<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)
March 7, 1997
TUBOSCOPE VETCO INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-18312 76-0252850
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
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: 19
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Exhibit Index Located at Page 18
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<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 March 19, 1997.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Fiber Glass Systems, Inc. and Subsidiary
The financial statements of Fiber Glass Systems, Inc. and
Subsidiary 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 Ernst & Young LLP
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: May 2, 1997 By: /s/ JOSEPH C. WINKLER
-----------------------------------------------
Joseph C. Winkler
Executive Vice President, Chief Financial
Officer and Treasurer
3
<PAGE>
ITEM 7(a)
Report of Independent Auditors
Board of Directors
Fiber Glass Systems, Inc.
We have audited the accompanying consolidated balance sheet of Fiber Glass
Systems, Inc. and Subsidiary as of December 27, 1996, and the related
consolidated statements of income, stockholdersO equity, and cash flows for the
year then ended. These financial statements are the responsibility of the
CompanyOs 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 the 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 Fiber
Glass Systems, Inc. and Subsidiary at December 27, 1996, and the consolidated
results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
Ernst & Young LLP
San Antonio, Texas
February 11, 1997
4
<PAGE>
Fiber Glass Systems, Inc. and Subsidiary
Consolidated Balance Sheet
December 27, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents $ 965,093
Accounts receivable 3,903,822
Inventories:
Finished goods 1,060,693
Work in process 200,225
Raw materials 407,408
-----------
Total inventories 1,668,326
Prepaid expenses and other current assets 322,331
Deferred tax assets 60,181
-----------
Total current assets 6,919,753
Property, plant, and equipment:
Land and improvements 370,335
Buildings and improvements 674,665
Machinery and equipment 2,030,624
Construction in process 667,580
-----------
3,743,204
Less accumulated depreciation 680,741
-----------
Net property, plant, and equipment 3,062,463
Goodwill, net of accumulated amortization of $379,079 6,808,941
Other assets 95,703
-----------
Total assets $16,886,860
===========
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C>
Current liabilities:
Accounts payable $ 713,032
Accrued liabilities:
Wages, salaries, and employee benefits 219,015
Insurance and other 289,359
Current portion of long-term debt 1,250,000
-----------
Total current liabilities 2,471,406
Long-term debt 4,250,000
Deferred tax liability 416,829
Stockholders' equity:
Common stock, no par value; authorized
1,000,000 shares, issued 58,722 shares 5,105,000
Retained earnings 4,643,625
-----------
Total stockholders' equity 9,748,625
-----------
Total liabilities and stockholders' equity $16,886,860
===========
</TABLE>
See accompanying notes.
6
<PAGE>
Fiber Glass Systems, Inc. and Subsidiary
Consolidated Statement of Income
Year Ended December 27, 1996
<TABLE>
<CAPTION>
<S> <C>
Net sales $26,256,702
Costs and expenses:
Cost of sales 18,066,657
Selling, general, and administrative expenses 2,170,199
Research and development expenses 376,773
-----------
20,613,629
-----------
Operating income 5,643,073
Other income, net 72,276
Interest expense 567,097
-----------
Income before income taxes 5,148,252
Income taxes:
Federal income taxes - current 1,983,000
Federal income taxes - deferred benefit (32,263)
State income taxes - current 116,401
-----------
2,067,138
-----------
Net income $ 3,081,114
===========
</TABLE>
See accompanying notes.
7
<PAGE>
Fiber Glass Systems, Inc. and Subsidiary
Consolidated Statement of Stockholders' Equity
Year Ended December 27, 1996
<TABLE>
<CAPTION>
COMMON TREASURY RETAINED
STOCK STOCK EARNINGS TOTAL
----------------------------------------------------
<S> <C> <C> <C> <C>
Balance at
December 29, 1995 $5,105,000 $(116,996) $1,562,511 $6,550,515
Issuance of treasury stock -- 116,996 -- 116,996
Net income -- -- 3,081,114 3,081,114
----------------------------------------------------
Balance at
December 27, 1996 $5,105,000 $ -- $4,643,625 $9,748,625
====================================================
</TABLE>
See accompanying notes.
8
<PAGE>
Fiber Glass Systems, Inc. and Subsidiary
Consolidated Statement of Cash Flows
Year Ended December 27, 1996
<TABLE>
<CAPTION>
OPERATING ACTIVITIES
<S> <C>
Net income $ 3,081,114
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 366,155
Amortization 267,611
Federal income taxes-deferred benefit (32,263)
Gain on sale of equipment (1,624)
Increase in receivables (1,507,344)
Increase in inventories (40,381)
Increase in prepaid expenses and other current assets (296,094)
Decrease in accounts payable (13,323)
Increase in accrued expenses 151,899
-----------
Net cash provided by operating activities 1,975,750
INVESTING ACTIVITIES
Proceeds from sale of equipment 9,400
Purchase of property, plant, and equipment (1,074,704)
-----------
Net cash used in investing activities (1,065,304)
FINANCING ACTIVITIES
Principal payments on long-term debt (1,000,000)
Issuance of treasury stock 116,996
-----------
Net cash used in financing activities (883,004)
-----------
Increase in cash and cash equivalents 27,442
Cash and cash equivalents at beginning of year 937,651
-----------
Cash and cash equivalents at end of year $ 965,093
===========
Supplemental cash flow information:
Interest paid $ 567,097
Income taxes paid 2,268,000
</TABLE>
See accompanying notes.
9
<PAGE>
Fiber Glass Systems, Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 27, 1996
1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Fiber Glass Systems, Inc. (Company) is a manufacturer of fiberglass reinforced
pipe products used primarily for corrosion control in medium-to-high pressure
applications of enhanced oil recovery projects. The CompanyOs products are
marketed on a worldwide basis. The CompanyOs corporate offices and one plant
are located in San Antonio, Texas. The Company maintains another plant in Big
Spring, Texas.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES, AND SOURCES OF SUPPLY
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary. All material intercompany accounts and
transactions have been eliminated in consolidation.
FISCAL YEAR
The Company uses a 52-53-week fiscal year.
CASH EQUIVALENTS
Cash equivalents are highly liquid investments with a maturity of three months
or less when purchased.
INVENTORIES
Inventories are stated at the lower of cost or market with cost determined using
the FIFO (first-in, first-out) method.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment is stated at cost and depreciated over estimated
useful lives using the straight-line method.
10
<PAGE>
Fiber Glass Systems, Inc. and Subsidiary
Notes to Consolidated Financial Statements (continued)
December 27, 1996
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES, AND SOURCES OF
SUPPLY (CONTINUED)
AMORTIZATION OF GOODWILL
Goodwill is being amortized on a straight-line basis over thirty years.
PRODUCT WARRANTIES
The Company's products are generally under warranty against defects in material
and workmanship for a period of one year. Provision for estimated warranty
costs is recorded monthly based on sales volumes and is periodically adjusted to
reflect actual experience.
RESEARCH AND DEVELOPMENT
Research and development costs are charged to operations in the period incurred.
Equipment used in research and development activities which has alternative uses
is capitalized.
INCOME TAXES
Income taxes are recognized for (a) the amount of taxes payable or refundable
for the current year, and (b) deferred tax assets and liabilities for the future
tax consequences of temporary differences between the financial reporting and
tax bases of assets and liabilities. Deferred tax assets and liabilities are
measured based upon enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
ESTIMATES
The preparation of the 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>
Fiber Glass Systems, Inc. and Subsidiary
Notes to Consolidated Financial Statements (continued)
December 27, 1996
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES, AND SOURCES OF
SUPPLY (CONTINUED)
SOURCES OF SUPPLY
The Company currently buys all of its fiberglass, an integral material of its
products, from one supplier. The Company has purchased its fiberglass from this
supplier, a FortuneE500 company, for a number of years with no interruption in
supply. Although there are a limited number of fiberglass suppliers, management
believes that other suppliers could provide fiberglass on comparable terms. A
change in suppliers, however, could cause a possible loss of sales, which would
affect operating results adversely.
3. LONG-TERM DEBT
The Company has entered into a $7Emillion term loan with a bank. The term loan
matures MayE30, 2000. At December 27, 1996, borrowings under the term loan bore
interest at a weighted average rate of approximately 9.25%. The term loan
contains certain covenants relating to the maintenance of certain financial
ratios and net worth requirements. In addition, the CompanyOs inventory,
accounts receivable, and property, plant, and equipment are pledged as
collateral.
Principal requirements on the term loan as of December 27, 1996 are as follows:
<TABLE>
<CAPTION>
<S> <C>
1997 $1,250,000
1998 1,500,000
1999 1,750,000
2000 1,000,000
</TABLE>
In addition, the Company has a $2,000,000 line of credit. The line of credit
bears interest at the Eurodollar rate and expires MayE31, 1998. A commitment
fee is payable at the rate of one-half of one percent on the unused portion of
the line of credit. The line of credit is collateralized by the CompanyOs
inventory, accounts receivable, and property, plant, and equipment. No amounts
were outstanding under this line of credit at December 27, 1996.
12
<PAGE>
Fiber Glass Systems, Inc. and Subsidiary
Notes to Consolidated Financial Statements (continued)
December 27, 1996
4. INCOME TAXES
Deferred income taxes and benefits are provided for temporary differences
between financial statement carrying amounts of existing assets and liabilities
and their respective tax bases. Temporary differences and the resulting
deferred tax assets and liabilities at December 27, 1996 are summarized as
follows:
<TABLE>
<CAPTION>
<S> <C>
Deferred tax assets:
Accrued employee benefits $ 41,171
Other 19,010
--------
Total deferred tax assets $ 60,181
========
Deferred tax liabilities:
Property, plant, and equipment $392,346
Inventory 16,650
Other 7,833
--------
Total deferred tax liabilities $416,829
========
</TABLE>
The reconciliation of income tax computed at the U.S. federal statutory tax
rates to income tax expense for the year ended December 27, 1996 is:
<TABLE>
<CAPTION>
<S> <C>
Tax at U.S. statutory rates - 34% $1,750,406
Tax on Foreign Sales Corporation - 34% 225,555
State income taxes, net of federal
tax benefit 108,018
Effect of permanent differences,
primarily amortization of
nondeductible goodwill 103,664
Foreign Sales Corporation benefit (147,100)
Other 26,595
----------
$2,067,138
==========
</TABLE>
13
<PAGE>
Fiber Glass Systems, Inc. and Subsidiary
Notes to Consolidated Financial Statements (continued)
December 27, 1996
5. RELATED PARTY TRANSACTIONS
The Company and Vos Groep B. V. (a corporation located in the Netherlands)
maintain a distributorship agreement. The distributorship agreement gives Star
Fiber Glass Systems B. V. (an affiliate of Vos Groep B. V.) the right to
purchase, distribute, and sell certain products of the Company in parts of
Europe, Africa, and the Middle East.
At December 27, 1996, accounts receivable due from Star Fiber Glass Systems B.
V. were approximately $950,528. Sales to Star Fiber Glass Systems B. V. were
$1,987,224 for the year ended December 27, 1996.
6. EMPLOYEE BENEFITS
The Company maintains a 401(k) plan (Plan) covering all eligible employees. An
employee is considered eligible to participate in the Plan if he or she is at
least 21 years of age and has completed one year of service, as defined in the
Plan. For any plan year (JanuaryE1 to DecemberE31), a participant may elect to
contribute from 1% to 15% of his or her earnings subject to limits set forth in
the Plan. Per the plan document, the Company makes matching contributions on
the first 6% of each participantOs compensation. The method for calculating the
matching contributions is based on earnings before depreciation expense and
income taxes. Additionally, the Company may make a discretionary contribution
for each plan year. The CompanyOs matching contribution for the year ended
December 27 was $92,470. The Company did not make a discretionary contribution
in the year ended December 27, 1996.
7. SIGNIFICANT CUSTOMERS
Three customers accounted for approximately $16,286,000 of net sales during the
year ended December 27, 1996.
14
<PAGE>
ITEM 7(b)
TUBOSCOPE/FIBERGLASS SYSTEMS
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
TUBOSCOPE/
FIBERGLASS TUBOSCOPE/
FIBER GLASS PRO FORMA FIBER GLASS
SYSTEMS TUBOSCOPE ACQUISITION PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS(2) CONSOLIDATION
------------ ----------- -------------- --------------
ASSETS <C> <C> <C> <C>
- ----------------------------------------
<S>
Current assets:
Cash and cash equivalents $ 965 $ 10,407 $ 11,372
Accounts receivable, net 3,904 96,083 99,987
Inventory, net 1,668 47,170 48,838
Deferred federal income 60 776 836
Prepaid expenses and 322 11,797 12,119
------- -------- ------- --------
Total current assets 6,919 166,233 173,152
Property and equipment 3,743 240,939 $ 800 245,482
Accumulated depreciation and
amortization (681) (59,559) (60,240)
------- -------- ------- --------
Net property and equipment 3,062 181,380 800 185,242
Identified intangibles, net -- 22,583 22,583
Goodwill, net 6,809 132,125 22,119 161,053
Other assets, net 96 2,844 2,940
------- -------- ------- --------
Total assets $16,886 $505,165 $22,919 $544,970
======= ======== ======= ========
LIABILITIES AND EQUITY
- ----------------------------------------
Current liabilities:
Accounts payable $ 713 $ 28,896 $ 29,609
Accrued liabilities 507 41,554 42,061
Federal and foreign income taxes payable -- 4,876 4,876
Current portion of long-term debt 1,250 16,514 17,764
------- -------- ------- --------
Total current liabilities 2,470 91,840 94,310
Long-term debt 4,250 168,229 $ 1,262 173,741
Pension liabilities -- 9,846 9,846
Deferred taxes payable 417 15,364 15,781
Other liabilities -- 984 984
------- -------- ------- --------
Total liabilities 7,137 286,263 1,262 294,662
Common stockholders' equity:
Common stock 5,105 416 (5,081) 440
Paid-in capital -- 261,932 31,382 293,314
Retained earnings (deficit) 4,644 (42,949) (4,644) (42,949)
Cumulative translation adjustment -- (497) (497)
------- -------- ------- --------
Total common stockholders' equity 9,749 218,902 21,657 250,308
------- -------- ------- --------
Total liabilities and equity $16,886 $505,165 $22,919 $544,970
======= ======== ======= ========
</TABLE>
15
<PAGE>
TUBOSCOPE/FIBERGLASS SYSTEMS
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED DECEMBER 31, 1996
-----------------------------------------------------------
HISTORICAL
--------------------------- PRO FORMA PRO FORMA
FIBER GLASS ACQUISITION ACQUISITION
SYSTEMS TUBOSCOPE ADJUSTMENTS CONSOLIDATION
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
Revenue $26,257 $ 341,431 $ $ 367,688
Cost of sales 18,067 243,854 553 (3) 262,474
------- ----------- ----------- ----------
Gross profit 8,190 97,577 (553) 105,214
Selling, general, and administrative
costs 2,547 42,257 44,804
Write-off assets -- 65,295 65,295
Drexel transaction costs -- 11,306 11,306
------- ----------- ----------- ----------
Operating Profit 5,643 (21,281) (553) (16,191)
Interest expense 567 13,414 95 (4) 14,076
Other expense (income) (72) 293 221
------- ----------- ----------- ----------
Income before income taxes 5,148 (34,988) (648) (30,488)
Provision for income taxes 2,067 8,238 (253)(5) 10,052
------- ----------- ---------- -----------
Net income before extraordinary loss $ 3,081 $ (43,226) $ (395) $ (40,540)
======= =========== ========== ===========
Net income per share $ (1.17) $ (1.03)
=========== ===========
Weighted average shares 36,809,126 2,415,858 39,224,984
=========== ========== ===========
Depreciation and amortization $ 634 $ 17,606 $ 553 $ 18,793
======= =========== ========== ===========
</TABLE>
16
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
(1) Basis of Presentation - The Unaudited Pro Forma Condensed Combined
Financial Statements are presented to give pro forma effect to the
acquisition of Fiber Glass Systems, Inc. ("FGS") for an aggregate purchase
price of $31,406,154, including an earn-out provision of $9,797,355. Upon
consummation of the acquisition, the outstanding shares of capital stock of
FGS were converted into the right to receive (i) 1,689,542 shares of Common
Stock of Tuboscope Vetco International Corporation (the "Company") and
$906,869 in cash and (ii) up to an additional 726,316 shares of Common
Stock of the Company and $355,260 in cash, contingent upon the realization
of certain earnout provisions. For purposes of these pro forma statements,
the full earn-out has been assumed.
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 FGS. The statement of operations for the
fiscal year ended December 31, 1996, combines the results of operations for
Tuboscope's fiscal year ended December 31, 1996 with FGS results for the
same period. Purchase accounting values have been assigned on a preliminary
basis and will be adjusted upon the completion of a valuation study.
(2) To record Tuboscope's purchase of FGS for $31,406,154. The purchase price
included 2,415,858 shares of Common Stock of the Company valued at $13.00
per share and cash consideration of $1,262,000. Adjustments to assets
include the estimated step-up of fixed assets of $800,000 and goodwill of
$22,119,000 represented by the excess purchase price over the estimated
fair market value of net tangible assets. Adjustments to liabilities and
equity include the $1,262,000 payment as an increase in the revolving
credit facility, the elimination of FGS' equity accounts, and the issuance
of 2,415,858 shares of Common Stock valued at $13.00 per share.
(3) To record additional amortization on goodwill resulting from the allocation
of the purchase price of FGS. Goodwill is amortized over 40 years based on
estimated economic life. The amortization period is consistent with that
used by Tuboscope and various other companies in the oilfield industry.
(4) To record additional interest expense on debt related to the purchase
price.
(5) To reflect the tax effect on the pro forma adjustments.
17
<PAGE>
EXHIBIT INDEX TO FORM 8-K/A
<TABLE>
<CAPTION>
Sequentially
Exhibit No. Description Numbered Page
<S> <C> <C>
23.1 Consent of Ernst & Young LLP 19
</TABLE>
18
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 33-72150) pertaining to the Amended and Restated Stock Option Plan
for Key Employees of Tuboscope Vetco International Corporation, (Form S-8 No.
3372072) pertaining to the Stock Option Plan for Non-Employee Directors of
Tuboscope Vetco International Corporation, (Form S-8, No. 33-54337) pertaining
to The Tuboscope Vetco International Corporation Employee Qualified Stock
Purchase Plan, (Form S-8, No. 333-05233) pertaining to the 1996 Equity
Participation Plan of Tuboscope Vetco International Corporation, and (Form S-8,
No. 333-05237) pertaining to the D.O.S. Ltd. 1993 Stock Option Plan of Tuboscope
Vetco International Corporation of our reported dated February 11, 1997, with
respect to the consolidated financial statements of Fiber Glass Systems, Inc.
and Subsidiary included in the Current Report (Form 8-K/A) filed with the
Securities and Exchange Commission.
ERNST & YOUNG LLP
San Antonio, Texas
May 5, 1997
19
