United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 8-K/A
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
DECEMBER 16, 2005
Warrior Energy Services Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 0-18754 11-2904094
- -------------------------------------------------------------------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
100 ROSECREST LANE, COLUMBUS, MISSISSIPPI 39701
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(Address of principal executive offices)
Registrant's telephone number, including area code: (662) 329-1047
Black Warrior Wireline Corp.
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2.below):
|_| Written communications pursuant to Rule 425 under the Securities Act
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act
SECTION 9. FINANCIAL STATEMENTS AND EXHIBITS.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of businesses acquired.
2
BOBCAT PRESSURE CONTROL, INC.
FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND THE
YEARS ENDED DECEMBER 31, 2004 AND 2003
Report of Independent Registered Public Accounting Firm
Board of Directors
Bobcat Pressure Control, Inc.:
We have audited the accompanying consolidated balance sheets of Bobcat Pressure
Control, Inc. (an Oklahoma corporation) and Subsidiary as of September 30, 2005
and December 31, 2004 and the related consolidated statements of operations,
stockholder's equity, and cash flows for the nine months ended September 30,
2005 and the years ended December 31, 2004 and 2003. 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 the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, 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 consolidated financial position of Bobcat Pressure
Control, Inc. and Subsidiary as of September 30, 2005 and December 31, 2004, and
the consolidated results of their operations and their cash flows for the nine
months ended September 30, 2005 and the years ended December 31, 2004 and 2003,
in conformity with accounting principles generally accepted in the United States
of America.
GRANT THORNTON LLP
Houston, Texas
February 6, 2006
BOBCAT PRESSURE CONTROL, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2005 AND DECEMBER 31, 2004
- ---------------------------------------------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
2005 2004
------------------- --------------------
ASSETS
Current assets:
Cash and cash equivalents $ 661,045 $ 130,637
Accounts receivable, net of allowance of $447,840 and $- 7,782,910 3,122,051
Other current assets 11,809 18,980
Prepaid expenses 257,844 264,270
------------ ------------
Total current assets 8,713,608 3,535,938
Inventories 351,884 207,003
Property, plant and equipment, less
accumulated depreciation of $2,524,388 and $1,533,045 10,838,026 8,416,975
Other assets 277,595 85,783
Intangible asset, net of accumulated
amortization of $412,936 and $289,055 1,238,806 1,362,687
------------ ------------
Total assets $ 21,419,919 $ 13,608,386
============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 2,967,105 $ 687,783
Accrued salaries and vacation 446,430 182,533
Other accrued expenses 2,109,820 1,243,541
Current maturities of long-term debt 1,114,986 1,087,924
Accrued interest payable to related parties -- 15,978
Notes payable to related parties 431,314 506,436
Deferred revenue 101,535 25,537
------------ ------------
Total current liabilities 7,171,190 3,749,732
Long-term debt, less current maturities 3,155,255 4,064,261
Notes payable to related parties 714,536 1,041,203
Deferred income taxes 2,313,898 983,768
------------ ------------
Total liabilities 13,354,879 9,838,964
Commitments and contingencies
Stockholder's equity:
Preferred stock, $.001 par value, 100,000
shares authorized, -0- and 92,890 shares
issued and outstanding at September 30, 2005
and December 31, 2004, respectively -- 93
Common stock, $.01 par value,
212,625 shares authorized, 100,000 shares
issued and outstanding 1,000 1,000
Additional paid-in capital 68,735 161,622
Deferred compensation (18,285) (20,114)
Retained earnings 8,013,590 3,626,821
------------ ------------
Total stockholder's equity 8,065,040 3,769,422
------------ ------------
Total liabilities and stockholder's equity $ 21,419,919 $ 13,608,386
============ ============
The accompanying notes are an integral part of these consolidated
financial statements.
2
BOBCAT PRESSURE CONTROL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND THE
YEARS ENDED DECEMBER 31, 2004 AND 2003
- --------------------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, --------------------------------------
2005 2004 2003
------------------- ------------------ ----------------
Revenues $21,704,482 $16,223,721 $ 7,806,232
Operating costs 9,748,675 7,296,578 3,479,568
Selling, general and administrative expenses 3,393,941 3,023,653 1,342,312
Depreciation and amortization 1,115,224 1,010,419 636,103
----------- ----------- -----------
Income from operations 7,446,642 4,893,071 2,348,249
Interest expense 354,237 605,586 563,322
Net loss (gain) on sale of fixed assets 20,133 24,655 (285)
Other expense (income) 4,603 13,538 (10,600)
----------- ----------- -----------
Income before provision for income taxes 7,067,669 4,249,292 1,795,812
Provision for income taxes 2,680,900 1,611,146 701,496
----------- ----------- -----------
Net income $ 4,386,769 $ 2,638,146 $ 1,094,316
=========== =========== ===========
The accompanying notes are an integral part of these consolidated
financial statements.
3
BOBCAT PRESSURE CONTROL, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND THE
YEARS ENDED DECEMBER 31, 2004 AND 2003
- ---------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCK COMMON STOCK ADDITIONAL RETAINED TOTAL
------------------- ------------------- DEFERRED PAID-IN EARNINGS STOCKHOLDER'S
SHARES PAR VALUE SHARES PAR VALUE COMPENSATION CAPITAL (DEFICIT) EQUITY
-------- ---------- -------- ---------- --------------- ------------ ---------- -------------
Balance, January 1, 2003 -- $ -- 100,000 $1,000 $ -- $175,509 $ (105,641) $ 70,868
Return land originally
contributed by
stockholder -- -- -- -- -- (64,902) -- (64,902)
Issuance of preferred
stock and exchange of
note payable for the
acquisition of Bobby
Joe Cudd Company 92,980 93 -- -- -- 26,634 -- 26,727
Issuance of stock warrants -- -- -- -- (24,381) 24,381 -- --
Amortization of stock
warrants -- -- -- -- 1,829 -- -- 1,829
Net income -- -- -- -- -- -- 1,094,316 1,094,316
------ ----- ------- ------ -------- -------- ---------- ----------
Balance, December 31, 2003 92,980 93 100,000 1,000 (22,552) 161,622 988,675 1,128,838
Amortization of stock
warrants -- -- -- -- 2,438 -- -- 2,438
Net income -- -- -- -- -- -- 2,638,146 2,638,146
------ ----- ------- ------ -------- -------- ---------- ----------
Balance, December 31, 2004 92,980 93 100,000 1,000 (20,114) 161,622 3,626,821 3,769,422
Retirement of preferred
stock (92,980) (93) -- -- -- (92,887) -- (92,980)
Amortization of stock
warrants -- -- -- -- 1,829 -- -- 1,829
Net income -- -- -- -- -- -- 4,386,769 4,386,769
------ ----- ------- ------ -------- -------- ---------- ----------
Balance, September 30, 2005 -- $ -- 100,000 $1,000 $(18,285) $ 68,735 $8,013,590 $8,065,040
====== ===== ======= ====== ======== ======== ========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
4
BOBCAT PRESSURE CONTROL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND THE
YEARS ENDED DECEMBER 31, 2004 AND 2003
- ----------------------------------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, ----------------------------
2005 2004 2003
------------------- ------------ ------------
Cash Flows from Operating Activities
Net income $ 4,386,769 $ 2,638,146 $ 1,094,316
Adjustments to reconcile net income to net cash provided --
by operating activities: --
Depreciation 991,343 845,245 512,222
Amortization 123,881 165,174 123,881
Amortization of stock warrants 1,829 2,438 1,829
Accretion of discount on warrant holder note -- 41,028 3,327
Allowance for bad debts 447,840 -- --
Deferred income taxes 1,164,429 202,771 462,744
Loss (gain) on sale of fixed assets 20,133 24,655 (285)
Changes in operating working capital: --
Increase in accounts receivable (5,108,699) (989,351) (1,676,576)
Increase in inventory (144,881) (54,310) (46,900)
(Increase) decrease in prepaid and other assets (12,514) 147,330 (365,079)
Increase in accounts payable and accrued expenses 3,409,498 722,715 824,626
Increase (decrease) in deferred revenue 75,998 (52,749) 78,286
Increase (decrease) in interest payable (15,978) (26,641) 42,619
----------- ----------- -----------
Net cash provided by operating activities 5,339,648 3,666,451 1,055,010
Cash Flows from Investing Activities
Purchase of property, plant and equipment (3,491,055) (3,438,535) (1,167,945)
Net cash paid upon acquisition of Superior Snubbing
Service, Inc. -- -- (3,522,096)
Proceeds from sale of fixed assets 58,528 29,250 66,154
----------- ----------- -----------
Net cash used in investing activities (3,432,527) (3,409,285) (4,623,887)
Cash Flows from Financing Activities
Borrowings from long-term debt 193,981 6,862,890 7,476,710
Repayments of long-term debt (1,477,714) (7,022,889) (3,874,363)
Repurchase of preferred stock (92,980) -- --
----------- ----------- -----------
Net cash (used in) provided by financing
activities (1,376,713) (159,999) 3,602,347
----------- ----------- -----------
Net increase in cash and cash equivalents 530,408 97,167 33,470
Cash and cash equivalents at beginning of period 130,637 33,470 --
----------- ----------- -----------
Cash and cash equivalents at end of period $ 661,045 $ 130,637 $ 33,470
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 370,214 $ 588,893 $ 517,377
Cash paid for income taxes $ 781,100 $ 637,620 $ 20,000
Assets acquired and borrowings from Superior Snubbing
Service, Inc. shareholder $ -- $ -- $ 2,000,000
The accompanying notes are an integral part of these consolidated
financial statements.
5
BOBCAT PRESSURE CONTROL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND THE
YEARS ENDED DECEMBER 31, 2004 AND 2003
- --------------------------------------------------------------------------------
NOTE 1 - GENERAL INFORMATION
Bobcat Pressure Control, Inc. (the "Company") is an oil and gas well service
company providing primarily hydraulic workover services, commonly known as
"snubbing," to oil and gas well operators. Snubbing services permit an operator
of a well to repair damaged casing, production tubing and downhole production
equipment in high pressure, "live well" environments. The Company also provides
wellhead freezing services, hot tapping well access services, and rental tool
services. The Company's services are provided throughout the Mid-Continent area
of the United States, but primarily in Oklahoma and northern Texas.
On December 16, 2005, all of the equity of the Company was purchased by Warrior
Energy Services Corporation.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiary, Bobby Joe Cudd Company
("BJCC"). All significant intercompany accounts and transactions have been
eliminated in consolidation.
USE OF ESTIMATES - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results
could differ from these estimates.
CASH AND CASH EQUIVALENTS - The Company considers all highly liquid investments
with original maturities of three months or less to be cash equivalents. The
Company had $375,845 and $-0- in bank accounts at September 30, 2005 in excess
of the Federal Deposit Insurance Corporation insured limits.
ALLOWANCE FOR DOUBTFUL ACCOUNTS - The allowance for doubtful accounts is
maintained at an adequate level to absorb losses in the Company's accounts
receivable. Management of the Company continually monitors the accounts
receivable from its customers for any collectability issues. An allowance for
doubtful accounts is established based on reviews of individual customer
accounts, recent loss experience, current economic conditions, and other
pertinent factors. Accounts deemed uncollectible are charged to the allowance.
Provisions for bad debts and recoveries on accounts previously charged-off are
added to the allowance. All accounts outstanding more than 30 days are
considered past due.
INVENTORIES - Inventories consist of operating supplies and are carried at the
lower of cost or market. Cost is determined using the first in, first out
method.
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment is stated at cost.
The cost of maintenance and repairs is charged to expense when incurred; the
cost of betterments is capitalized. The cost of assets sold or otherwise
disposed of and the related accumulated depreciation are removed from the
accounts and the gain or loss on such disposition is included in income.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets, which range from 3 to 10 years. At September 30,
2005 and December 31, 2004 significantly all of the property, plant and
equipment have been pledged as collateral for the Company's borrowings (see Note
7).
INTANGIBLE ASSETS - Intangible assets consist of customer relationships that are
amortized on a straight-line basis over their estimated useful life of 10 years.
6
BOBCAT PRESSURE CONTROL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND THE
YEARS ENDED DECEMBER 31, 2004 AND 2003
- --------------------------------------------------------------------------------
LONG-LIVED ASSETS - In accordance with SFAS 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets", the Company recognizes impairment losses on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows over the life of the assets are less than the
asset's carrying amount. If an impairment exists, the amount of such impairment
is calculated based on projections of future discounted cash flows. These
projections use a discount rate and terminal value multiple that would be
customary for evaluating current oil and gas service company transactions.
The Company considers external factors in making its assessment. Specifically,
changes in oil and natural gas prices and other economic conditions surrounding
the industry, consolidation within the industry, competition from other oil and
gas well service providers, the ability to employ and maintain a skilled
workforce and other pertinent factors are among the items that could lead
management to reassess the realizability and/or amortization periods of its
long-lived assets.
REVOLVING LOAN - The Company's revolving loan requires a lock-box arrangement.
This arrangement, combined with the existence of a subjective acceleration
clause in the revolving loan, requires the classification of outstanding
borrowings under the revolving loan as a current liability.
INCOME TAXES - The Company accounts for income taxes under an asset and
liability approach that requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been
recognized in the Company's financial statements or tax returns. In estimating
future tax consequences, the Company generally considers all expected future
events other than enactments of changes in the tax laws or rates.
REVENUE RECOGNITION - The Company derives revenues from performance of services
and the sale of equipment. Service revenues are recognized at the time services
are performed. The Company's sales are typically not subject to rights of return
and, historically, sales returns have not been significant.
ADVERTISING COSTS - The Company expenses advertising costs as incurred.
Advertising expense for the period ended September 30, 2005 and the years ended
December 31, 2004 and 2003 was $67,213, $95,920 and $65,470.
RECENT ACCOUNTING PRONOUNCEMENTS - On December 21, 2004, FASB Staff Position
(FSP) FAS 109-1, "Application of FASB Statement No. 109, Accounting for Income
Taxes, to the Tax Deduction on Qualified Production Activities Provided by the
American Jobs Creation Act of 2004, was issued. FSP FAS 109-1 clarifies that
this tax deduction should be accounted for as a special deduction in accordance
with Statement 109. As such, the special deduction has no effect on deferred tax
assets and liabilities existing at the date of enactment. Rather, the impact of
this deduction will be reported in the period in which the deduction is claimed
on our tax return beginning in 2005. As regulations are still pending, the
Company has not been able to quantify the impact.
In November 2004, the Financial Accounting Standards Board issued Statement 151,
Inventory Costs, an amendment of ARB No. 43, Chapter 4, which is effective for
inventory costs incurred during fiscal years beginning after June 15, 2005. The
amendments made by Statement 151 require that abnormal amounts of idle facility
expense, freight, handling costs, and wasted materials (spoilage) be recognized
as current-period charges and require the allocation of fixed production
overheads to inventory based on the normal capacity of the production
facilities. The Company does not believe that the adoption of Statement 151 will
have a significant effect on its financial statements.
7
BOBCAT PRESSURE CONTROL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND THE
YEARS ENDED DECEMBER 31, 2004 AND 2003
- --------------------------------------------------------------------------------
In December 2003, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 46 (revised December 2003) ("FIN 46(R)"), "Consolidation of
Variable Interest Entities, an interpretation of ARB 51." The primary objectives
of FIN 46(R) are to provide guidance on the identification of entities for which
control is achieved through means other than through voting rights ("variable
interest entities" or "VIEs") and how to determine if a business enterprise
should consolidate the VIEs. This new model for consolidation applies to an
entity for which either: the equity investors (if any) do not have a controlling
financial interest; or the equity investment at risk is insufficient to finance
the entity's activities without receiving additional subordinated financial
support from other parties. In addition, FIN 46(R) requires that all enterprises
with a significant variable interest in a VIE make additional disclosures
regarding their relationship with the VIE. The interpretation requires public
entities to apply FIN 46(R) to all entities that are considered Special Purpose
Entities in practice and under the FASB literature that was applied before the
issuance of FIN 46(R). The adoption of FIN 46(R) had no effect on the Company's
financial statements.
NOTE 3 - ACQUISITION OF SUPERIOR SNUBBING SERVICE, INC. AND BOBBY JOE CUDD
COMPANY
Superior Snubbing Service, Inc.
On March 20, 2003, the Company acquired substantially all the property and
equipment of Superior Snubbing Service, Inc. ("Superior"). Superior provided oil
and gas well snubbing services in north central Texas. The aggregate purchase
price was $5,522,096, including $3,250,000 of cash and subordinated debt of
$2,000,000 to the shareholder who is now a Vice President of the Company. In
addition, there was $272,096 of legal and professional fees incurred for the
acquisition. The acquisition has been accounted for as a purchase, and,
accordingly, the acquired assets have been recorded at their estimated fair
values at the date of acquisition. The operating results arising from the
acquisition are included in the consolidated statements of operations from the
acquisition date. The value of the property and equipment of $3,861,500 was
determined based on a third-party valuation appraisal.
The following table summarizes the estimated fair values of the assets acquired
and direct costs of the acquisition at the date of acquisition (March 20, 2003):
Property and equipment $3,861,500
Intangible asset 1,651,742
Other assets 8,854
----------
Total assets acquired $5,522,096
==========
Purchased intangible asset valued at $1,651,742 has a useful life of 10 years.
The intangible asset that makes up that amount is customer relationships. The
purchase price was allocated based on the fair value of the assets acquired.
Bobby Joe Cudd Company
On March 20, 2003, the Company also acquired 100% of the outstanding common
stock of BJCC from its sole shareholder, who is also the President and sole
shareholder of the Company, by the issuance of preferred stock and the
conversion of a note payable by the Company to the sole shareholder for
preferred stock. The results of BJCC's operations have been included in the
consolidated financial statements since the date of acquisition. BJCC is an
oilfield fishing and rental tool company operating in western Oklahoma. BJCC was
acquired in conjunction with the acquisition of the oilfield snubbing equipment
noted above.
The assets and liabilities of BJCC were transferred to the Company at the
predecessor's basis. This value was supported by a third-party appraisal at the
date of acquisition.
8
BOBCAT PRESSURE CONTROL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND THE
YEARS ENDED DECEMBER 31, 2004 AND 2003
- --------------------------------------------------------------------------------
The following table summarizes the estimated fair values of the assets acquired
and liabilities assumed at the date of acquisition (March 20, 2003):
Current assets $ 344,191
Property and equipment 1,228,153
Other assets 180,246
----------
Total assets acquired 1,752,590
Current liabilities 755,484
Long-term debt 838,688
Deferred income taxes 142,000
----------
Total liabilities assumed 1,736,172
----------
Net assets acquired $ 16,418
==========
Upon acquiring the stock of BJCC, an agreement was entered into by the
stockholder and Petro Capital, LP that sets forth how members of the Board of
Directors are appointed. The agreement gave Petro Capital, LP the right to
appoint two members to the Board of Directors, the stockholder the right to
appoint two members and these four members of the Board the right to appoint one
additional member.
On a pro forma basis, the Company would have realized revenue of $9,440,000 and
net income of $1,780,000 for the year ended December 31, 2003 had the
acquisitions occurred on January 1, 2003.
NOTE 4 - INTANGIBLE ASSET
Changes in the carrying amount of the Company's intangible asset for the nine
month period ended September 30, 2005 and the years ended December 31, 2004 and
2003 were as follows:
Intangible Accumulated
asset amortization
--------------- ---------------
Balance at January 1, 2003 $ - $ --
Acquisition of Superior Snubbing
Service, Inc. 1,651,742 --
Amortization (123,881) (123,881)
----------- -----------
Balance at December 31, 2003
1,527,861 (123,881)
Amortization (165,174) (165,174)
----------- -----------
Balance at December 31, 2004
1,362,687 (289,055)
Amortization (123,881) (123,881)
----------- -----------
Balance at September 30, 2005
$ 1,238,806 $ (412,936)
=========== ===========
9
BOBCAT PRESSURE CONTROL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND THE
YEARS ENDED DECEMBER 31, 2004 AND 2003
- --------------------------------------------------------------------------------
The following table summarizes the carrying amount and amortization of the
intangible asset as of September 30, 2005:
Gross
carrying Accumulated
amount amortization
-------------- --------------
Amortized asset:
Customer relationships
1,651,742 (412,936)
---------- ---------
$1,651,742 $(412,936)
========== =========
Aggregate amortization expense:
For the year ended December 31, 2003 $ 123,881
For the year ended December 31, 2004 165,174
For the nine month period ended September 30, 2005 123,881
Estimated amortization expense:
For the three month period ending December 31, 2005 $ 41,293
For the year ending December 31, 2006 165,174
For the year ending December 31, 2007 165,174
For the year ending December 31, 2008 165,174
For the year ending December 31, 2009 165,174
For the year ending December 31, 2010 and thereafter 536,817
NOTE 5 - RELATED PARTY TRANSACTIONS
The Company has executed notes payable to Bobby Joe Cudd and Bill Benedick both
of which are related parties. Mr. Cudd is the sole stockholder of the Company
and a member of the board of directors. Mr. Benedick is a warrant holder, an
officer of the Company and a member of the board of directors. At September 30,
2005 and December 31, 2004 notes due to related parties totaled $1,145,850 and
$1,547,639, respectively. The notes bear interest ranging from 8% to 12%.
Interest expense and accrued interest associated with these notes were as
follows:
NINE MONTHS YEARS ENDED DECEMBER 31,
ENDED ------------------------------------------------
SEPTEMBER 30, 2005 2004 2003
------------------------- ----------------------- ---------------------
Interest expense $83,385 $331,952 $473,525
Accrued interest $ -- $ 15,978 $ 42,619
During the nine months ended September 30, 2005, the Company made principal
payments of $100,000 to Mr. Cudd, which repaid his note in full. Mr. Cudd has
personally guaranteed $1,000,000 of the Comerica Bank credit facility.
In March 2003, the Company acquired the assets of Superior from Mr. Benedick for
approximately $5.3 million, including a note payable to Mr. Benedick in the
original amount of $2,000,000. During the nine months ended September 30, 2005,
the Company made principal payments of $301,789 to Mr. Benedick reducing the
balance of the note to $1,145,850 as of September 30, 2005. In connection with
the Company's acquisition of Superior from Mr. Benedick, Mr. Benedick received
common stock purchase warrants for 11.7% of the outstanding common stock of the
Company. The warrant exercise price per share is equal to $1,000 divided by the
number of shares being purchased and expires in 2013 if not exercised. The
warrants are recorded as deferred compensation and are being accreted to
compensation expense over the life of 10 years.
10
BOBCAT PRESSURE CONTROL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND THE
YEARS ENDED DECEMBER 31, 2004 AND 2003
- --------------------------------------------------------------------------------
The Company financed a portion of the purchase price for the March 2003 purchase
of Superior with borrowings of $4 million from Petro Capital, LP ("Petro
Capital"). These borrowings were repaid in 2004. In connection with the
financing, Petro Capital received the right to appoint one board member, Rosser
Newton, and Petro Capital received common stock purchase warrants for 29.5% of
the outstanding common stock of the Company. The warrant exercise price per
share is equal to $1,000 divided by the number of shares being purchased and
expires in 2013 if not exercised. The warrants are recorded as a discount on the
borrowings from Petro Capital and are being accreted over the life of 10 years.
The Company recorded $-0-, $41,028 and $3,327 of accretion expense related to
these warrants during the nine months ended September 30, 2005 and years ended
December 31, 2004 and 2003.
In connection with his employment agreement, Steven Johnson, the Company's Chief
Financial Officer and a member of the board of directors, received common stock
purchase warrants for 9.8% of the outstanding common stock of the Company. The
warrant exercise price per share is equal to $1,000 divided by the number of
shares being purchased and expires in 2013 if not exercised. The warrants are
recorded as deferred compensation and are being accreted to compensation expense
over the life of 10 years.
In lieu of exercising the warrants by payment of cash, the warrant holders can
elect to receive common shares equal to the value of the warrants. The number of
shares of common stock to be received in exchange for a warrant is based on a
formula that considers the number of shares for which the warrant is being
exercised times the fair market value of a share less the exercise price of a
share. The result is then divided by the fair market value of one share of
common stock. The formula is intended to provide the warrant holder the same
ownership interest in the Company as if the holder paid the exercise price in
cash.
The warrants were issued to provide the warrant holders the same ownership
interest in the Company as if the holder paid the exercise price in cash. The
fair value of the warrants was calculated using a Black-Scholes pricing model,
with a common value per share based on the equity balance at December 31, 2003.
The warrants were granted primarily as a means for the holders to capitalize on
future earnings potential of the Company; however, this potential was not
quantifiable at the grant date, and therefore management assumed that the equity
balance at December 31, 2003 was a fair assessment of current value of the
Company.
At September 30, 2005, none of the warrants had been exercised.
The Company leases two sales offices under operating leases with Mr. Cudd. The
leases expire in 2009. Lease payments for the nine months ended September 30,
2005 and years ended December 31, 2004 and 2003 were $46,800, $46,600 and
$27,000, respectively.
The Company leases a sales office under an operating lease with Mr. Benedick.
The lease expires in 2009. Lease payments for the nine months ended September
30, 2005 and years ended December 31, 2004 and 2003 were $78,429, $76,500 and
$-0-, respectively.
During the nine months ended September 30, 2005, 92,980 shares of preferred
stock of the Company were repurchased from Mr. Cudd at an aggregate price of
$92,980.
The President guarantees indebtedness in the amount of $1,000,000 from the
Company to Comerica Bank on behalf of the Company.
11
BOBCAT PRESSURE CONTROL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND THE
YEARS ENDED DECEMBER 31, 2004 AND 2003
- --------------------------------------------------------------------------------
See Notes 7 and 9 for financing arrangements and equity transactions with
related parties.
NOTE 6 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment include the following at September 30, 2005 and
December 31, 2004:
2005 2004
-------------- -------------
Land and building $ 275,769 $ 175,236
Vehicles 1,552,625 1,181,118
Operating equipment 11,322,967 8,472,369
Office equipment 211,053 121,297
------------ ------------
13,362,414 9,950,020
Less accumulated depreciation (2,524,388) (1,533,045)
------------ ------------
Net property, plant & equipment $ 10,838,026 $ 8,416,975
============ ============
Depreciation expense for the nine months ended September 30, 2005 and years
ended December 31, 2004 and 2003 was $991,343, $845,245 and $512,222,
respectively.
NOTE 7 - LONG-TERM DEBT AND OTHER FINANCING ARRANGEMENTS
At September 30, 2005 and December 31, 2004 long-term debt and other financing
arrangements consisted of the following:
2005 2004
-------------- --------------
Installment notes payable, monthly payments required in $ 471,753 $ 552,400
varying amounts through June 2009, interest at rates ranging
from 0% to 4.9%
Notes payable to Communications Credit Union, monthly -- 15,270
payments of $788 through September 2006, interest
payable at 7.75%
Notes payable to Comerica Bank, monthly payments of $75,000
plus accrued interest through June 2009, interest at prime
plus 2.0% (8.5% at September 30, 2005) 3,375,000 4,050,000
Notes payable to Premium Financing, monthly payments of
$7,964 through December 2005, interest at 10.33% 23,488 --
Notes payable to CNB, monthly payments of $430 through
September 2006, interest at 9.5% -- 8,275
Revolving line of credit to Comerica Bank, interest at prime
plus 2.0% 400,000 526,240
----------- -----------
4,270,241 5,152,185
Less: current portion of long-term debt (1,114,986) (1,087,924)
----------- -----------
Long-term debt, less current maturities $ 3,155,255 $ 4,064,261
=========== ===========
12
BOBCAT PRESSURE CONTROL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND THE
YEARS ENDED DECEMBER 31, 2004 AND 2003
- --------------------------------------------------------------------------------
Notes payable to related parties consist of the following at September 30, 2005
and December 31, 2004:
2005 2004
----------------- ----------------
8%, note payable to Bill Benedick, principal and interest due
March 2008 $ 1,145,850 $ 1,447,639
8.5%, note payable to Bobby Joe Cudd, principal and interest
due March 2006 -- 100,000
----------- -----------
1,145,850 1,547,639
Less: current portion of notes payable to related parties (431,314) (506,436)
----------- -----------
Long-term debt to related parties $ 714,536 $ 1,041,203
=========== ===========
On June 2004, the Company entered into the Credit Agreement with Comerica Bank
providing for the extension of revolving and term credit facilities to the
Company aggregating up to $5.5 million. The Credit Agreement includes a
revolving loan of up to $2 million, but not exceeding 80% of eligible accounts
receivable and a term loan of $4.5 million. Eligible accounts are defined to
exclude, among other items and subject to certain exceptions, accounts
outstanding of debtors that are more than 60 days overdue or 90 days following
the original invoice date and of debtors that have suspended business or
commenced various insolvency proceedings and accounts with reserves established
against them to the extent of such reserves as Comerica Bank may set from time
to time in its reasonable credit judgment. The interest rate on borrowings under
the revolving loan is 2% above a base rate and on borrowings under the term loan
is 2% above the base rate. The base rate is the higher of (i) the rate publicly
quoted from time to time by the Wall Street Journal as the base rate on
corporate loans posted by at least 75% of the nation's thirty largest banks, or
(ii) the average of the rates on overnight Federal funds transactions by members
of the Federal Reserve System, plus 0.5%. If an event of default has occurred,
the interest rate is increased by 5%. Advances under the Credit Agreement are
collateralized by a senior lien against substantially all of the Company's
assets. The Credit Agreement expires on June 2009.
Borrowings under the revolving loan are able to be repaid and re-borrowed from
time to time for working capital and general corporate needs, subject to the
Company's continuing compliance with the terms of the agreement, with the
outstanding balance of the revolving loan to be paid in full at the expiration
of the Credit Agreement on June 2007. The term loan is to be repaid in 60
monthly installments of $75,000 principal plus accrued interest.
The Company's revolving loan requires a lock-box arrangement. This arrangement,
combined with the existence of a subjective acceleration clause in the revolving
loan, requires the classification of outstanding borrowings under the revolving
loan as a current liability.
Borrowings under the Credit Agreement may be prepaid or the facility terminated
or reduced by the Company at any time subject to the payment of certain
pre-payment fees declining from 1.5% to .5% in the event the termination or
reduction during the first, second or third year of the term of the Credit
Agreement. The Company is required to prepay borrowings out of the net proceeds
from the sale of any assets, subject to certain exceptions, or the stock of any
subsidiary, the net proceeds from the sale of any stock or debt securities by
the Company, and any borrowings in excess of the applicable borrowing
availability, including borrowings under the term loan in excess of 70% of the
forced liquidation value of eligible term loan equipment. The forced liquidation
value of the eligible term loan equipment is established by appraisals conducted
from time to time but not more than twice per year.
13
BOBCAT PRESSURE CONTROL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND THE
YEARS ENDED DECEMBER 31, 2004 AND 2003
- --------------------------------------------------------------------------------
In connection with entering into the Comerica Bank Credit Agreement, the Company
agreed with the holders of certain notes to subordinate the payment of such
promissory notes to the full repayment of Comerica Bank.
Substantially all of the Company's assets are pledged as collateral for the
indebtedness outstanding under the Credit Agreement with Comerica Bank and
subordinated secured promissory notes. The President guarantees indebtedness in
the amount of $1,000,000 from the Company to Comerica Bank on behalf of the
Company.
Maturities of debt are as follows:
For the three month period ending December 31, 2005 $ 836,012
For the year ending December 31, 2006 1,524,581
For the year ending December 31, 2007 1,526,203
For the year ending December 31, 2008 1,071,218
For the year ending December 31, 2009 458,077
For the year ending December 31, 2010 and thereafter -
-----------
Total long-term and related party debt $ 5,416,091
===========
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Commitments
The Company leases land, office space and equipment under various operating
leases. The leases expire at various dates through 2009. Rent expense from
continuing operations was approximately $152,229 for the nine months ended
September 30, 2005.
The future minimum lease payments required under non-cancelable leases with
initial or remaining terms of one or more years at September 30, 2005 were as
follows:
OPERATING
LEASES
------------
For the three month period ending December 31, 2005 $ 45,600
For the year ending December 31, 2006 180,900
For the year ending December 31, 2007 164,400
For the year ending December 31, 2008 164,400
For the year ending December 31, 2009 64,100
For the year ending December 31, 2010 and thereafter --
----------
Total minimum lease payments $ 619,400
==========
Contingencies
The Company is the subject of various legal actions in the ordinary course of
business. Management does not believe the ultimate outcome of these actions will
have a materially adverse effect on the financial position, results of
operations or cash flows of the Company. There was one outstanding contingency
at September 30, 2005, relating to Centre Partners Management LLC ("Centre").
This case was subsequently settled upon acquisition of the Company by Warrior
Energy Services Corporation for $500,000, which was paid by Warrior Energy
Services Corporation to Centre.
14
BOBCAT PRESSURE CONTROL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND THE
YEARS ENDED DECEMBER 31, 2004 AND 2003
- --------------------------------------------------------------------------------
NOTE 9 - COMMON STOCK TRANSACTIONS AND WARRANTS
As of September 30, 2005, the Company's certificate of incorporation permits it
to issue up to 212,625 shares of common stock, of which 100,000 shares were
issued and outstanding at September 30, 2005. The Company has outstanding as of
September 30, 2005 common stock purchase warrants entitled to purchase or be
converted into an aggregate of 109,952 shares of the Company's common stock. The
exercise price per share is equal to $1,000 divided by the number of shares
being purchased and expires in 2013 if not exercised.
At September 30, 2005, none of the warrants have been exercised.
As of September 30, 2005, the Company's certificate of incorporation permits it
to issue up to 100,000 shares of preferred stock, of which no shares were issued
and outstanding at September 30, 2005.
During the nine months ended September 30, 2005, the preferred stock of the
Company was repurchased from Mr. Cudd at an aggregate price of $92,980.
NOTE 10 - INCOME TAXES
The provision for income taxes consists of the following for the nine months
ended September 30, 2005 and years ended December 31, 2004 and 2003:
2005 2004 2003
---------------- --------------- -------------
Federal:
Current $1,410,506 $1,361,177 $ 228,906
Deferred 1,164,429 202,771 462,744
---------- ---------- ----------
2,574,935 1,563,948 691,650
State:
Current 105,965 47,198 9,846
---------- ---------- ----------
105,965 47,198 9,846
---------- ---------- ----------
Provision for income taxes $2,680,900 $1,611,146 $ 701,496
========== ========== ==========
The provision for federal income taxes differs from the amount computed by
applying the federal income tax statutory rate of 34% to the Company's income
before income taxes, as follows:
2005 2004 2003
----------------- -------------- ---------------
Provision computed at federal statutory rate $2,403,007 $1,444,759 $ 610,576
State income taxes 69,937 31,151 6,498
Nondeductible expenses 108,879 114,966 35,359
Other 99,077 20,270 49,063
---------- ---------- ----------
Provision for income taxes $2,680,900 $1,611,146 $ 701,496
========== ========== ==========
15
BOBCAT PRESSURE CONTROL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND THE
YEARS ENDED DECEMBER 31, 2004 AND 2003
- --------------------------------------------------------------------------------
Deferred income taxes reflect the impact of temporary differences between
amounts of assets and liabilities recorded for financial reporting purposes and
such amounts as measured in accordance with tax laws. The items, which comprise
a significant portion of the deferred tax assets and liabilities, are as
follows:
2005 2004
--------------- ---------------
Deferred tax assets:
Bad debt reserve $ 165,701 $ --
Deferred tax liabilities:
Property, plant and equipment 2,313,898 983,768
---------- ----------
Net deferred tax liability $2,148,197 $ 983,768
========== ==========
NOTE 11 - MAJOR CUSTOMERS
Most of the Company's business activity is with customers engaged in drilling
and operating oil and natural gas wells primarily in Oklahoma and northern
Texas. Substantially all of the Company's accounts receivable at September 30,
2005 are from such customers. Performance in accordance with the credit
arrangements is in part dependent upon the economic condition of the oil and
natural gas industry in the respective geographic areas. The Company does not
require its customers to pledge collateral on their accounts receivable.
Customers with revenues in excess of 10% of total revenues during the nine
months ended September 30, 2005 and the years ended December 31, 2004 and 2003
are as follows:
2005 2004 2003
--------- --------- ---------
Devon Energy -- -- 28%
Newfield Exploration 10% -- --
Noble Energy Production, Inc. 12% 16% 15%
NOTE 12 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate fair
value:
CASH AND CASH EQUIVALENTS, ACCOUNTS RECEIVABLE, CURRENT PORTION OF LONG-TERM
DEBT AND ACCOUNTS PAYABLE - The carrying amount is a reasonable estimate of the
fair value because of the short maturity of these instruments.
LONG-TERM DEBT - The carrying value of the Company's long-term debt approximates
fair value due to the interest rates, which represent current market rates.
RELATED PARTY DEBT - Management is unable to estimate the fair value of the
Company's related party debt. This debt is due in March 2008 but is subject to
subordination to the Company's senior debt. The debt and accumulated accrued
interest in aggregate is carried at a book value of $1.1 million and $1.6
million in the balance sheet at September 30, 2005 and December 31, 2004.
16
BOBCAT PRESSURE CONTROL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND THE
YEARS ENDED DECEMBER 31, 2004 AND 2003
- --------------------------------------------------------------------------------
NOTE 13 - SUBSEQUENT EVENTS
On December 16, 2005, Warrior Energy Services Corporation purchased the
outstanding common stock of the Company for $52.8 million.
17
(b) Pro forma financial information.
18
WARRIOR ENERGY SERVICES CORPORATION
PRO FORMA COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2005
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Historical Pro Forma
------------------------- ---------------------------------
Warrior
Energy Bobcat Adjustments Combined
-------------- ---------- ------------- --------------
Revenues $ 51,579 $ 21,704 $ 73,283
Operating costs 31,177 9,749 40,926
Selling, general and administrative expenses 6,758 3,393 10,151
Depreciation and amortization 3,730 1,115 1,770 (1) 6,615
-------------- ---------- -----------
Gain from operations
9,914 7,447 15,591
Interest expense 2,896 354 4,160 (2) 7,056
(354)(3)
Net gain (loss) on sale of fixed assets 13 (20) (7)
Other expense (313) (5) (318)
-------------- ---------- ------------
Income from operations before income
taxes 6,718 7,068 8.210
Provision for income taxes 134 2,681 (2,651)(4) 164
-------------- ---------- -------------
Net income $ 6,584 $4,387 $8,046
============== ========== =============
Net income per share - basic and diluted $ 5.27 $ 6.44
============== =============
Number of shares outstanding - basic and
diluted $1,249,952 1,249,952
============== ==============
19
WARRIOR ENERGY SERVICES CORPORATION
PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2004
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Historical Pro Forma
--------------------------------- -----------------------------------------
Warrior
Energy Bobcat Adjustments Combined
------------------- ------------- --------------- ------------------
Revenues $ 53,687 $ 16,224 $ 69,911
Operating costs 34,411 7,297 41,708
Selling, general and administrative expenses 9,467 3,024 12,491
Depreciation and amortization 5,179 1,010 2,360 (1) 8,549
------------------- ------------- ----------------
Gain from continuing operations 4,630 4,893 7,163
Interest expense 4,821 606 4,651 (2) 9,472
(606)(3)
Net gain (loss) on sale of fixed assets 53 (25) 28
Other income (loss) 45 (13) 32
------------------- ------------- ----------------
Income (loss) from continuing operations
before income taxes (93) 4,249 (2,249)
Provision for income taxes -- 1,611 (1,611)(4) --
------------------- ------------- ----------------
Income (loss) from continuing operations $ (93) $ 2,638 $ (2,249)
=================== ============= ================
Net income (loss) per share - basic and diluted $ (1.41) $ (3.14)
=================== ================
Number of shares outstanding - basic and diluted 1,249,952 1,249,952
=================== ================
20
WARRIOR ENERGY SERVICES CORPORATION
PRO FORMA COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 2005
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Historical Pro Forma
------------------------- --------------------------------------
Warrior
Energy Bobcat Adjustments Combined
------------ ------------ -- ---------------- ------ --------------
ASSETS
Current assets:
Cash and cash equivalents $ 6,680 $ 661 $ 7,341
Accounts receivable, net 10,537 7,783 18,320
Other receivables 51 - 51
Prepaid expenses 1,058 258 1,316
Inventories - 352 352
Other current assets 1,457 12 1,469
------------ ------------ --------------
Total current assets 19,783 9,066 28,849
Property, plant and equipment, less accumulated
depreciation 15,145 10,838 4,701 (7) 30,684
Other assets 262 277 2,166 (5) 2,705
Intangible assets - 1,239 22,241 (7) 23,480
Goodwill 1,237 - 11,662 (7) 12,899
------------ ------------ --------------
Total assets $36,428 $21,420 $ 98,617
============ ============ ==============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $3,157 $ 2,967 6,124
Accrued salaries and vacation 1,001 446 1,447
Other accrued expenses 796 2,110 2,906
Accrued interest payable 8 - 8
Current maturities of long-term debt 2,086 1,115 10,314 (5) 13,515
Notes payable to related parties - 431 (431)(5) -
Deferred revenue - 102 102
------------ ------------ --------------
Total current liabilities
7,048 7,171 24,102
Long-term debt, less current maturities 5,254 3,155 42,492 (5) 50,901
Non current accrued interest payable to related parties 19,749 - (1,010)(6) 18,739
Notes payable to related parties 23,002 715 (1,100)(6) 21,902
(715)(5)
Deferred income taxes - 2,314 (716)(7) 1,598
------------ ------------ --------------
Total liabilities
55,053 13,355 117,242
Stockholders' equity (deficit):
Common stock 6 1 (1)(7) 6
Additional paid-in capital 20,276 69 (69)(7) 20,276
Deferred compensation - (18) 18 (7) -
Accumulated earnings (deficit) (38,324) 8,013 (8,013)(7) (38,324)
Treasury stock, at cost, 462 shares (583) - (583)
------------ ------------ --------------
Total stockholders' equity (deficit)
(18,625) 8,065 (18,625)
------------ ------------ --------------
Total liabilities and stockholders' equity $36,428 $21,420 $ 98,617
============ ============ ==============
21
WARRIOR ENERGY SERVICES CORPORATION
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
BASIS OF PRESENTATION:
On December 16, 2005, we completed our acquisition of the equity
securities of Bobcat. We accounted for the acquisition using the purchase method
of accounting pursuant to which the purchase price is to be allocated to the
tangible and intangible assets based on their estimated fair values. This
allocation process is still ongoing and until complete, we will use estimates on
the allocation. We have estimated a useful life of ten years on the allocated
intangible assets and reflected the amortization in the pro forma adjustments.
A summary of the initial allocation follows:
$ in millions
Purchase price $52.8
Fair value of net tangible assets
acquired 2.1
Fair value of property, plant and
equipment acquired 15.5
-----------------
Excess purchase price to be allocated $35.2
Estimated amount allocated to intangible
assets $23.5
Estimated amount allocated to goodwill $11.7
These unaudited pro forma combined financial statements are presented
for information purposes only and do not necessarily indicate what the operating
results or financial position would have been had such transactions been
completed on the dates indicated. Moreover, this financial data does not purport
to be indicative of the combined financial position or results of operations for
future periods.
These pro forma combined financial statements are based on our
historical audited and unaudited financial statements, and the pro forma
adjustments and assumptions outlined below. Accordingly, these pro forma
adjustments should be read in conjunction with our audited and unaudited
financial statements appearing in our annual report on Form 10-K for the year
ended December 31, 2004 and our quarterly report on Form 10-Q for the period
ended September 30, 2005 filed with the Securities and Exchange Commission. Our
SEC filings are available to the public over the Internet at the SEC's website
at http://www.sec.gov.
The accounting policies used in the preparation of the pro forma
combined financial statements are those disclosed in our audited financial
statements for the year ended December 31, 2004.
(1) To reflect additional depreciation and amortization related to (1) purchase
price allocation.
(2) To adjust interest expense to reflect borrowings to fund the Bobcat
acquisition at the (2) beginning of the period.
(3) To reflect payoff of the Bobcat debt upon acquisition at the beginning of
the period and elimination of (3) the Bobcat interest expense.
(4) At December 31, 2004 and 2003, we had available federal tax net operating
loss carryforwards ("NOL's") of approximately $35.6 million and $33.3
million, respectively. The pro forma adjustment reflects utilization of
these NOL's against pro forma combined taxable income and applies an
alternative minimum tax to pro forma combined earnings.
(5) To reflect payoff of existing senior debt with GECC and borrowings under
our new senior secured credit (5) agreement with GECC and fees associated
to secure funds for the Bobcat acquisition and retirement of Bobcat
existing debt.
(6) To reflect repayment of principal and interest of subordinated debt which
was paid off in connection with the funding of our senior secured credit
agreement with GECC.
(7) To reflect initial allocation of the purchase price of (7) Bobcat.
22
(c) Exhibits.
None
23
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
WARRIOR ENERGY SERVICES CORPORATION
Dated: February 21, 2006 By: /s/ William L. Jenkins
-----------------------------
William L. Jenkins, President
24