at
lower of average cost or market 59,153
------------
Total current assets 648,578
Properties and equipment
Drilling equipment $ 33,588,398
Automobiles and trucks 318,170
------------
33,906,568
Less accumulated depreciation and amortization (29,632,646)
------------
Net properties and equipment 4,273,922
Deposits 116,028
------------
Total assets $ 5,038,528
============
Liabilities and shareholders' equity
Current liabilities:
Accounts payable
Affiliate $ 86,630
Other 165,979
Accrued liabilities 11,911
------------
Total current liabilities 264,520
Stockholders' equity:
Common stock, $100 par value, 20,000
shares authorized, 11,300 shares issued
and outstanding 1,130,000
Paid-in capital 52,318,541
Accumulated deficit (48,674,533)
------------
Total stockholders' equity 4,774,008
------------
Total liabilities and stockholders' equity $ 5,038,528
============
See accompanying notes
A-1
20
Viersen & Cochran Drilling Company
Statements of Operations (Unaudited)
Six Months Ended June 30, 1996 and 1995
Revenues: 1996 1995
----------- -----------
Contract drilling operations $ 1,725,134 $ 1,401,059
Gains from sales of assets 1,521,564 8,485
Other income 1,076 15,503
----------- -----------
3,247,774 1,425,047
Costs and expenses:
Contract drilling operations 1,361,330 1,260,821
Repairs and maintenance 480,809 483,919
General and administrative 733,380 305,888
Ad valorem taxes and other 13,405 13,405
Depreciation 88,000 150,090
----------- -----------
2,676,924 2,214,123
----------- -----------
Net income (loss) $ 570,850 $ (789,076)
=========== ===========
Net income (loss) per share $ 50.52 $ (69.83)
=========== ===========
Weighted average shares outstanding 11,300 11,300
=========== ===========
See accompanying notes
A-2
21
Viersen & Cochran Drilling Company
Statements of Cash Flows (Unaudited)
Six Months Ended June 30, 1996 and 1995
1996 1995
----------- -----------
Reconciliation of net cash provided by
(used in) operating activities:
Net income (loss) $ 570,850 $ (789,076)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation 88,000 151,309
Gain from sales of assets (1,521,564) (8,485)
Change in assets and liabilities:
Decrease in accounts receivables 503,797 1,264,532
Increase in materials and
supplies inventories - (37,389)
Decrease in deposits 196 21,644
Decrease in accounts payable (410,362) (516,906)
Increase (decrease) in accrued liabilities (80,408) 4,344
----------- -----------
Total adjustments (1,420,341) 879,049
----------- -----------
Net cash provided by (used in) operating activities (849,491) 89,973
Cash flows from investing activities:
Proceeds from sales of assets 2,080,782 10,781
Capital expenditures - (125,161)
----------- -----------
Net cash provided by (used in) operating activities 2,080,782 (114,380)
----------- -----------
Cash flows from financing activities:
Cash contributions 400,000 100,000
Cash distributions (1,781,459) -
----------- -----------
Net cash provided by (used in) financing activities (1,381,459) 100,000
----------- -----------
Net change in cash (150,168) 75,593
Cash at beginning of period 472,282 263,915
----------- -----------
Cash at end of period $ 322,114 $ 339,508
=========== ===========
See accompanying notes
A-3
22
Viersen & Cochran Drilling Company
Notes to Condensed Financial Statements
June 30, 1996
(Unaudited)
NOTE 1. INTERIM FINANCIAL STATEMENTS
The accompanying unaudited condensed financial statements at June 30, 1996 have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10 - Q and
Article 10 of Regulation S - X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation of the financial position and operating results for the
interim periods have been included. The results of operations for the six
months ended June 30, 1996 and 1995 are not necessarily indicative of the
results for the entire years ending December 31, 1996 and 1995. For further
information, refer to the Company's 1995 audited financial statements.
NOTE 2. TRANSACTIONS WITH AFFILIATES
The Company has certain payables with an affiliated company. The payables,
which relate primarily to short- term advances received from an affiliate, were
$86,630 as of June 30, 1996.
The Company has various other related party transactions which are further
described below:
o General and administrative expenses relating to the Company's
Oklahoma City district office, where the Company and an
affiliated company share office space, are shared by the Company
and the affiliated company.
o The Company and an affiliate share all expenditures related to
the Company's aircraft including salaries and certain related
benefits. The Company charges the affiliate for the affiliated
company's share of the cost for the affiliate's aircraft usage.
o Certain general and administrative expenses at the Company's
corporate offices are paid by an affiliated company and are
allocated to the Company. These items include accounting
services, office rent, office supplies, telephone usage and
postage.
Pursuant to a Stock Purchase Agreement, all of the Company's outstanding common
stock was sold to UTI Energy Corp. on August 14, 1996. The Stock Purchase
Agreement provided that certain assets of the Company would either be sold or
transferred to an affiliated company prior to the closing of the sale
transaction. Assets sold, for which the net proceeds were transferred to the
affiliated company, included certain properties and equipment at the Company's
Utah facility, including salvage items (assets previously written off), and
automobiles. The Company's aircraft, aircraft hanger and Oklahoma City
building and yard facilities were transferred to an affiliated company. Such
sales and transfers were substantially accomplished prior to June 30, 1996.
A-4
23
APPENDIX B
PRO FORMA FINANCIAL INFORMATION
24
UTI Energy Corp.
Pro Forma Financial Statements
Acquisition of Viersen & Cochran Drilling Company
Acquisition of FWA Drilling Company, Inc.
(Unaudited)
On August 14, 1996 (the "Closing Date"), UTI Energy Corp., a Delaware
corporation (the "Company"), entered into a Stock Purchase Agreement (the
"Stock Purchase Agreement") with The Sam K. Viersen Jr. Trust dated September
9, 1986 as Amended and Restated on May 11, 1994 (the "Seller"), pursuant to
which a subsidiary of the Company purchased all of the outstanding shares (the
"Shares") of capital stock of the Viersen & Cochran Drilling Company, an
Oklahoma corporation ("Viersen"). Viersen owns a fleet of 13 drilling rigs
with related spare equipment and approximately 600,000 feet of drill pipe.
Viersen had suspended its operations prior to the Closing Date. The Company
intends to use Viersen's assets in its operations and may dispose of certain of
the acquired assets to the extent such assets are determined to be surplus to
the future operations of the Company. Under the terms of the Stock Purchase
Agreement, the consideration paid by the Company for the Shares, which was
arrived at through arms-length negotiations between the parties, consisted of
(i) $6,000,000 in cash paid on August 14, 1996 (a portion of which the Company
borrowed under its existing credit agreement); (ii) a two-year $8,000,000
promissory note (the "Promissory Note") executed by the Company in favor of the
Seller; and (iii) stock warrants (the "Warrants") to purchase 200,000 shares of
the Company's common stock, $.001 par value, at $15 per share.
The Promissory Note bears interest at the rate of 6% per annum and is
payable in full on or before August 14, 1998. The terms of the Promissory Note
require the Company to make a principal payment of $1,500,000 on or before
August 14, 1997 and an additional principal payment of $1,500,000 on or before
February 14, 1998. The Company has the option under the Promissory Note to pay
Seller $7,650,000 plus accrued interest on or before February 14, 1997 in full
satisfaction of the Promissory Note. The Company's obligations under the
Promissory Note are guaranteed by Viersen and are secured by a pledge of the
assets of Viersen pursuant to a security agreement.
On November 20, 1995, the Company purchased the capital stock of FWA
Drilling Company, Inc., (FWA), from USX Corporation for $14.0 million in cash.
The purchase price was determined through arms length negotiations. There is
no relationship between USX and UTI, or any affiliate, officer or director of
UTI or any associate of any such person. The purchase was completed by using
$9.0 million in term debt furnished by an equipment finance company along with
the cash proceeds from a private equity placement and cash on hand. FWA
Drilling owns and operates 29 drilling rigs, located in west and east Texas.
The unaudited pro forma balance sheet as of June 30, 1996 assumes that
the acquisition of Viersen occurred on June 30, 1996. The unaudited pro forma
statements of operations assume that the acquisitions of Viersen and FWA
occurred on January 1, 1995.
25
UTI Energy Corp.
Pro Forma Condensed Consolidated Statement of Operations (Unaudited)
Twelve Months Ended December 31, 1995
(in thousands, except share data)
UTI FWA Acquisition V & C Acquisition
As As Adjustments As Adjustments
Reported Reported Amount Notes Reported Amount Notes Pro Forma
-------- -------- ------ ----- -------- ------ ----- ---------
Revenue $ 40,124 $ 33,820 $ $ 3,461 $ $ 77,405
Cost of sales 32,685 29,293 3,969 65,947
Selling, general, and administrative 5,082 859 (500) (A) 881 (634) (A) 5,688
Depreciation and amortization 2,552 1,857 (457) (B) 300 420 (B) 4,672
------------------------------------------------------------------------------------
40,319 32,009 (957) 5,150 (214) 76,307
------------------------------------------------------------------------------------
Operating income (195) 1,811 957 (1,689) 214 1,098
Other income 293 23 1,457 (1,448) (E) 325
Interest expense 265 0 637 (C) 0 984 (C) 1,886
------------------------------------------------------------------------------------
Income (loss) from continuing operations
before income taxes (167) 1,834 320 (232) (2,218) (463)
Income taxes (benefit) (592) 0 732 (D) 0 (754) (D) (614)
------------------------------------------------------------------------------------
Income from continuing operations $ 425 $ 1,834 $ (412) $ (232) $ (1,464) $ 151
====================================================================================
Earnings (loss) per common share:
Continuing operations $ 0.13 $1,834.00 $ (20.53) $ 0.05
====================================================================================
Average common shares outstanding (F) 3,299,556 1,000 (1,000) 11,300 (11,300) 3,299,556
====================================================================================
See accompanying notes to Pro Forma Condensed Consolidated Financial Statements
26
UTI Energy Corp.
Pro Forma Condensed Consolidated Statement of Operations (Unaudited)
Six Months Ended June 30, 1996
(in thousands, except share data)
UTI V & C Acquisition
As As Adjustments
Reported Reported Amount Notes Pro Forma
-------- -------- ------ ----- ---------
Revenue $ 40,065 $ 3,248 $ (1,522) (E) $ 41,791
Cost of sales 32,702 1,842 34,544
Selling, general, and administrative 3,447 747 (629) (A) 3,565
Depreciation and amortization 1,979 88 577 (B) 2,644
------------------------------------------------------
38,128 2,677 (52) 40,753
------------------------------------------------------
Operating income 1,937 571 (1,470) 1,038
Other income 854 0 854
Interest expense 432 0 492 (C) 924
------------------------------------------------------
Income (loss) from continuing operations
before income taxes 2,359 571 (1,962) 968
Income taxes (benefit) 678 0 (473) (D) 205
------------------------------------------------------
Income from continuing operations $ 1,681 $ 571 $ (1,489) $ 763
Earnings (loss) per common share:
Continuing operations $ 0.46 $ 50.52 $ 0.21
======================================================
Average common shares outstanding:
Primary (F) 3,617,425 11,300 (11,300) 3,617,425
======================================================
Fully diluted (F) 3,629,396 11,300 (11,300) 3,629,396
======================================================
See accompanying notes to Pro Forma Condensed Consolidated Financial Statements
27
UTI Energy Corp.
Pro Forma Condensed Consolidated Balance Sheet (Unaudited)
June 30, 1996
(in thousands)
UTI V & C Acquisition
As As Adjustments
Reported Reported Amount Notes Pro Forma
-------- -------- ------ ----- ---------
Assets
Current assets:
Cash $ 1,691 $ 322 $ (322) (A) $ 1,691
Accounts receivable 12,174 267 (267) (A) 12,174
Other receivables 1,802 - 1,802
Inventories 812 59 (59) (A) 812
Mineral rights held for resale 162 - 162
Prepaid expenses 1,057 - 1,057
------- -------- -------- --------
Total current assets 17,698 648 (648) 17,698
Property and equipment 39,672 33,907 (16,489) (B) 57,090
Less accum depr and amort (21,892) (29,632) 29,632 (B) 21,892
------- -------- -------- --------
Net property and equipment 17,780 4,275 13,143 35,198
Deferred tax asset 505 - 505
(116) (A)
Other assets 130 116 2,514 (C) 2,644
------- -------- -------- --------
$36,113 $ 5,039 $ 14,893 $56,045
======= ======== ======== ========
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 4,876 $ 253 $ (253) (A) $ 4,876
Accrued expenses 1,969 12 (12) (A) 2,069
100 (D)
Accrued payroll costs 1,918 - 1,918
Current portion of long term debt 2,484 - 2,484
------- -------- -------- --------
Total current liabilities 11,247 265 (165) 11,347
Long term debt 7,753 - 13,687 (E) 21,440
Deferred tax liability 51 - 5,435 (F) 5,486
Other long term liabilities 350 - 350
Common shareholders' equity:
Common stock 3 1,130 (1,130) (G) 3
Additional paid in capital 15,095 52,319 (51,609) (G) 15,805
Retained earnings 1,745 (48,675) 48,675 (G) 1,745
Restricted stock plan unearned compensation (131) - (131)
------- -------- -------- --------
Total shareholders' equity 16,712 4,774 (4,064) 17,422
------- -------- -------- --------
$36,113 $ 5,039 $ 14,893 $ 56,045
======= ======== ======== ========
See accompanying notes to Pro Forma Condensed Consolidated Financial Statements
28
UTI Energy Corp.
Notes to Pro Forma Condensed Consolidated Financial Statements
The purchase of stock of Viersen & Cochran Drilling Company ("Viersen")
was completed for $14.7 million in cash, notes payable and warrants on August
14, 1996. The pro forma financial statements have been prepared by UTI
management based upon the financial statements of Viersen & Cochran Drilling
Company included elsewhere herein. The pro forma statements may not be
indicative of the results that actually would have occurred if the acquisition
had occurred on the dates indicated or which may be obtained in the future. The
pro forma financial statements should be read in conjunction with the financial
statements and notes of Viersen & Cochran Drilling Company contained elsewhere
herein and UTI's financial statements and notes contained in its Annual Report
on Form 10-K for the year ended December 31, 1995 and its Quarterly Report on
Form 10-Q for the six month period ended June 30, 1996.
A summary of the purchase price calculation for the Viersen acquisition
follows:
000's
--------
Cash paid to Seller (borrowed by UTI $ 6,000
under an existing line of credit)
6% promissory note issued to Seller 8,000
Warrants to purchase UTI common 710
stock issued to Seller
Total cash, note and warrants 14,710
Less discount on promissory note (313)
Add accrual for estimated transaction fees 100
Add deferred tax liability for tax
effect of the difference between the
book and tax basis of acquired assets 5,435
-------
$19,932
=======
Property and equipment $17,418
Assets held for resale 2,514
-------
$19,932
=======
29
Adjustments to June 30, 1996 Pro Forma Condensed Consolidated Balance
Sheet (Unaudited).
(A) Certain assets and liabilities of Viersen & Cochran were retained by
the Seller.
(B) Adjustment required to revalue Viersen & Cochran assets based upon
the purchase price
(C) Surplus acquired assets held for resale
(D) Accrued estimated transaction costs
(E) Borrowings to fund the acquisition, net of discount on promissory
note
(F) Deferred taxes provided on the difference between the book basis and
the tax basis of acquired assets
(G) Elimination of Viersen & Cochran's equity balances, net of UTI
warrants issued to seller
Adjustments to Pro Forma Condensed Consolidated Statement of Operations
(Unaudited) for the twelve months ended December 31, 1995 and for the six
months ended June 30, 1996.
(A) Eliminate selling, general and administrative expenses which the
Company believes will not be incurred on an ongoing basis.
(B) Adjust depreciation expense based upon the restated value of
property and equipment.
(C) Increase interest expense resulting from acquisition debt offset by
debt not assumed.
(D) Adjust tax expense or (benefit) at marginal rate.
(E) Eliminate gain on sale of assets.
(F) The warrants issued to seller did not have a pro forma dilutive
effect during any of the periods presented.
30
EXHIBIT INDEX
23.1 Consent of Ernst & Young LLP.