UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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): September 15, 1998
KEY ENERGY GROUP, INC.
(Exact Name of Registrant as Specified in Charter)
Maryland 1-8038 04-2648081
(State of Incorportation) (Commission File Number) (IRS Employer
Identification No.)
Two Tower Center, 20th Floor
East Brunswick, New Jersey 08816
Registrant's telephone number, including area code: (732) 247-4822
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 7 FINANCIAL STATEMENTS, PROFORMA FINANCIAL
INFORMATION AND EXHIBITS
(a) Financial Statements of Businesses Acquired
Incorporation of Certain Documents by Reference
The audited consolidated balance sheet of Dawson Production Services, Inc.
as of March 31, 1998 and 1997 and the related audited consolidated statements of
operations and cash flows for each of the years in the three-year period ended
March 31, 1998, together with the related notes and the report of KPMG Peat
Marwick LLP, independent certified public accountants, all contained in Dawson's
Annual Report on Form 10-K for the year ended March 31, 1998, are incorporated
herein by reference.
The unaudited consolidated balance sheet of Dawson Production Services,
Inc. as of June 30, 1998 and the related unaudited consolidated statements of
operations and cash flows for the three months ended June 30, 1998 and 1997,
together with the related notes, all contained in Dawson's Quarterly Report on
Form 10-Q for the period ended June 30, 1998, are incorporated herein by
reference.
(b) Pro Forma Financial Information
(i) Key Energy Group, Inc. and Subsidiaries Unaudited Pro Forma Combined Balance
Sheet as of June 30, 1998
(ii) Key Energy Group, Inc. and Subsidiaries Unaudited Pro Forma Combined
Statement of Operations for the year ended June 30, 1998
(iii) Key Energy Group, Inc. Notes to Unaudited Pro Forma Combined Financial
Statements
(c) Exhibits
2.1* Agreement and Plan of Merger, dated as of August 11, 1998, by and among Key
Energy Group, Inc.,Midland Acquisition Corp. and Dawson Production
Services, Inc. (incorporated by reference to Exhibit J to Amendment No. 4
to the Schedule 13D of Key Energy Group, Inc. and Midland Acquisition
Corp., filed with the Commission on or about August 12, 1998).
23.1 Consent of KPMG Peat Marwick LLP
99.1*$150,000,000 Bridge Loan Agreement, dated as of September 14, 1998 among
Key Energy Group, Inc., Lehman Brothers Inc., Lehman Commercial Paper Inc.
and the lenders and guarantors named therein.
99.2*Indenture for the Key Energy Group, Inc. Exchange Notes due 2008, dated as
of September 14, 1998.
99.3*Warrant Agreement among Key Energy Group, Inc. and The Bank of New York as
Trustee, dated as of September 14, 1998.
99.4*Debt Registration Rights Agreement, among Key Energy Group, Inc., Lehman
Commercial Paper Inc. and the guarantors set forth therein, dated as of
September 14, 1998.
99.5*Equity Registration Rights Agreement, between Key Energy Group, Inc. and
Lehman Brothers Inc., dated as of September 14, 1998.
99.6*Escrow Agreement among Key Energy Group, Inc., Lehman Brothers Inc.,
Lehman Commercial Paper Inc. and The Bank of New York, dated as of
September 14, 1998.
99.7*$550,000,000 Second Amended and Restated Credit Agreement, among Key
Energy Group, Inc., PNC Bank, National Association, Norwest Bank Texas,
N.A., PNC Capital Markets, Inc. and the several lenders from time to time
parties thereto, dated as of June 6, 1997 as amended and restated through
September 14, 1998.
99.8*Amended and Restated Master Guarantee and Collateral Agreement made by Key
Energy Group, Inc. and certain of its Subsidiaries in favor of Norwest Bank
Texas, N.A., dated as of June 6, 1997, as amended and restated through
September 14, 1998.
99.9*Intercreditor and Collateral Agency Agreement, dated as of September 14,
1998.
99.10* Indenture dated February 20, 1997 between Dawson Production Services,
Inc. and U.S. Trust Company of Texas, N.A. (incorporated by reference to
Exhibit 4.3 to the Annual Report on Form 10-K for the fiscal year ended
March 31, 1997 of Dawson Production Services, Inc. (No. 000-27732)).
99.11* Supplemental Indenture dated September 21, 1998, among Key Energy Group,
Inc., its Subsidiaries and U.S. Trust Company of Texas, N.A.
________________
* Previously filed
<PAGE>
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KEY ENERGY GROUP, INC.
Date: October 28, 1998 By: /s/ FRANCIS D. JOHN
--------------------------------------
Name: FRANCIS D. JOHN
Title: CHAIRMAN, PRESIDENT, AND
CHIEF EXECUTIVE OFFICER
<PAGE>
Key Energy Group, Inc.
Unaudited Pro Forma Combined Financial Statements
The following Unaudited Pro Forma Combined Financial Statements of Key Energy
Group, Inc. ("Key" or the "Company") have been prepared to give effect to the
following acquisitions (collectively the "Acquisitions"): (i) on September 18,
1998, the Company acquired all of the capital stock of Dawson Production
Services, Inc. ("Dawson"); (ii) on September 1, 1997, the Company acquired all
the capital stock of Ram Oilwell Service, Inc. and Rowland Trucking Co., Inc.
(collectively "Ram/Rowland"); and (iii) on October 1, 1997, the Company acquired
substantially all the assets and liabilities of Coleman Oil and Gas, Inc.
("Coleman"). The historical financial statements of the Company give effect to
the Ram/Rowland and Coleman acquisitions as of their respective dates of
consummation. The Unaudited Pro Forma Combined Balance Sheet gives effect to the
Dawson acquisition as if such transaction had taken place on June 30, 1998 and
the Unaudited Pro Forma Combined Statement of Operations gives effect to the
Acquisitions as if such transactions had taken place on July 1, 1997.
The pro forma adjustments are based on available information and upon certain
assumptions that the Company believes are reasonable under the circumstances.
The unaudited pro forma combined financial statements and accompanying notes
should be read in conjunction with the historical consolidated financial
statements of the Company, including the notes thereto, and the financial
statements of Dawson, Ram/Rowland and Coleman, including the notes thereto,
incorporated herein by reference.
THESE UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS ARE PROVIDED FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED TO BE INDICATIVE OF THE
FINANCIAL CONDITIONS OR RESULTS OF OPERATIONS OF THE COMPANY HAD THE
TRANSACTIONS DESCRIBED THEREIN BEEN CONSUMMATED ON THE RESPECTIVE DATES
INDICATED AND ARE NOT INTENDED TO BE PREDICTIVE OF THE FINANCIAL CONDITION OR
RESULTS OF OPERATIONS OF THE COMPANY AT ANY FUTURE DATE OR FOR ANY FUTURE
PERIOD.
<PAGE>
Key Energy Group, Inc. and Subsidiaries
Unaudited Pro Forma Combined Balance Sheet
as of June 30, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
The Proforma Proforma
Company Dawson Entries Combined
------------ ----------- ------------ ------------
Current assets:
Cash 25,265 30,400 55,665
Accounts receivable, net of
allowance for doubtful accounts 82,406 38,060 120,466
Inventories 13,315 - 13,315
Deferred tax asset 1,203 - 1,203
Prepaid income taxes 537 224 761
Other 4,831 1,399 6,230
----------- --------- ---------
Total 127,557 70,083 197,640
Net property and equipment 499,152 168,296 43,331 (a) 710,779
Goodwill, net 44,936 40,752 77,005 (a) 162,693
Other 26,995 18,293 7,329 (a) 52,617
---------- --------- ----------
Total assets $698,640 $297,424 $1,123,729
========== ========= ==========
Current liabilities:
Accounts payable 20,124 8,333 28,457
Other accrued 22,239 12,296 720 (a) 35,255
Accrued interest 3,818 - 3,818
Current portion of L/T debt 1,848 1,739 3,587
---------- --------- ----------
Total 48,029 22,368 71,117
Long-term debt, net 397,931 148,607 217,982 (a) 764,520
Noncurrent accrued expenses 4,812 - 4,812
Deferred taxes 92,940 11,594 26,164 (a) 130,698
Stockholders' equity:
Common stock 1,868 112 (112)(a) 1,868
Additional paid-in capital 119,303 98,001 (98,001)(a) 119,303
Treasury Stock, at cost (9,682) (1,272) 1,272 (a) (9,682)
Unrealized gain on
available-for-sale securities 2,346 - (2,346)(a) -
Notes receivable from officers - (142) 142 (a) -
Retained earnings 41,093 18,156 (18,156)(a) 41,093
--------- -------- ---------
Stockholders' equity 154,928 114,855 152,582
--------- -------- ----------
Total liabilities and equity $698,640 $297,424 $1,123,729
========= ========= ==========
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
<PAGE>
Key Energy Group, Inc. and Subsidiaries
Unaudited Pro Forma Combined Statement of Operations
Twelve Months Ended 6/30/98
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
The Ram/ Proforma Proforma
Company Dawson Rowland Coleman Entries Combined
---------- ----------- --------- ---------- ----------- ------------
Revenue:
Oilfield services $374,845 $ 223,228 $4,154 $ 10,002 - $ 612,229
Oil and gas well drilling 35,095 - - - - 35,095
Oil and gas 7,030 - - - - 7,030
Other, net 3,076 2,304 34 63 - 5,477
---------- ----------- --------- ---------- ------------
420,046 225,532 4,188 10,065 659,831
Costs and Expenses:
Oilfield service 259,495 156,684 2,487 7,083 (389) (b) 425,360
Oil and gas well drilling 26,473 - - - - 26,473
Oil and gas 2,983 - - - - 2,983
Depreciation, depletion and
amortization 31,001 21,802 272 587 (357) (c) 53,305
General and administrative 39,813 22,342 683 1,119 (719) (b) 63,238
Interest 21,476 13,838 - 9 29,414 (d) 64,737
---------- ----------- --------- ---------- ------------
381,241 214,666 3,442 8,798 636,096
Income before income taxes and 38,805 10,866 1,267 23,735
minority interes 746 -
Income tax expense 14,630 3,977 (8,884) (e) 10,296
114 459
---------- ----------- --------- ---------- ------------
Net Income $24,175 $ 6,889 $ 632 $ 808 $ 13,439
========== =========== ========= ========== ============
Earnings Per Share:
Income before income taxes and $ 2.26 $ 1.38
minority interest
Net Income $ 1.41 $ 0.78
Basic weighted shares outstanding 17,153 31 17,184
</TABLE>
See accompanying notes to unaudited pro forma combined financial statements.
<PAGE>
Key Energy Group, Inc.
Notes to Unaudited Pro Forma Combined Financial Statements
June 30, 1998
1. Basis of Presentation
The Unaudited Pro Forma Combined Financial Statements of Key Energy Group, Inc.
("Key" or the "Company") have been prepared to give effect to the following
acquisitions (collectively the "Acquisitions"): (i) on September 18, 1998, the
Company acquired all of the capital stock of Dawson Production Services, Inc.
("Dawson"); (ii) on September 1, 1997, the Company acquired all the capital
stock of Ram Oilwell Service, Inc. and Rowland Trucking Co. Inc. (collectively
"Ram/Rowland"); and (iii) on October 1, 1997, the Company acquired substantially
all the assets and liabilities of Coleman Oil and Gas, Inc. ("Coleman"). The
historical financial statements of the Company give effect to the Ram/Rowland
and Coleman acquisitions as of their respective dates of consummation. The
Unaudited Pro Forma Combined Balance Sheet gives effect to the Dawson
acquisition as if such transaction had taken place on June 30, 1998 and the
Unaudited Pro Forma Combined Statement of Operations. gives effect to the
Acquisitions as if such transactions had taken place on July 1, 1997.
The Company - Represents the consolidated balance sheet of Key Energy Group,
Inc. as of June 30, 1998 and the consolidated statement of operations of Key
Energy Group, Inc. for the year ended June 30, 1998.
Dawson - Represents the consolidated balance sheet of Dawson Production
Services, Inc. as of June 30, 1998 and the combined statement of operations for
the twelve months ended June 30, 1998.
Ram/Rowland - Represents the combined statement of operations of Ram Oilwell
Service, Inc. and Rowland Trucking Co. Inc. for the three months ended September
30, 1997. The individual entities of Ram/Rowland are being reported together, as
they are considered related businesses.
Coleman - Represents the combined statement of operations of Coleman Oil and
Gas, Inc. and subsidiaries, which include Big A Well Service Co., Sunco Trucking
Co. and Justis Supply Co. for the three months ended September 30, 1997. The
individual entities of Coleman are being reported together, as they are
considered related businesses. Only the assets and liabilities of Big A Well
Service Co., Sunco Trucking Co. and Justis Supply Co. were acquired by the
Company.
2. Pro Forma Entries
(a) To record the additional borrowings under the Company's amended and
restated credit facilities, proceeds of which were used to make the Dawson
acquisition and the allocation of the purchase price to the assets acquired
and liabilities assumed from Dawson using the purchase method of
accounting. The allocation of the purchase price to the assets acquired and
liabilities assumed is preliminary, and therefore, subject to change.
(b) To record specifically identifiable decreases in direct costs and general
and administrative expenses related to the termination of individual
employees. These pro forma adjustments only reflect efficiencies gained to
date, and do not necessarily reflect all efficiencies expected to be
achieved in accordance with management's future plans. Management believes
these efficiency gains, once achieved, will be materially beneficial to the
Company's earnings and cash flows.
(c) To record the estimated decrease in depreciation for the property, plant
and equipment acquired in the Dawson, Ram/Rowland and Coleman acquisitions,
due to the differences in useful lives of the acquired entites as compared
to the Company's.
<PAGE>
(d) To record incremental interest on the borrowings to finance the Dawson,
Ram/Rowland and Coleman acquisitions. The following table reflects the
calculation of the pro forma adjustment (dollars in thousands):
<TABLE>
<S> <C>
Incremental interest expense due to Dawson acquisition ($227,943 of
incremental debt to purchase Dawson capital stock, including fees and expenses,
times average interest rate of 9.53%): $21,718
Incremental interest expense due to refinance of PNC / Lehman credit
facilities ($150,000 times 8.07% plus $22,000 times 8.57% less $9,558
of historical credit facility interest expense): 4,432
Incremental interest expense due to increased amortization of debt issuance costs
($19,636 of incremental debt issuance costs divided by six years): 3,273
Elimination of Coleman interest expense for the three months ended Sept. 30, 1997: (9)
-------
$29,414
=======
</TABLE>
(e) To adjust pro forma income tax expense.
<PAGE>
Exhibit 23.1
Auditor's Consent
The Board of Directors
Dawson Production Services, Inc.
We consent to the incorporation by reference in the registration statements (No.
333-01777, No. 333-24497, No. 333-24499, No. 333-43115, No. 333-43779, and No.
333-44677) on Form S-3 of Key Energy Group, Inc. of our report dated June 17,
1998 , with respect to the consolidated balance sheets of Dawson Production
Services, Inc. as of March 31, 1998 and 1997, and the related consolidated
statements of earnings, shareholders' equity, and cash flows for each of the
years in the three-year period ended March 31, 1998, which report is
incorporated by reference in the Form 8-K/A of Key Energy Group, Inc. dated
October 28, 1998.
/s/ KPMG Peat Marwick LLP
San Antonio, Texas
October 28, 1998
