SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 8-K A00
AMENDMENT TO
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) -- July 29, 1996
DAWSON PRODUCTION SERVICES, INC.
(Exact name of registrant as specified in its charter)
TEXAS 0-27732 74-2231546
(State or other jurisdiction (Commission file Number) (I.R.S. Employer
of incorporation) Identification No.)
901 N.E. Loop 410, Suite 700
San Antonio, Texas 78209-1306
(Address of principal executive offices) (Zip code)
Registrants telephone number, including area code: (210) 828-1838
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
<PAGE>
Effective July 29, 1996, Dawson Production Services, Inc., a Texas corporation,
(the "Company"), acquired all of the issued and outstanding stock of Taylor
Companies, Inc. The Company reported this acquisition on a current report on
Form 8-K dated July 29, 1996. In accordance with item 7(a)(4), the Company
hereby files the required finanical statements of the business acquired and
proforma financial information pursuant to Item 7.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired: Taylor Acquisition Group
TAYLOR ACQUISITION GROUP
COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
December 31, December 31, June 30,
1994 1995 1996
(Unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $563,105 $283,054 $239,160
Accounts receivable - trade, (net) 3,669,784 2,973,206 3,299,590
Accounts receivable - affiliates 81,399
Accounts receivable - officer 445,655 164,135 202,628
Accounts receivable - other 286,256 122,273 298,003
Prepaid expenses 141,336 110,496 226,058
-----------------------------------------------------------
Total Current Assets 5,187,535 3,653,164 4,265,439
PROPERTY, PLANT AND EQUIPMENT
Heavy trucks and trailers 2,415,384 2,331,400 2,371,053
Frac tanks 3,961,543 3,980,401 3,992,401
Other equipment 2,776,437 2,667,291 2,707,025
Disposal wells 2,348,249 2,816,349 2,810,600
Land 45,953 55,627 55,627
-----------------------------------------------------------
11,547,566 11,851,068 11,936,706
Less: Accumulated depreciation 6,790,230 8,073,760 8,749,869
-----------------------------------------------------------
Net Property, Plant and Equipment 4,757,336 3,777,308 3,186,837
OTHER ASSETS
Equipment not in service 87,964 9,528
===========================================================
TOTAL ASSETS $10,032,835 $7,440,000 $7,452,276
===========================================================
</TABLE>
The accompanying notes are an integral
part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
December 31, December 31, June 30,
1994 1995 1996
(Unaudited)
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Notes payable - current portion $2,497,684 $2,026,198 $1,469,604
Obligation under capital leases - current portion 16,941 18,275 18,275
Accounts payable - trade 916,657 478,519 628,106
Accounts payable - affiliates 89,241
Accrued expenses 745,452 455,912 631,013
Deferred revenues 17,215 48,800 43,959
------------------------------------------------------------
Total Current Liabilities 4,193,949 3,116,945 2,790,957
LONG-TERM DEBT
Notes payable 1,640,936 852,817 820,173
Obligation under capital leases 36,288 18,013 18,013
Subordinated payable to stockholder 3,999,610 2,896,201 2,505,629
------------------------------------------------------------
Total Long-Term Debt 5,676,834 3,767,031 3,343,815
OTHER NON-CURRENT LIABILITIES
Deferred revenue 242,005 193,205 186,398
Deferred taxes 380,235 224,827 122,484
------------------------------------------------------------
Total Non-Current Liabilities 622,240 418,032 308,882
------------------------------------------------------------
Total Liabilities 10,493,023 7,302,008 6,443,654
STOCKHOLDER'S EQUITY
Common Stock, $1 par value; 30,000 shares
authorized; 15,000 shares issued and outstanding 66,100 67,100 67,100
Paid in surplus 5,000 743,011 1,129,083
Retained earnings (531,288) (672,119) (187,561)
------------------------------------------------------------
Total Stockholder's Equity (460,188) 137,992 1,008,622
============================================================
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $10,032,835 $7,440,000 $7,452,276
============================================================
</TABLE>
The Accompanying notes are an integral
part of these financial statements
<PAGE>
TAYLOR ACQUISITION GROUP
COMBINED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Years ended Six Months ended
December 31, December 31, June 30,
1994 1995 1996
(Unaudited)
<S> <C> <C> <C>
Revenues $19,651,930 $16,713,246 $8,943,005
Direct Cost of Operations 16,291,016 14,281,231 7,112,371
--------------------------------------------------------------
Gross Profit 3,360,914 2,432,015 1,830,634
General & Administrative Expenses 3,443,168 2,831,866 1,086,408
--------------------------------------------------------------
Net Operating Income (Loss) (82,254) (399,851) 744,226
Other Income and Expense 140,046 (100,896) (3,330)
--------------------------------------------------------------
Net Income (Loss) before Tax (222,300) (298,955) 747,556
Federal Income Taxes (Benefit)
Current (7,973) (2,716) 365,341
Deferred 380,235 (155,408) (102,343)
--------------------------------------------------------------
372,262 (158,124) 262,998
==============================================================
Net Income (Loss) ($594,562) ($140,831) $484,558
==============================================================
</TABLE>
The Accompanying notes are an integral
part of these financial statements
<PAGE>
TAYLOR ACQUISITION GROUP
COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
December 31, December 31, June 30,
1994 1995 1996
(Unaudited)
<S> <C> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net Income (Loss) ($594,562) ($140,831) $484,558
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation and amortization 1,645,314 1,607,042 676,109
Gain on sale of assets (15,058) (86,904) (1,789)
Decrease (increase) in accounts receivable (362,011) 696,578 (502,114)
Decrease (increase) in prepaid expenses and other assets (57,645) 119,829 (75,193)
Decrease (increase) in due to affiliates (64,354) 170,640 (89,241)
Decrease (increase) in accounts payable 265,419 (438,138) 149,587
Decrease (increase) in accrued expenses 147,618 (289,543) 175,101
Decrease (increase) in deferred revenue 259,220 (17,215) (11,648)
Decrease (increase) in income tax receivable (107,973) 75,000
Decrease (increase) in deferred taxes 380,235 (155,408) (102,343)
Decrease in officer note receivable for operations 0 105,509
Decrease in fixed and other assets used for operations 0 28,924
--------------------------------------------------------------
Total adjustments 2,090,765 1,816,314 218,469
--------------------------------------------------------------
Net Cash Provided By Operating Activities 1,496,203 1,675,483 703,027
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (1,143,548) (1,007,592) (85,638)
Proceeds on sale of assets 31,415 343,186 1,789
Advances on officer note receivable (321,806) (38,493)
Collections on officer note receivable 259,320 174,474
Purchase equipment not in service (87,964)
--------------------------------------------------------------
Net Cash Used For Investing Activities (940,777) (811,738) (122,342)
CASH FLOWS FROM FINANCING ACTIVITIES
New loans 1,158,560 250,000
Repayment of capital lease (16,961) (16,941)
Repayment of debt (1,674,845) (1,509,605) (589,238)
Repayment of note payable - shareholder (326,339) (100,000) (4,500)
Loans from shareholder 2,406,574 231,750
Distribution of Subchapter S earnings (2,406,574)
Issue capital stock 2,000 1,000
--------------------------------------------------------------
Net Cash Used For Financing Activities (857,585) (1,143,796) (593,738)
--------------------------------------------------------------
Net Decrease in Cash and Cash Equivalents (302,159) (280,051) (13,053)
Cash and Cash Equivalents, Beginning of Year 865,264 563,105 283,054
==============================================================
Cash and Cash Equivalents, End of Year $563,105 $283,054 $270,001
==============================================================
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Additional paid-in surplus $738,011 $386,072
Reduction in notes payable - officer (738,011) (386,072)
==========================================
- -
==========================================
Acquisition of equipment
Cost of equipment $1,617,653
Equipment loans (474,105)
====================
Cash paid for equipment $1,143,548
====================
</TABLE>
The Accompanying notes are an integral
part of these financial statements
<PAGE>
TAYLOR ACQUISITION GROUP
COMBINED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
Capital Paid-in Retained
Stock Surplus Earnings
<S> <C> <C> <C>
Balance, December 31, 1993 $64,100 $0 $2,589,538
Issue stock: Taylor Companies, Inc. 1,000
Newton SWD, Inc. 1,000
Capitalize Taylor Caldwell Properties, LLC. 5,000
Distribution of Subchapter-S earnings (2,526,264)
Net Loss (594,562)
--------------------------------------------------------------
Balance, December 31, 1994 66,100 5,000 (531,288)
Issue stock: Teague Interests, Inc. 1,000
Contribution of officer note payable 738,011
Net Loss (140,831)
--------------------------------------------------------------
Balance, December 31, 1995 67,100 743,011 (672,119)
Contribution of officer note payable 386,072
Net Income 484,558
==============================================================
Balance, June 30, 1996 $67,100 $1,129,083 ($187,561)
==============================================================
</TABLE>
The Accompanying notes are an integral
part of these financial statements
<PAGE>
TAYLOR ACQUISITION GROUP
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. The Group was organized for the purpose of providing oil field
services to major oil companies and drilling companies by providing
vacuum trucks, frac tanks, saltwater disposal and other services
necessary for the drilling, completion and production processes.
Operational areas exist primarily in the east, southeast, and central
regions of Texas. The Group maintains facilities in Carthage,
Caldwell, Bryan, Giddings, Pineland, Freestone, and Easton, Texas. The
Group had a facility in Laredo, Texas which was closed in December,
1994.
B. The combined financial statements include the accounts of Taylor
Companies, Inc. and its wholly owned subsidiaries Taylor Interests,
Inc., Taylor SWD Operating, Inc., Taylor Environmental, Inc., Taylor
Disposal, Inc., Production Disposal, Inc., Taylor Injection Systems,
Inc., DeBerry SWD, Inc., Tatum SWD, Inc., and Newton County SWD, Inc.
Cavern Disposal, Inc., which is also a wholly owned subsidiary of
Taylor Companies, Inc. is not included. Also included are Taylor Water
Injections, Inc., Teague Interests, Inc., Taylor Caldwell Properties,
LLC and the real property representing the Carthage yard, all of which
are owned by Mr. John Randall Taylor. Intercompany transactions have
been eliminated.
C. Fixed assets are recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the assets.
Virtually all assets excluding buildings are depreciated over an
estimated useful life of five years.
Depreciation expense on equipment, vehicles, and disposal wells is
included in cost of operations. Depreciation expense on these assets
totaled $1,526,491 and $1,619,505 in 1995 and 1994, respectively.
Depreciation expense on office furnishing and equipment and leasehold
improvements totaled $80,551 and $25,809 for 1995 and 1994,
respectively. These amounts are included in general and administrative
expenses.
For federal income tax purposes, depreciation is computed using the
modified accelerated cost recovery system. Expenditures for major
renewals and betterments that extend the useful lives of property and
equipment are capitalized. Expenditures for maintenance and repairs
are charged to expense as incurred.
D. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
E. Cash and cash equivalents are comprised of checking accounts, savings
accounts, and short term cash investment accounts maintained at
various financial institutions.
The Group has had monies invested into a special account with Premier
Bank into which excess operating funds are transferred on a daily
basis. The monies in this account earn a floating interest rate and
are collateralized by U.S. Government obligations.
<PAGE>
TAYLOR ACQUISITION GROUP
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
F. As explained in Note 1B, the Group consists of various companies and
assets which do not exist as a taxable entity. However, the tax
provisions reflected in the financial statements have been computed as
if the companies and assets did exist as a single taxable entity.
Income taxes are provided for the tax effects of transactions reported
in the financial statements and consist of taxes currently due plus
deferred taxes related primarily to differences between the bases of
depreciation and bad debt reserve for financial and income tax
reporting. The deferred tax assets and liabilities represent the
future tax return consequences of those differences, which will either
be taxable or deductible when the assets and liabilities are recovered
or settled. Deferred taxes also are recognized for operating losses
that are available to offset future federal income taxes.
NOTE 2 ACCOUNTS RECEIVABLE - TRADE
The Group's receivables consist of amounts due from major oil
companies and oilfield drilling companies for frac tank and vacuum
truck services and disposal fees. Receivables are uncollateralized
with 30 day terms.
1995 1994
Amout % Amount %
---------- --- ---------- ---
Current ................... $1,992,448 65 $2,477,303 66
30 Days ................... 712,236 23 895,283 24
60 Days ................... 193,362 6 254,940 7
90 Day and Over ........... 186,482 6 117,729 3
---------- --- ---------- ---
$3,084,528 100 $3,745,255 100
========== === ========== ===
An allowance for doubtful accounts of $111,322 and $75,471 has been
established as of December 31, 1995 and 1994, respectively.
NOTE 3 NOTES PAYABLE
1995 1994
-------- --------
Installment notes payable to The Associates,
secured by frac tanks and trailers, payable
monthly at 7.6% to 8.5% interest .................... $162,271 $404,744
Installment note payable to The Assoicates,
secured by vehicles, payable monthly at
8.15% interest ...................................... 8,741 120,635
Installment notes payable to General Motors
Acceptance Corporation, secured by vehicles,
payable monthly at interest rates of 7.9%
to 9.5% interests ................................... 26,163 58,831
<PAGE>
TAYLOR ACQUISITION GROUP
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 3 NOTES PAYABLE - Continued
1995 1994
---------- ----------
Installment notes payable to insurance
companies for current policies ................... $ 14,689 $ 64,048
Installment notes payable to MetLife Capital
Corporation, secured by frac tanks,
certain vacuum trailers and vehicles,
payable monthly at 6.66% to 7.33%
interest ......................................... 629,934 970,214
Installment note payable to Premier Bank,
secured by frac tanks, payable in monthly
installments floating at 1.5% over the
Chase Manhattan prime rate ....................... 258,750 393,750
Installment note payable to Premier Bank,
secured by frac tanks, payable in monthly
installments floating at 1.5% over the
Premier Bank prime rate .......................... 61,655 281,250
Line of credit from Premier Bank, secured by
equipment, with interest at prime plus
1.5% ............................................ 250,000 -0-
Line of credit from Premier Bank, secured by
accounts receivable, with interest at
prime plus 1.5% ................................. 1,000,000 1,000,000
Installment note payable to Case Credit,
secured by equipment, payable monthly at
7.31% interest ................................... 9,962 21,144
Installment note payable to Panola National
Bank, secured by portable office
buildings, payable in monthly installments
at 9.25% interest ................................ 59,266 72,605
Installment note payable to Premier Bank
secured by disposal wells, payable in
monthly installments at 1% over the
Premier Bank prime rate .......................... -0- 58,334
Installment note payable to Texas Workers
Compensation Insurance Fund, payable in
monthly installments ............................. -0- 221,432
Installment notes payable to Concord
Commercial Corporation, secured by vacuum
trailers and frac tanks, at 12.5% interest ....... -0- 7,510
Installment notes payable to U. S. Leasing
(formerly Ford Leasing), secured by frac
tanks, at 11.7% interest ......................... -0- 29,991
Installment notes payable to SafeCo, secured
by equipment and vehicles, at 12.25%
interest ......................................... -0- 15,705
Installment notes payable to Panola National
Bank secured by vehicles, payable in
monthly installments at 2% over Texas
Commerce Bank, Houston base rate ................. -0- 18,187
<PAGE>
TAYLOR ACQUISITION GROUP
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 3 NOTES PAYABLE - Continued
1995 1994
---------- ----------
Installment note payable to Premier Bank
secured by real estate, payable in monthly
installments of $2,500.00 over a remaining
period of 108 months floating at 1% over
the Chase Manhattan prime rate ................... 269,500 302,500
Installment note payable to Citizens State
Bank secured by real estate, payable in
monthly installments of $2,230 at 8%
interest ......................................... 78,084 97,740
Note payable to an individual secured by two
winch trucks, payable in annual
installments of $10,000 over a remaining
period of 5 years at 0% interest ................. 50,000 -0-
---------- ----------
Total Notes Payable ................................ 2,879,015 4,138,620
Less: Current Portion .............................. 2,026,198 2,497,684
---------- ----------
Long Term Debt ..................................... $ 852,817 $1,640,936
========== ==========
Maturities of the above notes are summarized below:
1996 ................ $2,026,198
1997 ................ 550,084
1998 ................ 93,223
1999 ................ 48,775
2000 and thereafter.. 160,735
----------
$2,879,015
==========
Total interest expense incurred was $461,326 and $473,448 for 1995 and 1994,
respectively.
Taylor Companies, Inc. also has a line of credit available with Premier Bank of
$800,000 for the purchase of new equipment or salt water disposal wells. The
loan agreement contains a restrictive covenant which requires net worth to be at
least $2,740,000 and debt to net worth of 2.25 to 1.00.
The Group had loans from its sole shareholder, Randy Taylor, for $2,896,201 and
$3,999,610 at December 31, 1995 and 1994 respectively. These loans are
subordinated to the Premier Bank loans and is considered as equity for
determining the debt to net worth ratio required by the Premier covenant.
<PAGE>
TAYLOR ACQUISITION GROUP
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 4 CAPITAL LEASES
In 1992 Taylor Interests, Inc. entered into a capital lease with The Associates
for three vacuum trailers.
The future minimum lease payments under capital leases together with the present
value of the net minimum lease payments are as follows:
Year ending December 31,
- -----------------------------------------------------------
1996 $ 20,405
1997 20,405
-----------
Total minimum lease payments ..................... 40,810
Less: amount representing interest .............. 4,522
-----------
Present value of net minimum lease payments ...... $ 36,288
===========
NOTE 5 FEDERAL INCOME TAXES
As explained in Note 1B, the Group consists of various companies and
assets which do not exist as a taxable entity. However, the tax provisions
reflected in the financial statements have been computed as if the
companies and assets did exist as a single taxable entity.
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred
taxes related primarily to differences between the bases of depreciation
and bad debt reserve for financial and income tax reporting. The deferred
tax assets and liabilities represent the future tax return consequences of
those differences, which will either be taxable or deductible when the
assets and liabilities are recovered or settled. Deferred taxes also are
recognized for operating losses that are available to offset future
federal income taxes.
The Group utilizes different methods of recognizing depreciation expense
and bad debt expense for financial statement and income tax purposes. The
Group also elected to expense certain costs relating to saltwater disposal
wells for tax purposes that have been capitalized under generally accepted
accounting principles.
1995 1994
--------- ---------
Net income (loss) before taxes ............... $(298,955) $(222,300)
--------- ---------
Timing differences
Depreciation ............................... 329,282 137,641
Basis in assets sold ....................... 110,978 4,601
Bad debts .................................. 35,851 47,371
Capitalization policies .................... (180,110) (353,310)
--------- ---------
Total timing differences ................ 296,001 (163,397)
Permanent differences ........................ 41,186 (72,475)
--------- ---------
Total differences ............................ 337,187 (236,172)
--------- ---------
Taxable income ............................... $ 38,232 $(458,472)
========= =========
Tax at statutory rates ....................... $ 5,735 $ -0-
Fuel tax credit .............................. 8,451 7,973
--------- ---------
Net tax ...................................... $ (2,716) $ (7,973)
========= =========
<PAGE>
TAYLOR ACQUISITION GROUP
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 5 FEDERAL INCOME TAXES - Continued
Deferred tax liability is computed as follows:
Depreciation expense (liability) ......... $ 1,251,644 $ 1,563,124
Bad debt expense (asset) ................. (111,322) (139,018)
Net operating loss (asset) ............... (479,065) (222,300)
----------- -----------
Net differences ..................... 661,257 1,201,806
Rate ................................ 34% 31%
----------- -----------
Deferred tax liability ................... $ 224,827 $ 380,235
=========== ===========
The deferred tax liability for 1994 was recognized as an expense all in
1994 since the companies had previously been taxed as Subchapter S
corporations. No deferral existed in prior years.
NOTE 6 DEFERRED REVENUES
Taylor Interests, Inc. entered into an agreement with a major oil company
whereby that company would contribute $285,900 toward the cost of drilling
and constructing a salt water disposal well. Taylor Interests, Inc., would
bear the remaining cost of placing the facility in operation. The oil
company would receive a credit of $.05 per barrel for each barrel disposed
until such time as its investment of $285,900 was recovered. Taylor
Interests, Inc. had disposed of 877,900 barrels under this agreement as of
December 31, 1995. Deferred revenues recognized were $48,800 and $43,895
in 1995 and 1994, respectively.
NOTE 7 EMPLOYEE BENEFIT PLAN
Taylor Interests, Inc. has established a 401(k) savings plan for its
employees. All persons employed by the Company on April 1, 1990, are
eligible to participate regardless of age or length of service. Persons
employed after this date become eligible upon the attainment of age 18 and
the completion of six months of service. At December 31, 1995, a total of
81 employees were participants in the plan.
This plan is a defined contribution plan in which the Company has the
option to match 50% of each employee's contributions which do not exceed
6% of the employee's annual compensation. All contributions are paid into
a trust fund which has been established solely for the participants in the
plan. Total plan expense to the Company in 1995 was $101,663 and $53,602
in 1995 and 1994, respectively.
A valuation of plan assets is prepared by an independent actuary. At
December 31, 1995, plan assets totaled $661,156. The Company has a
liability to the plan in the amount of $30,482 which is reflected in
accrued expenses.
NOTE 8 RELATED PARTY TRANSACTIONS
John Randall Taylor owns 100 percent of the stock of Taylor Companies,
Inc., Taylor Water Injections, Inc., Teague Interests, Inc., and Taylor
Caldwell Properties, LLC. On January 1, 1995, Mr. Taylor exchanged 100% of
the stocks of Newton County SWD, Inc. and Cavern Disposal, Inc. for
additional stock in Taylor Companies, Inc.
<PAGE>
TAYLOR ACQUISITION GROUP
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 8 RELATED PARTY TRANSACTIONS - Continued
Various members of the Group had outstanding notes payable to Mr. Taylor.
The note from Taylor Companies, Inc. is subordinated to the notes payable
to Premier Bank and bears an interest rate of 5% per annum.
1995 1994
----------- -----------
Taylor Companies, Inc. ...................... $ 2,505,629 $ 2,505,629
Taylor SWD Operating, Inc. .................. 5,000 5,000
Teague Interests, Inc. ...................... 231,500 -0-
Taylor Caldwell Properties, LLC ............. 17,000 17,000
Taylor Water Injectors, Inc. ................ 137,072 137,072
Taylor Disposal, Inc. ....................... -0- 243,493
Production Disposal, Inc. ................... -0- 109,920
Taylor Injection Systems, Inc. .............. -0- 65,049
DeBerry SWD, Inc. ........................... -0- 42,215
Tatum SWD, Inc. ............................. -0- 244,371
Newton SWD, Inc. ............................ -0- 629,861
----------- -----------
$ 2,896,201 $ 3,999,610
=========== ===========
Mr. Taylor contributed to paid-in surplus $738,011 of the notes payable
from Taylor Disposal, Inc., Production Disposal, Inc., Taylor Injection
Systems, Inc., DeBerry SWD, Inc., Tatum SWD, Inc., and Newton SWD, Inc. in
1995. The balance of the notes were distributed to Mr. Taylor.
Taylor Interests, Inc. leases its office and shop facilities in Carthage
from Mr. Taylor. The lease is renewable annually with lease payments of
$72,000 per annum. The Company also leases its Caldwell facilities from
Taylor Caldwell Properties, LLC, which is a member of the Group. The
Company also leases the administrative office in Carthage from Tay-Rob
Interests, Inc., a company in which Mr. Taylor is president and sole
stockholder. The lease is renewable annually with lease payments of
$12,000 per annum. Taylor SWD Operating, Inc. also leases its facilities
from Mr. Taylor for $12,000 per annum.
<PAGE>
TAYLOR ACQUISITION GROUP
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 9 COMMITMENTS AND CONTINGENT LIABILITIES
A. Taylor Interests, Inc. leases certain heavy trucks and vehicles from
various leasing companies. These leases are accounted for as
operating leases for financial statement purposes. Future minimum
lease payments on these leases for the next three years are as
follows:
1996 ........... $ 727,810
1997 ........... 527,251
1998 ........... 218,518
----------
$1,473,579
==========
B. The Group leases land for its salt water disposal wells from various
individuals at a monthly total of $5,525.
C. A suit is pending in District Court against Taylor Interests, Inc.
and Taylor SWD Operating, Inc. seeking relief based on property
rights relating to a salt water disposal well. The Company prevailed
at trial of this suit; however, the Court has granted Plaintiffs a
new trial. An adverse verdict could be for a material amount.
D. Four suits are pending in various State Courts involving vehicular
accidents against Taylor Interests, Inc. The Company has sufficient
insurance to cover the claims.
NOTE 10 ECONOMIC DEPENDENCY
The Group generated approximately 12% of its revenues from one customer in 1995.
Total sales to this company were $1,918,841. In 1994, the Group generated
approximately 24% of its revenue from two customers. Total sales to these two
companies were $4,393,749. No other one customer generated more than 10% of
total revenues.
The Group grants credit to customers in the oil and gas and related industries
in the normal course of business. Consequently, the Group's ability to collect
the amounts due from customers is affected by economic fluctuations in the oil
and gas industry.
NOTE 11 MOTOR CARRIER PERMIT
Taylor Interests, Inc. had previously invested in an intrastate motor carrier
permit for which it had paid $57,200 to another carrier. Intrastate trucking was
deregulated by the federal government as of January 1, 1995, resulting in a
permanent impairment of the value of the permit held by the Company. This
permanent impairment in value has been recognized as an expense in 1994.
<PAGE>
TAYLOR ACQUISITION GROUP
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 12 SUBSEQUENT EVENT
On January 1, 1996, Mr. Taylor contributed all the capital stock of Taylor Water
Injections, Inc. and Teague Interests, Inc. to Taylor Companies, Inc. in
exchange for additional shares in Taylor Companies, Inc.
<PAGE>
TAYLOR ACQUISITION GROUP
SCHEDULE OF REVENUES
FOR THE YEAR ENDED DECEMBER 31
--------------------------------
1995 1994
----------- -----------
Vacuum Trucks ........................ $ 9,463,142 $11,261,595
Frac Tanks ........................... 1,874,950 2,576,771
Disposal Fees ........................ 2,873,095 3,544,190
Completion Fluids .................... 1,848,761 1,746,284
Oil Sales ............................ 466,854 376,681
Other ................................ 186,444 146,409
----------- -----------
$16,713,246 $19,651,930
=========== ===========
The accompanying notes are an integral part of
these financial statements.
<PAGE>
TAYLOR ACQUISITION GROUP
SCHEDULE OF DIRECT COST OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31
------------------------------
1995 1994
----------- -----------
Car allowances ............................... $ 6,000 $ 8,417
Contract labor ............................... 50,110 97,196
Depreciation ................................. 1,526,491 1,619,505
Diesel ....................................... 1,301,865 1,520,198
Disposal expense ............................. 924,051 710,234
Equipment rental ............................. 20,779 32,785
Fluids ....................................... 911,570 498,794
Gas and oil .................................. 117,117 150,593
Hoses and fittings ........................... 29,631 27,558
Insurance .................................... 672,570 797,734
Landfarming and pit expense .................. 22,058 1,476
Licenses and tags ............................ 69,616 68,313
Medical payments ............................. 7,686 17,483
Oil and grease ............................... 104,382 121,890
Operating supplies ........................... 208,087 472,884
Payroll taxes ................................ 498,519 613,157
Employee benefit plan expense ................ 101,679 59,451
Physical's and motor vehicle records ......... 28,808 32,725
Rent ......................................... 64,040 191,552
Repairs and maintenance ...................... 844,542 1,248,637
Salaries and wages ........................... 5,084,533 6,101,501
Sub-contractors .............................. 15,480 11,349
Tires ........................................ 410,479 397,145
Uniforms ..................................... 69,853 76,729
Utilities .................................... 287,268 422,041
Vehicle leases ............................... 765,913 882,796
Water ........................................ 138,104 108,873
----------- -----------
$14,281,231 $16,291,016
=========== ===========
The accompanying notes are an integral part of
these financial statements.
<PAGE>
TAYLOR ACQUISITION GROUP
SCHEDULE OF GENERAL AND ADMINISTRATIVE EXPENSES
FOR THE YEAR ENDED DECEMBER 31
------------------------------
1995 1994
---------- ----------
Advertising ................................ $ 26,229 $ 36,587
Bad debts .................................. 97,248 111,958
Computer lease and repair .................. 11,358 23,612
Contributions .............................. 8,602 8,146
Depreciation ............................... 80,551 25,809
Dues and subscriptions ..................... 8,103 28,111
Insurance - general ........................ 247,369 242,933
Interest ................................... 461,326 473,448
Janitorial and laundry ..................... 9,451 7,299
Legal and professional ..................... 248,729 191,899
Miscellaneous .............................. 50,823 30,906
Office supplies ............................ 67,526 91,393
Permits .................................... 11,099 10,784
Postage and freight ........................ 17,383 21,251
Rent ....................................... 186,639 223,348
Repairs and maintenance .................... 48,148 59,258
Salaries and bonuses ....................... 759,808 1,131,893
Taxes - other .............................. 139,945 180,777
Telephone .................................. 176,086 273,573
Travel and entertainment ................... 119,684 187,705
Utilities .................................. 55,759 82,478
---------- ----------
$2,831,866 3,443,168
========== ==========
The accompanying notes are an integral part of
these financial statements.
<PAGE>
To the Stockholders, Members, and Owners
Taylor Acquisition Group
Carthage, Texas
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying combined balance sheets of the Taylor
Acquisition Group (the Group) as of December 31, 1995 and 1994, and the related
statements of income, changes in stockholder equity, and cash flows for the
years then ended. These combined financial statements are the responsibility of
the Group's management. Our responsibility is to express an opinion on these
combined financial statements based on our audits.
The Taylor Acquisition Group is an unincorporated combination of entities
consisting of Taylor Companies, Inc. (a Texas corporation) and its wholly owned
subsidiaries (excluding Cavern Disposal, Inc.), Taylor Water Injections, Inc. (a
Texas corporation), Teague Interests, Inc. (a Texas corporation), Taylor
Caldwell Properties, LLC (a Texas limited liability company), and the
unincorporated land and buildings owned by John Randall Taylor which constitute
the Carthage yard facilities. The wholly owned subsidiaries of Taylor Companies,
Inc. which are included consist of Taylor Interests, Inc., Taylor SWD Operating,
Inc., Taylor Environmental, Inc., Taylor Disposal, Inc., Production Disposal,
Inc., Taylor Injection Systems, Inc., DeBerry SWD, Inc., Tatum SWD, Inc., and
Newton County SWD, Inc., (all Texas corporations).
We conducted our audit 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 assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Taylor Acquisition
Group as of December 31, 1995 and 1994, and the results of their operations and
their cash flows for the years then ended in conformity with generally accepted
accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules of revenues, direct costs
of operations, and general and administrative expenses on pages 17-19 are
presented for the purposes of additional analysis and are not a required part of
the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
Chapman, Williams & Co.
Certified Public Accountants
Carthage, Texas
May 21, 1996
<PAGE>
(b) Pro Forma Financial Information
The following unaudited pro forma balance sheet gives effect to the acquisition
of all of the issued and outstanding stock of the Taylor Acquisition Group by
Dawson Production Services, Inc. (the "Company" or "DPSI") as if such
acquisition had occurred on June 30, 1996. The unaudited statements of income
for the year ended March 31,1996 and the three months ended June 30, 1996 give
effect to the acquisition as if such acquisition had occurred at the beginning
of the respective periods. The unaudited pro forma statements of income for the
year ended March 31, 1996 combine the Company's historical income statement for
the year ended March 31, 1996 and Taylor's historical income statement for the
year ended December 31, 1995. The pro forma information is based on the
historical financial statements of the Company and Taylor, giving effect to the
transaction under the purchase method of accounting and the assumptions and
adjustments set forth in the notes accompanying the unaudited pro forma
financial statements.
The unaudited pro forma financial statements have been prepared by the Company's
management based upon the historical financial statements of the Company and
Taylor. These pro forma statements may not be indicative of the results that
actually would have occurred if the combination had been in effect during the
periods indicated or which may be obtained in the future. The unaudited pro
forma financial statement should be read in conjunction with the financial
statements and related notes of the Company and the financial statements and
related notes of Taylor contained elsewhere herein.
UNAUDITED PRO FORMA BALANCE SHEET
<TABLE>
<CAPTION>
DPSI Taylor Pro Forma Pro Forma
June 30, 1996 June 30, 1996 adjustments Reference June 30, 1996
------------- ------------- ----------- --------- -------------
(in thousands)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $12,084 $239 ($3,750) A $8,573
Trade receivable (net) 9,906 3,300 - 13,206
Other receivables 7 500 - 507
Income taxes receivable 580 - - 580
Prepaid expenses and other 581 226 - 807
--------------------------------------------- ------------------
Total current assets 23,158 4,265 (3,750) 23,673
Net property and equipment 30,824 3,187 4,721 B 38,732
Goodwill and other assets 3,592 - 6,196 B,D,E 9,788
============================================= ==================
Total assets $57,574 $7,452 $7,167 $72,193
============================================= ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $2,749 $628 - $3,377
Accrued liabilities 2,508 631 - 3,139
Current portion of long-term debt 196 1,514 - 1,710
Current portion of obligations under capital leases 1,307 18 - 1,325
------------------------------ ------------------
Total current liabilities 6,760 2,791 - 9,551
Long-term debt, net of current portion 1,526 820 8,750 A 11,096
Obligations under capital leases, net of current portion 2,041 18 - 2,059
Subordinated payable to shareholder - 2,506 (2,506) C -
Deferred income taxes 473 122 1,931 D 2,526
Deferred revenue - 187 - 187
Shareholders' equity
Common Stock 64 67 (67) E 64
Paid-in capital 41,522 1,129 (1,129) E 41,522
Retained earnings 5,330 (188) 188 E 5,330
Notes receivable from officers (142) - - (142)
--------------------------------------------- ------------------
Total shareholders' equity 46,774 1,008 (1,008) 46,774
Commitments and contingencies
============================================= ==================
Total liabilities and equity $57,574 $7,452 $7,167 $72,193
============================================= ==================
</TABLE>
See accompanying notes to pro forma financial statements
<PAGE>
UNAUDITED PRO FORMA STATEMENTS OF INCOME
<TABLE>
<CAPTION>
DPSI Taylor
For the year For the year
ended ended Pro Forma
March 31, December 31, Pro Forma March 31,
1996 1995 adjustments Reference 1996
---- ---- ----------- --------- ----
(in thousands except for share and per share amounts)
<S> <C> <C> <C> <C> <C>
Revenues $52,391 $16,713 - $69,104
Costs and expenses:
Operating 34,319 12,755 - 47,074
General and administrative 8,937 2,290 - 11,227
Depreciation and amortization 4,397 1,607 1,004 F 7,008
--------------------------------------------- -------------
Total costs and expenses 47,653 16,652 1,004 65,309
--------------------------------------------- -------------
Operating income 4,738 61 (1,004) 3,795
Other income and expenses:
Interest expense 1,848 461 639 G -
(125) H 2,823
Other expense (income), net (129) (101) - (230)
--------------------------------------------- -------------
Total other income and expenses 1,719 360 514 2,593
Income before minority interest, income taxes and
--------------------------------------------- -------------
extraordinary item 3,019 (299) (1,518) 1,202
Minority interest in consolidated subsidiary 937 - - 937
--------------------------------------------- -------------
Income before income taxes and extraordinary item 2,082 (299) (1,518) 265
Provision for income taxes 709 (158) (437) I 114
--------------------------------------------- -------------
Net income before extraordinary item 1,373 (141) (1,081) 151
Extraordinary item (514) - - (514)
--------------------------------------------- -------------
Net income 859 (141) (1,081) (363)
Preferred stock dividends (88) - - (88)
============================================= =============
Net income applicable to common stock $771 ($141) ($1,081) ($451)
============================================= =============
Earnings per common share:
Primary:
Income before extraordinary item $0.44 $0.02
Extraordinary item ($0.17) ($0.17)
============= =============
Net income $0.27 ($0.15)
============= =============
Weighted average number of common and
=============
common equivalent shares 2,931,234 2,931,234
============= =============
Fully diluted:
Income before extraordinary item $0.43 $0.02
Extraordinary item ($0.16) ($0.17)
============= =============
Net income $0.27 ($0.15)
============= =============
Weighted average number of common and
common equivalent shares 3,207,622 2,931,234
============= =============
</TABLE>
See accompanying notes to pro forma financial statements
<PAGE>
UNAUDITED PRO FORMA STATEMENTS OF INCOME
<TABLE>
<CAPTION>
DPSI Taylor Pro Forma
For the three For the three For the three
months ended months ended months ended
June 30, June 30, Pro Forma June 30,
1996 1996 Adjustments Reference 1996
---- ---- ----------- --------- ----
(in thousands except for share and per share amounts)
<S> <C> <C> <C> <C> <C>
Revenues $14,678 $4,224 - $18,902
Costs and expenses:
Operating 9,493 2,952 - 12,445
General and administrative 2,260 473 - 2,733
Depreciation and amortization 1,375 327 250 F 1,952
------------------------------------------- -------------
Total costs and expenses 13,128 3,752 250 17,130
------------------------------------------- -------------
Operating income 1,550 472 (250) 1,772
Other income and expenses:
Interest expense 65 64 160 G 289
Other expense (income), net (122) (2) - (124)
------------------------------------------- -------------
Total other income and expenses (57) 62 160 165
------------------------------------------- -------------
Income before income taxes 1,607 410 (410) 1,607
Provision for income taxes 591 140 (40) I 691
=========================================== =============
Net income $1,016 $270 ($370) $916
=========================================== =============
Earnings per common share:
Primary :
Net income $0.16 $0.14
================= =============
Weighted average number of common and
common equivalent shares 6,509,816 6,509,816
================= =============
Earnings per common share:
Fully diluted :
Net income $0.16 $0.14
================= =============
Weighted average number of common and
common equivalent shares 6,509,816 6,509,816
================= =============
</TABLE>
Notes to Pro Forma Financial Statements:
A. To record the purchase of 100% of the common stock of the Taylor
Acquisition Group for $10.2 million and assumption of a $2.5 million
subordinated payable to shareholder for a total consideration of
$12.7 million. Such amount was financed using available cash of
approximately $4.0 million ($.03 million paid prior to closing), bank
debt of $7.0 million and a note payable to the seller by the Company
of $1.7 million.
B. To record Taylor's property and equipment at estimated fair market
value and goodwill at date of acquisition.
C. To reflect the liquidation of note of $2.5 million subordinated
payable to shareholder assumed by the Company.
D. To record the deferred tax liability and related goodwill as the
result of taxable temporary differences between the assigned fair
value and tax basis of property and equipment .
E. To reflect the elimination of equity in subsidiary upon consolidation
of Dawson Production Services, Inc. and the Taylor Acquisition Group.
F. Adjustment to reflect the amortization of goodwill resulting from the
purchase of Taylor over an estimated 20 year life and additional
depreciation for assets written up to fair market values.
G. To adjust interest expense to reflect the additional debt to a bank
at the rate of LIBOR plus 1.75% (currently at 7.125%), and a note
payable to the seller with an interest rate of 8.00%.
H. Adjustment to eliminate interest on $2.5 million note acquired from
seller.
I. To adjust the pro forma income tax expense to reflect the Company's
pro forma effective tax rate.
<PAGE>
(c) Exhibits
23.1 -- Consent of Chapman, William's & Co., Certified Public Accountants.
<PAGE>
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, thereto duly authorized.
DAWSON PRODUCTION SERVICES, INC.
By: /s/ P. MARK STARK
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Date:
EXHIBIT 23.1
The Stockholders, Members and Owners
Taylor Acquisition Group
We consent to the inclusion of our report dated May 21, 1996, with respect to
the combined balance sheets of Taylor Acquisition Group as of December 31, 1995
and 1994, and the related statements of income, stockholder's equity, and cash
flows for each of the years in the two-year period ended December 31, 1995,
which report appears in the Form 8-K of Dawson Production Services, Inc. dated
October 11, 1996
Chapman, Williams & Co.
Certified Public Accountants
Carthage, Texas
October 11, 1996
