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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
FORM 8-K/A-2
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report:
(Date of earliest event reported): March 31, 1999 (September 15, 1998)
-----------------------------------
KEY ENERGY SERVICES, INC.
(FORMERLY KEY ENERGY GROUP, INC.)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
MARYLAND 1-8038 04-2648081
(STATE OF INCORPORATION) (COMMISSION FILE NUMBER) (IRS EMPLOYER IDENTIFICATION NO.)
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TWO TOWER CENTER, 20TH FLOOR
EAST BRUNSWICK, NEW JERSEY 08816
(ADDRESS OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
(732) 247-4822
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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ITEM7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(b) Pro Forma Financial Information. (i) Key Energy Services, Inc.
and Subsidiaries Unaudited Pro Forma Combined Statement of Operations for
the twelve months ended June 30, 1998; (ii) Key Energy Services, Inc. and
Subsidiaries Unaudited Pro Forma Combined Statement of Operations for the
three months ended September 30, 1998; and (iii) Key Energy Services, Inc.
Notes to Unaudited Pro Forma Combined Financial Statements.
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 there hereunto duly authorized.
DATED this 30 day of March, 1999.
KEY ENERGY SERVICES, INC.
By: /s/ FRANCIS D. JOHN
--------------------------------
Name: Francis D. John
Title: Chairman, President and
Chief Executive Officer
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KEY ENERGY SERVICES, INC.
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Our unaudited pro forma combined financial statements have been
prepared to give effect to the Dawson acquisition and related transactions as if
they had taken place on July 1, 1997. The unaudited pro forma as adjusted
financial statements have been prepared to give effect to the offering of the
Units and the application of the net proceeds therefrom as if they had taken
place on July 1, 1997. The unaudited pro forma adjustments are based upon
available information and certain assumptions that we believe are reasonable.
Future results may vary significantly from the results reflected in the
accompanying unaudited pro forma combined financial statements because of, among
other factors, changes in product and service prices, future oil and gas
production declines and future acquisitions.
The unaudited pro forma adjustments are based upon preliminary
estimates, and we do not believe that the actual adjustments will differ
significantly from these preliminary estimates. Actual adjustments will be based
on appraisals and other analyses of fair values. The Unaudited Pro Forma
Combined Financial Statements should be read in conjunction with our
consolidated financial statements and notes included herein.
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KEY ENERGY SERVICES, INC. AND SUBSIDIARIES
(FORMERLY KEY ENERGY GROUP, INC.)
TWELVE MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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<CAPTION>
PRO FORMA OFFERING PRO FORMA
COMPANY DAWSON ADJUSTMENTS PRO FORMA ADJUSTMENTS AS ADJUSTED
------- ------ ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Oilfield services.......... $ 374,845 $ 223,228 $ 598,073 $ 598,073
Oil and gas well
drilling................ 35,095 35,095 35,095
Oil and gas................ 7,030 7,030 7,030
Other, net ................ 3,076 2,304 5,380 5,380
----------- ----------- --------- -------------
420,046 225,532 645,578 645,578
Costs and Expenses:
Oilfield service........... 259,495 156,684 416,179 416,179
Oil and gas well
drilling 26,473 26,473 26,473
Oil and gas................ 2,983 2,983 2,983
Depreciation,
depletion and
amortization............ 31,001 21,802 (2,057)(a) 50,746 50,746
General and
administrative.......... 39,813 22,342 62,155 62,155
Interest................... 21,476 13,838 28,401(b) 63,715 3,670(d) 67,385
----------- ----------- --------- -------------
381,241 214,666 622,251 625,921
Pretax income.............. 38,805 10,866 23,327 19,657
Income tax expense......... 14,630 3,977 (8,687)(c) 9,920 (1,284)(c) 8,636
----------- ----------- --------- -------------
Net income................. $ 24,175 $ 6,889 $ 13,407 $ 11,021
=========== =========== ========= =============
Earnings per share:
Net income................. $ 1.41 $ 0.78 $ 0.64
Basic weighted
average shares
outstanding............. 17,153 17,153 17,153
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KEY ENERGY SERVICES, INC. AND SUBSIDIARIES
(FORMERLY KEY ENERGY GROUP, INC.)
THREE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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<CAPTION>
PRO FORMA OFFERING PRO FORMA
COMPANY DAWSON ADJUSTMENTS PRO FORMA ADJUSTMENTS AS ADJUSTED
------- ------ ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Oilfield services.......... $ 105,799 $ 36,444 $ 142,243 $ 142,243
Oil and gas well
drilling................ 7,610 7,610 7,610
Oil and gas................ 1,770 1,770 1,770
Other, net ................ 408 (89) 319 319
----------- ----------- --------- -------------
115,587 36,355 151,942 151,942
Costs and Expenses:
Oilfield service........... 73,698 27,046 100,744 100,744
Oil and gas well
drilling 7,327 7,327 7,327
Oil and gas................ 759 759 759
Depreciation,
depletion and
amortization............ 10,703 5,443 (1,365)(a) 14,781 14,781
General and
administrative.......... 11,438 5,778 17,216 17,216
Interest................... 8,505 2,914 5,865(b) 17,284 917(d) 18,201
----------- ----------- --------- -------------
112,430 41,181 158,111 159,028
Pretax income.............. 3,157 (4,826) (6,169) (7,086)
Income tax expense......... 1,320 (583) (2,420)(c) (1,683) (321)(c) (2,004)
----------- ----------- --------- -------------
Net income................. $ 1,837 $ (4,243) $ (4,486) $ (5,082)
=========== =========== ========= =============
Earnings per share:
Net income................. $ 0.10 $ (0.25) $ (0.28)
Basic weighted
average shares
outstanding............. 18,268 18,268 18,268
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KEY ENERGY SERVICES, INC.
(FORMERLY KEY ENERGY GROUP, INC.)
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The Company -- Represents our consolidated statement of operations for
the twelve months ended June 30, 1998 and the three months ended September 30,
1998.
Dawson -- Represents Dawson's combined statement of operations for the
twelve months ended June 30, 1998 and the operating results from July 1, 1998
through September 14, 1998.
2. PRO FORMA ENTRIES
(a) To record the estimated decrease in depreciation and amortization
expense for the property, plant and equipment acquired in the Dawson
acquisition, due to the differences in useful lives and salvage values
we assigned compared to the estimated lives and salvage values Dawson
assigned.
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10% DEPRECIABLE
FMV SALVAGE BASIS LIFE QUARTERLY
--- ------- ----------- ---- ---------
DEPRECIATION:
<S> <C> <C> <C> <C> <C>
Well Service Rigs-core $139,500 $13,950 $125,550 25 $ 1,037
Well Service Rigs-components $ 15,500 $ 1,550 $ 13,950 10 288
Well Service Equipment $ 31,000 $ 3,100 $ 27,900 10 576
Motor Vehicles $ 24,000 $ 2,400 $ 21,600 5 892
Furniture and Fixtures $ 2,000 $ 200 $ 1,800 5 74
Buildings $ 5,000 $ 500 $ 4,500 30 31
-------
Total new depreciation 2,899
Recorded depreciation 4,629
-------
Proforma adjustment $(1,730)
=======
AMORTIZATION:
Dawson Goodwill n/a n/a 80,395 25 $ 664
Dawson Goodwill-Deductible 42,351 20 $ 437
Non-competes w/ Dawson executives n/a n/a 1,125 3 $ 77
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Totals Total new amortization $ 1,179
--------
Recorded amortization 814
--------
Proforma amortization 365
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Total Proforma adjustment (1,365)
========
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(b) To record incremental interest on the borrowings to finance the Dawson
acquisition. The following table reflects the calculation of the pro forma
adjustment (dollars in thousands):
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<CAPTION>
THREE
YEAR MONTHS
ENDED ENDED
JUNE 30, SEPTEMBER 30,
1998 1998
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Incremental interest expense due to increased indebtedness incurred in
connection with the Dawson acquisition ($229,361 of incremental debt to purchase
Dawson capital stock, including fees and expenses, times a weighted
average interest rate of 9.38%) .......................................................... $21,518 $ 4,443
Incremental interest expense due to the higher interest rate and higher principal
amount under the new credit facility compared to the average for the previous
credit facility ($150,000 times 7.56% plus $220,000 times 8.31% less historical
credit facility interest expense) ........................................................ 3,610 746
Incremental interest expense due to the refinancing of indebtedness in
connection with the Dawson acquisition ($19,636 of incremental debt issuance
costs divided by six years) .............................................................. 3,273 676
------- -------
$28,401 $ 5,865
======= =======
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(c) To restate combined income tax expense, adjusting for certain permanent
book/tax differences, at the Company's statutory rate of 35% adjusted for
nondeductible amounts, primarily the amortization of goodwill.
(d) To adjust interest expense for incremental effect of Notes sold in the
offering, the proceeds being used to retire the remaining $148.6 million
principal amount under the bridge credit facility.
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