<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT--AMENDMENT NO. 1
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report
(Date of earliest event reported)
September 20, 1996
TUBOSCOPE VETCO INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 0-18312 76-0252850
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
</TABLE>
2835 Holmes Road, Houston, Texas 77051
(Address of principal executive offices) (Zip Code)
(713) 799-5100
(Registrant's telephone number, including area code)
------------------------------------------------------------
(Former name or former address, if changed since last report)
Total Number of Pages: 26
----
Exhibit Index Located at Page 25
----
1
<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
The Registrant hereby amends the following items, financial statements
and exhibits of its Form 8-K Report filed on October 7, 1996.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Vetco Pipeline Services, Inc.
The financial statements of Vetco Pipeline Services, Inc. required to
be filed pursuant to Item 7 of Form 8-K are attached hereto as Item 7(a).
(b) Pro Forma Financial Information.
The pro forma financial information required to be filed pursuant to
Item 7 of Form 8-K is attached hereto as Item 7(b).
(c) Exhibits.
23.1 Consent of Coopers and Lybrand L.L.P.
2
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TUBOSCOPE VETCO INTERNATIONAL CORPORATION
Date: November 11, 1996 By: /s/ JOSEPH C. WINKLER
---------------------
Joseph C. Winkler
Executive Vice President, Chief Financial Officer
and Treasurer
3
<PAGE>
ITEM 7(a)
VETCO PIPELINE SERVICES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
WITH REPORT OF INDEPENDENT ACCOUNTANTS
AS OF AND FOR THE YEAR ENDED
DECEMBER 31, 1995
4
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Vetco Pipeline Services, Inc.
We have audited the accompanying consolidated balance sheet of Vetco Pipeline
Services, Inc. as of December 31, 1995, and the consolidated related statements
of operations, stockholders' equity and cash flows for the year then ended.
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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Vetco
Pipeline Services, Inc. as of December 31, 1995, and the results of their
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles.
As discussed in Note 1 to the financial statements, effective January 1, 1995
the Company changed its method of accounting for income taxes.
Coppers & Lybrand L.L.P.
Houston, Texas
February 9, 1996
5
<PAGE>
VETCO PIPELINE SERVICES, INC.
CONSOLIDATED BALANCE SHEET
December 31, 1995
<TABLE>
<CAPTION>
ASSETS 1995
(IN THOUSANDS,
EXCEPT SHARE
AMOUNTS)
<S> <C>
Current assets:
Cash and cash equivalents........................................... $ 776
Accounts receivable, less allowance for doubtful accounts of $399... 2,054
Costs in excess of billings on uncompleted
contracts........................................................... 1,767
Inventory........................................................... 2,166
Prepaid expenses and other assets................................... 48
-------
Total current assets........................................... 6,811
-------
Property, plant and equipment, net................................... 5,209
Debt issue costs..................................................... 85
-------
Total assets................................................... $12,105
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable to Parent............................................. $ 5,147
Account payable to Parent.......................................... 26
Accounts payable................................................... 604
Accrued liabilities................................................ 717
Billings in excess of costs on uncompleted contracts............... 314
-------
Total current liabilities 6,808
-------
Commitments and contingencies (Notes 4, 7 and 8)
Stockholders' equity:
Common stock, $1.00 par value, 1,000,000 shares authorized,
508,885 shares issued and 508,054 shares outstanding............ 509
Preferred stock, $500 par value, 10,000 shares authorized, issued 5,000
and outstanding.................................................
Additional paid-in capital........................................... 1,935
Accumulated deficit.................................................. (2,141)
-------
5,303
Less treasury stock, at cost - 831 shares...................... (6)
-------
Total stockholders' equity..................................... 5,297
-------
Total liabilities and stockholders' equity................... $12,105
=======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
6
<PAGE>
VETCO PIPELINE SERVICES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
for the year ended December 31, 1995
<TABLE>
<CAPTION>
1995
(IN THOUSANDS)
<S> <C>
Revenues.................................................... $10,707
Costs of operations......................................... 7,313
-------
3,394
-------
Operating expenses:
Selling expense............................................ 1,395
General and administrative expense......................... 3,355
-------
Total operating expenses................................. 4,750
-------
Loss from operations..................................... (1,356)
-------
Other income (expense):
Interest expense to Parent................................. (144)
Interest expense to third parties.......................... (739)
Other, net................................................. (93)
-------
(976)
-------
Net loss before extraordinary item....................... (2,332)
-------
Extraordinary item - loss on early extinguishment of debt... 116
-------
Net loss................................................. $(2,448)
=======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
7
<PAGE>
VETCO PIPELINE SERVICES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
for the year ended December 31, 1995
(In thousands)
<TABLE>
<CAPTION>
TREASURY COMMON PREFERRED ADDITIONAL RETAINED TOTAL
STOCK STOCK STOCK PAID-IN EARNINGS
CAPITAL (DEFICIT)
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1995..... $(6) $509 $1,935 $ 307 $ 2,745
Net loss for the year........ (2,448) (2,448)
Preferred stock issued....... $5,000 5,000
--- --- ------ ------ ------ -------
Balance, December 31, 1995... $(6) $509 $5,000 $1,935 $(2,141) $ 5,297
=== ==== ====== ====== ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
8
<PAGE>
VETCO PIPELINE SERVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended December 31, 1995
<TABLE>
<CAPTION>
1995
(IN
THOUSANDS)
<S> <C>
Cash flows from operations:
Net loss.................................................... $(2,448)
Adjustments to reconcile net loss to net cash
used in operating activities:
Extraordinary item...................................... 116
Depreciation............................................ 1,543
Amortization of debt issue costs........................ 122
Provision for bad debts................................. 360
Provision for write-downs on inventories................ 60
Increase in accounts receivable......................... (64)
Increase in costs in excess of
billings on uncompleted contracts..................... (9)
Decrease in inventory................................... 110
Increase in prepaid expenses and other assets........... (18)
Decrease in accounts payable to Parent.................. (72)
Decrease in accounts payable............................ (249)
Decrease in accrued liabilities......................... (69)
Decrease in billings in excess of costs
on uncompleted contracts............................ (112)
-------
Net cash used in operating activities............... (730)
-------
Cash flows from investing activities:
Capital expenditures........................................ (1,590)
-------
Net cash used for investing activities.................. (1,590)
-------
Cash flows from financing activities:
Proceeds from issuance of debt.............................. 350
Proceeds from note payable to Parent........................ 10,147
Repayment of debt........................................... (6,753)
Repayment of note payable to Parent......................... (6,272)
Proceeds from issuance of preferred stock................... 5,000
Decrease in restricted cash................................. 60
-------
Net cash provided by financing activities............... 2,532
-------
Net increase in cash and cash equivalents..................... 212
-------
Cash and cash equivalents at beginning of year................ 564
-------
Cash and cash equivalents at end of year...................... $ 776
=======
Supplemental disclosure:
Cash paid for interest..................................... $ 913
Cash paid for income taxes................................. 32
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
9
<PAGE>
VETCO PIPELINE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION
Vetco Pipeline Services, Inc. (the "Company"), a subsidiary of Rauma USA,
Inc. (the "Parent"), was incorporated in the state of Texas in April of
1990. The Company's primary business activity is the inspection of
pipelines for both pipeline companies and oil and gas companies throughout
the world. The significant accounting policies of the Company are described
below.
CONSOLIDATION
The financial statements include Vetco Pipeline Services, Inc. and its
wholly-owned subsidiaries. All significant intercompany accounts and
transactions are eliminated in consolidation.
INVENTORY
Inventory, which consists primarily of spare parts used in the repair and
maintenance of the Company's equipment, is carried at the lower of weighted
average cost or market, which approximates first-in, first-out.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Additions, renewals and
improvements are capitalized. The asset and accumulated depreciation
accounts are relieved for dispositions with resulting gains or losses
reflected in earnings. Maintenance and repairs are expensed as incurred.
Depreciation of property, plant and equipment is provided using the
straight-line method over the estimated useful lives of the various assets.
COMPUTER SOFTWARE COSTS
Costs incurred internally in creating a computer software product are
charged to expense when incurred as research and development until
technological feasibility has been established for the product.
Technological feasibility is established upon completion of a detail
program design or, in its absence, completion of a working model.
Thereafter, all software production costs are capitalized and subsequently
reported at the lower of unamortized cost or net realizable value.
Capitalized costs are amortized based on current and future revenue for
each product with an annual minimum equal to the straight-line amortization
over the remaining estimated economic life of the product. Unamortized
computer software costs amounted to $479,000 at December 31, 1995 and has
been included in property, plant and equipment on the balance sheet.
Amortization amounted to $96,000 during 1995.
INCOME TAXES
The Company joins with its Parent to file a consolidated federal income tax
return. Effective January 1, 1995 the Parent adopted Statement of
Financial Accounting Standards No. 109 ("SFAS 109"). Under SFAS 109,
deferred taxes are provided at enacted tax rates on temporary differences
between assets and liabilities for financial and tax reporting purposes.
Its provisions require subsidiaries to record federal income tax
liabilities/assets or expense/benefit (current or deferred) on a separate
company basis. The adoption of SFAS 109 did not have a material impact on
the financial statements.
10
<PAGE>
VETCO PIPELINE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
INCOME TAXES, CONTINUED:
Pursuant to the Rauma USA, Inc. and Subsidiaries Agreement to Apportion
Consolidated Federal Income Tax Liability (the "Agreement"), members whose
credits and deductions have been utilized will not receive any
reimbursement or compensation from the Parent or any other member of the
Agreement for the use of such credits and deductions.
Federal income taxes have not been provided on undistributed earnings of
foreign subsidiaries because the Company intends to reinvest their earnings
or to repatriate such earnings only when tax effective to do so.
CASH EQUIVALENTS
The Company considers cash on hand, deposits in banks and highly liquid
investments with original maturities of three months or less as cash
equivalents.
REVENUE AND COST RECOGNITION
Revenues from service contracts are recognized on the percentage-of-
completion method; however, in most instances estimating the final outcome
of a contract is impractical until field work is complete. Accordingly, no
gross margin is recognized until the completion of field work. Upon
completion of field work the final outcome can be estimated more precisely
and gross margin is recognized on the basis of incurred costs to estimated
total costs.
Contract costs include all direct material and labor costs and those
indirect costs related to contract performance such as indirect labor,
supplies, repairs and depreciation costs. Selling, general and
administrative costs are charged to expense as incurred. Provisions for
estimated losses on uncompleted contracts are made in the period in which
such loses are determined. Changes in job performance, job conditions and
estimated profitability may result in revisions to costs and revenues and
are recognized in the period in which the revisions are determined.
DEBT ISSUE COSTS
Debt issue costs relating to the Company's long-term debt are amortized to
interest expense over the scheduled maturity of the debt utilizing the
interest method. Unamortized debt issue costs relating to long-term debt
retired prior to its scheduled maturity are charged to expense as an
extraordinary item.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company includes fair value information in the notes to the financial
statements when the fair value of its financial instruments is different
from the book value. When the book value approximates fair value, no
additional disclosure is made.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
11
<PAGE>
VETCO PIPELINE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
RECENTLY ISSUED PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 ("SFAS 121") "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
of." The Company plans to adopt the requirements of SFAS 121 during fiscal
year 1996. Its adoption is not expected to have a material effect on the
financial statements.
2. CONTRACTS IN PROGRESS:
Information with respect to contracts in process at December 31, 1995 is as
follows:
<TABLE>
<CAPTION>
1995
(IN THOUSANDS)
<S> <C>
Uncompleted contracts:
Costs incurred.................................... $ 1,073
Estimated earnings................................ 920
-------
1,993
Less billings to date............................. (540)
-------
$ 1,453
</TABLE> =======
<TABLE>
<CAPTION>
1995
(IN THOUSANDS)
<S> <C>
The balance sheet includes these amounts
under the following captions:
Costs in excess of billings on uncompleted
contracts....................................... $ 1,767
Billings in excess of costs on uncompleted
contracts....................................... (314)
-------
$ 1,453
=======
</TABLE>
3. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consisted of the following at December 31,
1995:
<TABLE>
<CAPTION>
1995
(IN THOUSANDS)
<S> <C>
Land.............................................. $ 486
Building.......................................... 790
Machinery......................................... 8,128
Software.......................................... 479
Furniture and fixtures............................ 86
Automobiles....................................... 164
Construction in progress.......................... 685
-------
Total property, plant and equipment............... 10,818
Less accumulated depreciation..................... (5,609)
-------
$ 5,209
=======
</TABLE>
12
<PAGE>
VETCO PIPELINE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
4. NOTE PAYABLE TO PARENT:
During 1995, the Company entered into a Cash Management Master Agreement
with The First Bank of Boston through its Parent. Under the terms of this
agreement the Company can receive funding through a master account held by
its Parent. The Company's outstanding balance under this agreement at
December 31, 1995, was $5,147,000 and is reflected as a current liability
in the consolidated financial statements. The interest rate on the note at
December 31, 1995 was 6.5%. Under the terms of this agreement, the Parent
pledges substantially all of its assets as collateral for the loan.
5. INCOME TAXES:
For the year ended December 31, 1995, the Company recorded a net loss;
therefore, no provision for income taxes was required on a stand alone
basis. Deferred tax assets and liabilities are comprised of the following
at December 31, 1995 (in thousands):
<TABLE>
<CAPTION>
1995
(IN THOUSANDS)
<S> <C>
Deferred tax assets:
Net operating loss carryforward............... $ 421
Alternative minimum tax credit carryforward... 98
Allowance for bad debts....................... 72
Inventory reserve............................. 46
Accrued vacation pay.......................... 75
Other......................................... 4
-----
Gross deferred tax assets.................. 716
Deferred tax liabilities:
Depreciation.................................. 131
Amortization of computer software............. 67
-----
Gross deferred tax liabilities............. 198
-----
Net deferred tax asset.......................... 518
Valuation allowance............................. (518)
-----
$ --
=====
</TABLE>
The net deferred tax asset valuation allowance represents that amount for
which utilization is not assured due to the uncertainty of realizing
deferred tax assets. On a separate company basis, the Company has
available approximately $340,000 of U.S. federal regular tax operating
losses and $769,000 Canadian tax operating losses. The Company's U.S.
federal regular tax net operating losses expire 2008 and the Canadian tax
operating losses expire as follows:
<TABLE>
<S> <C>
1998................... $ 64,000
2000................... 553,000
2001................... 152,000
--------
$769,000
========
</TABLE>
13
<PAGE>
VETCO PIPELINE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
5. INCOME TAXES, CONTINUED:
The reconciliation of the expected to the computed tax benefit is as
follows at December 31, 1995 (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Tax benefit at federal statutory rate..... $(793)
Net operating losses not utilized......... 793
----
$ 0
====
</TABLE>
6. DEFINED CONTRIBUTION PLAN:
The Company maintains a defined contribution plan for its permanent
employees. Under the plan, eligible employees may contribute amounts
through payroll deductions, supplemented by employer contributions, for
investment in various funds established by the plan. The Company's
contribution to the plan was $70,000 in 1995.
7. CONCENTRATION OF CREDIT RISK:
The market for the Company's services consists of numerous customers
concentrated in the oil and gas transportation industry. The Company
performs ongoing credit evaluations of its customers and generally does not
require collateral. Additionally, the Company had balances of $472,000 and
$264,000 in accounts at two financial institutions as of December 31, 1995,
of which only $100,000 of each balance is insured by the Federal Deposit
Insurance Corporation.
The accounts receivable and cash balances as of December 31, 1995 include
amounts totaling $286,000 that relate to balances denominated in Mexican
pesos. Those amounts are stated using the exchange rate as of December 31,
1995.
8. COMMITMENTS AND CONTINGENCIES:
A summary of future minimum lease commitments at December 31, 1995 under
noncancelable operating lease agreements for office equipment, facilities
and a vehicle is as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1996......................... $100
1997......................... 78
1998......................... 47
1999......................... 43
2000......................... 22
----
Total........................ $290
====
</TABLE>
Rental expense amounted to $147,000 for the year ended December 31,
1995.
The Company has issued four stand-by letters of credit totaling $200,000 to
guarantee foreign bid proposals. The letters of credit will expire in
1996.
The Company is obligated to pay a commitment fee on the daily unused amount
of its revolving credit commitment with a bank at a rate of 0.5% per annum.
As of December 31, 1995 the Company had an unused balance of $2,500,000.
14
<PAGE>
VETCO PIPELINE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
8. COMMITMENTS AND CONTINGENCIES, CONTINUED:
The Company has signed an agreement with each of the employees who are also
shareholders of the Company that requires the Company to repurchase an
employee's shares if the employee resigns or is terminated. As of December
31, 1995, the total value of the shares the Company could be required to
repurchase is approximately $53,000.
9. RELATED PARTIES:
The Company's Common Stock is owned 81.88% by the Parent. The remaining
18.12% of the Company's Common Stock is owned by employees. During
December 1995, the Company issued 10,000 shares of Preferred Stock to its
Parent in exchange for $5,000,000. The Company had the following amounts
outstanding to the Parent at December 31, 1995.
<TABLE>
<CAPTION>
1995
(IN THOUSANDS)
<S> <C>
Parent guaranteed note payable at 6.5% per annum, $5,147
due in 1996 (See Note 4)..........................
Account payable to Parent........................... 26
</TABLE>
The Parent has committed in writing to provide the Company with financing
and/or cash as necessary to allow the Company to continue operations
through at least January 1, 1997.
10. GEOGRAPHIC SEGMENT INFORMATION:
The following table summarizes financial information by domestic and
foreign area at December 31, 1995 and for the year then ended (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
Net revenues from unaffiliated customers:
Domestic operations.................... $ 7,440
Canadian operations.................... 1,488
Mexican operations..................... 1,779
-------
$10,707
=======
Net loss before extraordinary item:
Domestic operations.................... $(2,635)
Canadian operations.................... 218
Mexican operations..................... 85
-------
$(2,332)
=======
Identifiable assets:
Domestic operations.................... $10,293
Canadian operations.................... 1,545
Mexico operations...................... 267
-------
$12,105
=======
Export revenues by geographic region:
Latin America.......................... 33
Europe................................. 747
Middle East............................ 211
Africa................................. 1,110
Far East............................... 236
-------
$ 2,337
=======
</TABLE>
15
<PAGE>
VETCO PIPELINE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
11. SUBSEQUENT EVENT (UNAUDITED):
On September 20, 1996, Tuboscope Vetco International Corporation, through
its subsidiaries, acquired all of the outstanding shares of the Company.
16
<PAGE>
VETCO PIPELINE SERVICES, INC.
CONDENSED CONSOLIDTAED BALANCE SHEET
JUNE 30, 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30,
1996
-----------
ASSETS (UNAUDITED)
<S> <C>
Current assets:
Cash and cash equivalents..................................... $ 963
Accounts receivable........................................... 2,267
Costs in excess of billings on uncompleted contracts.......... 1,539
Inventory..................................................... 1,745
Prepaid expenses and other assets............................. 96
-----------
Total current assets..................................... 6,610
Property, plant and equipment, net.............................. 5,330
-----------
Total assets............................................. $ 11,940
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable to Parent........................................ $ 5,000
Accounts payable to Parent.................................... 26
Accounts payable.............................................. 747
Accrued liabilities........................................... 1,038
Billings in excess of costs on uncompleted contracts.......... 189
-----------
Total current liabilities................................ 7,000
Stockholders' equity:
Common stock, $1.00 par value, 1,000,000 shares authorized,
508,885 shares issued and 508,054 shares outstanding....... 509
Preferred stock, $500 par value, 10,000 shares authorized, issued
and outstanding............................................ 5,000
Additional paid-in capital.................................... 1,936
Accumulated deficit........................................... (2,499)
-----------
4,946
Less treasury stock, at cost - 831 shares................ (6)
-----------
Total stockholders' equity............................... 4,940
-----------
Total liabilities and stockholders' equity............ $ 11,940
===========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
statements.
17
<PAGE>
VETCO PIPELINE SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1996 1995
--------- ---------
(UNAUDITED)
<S> <C> <C>
Revenues............................. $ 6,358 $ 5,195
Costs of operations.................. 4,324 3,939
--------- ---------
Gross profit.................. 2,034 1,256
Operating expenses:
Selling expense...................... 644 580
General and administrative expense... 1,573 1,584
--------- ---------
Total operating expenses...... 2,217 2,164
--------- ---------
Loss from operations.............. (183) (908)
--------- ---------
Other income (expense):..............
Interest expense.................. (147) (394)
Other, net........................ (28) (13)
--------- ---------
Net loss...................... $ (358) $ (1,315)
========= =========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
statements.
18
<PAGE>
VETCO PIPELINE SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1996 1995
--------- ---------
(UNAUDITED)
<S> <C> <C>
Cash flows from operations:
Net loss.................................................. $ (358) $ (1,315)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization........................... 648 789
Provision for bad debts................................. 30 30
Provision for write-downs on inventories................ 60 30
Increase in accounts receivable......................... (243) (567)
Decrease in costs in excess of billings on
uncompleted contracts................................. 228 356
Decrease (increase) in inventory........................ 362 (530)
Decrease in prepaid expenses............................ 37 48
Increase in accounts payable............................ 143 248
Increase in accrued liabilities......................... 321 16
Decrease in billings in excess of costs
on uncompleted contracts.............................. (125) (88)
--------- ---------
Net cash provided by (used in) operating activities... 1,103 (983)
Cash flows from investing activities:
Capital expenditures...................................... (769) (289)
--------- ---------
Net cash used for investing activities.................. (769) (289)
Cash flows from financing activities:
Repayment of debt......................................... (147) --
Borrowings on debt........................................ -- 1,317
-------- ---------
Net cash provided by (used in) financing activities..... (147) 1,317
-------- ---------
Net increase in cash and cash equivalents................... 187 45
Cash and cash equivalents at beginning of year............ 776 624
-------- ---------
Cash and cash equivalents at end of year.................. $ 963 $ 669
========= =========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
19
<PAGE>
VETCO PIPELINE SERVICES, INC. NOTES TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1995
1. Organization and Basis of Presentation of Unaudited Condensed Consolidated
Financial Statements.
The accompanying unaudited condensed consolidated financial statements of
Vetco Pipeline Services, Inc. ("Vetco Pipeline") have been prepared
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information in footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to these
rules and regulations. The unaudited condensed consolidated financial
statements included in this report reflect all the adjustments (consisting
of normal recurring adjustments) which are considered necessary for a fair
presentation of the results of operations for the interim periods covered
and for the financial condition of Vetco Pipeline at the date of the
interim balance sheet. Results for the interim periods are not necessarily
indicative of results of the year.
The unaudited condensed consolidated financial statements included in this
report should be read in conjunction with the audited financial statements
and accompanying notes of Vetco Pipeline included elsewhere in this Form 8-
K/A filing.
2. Acquisition of Vetco Pipeline by Tuboscope Vetco International Corporation.
On September 20, 1996, Tuboscope Vetco International Corporation, through
its subsidiaries, acquired all of the outstanding shares of capital stock
of Vetco Pipeline for an aggregate purchase price of $8.5 million in cash
plus additional earnout consideration contingent upon the realization of
gross profit from certain contracts.
20
<PAGE>
ITEM 7(b)
TUBOSCOPE/VETCO PIPELINE
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
TUBOSCOPE/
VETCO PIPELINE TUBOSCOPE/
PRO FORMA VETCO PIPELINE
VETCO PIPELINE TUBOSCOPE ACQUISITION PRO FORMA
ASSETS HISTORICAL HISTORICAL ADJUSTMENTS(1) CONSOLIDATION
- --------------------------------------------- -------------- ---------- --------------- --------------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents.................. $ 963 $ 7,912 $ -- $ 8,875
Accounts receivable, net................... 2,267 50,449 -- 52,716
Inventory, net............................. 1,745 14,039 -- 15,784
Deferred federal income taxes.............. -- 2,521 -- 2,521
Prepaid expenses and other................. 1,635 6,998 -- 8,633
-------------- ---------- --------------- --------------
Total current assets.................... 6,610 81,919 -- 88,529
Property and equipment...................... 11,587 155,304 (6,792) 160,099
Accumulated depreciation and amortization... (6,257) (48,146) 6,257 (48,146)
-------------- ---------- --------------- --------------
Net property and equipment................. 5,330 107,158 (535) 111,953
Identified intangibles, net................. -- 18,682 -- 18,682
Goodwill, net............................... -- 27,856 -- 27,856
Other assets, net........................... -- 4,630 -- 4,630
-------------- ---------- --------------- --------------
Total assets............................ $ 11,940 $ 240,245 $ (535) $ 251,650
============== ========== =============== ==============
LIABILITIES AND EQUITY
- --------------------------------------------
Current liabilities:
Accounts payable........................... $ 773 $ 14,981 $ -- $ 15,754
Accrued liabilities........................ 1,227 18,639 905 20,771
Federal and foreign income taxes payable... -- 2,041 -- 2,041
Current portion of long-term debt to Parent 5,000 -- (5,000) --
Current portion of long-term debt.......... -- 4,300 -- 4,300
-------------- ---------- --------------- --------------
Total current liabilities............... 7,000 39,961 (4,095) 42,866
Long-term debt............................... -- 104,159 8,500 112,659
Pension liabilities.......................... -- 9,142 -- 9,142
Deferred taxes payable....................... -- 10,025 -- 10,025
Other liabilities............................ -- 1,368 -- 1,368
-------------- ---------- --------------- --------------
Total liabilities....................... 7,000 164,655 4,405 176,060
Redeemable Series A Preferred Stock.......... -- 10,175 -- 10,175
-------------- ---------- --------------- --------------
Common stockholders' equity:
Common stock, $.01 par value,
60,000,000 shares authorized and
41,566,030 outstanding.................. 509 186 (509) 186
Paid in-capital............................. 1,930 116,934 (1,930) 116,934
Preferred Stock............................... 5,000 -- (5,000) --
Retained earnings (deficit)................. (2,499) (49,114) 2,499 (49,114)
Cumulative translation adjustment -- (2,591) -- (2,591)
-------------- ---------- --------------- --------------
Total common stockholder's equity....... 4,940 65,415 (4,940) 65,415
-------------- ---------- --------------- --------------
Total liabilities and equity............ $ 11,940 $ 240,245 $ (535) $ 251,650
============== ========== =============== ==============
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
21
<PAGE>
TUBOSCOPE/VETCO PIPELINE
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1996
------------------------------------------------------------------
HISTORICAL PRO FORMA PRO FORMA
------------------------------ ACQUISITION ACQUISITION
VETCO PIPELINE TUBOSCOPE ADJUSTMENTS COMBINED
--------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue...................................... $ 6,358 $ 141,661 $ -- $ 148,019
Cost of sales................................ 4,324 102,178 -- 106,502
--------------- ------------ ------------ ------------
Gross profit................................. 2,034 39,483 -- 41,517
Selling, general, and administrative costs... 2,217 17,550 -- 19,767
Write-off of long-term assets................ -- 63,061 -- 63,061
Drexel transaction costs..................... -- 11,206 -- 11,206
--------------- ------------ ------------ ------------
Operating loss............................... (183) (52,334) -- (52,517)
Interest expense............................. 147 6,010 129 (2) 6,286
Other expense................................ 28 348 -- 376
--------------- ------------ ------------ ------------
Loss before income taxes..................... (358) (58,692) (129) (59,179)
Benefit for income taxes.................... -- (1,916) (52) (3) (1,968)
--------------- ------------ ------------ ------------
Net loss..................................... $ (358) $ (56,776) $ (77) $ (57,211)
=============== ============ ============ ============
Net loss per share........................... $ (1.86) $ (1.88)
============ ============
Weighted average shares...................... 30,475,362 30,475,362
============ ============
Depreciation and amortization................ $ 648 $ 6,960 $ -- $ 7,608
=============== ============ ============ ============
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
22
<PAGE>
TUBOSCOPE/VETCO PIPELINE
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED DECEMBER 31, 1995
-----------------------------------------------------------------
HISTORICAL PRO FORMA PRO FORMA
------------------------------ ACQUISITION ACQUISITION
VETCO PIPELINE TUBOSCOPE ADJUSTMENTS COMBINED
-------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Revenue............................................... $ 10,707 $ 190,015 $ -- $ 200,722
Cost of sales......................................... 7,313 138,367 -- 145,680
-------------- ------------ ----------- -----------
Gross profit.......................................... 3,394 51,648 -- 55,042
Selling, general, and administrative costs............ 4,750 24,188 -- 28,938
-------------- ------------ ----------- -----------
Operating profit (loss)............................... (1,356) 27,460 -- 26,104
Interest expense...................................... 883 12,328 (331) (2) 12,880
Other expense......................................... 93 (73) -- 20
-------------- ------------ ----------- -----------
Income (loss) before income taxes..................... (2,332) 15,205 331 13,204
Provision for income taxes............................ -- 6,386 132 (3) 6,518
-------------- ------------ ----------- -----------
Net income (loss)..................................... (2,332) 8,819 199 6,686
Dividends applicable to Series A
Convertible Preferred Stock.......................... -- 700 -- 700
-------------- ------------ ----------- -----------
Net income (loss) applicable to Common Stock.......... $ 2,332 $ 8,119 $ 199 $ 5,986
============== ============ =========== ===========
Net income per share.................................. $ 0.44 $ 0.32
============ ===========
Weighted average shares.............................. 18,530,338 18,530,338
============ ===========
Depreciation and amortization........................ $ 1,544 $ 15,037 $ -- $ 16,581
============== ============ =========== ===========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
23
<PAGE>
TUBOSCOPE/VETCO PIPELINE
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Basis of Presentation. The Unaudited Pro Forma Condensed Combined Financial
Statements are presented to give pro forma effect to the acquisition by
Tuboscope Vetco International Corporation (the "Company"), through its
subsidiaries, of Vetco Pipeline Services, Inc. ("Vetco Pipeline") for an
aggregate purchase price of $8,500,000. The purchase method of accounting has
been used in preparing the Unaudited Pro Forma Condensed Combined Financial
Statements of the Company with respect to the acquisition of Vetco Pipeline. The
statement of operations for the six months ended June 30, 1996 and fiscal year
ended December 31, 1995 combines the results of operations for Tuboscope's six
months ended June 30, 1996 and fiscal year ended December 31, 1995 with Vetco
Pipeline's results for the same periods. Purchase accounting values have been
assigned on a preliminary basis and will be adjusted upon the completion of a
valuation study. The pro forma results included herein are not necessarily
indicative of actual results that might have occurred had the operations been
combined during all of the periods presented. No pro forma adjustment has been
made to depreciation expense due to immateriality.
(1) To record Tuboscope's purchase of Vetco Pipeline for $8,500,000. The payment
was assumed to be funded through the Company's revolving credit facility.
Adjustments to assets include the elimination of accumulated depreciation of
$6,257,000 against the historical costs of fixed assets and the step-down in
purchase price of $535,000 against fixed assets. Adjustments to liabilities
and equity include the $8,500,000 payment for the acquisition of Vetco
Pipeline as an increase in the revolving credit facility, purchase
accounting accruals associated with restructuring costs and management
agreements, the elimination of $5,000,000 of Vetco Pipeline's debt and
preferred stock (not assumed as part of the acquisition) and the elimination
of Vetco Pipeline's equity accounts.
(2) To record adjustments to interest expense based on outstanding debt related
to the purchase price.
(3) To reflect the tax effect on the pro forma adjustments.
24
<PAGE>
EXHIBIT INDEX TO FORM 8-K/A
<TABLE>
<CAPTION>
Exhibit No. Description Sequentially
Numbered Page
<S> <C> <C>
23.1 Consent of Coopers & Lybrand L.L.P. 26
</TABLE>
25
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements
of Tuboscope Vetco International Corporation on Form S-8 (File No. 33-54337,
File No. 33-072072, File No. 333-05233 and File No. 333-05237) of our report
dated February 9, 1996, on our audit of the consolidated financial statements of
Vetco Pipeline Services, Inc. as of December 31, 1995, and for the year then
ended, which report is included in this Form 8-K/A.
Coopers & Lybrand L.L.P.
Houston, Texas
November 12, 1996
26
